Indian Economy - News & Updates - Archive
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Saturday, December 13, 2008
NEW DELHI: Indias industrial growth unexpectedly shrank for the first time in 15 years, data showed on Friday, hit by the widening global recession that has weakened demand in Asias third-largest economy.
Industrial production contracted by 0.4 per cent in October after expanding by 12.2 per cent in the same month a year earlier, government figures showed. Output grew by a revised 5.45 per cent in September. Industrial production has been falling in Asias third-largest economy as a result of the worldwide economic downturn, but analysts had been expecting output growth in October of at least two per cent.
The industrial sector and indeed the economy as a whole has been softening for some time and the situation is deteriorating more rapidly now, said HSBC economist Robert Prior-Wandesforde.
Until recently India believed it would escape the brunt of the global financial turmoil thanks to its vast domestic market of more than 1.1 billion people and relatively small exposure to world trade. But a slew of data has shown its economy fast losing steam.
Output turned negative as Indian companies worked off inventories built up in anticipation of Octobers normally free-spending religious festival season that proved disappointing with lower sales of cars and other items. Steel, automobile and other sectors have been announcing production cuts in the face of weakening domestic and overseas demand.
The negative growth reflected a combination of factors including the developed world recession, the lagged effects of previous rate rises in India and the emergence of a credit crunch in the country, Prior-Wandesforde said.
Earlier this week, car sales posted their biggest annual fall in eight years, tumbling 19.38 per cent in November while sales of trucks and other commercial vehicles, a key signal of future economic activity, slumped by 49.52 per cent.
rubyjackass
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Very informative thread...
Thanks everyone.
Is there a similar thread in this forum about Pakistan's economy?
Thanks everyone.
Is there a similar thread in this forum about Pakistan's economy?
Imran Khan
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A special report on India: An elephant, not a tiger
Updated : Thursday December 18 , 2008 2:31:34 AM
James Astill
For all its chaos, bureaucracy and occasional violence, India has had a remarkably successful past few years. James Astill asks how it will cope with an economic downturn
EARLY next year, perhaps in April, Indias coalition government will face the judgment of 700m voters. Being mostly poor, they will not be happy. Recent months, moreover, have brought particular hardships: high inflation, a patchy monsoon, a slowing economy and vanishing jobs. In a worrying time, the terrorist attacks in Mumbai on November 26th-29th came as a particularly harsh blow. They gave the world images of India that jarred with the shining message of its recent progress. For three days Indias most cosmopolitan city and aspirant international financial centre echoed with gunfire. Amid the slaughter wrought by just ten well-organised assassins many individual Indians acted heroically. Yet the institutional response, as so often, was poor. Properly trained troops took over nine hours to arrive at the scene. Most of the 170-plus victims died during that time.
The Congress party, which leads Indias ruling coalition and runs Maharashtra, the state of which Mumbai is the capital, is likely to suffer for this. To make amends, Congress sacked the interior minister, and Maharashtras chief minister. The government, led by Manmohan Singh (pictured above), has also raised a crythough not, thankfully, its fistsagainst Pakistan, whence the terrorists probably came.
Yet for most poor Indians terrorism remains a small part of their troubles. To deal with those, Sonia Gandhi, Congresss leader, will reissue a lot of unkept promises when the election campaign begins: to bring everyone electricity, piped water, schools and jobs. She will say little about what this government has actually done: there hasnt been much.
At the same time Mrs Gandhi and her prime minister, Mr Singh, have presided over the biggest investment-led boom in Indias history. In the past five years the economy has grown at an average annual rate of 8.8%. Services, which contribute more than half of GDP, have grown fastest, above all Indias computer-services companies. Infosys, TCS and Wipro are now world-famous names. But Indian manufacturing has also done well. Its impressive run culminated in January with the launch by Tata Motors of an ultra-cheap family car, the Nano.
A world of fewer opportunities
India is now facing harder times. Its stockmarket has been sliding all year. As global credit has dried up, even Tata Motors, one of Indias best companies, has been struggling to lay its hand on capital. Indias economy is slowing rapidly and confidence is fragile. Previously soaring foreign investment in the country is expected to dip. Nobody yet knows how serious the slowdown will be, but in theory a recession in the rich world should hurt India less than other emerging markets: exports amount to only about 22% of Indias GDP, against 37% of Chinas.
Diplomatically, India has also started to matter more. The US-India nuclear co-operation agreement, which was approved by Americas Congress in October, was the clearest sign of this: to let India in from the nuclear cold, the developed world has made an exception to the counter-proliferation regime. Mr Singh can take much credit for this. A courteous and scholarly former finance minister who launched reforms in 1991 that unshackled Indias mixed economy, he has been an effective envoy for India.
That makes Indias main priority, reducing poverty through rapid economic growth, even more urgent. According to the World Bank, in 2005 some 456m Indians, or 42% of the population, lived below the poverty line. In 1981, by the same measure, the numbers were 420m and 60% respectively. The governments own estimates are lower. But everyone agrees that poverty in India is falling much too slowly.
Pick another wretched statistic: there are plenty of them. India has 60m chronically malnourished children, 40% of the worlds total. In 2006 some 2.1m children died in India, more than five times the number in China.
To make a serious dent in poverty, India needs to keep up economic growth of around 8% a year. In the medium term that should not be too difficult. More impressive even than the success of Indias best companies is the zest for business shown by millions of Indians in dusty bazaars and slum-shack factories. They are truly entrepreneurs. It is no coincidence, as is often noted, that Indians have prospered everywhere outside India.
But Indias task remains daunting. Some 65% of Indians live on agriculture, which accounts for less than 18% of GDP. Shifting them to more productive livelihoodsand so reducing povertywould be hard even if the number of people of working age was not growing so fast. Roughly 14m Indians are now being added to the labour market each year, and that number is rising. Half of Indias people are under 25 and 40% under 18 (see chart 2). They cannot all work for Infosys. Indeed, because of Indias historic underinvestment in education, many are not obviously skilled at anything. By one estimate, which may be optimistic, only 20% of job-seekers have had any sort of vocational training. If India cannot find employment for this lot, poverty will not be reduced and India may face serious instability.
Its democracy will be no defence. India is already worryingly violent. A Maoist insurgency in eastern India, which Mr Singh has called the greatest internal security challenge we have ever faced, is an obvious ill omen. Where it is spreading, in poor, agrarian and broken places, the invisible threads that bind India, in the phrase of Nehru, its first prime minister, are almost non-existent.
In recent years India has been creating more jobs than the gloomier scenarios suggested. Between 2000 and 2005 its rate of employment growth doubled, to 2.6% a year. But that is still insufficient, and there are also fears about the quality of jobs being created. To escape throttling labour laws, Indian entrepreneurs tend to keep their operations small: 87% of manufacturing jobs are with companies that employ fewer than ten people. These tend to be both less productive than jobs in bigger companies and less protected by the law.
If India is to sustain a growth rate of 8% or higher, as it aims to do, it will need to manage four potential constraints. The most pressing, its rotten infrastructure and the dreadful quality of its education, are, alas, not new. But the governments response has long been inadequate, and with Indias burst of high growth these two problems have become more urgent than ever. Indias current rulers, the mahouts to an elephantine state, seem at least to understand this. But their efforts to end these troubles remain unconvincing. Indias other big constraints, its cumbersome labour and land laws, should be easier to fix. But there is depressingly little sign that this will happen soon.
India is getting stronger, but its problems are also growing. In the end, the pattern of its progress suggests, it will succeed. But it may be a long and painful grind.
(Courtesy: The Economist)
___________________________________________________________
Updated : Thursday December 18 , 2008 2:31:34 AM
James Astill
For all its chaos, bureaucracy and occasional violence, India has had a remarkably successful past few years. James Astill asks how it will cope with an economic downturn
EARLY next year, perhaps in April, Indias coalition government will face the judgment of 700m voters. Being mostly poor, they will not be happy. Recent months, moreover, have brought particular hardships: high inflation, a patchy monsoon, a slowing economy and vanishing jobs. In a worrying time, the terrorist attacks in Mumbai on November 26th-29th came as a particularly harsh blow. They gave the world images of India that jarred with the shining message of its recent progress. For three days Indias most cosmopolitan city and aspirant international financial centre echoed with gunfire. Amid the slaughter wrought by just ten well-organised assassins many individual Indians acted heroically. Yet the institutional response, as so often, was poor. Properly trained troops took over nine hours to arrive at the scene. Most of the 170-plus victims died during that time.
The Congress party, which leads Indias ruling coalition and runs Maharashtra, the state of which Mumbai is the capital, is likely to suffer for this. To make amends, Congress sacked the interior minister, and Maharashtras chief minister. The government, led by Manmohan Singh (pictured above), has also raised a crythough not, thankfully, its fistsagainst Pakistan, whence the terrorists probably came.
Yet for most poor Indians terrorism remains a small part of their troubles. To deal with those, Sonia Gandhi, Congresss leader, will reissue a lot of unkept promises when the election campaign begins: to bring everyone electricity, piped water, schools and jobs. She will say little about what this government has actually done: there hasnt been much.
At the same time Mrs Gandhi and her prime minister, Mr Singh, have presided over the biggest investment-led boom in Indias history. In the past five years the economy has grown at an average annual rate of 8.8%. Services, which contribute more than half of GDP, have grown fastest, above all Indias computer-services companies. Infosys, TCS and Wipro are now world-famous names. But Indian manufacturing has also done well. Its impressive run culminated in January with the launch by Tata Motors of an ultra-cheap family car, the Nano.
A world of fewer opportunities
India is now facing harder times. Its stockmarket has been sliding all year. As global credit has dried up, even Tata Motors, one of Indias best companies, has been struggling to lay its hand on capital. Indias economy is slowing rapidly and confidence is fragile. Previously soaring foreign investment in the country is expected to dip. Nobody yet knows how serious the slowdown will be, but in theory a recession in the rich world should hurt India less than other emerging markets: exports amount to only about 22% of Indias GDP, against 37% of Chinas.
Diplomatically, India has also started to matter more. The US-India nuclear co-operation agreement, which was approved by Americas Congress in October, was the clearest sign of this: to let India in from the nuclear cold, the developed world has made an exception to the counter-proliferation regime. Mr Singh can take much credit for this. A courteous and scholarly former finance minister who launched reforms in 1991 that unshackled Indias mixed economy, he has been an effective envoy for India.
That makes Indias main priority, reducing poverty through rapid economic growth, even more urgent. According to the World Bank, in 2005 some 456m Indians, or 42% of the population, lived below the poverty line. In 1981, by the same measure, the numbers were 420m and 60% respectively. The governments own estimates are lower. But everyone agrees that poverty in India is falling much too slowly.
Pick another wretched statistic: there are plenty of them. India has 60m chronically malnourished children, 40% of the worlds total. In 2006 some 2.1m children died in India, more than five times the number in China.
To make a serious dent in poverty, India needs to keep up economic growth of around 8% a year. In the medium term that should not be too difficult. More impressive even than the success of Indias best companies is the zest for business shown by millions of Indians in dusty bazaars and slum-shack factories. They are truly entrepreneurs. It is no coincidence, as is often noted, that Indians have prospered everywhere outside India.
But Indias task remains daunting. Some 65% of Indians live on agriculture, which accounts for less than 18% of GDP. Shifting them to more productive livelihoodsand so reducing povertywould be hard even if the number of people of working age was not growing so fast. Roughly 14m Indians are now being added to the labour market each year, and that number is rising. Half of Indias people are under 25 and 40% under 18 (see chart 2). They cannot all work for Infosys. Indeed, because of Indias historic underinvestment in education, many are not obviously skilled at anything. By one estimate, which may be optimistic, only 20% of job-seekers have had any sort of vocational training. If India cannot find employment for this lot, poverty will not be reduced and India may face serious instability.
Its democracy will be no defence. India is already worryingly violent. A Maoist insurgency in eastern India, which Mr Singh has called the greatest internal security challenge we have ever faced, is an obvious ill omen. Where it is spreading, in poor, agrarian and broken places, the invisible threads that bind India, in the phrase of Nehru, its first prime minister, are almost non-existent.
In recent years India has been creating more jobs than the gloomier scenarios suggested. Between 2000 and 2005 its rate of employment growth doubled, to 2.6% a year. But that is still insufficient, and there are also fears about the quality of jobs being created. To escape throttling labour laws, Indian entrepreneurs tend to keep their operations small: 87% of manufacturing jobs are with companies that employ fewer than ten people. These tend to be both less productive than jobs in bigger companies and less protected by the law.
If India is to sustain a growth rate of 8% or higher, as it aims to do, it will need to manage four potential constraints. The most pressing, its rotten infrastructure and the dreadful quality of its education, are, alas, not new. But the governments response has long been inadequate, and with Indias burst of high growth these two problems have become more urgent than ever. Indias current rulers, the mahouts to an elephantine state, seem at least to understand this. But their efforts to end these troubles remain unconvincing. Indias other big constraints, its cumbersome labour and land laws, should be easier to fix. But there is depressingly little sign that this will happen soon.
India is getting stronger, but its problems are also growing. In the end, the pattern of its progress suggests, it will succeed. But it may be a long and painful grind.
(Courtesy: The Economist)
___________________________________________________________
nitesh
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good news:
Inflation falls to 6.84%
Inflation falls to 6.84%
December 18, 2008 12:07 IST
Inflation falls to 6.84 per cent for the week ended December 6 from 8.00 per cent in the previous week.
Last week, too, inflation rate fell mainly on account of declining prices of fruits and vegetables.
The wholesale price-based inflation fell by 0.4 per cent from 8.4 per cent in the previous week. The inflation was 3.89 per cent during the corresponding period a year-ago.
In primary articles group, the prices of fruits, vegetables, barley and grams declined during the week. As far as manufactured items were concerned, unrefined oil, gur, and rapeseed and mustard oil became cheaper.
The inflation rate has been declining after it touched a peak of 12.82 per cent in August.
© Copyright 2008 PTI. All rights reserved. Republication or redistribution of PTI content, including by framing or similar means, is expressly prohibited without the prior written consent.
Inflation falls to 6.84%
Inflation falls to 6.84%
December 18, 2008 12:07 IST
Inflation falls to 6.84 per cent for the week ended December 6 from 8.00 per cent in the previous week.
Last week, too, inflation rate fell mainly on account of declining prices of fruits and vegetables.
The wholesale price-based inflation fell by 0.4 per cent from 8.4 per cent in the previous week. The inflation was 3.89 per cent during the corresponding period a year-ago.
In primary articles group, the prices of fruits, vegetables, barley and grams declined during the week. As far as manufactured items were concerned, unrefined oil, gur, and rapeseed and mustard oil became cheaper.
The inflation rate has been declining after it touched a peak of 12.82 per cent in August.
© Copyright 2008 PTI. All rights reserved. Republication or redistribution of PTI content, including by framing or similar means, is expressly prohibited without the prior written consent.
nitesh
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Tata_First_On_Ferrari_F1!
Tata First On Ferrari F1!
Adil Jal Darukhanawala 17 Dec 2008
Indian F1 Grand Prix aficionados rejoice! Word, from none other than Ferrari head honcho Luca di Montezemolo has made it known that Tata branding would appear for the first time on the scarlet Ferraris of Felippe Massa and Kimi Raikkonen fighting for world championship honours in 2009!
"For the first time an Indian brand will appear on the Ferrari," president Luca di Montezemolo told Italian media. "It's historic." A Ferrari spokesman confirmed a deal had been reached and said the details and duration would be announced shortly.
Montezemolo is absolutely correct for such a deal being of historic proportions and this holds true not just for Ferrari or for the Tata Group but also for F1 and India for a variety of reasons. Given the fact that F1 is in the midst of a major changeover - technical, sporting, economic and what have you, this deal assumes major importance for Ferrari which seems to be bucking the trend to add in more backers to its sporting efforts.
While Reuters has reported that Luca di Montezemolo revealed that it was the Tata brand which would appear on the bodywork of the Ferraris next year, it wasn't exactly revealed whether it is the Tata Group (as we think it is) or is it to be Tata Motors as many are rampantly speculating. The Tata Group would join such big names as Shell, Alice (an Italian internet company), Acer Computers, AMD microprocessors, drinks giant Martini and Dubai-based finance and investment firm Mubadala as the main backers of the Ferrari F1 team in 2009.
The Tata Group is no stranger to F1 and also to Ferrari because they first weighed in with financial support to Narain Karthikeyan when he drove for Jordan in 2005. A year later the Tata logo adorned the Williams F1 cars driven by Mark Webber and Nico Rosberg on the F1 circuits while Narain Karthikeyan was the test driver for the outfit.
Ferrari has benefited massively from the efforts of Tata Consultancy which has supplied major programmes and solutions in various technological areas to the design, manufacture and operation of not just the F1 cars but also the eclectic sports cars which are the pride and envy of many enthusiasts in equal measure.
In fact, the relationship between Fiat SpA and the Tata Group has been predominantly in the automotive space and the duo have a joint venture in India for cars and drivetrains. This year, however, did see Tata Motors back a Ferrari initiative in India which was said to be a precursor to the Prancing Horse making its debut on the Indian car market in 2009. With Tata Motors said to be in the reckoning to set up an all new exclusive sales channel for top end marques like Ferrari, a Tata association with the Scuderia's Grand Prix team does only seem natural.
From the Tata perspective, this is a bold move which signals its determined intent to soldier on in its bid to becoming a global automotive major. With its truck and car manufacturing business in India already among the top echelons of the game and its global acquisitions like Jaguar - Land Rover and Daewoo Trucks giving it both a qualitative as well as an aspirational edge, a move into F1 is clearly an inspired move.
The timing of the deal has many guessing though, coming in the present economic downturn, with Honda having exited F1 and Suzuki and Subaru having pulled out from the World Rally Championship. However what everyone has to realize that all three Japanese OEMs have never achieved any worthwhile successes on the race tracks in this decade while Ferrari have kept on winning unabated with Michael Schumacher, Kimi Raikkonen and Felippe Massa for the last eight years.
Nothing succeeds like success according to Norbert Haug, boss of Mercedes-Benz Motorsport: "Mercedes-Benz's contribution (to F1) is cost-efficient, the resonance in the media and in the public which last season and Lewis Hamilton's win generated was worth many times our financial investment."Maybe this is one yardstick which the Tata Group would be comfortable relying on to go racing with Ferrari in a most cost-efficient and successful manner next year.
Tata First On Ferrari F1!
Adil Jal Darukhanawala 17 Dec 2008
Indian F1 Grand Prix aficionados rejoice! Word, from none other than Ferrari head honcho Luca di Montezemolo has made it known that Tata branding would appear for the first time on the scarlet Ferraris of Felippe Massa and Kimi Raikkonen fighting for world championship honours in 2009!
"For the first time an Indian brand will appear on the Ferrari," president Luca di Montezemolo told Italian media. "It's historic." A Ferrari spokesman confirmed a deal had been reached and said the details and duration would be announced shortly.
Montezemolo is absolutely correct for such a deal being of historic proportions and this holds true not just for Ferrari or for the Tata Group but also for F1 and India for a variety of reasons. Given the fact that F1 is in the midst of a major changeover - technical, sporting, economic and what have you, this deal assumes major importance for Ferrari which seems to be bucking the trend to add in more backers to its sporting efforts.
While Reuters has reported that Luca di Montezemolo revealed that it was the Tata brand which would appear on the bodywork of the Ferraris next year, it wasn't exactly revealed whether it is the Tata Group (as we think it is) or is it to be Tata Motors as many are rampantly speculating. The Tata Group would join such big names as Shell, Alice (an Italian internet company), Acer Computers, AMD microprocessors, drinks giant Martini and Dubai-based finance and investment firm Mubadala as the main backers of the Ferrari F1 team in 2009.
The Tata Group is no stranger to F1 and also to Ferrari because they first weighed in with financial support to Narain Karthikeyan when he drove for Jordan in 2005. A year later the Tata logo adorned the Williams F1 cars driven by Mark Webber and Nico Rosberg on the F1 circuits while Narain Karthikeyan was the test driver for the outfit.
Ferrari has benefited massively from the efforts of Tata Consultancy which has supplied major programmes and solutions in various technological areas to the design, manufacture and operation of not just the F1 cars but also the eclectic sports cars which are the pride and envy of many enthusiasts in equal measure.
In fact, the relationship between Fiat SpA and the Tata Group has been predominantly in the automotive space and the duo have a joint venture in India for cars and drivetrains. This year, however, did see Tata Motors back a Ferrari initiative in India which was said to be a precursor to the Prancing Horse making its debut on the Indian car market in 2009. With Tata Motors said to be in the reckoning to set up an all new exclusive sales channel for top end marques like Ferrari, a Tata association with the Scuderia's Grand Prix team does only seem natural.
From the Tata perspective, this is a bold move which signals its determined intent to soldier on in its bid to becoming a global automotive major. With its truck and car manufacturing business in India already among the top echelons of the game and its global acquisitions like Jaguar - Land Rover and Daewoo Trucks giving it both a qualitative as well as an aspirational edge, a move into F1 is clearly an inspired move.
The timing of the deal has many guessing though, coming in the present economic downturn, with Honda having exited F1 and Suzuki and Subaru having pulled out from the World Rally Championship. However what everyone has to realize that all three Japanese OEMs have never achieved any worthwhile successes on the race tracks in this decade while Ferrari have kept on winning unabated with Michael Schumacher, Kimi Raikkonen and Felippe Massa for the last eight years.
Nothing succeeds like success according to Norbert Haug, boss of Mercedes-Benz Motorsport: "Mercedes-Benz's contribution (to F1) is cost-efficient, the resonance in the media and in the public which last season and Lewis Hamilton's win generated was worth many times our financial investment."Maybe this is one yardstick which the Tata Group would be comfortable relying on to go racing with Ferrari in a most cost-efficient and successful manner next year.
nitesh
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Advance tax collections send early warning signals
Advance tax collections send early warning signals
Anindita Dey / Mumbai December 16, 2008, 0:58 IST
Most private firms see lower pay-outs; govt banks save the day.
Strong signs of the economic slowdown were evident in preliminary advance tax collections for Mumbai, which accounts for 35 to 40 per cent of income tax collections.
Barring mainly government-owned banks, private sector lenders and some of India’s largest companies headquartered in India’s financial capital have reported dips in advance tax payments for the October to December quarter.
Section 208 of the Indian Income Tax Act, 1961 makes it obligatory for all companies and individuals to pay advance tax in four quarters of a financial year when the annual advance income tax payable is Rs 5,000 or more.
Collections are still underway in some centres, but the list available with the income tax department till now shows that State Bank of India has emerged as the top tax payer for the third quarter.
Another government-owned bank, Central Bank of India, has recorded the highest growth in advance taxes at 123 per cent. Other state-owned banks — Bank of Baroda, Bank of India and Dena Bank — have also seen robust growth in advance tax payments.
The trend, however, is reversed for private lenders with both ICICI Bank and HDFC Bank recording a fall in payments.
Among companies in this early top 20 list, Larsen & Toubro and Tata Chemicals are the only two companies to have paid higher taxes. All the others, including Reliance Industries Ltd (RIL), India’s largest company by market capitalisation, and Mahindra & Mahindra, India's largest tractor maker, trail last year’s collections. In RIL’s case, the lower tax partly reflects the sale of shares in its new refinery Reliance Petroleum.
Among the Tata group companies, collections have fallen for Tata Steel, Tata Sons and Tata Power, while Indian Hotels and Tata Motors have not paid advance taxes.
Although Tata Steel has paid lower advance taxes for the quarter, cumulative payments for three quarters of the present financial year are higher at Rs 1,675 crore against Rs 1,418 crore last year, official sources said.
Among early birds in the public sector, Bharat Petroleum Corporation Ltd has also not paid any advance taxes for the quarter.
Housing companies — HDFC and LIC housing Finance Company — have paid higher taxes despite the slowdown in the real estate sector. Official sources said that the collection for other real estate companies appear to be not so encouraging.
Advance tax collections send early warning signals
Anindita Dey / Mumbai December 16, 2008, 0:58 IST
Most private firms see lower pay-outs; govt banks save the day.
Strong signs of the economic slowdown were evident in preliminary advance tax collections for Mumbai, which accounts for 35 to 40 per cent of income tax collections.
Barring mainly government-owned banks, private sector lenders and some of India’s largest companies headquartered in India’s financial capital have reported dips in advance tax payments for the October to December quarter.
Section 208 of the Indian Income Tax Act, 1961 makes it obligatory for all companies and individuals to pay advance tax in four quarters of a financial year when the annual advance income tax payable is Rs 5,000 or more.
Collections are still underway in some centres, but the list available with the income tax department till now shows that State Bank of India has emerged as the top tax payer for the third quarter.
Another government-owned bank, Central Bank of India, has recorded the highest growth in advance taxes at 123 per cent. Other state-owned banks — Bank of Baroda, Bank of India and Dena Bank — have also seen robust growth in advance tax payments.
The trend, however, is reversed for private lenders with both ICICI Bank and HDFC Bank recording a fall in payments.
Among companies in this early top 20 list, Larsen & Toubro and Tata Chemicals are the only two companies to have paid higher taxes. All the others, including Reliance Industries Ltd (RIL), India’s largest company by market capitalisation, and Mahindra & Mahindra, India's largest tractor maker, trail last year’s collections. In RIL’s case, the lower tax partly reflects the sale of shares in its new refinery Reliance Petroleum.
Among the Tata group companies, collections have fallen for Tata Steel, Tata Sons and Tata Power, while Indian Hotels and Tata Motors have not paid advance taxes.
Although Tata Steel has paid lower advance taxes for the quarter, cumulative payments for three quarters of the present financial year are higher at Rs 1,675 crore against Rs 1,418 crore last year, official sources said.
Among early birds in the public sector, Bharat Petroleum Corporation Ltd has also not paid any advance taxes for the quarter.
Housing companies — HDFC and LIC housing Finance Company — have paid higher taxes despite the slowdown in the real estate sector. Official sources said that the collection for other real estate companies appear to be not so encouraging.
nitesh
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Govt plans more steps to boost economy
Govt plans more steps to boost economy
BS Reporter / New Delhi December 16, 2008, 0:58 IST
India may add to the interest rate and tax cuts announced early this month as declining output and exports indicate Asia’s third-biggest economy is headed for a deeper than expected slowdown, a government official said.
“The government is committed that whatever steps are required to be taken in the near future as the scenario further unfolds will be taken,” Economic Affairs Secretary Ashok Chawla said in an interview in Hong Kong today.
The country’s industrial production declined in October to -0.4 per cent, in the negative territory for the first time in more than 15 years, adding to the evidence that the $1.2 trillion economy may expand at the slowest pace in six years as weaker domestic demand and waning exports force companies to cut production. Investor sentiment has also been shaken by terror attacks in Mumbai last month, which killed nearly 200 people and left more than 300 injured.
“The present priority is to ensure that the economy doesn’t slow down very much and that growth is not hampered,” Chawla said. “That is the main objective at this point.”
Weaker production and exports may hurt the country’s economic expansion. India’s growth may fall to 7 per cent in the year to March 31 from 9 per cent or more annually in the previous three years, the government expects. The country’s exports fell for the first time in seven years in October.
The economy may slow more than initially estimated and the Reserve Bank of India (RBI) will revise downwards its earlier forecast of 7.5 per cent growth rate in its January 27 policy meeting, according to RBI Governor D Subbarao. The economy will face a period of “painful adjustment” as the world sinks into recession, the central bank said December 6.
Interest Rates:
India’s economy expanded 7.6 per cent in the three months to September 30 from a year earlier, the slowest pace since 2004.
To revive demand, the RBI on December 6 lowered its benchmark repo rate to 6.5 per cent from 7.5 per cent, the third cut since October. The next day the government announced a $4 billion stimulus package.
“The next budget is a couple of months away, so we have to wait and watch what happens and what steps are taken till then,” Chawla said.
Concern over companies cutting production and losing profits has seen the Bombay Stock Exchange’s (BSE’s) benchmark Sensex decline 51 per cent this year. Overseas investors have sold $13 billion of Indian shares this year, compared with $17.2 billion of share purchases in 2007.
To help counter a slowdown in the construction sector, the state-run banks decided to cap the interest rate for home loans of up to Rs 5 lakh at 8.5 per cent, State Bank of India Chairman OP Bhatt said in Mumbai today. Interest rates capped at 9.25 per cent will be offered for borrowers seeking loans of between Rs 5 lakh and Rs 20 lakh, he said.
India’s steel production fell 0.5 per cent in October, compared with a 4.7 per cent gain in September, according to the government. Cement production in October grew at 6.2 per cent, slower than 7.9 per cent in September.
Govt plans more steps to boost economy
BS Reporter / New Delhi December 16, 2008, 0:58 IST
India may add to the interest rate and tax cuts announced early this month as declining output and exports indicate Asia’s third-biggest economy is headed for a deeper than expected slowdown, a government official said.
“The government is committed that whatever steps are required to be taken in the near future as the scenario further unfolds will be taken,” Economic Affairs Secretary Ashok Chawla said in an interview in Hong Kong today.
The country’s industrial production declined in October to -0.4 per cent, in the negative territory for the first time in more than 15 years, adding to the evidence that the $1.2 trillion economy may expand at the slowest pace in six years as weaker domestic demand and waning exports force companies to cut production. Investor sentiment has also been shaken by terror attacks in Mumbai last month, which killed nearly 200 people and left more than 300 injured.
“The present priority is to ensure that the economy doesn’t slow down very much and that growth is not hampered,” Chawla said. “That is the main objective at this point.”
Weaker production and exports may hurt the country’s economic expansion. India’s growth may fall to 7 per cent in the year to March 31 from 9 per cent or more annually in the previous three years, the government expects. The country’s exports fell for the first time in seven years in October.
The economy may slow more than initially estimated and the Reserve Bank of India (RBI) will revise downwards its earlier forecast of 7.5 per cent growth rate in its January 27 policy meeting, according to RBI Governor D Subbarao. The economy will face a period of “painful adjustment” as the world sinks into recession, the central bank said December 6.
Interest Rates:
India’s economy expanded 7.6 per cent in the three months to September 30 from a year earlier, the slowest pace since 2004.
To revive demand, the RBI on December 6 lowered its benchmark repo rate to 6.5 per cent from 7.5 per cent, the third cut since October. The next day the government announced a $4 billion stimulus package.
“The next budget is a couple of months away, so we have to wait and watch what happens and what steps are taken till then,” Chawla said.
Concern over companies cutting production and losing profits has seen the Bombay Stock Exchange’s (BSE’s) benchmark Sensex decline 51 per cent this year. Overseas investors have sold $13 billion of Indian shares this year, compared with $17.2 billion of share purchases in 2007.
To help counter a slowdown in the construction sector, the state-run banks decided to cap the interest rate for home loans of up to Rs 5 lakh at 8.5 per cent, State Bank of India Chairman OP Bhatt said in Mumbai today. Interest rates capped at 9.25 per cent will be offered for borrowers seeking loans of between Rs 5 lakh and Rs 20 lakh, he said.
India’s steel production fell 0.5 per cent in October, compared with a 4.7 per cent gain in September, according to the government. Cement production in October grew at 6.2 per cent, slower than 7.9 per cent in September.
nitesh
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DLF to invest Rs 15,000 cr in affordable housing
DLF to invest Rs 15,000 cr in affordable housing
Press Trust Of India / New Delhi December 16, 2008, 0:32 IST
Buoyed by robust sales in mid-income housing, real estate giant DLF today said that it would invest Rs 15,000 crore over the next three years to develop various residential projects across the country in the range of Rs 15-40 lakh.
DLF, the country's biggest real estate developer, had last year announced its plan to enter into the mid-income housing segment, realising the huge untapped demand in this category. "We will be investing Rs 5,000 crore a year over the next three years on mid-income housing projects," DLF Home Developers Vice President A Harikesh said."Mid-income homes will be our focus area and will witness significant growth in the coming quarters," he added.
DLF's investment plans for affordable housing coincides with the announcement by public sector banks to boost the segment by cutting home-loan interest rates, putting caps of 9.25 per cent for Rs 5-20 lakh and 8.5 per cent for loans of up to Rs five lakh.
Harikesh said that internal accruals, advances against sales and capital raised through private equity would take care of the planned investment. DLF had raised Rs 1,675 crore as private equity in eight projects in November 2007.
DLF Home Developers, the wholly-owned subsidiary of DLF, would construct about 40,000 housing units in the mid-income category, sizes of which would vary between 1,000 square feet and 1,800 square feet, he added. The company has witnessed tremendous response for its mid-income housing projects and sold over 7,000 flats so far this year, despite slowdown in the housing demand for the last six months on account of high interest rate and capital value.
DLF has launched mid-income housing projects in Bangalore, Gurgaon, Hyderabad, Indore, Kochi, Kolkata and Pune. The company would launch similar projects in Chandigarh, Jalandhar, Ambala, Goa and Lucknow within the next six months. DLF Homes plans to launch such projects in all 31 cities where the company will have a presence by 2009-10, Harikesh said.
"The price would vary from city to city but majority of the units would be in the price range of Rs 2,000-3,000 per square feet," he said, adding that in the metros, the apartment prices would be higher compared to smaller cities because of high land costs.
He noted that the demand for its affordable housing is largely coming from end-users. As part of its strategy, DLF is discouraging speculation in its property by introducing a lock-in-period of one year for re-sale and selling only one flat to each family. DLF currently has a land bank of over 750 million square feet of saleable area.
DLF to invest Rs 15,000 cr in affordable housing
Press Trust Of India / New Delhi December 16, 2008, 0:32 IST
Buoyed by robust sales in mid-income housing, real estate giant DLF today said that it would invest Rs 15,000 crore over the next three years to develop various residential projects across the country in the range of Rs 15-40 lakh.
DLF, the country's biggest real estate developer, had last year announced its plan to enter into the mid-income housing segment, realising the huge untapped demand in this category. "We will be investing Rs 5,000 crore a year over the next three years on mid-income housing projects," DLF Home Developers Vice President A Harikesh said."Mid-income homes will be our focus area and will witness significant growth in the coming quarters," he added.
DLF's investment plans for affordable housing coincides with the announcement by public sector banks to boost the segment by cutting home-loan interest rates, putting caps of 9.25 per cent for Rs 5-20 lakh and 8.5 per cent for loans of up to Rs five lakh.
Harikesh said that internal accruals, advances against sales and capital raised through private equity would take care of the planned investment. DLF had raised Rs 1,675 crore as private equity in eight projects in November 2007.
DLF Home Developers, the wholly-owned subsidiary of DLF, would construct about 40,000 housing units in the mid-income category, sizes of which would vary between 1,000 square feet and 1,800 square feet, he added. The company has witnessed tremendous response for its mid-income housing projects and sold over 7,000 flats so far this year, despite slowdown in the housing demand for the last six months on account of high interest rate and capital value.
DLF has launched mid-income housing projects in Bangalore, Gurgaon, Hyderabad, Indore, Kochi, Kolkata and Pune. The company would launch similar projects in Chandigarh, Jalandhar, Ambala, Goa and Lucknow within the next six months. DLF Homes plans to launch such projects in all 31 cities where the company will have a presence by 2009-10, Harikesh said.
"The price would vary from city to city but majority of the units would be in the price range of Rs 2,000-3,000 per square feet," he said, adding that in the metros, the apartment prices would be higher compared to smaller cities because of high land costs.
He noted that the demand for its affordable housing is largely coming from end-users. As part of its strategy, DLF is discouraging speculation in its property by introducing a lock-in-period of one year for re-sale and selling only one flat to each family. DLF currently has a land bank of over 750 million square feet of saleable area.
nitesh
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Bloomberg.com: India & Pakistan
India Central Bank May Extend Rate Cuts Amid Slowing Inflation
By Kartik Goyal
Dec. 20 (Bloomberg) -- India's central bank has scope to extend the steepest set of interest-rate cuts since 2000 after inflation slowed to a nine-month low, economists said.
The country's benchmark 10-year bonds yesterday completed the biggest weekly gain in at least a decade as investors speculated the central bank will add to the three interest-rate cuts of the past two months. A report this week showed inflation slowed more than economists expected, to 6.84 percent in the first week of December.
Easing inflation may alleviate the central bank's concern earlier this week that faster than ``acceptable'' price gains have made monetary-policy management more complex amid slowing growth. The Reserve Bank of India's actions should have been ``more aggressive'' to counter the global recession, according to Arvind Virmani, the finance ministry's chief economic adviser.
``Inflation is no longer a concern now and that gives the central bank huge leeway to cut borrowing costs,'' said Sonal Varma, an economist at Nomura International Plc in Mumbai. ``Inflation has gone below the central bank's year-end target for the first time this year, softening its worries over prices.''
Bonds rallied after the Dec. 18 inflation report. The yield on the 8.24 percent note due April 2018 dropped 66 basis points this week to 5.56 percent in Mumbai, according to the central bank's trading system. The Reserve Bank hasn't commented on the latest inflation data.
`Aggressive Cuts'
Slowing inflation is prompting central banks from the U.S. to Malaysia to cut interest rates as global economies slump amid the worst financial crisis since the Great Depression.
The Philippine central bank on Dec. 18 cut its benchmark interest rate to 5.5 percent. The U.S. Federal Reserve lowered its main rate to as low as zero on Dec. 16, and the Bank of Japan reduced its benchmark to 0.1 percent yesterday.
``The key meaningful policy response to the worsening economic situation will be aggressive policy rate cuts,'' said Rajeev Malik, regional economist at Macquarie Group Ltd. in Singapore. ``The mother of all monetary easing will continue to play on in India.''
Growth in Asia's third-largest economy may slow to 7 percent in the year ending March 31 from 9 percent or more annually in the previous three years as the global slump hurts exports, according to the government. India's industrial production fell 0.4 percent in October, the first decline in 15 years, and exports plunged 12 percent.
'Difficult Year'
``This year is difficult,'' Palaniappan Chidambaram, who was India's finance minister until Dec. 1, said this week. The economy expanded at the slowest pace since 2004 in the three months to Sept. 30. Chidambaram is currently the home minister.
To revive consumer demand and lending, the Reserve Bank on Dec. 6 cut its benchmark repurchase rate to 6.5 percent from 7.5 percent, the third reduction since Oct. 20. The following day, the government announced a $4 billion stimulus package to bolster spending, including lower taxes on consumer goods like cars, television screens and motorbikes.
India is working on more measures to boost economic growth and may announce a second installment of the stimulus package soon, Trade Minister Kamal Nath said last week.
``The central bank is likely to continue with further monetary easing on an ongoing basis,'' said Siddhartha Sanyal, an economist with Edelweiss Capital Ltd. in Mumbai, who expects prices in India to fall next year on cheaper commodities.
Inflation eased in the week to Dec. 6 after a drop in crude oil costs led the government to cut retail fuel prices, helping cool price-gains further from a 16-year high of 12.91 percent in August. Crude oil has tumbled more than 70 percent from a record $147.27 on July 11.
The central bank will review its inflation forecast in the Jan. 27 monetary-policy meeting, Governor Subbarao said Dec. 11, signaling he may lower an earlier estimate of 7 percent for the current fiscal year.
To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal @bloomberg.net.
Last Updated: December 19, 2008 13:31 EST
India Central Bank May Extend Rate Cuts Amid Slowing Inflation
By Kartik Goyal
Dec. 20 (Bloomberg) -- India's central bank has scope to extend the steepest set of interest-rate cuts since 2000 after inflation slowed to a nine-month low, economists said.
The country's benchmark 10-year bonds yesterday completed the biggest weekly gain in at least a decade as investors speculated the central bank will add to the three interest-rate cuts of the past two months. A report this week showed inflation slowed more than economists expected, to 6.84 percent in the first week of December.
Easing inflation may alleviate the central bank's concern earlier this week that faster than ``acceptable'' price gains have made monetary-policy management more complex amid slowing growth. The Reserve Bank of India's actions should have been ``more aggressive'' to counter the global recession, according to Arvind Virmani, the finance ministry's chief economic adviser.
``Inflation is no longer a concern now and that gives the central bank huge leeway to cut borrowing costs,'' said Sonal Varma, an economist at Nomura International Plc in Mumbai. ``Inflation has gone below the central bank's year-end target for the first time this year, softening its worries over prices.''
Bonds rallied after the Dec. 18 inflation report. The yield on the 8.24 percent note due April 2018 dropped 66 basis points this week to 5.56 percent in Mumbai, according to the central bank's trading system. The Reserve Bank hasn't commented on the latest inflation data.
`Aggressive Cuts'
Slowing inflation is prompting central banks from the U.S. to Malaysia to cut interest rates as global economies slump amid the worst financial crisis since the Great Depression.
The Philippine central bank on Dec. 18 cut its benchmark interest rate to 5.5 percent. The U.S. Federal Reserve lowered its main rate to as low as zero on Dec. 16, and the Bank of Japan reduced its benchmark to 0.1 percent yesterday.
``The key meaningful policy response to the worsening economic situation will be aggressive policy rate cuts,'' said Rajeev Malik, regional economist at Macquarie Group Ltd. in Singapore. ``The mother of all monetary easing will continue to play on in India.''
Growth in Asia's third-largest economy may slow to 7 percent in the year ending March 31 from 9 percent or more annually in the previous three years as the global slump hurts exports, according to the government. India's industrial production fell 0.4 percent in October, the first decline in 15 years, and exports plunged 12 percent.
'Difficult Year'
``This year is difficult,'' Palaniappan Chidambaram, who was India's finance minister until Dec. 1, said this week. The economy expanded at the slowest pace since 2004 in the three months to Sept. 30. Chidambaram is currently the home minister.
To revive consumer demand and lending, the Reserve Bank on Dec. 6 cut its benchmark repurchase rate to 6.5 percent from 7.5 percent, the third reduction since Oct. 20. The following day, the government announced a $4 billion stimulus package to bolster spending, including lower taxes on consumer goods like cars, television screens and motorbikes.
India is working on more measures to boost economic growth and may announce a second installment of the stimulus package soon, Trade Minister Kamal Nath said last week.
``The central bank is likely to continue with further monetary easing on an ongoing basis,'' said Siddhartha Sanyal, an economist with Edelweiss Capital Ltd. in Mumbai, who expects prices in India to fall next year on cheaper commodities.
Inflation eased in the week to Dec. 6 after a drop in crude oil costs led the government to cut retail fuel prices, helping cool price-gains further from a 16-year high of 12.91 percent in August. Crude oil has tumbled more than 70 percent from a record $147.27 on July 11.
The central bank will review its inflation forecast in the Jan. 27 monetary-policy meeting, Governor Subbarao said Dec. 11, signaling he may lower an earlier estimate of 7 percent for the current fiscal year.
To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal @bloomberg.net.
Last Updated: December 19, 2008 13:31 EST
nitesh
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CORRECTED - UPDATE 2-Indian inflation slows, government ups spending | Reuters
CORRECTED - UPDATE 2-Indian inflation slows, government ups spending
Thu Dec 18, 2008 6:53pm IST
(Corrects spending in para 2 to 424.8 billion rupees from 424.4 billion rupees)
By Manoj Kumar and Rajkumar Ray
NEW DELHI, Dec 18 (Reuters) - India's government beefed up its plan for extra spending to stimulate the economy and counter the impact of the global slowdown, just as inflation fell more sharply than expected in a sign of faltering activity.
The Congress party-led coalition asked parliament for 424.8 billion rupees ($9 billion) in additional spending for the fiscal year ending in March, a move which initially sent bond yields higher on expectations of some further borrowing.
The amount was more than 200 billion rupees announced earlier in the month, but it included about 125 billion rupees for food and fertiliser subsidies in addition to spending for rural jobs, roads, housing and a textile industry hit by easing exports.
"We expect continual thrust on the fiscal spending as the government is relying more and more on the fiscal part," said Sachchidanand Shukla, economist at ENAM Securities in Mumbai.
"And this will be through market borrowing, which will crowd out private investments and put pressure on interest rates."
Authorities have been pulling out all the stops to shore up growth in Asia's third-largest economy, although India's scope for a fiscal booster falls far short of neighbouring China as its combined state and central deficit is expected to top 7 percent of gross domestic product this financial year.
N.R. Bhanumurthy, economist at the Institute of Economic Growth in New Delhi, said it was hard to judge how effective fiscal stimulus packages would prove to be and India's was no exception.
"Definitely, we may have to do much more that what they have done today," he said.
The central bank has made a slew of interest rate cuts since mid-October to lift growth, which is expected to slow to about 7 percent this year from 9 percent in 2007/08 as a result of high borrowing costs and the global financial crisis.
The government faces national elections by May next year and the head of the Congress party, Sonia Gandhi, said in terms of the economy, the next few months were not going to be easy even though inflation was falling.
"The stimulus package is important to keep growth going," she said.
INFLATION
The benchmark stock index .BSESN extended the day's gains above 2 percent after news of the additional fiscal stimulus and the data showing inflation falling below 7 percent, the central bank's goal for the fiscal year end in March.
The 10-year federal bond yield <IN082418G=CC> see-sawed as the inflation and spending numbers emerged, before settling at a new 4-½ year low of 5.52 percent after a finance ministry official predicted easing price pressures would lead to further interest rate cuts.
The wholesale price index <INWPI=ECI>, India's most widely watched inflation measure, rose 6.84 percent in the 12 months to Dec. 6, sharply below the previous week's 8 percent and lower than a Reuters estimate of 7.49 percent.
"I think the RBI will go for aggressive moves. I expect a rate cut either this month or early January," said D.K. Joshi, principal economist at rating agency CRISIL, referring to the Reserve Bank of India.
Annual inflation peaked at 12.91 percent in early August but the central bank has cut its main lending rate by 250 basis points to 6.5 percent since mid-October and reduced banks' cash reserve requirements to try to unfreeze India's credit markets.
The fuel component of the index showed a steep drop, helped by falling prices of oil globally and a cut in government-set retail prices of petrol and diesel from Dec. 6.
$1=47.3 rupees (Additional reporting by Boby Michael in MUMBAI and Nigam Prusty and C.J. Kuncheria in NEW DELHI, Editing by Mark Williams) (Writing by Saikat Chatterjee and Charlotte Cooper)
CORRECTED - UPDATE 2-Indian inflation slows, government ups spending
Thu Dec 18, 2008 6:53pm IST
(Corrects spending in para 2 to 424.8 billion rupees from 424.4 billion rupees)
By Manoj Kumar and Rajkumar Ray
NEW DELHI, Dec 18 (Reuters) - India's government beefed up its plan for extra spending to stimulate the economy and counter the impact of the global slowdown, just as inflation fell more sharply than expected in a sign of faltering activity.
The Congress party-led coalition asked parliament for 424.8 billion rupees ($9 billion) in additional spending for the fiscal year ending in March, a move which initially sent bond yields higher on expectations of some further borrowing.
The amount was more than 200 billion rupees announced earlier in the month, but it included about 125 billion rupees for food and fertiliser subsidies in addition to spending for rural jobs, roads, housing and a textile industry hit by easing exports.
"We expect continual thrust on the fiscal spending as the government is relying more and more on the fiscal part," said Sachchidanand Shukla, economist at ENAM Securities in Mumbai.
"And this will be through market borrowing, which will crowd out private investments and put pressure on interest rates."
Authorities have been pulling out all the stops to shore up growth in Asia's third-largest economy, although India's scope for a fiscal booster falls far short of neighbouring China as its combined state and central deficit is expected to top 7 percent of gross domestic product this financial year.
N.R. Bhanumurthy, economist at the Institute of Economic Growth in New Delhi, said it was hard to judge how effective fiscal stimulus packages would prove to be and India's was no exception.
"Definitely, we may have to do much more that what they have done today," he said.
The central bank has made a slew of interest rate cuts since mid-October to lift growth, which is expected to slow to about 7 percent this year from 9 percent in 2007/08 as a result of high borrowing costs and the global financial crisis.
The government faces national elections by May next year and the head of the Congress party, Sonia Gandhi, said in terms of the economy, the next few months were not going to be easy even though inflation was falling.
"The stimulus package is important to keep growth going," she said.
INFLATION
The benchmark stock index .BSESN extended the day's gains above 2 percent after news of the additional fiscal stimulus and the data showing inflation falling below 7 percent, the central bank's goal for the fiscal year end in March.
The 10-year federal bond yield <IN082418G=CC> see-sawed as the inflation and spending numbers emerged, before settling at a new 4-½ year low of 5.52 percent after a finance ministry official predicted easing price pressures would lead to further interest rate cuts.
The wholesale price index <INWPI=ECI>, India's most widely watched inflation measure, rose 6.84 percent in the 12 months to Dec. 6, sharply below the previous week's 8 percent and lower than a Reuters estimate of 7.49 percent.
"I think the RBI will go for aggressive moves. I expect a rate cut either this month or early January," said D.K. Joshi, principal economist at rating agency CRISIL, referring to the Reserve Bank of India.
Annual inflation peaked at 12.91 percent in early August but the central bank has cut its main lending rate by 250 basis points to 6.5 percent since mid-October and reduced banks' cash reserve requirements to try to unfreeze India's credit markets.
The fuel component of the index showed a steep drop, helped by falling prices of oil globally and a cut in government-set retail prices of petrol and diesel from Dec. 6.
$1=47.3 rupees (Additional reporting by Boby Michael in MUMBAI and Nigam Prusty and C.J. Kuncheria in NEW DELHI, Editing by Mark Williams) (Writing by Saikat Chatterjee and Charlotte Cooper)
Sunday, December 21, 2008
MUMBAI: South Korean car maker Hyundai Motor Cos India unit expects its exports to fall by a quarter next year due to shrinking overseas demand, a company spokesman said.
To cope with the decline in demand, Hyundai Motor India Ltd is cutting production shifts at its plants, he said. We have enough orders on hand till the end of this year, but order flow in November and December has not been good and this will reflect in sales from January onwards, the spokesman told Reuters late on Friday.
The lag effect will result in a near 25 per cent drop in exports from January onwards, he added. Globally auto makers are facing depressed demands due to the economic slowdown and expect the downturn could extend to 2010. South Korean automakers are expected to see exports and local sales fall 6 per cent in 2009, after declining 5.2 per cent in 2008. Earlier this month Hyundai Motor had said it was launching output cuts in most of its factories abroad due to falling sales.
In November, exports from the Hyundai unit, Indias second-largest carmaker, rose by 188pc, but the orders were placed about three months previously, when the meltdown had just started. In 2008, exports have risen by 170 per cent, the spokesman said.It exports to about 95 countries, with major chunk of the demand coming from Europe. Small-sized cars accounted for the largest proportion of the exports, data from industry body Society of Indian Automobile Manufacturers showed.
linkinpark
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How India Avoided a Crisis
By JOE NOCERA
MUMBAI
What has taken a number of us by surprise is the lack of adequate supervision and regulation, Rana Kapoor was saying the other day. This was despite the fact that Enron had happened and you passed Sarbanes-Oxley. We dont understand it. Maybe its because we sit in a more controlled economy but .... He smiled sweetly as his voice trailed off, as if to take the sting off his comments. But they stung nonetheless.
Mr. Kapoor is an Indian banker, a former longtime Bank of America executive with a Rutgers M.B.A. who, along with his business partner and brother-in-law, Ashok Kapur, was granted government permission four years ago to start a private bank, which they called Yes Bank. In the United States, Yes Bank is the kind of name a go-go banker might give to, say, a high-flying mortgage lender in the middle of a bubble. (You can even imagine the slogan: Yes is part of our name!) But Yes Bank is not exactly the Washington Mutual of India. One news release it hands out to reporters who come calling is an excerpt from a 2007 survey by The Financial Express: #1 on Credit Quality amongst 56 Banks in India, reads the headline.
I arrived in Mumbai three weeks after the terrorist attacks that killed 200 people including, tragically, Yes Banks co-founder Mr. Kapur, who had served as the companys nonexecutive chairman and was gunned down while having dinner at the Oberoi Hotel. (His wife and two dinner companions miraculously escaped.)
My hope in traveling to Mumbai was to learn about the current state of Indian business in the wake of both the credit crisis and the attacks. But in my first few days in this grand, sprawling, chaotic city, what I mainly heard, especially talking to bankers, was about America, not India. How could we have brought so much trouble on ourselves, and the rest of the world, by acting in such an obviously foolhardy manner? Didnt we understand that you cant lend money to people who lack the means to pay it back? The questions were asked with a sense of bewilderment and an occasional hint of scorn. Like most Americans, I didnt have any good answers. It was a bubble, I would respond with a sheepish shrug, as if that were an adequate explanation. It isnt, of course.
In India, we never had anything close to the subprime loan, said Chandra Kochhar, the chief financial officer of Indias largest private bank, Icici. (A few days after I spoke to her, Ms. Kochhar was named the banks new chief executive, in a move that had long been anticipated.) All lending to individuals is based on their income. That is a big difference between your banking system and ours. She continued: Indian banks are not levered like American banks. Capital ratios are 12 and 13 percent, instead of 7 or 8 percent. All those exotic structures like C.D.O. and securitizations are a very tiny part of our banking system. So a lot of the temptations didnt exist.
And when I went to see Deepak Parekh, the chief executive of HDFC, which was founded in 1977 as the countrys first specialized mortgage bank, practically the first words out of his mouth were these: We dont do interest-only or subprime loans. When the bubble was going on, we did not change any of our policies. We did not change any of our systems. We did not change our thought process. We never gave more money to a borrower because the value of the house had gone up. Citibank has a few home equity loans, but most banks in India dont make those kinds of loans. Our nonperforming loans are less than 1 percent.
Yet two years ago, the Indian real estate market commercial and residential alike was every bit as frothy as the American market. High-rises were being slapped up on spec. Housing developments were sprouting up everywhere. And there was plenty of money flowing into India, mainly from private equity and hedge funds, to fuel the commercial real estate bubble in particular. Goldman Sachs, Carlyle, Blackstone, Citibank they were all here, throwing money at developers. So why did the Indian banks stay on the sidelines and avoid most of the pain that has been suffered by the big American banks?
Part of the reason is cultural. Indians are simply not as comfortable with credit as Americans. A lot of Indians, when you push them, will say that if you spend more than you earn you will get in trouble, an Indian consultant told me. Americans spent more than they earned.
Mr. Parekh said, Savings are important. Joint families exist. When one son moves out, the family helps them. So you dont borrow so much from the bank. Even mortgage loans tend to have down payments in India that are a third of the purchase price, a far cry from the United States, where 20 percent is the new norm. (Lets not even think about what they used to be.)
But there was also another factor, perhaps the most important of all. India had a bank regulator who was the anti-Greenspan. His name was Dr. V. Y. Reddy, and he was the governor of the Reserve Bank of India. Seventy percent of the banking system in India is nationalized, so a strong regulator is critical, since any banking scandal amounts to a national political scandal as well. And in the irascible Mr. Reddy, who took office in 2003 and stepped down this past September, it had exactly the right man in the right job at the right time.
He basically believed that if bankers were given the opportunity to sin, they would sin, said one banker who asked not to be named because, well, theres not much percentage in getting on the wrong side of the Reserve Bank of India. For all the bankers talk about their higher lending standards, the truth is that Mr. Reddy made them even more stringent during the bubble.
Unlike Alan Greenspan, who didnt believe it was his job to even point out bubbles, much less try to deflate them, Mr. Reddy saw his job as making sure Indian banks did not get too caught up in the bubble mentality. About two years ago, he started sensing that real estate, in particular, had entered bubble territory. One of the first moves he made was to ban the use of bank loans for the purchase of raw land, which was skyrocketing. Only when the developer was about to commence building could the bank get involved and then only to make construction loans. (Guess who wound up financing the land purchases? United States private equity and hedge funds, of course!)
Then, as securitizations and derivatives gained increasing prominence in the worlds financial system, the Reserve Bank of India sharply curtailed their use in the country. When Mr. Reddy saw American banks setting up off-balance-sheet vehicles to hide debt, he essentially banned them in India. As a result, banks in India wound up holding onto the loans they made to customers. On the one hand, this meant they made fewer loans than their American counterparts because they couldnt sell off the loans to Wall Street in securitizations. On the other hand, it meant they still had the incentive as American banks did not to see those loans paid back.
Seeing inflation on the horizon, Mr. Reddy pushed interest rates up to more than 20 percent, which of course dampened the housing frenzy. He increased risk weightings on commercial buildings and shopping mall construction, doubling the amount of capital banks were required to hold in reserve in case things went awry. He made banks put aside extra capital for every loan they made. In effect, Mr. Reddy was creating liquidity even before there was a global liquidity crisis.
Did Indias bankers stand up to applaud Mr. Reddy as he was making these moves? Of course not. They were naturally furious, just as American bankers would have been if Mr. Greenspan had been more active. Their regulator was holding them back, constraining their growth! Mr. Parekh told me that while he had been saying for some time that Indian real estate was in bubble territory, he was still unhappy with the rules imposed by Mr. Reddy. We were critical of the central bank, he said. We thought these were harsh measures.
For a while we were wondering if we were missing out on something, said Ms. Kochhar of Icici. Banks in the United States seemed to have come up with some magical new formula for making money: make loans that required no down payment and little in the way of verification and post instant, short-term, profits.
As Luis Miranda, who runs a private equity firm devoted to developing Indias infrastructure, put it: We kept wondering if they had figured out something that we were too dense to figure out. It looked like they were smart and we were stupid. Instead, India was the smart one, and we were the stupid ones.
Ms. Kochhar said that the underlying risks of having a majority of loans not owned by the people who originated them was not apparent during the bubble. Now that those risks have been made painfully clear, every banker in India realizes that Mr. Reddy did the right thing by limiting securitizations. At times like this, you tend to appreciate what he did more than we did at the time, said Mr. Kapoor. He saved us, added Mr. Parekh.
As the credit crisis has spread these past months, no Indian bank has come close to failing the way so many United States and European financial institutions have. None have required the kind of emergency injections of capital that Western banks have needed. None have had the huge write-downs that were par for the course in the West. As the bubble has burst, which lenders have taken the hit? Why, the private equity and hedge fund lenders who had been so eager to finance land development. Us, in others words, rather than them. Why is that not a surprise?
When I asked Mr. Kapoor for his take on what had happened in the United States, he replied: We recognize it as a problem of plenty. It was perpetuated by greedy bankers, whether investment bankers or commercial bankers. The greed to make money is the impression it has made here. Anytime they wanted a loan, people just dipped into their home A.T.M. It was like money was on call.
So it was. And our regulators, unlike theirs, just stood by and let it happen. The next time were moving into bubble territory, perhaps we can take a page from Mr. Reddys book sometimes its better to apply the brakes too early than too late. Or, as was the case with Mr. Greenspan, not at all.
None of this is to say that the global credit crisis hasnt affected India. It certainly has. Ill be back after the holidays with more columns from India, including how Sept. 15 the day Lehman Brothers defaulted changed everything, even here, on the other side of the world.
By JOE NOCERA
MUMBAI
What has taken a number of us by surprise is the lack of adequate supervision and regulation, Rana Kapoor was saying the other day. This was despite the fact that Enron had happened and you passed Sarbanes-Oxley. We dont understand it. Maybe its because we sit in a more controlled economy but .... He smiled sweetly as his voice trailed off, as if to take the sting off his comments. But they stung nonetheless.
Mr. Kapoor is an Indian banker, a former longtime Bank of America executive with a Rutgers M.B.A. who, along with his business partner and brother-in-law, Ashok Kapur, was granted government permission four years ago to start a private bank, which they called Yes Bank. In the United States, Yes Bank is the kind of name a go-go banker might give to, say, a high-flying mortgage lender in the middle of a bubble. (You can even imagine the slogan: Yes is part of our name!) But Yes Bank is not exactly the Washington Mutual of India. One news release it hands out to reporters who come calling is an excerpt from a 2007 survey by The Financial Express: #1 on Credit Quality amongst 56 Banks in India, reads the headline.
I arrived in Mumbai three weeks after the terrorist attacks that killed 200 people including, tragically, Yes Banks co-founder Mr. Kapur, who had served as the companys nonexecutive chairman and was gunned down while having dinner at the Oberoi Hotel. (His wife and two dinner companions miraculously escaped.)
My hope in traveling to Mumbai was to learn about the current state of Indian business in the wake of both the credit crisis and the attacks. But in my first few days in this grand, sprawling, chaotic city, what I mainly heard, especially talking to bankers, was about America, not India. How could we have brought so much trouble on ourselves, and the rest of the world, by acting in such an obviously foolhardy manner? Didnt we understand that you cant lend money to people who lack the means to pay it back? The questions were asked with a sense of bewilderment and an occasional hint of scorn. Like most Americans, I didnt have any good answers. It was a bubble, I would respond with a sheepish shrug, as if that were an adequate explanation. It isnt, of course.
In India, we never had anything close to the subprime loan, said Chandra Kochhar, the chief financial officer of Indias largest private bank, Icici. (A few days after I spoke to her, Ms. Kochhar was named the banks new chief executive, in a move that had long been anticipated.) All lending to individuals is based on their income. That is a big difference between your banking system and ours. She continued: Indian banks are not levered like American banks. Capital ratios are 12 and 13 percent, instead of 7 or 8 percent. All those exotic structures like C.D.O. and securitizations are a very tiny part of our banking system. So a lot of the temptations didnt exist.
And when I went to see Deepak Parekh, the chief executive of HDFC, which was founded in 1977 as the countrys first specialized mortgage bank, practically the first words out of his mouth were these: We dont do interest-only or subprime loans. When the bubble was going on, we did not change any of our policies. We did not change any of our systems. We did not change our thought process. We never gave more money to a borrower because the value of the house had gone up. Citibank has a few home equity loans, but most banks in India dont make those kinds of loans. Our nonperforming loans are less than 1 percent.
Yet two years ago, the Indian real estate market commercial and residential alike was every bit as frothy as the American market. High-rises were being slapped up on spec. Housing developments were sprouting up everywhere. And there was plenty of money flowing into India, mainly from private equity and hedge funds, to fuel the commercial real estate bubble in particular. Goldman Sachs, Carlyle, Blackstone, Citibank they were all here, throwing money at developers. So why did the Indian banks stay on the sidelines and avoid most of the pain that has been suffered by the big American banks?
Part of the reason is cultural. Indians are simply not as comfortable with credit as Americans. A lot of Indians, when you push them, will say that if you spend more than you earn you will get in trouble, an Indian consultant told me. Americans spent more than they earned.
Mr. Parekh said, Savings are important. Joint families exist. When one son moves out, the family helps them. So you dont borrow so much from the bank. Even mortgage loans tend to have down payments in India that are a third of the purchase price, a far cry from the United States, where 20 percent is the new norm. (Lets not even think about what they used to be.)
But there was also another factor, perhaps the most important of all. India had a bank regulator who was the anti-Greenspan. His name was Dr. V. Y. Reddy, and he was the governor of the Reserve Bank of India. Seventy percent of the banking system in India is nationalized, so a strong regulator is critical, since any banking scandal amounts to a national political scandal as well. And in the irascible Mr. Reddy, who took office in 2003 and stepped down this past September, it had exactly the right man in the right job at the right time.
He basically believed that if bankers were given the opportunity to sin, they would sin, said one banker who asked not to be named because, well, theres not much percentage in getting on the wrong side of the Reserve Bank of India. For all the bankers talk about their higher lending standards, the truth is that Mr. Reddy made them even more stringent during the bubble.
Unlike Alan Greenspan, who didnt believe it was his job to even point out bubbles, much less try to deflate them, Mr. Reddy saw his job as making sure Indian banks did not get too caught up in the bubble mentality. About two years ago, he started sensing that real estate, in particular, had entered bubble territory. One of the first moves he made was to ban the use of bank loans for the purchase of raw land, which was skyrocketing. Only when the developer was about to commence building could the bank get involved and then only to make construction loans. (Guess who wound up financing the land purchases? United States private equity and hedge funds, of course!)
Then, as securitizations and derivatives gained increasing prominence in the worlds financial system, the Reserve Bank of India sharply curtailed their use in the country. When Mr. Reddy saw American banks setting up off-balance-sheet vehicles to hide debt, he essentially banned them in India. As a result, banks in India wound up holding onto the loans they made to customers. On the one hand, this meant they made fewer loans than their American counterparts because they couldnt sell off the loans to Wall Street in securitizations. On the other hand, it meant they still had the incentive as American banks did not to see those loans paid back.
Seeing inflation on the horizon, Mr. Reddy pushed interest rates up to more than 20 percent, which of course dampened the housing frenzy. He increased risk weightings on commercial buildings and shopping mall construction, doubling the amount of capital banks were required to hold in reserve in case things went awry. He made banks put aside extra capital for every loan they made. In effect, Mr. Reddy was creating liquidity even before there was a global liquidity crisis.
Did Indias bankers stand up to applaud Mr. Reddy as he was making these moves? Of course not. They were naturally furious, just as American bankers would have been if Mr. Greenspan had been more active. Their regulator was holding them back, constraining their growth! Mr. Parekh told me that while he had been saying for some time that Indian real estate was in bubble territory, he was still unhappy with the rules imposed by Mr. Reddy. We were critical of the central bank, he said. We thought these were harsh measures.
For a while we were wondering if we were missing out on something, said Ms. Kochhar of Icici. Banks in the United States seemed to have come up with some magical new formula for making money: make loans that required no down payment and little in the way of verification and post instant, short-term, profits.
As Luis Miranda, who runs a private equity firm devoted to developing Indias infrastructure, put it: We kept wondering if they had figured out something that we were too dense to figure out. It looked like they were smart and we were stupid. Instead, India was the smart one, and we were the stupid ones.
Ms. Kochhar said that the underlying risks of having a majority of loans not owned by the people who originated them was not apparent during the bubble. Now that those risks have been made painfully clear, every banker in India realizes that Mr. Reddy did the right thing by limiting securitizations. At times like this, you tend to appreciate what he did more than we did at the time, said Mr. Kapoor. He saved us, added Mr. Parekh.
As the credit crisis has spread these past months, no Indian bank has come close to failing the way so many United States and European financial institutions have. None have required the kind of emergency injections of capital that Western banks have needed. None have had the huge write-downs that were par for the course in the West. As the bubble has burst, which lenders have taken the hit? Why, the private equity and hedge fund lenders who had been so eager to finance land development. Us, in others words, rather than them. Why is that not a surprise?
When I asked Mr. Kapoor for his take on what had happened in the United States, he replied: We recognize it as a problem of plenty. It was perpetuated by greedy bankers, whether investment bankers or commercial bankers. The greed to make money is the impression it has made here. Anytime they wanted a loan, people just dipped into their home A.T.M. It was like money was on call.
So it was. And our regulators, unlike theirs, just stood by and let it happen. The next time were moving into bubble territory, perhaps we can take a page from Mr. Reddys book sometimes its better to apply the brakes too early than too late. Or, as was the case with Mr. Greenspan, not at all.
None of this is to say that the global credit crisis hasnt affected India. It certainly has. Ill be back after the holidays with more columns from India, including how Sept. 15 the day Lehman Brothers defaulted changed everything, even here, on the other side of the world.
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