Indian Economy - News & Updates - Archive

[Neo]

Demand sparks India's power play

By Karishma Vaswani
Business correspondent, BBC News, Mumbai

Russia has agreed to build four nuclear reactors in Southern India as the country tries to feed a voracious demand for power and energy that is outstripping current supplies.

It is estimated that in 15 years time India will need three times as much energy as its using today.

The lights are on here for just a few hours a day - that's despite the fact that this village is only a two hour drive from Mumbai, India's financial and entertainment capital - where the lights are on all of the time.

For 13-year-old Trupti Yashwant Rao and her brother, studying by the light of a kerosene lantern is a daily reality.

Her father, a principal at a local school, has taught her this way since she can remember.

The reason for the blackouts is that the state of Maharashtra, where her village lies, is in the midst of a power shortage brought about by the rapacious demand for energy as India's economy expands rapidly.

We have power cuts here already for at least 8 hours a day

Chandrakant Yashwant Rao

'Real burden'

Now, there are reports that Maharashtra could see more power cuts - up to 14 hours a day. Villagers in Sangam are horrified.

"We have power cuts here already for at least 8 hours a day, and it is really difficult," Chandrakant Yashwant Rao, Trupti's father, says as he adjusts the kerosene lamp on his desk.

"No farming work can get done because there's not enough power for irrigation of the land.

"The children here all study by lantern light, making it hard on them too. It's a real burden for us."

Stumbling about in the darkness outside of Chandrakant's home - you are struck by the deep blackness of the night.

There is not a light to be seen for miles around; just small, tiny dots of fire and lanterns in the distance.

It is hard to believe that this is barely off the main highway that takes you back to Mumbai

Regular power cuts make life difficult

But this is a problem that is not isolated to Sangam Village.

A few hundred miles away, in the Maharashtran village of Palshi in the Amravati district, it is reported that farmers have threatened to commit suicide unless they get uninterrupted supplies of power.

They also say it is impossible for them to do any farming without the power to fuel their irrigation.


Struggle

Additional capacity is needed to keep pace with existing consumers of electricity - as well as future consumers

Martin Daniell
Platts

"As with many developing Asian economies, India has the same growth problems when it comes to power," says Martin Daniell of energy analysts Platts.

"Most areas in the country don't have enough electricity - not enough constant supplies of electricity.

"The problem lies in the fact that now these areas are also seeing economic growth.

"Additional capacity is needed to keep pace with existing consumers of electricity - as well as future consumers."

India's power crunch is proving to be problematic not just for its population, but also for its economic growth.

Power plants across the country are struggling to keep up with the pace of demand.

At Reliance Energy outside of Mumbai, power production is already at a peak.

The coal-powered plant supplies the majority of the electricity for Mumbai's homes and factories.

We're at peak production point - and it will be very difficult to produce more electricity here if the demand keeps growing

PK Majumdar
Reliance Energy

"Coal is responsible for the creation of two thirds of India's electricity," says plant manager PK Majumdar. "The rest comes from hydroelectricity."

"India has one of the lowest costs of production of electricity in the world - because of large and accessible coal reserves," he adds.

Alternative needed

Unfortunately those coal supplies are running out and demand is rising quickly.

Mumbai alone has seen an annual rise in demand for electricity of between 5% and 10% in the past few years, according to Reliance Energy.

"As the demand for electricity grew, we grew our capacity along with it," says Mr. Majumdar.

"But now we're at peak production point - and it will be very difficult to produce more electricity here if the demand keeps growing.

"We would need an alternative source of power - more power in some other form."

This then is India's challenge: finding an alternative source of energy - and fast.

According to recent reports, India's economy will become the second largest in the world by 2050.

But in order to keep its economic engine growing, it needs to fuel its factories, its machines, its homes and schools with some form of power.

Locating another source of energy is crucial for India's economic development.

Otherwise India's power crunch could turn the lights out on the country's growth.

http://news.bbc.co.uk/2/hi/business/6302927.stm

 

[Contrarian]

Only 3 per cent Indians understand economic reforms

NEW DELHI: India may be registering blistering rates of growth but only three per cent of its people understand the economic reforms being implemented and most think they have benefitted only the rich, said a survey published Friday.

“Seventy-two per cent of Indians were unaware of the economic changes that the country has been going through since 1991” when India launched market reforms, said the survey published in the Hindustan Times.

Sixty-two per cent also felt the changes in economic policy benefitted only the rich, said the poll by the New Delhi-based Centre for the Study of Developing Societies for the Hindustan Times and news channel CNN-IBN.

The survey questioned 7,681 people across 19 states of India.

It found that only 28 per cent of Indians had heard of economic reforms while “most did not have even a rough idea of the broad directions of the policy changes.”

Despite this lack of awareness of the reforms, 56 per cent said India’s economy had improved in the past decade while 46 per cent said their family’s economic situation had improved since 1991.

India liberalised its economy in 1991 when Manmohan Singh, who is now India’s prime minister, served as the country’s finance minister.

Sixteen years of reforms have seen revolutionary changes in Indian industry, with government figures showing 9.1 per cent economic growth in the first six months of 2006 led by strong manufacturing growth.

http://www.thenews.com.pk/daily_detail.asp?id=40534

I saw this poll result on TV, it was the State of the Nation poll, and a debate followed by experts. Pretty good!
They said that Indians only now realise that reforms are good, even now a majority think that it should be the govts responsibility to provide services to them, not private companies. And that there is such a shameful lack of knowledge about reforms in India. One of the major reasons is that reforms have always been a very political issue, any govt which publicly went with reforms was criticised, lost national standings, lost votes, other parties said that the govt was not 'anti-poor'. A term which can literally cause a govt to fall down from its majority!! It was a bullet, so most govts deliberately kept reforms quiet, going slowly.

This really points out the bad side of democracy, where political parties play vote bank politics at the cost of the nation

 

[Contrarian]

Demand sparks India's power play

HEHE...Chk this out. I saw it a couple of days back but couldnt post it.

http://timesofindia.indiatimes.com/...e_your_cell_with_dung/articleshow/1410529.cms

Now, charge your cell with dung!

AHMEDABAD: What do you do if you are left without electricity for long stretches of time? You make your own electricity. Simple. Niruttam Kumar Singh and Harvansh Yadav, a student-teacher duo from Gangagarh village in Bulandshaher, Uttar Pradesh, have made a cow dung battery that lights up electric bulbs, charges mobile phones and brings alive radios!

"In Gangagarh,we barely get five hours of electricity daily, making it difficult for students to study at night," says Yadav,who is in Ahmedabad to showcase his innovation at a workshop on 'Green Grassroots Innovation, Incubation and Enterprises' organised by the Society for Research and initiatives for Sustainable Technologies and Institutions (SRISTI) at IIM-Ahmedabad.

Three years ago, Yadav and Niruttam, a class 7, student came together to resolve the issue. "We knew cow dung produced biogas and decided to experiment with it to produce electricity.

We collected cow dung in a plastic container and put two discharged batteries in it. As we charged cow dung with a salt water solution, the positive and negative charges produced were collected in the batteries and interconnected in series to produce a current," Niruttan said.

The duo charged mobile phones with their innovation. "Each unit produces 1.5 volts of current," says Niruttam, adding, "The cow dung needs to be replaced once in 45 days. If one wants more efficiency, one can put sulphuric acid."

The two proudly say that their innovation has changed life in Bulandshaher. "Around 250 households in Gangagarh and neighbouring Kamonah, Jinamai, Risoolgarh and other villages use our battery to light bulbs and listen to radio. We teach them how to make such batteries free."

Niruttam is now planning to improve the design. "We want to use something that doesn't give a foul smell — cow urine perhaps." Meanwhile, this innovation is all set to charge mobile phones at Gujarat University. "We are planning to put a mobile phone charging unit in the campus for students," says professor Anil Gupta of SRISTI.

 

[Neo]

I And that there is such a shameful lack of knowledge about reforms in India.

I was quite surprised myself to learn that, India is often advocated as a democratic and iopen society.

One of the major reasons is that reforms have always been a very political issue, any govt which publicly went with reforms was criticised, lost national standings, lost votes, other parties said that the govt was not 'anti-poor'. A term which can literally cause a govt to fall down from its majority!! It was a bullet, so most govts deliberately kept reforms quiet, going slowly.

How can you keep reforms quiet, there's no such thing unless you're deaf and blind.
Please elaborate.

This really points out the bad side of democracy, where political parties play vote bank politics at the cost of the nation

There's no such thing as a perfect democracy either.

 

[Adux]

Neo

India is plagued with socailist menatlity to the extreme ends over here, Government has Hotels etc etc, governments job is to run the country and important insitutitions needed for that...

Our people like everything free, Reform is equal to transperancy, Loss of Babudom, Plus the mInister making a lot of money with the companies...etc etc

 

[Contrarian]

I was quite surprised myself to learn that, India is often advocated as a democratic and iopen society.

It is mate, it is democractic and open. You dont get it, its just that the reforms took place, but they were not publicised that much and other things were done to dwarf these proceses. The govt cannot stop any thing from being published, its just they did things that dwarfed such economic news in the media. They HAD to do it, or reforms would not have taken place at all. It was necessary since India went near bankruptcy in 1990.

How can you keep reforms quiet, there's no such thing unless you're deaf and blind.
Please elaborate.

Like this, when govt goes for any reform, then it would first say allow FDI in any secor only 25%, so when people say that this would lead to foreign companies taking over India, they would say that its only minority stake and the rest is with govt. Then after some years, they'd increase it to 49% as is the case with many sectors now, and they'd cut a deal with the copmany buying the shares that they would not fire the emplyees for atleast this much time, so the govt claims that the people will not be fired, etc, etc.

With every half way reform done, they would announce big projects taken by the govt that basically grabs the main attention, like either announcing subsidy on something or going for a big ticket project:
eg: Golden Quadrilateral Project started by the Vajpayee govt. He got money for this by announcing to the public that Rs 1 would be charged on petrol, and people should do this for the nation. Every citizen worth his salt commended him for taking effort to upgrade the nation's infrastructure.

The Golden Quadrilateral was the project to connect the 4 main centres of India, industrial and population wise. New Delhi, Bombay, Chennai,Calcutta. It was a HUGE project!

Now the second phase of the Project has started, making more lanes in the Golden Quadrilateral.

There's no such thing as a perfect democracy either.

Yes, but votebank politics are a HUGE thing in India.Much more so than in developed countries.

 

[Neo]

Thnaks for explaining.

 

[Neo]

India’s trade deficit at $5.68bn

NEW DELHI: India’s trade deficit widened to $5.68 billion in December from $2.69 billion a year earlier as the pace of export growth slackened in Asia’s fourth-largest economy.

The deficit stood at $6.20 billion in November, $6.21 billion in October and $5.33 billion in September. The government said on Saturday the trade gap widened to $41.72 billion in the first nine months of the fiscal year that began in April, from $31.76 billion in the same period last year.

Exports in December rose 7.75 per cent from a year earlier to $9.90 billion, while imports rose an annual 31.12 per cent to $15.58 billion, the provisional data showed. Analysts said the trade deficit was not yet a concern but slowing down of export growth needed to be looked at carefully.

“The trade deficit is not a concern but exports are lower than expectations. One needs to look at it closely to find out the reasons,” said Saumitra Chaudhuri, economic adviser, domestic ratings agency ICRA.

Exports in the April-December period were $89.49 billion, compared with $73.36 billion in the year-ago period. The government’s full-year export target is $126 billion, a rise of 22.3 per cent over the previous year.

Imports in the first nine months of 2006/07 were $131.21 billion an increase of 24.8 per cent from $105.11 billion in the same year ago period. Non-oil imports, a key gauge of industrial activity, were up 31.81 per cent in December to $10.76 billion while April-December period they rose 18.67 per cent to $87.40 billion.

Oil imports in December rose 29.58 per cent from a year earlier to $4.82 billion. In the April-December period, they grew an annual 39.23 per cent to $43.82 billion. India imports about 70 per cent of its oil needs.

http://www.thenews.com.pk/daily_detail.asp?id=40670

 

[Neo]

January 28, 2007

India opens telecom door to Vodafone

DAVOS, Jan 27: India hopes Vodafone will be able to establish itself there quickly, giving the global telecoms group’s plan to take over local player Hutchison Essar a welcome boost.

“We do hope that Vodafone will be able to establish its footprint in India sooner rather than later,” Junior Minister for Industries Ashwani Kumar said after meeting Vodafone Chief Executive Arun Sarin on the fringes of the World Economic Forum.

The two discussed Vodafone's plans to tap into India’s expanding telecoms market, although Sarin was not available to comment on the progress of the proposed bid for Hutchison Essar.

“My sense in meeting Sarin was that things are progressing well for Vodafone,” Kumar told Reuters in an interview after the meeting, adding that details of commercial negotiations were nothing to do with the Indian government.

Britain's Vodafone is being challenged by India’s Reliance Communications, the Hinduja group and Hutchison's minority partner in the venture, Indian group Essar, in the race for Hutchison Essar.

Valuation estimates for Hutchison Essar, where a 67 per cent controlling stake owned by Hong Kong conglomerate Hutchison Whampoa is on offer, have climbed to as much as $20 billion from around $13.5 billion as the list of suitors expands.

Asked whether Sarin had sought reassurances over the bid process from the Indian government, Kumar said:”I don't think he specifically asked for any reassurances. The Indian government telcom policy is clear-cut and it is well laid out.” Winning control of Hutchison Essar would give Vodafone a strong asset and 22 million customers in a fast growing market.

India’s main mobile operators now share nearly 150 million customers, but with India’s population over 1.1 billion, it translates to less than two out of 100 people owning a mobile.

For Vodafone, which faces slowing growth in its key Western European markets, a strong presence in India could provide it with a vital growth engine.

Vodafone owns a 10 per cent stake in India's top mobile company Bharti Airtel, but does not stand a chance of getting control as Bharti's main shareholders don't want to sell.

http://www.dawn.com/2007/01/28/ebr19.htm

 

[Contrarian]

UK Indians see Tata Corus buy-out as 'India poised'

LONDON: Indians - on the UK rich list and never notionally near it - have hailed Tata's purchase of Corus as a defining sign the mother country is finally poised to leap on to the world stage.

The jubilant reaction was led on Wednesday by Aditya Mittal, the Indian-passport-holding chief financial officer of Arcelor Mittal, the world's largest steelmaker and also it's most global.

Mittal told TOI, "Congratulations to Tata Steel. This is an important milestone for India's globalisation and is a strong signal that Indian companies are ready to compete on a global arena. Tata has a strong track record and I am confident they will make a success of integrating Corus and establishing a global business. For the industry more broadly this is a very positive development and Arcelor Mittal has long been a champion in the benefits of consolidation for the industry as we believe it will help create a more sustainable industry".

Mittal's endorsement was echoed by Britain's curry king, Ghulam Noon, who left Mumbai for London to build a multi-million-pound Indian food empire. In exuberant tones, Noon said "Oh this is fantastic. Congratulations to Tata. India is really shining now".

On a parallel but distinct note of congratulation, Lord Swaraj Paul, whose Caparo Steel was once the fancied globe-trotting player with a vision, told this paper, "this is a marvellous thing but it would be an overstatement to say that this is a symbol of India arriving on the world stage".

Paul, who combines his commercial interests with thoughtful comment on wider politics, business and society, said, "India should learn lessons from this....here was an Indian company bidding for a British one and everyone (here) has welcomed it. It is important to open ourselves up to the world. It makes a country stronger."

Noon added, in a prescient indication that Tata's overall control of the UK's former steel champion may one day come under scrutiny, "Fittingly, it is Tata that has done this. It is a great company. A great Indian company. People admire its ethics and governance".

The curry king said, along with a multitude of ordinary Indians who insisted that even though they were not captains of industry, "we still feel proud", that Tata's buyout would "encourage small, large and medium-sized Indian companies to look abroad".

He said Tata's win at the auction told the world that "Indian companies are now mature enough to stride the world".

But a reflective Paul added that it was time for India to see things clearly rather than blow them out of proportion. "Such takeovers happen in London everyday. It may be unique for India. The point is that these are two strong companies and this makes for a global combination in a global market".
http://timesofindia.indiatimes.com/...y-out_as_India_poised/articleshow/1547866.cms

 

[Contrarian]

Tata Steel shares plunge 10.47% on bourses

MUMBAI: Shares of Tata Steel on Wednesday plunged over 10 per cent on the bourses on concerns in the market that the 11.3 billion dollar Corus deal could stretch its valuations.

Tata Steel shares plunged by Rs 55.35 or over 10 per cent to close at Rs 463.95 at the BSE.

The scrip witnessed heavy trading on Wednesday with a total of 2.58 crore shares of Tata Steel changing hands on both the bourses.

On the National Stock Exchange, Tata Steel shares plunged by Rs 54.35 or 10.47 per cent to end at Rs 464.90. The scrip had touched a low of Rs 461.10 during the day.

Tata Steel shares affected the BSE Metal index, which plunged nearly 5 per cent to close at 9,283.17.

Besides Tata Steel, the major losers on the metal index included -- Hindustan Zinc down Rs 53.30 or seven per cent to end at Rs 707.20, PSU major SAIL losing Rs 4.90 or 4.33 per cent at Rs 108.15.

The only two scrips in the index, which managed to remain in the green were -- JSW Steel surging Rs 14 or 3.35 per cent to end at Rs 458.70 and Jindal Steel.

Tata Steel will acquire Anglo-Dutch steelmaker Corus Group for 11.3 billion dollar. Tata Steel has offered Corus' shareholders 608 pence per share in cash, topping a final bid of 603 pence from Brazilian Companhia Siderurgica Nacional (CSN).

 

[Contrarian]

Home, other loan rates to go up

MUMBAI: Buying a house, car, shares or shopping through credit cards may become expensive with the Reserve Bank of India hiking a key short term rate by 25 basis points for taming inflation.

In a policy review that may trigger across-the-board increase in interest rates, the RBI on Wednesday hiked the repo rate, through which it injects liquidity in the banking system, to 7.50 per cent from 7.25 per cent.

Concerned over excessive credit growth, the central bank targeted real estate, personal loans, credit card advances and exposure in share markets through higher provisioning norms.

While the home finance was kept out of these 'heated areas' which would attract even higher interest rates, analysts feel that buying a house would still become expensive along with the overall hardening of interest rates.

In his statement on the third quarterly review of monetary policy, RBI Governor Y V Reddy said the objective was to keep the inflation rate between 5 and 5.5 per cent this fiscal. In the backdrop of the buoyant economy, the RBI revised the GDP growth projections to 8.5-9 per cent for 2006-07.

The apex bank kept all other key rates unchanged. The bank rate and the reverse repo rate (the liquidity sucking mechanism) were kept at six per cent each, while the cash reserve ratio was maintained at 5.5 per cent. The last tranche of the CRR hike was effected in December and January to curb money supply and inflation.

It kept the statutory liquidity ratio unchanged at 25 per cent, despite a recent Ordinance allowing RBI to reduce it.

"We are trying to rebalance by attacking inflation without affecting the growth momentum," Reddy said in his customary press conference.

 

[Contrarian]

GDP growth rate revised to 9% for 2005-06

NEW DELHI: Indian economy, growing at a pace next only to China, expanded at a faster rate of 9.0 per cent during 2005-06 largely on the back of a higher output in farm sector than previously estimated.

The government on Wednesday revised upward its growth estimates for the last financial year to 9.0 per cent as against 8.4 per cent earlier, boosting hopes of the economy touching an overall 8.0 per cent in the 10th five-year plan.

The country's gross domestic product (GDP) had grown by 3.8 per cent in 2002-03, 8.5 per cent in 2003-04 and 7.5 per cent in 2004-05. The economy grew at 9.1 per cent in the first half of the current financial year.

With the revision, the GDP at constant prices stood at Rs 26,04,532 crore in 2005-06 from Rs 23,89,660 crore in 2004-05.

"It (the revised figures) augurs well for 2006-07. Although, I must caution we will have to see what will be its impact on growth figures this year as the base figures have been revised," Finance Minister P Chidambaram said after the Central Statistical Organisation released the figures.

The revision was primarily on account of higher growth in agriculture sector, which rose six per cent during 2005-06 as against the previous estimates of 3.9 per cent. Manufacturing growth was a shade better at 9.1 per cent as against the previous figure of 9 per cent.

Growth rates in construction has also been revised upward to 14.2 per cent. Similarly, insurance, financing, real estate and business services grew at a higher 10.9 per cent and transport and communication at 13.9 per cent in 2005-06.

 

[Contrarian]

Bankers welcome RBI move; BPLR hikes possible

MUMBAI: Bankers on Wednesday said the RBI Quarterly Monetary Review would trigger another round of interest rate hike even as they welcomed the measures to rein in inflation and push up growth.

The apex bank, in its third quarter review of its Annual Monetary Policy, hiked the repo rate by 0.25 per cent and increased provisioning in four segments.

"The RBI measures are well-balanced and not as worrisome as expected. Clearly, the need to curb inflation and ensure price stability were on top of the RBI's agenda," said Rana Kapoor, Yes Bank's Managing Director and CEO.

"A message has been sent that the RBI intends to tackle inflation decisively," V Vaidyanathan, Executive Director, ICICI Bank said.

Liquidity too could come under pressure, but enough would be available for deployment into productive sectors such as agriculture, SME segment, industry and infrastructure, they averred.

"The slight tightening visible presently is only to prevent credit flowing into unproductive sectors and speculative activities," said M B N Rao, Chairman and Managing Director, Canara Bank.

Following the repo rate hike, cost of funds will get higher for banks. "The RBI has conveyed its message in a direct manner," said P K Gupta, Chairman, United Bank of India.

Following an increase in provisioning norms, especially the commercial real estate, bankers said that loans would get costlier.

The increase in provisioning was expected, said K N Prithviraj, Chairman and Managing Director of Oriental Bank of Commerce, adding "it is a prudent move looking at the risks involved."

Mohan Shenoy, Treasurer, Kotak Mahindra Bank, however, described the increase from 1 to 2 per cent as "very steep" and that it would "discourage banks from lending in those particular sectors."

Bankers were unanimous that credit spreads for bank borrowings will go up, making deposit mobilisation crucial.

Banks are expected to take a re-look at their benchmark prime lending rates (BPLR) following the increase in provisioning in certain sensitive sectors and the 25 bps hike in the repo rate.

While Yes Bank will be hiking its BPLR by 50 bps effective from Thursday, ICICI Bank's Vaidyanathan said that several banks could follow suit. "ICICI Bank will study the impact of the policy before taking a call on its BPLR," he said.

Prithviraj, Gupta and Rao, all public sector bankers, however, said that raising of BPLRs would be an individual call of banks and that they felt no need to hike their rates immediately.

 

[Contrarian]

Kamal Nath hails Tata-Corus deal

NEW DELHI: Union Commerce and Industry Minister Kamal Nath on Wednesday hailed the Tata's acquisition of Corus as a sign of India's economic strength.

“The Tata's win reflects India's economic and fundamental strength,” Nath said.

Earlier, Nath had said that the corporate deals should always be determined by business forces taking into account the best corporate practices and governments should not have much role in these business deals.

Nath has been vocally supportive of cross-border mergers and acquisitions, including Arcelor-Mittal and Vodafone.