Indian Economy - News & Updates - Archive

[Contrarian]

Big deal: It's business as usual at Tata hub

MUMBAI: One would have expected some kind of hangover after all the celebrations at Bombay House on Wednesday. But inside the Edwardian building, headquarters to what is now India's largest business house, it was back to business as usual.

Ratan Tata and his team reported to work like they would on any other day, buzzing around the building with a lot of routine things to be attended to.

Given the kind of man hours and toil this deal has taken, one wouldn't have been surprised if Tata and the core team members had taken a day off.

But in true Tata tradition, everybody, including the big boys Noshir Soonawala and Ishaat Hussain, among others, were at work to pick up from where they had left off before the deadline for the deal drew closer.

As is usually the wont, there has been no talk of any party or distribution of sweets to mark the victory.

To an outsider, unaware of Wednesday's developments, Bombay House looked its usual self-calm, efficient and sober.

Although, Tata admitted the team had been very emotional at the Taj Presidential Suite once the Takeover Panel announced the winner, since the press conference on Wednesday he has gone back to his reserved self.

There was a flood of steady visitors, well-wishers, bouquets, phone calls, emails and text messages to congratulate the Tata team on their conquest.

Ratan Tata and Soonawala were in a closed door meeting for the better half of the day, while Hussain attended the Bombay Stock Exchange board meeting. Arun Gandhi, the deal maker, is expected to be back in office on Thursday.

Insiders say the next step in the deal will be getting all the legalities, paperwork and details ironed out.

The daunting task in front of Tata is to get approval from Corus' shareholders as well as get a go ahead from the London court.

Analysts say Tata will face challenges in integrating both businesses specially since there will be considerable differences due to the nationality, work culture and style of operation.

For the moment though, there has been no direct communication from the chairman's office regarding the acquisition. But Tata employees, right down to the security personnel manning the gates, seem to have a spring in their steps.

 

[Contrarian]

Indian bankers rue lost chance

MUMBAI: As the dust begins to settle on the Tata-Corus deal, Indian bankers are asking themselves whether they have lost an opportunity to structure the mega deal.

European investment banks-Deutsche Bank, Rothschild, ABN Amro Bank and Credit Suisse Group-were the lead bankers to the Tata Group in its effort to acquire the $12 billion Corus steel plant.

The country's largest public sector bank State Bank of India and private sector major ICICI Bank managed to play a small role in the loan syndication process.

"This was largely to protect the reputation of Indian banks,"a source said.Domestic banks are at a clear disadvantage when it comes to funding large-ticket acquisitions.

"Indian banks are equally capable. However, foreign banks have a good understanding of the global industry. And access to the global capital pool gives us an advantage,"said Gunit Chadha, chief executive officer and managing director, Deutsche Bank India.

The disadvantage, say bankers, is largely on account of the comparatively smaller balance sheet size, lack of experience, and limited global presence.

However, these banks are actively funding small acquisitions, which could increase from $1 billion to $1.5 billion.

Tata Steel, vice-president finance, Koushik Chatterjee, who is organising finance for his company's Corus acquisition, said foreign banks were preferred to the Indian counterparts because of their global presence, particularly in key markets like the US and Europe.

According to him, foreign banks understand investors' requirements and have the expertise to raise funds at competitive rates.

"Indian banks have to become global to compete with foreign banks."Chatterjee is in the midst of tying up around $10 billion to finance the acquisition.

But there are some other issues to consider as well. "In the current deal, the Tata Group was predominantly looking for foreign currency funding and the debt was raised at a very fine rate, which was not attractive to us,"said Tarashankar Bhattacharya, managing director of State Bank of India.

Typically, most Indian banks by regulation do not overexpose themselves to one particular group. The size of the Tata-Corus deal at $13 billion (Rs 54,000 crore) is considered too big for any Indian bank to fund.

The balance sheet size of SBI-India's largest bank-is $156 billion. Yet, it is not even among the top 100 banks in the world. It ranks 70th among banks in Asia.

O P Bhatt, chairman, State Bank of India in his earlier interaction with the media had said, "Indian banks have to acquire balance sheet size in order to enable them to finance huge overseas deals worth billions of dollars."

Despite being the largest bank in the country, SBI was involved in only 10% of deals in the international market, he added.

 

[Contrarian]

Takeover sets new benchmark for cos

MUMBAI: Even though investors gave a thumbs down to the price Tata Steel agreed to pay for acquiring Corus, there's good news.

The $12 billion that the Tatas will fork out is more likely to set a new benchmark for valuing steel companies, especially Indian companies.

Even since Mittal Steel acquired Arcelor, valuations of steel companies have risen by about 40%. But that was before the Tata-Corus deal.

Mittal valued Arcelor 5.8 times the latter's gross earnings (EBITDA: Earnings before interest, taxes, depreciation and amortisation), whereas Tatas have valued Corus at about 9 times its EBIDTA.

Steel sector analysts said currently Indian steel companies are valued at about 4-5 times their respective gross earnings, while European companies enjoy around 6-7 times the same figure.

Now with the Tata deal that involves Indian and European steel makers, these valuations are set to change. The fact that most Indian companies are integrated steel players will serve to augment these numbers.

For example, according to a sector analyst, at present Steel Authority of India (SAIL) has a market capitalisation of about Rs 46,000 crore and cash flows of about Rs 10,000 crore.

With nearly zero-debt and expected gross earnings a little over Rs 10,000 crore this financial year, its enterprise value comes to about Rs 36,000 crore.

This represents a multiple of a little over 3.5 times its gross earnings. In the changed scenario of upgraded benchmark valuation, companies like SAIL could see their market capitalisation soar.

Much the same can be said of other Indian steel companies like Essar Steel and Jindal Stainless, analysts pointed out.

Fuelling this valuation frenzy, they say, is the current trend of consolidation across the highly fragment steel business in the world.

The top five players control only 20% of global steel production. This creates some disadvantages for steel companies.
One, the lack of economies of scale. And two, the absence of bargaining power.

To stay in the game and iron out these deficiencies out of their system, steel companies will necessarily have to look at adding additional capacities.

This was the logic that LN Mittal deployed while mounting a bid for Arcelor.

The argument is true for Indian steel companies too. Either they will gobble other entities, or they will have to be gobbled up. In either which case, it is the investor in those companies that stand to gain.

 

[Contrarian]

Will drop in steel prices spoil party?

MUMBAI: Consider the facts. In the last eighteen months, global prices of steel have come off their top.

On the other hand, valuation of steel assets have been increasing rapidly after a wave of global consolidation in the last decade by players like Mittal Steel and Arcelor.

Tata Steel paid a substantial premium over the last big deal in the steel sector to acquire Anglo-Dutch company Corus.

Now, what will happen if global prices of steel were to weaken?

For over a year now, analysts have been saying that the steel price cycle has held out for far too long and prices of the commodity will soften after China slow downs its consumption, post-2008 Olympics.

In mid-2005, when the Chinese government decided to clampdown on steel imports to cool off the volatile market, steel prices tumbled and affected even Tata Steel's profitability.

Now, a recent report by Mumbai-based broking firm First Global has recommended investors to "sell"Tata Steel shares, branding it a long-term underperformer. The report argues that should steel prices fall $50-75 by next year, Corus will end up making a loss.

Tata Steel officials, for their part, say that they have factored several scenarios into the price they have finally paid for Corus. Say Koushik Chatterjee, vice president (finance) of Tata Steel: "We have taken into account possible steel price changes, geographical and product mix possibilities and funding alternatives while bidding for the deal. We are optimistic we can extract benefits from the acquisition in different scenarios."

The First Global report says that in cyclical industries, whether it is shipping or steel, the time to buy assets in when the cycle is at a low, when assets are unloved, distressed.

In the last decade, that was how L N Mittal built his steel empire. Also, the type of businesses to be leveraged to the hilt, are the ones with steady and predictable, if unexciting cash flows.

The report points out that in the Tata-Corus deal, both these basic tenets have been turned in their head. "The deal combines high business risk with high financial risk."

Says First Global's Devina Mehra: "If you look at Tata Steel's ten year earnings data, it is all over the place. Even five years ago, it was struggling to make a decent return on equity. When their earnings are linked so much to steel prices, we feel that they have over stretched themselves."

As recently as 2002, when steel prices had hit a global low, Tata Steel's profit margin had fallen below 5%.

When Mittal Steel was picking up global assets, Tata Steel did not even want to invest in a large expansion plan fearing a drop in earnings.

Tata Steel plans to fund its Corus acquisition by raising debt through a newly-formed, wholly-owned subsidiary.

 

[Contrarian]

Been there, done that

MUMBAI: In the mid-eighties, after beating the Japanese small-truck invasion in its backyard with its home-made 407 model, Tata Motors made a proposal to General Motors.

The pitch was around supplying trucks to the American auto giant. After listening to the proposal, the chief designer at GM told Arun Maira, then an executive with Tata Motors, who went on to head Boston Consulting Group's practice in India, "Young man, if a prize has to be given for audacity, it has to be given to you."

That was pretty much what everyone thought of Tata Steel's bid for Anglo-Dutch steelmaker Corus. When it purchased the company at 34% over the $8 billion it initially offered, eyebrows were raised. But the men behind the deal were oblivious to such reaction.

"In school, if you have been doing your homework well for a whole year, would you not feel confident at the exams? We had done our homework for about two years before we went into this deal,"Koushik Chatterjee, the group's finance wizard, who was handpicked by Ratan Tata, told TOI.

The thorough homework gave the group the guts to mount a bid and the bankers the comfort to open up their purses. Yes Bank CEO Rana Kapoor, who, as a banker with Rabo Bank, had helped Tata Tea raise funds for Tetley in the group's first derring-do, says the situation was similar then.

"When Tata Tea bought Tetley in 2000 it paid 300 million pounds more than what it offered in its first attempt in 1995. The Tata Tea stock crashed. I see a lot of parallels here,"Kapoor said.

In a way, the Tetley deal was even more daring than the Corus deal because it was done at a time when bankers were not comfortable with lending huge money to Indian companies. Also, the structure was a fairly complicated one.

The leveraging in the Corus buy is only 2:1 compared to 3.5:1 in the Tetley deal, which at that time was the largest acquisition in India.

Chatterjee declined to elaborate much on what gave the group the gumption to make such a large bid for Corus. But analysts point out, seven years ago, Tata Sons wasn't as cash rich as it is right now.

And the group's software jewel TCS wasn't as big as it is now. Things are different now and both of these entities can be leveraged to raise funds. That must have certainly imparted a sense of confidence to Tata Steel.

"TCS is a money-spinning machine. The Tatas ability to monetise stock is immense,"Kapoor said, remembering the high level of apprehension that prevailed in 2000. But Chatterjee added that Tata Steel has always been a conservative company. "Prudence is a very important part of finance at Tata Steel,"he said.

 

[Contrarian]

Fidelity seeks regulatory clearances

MUMBAI: Global asset management giant Fidelity is willing to give Indian investors the chance to diversify their portfolio with a sprinkling of foreign mutual funds, but absence of a clear regulatory guideline is an impediment.

"Fidelity's Indian mutual fund arm has already applied to the market regulator for launching a feeder fund,"Richard Wastcoat, MD, Fidelity Investments International said.

At present Indian mutual fund industry is allowed to invest upto $3 billion abroad, with each fund house having individual limits within this overall limit.

There's another rule, by RBI, the country's central banker, that allows an individual to invest upto $50,000 per annum in shares, properties and other assets in markets outside India.

Fidelity is awaiting for a clear regulatory framework that would allow Indians to invest this $50,000 in MF schemes that have been floated abroad.

At present, Fidelity's presence is spread across markets that account for about 95% of the world's combined market capitalisation, officials said.

"For the Indian market, Fidelity's current business plan is to continue to launch more products and also to educate investors,"Wastcoat said.

Fidelity's top official said it was heartening to see that there was a growing trend towards equity ownership in the country.

 

[Contrarian]

Rupee touches one-year high in early trade

MUMBAI: Buoyed by a strong rally on equity markets coupled with Dollar's weakness overseas, the Rupee on Friday touched one-year high of 44.10/11 a dollar during early trade.

In lacklustre activity at the interbank foreign exchange (Forex) market, the Indian currency resumed strong at 44.11/13 per dollar from Wednesday's close of 44.19/20 per dollar and later moved up to 44.10/11 a dollar in late morning deals.

The Rupee drew support from the weakness in Dollar against the Euro and the Yen on Thursday, forex dealers said.

A sharp rally in the benchmark Sensex, which jumped by 142 points to a new peak of 14,409.59 during morning trading also extended strength to the Indian unit.

Activity was however, at a low ebb during early trade in the absence of any dollar buying or selling, a forex dealer commented.

 

[Contrarian]

Sensex, Nifty zoom, close at all-time high

Sensex and Nifty closed at an all-time high, tracking intense buying across index pivotals. Firm global markets on back of US Federal Reserve's decision to keep interest rates steady, also boosted the bourses.

Capital goods, consumer durables, IT and pharma stocks led the rally. Banking sector was most volatile during the intra-day trade.

A lot of shares struck all-time highs buoyed by strong results.

The 30-shares BSE Sensex finished 136.59 points or 0.96 per cent higher, at 14,403.77, an all-time closing high. It had opened at 14,293.11, and had gone on to attain an all-time high of 14, 462.77.

The S&P CNX Nifty rose 46.30 points or 1.12 per cent at 4183.50, an all-time closing high. It had surged to an all-time high, 4,198.70, in intra-day trading.

The market-breadth was strong, as buying for small-cap and mid-cap stocks heightened. For 1,396 shares advanced, 1274 declined. A total of 52 remained unchanged.

Analysts expect the action to stay in this space, outperforming large-cap peers on account of robust results.

The total turnover on BSE amounted to a healthy Rs 5433 crore, as compared to Rs 4012 crore on Thursday.

The wholesale price index rose 6.11 per cent in the 12 months to January 20, 2007, higher than the previous week's annual rise of 5.95 per cent due to a rise in prices of manufactured products and foods, data showed on Friday.

Among the 30-Sensex pack, 27 advanced while the rest declined.

Among the sectoral indices, capital good stocks surged 2.46 per cent, telecom stocks jumped 2.04 per cent, consumer durable stocks climbed 1.90 per cent and pharma stocks advanced 0.92 per cent while PSU stocks fell 0.82 per cent and oil and gas stocks were down 0.20 per cent.

The major market movers on Sensex were Bharti Airtel which gained 5.16 per cent to Rs 769.40; L&T rose 4.58 per cent to Rs 1,674.05; HDFC rose 4.04 per cent to Rs 1,740; Satyam jumped up 3.87 per cent to Rs 492.50 and Reliance Communications rose 3.63 per cent to 491.

VSNL, Bharti Airtel, L&T, Zee Entertainment and Suzlon Energy were the major gainers in the NSE.

 

[Contrarian]

India is now an Asian financial hub

MUMBAI: A few months ago, a senior British investment banker, came in search of Indian businesses that companies back home could buy.

As part of the British trade delegation, he was introduced to a few prospective companies by a senior executive from management firm Boston Consultancy Group.

After some polite conversation, the Indian executives took the banker aside only to be asked if they could buy the British company instead.

Says Enam Financial Vallabh Bhansali: "India might in the global financial market is rising by the day. Big ticket deals by Indian companies abroad is only a part of the process in India's growing importance."

Already, India's fast growth is attracting a disproportionate share of the emerging markets fund flows. India received nearly half the investments that flowed into top eight emerging markets tracked by Morgan Stanley, an increase of 80% over the previous year.

In the first half of 2006 alone, India witnessed M&A deals collectively valued at $25.6 billion.

Grant Thorton, a research firm, found that India was the fourth hottest destination for deals in the IT space in the Asian region.

These numbers, however, hide a larger story - India's growing importance as a regional financial hub.

For lack of banking reforms and currency convertibility, India is still not considered a global financial destination.
Despite having a robust capital market in the Asian region, next only in size to Hong Kong, does not help.

It still lags far behind Hong Kong and Singapore in the region which attract global capital to pass through its financial markets more easily.

Large financial firms find it attractive and easier to base their regional headquarters in Singapore.

Veterans like DSP Merill Lynch Hemendra Kothari already see the first signs of a change. They feel that India's importance is slowly growing in the financial markets and there are changes in store in the near future.

Kothari argues that as more and more big ticket deals are executed by Indian companies abroad, it will become imperative for the global financial firms to set up their own offices in the country. Last year, seeing the opportunity, Goldman Sachs split up with its long time partner Kotak, to go on its own.

Merrill Lynch paid an hefty premium to buyout most of Kothari's stake in the ir joint venture company. Says Kothari: "There is a big growth coming for financial services business in India. Deal sizes will get bigger and bigger and so will profitability of the players."

To grab the opportunity, India has already a few advantages. It's banking system is better regulated and transparent than China. In the run upto convertibility, the rupee is far less controlled than the Chinese yuan.

With the Indian industry straining to establish a global footprint, mega acquisition deals oversas by local companies will only hasten India's position as a financial hub.

 

[Neo]

India to invest in Myanmar port

NEW DELHI: New Delhi will invest $130 million to develop Myanmar’s Sittwe port that will give India’s landlocked northeast access to a new trade route to South East Asia, an Indian official said on Friday.

“We signed an initial agreement recently and we will begin the project as soon as the (Indian) cabinet gives approval,” said the senior official who declined to be named.

“The proposal will be put up to the cabinet this month. Once cleared it will take about three to four years for the project to be completed,” he said.

The port project would mark the latest cooperation venture between New Delhi and military-ruled Mynammar.

India has been keen to develop closer links with Myanmar, formerly known as Burma, because of its huge reserves of gas and proximity to South East Asia.

The port will allow cargo vessels from India’s landlocked northeastern Mizoram state to navigate the Kaladan River to Sittwe, which sits on the edge of the Bay of Bengal.

“The project involves the development of roads, waterways and the Sittwe port,” the official said.

“The aim is to obtain an alternate transit route for products from India’s northeast to South East Asian markets, as Bangladesh has not yet allowed India transit facilities.”

New Delhi has repeatedly asked Bangladesh for an overland route but many rounds of talks between the two neighbours have yielded no results. Energy-starved India is seeking new sources of fuel to propel its booming economy.

http://www.thenews.com.pk/daily_detail.asp?id=41305

 

[Neo]

Last Updated: Saturday, 3 February 2007

India aims to end poverty by 2040

The poorest in India often lack the most basic facilities
India's finance minister has said poverty is fast declining in the country and could be wiped out by 2040.
In a BBC interview, Palaniappan Chidambaram attributed this to the fast pace of India's economic growth.

"People will have homes, work, food, clothing, access to education and medical care," Mr Chidambaram said.

But he also said that some 25% of all Indians - or more than 250 million people - were still living in "abject poverty", earning less than $1 a day.

Mr Palaniappan told the BBC World Service Newshour programme that poverty "will continue to decline" in India.

Affluence is more apparent in the country these days

"The faster we grow and the more inclusive that growth is, the decline in poverty will be rapid.

"I'm confident we can wipe out poverty by 2040."

Mr Palaniappan admitted that the rapid economic growth in India in recent years could have widened the gap between the richest and the poorest in the country.

But he said that "at the same time those at the bottom of the pyramid have seen improvement in their lives".

The minister also said more should be done to combat relatively low life expectancy rates and high mortality rates.

India has become a world economic power, with growth over the past three years averaging 8% - a rate approaching that of its booming neighbour, China.

Based on purchasing power parity, it is now the world's fourth largest economy.

However, income per head in India today is just $720 (£365) a year.

India's low costs and huge, English-speaking, workforce have made it popular with multinationals for work including manufacturing and call centres.

http://news.bbc.co.uk/2/hi/south_asia/6326629.stm

 

[Neo]

February 06, 2007
Indian airlines suffer $400m loss

MUMBAI, Feb 5: India’s airlines lost $400 million in the nine months ended December 2006 as high fuel and aircraft purchase costs hit carriers, and more trouble is ahead, aviation executives said on Monday.

At least half a dozen carriers, including budget airlines, have taken flight in the past three years in India’s skies, dominated by two state-run companies less than a decade earlier.

But profits have been hard to come by for most, and many could fold, leading private airline Jet Airways told a two-day South Asia aviation finance conference in Mumbai.

“The industry is seeing temporary over capacity but will have to charge more to cover costs,” said Wolfgang Prock-Shauer, chief executive officer with Jet Airways.

“The weaker airlines will exit the industry,” he said.

Executives and analysts at the conference forecast sharp growth for India’s aviation sector but stressed that financial and infrastructure problems would hamper growth.

Indian air passenger traffic is tipped to grow to 50 or 60 million by 2010, from around 25 million now, as a booming economy boosts wages in the country of more than one billion people.

With the industry set to grow further, most private airlines have committed millions of dollars to buy aircraft from US-based Boeing and European-based Airbus Industrie, a trend which is expected to continue.

Boeing expects India’s requirements over the next two decades at 856 planes to be worth $72 billion, according to an executive with the company in India.

Airbus has forecast India will order 1,100 planes over the next two decades.

Analysts said demand for seats in the new planes would keep pace.

“Looking at current GDP growth forecasts, air traffic growth is likely to be well above 20 per cent each year,” said Praveen Vetrivel, analyst with research firm International Bureau of Aviation.

Among the carriers, Jet Airways has a 30 per cent market share, followed by state-owned Indian with 21 per cent, 19 per cent for budget carrier Air Deccan and nine per cent each for Kingfisher and Air Sahara.

Low-cost carriers like SpiceJet, GoAir, IndiGo, Jagson and Paramount fight for the remaining 14 per cent share.But the airports and services for passengers have lagged behind this growth, forcing airlines to fly an additional 10 minutes due to air traffic congestion at Mumbai, Delhi and Bangalore, resulting in higher fuel consumption.

“This factor alone accounts for a loss of $80 million annually,” Prock-Shauer said.

Still, leading aviation companies are flocking to India, with more than 500 expected to hold displays at a five-day Aero India show starting on Wednesday in the southern hi-tech hub of Bangalore.—

http://www.dawn.com/2007/02/06/ebr17.htm

 

[Neo]

Tuesday, February 06, 2007

India’s 06/07 GDP growth seen at 8.6% :thumbsup:

NEW DELHI: India’s economy is expected to grow 8.6 percent in the financial year ending in March, at the lower end of central bank’s forecast, a Reuters poll of analysts shows.

The government will issue its first official growth estimate for 2006/07 on Wednesday, one week after it revised growth for 2005/06 up to 9.0 percent from 8.4 percent.

“Growth is very strong. On top of 9 percent, we are getting another year of more than 8 percent growth showing demand is still strong. I expect the trend to continue,” said Riyaz Khan, economist with think-tank Centre for Monitoring Indian Economy. Growth in Asia’s fourth-largest economy has averaged 8.3 percent over the past three fiscal years.

Last week, the Reserve Bank of India said it expected growth of 8.5 to 9.0 percent in 2006/07, while Finance Minister Palaniappan Chidambaram has said growth could be close to 9 percent.

India’s economic momentum has strained infrastructure and led to a squeeze on capacity that has added to inflation pressures. The central bank raised its key lending rate last week to 7.50 percent, a four-year high, following four rate rises in 2006.

Most analysts expect manufacturing to grow more than 9 percent in 2006/07, while services are seen growing close to 10 percent.

Farming, which accounts for a fifth of GDP but employs about 60 percent of the population, remains the laggard and is expected to grow around 3.0 percent.

Prime Minister Manmohan Singh has said farm output must grow by close to 4 percent on a sustained basis to ensure GDP increases by 7.0-8.0 percent annually over the next few years.

Singh’s government has pledged massive investment in farm infrastructure to improve irrigation and lessen the impact of poor monsoon rains on agriculture. The annual GDP forecast is due on Wednesday.

http://www.dailytimes.com.pk/default.asp?page=2007\02\06\story_6-2-2007_pg5_21

 

[Neo]

India raises full-year growth forecast to 9.2pc

NEW DELHI (updated on: February 07, 2007, 18:16 PST): India sharply raised its full-year growth forecast to 9.2 percent on Wednesday, from an estimate of above eight percent at the start of the year, on a surge in demand for services and manufactured goods.

The government's latest advance estimate for the year ending March 2007, the fastest rate in nearly two decades, comes after the central bank last month raised its full-year forecast to 8.5-9.0 percent, from above eight percent.

"The growth is driven by a combination of the investment demand and consumption demand," said Saumitra Choudhuri, chief economist with ICRA, a credit rating agency.

"So there is capacity creation which makes the growth robust. Growth may drop marginally (in the future) but not to the levels of six or seven percent seen earlier," he said.

Following the data, the chief economic adviser to the finance ministry said there was concern about the pace of growth and its impact on prices.

"It is not overheating yet, but it can overheat if the economy is not managed well and we will take steps to avoid such a situation," said Ashok Lahiri.

India's economy grew 9.1 percent in the first half of the current fiscal year to September and the country is second only to China, at 10.7 percent in 2006, in growth rates among major world economies.

The 30-share Mumbai stock exchange Sensex rose 164.94 points or 1.14 percent to a record close of 14,643.13 Wednesday following the news, beating the previous high of 14,515.9 set only Monday.

The Sensex also hit a new intraday high of 14,663.26 Wednesday.

India's Central Statistical Office makes regular revisions to leading economic indicators and forecasts such as inflation, growth and trade as changes in the fast-growing economy lead to updated data.

However, the changes lag private forecasts by economists from banks and thinktanks, many of which upgraded economic growth estimates last year.

Last week, the Central Statistical Office revised its estimate for the year to March 2006 from 8.4 percent to a much faster 9.0 percent, with the figures changing sharply as the true strength of the economy was measured.

Indian Prime Minister Manmohan Singh has set a 10 percent growth target but in December admitted that an ailing rural economy and inadequate public services hurt efforts towards achieving that goal.

Rising inflation, too, has been a source of worry for the government.

Last week, Singh said combating inflation -- which inched close to a two-year-high of 6.11 percent mid-January -- was a priority for his government.

India's central bank has said it is comfortable with annual inflation between 5.0 and 5.5 percent, and has been using a variety of tools such as interest rate hikes and higher bank cash reserves to fight rising prices since it began a tightening cycle in late 2004.

The government has cut customs duties on cooking oil, cement and other products in a bid to lower prices for such basics, but analysts expect such efforts will take time to work.

Rising prices of food, textiles, metal and paper spurred the headline inflation figure back above the six percent mark as of January 20, caused by what the central bank said earlier was an overheating economy.

"High inflation is always associated with high rates of growth. So we have to be very vigilant and try to minimise inflation," said Choudhuri of ICRA.

India's Congress-led government is mindful that rising costs can be political dynamite, particularly for an administration that came to power in May 2004 on a platform of helping improve standards for India's poor masses.

http://www.brecorder.com/

 

[Neo]

Suzuki to spend $1bn in India

MANESAR, India: Japanese compact car maker Suzuki Motor Corp will invest a further 200 billion yen ($1.66 billion) in its Indian venture as it expands capacity at car and engine plants, its chairman said on Tuesday.

Already, 100 billion yen has been invested in the plants run by Maruti Udyog Ltd and another 200 billion yen will be spent by 2010, taking total capacity to 1 million cars a year from 630,000 now, Osamu Suzuki said.

Maruti, which is majority-owned by Suzuki, on Tuesday opened its fourth car plant in Haryana state, near New Delhi which will have an initial annual capacity of 100,000 units.

That will be expanded to 300,000 units by 2010. “Suzuki made a commitment to India at a time when it was not fashionable to invest in India,” Maruti Udyog Managing Director Jagdish Khattar told reporters.

“This new plant marks the most important milestone in our partnership.” Maruti had earlier said total investment in new plants and new cars would top Rs90 billion ($2.04 billion) by 2010.

Maruti will make its popular Swift hatchback at the new plant, which can roll out a car every 50 seconds. A new export model, scheduled to be launched in 2008/09, will also be made at the plant, located in a 600-acre campus that will also house vendors and a research and development facility.

A diesel engine and transmission plant, which was also inaugurated on Tuesday at the same location, will start with an output of 100,000 units and reach 300,000 over the same period. “We have entered the diesel segment with a very competitively-priced product,” Khattar said. “We think it will help us a great deal.”

Maruti, which has nearly half of India’s market of mostly small cars, is offering two variants of the Swift with a 1.3-litre Fiat multijet engine.

http://www.thenews.com.pk/daily_detail.asp?id=41792