Indian Economy - News & Updates - Archive

[Neo]

February 14, 2007
India’s move to fight surging inflation

NEW DELHI, Feb 13: India's central bank tightened monetary policy on Tuesday for a second time in two weeks to fight accelerating inflation, hiking the amount of cash commercial banks must keep on deposit.

The Reserve Bank of India said it was raising the cash reserve ratio to 6pc from 5.5pc to take money out of the banking system and try to slow rapid credit growth that is helping fuel inflation.

“In view of the paramount need to contain inflation expectations and in the light of current liquidity conditions, it has been decided to increase the cash reserve ratio,” the bank said in a statement on its web site.

The move, which the bank said, would suck 140bn rupees, or $3.17bn, from the banking system, had been forecast by economists after inflation hit a more than two-year high of 6.58 per cent last Friday.

Inflation now is riding significantly above the 5-5.5 per cent tolerance limit set by the Reserve Bank, based in India's financial capital, Mumbai.

“This is a very sharp move, they are directly siphoning money out of the system ... this is a move to control the demand side,” said D.K. Joshi, principle economist at Indian credit rating agency Crisil in New Delhi.

The government last week estimated growth at 9.2pc for the financial year to March 31, 2007, after the economy expanded by nine per cent a year earlier.

Monetary policy authorities are trying to allow Asia's fourth-largest economy to move onto a higher growth path without letting inflation get out of control.

http://www.dawn.com/2007/02/14/ebr14.htm

 

[Neo]

India's license raj is alive and well
CHIDANAND RAJGHATTA
14 Feb, 2007

WASHINGTON: So you think India's infamous license-permit Raj has ended? Not according to the World Bank. A new report released on Tuesday by the Bank and its private sector arm IFC ranks India near the bottom of the world in several business metrics.

Although the report puts some gloss on marginal improvements arising from reforms and offers comfort saying India and Pakistan are South Asia's top reformers, the harsh truth is India fares dismally in the world business practices, notwithstanding all the international attention it is getting.

Overall, India ranks 134th in ease of doing business, 88th in starting a business, 112th in (ease of) employing workers, 110th in registering property, 65th in getting credit, 33rd in protecting investors, 139th in trading across borders, 133rd in closing businesses.

India's most miserable numbers are in dealing with licenses (155th), paying taxes (158th), and most crucially, enforcing contracts (173rd).

Even in South Asia, India ranks near the bottom in ease of doing business (6th) and starting a business (8th), dealing with licenses (7th), paying taxes (8th), enforcing contracts (6th).

Yet a World Bank release on the subject kicked off by saying ''doing business became easier in India and Pakistan in 2005-2006'' thanks to reforms which reduced the time, cost, and hassle for businesses to comply with legal and administrative requirements.

Worldwide, the South Asia region ranked last in the pace of global reforms. The South Asian rankings: the Maldives (53) and Pakistan (74), followed by Bangladesh (88), Sri Lanka (89), Nepal (100), India (134), Bhutan (138), and Afghanistan (162).

Singapore, New Zealand, United States, Canada and Hong Kong occupied the top five positions.

Within India, the report finds that Hyderabad has the most business-friendly regulations. Mumbai (11th) and Kolkata (12th) are at the bottom.

But some good practices exist, the study reveals. If the country could adopt, for example, Jaipur's regulations on starting a business, Bhubaneswar's rules on contract enforcement and taxes, and Chennai's trade practices; it could move its current global ranking from 134th to 79th.

The report finds that entrepreneurs in South Asia face large regulatory obstacles to doing business. For example, it takes 18 months of salary, on average in the region, to dismiss a redundant worker. Taxes are still high: a standard company in India pays 81% of commercial profits in taxes. Resolving commercial disputes through the courts is more time-consuming in South Asia than in any other region. On average it takes almost three years (969 days).

Despite some improvements in 2005-2006, the report says the pace of reform was slower in South Asia than in any other region, with only India and Pakistan starting to improve their business environment.

"Countries are competing for investment, enterprises, and the jobs that come with them. Some improvements are underway in the region, but the pace of reform must increase if South Asia wants to keep up with the rest of the world," said Simon Bell, World Bank Manager for Financial and Private Sector Development in South Asia.

http://timesofindia.indiatimes.com/...d_well/RssArticleShow/articleshow/1606978.cms

 

[Neo]

Thursday, February 15, 2007

India plans more restrictions on FDI

By Iftikhar Gilani

NEW DELHI: India plans to put further restrictions on foreign direct investment (FDI) through the amended Foreign Exchange Maintenance Act (FEMA) and a new National Security Exception Act (NSEA), which are to be presented in parliament soon.

Existing laws already prohibit FDI from Pakistan and Bangladesh, and more countries are expected to face restrictions under the new laws. National Security Advisor MK Narayanan recently told an international gathering that security agencies had analysed the threat of terrorist groups manipulating stock exchanges to raise funds for their operations. He said that fictitious companies had been found operating in the Mumbai and Chennai stock exchanges.

Apart from the two new laws, the government is also issuing secret guidelines for the monitoring of specified areas, countries and companies to halt suspect investments.

It is also proposed that an entity bringing or receiving FDI should make a declaration to regulators vowing not to indulge in any activity which adversely affects India’s national security. A national security exception clause could be made compulsory for all contracts, tenders and agreements entered into by the centre, state governments or local bodies.

Sources here said that senior bureaucrats who held a series of meetings chaired by Cabinet Secretary B K Chaturvedi remained divided on enacting a special NESA, as proposed by the National Security Council, but most supported the inclusion of national security exception clauses in agreements concerning FDI.

The NSC wants the government to have the power to suspend or prohibit any foreign acquisition, merger or takeover of an Indian company that is considered prejudicial to the national interest.

Through presently there is a law allowing the government to reject FDI from specific countries, investments from China, South Korea and tax havens like Cyprus and Mauritius are often frowned upon and hampered. In the meetings, there was no consensus on drawing up a list of countries of concern, as some felt the restrictions should be sector and location-specific rather than country-specific.

The guidelines that are being framed by the NSC secretariat also make it mandatory for sectoral regulators to seek the opinion of intelligence and security agencies and make it compulsory for existing foreign entities to take prior approval before starting any new activity in sensitive sectors or locations on receipt of foreign participation from countries of concern.

Narayanan also told the international gathering that banking secrecy needed to be lifted in terrorist-related cases. He said terrorist groups were involved in legitimate businesses like restaurants, real estate agencies and shipping and used part of their proceeds for terrorist activities.

http://www.dailytimes.com.pk/default.asp?page=2007\02\15\story_15-2-2007_pg7_36

 

[Contrarian]

Will some one please post the damn article on Vodafone's take over of Hutch!!
Its the biggest godamn take-over iN India. Vodafone paid 19.3 Billion USD for Hutch!! beating 5 other companies!!. Hutch is the second biggest cell fone company in India i think. Its ******** huge deal. Vodafone has finally entered India. Prices of cell fone rates will prolly go down even more. Its a huge thing, wil some get a few of the hundreds of articles on every major newspaper and post it in a new thread!!!!!!!!!!!!!!!!

 

[Neo]

I did cover that news Malay and someone even opened a thread about it.

 

[Contrarian]

damn! That was a fast reply Neo!!
But where did you post about it? I couldnt find a new thread about it?

 

[Neo]

I moved it to trash can, didn't like the way the topic was approached.

http://www.pakistaniforcesforum.com/showpost.php?p=49153&postcount=1

 

[Contrarian]

Neither did I. And the article had wrong info as well, its 19.3 Bil USD, its written wrong in the article. Perhaps you could find a good article Neo.

 

[Neo]

I will and will open a new thread about new India oversea JV's in this section soon.

Neo

 

[Neo]

'India set to enter lower-mid income ranks'

Siddharth Zarabi / New Delhi February 8, 2007

With the economy growing at over 9 per cent for two years in a row, India is certain to break into the league of middle-income countries soon.

The finance ministry’s chief economic advisor Ashok Lahiri said at present economic growth rates, India would break into the list of lower middle-income countries in the next 3-4 years.

However, according to World Bank estimates, it might happen next year, three years ahead of the earlier projection of 2011.

“India will probably move into the lower middle-income country classification of per capita income by 2008,” Dipak Dasgupta, lead economist for World Bank in India, said.

According to the advance estimates of national income for 2006-07, India’s per capita income at market prices stands at Rs 27,614 or $626.

The World Bank classifies its 184-member economies according to their 2005 gross per capita national income into four groups: Low income countries with per capita income of $875 or less, lower middle-income countries with per capita income between $876 and $3,465, upper income countries between $3,466 and $10,725 and high income countries with per capita income of $10,726 or more.

The World Bank classifications will remain in effect till July this year.

The difference between Dasgupta’s projection and Lahiri’s view lies in the way the World Bank calculates per capita income. While the figure of $626 is based on constant 1999-2000 prices, the bank uses current year data plus that of two preceding years and adjusts it for inflation and 20 other items.

Accordingly, the per capita income of the country stood at $720 for calendar year 2005.

 

[Neo]

India Passes Korea for Asia's Third-Largest Economy

After showing economic growth of 8.9 percent, its highest rate in 18 years, India is expected to overtake South Korea to become Asia's third largest economy, after China and Japan.
The International Monetary Fund announced Thursday that India's growth rate from April 2006 to March 2007 would hit 8.9 percent. Its GDP will reach US$840 billion, surpassing Korea¡¯s estimated GDP of $826.9 billion for 2006. Until last year, India was at 12th place in world rankings, one step lower than Korea.

Rapidly developing Russia expects its GDP to jump from $763.3 billion in 2005 to $975 billion in 2006 thanks to booming oil prices. The IMF expects Russia to beat Korea as well.

With GDP of $780 billion, Korea has been one of the top ten economies, ranking along with Brazil, India and Mexico with GDPs of $795 billion, $770 billion and $760 billion, respectively. With Russia and India recording such strong growth, Korea is expected to drop out of the top 12.

Meanwhile, India's Central Statistics Office announced that its GDP for the 2006 financial year will be $854 billion, a 9.2 percent increase from the previous year. The prediction is slightly higher than the IMF's forecast. India's rapid growth comes from service industries like software programming and rising production in the manufacturing sector after a few years of stagnation. Manufacturing production grew by 11.3 percent from growth of 9.1 percent last year.

Meanwhile, there are concerns that India's economy is overheating and that inflation is on the rise. The Economist business magazine said in its latest issue that while the country neglects essential factors for long-term growth such as public reform and infrastructure, price rates are rising 6 percent a year, double the inflation rate in China. High-flying India, the article warned, may be at risk of a hard landing.

http://english.chosun.com/w21data/html/news/200702/200702090008.html

 

[Neo]

India's economy 'nears $1 trillion'
By Andrew Walker
Economics correspondent, BBC News

If we needed a reminder of India's growing global economic presence, we had it last week in the steel industry when India's Tata won a stock market auction for the European company Corus.

The result of putting the two together will be the fifth-biggest steel producer in the world.

And it is an Indian-born entrepreneur, Lakshmi Mittal, who is the driving force behind the biggest of all in the industry, Arcelor Mittal.

That story is merely a recent news event that highlights India's rise. It is a much wider phenomenon.

Gerard Walsh, Regional Director for Asia at the Economist Intelligence Unit in London, says India is already close to being a $1 trillion economy.

And if you measure it using purchasing-power parities - an alternative to exchange rates which accounts for different price levels between countries - India is already the third-largest economy in the world, behind only the US and China.

Growing impact

Most economists expect India's recent relatively rapid growth - an annual average of about 7% over the last four years - to continue.

That alone would ensure the country would make a growing mark. But it has been a relatively closed economy, with barriers to foreign trade and investment.

Those barriers have been eased, but many remain. The government appears inclined to continue the liberalisation process - and that would make India's international integration proceed even more quickly.

The World Bank has done a recent study, called Dancing with Giants, looking at the implications of the rise of India and China.

Alan Winters, one of the authors, says that for the most part, India's rise is good news for the rest of us.

India's economic growth generates more of the goods it produces and others buy - and that will tend to push prices down.

Competition

But there may be some adverse consequences. Demand for raw materials from growing Indian industry will create upward pressure on those prices.

That's also true for oil, although Mr Winters emphasises that India is a small part of what will determine the global energy prices.

In addition, the increased competition as India produces more goods and services might hurt other countries in South Asia, especially in the textiles and clothing business.

That is an industry where low costs are one of the keys to success.

The same is true of another sector where India is already a big presence on the world stage - medicines.

India's biggest is Ranbaxy, a name we will probably hear more of in the future.

The company's chief executive, Malvinder Mohan Singh, says that 80% of revenue comes from international markets and just 20% from India.

It divides half and half between developed- and developing-country markets.

More sophisticated

Ranbaxy is a company that makes so-called generic medicines, cheap copies of drugs developed by others. But Mr Singh says they have ambitions to develop their own patented therapies.

It would be a move into an area that requires more high-level expertise, and that is a characteristic of other areas of India business life - notably computer software.

The low-cost, high-volume manufacturing will continue - at Ranbaxy and in other Indian industries - but a more sophisticated side is emerging.

Nonetheless, there is much in India that remains pretty basic. Poverty is deep and widespread. It is a matter of controversy whether India's economic growth has helped or not.

Some, including Indu Prakash Singh of Actionaid in Delhi, say the rich and middle classes have benefited, but the poor have not.

He says there have been many cases of poor people being displaced from urban areas in the name of development to areas where they have no housing and no livelihood.

The World Bank's Mr Winters agrees that the wealthy and middle-class clearly have gained.

But he also says the data suggests that the distribution of income hasn't changed much, so the poor are benefiting from India's economic growth. He says there is no reason why they should not continue to do so.

http://news.bbc.co.uk/2/hi/business/6334305.stm

 

[Neo]

Unleashed Indiahas more building to do
The Economist
February 05, 2007

The Indian tiger is on the prowl. Tata Steel, which dates to the days of British rule, leaped into the league of top producers when it bought Britain's Corus, which includes the steelmaking remnants of imperial Britain.
Younger Indian companies such as Infosys and Wipro are storming international markets. And the world's business people and investors are lined up to lavish money on India's engineers and scientists.

After years cast as China's underperforming neighbor, the huntress is in hot pursuit. In the past year, India's economy has grown an impressive 9.2 percent, close behind China's 10.4 percent.

India has attracted the attention of Minnesota Gov. Tim Pawlenty, who last week said he'll lead a trade mission to India in October. Pawlenty visited China in 2005.

At some point this year, India's growth rate could even outpace China's; and if you measure things by purchasing power parity, India should soon overtake Japan and become the third-biggest economy, behind only the United States and China.

No wonder more Indian businesspeople, policymakers and economists are basking in the belief that their country is burning bright, at last free of its bureaucratic cage.

Prime Minister Manmohan Singh's latest five-year plan assumes that India can sustain average annual growth of 9 percent. Fast growth is essential to pull millions of Indians out of poverty. But a cold shower is needed because of the many alarming signs of overheating. Across India, prices are rising fast, factories are at full capacity, loans are piling up.

When you mention overheating, analysts point at China. Yet India displays far more symptoms of the disease. Inflation has risen to 6 to 7 percent, compared with 2.8 percent in China; a record 99 percent of Indian firms report that they are operating above optimal capacity; and credit is expanding at an annual rate of 30 percent, twice as fast as in China.

Unlike China, India has a widening current-account deficit -- a classic sign of overheating, as domestic output fails to keep pace with demand. And if you are looking for a stock market bubble, Indian share prices have risen more than four-fold over the past four years, far more than in China. If something is not done, a hard landing will be inevitable.

The Reserve Bank of India has been too timid in cooling domestic demand: Although one interest rate was raised last week by a quarter point, the overall rise in rates over the past 2½ years has not even kept up with consumer-price inflation. But the government's attention should be on supply and dismantling the barriers that keep its speed limit below China's.

So far, India's reform has focused on setting its inventive private sector free from its fearsome bureaucracy. This has unleashed entrepreneurial talent, but more change is needed. Now is the time to tackle the public sector. Infrastructure, such as roads and power, and public services, such as education and drinking water, are woefully inadequate.

Even as the economy has been booming, many public services have worsened. Indians own mobile phones, but line up for hours for drinking water.

India's top computer scientists are feted around the world, yet most children in rural areas lack basic education. About half of all Indian women are illiterate, compared with a ratio of around one in seven in China.

If these things can be tackled, India can indeed match China's growth.

http://www.startribune.com/535/story/982850.html

 

[Neo]

Hindalco to Buy Novelis for $6 Billion

By Debarati Roy

Feb. 11 (Bloomberg) -- Hindalco Industries Ltd., India's biggest aluminum producer, plans to buy Novelis Inc. of Atlanta for as much as $6 billion to gain sheet mills that supply can makers and car companies.

Hindalco, controlled by billionaire Kumar Mangalam Birla, will make an announcement about the purchase at 5 p.m. today in Mumbai, company spokeswoman Pragnya Ram said in a telephone interview, without giving more details.

Spurred by an economy growing at more than 9 percent a year, Indian companies are seeking acquisitions in mature overseas markets to sell higher-margin goods and add capacities and products. Hindalco's purchase, which will follow Tata Steel Ltd.'s $12 billion takeover last month of U.K. steelmaker Corus Group Plc, will fetch the Aditya Birla Group company customers such as General Motors Corp. and Coca-Cola Co.

"The trend for Indian companies now is to look westwards, acquire companies and establish themselves as multinational companies,'' said J. Venkatesan, who oversees $1.5 billion of Indian assets at Sundaram BNP Paribas Asset Management Co. in Chennai. 2Investors will want more details on the acquisition and want to know what kind of benefits will accrue to Hindalco in the long run.''

Shares of Atlanta-based Novelis have doubled since Jan. 25 on speculation the unprofitable company may receive a takeover offer after several weeks of talks with potential acquirers. The shares fell 2.5 percent to C$45.07 a share on Feb. 9 on the Toronto Stock Exchange.

Hindalco Industries shares, almost unchanged this year, fell 1.75 rupees, or 1 percent, to 173.25 at close of trade on the Bombay Stock Exchange on Feb. 9.

Wider Access

Hindalco, which exports 16 percent of its total sales volume of aluminum, is one of the world's lowest-cost producers of aluminum. Hindalco will gains access to markets across the globe as Novelis operates in 11 countries and is the second- largest producer in North America, according to its Web site.

2This is a very good move from Hindalco,'' said Arvind Desai, head of research at Mumbai-based Niche Brokerage Pvt. "Hindalco will be able to ship primary aluminum from India and make value-added products.''

Novelis, which was spun off from Alcan Inc., controls 19 percent of the world's flat-rolled aluminum products, according to its Web site and also supplies to companies including Ford Motor Co., Eastman Kodak Co. and Thyssenkrupp Ag.

Debt, Loans

With a market value of C$3.34 billion ($2.8 billion) at the close of trade on Feb. 9, Novelis had about $3.2 billion in debt and loans outstanding, according to data on the Bloomberg. On Nov. 14 Novelis reported a loss of $102 million, or $1.38 a share, in the third quarter. A year earlier, net income was $10 million, or 14 cents a share.

In 2005, the company reported net sales of $8.4 billion, according to its Web site.

Hindalco plans to triple production of the metal to 1.5 million metric tons by 2012 to become one of the world's five largest aluminum producers. The Mumbai-based company, which also has interests in telecommunications, cement, metals, textiles and financial services, is currently the world's 13th-largest maker of aluminum.

Higher Rating

Acquisitions for Indian companies are also becoming easier with the nation's rating upgrade. Standard & Poor's on Jan. 30 raised India's rating to investment grade as growth in Asia's fourth-largest economy is likely to expand at a record pace of 9.2 percent in the year to March 31. Credit Suisse in December forecast India's economy will grow 10 percent this year from 9.5 percent in 2006, overtaking China as the world's fastest-growing major economy.

Suzlon Energy Ltd., India's biggest builder of wind turbines, on Feb. 9 offered 1.02 billion euros ($1.3 billion) for German rival Repower Systems AG, countering an offer from French nuclear-reactor maker Areva SA.

Alcan, the world's largest aluminum producer after Alcoa Inc., spun off Novelis to satisfy antitrust concerns after acquiring France's Pechiney SA for about $4 billion in February 2004. In January 2005, Novelis agreed to sell about $1.4 billion in bonds as part of a $2.9 billion refinancing needed to repay loans from Alcan.

 

[Neo]

ABB India posts record earnings growth

BANGALORE: Global engineering giant ABB said on Friday India has overtaken China as its fastest-growing market after the South Asian nation generated record profit, sales and orders last year.

Net profit in 2006 jumped 56 per cent from the previous year to Rs3.4 billion ($77.19 million) and sales were up 44 per cent to Rs43.4 billion, ABB India Managing Director Ravi Uppal told a news conference in Bangalore. The company won Rs56.2 billion of orders, up 50 per cent on the year, for its power and automation equipment as an economy expanding by nine per cent a year prompted India to invest more in deficient infrastructure such as electricity utilities and irrigation facilities. “These growth rates are higher than China’s,” said Dinesh Paliwal, the New York-based president for global markets and technology at ABB. “China has been growing several years for ABB at 25 to 35 per cent; India has now become our fastest-growing market.”

ABB, which added 500 new customers last year including consumer products companies Procter and Gamble and Hindustan Lever and automaker Hero Honda, expects the market to expand faster as the Indian government and industry step up investment. The company expects Indian investments of $200 billion in the power sector, $130 billion in steel and $13 billion in aluminium by the year 2012, Uppal said. “The urgent need for quality power, delivered efficiently and economically, across urban and rural India is now among the nation’s key priorities,” he said.

“At the same time, Indian industry is increasingly adopting automation technologies as it scales up.” That will drive demand for ABB’s products and services although interest rates are rising and banks are tightening credit, which may force some companies to put planned investments on hold.

“The demand propensity in the market is so high that most projects will go through,” said Uppal. “I don’t foresee a slowdown.”

ABB India increased its 2006 dividend to Rs10 a share from eight rupees the previous year. It announced a 1:5 stock split implying that each share with a face value of Rs10 will be split into five of two rupees. The market value of its shares will also change accordingly. “This will increase liquidity in the market and make the stock more affordable to small investors,” said ABB India Chief Financial Officer K Rajagopal.

http://www.thenews.com.pk/daily_detail.asp?id=43173