Indian Economy - News & Updates - Archive

[Janbaz]

HSBC enters India’s insurance market

BANGALORE: British banking giant HSBC Holdings on Monday tied up with Bangalore-based Canara Bank and another Indian lender to set up a life insurance business, entering a market fuelled by rising incomes and the absence of a social security system.

State-owned Canara will hold a 51 per cent stake in the venture, initially capitalised at two billion rupees ($45 million), with HSBC taking 26 per cent and New Delhi-based Oriental Bank of Commerce the rest, Canara’s general manager S Jayararam told AFP.

HSBC’s insurance arm agreed to pay a premium of Rs1.25 billion for its stake, raising the net worth of the proposed insurer to Rs3.25 billion, under an agreement signed on Monday, Jayaraman said.

The announcement came as HSBC, the world’s third-biggest bank, announced a 35.5-per cent surge in bad debts that dented net profit in 2006, which rose just 4.7 per cent to $15.789 billion year-on-year.

HSBC joins firms such as New York Life, Prudential and Allianz in setting up an insurance venture in India, where the market has doubled to more than $20 billion in annual premiums since opened to foreign investment in 2000.

“The insurance penetration rate is still extremely low and there’s a lot of scope for further expansion,” said Jayaraman, adding the partners had yet to decide on details of the joint venture.

The venture would have the advantage of marketing to the tens of millions of existing customers the three partners already have in the country. India opened up the market to expand coverage and make more funds available for investment in infrastructure such as power plants and roads.

But only 2.5 per cent of the population has insurance coverage, said the Canara official. “The market is untapped outside of the metros and smaller cities,” said Sushmul Maheshwari, chief executive of RNCOS, a market research firm.

“The awareness about insurance remains very low and outside of the cities people are not serious about getting insured,” he said. “That offers a huge opportunity for insurance companies.”

The lack of a social security system, growing life spans in an economy expanding nine per cent a year, and a per capita income that has doubled in the past decade are spurring more urban Indians to buy life cover.

Insurers are also marketing insurance-linked annuities and pension plans that offer market-linked returns, attracting a growing number of consumers who are buying such products to finance a longer life in retirement.

“If you go to a typical middle-class man and try to sell him insurance, he will likely say ‘I am never going to die,’” said Maheshwari. “He may be interested if you sell it to him as a pension plan.”

Insurance accounts for just 1.8 per cent of India’s economic output, compared with 5.2 per cent in the United States and eight per cent in South Korea, according to the Associated Chambers of Commerce, an industry lobby group.

The group predicted in January that India’s life- and non-life insurance market is set to reach a combined $60 billion in four years as demand swells in towns and villages. The so-called semi-urban and rural territories will make up for $35 billion and large cities generate $25 billion, it said.

HSBC’s 26 per cent stake is the maximum allowed by the regulator for a foreign insurance partner, with resistance from communist allies holding back government plans to raise the limit to 49 per cent.

The News.
http://thenews.jang.com.pk/daily_detail.asp?id=45649

 

[Janbaz]

S&P expects India’s growth to moderate

MUMBAI: Standard and Poor’s Ratings Services said on Monday it expected the pace of India’s economic growth and inflation to moderate in the fiscal year beginning in April.

“Our projection for the year 2007-08 is 7.90 to 8.40 per cent — a slight slowdown from the current year’s performance due to the impact of interest rate increases and liquidity constraints,” Subir Gokarn, chief economist of S&P’s Indian subsidiary CRISIL, said in a conference call with journalists.

The government expects gross domestic product to grow 9.2 per cent in 2006-07, the fastest pace in 18 years, driven by expansion of manufacturing and services sectors. “Accompanying this, we would see a decline in the inflation rate from the current 6.0 per cent to 5.0-5.5 range,” Gokarn said.

India’s annual inflation declined to 6.05 per cent in the 12 months to Feb 17, from 6.63 per cent a week earlier. The government cut retail fuel prices last month, and has also lowered duties on a host of items to try to rein in inflation.

The Reserve Bank of India has raised the cash reserve ratio (CRR) — the percentage of cash banks need to keep with it on deposit — twice since early December to absorb excess funds in the banking system and help check inflation.

It has also raised its short-term lending rate four times in the fiscal year which ends this month. S&P did not anticipate any problems from India’s external accounts in 2007-08, Gokarn said.

“Capital inflows would take care of the current account deficit,” he said. In January, S&P raised India’s sovereign credit rating to investment grade, citing strong economic prospects and external balance sheet, deep capital market and an improving fiscal situation. The rating was raised to the lowest rung of investment grade at “BBB-/A-3” from a speculative grade “BB+/B.”

The News.
http://thenews.jang.com.pk/daily_detail.asp?id=45650

 

[Neo]

Thursday, March 08, 2007

India’s 2007/08 growth seen slowing to 8.5%: ICRA

NEW DELHI: India’s economic growth could slow to 8.5 percent in the fiscal year beginning in April, from an estimated 9.2 percent expansion this year, as tighter monetary policy starts to bite, rating agency ICRA said on Wednesday.

Industrial production is expected to expand 9.8 percent in 2007/08, compared with 10 percent in the current year, while farm output growth could slow to 2 percent assuming normal rains from 2.7 percent, the Indian agency said in a report.

“The normal pace of monetary tightening through increase in policy interest rates coupled with raising cash reserve requirement should have an impact on demand that is homes, automobiles and other durable consumer goods,” ICRA said.

“That should result in cooling down the pace of economic activity by denying monetary accommodation, aside from making it more expensive.” India’s central bank has raised its key short-term lending rate six times since early 2004 by a total of 1.5 percentage points. It has also increased the level of deposits that banks must keep with the central bank twice since December to fight inflation.

Still, bank loans have continued to rise at about 30 percent a year and annual inflation is running at 6.05 percent, above the central bank’s estimate of 5-5.5 percent by end-March. “During 2007/08, monetary policy will continue to be biased towards tightness,” ICRA said.

Prospects of intensified conflict in the Persian Gulf has the potential of sending oil prices up and affect India’s headline inflation in the coming fiscal year, it added.

http://www.dailytimes.com.pk/default.asp?page=2007\03\08\story_8-3-2007_pg5_16

 

[Neo]

Thursday, March 08, 2007

India eyes bumper wheat output :thumbsup:

NEW DELHI: India, forced to import wheat after a gap of six years in 2006 following a poor crop, expects a bumper output of around 74 million tonnes this year due to good weather conditions, government officials said on Wednesday.

The forecast is at least one million tonnes more than previous estimates and sharply up from the 2006 output of 69.4 million tonnes.

Wheat prices in India have shot up on a supply squeeze. Last week, the government banned futures trade on wheat and rice, after politicians blamed speculation for fuelling prices and adding to inflationary pressures.

“Production may reach 73.5 million tonnes on extremely good weather conditions,” Farm Minister Sharad Pawar said on the sidelines of a food summit.

He said there was major expansion in area under wheat in Punjab, Haryana, Uttar Pradesh, Gujarat and Madhya Pradesh.

“Unlike last year when we had three to four weeks of bad weather in February conditions have been favourable this time.”

At a separate function, Food Secretary T Nanda Kumar said output was likely to be much higher than earlier estimates.

Alok Sinha, managing director of Food Corp. of India, told Reuters the state-run grains agency expected good purchases from farmers, based on a wheat crop estimate of 74 million tonnes.

Sinha said the agency expected to procure about 13 million tonnes of wheat from farmers this year to augment government stocks and meet demand for welfare schemes.

India was forced to contract for imports of 5.5 million tonnes of wheat at high costs after procurement in 2006 fell sharply to 9.2 million tonnes against a target of 16 million.

“As of April 1, we are expecting stocks of 4.5 million tonnes, against 2.0 million tonnes last April, Sinha said. Procurement starts in April and lasts for more than a month. “Our target is 12 million tonnes stocks for FCI, but we are likely to cross 17 million tonnes by May,” he said.

Bulk purchases from farmers at higher prices by private players were blamed for low government procurement in 2006.

Pawar denied media reports the government has asked private players not to procure wheat from the main growing regions this year.

“In a democracy no one can be prevented,” he said. “There is no possibility of preventing private players from procuring wheat.”

Kumar said actual imports may be about 40,000-50,000 tonnes less than the contracted 5.5 million tonnes. Most of the wheat from Australia and other destinations have already arrived at Indian ports.

“There is a clause in the import contracts that it could be a little less or more,” Kumar said.

He said the government would look at removing regulations, like imposition of stock limits on wheat, if it was able to manage things comfortably this year. Both Pawar and Kumar dismissed media reports the government was planning to deregulate the sugar sector and do away with a requirement for mills to sell part of the sugar output to the government as levy.

“There is no such proposal. We have not given a thought to it, there is no such move,” Pawar said.

http://www.dailytimes.com.pk/default.asp?page=2007\03\08\story_8-3-2007_pg5_21

 

[Incredible India]

India leads Asia billionaire club

India has the most billionaires in Asia with a total wealth of $191bn between them, according to the Forbes magazine annual list of richest people.
With 36 billionaires, India has overtaken Japan's 24 billionaires, after two decades of Japan topping the Asian rich list.

Steel magnate Lakshmi Mittal leads the Indian billionaire club, with a net worth of $32bn.

Globally, there are a record 946 billionaires, up from 793 last year.

"It was a sizzling year in Asia. Both India and China saw huge gains, " Forbes associate editor Luisa Kroll was reported as saying by the AFP news agency.

China and Hong Kong together have a total of 41 billionaires, according to the list.

Lakshmi Mittal, 56, is the fifth richest person in the world, according to the magazine.

The other Indians in the list include Mukesh and Anil Ambani of Reliance, Wipro chief Azim Premji, Bharti Group chairman Sunil Mittal and Aditya Birla Group chairman Kumar Mangalam Birla. India has recorded impressive economic growth in the past few years, though critics say the poor have been largely left out of the process.

Microsoft founder Bill Gates holds the top spot for the 13th year in a row in the world list of billionaires with a net worth of $56bn.

http://news.bbc.co.uk/2/hi/south_asia/6433367.stm

 

[Neo]

Sunday, March 11, 2007

India wants to curb prices without hurting growth

NEW DELHI: India wants to moderate inflation without hurting robust economic growth and the government supports central bank measures to curb price pressures, Finance Minister Palaniappan Chidambaram said.

India’s economy, Asia’s third-largest, is expected to expand 9.2 percent in the current fiscal year that ends on March 31 the fastest rise among major economies after China. But the growth, which has averaged 8.3 percent in the last three fiscal years, has accelerated annual inflation to above 6 percent causing unease to large sections of India’s huge population.

“It’s important to moderate inflation,” Chidambaram told reporters on Friday, after his traditional meeting with the directors of the Reserve Bank of India (RBI) following the annual budget on Feb. 28. “The government fully supports the monetary measures taken by the RBI and will continue to stand by and support the RBI when it takes more monetary measures as and when considered necessary,” he said.

The central bank, which has raised its key short-term lending rate six times since early 2004 by a total of 1.5 percentage point to 7.5 percent, reviews policy on April 24. It has also raised the level of deposits that banks must keep with the RBI by one percentage point since December, and resumed sales of market stabilisation bonds to drain surplus cash.

Data on Friday showed the wholesale price index rose 6.10 percent in the 12 months to Feb. 24, little changed from the previous week’s annual increase of 6.05 percent, but above the central bank’s estimate of 5-5.5 percent by end-March.

Chidambaram said the central bank’s board was in agreement with the stance of the budget, which had cut import duties of most non-farm goods to take tariffs closer to Asian nations and to douse spiraling prices. Rising prices of food items such as wheat and pulses were cited as a factor for the Congress party’s defeat in two state polls recently. Congress heads the communist-backed federal coalition.

The government has taken a string of measures in the past few weeks to curb inflation, including a cut in fuel prices and lowering import duties on big-ticket items such as cement and steel.

http://www.dailytimes.com.pk/default.asp?page=2007\03\11\story_11-3-2007_pg5_24

 

[Goodperson]

Mukesh eyes Rs 1 lakh cr war chest for global buyout

MUMBAI: Mukesh Ambani appears to be getting ready to make the mother of all acquisitions. He's building a war chest to finance a global scale takeover that will dwarf the $12 billion Tata-Corus deal. Indications are that it could be in the neighbourhood of $22 billion (that's Rs 1 lakh crore), going up to $30 billion. That's as serious as serious can get.

His sights are set on turbo-charging Reliance Industries Ltd into the global super-league. In the last fortnight, RIL has had two board meetings that effectively arm him — through what to the financially naive might appear as a complex set of moves — with the money and muscle to gun for a mega-ticket buyout. Insiders say that never in the history of Reliance have there been two board meeting in such close succession. What's more, the board meetings were on dates that don't add up to 9, the Ambanis' lucky number — such is the speed and urgency with which Mukesh is moving, say people who know him well.

As reported by TOI last week, one of the likely targets could be the $54bn US petrochemical giant Dow Chemical. There has been speculation on Wall Street that some of the world's biggest private equity funds — like Blackstone, KKR and Carlyle — may team up to bid for the US-headquartered giant. Mukesh senses an opportunity to partner these funds for a slice of the action.

Dow isn't the only one in Mukesh's crosshairs; there are other global petrochem giants he looking at. He knows that such a buy would give RIL easier access to global markets and offer him cutting-edge technology for speciality chemicals. (Dow earns nearly 35% of revenues from speciality chemicals and is the leader in plastics.) Another opportunity would be to export raw material from his home base and make value-added products overseas leveraging low cost for higher margins. With import duty on petrochemical products being slashed to Asean levels of 8%, RIL could even import valued-added products back to India.

http://timesofindia.indiatimes.com/Mukesh_eyes_Rs_1_lakh_cr_global_takeover/articleshow/1749931.cms

 

[Janbaz]

India’s IOC eyes Maurel & Prom’s Congo assets

NEW DELHI: State-run energy firms Indian Oil Corp (IOC) and Oil India are jointly eyeing French firm Maurel & Prom’s Congo assets as they seek to expand their foreign operations, an IOC source said on Monday.

Last month, Maurel & Prom announced the sale of some of its Congo assets to Italy’s Eni, but its partner in the assets, Britain’s Burren Energy, said it would look to use pre-emptive rights to block the $1.4 billion deal.

Maurel & Prom subsequently said the deal was final despite Burren’s claims. An IOC official, who would not be named, said the two Indian firms’ bid would be slightly higher than Eni’s but that no formal offer had yet been made.

“The talks are at a preliminary stage. Burren has pre-emption rights and we are going through them,” the official said. Indian media reports said on Monday IOC and Oil India were expected to make a $1.5 billion bid for the assets.

The deal includes the French firm’s entire 48.6 per cent stake in the M’Boundi field, its 66 per cent stake in Kouakouala A, 50 per cent holdings in the production licences of Kouakouala B, C and D, and the majority of an exploration licence for Kouilou. Burren has a 31.5 per cent stake in the licence for the M’Boundi field and the right to take over the deal by matching Eni’s price.

The News.
http://thenews.jang.com.pk/daily_detail.asp?id=46596

 

[Incredible India]

DELHI METRO RAIL
[YOUTUBE]

[YOUTUBE]

[YOUTUBE]

 

[Neo]

March 14, 2007
Indian PM urges major cuts in farm subsidies

NEW DELHI, March 13: India’s prime minister called on developed countries on Tuesday to make bigger farm subsidy cuts to ensure the success of the Doha round of world trade talks.

New Delhi was committed to an “early positive conclusion” of the deadlocked talks and believed a multilateral trading system was in the nation’s “strategic interests,” Prime Minister Manmohan Singh said in the Indian capital.

But “to break the impasse, developed countries must make meaningful offers to reduce the huge trade-distorting subsidies provided to their agriculture,” Singh told a conference organised by the Economist magazine.

The Doha round of the World Trade Organisation talks, launched in 2001 in the Qatari capital, ground to a halt last July, but trade ministers at the World Economic Forum in Davos earlier this year agreed negotiations should resume.

The European Union and US have been unable to agree on the size of cuts in agriculture subsidies and tariffs protecting their farm sectors and are pushing developing states to open their markets to industrial goods and services.

India, along with Brazil, have emerged as leaders in the developing world’s challenge to the wealthy nations to curtail generous farm subsidies as they seeks to keep their own agriculture supports.

A breakthrough in the talks must come before the expiration of US President George W. Bush’s Trade Promotion Authority (TPA) on July 1, WTO officials say.

If the breakthrough can be achieved, a conclusion to the Doha talks -- which have been called a once-in-a-generation chance to help bring millions out of poverty -- could be reached in about eight months, they say.

Singh said it “must be recognised that for us, agriculture is not just a business but a way of life and a major source of livelihood.”

”Markets are good for those who are part of a market system, but have no meaning for those who do not have the skills or resources to participate in it,” he said.

India says it needs to protect the livelihoods of its 650 million farmers, many of whom are desperately poor.

All countries should work towards an outcome of the WTO talks that “does not destabilise or cause distress to this large section of people,” Singh said.

India’s own efforts to build free trade agreements with many countries “should be viewed as building blocks of a larger agenda of trade liberalisation,” he said.

“Regional and free trade agreements help us speed up trade liberalisation and move closer to meeting our multilateral commitments,” he said.

As India’s economy has opened up to the world, the country appeared to be on a growth path which “if sustained for a decade or so, will enable us to eradicate the ancient scourges of mass

poverty,” he added.

For the first time in the country's history, the economy recorded over eight per cent growth in gross domestic product for three straight years, he said.

http://www.dawn.com/2007/03/14/ebr4.htm

 

[Neo]

Pathaks may sell out of £200 mn curry empire

Vijay Dutt

London, March 14, 2007

It is big news in the £500 billion Indian curry industry in the UK. The Pathaks, Kirit and wife Meena, are reportedly selling their thriving empire of Indian readymade food and spices marketed under brand name Pathak's and distributed in 75 countries.

Their curry business, with a turnover of over £70 million, is being estimated to be worth £200 million. The likely sale of their empire, or part of it, was first hinted at in the Times. But the family has refused to comment.

It took the market by surprise. Kirit's father, the late Lachman Pathak who had sued PV Narasimha Rao for alleging that he and Chandraswami had defrauded him, started with making snacks in a small kitchen. But then he nurtured it so astutely that the brand Patak's became a world-known brand. The present thinking is that Patak's could grow fast and reach a turnover of £500 million.

Both Meena Pathak and Kirit were awarded OBEs for their services to the food industry. More adventurous of the two, Meena Pathak had revealed that she used to take several top chefs around the world to India every year to taste different spices and regional cuisines. She is credited with adding a new high-tech plant to the string of Patak's factories.

Industry insiders say that either the husband and wife duo want to emerge as global players, which may not be possible on their own, or because of a long-running legal dispute with Kirit?s sisters who have demanded shares. Last October, Kirit settled the lawsuit by his two sisters out of court.

Interestingly, the company celebrates its 50th anniversary this year. Allegedly NM Rothschild, big investment bank, has been engaged "to carry out a review of strategic options for the firm in an effort to capitalise on an expected boom in demand for Indian ready meals and cooking ingredients".

The review by Rothschild will reportedly dwell on either one of Patak?s partners acquiring a stake in the business or a sale in which the family be part of the business. Apart from Chicken Tikka Masala Curry (CTNM in Britain), which is considered a national dish, Indian food is the fourth most popular cuisine.

The other major Indian food manufacturer Sir Gulam K Noon, with a turnover of over £80 million, said he was not surprised at the news of the Pathaks trying to sell.

http://www.hindustantimes.in/news/181_1950932,0002.htm

 

[Neo]

Power plan to increase capacity in 11th Plan

BS Srinivasalu Reddy

Mumbai, February 21, 2007

The Centre’s ‘Power for All’ plan resulting in huge capacity additions in the power sector in the Eleventh Plan is set to result in investments of Rs 80,000 crore in transmission sector alone in the next six years.

This is set to benefit power transmission equipment companies in the form of continued growth in their performance.

In a report on the power transmission sector, leading credit rating agency Crisil said, “We expect investments of around Rs 80,000 crore in the transmission sector over the next six years. The Power Grid Corporation (PGCIL) is expected to invest around Rs 40,000 crore for the national grid and central sector projects, while the rest would come from private players.”

This opens a huge window of opportunity for players in the transmission equipment sector, like KEC International, Kalpataru Transmission and Jyoti Structures. These companies have been reporting improved performance over the last three years, owing to the impetus provided to transmission capacity addition.

“Although the prices of raw materials like steel, aluminium and zinc have moved northwards, these companies were able to maintain their margins owing to their ability to pass on the cost escalation to end-users,” Crisil said in a report.

The government has planned huge capacity additions in the Eleventh Plan to tide over the power deficit in the country by 2012. The huge investments in generation capacity addition would require concomitant capacity additions in transmission for efficient evacuation of power. The low reserve capacity in transmission network and the expected introduction of open access are some additional reasons for transmission capacity addition.

India is facing 9.3 per cent of shortage in power supply during April-January 2006-07, and the same shoots up to 13.9 per cent of demand during peak hours.

The Mission-2012 of the Ministry of Power is targeting sufficient power to support India’s growth rate above 8 per cent level, and the ultimate goal of power for all.

http://www.hindustantimes.in/news/181_1934610,00020018.htm

 

[Neo]

Chennai moves into the big leagues
By Raja M

MUMBAI - Red-coated specters haunting old Fort St George by the Bay of Bengal in Chennai, formerly Madras, would be happy. The 350-year-old stronghold, now the seat of local government, was the first British Empire fortress in India.

The imperialists have been long kicked out, but Chennai is regaining its stronghold status with a slew of major deals. Last month the government of Tamil Nadu state, of which Chennai is capital, announced a memorandum of understanding with South Asia's largest vehicle-manufacturing consortium.

The consortium of Mahindra and Mahindra (India), Renault (France) and Nissan (Japan), the first of its kind in South Asia, will set up an integrated automobile-making unit with an initial investment of about US$897.2 million to roll out utility vehicles and cars. To be located at Oragadam near Chennai, the unit will be the biggest vehicle-manufacturing center at a single location in the country.

Such deals could be more commonplace in Chennai, a southern Indian metropolis that seems a halfway living station between the hyper-energy and relentless ambition driving Mumbai and the deep cultural anchor of Kolkata. According to India's official pre-budget Economic Survey, Tamil Nadu and Pondicherry (a former French colony) together accounted for $1.63 billion (6.5%) of foreign investments, a figure that could double shortly. If India is the world's sleeping giant awakening, Chennai could be India's sleeping foot stirring, increasingly getting attention from local and global investors.

"Chennai's growth has been phenomenal in recent years," local businessman Vivish George told Asia Times Online. "The city has expanded by about 85 kilometers. The challenge is a shortage of workforce as the city's economy is booming and there are more jobs at hand. A restriction on business growth is getting vacancies filled."

Sure enough, other big projects are taking life. Vehicle maker Mahindra is also planning a Mahindra Research Valley in the Mahindra World City near Chennai. The project is expected to add a whopping $4 billion a year to Tamil Nadu's gross domestic product (GDP). Additional investment from vendors and supporting service providers is expected to amass about $2.2 billion.

The Tamil Nadu government is also building an "IT corridor" on the outskirts of Chennai, another Indian Silicon Valley in the making. This forest of information-technology companies is expected to create 300,000 additional jobs. The local Highways Department is speeding up work on an IT highway to connect the IT corridor with the rest of the city. The IT corridor and related infrastructure are expected to be ready this August.

Such developments have changed and raised the city's profile, besides sending real-estate prices through the roof. Still, rentals are very low compared with other leading Asian cities. A two-story bungalow with a garden can be rented in suburban Tiruvanmayur for $270 a month.

A visitor to Chennai after 10 years, as was the case of this correspondent, can be astonished at how much the city has changed: flyovers, glitzy shopping malls, cleaner roads and greater expectations. From being a region whose inhabitants have often been the butt of jokes elsewhere in the country (southern Indians are usually lumped together as "Madrasis", particularly because of the accent in which they speak Hindi, as well as eating and dress habits) the city now wears a quiet confidence, wielding not just serious economic muscle but political power.

The state's ruling Dravida Munnetra Kalagam (DMK) is a key partner in the ruling coalition in the central government. India's successful young information and communications minister, Dayanidhi Maran, is the grandson of the state chief minister, Muthuvel Karunanidhi.

Karunanidhi, 82, a poet and former movie scriptwriter, is now in his fifth term as chief minister, for the past two decades gleefully throwing out the incumbent government and alternating with his arch-rival Jayalalitha Jayaram, a former top movie heroine in the 1970s and leader of the All India Anna DMK.

Jayalalitha, South Asia's version of Imelda Marcos, took over the party mantle after a brief power struggle following the death of her co-star, the party founder, former chief minister and movie idol M G Ramachandran or MGR. The dashing MGR, who initiated a state-sponsored nutritious-noon-meal scheme for schoolchildren, a program now widely adopted across India, was one of the first actor-politicians in the world to assume a major office and never lost an election until his death in 1987. Following in his footsteps, leading Tamil movie stars invariably join a political party or start their own, giving the state's politics a peculiar circus-like atmosphere unmatched anywhere else in the world.

Karunanidhi, besides indulging in many populist schemes including giving free color TVs to poverty-stricken families, has in his current spell as chief minister been energetically making the state investor-friendly to IT majors, so much so that questions now fly whether Bangalore, India's original Silicon Valley and the dictionary word for outsourcing (Bangalored), is losing ground to Chennai. Leading IT companies such as Tata Consultancy Services, Infosys, HCL Technologies and other global IT giants such as Ford Information Technology, Verizon, iSoft etc are upgrading their Chennai presence or starting major new ventures.

TCS, India's leading company, will open its largest development center in Chennai and will hire 8,000 software workers over the next 18 months. Mumbai, with about 6,000 TCS workers, gets relegated to second place.

"Foreign direct investment in Chennai is very satisfactory," R Subramanium, secretary general of the Madras Chamber of Commerce, told ATol. "Per capita income in Tamil Nadu has tripled in recent years and savings comprise one-third of income. So the potential for much more growth is there."

Vivek Harinarain, the state IT secretary, told the media that he is "very bullish" on Tamil Nadu's IT prospects, with the state opening up another 4 million square feet (371,600 square meters) of space for IT and software companies.

An IT industry analyst pointed out that these IT companies do not have a mere presence in Chennai, but their operations there are the largest or the second-largest in India or in the world.

http://www.atimes.com/atimes/South_Asia/IC08Df04.html

 

[Janbaz]

Vodafone signs Essar control pact

Mobile phone provider Vodafone has reached an agreement with Essar over how to run the Indian wireless company.
Last month, Vodafone agreed to buy a 67% stake in Essar for $11.1bn (£5.7bn) but it was not clear how the deal would be structured and the firm controlled.

The new company will be called Vodafone Essar. Operational control will be in the hands of the UK phone firm, while Essar will have seats on the board.

Essar also has the right to sell all or part of its 33% stake to Vodafone.

'Amicable partnership'

In earlier talks, Essar had called for the firm to be jointly managed and hinted it might look to increase its stake in the firm, a plan that had raised concerns about the viability of Vodafone's investment.

"It's good the two companies have reached an amicable partnership agreement," said Robert Grindle, an analyst at Dresdner Kleinwort.

"The market can now move on to anticipate operational success rather than ownership debates."

Thursday's deal allows Vodafone's purchase to go ahead, and still meet Indian regulations that a foreign firm cannot own more than 74% of a domestic telecommunications company.

Should regulations change in the future, then Essar has the right in three year's time to sell all of its stake to Vodafone for $5bn, or part of its stake at an independently valued price.

"In due course, the business will market its products and services under the Vodafone brand," the company said in a statement.

'Key role'

Under the terms of the agreement, Essar's vice-chairman Ravi Ruia will be chairman of the newly formed company's board.

Vodafone chief executive Arun Sarin, who has earmarked $2bn for investment in India, will be a vice-chairman.

"Essar has played a key role in transforming this business into a leading Indian mobile operator," Mr Sarin said in a statement.

"We look forward to leveraging this experience and working with our partner as the company enters its next phase of growth in the attractive Indian telecommunications market," he added.


BBC News.
http://news.bbc.co.uk/2/hi/business/6453677.stm

 

[Neo]

March 19, 2007
Farmers oppose setting up of industrial enclaves

By Anand Kumar

INDIA’S ambitious special economic zones (SEZs) policy, which promised to generate hundreds of thousands of new jobs in exclusive industrial and service enclaves around the country — besides attracting billions of dollars in foreign and domestic investments — will finally be laid to rest.

Last week’s violence in West Bengal, in which 14 people were killed in police firing in Nandigram, threatens to bring a premature end to the government’s SEZ policy. Sadly, the losers include thousands of poor farmers — the value of whose marginal land holdings have crashed in recent weeks following the uncertainties facing the SEZ sector — and tens of thousands of jobless youth who will have to remain satisfied with low-paying, exploitative jobs in the unorganised sector.

Well-heeled investors, including both Indian and international, will find dozens of attractive alternatives, in countries in South East Asia (Vietnam, Cambodia, Indonesia), Central and Eastern Europe, Latin America and even in Africa.

But in India, none of the two major parties who can be expected to rule the country — through alliances with smaller partners - alternatively over the next few years can be expected to revive the contentious SEZ policy. The Congress, a party that has reluctantly adopted economic reforms, is shell-shocked in the aftermath of the Nandigram killings, and can be expected to give a quiet burial to the concept of SEZs.

The BJP, an opportunistic party — which has been pushing for SEZs in states ruled by it, including Gujarat and Rajasthan — has smelt blood and can be expected to exploit the Nandigram incident in the crucial elections to the Uttar Pradesh assembly, due to be held next month.

But this is not the first time that sound economic policy is being hijacked by political considerations, nor is it going to be the last time. The BJP’s chief minister in the western state of Gujarat, Narendra Modi, tom-toms the billions of dollars in investments that the state government has attracted from international investors, but in the UP election campaign, the party would focus on the ‘anti-labour, anti-farmer’ policies of the Congress in the eastern state of West Bengal.

WHAT happened in Nandigram in West Bengal last week — when the police opened fire on a mob armed with bombs and other weapons, and was far from peaceful — was unfortunate. The police in India, including in states ruled by the Marxists, tend to be brutal, and when faced by a violent mob respond in the only manner they know — retaliating, even firing from point-blank range.

There have been countless commissions that have condemned the police for firing on demonstrators, but despite clear-cut rules and warnings from the government, many police officers have failed to control their men, who open fire when faced with unruly mobs. (Incidentally, a senior intelligence official had been lynched in Nandigram last month, and the police had been prevented from entering the village).

West Bengal’s pragmatic Marxist chief minister Buddhadeb Bhattacharjee, who has been trying to revive the moribund industrial sector in the state — following the disastrous policies pursued by his predecessors, which have driven away entrepreneurs — is now facing a dilemma, thanks to the trigger-happy men in his police force.

Though the Communist Party of India (Marxist) (CPM) dominates the West Bengal government, its allies — including the Communist Party of India (CPI) and the All India Forward Block (AIFB) — have been critical of Bhattacharjee’s overtures to industrialists and international investors.

A.B. Bardhan, an old-time CPI leader and an orthodox communist, flayed the West Bengal government for the firing in Nandigram. According to him, there can be no industrial development based “on the corpses of peasants.” The AIFB, which along with the CPI is opposed to Bhattacharjee’s laying of the red carpet for prominent businessmen, dubbed the action as “anti-people.”

While supporters of the Marxist regime in West Bengal have been extremely critical of the government, its opponents — including the Congress, the Trinamool Congress and the BJP — have lambasted the Bhattacharjee government, purely out of guile and even envy. The BJP’s Modi in Gujarat, or the Congress chief minister of Maharashtra, Vilasrao Deshmukh, are doing exactly what Bhattacharjee is doing — acquiring land from farmers (worse, they pay far less than what West Bengal offers farmers) and developing special economic zones, to attract global investments.

West Bengal has for decades faced a major crisis on the industrial and economic fronts, and Bhattacharjee has embarked on an ambitious programme, attracting investors from around the globe and within India to the state, urging them to set up industries. And investors, from India’s leading business group, the Tatas, to international majors, have responded to his pleas.

Ratan Tata, the chairman of the eponymous group, decided to set up his small-car project (which would sell automobiles for less than Rs100,000) in Singur in West Bengal. The Salim group of Indonesia has been another major investor in West Bengal, and was keen on setting up a chemical hub in Nandigram.

Mamata Bannerjee, the Trinamool Congress chief — whose party was trounced in assembly elections in the state last year — launched a high-profile hunger strike against the Singur project of the Tatas a few months ago, roping in ‘professional, celebrity protestors’ (who automatically attract television networks) and projected herself as a defender of farmers.

But despite the high-decibel protests, a majority of landowners in Singur sold their farmland to the Tatas, attracted by the hefty price that was offered. According to Bhattacharjee, 960 acres of a total of 997 acres have already been handed over by the farmers to the Tatas.

According to the West Bengal chief minister, landowners were being paid unheard of compensation of Rs900,000 an acre of single-crop land, and Rs1.2 million for multi-crop land. In most other SEZs that are coming up in India, farmers have been paid a fraction of the sum.

Bhattacharjee is now willing to relocate the chemical hub from Nandigram if the people there do not want new industries to come up. But in India, it is easy to mislead a few vocal local leaders and organise demonstrations against major projects — some from the underworld have also infiltrated such agitations, demanding extortion from promoters — and then project it internationally as a cause celebre, with the aid of ever-willing ‘celebrities’ out to grab a few minutes of fame on television.

BUT chief ministers like Bhattacharjee, M. Karunanidhi of the DMK in the southern state of Tamil Nadu, and even Y.S. Rajasekhara Reddy of the Congress in Andhra Pradesh, have been urging Prime Minister Manmohan Singh to remove the freeze on approving SEZs, imposed a few weeks earlier.

Many international majors have unveiled plans to invest millions of dollars in SEZs across India, and in some cases, the machinery and equipment has already started arriving. But following Mamata Bannerjee’s high-decibel opposition to the Singur SEZ of the Tatas, the weak, United Progressive Alliance (UPA) government in Delhi decided to freeze all new approvals for such zones.

The government had received applications for hundreds of SEZs from entrepreneurs — some of who included real estate developers, tired of getting clearances for acquiring land for developing townships from local authorities — but the old guard in the Congress warned the high command against aggressively pursuing the SEZ policy.

Though the federal government approved 235 SEZs, it has notified a mere 63. While the unwieldy coalition government in Delhi is unable to decide on the issue, international investors have been putting pressure on state governments. Tamil Nadu, for instance, is worried that investors like Nike — which planned to invest $300 million in the state — and US-based Velankani Communications (with plans for $600 million in investments) — would back out and head for other destinations in South East Asia.

The SEZs being planned by Nike and Velankani would alone have generated over 40,000 jobs in the state. Overall, the UPA government was hoping that 1.5 million new jobs would be churned out and investments worth nearly $15 billion be ploughed into the country by 2009, following the setting up of SEZs.

The next general elections are due to be held in 2009, and the Congress could have focussed on the success of the SEZs policy while seeking yet another term. But the party, which is facing an inner conflict between reformers and the old socialist warhorses, has been unable to reconcile the differences and is likely to dump a policy that would have resulted in jobs for the ‘aam aadmi’ (common man).

http://www.dawn.com/2007/03/19/ebr10.htm