Indian Economy - News & Updates - Archive

[Neo]

India, China auto marts carry high risks: S&P
26 Mar, 2007

MUMBAI: Global credit rating agency Standard and Poor's (S&P) has warned that the foreign auto makers may "hit some bumps on road to big profits" in India and China as the two countries carried high credit risks.

"On the road to big profits in China and India, global automakers may hit some bumps," a S&P rating services report said.

Global automakers like Volkswagen, BMW Group and DaimlerChrysler have lined up impressive investment plans for India in recent times whereas Suzuki, Hyundai, Toyota, General Motors already have substantial presence here.

Automakers' hopes are particularly high in China due to significant investments already made in the world's fastest-growing major economy.

"Despite promising high returns, the burgeoning auto markets of China and India carry high credit risks for foreign automakers, because of intense competition to maintain a foothold in these markets," the report said.

However, the risks are evenly balanced by the prospect of reaping rich rewards going by the projected purchasing power in India and China which is expected to grow between 7 to 10% over the next five years.

"It will take longer for the automakers to reap rewards from the Indian auto market as they are still in the initial stages of the investment cycle," the agency's report observed. Volkswagen is setting up a manufacturing facility at Chakan near Pune, DaimlerChrysler has also acquired 100 acres nearby at Chakan to set up a assembly line by end of 2008.

BMW Group is set to roll out its first cars from the Indian plant set up in the Mahindra City near Chennai beginning March 29.

Volkswagen and General Motors have largest presence in China and hence that could be a factor in their profitability, the report's author said. Competition has severely dented Volkswagen's China market share, which has fallen from 60% in the mid 1990s to just 18% in 2006.

Despite its established production base, investments in China remain high for the Group between 2007 and 2009. It will invest 1.9 billion euros in China which will come from internal funds of the auto major Volkswagen's local joint ventures.

In India and China, with populations of more than a billion each, fewer than 20 in 1,000 driving-age inhabitants owned a car in 2006.

This compares with 900 car owners per 1,000 inhabitants in the US, world's largest auto market. With the purchasing power forecast to grow at more than 7% per year in India and by more than 10% in China over the next five years, cars sales are expected to grow enormously, the report predicted.

http://timesofindia.indiatimes.com/...s_carry_high_risks_SP/articleshow/1807191.cms

 

[Neo]

Mar 27, 2007

India bucks global outsourcing trend
By Siddharth Srivastava

NEW DELHI - While worldwide information-technology (IT) firms witnessed an overall fall in new outsourcing contracts in 2006, Indian companies, such as Infosys, Tata Consultancy Services (TCS) and Wipro, saw their market share increase by more than 14 times in the past four years, according to a new study.

Meanwhile, boosted by huge investments across various sectors, India's domestic IT market is expected to grow at 21.5% this year to Rs758.91 billion (US$17.5 billion), making it the fastest-growing segment in the Asia-Pacific region.

"A major wave of IT investments has started to take place across
banks, financial-services institutions, telecom, manufacturing, government, resources, education and other industries,'' market research and analysis firm International Data Corp (IDC) said in its report "India Domestic IT Market Top 10 Predictions for 2007".

"This is probably why India is the fastest-growing country by IT spending in 2006 at 22.4% and is forecast to remain so in 2007 at 21.5% when it reaches Rs758.9 billion,'' it said.

Another study by outsourcing advisory firm TPI says there are difficult times ahead for the global IT majors, as they face intense competition from new market players. "Indian firms are emerging as an attractive and credible alternative to the traditional players and over the next few years they are expected to compete directly with the 'Big Six' for larger-value contracts,'' said Duncan Aitchison, TPI's managing director.

In contrast to the massive gains registered by Indian service providers, the market share of the "Big Six" global outsourcing majors - Accenture, IBM, HP, ACS, CSC and EDS - declined to 46% last year, from 71% in 2002.

The market share of India-based providers rose to 7% last year, from less than 0.5% in 2002. Indian service providers such as Wipro, Tata and Infosys are reaping the benefits of the trend toward single-process and specialist deals, the TPI study says.

Looking at industrywide contracts with a value of more $50 million, the Indian players grew their share from 8% in 2005 to 11% in 2006, while the share of the Big Six, which are known for their strong hold over IT contracts, dropped from 44% to 37%.

Indian firms have been particularly successful in the applications development and maintenance segment, where they expanded their market share to 36% in 2006 from 8% in 2003. India-based IT service providers are aiming for a $60 billion export target by 2010.

According to IDC, this year Indian enterprises will graduate to the second level of "dynamic IT infrastructure", where IT infrastructure will be able to change in response to changing business scenarios. The key technology components that will come to the fore will be virtualization, service-oriented architecture and application integration.

This year will mark the beginning of an aggressive effort by all major vendors to broaden and deepen their coverage of the small and medium-sized business sector. Vendors will experiment with new models such as on-premise hosted applications, hardware on lease, and software as a service.

"We are looking at five to 10 deals worth $50 million to $100 million each, across various verticals. We think customers feel a lot more comfortable with such deal sizes," TCS head S Ramadorai said recently. "Large corporations do not want to sign the $1 billion to $2 billion or $10 billion outsourcing deals for sure because they are also worried about the aspect of value delivery on a sustained basis. The key point emerging from the current trends in the industry is that $50 million to $100 million deals are the sweet spot."

Observers in India, however, say the tax regime for software companies could impact on profits in the near future. The tax-free status of software firms in India comes to an end in 2009. The National Association of Software and Service Companies (Nasscom), the industry's lobby body, has asked the government to extend the exemptions for another 10 years.

Software firms hope that once the Software Technology Parks of India (STPI) incentives come to an end, they may be able to shift to special-economic-zone status and benefit from similar tax breaks.

However, the left wing, a key coalition partner of the government, is opposed to this move. "What is the point in the economy doing very well, but the government not getting a share of the revenue [that] it can use for the other [poorer] sections?" a senior left-wing party leader recently asked.

Nasscom has said the STPI incentives are a key factor in the growth of the industry, which is likely to see export revenue rise nearly 30% to $29 billion or more in the fiscal year, which ends on March 31.

Until now software service units set up in STPIs have not paid taxes on exports, but have paid taxes on domestic business. However, from the next fiscal year, income from exports will come under a minimum alternative tax, which was last month extended to the sector in the federal budget for 2007-08. This rate is still much lower than domestic corporate tax.

Manpower continues to be a major area of concern. A severe manpower crunch combined with high growth has resulted in unprecedented rises in salaries in India. This is the fourth straight year that salaries in India are projected to rise faster than in any other major Asian country.

According to the annual study of human-resources consulting firm Hewitt Associates, India will continue to be the highest salary-growth region in the Asia-Pacific region, with an all-time high average pay hike of 14.5% in 2007 against 14.4% in 2006, 14.1% in 2005 and 13.7% in 2004.

Middle managers and professional and technical employees will get the biggest hikes at 15.1% and 15.8%, respectively. Even manual workers will get an average hike of 12.2% against 11.9% in 2006.

The Hewitt study follows an ECA International survey indicating that India will this year witness its highest-ever salary hikes.

ECA International, the world's biggest organization for human-resource professionals, said: "Indian workers are set to receive the highest raise, with firms forecasting annual salary hikes of 12% resulting in a real wage increase of 7%, once inflation has been taken into consideration."

Recently, N R Narayana Murthy, chief adviser to software giant Infosys, said India should quickly put in place a modern, world-class human-resources policy to avoid serious growth-related problems.

"There is a serious manpower shortage," said Murthy. "So unless we have put in place a dynamic, forward-looking, modern and world-class human-resources policy, I think we will regret it."

However, Murthy said he is against a tax holiday for IT companies. "I think we have to pay taxes. After all, what's the difference between a company that serves Indian consumers and a company that serves outside? There is no difference."

Siddharth Srivastava is a New Delhi-based journalist.

http://www.atimes.com/atimes/South_Asia/IC27Df01.html

 

[Neo]

India grapples with energy issues
By Siddharth Srivastava

NEW DELHI - India's hopes of tapping into Myanmar's gas resources might have hit a dead end, with Yangon pitching for China instead. India's problems with Myanmar follow US moves to strangle the US$7.4 billion Iran-Pakistan-India pipeline.

Reports of the meeting between Indian officials and Myanmar suggest that Yangon has refused to export gas to India or other contenders such as South Korea and instead would prefer a pipeline to China to export gas found offshore.

Myanmar has reportedly told an Indian delegation that it wants to sell gas from offshore Block A-1 and potential discoveries in Block A-3 to China. The Shwe natural-gas field was discovered by Daewoo on the Western Arakan coast of the Bay of Bengal.

While there is still confusion over how matters stand, with Daewoo, the South Korean company that operates the gas fields, denying the claims, nobody doubts that India's position is weak.

Meanwhile, Washington has told India it is opposed to the gas pipeline from Iran, US Energy Secretary Samuel Bodman, who has visited New Delhi, has said.

"During my trip, I have made it clear at the highest levels of the Indian government that the United States opposes the development of the Iranian pipeline to India," press reports quoted Bodman as saying. "We believe that Iran is seeking to develop nuclear weapons, and anything that will support that endeavor is something that we oppose."

A prominent US legislator, Congressman Tom Lantos, who is head of the House of Representatives' Committee on International Relations, has introduced a bill that, if passed, will ensure that India and Pakistan are not able to proceed with their gas pipeline connecting to Iran.

The legislation, the Iran Counter-Proliferation Act of 2007, seeks to target companies investing in Iran's energy sector by ensuring that deals with Iran worth more than $20 million will bring the investors under US sanctions.

According to reports, the US government has been quietly warning foreign energy companies, including Europe's Shell and Repsol and Malaysia's SKS, as well as the governments of China, India, Pakistan and Malaysia, that penalties are possible if they pursue energy deals with Iran.

As for Myanmar oil and gas, Indian intelligence agencies recently cautioned New Delhi about the possible shut-out of Indian interests by Russian and Chinese oil firms. The agencies argued that the decision by oil-business-savvy Russia and China to veto a US-led move in the United Nations Security Council to address the Myanmar junta's human-rights violations was a critical juncture in the evolving relationship with Russian and Chinese companies now well established in the country.

The agencies highlighted the recent award of three deepwater offshore blocks - AD-1, AD-6 and AD-8 - along Myanmar's western Rakhine coast and adjacent to India's territory - as a possible quid pro quo by the ruling State Peace and Development Council to China's China National Petroleum Corp.

Russia has also stolen a march over the Indian contingent, with the Republic of Kalmykia (RoK) of the Russian Federation recently acquiring its first oil-and-gas exploration and production asset in Myanmar - the B-2 onshore block.

India's ONGC Videsh Ltd and Gas Authority of India (GAIL) have a 30% stake in A-1 and A-3 blocks, while South Korea's Daewoo is the operator with a 60% stake. South Korea's KoGas has the remaining 10% interest.

According to a report by news agency Press Trust of India, "China has told Myanmar that it will lay about 900 kilometers of pipeline in Myanmar to transport the gas from the offshore area to the Myanmar-China border. The distance from the gas field to the India-Myanmar border is 290km, making it the most economical export option, but Myanmar's military leadership prefers to go with China.''

Perhaps sensing India's situation, Silver Wave Energy Corp of Singapore - a privately owned company headed by the well-entrenched Minn Minn Oung, which has helped India's state-run gas utility, GAIL, access three offshore blocks in Myanmar - seems to have given its relationship with GAIL a low priority by signing a tripartite agreement with the RoK and the Myanmar Oil and Gas Enterprise for oil and gas exploration.

Recently, more gas was discovered off Myanmar's coast, further enhancing the Southeast Asian nation's position as one of the richest countries in the region for hydrocarbons. The latest find was made by Thailand's PTTEP, the exploration arm of the Thai state-controlled oil-and-gas company PTT, in the Gulf of Martaban.

According to recent reports, Dhaka is now reportedly keen to renew discussions with the Indian government on the three-nation gas pipeline involving India, Myanmar and Bangladesh, which has failed to take off because of Dhaka's linking the pipeline and trade issues with India.

In this context, India has sought the inclusion of transnational oil and gas pipelines in the World Trade Organization's trade-facilitation measures, which aim to cut red tape and other obstacles to the flow of goods across borders.

"Countries like Bangladesh have shown a lack of commitment in entering into a treaty for providing a transit route [for] Indian goods, including the Myanmar-India gas pipeline, through their land, forcing India to consider other circuitous and uneconomical options,'' says an Indian government submission.

It now seems too little, too late. The solace for India is that in the recent past, massive gas reserves have been found in the rich Krishna-Godavari basin and elsewhere that should meet some of the rising demand for energy sources. India is also exploring the option of nuclear power after a historic deal with the US.

Looking to meet its growing energy requirements from every source, India recently mooted the concept of a "South Asian Energy Ring'', which would comprise transnational energy lines in electricity, gas and oil that would facilitate trade in energy in South Asia.

Speaking at the South Asia Energy Dialogue in New Delhi, under the aegis of the South Asian Association for Regional Cooperation (SAARC), Indian Power Minister Sushilkumar Shinde said this country already has grid interconnection with Nepal and Bhutan and feasibility studies are under way in Sri Lanka and Bangladesh.

The SAARC, for which energy is a very high priority for cooperation, comprises Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka.

Key SAARC nation Pakistan has welcomed the energy-ring concept. Amanullah Khan Jadoon, minister for petroleum and natural resources, said Pakistan is a strong advocate of energy cooperation in South Asia. Speaking at the meeting of SAARC energy ministers, Jadoon said high economic growth demands high energy inputs.

India needs to act fast. More than half of its power plants are either shut or running at half their capacity because of a coal shortage. Most of India's power plants are coal-based.

According to government estimates, India's dependence on crude-oil import will rise by 86.3% by 2011-12 from 78.3% at present (2006-07).

New Delhi has estimated a loss of 400 million units of power from 43 gas-based plants, due to an acute shortage of gas, which could be addressed once pipelines are in place from the Krishna-Godavari basin, the site of several recent gas finds. India's power industry suffers an average shortage of 8% and a peak shortage of 13%.

India, Asia's third-biggest oil market, is promoting exploration to reduce dependence on imports as prices rise to record levels and output from aging fields drops.

India's current gas supply of 85 million cubic meters a day, including imported liquefied natural gas, falls short of the potential demand of 170 million cubic meters, according to estimates by the Oil Ministry. Gas consumption may rise to 400 million cubic meters a day by 2025 if the economy grows at the projected rate of 7-8% a year.

http://www.atimes.com/atimes/South_Asia/IC24Df01.html

 

[Neo]

Indian FDI: It's a two-way flow now
Siddharth Srivastava

For long foreign direct investment (FDI) has been considered a major engine for growth in India. But for the first time, more investment is beginning to flow out of the country than into it.

With India Inc lining up several acquisitions overseas, investment abroad by Indian companies is likely to be more than FDI inflows in the country, India's Associated Chambers of Commerce and Industry (Assocham) has said.

While this speaks a great deal about the emergence of Indian multinational companies, the government has still to get it right in providing the correct infrastructure and legal framework to those who want to invest in India.

The massive exercise of setting up special economic zones (SEZs) has hit a roadblock after the virulent protests by farmers opposing land acquisition in Nandigram in the state of West Bengal. Fortunately, New Delhi is keen not to buckle while ensuring a good deal for those who are going to be dispossessed.

The bulk of the outward FDI flow, estimated at US$15 billion (compared with inflows pegged at about $12 billion), will be driven by India's booming manufacturing sector, says the "Study on FDI Outflow and Role of Manufacturing in the Mergers and Acquisitions Front, 2007".

Leading financial consultancy Thomson Financial has said that 2006 was a mega-merger year for India: 1,164 deals valued at a total of $35.6 billion as against 1,011 deals worth $21.6 billion in 2005.

After the Tata-Corus and Vodafone-Hutch mega-deals, conservative estimates by Indian analysts have pegged mergers and acquisitions (M&As), including outbound and inbound deals involving Indian firms, to reach $100 billion in 2007.

Another recent study by the Institute of International Finance, a Washington-based global association of financial institutions, has predicted that the desire of India Inc to operate in foreign lands will lead to a threefold rise in direct investment flows out of the nation in 2007.

The figure might appear meager weighed against the frequent investment announcements of hundreds of millions of dollars abroad by Indian majors, because of big foreign financing components or debts.

This year, India has already seen mergers worth more than $40 billion that include Tata Steel's acquisition of Anglo-Dutch steelmaker Corus ($12.2 billion), Hindalco's buyout of Novelis ($6 billion), and Suzlon's bid for Germany's REpower ($1.3 billion, a figure likely to go up because of a higher rival bid), besides Vodafone's acquisition of a majority in Hutchison Essar Ltd ($18.8 billion).

Others could include Reliance Industries' interest in the plastic division of General Electric, a deal that could top $5 billion. Comparable figures are being quoted for Ranbaxy and a private-equity firm's interest in German pharmaceuticals major Merck.

"Riding on strong balance sheets, good credit ratings and confidence shown by the global business community, Indian manufacturing is leading India Inc's global quest," said Venugopal Dhoot, president of Assocham.

The main factors driving the M&As among Indian companies are surplus funds, globally competitive business practices and a favorable regulatory environment, besides higher margins, revenue, volumes and growth prospects, says the Assocham report.

Preferred investment destinations are Europe, the United States and Africa, in the last case taking advantage of that continent's cost-competitiveness. Sectors such as pharmaceuticals and automobiles will give a major push to the FDI outflow, though information technology will continue to dominate the scene, said the report.

According to Assocham, the Indian conglomerates that see the brightest prospects include the Tata group, Bharat Forge, Ranbaxy, ONGC, Infosys and Wipro. "The sectors attracting investments include metal, pharmaceuticals, industrial goods, automotive components, beverages, cosmetics and energy in manufacturing, and mobile communications, software and financial services in services," the report said.

Highlighting specific examples, the study said: "The Apollo Group of Hospitals may strike [across] the border. Nicholas Piramal India Ltd plans to invest $50 million over a three-year period in its plants in the UK and India."

Incoming FDI and SEZs
Despite the government of West Bengal backing out from a proposed SEZ at Nandigram, it is not the end of the road for India's plans. There are many state governments in the country that are pushing for the setting up of SEZs where land acquisition is not an issue as the farmers are happy about the compensation packages.

Significantly, the leftist West Bengal government has also not said it is totally backtracking on the setting up of SEZs and has proposed that the industrial hub planned for Nandigram will be moved elsewhere in the state.

Although the killing of 14 people by police at Nandigram has severely vitiated the exercise of land acquisition, given the intense competition among state governments to attract industrial investment, the West Bengal government knows that industry has plenty of other options in other states.

Among the greatest supporters of special zones include the chief ministers of Tamil Nadu, Gujarat, Andhra Pradesh, Karnataka and Haryana. They have written to New Delhi conveying concerns of the firms that have lined up big investments in their states.

The chief ministers have asked to be allowed to go ahead with notifying SEZs that have gotten final approval. In many cases, the chief ministers have said land that has been with the state industrial development corporations for many years has been given to the developers. In others, landowners have been adequately compensated.

As many as 172 approved proposals are awaiting notification. Among the 166 SEZ proposals that have gotten in-principle approval, 100 have already tied up land. The federal government has also made it apparent that it is not going to reverse the policy, though it will make it more palatable to the farmers.

Post-Nandigram, it is imperative that the federal government devise a comprehensive set of umbrella rules to ensure the course of action in case of disagreements. The package has to make sure that farmers and sharecroppers are made part of the development process. At present, New Delhi has put the entire exercise on hold until a proper rehabilitation package is drawn up.

Home Minister Shivraj Patil has promised that the SEZ policy will be refined in consultation with the state governments, the farmers who own the land, and industrialists. He clearly indicated that the SEZs will be implemented.

Commerce and Industry Minister Kamal Nath has said that the federal government is fully committed to the zones with complete backing of Prime Minister Manmohan Singh.

Nandigram and political concerns "have not put me off, and the government is absolutely committed", Nath said, adding that he is confident that the Empowered Group of Ministers headed by External Affairs Minister Pranab Mukherjee will go ahead with clearing the SEZ cases where there is no land dispute. "Of course there is a fear now where land acquisition is concerned ... But where there is no land in dispute, why should we be worried?"

Nath said he is worried that if clearance for such SEZs is not forthcoming, several foreign investors might opt out of India and take their investment elsewhere.

"Of course I am worried. There is investment competitiveness from Thailand, from the Philippines, from Indonesia. Investment has to be attracted. It can't be demanded. [If there are delays] they will feel unstable. At the end of the day they are here because they look at India as a credible country."

http://www.atimes.com/atimes/South_Asia/IC23Df01.html

 

[Janbaz]

India, UAE companies sign major real estate deals

NEW DELHI: Indian and United Arab Emirates firms signed major real estate deals on Monday worth more than $20 billion during a visit by the ruler of Dubai, including plans to build two massive townships in India.

India’s largest real estate developer DLF said it inked a $20 billion deal with UAE’s Al Nakheel to build two townships in India, with an initial investment of five billion dollars each in the next three years.

“We have signed a 50:50 joint venture with Al Nakheel to develop integrated townships,” said a DLF executive, who asked not be named. The townships would be full-sized cities near the capital New Delhi and in western Maharashtra state, another company official said.

The executive, speaking on the sidelines of meetings with Indian business leaders by Sheikh Mohammed bin Rashed al-Maktoum, said the townships would cover 40,000 acres (16,200 hectares) of land, of which 70 per cent has already been bought. Construction will begin by the end of 2007, the official said.

The firm said a press conference planned on Monday to announce details of the deal had been cancelled but confirmed the agreement was signed. “We had plans to announce the details in the presence of UAE officials but they had a change of plans,” the executive said, indicating that the UAE officials had been called for meetings with the Indian foreign ministry.

Officials did not say how the company would buy large areas of land for the projects in the wake of bloody protests across India over the acquisition of land by the government for developing industry.

Among the proposals facing uncertainty over land acquisitions is Korean steel giant POSCO, which plans to invest $12 billion in a steel plant in eastern India in what will be the country’s largest foreign direct investment.

In other agreements sealed on Monday, India’s Hinduja Group, majority-owned by the London-based Hinduja brothers, said it signed a Rs12-billion ($275-million-) deal with Nakheel to develop resort and commercial property in Dubai.

The Hindujas also signed a joint venture with real estate group Limitless an arm of Dubai World, also the holding company for Nakheel to develop real estate for medical facilities with an initial investment of one billion dollars.

“Half a dozen lands have already been acquired for this project,” group chairman Ashok P Hinduja told AFP. The Hindujas will also set up a manufacturing unit for its commercial vehicle manufacturing firm, Ashok Leyland in Dubai.

Shares of Hinduja rose Rs8.75 or 1.45 per cent to 613.60 Monday while the benchmark Mumbai stock exchange Sensex fell 161.61 points or 1.22 per cent to 13,124.32.

The agreements were part of a string of business deals signed by companies from the two countries during the UAE leader’s visit at the head of a large business delegation. India’s third-largest software exporter Wipro signed a preliminary agreement with the UAE delegation to “work together” to tap opportunities in the Middle East, said Chief Financial Officer Suresh Senapaty.

“It’s a statement of intent to address the Middle East market of entities that come under the sultan,” Senapaty said in the southern technology hub of Bangalore. “The details are to be discussed.”

In January, DLF said it had filed a new and downsized initial share sale offer with the India stockmarket regulator almost six months after investors balked at its plan to raise three billion dollars for its ambitious expansion programme.

The News.
http://thenews.jang.com.pk/daily_detail.asp?id=48517

 

[Janbaz]

Hyundai India aims to double car sales overseas

BANGALORE, India: Hyundai Motor’s Indian unit plans to more than double overseas sales of cars by 2008 to cement its place as the country’s biggest automobile exporter, the company said Monday.

The South Korean automaker, which exported 113,000 made-in-India Accent and Santro cars last year, expects to ship 300,000 units by the end of 2008, it said after sending the first consignment of its Getz model to Europe.

Hyundai Motor India began exports in 1999 when it sold 20 Santro cars in neighbouring Nepal. Since then it has become India second biggest car maker behind the local venture of Japan’s Suzuki and the largest exporter.

Hyundai’s Indian-built automobiles are now exported to 67 countries spread over Europe, Latin America, the Middle East and Africa. “Given Hyundai Motor Company’s global strategy to make India an export hub for small cars, we are shipping the first consignment for export of the new Getz to Europe,” said H S Lheem, managing director of the unit, in a statement received here. “For the Indian operations, this is a major milestone.”

The company plans to ship 40,000 Getz cars overseas in the next year, boosting the number to 100,000 units by 2008. Since it was introduced in 2002, the Getz has sold more than 500,000 in Europe, accounting for close to 70 per cent of its total sales worldwide.

Hyundai Motor India is a wholly owned subsidiary of Hyundai Motor, marketing 16 variants of passenger cars in this country of 1.1 billion people. The company logged total sales of 299,513 vehicles in 2006, up 18.5 per cent.

In the domestic market it clocked growth of 19.1 per cent, with 186,174 units, while overseas sales grew 17.4 per cent to 113,339 units. India’s car market is forecast to expand 10 per cent a year to reach two million units by 2010 as an economy expanding nine per cent a year boosts the buying power of consumers in the world’s second-most populous nation.

International automakers drove into India after it opened up the potentially vast market to overseas investment as part of sweeping reforms launched in 1991 which overturned four decades of semi-socialist policies.

For decades after independence in 1947 India’s roads were dominated by two ancient models the boxy Premier Padmini and the full-sized Ambassador, still a mainstay among taxi drivers in many cities.

The News.
http://thenews.jang.com.pk/daily_detail.asp?id=48518

 

[Neo]

Foreign investment in India up by 151pc in ’06

27 March 2007

NEW DELHI — Betting on India's growth story, foreign firms increased their investments in the country by 151 per cent during April-December 2006, according to official data released yesterday.

"FDI (foreign direct investment) inflows during the period April-December had been $9,272 million against $3,697 million in the corresponding period last year, representing a record increase of 151 per cent," said the Department of Industrial Policy and Promotion (DIPP) of the commerce and industry ministry.

According to the DIPP's annual report, the amount invested by foreign players shows their confidence in India. The rise is also due to measures such as increasing the FDI limit to 100 per cent in many sectors, increase in equity caps, removal of restrictive conditions and procedural simplification.

"India's forex (foreign exchange) reserves stood at $193.12 billion on Feb 23, 2007 up from $151.62 billion at the end of March 2006," said the statement.

http://www.khaleejtimes.com/Display...h/business_March727.xml&section=business&col=

 

[Neo]

FDI inflow pegged at $15 billion
27 Mar, 2007

NEW DELHI: Global interest in India has prompted the government to scale up its projections on foreign direct investment (FDI) inflows for the current fiscal by 25% to $15 billion.

If the government's revised projections, announced by commerce and industry minister Kamal Nath on Monday, are met, it would mean that FDI inflows would have nearly doubled from last year's $7.72 billion. The ministry was earlier estimating FDI inflows of $12 billion during 2006-07.

While India received inflows of $38.90 billion between August 1991, when the economy was liberalised, and March 2006, estimated FDI flows during 2006-07 — the highest ever — would be 38.5% of the investment received in the previous 14 years.

In terms of direct investment, the current financial year has been a landmark of sorts with FDI inflows for the first time overtaking FII flows, which economists said pointed to higher confidence in India as companies were willing to invest long-term. But even at $15 billion, inflows into India are less than one-fourth of what China ($63 billion) attracted in 2006.

While Indian officials view China's FDI statistics with a degree of suspicion, they are excited about the inflows into India since a bulk of it was coming into manufacturing where government is trying to step up investment to create jobs.

"Investment in industrial sector is good for a country like India where majority of the population is dependent on agriculture. FDI is adding to the booming investment proposals from Indian players. A large number of the proposals are from first-time investors so there will be more inflows in future," an official said. Between April and December, FDI inflows were $9.27 billion, 151% higher than same period last year.

http://timesofindia.indiatimes.com/..._pegged_at_15_billion/articleshow/1812886.cms

 

[Neo]

India's growth may slow down: Report
27 Mar, 2007

TOKYO: The Indian economic growth should slow down to 8.0 per cent this year before picking up to 8.3 per cent in 2008 despite higher inflation and a weaker agricultural sector, said the Asian Development Bank on Tuesday.

While India’s growth momentum was robust in 2006, it also led to “high capital inflows and currency appreciation pressures,” the ADB said in its annual Outlook report. “Manufacturing and construction growth have stimulated a voracious appetite for credit, which in turn complicates attempts to control money supply,” said the report.

The ADB added that “agricultural stagnation” was a key structural challenge as rising food prices contribute largely to inflation. Stagnation in turn raises pressure to transfer land out of agriculture for industrial use, causing worker displacement and serious social unrest. The construction sector, which plays a major role in the Indian economy, has been through a boom which drove gross domestic investment to 33.8 per cent of gross domestic product (GDP) in 2005, an upward trend that seems to be continuing.

This investment binge has been met by growth in bank lending, which is now causing problems in reining in money supply, the ADB said. While the federal government has tried to combat inflation with a raft of measures including a cut in tariffs on imported goods, including food, the results have been limited.

“Faced with demand-led inflation, the Reserve Bank of India needs to dampen expenditure,” said the ADB. “However, in doing so, it will be important not to reduce the credit available for expanding manufacturing capacity more than is necessary to contain inflation ... These capacity expansions are vital for enhancing growth potential in the medium- to long-term,” concluded the report.

http://timesofindia.indiatimes.com/..._may_slow_down_Report/articleshow/1815746.cms

 

[Janbaz]

Renault, GM join battle for India’s car market

MUMBAI: Half a century ago, Renault and Mahindra & Mahindra Ltd failed to get off the ground a venture to make a cheap car for the local Indian market priced at a princely $158.

Nowadays, that might buy you a set of new tyres, but the two are back in partnership vying with global automakers to grab a slice of an Indian car market that is forecast to nearly double to 2 million units by 2010, if not sooner.

The new $10,000 Logan sedan, slated by Renault and Mahindra for launch early next month, will go up against similar small models offered by Ford Motor Co, Tata Motors and Suzuki Motor Corp’s Maruti Udyog.

Small cars make up more than two-thirds of the Indian market, but spreading wealth among the 1 billion-plus population has also triggered growth in bigger models from manufacturers such as Maruti, Tata, Hyundai Motor Co Ltd, Ford, Honda Motor Co Ltd and Toyota Motor Corp.

General Motors Corp, still the world’s biggest volume carmaker, is also getting in on the act, with the imminent launch of its Chevrolet Spark. GM, which swung to a small profit in the fourth quarter, aims to shift 220,000 vehicles in India by mid-2008, up from just 65,000 last year, as it adds India’s fast-growth market to a global autos battlefield between US, Asian and European rivals.

That would give GM around 10 per cent market share in India where small cars up to 4 metres long and with a 1.2-litre petrol engine or 1.5-litre diesel engine get preferential tax treatment. “GM clearly needs to make the Spark a success because this will be their big volume brand,” said Pradeep Saxena, a senior vice president at research firm TNS Automotive.

“For GM, India may not be as crucial to its overall restructuring, but it has huge potential. In how many markets do you see 20 per cent annual growth?”The Spark will have a sticker price of around $8,000, analysts estimate, and will slug it out in dealers’ yards with Maruti and Tata’s Indica.

Renault is one of several big European car makers drawn to India’s low-cost manufacturing base as well as its dynamic domestic market.Announcing the venture with Mahindra, Renault’s executive vice president Patrick Pelata said India would be “a key part of our mission for profitability”.

“One of the reasons we’re here is that costs are low,” he said.Luxury car maker BMW will soon start production in India, while Volkswagen will begin making sub-compact models from 2009. Its premium Audi unit is also starting production, while Italy’s Fiat, partnering Tata, will rejig its Palio and launch the Grande Punto and Linea sedans.

“On its own Renault could have struggled to get its brand known, but with the Mahindra co-branding, it’s taken care of,” said Ashutosh Goel, an analyst at Edelweiss Securities.

Renault and Mahindra, which previously partnered Ford in India, had planned to make 50,000 Logans at a Mahindra plant, but then Nissan Motor Co Ltd.Renault’s global partner, said it would join the venture to spend $905 million in a project to make 400,000 cars in seven years’ time.

Nissan, which has so far only imported X-Trail sports utility vehicles into India, is keen to get into the compact segment.“The Logan’s success really depends on the pricing because at that level, the consumer is very price-sensitive,” said Chandraprakash Padiyar, who manages $23 million in UTI Auto Fund.

Intended for emerging markets, such as China, India and Russia, the Logan concept has quickly become a hit even in mature European markets, inspiring other automakers such as Volkswagen, Fiat and Toyota.

The News.
http://thenews.jang.com.pk/daily_detail.asp?id=48646

 

[Janbaz]

Man Indian automotive sector has been getting hotter and hotter! Renault and GM now, before that Hyundai in the mix of economic chit chat. A definate sign of expanding economy when the auto sector expands and moves on and on!

 

[Contrarian]

'Chinese market more complex than India'
[ 28 Mar, 2007 1015hrs ISTIANS ]
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NEW DELHI: With a growing middle class and increasing propensity to spend on goods and services, India offers a more conducive market than China, says Danielle Duran, international trade coordinator for New Mexico state in the United States.

"China looks like a complex economy to tackle and they are very large. India is much more logical with booming new businesses and a growing middle class," Duran said.

Duran is heading a delegation of small and medium enterprises (SMEs) from the US to push bilateral trade and investment under the aegis of the US-India Political Action Committee (USINPAC), a political advocacy group for the Indian American community.

According to Duran, whose delegation comprises five members representing areas like aviation and technology, SMEs in India are growing like never before with a more aggressive outlook and competitive edge than other emerging economies in Asia.

"The SME scene here is very exciting. People are good at business and realistic about the marketplace," she said, adding that her delegation will explore investment opportunities in India.

"We are also looking at faculty exchange options as we are also promoting New Mexico as a preferred destination for higher studies," Duran said.

These measures, according to her, will help in creating a longer relationship with India.

During her visit, Duran met senior government officials in the directorate general of civil aviation, department of biotechnology and as representatives of some big IT companies such as Tata Consultancy, Wipro and HCL.

The delegation will also visit cities like Mumbai, Bangalore and Chennai to explore the possibilities of promoting SME trade in diverse fields.

"We are also speaking with the Film Producers Guild of India for choosing New Mexico for shooting films there," said Duran, who has previously worked in Japan, Israel, Germany and Britain.

According to her, four-five SMEs in optics and water-related technologies from New Mexico will visit India soon to study the Indian market. Some companies are also eyeing at investing in India's special economic zones, she added.

 

[Contrarian]

CMC likely to merge with TCS


MUMBAI: The Tata group's stated ambition of making a global powerhouse out of Tata Consultancy Services (TCS) is set to get another shot in the arm. CMC, the IT company that the Tatas got control of when the government kicked off a divestment drive six years ago, is ready to be merged with TCS.

This move is in line with the group's policy of merging smaller group companies in the same line of business with the flagship.

Over the last couple of years, group companies like Airlines Financial Services, Airlines Software Development Consultancy India, Phoenix Global Services and Tata Infotech were merged into TCS. CMC, industry sources say, is next. Subsequent to this, sources add, the group will have to consider merging Tata Elxsi into TCS.

On Dalal Street, market players reckon that when the merger happens, the swap ratio will be 1.5 shares of TCS (at a face value of Re 1) for every one share of CMC (with a face value of Rs 10). This, analysts point out, is the reason why in spite of a carnage on the stock markets in recent times, CMC is up nearly 19%.

On Monday, CMC was trading at Rs 1,273. As against this, when the market started sliding on February 7, the stock was available at Rs 1,073. During the same period, TCS lost 3.5% and is now at Rs 1,261.

When contacted, S Mahalingam, CFO, TCS, said there are no plans on the table to merge CMC and TCS.

"We are very happy with the current shareholding pattern and operational synergies between the two companies," he added.

On the operational front, TCS and CMC have been working at achieving synergies. CMC has strong expertise in
infrastructure management services and good presence in the domestic market, especially in the e-governance segment.

Over the years, CMC has been reducing its dependence on the hardware maintenance business, which, once upon a time, it used to dominate.

Although the two companies exist as separate legal entities, there is a lot of integration in areas like finance, human resources, sales and marketing, services, R&D and products, sources said.
CMC became part of the Tata group in 2001 when the government divested 51% of its holding in the company in favour of TCS.

The residual government stake in the company was sold through a public offer in early 2004. At present, TCS holds about 51.1% stake in CMC.

On a comparative basis, for the year ended March 2006, TCS had earnmed a net profit of Rs 2,717 crore compared to CMC's Rs 44 crore. Last fiscal, while TCS had a turnover of Rs Rs 11,283 crore, that of CMC was Rs 858 crore.

In an unrelated development, the Tatas on Tuesday sold its 50% stake in Sitel India, a voice-based business process outsourcing company, to its US-based joint-venture partner Sitel Corporation for $22 million. TCS was holding 40% and Tata International had a 10% stake in Sitel India, which currently has about 4,000 employees, with offices in Mumbai, Hyderabad, Chennai and Gurgaon.

 

[Contrarian]

Below secondary level bags maximum jobs
[ 28 Mar, 2007 0058hrs ISTTIMES NEWS NETWORK ]
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NEW DELHI: Higher employment rate in the economy is not just benefiting the MBAs and those with fancy professional degrees but also those with less than secondary school qualifications.

In fact, those who have studied till middle school seem to be the biggest gainers from the growth in employment, cornering nearly 42% of the 70 million jobs that came up between 1999-2000 and 2004. This translates into over 29 million new jobs during the five-year period.

Next in line are those who have completed primary school, bagging over a quarter or 18 million new jobs that were up for grabs.

While their educational qualifications would have made them eligible only for blue collar jobs in factories, these two segments also fared well in the services sector. Given the high skill levels required for IT, telecom and financial services, those without secondary degrees got nearly 70% of the new jobs in the manufacturing sector, compared with 45.6% in service sector companies.

The analysis by the Asian Development Bank, based on the numbers in the latest National Sample Survey Organisation report on employment, show that those with post-secondary qualifications have bagged 17.4% of the new jobs.

While the NSSO report revealed that employment growth rate picked up from 1% between 1993-94 and 1999-2000 to 2.8% during 1999-2000 to 2004, it was industrial sector which saw the steepest increase (5.8%), followed by services (3.9%) and agriculture (1.5%). The NSSO report also pointed out that there was a 4.3% rise in the number of self-employed, while the number of those employed in regular jobs rose 3.6%. The real good news was a 0.1% decrease in the population doing casual labour.

The ADB study revealed that 74% of the new jobs that came up in the manufacturing sector between 1999-2000 and 2004 were in textile and garments units, or factories manufacturing non-metallic mineral, wood products.

 

[Contrarian]

ADB slams India's SEZ policy for tax concessions
[ 28 Mar, 2007 0057hrs ISTTIMES NEWS NETWORK ]
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NEW DELHI: First it was IMF, now it's Asian Development Bank that has criticised the government's policy on special economic zones.

While a bulk of ADB's criticism in the Asian Development Outlook 2007 is centered around the slew of tax concessions that have been offered, it has said that the landless, which are the biggest opponents of the over 700-odd zones that are planned, could be the worst hit since they may not receive adequate compensation and would not have the resources to be self-employed.

The multilateral funding agency has questioned the need for providing fiscal sops saying that with companies already eager to invest, providing enclaves that meet these needs might be enough to stimulate investment.

Besides, the cost to the exchequer in the form of loss of potential revenue, estimated at over Rs 100,000 crore by the finance ministry, come at a time when the government is struggling to find resources to finance infrastructure projects in India. The report said that tax exemptions always run the risk of creating loopholes for tax evasion.

"Subsidies can undermine both investment and existing firms located outside the SEZs," it said since companies in located outside the SEZs not only have to deal with poor infrastructure but higher tax rates as well.

So far, government has cleared 237 zones, while another 160-odd are awaiting final clearance and companies have submitted proposals to set up another 300-plus SEZs. But all pending proposals are on hold following concerns of displacement of farmers.

The report has pointed out that the tension over displacement could be dealt with if compensation package was adequate and affected people can be retrained to qualify for jobs in the zones. It suggested that government needs to invest in infrastructure.