Indian Economy - News & Updates - Archive

[Neo]

'IT/ITeS market to touch $100b by 2011'
Sujata Dutta Sachdeva
5 May, 2007

NEW DELHI: There is nothing new about the prediction that the Indian IT/ITeS industry is poised for bigger growth in future.

What’s striking is the IDC’s latest forecast that says IT and ITeS industry in India will grow at 18 per cent for the next five years and will earn Rs 458,228 crore revenue.

Kapil Dev Singh, country manager, IDC India, says: “IT/ITeS market is expected to touch $100 billion by 2011. Since, the base has become significant over the last few years, the next five years will require industry as well as government to identify new uses of IT, new user segments and new relevance in a common man’s life.”

What’s triggering the IT/ITES market is a buoyant economy and more disposable incomes, say experts. Consumers are now spending more on ICT products and services which include not just PCs, but smart handheld devices, digital cameras, MP3 players, gaming devices as well.

So how can this momentum be carried forward? “The focus should now be on domestic market,” says Singh.

The domestic market has been growing rapidly in the last three-four years. In the next five years, the IT/ITeS market is expected to grow at 19.7 per cent. IT alone will grow at 16.4 per cent, while ITeS is expected to register a 40.4 per cent growth.

“But a lot still remains to be tapped. The IT penetration in homes, and small and medium business segment and beyond top 50 towns certainly can be improved,” feels Dev.

Agrees John Gantz, chief research officer, IDC USA. ‘‘The future lies not in the exports market, for that path is well-established. Upgrading the domestic market should be priority. When a product is developed, the company should concentrate first on selling it domestically and then look out,’’ Gantz says.

“The key issues for Indian IT exports market will lie less in worldwide market growth and more in the internal dynamics around IT outsourcing, Indian labour supply, and competition from other regions,’’ he says.

Singh feels the recipe for developing IT market should include creating the right ecosystem. “It’s important to create suitable products which are made in and made for India. A strong local hardware manufacturing industry will play a crucial role in achieving this,’’ he says.

http://timesofindia.indiatimes.com/...to_touch_100b_by_2011/articleshow/2005961.cms

 

[Neo]

Indians seek addresses abroad
By Siddharth Srivastava

NEW DELHI - India's comfortable foreign-exchange reserve has resulted in further easing of norms for property investments abroad. Cash-rich Indians have been looking to buy dwellings in preferred locations that range from Malaysia, Singapore and Thailand to London, Dubai and New York.

In an effort to provide macroeconomic stability and another step toward full capital-account convertibility, the Reserve Bank of India (RBI) has eased the limits for individual property investments abroad.

The new policy allows individuals to invest or spend up to US$100,000 in a financial year, up from $50,000. This means that a husband and wife can purchase a joint property worth $200,000. Other family members can be added.

Property prices in popular destinations such as Singapore, Malaysia, Thailand and Dubai currently quote cheaper than in Mumbai or Delhi while providing much better infrastructure facilities and living conditions. Prices in some suburbs of London now quote similar to Mumbai.

The process of transferring funds is quite easy now as most Indian banks have foreign branches and an account can be easily opened.

There are some issues related to double taxation. Though India has signed treaties with about 140 countries, the Tax Department is not considered very efficient because of delays in refunds and assessment. But the interest in owning international property only grows.

In the past two years since the RBI began easing overseas investment rules, more than 500 Indians have registered for the "Malaysia, My Second Home" venture that is being sponsored by the Malaysian government.

"What we are looking at is a concept where real estate helps boost the tourism industry. Given the large disposable incomes of people in India and the growing urge of a holiday destination, we are confident that the response from India will be tremendous," a Malaysian tourism spokesperson said.

Overseas-based investors are now estimated to account for a quarter of new property purchases in Singapore, which is fast joining the league of most expensive property areas such as London, Tokyo and Hong Kong. Investors include Indonesians, Malaysian, Britons, Indians, Australians, Americans and Chinese.

Knight Frank, one of Britain's biggest real-estate agents, released a report recently called "Brics & Mortar: International Project Marketing 2007". The report said rich Indians are keen on places in central London such as Grosvenor Square, Kensington Palace Gardens and Park Lane. The report added that mid-price properties, between 400,000 and 700,000 pounds ($800,000 to $1.4 million), are most popular.

The RBI's aim is apparent. It wants to offload the excess US dollars in its coffers as well as mop up domestic currency to rein in inflation and prevent further appreciation of the rupee against the dollar that would end up hurting exporters.

The RBI is looking to create a demand for the dollar as India's forex reserves crossed $200 billion for the first time on April 6. One can gauge the progress, as 17 years back India's forex reserves were barely $1 billion. The reserves at the end of December 2003 totaled $100 billion.

However, the burgeoning reserves have resulted in money supply growing more than 20% in the past year, a level not very palatable to the central bank, given the attendant inflation that has hovered around the 6% mark.

The rupee has been moving in the 41-42 band against the dollar, the highest in about a decade.

Apart from seeking capital appreciation, one important reason for international property interest is that more and more Indians are now traveling abroad and being exposed to the best. Close to 8.5 million Indians traveled to foreign shores last year, either on business or for leisure, spending big on their foreign excursions.

According to a survey by market research firm ACNielsen for the Tax Free World Association, Indians on average spent $903 each overseas in 2006 and collectively a huge $7.5 billion. Every year, Indian travelers are spending 28% more than in the previous year.

The world's biggest travel spenders are the Japanese, who continue to be way ahead with an average spending of $3,000 each. The Chinese currently dole out $100 more per person than the Indians.

Indeed, many of these cash-laden Indians are being looked on as major investors abroad. Job opportunities and salaries in India continue to be very lucrative, and it does not look as if foreign exchange is going to be a problem in the near future, despite India's heavy dependence on crude-oil imports.

A recent report released by International Data Corp, a global research and market intelligence firm for information technology (IT), telecom and consumer technology has said that the export-led Indian IT industry will cross the $100 billion mark in revenues within the next four years with a growth rate of 18%.

Driven by growth in sectors such as software, business and management consultancy, exports of services in India may surpass exports of goods by 2012, a recent survey by the Federation of Indian Chambers of Commerce and Industry said.

"India's exports of services will be close to $311 billion by 2012, overtaking the expected level of merchandise exports of $305 billion in that year," said the federation.

International remittances to India are the highest in the world, worth $25 billion a year and growing at 25% annually. It is one of the fastest-growing markets in the world, with the Persian Gulf region one of the major contributors.

Salaries, meanwhile, only continue to rise in the face of high growth and a manpower crunch.

According to the annual study of human-resources consulting firm Hewitt Associates, India will clock the highest salary growth region in the Asia-Pacific region for the fourth consecutive year, with an all-time-high average pay hike of 14.5% in 2007.

Middle managers and professional and technical employees will get the biggest hikes at 15.1% and 15.8%, respectively. In this context, the RBI is only looking to ease forex controls.

Other recent measures in forex management by the RBI include higher prepayment limits on external commercial borrowings up to $400 million without prior RBI approval and enhancing Indian companies' limit for portfolio investment abroad in listed overseas companies to 35% of their net worth. Mutual funds too can now invest up to $4 billion overseas.

All these steps are aimed at balancing dollar inflow with outflow to keep the rupee stable without RBI's direct intervention.

"These measures are in line with the liberalization of outward investment policies and provide a level playing field to Indian firms relative to their foreign competitors. Additionally, the measures will help achieve a balance between capital inflows and outflows," said K V Kamath, chief executive officer of ICICI Bank.

India's domestic property market, meanwhile, continues to boom because of high demand and capital appreciation prospects. Reformed real-estate investment laws for non-resident Indians and foreign investors have provided the fillip to catapult the Indian real-estate market toward US$50 billion by 2010.

Siddharth Srivastava is a New Delhi-based journalist.
http://www.atimes.com/atimes/South_Asia/IE04Df01.html

 

[Bushroda]

Feeling Like a Trillion Dollars

By Pramit Pal Chaudhuri
Special to washingtonpost.com's Think Tank Town
Friday, May 4, 2007

Last week India became the 12th country in the world to have an economy worth a trillion dollars. It was a purely symbolic accomplishment. However, the manner in which India reached this figure neatly caught both the opportunity and the obstacles of its present economy.

India's economy touched the trillion dollar mark on April 25 according to a calculation by Credit Suisse, thanks to a sudden surge in the value of the rupee against the dollar. The economy was already within hailing distance of the 10-digit figure following two successive years of over nine percent growth, but the rupee's rise pushed it past the mark.

If the growth figures are the sunny side of the economy, the rise of the rupee is the darkening edge. The Indian currency rose suddenly as an indirect consequence of New Delhi's attempts to beat down inflation.

The consumer price index touched eight percent in March, a politically unpalatable figure in a country with as many poor as India. The Reserve Bank of India, the country's central bank, recently responded by hiking interest rates in an effort to temper consumption. It also allowed the rupee to appreciate, as a JP Morgan analysis concluded, in large part to avoid intervening to keep the currency down, as that would increase the money supply and, therefore, add to the inflation rate.

The rupee has now risen over 13 per cent against the dollar since last summer. Since the beginning of March this year it has been the fastest appreciating Asian currency. This may be helping ease rising consumer prices at home, but it is coming at a cost. One of the most immediate costs is a slump in exports as Indian goods are priced out of the international market.

It has the look of a near-textbook example of an economy trading growth against inflation.

The Indian economy has reached an impasse. There is now general consensus that if it attempts to grow beyond 8.5 per cent a year, it runs a high risk of contracting inflationary flu. This forces government to force-feed medication to curb economic growth.

"Feeling like a trillion dollars" isn't what it used to be.

But being a trillion-dollar economy does mean that a country has the resources to try and upgrade its economic motors.

India has already initiated the policies needed to rebuild the bottleneck most evident to any visitor to the country: its crumbling infrastructure.

New Delhi has put together risk-sharing financial packages to give the private sector a helping hand in setting up the new ports, roads and power plants India desperately needs. A Standard and Poor's analyst has described the package for roads as "among the most advanced in the world."

The Indian government says it has already lined up $350 billion for infrastructure investment for the next five years. Private investors are prepared to jump in with more, once they see the new policies withstand the test of implementation.

Significantly, though domestic consumption remains the primary driver of India's economic growth, investment is only a nose behind. Investment rose to nearly 34% of gross domestic product last year -- a sign that the country is building the capacity for higher rates of non-inflationary growth.

India hopes to get the sort of sustained infrastructure boom that Japan saw in the 1960s and China saw in the 1980s. This would pull the economy into a higher sustainable growth rate, from the present 8.5 per cent to the government's own goal of 10 percent per year. Jonathan Anderson, chief Asian economist for UBS, has argued that the Indian story of the next five years will be similar to how the ugly duckling of 1990 China became the economic highflier of today.

This transformation will take time, sound follow-through on policies, and some luck. The Indian economy could be stuck in the region of one-trillion dollars for a year or two.

After that, it could leave the number behind faster than anyone would have believed possible for a raucous, billion-person democracy.

Besides its own government policies, India will be helped by a revelation from India's 1991 economic liberalization policy: the coming-of-age of its private sector. Corporate India has been partially powered by the domestic stock market, whose $940 billion market capitalization last week indicated it is about to sail past its own trillion dollar milestone in the very near future.

Credit Suisse's report said that eight of the previous 10 economies to pass a trillion dollars saw their stock markets rally for a full year afterwards. While the figure doesn't change the fundamentals of an economy, the bank said, it does seem to boost investor confidence.

Keeping in the spirit of things, an Indian government expert committee on making Mumbai an international financial center calculated last week that the roughly 20 million-strong Indian diaspora had amassed a wealth of, you guessed it?one trillion dollars.

 

[Neo]

Happy Feet, where have you been man?
Good to have you back!

 

[Neo]

Sunday, May 06, 2007

India setting up body to achieve one-India economy

By Iftikhar Gilani

NEW DELHI: Weary of its own provincial government’s refusal to pull down intra-state tariff barriers, India is setting up of a committee of top officials to push forward the concept of one-India economy.

Investors and farmer unions here are saying that when India was vying for a free flow of trade with the neighbouring countries, its own states were spurning every effort to allow free trade and commerce across their borders.

TKA Nair, Principal Secretary to Prime Minister Dr Manmohan Singh, told a meeting of chief secretaries here that a committee of state secretaries could be set up to realise the concept of one-India economy.

He said the concept could be started by merging economies of north-Indian states initially especially in the areas of power, e-governance, taxation and drinking water.

“To evolve a consensus, the committee should meet periodically and review the progress,” he told a meeting of chief secretaries of north-Indian states organised by the PHD Chamber of Commerce and Industry (PHDCCI).

The meeting, which was attended by chief secretaries and senior functionaries from 10 states besides over 200 delegates, unanimously endorsed the concept of a common Indian market.

Senior state officials also decided to ‘wire’ the region through e-governance. It was agreed to introduce a digital workflow administrative system to cut down the paper work besides automation of treasury and sub-treasury operations, digitalisation of VAT and other taxes information system and automation of PWD management.

The meeting also focused on the need for closer co-operation to harness natural resources for power generation and distribution of reforms. “An integrated approach to match the power requirement was also suggested and approved by the state governments,” said a press release issued by the PHDCCI.

A policy paper prepared by the PHDCCI had stated that the state governments were the main hindrances in the free flow of goods and are thus fragmenting the common national or regional market.

Despite appeals by Prime Minister Dr Manmohan Singh at the last National Development Council (NDC) meeting for removal of barriers, the states have preferred to keep barriers to raise their incomes.

According to the UN Food and Agriculture Organisation (FAO) report, the cost of importing from the US to select ports in India comes cheaper at Rs 1,365 per tonne than the road transport of grains from Punjab to Andhra Pradesh, which comes at a whooping cost of Rs 2610 per tonne

http://www.dailytimes.com.pk/default.asp?page=2007\05\06\story_6-5-2007_pg5_2

 

[Neo]

Sunday, May 06, 2007

India rejects WTO’s call for flexiblity on agri imports

* Says subsidies by developed countries a serious challenge to successful completion of talks

LONDON: India dug in its heels on Friday over agricultural issues in troubled World Trade Organisation (WTO) talks and rejected a call to be more flexible on imports.

Commerce and Industry Minister Kamal Nath said proposals put forward by the chairman of WTO farm negotiations, New Zealand’s ambassador Crawford Falconer, were unbalanced and disappointing.

In suggestions for breaking a deadlock in farm talks, a key part of the WTO’s Doha round aimed at reducing trade barriers across the board, Falconer said developing countries would have to soften demands to shield up to 20 percent of their agricultural market from competition.

“I must express disappointment,” Nath told a news conference. “The (Falconer) paper suffers from serious imbalances. They are not paying enough attention to the livelihoods of farmers in developing countries,” he said.

Nath said that Falconer had not been demanding enough on the need for rich WTO members, notably the United States and the European Union, to slash farm subsidies which India and others say distort world markets.

“Subsidies by developed countries cause a serious challenge to the successful completion of these talks,” he said.

Leading WTO states, among them India, say they want a final deal in the 5-year-old Doha round, which aims to reduce poverty and boost growth, by the end of this year. This means a blueprint must be agreed by August. “I wish the round closed, but you must realise that the content is as important as the completion,” Nath said when asked about the urgency of achieving a breakthrough.

Senior officials from the G4 Brazil, the European Union, India and the United States had three days of talks in London this week before a ministerial meeting in Brussels on May 17-18.

The Brussels meeting will be followed by three more before mid-June by when the G4, which represents a range of trading interests, hopes to have an understanding that will make it easier for the full WTO membership to agree a deal. While some progress was made in London, deep differences remain, according to officials who attended the talks.

“The United States is wary about talking numbers on subsidies,” said one diplomatic source.

Some diplomats say Washington has indicated that it could lower the ceiling on trade-distorting farm subsidies to $17-19 billion a year, from the $22-23 billion it is formally offering. Even that is way above what it actually spends and therefore offers developing countries no inducement to open their markets further to either farm or manufactured goods, another important area of the Doha round, some diplomats say.

“We believe that whatever impression of movement there is in the round is in the wrong direction,” said one senior diplomat from a developing country.

http://www.dailytimes.com.pk/default.asp?page=2007\05\06\story_6-5-2007_pg5_23

 

[Bushroda]

Happy Feet, where have you been man?
Good to have you back!

Thanks Neo, Just been keeping slightly busy. Great to be back here now. Howz you doing?

 

[Neo]

Busy here and there, mostly in the economy section, my favorite subject.

 

[Neo]

May 07, 2007
Modernising Indian highways

By Anand Kumar

MAY is the month when millions of middle-class and affluent Indians go on holidays – to hill stations, beaches, historic cities, or to their ‘native towns’ (as most migrants to cities refer to their home towns).

In the past, the railways used to be the sole mode of travelling long distances to these places. But the dramatic transformation in the Indian aviation sector — brought about by private airlines, especially low-cost, no-frills carriers — has triggered off a rush by millions of Indians who now fly to their holiday destinations.

But an equally significant transformation is occurring on the roads. The auto revolution in India – which now has virtually every major car manufacturer from the US, Europe, Japan and Korea operate plants in the country – has seen thousands of holiday-makers take to the wheels.

Fortunately, the ambitious road expansion projects launched by the central and state governments have also brought about a remarkable transformation on the ground: while in the past it used to be a tortuous experience to drive on Indian highways, today it can be a pleasurable one.

National Highway 4 (NH-4), which links Mumbai to Bangalore and Chennai, is one of the busiest highways in India. Thousands of trucks, buses, cars, two-wheelers, tractors and other types of vehicles can be found on this 1,200-km-long stretch that links important Indian western and southern cities including Mumbai, Pune, Bangalore and Chennai.

Driving along this highway was a horrendous experience and could take a motorist over a day to reach Bangalore, about 800 km from Mumbai. But how things have changed. The ambitious Golden Quadrilateral project providing for four-lane of national highways linking the four major metros – Delhi, Mumbai, Chennai and Kolkata – has transformed the NH-4.

Driving from Mumbai to Bangalore now takes under 16 hours, and a growing number of motorists are taking out their cars to drive long distance on such national highways in India. On NH-4, for instance, one comes across cars from as far as Delhi and Haryana, and of course from Gujarat, Maharashtra, Goa, Karnataka, Andhra Pradesh and Tamil Nadu.

Vehicles that used to crawl at 20 to 30 km an hour, now zoom at over 120 to 140 kmph. Unfortunately, many of the motorists are not used to driving at such high speeds, and accidents are growing on Indian highways. Many of them do not bother to check tyre pressure, or follow the norms; lane indiscipline is rampant, a majority of motorists switch on the full headlights at night, and over-worked truck and bus-drivers falling asleep on the steering wheel, is also common.

Worse, many of the rural folk blatantly violate all traffic norms. Along NH-4, for instance, it is not uncommon to find farmers in their tractors – over-loaded with sugarcane or other produce – driving in the opposite direction in the fast lanes. Two-wheeler riders and cyclists routinely drive in the opposite direction, as the authorities have not provided for service lanes.

And in the absence of pedestrian crossings – subways or over-bridges – many tend to stray across the high-speed highways, resulting in gory accidents. Many also walk across the highway with their flock of sheep, goats or buffaloes, adding to the miserable track-record of road accidents in India.

The modernisation of Indian roads infrastructure has had more than its share of controversies. The Golden Quadrilateral project was launched by the previous BJP-dominated National Democratic Alliance government, and towards the end of its regime, the government put up huge posters of then prime minister Atal Behari Vajpayee along major highways, proclaiming it as his personal contribution to the development of India (the infamous ‘India Shining’ campaign).

When the Congress-led United Progressive Alliance government came to power in 2004, its first reaction was to rubbish the highway development project as an elitist one, meant for the benefit of the rich; the project was neglected resulting in cost over-runs and delays.

Fortunately, good sense prevailed, as the biggest beneficiaries of the highway upgrade and modernisation project were the rural poor, who found easy and cheap access to the markets for their produce.

The UPA government then not only revived the NDA government projects, but also stepped up investments in the North-South, East-West corridors, and a new one to build expressways linking major cities, and also upgrading four-lane highways to six-lanes.

About $60 billion are to be invested in the roads infrastructure during the current Five Year Plan period (2007-2011). India’s road network of 3.3 million-km (the second largest in the world) carries 70 per cent of its freight and 85 per cent of passenger traffic. While the affluent are only now using the national highways as a means of transport, for millions of poor people – who do not have access to railway stations or airports – national and state highways have been the only means of travelling across the country.

The National Highways Development Project (NHDP) comprises two major components – the 5,846-km Golden Quadrilateral, and the 7,300-km North-South, East-West corridors. Both are likely to be completed in about two years.

The biggest problems related to land acquisition, but the government succeeded in tackling most of these issues. It has also managed to resolve contentious issues relating to funding the projects. A model concession agreement (MCA) is now in force, and most of the road infrastructure projects are now being taken up as public-private partnerships (PPPs).

Initially, there were fears that motorists – and also the powerful truckers’ lobby – would oppose moves to levy toll on road users. But there has been a surprising degree of acceptance by virtually all road users. On the Mumbai-Bangalore stretch of the NH-4, for instance, motorists have to pay up to Rs500 by way of toll fees; truckers and bus operators have to pay much more.

But despite the steep cost, there has been universal acceptance of the concept of users’ paying charges for new facilities. Consequently, the government now estimates that up to 80 per cent of the $60 billion investments in new road projects would be made by the private sector.

The limited resources that the government has could be better utilised to build village and other rural sector roads, for which there is little private sector enthusiasm. Interestingly, while initially the government had to provide grants to attract private road builders, increasingly the concept of ‘negative grants’ is taking root. Private builders pay the government money for acquiring contracts to expand existing highways, or building new ones, as they get lucrative toll contracts on the roads.

The success of the expressways project (the Mumbai-Pune expressway has been an outstanding success) is also encouraging several state governments to build new ones linking important cities. Expressways, unlike national highways, are access-controlled, and pedestrians, two-wheeler riders, auto-rickshaws, tractors and off-road vehicles, and more importantly, buffaloes, sheep, and other animals are not allowed on these high-speed roads.

The fact, however, remains that woeful lack of patrolling on the national highways will nullify all these achievements. Traffic police along most national highways operate like dacoits, extorting funds from trucks and unlicensed bus operators. Truckers are allowed to overload their vehicles (often well past their prime), violating a Supreme Court order imposing restrictions on the carrying capacities of vehicles.

The police also ignore vehicles that violate pollution norms. Most of the highway stretches have abysmal medical facilities to treat accident victims. Those causing ghastly accidents get away with light prison terms – the sentences are in most cases awarded several years after the accidents occurred. Nearly 100,000 people are killed in road accidents in India every year.

Driving licenses are issued to all and sundry, including those who cannot read basic traffic signs. In many cases, money plays a major role in the award of licenses, rather than driving skills. The central government has recently initiated moves to tighten the rules and restrict the issue of licenses to the unlettered. But instilling traffic discipline and safe driving standards will prove to be a far more difficult task than building roads and highways in India.

http://www.dawn.com/2007/05/07/ebr10.htm

 

[Neo]

Sunday, 6 May 2007

Airbus woos India with superjumbo

Airbus hopes to generate more Indian interest in the A380
An Airbus A380 superjumbo has landed in New Delhi, marking the first time the giant jet has flown to India.
The debut trip is designed to test the ability of Indian airports in dealing with the A380 and raise the profile of the jet's only Indian customer so far.

Indian airline Kingfisher has ordered five double-decker A380s as part of a wider $3bn (£1.5bn) Airbus deal.

Production delays with the troubled A380 project has led to heavy profit losses at the European plane-maker.

In February, Airbus said it planned to cut 10,000 jobs across Europe as part of a major restructuring drive.

New carriers

Kingfisher, which is owned by the Indian company which makes Kingfisher beer, expects to take delivery of the first of its five A380 jets in 2011.

The airline has drawn up plans to start international flights, and hopes to use the A380 on key routes to the US.

India's domestic airline industry has been booming, with new carriers such as Kingfisher benefiting from heavy growth in demand as the country's economy expands.

The Airbus A380 is due to fly a select group of passengers around New Delhi before heading on to India's financial capital, Mumbai.

http://news.bbc.co.uk/2/hi/business/6630333.stm

 

[Bushroda]

Turbocharged India on way to overtaking the US economy
By Mark Kleinman, Asia Business Editor
Last Updated: 1:31am BST 08/05/2007


Supper time in the plush New Delhi residence of the British High Commissioner, Sir Michael Arthur, last Monday evening, saw something unusual on the menu: Weetabix. Executives from the food company drank tea with Indian health experts to mark the launch of Britain's most famous breakfast cereal into India's 40 biggest cities.

The event underlined in its relatively modest way the same point as that made by Vodafone's recent £5.5bn takeover of Hutchison Essar - India is booming.

"We are aiming at a 10pc market share in 2009," said Andy Harris, international commercial manager at Weetabix. "There is a new middle class of 140 million people, so there is big growth potential."

The excitement is not limited to foreign food manufacturers. From property and consumer goods to the burgeoning outsourcing and Bollywood film industries, India is experiencing a surge that Goldman Sachs, the investment bank, has predicted will see it overtake the US as the world's second-largest economy by 2042.

GDP growth lags only that of India's Asian neighbour, China, among major economies and it has a middle class that each year is growing at a rate equivalent to the population of Holland. Only last week, McKinsey, the management consultancy, published a report suggesting that India will become the world's fifth-biggest consumer market in less than 20 years.

"Barring exogenous shocks, we are fairly certain that the economy will grow by at least 8pc [this year]," the Indian finance minister, P Chidambaram, told a conference in Hong Kong a few weeks ago.

On the face of it, the outlook is almost blindingly bright, for foreign and domestic investors alike. Indian companies are expanding on to the global stage as never before. Tata Steel's takeover of the Anglo-Dutch steelmaker, Corus, for £6.7bn was the largest foreign takeover by an Indian enterprise, backed by the country's highest-ever corporate loan. Since then, other notable cross-border transactions have followed, including the $6bn (£3bn) acquisition of Novelis, a Canadian aluminium firm, by Hindalco, a major Indian player in the sector.

According to Dealogic, the financial data provider, cross-border transactions involving Indian companies have already reached $33.5bn this year, more than the total for 2006, which was itself a record. "India is on turbo-charge," said Lord Bilimoria, founder and chief executive of Cobra Beer, which saw consumption in India rocket 600pc during a six-month period last year.

Meanwhile, corporate earnings are up, the Bombay exchange's benchmark Sensex index has soared to record levels and the country's core industrial base is expanding into areas once outside India's natural domain. These include large-scale car manufacturing, through joint ventures with the likes of Fiat and General Motors.

"It is our intention to make India a manufacturing hub," said Mr Chidambaram. "We are already a top-three country in a dozen manufacturing sectors, such as petrol refining, steel, automotive parts, leather and textiles."

For British investors in India, manufacturing has taken second place to financial services, where Aviva, Prudential and Standard Chartered have all placed big bets on the country's growth prospects. Consumer goods companies, such as Scottish & Newcastle and Unilever, have also been trying to tap the emerging middle classes.

"The outward-looking face of India has been the biggest change [since the country's liberalisation], as opposed to the old insular, protected attitude," said Lord Bilimoria, who also serves as UK chairman of the Indo-British Partnership Network, established in 1993 to strengthen business links between the two countries.

Bilateral trade between Britain and India doubled between 1995 and 2005 - the latest year for which full figures are available - to £7.9bn, but while the overall value of trade is increasing, Britain's share of the Indian market is in decline. In 1991, when the process of liberalising the Indian economy began, Britain's market share of Indian imports was about 14pc but by 2005, that had reduced to a little more than 2.5pc.

Many British companies "already have an Indianised presence" as a result of historical colonial links, said Andrew Cahn, chief executive of UK Trade & Investment.

As Britain's share of India's foreign trade shrinks, competitors from Europe, Asia and North and the Americas are rushing in. "It is going to be a very fruitful place for foreigners to do business," said Mr Cahn. "Key factors are the pace of liberalisation and the confidence with which India embraces globalisation. It is said that the IT outsourcing industry grew so rapidly partly because the government did not realise it was happening."

The government's stance on foreign direct investment laws has often appeared ambivalent, with ownership laws establishing barriers to foreign takeovers and joint ventures in sectors such as insurance and retail. But with so much outbound M&A activity, most people expect the government to relax those barriers in the medium term - and overseas retail giants such as Wal-Mart, Tesco and Kingfisher are keen to pounce.

"One advantage India has is that it is not wholly reliant on

re-exporting, unlike China. Much of the investment going into the country is for domestic supply as well as other markets," said Mr Cahn. "The demographics, with a very young and increasingly educated population, are right for sustained growth."

But there is another side to the story. The soaring growth rates and influx of foreign capital cannot conceal the fact that India barely functions at all. As any visitor to one of the country's major business centres, such as Bangalore, Delhi or Mumbai, will testify, the infrastructure is creaking.

The government estimates that at least $350bn is required to upgrade the roads, airports and utilities networks that India requires if it is to thrive, but even that figure is dismissed as conservative by some.

There are other issues for the government to grapple with, including a relentless battle with inflation and the endemic poverty which means that 300 million Indians are still forced to survive on less than a dollar a day. A looming skills shortage is also causing headaches, with Nasscom, an IT industry body, predicting a shortfall of half a million Indian professionals in the IT sector by 2010.

So far, the Indian juggernaut is rolling on regardless, and overseas private-equity money from the likes of 3i and Blackstone should provide some much-needed assistance to bridge the gaping infrastructure deficit. Without it, India will need more than Weetabix to fuel its journey towards becoming a genuine economic superpower.

 

[Bushroda]

Expats head back to sizzling economy

India has grabbed centre stage from China as the hottest venue for foreign assignments in industries such as telecommunications, software and health care

Joann Lublin (Wall Street Journal)


Ambitious global managers are looking for passage to India—with good reason.

Major US, European and Indian companies are rapidly expanding their ranks of expatriates in the world’s second-most populous nation, hoping to profit from its sizzling economy. India has grabbed centre stage from China as the hottest venue for foreign assignments in industries such as telecommunications, software, health care, retailing, airlines and hotels, executive recruiters report.

“If you are doing well, you come to India” and gain valuable experience, says Rajeev Vasudeva, a recruiter at search firm Egon Zehnder International in New Delhi. “We are looking for expatriate talent.”

He figures there are about 1,000 expat senior managers in India, roughly seven times the number two years ago. By 2009, that will more than double, predicts Deepak Gupta, India managing director for recruiters Korn/Ferry International in New Delhi.

Cisco Systems, the San Jose, California, networking concern, says that all but one of the eight top officials at its globalization centre in India are expatriates who transferred there this year. Accenture has nearly 100 expatriates in India, up from fewer than 12 in 2004. The consulting and outsourcing giant expects overall Indian staffing levels will surpass its US head count by late August.

Lots of career routes can carry people there—but they have to prove themselves elsewhere first. Many US citizens of Indian origin, nicknamed “boomerang professionals,” find themselves wooed back because they earned their stripes at a western business.

“There are tremendous opportunities for someone like me,” observes Sandeep Arora, Accenture’s senior technology executive in India. Born and raised in India, he attended graduate school in the US and became a citizen. He joined the firm in 1994.

Arora says fellow partners chose him to enlarge its small Indian operation almost a decade later because he understood the culture of his employer and homeland. He commuted between Seattle and Bangalore for 18 months until his 2006 relocation. He says he “is having so much fun” that he would have moved without an expatriate compensation package. His perquisites include a driver, housing allowance and tuition subsidy for his teenage daughters.
It’s a similar story at Goldman Sachs Group. Eight of 10 expatriates in its year-old Mumbai office are Indian returnees. They formerly worked for the Wall Street investment bank outside India.

Individuals lacking Indian backgrounds sometimes arrive in India via successful prior Asian stints. L. Brooks Entwistle, the American-born head of India operations for Goldman Sachs, says he landed key Indian high-tech clients during his second Hong Kong assignment with the firm. To flourish as a foreigner in India, he cautions, “you really have to be psyched for this; it’s a love-hate place.”

Transferable skills, a pioneering spirit and frequent Indian business trips while employed elsewhere in Asia for 13 years helped Gary Bennett win the CEO spot in July 2005 at Max New York Life, a New Delhi joint venture between an Indian and US insurer. The Australian executive previously ran the Hong Kong operations for New York Life, but hadn’t lived in India before. Bennett urges those aspiring to work in India, but who don’t have Asian experience to volunteer for short assignments there, to make sure “you will fit in”.

Max New York Life has brought over numerous actuarial, information-technology and product-development staffers from abroad for six weeks to two years. However, certain temporary transferees decide India “is not my cup of tea”, Bennett reports.

Extensive personal travel in India may also impress a western multinational. “You can put on your resume, ‘I’ve spent a month there and like the place’,” suggests Joyce Thorne, an American expatriate in Mumbai. She is world-wide director of training for Integreon, a global outsourcing concern based in Los Angeles. In June 2004, she recruited a veteran US paralegal to become an India account manager for Integreon’s major law firm clients. Though the new expatriate had never worked abroad, “he spent two months living in a small Indian village getting to know the culture and daily life”, Thorne explains. “This was important to me because people from the West who successfully live and work in India must be highly adaptable.”

Other paths could help you attract attention from big Indian businesses willing to hire non-native employees. The most critical step: Increase their awareness about your specialized expertise that’s in short supply there. Give speeches at important industry conferences, especially those held in India. Introduce yourself to search firms with Indian offices. Sign up for local chamber of commerce delegations visiting companies in India.

But it makes little sense for would-be expatriates without Indian ties to join the American arm of a global-minded Indian enterprise. Anyone hired in the US by such concerns usually lacks the skills they need back in India, notes Vasudeva, the recruiter.

 

[Bushroda]

Indian rupee to soar more
--------------------------------------------------------------------------------
Published on: Tuesday, 8th May, 2007


The Indian rupee, which hit a near decade-high against the dollar earlier this year, is expected to extend its rise and pressure export firms that bill in dollars, investment bank Credit Suisse has said.

In an advance not foreseen by either economists or companies, the rupee had risen by 8.5 per cent against the greenback in the year to date, making it the fourth-biggest currency gainer of 2007, the bank said in a research note to clients. “The rupee appreciation is sharp and here to stay,” it said. “The impact is material for many and can no longer be ignored as cyclical.”

The report said it could appreciate “by a further one to two per cent in following months”. Software and service exporters such as Tata Consultancy, Infosys and Wipro – India’s three biggest information-technology companies – face profit pressure because most of their earnings are denominated in dollars, the bank said.

Drugmakers like Dr Reddy’s, Cipla and Lupin could also have profits dented because of weak pricing power on exported products. Hotels and transportation companies too have adverse exposure, the bank said. Net foreign-exchange earnings make up 51 per cent of sales at Tata Consultancy, 56 per cent at Infosys and 35 per cent at Wipro.

Commodities, media, construction engineering may be among the beneficiaries of a stronger rupee, the report said. “In a way, the rupee appreciation has significantly reduced the defensive appeal of the information technology and drug industries,” it said. The rupee ended last week just above the 41 to the dollar level.

The currency’s rise briefly propelled India to a trillion dollar economy in April when it breached the 41 level, its advance helped by inflows from investors eager to pump money into an economy expanding by nine per cent a year.

 

[Bushroda]

Riding India's wireless typhoon
By Roman Zakaluzny, Ottawa Business Journal Staff
Tue, May 8, 2007 9:00 AM EST


India's economy, in particular its high tech wireless market, is growing in leaps and bounds.

Just ask Raj Narula, a Canadian who does consulting work for local firms that want to break into the South Asian market.

"I'm standing in Bangalore right now, at a busy intersection," the co-founder of TaraSpan, an Ottawa company that helps Canadian firms break into the Indian market, told the OBJ. "It's chock-a-block traffic. That's an Indian phrase that means it's so busy that the cars, the bicycles, the scooters – everything – is filling up the entire street. That's an occurrence in every city in India."

It could also be a metaphor for the Indian wireless market. To Mr. Narula and the companies for which he arranges meetings and partners, every one of those people outside his window equals potential growth.

"There is major growth happening in terms of jobs being created every month," he said. "It's not unusual to find companies with 30 per cent growth year after year."

With a population approaching 1.1 billion, India boasts four cities with more than 20 million people, and at least three dozen metropolitan areas the size of Ottawa.

And a steadily improving quality of life in India translates into more and more Indians looking to get equipped with the technological conveniences most North Americans already have. In fact, they're set to race ahead of the west.

Take mobile phones: India sees six million new cell phone subscribers a month. That's an incredible growth rate that dwarfs Canada's, especially since a March report from the SeaBoard Group showed wireless penetration rates in Canada are second last in the OECD, a full 20 percentage points behind the United States. Even though Canadians consider their country to be one of the most wired when it comes to technology and Internet usage, India and other developing countries are already well ahead in cell phone usage.

It's no wonder some Ottawa firms are starting their international forays in India, hoping for a cut of the action in the hot, English-speaking wireless market. And they're not simply going there to find a cheap source of qualified labour for call centres and programming.

"The economy is moving at a massive scale," said Mr. Narula. "The software industry in India is (worth) $50 billion in annual revenue. It'll get this up to about $100 billion in the next three years. It's going to be doubled.

"The movement, if you look at wireless, has been from 15 million subscribers four or five years ago to about 175 million subscribers, with six million-plus adds a month."

TenXc Wireless first ventured to the Indian subcontinent a year ago. CEO Joe Hickey said after a year of studying the market and meeting with business people, the firm is ready to begin a trial for its Bi-Sector Array, which allows India's wireless companies to multiply the efficiency of the small amount of bandwidth available to them in the very tight market.

"India has some of the least available spectrum available," Mr. Hickey told the OBJ. "A lot is held by the government. We basically allow them to double the efficiency of their spectrum."

While North America continues to be TenXc's main market, India is quickly becoming a close contender for second place. The company just recently sent over a few staffers from the 40 it has in Ottawa for the year-long trial and, if successful, will be looking to hire local staff there.

"You might think Europe would be a destination, but we picked India because we knew it was the fastest growing market in the world," Mr. Hickey said. While TenXc does do some outsourcing in Pakistan, he said, India, with its growing market and limited available spectrum, provides the "perfect storm" of opportunity for his company to sell products there as well.

However, India is also experiencing many serious growing pains – salaries for some skilled IT professionals are approaching Canadian levels, and shortages of workers are resulting in turnover rates of as much as 500 staff a week at some of the largest firms.

It's enough for even Mr. Narula to call the growth "scary" at times.

"The number of cars has doubled ever few years," he said. "Fifty new retail malls (are) to be built just in and around Delhi and Mumbai.

"There was a major acquisition of three acres of land in New Delhi recently. Guess how much it cost? $20 million Canadian dollars."

One outsourcing company Mr. Narula visited with some of his Canadian clients, for instance, is hiring 60 to 70 people a day, he said. "They're losing about 20 or 30 people a day ... The hiring rates are extremely high."

Salaries are rising at a rate of 15 per cent annually, he added.

For a Canadian company looking to break into this market, an "intimate" knowledge of the major players is critical, said Mr. Hickey.

"You've got to know who owns who, and for ways to work around that," he said. With takeovers by foreign multinationals of Indian companies and, increasingly, Indian companies of foreign companies, ownership can change quickly.

"In India, a lot of the wireless firms are owned by Indian conglomerate companies," he explained. "The best example in Canada: Rogers. Ted owns most of it."

Many Indian wireless companies are starting to go public, he said, with demand so huge, one recent IPO was oversubscribed by a factor of 70.

What about India's notorious reputation for bureaucratic red tape?

"What you'll find is all of our clients are working in the private sector," Mr. Narula said. "The fact of the matter is, unlike China where the entrepreneurs have hooks into the government departments, the entrepreneurial community is not like that (here). It's an independent society. In India, there was $20 billion in acquisitions overseas by Indian companies in the first four months of this year alone."

 

[Bushroda]

Charting India's savings story
By Andy Mukherjee Bloomberg NewsPublished: May 7, 2007


The consulting firm of McKinsey last week challenged a widely accepted notion of how India is going to finance a high rate of economic growth over the next couple of decades.

The conventional wisdom is for India to replicate the East Asian model of capital accumulation.

The annual household-savings rate is expected to rise from its current level of about 22 percent of gross domestic product, thanks to a "demographic dividend," or a growing preponderance of younger-age workers with fewer children to support.

McKinsey has a dramatically different opinion.

"With reduced pressure to save for children and elders, and retirement a distant prospect, India's youthful households will tend to save less," Jonathan Ablett and other analysts at the New York-based consulting firm noted in their study.

That's not the consensus view.

Between 2005 and 2025, the working-age population in India will swell by 273 million, according to the United Nations. The country's total population will rise by 313 million.

"When the demographic bulge raises the share of working-age adults in the population, the overall propensity to save rises sharply," Sanjeev Sanyal, a Deutsche Bank economist in Singapore, said in a 2005 study.

Like Japan in the 1950s and China in the 1980s, India was entering a demographic "sweet spot," Sanyal said.

According to the McKinsey report, Indian families are already saving too much to support small businesses directly.

Compare India with South Korea. In 2005, both had an almost identical national-savings-to-GDP ratio of about 33 percent. Yet, in Korea's case, households accounted for just a fifth of the overall rate, compared with 69 percent in India.

Household thrift in India is even more pronounced than in China, where the bulk of the country's 50 percent savings rate comes from companies and the government.

As organized business expands in India, more people will give up their self-funded, low-productivity occupations and move into the formal workforce.

The modern economy has recourse to bank loans and capital markets.

"Greater access to capital from the financial system will reduce the amount of personal capital that entrepreneurs are obliged to tie up in their small businesses," the McKinsey report notes. "Households will not need to save so much."

Granted, the focus of the McKinsey study is on how much Indian consumers will spend, and not what they will put away.

The consulting firm predicts that the Indian consumer market will surpass Germany's by 2025 to emerge as the fifth-largest in the world, after the United States, Japan, China and Britain.

India ranks 12th at present.

As for predicting savings behavior, McKinsey researchers do agree that the task is a complex one.

"Even if the savings story plays out differently from that of our base case - for example, if investment expands to a higher level than that which we have forecast - the impact on consumption is likely to be minimal," the McKinsey analysts say.

Does it matter if Indians set aside more money or less?

The Reserve Bank of India's deputy governor, Rakesh Mohan, says that it is plausible that gross domestic savings in the year ending March 31, 2008, will rise to as much as 35 percent of GDP.

That is almost 10 percentage points higher than in 2003.

Add a small amount of capital absorbed through a current-account deficit, estimated to be less than 2 percent of GDP, and India has enough resources for economic growth of 8 percent or 9 percent. With more productive use of capital, even 10 percent is feasible.

The trouble with this happy picture is that when the economic cycle turns, both the growth in corporate profits and the government's fiscal improvements may disappear, cutting off resources for economic expansion.

So does India really need savings to rise much further? No, it only needs the ratio of savings-to-GDP to become more stable.

And that will require the demographic dividend to kick in.

The additional resources that have sustained the resurgence in economic growth in the past four years have largely come outside of the household sector - from company earnings and budgetary gains.

In the financial year that ended in March 2003, household savings were about 23 percent of GDP. The economy that year grew less than 4 percent. Three years later, the GDP growth rate was as high as 9 percent and yet the ratio of household savings to GDP was practically unchanged.

It is perhaps too early to look for a demographic dividend, which works by drawing a large number of people out of subsistence agriculture and into factory jobs. This has yet to happen in India. When it does, savings are bound to increase.

Another impetus may come from higher demand for pension cover, which 9 out of 10 Indian workers do not have at present; this is going to change as the retirement-savings industry modernizes and expands and as more workers join the formal economy, where they have to make mandatory provident-fund contributions.

McKinsey's prediction of a decline in India's household-savings rate is perhaps too simplistic.