Indian Economy - News & Updates - Archive

[Bushroda]

India-made cars coming to NWI
Tuesday, May 8, 2007 9:15 AM CDT

BY ANDREA HOLECEK
holecek@nwitimes.com
219.933.3316

HOBART | Team Imports will begin importing Mahindra all-diesel pickups and sport utility vehicles from India for sale at its Team Mahindra dealership as the vehicles make their first appearance in the U.S. market.

Mike Rudolph, one of Team Imports' owners, said the Mahindra's "out of the box" vehicles with their four-wheel drive automatic turbo diesel engines, good fuel economy and reasonable pricing have prompted him to become one of the company's 200 U.S. franchisees, the only one in Northwest Indiana.

"I like their thinking," Rudolph said Monday. "They offer a different vehicle. They're attacking the market from a different niche."

Manufactured by auto division of Mahindra & Mahindra LTD in Mumbai, India, the Mahindra pickups will begin appearing in the U.S. market in late 2008, with the company's Scorpio-model SUV's following in early 2009, Rudolph said.

The Indian conglomerate began its first venture into the auto market producing the "Willy," a Jeep-like vehicle, in 1954. It currently sells its SUVs in Europe, Australia and South Africa, according to its Web site. Mahindra is the fourth-largest tractor producer in the U.S., with manufacturing plants in Calhoun, Ga., and Red Bluff, Calif.

The company's entrance into the Indiana and U.S. market will be aided by the market's growing Indian population -- already are familiar with the company and its vehicles -- and their good value, Rudolph said.

"When most consumers can find a good value at a good price they'll get over it (foreign production) quickly," he said. "Their quality is good. By the J.D. Powers ranking, they (Mahindra) are in the top four or five among the out of 20-plus brands sold there."

The basic Mahindra SUV will have a $23,100 price tag, compared to a U.S.-made vehicle with a similar powertain and features that's priced $10,000 higher, Rudolph said. Mahindra vehicles all carry a four-year, 60,000 mile bumper-to-bumper warranty.

The Team Mahindra dealership at 4000 E. Lincoln Hwy., Hobart, will have mechanics trained to repair and maintain the imported vehicles. It's investing in the special tools for certain procedures, but Rudolph said any good diesel mechanic will be able to handle most normal maintenance.

The dealership also will carry a stock of replacement parts, with others available through its network of dealerships and a main parts warehouse in Alpharetta, Ga. Mahindra's U.S. importer, Global Vehicles USA Inc., is also located in Alpharetta. The company expects to sell 50,000 vehicles during its U.S. debut year.

"Mahindra knows they have one chance to get right in the U.S. market, so they're making sure everything's right quality-wise," Rudolph said. "They're very technologically-oriented and on top of the science."

 

[Bushroda]

Canada needs its A Game in dealing with India
A strong pan-Canadian effort must be made by business and government to be a player in this increasingly important market
DONALD STEWART
May 7, 2007


If I had to summarize the business relationship between Canada and India today, it would be: great potential, modest progress.

This is worrisome.

After all, India is on course to become one of the world's most important economic players. The steps Canada takes now to improve its economic ties with India will have a long-term impact on our future economic growth and the prosperity of all Canadians.

I say this from the perspective of head of a Canadian company whose roots in India run very deep.

Sun Life began operating there in 1892, left upon the nationalization of the insurance industry in 1956, returned to India in 1999 as a provider of mutual funds and, two years later, re-entered the newly deregulated life insurance market.

India is one of our most important international markets. Our joint venture there with the Aditya Birla Group has a sales force of more than 45,000 advisers serving 95 Indian cities, and we have grown to be one of the top five privately owned life insurers in the country.

India is one of the most important international markets, a country of extraordinary potential, with a huge population. This includes a well-educated and confident middle class approaching 300 million individuals, and GDP growth of more than 8 per cent annually in recent years.

However, Indian demographics and growth are only one side of the equation. There are a number of factors here in Canada that support trade and investment between our great countries.

Canada has a robust economy and educated work force, and is a proven conduit into the overall North American market. We share bonds of family and culture - Indian immigration to Canada is healthy and growing. There are also important similarities in many of our institutions, legal systems, and the language of business.

However, we must act now to fully realize the potential and succeed against tremendous competition from other countries that have intensified their focus on India.

In this fast-paced world of expanding free-trade zones and proliferation of bilateral trade deals, competition among countries is as fierce as competition among businesses. Make no mistake: It is their flag versus our Maple Leaf. Canada needs to promote a stronger national brand in India.

The race is on. Canada must compete - and compete to win. It's time to show the world, and India especially, that we mean business. Here are a few suggestions: First, we need to engage Indian decision makers deliberately, continuously and strategically.

The most effective place to start is government to government. The highest-level engagement is critical because India has many suitors in this economic courtship. Building a relationship at the top sets the right tone of commitment and partnership.

The government of Ontario and the federal International Trade Ministry have completed their own trade missions to India recently. We have been active participants in these initiatives, and they have our firm support. But if Canada is to continue punching above its weight on the global stage, there must be a higher level of strategic purpose and execution.

We need to move beyond disparate, in-and-out visits. We need a more co-ordinated and deeper, pan-Canadian approach to leverage these opportunities. Canada should intensify the number of diplomatic, trade and cultural initiatives across federal and provincial governments. Let us pursue one clear, common strategy, with each mission, initiative and exchange building off the previous one.

Second, we must focus on Canada's core competencies, sectors where we can win against the best the world has to offer to India. For example, we have world-class financial services expertise in this country. We should promote this expertise in India and seek greater investment liberalization in this sector. Other high-value-added industries, such as technology, also come to mind. In global negotiations, our government must be prepared to actively support its international champions.

Third, Canada should pursue a bilateral trade agreement with India to improve access to all key economic sectors, and to build our trade with India over the next decade. Remember this: As India becomes a dominant world player, Canada needs India more than India needs Canada.

It is of course also critical that we engage on a business-to-business level with successful companies mentoring those trying to establish themselves in India. We also need to better leverage organizations like the Canada-India Business Council to ensure Canada's commercial contribution and long-term goals are best represented in India.

In business, as in life, relationships require ongoing effort and investment. Sun Life is investing considerable efforts in India and this has proven to be a tremendous choice for us. We believe that it would be the right choice for Canada as well.

Mr. Stewart is the chief executive officer of Sun Life Financial Inc.

REQUIRED READING

"The early explorers sought a way to India in search of silks and spices. In 2007, a new mission of exploration is under way as businesses from around the world come to India for opportunities. India is not just being rediscovered - it already has been found by our competitors."

Canada and India: Boosting Economic Ties and Cutting Barriers, Strategies for Closer Economic Relations, The Canadian Chamber of Commerce, March, 2007, http://www.chamber.ca

"As serious attempts are made to tackle its weaknesses and build on its strengths, India is broadening its economic reforms and establishing itself as a high-growth emerging market. Canada should be moving more quickly to deepen the bilateral economic relationship."

Wendy Dobson, The Indian Elephant Sheds its Past: The Implications for Canada. C.D. Howe Institute, No. 235 (Spring 2006), http://www.cdhowe.org

"India is emerging from the shadow of China as a land of bountiful promise for foreign firms - if they can overcome the cultural hurdles."

Sun Life's insurance policy: The great Indian middle class, by Sinclair Stewart, The Globe and Mail, Oct. 1, 2005, http://www.ReportonBusiness.com/agenda

By the Numbers

1,095,300,000

India's population in 2006.

8.5 per cent

Real GDP growth in India's services sector over the past five years. It was 10 per cent in 2005-06

53 per cent

Proportion of India's GDP that the services sector accounts for.

$1.67-billion

Total value of Canadian exports to India in 2006.

50 per cent

Growth in Canadian exports to India, between 2005 and 2006.

Sources: United Nations, Department of Foreign Affairs and International Trade, Statistics Canada

 

[Bushroda]

India's top envoy bullish on Canada
'Yippee' was 59-year-old's reaction upon learning he'd been posted to Ottawa

May 07, 2007 04:30 AM
Prithi Yelaja
Staff Reporter

India's new high commissioner to Canada had a wide grin on his face for most of his first visit to Toronto since assuming the job.

The bullish view of India that R.L. Narayan heard on his round of meetings with Canadian business leaders and this country's finance minister last week might have had something to do with his upbeat demeanour.

As the world's 12th largest economy, projected to be fourth largest by 2025, "India is increasingly being seen as the market of boundless opportunities and tremendous potential," Jim Flaherty said at a dinner organized by the Canada-India Business Council.

However, "while the world is turning its attention to India, (Canada has) only scratched the surface," and risks being left behind, he added.

"Our market share of India's exports and imports are a fraction of countries such as the United States or the European Union or Australia. They are outrunning us in this highly competitive global economy and the need to set the pace is important from a Canadian point of view."

His comments were echoed by Donald Stewart, CEO of Sun Life Financial, who described the business relationship in four words: "great potential, modest progress."

"This is worrisome," said Stewart. "In this fast-paced world ... competition among countries is as fierce as competition among businesses.

"Make no mistake: It is their flag versus our maple leaf."

Stewart suggested Canada needs to be aggressive in promoting its brand in India. His company has already formed a partnership with Aditya Birla Group to form Birla Sun Life, now one of the top five private life insurers in India, with a sales force of 40,000 in 95 cities.

"As India becomes a dominant world player, Canada needs India more than India needs Canada," said Stewart.

There is progress: Two-way trade was $3.6 billion last year, up 25 per cent from the previous year. Canada is pushing ahead to remove barriers and forge links with India, including a foreign investment protection and promotion agreement, with a view to a free trade deal in future, Flaherty said.

"So Canada's new government is determined we ensure we do what we can to further our relationship with India. Our government, along with the private sector, is focusing on India like never before. It's good for families and businesses in both countries."

Narayan, seated next to Flaherty at the dinner, beamed.

"This is music to any high commissioner's ears," he said, reflecting on the event. "I was especially pleased to hear the declaration by the minister that India is a priority. This kind of political muscle will mean the relationship between our countries will move ahead very fast."

Ottawa is Narayan's 10th posting in 35 years as a diplomat. His previous posts have included Washington, Moscow, Warsaw, Doha and Kuala Lumpur.

The refreshingly down-to-earth 59-year-old recalled his reaction upon learning he'd be posted to Canada: "I said `Yippee.'

"Canada is what I had asked for. It's a big country, an important country and there is great potential to grow the relationship with India. We have huge stakes in Canada and getting bigger," he said, pointing to recent acquisitions in Canada by Indian companies, including the Aditya Birla Group's takeover of Minacs Worldwide last year and the recent bid for Algoma Steel by Essar Global, India's largest exporter of flat steel.

"(India) will have a lot to do with Canada in the future," he said. As its economy grows at nearly 10 per cent a year and adds 18 million people a year, "there will be huge demands for energy, infrastructure and technology – and Canada is an expert in these areas."

Post-secondary education is another field where Canada could market its services in India, said Narayan. About 120,000 Indian students go abroad each year, most to the United States, Britain or Australia, who have made concerted efforts to woo them.

While Canada views India as a "priority nation" for trade, the reverse is not yet true, Narayan admits. However, next month's visit of Kamal Nath, India's minister of commerce and industry to Canada, signals a change, he adds.

"In India we tend to compare Canada with the U.S., which is not always fair when you look at the size of the population. There is certainly interest in Canada and I'm sure it will translate into results."

After serving two terms in Moscow, Canadian winters will be a piece of cake, Narayan said with a chuckle.

While in Toronto, he met with leaders of the GTA's Indo-Canadian community, whom he called "a huge asset" to both countries.

"Firstly, they're Canadians. Many of them have been here for decades so they know this country well. At the same time, they've kept in touch with India so they understand the business ethos there.

"You could call them ambassadors," says Narayan, laughing. "Since I'm a high commissioner, I don't mind."

 

[Bushroda]

That $2500 Car You Wished For, On The Way
Claudia Strasbaugh

Can a cheap car be sexy? Maybe... I have a love affair with my car, I had one with the last set of wheels. Sure I resist paying for a really good ride but never have buyer's remorse. So if I can dodge being part of global warming and not have to pay off a costly machine, whatta deal. Maybe I'll take a cruise and watch the ozone hole close up.

India thinks they can help via Tata Motors (TTM) who's sending us a $2500 ride. Today the least expensive car I could find is a Chevy, their Aveo goes home with you for just under $11,000.

Sexy or not, think about it a minute, a car for a fraction of the price of that flat screen. Most of us can slap it on the ole' Discover card and pay it off before the holiday shopping season.

Tata isn't new to the car biz, they're been turning out trucks, buses, ambulances, even some cement mixers since the company was founded 52 years ago. They also act as a secondary market, cranking out parts for Ford, GM, Benz, Toyota, and Jags.

India manufacturers are often privy to employee training the way the company trains techs in order to in-source jobs from the rest of the planet. Quality of individual work is considered better than that in China. Second in population after China, many think India with a billion citizens will overtake China's population to become the world-wide #1 economy. Indian Central Statistical Office estimates GDP growth rate at 9%.

Today selling at $19 with a P/E of 15 and a dividend yield of 1.5% Tata trades on the New York Stock Exchange under the symbol TTM. Market capitalization is $7.3 billion, favorable contrast with Toyota's equivalent P/E or higher P/E of 23 at Honda.

Tata Motors were up 19% in the month of February in a year to year comparison, commercial sales up 22% (David Riedel of Riedel Research Group). Granted, sales only rose 11% in March but quarterly revenue still was 60% on the positive side, earnings up 30%. Which U.S. or European car manufacturer would not have danced in the street for half that, half that over the past several years.

The sales have been influenced by two things - the government and the economy. The Indian government has imposed strict emissions standards to protect the environment forcing people to buy fuel efficient trucks and cars.

What has been a boom Indian economy and now may become one for us is the fact India wants it's young employees to be able to afford a reliable car. Today that's only 7 out of 1000 among the unwashed masses so Tata has huge potential there and may become the hit of the planet.

Truck owners aren't left out. Tata got orders for $5100 priced trucks under the model name "Ace" they introduced back in 2005. They've sold 100,000 Ace trucks in less then two years so says Forbes. To serve demand Tata is also building factory facilities to meet truck demands.

What will a Tata cost you today. Nothing, can't be had. It is anticipated when one is available cost will be more than $5000 thankyou Federal Government Customs Duties. There may be some minor car modifications required to meet all our specifications. Still, demand is the name of the game. If we insist, we can and will get it, sooner rather then later, too.

 

[Neo]

Indian Punjab to set up business centre at Wagah

AMRITSAR (May 08 2007): The Indian Punjab state government will establish a 100 acre state-of-the-art modern business centre, conforming to global standards, at Wagah border to facilitate trade with Pakistan.

This was stated by Chief Minister Parkash Singh Badal while addressing industrialists at the Guru Nanak auditorium here during a function organised by the industry and commerce department to disburse capital subsidy worth Rs 160 million to 221 industrial units.

He further said that the business centre as well as Wagah would have four-lane super-highway connectivity within two years. "Three development boards would be set up to boost industrialisation and economic activity in the state, " said Badal.

http://www.brecorder.com/index.php?id=561195&currPageNo=1&query=&search=&term=&supDate=

 

[Neo]

India to target 210m kg tea exports

KOLKATA: India’s tea industry will target exports of 210 million kg in 2007, slightly higher than last year’s exports with demand emerging from new markets, a top tea board official said on Monday.

India is likely to export more tea to countries like Egypt, Pakistan and Iraq this year, said Vasudeb Banerjee, Chairman of the state-run Tea Board of India. “A growing demand from emerging markets will help us achieve our goals. We are targeting exports of at least 210 million kg this year,” he said.

The bulk of India’s 203.8 million kg exports in 2006 went to Iraq, Russia and the United Arab Emirates. “We expect tea exports to Egypt to touch 6 to 10 million kg this year compared to 2.7 million kg last year,” Banerjee said at a news conference.

A delegation of tea board officials and Indian tea producers visited Egypt and Pakistan in April to promote export of tea, the official said. “Pakistan is emerging as a significant market for Indian tea and we expect to export up to 20 million kg this year,” Banerjee said.

Last year, India had exported over 15 million kg of tea to Pakistan. Better road transport facilities, lower duties and freight charges were likely to spur the increase in exports, officials said. Tea board officials and Indian tea producers said on Monday that production also was likely to be higher than last year. “We will be ahead this year,” Banerjee said. India produced 955 million kg of tea in 2006.

http://www.thenews.com.pk/daily_detail.asp?id=54759

 

[Neo]

Airbus to invest $1bn in India

NEW DELHI: Airbus Industrie on Monday confirmed plans to invest one billion dollars in India in the next decade as its superjumbo Airbus A380 arrived to raise the profile of its only customer in the country.

The aircraft flew a maiden trip to New Delhi Sunday to mark the second anniversary of private domestic carrier Kingfisher Airlines, the only Indian airline and among 16 airlines globally to have ordered the plane from the European manufacturer.

Airbus will invest “one billion dollars in the next 10 years” in India for training, maintenance and a design centre, John Leahy, chief operating officer for customers at European-based Airbus Industrie, told reporters in New Delhi.

In February Airbus said in the southern city of Bangalore that it would invest one billion dollars in the country during the next decade, but Leahy’s confirmation comes as the airline pursues massive cost-cutting linked to low demand and production delays of the giant passenger jet.

Kingfisher Airlines, ordered five A380s in 2005 among 15 planes in a deal worth about three billion dollars. It expects the first delivery of the aircraft in 2011 as it draws up plans for an international debut, using the A380 which has been much delayed in production on high-density routes such as to the United States. Air travel in India has soared in the past five years as almost a dozen new airlines have been launched to serve demand in the fast-expanding economy.

http://www.thenews.com.pk/daily_detail.asp?id=54775

 

[Bushroda]

India plans to borrow $15 billion for railroad overhaul
By Cherian Thomas Bloomberg NewsPublished: May 8, 2007


KYOTO: Indian Railways, Asia's oldest network, plans to borrow $15 billion from commercial banks over the next five years to build new tracks, add passenger cars and modernize stations, the company's chairman, J. P. Batra said recently.

The funding is part of the state-run network's plan to spend as much as $56 billion by 2012 to meet rising demand for transportation in the world's second-fastest growing major economy after China.

Goldman Sachs estimates that India's $854 billion economy will grow at an average of 8 percent each year until 2020. That expansion will raise annual goods movement by 51 percent to 1.1 billion tons and passenger traffic by 31 percent to 8.4 billion people a year by 2012, Batra said.

"We realize that such high growth would be difficult to sustain without adequate capacity augmentation," Batra, the top bureaucrat in the Ministry of Railways, said in an interview in Kyoto on Sunday. "A number of major Japanese and European banks are keen to lend money to us."

Batra said that the Indian Ministry of Finance is in talks with its Japanese counterpart to arrange $4 billion of loans to finance a dedicated freight corridor in India. He did not name the banks with which Railways is negotiating for loans.

Indian Railways is building two freight tracks along the country's busiest routes. The first will connect India's financial capital, Mumbai, in the west, to New Delhi in the north. The second track will run between Ludhiana in the north and Calcutta in the east. The first phase of the project involves 2,700 kilometers, or 1,700 miles, of track at a cost of about $6.5 billion, Batra said.

The plan to refurbish the railroad is part of Prime Minister Manmohan Singh's plan to invest $320 billion by 2012 on improving the country's roads, ports and other infrastructure, all of which are strained. Singh wants better utilities to encourage investment in factories, generate jobs and accelerate economic growth to eradicate poverty in the world's second-most populous country.

The railroad, which has 1.4 million people on its payroll, plans to spend $7.7 billion in the current financial year, ending on March 31, to increase capacity.

Batra said that the railroad would rely on its surplus cash to make the investments. It earned a surplus of $4.5 billion in the year that ended March 31, and expects a surplus of $5 billion this year, he said.

"The major focus in the next five years will be on rolling stock such as the locomotives and passenger cars," Batra said. The plan is to almost double the annual capacity to produce passenger cars and locomotives to 4,500 and 700 respectively.

Indian Railways currently runs 11,000 trains a day, moving about 15 million people, or almost the combined population of New Zealand, Hong Kong and Singapore.

Still, the fastest train in India clocks a maximum speed of 140 kilometers an hour, half the pace of the fastest train in Japan.

East Japan Railway, Japan's largest rail operator, is testing a new shinkansen, or bullet train, called the Fastech 360, which has a top speed of 360 kilometers an hour. No date has been set for its introduction and no decision has been made about whether to run the train at top speed if it is introduced.

"We are starting feasibility studies to introduce high-speed trains in India, covering a distance of 2,800 kilometers," Batra said. "This will involve a major participation from private companies."

India was the first in Asia to get a passenger railroad when British rulers opened a 34-kilometer track from Mumbai to Thane on April 16, 1853. The network now covers 63,000 kilometers.

Rail lines make up 2.3 percent of the country's economy, which grew 9.2 percent in the year that ended on March 31, the fastest pace in almost two decades. Growth has averaged 8.6 percent in the past four years, the quickest expansion since the country's independence in 1947.

India also needs to spend money to upgrade the network as the key railroad tracks connecting the nation's biggest cities are "saturated in most sections," according to a May 2002 report by the railroads.

As many as 2,500 people have died in rail accidents between 1960 and 2004, and as many as 6,830 trains have derailed in that period, according to the railroads.

 

[Neo]

LG Electronics India unit to invest $125m

BANGALORE: The Indian unit of South Korea’s LG Electronics plans to invest at least $125 million over the next five years to boost its presence in consumer electronics and home appliances, a top company official said on Tuesday.

The firm, the top branded consumer electronics company in India, plans to increase its local market share to 35 per cent by 2010 from between 28 and 29 per cent now, Moon Shin, managing director of the India unit, told reporters.

“We are going to invest to promote our brand. We are working very hard to come out with new products,” Shin said after launching a new range of audio and video products including MP3/MP4 and disc players for the local market.

He said the investment would be made to expand capacity and to launch new products such as air conditioners in the next couple of years.

“Huge potential is there. The economic growth is very healthy and sound. Current business we have to increase and new business we have to find,” said Shin.

LG Electronics India, which increased sales by 10 per cent last year to Rs82.5 billion ($2 billion), was on track to achieve a sales target of 95 billion in 2007, said Shin, who took over as the India unit’s chief in January.

Home appliances made up 43 per cent of 2006 sales, consumer electronics made up 39 per cent and mobile phones 5 per cent.

LG’s India unit expects earnings from exports of products such as televisions, refrigerators and optical storage devices to rise to $240 million in 2007 from $170 million last year.

It exports to the Middle East, Africa, Bangladesh, Sri Lanka, Nepal and some European countries.

Shin said LG Electronics India would raise its contribution to the parent’s annual revenue to 10 per cent by 2010 from about 6 per cent now.

The Indian unit is aiming for turnover of Rs4.5 billion ($110 million) in digital audio-video products in 2007.

“This translates into a 70 per cent value growth in the segment for LG, even though the industry itself is growing at a rate lower than 10 percent,” Shin said in a statement.

The company also said it would spend Rs50 million in the current quarter for marketing the audio-video products.

Amitabh Tiwari, business head for consumer electronics, said LG Electronics planned to raise market share in the audio segment to 20 per cent in the year ending December 2007 from 14.3 per cent at present, and to 30 per cent in video, up from 25 per cent.

LG Electronics and Samsung Electronics Co Ltd dominate the Indian home electronics market. Haier, Videocon and Sony Corp also compete.

http://www.thenews.com.pk/daily_detail.asp?id=54944

 

[Bushroda]

Sky's the limit for India flight boom
By Damian Grammaticas
BBC News, Delhi

India is now the fastest growing aviation market in the world.

A rapidly expanding economy, incredibly cheap fares and bullish new airlines are all driving the growth.

Hundreds of new aircraft are being ordered and airports like Delhi are planning to handle up to 100 million passengers a year, more than any airport in the world does today.

On the tarmac at Delhi's International Airport you can see the change happening.

The air is filled with the roar of jet engines as new airliners land, disgorge their passengers, then head off on their next trip.

Fuel trucks and baggage trolleys trundle purposefully to and fro. A dark haze hangs in the sky turning the setting sun into a soft, red disc.

In the terminals check-in counters are swamped by passengers.

At the ticket offices people clamour for seats, trying to snap up some of the cheapest fares in the world.

Potential

According to the Centre for Asia Pacific Aviation (Capa), passenger numbers are growing faster in India than anywhere else.

In the six months to September last year the number of people carried by airlines in India leapt 45% compared with 2005.

"India is accelerating quickly after years of inertia. The potential is huge," a recent report by Capa says. "Managed correctly, India stands poised as one of the most exciting aviation markets in the world."

Posing on the tarmac this week, surrounded by photographers and news cameramen was one of the new airline tycoons with big ambitions.

Vijay Mallya was standing in front of an Airbus A380 superjumbo.

He has ordered five for his company Kingfisher Airlines, with an option to buy five more. Kingfisher is less than two years old, and not even making a profit yet.

"With the five airplanes we've ordered we intend to launch daily services between Delhi and New York and Bombay and New York," Mr Mallya says.

"I've publicly stated that by 2010 we aim to be India's largest airline. We're on track to achieve that."

Just four years ago, before India liberalised aviation, there were only three main domestic airlines. Today there are around a dozen, among them aggressive budget carriers fighting for passengers.

None are making money yet, but 500 new aircraft are on order, and 2,000 new pilots will have to be hired.

The country's economic boom is what lies behind the growth. People have money to spend. And tickets on many routes start at less than $1 each.

Kapil Kaul, Capa's chief executive for India and the Middle East, believes that for the next 20 years India will be the world's fastest growing aviation market.

"This is all a combination of the economy doing very well and people having money to spend on travel which is what is creating this unbelievable kind of euphoria about aviation in India," he says. "And on the other side the fares are ridiculously low."

Environmental concerns

Today Delhi airport sees up to 20 million passengers a year. The busiest airport in the world is Atlanta with 84 million.

But India's capital has begun a massive expansion programme, planning for 100 million passengers by 2030.

Few of those flying today, though, know what all this will mean in terms of pollution and carbon emissions.

"I'm not thinking about all that right now," said Anita Gupta as she arrived to catch her flight to Mumbai.

"How it impacts the environment is difficult to grasp," added Anjali, as she queued at the security gate.

Danesh, a businessman, was the only person we found who was concerned.

"All these additional planes being added to the system, and the fuel being emitted, causing more warming is very hazardous," he said, "but I am still flying because I have to for my job."

For now, India's priority is a massive programme of building: half a dozen new international airport terminals, new runways, new infrastructure.

Worrying about the environmental cost will come later.

 

[Bushroda]

Industrial growth at 10-year high

Some experts call it an aberration, others say it is set to continue, even if the pace may slow down marginally

Paromita Shastri
New Delhi

India’s industrial production, according to data released by the government on Friday, grew 11.3% in 2006-07, a 10-year high, on the back of an unexpected 12.9% acceleration in March, as the highest interest rates in five years failed to curb consumer spending. Economists were expecting the index of industrial production (IIP) to rise 10.4% in March.

The surge in industrial growth has triggered fears among some experts that the central bank, the Reserve Bank of India (RBI), may be prompted to again raise interest rates to further curb credit growth. However, another set of data released by the government on Friday said that wholesale inflation had fallen to 5.66% for the last week of April, a four-month low that reduces chances of RBI increasing interest rates.

“The spurt in IIP augurs well for (the fight against) inflation. Incremental capacity is likely to kick in across industries in the coming months and should add to the salutory impact on prices,” said ICICI Bank chief executive officer and managing director K.V. Kamath.

Experts said that industrial production would slow down in 2007-08 because some of the credit-tightening measures undertaken by the central bank would take time to kick in. “There is a lag between rising interest rates and its impact on industrial production,” said Sujan Hajra, chief economist at Anand Rathi Securities Ltd, a Mumbai brokerage.

Data released by the ministry of statistics and programme implementation show that the manufacturing sector, which has the highest weight, 79.36%, in the IIP, grew by 14% in March, pushing annual growth in the sector to 12.3%, the highest since 1995-96.

The high industrial growth improves chances of the government meeting its targeted growth of 9.2% in gross domestic product, or the national income, in 2006-07.

Experts had been busy revising their growth estimates down to 8.5% or less.

Data for the the fourth quarter will be announced on 31 May.

Some industry analysts such as JP Morgan Chase Bank’s Rajeev Malik, stunned by the unexpected rise in IIP, are already calling it an aberration. However, the performance of the use-based groups of industries shows that the growth has been primarily investment-driven.
A 17.7% growth in capital goods, or machinery and equipment, in 2006-07, on top of a 15.8% growth in 2005-06, suggests that industrial expansion is set to continue, even if the pace may slow down marginally later.

“Growth is getting more tilted in favour of investment. It is now an important driver of the economy.

Also, this sector is yet to feel the impact of tight monetary policy,” said Dharmakirti Joshi, principal economist at credit rating firm Crisil. Finance minister P. Chidambaram has already indicated that investment growth may have already crossed 35% in 2006-07.

Barring September-October 2006, growth in the capital goods sector growth has been in double digits, said Devendra Pant, director, Fitch Ratings, another credit rating firm. “Another indicator for sustained industrial growth is the turnaround in growth of basic and intermediate goods, where growth went up from 6.7% and 2.5% in 2005-06 to 10.2% and 11.7% (in 2006-07). This implies that industrial activity continues briskly,” he added.

A closer look at the data reveals distinct signs of a slowdown in credit and inflation-sensitive sectors such as consumer goods.

Production of durables, essentially consumer appliances and consumer electronic products has steadily grown slower from 6.8% in January to 1.6% in February and 2% in March, bringing down annual growth to 9% compared with 15.3% in 2005-06.

“Data does show that the interest rates hike is impacting some sectors, particularly durables, where the growth has dramatically slipped to 2.7% in March from 21% (last March). This is supported by the evidence of a slowdown in automobiles,” said Crisil’s Joshi.

According to Morgan Stanley economist Chetan Ahya, sales of trucks slowed to 9.4% in April from 13% in March, while sales of both passenger cars and bikes remained weak.

The strong dip in durables was partly offset by an 18.5% growth in March in consumer non-durables, such as cosmetics and clothing.

The data comes in the backdrop of fears that the Indian economy is overheating. Last month, Moody’s Investors Service said India’s $854 billion economy (Rs35 lakh crore) was showing “classic signs of overheating” including higher than acceptable inflation and rapid rupee appreciation driven mainly by strong capital flows.

Delhi School of Economics professor N.R. Bhanumurthy said he expects “a general moderation” to 9% average industrial output growth in the current year. “The past global slowdown is transmitting into the economy with a lag and global cycles will affect domestic output and exports,” he added.

RBI on 24 April forecast economic growth to slow to 8.5% in 2007-08.

China’s economy is expected to expand 10% this year, according to the International Monetary Fund.

Crisil expects the Indian economy to grow by between 8.4% and 9.1% in 2007-08, while Fitch’s Pant said that he expects growth to slow down in even the services sector to 9% because of the rising rupee.

 

[Bushroda]

Guangdong eyes hot Indian economy

Guangdong Province has its sights set on the Indian market in an attempt to boost trade with the booming South Asian nation in coming months.

Guangdong, China's biggest foreign trader, should make greater efforts to tap the potential of the Indian market and increase imports from the region, according to an official from Guangdong provincial bureau of foreign frade and economic cooperation.

"Guangdong has planned to buy even more raw materials, minerals, agricultural products and other hard-to-find commodities from India in the remaining months of the year to support its fast growing economy," the Guangzhou-based Yangcheng Evening News quoted the official as saying.

He urged the province's business representatives to seize opportunities to expand their trade links with India.

Guangdong's foreign trade volume with India reached $1.31 billion in the first quarter of the year, up 77.1 per cent year-on-year, and it's expected to grow, according to statistics from Guangdong Customs.

Guangdong, which lacks natural resources and energy for its economic development, is hungry for imported raw materials, minerals and natural resources from India.

The Indian economy also provides a vast market for Guangdong's high quality products.

Many international companies have established production facilities in the province, turning Guangdong into a "factory of the world."

The province's exports to India rose to $790 million in the first quarter of the year, while imports from India hit $520 million in the first quarter of the year, year-on-year increases of 77.5 per cent and 76.6 per cent respectively.

The province's machinery and electronic products have enjoyed hot sales in the Indian market since the beginning of the year.

Guangdong's machinery and electronic product exports to India reached $630 million in the first quarter of 2007, up year-on-year 86.5 per cent and representing 79.8 per cent of the province's total exports to the country.

The province also sold $18 million worth of textiles to India in the first quarter, up 68 percent from last year.

Source: China Daily

 

[Bushroda]

Hot on the heels of Hollywood
By Josephine Moulds
Last Updated: 3:03am BST 12/05/2007

On a rain sodden industrial estate in a deeply unfashionable part of London, the powerhouse of Bollywood cinema nestles among air-conditioning wholesalers, ironmongers, and printing suppliers.

Eros International, recently named the BDO Stoy Hayward Business of the year at the Eastern Eye Asian business awards, is by no means a flashy media company.

But these very modest surroundings may soon have to be swapped for something much grander if the company's chairman and chief executive Kishore Lulla realises even some of his ambitious plans.

Mr Lulla talks like a man confident he is sat on a gold mine, and rightly so. Eros is the market leader in an Indian entertainment industry that PWC estimates is growing at 18pc a year and will be worth £12bn by 2011.

Bollywood - named after the centre of India's film industry, Bombay (now Mumbai) - produces some 1,000 films a year, or twice the number made in Hollywood.

And while quality has in the past played second fiddle to quantity, that too is changing.

"One of the factors is going global," says Mr Lulla. "Consumer taste is evolving. So countries like Indonesia, Malayasia Thailand, Russia and Germany, have started consuming Indian movies. And this is like fresh air for them when they see a totally different kind of movie with a lot of family values, music, Indian culture. The second is the Indian economy. There are 300 million people in the middle class [in India] at the moment, 300 million people have a lot of disposable income they are spending in multiplexes, so you are seeing a lot of tickets sold.

"There are only 13,000 screens in India at the moment. This will go up to 50,000 screens in the next five to 10 years. Once that happens you would see a film grossing maybe $50m-$100m (£25m-£50m). And once that happens you will see a lot of money going back into production.

"It's like different cultures competing for the same audiences in the future," says Mr Lulla. "Because if you look at the quality of Bollywood movie, we can produce those movies at maybe 10pc, or 20pc of the cost that Hollywood can do.

"If Hollywood is spending $100m a movie, we make the same kind of movie for $10m-$20m so just imagine if we have $50m dollar budget in India, what world class product we can make. There is obviously a lot of talent in India. Hollywood is looking back to India to commission a lot of the post-production work and shooting work."

Mr Lulla's father founded Eros in 1977, with enough success to give his children a comfortable, middle-class upbringing.

"Dad used to export movies," says Mr Lulla. "I was in college and I used to go and visit Dad to see different buyers across the world. So then in the 80s we decided that instead of selling our movies, Bollywood will go global soon.

"We thought about globalisation at that time. It took another 25 years to globalise Bollywood, but fine it happened, never too late.

"And then we started setting up offices in the different parts of the world and now we operate in 50 different countries."

Eros operates a studio model, commissioning films and co-producing them to minimise the risk of backing a flop, which it then distributes in India and across the world. Its mission is to consolidate the domestic market industry although not via acquisition.

"The market is fragmented and there are not many companies to buy," says Mr Lulla. "They are mostly a one-man, two-man band, how Hollywood was in 1930s.

"In the past 30 years the management team, and especially my family, has worked with most of the makers and most of the directors. They know us very well, they think Eros is part of them." So it is not surprising that the company is in talks with three of the five major Hollywood studios, who are scrambling to tap this lucrative market.

But Mr Lulla is unlikely to cede control of this very family-orientated business any time soon. Brother Sunil is president of Indian operations, while a cousin heads the international business. Founder and honorary life president, Arjan Lulla, still goes into the office every day.

A cultural chasm opens with Mr Lulla's earnest response to my question as to whether his father is always welcome.

"I love it," he says. "I don't want my father to stop work at all. Even if I get stuck sometimes in any decision making I always call my father and take his valuable advice."

Otherwise he models the business on the big five Hollywood studios.

"I've seen what the different studios have done in the last 70 years. I will never do the Warner/AOL merger. So I'm trying to borrow the best of all the models and implement it in Eros.

"Hence Eros has the production, without [all] the risk or production, and the distribution, and the new media, and the music, and the publishing.

"We've got Eros animation which is like a Disney arm. Once you have that in place you can have Eros merchandising.

"So I keep on studying the Hollywood model."

Now may be the time to start planning that office move

 

[Bushroda]

Arnold Schwarzenegger to visit Hyderabad in November
Malaysia Sun
Thursday 10th May, 2007
(IANS)

California Governor Arnold Schwarzenegger, hero of many Hollywood action films, will visit Hyderabad in November with a high-level business delegation to discuss mutual cooperation and investment opportunities in Andhra Pradesh.

This was decided at a meeting Chief Minister Y.S. Rajasekhara Reddy had with Schwarzenegger in Sacramento, California, Thursday.

According to a statement from the chief minister's office here, he had detailed discussions with Schwarzenegger on boosting trade ties between Andhra Pradesh and California in various sectors.

The meeting took place at the invitation of Schwarzenegger. On learning about Reddy's stay in California as part of his four-day visit to the US, he had invited him.

The California governor agreed to Reddy's request to explore all possibilities for investments in major sectors like IT, biotechnology, pharmaceuticals, food processing, BPO (business process outsourcing), micro-irrigation and water conservation.

Schwarzenegger had a word of praise for Reddy. 'You seem to be very popular among the people of not only your state, but the country. You are a blend of a farmer but a modern administrator and astute politician. That is what is wanted in an agrarian economy, particularly in a developing democratic country like India. You are doing very well on the farm, water and irrigation front,' he said.

Reddy told Schwarzenegger that he was very popular in India. 'Even in my state of Andhra Pradesh, you as an actor has many fans,' said the chief minister.

The California governor said he has great admiration for India, a great liberal democratic country. 'My wife, in fact, likes the spirituality of India', Schwarzenegger said, adding that he would love to visit India and its people.

Schwarzenegger said he was happy that many Indians do stay and work in his state. The chief minister pointed out that that every fourth Indian in California is from Andhra Pradesh.

Reddy explained to him the rapid strides made by Andhra Pradesh in IT, biotechnology, pharmaceuticals and food processing and briefed him about massive irrigation schemes and infrastructure projects including the upcoming Rs.24.78 billion (nearly $610 million) international airport at Hyderabad.

 

[Bushroda]

India's Production Growth Unexpectedly Accelerates
By Cherian Thomas

May 11 (Bloomberg) -- India's industrial production growth unexpectedly accelerated in March, as the highest interest rates in five years failed to curb consumer spending.

Output at factories, utilities and mines gained 12.9 percent from a year ago after a revised 10.8 percent increase in February, the Central Statistical Organisation said in a statement in New Delhi. Economists expected a 10.4 percent rise.

Faster-than-expected production growth suggests it may take longer for the Reserve Bank of India's interest-rate increases to damp the enthusiasm of consumers, who last year received the highest wage rises in Asia. Unlike China and other emerging economies, India's growth is driven by its 300 million middle class people, equal to the population of the U.S.

``There is a lag between rising interest rates and its impact on industrial production,'' said Sujan Hajra, chief economist at Anand Rathi Securities Pvt. Ltd. in Mumbai. ``Production growth this year will be slower than last year.''

India's benchmark Sensitive index increased 0.2 percent to 13,796.16 at 3:30 p.m close in Mumbai. The yield on the 10-year government bond rose 5 basis points to 8.17 percent.

Moody's Investors Service last month said India's $854 billion economy was showing ``classic signs of overheating'' including higher-than-acceptable inflation and rapid rupee appreciation driven mainly by strong capital flows.

Slower Growth

India's central bank April 24 forecast economic growth to slow to 8.5 percent in the year ending March 31, from 9.2 percent in the previous year. China's economy is expected to expand 10 percent this year, according to the International Monetary Fund.

In March, manufacturing gained 14.1 percent from 11.9 percent in the previous month, while electricity output almost doubled to 7.9 percent. Consumer goods output jumped to 14.2 percent, according to today's report.

India's middle class, people earning from $4,545 to $23,000 a year, has tripled to 300 million in the past 20 years as the government opened its economy to foreign investors such as Ford Motor Co. and Dell Inc. and created jobs, according to the National Council for Applied Economic Research.

``The impact on industrial growth will be really visible from April onwards,'' said D. H. Pai Panandiker, president, at RPG Foundation, an economic policy group in New Delhi. ``Demand is gradually slowing.''

Merrill Lynch & Co. and Franklin Resources Inc. are increasing purchases of Indian government debt, predicting the central bank will end the cycle of nine interest-rate increases since Oct. 2004.

Confidence Wanes

DSP Merrill Lynch Fund Managers Ltd., a unit of New York- based Merrill, last fortnight raised 2.8 billion rupees ($68 million) for its first Indian bond fund since 2002. Franklin Templeton India, part of the San Mateo, California-based money manager, doubled holdings of benchmark debt in one of its funds in March. The increase in demand for the securities may bolster prices for Indian bonds, which have slumped since 2004.

The central bank may also refrain from raising interest rates as business confidence in India fell this quarter for the first time in six months as Maruti Udyog Ltd. and other companies said sales may slow on higher borrowing costs, said Shashanka Bhide, chief economist at the National Council of Applied Economic Research in New Delhi.

The business confidence index developed the NCAER, based on responses from 590 companies, declined to 151.3 in the current quarter ending June 30 from 157.3 in the previous quarter, the research group said May 4.

Cash Rebates

Maruti Udyog Ltd., India's biggest carmaker, is offering cash rebates to attract buyers who are deterred from purchasing because of higher borrowing costs. Car sales will likely grow about 15 percent this fiscal year compared with 22 percent in the previous year, according to Ashutosh Goel, a Mumbai-based analyst for Edelweiss Capital Ltd.

Bajaj Auto Ltd., India's second-biggest motorcycle maker, reported a 10 percent fall in sales in April from a year earlier as demand for motorcycles waned.

Commercial banks have increased their lending rates by between 200 basis points and 250 basis points since December. State Bank of India, India's biggest commercial bank, said on April 7 it will charge its best borrowers 12.75 percent, the highest since April 1999.

Governor Yaga Venugopal Reddy left the central bank's key overnight lending rate unchanged on April 24 to support growth as he forecast inflation to slow to 5 percent this year.

``There have been signs that the economic momentum have already slowed mildly,'' said Sebastien Barbe, Hong Kong-based senior economist at Calyon, the investment banking unit of France's Credit Agricole SA. ``The central bank will likely give time for the monetary policy tightening to produce its full effect on inflation.''

Reddy, who raised the benchmark rate six times in the past 16 months to a five-year high, may be relying on the lagged impact of past rate increases to rein in price gains in Asia's fourth-largest economy, assisted by a strengthening currency and cuts in import taxes.

India's benchmark wholesale price inflation slowed to a four-month low of 5.66 percent in the week ended April 28 as higher rates damped demand for manufactured goods and lower import taxes reduced prices of wheat and pulses, the government said today.