Indian Economy - News & Updates - Archive

[Bushroda]

Thats awsome!
Are u studying or are u emplyoyed?
And where did you do your CS Engg. from?

Thanx,

I did my Engg from Harcourt Butler Technical Institute(HBTI), Kanpur. Did my MS in Advanced Network Technologies from University of Minnesota, Minneapolis and am currently employed with Agilent Technologies.

 

[Bushroda]

A better tomorrow for all
Banking outreach programmes will prove financially remunerative
VP SHETTY
Posted online: Friday, June 08, 2007 at 0000 hours IST

India recently joined a select club of a dozen countries that can boast of trillion-dollar economies. Our GDP is estimated to have expanded by 9.4% in 2006-07, and that too, on the back of 9% growth the previous year.

All these numbers coupled with the stock market buzz about the ‘India growth story’ (market capitalisation is now just shy of the magical $1 trillion mark) could tempt us to jump to the conclusion that the Indian economy has hit the ‘sweet spot’ and is poised for ‘take-off towards self-sustained growth’. However, one should not be deluded by numbers. The moot question is whether this growth is equitable and all-encompassing, or has ended up creating ‘islands of prosperity’ in a country of one billion plus. Further, can the 9% plus economic growth be sustained in the years ahead if the fruits of liberalisation, privatisation and globalisation are not realised by people residing in India’s vast hinterland?

The answer is actually a truism: Economic growth in India has to be inclusive in order to make it sustainable.

An inclusive agenda has other beneficial spin-offs as well. Enhanced purchasing power in the hands of those at the bottom of the pyramid will help stoke demand for goods and services, which, in turn, will yield robust turnover numbers in the constituent sectors, thus boosting the economy as a whole. This is the ‘bottoms-up’ approach to generating demand in the economy. Further, if domestic demand is robust, then it could insulate the economy from any possible slowdown in exports.

Thus, sustained growth momentum, and with it the prosperity of India Inc, is dependent on wealth creation at the grassroots level. The banking system must play a signal role in empowering the underprivileged. Recognising this, and in the light of the fact that current banking practices preclude vast numbers of rural Indians from accessing banking services, the RBI has, in the mid-term review of its Annual Policy 2005-06, exhorted banks to make available ‘basic banking’—a ‘no-frills’ bank account with nil or low minimum balance requirements—available to the hitherto excluded sections of the population. Though the number of transactions in such accounts, by their very nature, would be low, no-frills banking will go a long way in bringing formal banking to the intended beneficiaries.

Banks have responded by opening ‘no-frills’ accounts in the target areas with simplified procedures (all those opening such accounts will not have identity and proof-of-residence documents). All that is required to open this account is an introduction from an existing account holder who meets all the know-your-customer norms of the bank and has a satisfactory transaction record.

Extending banking services to the underprivileged can also be viewed as a portfolio diversification strategy involving a massive and stable customer base

Further, ‘no-frills’ account holders in rural and semi-urban areas can withdraw cash against the sanctioned limit under the general purpose credit card scheme. Under this, there is no linkage to any end-use purpose specifications of funds, nor collateral security. Women are given preferential treatment. The idea is to help rural households escape the clutches of local moneylenders who charge usurious interest rates, often as high as 50%. Banks have been given a sop to promote the credit card with 50% of the outstanding amount being treated as indirect finance to agriculture, a priority target.

However, there is a need to adopt a holistic approach to financial inclusion by customising banks’ products and services at affordable prices to meet the entire range of financial needs of the underprivileged. This would involve banking outreach programmes that go beyond the no-frills provision to include credit facilities and other financial services like insurance. Apart from a flexible approach in terms of working hours, documentation, mode of interaction and transactions, banks would do well to utilise local knowledge for effective loan monitoring and risk mitigation. Extending banking services—no frills account, general purpose credit cards, micro-mortgages, agriculture loans, micro-insurance and remittances—to the underprivileged can be viewed as a portfolio diversification strategy on a massive and stable customer base.

The technology deployed for the purpose is highly secure, amenable to audit and in consonance with widely accepted open standards to allow interoperability among the differing systems adopted by different banks.

Linkages with self-help groups (SHGs) are also important. In sum, an inclusive banking agenda goes beyond the ambit of mere corporate social responsibility and makes for an attractive business proposition if appositely designed and implemented. The underprivileged are conscientious in repaying their dues, and gaining their custom makes eminent business sense.

—VP Shetty is chairman & managing director of IDBI, which has been awarded for its performance on strength & soundness by FE

 

[Bushroda]

Goldilocks tests the vindaloo
Jun 7th 2007
From The Economist print edition

http://imageshack.us
India's monetary policy is still too loose

AMERICA was the original “Goldilocks economy” (neither too hot nor too cold), but the fair maiden has now moved to India. The bears there prefer curry to porridge, but once again Goldilocks is reported to judge the economy “just right”, with strong growth and falling inflation. Indeed, concerns earlier this year about overheating are fading. Wholesale-price inflation has dropped from 6.7% to 5.1%, even as India's GDP jumped by 9.4% in the fiscal year ending in March—its second-fastest growth on record. Palaniappan Chidambaram, the elated finance minister, says it is time to shed any scepticism about the sustainability of India's strong growth. The Economist remains unconvinced.

India has much to cheer about. The economic reforms of the 1990s and stronger investment have lifted its sustainable rate of growth. But demand has also been inflated by an unduly lax monetary policy. The government thinks its target of 9% average annual growth in the next five years can be achieved without pushing inflation up. But India displays more symptoms of overheating than China does: inflation is much higher, bank lending is growing almost twice as fast, and Indian share prices have risen by twice as much in dollar terms as China's since the end of 2002. The government, initially slow to react to higher prices, has cracked down this year with a series of administrative and fiscal measures, notably banning wheat exports and lowering fuel taxes; and the Reserve Bank of India (RBI) has tightened monetary policy.


Many local economists think there has now been enough tightening. Yet the idea that Indian inflation is tamed seems to be based on five common myths. The first is that the run-up in inflation could largely be attributed to higher food prices caused by “supply shocks” in the agriculture industry; so monetary policy does not need to be tightened. In fact, manufactured goods have accounted for much more of the rise in inflation over the past year. The main reason for higher prices is that aggregate demand is growing faster than supply.

A second misconception is that the government's various schemes this year, like the wheat-export ban, have done a better job in reducing inflation than monetary policy would do. But such measures merely suppress the symptoms; they do not tackle the underlying problem. Inflation can be genuinely reduced only by a period of slower growth. And although the various schemes have helped to reduce wholesale-price inflation, the measure that the government likes to focus on, consumer-price inflation, the choice of all other central banks, is still running at almost 8% (taking a crude average of the rates for industrial, non-manual and agricultural workers).

A third myth is that the increase in fixed capital spending from 23% of GDP in 2001 to 29.5% last year will immediately lift the economy's speed limit. In the long term investment will indeed add to productive capacity, but in the short term higher capital spending boosts demand and adds to overheating.

The fourth fairy tale is based on the idea that the interest-rate rises over the past year must eventually have more of an effect—and thus slow the economy in the coming months. Interest-rate hikes certainly take time to work. The snag is that in India rates have risen by less than the increase in consumer-price inflation, and monetary conditions are still too loose. India has by far the lowest real interest rates among the world's big economies. The RBI, constrained by politicians, has been too timid in cooling domestic demand. Its attempts, until recently, to hold down the rupee through heavy foreign-exchange intervention forced it to run an overly lax monetary policy. The good news is that the RBI is now allowing the rupee to rise (see article), which should make it easier to fight inflation—if the government allows it to do that.

Lastly some critics of the central bank say that proper monetary tightening would kill the expansion. In fact, expansion is far more likely to end prematurely if inflation gets out of control and imbalances widen, raising the risk of a hard landing. Controlling inflation is the best way to sustain growth.

The bear necessities
In the longer run India's ability to grow faster depends on it unblocking its infamous infrastructure bottlenecks, notably its lousy roads, ports and power. The increase in electricity capacity over the past five years was only 57% of its targeted level, so power cuts have worsened. Skills shortages will be eased only by improving education and reforming India's rigid labour laws. This will all take time. Meanwhile, India will have to accept slower growth to keep inflation in check.

 

[Bushroda]

Global airline groups woo Indian carriers
Amitabha Roychowdhury (PTI)
LiveMint.com, Wall Street Journal

Air India has already declared its intention of joining the Star Alliance

Two global airline alliances, SkyTeam and OneWorld, are bullish on India and have started holding preliminary discussions with Indian carriers to attract them into their respective teams.

“The need and potential of having an Indian airline in the alliance has grown. We have held exploratory discussions with Air India, Jet Airways and Kingfisher about joining the alliance. Sooner than later, we will have an Indian airline joining the SkyTeam,” its chairman, Leo van Wijk, said.

Both van Wijk and his competitor, OneWorld managing partner John McCulloch, said India was a huge market and a “major target for us.” The SkyTeam chief said his alliance “has made it a priority to finalize discussions with Indian carriers and select a partner.”

However, McCulloch said the Indian aviation industry, where consolidation has already begun with the Jet-Sahara, Air India-Indian and Kingfisher-Air Deccan deals, would take “three to four years to stabilize. So any decision will have to be taken after that.”

India, China and Brazil were “the next growth markets and the global airline alliances will see more participation from these nations,” he added.

The state-owned Air India has, however, already declared its intention of joining the third group, Star Alliance.

Replying to questions, McCulloch also said India was set to become a “major aviation hub in the next two to five years” and give tough competition to other hubs like the Gulf region and Southeast Asia.

“All the activity that is taking place in the aviation sector—from purchase of aircraft, development of airports or the strong growth of the economy and the resultant increase in demand for air traffic—will ensure that India becomes a major aviation hub. India’s geographical position also goes to its advantage,” he said on the sidelines of the 63rd Annual General Meeting of the International Air Transport Association here. The OneWorld chief also pointed out the “huge local and regional market” coming up in the Indian subcontinent and said “we have to consider that.”

While the SkyTeam has 10 airlines as members, including Aeroflot, Air France, Alitalia, Continental Airlines, KLM and Northwest Airlines, OneWorld has British Airways, American Airlines, Cathay Pacific, Japan Airlines, Qantas and Royal Jordanian as members.

Star Alliance is the largest with global carriers such as United Airlines, Lufthansa and Singapore Airlines.

 

[Bushroda]

Indian biotech sector crosses $2 billion in FY 2007
Posted June 7th, 2007 by Tarique

Bangalore : India's emerging biotechnology sector crossed the $2 billion mark in fiscal 2007, registering 30 percent growth over the previous fiscal (FY 2006) at $1.45 billion.

The bio-pharma segment led the growth, accounting for $1.4 billion, or 65 percent of the total revenue, with 20 percent year-on-year (YoY) growth, Karnataka vision group for biotechnology chairperson Kiran Mazumdar-Shaw said Thursday at the inaugural session of the three-day Bangalore Bio 2007 here.

Similarly, bio-services and bio-agritech accounted for about $500 million, contributing Rs.10 billion ($250 million) and Rs.11 billion respectively. Bio-industrial and bio-informatics generated Rs.4 billion and Rs.1.3 billion respectively.

Total exports were Rs.10 billion.

"With healthy and consistent growth rate, the emergent biotech sector is on track to achieve the $5-billion target set for 2010. The agri-biotech segment witnessed 50 percent YoY growth, the highest globally with the largest acreage of nine million.

"The sector also witnessed 37 percent increase in investment of Rs.22.7 billion in the last fiscal, as against Rs.16.5 billion in FY 2006. As the biotech capital of India, Bangalore attracted the lion's share of investments - Rs.10 billion," Shaw said.

Delivering the inaugural address, Shaw said that of the 340 biotech firms in the country, 183 were in Karnataka, with 137 in Bangalore alone.

Of the 12 new firms registered in FY 2007, nine are in Karnataka and six in Bangalore.

To address the widening demand-supply gap in human capital, the Karnataka government is partnering Deakin University in Australia to start postgraduate and doctoral programmes for high-end scholars and biotech scientists, Shaw told about 800 delegates participating in the conference-cum-trade show here.

According to a study by the industry body ABLE (association of biotechnology-led entrepreneurs) and BioSpectrum, India's cost and skill base supports affordable drug development. The scientific headcount has doubled to about 16,000 from the previous fiscal.

"India is an emerging preferred hub for contract research organisations and contract manufacturing organizations. The transnational partnership models of global firms are suitable to Indian firms.

"Discovery research is leading to new molecules in place of generics. Pre-clinical development and presence of large animal facilities is set to attract investments in bio-pharma and bio-agritech segments. The challenges before the sector are about securing private and public funding despite risk aversion among the VCs (venture capital funds).

"Though the sector is becoming popular with trained and skilled human resource, the gap in drug discovery and clinical development is seeing a reverse brain drain, with hordes of Indian scientists coming back," Shaw, also chairperson of Biocon India Ltd, pointed out.

She, however, told union Finance Minister P. Chidmabaram, who inaugurated the trade event, about the need to improve the regulatory infrastructure, bio-manufacturing standards, clinical development capabilities and research and development collaborations with US/EU firms as well as acceptance of Indian clinical data by the USFDA and EMEA of Europe.

Karnataka Chief Minister H.D. Kumaraswamy, Australian state of Victoria Governor David de Kretser, British High Commissioner Michael Arthur and heads of 15 overseas delegations also attended in the inaugural event.

 

[Bushroda]

The Whisky Rebellion
Thursday, Jun. 07, 2007
By HUGH PORTER / GLASGOW
THE TIME

For Vijay Mallya, taking over foreign companies is routine stuff. By building and buying everything from airlines to agrochemicals, he has created a $2 billion conglomerate. But he could be forgiven for taking a little added satisfaction in the recent $1.18 billion acquisition of scotch-whisky producer Whyte & Mackay by his UB Group, based in Bangalore, India. United Breweries has come full circle since the days of empire, when the firm was founded by Scotsman Thomas Leishman in 1915. It wasn't until India gained independence from Britain in 1947 that the first Indian director was appointed--Vittal Mallya, Vijay's father. Vijay Mallya has spread UB's global reach, and taking over production of some of Scotland's most treasured whiskies could be his most audacious move yet.

UB's liquor arm United Spirits, the biggest whisky maker in India, and the Scotch Whisky Association (SWA) have been doing a brisk trade in bitter remarks, each charging the other with unfairly blocking its exports. Hardly the spirit, given that "scotch whisky is enjoying its best growth prospects for a generation," according to Alberto Gavazzi, global brands director for Diageo, the producer of Johnnie Walker and J&B.

Scotch exports had a record year in 2006, with almost $5 billion worth shipped--a quarter of all food and drink exports from Britain. Asia's new rich are a big market--Chinese consumers imported $115 million worth of whisky last year, up from $3 million in 2000--but it is India that's driving distillers to stack the barrels high in warehouses from Islay to the Highlands. India is the biggest consumer of whisky in the world, putting away 70 million cases last year. With an 80 million-- strong middle class and an economy growing more than 9% a year, it's a market loaded with potential.

The problem for scotch producers is, it's still only potential: 99% of the whisky sold in India is made locally. Imports of scotch have grown from 5.5 million bottles in 2000 to nearly 20 million last year, but it is still a tiny sliver, less than 1% of the overall whisky market. Scotch sales are stifled by punishing taxes and duties on imported spirits and wines--totaling anywhere from 200% to 550%. Gavin Hewitt, chief executive of the SWA, describes the charges as "discriminatory" and "pure protectionism."

Vijay Rekhi, president of United Spirits, counters that the Europeans have put up an "invisible barrier" to trade by refusing to even call the stuff made in India by the name whisky. Most Indian whiskies are made from sugarcane molasses, but if they aren't made from grain and matured for a minimum of three years, they can't be labeled whisky in the E.U. "You can call them Indian spirit, you can call them rum," says Rick Connor, director of public affairs for Chivas Bros. "We do object to calling them whisky." That definition, Rekhi says, blocks UB from selling its leading Indian brands, like Bagpiper and McDowell's No. 1, in Europe.

And so the battle lines were drawn at the Glasgow's Radisson SAS hotel in April when Rekhi was invited to Scotland to address the World Whiskies Conference. Delegates chatted over tea, coffee or 12-year-old Aberfeldy, discussing only one thing: India. Rekhi opened his speech by demanding that the E.U. redefine whisky to accommodate molasses-derived brands. "There should be no definitional barriers based on geography or substrates," he says. "Whisky cannot ring-fence itself." Yes it can--and should--according to rebuttals from the scotch side. "Rules are there to protect consumers," said Mike Keiller, CEO of Morrison Bowmore. "I would have grave difficulty for something called Indian whisky made that way to sit alongside my Bowmore."

As head of the third biggest spirits producer in the world, Mallya, a flamboyant, bejeweled billionaire, is in a position to be the arbiter of peace in the whisky wars--or to mix it up further. Last year Mallya was so incensed by the SWA's whisky edicts that he called a press conference to vent. "This imposition of British imperialism is unacceptable," he said. Maybe he'll tell the SWA so himself at its next board meeting. Now that he owns 9% of scotch production, he is eligible to join the group. "I'm sure the rest of the industry would welcome him to the table," says Hewitt. "But it's not a free ride."

But Mallya's billion-dollar investment will get him more than a seat in the clubhouse. "It really gives him a good portfolio," says Alan Gray, author of the Scotch Whisky Industry Review for Edinburgh analysts Sutherlands. "It has brands like Whyte & Mackay. And the Isle of Jura and the Dalmore single malts are the icing on the cake." The acquisition also provides UB with a ready supply of scotch to blend into Indian whisky and to export to India and China. UB plans to double production at the Invergordon distillery within a year, creating the biggest whisky plant in the world.

Mallya isn't the only one expanding. William Grant & Sons, owner of Glenfiddich single malt, plans to build a new distillery, as does Bruichladdich on the island of Islay. In February, Diageo announced plans for a $200 million distillery and other facilities in Scotland, and the firm may double its investment if demand in emerging markets pans out.

That will depend on the resolution of the import-tariff dispute with the Indian government. In July an E.U. panel found the additional duty on imported wines and spirits a "blatant violation" of World Trade Organization (WTO) rules, and with the U.S. also complaining, the WTO has launched its own investigation. A ruling may be more than a year away, but things may move more quickly now that Mallya too is an importer. The self-styled "King of Good Times" is a Member of Parliament as well.

"We have been progressively reducing our import duties," says Shipra Biswas, a spokeswoman for India's Ministry of Commerce and Industry. "At the same time, there's the issue of reciprocal access to the E.U. for our whisky." Biswas insists the issues are unrelated, as has Rekhi, though he suggested to the delegates at the whisky conference that "it should be a win-win situation. You want to dismantle tariffs? Let's dismantle intellectual barriers."

When change does come, sales of imported whiskies are sure to boom. In the lobby of the five-star Grand Hotel in New Delhi on a recent Sunday night, businessmen J.P. Goenka and N.R. Pillai enjoy 12-year-old Glenfiddich at $8.50 a shot. "Those who can afford it drink it. But for most people, it's still too expensive," says Pillai. "It's a sort of a status symbol," says Goenka, each finger encased in a nuggety ring. "India has a massive middle class ready for this sort of thing, but it's still perhaps just a bit beyond them." The two men take another sip.

with reporting by Simon Robinson / New Delhi

 

[Contrarian]

Thanx,

I did my Engg from Harcourt Butler Technical Institute(HBTI), Kanpur. Did my MS in Advanced Network Technologies from University of Minnesota, Minneapolis and am currently employed with Agilent Technologies.

Cool, where is Agilient Tech. located? India or US?

Im gonna go to US after a couple of years for my MBA. Dont plan on having a career in programming. Its either IIM, ISB, in India, or straight to US.

 

[Neo]

Friday, June 08, 2007

‘India could use forex reserves in foreign projects’

MUMBAI: India, seeking ways like China to use its foreign exchange reserves, could invest some in other countries’ infrastructure projects to supplement its own needs, a government-appointed panel said in a report seen by Reuters on Thursday.

India also needs $475 billion, more than previously estimated, over the next five years to develop its infrastructure if it is to grow at nine percent in the medium term, the report from the Committee on Infrastructure Financing said.

The report, which was dated May 2007 but has not been publicly released, said a previous funding estimate of $320 billion, based on 2005/06 prices at an exchange rate of 45.30 rupees per dollar, needed to be raised to $384 billion, or $475 billion at current prices.

India, Asia’s third-largest economy, is looking for ways to fund development of roads, ports and power, and has been debating how to use its rising foreign exchange reserves, now more than $200 billion, for a couple of years.

China is setting up an agency to diversify part of its $1.2 trillion reserves and in May it unveiled a plan to take a $3 billion stake in US private equity firm Blackstone.

The Indian panel report said a firm could be set up in a foreign country, funded by the government. That firm could borrow, say, $10 billion of reserves, with the loan benchmarked to the 30-year US government bond and the central bank getting a premium over that to compensate loss of liquidity.

“The mandate of this company would be to invest in infrastructure development outside India, only of the kind that would either supplement India’s infrastructure needs or help in sourcing raw materials or importing machinery for domestic development,” the report said.

For example, it could invest in power projects in Nepal or Bhutan with an understanding they would supply power to India.

“Also the company can provide support to Indian oil and gas companies to acquire assets overseas which would facilitate India’s infrastructure development,” it said.

Balancing act: Finance Minister Palaniappan Chidambaram announced some of the panel’s recommendations back in February.

These were that proposed overseas subsidiaries of India Infrastructure Finance Company Ltd. could borrow reserves and lend to Indian firms involved in domestic infrastructure projects for capital spending abroad, or borrow to invest in securities and provide insurance for overseas fund-raising for home projects.

In the May edition, the report said borrowing reserves from the Reserve Bank of India (RBI) should not add to high domestic monetary expansion and only a small portion should be used.

“The challenge is to balance the objectives of the RBI in its reserve management (safety, liquidity and return) against the needs of the infrastructure sector,” it said.

The financing gap — the difference between targeted spending and current spending as a percent of GDP — would be $162 billion at current prices, which had to come from private sector and offshore investors, it said.

The report also recommended tax benefits for infrastructure firms, more liberal share buyback rules and tax rebates to big power projects.

It suggested allowing greater foreign institutional investor participation in India’s markets to generate funds and proposed a separate regulatory regime for infrastructure companies.

Rupee loans for infrastructure projects could be refinanced through foreign currency loans, and the report said an interest-rate ceiling for senior, subordinated and mezzanine foreign debt should be dismantled to ensure an adequate supply of funds.

http://www.dailytimes.com.pk/default.asp?page=2007\06\08\story_8-6-2007_pg5_23

 

[Bushroda]

Cool, where is Agilient Tech. located? India or US?

The company has its HO in Santa Clara, California. But, I work for their development lab in Troy, Michigan. At the moment I am across the Atlantic in Britain on a Virgin Media prj. The company has its offices in Bangalore & Chennai. They have a huge Chip design lab in Gurgaon which is their biggest lab outside US. I cannot confirm but the rumours from the boardroom has it that the Central Management is planning to set up another Fab lab in Kolkata by the end of next year.

Im gonna go to US after a couple of years for my MBA. Dont plan on having a career in programming. Its either IIM, ISB, in India, or straight to US.

Good Luck to you. I hope you make it to IIM/ISB. Though competition is extremely strong but nothing is impossible. From which Uni are you doing your CSE from?

 

[Neo]

India’s stagnant farm output a worry: FM

BANGALORE, India: India’s finance minister said Thursday that he was worried about near-stagnant farm output that has forced the country to import grains to feed its billion-plus people.

Both manufacturing and services are expanding strongly, P Chidambaram said in the country’s high-tech hub, contributing to a record 9.4 per cent rise in economic output during the financial year ended March.

“But we are concerned about the slow rate of growth in agriculture,” he said at an annual gathering in Bangalore of biotechnology companies, noting India had turned from a food exporter to an importer.

Land under rice and wheat cultivation has remained stagnant in the past decade, he said, urging India’s two billion dollar biotechnology industry to focus as much on devising better-yielding crop varieties as it does on drug research and discovery.

Agriculture contributes about a fifth of India’s economic output but is a direct or indirect source of livelihood for two-thirds of its population.

Annual per capita food grain production declined from 207 kilograms (455 pounds) in 1995 to 186 kilos last year. The rate of agricultural growth fell from five per cent in the mid-1980s to less than two percent in the past five years.

http://www.thenews.com.pk/daily_detail.asp?id=59599

 

[Bushroda]

Spice Up Your Portfolio With Indian Companies
By Jennifer Openshaw
TheStreet.com
6/8/2007 11:50 AM EDT

If you're like me, I'll bet you're at least a little bit intrigued by investing in rapid-growth overseas markets. You've heard a lot about the BRIC countries -- Brazil, Russia, India and China.

They're growing like weeds, exporting everything that isn't nailed down. They have growing consumer economies; it's almost like turning back the clock to early Industrial Age America, where almost any investment paid off and even bad ideas worked in a booming economy.
Of course, I don't advocate bad investing ideas in the The Millionaire Zone. But I am sure taken by these growth stories. And one in particular curries my favor -- India.

Why India above the others?

Quite simply, political vagaries make me shy away from Brazil and Russia. I don't understand those countries or their economies that well, and I don't invest in things I don't understand.

So why India over China? I know China is growing faster. But I believe India has two distinct structural advantages that make its economy more diverse and bring steadier demand for its goods and services.

The first advantage is language. Most Indian citizens are bilingual (or multilingual) with English as their second language. This is a huge advantage in a world economy that does much of its business in English.

Secondly, and perhaps as a result, India has developed a strong service economy, with services that can be exported. Sure, there are call centers, but there's also rapid growth in highly valued services like accounting, engineering and product design.

Beyond that, India's consumer economy and middle class are further along than China. Estimates call for a middle class of some 900 million by 2010, and the government, partly in response, is opening up retail markets to foreign companies. Tax reforms and reasonable inflation (5%) round out the picture.

So how does one invest in India? Here are four ways:

ADRs. American depositary receipts, or ADRs, are shares traded on domestic exchanges representing a like value of foreign shares. You can emphasize companies serving the Indian market or those that export their wares overseas.

HDFC Bank (HDB - Cramer's Take - Stockpickr) thrives on both local infrastructure and consumer growth, while Satyam Computer (SAY - Cramer's Take - Stockpickr) provides local IT infrastructure and services. Solid export businesses include familiar call center operators Wipro (WIT - Cramer's Take - Stockpickr) and Infosys (INFY - Cramer's Take - Stockpickr).


ETFs. Exchange-traded funds are a more diversified if slightly more expensive way to play. The iPath MSCI India ETF (INP - Cramer's Take - Stockpickr) follows all Indian securities and works for a long-term play. Are you worried about another hit to emerging markets, like what happened in February? The fact that Indian markets only dropped 5% while China plunged more than 10% should give comfort.

Closed-end funds. Closed-end funds offer a little more active management -- professional stock selection. Two that fit are the Morgan Stanley India Investment Fund (IIF - Cramer's Take - Stockpickr) and the Blackstone India Fund (IFN - Cramer's Take - Stockpickr). The 11.9% discount to net asset value makes the Blackstone fund especially appealing right now.

U.S. companies. Those who read my columns (including this one on S&P 500 exporters) know that one of my favorite ways to play overseas is to find domestic companies that sell a lot abroad. For India, I know that Microsoft (MSFT - Cramer's Take - Stockpickr), McDonald's (MCD - Cramer's Take - Stockpickr) and even Wal-Mart (WMT - Cramer's Take - Stockpickr) do big business with, and in, India.
Now, this may not be the most revealing or complete list you've seen. In fact, I left out the whole spectrum of Indian companies, large and small, that don't trade in the U.S. There is, however, a lot of promise, and Yahoo! Finance India and the Bombay Stock Exchange portals are worth at least a look.

However you decide to play, India is sure to add some heat to your investment masala.

 

[Bushroda]

Time for India to make a choice
Source: Dipayan Mazumdar and Associates
Jun 08, 2007 05:55:20
ORLog.org, Romania

Is India heading for a crisis or a boom are two conclusions which can be reached today depending on which side of the divide you stand.

(PRLog.Org) – Is India heading for a crisis or a boom are two conclusions which can be reached today depending on which side of the divide you stand. If you are engaged in industry, service sector or other sunshine sectors, India is the flavour of the future as it is becoming a world player with nine per cent growth in the economy.

Indian industrialists are becoming world leaders and are on buying spree picking up giants in Europe and other parts of globe. The multinationals are setting up offices in India or outsourcing their work to be done here because of our skills in IT industry and availability of trained manpower which is proficient in English.

Our exports continue to grow even though a ten cent rise in value of Indian rupee as compared to US dollars has made the job difficult for exporters. All the mutual fund managers and venture capitalists want a share of growing Indian pie. The luxury goods manufactures are making a beeline for Indian markets and every month we hear about the entry of one more automobile manufacturer setting up shop in India.

The glittering malls, swanky apartments and a younger generation patronizing them are going after the goodies as if there will be no tomorrow. The hike in interest rates may have hurt the reality market, but there are no sign of a slow down yet. The indication being rising prices of cement and steel. The stock markets- another indicator of economics growth is touching new heights everyday. At one point India followed a fixed rate of exchange as it feared that rupee may sink in value as compared to other currencies. At the moment there is growing demand for taking steps to control the rising value of Indian rupee so that our exporter are not hurt

It was not many years ago that we lived in economy where foreign currency was guarded carefully by the Reserve bank of India and Indians traveling abroad had to make do with miserly allowance allowed to them by regulators. The situation has changed today and anyone can now splurge in foreign markets. Indian are not only buying companies but also real estate in destinations like Dubai, London, Singapore and Malaysia.

If this is a picture of economy booming, we also have a darker side. India after having its storage silos full for many years is now floating tenders for buying wheat in world markets and not many are coming forward to sell it to us at prices which we would like to pay. India is offering to pay more compared forward to sell it to us at prices which we would like to pay. India is offering to pay more as compared to the price paid to local producers, but world prices are riding much above these levels.

Worried about feeding over one billion people, the Government is looking for desperate measures to increase production or aim at ushering in second green revolution, but agriculture is defying the effort by our planners and scientist and the growth rate remains at extremely low level of one to two percent. In some critical areas like wheat production, oilseeds and pulses it has started stagnating. The farmers who are witnessing fertility going down, seeds being difficult to procure and growing debt burden are resorting to suicide instead of facing up to the situation. The fragmentation of land, inability to reduce our dependence on monsoon by investing in irrigation is making agriculture more and more as means of sustenance instead of being a mean to earn a decent living. The planners continue to talk about huge allocation of resources for upliftment of farmers but it is failing to change the situation. Are we heading for a situation where we lived dependent on ship loads of wheat from USA to supply to the poor.

The unfortunate part is that with growing incomes some of it is tricking down and people in present in present times not only seek wheat or rice, but also edible oil and pulses to meet their requirement of proteins. India has enough foreign exchange to buy these items but does it mean that we have to say good by to slogans like self sufficiency and become dependant on others to feed our population.

To be frank our planners as well as the government has no clear strategy to deal with the situation. It gives subsidy on Ammonia but not on potash and other nutrients with the result that soil quality is suffering. We want a free market economy but also want to control prices of agriculture products while industrial products are allowed to be sell at prices fixed by them. The situation is creating political uncertainty. It results in incumbency becoming a serious factor because major section of our population dependent on agriculture is not getting any benefits or very little from the growth in our national economy.

This challenge of twenty first century will require some out of box thinking. Repeating old slogans like working for common man or poverty eradication will not work. The pressure on land will have to be reduced. Productivity will have to be increased. This requires major initiative by Center State, and our food scientist. Sooner we change to meet the challenge better it will be. The alternative is too dreadful to imagine as it would lead to violence and bloodshed as is being noticed in many areas with growth of Naxalites in rural areas inhabited by tribals and other weaker section. Choice has to be made fast.

 

[Bushroda]

The Commercial Vehicle Industry has Been Registering Positive Growth Rates Since 2002
Businesswire (Press Release), CA

DUBLIN, Ireland--(BUSINESS WIRE)--Research and Markets (http://www.researchandmarkets.com/reports/c59077) has announced the addition of “Indian Commercial Vehicle Industry” to their offering.

Emphasis is laid on the following key subject matters to accomplish the report:

The transition of the industry from the days of restrictive government policies to free market competition.

The characteristics of the industry and its demand drivers, with specific focus on the impact of government regulations (overloading, aging & emission norms) and road infrastructure on the industry.

The changing demand dynamics of the industry with a significant shift in demand from vehicles with GVW >12 to 5 to =16.2 tonnes due to improved road infrastructure and the development of Hub & Spoke model of distribution.

The increased specialization seen among the CV manufacturers as per consumer preference.
Segment-wise vehicle sales analysis for the period FY 01-07. Sales projection with a five year horizon, for both Goods and Passenger Carriers.

Financial profile, international forays, expansion plans of the top five players along with the details of corporate actions by other global and local players in India.
Commercial Vehicle Industry in top gear

Approximately 66% of the goods and 87% of the passenger traffic moves via road. This makes the Commercial Vehicle (CV) Industry, the lifeline of Indian economy. With a domestic market size of approximately Rs.23, 275 Crores and export sales of Rs.1, 610 Crores in FY 06, the Indian CV industry is the fourth largest manufacturer of CVs in the world.

The industry is overwhelmingly dominated by Tata Motors with Ashok Leyland and Mahindra & Mahindra being distant second and third. Eicher Motors and Swaraj Mazda are some other Indian players in this space.

The industry is cyclical as it draws its demand from the economy. The capital intensity and the high susceptibility to technology changes raise the entry barriers to the industry making it an oligopolistic market. The demand dynamics of the industry is dependent on the general health of the economy, infrastructure facilities (road condition), regulatory environment (emission, loading, aging norms etc.), interest rates scenarios, freight rates and fuel costs. In addition, prices of vehicles, their specifications and applications, fuel efficiency, technological conformity, spare parts availability and manufacturer’s service centre network sway the consumer preference significantly.

The evolving Hub & Spoke model of distribution, improved road infrastructure and the Supreme Court ban on overloading of vehicles have brought about a shift in the consumer demand. The demand has shifted away from vehicles with GVW >12 to 16.2 tonnes (multi axle vehicles & tractor trailers). The market is now also witnessing increased specialization, with application oriented vehicles viz. cement mixer, LPG carrier, defence vehicles etc being introduced.

The CV industry has been registering positive growth rates since FY 02. Although growth was subdued in FY 06, the Supreme Court judgment on overloading and the evolving Hub & Spoke model has led to stupendous growth of over 38% in FY 07 for the GC segment. The industry sold 5, 17,648 vehicles in FY 07 (Domestic sales of 4, 67,882 vehicles & Export sales of 49,766). The GC sub-segment of GVW 7.5 to 16.2 to 12 to 5 to 35.2 tonnes has also grown at a very fast pace.

The Indian CV manufacturers are now attempting to increase the proportion of export revenues. However, the growth in exports at about 8% in FY 07 was relatively slack compared to the earlier years.

Going forward, we estimate the domestic GC segment to register a CAGR in the range of 7.5-9% in tonnage terms over the next five years (2007-2012). The growth may be higher due to emerging export thrust and tightening of the regulatory environment (e.g. strict implementation of ageing norms etc).

The domestic PC segment registered a growth of 4.03% in FY 07. The PC exports growth has remained strong in FY 07, registering a growth of over 84%. The PC demand today is largely driven by the private sector players. The State Transport Undertakings being cash strapped hardly replenish their fleet, thus capping the domestic growth in this segment.

Going ahead, we estimates the PC segment to grow at a CAGR of 5-7% over the next five years (2007-2012).The segment can grow at a higher rate due to privatization of State Transport Undertakings or even privatization of certain profit making routes.

Just as Indian CV manufacturers are making global forays, so are the global players making Indian forays. MAN AG, International Trucks and Engines Corporation have entered the M&HCV segment through the JV route. Hyundai, Scania, Stokota, Ural are some other International players who have plans to enter the Indian CV market. The competition from local players is also expected to intensify with Bajaj Auto and Piaggio entering the CV market. Moreover, the existing player’s viz. Tata Motors, Ashok Leyland have also planned huge capacity expansions.

In the long run, ability to provide high technology products with a wide range covering all the evolving market segments will be the key to success. Hardening of interest rates, increase in operating costs and impending competition from railways are worrisome factors for the industry.

 

[Bushroda]

Rupee future crosses $24 mn on Dubai Exchange
PTI[ FRIDAY, JUNE 08, 2007 06:12:43 PM]

DUBAI: Indian rupee, which is being traded on a global exchange for the first time, crossed a turnover of $23.24 million on the second day of its debut at the Dubai Commodity Exchange on Friday.

The latest trading price was $2.4325 , with 477 lots having been traded by the evening on the exchange, latest data shows.

In its debut trade yesterday, settlement price for 100 Indian rupees was 2.4583 dollars, with 645 lots having been traded. It had hit a high of 2.4615 dollars and a low of 2.4571 dollars during the 12-hour session.

The volume of the rupee contract is impressive and would pick up more in the days ahead, a market observer said.

"The DGCX Indian Rupee contract will for the first time in history enable individuals and companies to have the opportunity to hedge and trade their Indian rupee risk on transparent and equal basis that an exchange provides," DGCX Chairman Colin Griffith said.

"The recent strengthening of the rupee has necessitated the need for an efficient and easily accessible risk management tool which is exactly what this DGCX contract will provide. As the Indian economy continues to grow at record pace, so will the need for this contract," he said.

Each DGCX Indian rupee contract represents two million rupees. Prices would be quoted in US Cents per 100 Indian rupees, with a minimum price fluctuation of 0.000001 US dollar per rupee (2 dollars per contract).

At any point in time, DGCX would list the current and next two calendar months for the rupee contract, Griffith said.

 

[Bushroda]

Gen-X are drivers of Indian retail boom: study
Posted June 8th, 2007 by TariqueEconomy By IANS

New Delhi : India's booming retail industry, estimated to become a $427-billion industry by 2010 from the current $328 billion, should increase its focus on the youth as the most potential consumer, says a study.

The retail sector in India is undergoing a major paradigm shift, boasting of a billion plus consumers of which over 50 percent are less than 25 years of age with an enormous appetite for quality products and have high purchasing power, said YouSumerism - Youth In India: Opportunity Knocks - conducted by leading global professional services firm Ernst & Young.

Effective capitalisation of India's youth would help the global retailers, who are eyeing major investments in the sector, in securing their business in an emerging market like India where large-scale consumerism has yet not attained maturity.

"Those living in emerging markets still have the tendency to save money. However by 2010 it is expected that the per capita income in India will reach a tipping point which will then lead to accelerated consumerism in India," Ashok Rajgopal, director (retail industry), Ernst & Young said in a statement here.

"By targeting the youth population in India, retailers will be investing for the future as they will be able to influence and create loyalty from the start," Rajgopal added.

According to the study, Indian youth can be classified into three age groups - 13-21, 22-28 and 29-35 - who have different behavioural patterns and thus distinct habits.

It also elaborates on how consumerism differs between the behaviour of youth in large cities and those in smaller towns, highlighting the fact that regional set-up and ethnic backgrounds also could be used as an effective tool to reach out to the youth.

"The Indian youth offers a huge lifestyle and luxury products and services consuming audience," stressed Rajgopal.

He underscored that though the industry continues to be regulated, the retail sector has become the cynosure of a considerable amount of foreign investors.

Rajgopal said that India currently is most suitably poised for the retail revolution to occur, adding: "The availability of quality retail spaces and brand communication are seen as positive factors inviting investment from retailers in the UK, Spain, Germany, Italy, France and some from the United States as well."