Indian Economy - News & Updates - Archive

[Bushroda]

Bring parallel economy into tax net: Kalam

Nagpur, Jun 15: President Dr A P J Abdul Kalam today called for research to work out ways and means to bring the country's entire economy, including the 'parallel economy', within the tax net.

Speaking at a function as part of the silver jubilee celebrations of the National Academy of Direct Taxes (NADT) here, Dr Kalam said the research would enable the Ministry of Finance to make the necessary changes in its policy every year to bring the parallel economy into the tax net.

Referring to reports about the existence of the parallel economy, he said the research on the ways to bring the parallel economy into the tax net could be carried out in cooperation with renowned economists from academic institutions. Probationers from NADT could participate in the research, he added.

Dr Kalam said the probationers could also study judgements from direct tax tribunals and the courts to determine if there is a need to make the laws simpler or clearer so that the need for litigation was reduced.

Research could also be conducted to bring more transparency in the tax system, reduce the fear in the minds of the tax-payers, increase recovery amid a friendly environment, improve the economy, contain inflation and ways to put tax collections to maximum use for the development of the country, the President said.

Although India's Gross Domestic Product (GDP) is growing at 9 per cent per annum, economic growth has not fully reflected in the quality of life of a large number of people, especially of those in the rural areas, he said.

To improve the quality of life, efforts must be made to provide housing, drinking water, nutrition, sanitation, education, employment and healthcare, besides promoting the joint family system and righteousness, removing social inequalities and reducing corruption Dr Kalam said.

This would ensure a prosperous and strong India, he added.

Maharashtra Chief Minister Vilasrao Deshmukh was the chief guest at the function.

 

[Bushroda]

Looking into the eye of the tiger
By Gaurav Ghose, Financial Reporter
GULFNEWS

India's economic growth continues apace. The latest GDP figure of 9.4 per cent in the year to March is a sign of the continuing robustness.

Despite concerns of the economy overheating - though there are some recent signs of cooling - most economists regard the macroeconomic performance as commendable.

Now the same tribe looking ahead and wondering what lies ahead have first to evaluate what's going on, then what makes India unique and what are the factors that will sustain high growth, even if it is somewhat slower than the current rate. And it is here there are some agreements and equally serious disagreements.

In documenting the growth story and making a 2008 outlook forecast, the latest BNP Paribas report carries the headline "India is different."

It nominates two areas of deviation from the rest of the Asia growth experience.

First is the fact that India's lively growth rates are being achieved with exports playing a secondary role. Though its contribution has risen, India's export-to-GDP ratio reached only 20.2 per cent in 2006, significantly lower than its regional counterparts (see Table 1).

Second is India's distinctive de-industrialisation process, which, unlike other developing countries, bypassed the manufacturing stage of economic development and leapfrogged straight into services.

Since 1991, when economic reforms were hastened, the services sector has grown 8.1 per cent per year, compared with only 6.4 per cent in industry and 2.7 per cent in agriculture.

There are several implications of India's distinctiveness.

The report points out "at a time when there is a debate on whether Asian economies (referring to North Asia and Asean economies) are uncoupling from the OECD economic cycle, we contend this issue is not applicable to India, which has only a small export sector. An important corollary is that India is less vulnerable to external demand shocks..."

Amitendu Palit, a member of the Indian Economic Services and now a visiting scholar at ICRIER, an autonomous policy institute in New Delhi, disagrees.

He believes exports have to grow to ensure double digit growth rates on a sustained basis. "Services have definitely helped growth. But the 'leapfrogging' has created serious structural imbalances. This is unlikely to be sustainable, unless industry grows," he adds.

Concerns

In fact, the BNP Paribas report notes that the main concern behind India's peculiar mode of development is that the knowledge-intensive services sector is never likely to become a mass employer of low-skilled labour.

In monetary matters, concerns on the development of agriculture, rising inflation and strong credit growth have led the Reserve Bank of India to adopt a series of monetary tightening measures, including successive increase in repo rate and cash reserve ratio since April 2006.

Standing back, it is the growth in private savings, the improvement in fiscal balances, a rise in the overall investment rate and much improvement in external debt which feature as positive factors determining economic prospects.

India's overall savings rate of 32.4 per cent - comprising household savings, private corporate savings and public sector savings - compares favourably with the world average of 22 per cent and the 17 per cent in low economies. "Still not enough, when compared to China and definitely needs to reach 40 per cent of GDP," Palit points out.

In the budget arena, the consolidated deficit of the central and state governments has declined to about 6.3 per cent for 2007 from a peak of 9.9 per cent in 2002 (see Chart 1).

But, says Aninda Mitra, vice-president and senior sovereign analyst at Moody's, "[That level of] deficit does not take into account several off-budget items, especially items related to oil subsidies (estimated at 1 per cent to 2 per cent of GDP), which add to general government debt and require market funding."

Also, Mitra says, despite deficit reduction, the stock of India's public debt remains well over 80 per cent of GDP. This burden corresponds to more than four times government revenue and requires interest payments of about 30 per cent of total revenues.

That said, he also observes that foreign currency denominated debt is negligible, and the domestic debt market is deep, providing ample financing for the government.

Paul Rawkins, a sover-eign analyst at Fitch Ratings, adds that, although the fact that central government [?] and the states have been "singing from the same hymn sheet" in policy terms is notable, "fiscal consolidation needs to be faster if India is to aspire to sustained higher growth".

The BNP Paribas report observes that India's external debt expanded at a much lower rate than GDP during the last few years, which has resulted in a gradual decline in the debt-to-GDP ratio, so that the country has low external vulnerability (see Chart 2).

Yet FDI into India has remained low. Instead, commercial loans (accounting for 34.9 per cent of total capital inflows in 2006, dominate capital inflows into India.

It is estimated that to support an annual GDP growth rate of eight per cent, the investment component needs to be 31 per cent of GDP. Thus, investment rates need to improve to meet the 10 per cent target growth for the Eleventh Plan.

Moreover, in respect of business regulation, India ranks a poor 134th in the World Bank's Doing Business survey, of 175 countries surveyed. In the Enterprise survey electricity is the main constraint. Taxation and corruption are the other main constraints. So what should we take from this analytical round-up?

The BNP report estimates India's growth to ease to 8.1 per cent in 2008 as "domestic demand, especially private consumption and investments, softens." It expects a slight deceleration in export growth as global demand slows and [from] the lagging effects of a stronger rupee.

Moody's puts the 2008 outlook figure at 7.6 per cent, the lowest of the lot, Palit feels confident about 8.5 per cent growth and Rawkins, the most upbeat, is looking closer to 9 per cent.

So the tiger may be adjusting its stride. In doing so so, it might alleviate the inflation issue, and address some of the structural concerns which have lagged behind in its surge. A slight pausing for breath might make both India itself and the watching world feel a little easier.

 

[Bushroda]

The grand Indian TOUR

Check out this bit of trivia on Indian tourism. The first Planning Commission in 1955 had ranked tourism in the 269th place on their priority list, even lower than the development of lighthouses. It took nearly three decades of darkness before somebody saw the light and the huge potential in tourism revenue as well as scope for employment.

While international tourist arrivals remain sluggish, domestic tourism is where the action is. An incredible 375 million Indians are discovering the country’s myriad destinations and fuelling an unprecedented boom.

“Incredible India” trumpets the high decibel campaign but its no hype. From the awesome heights of the Himalayas to Goa’s sun-kissed beaches, India is a land of a million journeys.
India’s tourist destination ranges from the top 10 World Heritage sites to new untapped destinations like the Lakshwadeep and the Andamans. India has also been popular for its wildlife.

While the tiger remains the symbol of India’s magnificent wildlife, our sanctuaries offer some of the widest range of wildlife in the world. India’s mountains offer some of the best places in the world to literally chill out. Some are well known while others remain unexplored but all rejuvenate body and soul.

Here are some of the well-known places that offer world-class hospitality and are renowned for their heritage.

Rajasthan ~ The historical citadel of India, Rajasthan is the land of Rajput royalty. From the Amber Fort to the desert fortress of Sonar Kella, it provides a most authentic taste of war, honour and extravagance of the royal Rajputana.

Maharashtra and Goa ~ The land of silvery sandy beaches, emerald blue waters Goa is a paradise for leisure seekers. The Ajanta-Ellora caves in Maharashtra are a historical marvel. Dated back to the 2nd century BC it is said that Buddha meditated here. The Elephanta Caves near Mumbai also deserve a special mention.

Kashmir - In spite of the ongoing militancy Srinagar continues to attract tourists eager to experience its legendary charms. Tourists can hire a houseboat to savour the charms of the Dal Lake. Winters in Gulmarg are beautiful as the sun shines while the snow kisses your feet.

The Andamans ~ Floating in the azure blue waters of the Indian Ocean the emerald green Archipelago of 572 islands has a long history. Blessed with natural green forests and exquisite endemic species, the place is a nature lover’s haven.

Darjeeling - The “Queen of the hills” of Bengal is of exquisite beauty. From the legendary Toy Train to the lush tea gardens, everything in this hill station brings pleasure with leisure.

Kerala ~The land of coffee, the backwaters of Kerala are worth visiting. It is often referred to as “God’s Own Country” for its natural surroundings of lush greenery amidst a myriad of tranquil lagoons.

Pondicherry ~ A family vacation spot, it is truly the mother of all getaways on the southeastern side of India. For those wanting to give History and Architecture a slip, there’s plenty to do here. One can enjoy the exhilarating experience of watching the sunset on the shimmering blue sea.

The list of exotic vacation spots in India is truly endless. Ranging from the ancient rock temples to the sun-kissed beaches, every place in India seems to offer something different.

India’s ancient cultural past and religious traditions have created distinctive architectural styles and world famous monuments.

Chitrakoot - ‘The hills of many wonders’ is a revered place for the Hindus. Located in the Banda district of Uttar Pradesh, Lord Rama is said to have spend 12 years of his exile here.

When mentioning Indian temples, then along with Konark in Orissa is another Sun Temple that leaves one spellbound — the temple at Modhera, Gujarat. Vandalised by Allaudin Khalji’s commander, many of the adornments of the temples are missing, but even in the ruined state Modhera’s beauty is bewitching with its breathtaking expansive layout and design.

And if you yearn for a tinge of royal hospitality in the laps of the Himalayas, just head for Nalagarh Fort in Himachal Pradesh. Spread across 20 acres on the Shivalik foothills, it offers a range of facilities with modern comforts. In the South, Thanjavur near Madurai remains famous for its Tanjore paintings and cluster of ancient temples.

India’s tourism industry is booming. Ambika Soni, our tourism minister is hopeful that in a few years India will be among the most visited countries by tourists across the world. India received an estimated of

3.5 million foreign tourists last year but the number of domestic tourist were 366 million over the same period. The new generation of Indian travellers is young and takes frequent holidays in the year.

In global terms the tourism industry is the single largest employer in India. It is found that every rupee spent by a tourist changes hands 13 times, and every hotel room gives direct employment to three people and indirect employment to eight.

The tourism sector is expected to grow at a rate of 9.7 per cent per annum and will create 7 million jobs over the next 10 years. Tourism is now being heralded as the ‘next big thing’ for Indian economy. From Kashmir to Kanyakumari, from Dwarka to Arunachal Pradesh every state in India has something dazzling and beautiful to offer.

The next time you wish to take a holiday, plan it somewhere in our own ‘Subcontinent of wonders’ so that you get to see the diverse beauties of our motherland and also play an important role in boosting the country’s tourism industry.

So, leave aside the hectic schedules and rush hour traffic behind and take a look at those places sure to take you miles away from the maddening rush.

 

[Bushroda]

FM confident of GDP growth touching 10 per cent this fiscal
Coimbatore, June 16, 2007
First Published: 15:39 IST(16/6/2007)

Union Finance Minister P Chidambaram on Saturday expressed confidence of the GDP growth touching 10 per cent during the current fiscal.

With efforts put in by entrepreneurs, industrialists and all sections of the society, the country achieved 7.5 per cent growth in the first year of the Manmohan Singh-led UPA rule followed by nine per cent next year and 9.4 per cent in the just concluded financial year, Chidambaram said.

Speaking after inaugurating a plant, manufacturing defence-oriented products, on the city outskirts, Chidambaram said the Government's confidence in the reforms was the main reason for the economic growth being achieved and taking the nation economically forward.

Lauding the efforts of Saarc Tech Tool for taking up the manufacture of packaging system for defence and war equipment, Chidambaram said it was really regrettable that the country had to imports coffins at a cost of Rs 1.10 lakh each to bring back the body of jawans who died in the Kargil war.

The Nine crore rupees plant would manufacture defence-oriented products like roto moulded transit cases (boxes), which could be used by defence forces for carrying sophisticated defence equipment. The plant has a capacity to manufacture 60,000 boxes annually, its Managing director, P Murugesh said.

The company was ambitious of achieving a turnover of Rs .100 crore in the next five years, Murugesh said.

 

[Bushroda]

What the economic rise of China, India means for Japan
Takashi Shiraishi / Special to The Yomiuri Shimbun
The Daily Yomiuri, Japan

The economic rise of China and India is a given, but what changes will it bring about in the international balance of power when viewed from a long-range perspective? And how should Japan deal with these changes?

Intriguing projections on the topic can be seen in the latest long-term global economic forecasts by the Japan Center for Economic Research (JCER), a private think tank.

According to the projections, Japan's gross domestic product, as measured on the basis of purchasing-power parity as of 2000, will stand at 4.2 trillion dollars in 2020.

The figure will increase to 4.7 trillion dollars in 2030, and rise to around the 5 trillion dollars level in 2040 and 2050.

China's GDP based on the purchasing-power parity measurement will be 17.3 trillion dollars in 2020, expanding to 25.2 trillion dollars in 2030, 30.4 trillion dollars in 2040 and eventually to 33.4 trillion dollars in 2050, JCER said.

This means that the size of the Chinese economy will be four times as large as Japan's in 2020, five times that of Japan in 2030, six times in 2040 and almost seven times in 2050.

Meanwhile, the GDP of the United States is projected to stand at 16.8 trillion dollars in 2020, 21.4 trillion dollars in 2030, 27.2 trillion dollars in 2040 and 34 trillion dollars in 2050.

In other words, the size of the Chinese economy is forecast to surpass that of the United States during the 2020-2040 period.

However, the U.S. economy, in terms of 2000 PPP-based GDP, will be more than that of China by 2050, due mainly to differences in population growth ratios of the two countries, according to the estimates.

As for India's GDP, the figure in 2020 will be 7.1 trillion dollars, and will leap to 19.1 trillion dollars by 2050, the forecasts said.

The scale of the European Union economy, on the other hand, is estimated to expand to 14.5 trillion dollars by 2020 and climb to 19.9 trillion dollars by 2050.

This means the scale of the EU economy may be similar to India's in 2050.

The size of the economy of the 10-member Association of Southeast Asian Nations will keep swelling to 3.9 trillion dollars in 2020, 5.5 trillion dollars in 2030 and 9.2 trillion dollars in 2050.

This signifies that the ASEAN economy will stand above Japan's in 2030 and will be 1.8 times that of this country in 2050, according to the think tank's long-term forecasts.

To avoid misunderstanding, it should be stated that the size of a country's economy based on purchasing-power parity is not exactly the best yardstick for measuring that country's power.

Military might, technological clout and political leadership matter a great deal.

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Interdependence a certainty

Nevertheless, when the scale of the Chinese economy--gauged on a purchasing-power parity basis--exceeds that of the United States and grows to a level five to six times larger than Japan's, while India's economy evolves to be on a par with the EU in terms of GDP, the global order, as well as that in Asia, will almost certainly undergo a major transformation.

The presence of China and India will surely become a far more important factor in international relations than at present.

Another noteworthy point is the certainty that international economic interdependence will continue to expand and deepen in the future.

In an age of globalization and regionalization, economies of individual countries, as a matter of course, can never be considered self-sufficient.

This is demonstrated by the fact that East Asian economies--comprising Japan, the newly industrializing economies of South Korea, Taiwan, Hong Kong and Singapore, plus ASEAN and China--are being brought together more closely than ever because of ever-increasing and interdependent regional business networks.

As a result, China's economic development has been heavily reliant on direct investment from overseas. A glance at the latest statistics shows that China's foreign trade dependency ratio, or the ratio of the sum of exports and imports to GDP, soared to 70 percent in 2004 compared with 51 percent in 2002.

To put it another way, because of the expansion and deepening of economic interdependence among nations, China and other countries are taking an increasingly significant interest in the stable development of the existing world political and economic order.

What changes will occur in the global order, and that of Asia, in the wake of China's and India's emergence as economic powerhouses?

How the changes will ultimately manifest themselves in the global and Asian order is immaterial. There is no way to know.

It is clear, however, that for Japan, as well as many other countries, revolutionary changes in the world order would be undesirable.

Many countries want to see the existing order change gradually, in an evolutionary way.

A fundamentally significant problem is what Japan should do to assist this process.

Two relevant points are worth noting: First, efforts should be made to enhance long-range predictability in world and regional affairs.

As already mentioned, the scale of the Chinese economy will exceed that of the United States, in purchasing-power parity terms, from 2020 to 2040, while the Japanese economy will be dwarfed to a size one-seventh that of the United States and China and one-fourth that of the EU and India by 2050.

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Long-term predictions a must


Consequently, Japan will find it difficult to act as a major power in global politics, as potent as the United States, the EU, China and India.

As the American and Chinese national power become competitive, however, Japan will play a decisive role in determining the regional balance of power in East Asia. In the 2020-2040 period, for example, when the scale of China's economy will top that of the United States, the size strength of the Japanese and U.S. economies combined will still be greater than China's.

What should Japan do, then?

Suppose a major transformation of the balance of power in international relations takes place. If all players believe in and act upon the mind-set that the process would lead to revolutionary changes in the global order, the situation could become extremely volatile.

To preempt this possibility, it will be imperative to increase the long-term predictability regarding changes in the global and regional order.

The role Japan can play will not be to focus its diplomatic efforts on formulating a balance of power between the United States and China.

Instead, Japan should maintain the Japan-U.S. alliance, while forging ahead with strategic dialogues with China, thus encouraging a gradual transformation of the order.

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Japan should pursue India partnership


It is of great importance for Japan to explore ways of forming a strategic partnership with India, which is projected to become a rising economic power on a par with the EU over the long term.

But any attempt to have India involved in balance-of-power politics in East Asia should be avoided. In any case, India is not likely to play this game.

Second, the East Asian network of economic partnerships should be given added momentum.

The deeper the interdependence among regional economies, the more it will be in China's interest to endorse evolutionary changes to regional order. This, too, applies to many other countries in the region. In other words, the more isolated from the network of interdependence of nations a country may be--as is the case with Myanmar--the stronger its disposition for dependency on China.

Another point worth noting is that many Southeast Asian countries whose industries are competitive rather than complementary with China's perform a balancing act that engages both Japan and China.

Thailand, for instance, has three strategic industries: the automobile industry, which relies on Japanese automakers, and tourism and agribusiness, which have their eye on the China market.

Indonesia, for its part, already has a strategic partnership with China and is now seeking another with Japan.

All these cases show that Japan's commitment to help facilitate future development of East Asian economies will be certain to promote regional economic partnerships, bringing about a stable evolution of regional order.

The government's Council for the Asian Gateway Initiative, chaired by Prime Minister Shinzo Abe, recently issued a set of policy recommendations.

Among major initiatives envisioned by the council are calls for revamping policies concerning the nation's civil aviation policy, foreign students studying in Japan as well as measures to make Japan's financial market truly attractive in the eyes of the rest of Asia.

The council's blueprint envisions Japan opening ever more widely to Asia and the rest of the world, and tapping Asian economic growth potential and vigor for the benefit of the Japanese economy, so that this country can play a responsible role in promoting the development of Asia and the evolutionary transformation of the regional order.

Enhancing the long-term predictability of the changing regional order, while deepening economic integration in the region, is the way to go for Japan.

 

[Bushroda]

Air India showcases first refurbished aircraft
Fly South Aviation News, South Africa

The new carrier will operate to the U.S. Five more aircraft to get facelift

http://imageshack.us

MUMBAI: Air India on Friday unveiled its refurbished Boeing 747-400 aircraft, the first of six aircraft that will undergo a total makeover. The aircraft is christened `Agra' and will operate to the U.S. destinations of New York, Newark and Chicago.

Air India has for the first time undertaken a major in-house cabin refurbishment and in-flight entertainment upgradation programme at an estimated cost of Rs. 50 crore for each aircraft, thus totalling to Rs. 300 crore for the six aircraft.

The cabin has been upgraded with all new economy seats, cushions and upholstery; the new i4000 in-flight entertainment system from Thales is installed on every seat back including the economy seats with audio and video on-demand and other interactive entertainment. Also, all passengers will have access to personal screens with 415 gigabytes of content — nearly 200 movies in English, French, Japanese and some regional ones.

Besides, new overhead bins and aircraft side panels, a new overhead ceiling for the cargohold, freshcoat of paint for the side trims, cockpit trims and new toilets are part of the refurbished aircraft. All these were supplied by Jamco, a Japanese cabin interior equipment provider. Health Tecna was selected for the interior scheme and components and new seats were provided by the Texas-based Weber Aircraft. Air India is acquiring 68 new aircraft, which will boast the latest amenities. Seven of the 18 aircraft ordered for Air India Expresshave already been inducted in its fleet. The first of the 50 new aircraft for Air India will join the fleet in June. With the induction of the Boeing 777 aircraft, the airline will launch ultra-long range, non-stop services between India and the U.S. Thereafter, Air India will introduce one-stop services to several American cities from multiple points in India.

 

[Bushroda]

Scotch set for passage to India
By Selwyn Parker
Sunday Herald, UK

With emerging markets clamouring for quality whisky, and the previously closed Indian sector ready to open to premium brands, the industry is poised for unprecedented growth

IT IS a fair bet that Vijay Mallya started lobbying for the dismantling of India's blockade of tariffs on imported whisky as soon as he returned home after the announcement of his company's £595 million purchase of Whyte & Mackay in May.

Now that exorbitant tariffs of up to 550% on Scotch whisky, not to mention other measures against imported spirits, will work against his new investment, there is no longer any point in the chairman of United Spirits pretending the barriers that have largely kept the Scottish whisky industry out of India are justifiable.

By ensuring a virtually protected market the duties certainly helped Mallya build United Spirits from a business worth perhaps £100m when he took it over from his father in 1983, but they now prevent him from making the most of his ownership of Whyte & Mackay.

Under the current sky-high barriers, United Spirits will not be able to sell its new label at prices Indian consumers can afford. And, as a politician and president of the Janata Party, Scotland's latest whisky baron is in a position to do something about it.

Meantime, it is no exaggeration to say that the entire Scottish industry, from independent distillers such as Perthshire's Tullibardine to global giants like Pernod Ricard, anxiously await the outcome. By opening up the Indian market, Mallya could deliver a half- century of ever-increasing profits not only for Whyte & Mackay but for the entire Scotch whisky industry.

"Mallya sells about 60 million cases a year of his molasses-based whisky in India compared with 80 million cases of Scotch sold worldwide," points out Michael Beamish, a director and shareholder of Tullibardine, which has increased capacity by 25% in the last few months on the back of mainly Asian demand. "If just 20 million of those 60 million cases were Scotch, it would boost the industry by a quarter."

But this is a highly political situation and industry figures are reluctant to get involved just yet. "It's very interesting but we can't say what will happen," says Chivas Brothers's chairman and chief executive Christian Porta.

However, there is no doubt that the industry could be looking at years of sustained profits out of India if it goes the same way as other Asian nations in the last five years. At this rate, by 2050 the best business in Scotland could be whisky rather than finance.

The glowing future for whisky (and probably gin) shows how old industries - in the case of whisky, one of the oldest - can survive and prosper provided they leave home. When Pernod Ricard-owned Chivas Brothers recently unveiled its £27m global marketing campaign for Ballantine's blended whisky and another campaign to revive Beefeater gin, the owners made it clear they entertained virtually zero ambitions for either of the brands in Britain.

Indeed, according to a study by International Wine and Spirits Record, by 2010 Scotch is expected to fall to second place behind vodka as Britain's most popular spirit, down by about 10.35% from the present 7.4m cases a year.

By happy contrast, Asia dominates the spirits market, accounting for 47% of consumption, while Britain accounts for less than 10% of global whisky sales.

It is a measure of the excitement in new markets, from Asia and Central America to Russia and the Baltics, that Ballantine's TV advertisement was shot in Buenos Aires with a soundtrack of Italian diva Maria Callas singing an aria set in the Austrian Tyrol. In a global campaign relying on sales practically everywhere except Britain, it is not helpful to be associated with any one country. Also, there was nobody aged over 40 in sight.

Similarly, Beefeater is pursuing 25-35-year-olds who have probably never been to Britain. The campaign is titled London Calling and features Jamie Oliver and other celebrities associated with a capital that is considered cool in important markets such as Spain, Russia and the United States.

More IWSR figures show that the world's hot spots are emerging markets. It is newly affluent Chinese who have pushed up sales of premium whisky there by 116% in the last two years and of super/ultra, the oldest dram, by over 32%. Diageo, for instance, says its sales are up by 80% in China.

The industry fervently hopes that China will continue at this rate and follow South Korea and Taiwan where premium blends and, increasingly, single malts are just about de rigueur for ambitious young executives seeking the reflected prestige of heritage brands. Overall, sales to China have rocketed from £1m to £50m in just five years with much more to come.

"There is massive potential in the Chinese malt whisky market," explains Tullibardine's Beamish. "It is in its infancy." Like other independent distillers, Tullibardine is anxious to sign up a distributor in China, hoping to do so within a month.

Other nations have joined the rush to "premiumisation" - the demand for higher-value spirits. In vodka-loving Russia, sales of premium whisky jumped by 53% and of super/ultra by 71% between 2003-2005 with the help of specially branded bars, snow golf tournaments and recitals of chamber music among other promotions.

"There is a lot of money in Russia. The move from socialism to capitalism has created many wealthy individuals who want to be seen driving the right cars, wearing the right labels and drinking the right brands," points out Andrew Sowray, Chivas Brothers's regional manager there.

Sales of premium are up 47% in Eastern Europe and the Baltics, up 38% in Singapore, Malaysia and Hong Kong, up 40% in Venezuela (and 43% for super/ ultra), and in the US up respectively by 4.5% and 20%. But, with hundreds of brands competing in emerging markets, no promising prospect can be missed, which is why Diageo and Pernod Ricard - among others - have descended on oil and diamond-rich Angola and are testing different labels there.

The general strategy is to grow different brands in each market rather than to try and Johnnie Walker-ise the world. For instance, the Pernod Ricard-owned label 100 Pipers, Edrington Group's The Famous Grouse and Dewar's are big-selling labels in Thailand, another runaway market - boosted by the world elephant polo tournament organised by Pernod Ricard.

In France, Clan Campbell sells 1.6m cases a year in part by working its heritage with the Duke of Argyll to the hilt and through sponsorship of the official after-show party for the Cesars - the French equivalent of the Oscars. Chivas Brothers's Passport is big in Spain and Edrington Group's Cutty Sark in Turkey.

But of all the opportunities around the world, India offers the most massive and almost immediate potential, as Mallya is the first to acknowledge. "The potential for premium Scotch whisky in India is enormous," he summarises. Indeed, company reports show his company last year imported 17m litres of Scotch for his home-grown blends.

At present, the top brands barely scrape a living there, in what is very much a bulk market sustained on United Spirits's labels such as 30-year-old Bagpiper, the second-biggest non-Scotch brand in the world, whose packaging features a bearded Sikh playing the pipes. As Gavin Hewitt, director of the Scotch Whisky Association, points out: "Scotch accounts for less than 1% of a 100m case spirits market."

A Chivas Brothers insider drily acknowledges: "I suppose you could say that Ballantine's exists in India." Because of the daunting levels of protection, true Scotch brands are forced into the limited market of top restaurants, nightclubs frequented by expatriates, duty-free outlets and airlines, although probably not Mallya's own Kingfisher airline which is named after his company's beer.

When the barriers come down, it is certain that United Spirits will get a head start of perhaps two years. As the industry here regretfully points out, it will be the local producers who will find their way around the tortuous bureaucracy and eccentric distribution system the quickest. "Mallya has a very rapid route to market," says one player. Thus he will be the first to capture the benefit of the lower tariffs.

However, it looks as though the industry's long and sometimes bitter fight to get into India is reaching a happy conclusion. Prodded by a determined Scotch Whisky Association, the EU will refer the matter of fair access to India to the World Trade Organisation unless tariffs come down beforehand. If they do not, the WTO should deliver a ruling on the matter by early 2008. Nobody expects anything other than a favourable verdict.

Although Mallya has plans to take Whyte & Mackay, the fourth-largest producer of Scotch behind Diageo, Pernod Ricard and William Grant, deeper into China among other markets, the home nation will be United Spirits's main priority. "This is a deal done completely for the domestic market," insists Sandeep Gill, managing director of Deloitte Corporate Finance.

As the jewel-bedecked billionaire himself implies, his purchase of Whyte & Mackay amounts to a vote of confidence in premiumisation. Put another way, in an economy that is rapidly acquiring the wealth to pursue top brands, United Spirits's Bagpiper brand just will not cut it.

Last week, Ermenegildo Zegna, the Italian maker of luxury suits, opened a store in Mumbai, reflecting the fact that India claims more billionaires than any other country in Asia. Furthermore, about 1.6m households earn £50,000 a year, quite enough to splash out on a bottle of 12-year-old Whyte & Mackay. For the ambitious spirits baron, a distillery in the industry's heartland is the essential first step to selling whisky into the premium and super/ultra categories. For the same reason, India's Tata Tea felt it had to buy Tetley.

The question now is whether there is enough Scotch for India, China and other nations thirsty for the world's most distinguished tipple. "Growth in the Asian market is huge. If long-term forecasts are right there may not be enough Scotch whisky to meet future demand," Fraser Thornton, managing director of Burn Stewart, told the Sunday Herald late last year.

Whyte & Mackay looks to be ready for that, with a bulk Scotch inventory of about 115m litres. Its new owner has signalled he will crank up production to meet expected demand in his home country. Earlier this year, Diageo, which has earmarked a marketing budget of £50m for Asia alone, announced a £100m spend on a new malt distillery at Roseisle near Elgin, an expansion of its Cameronbridge distillery in Fife where Johnnie Walker, J&B and Bell's are produced, and bottling facilities and casks. Other whisky companies have hundreds of warehouses all over Scotland packed 10 stories high with maturing barrels of whisky.

Meantime, some independents are busily adding capacity to produce more of their own-label whisky but also for the blends of others. "We've increased production by 25% in the last few months," says Tullibardine's Beamish, although that may not be enough. At present, single malts hardly make double figures in most Asian markets, but more and more drinkers are moving up from blends as they develop their palate.

"In spirits we see a shift in whisky consumption in Asia towards more malts with increasingly sophisticated drinkers," Vinexpro chief executive Robert Beynat told Drinks Business magazine recently.

The race is on to make sure that Vijay Mallya's United Spirits does not get more than rival companies regard as a fair share in those increasingly sophisticated Asian markets, starting with India.

 

[Bushroda]

New Destinations Pushing The Investment Envelope

Exciting new investment avenues are emerging that enable you to diversify and grow your portfolio

RAJESH NAIDU & RAHUL JAIN
Posted online: Sunday, June 17, 2007 at 0106 hours IST

The Indian stock markets, though far from being evolved, have attained a level where new developments are creating new investment trends and avenues. The investor is the one who has benefited to the hilt from the dynamics in this segment. And the upshot of these increasing dynamics has been new, innovative and tailored financial instruments like currency derivatives, weather derivatives and rainfall insurance. These new developments in the markets have created instruments that cater to the varied needs of investors.
In fact, considering the launch of derivatives products on the Bombay Stock Exchange (BSE) in June 2000, it was a mere conjecture to assume that the stock market will see such investment instruments. More so, that assumption was rubbished and considered to be inadequate understanding of the market, since the markets didn’t accomplish the peaks, which it has in recent times.

FE Investor studies the various emerging and upcoming bouquet of financial instruments in the markets and gives insight into the technicalities involved in investing in these instruments. The reason being these instruments may be the future market-movers and momentum-creators. In a nutshell, these instruments can change the way financial instruments are looked at.

Commodity-linked securities

This instrument is yet to be launched. If you are willing to take a little risk over a longer term for getting a higher return than the conventional way, then commodity-linked securities is a good bet. But considering the Indian markets conditions, there is still uncertainty over the launch and acceptance of these securities.

Points out Mohan Natarajan, director, Kotak Commodities, “In India there are some regulatory hurdles, when it comes to new financial instruments like commodity-linked securities. And unlike India, internationally, banks are allowed to issue commodity-linked instruments.”

And if banks and other financial institutions are allowed to issue such instruments, it will stand in good stead for investors who intend to cash in on such instruments. Also, it makes tremendous sense from a corporate standpoint, considering the dependence of most companies on commodities is much higher. Companies into oil and gas, steel, aviation are the ones to name a few. And these commodities have a major effect on the earnings of the companies that can be a supplier or consumer.

Ideally, a commodity-linked security instrument entails this: the returns on a security will be linked to the prices of a specific commodity and if the price of the commodity increases, returns will lower and vice versa.

Currently, this instrument is privately placed and issued as capital guarantee bonds by various commodity brokerages wherein the returns are linked with any specific commodity like gold, silver or mix of both. It has zero downside risk and unlimited upside gain and also this instrument is structured according to the requirement of the client. However, adds Natarajan from Kotak Commodities, “In order that this instrument be used to its potential, there needs to be listing of such instrument, and a clarity on whether NBFC should be allowed to issue such instruments or not.”

Weather derivatives

The short-lived but strong and considerable impact of weather on the corporate earnings and, more specifically, on the business domain, accentuates the significance of the weather derivatives instrument in India. The instrument was launched on September 22, 1999 on the Chicago Mercantile Exchange (CME).

Says an analyst from a leading broking firm, “Weather derivatives will be of great benefit not only to niche investors but also to farmers. Also, looking at the monsoon conditions in India, farmers can reduce their risk by taking exposure in commodity futures.”

In a crude description, weather derivatives entails this: as an investor, you end up gaining a compensation for your claim of choosing the weather derivative product and lose if your claim fails to realise.

For example, there is a sweater seller ‘A’. He, as an investor, gets a weather derivatives structured with XY subscriber, that if the winter temperature passes 19 degrees, the subscriber will pay for the losses incurred by him, due to under-selling of sweaters. However, if otherwise, the investor A will pay a premium to the subscriber. In this context, weather derivatives hold significance in India. In fact, it can be applied to rainfall, which is a more important variable. In this, a rain day (RD), defined as a 24-hour period during which precipitation was in excess of the reference (20 mm), and an index cumulating the number of RDs between June 1 and September 30 can be used to compute pay-off.

Considering the unpredictability of monsoons in India such instruments even out any wrong tactics, which is so easily found in the markets. It is found that in the US, weather affects an estimated 20% of the economy. And in India, the figure would be higher, considering the fact that India is an agrarian country.

The pricing of weather derivatives is an issue. One cannot buy or sell the underlying, be it sunshine or rain. Positions have to be hedged with offsetting positions and one cannot create a risk-free portfolio by combining the derivative with its underlying.

Predictability of even large-scale weather systems beyond a week is difficult at best. Even though it is a nascent market and has not yet extended beyond the US, almost 2,000 “weather” swaps (private, off-exchange contracts between individual entities) with an estimated value of close to $3 billion have been negotiated. The Indian markets can follow suit.

Weather insurance

Weather insurance has been a boon in disguise for the farmer community. Whether it is protecting farmers’ losses occurring from low rainfall, excess rainfall, lower crop yields and bad weather condition, weather insurance has been a saver. ICICI Lombard and IFFCO-Tokyo had started this product in some areas. The product is designed for farmers who get affected by adverse weather conditions and ultimately get lower yield/earnings on their grown crops. Weather insurance can offset this problem.

The premium is based on various parameters, studying past rainfall pattern, weather condition, and this helps in ascertaining the impact of weather on crop yields/output. The claim is settled on the basis of index. The index is created by assigning weights to critical time periods of crop growth.

The past weather data is mapped on to this index to arrive at a normal threshold index. The actual weather data is then mapped to the index to arrive at the actual index level. In case there is a material deviation between the normal index and the actual index, compensation is paid out to the insured on the basis of a pre-agreed formula.

Gold ETF

Gold ETF (exchange traded fund) has been in the news of late. It is just like a mutual fund where you will get units on the basis of net asset value (NAV) on that day. Explains Rajiv Mehta, executive director, Benchmark Asset Management, “Internationally, ETFs took time to emerge as a good investment option. However, considering the Indian markets’ conditions, it won’t be long that these ETFs would soon be a preferred option.”

In a Gold ETF, the NAV price is directly mapped to the bullion index. A very small percentage is kept in cash or money market instruments. The minimum investment is Rs 10,000 in case of Benchmark and Rs 20,000 in UTI.

Investing in Gold ETFs is comparatively better than buying physical gold. This is because a minimum lot size in buying physical gold is 100 gm (futures market), which costs little less than a lakh plus the risk of theft. Gold ETF is a different investment product and returns are linked to gold prices, which are derived from demand supply forces.

And also those investors who cannot take exposure in all the stocks in a specific index can opt for the specific sector index ETF. See box “Other avenues”

Securitised paper

Securitised paper is analogous to the saying “What goes around comes around.” Currently, only institutional players participate in these papers. However, it may emerge as a new financial instrument for individual investors. It goes this way: you can come across a situation where you can get interest on your investment in a loan asset of a bank where you yourself is a borrower. Shocked? You could see this in the near future. This type of structured products is known as mortgage-linked investment product.

The structured product will include a portfolio of borrowers of some specific category depending upon income level, location, the amount of the loan borrowed, etc. The product will be floated through a special purpose vehicle (SPV).

Take a case, ‘A’ bank has lent money to purchase a house to say 10,000 individuals having salary income with tenure of 7 to 10 years and the loan amount is between Rs 5 to 7 lakh. Such identical ‘loan assets’ are clubbed together by the bank and transferred to a special purpose vehicle. This is nothing but securitisation of debt. The SPV thereafter is entitled to receive the cashflows in terms of the EMI payments from the borrowers through the bank. The loans are then sold to the investors and the SPV then pays the lender the consideration for the loan assets. Here, you, through a borrower, may actually end up buying into this loan asset at a later stage.

This instrument being asset backed is of high credit quality long-term instrument having a fixed coupon rate because the paper/bond is backed by mortgage of the asset like house, car, bike and consumer durable.

“This instrument will help to maintain the liquidity in the banking system and to ease the high interest rates scenario”, says a banking analyst from a leading broking firm.

The interest could be paid monthly, quarterly or half yearly from the EMI coming from the borrowers. The coupon rate will naturally be lower than the loan rate to the margin. But at what rate they float instrument is a thing to watch out for.

Real estate mutual funds

An increasing interest in the real estate sector has made sure the emergence of new lucrative opportunities for investors. A case in point is the Real Estate Mutual Funds (REMFs), a new emerging financial instrument. The huge funds that are entering the real estate market were bound to cause a stir in an already booming sector. A slew of real estate funds promoted by both foreign and Indian financial institutions are competing to invest in the higher return segment.

Some of the prominent companies promoting real estate funds in India are HDFC Property Fund, DHFL Venture Capital Fund, Kotak Mahindra Realty Fund, Kshitij Venture Capital Fund (a group venture of Pantaloon Retail India) and the ICICI’s real estate fund, India Advantage Fund. Regulated under Sebi’s venture capital funds, these are closed-ended schemes with an initial public offer (IPO) contributing to a discount on net asset values (NAVs).

Moreover, there is also a long list of international investors, like US-based Warburg Pincus, Blackstone Group and JP Morgan Partners to name a few, pumping in foreign funds in India.

The 10th Five-Year Plan ending in 2007 has proposed that Securities and Exchange Board of India (Sebi) would regulate the real estate mutual funds in India. These can invest in real estate in India directly or indirectly. Sebi would introduce the real estate mutual funds (REMFs) as close-ended units and list in the stock markets.

Globally, REMFs are also known as Real Estate Investment Trusts (REITs). The REMFs or REITs once introduced in the country are expected to bring in more liquidity and heighten the organisation level of the emerging real estate market in India.

REMFs are to be introduced in India following their success stories in some major economies like the US, the UK, Japan, South Korea, Singapore, and Hong Kong. These shall lessen the tax burden on entities by exempting corporate and capital gains tax. According to reports, at least 90% profits from REITs are distributed as profits through dividends. In fact, instruments like these, if regulated and fostered with greater-good-for-all rules, bring in more success stories of investment.

More so, in the context of Indian markets it holds paramount importance. The reason being, with the economy growing along with the surge in the income level, instruments like these can prove to be judicious destinations for parking hard-earned money.

But in this whole plethora of varied financial instruments, in order to avoid any eventuality, you need to employ culling strategy in the selection of varied financial instruments along with sifting of your investment objectives.

 

[Adux]

India's investment in US surpasses $2 bn in 2006-07

Sunday, June 17, 2007
12:22 IST

Blog this story



New Delhi: Indian companies invested over $2 billion in the US in 2006-07 and completed a total of 48 deals with the firms there, says a report.


The IT and ITES (IT-enabled services) industries have accounted for 48 per cent of the 48 deals, including mega deals taking place in other sectors such as pharma, hospitality, agro products and automotive industry among others, according to a study jointly done by the Federation of Indian Chambers of Commerce and Industry (FICCI) and global professional services firm Ernst & Young.


Indian outbound deals crossed $15 billion in 2006 and it is expected that by 2007, the value could surpass $35 billion. Also, during the first nine months of 2006, Indian companies have announced 115 foreign acquisitions worth $7.4 billion, a seven-fold increase since 2000.


According to the report, the companies that have clinched the top five deals during the period are Tata Tea, ONGC Videsh, Tata Coffee, Indian Hotels and HOV Services.


"Over the last decade, Indian companies belonging to diverse industries have been gradually gearing up to become emerging multinationals. Leveraging the nation's comparative advantage of knowledge, Indian companies have grown through acquisitions, built best-in-class competency and become large-scale players," the report says.


It also stresses on the fact that Indian investments abroad are not always done by large business conglomerates but are largely driven by several of small and medium enterprises.


One of the main factors that have acted as a catalyst for such enormous deals is the growing confidence among Indian companies coupled with the willingness to take risk.


Also, India Inc is now well-equipped to acquire overseas companies because of the regulatory development that has taken place due to the government's liberal measures and various monetary relaxations provided by the Reserve Bank of India (RBI) with the growth of foreign exchange.


In the BPO (business process outsourcing) space, the report said, Indian companies are now increasingly opening up units in the US providing opportunities of large-scale employment there, giving rise to a 'reverse outsourcing' trend.

 

[Neo]

Major firms eyeing expanding biotechnology sector​

By Anand Kumar

INDIA’S biotechnology (BT) sector, which shows immense potential for growth, continues to expand at a hefty pace.

Earlier this month, some of the biggest names from the sector, both within India and from abroad, gathered in Bangalore – the Silicon Valley of India – for their annual love-fest.

The country’s BT potential has been spoken of in awe by industry insiders for years, but unlike the phenomenal growth of the information technology (IT) sector, there has been little headway so far, in terms of high-profile companies, major export orders, mergers and acquisitions, venture capital funding and the like.

India is also facing an acute shortage of trained personnel, and though there has been a mushrooming of scores of institutions offering biotechnology courses, there is a massive shortage of teaching faculty and experienced mentors.

Many state governments – notably the two southern ones, Karnataka and Andhra Pradesh, and Maharashtra in the west – have been offering incentives to attract the BT industry.

But for all the hype that has been built around the sector, it has only now reported total revenues of a paltry $2 billion – in contrast, the top three IT firms, TCS, Wipro and Infosys, are pushing ahead aggressively, with annual revenues of $4.3 billion, $3.5 billion and $3.1 billion respectively. Total IT industry revenues add up to a whopping $47.8 billion.

BT industry leaders, however, feel it is unfair to compare it with the more successful IT sector, which has had a head-start of nearly 20 years. BT industry revenues have doubled in a short span of two years; total revenues were around a billion dollars in fiscal 2004-05.

Kiran Mazumdar Shaw, the doughty chairwoman and managing director of Biocon India – and the chief spokesperson for the industry – is confident that the sector is on the right track to achieve the targeted turnover of $5 billion by 2010. According to Shaw, the bio-pharma sector accounted for $1.4 billion of the total revenues, while bio-services and bio-agri sector added about $250 million each. While the overall BT sector expanded at about 30 per cent, bio-agri saw a growth of 50 per cent.

Investments into the BT sector almost touched the $600 million mark, with Bangalore alone attracting investments of $245 million during financial year 2006-07 (ending March 31, 2007).

International consultancy Ernst & Young has ranked India number three, behind Japan and South Korea, in terms of biotechnology potential in the Asia-Pacific region.

According to Shaw, the biotechnology industry in India is “gaining critical mass.” India’s cost and skill base is supporting affordable drug development. The country is also gaining global leadership in BT (bacillus thuringiensis) cotton, and thanks to farmers adopting the genetically modified seed, India has emerged from a net importer of cotton to a net exporter in a short span of just a few years.

INDIA’S high-tech capital, Bangalore – which is also the capital of Karnataka – continues to hold sway in the biotechnology sphere. The government is promoting a sprawling BT park, the Bangalore Helix, which has already started attracting the attention of international firms.

According to government sources, over a dozen international companies made inquiries about the park, coming up near the Electronics City, another showpiece, which is fast developing on the outskirts of Bangalore. The first phase of Bangalore Helix is expected to be operational from next month, and will house the Centre for Human Genetics and the Institute of Bioinformatics and Applied Biotechnology.

The entire project is expected to be ready in about five years, and will ensure Karnataka’s lead in the BT sector. The state already accounts for more than half of India’s BT revenues, and there are nearly 200 firms involved with BT operating out of Bangalore.

Companies like Biocon – based in Bangalore – are busy signing agreements with international partners. It recently signed a memorandum of understanding with the Deakin University, Victoria, Australia, for joint multi-disciplinary research focused on BT and biosciences.

According to Crispin Kirkman, managing director, Emerging Technologies Network Agency, UK, “the opportunities for Asian and Indian companies in the biotechnology sector are immense. The key to their success is their ability to retain their cost advantage while matching the quality standards of the west.”

India, he points out, is an increasingly attractive destination for R&D activities in the pharmaceutical and biotechnology industry. “Western companies are looking to partner with Indian companies because of their low cost, flexibility, high proficiency in health care and science, and excellent talent pool,” adds Kirkman.

The biotechnology (or life-sciences) business has of course attracted all the top Indian corporates. The Tatas, Reliance Industries and the Aditya Birla group have set up separate life-sciences divisions and groups to take advantage of the expected explosive growth in the sector.

All these three top business groups aim to focus on research and development, which could lead to global patents on new drugs. Reliance Life Sciences has filed over 200 international patents on various innovations, and recently acquired UK-based biotech start-up, Genemedics. Reliance has also gone in for strategic investment in a US-based BT fund.

The Tatas have also been investing in research firms, including Avesthagen and Advinus Therapeutics, both of Bangalore, and Indigene Pharma of Hyderabad. The Aditya Birla group is also focussed on R&D in the BT arena.

THE most significant gain recorded by the BT sector has been in cotton production. Finance Minister P. Chidambaram wants the industry to replicate the success in the area of food crops, which would help make India self-sufficient.

Emphasising the importance of BT in agriculture, Chidambaram told scientists that “what has been done with Bt cotton must be done with foodgrains.” Referring to the opposition to the use of genetically modified seeds and produce by some environmentalists, Chidambaram says these are issues that need to be tackled by scientists, and not “brushed aside by emotion and political arguments.”

K.K. Narayanan, president, Association of Biotechnology-led Enterprises (ABLE), who is also managing director of Metahelix, an agri-biotech firm, points out that India’s cotton production soared from 14 million bales in 2002 to 27 million bales last year, thanks to BT.

From being a net importer of cotton, India emerged as a net exporter in a short span of three years. Yields have gone up from 300 kg a hectare to 500 kg at present. And India has also surpassed China as the country with the largest acreage of Bt cotton – 9.5 million acres – points out Narayanan.

Metahelix, which has launched transgenic seeds for wheat and vegetables, is also active in contract R&D, and has obtained early stage funding from venture capital funds.

India is today the world’s third largest producer of cotton, and production is expected to grow by seven per cent in the new season beginning October. Industry analysts expect total cotton production to reach 28 to 29 million bales next year.

India’s cotton exports have soared to 4.7 million bales, with China being the major consumer. The use of genetically modified seeds has helped improve the quality of Indian cotton as well.

The agriculture sector in India has been seeing anaemic growth in recent years. At a time when the services and manufacturing sectors have grown by 13 per cent and 12 per cent respectively, agriculture has been plodding at a mere 2.3 per cent. India’s gross domestic product (GDP) grew by 9.4 per cent in the year ended March 31, 2007.

BT has had a tremendous impact on one crop – cotton – in recent years. The BT industry believes there is enough scope to repeat a similar success story in other crops and even food grains.

http://www.dawn.com/2007/06/18/ebr12.htm

 

[Neo]

Is India a closed-door economy?​

PRITI PATNAIK

MONDAY, JUNE 18, 2007

NEW DELHI: The brouhaha over large capital inflows, particularly into the stock markets, may be unfounded. Even as finance minister P Chidambaram calls for greater maturity in handling large capital flows, India remains one of the more closed economies compared to other Asian countries. Data sourced from Unctad, which measures FDI openness in terms of FDI stock as a percentage of GDP, shows that for India the figure was just 5.5% compared to Pakistan or Indonesia, where FDI constituted at least 7% of GDP. Hong Kong’s FDI stock stood at nearly 300% of its GDP in 2005.

India’s FDI openness increased 10-fold from 0.5% in 1990 to 5.8% in 2005. “However, this is still much lower than other emerging market economies in Asia, including China,” the report says.

FDI flows have been determined by several push and pull factors, including strong global growth, soft interest rates in home countries, a general improvement in the risks associated with emerging market economies, greater business and consumer confidence, rising corporate profitability, large-scale corporate restructuring, sharp recovery of asset prices and rising commodity prices.

According to RBI, the indicators of India’s openness are merchandise trade, trade of goods & services and gross capital transactions. “Comparing FDI stock as a percentage of GDP is fair because it shows the amount of foreign participation in the economic activity of a country,” said an analyst. Though our capital market is booming, qualitatively, there is much to be desired, he added. If India had to keep pace with China, the economy should have received about $30 billion of FDI two years ago.

FDI equity flows are expected to touch $30 billion by March 2008, almost doubling from the previous year, commerce minister Kamal Nath said recently. FDI in 2006-07 stood at $16 billion, the highest ever.

Last week, Mr Chidambaram had said, “All the developed economies are either fully convertible or nearly fully convertible. So if we aspire to be a developed country, we must learn to manage fully convertible or nearly fully convertible capital account.” The only way to manage large inflows is to evolve policies that will encourage large outflows too. If inflows and outflows are equally large, then it is manageable, he had said.

RBI deputy governor Rakesh Mohan said opening up the capital account meant market participants needed to be better able to absorb greater volatility and shocks. “In the context of progress towards further capital account convertibility, the market participants are going to be faced with increased risks on multiple accounts: volatility in capital flows, volatility in asset prices, increased contagion and the ability of legacy institutions in managing risks,” he said.

On an average, India’s share was 24% of the total portfolio flows to all developing countries during 1999-2005. Foreign investors were betting on Indian stocks and net portfolio flows stood at $12.2 billion in 2005, almost double the FDI figure at $6.6 billion.

http://economictimes.indiatimes.com...a_closed-door_economy/articleshow/2129760.cms

 

[Neo]

Sony Ericsson to set up R&D unit ​

MUMBAI: Mobile phone maker Sony Ericsson said on Wednesday it is setting up a research and development unit in India to strengthen its position in the world’s fastest-growing mobile market.

Sony Ericsson began selling cheap mobile phones in India in Januaugh manufacturing agreements with Flextronics and Foxconn and has a production target of 10 million units by 2009.

“Establishing a development facility in India, along with manufacturing, gives us a strong foothold for generating future growth,” Sudhin Mathur, general manager for Sony Ericsson India, said in a statement. No financial details were disclosed.

Sony Ericsson, a joint venture between Japan’s Sony Corp. and Swedish telecom equipment maker Ericsson had more than doubled its share of the Indian market, the statement said without specifying the share.

The India unit will develop innovations that have “worldwide appeal” as well as for the Indian market, the company said.

The unit in the southern city of Chennai will be headed by Anders Grynge, who was previously at its R&D centre in Sweden.

Sony Ericsson said it also has R&D units in China, Japan, Sweden, the Netherlands, the United States and Britain.

http://www.thenews.com.pk/daily_detail.asp?id=61298

 

[Neo]

Nissan-Renault boss eyes $3,000 car in India ​

TOKYO: Carlos Ghosn, head of Japan’s Nissan Motor Corp and France’s Renault, said Wednesday the automakers were considering launching a low-cost 3,000-dollar car in India.

Ghosn said he saw ready opportunities in India, which is one of the world’s fastest growing automobile markets, on the back of a burgeoning middle class.

“We are investigating at the level of the alliance this is a common work made Renault and Nissan how can we make a 3,000 dollar car,” Ghosn told reporters after a Nissan shareholders meeting in Yokohama.

“The very likely situation is, if we build a car like this, it will be done in India because the suppliers are there, the plants will be there and the environment in India will be very favourable to a frugal product definition.” afp

http://www.dailytimes.com.pk/default.asp?page=2007\06\21\story_21-6-2007_pg5_24

 

[Neo]

Thursday, June 21, 2007

Kingfisher lines up $7 billion Airbus order​

LE BOURGET: India’s Kingfisher Airlines said on Wednesday that it had signed a preliminary sales agreement to buy 30 long-haul Airbus planes and 20 small aircraft worth 7.0 billion dollars (5.2 billion euros).

The deal, an intention-to-buy agreement, was signed by Kingfisher chairman Vijay Mallya for 15 midsized A350 airliners, 10 A330s, five A340s and 20 single-aisled A320s.

“Our strategy at Kingfisher is to open new long-haul routes and expand existing ones,” said Mallya in a statement.

“With the A340-500 and then the A350 XWB we will be able to offer direct routes between India and the United States for example.

“The A330 will allow us to expand services to Europe and the A320s will help us to meet demand in our home region.”

The order for the mid-sized longhaul A350 was particularly welcome for Airbus, which is hoping to establish the plane as a rival to the extremely popular Boeing 787 Dreamliner.

“Kingfisher have reaffirmed their faith in the A350 XWB and we are delighted with this,” said Airbus sales director John Leahy. afp

http://www.dailytimes.com.pk/default.asp?page=2007\06\21\story_21-6-2007_pg5_27

 

[joey]

Moser Baer lines up Rs 2,000 crore funds for FAB City

KVVV CHARYA
Posted online: Wednesday, June 13, 2007 at 0048 hours IST



HYDERABAD, JUN 12: CDs, DVDs and floppy disks major, Moser Baer India Ltd mulls to set up its proposed solar photovoltaic cell making unit in Fab City, Hyderabad, according to the official sources.

Moser Baer chairman and MD Deepak Puri had recently met the chief minister YS Rajasekhara Reddy and sought his support for the project. The company has sought about 75 acre land in the Fab City and plans to make an investment of about Rs 2,000 crore in the next one year. It is targeting a capacity of 80 mw by 2007.

Confirming the development, the state’s industry secretary B Sam Bob said, “We have asked the company to submit its business plan, accordingly a decision will be taken soon.”

Besides the land, the company has evinced interest in joining the Fab City SPV project, which will develop the required infrastructure for the Fab. Moser Baer India had recently altered its Objects Clause facilitating the company to act as developer. Considering the special status the company had accorded for entering renewable energy sector, it is planning to develop an SEZ with upstream and down stream companies.

http://www.financialexpress.com/fe_full_story.php?content_id=166997

For peoples who dont know Moserbaer is a Indian company and accounts for 20 to 30% of world CD market OEM's, They are the first recently to make 8x or 16x Double sided blue ray disc IIRC.

Their DVD blank medias are of the best quality you can get in India, not even sony comes close.