Indian Economy - News & Updates - Archive

[Contrarian]

Hotel rooms planned in malls now

GURGAON: After malls in the national capital region (NCR) emerging as the happening spots, developers have chalked out a plan to create hotel rooms in upcoming malls to provide staying facility to the inbound tourists and also for those who wish to stay close to ‘happening’ life yet maintain complete ‘privacy’.

Major players in the real estate industry say that this would bring a revolution in the sector since such a trend has brought desired dividend in the foreign countries.

According to industry players this was waiting to happen around Delhi since there is a high demand of hotel rooms and that the demand is going to see a manifold increase in the near future.

‘‘First of all creation of hotel rooms in malls costs less to the developers since the additional facility is created with less investment. You don’t need to acquire fresh land for these rooms. So, at the end of the day, the customer also has to pay less for using the facility,’’ said Vipin Luthra of Ambience Hospitality Management.

Group executive director Rajeev Talwar of DLF said that the trend is going to be a success in this region. ‘‘We are expecting to start first 250 rooms hotel - Hilton Garden Inn - at our mall in Saket in Delhi in 2008. We will be creating more such colocate hotels in our future malls. This has started since we have entered into a joint venture with Hilton Hotels,’’ Talwar added.

Even Ansal API and Ambience Hospitality Management are putting up about 100 rooms each at two of their malls coming up in Greater Noida and Gurgaon. ‘‘These hotel rooms are exclusive ,’’ said Sushil Ansal, chairman of Ansal API.

 

[Contrarian]

TCS close to buying 2 LatinAmerica cos


BANGALORE: India's top software exporter, Tata Consultancy Services, is close to buying two firms in Latin America for about 2 billion rupees ($50 million), Business Standard daily said, citing unnamed sources.

A spokesman for Tata Consultancy declined comment on the report.

Mumbai-based Tata Consultancy, part of the salt-to-steel Tata business group, is looking at one back-office services firm and an IT services company in Latin America and it has completed due diligence of the target companies, the newspaper said.

According to the report, the company has completed due diligence of the targeted companies. The estimated value of these two firms is said to be around Rs 200 crore, with a headcount of 100 each.

In May, Tata Consultancy, whose clients include General Electric and ABN AMRO, said it had set up a software development centre in Mexico to serve local clients and provide near-shore services to US customers.

In all, TCS has set up operations in 14 countries including major centres in Argentina, Brazil, Chile and Uruguay, employing over 5,000 persons. Revenues from its Latin American operations touched $159 million (around Rs 650 crore) in 2006-07

 

[joey]

India, Japan to discuss Delhi-Mumbai industrial corridor

HT

Mumbai+industrial+corridor
Indo-Asian News Service
New Delhi, June 30, 2007
First Published: 14:17 IST(30/6/2007)
Last Updated: 14:23 IST(30/6/2007)

Ahead of Japanese Prime Minister Shinzo Abe's visit in New Delhi late August, India and Japan have stepped up negotiations on an economic pact and the multibillion dollar Mumbai-Delhi industrial corridor with Trade Minister Akira Amari beginning a five-day visit in New Delhi on Saturday.

Japan's Minister of Economy, Trade and Industry Amari is leading a delegation of top 15 corporate honchos, led by Suzuki Motor chairperson Osamu Suzuki.

Amari will meet Commerce Minister Kamal Nath and deputy chairperson of the Planning Commission Montek Singh Ahluwalia and discuss with them a host of trade-related issues with special focus on fleshing out the Delhi-Mumbai industrial corridor project.

India has fine-tuned an ambitious plan for the industrial corridor project and will make a presentation to the Japanese side to increase funding for the project, now expected to cost $90-100 billion.

The project entails the development of infrastructure along the 1,483-km dedicated freight corridor between New Delhi and Mumbai that includes the building of airports, setting up of several agro-processing parks and special economic zones, creating 4,000 MW of power generation facility and two ports in Gujarat and Maharashtra.

The industrial corridor project, which was initiated during Indian Prime Minister Manmohan Singh's Tokyo visit in December 2006, is likely to be finalised during Abe's visit to India in the last week of August.

The first phase of the project is expected to be completed by 2012. The second and the last phase of the project are expected to be completed by 2016.

Japan is keen to invest in India's infrastructure and make it a hub for production and exports to Europe and West Asia.

Amari's visit will be followed by a delegation of Japanese officials who will come here for another round of negotiations on a comprehensive economic partnership agreement between the two countries.

---------------------------------------------

100 bn dollar investment for a industrial corridor.. Adux how about a partnership and investing money to buy land up the corridor once work begins?

 

[Contrarian]

India, Japan to discuss Delhi-Mumbai industrial corridor


100 bn dollar investment for a industrial corridor.. Adux how about a partnership and investing money to buy land up the corridor once work begins?

This is excellent news.

BTW Joey, the land along those areas is already very expensive. The land prices there have already shot up by a good margin. If you really wanna buy land, buy it in the still relatively rural areas around Gurgaon, that is beyond Sonipat, etc. Within 5 years, you'd be left with double the money you invested.

 

[Neo]

India, Japan set deadline to start work on $90bn industrial project ​

NEW DELHI: India and Japan on Monday set a deadline of next January to start building a chain of manufacturing clusters between New Delhi and Mumbai in an ambitious project that aims to make India an export base for Japanese companies.

The proposed project, called the Delhi Mumbai Industrial Corridor, is expected to attract investments of about $90 billion (euro66 billion) over seven years, said Indian Commerce and Industry Minister Kamal Nath.

The plan involves building new plants and infrastructure projects, mostly with Japanese money, along a 1,483-kilometer (922-mile) stretch that cuts through six states in India’s north and west and runs parallel to a railroad and highway linking New Delhi and Mumbai, a port city.

“We expect to start work by January next year,” Nath told reporters after holding talks with visiting Japanese officials and business executives. Both sides agreed to work out the details of implementing the project before Japanese Prime Minister Shinzo Abe visits India next month.

The governments of the two countries, along with infrastructure companies, will build roads, power plants and ports, while top Japanese manufacturers will invest in new plants, said Akira Amari, Japan’s minister for economy, trade and industry. Indian companies willing to build infrastructure for the project will be able to raise money from the Japanese market, Amari said.

“I believe (the project) will become a trigger for a new industrial revolution in India,” Amari said. “It will help India enter a new phase of growth.” India’s rapid economic expansion in recent years _ averaging 9 per cent a year _ has attracted Japanese companies to expand their operations here, and some are now looking to use India as a base to export to Africa and Europe.

Top executives from Japanese companies such as Mitsui & Co, Honda Motors Co, Suzuki Motor Corp, NEC Corp, Sony Corp and Hitachi Ltd attended the talks. “The presence of the CEOs is evidence that Japan’s business holds a very strong interest in India,” Amari said.

http://www.thenews.com.pk/daily_detail.asp?id=62971

 

[Neo]

Indian trade deficit rises by 45pc​

NEW DELHI, July 2: India’s trade deficit grew by 45 per cent in May to $6.21 billion compared with last year as imports leapt thanks to a rapidly growing economy, according to data released on Monday.

The deficit, which was swelled by non-oil goods, was up from $4.26 billion in the same month in 2006.

Imports climbed by 26.4 per cent to $18.07 billion in May from a year earlier while exports jumped 18 per cent to $11.86 billion, data showed.

Imports have been climbing on the back of a fast-expanding economy.

India’s economy posted 9.4 per cent growth in the last financial year to March, the fastest pace in nearly two decades.

The trade deficit stood at $7.06 billion the previous month after rising from $3.80 billion in March, the Ministry of Commerce and Industry said export growth was slower in May compared to the 23.06 per cent year-on-year growth achieved last month.

“The export performance in May reflects execution of old orders by exporters. The rupee rise impact may be visible from July onward,” Commerce and Industry Minister Kamal Nath said.

The rupee has risen nearly nine per cent against the dollar so far this year as investors pump money into the South Asian economy.

Fuelled by fast economic growth, non-oil imports jumped by a strong 41.58 per cent to $13.33 billion in May compared with $9.42 billion in the same month last year.

Cumulatively for April-May in the current financial year to March 2008, exports increased by 20.37 per cent to $22.43 billion. Imports for this period climbed by 33.05 per cent to $35.71 billion.

The value of oil imports dropped by 2.99 per cent to $4.74 billion in May from $4.88 billion in the same month of the previous year.

“We expect the current account to worsen in full year 2008 due to the recent large appreciation in the rupee,” said brokerage Goldman Sachs in a research note.

“The rupee has appreciated by 8.8 per cent in the year to date, which is expected to widen the trade deficit significantly,” it said.

“The May trade data emphasises that trend,” it said.

“Outsized capital inflows will maintain pressure on the rupee to appreciate,” Rajeev Malik, senior economist at JP Morgan Chase in Singapore, added.

http://www.dawn.com/2007/07/03/ebr19.htm

 

[Bushroda]

Clues to India's future prosperity can be found in Henry Ford's past
Globe and Mail, CANADA
MARCUS GEE
July 4, 2007

When Henry Ford's Ford Motor Co. introduced the Model T in 1908, it sold for $850 (U.S.), less than half the $2,000-$3,000 charged by competing auto makers. The Tin Lizzie (as it came to be known) was so successful that by the time the 10 millionth rolled off the assembly line, nine out of 10 cars roaming the roads of the world were made by Ford.

Next year, exactly a century later, India's Tata Motors hopes to repeat the trick when it brings out a no-frills car for the masses that will sell for about 100,000 rupees ($2,600 Canadian). That's one lakh in Indian terms of measurement, and the one-lakh car would be the cheapest by far, not only in India, but in the world.

Many in the auto industry doubt that mastermind Ratan Tata, head of one of India's biggest business empires, can keep the cost that low. But if he even comes close, he will have done for India what Ford did for the United States 100 years ago: Put the dream of car ownership within reach of the common people.

At present, most Indians get around by train, bus, motor scooter and three-wheeled auto rickshaw. Indians buy about 1.3 million passenger cars a year, less than Canadians, even though India's population is 36 times as big. But with India's economy growing at 8 or 9 per cent a year, the market is set to boom. One study estimated it will double within a decade. With a population of 1.1 billion, and a middle class expected to grow tenfold over the next two decades, India is a potential motherlode for car makers.

Rather than cater to the upwardly mobile "New Indians" who want a flashy car to advertise their success, Tata is aiming at the lowly striver who wants to get around while getting ahead. The cheapest competing car, Suzuki's Maruti 800, goes for more than $4,000.

But Tata's car wouldn't be a bucket of bolts like East Germany's infamous Trabant. If reports of the secretive project are correct, Tata's rear-engine one-lakh car would have four doors, a top speed of around 120 kilometres an hour and a 33-horsepower engine, but no power steering or air conditioning on the basic model.

No one knows what the creature will look like yet, but Mr. Tata trained as an architect and brought in Italian car designers for the project, so it is bound to be much more than a tin box on wheels. If it catches on, Tata hopes to sell them not just in India but in Africa, Latin America and other parts of Asia - wherever incomes are still relatively low but aspirations high.

Tata is not the only one to see the potential of a low-cost car for the developing world. Every important global car maker, from Toyota to Volkswagen to Peugeot, has plans to produce a low-cost people's car. Chrysler is working with China's Chery and General Motors is working with South Korea's GM Daewoo on no-frills models. Germany's Roland Berger Strategy Consultants predicted in a recent report that 18 million cars priced at less than $14,300 would be sold around the world annually by 2012, an increase of four million a year from the current figure.

Renault's Logan has already sold more than half a million of its basic Logan model, which made its debut at $7,600 in 2004. Now it plans to take on Tata by producing a new model that Renault-Nissan chief executive officer Carlos Ghosn hopes to sell for less than $3,000 and market in Asia, with low-cost India as the manufacturing base.

If it's smart, India could become a hub for the production of small, cheap cars for the world. It has low-cost labour in abundance, hordes of skilled engineering graduates and a growing number of inexpensive parts makers.

Tata honed its low-cost car-making skills with the Indica, a compact hatchback it sells in Europe, and the Ace, a small, sturdy truck that went on sale two years ago for $5,400 and became a huge hit with Indian drivers.

India's recent economic success has been founded to a large extent on supplying services like software development to wealthy overseas clients. Its future success may lie with supplying inexpensive, good-quality products and services to its own people, cutting costs through creative innovation. That was Henry Ford's trick, after all.

 

[Bushroda]

Japan to Partly Fund Indian Public Works on Freight Corridor
Bloomberg
By Kartik Goyal

July 2 (Bloomberg) -- Japan will partly finance India's $90 billion plan to build ports, airports, roads and set up new industrial centers along the New Delhi-Mumbai freight railroad, Japan's Economy and Trade Minister Akira Amari said.

``Implementation of this project will be extremely important for attracting the Japanese companies that are the potential investors,'' Amari said, through an interpreter, addressing a media conference in New Delhi today.

Finance Minister Palaniappan Chidambaram estimates India needs an investment of $475 billion by 2012 to improve public works. The government wants better utilities to woo investment in factories, generate jobs and accelerate economic growth to fight poverty in the world's second-most populous country.

India plans to upgrade industrial infrastructure along the 1,483 kilometer (921 miles) Delhi-Mumbai freight corridor that connects the capital Delhi in the north and the financial center Mumbai in the west to boost industrial growth and create jobs.

The first phase of the project is likely to be completed by 2012 in line with the dedicated rail freight corridor, Indian Trade Minister Kamal Nath said. The project will involve upgrading six airports and setting up two ports, one each in the western states of Gujarat and Maharashtra.

Nath invited Japanese companies to utilize the investment opportunities arising out of India's thrust on infrastructure. The government of India will also invest in the project.

``The project is expected to transform the industrial landscape across half-a-dozen Indian states leading to rapid development of industrial as well as physical infrastructure along the route of the corridor,'' Nath said.

Indian Railways is building two freight tracks on the busiest routes of the country. The first will connect Mumbai to Delhi. The second track will run between Ludhiana in the north and Kolkata in the east.

India's economy grew 9.4 percent in the year ended March 31, the fastest pace since 1989. India's growth in the past four years averaged 8.6 percent, making it the second-fastest growing major economy after China.

 

[Bushroda]

Putting India's reserves to work
INTERNATIONAL HERALD TRIBUNE
By Andy Mukherjee Bloomberg
NewsPublished: July 3, 2007

India has wasted three years debating a modest proposal for diverting some of its foreign reserves to plugging the country's abysmal infrastructure deficit. It's only now that China is all set to carve out $200 billion from its reserves into a sovereign wealth fund that India is hastening to reach a decision on what to do with its own low-yielding cache.

Finance Minister P. Chidambaram said in a speech at the London Business School last week that the government has "persuaded" the Reserve Bank of India to lend $5 billion from its $212 billion kitty.

The money will go to a special-purpose vehicle formed last year to enable long-gestation projects to raise funds cheaply.

India urgently needs to raise investments in roads, ports, airports, power stations and railways. The latest official estimate puts the amount of funds required in these areas at a massive $475 billion over five years.

Those who oppose using reserves for infrastructure investments highlight two key risks: The economy may overheat because of additional domestic liquidity, and the country may lose hard-currency cover in the event of a run on the rupee.

After four years of 8.5 percent compounded annual growth in gross domestic product, there is a danger that the economy is exhausting its productive capacity.

Bloated order books bear testimony to serious supply constraints. Bharat Heavy Electricals, India's biggest maker of power equipment, has a three-year order backlog. Pakistan's cement makers are hoping to benefit from a shortage of building materials in India.

All of this provides a perfect setting for spending a few billion dollars from foreign reserves to import turbines, railway coaches, port equipment and air-traffic control systems.

With adequate leverage, even $5 billion can have an amplified impact on a $1 trillion economy. India Infrastructure Finance, the special-purpose vehicle, can then have a significant corpus to provide credit lines to companies that will import capital goods.

So while spending foreign reserves at home may shore up domestic liquidity and inflation, utilizing the funds overseas will help the economy achieve a better balance between strong demand and tepid supply.

At $65 billion, the annual trade deficit is both large and widening. However, that shouldn't deter the country from accelerated machinery imports.

India's basic balance of payments, or the sum of net exports of goods and services and foreign direct investment, is quite healthy. The minuscule $1.2 billion shortfall in the year that ended March 31 was only a third as large as in the previous year.

Those who support the plan to make use of reserves emphasize the low returns on the central bank's foreign assets, which are financed by selling high-cost local debt.

The Reserve Bank of India recently issued three-month treasury bills at a 7.2 percent yield to mop up some of the excess local liquidity created by its purchase of U.S. dollars.

The central bank is buying dollars to stem the pace of appreciation in the rupee, Asia's second-best-performing this year after the Thai baht. However, it isn't making much on the assets it's acquiring with those dollars. In the year that ended June 2006, the Reserve Bank earned 3.9 percent on its reserves.

The domestic economy - especially infrastructure - promises significantly higher returns. National Thermal Power Corporation, the country's biggest power producer, sold a 10-year dollar-denominated bond last year, paying a coupon rate of about 5.9 percent.

The higher returns from domestic infrastructure lending, skeptics say, will only be a reward for sacrificing safety and liquidity, the two essential features of reserve assets.

In this view, lending to Indian companies will compromise the Reserve Bank's balance sheet, leaving it unprepared for a currency crisis. This argument, too, is an exaggerated one.

India's reserves exceed short-term debt by a multiple of 16, providing a much greater cushion than mandated by the Guidotti-Greenspan principle.

That rule of thumb, named after Pablo Guidotti, a former treasury secretary of Argentina, and Alan Greenspan, the former U.S. Federal Reserve chairman, says that countries should hold reserves equal to foreign liabilities coming due within a year.

Even if India were to pay off its entire foreign borrowings - short-term and long-term - it would still be left with $44 billion. So, even by a conservative estimate, a fifth of India's reserves are surplus. Out of this, the current proposal only envisages using $5 billion. How big a risk can that pose?

Using reserves to finance the acquisition of foreign-made capital goods is undoubtedly a roundabout way to achieve a goal that may be as easily reached if the central bank were to just stop buying the incoming dollars. An appreciating rupee will automatically make imports cheaper.

That will be an altogether more satisfactory solution than creating a new layer of state interference.

However, after witnessing New Zealand's helplessness against carry traders who are pushing its currency too high, the Indian central bank isn't likely to leave the rupee entirely to market forces. So it will acquire dollars even when further reserve accumulation doesn't make economic sense.

From this perspective, putting a small part of the treasure trove into infrastructure will at least be a second-best alternative to laissez-faire.

 

[Bushroda]

India may win $2 bn FDIs after easing mining law
AGENCIES[ WEDNESDAY, JULY 04, 2007 01:15:25 PM]

MUMBAI: India expects to attract as much as $2 billion of foreign direct investment annually in metals and minerals sector after the government overhauls a 50-year-old mining law, Junior Mines Minister said.

A panel of ministers will meet July 6 to discuss the new policy, which may be approved by Parliament in the monsoon session scheduled to begin next month, T Subbarami Reddy said today in New Delhi.

Delays in securing mining licenses and land have undermined India's efforts to win more investments, leaving the South Asian country short of the raw materials required for an economy that expanded 9.2 per cent last year, the most in almost two decades.

``If all the obstacles are taken care off, we could invest up to $1 billion in a period of five years,'' said Christopher Rashleigh, director of Indo Gold Ltd, in an interview today in New Delhi. The Australian mining company has applied for rights to explore gold and copper in the northern Rajasthan state.

India's government wants to simplify procedures and reduce delays that have dissuades mining companies from investing in the country, which according to McKinsey & Co has the world's fourth largest bauxite deposit, and the fifth-largest of iron ore reserve.

Posco, Asia's third-biggest steelmaker, has faced delays in getting rights to mine iron ore for its 12 million tons-a-year plant. Construction work on the plant will start in October, six months later than planned, because of the hold up, the company said on May 15. The federal government and the ministry of mines has asked the Orissa state administration to hasten the process, Reddy told reporters today.

 

[Bushroda]

Panasonic to integrate India ventures for better synergy

Panasonic Sales is the new umbrella entity that has been created by MEI to coordinate the activities of all its consumer electronics ventures in India

Livemint.com, WALLSTREET JOURNAL
Yassir A. Pitalwalla and Sagar Malviya

Mumbai: The world’s largest consumer electronic company, Japan’s Matsushita Electric Industrial Co. Ltd (MEI), that owns the National and Panasonic brands is looking to gets its five independent consumer electronics ventures in India to work together.

“We are looking to unify the activities of our India ventures to synergize them for better focus,” said Arjun Balakrishnan director, operations, Panasonic Sales and Service India Pvt. Ltd.

Panasonic Sales is the new umbrella entity that has been created by MEI to coordinate the activities of all its consumer electronics ventures in India.

The move follows the India visit of Takemi Sano, executive vice-president, MEI, this week. Sano was part of a high-level delegation, accompanying Japan’s minister for economy, trade and industry on a visit to the country.

“Panasonic wants to create a unified holding company structure in India which will hold shares in all its India businesses. The Japanese parent often finds it difficult to get a group wide view of operations in India,” said Sushil Jiwarajka, managing director of the Salora group, one of the partners of Panasonic in India. Jiwarajka added that the five companies had been started at various periods of time by different divisions of Matsushita.

For the year ended March 2007, the five MEI-controlled listed entities had a combined turnover of Rs707.58 crore and a profit after tax of Rs19.35 crore.

A merger of the five listed companies, however, is not being contemplated because the companies have different joint venture partners. Matsushita Electric Works (MEW), which bought an 80% stake in Anchor Electricals Pvt. Ltd, will continue to operate separately from the five companies. “Anchor, which is controlled by MEW—a 51% subsidiary of MEI—will continue to operate independently,” said Toshihide Arii, chairman of Anchor Electricals.

Due to the absence of a unified structure of command, Matsushita has been unable to develop a comprehensive India strategy across different product segments—from zinc carbon batteries to rice cookers and plasma television sets.

Out of the five listed companies, two manufacture components used by the group’s other Indian ventures.

While Panasonic AVC Networks manufactures television sets and audio systems, and the main components that go into colour television sets, Panasonic Carbon makes carbon cell rods used in dry cell batteries.

Panasonic Battery sells batteries used in torches and other instruments and appliances under the Novino and Panasonic brands while Nippo Batteries too sells batteries but under the Nippo brand. And Panasonic Home Appliances manufactures rice cookers and hair dryers.

“There can be a lot of synergies in promoting the common brand, sharing best practices, reducing costs and bringing in efficiencies thus helping improve market share and shareholder value,” said Jiwarajka.

 

[Bushroda]

India's in inflation comfort zone, says Montek
REUTERS[ TUESDAY, JULY 03, 2007 12:23:44 AM]

NEW DELHI: India’s inflation rate has entered a “comfort zone” and fears of overheating in the economy are in the past, a top government official said on Monday, as he predicted growth of at least 8.5% this fiscal.

“I certainly feel the fear of overheating is behind us,” Montek Singh Ahluwalia, deputy chairman of the Planning Commission, said. “I mean the rate of inflation has been steadily coming down in each of the past five weeks. I would definitely say that we have entered the comfort zone as far as inflation is concerned.”

India’s most-widely tracked inflation rate fell more than expected to a 14-month low of 4.03% in mid-June, well below a two-year high of 6.69% in late January. Mr Ahluwalia said the economy should grow by at least 8.5% in the financial year to March 2008. An average of 9% growth over the next five years was achievable.

“Opinions vary but most people still think that the growth this year will be above 8.5%. I mean 8.5% is the lowest number that I have seen.” Mr Ahluwalia said monetary tightening measures adopted by the central bank had achieved the expected objective without hurting growth. “I am pretty sure that the inflation rate is going to go down. The monetary tightening has achieved the objective that was expected and I don’t think it has really killed the growth momentum,” he said.

The Reserve Bank of India has raised interest rates five times in the past year, the last time at the end of March, but could now hold its fire when it next reviews policy on July 31 with inflation now below its stated tolerance level for 2007-08 of 5%. Mr Ahluwalia said inflation would not be a problem in the next 5 to 6 months, assuming monsoon rains were normal. “So I would, therefore, assume that any fear that, you know, we have to keep doing things to control inflation, I mean they are not warranted,” he added.

 

[Bushroda]

India 07/08 tech exports seen up 26-29 pct
By Sumeet Chatterjee

BANGALORE (Reuters) - Indian software and services exports are expected to rise by 26 to 29 percent to around $40 billion in the year to March 2008 as demand for outsourcing remains strong, an industry body said on Monday.

That would be lower than 2006/07 export growth of 33 percent to $31.4 billion, but, despite worries about the strength of the rupee currency, the sector was on track to achieve a target of $60 billion in export revenue by 2009/2010, the National Association of Software and Service Companies (Nasscom) said.

"We are confident and I think we will get there. The projections look robust and strong and we should hit $60 billion in exports by 2010," Nasscom President Kiran Karnik said at the release of its annual survey for the sector.

"The overall demand is strong ... The headroom for growth is huge."

Overall revenue in the export-driven software and services sector is likely to grow by 24 to 27 percent to $49 billion to $50 billion this fiscal year, after a rise of 30.7 percent to $39.6 billion in year ended on March 31.

Indian software firms such as Tata Consultancy Services, Infosys Technologies and Wipro provide solutions like system integration, application development, and supply chain designing and back-office services.

The country's large pool of English-speaking engineering workforce and wages well below western salaries have helped to attract outsourcing from Western firms like ABN AMRO, Nortel and Airbus.

But the industry does face some obstacles -- a skills shortage and related wage rises of about 10 to 15 percent a year, inadequate infrastructure, and the rise in the rupee of nearly 9 percent against the dollar this year.

"We are concerned about the very sharp appreciation of the rupee vis-à-vis the dollar. It's has been too much, too fast, and that is of concern," Karnik said.

He said Asia's third-largest economy continued to be a preferred outsourcing destination as the costs were still lower, despite rising wage bills. Nasscom says the industry contributes 5.2 percent to the country's gross domestic production.

 

[Bushroda]

'BRIC' ETF Investing: Getting Started in India
By Jonas Elmerraji
Special to TheStreet.com
7/5/2007 4:00 PM EDT

India is a country with mind-blowing economic potential in the coming years. As is, its economy is growing at a rate of over 9% per year (see data from India's Central Statistical Organisation).

Now, with two India-focused exchange-traded funds (ETFs) in development, here is a primer on India and how you can get a share of the "I" action in BRIC.

BRIC Recap

BRIC is the term investors use to describe the emerging economies of Brazil, Russia, India and China (see "'BRIC' ETF Investing: An Introduction"). The BRIC countries are the poster children of emerging-market investing. Each country is estimated to become an economic powerhouse within the next several decades.

Whether or not you believe the hype surrounding BRIC, the returns are irrefutable. BRIC securities have pounded returns well into the double digits this year with no signs of slowing down, including India-based companies such as ICICI Bank (IBN - Cramer's Take - Stockpickr) and Mahanagar Telephone Nigam (MTE - Cramer's Take - Stockpickr) (see the "Portfolio Tracking" section of Stockpickr's "Highest-Yielding BRIC Stocks" portfolio).

So, Why India?

There are a couple of reasons why Indian investments could be an attractive addition to your portfolio. First, outsourcing has become the name of the game here in the U.S., and India is one of our favorite places to send offshore service jobs. The West's increasing exposure to the Indian economy is opening up a pipeline of cash (see cash flow) to Indian companies.

Second, India has a growing middle class that's educated, hardworking and filled with entrepreneurial ambition. Combined, it's the recipe for a great emerging-market investment.

While the first steps in India's economic growth have been predominately in manufacturing jobs and broad customer service jobs, Indian workers are starting to move into more specialized service jobs. Financial services, information technology and research are among the more focused and advanced-level services that Indians are now beginning to provide on a regular basis. Workers in these specialized roles earn more money and help provide Indian contracting companies with the wherewithal to make an impact on the international stage.

India ETF

If you're interested in investing in an emerging economy like India, an ETF is an attractive way to get started, because it can provide you with easier access to the market as well as professional management (see money manager).

However, while PowerShares has two India-specific ETFs in its product pipeline (see "New Passages to India for ETF Investors"), there is currently no pure India ETF that's available to investors. (To learn more about ETF investing, visit TheStreet.com's ETF Center.) That's not to say that there isn't anything ETF-like that's available right now if you want to add India to your portfolio.

India ETN and India Closed-End Fund

An exchange-traded note (ETN) is a fairly new idea. Basically, instead of giving you equity like an ETF does, an ETN is a debt security (like a bond) that promises to pay you the change in the asset that it tracks. In the case of India, Barclays' iPath MSCI India ETN (INP - Cramer's Take - Stockpickr) tracks the MSCI India Index of companies.

In terms of share price, since an ETN's issuer is on the hook for debt, the share price of iPath MSCI India ETN is reliant not only on the index it tracks but also on the credit of Barclays.

ETNs are definitely something to keep your eye on. India has highly restrictive laws about non-Indian direct investment in their country. Because no Indian equities need necessarily be owned by an ETN, the idea behind this investment type is that it can open investors up to the profitability of a place like India, without all of the bureaucratic red tape (and expense) that's normally associated with investing in the country as a foreigner.

In addition to an India-centric ETN, closed-end mutual funds have been the easiest way for American investors to get India-specific exposure in their portfolios. Like ETFs, closed-end funds trade openly on exchanges such as the NYSE and Amex.

Two India-focused closed-end funds are The India Fund (IFN - Cramer's Take - Stockpickr) and Morgan Stanley's India Investment Fund (IIF - Cramer's Take - Stockpickr) (both have brought triple-digit returns since the summer of 2003).

However, unlike ETFs, these (and other) closed-end funds trade at a premium or discount, which means that the share price of a closed-end fund isn't as closely tied to its net asset value (NAV) as that of an ETF. Because Indian closed-end funds have a tendency to trade at a premium these days, it's a good idea to wait for a market correction before going too wild with these.

Know What You Own

Even though India is on the fast track to big money, its economy is not risk-free. While outsourcing is a huge boon to the Indian economy, having too large of a dependence on American interest (and money) could be a deal-breaker until the country's economy is able to sustain itself with the same degree of prosperity that it's currently enjoying.

For now, however, money is doing the talking with respect to India. Emerging-market investments are crushing expectations, and if fund managers are concerned about the amount of risk in the Indian economy, they certainly haven't been letting on to it.

 

[Bushroda]

AI’s direct flights to US from Aug1
G GANAPATHY SUBRAMANIAM
TIMES NEWS NETWORK[ THURSDAY, JULY 05, 2007 03:28:48 AM]

NEW DELHI: Air India’s much-awaited direct flight to the US would be launched on August 1. While direct connectivity from Mumbai to New York would save time and the hassle of catching a connecting flight at a European or a south-east Asian hub, passengers have to fork out about Rs 4.58 lakh for a first-class return ticket.

A club-class ticket on the Mumbai-New York-Mumbai sector would cost around Rs 2.25 lakh, according to airline sources. The economy fare on this flight would be Rs 54,700. All regulatory clearances have been obtained and Air India would deploy a Boeing B777-200 long range aircraft for this flight, the sources said. The airline, now being merged with sister carrier Indian, has been preparing for a long time to launch this connection.

This is the first direct flight from India to the US by any Indian airline. US carriers like American and Continental are operating non-stop flights between the two countries, but most of the traffic between India and the US is routed through hubs like London, Singapore, Kuala Lumpur, Dubai, Paris or Frankfurt.

Air India plans to pamper passengers on this flight since the flight time is nearly 15 hours. According to plans approved by the airline’s chief V Thulasidas, new standards have been set for in-flight entertainment and hospitality. “There is enough time to pamper the passengers and enable them to emerge fresh and relaxed from the long flight,” sources said.

Air India is the only Indian carrier flying to the US, though Jet Airways is expected to enter this segment soon. UB group’s Kingfisher is also planning direct flights to the US, starting with a Bangalore-Los Angeles connectivity meant for the infotech industry, but has to wait for regulatory clearances. According to government rules, only airlines with five years of domestic experience are allowed to fly abroad, but the policy is under review now. Kingfisher has to either wait for policy relaxation or utilise the rights of Air Deccan, wherein the UB Group recently bought 26% stake.

Airline sources said the B777-200s flying on the Mumbai-New York sector will have eight first-class seats, 35 club-class seats and 195 economy-class seats. These aircraft are equipped with accent lighting or mood lighting enhancement facilities. All seats are fitted with entertainment system containing 250 hours of video and over 150 hours of audio programming. Passengers will be able to use laptops, keyboards and MP3 players using connectivity provisions provided in the cabin. Wall-mounted satellite telephones are available for making calls anywhere in the world during flights, they said.

First-class passengers would have the luxury of ordering exclusive ‘convenio’ service to have meals at a time of their convenience. Air-India plans to offer Indian, Continental and Oriental cuisine on the India-US flights.

Each first-class seat would virtually be a cabin with space width of 23 inches and design meant for privacy. These seats have an in-built lumbar support and massage system.

The club-class seats can transform into a flat bed at the touch of a button, the sources said. Air India is providing limousine service for both first and club-class passengers.

For Air India, launch of the US flight would be the first major highlight after the merger with Indian is formalised by the month-end. Boeing is delivering the B777-200 aircraft later this month and large-scale preparations are on the direct-to-US flight, the sources said.