Indian Economy - News & Updates - Archive

[Bushroda]

"Chindia": A Match Made in Heaven?
Tom Doctoroff
Posted July 5, 2007 | 01:46 PM (EST)

Thomas Friedman, the esteemed New York Times columnist, says the world is flat. Every day, it seems, we are losing manufacturing, and now service, jobs to the emerging giants in the East. Is there a new Godzilla ready to tear its teeth into our economic fabric? China and India represent a whopping 20% of global output and, combined, are already larger than the United States.

If the two nations were able to structure their economies to achieve enduring collaboration, "Chindia" would take over the world.

But rest easy . This union will not be consummated for a very long time, if ever.

Complementary Economies

Were there ever two countries more yin-and-yang than India and China? On every dimension, in every sphere, their strengths and weaknesses are complementary, ripe for a commercial partnership that could -- theoretically -- alter 21st-century order. China, overflowing with technocrats, could build the factories. The business of building and managing global companies and brands could be turned over to India, a country of tremendous intellectual and strategic energy .

Compared to China, the subcontinent is a manager's nirvana (but lacks investment capital). Its service sector, representing well over 50% of output, is light years ahead of China's. Ditto the emergence of world-class multinational corporations led by seasoned management. Economic development is lubricated by sophisticated corporate governance and a stubbornly independent judiciary. The Indian economy seems to be -- finally -- thriving, despite dysfunctional state organs and petty political infighting. And Tata's long-awaited -- and skillfully executed -- bid for Dutch steelmaker Corus Group presages a new era for the Indian multinational. Finally, while primary education is lacking, India's universities produce legions of inventive, conceptually driven, English-speaking professionals. In contrast, China's "Innovate or die!" rallying cry is no more than a propaganda campaign orchestrated by party cadres.

The Middle Kingdom, on the other hand, boasts formidable production capability (but does not nourish its consumer markets). Fueled by armies of well-trained workers, it is a powerhouse, exploding with energy and ruthlessly propelling its way to the top of value chains. A massive, technocratic bureaucracy has, in spite of rampant corruption and few checks and balances, engineered a stunning industrial infrastructure within the past two decades. The PRC is roaring ahead, driven by a focused central (imperial) government as well as a dynamic private sector. The Chinese people, right down to the farmers, are equipped with an expansive worldview and trenchant ambition. They are hungry for glory.

Hurdles to Overcome

Flirtation between the two powers has begun. Bilateral trade figures -- up from practically nothing a few years ago to more than $20 billion in 2006 -- hint at a new age of win-win cooperation. It looks like a match made in heaven.

But the bride and groom are miles from the chapel. From a Chinese vantage point, there are three barriers that preclude symbiosis -- i.e., actual integration of economic and corporate structures. First, on the Chinese side, disputes regarding sovereignty, remnants of a 1962 border war, have not been resolved. More critically, India's embrace of Tibet's Dalai Lama, a "splittist intent on dividing the motherland," hits the paranoid third rail of centrifugal disintegration.

Second, India's most exportable products -- services such as education and software development -- have limited entry to the mainland. NIIT, the world's largest technology institute, has struggled valiantly to operate freely in the PRC, despite a severe shortage of qualified IT professionals. China's own service sector -- banks, travel, financial services -- is nascent. Its central government is obsessive about controlling political dialogue, shying away from industries driven by free expression, despite an oft-proclaimed need for innovation. Leaders are schizophrenically torn between "learning from the world" and insulating state-owned enterprises (SOEs) from the claws of foreign competition.

Finally, China and India spring from two radically different worldviews. Confucianism, the PRC's cultural blueprint, dictates that the individual accepts his place in, and then advances through, an intricate societal hierarchy. Chinese adhere to a striving, pragmatic, morally relativistic code of conduct (visitors driving through Beijing's Darwinian traffic will feel this firsthand). Hinduism and Buddhism, in contrast, reject materialism and embrace cosmological transcendence. "Brahminian restraint" (i.e., primary satisfaction derived from intellectual exchange) has yielded a love of debate. But the Chinese like to get on with it.

Are the Chinese and Indian nations destined to deal with each other on tender hooks, confounded by motivational discrepancies? True, both are scaled emerging economies with complementary strengths and weaknesses. But any marriage must be built on trust. Unless the leaders of both countries encourage their own people to celebrate cultural diversity, the potential for the Chinese dragon and Indian tiger to achieve collective greatness will be capped.

 

[Bushroda]

Back to export subsidies?
Business Standard / New Delhi July 05, 2007

The finance minister is reported to have said in London that he is thinking of how to help exporters tide over the impact of a rising rupee. The option, of course, would be to try and keep the rupee down, as China is accused of doing with the yuan. Indeed, the widely debated question is whether such mercantilism explains China’s economic success of recent years. While some have argued that China’s currency is massively under-valued, others have contended that the yuan’s value is not terribly out of line—in other words, the Chinese miracle is not driven by cheap currency alone. In the Indian context, one explanation for long years of under-performance is that the rupee was consistently overvalued, leading to persistent foreign exchange problems. This was corrected only when Manmohan Singh assumed charge as finance minister in 1991 and substantially devalued the rupee in a quick double-step. Now, 16 years later, the rupee has been climbing against key international currencies because of the current account surplus in the January-March quarter and strong capital inflows, so a weaker rupee is what exporters clamour for once again. Commerce Minister Kamal Nath, while echoing the exporting community’s woes, has argued for concessions from the government over and above what he announced some weeks ago. Indeed, while commenting on the export performance during May, when export growth dropped to 18 per cent, compared to 23 per cent in April, Mr Nath has cautioned that worse is to come.

There are of course those who argue that the rupee should be allowed to find its own level, and that everyone should adjust to changes in the currency market, but they are in a small minority. So the real choice before the government is to try and drop the rupee’s value or work out an export benefit package. The only way to lower the rupee’s value is for the central bank to buy dollars. But is this a feasible policy, when last year’s capital account surplus was $45 billion, and the January-March quarter saw a current account surplus as well? And if the RBI does manage to devalue the rupee, what will be the costs of such an operation? Since the RBI will have to sterilise the flood of rupees that it will unleash on the market when it buys dollars (the alternative will be to risk inflation), this will involve an interest cost, which will be the difference between what the RBI earns on its dollar deposits and what it pays the banks that buy its sterilisation bonds (with the tab being picked up by the government through the Budget). There is then the cost that the economy will pay by way of more expensive imports, when the RBI tries to lower the rupee’s value. Whether the costs outweigh the benefits is an issue for debate, but it is obvious that any policy of deliberately undervaluing the rupee distorts economic signals and could make the problem worse by encouraging further inflows in the belief that the RBI’s policy will not be sustainable. Indeed, the rupee’s recent climb is precisely because the RBI felt it could not sterilise the inflows fully.

A less distorting method, and one that the finance minister and commerce minister seem to be working towards, is a specific export package of concessions and benefits to neutralise some of the impact of the rising rupee on exporters. The duty drawback and duty entitlement passbook (DEPB) scheme offer a way out, especially since state-level taxes that add up to a tidy sum are not rebated at the moment. However, the last thing the country needs is a re-birth of permanent export subsidies, which were abolished when the rupee was devalued in 1991. So it will be important to have a sunset clause in any relief package that is worked out; exporters should understand that they are being given only temporary sustenance until they improve their productivity levels and can compete without the help of crutches.

 

[Bushroda]

Unitech to build plush luxury villas, targets NRI buyers
Jul 5, 2007, 12:00 GMT

New Delhi, July 5 (IANS) Indian real estate major Unitech Ltd Thursday announced its latest multi-million dollar residential complex of luxury villas and penthouses coming up in Noida, targeting non-resident Indian (NRI) buyers.

For this project Unitech has acquired 347 acres of land for about Rs.17 billion (Doller 420 million) in May 2006. The cost of construction will be about Rs.60 billion, according to company officials.

'This is the biggest ever land deal in India by any real estate developer. The new project - Unitech Grande - is meant for the high-end luxurious segment as there is a growing need for such type of residential complexes in India,' Sanjay Chandra, Unitech managing director, said at a press conference here.

'The economy is booming and with the arrival of global luxurious brands in India, the demand for an upscale lifestyle is gradually emerging,' he added.

Aimed primarily at the NRIs, the complex is going to have its own golf course, a fitness centre, eight signature towers and four gateway towers which will house the penthouses.

The complex is also expected to house schools, hospitals and shopping outlets.

The size of the apartments will be between 2,200 sq ft and 5,500 sq ft. The total project will be built in four phases over a span of seven years.

During the first phase over 670 units will be built within three years and three months. The complex will have a total of 5,300 units, officials said.

'We have already sold over 25 percent of the 670 units that will be ready in the first phase of construction, out of which 10 units have been sold to NRIs. As the project gets ready, we will eventually start targeting the corporates,' Chandra said.

 

[Bushroda]

Larsen to launch $1 bln infrastructure fund
Thu Jul 5, 2007 8:40 PM IST

BANGALORE (Reuters) - India's top engineering and construction firm, Larsen & Toubro Ltd. (L&T), said on Thursday it will launch a $1 billion infrastructure fund in one to two months.

"Various institutions around the world will invest in that fund...L&T will invest $50 million in that. The fund will work independently to promote various infrastructure projects in India," Chairman A.M. Naik told reporters.

Naik also said that L&T will form 3 wholly-owned units for power, shipbuilding and railways to tap growing business potential as Asia's third-largest economy steps up investment on infrastructure projects to boost growth.

"We are creating these separate companies so that we can attract the best talent to be the CEOs...It will take more than 5 years before these companies mature for an independent existence without L&T's support."

In the power business, Nayak said L&T had tied up with Japan's Mitsubishi Heavy Industries to make super-critical boilers in India. It will soon form a joint venture with a leading turbine manufacturers, he said.

Analysts say companies such as L&T and state-run power equipment maker Bharat Heavy Electricals Ltd. are expected to benefit from a slew of big power projects planned by India to overcome shortages in electricity.

India plans to add 78,577 megawatts of power generation capacity by 2012, mainly from coal-fired units.

Shares in the company ended 1.7 percent higher at a record close of 2,331.15 rupees, after rising to a life high of 2,364 rupees during trade, in a Mumbai market that fell 0.1 percent.

 

[Bushroda]

WEB FEATURE: Investing in India
By Dorothy Alpert, Deloitte & Touche LLP

JULY 05, 2007 -- For a number of years, India has been a paragon of profitability for companies seeking to outsource information technology (IT). This is just one of the factors that have contributed to India’s continual increasing power in the global economy.

While the IT industry and other market influences are expanding India’s gross domestic product at a rate of 8.5 percent, Indian real estate market values have also been rising. Market values are now appreciating at 30-plus percent annually, particularly residential.

This growth can be attributed to rising incomes, rapid population growth and a significant cultural shift. The up-and-coming generation of Indians is seeking to live outside extended-family homes, thus driving multifamily housing development.

With a median age of 24-years-old and 2.5 million employable college graduates emerging every year, India’s multifamily real estate has yielded impressive gains for the past two years with a sharp increase in demand. Along with this impact on housing, there has been a compelling change for offshore investors—India’s foreign direct investment (FDI) reform.

As of 2005, FDI of up to 100 percent is permitted in new development and subject to guidelines including minimum property size, capitalization and other standards. Due to the changes in FDI regulations, investments may now be made directly with joint venture partners, through holding companies, or in a combination of these vehicles with a choice of explicitly defined ownership structures.

In the 1990s, reform of interventionist economic policies first enabled significant growth. Trade barriers were lowered and capital markets were liberalized, helping spark the current outsourcing boom. In the interim, corporate tax codes have been restructured and stock market regulation has been strengthened, in addition to other reforms.

Specific to real estate, the government has repealed restrictive land ownership laws, decreased property taxes and revised rent control policies that were formerly weighted against owners. Inconsistent urban renewal policies have been replaced by cohesive regional financing. In areas where development scale was limited by lack of institutional financing due to public perceptions of market risks, new regulations seek to encourage large projects.

India’s substantial opportunities are not without risk. Macro-level issues include a swelling national deficit, rising interest rates, stock market gyrations and possible inflation. Despite India’s fast-developing, infrastructure-focused economy, structural constraints exist. Overloaded roads, bridges, power, water and sewer systems can cause traffic tie-ups, limit water availability and cause electrical outages.

Additionally, a lack of adequate medical care in a society where 60 percent of people live at or near the poverty line greatly increases health risks including pandemic vulnerability. Civil unrest and terrorism prospects may be amplified by urbanization, rapid population growth, anti-globalization sentiment and strained Indian-Pakistani relations. Natural disasters such as the 2005 floods in Bangalore, along with the possibility of earthquakes and monsoons, may also pose a threat.

Even after weighing the potential benefits and risks of Indian real estate, foreign investors should partner with a qualified real estate advisor. Investors should seek a real estate advisor who meets the following criteria: a meaningful history and widespread presence in India, the ability to chart both entry and exit strategies, familiarity with Indian and Western business practices and an intmate knowledge of the many intangibles that make investing in India as promising as it is may be complex.

India presents extraordinary real estate opportunities for astute foreign investors. Deep market knowledge, development-process familiarity, steely nerves, patience and higher-than-usual risk tolerance may be essential to realizing the gains—and providing the benefits—that Indian real estate is uniquely positioned to deliver.

 

[Bushroda]

Can organised retail in food help lift the tail?
ASHOK GULATI & THOMAS REARDON
[ FRIDAY, JULY 06, 2007 04:22:23 AM]

Organised food retail is perhaps the fastest growing component in the entire agri-system of India today. Last year, it registered a growth rate of 46% in sales, 48% in retail space and 65% in the number of outlets of the organised retailers in 73 cities of India. This year, the indications so far are that the growth may be equally strong or even more, albeit still from a low base.

Compared to this phenomenal growth in organised retail, agriculture, the so-called tail-end of the agri-system, has been growing at an average annual growth rate of 2.3% during the last five years (2002-07). The key policy question is can the booming organised retail in food help lift the growth rates in agriculture? The short answer is ‘yes’ in due course, especially when organised retail attains a critical level in terms of size and scale, and if it finds the environment conducive enough to tie up with farmer groups either directly or through the retailers’ specialised and dedicated procurement agencies/companies or processors.

To understand how organised retail can help production in the farms, one has to imagine the process from plate to plough, or retail to tail (farming) (see the figure). In the emerging Indian economy, consumer is going to be the queen as supply bottlenecks are removed and competition builds up in each sector.

The organised retailers are first interface with the consumers who buy in the organised channels, and they can effectively communicate consumers’ preferences back to the producers in terms of quantity, quality and other specific traits of different commodities. By contrast, traditional retail, working facelessly through the wholesale market, is not in direct communication and interface with the farmers in the fresh domain, and the processors in the processed domain.

This market information itself is critical for producers to mitigate their market risk and encourage investments. The process can be strengthened and expedited if the retailers or their specialised procurement agencies not only tie up with farmer organisations for their output but also help them in providing critical inputs such as technical expertise, extension, finance, insurance, etc which are in general scarce or even missing in the public support systems accessed by farmers. Given the scale at which organised retailers operate, they can bring in the services of banking, insurance, etc through specialised agencies.

This would release credit constraints and also cover production risks as farmers move from low to high value agriculture. This surge of access to inputs means farmers are empowered to modernise and become more competitive both in national and international markets. Supplying to supermarkets can thus be a springboard or (in bicycle) “training wheels” for exports even by small/medium farmers.

Given the size of demand by organised retailers, it is very difficult for individual farmers, especially small ones, to enter into any agreement or contracts with these retailers. That is where a challenge lies in clustering farmers in groups of viable size to match their supplies with the type and size of demand by the organised retailers. But who would do it?

Remember the Mother dairy case in milk during 1970s. Although it was under a sort of cooperative network, duly supported by the government (NDDB) in terms of ‘cheap’ capital, the key feature was that it rolled out the front end (neighbourhood milk booths) in Delhi as well as other cities in India (such as in the chain of Milk Parlours” in Bangalore), and procured milk from cooperatives of farmers from far off areas, chilled and homogenised that and by next day put it in the booths all over Delhi and other cities.

This helped farmers by giving them an assured market (while the traditional market was risky and fluctuating) and induced more investments in the milk sector. Today, India is the largest producer of milk. Part of that feat is due to productivity increases from the NDDB scheme. But there is still much potential to be realised, as still less than 20% of that passes through the organised sector.

Similar things can happen under private ownership of retail, and for various commodity chains, ranging from tomatoes, mangoes to poultry and so on. The backward integration of these mega retailers can take several forms, directly through farmers’ organisations, or through “lead” farmers, or through specialised agencies. But all this happens when the front end of organised retail is big enough to necessitate large procurement and thus pay for the price premiums that reward consistency and quality differentiation. Once they reach a critical level of say 20-30% of the total retail, their impact on modernising the wholesale markets, logistics, and in providing necessary inputs to farmers, etc would start becoming visible.

Today, the organised retail is in its infancy but moving fast in that direction. Next five-to-ten years are critical for its scaling up to have a visible impact on the backend operations of these retailers. The government and business need to work together in a way that this opportunity is not lost but used in a manner that benefits majority of stakeholders in this chain from retail to tail.

This can be done when the government follows policies for their continued growth, mops up revenue resulting from compliance to taxes by the organised retail, and uses that revenue to build infrastructure in commodity chains that helps farmers, wholesalers and also traditional retailers, as well as the procurement activities of modern retail itself. Each commodity chain is unique and needs careful assessment by both the business and the government. If one plays this game wisely, one can make it much more inclusive by bringing in farmers and several informal vendors in the mainstream of this structural change, without sacrificing efficiency of value chains.

 

[Bushroda]

India amongst top 3 FDI destinations: E&Y survey

New Delhi, July 5: India's popularity as an international investment destination appears to be increasing fast. According to a survey undertaken by Ernst and Young, India is one of the top three destinations attractive to foreign investors, the other two being China and the United States.

The survey, according to The China Daily, said that eleven percent of investors had cited India as being among their top three preferences in 2004, but in 2007, the investor marker has risen to 26 percent.

China is still the most attractive destination for foreign investment, the Ernst and Young survey claimed.

Between February and March 2007, the survey asked 809 managers from various industries in European, American and Asian firms about their investment preferences.

Forty-eight percent cited China as one of their top three preferred business locations in 2007, up from 41 percent in the 2006 survey.

They said they were drawn to China because of its low labour costs, more competitive rates and higher productivity.

The country's infrastructure, quality of research and development, workforce education and political stability were cited as major advantages.

However, the survey revealed that China still lags behind in quality of workforce. Only four percent of those surveyed said it is the most attractive country in terms of its labour skills.

In addition, only four percent of respondents said China is the most attractive economy in terms of research and development availability and quality, as opposed to 43 percent for Europe and 27 percent for North America.

The survey ranked investment preferences on the basis of market and access, labour and productivity, fiscal, legal, environmental and regional issues. The United States was found to be the second-most attractive country, finding favour with 33 percent of the respondents.

Aside from India and China, the other two "BRIC" countries -- Brazil and Russia - featured less prominently in terms of investor interest.

Despite Russia's abundant energy supplies, internal political uncertainties seem to deter investors. Similarly for Brazil, the considerable efforts by the government to secure macroeconomic stability have failed to convince corporate decision-makers.

 

[genmirajborgza786]

Indian stocks jump to record high
India's main stock index, the Sensex, has burst through the 15,000 mark, surging to a record on optimism about economic growth and corporate profits.
Bombay's Sensex closed 102.23 points, or 0.7%, higher at 14,964.12. It rose as high as 15,007.22 on Friday, taking gains for the week to more than 2%.

Official data on Friday showed that inflation had eased, making it less likely that interest rates will rise.

Gains may continue thanks to the strong economic environment, analysts said.

Better figures

"We expect Indian corporates to show sound earnings data, which could keep the markets buoyant," said Naresh Garg of Sahara Mutual Fund.

Andrew Holland of DSP Merrill Lynch said: "We expect the markets to remain strong over the short term, probably ending the year higher than they are now."

The Sensex has gained almost 9% this year, extending last year's near 50% surge.

Underpinning the stock market has been foreign demand for Indian shares, as investors try to tap into one of the world's best-performing economy.

At the same time, domestic demand has also remained steady.

"Investors have been positively surprised by the stronger-than-expected appetite for issuance over the past month and also by favourable inflation data," said Rajeev Malik, an economist at JP Morgan Chase Bank.

Software services companies Tata, Infosys and Wipro led gains on Friday, closing 4.4%, 2.9% and 3% higher respectively.

Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/6278008.stm

Published: 2007/07/06 14:49:12 GMT

© BBC MMVII

 

[Bushroda]

India's Wipro buys Singapore-based Unza for US$246m
Channel News Asia, Singapore
Posted: 06 July 2007 2322 hrs

BANGALORE, India : Wipro Ltd, which built India's third-largest software business after starting out as a maker of oils and soaps, said Friday it would buy Singapore-based consumer products firm Unza Holdings for 246 million dollars.

Bangalore-based Wipro signed definitive agreements to acquire Unza in a transaction expected to be completed by the end of July, catapulting the combined entity into a strong Asian force, the company said here.

Unza is Southeast Asia's largest independent maker and marketer of personal care products, with a presence in more than 40 countries.

Unza has manufacturing plants in Malaysia, Vietnam, China and Indonesia. Its sales last year grew 14 percent in dollar terms, well ahead of market growth rates in the region.

Wipro Consumer Care and Lighting reported revenues of 8.18 billion rupees (202.5 million dollars) for the financial year ended March, clocking growth of 36 percent. It makes soaps and office furniture and has domestic and commercial lighting businesses.

The purchase is only the latest overseas asset acquisition this year by an Indian firm, attesting to the growing clout abroad of an economy that grew at a record 9.4 percent pace in the last financial year.

 

[Bushroda]

Thriving in central India's suicide belt
DOUG SAUNDERS
From Saturday's Globe and Mail, Canada
July 6, 2007 at 7:33 PM EDT

YAVATMAL, INDIA — Amidst the sun-charred fields and sad villages of central India's suicide belt, you'll find a surprising burst of green fields, filled with a range of thriving crops and lined with fruit trees, an oasis of prosperity and success that seems to defy the depressing logic of the region's farm economy.

This thriving 25-hectare farm, run by a man who failed at cotton almost to the point of suicide himself, shows what can be done, with knowledge and planning, on the same stretch of soil.

Subhash Kuttall Sharma, a 55-year-old farmer with a seemingly endless supply of energy and a quiet smile, came here in 1960 with his father, who had joined thousands of people from India's northern states in the early years of the Green Revolution, hoping to grow high-yield cotton and soybeans for export.

He was among the first to adopt the chemical fertilizers and high-yield hybrid seeds of the Green Revolution, and in the early years they made good money. In 1973, he won a state award for running the best chemical-fertilizer farm in the region.

Then it all started to go wrong. His cotton yields plummeted, from 450 tonnes to around 50 tonnes. His sorghum plants lost 30 centimetres in height, dropping the yield from about 1,000 kilograms a hectare to less than 250. He took out a loan, and by 1992 he was deep in debt. In 1994, nearly bankrupt, he went to school and started studying other, older farming techniques.

Today, he practices a labour-intensive form of agriculture using many of the techniques that are called “organic” in the West. He preserves the monsoon rains by landscaping the fields and holding millions of litres in hand-dug pits. He uses manure and plant waste as fertilizer, and keeps one-third of his land fallow at all times.

And, most significantly for this troubled region, his farm requires a lot of labour: While conventional Green Revolution farms require one labourer for two hectares, he employs 1.5 labourers per .4 hectares, 45 employees for his 20-hectare farm. They're housed and fed at his farm; they all say they prefer this life to the devastation of cotton farming.

“Before, I was taught that the only important thing was to maximize my yield each year, and I was so good at this that I won awards,” he said, laughing, over a meal of curry and rice with his labourers. “But it nearly killed me. I've realized that sustainability and diversity are much more important than yield: You plant six or eight different crops, so that even if half of them fail, you'll still get by.”

Actually, he gets by very well. Last year, he harvested 500 tonnes of produce from the 20 hectares he cultivated, generating $20,000 before his labourers were paid (at around $1 a day each). This is a huge return by Indian standards, allowing him to build a big house in town. He is able to keep an eye on futures markets, so he can predict which crops will be making good money in a year's time – something that the tiny, impoverished farms of India are unable to do.

Agriculturalists describe this sort of farming as the solution to the crises of the developing world – they employ a lot of people, protect farmers from failure, and satisfy consumers with high-quality organic produce. But they require a lot of training, and farm colleges in countries such as India do not generally teach these methods.

 

[Bushroda]

Ethiopia connects to Indian schools, hospitals with new 'e-network'
Sydney Morning Herald, Australia
July 7, 2007 - 2:50AM

Dr. Desalew Mekonnen, a first-year medical resident at Black Lion Hospital in the Ethiopian capital, mulled over a patient's electrocardiogram and frowned.

A consultation was in order. Desalew called upon a more experienced physician _ in Hyderabad, India _ by Web cam as part of a new US$116-million project that links Indian hospitals and universities to Ethiopian ones.

"It's very helpful," 28-year-old Desalew said Friday. "It will improve health care in Ethiopia."

The program, paid for by the Indian government, allows doctors, students and teachers in Ethiopia to take classes and consult with Indian specialists by Web cam and e-mail.

Pranab Mukherjee, India's foreign minister, inaugurated the program during a trip to this Horn of Africa nation, saying the two countries have strong ties. Ethiopia has 3,000 students enrolled in Indian universities, and Ethiopian universities have 450 Indian teachers, he said.

"Education and knowledge are the prime drivers of all economic and social development," he said. "We are happy through this project to be able to strengthen our cooperation with Ethiopia in this critical field."

Fekadu Mulugeta, a vice president at Addis Ababa University, said the program allows Ethiopia to harness India's expertise. With a booming technology industry, India's economy is expected to grow by 8 percent this year.

"It can help in providing education for people who may not be able to travel abroad," Fekadu said.

Getachew Wegaw, a student at Addis Ababa University, watches live telecasts with professors in New Delhi for his masters' in business administration.

"In this type of technology, we can ask questions, we can get answers live," said the 30-year-old student. "Very experienced teachers are leading the course. They are sharing their experience, their knowledge with us."

The program now involves four Ethiopian schools and hospitals. But officials said they hope it will eventually connect all 53 African nations to India by satellite and fibre optic connection.

"We are in the information age," said Tefera Walwa, Ethiopia's Minister of Capacity Building. "Our country cannot function in isolation of the rest of the world."

 

[Bushroda]

Reliance supermarkets jostle for space in India
International Herald Tribune
By Saikat Chatterjee Bloomberg News
Published: July 5, 2007

NEW DELHI: Ram Pukar doesn't need Wal-Mart Stores to make him worry about his fate as a fruit salesman in a New Delhi suburb. Homegrown stores owned by Reliance Industries have already cut his profit in half.

India's biggest company by market value is "trying to drive us out of business by offering cheap rates," said Pukar, who sells mangoes and pomegranates from his cart a kilometer from where a Reliance Fresh convenience store recently opened.

Investors concerned that the Reliance chairman Mukesh Ambani's lack of retail experience would be a handicap should think again. The Mumbai-based group is investing $6 billion in the stores, supported by record profits from operating the world's third-largest oil-refinery. The stores are opening as India's retail sales surge, rising as much as 35 percent a year driven by a burgeoning middle class.

The supermarket chain's sales will reach $25 billion by 2011, more than its total revenue last year, the company has forecasted. The growth, combined with profits from oil, will drive Reliance shares to 2,060 rupees in the next 12 months, Goldman Sachs Group analysts said in a June 18 note.

"They have entered a virgin area, very, very early, which is growing at a phenomenal pace," said Chakri Lokapriya, who manages $470 million in shares, including Reliance, at BNP Paribas Asset Management.

Reliance shares are up 34 percent already this year, giving the company a market value of $59 billion. The company's net profit reached 109 billion rupees in the year ended March 31.

Reliance is getting into the market before Wal-Mart, the world's biggest retailer, because the Indian government does not currently allow foreign companies to open supermarket chains in the country. Carrefour and Tesco, Europe's biggest food retailers, have also expressed interest in entering the market. Single-brand retail outlets owned by foreign companies are permitted.

The Indian government commissioned a study about the impact of large retailers on the nation's economy before making a decision on allowing foreign investment in retail. The results are expected to be released within months.

Wal-Mart has instead entered into a wholesaling joint venture with the India-based Bharti Group, controlled by the billionaire Sunil Mittal.

Wal-Mart aims to sell goods to retailers, including small store owners, to help them "lower costs and increase profits," wrote Kevin Gardner, a spokesman for the Arkansas-based company, responding to questions in an e-mail.

By 2010, there will be 65 million middle-income households in India, up from about 40 million last year, according to McKinsey estimates.

"The economy is growing by more than 9 percent and even if Reliance takes between 20 percent to 25 percent market share of the organized retailing, they will still have a very huge business," said Suhas Naik, who manages the equivalent of $100 million in stocks, including Reliance Industries, at IL&FS in Mumbai.

For now, most produce shopping takes place on street corners where vendors in pushcarts jostle for space. The vendors shout out what they have on offer to lure customers -who then elbow each other to pick the best vegetables from wicker baskets lying on the ground.

Such outlets control 96 percent of the country's retail market, according to a New Delhi-based consulting firm, Technopak Advisors.

Reliance and other retailers, such as Pantaloon Retail India, want to change all that. Reliance's stores sell vegetables, fruits and even flowers used for offerings to Hindu deities under one roof. The stores also sell staples such as sugar and rice for less than the neighborhood stores.

Reliance, which opened its first store on Nov. 3, is reaping its home-court advantage to grab more shoppers like Kavita Gupta. Gupta enjoys the unaccustomed pleasure of shopping in an air-conditioned store.

"The shopping experience has become much better, I can avoid the heat outside and can get most of the stuff I need under one roof," Gupta, 37, said.

Other companies plan to follow suit: Bharti Group and Aditya Birla Group are among other companies that are set to start nationwide retail chains within the next year. Tushar Pania, a Reliance spokesman, declined to comment on the company's plans.

Street vendors and some politicians are fighting the trend. The Indian government's Communist allies oppose any opening to overseas retailers on the grounds that it will displace small retailers and hurt the livelihoods of those who work there.

India's Congress Party, which leads the governing coalition government, wants to have safeguards from the government before it allows foreign investors greater access to the nation's retail industry, which accounts for about 7 percent of the Indian workforce.

Others have taken a more violent approach. A group of protesters belonging to the Indian Justice Party stoned a Reliance store in New Delhi last month.

"We feel that big companies shouldn't enter the retail business be it Indian or foreign," Udit Raj, chairman of the party, said in an interview in New Delhi. "Small vendors are facing total starvation."

Reliance Fresh outlets in Ranchi, in eastern India, and Indore, in central India, have been attacked by traders. On May 27, vegetable vendors held a one-day strike to protest the opening of Reliance Fresh stores. Traders also went on protest marches in the western city of Ahmedabad against retail chains, the Press Trust of India reported.

As for Pukar, he's not optimistic that either the country's cart vendors or the nation's consumers will win. He said, "once we are gone, Reliance will raise the prices."

 

[Bushroda]

25,000 level within 3 years?
7 Jul 2007, 0236 hrs IST,Prabhakar Sinha,TNN

NEW DELHI: If the economy continues to perform at the present level, the 30-share sensitive index of Bombay Stock Exchange could cross the 25,000 mark in the next three years.

This will prove the high networth investor Rakesh Jhunjhunwala correct, who in 2005 had predicted that the sensex would cross the 25,000 level in the next five years.

At present, the industrial sector is growing at over 13%. In April 2007, the rate of growth of industrial sector was 13.6% at the constant price. If annual inflation of 5% is taken in to account, on the nominal term, the industry should be growing at over 18%. Normally, a senior economist of a financial institutions said, performance of large Indian companies on the whole is better than the overall industrial growth, That means, the sensex stocks turnover should grow at higher than the 18% — the nominal Industrial growth rate.

If the profit margin of the companies remained at the present level, the profitability of companies will also grow at over 18% in times to come. In fact, in the past four years, the profitability of sensex companies grew at over 20%.

If the profitability grew at 18.6% in the next three years, the sensex should be at over 25,000 level if the shares continue to quote at the present level of 22 times of the underlying earnings. That means, the sensex would also grow at the same level.

In last four financial years, the sensex has improved at an annual growth rate 44% from 3048 as on March 31, 2003 to 13,072 on the last trading day of the last financial year. In the last two years also, the sensex grew at 42% compounded annually. However, in 2006-07, the sensex improved by only 16% from 11,280. But, in the last over 3 months, the index has increased by 15%.

Market sources said that going by the future demands in the Indian and global markets for goods and services produced by Indian companies, their performances are likely to continue be good.

He said that in the last two years, Indian companies have emerged stronger and more efficient because of global competition.

China is no more a threat to the Indian companies, instead its high growth has provided a huge markets to Indian companies.

He said that the future driver for growth in India would be financial markets, real estate, retail and healthcare including pharmaceuticals. Software and auto ancillaries will continue to boom. On top of this all, India has emerged as important investment destination for investors all over the world. Therefore, he said, going by the present trend, sensex might cross the 25,000 mark much before 2010.

 

[Bushroda]

Anheuser-Busche to sell Indian-brewed Budweiser
International Herald Tribune
The Associated Press
Published: July 6, 2007

MUMBAI, India: India, this Bud's for you.

Anheuser-Busch, the world's largest brewer, introduced an Indian-brewed Budweiser on Friday as part of the company's plan to tap into the country's booming economy, a top official said.

While India is one of the world's largest markets for spirits, it ranks near the bottom among beer-guzzling nations.

Anheuser-Busch, however, sees great potential in the country.

"India has strong and consistent economic growth," said Stephen J. Burrows, chief executive officer of Anheuser-Busch Asia-Pacific operations. "It represents a major entry point for Anheuser-Busch."

Budweiser will initially be on sale only in southern and western India. The company does not sell imported Budweiser in the country.

"The first step is to get the beer established, then we will look at expansion," said Burrows.

India's beer industry posted a blistering 20 percent growth per annum over the past two years, up from 10 percent per year over the past decade. The growth has been fueled by India's growing middle class and its huge population of young people. Roughly 60 percent of the nation's 1.2 billion are people under the age of 30.

"The emerging strong middle class has historically been good for the beer industry," said Burrows.

The St. Louis-based beer maker announced a joint venture in February with Crown Beers India Ltd. to brew, market and distribute Budweiser and other brands in India and set up a new brewery in the southern Indian city of Hyderabad.

With a flat U.S. beer market, Anheuser-Busch has sought overseas growth. It began brewing in China in 1995 and that country's beer market pushed ahead of the U.S. in 2002 as the world's biggest.

Anheuser-Busch has a 27-percent share in the China brewer Tsingtao Brewery Co., China's biggest brewer, and a 50 percent ownership in Grupo Modelo, Mexico's leading beer-maker.

The company faces tough competition in India with United Breweries Ltd., the world's second-largest alcohol manufacturer, which has about 45 percent of the beer market share, followed by London-headquartered SABMiller with some 36 percent.

The Crown Group operates businesses in India's agriculture industry through seed production and export businesses. The group also deals with industrial exports and real estate.

 

[Bushroda]

Japan's JAL to fly daily to New Delhi
Channel News Asia, Singapore
Posted: 06 July 2007 2257 hrs

TOKYO : Japan Airlines will start flying daily between Tokyo and New Delhi to meet strong business demand, the airline said Friday.

JAL currently operates four flights per week on the route, offering business and economy class cabins, the airline said.

"As business passenger demand on this route has been particularly strong, JAL has decided to increase flight frequently further," it said in a statement.

The daily service will start from October 28, it said.

Japan has been trying to build closer political and economic relations with India, in part to counter frequent rifts with China, although Japan's trade with China still far surpasses its investment in South Asia.

Japanese Prime Minister Shinzo Abe will visit India next month along with a commercial delegation headed by Fujio Mitarai, chairman of the influential Japan Business Federation.

Trade Minister Akira Amari recently visited India and announced an initiative to help develop the South Asian country's infrastructure.