Indian Economy - News & Updates - Archive

[Bushroda]

Andhra Pradesh to be the most favoured destination for investors: YSR

Hyderabad, July 27 :Andhra Pradesh Chief Minister Y S Rajasekhara Reddy today said he was determined to continue with efforts to project the state as the most favoured destination for domestic and foreign investment for creation of employment opportunities.

Addressing the captains of the Indian industry at the National Executive Committee meeting of the Federation of Indian Chambers of Commerce and Industry (FICCI) here, Dr Reddy said employment was one of the major indicators of the economy's health.

It was government's endeavour to generate employment for its citizens by promoting industries by laying special emphasis on employment intensive sectors such as textiles, leather, gems and jewellery besides IT and ITeS.

The government was also keen on creating infrastructure to fully realise the state's potential.

Andhra Pradesh would also build a natural gas pipeline network across the state to supply gas from the Krishna-Godavari Basin to meet the needs of existing and new industries besides domestic consumers.

Due to investor-friendly policy, the state was able to attract more industries. The government was also providing several incentives to those putting their money in the state.

 

[Bushroda]

Brisk pace amid financial market risks
Nagaland Post

India's growth rates have been scaled up along with those of China and Russia in the IMF's July update for the world economy, which is on a " brisk pace", with the emerging market countries leading the way. But, IMF points out financial market risks have also increased as credit quality has deteriorated in some sectors and exchange markets remain volatile.

For 2006, India's growth rate has been raised to 9.7 per cent, which should gladden the hearts of globalisers here, while projection for 2007 is 9 per cent, an increase of 0.6 percentage points over the April World Economic Outlook estimate of 8.4 per cent. These are calendar year projections. Taking note of China's sizzling growth, the revised figures for 2006 and 2007 are 11.1 and 11.2 per cent respectively but for the two Asian giants, the tentative estimate for 2008 is 8.4 per cent for India and 10.5 per cent for China. The oil-rich Russian economy is expected to grow by 7 per cent 2007 and 6.8 per cent in 2008.

The US role as the principal locomotive of the global economy is somewhat muted by the growth decline to 1.7 per cent in the first quarter. IMF says recent indicators suggest that the economy regained momentum in the second quarter, and with correction in the housing sector continuing, overall downside risks related to U.S. domestic demand have diminished somewhat. This view runs counter to the prevailing fears of problems in the sub-prime mortgage market spreading and investor appetite for debt instruments drying up, as US market reports say. IMF sees the American economy returning to potential by mid-2008 after a mere 2 per cent in 2007 and rising to 2.8 per cent in 2008.

World output estimates in PPP (purchasing power parity) terms, in IMF usage, would be 5.2 per cent in 2007, higher than the 4.9 per cent April estimate, and a similar growth in 2008. At market exchange rates, it would be 3.6 per cent in 2007 (a against 3.9 per cent in 2006) and 3.7 per cent in 2008.

Besides the emerging markets, especially of Asia, contribution to sustained global expansion comes from the above-trend growth in EU and Japan where, IMF notes, domestic demand is taking a more central role. Both euro area and Japan will likely maintain 2.6 per cent growth in 2007 with some moderation in 2008. While developing Asia, mainly China and India, will be the fastest growing region (9.6 and 9.1 per cent over the two years), higher growth is also projected for Sub-Saharan Africa and emerging markets in other regions.

Inflation globally is well contained but some emerging markets (including India) and developing countries face price pressures, especially from energy and food prices, the Update said. Oil prices have risen again toward record highs against the backdrop of limited spare production capacity and strong demand and the risk of oil price hikes remains a concern. In food, supply shortage and growing demand of grains for bio-fuels are pushing prices.

The Petroleum Minister Mr Murli Deora has already sounded an alarm signal for revision of retail prices if there is no let-up in the oil price surge as the average price for Indian crude has already risen by 18 per cent in the first half of 2007 with continuing heavy losses for the marketing companies under the present subsidized pricing system for users of petroleum products.

Inflation risks have increased the likelihood of central banks having to tighten monetary policy further, IMF said. In many advanced countries (EU, UK and Australia) and some of the emerging economies (Korea) interest rates have been raised during the year. According to IMF, consumer prices in developing countries combined will also be higher at 5.7 per cent in 2007 before declining to 5 per cent in 2008.

In RBI's July 31 review, policy orientation is likely to be greater towards price stability and a closer look may be taken on financial market trends, especially with reference to credit quality and the debt flows. According to IMF, consumer prices in these countries combined will also be higher at 5.7 per cent in 2007 before declining to 5 per cent in 2008.

On global imbalances, IMF says some progress has been made toward reducing risks of disorderly unwinding of global imbalances although protectionist pressures are a continuing concern. Given the still bleak prospects for a successful conclusion of the Doha Round of multilateral trade negotiations, protectionism, in some form or the other, in major industrial countries could become a real threat.

In a Financial Market Update on July 25, IMF noted that though improved fundamentals and positive developments were seen in their local capital markets, financial vulnerabilities have continued to exist in some countries. Strong macro-economic performance has continued to underpin overall financial stability. Banks and corporations in some emerging market countries have, however, tapped foreign capital markets leading to "overly rapid borrowing, which is further complicated by their foreign currency exposures".

In sum, risks have increased in credit and markets and credit markets could remain volatile in the period ahead with a further re-pricing of some credit products. "However, so far, our assessment is that this risk is likely to remain largely contained, although further adjustments are still possible," the Financial Market Update said.

World trade volume (goods and services) is estimated to decline from 9.4 per cent in 2006 to 7.1 and 7.4 per cent in the two years 2007-08. IMF projections show that while advanced countries will export and import less, in these two years, other emerging markets (with exceptions like China) and developing countries will continue to run trade deficits. Their imports would decline from 15 per cent growth in 2006 to 12.8 and 11.1 per cent in the next two years but their export growth would also slow from 11.2 per cent in 2006 to 11.1 and 10.7 per cent for the next two years.

 

[Bushroda]

Overwhelming desire for full set of wheels
By Dan McDougall
New Zealand Herald, New Zealand
Saturday July 28, 2007

"Wheels truly show your status. If I had a four-wheeler I would have better marriage prospects in my village, I would be respected," says Bengali market stall owner Venkat Banarjee. "I have an old Honda motorbike, so I am looked down on. To be able to afford a proper car, with four wheels, that would change my life, it would turn things around."

Four wheels good, two wheels bad, is a middle-class mantra, and now Indian billionaire Ratan Tata is preparing to unveil the world's cheapest car to meet the aspirations of the world's fastest-growing consumer markets.

Taking shape in a controversial Chinese-style "special economic zone" on the outskirts of Kolkata, the "Indian Mini" or "People's Car" is a concept Tata believes will offer the "miracle of personal transport" to India's masses and make his company a huge international player.

The domestic and global automobile industry is keenly watching the development of this ultra-economy car, expected to be launched at the end of the year and sell at about 100,000 Indian rupees ($3200), half the cost of the cheapest car available, the Suzuki Maruti 800.

The firm has shrouded the prototype in mystery, although Tata has dropped a few hints: "It is not as small as a Smart. It is not a car with plastic curtains or no roof. It's a real car." Tata is involved with the project and reportedly vetoed the design of the wipers - one wiper, not two.

Tata Motors is India's largest commercial vehicle maker. Tata Steel, an arm of the conglomerate, is now the world's fifth-biggest steelmaker after swallowing up the Anglo-Dutch Corus Group for US$12.2 billion. Last week, the firm was linked with a buyout of Jaguar.

But rather than become a symbol of growth and modernisation for a nation, Tata's "People's Car" has quickly come to symbolise the David versus Goliath battle between India's super industrialists and impoverished farmers who claim their land was seized by the government to make way for the new plant.


In Singur, West Bengal, where the world's cheapest car will be produced, hundreds of farmers, evicted from their land to make way for the special economic zone, are refusing compensation "pay-offs". Instead of public consultation, an 1894 colonial-era land law was exploited by West Bengal's government to acquire the land for Tata.

Hundreds of people have been hurt as protests have turned into clashes with police. Protesters claim the land seized for the plant is the most fertile on the plains of Bengal. The government denies this and claims most of the 14,000 farmers have accepted compensation.

Driving across the monsoon-lashed landscape of Singur, agricultural life is still thriving. Most farmers are on the third crop of the season. "This plant is the absolute end of us because we know more will follow or it will expand and we will be squeezed out and forgotten about," said farmer Bishnupada Mondol, 36. "As things stand many of the farmers have accepted the cash, but they don't realise the long-term future.

"I know of a few neighbours who have been offered a job in the Tata plant, but in reality they are simple farmers; working on a production plant will turn out to be their worst nightmare. People here have large families and they will spend the money quickly, then look around them and realise they have no land, no income and no prospects. I, for one, will not give up my land."

Nearly 404ha of farmland is already fenced off beside the best highway in the state. A further 320ha has been targeted. The project is billed as key to the rejuvenation of West Bengal, a signal that the communist regional government is investor-friendly.

Over the past year the Indian government has received applications for 250 similar special economic zones, involving turning huge tracts of land into gated business enclaves with middle-class townships attached. The zones have become a time-bomb for the political classes but the message coming from government is simple: this is a time of change, for the better.

Environmentalists, while sympathetic to evicted farmers, claim bigger issues than land seizures are at stake. "What we are really worried about is the appalling congestion in India's biggest urban areas," said Anumita Roychowdhury, associate director of the Centre for Science and Environment in New Delhi.

"Once people start using cars it will be hard to get them back, and selling cars for bottom dollar and encouraging banks to offer finance plans is a recipe for disaster. Tata reckons he will sell a million of these things a year. This will be an environmental disaster."

There could be further bad environmental news. Ford Motor Company in India have plans to make a small car for India while Honda and Volkswagen are expected to follow suit. India's environmental lobby seem resigned to defeat.

"He [Tata] knows he is on to an absolute winner," says Roychowdhury. "In the new India, four wheels has emotional appeal, not just practical. It is hard to get people to see beyond their immediate desires."

 

[Bushroda]

At Home and Abroad, What Value Do Non-Resident Indians Bring to Multinational Corporations?
Knowledge@Wharton
Published: July 26, 2007

In 1980, Vivek Paul left India to obtain his MBA in the U.S. and, after graduating, had the good fortune to be recruited by Jack Welch at GE. In 1999, he left his position as the global head of GE Medical Systems to join Wipro, the Bangalore-based IT services firm, which at the time had about $150 million in revenues. By the time Paul stepped down in 2005 as Wipro's CEO and vice chairman, the company had become a leader in global outsourcing, with revenues reaching $1.4 billion.

Paul, who is now a partner with the U.S. private equity firm Texas Pacific Group, is a high-profile example of what some believe is a growing catalyst for the development of Indian business: non-resident Indians (NRIs) educated in the West -- often in the United States -- who participate in the overseas expansion of Indian companies or who help international firms expand their business in South Asia with a high degree of Indian "DNA."

According to Jitendra Singh, a professor of management at Wharton and Ravi Ramamurti, professor of international business at Boston's Northeastern University, émigrés can help their countries of origin in a variety of ways, providing economic capital that may be in short supply domestically, providing "hard" skills -- like engineering training -- and "soft" skills, such as a more intimate knowledge of global business culture.

Singh and Ramamurti have been studying the emergence of multinational corporations from emerging economies, including India. In late June, they organized a conference on this topic in Boston, sponsored by the Center for Emerging Markets at Northeastern University, and The Mack Center for Technological Innovation and the Center for Leadership and Change Management -- both at Wharton. The conference's papers will form the core of an edited volume of the same name, which the organizers hope to see published in 2008.

In India, the contributions made by émigrés are not readily apparent in economic terms. "Overseas [expatriate] Chinese accounted for 80% or more of the inward FDI [foreign direct investment] into China in the 1980s and early 1990s, when that country opened up," Ramamurti says. By contrast, "Non-resident Indians (NRIs) accounted for 10% or less of inward FDI after India opened up. Most of the capital sent to India by NRIs was personal transfers to family and friends, not FDI."

Instead, NRIs bring a mixture of hard and soft skills, some of the latter quite subtle but still important. "The subtlest aspect can be a different set of aspirations and the confidence that they can be achieved, which can transform a firm's culture, if leveraged well," Singh notes.

"But in some industries, like pharma or biotech, or some other high tech industries," he adds, "there can be hard factors as well like research or production processes, or the use of technologies like recombinant DNA or cell fusion in biotech."

Two Generations of MNCs

"There are two types of Indian MNCs today," Ramamurti says, "first-generation MNCs that were created when India was a closed economy -- in the 1980s and before -- and second-generation MNCs that were born after India embraced globalization in the 1990s."

At different political and economic stages, different skills were needed. "In theory, NRIs offered three potential advantages: cutting-edge expertise, a rich professional network in the West, and, in the case of high-net-worth individuals, capital," Ramamurti notes. "But these advantages were of limited use in dealing with the central challenge facing first-generation MNCs, namely, organizational transformation of their domestic operations."

"The most important contribution of NRIs to first-generation MNCs was probably indirect," he adds. "Through their outstanding professional contributions in the U.S. and Europe, NRIs established the credibility of Indian talent and added luster to the India brand. This cleared the way for Indian companies to sell their products and services in the West. And through their annual remittances of $20 billion or more, NRIs helped strengthen the Indian rupee, making overseas acquisitions more affordable."

In addition to capital, connections, and both hard and soft skills, non-resident Indians sometimes fill the role of "fulcrum," or ambassadors between foreign MNCs and their Indian subsidiaries -- and between Indian MNCs and their foreign subsidiaries or markets -- shortcutting much of the need for cultural education. "Multinational corporations that are increasingly interested in India are hiring such non-resident Indians or sending senior NRIs already on their staffs back to India," Singh says.

What Qualifies as 'Indian'?

Recent mergers and acquisitions in the steel sector -- such as Netherlands-based Arcelor Mittal -- have put Indians and Indian companies at the forefront in that industry. But can such companies still be considered 'Indian'?

"By a very loose definition," Singh says, "Arcelor Mittal can be thought of as an Indian MNC, but I tend to think of it as an MNC led by Indians. It is quite different from India-based companies that have most of their revenues or profits coming from India -- like Reliance or Bharti Airtel -- or, for that matter, Infosys or TCS, which have most of their revenues and profits come from outside India but are based in India. Arcelor Mittal has relatively modest India exposure, but it is a truly global firm."

"The nationality of MNCs has become a less meaningful concept as globalization has accelerated," Ramamurti says. "At one time, firms were headquartered in their country of origin and raised most of their capital at home before slowly expanding abroad. Today, in a world where people and capital are highly mobile, entrepreneurs can optimize where they incorporate their firms, in the same way that they might optimize the global supply chain. Just as products today are made with inputs from many countries, the modern firm is created with inputs from several nations, and therefore it is less and less meaningful to speak of the 'nationality' of MNCs."

Ramamurti points to a variety of different kinds of cross-pollination between NRIs and firms, both Indian and foreign. "NRIs in the U.S. venture capital or private equity businesses have helped fund start-ups in India. Other NRIs became entrepreneurs themselves, often creating 'born-global' firms that, from day one, had a front-end sales or design team in the U.S. and a back-end operations team in India -- such as MindTree Consulting. Other firms did exactly the same thing but were headquartered in the U.S. and were therefore technically U.S. MNCs, not Indian MNCs, like 24/7 Customer, Cognizant and OfficeTiger."

Singh cautions that it is important not to overstate the importance of NRIs to the current boom. "Most of the India-based firms, like Reliance, the Tata group, the Aditya Birla group, the IT companies and many others, were in large part not led by NRIs or expats, although they may have contributed to such firms. So if a case can be made [for the importance of NRIs], it has to be a rather circumscribed one."

Indians vs. Indians

The outsourcing boom has highlighted growing competition between Indian workers -- both in service industries like call centers and in higher-value areas like engineering -- and workers in more advanced economies, like the U.S. This competition has deep political and cultural resonances and often has a sharp edge to it. The business success of NRIs often engenders some ambivalence, depending on where it takes place. The successes of Indians or Indian businesses abroad is most often cause for celebration and national pride; the success of NRIs, particularly those who either re-immigrate to India or split their time between several locations, is sometimes viewed as a bit of a mixed blessing.

"One problem I have seen on several occasions," Singh notes, "is the animosity that can sometimes develop between the NRIs and the local executive talent." He cites the hypothetical example of two graduates from one of the IIMs or IITs, who were classmates 25 years back, who meet again in an Indian firm which is starting to go global.

"One of them has spent the last 20 years in the U.S. or Europe and developed world-class capabilities, say, in the biotech world. The other has made steady progress up the ranks while remaining in India. The only way the Indian firm can hire the NRI is to pay him compensation comparable to his global market value, or else they will not get him. Clearly, they cannot pay the other guy the same. While he is capable, his market value is much lower. Needless to say, if he finds out that his former classmate is doing two or three times better than him in overall compensation, he is not going to be happy about it. He sees the other guy as a little bit different than him, but that does not give full credit to his colleague's quite different human capital, which is recognized by the global marketplace. This will be a rather serious issue for Indian firms for the next few years."

Ultimately, Singh believes, this is a management issue which Indian firms will have to work through. "I think the leadership of firms that bring in such people are responsible for helping them integrate better," he says.

 

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India on the mind
Planet India by Misa Kamdar
Reviewed by Scott B MacDonald

One of the interesting conclusions about Kenneth Pyle's book Japan Rising: The Resurgence of Japanese Power and Purpose is that the Asia-Pacific country is an adaptive power, "more likely to take cues from the unfolding international system".

What is implied is that Japan is not likely to become a true

hegemon in the sense that it has universal values that have an appeal and spread to other countries in the fashion of the American, French, Chinese and Russian revolutions.

As Sreeram Chaulia adeptly noted in his review of Pyle's book in Asian Times Online, Japan "looks destined to remain a cautious adaptive power that receives more from the international system but gives less". [1] The same cannot not be said of emerging India.

According to Mira Kamdar, a senior fellow at the World Policy Institute and an associate fellow of the Asian Society, India is economically on the rise, very much plugged into globalization, and is increasingly a pivotal player in a changing international system. Along these lines, India's experiment with democratic capitalism has an increasing appeal across borders, especially those in lesser developed countries.

In her Planet India: How the Fastest-Growing Democracy Is Transforming America and the World, Kamdar emphasizes India's soft power, the appeal of its democratic system, and growing economic success make it an exciting counterpart to more authoritarian China and a far more affluent (and wasteful and materialistic) United States. She states: "From combating global terror to finding cures for dangerous pandemics, from dealing with the energy crisis to averting the worst scenarios of global warming, from rebalancing stark global inequalities to spurring the vital innovation needed to create jobs and improve lives - India is now a pivotal player. The world is undergoing a process of profound recalibration in which the rise of Asia is the most important factor: India holds the key to this new world."

Kamdar undertook Planet India "because I believe India matters as never before to a world in crisis". The old Western-dominated world order is in decline - as reflected by severe environmental problems, a sharp-elbowed scramble for natural resources, global terrorism, extreme inequity, and the spread of AIDS and other diseases. While the West has a high standard of living and remains an attractive pole for people around the world, the expensive nature of Western society cannot be easily replicated. Consequently, another model is needed, and India fills that role.

According to Kamdar, "India's goal is breathtaking in scope: transform a developing country of more than 1 billion people into a developing nation and global leader by 2020, and do this as a democracy in an era of resource scarcity and environmental degradation."

While Planet India is very much an India-first book, it clearly points to all the soft-underbelly problems of widespread corruption, poor infrastructure, socioeconomic inequality, water shortages, disease and pollution. For example, Kamdar notes: "India is a potential hotbed of the planet's most lethal pandemics. It is also rapidly becoming the capital of non-communicable epidemics, with rates of diabetes and heart disease as well above global averages." She also takes into consideration problems such as poor treatment of women, the underclasses, and others, not to mention Hindu/Muslim tensions that all threaten to derail Planet India.

Despite the multitude of problems confronting India, there is a very active desire to change things. Since the early 1990s, reforms have unshackled the economy, breaking out of a more socialistic development mode. This is where India offers an alternative mode of development between a wealthy and out-of-reach lifestyle in the West and a rapidly growing politically authoritarian China. India must offer lower-cost solutions to global problems, such as disease.

"But India is also where there is perhaps the most hope of finding ways to deal with these and other scourges on a scale that could actually serve the world's billions," writes Kamdar. "The high-cost regimens will only help a few of those afflicted. If India can find low-cost, convenient therapies, for example oral insulin therapies where patients don't have to inject themselves, the lives of millions of people will improve." This lower-cost approach extends to a host of other areas, including alternative energy.

Kamdar has written an interesting and topical book that most Americans should read, especially as India will increasingly become part and parcel of US life - either through the growing numbers of Indians living and working in the United Sates, Indian products showing up in the marketplace, or jobs being sent offshore to Delhi or Mumbai. She correctly points out that Indians living in the United States "are one of the most prosperous and well-educated groups in America".

That success increasingly has an impact on driving India and the United States closer together and in Indians in the US wishing to give something back to the land of their origin. This is certainly a factor in improved US-Indian relations during the years under presidents Bill Clinton and George W Bush, founded on a growing clutch of shared strategic concerns, including the terrorist threat poised by radical Islam and a rising China.

India's rise also provides, according to Kamdar, a historical opportunity for the US in terms of a partnership: India and the United Sates, undoubtedly two of the world's great democracies, have a real opportunity to recall each other to the moral bedrock of their respective founding moments; to turn away from rampant militarism and save our environment.

There is a growing sea of ink being spilled to cover the rise of India. In many regards, India is in a race between the weight of a large and growing population hit by rising expectations and a highly competitive world and finite resources. The great Indian experiment is one of the most significant events of the early 21st century, something Kamdar brings very much to life. Planet India is clearly one of the more noteworthy additions to the literature on India and is strongly recommended.

 

[Bushroda]

Rise Of The Rupee
Tech companies and exporters are losing profits as the currency continues to rise
by Manjeet Kripalani and Nandini Lakshman

On July 20, a group of Indian businessmen gathered in Mumbai to listen to a presentation entitled "How to Deal with the New, Improved Rupee." Yet for this crowd—mostly smallish exporters of textiles and commodities—the rupee's 10% appreciation against the dollar this year feels more like a punishment than an improvement. Jamal Mecklai, the risk-management consultant giving the talk, explained that the currency's unprecedented show of strength is a sign of India's increasing importance in the global economy. "India has grown up," he said.

And it has done so in a hurry. A key manifestation of globalization has been a rebalancing of the world's currencies, as the dollar has fallen to new lows and the euro has hit all-time highs. Few developments, though, have been as unexpected as the strength of the rupee, which since March seems to have turned from a perennial weakling into a surging up-and-comer.

Blame it on India's red-hot economy. After decades of puttering along at about 3.5% a year, the country is averaging growth of 9% or better annually, powered by a vibrant info-tech services sector and exploding consumer demand. What's more, India is awash in foreign money: $25.2 billion poured in during the fiscal year that ended in March, up 25% from 2005, attracted by deregulation of sectors such as retail and real estate and a roaring stock market.

Although the currency was decoupled from the dollar and made partially free in 1993, the central bank has since operated a "managed float," intervening in the market to smooth out volatility but not to hold down the rupee's value. However, the Reserve Bank of India has been largely overwhelmed by the foreign funds rushing in—money it can't mop up completely without provoking inflation. So it unteathered the rupee. "It was hard to fight the tide," says Chetan Ahya, chief economist for India at Morgan Stanley (MS).

Indians don't quite know what to make of the rupee's levitating act. Some say it puts the country's hard-won export gains in jeopardy: Exports now make up 13% of gross domestic product, up from 9% a decade ago (although still far from China's 38%). A particular worry is that India could be ceding ground to Asian economies that manage their currencies more actively—notably China, which has refused to float the yuan. "We are losing our competitiveness to China, Korea, Taiwan, and Singapore...and the Reserve Bank is allowing the rupee to appreciate?" growls New Delhi economist Surjit Bhalla.

WAGE SQUEEZE

No sector is more exposed to the effects of a strong rupee than the dynamic IT services industry, which brought in about $35 billion in export revenues last year. The top four IT companies—Tata Consultancy Services, Infosys Technologies (INFY), Wipro (WIT), and Satyam Computer Services (SAY)—are all complaining that the currency's strength is crimping margins. Profitability across the sector fell by 8% in the most recent quarter. "The rupee pressure is a concern," says Azim H. Premji, chairman of Wipro. "We have to squeeze efficiencies in cost, operations, supply chain, and processes." Still, with margins of 25% to 30%, "the big boys are in a position to take a hit for a while," says Kiran Karnik, president of the powerful Indian software association Nasscom.

The pressure, though, won't let up on the IT players. Wages have risen by more than 15% in the past year, and the effect is amplified by a strong rupee, since most of the companies' sales are in dollars. The strength of the rupee is "an additional reason to convince customers they have to help us," says Ramalinga Raju, chairman of Satyam, which boosted prices by an average of 2% in the first quarter.

BUYING BINGE

India's manufacturers have taken it on the chin, too. "The appreciation was so sudden that we were unprepared, and it has beaten all of us in the short term," says Baba Kalyani, chairman of Bharat Forge, an auto-parts maker that gets 70% of its export revenues from the U.S. The giants, though, are in a much better position to withstand the pain than are low-margin businesses in textiles and apparel. A further rise in the rupee, says Suresh Ramrakhiani, economist at the Cotton Textile Export Promotion Council in Mumbai, could lead to job losses for up to 200,000 people. Really small exporters—spice merchants, producers of brassware, and the like—are hurting the most. And these small and midsize enterprises contribute 60% of India's export earnings, according to the Associated Chambers of Commerce & Industry in India.

There's one upside to the strength of the rupee: It makes purchases abroad cheaper. India's biggest companies have been on a buying spree lately. In January, Tata Steel took over Corus Group PLC, an Anglo-Dutch company five times it size, for $11.3 billion, the biggest of its 11 foreign acquisitions in the past year. A strong rupee will only serve to make such deals more attractive.

No one knows whether this is a passing trend or a lasting phenomenon. Some say the rupee hasn't found its true level yet and predict that in coming months it will settle at around 38 to the dollar, compared with about 40 today. And many would argue that such discomfort is simply a part of making the transition to a fully convertible currency regime, which India aims to do by 2011. "India used to be a large country with a small economy," says Ajit Ranade, chief economist at Aditya Birla Group, a Mumbai conglomerate with operations in textiles, metals, chemicals, and more. "Now we are a big economy, and we should act like one."

With Steve Hamm in New York.

 

[Bushroda]

The East Also Rises
28 Jul 2007, 0059 hrs IST,Kaushik Basu

India's eastern region, which has seen a steady deindustrialisation for over 40 years, is stirring and there seems to be reason for hope. Recently, in Patna, Bihar chief minister Nitish Kumar gave one of the finest speeches one could have heard by an Indian politician. It was given in elegant, rhetoric-free Hindi, and with virtually no notes.

He spoke about the poverty line, the numbers living below it in Bihar and what should be done about this. He then sat through several sessions listening to professional economists, and later, in an informal group, talked intelligently about reviving higher education in Bihar.

Orissa, under Naveen Patnaik, has also shown dynamism that was alien to the state. There are initiatives afoot to attract industry and set up a mega private university. Add to these the recent changes in West Bengal, and one perceives a glimmer of hope for an industrial resurgence in the long-somnolent economy of eastern India.

I have been studying West Bengal in some detail. It has had one of the most stable democratically-elected governments anywhere in the world, a 30-year unbroken run of the Left Front government, led by the CPM, involving seven easily-won elections. In fairness, the deindustrialisation of West Bengal began before the communists came to power, but, in the early years, the party revelled in it, and the flight of capital from the region picked up pace.

The CPM made it clear that it would not tolerate industrialists who did not employ workers on better terms, not pausing to think that there were other regions willing to tolerate such industrialists. Hence, the workers of Bengal were not employed on better terms; they were not employed.

West Bengal, however, had success with agriculture, and was the region with the fastest agricultural growth in India through much of the 80s and 90s. But the highest growth that agriculture can sustain never measures up to what is achievable by the industrial and services sectors. Hence, ignoring these and driving away industrial capital meant that the region steadily lost out in overall terms.

The West Bengal government cannot defend itself by arguing that it willingly gave up its initial advantage in the industrial and tertiary sectors and higher education in order to concentrate on poverty removal and primary education.

The 2001 census shows that West Bengal, with a literacy rate of 69 per cent, is just a notch above the all-India average of 65 per cent and way below regions like Kerala (91 per cent), Maharashtra (77 per cent) and several others. The percentage of population below the poverty line in 1999 was 26 for India and 27 for West Bengal.

As often happens with communist parties, change of policy had to wait for a change of person at the helm.

In November 2000, the long-standing chief minister of West Bengal, Jyoti Basu, retired, and Buddhadeb Bhattacharjee took over. Buddha started out as an orthodox Marxist but had the intelligence to be wary of the party's wilful driving out of capital. He had had a famous falling out with Basu in the 90s. Later he seemed — though one does not think he was — repentant, and was allowed back into the CPM fold.

Over the last three or four years an interesting dichotomy has appeared in the policy statements that come out of the CPM leadership. For every market-oriented reform that is announced by the Congress-led government of India, the CPM leadership — usually members of the politburo — is harshly critical. On the other hand, in recent years, in the state of West Bengal the same party has announced a series of capitalist-friendly policies, more gung-ho than anything the Centre has tried.

In 2002, soon after the change of guard, the West Bengal government declared the information technology and IT-enabled sectors to be a "public utility service", using a special provision permitted under India's Industrial Disputes Act, 1947, so as to stop trade union disruption in that sector. There is no way the party would have tolerated something like this if it came from the Union government. Last year when India jettisoned its arcane commodity taxation system for the more market-friendly VAT system, the movement was spearheaded by West Bengal's finance minister, Asim Dasgupta.

Whether this divergence between the statements of politburo members and those of elected leaders like Buddha is a sign of some fissure in the party or a deliberate strategy one has no way of knowing. My own hunch is that the party is now devoid of ideology. This is a desirable change since ideology can be a bit like religious fundamentalism. It can delude people into believing that the secrets of the world are written down in a little magic book. This ideological fatigue, akin to what happened to China in the late 70s, therefore, represents great opportunity for change.

 

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South Africa: Envoy to India Tells of Open IT Posts
Lesley Stones
Business Day (Johannesburg)
27 July 2007

There are an estimated 60000 posts that need to be filled in SA's information technology sector, but due to a skills shortage they remain vacant, and that is jeopardising the country's chance of meeting its economic growth targets.

"Our economy is growing well but we have one Achilles Heel -- our people are not sufficiently trained to support the kind of economic growth we have and the 6% growth per annum we envisage," SA's high commissioner to India, Francis Moloi, said.

"At the moment we need about 60000 trained ICT professionals. And we need them yesterday," he said.

"The biggest challenge our government is facing is giving people the skills they need to support this economic growth."

Moloi was addressing a press conference hosted by Satyam Computer Services, where the New York-listed company outlined its plans to expand in SA.

Satyam is recruiting technology graduates from SA and putting them through intensive year-long courses in India.

Thirty South African students are based in Hyderabad.

After three months of classroom training they will be assigned to projects where they shadow Indian experts.

A pilot batch of 12 have already returned to SA to work on projects for Standard Bank and the Limpopo provincial government. Another 100 will be recruited for training from September, with the courses costing Satyam R340000 for every student.

Moloi said Satyam's training was one of the best programmes he had seen so far. "If you need more people we will scout around SA and bring them here," Moloi said. The government did not put any money into the initiative, but it would look "favourably" on foreign companies that were helping to alleviate SA's skills crisis .

Satyam's campus can train 3500 students a year, and the number of South African trainees could grow from hundreds into thousands, said senior vicepresident Virender Aggarwal. The constraining factor would be Satyam's ability to find them all meaningful employment afterwards. That made it crucial to earn the support of SA's government to help Satyam win enough work in SA to use all the students it intended to train.

Satyam supplies technology services to 165 of the Fortune Global 500 companies. It runs graduate training programmes for students from about 18 countries . Aggarwal said the best students from a mathematical perspective came from China and India, but the South African recruits were coping well.

"The South Africans are as good as any, and in terms of attitude possibly among the best."

 

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China, India key to building ACT economy, Stanhope says
The Canberra Times
Sonya Neufeld

The ACT needs to build stronger links with economies like China's if it is to continue to grow and diversify, Chief Minister Jon Stanhope says.

Ernst & Young hosted a China Economy briefing yesterday, bringing together members of Canberra's business community to discuss how to pursue business in the rapidly growing Chinese market.

Speaking at the briefing, Mr Stanhope said Canberra's economic footprint was "minuscule" compared with China's. It is forecast that by 2041, China will have the world's largest economy. The country is the largest source of imports for Australia and our second-largest export market.

Mr Stanhope said, "For Canberra to continue its trajectory of strong economic growth and diversify its economy further, it needs to build stronger links to the economies which are shaping the economic future of the globe".

"China and India are undoubtedly the best examples."

The Stanhope Government has been working hard to strengthen business ties between the ACT, India and China, and earlier this year led trade delegations to both countries.

"The message we took to China was about the diversity of the ACT economy, our track record and innovation and our city's position as Australia's leading knowledge-cluster economy," Mr Stanhope said.

According to figures from the Department of Foreign Affairs and Trade, the territory's relationship with China is building.

In 2005, China was the ACT's fifth-largest trading partner and was its second-biggest goods export destination after the United States.

Mr Stanhope said the ACT's top exports to China were education and tourism.

Of the 81,000 Chinese students enrolled in Australian educational institutions, more than 2000 were studying in the ACT. In the tourism sector, the territory received more than 20,000 Chinese visitors last year. The number of Chinese visitors to the ACT had risen by 171per cent since 1999.

"China has a strong desire to further develop its services sector, and that's almost exclusively a service and knowledge-based economy that the ACT has much to offer and much to gain from."

He said when pursuing business, Australian companies needed to focus on the medium-to-long term, be patient and be realistic about "complex" markets like China.

"It can take some time to get established, and sometimes it's hard to stay engaged, but once you're in, the rewards can be immense."

Mr Stanhope said the ACT Government planned a further trade mission to China and India.

"It's important we continue to maintain the momentum which we are now developing in relation to our relationships with these two powerhouses," he said.

A partner and NSW leader of Ernst & Young's China Business Group, Colin Jones, said the biggest areas of opportunity for Australia in China would come from the building, engineering, food and beverages, agribusiness and information and communication technology sectors.

Certain things were necessary when doing business in China.

"Economies don't do business with each other, people do, so when it comes to doing business in China one needs to be patient, nimble and know the value of their proposition."

Mr Jones said one of the main challenges that companies needed to consider about China was its ageing population and the huge potential migration from China.

Ultimately, the most important ingredient of all in fostering a solid future with China was relationships. "In China, government is absolutely revered, and if you come with their support, many, many more doors will open for you."

 

[Bushroda]

Global designs on India
Arati Menon Carroll / Mumbai July 28, 2007

Indian real estate is benefitting from the integration of global architecture and design firms. What is driving this trend?

By the end of the year, that darling of developers, Mohit Gujral, will be extending his architectural firm’s talent pool to include 30 Singaporean architects and designers in his first overseas office. Many of them will be practitioners in specific design areas like lighting or landscaping.

Edifice Architects — a Rs 300 million architecture and interior design firm with a focus on the IT, ITeS, telecom and hospitality sectors — is also looking at starting an overseas office in the Philippines by the end of the year.

Their approaches may be different — Gujral is climbing up the value chain by employing highly skilled designers, Edifice is leveraging cost efficiency and will outsource its base level drafting and 3-D animation work to the Philippines. Both, however, are means to achieve a greater scale of operations. And quick.

Some of this urgency, both admit, comes from the increasing competition on home turf. From DLF to Unitech, Ansal API and Emaar-MGF, prestigious developers are signing on architects with a global imprint and Indian architects are feeling just that little bit unsettled.

What started with the government liberalising the foreign investment regime in the $14 billion (source: Dun &Bradstreet) real estate sector and the subsequent rush of foreign investors, is unlikely to slow down.

According to a report published earlier this year in fDi — a bimonthly publication on the business of globalisation — overseas funds of about $7 billion have been announced for investment in Indian real estate and FDI in real estate is estimated to reach $16 billion by 2012 from $600 million last year.

“As a result, an increasing percentage of retail and commercial real estate development is now driven by standards set by private equity,” according to Peter Burke, a senior architect with Buchan group that is, at this time, involved with masterplanning projects in India.

“It’s not as if there’s not enough work to go around but the imbalance between the scale of construction and the supply of local architects in the country is undeniable,” concedes Gujral.

According to Vijay Sohoni of Council of Architecture, there are 40,000 registered architects in India, of which only 30,000-odd are practising — 80 per cent of these in the 10 large cities. But the problem, most say, is the proverbial quantity over quality.

When Provogue tied up with UK-based Liberty International to float Prozone, a retail infrastructure arm, they were convinced that to create true brand differentiation in the mall space, a retail infrastructure specialist would have to be roped in.

“Unfortunately local architects hadn’t had exposure to developing a mall of three million sq ft,” says Salil Chaturvedi, promoter of Provogue.

So they signed on Benoy, a UK based practise with expertise in the retail and leisure markets. “Did you know that 35 per cent of the traffic in a mall is replenishment traffic, so certain procedures for traffic flow, service entry, offloading terminals have to be followed. Local suppliers just did not have that kind of hindsight,” says Chaturvedi.

Ravi Sarangan, director, Edifice Architects, suggests that the demand-supply gap is even more conspicuous in sectors like hospitality. Edifice, who’ve chosen to focus on hospitality for precisely this reason, themselves collaborate with foreign architects to gain expertise.

Similarly, as John Zeckendorf of Mandala Asset Solutions — professional developers and asset managers — points out, “The concept of integrated townships are around three years old in India and 50 years old elsewhere. International architects have had time to iron out the kinks and debug problems.”

Mandala, that is currently working on mandates for eight townships, works with Australian biggies like Edaw and Buchan to ensure that land owners are able to “supply a differentiated product to a limited market”.

The fact that projects are getting more grandiose in scale and complexity is driving the need for experienced master planning and urban design specialists.

Take for instance, Unitech Grande, a super-luxury residential community with a Greg Norman golf course, that is being developed in Noida over 347 acres. The project involves 10 global architectural and design consultants.

Often developers use different firms for specific areas of design within one project. Ansal API’s 5,000-acre Sushant Golf City in Lucknow offers golf villas designed by KTGY inside an 18-hole professional golf course designed by Martin Hawtree with landscaping by Belt Collins.

There is also an upsurge of real-estate projects that wish to emulate foreign architecture. Mohali Hills, an Emaar-MGF development, is a gated mixed-use community with Spanish style architecture.

“Global design firms work with the best developers worldwide and have to their credit some of the finest landmark structures in the world today,” says a senior company spokesperson.

“When developers want iconic solutions, they tend to go with a global biggie like HOK, Renzo Piano or FX Fowle, all of whom are looking at entering India in a big way,” explains Sarangan.

But what does that do to costs? “For most projects, there is a fractional increase in cost, of say Rs 10 per sq ft, but this is easily recouped from a sale price premium of up to 20 per cent on account of better design.”

“If you have a ‘developer’ attitude with a view to flip the asset in three years you will tend to tightly manage costs. If you follow an asset owning model you want flawless and accurate designing because the cost of rewriting is very high,” explains Chaturvedi.

DLF believes it is an equitable trade-off bet-ween cost and time saving. Last year, they entered into a joint venture with a leading UK-based construction company, Laing O’Rourke, and have commenced the development of 14 projects covering a total area of 25.7 million square feet with an order book of Rs 4,172 crore, including big-ticket projects like The Magnolia, The Belaire and the Mall of India in Gurgaon.

“They give us access to the latest advances in design and construction techniques, which always shortens lead time for completion,” says a company spokesperson.

Sarangan hints at several peers whining about work being snatched away from them. But developers will tell you that there is a more than fair integration of local talent even when foreign architects are involved.

“It is always a collaborative effort. Local architects have a better appreciation of local code compliance and regulatory issues. They also possess a sound understanding of the onground social milieu which largely influences realty design and development,” says the spokesperson for Emaar-MGF.

In fact, Banerji’s lament is that senior Indian architects are actually so inaccessible that it’s impossible to tie them down to a discussion even. Mohit Gujral’s order books, for example, are overflowing with over 65 million sq ft of project work.

With the Indian real estate market getting exposed to global best practices and international standards of designing, it seems certain that only those architects who rise to the occasion will profit, while others will get relegated to undertaking routine contracting work.

As Gujral says, “With a huge infusion of funds in the market no one needs to learn from mistakes. They can afford the best the first time round.”

 

[Bushroda]

Senior managers too in queue
28 Jul, 2007, 0322 hrs IST,Thanuja B M, TNN

BANGALORE: Call it the effect of NRIs returning to their homeland and prepared to set up new companies, 2001 vintage entrepreneurs taking new guard or experienced corporate employees stepping out of their comfort zones. Venture capital (VC) firms are now seeing the average age of the people in non-internet areas approaching them for funding increasing to the late 30’s.

According to Sudhir Sethi, vice-chairman & MD, IDG Ventures India Advisors, “The average age of the entrepreneur from non-internet sectors approaching us for funding has gone up. It is now between 35-40 years.’’ In general, the tech sectors (internet, consumer wireless) still attract younger profiles whereas segments like software services, infrastructure, retail and related sectors are attracting the relatively older entrepreneurs.

Agreeing with this, NS Raghavan of Nadathur Holdings said, “Earlier we used to get people who approached us soon after their education. There were only a couple of people with experience who did come to us seeking funding for setting up ventures. Now, there are lot more experienced and older people seeking funding, especially people who have returned from overseas.’’ He added that there is now some reluctance to fund youngsters out of college since they don’t know too much about business.

So, why this change? Kanwaljit Singh, managing director of Helion Ventures opines, “One of the reasons I believe is that more senior managers are looking at turning entrepreneurs. This is prompted by a combination of overall market buoyancy, many success stories of first-time entrepreneurs in India in the past 5 - 7 years and also higher financial stability from the existing jobs so they have reasonable money in the bank to take the risk of entrepreneurship. The advent of more VCs and the ability for an experienced professional who has built `companies in the past’ to raise venture money is an added driver.’’

Mohit Bhatnagar, an Operating Partner with Sequoia Capital India just says that it is a great time to be an entrepreneur.

``Opportunities in India are fantastic and venture capital is accessible. So frankly entrepreneurs of all ages are stepping onto the stage.’’ Currently, there are around 44 VC firms investing in India. About ten of them have own offices in the country and see anywhere between 100 to 400 business plans a year. 2006 saw VC investment of $506 million in India.

 

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ITC to invest Rs 8,000 cr in 5 hotels in 5 yrs

Kolkata, Jul 27 (UNI) ITC Limited will invest Rs 8,000 crore to set up five new premium hotels in Bangalore, Ahmedabad and Chennai in the next five years.

Speaking to mediapersons here today at the 96th Annual General meeting of the company, ITC Ltd chairman Y C Deveshwar said the hotel in Chennai would be the biggest hotel in India with 825 rooms.

'' We will also venture in super premium, heritage and luxury hotels in various locations of the country. The company plans to set up a seven star hotel in Ahmedabad and land for the project has already been acquired,'' he said.

Three hotels would be built in Bangalore which would be in the premium segment, he added.

Talking about the company's plans about the retail segment, Mr Deveshwar said,''We are not going to foray into modern retail concept unless the real estate prices become more realistic.'' However, the company plans to introduce a new strategy of positioning itself as a wholeseller that would supply FMCG directly to the hawkers under "Choupal Fresh" brand.

'' We are still toying with this concept and also intend to have our presence felt in the modern supermarts through standalone shops,'' he said.

In the premium segment ITC currently has 200 stores under Wills Lifestyle and newly launched Miss Players segment.

ITC Limited is hopeful about the company's growth in FMCG segment, specially the food business, which grew at the rate of 60 per cent in the last fiscal.

Speaking about the company's investment plans in Bengal, Mr Deveshwar said his projects in the state, entailing an investment of Rs 1500 crore, have been delayed due to land acquisition.

''We have plans to create an integrated experimental farm cum food processing zone with logistics infrastructure. The project is yet to take off due to land acquisition hiccups,'' he said adding the horticulture projects had also been delayed due to the same reason.

 

[Bushroda]

Infosys' Aspirations in Europe
The Indian tech services giant calls its move to take over some Royal Phillips' BPO centers an "outsourcing deal structured as an acquisition"

Businessweek
27 July 2007

This will be Bangalore, India-headquartered Infosys' only second acquisition in its 25-year history where it last acquired Australian Expert Information Services for US$22.9 million in 2003.

Described by Infosys CFO V. Balakrishnan as an "outsourcing deal structured as an acquisition", the agreement includes Infosys' move to take over Philips' finance and accounting business process outsourcing (BPO) centers in three countries—India, Poland and Thailand—from Oct. 1 this year. Infosys will absorb 1,400 Philips professionals currently stationed at the three centers, into its own BPO headcount.

The Indian services giant on Wednesday announced it will pay Philips US$28 million for the BPO assets, which include infrastructure, processes and intellectual property.

The deal also entails a seven-year contract with Philips that will see Infosys providing finance and accounting services, as well as the processing of purchase orders.

Infosys will deliver its services at a reduced billing rate during the first year, after which employees the Indian company acquired can be assigned to service clients other than Philips.

Infosys said it intends to bring down the operation cost of the three BPO centers, in particular, it added that the acquisition will strengthen the company's foothold in Europe.

Infosys CEO S. Gopalakrishnan said in a statement: "Global corporations require transformation partners like Infosys to enhance their competitiveness in the flat world… We are excited to partner with Philips to take their F&A (finance and accounting)and procurement functions to the next level of transformation."

Infosys' BPO subsidiary currently has close to 11,000 employees, and posted revenues of around US$164 million—registering over 70 percent growth—and net profit of US$37.5 million in its last fiscal year, ended Mar. 31. This business registered a revenue growth rate of over 70 percent.

In an e-mail interview, Milan Sheth, a partner at Ernst & Young India's outsourcing advisory center, said the deal will allow Infosys to get "a readymade delivery engine from a very large and reputed European multinational".

Sheth said a deal of this kind, where a company exits from its captive units through a reverse BOT (built, operate, transfer), is quite popular in Europe but is still fairly uncommon in the Indian context.

Michael R Guilbault, senior analyst of professional services business quarterly at Technology Business Research (TBR), said in a research note: "This is one of the biggest outsourcing deals ever signed by an Indian IT services firm," Guilbault said, noting that the agreement is as significant as the US$244 million contract inked between Tata Consultancy Services and ABN Amro in 2005.

"This deal clearly shows that Infosys is climbing the value chain by its newfound willingness to take on staff and facilities as part of a deal," he added.

Earlier this month, rumors had swirled over a possible merger between Infosys and consulting firm Capgemini, though neither companies were willing to comment on the speculation. TBR's Guilbault noted that this union was unlikely.

 

[Bushroda]

Bharti to Spend $1 Billion on Towers, May Sell Stake
By Shailendra Bhatnagar and Catherine Yang

July 27 (Bloomberg) -- Bharti Airtel Ltd., India's largest mobile-phone operator, will spend $1 billion to expand transmission towers before joining rival Reliance Communications Ltd. in selling shares in the unit to investors.

Bharti Airtel plans to sell a stake in the wholly owned tower subsidiary, Chief Executive Officer Manoj Kohli said in an interview today, without giving a timeframe. The unit will grow to be the world's biggest by the end of the year, he said.

``A separate tower company gets a much better valuation than a single entity,'' said Mahesh Patil, who helps manage the equivalent of $1.5 billion in equity assets at Birla Sun Life Asset Management Co. in Mumbai. The incremental value creation in Bharti's case could be as much as $12 billion, said Patil, who has Bharti as his largest holding.

Reliance Communications, India's second-largest wireless operator, valued its tower assets at 270 billion rupees ($6.7 billion) when it sold a 5 percent stake, more than the entire company's market value when it went public last year.

India's government is encouraging carriers to share their infrastructure to expand coverage in rural areas. Bharti's tower spending is part of a plan to spend as much as $3.5 billion this year on network expansion to maintain its lead over Reliance and Hutchison Essar Ltd.

Tower Sharing

Bharti, about a third owned by Singapore Telecommunications Ltd., aims to have more than 65,000 towers by the end of March, from about 45,000 now, Kohli said. The company will share them with Hutchison Essar, controlled by Vodafone Group Plc, and Idea Cellular Ltd., owned by billionaire Kumar Mangalam Birla.

The legal process to set up an independent tower company will be completed by the end of October, Kohli said. The focus would be to cut energy costs, he added.

The sharing of towers will result in the greater spread of mobile-phone services and lower costs for users as carriers pass on cost benefits to customers, a unit of UBS AG said.

UBS Securities analysts Suresh Mahadevan and Lydia Chan revised their forecast for wireless penetration in India to 65 percent by March 2016 from 52 percent, mainly on account of sharing of passive infrastructure by rival carriers.

``This is likely to result in making the mobile services more affordable and available to end consumers,'' Mahadevan and Chan said in a note released in April.

Bharti shares declined 3.6 percent to 892.35 rupees at the 3:30 p.m. close of trading on the Bombay Stock Exchange today. Indian stocks fell the most in almost four months, mirroring a global decline. India's key Sensitive Index plunged 3.4 percent.

Lowest Rates

The world's lowest local mobile call charges, of about 2 U.S. cents a minute, helped India add a record 7.34 million mobile-phone users in June, beating growth in China. About 17 percent of 1.1 billion people use handsets primarily because of the lack of networks in rural areas.

Bharti is focusing on villages where 700 million people reside, Kohli said. The company has already slashed its lifetime prepaid connection fee by more than half to 495 rupees to lure lower-income users.

``We have a matchbox distribution strategy,'' Kohli said. ``Wherever a matchbox sells in India, Airtel should sell.''

Attracting more rural customers would result in a drop in the average revenue per user, a key financial parameter, Kohli said. The decline won't be of concern as long as the company's profit margin on every minute of calls made by users can be sustained, he said.

More Users

Bharti's average revenue generated by each mobile subscriber in a month declined to 390 rupees in the April-June period from 406 rupees in the preceding quarter and 441 rupees a year earlier. That drop was offset by the rise in the average usage time, which increased to 478 minutes a month from 441 minutes a year ago, the company said.

First-quarter profit at Bharti doubled to a record 15.1 billion rupees ($375 million) from 7.55 billion rupees a year earlier, the New Delhi-based company said yesterday. The profit beat the median estimate of nine analysts Bloomberg surveyed. Sales rose 53 percent to 59.1 billion rupees.

Reliance Communications announces earnings on July 31.

 

[Bushroda]

South Africa to host largest ever Indian trade delegation
July 27th, 2007

JOHANNESBURG, July 27 (NNN-BUANEWS) -- South Africa's official body for organised business, Business Unity South Africa (BUSA) is to host the largest Indian trade delegation yet to visit the country.

Next month on 2 and 3 August, (BUSA) will host a meeting known as India Calling, which forms part of the Indian Merchants Chamber (IMC) centenary celebration.

"India Calling is a very important date on South African business' calendar; we look forward to hosting our Indian counterparts and believe the conference will be educational and fruitful for all attending," said Jerry Vilakazi, chief executive officer of BUSA.

The event endeavours to promote and build business relations between India and South Africa and will in particular focus on the infrastructure, Information and Communication Technologies, pharmaceuticals, skills training, financial services, mining and media industries.

India Calling is to be addressed by President Thabo Mbeki, said the organisers, as well as India's Minister of State for Industry and various local and Indian government and business delegates

The event is to take place in Johannesburg at the Sandton Convention Centre.

South Africa has been chosen by the sub-continent's powerhouse as a strategic investment destination.

India, Brazil and South Africa are partners in the IBSA forum, which is aimed at promoting closer cooperation between the three nations, particularly in stimulating economic growth and promoting co-ordination on global issues.

The partnership also seeks to advance the developmental agenda of the South and promote closer coordination on global issues among the three nations.

Trade between the three nations has risen sharply over the past few years and is expected to grow even more significantly once a formal trade agreement is in place between the IBSA partners.

Trade between Brazil and South Africa rose to more than R10 billion in 2005 from R6.6 billion two years earlier. (R 1= 0.1411 USD)

Trade between India and South Africa totalled more than R14 billion last year, more than double that of 2003.

In November last year, the South African Revenue Services (SARS) Commissioner Pravin Gordhan hosted his Indian and Brazilian counterparts, KM Chandrasekhar and Jorge Rachid respectively at the Union Buildings.

The IBSA partners agreed to streamline issues of tax and customs administration, to enhance cooperation on tax and customs among themselves.

The revenue heads of the three nations signed a joint declaration, committing their organisations to closer ties across a wide range of areas on both the revenue and customs fronts.

The countries agreed to boost trade and economic development while also seeking to thwart smuggling, drug trafficking, fraud and tax avoidance in the three nations. -- NNN-BuaNews