Indian Economy - News & Updates - Archive

[Bushroda]

Aviation policy to attract $150 bn projects
8 Sep, 2007, 0235 hrs IST, TNN

KOLKATA: The proposed new civil aviation policy, being scrutinised by a group of ministers, is looking to attract $150 billion of investment in the aviation sector.

"We hope to attract around $150 billion — both in terms of hardware and software. In terms of infrastructure, our target is to have at least 500 airports both big and small, with a total fleet of around 1,000 commercial aircraft in the next five years and around 1,500 aircraft by 2020," aviation minister Praful Patel said on Friday.

The new policy will also actively encourage the setting up of merchant airports, Mr Patel said. “These will essentially be private airports and we would like to see more such airports coming up. However, air traffic control will remain under the government,” he added.

Tata Steel has recently announced plans to set up such a merchant airport in Jamshedpur, he added. Dubbed Vision 2020, the civil aviation policy has outlined in detail the commercial and navigationsl requirements too.

"By next year, India will be only the fourth country to have a satellite-based navigation system to manage its airspace. In terms of manpower upgradation too, the policy aims to spell out new skills and institutes needed to support aviation growth," Mr Patel said.

Significantly, the ambit of the regulatory framework in the aviation sector, now under Airport Economy Regulatory Authority, is also slated to be expanded to include crucial issues like consumer grievances and a host of other issues, Mr Patel added.

On the question of relaxation in the five years in operation and 20 aircraft fleet strength norm for domestic carriers to be able to fly abroad, Mr Patel said the ministry views that Indian carriers should command a 50% share of all in-bound and out-bound air traffic to and from the country.

Currently, Indian carriers have a 30% share of air traffic which stands further diluted if long haul routes are taken into consideration.

 

[Bushroda]

Railway’s High-Speed plan gets on track
RAGHVENDRA RAO
Sunday September 9 2007 02:08 IST

NEW DELHI: Even as serious doubts are being raised in the Rail Bhavan corridors over the feasibility and commercial viability of the ambitious High-Speed Passenger Corridor Project, the Indian Railways is buoyed over the fact that not only have nine state governments shown interest in it, they have even suggested as many as 16 routes, spread over 5,400 km, for constructing such corridors.

While Maharashtra, Karnataka, Tamil Nadu, Gujarat, Delhi, Haryana, Punjab, Andhra Pradesh and West Bengal are learnt to have formally expressed interest in the project, others like UP, Rajasthan, Gujarat, Kerala, Bihar and Jharkhand too are testing the waters. Some of the routes suggested by the states include Mumbai-Ahmedabad, Bangalore- Mysore, Chennai- Coimbatore, Delhi-Chandigarh, Hyderabad-Bangalore, Vijayawada-Vishakhapatnam and Howrah-Haldia.

What has the Railway Ministry excited is that all the states formally expressing interest have also accorded “in principle” approval for the pre-feasibility studies needed. From the beginning, the Railways was keen that state governments share the cost of pre-feasibility studies on the project, which is expected to take a minimum of two years.

The project, announced by Railway Minister Lalu Prasad In this year’s Rail Budget, essentially envisages constructing railway corridors where passenger trains can move at speeds between 300- 350 kmph.

By constructing these corridors, the Railways hopes to win back clientele that has migrated to low-cost airlines in recent times. Railway officials say that some rough surveys done on the Mumbai-Ahmedabad and Delhi-Amritsar routes indicate that a high-speed train would attract enough ridership.

Further, the Railways are keen to market the idea as an important instrument in the battle against carbon emissions. The Railways’s preliminary estimates suggest that a High-Speed Rail consumes 0.933 litres of fuel per 100 km travelled, in comparison to the 4.04 litres consumed by an airplane and 5.69 litres consumed by an economy car.

The estimates further indicate that if one were to commission a High-Speed Passenger Corridor in 2007, it would result in taking 2,36,000 cars and 74,000 buses off the roads by the year 2012.

However, the exorbitant costs involved in setting up the infrastructure for the project has many worried in the Ministry. Rough estimates prepared by Rail Bhavan mandarins suggest an expense of Rs 25,000 crore (excluding the cost of land) for every 500 km.

The Railways is mooting raising Rs 11,000 crore of it from debt, another Rs 5,000 crore through equity, Rs 5,000 crore through commercial exploitation of land and the remaining Rs 4,000 crore by viability gap funding. The bottomline, say officials, is to have zero net cost to the Government.

 

[Bushroda]

Indian economy expected to continue growing at over 9 pct - PM's advisor
FORBES, NY
09.12.07, 8:31 AM ET

MUMBAI (Thomson Financial) - The Indian economy is expected to continue growing at over 9 pct, said C Rangarajan, chairman of the Economic Advisory Council to the prime minister.

Speaking at a conference on global banking in Mumbai, he stressed that retail and consumer lending, which has grown exponentially over the past decade, needs newer methodologies and more stringent models of lending. Banking is resurgent in India, with deposits growing at 30 pct a year.

Rangarajan said the Indian banking sector must adopt better risk management approaches and evolve new models to assess credit risks for the services sector. He called for sector consolidation, citing Indian state-run banks accounting for three-fourths of all assets in the banking system.

Rangarajan added there was a real need to explore commercially-driven consolidation opportunities and the government must cut its stake in state-run banks below 51 pct, adding consolidation will drive growth in the sector, going forward.

He also said the government must decide on the approach it will take in de-regulating the sector further. He said the government must either bring additional stake, raise additional capital or have other quasi government companies like LIC take additional stake.

 

[Bushroda]

47% job growth expected in Q3, says survey
New Delhi September 13, 2007

A manpower consultancy firm today said, the employment prospects in India for the forthcoming Oct-Dec quarter are the strongest since mid-2005, with job growth expected at over 47 per cent growth, as against 39 per cent in the current quarter.

Manpower India conducts a quarterly survey of Indian employers. Today it said that all industry sectors, barring manufacturing, expect an increase in hiring activity.

The services sector has reported the most optimistic net employment outlook at over 54 per cent, as against 46 per cent in the previous quarter. The survey involved around 4,922 employers across sectors like services, manufacturing, transport and public administration among others.

"With employers implementing business strategies and plans in full motion, hiring activity is projected to gain further momentum in the quarter. The optimism of Indian employers is reflective of the pace at which business is growing across India," Soumen Basu, executive chairman, Manpower India, said.

Recent data showed that India's economy, as measured by the gross domestic product, grew 9.3 per cent in the first quarter of the current financial year.

Hiring intentions in the finance, insurance and real estate sector are considerably stronger on a quarter-on-quarter basis with an increase of 17 percentage points and a net employment outlook of plus 51 per cent.

The year-over-year comparison reveals an increase of five percentage points in the overall net employment possibility in the country.

 

[Neo]

Reverse outsourcing takes off In Indian IT firms​

(AFP)

13 September 2007

BANGALORE - Indian IT firms that thrived on the outsourcing boom in the West are themselves headed offshore, from Malaysia to Mexico, to escape the double sting of surging salaries and a rising rupee.

Tata Consultancy, Infosys, Wipro, Satyam and smaller companies are stepping up acquisitions and opening more facilities closer to US and European clients to cut costs — the reason why work was farmed out to India in the first place.

Salaries of software professionals rose 18.7 percent in 2007, a survey showed Tuesday, while the rupee has gained almost 10 percent this year to near 10-year highs against the dollar.

That’s eroding the cost advantage once enjoyed by the 50 billion dollar information technology industry, which bills two-thirds of sales in dollars but whose expenses are almost all incurred in rupees.

IT firms are “off-shoring” work to time zones and locations nearer their clients in a reversal of the trend that made Bangalore, India’s Silicon Valley, the favourite back-office of the world’s biggest companies.

Bangalore also gave the English language a new slang verb: being ”bangalored” in the US meant a person had lost his job because it had been handed to an IT company in India that would do it for a fraction of the cost.

The term looks set to lose its pejorative punch as the same IT industry, which employs 1.63 million people at home, creates and sustains thousands of jobs abroad.

This week Wipro opened a facility in the Mexican city of Monterrey to service American and European clients and Satyam launched a software centre in MSC Malaysia, a government-designated high-tech zone.

“In the past, we viewed off-shoring as India-centric, but we do not do it any more,” said Satyam founder B. Ramalinga Raju, who on Monday opened the centre to support business in the US, Southeast Asia and the Middle East.

“We look at off-shoring as delivering through high-quality workforce in lower-cost countries,” he said.

Hyderabad-based Satyam has hired 300 mostly-Malaysian IT engineers to man the facility, whose workforce will rise to 2,000 in four years to cater to clients such as GlaxoSmithKline, one of its top 10 customers.

Malaysia was chosen because of its “competitive cost environment,” said Raju, whose company is distributing work to locations where “it makes the most business sense.”

Wipro will add to the 100 employees it hired in Mexico and invest in other lower-cost locations, said chairman Azim Premji, who in August paid 600 million dollars to buy US-based outsourcing firm Infocrossing to serve American clients.

Mumbai-based Tata Consultancy, India’s top software maker, opened a centre in the Mexican city of Guadalajara with 500 employees and said it will employ “thousands more” in the next five years.

Mexico shares a similar time zone with and is within five hours flying distance from anywhere in the US, enabling TCS to provide ”nearshore services” to clients, the company said.

Infosys Technologies opened a 400-person facility in the Czech Republic to service European clients and purchased the service centres of Royal Philips in Poland and Thailand besides India. It’s also weighing potential acquisitions.

At home, wage bills are rising as Indian firms compete with multinationals to hire and keep scarce software talent.

The IT industry’s average annual salary rose 11 percent this year to 620,000 rupees (15,320 dollars), said a survey by the market-research firm IDC India for Dataquest magazine, a considerable amount in a country where the per capita income is less than 900 dollars.

“Indian tech companies must find a way out of this ever increasing wage rise as rupee appreciation squeezes their margins further,” said the industry survey.

The rupee is rising on inflows of billions of dollars into an economy growing nine percent a year.

But costs alone are not driving the “dispersal of the IT industry around the globe,” said Kiran Karnik, president of the industry grouping National Association of Software and Service Companies, or Nasscom.

“Cost optimization is just one reason,” he said. “Proximity to clients is also important, both geographically and culturally. If you want to serve clients in the US or Spanish-speaking Latin America, it makes sense to be in Mexico.”

Khaleej Times Online - Reverse outsourcing takes off In Indian IT firms

 

[Neo]

Industrial production grows at slowest pace​

(Bloomberg)

13 September 2007

NEW DELHI — India’s industrial production grew at the slowest pace in nine months in July, easing pressure on the central bank to raise interest rates from a five-year high.

Production at factories, utilities and mines rose 7.1 per cent from a year earlier after June’s revised 9 per cent gain, the statistics bureau said in a statement in New Delhi yesterday. Analysts were expecting a 9.6 per cent increase.

Reduced output may help keep inflation within the central bank’s 5 per cent target this financial year. It may also curb the pace of economic growth to the weakest in three years. “A slowdown in economic growth is building,” said Shuchita Mehta, an economist at Standard Chartered Bank in Mumbai. “The short-term outlook does not make a strong case for a rate hike, but the central bank will ultimately resort to more tightening in the fiscal fourth quarter.”

Industrial production in the four months ended July rose 9.6 per cent compared with an 11.1 per cent gain in the same period last year, today’s report said. The central bank expects the economy to grow 8.5 per cent in the current financial year, the slowest expansion since March 2005.

The benchmark Sensitive index fell 0.3 per cent to 15,502.83 at 3 pm on the Bombay Stock Exchange. The yield on the benchmark 10-year note dropped 2 basis points to 7.88 per cent on optimism the central bank will soon end its policy of raising borrowing costs.

Interest rates

The central bank has raised its policy rates by 2.25 percentage points in the past three years, and since December has increased the proportion of deposits commercial banks must place with it as reserves by 2 percentage points to 7 per cent. As a result, loans to consumers and companies grew at the slowest pace in three years last month, helping the benchmark wholesale-price inflation cool to 3.79 per cent in the week ended August 25, the government said on September 6.

“I expect inflation to pick up again next year,” said Robert Prior-Wandesforde, an economist at HSBC Holdings Plc in Singapore.

The central bank last month said inflation concerns persist because of rising commodity prices and demand for goods exceeding their supply. Crude oil today traded close to a record in New York, while the price of wheat, which India has been importing in the past year, surpassed $9 a bushel today.

“There has been a moderation in demand, but demand continues to be strong because of rising personal incomes,” said D. H. Pai Panandiker, president of RPG Foundation, an economic policy group in New Delhi.

Price increases

Tata Steel Ltd., the world’s sixth-largest steelmaker, said it plans to raise prices of hot-rolled coils this month by as much as Rs500 ($12) a metric tonne because of rising demand. “We are not able to meet the needs of all our customers,” said T. Mukherjee, deputy managing director of Tata Steel.

Still, manufacturing output in July increased 7.2 per cent, slower than the 9.8 per cent gain in the previous month, yesterday’s report said. Mining gained 4.9 per cent, while electricity rose 7.5 per cent, the report said. Higher interest rates are denting sales of cars, trucks and motorcycles, which dropped in three of the first four months of the current fiscal year.

Hero Honda Motors Ltd. and Baja Auto Ltd., India’s biggest motorcycle makers, continued with production cuts announced in June as consumer demand waned. “Higher interest rates are impacting everyone,” said Jagdish Khattar, managing director at Maruti Udyog Ltd., which is luring buyers with cash incentives to boost its sales. He said last week the company may fall short of the record 20 per cent sales growth it achieved in the last financial year.

July’s industrial production was also affected by a slump in output from Coal India Ltd. after a conveyor belt broke down. Coal India produces 87 per cent of the nation’s coal and supplies companies such as National Aluminium Co., which partially closed its factory at the end of July.

Khaleej Times Online - Industrial production grows at slowest pace

 

[Bushroda]

Banking on India
By KATHLEEN KINGSBURY
TIME
Thursday, Sep. 20, 2007

Like most popular managers, L. Brooks Entwistle, head of Goldman Sachs India, maintains an open-door policy. Entwistle admits, however, that this accessibility hasn't always been by choice. "When your entire office is a hotel room packed with desks, you can't help getting to know your colleagues," he says.

He laughs at the memory now, but those cramped quarters served as the unlikely launching pad for the investment bank's billion-dollar bet on India. Entwistle's version of sightseeing in Mumbai (formerly Bombay) is a tour of the old Goldman outposts in India's financial hub. First stop, suite 1034 at the Hilton--down the hall from a group of Thai masseuses and rotating airline crews--where Goldman set up shop in late 2005, with Entwistle as employee No. 1. Next, a second temporary home in a worn-down office building abutting a sprawling slum. When rains flooded the streets, many employees chose to stay the night rather than wade through the ****** water. Entwistle points out the Dumpster that the firm donated to the block, as well as the spot where the generator truck running the trading floor used to park. "When you're working out of a dump, you know you've really got people's loyalty," Entwistle says. Another benefit, he notes wryly: "It's not hard to get them to go out and meet clients."

The Mumbai team, assembled from around the world in just 18 months, has already managed two record deals for India's banking industry: Vodafone's $11 billion purchase of mobile-phone provider Hutchison Essar, announced in February, and ICICI Bank's $4 billion secondary public offering in June.

With an economy growing at about 8% a year and corporate earnings a robust 25%, India has become a must-see for multinational investment banks looking for big, bold corporate mergers, acquisitions and financing deals outside the U.S. The country's total market cap reached $1 trillion earlier this year, up from just $280 billion five years ago. Companies in India's technology and financial sector are booming, and the world's investment bankers are paying court. Banks used to "come to India about once a decade, get spooked and pull out," says industry analyst Janmejaya Sinha of Boston Consulting Group. This time around, "it's going to take more than parachuting in."

Goldman Sachs cut ties in March 2006 with a halfhearted joint venture it had held for more than 10 years and pledged $1 billion in investment capital for India. Entwistle says he immediately got to work convincing Mumbai's business community that Goldman is in India full force. He told them, "We've brought the boats ashore, and we're burning them."

A company like Goldman has access to plenty of talent, but shaping a team in a hot market with a lousy infrastructure required a new strategy. As more foreign banks move in and local institutions grow, salaries in India's financial-services sector, like those in the even hotter technology sector, are skyrocketing, and turnover in many firms tops 35%. Goldman "took a different approach to hiring than most multinationals," says Luis Moniz, a Mumbai-based analyst for the human-resources consultancy Heidrick & Struggles. Most rivals tried a balanced approach, with half local hires for on-the-ground expertise and half expats to maintain a connection to the head office.

Entwistle threw that logic out with last night's room service. He initially recruited the majority of his investment-banking team from other Goldman offices. They had in common a commitment to make Goldman a player in India's boom. All but two employees are of Indian descent, but they're as likely to have come from New York City, London or Tokyo as Bangalore. Their boss can rely on "a team that knows Goldman's particular systems and culture inside and out," Moniz says. "They only have to get up to speed on the local market."

Nikhil Bahel, a Goldman vice president who arrived from the bank's New York City headquarters in May 2006, says he came to India "to chase the most entrepreneurial opportunity the bank has going on right now." Sandeep Patel, head of corporate finance, hoped to be part of "something historic." Rishi Maheshwari wanted the responsibility and client interaction of a smaller office. All of them say the chance to work for Entwistle sealed the deal. Built like an aging quarterback, the 39-year-old Colorado native is a charmer. His favorite stories usually involve one of his three daughters or some bit of subcontinental trivia picked up on one of the 50 trips he's made to India from Goldman's Hong Kong office since 1998. "Brooks has a limitless passion for being here," says analyst Debanshi Basu, who transferred from Bangalore. "You know he's committed to doing great things, and you want to be part of that."

The pristine space that Entwistle eventually secured for Goldman's Mumbai headquarters--three floors in a building in the eclectic Prabhadevi neighborhood--certainly looks like the office of a serious investment bank. But it feels more like the postcollegiate playground of a Silicon Valley start-up. Meetings seem to happen as often over cubicle walls as in boardrooms. Goldman employees come back from business trips abroad with a pound of Starbucks coffee for the office. On weekends, you'll find them building houses for the poor or taking the kids to the Entwistles' for Saturday brunch. Every Monday morning, Entwistle gathers the troops. "He calls on even the most junior people to talk," says associate Anjali Talera, "and everyone's contribution is treated as equally crucial." A local hire from Merrill Lynch, Talera says that feeling is "rare in investment banking."

Goldman vice president Sunil Sanghai, whom Entwistle lured from Morgan Stanley, says these strong personal bonds translate directly into stronger client relationships. Sanghai should know. He brokered Goldman's lucrative role in the ICICI offering. "You always hear how much teamwork means at Goldman, but it's true," Sanghai says. "If a client wants research overnight, I have 2,000 bankers worldwide willing to help."

That confidence may come in handy in the next few months. The U.S.'s subprime woes will have little effect on Indian investors, who have largely avoided leveraged buyouts, unlike their U.S. counterparts, who have been relying on the now shaky credit markets to finance those deals. But if global credit markets tighten, "India won't be immune," says Ernst & Young financial-services analyst Ashvin Parekh. Foreign investors sank $98 billion into India from 2003 to 2006, according to Morgan Stanley, and every major investment bank in the world is chasing that business. Less free-flowing credit will inevitably lead to Indian companies' eyeing fewer deals and therefore to even more competition for their business. In India, commissions and fees are often less than a quarter of what they are in the West, so if foreign banks want to make money, says Alok Aggrawal, chairman of market watcher Evalueserve, they will have to go after the biggest, most profitable deals. "That's a small pool with a lot of sharks."

Such talk will hardly dampen Entwistle's plans. He's adding personnel rapidly, sometimes an employee a day. Goldman Sachs has also built relationships with Indian universities and M.B.A. programs in an effort to nourish the Goldman culture in India from the ground up. The bank plans to hire most of its India staff locally within the next few years. Previously, the only way to recruit India's top students was by offering them the chance to go abroad. "Now they don't want to miss out on what's going on at home," Entwistle says, "and we can finally offer it to them."

Not that Entwistle doesn't have grand ambitions for the team he already has. Beyond more blockbuster deals, he wants to field a group of runners in Mumbai's annual marathon next January. "Participation isn't mandatory," he says, "but I think I can convince most people to join." You'll find him at the head of the Goldman pack.

 

[Bushroda]

Indian rupee surges past 40 on Fed cut
Gulf Times, Qatar
Friday, 21 September, 2007, 08:10 AM Doha Time

MUMBAI: India’s rupee strengthened beyond 40 per dollar for the first time in nine years as a US interest-rate cut prompted investors to seek higher returns in the world’s second-fastest-growing major economy.

The rupee is Asia’s best-performing currency this year, climbing 11%, as share purchases by overseas investors surpassed the total for 2006.

The benchmark Mumbai Stock Exchange Sensitive Index, or Sensex, has climbed 4.3% to a record since the Federal Reserve’s Tuesday rate cut.

“The Fed’s rate-cut is the key reason for a rupee rally,” said Richard Yetsenga, a strategist at HSBC Holdings in Hong Kong. “The authorities in India will undertake policies periodically to slow the move, but there isn't much anybody can do about the ultimate direction.”

The rupee surged 0.8% to 39.8825 against the dollar, the highest close since May 13, 1998, according to data compiled by Bloomberg. Yetsenga expects the currency to rise to 39 by the end of the year and to 37.5 by December 2008.

The currency’s rally had slowed after it breached 41 to the dollar in April as the central bank sold the rupee and global investors shunned emerging market assets because of a deepening credit market slump. The currency has risen 1.5% since the Fed's decision to cut rates, which reduced investor concern that global economic growth will slow.

Indian Trade Minister Kamal Nath said the gain in the rupee is a cause for concern and the government is considering a relief package for exporters. “Export is the engine of growth and we have to ensure that growth is not affected,” Nath told reporters in New Delhi yesterday. “We are going to look at it immediately. It’s a new situation and a new situation requires a new response.” The Reserve Bank of India on September 14 arranged purchases or sales of foreign exchange to contain volatility. The central bank bought $11.4bn in July, the most since February, central bank data show.

The sensitive Index climbed to a second straight record yesterday. Raw-material producers rose, led by Hindalco Industries and Oil & Natural Gas Corp, after the prices of metals and oil climbed.

The Bombay Stock Exchange’s Sensex added 25.20, or 0.2%, to a record 16,347.95, after yesterday exceeding 16,000 for the first time.

The S&P/CNX Nifty Index on the National Stock Exchange climbed 15.20, or 0.3%, to 4,747.55. Nifty futures for September delivery rose 0.1%, to 4,748.

Software exporters fell, led by Tata Consultancy Services, after the rupee climbed, reducing the local-currency value of their US sales.

Tata Consultancy, the country's largest software exporter, fell Rs21.65, or 2.1%, to Rs1,000.80. – Bloomberg

 

[Bushroda]

Fortune Magazine Plans India Edition
By RAJESH MAHAPATRA AP Business Writer
© 2007 The Associated Press

NEW DELHI — Time Inc. plans to start an Indian edition of its Fortune magazine under a license deal with a local media company, an editor at the U.S.-based business publication said Friday.

Under Indian laws, a foreign company has to form a joint venture with a local company or give a license to one to publish news in India.

Fortune plans to bring out an Indian edition through a licensed deal with a local publishing group, Robert Friedman, the magazine's international editor, told The Associated Press.

Friedman didn't name the Indian group. He said a formal announcement will be made closer to a business leaders' conference Fortune is hosting in New Delhi beginning Oct. 29.

That meeting _ the Fortune Global Forum _ will be attended by Indian and international business executives and government officials, including U.S. Treasury Secretary Henry Paulson.

"We would like to use the global forum to help expand Fortune's presence in India," Friedman said. "We think we are under-leveraged in India."

Currently, the magazine, published every two weeks, sells about 8,000 copies per issue in India. That number could increase 10 times with a local edition, Friedman said. Under a license deal, Fortune would get a royalty from the Indian partner.

Rapid globalization of the Indian economy and rising middle class incomes are driving demand for such products as Fortune, which caters to wealthier readers interested in international investments and personal finance. Several global media companies have entered India in recent years to seize the opportunity in this segment of readers with more money to spend on leisure and business reading.

New York-based Conde Nast Publications Inc. recently introduced a local edition of fashion and lifestyle magazine Vogue. Conde Nast also plans to bring Glamour, Vanity Fair and Traveler to India depending on the success of Vogue.

Magazines like Cosmopolitan, Marie Claire, Men's Health, and Maxim are already being published through joint ventures. A local edition helps these magazines compete with their Indian rivals.

A copy of Fortune currently sells for 80 rupees (US$2), four times the price of an Indian business magazine.

 

[Bushroda]

"India After Gandhi" | The rise of a nation and the people behind it
By John Freeman
Special to The Seattle Times

India, which last month marked the 60th anniversary of its independence, has a great deal to celebrate. It has become one of the most powerful economies in the world, has fought back a wave of organized crime as violent as that that plagued Chicago in the '20s and is building strong alliances regionally and internationally.

"India After Gandhi," a massive, illuminating and highly readable volume by economist and cricket historian Ramachandra Guha, however, makes a compelling argument that India's most profound success is not its economy but its nationhood.

"At no other time or place in human history have social conflicts been so richly diverse, so vigorously articulated, so eloquently manifest in art and literature," writes Guha, "or addressed with such directness by the political system and the media." Guha's book goes a long way toward explaining which founding men and women made this possible. The list includes the country's first prime minister, Jawaharlal Nehru, and his daughter, Indira Gandhi, who had the bravery to abolish parliament to save Indian democracy, as well as Bengali film giant Satyajit Ray, whose social realist films became a mirror of the new state.

Guha carefully tracks how the young country forged an idea of itself and used it to bind disparate groups. He takes a close look at the forming of the Indian Constitution, which at 395 articles and eight schedules is one of the largest in the world, and the amalgamation of the some 500 princely states as Gandhi gradually began to strip princes of their titles and purses in 1967.

In addition to his other hats, Guha is a biographer. If one criticism can be leveled at this impressive history, it is that it would have been helpful for Guha to apply more of his biographer's skills to the great number of characters an American reader will meet (probably for the first time) here. Guha is an elegant analyst of why India succeeds — and he brilliantly describes the permutations of India's complex government — but it would be terrific if he brought to life the people who believed in the project as well as he describes the ideas that kept them aloft.

The end of Britain's empire over the territory that became India and Pakistan gave birth to a powerful democracy; but first came the bloodshed. In the years leading to and after partition, over a million people died in a firestorm of killing that raged between Hindus, Muslims and Sikhs.

At the center of it all were five figures, from Mohammad Ali Jinnah to the towering Nehru, whom Alex von Tunzelmann reveals in all their human foibles in "Indian Summer." Even today's soap operas would have trouble rivaling the real-life dangerous liaisons going on behind the scenes among these powerful and important figures in 1947.

For starters, the wife of Louis "Dickie" Mountbatten, who the British had dispatched as viceroy, was probably conducting an open affair with the future prime minister Nehru. Von Tunzelmann is clearly fond of the cuckolded Dickie but is less smitten with Mohandas ("Mahatma") Gandhi, whom she paints as an eccentric counterpoint to this randy atmosphere, campaigning against sex and for a morally pure new state. Dickie's wife, Edwina — affairs aside — comes across as more human, helping out with refugees in a country far from home.

Bridging these dramatic personal details with the anguished cost of independence is a tough task, and von Tunzelmann, as good a writer as she is, does not prove entirely adept at juggling the two — especially as she has a mostly forgiving picture of Mountbatten and his wife.

One departs this guiltily enjoyable read with a lingering sense that the harder, more anguished drama — that of the million lives lost — has yet to be told.

John Freeman is president of the National Book Critics Circle.

 

[Bushroda]

India's Inflation Rate Eases to Lowest Since 2002
By Kartik Goyal and Cherian Thomas
Bloomberg

Sept. 21 (Bloomberg) -- India's inflation eased to the lowest since 2002, as interest rates at a five-year high began to tame consumer demand for cars and homes.

Wholesale prices rose 3.32 percent in the first week of September from a year earlier, down from a 3.52 percent gain in the previous week, the Ministry of Commerce and Industry said in a statement in New Delhi today.

Inflation is also slowing as adequate rains increase supplies of fruits, vegetables and wheat. Still, record foreign investment, and rupee sales by the central bank aimed at stemming currency gains, are flooding the Indian economy with cash and threaten to rekindle price gains.

``If foreign investment flows continue at such elevated levels, then the central bank will have to resort to another increase in the cash reserve ratio,'' said Sujan Hajra, an economist at Anand Rathi Securities Ltd. in Mumbai. ``Excess liquidity in the system can stoke inflation.''

India's central bank has been relying on the cash reserve ratio, or the proportion of deposits lenders need to place with it as reserves, to curb bank lending. Governor Yaga Venugopal Reddy's next monetary policy statement is due Oct. 30.

The yield on the benchmark 10-year government bond held at 7.83 percent after the release of the inflation data, which was more than analysts' estimate of 3.28 percent.

Stronger Currency

India's currency has strengthened beyond 40 per dollar for the first time in nine years amid unprecedented overseas investment in local shares. The central bank has injected rupees worth $43.1 billion in the nine months to July, almost three times the amount in the previous nine months, to prevent the currency from gaining more.

Overseas investors bought a net 24.85 billion rupees ($608.6 million) of Indian shares on Sept. 19, nine times the average of the last six months. The Securities & Exchange Board of India will release data for yesterday's purchases later today.

Foreign investors are buying shares and building factories in India to take advantage of the nation's record growth, which is second only to China among the world's biggest economies.

Consumer prices in China surged 6.5 percent in August, the fastest rate in 10 years, led by food. Of 20,000 households surveyed in a central bank quarterly report released yesterday, a record 61.3 percent said they expect inflation to quicken in the fourth quarter.

China's central bank last week raised interest rates for a fifth time this year. It has also ordered lenders to set aside larger reserves on seven occasions since January and sold bills to soak up cash from the financial system.

India today revised the inflation rate for the week ended July 14 to 4.76 percent from 4.41 percent. The government revises the inflation rate after a delay of two months on additional price data.

 

[Bushroda]

Air India Starts Talks With Boeing, Airbus; Eyes A380
CNN Money
September 21, 2007: 01:52 AM EST

NEW DELHI -(Dow Jones)- State-owned Air India has begun talks with Boeing Co. (BA) and Airbus to buy new planes including the A380 superjumbo, people familiar with the development said Friday.

In July, Air India said it plans to buy about 60 new passenger jetliners over the next few years and aims to start the selection and purchase process by mid- August.

"The airline is in touch with both Boeing and Airbus on the types of aircraft available and what will be required in the industry in future," said a senior airline executive, who didn't want to be named.

In March, the government approved the merger of Air India and Indian Airlines to take on rising competition from domestic and foreign rivals. The merged airline named Air India, which is run by the National Aviation Co. of India, has a fleet of more than 110 planes with an additional 111 on order.

"There is a committee in the airline which is discussing the ratio of planes to buy, how many small capacity and short haul and how many ultra-long range. It includes the A380 and the 747-800 model," the airline executive said.

In a move to modernize their aging fleets, Air India ordered 68 Boeing jets, worth over $11 billion at list prices in December 2005, while Indian Airlines placed a $2.2 billion order in February 2006 with European Aeronautic Defence & Space Co. (5730.FR) unit Airbus, for 43 planes.

"Air India has had preliminary discussions with Airbus and they have expressed interest in the A380," another person, who also didn't want to be identified, said.

Consultancy firm Ernst & Young India forecast in a recent report that the fleet size of Indian carriers will more than triple to 700 from 235 by 2012.

India's aviation industry is expected to grow by more than 25% annually over the next few years as a rapidly expanding economy boosts incomes, making it an attractive market for local and international carriers.

 

[amunhotep]

The rising rupee is seriously hurting exporters.

hoping for a correction in the rupee.

 

[Bushroda]

Rupee expected to continue advance after hitting nine year high
By Sam Nagarajan
International Herald Tribune, France
Published: September 20, 2007

NEW DELHI: India's rupee climbed beyond 40 per dollar for the first time in nine years, as the U.S. Federal Reserve's interest-rate cut prompted investors to seek higher returns.

The rupee is the best-performing currency in Asia this year, climbing 11 percent, as share purchases by overseas investors surpassed the total for 2006. The benchmark Bombay Stock Exchange Sensitive index, or Sensex, rose to a record after climbing 35 percent in the past 12 months.

"The Fed's rate cut is the key reason for a rupee rally," said Richard Yetsenga, a strategist at HSBC. "The authorities in India will undertake policies periodically to slow the move, but there isn't much anybody can do about the ultimate direction."

The rupee surged as much as 0.8 percent to 39.8975 against the U.S. dollar, the highest since May 14, 1998, before trading at 39.925 at midday in Mumbai, according to data compiled by Bloomberg. Yetsenga expects the currency to rise to 39 by the end of the year and to 37.5 by December.

The Reserve Bank of India said on Sept. 14 that it intervenes in currency markets, arranging purchases or sales of foreign exchange to contain volatility. The central bank bought $11.4 billion in July, the most since February, central bank data show.

"The government's measures to curb the rupee have thus far been half-hearted," said Ganesh Kumar Gupta, the president of the Federation of Indian Exporters in New Delhi. "If the rise in the value of the rupee continues, 8 million people are likely to lose their jobs by the year-end."

The Indian trade minister, Kamal Nath, said in New Delhi that the gain in the rupee is a cause for concern and the government will consider granting some form of subsidy to exporters. The central bank will probably intervene as the currency rises to 39.50, said Y.M. Deosthalee, the chief financial officer of Larsen & Toubro, the biggest engineering company in India. N.R.K. Raman, chief executive officer of I-Flex Solutions, an Indian computer software company controlled by Oracle, is also worried. "We are taking steps, including improving efficiency and productivity, to counter the rise of the rupee."

The Sensex, which climbed above 16,000 for the first time Wednesday, rose as much as 0.3 percent Thursday as investors bought emerging market equities.

Overseas funds bought $9.5 billion more in Indian equities than they sold this year, compared with $8 billion in all of 2006, according to the Securities & Exchange Board of India. "Even in the event of a slowdown in the U.S., we think India is a good story," said Irene Cheung, a strategist at ABN Amro. "The appetite for risk is coming back."

The rupee may rise to 39 by the end of 2008, Cheung said. The median forecast of 19 strategists surveyed by Bloomberg is 40. The spread, or the yield difference, between a 10-year U.S. Treasury note and a similar-maturity Indian government bond has widened to 3.32 percentage points from 2.77 percentage points July 18, Bloomberg data show.

"The outperformer in Asia is the Indian rupee," said Tetsuo Yoshikoshi, a market analyst at the treasury unit of Sumitomo Mitsui Banking in Singapore. "We're seeing a lot of investor inflows into India."

Growth in the fourth-biggest economy in Asia unexpectedly accelerated in the quarter ended June 30 to 9.3 percent. Only the 11.9 percent growth of China in the period was faster among the 20 largest economies in the world.

The central bank governor, Yaga Vengupal Reddy, has increased the repurchase rate six times since the beginning of 2006 to 7.75 percent, a five-year high. The pace of the currency's rally may slow as the central bank buys dollars to prevent a stronger rupee from hurting exporters, said Indranil Pan, the chief economist at Kotak Mahindra Bank.

He said that rising demand for imports was also a threat to the rupee's advance. India's trade deficit widened to $38.2 billion in the seven months through July from $26.1 billion a year earlier, according to government data. Oil is trading close to a record high, which may widen the deficit as India depends on shipments from abroad to meet three-quarters of its energy needs.

The euro is more important to India than the dollar because the European Union accounts for 40 percent of the goods exports, said Sebastian Barbe, an economist and currency strategist at Calyon in Hong Kong. The rupee has weakened against the euro by 0.8 percent in the past month, Bloomberg data show.

"The Reserve Bank of India is also looking at the currency on a trade-weighted basis," Barbe said.

 

[Bushroda]

India and China struggle over Latin oil
India follows in China's van in securing energy supplies in Latin America. Indian oil firm Reliance is closing on deal for two oil blocks in Peru. Indian interests also nosing around Colombia and elsewhere.

by Alex Sanchez
EnerPub, TX
Friday, September 21, 2007

The Oil Race is on: China signs multi-billion dollar oil contract with Venezuela but India also wants Latin American Oil

It is no revelation to say that India, as it begins to bloom as a global power, is adopting a China-like posture in its search for new oil suppliers. New Delhi’s quest for energy supplies, as well as other extracted resources, has brought the Asian powerhouse to the Western Hemisphere, and to Washington’s attention. India is befriending potential oil suppliers, be it Mexico or Venezuela, Cuba or Canada. Even more interesting are New Delhi’s approaches to Cuba regarding the island’s possible oil reserves. It seems clear that India is hungry for guaranteed oil sources in order to maintain its booming economy’s momentum and its growing geopolitical influence, and in Latin America it is finding these potential suppliers and new friends.

Indian Oil Hunger

On July 2nd, the Financial Express published an article predicting that the Indian government will send the Indian Navy to fly the flag throughout the hemisphere in oil-rich zones, especially locations where the state-owned oil company, ONGC Videsh Ltd (OVL), has invested in oil and gas exploration. Pranab Mukherjee, external affairs minister, said that maritime diplomacy has become an essential component of India’s overseas foreign policy and that it must fulfill its necessities outside the immediate geographical area. “We have to look at the investments ONGC Videsh is making in energy rich areas such as Sakhalin, Sudan, Nigeria and Venezuela and extend our maritime interests through maritime diplomacy,” Mukherjee said.

Furthermore, a senior member of the Confederation of Indian Industry (CII) said the obvious when he noted that “oil is the need of the hour and India has to focus on new markets to get the momentum going. We have to go beyond Europe and build economic cooperation.” According to a report issued by the Indian news agency PTI, the growth of oil imports in the first four months of 2006-07 came to 43 percent, 32 percent in 2005-06 and 62 percent in 2004-05. India is importing crude oil not only to meet domestic demand of petroleum products, but also for export of value-added products. The report mentions that Indian oil imports, mostly comprised of crude oil, were valued at $19.87 billion between April 2007 and July 2008. India also has plans to have as much as 5 million tons of oil in reserve for emergency use. The country currently imports around 70% of the oil it consumes.

It is only natural that India will soon have to turn in a major way to areas with reliable sources of oil, like Latin America, which presently is the second-largest source of oil reserves after the Middle East.

Venezuela

Last September, as reported by the Caracas daily El Nacional, Venezuela’s Hugo Chávez was quoted as saying: “India needs more oil each day. Venezuela wants to become and will become India’s oil supplier.” Not long after that, in January 2007, there were reports that Venezuela’s state oil company, Petróleos de Venezuela SA, or PDVSA, was looking at the possibility of setting up a refinery in India and establishing a petroleum retailing venture there. An Associated Press article elaborated that the proposed refinery would process the Venezuelan crude from the San Cristobal block, where India’s ONGC Videsh Ltd., an arm of ONGC, has been offered a 30 percent stake. The block has the potential to produce 900,000 to 1 million barrels of oil daily. On February 16, AFX International Focus reported that President Chávez said he is ready to divert oil exports from their current markets to other countries like China and India, although his ability to find an immediate alternative market is complicated because most refineries capable of processing Venezuela’s heavy crude are located in the United States.

Recently, Chávez ran into trouble with foreign oil companies regarding the nationalization of oil production ventures in the South American country. As a result, oil companies like Exxon and Conoco operating in the country decided to liquidate their stakes in Venezuela and seek just compensation. It is unclear if this nationalization would also affect Indian companies, but it seems clear that, regardless of whatever decisions Chávez carries out, New Delhi intends to go well out of its way to obtain a share of Venezuelan oil rights. This is particularly true after the recent $10-billion deal signed between Beijing and Caracas. China already is India’s direct competitor in Asian energy markets, and New Delhi cannot afford to be left out of the race for dwindling global oil supplies.

As important as Venezuela is, due to its vast oil reserves, it is noteworthy that India is also looking for oil suppliers elsewhere in the region.

Brazil

A March 29 article by Business Times Singapore provides the example of Brazil as an untapped oil giant. The article explains that with almost 12 billion barrels, Brazil ranks third in proven oil reserves in the region, after Mexico and Venezuela; it also has much unexploited potential reserves. Sixteen per cent of Latin America’s oil supply in 2005 came from Brazil and the country’s market share is scheduled to expand to 21.5 per cent by end-2010, with 2.5 million barrels per day in production.

Brazil’s major oil reserves are certainly of interest to India. A June 4 AP Financial Wire article reported that India’s state-run Oil and Natural Gas Corporation (ONGC) and the Brazilian state-run oil leader Petróleo Brasileiro, or Petrobras, “agreed to swap interests in oil exploration blocks, as part of efforts to boost economic cooperation between the two countries.” The blocks are located in Maranhão, in the Sergipe-Alagoas Basin and in the Santos Basin. Last year, the Indian company bought a 15-percent stake in a Brazilian offshore oil field for about US$170 million from Royal Dutch Shell PLC, after Petrobras agreed to waive its first right to buy that stake once it became available. Under the latest agreement, Petrobras plans to offer 25- to 30-percent stakes to ONGC in three exploration blocks in Brazil.

Mexico

A September 10 Deutsche Presse-Agentur article explains that in 2006 crude oil accounted for 90 percent of Mexico’s exports to India, which makes petroleum the cornerstone, at this time, of Indian-Mexican relations. In addition, the Mexican Energy Secretary has released a press statement announcing that four companies—the Colombian state oil company Ecopetrol, Japan’s Itochu, India’s Reliance, and the U.S. company Valero—have shown interest in building a refinery in Central America. The members of the Plan Puebla Panama (PPP) co-operation scheme back the project, with four countries (Costa Rica, Guatemala, Honduras and Panama) interested in being considered as the location for the new refinery.

The idea of building this type of oil facility was first announced by former Mexican president Vicente Fox at the Summit of the Americas, held at Mar del Plata in November 2005. According to a July 9 article which ran on the AP Financial Wire, Mexico has promised to supply the plant with 80,000 barrels of heavy crude daily from the state-owned oil company, Petróleos de Mexico. The company that wins the construction bid will also be committed to supplying 55,000 barrels a day of gasoline and diesel stock (36 percent of regional demand) at a preferential price.

The aforementioned Business Times article regarding Mexico mentions that the country is stepping up oil production, and is expected to produce 3.8 million barrels of oil per day by 2010, which adds up in total to about 33 percent of Latin America’s supply. Mexico’s share of regional refining capacity, at almost 21 percent in 2005, is likely to expand to almost 23 percent. The country has six refineries with a total capacity of about 1.5 million barrels per day.

It will be interesting to see how the recent bombings around a dozen oil and gas pipelines in the Gulf Coast state of Veracruz affect, it at all, Indian-Mexican relations and oil-related projects. The People’s Revolutionary Army (ERP) has claimed responsibility for these attacks. President Felipe Calderon was actually on a visit to India when the incident occurred. He declared that “there is no room for such criminal acts in a democratic Mexico.”

Cuba & the Caribbean

In September 2006, India’s Oil & Natural Gas Corp. announced they will explore oil deposits in the N-34 and N-35 blocs of Cuba’s economic exclusion zone in the Gulf of Mexico. Cuban President Fidel Castro partly opened the oil sector to foreign investment in June 1999, in order to cut dependence on oil imports after years of power blackouts and fuel shortages. The blocs have an estimated size of about 1,660 square miles and are located in western Cuba. This is a six-year agreement through which the Indian oil giant will explore an area of 4,300 square kilometers (1,544 square miles) of Cuban waters. \

When the decision was announced, Florida’s daily St. Petersburg Times published an article explaining that: “exploring for oil ninety miles off the coast of Florida has set off a political debate over whether U.S. companies, sidelined by sanctions, should be allowed to explore there. Some Florida lawmakers say they are worried about environmental damage and the potential threat to Florida’s tourism industry, and want companies exploring with Cuba punished.” U.S. companies are barred from oil exploration in Cuba’s offshore due to executive-mandated trade sanctions enforced against Havana since 1962.

It is noteworthy that Cuba is not the only country that India is courting in the Caribbean, nor is it only oil on India’s mind. An April 24 article by Business Line explained how relations are improving between Trinidad and Tobago and India. The article explains that there have been on the Caribbean island, with its large Hindu population, a total of $3 billion in Indian investments. Mittal Steel has invested $1.8 billion, while Essar Steel is setting up another steel plant costing $1.2 billion. The island also possesses abundant oil reserves. Finally, the article notes that a delegation from Reliance Industries Ltd (RIL) was in Suriname last month looking at the possibility of oil exploration and production as well as mining projects.

Colombia, Peru and Bolivia

Meanwhile, with respect to Colombia, a key South American player, New Delhi is also making its presence felt. Last September, the Press Trust of India reported that the Indian Oil company paid about $425 million dollars to acquire 50 percent stake in the Colombian oil firm, Omimex de Colombia. The article explains that India’s state-owned ONGC Videsh Ltd, the overseas arm of ONGC, and the Chinese firm Sinopec are paying $850 million dollars to acquire Omimex de Colombia, which currently produces 20,000 barrels of oil per day.

With regards to Peru, the Indian company Reliance is at an advanced stage of closing contracts on two oil blocks in the Andean country.

Finally, as a side note but of equal importance, even if it is not oil-related, is a recent deal between New Delhi and La Paz, regarding El Mutún in Bolivia, the world’s largest undeveloped iron deposit, which is estimated to contain more than 40 billion tons of ore. Jindal Steel & Power Limited (JSPL) along with its subsidiary Jindal Steel Bolivia (JSB), signed a contract with the Bolivian government, through which JSPL will invest US$2.1 billion over eight years to develop an integrated steel plant in the country. A JSPL press release explains that “this is the largest investment by an Indian company in Latin America and the largest foreign investment in a single project so far in Bolivia.”

Oil and Friends for New Delhi

Along with China, India is one of the world’s growing superpowers. With this new position comes a demand for energy to supply its accelerating economy and its increasingly diversified industries. By entering the Western Hemisphere, India is expressing interest in Washington’s backyard; even more interesting is New Delhi’s approach to Cuba. This must be of major concern for Washington as it refuses to loosen its trade barrier on the Caribbean island. What’s worse for the U.S., it is hardly in a position to exercise pressure on its vital newfound Asian ally. Washington seems to be caught between a rock and a hard place, while Indian influence, in its quest for oil, continues to expand throughout the Western Hemisphere, unencumbered by ideological considerations or historic political animosities.

This analysis was prepared by Research Fellow Alex Sánchez of the Council on Hemispheric Affairs.