Indian Economy - News & Updates - Archive

[Bushroda]

India's Innovation Attracts SAP
By Pankaj Maru
CXOToday, Mumbai
Jun 5, 2008

In January 2006, the out-going CEO of SAP, Henning Kagermann said, "India is slowly getting expensive. So, we've decided to hire a certain number there, and then start looking at other locations." He was quoted in the German edition of Financial Times.

It's over 2 years now since this statement was made, and today we see a total shift in SAP's business strategy.

India has made phenomenal progress, particularly with the IT companies propelling the overall economy toward constant growth. This growth is being realized by many big companies. And SAP India is no exception.

For SAP India, this progress was attractive enough and in the ongoing SAP Summit 08, the company has revealed its investment plans for India. By 2010, the company plans to invest around USD 1 billion through SAP Ventures.

While referring to Kagermann's statement about Indian offshore development market getting expensive, Bill McDermott, president and CEO of SAP (Americas and Asia Pacific Japan) commented, "India is an attractive and expanding market and it's growing continuously."

McDermott added, "We'll invest in IT sector, particularly enterprises and emerging companies. At present, we're looking at a dozen investments, and within next 2-3 months we'll close 3 investment deals."

Ranjan Das, CEO and president of SAP India, stated, "SAP hasn't come to India to find cheap offshore development services. Instead, it has come for innovation and India offers that."

SAP Ventures started its operations in 1997 and over the past 12 years it has been investing in IT companies in the US and Europe. Presently, it has invested in 38 companies globally. Red Hat, Virsa, and MySQL are some of the US companies it has invested in.

However, this is the first time, SAP Ventures plans for direct investments in India. This is expected to boost emerging companies working in the field of innovation and technology. The investment size would be about USD 4-5 million and could go up to USD 8-10 million.

 

[Bushroda]

India Sews Victoria's Secret Thongs for Singh's Blooming Zones
By Cherian Thomas

June 6 (Bloomberg) -- When Boston Red Sox co-owner Martin Trust first visited the southern Indian village of Achyutapuram three years ago, a pot-holed road ran through the stretch of bare land dotted with thatched huts.

That didn't deter Trust from investing $12 million in a special economic zone being created there by Brandix Lanka Ltd., which makes lingerie for Victoria's Secret. His bet may now be paying off as workers finish constructing roads, a power plant and helipad, and companies including Quantum Clothing Group, a U.K. supplier to Marks & Spencer Group Plc, sign up to build factories in the 1,000-acre industrial site.

The change “is startling,'' said Trust, 73, who is also founder and president of Brandot International Ltd., a Salem, New Hampshire, investment firm with stakes in 18 textile and apparel companies in seven countries including China, Israel and Mexico. “It's an inviting place for any investor.''

India's economic zones are finally taking root after more than four decades, laying the foundation for Prime Minister Manmohan Singh's plan to increase manufacturing to a quarter of the economy by 2012 from 17 percent now. That's vital for a nation that needs to find jobs for the 150 million people who will join its workforce in the next 10 years.

There is “real momentum'' behind the zones, said Alastair Newton, senior political analyst at Lehman Brothers International in London. “Governments, both at the central and state level, realize they have the potential to create good, long-term employment.''

Reducing Red Tape

Special economic zones are enclaves with uninterrupted power, water and other infrastructure support for manufacturers. The zones reduce red tape by offering a single window for environmental, tax and other government clearances. Companies in India's sites, as well as their developers, also get tax breaks for as long as 15 years.

The zones are designed to make India more attractive for investors concerned about putting money into a nation that lacks water for industry and produces 10 percent less electricity than it needs.

The incentives lured Chicago-based Boeing Co., which is building a $100 million aircraft-maintenance unit in the central Indian town of Nagpur, said Dinesh Keskar, a senior vice president at the world's second-largest commercial jet maker.

“The economic zone we are investing in has its own power station,'' he said. “That's important for Boeing because you can't have our shop closed for a day.''

Shifting Strategies

India was one of the first nations to set up a special economic zone, in 1965. It established another seven by the end of the decade before shifting to other strategies to spur exports, including industry-specific tax incentives, said Lalit Behari Singhal, director general of the Export Promotion Council of Export Oriented Units and Special Economic Zones.

Meanwhile neighboring China, under former leader Deng Xiaoping, adopted the strategy in the early 1980s to stimulate` manufacturing. Shenzhen, the most successful Chinese zone, was a small fishing village 20 years ago. Today, it is home to more than 10 million people and some of China's largest companies, including Huawei Technologies Co., the nation's biggest maker of telephone-network equipment.

The world's fastest-growing major economy now has seven economic zones and another 100 smaller state and high-tech industrial zones, which account for about 12 percent of gross domestic product.

`Manufacturing Boom'

“The most conspicuous difference between growth in China and India is the absence of a manufacturing boom,'' said Mark Williams, Asia economist at Capital Economics Ltd. in London. Foreign direct investment in India has been less than a quarter of the $400 billion that has poured into China since 2002, keeping Indian manufacturing at half China's level as a proportion of GDP.

To emulate China's success, India's then-commerce minister, Murasoli Maran, announced a policy in April 2000 to set up new zones. The fresh start wasn't without problems. The government was forced to suspend its plan in December 2006 after farmers protested what they considered the cheap prices paid to acquire of their land. Clashes in March 2007 left 14 dead in West Bengal state.

The government restarted the program in April 2007 after prescribing a ceiling on size -- 5,000 hectares (12,355 acres) -- and forbidding state administrations to take land by force.

Farmer Resistance

While farmer resistance continues in some states, including West Bengal, Haryana and Goa, India now has 42 zones, including the original eight, creating an estimated 176,000 jobs in the past two years, the Commerce Ministry says.

Another 229 zones are under construction and an additional 210 proposals await final government approval, according to the ministry, which forecasts the zones will attract $75 billion in investment by 2013 -- almost a third of India's industry.

To convince local villagers that it's serious about creating employment in Achyutapuram, Sri Lanka-based Brandix set up a trial factory close to its zone that currently employs about 1,500 local women. Ladies “who never had proper clothes are today making thongs for Victoria's Secret,'' said Reshan Wickramasinha, chief executive officer at Brandix India Apparel City Ltd.

Kanak Mahalaxmi, 19, says her life “has changed dramatically'' since she got a job as a sewing operator a year ago. “We just finished building a brick house after living in a thatched one all our lives,'' said Mahalaxmi, who earns 2,500 rupees ($59) a month. “We just bought our first television set as well.''

$1 Billion Investment

Brandix will set up another apparel factory in its zone and rent space to 19 other manufacturers, with investment reaching $1 billion in five years from $50 million currently and employment totaling 60,000, Wickramasinha said.

Achyutapuram is the first economic zone Brandot has invested in, Trust said. Its other ventures are textile and apparel factories.

“This is more of a real-estate issue; our success will depend on attracting highly valuable clients and making sure our pricing is highly competitive,'' he said, adding that Brandot has a 26 percent stake in the project. “If by the end of the tenth year, we are reaching an annual return of 10 percent, then we are doing fine and we can build on that.''

About 260 kilometers (161 miles) north, in the coastal town of Gopalpur, Tata Steel Ltd., India's largest steelmaker, is building a zone that will act as a “catalyst for growth'' in the state of Orissa, one of the poorest provinces in India, said Bhagabata Patro, an economist at Orissa's Berhampur University.

“The economic zones provide the basis for factories to flourish,'' he said. “There's no doubt it's an important part of India's strategy to create employment at the monumental scale that the country requires.''

 

[Bushroda]

India's strong fundamentals support 'Baa3/Ba2' ratings - Moody's
Thomson Financial News
05.14.08, 1:40 AM ET

MUMBAI (Thomson Financial) - Moody's Investors Service said India's strong fundamentals, a private-sector induced upturn in savings and investment and a rising rate of potential growth support its foreign currency sovereign bond rating of 'Baa3' and local currency bond rating of 'Ba2'.

The ratings agency said in a report the Indian economy's external fundamentals are strong enough to withstand a range of potential shocks, including sudden reversals in short-term capital flows, a sharp slowdown in global growth and weak government finances, or a slowing in structural reforms because of a fractious political landscape.

'The government's local currency bond rating of 'Ba2' balances a high level of indebtedness with a favourable debt structure,' Moody's (nyse: MCO - news - people ) said.

'At the same time, concerns about the size and servicing burden of government debt is somewhat mitigated by the latter's high local currency content, long tenor, growing domestic savings and a stable creditor base dominated by domestic institutions,' Moody's added.

The report noted the Indian government's 'Baa3' rating reflects India's low external debt and strong external payments capacity. But Moody's said weak government finances, though improving, are still a constraint on India's physical, financial and social infrastructure.

Moody's said the stable outlook on the foreign and local currency government ratings reflects its view that along with a large and well-diversified economy, a reasonably adequate policy framework should help to contain several near-term macroeconomic challenges.

Moody's said the main challenges include maintaining monetary stability amid food and fuel price pressures, large capital inflows and various supply-side rigidities, containing fiscal reversals in the run-up to elections, managing fiscal consequences after the implementation of a retroactive 40 percent rise in civil servants' pay and ensuring more 'inclusive growth' that raises incomes in the poorer and the slower-growing farm sector in a sustainable, prudent fashion.

 

[Flintlock]

Mega expansion plan for higher education in 11th Plan


Basant Kumar Mohanty
New Delhi, Jun 8 (PTI) Mega expansion of the education sector is in the offing with moves to establish 30 universities, including some with world-class standards, and enhance the infrastructure of existing institutions during the 11th Plan.

The action plan prepared by the University Grants Commission envisages to increase the gross enrolment ratio (GER), the percentage of youths in the age group of 18-23 in higher education, from 10 per cent now to 15 per cent by 2012.

"To achieve 15 per cent GER by 2012, we have to increase the facilities accordingly. Apart from the 30 new universities, there is plan to set up 370 colleges in districts where the GER is lower than the all India average," UGC chairman Prof Sukhadeo Thorat told PTI.

For the proposed 16 Central universities, concept paper and draft bill has been ready, he said. Similarly for the 14 world class universities, a committee has been set up to prepare concept paper and the draft bill.

Detailed project reports for the proposed 370 colleges are in the final stage. Special development grants will be provided to these institutions, he said.

The UGC has earmarked Rs 870 crore for expanding the infrastructure in the existing over 20 Central universities for implementing 27 per cent OBC quota, which has been given the go-ahead by the Supreme Court.

This initiate assumes significance in view of the Knowledge Commission saying that there is a need to set up 1500 universities to make India a knowledge society. PTI

 

[Flintlock]

India’s GDP growth may dip to 7%: World Bank

Special Correspondent


NEW DELHI: The World Bank has projected India’s GDP (gross domestic product) growth to slow further to seven per cent in 2008 on account of the tight monetary policy in place as a measure to rein in inflation leading to a consequent slowdown in demand for industrial goods.

In its report on ‘Global Development Finance’ released on Tuesday, the World Bank said: “GDP growth in India eased to a still strong 8.7 per cent in 2007, from 9.7 per cent in 2006, and is projected to slow further to 7 per cent in 2008.” The Bank attributed the moderation in the country’s economic growth to the “monetary tightening in 2007 [that] led to softening in domestic demand.”

The report pointed out that although the restrictive monetary policy measures prevented a further surge in the inflationary spiral, the resultant strengthening of the rupee proved detrimental to the exporting community. With the country’s industrial production decelerating to three per cent in April this year, the report noted that there were growing signs of the economy cooling down. However, thanks mainly to the large remittance flows and robust growth in wage rates, the industrial slowdown has not led to a fall in the rate of consumption, it said.

Alongside, the report noted that owing to an overall slowdown affecting most economies, the global GDP growth is projected to slide from 3.7 per cent in 2007 to 2.7 per cent in 2008.
Surge in food prices

Aggravating the situation was the worldwide surge in food prices in 2008 and there was a “sharp reduction in purchasing power of the poor,” owing to the increasing gap between wages and food prices. However, the report pointed to the export restrictions imposed by countries such as India, China and Vietnam as the major reason for the soaring global prices of food commodities.

“Among other factors, rice producers such as China, India and Vietnam have introduced export restrictions to keep stocks for domestic use and to prevent sharp domestic price increases; these policies have contributed to the increase in international grain prices,” the Bank said, while noting that “India is self-sufficient, but grain stocks are low and crop production has been on the decline”.

The report pointed out that soaring food prices had become a serious concern in South Asia by early 2008, mainly because food insecurity in the region was relatively high and the rural population have to spend over 50 per cent of their total income on food. It noted that the rapidly rising gap between food prices and wages indicated a sharp reduction in the purchasing power of the poor and the situation had become increasingly acute across the region, especially in Bangladesh and Afghanistan.

Referring to the global turmoil in financial markets, the Bank noted that the turbulence had adversely affected the Indian stock market as well.

“The turmoil in international financial markets...has affected the region primarily through fallouts and weakness in equity market. The latter has been most pronounced in India, particularly during the first quarter,” the report said.

The Hindu : National : India’s GDP growth may dip to 7%: World Bank

 

[Flintlock]

'India biggest hoarder, food crisis to worsen'

Aziz Haniffa in Washington, DC | June 11, 2008 | 12:18 IST

The food crisis will worsen following India's ban on rice exports, says Swaminathan S Aiyar, noted economist and longtime World Bank consultant, who is currently a Research Fellow at the Cato Institute in Washington for India and Asia. He said the rice export ban shows India "is the biggest hoarder."

Aiyar, who was the lead panelist on a discussion of trade and security at a Heritage Foundation-FICCI sponsored conference on US-India Synergy: Facing the Economic Challenges of the 21st Century, said, "The government of India wants to crack down on hoarders, but the biggest hoarder actually is India by refusing the rice to be exported."

Arguing that the current food shortage was directly the result of export curbs, he noted that the International Food Policy Research Institute "has estimated that a relaxation of trade curbs can cut world (food) prices by 30 percent and in the case of rice, it would cut world prices by more than 50 percent."

"The problem is not a shortage of rice; it's that wherever the rice is being produced, to protect the domestic consumer, it is not being allowed to be exported and therefore you are artificially shrinking the grain in the world market and artificially pushing up prices."

Aiyar said that the IFPRI "has rightly called this 'starve your neighbor' policy,' and argued that India by imposing these export controls had effectively cut the production of rice.

"India used to produce almost one-fifth to one-sixth of the total rice trade - it exported 5.5 million tons of rice in 2007," he said, but said that this year it would only be exporting 1-2 million tons. "So three million tons are off the market from India alone and it's like one-tenth of the world trade (in rice) has disappeared just because of India's action."

Aiyar said by doing so, India had "managed to keep our rice prices only up 10 percent, (but) in neighboring Bangladesh, it is up 60 percent. So, this is what you call, 'Starve your neighbor policies."

He asserted, "The world needs to get together and say, 'Look, there is panic going on here- panic, when one country bans it, another country bans it, and the result is the prices are going up far more than required."

Aiyar said, "We really do need a world meeting of the rice exporters to say, how do we provide another extra two million or three million tons to the world market. How do we apportion this extra rice quota to each country. I think just an announcement that you can do that, would bring prices of rice down by $200-300 a ton."

Aiyar said he is convinced that the food crisis would soon blow over "and we are going to be back very soon to the issues of over-production through subsidies - which was what the Doha Round was about. The whole point of the Doha Round was there is too much production because of excessive subsidies. I do believe that the current phase is a highly temporary one."

"For those who are not familiar with India," he explained, "when we had the sharp increase in domestic prices in the late 1990s, farmers responded and we got a mountain of food- at one point India alone had food stocks of 65 million tons in 2000 and at great loss we exported all this."

But Shenggen Fan, division director, Development Strategy and Governance, said that the protectionism by India by curbing exports may have been what had helped the kind of food riots seen in some other Asian countries.

He recalled that just a few years ago, food prices in India were about 20-30 percent higher than global food prices, but "today, it is opposite. The domestic (food) price in India is actually about 20-30 percent lower than the global prices."

"The Indian government used trade restrictions and so, that is why in India you have not heard of any food riots and lots of complaints," he added.

'India biggest hoarder, food crisis to worsen'

 

[shrivatsa]

Government protecting its people ,it seems that these guy wants food prices in india to go up

 

[Bushroda]

India’s GDP growth may dip to 7%: World Bank

Special Correspondent

The Hindu : National : India’s GDP growth may dip to 7%: World Bank

Take a break.. party is not yet over.

 

[Bushroda]

3 Indian cities in world's top centres of commerce
Monday , June 09, 2008 at 06:29:06

New Delhi, June 9: Reflecting the growing global economic clout of the Asian region, three Indian cities -- Mumbai, New Delhi and Bangalore have been ranked among the 75 top centres of commerce in the world.

According to a study titled 'Mastercard Worldwide Centres of Commerce Index', London has been ranked as the most influential city in the world in the 75 cities index.

However, it stated that future appears to belong to Asia and Eastern Europe, whose cities represent the fastest rising regions within the index.

The index is an annual research initiative designed to evaluate and rank how major cities compare in performing critical functions that connect markets and commerce around the world.

"The booming Chinese and Indian economies have clearly continued the shift of economic power to Asia. The strong presence of Asia/Pacific, Middle East and Africa cities is further evidence of the growing influence of the region not just in manufacturing and services, but also in broadly based commercial strength," the report stated.

In 2008, three Indian cities have been ranked in the index of 75 cities with Mumbai at the 48th position, New Delhi at 61 and Bangalore at 66th place, the report revealed.

New Delhi and Bangalore are new additions to the index in 2008 which was extended from 50 cities in 2007 to 75 cities in 2008, while Mumbai, which had been ranked at the 45th place in 2007, has fallen three positions in 2008.

In comparison, China has five cities in the index including Shanghai, a rapidly growing and massive city that ranks 24th this year, up from 32 in the 2007.

"It's fascinating to note that the city whose score increased the most compared with London since last year is Moscow, followed by Singapore, Tel Aviv and Bogota all cities in new or emerging markets while no North American city advanced significantly in the index this year," MasterCard Worldwide Centers of Commerce Program Director Michael Goldberg said.

Besides, the top ten cities in the Worldwide Centres of Commerce include -- London, New York, Tokyo, Singapore, Chicago, Hong Kong, Paris, Frankfurt, Seoul and Amsterdam.

The eight Asian cities which have been ranked in the top 25 centers of commerce, Tokyo, Singapore, Seoul, Sydney, Hong Kong, Osaka, Taipei and Shanghai rank among the top 25 Centers of Commerce, confirming Asia's prominent role in the global economy.

The various dimensions on which the cities are ranked include -- legal and political framework, economic stability, ease of doing business, financial flow, business center, knowledge creation and information flow and livability.

 

[Bushroda]

Pathak bides his time for practice in India
Chris Merritt, Legal affairs editor
The Australian
June 13, 2008

IN India, where connections count, Freehills partner Neil Pathak has a surname that any lawyer would envy.


Neil Pathak, an Australian citizen from an
Indian family, who can't pratice in India.
Picture: Michael Potter

His uncle, R.S. Pathak, was chief justice of India's Supreme Court in the 1980s until he resigned to join the bench of the International Court of Justice.

His grandfather, G.S. Pathak, was a judge of the High Court of Allahabad and later became governor of the state of Mysore, federal minister for legal affairs and, in the early 1970s, vice-president of India.

"It was a previous generation. It was a few years back," says the self-effacing Melbourne lawyer, although he did concede that the family name still opened doors whenever he visited India.

With India's economic awakening, those trips are becoming more frequent.

Pathak, who is co-head of Freehills' India practice, says there is so much legal work linked to India that he needs to visit the country two or three times a year. "The growth has been amazing," he says.

The legal work associated with helping Australian companies to invest in India is growing rapidly, he says.

In the past few years, though, more of the work of the firm's India practice has been generated by Indian clients investing in Australia.

A number of Indian corporations, including a division of the giant Tata group, have included Freehills as one of their legal advisers.

That link has given the firm access to transactions that extend beyond Australia.

Last year, Freehills did the legal work when Tata Power Company paid $US1.1 billion for 30 per cent of Indonesia's PT Bumi Resources, a major coal producer. This transaction was later nominated by the India Business Law Journal as the merger and acquisition deal of the year.

India's awakening has provided a strong flow of work, but the country's protectionist approach to legal services has prevented the latest member of the Pathak family from practising law there.

Like all foreign lawyers, Pathak is affected by restrictions designed to protect India's lawyers from competition.

Despite his heritage, Pathak's legal career is a product of Australia. He arrived in this country at the age of one, grew up here, qualified as a lawyer here and - apart from four years working for big firms in London - has built his career here.

He says the ban has not yet affected Freehills' ability to do business with Indian clients but he worries that might change once India's relatively small firms develop the expertise to advise on major international transactions.

"At this stage, it has not really affected us," he says.

"You cannot practise domestic law, but a lot of transactions are in English, or New York law, and all law firms around the world do work on a fly-in, fly-out basis," he said.

Those restrictions are strongly supported by the organisational wing of India's legal profession. Last month, Indian International Bar Association (IIBA) president Lalit Bhasin warned of the threat posed by foreign lawyers.

According to Business Wire India, a news agency, Bhasin told a conference in New Delhi that India's legal profession "has a unique harmony based on a well-developed ethos, culture, tradition and a very noble heritage".

"All these things are now threatened by a potential influx of foreign lawyers.

"These are likely to alter the profession at its roots and create a much more commercial, even mercenary, approach to the business of law in India.

"The finer, noble values of the profession in India will undoubtedly be compromised and diluted," Bhasin said.

That might be the view of the profession's organisational wing, but India's leading firms and national government appear to see things differently.

Commerce Minister Kamal Nath wants to include trade in services - such as legal services - in the proposed free trade agreement with Australia.

Separately, India's Justice Ministry has a case before the Mumbai High Court in which it is seeking to "clarify" the ban on foreign lawyers. The ministry wants the court to rule that foreign lawyers can provide legal advice, consultancy and document drafting in India on matters relating to US or British law.

One of India's leading firms, Amarchand Mangaldas, sees the impact of foreign firms more favourably than the IIBA.

Amarchand managing partner Shardul Shroff told last month's conference in New Delhi: "there is already a great deal of mutual understanding with our foreign counterparts, which has always been mutually fulfilling".

Amarchand is developing a reputation in Australia as one of India's go-to firms. It is one of the two practices that Middletons uses for Indian domestic legal work.

Amarchand alumni form a big part of Pathak's team. Senior associate Prashanth Sabeshan was a junior partner at Amarchand in Mumbai, who moved to Australia "to broaden his experience", Pathak says.

Sabeshan works alongside solicitors Karthik Kumar, who also came from Amarchand in Mumbai, and Rohit Kumar, who was formerly at New Delhi firm J.Sagar Associates.

The India desk consists of two partners - Pathak in Melbourne and John Nestel in Sydney - and three solicitors who have all practised in India.

This relatively large investment in the India desk is more than justified by the rapid growth in two-way trade with India, Pathak says. Freehills nominates India as Australia's fastest growing major export market for goods and services.

"The Indian economy is a giant that's just awakening," he says. "The need for resources will lead to more Indian companies coming here, looking for coal and other assets."

China is currently the world's hot spot for legal services, Pathak says, but large numbers of leading Australian companies are seeking advice from his firm on doing business in India.

Despite the attractions of doing business in China, Pathak says there is far more "common ground" between Australia and India. "There is greater cultural affinity - and it goes beyond cricket. We have similar legal and political systems."

For the time being, Pathak says, Freehills is content to simply "get on with business".

"I don't expect something like the free trade agreement to happen overnight, but there may come a time when we would be keen for liberalisation to happen," he says.

 

[Bushroda]

Passages from India
The Times of India, the world's largest circulation newspaper group, has made its first foray into overseas markets. Will its recent purchase of Virgin Radio be its last?
Randeep Ramesh in Delhi
The Guardian,
Monday June 9 2008

When the Times of India broke the story that it had bought Virgin Radio for £53m last weekend, it marked the first foreign takeover by an Indian media company. The paper's headline read: "Voice of India will now be heard all over London."

The world's largest-circulation newspaper was founded to support the Raj's interest in western India 170 years ago, and the old lady of Boribunder has revelled in the role of reverse colonialist.

Bennett Coleman, India's biggest media company and proprietors of the Times of India, will now own one of Britain's three commercial radio licences and serve 2.7 million listeners and another 600,000 unique users through its website. The Virgin name will disappear, because Virgin Radio in India is a partner with a rival of Times of India's radio stations.

The rise and fall of Virgin Radio, bought in 2000 for £225m by Scottish Media Group and sold for less than a quarter of that sum, could be seen as a sign of things to come. Thanks to the internet, the traditional western media business model - selling news and entertainment to audiences, and then selling audiences to advertisers - is falling apart, just as the current economic slowdown is making things worse.

Cherry-pick assets

All this comes at a time when media companies in the developing world, where internet penetration is low, are seeing bottom lines bulge as their audiences grow.

India is now the second largest newspaper market in the world with 99m copies sold daily - and newspaper sales grew by 11% last year. Not only "dead tree" media benefit from the rising tide of literacy and wealth. According to PricewaterhouseCoopers, TV and radio advertising in the country will grow by more than 20% for the next five years.

Sitting on top of this mountain of cash in India is Bennett Coleman, a family-owned company where the proprietors like profiles to be kept low and profits to be kept high. The group sells more than 6m newspapers a day - a figure that includes local language editions and the country's biggest business paper, the salmon-pink Economic Times. It has two television channels - including a rolling news network backed by £10m from Reuters. Times Group also owns 32 radio stations in India, a string of profitable websites, a PR company and an outdoor advertising company, which Goldman Sachs and Lehman brothers together paid $25m each for a 8% stake.

Indicating Bennett Coleman's global ambitions, its managing director, 41-year-old Vineet Jain, said last week it would "aggressively [grow] in India and cherry-pick assets and brands around the world".

Ravi Dhariwal, Bennett Coleman's chief executive, says he is an admirer of "the Financial Times and the Economist". "American newspapers have not innovated," he adds. "That is why they are losing readers. They just get heavier and lose relevance with younger people. The quality market in England is still healthy but newspapers have to be good value, a low price. You know the FT is a couple of bucks." When asked if Times Group might consider buying the Financial Times, he says he will say "nothing more".

Bennett Coleman's dominance can be attributed to one man: 53-year-old Samir, the vice chairman and Vineet's elder brother. Low-key and unassuming, Samir rarely gives interviews to the mainstream media. The Jain family are Marwaris, a community known for their business sense and spirituality. Samir and Vineet's mother Induja chairs the group. When Forbes magazine listed the family matriarch on its 2006 list of the wealthy as the 15th richest person in India, she sued the magazine on grounds of privacy.

Samir Jain is a vegetarian who doesn't drink or smoke, and a fitness fanatic who has no interest in politics or Bollywood, often slipping out of newspaper parties unnoticed.

Plucked from running the family's ailing jute division, he considers news a business. In the early 90s, Samir Jain began to market the Times aggressively, first by cutting the cover price and then once circulation ballooned by sharply raising advertising rates. He shut down venerable but unprofitable magazines, and introduced new supplements filled with celebrity gossip. Samir had little time for journalistic egos. The editor of the newspaper, once a grand figure, is now virtually anonymous.

While critics accused the Jains of "dumbing down" content, readers flocked to the new paper. The Times' circulation has shot past 2.5m, up from half a million a couple of decades ago. In the latest year for which figures are available, ending March 2007, Bennett Coleman's profit before tax was 6.45bn rupees (£80m) on revenues of 28.5bn rupees.

Product placement

"Times Group spent a lot of time building brands that capture the attention of the young reader. That's important when half the population is under 25," says Vanita Kohli-Khandekar, author of The Indian Media Business.

In its glossy supplements the paper's editorial space is sold to advertisers, leaving it unclear to an unfamiliar reader whether the content is paid-for advertorial or not. Bennett Coleman says there are no ethical issues as it is not "news editorial space" that is being filled. "It is not marked as an advert but it is clearly an advertising supplement only for lifestyle coverage," says chief executive Dhariwal.

In 2004, the paper took a step further when it began accepting payments for advertisements in the form of shares in the advertiser's firm. It now has 120 such "private treaties", which lock out rivals from seeking ad revenue.

The firm's executives insist that neither its own shareholdings nor its advertisers influence its coverage. But articles in Times publications rarely reveal the paper's shareholding interests. This practice, say critics, is a conflict of interest.

"With the price wars, papers are cheap. The Times of India, for example, costs just 2.50 rupees. So you are heavily dependent upon advertisers," says Pradyuman Maheshwari, a journalist who started a media blog but shut it down after receiving legal notices from Bennett Coleman.

However, Times executives dismiss such talk as motivated by "envy". Dariwal says that "editorial works hand in hand with the advertising department to understand readers. We have stakes in companies because we have a fundamental belief in India's success. The idea we would not write something because we owned a slice of a company is nonsense. As shareholders we would want to know if something is wrong and would encourage reporters to write about it."

About this articleClose This article appeared in the Guardian on Monday June 09 2008 on p6 of the News & features section. It was last updated at 16:00 on June 09 2008.

 

[shrivatsa]

domain-b.com : Reliance to sell gas in India at an 80-per cent discount to global prices

Reliance to sell gas in India at an 80-per cent discount to global prices news
12 June 2008


Mumbai: Reliance Industries Ltd will start selling natural gas in the country this year at $25.20 per barrel equivalent of oil - an 80-per cent discount to global prices of over $135 - helping the country reduce imports at record prices.

The Krishna-Godaveri basin gas field will produce 80 million cubic metres of gas a day, saving the country over Rs1,14,000 crore ($27 billion) in annual import bill, chairman Mukesh Ambani told shareholders today.

Reliance will also commission a transmission system for natural gas from the KG basin, off the eastern coast. The soaring cost of exploration and a cap on gas prices may, however, cut Reliance's profit margins.

The government has ordered Reliance to sell natural gas from the KG field for $4.2 per million British thermal units, less than the $4.5 it had sought.

Reliance aims to produce 240-350 million cubic feet of gas a day from the MA-1 field from the second half of the 2008-09 fiscal year, when gas production from two other fields in the block, D1 and D3, will also begin.

Reliance Gas Transportation Infrastructure Limited is setting up an East-West gas pipeline system to connect the country's cities for distribution of gas from the KG basin.

Reliance Industries, which is investing $5.2 billion to develop the KG basin oil and gas fields, the nation's largest, expects to more than double gas output in the country.

Reliance is also aiming to start oil production from its D-6 block in the KG basin in July-August, by the time it commissions its second refinery in Jamnagar, Gujarat.

Commissioning of the 580,000-barrel-a-day refinery will increase Reliance's crude processing capacity to 1.24 million barrels per day, equivalent to about 2 per cent of global capacity, Ambani said.

The new refinery is being built adjacent to Reliance's 660,000-barrel-a-day plant at Jamnagar and the combined facility will be the world's biggest.

Reliance would produce sweet oil with an API density of 43 degrees from two or three wells to meet initial targeted output of 20,000 bpd and has already started inviting bids for sale of the crude.
The country currently imports 70 per cent of its crude oil requirements and doesn't produce enough gas to meet local demand.

Reliance, meanwhile, reported over Rs15,000 crore in net profit for the year-ended March 2008.

Reliance, which enjoys a global market share of seven per cent in the polyester fibre and yarn business, plans to further consolidate its global leadership in polyester with the new 2.5 million tonnes per year Paraxylene manufacturing facility at Jamnagar.

 

[Bushroda]

Now is the time to invest in India, says manager
By Danielle Levy
City Wire, UK
13 June 2008

Bhupinder Sethi, manager of the newly launched New Star India Equity fund, believes rising inflation in India will moderate over time and stresses that the region offers investors a ‘multi-decade opportunity’.

Indian inflation has just hit a seven year high, but Sethi says the investment case remains powerful.

‘The global economic landscape is here to stay and will play out over the next five to 10 years. The key is to put money where growth is. In Asia India is the fastest growing economy,’ he says. 'The changes coming through in the economy mean there is a strong case to invest.’

With an election on the cards, Sethi says it is likely that there is a possibility that the current government and a potential new government could sacrifice some GDP growth to contain inflation. However, he says that any falls in the market as a result should be seen more as a minor blip. Pointing to falling valuations, he stresses that now remains a good time for investors to enter the market for medium to long-term gains.

Sethi works for Tata Asset Management Mauritius, part of India's giant Tata Group, which has partnered with New Star Asset Management in a joint venture and is named as the investment manager on the fund.

Lead manager Sethi believes Indian growth has been driven by changes in the developed world and believes the opportunities created by this change will lead to long-term benefits for the country.

Sethi pinpoints infrastructure as a key theme and believes the sector stands to benefit from an increase in public-private partnerships. In particular, he highlights the strain that India’s airports have come under as air travel has grown significantly on the back of increased budget airline flights into the region. He is positive on the government’s decision to privatise airports and, more generally, the increased involvement of the private sector in infrastructure projects.

He describes what he sees as a healthy cycle, as increased infrastructure spending leads to economic progress which in turn leads to further infrastructure spending.

He is also positive on the domestic consumer, particularly as the workforce grows. He believes that India’s 10% consumer credit/GDP ratio in comparison to Malaysia’s 59% and Korea’s 41% represents ‘huge opportunities in terms of consumption’.

Sethi says the increased uptake of consumer loans by the younger population is a theme he intends to play, particularly as he sees financial services as under-penetrated.

Sethi and his team will use a GARP investment approach which provides specialist quantitative analysis of the market situation to reduce the investment universe of 5,000 companies to 400 companies. They then seek to sniff out companies which are fundamentally strong and undervalued.

He uses India-based private bank Axis Bank and construction and engineering firm Larsen & Toubro as examples of the type of companies they are looking to invest in.

 

[Bushroda]

India Inflation at 8.75%; Fastest Pace in Seven Years
By Kartik Goyal

June 13 (Bloomberg) -- India's inflation accelerated to a seven-year high on soaring commodities and energy prices, stoking speculation the central bank will increase interest rates next month.

Wholesale prices jumped 8.75 percent in the week to May 31, after gaining 8.24 percent in the previous week, the government said in a statement in New Delhi today. Economists surveyed by Bloomberg News predicted an 8.28 percent increase.

The Reserve Bank of India raised the benchmark rate to 8 percent this week, joining central banks in Brazil, China and Russia in increasing borrowing costs to combat inflation even as economic growth slows. Jet Airways (India) Ltd., the nation's largest domestic carrier, and JSW Steel Ltd. said near-record oil prices and other costs are hurting profits.

``Our profit margins have narrowed by as much as 10 percent in the past three months due to the relentless rise in input costs,'' said Sajjan Jindal, vice chairman and managing director of JSW Steel, India's third-biggest producer of the metal. ``Inflation is the biggest danger to the economy.''

India's central bank on June 4 raised its repurchase rate to a six-year high of 8 percent from 7.75 percent, after twice increasing its cash reserve ratio in April to contain inflation.

Bonds fell as faster inflation spurred speculation the central bank will raise borrowing costs next month for a second time this year. The yield on the benchmark 8.24 percent note has increased 14 basis points this week. Governor Yaga Venugopal Reddy and his colleagues are due to meet on July 29.

Repurchase Rate

``We expect the Reserve Bank to raise the repurchase rate by a further 25 basis points in the next policy meeting,'' said Tushar Poddar, an economist at Goldman Sachs Group Inc. in Mumbai. ``We also expect a further 50 basis points increase in the cash reserve ratio in the remaining of 2008.''

Surging food costs and a doubling in the price of oil in a year limit the ability of the central bankers to cushion growth, the Organization for Economic Cooperation and Development said in its June 4 report, predicting the strongest worldwide inflation this year since 2001.

India's inflation in the last week of May was the fastest since February 2001. Price gains in neighboring Pakistan accelerated to 19.3 percent in May, the highest in 30 years. Inflation in Vietnam was 25.2 percent in the same month, the fastest since 1992, and in Indonesia consumer prices jumped 10.4 percent from a year ago.

Indonesia, Vietnam

Central banks in Indonesia, the Philippines, Vietnam and Pakistan have increased borrowing costs over the last two months to tackle inflation. China, where retail sales grew in May at close to the fastest pace in nine years, raised its cash reserve requirements for lenders for the fifth time this year to 17.5 percent from June 25.

India's inflation is likely to accelerate to more than 9 percent next week, the highest in 13 years, after the government raised retail fuel prices on June 4, according to economist Sonal Varma at Lehman Brothers Holdings Inc. The changes in fuel prices will be reflected in price data due on June 20.

Crude oil prices touched an all-time high of more than $139.12 a barrel on June 6, raising concern India's import costs will jump. The South Asian nation relies on crude oil from overseas to meet three-quarters of its energy needs.

``Higher oil prices look set to weaken growth by squeezing profit margins, widening the trade deficit and reducing consumer purchasing power,'' Varma of Lehman said. ``The rate hike increases the downside risk to growth because it will raise the cost of borrowing for companies and households.''

Slower Growth

India's industrial production, which accounts for a quarter of the $912 billion economy, increased 7 percent in the month of April, slower than the 11.3 percent gain in the same month a year ago, the government said yesterday. The economy is likely to grow by 8.5 percent this year, the slowest pace in four years.

Concern that faster inflation and higher borrowing costs will slow growth, hurting profits, have led to a 25 percent decline in the Bombay Stock Exchange's Sensitive Index, or Sensex, this year. The stocks gauge was 0.4 percent or 56.4 points down at 15,193.76 at 2:31 p.m.

Higher cost of funds may force lenders like State Bank of India, the nation's largest lender, and ICICI Bank Ltd., to raise loan rates for houses and automobiles, hurting consumer demand. State Bank is scheduled to decide on lending rates today.

Record crude oil prices prompted Indian refiners to raise local jet-fuel costs by 53 percent this year, threatening profits at Jet Airways and its local rivals. SpiceJet Ltd., India's second-largest discount airline, yesterday said it will cut more routes as a surge in jet-fuel prices hurt profit.

Edible Oils

Inflation in India may accelerate further as the government may revise today's preliminary wholesale-price estimate in two months after receiving additional data. The commerce ministry today raised its inflation estimate for the week ended April 5 to 7.71 percent from 7.14 percent.

To contain inflation, Prime Minister Manmohan Singh has cut import duties on edible oils, fuels and other food items and banned the export of pulses, wheat, rice and cement. Inflation is likely to ease in six to eight weeks time, according to the government.

 

[Bushroda]

Asia's awesome threesome
Rivals by Bill Emmott
Reviewed by Sreeram Chaulia

For the first time in history, three great powers - China, India, and Japan - coexist uneasily in Asia. Lacking natural compatibility, all three are beefing up their militaries with consciousness of one another as a prime motive. Just as Pakistan is not the main concern for Indian strategists, China's rising defense expenditures can no longer be explained in the traditional straitjacket of Taiwan.

While Asian sovereign wealth funds are attempting to acquire Western assets, financial capture of a Japanese or Indian company by a Chinese state-owned firm is inconceivable. This is because the three regional powers are prone to suspicions and jealousies in a highly competitive strategic environment.

In his new book Rivals, Bill Emmott, a former editor of The Economist, argues that friendship among Asia's awesome threesome is "only skin-deep" and examines the consequences of their rivalry for the world. Emmott's thesis is that internal changes like the experience of economic growth, awareness of increased strength and pressures of public opinion will affect how India, China, and Japan size up each other and the West in a "new power game" (p 9).

Sadly, this preoccupation with domestic issues leads to lengthy assessments of each country's internal affairs that are not fully relevant to the book's theme of inter-state rivalry. Trapped in the shopworn modernization paradigm of "disruptive transformation" inside each society, Emmott misses slices of the larger geopolitical canvas on which Asia's power struggles are being played out.

The book begins with the accelerating commercial links that are integrating Asia like never before. In the immediate post-war and post-colonial decades, economic exchanges from Japan in the east to India in the west barely existed. Yet, today, the Asia that never had a single dominant culture has "a unifying religion: money and the ambition of economic development" (p 33). Multinational corporations now treat the region as a single economic space and as a "tightly connected pan-national supply chain" (p 42). In the security realm, though, Asia is not quite a collective entity, as shown by the absence of unifying regional institutions.

Emmott's survey of China's strengths and weaknesses leads to the inference that it will be an "awkward neighbor" for India and Japan. Beijing's "smile diplomacy" to assure that its rise should not be feared has few takers in New Delhi due to the former's provocative behavior on the bilateral border dispute. Chinese naval encroachments in the Indian Ocean to secure the "safety of sea lanes" is seen by Indian strategic elites as a strategy of "concirclement". China's military spending is more than double that of India's and roughly the same as that of Japan, which is a far richer country. Emmott portrays China and India as participants in a "strategic insurance policy race" (p 256) that is based on enhancement of respective military capabilities.

At present, the Chinese state does not tax farmers or urban households heavily. However, as expectations for a substantial social security system increase, the Communist Party will need to broaden the tax base and risk demands for democratic representation. Emmott predicts that a serious protracted economic downturn could cause a drop in corporate tax revenues and force the party to introduce "some form of electoral democracy, while ensuring that its substance remains suppressed" (p 85).

The author does not tackle the matter of how domestic regime change in China might go on to impact relations with India and Japan. He assumes that a more open China will be less threatening to the other two Asian powerhouses, although the historical evidence suggests that even if the Kuomintang had won the Chinese civil war and established democracy in the mainland, China would have posed the same strategic threats to India and Japan. Emmott fails to properly evaluate Chinese hyper-nationalism, which shows no sign of abating, even if democracy arrived.

Moving to Japan, Emmott warns against writing it off as a spent force. Five years of continuous economic growth and a new assertiveness in international relations have brought Japan back into the reckoning. The bottlenecks it faces are an aging and shrinking population and ensuing extra-budgetary burdens. Mounting labor costs will be a difficult proposition for the Japanese economy to cope with. Emmott is still hopeful that scarce labor will "provide a new source of discipline to Japanese companies to become more efficient and profitable" (p 115).

Japanese willingness to face up to China underscores Tokyo's "anxiety to involve India in regional affairs" (p 96). A Japan in relative decline, with expected annual gross domestic product (GDP)growth rates of only 1.4% for the next five years, will have "little chance of standing tall and strong alongside China" (p 106). It is in this context that Tokyo and New Delhi are growing closer through "economic partnership agreements" and joint military exercises, which Emmott labels "sensible precautions" against Chinese ascent (p 120).

On India, Emmott credits the momentum that has built up thanks to consistent public policy, regardless of which political party is in power. All Indian governments of the past 15 years have continued economic reforms, moved closer to the United States and deepened engagement in East and Southeast Asia. As India attains global standards of economic growth, it can no longer be overlooked or treated with contempt, as China did in the past. Emmott sees promise in the sharp rise in India's levels of savings (32% of GDP), investment (34% of GDP) and manufacturing sector performance.

On infrastructure, India pales in comparison to China but is improving nevertheless. India ranks well below even its South Asian neighbors on the ease with which business can be transacted and contracts enforced. Except for English language proficiency and an advanced service sector, "India comes up short on almost every measure in comparison with China" (p 149).

Yet, in spite of the frustrations with India's wobbly progress, "more is being done than in the past and things are still getting better" (p 145). For India to march ahead, Emmott advocates meaningful free trade agreements with ASEAN (Association of Southeast Asian Nations) or all members of the East Asia Summit, and faster cross-border trade liberalization with South Asian neighbors that is spearheaded by provincial governments rather than the central government in Delhi.

Emmott devotes one chapter to the environmental degradation facing rapidly industrializing China and India. He presents Japan as a role model to emulate for cleaning up the smoggy and muddied Chinese and Indian skies and waters. A combination of popular protests and the "oil shock"-induced switch away from heavy industry to electronics and high-tech gadgetry helped Japan become a more salubrious country in the 1970s.

China's lack of democracy and independent judiciary, however, leave environmental improvement entirely in the hands of a central government that is beholden to business interests. In a system where promotions and careers of local officials depend on economic growth quotas, environmental law enforcement has a dubious future.

The only way local bureaucrats will change their priorities is if a post-Kyoto deal on global warming is signed by China and applied as external pressure on the mandarins. As to India, New Delhi could be persuaded to join a post-Kyoto treaty if Japan provides financial compensation and discounted technological assistance on pollution control. Such an offer would also present Tokyo "yet another way to balance China's rise" (p 182).

The later chapters of Emmott's book highlight old animosities among China, Japan and India, which are worsening in spite of the continent's economic integration. Heavily politicized interpretations of history endlessly muddle Sino-Japanese relations. As Chinese and Japanese great power ambitions "well up all over the region", flashpoints that look resolvable on paper simmer on (p 213). The biggest risk lies in the East China Sea, where Chinese "gunboat diplomacy" over disputed islands and marine resources has raised Japanese hackles. Chinese claims over parts of North Korea (the "Koguryo Kingdom") ring alarms in Japan, which does not want a Chinese dagger pointing in its direction from the Korean Peninsula.

Sino-Indian quarrels over Aksai Chin and Arunachal Pradesh have stabilized with time, but risk re-ignition should unrest break out in Tibet during a period of weak Chinese central government. The absence of strategic communication lines among China, India, and Japan holds prospects of misunderstandings and miscalculations in crises. Emmott recommends conversion of the East Asia Summit into "Asia's principal political and economic forum", through which regular dialogue among all three major powers is institutionalized (p 272).

Emmott's final chapter is a hodgepodge of unsubstantiated remarks and scenarios. He argues against factual reality that a rapid rise in oil prices would not hurt economic growth in rich, consuming countries. He claims that terrorism and political tension have remained distant from the main arenas of Asian growth, trade and investment between 2003 and 2007, notwithstanding the massive economic costs India has endured from jihadi terrorism. Emmott seems to want readers to believe that India escaped terrorism and that this enabled it to grow economically. He could have done better by offering an explanation of how India managed to grow despite being buffeted with terrorism.

Apart from the general deficiency of reading like a collection of Economist Intelligence Unit country reports, Emmott's book sits on the flawed premise that China, India and Japan are all "grinding up against each other and each is suspicious of the others' moves" (p 253). How can India and Japan be rivals in any sense? Asia is actually beset by two dyadic rivalries, that is, China versus India and China versus Japan. Emmott's concept of a triangular contest is imaginary and illogical. Occasionally, he does broach the possibility of Japan and India "ganging up together against China" (p 263), but fails to unravel the mystery of why such an alignment is taking so long to germinate.

Emmott's yen for futurology yields interesting speculations on what might happen after the deaths of Kim Jong-il in North Korea or the exiled Tibetan spiritual leader, the Dalai Lama, but he bypasses the impact of Russian-American tensions on how Asia's "Big Three" relate to each other.

The author's Western lenses, trained to accept the US as the sole stabilizer in Asia, are blind to the meaning of Russian renaissance for Asia's power balance. His faith in the US and the European Union to bring about peaceful change in Asia overlooks two vital puzzles: How will the emerging Russian-Chinese entente affect traditionally strong Russian-Indian ties and and how does the Moscow card impinge on the cagey Sino-Indian relationship?

By the end of the book, one is left wondering whether geopolitics matters at all or if the "new Asian drama" can largely be explained by rating the economic growth prospects of its protagonists. A consultancy style comparative stocktaking of the Indian, Chinese and Japanese economies and polities differs from a study of the diplomatic maneuvering among the three states along with two other players - the United States and Russia. Emmott's disappointing fare tries to do a bit of both and falls short.

Rivals. How the Power Struggle Between China, India and Japan will Shape our Next Decade by Bill Emmott, Allen Lane, London, 2008. ISBN: 9781846140099. Price: US$26, 314 pages.