Tag Archives: India

India central bank chief endorses advisors on policy rate cut

MUMBAI: India’s central bank governor Duvvuri Subbarao endorsed the unanimous recommendation of all external members of the bank to cut its policy interest rate last month the first cut in 9 months minutes of the quarterly meeting released on Saturday showed.

Four of the six members suggested that the Reserve Bank of India (RBI) should reduce the policy rate by 25 basis points in the third quarter policy review as global conditions were favourable and marginal decline in WPI inflation provided room for some monetary easing.

On January 29 India’s central bank lowered its key policy repo rate by 25 basis points (bps) to 7.75 percent to help support an economy set to post its slowest annual growth rate in a decade.

It also unexpectedly reduced the cash reserve ration (CRR), the share of deposits banks must keep with the central bank, by 25 bps to 4.00 percent, to infuse an additional 180 billion rupees into the banking system.

The committee consists of seven external members, apart from the governor and the deputy governors.

The panel’s role is purely advisory, with the governor having the final say in deciding rates.

Two of the members felt that a 25 basis points reduction in the repo rate alone might not induce banks to reduce their lending rates and advised a cut in the banks’ cash reserve ratio (CRR) of 25 basis points to nudge the lending rates down was in order.

This would also enable loan rates to reduce more than deposit rates.

One of the other two members felt that the Reserve Bank should make use of open market operations (OMOs) to manage liquidity and keep the CRR unchanged.

These two members recommended a sharper reduction in the repo rate by 50 basis points and use of OMOs to manage liquidity.

Copyright Reuters, 2013

India inflation at three-year low

Indian food market India’s central bank has previously cited high inflation as the reason for not easing its policies India’s inflation rate has dipped to a three-year low, giving more room to policymakers to take steps to revive its sluggish economy.


The Wholesale Price Index, India’s main gauge of inflation, eased to 6.62% in January, down from 7.18% in December.


India’s growth rate has dipped recently amid slowing exports, a decline in investment and subdued domestic demand.


India’s central bank cut interest rates last month and a slowdown in inflation may see it ease its policies further.


“We are looking at a sharp and sustained downward trend, which should give the Reserve Bank of India the elbow room to go ahead at least with a couple of more rate cuts,” said Abheek Barua, chief economist at HDFC Bank.


Mr Barua said he expects the central bank to cut rates in March and April.

Growth concerns

Earlier this month, India’s statistical office lowered its growth forecast for the year to 31 March 2013, saying it now expects the economy to grow by just 5% during the period.


The central bank has also lowered its growth projection for the year to 5.5% from 5.8%.


India’s economy has been hurt by a slowdown in exports and subdued domestic demand, the combination of which has affected the manufacturing and services sectors.


Meanwhile, a delay in key economic reforms has seen foreign investors become wary of entering the country.


That has led to concerns that India’s growth rate may slow further in the coming months.


Prompted by these fears, policymakers have taken various steps to try and spur a fresh wave of economic growth.


Last month, India’s central bank cut its key interest rate to 7.75% from 8%, the first such move in nine months.


It also lowered the amount of money that banks need to keep in reserve, a move it said should provide 180bn rupees ($3.4bn; £2.1bn) of extra cash for them to lend.

India lowers growth forecast to 5%

A decline in manufacturing activity has added to fears about the health on the Indian economy India has lowered its growth forecast for the second time in two weeks, underlining the challenges it faces in reviving its sluggish economy.


The statistical office has forecast growth of 5% for the year to 31 March 2013, based on advanced estimates.


Last week, India’s central bank had cut its forecast to 5.5% from 5.8%.


India’s growth has slowed in recent months because of several factors, not least the sharp slowdown in its manufacturing and services sectors.


Rupa Rege Nitsure, chief economist at the Bank of Baroda, said that the revised figure of 5% growth was “more in tune with reality”.


“The industrial sector downturn has extended beyond anyone’s expectation. Exports have been continuously declining, non-food credit growth is slowing while agricultural sector performance has also been sub-optimal,” she added.

No complacency

India’s economy grew by 5.3% from a year earlier in the July to September quarter, the slowest pace of expansion in three years.

Continue reading the main story
One of the messages that this forecast sends is that the government cannot afford to be complacent with its reform process”

End Quote Vishnu Varathan Mizuho Corporate Bank A slowdown in exports and subdued domestic demand have affected the manufacturing and services sectors.


Meanwhile, foreign investors have also been wary of entering the country amid a delay in key reforms.


That has led to concerns that India’s growth rate may slow further in the coming months.


Prompted by these fears, policymakers have taken various steps to try and spur a fresh wave of economic growth.


The government has passed key reforms, opening up the retail and aviation sectors to foreign investors.


Last month, India’s central bank, the Reserve Bank of India, cut its key interest rate to 7.75% from 8%, the first such move in nine months.


It also lowered the amount of money that banks need to keep in reserve, a move it said should provide 180bn rupees ($3.4bn; £2.1bn) of extra cash for them to lend.


Analysts said that while these moves had been positive, the downward revision in growth numbers was an indicator that the policymakers needed to do more.


“One of the messages that this forecast sends is that the government cannot afford to be complacent with its reform process,” Vishnu Varathan, senior economist with Mizuho Corporate Bank told the BBC.


“It needs to keep pushing through with even more measures.”


Mr Varathan added that the government needed to reduce its subsidy burden, improve infrastructure, and simplify and streamline the tax regime.


He said such moves would not only help increase revenue and reduce the deficit but also help shore up investor confidence, which he said had been dented recently.


“They key to get the economy going lies in getting investment growth back on track,” Mr Varathan said.

India set for worst car sales in decade

NEW DELHI: India’s once-booming passenger car sector looked set to post its worst annual performance in a decade, an industry group said Monday, after reporting a 12 percent plunge in auto sales in January.


Car sales viewed as an important barometer of overall economic health slid by 12.45 percent to 173,420 units in January from the same month in 2012, the Society of Indian Automobile Manufacturers (SIAM) said.


“We now think passenger car sales growth for the (2012-13 financial) year will be in negative figures,” SIAM deputy director general Sugato Sen told AFP, adding “the last time we had a negative (figure) was in 2002-03″.


“The industry is in tough times,” Sen said.


India’s weak figures come as vehicle sales in China, the world’s largest car market, shifts back to higher growth. Passenger vehicle sales surged 48.7 percent to 1.73 million units in January from a year earlier, the China Association of Automobile Manufacturers said late last week.


India’s car sales grew by a breakneck 20-to-30 percent in the previous decade prompting foreign carmakers such as Ford, Renault-Nissan, GM and other firms to make a beeline for the country as they sought to boost sales globally.


But passenger sales growth in India, the sixth-largest car market worldwide, has been in decline since 2010 with the nation’s expanding middle classes steering clear of auto showrooms as the economy has slowed.


India, Asia’s third-largest economy, is forecast to grow by five to 5.5 percent this financial year its weakest pace in a decade.


Increased ownership costs, such as costlier fuel and steep interest rates, have also deterred buyers.


“People aren’t getting the right vibes from the economy and are delaying their car purchases,” Deepesh Rathore, India-based expert of industry forecasting group IHS Automotive, told AFP.


“Car buying in India is still a very emotional business,” he added. “Even if buyers need a car they will probably wait until they feel good about the economic situation.”


SIAM had already slashed its passenger car sales growth forecast for the fiscal year to March 31 to zero-to-one percent from an initial 10 to 12 percent.


Sen said there would be no further official revision but added the group did not expect a recovery in car sales in the final financial quarter.


Sales for April to January were down around two percent from the same period a year earlier, Sen said.


Rathore said India’s passenger car sector was expected to gain traction in the next financial year, growing by six to seven percent, as long as the rest of the economy also picked up speed.


Total sales of trucks and buses another key pointer to economic vitality slumped by 9.51 percent to 63,218 units in January from a year ago.


The SIAM official said there was “still major headroom there for growth” in the car sector longer-term thanks to a highly under-penetrated market. Just one in 11 households in cities and one in 50 in rural areas own cars, SIAM said.

Copyright AFP (Agence France-Presse), 2013

India rubber seen steady as farmers trim supply

rubber--naturalMUMBAI: Indian natural rubber futures are likely to remain steady this week as farmers are holding back produce, hoping for an increase in prices March onwards, while tyre makers are trimming purchases due to lower demand from the auto industry.


At 1039 GMT, the key March rubber contract on the National Multi Commodity Exchange was down 0.1 percent at 16,132 rupees per 100 kg.


“Tyre producers are carrying enough inventories. They are not buying large quantities,” said N. Radhakrishnan, a dealer and former president of Cochin Rubber Merchants Association.


“The slowdown in the auto industry is hurting rubber demand from tyre companies. It looks like demand will remain weak for the next few months.”


Tata Motors Ltd’s vehicle sales in January plunged by 29.5 percent from last year’s level.


The spot price of the most-traded RSS-4 rubber (ribbed, smoked sheet) in Kochi, Kerala, rose by 66 rupees to 15,806 rupees per 100 kg.


“Farmers are not in a mood to sell at the current price. They are expecting an improvement in price from March onwards due to a drop in tapping,” Radhakrishnan said.


Rubber production in India peaks during the October to January period and starts falling from February.


The country is likely to produce 942,000 tonnes of natural rubber in the current year, up from 899,400 tonnes a year earlier.


A drop in the overseas markets was also putting pressure on local prices, dealers said.

Copyright Reuters, 2013

India rates cut after nine months

A vendor selling vegetables in India Rising food costs have seen India’s central bank resist calls for cutting interest rates India has cut its main interest rate for the first time in nine months in an attempt to revive economic growth.


The Reserve Bank of India (RBI) has lowered its key rate to 7.75% from 8%.


It also lowered the amount of money that banks need to keep in reserve, a move it said should provide 180bn rupees ($3.4bn; £2.1bn) of extra cash for them to lend.


India’s growth has fallen to a three-year low and the RBI has been under pressure to stimulate the economy.

Easing inflation

The slowdown in India’s growth had resulted in calls from both the government and business for the central bank to lower the cost of borrowing.


It had resisted the calls saying it had to keep inflation in check. However, the pace of consumer price growth has slowed in recent months.


India’s Wholesale Price Index, the country’s main gauge of inflation, eased to an 11-month low of 7.18% in December.


Commenting on its most recent move, the RBI said in a statement that the slowdown in the rate of inflation “provides space, albeit limited, for monetary policy to give greater emphasis to growth risks”.


The RBI added that it expects inflation to slow further in the coming months.


It said that it expects the rate of inflation to dip to 6.8% in March, compared with its earlier projection of 7.5%.

Further cuts? Continue reading the main story
The Reserve Bank of India is definitely less hawkish in its statement, and we think it will remain in the easing mode in 2013”

End Quote Sujan Hajra Anand Rathi Securities India’s economy grew by 5.3% from a year earlier in the July to September quarter, the slowest pace of expansion in three years.


The Asian economy has been hurt by a variety of factors.


The slowdown in the global economy has hurt demand for its exports and affected its manufacturing sector.


Meanwhile, domestic demand in the country has also remained subdued and foreign investors have been wary of entering the country amid a delay in key reforms.


That has led to concerns that India’s growth rate may slow further in the coming months.


On Tuesday, the central bank lowered its full-year growth forecast for the financial year 2012-13 to 5.5%, from its earlier projection of 5.8%.


Analysts said that the RBI may cut its interest rates further in an attempt to try and sustain long term growth.


“The Reserve Bank of India is definitely less hawkish in its statement, and we think it will remain in the easing mode in 2013,” said Sujan Hajra, chief economist at Anand Rathi Securities in Mumbai.


Mr Hajra said that he expected the RBI to cut rates by 0.5% over the next five months.

Rural buyers fuel India luxury car boom

Gurgaon, India Western luxury carmakers are finding plenty of new buyers in India

Taking his family on a joy-ride around the town in his brand new Mercedes, Randhawa Sehrawat shows his kids what once used to be their wheat fields.


His children open up the sunroof to wave to their friends.


Their village of Sukhrali, like the rest of Gurgaon, has been transformed by India’s economic growth and the Sehrawat family’s fields are now the site of high-rises and shopping malls that dominate the landscape.


Mr Sehrawat’s life, like other farmers in his village, used to depend on erratic monsoons.


But their lives took a dramatic turn as real estate developers, hungry for land in one of India’s fastest-growing suburbs, came knocking on their doors.


And property prices here soared; the acres of farmland they owned turned farmers such as Mr Sehrawat into millionaires.


Buying his first car was an easy decision for the 29-year old.


“My grandfather always used to joke about it when I drove around in my bullock cart. He would ask why am I parading around like it’s a Mercedes-Benz,” he tells the BBC.


“Now I really have a Mercedes to drive around.”

Boom town

Mr Sehrawat is not alone. Retailers say the majority of new car buyers in the area are farmers.

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The market in India is already quite big. It is nearly as big as the German market”

End Quote Eberhard Kern Mercedes-Benz India And the Delhi area which, along with the suburbs of Gurgaon and Noida, forms the National Capital Region (NCR), is the biggest market for luxury cars in India.


There is a flush of new money in these parts, and people living here are the new big spenders that luxury carmakers are now targeting in India.


One salesman recounts how he delivered a brand-new luxury SUV to a farmer in the middle of a mustard field as he was tending to his buffaloes.


And he paid for it with money stored in large potato sacks.


The luxury car market in India is expanding at annual rate of 40%, even as growth in the overall car market has stagnated in recent months.

Further growth

And what is getting the luxury car makers excited is the fact that the potential for growth in India is enormous.


Mercedes-Benz was the first to enter the Indian market. Last year the firm sold 7,138 cars in India, compared with 206,150 units in China.

Indian movie stars at the launch of an Audi car Some car makers have been tapping into the appeal of Indian movie stars to boost sales

And with firms seeing slower growth in markets such as Europe and the US, India presents a great opportunity for them to keep their momentum going.


“The market in India is already quite big. It is nearly as big as the German market,” says Eberhard Kern, managing director of Mercedes-Benz India.


“It is bigger than France or Italy or other markets that were developed a long time ago.”


He adds that while the share of the premium and luxury cars is still a small one, it will definitely grow in the coming years.


“India is on our roadmap on one of the top positions. We look forward to what business we can do here.”

Star appeal

According to a Confederation of Indian Industry-AT Kearney report, India’s luxury market was worth $5.8bn (£3.7bn) in 2011 and is expected to treble by 2015.


The bulk of that spending goes towards the fast-growing luxury car market and firms are using all their resources to try and capture a bigger share.

Audi, for example, is using the charm and celebrity status of India’s big-name movie stars to sell its cars.


An upcoming thriller movie titled Race 2, features a range of Audi cars in its action sequences.


The movie’s stars even came to a Delhi showroom to promote the movie along with a new version of Audi’s R8 Spyder car.


Targeting younger buyers, the company has seen its sales jump 63% last year.


The firm has also introduced a range of lower-priced models and is offering finance schemes to make it easier for young buyers to own luxury cars.


“With the financing scheme, we are tapping a new segment… we are seeing more and more salaried customers,” says Michael Perschke, managing director of Audi India.


“They have invested in property, and schooling is taken care of, and now they are ready for luxury cars.”

Made in India?

However, luxury carmakers are facing some hurdles as well, not least the high rates of taxation.


The Indian government levies a tax of more than 100% on imported luxury cars, pushing up their cost substantially.


But increasingly, car makers are making investments to assemble some units within India in an attempt to reduce the taxes as there is only a 10% tax on import of automobile parts.

Farmers in a rural area in India sitting in front of a luxury car Luxury cars are attracting a growing number of buyers from India’s rural areas

Tata Motors, which now owns the British luxury brands Jaguar and Land Rover, is assembling the Jaguar XF in Pune in central India – reducing the price tag by over $20,000.


Market leader BMW, which sold more than 9,300 units by the end of 2012, is also planning to launch the new BMW 1 Series from its Chennai plant.


That should be good news for the likes of Mr Sehrawat.


As he sits with family sit outside their home on traditional string cots or charpoys in the winter sun, his 75-year old grandmother wants him to buy a luxury sport utility vehicle as his next vehicle.


A Range Rover would be a good idea, she says. Others nod in agreement.


Mr Sehrawat also agrees that it will be a good move as the four-wheel drive will be useful when he takes it to his fields.


Once bypassed by development, villages such as Sukhrali are now at the centre of it all.

India central bank cuts rates by 25bps as expected

MUMBAI: India’s central bank reduced its policy interest rate by a widely expected 25 basis points on Tuesday, taking comfort from cooling inflation as it made the first cut in nine months to support an economy headed for its slowest growth in a decade.


The Reserve Bank of India (RBI) cut its key repo rate to 7.75 percent, as forecast by a Reuters poll.


The RBI unexpectedly also reduced the cash reserve ratio (CRR), the share of deposits banks must keep with the central bank by 25 bps to 4.00 percent, which will infuse an additional 180 billion rupees into the banking system.

Copyright Reuters, 2013

Is India losing its competitiveness?

A call centre in India India is already facing increased competition in sectors such as the call centre industry Nations and regions across the world compete in offering the most productive and competitive environment for businesses.


In simple terms, competitiveness of a nation or a region is about how it utilises its human, capital and natural resources.


Meanwhile, productivity is a reflection of what domestic and foreign companies choose to do in that nation or region.


If we look at this fundamental premise, then India needs to be worried. Really worried.

Potential pitfalls

India has been focusing on and celebrating the wrong achievements.


It is great to see the emergence of IT as an industry within the country. However, one has to remember that the sector has built its business on cost arbitrage.


The problem with this model is that it is short lived and would last until the time another low cost location emerges from the shadows.


One can already see the impact of this on the call centre industry in India, which is facing the heat from the Philippines.


India also suffers from the obsession that it is a services economy.

Continue reading the main story
The government’s policies in areas such as infrastructure, interest rates, fiscal deficit and inflation have not yielded the desired results”

End Quote This idea is inherently hazardous as it hurts innovation in key sectors such as agriculture or manufacturing, which are paramount to India’s growth going forward.


India is also often touted as having a demographic dividend, with majority of its population being young.


On the face of it, it does seem like a big advantage to have. But dig a bit deeper and one begins to realise that what India is actually facing is nothing short of a demographic disaster.


According to some estimates, only 4-6% of graduates in India are skilled enough to get employed. That doesn’t do any favours to India’s competitiveness.


India churns out close to 1.2 million engineers and MBAs graduates per year. But a majority of these graduates are job seekers and not job creators.


That needs to change and the emergence of an entrepreneurial culture is critical for that to happen.


To add to India’s woes, the disparities between its various states are increasing at an alarming rate.


States such as Goa and Delhi boast an annual per capita income of more than $2,000 (£1,250), while at the other end, states such as Bihar and Uttar Pradesh it is less than $400.


If not addressed in time, this can create huge social problems.


At the same time, if some states continue to be more prosperous than the others, it could lead to a big migration of labour from poor to richer states, the beginnings of which we are already starting to see.


That would make it even tougher to boost long-term sustainable growth in the poorer states, as bigger firms may be reluctant to set up shop there, which would hurt the economy and also dent job creation.

Stuck at the bottom?

Any economy typically has an evolutionary cycle wherein its growth is driven either by factor, investment or innovation.


The first stage in the cycle is that of factor-driven economies which focus on low-cost basic factor conditions, such as low-skilled labour, natural resources and geographic location.

Rising cost of food and fuel have been a hot political topic in India A high rate of inflation has been one of the biggest headaches for India’s policymakers

At the next stage are investment-driven economies which have the ability to produce products and services of high quality using efficient methods but at lower wages than advanced economies.


At the end the cycle, are innovation-driven economies that focus on innovative products and services at the global technology frontier.


India today without a doubt is stuck at the factor-driven stage and is within an arm’s reach to get the plot wrong at this level as well.


Economies at this stage of development need to focus on input costs, macro-economic, political and legal stability, efficient basic infrastructure and lowering the regulatory cost of doing business.


India seems to be lagging behind, and in some cases even failing on these parameters.

Lack of direction?

India’s growth story, which has been ongoing since it unleashed reforms in 1993 has been faltering in recent years.

Continue reading the main story
Innovation-driven economies need to focus on advanced skills, advanced infrastructure, incentives and rules that encourage innovation”

End Quote The government’s policies in areas such as infrastructure, interest rates, fiscal deficit and inflation have not yielded the desired results, prompting one to question if it even has an economic strategy.


As it looks to spur a fresh wave of economic growth, the biggest question that India needs to answer is: What kind of a market economy does it wish to be?


An economy that is driven by populist measures and subsidies, that have started to hurt growth and will only add to its troubles in the long run, or one that enhances the efficiency of doing business and encourages investment and innovation.


If it chooses the former, it is likely to remain stuck at the bottom of the growth evolution.


If it decides on the latter it will result not only in a revival in growth but also see it move up the economic evolutionary cycle.


However, that journey will be far from easy.


It has to keep in mind that investment-driven economies need to work on building efficiencies, enhancing local competition, market openness, incentives and rules for encouraging productivity.


Meanwhile, innovation-driven economies need to focus on advanced skills, advanced infrastructure, incentives and rules that encourage innovation.


India has long way to go to achieve that. It can perhaps start by trying to maintain its competitiveness.


Amit Kapoor is Honorary Chairman, Institute for Competitiveness, India; Professor of Strategy at MDI, Gurgaon, India. The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Links to external sites are for information only and do not constitute endorsement. Always obtain independent, professional advice for your own particular situation.

India raises import tax on gold

Many Indians buy gold as a hedge against inflation India has raised import duties on gold by a half to try to rein in demand for the precious metal.


The import tax is rising from 4% to 6%, a year after doubling from 2% to 4%.


The Indian government wants to curb imports of gold to try to help reduce the country’s current account deficit, which hit a record 5.4% of total economic output between July and September last year.


India is the biggest importer of gold in the world.


Many Indians buy gold jewellery and coins to protect the value of their money in the face of inflation.


“It is difficult to establish the impact [of the tax] on the deficit and by how much it will come down, but there will be some moderation in gold demand,” said Economic Affairs Secretary Arvind Mayaram.


“The duties will be reviewed after some time if there is a moderation in the quantity of gold that is imported into the country.”


Last year’s rise in import duty only had a temporary impact on demand, and some analysts said the latest move would have little effect.


“The government’s revenue will increase, but imports won’t diminish,” said Mohit Kamboj, president of the Bombay Bullion Association.

Ikea closer to stores in India

Ikea has been trying to gain access to the lucrative consumer market in India for years India’s foreign investment agency has approved Ikea’s entry into the Indian market, bringing the Swedish firm closer to being the first major foreign retailer with wholly owned outlets.


Ikea plans to open 25 stores, investing about $2bn (£1.3bn) over the next 15 to 20 years.


The proposal now needs approval from the federal cabinet.


It comes with Indian policymakers trying to boost foreign investment to spur the slowing economy.


“The government is committed to play a constructive role in encouraging FDI (foreign direct investment) specially in areas which create jobs and provide technological advancement,” a statement from the trade minister said.


Last year India changed its policies to allow some foreign retailers to own 100% of their Indian subsidiaries.


It also allowed foreign multi-brand retailers, such as Wal-Mart and Carrefour, to own as much as 51% of outlets.


This was Ikea’s second attempt to get approval from the Foreign Investment Promotion Board.


In November, the board cleared the proposal but restricted Ikea to selling furniture and not products it does not brand, including food and beverages, textiles, books and office supplies.


Ikea objected to those requirements and resubmitted the proposal. Monday’s decision allows Ikea to bring the same model it uses elsewhere to India.


“We consider this as a very positive development,” Juvencio Maeztu, IKEA country manager, said in a statement.

Making women safe at work in India

BBC News, Delhi After the India rape tragedy, Shilpa Kannan looks at safety in the workplace

The death of a 23-year-old woman who was gang-raped and thrown from a bus in Delhi has shocked India and made headlines around the world.


It’s sparked a fierce debate nationwide about the treatment of women, as a number of reports rank India as one of the worst countries in the world to be female.


But a generation of newly-empowered young women are going out to work in larger numbers than ever before, so just how safe do women in the capital feel?

Busy street

At the Munirka bus stop where the young medical student and her friend boarded a bus on the night of 16 December, women say they fear getting into buses.


But buses are one of the cheapest modes of transport so many don’t really have a choice.


While this spot has become one of the focal points in the city while talking about women’s safety, the irony is that it’s not a remote area of Delhi.


It’s one of the busiest streets in prime south Delhi and has traffic day and night.

Indian women practise judo Indian women are turning to martial arts to protect themselves

Hundreds of women use this place every day – to get to work and back.


But some like Sweeti Dagar are learning self-defence skills. In a basement martial arts centre, she practices her kicks and punches on a male colleague.


She lives in Najabgarh on the outskirts of Delhi and spends nearly two hours every day on public transport to get to university and back.


The petite 21-year-old says she wants to be strong to be able to protect herself out on the streets.


“I think it’s important to learn martial arts – all women should. It’s not safe out there. When in danger, we can’t wait for our brothers or fathers to protect us.”


With crime rates against women increasing in India’s cities, some industries are investing to protect their workers and encourage more women to join them – like the IT and outsourcing sector.


After yet another horrific rape and murder of a 24-year-old woman employee of Hewlett-Packard in Bangalore, a strict code of conduct was put in place to protect workers.

Helplines

Nasscom, the industry body that represents Indian technology companies, says women form more than a third of its workforce.

The gang-rape on a Delhi bus has sparked national outrage

Sangeeta Gupta, senior vice-president at Nasscom, says this higher percentage of female participation is because “the industry has a complete mechanism internally to ensure we have helplines to provide all the safety-security of women – particularly in transportation and safety”.


The measures include:

Providing company transport to and from the workplaceEnsuring that the women employee is not the first to be picked up and not the last to be droppedInstalling GPS tracking systems in all cabsCompanies doing background checks all security guards and drivers including maintaining records of fingerprints and photographsCompanies providing their database of drivers to Nasscom and they in turn give that to the police.’Risk’

All this comes at a cost, which Ms Gupta says companies operating in markets like the Philippines don’t have to incur.


“In the Philippines, even if a shift ends late in the night, workers take cabs and don’t feel unsafe,” she says.


“Whereas here in India, we cant take that risk. While it’s an added cost, its something companies take into consideration as we want more women to work for us.”

There is an added cost for firms to protect their female workers

But for small businesses, it’s a lot harder to invest in security.


It’s a question that employers are considering before hiring women.


With outlets across the country, Speciality Restaurants employs hundreds of women.


But the owner says that in Delhi he hires more men as he is worried for the safety of female employees.


“I have restaurants in 26 cities in India but Delhi is what concerns me the most,” says the firm’s MD Anjan Chatterjee,


“I hire more women everywhere else. But here it’s a different story. I’m from Delhi and I know first-hand how the environment here is. I don’t think I can have women workers – especially as they will need to work late hours.”

‘Nasty stuff’

Even so, he arms all his women workers with pepper sprays.


At his Chinese restaurant in south Delhi, one of the employees sprays a little at the floor to show me its efficacy.


Soon the entire floor has men coughing and sneezing – it’s pretty nasty stuff. But more and more women on the streets now own one.


Chemists in every locality have signs now advertising that they sell pepper-sprays – mostly sourced from China.


Many feel that it’ll take more than just pepper-spray to make India’s women feel more secure.


But while the country is debating the issue, there is now more pressure on employers to ensure the safety of their workforce.

India upper house approves reform

7 December 2012 Last updated at 10:11 GMT Bahujan Samaj Party (BSP) President Mayawati (C) leaves Parliament house during the winter session in New Delhi on December 5, 2012. Ms Mayawati of BSP said it supported the government because the move was not binding on states The upper house of India’s parliament has voted in favour of the government’s decision to open the retail sector to foreign competition.

The government won with 123 MPs voting in favour and 109 MPs opposing it.

The win came about after the regional Bahujan Samaj Party’s 15 MPs voted with the government, which does not have a majority in the chamber.

The BSP said it supported the government because the move was not binding on states.

The party had walked out before the vote in the lower house on Wednesday, helping the government win.

Ahead of the vote in the upper house on Friday, MPs from another regional party, Samajwadi Party, walked out of parliament, bringing down the margin for victory.

The decision to allow foreign direct investment was hotly debated on Thursday and Friday in the 244-member upper house.

Winning the vote will help the Congress party push ahead with further economic reforms to bolster India’s slowing economy, correspondents say.

Opposition parties, led by the Bharatiya Janata Party (BJP), oppose the government’s decision to allow global firms – such as Walmart and Tesco – to buy up to a 51% stake in multi-brand retailers in India.

India to sell phone airwaves worth $3.7bn

telecom-airwavesNEW DELHI: The value of telecom airwaves to be put on auction in India in this fiscal year ending March will be worth about 200 billion rupees ($3.67 billion) at the current reserve price, R. Chandrashekhar, telecoms department secretary, said on Friday.


India is betting on the revenue from phone airwaves auctions and stake sales in state-run companies to plug its widening fiscal deficit. The government raised less than a quarter of its 400 billion rupee target in last month’s auction.


The government aims to conduct the next auction during the current fiscal year. It also plans to sell 900 megahertz band airwaves in a separate but simultaneous auction.


In the last month’s auction, the government managed to get bids for parts of the airwaves it had put on block.

Copyright Reuters, 2012
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India factory output surges 8.2%

12 December 2012 Last updated at 06:49 GMT A Ford plant in Chengalpattu near Chennai in India A slowdown in global and domestic demand has hurt India’s manufacturing sector India’s industrial output rose more than expected in October, boosted by increased demand during the festive season in the country.

Factory output rose 8.2% from a year earlier. Most analysts had forecast a rise of 4.5%.

Manufacturing activity, which accounts for almost two-thirds of overall output, rose 9.6% from a year earlier.

Analysts said the data was also helped by a low base and did not indicate a recovery in India’s economy.

Industrial production had dipped 5.1% during the same month last year.

“It’s a positive surprise, but bear in mind the jump is distorted by last year’s low base, and this is going to reverse in November,” said Rajeev Malik, a senior economist with CLSA.

Mr Malik explained that the festival of Diwali, which is traditionally associated with a surge in consumer demand in India, was celebrated in October last year and in November this year.

Factories mostly manufacture and ship their goods ahead of the festival, and as a result, there had been a fluctuation in demand during the respective months.

“The real, credible assessment will be possible only after the November data,” Mr Malik said.

India central bank signs currency swap agreement with Bank of Japan

Tuesday, 04 December 2012 13:16 Posted by Asad Naeem

Indian-flag 400MUMBAI: The Reserve Bank of India signed a currency swap agreement with Bank of Japan to swap their local currencies against the US dollar for up to $15 billion, a statement said on Tuesday.

“The arrangement aims at addressing short-term liquidity difficulties and supplementing the existing international financial arrangements,” the RBI said.

The bilateral swap arrangement is for a period of three years. The two countries had earlier signed a similar pact for up to $3 billion from June 2008 to June 2011.

Copyright Reuters, 2012

India warns Maldives over airport deal row

New Delhi: India warned its neighbour the Maldives on Monday that it might freeze $25-million annual aid to the country amid anger over the cancellation of an airport contract for an Indian firm.

Last week, the new Maldives government gave five days to Indian infrastructure company GMR to leave after prematurely ending a 25-year management lease signed for the archipelago’s main international airport.

The decision angered New Delhi and raised concerns about the investor climate at a time when the Maldives is seeking foreign financing for tourism projects after a year of political turmoil.

“We are not happy with the way Maldives cancelled the GMR airport deal. This has surely left an impact on our bilateral ties,” a foreign ministry official told AFP, asking for anonymity.

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A second official in the ministry said that next year’s financial aid of $25 million would be provided only “after every aspect of the airline deal is reviewed.”

“A decision whether the money should be given or not will be taken soon,” he said, also on condition of anonymity.

Bangalore-based GMR Infrastructure had signed the deal to manage the airport in 2010 under former President Mohammad Nasheed, the country’s first democratically elected leader who was ousted after violent protests in February this year.

Nasheed’s deputy, Mohammad Waheed, assumed the presidency in what the former government initially described as a “coup” but which has since been judged a legal transfer of power.

Waheed’s government, which has aligned more closely with a hardline Islamist party, objected to the privatisation of the airport carried out by Nasheed and said the deal was corrupt.

Earlier this month, senior Indian officials welcomed an opposition Maldivian politician who claimed he was beaten up by police in what was also viewed by some as a sign that New Delhi was concerned about political violence in the country.

Reserve Bank of India to buy 120bn rupees of bonds in open market

MUMBAI: Reserve Bank of India will buy 120 billion rupees ($2.2 billion) of federal government bonds on Dec. 4 through open market operations (OMO), it said in a release on Thursday.


 


The Reserve Bank of India will buy 8.24 percent 2018 bonds, 8.19 percent 2020 bonds, 8.15 percent 2022 bonds and 8.28 percent 2027 bonds.


 


Copyright Reuters, 2012

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Moody’s says India outlook stable

Mumbai: Global credit ratings agency Moody’s said on Tuesday the outlook for India’s investment grade credit rating was stable, partly thanks to high investment, sparking a jump in share prices.

Moody’s said that the country’s Baa3 ranking was underpinned by “strong economic growth” and investment in its annual credit analysis on India.

The news pushed up the Bombay Stock Exchange’s benchmark 30 leading share Sensex index by 1.34 per cent or 248.12 points to 18,785.13 points.

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Moody’s cited “credit strengths which include a large, diverse economy, strong GDP growth as well as savings, and investment rates that exceed emerging market averages”.

But it also pointed to constraints including “India’s poor social and physical infrastructure, high government deficit and debt ratios, recurrent inflationary pressures and an uncertain operating environment”.

India’s gross domestic product expanded at its slowest pace in three years in the second financial quarter, at 5.5 per cent, down from near double-digit rates through much of 2005 to 2011.

India’s Congress party-led government has since September introduced pro-market reforms to boost the investment climate and stem the fiscal deficit, but faces strong opposition in the country’s unruly parliament.

“Given the delayed timing and still modest scope of these (reform) measures, growth may remain subdued in the near term amid continued domestic political uncertainty and a global slowdown,” the report said.

The Moody’s view contrasts with the outlooks of other global ratings agencies on India’s prospects. Moody’s said its report was an update for financial markets on India and did not constitute a “ratings action”.

Last month Standard & Poor’s warned India still faced at least a “one-in-three” risk of its credit rating being cut to junk status, although it said the country’s outlook was slightly better as a result of the reforms.

Fitch also has a negative outlook on India.

India’s investment grade rating is just one notch above “junk” status.

GSK to raise India unit stake in $940m deal

Mumbai: GlaxoSmithKline Plc plans to buy up to an additional 31.8 per cent stake in its Indian consumer products arm for about $940 million (Dh3.45 billion), as Britain’s biggest drugmaker deepens its emerging markets and non-prescription consumer health footprint.

The move is the latest in a series of deals by GSK to increase its presence in fast-growing economies a nd reduce its reliance on traditional pharmaceuticals in Western countries where sales are slower.

GSK aims to raise its stake in GlaxoSmithKline Consumer Healthcare Ltd to 75 per cent from 43.2 per cent, paying Rs3,900 rupees per share through an open offer, it said in a statement.

The price represents a premium of 28 per cent to the stock’s Friday close.

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The news sent shares of GSK Consumer Healthcare to a record high. The shares were locked at Rs3,659.20, up 20 per cent, their maximum daily trading limit, while the Mumbai market was up 0.2 per cent, by 0800 GMT.

“This transaction represents a further step in GSK’s strategy to invest in the world’s fastest growing markets,” said David Redfern, chief strategy officer at GSK in London.

The company, however, has “no current plans” to launch an open offer for its Indian drugs unit GlaxoSmithKline Pharmaceuticals Ltd, he added.

GSK said the transaction — to be funded through existing cash resources — would be earnings neutral for the first year and boost earnings thereafter. It will not impact expectations for the group’s long-term share buyback programme.

Tough market conditions in Europe have hampered GSK’s hopes for a return to sales growth this year, although the company’s growing business in emerging markets and its large consumer healthcare operation are both doing well.

In India, for example, sales of the consumer unit’s flagship Horlicks brand stood at £270 million in the year that ended December 2011, contributing to nearly three-quarters of its total revenues.

“A lot of the current business of Horlicks is in the south and the east of India. So there is still a great opportunity to increase the penetration to the north and the west,” Redfern told Reuters in an interview, adding that the company intended to introduce new variants of the brand in the country.

GSK does not plan to delist the unit.

Securities regulations in India require a minimum public shareholding of 25 per cent for a company to maintain a public listing.

The offer period is expected to begin in January 2013.

Telenor refuses to be drawn on India merger talk

Wednesday, 28 November 2012 15:08 Posted by Parvez Jabri

tata telenor 400NEW DELHI: Norway’s Telenor Wednesday refused to comment on reports it is in talks to merge its Indian operations with local firm Tata Teleservices as it seeks to enlarge it presence in the vast mobile phone market.

The state-run Norwegian firm, the largest phone operator in the Nordic region, is seeking a majority stake in the proposed merged group, media reports have said.

“Telenor Group never comments on rumors or speculation,” A Telenor spokesman said in an e-mail, while Tata Teleservices could not be immediately reached for comment.

Telenor won rights to operate in six Indian cellular zones earlier this month in an auction after India’s Supreme Court cancelled its previous 13 permits due to irregularities in the 2008 bidding process.

Tata Teleservices — part of the tea-to-steel Tata conglomerate — has licences to operate in all of India’s 22 mobile zones, making it an attractive partner for Telenor.

A deal between Telenor and India’s Tata would mean the Tata Group would reduce its holding in unlisted Tata Teleservices, the country’s sixth largest mobile phone operator by number of subscribers.

But Japan’s NTT DoCoMo would retain its 26 percent stake, the reports said.

Telenor has had a rough ride since entering the crowded Indian mobile market four years ago, the world’s second-largest by subscribers after China.

The Norwegian firm paid $1.10 billion for a majority stake in a phone venture with Indian property developer Unitech, which bought a licence in a distribution process. But then Telenor found itself mired in controversy.

Telenor’s Indian unit was among eight mobile operators whose licences were cancelled by the Supreme Court on grounds the 2008 permit sale was under-priced and corrupt in what has become one of the biggest scandals in India’s history.

Analysts say the ruling may have one welcome fallout for operators by leading to a long-anticipated industry consolidation as weak operators fall by the wayside or are swallowed up by stronger rivals. There are more than a dozen operators currently.

Local phone service providers such as Bharti Airtel, India’s leading mobile phone operator, and Vodafone India whose licences were awarded before 2008 have not been hit by the 2008 court ruling.

Copyright AFP (Agence France-Presse), 2012

India and Australia look to boost innovation ties

Posted November 27, 2012 11:52:24

Businesses and researchers from India and Australia are hoping innovation and cooperation in research and technology will lead to long-term economic growth.

Australia has a history of world leading innovations, while India, a country with one of the largest concentrations of scientists and engineers, does poorly on conventional indicators for measuring the level of innovation.

Key figures from industry, universities and research bodies came together in New Delhi recently to push the process forward.

Amit Kumar, an expert on energy-environment technology, has told Radio Australia’s Connect Asia he is looking forward to the partnership.

“Many of the Australian universities are the pioneers in innovative research,” he said.

“The technologies that have been developed there especially in solar and smart grids is what we are looking forward to, so I think this kind of interaction will try to bridge those gaps that are there.”

The Australia-India Strategic Research Fund, a major bilateral initiative co-funded by both governments is now offering scientists collaboration opportunities.

This jointly administered fund has supported more than 90 joint research projects, involving more than 100 leading Australian and Indian universities and research institutes since its inception in 2006.

Professor Thomas Kvan of the University of Melbourne says some of the areas include planning of cities, biotechnology, energy and mining – areas Australia has strong interest and expertise in.

“We are looking at growing cities again not on the scale you are looking here, but at the strategies…we are interested in are many of the strategies you are interested here,” he said.

“For example, [for] the Delhi metro system, the installation of infrastructure is a key issue and Melbourne is having a discussion about how to develop the transportation system and the choices we have.

“So while the contexts are not identical, we can learn from the decisions that are made, the strategies being followed and the implementation and from that we can learn from each other.”

The pace of research activity in India has picked up, with emerging leadership in several research areas, especially chemistry and, to a lesser extent, engineering, biology and biotechnology.

Dr Chetan Chitnis, who has has 3 patents pertaining to malaria vaccines, says collaboration between the two countries can make a huge difference.

“There are some big challenges we have to address in the areas of health and agriculture,” he said.

“The more minds we get together, and the more resources and expertise we can get to apply on problems – huge problems like malaria, dengue in India and other problems in other parts of the world – I think the two countries together can make a huge contribution.”

Currently two-way trade is over $US21 billion and it is hoped that will double by 2016.

Former cricket captain turned businessman Steve Waugh says innovation is the key.

“If you stay still for too long and pat yourself too often you are going to fall asleep,” he said.

“You have to be ready to do things differently and think outside the box.”

Topics: science-and-technology, business-economics-and-finance, trade, india, australia, asia

Patience needed to profit online in India

27 November 2012 Last updated at 00:02 GMT By Shilpa Kannan BBC News, Delhi Fashion is playing a key role in driving India’s e-commerce growth

As the lights come on, models pose and the cameras click away.

Tunics, shoes and jewellery – are all being snapped.

Photos are uploaded within minutes; to be seen by millions of online customers across the country.

This is the new world of e-commerce in India.

Jabong is one of the latest companies to enter the market.

Selling more than 50,000 products from shoes to cutlery online, the company says the Indian market is promising – especially in small towns, where more than half of all online sales comes from.

Arun Chandramohan is one of company’s founders and chief executive.

He says India is “structurally more attractive because we have a large youth population, growing aspiration, a large country where we don’t have very high penetration of malls”.

Fast catching up

Increasingly Indian shoppers have discovered buying items with just a click of a button, including through their mobile phones too. Travel booking websites are the most popular choice.

The Indian railways ticket site is used by almost one in five of the country’s web users, according to research company Comscore.

But retail websites are fast catching up as more young people begin to buy their clothes and shoes online.

While there are only about 10 million active online shoppers right now, the industry estimates that there are over a hundred million consumers ready to spend their money over the web.

But getting to those consumers is not easy – India faces serious issues with poor infrastructure and logistics.

Most companies, like Jabong, follow a model where they buy products, pile them high in their warehouses and hope consumers will buy it from them.

But this approach adds the costs of warehousing, inventory and logistics.

Some others follow the marketplace model.

This is when a company displays products from various vendors on their website and orders a product only after a consumer buys it online.

But it means shipping and delivery may take longer.

Ignoring profits

The sustainability of both business models is a critical issue, warns K Vaitheeswaran, the boss of Indiaplaza – the country’s first e-commerce site.

“So far all the investors who have come and heavily invested in new e-commerce companies have asked for sales and top-line growth,” he says.

“But they ignored profits. Suddenly they are beginning to realise that they may not get good returns on their money.”

He says his company has survived this long because they have kept operating costs low.

When the company was first set up in 1999, less than three million people used the internet in India, and only about 20,000 people actually shopped online.

Now, the country is among the top three fastest growing internet markets in the world – last year, internet use surged by 41%.

Indiaplaza screenshot Indiaplaza was India’s first e-commerce site

The potential to grow further is huge.

According to Rajan Anandan, managing director of Google India, of the 137 million internet users in India, only about 25 million are involved in online transactions.

In comparison, China has already got more than 180 million people transacting online.

While the number of people getting online is increasing, getting them to spend their money is still difficult.

Companies say the cost of acquisition of customers is quite high.

To attract new customers, firms have to spend money on advertising and offer discount coupons or have flash sales.

Some industry estimates suggest that firms are spending between $15-$50 (£9.30-£31.20) in getting each customer.

So the country’s $10bn market is driven mainly by companies offering big discounts and free deliveries.

The other big problem facing companies is that very few Indians own credit cards.

So most firms have an option where customers can pay cash on delivery – adding significantly to their costs.

Funds crunch

But while the costs are daunting, it hasn’t stopped companies from entering the market.

Amazon’s Indian venture, Junglee.com, doesn’t sell products directly but aggregates information from different e-commerce sites.

Ebay India, which started in 2005, clocks six transactions per minute, according to the Internet and Mobile Association of India.

Trainers are packed in an Indian warehouse A lack of credit cards in the country means products are often paid for with cash on delivery

In comparison, India’s largest e-commerce company, Flipkart sells 20 items per minute.

E-commerce accounted for the maximum chunk of private equity and venture capital deals in 2011 according to a study by advisory firm, Zinnov.

They reported that the sector has grown 800% since 2008.

Another firm, Technopak, predicts the ecommerce market to hit $70 billion by 2020.

But the worry is that none of the companies are making a profit yet.

And there are signs of a funds crunch.

Venture capitalists are becoming more wary as barely any e-commerce firms so far have made any profit.

Winners and losers

Already some consolidation is taking place.

Sunjay Guleria is co-founder of Sher Singh and Exclusively, sites which target Indian expats. He recently sold his company to another retailer, Myntra.

He agrees that capital has tightened up considerably.

“There will be winners and there will be losers.

“India itself – the landscape is very small in terms of the conversion rates. So there will be people who just don’t make it.

“It’ll be the bigger guys who have achieved scale that are doing millions of dollars a month in transactions that will break away from the path.”

With organised retail accounting for less than 5% of the market, ecommerce is leap-frogging across the country especially in towns that lack supermarkets or shopping malls.

As incomes improve, and more young people get online to buy, the brands they aspire to own is increasingly just a click away.

Promising news for the companies that have dived in – but making big profits may take longer than they originally hoped.

India to sell 130bn rupees of federal govt bonds

indi234MUMBAI: India will sell 130 billion rupees ($2.33 billion) of federal government bonds on Nov. 30, the Reserve Bank of India said on Monday.


 


It will sell 30 billion rupees of 8.07 percent 2017-July bonds, 70 billion rupees of 8.33 percent 2026 bonds and 30 billion rupees of 8.97 percent 2030 bonds, the RBI said in a statement.


 


Copyright Reuters, 2012

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GSK unveils expansion plans in India, Nigeria

Monday, 26 November 2012 17:10 Posted by Shoaib-ur-Rehman Siddiqui

GlaxoLONDON: British drugmaker GlaxoSmithKline said it intends to increase its holdings in its Indian and Nigerian divisions, as part of a long-term strategy to expand into emerging markets, in a statement on Monday.

GSK said it had offered to buy an additional stake of up to 31.8 percent of its Indian unit, GlaxoSmithKline Consumer Healthcare Ltd, in a bid pitched at 3,900 rupees per share.

The proposed voluntary open offer, which would lift its holding from 43.2 percent to up to 75 percent, is worth about £591 million ($941 million, 730 million euros) or 52.2 billion rupees, funded through existing cash resources.

“GSK Consumer Healthcare is a well established business in India and its leading product, Horlicks, is an iconic household brand,” the group’s chief strategy officer David Redfern said in a statement.

“This transaction represents a further step in GSK’s strategy to invest in the world’s fastest growing markets and, we believe, offers a liquidity opportunity at an attractive premium for existing shareholders.”

In a separate statement, London-listed GSK said it has also reached a deal in principle to ramp up its stake in GlaxoSmithKline Consumer Nigeria PLC from 46.4 percent to 80 percent, in a proposed transaction worth some £62 million.

Redfern added: “This proposal to increase GSK’s ownership of GlaxoSmithKline Consumer Nigeria reiterates our long term support of the company’s strategy and our confidence in the continuing growth prospects of the business.”

In morning deals, GSK’s share price dipped 0.71 percent to 1,337.50 pence on London’s FTSE 100 index of top companies, which was 0.44 percent lower at 5,793.25 points.

Keith Bowman, equities analyst at brokerage Hargreaves Landsdown, said the move was part of GSK’s wider strategy.

“The emerging markets continue to form an important growth driver for GSK,” Bowman told AFP.

“Today’s moves appear to underline management’s confidence in expected long term growth for both locations.”

Copyright AFP (Agence France-Presse), 2012

Patient India investors wait for turn around

So many things in India are not going well for the economy but seasoned investors are biding their time, firmly resolute in their belief that the world’s second-most populous nation has tremendous potential to turn things around and provide handsome returns.

Volatile share price movements, which have been the highlight of the market over the past few weeks, are set to stay for some time to come with a malfunctioning parliament holding up vital statutory bills that are needed to get the ball rolling on reforms.

Populist posturing by national and regional parties across the political spectrum is hampering the nearly $2-trillion economy, Asia’s third-largest after China and Japan, whose growth has slowed sharply to around 5.5 per cent from more than 9 per cent until about 18 months ago.

The first two days of proceedings in parliament that opened for the winter session on Thursday was disrupted by opposition parties and this trend is unlikely to change until the government takes the lead to pacify tempers. The opposition is demanding a debate and vote on the government’s decision in September to allow global retail giants like Wal-Mart and Carrefour into the domestic supermarket sector.

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The ruling Congress party-led coalition is ready to debate the issue but is against a vote in parliament because many of its allies and even Congressmen are against opening the door to foreign companies in the sector because they fear the move would drive small traders out of business.

The logjam could potentially hurt other parliamentary business, snuff out debates and delay legislation needed to allow foreign participation in the pension sector, higher foreign holding in insurance and paving the way for issue of new banking licences.

All these are bad news for New Delhi’s cash-strapped government, which is fighting a losing battle to rein in the fiscal deficit to its upwardly revised target of 5.3 per cent of GDP. Economists say there is every chance of the shortfall shooting past 5.6 per cent by the end of the financial year in March.

Still, market pundits are looking ahead with cautious optimism.

“December is very kind to equities,” Morgan Stanley said in an India strategy report titled “Darling December”. The month has produced a

4.6 per cent median return with an 80 per cent probability – the best for any month in the calendar, said the brokerage, trawling through 32 years of data from 1980

“Ordinarily speaking, such as this time around, December should prove good for bulls.”

The fiscal problems in the US and the political issues in India are risks to the call, but there could be a silver lining.

“The parliament session causes damage to the policy environment.

Expectations are low, so an upside surprise is more likely,” Morgan Stanley said, adding it preferred large-cap cyclicals in banks, autos, media and industrials. “The stocks in our focus list include IDFC, ICICI, Maruti, Tata Motors, Zee and L&T.”

Others are upbeat on the coming year.

“We remain constructive on Indian equities as we go into 2013,” Adrian Mowat and Sunil Garg, analysts at JPMorgan Chase & Co, wrote in a report. The brokerage picked Indian stocks as their top selection among the BRIC nations next year, citing improving policy and easier monetary conditions.

Notably, JPMorgan is underweight on rival China, where the key concern is profits as capacity continues to grow faster than demand, it said.

The top-30 Sensex nudged up 1.1 per cent to 18,505.57 in the week, but there were clear signs of indecisiveness and caution was the watchword. The government raised Rs8.1 billion (Dh551 billion) on Friday by selling just under 6 per cent holding in state-run Hindustan Copper Ltd, in its first asset sale this year and should help cushion the fiscal deficit.

The sale was copiously helped by heavy subscriptions from state-owned Life Insurance Corp and government-controlled State Bank of India. New Delhi aims to collect Rs300 billion through divestments in 2012-13, and more share sales should hit the market in the coming months.

The writer is a journalist based in India.

Walmart India unit suspends CFO, others pending probe

Mumbai: The Indian joint venture of Walmart Stores Inc has suspended its chief financial officer and other employees as it investigates alleged violations of US anti-bribery laws, a development that could hamper India’s efforts to open its domestic supermarket sector to foreign investment.

Walmart, the world’s largest retailer, said last week it has opened internal inquiries or investigations into bribery allegations in a number of countries including Brazil, China and India, which follows an earlier probe in Mexico. “The suspension is a routine global practice followed in such investigations,” an official at the Indian unit said, declining to be named. “We cannot carry out a fair investigation when the people we are investigating are in office. What we must not forget is they are innocent until proven guilty,” the person said.

Separately, a spokeswoman for the joint venture confirmed the suspensions and said the venture was “committed to conducting a complete and thorough investigation.” Walmart’s partner in the venture is Bharti Enterprises.

Walmart, the world’s largest retailer, declined to say whether similar suspensions could be carried out elsewhere as its investigation proceeds.

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“We are a committed to conducting a complete and thorough investigation,” Walmart said in a statement. “It would be inappropriate for us to comment further until we have finished the investigation.”

If any alleged improper conduct occurred, then the suspensions by Walmart “will serve it well in the eyes of enforcement agencies” such as the Department of Justice and the Securities and Exchange Commission, in deciding how to resolve the broader case, said Mike Koehler, assistant professor of law at Southern Illinois University School of Law, who also runs the FCPA Professor blog, a forum focused on the Foreign Corrupt Practices Act.

“Suspensions are common in situations like this. Companies that are under FCPA scrutiny want to demonstrate to enforcement agencies that upon learning of improper conduct, they took effective remedial measures,” said Koehler. “Part of doing that is to isolate current employees from their positions, so that any improper conduct does not continue.”

Indian authorities are also investigating claims that Walmart violated foreign exchange rules when it invested $100 million (Dh367 million) in a domestic unit owned by its wholesale joint-venture partner.

Indian opposition parties and allies within the Congress party-led coalition government in New Delhi are opposed to allowing global giants like Walmart into the retail sector, saying to do so would drive small traders out of business.

After several delays, the government in September finally allowed foreign direct investment in the sector to revive stalled reforms and help halt a slide in economic growth.

On Thursday, when the Indian parliament opened for its winter session, opposition politicians demanded a debate and vote on the policy decision and have threatened to halt parliamentary proceedings.

India to struggle to meet new deficit target, government officials say

New Delhi: India will struggle to meet its already swollen deficit target this year after a dismal response to this week’s auction of mobile phone licences and a battle to sell stakes in state companies, Indian finance ministry officials privately concede.

Global rating agencies have threatened to downgrade India’s sovereign credit rating to junk if it fails to put its fiscal house in order. Analysts said while the disappointing auction would likely not be a deciding factor, it underscored the challenges facing the government in trying to slash the deficit.

Just last month, subdued tax revenue and higher spending on subsidies forced the government to revise its fiscal deficit target to 5.3 per cent of gross domestic product (GDP) for the current financial year from a previous target of 5.1 per cent.

In setting the new target, the government was banking heavily on generating billions of dollars from the auction of second-generation (2G) mobile phone licences. But the auction this week yielded just under 25 per cent of the targeted Rs400 billion rupees (Dh24 billion or $7.3 billion), a result that caught officials off-guard.

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Finance Minister P. Chidambaram declined on Thursday to answer questions about the disappointing auction, but his officials said it may have pushed the government’s already tough deficit target even further out of reach.

“The task has become more difficult. Some out-of-the-box measures are needed to save the situation,” a senior finance ministry official with direct knowledge of the matter told Reuters.

Other finance ministry officials interviewed by Reuters this week gave similar assessments. The officials declined to be identified as they are not authorised to speak to the media.

Seven private economists polled by Reuters said they now expected the fiscal deficit for the year to end-March 2013 to slip to 5.5-6 per cent of GDP.

“Slippage is now inevitable. How much slippage happens depends on whether they can actually cut down on any spending area,” said Sonal Verma, an economist at Nomura.

The government still holds some tools to get it closer to its fiscal goal. It has an option to sell its stakes in private firms such as Axis Bank, infrastructure company Larsen and Toubro and hotel and tobacco conglomerate ITC. It can also ask for special dividends from cash-rich state-run companies.

Besides selling still-unsold telecom spectrum, it could even consider liquidating its land holdings, finance ministry officials said.

But the officials said it was unclear just how much revenue this would all generate and whether it would be enough to meet the 5.3 per cent fiscal target.

Last year, the fiscal deficit overshot the target of 4.6 per cent by 1.2 percentage points. Another big slippage this year could further erode the nation’s fiscal credibility.

“It is not business as usual. Everybody is under pressure to meet the [deficit] target,” said a finance ministry official. “Time is running out.”

The government’s battle to mend its finances not only undermines the battle against high inflation, but it also lowers growth prospects as funding the deficit from domestic savings crowds out private investment.

The government is on track to borrow Rs5.7 trillion rupees, 5.6 per cent of GDP, by February. Every 0.1 percentage point increase in the deficit is estimated to result in an additional market borrowing of at least 100 billion rupees.

The response to the 2G auction was in sharp contrast with the 2010 sale of faster third-generation licences, which fetched the government more than $12 billion and helped contain the deficit that year at 4.7 per cent.

“We were over-optimistic,” a senior economic adviser at the ministry conceded.

Chidambaram pledged last month to nearly halve the fiscal deficit by March 2017. But the plan he presented was short on specifics and was panned by economists.

US Ambassador argues for India FDI

New Delhi: Allowing FDI in India’s retail market will benefit the Indian consumers and farmers, American Ambassador to India Nancy Powell said here on Monday.

“We see benefits for consumers in India, a much bigger impact will come to the producers, the farmers in particular, to those who handle produce as they come out of the farms,” Powell told journalists during an interaction at the Indian Women’s Press Corps.

Explaining the benefits of multi brand retail, Powell said: “An incredibly high percentage, 40 per cent of food, is lost in India due to the lack of cold storage, the lack of quick transportation. This is one of the very important benefits of multi brand retail that they have brought across the world in improving the supply chain.”

“It has meant better prices for many of the producers, higher return as they do not lose as much between the farm and the store,” said Powell, who is the first woman US ambassador to India.

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On the controversy over foreign direct investment (FDI) in retail in India, Powell said: “Obviously it is a political issue here…how you work with the kiranas, the smaller traders but, it is also a recognition that not everybody is going to a big store, you will continue to have variety of retail outlets partially due to transportation. This will continue to be part of your political debate but we are very very pleased to see it coming to India.”

“I think multi brand retail is something which has been very controversial in my part of the US. When Wal Mart came, we saw some very familiar debates which I now read in the Indian newspapers,” she said.

“As we worked at the impact of multi brand retail on consumers, we found it provides consumers more selections of goods and services to choose from and at lower prices and fresher products,” she added.

The Left parties want a debate and vote on FDI in the winter session of parliament starting November 22.

The Bharatiya Janata Party (BJP) has also said that the party will oppose FDI and coordinate with the National Democratic Alliance (NDA) constituents and other opposition parties on the issue.

Jumeirah Group signs hotel deal in India

Dubai: The Jumeirah Group, operator of the Burj Al Arab, signed a management deal for its first hotel in India that is expected to open in 2017 — marking its entry into the country, the group said on Sunday.

“We are very focused on developing Jumeirah’s name within the Middle East region generally as well as in India and Asia. We do hope that in the near future, we will able to announce further projects in India but these projects are very much decided upon by Jumeirah on a hotel-by-hotel basis,” Gerard Lawless, president and group chief executive of Jumeirah Group, told Gulf News in an email when asked whether the company has more hotels in the pipeline for India.

The luxury hotel is part of a new development in the Lower Parel district of Mumbai and forms the first phase of the group’s expansion into India, the company said in a statement.

Jumeirah Group is in “advanced negotiations” for hotels and resorts in other key destinations in India, according to the statement.

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“The demand for five-star hotels in the Indian market has been robust and we are delighted to have initiated the first phase of our expansion into India with this landmark project in Mumbai,” Lawless said.

When complete, the property will consist of 470 rooms, suites and serviced apartments, a range of restaurants and bars, conference, wedding, banqueting and meeting facilities and a spa.

Jumeirah Group currently operates 20 luxury hotels and serviced apartments, including 10 in the UAE, seven in Europe, two in the Maldives and one in China. A further 15 hotels are now under development.

Textile ministry joins farmers in denouncing trade with India

Says decisi­on to open trade with India will “destro­y” Pakist­an’s textil­e indust­ry.  The Ministry of Textile Industry now says that the future of local industry seems bleak because of the “hasty” decision to open Pakistani markets for Indian textiles.


ISLAMABAD: After Pakistani farmers’ recent lobbying to prevent imports of agricultural produce from India, the Ministry of Textile Industry, too, seems to be getting cold feet ahead of the liberalisation of trade between the two estranged neighbours. Its apprehensions over the import of Indian textiles have surfaced hardly a month before the government is expected to phase out its negative list for goods tradable with India.


The Ministry of Textile Industry now says that the future of local industry seems bleak because of the “hasty” decision to open Pakistani markets for Indian textiles. It claims that allowing imports at reduced rates under the Most Favoured Nation (MFN) regime will swallow up the domestic textile sector.


Echoing similar concerns first raised by farmers on imports of India’s agricultural produce, the ministry says that the Indian textile industry enjoys “huge” subsidies and tariff protection, which will lead to imbalances in the market and affect Pakistani farmers. It has argued that India and Bangladesh have realised the importance of the textile sector in their economic development, growth of exports and generation of employment and therefore protect their industry. The ministry says that Pakistan should also protect its textile sector, which it fears will be “destroyed” after the entrance of Indian goods into domestic markets.


“We have still not been able to export more than $272 million worth of goods to India, whereas India has exported around $1.5 billion worth of commodities to Pakistan, being allowed 1,900 tariff lines,” the textile ministry said in its comments on trade with India after the grant of the MFN status. It added that Pakistan exported only $45 million worth of textile products to India in 2010, whereas India exported $566 million worth of textile products to Pakistan while the negative list was still in force.


Under the South Asian Free Trade Area (Safta) agreement, tariff rates are to be held between 0%-5% on all products not on a country’s sensitive list. Initially, Pakistan had 1,183 tariff lines on the sensitive list, out of which 293 pertained to textile products. Recently, the Ministry of Commerce whittled the sensitive list by 20% and the sensitive list now contains only 242 textile tariff lines. The Ministry of Textile Industry is worried that there is no indication that India or Bangladesh have done the same, or intend to do so.


“Almost all textile lines in which Pakistan has export potential are itemised in India’s sensitive list. Other than this, India has kept high non-ad valorem duties on most textile products (around 700 tariff lines) which form barriers to Pakistan’s exports,” the textile ministry cautioned. The textile ministry also alleged that India’s multilayered tariff system damages Pakistan’s export prospects to the country.


“India has huge state-owned textile mills and cotton trade. India has also banned the export of cotton, which results in lowering the cost of cotton for Indian textile industries and losses for Pakistani importers of cotton,” the textile ministry additionally noted.


The textile ministry has said that a tariff level for trade with India should be computed scientifically to ensure optimal rates. The ministry also warned that as far as trade defence mechanisms are concerned, Pakistan may have laws in place, but the country has limited experience in handling anti-dumping measures and limited resources to implement protective policies.


“A highly-skilled, well-budgeted and resourceful organisation, along with an organised domestic sector, may take years to develop. Till such time, there will be no mechanism available for the defence of the domestic sector,” the textile ministry says.


It also claimed that the private sector lacks the capacity to initiate or develop a strong case to invoke trade defence laws on the basis of a decrease in capacity utilisation and or loss in domestic market share, as no reliable data has been maintained as far as local production and sales is concerned. Recourse to such data is an important requisite for any kind of defensive action under the World Trade Organization’s laws.


On the other hand, the Indian textile industry – which is the second largest in the world – is enjoying a large protected domestic market, which ensures economies of scale, said the ministry. It said it fears the opening of borders will just increase the outreach of Indian textiles under the umbrella of SAFTA tax regimes.


Published in The Express Tribune, November 22nd, 2012.

MFN status to India: Farmers alone in their fight against Indian imports

Minist­ry of Financ­e ‘nays’ subsid­y for the agricu­lture sector. Farmers demand that major crops should be added to the sensitive list; barring Indian goods to shield the local sector. DESIGN: TARIQ GILANI

ISLAMABAD: 

The Ministry of Finance has expressed its inability to subsidise the local agricultural sector to make it competitive with the list of agricultural items that could be imported from India, which farmers’ lobby say may destroy the Pakistani agricultural industry after implementation of the Most Favoured Nation (MFN) status.

The government plans to grant MFN status to India by the end of December, and, according to the plan, land routes will be opened for trade with India by January next year.

Sources said that the Ministry of commerce, backed by stakeholders, had approached the finance ministry for allocation of subsidy for agriculture sector in the new trade policy so that Pakistani agriculture produce becomes competitive with Indian imports.

“However, the finance ministry has insufficient funds due to huge subsidy being paid to the inefficient power sector, and therefore is reluctant to go ahead on proposed financing plan for the agriculture sector,” sources said, adding that since agriculture goods were exclusive of the negative list, import duties will be levied on them.

“Presently, gas feed stocks to fertiliser factories are subsidised, amounting to Rs11 billion a year. However, surging oil prices and power outages have increased the cost of production, thus Pakistan’s agriculture sector is not equipped well enough to able to compete with Indian agricultural imports,” an official of the Ministry of Food Security and Research said.

Growers fear they will lose in the import deal with India. Farmers demand that major crops should be added to the sensitive list; barring Indian goods to shield the local sector. Earlier, farmers alleged that the government had not taken them on board during decision-making on the list of bilateral trade with India.

Officials admitted that import of sugar, pulses and red chillies will affect the domestic market.

“Indian farmers are enjoying huge subsidies and therefore, the government should subsidise the local farming sector to bring at par with the Indian farmers,” one grower said.

Other stakeholders raised concern that granting the MFN status to India was done without proper cost-benefit analysis of its impact on Pakistan’s economy.

The official said that the government was regulating wheat and sugar imports, therefore they will remain unaffected.

“If trade doors are opened without taking effective measures, and without negotiating reciprocal treatment and negotiating market access for Pakistan agricultural goods to India, local farmers will be left at the mercy of Indian growers,” a farmer said.

Published in The Express Tribune, November 21st, 2012.

View the original article here

India central bank will infuse more liquidity if needed: deputy

NEW DELHI: The Reserve Bank of India (RBI) will step in to provide more liquidity into the market if the need arises, deputy governor with the central bank Keshab Chandra Chakrabarty said on Wednesday.


He declined to say whether the RBI will resort to buying bonds through open market operations to inject liquidity.


Borrowings in the daily repo auction have risen above 1 trillion rupees for six consecutive sessions, nearly double the deficit level seen as acceptable by the RBI.

Copyright Reuters, 2012

SA has trade growth plan for India

Updated October 31, 2012 13:50:07

The South Australian Government wants to take advantage of rapid economic growth in India.

It has launched a 10-year strategy aimed at strengthening ties, with a focus on aerospace, defence, energy, natural resources, education and training and clean technology.

SA Trade Minister Tom Koutsantonis says a South Australia-India council is being established to help guide the process.

“Our exports to India are about $800 million a year already, heading up to $1 billion,” he said.

“We want to see those figures grow. We want to see more Indian students, we want to see more Indian investment into South Australia and ultimately we want to see more South Australian businesses sell their goods and commodities to the fastest-growing marketplace in the world.

“What we know is over the next 10 years the two largest economics in the world, China and India, are going to be our top two trading partners. We need to have very, very concise, detailed strategies to engage with those communities, those markets.”

SA Premier Jay Weatherill is planning to visit India next month.

Topics: states-and-territories, government-and-politics, trade, economic-trends, sa, adelaide-5000, india, australia

First posted October 31, 2012 13:48:43

Britain to stop all aid to India by 2015

Posted November 10, 2012 04:11:57

The British government has announced it will stop all aid to India by 2015 and slash its remaining handouts.

The measures are in response to growing domestic pressure over its foreign development budget at a time of austerity.

The International Development Secretary Justine Greening says the move will save Britain around around 320 million US dollars from 2013 to 2015.

She says the measure recognises India’s “changing place in the world”.

Prime Minister David Cameron has faced growing opposition at home to the aid commitment to India, with commentators pointing out that the booming former colony is able to fund its own space programme.

Topics: business-economics-and-finance, international-aid-and-trade, england, india, asia

Britain cuts off aid to booming India

Updated November 10, 2012 12:19:59

Britain will cut off all aid to India by 2015 in a major overhaul of the countries’ financial relations.

The aid had been a controversial issue in Britain, with critics questioning why money should given to a country that is growing increasingly rich and even has its own space program.

The move is set to save the UK government around $300 million and will be phased out over the next three years.

The British government says it will signal a new type of relationship, focusing more on trade.

International Development Secretary Justine Greening said: “It’s time to recognise India’s changing place in the world.”

All current aid projects will be fulfilled, but attention will now turn to sharing skills.

The Indian government has supported the decision, but some charities have raised concerns about its impact on India’s most vulnerable people.

Last year, Indian prime minister Manmohan Singh announced a $5 billion aid credit line for Africa.

India, which became independent from British rule in 1947, is now the third largest investor in Britain and its companies own flagship brands including Jaguar Land Rover.

ABC/Reuters

Topics: world-politics, government-and-politics, economic-trends, united-kingdom, india

First posted November 10, 2012 12:14:51

India October inflation surprises; slowest in 8 months but still high

New Delhi: India’s headline inflation unexpectedly eased to its slowest pace in eight months in October, a welcome relief from a string of bad data but still high enough to be a headache for policymakers struggling to balance the need for growth with taming prices.

Wholesale prices — India’s main inflation gauge — rose an annual 7.45 per cent, the slowest pace since February, government data released on Wednesday showed.

The figure was slower than the 7.81 per cent recorded in September, as food and fuel prices rose less quickly, and less than the 7.96 per cent predicted in a Reuters poll of analysts.

With India’s economy on track to grow at its worst pace in a decade, and a general election due in just over a year, the government has been pressing the Reserve Bank of India (RBI) to cut interest rates to revive growth. But the central bank has rebuffed those calls, saying prices are still rising too fast to risk loosening policy.

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The latest inflation reading is still seen as too high for the RBI to bow to pressure from the government and businesses by cutting rates at its next policy review in December. However, it could do so early next year.

“Despite the downtick, elevated inflation will prevent the RBI from easing aggressively,” said Jyoti Narasimhan, senior principal economist, IHS Global Insight.

“With inflation unlikely to recede substantially, we no longer expect the RBI to soften its stance and cut policy rates on 18 December to support flagging economic growth.”

India’s financial markets were closed on Wednesday for a festival.

Data on Monday showed the monthly trade deficit climbed to its highest-ever level, while industrial production surprisingly contracted, dashing hopes that the economy was regaining traction.

Prime Minister Manmohan Singh’s government is trying hard to get the economy back to the near double-digit growth that helped project India as a rising global power and helped Singh’s Congress party win two back-to-back elections since 2004.

But with state polls looming and a general election due in 2014, an economic revival would help Singh generate resources to fund big-ticket welfare programmes meant for his party’s core constituency comprising poor and rural voters. It would also help mitigate anger at rising prices.

Singh said in a speech over the weekend that his government had “dispelled doom and gloom” about the economy with a series of policy steps, including curbing fuel subsidies and liberalising foreign investment rules.

But investors are clamouring for the government to do more. They want Singh to push ahead with a reform agenda that has progressed fitfully, calling for a more business-friendly tax regime and speedier clearances for infrastructure projects.

Singh has faced opposition to flagship policies from powerful regional allies as well as opposition parties, setting the stage for another stormy parliament session when it reconvenes on November 22.

“The (inflation) number is better than what most people had expected, but based on the past experiences there is a likelihood of the numbers getting revised,” said Rupa Rege Nitsure, chief economist at Bank of Baroda in Mumbai.

The government revised up August inflation to 8.01 per cent from the 7.55 per cent initially reported.

“The Reserve Bank will wait till the headline inflation falls by 100 basis points more. The government is putting on pressure, but the Reserve Bank will not succumb to that pressure until the inflation comes down to the comfort zone,” Rupa Rege Nitsure said.

India 2G auction short of target

 The auction of the 2G telecom licenses has been marred in controversy India’s latest auction of mobile phone licences has fallen flat, raising less than a quarter of the money the government had targeted.


The auction for second-generation (2G) mobile phone licences raised 94bn rupees ($1.7bn; £1bn). The government had wanted closer to 400bn rupees.


Many companies had complained that prices were set too high.


An earlier sale of the licences was annulled by the Supreme Court after a corruption probe.


The previous licences were issued by former minister A Raja, who is accused of mis-selling the bandwidth in what has been called India’s biggest corruption scandal. Mr Raja, who is currently on trial for fraud, has denied any wrongdoing.


Government auditors say the scandal cost the country about $40bn (£24.5bn).

‘A big embarrassment’ Continue reading the main story
ll in all, a big embarrassment for the Indian government, but one could see it coming”

End Quote Prashant Singhal Ernst & Young The auction has been marred with controversy as firms not only complained about the high base prices, but also alleged that the limited amount of bandwidth being offered had deterred many bidders.


“The limited amount of spectrum… was guaranteed to have a very detrimental impact on the auction,” said Rajan Mathews, secretary general of the Cellular Operators Association of India.


“We said that the high reserve price would ensure that limited players come into the bid and that is exactly what we have seen.”


In a big blow to the government, four circles, including Mumbai and Delhi did not attract any bids.


There were also no takers for the all-India licence.


“All in all, a big embarrassment for the Indian government, but one could see it coming,” said Prashant Singhal, telecom industry leader, at Ernst & Young India.


The lacklustre response to the 2G auction contrasts with the 2010 sale of faster third-generation (3G) licences that fetched the government nearly $15bn.

Income disparities in India more pronounced than in Pakistan


LAHORE: Income disparities in India are more pronounced than in Pakistan but it has developed a consuming base of 300 million strong upper middle class earning between $10,000 and $50,000 per annum that Pakistan lacks in proportion to its population, said experts on Saturday.


The presence of such a strong upper middle class comprising around 25 percent of its population is the main reason for its robust economy, they said.


In contrast, such a high earning middle class is limited to hardly two million in Pakistan, which accounts for less than 2.5 percent of its population.


Dr Shahid Zia, a senior market analyst, said that effective middle class comprising industry professionals, scientists, doctors and engineers play a pivotal role in the growth of a country.


Those earning over $10,000 per annum in developing nations enjoy the same living standard as enjoyed by a person earning $25,000 in a developed country, he said, adding that the notion that those living above poverty level are the real middle class is not true because they have no voice in the developing societies.


The OECD in its latest projections has predicted that by 2060 the average per capita income in India would be above $10,000.


Naveed Anwar Khan, a senior economist, said that the number of people earning above $10,000 per annum has grown in Pakistan, as well but the two million workforce employed by the Indian information technology industry alone earn more than this amount.


He said the resource distribution in recent years have been fairer in India for the skilled and professional workers. It would have been in Pakistan had the government had prepared the skilled human resource, said Khan.


He said a middle class in relative terms can be defined as the middle income range of each country. The problem with this approach, he said, is that each country has a different median income, so the definition of what is a middle class shifts from place to place.


A more prudent method, said Khan, is to use a fixed income band for all countries. This is more representative method because this constitutes empowered segment of the society in every country, he said.


Yunus Kamran FCA, market analyst, said that in India the local and international banks are making consumer credit increasingly available to the middle class borrowers. This is spurring a new wave of consumer spending unprecedented in India’s history, whereas in Pakistan, the commercial banks are pulling out of consumer finance as it carries high risk due to limited incomes of the middle class.


Indians are optimistic that their upper middle class would go on expanding as it crossed 300 million from 130 million in 2009. In 1995, he said, those earning $10,000 to $50,000 in India accounted for only two percent of its population that increased to five percent in 2005 and 11 percent in 2009 and now it is 25 percent. The momentum has been set and India would now grow on its middle class for years to come, he said.


A new wave of consumer spending unprecedented in India’s history has sprung, he said, adding that Pakistan needs to increase its effective middle class by increasing its spending on education and skill training. “Only after that we could dream of sustained growth on local consumption,” he said.


Asif Ali Shahid CPA said that the middle class included intellectuals, engineers, doctors, scientists, and industry professionals.


They are the backbone of the civil society. They influence policies. They fight corruption, bad governance and incompetence. They spur growth. They are consumers of goods and services, he added.


The middle class is also different when it comes to the role of freedom in their own lives. They support struggle for freedom of speech, freedom of religion, freedom from hunger and poverty, or freedom from crime and violence, he said.


Shahid said that the middle class is more inclined than the less wealthy to consider equal judicial treatment very important.


When confronted with a choice between a good democracy and a strong economy, members of the middle class in several developing countries prefer good democracy over affluence, he added.

India Kingfisher unlikely to fly again: minister

MUMBAI: India’s aviation minister on Monday virtually sounded the death knell for the cash-strapped Kingfisher airline, saying it would be “very difficult” for the ailing carrier to resume operations.


The statement comes after the aviation regulator on Saturday suspended the flying licence of the debt-laden airline, which has grounded its fleet since October 1 due to a crippling strike by employees over unpaid salaries.


Kingfisher, promoted by liquor baron Vijay Mallya on its best selling beer brand, owes billions of dollars in taxes, airport fees and to staff who have not been paid for the past seven months and are on strike.


“It would be very difficult,” Ajit Singh, India’s civil aviation minister told New Delhi Television on Monday, when asked if Kingfisher could start flying again.


In a desperate bid to bring the staff back to work, the carrier on Monday proposed to pay employees three months of pending pay by the Hindu festival of Diwali on November 13.


Kingfisher shares slid 4.8 percent to 10.9 rupees at the Bombay Stock Exchange on Monday. Shares have fallen 29 percent since the staff agitation started.


Relations between management and staff reached boiling point last month after the company declined to commit to a date for settling its debts, prompting employees to walk out.


Mallya is desperately seeking a foreign buyer to save it from complete collapse, but many analysts are doubtful any rescue is possible.


Kingfisher was India’s second-largest airline until a year ago but now it has a market share of just 3.5 percent, the smallest of the country’s carriers.


Local banks which own a quarter of Kingfisher have rejected a request from the company for another loan.


At least 4,000 of Kingfisher’s staff which includes pilots, engineers and ground staff have not been paid salaries since April, despite previous promises.


Kingfisher employees “must be feeling that they have been taken for a ride,” Singh said.


“There were continuous emails, discussions and assurances that they would be paid, they (employees) had hope they would be paid. It must be a very sad experience for them,” he added.


A report by the Centre for Asia Pacific Aviation, a Sydney-based consultancy, says Kingfisher’s debts total $2.49 billion including bank debts of $1.1 billion, and it had accumulated losses of $1.9 billion.

Copyright AFP (Agence France-Presse), 2012

Govt urged to link negative list removal to proportionate measures by India


LAHORE: Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM), reacting to the decision to abolish negative trade list with India by the end of the year, has suggested the government to link phase out to proportionate measures by India towards reduction in non-tariff barriers (NTBs), according to a statement on Monday.


“The sensitive list needs to be maintained for at least next 10 years, before we can consider any reduction in the tariff lines,” said Munir K Banna, chairman of PAAPAM.


“There is no clarity on the issue of phasing out of the negative list. Pakistan cabinet had clearly decided that the negative list will not be phased out by December 31, unless India removes all NTB’s to our satisfaction.”


“Secondly, Pakistan’s auto industry is not prepared for phasing out the negative list, as our government has not carried out administrative and organisational changes in their internal system, for gearing up to the onslaught of the Indian products.”


PAAPAM wants manufacturing-based trade with India and does not want Pakistan to become a market for Indian finished goods, he warned.


The PAAPAM chairman said that the ministry of industries has admitted that Pakistan’s domestic industry is in a gross comparative disadvantage position in terms of energy and access to credit. “Numerous industrial zones in India offer concessions to promote the industry, while in Pakistan there are frequent and prolonged energy outages and the production capacities remain unutilised across-the-board, increasing the production costs for the majority of those small and medium enterprises (SMEs) who do not have resources to set up captive plants.” Usman Malik, vice chairman of PAAPAM, said that India should not be allowed to use Pakistan as a dumping ground for its cheap and substandard goods.


The auto industry is neither consulted nor taken into confidence on the attached issues agreed with the commerce secretary of India, he added.

India, Turkey should start free trade agreement negotiations: Envoy

New Delhi: To further enhance bilateral trade, India and Turkey should start negotiations for signing a free trade agreement (FTA), the Turkish envoy here said.


“In 2011 we had traded around $7.3 billion [Dh26.8 billion], which heavily favoured India. I believe that the potential of trade is far more than this level and a FTA will help expand it enormously,” Turkish envoy to India Burak Akcapar said.


When asked by IANS about the Turkish position on a joint study group (JSG) conducted on furthering the bilateral trade between both the countries, Akcapar said that both sides should start negotiations soon based on its findings.


“The FTA will also help bring down high import duties and will also allow Indian companies to export to European Union countries via Turkey as we have a duty free agreement with EU and are customs integrated with them,” he said.

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The JSG was formed to examine the feasibility of an FTA between the two countries and has submitted its report to the two governments, which are currently studying the findings.


Historic relations


According to the envoy, the excellent political and historic relations between both the countries also have the potential to attract Turkish investments into India in sectors like infrastructure development and tourism.


“Turkey has had good experience in developing infrastructure that can be replicated here. We have received positive response from both sides on the infrastructure sector. We may see some developments soon,” he said.


Currently, institutional arrangements consisting of a joint commission for economic and technical cooperation (JCETC), joint business council (JBC) exists between the two countries.


Turkey and India are also signatories to agreements like avoidance of double taxation (DTA), reciprocal protection and promotion of investments, maritime, agricultural and tourism cooperation.


According to data from the Consulate General of India in Istanbul, in 2011 both sides had a bilateral trade of $4.09 billion, out of which Indian exports accounted for $3.62 billion, while Turkish exports stood at $0.477 billion.


Goods traded


Till January-July, 2012, both sides had traded $3.9 billion, out of which India’s exports were $3.46 billion, while Turkish exports stood at $0.440 billion.


India’s exports to Turkey include petroleum products, vaccines, cotton yarn, organic dyes, denim, steel, granite, antibiotics, carpets, tobacco, cars, sesame seed, TV CRTs, mobile handsets, clothing and apparel, tractors and aluminium.


In turn Turkey’s exports to India include poppy seeds, auto components, marble, textile machinery, denim, carpets, cumin seeds, copper ores and concentrates, steel, gold, silver and jewellery.


More than 150 companies with Indian capital have registered businesses in Turkey in the form of joint ventures, trade and representative offices which include GMR Infrastructure, Tata Motors, Mahindra and Mahindra, Reliance, Ispat and Aditya Birla Group.


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Visit to Kishanganga Dam site: India has stopped work following court’s orders

Chines­e firms threat­en to abando­n Neelum Jhelum projec­t over delay in cleara­nce of dues.  Chinese firms threaten to abandon Neelum Jhelum project over delay in clearance of dues? ILLUSTRATION: JAMAL KHURSHID

ISLAMABAD: 

Much to the satisfaction of Pakistan, Delhi has told Islamabad during a recent visit to the site of Kishanganga Dam, which was being built on Neelum Jhelum River, it has stopped work on the project and will not violate the stay order granted by the International Court of Arbitration, say officials.


However, Pakistan faces a threat back home as a Chinese joint venture has warned that it will abandon the strategic 969-megawatt Neelum Jhelum hydropower project, located in Azad Jammu and Kashmir, because of delay in clearance of its dues.


During a visit of the Pakistan-India joint inspection commission to the site of Kishanganga Dam, Pakistani officials noted that no construction work was under way following the stay order from the international court, approached by Pakistan.


“India is not even working on those parts of the dam, where work has not been restricted by the court,” a senior government official said.


The government claims that India will win water rights over Neelum Jhelum River if it builds Kishanganga Dam before completion of the Neelum Jhelum power project. This will lead to Pakistan losing 13% of the river’s water, it says.


However, officials in knowledge of the developments insist that Pakistan enjoys water rights over the river under the Indus Waters Treaty and India cannot lay claim to it by building the dam.


Today’s deadline


The joint venture of China Gezhouba Group of Companies and China Machinery Engineering Company, which is working on the Neelum Jhelum power project, has set a deadline of October 20 for the government to clear its dues amounting to Rs8.5 billion, says an official. In case of failure, the companies will back out of the project, leaving the government in a critical situation.


According to sources, the government is finding it difficult to arrange funds for the project as the Chinese government has linked the release of a loan of $448 million with the award of Islamabad Safe City project to a Chinese company.


“We will talk about the loan if Pakistan awards the contract of Islamabad Safe City to a Chinese firm,” an official said, quoting Chinese authorities.


However, in August this year, the Supreme Court of Pakistan cancelled the Rs14 billion Safe City project in the capital due to allegations of corruption.


The Abu Dhabi government’s leading national entity, the Abu Dhabi Fund, has also withheld a promised loan of $100 million for the Neelum Jhelum project until the settlement of a payment dispute between Pakistan and Etisalat pertaining to privatisation of Pakistan Telecommunication Company Limited (PTCL).


Rs2b a month


“The Ministry of Water and Power has requested the finance ministry to provide Rs2 billion every month for the Neelum Jhelum project, but no response has been received,” an official of the Ministry of Water and Power said.


The contract for the project, which has already been delayed, was awarded to the Chinese joint venture during the Musharraf regime without firm financing commitments, the Planning Commission observes.


Owing to the delay, the cost of the project has gone up from Rs84.5 billion to Rs274.8 billion, which will push up power generation cost to over Rs10 per unit compared to existing cost of 16 paisa per unit for hydropower.


The burden of delay and inefficiency is falling on the consumers as the government has decided to arrange 40% of funds for the project through a levy on energy. At present, the consumers are paying a surcharge of 10 paisa per unit, which amounts to Rs6 billion per year.


Published in The Express Tribune, October 20th, 2012.

Getting India back on track

India’s Finance Minister P. Chidambaram exudes the self-confidence of a man who, in the eyes of India’s cheerleading financial markets, can do little wrong

ReutersPublished: 19:41 October 19, 2012
Image Credit: SuppliedPalaniappan Chidambaram : Indian Home minister

New Delhi India’s Finance Minister P. Chidambaram exudes the self-confidence of a man who, in the eyes of India’s cheerleading financial markets, can do little wrong.

In the 11 weeks since he took office, the benchmark BSE index has surged around 8 per cent, due in large part to his hard-charging drive to boost investor sentiment that had soured under his predecessor, Pranab Mukherjee.

When you are fixated on equity markets and you are doing whatever you can to push them higher that is exactly what you will see

Economist Rajeev Malek of CLSA, Singapore

But the reality is the steps taken so far will not fix the sluggish economy in the near term, and the window of opportunity for implementing game-changing reforms such as slashing government spending on fuel, food and fertiliser subsidies will narrow as campaigning for a 2014 election gets under way.

“When you are fixated on equity markets and you are doing whatever you can to push them higher that is exactly what you will see,” said economist Rajeev Malek of CLSA, Singapore.

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“Pushing up equity markets is a lot easier than taking up some of these more difficult moves.”

Together with Prime Minister Manmohan Singh, Chidambaram has unveiled a series of big-ticket and small-bore initiatives over the past month that were long demanded by investors and business leaders frustrated by years of policy inaction in New Delhi.

According to government officials, the slew of policy announcements on lifting the bar on foreign investment in the airline, insurance, pensions and retail sectors are part of a two-step government strategy — first, pump up the financial markets, then unveil a road-map for cutting the fiscal deficit.

The first step has worked. Net inflows from foreign investors have surged since Chidambaram’s appointment, with $7.7 billion (Dh28.3 billion) flooding into stocks and bonds since then, according to regulatory data. The next step will be more difficult.

Reports published by the World Bank, International Monetary Fund (IMF), Standard & Poor’s and a government panel over the past 10 days have provided sobering reminders of the huge challenges facing an economy still beset by high inflation and dragged down by ballooning current account and fiscal deficits.

The IMF sharply cut its econ-omic growth forecast for India for 2012 to 4.9 per cent from an earlier projection of 6.1 per cent growth. The Kelkar budget panel, meanwhile, warned that India was teetering on the edge of a “fiscal precipice” and called for swift action to reduce the deficit, which it said could hit 6.1 per cent of GDP this year if no action was taken.

Chidambaram has signalled that he is acutely aware of the dangers, telling a news conference last week that without reforms to curb the deficits, India “risked a sharp and continuing slowdown of the economy”. He is expected to unveil a deficit reduction plan soon, possibly before the Reserve Bank of India’s next policy review on October 30.

But turf wars within the cabinet, friction among coalition partners, continued weak government at a federal and state level and fears of alienating voters ahead of the 2014 election could still choke off Chidambaram’s reform drive.

The Finance Ministry knows it has a “very small window” in which to act, a senior ministry official told Reuters.

There is already disagreement among ministers over a land acquisition bill long sought by Indian business leaders that would make it much easier for companies to buy land for industrial and infrastructure projects. The bill is stalled in cabinet and it is not clear when it will be approved.

The environment minister, meanwhile, has raised objections to another Chidambaram initiative — a national investment board aimed at cutting through red tape that can hold up infrastructure projects for years. The proposal is seen as the government’s boldest attempt yet to clear infrastructure bottlenecks that have strangled economic growth.

Singh’s coalition government has also been seriously weakened by the walkout of a key ally and now governs without a parliamentary majority.

It is dependent on support from two fickle allies that have campaigned against some of its flagship reforms, such as allowing foreign supermarkets into India.

That will make it difficult for the government to get pension and insurance reforms, recently approved by the cabinet, through parliament. In fact, there is now a higher risk of the government falling and an early election being called.

Critics question whether, in the face of such challenges, the ruling Congress party will have the political will to follow through with what Singh and Chidambaram have started.The party’s powerful chief Sonia Gandhi favours costly welfare measures and had to be persuaded to back the recent reforms.

“If the government were to enter into a populist mode come FY14 budget and roll back any of the reform initiatives, risks of a (credit rating) downgrade will rise come next year,” said Radhika Rao, an economist at Forecast in Singapore.

The government has already baulked at the recommendation of the Kelkar deficit reduction panel to phase out fuel subsidies, saying it had a duty to protect India’s poorest citizens.

And Oil Minister Jaipal Reddy said last week he was “not so courageous” as to raise diesel prices anytime soon after a hike in mid-September sparked a nationwide strike and street protests led by opposition parties. His comment suggested the government is already viewing policy decisions through the prism of a general election due by mid-2014, when it will face a tough fight to win a third term.

Those political considerations pose a challenge even for someone as single-minded and determined as Chidambaram, finance minister for the third time in a storied political career. The question now is how much time India’s political leaders will give him to get the economy firmly back on track.

Farm to fork, no easy ride in India

Narayangaon, India: As Wal-Mart Stores Inc ramps up its operations in India, it needs to find more farmers like Yogesh Todkari.


His acre of cauliflowers is big, leafy, and a deep shade of green, thanks to modern irrigation and quality nutrients and seeds – all provided by the world’s largest retailer. Most farmers in India, though, don’t meet Wal-Mart’s standards.


“They train us and assist right from when the crop is sown to when it’s harvested. They give us a higher price than the market for better quality,” said Todkari, 29, who works the field in western India with his elderly father.


Investing in farmers to help them improve quality and efficiency, and getting around the army of costly middlemen, will be key to whether global chains like Wal-Mart and Tesco Plc succeed where local operators have failed to make a profit. It will also be a test of whether India’s politically fraught decision to allow in global supermarkets in order to modernise its food supply chain proves to be the right one.


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“We plan to procure as much as we can via direct farming so the procurement from traders in local markets is as little as possible,” said Krishnakant Reddy, who is in charge of direct farming in south and west India for Wal-Mart, which already operates in India through 17 wholesale stores.


Under the reforms, foreign retailers must source at least 30 per cent of their goods from local, small industries.


India recently let in global supermarkets, despite heavy political opposition, in the hope of improving the supply chain and bringing down wastage and costs in a country where one-third of fresh produce rots and food inflation is persistent.


Wal-Mart, by far the most aggressive foreign supermarket operator in India, expects to open its first store selling directly to the public in 12-18 months, and aims to turn a profit in 10 years, something it hasn’t managed in China after 12 years.


To get there, Wal-Mart plans to sign up 35,000 farmers over the next three years, up from the 6,700 it has now. Fresh produce accounts for about 30 per cent of Wal-Mart’s sales in its wholesale outlets in India.


Wal-Mart must buy in small batches from small plot-holders in a country where more than 80 per cent of farms are under two hectares. That means contracting with thousands of farmers will still yield only a few thousand tonnes. In North America, retailers like Wal-Mart can buy from a few hundred farmers who provide hundreds of thousand of tonnes of produce between them.


“It’s going to be a huge challenge and requires a lot of work on the ground,” Reddy said during a recent visit to Narayangaon, a few hours from the city of Pune where Wal-Mart runs one of its seven Indian farm procurement centres.


Cutting Out The Middle Man


Wal-Mart is trying to learn from the difficulties of Indian chain operators such as Reliance Industries and Shoppers Stop, most of which rely on middlemen after struggling to establish a strong direct farm supplier base.


Skirting the entrenched network of middlemen, who opposed the government’s decision to allow in supermarkets and includes both traders and local markets run by state Agricultural Produce Marketing Committees (APMCs), isn’t easy.


States require all farm produce to be sold through government regulated markets, and impose registration and transaction taxes on buyers, in addition to fees charged by middlemen operating in the markets. In some states, including Karnataka, buyers can purchase directly from farmers, but still have to pay taxes and fees both to the APMC and middlemen.


In Maharashtra, where Narayangaon is located, Wal-Mart must send by truck the produce it buys from Todkari about 20 minutes away to an APMC market and pay fees before delivering it to stores.


“The APMC fee is actually a tax for doing nothing and that is detrimental to direct farming,” said Raj Jain, who heads Wal-Mart in India and like the Confederation of Indian Industry, a large trade group, wants to get rid of the APMC system.


Traders were among the most vocal opponents of letting in foreign retailers, a move whose impact will be dulled by allowing states to opt in or out. Under populist pressure, most states plan to keep global operators out, at least for now.


“The government is thinking of cutting us out without even thinking about the families who depend on this. We facilitate trade in these markets. Thousands of jobs across India depend on this,” said Rajesh More, a trader at the APMC market in the neighbouring village of Manchar.


There are an estimated 50 million small traders involved in the farm-to-store agriculture business across India, according to the Confederation of All India Traders.


The Congress party-led coalition government in New Delhi defended its decision to allow in foreign retailers as benefiting farmers and reducing dependence on the middlemen network. Congress is also the ruling party in Maharashtra.


“The government has anyway let the foreigners in, which will hurt small store owners, and now they’re targeting us,” More said.


Hand-Picked


The region near Pune is one of India’s most productive for horticulture, and Todkari is among only 600 farmers to have met Wal-Mart’s standards. The retailer targets a small number of farmers who are respected locally and can convince others to work for the grocery giant.


“This is mainly done to build trust as most Indian farmers haven’t heard of Wal-Mart and are apprehensive about working with us,” Reddy said.


The farmers Wal-Mart selects are suited to modern irrigation, have higher yields and are capable of crop rotation. Wal-Mart’s investment in farmers is part of the $100 million initial spending India requires foreign chains to make under the retail reforms.


“Quality suppliers who these foreign chains can do business with are still small in number and so are the supply bases where they can procure from,” said Debashish Mukherjee, partner at consultancy AT Kearney.


Wal-Mart buys more than a dozen fresh produce items from the Narayangaon area, including cabbages, tomatoes, onions, grapes, cauliflowers and pomegranates.


The US-based retailer has tie-ups in north India with logistics companies to send fresh produce to store by refrigerated truck – a facility it will extend to other farm bases as procurement volumes increase.


“The produce has to be sent to the store even if cost-wise it’s a struggle. It’s a business that needs scale and, now with permission to open stores, we’ll have that,” said Reddy.


Wal-Mart says it pays farmers a premium of at least three per cent above the market price for better quality produce. What Wal-Mart doesn’t buy, the farmer can sell at the local market.


Siddhesh Jagtap, who grows pomegranates in Narayangaon, was not among Wal-Mart’s chosen few. “They approached us, but never came back. It doesn’t hurt us as they don’t procure a lot,” he said.


“If their requirements go up and they want to work with us, we will be open. They give a good price and make timely payments, which is all a farmer wants.”


PrintEmail a friend More from Investment Farm to fork, no easy ride in India Soft drink giant to launch ‘beauty drinks’ Dubai Metro, Tram in line with RTA vision Industry to curb reliance on imported goods

Engro in talks with India for technology transfer


KARACHI: Sindh Engro Coal Mining Company (SECMC) is in consultations with the Indian companies for technology transfer to conduct open cast mining of Thar coal, said Shamsuddin Ahmed Shaikh, chief executive officer of SECMC on Friday.


India is digging out 550 million tons of coal every year from the coalfields in Rajasthan and others, which were quite similar to Thar, he said.


“It is better to acquire technology and expertise from the neighbouring country instead of opting for European companies,” said Shaikh.


The senior management of SECMC would visit India soon to discuss technical collaboration, equipment procurement and coal export to India, said Shaikh, adding that Tata Power and BHIL had expressed keen interest in forming collaborations with them.


SECMC plans to setup a 1,200MW coal-powered power plant in Thar and open cast mining of coal, envisaging an investment of $3 billion.


Shaikh said that the circular debt among several other issues is creating problems in securing the financing but once the funds were arranged, it would take four years for the commercial power production.


The Sindh Engro Coal Mining Company Limited is a joint venture between the Sindh government and Engro Powergen, to mine coal from Thar Block II.


Although the project is in its early stages of technical and economic feasibility assessments, the company aims at utilising ample reserves of Thar coal for power generation.


The government has decided that only Thar coal would be used for coal-based power generation in the future and all conversions of existing and construction of new power projects would be designed on Thar coal specifications, he said.


The landmark policy decision was taken by Prime Minister Raja Pervez Ashraf, while chairing a meeting of the Thar Coal and Energy Board at the Prime Minister’s Secretariat on October 3. The Sindh government has requested the federal government that the conversion of the existing 800MW and new 600MW power plants at Jamshoro be designed on Thar coal specifications. The policy decision will ensure energy security that has been eluding the country for such a long time.


The Thar coal field is estimated to have reserves of 175 billion tons, 68 times higher than Pakistan’s total gas reserves.

Walmart denies breaking India investment rules

New Delhi: US retail giant Walmart on Friday denied accusations it broke rules banning foreign investment in Indian supermarkets while the government said no formal inquiry had been ordered.

Any investments were “in complete compliance with India’s foreign direct investment laws” and all “processes have been duly followed and details filed with relevant Indian government authorities”, a Walmart spokeswoman told AFP.

India’s commerce ministry said it asked the central bank to look into the allegations by a lawmaker that Walmart broke foreign investment laws and “clandestinely” invested $100 million (Dh367 million) in a local supermarket chain.

But a senior ministry official told AFP on condition of anonymity that media reports a government “probe has been ordered is too strong a word”, adding: “I would not call it a probe — rather an examination.”

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Communist lawmaker M.P. Achuthan, whose party opposes foreign investment in the $500-billion retail sector, made the charges in a letter last month to Premier Manmohan Singh’s office.

It forwarded the complaint “as a matter of routine” to the commerce ministry under whose domain the sector falls, the ministry official said.

The ministry sent on the letter “for examination by the Reserve Bank because the allegations involved remittances”, said the commerce ministry official.

The focus on Walmart’s Indian investments comes as its operations elsewhere globally have come under attention. Earlier this year, Walmart’s Mexican unit faced accusations of bribing officials to boost its market position.

Achuthan also charged that two years ago a Walmart unit “illegally” invested in debt securities of a holding company that owns Bharti Retail, which runs more than 200 Easyday supermarkets throughout India.

These securities, the lawmaker said, could be converted into a 49 per cent equity stake in the holding company — part of the business empire built by India’s telecom tycoon Sunil Bharti Mittal.

The alleged infraction of Indian rules took place when a government ban was in place preventing overseas investments in “multibrand” retailers — stores selling more than one brand of goods. That ban is no longer in place.

Rural India needs infrastructure, services, experts says

New Delhi: The spread of mobile telephones and better roads in the past decade has fuelled growth in rural India, which is inhabited by 800 million people and is a market worth $425 billion (Dh1.56 billion), experts said on Wednesday.

The experts called on authorities to focus on developing basic infrastructure and providing more services, especially in the new census towns.

“The spread of mobile telephones, better road connectivity in the past decade and doubling of the number of people attending schools have contributed significantly to the development of rural India,” said Planning Commission member Abhijit Sen.

Addressing a Confederation of Indian Industry meet on ‘Rural Services-The Next Growth Enabler’, Sen said the government and the private sector should now focus on developing infrastructure and providing services in the new census towns that have come up near the cities but are technically covered under the various rural development schemes.

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“PURA [the Provision of Urban Amenities in Rural Areas] scheme of the government should focus on new census towns that have developed near the cities as they technically come under rural growth programmes,” Sen said.

A census town is a place where more than 5,000 people live. It has a population density of more than 400 per square km, with three-fourths of male workforce employed in non-agricultural jobs. The number of such towns has almost trebled from 1,362 to 3,894 between the 2001 and 2011 censuses.

Other speakers also said the expansion of the services sector that has benefited the Indian economy has remained largely urban-centric.

“The focus has not been on rural areas which have a growth potential. Villages need financial, skill-based and mechanised services,” said Subodh Bhargava, former CII chief.

Rural development secretary S. Vijay Kumar said that economic development was necessary for inclusive growth.

Noting that roads are the first step towards rural development, Kumar said out of Rs950 billion (Dh66 billion) allocated for the purpose under the Pradhan Mantri Gram Sadak Yojana in the 11th five-year plan (2007-8 to 2011-12), Rs750 billion were spent in building new roads and upgrading existing ones in the villages.

“This has facilitated rural growth,” said Kumar.

However, Sanjay Panigrahi, who runs the non-governmental SREI e-village Limited, said community-based strategies, rather than uniform growth models, are best suited for 650,000 villages in India.

Willing to buy India fuel, but at a competitive price: Dr Asim

NEW DELHI: Petroleum minister, Dr Asim Hussain, on Tuesday said the country was willing to import diesel and jet fuel from rival India if the price is “right”.

The statement by visiting Pakistan petroleum minister, was the latest sign of warming ties between the nuclear-armed neighbours who have fought three wars since independence from Britain in 1947.

If the right prices are given, we have no problems importing (diesel and jet fuel),” Hussain said on the sidelines of a petrochemical conference in the Indian capital, according to the Press Trust of India news agency.

India and Pakistan have been channelling their peace efforts into “trade diplomacy” in a bid to build enough trust to tackle thornier issues that divide them such as the disputed Himalayan territory of Kashmir.

While Pakistan has removed fuel imports from its list of goods that were banned from being imported from India, it allows import of diesel and jet fuel only by ship.

India, which has refineries across the border, is keen to take the road

route to reach fuel-short Pakistan.

“I think a way could be found (to import via land) as import of (fuel) products is not banned,” Hussain said, adding that a team from India’s

state-run Hindustan Petroleum Corp would soon visit Pakistan to discuss prices.

India in August lifted a ban on foreign investment from Pakistan except in defence, space and atomic energy in a step designed to build goodwill amid the renewed push for a peace settlement.

Pakistan has pledged to grant India “Most Favoured Nation (MFN)” status by yearend, meaning Indian exports will be treated the same as those from other nations. India granted Pakistan MFN status in the mid-1990s.

Official bilateral trade is just $2.7 billion and heavily tilted in New Delhi’s favour, according to the most recent figures, but unofficial trade routed through third countries is estimated at up to $10 billion.

India warily resumed a full peace peace dialogue with Pakistan early last year after suspending it following the 2008 attack by Islamist gunmen on Mumbai that killed 166 people. (AFP)

India Telecom Commission for reallocating all airwaves in 900 Mhz band

Wednesday, 17 October 2012 12:13 Posted by Shoaib-ur-Rehman Siddiqui

NEW DELHI: India’s Telecom Commission recommended that mobile phone carriers give up all their airwave holding in the superior 900 mega hertz band at the time of their permit renewals, a widely opposed move by the industry that it says will cost about $24 billion more in capital outlay.


The Telecom Commission’s recommendations will have to be approved by a ministerial panel before they are implemented, telecoms secretary R. Chandrashekhar, who also chairs the commission, said on Wednesday.


Market leaders Bharti Airtel Ltd and Vodafone’s India unit — two of the country’s oldest carriers — will be hit the most by the proposed refarming or substituting of their more efficient 900 MHz band airwaves with inferior quality 1800 Mhz band airwaves starting in November 2014.


This would mean the carriers will have to buy the replacement airwaves in an auction, and also have to build more mobile masts and replace some of the existing gears to continue services.


The spectrum switch will force operators to write off a total $4.7 billion of assets, as some of their existing equipment becomes obsolete, the Cellular Operators Association of India (COAI) said in May.


Telecoms stocks barely moved, with analysts saying that the market has already priced in the potential cost after the sector regulator’s proposals earlier this year.


By 0615 GMT, Bharti Airtel shares were up 0.8 percent, while Idea Cellular Ltd gained 0.4 percent in a Mumbai market that was little changed.

Copyright Reuters, 2012

Farm to fork Wal-Mart faces India sourcing challenge


NARAYANGAON, India: As Wal-Mart Stores Inc ramps up its operations in India, it needs to find more farmers like Yogesh Todkari.


His acre of cauliflowers is big, leafy, and a deep shade of green, thanks to modern irrigation and quality nutrients and seeds – all provided by the world’s largest retailer. Most farmers in India, though, don’t meet Wal-Mart’s standards.


“They train us and assist us right from when the crop is sown to when it’s harvested. They give us a higher price than the market for better quality,” said Todkari, 29, who works the field in western India with his elderly father.


Investing in farmers to help them improve quality and efficiency, and getting around the army of costly middlemen, will be key to whether global chains like Wal-Mart and Tesco Plc succeed where local operators have failed to make a profit. It will also be a test of whether India’s politically fraught decision to allow in global supermarkets in order to modernise its food supply chain proves to be the right one.


“We plan to procure as much as we can via direct farming so the procurement from traders in local markets is as little as possible,” said Krishnakant Reddy, who is in charge of direct farming in south and west India for Wal-Mart, which already operates in India through 17 wholesale stores.


Under the reforms, foreign retailers must source at least 30 percent of their goods from local, small industries.


India recently let in global supermarkets, despite heavy political opposition, in the hope of improving the supply chain and bringing down wastage and costs in a country where one-third of fresh produce rots and food inflation is persistent.


Wal-Mart, by far the most aggressive foreign supermarket operator in India, expects to open its first store selling directly to the public in 12-18 months, and aims to turn a profit in 10 years, something it hasn’t managed in China after 12 years.


To get there, Wal-Mart plans to sign up 35,000 farmers over the next three years, up from the 6,700 it has now. Fresh produce accounts for about 30 percent of Wal-Mart’s sales in its wholesale outlets in India.


Wal-Mart must buy in small batches from small plot-holders in a country where more than 80 percent of farms are under 2 hectares. That means contracting with thousands of farmers will still yield only a few thousand tons. In North America, retailers like Wal-Mart can buy from a few hundred farmers who provide hundreds of thousand of tons of produce between them.


“It’s going to be a huge challenge and requires a lot of work on the ground,” Reddy said during a recent visit to Narayangaon, a few hours from the city of Pune where Wal-Mart runs one of its seven Indian farm procurement centres.


Wal-Mart is trying to learn from the difficulties of Indian chain operators such as Reliance Industries and Shoppers Stop, most of which rely on middlemen after struggling to establish a strong direct farm supplier base.


Skirting the entrenched network of middlemen, who opposed the government’s decision to allow in supermarkets and includes both traders and local markets run by state Agricultural Produce Marketing Committees (APMCs), isn’t easy.


States require all farm produce to be sold through government regulated markets, and impose registration and transaction taxes on buyers, in addition to fees charged by middlemen operating in the markets. In some states, including Karnataka, buyers can purchase directly from farmers, but still have to pay taxes and fees both to the APMC and middlemen.


In Maharashtra, where Narayangaon is located, Wal-Mart must truck the produce it buys from Todkari about 20 minutes away to an APMC market and pay fees before delivering it to stores.


“The APMC fee is actually a tax for doing nothing and that is detrimental to direct farming,” said Raj Jain, who heads Wal-Mart in India and like the Confederation of Indian Industry, a large trade group, wants to get rid of the APMC system.


Traders were among the most vocal opponents of letting in foreign retailers, a move whose impact will be dulled by allowing states to opt in or out. Under populist pressure, most states plan to keep global operators out, at least for now.


“The government is thinking of cutting us out without even thinking about the families who depend on this. We facilitate trade in these markets. Thousands of jobs across India depend on this,” said Rajesh More, a trader at the APMC market in the neighbouring village of Manchar.


There are an estimated 50 million small traders involved in the farm-to-store agriculture business across India, according to the Confederation of All India Traders.


The Congress party-led coalition government in New Delhi defended its decision to allow in foreign retailers as benefiting farmers and reducing dependence on the middlemen network. Congress is also the ruling party in Maharashtra.


“The government has anyway let the foreigners in, which will hurt small store owners, and now they’re targeting us,” More said.


The region near Pune is one of India’s most productive for horticulture, and Todkari is among only 600 farmers to have met Wal-Mart’s standards. The retailer targets a small number of farmers who are respected locally and can convince others to work for the grocery giant.


“This is mainly done to build trust as most Indian farmers haven’t heard of Wal-Mart and are apprehensive about working with us,” Reddy said.


The farmers Wal-Mart selects are suited to modern irrigation, have higher yields and are capable of crop rotation. Wal-Mart’s investment in farmers is part of the $100 million initial spending India requires foreign chains to make under the retail reforms.


“Quality suppliers who these foreign chains can do business with are still small in number and so are the supply bases where they can procure from,” said Debashish Mukherjee, partner at consultancy AT Kearney.


Wal-Mart buys more than a dozen fresh produce items from the Narayangaon area, including cabbages, tomatoes, onions, grapes, cauliflowers and pomegranates.


The US-based retailer has tie-ups in north India with logistics companies to send fresh produce to store by refrigerated truck – a facility it will extend to other farm bases as procurement volumes increase.

India to organise trade exhibition in Karachi

Indian offici­als are in the city to overse­e pre-event prepar­ations.  “Over 100 Indian business delegates are expected to visit Karachi for the exhibition,” Sunil Agnihotri, Joint Deputy Director General of Federation of Indian Export Organisations (FIEO). PHOTO: MOHAMMAD SAQIB/EXPRESS


KARACHI: For the first time in Karachi, an apex public sector trade promotion body of India will organise a three-day exhibition of Indian products in December in the latest in a series of efforts to bolster trade between the neighbouring countries.


“Over 100 Indian business delegates are expected to visit Karachi for the exhibition,” Sunil Agnihotri, Joint Deputy Director General of Federation of Indian Export Organisations (FIEO) – the organisers – said while talking to The Express Tribune at the Trade Development Authority of Pakistan (TDAP) office here on Tuesday.


Agnihotri and FIEO Deputy Director Prashant Seth were in Karachi to oversee pre-event preparations and also visited the venue of the exhibition, the Karachi Expo Centre. FIEO has been established by the Indian Ministry of Commerce.


Agnihotri expressed the hope that the event, which will be held from December 21-23, would help promote bilateral trade between India and Pakistan and take the trade volume to $6 billion from present $2.7 billion in the next three years.


He said besides the textile sector, pharmaceutical, cosmetics, chemical, leather, herbal medicine and gems and jewellery – the main attraction – companies would participate in the fair.


Such exhibitions and regular exchange of business visits at frequent intervals would boost trade in coming years, he stressed.


The Karachi Chamber of Commerce and Industry – the co-organisers – and the TDAP are extending support to the expo. This will be the first exhibition of its kind in Karachi where a large number of Indian companies will display their products for sale. The FIEO team is meeting the authorities concerned in Pakistan to make the show a success.


The exhibition is part of an understanding between the governments of Pakistan and India to encourage business and trade.


An exhibition of this kind was organised in Lahore in February this year to coincide with the three-day trip of Indian Commerce, Industry and Textile Minister Anand Sharma to Pakistan.


However, the Pakistani business community believes that the biggest reason for its trade gap with India is the non-tariff barriers. Indian diplomats repeatedly assure Pakistan that once the two sides start doing liberal trade, Pakistan’s exports to India will increase sharply with the decline in smuggling and indirect trade through the UAE and Singapore.


To address the concerns of businessmen, India and Pakistan have recently signed three agreements on customs cooperation, mutual recognition of quality certification and grievance-addressing mechanism.


Pakistan is also taking keen interest in exhibiting its products in India. Following extraordinary response from the Indian customers and business community in an exhibition this year, the TDAP is planning to organise another fair in India in April next year.


“The response of Pakistani businessmen can be gauged from the fact that they are trying to book space as soon as possible for the exhibition in India,” a TDAP official told The Express Tribune.


Published in The Express Tribune, October 17th, 2012.


View the original article here

Gillard visit paves way for India uranium sales

Updated October 18, 2012 09:54:28

Prime Minister Julia Gillard says there are no outstanding obstacles in the relationship between Australia and India, paving the way for the sale of uranium to the subcontinent super power.

During a three-day official visit, Ms Gillard visited slums, cricket academies and held forums for India’s business elite.

But she left her most important meeting for last – the one with the Indian prime minister Manmohan Singh.

She says she left the appointment with a good feeling about the future of Australia-India relations.

“I don’t think there are any outstanding obstacles,” she said.

One of those obstacles had been the ban on uranium sales.

Ms Gillard reversed the ban last year and says formal negotiations can now commence.

“Prime minister Singh and I have agreed that we will commence negotiations for the nuclear safeguards agreement, the civil nuclear cooperation agreement given Australia is now prepared to sell uranium to India,” she said.

Australia’s poor image after a series of attacks on Indian students was also blocking better relations.

Since then there has been a huge effort by the Government to improve Australia’s image in India, and Ms Gillard says it is paying off.

“I certainly think its better than it was. I was here at the height of this when the Indian community was very, very concerned about student welfare issues,” she said.

“We’ve seen some fairly sizeable press packs during this visit but actually let me assure you, they were not the same size as I had when I was deputy prime minister.

“This issue was really hot in India and there was a media feeding frenzy about the circumstances of Indian students in Australia.”

Ms Gillard and Dr Singh agreed to boost military ties and also announced an annual leader’s summit.

“This is important because having an annual leaders meeting keeps momentum in a relationship, gives high level oversight of how the relationship is developing and what more needs to be done,” Ms Gillard said.

The prime ministerial visit seemed to be received positively by the Indians.

Bestowing an Order of Australia Medal on Sachin Tendulkar went down well with the public and the promise of future uranium sales is sure to have made the Indian government happy.

Topics: world-politics, foreign-affairs, uranium-mining, nuclear-issues, australia, india, asia

First posted October 18, 2012 07:42:32

Gillard seeks to strengthen ties with India

Updated October 17, 2012 20:10:29

Prime Minister Julia Gillard is today expected to announce that Australia will strengthen its relationship with India, elevating it to a similar status that Canberra enjoys with Japan, Korea and Indonesia.

Ms Gillard is on a three-day visit to New Delhi, and will today meet with her Indian counterpart Manmohan Singh and Congress Party head Sonia Gandhi.

Ms Gillard went to India bearing promises of uranium sales and greater cultural links between the two countries.

In return, it appears she wants to cultivate the south Asian giant as a counterpoint to China.

Bilateral trade between India and Australia is worth almost $18 billion.

But Dr Kamal Mitra Chinoy, a New Delhi-based Indian foreign policy expert, says Western nations should curb their enthusiasm about India.

“China can compare itself with the United States, and India just isn’t in that league,” he said.

“So we have to do a lot of development, including development of technology, increasing our manufactures, increasing our exports, cutting down on our imports.

“All this requires a long time. This is not a one or two, three-year program. It’ll take a couple of decades I should imagine.”

Whatever Ms Gillard’s long-term motives are, her trip has definitely been aimed at earning the goodwill of Indians.

She has addressed a town hall-style meeting, where she explained the Government’s decision to overturn a long-standing ban on exporting uranium to India.

She said there were safeguards in place to ensure it will be used for peaceful purposes.

She also co-hosted the second meeting of the India-Australia CEO Forum and yesterday bestowed an Order of Australia honour on Indian cricket legend Sachin Tendulkar.

Ruchir Punjabi, the chairman of the Australia India Youth Dialogue, says the approach has worked with the Indian public.

“I think perhaps the Order of Australia to Sachin Tendulkar is probably going to be bigger than the nuclear issue,” he said.

“I think the nuclear issue is a trust issue with the Indian government whereas the Order of Australia to Sachin Tendulkar is going to be the headline in most newspapers here.

“And I think … things like that play an important role in bringing the two countries closer.”

Topics: foreign-affairs, government-and-politics, world-politics, federal-government, uranium-mining, australia, india

First posted October 17, 2012 07:57:33

Trade with India: Given ‘right price’, Pakistan ready to import Indian oil

Countr­ies plan to set up a 200km pipeli­ne from Bathin­da to Lahore for trade.  Countries plan to set up a 200km pipeline from Bathinda to Lahore for trade. PHOTO: FILE

NEW DELHI: 

In what could be an important Confidence Building Measure (CBM) between the two countries, Pakistan is not averse to importing petroleum products such as diesel and petrol from India if it gets “the right price was offered”, Petroleum Minister Asim Hussain said on Tuesday while on a visit to the Indian capital.


“A team from HPCL (Hindustan Petroleum Corporation Ltd) will come to Pakistan very soon to discuss prices (for exporting fuels),” Hussain told reporters on the sidelines of Petrotech 2012. “If right prices are given, we have no problems importing.”


Trade ties between the two nations have shown signs of a thaw recently. Early this year, Pakistan notified its negative list for India, which means barring 1,209 items, New Delhi can now export all products to the neighbouring country. The negative list contains products such automobiles and textiles.


Pakistan also agreed in-principle to grant India ‘Most Favoured Nation’ status over 15 years after it was given the same status by India.


In March this year, Pakistan’s then petroleum and natural resources secretary Muhammad Ejaz Chaudhry had discussed with his Indian counterpart G C Chaturvedi the possibility of Pakistan importing petroleum fuels from India.


Hussain said on Tuesday that if prices can be agreed upon, Pakistan can import petroleum fuels from India both through pipelines and sea routes.


India and Pakistan plan to set up a 200 kilometre pipeline from Bathinda in Indian Punjab to Lahore to trade petroleum products. India has surplus refining capacity, and is a major exporter of oil products while Pakistan meets most of its needs through imports from West Asian countries. Apart from HPCL, IndianOil will also benefit as the company has an oil storage depot in Bathinda, and a 12 million tonne refinery in Panipat, Haryana.


The minister also said on Tuesday that the country will offer 60 oil and gas exploration blocks in the next two months, and will discuss with his Indian counterpart possibilities of offering some of the blocks to Indian companies on a bilateral basis.


Published in The Express Tribune, October 17th, 2012.


View the original article here

Logistics major DHL investing $130m in India

Mumbai: Deutsche Post DHL’s Indian arm plans to invest €100 million (Dh475 million or $129.4 million) via its supply chain division to build new warehouses and transport facilities in India as it positions itself to exploit the opening up of the retail sector.

“With government investments in infrastructure on the rise coupled with streamlining of regulatory policies, we are enthusiastic about the fast-paced growth in the logistics market,” Paul Graham, chief operating officer of DHL’s supply chain division for Asia told reporters at a news conference.

“We want to keep ahead of growth. We want to be ready when our customers want to expand.”

Last month, India took the politically fraught decision of allowing foreign direct investment in its supermarkets.

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The expectation is that this opening up will attract greater investment in India’s poor supply chain infrastructure, which now results in huge wastage in the journey from the farm to retail shelves.

“The new retail legislation lays a huge emphasis on making India a sourcing hub and that is very important,” said Graham, adding that the company was ready to bring its global retail logistics expertise to India.

DHL already offers express delivery, global forwarding and supply chain services in India.

Deutsche Post DHL raised its 2012 profit outlook in August, bucking a weaker trend at US rivals such as UPS and FedEx, citing robust demand for its express delivery services in Asia.

Opening up the retail sector to the likes of Wal-Mart Stores

Inc and Carrefour was part of a slew of policy announcements last month as Prime Minister Manmohan Singh’s government rediscovered its reforming vim.

Also unveiled was a lifting of the bar on foreign investments in other sectors such as pensions, insurance and airlines, raising diesel prices and pushing for faster roll out of infrastructure projects.

Graham said DHL planned to add 5 million sq ft (465,000 sq m) of warehousing space, more than doubling its capacity from the current 4 million sq ft. The warehouses will be in Mumbai, Gurgaon, Delhi, Bangalore, Nagpur, Chennai, Kolkata and Ahmedabad.

The company operates a large free trade warehousing zone in the southern Indian state of Tamil Nadu which caters to the retail, energy, healthcare and automotive sectors, among others.

Graham said DHL would make further investments in four more free trade warehousing zones across India, outside the 100 million euros announced now.

Vikas Anand, DHL’s chief operating officer for the supply chain division, said the next such free trade zone investment would be outside the financial capital Mumbai.

He said the company would work through a tie-up with local partners to help with the tricky task of land acquisition for warehouses.

India has been trying to overhaul its century-old land acquisition law for several years to make it easier to secure land for industrial and infrastructure projects, but political opposition, including from its own ministers, has stalled the process.

UBL approaches RBI to open ­branches in India


KARACHI: United Bank Limited (UBL) has contacted the Reserve Bank of India (RBI) to find out about the specific statutory requirements necessary for the commencement of business operations in India, banking industry sources said on Monday.


According to these sources, UBL has asked the Indian central bank about the financial rules and regulations – including capital adequacy ratios – a foreign entrant needs to comply with in order to open branches in India. At present, it is said, UBL intends to open at least two branches in India.


Once the RBI is satisfied that UBL is capable of meeting its statutory requirements, it will signal the same to UBL, which will then apply formally for the establishment of its branches in India.


The National Bank of Pakistan is already in contact with the Indian central bank and wrote a letter to the RBI last month, asking for information regarding the setting up of operations in India. The NBP is currently working on meeting the criteria specified by the RBI.


Last month, the SBP had given permission to National Bank and UBL to approach the Indian central bank for starting operations there. Meanwhile, the third aspirant for the permission to set up branches in India – MCB Bank – is said to be in touch with the SBP and is considering reapplying for permission to go to India.


Banking sources say the Nishat Group stands to gain tremendously from setting up branches in India, given its other business interests and synergies. Earlier, the central bank had rejected MCB Bank’s initial application, arguing that the bank did not have the financial muscle to manage overseas operations in addition to local operations.


However, analysts are of the view that the number of Pakistani banks setting up shop in India will be contingent on the amount of trade between the South Asian neighbours. “Banks from both sides are willing to start operations on each other’s soil because the fee earned on the opening of letters of credit by exporters for international trade are a major source of earning for commercial banks,” said Dr. Ashfaque Hasan Khan, former advisor finance to the government. “But the process of starting banking operations depends on the state of progress within the services sectors of Pakistan and India.”


Echoing Khan’s concerns are those analysts who say that in spite of the fact that the NBP and UBL are the two of the largest banks of Pakistan in terms of capitalisation, profitability, assets, local and international branch networks, penetrating the Indian banking industry will be a challenging task.


“Currently, there are branches of 88 foreign banks in India,” they say. “Our banks can survive there only if they follow an aggressive business strategy, taking the Pakistani business community on board.”


The opening of banking channels in each other’s countries was one of the main features of the Pak-India trade agreement signed in February 2012. It was also decided that the representatives of the central banks of both countries would meet and finalise the institutional framework for the opening of banking branches in India and Pakistan with a view to enhancing economic and trade ties between the two countries.


Interesting, however, despite the interest shown by top Indian banks – including the Bank of India and the State Bank of India – to enter the Pakistani financial market, none have applied to the SBP or the RBI for the relevant NOCs.

India central bank to intervene in FX market if there is ‘extreme’ volatility

Tuesday, 16 October 2012 12:53 Posted by Imaduddin

MUMBAI: India’s central bank will intervene in the foreign exchange market if there is “extreme” volatility in the exchange rate, Deputy Governor H. R. Khan said.


Khan was responding to an audience question at a banking conference on Tuesday.


The Indian rupee was trading stronger at 52.83 to the dollar, snapping a two-day fall.

Copyright Reuters, 2012

India wins over markets, now comes the hard part


NEW DELHI: India’s Finance Minister P Chidambaram exudes the self-confidence of a man who, in the eyes of India’s cheerleading financial markets, can do little wrong.


In the 11 weeks since he took office, the benchmark BSE index has surged around 8 percent, due in large part to his hard-charging drive to boost investor sentiment that had soured under his predecessor, Pranab Mukherjee.


But the reality is the steps taken so far will not fix the sluggish economy in the near term, and the window of opportunity for implementing game-changing reforms such as slashing government spending on fuel, food and fertiliser subsidies will narrow as campaigning for a 2014 election gets under way.


“When you are fixated on equity markets and you are doing whatever you can to push them higher that is exactly what you will see,” said economist Rajeev Malik of CLSA, Singapore“Pushing up equity markets is a lot easier than taking up some of these more difficult moves.”


Together with Prime Minister Manmohan Singh, Chidambaram has unveiled a series of big-ticket and small-bore initiatives over the past month that were long demanded by investors and business leaders frustrated by years of policy inaction in New Delhi.


According to government officials, the slew of policy announcements on lifting the bar on foreign investment in the airline, insurance, pensions and retail sectors are part of a two-step government strategy – first, pump up the financial markets, then unveil a road-map for cutting the fiscal deficit.


The first step has worked. Net inflows from foreign investors have surged since Chidambaram’s appointment, with $7.7 billion flooding into stocks and bonds since then, according to regulatory data. The next step will be more difficult.


Reports published by the World Bank, International Monetary Fund (IMF), Standard & Poor’s and a government panel over the past 10 days have provided sobering reminders of the huge challenges facing an economy still beset by high inflation and dragged down by ballooning current account and fiscal deficits.


The IMF sharply cut its economic growth forecast for India for 2012 to 4.9 percent from an earlier projection of 6.1 percent growth. The Kelkar budget panel, meanwhile, warned that India was teetering on the edge of a “fiscal precipice” and called for swift action to reduce the deficit, which it said could hit 6.1 percent of GDP this year if no action was taken.


Chidambaram has signalled that he is acutely aware of the dangers, telling a news conference last week that without reforms to curb the deficits, India “risked a sharp and continuing slowdown of the economy”. He is expected to unveil a deficit reduction plan soon, possibly before the Reserve Bank of India’s next policy review on Oct. 30.


But turf wars within the cabinet, friction among coalition partners, continued weak government at a federal and state level and fears of alienating voters ahead of the 2014 election could still choke off Chidambaram’s reform drive.


The Finance Ministry knows it has a “very small window” in which to act, a senior ministry official told Reuters.


There is already disagreement among ministers over a land acquisition bill long sought by Indian business leaders that would make it much easier for companies to buy land for industrial and infrastructure projects. The bill is stalled in cabinet and it is not clear when it will be approved.The environment minister, meanwhile, has raised objections to another Chidambaram initiative – a national investment board aimed at cutting through red tape that can hold up infrastructure projects for years. The proposal is seen as the government’s boldest attempt yet to clear infrastructure bottlenecks that have strangled economic growth.


Singh’s coalition government has also been seriously weakened by the walkout of a key ally and now governs without a parliamentary majority. It is dependent on support from two fickle allies that have campaigned against some of its flagship reforms, such as allowing foreign supermarkets into India.


That will make it difficult for the government to get pension and insurance reforms, recently approved by the cabinet, through parliament. In fact, there is now a higher risk of the government falling and an early election being called.


Critics question whether, in the face of such challenges, the ruling Congress party will have the political will to follow through with what Singh and Chidambaram have started. The party’s powerful chief Sonia Gandhi favours costly welfare measures and had to be persuaded to back the recent reforms.


“If the government were to enter into a populist mode come FY14 budget and roll back any of the reform initiatives, risks of a (credit rating) downgrade will rise come next year,” said Radhika Rao, an economist at Forecast in Singapore.


The government has already baulked at the recommendation of the Kelkar deficit reduction panel to phase out fuel subsidies, saying it had a duty to protect India’s poorest citizens.


And Oil Minister Jaipal Reddy said last week he was “not so courageous” as to raise diesel prices any time soon after a hike in mid-September sparked a nationwide strike and street protests led by opposition parties.


His comment suggested the government is already viewing policy decisions through the prism of a general election due by mid-2014, when it will face a tough fight to win a third term.


Those political considerations pose a challenge even for someone as single-minded and determined as Chidambaram, finance minister for the third time in a storied political career. The question now is how much time India’s political leaders will give him to get the economy firmly back on track.

UAE top among visitors from GCC to India

Muscat: UAE tops among the GCC member states, followed by Oman, in sending tourists to India. The region has seen a steady increase in visitors going to India.

“Oman has been one of the major trading partners of India and we are keen on taking that relationship to the next level in all sectors,” Girish Shankar, Additional Secretary at Ministry of Tourism, said in reply to a question by Gulf News at an interactive session with audience at the ‘Incredible India’ tourism road show at Al Bustan Palace hotel here on Sunday night.

“We are seriously considering opening a representative office in Oman and perhaps in the other GCC countries as well,” he further said, adding that the permanent office in Dubai will continue to function.

According to statistics, 40,577 Omanis visited India in 2011, second only to UAE (66,383). “India is a favourite destination for the Arabs, especially Omanis and Emiratis for various reasons,” Vikas Rastogi, Regional Director, West Asia and Africa, India Tourism Board, said.

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The other visitors to India from the region include Bahrain (9,587), Iraq (30,808), Saudi Arabia (26,268), Turkey (17,359), Yemen (14,955) and other nations (24,747).

A high-level Indian tourism delegation is in Oman to give a glimpse of the attractive tourism products as well as the countless cultural, spiritual and travel experiences that India offers as a tourist destination.

Shankar said that foreign tourist arrivals to India had witnessed a steady increase over the years. He also pointed out that India was keen on promoting budget accommodation. “The rural tourism is something we are promoting and it is fast catching up with the international tourists,” he added.

The senior tourism official also said that medical tourism in India was growing at the rate of 20 per cent per annum.

In 2011, Foreign Tourist Arrivals (FTAs) in India went up to 6.29 million, fetching foreign exchange earnings to the tune of $16.691 billion, up by 17.6 per cent from 2010.

India’s foreign exchange earnings from tourism grew by an impressive 14.1 per cent compound annual growth rate (CAGR) during 2011-2012, nearly double the global average.

A very impressive audio-visual presentation about the various aspects of tourism across India was shown to a packed house at the Majan Ballroom..

India inflation rises, dampens rate cut hopes

Indian inflat­ion accele­rated to its highes­t level this year, hittin­g 7.81 percen­t. Indian inflation accelerated to its highest level this year, hitting 7.81 percent. DESIGN: ASAD SALEEM

NEW DELHI: Indian inflation accelerated to its highest level this year, hitting 7.81 percent in September, data showed on Monday, outpacing market forecasts and reducing the chances of an interest rate cut.

The country’s hawkish central bank will meet at the end of the month to consider its interest rate policy as it faces calls from businesses to cut rates to spur economic growth that has slowed dramatically.

The Wholesale Price Index – India’s most widely watched inflation measure – rose 7.81 percent year on year last month – just exceeding market forecasts of 7.7 percent.

The reading was up from 7.55 percent the previous month and 6.87 percent in July, which was close to a three-year low.

Developing countries such as China, South Korea and Brazil have lowered borrowing costs in a bid to protect their economies from the effects of the Eurozone debt crunch.

But India’s central bank still is targeting inflation, which remains stubbornly above its “comfort” level of five percent.

September’s inflation rise comes after the government recently hiked state-controlled diesel prices by some 14 percent in an effort to lower massive fuel subsidies that have contributed a bloated fiscal deficit.

The price hike was hailed by some as a sign of readiness by the government to tackle tough economic reforms and the widening hole in the public accounts.

But critics said it would spur inflation at a time when growth has slowed sharply to around 5.5 percent from near double-digits in recent years.

Most analysts predict the central bank will keep lending rates on hold until inflation shows a decisive downward move. The bank last cut rates in April after raising borrowing costs 13 times.

The central bank will “approach easing with caution, keeping a keen eye on inflation and further policy progress out of Delhi”, said Leif Eskesen, HSBC chief India economist.

The higher inflation comes as the Congress-led government of Premier Manmohan Singh is hoping the economy will pick up as a result of a string of market-opening steps in the past weeks that ended years of policy paralysis.

View the original article here

India inflation at ten-month high

New Delhi: Rising fuel prices drove up Indian inflation in September to 7.8 per cent, its highest level since November, undermining the government’s case for a central bank interest rate cut this month to boost the sluggish economy.

The rise in the wholesale price index — India’s main inflation gauge — was more than expected. Economists in a poll had expected an inflation reading of 7.7 per cent, up from 7.55 in August.

The Reserve Bank of India (RBI) has held its policy rate at eight per cent since April, even though economic growth is at its weakest in three years, saying stubbornly high inflation prevents it from cutting borrowing costs. Inflation is well above the central bank’s comfort level of four-five per cent.

“Today’s inflation number significantly reduces the chance of a repo rate cut in the next policy [review],” said Jyotinder Kaur, economist at HDFC Bank in New Delhi. “But we see the Reserve Bank of India reciprocating to the government’s recent reform measures by yet again cutting bank’s cash reserve ratio.”

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Financial markets were muted in their response to the data. However, the five-year and one-year swap rates both rose two basis points, suggesting traders believe the prospects of a rate cut have receded slightly.

Faced with a big hole in the budget and the prospect of losing its investment grade credit rating, the Indian government increased the price of heavily subsidised diesel on September 13.

Monday’s data showed that fuel prices in September rose 11.9 per cent from a year earlier, a sharp pick-up compared with a rise of 8.32 per cent in August.

“The inflation number is very ugly,” said Rupa Rege Nitsure, the chief economist of Bank of Baroda in Mumbai. “Overall the inflation situation is going to worsen until end-December.”

Nitsure said she expected the central bank to keep rates on hold until the fourth quarter of the fiscal year to next March. However, given weak growth, she expected the central bank to ease the amount it requires banks to hold as reserves — which frees up more cash for lending — at its policy meeting on October 30.

The central bank cut the cash reserve ratio in September by 25 basis points to 4.5 per cent in a move to inject about Rs170 billion (Dh11.78 billion) into the banking system.

Analysts expect inflation to quicken more in the coming months because fuel and food make up more than a third of the wholesale price index (WPI), but one of the government’s top economic policy advisers played down such concerns.

“It is true that when you raise a key price like diesel, in the short run you have an uptick, but the idea that six months later the inflationary situation will be worse as a result of this is not true,” Montek Singh Ahluwalia, deputy chairman of India’s Planning Commission, said in Mumbai.

A few economists think WPI inflation will fall, arguing that weak demand will offset fuel price pressures.

The data also showed a modest pick-up in manufacturing inflation to 6.26 per cent in September from 6.14 per cent in August. Food inflation, meanwhile, slipped to 7.86 per cent in September from 9.14 per cent a month ago following a moderation in vegetable prices.

Finance Ministry officials have said recent fiscal reforms have given the Reserve Bank of India (RBI) room to cut interest rates by at least 25 basis points, and finance minister P Chidambaram gave the RBI a further prod in an interview on Saturday, when he called for it to take “calibrated risks” to support the economy.

“Pressure is mounting on the central bank for a quid-pro-quo move after the government initiated reforms to correct the fiscal imbalances and we expect consensus to be split as we approach the end-October review,” said Radhika Rao, economist at Forecast in Singapore.

But the response to the global economic slowdown could keep the RBI on a tight leash. Massive asset-purchase programmes by central banks in the US, Europe and Japan could stoke global commodity prices and keep domestic prices on the boil.

Despite the inflationary pressures, some analysts refuse to rule out a surprise rate cut as a reward for the government’s moves to raise the prices of diesel and fertiliser.

With barely 18 months until the next general election, Prime Minister Manmohan Singh is trying hard to get the economy back on track, partly to fund big-ticket welfare programmes.

As well as increasing fuel prices, in the last few weeks he has opened up the retail sector to global supermarkets, allowed foreign airlines to buy stakes in local carriers and proposed raising the bar on foreign direct investment in insurance firms.

But that may not be enough to rescue an economy a government panel recently said was teetering at a fiscal precipice.

Inflation has been above seven per cent in each month since late 2009. And still-high spending on fuel, food and fertiliser subsidies could drive the fiscal deficit to six per cent of GDP for the financial year ending in March, above New Delhi’s target of 5.1 per cent, Standard & Poor’s said last week.

Pacific nations could challenge Australian uranium sales to India

Posted October 12, 2012 21:05:52


A move by Australia to allow the export of uranium to India could face a legal challenge from Pacific nations.


Australia’s Prime Minister, Julia Gillard, will travel to India on Monday to meet with her counter-part Manmohan Singh.


She’s expected to discuss the decision last November to overturn a ban on selling uranium to India, which was previously in place because India isn’t a signatory to the Nuclear Non-Proliferation Treaty.


International law expert Professor Donald Rothwell has told Radio Australia’s Asia Pacific program that could lead to a challenge under a 1985 treaty which governs nuclear testing and the use of nuclear materials from the region.


“Australia therefore has an obligation to ensure that its sale of uranium mined from within Australia is dealt with consistently with the provisions of the South Pacific Nuclear Free Zone Treaty,” he said.


“To that end, there’s very much an expectation that any sale would be only to countries that meet the Nuclear Proliferation Treaty obligation and that immediately raises an issue, because India, of course, is not a party to the NPT.”


The South Pacific Nuclear Free Zone Treaty, or the Treaty of Rarotonga was signed in 1985 by 12 nations in the Pacific and Australia.


Any objection under the Treaty of Rarotonga would have to be brought by one of the Pacific Nations that are signatories to the agreement.


Mr Rothwell says due to its history, the South Pacific does have a very strong record of being anti-nuclear


“The region fiercely contested France’s nuclear weapons testing program in the 1970s and as recently as the 1990s,” he said.


“So any concerns that might be raised by Australia’s conduct could well come from within the region and given the history of the region, it shouldn’t be completely ruled out.


As a rapidly expanding economy, India’s need for uranium to generate power is growing.


India has agreements with at least eight countries to supply its nuclear energy program.


It only uses domestically-sourced material for its weapons program, and the former head of the Australian Safeguards and Non-Proliferation office John Carlson says it would be unlikely India would funnel Australian uranium into its military activities.


“They have an independent military program which is clearly sufficient for their needs and now that India has taken the decision that it wants to import nuclear technology and nuclear material from around the world,” he said.


“It’s clearly important for India to maintain security of supply for those materials and therefore I think our starting assumption would be there would be no reason why they would violate agreements that would led to a stoppage of supply.”


Since the ban was lifted last November, work has been under way to develop a safeguards treaty and put in place legislation that would enable sales to begin.


While its expected talks between prime ministers of Australia and India next week will further the process, it is possible an agreement is still some way off.


India insurers need more than foreign funds

Mumbai/Hong Kong: India’s proposal to allow more foreign investment in its $41 billion (Dh150.59 billion) insurance business provides a lifeline for an industry starved of capital and squeezed by regulation — but it may not pass parliament and it may not be enough.


India’s insurance business was full of promise when it was thrown open to competition in 2000, but has instead been brought to its knees by losses, regulatory change, uncertainty and a sharp slowdown in economic growth.


Many firms are fed up and looking for the exit.


“What is required is some stability in the regulatory regime, for companies to really focus on business rather than deal with the onslaught of regulatory change,” Rajesh Sud, CEO of Max Life, owned by Max India and Japan’s MS&AD Insurance Group, said.


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Last week, the government sought to remove a key barrier to bringing in much-needed capital by proposing to raise the cap on foreign ownership of insurance firms to 49 per cent from 26 per cent.


Parliamentary approval


But the measure, part of a series of sweeping economic reforms, requires parliamentary approval, which will not be easy, given that the ruling coalition is technically in a minority and other recent reforms have inflamed populist opposition.


Workers at former state monopoly Life Insurance Corp of India, which has a 70 per cent market share and about 1.3 million agents — as many as those employed by the 23 private sector firms — have held street protests against the proposal.


The life insurance industry, which makes up about three-quarters of the sector, has lost a combined $4 billion in the past decade and was battered by a 2010 clampdown on the sale of lucrative equity-linked products.


Life insurance companies say a revival will depend on faster approval for new products and regulatory changes to allow banks to sell products of more than one insurer to cut distribution costs.


In the non-life segment, where six of the 27 firms operating are state-run, 13 private sector insurers, including units of Canada’s Fairfax Financial and Japan’s Tokio Marine, reported losses in the year ended March 2011.


Underwriting losses


The cumulative underwriting losses for non-life insurers were nearly $6 billion in the year to March 2010, the Boston Consulting Group said in a report last year, and industry officials said the figure may have since touched $7.5 billion.


The life insurance industry, where many smaller firms have lost interest in pumping in fresh capital is also ripe for consolidation, though buyers may be scarce, banking sources said.


Max Life’s former partner, New York Life, this year became the first foreign insurer to exit India, citing international business “repositioning” when it sold to MS&AD. It is unlikely to be the last.


ING is looking to sell its stake in its India insurance joint venture as part of the planned sale of its Asia business. Local media have reported that HSBC was also looking to sell its stake in its local insurance venture.


“It’s all nice talk, but I just don’t think it will get through,” Gary Bennett, who runs New York Life’s Asia business, said referring to the need for parliamentary approval of the foreign investment proposal. “It would be good for the industry. It needs something to give it another shot in the arm because it was really savaged by regulation over the last couple of years, and a slowing and sort of plateau in the middle class,” he said.


Nine of the 23 private sector life insurers, including units of HSBC, Italy’s Generali and Dutch life insurer Aegon, lost money in the year ended in March.


Loss-making ventures


Many operators have been shutting branches and shedding staff to manage their costs. Some, including ING’s tie-up with Indian car battery maker Exide as well as the joint venture between France’s Axa and Bharti Enterprises, owner of India’s biggest cellular carrier, have never made money.


Some Indian companies rushed into insurance hoping the cap on foreign ownership would be quickly raised, enabling fresh funding from overseas partners and through initial public offerings. Some now want to opt out so they can focus on their core businesses.


Future Group, India’s biggest retailer, has been looking to exit its venture with Generali, while DLF, India’s largest listed property company, wants to leave a joint venture with Pramerica as part of its efforts to pare its debt, bankers have said.


“If you look at the local shareholders in India who own 74 per cent, you have companies whose core businesses can be banking, telecoms, all kinds of sectors,” Francois-Valery Lecomte, regional chief financial officer of AXA Asia, said. “Every penny they inject in insurance is diverted away from their sector,” Lecomte, who believes an increase in the foreign ownership cap to 49 per cent will help bring in funds, said. “If the balance was 49-51, there would be much more capital flowing into the market because international insurers are willing to invest in India.”


India’s insurance industry needs an estimated $12 billion in capital to be adequately funded.


Life insurance penetration in India is about 4.4 per cent of the country’s gross domestic product (GDP) in terms of total premiums underwritten in a year. That compares with 8 per cent in Japan and 9.5 per cent in Britain.


Low margins


Tough competition and little product differentiation means companies generate low margins. India’s new business margin for insurers, a key gauge of profitability, is around 10-15 per cent against 20-25 per cent in China and 30 per cent-plus in Hong Kong, industry officials said.


Standard & Poor’s said in a report in July the absence of progress in raising foreign ownership could result in “continued volatility” in the life insurance market.


That could change if New Delhi finds the political support to turn its proposal to raise the ownership cap into law. Recent moves to increase foreign ownership in supermarkets and airlines met fierce opposition, but did not need parliamentary approval.


“We are approaching it with optimism, but I won’t say that we have declared any kind of victory or success on this because it’s still a long way to go,” Max Life’s Sud said.

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More Pakistani banks can apply for India operation


KARACHI: More Pakistani banks can apply for India operation under the ongoing talks for strengthening economic relations between the two countries, said Naeem Anwar, Minister (Trade) at Pakistan High Commission in India, on Saturday.


“Two Pakistani banks have applied for opening up branches in India, reciprocating three Indian banks that have intended to open their branches in Pakistan,” he said, adding that the banks in the two countries have been advised to finalise their documentation process by November 30 to make them operational by April 1, 2013.


The United Bank Limited (UBL) and the National Bank of Pakistan (NBP) from Pakistan are in the process to open branches in India, in reciprocating three Indian banks, including the Reserve Bank of India (commercial operation), Bank of India and the Punjab National Bank have initiated the process.


Addressing members of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) at a meeting, he said that the trade bodies should prepare themselves for huge influx of Indian products after completion of talks for trade liberalisation between the two countries.


He lamented that the trade bodies in Pakistan have no in-house mechanism for product information. “In contrast, the trade bodies in India are well aware about their imports and exports,” he added.


Anwar said that in the recent joint commerce secretary-level meetings it was decided that India will reduce duty for Pakistani products up to five percent by April 13, except for 100 tariff lines, as it had allowed for South Asian Free Trade Agreement (SAFTA) countries.


Similarly, Pakistan would also reduce to 100 tariff lines for India products by 2017, he added.


At present for accessing the Indian markets, he said, Pakistani products face high duty rates.


Meanwhile, Pakistani textile and agro-based products are facing 30-250 percent duty rates, he added.


He also urged the local businessmen to explore Indian market in a scenario after April 2013, as it has big markets.


He said that the trade community should think about enhancing exports to India in a strategic way instead of opportunist approach. “Pakistani traders need intellectual work on the issue, whereas their counterparts have strong homework,” he added.


About visa restriction, he said that the commerce secretaries have agreed on two categories for the business community. However, the Indian side was emphasising that the declaration of the income tax return of a businessman should be made mandatory for allowing visa, he added.


Regarding, opening Munabao-Khokhrapar border, he said that the two countries have discussed the issue and ready to open it. He, however, advised the FPCCI members to send their comments about viability of this route and asked for a list of products for exporting to India through this border.


Earlier, Haji Fazal Kadir Sherani, president of the FPCCI, said that the trade relations were important to cement political relations. “India has already granted the most favoured nation (MFN) status to Pakistan, and now its Pakistan’s turn to do the same,” he said.


Sherani said that after easing the market access by the two countries, Pakistan will get most of the benefits, while trading with the Asian countries.


Shakeel Dhingra, vice president of the FPCCI, said that the economic centre is shifting towards Asia as per the study prepared by the Confederation of Asia-Pacific Chamber of Commerce and Industry. “Now it is time that Pakistan and India improve their trade relations to get the benefit of this change,” he added.

India factory output beats estimates

New Delhi: Indian industrial production rose more than estimated in August, climbing for the first time in three months ahead of a policy revamp to revive the economy.

Output at factories, utilities and mines rose 2.7 per cent from a year earlier after a revised 0.2 per cent fall in July, the Central Statistical Office said in a statement in New Delhi on Friday. The median of 36 estimates in a Bloomberg News survey was for a 1.1 per cent gain.

Indian factory production has been subdued for most of this year as Europe’s debt crisis saps exports and elevated inflation curbs scope for interest-rate cuts to bolster spending at home. The government overhauled policies in September to lure more foreign investment, limit its budget deficit and steady the nation’s currency.

“Economic activity is still weak and below trend,” said Robert Prior-Wandesforde, an economist at Credit Suisse Group AG in Singapore. “I don’t think we should get too carried away with all this. But it is the strongest evidence to date that recovery is underway in India and March quarter was the bottom.”

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Prime Minister Manmohan Singh’s government began the policy changes on September 13 by announcing a rise in diesel prices to curb expenditure on fuel subsidies, before opening industries from retail to aviation to more investment from abroad. The cabinet this month decided to seek parliamentary approval for more overseas participation in the insurance and pension businesses.

The rupee has strengthened about 5 per cent against the dollar since the overhaul, paring its loss in the past year to 7 per cent. The currency was little changed at 52.64 per dollar as of 12:28pm in Mumbai, while the BSE India Sensitive Index of stocks fell 0.4 per cent. The yield on the 10-year bonds due June 2022 climbed to 8.17 per cent from 8.16 per cent yesterday.

Gross domestic product in Asia’s third-largest economy may rise 4.9 per cent in 2012, the weakest pace in a decade, the International Monetary Fund said this week. The country’s trade deficit widened to $18.1 billion last month as exports dropped 10.8 per cent from a year earlier.

Standard & Poor’s reiterated two days ago that the nation could lose its investment-grade credit rating within the next 24 months if growth slows further and political opposition to policy overhauls increases.

S&P predicted a budget shortfall of about 6 per cent of gross domestic product in the financial year through March 2013, compared with the government’s target of 5.1 per cent.

“Twenty-four months is a long time,” Finance Minister Palaniappan Chidambaram said in Tokyo yesterday, where he is attending the IMF annual meeting. “You will see a lot of reform, a lot of change, a lot of strengthening of the Indian economy.”

Manufacturing rose 2.9 per cent in August from a year earlier after a fall in the previous month, while consumer-goods output advanced 5 per cent, today’s data showed. Mining climbed 2 per cent and electricity output climbed 1.9 per cent.

The Reserve Bank of India, which has left interest rates unchanged for the past three meetings since a cut in April, has previously signalled that narrowing the budget gap would increase scope for reductions in borrowing costs.

Headline inflation, as measured by the wholesale-price index, accelerated to a nine-month high of 7.7 per cent in September, according to the median estimate in a Bloomberg News survey ahead of a report due Oct. 15. The central bank has said the comfort level for price increases may be about 5 per cent.

Consumer prices rose 9.73 per cent in September from a year earlier, another report showed today. That’s the slowest pace in six months.

The Society of Indian Automobile Manufacturers predicts full-year domestic car sales growth of as little as 1 per cent. Slower economic expansion, inflation and the cost of borrowing has damped demand for vehicles from companies such as Maruti Suzuki India Ltd, the nation’s biggest carmaker by volume.

Vodafone may avoid $2b India tax

Image Credit: Bloomberg NewsA pedestrian using a mobile phone stops outside a Vodafone store in Mumbai, India.

New Delhi: Vodafone Group Plc may win a reprieve in a $2.2 billion (Dh8.08 billion) Indian tax case after a panel opposed a retroactive clause in the nation’s laws that drove away foreign investors and pushed the rupee to a record low.


Retrospective tax demands should only be made in “rarest of rare cases” and changes made to the way capital gains on cross-border deals are taxed should only apply to future transactions, the committee said in a draft report yesterday. Should the government accept the advice, Vodafone won’t be liable for its 2007 purchase of Hutchison Whampoa Ltd’s Indian assets, Ernst & Young LLP and KPMG said.


The recommendations were posted on the finance ministry’s website less than a month after Vodafone expressed willingness to settle the case provided it could just pay the original tax claim and not the penalty and interest. Chief financial officer Andy Halford said in a September 14 interview that he may make a provision to cover legal risks after former finance minister Pranab Mukherjee amended the tax law in March. India’s Supreme Court had ruled in January that the operator isn’t liable and dismissed the government’s case.


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“If the report is fully implemented, then Vodafone will be exonerated entirely,” said Mumbai-based Dinesh Kanabar, chairman of taxes at KPMG’s local unit. “The retrospective amendment, if deemed to be a valid law, would allow the government to proceed against Hutch, not Vodafone. Whether they want to do that is a separate issue.”


The panel, set up by Mukherjee’s successor Palaniappan Chidambaram, seeks to undo some of the amendments to “better reflect principles of equity and probity” in commonly recognised tax laws. The proposals come amid US Treasury Secretary Timothy Geithner’s two-day visit to India, during which he hailed the burst of policy changes Prime Minister Manmohan Singh announced in the past month to lure investment from overseas.


Newbury, England-based Vodafone, the world’s second-argest mobile-phone operator, today fell 0.2 per cent to 179.05 pence as of 8.54am in London. Spokesman Ben Padovan declined to comment on the report.


Geithner discussed the amendments in his meetings with Mukherjee in April after American trade and lobby groups said the move may lead to retroactive levies for a period going as far back as 50 years and deter foreign investment. UK Chancellor of the Exchequer George Osborne criticised the plan, saying it could damage India’s investment climate.


The tax panel, led by Parthasarthi Shome, a former adviser to the finance minister, was set up by Singh in July to shore up confidence as the economy struggled, the rupee tumbled and the odds of a credit-rating downgrade increased.


Singh’s administration started a wave of economic policy changes last month to restrain its fiscal deficit and permit increased investment from abroad in industries such as retailing and aviation, stoking a surge in the rupee and buoying stocks.


The currency has rebounded about 8 per cent from a record low it touched in June, and traded at 53 a dollar as of 11.45am in Mumbai, according to data compiled by Bloomberg. It has advanced 4.5 per cent since September 13, when officials announced a diesel-price rise to pare expenditure on fuel subsidies in the first step of the policy overhaul. The BSE India Sensitive Index has rallied 15 per cent since the end of May.


The recent moves snapped months of inaction that had dimmed India’s outlook. The gridlock contributed to decisions by Standard & Poor’s and Fitch Ratings to cut the outlook on the nation’s credit rating to negative from stable earlier this year, imperiling its investment-grade status.


Indian economic growth may weaken to a decade-low this year of 4.9 per cent even as the government pursues a policy revamp, estimates from the International Monetary Fund showed yesterday.


India has also said it may soon finalise the rules for a proposed clampdown on tax avoidance as it considers delaying implementation of a plan that also spooked foreign investors.


The norms for the so-called General Anti-Avoidance Rules, or GAAR, should be ready by the end of the month, Finance Minister Chidambaram said on October 1 after the Shome committee submitted its final report on the measure.


Vodafone, which may be getting ready to participate in a $7 billion spectrum auction in India to expand its user base, said in April that it will pursue international arbitration against the Indian government if the country proceeds with plans to make the operator liable for the tax bill.


Vodafone’s Dutch unit served a notice of dispute to the Indian government on April 17, invoking an investment treaty between India and the Netherlands.


The panel said the seller making the gains should be liable if the government still opts to levy charges on past deals, whereas Vodafone was the acquirer in the transaction at issue.


“Vodafone is not liable to tax, interest, or penalty,” said Satya Poddar, a tax partner with Ernst & Young based in Gurgaon near New Delhi. “That’s the recommendation.”

India reforms cheer markets


NEW DELHI: India’s reforms blitz has cheered markets and changed perceptions of the government but the outcome is far from assured, with the nation a long way from returning to a high-growth path, analysts say.


Since mid-September, Prime Minister Manmohan Singh’s Congress-led government has opened the retail, broadcasting and aviation sectors and proposed inviting foreign investment into the insurance and pension industries.


But some of this deregulation, which the media has dubbed the country’s second reform “big bang” since Singh as finance minister began opening India’s economy to the world two decades ago, may not have much immediate effect.


“The announcement is symbolically significant, partly because the reforms have been under discussion for years and partly because the decision shows evidence of sustained (government) momentum,” said Eurasia Group analyst Anjalika Barali.


But they may be “short on impact,” she added.


Just nine of India’s 29 states say they will implement the retail reform and allow in foreign supermarkets, with the others fearful of the effect on the hundreds of thousands of small store owners.


And while US giant Wal-Mart plans to open its first outlet in the next 18-24 months, other large retailers like Britain’s Tesco and France’s Carrefour, which initially expressed interest, are now struggling financially, analysts say.


In the aviation sector, the government has permitted foreign carriers to take a stake in Indian airlines, but the sector is drowning in debt and struggling with high prices of fuel and airport landing rights.


Kingfisher Airlines, owned by flamboyant liquor tycoon Vijay Mallya, is desperate for a foreign buyer, but is finding it tough to attract interest.


The Centre for Asia Pacific Aviation, a consultancy, says it does not expect “any foreign airline to invest in Kingfisher in its current state with its massive ($2.5-billion) debt burden, crippled fleet and poor employee morale”.


Finally, the government’s plans to raise foreign ownership caps in the massively underpenetrated insurance and pension sectors must still clear India’s fractious parliament.


The reforms have already cost the government its parliamentary majority with the exit of a key ally who has threatened to bring a no-confidence motion against its former partner when the house reopens next month.


It could be “back to the old brick wall,” warned CLSA economist Rajeev Malik, referring to the gridlock in previous parliamentary sessions.


As it slashed its growth forecast for the Indian economy this year to 4.9 percent, the International Monetary Fund said on Tuesday that the “outlook for India is unusually uncertain”.


The IMF’s 2012 forecast for Indian economic expansion was its lowest in a decade, the institution said in its World Economic Outlook report.


The moves to open up sectors of the economy to foreign investment also fall short of addressing the so-called “structural problems” holding back the development of India’s economy, Asia’s third biggest, economists say.


Rigid labour laws discourage companies from hiring, antiquated land acquisition rules make setting up industrial projects difficult, while infrastructure from roads to power is old and insufficient.


Red tape and corruption are also huge problems for businesses and the government still runs large areas of the economy, including banks, mining companies and energy groups.


Subsidies on everything from fuel to fertilizers have also blown apart the government’s budgeting, with a long-delayed move to hike the price of subsidised diesel as part of the reform package seen as a small move in the right direction.


But with general elections in 2014 and two state polls looming, the Congress-led government “knows its limits,” said Ajay Bodke, strategy head at India’s Prabhudas Lilladher investment house.


“The government has swung round perceptions of itself to being action-oriented rather than asleep,” he said. “But they haven’t addressed the really hard stuff like substantially reducing subsidies that is the most politically treacherous.”


Investors have so far liked what they have seen from Prime Minister Singh and his reformist finance minister — shares are up nearly 10 percent since the end of August — but justifying the optimism is the government’s next challenge.

India could see rating cut despite reforms: S&P


MUMBAI: Global ratings agency Standard & Poor’s warned on Wednesday that India still faced at least a “one-in-three” risk of its credit rating being cut to junk status, despite a blitz of economic reforms.


The Congress-led government of Prime Minister Manmohan Singh in the past few weeks has announced a string of reforms intended to boost foreign investment and spur the sharply-flagging economy.


The reiteration of the ratings downgrade threat — initially issued in April — sent India’s stock market down by 162 points to close at 18,631.10.


Standard & Poor’s (S&P) said there was “at least a one-in-three likelihood” of a downgrade of India’s sovereign rating within the next 24 months.


The statement came a day after the International Monetary Fund lowered its forecast for India’s 2012 growth by one percentage point to 4.9 percent, due to stalled investment caused by graft issues, red tape and poor business sentiment.


India’s growth right now is bumping along at 5.5 percent, according to the most recent official quarterly figures — its slowest pace in about three years.


The ratings agency said global economic uncertainties are intensifying.


“In our view, there is a significant chance that this trend could eventually affect political, economic, fiscal or external factors to lower the credit rating on India,” the agency said.

India working on to cut deficit

New Delhi: India’s finance minister promised on Monday a “credible” plan to cut a gaping fiscal deficit that has alarmed investors and said he was determined to push through more reforms to spur the economy.

The pro-market minister, P. Chidambaram, said there was an “imperative need” to cut spending after a government panel warned that India stood on the edge of a “fiscal precipice” due to a swelling subsidy bill.

“It is our intention to announce a credible and feasible path of fiscal consolidation beginning this year,” he said, giving a new target for the deficit of 5.3 per cent of gross domestic product.

Since taking over the finance job in July, Chidambaram and 80-year-old Prime Minister Manmohan Singh have begun what some economists say are the biggest reforms in two decades since India began opening up its economy to the world.

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Chidambaram said the government, which last month eased foreign investment curbs in retail, aviation and broadcasting, would keep pushing forward with reforms.

“The reform momentum will remain strong and unabated,” he said, warning without modernisation India risked a “sharp and continuing slowdown of the economy”.

India’s economy grew by 5.5 per cent in the fiscal first quarter, the lowest in around three years, but Chidambaram said expansion should accelerate over the rest of the year and hoped for eight-to-nine percent expansion longer-term.

“There is no reason growth should stagnate at 5.5 per cent in all four quarters,” he said, adding “the India growth story is sound.”

The government also outlined last week plans to raise foreign investment caps in the insurance and pension sectors.

Chidambaram said the insurance market needed $5-6 billion in “the immediate future” to begin covering India’s overwhelmingly underinsuranced population.

Investors have welcomed the reforms blitz that has ended years of policymaking paralysis amid massive government corruption scandals.

The stock market has jumped nearly 10 per cent since the end of August while the Indian currency has gained more than five rupees against the dollar since June, trading at 52.13 yesterday, making both the best performing Asian assets.

“The rupee is stabilising,” Chidambaram said.

Ratings agency Standard and Poor’s warned in June that India could lose its investment-grade rating unless it took urgent action to balance its books, rein in public spending and boost investor confidence.

India’s fiscal outlook has been hit by a slump in tax revenues due to economic weakness and surging subsidies for India’s hundreds of millions of poor.

Chidambaram urged the main opposition Bharatiya Janata Party, which has stalled the last few parliamentary sessions, to support reforms, noting it backed many of the same policies while in government.

“There is a judgement day for every government every five years – opposition is legitimate, obstruction is not,” he said.

He said some subsidies in such areas as food, fertilisers and fuel, must remain “at this stage in India’s development”, but forecast “huge savings” with plans to make direct cash transfers to the needy and avoid widespread leakages.

Ikea applies to open India stores

London: Ikea, the Swedish home-furnishing retailer, has applied to the Indian government to set up its stores in the country, taking advantage of New Delhi’s recent moves to open retail businesses to foreign ownership.

The application by Ikea is the culmination of years of negotiating with New Delhi to set up shop in India, which has seen a construction boom in recent years and has a huge pent-up demand for affordable home furnishings.

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IKEA closer to India entry after easing of rules

Ikea furniture STOCKHOLM: IKEA, the world’s largest furniture retailer, pushed ahead on Monday with a plan to open its first stores in India following the relaxation of rules on sourcing from local suppliers.

India last month eased the heavily criticised rules, anxious not to scare off IKEA – one of the few big name firms that has unveiled plans to invest in the country – or any others willing to follow.

The Swedish retailer said it had filed the last part of an application to begin trading in the world’s second most populous nation.

“IKEA Group views the recent developments related to single brand foreign direct investment in retail positively,” the privately held group, known for budget furniture in self-build flat packs and huge stores, said in an emailed statement.

“Once our application is approved we will develop a solid plan for the establishment of IKEA stores for many years to come.”

India opened the door to foreign retailers in January, but drew criticism for demanding that companies source 30 percent of their products from small- and medium-sized domestic firms. In September, the government dropped the requirement specifying the size of supplier.

IKEA in May unveiled plans to open 25 stores and invest 600 million euros ($784 million) there, but negotiations around the sourcing requirements raised the prospect the investment would be delayed.

There are 338 IKEA stores around the world, 298 of which are run by IKEA Group and the other by external franchisees. IKEA Group is about to speed up expansion, mainly in existing but also in new markets. ($1 = 0.7657 euros)

Pharma industry’s fears: Free trade may bring inferior drugs from India

PPMA former chief says Pakist­an’s medici­nes are of far better qualit­y than India.  Pakistan’s pharmaceutical exports were over $150 million in 2011, and are now touching the mark of $200 million a year. PHOTO: FILE

KARACHI: 

The bigwigs of the pharmaceutical industry are upset with the government. On the one hand, they claim, it has wreaked havoc on local drug manufacturers by passing the 18th Amendment, which turned the health sector from a federal subject into a provincial one.


On the other hand, they say, the government is about to destroy their businesses by lifting trade restrictions that have so far protected local players from their Indian counterparts.


“Out of India’s roughly 25,000 drug manufacturers, only a 100 or so are foreign accredited, with state-of-the-art facilities and standardised, quality products. They produce high-value drugs and export to developed countries only,” said Dr Kaiser Waheed, former chairman of the Pakistan Pharmaceutical Manufacturers Association (PPMA) while speaking to The Express Tribune.


“It’ll be silly to think that those 100 companies will export to Pakistan once Pakistan-India trade barriers are lifted. What Pakistan will be importing in the name of free trade with India is substandard and spurious drugs produced by the overwhelming majority of the pharmaceutical industry of India that is, by and large, unregulated,” he added.


Explaining his argument, Waheed stated that unlike Pakistan’s pharmaceutical industry, which is regulated by a national body called the Drug Regulatory Authority, India’s drug manufacturers operate without a central regulatory framework. “Each state in the Indian federation has its own rules, regulations and regulatory body. Sometimes rules are adhered to, sometimes not. There is no standardisation and no central authority to streamline the pharmaceutical sector.”


While shortages of everyday medicines in Pakistan’s drugstores are not unusual, the fact remains that the country’s pharmaceutical exports have been rising steadily. Although the World Trade Organisation (WTO) says Pakistan’s exports of pharmaceutical products were over $150 million in 2011, the PPMA says they are now touching the mark of $200 million a year.


So how exactly has Pakistan managed to increase its pharmaceutical exports by an annual rate of 7% for the past five years, even though it sometimes fails to meet the local demand?


“Pakistan does not export pharmaceutical products to regulated markets. We export to countries whose pharmaceutical sectors are either semi-regulated or unregulated,” says Waheed.


His bold acknowledgement of the underlying factor that is driving Pakistan’s pharmaceutical exports upwards is backed by revealing statistics. The biggest export destination for Pakistani drugs is Afghanistan, which has a considerably weak regulatory framework. With a share of almost one-fifth in Pakistan’s total exports of pharmaceutical goods to the world, Afghanistan received Pakistani drugs worth $29.1 million in 2011.


It is noteworthy that Pakistan’s pharmaceutical exports to Afghanistan have grown by 30% per annum for the last five years. Sri Lanka, the Philippines, Vietnam and Sudan are other major export destinations for Pakistan-made drugs.


It is mainly the fear of substandard medicines flooding Pakistani drugstores that the pharmaceutical industry is opposed to unconditional easing of trade restrictions with India, says Waheed.


Currently, a large proportion of pharmaceutical products that Pakistan imports every year comes from developed countries with heavily regulated pharmaceutical sectors. Switzerland, Denmark, Germany, Belgium and France are the top five exporters of pharmaceutical goods to Pakistan, according to the WTO.


Drugs coming out of the unregulated pharmaceutical sector of India will replace existing medicines of far better quality if Pakistan eases the trade policy without providing the local industry with a level playing field, says Waheed.


Published in The Express Tribune, October 7th, 2012. 

India expects 400bn rupees from sale of mobile phone airwaves


indian-flagNEW DELHI: India hopes to get 400 billion rupees ($7.71 billion) from the sale of mobile phone airwaves in 2012/13, finance minister P. Chidambaram told reporters on Monday.


 


The country is for the first time selling 2G mobile radio airwaves through open auction, following a Supreme Court order in February to revoke all permits awarded in a scandal-tainted 2008 state grant process and redistribute them in an open bidding process.


 


India may shut Kingfisher as fleet remains grounded

Saturday, 06 October 2012 02:53 Posted by Abdul Ahad

Kingfisher-Airlines-925048873-2887690-2MUMBAI/NEW DELHI: Debt-strapped Kingfisher Airlines, devoid of a turnaround plan to get back into the air, faced a possible shutdown by the government after extending the grounding of its fleet for another week.

The industry regulator told the airline late on Friday to demonstrate why its permit to fly should not be suspended or cancelled, and gave it 15 days to reply.

The Directorate General of Civil Aviation said the airline had failed to establish a “safe, efficient and reliable service”.

Kingfisher stopped flights on Monday after a weekend protest by staff turned violent. Airline employees have not been paid for seven months.

“The airline has not been able to resolve its issues. They have not approached DGCA with any operational plan,” the ministry of civil aviation said in a statement.

The company said in a statement it would submit its response to the regulator “well in time” and would also come up with a plan to restore services after negotiating with employees.

About 150 Kingfisher staff staged a protest march in Mumbai earlier on Friday, following what police said was the suicide of an employee’s wife worried about the family’s precarious finances. Another 100 staff held a candlelit march in Delhi on Friday night, adding to pressure to resolve the carrier’s long-running financial problems.

Kingfisher, once India’s second-biggest airline, has failed to find an overseas airline or other investors to bring in fresh equity.

The Centre for Asia Pacific Aviation, which estimates Kingfisher’s debt at around $2.5 billion, said a fully funded turnaround would cost at least $1 billion. It said Kingfisher had only an outside chance of recovery and that its “massive debt burden, crippled fleet and poor employee morale” would deter a foreign airline investor.

It is now the smallest of India’s six main carriers and its steep decline has enabled rivals such as Jet Airways and IndiGo to raise fares in what had been a ferociously competitive market plagued by overcapacity.

Kingfisher, controlled by liquor baron Vijay Mallya, has never turned a profit since its launch in 2005 and before this week was flying only 10 planes. Its fleet once numbered 64.

“How can the management realistically expect us to work?” said Krishna Kumar, a 35-year-old engineer in Mumbai who joined Kingfisher six years ago. “We have borne this for seven months,” said Kumar, wearing a black arm band.

Talks between airline management and Delhi-based pilots and engineers broke down on Thursday. Similar talks in Mumbai on Wednesday ended in what one senior pilot called a stalemate.

Kingfisher spokesman Prakash Mirpuri said the airline was extending what it described as a partial lock-out to Oct. 12 or until the strike is called off.

TOUGHENED STANCE

The government has been toughening its stance towards Kingfisher after allowing it to operate for months despite grounding most of its fleet and defaulting on payments to banks, oil companies, airports and others.

Kingfisher’s lenders, mostly government banks led by State Bank of India, have refused to extend further credit in the absence of fresh equity, but they have shown patience. Indian state banks rarely force big companies to liquidate.

“Banks are still giving time to Mr. Mallya to get an investor. Because if we pull the plug it would be irretrievable. And if we are patient with him possibly there is a chance that he would revive,” SBI Chairman Pratip Chaudhuri told reporters.

“Having waited for so long we might as well wait longer.”

Mallya’s United Spirits Ltd and Diageo Plc recently confirmed long-rumoured talks for the UK giant to take a stake in India’s dominant whisky maker, which could make it easier for Mallya to find funds to rescue Kingfisher.

Rohan Shrivatsava, 28, who has been with the airline for five years and was part of the protest in Mumbai, said he had been looking for another job without success. “Getting a job after working at Kingfisher is not possible. Do you know how many airline engineers are in the market running for jobs?” he said.

A 31-year-old in Mumbai cargo operations who declined to be identified said he had earned about 18,000 rupees ($350) a month in salary and paid 7,000 rupees a month to rent a room.

“My landlord has been furious about my rent dues. I have not paid rent for last three months. How do I pay my rent, where do I live if I am thrown out tomorrow?

Some employee anger was directed at Mallya, the self-described “King of Good Times”, known for his lavish lifestyle.

One placard read: “Is your party over Mr. Mallya?”

Kingfisher shares fell 4.7 percent on Friday, effectively at their daily limit of 5 percent for the fifth straight session.

Vested interests creating hurdles in petrol import from India

KARACHI: The country’s plan to import petrol from India through Wagah border, which would save around $300 million, is being delayed because of the disagreement of some influential lobbies having vested interests, said Khurram Saeed, executive committee member of India-Pakistan Chamber of Commerce and Industry.

“The scheme is quite beneficial for Pakistan and despite significant advancement on government-to-government level, the plan is not being materialised as some quarters are creating hurdles,” said Sayeed.

Certain quarters in the country have their interests linked with the status quo in terms of commissions and other benefits and they are not willing to let Indian petrol enter directly in Pakistani Punjab, he said.

Sayeed said that petrol imports would largely benefit Pakistan and would result in the saving of $300 million, besides saving time. Presently, gasoline and diesel is imported through Karachi and then it is shipped to upcountry and if it lands in Lahore through the Wagah border, it would save the cost and time, he said.

At present, Pakistan’s gasoline import requirement is around 1.5 million tons per annum, which is being arranged through spot tenders, he said, adding that Pakistan had allowed diesel imports in 2009 but none of the Indian oil firms could supply the fuel in face of preferential prices Pakistan gets from Kuwait.

Pakistan imports around four million tons per annum of diesel, of which 75 percent is purchased on a long-term supply contract from Kuwait. The rest is sourced through open competitive biddings and India was asked to quote in the tender.

Pakistan also imports around six million tons of furnace oil, of which one million tons is being met through long-term supply contract, while the remaining volumes are sourced through the open competitive biddings.

India set to offer bailout to power distributors

NEW DELHI: India is set to offer a bailout to its cash-strapped power distributors that would help restructure more than $35 billion in debt but do little to reform a sector whose dysfunction has exacerbated the country’s growth-sapping energy crisis.

The country’s mostly state-owned distribution utilities are drowning in losses and were blamed for triggering probably the worst blackout in history in July, when power was cut for two consecutive days in a massive area home to 670 million people.

The federal cabinet will consider the bailout plan, the second in a decade, when it meets at 5.30 pm (1200 GMT) on Monday, officials said. Shares in some Indian power sector lenders and power producers rose 2-3 percent on hopes that the cabinet would approve the plan, the latest in a series of actions to address structural problems slowing down Asia’s third largest economy. A lifeline for power distributors would free up cash and help them buy more power to supply factories and homes that resort to expensive diesel generators and solar panels to plug their energy gaps.

Last week, the government cut subsidies on diesel and opened up the country’s vast retail sector as well as aviation to foreign investment to win back investor confidence and attack the country’s ballooning fiscal deficit.

Prime Minister Manmohan Singh, defending the measures, said “money does not grow on trees” and that failure to bridge the gap between government spending and income would stoke inflation and lead to further loss of confidence in the economy.

Under the rescue plan for power distributors, provincial governments will take on half of their short-term debt and convert them into long-term bonds over the next three years.

Lenders, who are mostly government-run banks, will be asked to turn the rest into long-term loans and offer a moratorium on repayment of the principal for three years. But they will not be expected to reduce interest rates on the restructured loans, Montek Singh Ahluwalia, the deputy chairman of the Planning Commission, said.

But analysts said the bailout plan did not address the country’s long-term energy problems and may only drag government lenders deeper into the red.

“The debt restructuring, as it stands, appears largely a breather as it is not accompanied by any concrete reform measures,” said Kameswara Rao, a partner at consultancy PricewaterhouseCoopers.

With loans to power distributors accounting for 4-7 percent of their respective books, Indian Bank, Union Bank of India, Bank of India, Oriental Bank of Commerce and Canara Bank are among those with the highest exposures, according to a report by Bank of America Merril Lynch.

The country’s largest lender, State Bank of India, and leading private banks have no exposure to the distributors, according to the report.

“The restructuring could worsen their (banks’) asset liability mismatch,” Rao warned. That is because banks will have to wait longer to be paid back, hampering their ability to repay short-term liabilities.

Years of populism, corruption and mismanagement have driven power distributors into losses that had accumulated to 926 billion rupees ($17.35 billion) by the end of financial 2010/11.

Under political pressure to sell below cost and losing more than a quarter of power supply to theft and decrepit networks, distribution companies have been borrowing for years to fund their losses.

Just seven of the country’s 28 states – Rajasthan, Uttar Pradesh, Haryana, Tamil Nadu, Punjab, Madhya Pradesh and Andhra Pradesh – have between them accumulated short-term debt of 1.9 trillion rupees ($35.6 billion) from power distribution.

Walmart aims for first retail store in India in 18 months

NEW DELHI: US giant Walmart said on Friday it aims to launch its first retail store in India within the next 18 months after the government opened the vast consumer market to foreign chains.

“That is the plan — to open (stores) in 12 to 18 months,” a spokesman for the world’s largest retailer by sales told AFP, declining to disclose details including how many branches Walmart might open.

Up until now foreign groups such as Walmart could only operate as wholesalers amid fears that big Western retail chains would swamp India’s tens of millions of small family-run stores which dominate the sector.

The government signed into law Thursday a decision to allow foreign multibrand retailers to set up shop in India via joint ventures, as part of a burst of reforms to further open up the economy and kickstart sharply slowing growth.

Walmart, which already operates stores in neighbouring China, is the first foreign company to formally announce its intentions to enter the retail market under the new policy which kicked up a political storm, with the Congress-led government’s largest coalition partner pulling out in protest on Friday.

Protests against the reforms were staged across India on Thursday.

To prepare for its store entry, Walmart opened its first wholesale supply outlet in 2009 in alliance with Bharti Enterprises, parent of India’s top mobile firm Bharti Airtel, and now has 17 “Best Price” cash-and-carry outfits.

“Walmart has a reasonable amount of experience about the Indian customer and society and that’s why I think they can get off the ground reasonably quickly,” Arvind Singhal, chairman of Indian consultancy Technopak, told AFP.

Walmart and French supermarket Carrefour, the world’s second-largest retailer, and others such as Britain’s Tesco had been pressing the country of 1.2 billion people to open up the retail sector to offset tepid Western markets.

India’s retail market clocks $500 billion in sales annually, a figure expected to grow to $800 billion in the next five years, Technopak says. Of that, chain stores account for $33 billion, a sum seen growing to $80 billion within five years.

Technopak’s Singhal dismissed fears family-owned neighbourhood stores would be pushed out of business by enlarging the foreign retail presence.

“The pie’s big enough for everyone. If you look at the projected figure for chain store sales in five years, it represents only 10 percent of total sales,” he said.

The government has also imposed curbs, saying foreign multibrand stores can only open in states welcoming them and in cities with over one million people, he noted. Just a third of India’s 29 states have said they back retail reforms.

Modernisation of India’s retail market would take years, Singhal added. “This transformation will not be overnight.”

Tesco, which helps steel-to-tea giant Tata Group operate the Indian company’s Star Bazaar chain of 13 stores, said in a statement the company “welcomes this positive development, but we await further detail”.

And Carrefour, reported by Indian media in July to have put on hold an expansion plan for wholesale stores in India in the face of a European slowdown, declined to comment. It has two cash-and-carry stores in India.

Earlier this year India allowed foreign companies to own 100 percent of “single-brand” retail ventures, up from an earlier cap of 51 percent.

Secretary-level talks: India, Pakistan discuss resuming ‘capital’ flights

Arch-rivals commen­ce two-day trade talks; discus­s cooper­ation on market access, tariff­s. Arch-rivals commence two-day trade talks; discuss cooperation on market access, tariffs. PHOTO: FILE

ISLAMABAD: Pakistan and India are discussing a proposal that seeks to restore direct flights between Islamabad and New Delhi, in a latest move indicating improved relations between the nuclear-armed neighbours.

The idea was discussed during the first day of two-day talks, held on Thursday at the commerce secretary level. Both sides were also exploring the possibility of launching container service between Lahore-Amritsar and Lahore-Ludhiana aimed at facilitating fast-track goods’ movement across the borders.

The negotiations are part of the peace process, which has picked up momentum in recent months. The latest trade talks seek to iron out the remaining outstanding issues, which may delay phasing out of negative-list containing 1,209 non-importable items from India.

Pakistan has in principle decided to abolish the list by end of this year but seeks greater access to Indian markets for providing level-playing field to its exporters.

Head of the Indian delegation, Commerce Secretary S R Rao, also stressed the “need to focus on grey areas (for promotion of trade) rather than in the sectors where the business community on both sides of the border is slightly uneasy and sensitive”.

Rao’s opening statement hints at the biggest thorny issue — the possibility of abolishing Pakistan-specific sensitive list maintained under the South Asia Free Trade Agreement and banning trade in products where Islamabad enjoys competitive advantage.

The Indian delegation comprised officials of the Bank of India, External Affairs, and Power and Heavy Electricals, Gas Authority of India, Ministry of Railways, Civil Aviation and Quality Control Departments.

Rao said the 18-member delegation has a mandate from the Indian government to find a cooperative approach and discover commonalities. He said the way the world trade is moving is the reason why both countries are sitting across the table to normalise trade relations. He said despite multilateral trade arrangements, 60% of the total trade is still bilateral.

Pakistan’s Commerce Secretary Munir Qureshi urged India to resolve the issues of tariffs and non-tariff barriers and deficiency of infrastructure which was hampering the movement of goods. He said the business community was pushing for the resolution of all the outstanding issues. Qureshi stressed the need to provide a level-playing field to local businessmen and urged that the remaining issues should also be addressed in the same spirit of “give and take”.

Both the sides also decided to train exporters in their respective countries so they should be more familiar with quality standards — minimising problems at the time of export. In a bid to lower the cost of conducting business, both sides also reviewed the possibility to sign avoidance of double taxation treaty.

The parties gave final touches to the draft of the three agreements that will be signed today (Friday). Both the sides decided that the rules and regulations to govern these agreements will be framed within three months.

India and Pakistan also explored the possibilities of cooperation in the areas of telecommunication and courier services. They discussed promoting small and medium enterprises aimed at extending benefits to be yielded due to the normalisation of process at all possible levels.

Published in The Express Tribune, September 21st, 2012.

Walmart aims for first India store within 18 months

Walmar­t entere­d the wholes­ale retail supply chain in 2009 in an allian­ce with Bharti Enterp­rises. Walmart entered the wholesale retail supply chain in 2009 in an alliance with Bharti Enterprises. PHOTO: FILE

NEW DELHI: US giant Walmart said on Friday it aims to open its first store in India within the next 12-18 months after the government opened the vast consumer market to foreign chains.

“That is the plan – to open (stores) in 12 to 18 months,” a Walmart spokesman told AFP, declining to disclose how many stores it might open or other details.

Up to now, foreign groups such as Walmart could only operate as wholesalers amid fears that big Western retail chains could swamp small family-run stores that dominate the sector.

The government signed into law a decision late Thursday to allow foreign multibrand retailers to set up shop in India via joint ventures as it moved to further open up the economy and kickstart sharply slowing growth.

US-based Walmart and French supermarket Carrefour, the world’s second largest retailer, and others had been lobbying India’s government to open the the country of 1.2 billion people to foreign store chains.

In a bid to prepare the terrain for a potential move into India’s retail sector, Walmart entered the wholesale retail supply chain in 2009 in an alliance with Bharti Enterprises, parent of India’s top mobile firm Bharti Airtel.

The joint venture, which has nearly 17 cash and carry stores, sells mainly to vegetable vendors, hospitals, restaurants and other firms.

Carrefour, which was reported by Indian media in July to have put on hold an expansion plan for wholesale stores in the country, declined to comment on the government’s new step to liberalise the retail sector.

Carrefour opened its first cash-and-carry store in India in 2010 and now has two, catering to food firms, restaurants and retailers.

Earlier this year, India allowed foreign retailers selling one brand to operate stores and Sweden’s IKEA is awaiting approval of its plans to open outlets in the country as it seeks new markets for its flat-pack furnishings.