Indian Economy: News and Discussion

[Eiffe]

Easing FDI: Will it revive India's slowing economy?



Trust the government to introduce economic reforms under duress and only after the economy has been pushed into a corner.

Earlier this week, various media reports said the rules on foreign direct investment (FDI) in multi-brand retail and aviation are likely to be eased very soon.

It's been a long, long wait, especially for the retail industry. The cabinet is expected to consider a note from the commerce and industry ministry next week on allowing 51 percent FDI in multi-brand retail and increasing the limit on single-brand retail to 100 percent from 51 percent.

In the case of aviation, reports said the aviation ministry is proposing to allow 24 percent FDI in the sector. India currently allows FDI up to 49 percent in the aviation sector, but foreign airlines are not allowed to invest in local airlines. That looks set to change: foreign airlines may soon be allowed to invest up to 24 percent.

Both proposals are expected to be considered by the cabinet in the next two weeks.

Both are intended to increase overall capital inflows, which have dwindled in the past few months, into the country.

A much-needed step

The government's plan to ease FDI rules is a step in the right direction. Foreign direct investments are more stable and permanent compared with investments in capital markets, which can be pulled out in a matter of days.

At the moment, the dire state of the economy is struggling to attract investors. Industrial activity is slowing down, corporate earnings are sliding, foreign investors are moving out of relatively riskier emerging-market assets and into safe havens, like the US dollar, and the rupee is crashing.

Meanwhile, inflation remains at elevated levels, posing a threat of stagflation – stagnating growth and inflation.

What can the government do? Not much, at least on its own.

With the government's finances spinning out of control— the fiscal deficit (the gap between government revenues and government expenditure) is already equivalent to 70 percent of what was estimated for the year ending March 2012)— it's in no position to jumpstart the economy through a fresh bout of spending.

The next bet is attracting foreign investments. While foreign investments in capital markets have fallen sharply this year, surprisingly, FDI has actually held up in the first half of the current financial year (April to September), with investments equaling the entire FDI for the year ending March 2011, according to Mint.

However, in September, inflows slowed down compared with a year ago. The government needs to do something now to ensure this source of funds does not evaporate as well.

No option but to reform

That "something" has to be big-bang economic reforms. The most controversial measure, of course, involves liberalising the lucrative retail sector, which is $450 billion currently. With India tipped to become one of the top markets for retail growth over the next few years, international giants from Wal-Mart to Carrefour have been salivating over the prospects of this market.

Currently, foreign retailers selling different brands are only allowed wholesale outlets and cannot sell directly to retail buyers. Only single-brand companies like Levi's are allowed to do that.

One advantage of allowing more foreign investments is the possibility that food inflation —still hovering in double-digits — could ease over time, because investors will most likely be required to invest at least 50 percent in "back-end infrastructure".

Such investments will help improve agricultural supply chains that are badly in need of upgrades. According to one estimate, up to 40 percent of India's fruits and vegetables rot before they can be sold because of a lack of cold-storage facilities and poor transport infrastructure.

Of course, expect political opposition to all foreign investment proposals, especially retail, to be extremely vocal. But given the situation the economy is in, the government might just decide to take a deep breath and brush aside those concerns.

It will take a lot of courage, but given that the government is running out of options, there's no turning back now.


Easing FDI: Will it revive India's slowing economy? | Firstpost

 

[Eiffe]

Coca-Cola set to invest $2 bn in India over 5 years

Coca-Cola India on Monday announced plans to invest $2 billion (around Rs 10,000 crore) over next five years in India to ramp up its business capabilities as it prepares to gear up for increased business opportunities. Coca-Cola India is a 100% subsidiary of Atlanta-based The Coca-Cola

"India has passed the threshold and reached a scale where it can be among the top 10 markets for us," said Ahmet C Bozer, president Eurasia and Africa for The Coca-Cola Company.
The current investment plans by Coca-Cola assumes significance because since 1993, 18 years since Coca-Cola started operations in India, it had invested around $2 billion in India.

The investments are a part of the company's 2020 Vision wherein it plans to double its revenue. The current phase of investment is also a part of the its plans to invest $30 billion (Rs 1,50,000 crore) globally over the next five years to support anticipated growth across its system.
"We plan to ramp up our manufacturing capabilities, establish new bottling lines and procure new cold chain equipment among others," said Atul Singh, president and CEO, Coca-Cola India and South West Asia. Singh refused to divulge about how much of the said investment would come under foreign direct investment. "A chunk of this investment will also come from our Indian bottling partners."
A part of this planned investment will go toward setting up a company-owned manufacturing plant. The company at present is scouting for locations in Karnataka to establish a new manufacturing facility.
Singh said that the company is also preparing a roadmap for strategic investments in rural markets, wherein it is pilot-testing solar coolers, which would keep beverages cool in rural areas with erratic electricity supply.
India's per capita consumption of Coca-Cola beverages ranks much below other countries such as China. It produces popular beverage products such as Coca-Cola and Thums Up, among several others.

Coca-Cola set to invest $2 bn in India over 5 years - Hindustan Times

 

[Eiffe]

World Bank plans $1.5-bn investment in Indian energy sector

The World Bank expects to invest about $1.5 billion in the country's fast growing energy sector over the next two years, according to a top official. The multilateral lender, which has a long association with the Indian energy sector, has already put $4 billion in the segment.

"Our investment in energy sector is around $4 billion and another $1.5 billion is under preparation -- means projects that are not finalised but are under the process of finalisation," World Bank's India Energy team leader (South Asia Sustainable Development) Ashish Khanna said.
He said that $1.5 billion would be extended to the energy sector "somewhere between now and 2014".
Pointing out that overall growth of the country's energy sector is rapid, Khanna said that from proportions perspective, the World Bank is not a major player in this segment.
"... if you look at the overall energy investments in India, which is roughly close to $15 billion every year, we are only about three to four per cent of investments done in last five years," he noted.
On World Bank assistance, Khanna said the entity brings in a lot of international knowledge on what India is grappling with and how other countries have resolved these issues.
"But often, you can't get cookie-cutter solutions... because local conditions are different. We help set up model institutions like NTPC and Power Grid which take forward energy development of the country.
"World Bank's role is in facilitation of dialogue and hand holding governments," he said.
The multilateral agency has supported the country's largest hydro-power plant at Nathpa Jhakri in Himachal Pradesh and would be providing financial assistance for the proposed Vishnugad Pipalkoti Hydro Electric Project in Uttarakhand.
Among others, the multilateral lender is also helping in improving power transmission and distribution in Haryana and Maharashtra, while it had extended a loan of $1 billion to state-run Power Grid Corporation of India in September, 2009.

World Bank plans $1.5-bn investment in Indian energy sector - Hindustan Times

 

[thakur_ritesh]

Easing FDI: Will it revive India's slowing economy?

Easing FDI: Will it revive India's slowing economy? | Firstpost

We have reached a point where opinions and articles like these have lost their relevance, and its become quite meaningless because no one in the government is listening.

When the ambani's, premji's, cant make the government inch ahead, let alone crawl, articles and opinions like these will have no takers.

By the way, bjp has already said a no to overseas airlines fdi in the aviation sector, so its not just a congress thing, if people so thought. And bjp will not agree to reforms in the retail sector because back in the days they were termed as the "bania party", or traders' party when they largely used to trace their support base to the shopkeeper on the street and they are not going to spoil that support base.

 

[Eiffe]

We have reached a point where opinions and articles like these have lost their relevance, and its become quite meaningless because no one in the government is listening.

When the ambani's, premji's, cant make the government inch ahead, let alone crawl, articles and opinions like these will have no takers.

By the way, bjp has already said a no to overseas airlines fdi in the aviation sector, so its not just a congress thing, if people so thought. And bjp will not agree to reforms in the retail sector because back in the days they were termed as the "bania party", or traders' party when they largely used to trace their support base to the shopkeeper on the street and they are not going to spoil that support base.

The goverment has a good number of reforms in plan, the only thing is will they pass the winter session without any trouble. With
the global economy slowing, we need larger investments from abroad to curb the slowdown.

 

[Pintu]

Govt hopes March end inflation at 6.7 pc<?xml:namespace prefix = "o" ns = "urn:schemas-microsoft-comfficeffice" /><o></o><o> </o> - www.ddinews.com

Govt hopes March end inflation at 6.7 pc

Finance Minister Pranab Mukherjee on Tuesday assured that government is committed to bring down inflation to acceptable levels and expressed hope that it will come down to 6-7 per cent by March end.

Tabling a statement on inflation in the lower house of the Parliament, Pranab Mukherjee said that a durable solution lies in improving agri productivity and strengthening of food supplies.



He also stressed on augmenting capacities in the manufacturing sector to keep pace with the growth in demand.



"...while there has been a steady improvement in the inflation situation in India, there are important tasks ahead to be undertaken to get the desired outcomes," Mukherjee said.



He attributed the rising prices to demand-supply mismatch, depreciating rupee, global commodity prices and easy monetary policy followed by some countries.



"...the government is committed to bring down inflation to more acceptable levels. I hope to see the March end inflation between 6 to 7 per cent", he said and sought suggestions from the members on how to tackle the issue.



Inflation has remained over 9 per cent since December 2010. The headline inflation measured on WPI was 9.7 per cent in October, while the rate of price in food segment for the week ended on 5th November was 10.6 per cent.





(AKS-22/11)

 

[thakur_ritesh]

FDI in retail cleared - NDTV

51% in multi brand

100% in single brand

 

[Pintu]

India, <?xml:namespace prefix = "st1" ns = "urn:schemas-microsoft-comffice:smarttags" /><st1:country-region><st1lace>Nepal</st1lace></st1:country-region> to ink double taxation avoidance pact today - www.ddinews.com

India, Nepal to ink double taxation avoidance pact today

India and Nepal will sign the key Double Taxation Avoidance Agreement (DTAA) during the day-long visit of Finance Minister Pranab Mukherjee in Kathmandu on Sunday, a move which will help create better investment climate for Indian businesses in this country.

Foreign Secretary Ranjan Mathai, who arrived in Kathmandu on Saturday to prepare ground for Mukherjee's visit, said the Finance Minister and his Nepalese counterpart Barsha Man Pun will ink the pact on Sunday.


"India has an abiding interest in the peace, stability and prosperity of Nepal and this motivates our wish to expand the cooperation between our two nations," he told reporters at the Tribhuvan International Airport upon his arrival in Kathmandu.


DTAA, which embodies modern trade principles, will enable Indian investors and traders to enjoy tax relaxation in India once they pay taxes in Nepal.


During Nepalese Prime Minister Baburam Bhattarai's recent visit to India, the two countries had signed BIPPA (Bilateral Investment Promotion and Protection Agreement) to attract more Indian investment in Nepal.


The two sides were supposed to sign DTAA during Bhattarai's India visit, but it was postponed due to some technical reasons.


The agreement will boost the confidence of the investors and help Nepal attract more investment from India, according to experts.


Nepal government has sorted out differences on the text of some of the articles of the agreement, making it at par with that of India.



The Nepalese Cabinet some days back endorsed the revised texts of the agreement.



(SP-26/11)

 

[Apollyon]

Food inflation eases to nearly four-year low of 4.35%

NEW DELHI: Food inflation fell to a nearly four-year low of 4.35% during the week ended December 3, reflecting a decline in prices of essential items like vegetables, onions, potatoes and wheat.
This is the lowest rate of food inflation since the week ended February 23, 2008, when it stood at 4.28%.
Food inflation, as measured by the Wholesale Price Index (WPI), stood at 6.6% in the previous week. It was recorded at 10.78% in the corresponding period last year.

Food inflation eases to nearly four-year low of 4.35% - The Times of India

 

[Apollyon]

Moody's upgrades rating of Indian government bonds :​

Global agency Moody's on Wednesday upgraded the credit rating of Indian government's bonds from speculative to investment grade, a move that could encourage FIIs to increase their exposure in gilts and help companies raise funds from abroad at competitive rates.

Moody's said, "Diverse sources of Indian growth have enhanced its resilience to global shocks". It added the present slowdown "could reverse sometime in 2012-13, as inflation cools from current 9 per cent levels"​

Moody's upgrades rating of Indian government bonds - The Times of India

 

[trackwhack]

Business Line : Opinion : India story is about manufacturing

 

[agentperry]

The Indian stock market on Tuesday lost its trillion-dollar status, as a decline in the rupee and share valuations led to its size slipping below this mark to $994.97 billion.

India had managed to hold onto the select league of the countries with a trillion-dollar stock market by a whisker for the past few days, but finally gave in today [Tuesday] after the market barometer Sensex fell to a fresh 28-month low and the rupee lost further value against the U.S. dollar.

At the end of Tuesday's trade, the total size of the Indian market, measured in terms of cumulative valuation of all listed stocks, stood at Rs.52.60-lakh crore.

As the rupee ended the day at 52.87, the stock market's size in the American currency was $994.97 billion, just a shade below the trillion-dollar mark. The Indian market had a size of $1.0116 trillion (Rs.53.48 lakh crore) at the end of Monday's trade.

A total of 13 countries are now estimated to be left in the trillion-dollar stock market club, including the U.S., the U.K., Canada, Brazil, Australia, Hong Kong, South Korea, China, Japan, Spain, Germany, Switzerland and France.

The Indian market had first achieved a trillion-dollar size about four-and-half years ago on May 28, 2007, but moved out of this coveted league about a year later on July 1, 2008. It again joined this elite club of markets with trillion-dollar valuation about a year later on June 3, 2009.

The Indian market was, in fact, seen inching towards the two-trillion dollar mark at least twice in the past — first in early 2008 and then at the beginning of 2011 with a size as high as $1.9 trillion.

A sharp plunge in the market this year has led to the market valuation falling by close to Rs.20-lakh crore (over $500 billion), from about Rs.73-lakh crore ($1.7 trillion) at the beginning of 2011.

The rupee has been declining for many months now and had hit its record low level below 54-level last week, but the fall was somewhat checked since then on the back of an intervention by the Reserve Bank of India.

The market size has been hovering above the trillion-dollar mark for the last few days and an eminent miss was averted on Thursday last week, when the RBI managed to reverse the downfall of rupee after a record fall to 54.30-level.

On Friday, the market size stood at Rs.54.11-lakh crore or $1.026 trillion, based on that day's currency rate of 52.30, as the market tanked sharply. The trillion-dollar tag had been lost that day itself, if the rupee had managed to hold onto its record high levels.

In terms of individual exchanges, the total size of stocks listed on the NSE on Monday itself slipped below the trillion-dollar mark to $989 billion (Rs.52.30-lakh crore).

At the end of Tuesday's trade, NSE-listed market valuation stood at Rs.51.42-lakh crore ($972.68 billion). However, the market valuation of NSE-listed companies is not considered as the country's stock market size, as not all the companies are listed on this exchange.

 

[Apollyon]

Micromax grows up fast

The world's 12-th largest handset manufacturer has set a scorching pace in localisation.
Micromax was best known so far as the handset vendor which forced Nokia and Samsung to review their strategies for the entry-level market in India. Earlier this month, the company became the 12th largest handset manufacturer in the world, with one per cent share globally.
Micromax, according to a Strategy Analytics report, is now larger than global Japanese handset makers like Sharp and NEC. It has even moved ahead of Lenovo and is closing the gap with Sony Ericsson globally. Strategy Analytics tracks the world's 30 largest handset vendors on a quarterly basis.

 

[SpArK]

India to be among most favourable listing destinations by 2015


​

NEW DELHI: The future of equity capital markets is shifting towards the East and in 15 years time, Indiais likely to be among the most favourable listing destinations for foreign companies, says a report.

According to PricewaterhouseCoopers' Capital Markets in 2025' report, that covered 400 senior managers at companies from across the globe, developing Asia is emerging as the most popular region for future listings.

Nearly 80 per cent of respondents covered by the study believe China will be the home of most new issuers and will also be the domicile to raise the largest pool of equity capital by 2025, while India comes second in terms of issuers (voted for by 59 per cent of respondents) and third in terms of capital (39 per cent).

As per the report, foreign companies overtook Chinese enterprises to become the biggest participants in the Hong Kong Stock Exchange's IPOmarket.

Overseas companies raised HK dollar 122.5 billion, contributing to a record high of 70 per cent of the total IPO capital proceeds in Hong Kong this year. A similar pattern has emerged in Singapore, where more than 40 per cent of companies listed on the Singapore Exchange now originate from outside of Singapore, the report said.

In terms of IPO deal volumes in 2004 emerging markets represented less than one quarter of global IPO volume. By the end of 2010, that figure had rocketed to 67 per cent. Emerging markets have accounted for 55 per cent of global IPO volumes in the year to date.

Meanwhile, in terms of electronic-order-book value, the National Stock Exchange of India is now the fourth-largest exchange by number of trades in equity shares globally.

India's primary markets are growing rapidly; in 2010 a total of 63 IPOs raised USD 8.3 billion for domestic companies, up from USD 4.5 billion raised by 36 IPOs in 2008. However, amid global economic turmoil, domestic firms raised only USD 1.14 billion through 34 IPOs in 2011 calendar year, according to the data by global consultancy firm Ernst and Young.

Besides Asia, other emerging markets are also developing increasingly dynamic equity markets. During January-June 2011, Brazil's BM&FBovespa became the world's 10th largest bourse in domestic capitalisation term. Latin American issuers raised USD 21.2 billion via 48 IPOs in the first half of 2011, the highest H1 volume on record.

Developed markets still far outstrip their emerging rivals in terms of size. Besides, the legal and regulatory environment, followed by political uncertainty, is seen as the factor most likely to derail the shift to emerging market exchanges, the report said.

As trade and investment between emerging markets rises, economists believe so-called "south-south" integration will intensify. Around 74 per cent of respondents say, by 2025, emerging market companies will look to another emerging market instead of a developed market for a secondary listing.

 

[SpArK]

Pastures turn greener for NRIs​

The interest rate cycle may be peaking, so a further increase in NRE deposit rates seems unlikely.


One's loss is often another's gain. So even as the sharp depreciation of the rupee has left Indian importers poorer, NRIs are getting more rupees, as much as 18 per cent more, for each dirham or dollar or other forms of currency.


As if this was not enough, the RBI last week deregulated interest rates on non-resident external rupee (NRE) and ordinary non-resident (NRO) accounts.


This, the latest in the central bank's series of measures to attract foreign currency flows and stem the Rupee's fall, has led to a scramble among many banks to increase rates on NRE deposits.


WHAT'S CHANGED?


NRE and NRO accounts are essentially rupee-denominated bank accounts which non-resident Indians (NRIs) and persons of Indian origin (PIOs) can open and maintain in India. NRO accounts can be opened by any person resident outside India including foreign nationals visiting India while NRE accounts can be opened only by NRIs and PIOs.


The RBI allows accounts under both these schemes to be in the form of current, savings, recurring or fixed deposit accounts. While the balance in an NRE account is fully repatriable (can be sent across to another country), that in an NRO account is repatriable up to certain limits ($1 million a year), and subject to certain conditions.


Another key difference is that interest income on NRE accounts is exempt from tax in India, while interest on NRO accounts is subject to tax deduction at source at a flat rate of 30.9 per cent.


Until last week, interest rates under the NRE scheme and on savings bank accounts under the NRO scheme were regulated. Banks were, however, free to fix term deposit rates under the NRO scheme.


As a result, banks offered high rates comparable to those on domestic deposits on NRO fixed deposits – 9 or 10 per cent currently for one-year tenure, which worked out to a modest 6 – 7 per cent post-tax.


On the other hand, the return offered on NRO savings bank accounts and NRE accounts (savings and term deposits) was quite low in the range of 3.5 per cent to 4 per cent.


FREEDOM TO FIX RATES


In November, the RBI raised interest rate on NRE term deposits by 100 basis points, but it was still regulated being linked to LIBOR movements.


Last week, however, the RBI made a clean break. It allowed banks the freedom to fix interest rates on savings bank accounts (under both NRE and NRO schemes) and on term deposits of one year and above under the NRE scheme. The revised rates will apply to fresh deposits and on renewal of maturing deposits. The only restriction is that interest rates offered by banks on NRE and NRO deposits cannot be higher than those offered by them on comparable domestic rupee deposits.


With domestic deposit rates currently hovering close to or above 10 per cent for deposits of 1 - 2 years, RBI's move has set the cat among the pigeons. Several banks, especially those with big business in Kerala which has a significant NRI population, have been quick to respond and have raised rates significantly on NRE term deposits.


This may lead to other banks following suit and hiking rates to comparable levels.


NRIs sure have reason to be pleased. Interest on NRE deposits and accounts being exempt from tax, a 9 to 10 per cent post-tax return would beat returns earned by most domestic investors on comparable deposits.


SHOULD NRIS BITE THE BAIT?


That the new rates on NRE deposits are attractive is quite clear, especially when compared to what they were getting previously.


However, non-resident Indians should also take into account that the weakening of the rupee, if it continues, has the potential to eat into their returns on maturity.


This, however, would apply only if the NRI plans to convert the rupee holding on maturity into foreign currency and repatriate the same.


If the rupee amount is sought to be held back in India, then they should consider scouting for the best rate and locking in for the suitable tenure. Also, given that there the interest rate cycle in India may be peaking, a further increase in NRE deposit rates, going forward, may be unlikely.






Business Line : Investment World / Personal Finance : Pastures turn greener for NRIs

 

[Apollyon]

Closing India's infrastructure deficit

Ensuring improved governance standards has emerged as the main challenge in meeting the country's infrastructure shortages.
India is said to have the potential to become the world's third largest economy within two decades. But it must move ahead boldly. Its infrastructure, its industrial sophistication, its management of cities and of a host of knowledge-promoting institutions must be transformed. It must improve the whole apparatus of skill development for its young population. It will need to increase current spending on higher education from 1.12 per cent of GDP to 1.5 per cent; and expenditure on health from less than 1 per cent of GDP to 3 per cent.​

Closing India's infrastructure deficit

 

[Apollyon]

Food inflation plunges to six-year low of 0.42%

NEW DELHI: Food Inflation fell sharply to a six-year low of 0.42% in the week ended December 17 as prices of essential items like vegetables, onion, potato and wheat declined.
Food inflation, as measured by Wholesale Price Index (WPI), stood at 1.81% in the previous week. It was recorded at 15.48% in the corresponding week of 2010.
According to official data released today, onions grew cheaper by 59.04% year-on-year during the week under review, while potato prices were down by 33.76%. Prices of wheat also fell by 3.30%.
Overall, vegetables became 36.02% cheaper during the week ended December 17.
Experts feel the sharp fall in food inflation numbers, which was in double digits till the first week of November, comes as a big relief to both the government and the Reserve Bank, who have been battling high prices for over two years.

Food inflation plunges to six-year low of 0.42% - The Times of India
​

 

[charlyondfi]

[h=2]Infrastructure in India December, Economist
Infrastruggles
One of India's most important industries has a knackered balance-sheet

[/h]Dear everyone: I can't post the full article even provided is just an abstract from Economist. Still, I am keen to know how accurate in Economist report. It has been 5+ years since last time my 2 weeks stay in India. Pls notice it's NOT about how good or bad about India's economy, but mainly focusing on the infrastructure industry -- road, power plant, airport, telecom -- which I agree a key one.

 

[Apollyon]

Easing inflation silver lining
​

NEW DELHI: The silver lining amid the clouds of gloom that are hanging over the Indian Economy is that easing of inflation may provide headroom for the Reserve Bank of India to cut rates and help boost growth.
"2012 will be a challenging year. The outlook will be shaped by a variety of factors - some within our con-trol and others outside our influence," said D K Joshi, chief economist at ratings agency Crisil.
"The rifts in Europe and global commodity and crude price movements are outside our influence. But a fresh dose of reforms can partially cushion us against the global headwinds by boosting investor confidence," said Joshi.
Economic analysts point out that India needs to pursue pro-growth policies with greater determination to kick-start the economy. Inflation may have eased but serious efforts must be undertaken to plug the supply side problems, while the talk of a second green revolution must move from the draw board to the fields. Restoring the health of public finances is another important area the government urgently needs to address.
And above all, constant vigil and greater harmony of ideas between RBI and the government will be needed to steer the economy through rough waters. ​

​

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Easing inflation silver lining - The Times of India​

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[JAISWAL]

Making of Bulk Carrier in Cochin ShipYard
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Making of Bulk Carrier in Cochin ShipYard - YouTube
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