An Entrepreneur's Blogg...

If china chooses to unfreeze its currency, how it would be beneficial to India and other emerging markets?

2010-04-14T20:42:00.000-05:00

If china chooses to unfreeze its currency, how it would be beneficial to India and other emerging markets?

United states and other leading countries have been accusing China for freezing its currency to let export boom continue and strengthen its economy at the cost of jobs in developed economies. China chose to freeze its currency as part of its economic strategies that would support more and more exports from the country and continue to take a big pie of the exports market all over the world.

Watching the success of China, India and other emerging nations have been applying the similar approach to create jobs by developing export oriented market. India is considered back office of the world, but similarly it also owns cheap labor resources due to favorable exchange rates. India has been trying to establish world class infrastructure in place to attract more export. India’s political scenario and decision making did not help it to compete with china.

There could be couple of scenarios if China unfreezes the exchange rates:
China to maintain export boom:
Currently China’s per capita income per day in those export led factories are $1.00 and due to favorable exchange rates it helps the Chinese people to maintain decent life. While US and other developed nations pay almost $7.00 an hour for labor jobs. However even if due to freely traded Yuan, if Yuan appreciates 40-50%, it will make the same china job pays approximately $2.00 a day, which is still quite less as compared to what US and other developed countries pay. The end result would be China is still maintaining the export boom and US will continue to import from China. And since increased exchange rates would make US goods more expensive. So it would be a setback for US.

India and emerging nations gains market share:
If china and export led businesses find better places to manufacture the goods and export it to developed economies, it would provide a proxy to China. India, Bangladesh, Sri Lanka, Vietnam, Myanmar and other Asian nations can fill the gap by providing the manufacturing at cheap rates. However, the shift of exports from China to other countries is not going to help US or any other developed nations to save jobs. The already started battle to maintain competitiveness across organizations will find alternative destinations to produce cheaper goods and services.

However, there will be advantages to other emerging nations as they will share a pie of the export boom and similarly to US and other nations multinational firms to gain more business from more countries.

India story is unfolding!

2010-04-02T00:32:00.004-05:00

Oil and petro-chemicals giant, Reliance Industries, are entering retail business in India. Bharti Airtel, India’s largest telecom firm that covers almost 23 percent market share, wants to enter retail business partnering with US based Wal-Mart. Wipro chairman, Azim Premji’ takes over south India based retail chain Subhiksha.

Retail business tycoon, Kishor Biyani, led Future Group launched their first retail store, Big Bazaar, in 2001 in Bangalore and in another 8 years they are operating more than 100 more stores across metro, tier-1 and tier-2 cities. Apart Future group also created other brands on the success of Big Bazaar like Pantaloons, Bijli Ghar, Food Bazaar, City Centrals exclusive brand showrooms, creating a 1000cr group with interests in manufacturing to retail value chain targeting every class of consumers in India, whose GDP growth has been increasing at a hefty pace of 8-9%.

One might wonder why all of a sudden there is so much interest of all the premier businessmen to enter the retail business?

See some of the numbers below:
910M - Total indian population in 2000
1.1B - Total Indian population (Times of India) in 2008
India's population is growing at a very rapid pace. Currently India in second most populated country with 1.1B numbers, just behind China's 1.25B, but India's population growth is uncontrollable, while china has controlled it to a great extent. As per estimates, India will be largest populated country by 2030 with 1.45B population.

10M - Indian know/speak English in 2000
100M - Indian know/speak English in 2007 -- as compared to 300M of USA and ~200M of European union - This number is growing very fast because India is producing 100K engineers every year from engineering colleges with engineering degree in English - This number gives good comfort factor to all the software and back-office firms that enough resources are available in India at one forth or one tenth cost that in US of A.
~10M - Indians are employed in Software or back-office industry. (per NASSCOM reports)

India has a demographic advantage of 100M English speaking population, vast population, comparatively cheap labor and favorable exchange rates for attracting good jobs in Back Office processing, Software Outsourcing, Research projects.

Since these sectors are providing good job opportunities, there are other sectors feeding up the demand for them. Due to getting good job and better salary standards, these persons employed in other sectors are also getting good opportunities around, with decent life, with better diet, more food options and better vehicle, better residence and year-end trip to Europe/Switzerland, cinema every alternate weekends. The decent lifestyle generated the demand in other sectors like Real-Estate, Restaurants, Hotels, Airline, Vacation Home and Trips, Theaters, Movies, Auto and many more creating better jobs for another almost 50M people in the country.

$1100 - Per-capita income in 2002
$2000 - Per-capita income in 2007
India's 1.1Billion population is generating very good demand for consumption story. If everyone spends 10% of one's income on staple foods, the whole numbers across the India's booming economy are really big. Due better opportunities arising in almost every sector, per-capita income is raising very fast, providing great opportunities in retail sector. Till 2004, India's retail was largely based on family owned small shops, mega-stores created have good opportunity to take up the opportunity and serve the biggest population.

India's retail story is unfolding, and providing enough growth for India story.

Winter Olympics: Opportunities for India

2010-03-29T23:25:00.002-05:00

Winter Olympics at Vancouver, Canada is just over. Lots of participants participated the biggest winter sports event all around the countries. I could not find any single athlete from India. Are there no athletes to compete at international stage or there is no infrastructure to develop such sportsmen?

I was just going through some possibilities of acquiring skills for winter sports, but hardly found that there is only a ski-ring available in Manali, Himachalpradesh and couple of ski-treks in himalayas. I have observed developed country citizens spend much time and energy on their child's future. When the children are very young their parents regularly take deep interest in shaping their possible careers.

In India, winter sports related facilities are not available, but however many parents must have aspired that their child be sports-persons for such sports, but due to lack of such services they can not realize their goals. Ski-treks can not be created as they are natural gift to the nations in northern hemisphere, but however in-house winter sports complexes can be created. In India the temperature largely varies from 0'C to 40'C in northern part and 5'C to 45'C in southern India. Can't there be any technology to develop ski-rings in such areas and maintained within required temperature range? An example, In mumbai, India's largest city and financial capital, the temperature remain in mid 20s all round the year, while temperature in Northern India and New Delhi, India's capital, remains 0-15'C in winter months, that is almost same as some cities in US, and if such innovative technology helps it helps so many citizens to realize their child's dreams and one more nation to compete on international winter events.

6th Indo-US Economic Summit in Feb, 2010 in New Delhi

2010-02-10T22:53:00.001-05:00

Indo-US Economic Summit is to be held by IACC on 16-17th February, 2010 at Hotel Lalit, New Delhi. Primary theme of the event is “Synergizing partnerships for growth” and key areas to focus are as below:

* Energy Security
* Education
* Aerospace and aviation
* Services exports
* Knowledge based manufacturing
* Infrastructure development
* Bollywood to hollywood

More details about the event can be retrieved from http://www.indoussummit.com/

iPAD effects, new opportunities

2010-02-06T17:00:00.004-05:00

Apple is famous for launching different from generic products in the market and gain from it. It has proved by phenomenal success from iPOD in 2001, iTunes in 2003, iPhone(& iTouch) in 2007 and recently it launched much awaited iPAD on their keynote series on 27th Jan 2010. Since the launch of the product there has been lot of hues and cries about the product, so one question comes in my mind, will iPAD be able to enjoy the phenomenal success, other apple products have enjoyed? Will it be able to define a new market again?

As discussed by critics, iPAD is nothing but an enlarged version of iTouch with iBooks application with several options for broadband connection. Apple's primary intention is to redefine a new market for digitization of books that has been captured by Amazon's Kindle to some extent and leveraging its existing iTouch framework. While iPAD will give more freedom towards using the product as a digital book reader apart from the regular iTouch/iPhone functions where one can check mails, browse internet, play games and enjoy 1 Million + iPhone applications.

One question arises in my analyzing mind, if one person already owns iPhone and has 3G connection, is it wise to get an iPAD with 3G connection?, Can't Apple come up with connectivity bluetooth/wired connections that can be used to leverage the existing 3G connection. It will certainly not affordable for any person in generic income group to have two 3G connections and affects sky-rocket the monthly telephone bills by just newly launched internet products in the market. No doubt the product will certainly create a new market, different from a internet phone and laptops, and its ability to access internet more better and convenient way, redefine digital books market.

While Apple is renegotiating contracts from publishers for selling e-books $12-$15, Amazon is certainly feeling heat from the publishers to renew the contracts and raise the e-book prices from $9.99. How it will affect the Kindle's market share?, Though Kindle has captured good amount of market, it is still contributing only 2% on topline of the AtoZ, the internet bellwether, so it will be very minimal effect on Amazon's revenues. But if Amazon is able to negotiate a new deal with existing established players to launch a similar product, it would be able sail the new market with better market-share, revenues and a completely new business. Say Microsoft is able to make a deal with Amazon to launch a similar product, it would be a win-win situation for both the firms, giving a new market share to Kindle and creating new opportunities for Microsoft in book reader, tablet market share and unknown advantages on solidifying its Zune developer's network, Microsoft application's store and many more hidden new opportunities to compete in iPOD/iPhone market-share.

Google is rumoured to launch a brand new iTablet in coming months to compete with iPAD, though it is facing certain legal hurdles from book publishers for their google books store.

Anyways, product reviews and competitor's actions will certainly tell the future of newly created market, so waiting and watching the new game, till a product is launched that satisfies my requirements to buy it .....

-Amit

Analyzing correct way: Median vs. Average

2010-01-08T15:41:00.001-05:00

I have been reading from research reports and leading business newspaper daily's about XYZ banks average salary is 650K leading the 2nd best bank on wall street with 275K. It always amuses me why the reporting agencies and newspaper report average salaries and question my mind:
- what significance does it represent.
- is average salary more important or should it be median salary?
- does average salary mean higher standard of living for all employees of the firm or atleast 50% of the firm employees?

Let me put down some points as below:

Consider the following scenario.
A company has 100 employees each earning in the range of 90K to 110K with average salary of 100K, now the company does amazingly good while coming out of the recession and offers 20% bonus to each employee along with 100M of bonus to the CEO for the extraordinary efforts and his wisdom. XYZ company's Nth year average salary is 100K while in the N+1st year the average salary goes upto 1.1M. Amazingly the firm gets into reports and newspaper everywhere about the generous pays the company offers. While the 99 employees of the firm are still earning in the range of 110K to 130K only based on 20% "generous" bonus offered by the firm and their lifesyle does not change much because of 20% bonus.

Facts:
Many of the investment banks and partnership firms pays are highly dependent on the year-end bonuses. In partnership firms, the bonuses many-a-times exceed the base salaries. And generally a firm holds ~1-2% of the total employees as partners and these partners earn major chunk of the firm's profits. So, taking an average as calculation in salary standards does not help to measure or analyze the living standards of the employees. Though it can give good analysis point for how good the firm's businesses doing.

Analysis:
The average of the firm's salary falls 1.1M, almost 1000% rise over last year's average salary of 100K. 1.1M is average salary, but it does not signify what is the take-home salary for most of the firm's employees.

if we take median into consideration for computing the salary then it was 100K in Nth year while in N+1st year it increased upto 120K based on 20% bonus paid by the firm, and it shows 20% year-over-year growth. These numbers gives us some form of understanding about salary perspective.

Similarly, as an entirely different point of view average of 90% or 95% would give us different and more meaningful results than the results by average. As in the mentioned scenario, average of 90% and average of 95% would give us 120K in N+1st year and it co-relates that of the median. The average of 90% and average of 95% of terminology is widely used across technology for analyzing different

So what are the scenarios average does not help us analyzing the outcome?
- where distribution is very high(in the given scenario, only 1 person is earning 100M while rest all the employees are earning 110K to 130K, so 99% of employees earn in the range of 110K to 130K, or average 120K)

Anyways, users are can put down more points to clear the distinction between average and median in practical usage terms.

-Amit

Growth engines: Commodities, Energy & Emerging markets

2009-12-12T10:05:00.004-05:00

Commodities and energy have been hot since last couple of years. Most of the hedge funds, private equity funds and venture capital funds have been investing and trading the asset classes for better growth and return opportunities. The rational is simple about demand-supply mismatch that oil and precious commodities’ supply is limited or the future is unforeseeable while consumption is increasing resulting in higher commodity prices.

Some simple observations based on demand-supply scenarios are:

Commodities

1. Two of the largest populated countries in the world China and India have population of 1.3 billion and 1.1 billion respectively and it has been estimated that India will surpass the China population by 2030. Let’s take it for India where per capita income in India has increased from merely ~$2000.00 in 2000 to ~$4500.00 in 2007 as per World bank reports. Since per capita income is increasing and because of better market sentiments and more job opportunities in Software, Hardware, Auto, Pharma, Business, Exports and host of other sectors, food habits of people is changing and more options for food is available all across the towns. More and more number of mall and recreational centers opening leading to more consumption on transportation, gas and commodities leading higher commodity prices.

2. The biggest recession since world war 2 has made people think before they invest that the asset class is right one and would not create future bubble preserving the investment value. Fed has decreased interest rates to 0% for lending to banks and helping to continue the money and credit supply in the market by providing stimulus package to critical industries, so as the industries can start creating/maintaining new jobs and the nation can survive on consumers’ spending patterns. Because of 0% interest rates and stimulus package the economic recovery is faster and ‘V’ shaped. The faster recovery and longer sustained 0% interest rate will further create inflation, hence increasing/inflating the demand of commodities like Gold where people is thinking a safe investment option.

3. Since the interest rates in the lower range around 0%, there is no benefit to risk-savvy investors as they are not getting any good debt returns, leading them to invest in currently considered safe heaven investments as Gold which has very limited production. When lot of people chase very limited resource, the resource price going to inflate realistically.

4. Emerging markets have seen loss of agricultural land because more land is getting converted towards industrialization and housing, leaving less land for cultivation and this widens the demand-supply gap, leading to higher commodity prices.

5. Since many governments have legalized mixing ethanol with oil, demand for ethanol has been increasing constantly. While ethanol is produced mainly from corn, there is huge demand-supply gap in corn production leading to higher corn prices. This will continue till we have some other alternative fuel to replace oil.

Energy

1. Oil supplies are limited and oil companies are spending a lot on discovering more oil resources. Till the time there is no viable alternative found for Oil, oil is going to remain hot commodity. Although oil prices sky-rocketed in 2008, emerging market’s oil consumption is increasing everyday, because people have more money and their spending pattern is changing. Due to this demand-supply imbalance, again there will be rise in oil prices.

2. Solar-energy and wind-energy are alternative energy sources to oil and they have potential to generate electricity and act as viable energy source, but the energy produced using the sources neither have a consistent pattern of energy production nor it is cheaper than the existing sources like coal and oil. Solar and wind energy are very much dependent on the geographic conditions and cannot be implemented everywhere. Further they require substantial investment to produce the energy. In future when oil/coal prices sky-rocket, this sources might be beneficial in terms of cheaper energy needs.

3. Since the limited supply of oil, there is renewed interests in searching alternative energy fuels. Some venture capitalists and universities are investing heavily inventing alternative energy sources.

Emerging Markets:

1. Since Goldman Sachs coined the term BRIC in their 2000’s research report, Emerging markets such as China and India have remained focused for better growth engines for many funds. Due to surge in consumption demand, stable governments, and better economy prospects emerging markets give better returns than their developed world counterparts. As specified earlier, the per capita income in India has surged leading to better consumption growth story. As per sources, China and India continue to grow at 7.5% and 10.5% of their GDP respectively. Apart from that government’s spending on infrastructure & power, health/medicine sectors will provide necessary boost for the growth as well as good indications to foreign investors to invest in the developing countries, where hugh thrust on developing infrastructure and providing services at cheaper rates will boost the economy.

2. International Olympics Committee recently chose Brazil for hosting the 2016 Olympics and Brazil is also hosting 2014 FIFA World-cup. For this Brazilian government will spending hugh money on building roads, bridges, and stadiums, providing lots of jobs and business opportunities. As per consumer reports, Brazil will witness 11-12% of GDP growth and will fetch millions of foreign visitors. It will boost hotel, airlines, local restaurants and host of other local businesses including the currency.

Based on the points discussed above commodities like gold, silver, oil, gas will give better returns than index funds or any other asset class, but it give little comfort to consumers because they will see their daily budgets shooting the skies. Investing in emerging markets companies is associated with risk towards government stability, foreign policies and management, but however it will give better returns. Infrastructure companies in emerging nations that construct roads, build bridges and infrastructure, produce power will give very good returns.

The observations are solely based on demand-supply scenarios, and they do not represent any speculation on the commodities e.g. oil and gold, but rather a conservatively optimistic views of the author on the particular asset classes.

Do Banks' current quarter results represent an economy's outlook?

2009-08-02T12:31:00.004-05:00

In my last blog, I had discussed recently concluded quarter results about various firms like Goldman Sachs, JPMorgan Chase, Microsoft, Amazon. Looking at the current economic outlook and the way the organizations are slashing their payroll to remain in profit, one question comes to everyone's mind "Do the quarterly results of the firms represent the economy outlook?"

Goldman Sachs declared record quarterly profits in their history surpassing analyst expectations, while Microsoft and Amazon could not meet analyst expectations to reach their targets. We can consider sentiment plays an important part when DOW-JONES tumbled upto 6600 in Mar'06 in response to continuous failure of banks in US and most of the retailer's same stores sales were plummeting. Since March '09, DOW has recovered upto 9200 in July 31st, increased ~40% and it shows the optimism across the board rather than an economic outlook. There are not much changes to the economy since March '09, as Unemployment has increased from ~8.5% to ~9.7% from Mar '09 till Jul '09, 57 more banks have filed Chapter 11 bankruptcy since Jan '09, industries are still cutting payrolls, job cuts were 467,000 in Jun '09, 322,000 in May '09.

Results of the banks are showing optimism in the economy as there is positive sentiment in the economy for signs of stabilization, but they do not provide the exact picture of the economy. Rather firms whose profits are directly related to the consumer spending such as Discount Retailers e.g. Walmart, Sears, Electronic retailers like RadioShack, BestBuy, J&R, online retailers e.g. Amazon, OfficeDepot and most of the retailing firms' results are not showing any improvement even though they are cutting their payroll to remain in profit. And till the time unemployment is rising, and there wont be any positive signs on people's spending there can't be any growth to the economy.

Obama led government is putting their every effort to increase consumer spending and provide employment by increasing construction, bridge, roads related contractual works. But DOW's 2600 points jump from Mar '09 till Jul '09 does give breath to consumers till the time teh industries feel confident about the economy and again start hiring.

So we can say economy is stabilizing and it will take 9/12 months before it shows good signs of improvement.

-Amit

Kutch/Gujarat an ideal investment destination in India

2009-08-01T13:24:00.003-05:00

Kutch is a growing economic and industrial hub in one of India's fastest growing states,Gujarat and it is becoming an ideal investment destination for big investors and big business houses in India. As a nature Kutch-Gujarat is almost dead agricultural region where the average annual rain is 250mm and most its land is covered with sand. But since 2001's earthquake epi-center in Kutch region and Gujarat's Chief Minister Mr. Naredra Modi's ideal thoughts to grow industries in the region has attracted investors from all around the world. Government declared tax incentives upto 15 years.

Kutch's Kandla port is considered the most busy port in India after Mumbai's Jawaharlal Nehru port and has attracted lots businesses related to transportation and import/export in the region since decades. And since Mr. Narendra Modi's ideal sight of converting an idle region into a business destination, land prices increased more than 10/15 times in a span of 7 years(this depends on location and growth oriented areas). And due to large tax incentives and government's 'Vibrant Gujarat' initiatives it attracted Rs.12,000,000 Crore worth of MOUs in 2009's event to invest in businesses. Apart from Kandla port, Mundra port is developed by Adani Industries whose businesses range from pickel export, power/coal trading, natural gas trading, power and import/export.

The industries who are investing includes World leader in Wall Clock Manufacturing Ajanta group's CFL plant, Nissan Motors manufacturing plant that will export the assembled Nissan motors to Europe region and host of businesses(including Welspun group in Anjar, JayPee group, Jindal group and couple of windmill farms) who wants to take advantage of the tax incentives and its ideal destination for import/export market. Sanghi industries is having India's biggest cement plant at a single location and currently expanding.

Kutch is mineral rich region with very large reserve of Lignite, Gypsum and lot of other mineral. GMDC(Gujarat Mineral Development Corp) and lot of Cement industries are dependent on this materials are expanding their wings in the mineral rich region.

In all, Kutch's ideal location and geographical benefits would help it attract lots of manufacturing businesses and help to provide more synergies to export-focused businesses.

View invited from readers.

Amit

US Economy Review. 07/26/2009

2009-07-26T10:16:00.006-05:00

Goldman Sachs(GS) reported their earning $4.93 far ahead than estimated $3.53. Their Equities and FICC generated revenues $3.18B and $6.8B respectively amid a better stage set in trading environments. Following GS, JPMorgan Chase which bought Bear Sterns and Washington Mutual(WaMu) reported good results and these events helped DOW to climb 937.14 points from 8157.10 to 9093.24 in a matter of 10 business days. Is the US economy on its track to rebound?

No doubt the economy is showing signs of stabilizing and DOW has recovered from 6600 points in Mar'09 to 9100 in Jul'09 and many of the banks have returned their share of Stimulus money back to the government, but still Obama led government is concerned about how to get the economy on track, generate more employment, keep unemployment as below as possible and get back the consumer spending. US' peer Spain is facing 17.7% unemployment and it could go upto 22-24% by mid next year if the industries will keep on slashing jobs at the same rate and economy does not show any signs of improvement.A bloomberg article shows how bad situation is there in Spain and it has ~30% unemployment population among euro region. http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aOBGPyetNGIg.

Obama led administration is putting every effort to fix the economy related issues, but still the economy is not showing any signs of growth as the unemployment is around 10% and none of the industries are showing any signs of hiring, putting pressure on government on how to tackle the problems the economy is facing, whether one more stimulus required to boost the consumer spending? Since consumer spending is core to get the economy on track. But current results from Microsoft and Amazon are showing dizziness how much time it will take to get on track, how the consumer spending and the companies are cutting their expenses. MS missed its revenue and net profit projections and for the first time since going public and it reported negative revenue growth. The same way Amazon missed its revenue and net profit projections even though their Kindle 2 was a big success in digital e-Book market surpassing Kindle 1 sales. And couple of companies declared their negative results amid less consumer spending indicates recession might prolong.

World leaders at the currently concluded G20 summit are concerned about how the get back the consumer spending and generate more number of jobs, and world reserve currency as USDollar is showing its weakness and most of countries who have their foreign exchange in US Dollar are seeing their values plummeting.

So seeing a rosier picture for couple of days in DOW, we can expect the market to correct to some extent and till the economy is not showing firm signs it would trade range bound 8500-9000 points.

I will keep on posting market views as and when getting some time.

India remains world's favourite outsourcing destination

2007-09-05T21:24:00.000-05:00

When it comes to outsourcing, India continues to rule as the favourite global destination, even though factors like emergence of cheaper destinations, employee and salary crunch are adversely affecting the sector, a recent study shows.

India holds an edge as it commands global confidence to produce perfect Turn Around Time (TAT), a recent study by recruitment solutions provider Elixier Solutions shows.

TAT is the time needed for performing a task, especially receiving, completing, and returning an assignment.
"At present outsourcing business in India is increasing at a rate four times more than any other country and the county has the resource and margin to meet the competition," a partner in Elixier Solutions Vipul Prakash said.

According to the study, growing at a rate of 40 per cent annually, India is the lead player in this sector followed by China at the second spot with a growth rate of 25 per cent.

"Certain companies restrain from outsourcing their practices thinking it to be a luxury practice which only organisations having deep pockets can afford," Elixir Web Solutions Associate Partner Jacob Samuel said.

The overall outlook of this industry seems positive with experts predicting that the global market for shared services would grow to 1.43 trillion dollar by the end of 2009 from 1,000 billion dollar at present.

Although India and China are the market leaders in this sector, there are huge opportunities present in the market to give ample space to other countries like Philippines, Vietnam, Romania, Kenya, Sri Lanka and North America market to grow, the report said.

The study also said although it is unlikely that India would be able to retain its number one slot with China aggressively trying to outstrip it in the business, it would still be able to get a decent share of the pie.

Also, processes like human resource, insurance, life sciences, finance, legal services, technical support, risk management, supply chain and media would come up in a big way in terms of business and employment opportunities, the study added.

India to top in venture capital investments: Study

2007-08-26T11:15:00.001-05:00

The supremacy of western economies in the venture capital investment space is facing challenges from emerging economies with India expected to overtake global leader UK by 2009 if the current trend persists, a latest UBS-sponsored report said.

As per data analysed by the 'UBS UK Venture Backed Report - 2007' western leadership in innovation is being increasingly threatened by emerging economies like India and China.

According to the report, "India's VC market with a growth rate of approximately 90 per cent is likely to overtake the UK by 2009."

The Chinese VC market has already surpassed UK in terms of absolute size in 2006 and is growing at a much faster pace.

If the current growth rate persists, China's VC market would overtake the European market as a whole within two to three years. India would follow suit in the next four years, said the UBS sponsored report by Library House titled 'Funding Growth in a Changing World'.

The prime factor behind this stupendous growth by the emerging economies is that these countries have carved out a niche for themselves in the field of innovation as VC funds are utilised to support new ideas.

Venture capital forms a major component of a country's ability to innovate. The US is the acknowledged leader in technological innovation, while India and China pose an increasing challenge to the western economies.

India and China are at the cutting edge of innovation and strongly accelerating against the sluggish growth in Europe and the US, the report added.

The report says policy makers in the UK, Europe and the US must focus on how to maintain their lead in innovation amid the high competition. It cautioned that the rise of China and India should not be seen as a threat' to the West and vice-a-versa.

The reason being that for economic growth the utilisation of innovative products and services are perceived to be more important than their generation, analysts said.

"The consumption of innovation by an economy is just as important, as the generation of that innovation. UK companies need to become more willing to procure from innovative, but inexperienced, young companies," Professor of Business at Columbia University Amar Bhide said.

The global VC market has risen in recent years. Over 1.4 billion pounds of institutional capital was invested during 2006 through 556 deals in UK. The venture capital investments in 2006 shows a 27 per cent hike compared to 1.1 billion pound that was raised through 539 deals in 2005.

UK is the leader in Europe for VC but it still lags significantly behind the US in terms of absolute size.

Gujarat rules road to industrialisation: RBI

2007-08-19T11:19:00.001-05:00

Gujarat has edged out Maharashtra to become India's top state in terms of investment commitments during 2006-07, cornering over 25 per cent of the total spending proposed by corporates across the country.

Gujarat received investment proposals to the tune of Rs 74,988 crore in 86 projects, while Andhra Pradesh was at a distant second with investment intentions worth Rs 25,173 crore, Maharashtra Rs 24,330 crore and Tamil Nadu Rs 24,229 crore, the Reserve Banks said in an analysis of 'Corporate Investment: Growth in 2006-07 and prospects for 2007-08.'

Gujarat, which is slated to go for elections some time in November, has displaced Maharashtra from the top slot attracting one-fourth of the total investment intentions in 1,054 projects aggregating Rs 2,83,440 crore.

Corporates invested Rs 1,31,299 crore in 812 crore during the previous year 2005-06.

Total investments during 2007-08, after taking into account the capital expenditure, ECBs etc, are likely to aggregate to Rs 2,06,460 crore, RBI said, adding the turnaround in corporate investment, which began in 2002-03 and peaked in 2004-05, is expected to be sustained in 2007-08.

During 2006-07, Maharashtra, in terms of investments, was relegated to the third place after Andhra Pradesh which attracted 8.9 per cent (Rs 25,173 crore) of the total corporate investments.

Maharashtra shared the third slot with Tamil Nadu attracting 8.6 per cent of total investments.

China set to replace US as world's No 2 exporter

2007-08-18T16:52:00.000-05:00

China is all set to overtake the United States as the world's second-largest exporter this year, and may well top Germany as the world's leading exporter next year, Xinhua news agency quoted vice minister of commerce Yu Guangzhou as saying.

China currently ranks third in export volume after Germany and the United States.

Beijing could overtake the US by the year-end if current trade trends continue, Guangzhou told the China Economic Development Forum.

Last year, China's export volume trailed US exports by less than $70 billion, while the pace of export growth was 7 percentage points faster than that of the US. If that growth continues, China's exports could exceed US exports by $50 billion this year, Yu said.

Chinese customs statistics show that the country's foreign trade volume reached $980.9 billion in January-June, up 23.3 per cent from the same period a year ago. Of this, exports grew 27.6 per cent to $546.7 billion, and imports grew 18.2 per cent to $434.2 billion.

Meanwhile, China's quality watchdog has warned that the country's failure to improve the quality of some of its exported goods was undermining its trade strength.
"We may have entered the ranks of the big traders, but we're still far, far from being a strong trade power, and the fundamental reason is that our product quality competitiveness is not strong," the People's Daily quoted Li Changjiang, head of the General Administration for Quality Supervision and Quarantine, as saying.

Concern over potentially tainted products made in China has resulted in recalls or bans on such goods - from Chinese toothpaste to toys and pet food. (See: Recall of Chinese toys has lead to factory closures: China Toy Association)

His comments were reported a day after China said it would send officials to the United States this month and next to cool worries stemming from a series of scandals over tainted exports, from toothpaste to pet food and toys containing lead paint.

"Quality is a symbol of national strength," Li said. He also called for tougher regulation of manufacturers and exporters.

India to beat US, Japan by ’50

2007-08-05T23:02:00.001-05:00

Another Study Ranks Bric Nations As Top I-Destinations

Emerging economies, including India, will overtake the developed countries in economic growth by 2050, with the popularity of India and China as investment destinations is rising while the attractiveness Europe and North America is slipping, says a study.

“The seven new global powers by 2050 will comprise the so-called Bric economies (Brazil, Russia, India and China) together with Indonesia, Mexico and Turkey,’’ says the Ernst and Young European Attractiveness Survey 2007.

These seven emerging countries would overtake the economies of the G7 countries—Britain, Canada, France, Germany, Italy, Japan, United States—in terms of GDP but whether India can develop its infrastructure at pace with that of global investment remains to be seen, the survey added.

Earlier in January, a Goldman Sachs report had put India second to China and ahead of the US in its ranking for the top economy in 2050.

The developing economies will outdo the G7 if they manage to mend the loopholes regarding transparency, fairness and infrastructure development. India’s popularity is rising as 26% respondents said the country is among their top three preferences in 2007 whereas the figure was just 11% in 2004.

The survey highlights that with intensifying competitive cost pressure, companies across the world would resort to offshore services and manufacturing to lower cost and higher growth economies such as China and India. One company in five intends to relocate all or part of its European activities outside the region and for this they look forward to the Asian countries.

“China attracts the interest of 50% of respondents currently undergoing a relocation search, while India is considered by 30% of voters,’’ the survey said. Europe’s attractiveness for foreign investors declined significantly in 2007, though it has managed to maintain its lead as the most attractive global investment region, the survey says.

However, the survey cautions that the mature economic markets in Europe are losing their hold on investors as the emerging economies of Asia gain further momentum. This change in foreign investor interest towards Asian countries is because of high skilled labour power, cost effectiveness and good ground for research and development (R&D) activities.

Asia has shown a significant gain and narrowed the gap with Europe and in the list of preferred regions China has moved up to the second position this year, while India has attained fifth position in the league.

Western Europe tops the chart with 55% respondents naming it as one of their most preferred business locations followed by China which received the vote of 48% respondents, while India managed to hold on to the fifth position with 26% decision makers voting in its favour, the survey said. Central and eastern Europe grabbed the third position (39% vote) while the United States and Canada shared the fourth slot with 38% respondents voting in their favour for the preferred location for investments.

The global business world has become increasingly multipolar, the survey said adding that “the attractiveness of the traditional top ranked regions of Europe and North America is giving way to a rise in popularity of India and China’’.

India: Spending on Infrastructure to benefit rural India

2007-07-22T01:18:00.000-05:00

Finance minister Palaniyappan Chidambaram's latest speech may have skirted the infrastructure sector in the announcement of big-bang budget proposals. But infrastructure players may not have much to complain.

The allocation for the development of national highways as well as rural roads has been increased, two ultra-mega power projects have been announced and asset management companies (AMCs) will now be able to dabble in infrastructure funds.

In another important development, there has been a whopping 31.5 per cent increase in the allocation (over the earlier Rs18,696 crore) towards the Bharat Nirman programme. A project of the department of drinking water supply under the ministry of rural development, this programme aims at strengthening infrastructure in six areas, — housing, roads, electrification, communication (telephone), drinking water and irrigation. All this in the four years from 2005-06 to 2008-09.

Roads
The provision for the National Highway Development Programme (NHDP) has been increased to Rs.10,667 crore from the existing Rs.9,945 crore. Of this, Rs.405 crore will be mopped up by the North-Eastern region of the country for which another road-cum-rail project has also been announced over the Brahmaputra river in Bogibil, Assam. Work on the Golden Quadrilateral road project - which dominated discussions during the last two annual Budget presentations - is on in full swing. According to the finance minister, the project will be completed by 2009.

Cement
The Budget has been a mixed bag for cement producers. The focus on the NHDP will benefit cement companies. But a differential excise for cement manufacturers will leave some of them sulking. The excise duty on cement has been reduced from Rs.400 per tonne to Rs.350 per tonne for cement bags sold at Rs.190 per bag or less in the retail market. But those sold above this price will attract an excise duty of Rs.600 per tonne.

Power
Two more ultra-mega power projects (UMPPs) will be approved by July 2007. Each of the coal-based project will have a capacity of 4,000 MW or above. The recently-released Economic Survey 2007-08 had reported that the CEA (Central Electricity Authority) has identified nine sites in nine states for the UMPPs. These include four pithead sites and five coastal sites.

Irrigation
An additional 24 lakh hectares of irrigated area are proposed to be created by the end of financial year 2007-08, including nine lakh hectares under the Accelerated Irrigation Benefit Programme. During this period, the target for farm credit has been hiked from Rs175,000 crore to Rs225,000 crore. An outlay for irrigation has also been announced at Rs11,000 crore.

The duty on lift irrigation, agricultural sprinklers and food processing equipment reduced from 7.5 per cent to five per cent. The finance minister has also announced a one hundred per cent subsidy for small farmers and 50 per cent for other farmers for water recharging schemes.

Tourism infrastructure
The allocation towards tourism infrastructure has been hiked from Rs.423 crore to Rs.520 crore.

OECD predicts steady growth for BRICs

2007-07-17T02:03:00.001-05:00

According to a new study by Organisation of Economic Cooperation and Development (OECD), economic growth in the emerging BRIC economies (Brazil, Russia, India and China) will continue on a steady path even as the developed nations will see a slower progress.

The OECD study said, "The latest composite leading indicators (CLIs) suggest that moderate economic expansion will continue in the developed countries and Brazil, Russia, China, and India will continue with their steady expansion."

The OECD has compiled composite leading indicators (CLIs), which summarise information contained in a number of key short-term indicators linked to GDP for its member-countries since the 1980s.

It was designed to provide early signals of turning points (peaks and troughs) between expansions and slow-downs. The CLI for the OECD area, which covers 29 developed countries of Europe, America and Asia Pacific, rose 0.5 point in May to 110.1 from a revised 109.6 in April.

For China, the CLI rose 3.3 points in May whereas CLI for India increased 1.6 points in April as data for May was not available in the the report. India's CLI rose to 154.8 points in April from 153.2 points in February this year.

The CLI for Russia rose by 1.4 points and for Brazil it increased by 2.4 points.

Meanwhile, for the United States CLI increased by 0.5 point in May and in the euro areas CLI increased by 0.1 point in May and in the UK the index went up by just 0.5 point in the month.

OECD's CLI index is a tool to provide qualitative information on short term economic send this article to a friend movements rather than quantitative measures emphasising on movements over time in up or down directions rather than levels.

Bric(Brazil, Russia, India, China) overtakes US in energy: Goldman Sachs

2007-06-27T15:51:00.000-05:00

United Nations: The main challengers to US economic power—Brazil, Russia, India and China—have overtaken US in dominating the global energy industry, according to a study by Goldman Sachs.

The rising power of the four countries—the new economic tigers nicknamed the Brics’—is already evident in the metals and mining sector and is starting to be felt in insurance and consumer-related industries, said Anthony Ling, a managing director at the investment bank.

“For any company operating on a global scale, world is changing rapidly, more challenging than ever before, truly globalising,” he said, and one of the significant changes is “rise of Bric economies.”

At the end of the first Gulf War in 1991, 55% of the 20 largest companies in the energy industry by market capitalisation were American, and 45% were European, according to Goldman Sachs study. But in 2007, 35% of the 20 largest energy companies are from Bric countries, about 35% are European, and about 30% are American, the study said.

“The US is now lagging with the smallest percentage number of energy companies worldwide,” Ling said. “If you think about the global resource industry typically being a leader in terms of global trends, we’re starting to see this replicated in the mining industry, where 20% of the top 20 companies are now from Bric countries,” he said. “We believe this sort of pattern will be repeated industry by industry.”

It is already evident in the insurance business, where Brics account for about 10% of the top 20 companies, and in the global beverage industry, where the new economic powers are just starting to show with about 5%. Ling predicted the Brics would soon be moving into the food and pharmaceutical sectors.

If investors and corporations don’t take the growing power of the Brics in the global economy into account, he warned, they will lose out on investment growth and competitive advantage for their companies.

Ling, who has been involved in analysing the energy industry for 20 years, said he did not believe anyone polled after the first Gulf War “would come remotely close” to predicting the market capitalisation of the energy industry today. “I think there’s a number of factors, which I think is a very good case study for just how rapidly changing the competitive environment for most industries are,” he said.

Exxon Mobil is still the No. 1 energy company by market capitalisation today, as it was in 1991, Ling said. But he said it is now followed by the likes of PetroChina Co, a unit of state-owned China National Petroleum; Gazprom, the Russian gas monopoly; Petrobras, Brazil’s government-run oil company; China’s Sinopec; Russi’s Rosneft and Lukoil; China National Offshore Oil Corp; and India’s ONGC.

“So you have major state energy companies that have entered the market capitalisation ranks,” he said. “I think it’s a combination of the US energy industry falling dramatically behind the rest of the world for a number of reasons.” First, Ling said, energy production has changed. Goldman Sachs analysed about 170 new projects around the world, each in excess of 500 million barrels, “the socalled legacy assets that will drive production in the future,” he said.

Ling said 70% of that new production is coming from outside the Organisation for Economic Cooperation and Development, which includes the world’s richest nations including the US, Japan, South Korea, Canada, and major European nations.

Fun Business: India and China are driving growth in global media and entertainment

2007-06-26T01:15:00.000-05:00

Entertainment could be the best business proposition going. According to a PricewaterhouseCoopers (PwC) report, India and China are set to drive expansion of the global entertainment and media (E&M) industry to $2 trillion by 2011. BRIC countries will be responsible for 24 per cent of this growth, with India and China as the principal contributors.

India’s E&M market is experiencing a tearaway 18.5 per cent annual growth, the highest in the world among major markets. The country is clearly in the throes of a consumer boom. With rising disposable incomes, people have more to spend on leisure and entertainment. An increase in advertising spend, which stands at a mere 0.34 per cent of GDP in 2006, could boost the ongoing expansion of India’s E&M industry, which encompasses newspapers, magazines, TV content, TV distribution, radio, broadband Internet, films, video games, amusement parks and more. Given that India has the potential to become a big E&M player — as it is in IT today — concentrated efforts must be made to make this sector of the economy internationally competitive.

E&M is being transformed by the advent of digital technologies and the PwC report says that half the expected industry growth will be generated through online and wireless technologies. Regulation of broadcasting, cable and Internet distribution networks must take account of technological convergence, thanks to which phone, TV and broadband Internet services can soon be provided together in one gadget. The policy framework must not be biased against any particular media format, and there should be a level playing field between public and private sector players. Piracy also needs to be addressed, for which legislation needs to be beefed up and enough empowered officers deployed in the field to check piracy.

Bollywood will find Hollywood taking the battle to its home markets by dubbing its products in Hindi or other regional languages. Indian movie-makers will have to respond by making films that are internationally acceptable beyond the Indian diaspora markets. Bollywood doesn’t yet have its equivalent of Crouching Tiger, Hidden Dragon, a film made with an international cast of ethnic Chinese actors that grossed $130 million in the US market. When that happens Indian soft power will be a force to reckon with in the world.

Indians head home in 'brain gain'

2007-06-08T16:41:00.000-05:00

For much of the last century India suffered a "brain drain". Generations of Indians set off in search of a better life in other countries. Today, an estimated 25 million people of Indian origin live overseas. But could the tide be turning?

"My dad was against me moving back to India," Manish Amin tells me in his new flat in Delhi where he lives with his wife and two sons.

Three decades ago Manish's parents moved from India to the UK. He has just moved back.

"My dad's idea was that everyone wants to get away from India", Manish says. "But now he's seen the big high rise flats, the big shopping malls, even he's amazed. You get Marks and Spencer, Debenhams, everything's here now."

Manish has set up his own online travel company. He's already taking 200 bookings a day.

India's breakneck economic growth seems to be enticing the country's diaspora back to the motherland.

In Bangalore, one of India's booming high-tech centres, an estimated 35,000 overseas Indians have set up home.

In the last few years people born overseas who are able to prove their Indian descent have been able to apply for a special immigration status.

The Overseas Citizenship Certificate provides many of the benefits of full citizenship without the need to give up a foreign passport.

Mr Gurucharan, Joint Secretary in the Ministry of Overseas Indian Affairs, says they are proving popular.

"In the last six months or so we've issued over 40,000 Overseas Citizenship Certificates, and I believe that this trend will grow," he says.

"In the 1960s when people left India the buzz word was 'brain-drain'. We see it now as 'brain-gain'."

Career prospects

India's healthcare system is benefiting. Doctors who have trained in overseas health services are finding faster career advancement.

Dr Shabnam Singh recruits doctors for a private hospital.

"The Indian private sector facilities are at a par, and dare I say it, in some cases better than what is available in the West," she says.

"In the last six years I would say that from a trickle at first there is now a constant flow of people wanting to relocate back home."

The Indian government does not have the detailed figures to prove whether "reverse migration" is increasing at a significant rate.

Many of those applying for the Overseas Citizenship status may simply want the convenience of visa-free travel, without intending to relocate to India.

But there can be no doubt that many young people of Indian origin no longer see the best opportunities as being in the West.

Lifestyle choice

Ferena Scott was born and raised in Glasgow. She now has a successful career as an actress in Bollywood.

"There's something for everyone here," she says.

"And because you have a luxurious lifestyle you can enjoy yourself more."

It is an attraction some find hard to resist. The yawning gap between the new rich and the old poor means the wealthy in India have a very high standard of living.

There is also the emotional bond. Scott says that despite being born in the UK she has always felt a strong tie to India.

"As a young kid in Britain people would look at me and ask me where I was from. I'd say, 'Scotland', and they'd say, 'yes, but where are you really from?'

"Somewhere at the back of your mind you're wondering about this country that your parents came from and wondering if maybe you belong there."

Despite its so-called "economic miracle", India still has shocking levels of poverty, a burdensome bureaucracy and crumbling infrastructure. But many overseas Indians feel the country's time has come.

"When I was young, growing up in the UK, we used to play football in the streets," says Manish Amin.

"Kids can't do that there now. Here though, there's open ground, the kids can play by themselves. I think the main thing for us was just to have that comfortable life here."

India's rise as a manufacturing giant

2007-06-08T01:18:00.000-05:00

India Inc is on a roll after a series of recent global mega-mergers and hostile takeovers in the recent past.

Earlier this week, KM Birla's Hindalco acquired the world's largest producer of rolled aluminium products, Novelis, for $6bn.

Before that, LN Mittal - who is based in London but holds an Indian passport - took over the world's largest steel-maker, Arcelor, and Ratan Tata gobbled up another steel manufacturer, Corus, to become the fifth largest producer.

The deals herald the emergence on the world stage of global Indian entrepreneurs in manufacturing, and indicate that India is becoming an international hub for metals, petro-products and auto components.

Global leaders

The rise of the manufacturing giants follows that of services firms, like TCS, Wipro and Infosys, who have all left their mark globally.

Now ambitious Indian conglomerates are thinking of either crashing into the Fortune 500 list, or vastly improving their existing position.

The country's second largest private firm, the Mukesh Ambani-owned Reliance Industries, aims to be among the top 10 in the list.

With Novelis in the bag, Kumar Birla's Hindalco Industries is sure to enter the list, three years ahead of its target year.

Others like Videocon, Moser Baer and Bharat Forge have emerged as global leaders in their respective sectors.

A Boston Consulting Group (BCG) report last May argued that "a revolution in global business is under way", and the axis of corporate power was shifting towards the BRIC (Brazil, Russia, India and China) countries.

It identified 100 new global challengers from these nations, which included 21 Indian firms, including Bharat Forge, Hindalco, Videocon and Tata Steel.

Last year, a McKinsey study found the dynamics in emerging markets like India "actually provide an invaluable springboard" for their companies to go global.

A 2006 study by Mape, an investment bank, concluded "the Indian Multinational Company (MNC) has finally come of age" and "Indian buyers have become a force to reckon with in many industries such as pharma, auto components and oil and gas".

Factors such as liberal policies, access to cash, and the rise of entrepreneurial ambitions are responsible for the emergence of global Indian groups.

At a public meeting a few weeks ago, India's Finance Minister, P Chidambaram, commented that Tata Steel's multi-billion dollar interest in Corus reflected the rising aggression among Indian promoters.

Ratan Tata, who was present, countered that this would not have been possible five years ago because of restrictive policies.

Even as Indians shop abroad, foreigners are eyeing investment potential in India.

Operational incentives

But unlike the 1990s, when global MNCs wished to tap only the burgeoning base of Indian middle-class consumers, they are now planning to take advantage of low costs and widely available natural resources to make India their exports hub.

In steel, Arcelor-Mittal and South Korea's Posco wish to set up a plant producing 10 million tonnes of steel every year in the east of India - for both domestic sales and exports.

A similar trend can be witnessed in other sectors like auto components.

As India plans to build dozens of special economic zones, with a slew of financial and operational incentives, it will attract more foreign investors.

A recent DSP Merrill Lynch study pointed out that Foreign Direct Investment (FDI) inflows to India this fiscal year (2006-07) are likely to overtake Foreign Institutional Investors' investments (FII) on Indian bourses.

Between April and November 2006, India's FDI inflows stood at $7.3bn, a 117% rise over the same period in the previous year.

With foreign money pouring in, Indian firms have no option but to become bigger, better and bolder.

Buy the world

They have to go global and capture new geographical markets.

If the proposed Mittal or Posco plant had come up in India prior to the Tata-Corus deal, Tata Steel would have become a puny player even in the domestic market.

Now, with an additional annual production capacity of 19 million tonnes, Tata Steel can effectively compete with either of them, both globally and domestically.

Other Indian groups like Birla and Dhoot (of Videocon) have realised they have to initiate similar acquisition moves in a bid to survive - and thrive.

Grant Thornton has estimated that while Indian outbound deals, or global mergers and acquisitions, were valued at $4.3bn in 2005, they crossed the $15bn mark in 2006.

In the first month of this year, the two combined deals (Tata-Corus and Birla-Novelis) have been valued at over $18bn.

Indians, it seems, are taking over - or buying out - the world.

Middle class in India has arrived

2007-03-19T21:58:00.000-05:00

The middle class in India has the sense that it is coming into its own; that it has acquired the numerical strength (300 million and more, if you use a fairly loose definition) to make the Indian market matter even in a global context; and to demand that their issues be addressed when elections come round.

The cacophony on television, the visible shift in focus of the general newspapers (out with coverage of city slums, in with coverage of shopping malls), the rush to start new airlines and the obvious international interest in India, all say the same thing: the middle class in India has arrived.

Didn't Indian airline companies account for close to half of all the new Airbuses ordered at the Paris air show? QED.

Is it that open and shut, or is there room for doubt? Looking at how the political system does not respond to the need for basics (like clean water and reliable power) would straightaway belie the claim that the middle class has political clout, but what of the other posers?

As always, the NCAER (or National Council of Applied Economic Research) survey of households gives us interesting answers to these vital questions.

It is a shock to discover, for instance, that despite the evident emergence of a strong middle class, barely 10 per cent of all households have life insurance cover--traditionally the first form of savings for anyone with a reliable income flow and with dependants.

And medical insurance is available for barely 1 per cent of all households!

There is worse to come. Only 2 per cent of households have credit cards (so much, then, for the vaunted advent of plastic money). Even that basic item in a middle-class household, the refrigerator, exists in only a sixth of all households in the country (probably because only a third of rural households have a domestic electric connection!).

It might be as much of a surprise to know that half of all the TV sets sold in the country are either black and white, or small (i.e. 14-inch) colour sets.

The only items of truly mass consumption remain daily consumables like cooking oil and washing and toilet soaps (which should really be classified as necessities, not options), followed some way behind by shampoos.

Among consumer durables, the ones used most often are not the stuff of contemporary middle class legend, and are either table/ceiling fans or bicycles. The first category sells about 37 million each year, the second about 25 million.

In other words, what appears a normal lifestyle to the average city youngster working in an office is completely abnormal for the majority, in both towns and cities (just as it is completely abnormal to speak and write in English -- only about 6 per cent do that).

From this, it is a short leap to yielding to the obvious appeal of CK Prahalad's thesis, that your "fortune lies at the bottom of the pyramid"; in other words, if you want to make big bucks in the Indian market, you had better serve customers with really low-cost goods and services.

Certainly, the evidence of the mobile phone industry and of cable TV bears this out; both expect their customers to pay no more than a few hundred rupees every month, for a fairy nominal cost, and they add enormously to the quality of life and to productivity.

The NCAER projections till the end of the decade do show, however, that for almost any category of product the market will double in terms of annual sales.

Some will do even better, while others will grow slowly. So most businesses can be said to have a good future if they can find their customers. That means more airports, more flights, many more cars. . . the full works.

That's because the size of the middle class itself will grow sharply in the coming years. But while there will be plenty of reason to celebrate the Indian party, the NCAER projections show that even in 2009-10 the middle class will be an island in a larger ocean of non-consuming classes.

Time we got a little impatient with the pace of change and economic reform?

BRIC may yield ground to CHIME

2007-03-18T21:37:00.000-05:00

After having lavished attention on the BRIC (Goldman Sach's acronym for the emerging markets of Brazil, Russia, India, China) markets, global investors are now looking at a new alphabetical grouping, CHIME, symbolising China, India and Middle East.

Analysts believe that this geographical grouping — China and India's high growth and the fund flush Gulf region — holds the promise of tremendous growth in the years ahead.

According to a report in the Asian Venture Capital Journal, "The Middle East and Asia corridor is slowly becoming real and important. As Asia has become a lot more attractive today than the Western countries and the Gulf is an emerging market with a lot of liquidity."

Compared to the high-growth BRIC emerging markets, CHIME is developing as a far more geographically continuous and economically consistent proposition, the report noted.

This reverses the previously held view that the Mid East region continues to look for investment avenues outside.

Investors from the prosperous and high growth six-member Gulf Cooperation Council, or GCC, (comprising the UAE, Saudi Arabia, Kuwait, Oman, Qatar and Bahrain) have a different outlook and priorities to Western funds looking to diversify away from their own slow-growth economies.

The abundant liquidity of the GCC group means that investors may be more ready to explore new options and take risks and hence there could be an increasing look towards the east.

Another good year for urban India; what about rural Bharat?

2007-03-18T21:32:00.000-05:00

If national security measures can get nearly Rs100,000 crore, surely we can afford to invest at least as much in securing our 'food security', argues Arun Firodia, chairman, Kinetic Group.

The current financial year has been a great one. GDP has grown by 9.2 per cent, government revenues are buoyant, and exports are up. Full credit should be given to the finance minister for the excellent economic management of the country. He seems to have decided not to touch the 'winning formula' and continued with his existing policies, more or less.It was expected that finance minister would chart out a revolutionary new path and transform the rural economy into a powerhouse of future economic growth. While there are many good schemes already operating in this sector, they have not succeeded in reaching the intended beneficiary stakeholders, because of a lack of sound implementation.

Unless delivery mechanism improves, these schemes would remain a drain on the exchequer.
Also the financial outlay on rural sector should have been at least Rs100,000 crore since the rural sector accounts for nearly 20 per cent of India's economy. But important areas like crop insurance will get only Rs100 crore and the National Rainfed Area Authority would get another measly Rs100 crore.

If national security measures can get nearly Rs100,000 crore surely we can afford to invest at least as much in securing our 'food security'. Instead of spending Rs43,000 crore to buyout the Reserve Bank of India's stake holding in the State Bank of India. The government could well have channeled this amount in creating asset like small irrigation, roads, cold storage, etc, in rural areas.Infrastructure sector of power, ports, roads, etc, cry out for immediate attention. But 80 per cent of this Budget will be spent on revenue expenditure with, a comparatively insufficient amount being allocated left for infrastructure creation.

There are some welcome incremental steps in the area of job creation, food processing, bio-energy, R&D, etc. It is also good to know that there will be further fiscal consolidation in the current year.

Urban India can look forward to another good year. But what about rural Bharat?