<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->They are not racing us to the bottom. They are racing us to the top.<!--QuoteEnd--><!--QuoteEEnd-->
It means, now India need to spend more on Defense and nuclear weapons to protect its over Billion citizens. Now India is more vulnerable to foreign attacks from far countries.
<!--QuoteBegin-->QUOTE<!--QuoteEBegin--><b>Fiscal deficit at Rs 28,406 cr in April </b>
Pioneer - Agencies/ New Delhi
With Finance Minister P Chidambaram aiming to rein in fiscal deficit below 4.1 per cent of GDP in 2005-06, North Block has stepped up efforts and contained the fiscal gap at Rs 28,406 crore in April.
The fiscal deficit in the first month as a percentage of the budget target has improved to 18.8 per cent in 2005-06 from 19.1 per cent during 2004-05.
However, in absolute terms the deficit was at Rs 28,406 crore in April 2005, which is 9.3 per cent higher than Rs 25,998 crore in April 2004, as per figures released by Controller General of Accounts.
The fiscal prudence shown in the first month is despite the fact that Centre's revenue and non-debt capital receipts were lower at Rs 1,850 crore in April this year compared to Rs 4,279 crore in April 2004.
While revenue receipts was higher at Rs 1,717 crore in April 2005 compared to Rs 823 crore a year ago, non-tax capital receipts declined sharply to Rs 133 crore from Rs 3,456 crore in April last year.
The lower receipts is reflected in widening of revenue deficit to Rs 27,016 crore in the first month of 2005-06 compared to Rs 23,218 crore a year ago.
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However, Centre has been able to squeeze its spendings to Rs 30,256 crore in the first month of 2005-06, which is marginally lower than Rs 30,277 crore a year ago.
Fiscal deficit has been budgeted at Rs 1,51,144 crore or 4.5 per cent of GDP for 2005-06 compared to Rs 1,36,452 crore (4.3 per cent) last fiscal.
Since the fiscal deficit actually came down to 4.1 per cent last fiscal, Chidambaram now aims to further lower it in 2005-06.Â
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<b>Report: 7 Percent Growth Seen in India </b><!--QuoteBegin-->QUOTE<!--QuoteEBegin-->NEW DELHI - India's economy is likely to grow by 7.2 percent in the current fiscal year despite rising world oil prices and U.S. interest rate hikes, a private industry report said Sunday.
Growth of more than 7 percent in 2005-06 would make India the world's second-fastest growing economy, after China, for the second consecutive year. <b>Last year, India's economy expanded at 8.5 percent, its highest in 15 years</b><!--QuoteEnd--><!--QuoteEEnd-->
Correspondents say India has embarked on "pipeline diplomacy" to meet its rising energy needs.
Three pipelines are under consideration - from Iran through Pakistan, from Turkmenistan through Pakistan and Afghanistan, and from Burma through Bangladesh.
Pakistan, Bangladesh and Afghanistan stand to reap millions of dollars in transit fees.
<b>India has already signed a $40bn (£21bn) deal to import millions of tonnes of liquefied natural gas from Iran</b>
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->China has a new growth challenger, Pakistan
(Bloomberg)
Updated: 2005-06-07 09:17
The world's second-fastest growing economy after China is no longer India. It's Pakistan.
According to figures released over the weekend by Pakistan's Prime Minister Shaukat Aziz, the $110 billion economy is estimated to have grown 8.4 percent in the current fiscal year that ends June 30. That compares with 9.5 percent expansion in China's gross domestic product last year, while India recorded 6.9 percent GDP growth in the 12 months ended March 31.
Now that Pakistan is within striking distance of China's growth, it aims to catch up. The growth target for the next fiscal year, as set out in the nation's annual budget yesterday, is as much as 8 percent, the same as Beijing's goal for the year.
That may be a trifle over optimistic. Pakistan isn't yet ready to sustain 8 percent growth year after year -- not until it can push up its savings rate, which is languishing at 14 percent of gross domestic product.
Inflation is at an eight-year high of 11 percent, a clear indication of an economy overheating from too much consumption. (China's problem is too much investment.)
Still, another year of strong growth is eminently achievable in Pakistan, provided the central bank can maneuver deftly to suppress inflationary expectations, even as the government goes ahead and steps up investments in public works.
Even a slightly less rapid expansion than this year would go a long way in boosting personal incomes, which have risen a very impressive 27 percent in U.S. dollar terms in the past two years.
Sept. 11 'Windfall'
Sure, Pakistan's retreat from the brink of a balance-of- payment crisis in 1999 had a lot to do with its Sept. 11 "windfall," as some commentators termed it. Pakistan received grants and debt waivers and additional textile quotas from the Bush administration for helping it topple the Taliban in Afghanistan.
That was in 2001.
In 2005, what's helping sustain growth isn't U.S. largesse, but a revival of investor interest, which is evident from the list of bidders short-listed by the government for a proposed sale of 26 percent in state-owned Pakistan Telecommunication Co.
Bidders for the phone service provider, whose market value is about $5.5 billion, include telecom companies from Singapore, China, Malaysia, United Arab Emirates, Turkey and Saudi Arabia.
Yesterday, the benchmark Karachi Stock Exchange 100 Index plunged 1.5 percent after the government said it would delay the stake sale in the phone company because of pressure from labor unions. The government said it isn't scrapping the sale, which it now expects to go through by end-June.
2007 Election
The risk of such setbacks will remain, though the broad outlines of an investor-friendly regime should stay intact at least until 2007 when President Pervez Musharraf will, according to news reports, shed his army uniform and seek re-election as a civilian. Musharraf, an army general, took power in a coup in October 1999, and appointed himself president in June 2001.
While poverty still remains endemic, and only 18 percent of women aged 35 to 44 are part of the workforce (compared with 96 percent for males in the same age group), a new middle class has started to emerge in Pakistan.
Private consumption is up 17 percent from a year earlier in the 12 months ending June 30. Per capita income has surged to $736. Once Pakistan crosses the $1,000 threshold, like China did last year, it'll become a middle-income country with a lucrative domestic market of 154 million consumers.
Further income growth in Pakistan will require new jobs. And there's no sign yet of a reduction in urban unemployment, which has risen almost 3 percentage points in the last nine years to reach 9.7 percent. For now, GDP growth appears to be driven by more productive use of domestic capital, supplemented lately by an inflow of foreign savings. The current account now has a full- year deficit equal to 1.2 percent of gross domestic product.
Selling Bonds
Capital flows have been buoyant, as Aziz, a former executive at Citibank NA, has made good use of easy global liquidity conditions to raise cheap money from bond sales.
From investor such as Temasek Holdings Pte, the Singapore government's investment arm that bought 25 percent of a Pakistani bank in April, it helps that Pakistan's relations with India are improving as businesses in the two fast-growing economies press for closer ties. The neighbors have fought two of their three wars over Kashmir, a half-century-old dispute that remains unsettled.
There's help coming from another quarter. Raw cotton, yarn, cloth and garments account for three-fifths of Pakistan's overseas shipments. Along with China and India, Pakistan is widely expected to gain from the new quota-free system of global textile trade.
Yesterday's budget scrapped a 15 percent tax on materials imported by the country's textile industry.
A textile windfall would be a big bonus for an economy brimming with optimism, and quite deservedly. After all, it has been two decades since it last grew as fast as this year. Mimicking China's growth may be a tough act to follow, but Pakistan seems determined.<!--QuoteEnd--><!--QuoteEEnd-->
<b>Exports up 22.28% in May; trade deficit doubles </b><!--QuoteBegin-->QUOTE<!--QuoteEBegin-->New Delhi, June. 15 (PTI): India's exports grew 22.28 per cent in May 2005-06 but imports rose at a faster pace at 35.46 per cent, widening the trade deficit to 7.2 billion dollars in the first two months of the current fiscal.
Exports rose to 7.2 billion dollars during the second month of the new fiscal compared to 5.9 billion dollars in May 2004-05 while imports jumped to 10.8 billion dollars against 8 billion dollars during the same month a year ago.
Trade deficit during April-May 2005-06 more than doubled to 7.2 billion dollars from 3.3 billion dollars in the corresponding period last fiscal, as per the latest trade data released by the Government on Tuesday.
In rupee terms, exports during May 2005 rose 17.52 per cent year-on-year to Rs 31,404.91 crores.
<b>Exports during the first two months increased 19.81 per cent to 13.7 billion dollars as against 11.5 billion dollars in April-May 2004-05. </b>
Imports during the two months this fiscal were up <b>40.9 per cent to 21 billion dollars compared to 14.9 billion dollars in April-May 2004-05.</b>
<b>Oil imports in April-May this year surged 35.84 per cent to 6 billion dollars from 4.4 billion dollars a year ago, while non-oil imports jumped 43.10 per cent to 14.9 billion dollars compared to 10.4 billion dollars in April-May 2004</b>.
The Government had revised upwards the export target for this fiscal to 92 billion dollars from 88 billion dollars earlier after exports surpassed the 75 billion dollar target set for 2004-05 to touch 80 billion dollars during the year gone by
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Infosys Technologies Ltd has played a <b>major role</b> in the design and development of A380, the world's largest passenger aircraft produced by Airbus, the software major said on Tuesday
In a statement, Infosys said its contribution was in the design and development of the jumbo aircraft's structural components, using its unique global delivery model.
According to Franco Gonsalves, Infosys vice president for automotive and aerospace unit, the work consisted of high-end engineering tasks, including delivery of cost-effective solutions for Airbus, resulting in shorter lead-times and faster roll-out to reduce the project cost. "With our engineering skills and process understanding, <b>we helped Airbus develop and deploy software solutions, including interface with legacy data archiving and distribution systems, enhancement of data exchange applications for the extended enterprise, interface with SAP, key characteristics and tolerance management," Gonsalves said.</b>
Currently, this power rests with the Internet Corporation for Assigned Names and Numbers (ICANN), a non-profit corporation based in California. Of the many tasks that it oversees is the domain name system management. This lets you type the name of the website you want to look at, converts this name into numbers -- the corresponding Internet Protocol address -- and connects you to the desired website.
Indecisive India
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->India's Congress-led government seems likely to survive the boycott by its Communist allies of the coalition's main co-ordinating body in protest over plans to sell 10 per cent of a state-controlled electrical equipment group. <b>With no essential legislation pending that requires their support, the Communists' action appears largely symbolic</b>. However, it is a sharp reminder of the severe political constraints facing the country's economic reformers.
Having embraced privatisation at state level, the Communists cannot credibly attack it at federal level. In any case, the dispute is as much about how the proceeds are used and about Communist demands for binding commitments to fund poverty programmes. It should therefore be soluble.
However, it comes when the government's reform programme looks increasingly embattled. Political opponents have forced it this year to strip legislation for special economic zones of a key proposal to relax application of India's rigid labour laws. Plans to relieve chronic electricity shortages by encouraging private generation and distribution are in a mess, and other vital infrastructure programmes are treading water. <b>Little has been done to cut back strangulating bureaucracy.</b>
In fairness, Delhi has continued the last government's policy of lowering industrial tariffs. It has also eased some restrictions on inward investment, though its efforts to open retailing to foreign supermarket groups have yet to succeed. However, <b>action has been haphazard and piecemeal: there is no evidence of any grand master plan and - notably in the case of electricity - implementation has been weak.</b>
Ministers respond that in India, reform is best advanced by stealth. Yet even Manmohan Singh recently awarded himself only six out of 10 for his first year's achievements as prime minister. With almost four years of his term left, he can afford to be bolder. Given the feeble progress to date, he will need to be.
The notion that effective reforms could be enacted by a fragmented multi-party coalition always looked dubious. It will become more so as elections approach. The government should take a firm stand, rise above partisan obstructionism and make its case for reforms directly to the people. It does not lack for persuasive arguments. <b>Liberalisation of airlines and telecommunications, both initiated by its predecessor, have proven successful and popular</b>. There are many more instances where removing the dead hand of government from the economy would yield equally beneficial results.
The Communists and their supporters would doubtless object. They need to be shown for what they are: defenders of the privileges of trades union barons and other powerful vested interests. Mr Singh's administration came to power on a reformist platform and promising to govern in the interests of the country as a whole. It had better start doing so soon, or voters will begin wondering why they put it in office.
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<b>India's per capita up by 5.2 per cent: CSO</b><!--QuoteBegin-->QUOTE<!--QuoteEBegin-->India remains one of the fastest-growing economies in the world. The latest figures released by the Central Statistical Organisation (CSO) point out that <b>the economy clocked a growth rate of 6.9 per cent during fiscal 2004-05 as against 8.5 per cent the previous financial year.</b>Â <!--emo&:thumbdown--><img src='style_emoticons/<#EMO_DIR#>/thumbsdownsmileyanim.gif' border='0' style='vertical-align:middle' alt='thumbsdownsmileyanim.gif' /><!--endemo--> This is in line with earlier government estimates. Interestingly, per capita income rose by 5.2 per cent to Rs 12,416 during 2004-05 as against Rs 11,799 reported for 2002-03.
The revised estimates of national income and quarterly estimates of GDP were released here on Thursday by the CSO. The growth rate was marginally higher at 7 per cent in the last quarter (January-March) of 2004-05. However, this is much behind China, whose economy expanded at 9.4 per cent in the same period.
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<!--QuoteBegin-->QUOTE<!--QuoteEBegin--><b>Fiscal deficit shot up by 31% to Rs 54,517 crore </b>
Pioneer
New Delhi
The Centre's fiscal deficit shot up by about 31 per cent to Rs 54,517 crore in the first quarter of this fiscal due to higher expenditure. However, buoyant tax collections kept revenue deficit marginally higher at Rs 47,311 crore in Apri-June this fiscal as compared to Rs 46,394 crore a year-ago period, according to the figures of the Controller General of Accounts
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When Manmohan Singh is PM <!--emo&--><img src='style_emoticons/<#EMO_DIR#>/biggrin.gif' border='0' style='vertical-align:middle' alt='biggrin.gif' /><!--endemo-->
<b>Capital Comes Calling on India</b>....chappar phad ke!!
L. Brooks Entwistle
One of the toughest tickets to come by today is a seat, any seat, on a flight from the world's financial centers to India. If you are lucky enough to get a seat, you will find yourself surrounded by private equity professionals, venture capitalists, and investment bankers. You cannot miss the type: just look around at the people working throughout the flight devouring analysts' reports, business plans, and other background research as they begin their quest for the next big investment opportunity on the subcontinent. Some of the world's leading private equity firms, venture capital players, and hedge funds (collectively referred to as "financial sponsors" in this essay) already are firmly established in India, including Warburg Pincus, the Carlyle Group, General Atlantic Partners, and Newbridge Capital. The race has begun, with a second wave of international private capital players now looking to plant the flag on the subcontinent. In the spring of 2005 alone, over 25 new India-focused private equity, venture capital, or hedge funds were raising new investment capital. Add to that the firepower of financial sponsors who are looking to invest in the country through an already existing fund and you have a <b>huge wave of capital heading toward India.</b>
This heightened interest among financial sponsors in India has been driven by several factors. First, the overall economic picture for India is one of explosive and sustained growth. <b>According to some predictions, India's economy will be the third largest in the world by 2035</b>. This economic engine will drive demand for capital. Second, investors have developed an "investment thesis" with respect to India based on five key factors, including an abundance of skilled labor and a significant time-zone advantage. Third, the success of several sectors of the Indian economy in the global marketplace has given financial sponsors case studies to show to their investment committees. Infosys and Wipro in the information technology (IT) services sector and Dr. Reddy's Laboratories and Ranbaxy Pharmaceuticals in the healthcare sector are excellent examples of Indian companies achieving worldclass status. Fourth, India's own public equity markets have matured and performed well in the last year, attracting significant foreign institutional investor (FII) interest in the country. Net inflows of FII funds to India have increased dramatically from $6.7 billion in 2003 to $8.5 billion in 2004 to $4 billion already in early 2005. The existence of a deep public equity market provides financial sponsors with both increased investment opportunities and a means through which to "exit" or realize profits on these investments. Fifth, the emergence of a robust mergers and acquisitions market has given financial sponsors another mechanism through which to exit their investments. General Atlantic Partner's sale of Daksh, a business process outsourcing company, to IBM is a good example of this phenomenon. Finally, the first wave of private equity players have realized significant success in the last several years. Warburg Pincus, the largest foreign investor in India, has been able to return a significant amount of the over $1 billion in equity it has invested while still holding several substantial stakes in leading Indian companies, including Bharti Telecom.
At the same time, several important factors could divert the wave of capital heading toward India. First, India has failed to invest in infrastructure to keep pace with the growth of the economy. For example, only five years ago the drive from one's hotel in Bangalore to Electronics City, the home of India's IT services miracle, took 30 minutes. Now that same drive is a pollution-choked experience that takes an hour and a half through heavy traffic. Second, capital needs ideas. While no one would suggest that India is lacking in entrepreneurial spirit, the country must work toward promoting investment across all sectors. Financial sponsor activity has been concentrated in the information technology, telecommunications, and healthcare sectors. The automobile components and chemical sectors show signs of coming to life, but others need to follow. The retail sector, for instance, is still heavily regulated, restricting foreign investment. Lastly, China looms. Potential financial sponsors are also looking at China, and just as China and India will compete for natural resources in the years to come, they will also square off against each other to attract capital.
The Macro Economic Machine
The change in India since the market liberalizations of 1991 has been extraordinary. The abolition of the government-controlled "Raj" industrial licensing scheme, the reduction of import tariffs, and the initial opening of the country to foreign direct investment set the stage for India's emergence from its economic shell. As positive as these changes were, however, it is future possibilities that have potential investors in the country breathless with anticipation.
As noted, India's economy is projected by some sources to be the third largest in the world by 2035, trailing only China and the United States. Along the way, India will pass Japan and the combined economies of Britain, France, Germany, and Italy. India is also projected to sustain its spectacular annual rate of growth of 5 percent or better through 2050. No other country, China included, will show this sustained growth rate over the same period. With its overall population expected to surpass China's in 2035, India's workforce will continue to expand into the middle part of the century, long after China's workforce begins to age and thus decline.1
What does this all mean for potential investors? Consider the following examples from the oil, automotive, and mobile phone industries. India's contribution to the rise in global demand for crude oil is likely to surpass that of China in 15 years. India will represent potentially 15 percent of overall global demand for crude by the year 2050. The geopolitical implications of India's increasing demand for crude are evident in its recent negotiations with Russia, Iran, and Myanmar.
Related to this steep growth in oil consumption is the dramatic rise in the number of automobiles in India. Over the next ten years, the number of cars in the country will likely triple. By 2050, India is projected to have the second largest car market in the world after China. As India's manufacturing prowess grows, the proliferation of industries related to the automotive sector, including an already burgeoning auto parts market, will provide ripe opportunities for financial sponsors looking for businesses in which to invest.2
Many experts believe that the "sweet spot" for mobile phone penetration is GDP per capita of roughly $3,000 per year. India, whose mobile phone market has already taken off, will not hit that level of GDP per capita for another 15 years. Even so, the telecom sector has proven to be fertile ground for investment.3
Beyond this rosy macroeconomic picture, it is important to point out the critical tenets of the investment thesis for financial sponsors looking at India. First, India has an abundance of skilled resources. The country's large pool of engineers and postgraduates, all of whom speak English, have a proven track record of providing high-end solutions to problems and world-class research and development. Second, the cost benefits of doing business in India, while eroding in IT engineering and other sectors, are still significant. Importantly, this cost benefit structure has coexisted with recognized high-quality work. Third, India has established a reputation for quality delivery. Over the years, the importance of refined process methodology, stringent quality controls, and the general adoption of global "best practices" have enabled Indian companies to deliver competitive services and products globally. Fourth, the country's time-zone advantage, which makes it possible for Indian companies to program software, staff call centers, produce documents, and provide myriad other services while the United States sleeps, has continued to be a critical dimension of the value-added thesis for India. Fifth, the dramatic rise in domestic consumption has provided a key corresponding impetus, along with the global interest in Indian services and products, driving the demand side of the equation.
While these five forces clearly do not apply to all sectors of the Indian economy, the sectors that have enjoyed successâIT services, telecom services, healthcare, and, increasingly, financial services and automotive componentsâhave exploited these factors to develop globally competitive businesses.
The first world-class companies to emerge on the global stage were the leading IT services firms. Infosys and Wipro, with their gleaming campuses in Bangalore, blue-chip customer base in the United States, and successful listings on the U.S. stock markets were early indicators of what the investment thesis highlighted above could yield. For many potential investors in India, their "I get it!" moment occurs when they tour the sprawling Infosys headquarters in Bangalore. From just one building less than a decade ago, the campus now comprises 20 buildings and features a swimming pool and health club for employees, restaurants serving both local Indian cuisine and Dominoes pizza, and a coffee shop with the best latte on the subcontinent. This impressive complex, with its enormous training facilities and futuristic board room, is an epiphany for people who once questioned India's potential.
Infosys is by no means alone. Wipro and other IT services firms have created similar world-class facilities around the country. Healthcare companies have followed suit, with Dr. Reddy's and Ranbaxy achieving a level of international recognition. The success of these companies has spawned a plethora of smaller start-up companies that are striving to follow in the footsteps of these early pioneers. The opportunity to invest in the next Wipro, Dr. Reddy's, or their equivalent in other emerging industries is driving the financial sponsor community to scour the country for investment possibilities.
Important Factors for Investors
An important part of any market entry strategy for financial sponsors is to understand the possibilities for "exit," or divestment in order to reap the profits generated by their investment through either the public equity markets or a strategic sale of the company. The impressive performance of India's equity markets over the last two years has helped financial sponsors answer the question of how they can unload their investments for cash. The benchmark Bombay Stock Exchange SENSEX index gained 13 percent in 2004. More importantly, the market recovered immediately after a wild dip in May of that year when national elections provided a surprise (at least to the markets) outcome.
In addition to overall market performance, the financial sponsor community also watches the level of investment by foreign institutional investors, their brethren who invest directly in the Indian stock market. As a result of India's strong overall performance and the influx of FII funds, there has been a solid flow of initial public offerings over the last three years. In addition, the market has been able to provide successful exits for financial sponsors who have invested in companies. Warburg Pincus recently completed two very successful, and sizable, transactions that enabled it to monetize a large portion of its stake in Bharti Telecom. In February of this year, Warburg sold $306 million of its stock in Bharti; it sold another $560 million in March. These deals, impressive and sizable in any market, were a watershed moment for the financial sponsor community in India as they showed that the Indian capital markets are now deep and robust enough to support significant, and profitable, exits for quality companies and their backers.
Equally important to financial sponsors are developed mergers and acquisitions markets. While India is by most measures still early in this game, there have been several very encouraging signs over the course of the last few years. While the overall dollar volume of transactions is down from its peak in 2000, the total number of deals and the number of cross-border deals have increased dramatically.
In 2004, General Atlantic Partners sold one of its earliest Indian investments, Daksh, to IBM for $170 million. This deal was significant for several reasons, including the fact the business was sold in a cross-border transaction, showing the interest of foreign strategic players like IBM in the Indian market. Furthermore, the sale came only two years after General Atlantic made its investment in the company. The Daksh transaction, similar to Warburg's successful sale of its Bharti stake on the public markets, showed financial sponsors thinking about investing in India that real and lucrative exit opportunities now exist.
This has heightened the interest of other financial sponsors looking at India. In 2004, financial sponsors invested $1.7 billion in the country. However, when compared with the $100 billion in financial sponsor funds dedicated to all of Asia at the end of 2004, the percentage allocated to India is still quite small. The second wave of financial sponsors, those individuals filling up the airplane seats to India, are on their way. Their predecessors, the early adopters, have been flexible in their investment approach, often changing their investing model from strategies employed in home markets. The challenge of looking at new industries, focusing on smaller deals, and using different vehicles through which to invest awaits the new entrants to the market.
Critical Issues Must Be Addressed
While the next wave of financial sponsors who are looking at India need to adjust their model for future investments, India itself needs to address some critical issues. At the top of any list is the state of India's infrastructure. The comparisons with China have been well documented and do not shed the most flattering light on India. Travelers to China and India notice the difference immediately. The new state-of-the-art airports across China stand in stark contrast to the decaying terminals in India's main cities. The difference is even more striking outside the airport. The trip on the tree-lined superhighway leading to downtown Beijing is a much more pleasant experience than the painfully slow crawl along Marina Drive to the heart of Mumbai.
There are encouraging signs of improvement in India: over 25 new airports are either under construction or planned, and new roads, including the Mumbai to Pune expressway, are finally emerging. However, the government must continue to focus on meeting the challenge of building infrastructure because no matter how strong the investment thesis for India is for prospective financial sponsors, the infrastructure bottleneck will slow this flow of capital. Not surprisingly, several dedicated infrastructure funds have emerged on the scene in anticipation of new investment.
New Delhi must also keep its foot on the pedal of reform. The impact of the 1991 market liberalization measures and subsequent reforms has been dramatic. Certain sectors, including telecom and financial services, have had their foreign direct investment limit increased. Other sectors, such as media and retail, are still far more difficult or impossible to invest in under the current regime due to restrictive laws. Lastly, primary education, rural poverty, and other classic emerging market issues must be addressed by the government.
The Challenges Ahead
India is one of the hottest topics in the financial sponsor community today. The country's enormous potential for economic development, its solid underlying fundamentals, and the impressive early returns to the first wave of investors have made this a market that investors sitting in New York, London, or Hong Kong cannot ignore. Even if such individuals have no intention of investing in the country directly, chances are that one of their existing portfolio companies, or more likely all of them, are feeling the impact of the Indian economic machine. As further proof of this trend, as this essay was going to press, Blackstone, one of the largest private equity firms in the world, announced the opening of a Mumbai office and the launch of a $1 billion fund.
The challenge for India will be how to deal with its remaining obstacles to development, including its transportation infrastructure issues and its need for a reliable supply of energy. If India can address these problems, it will be able to capitalize on its skilled human resources, low costs, reputation for producing quality products, timezone advantage, and rising domestic consumption and international demand for its products. Meanwhile, growing capital markets and increasing mergers and acquisitions activity will provide more opportunities for investors to get a toehold in the new generation of India's world-class companies and to realize returns as their investments mature. India's time for financial sponsors is the present. Buy your tickets now, seats are filling up fast.
*L. Brooks Entwistle is a managing director of the Investment Banking Division of Goldman Sachs. From 1998 to 2004, he was based in Asia, where he had responsibility for India. The views expressed here are his own and not necessarily those of Goldman Sachs.
Notes:
1. Goldman Sachs Research, "Dreaming with BRICs," October 2003. The acronym "BRIC" stands for Brazil, Russia, India, and China.
2. Goldman Sachs Research, "The BRICs and Global Markets: Crude, Cars and Capital," October 2004.
3. Goldman Sachs Research, "BRICs Layers," April 2005.
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This is where the action lies :
Freedom from poverty (experts)
This Independence Day, deliver us from this tribe
BUNKER ROY
Posted online: Monday, August 15, 2005 at 0230 hours IST
The intellectual activists behind the Millennium Development Goals (MDGs) who sit in New York are making sure the goals will remain unreachable. Over the last 34 years, having lived and worked with the rural poor earning less than a dollar a day in India, I have ceased to be surprised by the incredible ignorance, stupidity and hype thatâs generated to tackle extreme poverty. Ever so often, jobless politicians find themselves heading Commissions. There is no shortage of funds for travel and workshops preparing pointless recommendations and action plans no one reads or follows. But how many have actually involved the poor in the making of these action plans? Adviser to the UN secretary-general Jeffrey Sachs â with his promises of ending poverty â is just another one of the many getting his bit of temporary glory and he will fade away like Clare Short (remember her?) and her White Paper which promised the eradication of poverty by 2015.
Poverty is big business today. Thousands of jobs in the North depend on churning out sensational figures in glossy magazines highlighting how the poor will remain poor unless more funds are allocated. Never mind if these funds end up as $1,000 per day consultancies given to people who have never spent a night in a village. Not that these consultants have ever gone hungry in their lives, or drunk contaminated water, or walked 10 km to school, or trudged for two days for a canister of kerosene to light the stove. So when do we start educating them? Do they have the humility to listen or are they so arrogant that they know all the answers?
How do we start explaining to these insensitive âexpertsâ what it feels like to face fear, death, hunger, starvation, exploitation, discrimination, injustice every day of their lives? How do we convey the urgency, impotence and anger these glorified paper pushers can never feel? If we are to believe Jeff Sachs, the problem is money. So whatâs new? Governments in the South are not that stupid that they cannot see that poverty is increasing. So is corruption and waste running into millions of dollars and none of the international donors are even talking about their series of successful failures. Is Jeff Sachs, the evangelist, hob-nobbing with film stars, singers, presidents and prime ministers talking about that? Of course not. But why not? Because it is not sexy to talk about mistakes.
We have to look ahead. Learn from the past, think out of the box. Think about simple solutions (like mosquito nets). What about the other simple solutions people are already implementing and not waiting for their governments (too slow, too corrupt) or donors to act? Jeff Sachs has obviously not heard of them from his network of contacts because it is not mentioned in his Latest Report. So far, he has got it all wrong. What requires money is the top-down approach, the North-South percolation of ideas, methods, approaches, equipment and personnel. This has failed miserably. Instead of asking for more money that will inevitably be wasted away, he would do well to offer alternatives on how existing funds could be better spent. There is enough money for drinking water and sanitation if the experts listen to the low-cost, community-managed and community-owned solutions of the people. There is not enough money if they listen to the solutions offered by (un)qualified water engineers.
For the cost of one down-the-hole drilling rig installing one hand pump in one school (the stupid solution of the âqualifiedâ water engineer), it is possible to collect 15 million litres of rain water in over 100 schools and provide employment to 1,000 people for four months in the villages. Why is Jeff Sachs not pushing roof-top rain water harvesting in schools as a source of water for drinking and sanitation? Many reasons. First, because his high-powered team producing reports are not practical enough to hear about simple solutions like this. Small is not beautiful in their eyes.
Second, he does not want to look beyond the obvious and anger his friends who are water engineers and who are solely responsible for the colossal waste of money in the drinking water sector. Third, he wants to please everybody by keeping quiet on sensitive issues like corruption, wastage and incompetent management. He would much rather talk eloquently about the US being stingy and earn brownie points, than talk about transparency and accountability. He believes the problems faced in Africa was overcome 40 years ago in Asia. Totally false. He seems to be enamoured by Indiaâs impressive food production figures. But what about the 60 million tons of food rotting in government godowns eaten by rats while millions starved? The problem is distribution, not production.
Jeff Sachs reminds me of Einsteinâs definition of insanity: âEndlessly repeating the same process hoping for a different result.â The barriers to development in the poorest countries in Africa and Asia is in the mind, not only in the soils and rainfall. A change in mindset does not need money. Taking the poor into confidence and letting them implement their own schemes does not require more money. As a wise politician once remarked: people cannot be developed. They develop themselves. But first it requires the government and donors to act as facilitators and take a back seat. Patronage requires money; participation and partnership do not.
What Jeff Sachâs MDG approach to solutions fails to take into account is the incredible knowledge, indigenous skills and practical wisdom that traditional communities everywhere possess, which could be identified and applied today. It will require no extra money. The people have their own inexpensive solutions that would baffle the urban expert. Give them an opportunity and a chance to apply it for their own development.
If Jeff Sachs is serious about wanting to meet MDGs, he has to stop playing to the gallery. The answer is to demystify and decentralise right down to the community level. He has to list low-cost alternatives that have worked and stop listening to the paper-qualified experts who can only think of using him to raise more money and thus play into the hands of contractors, consultants, vested interests, corrupt bureaucrats and politicians.
The writer is the founder of Barefoot College, Tilonia
NEW DELHI: The government on Tuesday said it has formally called-off plans to sell 13 profit-making central public sector companies.
"In keeping with the National <b>Common Minimum Programme guidelines </b>it has been decided to call off the process of disinvestment through strategic sale of 13 profit-making PSUs," Minister of State for Finance S S Palanimanickam said in a written reply in Rajya Sabha.
The companies that have been taken-off the disinvestment list include National Aluminium Company Ltd, Shipping Corporation of India, National Fertilizers Ltd, Hindustan Petroleum Corporation Ltd and Engineers India Ltd.
Balmer Lawrie, Hindustan Paper Corporation, State Trading Corporation, National Building Construction Corporation, Engineering Projects India Ltd, Sponge Iron India Ltd, Manganese Ore India Ltd and Rashtriya Chemicals and Fertilizers are the other companies which will not be privatised. <!--QuoteEnd--><!--QuoteEEnd-->
<!--QuoteBegin-->QUOTE<!--QuoteEBegin--><b>Tighten belts, now </b>
The Pioneer Edit Desk
The results of the First Quarter show that there has been a healthy rise in revenue receipts over the corresponding period of last year. But <b>the revenue deficit has increased from Rs 46,311 crore to Rs 46,394 crore</b>.
The review says that the non-plan expenditure has come down from 20.10 per cent last year to 18.7 per cent this year. Yet, there is<b> no plan of action in place to manage subsidies and raise resources </b>in order to meet the objectives of the common minimum programme of the UPA Government. <b>The fiscal deficit has risen to 36.1 per cent of the budgeted Rs 1.51 lakh crore compared to 30.3 per cent last year</b>.
Even so, the government claims everything is kosher. How is the public to believe this when a price rise of petroleum is round the corner, inflation (4.1 per cent) already galloping and dividend earnings from the oil majors dwindling? The Rural Employment Guarantee Scheme, meanwhile, is admitted as the most daunting fiscal challenge ever faced by the country. Doubtless, this will have an impact on capital expenditure and the 35 per cent slash reflected in the Q1 results may be just advance notice.
The long and short of it all is that the UPA, in its 15th month, is still guided by polemics and unsure about direction. Its powerlessness to assert itself in the face of Leftist pressure is evident from the statement of the Prime Minister, who publicly pleaded with the Left for latitude by consistency. He has reminded them of the caricature of the Left's position on disinvestment put on international display now by the West Bengal Chief Minister. <b>A seven per cent growth rate can hardly be achieved if the scoring of narrow political points becomes the obsession of men who are supposed to rule</b>. The decision to call off strategic sales in 13 Navaratnas is likely to result in the exchequer losing at least Rs 8,400 crore. The outlook, therefore, is definitely not rosy.
At first sight the only redeeming feature is Finance Minister P Chidambaram's decision to present an Outcome Budget setting targets for each ministry and department. This is a laudable initiative, because by placing physical targets for each branch of Government, a process of internal audit would be placed. Ministers can no longer get away with claims of how much money they have spent under each head.
Henceforth, they will have to reveal exactly how many highways have been repaired or constructed and whether the funds released under education, or health or ports have translated into tangible gains for the country. An exercise of this sort, if implemented honestly, may plug leakages and diversions. Eventually, it might also be possible to know exactly how much is the burden of carrier costs.
The old policy of passing sweeping cuts on "Government spending" was like putting the cart before the horse. But one of the first steps that can bring credibility to the process is by making public which of the states are flouting the system of producing utilisation certificates. Transparency, as Mr Manmohan Singh knows, is the chief underpinning of any credible economic reforms programme. States which are undermining fiscal prudence should be told to behave for the sake of the UPA's credibility.
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<!--QuoteBegin-->QUOTE<!--QuoteEBegin--><b>Forex reserves down by $1.1 billion </b>
PTI / Mumbai
After rising continuously for the past three weeks, India's foreign exchange reserves fell by $1.1 billion for the week ended August 19, 2005.
The forex reserves stood<b> at $1,43,218 million, a fall of $1,157 million</b>, during the week under review, according to Reserve Bank of India's weekly statistical supplement released here on Saturday.
The fall in inflows is mainly due to the revaluation of international currencies especially USD, analysts said. <b>Foreign currency assets also decreased by $1,141 million to $1,37,383 million, it said. Gold reserves and Special Drawing Rights (SDRs) remained static at $4,395 and $ four million, it said.The country's reserve tranche position fell by $16 million to $1,436 million</b>, it said.
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<b>THE last thing you would expect India's call-centre bosses to be worrying about is a shortage of staff. The entire âbusiness process outsourcingâ (BPO) industry, including a wide range of services besides manning the telephone, employs an estimated 348,000 people (see chart). Nearly 3m English speakers graduate from university every year. That has been India's big attraction: call-centres have been spoilt for choice. Yet finding and retaining qualified workers has become the industry's biggest medium-term worry. It may, as a new report by Gartner, a consultancy, puts it âstall the offshore call-centre boomâ.</b>
The infant industry has grown explosively. Youngsters have hopped from job to job. Staff-attrition rates for the industry as a whole have climbed to 45-50% a year. Entry-level salaries have now reached about 10,000 rupees a month ($230), considered very high for a first job (which explains why outsourcing to India remains so attractive). Training costs are also mounting, as firms take on less-qualified applicants. Sam Chopra, president of the Call Centre Association of India (CCAI), which represents some 60 of India's 400-odd BPO firms, says the pressure is such that firms do not always check staff references at once. Such slipshod practices are blamed for the very few, but widely publicised, fraud scandals.
Call-centre jobs, rather glamorous until recently, are losing their allure. Staff often have to work nights, put up with abuse and undergo undignified security checks. With the number of BPO workers expected to reach 1m by 2009, a shortfall of 260,000 qualified personnel is predicted. Sujay Chohan, of Gartner, contrasts BPO with India's booming software-development industry. There, Indian firms grew in parallel with their mostly American clients. Engineering colleges, in-house trainers and private institutes kept pace with demand. In businesses such as call-centres, however, growth is even faster and training has been much less organised.
The industry is beginning to help itself. The CCAI, with the Confederation of Indian Industry, has launched a training initiative. It will offer a standardised qualification for new BPO workers: improving English, âneutralisingâ accents, teaching some computer skills and so on. NASSCOM, a lobby for the software and services industry, is also introducing an âassessment and certificationâ programme for would-be employees. Such schemes should cut costs, ease wage pressures and help keep crooks out.
<b>India still has a unique combination of manpower and English-language skills. But the full potential of BPO, beyond call-centres, has only been glimpsedâthere are huge emerging markets in legal services, accounting, health care, personnel services, and so on. It would be a shame if India were to miss out by misusing its one unbeatable, seemingly inexhaustible resource: well-educated young people.</b>
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