Thread: Indian Economy

GoAir to buy 20 Airbus planes for 5,300 cr

MUMBAI, FEB 22: GoAir has placed an order for 20 aircraft with Airbus at a contract value of $1.2 billion (approximately Rs 5,300 crore). The orders were placed in the Asian Aero Space Conference in Singapore on Wednesday.

"The additional aircraft will allow us to expand aggressively into the North Indian and metro-to-metro flight routes," GoAir managing director Jeh Wadia said in a statement released here on Wednesday. GoAir currently operates 3 Airbus A320s on 24 flights covering 11 cities.

The airline required these planes in order to respond to the "tremendous growth in air traffic we are experiencing in India and the increasing demand for GoAir," Mr Wadia added.

GoAir is a low-cost carrier promoted by the Wadia Group, launched in November 2005 with scheduled services to Goa, Ahmedabad, and Coimbatore from Mumbai. The airline had already announced its plans to expand its fleet to 36 aircrafts in three years and the current announcement is part of this plan.

"These aircraft will allow us to develop our network and introduce new routes not previously served and we are excited about being able to offer the "Fly Smarter" experience to more cities and passengers throughout India," Mr Wadia said. The new aircrafts too would have a single-class economy layout with 180 seats.

Link

And here is the main danger to the Indian economy

Infrastructure

http://news.bbc.co.uk/2/hi/business/4715802.stm

Mumbai has had a long history of trade.


Mumbai plays host to ships of all shapes and sizes

Between the 9th and the 13th centuries, the Indian Ocean - and especially the Arabian Sea, on which Mumbai sits on - was the world's centre of commerce.

Ships laden with goods transported merchandise between Mumbai (Bombay) and cities in the West.

As demand for goods from India increased, shipping lanes were crowded and busy, and Mumbai's businessmen prospered.

Hundreds of years later, business is still booming in the city, now India's financial capital.

The Indian economy is expected to grow by 7% this year at least, and 5% of that comes from Mumbai.

Western retailers and manufacturers are hungry for Indian products - like garments, footwear, and steel.

And as more Indians are able to afford goods from the West, imports to India are growing too.

Nought to 60%

In an attempt to meet demand from both outside and inside India, the country has built a brand-new port.

Jawaharlal Nehru Port Trust (JNPT) is about an hour's ferry ride away from the main city of Mumbai, and it currently acts as a conduit for more than 60% of India's imports and exports.

It was built in 1989 to divert congestion at Mumbai's original ports, run by the Mumbai Port Trust.

And with demand soaring, it is now expanding.

Its very hard to do business in this city, but you can't leave it either... This is the commercial hub of India

Manoj Jagwani

"We are building two new container terminals, which will be ready in the next few years," says Chairman Ravi Budhiraja.

"The demand for importing and exporting goods through Mumbai city is expected to grow threefold in the next few years, as the economy grows by 7% or 8%.

"Already we've seen business at our ports increase. In order to handle the growing demand, we have to expand our capacity."

'You can't leave'

For some, the expansion cannot come fast enough.

Manoj Jagwani has been exporting home furnishings to Western retailers such as Ikea and Carrefour, for 14 years.

Hundreds of trucks belonging to companies such as Mr Jagwani's crawl along the route to Mumbai's ports every day, carrying billions of dollars worth of merchandise.

But congestion at the ports have caused delays in shipments of his goods to Europe and America, leaving them - on occasion - stacked in warehouses for as much as a month.

Even before the goods reach the dockside, there is Mumbai's vicious congestion to contend with, which means a 40-kilometre journey can take 10 hours, even on a good day.

Red tape can add as much as a week too.

Mr Jagwani is understandably frustrated with the slow pace of development at the ports.


The port now accounts for 60% of India's cargo

"Its very hard to do business in this city, but you can't leave it either," he says.

"This is the commercial hub of India. If I move from Mumbai, where do I go? All my suppliers are here, my manufacturers are here, my workers are here. I can't just up and leave and go somewhere else."

Infrastructure shortfall

And it is not just the Mumbai ports that are facing this problem.

Infrastructure in some of India's main commercial hubs is in desperate need of investment.

Traffic in Bangalore, India's Sillicon Valley, regularly grinds to a halt, and this has caused many foreign firms to rethink their decisions to set up in the city.

Bangalore's state government is worried and says the city needs a new brand image to attract more foreign investment to its shores.

But in order for that to happen, Bangalore needs more investment in its infrastructure.

Breakneck pace

As does Mumbai.

The city's ports, roads and airports cannot handle the pace of growth in India.

The Indian government wants to attract more foreign investment, and in an attempt to do that it privatised two of India's major airports, Mumbai and Delhi, this month.

But the privatisation was met with protests and strikes across the country by airport workers.


The new port is already needing to expand

They say they are worried that privatisation will cost them their jobs.

Foreign investors say privatisation of state owned entities, and modernisation of roads and airports, must happen soon.

"The privatization of Mumbai airport is a test case fore foreign investors," says Andrew Holland of Merrill Lynch in Mumbai.

"If it happens, it will help India to maintain its economic pace of growth of 6-7%.

"But there are concerns that if it stalls, then imports and exports will stall, and that could spell trouble for the economy."

I want to see privatization moves in the oil industry now.

I want to see excise duties on manufacturing sector goods to be lowered by 4%/

I recently learnt that there is this environment law in India established in the 1950s by Mr idiot himself, PM Nehru, where a commercial building which is greater than 100000sq ft( or was that 10000sq feet) cannot be built until permission is given by the federal govt. This process takes 15 months on average with all the kickbacks you can imagine of course. iN a country where a service boom is forcing banks and it companies etc to expand on the infrastructure front, something we need anyway, note the magic word infrastructure, such idiotic Nehruvian laws need to be abolished.

Jagson to buy 20 Airbus planes for $1.3 bn

FEB 23: Jagson Airlines Ltd, an Indian airline which flies to northern tourist destinations with propeller planes, said it will buy as many as 20 planes from Airbus SAS for $1.3 billion to start a nationwide carrier.

Jagson held discussions with Airbus during the Singapore air show and is deciding on the financing for the project, the New Delhi-based airline said in a statement obtained by e-mail. The airline plans to buy 14 of Airbus’s A321 type of planes on firm order, with an option to buy another six.

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Long-distance calls may cost a third less

Access deficit levy cut, BSNL to take Rs 2,000cr hit.

National and international long-distance call charges are set to fall by a third as the Telecom Regulatory Authority of India today announced a sharp cut in access deficit charge — a levy paid by telephone users to fund Bharat Sanchar Nigam Ltd’s rural telephony. BSNL is likely to suffer an annual revenue loss of about Rs 2,000 crore due to this cut.

For STD calls, Trai has said that telecom companies will pay 1.5 per cent of their annual adjusted gross revenue as ADC against 30 paise per minute at present. Operators’ revenue from rural subscribers will be exempted from revenue-share.

Trai has retained the per-minute ADC for international calls, but reduced it to 80 paise per minute for outgoing calls and Rs 1.60 per minute for incoming calls. In addition, international long-distance operators will share 1.5 cent of revenue as ADC.

The new norms come into effect on March 1 and will reduce the total ADC amount to Rs 3,335 crore from about Rs 5,340 crore at present.

According to Trai estimates, of the Rs 3,335 crore ADC collection, BSNL will get only Rs 3,200 crore, as private operators have been allowed to retain the ADC they collect on all STD calls and outgoing international calls from their fixed-line customers.

Trai also added that the ADC regime would be eliminated by 2008-09.

The regulator also set a ceiling on carriage charges for domestic long-distance calls at 65 paise per minute, against the current ceiling of Rs 1.10 per minute. But the call termination charge has been retained at 30 paise per minute.

“The main thrust of this regulation is to give further relief to domestic consumers,” Trai said in a statement. More importantly, the reduction will enable all operators to roll out OneIndia tariffs for STD calls at Re 1 per minute.

All leading private operators, including Bharti, Reliance Infocomm and Idea Cellular, have said that the reduction will be passed on to subscribers. Telecom industry analysts have estimated that if the entire reduction is passed on to subscribers, STD tariffs can reduce by up to 35 per cent and ISD by about 25 per cent.

On BSNL suffering an annual revenue loss of about Rs 2,000 crore, Minister for Communications and Information Technology Dayanidhi Maran said the PSU had taken this factor into account before announcing its OneIndia tariffs.

“The prescription of a 1.5 per cent revenue represents a significant reduction of the ADC burden on the industry and in turn, on consumers. This will reduce telecom tariffs across the board, and will facilitate the offer of competitive OneIndia tariffs by all private operators,” said TV Ramachandran, director-general, Cellular Operators’ Association of India, a body representing all GSM players.

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NEW DELHI: India’s centre-left coalition is likely to cast the tax net wider and simplify the tax structure in its annual budget on Feb 28, as it seeks more funds to spend on the poor without blowing a hole in its finances.

Analysts say the government will probably slash import duty to bring it more in line with India’s Asian neighbours while still pursuing its drive to raise revenue for projects aimed at 260 million poor by phasing out some tax breaks and taxing more services.

The communist-backed government is seen having to improve tax compliance, remove exemptions and further streamline collection if it wants to fund new spending without increasing debt or breaking a law that commits it to deficit reduction.

“The emphasis will be on widening the tax base. There will be an incremental effort to reform the system,” said V Anantha Nageswaran, director of Libran Asset Management, Singapore.

“I hope there will be a concerted effort to ensure that the benefit of evasion is lower than the benefit of paying taxes.” The strategy is not new.

The Congress party-led coalition government has made tax reform the centre of its fiscal policy since being elected in May 2004, subscribing to the view that lower taxes lead to greater compliance.

The concept has worked so far, as tax collection to gross domestic product is expected to rise to 10 percent this financial year from 8 percent in 2002. reuters

India should not worry that much about the fiscal deficit, as long as gdp growth remains strong, this will not be a problem, worry about the revenue deficit in stead, this is a more direct problem.

Also deficits are not all that bad to maintain if the money is spent on productive sectors such as infrastructure.

The FBT must also be lowered or scrapped and i would rather see a small increase in corporate taxes rather than the FBT (although corporate taxes are high already in india). IN any event we need to simplify this tax system of ours, it makes zero sense.
We need to encourage people to use plastic in this country, not necessarily credit cards but debit cards, this will help the GOI in mopping up VAT, we all know what happens when people pay cash in India, half the things being sold are not even declared by the shop keepers.

Economy set to grow at over 8%: CII

NEW DELHI, FEB 26: Industry chamber CII has projected the economy to grow at over 8% this fiscal in line with quick estimates by the central statistical organisation due to good monsoon and impressive growth in services sector.

However, fiscal and revenue deficit targets are likely to be missed, the chamber said in its latest state of the economy report.

Pointing out that both exports and imports registered a decline in the first three quarters of the current fiscal, the report said major challenge lies in increasing the growth of exports as bringing down the imports growth may not be advisable in view of the capital-intensive nature of imports and high oil prices.

The chamber also said the fear of rupee getting weak does not hold water at the moment since the real effective exchange rate assumed a rising trend during the first nine months of this fiscal.

The projection of 8% plus growth is based on the revised 1999-2000 prices, but on the old series of 1993-94 prices the growth is expected to be in the range of 7.7-8 per cent, close to the forecast by the Reserve Bank of India. During the first half of this fiscal, the economy registered an 8.1% backed by strong performance of manufacturing and services sector, CII said.

A high growth in manufacturing and services sector brought down the share of agriculture in GDP from 18.6% in the first half of 2004-05 to 17.5% in H1 of 2005-06, the report said.

On revenues, it said growth in direct taxes stood at 19% during the first nine months of this fiscal against the target 32% for the entire 2005-06, while indirect taxes showed slightly higher growth of 11.6% against the target of 11.3%.

The growth in direct tax collections for the period as a whole is likely to increase, considering the seasonal pattern of income tax receipts, the chamber said.

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Rs 1 lakh car to have a tsunami effect: study

NEW DELHI, FEB 26: The entry of a Rs 1 lakh car in the Indian market, being developed by the Tatas, would lead to a “structural shift” in the dynamics of the Indian automobile industry because of its “tsunami-like” effect, according to J D Power.

JD Power, a global marketing information firm that conducts independent surveys of customer satisfaction, product quality and buyer behaviour, particularly in the auto industry, feels such a low-price proposition, costing nearly half the current entry-level car offering, is capable of changing the landscape of the Indian auto market.

“If the car happens, it will mean a structural shift to the market. It changes the landscape of the industry, quite like the tsunami which changed coastlines,” J D Power’s director (India) Mohit Arora said here.

The idiotic Kangress babus are planning to ammend the Indian Postal act. For a while now all of us have been sending our mail through courrier services because they are more efficient. This has resulted in a major loss of revenue to the Indian postal service. So Kangress want to ammend the act and stipulate that anything below 500mg can only be carried by the Indian postal service.

Kangress should make the IPS more competitive and more efficient by letting it compete, we have seen BSNL and Indian competing well and even the railways have started to compete and are doing better. I dont understand why Kangress wants to force Indian consumers to buy an inferior service, ie sending letters by the Indian postal service when they stink.

Monday, February 27, 2006 (New Delhi):

Cautioning that the economy's rosy outlook was not devoid of risks of inflation, hardening interest rate and fiscal deficit, Economic Survey prescribed hastening tax and labour reforms.

The 2005-06 Survey tabled in Parliament said the Indian industry needed to be unburdened from high level of taxes.

"Simplification and digitisation of tax administration remains a pre-requisite for a transparent and hassle free tax system," the report card of the government, said.

The Survey projected economic growth of 8.1 per cent during 2005-06 with new industrial resurgence, pick up in investment and modest inflation.

Power shortages

Identifying power shortage as the single most impediment to growth, the Survey said appropriate policy initiatives constituted the first and foremost challenge for speedy infrastructure development.

It favoured liberalisation of FDI regime for captive mining as slowdown in mining sector was of concern, especially coal.

The Survey said regretting that the movement towards market determined prices in the hydrocarbon sector has floundered pending resolution of subsidies in domestic LPG and PDS Kerosene.

The Survey said high deficit, unproductive expenditure and tax distortions have constrained the economy from realising its full growth potential.

The Survey also stated that there was much scope for better productivity in expenditure and greater growth through deepening the reform process for harnessing higher savings and investments.

High and volatile global petroleum prices put an uncertainty in inflation outlook casting its shadow on the interest rate scenario, which may pose a risk of dampening the domestic investment boom.

The fiscal risk, both at the Centre and state level, has led to expenditure compression of the wrong kind. The government should revert to meeting the FRBM target of reducing fiscal and revenue deficit by 0.3 and 0.5 per cent of GDP annually.

The Survey cautioned the Government while constituting sixth pay commission to avoid deterioration of state and central finances.

Infrastructure development

Laying emphasis on infrastructure development, the Survey said Rs 1,72,000 crore was required for highways by 2012, Rs 40,000 crore for airports by 2010, Rs 50,000 crore for ports by 2012.

A substantial share of this investment is expected to come from the private sector and India has a potential to absorb $150 billion of FDI in next five years.

To speed up infrastructure development, a well-defined regulatory mechanism has to be put in place to increase the comfort level of different players in the market.

Agriculture reforms

The Survey laid special emphasis for speeding up agriculture and rural development, particularly in areas like horticulture, floriculture, organic farming, genetinc engineering, food processing, branding and packaging and futures trading.

It also listed some of the issue that needed to be tackled in agriculture like low yield, volatility in production and wide disparities in productivity.

It also favoured a shift from the existing Minimum Support Price (MSP) and Public Procurement System and developing alternative product markets.

The Survey stressed on a paradigm shift to encourage banks to look at credit to small and medium enterprises and agriculture as an opportunity for profit.

It suggested efficient management and delivery of social sector programmes through adequate capacity building, decentralisation of implementation and transparency in delivery and accountability of agencies involved.

It said emphasis should be laid on quality of outcome of various social sector programmes including education and health rather than quantity of coverage.

Concerned over the rapid growth of public pension liability, the Survey wanted pension reforms, including the passage of Pension Fund Regulatory Development Authority Bill, to be speeded up. (PTI)

1. Economic growth projected at 8.1 per cent in 2005-06
2. Agriculture growth at 2.3 per cent
3. Foodgrains output up by 5 million tonnes to 209
4. Inflation rate projected at 5 per cent in current fiscal
5. In medium-term, inflation likely to fall
6. Interest rates may harden
7. Savings rate up at 29.1 per cent of GDP
8. Investment rate up at 31 per cent of GDP
9. Industrial growth at 7.8 per cent (April-December)
10. Fiscal and revenue deficit targets to be met
11. Tele-density increases to 11.32 per cent
12. Current account deficit surfaces after a gap of 3 years
13. Trade deficit increases
14.Bold policy reforms in oil sector required
15. Policy required for speedy development of infrastructure
16. Indian industry needs to be unburdened from high taxes
17.Forex reserve down by $2 bn to $139.2 bn (till Jan'06

India's Finance Minister Palaniappan Chidambaram delivered his "common man's budget" on Tuesday, setting an ambitious annual growth target of 10%.
He said India was on target to cut its fiscal deficit - the difference between what it spends and earns each year.

Two out of three Indians still live on less than $1 a day and the budget focused on agriculture, healthcare and education for the masses.

Education spending is to rise by 31.5% and health spending by 22%.

Analysts welcomed the news that the Union Budget would seek to cut the fiscal deficit to 3.8% of gross domestic product (GDP) next year from a better-than-expected estimate of 4.1% this year - relying on the extra tax revenues from India's booming economy.

"For the first time, India has seen the government deliver on trying to keep fiscal deficit under control and that is the most positive aspect of this budget," said Hemen Kapadia, a technical analyst with investment advisors Morpheus Inc.

Infrastructure

The minister also announced a series of infrastructure projects aimed at producing the power supply, roads, ports, railway stations and airports needed to sustain the rapid growth of Asia's third-biggest economy.

He allocated 187bn rupees ($4.1bn; £2.4bn) for rural infrastructure projects and said contracts to build five huge power projects would be awarded by December.

The budgetary proposals on infrastructure and social sectors sound good, but one concern is how will the government find resources for funding these projects?

Gurunath Mudlapur, Atherstone Institute of Research


Do India's sums make sense?

India will also build 1,300km of "access-controlled" highways linking key cities, including Mumbai and Baroda, Bangalore and Madras, and Delhi and Agra.

Some 96% of the Golden Quadrilateral, a major highway project connecting the four corners of India with the capital Delhi, will be completed by the end of 2006 and the entire project by 2008, he said.

The government expects 220bn rupees to be spent on oil refining over the next few years, and will encourage spending on refineries, pipelines and green fuel.

Mr Chidambaram said he wanted to double India's share of world exports to 1.5% by 2008/9, and the government would promote the textiles, automobile, leather and food processing industries as a means of doing this.

Rural areas

Lack of investment has hampered the growth of many Indian industries, and he asked banks to treat the food processing industry as a priority sector.


A massive road building plan is underway in India

Food processing could be a key driver of growth and employment in India's rural areas.

More than half of India's population are employed there - but they produce just 20% of the country's gross domestic product (GDP) and lack the resources to develop their farmland.

Farm sector output is expected to grow by 2.3% in the year to March 2006, way behind the growth levels seen in the industry and service sectors.

Taxes

Although the budget contained no major changes in personal or corporate taxes, many analysts seemed to think that taxes would have to rise somewhere.

"The budgetary proposals on infrastructure and social sectors sound good, but one concern is how will the government find resources for funding these projects?", said Gurunath Mudlapur, managing director at the Atherstone Institute of Research in Mumbai.

"There could be fresh taxes to mobilise resources and that could be a concern."

http://news.bbc.co.uk/1/hi/business/4757578.stm

The BBC has made a bit of a bubu there, 2/3 of Indians dont live on less than 1$ per day, that is absolutely false and a quick visit at the 1999, forget 2006 World Bank poverty figures will proove this.