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Thread: Indian Economy

  1. #526
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    India expects $12b foreign investment this year

    Thursday, June 22, 2006

    By Khalid Hasan

    WASHINGTON: India expects to attract around $12 billion in foreign direct investment this year with growing interest among companies from Japan, South Korea and Taiwan, the Associated Press reported on Tuesday quoting an Indian government official.

    Foreign direct investment to India last fiscal year, ending in March, totalled nearly $8 billion and the government had earlier projected it to increase to $10 billion this year.

    Industry Secretary Ajay Dua is quoted as saying that the target was revised upwards after encouraging response from companies in Japan, Taiwan and South Korea, whose investments in India so far have not been large. The United States and Western European states have been the major investors of foreign capital in India. “We hope to attract about $1 billion from Japan this year, while investments from South Korea and Taiwan should be $500 million each,” Dua said. Several companies from Japan, Taiwan and South Korea are already engaged in talks with the government, exploring investment options.

    According to AP, Japan’s Nissin Electric Company Limited has shown interest in building a facility to manufacture and export power-distribution systems. “They are also looking at an investment of $200 million. Nissin’s president Koshi Itaka had a meeting with us yesterday (Monday),” Dua said. “Most Taiwanese companies that have shown interest to invest in India are in sectors like manufacturing of computer hardware, electronics assembly as well as electrical equipment,” he added. “The feedback we got from them is very positive.”

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    Huge Indian airlines merger off

    Jet Airways commands 35% of the market in India
    Indian airline Jet Airways' deal to buy rival carrier Air Sahara has fallen through after a deadline to complete it passed at Wednesday midnight.
    The $500m (£284m) deal would have been the biggest in India's aviation, creating the country's largest airline.

    The BBC's Karishma Vaswani in Mumbai says the deal failed because Jet Airways felt the price was excessive and wanted a discount.

    Air Sahara will take back control of its airline, a company official said.

    Jet Airways, which was founded by London-based former travel agent Naresh Goyal, controls about 35% of the Indian domestic airline market.

    Air Sahara, owned by the reclusive businessman Subrata Roy, controls about 9% of India's market, analysts say.

    The takeover was subject to approvals from the government and would have allowed Jet Airways to use Air Sahara's fleet, air routes and traffic.

    The deal was proving to be an expensive proposition for Jet Airways

    Kapil Kaul, aviation analyst

    "From Thursday, we are going to run our airline as if there had not been any deal. It is our firm belief that we will be able to run the airline as we have been doing over the past 13 years," Air Sahara president Alok Sharma was quoted in The Hindu newspaper telling reporters.

    'Expensive'

    Jet Airways had also failed to secure government permission for its chairman Naresh Goyal to join the board of directors of the rival carrier.

    There has been no official comment as yet from Jet Airways on the developments.

    One aviation analyst said the deal would not have made financial sense for Jet Airways.

    "The deal was proving to be an expensive proposition for Jet Airways. Not only was it paying $500m to buy Sahara but it would have ended up paying more money to bring it to the same operational level as itself," Kapil Kaul, chief of the Delhi-based Centre for Aviation told the BBC.
    Goyal was refused government permission to join the Sahara board

    "It would make more sense for Jet to invest all those resources in consolidating its position in the domestic and international markets."

    Mr Kaul said Indian fliers will not be affected by the development.

    "They will continue to get air tickets at unbelievable prices from other airlines. With new airlines entering the market soon and increased competition, passengers will continue to enjoy the good times," he said.

    Jet has 43 aircraft and runs 320 scheduled flights daily to 48 destinations in India and abroad. It recently won government permission to fly to London, Singapore and Kuala Lumpur.

    Air Sahara has 27 aircraft and operates 134 flights daily in India. It recently begun flying to the US, London and Singapore.

    Explosive growth


    India recorded a 25% growth in air passenger traffic in the past year alone on the back of a booming economy and lower fares.

    Indian airlines emerged as big buyers at last year's Paris Air Show, placing orders worth roughly $12bn.

    State-owned Indian Airlines and Air India will be buying 111 new airplanes between the two of them, including 50 wide-bodied long-range planes, and 43 Airbus aircraft to replace an existing fleet.

    But India's aviation industry is hampered by overcrowded airports, stretched air traffic controls, antiquated ground handling equipment and a shortage of pilots and engineers.

    India began to open up its domestic airline market - previously dominated by state-run carrier Indian Airlines - in the 1990s.

    http://news.bbc.co.uk/2/hi/south_asia/5104760.stm

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    India’s inflation rate eases as economy grows

    NEW DELHI: India’s inflation rate fell on Friday but analysts still forecast the central bank would hike a key interest rate next week to restrain prices in the fast-growing economy.

    They pointed to asset price inflation, surging oil prices, fast credit expansion and strong industrial activity in Asia’s third-largest economy which logged first-quarter growth of 9.3 per cent as reasons for the hike.

    Inflation slipped to 4.68 per cent for the week ended July 8 from 4.96 per cent the previous week due to cheaper food prices, official data showed.

    But the rate measured by the wholesale price index India’s closely watched price monitor was up more than two-tenths of a percentage point from its year-ago level of 4.46 per cent.

    Analysts said they expected the Reserve Bank of India (RBI) would hike its benchmark short-term reverse repo rate by a quarter of a point to six per cent at its policy meeting on Tuesday.

    “We expect the RBI to raise rates by 25 basis points,” said Romya Ramachandran, econ-omist at IDEAglobal in Singapore, citing “high levels of wholesale price inflation, asset price inflation and money supply growth.”

    Such an increase would mark the third rate hike this calendar year. The bank raised its key lending rate by a quarter point to 5.75 per cent last month following big fuel price increases as the government cut subsidies to bring oil prices closer into line with world costs.

    Since the hiking cycle began in October 2004, the reverse repo rate has risen by 125 basis points and analysts say next week’s expected hike may not be the last.

    The bank’s “statement will be hawkish and emphasise demand-driven inflationary pressures and the incomplete pass-through of higher global crude oil prices” as inflationary risks, said Rajeev Malik, senior economist at J P Morgan Chase Bank in Singapore.

    Added to this are expectations of further global monetary tightening which would put pressure on the RBI to follow suit, economists said.

    A hike in the cash reserve ratio, now at five percent, was unlikely but could not be ruled out later in the year if loan growth “remains stubbornly high,” added Malik.

    The cash reserve ratio is the percentage deposit banks must keep as cash with the central bank and a vital tool in managing credit growth.

    Credit has been growing at its fastest pace in three decades. Finance Minister P. Chidambaram told reporters there was “some uncertainty” over inflation that he hoped would “get resolved in the next few days and weeks.

    Inflation will be kept under control both by the government and RBI.” At the same time he said 4.68 per cent inflation was “tolerable.”

    Analysts say inflation could end the fiscal year to March 2007 at nearly six per cent, just over the bank’s forecast of 5.0-5.5 per cent and that it may raise its inflation target to 5.5-6.0 per cent.

    Another rate hike should not have much effect on economic growth even though it could slow personal consumption, analysts said.

    “The real concern is the monsoon. If it’s normal, agriculture production will go up and we should have 7.5 per cent-8.0 per cent growth. If it’s not good, we could see growth of seven per cent,” said D H Pai Panandiker, head of New Delhi economic think-tank RPG Foundation. The economy grew by 8.4 per cent in the last fiscal year.

    http://www.thenews.com.pk/daily_detail.asp?id=16607

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    The mango is known as the 'king of fruit' throughout the world.The name 'mango' is derived from the Tamil word 'mangkay' or 'man-gay'. When the Portuguese traders settled in Western India they adopted the name as 'manga'.

    Mangos originated in East India, Burma and the Andaman Islands bordering the Bay of Bengal. Around the 5th century B.C., Buddhist monks are believed to have introduced the mango to Malaysia and eastern Asia - legend has it that Buddha found tranquility and repose in a mango grove.

    Persian traders took the mango into the middle east and Africa, from there the Portuguese brought it to Brazil and the West Indies. Mango cultivars arrived in Florida in the 1830's and in California in the 1880's.

    The Mango tree plays a sacred role in India; it is a symbol of love and some believe that the Mango tree can grant wishes.In the Hindu culture hanging fresh mango leaves outside the front door during Ponggol (Hindu New Year) and Deepavali is considered a blessing to the house.Mango leaves are used at weddings to ensure the couple bear plenty of children (though it is only the birth of the male child that is celebrated - again by hanging mango leaves outside the house).

    Hindus may also brush their teeth with mango twigs on holy days (be sure to rinse well and spit if you try this at home - toxic).Many Southeast Asian kings and nobles had their own mango groves; with private cultivars being sources of great pride and social standing, hence began the custom of sending gifts of the choicest mangos.The Tahis like to munch mango buds, with Sanskrit poets believing they lend sweetness to the voice.

    Burning of mango wood, leaves and debris is not advised - toxic fumes can cause serious irritation to eyes and lungs.Mango leaves are considered toxic and can kill cattle or other grazing livestock.In India, a certain shade of yellow dye was attained by feeding cattle small amounts of mango leaves and harvesting their urine. Of course as stated above, this is a contraindicated practice, since mango leaves are toxic and cattle are sacred. It has since been outlawed.

    Mangos are bursting with protective nutrients. The vitamin content depends upon the variety and maturity of the fruit, when the mango is green the amount of vitamin C is higher, as it ripens the amount of beta carotene (vitamin A) increases.There are over 20 million metric tons of mangos grown throughout the tropical and sub-tropical world.

    The leading mango producer is India, with very little export as most are consumed within the country. Mexico and China compete for second place, followed by Pakistan and Indonesia. Thailand, Nigeria, Brazil, Philippines and Haiti follow in order.According to the Foreign Agricultural Organization, the top mango exporters reported in 1997 are as follows in order: Mexico, Brazil, South Africa, Haiti, Guatemala, Venezuela, Peru, Nicaragua, Dominican Republic.

    The fruit of the mango is called a Drupe - consisting of the mesocarp (edible fleshy part) and endocarp (large *****, flattened pit).The mango is a member of the Anachardiaceae family. Other distant relatives include the cashew, pistachio, Jamaica plum, poison ivy and poison oak.The over 1,000 known mango cultivars are derived from two strains of mango seed - monoembryonic (single embryo) and polyembryonic (multiple embryo).

    Monoembryonic hails from the Indian (original) strain of mango,polyembryonic from the Indochinese.Dermatitis can result from contact with the resinous latex sap that drips from the stem end when mangos are harvested. The mango fruit skin is not considered edible.Every part of the mango is beneficial and has been utilized in folk remedies in some form or another. Whether the bark, leaves, skin or pit; all have been concocted into various types of treatments or preventatives down through the centuries.

    A partial list of the many medicinal properties and purported uses attributed to the mango tree are as follows: anti-viral, anti-parasitic, anti-septic, anti-tussive (cough), anti-asthmatic, expectorant, cardiotonic, contraceptive, aphrodisiac, hypotensive, laxative, stomachic (beneficial to digestion)....Mangiferin - rich in splenocytes, found in the stem bark of the mango tree has purported potent immunomodulatory characteristics - believed to inhibit tumor growth in early and late stages.

    http://economicstrategy.blogspot.com/2006/07/mango.html

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    Mobile boom drives up Bharti net 48%

    Riding on the overall spurt in growth in the Indian mobile market, Bharti Airtel on Wednesday said net profit for the quarter ended June 30 this year had grown by 48 per cent to Rs 755 crore over Rs 510 crore in the same period last year.

    Total revenues for the period under review grew by 53 per cent to Rs 3,856 crore, up from Rs 2,517 crore a year before. The strong performance came on the back of the highest ever net-addition of 3.65 million customers in a single quarter by the company.

    Bharti Tele-Ventures joint managing director Akhil Gupta said the growth could be attributed to three factors - the overall rapid growth in mobile usage in a market that added 13 million subscribers during the first quarter of 2006-07, Airtel's reach that covers 46 per cent of the country's population, the company's focus on expenses and the economies of scale it enjoys in purchasing. "I am confident that we will be able to sustain this growth", he added.

    Bharti Airtel's total customer base stood at 24.5 million at the end of the first quarter, of which 23 million are mobile users and the rest broadband and fixed-line users.

    CMD Sunil Mittal said: "The Indian telecom sector continues to demonstrate a strong growth led by the mobile segment, crossing the 100 million subscribers this past quarter. We have started the year well with strong operational and financial performance and, under the new management structure we are confident that the growth momentum would be sustained."
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    Thales UK wins $24 million Full Flight Simulators Contract

    Kingfisher Airlines India's fastest growing airline and the first Indian carrier to offer Full Service at True Value today in a contract valued at over $24 million signed Thales UK for the supply of three new Full Flight Simulators (FFS).

    Thales UK will be providing two A320 Full Flight Simulators and one ATR Full Flight Simulator. The contract also includes provision of a Thales A320 maintenance/flight training device (MFTD) and a turnkey maintenance support package.

    All the equipment to be supplied will be from the Thales Formation family, a product range that covers all civil aviation crew training from desktop to FFS. Formation provides customers with a suite of products based on the same PC/Windows NT real time architecture allowing for effective training syllabi across multiple devises.

    Dr Vijay Mallya, Chairman & CEO, Kingfisher Airlines, said:
    Kingfisher Airlines is the fastest growing airline in India and I have personally ensured that every Kingfisher Airlines aircraft meets the international standards in terms of safety. I am proud of our brand new fleet incorporating the latest technology available. The addition to our stringent crew training regime provided by Thales equipment, which I am personally convinced is the best available, is our way of ensuring our commitment to customer safety.

    Justin Walker, Managing Director of the Thales UK services business, said:
    With the growth of Kingfisher Airlines and aviation in the Indian subcontinent in general, we are particularly proud to have been selected by such a discerning customer in a highly competitive market.

    Kingfisher Airlines currently operates a fleet of 14 brand new aircraft from the Airbus family and ATR and connects 17 key business and leisure destinations with 86 flights daily across India. Kingfisher Airlines is the first Indian carrier to have placed an order for five Airbus A380s, five A350s, five A340s and five A330s. The deliveries of A330s are expected to begin in 2007, of A340s in 2008 while the A380s and A350s arrive in 2010 and 2012 respectively.
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    India could stop importing mobile phones by 2007, says Maran

    Chennai, July 28: India could stop importing mobile phones by the second quarter of 2007 with telecom majors setting up their production units in the country, Union IT and Communications Minister Dayanidhi Maran said here today.

    Nokia is already producing over two million phones from its facility in Chennai every month and Motorola, which is expected to begin operations on January 14, 2007, is expected to produce about 1.3 million phones every month," he said.

    Speaking at the Regional Annual Meeting of Indo-German Chamber of Commerce, Maran added that 80 per cent of mobile phones needed in the country will be manufactured in Chennai.

    Maran said that Germany is India's fourth largest trading partner after the US, UK and Japan. "It has crossed record USD eight billion last year. Indian imports grew by almost 35 per cent, while India's exports to Germany rose by 12 per cent." He said that it was time for the small and medium entrepreneurs to make their mark in the Indo-German trade relations. He also called upon the German companies to participate in developing the infrastructure in the country.

    Bernd Muetzelburg, Ambassador of Germany to India, said his country wanted India to continue the reforms process it started in the early 1990s.

    He said India has to overcome the "red tapes" that still existed in its system.

    "You will have to improve conditions for inclusive growth. Connect the 800 million people in villages with the 200 million who are enjoying the economic miracle that is happening in India," he added.
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    India's forex reserves increased by USD 689 million to stand at USD 163.348 billion

    India's forex reserves increased by USD 689 million to stand at USD 163.348 billion during the week ended on July 21, 2006, as against USD 162.659 billion during the week ended July 14, 2006.

    The reserves had decreased by USD 601 million during the preceding week ended July 14, 2006, compared to a week ago period.

    Foreign currency assets increased by USD 682 million to USD 156.398 billion during the seven-day period ended July 21, 2006, according to figures released by the Reserve Bank of India.

    Foreign currency assets in dollars include the effect of revaluation of non-US currencies such as Euro, Sterling, Yen held in reserves.

    Reserve position in the IMF stands at USD 763 million.

    Gold reserves remained static at 6.18 billion while SDR has increased by Rs. 31-crore to Rs 33-crore.
    http://www.outlookindia.com/pti_news.asp?id=402504

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    Aids 'could hit' India's growth

    More than 5m people in India have HIV

    India's economy could suffer if the country fails to check the spread of HIV and Aids, a new report says.
    Economic growth currently at 8% could fall by nearly 1% if the disease is not contained, it says.

    But the head of India's main anti-Aids agency said the government's prevention drive could help reverse this.

    More than five million Indians are infected with HIV and the UN says India now has more people with the virus than any other country in the world.

    "Economic growth could decline by 0.86 percentage points... and per capita gross domestic product by 0.55 percentage points," over a 14-year period beginning in 2002, the National Council of Applied Economic Research (NCAER), a government-funded body, said.

    It said the government needed to spend more on prevention programmes.

    "It is time to see policy action against Aids as a growth-enhancing policy endeavour, and, first and foremost, dedicate adequate resources for this purpose," the report says.

    Increased poverty

    The report identifies unskilled labourers in industries such as construction, chemicals, mining and quarrying as the most vulnerable to infection.

    It also concluded that Aids could lead to increased poverty in India.

    But Aids prevention organisations in India say that an aggressive campaign against the disease could head off the threat.

    "The government of India's scaled-up response in financing and energy will halt and reverse the trend the epidemic has shown over the next four or five years," said Ruben del Prado of UNAids.

    "We have already found that in high-risk states, the growth of HIV infections can be reversed with the government pushing an aggressive campaign against the spread of the disease," added Sujata Rao, director of India's National Aids Control Organisation.

    http://news.bbc.co.uk/2/hi/south_asia/5198402.stm

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    http://www.businessworldindia.com/issue/news02.asp

    Cairn Energy is planning to list its Indian subsidiary on the Bombay Stock Exchange in the last quarter of 2006. Bill Gammell, CEO of the Edinburgh-based oil explorer, says it could float anything between 25 per cent and 80 per cent shares of the company.

    Gammell says: “Oil majors have wrongly assessed the risks associated with India for many years. We have seen the benefits of being active in India.” He points out that the important lesson is that in the oil business one has to double the risk and halve the rewards.

    That has shown results since Cairn is, by far, the most successful global oil company in India. It has made 18 discoveries in Rajasthan. Of this, the Mangala field is among the top 100 wells globally and is expected to produce 150,000 barrels of crude a day by the end of 2008. Gammell points out that there is more than 3.5 billion barrels of oil in place within its Rajasthan acreage. This is expected to generate $40 billion to Cairn at $40-50 per barrel.

    Cairn that has invested close to $2 billion in India over the past decade is looking to expand its presence in India. For that, it will be bidding for blocks in the sixth round of the New Exploration and Licensing Policy (NELP-VI) that opens in September.

    On building a refinery in Rajasthan, he says: “As per the plan, the fuel was to be moved to the coast.” For that a pipeline has to be laid. Although there’s no clarity about it yet, Gammell is confident things will fall into place.

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    Indigo, India’s 13th airline, set to take off on August 4

    NEW DELHI, JULY 31: India's 13th scheduled airline and the fourth low-cost carrier (LCC), Indigo Airlines, will start commercial operations from August 4. Indigo's inaugural flight will be on the Delhi-Guwahati route, the airlines president and CEO Bruce Ashby said on Monday.

    Ever since the country's first low-cost carrier Air Deccan launched operations in August, 2003, LCCs have captured over 38% share of the fast-growing domestic aviation market. With new airlines like SpiceJet and GoAir also joining the race, share of LCCs is likely to touch 50% over the next two years, according to Centre for Asia Pacific Aviation estimates.

    With the aviation industry expecting an addition of 15 million first time air travelers this year, Indigo Airlines expects to carry 4.75 lakh passengers in its first year of operation, initially covering 10-odd routes.

    Only 19 jets fly in the country in the low-cost category. In the US, the largest low-cost airline, South West Airline, has a fleet of 453 jet aircraft followed by US Airways, which has 356 planes.

    Indigo had committed buying 100 A320 family aircraft at the Paris Air Show in 2005 at a list price of $6 billion. The 100 aircraft will be received over a period of 10 years, with an average addition of one aircraft a month.
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    Low-cost airlines further boost market share

    NEW DELHI, JULY 31: The low-cost carrier (LCC) phenomenon continues to rule the skies, as India’s full service carriers find it increasingly difficult to
    hold-fast on their share of the domestic market.

    While the battle between Indian Airlines and Air Deccan over the second largest domestic carrier’s slot intensifies, new low-cost entrants have cornered almost 15% additional market share between January and June 2006. Even in the international segment, the LCCs are increasingly gaining a
    chunk of the pie.

    The market share of full service carriers has come down from 76.4% in January to 60.3% in June. Indian Airlines’ market share fell from 25% to 21.8%. Air Deccan’s share has gone up from 13.3% in January to 20.3% in June, a marked rise of 7% within six months. Analysts feel Air Deccan’s share has grown because the company connects smaller towns with ATR aircraft where larger Airbus-A320s and Boeing-737s cannot land, thereby providing the airline some exclusive routes.

    According to Centre for Asia Pacific Aviation (CAPA) Indian Subcontinent & Middle East CEO Kapil Kaul, the LCCs are going to corner 50% market share within the next two years. “As per CAPA projections, low cost carriers will dominate with 60-70% share of the market. Full service carriers would have to equally serve both international and national markets to remain relevant in a five year scenario,” he said.

    Besides Air Deccan, another LCC SpiceJet, has increased its market share from 6% to 8% during the first six months of 2006. Kingfisher Airlines’ market share have shown a slight improvement at 8%.

    In the international sector, the international low cost carriers — Air India Express, Jetstar Asia, Jazeera Airways — have increased their market share from an insignificant number to 5-7% of the market.
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    India's Rating Raised to Investment Grade By Fitch

    India's Rating Raised to Investment Grade By Fitch
    Aug. 1 (Bloomberg) -- India had its debt rating raised one level to BBB- with a stable outlook by Fitch Ratings, which cited an improvement in the government's finances.

    Fitch raised India's long-term foreign and local currency debt ratings to its lowest investment grade level, bringing it on par with Croatia, Romania and Namibia. It also raised the country's short-term foreign currency rating a level to F3.

    ``This upgrade reflects Fitch's view that fiscal consolidation is at last taking hold in India, reinforced by the impressive growth story and India's strong external balance sheet,'' Paul Rawkins, senior director at Fitch in London, said in a statement today. ``Public finances are still weak, but they are no longer an insuperable constraint on this rating.''

    The rating upgrade may help lower borrowing costs for India's biggest companies and make Asia's fourth-biggest economy more attractive to overseas investors. Prime Minister Manmohan Singh's government is banking on faster growth to increase tax revenue and abide by a law that requires it to cut its budget deficit to 3 percent of gross domestic product by March 31, 2009, from 4.1 percent in the year ended March 31.

    ``Many funds that have restrictions on investment in non- investment grade countries such as India, may have a re-look and decide to buy local equities,'' said Janak Desai, country head of financial markets at ING Vysya Bank Ltd. in Mumbai. ``It may add pressure on other major agencies such as Moody's Investors Service and Standard & Poor's to revise their ratings.''

    Moody's, S&P

    Moody's in May raised India's local currency debt outlook to stable from negative while maintaining its Ba2 rating, two levels below investment grade, which was assigned in June 1998. Standard & Poor's in April raised India's local currency debt outlook to positive from stable. S&P has a BB+ rating, the highest non-investment grade, on India's local currency debt.

    India's benchmark Sensitive Index rose 0.1 percent to 10751.66 on the Bombay Stock Exchange at the 3:30 p.m. close, after declining as much as 0.9 percent during the day.

    The yield on the 7.59 percent note due in April 2016 rose 6 basis points, or 0.06 percentage point, to 8.30 percent as of 5:30 p.m. close in Mumbai, according to data compiled by Bloomberg. The rupee fell 0.1 percent to 46.5925 against the dollar at the 5 p.m. close of trading in Mumbai, according to foreign-exchange broker Kanji Pitamber & Co.

    ``The currency and bonds will be substantially benefited only after more global agencies upgrade India's ratings,'' said A. Prasanna, a fixed-income strategist at ICICI Securities Ltd.

    Budget Deficit

    India's budget deficit in the three months ended June 30 reached 52.3 percent of the government's 1.48 trillion rupee ($31.7 billion) target for the year, the Controller General of Accounts said yesterday. It was 36.1 percent of the year's target in the same period of 2005.

    India's Finance Minister Palaniappan Chidambaram said today though the government has accelerated spending, it is working to cut the budget deficit to the targeted 3.8 percent of gross domestic product in the year ending March 31.

    ``Recent monthly fiscal data are increasing the uncertainty over achieving the full-year fiscal deficit target,'' said Rajeev Malik, senior economist at JPMorgan Chase & Co. in Singapore. ``Fitch appears to have jumped the gun as there are increasing pressures that might impact the outcome for fiscal deficit, and the sanctity of the targets of the fiscal responsibility law.''

    The government expects India's economy to grow as much as 8 percent in the year ending March 31 following an average 8.1 percent gain in the past three years. Prime Minister Singh is aiming for 10 percent growth in the next two to three years.

    Rapid Growth

    Faster growth helped India contain its budget deficit to 4.1 percent of GDP in the year ended March 31, compared with its 4.3 percent target.

    ``Rapid growth is not only raising personal incomes but also feeding the government's tax revenue,'' said Sanjeev Sanyal, senior economist at Deutsche Bank AG in Singapore. ``However, reforms need to be accelerated in order to keep this cycle going otherwise it will eventually lose momentum.''

    India in July 2004 enacted a law that aims to cut the budget deficit each year by the equivalent of 0.3 percent of GDP, and to eliminate its revenue deficit by 2009, borrowing only to fund investments thereafter.

    Fitch today said that for the first time since it started rating India in March 2000, ``there appears to be near universal commitment among the centre and the states to fiscal consolidation'' and that has ``reduced the risk that India's weak public finances could impair its strong external financial position''.

    India's foreign-exchange reserves rose by $689 million to $163.35 billion in the week ended July 21, central bank said July 28.

    ``India has long demonstrated an ability to sustain much higher debt levels than many of its peers,'' Fitch said in its statement. ``Fiscal consolidation will remain the main focus of this rating, particularly in the context of such strong growth.''

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    Indian IT majors outsmart global peers: report

    New Delhi, Aug 4. (PTI) : It's advantage for Indian companies like Infosys, Wipro and TCS on the country's IT services arena over their global peers including the giants like IBM and Accenture on the revenue and profit growth parameters, a recent study shows.

    According to a report from global research firm Forrester analysing the performance of global IT vendors and their Indian counterparts, the tier one Indian providers have continued to thrive while major global players are continuing to lose ground.

    Forrester Research Vice President Stephanie Moore said that many global service providers are continuing to lose ground to large Indian firms, especially in the application services market.

    While most legacy service providers worldwide have posted minimal to negative growth in the recent past, companies like Infosys, TCS and Wipro have all reported outstanding revenue and profit growth for their latest quarters, she added.

    Forrester said Indian providers are clearly outsmarting global majors in terms of growth and profits, while global majors are struggling to compete in the more efficient and transparent world of IT service provisioning created by the Indian vendors.

    Forrester Research's India Head and senior analyst Sudin Apte said, "To move up the value chain, top Indian vendors are working successfully towards penetrating the global market for high-end services."

    While Indian firms are challenged by a linear revenue growth linked with the labour growth, they are trying their best to break direct connection between the two, Apte added.

    Moore said their revenue and profit growth figures are shaming most of the global majors, which are still struggling to compete in the more efficient and transparent world of IT service provisions created by the Indian vendors.

    Indian companies are likely to maintain their lead going forward as well, as they are investing for moving up the chain, while global majors continue to be "Distracted by their legacy delivery engines and stall on their ability to provide a true global, seamless and efficient experience."

    TCS recently reported a revenue growth of 42 per cent and net income growth of 33 per cent for the June quarter, while Infosys reported a revenue growth of 39 per cent and profit growth of 43 per cent, which were ahead of the market expectations.

    Wipro's revenue rose 37 per cent, while earnings were up by 44 per cent in the same quarter.

    In contrast, the global majors has reported relatively disappointing results. IBM's services revenue in the June quarter was down by 1 per cent, although its profitability across all business lines rose by 9 per cent.

    Accenture has reported a revenue growth of 11 per cent and net income growth of 7.8 per cent for its last quarter.

    Moore said Indian vendors are changing the way services are delivered and the way clients interact with their service providers. While global legacy providers have been talking about transformational outsourcing for years, the Indians have been quietly transforming the systems they support as part of their standard offering, she added.

    A more efficient support system leads to better margin for the vendor and better services for the customers, Moore said.

    While, many global majors are building out their capability in India and other low-cost countries, this has not solved the problem, Forrester said.

    Moore said many global majors do not understand that Indian providers offer more than low-cost labour. In addition, Indians are pricing their services more competitively and transparently, while global majors are yet to properly execute the global delivery model.
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    EEPC targets $23-b exports this fiscal

    Kolkata , Aug 3

    The Engineering Export Promotion Council (EEPC) aims to scale a higher engineering exports target for 2006-07 at $23 billion compared to $19.18 billion achieved in 2005-06, warranting a 20 per cent growth.

    This is said to be in line with the revised $125-billion target set for overall merchandise exports from India this fiscal. The target would be subjected to a mid-term review.

    The Council has also urged the Government to come out with a single scheme, merging the existing duty exemption schemes, which will provide refunds to exporters for customs duty, excise, State-level taxes and other levies which contribute to the disability factor for Indian exports.

    Talking to newspersons here on Wednesday on the takeaways of a recent meeting with the Union Commerce Minister, Mr Kamal Nath, Mr Rakesh Shah, National Chairman of EEPC, said during the first quarter (April-June) of the current fiscal, $5.5-billion worth of engineering items (including services) were exported from India, recording a 20 per cent increase over last year (for the same quarter).

    Mr Shah said if the DGCI&S (Directorate General of Commercial Intelligence and Statistics) agrees to bring the miscellaneous 292 items under the engineering items category, the annual target would climb by another billion, taking it to $24 billion. These items yield an export of around $700 million. Engineering exports account for some 18-19 per cent of the total exports from the country.

    Pointing out that engineering exports, in dollar terms, hit a record growth of nearly 25 per cent, he said exports this fiscal may go beyond $20.3 billion, after excluding services exports and export of the 292 engineering items still not considered as principal commodities by DGCI&S.

    Exports of engineering services from India in 2005-06 are estimated at around Rs 1,280 crore ($289 million), indicating a growth of around 16 per cent over 2004-05.

    `Numero uno' slot

    Mr Shah said the achievement of $19.18-billion exports in last fiscal has catapulted EEPC to the `numero uno' slot, ahead of the gem & jewellery export promotion council, which clocked exports of $15.54 billion.
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