WAL-MART OPENS INDIA WHOLESALE OUTLET WITH BHARTI
Wal-Mart Stores Inc., the world’s largest retailer, and local partner Bharti Group opened their first wholesale outlet in India as rising disposable incomes boost demand in the world’s second-fastest-growing major economy.
Bharti Wal-Mart Pvt. today opened the cash-and-carry store in the northern city of Amritsar, it said in a statement. The venture plans to open 10 or 15 wholesale outlets and employ 5,000 people during the next three years...
Bloomberg
Sunday, May 31, 2009
Wednesday, May 27, 2009
BHARTI-MTN DEAL LARGEST INDIAN CROSS-BORDER CORPORATE MERGER
--- India’s biggest cross border deal, twice the value of Tata Steel – Corus and Vodafone – Hutchison Essar transactions
The potential merger of India’s largest GSM mobile telecom service provider Bharti Airtel Ltd and South Africa's largest telecom company MTN Group Limited highlights the attractiveness of fast-growing telecoms markets in India and Africa and reinforces India Inc.’s global ambitions undeterred by the worldwide economic slowdown.
”The companies are buying international scale and growth in the world’s fastest growing telecoms markets of India and Africa,” said Bundeep Singh Rangar, Chairman IndusView Advisors Ltd, the India-focused cross-border advisory firm. “This one deal worth $23 billion will almost match the value of the 280 cross-border mergers and acquisitions last year at $25 billion. It marks the grand entry of India as an acquirer in the international telecoms industry, just as previous years saw India Inc. buy into international steel, auto and IT industries.”
“It shows what a catalyst a stable government with an unencumbered policy toward economic liberalization can be,” he added. The Indian National Congress led United Progressive Alliance (UPA) won a second term in Parliament with an increased majority, in an affirmation of its economic policies of continued liberalization and desire for political stability and continuity.
The merger of Bharti and MTN will be India’s biggest cross border deal at almost twice the value of the acquisition of U.K.’s top steel maker Corus Group Plc for $12 billion by India’s Tata Steel Ltd in January 2007. It also surpasses the acquisition of Hutchison Essar Ltd, India’s second largest GSM mobile service provider then by the U.K.’s Vodafone Group Plc for $11 billion, by more than a similar margin.
The Bharti Airtel and MTN Group combine will create a leading emerging market telecom operator with more than $60 billion in market value, revenues of about $20 billion and over 200 million subscribers. The combined entity will be amongst the top five service providers globally with operations spanning more than 23 countries in Asia, Middle East and Africa.
The new entity will enjoy better pricing power in the market, lower costs on account of shared infrastructure and resources, better purchasing power with suppliers, doubling up of subscribers to 200 million that will gradually result in more average revenue per user (ARPU) as new mobile applications and services are offered to them.
Global telecom companies are drawn to India’s market estimated to grow to more than 650 million subscribers by 2012 from 360 million currently as 10 million new subscribers are added each month. Africa’s telecommunications growth is driven by its 360 million mobile users who account for 90% of all subscribers, growing at about 40% per year.
The telecommunication sector has been a significant driver of merger and acquisition (M&A) deals in India accounting for the highest share of deals at 18.6% and 22% during the last two years with values of $5.7 billion and $11 billion in 2008 and 2007, respectively.
“The deal will add the much needed traction to the deal flow in the country this year encouraging other companies to pursue their growth ambitions that had been stalled owing to the downturn,” added Rangar.
The total number of M&A deals during the first four months of 2009 at $2 billion against $9.43 billion during the corresponding period last year illustrates the impact of the economic slowdown.
The string of investments in Indian telecom companies since last year, including, Tata Teleservices Ltd, the telecommunication services arm of India’s largest private sector diversified Tata Group by NTT DoCoMo, Inc., the largest Japanese mobile telecom service provider; Unitech Telecom, the telecom arm of India’s second largest real estate developer Unitech Ltd by Norwegian telecom firm Telenor ASA, world’s seventh largest telecom service provider at $1.36 billion; and Swan Telecom, a start-up GSM telecom service company of a Mumbai-based real estate developer Dynamix Balwas Group by Dubai-based Emirates Telecommunications Corp (Etisalat) at $900 million; Gulf-based Bahrain Telecommunications Co’s acquisition of 49% stake in S Tel Ltd, joint venture between Skycity Foundations and Telecom Investments (Mauritius) Ltd for $225 million; and now, South Africa’s largest telecom company MTN Group’s renewed attempt to enter the Indian market – are an indication of the fact that there is ample room to enter this market, at least inorganically.
Other international telecom service providers seeking an India entry include Kuwait-based Zain Group, Qatar Telecom, Italy-based Telecom Italia SpA, among others. However, some of the global mobile telecom service providers such as Telefonica SA of Spain, French mobile telecommunication services provider, France Telecom and Deutsche Telekom AG of Germany are among those missing out on the opportunity to tap a market that is projected to offer overall mobile services revenues of more than $37 billion by 2012 growing at a CAGR of 18%, according to estimates.
Such growth trends bring with it corresponding increase in investments as government estimates suggest that the overall telecommunication sector will need $73 billion over the next five years to achieve a tele-density of up to 45%. And, a major chunk of the investment is expected to be realized through Foreign Direct Investment (FDI), particularly in the area of mobile communication.
“The Indian National Congress led government’s pledge to revive the economy from the slowdown with continued liberalization will likely see more regulatory reforms toward attracting investments in the telecom sector, among others,” added Rangar
It becomes significant as the government has granted new licenses and spectrum to aspiring operators such as Datacom Solutions a subsidiary of one of India’s leading consumer durables company Videocon Industries Ltd; and Loop Telecom, a BPL Mobile Communications group company, which are likely targets – but within the regulatory purview of the overseas entity’s stake in the domestic company not to exceed 74%.
--- India’s biggest cross border deal, twice the value of Tata Steel – Corus and Vodafone – Hutchison Essar transactions
The potential merger of India’s largest GSM mobile telecom service provider Bharti Airtel Ltd and South Africa's largest telecom company MTN Group Limited highlights the attractiveness of fast-growing telecoms markets in India and Africa and reinforces India Inc.’s global ambitions undeterred by the worldwide economic slowdown.
”The companies are buying international scale and growth in the world’s fastest growing telecoms markets of India and Africa,” said Bundeep Singh Rangar, Chairman IndusView Advisors Ltd, the India-focused cross-border advisory firm. “This one deal worth $23 billion will almost match the value of the 280 cross-border mergers and acquisitions last year at $25 billion. It marks the grand entry of India as an acquirer in the international telecoms industry, just as previous years saw India Inc. buy into international steel, auto and IT industries.”
“It shows what a catalyst a stable government with an unencumbered policy toward economic liberalization can be,” he added. The Indian National Congress led United Progressive Alliance (UPA) won a second term in Parliament with an increased majority, in an affirmation of its economic policies of continued liberalization and desire for political stability and continuity.
The merger of Bharti and MTN will be India’s biggest cross border deal at almost twice the value of the acquisition of U.K.’s top steel maker Corus Group Plc for $12 billion by India’s Tata Steel Ltd in January 2007. It also surpasses the acquisition of Hutchison Essar Ltd, India’s second largest GSM mobile service provider then by the U.K.’s Vodafone Group Plc for $11 billion, by more than a similar margin.
The Bharti Airtel and MTN Group combine will create a leading emerging market telecom operator with more than $60 billion in market value, revenues of about $20 billion and over 200 million subscribers. The combined entity will be amongst the top five service providers globally with operations spanning more than 23 countries in Asia, Middle East and Africa.
The new entity will enjoy better pricing power in the market, lower costs on account of shared infrastructure and resources, better purchasing power with suppliers, doubling up of subscribers to 200 million that will gradually result in more average revenue per user (ARPU) as new mobile applications and services are offered to them.
Global telecom companies are drawn to India’s market estimated to grow to more than 650 million subscribers by 2012 from 360 million currently as 10 million new subscribers are added each month. Africa’s telecommunications growth is driven by its 360 million mobile users who account for 90% of all subscribers, growing at about 40% per year.
The telecommunication sector has been a significant driver of merger and acquisition (M&A) deals in India accounting for the highest share of deals at 18.6% and 22% during the last two years with values of $5.7 billion and $11 billion in 2008 and 2007, respectively.
“The deal will add the much needed traction to the deal flow in the country this year encouraging other companies to pursue their growth ambitions that had been stalled owing to the downturn,” added Rangar.
The total number of M&A deals during the first four months of 2009 at $2 billion against $9.43 billion during the corresponding period last year illustrates the impact of the economic slowdown.
The string of investments in Indian telecom companies since last year, including, Tata Teleservices Ltd, the telecommunication services arm of India’s largest private sector diversified Tata Group by NTT DoCoMo, Inc., the largest Japanese mobile telecom service provider; Unitech Telecom, the telecom arm of India’s second largest real estate developer Unitech Ltd by Norwegian telecom firm Telenor ASA, world’s seventh largest telecom service provider at $1.36 billion; and Swan Telecom, a start-up GSM telecom service company of a Mumbai-based real estate developer Dynamix Balwas Group by Dubai-based Emirates Telecommunications Corp (Etisalat) at $900 million; Gulf-based Bahrain Telecommunications Co’s acquisition of 49% stake in S Tel Ltd, joint venture between Skycity Foundations and Telecom Investments (Mauritius) Ltd for $225 million; and now, South Africa’s largest telecom company MTN Group’s renewed attempt to enter the Indian market – are an indication of the fact that there is ample room to enter this market, at least inorganically.
Other international telecom service providers seeking an India entry include Kuwait-based Zain Group, Qatar Telecom, Italy-based Telecom Italia SpA, among others. However, some of the global mobile telecom service providers such as Telefonica SA of Spain, French mobile telecommunication services provider, France Telecom and Deutsche Telekom AG of Germany are among those missing out on the opportunity to tap a market that is projected to offer overall mobile services revenues of more than $37 billion by 2012 growing at a CAGR of 18%, according to estimates.
Such growth trends bring with it corresponding increase in investments as government estimates suggest that the overall telecommunication sector will need $73 billion over the next five years to achieve a tele-density of up to 45%. And, a major chunk of the investment is expected to be realized through Foreign Direct Investment (FDI), particularly in the area of mobile communication.
“The Indian National Congress led government’s pledge to revive the economy from the slowdown with continued liberalization will likely see more regulatory reforms toward attracting investments in the telecom sector, among others,” added Rangar
It becomes significant as the government has granted new licenses and spectrum to aspiring operators such as Datacom Solutions a subsidiary of one of India’s leading consumer durables company Videocon Industries Ltd; and Loop Telecom, a BPL Mobile Communications group company, which are likely targets – but within the regulatory purview of the overseas entity’s stake in the domestic company not to exceed 74%.
Monday, May 18, 2009
BOMBAY STOCK EXCHANGE'S SENSEX WELCOMES UPA WITH HIGHEST SURGE THIS YEAR
India’s Dalal Street, home to the Bombay Stock Exchange was a busy address on Monday, May 18th creating history with euphoric investors leading the Sensex, the benchmark index to surge more than 17% or 2,099.21 points higher at 14,272.62, the highest ever increase in a day anywhere in the world, so much that the trading had to be halted for the day. The Sensex touched the upper limit twice, earlier opening at 10.73% or 1,305.97 points higher at 13,479.39.
“The overwhelming response on the first trading day following the verdict of the people in the General Elections for the 15th Lok Sabha or the House of the People, in favour of the Indian National Congress led United Progressive Alliance (UPA) is an affirmation of its economic policies of continued liberalization and the stock market’s vote for stability and continuity.” says Bundeep Singh Rangar, Chairman, IndusView Advisors Ltd, the India-focused cross-border advisory firm.
“India’s high gross domestic savings rate of 30.7% compared to the 1.8% in the U.S. and 1% in the U.K. is indicative of the lower propensity to invest among Indian households and hence signifies the scope of potential investments that can move in to the Indian Equity Markets if these households are assured stability and increased return on investments.” says Rangar
“Increasing Indian households exposure to the Stock markets along with the Foreign Institutional Investors (FIIs), who made net investments worth $74 million in equities so far this year and other investors could result in the BSE’s Sensex scaling new highs.” added Rangar
The first signs of the investors’ confidence in the expected outcome of the elections came on Friday, May 15, as Foreign Institutional Investors (FIIs) made a net investment of $205 million (Rs 983.86 crore) while domestic institutional investors made a net investment of $90 million (Rs 432.47 crore) in equities, taking the BSE's benchmark index to cross 12,000 level.
Both the Congress and BJP led governments have successfully accelerated India’s GDP growth rate to about 7% today from 1.4% in 1991-92. This momentum peaked at 9.7% in the fiscal year 2006-07, under the current Congress led government, before slowing down on account of the worldwide recession.
The outcome of the General Elections will usher a new wave of confidence globally in the Indian economy with expected ramp up in economic activity, brought about by the urgent need to develop world class infrastructure, globally competitive pharmaceutical sector, telecom and augmentation of power generation.
“The government will have its task cut out with more than $700 billion worth of investments to be channeled in to India’s infrastructure, power, telecom and pharma sectors over the next five years to provide the country a strong foundation to achieve the aspirational growth of 10%.
The General Elections this time witnessed a three-way contest between the Indian National Congress led United Progressive Alliance (UPA), Bharatiya Janata Party (BJP) led National Democratic Alliance (NDA) and Third Front, comprising of the Communist Parties and smaller regional parties, attempting to offer another alternative.
“The Government would be best served if it continued and augmented the ‘India Shining’ policies that currently sustain a Gross Domestic Product (GDP) growth of more than 7% as India continues to defy negative GDP growth seen in many Western economies.” says Rangar
Investment in Energy
India’s power deficit entails an estimated investment of up to $150 billion by 2012. To meet the growing demand, the government plans to add 90GW over the same period to its existing generation capacity of 145GW.
“India will become a lucrative market for nuclear energy equipment makers as soon as The United States-India Peaceful Atomic Energy Cooperation Act of 2006 between India and the U.S. starts to show the benefits of investments coming in to the country.” says Rangar
Nuclear energy makes up only 3% of total installed capacity in India and its domestic uranium reserves are also limited. India’s Atomic Energy Commission estimates that domestic resources could support only 10 GW of installed nuclear capacity, signifying the potential of a multifold ramp-up.
Favourable policy initiatives could see global energy companies such as Areva SA, Alstom SA and Électricité de France (EDF) of France; the U.S.-based General Electric Co., Russia's state-owned nuclear company Rosatom State Nuclear Energy Corporation and Toshiba Corp., a diversified Japanese conglomerate, among others vying to enter India’s nuclear energy market.
Infrastructure: Foundation of Growth
India's challenge is not only to augment its antiquated infrastructure, but also to build new infrastructure to keep up with its $1 trillion economy and the aspirations of its 1.2 billion population that grows by 16 million people each year.
Recognising that good infrastructure are a vital pre-requisite to build a strong nation, infrastructure development has been accorded key priority for the 11th Five-Year-Plan for the years 2007-2012 and the 12th plan period 2012-2017 with projected investment requirement of $500 billion and $1.5 trillion respectively by the Prime Minister's Committee on Infrastructure.
“The Interim Budget for the financial year 2009-10 announced in February by the Finance Minister of the ruling United Progressive Alliance (UPA), focused on infrastructure development, easing of Foreign Direct Investments (FDIs) norms and economic stimulus packages announced last year had set the ground for how the alliance was approaching the General Elections.” said Rangar
The government’s spotlight on Infrastructure Development heralds the importance it attaches to the sector as a means to counter the prevailing economic woes. The minister responded to an urgent demand for new infrastructure, announcing that 9% of the country’s GDP will be spent on infrastructure by 2014, from the current 5%. Estimates suggest that a third of this investment will come from private companies, paving the way for unprecedented investment opportunity
Telecom: Dial India For Growth
“India’s mobile telecommunication services sector has defied the economic recession. The incumbent mobile telecommunication service providers collectively add about 10 million new subscribers a month, which is more than the population of Finland, home country of largest mobile handset manufacturer Nokia Corp., taking the country’s total tally of wireless subscribers to 362 million.” explains Rangar
To ensure quality service to match the growing subscriber base and achieve the target of 45% tele-density, the telecom sector is estimated to need about $73 billion during the next five years.
The world's fastest-growing mobile telecom services market estimated to reach a subscriber base of about 650 million by 2012, exposes the growth potential for global mobile telecom service providers who are not yet present in India. Such service providers are missing out on opportunities to grab a share of the projected mobile services revenues of more than $37 billion by 2012 growing at a CAGR of 18%, while the profitability of their operations in saturated developed markets continue to be under pressure.
Of significance is the fact that the government has granted new licenses and spectrum to aspiring operators such as Datacom Solutions a subsidiary of one of India’s leading consumer durables company Videocon Industries Ltd; Loop Telecom, a BPL Mobile Communications group company; S Tel Ltd, joint venture between Skycity Foundations and Telecom Investments (Mauritius) Ltd; among others which are likely targets – but within the regulatory purview as an overseas entity’s stake in the domestic company cannot exceed 74%.
Indian Pharma: Prescription for Growth
The Indian Pharmaceutical sector is positioning itself to be among the top five centres of global innovation as the Department of Pharmaceuticals (DoP), Government of India outlines its roadmap for the sector up to the year 2020 (Vision 2020). It foresees investments of about $2 billion annually, under the public-private partnership model.
The initiative will open avenues of growth for global pharmaceuticals companies and fuel the next wave of mergers and acquisitions (M&As) in a market where consumer spending on healthcare increased to 7% in 2007 from 4% of the Gross Domestic Product (GDP) in 1995 and is expected to rise to 13% of GDP by 2015. India also offers the benefits of low cost research and development (R&D), a domain in which it is estimated to capture about 10%-20% share of the world’s R&D business by 2020 from less than 1% currently.
Expansion by global pharmaceutical companies in to emerging markets like India becomes imperative as about $103 billion worth of patented drugs will go off patent in the next few years. This will further hit the already sagging fortunes of global pharma companies which are trying to augment their revenues by acquiring or aligning with companies in the generics business.
With such sectoral growth indicators, the need of the hour is to take existing initiatives to the next level of implementation and completion, with enough scope of ramping up and innovation.
India’s Dalal Street, home to the Bombay Stock Exchange was a busy address on Monday, May 18th creating history with euphoric investors leading the Sensex, the benchmark index to surge more than 17% or 2,099.21 points higher at 14,272.62, the highest ever increase in a day anywhere in the world, so much that the trading had to be halted for the day. The Sensex touched the upper limit twice, earlier opening at 10.73% or 1,305.97 points higher at 13,479.39.
“The overwhelming response on the first trading day following the verdict of the people in the General Elections for the 15th Lok Sabha or the House of the People, in favour of the Indian National Congress led United Progressive Alliance (UPA) is an affirmation of its economic policies of continued liberalization and the stock market’s vote for stability and continuity.” says Bundeep Singh Rangar, Chairman, IndusView Advisors Ltd, the India-focused cross-border advisory firm.
“India’s high gross domestic savings rate of 30.7% compared to the 1.8% in the U.S. and 1% in the U.K. is indicative of the lower propensity to invest among Indian households and hence signifies the scope of potential investments that can move in to the Indian Equity Markets if these households are assured stability and increased return on investments.” says Rangar
“Increasing Indian households exposure to the Stock markets along with the Foreign Institutional Investors (FIIs), who made net investments worth $74 million in equities so far this year and other investors could result in the BSE’s Sensex scaling new highs.” added Rangar
The first signs of the investors’ confidence in the expected outcome of the elections came on Friday, May 15, as Foreign Institutional Investors (FIIs) made a net investment of $205 million (Rs 983.86 crore) while domestic institutional investors made a net investment of $90 million (Rs 432.47 crore) in equities, taking the BSE's benchmark index to cross 12,000 level.
Both the Congress and BJP led governments have successfully accelerated India’s GDP growth rate to about 7% today from 1.4% in 1991-92. This momentum peaked at 9.7% in the fiscal year 2006-07, under the current Congress led government, before slowing down on account of the worldwide recession.
The outcome of the General Elections will usher a new wave of confidence globally in the Indian economy with expected ramp up in economic activity, brought about by the urgent need to develop world class infrastructure, globally competitive pharmaceutical sector, telecom and augmentation of power generation.
“The government will have its task cut out with more than $700 billion worth of investments to be channeled in to India’s infrastructure, power, telecom and pharma sectors over the next five years to provide the country a strong foundation to achieve the aspirational growth of 10%.
The General Elections this time witnessed a three-way contest between the Indian National Congress led United Progressive Alliance (UPA), Bharatiya Janata Party (BJP) led National Democratic Alliance (NDA) and Third Front, comprising of the Communist Parties and smaller regional parties, attempting to offer another alternative.
“The Government would be best served if it continued and augmented the ‘India Shining’ policies that currently sustain a Gross Domestic Product (GDP) growth of more than 7% as India continues to defy negative GDP growth seen in many Western economies.” says Rangar
Investment in Energy
India’s power deficit entails an estimated investment of up to $150 billion by 2012. To meet the growing demand, the government plans to add 90GW over the same period to its existing generation capacity of 145GW.
“India will become a lucrative market for nuclear energy equipment makers as soon as The United States-India Peaceful Atomic Energy Cooperation Act of 2006 between India and the U.S. starts to show the benefits of investments coming in to the country.” says Rangar
Nuclear energy makes up only 3% of total installed capacity in India and its domestic uranium reserves are also limited. India’s Atomic Energy Commission estimates that domestic resources could support only 10 GW of installed nuclear capacity, signifying the potential of a multifold ramp-up.
Favourable policy initiatives could see global energy companies such as Areva SA, Alstom SA and Électricité de France (EDF) of France; the U.S.-based General Electric Co., Russia's state-owned nuclear company Rosatom State Nuclear Energy Corporation and Toshiba Corp., a diversified Japanese conglomerate, among others vying to enter India’s nuclear energy market.
Infrastructure: Foundation of Growth
India's challenge is not only to augment its antiquated infrastructure, but also to build new infrastructure to keep up with its $1 trillion economy and the aspirations of its 1.2 billion population that grows by 16 million people each year.
Recognising that good infrastructure are a vital pre-requisite to build a strong nation, infrastructure development has been accorded key priority for the 11th Five-Year-Plan for the years 2007-2012 and the 12th plan period 2012-2017 with projected investment requirement of $500 billion and $1.5 trillion respectively by the Prime Minister's Committee on Infrastructure.
“The Interim Budget for the financial year 2009-10 announced in February by the Finance Minister of the ruling United Progressive Alliance (UPA), focused on infrastructure development, easing of Foreign Direct Investments (FDIs) norms and economic stimulus packages announced last year had set the ground for how the alliance was approaching the General Elections.” said Rangar
The government’s spotlight on Infrastructure Development heralds the importance it attaches to the sector as a means to counter the prevailing economic woes. The minister responded to an urgent demand for new infrastructure, announcing that 9% of the country’s GDP will be spent on infrastructure by 2014, from the current 5%. Estimates suggest that a third of this investment will come from private companies, paving the way for unprecedented investment opportunity
Telecom: Dial India For Growth
“India’s mobile telecommunication services sector has defied the economic recession. The incumbent mobile telecommunication service providers collectively add about 10 million new subscribers a month, which is more than the population of Finland, home country of largest mobile handset manufacturer Nokia Corp., taking the country’s total tally of wireless subscribers to 362 million.” explains Rangar
To ensure quality service to match the growing subscriber base and achieve the target of 45% tele-density, the telecom sector is estimated to need about $73 billion during the next five years.
The world's fastest-growing mobile telecom services market estimated to reach a subscriber base of about 650 million by 2012, exposes the growth potential for global mobile telecom service providers who are not yet present in India. Such service providers are missing out on opportunities to grab a share of the projected mobile services revenues of more than $37 billion by 2012 growing at a CAGR of 18%, while the profitability of their operations in saturated developed markets continue to be under pressure.
Of significance is the fact that the government has granted new licenses and spectrum to aspiring operators such as Datacom Solutions a subsidiary of one of India’s leading consumer durables company Videocon Industries Ltd; Loop Telecom, a BPL Mobile Communications group company; S Tel Ltd, joint venture between Skycity Foundations and Telecom Investments (Mauritius) Ltd; among others which are likely targets – but within the regulatory purview as an overseas entity’s stake in the domestic company cannot exceed 74%.
Indian Pharma: Prescription for Growth
The Indian Pharmaceutical sector is positioning itself to be among the top five centres of global innovation as the Department of Pharmaceuticals (DoP), Government of India outlines its roadmap for the sector up to the year 2020 (Vision 2020). It foresees investments of about $2 billion annually, under the public-private partnership model.
The initiative will open avenues of growth for global pharmaceuticals companies and fuel the next wave of mergers and acquisitions (M&As) in a market where consumer spending on healthcare increased to 7% in 2007 from 4% of the Gross Domestic Product (GDP) in 1995 and is expected to rise to 13% of GDP by 2015. India also offers the benefits of low cost research and development (R&D), a domain in which it is estimated to capture about 10%-20% share of the world’s R&D business by 2020 from less than 1% currently.
Expansion by global pharmaceutical companies in to emerging markets like India becomes imperative as about $103 billion worth of patented drugs will go off patent in the next few years. This will further hit the already sagging fortunes of global pharma companies which are trying to augment their revenues by acquiring or aligning with companies in the generics business.
With such sectoral growth indicators, the need of the hour is to take existing initiatives to the next level of implementation and completion, with enough scope of ramping up and innovation.
Saturday, May 16, 2009
UPA TO CONTINUE IN GOVERNMENT: ADVANTAGE REFORMS AND DEVELOPMENT
--- Potential Investments Worth $700 billion To Go On Track
--- Power & Energy, Infrastructure, Telecommunication and Pharmaceuticals To Drive The Next Wave Of Investments
If the trends emerging from the counting of votes are to be believed in the General Elections for the 15th Lok Sabha or the House of the People, the Indian National Congress led United Progressive Alliance (UPA) will most likely be the victor that would be an affirmation of its economic policies of continued liberalization.
The results so far indicate that the United Progressive Alliance (UPA) with 48% seats out of 543 will likely form the government with support from smaller regional parties. The outcome will usher a new wave of confidence globally in the Indian economy with expected ramp up in economic activity, brought about by the urgent need to develop world class infrastructure, globally competitive pharmaceutical sector, telecom and augmentation of power generation.
“The government will have its task cut out with more than $700 billion worth of investments to be channeled in to India’s infrastructure, power, telecom and pharma sectors over the next five years to provide the country a strong foundation to achieve the aspirational growth of 10%.” says Bundeep Singh Rangar, Chairman, IndusView Advisors Ltd, the India-focused cross-border advisory firm.
The General Elections this time witnessed a three-way contest between the Indian National Congress led United Progressive Alliance (UPA), Bharatiya Janata Party (BJP) led National Democratic Alliance (NDA) and Third Front, comprising of the Communist Parties and smaller regional parties, attempting to offer another alternative.
Both the Congress and BJP led governments have successfully accelerated India’s GDP growth rate to about 7% today from 1.4% in 1991-92. This momentum peaked at 9.7% in the fiscal year 2006-07 before slowing down on account of the worldwide recession.
“The Government would be best served if it continued and augmented the ‘India Shining’ policies that currently sustain a Gross Domestic Product (GDP) growth of more than 7% as India continues to defy negative GDP growth seen in many Western economies.” says Rangar
Investment in Energy
India’s power deficit entails an estimated investment of up to $150 billion by 2012. To meet the growing demand, the government plans to add 90GW over the same period to its existing generation capacity of 145GW.
“India will become a lucrative market for nuclear energy equipment makers as soon as The United States-India Peaceful Atomic Energy Cooperation Act of 2006 between India and the U.S. starts to show the benefits of investments coming in to the country.” says Rangar
Nuclear energy makes up only 3% of total installed capacity in India and its domestic uranium reserves are also limited. India’s Atomic Energy Commission estimates that domestic resources could support only 10 GW of installed nuclear capacity, signifying the potential of a multifold ramp-up.
Favourable policy initiatives could see global energy companies such as Areva SA, Alstom SA and Électricité de France (EDF) of France; the U.S.-based General Electric Co., Russia's state-owned nuclear company Rosatom State Nuclear Energy Corporation and Toshiba Corp., a diversified Japanese conglomerate, among others vying to enter India’s nuclear energy market.
Infrastructure: Foundation of Growth
India's challenge is not only to augment its antiquated infrastructure, but also to build new infrastructure to keep up with its $1 trillion economy and the aspirations of its 1.2 billion population that grows by 16 million people each year.
Recognising that good infrastructure are a vital pre-requisite to build a strong nation, infrastructure development has been accorded key priority for the 11th Five-Year-Plan for the years 2007-2012 and the 12th plan period 2012-2017 with projected investment requirement of $500 billion and $1.5 trillion respectively by the Prime Minister's Committee on Infrastructure.
“The Interim Budget for the financial year 2009-10 announced in February by the Finance Minister of the ruling United Progressive Alliance (UPA), focused on infrastructure development, easing of Foreign Direct Investments (FDIs) norms and economic stimulus packages announced last year had set the ground for how the alliance was approaching the General Elections.” said Rangar
The government’s spotlight on Infrastructure Development heralds the importance it attaches to the sector as a means to counter the prevailing economic woes. The minster responded to an urgent demand for new infrastructure, announcing that 9% of the country’s GDP will be spent on infrastructure by 2014, from the current 5%. Estimates suggest that a third of this investment will come from private companies, paving the way for unprecedented investment opportunity
Telecom: Dial India For Growth
“India’s mobile telecommunication services sector has defied the economic recession. The incumbent mobile telecommunication service providers collectively add about 10 million new subscribers a month, which is more than the population of Finland, home country of largest mobile handset manufacturer Nokia Corp., taking the country’s total tally of wireless subscribers to 362 million.” explains Rangar
To ensure quality service to match the growing subscriber base and achieve the target of 45% tele-density, the telecom sector is estimated to need about $73 billion during the next five years.
The world's fastest-growing mobile telecom services market estimated to reach a subscriber base of about 650 million by 2012, exposes the growth potential for global mobile telecom service providers who are not yet present in India. Such service providers are missing out on opportunities to grab a share of the projected mobile services revenues of more than $37 billion by 2012 growing at a CAGR of 18%, while the profitability of their operations in saturated developed markets continue to be under pressure.
Of significance is the fact that the government has granted new licenses and spectrum to aspiring operators such as Datacom Solutions a subsidiary of one of India’s leading consumer durables company Videocon Industries Ltd; Loop Telecom, a BPL Mobile Communications group company; S Tel Ltd, joint venture between Skycity Foundations and Telecom Investments (Mauritius) Ltd; among others which are likely targets – but within the regulatory purview as an overseas entity’s stake in the domestic company cannot exceed 74%.
Indian Pharma: Prescription for Growth
The Indian Pharmaceutical sector is positioning itself to be among the top five centres of global innovation as the Department of Pharmaceuticals (DoP), Government of India outlines its roadmap for the sector up to the year 2020 (Vision 2020). It foresees investments of about $2 billion annually, under the public-private partnership model.
The initiative will open avenues of growth for global pharmaceuticals companies and fuel the next wave of mergers and acquisitions (M&As) in a market where consumer spending on healthcare increased to 7% in 2007 from 4% of the Gross Domestic Product (GDP) in 1995 and is expected to rise to 13% of GDP by 2015. India also offers the benefits of low cost research and development (R&D), a domain in which it is estimated to capture about 10%-20% share of the world’s R&D business by 2020 from less than 1% currently.
Expansion by global pharmaceutical companies in to emerging markets like India becomes imperative as about $103 billion worth of patented drugs will go off patent in the next few years. This will further hit the already sagging fortunes of global pharma companies which are trying to augment their revenues by acquiring or aligning with companies in the generics business.
With such sectoral growth indicators, the need of the hour is to take existing initiatives to the next level of implementation and completion, with enough scope of ramping up and innovation.
--- Potential Investments Worth $700 billion To Go On Track
--- Power & Energy, Infrastructure, Telecommunication and Pharmaceuticals To Drive The Next Wave Of Investments
If the trends emerging from the counting of votes are to be believed in the General Elections for the 15th Lok Sabha or the House of the People, the Indian National Congress led United Progressive Alliance (UPA) will most likely be the victor that would be an affirmation of its economic policies of continued liberalization.
The results so far indicate that the United Progressive Alliance (UPA) with 48% seats out of 543 will likely form the government with support from smaller regional parties. The outcome will usher a new wave of confidence globally in the Indian economy with expected ramp up in economic activity, brought about by the urgent need to develop world class infrastructure, globally competitive pharmaceutical sector, telecom and augmentation of power generation.
“The government will have its task cut out with more than $700 billion worth of investments to be channeled in to India’s infrastructure, power, telecom and pharma sectors over the next five years to provide the country a strong foundation to achieve the aspirational growth of 10%.” says Bundeep Singh Rangar, Chairman, IndusView Advisors Ltd, the India-focused cross-border advisory firm.
The General Elections this time witnessed a three-way contest between the Indian National Congress led United Progressive Alliance (UPA), Bharatiya Janata Party (BJP) led National Democratic Alliance (NDA) and Third Front, comprising of the Communist Parties and smaller regional parties, attempting to offer another alternative.
Both the Congress and BJP led governments have successfully accelerated India’s GDP growth rate to about 7% today from 1.4% in 1991-92. This momentum peaked at 9.7% in the fiscal year 2006-07 before slowing down on account of the worldwide recession.
“The Government would be best served if it continued and augmented the ‘India Shining’ policies that currently sustain a Gross Domestic Product (GDP) growth of more than 7% as India continues to defy negative GDP growth seen in many Western economies.” says Rangar
Investment in Energy
India’s power deficit entails an estimated investment of up to $150 billion by 2012. To meet the growing demand, the government plans to add 90GW over the same period to its existing generation capacity of 145GW.
“India will become a lucrative market for nuclear energy equipment makers as soon as The United States-India Peaceful Atomic Energy Cooperation Act of 2006 between India and the U.S. starts to show the benefits of investments coming in to the country.” says Rangar
Nuclear energy makes up only 3% of total installed capacity in India and its domestic uranium reserves are also limited. India’s Atomic Energy Commission estimates that domestic resources could support only 10 GW of installed nuclear capacity, signifying the potential of a multifold ramp-up.
Favourable policy initiatives could see global energy companies such as Areva SA, Alstom SA and Électricité de France (EDF) of France; the U.S.-based General Electric Co., Russia's state-owned nuclear company Rosatom State Nuclear Energy Corporation and Toshiba Corp., a diversified Japanese conglomerate, among others vying to enter India’s nuclear energy market.
Infrastructure: Foundation of Growth
India's challenge is not only to augment its antiquated infrastructure, but also to build new infrastructure to keep up with its $1 trillion economy and the aspirations of its 1.2 billion population that grows by 16 million people each year.
Recognising that good infrastructure are a vital pre-requisite to build a strong nation, infrastructure development has been accorded key priority for the 11th Five-Year-Plan for the years 2007-2012 and the 12th plan period 2012-2017 with projected investment requirement of $500 billion and $1.5 trillion respectively by the Prime Minister's Committee on Infrastructure.
“The Interim Budget for the financial year 2009-10 announced in February by the Finance Minister of the ruling United Progressive Alliance (UPA), focused on infrastructure development, easing of Foreign Direct Investments (FDIs) norms and economic stimulus packages announced last year had set the ground for how the alliance was approaching the General Elections.” said Rangar
The government’s spotlight on Infrastructure Development heralds the importance it attaches to the sector as a means to counter the prevailing economic woes. The minster responded to an urgent demand for new infrastructure, announcing that 9% of the country’s GDP will be spent on infrastructure by 2014, from the current 5%. Estimates suggest that a third of this investment will come from private companies, paving the way for unprecedented investment opportunity
Telecom: Dial India For Growth
“India’s mobile telecommunication services sector has defied the economic recession. The incumbent mobile telecommunication service providers collectively add about 10 million new subscribers a month, which is more than the population of Finland, home country of largest mobile handset manufacturer Nokia Corp., taking the country’s total tally of wireless subscribers to 362 million.” explains Rangar
To ensure quality service to match the growing subscriber base and achieve the target of 45% tele-density, the telecom sector is estimated to need about $73 billion during the next five years.
The world's fastest-growing mobile telecom services market estimated to reach a subscriber base of about 650 million by 2012, exposes the growth potential for global mobile telecom service providers who are not yet present in India. Such service providers are missing out on opportunities to grab a share of the projected mobile services revenues of more than $37 billion by 2012 growing at a CAGR of 18%, while the profitability of their operations in saturated developed markets continue to be under pressure.
Of significance is the fact that the government has granted new licenses and spectrum to aspiring operators such as Datacom Solutions a subsidiary of one of India’s leading consumer durables company Videocon Industries Ltd; Loop Telecom, a BPL Mobile Communications group company; S Tel Ltd, joint venture between Skycity Foundations and Telecom Investments (Mauritius) Ltd; among others which are likely targets – but within the regulatory purview as an overseas entity’s stake in the domestic company cannot exceed 74%.
Indian Pharma: Prescription for Growth
The Indian Pharmaceutical sector is positioning itself to be among the top five centres of global innovation as the Department of Pharmaceuticals (DoP), Government of India outlines its roadmap for the sector up to the year 2020 (Vision 2020). It foresees investments of about $2 billion annually, under the public-private partnership model.
The initiative will open avenues of growth for global pharmaceuticals companies and fuel the next wave of mergers and acquisitions (M&As) in a market where consumer spending on healthcare increased to 7% in 2007 from 4% of the Gross Domestic Product (GDP) in 1995 and is expected to rise to 13% of GDP by 2015. India also offers the benefits of low cost research and development (R&D), a domain in which it is estimated to capture about 10%-20% share of the world’s R&D business by 2020 from less than 1% currently.
Expansion by global pharmaceutical companies in to emerging markets like India becomes imperative as about $103 billion worth of patented drugs will go off patent in the next few years. This will further hit the already sagging fortunes of global pharma companies which are trying to augment their revenues by acquiring or aligning with companies in the generics business.
With such sectoral growth indicators, the need of the hour is to take existing initiatives to the next level of implementation and completion, with enough scope of ramping up and innovation.
Thursday, May 14, 2009
ECONOMIC AGENDA FOR THE NEW GOVERNMENT
* The New Government Expected To Give Further Stimulus To Economy.
* Urgent Need To Boost Investments, Particularly In Infrastructure.
* Challenge Of Keeping The Fiscal Deficit Under Check.
* A Number Of Policy Reforms On The Table
The policy initiatives of the new government are certainly going to determine how quickly the Indian economy will recapture its high pace of growth. There are a number of pending economic issues that need the urgent attention of the new policymakers. The real challenge for the new government lies in stimulating the economy on the one hand, and at the same time controlling the fiscal deficit on the other hand. The fiscal deficit has already reached near 12% of the gross domestic product (GDP), which is clearly not sustainable.
Waiting For The Third Stimulus:
After the announcements of two stimulus packages by the outgoing government in December 2008 and January 2009 respectively, the planning commission Deputy Chairman Montek Singh Ahluwalia had suggested that the country will need a third stimulus, which can be announced by the new government. One needs to wait and watch what kind of fresh stimulus comes from the new government now. For the purpose of countering the economic slowdown, the government can reduce corporate taxes and remove income tax surcharge. As a measure to push the rural demand, the scope of the National Rural Employment Guarantee Scheme can also be extended so that more people would come under its net. A further push to infrastructure can also be a part of the fresh stimulus package.
Continuation Of The Economic Reforms:
There has been a consistency in pursuing the economic reforms during the past 10 years, although there was a change of guard in 2004 when the United Progressive Alliance (UPA) replaced the National Democratic Alliance (NDA) at the centre. The dependency of UPA on the left parties was a stumbling block for UPA in pursing the reforms at full pace, yet the UPA government managed to implement a number of reforms. The continuation of the reform process, not in words but in action, is required to keep the engine of growth turned on.
Focus on Infrastructure:
There is a general consensus that infrastructure development has to be accorded key priority. The Prime Minister's Committee on Infrastructure has already projected earlier that India will require investments worth $500 billion and $1.5 trillion for the 11th Five-Year-Plan (2007-2012) and the 12th plan period 2012-2017 respectively. The government had announced in the Interim Budget presented in the Parliament in February 2009 that 9% of the country’s GDP will be spent on infrastructure by 2014, from the current 5%. If the new government successfully pursues this path, it will be a great push to the growth rate of the country.
Reining in the fiscal deficit:
India’s total fiscal deficit including the central and state deficits is estimated to reach at about 12% of GDP, which has become a major worry for the country. Most economists believe that the new government will have to take immediate steps to control the situation. In fact, the global factors have derailed India’s fiscal reform process that was going very smoothly as per targets during the past four to five years. When the global crude oil prices moved up very sharply in 2008, it resulted in highly inflated subsidy bill – particularly for the oil subsidy and fertilizer subsidy. Then, the global slowdown impacted the growth rate of India too, and resulted in lower than expected tax revenues. Also, the Indian government decided to revise the salaries of its employees by a fat margin at each level. A loan waiver programme for poor farmers also put a heavy burden on the exchequer. And, in order to counter the slowdown, the government came out with two stimulus packages. While all these steps were required and aimed at benefiting large sections of the society as well as the economy, these measures certainly inflated the fiscal deficit to such a high level that was not seen in the recent history of India.
Now, the new government will have only two ways to control and reduce the fiscal menace – reducing its expenditure and increasing the revenues. Both the options are not easy at the moment. At a time when the Indian economy has considerably slowed down, the tax revenues can’t be expected to increase. Increasing the tax rates will certainly not be a wise decision, as history suggests that tax rate hike in troubled period for economy always turns out to be counter-productive. R.K. Gupta, Managing Director of Taurus Mutual Fund that manages the equivalent of more than $100 million of stocks, warns that while a tax rate hike may lead to more tax evasions and ultimately not increase the tax revenue for the government, it might actually reduce the growth rate of the economy further.
On the other hand, reducing the expenditure is easier said than done. A systemic change aimed at expenditure reforms is the need of the hour. Dr. D.K. Joshi, Director and the Principal Economist at Mumbai-headquartered rating agency CRISIL said that as long as the growth rate was high and tax revenue was good, the government managed to run its business even without expenditure reforms, but it couldn’t be ignored any more. He said, “The new government would have to clearly spell it out how it plans to curtail its expenditures. Also, it would have to chalk out a clear roadmap regarding stimulus packages. How much stimulus it wants to provide and for how long? And then, how it plans to revert to fiscal prudence?”
PSE Disinvestment: A Right Prescription
The government has an option of selling its shareholding in a number of public sector enterprises (PSEs) to private sector, which can bring it much needed money. But commencing the disinvestment programme is a politically sensitive issue and reaching a consensus among the political parties is difficult. Also, even if the government manages to pursue this programme, it will have to use the proceeds very prudently. As Dr. Joshi warns, the proceeds of disinvestment should be used strictly for infrastructure creation, not for merely giving subsidies.
Goods & Services Tax
A unified goods and services tax (GST), a major reform of indirect taxes in India, is already proposed to be introduced from April 01, 2010. It’s advisable to have a single tax rate for all goods and services barring few exceptions across the country. Since there is not much time left, the new government should immediately chalk out the detailed implementation plan for the same. It shouldn’t be a difficult task because generally there is a political consensus on this issue. The Indian industry has already welcomed this initiative and is keenly waiting for its implementation.
Reducing Petroleum Subsidy:
The retail prices of petroleum products are determined by the Government of India due to political considerations. The situation caused a major trouble for the economic health of the government last year when the crude oil prices sky-rocketed in global markets. The oil marketing companies, most of them majority-owned by the government, were forced to sell products at their retail outlets at prices much below cost. It caused havoc on their balance sheets and almost every oil marketing company stalled all kinds of investments. Now, post elections, it will be politically easier for the government to opt for market-linked prices. As the global crude oil prices have cooled off considerably from their peak levels, linking the retail prices to market conditions won’t cause any major upward revision in the retail prices. Hence, it could be the best time for switching to market-linked prices from the administered prices
* The New Government Expected To Give Further Stimulus To Economy.
* Urgent Need To Boost Investments, Particularly In Infrastructure.
* Challenge Of Keeping The Fiscal Deficit Under Check.
* A Number Of Policy Reforms On The Table
The policy initiatives of the new government are certainly going to determine how quickly the Indian economy will recapture its high pace of growth. There are a number of pending economic issues that need the urgent attention of the new policymakers. The real challenge for the new government lies in stimulating the economy on the one hand, and at the same time controlling the fiscal deficit on the other hand. The fiscal deficit has already reached near 12% of the gross domestic product (GDP), which is clearly not sustainable.
Waiting For The Third Stimulus:
After the announcements of two stimulus packages by the outgoing government in December 2008 and January 2009 respectively, the planning commission Deputy Chairman Montek Singh Ahluwalia had suggested that the country will need a third stimulus, which can be announced by the new government. One needs to wait and watch what kind of fresh stimulus comes from the new government now. For the purpose of countering the economic slowdown, the government can reduce corporate taxes and remove income tax surcharge. As a measure to push the rural demand, the scope of the National Rural Employment Guarantee Scheme can also be extended so that more people would come under its net. A further push to infrastructure can also be a part of the fresh stimulus package.
Continuation Of The Economic Reforms:
There has been a consistency in pursuing the economic reforms during the past 10 years, although there was a change of guard in 2004 when the United Progressive Alliance (UPA) replaced the National Democratic Alliance (NDA) at the centre. The dependency of UPA on the left parties was a stumbling block for UPA in pursing the reforms at full pace, yet the UPA government managed to implement a number of reforms. The continuation of the reform process, not in words but in action, is required to keep the engine of growth turned on.
Focus on Infrastructure:
There is a general consensus that infrastructure development has to be accorded key priority. The Prime Minister's Committee on Infrastructure has already projected earlier that India will require investments worth $500 billion and $1.5 trillion for the 11th Five-Year-Plan (2007-2012) and the 12th plan period 2012-2017 respectively. The government had announced in the Interim Budget presented in the Parliament in February 2009 that 9% of the country’s GDP will be spent on infrastructure by 2014, from the current 5%. If the new government successfully pursues this path, it will be a great push to the growth rate of the country.
Reining in the fiscal deficit:
India’s total fiscal deficit including the central and state deficits is estimated to reach at about 12% of GDP, which has become a major worry for the country. Most economists believe that the new government will have to take immediate steps to control the situation. In fact, the global factors have derailed India’s fiscal reform process that was going very smoothly as per targets during the past four to five years. When the global crude oil prices moved up very sharply in 2008, it resulted in highly inflated subsidy bill – particularly for the oil subsidy and fertilizer subsidy. Then, the global slowdown impacted the growth rate of India too, and resulted in lower than expected tax revenues. Also, the Indian government decided to revise the salaries of its employees by a fat margin at each level. A loan waiver programme for poor farmers also put a heavy burden on the exchequer. And, in order to counter the slowdown, the government came out with two stimulus packages. While all these steps were required and aimed at benefiting large sections of the society as well as the economy, these measures certainly inflated the fiscal deficit to such a high level that was not seen in the recent history of India.
Now, the new government will have only two ways to control and reduce the fiscal menace – reducing its expenditure and increasing the revenues. Both the options are not easy at the moment. At a time when the Indian economy has considerably slowed down, the tax revenues can’t be expected to increase. Increasing the tax rates will certainly not be a wise decision, as history suggests that tax rate hike in troubled period for economy always turns out to be counter-productive. R.K. Gupta, Managing Director of Taurus Mutual Fund that manages the equivalent of more than $100 million of stocks, warns that while a tax rate hike may lead to more tax evasions and ultimately not increase the tax revenue for the government, it might actually reduce the growth rate of the economy further.
On the other hand, reducing the expenditure is easier said than done. A systemic change aimed at expenditure reforms is the need of the hour. Dr. D.K. Joshi, Director and the Principal Economist at Mumbai-headquartered rating agency CRISIL said that as long as the growth rate was high and tax revenue was good, the government managed to run its business even without expenditure reforms, but it couldn’t be ignored any more. He said, “The new government would have to clearly spell it out how it plans to curtail its expenditures. Also, it would have to chalk out a clear roadmap regarding stimulus packages. How much stimulus it wants to provide and for how long? And then, how it plans to revert to fiscal prudence?”
PSE Disinvestment: A Right Prescription
The government has an option of selling its shareholding in a number of public sector enterprises (PSEs) to private sector, which can bring it much needed money. But commencing the disinvestment programme is a politically sensitive issue and reaching a consensus among the political parties is difficult. Also, even if the government manages to pursue this programme, it will have to use the proceeds very prudently. As Dr. Joshi warns, the proceeds of disinvestment should be used strictly for infrastructure creation, not for merely giving subsidies.
Goods & Services Tax
A unified goods and services tax (GST), a major reform of indirect taxes in India, is already proposed to be introduced from April 01, 2010. It’s advisable to have a single tax rate for all goods and services barring few exceptions across the country. Since there is not much time left, the new government should immediately chalk out the detailed implementation plan for the same. It shouldn’t be a difficult task because generally there is a political consensus on this issue. The Indian industry has already welcomed this initiative and is keenly waiting for its implementation.
Reducing Petroleum Subsidy:
The retail prices of petroleum products are determined by the Government of India due to political considerations. The situation caused a major trouble for the economic health of the government last year when the crude oil prices sky-rocketed in global markets. The oil marketing companies, most of them majority-owned by the government, were forced to sell products at their retail outlets at prices much below cost. It caused havoc on their balance sheets and almost every oil marketing company stalled all kinds of investments. Now, post elections, it will be politically easier for the government to opt for market-linked prices. As the global crude oil prices have cooled off considerably from their peak levels, linking the retail prices to market conditions won’t cause any major upward revision in the retail prices. Hence, it could be the best time for switching to market-linked prices from the administered prices
REVIVAL TRENDS: INDIA SHINING
If historical patterns are anything to go by, the voting in of the 15th Lok Sabha or the House of the People, the directly elected lower house of the Parliament of India, will mark a starting point for a sharp ramp-up in economic activity for the country. Economic activity, as measured by industrial production index, had increased immediately after five elections out of seven polls since 1984, as political stability provided a platform for economic growth.
Economic activity has risen consecutively following the last three elections held on 1998, 1999 and 2004. A comparison of industrial production (IP) data before elections and six months after elections, shows that on five occasions, the IP index rose by 20-80 basis points, according to data from Goldman Sachs Global ECS Research.
The Interim Budget for the financial year 2009-10 announced in February by the Finance Minister of the ruling United Progressive Alliance (UPA), focused on infrastructure development, easing of Foreign Direct Investments (FDIs) norms and economic stimulus packages that set the ground for how the alliance was approaching the General Elections.
The new Government that comes in to power would be best served if it continued and augmented the “India Shining” policies that currently sustain a Gross Domestic Product (GDP) growth of more than 7% as India continues to defy negative GDP growth seen in many Western economies.
Such growth initiatives have led to an economic revival in key sectors like steel, cement, automobile, food and beverages and fast moving consumer goods (FMCG) (See Vol 4 | Issue 3 ‘Clearing The FDI Highway’) that are best not derailed.
If historical patterns are anything to go by, the voting in of the 15th Lok Sabha or the House of the People, the directly elected lower house of the Parliament of India, will mark a starting point for a sharp ramp-up in economic activity for the country. Economic activity, as measured by industrial production index, had increased immediately after five elections out of seven polls since 1984, as political stability provided a platform for economic growth.
Economic activity has risen consecutively following the last three elections held on 1998, 1999 and 2004. A comparison of industrial production (IP) data before elections and six months after elections, shows that on five occasions, the IP index rose by 20-80 basis points, according to data from Goldman Sachs Global ECS Research.
The Interim Budget for the financial year 2009-10 announced in February by the Finance Minister of the ruling United Progressive Alliance (UPA), focused on infrastructure development, easing of Foreign Direct Investments (FDIs) norms and economic stimulus packages that set the ground for how the alliance was approaching the General Elections.
The new Government that comes in to power would be best served if it continued and augmented the “India Shining” policies that currently sustain a Gross Domestic Product (GDP) growth of more than 7% as India continues to defy negative GDP growth seen in many Western economies.
Such growth initiatives have led to an economic revival in key sectors like steel, cement, automobile, food and beverages and fast moving consumer goods (FMCG) (See Vol 4 | Issue 3 ‘Clearing The FDI Highway’) that are best not derailed.
GENERAL ELECTIONS: THREE-WAY TUSSLE
India’s month long General Elections, which will decide the political framework of the next government, is turning out to be a three-way contest.
The tussle for power used to be bi-polar one between the two largest national political alliances, the Indian National Congress led United Progressive Alliance (UPA) and Bharatiya Janata Party (BJP) led National Democratic Alliance (NDA). Now this has turned to be three-way one with a Third Front, comprising of the Communist Parties and smaller regional parties, presenting another alternative. An emerging power broker is likely to be the Bahujan Samaj Party (BSP), representing low-caste interests, that runs the state government in India’s largest province Uttar Pradesh. It is likely to win significant seats.
The Communist Parties emerged as a prominent force following their intense opposition to the Indo-U.S. Civil Nuclear Agreement that threatened the survival of India’s ruling coalition government of the United Progressive Alliance (UPA) last year.
This three way contest, however, has a bi-polar implication. On the one hand, the UPA and the NDA alliances have the experience of successfully running a National Government that propelled India to grow its Gross Domestic Product (GDP) more than 9% in recent years. On the other hand, the inexperienced Third Front has never been able to provide a stable government having only ever been in power for less than half of any full five-year term. Moreover, they are likely to be less inclined to open up India’s economy that has been turbo-charged over the past decade. Election results are due to be announced on May 16th.
Both the Congress and BJP led governments have successfully accelerated India’s GDP growth rate to about 7% today from 1.4% in 1991-92. This momentum peaked at 9.7% in the fiscal year 2006-07 before slowing down on account of the worldwide recession.
India’s month long General Elections, which will decide the political framework of the next government, is turning out to be a three-way contest.
The tussle for power used to be bi-polar one between the two largest national political alliances, the Indian National Congress led United Progressive Alliance (UPA) and Bharatiya Janata Party (BJP) led National Democratic Alliance (NDA). Now this has turned to be three-way one with a Third Front, comprising of the Communist Parties and smaller regional parties, presenting another alternative. An emerging power broker is likely to be the Bahujan Samaj Party (BSP), representing low-caste interests, that runs the state government in India’s largest province Uttar Pradesh. It is likely to win significant seats.
The Communist Parties emerged as a prominent force following their intense opposition to the Indo-U.S. Civil Nuclear Agreement that threatened the survival of India’s ruling coalition government of the United Progressive Alliance (UPA) last year.
This three way contest, however, has a bi-polar implication. On the one hand, the UPA and the NDA alliances have the experience of successfully running a National Government that propelled India to grow its Gross Domestic Product (GDP) more than 9% in recent years. On the other hand, the inexperienced Third Front has never been able to provide a stable government having only ever been in power for less than half of any full five-year term. Moreover, they are likely to be less inclined to open up India’s economy that has been turbo-charged over the past decade. Election results are due to be announced on May 16th.
Both the Congress and BJP led governments have successfully accelerated India’s GDP growth rate to about 7% today from 1.4% in 1991-92. This momentum peaked at 9.7% in the fiscal year 2006-07 before slowing down on account of the worldwide recession.
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