Indian Economy - News & Discussion 27 May 2012

[Singha]

walmart can only dominate in nations like US and Canada where everyone has a car and is willing to drive 20 miles to get a 55 gallon drum of tomato ketchup and 96 pack of toilet paper on sale or people fight and camp overnight to get some worthless $25 dvd player.

they are mostly failures across the globe..in china also I believe they are just one of the players not a dominant presence.

>> With Walmart, the local economy will take a huge hit. Small stores will shut down and the workers have to work at Walmart for lower wages without job security. Unlike Walmart, the local kirnana store usually employs relatives & family friends and rarely kicks them out.

that would only happen if they open 100,000 small stores in india. restrict them to the supercenter format. there are enough people in india and more to staff both the small shops and wal marts ten times over. we need expansion of retail to absorb some of the 10 mil new people entering the workforce every year and the local shops are hardly able to employ a couple of people incl relatives.

[Theo_Fidel]

The key difference is we don't have giant retail champions to take on WM. Germany, SoKo & Japan succeeded because they had domestic champions with access to 0% cash who could beat off WM. I'm not sure India has that.

It may all be moot soon. Maybe UPA is serious this time.
----------------------------------------------

http://business-standard.com/india/news ... ll/478862/

The government is planning to set the ball rolling on allowing 51 per cent foreign direct investment (FDI) in multi-brand retail as soon as the Presidential poll is over next month. According to officials in the Department of Industrial Policy and Promotion (DIPP), it has completed all the pertinent meetings with the stakeholders, including the states. The decision has already received the Union Cabinet’s approval; only the notification part is left.

A senior DIPP official said today that the decision had already undergone the “most difficult” part: getting the Cabinet approval. “We would just need to notify the decision now,” he told Business Standard. “All the state governments have been duly informed of our intention. Those states which want this to happen will welcome the retailers; those who oppose it will stay away. The state governments will only grant the necessary licences for the opening of the stores.”

[Singha]

IKEA has announced a investment of around $1b but then they are single brand retail which comes under 100%

control freaks and makhi choos like walmart will likely wait it out for 100%, but many others might come for 51% .... my wishlist would be Rei, sports authority, decathlon retail, amazon.com, best buy , target, kohls, macys , home depot.... all in a line on the blr ORR.... its rather tough to get a good choice of sports eqpt , tools here at reasonable prices...

btw cadbury has announced that they will import and market toblerone now on their retail network directly . apparently chocolate consumption in india has kind of trebled in the last 5 yrs.hopefully they will also start making it locally and generate some jobs.

[Gaurav_S]

^^Ikea rules when it comes to furniture that can be easily assembled. So able to transport many more pieces at less cost. Would be interesting to see how much jobs they create and how much material they manufacture/procure from local market.

PM's "reforms team" back with a bang!

Seems no one liked FM Pranav. Hopefully momentum is not lost and yields something positive results.

[Altair]

^^
Markets did respond positively to MMS being at helm of Finance. Rupee gained 120 paisa in a single day. Sensex too rose sharply.
Let us see how long the steam lasts. No point in coming to early conclusions. We have been disappointed before.

[nachiket]

I don't have high expectations. If the UPA was really interested in pushing through reforms, they could have done it even with Pranab da in charge. MMS taking over changes nothing IMHO.

As for the FDI in retail thing, correct me if I'm wrong, but isn't that really a policy decision for which the GOI doesn't need parliamentary approval? If so, what was the point of debating it in parliament last time? They must have known there would be opposition (not necessarily because it is a bad idea, but because it is point on which the opposition can be easily justified to the people as a fight against the big bad MNCs). This time they should just present a fait accompli, if they are serious.

[Sri]

Sriji, I am not an economic expert but it's my gut feeling that our economy (and the gobermint) are not mature enough to handle these things..either they should go for a Joint venture or should just keep away from this boor country

Sridhar Ji. Since we are going solely on guts... my gut feeling is that overall it will be good for our economy. It will force the local retailers and the kirane wala to be more productive and efficient. And soon they will realize that there is no great shakes in it. They will realize that they can take on Wal mart, that indian baniyas are no less... Customer focus will increase. Backward integration will happen.

Remember if Walmart uses Analytics so can we. If Walmart does backward integration, then so can we. If Walmart imports from other countries, so can we... I really don't see any problems in it.

I remember in 1991 we were giving same arguments against foreign banks... Why didn't SBI open ATM before that? Why didn't Indian banks invest in core banking solutions before that? Answer is clear... competition or rather lack of it...

[vishvak]

..

Remember if Walmart uses Analytics so can we. If Walmart does backward integration, then so can we. If Walmart imports from other countries, so can we... I really don't see any problems in it.
..

One should lookout for difference in behavior towards Indian firms v/s 'international' firms meaning western countries outside India.

This difference in behavior could be anything from arm twisting to NGO-mongering to media to whatever. In India one can do all this without hindrances and disorder but is there a guarantee for exactly same behavior with transparency and facilitation for Indians as it is for 'international' firms?

We are taking words like 'international' and 'Foreign' for granted to be as orderly, transparent and civilized as it is inside.

Two cents onlee.

[Altair]

What is more worrying is MMS is more of a Sobha Singh(Khushwant Singh's father) type of character. MMS will be Nobled for his nobleness.
India needs a Bhagat Singh during these tough times.

[RamaY]

And please explain to me how MNC's are going to conquer and rule us like the EIC. I'm in the mood for a nice laugh.
.

Please check the threads on op-parakram where the MNCs steered Indian response to parliament attacks thru their Indian offshoring partners.

[RamaY]

IKEA has announced a investment of around $1b but then they are single brand retail which comes under 100%

control freaks and makhi choos like walmart will likely wait it out for 100%, but many others might come for 51% .... my wishlist would be Rei, sports authority, decathlon retail, amazon.com, best buy , target, kohls, macys , home depot.... all in a line on the blr ORR.... its rather tough to get a good choice of sports eqpt , tools here at reasonable prices...

btw cadbury has announced that they will import and market toblerone now on their retail network directly . apparently chocolate consumption in india has kind of trebled in the last 5 yrs.hopefully they will also start making it locally and generate some jobs.

Singha ji,
Sports authority, home depot my have some value addition... But everyone else in your list is waste in the Indian context.

All the other players in your list are nothing but business models that exploit the difference between manufacturing and consuming societies. And their real value in western society is their return policies, which cannot work in Indian system.

[shyam]

Remember if Walmart uses Analytics so can we. If Walmart does backward integration, then so can we. If Walmart imports from other countries, so can we... I really don't see any problems in it.

There one thing no Indian company can do, but Walmart can. Walmart can raise unlimited global capital, currently at a much cheaper rate.

[uddu]

This is going to be another disaster in the making. Without global brands to compete, without retail chains of global stature, UPA is pushing India to another kind of mass imports and making way for money to flow out at much faster rate than it comes in. The time has not yet come. This need to be challenged at the moment. Let's wait till 2015, then we can slowly start opening up these sectors for competition.
Even if the retail sector is opened then there must be a clause that states that whatever the company sells, must be sourced from within India, every component and every bit of it must come from within India. Even branded items if need to be sold, should be manufactured in India by that company. Be it potato chips or computer chips.

[RamaY]

^
Can you please explain how money would flow out at a faster rate when Indian retailers import from outside compared to a foreign retailer importing them?

If Walmart's value-addition comes from its ability to source a product from anywhere in the world where it can be produced for the lowest price, then how can India reap that benefit by forcing Walmart to make a certain % of products locally?

Are you suggesting that just to get entry to India, Walmart should somehow ensure that another environmentally disastrous slave-manufacturing machine is established in India? Can India do that even if it wanted to? Assuming some of these efficiencies are achieved if and only if certain level of Economies of Scale are achieved, what will India do with the excess capacity? Does the world have enough consumption capacity to absorb Chinese and Indian manufacturing capacity? What about the raw materials?

Let us assume a plastic toy from China costs Rs 100 in India. Assume that Walmart makes Rs 40 profit on it, where as Indian retailer cannot demand more than Rs 20 profit. Also assume that the manufacturing cost is Rs 50 and China makes Rs 10 profit. What is a good option for India?

1. Let China produce the toy, let Indian retailer make Rs 20 profit and get the product for Rs 100.
2. Let China produce the toy, allow Walmart to make Rs 40 profit and hope that they will make the product available for Rs 80 (Can happen as long as the Indian retail competition exists, but will go up to Rs 100 once internal competition is killed/acquired).
3. Let India invest $B to setup a toy factory, make the product at Rs 50 (no guarantee given the cost of capital and other factors, but let us assume) and allow its internal manufacturer and retailer to make Rs 30 profit and make the product available at Rs 80. This includes the social costs of environment pollution, labor exploitation etc., while the social benefits are employment created.
4. Let India invest $B to setup a toy factory, sell it to Walmart at Rs 60, which might sell the product at Rs 100, after the competition is killed. This includes the social costs of environment pollution, labor exploitation etc., while the social benefits are employment created.

[RamaY]

Remember if Walmart uses Analytics so can we. If Walmart does backward integration, then so can we. If Walmart imports from other countries, so can we... I really don't see any problems in it.

There one thing no Indian company can do, but Walmart can. Walmart can raise unlimited global capital, currently at a much cheaper rate.

Cost of capital also depends on the location of investment. Just because Walmart is loaning the money, no one will give it at cheaper rate, if Walmart want to invest it in Pakistan.

[shyam]

Here were are comparing Walmart and Indian companies. It is easy for WM to raise capital from US markets, unlike Indian companies.

[member_23626]

Those who are batting for walmart should remember that we are talking about Indian economy not US or any western companies... we are not mature enough yet, also if we want to be a leader, we must lead, not follow. FDI by companies like walmart won't contribute a $hit to this country. Our country is already screwed, I hope this is not another epic step to screw this more

[chetak]

Those who are batting for walmart should remember that we are talking about Indian economy not US or any western companies... we are not mature enough yet, also if we want to be a leader, we must lead, not follow. FDI by companies like walmart won't contribute a $hit to this country. Our country is already screwed, I hope this is not another epic step to screw this more

+1.

What they couldn't do thru the fu(ked up nuke deal they will do through the FDI route.

[uddu]

Can you please explain how money would flow out at a faster rate when Indian retailers import from outside compared to a foreign retailer importing them?

Don't you think it's going to get doubled or more than that? Allowing for more chances of imports and negatively affecting the local economy?

If Walmart's value-addition comes from its ability to source a product from anywhere in the world where it can be produced for the lowest price, then how can India reap that benefit by forcing Walmart to make a certain % of products locally?

What's that value addition? It's the perception. And what make you think that Indians cannot manufacture stuff at lower cost? If there is reforms that need to be in the labor and other sectors. Not handling over a big market to corporations on a plate and doing hara-kiri of the nation. We can make products with good quality at cheap prices, may be even compete with the Chinese in terms of pricing. It's possible. And no one is inviting Walmart to come. If they cannot compete within the rules of India ,they don't' have to. India is not going to crumble if Walmart is not coming.

Are you suggesting that just to get entry to India, Walmart should somehow ensure that another environmentally disastrous slave-manufacturing machine is established in India? Can India do that even if it wanted to? Assuming some of these efficiencies are achieved if and only if certain level of Economies of Scale are achieved, what will India do with the excess capacity? Does the world have enough consumption capacity to absorb Chinese and Indian manufacturing capacity? What about the raw materials?

Yes absolutely, there must be rules that ensure that everything is sourced from within India. Not saying that there cannot be any competition, there cannot be best practices, there cannot be business friendly+labor friendly laws. Even innovative manufacturing techniques including robotics can be tried to mass manufacture products with minimal labor. But still this can create a lot of employment. If we do have excess capacity, let's export. Why should we be bothered about whether Chinese are able to market their products worldwide or not. If Indian goods come at a price compared to the Chinese with good quality, why you think that the Chinese should keep manufacturing stuff. May be they can stop. But let's leave it to them.

Let us assume a plastic toy from China costs Rs 100 in India. Assume that Walmart makes Rs 40 profit on it, where as Indian retailer cannot demand more than Rs 20 profit. Also assume that the manufacturing cost is Rs 50 and China makes Rs 10 profit. What is a good option for India?

1. Let China produce the toy, let Indian retailer make Rs 20 profit and get the product for Rs 100.
2. Let China produce the toy, allow Walmart to make Rs 40 profit and hope that they will make the product available for Rs 80 (Can happen as long as the Indian retail competition exists, but will go up to Rs 100 once internal competition is killed/acquired).
3. Let India invest $B to setup a toy factory, make the product at Rs 50 (no guarantee given the cost of capital and other factors, but let us assume) and allow its internal manufacturer and retailer to make Rs 30 profit and make the product available at Rs 80. This includes the social costs of environment pollution, labor exploitation etc., while the social benefits are employment created.
4. Let India invest $B to setup a toy factory, sell it to Walmart at Rs 60, which might sell the product at Rs 100, after the competition is killed. This includes the social costs of environment pollution, labor exploitation etc., while the social benefits are employment created.

Assumptions will remain assumptions.

[vijayk]

http://www.indianexpress.com/news/low-y ... m/968452/0
Low yields for UPA populism

If the Congress were to reflect on its record, it would find that, both in terms of overall economic and political performance, it has performed worse than any other government in Indian history. While many justifiably accused Indira Gandhi for worse to worst economic policies, and worse to worst destruction of institutions, no one has accused her of being an unclever politician. But the record of UPA 2, and Sonia Gandhi, is one of bad politics and bad economics. For the latter, one has to only look at the record of UPA 2 on growth, inflation, the current account deficit, the rupee, corruption, the lack of confidence, the lack of animal spirits, etc. For politics, one has only to look at the large number of Congresswallahs who have lost their deposits in practically every election held since May 2009.

And since their own high-profile staff in the National Advisory Council (NAC) claim that almost three-fourths of the country goes to bed hungry every night, maybe the Congress has unselfishly helped the nation. So what if food prices go up, and the poor cannot afford food — at least the country is producing food at a faster pace!

The table documents the data on agricultural production and related statistics for four time-periods: 1950-1977, 1978-2011, 1998-2003, and 2004-2011. Rainfall data since 1871, properly weighted by area under crops, indicates that during NDA rule, rainfall in the five years ending in 2003 was among the 15 worst such periods since 1871. In contrast, the five-year rainfall during the lucky UPA rule has been slightly better than average. So, when the data in the table are examined, this important fact should be kept in mind.

Perhaps the Congress can make Narendra Modi its agriculture minister so that India can benefit from high agricultural growth. Gujarat in the last decade has recorded agricultural growth above 10 per cent per annum! OUCH! That got to hurt the CON woman and her cronies in the media

No matter what the criteria, agricultural performance during the UPA reign has been worse than under the NDA. Rain-adjusted agricultural growth under the NDA was marginally higher by 0.1 per cent per annum. Rice production higher by an average 1 per cent per annum, and food production higher by an average 0.4 per cent per year. The prices received by producers of agricultural goods (relative to non-agriculture) decreased at about 2 per cent per annum during 1998-2003.

What the kulak policies have achieved is an increase in food subsidies, and overall inflation. And no increase in the rate of growth of agricultural output. And India has paid heavily for this grotesque miscalculation. There are other causes of high inflation, but high procurement prices for food seems to be a major cause. Each 10 percentage point increase in the average procurement price increases the inflation rate by 3 percentage points. But the damaging effect of the kulak policies is enlarged by the domino effects in monetary policy.

[RamaY]

This is going to be another disaster in the making. Without global brands to compete, without retail chains of global stature, UPA is pushing India to another kind of mass imports and making way for money to flow out at much faster rate than it comes in. The time has not yet come. This need to be challenged at the moment. Let's wait till 2015, then we can slowly start opening up these sectors for competition.
Even if the retail sector is opened then there must be a clause that states that whatever the company sells, must be sourced from within India, every component and every bit of it must come from within India. Even branded items if need to be sold, should be manufactured in India by that company. Be it potato chips or computer chips.

uddu,

I was responding to this post. Maybe I misunderstood your post... for some reason i thought
1. You wanted to invite Walmart and other global brands
2. You wanted to force the likes of Walmart to take local produce.

could be a complete mis-understanding...

[Prem]

http://news.yahoo.com/indias-june-facto ... iness.html
....India's June factory activity ticks up, hiring expands: survey

BANGALORE (Reuters) - Indian factories in June stepped up production and hired workers at the fastest rate in more than two years, but sagging demand abroad took a toll on growth in new export orders, a survey showed on Monday.The HSBC manufacturing Purchasing Managers' Index (PMI) rose to 55.0 in June, a four-month high, from 54.8 in May. It has kept above the 50 mark that divides growth and contraction for more than three years.ill, the survey raised some concerns. High prices continue to weigh on manufacturers, with both input and output costs rising sharply from May. That underscored expectations the central bank is unlikely to cut key interest rates soon.Asia's third-largest economy is grappling with slowing economic growth but high inflation at a time when the health of the global economy is deteriorating. A slump in factory activity in China and Japan deepened in June [nL3E8I109O]."Activity in the manufacturing sector kept up the pace in June with output and employment expanding at a faster pace," said Leif Eskesen, economist at HSBC.The employment sub-index was at 52.4 in June, the highest level since May 2010.While the PMI suggested domestic demand was holding up, signs from abroad looked more ominous

[Austin]

Just saw Brent has hit $100 today so to drop in oil price was temporary looks so atm.

What prompting the rise Iran sanctions or Europe coming to some agreement ?

[Suraj]

Demand usually rises during summertime due to more people driving in the US and Europe on holiday.

[pentaiah]

Not in this instance
There is always a lag between crude prices and price / demand at the pump
OPEC is set to cut production as recent trend in crude prices was downward
May be Syria is going hot in few days or as Johann says chemical warfare is imminent


Added later after I consulted googledar chai wallah

Meanwhile
.........
ALGIERS, July 3 (Reuters) - Algeria said on Tuesday it would seek an emergency meeting of producer group OPEC if oil prices resume their decline, backing comments from other members concerned about oversupply.

"If the price falls further, we support the idea of the organization's extraordinary meeting," Energy and Mines Minister Youcef Yousfi told state radio. "The head of the organization has prerogatives to call for a meeting when prices deteriorate."

Iran at the weekend urged OPEC's secretary general to convene an emergency meeting to stop a drop in prices.

That followed a call from Iraq to cut OPEC's supply and a Venezuelan request for an extraordinary meeting in the third quarter of this year if prices remain low.

Oil topped $101 a barrel for the first time in three weeks on Tuesday as tension over Iran increased concerns about supply and as investors bet on further policy action to support global economic growth.

[Johann]

May be Syria is going hot in few days or as Johann says chemical warfare is imminent

No Spinster, its not imminent. Assad is not a fool.

But if he loses control and the whole system breaks down what happens next to those warheads is something that some governments are worrying about.

[V_Raman]

btw, does anyone know what happened to the whole biodiesel thing and it impact on our economy? there are many small-scale fully self-contained/automated bio-diesel units that will be very useful for villages if they have the seeds.

[Theo_Fidel]

http://www.thehindubusinessline.com/com ... 572551.ece

Danfoss India plans to invest Rs 500 crore over the next three years to expand its manufacturing and R&D facilities which will generate over 2,000 jobs. India will be the Danish-headquartered company’s manufacturing hub for the Asia-Pacific and its largest global R&D centre. The company is among the top manufacturers of electronic controls for power sector including renewable energy, refrigeration, air-conditioning and commercial compressors. The investments will be in place by 2015, when the company will set up a 50-acre factory in Oragadam, an industrial suburb to the west of Chennai. It will employ over 2,000 workers including 1,000 in R&D and an equal number in administration and manufacturing. The company now employs over 300 people.

[nawabs]

Raghuram Rajan tipped to be next Chief Economic Advisor

http://www.thehindubusinessline.com/ind ... ef=wl_home

Former IMF economist Dr Raghuram G. Rajan is believed to be leading the race for the post of Chief Economic Advisor. The incumbent, Dr Kaushik Basu’s term ends on July 31.

Highly placed Government sources told Business Line, “Dr Rajan’s name is being considered actively.” However, they declined to comment on whether Dr Rajan’s name had been picked by the Search Committee appointed to find Dr Basu’s successor.

Dr Rajan has the distinction of being the youngest person to hold the post of Economic Counsellor and Director of Research at the International Monetary Fund (IMF). He is also considered to be one of the first economists to see the financial crisis of 2008 coming.

[AbhiJ]

Another JNUwallah inducted in NAC.

The government has reconstituted the National Advisory Council (NAC) chaired by Sonia Gandhi by dropping three members and inducting two new faces.

Mihir Shah, Member, Planning Commission, and Ashis Mondal, founder of the Bhopal-based NGO, Action for Social Advancement, have been inducted in the advisory panel for a period of one year.

Government reconstitutes National Advisory Council

About Mihir Shah:

A Ph.D. in Economics from the Jawaharlal Nehru University, New Delhi, Dr. Shah co-authored India's Drylands, a study for the UNDP, which was published and released worldwide by the Oxford University Press in 1998. The study brings out the macro-economic significance of watershed programmes for food security and employment guarantee in India.

His Share under NREGA:

on a million acres of land across 72 districts in 12 states.

[Prem]

http://news.yahoo.com/india-free-generi ... nance.html
India to give free generic drugs to hundreds of millions

MUMBAI (Reuters) - India has put in place a $5.4 billion policy to provide free medicine to its people, a decision that could change the lives of hundreds of millions, but a ban on branded drugs stands to cut Big Pharma out of the windfall.From city hospitals to tiny rural clinics, India's public doctors will soon be able to prescribe free generic drugs to all comers, vastly expanding access to medicine in a country where public spending on health was just $4.50 per person last year.The plan was quietly adopted last year but not publicized. Initial funding has been allocated in recent weeks, officials said.Under the plan, doctors will be limited to a generics-only drug list and face punishment for prescribing branded medicines, a major disadvantage for pharmaceutical giants in one of the world's fastest-growing drug markets."Without a doubt, it is a considerable blow to an already beleaguered industry, recently the subject of several disadvantageous decisions in India," said KPMG partner Chris Stirling, who is European head of Chemicals and Pharmaceuticals."Pharmaceutical firms will likely rethink their emerging markets strategies carefully to take account of this development, and any similar copycat moves across other geographies," he added.But the initiative would overhaul a system where healthcare is often a luxury and private clinics account for four times as much spending as state hospitals, despite 40 percent of the people living below the poverty line, or $1.25 a day or less.
Within five years, up to half of India's 1.2 billion people are likely to take advantage of the scheme, the government says. Others are likely to continue visiting private hospitals and clinics, where the scheme will not operate."The policy of the government is to promote greater and rational use of generic medicines that are of standard quality," said L.C. Goyal, additional secretary at India's Ministry of Health and Family Welfare and a key proponent of the policy."They are much, much cheaper than the branded ones."Global drugmakers like Pfizer, GlaxoSmithKline and Merck will be hit. They spend billions of dollars a year researching new treatments and target huge growth for branded medicine in emerging economies such as India, where generics account for around 90 percent of drug sales by value, far more than in developed countries.U.S.-based Abbott Laboratories, which bought an Indian generics maker in 2010, is the biggest seller of drugs, both branded and generic, in India, followed by GlaxoSmithKline

[Hitesh]

May be Syria is going hot in few days or as Johann says chemical warfare is imminent

No Spinster, its not imminent. Assad is not a fool.

But if he loses control and the whole system breaks down what happens next to those warheads is something that some governments are worrying about.

A mutual acquaintance of ours says this, "Civil War 101. You need two of three things to win a civil war. Guns, money, and the people. Assad still have the guns. He lost the people. And he is rapidly losing the money."

By the way, he says hi and wishes to hear from you. Drop him a line at anytime.

[Vipul]

Mauritius offers India 2 islands in effort to preserve tax treaty.

How far will a country go to secure a favourable deal for itself? Pretty far, it seems. Mauritius has offered a couple of sun-drenched islands to India as part of a trade and investment deal. While the offer has been talked about for a while, Mauritius has revived it - at a time when it's very keen on persevering with the 1983 double-taxation avoidance treaty with India.

Mauritius foreign affairs and trade minister Arvin Boolell said that it was up to India to use the islands to its advantage. He said the "blue economy" had great potential. India could use North and South Agalega Islands (which are located 1,100 km north of Mauritius and have an official total area of 70 sq km) for setting up hotels and tourist resorts, for trade, marine studies, or for building a strategic presence in the Indian Ocean, official sources told TOI. North Agalega Island also has an airstrip.

In November 2006, TOI had first reported about preliminary discussions between the two countries for handover of Agalega Islands - which is closer to India than the African country -for development as a tourism and trade hub.

"There is no problem on the issue," minister Boolell said when asked if the islands could be handed over to India as part of an economic package. Pressed further, Boolell said, "We want investment to flow into Mauritius. India can use Mauritius as a springboard for investment (to Africa) and locally. Now we want India to respond positively and take advantage - and it is true for other friendly countries - of the tremendous potential of the Blue Economy, which is the ocean economy."

Interestingly, the offer of the islands has been renewed at a time when investment flows into India via Mauritius were threatening to dry up following the proposal to introduce GAAR (General Anti-Avoidance Rules) that aimed at plugging loopholes in the double-taxation avoidance treaty by making disclosure of the source of funds mandatory. Mauritius has maintained that GAAR was creating a lot of uncertainty among investors.

"We want to develop as an ocean basket and ocean market," said the minister. "The potential is tremendous. We work very closely with India. We should not forget that India has helped us in marking our territories, has helped us in conducting hydrographic studies and in two years we will acquire an offshore vessel from India under the line of credit that India has offered. We are doing several projects together."

While Boolell indicated that the island nation was open to amendments in the double-taxation avoidance treaty, he denied that there was any misuse.

In 2006, when the offer of the Agalega Islands was first discussed, India was exerting pressure on Mauritius to amend the treaty and sign a Comprehensive Economic Cooperation Agreement. Subsequently, New Delhi relented amidst suggestions that India had a long link with the African country, with a sizeable population of people with Indian-origin.

The discussions between the two countries on the two islands -- which may give India strategic depth in the Indian Ocean, especially in its fight against piracy - had then focused on the development of hotels and resorts and upgrading an existing airstrip in the island into an airport.

In 2006, sources had told TOI that there was also an option to develop a port on one of the two islands. There were, however, no discussions on how the arrangement would be structured. At the time when it was first reported by TOI, there were also some protests in Mauritius against handing over the islands to India.

[sudarshan]

Mauritius offers India 2 islands in effort to preserve tax treaty.


In November 2006, TOI had first reported about preliminary discussions between the two countries for handover of Agalega Islands - which is closer to India than the African country -for development as a tourism and trade hub.

DDM at work? The Agalega Islands seem to be more than twice as far from Lakshadweep (which seems to be the closest that they are to India) than from Mauritius.

In any case, this would greatly expand India's reach. Hope it goes through.

[Austin]

8% growth not God-given right: Montek Singh Ahluwalia

NEW DELHI: It is not possible to achieve 9% economic growth during the 12th Five-Year Plan period (2012-17), Planning Commission deputy chairman Montek Singh Ahluwalia said on Friday.

He hinted at revising the growth target for the 12th Plan to 8-8.5%. The approach paper for the 12th Plan has set a target of 9% average annual growth for the period.

"It is not possible to think of 9% growth. I think somewhere between 8% and 8.5% is feasible," Ahluwalia said, adding that even 8% growth would not be easy to achieve given the deteriorating global economic situation. He said achieving 8% growth in the next five years would require a "major effort" and could not be taken as a "God given right".

Ahluwalia said lowering of ambitions for the period will be internally discussed in the Planning Commission. This is being done in view of a "sharp deterioration" in the world economy and its impact on India, he said. "Given that the world economy deteriorated very sharply over the last year, the growth rate in the first of year of the plan (2012-13) is likely to be 6.5 to 7%," he added.

Ahluwalia also said the commission was proposing a target of reducing poverty by 10% to less than 20% of the population by 2017 — the last year of the 12th plan.

[Austin]

Stockbroker Ketan Parekh in major stock market scam, reveals IB report

[Austin]

India Today: Can Prime Minister Manmohan Singh revive the economy?

[Prem]

http://news.yahoo.com/firms-see-india-3 ... iness.html
Firms see India 3rd most-favoured destination: U.N. report

NEW DELHI (Reuters) - Major global companies consider India their third most favoured destination after China and the United States, a U.N. report said on Thursday, and investment inflows could increase by more than 20 percent both this year and next.Foreign direct investment (FDI) flows into India leapt 30 percent to nearly $32 billion in 2011, though held back by slow pace of reforms, it still remains a long way down the league table of FDI recipients.China drew $124 billion last year, while Brazil attracted nearly $67 billion and Russia $53 billion.."The FDI inflows into India can go up by 20-25 percent this year and by about 20 percent next year, if the present trend continues," said Nagesh Kumar, Chief Economist, United Nations Economic and Social Commission for Asia and the Pacific, while releasing the UNCTAD's World Investment Report

[Prem]

India's Reliance Power Gets $1.1 Billion in Loans from China http://online.wsj.com/article/SB1000142 ... 74806.html

NEW DELHI—Reliance Power Ltd. 532939.BY +3.87%has secured $1.1 billion in financing from three Chinese banks for a power project in central India, the first such endeavor financed by the Chinese in India, people familiar with the matter said.
The loans will be used to refinance part of the 145 billion rupees ($2.6 billion) the company received in financing from banks in India to build a coal-fired power project at Sasan in the central state of Madhya Pradesh, the people said
This is a unique transaction, as we have substituted Indian lenders of the project with Chinese banks to reduce the cost of funding and get better maturities," said Reliance Power Chief Executive Jayarama Prasad Chalasani.The loans, secured last week, are from Bank of China Ltd., 3988.HK +0.70%China Development Bank Corp. and Export-Import Bank of China. The banks didn't respond to requests for comment.Reliance Power is part of a conglomerate controlled by Anil Ambani, one of India's richest men. Mr. Ambani also is the Indian chairman of the Indo-China CEO forum, which was created last year.

[RamaY]

^ looks like a financial engineering transaction to better use $/Rs conversion rate and interest rates.