India Economic News




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India Economic News

No. 8-9/09 August/September, 2009


Contents


India Economic News 1

GOVT WILL GO ALL-OUT TO GET BACK TO 9% GROWTH: PM 1

ECONOMY TO GROW AT 6.7%: FM 3

INDIAN BANKS PASS STRESS TEST 3

INDUSTRIAL OUTPUT GROWS 7 PER CENT IN JULY 2009 3

INDIAN ECONOMY SET FOR POSITIVE GROWTH IN 2010: S&P 4

INDIA TO EMERGE AS THE PREFERRED DESTINATION FOR FOREIGN INVESTORS: MOODY’S 4

INDIAN INVESTORS EMERGE MOST OPTIMISTIC IN ASIA: ING 4

GOVT UNVEILS ROADMAP FOR FINANCIAL SECTOR REFORMS 5

NEXT DECADE WILL BE OF INFRASTRUCTURE: MINISTER 5

$ 51 MLN AUTHORITY SET UP TO CLEAN UP RIVERS, LAKES 6

LANDMARK EDUCATION BILL PASSED BY PARLIAMENT 6

FTA SIGNED, $50-BN TRADE BY 2010 6

INDIA EMERGES SECOND IN GLOBAL CONSUMER CONFIDENCE SURVEY 7

INDIA SME’S AMONG MOST CONFIDENT IN WORLD, SAYS SURVEY 7

INVESTMENTS IN HEALTH INFRASTRUCTURE TO GET A BOOST 8

INDIA INC FINDS STEM CELLS A HEALTHY BUSINESS 8

INDIAN MEDIA INDUSTRY TO OUTSHINE GLOBAL PEERS 9

LDA, ABG PORTS TEAM UP TO OFFER LOGISTICS SERVICES TO INDIAN PORTS 10

CAIRN, ONGC TO INVEST $4 B IN RAJASTHAN 10

AGRI EXPORTS TO DOUBLE IN 5 YRS: APEDA 11

INDIA CONTINUES TO BE MOST ATTRACTIVE OUTSOURCING HUB 11

TELECOM SUBSCRIBER NUMBERS IN INDIA WITNESS UPSURGE IN JULY 11

NOKIA GETS STRONG SIGNALS FROM INDIAN MARKET 12

BOEING REMAINS BULLISH ON INDIA, SEES AIR TRAVEL BOUNCING BACK 12

MERCEDES TO INVEST € 700 M IN CHENNAI PLANT 13

NISSAN TO SHIFT PRODUCTION OF SMALL CAR FROM UK TO INDIA 13

GOVT WILL GO ALL-OUT TO GET BACK TO 9% GROWTH: PM


The Prime Minister, Dr. Manmohan Singh, said that the Government will take every possible step to restore annual economic growth to nine per cent.
“Restoring our growth rate to nine per cent is the greatest challenge we face. We will make every necessary effort to meet this challenge - whether by increasing capital flows into the country, or by encouraging exports or increasing public investment and expenditure,” he said in his address to the nation on its 63rd Independence Day.
Dr Singh, delivering his fifth Independence Day speech as the Prime Minister, indicated that despite the deficient monsoons, things were looking up. “We expect that there will be an improvement in the situation by the end of this year, but till that time we will all have to bear with the fallout of the global economic slowdown,” he said in his address.

“Some people question whether India will ever be able to attain its true potential,” Dr Singh said, “I have no doubt about this.” The economy grew at an average of around 9 per cent in the four years ending March 2008, but the pace of growth declined to 6.7 per cent in the last fiscal year due to the global economic crisis, he said. “It is only a result of our policies that the global crisis has affected us to a lesser extent than many other countries,” he said in his speech.

Dr Singh said the deficient rains would have an adverse impact on crops, but the country would be able to deal with the situation. “We have adequate stocks of food grains. All efforts will be made to control the rising prices of food grains, pulses and other goods of daily use,” he said.
“Our goal is 4 per cent annual growth in agriculture and I am confident that we will be able to achieve this target in the next five years,” Dr Singh said. He also appealed to the business community to fulfill its social obligations by joining the Government’s efforts to ensure inclusive growth. To ensure that no one goes hungry, he said the Government is working to bring a food security law that provides for supply of 25 kg of rice or wheat at Rs 3 a kg to families living below the poverty line.
Underlining the need for expansion of secondary education in the country, Dr Singh said funds would not be a constraint and disabled children would get special attention.
He also urged the nation to not panic over the outbreak of swine flu and assured that India was well equipped to deal with the pandemic. (The Hindu Business Line: August 17, 2009)



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ECONOMY TO GROW AT 6.7%: FM


Finance Minister, Mr. Pranab Mukherjee, said the economy was expected to maintain a growth rate of 6.7% in 2009-10, the same as the last fiscal year, as some signs of pickup were visible. "We have ended 2008-09 at 6.7%. I do hope this level of growth we will be able to maintain (in 2009-10)," he said while commending the Finance Bill in the Rajya Sabha (Upper House of Parliament).

He said although some signs of recovery were visible, it was too early to point out whether they would be steady. Expressing his hope that the stimulus, both in terms of financial concessions, fiscal policy and the monetary measures announced by RBI, will have its "desired impact", he said the early signs of improvement in the Indian economy were seen despite no big recovery visible in the global economy.

He said that trillions of dollars would have been injected in the Europe and North America. "But there is no immediate restoration of the (global) economy," he added. (The Times of India: July 30, 2009)

INDIAN BANKS PASS STRESS TEST


The Indian banking system is resilient to the shocks that may arise due to higher non-performing assets (NPAs) and the global economic crisis, the Reserve Bank of India’s (RBI’s) stress test has shown.

RBI’s Annual Report-2008-09 said the test was done to assess the capital adequacy of the banks to sustain losses from deteriorating asset quality, primarily due to falling external demand in the wake of the global recession a subsequent slowing of domestic private demand.

A similar test was done to assess the risks associated with the mark-to-market (MTM) losses on the banks’ overseas exposure. MTM means stating losses based on the current market value of the currency. The assessment, done in 2008, suggested that the MTM risks to the Indian banking sector appeared limited and manageable.

The exercise tested the banks’ exposure to seven sectors whose prospects have dampened due to the slowdown in external demand.

The sectors were chemicals/ dyes/paints, leather and leather products, gems and jewellery, construction, iron & steel, automobiles and textiles. These account for 15.4% of total advances and 12.2% of gross NPAs of Indian banks. The test assumed 300% and 400% simultaneous rise in NPAs in these sectors and adjusted the additional provisioning requirements from existing capital and risk-weighted assets. Barring two banks, which accounted for 3% of the total assets of the banking system, others were found to have the strength to withstand such a risk.

In September 2007, following the financial crisis in the US, RBI started a monthly reporting system to capture the banks’ overseas exposure to off-balance sheet items (primarily credit derivatives and investments such as asset-backed commercial papers and mortgage-backed securities). An analysis of such information so far has revealed that the banks’ exposure to such instruments has gradually come down from June 2008. The MTM losses, however, gradually increased up to March 2009, reflecting the impact of the sustained fall in value of the assets. (Business Standard: August 28, 2009)





INDUSTRIAL OUTPUT GROWS 7 PER CENT IN JULY 2009


Commerce and Industry Minister, Mr Anand Sharma, on August 27, 2009, said that industry output, as measured by the index of industrial production (IIP), grew 7% in July 2009, the same as in July 2008.

Mr Sharma attributed the 7% growth to fiscal and monetary measures by the government and the Reserve Bank of India (RBI). "These measures have had a salutary effect on our economy," he said. Moderated and better factory production have been major factors that have led to growth in IIP, reviving hopes of economic recovery. The IIP numbers have also shown growth owing to the double-digit growth in two-wheeler and car segments and consumer goods production. "While industry data for July is buoyant, with two-wheelers up 18.2%, cars up 29.1%, commercial vehicles up 5.1%, we expect the July IIP to come lower at 5% levels versus the surprisingly high 7.8% reading in June," said Ms. Rohini Malkani, economist, Citi India, in a report earlier.

Overall consumer goods production rose 3.8% in June 2009, driven by a 15.5% expansion in consumer durables output.


India News 3

INDIAN ECONOMY SET FOR POSITIVE GROWTH IN 2010: S&P


The turbulence in the global economy and its financial markets during the last year or so has brought home to all of us that were witnessing a shift in the economic world order, from being G-8 focused to, increasingly, the more inclusive and relevant G-20. As signs of stabilization and even a turnaround have begun to manifest, Standard & Poor's Asia-Pacific chief economist, Dr. Subir Gokarn, presented a mid-year review of the Indian economy.
"We anticipate that India will remain in positive growth territory throughout this global recession and financial turmoil," observed Dr Gokarn. Explaining this he added, "Domestic policy responses, both monetary and fiscal, appear to have played a significant role in shoring up domestic demand in an environment of drastically reduced exports."
India's GDP growth is forecast at 5.8-6.3% in 2009 and 6.8-7.3% in 2010. GDP will be driven by the Indian economy's very strong domestic consumption, which has been held up by stable rural demand and the recent hike in public sector salaries."
A review of the last two quarters shows that the expansionary domestic policies and relatively limited financial integration significantly helped India to sustain positive growth in the first quarter. India discarded its fiscal consolidation targets and rapidly increased spending to bolster domestic industry, infrastructure, and construction-and propel domestic consumption. Besides the boost to industry, India gave direct stimulus to the larger rural population, low income earners, and pensioners in the form of farm-loan waivers, subsidies to buy consumer durables, tax incentives, and so on.

Some of the potential threats that could slow down or even derail the recovery include revival of inflation, high interest rates and persistent global sluggishness. Although inflation continues to drop, fiscal boosts and previously-pumped-in liquidity are cautioning the central bank against further rate cuts, waiting for fiscal policy to play out.


The recent rebound in food and commodity prices does pose a potential risk. But the greater challenge for central banks would be to time rate hikes to absorb excess liquidity and prevent a re-ignition of demand-led inflation. Beyond this, fiscal pressures will continue to weigh on India's credit quality.
Overall, the Indian economy is expected to continue in the positive growth trajectory on account of domestic forces - robust local consumption driven demand reinforced by strong policy responses. (The Economic Times: August 13, 2009)



INDIA TO EMERGE AS THE PREFERRED DESTINATION FOR FOREIGN INVESTORS: MOODY’S


India and China will soon emerge as the preferred destinations for foreign investors, as per Economy.com, the research arm of global rating agency Moody's.
"Investment opportunities in China and India will soon be in hot demand again. The two emerging giants had remained appealing to international investors even during the gloomiest phase of the global downturn," as per Mr. Sherman Chan, an economist with Moody's Economy.com.
Mr. Chan further said, "India is expected to record gradual recovery in FDI (foreign direct investment) inflows in coming months, especially since the Indian authorities are keen to promote public-private partnerships in supporting growth initiatives." The research arm also said that the recent stabilisation in corporate conditions may have also revived investment flows into China and India.



INDIAN INVESTORS EMERGE MOST OPTIMISTIC IN ASIA: ING


Indian investors have emerged as the most optimistic group in Asia, according to the Quarterly Investor Dashboard Sentiment survey by global financial services group, ING.
As per the survey, around 84 per cent of the Indian respondents expect the stock market to rise in the third quarter of 2009. The report stated, “The Indian investor index jumped to a record high of 182 for second quarter of 2009 from 133 from first quarter of 2009 amidst anticipated strong GDP growth and stock market improvements.”

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Indian investors are optimistic about most of the key performance indicators including household financial situation, impact of US economy, property prices and stock marker recovery. The report also elaborates, “With a strong economic growth, concern for job security is the least in India (seven per cent as compared to 49 per cent Asia Pacific average). Also, 43% of Indian investors plan to invest more in Q3 09.”



GOVT UNVEILS ROADMAP FOR FINANCIAL SECTOR REFORMS


The Finance Ministry made its priorities with regard to reforms clear, by tabling in Parliament its menu of financial sector reforms to be taken up immediately.
These include liberalization of rules governing sale of shares by Indian companies abroad through American depository receipts (ADRs), relaxation in the external commercial borrowings (ECBs) guidelines and coming up with innovative measures to spur investments through public-private partnerships.
Maintaining the public shareholding in listed firms at a minimum level of 25% is also a priority, which has already been discussed with the market regulator Securities and Exchange Board of India (Sebi). The requirement of higher public shareholding will be implemented in phases, though the government is yet to finalize the exact percentage of the minimum float, an official said. “It could be more (than 25%). It is being debated,” he said.
The government also intends to set up a dedicated SME stock exchange or a platform for small & medium enterprises to raise equity, Minister of State for Finance, Mr. Namo Narain Meena, said in a written reply in the Rajya Sabha (Upper House of Parliament). In fact, at SEBI’s board meeting in early July, the Finance Minister had expressed his keenness to start an SME exchange. While there is a ‘considered view’ on raising the minimum public float in the listed companies, the measures governing ADRs and ECB rules are to be fleshed out, a senior official said.
Changes in the ECB policy could involve allowing more companies and sectors to bring funds through the automatic route. The rules can be further liberalized to allow more sectors access the ECB window. The government has recently allowed developers of special economic zones (SEZ) raise ECBs for providing infrastructure facilities in SEZs.

Reserve Bank of India governor D Subbarao said in Mumbai that the financial sector reforms need not be slowed down, but recalibrated in the backdrop of the global crisis.


Another measure on the priority list of the government includes evolving the ‘takeout financing scheme’ for long-gestation infrastructure projects, and giving trusts greater autonomy in deciding their investments by amending the Indian Trusts Act, 1882. India Infrastructure Finance Company Ltd has appointed a consultant to finalize the takeout financing scheme, Mr. Meena said.
Besides, passage of the Pension Fund Regulatory & Development Bill is on the cards. This will give statutory backing to the interim pension regulator and allow foreign investors pick up to 26% stake in the sector. The Finance Ministry has finalized the draft bill after clearance of the Law Ministry.
While spearheading these reforms, the government would continue to focus on fiscal consolidation by cutting down unproductive spending in order to sustain high growth. To spur investment in the infrastructure sector, the government is considering putting in place a new monitoring mechanism consisting of officials from various administrative ministries, which will meet regularly to take stock. (The Financial Express: August 5, 2009)



NEXT DECADE WILL BE OF INFRASTRUCTURE: MINISTER


Union Road Transport & Highways Minister, Mr. Kamal Nath, started a campaign in Singapore to invite foreign players to invest in the road sector in India.
Addressing the investors at ‘Building India: India Infrastructure Summit’ today, Mr. Nath said India’s next decade would be of infrastructure. He said infrastructure would be the defining sector for India in the coming decade as was information technology in the 1990s and the present decade. He also invited the investors to come out with suggestions to make the present process more attractive for them. Stressing on the vast investment potential in the road sector, he said that his ministry aimed to construct 7,000 km of roads a year. (continued on next page)

India News 5


The Minister told investors that with a projected traffic growth of 7% and vehicle growth of 12% per annum along with vast demand from the booming rural sector, India’s road sector presents great potential for growth and private sector participation.
Mr. Nath also informed the investors that the ministry was taking steps towards reforming the processes, carrying out structural changes at the National Highways Authority of India (NHAI), and also planning for capacity building for both the contractors and the authority.
Hailing public-private partnership (PPP) as one of the most suitable models for the road sector, he said that of the 12,000 km road aimed for the next year, 7,000 km will be built on the BOT toll basis, while the remaining 5,000 km will be on the annuity and engineering procurement construction basis.
The sector’s investment requirements till 2012 are pegged at $12 billion. (Business Standard: July 17, 2009)



$ 51 MLN AUTHORITY SET UP TO CLEAN UP RIVERS, LAKES


As part of the Government’s programme to clean up rivers and lakes, the Government proposes to set up a Ganga River Basin Authority for which a corpus of app. $ 51.57 mln has been formed.
The Minister of Environment and Forests, Mr Jairam Ramesh, announced that the National Environment Protection Authority will monitor and ensure compliance of environmental standards by industrial units. He also announced that the National Green Tribunal will deliver speedy justice to those hit by implementation of environment and forest laws.
The announcements came at the inauguration of Federation of Indian Chambers of Commerce and Industry (FICCI) Environment Conclave 2009. Mr Ramesh said that by the year-end, the National Environment Protection Authority, backed by state Environment Protection Authorities, would be in place to monitor the adherence to environment standards laid out and ensure compliance. (Hindu Business Line: July 15, 2009)



LANDMARK EDUCATION BILL PASSED BY PARLIAMENT


The Lok Sabha (Lower House of Parliament) passed the Right of Children to Free and Compulsory Education Bill, 2008, hailed as a “historic effort” to make free education a fundamental right for children.
The Bill to provide free and compulsory education to children aged between 6 to 14 years also aims to reserve 25 per cent seats to weaker sections in private schools. The Rajya Sabha (Upper House of Parliament) has already approved the Bill.
Union Human Resource Development Minister, Mr. Kapil Sibal, described it as “harbinger of a new era” for children “to meet the challenges of the 21st century”. “This will be a historic opportunity for providing better future to children of the country as there was never such a landmark legislation in the last 62 years since independence,” Mr. Sibal added. “We as a nation cannot afford our children not going to schools,” the Minister said.
The government will also put an end to the practice of schools taking capitation fees before admission and subjecting the child or parents to any screening procedure, through this Bill. The states will be implementing the policy of reservation in admissions. The Bill also aims at achieving 10 broad objectives, including free and compulsory education, obligation on the part of states to provide education, nature of curriculum consistent with the Constitution, quality, focus on social responsibility and obligation of teachers and de-bureaucratization in admissions. (Business Standard: August 05, 2009)



FTA SIGNED, $50-BN TRADE BY 2010


The signing of the Free Trade Agreement (FTA) with the Association of South-East Asian Nations, or Asean, would increase the overall trade turnover between India and the 10-country block by over a fourth to as much as $50 billion.

Under the pact, which forms a part of the Comprehensive Economic Cooperation Agreement, tariffs on most of the trade between India and Asean will be cancelled by 2016, while duties on 489 “very sensitive” products will be retained. The agreement would come into force from January 2010. (continued on next page)



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“India and Asean have set an ambitious target of achieving bilateral trade of $50 billion by 2010. The current agreement would help achieve this target,” said a statement issued by the government.
The agreement, which was signed after six years of negotiations, calls for gradual elimination of duties on items which account for 75 per cent of the trade between India and Asean. These include electronics, textile, machine and chemical goods.
The agreement would provide additional market access to exporters, fuelling the growth in bilateral trade and investment. Indian exporters which stand to benefit from the pact include those dealing in machinery, steel, agriculture products, auto components, chemicals and synthetic textiles. In addition, Indian manufacturers now would also be able to source products from overseas at competitive prices from the Asean members.
The pact also provides for safeguard mechanisms to protect bilateral trade in case of a sudden surge in imports after the treaty. “In such an eventuality, if it hurts a domestic industry, measures like imposition of safeguard duties may be put in place for up to 4 years,” the statement mentioned.
Commerce Minister Mr. Anand Sharma said that India’s trade with Thailand alone - one of the Asean members and ranking fourth in Indian imports - may jump to around $10 billion by the end of 2010 from $6 billion currently. The overall trade turnover between India and Asean was over $40 billion in 2007-08, making the bloc the fourth-largest trading partner for the country.
The domestic industry bodies have expressed hope that the pact would open up market for the exporters. “The agreement is not an agreement in goods alone. It would eventually cover services and investment too. Indian professionals and service providers would be able to have greater market access in the Asean region once the FTA in services is in force,” said Dr. Amit Mitra, Secretary General, Federation of Indian Chambers of Commerce and Industry.
“The FTA would give us access to a trillion-dollar Asean economy,” added Mr. Chandrajit Banerjee, Director General, Confederation of Indian Industry. (Business Standard: August 14, 2009)



INDIA EMERGES SECOND IN GLOBAL CONSUMER CONFIDENCE SURVEY




India has been ranked the second most optimistic nation in the world in consumer confidence, according to a survey conducted by the global consultancy firm, Nielsen Company. Factors such as better job prospects, personal finances and majority of people willing to continue spending in the next 12 months, were attributed for the growing confidence.
The survey further points out that consumers in India are more confident, with confidence levels witnessing a significant 13-point rise to 112 index points in the second quarter after Indonesia with113 points. The mentioned three parameters contributed the maximum rise.
"The recent elections in India have had a positive effect on Indians' sentiments towards its economy. With the government back in power for the second term, consumers are more confident that political and policy continuity will help recover the Indian economy," The Nielsen Company Associate Director Consumer Research Ms. Vatsala Pant said.
While India ranked second in terms of job prospects, in terms of personal finances, Indians are the most optimistic globally as about nine per cent of Indians think that their personal finances would be 'excellent' in the next 12 months and 65 per cent consider they would be 'good', according to the survey.



INDIA SME’S AMONG MOST CONFIDENT IN WORLD, SAYS SURVEY


Small and medium enterprises (SMEs) in India are among the most confident in a survey of 12 emerging markets around the world, the HSBC emerging markets small business confidence noted.

A semi-annual survey of the small business sector, the HSBC emerging markets small business confidence monitor reflects the views of more than 3,400 SMEs in 12 markets across Asia, Latin America and the Middle East. Respondents were asked about their six-month outlook on economic growth, capital investment plans, recruitment plans and trade. The results were used to calculate a monitor ranging from 0 to 200 where 200 represents the highest confidence level, zero represents the lowest and 100 neutral. The survey was conducted in May and June 2009. (continued on next page)



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The regional index rose from 92 in the fourth quarter of 2008 to 107 in the second quarter of 2009.Vietnam score the highest index with 150, followed by India at 128, Mainland China at 105 and Indonesia at 101.
In terms of local GDP growth, 43% of India SMEs expect faster growth to in the next six months and 47% expect the maintain the same pace as in the fourth quarter of 2008. Just 10% expect slower growth, the survey said.
Talking about the outlook on capital expenditure, the survey revealed that across all 12 markets, most businesses are not planning to make changes to their capital investment plans. “In India, 37% plan to increase expenditures, 57% plan to maintain the same level as last year, and 6% plan to decrease expenditures,” the survey said. The survey also showed that the majority of small businesses are holding steady on staff levels and very few SMEs plan to cut jobs. In India, 75% plan to maintain the same level as last year, 22% plan to increase staff and 2% plan to cut staff.
“The increasing confidence of SMEs in India, the bellwether of the country’s economy, is a positive sign. Challenging times notwithstanding, SMEs are gearing up for the upswing, and this is reflected in their views on capital expenditure and jobs,” said Mr. Dheeraj Dikshit, head SME business, HSBC India. (The Financial Express: July 24, 2009)



INVESTMENTS IN HEALTH INFRASTRUCTURE TO GET A BOOST


The expenditure on healthcare infrastructure in the country is projected to grow at 5.8% annually to reach $14.2 billion by 2013, a near 50% increase over the 2006 level, according to KPMG. This forecast on the expenditure includes spending both by the government and the private sector on construction and maintenance of buildings that would house medical research, drug production or primary health care services.
Going by the 2006 data, six large states - Maharashtra, Rajasthan, West Bengal, Uttar Pradesh, Tamil Nadu and Andhra Pradesh - account for over 50% of the total expenditure on health infrastructure while 12 states combined end up spending less than 4.5% of the sum.
In fact, Maharashtra, which crossed the $1-billion mark in healthcare infrastructure spending in 2005 individually accounts for 12% of the total expenditure, a share the state will retain even in 2013, by when the state could be spending around $1.6 billion on the healthcare infrastructure.
Health infrastructure is also among the healthcare sub-sectors identified by CII in a latest report that would attract large chunk of investments by private equity firms in future. The findings of these reports are also in conformity with a PwC report released in 2007 which said that an enormous amount of private capital will be required in the coming years to enhance and expand India’s healthcare infrastructure to meet the needs of a growing population and an influx of medical tourists. “Currently, India has approximately 860 beds per million population. This is only one-fifth of the world average, which is 3,960, according to the World Health Organization. It is estimated that 450,000 additional hospital beds will be required by 2010 - an investment estimated at $25.7 billion. The government is expected to contribute only 15-20% of the total, providing an enormous opportunity for private players to fill the gap,” the PwC report had estimated. There is a near consensus among experts that PPP is the future model to fund and operate health infrastructure. (The Financial Express: July 22, 2009)



INDIA INC FINDS STEM CELLS A HEALTHY BUSINESS


In March this year, Bangalore-based Stempeutics Research received clearance from the Drug Controller General of India to conduct human clinical trials to develop drugs using stem cells.

With this, India became the first country after the US to allow human clinical trials to develop drugs by using dormant cells in the body that have natural regeneration capabilities. Once injected into a patient, the stem cells can be controlled with a simple magnet to direct them to the damaged area and cure it.



Welcome to the stem cell research boom in India – something that revived eight-year-old Pramita Aich, who was suffering from abdominal cancer. Aich underwent bone marrow stem cell transplant at the Netaji Subhas Chandra Bose Research Institute in Kolkata. It was the first such successful treatment in eastern India. The growth has been phenomenal. The Stem Cell Global Foundation, a New Delhi-based organization promoting stem cell research, estimates the business to be growing at a (continued on next page)

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compounded annual growth of 15 per cent and cross Rs 22,000 mln next year. The market was nearly non-existent a few years ago. Mr. Karan Goel, chairman and founder of the foundation, says the growth estimates for other Asian countries, except China, are less than that for India.
The reason is simple: Therapies using stem cells are giving hope to millions of patients afflicted with chronic diseases. Globally, stem cells are used to treat over 130 diseases and it is estimated that more than 500 clinical trials are being done to develop therapies using stem cells. Indian companies are becoming an important part of this revolution, helping treat patients with diseases ranging from eye problems to heart disorders.
Apart from Stempeutics, at least 20 research organizations and 15 companies such as Reliance Life Science and Lifecell are working on stem cells in India, prompting K V Subramaniam, president and CEO of Reliance Life Sciences, to say that India is one of the few countries in the world actually pursuing stem cell research.
Reliance Life, the pioneer in stem cell-based research in India on a commercial scale, has already commercialized two products. Last year, the company launched ReliNethra, a first-of-its-kind treatment in India for corneal blindness.
Recently, it launched ReliHeal-G, which quickly heals wounds. The company has completed clinical trials for treatment for heart attack using stem cells from the bone marrow of the patient. It is carrying out clinical trials for application of stem cell-based therapies for skin disorder stable vitiligo, non-healing diabetic ulcers, Parkinson’s disease and spinal cord injury.
There is more. India’s largest stem cell banking company, LifeCell, and US-based Harvest Technologies, which manufactures devices for stem cell harvesting, are developing a unique treatment for heart attack in association with cardiologist Naresh Tehran’s hospital in New Delhi and Ramachandra Medical College, Chennai.
“We have completed a pilot study of 60 patients and hope to commercialize the product in three to four years. Stem cell-based cardio vascular therapies have a potential of about € 430 mln (Rs 30,000 mln) in India,” said Mr. Mayur Abhaya, executive director of LifeCell.
Stempeutics, funded by the Manipal Education and Medical Group, started two years ago and is planning to commercialize two drugs by 2011, one for heart complications and the other for limb complications. The company already owns seven patents.
Parkinson’s patients in the country will be able to avail stem cell therapy services for treatment as the Mumbai-based Jaslok Hospital and Reliance Life are working together to explore using the patient’s own stem cells for curing the disease. Stem cell transplants using an advanced technique of biological adhesive agent was recently carried out in eight cases at a military hospital in Jammu. (Business Standard: July 14, 2009)



INDIAN MEDIA INDUSTRY TO OUTSHINE GLOBAL PEERS


The Indian media & entertainment (E&M) industry would grow at a rate five times the global annual average growth rate in the next five years, albeit on a base of around 1% of the total global media & entertainment pie.
India’s E&M industry is expected to grow at a compound annual growth rate (CAGR) of 10.5% between 2009-2013 compared to the global rate of 2.7% for the same period, projects a PwC report.
While the Indian media industry would touch $18.58 billion by 2013, the global E&M market is expected to grow 2.7% compounded annually over the five year forecast period to $1.6 trillion in 2013. After registering a growth of around 16.6% compounded annually over the period 2004-08, growth in the Indian media industry is set to decelerate to 8% in 2009. This has largely been influenced by a marked slowdown in advertising spending, which is expected to touch 9.2% in 2009 after posting a CAGR of close to 17.3% during the period 2004-08.
Growth rates will increase in 2010 to 10.4% as economic conditions are expected to improve. For the remaining years of the forecast period, the industry will continue to grow at increasing rates, resulting in the overall CAGR for the period 2009-13 of 10.5%. The television industry is projected to be the major contributor to the overall industry revenue pie and is estimated to grow at a stable rate of 11.4%.
The film industry is projected to grow at a CAGR of 11.6% over the next five years, touching $ 3.7 billion in 2013 from the present $ 2.14 billion in 2008. The relative

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shares of the film industry are expected to shift marginally from the traditional revenues to the new emerging revenues.
The print industry is projected to grow by 5.6% over the period 2009-13, touching $ 4.26 billion in 2013 from the present $3.24 billion in 2008. The relative shares of newspaper publishing and magazine publishing are not expected to change significantly and are expected to remain the same at around 87% in favor of newspaper publishing. Magazine publishing is expected to grow at a higher rate of 6.5% as compared with newspaper publishing which is expected to grow at 5.6% for the next five years.
Overall ad spending is expected to increase from the present size of $4.32 billion in 2008, to $7.32 billion in 2013 (a cumulative growth of 11.1% on an overall basis).

Mr. Timmy Kandhari, Leader, India entertainment and media practice, PwC added, “Against the backdrop of volatility in advertising spending, we are also experiencing increased fragmentation of media and its audiences. This will result in a structural change in the advertising world with advertising becoming more targeted, interactive and accountable”. (The Financial Express: July 31, 2009)





LDA, ABG PORTS TEAM UP TO OFFER LOGISTICS SERVICES TO INDIAN PORTS


French shipping & logistics firm Louis Dreyfus Armateurs (LDA) and Mumbai-based ABG Ports Pvt Ltd have signed a 49:51 Joint Venture (JV) for offering efficient port and logistics services to customers and Indian ports. ABG also plans to transfer the ABG group's bulk handling division to this new JV.
The new JV company, christened ABG-LDA, is looking at an investment of $80 million by October 2009 and is looking at a first full year income of Rs 1800 - 3000 mln (€ 26 – 43 mln). Investment will include buying barges as well as cranes for its operations. "We hope to register a total tonnage of about 10-30 million tonnes during 2010-11. And with handling rates of at Rs 75-100 per tonne we are looking at a first year revenue of Rs 1800 – 3000 mln," said Mr Saket Agarwal, Director ABG Bulk Handling.
"Having established a formidable presence in the growing infrastructure space of the economy, being one of the two largest crane rentals company in the country, and a presence on both the coasts of the country for container terminal operations at Kandla and Kolkata, it was only logical that ABG entered into the business of handling bulk cargo. Currently ABG is handling bulk cargo at three ports. It is operating mobile harbor cranes at New Mangalore, Paradip and Vizag ports," said Mr Agarwal.
Additionally, ABG-LDA proposes to offer customized barging solution to bring back volumes and thereby provide stimulus to steel and power sector and other economic activities in and around Haldia. The Haldia port has been suffering due to lack of draft.
LDA – is a worldwide specialist in bulk transportation and logistics. With a 40 unit fleet of capsize, panamax, floating cranes, barges and tugs, LDA offers a wide variety of services. The company handles about 60 million tonnes of dry cargo transportation and logistics. During 2008 the company registered revenue of Euro 1 billion. (The Economic Times: August 6, 2009)



CAIRN, ONGC TO INVEST $4 B IN RAJASTHAN


Cairn India, the domestic subsidiary of Edinburgh-based oil explorer Cairn Energy, and state-owned ONGC will jointly invest $4 billion to scale up the production capacity of their oil fields at Barmer in Rajasthan by 25,000 barrels of oil per day (bopd) to 200,000 bopd. They had earlier revised their production target from 150000 bopd to 175000 bopd.

Addressing the shareholders of Cairn India in Mumbai, Chairman Sir Bill Gammell said: “By 2011, Cairn and its joint venture partner will invest up to $4 billion on the development of Mangla, Bhagyam and Aishwarya fields.” The investment will be shared between Cairn India and ONGC in the ratio of 70:30 in line with their equity holding in the oil fields.

“We will commence crude oil production from Barmer shortly. We believe there is potential to extend and enhance peak plateau production from Rajasthan fields above the level of 175,000 bopd,” he added. Cairn, the main operator of the blocks, had earlier revised the production target from 150,000 bopd to 175000 bopd. The commercial production at the Mangla filed in the Barmer basin is expected to begin by this month with an initial capacity of 30,000 bopd. The production will be increased by a further 100,000 barrels per day in the first half of next year.

(continued on next page)



10 India News


An analyst with an international firm said the proposed investment was anticipated. “Cairn is setting up a processing capacity of 205,000 bopd for the Mangla processing terminal. This suggests that Cairn’s peak production will be beyond 175,000 bopd,” he explained. However, he said there should be more clarity on the pricing and off take of the Cairn’s crude from Rajasthan fields.
Cairn intends to transport the oil through an insulated pipeline from Rajasthan to the Gujarat coast. But before the completion of the pipeline, expected by December, it will have to transport oil in trucks to Gujarat for shipping to Indian Oil and MRPL. (The Economic Times: August 19, 2009)


AGRI EXPORTS TO DOUBLE IN 5 YRS: APEDA


Though the global recession is still lingering on, India’s agri-export turnover is expected to double in the next 5 years, said Agricultural and Processed Food Products Export Development Authority (Apeda) chairman, Mr. Asit Tripathy. Agri-export turnover is set to rise from $9 billion to nearly $18 billion by 2014.
Despite the global recession, the country’s agri-exports have registered a 25% growth in 2008-09. Unlike the software and handicraft industry, agricultural products are not dependent on the U.S. Experts in this field believe the worst of recession is already over. (The Financial Express: August 19, 2009)



INDIA CONTINUES TO BE MOST ATTRACTIVE OUTSOURCING HUB


India continues to be the most preferred destination for companies looking to offshore their IT and back-office functions, despite the backlash against outsourcing to the country. It also retains its low-cost advantage and is among the most financially attractive locations when viewed in combination with the business environment it offers and the availability of skilled people, according to global management consultancy AT Kearney.
India has retained its number one position even as some other well-established outsourcing hubs dropped in their attractiveness to be replaced by new emerging destinations in AT Kearney’s latest ranking of the top outsourcing destinations across the globe. “The top three countries in the 2009 Global Services Location Index (GSLI) remain the same — India, China and Malaysia — but the world’s volatile economic environment is reflected in the rest of the rankings,” the consultancy pointed out. The study evaluates 50 top countries.
Significantly, India is also no longer being viewed as a competitor but also as an enabler to industry growth in other regions. “Indian companies are some of the gorillas and they are increasing their global footprint as clients look for multi-region support,” added Mr Doshi. (The Economic Times: July 09, 2009)



TELECOM SUBSCRIBER NUMBERS IN INDIA WITNESS UPSURGE IN JULY


The telecom industry has witnessed a huge upsurge in the number of wireless subscribers by mobile operators in July this fiscal year, taking the total wireless user base to 441.66 million in the country. Data released by telecom regulator, Telecom Regulatory Authority of India (TRAI), reveals that approximately 14.25 million telephone connections, including wireline and wireless, were added during July 2009 as against a total of compared to 11.91 million connections added in June 2008, thus increasing India's telecom subscriber base to 479.07 million at the end of July from 464.82 million a month before,.
The total wireless subscriber base constituting of GSM, CDMA and WLL (F) stood at 441.66 million in July 2009, rising from 427.28 million. The wireline subscriber base stood at 37.41 million in July. The broadband subscriber base reached the 6.8 million-mark. India's mobile user base rose 25 times in the last five years and research firm, Gartner forecasts a rise up to 737 million by 2012.
Pace of growth in India's mobile subscriber base has registered an increase by more than eight million a month owing to factors such as call rates being as low as US 1 cent a minute and network expansion by operators.



India News 11

NOKIA GETS STRONG SIGNALS FROM INDIAN MARKET


Nokia, the world's largest handset manufacturer and also the market leader in this segment in India declared that India would continue to be a strong destination in the communications sector and the drought was unlikely to affect the company’s sales in the country, which dominates the bulk of its entry level models.
According to a study conducted by Nokia the communications sector is expected to emerge as the single largest component of the country’s GDP with a 15.4% by 2014. “We have an ambitious plan to have as much possible share of that contribution,” Mr. Olli-Pekka Kallasvuo, Global CEO Nokia Corporation, said.
“Communications is recording a 25.7% growth in this country, a mobile phone is more of a utility purpose object than just a tool to communicate for a large number of people in this country”, Mr. Olli-Pekka Kallasvuo said. "We don't think the market will slow down for mobility in rural India," Mr. D Sivakumar, Managing Director of Nokia's India operations added, emphasizing that given the utility of phones people in the country were unlikely to curtail their expenditure on mobile phones.
Commenting upon the sale of smart phones in India, Mr. Olli-Pekka Kallasvuo said the sales of Nokia's high-end smart phones were also growing in the country, the world's second-largest mobile market with around 430 million users and nearly 60% of mobile subscribers using Nokia handsets. "India is very often perceived to be a low-end market. That is not the case," he said, adding Nokia's high-end phone models such as N97 and N86 were selling nicely in the country.

Speaking upon the company’s future growth path in India, Mr. Olli-Pekka Kallasvuo said, “India would remain one of Nokia's top growth markets, as 81 % of the country's mobile users were in urban areas and they were driving demand for high-end phones". India is the second largest revenue contributor to the Finnish phone manufacturer’s global kitty, after China. (The Financial Express: August 20, 2009)




BOEING REMAINS BULLISH ON INDIA, SEES AIR TRAVEL BOUNCING BACK


Aerospace major Boeing forecasts that the Indian market will require 1,000 commercial jets in the next 20 years, which will represent over 3% of Boeing Commercial Airplanes’ forecasted market worldwide. This makes India a $100 billion market in 20 years.
Boeing India President Mr. Dinesh Keskar shared the company’s market data and forecast at a media conference focused on Boeing’s view of India’s commercial airplane market.
India’s economy has averaged 7% annual growth over the past 10 years and the country’s economic growth remains among the strongest in the world. The record growth in air travel, which expanded rapidly in the past eight years due to liberalization and favorable economic conditions, is now tracking at 2007 levels, Boeing said in a media statement.

Mr. Keskar said air travel in India, tied closely to the country’s economic growth, will rebound. “There is strength and resilience in the India commercial aviation sector over the long term,” Mr. Keskar said. “The potential for future growth of air travel, both domestically and internationally, is among the greatest in the world.”


Recent market forces and recession in many parts of the world have led to a contraction of India’s commercial aviation sector, with consolidation of airlines and an overall reduction of capacity. Nonetheless, Mr. Keskar said India’s projected GDP growth over the next 20 years will average 6.5 per cent annually, driving a resurgence of demand and capacity growth for the country’s airlines.
“If you take a realistic and broad look at the India market, what resonates is that there is more positive than negative and the prospect for continued long-term growth remains high,” Mr. Keskar said. (Business Standard: July 24, 2009)


12 India News

MERCEDES TO INVEST € 700 M IN CHENNAI PLANT


Mercedes-Benz plans to invest € 700 million to increase the production capacity of its trucks in its manufacturing plant in Chennai. While the infrastructure is expected to address future expansion plans of the company, details of the time frame of investment were not disclosed.
The company currently operates a manufacturing base in Pune with independent assembly facilities for passenger cars and commercial vehicles. The company rolled out close to 4,000 units in India last year where it has a 38% market share among passenger car makers. But the company said it would register a lower sales volume this year due to the unfavorable market conditions.
“The first half of the year was difficult in terms of sales. We have sold 1,500 units so far this year and we hope the second half would be better as retail orders are gaining pace and customers are approaching banks for car loans,” said Mr. Wilfried G Albur, Managing Director and Chief Executive of Mercedes-Benz India.
The German car maker is also on course to increase its headcount three-fold at its R&D centre in Bangalore by next year and will invest close to Rs 4500 mln (app. € 64.5 mln) on infrastructure and people-related costs. The company that operates in 25 cities in India has about 1,000 people on its rolls and operates through 11 dealers in the country. Mercedes-Benz is currently a division of its parent company, Daimler. As per industry estimates, about 8,000 passenger cars were sold by luxury car makers in India last year. (The Economic Times: August 04, 2009)


NISSAN TO SHIFT PRODUCTION OF SMALL CAR FROM UK TO INDIA


In a move that reflects the growing stature of the Indian car industry globally, Japanese major Nissan has decided to shift the entire production of its small car, Micra, from the UK to India. After production of the Micra in India begins, Nissan plans to manufacture four more models in India.
The move underlines the rush among automakers to rationalize production costs and move to locations that offer the best value and quality. “We have decided to manufacture the Micra at our upcoming factory at Oragadam, near Chennai,” Nissan India MD and CEO Kiminobu Tokuyama said.
The company’s Chennai plant will start production from May next year, and export markets would be catered to from autumn, Tokuyama said. Nissan, he said, plans to meet Micra’s requirements for the entire European region as well as some other markets like West Asia from the Chennai plant. “We plan to start with export volumes of 110,000 units, which would be gradually scaled up to 180,000 units as demand goes up,” Tokuyama said.
But what prompted the step? “There are many benefits in India, including a high-quality vendor base that is also cost-effective, leading to globally-competitive pricing,” Tokuyama said. Nissan will thus emulate companies like Hyundai and Maruti Suzuki, which make small cars in India to export to Europe. (The Economic Times: August 28, 2009)




Edited by Mr. Ashok C. Kaushik, Marketing Officer, Embassy of India, Buitenrustweg 2, 2517 KD The Hague.

Tel: 070-3469771; Fax: 070-3462594; E-mail: markoff@bart.nl; Web: http://www.indianembassy.nl


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