Weekly Economic Bulletin Date: February 26 March 3, 2008 Issue No. 253 Contents 1 News Feature Page 1-2 Exports up 20.47% in Jan Third quarter GDP grows at 8.4% Chidambaram confident of 9% growth in 2008-09 2 Overseas Investment Page 2-3 37 FDI proposals in broadcasting sector cleared Retail stocks up on FDI hike suggestion Survey favours liberalising FDI in insurance, retail Survey suggests 49% FDI in insurance 3 Trade News Page 3-6 France aims to double trade with India by 2012 India, US agree on time-bound steps to expand hightech trade Canada for closer economic ties with India 4 Sectoral News Page 6-8 Jewellery exports up 20% in Apr-Sept `07 Indian PC shipments grow 20% General Insurance sector logs growth of 12% in January 5 News Round-up Page 8-9 Growth story weaves new history Indians rate better on entrepreneurial skills than Chinese
News Feature Exports up 20.47% in Jan India's exports grew by 20.47 per cent in January to $13.14 billion as compared to $10.90 billion in the same month last year. Imports during the month stood at $22.5 billion, registering a growth of 63.57 percent over $13.75 billion in January 2007. For the April-January period of the current fiscal, exports grew by 21.62 per cent to $124.19 billion as compared to $102.11 billion in the year ago period. Imports during the period expanded 29.63 per cent to $191.6 billion from $147.8 billion a year ago. The trade deficit for April-January is estimated at $67.4 billion, higher than $45.7 billion deficit in during the same period last fiscal. http://www.thehindubusinessline.com/businessline/blnus/03031620.htm Third quarter GDP grows at 8.4% Indian economy grew 8.4 per cent in October-December 2007, the slowest pace since last quarter of 2005-06. This growth performance was weaker than the 8.9 per cent GDP growth recorded in second quarter of current fiscal and 9.1 per cent recorded in October-December 2006. The Central Statistical Organisation (CSO) and the Economic Survey 2007-08 have projected a GDP growth of 8.7 per cent for 2007-08. The Finance Minister, Mr P. Chidambaram, has expressed confidence that the economic growth for 2007-08 would finally turn out to be better than the 8.7 per cent projected by the CSO in its advance estimates. http://www.blonnet.com/2008/03/01/stories/2008030151380200.htm Chidambaram confident of 9% growth in 2008-09 Finance Minister P Chidambaram exuded confidence of achieving a nine per cent economic growth and containing inflation in 2008-09 and said this would help ensure overall welfare of common man. Speaking after tabling Economic Survey 2007-08 in the Parliament, Chidambaram said that he was confident of achieving 11th Plan target of 9 per cent growth. With the better targeting of government reserves and increase in quality, we can ensure the overall welfare of the common man in terms of both private consumption and supply of public goods, he said. 1
"Given the solid foundation of domestic investment and savings, we are confident of meeting the 11th Plan target of nine per cent average growth," the Finance Minister said. "We will be able to mobilise the resources for meeting the growth target of nine per cent," he added. Chidambaram said that economy has precisely moved to higher growth trajectory during the five years to 2007-08 in terms of GDP with an average growth rate of 8.7 per cent per annum during these five years. "This indicates stability and sustainability," he said. http://budgetwithet.economictimes.indiatimes.com/chidambaram_confident_of_9_g rowth_in_2008-09/esarticleshow/2822206.cms Overseas Investment 37 FDI proposals in broadcasting sector cleared Thirty-seven FDI proposals pertaining to the information and broadcasting sector were approved by the Foreign Investment Promotion Board during 2007, Mr P.R. Dasmunsi, Minister of Information and Broadcasting, told the Lok Sabha. The Minister also informed the House that the tax review proposals received by the Ministry included the Multiplex Association of India s demand to bring down customs duty on imported equipment such as xenon bulbs, cinema digital and analogue sound processors. It has also sought tax relief for small budget films. The Government has been urged to bring the rate of depreciation, currently at 15 per cent for plant machinery and furniture, and 10 per cent for building, at par with the 40 per cent applicable to public transport and tourist taxis. The Government proposes to set up 93 All India Radio transmitters and 41 Doordarshan transmitters during 2007-2008 and 2008-2009. It has also planned 100 low power transmitters to be up in the North-Eastern States, the Minister informed the House. The estimated cost for the AIR is Rs 182 crore and for Doordarshan is Rs 198.37 crore. http://www.thehindubusinessline.com/2008/02/27/stories/2008022751520500.htm Retail stocks up on FDI hike suggestion Most of the retail stocks ended in the green after the Economic Survey suggested a hike in Foreign Direct Investment (FDI) in retail and insurance sectors to sustain the nine per cent rate economic growth. However, the sector slipped 146.62 points or 1.47 per cent to 9,833.10 points. 2
Among the retail firms, the gainers were Provogue India, Pantaloon Retail India, Shoppers Stop and Koutons Retail India. http://economictimes.indiatimes.com/articleshowarchive.cms?msid=2823345 Survey favours liberalising FDI in insurance, retail Barely a month after the Centre relaxed foreign direct investment (FDI) norms for sectors such as civil aviation, petrochemicals and commodity exchanges, the Economic Survey advocated raising foreign equity cap in insurance, new private rural agricultural banks, and the retail sectors. The Survey which is a report card on the Indian economy ahead of the Union Budget has suggested allowing a share for foreign equity in all retail trade, and mooted 100 per cent foreign equity in foreign branded, specialised retail chains like luxury brands, consumer durables, and semi-durables. In case of insurance sector, the Survey recommended raising foreign equity share to 49 per cent, while prescribing 51 per cent foreign equity in a special category of insurance companies those providing all types of insurance such as health and weather, to rural residents and for all agricultural related activities including agro-processing. In the banking sector, the Survey favoured allowing 100 per cent FDI in greenfield private rural-agriculture banks. As an incentive such a bank could be allowed expansion into small towns when the general FDI policy on banks is liberalised. http://www.blonnet.com/2008/02/29/stories/2008022950821000.htm Survey suggests 49% FDI in insurance The Economic Survey, tabled in Parliament, has suggested that the foreign direct investment (FDI) in insurance be increased to 49 per cent from the present 26 per cent. The survey also pointed out that 51 per cent foreign equity be allowed in a special category of insurance companies that provide all types of insurance health, weather etc, to rural residents and for all agricultural related activities including agro-processing. http://www.blonnet.com/2008/02/29/stories/2008022950751000.htm Trade News France aims to double trade with India by 2012 France plans to expand ties with West Bengal to double Indo-French bilateral trade by 2012. It has decided to reopen the French consulate office in Kolkata, which was closed down in 1998. The new office will start functioning by the year-end and will provide an 3
entire bouquet of consular functions visa office, economic mission and a cultural and education wing. The French government s decision to reopen the city consular office is based on the interest to expand ties and promote bilateral relationships in the state. Even the West Bengal government wanted us to reopen the office. French president Nicolas Sarkozy has given a mandate to open the Kolkata consulate office by December, French ambassador in India Jerome Bonnafont said. Earlier, the French government had closed down the Kolkata consulate office at Park Mansion due to some administrative problems. We then had a small office within the German consulate in Kolkata, but it appeared to be ineffective. The city consulate office was thereafter shut down in Kolkata, said Mr Bonnafont. Mr Bonnafont was talking at a meeting organised by Indian Chamber of Commerce. The Indo-France bilateral trade in 2007 was around euro 6 billion and both the governments have decided to double it in the next five years. Kolkata may also have a direct air connectivity with France. Air France is expanding its operations in India and has started the feasibility study of a direct flight between Paris and Kolkata. A decision is soon expected, said Mr Bonnafont. French companies are also keen to invest in the state across multiple areas. This includes food processing, IT, steel and business consultancy. There has been a transformation of Kolkata s image among French investors. We are also keen to expand cooperation between universities in France and Kolkata. For this, we will seek opportunities with Jadavpur University for student exchange programmes, Mr Bonnafont said http://economictimes.indiatimes.com/articleshowarchive.cms?msid=2823970 India, US agree on time-bound steps to expand high-tech trade Despite uncertainty over the nuclear deal, India and the US Friday agreed on "a series of time-bound actions" that will bring the level of their high technology trade in tune with their growing strategic partnership. Foreign Secretary Shivshankar Menon and US Undersecretary of Commerce for Industry and Security Mario Mancuso co-chaired the sixth meeting of the India-US High Technology Cooperation Group (HTCG). They discussed ways of expanding high technology trade between them, a small but significant portion of which is restricted to India due to nuclear tests it conducted in 1974 and 1998. "The two sides looked forward to a series of time-bound actions in the above areas to raise high technology commerce to the next level of bilateral cooperation - in keeping with 4
the transformed nature of the strategic partnership between India and the US," said a statement from the external affairs ministry. "Highlights of the action plan include a timetable for reviewing export controls in respect of India - building on innovative efforts already underway for simplifying export controls," the statement said at the end of the talks. The action plan followed recommendations of the two sides' industries, which held their meeting, for enhancing US high-tech transfers to India. "India recognised and welcomed the US administration's announcement of their dual use export control reform initiative," the statement said. The two sides discussed the Validated End-User (VEU) programme; a US initiative to simplify export licensing requirements for Indian companies, and agreed that "further discussions were required" as US export control polices "should keep pace with the transformed relationship between India and the US". Menon underlined India's record in non-proliferation and stressed the importance of US high technology exports to spur India's development that in turn will help the nation achieve the larger goals of better life for its citizens. Over the years, India's high technology trade with the US has grown steadily which now accounts for 45 percent of $17 US billion exports. http://economictimes.indiatimes.com/indicators/india_us_agree_on_timebound_steps_to_expand_high-tech_trade/articleshow/2828309.cms Canada for closer economic ties with India Seeking to increase its commercial presence in Indian markets, Canada has stepped up efforts to expand economic cooperation with India, a senior official has said. "We have stepped up efforts to expand our level of cooperation that would be beneficial for both the countries," Deepak Obhrai, newly appointed Parliamentary Secretary to the Minister of International Cooperation, said. Obhrai, who is also the Parliamentary Secretary to the Minister of Foreign Affairs, said Canada was focusing on increasing its commercial presence in rapidly growing markets in India and to support Canadian investment there. He was speaking at a Indo-Canada Chamber of Commerce meeting. R L Narayan, Indian High Commissioner to Canada said that trade relations between the two nations were about to take-off and high-level exchanges at official and political level were going on. 5
He stressed there has been a rapid increase in foreign direct investment in Canada by Indian software companies. Areas of Indian investment also included minerals and metals, pharmaceuticals, petrochemicals, oil and gas, auto ancillaries, financial services. Citing the examples of State Bank of India and ICICI, he said that the Indian banks were expanding fast in Canada. Narayan said that more and more Canadian companies were investing in the country as they realised that Indian economy was one of the worlds fast expanding economies. The Indian ambassador also highlighted the cooperation in field of education and said that more and more educational institutions and universities were establishing closer linkages between the people of two countries for mutual benefits. http://economictimes.indiatimes.com/articleshowarchive.cms?msid=2828546 Sectoral News Jewellery exports up 20% in Apr-Sept `07 Gems and jewellery exports grew at over 20 per cent in the first half of financial year 2008, reviving from FY07, helped by cuts in import duties of rough jewels, according to the annual economic survey. Exports from the sector, comprising diamonds, gold jewellery and coloured gemstones, formed 12 per cent of India s merchandise exports in 2006/07, according to the survey presented in parliament by Finance Minister Palaniappan Chidambaram. The survey did not provide the growth rate for the sector in 2006/07, but said there had been a deceleration in the rate of growth of exports from the sector during that period. Gems and jewellery accounts for about 12 per cent of India s exports, which is expected to touch $150 billion this financial year. Almost 80 per cent of the country s gems and jewellery exports comprise diamonds. According to Sanjay Kothari, head of the Gems and Jewellery Export Promotion Council, the surge in exports is largely a result of the import duty cut on polished diamonds. With the dollar weakening against the rupee, exporters prefer to import polished diamonds rather than source them from within the country. With the rupee appreciating almost 15 per cent against the dollar in the last one year, most sectors have reported a slowdown in export growth, including textiles, apparel and leather products. All these sectors have seen a high incidence of lay-offs. 6
Gems and jewellery as also petroleum products, on the other hand, has registered high growth on account of their high import content. http://www.businessstandard.com/common/news_article.php?leftnm=0&autono=31 5277 Indian PC shipments grow 20% The desktop and notebook market grew 20 per cent year-on-year, with 6.5 million units shipped into the country in 2007, as compared with 5.4 million units in 2006, according IDC s latest India quarterly PC tracker. Notebook shipments accounted for more than 27 per cent of the total PC shipments for the first time in a calendar year. Notebook PC shipments touched 1.8 million units, as against 0.98 million units in 2006, which show acceptance of laptops as the preferred choice for first-time PC buyers, according to Kapil Dev Singh, country manager, IDC India. Piyush Pushkal, manager, PC research, IDC India, said: With consumer desktop shipments reporting flat growth, the higher overall growth of the consumer client PC segment signals maturing of the market. The consumer PC category is shifting from desktop-centric to being notebook-centric. While the notebook PC market grew 81 per cent in 2007 year-on-year, the desktop PC market grew by 7 per cent as it shipped 4.7 million units in 2007 as against 4.4 million units in 2006. http://www.businessstandard.com/common/news_article.php?leftnm=8&autono=315233 General Insurance sector logs growth of 12% in January The General Insurance industry grew by about 12 per cent during January with robust performance by private players like Reliance General and Cholamandalam. The 16 nonlife insurers collected Rs 2,520 crore premium in January 2008, against Rs 2,253 crore in the same month last year, according to industry data. During the month, nine private sector general insurance companies garnered Rs 990 crore against Rs 811 crore in the same month a year-ago. Reliance General increased its premium by 47.5 per cent to Rs 149 crore, Cholamandalam MS General Insurance premium grew by 65 per cent to Rs 48 crore in January. The largest player in the segment, ICICI Lombard collected Rs 278 crore against Rs 275 crore in January 2007. At the same time, four public sector non-life insurance companies collected Rs 1,467 crore against Rs 1,391 crore in the corresponding month a year ago. 7
In percentage terms, while the public sector could increase their premiums by just 5.4 per cent, nine private sector players clocked premium growth of 22 per cent. During the month, market leader New India Assurance premium collection grew by 6.7 per cent to Rs 451 crore as compared to Rs 422 crore in the year-ago period. However, Oriental Insurance posted a negative growth of 1.9 per cent to Rs 327 crore against Rs 333 crore in the same month last year. Private sector players' market share stood at 40 per cent as compared to the public sector's share of 60 per cent in the month. http://economictimes.indiatimes.com/personal_finance/insurance/general_insuran ce_sector_logs_growth_of_12_in_january/articleshow/2820251.cms News Round Up Growth story weaves new history The survey says an upward adjustment to the 2007-08 GDP projection is possible. Confirming and even exceeding some projections, the Economic Survey for 2007-08 said the Indian economy has moved decisively to a higher growth phase. It projected full year gross domestic product (GDP) at factor cost at constant 1999-2000 prices to grow at 8.7 per cent, which is marginally higher than the Reserve Bank of India s projection of 8.5 per cent for 2007-08. This represents a deceleration of growth (which is spread across most sectors barring power and various services) from the unexpectedly high growth rates witnessed in the past two years, the survey said. However, it pointed out that an upward adjustment to the 2007-08 projection was possible, keeping in mind the revisions in previous years. GDP growth for 2006-07 was initially estimated at 9.2 per cent in February last year, 9.4 per cent in May and finally at 9.6 per cent in the quick estimates released this January. GDP at current market prices is projected at Rs 46,93,602 crore in 2007-08, making it the first time that the size of the Indian economy at market exchange rate will cross $1 trillion. At the nominal exchange rate (average of April-December 2007), GDP is projected at $1.16 trillion during the year, while the per capita income is pegged at $ 1021. India thus continues to remain in the category of low income countries. On the whole, the survey, which provides an overview of the Tenth Five Year Plan (2002-07) achievements, pointed out that GDP growth at market prices has exceeded 8 per cent every year since 2003-04. The projected 8.7 per cent growth is fully in line with this trend, it adds. 8
The higher economic growth trajectory and the projected growth of 8.7 per cent in 2007-08 is based on a quantum jump in savings and investment rates, Finance Minister P Chidambaram said in a statement after placing the survey in Parliament. The rate of investment (gross capital formation) rose to an unprecedented 35.9 per cent of GDP in 2006-07 and is projected to increase in 2007-08. Similarly, the savings rate scaled new highs in 2006-07, reaching 34.8 per cent of GDP in the year. http://www.businessstandard.com/common/news_article.php?leftnm=3&autono=315351 Indians rate better on entrepreneurial skills than Chinese Indian leaders are more entrepreneurial than their Chinese counterparts thanks in large measure to their strong language skills and association with a society that encourages entrepreneurship. This is one of the many reasons that Indians move up and occupy top positions in transnationals across the world. However, Indians are less social, more task-oriented and more hierarchical compared to the best leaders in North America, according to a survey by Korn/Ferry International, an executive search firm. But Chinese executives are not very entrepreneurial and very hierarchical. They do not adapt easily to other cultures and are wary of taking risks. This is because in most cases, the Chinese approach tends to be more top-down while Indian CEOs are generally more adaptable. So, it s easier for them to succeed in foreign land. For instance, some 30% of the business leaders in Singapore are from India, said the report. David Everhart, senior client partner and MD (leadership development solutions Asia), Korn/Ferry International says that the effective leadership style differs from country to country. What we need today is leaders who can switch to these attitudes depending on business and cultural demands. Indian executives were less concerned about appearing more open to suggestions or building a consensus. This is effective in the Indian business context and could be one of the reasons for even MNCs to adopt a different style of leadership in India, he told. http://economictimes.indiatimes.com/news/news_by_company/indians_rate_better _on_entrepreneurial_skills_than_chinese/articleshow/2814363.cms 9