Fergusson College, Pune completes 125 years.
3.1.09
Slowdown snippets
Big discounts and price cuts, following the 4% reduction in excise duty, failed to accelerate sagging automobile sales in the domestic market with major companies reporting double digit declines in sales in December. Sales of Maruti slipped 11% —third month in a row —to 52,029 units against 58,401 units in the same month last year. Alarmingly, this decline comes even after the addition of a new compact model A-Star. General Motors fared worse as its sales fell 36% in December at 4,041 units against 6,309 units in the same month last year. The story was no better on two-wheeler front, with the top two players— Hero Honda and Bajaj Auto— reporting a double-digit fall. Hero Honda said sales stood at 2.15 lakh units against 2.4 lakh units in December last year, a fall of 10%. On the other hand, Bajaj Auto’s two-wheeler sales dipped 33% at 1.19 lakh units against 1.77 lakh units. Bajaj Auto MD Rajiv Bajaj said the company will launch an all-new motorcycle this month, “the first of several to be introduced in 2009’’, to stimulate demand. “Targeted at the ‘sport commuter’ segment, this motorcycle will be available nationally at all Bajaj dealers and is intended to further Bajaj’s leadership in the 125 cc+ segment,’’ he said. According to analysts, auto sales are likely to remain depressed till the end of this fiscal as people are expected to stay away from big-ticket purchases in view of the slowdown and high retail financing rates. The credit crunch in retail finance will also continue for some time, impacting sales. On the decline in December sales despite lucrative deals and reduced prices, they said this was because dealers were clearing pending inventories. “The sales numbers announced by the companies are factory dispatches. These are low as dealers are currently clearing only pending stocks and not taking fresh deliveries from companies,’’ an analyst said.Exports fell 9.9% in November to $11.5 billion, the second month of negative growth, as demand dwindled in US and Europe, following the global financial crisis. In October, exports dipped 12.1% to $12.8 billion. However, in rupee term, exports in November rose 12% with increase in realisations, owing to 20% depreciation in the value of rupee against dollar in the last one year. During April-November, exports grew 19.4% to $119.3 billion. It seems government will have to take some big measures to achieve the export target of $200 billion for 2008-09. “Sectors like leather, textile, gems and jewellery have been hit hard because of demand slump in US and Europe,’’ export body FIEO president A Sakthivel said. He further added that exports are likely to be hit for few more months. The government has already announced a number of measures to boost exports. It has provided subsidies to lend funds to exporters at concessional rates. But, because of the slowdown in the developed economies including US and Europe, the demand has taken a hit.
The New Year has brought good news on pricing front as inflation has further gone down to 6.38%, creating enough space for RBI to infuse liquidity to bring down the interest rates. The annual inflation fell by 0.23 percentage points due to falling prices of food and fuel items during the week ended December 20. This was the eighth consecutive weeks of downside movement of the inflation.
Bangalore may house 100-floor tower
Here’s some scintillating news that’s sure to cheer Bangaloreans as they welcome 2009. The city will soon be home to India’s tallest tower. The Karnataka government proposes to construct a 100-storeyed trade centre on the lines of New York’s erstwhile World Trade Center. Proposed locations are either the Race Course or the Karnataka Soaps and Detergents Ltd (KSDL) land at Rajajinagar. Conceived and promoted by large and medium industries minister Murugesh R Nirani, an industrialist himself, the project is envisaged as a public-private partnership. “Nearly 10 investors have evinced interest in partnering with the government to build this skyscraper,’’ Nirani said. Chief minister B S Yeddyurappa is said to have given consent to the idea. Nirani said financials of this venture have not been worked out, especially revenue-sharing with the private developer. “Very soon, an expert agency will be involved to give a feasibility report,’’ Nirani said. Project work is expected to commence by March. The tower will offer office space, observation decks, restaurants, clubs, public parks, jogging tracks, multi-level shopping and parking areas. According to the plan, a small portion—less than six acres—of the 64-acre Race Course would be used for the tower. Race Course is being considered for two reasons: it’s in the heart of the city and also because Bangalore Turf Club has been asked to shift to the outskirts by December 2009. Large and medium industries minister Murugesh R Nirani said, “Even if this skyscraper takes less than six acres, rest of the Race Course area will be reserved for lung space.’’ But BTC officials have no knowledge of the move. As for KSDL—which sits on 35 acres of prime land in Rajajinagar —the logic is the same. As the company is using only a few acres, the government might move KSDL to Dobbspet, near Tumkur. In both cases, Nirani said, land ownership will remain with the government. The project will need multiple approvals: from the Airports Authority of India (AAI) to ensure it doesn’t interfere with air-traffic routes; no-objection certificates from fire force, telecom, BWSSB, Bescom and pollution control boards. According to a senior BBMP town planning official, “Bangalore earth capacity will support a 100-storeyed tower. Availability of road width, floor area ratio and sital area are vital components for any tall towers.’’ The official further said both identified locations fulfil these norms and they will try to work out how to progress.
Ahmedabad's BRTS' bus snippets
On Friday afternoon, a prototype of Bus Rapid Transit System (BRTS) glided noiselessly into the swanky GMDC bus stop on a trial run. Blame it on high expectations, deadline pressures or steel price rise, Ahmedabad’s first real BRTS bus, somehow did not look like what was promised. BRTS has been hailed as a solution to traffic congestion. The double-door diesel bus that Amdavadis saw had metallic silver interiors, bearing a Tata chassis, with a capacity to seat 35 and space for 50 passengers to stand. Its body has been made by Ahmedabad-based Charted Speed Private Limited in Sarkhej. Curious passers-by stopped to look at the machine that ran on the most impressive stretch of BRTS corridor so far, along the 132-feet Ring Road. The swankier part of the bus includes a ticketing system using a smart card reader installed at the door. Municipal commissioner IP Gautam who addressed mediapersons from the bus stop,said,“From next week onwards we will start regular trials of BRTS buses on this stretch. We are also awaiting inputs from public about any design changes or requirements in the structure.” Conceptualised three years ago, Ahmedabad Janmarg Limited (AJL), a special purpose vehicle set up by AMC, Ahmedabad Urban Development Authority(AUDA) and Gujarat government, will govern BRTS operations. Two of the proven BRT successes are Trans Millenio in Bogota, capital of Colombia and Curitiba in Brazil. About compromise on capacity of the bus as against initial planning, a senior AMC official said, “High capacity bus would have cost us around Rs 50 to 60 lakh while this one cost us Rs 27 lakh without compromising much on comfort. Buses will be accessible to physically challenged as well.” City mayor Kanaji Thakore said, “BRTS bus will improve travelling facilities in city.” What makes this bus unique? Length - 12 m. Height - 3m .Seating capacity - 35 passengers and a driver. Standing capacity - 50 passenger .Inbuilt ticket validating machine. Liquid Emitting Diode (LED) display of bus routes and approaching bus stands .Cost of a bus - Rs 27 lakh .Bus operator - Charted Speed Private Limited (for a 7-year period) .Before zeroing in on this prototype, AJL had also considered... Volvo 7700 ,Volvo 8500 city bus low floor ,Volvo 8500 intercity bus ,Tata starbus low floor ,Tata starbus Ultra low floor CNG ,Ashok Leyland Viking BS-II ,Ashok Leyland 12 M bus
Tale of Two Countries
An interesting article by Gurcharan Das.
China and India are in a struggle for a top rung on the ladder of world power, but their approaches to the state and to power could not be more different. I met with a Chinese friend who was visiting India on business two days after last month’s terrorist attack on Mumbai. He was shocked as much by the transparent and competitive minute-by-minute reporting of the attack by India’s dozens of news channels as by the ineffectual response of the government. He had seen a middle-class housewife on national television tell a reporter that the Indian commandos delayed in engaging the terrorists because they were too busy guarding political big shots. He asked how the woman could get away with such a statement. I explained sarcasm resonates in a nation that is angry and disappointed with its politicians. My friend switched the subject to the poor condition of India’s roads, its dilapidated cities and the constant blackouts. Suddenly, he stopped and asked: “With all this, how did you become the second-fastest growing economy in the world? China’s leaders fear the day when India’s government will get its act together.” The answer to his question may lie in a common saying among Indians that “our economy grows at night when the government is asleep.” As if to illustrate this, the Mumbai stock market rose in the period after the terrorist attacks. Two weeks later, in several state elections, incumbents were ousted over economic issues, not security. All this baffled my Chinese friend, and undoubtedly many of his countrymen, whose own success story has been scripted by an efficient state. They are uneasy because their chief ally, Pakistan, is consistently linked to terrorism while across the border India’s economy keeps rising disdainfully. It puzzles them that the anger in India over the Mumbai attacks is directed against Indian politicians rather than Muslims or Pakistan. The global financial crisis has definitely affected India’s growth, and it will be down to perhaps 7 per cent this year from 8.7 per cent in 2007. According to my friend, China is hurting even more. What really perplexes the Chinese, he said, is that scores of nations have engaged in the same sorts of economic reforms as India, so why is it that it’s the Indian economy that has become the developing world’s second best? The speed with which India is creating world-class companies is also a shock to the Chinese, whose corporate structure is based on state-owned and foreign companies. I have no satisfactory explanation for all this, but think it may have something to do with India’s much-reviled caste system. Vaishyas, members of the merchant caste, who have learned over generations how to accumulate capital, give the nation a competitive advantage. Classical liberals may be right in thinking that commerce is a natural trait, but it helps if there is a devoted group of risk-taking entrepreneurs around to take advantage of the opportunity. Not surprisingly, Vaishyas still dominate the Forbes list of Indian billionaires. In a much-discussed magazine article last year, Lee Kwan Yew, the former prime minister of Singapore, raised an important question: Why does the rest of the world view China’s rise as a threat but India’s as a wonderful success story? The answer is that India is a vast, unwieldy, open democracy ruled by a coalition of 20 parties. It is evolving through a daily flow of ideas among the conservative forces of caste and religion, the liberals who dominate intellectual life, and the new forces of global capitalism. The idea of becoming a military power in the 21st century embarrasses many Indians. This ambivalence goes beyond Mahatma Gandhi’s non-violent struggle for India’s freedom, or even the Buddha’s message of peace. The sceptical Indian temper goes back to the 3,500-year-old “Nasadiya” verse of the Rig Veda, which meditates on the creation of the universe: “Who knows and who can say, whence it was born and whence came this creation? The gods are later than this world’s creation. Who knows then whence it first came into being?” When you have millions of gods, you cannot afford to be theologically narcissistic. It also makes you suspect power. Both the Chinese and the Indians are convinced that their prosperity will only increase in the 21st century. In China it will be induced by the state; in India’s case, it may well happen despite the state. Indians expect to continue their relentless march towards a modern, democratic, market-based future. In this, terrorist attacks are a noisy, tragic, but ultimately futile sideshow. However, Indians are painfully aware that they must reform their government, bureaucracy, police and judiciary — institutions, paradoxically, they were so proud of a generation ago. When that happens, India may become formidable, a thought that undoubtedly worries China’s leaders.
China and India are in a struggle for a top rung on the ladder of world power, but their approaches to the state and to power could not be more different. I met with a Chinese friend who was visiting India on business two days after last month’s terrorist attack on Mumbai. He was shocked as much by the transparent and competitive minute-by-minute reporting of the attack by India’s dozens of news channels as by the ineffectual response of the government. He had seen a middle-class housewife on national television tell a reporter that the Indian commandos delayed in engaging the terrorists because they were too busy guarding political big shots. He asked how the woman could get away with such a statement. I explained sarcasm resonates in a nation that is angry and disappointed with its politicians. My friend switched the subject to the poor condition of India’s roads, its dilapidated cities and the constant blackouts. Suddenly, he stopped and asked: “With all this, how did you become the second-fastest growing economy in the world? China’s leaders fear the day when India’s government will get its act together.” The answer to his question may lie in a common saying among Indians that “our economy grows at night when the government is asleep.” As if to illustrate this, the Mumbai stock market rose in the period after the terrorist attacks. Two weeks later, in several state elections, incumbents were ousted over economic issues, not security. All this baffled my Chinese friend, and undoubtedly many of his countrymen, whose own success story has been scripted by an efficient state. They are uneasy because their chief ally, Pakistan, is consistently linked to terrorism while across the border India’s economy keeps rising disdainfully. It puzzles them that the anger in India over the Mumbai attacks is directed against Indian politicians rather than Muslims or Pakistan. The global financial crisis has definitely affected India’s growth, and it will be down to perhaps 7 per cent this year from 8.7 per cent in 2007. According to my friend, China is hurting even more. What really perplexes the Chinese, he said, is that scores of nations have engaged in the same sorts of economic reforms as India, so why is it that it’s the Indian economy that has become the developing world’s second best? The speed with which India is creating world-class companies is also a shock to the Chinese, whose corporate structure is based on state-owned and foreign companies. I have no satisfactory explanation for all this, but think it may have something to do with India’s much-reviled caste system. Vaishyas, members of the merchant caste, who have learned over generations how to accumulate capital, give the nation a competitive advantage. Classical liberals may be right in thinking that commerce is a natural trait, but it helps if there is a devoted group of risk-taking entrepreneurs around to take advantage of the opportunity. Not surprisingly, Vaishyas still dominate the Forbes list of Indian billionaires. In a much-discussed magazine article last year, Lee Kwan Yew, the former prime minister of Singapore, raised an important question: Why does the rest of the world view China’s rise as a threat but India’s as a wonderful success story? The answer is that India is a vast, unwieldy, open democracy ruled by a coalition of 20 parties. It is evolving through a daily flow of ideas among the conservative forces of caste and religion, the liberals who dominate intellectual life, and the new forces of global capitalism. The idea of becoming a military power in the 21st century embarrasses many Indians. This ambivalence goes beyond Mahatma Gandhi’s non-violent struggle for India’s freedom, or even the Buddha’s message of peace. The sceptical Indian temper goes back to the 3,500-year-old “Nasadiya” verse of the Rig Veda, which meditates on the creation of the universe: “Who knows and who can say, whence it was born and whence came this creation? The gods are later than this world’s creation. Who knows then whence it first came into being?” When you have millions of gods, you cannot afford to be theologically narcissistic. It also makes you suspect power. Both the Chinese and the Indians are convinced that their prosperity will only increase in the 21st century. In China it will be induced by the state; in India’s case, it may well happen despite the state. Indians expect to continue their relentless march towards a modern, democratic, market-based future. In this, terrorist attacks are a noisy, tragic, but ultimately futile sideshow. However, Indians are painfully aware that they must reform their government, bureaucracy, police and judiciary — institutions, paradoxically, they were so proud of a generation ago. When that happens, India may become formidable, a thought that undoubtedly worries China’s leaders.
Second economic booster shot
The government has been provoked into launching, jointly with the Reserve Bank, another frontal assault on torpid demand and loan scarcity. With earlier stimulus packages having failed to revive the limp economy, and with general elections now just three or four months away, smugness seems to have visibly given way to panic. The government has said this might be the last stimulus package for this fiscal year. Also, this year’s budget is likely to be a vote-on-account. Friday’s giveaways thus had the feel of a mini-budget, minus the usual trappings of personal tax rate changes.The government announced a slew of measures that broadly aim to provide booster shots to the housing sector, improve the credit flow (both domestic and overseas loans) to financial and manufacturing companies, accelerate the sales of trucks and buses, catalyse infrastructure projects and resurrect exports. On its part, the RBI has cut its key interest rates and ensured additional money flow into the system. The RBI had last cut rates just a month ago, on December 8. However, initial reactions do not seem to indicate that this package will be enough to get the economy back in fighting shape. On being asked whether the second package was prompted by the failure of the first one, planning commission deputy chairman Montek Singh Ahluwalia said, “The packages are announced as the situation evolves. Both packages announced so far should be good enough to ensure 7% growth in the current fiscal, which is satisfactory in the light of the global crisis.’’ The proximate reasons for the alarm are clearly the disappointing economic data—with the exception of the inflation rate—that have been released in the recent past. On inflation, while the wholesale index has been dropping, the consumer index is still to show moderation. The index of industrial production for October has slipped into negative territory, implying industry produced less than what it did in October 2007. The index grew by only 4.1% during April-October, which is less than half the 9.9% witnessed during the same period of 2007. Exports during both October and November declined, indicating that the slump might be more severe than was assumed earlier. Even auto and two-wheeler sales remained depressed during December, despite the excise duty cuts provided on the 7th. The government has taken the onslaught into the enemy camp—slowdown in demand and an unprecedented loan drought for the corporate sector. It has tried to rejuvenate demand by stimulating the housing and transport sectors which have deep, ancillary knock-down effects and any push there is likely to benefit other sectors too.
RBI cuts CRR 50 basis pts -Infuses Rs 20,000 crore into system, in addition to over Rs 3 lakh crore freed over past three months ,reduces repo rate by 100 bps to 5.5%, an eight-and-a-half year low - Banks may cut loan, deposit rates .Cuts reverse repo rate 100 bps to 4% - Banks may be forced to lend more. Cost ceilings removed for ECBs - Frees corporates to hunt for funds overseas. NBFCs into infrastructure funding exclusively can borrow from multilateral, bilateral institutions - Opens up financing earlier available only to state-owned units. Integrated townships can access ECBs - Boost for housing sector . FII investment limit in rupeedenominated corporate bonds hiked to $15bn from $6bn - Provides corporates with an alternative funding platform. Centre to ask states to release land for low- and middle-income housing - Will catalyze housing activity, could have political dividends too. New company created to funnel Rs 25,000cr into finance companies - Liquidity for vital financing component in the economy. States allowed to raise Rs 30k cr through market borrowings - Burden of expenditure shifts to states, while boosting local demand . India Infrastructure Finance Co can access extra Rs 30,000cr through tax-free bonds in addition to the Rs 10,000cr allowed earlier - Expected to kickstart infrastructure projects worth Rs 1 lakh crore. Government addresses loan crisis faced by Indian companies .Therefore, look at what has been proposed for the auto sector, especially trucks and buses—public sector banks will provide special credit to finance companies that give out loans for buying trucks, to states to get funds from the Centre’s urban development schemes to buy buses, and to fleet owners who can save on taxes if they buy trucks between January 1 and March 31. Similarly, for the housing sector, there is a host of measures apart from the RBI’s rate cuts which are expected to translate into cheaper housing loan rates. Integrated townships can now access foreign loans and Delhi will cajole states to release land for lower and middle income housing schemes so that there is a concerted increase in activity. These come over and above the earlier decisions which provided concessional rates for loans up to Rs 20 lakh. There is an attempt to shift some of the expenditure burden from the Centre to the states in the hope that money spent by the states on local projects will also help in demand invigoration. States have been allowed to borrow Rs 30,000 crore extra, in addition to their budgeted loans, from the market. The government has tried to address the loan famine faced by Indian companies. For one, it has made it easier for them to access foreign currency loans by removing the ceiling on interest rates. However, there are still no indications whether international banks have got back into a lending mood. Second, foreign investors have been allowed to invest more in rupee bonds floated by Indian companies—now $15 billion against the $6 billion earlier. Third, credit targets for all PSU banks are being revised upwards. In addition, it’s hoped that the fusillade of rate cuts and repeated money pumping by the RBI will finally unclog the economy’s financial arteries. Some domestic sectors such as cement, TMT bars and structurals (used mainly in construction activity), zinc and ferro alloys—have got a special leg-up after the government has made it slightly more expensive to import these items. This has been achieved by re-imposing duties that were waived briefly when the government was combating inflation. There is also acceptance of the important role that NBFCs (non-banking finance companies) play in the whole economic chain. The second package has a lot that attempts to keep them liquid. Those in the infrastructure business exclusively (for example, Infrastructure Development Finance Corporation) can now access foreign exchange loans from global institutions that provide concessional credit. A special company will be floated soon to funnel Rs 25,000 crore into NBFCs and PSU banks will provide special loans to them for financing truck purchases. Shaken up by the rapidly deteriorating export numbers (exports contribute roughly 12-15% to the country’s economy), there is a special section for exporters too that tries to put more cash into their hands in the face of depleting earnings. The government is also hoping that the money now invested in infrastructure will yield results that will be in multiples of the initial capital. It has allowed India Infrastructure Finance Co Ltd to raise an additional Rs 30,000 crore through tax free bonds, over and above the Rs 10,000 crore that was sanctioned a month ago. In total, this is expected to spur Rs 100,000 crore of investment in infrastructure projects over the next three to six months.
RBI cuts CRR 50 basis pts -Infuses Rs 20,000 crore into system, in addition to over Rs 3 lakh crore freed over past three months ,reduces repo rate by 100 bps to 5.5%, an eight-and-a-half year low - Banks may cut loan, deposit rates .Cuts reverse repo rate 100 bps to 4% - Banks may be forced to lend more. Cost ceilings removed for ECBs - Frees corporates to hunt for funds overseas. NBFCs into infrastructure funding exclusively can borrow from multilateral, bilateral institutions - Opens up financing earlier available only to state-owned units. Integrated townships can access ECBs - Boost for housing sector . FII investment limit in rupeedenominated corporate bonds hiked to $15bn from $6bn - Provides corporates with an alternative funding platform. Centre to ask states to release land for low- and middle-income housing - Will catalyze housing activity, could have political dividends too. New company created to funnel Rs 25,000cr into finance companies - Liquidity for vital financing component in the economy. States allowed to raise Rs 30k cr through market borrowings - Burden of expenditure shifts to states, while boosting local demand . India Infrastructure Finance Co can access extra Rs 30,000cr through tax-free bonds in addition to the Rs 10,000cr allowed earlier - Expected to kickstart infrastructure projects worth Rs 1 lakh crore. Government addresses loan crisis faced by Indian companies .Therefore, look at what has been proposed for the auto sector, especially trucks and buses—public sector banks will provide special credit to finance companies that give out loans for buying trucks, to states to get funds from the Centre’s urban development schemes to buy buses, and to fleet owners who can save on taxes if they buy trucks between January 1 and March 31. Similarly, for the housing sector, there is a host of measures apart from the RBI’s rate cuts which are expected to translate into cheaper housing loan rates. Integrated townships can now access foreign loans and Delhi will cajole states to release land for lower and middle income housing schemes so that there is a concerted increase in activity. These come over and above the earlier decisions which provided concessional rates for loans up to Rs 20 lakh. There is an attempt to shift some of the expenditure burden from the Centre to the states in the hope that money spent by the states on local projects will also help in demand invigoration. States have been allowed to borrow Rs 30,000 crore extra, in addition to their budgeted loans, from the market. The government has tried to address the loan famine faced by Indian companies. For one, it has made it easier for them to access foreign currency loans by removing the ceiling on interest rates. However, there are still no indications whether international banks have got back into a lending mood. Second, foreign investors have been allowed to invest more in rupee bonds floated by Indian companies—now $15 billion against the $6 billion earlier. Third, credit targets for all PSU banks are being revised upwards. In addition, it’s hoped that the fusillade of rate cuts and repeated money pumping by the RBI will finally unclog the economy’s financial arteries. Some domestic sectors such as cement, TMT bars and structurals (used mainly in construction activity), zinc and ferro alloys—have got a special leg-up after the government has made it slightly more expensive to import these items. This has been achieved by re-imposing duties that were waived briefly when the government was combating inflation. There is also acceptance of the important role that NBFCs (non-banking finance companies) play in the whole economic chain. The second package has a lot that attempts to keep them liquid. Those in the infrastructure business exclusively (for example, Infrastructure Development Finance Corporation) can now access foreign exchange loans from global institutions that provide concessional credit. A special company will be floated soon to funnel Rs 25,000 crore into NBFCs and PSU banks will provide special loans to them for financing truck purchases. Shaken up by the rapidly deteriorating export numbers (exports contribute roughly 12-15% to the country’s economy), there is a special section for exporters too that tries to put more cash into their hands in the face of depleting earnings. The government is also hoping that the money now invested in infrastructure will yield results that will be in multiples of the initial capital. It has allowed India Infrastructure Finance Co Ltd to raise an additional Rs 30,000 crore through tax free bonds, over and above the Rs 10,000 crore that was sanctioned a month ago. In total, this is expected to spur Rs 100,000 crore of investment in infrastructure projects over the next three to six months.
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