Current Economic Statistics and Review For the
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Theme
of the week: IT and ITeS-BPO Exports of India* Services
Exports of
A
significant feature of the structural transformation of the Indian economy
in recent years has been the rising contribution of the services sector
which includes substantial value-added and skill-intensive services,
predominantly software development and production, information technology
enabled services (ITeS), business process outsourcing (BPO) and
knowledge-process outsourcing (KPO) – outsourcing by foreign countries
in favour of Services exports were initially led by rapid rise in business and professional services followed by travel and software services. The compositional shift in favour of software and business services became even more pronounced in 2005-06.
The rise from US$ 4.5 billion in 1990-91 to as much as US $ 60.6 billion in 2005-06 in India’s services exports (Table 1), has made the country emerge as the 18th largest service exporter in the world in 2004 and its market share has expanded to 1.8 from 0.6 per cent in 1990 (Table 2). In 2000-01 the share of software exports in total service exports was around 39 per cent, the subsequent decline in this ratio to 37.4 per cent in 2004-05 by some increase in miscellaneous services rose to 47.6 per cent in 2003-04. The gains recorded by the exports of services have far exceeded those recorded by exports of goods.
Services
and Software Exports of A
significant development with far-reaching implications on international
scenario has been that In
some ways this is a counter-point from many of the earlier predictions in
the literature that suggested that the growth of the software industry in
In
the past decade from 1995-96 to 2004-05,
During
2001-03, for a short period of 2-3 years the year-on-year (y-o-y) growth
of software and services exports have declined owing to slow growth of IT
spending and jobless recovery in major markets world over. The y-o-y
growth in software and services exports of From
2001 onwards, Indian info-tech companies, apart from consolidating their
presence in traditional verticals such as BFSI (banking, financial
services and insurance), diversified into new verticals such as telecom,
retail, utilities and health care and initiated offering new services like
enterprise application integration (EAI), package implementation,
engineering services, software testing and service oriented architecture
and web services. Consequently, during the period 2003-06 the impressive
growth rate of software and services exports of India continued despite
global competition and appreciation of the rupee, with its revenue rising
from US $ 9.5 billion in 2002-03 to a staggering US $ 23.6 billion in
2005-06 recording a growth of around 50 per cent and is estimated to touch
around US $ 30 billion in 2006-07. Analysts and industry observers have
predicted that by 2010, the total IT, ITeS-BPO exports of
Globally,
In
order to withstand growing global competition, the Indian IT companies
have started moving up the value chain by exploring untapped potential in
IT consulting and system integration, hardware support and installation
and processing services.
Performance
of the Indian BPO industry
The
ITES-BPO industry has witnessed phenomenal growth since 1999. The ITES-BPO
exports of the Indian BPO market was $565 million in 1999-00, which surged
to $ 1.5 billion in 2001-02. Furthermore, it increased by 42 per cent from
$ 2.5 billion in 2002-03 to $ 3.6 billion in 2003-04. The exports growth
is being driven by a steady increase in scale and depth of existing
service lines. In recent years there has also been addition of newer
vertical specific services and emerging business services, consequently
the ITES-BPO exports have grown to US $ 6.3 billion in 2005-06, recording
a growth of 37 per cent over the previous year and are expected to grow to
US $ 8 – 8.5 billion in 2006-07 (Table 6).
According
to the annual Nasscom survey on IT industry performance, Genpact, WNS and
Wipro BPO are the top three third-party ITES-BPO companies in 1) BFSI is amongst the most mature verticals in terms of offshore ITES-BPO adoption. This segment is estimated to account for approximately 35-45 per cent of offshore ITES-BPO, and has the greatest service line depth. 2) Pharmaceuticals and life sciences sector is a relatively new sector with rapidly growing IT-ITES spends and significantly under-penetrated offshore potential. 3) Legal services segment is a relatively newer segment that has witnessed recent interest and is believed to hold significant market potential to grow to $6 billion The
new strategy of offshore outsourcing to Favouring
large-scale outsourcing of software services and R&D works to
countries such as Tata
Consultancy Services (TCS) TCS,
a true Indian MNC, is one of the most successful IT companies, having
branches in 32 countries with over 4,000 foreign nationals (accounting 6.5
per cent of total employees) working for it and serving more than 1,000
global clients round the world, including companies like, General
Electric, Citigroup, Chevron Texaco, AIG and Verizon Communications. At
any time about 10,000 engineers are abroad and some of them are working at
global delivery centres in Australia, Canada, Japan, UK, US, Hungary and
China. Started in 1968 the company has grown into a giant of 62,832
employees as on March 31, 2006, adding 3,000 – 4,000 people every year.
TCS
has grown more than 14 times in revenue in 8 years, from Rs 500 crore in
1996, to Rs 11,282 crore in 2005-06. The company crossed a billion dollars
in revenues in 2002-03. TCS is a rare services company to have a
decent-sized R&D expenditure, spending about 2 per cent of its sales
on R&D or 0.28 per cent of its total income. Apart from revenues
earned through the sale of software licences, the tools and products
developed as part of TCS Corporate R&D have been used extensively
within the company for developing software solutions. The table below
shows the number of new licences provided for internal use in the company
and the estimated savings in cost by avoiding purchase of products and
other sources.
Pursuing
global growth through selected, strategic Mergers & Acquisitions
(M&As) has been an articulated approach of TCS as to emerge as
an integrated full-service player. In 2005-06, it completed three
M&As, of which one was in Recently,
TCS has acquired 75 per cent stake in its Swiss partner, TKS-Technosoft
for around $ 80 million in a move aimed at giving it direct access to
continental Infosys Infosys’s
financial record in the last 10 years has been mind-boggling. The sales,
net profit and software exports have been rising at the rate of around 60
per cent in the last decade. Its exports during the last 10 years rose
from Rs 25 crore to Rs 4,695 crore, a CAGR of 61 per cent (Table 8). In
2003-04, Infosys became the first listed IT company in
In
the year 2005-06, the company recruited approximately 12,500 new
employees, net of attrition. The total number of employees in Infosys as
on March 31, 2006 stood at 44,658.
Table
indicates that there is a heavy reliance on the
Key Issues in IT software exportsIndian
software exports have been dominated by export of software services, in
the form of custom software work, rather than export of software products,
in the form of packages. The top IT firms in However, product development also requires Indian companies to take greater risks and make larger investments on research and development. It also needs companies to have much greater understanding about the emerging IT platforms and technologies. For that they require more number of software architects, as they help the developers to understand the system and allow enterprises to design efficient better systems, and increase the reuse of frameworks and components and also reduce the cost. Indian software firms can also learn from I-flex Solutions, which has done wonders in the product arena. It has become the top banking software product company in the world. The company’s strength and competitive advantage lies in specializing and concentrating on a specific vertical to achieve success. Creating a specialized product for a specific vertical has a much greater chance of success than trying to create a product that address a horizontal market. Despite
a robust growth in export earnings, the Indian IT companies rank low on
revenues earned per employee. For instance, Infosys and TCS earn $ 48,333
and $ 37,719 per employee, per year, the revenue earned by IBM and Google
stand at $ 2.6 lakh and $10.8 lakh, respectively. Challenges
ahead in ITeS and BPO segment Presently
Indian BPO industry is shifting both ways – a vertical movement
(offering more critical services in the same domain) and a horizontal
movement (expanding service portfolio by moving into sophisticated areas
like analytics and complex transactions); these will continue to be so.
Even as the Indian BPO industry is poised for growth, a major inhibiting
factor is the high staff attrition rate in the Indian BPO companies. In
addition to high attrition rate, Indian BPO companies have to overcome the
possible challenges of the potential BPO backlash, and more importantly,
competition from other countries. As
per Gartner, an international research firm, Furthermore,
in just four to five years of BPO business in 1)
lack of opportunity for growth 2)
no
personal life (owing to working in night-shifts) 3)
desire for pursuing
higher education and 4) involves intense physical strains.
*
This note is prepared by Bipin K. Deokar.
Highlights of Current Economic Scene AGRICULTURE
The government
has revised downward, after two upward revisions, the kharif oilseed
output estimate for the crop year (July-June) 2006-07 to 13.93 million
tonne from 14.55 million tonnes projected a week earlier. Groundnut output
estimate has been cut marginally to 4 million tonnes from 4.55 million
tonnes, while soybean output has been revised downward to 8.09 million
tones from 8.13 million tonnes estimated earlier. Meanwhile, the Central
Organisation for Oil Industry and Trade (COOIT) has estimated the oilseed
production for the `kharif' 2006-07 at 128.4 lakh tonnes, which is about 9
lakh tonnes lower than that of 137 lakh tonnes recorded during the last
kharif season. According to
Solvent Extractors’ Association, the edible oil imports during the
oil-year (November-October) 2005-06 has fallen by 15 per cent to 4.3
million tonne over the previous year, driven mainly by drop in the
domestic demand, good availability of mustard seed and high prices in
overseas markets. On the contrary, non-edible oil imports, during the same
period, have posted a whopping increase of 65 per cent to 675 thousand
tonnes over the previous year. While Vanaspati imports have also been
higher at 3 lakh tonnes compared to 2 lakh tonnes of the earlier oil-year,
total vegetable oil imports have been lower at 5.27 million tonnes
compared with 5.65 million tonnes. On the export
front, the total oilmeals export has jumped by 31 per cent during
April-October at 1.97 lakh tonnes as compared with 1.5 lakh tonnes during
the comparable period last year. The
soybean meal export jumped from 8.8 lakh tonne to 11.9 lakh tonnes, while
rapeseed meal export increased from 3.7 lakh tonnes to 5.3 lakh tonnes,
due to the availability of rapeseed during the off-season from Nafed,
which not only boosted the crushing and oil availability, but also
increased availability of rapeseed extractions, leading to a boost in the
export of rapeseed meal. According to
the estimates of the Rubber Board, exports of natural rubber have
registered a 49.6 per cent growth to 49,097 tonnes during the
April-October 2006 from 32,810 tonnes a year ago, facilitated by a rise in
production and lower domestic prices compared to those in the global
markets. The Board has projected a growth of 10.1 per cent in total rubber
production to 464,660 tonnes in the first seven months of fiscal year
2006-07, from 422,090 tonnes registered during the same period last year
on account of favourable climate and active tapping in most of the
rubber-producing areas of Kerala and Tamil Nadu. Rubber consumption,
however, is set to increase moderately by 2.2 per cent to 473,900 tonnes
during the same period and is expected to fail short of its target of
841,000 tonnes owing to increased use of synthetic rubber, lower rubber
offtake, especially from the non-tyre sector and shut-down of several
number of small and medium industries. The All-India
Starch Manufacturers' Association has demanded a reduction in import duty
on maize and ban on its exports considering the possibility of lower
domestic production in 2006-07 compared to previous year.
As per the estimates of the association, maize production is likely
to be 12.8 million tonnes, less than the projected demand of 13.86 million
tonnes. The association has sought for an urgent review of the existing
import and export policy with regard to maize as the short supply of the
same in the domestic market would put forth increasing pressure on maize
prices, which in turn would have a spiralling effect, causing increase in
prices of all the products of maize consuming industries. As per the
industry estimates the poultry exports are set to drop by 40 per cent in
the financial year 2006-07 as compared to poultry products worth Rs 326
crore exported in 2005-06. As
per Indian Poultry Federation, 5 months of the current fiscal year (from
April to August) 2006-07 have passed without any export, which would cause
a radical decline in poultry exports in 2006-07. The department of animal
husbandry is trying to get The National
Bank for Agriculture and Rural Development (Nabard) has sanctioned loans
to the tune of Rs 437 crore to Andhra Pradesh for taking up a variety of
rural infrastructure projects. The project sanctioning committee has
approved loan proposals for 461 roads, 11 bridges, 18 lift irrigation
schemes and 140 bio-diesel projects. The new loan included Rs 39.8 crore
for bio-diesel plantations in over 16,600 hectares of forestlands. The
lift irrigation schemes, covering `distress districts', would get Rs 39
crore. IndustryOverall
The strong growth momentum in manufacturing, electricity generation and mining has propelled the Index of Industrial Production (IIP) by 11.4 per cent in September 2006 compared to 7.2 per cent in September 2005. The cumulative growth rate for the first six months of the fiscal year has touched 10.9 per cent. According to use-based classification, the basic goods sector have grown by 11.3 per cent in September 2006 while the capital goods sector has improved by 2.2 per cent. The intermediate goods sector has recorded a 14.7 per cent growth. In terms of industry groups, the `beverages, tobacco and related products' group and the `basic metal and alloy industries' group have shown the highest growth of 19.8 per cent, followed by 19.6 per cent in 'wood and wood products, furniture and fixtures' while 'non-metallic mineral products' have grown by 16.7 per cent. On the other hand, the `other manufacturing industries' group has seen a decline of 10.9 per cent; growth in 'jute and other vegetable fibre textiles (except cotton)' has also dropped, by 0.1 per cent. Pharmaceuticals The Tamil Nadu Chemists and Druggists Association (TCDA) has announced that the MRP (maximum retail price) on drugs manufactured after October 2, 2006 will be inclusive of taxes in line with the union government's order dated June 26, 2006. Meanwhile, medicines manufactured on a prior date would continue to quote MRP without including local taxes, which could create confusion among customer, as these stocks are likely to be on the shelves for three to six months. Recently, 11 top manufacturers have cut prices on 886 branded drugs but this will substantially impact the buyers since these account for just 1-2 per cent of the all-India pharmaceutical sales, which is estimated around Rs 50,000 crore per month. Automobiles Helped
by the festive season purchases, passenger cars and motorcycles sales have
seen double-digit growth during October 2006 at 16.34 per cent to 92,383
units and 13.16 per cent to 47,994 units, respectively. Motorcycles sales
during the month have stood at 7,05,467 units (6,23,432 units), up by
13.16 per cent while scooter sales have continued to be on the decline at
9.75 per cent to stand at 84,680 units (93,830 units). Meanwhile,
commercial vehicle sales during October have been 38,554 units (31,663),
up by 21.76 per cent. The growth in the commercial vehicle sales has been
driven by medium and heavy commercial vehicles, which have clocked a
healthy 27.68 per cent growth at 22,183 units (17,373 units). InfrastructureOverall
A hike in crude oil production coupled with high refinery and power generation growth has propelled the overall infrastructure growth to 9.9 per cent in September 2006 compared with 6.3 per cent during the same month of the previous year. Cumulatively, the six core industries have registered a growth of 7.3 per cent in April-September this year as against 6.1 per cent in the corresponding period last year. Petroleum,
Petroleum Products and Natural Gas The
government is expecting about $ 1 billion of investments in exploration of
gas trapped below coal seams in the areas offered recently to developers
under the third round of coal bed methane (CBM-III) bidding. Contracts for
9 of 10 blocks offered under CBM-III have been signed by the government
with three consortia, namely, the one led by the Anil Ambani group’s Ethanol The supply of ethanol-blended petrol is set to start across the state of Tamil Nadu with the distilleries and oil companies agreeing on ethanol pricing. According to sources, they have agreed on a base price Rs 21.50 a litre of ethanol for a three-year period and the distilleries have been asked to supply ethanol with immediate effect; previously, they were paid Rs 18.75. Over the next three years, the distilleries will supply 5.8 crore litres of ethanol a year. Initially, distilleries connected to five sugar mills — Thiru Arooran Sugars, Dharani Sugars, Rajshree Sugars, Kothari Sugars and Sakthi Sugars — will supply the ethanol. In March 2007, E.I.D. Parry is also expected to commence supply and from July 2007, two cooperative sugar mills in Tamil Nadu are expected to have ethanol production facilities, when they will also start supplying. Together they will meet the ethanol requirement in Tamil Nadu for the gasohol programme. The programme was earlier taken up in fits and starts because of problems in ethanol availability and pricing and also because of limitations in the quantity of ethanol available the programme being restricted to a few districts in south Tamil Nadu. This time the contract is for a three-year long period with oil companies having a long-term plan and, hence, the ethanol suppliers having an assured market and a stable price. SIt is expected that sufficient quantity of ethanol will be available to cover the entire state under the ethanol-blended petrol, gasohol programme. Railways Even
though the railway ministry has decided to fund the dedicated freight
corridor project on its own, it is grappling with the problem of financing
about 268 projects which are estimated to cost around Rs 54,000 crore. The
projects, which consist mainly of laying down new railway lines and gauge
conversion, are found to be too unprofitable for the ministry to complete
on its own. The reluctance of the ministry to do so is evident from the
fact that some of them are lying unfinished for over 20 years. The
ministry is of the view that it can only take up projects that have a high
rate of return. In a last ditch attempt, the ministry has now approached
state governments to prioritise these projects and to partly fund them on
their own. However, official sources admitted that the response of state
governments to the proposal has not been very encouraging. So far, only
six states — Jharkhand, Karnataka, Tamil Nadu, Haryana, Uttaranchal and Aviation The
civil aviation ministry has expressed reservations about joining the open
skies agreement of the Asean by 2010, mainly on the grounds that it could
act against the interest of domestic public and private airlines. The
Ministry has said that if at all India were to get into such an
arrangement with the Asean, it should be considered only for flights to
and from each of the countries of the regional bloc, and that too only
after 2015. Most of the Asean countries plan to follow an open skies
regime from 2010 and have invited InflationThe annual point-to-point inflation rate based on wholesale price index (WPI) rose by 5.09 percent for the week ended October 28,2006 as compared to 5.41 per cent in the last week or at a lower rate of 4.75 per cent during the corresponding week last year.
During the week under review, the WPI remained unchanged at 208.4 the same as in the previous weeks’ level (Base: 1993-94=100). The index of ‘primary articles’ group, (weight 22.02 per cent), increased by 0.2 percent to 213.3 from its previous week’s level of 212.9, mainly due to increases in prices of ‘food article like condiments and spices; mutton, fish marine, eggs, barley and ragi. The index of ‘fuel, power, light and lubricants’ group (weight 14.23 per cent) remained unchanged at the last week level of 329.5. The index of ‘manufactured products’ group declined by 0.1 per cent to 179.7 from 179.8 during the week under review thereby registering a growth rate of 0.1 per cent. Food Products, Textiles, Basic metals and alloys and Machinery and machine tools prices rose, the decline in chemicals and chemical products and non-metallic mineral products offset it to some extent. The latest final index of WPI for the week ended September 02,2006 has been revised upwards; as a result both, the absolute index and the implied inflation rate stood at 207.1 and 5.34 per cent as against their provisional levels of 206.0 and 4.78 per cent, respectively. Banking The RBI, in a
recent draft circular has said that banks must not hold more than 10 per
cent stake in a deposit-taking, non-banking financial company, however,
housing finance companies have been exempted. The draft circular, which
aims to plug loopholes in existing norms, will affect the operations of
NBFCs owned by Citibank, GE Capital, DBS and Societe Generale. In its revised
draft guidelines on the priority sector lending, the RBI has given broad
classification of the sectors, which would be included under the purview
of priority sector lending. The priority sector now will broadly comprise
of agriculture, small-scale industries, small business/service
enterprises, micro-credit, education loans and housing loans. As against
the earlier requirement of classifying all housing loans up to Rs 15 lakh
under priority sector lending, the draft guidelines said the loans up to
Rs 15 lakh for the construction of houses by individuals would be
considered. Meanwhile, the regulator has also introduced a new segment of
micro credit, which would include provision of credit and other financial
services of small amounts not exceeding Rs 50,000 per borrower to the
rural, semi-urban, urban areas and which would enable in improving the
standard of living of poor. Further, the release said that the priority
sector lending target and sub-targets for all banks would now be linked to
adjusted net bank credit or credit equivalent of off-balance sheet
exposures, whichever is higher, as on March 31 of the previous year.
Adjusted net bank credit would be calculated as net bank credit plus
investments made by banks in non-SLR bonds held in HTM category. In a bid
to augment this, the outstanding FCNR (B) and NRNR deposits balances will
no longer be deducted for computation of Net Bank Credit for priority
sector lending purposes. These guidelines also take into account the
revised definition of small and micro enterprises as per the Micro, Small
and Medium Enterprises Development Act, 2006. The formation
of an alliance among country’s two large size bank and IDFC has suddenly
boosted the domestic syndication for infrastructure market. The alliance
among Bank of India, Union Bank of Financial MarketsCapital
Markets Primary
Market The
initial public offerings (IPOs) of two new real estate companies --
Parsavnath Developers Ltd (PDL) and Lanco-Infratech Ltd (LIL) -- whose
offer closed on Friday, have been oversubscribed. PDL has received bids
for more than 201 crore shares as against 3.32 equity shares on offer.
This, analyst says is primarily driven by robust demand from overseas and
other institutional investors and LIL has received bids for over 52 crore
shares against the offer of 14.44 crore equity shares. Secondary
Market The
BSE Sensex rose 164.57 points (1.25per cent), for the week had settled at
a lifetime high of 13,295.36, while the S&P CNX Nifty rose 36.30
points (0.95per cent), also to settled at a lifetime high of 3,841.65. On
10 November, the Sensex struck an all-time high of 13,303.85, while the
S&P CNX Nifty touched a high of 3,842.40, in intra-day trade. The
Sensex rose 56.10 points, to 13186.89 on 6 November following buying
demand for index pivotals. Profit-taking struck and the benchmark Sensex
declined 30 points to 13,156.66 on 7 November. Sensex lost 84.15 points on
8 November and ended at 13,072.51, on selling pressure in index pivotals.
Concerns over Indo-US relations following Democrats wresting control of
the House of Representatives from President George W Bush's Republican
Party in Congressional elections, hit the Indian market that day. Sensex
resumed its winning streak, gaining 64.98 points on 9 November, to
13,137.49 as buying resumed. The Sensex surged 145.42 points, to
13,295.36, on 10 November, on strong buying demand in banking and oil
& gas stocks. Strong industrial output data and benign inflation
figures boosted the market that day.Market breadth has been intermittently
negative despite key indices making new highs nearly every session since
last one week Derivatives
The spot Nifty closed at 3834 on Friday’s high-volume action in the cash markets. Derivatives volumes spiked as did open interest. The November Nifty future was held at 3842, December at 3884.5 and January at 3847. There are high levels of OI in all three contracts and it’s extremely unusual to have positive carry across the series. Stock futures far outrun stock options in volumes and open interest. This means unfortunately that our ability to create hedged stock-derivatives positions is low. You have to take a view on the basis of technical factors and gamble on that. Government
Securities Market Primary
Market Under
the weekly T-Bill auctions, the RBI mopped up Rs.1188.74 crore and Rs.2000
crore through 91-day T-Bill and 364-day T-Bill. From this, the RBI raised
Rs.488.74 crore and Rs.1000 crore under the Market Stabilisation Scheme
(MSS) through 91-day T-Bill and 364-day T-Bill respectively. The cut-off
yields for the 91-day and 364-day T-Bill were 6.6462 per cent and 6.9939
per cent respectively. Eleven
state governments have announced the sale of 10-year State Development
Loans (SDLs) for an aggregate amount of Rs.2,431.23 crore through a yield
based auction using multiple price auction method on November 16, 2006. RBI
has fixed rate of interest on the FRB 2012 applicable for the year
(November 10, 2006 to November 9, 2007) at 7.04 per cent per annum. Secondary
Market With
easing of inflation rate, the weighted average YTM of
7.59 per cent 2016 bond has been 7.5979 per cent
on Nov 10, 2006 as compared to 7.5995 per cent on Nov 03, 2006. The
1-10 year YTM spreads decreased by 1 bps to 61bps. Finance
minister P Chidambaram said there is no need for an immediate hike in
interest rates by public sector banks. “On interest outlook, liquidity
is quite comfortable and because of rebalancing of portfolio I don’t see
an immediate rise in interest rates,” the minister said at the Economic
Editors’ Conference on Tuesday. He reiterated that some sectors like
real estate, personal loans, credit card have seen rapid credit growth.
“Rebalancing does not mean that interest rates would need to be
increased,” he said, adding that banks need to clip credit flow into
some sectors and redirect them into some others, especially like industry,
services, agriculture and small and medium enterprises. Chidambaram
pointed out that credit growth has to be moderate, while deposit growth
has to increase. It may be noted that several banks have indicated that
rebalancing could push up interest rates in the next few months. He added
that most banks would achieve their credit target of 40per cent to the
priority sector. The
Central Board of Trustees failed to decide on the rate of interest for the
Employees Provident Fund (EPF) as they did not have enough details about
the incomes and available surplus fund. Despite
fall in the international oil prices in recent times, Rakesh Mohan, deputy
governor, Reserve Bank of India (RBI), has maintained that the incomplete
pass-through of rising oil prices, particularly LPG and kerosene, has kept
inflation under check. The other factors, namely declining intensity of
oil usage, higher competition and stable inflation expectations, have also
controlled inflation. At
the address on ‘State of Bank
of England raised the official bank rate paid on commercial bank reserves
by 25 basis points to 5 per cent. Bond
Market HUDCO
has tapped the market to mobilise Rs 200 crore through issue of bonds by
offering a coupon of 9.05 per cent for 10 year with call option at the end
of 3rd and 5th years. Foreign
Exchange Market The
rupee-dollar exchange rate has appreciated from Rs 44.84 on November 3 to
Rs 44.45 on November 10. The six-month forward premia closed at 1.77 per
cent (annualized) on 10 November, 2006 vis-à-vis 1.98 per cent
on 03 November, 2006. Commodities
Futures derivatives Forward
Markets Commission, the commodity market regulator, has allowed National
Commodities and Derivatives Exchange (Ncdex) to relax quality norms for
urad futures to ensure better delivery of the contracts.
The relaxation on urad contract was meant to align the running
futures contracts with the available quality in physical markets, Ncdex
sources said. “There has
been no change in basic quality for the urad future contracts. However,
some parameters have been relaxed to allow smooth delivery of available
quality in the physical market,” they added.
FMC’s approval was given to Ncdex after the exchange had sought
permission to allow delivery of a slightly inferior quality of urad
variety available in the physical market.
In fact, the urad crop that has started arriving in the market had
got affected due to unprecedented rains in the major producing state of After
the relaxation of delivery specification for urad futures on National
Commodity and Derivatives Exchange (Ncdex) by the Forward Markets
Commission (FMC), the focus now is on the chilli November contracts, which
will mature on November 20. Traders
fear that chilli stocks at the Ncdex-accredited warehouses are of inferior
quality. A fortnight ago, when the trading at Ncdex had come to a halt,
owing to technical glitches, chilli, along with pepper, was in the news.
Chilli
futures prices had dropped by more than 20 per cent compared with those of
the spot market. The news of inferior quality of chillies had triggered
the decline in prices. It is the responsibility of the exchange concerned,
Ncdex in this case, to ensure that the quality of the commodities as
specified in the contracts is available for delivery, said a trader.
Recently, when an Ncdex team had visited “We
took this decision after long deliberation and this will be an exceptional
case,” said Prices of urad, chana and tur futures have fallen about 5 per cent, 12 per cent and 20 per cent, respectively, since Diwali. The commodities’ spot prices, too, have seen a declining trend, primarily owing to lack of demand. Chana prices have declined mainly on lack of demand and expected increase in rabi production. In the spot market, chana prices have dipped to Rs 2,900 a quintal level from Rs 3,300 a quintal during Diwali. The rabi acreage is estimated to go up from 11 lakh hectare last year to 16 lakh hectare, and there is a likelihood of good crop size. Rabi crop of chana is expected to arrive from January. Post-Diwali,
urad prices too have declined about 4-5 per cent – both in the futures
and spot markets – owing to low demand from traders after the festive
season as well as increased arrivals in Considering
the improved supply position of pulses, Maharashtra has decided to
increase stock holding limits for pulses for wholesalers from 50 tonne to
200 tonne and, in the case of retailers, the stock limit has been
increased from 2 tonne to 5 tonne, said a senior state government official
from the civil supplies ministry. He
said the increase of 200 tonne is for wholesalers in big cities such as
Mumbai, Pune and Multi
Commodity Exchange of India (MCX) is all set to launch spot trading before
December 14. “The spot exchange, under the title of the National Spot
Exchange for Agriculture Produce (NSEAP) and headed by Anjani Sinha, will
commence official trading this year, to begin with, in three states –
Rajasthan, West Bengal and Kerala,” MD and CEO Jignesh Shah said.
“However, if the December 14 deadline cannot be met, the trading will
start only after January 14, 2007, as this period (December 14, 2006 to
January 14, 2007) is considered inauspicious to start any work or
service,” he added. The
NSEAP was proposed to be set up at an investment of Rs 50 crore to effect
a co-relation between spot and futures trades with a view to bringing all
7,500 mandis on to a single platform.
While MCX holds around 5 per cent stake in the NSEAP, the National
Agricultural Co-operative Marketing Federation has invested Rs 50 lakh in
the spot exchange. Financial Technologies holds the remaining stake.
The new initiative of MCX comes at a time when the world has
started recognising the country’s technology and commodity power.
Meanwhile, Shah has been nominated for US-India Businessman of the
Year for 2005-06. The
award will be conferred on him by the Senator Hillary Clinton on November
15 in Corporate SectorThe corporate sector has posted robust growth during the first half (April-September) 2006. A study carried out by The Financial Express of 762 companies shows the aggregate sales have risen by 30.1 per cent to Rs 5,64,295 crore from Rs 4,33,848 crore. Other income of these companies also has increased by 23.1 per cent to Rs 24,784 crore. On the profit front, net profit has grown by 31.2 per cent to Rs 76,000 crore from Rs 57,909 crore. Profit after tax (PAT) to sales ratio has risen from 13.35 per cent during April-September 2005 to 13.47 per cent. Companies like Hindalco Industries, Bharti Airtel, Mahindra & Mahindra, Hindustan Zinc, National Aluminium Company Limited have reported healthy financial performance. According to Society of Indian Automobile Manufactures (SIAM), the total domestic sales of passenger vehicles, commercial vehicles, two and three-wheelers have increased by 16 per cent to 58.7 lakh units during April-October 2006 from 50.7 lakh units over the same period a year ago. Exports have grown by 27.8 per cent to 6 lakh vehicles.
Festival
season, coupled with discounts and various auto-finance schemes have
helped the passenger car market to register a double-digit growth of 21.8
per cent in April-October 2006 at 5.9 lakh units from 4.9 lakh units over
the same period a year ago. Among the various categories, commercial
vehicle segment has recorded the highest growth rate of 34.3 per cent
during the April-October 2006, by registering total sales of 2.44 lakh
units against 1.82 lakh units. Table 2 show volume growth of several companies for the month of October. All the companies have registered a healthy increase in total sales. In the two-wheeler segment, Hero Honda being the leader has registered satisfactory sales performance in domestic and exports front.
Tata Motors has reported a total sale of 43,540 vehicles (including exports) for October 2006, a growth of 5.6 per cent over 41,219 vehicles sold in October 2005. The company’s sales of commercial vehicles in October ‘06 in the domestic market have stood at 23,354 units, an increase of 18.6 per cent over 19,700 vehicles. Hero Honda Motors, the world’s largest two-wheeler manufacturer, has reiterated its undisputed leadership of the Indian two-wheeler industry with total sales of 3.6 lakh units (including exports), a rise of 20 per cent in October 2006. During the month of October 2006, the company has launched two new models Passion Plus and the New Glamour with alloy wheels. Bajaj Auto has witnessed a significant growth of 76 per cent in exports to 40,148 units in October 2006. GLG Partners, a UK based asset management company, has bought 8 per cent stake in the Aditya Birla group controlled Idea Celluar for around Rs 960 crore. This acquisition of shares has brought down the Aditya Birla group’s holding in the Cellular company to 65 per cent from 73 per cent. Tata
Consultancy Services (TCS) and Satyam Computers, Export SectorThe
commerce ministry is considering a two-stage screening of proposals for
setting up of special economic zones (SEZs). The idea is to limit the
number of cases that are sent to the inter-ministerial Board of Approval
for clearance. An
analysis by the commerce ministry of the top 10 items of trade under the
Free Trade Agreement with The center has approved 32 FDI proposals worth $55.7 million across a range of sectors and involving firms like Volvo, Walt Disney Co. and Honda Motor Co. TelecomKolkata,
the first city in
*These statistics and the accompanying review are a product arising from the work undertaken under the joint ICICI research centre.org-EPWRF Data Base Project. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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