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Autocomponent makers demand sops from Commerce MinAuto Component Manufacturers Association (ACMA) members met the Commerce Minister Kamal Nath on December 22 to ask for sops for the sector. The ACMA has demanded an emergency fund to be setup for auto component manufacturers, reports CNBCTV18, quoting sources.Source: Moneycontrol Top Headlines | 23 Dec 2008 | 8:43 pm RComm eyeing big time rollout of their 2G GSM networkReliance Communications wants to do a big time rollout of their 2G GSM network it was originally supposed to have happened on and around the December 28, the birth anniversary of the founder of the group but sources now seem to suggest that which is likely to happen only after that perhaps in the firstt week of January.Source: Moneycontrol Top Headlines | 23 Dec 2008 | 7:48 pm Investor risk appetite in realty dry but HNIs still activeThe risk appetite of investors in the real estate market has indeed dried up but high networth individuals or HNIs seem to be bucking the trend. Experts say that the HNI money is still very much in the market and developers are not missing the cue.Source: Moneycontrol Top Headlines | 23 Dec 2008 | 5:55 pm Unitech may sell 2640% equity at Rs 6065/sh: SourcesUnitech is looking to sell 2640% of its equity at Rs 6065 per share, reports CNBCTV18, quoting sources. The company is talking to a clutch of investors. Investors are unlikely to pay significant premium over current share price, sources said.Source: Moneycontrol Top Headlines | 23 Dec 2008 | 5:54 pm Tata Nano to come in micro hybrid versionThe Nano is a people\'s car and that\'s why Tata Motors is learnt to be working with component major Bosch to offer a greener and more fuel efficient version of the vehicle. The Nano is likely to come out in a micro hybrid version also.Source: Moneycontrol Top Headlines | 23 Dec 2008 | 5:46 pm Property consultants cut cost to beat eco slowdownThe slowdown in the Indian property market has not only left developers and buyers affected, but even property consultancy firms, who have resorted to cost cutting. CNBCTV18\'s Anumeet Kaur Bisen reports of what cost cutting measures have been taken by these consultancy firms.Source: Moneycontrol Top Headlines | 23 Dec 2008 | 5:13 pm Green cars: technology race still wide open for winning formulaTokyo: As Detroit’s Big Three auto makers flirt with collapse, punished for years of over-dependence on gas guzzlers, the future of the motor industry would seem to belong to energy-conscious rivals such as Japan’s Toyota Motor Corp. and Honda Motor Co. Ltd. Not necessarily, say Japanese auto executives.  Geared for future: Mitsubishi’s i-MiEV electric car is based on a gasoline-powered 660cc mini-car. Andrew Harrer / Bloomberg “So far, the majority of cars still run on internal combustion engines,” Kondo said. “Sure, there’s all kinds of hype about electric vehicles and hybrids and fuel-cell cars, but no one has the breakthrough technology to bring them into the mainstream.” That may seem surprising coming from a company that has, with Toyota, been alone for most of the last decade in offering fuel-sipping, petrol-electric hybrids, seen as the next big thing to replace petrol and diesel-powered cars. To widen that lead, Honda is preparing to launch next spring its low-cost Insight, which chief executive Takeo Fukui has said would mark the true test for hybrid cars as a sustainable business after selling at a loss or at razor-thin margins so far. Kondo’s peer at Japan’s third-ranked Nissan Motor Co. Ltd agrees, saying the most difficult part is mass production—a feat first achieved 100 years ago by Henry Ford with the Model T. “You can’t build next-generation cars cheaply enough without the volumes,” Mitsuhiko Yamashita, Nissan’s executive vice-president in charge of research and development, said. “It’s thanks to Ford’s system that we can sell a lump of steel with all those functions at a relatively low price. The business model doesn’t work with vehicle technology alone.” Volt to the rescue? That should be music to the ears for companies such as General Motors Corp. that are bleeding cash but are not necessarily behind in developing next-generation cars. GM is betting on its Chevy Volt electric car to grab the industry crown back from Toyota and craft a new image as an auto maker capable of producing “green” cars. You can’t build next-generation cars cheaply enough without the volumes Although they have no prototype on the road, the partners are busy signing up municipal and national governments for tax incentives and other programmes to pave the way. But Nissan’s Yamashita acknowledged that no one knows who is leading the field in developing electric cars. Japan’s Mitsubishi Motors Corp. and Subaru-maker Fuji Heavy Industries Ltd are the only mass-market auto makers currently testing electric cars on the road—and still only a few dozen at that. “It’s impossible to tell who’s got the competitive products because they’re all still in the lab,” Yamashita said, adding that even Mitsubishi’s i-MiEV electric car, based on a gasoline-powered 660cc mini-car, was too expensive at an expected price of 2.5-3 million yen (Rs12.8-15.3 lakh). Not so fast Japanese executives said the Detroit auto makers’ financial woes put GM, Ford Motor Co. and Chrysler Llc. at a big disadvantage, noting Nissan faced the same problem as it came close to bankruptcy in the late 1990s and skimped on research and development outlays. “Even if it’s just two or three years, once you fall behind the damage is big and it’s tough to close that gap,” Yamashita said. “You really have to pick your battles and use resources wisely.” Even then, coming up with a winning product is no small feat, and something the Detroit model has had little success with lately. “Detroit has some great technology, but there’s a big difference between the way technology is defined in the US and in Japan,” said Shoichiro Irimajiri, former board member at Honda and US parts maker Delphi Corp., who is now co-chairman of Japanese supplier Asahi Tec Corp. “In the US, it’s all about the invention, the patent,” he said. “But in reality, there are many stages—innovation, application, and applying the technology in an actual, winning product with feedback from consumers. That’s where (the Americans) lose competitiveness.” Honda’s Kondo said producing cars cheaply in itself would require a “revolutionary” technology akin to Ford’s invention in 1908 that made the automobile affordable for the masses. “These past three-four years have been a contest in the technological field,” he said. “I think (the Volt) has some impressive technology behind it, but any product has to be desired by consumers. Those that can’t make products like that will be weeded out in this next stage of competition.” Source: Tech News - Livemint.com | 23 Dec 2008 | 5:04 pm Forging industry hit by eco slowdown, seeks govt helpThe trickledown effect of the economic slowdown is now becoming more evident. A slowing auto industry has knocked the juice out of the forging industry. CNBCTV18\'s Prasad Deshpande and Sumantra Barooah delve deeper.Source: Moneycontrol Top Headlines | 23 Dec 2008 | 4:58 pm Wipro to buy Citi Tech for $127 m in cashWipro is reported to buy Citi\'s India tech arm for USD 127 million for cash. Citi Tech Services is Indiabased captive provider of IT services and solutions. The agreement provides for delivery of atleast 500 millon in service revenue over the period of the contract. The transaction is expected to be closed by March 2009.Source: Moneycontrol Top Headlines | 23 Dec 2008 | 4:51 pm The US will get worse before it gets betterNew Delhi: Joseph E. Stiglitz was awarded the Nobel prize in economics in 2001 for his pioneering research on markets with asymmetric information; his work has helped explain the cirumstances in which markets would work better with selective government intervention. Currently, he is the University Professor at Columbia University in New York. The 65-year-old former chief economist of the World Bank and member of President Bill Clinton’s economic team was in India this week. He spoke to Mint on a range of issues, including the rapidly eroding global economic outlook, the economic strategy of incoming United States president Barack Obama and how the current crisis was forcing a rethink in economic ideologies. Click here to watch video Is the worst over for the world economy? No. We are just in the downward part of the trajectory. I am focusing mostly on the United States, because that is where the problem began and until that problem gets solved the global economy is going to be in difficulties. United States is going to get worse before it gets better. The measures that are necessary to get us out of the downturn have not yet been taken. Everybody is waiting for (Barack) Obama to assume the presidency on 20 January; (the United States) Congress has to pass (the package), he has to sign; and, then the measures have to be actually put in place. That doesn’t happen overnight. So, I think we can see things probably getting worse for the next six months. That means the collateral damage to the rest of the world is likely to endure? Exactly. So, then what is the outlook you see for emerging economies such as India and Brazil? I think the outlook is for a weak economy for a year-and-a-half, two years. I have three observations. Actually your (India’s) economy, in terms of fundamentals, is much stronger. There is an article, just the other day, in the International Herald Tribune, pointing out how lucky you were to have a (Reserve Bank of India) governor like (Y V) Reddy, who was criticized for putting on the brakes. But now everybody realizes that he was doing exactly the right thing. And, that means your banks are in much better shape. Obviously, when the economy slows down there are going to be problems; but their magnitude is so much less because you had a good bank regulator. Also, in the case of India your growth has been very robust; you have been growing at 9%. So you slowdown to 7%, 6%, 5%, it is still growth. In the case of United States we are talking about slowdown (turning) into decline; into a situation where the GDP (gross domestic product) is actually falling. The third observation is that there are lags that typically affect developing countries little bit later than Europe; so the weaknesses of the US economy are just beginning to be felt in many of the developing countries. Because what happens is that some of the effects are indirect; for instance some of the effects are because of commodity prices—commodity prices are falling because global GDP is falling. You, have to first slow down the GDP, before commodity prices start to decline. So, the dynamics of these are often complicated. Would this crisis lend a body-blow to world trade by stoking protectionist trends? No. I have very strongly criticized the WTO (World Trade Organization) that it has been unfair, but it still a rule of law. So yes the United States might want to raise tariffs and before the WTO.... The scope for doing that is much restricted. So, there will be a little bit of adjustments, but it will be relatively little. What is true is that this is not the time to go forward with many liberalization measures. But those were running into problems anyway, because the United States and Europe are not willing to cut back on their agricultural subsidies and developing countries say that unless you do what they promised why should we liberalize more. So, the liberalization agenda has run into difficulties. In a recent interview you remarked that this economic downturn will mark a realignment of the world economic order. Could you elaborate?  Economic realignment: Stiglitz says one needs a stronger role for the government to make sure the rules are such that the market works better. Ramesh Pathania / Mint After the Soviet Union fell, at that time state intervention was held to be the problem in the economy. There were principal-agent problems, misallocation. Now of course people say that it’s deregulation that has gone far. Do you think if state intervention is brought back in as it is being thought of in the US and elsewhere in the developing world, those problems would emerge again and how do we prevent their emergence again? Well I have consistently said that we have to find the third way. The communist system could not work and did not work. In fact I have given an analogy that what 15 September (the day the Wall Street collapsed massively this year) is in many ways to market fundamentalism what the fall of the Berlin Wall was to communism. 15 September marked the moment where it was very clear that market fundamentalism could not work. So I think most reasonable economists have said that we need to find a balance. That’s an ongoing struggle, an ongoing effort. It’s not a simple formula. The problem was that too many people looked for too simple a solution. No government or government does everything. In between is a much harder thing. Because we have to think whether this is a right thing or a wrong thing for the government to do. But in a way, it strengthens democracy because we have to have an ongoing debate on every issue on what is the right role for the state. It’s not just a question of too much or too little but also how it does it and what it does. For instance in the area of regulation, one of the things that I have argued is that we have to regulate incentives. To make sure the incentives are not leading to short-sighted, excessively risky, behaviour. Capitalism of the 21st century is not the same as the capitalism of the 19th century. In the 19th century, the model we had is that of the firms that were owned by a single individual. We had no problems of corporate governance. If he made a bad mistake, he bore the consequences. In the 21st century we have large enterprises, separation of ownership and control. The chief executives don’t own it. They own 1%, 1/10th of 1% or even 5%. So there’s always the problem of their trying to steal the money from the rest of the system for their own benefit. And that’s what has happened in the US and other countries. But a market economy can’t work if people don’t have trust. And so what I have been arguing is that you need a strong role for government to make sure that the rules of the game are such that the market actually works better. Do you think there are cycles of economic learning so that you learn from the past mistakes and dampen the effects of the mistake the next time there’s a crisis? Why is that that’s not in evidence now? We have the example of the Great Depression and now in this crisis we seem to be making the same mistakes. I think there are two reasons. One of the reasons is that memories are short. Part of this has to do with the education system that I have been very critical of. In economics, we don’t teach economic history. And so our students really don’t understand the Great Depression and the lessons to be learnt. There are people who are using the word “the new economy”. Some people said that recessions are things of the past. I don’t know if you remember that in the end of the 1990s people were saying with the services economy we are not going to have any downturn. It seems absurd now but even less than 10 years ago very prominent people were talking that way. I think it is difficult for people, particularly if you don’t study history, if you don’t take an analytic approach.... Because there are changes but you have to figure out what are the similarities and what are the differences that it is often very difficult to take on board the lessons of the past. Your thoughts on one of the Obama proposals: pull up the economy by the bootstraps by investing in a green economy. Is this a smart idea? Yes I do. I think it is absolutely essential. The style of life that has dominated America is not sustainable. And so there has to be a change. There are just no two ways about it. With the growth in India, China, the growth in countries all over the world. They rightly say why should’nt we have the same standard of living that you have. But the planet won’t sustain it. So that means the burden is on the US and Europe to change their lifestyle to reduce their emissions. That has to happen. To change that requires a change, a fundamental change, in the way our society is organized. What does that mean? It means, for instance, not just going to more fuel-efficient cars. That we all agree on. But it is going to things like “how do we change the pattern of living and working?” So we have more people living closer to where they work. Cities with good public transportation systems rather than the car, which has dominated American life for the 60 years. So they are really fundamental changes. So these are big changes in that they require heavy investment in public transportation. If it works, it’ll be a dramatic change in America. It will have, I think, other profound effects on our society. People that live together, interact differently. You create more space for communal, collective action, a sense of community as opposed to when people are living in their own little acres. Scattered over, you weaken the sense of community. So I think there may be some very deep, profound, effects on the evolution of our society.  That’s right and Obama has been quiet strong in saying that we need to have significant cut-backs in the level of emissions relative to the 1990 level. Numbers like 80% cut-backs. Now those are dramatic numbers because remember our economy’s going to be much larger than it was in 1990. So an 80% cut-back in emissions is not going to be feasible unless we have some dramatic changes. Which means that developing countries too have to revisit their arguments which they make as of now based on per capita emissions. That’s right. I mean already the developing countries are contributing about half of all emissions. The general principle is that developing countries should at least be allowed to emit the same amount as the developed countries on a per capita basis. If you were going to issue emission permits you might even say that it’s a property right that we’re creating. How should you distribute the property right? At the very minimum, the standard is equal per capita. Why should the rich get more of this property right? You could argue that they should get less for two reasons. One, they’ve polluted in the past. And secondly, if you were distributing any property right, if you had a new source of property, you would say let’s give more to those who are poor. So the issue of emission rights if we move in that direction of issuing emission rights, the minimum, is equal per capita rights. In many developing countries, economic reforms did not go far. By the time this crisis came, they were still trying to move in that direction. Do you think there is danger from vested interests, lobbies such as the protectionist and other kinds of domestic lobbies that just might stall reforms now that having the state back in is in fashion? What would be the consequences for economic growth? Everybody loves the word reform. I think one has to be very clear that all that the word reform means is change the form. The question is which reforms? And not all reforms are good reforms. Some reforms are always going to be necessary. So, for instance, the excessive deregulation was called a reform. Financial market deregulation was called a reform. That was a reform that had an enormous cost. What I think we ought to be doing is going back to the more fundamental issue that we were talking about earlier: What is the right balance between the government and the market? We need social protections, but we also have to have flexibility and we have to have a dynamic economy. One of the things I think we should be learning is how do we change the way we do things. So, for instance, in the US I have argued that globalization requires a larger role for the state in providing social protection. Companies like GE (General Electric Co.), General Motors, should not be in the business of providing health insurance. The responsibility of providing healthcare should be the role of the government. Somebody who is a good producer of cars is not necessarily a good producer of health programmes. So you can separate the two and you can have a more efficient economy by separating those roles. You are very right that there are special interests who will try to take advantage of this situation to push back on some of the reforms that are important, that are needed. I think the response to that is to come back to this basic issue that we need reforms but we have to think very carefully about what the right reforms are. In the case of trade liberalization, for instance, I always said it does not do any good to move people from low productivity protected sectors to zero productivity unemployment. That does not make any economy more efficient. If you have protected sectors and you have people, therefore of low productivity, you have to move them from low productivity, protected sectors, into high productivity export sectors. To do that you have to have financial markets that actually provide capital to new entrepreneurs. So you have to look at packages of reforms, identify where the problems are and move things. It means you have to retrain workers so that they can move from where they were to where they are going to be more efficient. So you have to think of these reforms in a broader sense … you see in the past too much of this ideology “markets can take care of everything”. So we can get rid of protection and markets will create jobs. A lot of people said that. It did not happen and a lot of people suffered as a result and the economy did not grow. So if you do the other things, yes then you have a package, and that package can make the economy more dynamic and protect people. In this context, take India for example. It has had a fairly good run in the past five or six years. Yet it has accumulated a fiscal deficit of around 8% if you account it properly. This, in spite of reforms since 1991. Now in a time of crisis there are cries for larger spending that can endanger the economy. For a country like India it’s almost impossible to go in for US style deregulation. How does one manage reforms in a place like India? On the fiscal side I would like to highlight a couple of points. One of them is that there is a large need for public spending for instance for roads and infrastructure. One of the difference between India and China is the investment in infrastructure, education, technology and so forth. You can’t have those without tax revenue. Taxes have a cost. But the benefits of spending, if it’s well done, can outweigh the costs. Now one of the problems that India faces is that like many countries there are large elements of tax evasion. Maybe tax avoidance is the right word. People finding ways of escaping taxation. The so-called foreign investment is done through safe havens, secret bank accounts, deliberately to avoid taxation. One has to work to close those kinds of loopholes that would give you more revenue and that will create a more level-playing field, which leads to a more efficient economy. But the bottom line is that you need public spending, you need tax revenues to pay for that public spending and one way or another, you have to get that. Part of the deregulation mantra that has dominated the past 10 years was very much that high taxes depress an economy. Among the fastest growing countries of the advanced industrial countries and the highest performing in terms of wealth and broad measures of well-being are the Scandinavian countries and other European countries that have the highest tax rates. I asked the finance minister of one of these countries that you’re supposed to be a disaster with your tax rates so you should not be able to grow. He said we grow because we have high tax rates. Now what he meant by that was that not everyone loves high tax rates but because they have high tax rates, and fiscal responsibility is the only way they can finance the investments in education, technology and infrastructure that are the basis of their success. So I think this moment where we’re reexamining the role of the state, it’s not just a question of deregulation but this notion that smaller the state, the better. It’s just wrong. Philosophically, the Iraq war marked the end of the Neo-cons, and this crisis is marking the end of the neo-liberals. Are we now preparing for a long bout of Keynesian economics as you have argued that now everybody is a Keynesian? I think everybody now is going to be a Keynesian but there are different kinds of Keynesians. And the debates will be within the Keynesians. Some people will try to use the vocabulary of the Keynesians to re-get the special interest kind of legislation that they want without really thinking about the full depth of what Keynes originally talked about and the variety of thoughts in that framework. Let me give you one example. One of the things that Keynes was very concerned about was the notion of underconsumption, the lack of aggregate demand. We could view, for instance, that people are better off are more likely to save than people who are poor. If you give money to someone who is unemployed or someone whose income is very low, he’s going to spend it. If you give money to someone who is very well-off, he will save a significant fraction. One of the reasons the economy is weak today, I think, is the lack of aggregate demand. This in part is due to the growing inequality in our society. One natural response to this problem is to say, let’s try to redistribute income to those who are less well-off. Let’s try to design policies that create more equality and that will not only be consistent with principles of social justice, but will actually stimulate the economy. This seems to be an obvious implication of being a Keynesian. But there are many people who will not fully adopt this perspective. What do you see for a global currency. Will the dollar continue to be the global currency? I have argued very strongly that we need a reform of the global reserve system. That we need to create a multilateral reserve currency. Keynes talked about this, since you earlier asked if we were we all Keynesians now. If we were all Keynesians, we would be arguing for the creation of this global reserve currency. The dollar-based system is fraying. Right now the dollar is doing a little bit better. Even though the US is the source of the current economic crisis, people still believe the US government guarantee is worth more than a government guarantee from some small developing country. So if you had a choice between having your money in a bank in a developing country with a guarantee or money in a US bank with a guarantee, people say I will trust the American government guarantee. So it’s understandable why in the current context, the money is flowing back to the US. But that’s short-term, but in the longer-term the global economy will recover and the dollar will continue to get weaker given the huge deficits that we have accumulated and that will continue to contribute to global instability. The dollar is not a stable store of value and it will be very difficult to return as a stable store of value. And that’s why in the new world of globalization it makes so much sense to have a global currency. In this issue we have an SDR (special drawing right) of the IMF but its only been done episodically and the last one, the US vetoed. So in some sense what I am calling for is simply the SDR system but on a regular, annual, basis. We could also discuss a number of reforms in the details about how do you allocate the SDRs, how do you provide incentives to people for not to have surpluses, to make sure that we avoid global imbalances. But those are relatively small details that can easily be solved. The interesting thing is that parts of the world are already moving in that direction. There’s the Chiang Mai initiative, which is a mini forum of a global reserve system. It’s now being proposed to expand that to an Asia Monetary Fund. The Bank of the South in Latin America was discussed and its expansion to the global system. My perspective is described in my book, “Making Globalization Work”. anil.p@livemint.com Source: LatestNews-Home - Livemint.com | 23 Dec 2008 | 4:47 pm Marathi poet Mahambare passes away - Hindu
Source: Google News India - Business | 23 Dec 2008 | 4:46 pm HC sets aside appointment of IIT-Madras Director - Hindu
Source: Google News India - Business | 23 Dec 2008 | 4:46 pm Govt issues oil bonds worth Rs 22000 cr - Business Standard
Source: Google News India - Business | 23 Dec 2008 | 4:43 pm Future Group cuts executive salaries by 5%Retail giant Future Group\'s Kishore Biyani is leaving no stone unturned to ensure his ship weathers the economic storm. The group has cut executive salaries by 5%, and initiated several other cost cutting measures. CNBCTV18\'s Nachiket Kelkar and Ashwin Mohan report on the various cost cutting measures taken by the group.Source: Moneycontrol Top Headlines | 23 Dec 2008 | 4:42 pm Satyam barred from World Bank businessMUMBAI (Reuters) - Satyam Computer Services Ltd was barred from business with the World Bank for eight years, dealing a setback to the company just a week after it canned a deal which upset investors.Source: Reuters: Money News | 23 Dec 2008 | 4:41 pm JP Associates: Shareholders upset - Business Standard
Source: Google News India - Business | 23 Dec 2008 | 4:37 pm Confessions of a fund managerDuring October, the Indian mutual fund industry narrowly averted a systemic meltdown of its debt funds. Investors were redeeming their investments in large amounts, and the fund companies were running out of ready cash to honour these redemptions. The root cause of the problem was very simple. The fund companies were running debt funds of various types from which investors could withdraw money at any time. However, investors’ funds were invested in bonds that weren’t easy to redeem quickly. Most such funds kept some part of the assets in instruments that should have been easy to sell quickly. However, when the crisis broke, the normal definition of ‘easy to sell’ also broke down. As businesses started panicking, the volume of redemptions also rose way above normal. In this exclusive interview, the debt fund manager of a large mutual fund house spoke to Dhirendra Kumar, CEO, Value Research about what was happening and how things were managed. The fund manager spoke with complete frankness and honesty–something that isn’t normally possible for someone in his position. In exchange, we’ve promised to keep his identity a secret. Have you ever witnessed such a crisis in your entire professional life?  This time when the systemic liquidity disappeared, it caught our portfolio managers unaware. We were not prepared for the six sigma event. The liquidity crisis was genuine. We had three month to five month maturity portfolios, but our investors could have taken the money out probably on a daily basis. Was this an error? Yes. Could we have predicted this? The answer is no. First it was a crisis of liquidity. Then, it became a crisis of confidence. The latter hurt more than the former. Without any basis, people were writing reports that mutual funds are going to default. However, because of the regulator’s support and the systems’ support we have all survived and no mutual fund has defaulted on any obligations. When did you realise that you were being hit by a crisis? Probably around the end of September. Despite advance tax payments ending on September 15, redemptions continued. By the end of September our cash balances started dwindling and it hit us that we were in a crisis. What did you do? We hit our lowest when the people we trusted, were friendly with...within the corporate treasury did not stand by us So selling the securities and existing cash balances helped us survive to some extent. Even after these measures we couldn’t see any slow-down in redemptions. Then we had no option but to solicit regulatory support. Could you not have had a word with your investors? Of course we did. But what do you do when irrationality prevails? Some of our investors whom we serviced for a decade and with whom we are completely transparent and disclose our portfolios totally acted quite foolishly. They admitted that they were actually comfortable with our portfolios but someone higher up decided to pull out because of the bad publicity. One would not expect such an irrational decision from a non-retail investor. The top brass didn’t have any problem except that they wanted to avoid bad publicity. I’ve heard of a big corporate which redeemed from a Fixed Maturity Plans (FMPs) which had an all-Certificate of Deposit (CD) portfolio and transferred the money into the very bank whose CDs they were! So what was the corporate governance standard in this company, which takes a loss of capital but moves exposure to the same bank eventually? This is completely absurd. So what has been the real loss to investors? The real loss to investors has been on the FMP side. In a liquid fund they got away at the NAV which protected the capital and return. I think the FMPs are the only places where the investors have reacted in panic and taken away their money even at a loss. What is really unfortunate is that the actual loser was the retail investor, because this same set of investors would now need a lot of conviction to enter back into a mutual fund. They won’t realize their mistake. That it is their stupidity that has resulted in the losses. Instead, they blame the mutual fund. That is because the retail investor is provided with an indicative return when he invests in FMPs. True. We have indicated a return based on certain portfolios, but that return holds only on maturity. It is not there for in-between periods. If the market has moved against us, then in no way can I protect the investors who are redeeming right now. I need to be fair to the investors who are leaving me and the investors who are staying back with me. What was worst point in the whole crisis period? Personally and professionally, the worst part was when a lot of corporates opted for the path of least resistance and withdrew money knowing fully well, that each of their redemptions would take us to the crisis point. The moment in time when we hit our lowest was when the people we trusted, were friendly with and had a rapport within corporate treasury who did not stand by us. All we wanted was for them to make a rational decision and stand up for us in front of their bosses. They could have done that. They could have told their higher-up that they did not have a problem with this mutual fund. They could have shown the portfolio, revealed our track record. We always worked for them and never against them, they knew it. Our fund managers actively advised the customers to shift from income funds to liquid funds as the interest rates were rising. We even put their interest ahead of our fees. Yet, when the rubber hit the road, they just shrugged their shoulders and took the convenient way. Was there anything else you could have done? I still wonder about that. I have tried to figure out what else we could have done to give them the confidence. Who initiated the idea of RBI support? I am not privy to all these things. But I think all of us have some contact on a personal and professional level within Securities & Exchange Board of India (SEBI), Reserve Bank of India (RBI) and Ministry of Finance. And each one of us used those contacts to pass the information on that the pressure was daily building up. How did they move? Eventually, Association of Mutual Funds in India went (AMFI) to SEBI, and the two approached the RBI to get the nitty gritty worked out. The regulator behaved like a responsible parent. They helped us! They worked overnight, they responded quickly and that’s why we all survived. If there was any delay in regulatory support we would have been finished. All this was operationalised in less than 48 hours. What has been the learning with regard to your investment portfolios? Our investment portfolios now would be geared for six sigma event not just for normal day-to-day operations. We will have to restructure our portfolio in a manner that the maturity mismatches come down to bare minimum. We have to ensure that mark-to-market of our portfolios are around 90 or 30 days, instead of 182, so that the risk is transferred to the client. There is no way now the asset management company will stand as a guarantor, taking all the risk and giving all the returns. The risk and return both would be passed on to the customer. Then do you see investors, who have flocked to banks, coming back? Eventually they would. We were giving them value. We were giving them any-day liquidity vis-à-vis a minimum 7-seven day lock-in by the banks. We were giving them comparatively better returns for most part of the year, compared to the banks. That is essentially because our intermediation cost is much lower. Surely some people will come back but that will take some time. And then they will have to come back on newer terms and conditions which may not be as favourable to them as before. They will have to get used to the new regime, which will be lower returns with the attached risk. The purity of product structure will make our future products less attractive than the current products, as we will be bundling the risk and the return together. All along, the returns were passed on and risk was absorbed by the AMC. Will the changes translate into some products getting disbanded? We probably have an extended range of products. They were created to cater to the niche requirement of the customers rather than the mass requirement of the customers. Now, as the focus shifts back to mass rather than the niche, the products would disappear. We have a liquid fund and a liquid plus fund. But do we really require all the plans? We were rolling out FMPs for 1 month, 3 months and 6 months every other day. We won’t be doing that again. In FMPs, we were providing customers with an exit option. Going forward that may not remain. The FMP is a close-ended fund so you come here with a lock-in premise. I cannot allow premature withdrawals. So a lot of the impurities that have got into the system will clear out. How has this entire crisis changed the perception of your fund house towards investors? We were dealing with corporate treasury giving them the best of service, the best of returns and taking all the risk on our own account. And when the crisis came, they walked away. On the other hand, we have retail investors who lost 50 per cent of their money in the equity crash and are still giving us money. Somewhere the industry focus would shift from AUM gathering to getting quality investors in. So there will be a change in the business model? It would have to change. Till now we were using the third party network to reach our customers and we were garnering larger AUM with a select set of customers and using that as income to fund the retail model. Our strategy was pull based where we thought our transparency, disclosure and professional expertise would pull money in the fund. And on this front we have succeeded reasonably, but not up to the scale that we would have liked to. The penetration of the mutual fund industry, compared to the insurance industry, which came later, is very low. Moreover our ability to retain the customers for a long period of time is quite pathetic. Has thinking started at the owners’ level that this is not the business worth doing? Definitely. Most AMCs have got huge support from their sponsor, that’s why they are surviving today. Whether the support came in the form of losses to be absorbed by the AMC or whether the support came in the form of investments in liquid or mutual funds. But without the support of the sponsors no one would have survived. The sponsors put money at 9 per cent or 10 per cent of return when their own cost of borrowing was 15 or 16 per cent. And now they are realising that this business does not make sense. They would rather run a business that is profitable than one which is going to get valued on percentage of AUM. Were other mutual funds hit by the external crisis or was it the result of extreme internal indiscipline? To be fair, barring one or two mutual funds where the credit side of the portfolio is debatable, all the mutual funds have shown an exemplary track record and credit worthiness. Most have not erred on the maturity side also. It is not that in our liquid fund we have got a 10-year maturity vis-à-vis say one-day liability. However, when the crisis came the difference was sponsor support. What has happened with fund houses like Lotus and Mirae Asset? In the case of Mirae Asset, the sponsor was not willing to absorb the loss. In Lotus’ case, probably the same thing happened. Since they were not willing to take the loss or provide liquidity, they had no option but to sell out. All mutual funds today are surviving and prospering based on sponsors’ support. Write to us at businessoflife@livemint.com *************************** CONNECT Know DLF Pramerica Mutual Fund, a joint venture between US life insurance major Prudential Financial (PFI) and real estate company DLF, has received an “in-principle approval” from Sebi to start its mutual fund business in India. In November, brokerage India Infoline received an in-principle nod from Sebi for sponsoring an MF. Ironically, October recorded a massive liquidity and confidence crisis that sent fund houses reeling. The massive redemptions in liquid funds, coupled with a tumbling equity market, resulted in assets under management (AUM) crumbling. Reliance Mutual Fund lost Rs15,400 crore in its assets from the previous month (September), ICICI Prudential Mutual Fund, Rs10,594 crore and HDFC Mutual Fund, Rs6,519 crore. Invest How good are balanced funds? An intrinsic element of such funds is that they protect the downside in a volatile equity market since the debt component acts as a cushion in a market downfall. When we looked at the returns of all the open-ended, equity-oriented balanced funds for the last bull phase (15 May 2006-8 January 2008) and in the ongoing bear phase (8 January-25 November) we noticed that some of them failed to do so. The best performers in the bull phase—ICICI Prudential Child Care Gift, Escorts Balanced, LICMF Balanced, Tata Balanced—which turned in an average return of 65% have emerged as the worst performers in the rough phase of the market. Do IGilt funds are MFs that invest in government securities (G-Secs) including Union government dated securities, state government securities and treasury bills. Investments in G-Secs fetch the highest level of safety as they are immune to default. The only risk here is the interest rate sensitivity since they are marked to market. So if the interest rate goes down, the price of the security rises and vice versa. This is because if the coupon rate of the bond is higher than the current rate of interest, people are willing to pay more for such a bond. The recent cut in CRR and repo rate has favoured gilt funds since it made the mark-to-market valuations of G-Secs and corporate debt attractive. Source: LatestNews-Home - Livemint.com | 23 Dec 2008 | 4:17 pm Pack a travel cover tooIt’s that time of the year again. With holidays round the corner, most families will find themselves planning trips in India and abroad. Students, meanwhile, will be negotiating with foreign universities, with their session beginning early next year. But before you pack your bags, ensure that you have adequate travel insurance to meet medical emergencies and flight inconvenience. You can buy it for leisure or business trips abroad, domestic travel, or studying abroad. The Cover  These covers are available for tenures of one month to a year and can be taken as single trip or annual multi trip covers. M. Ravinder, head (underwriting), Tata AIG General Insurance Co. Ltd, says: “A single trip cover is valid for the time you are abroad. You can move from one country to another, internationally, and still avail the cover. If you buy a multi trip cover, which comes for one year, you could travel between India and abroad for a year, but for a maximum of 30 days per trip.” Under the health cover, remember that inclusion of a pre-existing disease is negotiable. Ravinder says: “We don’t exclude all pre-existing diseases. For instance, a pre-existing disease on account of which there has been no hospitalization for the last five years is included.” ICICI Lombard’s overseas travel insurance plans cover pre-existing diseases. Says Sudhir Menon, head (travel insurance), ICICI Lombard General Insurance Co. Ltd, “We cover the medical cost of pre-existing diseases under ‘emergency and life-threatening conditions’. In such cases, we refer to the medical reports to determine the nature of the disease.” Travel insurance provides strong assistance services such as delivery of medicines at the doorstep or a doorstep check-up, which are otherwise difficult Domestic insurance: This category offers pretty much the same covers. But these are for shorter durations, ranging from one day to three months. Domestically, travel insurance policies may make little sense if you already have health insurance and personal accident policies. However, there is merit in looking at them if you are travelling to unfamiliar places and have valuable baggage to carry. According to C. Chandrasekhar, chief marketing officer, Apollo DKV Insurance Co. Ltd, a stand-alone health insurance firm, “A travel insurance provides strong assistance services like delivery of medicines at the doorstep or a doorstep check-up by a physician, which are difficult in a standard health insurance or accident policy.” Student insurance: A student can take insurance in India or avail the cover given by the university he enrols in. In addition to the features of a standard travel insurance, a student-specific cover includes add-ons, such as the study interruption cover that pays for your advance tuition fees in case your studies get interrupted by a medical exigency. The sponsor protection add-on pays your remaining fees in case of death or permanent disablement of your sponsor. The compassionate visit add-on pays for the return ticket and boarding of a family member if you are hospitalized for more than a week, besides giving third-party cover. It is available for a year and is renewable. You can also take the bail bond that pays out your bail in case you are jailed for a bailable offence. The Cost The cost of a policy would depend on the range and extent of coverage. The range would define the covers you take and the extent would mean whether trips to the US and Canada are covered. Covers that come with add-ons are usually more expensive. Premiums would also depend on the period of travel and your age. To give you an idea, Travel Guard Gold by Tata AIG offers medical expense reimbursements up to $200,000 (Rs99.4 lakh), accidental death and dismemberment benefit up to $20,000, personal liability benefit up to $200,000, baggage delay benefit up to $100, checked baggage loss benefit up to $1,000, passport loss up to $250, trip delay benefit of up to $100, hijacking benefit of up to $500 and emergency cash advance of up to $1,000. All this at a premium of Rs2,044 for a 30-year-old on a single one-month trip to countries, including the US and Canada (see Travel Safe). In its lower silver variant, the medical reimbursement is reduced to $50,000 and does not have covers such as trip delay, hijack cover and hospital cash benefit. It comes at a premium of Rs1,667. If you go for the platinum cover, it has a medical reimbursement of up to $500,000 at a premium of Rs2,356. How to choose a policy Cost and convenience should help you choose a policy that suits you best. Ravinder says: “For travel to, say, Thailand and Singapore, the medical costs are comparable, so a $50,000 cover would be sufficient. However, for most other countries, a medical cover of $200,000 would be required.” While covers such as baggage loss and trip delays are reimbursable, most health covers are cashless. Says Sreeraj Deshpande, head (underwriting), Bajaj Allianz General Insurance Co. Ltd: “The policyholder needs to get in touch with us through one of our call centres. We then coordinate with the hospital. Depending on his medical records, we agree to pay the hospital up to the sum insured over and above the deductible that the policyholder has to pay.” Buy in India: For students, buying a travel insurance plan in India works out a lot cheaper than the ones offered by their respective universities. Deshpande says, “The policies there would be about three times more expensive than in India.” Another advantage of buying in India is that the policy will cover you from the minute you check in and board the flight. A foreign insurance policy would cover you once you have registered at the university. However, do check with your university whether it accepts a policy bought in India. Remember, your packing is not complete without travel insurance. Travel Safe This is an indicative table of what is on offer under each category of travel class. The premiums will differ based on factors such as age, country of visit, number of days and the benefits opted for. Each policy would have further sub-limits Domestic Benefits: Emergency medical evacuation benefit, cash for accidental hospitalization, personal liability, accommodation charges due to trip delays, loss of ticket, family transportation, baggage delay Premium: Rs100-500 (for up to 30 days) We like: Policies by Bajaj Allianz, Apollo DKV and Tata AIG General Insurance International biz/leisure Benefits: Emergency medical evacuation, baggage delay, baggage loss, loss of passport, personal liability, trip delay, hospital cash, emergency cash advance and automatic extension of the policy up to seven days Premium: Rs1,000-5,000 (for up to 30 days for a 30-year-old male traveller) We like: Policies by PSUs and private players such as Iffco-Tokio, Reliance General Insurance and Royal Sundaram International student Benefits: Study interruption, sponsor protection, accidental medical expenses, compassionate visit by a relative, visit by the student to India, baggage loss, personal liability and bailable bond Premium: Rs 8,000-25,000 (one-year policy) We like: Policies by PSUs and private players such as Tata AIG and Bajaj Allianz Note: The benefits are in addition to health insurance and personal accident cover Connect Know Company deposits give higher interest rates than banks. Income tax is not deducted at source on deposits up to Rs5,000 and on interest income up to Rs5,000 in a financial year. These deposits have a higher risk of default. As they are unsecured, you cannot sell the documents to recover capital if the company defaults. Do not invest in companies with a credit rating below ‘A’ and spread your deposits across a large number of players. Avoid companies that do not pay dividends regularly. Companies that try to entice depositors through high interest rates are risky. Go for short-term deposits of six months to a year. - Bindisha Sarang Do Should the weakening stock market worry investors who take the Ulip route to equities? The product is best for generating wealth over periods of not less than 10 years. If you are holding Ulips with full exposure to equity, stay invested that way till maturity is around five years away. Ulips allow investors to switch their corpus to non-equity options such as debt or balanced funds. If the fund value has eroded over the last six months or so, stick to the equity option. If you have been putting premiums in the debt fund option, now is the time to move into equity. You can do this in two ways—by moving the entire corpus in one go or by transferring smaller amounts at regular intervals. - Sunil Dhawan Track You should always check out your liquid fund’s credit quality. Monthly portfolios of existing schemes (if you are invested in liquid and liquid-plus schemes) are available on the mutual fund’s website. Alternatively, you can ask your agent to obtain for you a monthly factsheet and have him take you through the portfolio’s credit quality if you are unable to decipher these details yourself. Avoid schemes that have a large holding in assets below an AA or an equivalent credit rating. If you are invested in FMPs, make sure you read the offer document. Some FMPs clearly say in the offer documents that they will avoid low-rated scrips. Look out for such portfolio credit-quality-related statements in the offer document. For fresh investments, stick to pedigreed FMPs and then only if you are willing to wait till maturity. - Kayezad E. Adajania Invest With the markets down, bank fixed deposits for terms less than five years with a 9.6-10.3% interest rate look attractive. But are they? No, if your income is in the 20% or 30% tax bracket. The 9-10% rate advertised is only the pre-tax return. You need to look at the post-tax return and this is where FDs lose out, especially for those in the highest 30% tax bracket. Interest income from FDs is taxed at the marginal rate, with no exemptions or deductions available unless it is a notified five-year FD. So, for someone in the 30% tax bracket, the 10% return from an FD becomes 7%. If you invest your money in an FD, your real return would be negative. -Veena Venugopal The views expressed on this page are not the newspaper’s opinion and are provided for information purposes only by Outlook Money. Readers are requested to do their own research. Neither Mint nor Outlook Money will be responsible for any actions and outcomes based on information provided here. Write to us at outlookmoney@livemint.com Source: LatestNews-Home - Livemint.com | 23 Dec 2008 | 4:16 pm PM panel head favours more rate cuts - Business Standard
Source: Google News India - Business | 23 Dec 2008 | 4:15 pm Tech T-shirts | What’s up your sleeve?1. Wi-Fi detectors Want to know when you are in a Wi-Fi zone? Sure, your smartphone does it for you easily. But if you want a fashion-savvy way to detect Wi-Fi settings, wear Thumbs Up T-shirts. The green bars in front of the tee light up every time you are in a Wi-Fi zone: the stronger the connection, the more the number of bars that light up. The T-shirt comes with a small battery pack that is hidden in the hem, which powers a tiny circuit that detects Wi-Fi signals. There is one downside, though. You need to disconnect the circuit from the print every time you want to wash these tees. Available at: www.thumbsupuk.com Price: Rs1,600 (approximately) 2. Drum kit This T-shirt lets you play the drums... well, almost. Battery operated, it comes with a standard drum kit that lets you play seven different sounds at various volume levels. All you need to do is touch parts of the drum motif on the tee to release different sounds. In fact, with a little practice, you can even play whole beats with this T-shirt, keeping time for your guitarist buddies. Like the Wi-Fi T-shirt, the Think Geek tees also come with a battery pack and a ribbon wire that connects the motif to tiny speakers. And yes, you do need to remove the wires and battery pack before washing the tee. You can easily put them all back, though. Go play. Available at: www.thinkgeek.com Price: Rs1,500 (approximately) 3. Background music If you are not satisfied with just the drums, try the background music T-shirts. The embedded speaker in these can play a variety of sounds, from “disco floor” to “metal air raid siren”. You can even save your favourite music (up to 20 songs) on an SD card and connect it to the tee’s tiny remote. It helps you pick the sound effect or the song you want to play. You can even plug in your MP3 player to the remote and listen to your favourite music, loud and clear. Like the other two T-shirts, this one too is battery powered and connected with wires. And yes, like all other such tech-ready T-shirts, washing these may seem a tedious process. Available at: www.thinkgeek.com Price: Rs2,000 (approximately) 4. T-Qualizer Some people just like to listen to music, letting others do the hard work of playing it for them. The aptly named T-Qualizer does just that for you. It converts the T-shirt into a real-life equalizer display. As soon as you enter a party, the multi coloured bars on the shirt glow and move up and down with the pitch and volume of the music, just as any halfway decent music player would. Like all the aforementioned ones, this T-shirt also uses a battery pack concealed in the hem and tiny circuitry that needs to be removed when you wash it. Available at: www.iwantoneofthose.com Price: Rs1,600 (approximately) 5. The Pirate Bay The Pirate Bay has been at the centre of the digital piracy storm for a long time now. Long accused of tracking almost anything ever released by anybody on the Internet, this site has grown into one of the most frequently visited Web pages. The Pirate Bay T-shirt brings the logo of the site, a magnetic tape cassette with crossbones, onto black cotton. While these tees may not be as technologically evolved as the others, they still serve a purpose in the digital world: They reaffirm your right to fair use and let people know you are serious about stealing off the Internet, all while looking like a character out of Pirates of the Caribbean. Available at: www.thepiratebay.com Price: Rs1,900(approximately) 6. ‘Talk nerdy to me’ T-Shirt Hell wants us to believe that they take their tagline extremely seriously. They say that they are the place “where all bad shirts go”. Known for their dark humour, and slogans that offend most readers, the site also has a brief selection of shirts that appeal to most people interested in tech. The ‘Talk nerdy to me’ shirt exemplifies this quality of the site. Use it as a conversation starter, or to just let the world know you can actually work your way round a computer. Younger readers beware; your parents might not like you wearing this around the house. Available at: www.tshirthell.com Price: Rs1,000 (approximately) 7. Space Invaders After a long time in obscurity, ancient, blocky 16-coloured games seem to be making a comeback. While most enthusiasts won’t be moving back to playing “pong” on boxy television sets, this renewed interest in old technological games has affected retro fashion. T-shirts haven’t been spared either. This space invader shirt brings back memories of simpler times, when computer games were limited to boxlike things that fell from the top of the screen and you shot at them. Printed on cotton, this proves that you were into all things technical long before computers became cool. Available at: www.bytelove.com Price: Rs1,400 (approximately) 8. Family tree You must know your roots, the place where you come from. This shirt proudly displays your nerd lineage in the form of all the Nintendo gaming consoles you’ve grown up with. Starting with the popular in the 1980s NES (Nintendo Entertainment System), the shirt shows how that console evolved into the Game Boy and the SNES (S for super, the rest of the letters are the same), and follows the line to the latest DS and Wii. A must-have for gamers who want to wear their cred, on, well, their sleeves! Available at: www.nerdyshirts.com Price: Rs1,000 (approximately) Connect Shoot Nikon’s GP-1 global positioning system (GPS) unit ($240) lets you “geotag” your photos by attaching to the “hot shoe” of your Nikon camera (D3, D300, D700, D2Xs, D200 and D90 D-SLRs) or to the strap, with an adaptor. The 2 by 1.8 by 1-inch dongle records latitude, longitude, altitude and time. It acquires a satellite signal in about 45 seconds (after coming on) or five seconds (if already powered). The system’s three-colour status indicator flashes red when no recorded GPS satellite data is available; green if it has detected three satellites; and a solid green for four or more. ©2008/ The New York Times ********** Play The Logitech G13 Gameboard consists of 22 programmable keys—the four in the centre can be mapped to the standard four needed by most PC games—and a mini-joystick with three action buttons. You can create multiple profiles for different games and map different keys to different actions. The keyboard ($79.99) also has an LCD screen that connects to most games and can display game statistics, system information or messages from your in-game friends. ©2008/ The New York Times ********** Protect If you are worried about the long hours your children are spending on the computer and have no idea of the sites they are visiting, point your browser to ’http://download.live.com/familysafety’, grab Windows Live Family Safety and quit fretting. This free software from Microsoft lets you limit the hours/days your kids stay online, restrict sites and searches, filter content, specify contacts they communicate with, generate activity reports, and even supervise their online doings from your PC. Ashish Bhatia ********** SYNC If your cellphone is a Windows Mobile device, you needn’t worry about losing your list of contacts in case you misplace it. You can easily use your Hotmail or Windows Live account to back up (as well as regularly sync) your phone’s contact list. When you open your Hotmail or Live account next time, delve into the More drop-down menu and click on Mobile to check it out. Several other smart options—including calendar synching and email alerts— are also possible. Ashish Bhatia Write to us at businessoflife@livemint.com Source: LatestNews-Home - Livemint.com | 23 Dec 2008 | 4:14 pm Andhra villagers clash with police over land acquisition for SEZVillagers protesting against Special Economic Zone (SEZ) in Andhra Pradesh Tuesday clashed with the police as authorities allegedly tried to forcibly acquire their lands.Source: IndiaeNews.com: Business News | 23 Dec 2008 | 4:03 pm Maldives is a model for democracy in Islamic world: NasheedMaldives President Mohamed Nasheed Tuesday said his country was a model for bringing democracy into an Islamic nation.Source: IndiaeNews.com: Business News | 23 Dec 2008 | 4:03 pm World Bank blacklists Satyam for eight yearsSatyam Computers' cup of woes seems to be overflowing, with news surfacing Tuesday that the software vendor has been debarred by the World Bank for alleged data theft and bribing bank officials.Source: IndiaeNews.com: Business News | 23 Dec 2008 | 4:03 pm MCD will sack errant sweepers: Delhi mayorThe Municipal Corporation of Delhi (MCD) is moving to sack 25 percent of its errant safai karamcharis (sweepers) as 'they have been drawing salaries sitting at home', city Mayor Arti Mehra said Tuesday.Source: IndiaeNews.com: Business News | 23 Dec 2008 | 4:03 pm Monetary policy has teethThe Federal Reserve’s lowering of interest rates last Tuesday was welcome, but it was also received with scepticism. Once the federal funds rate is reduced to zero, or near zero, doesn’t this mean that monetary policy has gone as far as it can go? Fed chairman Ben Bernanke’s statement last Tuesday made it clear that he does not share this view and intends to continue to take actions to stimulate spending. There should be no mystery about what he has in mind. Over the past four months, the Fed has put more than $600 billion of new reserves into the private sector, using them to discount—lend against—a wide variety of securities held by a variety of financial institutions. Why do I describe this as an action to stimulate spending? Financial markets are in the grip of a “flight to quality”. Everyone wants to get into government-issued and government-insured assets, for reasons of both liquidity and safety. Individuals have tried to do this by selling other securities, but without an increase in the supply of “quality” securities, these attempts do nothing but drive down the prices of other assets. The only other action people can take as individuals is to build up their stock of cash and government-issued claims to cash by reducing spending. This reduction is a main factor in inducing or worsening the recession. Adding directly to reserves—the ultimate liquid, safe asset—adds to supply of “quality” and relieves the perceived need to reduce spending. When the Fed wants to stimulate spending in normal times, it uses reserves to buy treasury bills in the federal funds market, reducing the funds’ rate. But as the rate nears zero, treasury bills become equivalent to cash, and such open-market operations have no more effect than trading a $20 bill for two $10s. There is no effect on the total supply of “quality” assets. A dead end? No. The Fed can satisfy the demand for quality by using reserves—or “printing money”—to buy securities other than treasury bills. This is how the $600 billion got into the private sector. This expansion of Fed lending has not violated the constraint that “the” interest rate cannot be less than zero, nor will it do so in the future. There are thousands of different interest rates out there and the yield differences among them have grown dramatically in recent months. Could the $600 billion in new reserves be called a bailout? In a sense, yes: The Fed is lending on terms that private banks are not willing to offer. They are not searching for underpriced “bargains” on behalf of the public, nor is it their mission to do so. Their mission is to provide liquidity to the system by acting as lenders of last resort. We don’t care about the quality of the assets the Fed acquires in doing this. We care about the quantity of its liabilities. There are many ways to stimulate spending, and many of these methods are now under serious consideration. How could it be otherwise? But monetary policy as Bernanke implements it has been the most helpful counter-recession action taken to date, in my opinion, and it will continue to have many advantages in future months. It is fast and flexible. There is no other way that so much cash could have been put into the system as fast as this $600 billion was, and if necessary it can be taken out just as quickly. The cash comes in the form of loans. It entails no new government enterprises, no government equity positions in private enterprises, no price fixing or other controls on the operation of individual businesses, and no government role in the allocation of capital across different activities. These are important virtues. The Wall Street Journal Edited excerpts. Robert E. Lucas Jr is a professor of economics at the University of Chicago and winner of the Nobel Prize in economic sciences in 1995. Comment at otherviews@livemint.com Source: LatestNews-Home - Livemint.com | 23 Dec 2008 | 4:02 pm The next stage of the crisisIs it now time to prepare for the third stage of the unfolding global crisis? The crisis began in the market for US subprime mortgages in the summer of 2007. It then spilled over into the rest of the global financial system, as investors realized that banks in other countries held complex derivatives based on reckless subprime lending in the US. The credit markets froze in fright. The financial system was close to collapse by September, but now seems to have stabilized despite many cracks in the edifice. Then came the second stage. Around a year after the first subprime defaults were reported, the damage to the global financial system was widespread enough to affect the real economy of output and jobs. Though the US recession is now said to have started at the end of 2007, it is only over the past three months that world economic growth has really tumbled. Most forecasters have cut their expectations of growth around the world. Many expect this to be a long and deep recession. International Monetary Fund first deputy managing director John Lipsky said in a 10 December speech at Frankfurt that the major advanced economies are contracting in unison for the first time in the post-war era. He also added that a new IMF forecast for 2009 that is due in January would predict a further fall in global growth. If finance was the epicentre of the first stage of the crisis and the real economy of the second stage, then the geopolitical implications are likely to visit us in the third stage that may begin around 12 months from now. I think there are three issues worth tracking. First, deep recessions will force political leaders to focus on domestic problems rather than multilateral ones. Economic nationalism is the most obvious threat. Economies are now being supported by huge increases in government spending as well as bailouts and nationalizations of key industries. That means the power of governments over markets could grow. There could also be creeping protectionism as governments try to protect domestic companies. This is dangerous stuff. The US Smoot-Hawley Tariff Act of 1930 tried to protect American companies against imports. It led to similar legislation in Europe. World trade shrank and the recession of the 1930s worsened. The lessons of that decade are unlikely to be forgotten, but it is quite possible that governments will use other means to protect “their” industries and damage the world trading system. On the other hand, other key multilateral issues such as climate change, too, may fall off the map of global concern. Second, there could be shift of global power away from the West. “Over the medium term, Washington and European governments will have neither the resources nor the economic credibility to play the role in global affairs that they otherwise would have played. These weaknesses will eventually be repaired, but in the interim, they will accelerate trends that are shifting the world’s centre of gravity away from the United States,” says Roger C. Altman, a former US deputy treasury secretary, in an article in the January/February issue of Foreign Affairs, a bimonthly journal. Altman believes that China will be a major beneficiary of this power shift, partly because of its strong finances—a budget surplus, a current account surplus and nearly $2 trillion in foreign exchange reserves. India fares poorly on each of these three parameters of financial soundness. We have reason to worry if China uses this crisis—as it very well may—to further its geopolitical leverage. Third, these will be trying times for several autocratic regimes. Many of them are heavily dependent on profits from commodities such as crude oil. This is no coincidence. Economists have shown that countries rich in natural resources tend to be more repressive and corrupt. Governments in normal countries that tax citizens are forced to give something in return: good governance, stability and security, for example. But rulers sitting on huge natural resources do not need tax revenues to run the show. They are far more likely to destroy civil society. The recent commodity boom helped strongmen such as Vladimir Putin and Hugo Chavez intensify their power over opponents. The fall in commodity prices will harm them. We have already seen the pace at which Russia’s economy is unravelling, harming not just its oligarchs but the Putin regime as well. The economic crisis and recession will shift power away from dictators, though it is tough to guess whether this shift will be smooth and orderly. What will crude oil at, say, $20 a barrel mean for Saudi Arabia, Iraq, Iran and other current and potential trouble spots. Policymakers have had some success right now in stabilizing the financial system and are fighting a tougher battle to beat recession. Managing the geopolitical implications of the global economic crisis will not be easy either. Your comments are welcome at cafeeconomics@livemint.com Source: LatestNews-Home - Livemint.com | 23 Dec 2008 | 4:02 pm The next stage of the crisisIs it now time to prepare for the third stage of the unfolding global crisis? The crisis began in the market for US subprime mortgages in the summer of 2007. It then spilled over into the rest of the global financial system, as investors realized that banks in other countries held complex derivatives based on reckless subprime lending in the US. The credit markets froze in fright. The financial system was close to collapse by September, but now seems to have stabilized despite many cracks in the edifice. Then came the second stage. Around a year after the first subprime defaults were reported, the damage to the global financial system was widespread enough to affect the real economy of output and jobs. Though the US recession is now said to have started at the end of 2007, it is only over the past three months that world economic growth has really tumbled. Most forecasters have cut their expectations of growth around the world. Many expect this to be a long and deep recession. International Monetary Fund first deputy managing director John Lipsky said in a 10 December speech at Frankfurt that the major advanced economies are contracting in unison for the first time in the post-war era. He also added that a new IMF forecast for 2009 that is due in January would predict a further fall in global growth. If finance was the epicentre of the first stage of the crisis and the real economy of the second stage, then the geopolitical implications are likely to visit us in the third stage that may begin around 12 months from now. I think there are three issues worth tracking. First, deep recessions will force political leaders to focus on domestic problems rather than multilateral ones. Economic nationalism is the most obvious threat. Economies are now being supported by huge increases in government spending as well as bailouts and nationalizations of key industries. That means the power of governments over markets could grow. There could also be creeping protectionism as governments try to protect domestic companies. This is dangerous stuff. The US Smoot-Hawley Tariff Act of 1930 tried to protect American companies against imports. It led to similar legislation in Europe. World trade shrank and the recession of the 1930s worsened. The lessons of that decade are unlikely to be forgotten, but it is quite possible that governments will use other means to protect “their” industries and damage the world trading system. On the other hand, other key multilateral issues such as climate change, too, may fall off the map of global concern. Second, there could be shift of global power away from the West. “Over the medium term, Washington and European governments will have neither the resources nor the economic credibility to play the role in global affairs that they otherwise would have played. These weaknesses will eventually be repaired, but in the interim, they will accelerate trends that are shifting the world’s centre of gravity away from the United States,” says Roger C. Altman, a former US deputy treasury secretary, in an article in the January/February issue of Foreign Affairs, a bimonthly journal. Altman believes that China will be a major beneficiary of this power shift, partly because of its strong finances—a budget surplus, a current account surplus and nearly $2 trillion in foreign exchange reserves. India fares poorly on each of these three parameters of financial soundness. We have reason to worry if China uses this crisis—as it very well may—to further its geopolitical leverage. Third, these will be trying times for several autocratic regimes. Many of them are heavily dependent on profits from commodities such as crude oil. This is no coincidence. Economists have shown that countries rich in natural resources tend to be more repressive and corrupt. Governments in normal countries that tax citizens are forced to give something in return: good governance, stability and security, for example. But rulers sitting on huge natural resources do not need tax revenues to run the show. They are far more likely to destroy civil society. The recent commodity boom helped strongmen such as Vladimir Putin and Hugo Chavez intensify their power over opponents. The fall in commodity prices will harm them. We have already seen the pace at which Russia’s economy is unravelling, harming not just its oligarchs but the Putin regime as well. The economic crisis and recession will shift power away from dictators, though it is tough to guess whether this shift will be smooth and orderly. What will crude oil at, say, $20 a barrel mean for Saudi Arabia, Iraq, Iran and other current and potential trouble spots. Policymakers have had some success right now in stabilizing the financial system and are fighting a tougher battle to beat recession. Managing the geopolitical implications of the global economic crisis will not be easy either. Your comments are welcome at cafeeconomics@livemint.com Source: LatestNews-Home - Livemint.com | 23 Dec 2008 | 4:02 pm Despite slowdown, Gujarat is still on investors' radar: ModiDespite the global economic slowdown, Gujarat is still on 'investors' radar' and has the potential to take the maximum advantage of the economic situation, Chief Minister Narendra Modi said Tuesday.Source: IndiaeNews.com: Business News | 23 Dec 2008 | 4:01 pm War games with PakistanThe political atmosphere between India and Pakistan is very charged. Tough statements by India’s minister of external affairs, Pranab Mukherjee and those by Pakistani leaders are now almost daily fare. Pakistan alleged that Indian Air Force fighters had violated its airspace. India denied that. Islamabad has now scrambled its fighter jets and kept its armed forces on high alert. The question is: are we close to war?  Illustration: Jayachandran / Mint Not any more. There are two reasons for this. By now, the militants have disappeared and, given India’s abysmally poor intelligence gathering capabilities, there will be more collateral damage than meaningful destruction of terrorist apparatus. At the same time, the US is unlikely to let things get out of hand at this time. The stern messages are not only meant to serve as a warning to the rulers of Pakistan, but also indirectly to India. India cannot use the excuse that the US is not applying pressure even if that pressure is worth less than what the US would have us believe. Diplomatically, that can’t be ignored. There are additional factors that complicate matters now. Given the internal situation in Pakistan, do we have a strategy that prevents a small military strike from escalating into war and then, however remote that possibility may be, into a nuclear exchange? A comparison to US-Soviet and Chinese-Soviet cases is not useful. None of those countries faced an existential threat from within. Pakistan is a polar opposite of those cases. Its perceptions of threat to its existence are much stronger than of those countries. Have we factored that in? Military success demands a blend of initiative and right capabilities. While our capabilities remain strong, mindless statements are ensuring a loss of strategic surprise vital for such endeavours. These imponderables would not have arisen had we seized the the right moment. That only leaves one question: What purpose does the jamboree in New Delhi serve? The calling of 120 envoys of the country for consultation did not have to be a media spectacle. Mukherjee’s statements increasingly have that air. One only hopes that our leaders have not discovered a political opportunity in the wake of 26 November. Mere sabre rattling or meaningful strategy: what are our leaders up to? Write to us at views@livemint.com Source: LatestNews-Home - Livemint.com | 23 Dec 2008 | 4:01 pm Firms aware of climate change issues: surveyNew Delhi: A number of Indian firms are making strategic changes in their businesses to address climate change risks, a recent survey says. The FE-EVI Green Business Survey 2008 was conducted by AC Nielsen ORG-Marg among chief executives, chief information officers and senior executives of 213 firms from the FE 500 list complied by The Financial Express newspaper. At least 62% of the participants said they are aware about the implications of climate change on their business and are making strategic changes, and 17% said they are aware but waiting for others to take steps before deciding their own strategy. “Operational risk was considered to be the highest in the manufacturing sector. So, it’s more proactive than the services sector,” said the survey, which was released by The Energy Resources Institute director general R.K. Pachauri. It covered firms from manufacturing to services, public sector undertakings to multinational firms, and top 100 firms to top 300-500 firms. Around 58% of the respondents claimed to have an understanding about climate change issues and international policies. About three-fourths of the firms said the issues will impact them. Source: LatestNews-Home - Livemint.com | 23 Dec 2008 | 4:01 pm Needed: a last jolt of reformsManmohan Singh pushed through the most important parts of the original economic reforms programme in his first hundred days as finance minister in the Narasimha Rao government. Singh is back at the finance ministry, though now he is head of the government as well. Will he surprise us with another big bang, this time during the last days of his government before it goes to the electorate? Such a surprise would be welcome. The government has left itself very little room to manage the slowdown. Weak public finances virtually rule out a huge fiscal stimulus that industry now demands and what other countries such as China have promised. But one last reforms push would do a lot to lift spirits and revive confidence—as well as prepare India for the inevitable recovery in the global economy a few years down the line. The government’s decision to introduce two key insurance Bills in Parliament this week is thus a sign of hope for all votaries of economic reform. One Bill will allow foreign companies to own 49% of domestic insurance companies after Parliament gives the proposal its nod. A better-capitalized insurance sector will further the cause of social security and help create a market for long-term bonds that infrastructure companies sell to finance new roads, ports and airports. Insurance reform has been a long struggle ever since the first Bill to create a regulator for this sector was put before legislators a decade ago. The introduction of the new insurance Bills is an important step forward. The Left is fuming. It believes that its diehard opposition to financial sector reforms saved India from the worst of the global crisis. This is rubbish. The Indian policy establishment has always been more cautious about financial reforms than it has been about trade and product market reforms. But the Left controls the major insurance trade unions and is hence unlikely to give in that easily. Our own hope is that these insurance Bills are the first steps in the Manmohan Singh government’s belated—but welcome—last-minute dash for economic reforms. The government is now free of the the pressure to mollify its erstwhile friends in the Left. It should make the most of this opportunity. Should the government push reforms? Write to us at views@livemint.com Source: LatestNews-Home - Livemint.com | 23 Dec 2008 | 4:01 pm Madras High Court stays screening of Aamir starrer 'Ghajini'The Madras High Court Tuesday stayed the release of the much-awaited Aamir Khan-starred Hindi film 'Ghajini', two days before it was to hit the screens worldwide after the producers of the Tamil film on which it is based filed objections.Source: IndiaeNews.com: Business News | 23 Dec 2008 | 4:00 pm Citi sells Indian IT arm to Wipro for $127 mnThe ailing global financial services firm Citigroup Inc is selling its India-based captive IT services subsidiary City Technology Services (CTS) to Wipro Technologies for $127 million (Rs.6.2 billion) in an all-cash deal, the IT bellwether announced here Tuesday.Source: IndiaeNews.com: Business News | 23 Dec 2008 | 4:00 pm Airbus to test fuel-saving winglets on its A320 planesSeattle: They have become a familiar sight on one of the world's most popular commercial jets—large sail-like structures at the end of the wing that gracefully curve up towards the sky. The blended winglets, developed by Aviation Partners Inc., a small Seattle company, have helped transform an industry that is looking for all things “green”. The winglets improve fuel burn and help big jets be more efficient. They are on some 2,500 Boeing Co.’s planes, mostly the single-aisle 737s. And someday they could be on the Airbus A320 family of single-aisle planes, too. The A320 and 737 families are the most frequently flown commercial jets around the globe. “We are in a green revolution today and we have a great solution. Our winglets are the best fuel hedge that an airline can get,” said Joe Clark, one of the founders of Aviation Partners, after his company and Airbus SAS announced that blended winglets will be tested on an A320. Interestingly, Boeing would profit if the tests prove successful and Airbus decides to offer the winglets as an option to customers, as Boeing does now for customers who order its 737s. Clark said Boeing has helped Aviation Partners pioneer the technology. A new company would likely be formed to provide the technology for Airbus, Clark said, and Boeing would have a financial interest in that company. “But we have not even discussed those kinds of things,” Clark said. “We are still in the technical stage. We are a long ways from getting blended winglets on an Airbus plane.” He said the Airbus trials may take about three months. Clark said the winglets designed for the A320 are unique to that plane, though they look similar to those on the 737. Even though Clark's company and Boeing have worked closely over the years, and formed a joint venture called Aviation Partners Boeing, Clark said the joint venture has nothing to do with the work his company is doing with Airbus. He used the analogy of GE engines, which are found on both Boeing and Airbus planes. Aviation Partners was established by Clark and Montana businessman Dennis Washington in 1991. The idea took root when Washington called his friend Clark and asked Clark to explore the possibility of extending the range of Washington's Gulfstream II. Clark gathered a team of mostly retired Boeing and Lockheed Martin Corp. engineers and flight-test department heads. They included Louis Gratzer, a University of Washington professor of aeronautics who had once been chief of aerodynamics for Boeing. Clark called the bunch his “dream team”. “They were all just waiting around to play tennis,” Clark quipped in a 1999 interview. “We harnessed some marvellous Boeing talent.” The winglet, the team designed, reduced the drag on Washington's Gulfstream II by more than 7%. The winglets work by reducing drag created by the vortices that are generated by a plane's wingtips. By 2014, Aviation Partners Boeing estimates that blended winglet technology will have saved the airline industry more than 5 billion gallons (22.5 billion litre) of jet fuel. Winglets were common on business jets before Aviation Partners took an interest. But those traditional winglets, which also are found on all Airbus models and the Boeing 747-400, rise at a sharp angle from the wing. Blended winglets gently curve up, as if they are part of the wing. Winglets were first developed by the National Aeronautics and Space Administration, or Nasa, in the 1960s to help reduce drag. Increasing the wingspan can produce the same results. But jetliner wings can't get any longer and still fit at airport gates. That's why Boeing decided to put a traditional winglet on its 747-400. Source: World Business - Livemint.com | 23 Dec 2008 | 4:00 pm World Bank admits to ban on Satyam for data theft: FOXThe World Bank has admitted to debarring Satyam for eight years due to data theft, reports CNBCTV18, quoting FOXNews.com. The World Bank has said that Satyam was suspended in February from all businesses, the report added.Source: Moneycontrol Top Headlines | 23 Dec 2008 | 3:47 pm Pyramid Saimira smells foul-play; wants CBI probe - Moneycontrol.com
Source: Google News India - Business | 23 Dec 2008 | 3:43 pm Wipro to buy Citi unit for $127 mlnBANGALORE (Reuters) - Wipro Ltd, India's third-ranked outsourcer, said on Tuesday it would buy Citi Technology Services Ltd for $127 million, as the embattled Citigroup sheds assets outside its core business.Source: Reuters: Money News | 23 Dec 2008 | 3:39 pm Wipro to buy Citi Tech for $127 m in cash - Moneycontrol.com
Source: Google News India - Business | 23 Dec 2008 | 3:27 pm World Bank bans Satyam from providing software services - Economic Times
Source: Google News India - Business | 23 Dec 2008 | 3:13 pm Satyam banned from dealing with World Bank for 8 yearsThe World Bank has said it has banned leading software vendor Satyam Computers from all business at the bank for a period of eight years - and that the ban started in September, according to a US broadcaster.Source: IndiaeNews.com: Business News | 23 Dec 2008 | 3:02 pm Adhere to guidelines on pilots for Delhi's fog, airlines toldIndia's aviation regulator Directorate General of Civil Aviation (DGCA) Tuesday asked airlines to adhere to its guidelines while flying in low visibility conditions at Delhi's Indira Gandhi International (IGI) Airport.Source: IndiaeNews.com: Business News | 23 Dec 2008 | 3:00 pm Govt sees bids for spectrum to be 'few times' reserve price - Hindu
Source: Google News India - Business | 23 Dec 2008 | 2:51 pm Functioning of PSU insurance cos hit in T. Nadu - Hindu
Source: Google News India - Business | 23 Dec 2008 | 2:50 pm U.S. Q3 GDP shrank 0.5 pct as economy chilledWASHINGTON (Reuters) - The U.S. economy shrank at a 0.5 percent annual pace in the third quarter as expected after consumers and businesses cut spending and the country's recession gathered steam, government data showed on Tuesday.Source: Reuters: Money News | 23 Dec 2008 | 2:47 pm Successful 3G bidders eligible for 2G spectrum space: DoTSuccessful bidders for spectrum allocation for third generation (3G) telecom services will also be eligible for second generation (2G) spectrum space, the government said here Tuesday.Source: IndiaeNews.com: Business News | 23 Dec 2008 | 2:30 pm Morgan Stanley starts India PE deals, sees busy 2009MUMBAI (Reuters) - Morgan Stanley's private equity unit has invested $37.5 million in an unlisted firm in its first transaction in India, and a top official said the firm expected a busy 2009 as the need for capital drives deals.Source: Reuters: Money News | 23 Dec 2008 | 2:11 pm PM virtually rules out war with PakistanNew Delhi: Prime Minister Manmohan Singh today virtually ruled out a military conflict with Pakistan but asked the world community to nudge Islamabad into dismantling the “terror machine” there calling the terror strike in Mumbai as an attack on India’s “ambitions to emerge as an economic power”. Singh clearly hinted at Pakistan, which he did not name, over the Mumbai attacks when he said as he said “non-state actors were practising terrorism aided and abetted by state establishments.” Addressing a conclave of over 120 Indian Ambassadors and High Commissioners here, he said India was seeking peace and stability in its neighbourhood but the situation was “worrisome”. Referring to terror strikes in Mumbai, he said these were “an attack on the country’s ambitions to emerge as an economic power” but “India would not accept a situation where terrorism is used as an instrument to cripple India’s economy or the values it stands for.” Later talking to reporters outside Parliament, Singh said India does not want war with Pakistan but would like Islamabad to dismantle the “terror machine” existing on its soil and the international community to use its “power” to persuade Islamabad to do so. “The issue is not war. The issue is terror and territory in Pakistan being used to provoke, to aid and abet terrorism. I think that is the issue, the issue is not war. Nobody wants war,” he said when asked for his comments on the current standoff with Pakistan in the wake of Mumbai terror attacks. Source: Home - Livemint.com | 23 Dec 2008 | 1:57 pm Govt issues $4.5 bln of oil bonds to refinersMUMBAI (Reuters) - India will issue oil bonds worth 220 billion rupees ($4.5 billion) to refiners to compensate them for selling fuel at state-set prices, the central bank said on Tuesday.Source: Reuters: Money News | 23 Dec 2008 | 1:21 pm Satyam barred from doing business with World BankThe World Bank has barred India's Satyam Computer from doing business with it for eight years on the charges of data theft.Source: Daily News & Analysis: Money News | 23 Dec 2008 | 12:22 pm Govt upbeat on 3G auction, moves to hook foreign cosNEW DELHI (Reuters) - India is confident the global financial crisis will not derail its auction of 3G mobile services spectrum due in mid-January, hanging out the prize of a larger foothold in the world's fastest growing wireless market.Source: Reuters: Money News | 23 Dec 2008 | 12:17 pm US stocks slide amid bleak outlook !US stocks fell Monday amid concerns of a gloomy outlook for fourth-quarter corporate earnings.Source: Zee News : Business | 23 Dec 2008 | 12:10 pm UK`s biggest trade union backs govt bailout for Tata`s JLR!Tata Motors` case for state financial aid for Jaguar Land Rover has received support from UK`s biggest trade union.Source: Zee News : Business | 23 Dec 2008 | 12:10 pm Sensex down 151 pts in early trade !Sensex plunged by over 151 pts in early trade on Tuesday.Source: Zee News : Business | 23 Dec 2008 | 12:10 pm DoT to hold 3G pre-bid meet!DoT`s pre-bid meet with prospective private bidders for clarifications about online 3G auction.Source: Zee News : Business | 23 Dec 2008 | 12:10 pm Oil prices dip below USD 40 in market hit by weak energy demand!Oil prices fell further below USD 40 in Asian trade on Tuesday in a market plagued by weak energy demand, dealers said.Source: Zee News : Business | 23 Dec 2008 | 12:10 pm IMF tentatively clears USD 800mn to El Salvador!The IMF said it had given tentative approval to a USD 800mn credit line to El Salvador.Source: Zee News : Business | 23 Dec 2008 | 12:10 pm Public sector insurance employees on strike !Around 150,000 public sector insurance employees will strike work Tuesday.Source: Zee News : Business | 23 Dec 2008 | 12:10 pm SMEs may face more closures in '09 - officialMUMBAI (Reuters) - More than 100,000 small and medium enterprises (SMEs) shut shop in India in 2008, hurt by falling demand and difficult credit conditions, and the figure is likely to rise in FY09, an industry official said.Source: Reuters: Money News | 23 Dec 2008 | 11:48 am Indian firms review security but hesitate at costsMUMBAI Reuters) - The Mumbai attack sounded a wake-up call to Indian hotels and businesses over security and terror insurance, security experts said, but an economic slowdown and a tradition of penny-pinching could hinder improvements.Source: Reuters: Money News | 23 Dec 2008 | 11:45 am BSE Sensex drops 2.4 pct, Satyam slumps 13.55 pctMUMBAI (Reuters) – The BSE Sensex fell 2.4 percent on Tuesday to their lowest close in more than a week, as global economic uncertainties and concerns about corporate earnings triggered a flight from risky assets.Source: Reuters: Money News | 23 Dec 2008 | 11:33 am Sensex continues fall for 2nd day, ends 241 pts downNew Delhi: The benchmark Bombay Stock Exchange Sensex fell 2.43% on Tuesday, 23 December. Marketmen said the bearish sentiment picked up due to weak Asian markets that slumped on low oil price and the nearing expiry of the monthly futures contract. The 30-share BSE index end 241.6 points down to 9,686.75, its was its second consecutive day of losses. The broad based 50-share National Stock Exchange Nifty index fell by 70.65 points to 2968.65. Stock selling was mainly led by oil, gas, banking, auto, capital goods, metal and technology segments. Rupee also neared it’s 2-week low as it depreciated against dollar by 49 paise. Satyam Computers was the highest loser at 13.55% fall to Rs140.40 from Rs163. Past week has been turbulent for Satyam shares as investors resented company’s decision to buy parts of distressed Maytas. Also on Tuesday FOX News reported that World Bank had confirmed the channels earlier report that the Indian software vendor had been banned last year for alleged data theft. Other markets losers were Jaiprakash Associates (10.18%, Rs78.50), Tata Motors (7.04%, Rs174.85), Sterlite Industries (6%, Rs263.80) and Mahindra and Mahindra (5.33%, Rs290.25). Meanwhile Asia markets traded lower through the day, Shanghai and Hang Seng tumbled between 2.5-3%. Japan’s exchange Nikkei was shut on account of Emperor’s Birthday. Source: Home - Livemint.com | 23 Dec 2008 | 11:26 am Govt indicates further cut in interest ratesNew Delhi: The government on Tuesday indicated “aggressive” easing of interest rates and “fast-tracking” reforms to offset the impact of global turmoil on the growth which is expected to moderate to around 7% this fiscal besides inflation returning to “normal levels” by March. The Mid-Year Review of the economy presented to Parliament said, “there is a considerable scope for monetary policy easing over the next six to 12 months to offset the global increase in demand for money that is being transmitted to India... “An aggressive monetary policy may be necessary if the global economic depression continues to adversely affect manufacturing,” the review said. Following cuts in the policy rates by RBI, several banks have already reduced their lending rates giving relief to the hardpressed borrowers especially in the sectors including housing, exports, small and medium enterprises. Through a slew of measures, the central bank has injected about Rs3 lakh crore into the cash-strapped system. Preparing the country for a “significantly” slower growth in the second half of the fiscal, the review projected economic expansion at around seven per cent for the year. It attributed the moderation in growth from 9% in the previous fiscal to crisis in the industrialised countries affecting India’s external sector including exports and capital flows. On the positive side, the review said the decline in commodity and fuel prices will help bring the inflation to “normal” levels by March 2007. From a peak of 12.91% in August, the inflation has come down to 6.84% in early December. Having introduced the insurance reforms bills, pending for four years, Government wants to “fast-track” the pending agenda to revert to 8.5 to 9% growth. Source: Home - Livemint.com | 23 Dec 2008 | 11:18 am 3G entrants can get 2G spectrum: telecom officialNew Delhi: India is hopeful that an auction for third-generation (3G) radio waves next month will draw in bids at a “few times” the reserve price of Rs20.20 billion ($415 million), a senior government official said on Tuesday. The telecom commission feels that the global financial crisis is unlikely to affect the auction for 3G services. The government also expects to come out with the mobile virtual network operator (MVNO) policy by 5 January, when the auction of 3G spectrum commences. Addressing the pre-bid conference for the auction of 3G and BWA spectrum, Department of Telecommunications (DoT) Joint Secretary J S Deepak said, “We are hoping to come out with the policy on MVNO before the end of January 5, which is the deadline for (the) application of 3G spectrum.” As MVNOs do not have spectrum, they operate through commercial arrangements with licensed Mobile Network Operators (MNOs), buying bulk minutes of traffic and reselling them to their own subscribers. Virgin Mobiles is an example operating in India in partnership with Tata Teleservices. Clearing the air over spectrum allocation, the government also said that successful 3G bidders will be eligible for 2G spectrum. Addressing a pre-bid conference for auctioning 3G and BWA spectrum, Telecom Commission Member (Finance) R Ashok said, “Successful 3G bidders will be eligible for getting 2G spectrum.” However, since the availability of 2G spectrum is an issue, it is very unlikely that the 3G bidders would get it right away. COAI Director General TV Ramachandran said this was technically correct. “The 3G players are eligible for 2G spectrum but they can get the spectrum only after the need of the existing players is met,” Ramachandran added. The auction for the allocation of third-generation radio waves is due next month on 16 January. (With PTI, Reuters adds) Source: Tech News - Livemint.com | 23 Dec 2008 | 11:09 am Economy not to grow above 6 pc in 2008-09: Yashwant SinhaFormer finance minister Yashwant Sinha says the country's economy will grow at 6 per cent.Source: Daily News & Analysis: Money News | 23 Dec 2008 | 11:06 am Satyam barred from World Bank business: WB spokesmanMumbai: India’s Satyam Computer Services has been barred from business with the World Bank, a spokesman for the World Bank said on Tuesday, confirming a report by Fox News. “The information is true,” Sudip Mozumder, a spokesman for the World Bank in New Delhi, told Reuters. Shares in the Hyderabad-based firm closed down 13.55%, at Rs140.40, day’s highest loss on the index. According to a report by Fox News Satyam was barred last February from all business at the bank for an eight-month period on account of an alleged data theft. Fox News had reported the scandal about ultrasensitive data heists by Satyam Computers, but complying with its secrecy policy the World Bank denied reports. Read the FOX story on the revelation Satyam questioning the validity of the FOX scandal report in a defensive statement released earlier had said: “The story that claims Satyam was involved in an alleged security breach at the World Bank has no validity. Satyam takes this matter very seriously. We hold ourselves to the highest standards in the industry, and we take extraordinary care to develop secure networks and IT infrastructure for all our clients.” According to FOX reports the Satyam case had been turned over to the Justice Department in 2006 as well as to the US Treasury Department but no legal action against the company is known as yet. Source: Home - Livemint.com | 23 Dec 2008 | 11:00 am Govt says has scope for more monetary easingNEW DELHI (Reuters) - India has considerable scope for monetary easing next year and may need more aggressive action, the government said on Tuesday, stoking expectations the Reserve Bank will kick off another round of rate reductions soon.Source: Reuters: Money News | 23 Dec 2008 | 10:44 am Mid-Year Review sees slowdown in growth, inflationNew Delhi: Preparing the country for a lower growth of around 7% in current fiscal due to the global crisis, the Mid-Year Review of the economy on Tuesday said the decline in commodity prices will help bring down the inflation to “normal levels” by March 2009. “We should be prepared for growth in 2008-09 as a whole to be around 7%” because the crisis in industralised countries is bound to have impact on the world economy, the review tabled in Parliament said. It said most emerging economies have slowed down significantly and “India has also been affected”. On the positive side, the review expects the inflation to cool down to “normal levels” by end of this fiscal. It said India continues to retain its position as a preferred destination for investments. While the foreign direct investment (FDI) inflows accelerated in the first half of this fiscal and are likely to remain strong, the prospect on remittances also seem favourable. “Compared to other emerging economies, India has several strengths that can help mitigate the adverse effects of the global financial crisis provided appropriate policy action is initiated,” it said. Source: Home - Livemint.com | 23 Dec 2008 | 10:38 am Indian economy remains second fastest growing in the worldThe Indian economy continues to remain the second-fastest growing economy in the world, a top economist said on Tuesday.Source: Daily News & Analysis: Money News | 23 Dec 2008 | 10:24 am Asia stocks falls by 3%, oil under $40Hong Kong: Asian stocks fell for a third straight session on Tuesday as a continued retreat in oil prices below US $40 a barrel hit resource-related shares, while auto makers slumped after Toyota’s profit warning. The uncertain economic outlook continues to bolster low-yielding but safer government bonds, as evidenced by the record US $38 billion of two-year notes sold by the US government on Monday for a historic low yield of below 1%. Asian shares tumbled, with auto makers such as South Korea’s Hyundai Motor slumping 10% a day after Toyota Motor Corp announced its profit warning report for the year until end-March. Resource-related stocks such as BHP Billiton also fell on worries that a deep global downturn will hit demand for commodities. Shares in South Korea, Hong Kong, Taiwan and India fell between 2 to 3%. European shares were also set to fall as worries over the global economy remain. Up next on the global data front is the final US gross domestic product figure for the third quarter, with the wait pressuring the dollar in Asian trade. Shanghai’s main index fell almost 5% after China’s central bank on Monday trimmed interest rates by 27 basis points (bps), in a move that disappointed investors because it was smaller than more aggressive actions by other central banks. “I believe the optimism that we had over the last month has pretty rapidly come to an conclusion,” said Tim Rocks, an equity strategist for Macquarie Securities in Hong Kong. “The macro data is just truly awful, the Japanese export data on Monday was the most frightening thing that I have seen for a long, long time. The economic data just shouldn’t behave like this,” he said. On Monday, figured showed Japanese exports plunging at the fastest annual pace on record in November. The MSCI index of Asia-Pacific stocks outside Japan dropped 3%. Though the index is now well off a 5-year low hit in November, it remains down 54% for the year in the worst yearly slide in its 20-year history, Trading was limited, with Japanese financial markets closed for a national holiday and many market players away from their desks before Christmas and other year-end holidays. It has been a tough 2008 that has featured the collapse of Bear Stearns and Lehman Brothers, as well as an unprecedented wave of rate-cutting, stimulus packages and government support for the ailing financial sectors. New Zealand’s economy contracted by the biggest amount in 8 years in the third quarter, reinforcing the case for more central bank rate cuts, data on Tuesday showed. Australian shares ended the day 0.7% lower. Oil prices extended their recent sharp falls, falling 51 cents to US $39.40 a barrel as investors worry that production cuts from oil cartel OPEC could take a while to come through. The US is expected to confirm later in the day that the world’s largest economy contracted 0.5% in the third quarter, matching an earlier advance estimate. The euro edged up 0.3% to US $1.3985, and also rose against the Japanese yen, up 0.3% to 126.22yen. The dollar index, a gauge of the US currency’s performance against six major currencies, edged down 0.1% to 81.080. However, most Asian currencies fell against the US dollar. Economists at Goldman Sachs warned that the US would need ongoing fiscal support. “The US economy needs not only a large package of fiscal stimulus in 2009, but one that provides substantial support beyond next year,” they said in a note to clients. Source: Home - Livemint.com | 23 Dec 2008 | 10:11 am RIL to begin natural gas production from KG-D6 by JanNew Delhi: Reliance Industries is likely to start natural gas production from its eastern offshore KG-D6 block by January, Minister of State for Petroleum & Natural Gas, Dinsha Patel informed the Rajya Sabha on Tuesday. In a written reply to a question, he said commercial production of oil from Reliance KG-DWN-98/3 block or KG-D6 commenced in September at the rate of 10,000 barrels of oil per day. “The gas production from the Block KG-DWN-98/3 is expected to commence by January 2009,” he said. Reliance and its Canadian partner Niko Resources has established 570 million tons of oil and oil equivalent gas reserves in the block. The Gujarat State Petroleum Corp (GSPC) has discovered 45.3 million tons of oil and oil equivalent gas reserves in the neighbouring KG-OSN-2001/3 block, he added. Source: Home - Livemint.com | 23 Dec 2008 | 9:59 am Warring Bajaj brothers reach settlementThe warring Bajaj brothers have reached an agreement where family patriarch Rahul has agreed to give control of Bajaj Hindusthan to younger brother Shishir.Source: Daily News & Analysis: Money News | 23 Dec 2008 | 9:47 am Govt indicates further cut in interest ratesThe government indicated "aggressive" easing of interest rates and "fast-tracking" reforms to offset the impact of global turmoil on growth.Source: Daily News & Analysis: Money News | 23 Dec 2008 | 8:02 am Rupee near 2-week low as shares dropMumbai: The rupee fell to its lowest in nearly two weeks on Tuesday, as a wobbly stock market raised concerns about foreign fund withdrawals. At 10:55am, the partially convertible rupee was at Rs48.48/49 per US dollar, off a trough of Rs 48.535, its lowest since 12 December, according to Reuters data, and about 1% lower than Monday’s close of Rs 48.01/03. “I see the rupee trading in a 48.25-48.75 range,” a trader with a state-run bank said. “We could see some US dollar sales from exporters above 48.50 levels.” The rupee has gained around 3.3% in December, helped partly by foreign portfolio inflows of US $519 million in the same month, but is down more than 18% in 2008 on equity outflows of more than US $13 billion. India’s main share index was down 1.7% at 11:10am on deepening worries about the global economic outlook and tracking weak Asian markets. The US dollar’s gains overseas also put pressure on the rupee, traders said. The dollar held firm against the Japanese yen on concerns over the Japan’s economy following more gloomy data and a deteriorating economic outlook expressed by Bank of Japan. Source: Home - Livemint.com | 23 Dec 2008 | 7:09 am 3G entrants can get 2G spectrum: Telecom CommissionClearing the air over spectrum allocation, the government on Tuesday said successful 3G bidders will be eligible for 2G spectrum.Source: Daily News & Analysis: Money News | 23 Dec 2008 | 6:57 am Piramal Health to buy Minrad for $40 mnMumbai: Pharma company Piramal Healthcare Ltd said on Tuesday that it has signed a deal to buy US based inhalation anaesthetics maker Minrad International Inc for about US $40 million in cash and debt. Under the terms, Minrad shareholders will get 12 cents a share in cash, a 100% premium to the stock’s on Monday closing price on the American Stock Exchange (Amex). Piramal will also buy Minrad’s senior secured convertible notes, the company said in a statement to the stock exchange. “The offer to Minrad is consistent with our commitment to build a serious global presence in critical care,” chairman Ajay Piramal said in the note. With the acquisition, Piramal will gain access to the intellectual property for making inhalation anaesthetics and will be able to immediately break into the US pharmaceutical market for the country’s top-selling inhalation anaesthetic, sevoflurane. The deal is expected to close in the first quarter of 2009 subject to Minrad shareholders approval and will add to Piramal’s earnings for the year to March 2010, the company said. This year, the company has already acquired German PlasmaSelect AG’s blood expansion products, two brands from the India-based Khandelwal Labs, and bought out Bangalore-based Healthline Pvt Ltd’s drug business. Piramal shares are trading 2.9% lower at Rs236.05 on very low volumes in a weak Mumbai market, while Minrad ended on Monday 14.3% lower at 6 cents on the Amex. Source: Home - Livemint.com | 23 Dec 2008 | 6:44 am UK trade union bats for govt bailout for Tata'a JLRTata Motors' case for state financial aid for Jaguar Land Rover on Tuesday received support from Britain's biggest trade union.Source: Daily News & Analysis: Money News | 23 Dec 2008 | 5:57 am Tata Tele aims 60 pc jump in subscriber base in eastTata Teleservices Ltd is aiming to increase the subscriber base by 60 per cent to five million by March 2009 in the eastern region.Source: Daily News & Analysis: Money News | 23 Dec 2008 | 5:55 am Deutsche Telekom to join Vodafone in Internet ventureBerlin: German telecommunications group Deutsche Telekom is to join forces with British rival Vodafone to develop a fiber optic network for high-speed Internet access, a senior Deutsche Telekom official said. The two groups want to develop two projects in Germany to establish a high-speed Internet network that could serve 1,00,000 homes, Timotheus Hottges, responsible for fixed telephone operations at Deutsche Telekom, told AFP. “We are going to see how this cooperation would work at the technical level,” he said. “We want to show that Deutsche Telekom does not want to monopolise the new networks.” Hottges said, “Deutsche Telekom was going to have to abandon some parts of the (fixed telephone) market” but added that client losses should peak in 2010 and level off after that. Source: World Business - Livemint.com | 23 Dec 2008 | 5:55 am Tata Tele aims 60% jump in subscriber in ’09Kolkata: Leading telecom service provider under the Tata Indicom brand, Tata Teleservices Ltd, is aiming to increase the subscriber base by 60% to 5 million by March 2009 in the eastern region. “We have already crossed 4.3 million subscriber base and by March we will touch 5 million mark in eastern region. In 2007-08 the number was three million,” TTSL Chief Operating Officer (Kolkata) and Regional Head (East) Sanjiv Kumar Sinha said. Speaking about Bihar, Sinha said it was one of the fastest growing telecom markets in the country both in terms of number of new subscriber and average revenue realisation per user. He said, “Bihar is adding six to seven lakh new subscribers per month for the industry. TTSL has a subscriber base of 1.7 million and it is likely to expand to two million in the state by March 2009.” Asked whether the current financial crisis would hit investment in network augmentation next year, Sinha said, “We have invested Rs400 crore during the year mostly in network strengthening and investment will continue to flow”. TTSL has added 700 base stations taking the total number to 2,000 towers spread over the entire eastern region. The telecom major has begun setting up network in Orissa for the GSM rollout. The company has received spectrum for Orissa and Kolkata circles for GSM. Source: Home - Livemint.com | 23 Dec 2008 | 5:31 am Tata Tele aims 60% jump in subscriber in ’09Kolkata: Leading telecom service provider under the Tata Indicom brand, Tata Teleservices Ltd, is aiming to increase the subscriber base by 60% to 5 million by March 2009 in the eastern region. “We have already crossed 4.3 million subscriber base and by March we will touch 5 million mark in eastern region. In 2007-08 the number was three million,” TTSL Chief Operating Officer (Kolkata) and Regional Head (East) Sanjiv Kumar Sinha said. Speaking about Bihar, Sinha said it was one of the fastest growing telecom markets in the country both in terms of number of new subscriber and average revenue realisation per user. He said, “Bihar is adding six to seven lakh new subscribers per month for the industry. TTSL has a subscriber base of 1.7 million and it is likely to expand to two million in the state by March 2009.” Asked whether the current financial crisis would hit investment in network augmentation next year, Sinha said, “We have invested Rs400 crore during the year mostly in network strengthening and investment will continue to flow”. TTSL has added 700 base stations taking the total number to 2,000 towers spread over the entire eastern region. The telecom major has begun setting up network in Orissa for the GSM rollout. The company has received spectrum for Orissa and Kolkata circles for GSM. Source: Tech News - Livemint.com | 23 Dec 2008 | 5:31 am Free software Operating System for engineering studentsHyderabad: Engineering students who are tired of installing and uninstalling various software pertaining to their course of study can now hope to breathe easy. A new “free software Operating System” developed by ‘e-Swecha´, a variant of Linux--a popular open source OS, promises to solve their problems concerning the installation and uninstallation of software for the purpose of study. Richard Stallman, the founder of the Free Software Foundation and GNU Project, will launch the e-Swecha initiative, on Wednesday, wherein about 21,000 computers will see migration from present OS to e-Swecha across the state in the next one month, they said. JNTU Hyderabad has already taken an initiative to promote the usage of free software in colleges and has stood by its word for transformation of the current OS to e-Swecha OS, they added. Stallman said Kerala initiated the process of switching computers in its public schools to free software in association with Free Software Foundation of India. “Nearly 700 high schools in Karnataka and about 400 in West Bengal have also switched over to free software, but nothing substantial had been done in AP, so far,” Stallman said. Source: Tech News - Livemint.com | 23 Dec 2008 | 5:19 am Britain’s trade union backs bailout for Tata’s JLRLondon: Tata Motors’ case for state financial aid for Jaguar Land Rover on Tuesday received support from Britain’s biggest trade union, which wants the government to provide help by Christmas, as Tata has injected more cash into the company. Tony Woodley, joint general secretary of Unite, said that there was little reason for the British government not to act now that Tata Motors had injected more cash. Jaguar Land Rover, which employs 15,000 people in Britain, was reported to have received “tens of millions” from Tata Motors, which will stave off an immediate cashflow crisis. Woodley told The Times: “I’m delighted that Tata has put more financing into the company. It is obviously right that they do so, having bought it only nine months ago. “I would now be extremely surprised if the Government did not give financial support to the company as well and I would be very surprised if it wasn’t this side of Christmas. I would be disappointed if there was no confirmation of the availability of a loan or credit guarantees at least,” he said. Reports, however, said that despite Woodley’s optimism, a state bailout is unlikely to come before Christmas. Tata Motors, which bought Jaguar Land Rover from Ford in March for $2.3 billion, borrowed $3 billion to finance the acquisition and to step up production of its low-cost Nano model. Reports said that Tatas have secured “last minute funding” for JLR as bankers were convinced that the UK government will prevent a collapse of the luxury car maker. Source: World Business - Livemint.com | 23 Dec 2008 | 4:57 am US manufacturers cut jobs, pay amid downturnChicago: Several US manufacturers added their names to the growing list of companies making job or benefit cuts to weather the global financial crisis. Caterpillar Inc, the world’s largest maker of heavy construction and mining equipment, said Monday it is cutting white-collar pay by up to 50% and offering buyouts to as many as 25,000 US employees as it looks to cut costs during what it characterized as “uncertain times.” Textron Inc, the world’s largest maker of corporate jets, said it will eliminate 2,200 jobs worldwide to cope with a global downturn that has forced its customers to pare all but essential spending. The Providence, Rhode Island based company, which employs about 44,000 workers worldwide, said “further headcount reductions” and other cost-cutting actions were likely. Other companies announcing plans to cut jobs and bring production in line with fast-falling demand just days before the Christmas holiday included Steelcase Inc, a maker of furniture equipment, Kemet Corp, a maker of passive electronic components, and diversified manufacturer Roper Industries Inc . Analysts said the moves, which follow other cost-cutting measures announced in recent weeks, suggest managers are desperately throwing as many levers as possible to bring operations in line with deteriorating fundamentals. Caterpillar’s actions, in addition to an across-the-board wage freeze at the Peoria, Illinois-based company, are its broadest moves yet in response to weakening demand for its earth-moving equipment, diesel engines and gas turbines. Until now, their cuts have been more surgical, confined to specific product lines, like residential construction equipment plants or factories making diesel engines for big-rig trucks, or to contract workers who were not, technically speaking, Caterpillar employees. In 2009, it said that compensation for its most senior executives will be cut by as much as 50%, while pay for senior managers will be reduced 5 to 35%, and other management and support staff will see cuts of up to 15%. The cuts will come via reductions in its incentive compensation program and equity-based compensation and not through cuts in base pay. Analyst Eli Lustgarten at Longbow Research, who thinks Caterpillar’s earnings may fall as much as 33% next year, said the blunter approach was necessary, given the broad-based and fast-spreading deterioration in business. The moves announced on Monday come just days after FedEx Corp said it was forcing salaried workers to take at least a 5% pay cut and was suspending its 401(k) retirement plan match. Experts said the takebacks are an ominous sign of things to come at many other US companies as businesses - even relatively healthy ones like FedEx and Caterpillar - adopt defensive crouches in response to the worst economic downturn in decades. According to the employment consulting firm Watson Wyatt, 11% of all the companies it recently surveyed either already had cut wages or planned to do so over the next 12 months, and 10% either have reduced their employer 401(k) match or planned to do so. Caterpillar also warned that additional involuntary layoffs, like the one announced last week at its Mossville, Illinois diesel engine plant, could be necessary. It said it would also implement temporary factory shutdowns as needed “in response to economic conditions that impact the markets for its products.” In the meantime, some members of Caterpillar’s management and most of its US-based support staff are being offered buyouts. Caterpillar said eligible employees would have three weeks to elect to take part in the program. Source: World Business - Livemint.com | 23 Dec 2008 | 3:59 am Renault weighs Logan hatchback option for NashikMumbai, Dec. 22 French automaker, Renault, is exploring the option of producing the Logan hatchback at Nashik, which is already home to the sedanSource: Business Line - Home Page | 23 Dec 2008 | 12:00 am Insurance reforms gain pace; FDI cap to be hiked to 49%New Delhi, Dec. 22 In the last leg of its term, the UPA Government has come up with a big-bang approach to insurance sector reforms by introducing two Bills in Parliament.Source: Business Line - Home Page | 23 Dec 2008 | 12:00 am Kingfisher in talks for more bank fundingBangalore, Dec.22 Kingfisher Airlines has approached a consortium of banks for funds to bail out the airline even as it has drawn about 80 per cent of the Rs 1,000-crore loan it received from ICICI Bank early thisSource: Business Line - Home Page | 23 Dec 2008 | 12:00 am LIC Bill seeks to trim pay-out to policy holdersNew Delhi, Dec. 22 Amid protest from the Left parties, the Government on Monday introduced a Bill in the Lok Sabha to raise the minimum capital of Life Insurance Corporation to Rs 100 crore from the existing Rs 5 crore. Insurance regulator IRDASource: Business Line - Home Page | 23 Dec 2008 | 12:00 am Uncertainty in business momentum looms largeBangalore, Dec. 22 Growth for the Indian IT sector came under a reality check in the year that saw major global customers in US and Europe wilt under the weight of an economic recession.Source: Business Line - Home Page | 23 Dec 2008 | 12:00 am Day Trading GuideDLF is experiencing selling pressure at higher levels. Initiate fresh short-position if the stock declines below Rs 304 with tight stop-loss.Source: Business Line - Home Page | 23 Dec 2008 | 12:00 am Cos turn to need-based leasing of commercial spaceNeed-based leasing of IT space seems to be ‘gaining ground’ in commercial real estate. For the last few years, IT firms had been maintaining a healthy bench and going aggressive on hiring. This, in turn, meant taking a two-three yearSource: Business Line - Home Page | 23 Dec 2008 | 12:00 am Why oil prices should not fall beyond a pointThere seems to be no stopping the oil prices’ fall, just as there was no stopping its rise earlier this year. Truly, oil’s movement has been dizzy, climbing to a high of $147 a barrel in July only to drop to around $50 today, and set goSource: Business Line - Home Page | 23 Dec 2008 | 12:00 am Cairn strikes more oil, gas in Rajasthan blockNew Delhi, Dec. 22 Cairn India Ltd has struck more oil and gas in its Rajasthan block which could take the estimated production from the area beyond the targeted 175,000 barrels a day bySource: Business Line - Home Page | 23 Dec 2008 | 12:00 am Wockhardt (Rs 111.75): BuyWe recommend a buy in Wockhardt from a short-term horizon. It is evident from the charts of Wockhardt that the medium-term downtrend which commenced to decline from the resistance level at Rs 210, halted at Rs 88.8 in early December, which isSource: Business Line - Home Page | 23 Dec 2008 | 12:00 am Cracks in realty lobby as prices are slashed by 15-30%After months of steadfastly offering minor freebies to boost dwindling property sales, developers in Mumbai and Thane are cutting rates by as much as 15-30%, if not more.Source: Daily News & Analysis: Money News | 22 Dec 2008 | 10:31 pm Toyota Motor expects loss after 71 yrsToyota Motor Corp, the world's second-largest automaker, has forecast its first operating loss in 71 years because of plunging sales in US and Europe.Source: Daily News & Analysis: Money News | 22 Dec 2008 | 10:30 pm Global, domestic logistics majors queue for Delhi cargo airportSeveral Indian and international aviation and logistics companies such as Air India, Singapore Airport Terminal Services (SATS), Menzies, Bobba, Swissport, Bird Group and Worldwide Flight ServicesSource: Business Standard | Front Page Headlines | 22 Dec 2008 | 6:52 pm Mallya, Slim in race for Honda F1Liquor and airline business tycoon Vijay Mallya is pitched against Mexican billionaire and one of the world's richest men Carlos Slim Helu, among others, to buy the Formula One team of Japanese autoSource: Business Standard | Front Page Headlines | 22 Dec 2008 | 6:51 pm Unitech board okays plan to raise Rs 5,000 croreCompany to call EGM for shareholder approval on January 19.??The board of Unitech Ltd, the countrys second largest realty company, has approved a plan to raise Rs 5,000 crore through debt andSource: Business Standard | Front Page Headlines | 22 Dec 2008 | 6:49 pm Biyani may seek peace with suppliersKishore Biyani, the retail baron, seems ready to smoke the peace pipe with suppliers with whom he has been at loggerheads for the past few months.Source: Business Standard | Front Page Headlines | 22 Dec 2008 | 6:45 pm Bad asset norms may be relaxedRBI may delink defaulting firm from group.Source: Business Standard | Front Page Headlines | 22 Dec 2008 | 6:44 pm Left, UPA come to blows as govt tables insurance BillsTwo Bills introduced in Parliament on the insurance sector riled the Left parties so much that they came to blows with the government on the floor of the Rajya Sabha.Source: Business Standard | Front Page Headlines | 22 Dec 2008 | 6:30 pm India and China still no match for US spendingMumbai: They were supposed to keep the good times going: Prakash Shetty, caught recently thumbing through Singh is Kinng DVDs at a mall in India, and Zhu Xiaolin, who enjoys cute Adidas sportswear and Body Shop cosmetics in China. But how far can Shetty and Zhu, both 26, and other Asian consumers go to save the groaning global economy? Just how many Buicks, Barbie dolls, Wrangler jeans, waffle fries, kiwi lip balms and plastic thingamajigs are they willing or able to buy? Not enough, it turns out.  Hyperbolic expectation? A store at the Ambi Mall in Gurgaon. Companies that have entered India and China are finding these markets still too small to make up for the slowdown in the US and other rich countries. Ramesh Pathania / Mint China will be the world’s third largest consumer market by 2025 and India will be No. 5, ahead of Germany, McKinsey and Co. has predicted. As US sales swooned this year, emerging markets were the sole bright spot on many balance sheets. But such heraldry obscures a painful bit of math: US consumers still buy at least five times as much as Indian and Chinese shoppers combined. Companies such as Adidas AG that have plunged into India and China are finding that these markets are, by and large, still too small to make up for the slowdown in the US and other rich countries. Also, India and China are not immune to the global crunch. Declining exports, particularly in China, and tight credit have cooled spending growth, despite the favourable long-term trends. Chinese consumer spending is projected to reach $1.3 trillion (Rs61.62 trillion) this year, according to Euromonitor International, a market research firm. That would approach France’s $1.4 trillion, but pales in comparison with the US’ $9.9 trillion. Indian consumers will spend $660 billion. “In dollar terms, they can’t offset,” said Arvind K. Singhal, chairman of Technopak Advisors Pvt. Ltd, a retail consulting firm based in New Delhi. It’s not that Indian and Chinese shoppers aren’t eager. Take Shetty. Trim and gregarious, he just got promoted to assistant manager at the Leela Kempinski, a luxury hotel in Mumbai where rooms were going recently for $280 a night. After he got the news, he handed his mom a fistful of cash, bought a television set, two cellphones (one for his dad), a stack of DVDs, a $700 gold necklace for his fiancée and a couple of new outfits for himself. “You feel great when you buy new clothes,” he said, fending off a small crowd at the DVD rack of Big Bazaar, a popular discount shop. His appetite for shopping helps explain why growing markets such as India and China “may make up for some of the stagnation you have in more mature markets”, said Jan Runau, a spokesman for Adidas. By the end of this year, China is expected to surpass Japan as the second largest market for Adidas worldwide, after the US. But, Runau cautioned that once other countries entered the recession, India and China would be affected: “They can’t make up for everything.” Dell Inc., the world’s second largest personal computers maker, saw revenues grow 48% in India and 18% in China in the third quarter, but global sales still fell 3% to $15.2 billion. The two markets contribute about 5% of the company’s revenues, while the US accounts for half. “It’s starting to have a meaningful impact on Dell’s results, but it’s not enough to offset what’s going on in the US,” said Steve Felice, president of Dell Asia Pacific and Japan.
Now the economies of India and China, too, are slowing. Their stock markets have plunged, people are finding it harder to access credit, and fears of job losses have shaken consumer confidence. Lower export growth in China is spilling over into consumer spending, as workers fret about pay and job security. Zhu, who works at an export company in Shanghai, has been trolling the Internet for shopping deals, because she is not getting a bonus this year. “Companies that can’t manage to sell their export items are selling online at very low prices... It doesn’t mean I don’t like shopping in stores, but I can’t afford that right now.” Despite government efforts to spur domestic spending, many Chinese remain frugal, concerned about saving for health care and retirement. “Consumer demand is not going to be the answer to disappearing exports,” said Robert Lawrence Kuhn, chairman of Kuhn Global Capital Llc. and an adviser to the Chinese government. “China’s domestic consumption is necessary but not sufficient to stabilize China, much less the world.” India relies less on exports. They account for about 20% of the Indian economy, versus 35% in China. Still, the global financial crisis has hit the Indian stock market and sparked a nasty credit crunch. Gibson Vedamani, chief executive of the Retailers Association of India, says overall retail sales in India will likely grow 8-10% this year, down from about 30% last year. Sales of basic items such as food and clothes, which account for most Indian spending, have held up far better than credit-driven purchases, such as homes and cars. “We are not seeing a slowdown on basic products,” said Kishore Biyani, chief executive of the Future Group, India’s largest retailer, whose holdings include discounter Big Bazaar. He’s still hiring and plans to expand total floor space from 11 million sq. ft to 16 million sq. ft by June. Most Indians won’t set foot in Biyani’s sweeping 16 million sq. ft for years, however. The masses still struggle, parcelling out their rupees at the hot, hectic mom-and-pop shops that dominate the landscape. “We won’t buy from the mall,” said Suraj Buralkar, 21, who dropped out of school and started driving a taxi to help support his parents and three siblings. “The mall is too expensive for us.” Still, Buralkar is on his way. Earning just Rs3,200 a month and working overtime to satisfy his gnawing desire for stuff, he saved enough to pluck a pair of jeans, at Rs1,300, from one of India’s teeming roadside bazaars. Elaine Kurtenbach in Shanghai and Monika Mathur in New York contributed to this story. Source: World Business - Livemint.com | 22 Dec 2008 | 6:25 pm Mallya, Carlos Slim in the race to purchase Honda’s F1 team London: Business tycoon Vijay Mallya is pitched against Mexican billionaire and one of the world’s richest persons, Carlos Slim Helu, among others, to buy the Formula One team of Japanese auto firm Honda Motor Co. Ltd, a report said on Monday.  Pulling out: A 15 May photo of Britain’s Jenson Button driving a Honda F1 car. Honda put its Formula One team on the block earlier this month as it decided to move out of the racing activities due to the slowdown. Claude Paris / AP In a report published on Monday, automotive industry website Motor Authority said Carlos Slim, Force India’s Mallya and UK-based motorsport and auto engineering group Prodrive Holdings Ltd’s David Richards have emerged as the potential buyers. The other interested parties include a Swiss hedge fund and Greek shipping tycoon Achilleas Kallakis, it added. Force India formula one motor racing team was formed last year after a consortium led by Mallya bought the Spyker F1 team for £88 million (Rs621 crore today). Noting that Richards has “has travelled to the Middle East for talks with investors,” the report said, “another serious candidate is Carlos Slim, a Mexican billionaire, who is the second richest man in the world.” “68-year-old Slim, who controls the telecommunications company Telmex, gave the game away when he visited the embattled team’s UK headquarters last week,” it said, adding, “His helicopter, displaying his official crest, was too big to be landed on the helipad, so the team had to clear the carpark.” “A takeover by Slim would boost the chances of GP2 driver Bruno Senna, who is backed by the Telmex subsidiary Embratel,” the report said, adding “it is also believed that Force India’s Vijay Mallya has expressed an interest in the team, as has a Swiss hedge fund and Greek shipping tycoon Achilleas Kallakis”. The report quoted Honda F1 team’s chief executive officer Nick Fry as saying, “We have had a high level of interest in the team since Honda announced their withdrawal from formula one... Work on the build (up) of our 2009 car continues to ensure our objective of being on the grid at Melbourne in March will be achieved.” Indicating that it might have to shut down the Formula One racing outfit if no buyer was found, Honda chief executive Takeo Fukui said, “We, Honda Motor Co. Ltd, have come to the conclusion that we will withdraw from all Formula One activities, making 2008 the last season of participation. “This difficult decision has been made in light of the quickly deteriorating operating environment facing the global auto industry, brought on by the subprime problem in the US, the deepening credit crisis and the sudden contraction of the world economies,” he said. Source: World Business - Livemint.com | 22 Dec 2008 | 4:51 pm
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