Article first published as French President Woos India Against the United States on Blogcritics.
France President Nikolas Sarkozy is now on India tour along with his wife Carla Bruni for four days from November 4 to November 7. The US president Barack Obama began his India visit with India’s business hub Mumbai. Sarkozy chose India’s technology hub to start his India tour. He brought 50 member business community and top cabinet officials including Economy minister Christine Lagarde along with him. Sarkozy seems to have come on a top mission along with signing some business contracts.
Strategic and Business Goals
During his speeches on November 4 and his interview to Times of India newspaper, Sarkozy outlined his top political and trade related priorities on global arena of his India tour. Very important offers extended to and requirements sought from India are as follows:
Supporting France’s G20 agenda to reform global monetary system during its G20 presidency in 2011
Improvements in global governance
Help maintain greater stability in commodity prices
In return, to the help in achieving the above-mentioned France’s goals, Sarkozy offered following package.
Helping Rupee to become one of the major currencies in the world
Support India’s long standing demand of securing permanent seat in UN Security Council
Some business contracts will be concluded during Sarkozy’s visit. Major one is a memorandum of understanding signed between a French nuclear group Areva and India’s Nuclear Power Corporation of India Limited (NPCIL) to supply at least two water-pressurised reactors worth 7 billion euros ($9.4 billion or Rs 43,240 Cr). France is competing with the US company Boeing to supply 126 fighter jets. France’s defence electronics group Thales is hoping to gain a contract to modernise 51 mirage 2000 planes.
PTI | Yahoo News | 25/11/2010
The Supreme Court today came down heavily on the CBI for failing to question former Telecom Minster A Raja and Telecom Secretary in the 2G Spectrum scandal, saying it was "beating around the bush". A bench of justices G S Singhvi and A K Ganguly wondered why the premier investigating agency failed to question the duo despite the CVC and CAG report sharply indicting them for their involvement.
"We are on the limited point. The CAG under the constitution has a very important position. It is an authority set up under the constitution. "Any responsible person will question the involvement of the Minister and the Secretary and you (CBI) say that 8,000 documents have been examined. You are beating around the bush. It was (questioning) minimum expected of the CBI. What do you take this court for," the bench observed during the argument.
Explaining the delay, senior counsel K K Venugopal submitted that the CBI has its own methods of investigations.
Article first published as Indian Government Mired in Corruption Scandals on Blogcritics.
Indian Parliament’s winter session is facing a deadlock with the opposition parties demanding setting up of a Joint Parliament Committee (JPC) for probing into the Rs. 1.76 lakh crore ($39 billion) worth corruption scandal of the former Telecom minister A Raja. The government has been mired in series of scandals this year such as corruption in CWG arrangements because of which three top officials have already been suspended.
Telecom scandal has occupied headlines with the revelation of the government watchdog Comptroller and Auditor General in its report that the licenses for 2G spectrum were allotted at cheapest costs for a chosen set of companies. CAG has implicated the former Telecom minister A Raja, who resigned a week back for deliberately avoiding established procedures in sale of 2G spectrum to private companies.
CAG report said the government has lost $39 billion because of not auctioning 2G spectrum licenses. Instead of going for auctions, the minister has sold the spectrum licenses on first-come-first basis. CAG alleged that the minister took interest in particular companies. He did not give much time to other companies to place their applications, CAG said. The minister did not even listen to the Prime Minister’s suggestion that he should go for auctioning spectrum licenses as per the CAG report.
Reprimanding Prime Minister
As if that is not enough, the Supreme Court has reprimanded the Prime Minister for keeping calm for 16 months on permission sought after by a lawyer through a Public Interest Litigation to prosecute the minister. The Prime Minister Manmohan Singh is considered Mr Clean among Indian politicians. The bureaucrat turned politician, Manmohan worked as finance minister in the Congress government during 1991-96 period and introduced globalization policies for Indian economy. He is the most sought politician by the western countries that have been pushing India to open up its economy for foreign multinational companies.
Article first published as Indiaâ€™s Policy Review: RBI Raises Rates, Says Last Time in Near Future on Blogcritics.
RBI has raised bank ratios again by 25 basis points in its November 2 policy review. It has lifted he repo rate, at which it lends to banks, to 6.25 percent and reverse repo rate, at which it absorbs excess cash from the system, to 5.25 percent. RBI has discussed global and domestic scenarios in its second review of monitory policy 2010-11.
RBI has noted that though IMF revised upwards its forecast for world growth in its October 2010 World Economic Outlook from 4.6 to 4.8 percent, growth in advanced economies like the US and Japan has been still sluggish. Unemployment, modest income growth, lower housing wealth and tight credit were impediments for the US growth, RBI said. It noted that slowdown in industrial production and exports’ growth reflected the moderation of economic recovery in Japan.
However, the Euro region is showing signs of resilience in the aftermath of the sovereign debt crisis which is again uneven. RBI has said the growth in the Emerging Market Economies (EMEs) continued to be strong. It has particularly pointed out that the strength of the EMEs is led by domestic demand but supported by exports, indicating that without the exports’ support, the growth could be weaker.
RBI says India’s growth set in second half of last fiscal year, is consolidating with Q1 growth recording at 8.8 percent. It expects normal South-West monsoon will contribute to increase in Agricultural production. RBI and Planning Commission have been telling for last one and half years that the normal monsoon will help reduce the stubborn inflation, which is proved wrong. It seems they still do not find any fresh reason for showing as pretext for high inflation.
Industrial growth has been robust but volatile with average figure of 10.6 percent during April – August 2010. Volatility suggests deceleration but momentum is continuing. Direct and indirect taxes increased over the last year.
In the following, FII is providing a summary of the discussion paper by DIPP about the “Issue of Discussion Paper on Foreign Direct Investment (FDI) in Multi-Brand Retail Trading” with the most important points.
The discussion paper starts with the present scenario, according to which Multi-Brand retailing is prohibited in India, but FDI in Single-Brand Retailing is permitted since 2006, to the extent of 51%. Since then, a total of 94 proposals have been received till May, 2010. Of this, 57 proposals were approved. An FDI inflow of US $ 194.69 million (Rs. 901.64 crore) was received between April, 2006 and March, 2010, comprising 0.21% of the total FDI inflows during the period, under the category of single brand retailing.
FDI in cash and carry wholesale trading was first permitted, to the extent of 100%, under the Government approval route, in 1997. It was brought under the automatic route in 2006, the paper reports.
A number of CONCERNS have been expressed with regard to opening of the retail sector for FDI. The first is that the retail sector in India is the second largest employer after agriculture. As per the latest NSSO 64th Round, in 2007-08 retail trade employed 7.2% of total workers and provided job opportunities to 33.1 million persons. A second would be that FDI would lead to unfair competition and ultimately result in large-scale exit of domestic retailers, especially the small family managed outlets, leading to large scale displacement of persons employed in the retail sector. Further, as the manufacturing sector has not been growing fast enough, the persons displaced from the retail sector would not be absorbed there. A third argument listed by the discussion paper is that the Indian retail sector, particularly organized retail, is still under-developed and in a nascent stage and that, therefore, it is important that the domestic retail sector would be allowed to grow and consolidate first, before opening this sector to foreign investors.
From the retail front, the discussion paper comes to the backend and argues that there would be “limitations of the present setup”, as there has been a lack of investment in the logistics of the retail chain, leading to an inefficient market mechanism. Though India is the second largest producer of fruits and vegetables (about 180 million MT), it has a very limited integrated cold-chain infrastructure. The chain would be highly fragmented and hence, perishable horticultural commodities find it difficult to link to distant markets, including overseas markets, round the year. STORAGE INFRASTRUCTURE is necessary for carrying over the agricultural produce from production periods to the rest of the year and to prevent distress sales. Lack of adequate storage facilities cause heavy losses to farmers in terms of wastage in quality and quantity of produce in general, and of fruits and vegetables in particular.
Reuters | Oct 18, 2010 | 8:32pm IST
A majority of an Indian review panel recommended on Monday that environmental clearances given to South Korea’s POSCO for a steel mill in Orissa be cancelled because the project could violate forest laws. The panel’s findings are not binding, and a final decision on what has come to be seen as a test case of India’s investment climate lies with Environment Minister Jairam Ramesh.
The panel recommended that POSCO be asked to carry out a fresh environmental impact assessment for the $12 billion mill, touted as India’s biggest foreign direct investment, which has already been delayed by more than three years. The South Korean company is among several corporations, including London-listed Vedanta Resources, whose Indian projects have come under scrutiny by an environment ministry that has been tightening rules — often bringing it into conflict with other government departments pushing for rapid industrialisation. A POSCO official in India declined to comment.
In August, India’s environment ministry ordered a halt to all work on the project, including land acquisition, while the panel investigated if the Forest Rights Act that seeks to protect forestland and settlers had been violated. POSCO was scheduled to begin production from its plant in Orissa’s Kujanga region by the end of 2011.
The memorandum of understanding for the mill was signed in June 2005 that also included captive iron ore mining rights in the state’s Khandadhar area. But the world’s third-largest steelmaker faced delays arising from protests from local residents who stand to be affected by the plant as well as the environment ministry probe.
Reuters | Oct 8, 2010 | 7:18pm IST
Oil and Natural Gas Corp said it would issue its response to Cairn Energy’s plans to sell a controlling stake in its Indian unit to Vedanta Resources "very soon.” The company is also in talks with the Indian government about the royalties it must pay on the fields it co-owns with Cairn India, and hopes that it will find an outcome, which limits its liability — potentially at the expense of Cairn or Vedanta.
"We have been raising that issue… we are in discussions with the Petroleum Ministry and the Finance Ministry," said Chairman R.S. Sharma. "I’m very positive that we will be able to get a solution to our satisfaction." Following an exemption offered some years ago to encourage companies to explore in India; Cairn is not liable for royalties, while ONGC must pay royalties on the oil blocks.
Reuters | Oct 7, 2010 | 3:24pm IST
India-focused miner Vedanta, which posted mixed second quarter output data, has postponed expansion of aluminium operations after India rejected a plan to mine the raw material to make the metal. In August, India denied London-listed Vedanta a permit to mine bauxite in Orissa over environmental concerns. "Since final clearance was not granted for bauxite mining at Niyamgiri, we have reviewed our capital expenditure programme," Vedanta said in its quarterly production report.
The impact on capex was tentatively estimated at $1.5 million to $2.0 billion over the next two years, chief executive Mahendra Mehta told a conference call. The launch of the second phase at the Jharsuguda smelter and a new Korba smelter were being temporarily deferred as well as work on an expansion of its bauxite refinery.
In September, the environment ministry said it had found serious violations at Vedanta’s refinery that uses bauxite to make alumina, an intermediate product. Vedanta, which is continuing to operate the plant at a production rate of 1 million tonnes per year, had planned to expand the refinery’s annual output to 6 million tonnes.
Vedanta shares rose 0.6 percent to 2237 pence by 0906 GMT, compared to a 0.4 percent fall in the British mining index. The shares have underperformed the mining index by 23 percent this year as the group has been hit with setbacks. "On balance (the news) is negative, but most of this bad news was already known to the market and the expansion cuts should come as no surprise," said analyst Andy Davidson at Numis Securities in London.
Reuters | Oct 2, 2010 | 1:18am IST
The maker of the BlackBerry Smartphone has granted India’s government manual access to its Messenger service and has promised automated access by Jan. 1, enabling authorities to track such messages in real time, the country’s top interior ministry official said on Friday.
India, one of the world’s fastest growing mobile telephone markets, also wants access to encrypted email traffic sent via Research In Motion’s enterprise servers. The BlackBerry maker says its system is designed so that only the sponsoring business or organization has the technical capability to grant such access.
India, among several countries to express concerns BlackBerry services could be used to stir political or social instability, has threatened RIM with a ban if denied access to the data. RIM won a 60-day reprieve from India at the end of August after offering India a solution to monitor some BlackBerry data, a claim yet to be confirmed by the Canadian firm. "We have manual access to the Messenger service. We want automated access and we are hopeful of getting it from January 1," G.K. Pillai, India’s home (interior) secretary, told Reuters.
At the moment, security agencies are getting manual printouts of chat messages within four to five hours of placing their requirements with RIM, a home ministry source said, adding that once it gets automated access, it
Reuters | Sep 28, 2010 | 5:59pm IST
The World Bank is exploring whether to invest in an $11 billion debt fund the Indian government will roll out by next year as part of a massive push to its infrastructure sector, the bank’s India head said. Roberto Zagha said India was making progress in tackling procedural hassles that have held back faster infrastructure growth but a major roadblock to more private investment was a shortage of bankable projects.
The World Bank was likely to lend around $15 billion to $20 billion to India’s infrastructure sector in the next five years. Typically, the bank’s lending to the sector ranges between 40-60 percent of the total annual lending.
The government has announced the $11 billion debt fund as a part of a series of recent measures to overhaul India’s creaking infrastructure, which has long been seen as hobbling faster growth in Asia’s third-largest economy. A similar fund is also under consideration for the power sector.
"It is being explored," Zagha said in an interview as part of the Reuters India Investment Summit, when asked whether the World Bank would contribute to the fund. "Our role is not entirely clear, whether there is a need for finance from the bank, or whether there is a need for expertise from the bank," he added.
Reuters | Sep 27, 2010 | 7:16pm IST
India’s power sector is increasingly attractive to investors, but domestic firms with local knowledge and improving access to offshore funding will still dominate the industry for the near future, a senior government adviser said. Overseas investors have mostly limited themselves to making loans or buying stakes in listed Indian firms, even though India allows 100 percent foreign direct investment (FDI) in power.
"The main entrepreneur continues to be Indian. This model we find is not a bad one because he knows the conditions here, he’s able to handle it much better than a foreign partner," said Bal Krishna Chaturvedi, the Planning Commission’s member in charge of energy and infrastructure. "I don’t see any completely independent plants being set up by foreign companies," he said in an interview on Monday for the Reuters India Investment Summit.
India has targeted investment of $350 billion to $400 billion in the power sector in the five years ending March 2017. Half of India’s total infrastructure expenditure between 2012 and 2017 is expected to come from the private sector. Difficulties over land acquisition and securing coal, navigating the thicket of regulatory red tape and delays that can derail assumptions on returns have kept all but a few foreign players such as Hong Kong’s CLP Holdings from operating their own plants in Asia’s third-largest economy.
Reuters | Sep 17, 2010 | 9:02am IST
Energy major Reliance Industries is in talks with U.S.-based Chesapeake Energy to buy a stake in Eagle Ford shale gas project, a source with direct knowledge of the matter said on Friday. Financial terms of the deal have not yet been finalised and Reliance may form a joint venture with Chesapeake to develop the asset, said the source, who declined to be named. Reliance Industries declined to comment.
On Thursday, Chesapeake CEO had said the company expects to strike a joint venture deal for the Eagle Ford acreage in the next 30 days, but did not name a partner. A U.S. brokerage firm said last month that Reliance is a likely partner for Chesapeake Energy’s Eagle Ford shale acreage. Reliance, controlled by billionaire Mukesh Ambani, has struck three shale gas joint ventures with U.S. firms this year. The company has received about 20 to 25 pitches from investment bankers for shale assets, Chief Financial Officer Alok Agarwal has said.
(Article first published as Reserve Bank of India Beats Forecast on Rate Hike on Technorati.)
The Governor of Reserve Bank of India, Duvvuri Subba Rao could not allow himself lagging behind the trend of beating forecast by growth numbers of India. At the quarterly review meeting on Sept 16, 2010, the RBI raised interest rates more aggressively than expected. The RBI lifted repo rate, at which it lends to banks and other financial intermediaries, by 25 basis points to 6 percent. It also lifted reverse repo rate, at which RBI absorbs the cash from the system, by 50 basis points to 5 percent.
The deference between the repo rate and reverse repo rate is decreased from 1.25 percent to 1 percent, signalling that the central bank is committed to control the high rate of inflation. "Inflation remains the dominant concern in macroeconomic management," the central bank said in a statement released to reporters. “Monetary Policy Review: September 2010,” almost confirmed that the inflation rates have reached their peak, but cautioned it is likely to remain at unacceptably high levels for some months.
Several factors prompted the central bank to rein in the inflation, which is still nearer to the double-digit figure. Almost double the forecast growth (13.8 percent) of Industrial output in July 2010; rocket speed rise of the share markets; and robust annualized growth rate of GDP (8.8 percent) for the quarter ending with June 2010 necessitated controlling the money supply in the system.
Indian Express | Sep 16, 2010 | 04:20 PM
The Supreme Court today put some searching questions to Board of Control for Cricket in India (BCCI) on permitting its Secretary N Srinivasan to bid for Chennai Super Kings, a franchise of IPL championship, as there appeared to be a "conflict of interest." A Bench of Justices J M Panchal and Gyan Sudha Mishra, during the arguments, said Srinivasan, being a key member of BCCI, should have ideally suspended his association with the Board before bidding for the franchise, which he had successfully won. "An amendment has been brought and there seems to be a conflict of interest. Can a person be a judge of his own case? "I am hearing the matter relating to the controversy. But can I participate in the bidding of IPL teams tomorrow?" Justice Sudha, speaking for the Bench, asked Attorney General G E Vahanvathi who appeared for the Board.
The apex court posed the query during the daylong hearing of the petition of former BCCI president A C Muthiah challenging the amendment made by the Board in its regulations to allow administrators to bid for franchises in IPL and T-20 tournaments. The Bench said Srinivasan, who was at that time the Treasurer of the Board, should have got his membership suspended as he definitely had a stake in the IPL tourney. "You introduce an amendment where the IPL will be an exception. You are a prominent industrialist holding a key position in the Board and have a stake in the bidding. "In order to avoid suspicion and be above board, you should have got your membership suspended," the Bench said.
PTI | Sep 15, 3010 | 09:43 PM
As the fate of its USD 1.7 billion bauxite-mining unit proposed in Orissa hangs in balance, Vedanta Resources today denied violating any laws in connection with the project while replying to the show-cause notices served by the environment ministry. "Vedanta Aluminium Ltd has submitted its reply along with supporting documents to both the show cause notices issued by the ministry on August 31," said Mukesh Kumar, chief operating officer (Lanjigarh) of the firm.
"Once again Vedanta would like to reiterate that no violation has been done by it on any account and Vedanta is a law abiding company and have high respect for the law of the land," he said in a statement here. However, officials in the environment ministry maintained that they were yet to receive the reply from the company.
The ministry had served the show-cause notices on the company based on a report submitted by the NC Saxena panel, which had accused the company of violating a host of regulations at the site. The UK-based Vedanta Resources has been