towards 3rd issue

8/14/2019 Towards 3rd Issue

1/34

towa

rds

.MergeDream1Dream2;

An effort by Stockyard in association with mantra consulting grou

25th A ril 2008 Issue 3w.stockyard.infinities.net

ContentHow to conquer India

Company Search: RIL

Economy: ADB Repor

Economic Forecast

08/09

Business News

G7 meet for crisis

Industry Analysis

Semi conductor I

Casting Industry

Guest Colum: Inflatio

Political Radar

Tata Group

Soros


2/34

How to conquer India

Probably, we wont understand the power of our culture and

education system. Here is a rare historical document which revel

our strength. Document itself is self explanatory.


3/34

Editorial

A small story.about a cable operatorin 2002...just6 years before.he

was very upset that Set-top boxes have come and Government is unnecessarily

tinkering with his operations ,putting in service tax,etc,andhe felt it was

unprofitable to function in such a scenario..

And a journey began

In 2003 he entered Cinema business...In 2006 he brought IPO Andtoday, his firmhas

become an Entertainment Conglomerate spanning continents and businesses.

Pyramid Saimira and Mr P.S.SamiNathan has turned his small cable

operator business into Worlds 3

rd

largest Cinema Operatorwith nearly 4.5Lakh seats as of January 2008.

And if He has to be believedPyramid will be Number 1 globallyby the end of this

Year.

The group has emerged as a holistic Entertainment supply chain with Market capitalization of

more than Rs 900 crore. Company has taken theatres and multiplexes on long leases and is in

the process of upgrading them to a uniform high quality experience.

Some of the feathers in cap:

Company is the largest distributer of Movies in India with 65 films this year. Its Network includes 53 multiplexes with around 800 screens across India,

Malaysia, Singapore and North America.

In USA, it has acquired a Theatre Chain, Fun-Asia, the largest Asian theatrechain operating 23 screens in Washington, Chicago and the Bay Area.

More than half of south Indian language films are being distributed byPSTL.PSTL has produced 13 films and plans to produce over 70 films in coming

year, at a combines value of over Rs 700 crore,in various languages.

Recently Saimira has entered in a JV with UK-based Spize TV, a DTH platform. In the next 2 years, the group plans to operate 175 multiplexes with 2,000

screens in India alone. Company is expecting revenue of Rs 1,000 crore this

year, from last years Rs 166 crore.

This could make it one of the fastest growing companies in the Indian

growth story!!!


4/34

This is the power of DreamAre your dreams equally powerful???

Dreams.Are not those that are seen in deep sleepiness.

Dreams born in deep Human consciousnessDreams born in deep creativitySometimes in

deep frustration too.

I have always felt a dream in me...Since I remember consciouslyand I believe there is a

dream in you alsomay be in most of our hearts

We have dreamsbit of dreamsin fractionsin piecesthey germinatesproutgrow a little

and finally die downWhy? Because perhaps we do not sprinkle and water our dreams with

love

So, should we all let our dream die an unnatural death.? Or is there a way out? To let

dreams flourish let them cherish.let them realizeAndlet them spread in all over the

worldtouching all the lives

Yes There is a way out

I have a dreamyou have a dreamAndfor that matterwe all have wishes, desires

,ambitions and these uncherished dreams

Lets merge them together

In SAS Programming all it takes is fewcoding to merge big files of GBsI often

thinkcould we all merge our dreams togetherlike we merge files in SAS.

Just think over itIf we all come togethershare our dreamsweed out fewcontentious jerks

from themand whatever is left outthe creamthe flowerjust put them one behind

otherjust attach all our dreams like a garland and see our dreams becoming ONE ..A

bigbiggerstill bigger dream...a MEGA...GIGA DREAM..

Just imaginelooks weirdright..?Stilljust try once

How does it look?Possible..? Menifestable? More beautiful.?Achievable.?

And then you ask.How to do it?

Let us all discuss all our dreamsLet us churn out ourselvesput all our dreamscreativities in

one basket stir our mind and conscienceAnd come closerand closer.day by day

The Dream is bornit was always here.the delay was in realizing and manifesting it

A dream is about to born in youand it is crying to be manifestedDo not let it diejust

because you did notcare.


5/34

This issue 3rd

in seriesis dedicated to the idea of merging our Dreams

togetherso that we all could realize our dreams in unityin Oneness.

We have a special article on Inflation, contributed by Mr Kankan PaulWho has tried to bring

out all possible explanations on Inflation the single most challenging issue in Global

Economy and society.

We have also included an in-depth analysis on Global; Asian and Indian Economy from the

perspective of Asian Development Bank.ADB has recently come up with its 300+ pages report

on Economy. We have tried to sum-up and provide a gist of it to you.

In our equity research section, we have tried to analyze some of TATA Group companies in a

fundamental perspective.

We also covered a brief outlook and potential of Semiconductor Industry in India for our

Industry Analysis.

May all our dreams come together and cherishAmen.!!!

With this notethe Issue is in your hand.

With Love and Affection


6/34

Company Searc

RIL to sell 10% in KG Basin

RIL may hive off its KG basin D-

6 assets into a separate

company and offer stake to a

foreign player. The gas output

from RILs D-6 block in the KG

basin may rise another 50% to

120 mmscmd after eight new

discoveries. With the gas projection from KG b

being increased to 120 mmscmd and comme

production just a quarter away, the valuatio

the field will go up by 50%. Last year, Gold

Sachs had valued RILs D-6 block with 14 tri

cubic feet (tcf) reserves close to $40 billion.

RIL-RNRL case in HC today

The Bombay High Court on Friday will start hearing

the Reliance Natural Resources (RNRL) Reliance

Industries (RIL) case over the vexed gas supply

issue on a day-to-day basis. The outcome of the

case will have enormous implications for RIL, RNRL

and for the entire country as gas production isslated to begin in a few months. This is because

the court has restrained RIL from selling upto 80

mmscmd of gas to any third party. RIL, not being

able to firm gas contracts, had sought that the stay

be lifted. Selling gas at $2.34 per mmbtu will halve

the valuation of the KG-D-6 block. A consortium

comprising Reliance Industries (RIL) has made a

significant oil discovery in Yemen. The discovery in

Block 9 in Qarn Qaymah 2 well is learnt to be

significant, and RIL is in process of evaluating thepotential commercial interest. Block 9 has an

output of 10,000 barrels of oil per day (bopd),

operated by Calvalley Petroleum of Canada holding

a 50% stake. Hood Oil, subsidiary of the Yemen-

based business group, Hayel Saeed Anam Group

(HSA) owns 25% in this block. RIL is setting u

greenfield refinery in Yemen with an in

capacity to process over 50,000 bopd and sca

up to 1,00,000 bopd. It has also sought permis

to set up petrol pumps there. RIL has propo

equal equity participation with partner Hood Othe project. The refinery may comme

operations by 2011. RIL operates a 33-mil

tonne refinery in Jamnagar and is commissio

another 27-million-tonne refinery in the Jamn

SEZ, making it among the worlds largest refine

at a single location. Besides Block 9, RIL

acquired stake in two onshore oil blocks, 34

37, in Yemen where it is partnering Hood Oil.

blocks measure 7,500 sq km each and are loc

along the border with Oman. RILs other gl

exploration assets comprise of two blocks eac

Oman and Columbia and one each in East Ti

and Australia covering an area of about 38,00

km.

RIL planning to enter Rigs manufacturing business

Reliance Industries is scouting for a partner to

enter into the rig manufacturing business besides

investing $2.5 billion to venture into petrocokegasification. Keen to sort out the rig availability

problem that is being faced by the oil and gas

industry, RIL would get into oil field services

business, which includes rig manufacturing. The

company had in October 2007 sought a three-year

drilling holiday for exploring nine deep sea blocks it

won through NELP auctions due to rig shortage.

The proposed rig manufacturing facility would be

operational by the end of the current fiscal or at

the beginning of the next financial year.

company would invest $2.5 billion for its petro

gasification project, which would replace napas feedstock to its captive power plants at

Jamnagar facility. At present, the fuel for cap

plants is sourced from crude oil. Due to surg

price of crude, company is thinking of making

by gasification of petrocoke. RIL plans to expan

power generation capacity to 850 MW from

MW.


7/34

ECONOMYAsian Outlook

Economic activity in developing Asia is expected to remain

strong and growth of 7.6% is expected in 2008. This solid

performance in an unsteady global economy is underpinned by

favorable policy conditions, strong productivity growth, and

the ongoing structural transformation of Asian economies.

Still, growth projections for 2008 and 2009 are slightly below

the recent historical trend in developing Asia. Developing Asia

will not be immune to the global economic slowdown, nor will

it be hostage to it. Trade channels remain an important

conduit for the transmission of shocks from G3 to Asia. As yet,

market penetration by Asian suppliers in the PRCs (China) final

goods markets is limited, and strong growth in the PRC will

provide only a limited cushion against the G3 downturn. In the

past decade, developing Asia has become much more deeplyintegrated with global financial markets, raising the potential

for contagion. But Asias financial systems are likely to be

spared a credit crunch, though there may be some tightening

in credit markets. Asias banks, which still dominate private

financial markets, are generally well capitalized and there does

not appear to be substantial value at risk on their balance

sheets. In the near term, the major risk lies not so much in

softer growth but in rising commodity prices and accelerating

inflation. If inflation expectations are allowed to become

ingrained, this could create distortions that damage

productivity growth over a protracted period. Though

measures to restrict the impact of rising food prices on the

poor are understandable, these should not be allowed to

jeopardize adjustments that are needed to bring forth

additional supply. Extensive subsidies on fuel come at high

fiscal costa rising burden in several countriesas the gap

between domestic retail and border prices widens. Over the

medium term, and once developing Asia has passed through

the gathering storm of rising commodity prices and inflation,

its growth prospects are likely to depend much more on how

successfully countries manage their economies and overcomedomestic constraints to growth. Developing Asias economy is

expected to expand by 7.6% in 2008, picking up a shade to

7.8% in 2009. These projections suggest a slowdown from

2007s outcome, now estimated at 8.7%, the highest in 19

years. Rising food and fuel prices are stoking headline inflation,

but economic speed limits have also been tested, with recent

output growth straining capacity. If the global slowdown is

concentrated in sectors such as electronics, textiles and

garments, and toys, as recent data appear to suggest, this

Structural Factors for H

crude prices:

Production from the Organization

Petroleum Exporting Countries (O

and non-OPEC production mus

even to meet short-term foreca

demand. The International E

Agency (2008) sees demand risi

1.7 million barrels a day in 2008

most of the added demand co

from Peoples Republic of China,

and the oil-producing countries o

Middle East themselves.

Difficulty in supply keeping up

demand are complex but have

with domestic political const

within the OPEC countries and th

that non-OPEC production has p

and is set to decline.

Alternative fuels such

unconventional sources of oil

sands), biofuels, and natural ga

difficult to develop and involve

investments and lags of up to 5

between investment and productio

Transportation services is gr

rapidly and despite the developm

hybrid engines using combinatio

fuel, there is no meaningful short

substitute for oil-based fuels

transportation services on air, lan

sea.

The rising price of oil is c

associated with the price of natur

as can be seen in sharp increas

fertilizer prices. The price

diammonium phosphatea fer

produced from feedstock of n

gashas risen from $260 per t

2006 (period average) to $76

February 2008.

Higher costs of energy inputs also

electricity costs for use of

irrigation systems, tractor harvester/ thresher fuel costs, an

cost of transporting inputs and ou

related to agricultural production.

Food and oil prices move c

together through time in such a

that a rise in oil prices has a statis

significant positive impact on

prices.


8/34

would hurt Asian exporters. Rising food and fuel prices could

probe developing Asias resilience. Countries that are net fuel

and food importers are likely to be squeezed by adverse

movements in their terms of trade; more so, when unit values

of important export products are weakening, as they now are

for garments and textiles. Asias financial markets are becomingmore closely meshed with global markets. Most measures of

financial integration, and thus potential contagion, have greatly

strengthened over the past decade. Through these channels,

Asian borrowers will feel the pinch in international credit

markets and Asias bourses are likely to experience heightened

volatility. Asian banks are still the main originators of domestic

credit, and their leverage and exposure to unsafe securities are

low, the possibility of the credit crunch washing onto Asias

economic shores seems remote. Most Asian economies have

ample foreign reserves in the event of an unexpected rush to

sell domestic currency. Although the slowdown in global

demand should ease inflation pressures, deep cuts in US

interest rates would add to them if Asian economies do not

allow greater flexibility in nominal exchange rates. Lower

interest rates also tend to make commodities more attractive

as assets and so may support high prices, though the effects on

inflation should be transitory.

Any passive acceptance by Asia of an upward drift in inflation

could deal a hard blow to long-run productivity growth. Even

moderate inflation typically proves costly to get rid off.

Conversely, price controls and extensive price subsidies, thoughthey may temporarily corral inflation expectations, are not the

answer and would stymie market adjustment processes.

Developing Asias exports do respond quickly and in some cases

strongly to variations in G3 demand. Precise impacts differ

depending on the source of the demand shock and trade

structure. Though developing Asias economy is not immune to

the vicissitudes of global demand, its longer-run growth

trajectory will be much more a function of structural and supply-side dynamics. To maint

momentum, countries will have to address and overcome a variety of constraints. In the sh

run, the impact of the global slowdown is likely to be modest: even a highly unfavorable gloscenario that dents growth in developing Asia. Though it is unlikely that price of crude rises w

be sustained secularly, the outlook for the next 2 years is for continuing upward pressure. The

is also a risk that cost inflation may lead to demands for upward adjustment of money wages

increased fiscal outlays to subsidize food and fuel consumption. The subsequent monetization

the fiscal costs coupled with accelerating wage increases are potential triggers for an inflat

spiral of prices and costs.

Structural factors

rising Food prices:

Demand that is driven by

economic growth and urbaniza

particularly in India and the Peo

Republic of China, and assoc

changes in diets that require

grain to produce the same amou

calories for consumption.

Supply constraints arising

competition for agricultural land

its conversion, increasing scarci

fresh water; and migration of

from agricultural to nonagricu

activities;

Direct competition for key food

for nonfood demand (such

biofuels)

Underinvestment in agricu

technologies and infrastructurehave contributed to slow grow

yields per hectare of agricultural

Climate change, which is incre

the incidence of drought and floo

that hit agricultural production.

Global rice stocks have fallen an

expected to reach 25 year lows a

70 million tons this year, down

150 million tons in 2000 (USDA 20

Trade policies currently greatly d

international price signals agriculture and lessen the likeli

of rapid and efficient s

responses. Rice prices are

overwhelming importance

developing Asia because well

50% of its population relies on ri

a staple of consumption, and n


9/34

India Outlook

Key structural challenges include establishing a new fiscal adjustment road map, raising la

productivity, and enhancing structural reforms.

RBI has been attempting to control money supply growth to maintain price stability, wh

seeking to ensure credit market and interest rate conditions that support investment in t

context of relative stability in the exchange rate. But it has had limited success. The year-on-yemoney supply growth of 24% (to end-January) remains significantly higher than the target grow

rate of 1717.5% Strong capital inflows have increased money supply, raising inflation press

and rendering difficult the management of monetary and exchange rate policy. In FY2007,

followed a dual-policy approach to all

greater exchange rate flexibility along w

intervention in the foreign exchange mark

This led to appreciation of the rupee agai

the United States (US) dollar, mainly in t

early months of the fiscal year, and a la

accumulation in RBIs foreign exchange ass

over the full year. While the rupee weaken

slightly in the latter part of FY2007,

appreciated by about 13% against the do

and by about 7% on average for the year

real effective terms. Some developm

agencies project that global food prices

2017 could be 2040% higher than

average of 20022006. India has emerged as the largest importer of edible oils in the world w

more than 40% of its domestic demand met through imports. Reflecting the tight global situat

and affected by domestic supply constraints, food prices have risen faster than overall inflation

recent months. The Government has responded by increasing subsidies on food items, controlexports, and subsidizing imports. Appreciation of the local currency against the US dollar has h

Indian exporters. Merchandise exports (on a customs basis) grew by 21.6% in the first 10 mont

of FY2007 when expressed in US dollars .However; this reflects the sharp appreciation of t

rupee more than the actual increase in exports, the growth of which, in rupee terms, w

subdued at just 7.7%. The slowdown was evident most notably in chemicals, engineering goo

textiles, and readymade garments and handicrafts. The growth of merchandise imports, at 29.

in US dollar terms in the first 10 months of FY2007, is also overstated when compared to

rupee value (14.7%). Non-oil imports of capital goods, chemicals, edible oils, and precious a

semiprecious stones provided the main stimulus for import growth; rising by 36.1%, while

imports advanced by 16.5%. The net effect was a near 50% widening of the US dollar trade deffrom a year earlier. Preliminary estimates indicate that the current account deficit will be abo

1.9% of GDP, slightly higher than in FY2006. Although the trade deficit widened significantly

was offset by a strong rise in the inflow of remittances and a growing surplus from exports

services such as software and business services, though their expansion in earnings was reduc

from the rapid rates seen in previous years.

Avoiding a deep downdraft in the next 2 years

will primarily be shaped by the outcomes of

three counteracting forces:

keeping food price inflation moderate,

Lowering interest rates to sustain high

levels of investment,

Containing the fiscal deficit.


10/34

Economic forecast for 2008/0

Forecast

Economic growth will likely moderate further to 8.0% in FY2008. Overall GDP growth in FY2009

predicted to return to around 8.5%, nudged along by a broad-

based pickup in spending. Even though growth has faltered,the economy has built up considerable momentum in recent

years and this sense of dynamism should help pull up the pace

again. However, major macroeconomic challenges need to be

met in order to ensure that the current deceleration remains

mild in the face of turmoil in global financial markets and of

the marked economic slowdown in industrial countries. The

growth outcomes in the economy over the next 2 years will

depend in part on the timing and scope for relaxing the

present tight monetary policy. Exactly when this will be

feasible will be determined by success in containing inflation,

which in turn depends on two uncontrollable factors: the

outturn in domestic food production and the course of

international commodity prices. Growth in international

commodity prices is expected to flatten in FY2008 and fall in

FY2009, taking the pressure off inflation and allowing

domestic demand to pick up in FY2009. Private consumption

expenditure will remain relatively buoyant in FY2008 at just

over 6%, supported by continued strong wage gains in a skills-

short formal economy, larger income tax exemptions, the

debt waiver for farmers given in the FY2008 budget, higher prices for cash crops in the ru

economy, and higher pay for civil servants. Government consumption expenditure also will risesupport the ambitious social sector development agenda of the 11th Plan. Reinvestment

corporate profits, capital inflows, and credit availability will continue to support investme

growth. While investor enthusiasm remains high, drawing on a broad range of new busin

opportunities and high capacity utilization in existing plants, expansion in fixed investment

projected to slow in FY2008. It will account for about half of the decline in economic grow

although this will be partly offset by some cyclical building of inventories. Postponement

launching initial public offerings in early 2008 is one indicator that the expansion plans of ma

Indian companies are being scaled back. Much of the deceleration in investment is expected

be due to a slowing in property development. Easing of lending rates and revival of the consum

durable goods sector and construction activities are important for achieving a pickup in industgrowth. But despite the current slowdown in demand, lending rates cannot be reduced becau

stabilizing inflation at a moderate level remains the priority of RBI during FY2008, even at the c

of growth. A more accommodative monetary policy stance is expected only after the gene

elections. After that, RBI is likely to move to ease its tight policy stance by reducing policy rate

food inflation is relatively well controlled. A fall in borrowing costs, together with grow

consumption demand, would lift industrial production in FY2009 after an initial hitch in FY20

Agricultural growth will continue to be driven by monsoons until better infrastructure a

institutional set-ups are in place. The 11th

Plan emphasis on agriculture, coupled with a Rs2,8

billion($70 billion) target set for agricultural credit in FY2008, as well as a host of refo

measures for agriculture and water resource management announced in the FY2008 budg

Assumptions:

The domestic food supply position

remain tight but manageable in FY2

but improve in FY2009

RBI and the federal Government

take all steps necessary to co

inflation in FY2008, largely becau

the general elections due by early 2

Monetary conditions will be rela

more accommodative during FY200

Substantial revisions in domestic

of petroleum products will likel

made only in FY2009 (that is, afte

elections)

The rupee/dollar exchange rate

remain relatively stable throughou

period.


11/34

should take hold and lead to the needed improvem

in agricultural performance in FY2009. Domestic pric

especially of food and fuel, will be critical in determin

wholesale price inflation, which is projected to be a

moderate level of 4.5% in FY2008. Inflation pressur

however, will persist as the domestic output

foodgrains and vegetables is expected to remain tigh

FY2008 due to subdued sowing of the winter crop

October 2007.The tight supply position of wheat, pulses, edible oil, a

coarse cereals appears due to diversification to c

crops and water shortages in parts of the country. Eas

of international prices of nonfuel commodities, includ

foodgrains, will help in augmenting domestic supp

Several low-profit-margin exports such as textiles a

handicrafts were hurt from rupee appreciation in 20

but exports of more sophisticated products such

capital-intensive manufactured goods, as well as sales

business services, continued to expand. The rupedollar exchange rate is assumed to remain relativ

stable during FY2008 and FY2009. Exports are therefo

expected to grow at about 1618%, partly due to

sizable share in the total (nearly 20%) of refin

petroleum products, whose prices are on the r

Markets other than the US are also opening up to Ind

high-tech service exports such as information a

communications technology and business proc

outsourcing, which provide a cheaper source of sup

to increasing demand from industrial economies. Ind

exporters have started diversifying to other major exp

markets, notably Europe, Peoples Republic of Chi

and the rest of Asia. Import growth will continue to

rapid, reflecting both high international oil prices a

expansion in non-oil imports, especially of capital goo

and intermediates that have become necessary

sustain high levels of investment. These factors ha

been incorporated in the projection of a widen

current account deficit, which is likely to be around 2

2.6% of GDP.

Downside Risks:

Monetary management may have to

deal with the possibility of supply

shocks beyond the 2007 and 2008

sowing seasons.

The loan waiver can be effective inaugmenting food supply provided

that farmers are also supported with

a comprehensive package of

technology, services, and public

policies related to input and output

pricing.

Rising food prices, especially of

commodities consumed by the broad

public, would damp their general

purchasing power and GDP growth.

In the event of high food prices,

monetary conditions would need toremain tight, and the assumed move

to lower lending rates would not

occur and growth would be less.

The global slowdown may more

adversely affect Indias engineering

and other high-end exports as well as

earning from sales of software and

other business services than

projected. While this would raise the

negative impact of net exports, the

main damage would be seen in the

erosion of the exuberant business

outlook.

If the larger part of the private sector

turns cautious and waits to see what

happens next, investment and

growth would fall below those

projected.


12/34

Challenges to development

Over the past decade, India has undergone a transformation and climbed to a high growth pa

as macroeconomic and structural reforms reduced regulation, improved the busin

environment, and opened the economy to greater competition. It still needs to focus on cert

key areas with the potential to push growth to a higher plateau. The most crucial are enhanc

the policy and regulatory framework to encourage the private sector and reining in fiscal deficA dynamic private sector that creates jobs, increases productivity, and invests in the econo

plays a crucial role in bolstering growth. Removing the bottlenecks to private sector growth a

competition in India could well generate an additional 2% of GDP growth. All levels

government need to reengineer their laws and procedures to reduce barriers to entry of fir

into any product area; modernize out-dated and excessive regulations, including more flexibi

in the labor code; eliminate the roadblocks that hinder free interstate movement of goods

achieve a competitive national market; and end the present lengthy process required

restructure or close bankrupt companies. Archaic management structures and institutions

prevail in much of the daily working of government. Thus reengineering needs to be introduc

into institutions at all levels by adopting the management and operating techniques

successfully developed by Indias computer software and business services industries. The

changes would be especially effective at the level of local government. Fiscal consolidation,

targeting combined state and federal government deficits, including off-budget and conting

liabilities, is essential to create the fiscal space for essential social and infrastructure spendi

The Governments decisionto keep domestic prices artificially suppressed in response to ris

international food and oil priceshas distorted product prices and generated large, annual o

budget liabilities that are rapidly escalating the already heavy deadweight of interest paymen

Aligning food prices with the international market would raise farmers incomes and set pri

that will not distort land allocation to crops. A similar move for oil will likewise give consum

the right price signal to save energy and demand more energy-efficient products. A part of

saving from ending these subsidies could then be available for direct cash payments in wtargeted safety net programs. This would eliminate the large diversions and losses involved in t

present price subsidy schemes. Declining labor productivity is a key issue in sustaining Ind

long-term growth. Defined as output per worker, labor productivity dropped from an average

5.8% during the period from FY1993 through FY1998 to 3.6% during the period from FY19

through FY2004. One reason is an increasing shortage of appropriate skills.


13/34

Business new

Dabur Pharma sells its stake

Dabur Pharma is selling 73.27 % stake to Fresenius Kabi

(Singapore) Pte Ltd for an undisclosed amount. The

Singapore firm would purchase the stake at Rs 76.50 an

equity share from the promoters and certain other

shareholders of the company. At present, Dabur Groupspromoters - the Burman family - hold 65 per cent stake in

the pharma company. Last year, Dabur had sold its non-

oncology formulations business, mostly comprising cardiac

and anti-diabetes drugs, to Ahmedabad-based Alembic for

Rs 159 crore. In 2003, the company had hived off its

pharmaceutical division from the FMCG business. Dabur is

trying to consolidate itself in FMCG space. Fresenius Kabi

Pte is a unit of Germany-based healthcare firm Fresenius

SE, which makes anti-cancer drugs. Daburs strong pipeline

of oncology drugs synergises well with the German parentcompany. The Indian pharma company had recently

launched its rectum cancer injection Irinotecan in the US -

its fourth product in the North American market. Dabur

also has an agreement with Thailands Government

Pharmaceutical Organization to supply a generic version of

an anti-cancer product, Docetaxel. Anti-cancer drugs

worth $10 billion is set to go off patent in the next few

years and with only a few generic players in the global

market, the acquisition makes it a good buy for Fresenius.

Wipro FY08 net up 11% at Rs 3,283

crore

Consolidated total income: Rs 20,397 crore (Rs15,271.4 cr)

Consolidated Net Profit: Rs 3,282.9 cr (11.57 % increase)

Net Profit (4th Quarter) : Rs 880 crore ( Rs 856.1 crore)

Total income (4th Quarter) : Rs 5,777.2 crore (Rs4,395.9 cr)

Indian Bank Results

Net Interest Income for Q4 Rs 513 crore against Rs573 cr

Net Interest Income for Year : Rs1872 cr against Rs759 cr

Net Profit : Q4 242 Crore against Rs 235 crores

Net Profit: Rs 1008.74 crore against Rs 759 crore

Crude Oil at $120 / Bl

Saudi Arabia plans to increase its produ

capacity by five million barrels per day

by 2012. OPEC aimed to boost produ

capacity by nine million bpd by 2020. Cu

OPEC output stands at about 32 million

Even though OPEC has promised to inc

production capacity, the long-term s

increase does not resolve the main fa

that are underpinning prices now

weakening US dollar has spurred oil de

because dollar-priced oil becomes cheap

buyers holding stronger foreign curreGlobal supply worries were stoked

Anglo-Dutch oil group Royal Dutch

reported an output loss of 169,000 bpd

sabotage of its key pipelines in sou

Nigeria.Shell said on Monday that it migbe able to honor oil contracts for Apri

May after the attacks. If oil prices re

above $100 per barrel, inflation could su

9 percent in the third quarter of 2008

average over 7.5 per cent in 2008/09

Impact of CRR Hike

The rupee may slightly appreciate and

prices could harden further by 7-10 basis p

following the hike in the Cash Reserve

(CRR) by the RBI. The rupee may teappreciate in the short term. But the rising

of global crude, widening trade deficit, sl

down of capital flows and the overall c

down of the economy may cause the rup

weaken in the medium term. The CRR hik

now raised expectations of a hike in rep

reverse repo in the monetary policy on Apr

CRR Hike

The CRR hike of 50 basis points in 2 stage

on 26th

April and another on 10th

May. Lik

reduce Net Interest Margin by 5 basis p

Would suck out Rs 18,500 crore from

banking system. Banks do not earn any in

on CRR deposits. Year 2008-09 is likely

more difficult for banks, especially on ma

for Government banks and on loss of in

from forex and collateralized debt oblig

(CDO) provisions for private banks.

Bank earnings could be impacted for

government banks owing to the 60-75

points cut in lending rates. Rising inflatio

weakening demand could impact vo

growth. The key risks to the sector are a

interest rates, deteriorating retail asset q

and a further slowdown in loans and fees.

In the current situation, with demand for

on a slide, credit growth could be just abo

average of 20% this year.

Public sector banks might see multiple pre

points from Basel 2 implementation,

waivers, labour demands and an inabil

respond to interest rate signals approprTotal hit on the banking system is expect

be about Rs 750-900 crore. Private bank

see a loss of Rs 300 crore.


14/34

Infosys Results

Consolidated net profit of Rs 4,659 crore for the year

ended March 31, a 20.82 per cent growth over the

corresponding period a year ago. Infosys had a

consolidated net profit of Rs 3,856 crore for the year

ended March 31, 2007.

The consolidated total income rose to Rs 17,396 crore for

the year ended March 31, 2008 from Rs 14,265 crore in

the year-ago period. The company declared a final

dividend of Rs 7.25 on shares of Rs 5 each (145 per cent)

and a special dividend of Rs 20 pe r share (400 per cent

on an equity share of face value of Rs 5). Besides, Infosys

has decided to increase the dividend payout ratio to up

to 30 per cent of net profits effective from fiscal 2009, the company added. For the quarter ended M31, the group reported a net profit of Rs 1,249 crore as compared to Rs 1,144 crore for the quarter e

March 31, 2007. Total income increased to Rs 4,681 crore for the quarter ended March 31, this year

Rs 3,891 crore f or the corresponding quarter a year ago.

Ban on cement exports to dent majors toplines

With the government banning cement exports, revenues of major cement exporters will be dented by about Rs 1

crore. Two cement exporters, Ultratech and Ambuja Cement, in separate statements to the Bombay Stock Exchang

Monday, said their revenues are likely to be impacted. Ambuja Cement said the company exported about 1.32 mtonne of cement worth about Rs 277.48 crore in FY 2007. Similarly, Ultratechs 10% revenues come from cement exp

Going by Ultratechs nine-month turnover, 10% would come to about Rs 392 crore, approximately. Hence, the

Companies, together, will take a hit of more than Rs 670 crore. India exported about 3.5 million tonne cement last

And with international cement prices at about Rs 2,500 per tonne, the Companies will take a revenue hit of about Rs

crore. However, if we include the ban on clinkers as well, then there will be a revenue hit of about Rs 1,000 crore t

1,200 crore. The manufacturers based in the western region, especially Gujarat, would be the worst hit, as 91% of In

exports are from the state. With almost 3.3 million tonnes flowing back to the region due to the export ban, we

pricing decline in the western region, which are currently at Rs 231 a bag.

New Merger policy in

Telecom

The Government on Tuesday said that no mand acquisitions of telecom licenses would

place if the number of service providers re

below four in a circle consequent upon the

Prior approval of DOT for the M&A of the lic

is necessary and the combined market share

merged entity shall not be greater than 4

cent in terms of subscriber base or in ter

revenue.


15/34

Orchid Chemical

After much sensation and hype over Solrex bid for

12.8% of Orchid Chemical, for the first time,

Ranbaxy on 22nd April admitted that Solrex was a

partnership between two of its wholly owned

subsidiaries Solus Pharmaceuticals Ltd and

Rexcel Pharmaceuticals Ltd. According to Indian

regulations, the acquisition of a 15 per cent stake

in a firm by persons other than the founder or the

founder-group would trigger a mandatory open

offer for a further 20 per cent. If that happened,

then Orchids current management would have

had to give up control to Ranbaxy. Therefore, the

business alliance with Ranbaxy could put an end to

Orchids fear for now. Ranbaxy has similar strategic

stakes of just under 15 per cent in other pharma

companies, including Krebs Biochemicals and

Industries Ltd and Jupiter Bioscience Ltd.

On the alliance with Orchid, Mr Malvinder Singh

said the companies were looking to leverage on

each others strengths with Orchid having strong

presence in antibiotic cephalosporin formulations.

Orchid is a niche player in the g

pharmaceutical industry with an impressive

record, particularly in sterile products. We

pleased to enter into this long-term stra

alliance with Orchid. The agreement wi

mutually beneficial and synergistic, allowing

organisations to leverage each others inh

strengths.

Commenting on the alliance, Mr K. Raghave

Rao, Managing Director, Orchid, said, We

happy to join hands with Ranbaxy, Indias la

pharmaceutical company. Ranbaxys global

and market reach and Orchids advadevelopment and manufacturing capab

would expand the business of both companie

believe that this will be a win-win arrangeme

both companies.


16/34

G 7 meets for Cris

Finance chiefs from the G7 nations signaledconcern on the dollar's slide and said the global

economic slowdown may worsen

amid an ``entrenched'' credit

squeeze. The officials downgraded

their outlook for the world

economy from that of two months

ago, blaming the U.S. housing

recession, credit-market turmoil,

commodity prices and inflation

pressures. The dollar has lost 8

percent against the euro and 6

percent versus the yen sinceFebruary.

Policy makers laid out a 100-day plan to strengthen

regulation of capital markets. They urged financial

companies to ``fully'' disclose in their mid-year

earnings reports their investments at risk of

Firms should also establish ``fair value estima

for the complex assets that investors

shunned and boost their capital as needed.

European Central Bank has left its unchanged

six-year high of 4 percent amid inflation at a

year high. Growth differentials are still stacke

against the dollar and since there's no

whatsoever that the group is about to interv

that clears the way for further dollar weakn

The U.S. currency reached a record low of $1.5

against the euro this week. The dollar is expe

to reach $1.60 per euro. The G-7 again urged C

to allow ``accelerated appreciation'' in its curre

while acknowledging its recent rise through 7

dollar for the first time since a fixed exchange

ended in 2005. With the credit squeeze now ininth month, the G-7 highlighted ``downside r

to growth in a ``challenging and unce

environment.''

``The turmoil in global financia

markets remains entrenched and

more protracted than we had

anticipated,'' the officials said in thei

statement. ``Near-term globa

economic prospects have weakened.''

towards.?


17/34

Industry Analy

Semiconductor Industry

The Indian semiconductor design servicesindustry is projected to grow at a compounded

annual growth rate (CAGR) of 21.7 per cent to$10.96 billion in 2010, from the current level of $6

billion. The industry is expected to clock a

revenue of $7.3 billion by 2008-end. The key

factors that position India as a favored destination

for semiconductor and embedded designs are the

growing expertise and capabilities in end-to-end

design, intellectual property (IP) development, a

strong pool of engineers, emergence of

outsourced third party design services companies

and cost effective products. The market for very

large scale integration (VLSI), hardware/board

design and embedded software industry and the

market dynamics between the members of the

eco-system have presented a tremendous

growth potential to the Indian semiconductor

industry. Indian industry growth is three times

more than the global growth rate of around 7 per

cent. Industrys structure is changing as the

proximity between the third party service

providers and original equipment manufacturers

(OEMs) for end-to-end product designs is

increasing in the country. Companies are moving

up the value chain from mere project execution

to end-to-end development of products.

increase in jobs from 129,900 in 2007 to 218

in 2010, a CAGR increase of 18.8 per cen

anticipated in the Industry. At present, the buthe jobs are in the embedded software (82

cent) followed by VLSI design (11 per cent)

hardware/board (7 per cent). A large chun

the industry product design space is occupie

general consumer electronics and the wire

handset area (mobile technology). In the

design projects executed in 2007, 14 per

was portable wireless products, 33 per

pertained to consumers and 31 per cent

telecom networking products. In another co

of years, lot of designs will shift from the pre

90 and 65 nanometres to 45 nanome

Secondly, the growing domestic market w

boost the industry as the consumption

electronic products in the country is estimate

increase. The industry is still nascent. Start

and early stage companies need a different h

holding, tremendous support is needed from

government for nurturing technology outpu

smaller companies. The industry will have

constantly evolve, upgrade and innovate w

keeping the costs down in order to stay

competitive in the global market.

Casting Industry

According to an Engineering Export Promotion

Council data on steel prices, the domestic priceof pig iron on April 3 was $850 a tonne

(inclusive of VAT and excise) and the

domestic price in China was $606-613 a tonne.

Iron ore is the raw material for pig iron. Huge

quantities of Indias iron ore exports go to

China. The Chinese Government now

encourages export of value-added products and

has levied 25 per cent duty on coke

primary steel product exports.The steel plants need 0.8 tonne of coke to mone tonne of steel. Most of the cas

exporters enter into annual contracts with t

overseas buyers. If the buyer sources cast

from China too, then the Chinese have a 25

cent cost advantage in raw material over

Indian manufacturer. Thus, the competitive

of Indian foundries, the fourth largest cas

producer in the world, has been affected.


18/34

Guest Colum

Inflation: India and the Global Economy

Recently i.e. on 4th April Government of India had

published the data on Annual Inflation for the

week ended on 22nd March and we observed that

it had touched 7.07%, the highest in the last three

years.

This is a bad news for everyone, starting from the

general Indian population to the Indian policy

makers. But this is definitely a good news for the

politicians in the opposition parties as it is a good

tool that can be used against the ruling

government especially in the election year.

But we will discuss here only the issues related to

Why inflation suddenly increased (i.e.

causes.)? Is it only an Indian phenomenon ri

now or happening globally? If possible, w

could be the possible solution for controlling

inflation?

We will discuss regarding all the aforesaid iss

one by one.

First lets see the recent inflation figures in In

The year 2008 started with 3.79% of inflation r

for week ended on 5th January. As the y

progressed inflation got doubled and crossed

mark.

Week ended on Annual Inflation Percentage increase

1st March 5.11% -

8th March 5.92% 15.85%

15th March 6.68% 12.84%

22nd March 7.07% 5.84%

If you notice carefully then you find out that within

three months annual inflation has gone up by

around 87%. This is really shocking because our

Indian political scenario is very much vulnerable

inflation and you will find each and ev

newspaper publishing it with grandeur.

Now the question is that why this sudden increase?

According to Economics there is no phenomenon

that is the result of a single incident or situation.

Truly there are several reasons behind this sh

rise in prices. Lets explore tho


19/34

table showing the increase in wholesale pricesof different items

.

Products Percentage increase on annual basis

Iron and Steel 27%

Minerals in general 41.5%

Edible Oils 21.1%

Cereals 8%

Vegetables 11.4%

Milk 10%

Dairy Products 9%

Cement 12.2%

Mineral Oil and Coal 9%

Hence prices of almost all essential commodities have gone up. Specially Iron and Steel and Oil prices h

shot up like nothing; prices of wheat, rice, corn, soyabean, soyabean oil, palm oil, non-ferrous metals

also of main concern. The metallic minerals have gone up by around 38% in a week.

Just take a look into the data published by IMF (International Monetary Fund). Its commodity price in

showed increase in food prices in February by 65%, metal prices by 70% and petroleum prices by 175since 2005!

As far as the reason is concerned for this price hike rising

demand of the developing nations especially India and

China, production shortfall, higher crude oil prices in the

international market are of prime importance. Chinese

economy has grown by more than 10% on an average

throughout the last two years. Indian economy is growing

at a pace of more than 8% on an average per year (9.4% in 2006-07, expected 8.7% in 2007-08).

agriculture, infrastructure etc. are not growing at the same pace especially in India.

Lets take a look on the agricultural situation world wide.


20/34

In 2007-08 wheat production is estimated to be lower at 74.81MMT (million metric tons) lower than

years output of 75.81MMT, which indicates that government may import wheat this year also, at le

there is a high possibility. Rice and maize productions are estimated at 94.08MMT and 16.78M

respectively; both figures are more than those of their previous years. According to the US Departmen

Agriculture

Name of

crops

2007-08 estimated production in MMT (million metric

tons)

Change w.r.t previ

year

Wheat 605.0 +1.9%

Coarse Grains 1056.2 +7.8%

Milled Rice 422.9 +1.11%

Oilseeds 390.1 - 4.4%

Cotton 118.9 - 2.6%

Soyabean 219.85 - 7.34%

Though Soyabean production has increased in India. But this increase is not very much and moreove

case of each and every crop the major exporting countries are facing increasing demand internally, he

they are reducing the amount that they are supposed to export.

Rice: World and India

Recently China, Egypt, Vietnam, India have either curbed their

rice exports or increased the tax on export due to increase in the

domestic consumption. Thailand has expressed its tight

domestic situation and curbed the export by more than half to

1.2 MMT. On the other side the situation of rice is not good in

Philippines; the Department of Agriculture and National Food

Authority has asked the Filipinos to eat more unpolished whole

rice grain to cut down on imports. Philippines, worlds largestimporter of rice, is set to buy around 100,000 MMT of rice from

the US. Already they have bought approx. 1.1 MMT of rice from Vietnam. This will definitely drive

price upward in the international market and also in domestic market in Philippines. An already

future contract has risen to record price on 4th April in Chicago Board of Trade (CBOT).


21/34

In India the situation is odd. Though India is the second largest rice producer in the world, we are facin

serious hike in rice price, twice the minimum export price has been increased but still situation is bad. T

is because the government didnt attempt to buy sufficient amount of rice from the farmers and replen

the food stocks. Moreover due to packing restrictions low priced coarse variety rice goes to Africa,

Lanka and Bangladesh through hawala route; this has increased recently and the government has

taken any action against this.

Wheat: World and India

The US is the major producer, after her Argentina, China, Kazakhstan, Ukraine, Russia and Australia

there as important producers and exporters. Two consecutive droughts in the last two years in Austr

hampered the wheat exports very much along with floods in Argentina. China has imposed restrictions

exports of wheat flour, following Ukraine and Russia.

Last week Friday price of Wheat May futures shot up by 5% as there is chance that due to a mix of dry a

wet weather the US wheat production could take a hit. If it happens the wheat prices in the market

definitely go up by leaps and bounds.

Coming to the Indian situation, as I have already mentioned that this year the wheat production

expected to be lower than that of the last years; due to increase in consuming population and as m

people are getting habituated in having wheat based food products it is surely that the wh

consumption will increase this year. Again the general trend is around 12.5% of the output is


22/34

considered for consumption on the account of seed, feed and wastage. Government has already fixed

minimum support price (MSP) for wheat as Rs.1000 per quintal. But a problem is that the Pakist

farmers have demanded Rs.1000 per 40 kg of procurement price which could antagonize farmers in In

and it could happen that while competing with ITC and Cargill in procurement FCI (Food Corporation

India) may face problem in achieving procurement target for the year which will result in buying wh

from international market at increased price. This also happened in the last year. The domestic wh

production is expected to take a hit due to hailstorms after 4th April across the north, northwest

northeast India.

Oil and Oilseeds:

India mainly imports the edible oils, around 4 MMT

of palm oil and 2 MMT of soyabean oil. Recentlythe price of Crude Palm Oil (CPO) in the Malaysian,

largest producer, market climbed to record high of

4000 Malaysian Ringgits (MYR) and it could go

upward to at least 4500 MYR. Soyabean Oil is also

expected to grow more than US$1500 per metric

ton in the US, everything depends upon the

weather. The price rise is generally due to demand

supply mismatch as Chinese demand has

increased steadily.

Crude oil is increasing due to increased demand

from China, India and other developing countries

especially BRIC nations along with the US, due to

speculation over demand supply mismatch and

finally geopolitics. Recently supply from the OPEC

(Organization of the Petroleum Exporting

Countries) has reduced. Moreover increased

tension in Middle East Asia, tensed relation

between the US and Venezuela, the US and I

and also decrease in Russian production have to the rise. Recently the value of the US$ has a

decreased somewhat led to the rise. On 17th Ma

NYMEX Crude hit a record US$111.80 per ba

and also US$ lowered to 1.5903 Euro.

Coming to the Indian scenario, Indian Crude Bas

consists of average of Oman and Dubai Sour Gra

Crude and Brent Sweet Grade crude in the ratio

59.8:40.2 since fiscal year 2006-07. Each year In

imports around 76% of its crude oil requireme

which costs it around US$50 billion. Rise in

crude price combining with Rupee appreciation

around 13% has result an extra burden on

Indian coffer by around 4%. Recently

government had increased the fuel prices also

release by some amount.


23/34

Metallic Minerals:

Prices of different types of steel has increased by more than 65% w.r.t. that of last year. Last year m

steel was priced at an average ofaround Rs.27000 per ton and now it is priced at around Rs.45000 per

as the steel plants have increased the prices of steel twice. According to them prices of iron ore and cok

coal were hiked. It is true, because NMDC (National Mineral Development Corporation) has increased

price by around 40% during this fiscal year. Not only in India but also in the International market iron

prices are very high as BHP Billiton Ltd. and Rio Tinto are charging higher price for iron ore from As

buyers as freight premium. Also Companhia Vale do Rio Doce, Brazilian mining giant has contracted w

the Chinese and Japanese steel producers on 65% to 71% higher price. Power shortage in the mining a

and increasing demand due to construction boom from the Chinese companies are major reasons for

price increase. Hence more and more Asian companies are going for iron ore from Australia rather th

from Brazil as freight cost has increased. Hence mining companies are charging for freight premium.Coking coal price is soaring due to three main reasons lost production in Australia, Chinese export c

and power shortage in South African mines. Storms in Queensland has resulted in a loss of 15 MMT of c

production that probably wont come to the market and China has imposed export restrictions af

winter storms. Last year Australian coking coal was priced at US$98 per MT for Japanese steelmakers, t

year it is US$258 per MT whereas Australian thermal coal was US$55 per MT and now US$110 per MT.

Industrial Growth in India:

Prices of essential commodities are already on fire and in such a situation industrial growth is falling

India. Im giving the growth of the six core sectors as was in December 2007

Sectors

Weight

(%)

in IIP

Dec-06

% growth

Dec-07

% growth

Apr-Dec 06-

07

% growth

Apr- Dec 07-

08

% growth

Crude Petroleum 4.17 10.7 -1.58 6 0.3

Refinery Products 2 10.8 2 13.2 7.5

Coal 3.22 2.9 8.4 4.6 4.9

Electricity 10.17 9.1 3.8 7.5 6.6

Cement 1.99 8 3.9 10.3 7.2

Finished Steel

(Carbon)5.13 10.2 5.1 11.4 5.6

Overall 26.7 9 4 8.9 5.7


24/34

Notice that crude petroleum and refinery products, these two sectors growth had fallen too much wh

is enough too creates pressure on the supply of petroleum products, fertilizers and that is leading towa

price rise, finally inflation.

When our country is growing at an average of 8% every year, disposable income of people are growing

a fast pace, people are spending in perishable goods, durable goods and real estate heavily, the co

sectors are expected to grow at more than 8% in every quarter. Only then the supply demand misma

can be solved to some extent.

Now just look at the following tables for the industrial growth in the 2008

Sector Weight

(%)

in IIP*

Growth in %

Jan-07 Jan-08 Apr-Jan

06-07

Apr- Jan

07-08

Crude petroleum 4.17 4.7 -0.2 5.9 0.3

Refinery products 2 11.2 5.3 13 7.3

Coal 3.22 9.9 4.8 5.2 4.8

Electricity 10.17 8.3 3.3 7.6 6.3

Cement 1.99 7.2 5.2 9.9 7

Finished steel

(Carbon)

5.13 8.5 5.5 11.1 5.1

Overall 26.7 8.3 4.2 8.9 5.5

Sector Weight

(%)

in IIP

Feb-08

% growth

Feb-07

% growth

Apr- Feb

07-08

% growth

Apr-Feb

06-07

% growth

Crude petroleum 4.17 2.30 4.90 0.40 5.80Refinery products 2.00 5.80 11.30 7.20 12.80

Coal 3.22 11.70 6.50 5.60 5.30

Electricity 10.17 9.60 3.30 6.60 7.20

Cement 1.99 12.40 5.80 7.50 9.50

Finished steel (carbon) 5.13 8.20 13.60 5.00 11.30

Overall 26.70 8.70 7.60 5.60 8.70

Though in February the core six sectors grew overall but the petroleum and steel sectors are

underperforming. Can they be penalized for their underperformance that is leading to inflation? Af

months of underperformance how the steel plants, the iron ore mines can go for price increase? They

defending themselves that in the international market price is increasing, but are performing like

international players?

Now let us come to the financial sector. What can be their role in causing inflation? Yes, there is its ro

Has anyone of you ever noticed the central bank interest rates of different countries especially develop

ones and the currency conversion rates?


25/34

Last month US dollar was decreasing w.r.t. almost all the major currencies including Indian Rupee. N

just think carefully, in the US the 90 day rate is 1.28% and in India it is 7%. With this massive r

differential generally there is a trend of carry trading. What is that? It is borrowing money from a coun

where the borrowing cost is low i.e. the interest rate that you have to pay on borrowing the money is

and then investing the money in a country where return is high i.e. the interest rate on getting back

money is high. Hence there will be lots of capital inflow in the country where interest rate is high. Sam

happening to India. Big investors and FIIs are borrowing from the US and investing in India and earning

interest rate differential. Hence capital inflow in India is increasing heavily causing increase in the mo

supply finally leading to inflation. Last month when Indian Rupee was appreciating against US Dollar ca

traders were discouraged as such appreciation was decreasing their earnings from carry trading.

Indian Rupee appreciation was hurting Indian exports, hence the central bank (RBI) interfered and a

due to easing out of the speculation of credit crunch through out the world lead to a stop on th

appreciation. Now US Dollar is appreciating against the Indian Rupee and giving a chance to the ca

traders to increase the trading and capital inflow to India.

Hence we saw that inflation is not only creating problem in India but it is a global problem now. Just tak

look

CountriesAnnual Inflation Rate (%)

(CPI based) 2006

Annual Inflation Rate (%)

(CPI based) 2008

China 0.9 8.3

Singapore 1.2 6.3

Japan -0.1 0.7

Hong Kong 1.2 6.1

India 4.6 5.4

Sweden 0.6 3.1

Germany 1.8 2.8

Spain 3.9 4.3

Australia 2.8 3.0

Russia 10.5 12.0

Britain 2.0 2.5

South Africa 3.8 9.3

Brazil 5.4 4.5

United States 3.5 3.9


26/34

Now the question is what is the solution? As per Economics there cannot be a particular solution to

economic problem, each and every problem has its own disadvantage and hence it is difficult to prescr

a particular solution to this inflation problem. But still now we can discuss some of the measures.

First the point here is that this problem is a combination of both demand supply mismatch

increasing money supply. So we need to concentrate on both these issues.

Regarding the essential commodities the Indian Government already has curbed the exports of rice, try

to stop hoarding; export of cement is also under consideration along with an import of around 11.5 M

of cement from Pakistan at a cheaper rate (in Pakistan cement price is Rs.170 Rs.175 per 50 kg wher

in India it is Rs.230 235).

FCI should achieve the target regarding buying enough wheat and rice from the farmers so that it

build its buffer stock. But this is a very difficult task to achieve, it seems and India may have to proc

wheat from the international market again. In this regard I want to let you know that the government

allocated a minimum support price (MSP) for wheat at Rs.1000 per quintal which is double w.r.t what w

paid last year but less than by at least Rs.150 per quintal w.r.t. the market price. Hence the governme

can pay an advance to the farmers after a month on the basis of the amount purchased from them so t

the farmers can be attracted towards government procurement. This is already a method that FCI ado

for sugarcane.

Another solution that already the government is considering using a call option to hedge against

rising global prices so that if it has to buy in future it can buy at a rate lesser than the prevailing mar

rate. This measure can act as a deterrent to the farmers willingness to sell wheat to the private play

rather than the government.

Secondly the government had withdrawn the import duty from the crude edible oils and reduced the d

from the refined oils. Though this has brought down the wholesale prices of the edible oils through

the country but it will definitely increase the fiscal deficit.

Third is to ban the export of iron ore at least temporarily, this will lead to increase in domestic supply a

also the government will be able to add at least Rs.2000 crores to its exchequer in the form of excise d

Also government should ask the NMDC to reduce the raw material price otherwise the steel producers

not be able to reduce the steel prices.

Fourth is about increasing the industrial production especially the petroleum and crude oil sector, iron a

steel sector and cement sector. A reduction in the growth of these sectors will definitely hamper not o

the physical growth but also the fiscal growth of the nation.

The fifthsolution about which Im going to discuss is the most common monetary regulation and tha

increasing the central bank interest rate or technically Cash Reserve Ratio (CRR) from 7.75% to 8% or m


27/34

whatever the RBI suits better. But will that reduce the capital flow through FII path? Recently ASSOCH

Chairman Mr. Venugopal Dhoot suggested adopting this path immediately. I feel his opinion is pu

superficial without analyzing the situation deeply. Also one suggestion that he had given ban of

commodity futures trading. I feel this is the most absurd solution that a person like him can give. I do

know how, being the Chairperson of a top most industrial body, a person can suggest such an abs

solution.

Since I am not supposed to discuss the benefits or the necessities of futures trading of commodities he

in this article, I just only want to mention that taking such a decision by the Indian government will

only create chaos in the market but it will be of no use, it will make the pricing mechanism of t

commodities, including the essential ones, very much inefficient and the AAM AADMI will bear t

brunt, not persons like Mr. Venugopal Dhoot.

Once I read an article in the Business Standard, and the writer suggested amending the RBI Act, so t

finally the Indian Rupee can be allowed to appreciate against the US Dollar freely, which will fin

discourage the carry traders to trade and thus the capital inflow can be controlled through the FII pa

Well I am really not very sure about this solution. Could anyone from the readers please throw some li

on this issue?

In the above article I have just tried to throw some light on the current burning issue of inflation, whic

not only a national but international problem and caused by not only the domestic abnormalities but a

by the international ones.

If anyone of you has any further suggestions regarding the causes and solutions to the problem of inflat

please suggest us.

Contributed By

Kankan Paul (+91 9962752791)

Commodity Mantra


28/34

Political Rad

Monarchy in super Democra

Rahul Gandhi, the crown Prime Minister of India is roamin

across the nation to understand the pulse of India. To

precise, he wants to know the real problems and challen

that hound the India nation. It is ironical that people who

going to rule this country do not know the country. All sec

generation leaders be it Rahul,Priyanka,N

Jindal,Jyotiraditya Scindhia,Manvendra Singh, Umar Abdu

and many moreare all born with silver spoonsThe challe

is how are they going to rule this nation..How much do

know about itNothing literally? All Oxford, Boston or Stan

return Political NRIs, people who spent their childhood pla

Squash and Golf in marquee lawns of London AND

probably would be ruling the nation down the line are actu

illiterate in the sense that their interaction with Indiaas it is is very low and it would be practi

difficult for them to function in a way, they should

It is hance, very appreciable that Mr Rahul Gandhi is trying to understand India in all nooks and corn

He must know India that is beyond 10 Janpath, Columbian Beaches or may be Delhi metro..

Why only Rahul all our politicians in Z-++ security should come on streets , roam villagesnight ou

suburbs leaving their cordon security this is the only way to understand India of 1 billion+ people

how difficult life has been for them all along.

The execution of Indian national

Sarabjit Singh, sentenced to

death for his alleged involvement

in bomb attacks in Pakistan, has

not been postponed further, a

presidential spokesman said on

Saturday, April 19th

.The hanging of

Sarabjit was deferred for 30 days

by President Pervez Musharraf last

month so that Pakistan's new

government could review his case

following an appeal for clemency

from the Indian government.

Sarabjit was originally set to be

executed on April 1. Government

of India has asked for help in the

matter from US President Bush.

China will execute almost 400 people during the Beij

Olympics this August, leading human rights watch

Amnesty International has alleged. "According to reli

estimates, on (an) average China secretly executes around

prisoners every day -- that's 374 people during the Olym

Games," Amnesty's British director Kate Allen said in a statem

In its annual report on worldwide executions, the human ri

group said on Tuesday that Iran remains the country with

second highest number of executions, and that the number

nearly doubled from the year before. The 377 inmates includ

man stoned to death for committing adultery. The United St

was fifth in the rankings with 42 executions.

President Pratibha Patil passed

national flags in Mexico withoutbowing .She passed by both the

flags of India as well as Mexico

without bowing as is necessary

under the protocol of both India

and Mexico. She perhaps did not

know the basic protocol, a

president must have known. For

this she was deliberately insulted

by 15 senators of Mexico causing

embarrassments for Indian


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You know why we are unable to solve even the most basic issues of common men. Because people a

helm of affairs do not understand that unless they travel by state buses they would never underst

why a bus with 48 tender kids got drowned in Narmada river in Vadodra and why no state help co

reach them until 2 hours when all those who could be saved were drowned. They didnt diethey w

killed. Most of the people on our roads do not die by accidentthey got killed by state machinery.

Mr Praful Patel,our Minister of aviation has a great sense of economics. Ask him and he will tell you

we have uncomfortable food inflation. His answer North Indian are consuming more of Rice and SIndians more of wheat so please do not blame Government to be poorly handling

fiasco. Rather it is you to be blamed. Great economics Mr Patel!!!.

So at least Mr Rahul is trying to understand India from deep within its roots. It is more crucial tha

learns that India as a nation has become almost Hopeless and things down the lanes.distant from

top echelons of power and luxury is very very ugly. It is in this ugliness that a common Indian is livin

lifethroughout the 50 years of Indian nation. In these 50 years, there has nothing that has changed

many people in this nation. They

are still living in same ugliness

and darkness.

I believe perhapsthis was the

something that has lacked in all

our Leaders that they do not

know the fundamental glooms of

India.

At least Mr Rahul Gandhi is trying

to understand that.

Kudos Mr Rahul Gandhi!!!!

And also to concept of before job

training.

The Supreme Court, in a significant verdict on Thursday

upheld the law enacted by the Union Government providing

27 per cent quota for Other Backward Classes in Centra

educational institutions such as IITs/IIMs from the academi

year 2008-09. The court, however, made it clear that creamy

layer should be excluded from the socially and educationall

backward classes. The court said that the definition ofOBCin Section 2(g) of the Act shall be read as SEBC other tha

SC/ST determined by Central Government, and if the

determination is with respect to caste, creamy layer shall b

excluded.


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TATA Group Companies: A research of Group Compan

TATA POWER

Tata Power is Indias largest private sector

power utility with installed capacity in excess

of 2,300 mw. Over 600 mw new capacity is

likely to be added during FY09, with another

8,000 mw capacity to be added over the next

five years including a 4,000-mw UMPP at

Mundra. TPL has acquired a 30% stake in two

major Indonesian coal producers to assure

future fuel requirements. It is emerging as an

integrated player in India's power sector with

investments in power generation,

transmission, distribution and fuel supplies

(coal mining and transport).

Meeting the time and cost deadlines while

executing the long gestation projects is a big

challenge as the costs of equipment and

project implementation services have gone up

substantially. Even after the successful

completion of its projects, TPL has to manage

the regulatory environment well to ensure

sufficient return on its investments.

INDIAN HOTELS

Indian Hotels runs the largest domestic hotel

chain with 71 hotels and an inventory of

10,487 rooms. It enjoys presence across wide

range of hotels right from deluxe properties

to budget. This puts the company in a bright

spot and helps it take advantage of the

growing tourism industry in India. _Besides,

the company has 14 properties overseas and

is expanding its global footprint via

acquisitions and greenfield ventures. This is

likely to result in greater brand recognition

abroad. Its recent entry into lucrative

segment of business jets will help the

company to take advantage of growing

opportunities in this space.

Its revenue is greatly dependent on India,

where average room rates are expected to

see a decline beyond FY09 when supply starts

coming in. Rising real estate costs have

greatly reduced the return on capital on new

properties in major cities.

TATA TEA

The company has taken initiatives to

introduce different variants of tea. It has also

forayed into bottled water and other

beverages. This is likely to help it transform

itself from a tea company to a beverages

company. Acquisitions, geographic expansion

and new products are the way to go for Tata

Tea, which is already the second largest

integrated tea company in the world. Its retail

foray through Chai Unchai beverage stores is

likely to open a new route of growth for the

company. Tata Tea operates in a labour-

intensive tea industry, which has long

gestation periods. This can be an imepdiment

in improving operational efficiency. The

company will have to grapple with the

increase in raw material prices. The

appreciation in the rupee is likely to drag

profitability of the international businesses.
http://economictimes.indiatimes.com/Features/Investors_Guide/A_dozen_reasons_for_Ratan_Tata_to_smile/articleshow/msid-2931112,curpg-5.cmshttp://economictimes.indiatimes.com/Features/Investors_Guide/A_dozen_reasons_for_Ratan_Tata_to_smile/articleshow/msid-2931112,curpg-5.cmshttp://economictimes.indiatimes.com/Features/Investors_Guide/A_dozen_reasons_for_Ratan_Tata_to_smile/articleshow/msid-2931112,curpg-5.cms


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TATA COMMUNICATIONS

Utilisation of existing infrastructure to deliver

valueadded services is a sound proposition for

Tata Communications. The company recently

tied up with Telsima to provide WiMAX

services in the country. It has also launchedits global telepresence network service to

offer virtual meeting solutions. These

initiatives will fuel future revenue growth.

Tata Comms strategy to build global tie-ups

for high-end technologies will help it keep pace

with the fast-changing technology scenario

and improve its global presence. Tata Comm

needs to increase focus on deploying

managed services, given the stiff competition

in domestic as well as global enterprise dataspace from bigger telecom operators. The

company has to improve operational

processes in order to increase customer base

for its broadband and other services rapidly.

TATA CHEMICALS

The recent acquisition of US-based General

Chemicals has consolidated position of Tata

Chemicals (TCL) in the global soda ash market.

Post-acquisition, TCL has become the second

largest soda ash manufacturer in the world

with majority of the production coming from

cheaper natural sources. This goes well with

its overall global strategy. TCL is already on an

expansion spree for its inorganic chemicals

and fertilisers plants in India. This will help it

to strengthen its domestic presence. TCL is

setting up a 30,000-litres-per-day ethanol

plant and has ventured into wholesaling of

fresh agricultural produce. This diversification

would help in mitigating risk from slowdown

in the core business. TCL has to see through

an effective integration strategy of its soda

ash business with the overseas acquisition.

Managing overall growth of the company will

be a tough task given the diversification into

new business domains.

VOLTAS

Voltas is a market leader in central air-

conditioning and climate control business in

India, besides being a major player in

booming West Asia. It is also India's leading

distributor and re-seller of textile and mining

equipment. Recently it went through a

corporate restructuring which has

transformed it into a leaner and competitive

player. The demand for central A/Cs and

climate control systems is booming, thanks to

rapid growth in retail, real estate and

hospitality sectors. It has also got a boost

from strong capex in textile, mining and retail

sectors where it supplies forklifts. Being a

capital goods supplier, it's highly prone to an

economic downturn. It faces strong

competitors across its product portfolio. The

consumer air-conditioner business continues

to be a drag on the company's profitability.


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Soros: Most serious financial crisis of the lifetim

Global financial system is relying on a false paradigm that the financial

Markets tend towards equilibrium and deviations from the equilibrium are

random. I disagree with this and propose a different paradigm that is based

on the concept ofreflexivity.

Right now, we have not just one of these situations connected with the

housing market, but what I call a super bubble.

A reflexive relationship is bidirectional; with both the cause and the effect affecting each another i

a situation that renders both functions causes and effects.

Reflexivity is discordant with equilibrium theory, which stipulates that markets move towards

equilibrium and that non-equilibrium fluctuations are merely random noise that will soon be

corrected.

In equilibrium theory, prices in the long run at equilibrium reflect the underlying fundamentals,

which are unaffected by prices.

Reflexivity asserts that prices do in fact influence the fundamentals and that these newly-influence

set of fundamentals then proceed to change expectations, thus influencing prices; the process

continues in a self-reinforcing pattern. Because the pattern is self-reinforcing, markets tend towarddisequilibrium--a case in which every outcome is uniquely different from the past in a visible

absence of equilibrium.}

{Reflexivity refers to circular relationships

between cause and effect.}.


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