Economic Advisory Council to PM Releases ‘Economic Outlook 2008-09’
13 August 08, New Delhi
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The Chairman, Economic Advisory Council to PM, Shri Suresh Tendulkar briefing the media at the release of ‘Economic Outlook for 2008-09’ at a Press Conference, in New Delhi on August 13, 2008. |
The Chairman, Economic Advisory Council to PM, Shri Suresh Tendulkar released ‘Economic Outlook for 2008-09’ at a Press Conference in New Delhi today. The Economic Outlook 2008-09 was submitted to the Prime Minister on July 30, 2008. Outgoing Chairman, Dr. C. Rangarajan and members of the Council comprising Dr. G.K. Chadha, Dr. Satish C. Jha, Dr. M. Govinda Rao and Dr. Alok Sheel were present on the occasion. Following are the highlights of the Economic Outlook:
Economy to grow at 7.7 per cent during 2008/09 as against 9% in
2007-08 |
- Agriculture 2.0 per cent (4.5% in 2007-08)
- Industry 7.5 per (8.5% in 2007-08)
- Services 9.6 per cent (10.8% in 2007-08)
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| A number of factors inimical to growth have intensified in 2008 |
- Sharp elevation in global commodity inflation, especially food and oil
- Tightening in credit and equity markets following sub-prime crisis in the U.S
- Global slowdown in growth
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| Impact of adverse global environment on India |
- Lower growth
- Widen the current account
- Pressure the fiscal system through widening subsidy bills.
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| Economy continues to be supply constrained, especially in |
- Physical and social infrastructure
- Electricity, water, road/rail transportation, urban/rural infrastructure and agriculture
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| Robust employment growth between 1999/00 and 2004/05 |
- 2.89% CAGR by UPSS method and 2.6% by CDS method
- Highest growth rates in industry and services with wide interstate variations
- Outside agriculture sectoral GDP and employment growth rates moved in tandem
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| Investment rate similar to 2007/08, but savings projected to decline |
- Investment rate projected at 37.5% and savings at 34.5% of GDP
- Lower savings through worsening government finances and erosion in corporate profit.
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| Current Account deficit estimated at 3.2% of GDP (1.5% in 2007-08) |
- Merchandise trade deficit $ 134.1 billion (10.4% of GDP, as against 7.7% last year)
- Merchandise export growth rate 31.4% (23% in 2007-08)
- Non-oil merchandize exports 22.5% higher
- Merchandise import growth rate 37.8% (27% in 2007-08)
- Crude oil imports 80% & non-oil, non-bullion imports 22.5% higher
Invisibles trade surplus $ 92.7 billion (7.2% of GDP, as against 6.2% last year)
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| Capital inflows of $ 70.9 billion ($ 108.03 billion in 2007-08) |
- Net reserves accretion of $ 29.4 billion ($ 92.2 billion in 2007-08)
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| Surge in Inflation |
- Mostly on account of rising global commodity prices.
- Co-ordinated policy action can bring inflation down to 8-9% by March 2009.
Tight monetary stance necessary
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Serious fiscal risks |
- Fiscal deficit targets to overreach while revenue deficits would persist.
- Fiscal deficit improved through higher tax revenues and lower interest payments.
- Serious fiscal risks arising from growing off-budget liabilities estimated at 5% of GDP.
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| Overseas venture capitalists invest Rs 17,000 crore in Indian assets in Q1 |
While foreign portfolio investors have been selling stocks of Indian companies, overseas venture capitalists continue to invest in Indian assets. In a sharp contrast to foreign institutional investors (FIIs) selling shares worth Rs 15,000 crore in the first quarter, foreign venture capital (FVC) investors have invested close to Rs 17,000 crore in Indian assets during the April-June quarter. The spurt in foreign venture capital investments has been attributed to dipping asset prices, the presence of more India-dedicated venture funds, besides the slide in the stock market. While IT companies continue to account for a majority of foreign venture capital investments, the proportion of non-IT investments - both by activity and value - has gone up. Sebi’s data shows that FVC investors have invested Rs 1,545 crore in various IT firms in the first quarter of the current fiscal. Real estate and the services sector have received Rs 1,424 crore and Rs 1,259 crore, respectively, in the first quarter. FVC investments are increasingly focusing on alternative energy, media, retail and other consumer demand-led sectors as well, say analysts. This is at variance with foreign equity portfolio investors, who have been drastically reducing their holdings in manufacturing concerns, real estate companies and telecom set-ups.
According to Navin Wadhwani, director at investment bank NM Rothschild, "FIIs invest only when stocks gain some sort of an upward momentum; they also make it a point to exist when the downturn starts. FVC investors invest in assets when prices cool off, but they hold on to their investment for a longer term. Indian assets have become more appealing with capital markets trending down and valuations becoming more realistic," Mr Wadwani added. According to Dow Jones VentureSource India Venture Capital Report, venture capitalists invested some Rs 3,712 crore through 80 deals in 2007. As a matter of fact, FCV investors, alone, have surpassed last year's net venture capital investments in flat three months. Overall venture capital investments (domestic players included) during the first quarter is pegged at Rs 32,379 crore.
According to Axis PE CEO Alok Gupta, "Compared to Europe and the US, India is becoming an attractive destination for overseas investors. The investment market in Europe and the US has been wiped out because of subprime and a probable slowdown; their mainstay - the leverage buyout market - is virtually dead. Growth investing is becoming more popular as opposed to leverage funding among global investors," Mr Gupta added. The fall in the stock markets has also done a world of good for venture capital investors. With the average six-month stock price (calculated while making stake placements in a listed company) coming down drastically, investors are able to find good deals in publicly-listed companies as well, industry officials said. Estimates show that of all Indian companies that received venture funding in 2007, nearly 73% are already generating revenues or are profitable.
"Funds with global mandates have always dominated the venture capital segment. By value terms, over 50% of total venture capital inflows originate from global funds; India-dedicated venture funds account for the remaining portion," said Arun Natarajan of Venture Intelligence. "From what we understand, on contrary to late-stage investments, which could dry up if there is a persistent global recession, venture capital investments will continue for a longer term. This is because there are more than a hundred overseas funds that only has the mandate to invest in India," added Mr Natarajan.
Source: The Economic Times |
Berggruen Holdings forays into Indian realty space
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Private investment company Berggruen Holdings (BH) has forayed into the realty space in India, lining up a slew of commercial and residential projects. It plans to take advantage of the sluggish market scenario to make investments.“The real estate market is going to be difficult for a couple of years. It will be bad because the projects will be slower. But it will be a better opportunity for people willing to invest. But the valuations are more reasonable now,” says Berggruen Holdings founder Nicolas Berggruen. Also, the investments are not constrained in terms of sector or asset classes, because BH is not answerable to investors. It manages and invests its own proprietary capital, which exceeds $1 billion. The firm has pumped in $30 million so far and will add another $20 million to this. Its first project in the realty space, a Rs 350-crore commercial project in Hyderabad, will kick off at the end of the year. The other locations for the realty space include Nagpur, Coimbatore, Mysore, Raipur and Vizag.
“We have a group of people who can execute property development from A to Z. They will acquire land, develop capability, deliver projects in housing and retail formats. Quality and aesthetics will be a major component,” Mr Berggruen said. In India, the firm's been active for the past two years and invests across asset classes - private equity, real estate and public markets. The firm has invested $100 million in the country so far. In terms of sectors, it's spread across hospitality, education, car rentals, warehouse & logistics, equipment rental and real estate. Berggruen typically invests $10 million to $100 million in any single transaction. “India has the advantage of being vast and presents dynamic opportunities. We decided to start business from zero, instead of buying into existing ones,” Mr Berggruen added. Retail and energy are the other sectors that the firm is looking at in India.
Source: The Economic Times |
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$100m, six TV channels, Murdoch's new Indian bet
In a country with 340 television channels - 60 were launched this year alone - Australian media tycoon Rupert Murdoch announced the launch of another six. Backed by an investment of Rs 420 crore ($100 million) in the next 24 months, Murdoch's News Corp-owned Star TV is all set to expand its bouquet of regional channels.
"We'll invest $100 million in India in the next 12 months to set up six regional channels under the Star brand," said the chairman of Newscorp, the multi-billion dollar media conglomerate based in New York.
In Mumbai to launch the 30 Dow Jones India Titans 30 Index, which would help launch exchange-traded funds linked to the stock market, the 77-year-old magnate has a media empire with interests in television, film, pay TV, the Net, newspapers, and publishing. According to Forbes, Murdoch's individual Net Worth stands at $8.3 billion.
Viewership measurement agency, TAM Media Research says the relative share of southern regional channels for the week July 20-July 26 stood at 18.7 per cent, in comparison to 23.2 per cent occupied by Hindi general entertainment channels.
Star already has channels in Tamil, Bengali and Marathi, along with 11 other channels.
"Regional television is the future. Over a long-term period, it is a very good bet," said Shashi Sinha, CEO, of media agency Lodestar Universal.
Source: Hindustan Times |
Haryana sees investment of US$ 8.32 billion over 3 years
Haryana has witnessed a gush of investments in the industrial sector over the last three years, with investments totalling up to US$ 8.32 billion. Projects worth another US$ 16.67 billion are in the pipeline. In exports, Haryana is close to achieving an all-time high of US$ 9.53 billion during the year 2007-08, against US$ 7.14 billion in the year 2006-07, a spokesman of the Industries Department said. Stressing on the importance of the Haryana SEZ Act, 2005, in the area of exports, he informed that the state has received 94 proposals for the setting up of special economic zones (SEZs) that could catalyse an investment of more than US$ 47.64 billion, with employment for over 20 lakh persons. Moreover, out of the total proposals, 41 have already been sanctioned by the Government of India.
Riding on strong economic fundamentals that have led the state to be identified as one of the most forthcoming pro-business states in the country, Haryana is home to 94 large and medium units and 5031 small scale industrial units. Besides, 338 Industrial Entrepreneurs Memorandums (IEMS) with an investment of US$ 1.34 billion have already been implemented.
Moreover, as many as 567 IEMS worth US$ 3.37 billion have been filed with the Government of India for implementing large and medium projects in the State. The recently enacted Haryana Industrial Promotion Act, 2005 aims to expedite approvals to industrial projects and provide time-bound clearances. Entrepreneurs could benefit from a provision made by the State Government, for grant of deemed approvals for change of land use permission in industrial zone, building plans, NOC from Municipal Committee, NOC from Pollution Control Board, the spokesman added.
Source: IBEF |
Nokia announces an additional US$ 150 million investment in India and China
On 31 July, 2008, Nokia announced an additional US$ 150 million inflow into its private equity and venture capital arm to invest in the rapidly growing markets of India and China.
The company will invest the amount in Nokia Growth Partners, increasing the funds for direct investments with the company to US$ 250 million. In a company statement, it was announced that Nokia Growth Partners will set up direct operations in India and China and also increase its investments in the US and Europe. The statement further said, "With the additional investment announced on Thursday, Nokia Growth Partners will continue pursuing investments that are of strategic relevance to Nokia, and or complementary to their strategy."
The added investment is being made with the objective of targeting innovators in software and services. "Target investments include companies creating innovative mobile applications and services that encourage rapid adoption of mobile solutions, such as context and location-based services, mobile payments, mobile advertising, music and entertainment and other mobile services and software," the statement revealed.
Apart from direct investments, Nokia Growth Partners will also steer Nokia's other venture capital fund investments. Presently, the company's commitments to venture funding activities are in excess of US$ 900 million.
Source: IBEF |
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