Mumbai Terror Attack Reveal New Strategy of Terrorists

With new terror strike in Mumbai terrorist have unveiled their new strategy of taking seize of economic hubs, random killing and fighting pitch battles with police force rather than blowing up locations in quick succession.

The strategy seems to be clearly aimed at denting the normal business life by taking seize of economic hub and preventing it functioning, thus causing enormous damage. These prolonged pitch battles are aimed at ruining the economic life and order as they did it in J&K. This has been extremely successful in long run, when frequent terrorist strikes have killed the economy. By taking aim at major business hotels they have already signaled that Mumbai is not going to remain safe place to do business.

Another aspect of their economic terrorism is taking tourists hostage and attacking tourist hotspots like Colaba. India has already entered in bad map of foreign tourist with one after another city becoming unsafe for them. This will have larger impact on tourism and hospitality industry both in Mumbai and rest of the country.

Further, random targeting of civilians at all possible public place is going to play havoc in the minds of citizens will change the mobility pattern of urban population in India. Any future replication of this Mumbai terror attack in other cities is going create major trouble for economic growth of the country.

India to Amend its Trade Mark Laws to Facilitate Technology Transfers

The government has approved amendments to the Indian trademark through Trade Mark (Amendments) Bill 2007. The bill will be introduced in Parliament for its approval. According to the government the amendment will encourage technology transfer through trademark licensing and franchising.

The Trade Mark Amendments Bill is India’s gateway to the Madrid Protocol, once approved the Bill will facilitate India’s joining of Madrid Protocol of trade marks as amendments to the bill make their case stronger in India’s intellectual property rights. India’s entry into the Madrid Protocol will facilitate Indian companies to register their trade marks in the member countries through a single application.

Avoiding Unemployment as Poll Issue

Employment has suddenly emerged as the issue that is jolting the confidence of both politicians and businessmen alike. The government once again caught off-guard, is in mood of denial as it did in case of credit crisis and economic slowdown. The government seems to not woken up to the reality or it’s the Prime Minister Manmohan Singh, who wants to divert the attention by making claims about the economic growth. Mr Singh once again in a summit last week said that India would achieve next year’s growth target of 8%, when a few weeks back they were claiming it would be 7%.

Rising unemployment rate during elections are major embarrassment to any government, UPA recognises this fact and thus avoid any talk on the issue to prevent its escalation in media. The government and PM has kept on making statements about India’s miraculous future growth despite global slowdown. Finance Minister has severely criticized reports on layoff by industry and suggested industry could manage downturn without downsizing. The government has been trying to hush-up the matter. It want to keep the issue of unemployment under carpet to avoid any further jolt to its chances of winning election.

Almost every sector in the industry be it retailing, technology, automotive, textiles and exports are under pressure to shed labour and bring down production to avoid any closure. Government has no business in directly supporting industries in this business cycle, it should have taken steps to boost economic growth but it has even failed on this count.

Textile, Jewellery & Auto-components- Unemployment rises amongst India’s Forex Earners

The global economic slowdown has impacted different sectors with varied degree of severity. Textiles and Gems & Jewellery sector, which are one of the biggest contributor’s of India’s exports earnings, are in shambles. Both the sectors are tied with discretionary consumption of global clientele for their produce thus heavily dependent on global market. With discretionary consumption taking nose dive with economic uncertainty all over the world, consumptions of products likes jewellery and garments have fallen dramatically.

This has direct impact on the economic viability of business units related to these two sectors. As a large number of units in these sectors are small and medium size units and most of the workforce belong to unorganised sector. As the new orders have dried out, a large number of these SME units have shut shops leaving workers in lurch. Around 50,000 works have lost jobs in gems & jewellery industry, which expects job losses to go further. Textile industry also expects to cut 5 lakh employees in next five months. Adding to the woe is auto components industry, which in last few years had become darling of global automotive giants, as automobile industry faces question of declining demand the small components manufactures are already showing door to the contact labourers.

Sovereign Wealth Funds to Invest in India’s Oil Exploration Sector

E&Y report also lists China’s SWF as possible investor in India

Ernst & Young has come out with a new report that forecasts India will receive up to USD10 bn of investment in oil exploration and production sector. Interestingly, report also suggests that Sovereign Wealth Fund (SWFs) of Mid-east, Singapore and China would be making such future investments in India’s oil and gas exploration. Also, exploring there chances would be much reluctant Japanese Banking institutions, which so far don’t have a bigger presence in India.

SWFs are surprise entrant to the Indian exploration market. SWFs have been making huge investments in energy sector focused around Mid-east and Africa region but India was never on its target as most of the investment is directed towards securing it energy needs. E&Y has unexpectedly included SWFs from China, which have been in forefront of securing China’s growing energy need and have been competing with India on foreign acquisitions.

India opened its oil and gas exploration sector for private players through New Exploration and Licensing Policy in 1998, so far seven rounds have taken place and 207 blocks have been awarded to the participating companies. This has brought down the average unexplored acreage in India’s total sedimentary area to 15% in FY07 from 41% in FY '99.

DLF enters Asset Management Business

DLF Pramerica, a JV between India’s largest realty firm DLF and Prudential Financial Inc (PFI) of the US, that got an in-principle approval to set up an asset management company (AMC) from the SEBI, expects to break even within three to five years in the business.

PFI is the majority shareholder in the JV with 61%, while DLF will own the remaining 39.5%. Pramerica is the brand name used by PFI in India and other select countries. The asset management business will have a capital base of $45 mn and will be based in Mumbai. DLF Pramerica Mutual Fund is a sub-brand under the umbrella brand of DLF Pramerica. The fund venture, DLF Pramerica Asset Managers Pvt Ltd, is headed by Vijay Mantri, who joined in April from the Indian fund unit of Deutsche Bank.

The AMC will provide full range of mutual fund and investment products, including domestic and international mutual funds to customers. Prudential Financial has assets under management of around $602 bn as on 30 September, 2008 and has operations in US, Asia, Europe and Latin America.

DLF Pramerica joins more than 20 firms looking to break into the Indian fund industry, which saw its assets grow more than four-fold to Rs 5.5 trillion rupees in five year ending 2007. According to a recent McKinsey report, the total AUM of the Indian mutual fund industry could grow to $350-440 bn by 2012, expanding 33% annually. While the revenue and profit (PAT) pools of Indian AMCs are pegged at $542 mn and $220 mn respectively, it is at par with fund houses in developed economies. Operating profits for AMCs in India, as a percentage of average assets under management, were at 32 basis points in 2006-07, while the number was 12 bps in UK, 17 bps in Germany and 18 bps in the US, in the same time frame, the McKinsey report said.

Even though many players are entering the mutual fund space, the space itself is seeing lots of turmoil. Assets have shrunk 28% to Rs 3.9 trillion this year due to a stunning 51.5% slump in India's benchmark index and outflows from fixed income funds. The mutual fund industry in India, in recent times, has seen a wave of redemptions especially in the debt schemes.

The sector is also seeing consolidation, recently Religare-Aegon AMC, which had recently started operations, acquired Lotus India AMC. The latter has begun operations in 2005. Even DLF Pramerica, has made its intentions clears, saying that it would also look at the inorganic growth route also in addition to the organic route, especially when there there were AMCs for sale available in the market.

OVL & Cairn boost India’s Energy Security

OVL acquires oil block in Columbia; Cairn hikes crude production in Mangala

India’s energy security got a boost last week when ONGC’s overseas arm OVL succeeded in bagging an oil block in latin American country of Columbia. The oil block is located in north-western Columbia near La Creciente natural gas field. The oil block has been awarded as equal joint venture between Columbia and OVL, which will remain property of Columbian government. The awarded block is 550km long and has total area of 2.7 Lac hectares. The OVL consortium will initially invest USD 23mn in first phase of the exploration.

In another development, the Cairn India announced that it will increase the production capacity of its Mangala oilfields to 175,000 barrels per day from present 65,000 bpd. This would increase Mangala oilfields contribution to 25% of the present domestic production capacity. Increase in production capacity will help India in reducing its oil import bill and further securing in energy needs.

Indian Mobile Subscription all Boom in Gloom & Doom Economic Situation

Notwithstanding the gloom in the economy, growth in mobile subscriber base continues to increase by leaps and bounds, buoyed further by festive-season sales. It has now become the fastest growing mobile market of the world, where telecom companies are offering services at quite low rates.

Global System for Mobile communications (GSM)-based networks added 3.3% or 7.7 mn subscribers (excluding Reliance Telecom) in October. The country has a total 241.4 mn users in October as compared to 233.7 mn users in September, as per the data of nine telecom companies maintained by Cellular Operators’ Association of India (COAI). At the current growth rate, the GSM segment is expected to cross the historic 250 mn part by December 2008.

Among the top five in the segment, top operator Bharti Airtel Ltd added 2.72 mn new users in October, taking its total base to 80.2 mn, while Vodafone Essar added its highest ever number of new users at 2.1 mn to take its base to 56.7 mn. Public sector operator and fourth ranked Bharat Sanchar Nigam Ltd (BSNL) added 669,551 new users to have a base of 39.8 mn users, while fifth ranked Idea Cellular Ltd signed up 1.2 mn users in October to have a total of 31.6 mn.

Inflation falls to Single digit at 8.9%

In an unexpected happening, WPI inflation fell to single digit numbers for the first time in 5 months, falling by 174 bps from the previous week to 8.98% for the week ended November 1, 2008. The point-to-point inflation rate also fell the most in at least 18 years. The reading was way below average estimate of economists, which ranged between 10.2-10.5%. This comes as welcome signal for the economy, reeling from low growth numbers, tight liquidity and worries of global economic recession. The fall in inflation has also given the Reserve Bank of India, more headroom to cut rates, bringing out another positive aspect of the fall in inflation, fall in rates could be a big boost for the domestic economy reeling from slowing growth.

What aided the sharpest-ever fall in WPI inflation in over five months was the slump in the prices of various petroleum-based fuels such as naphtha, aviation turbine fuel (ATF), furnace oil and light diesel oil as global crude prices plummeted from $145 a barrel in July to $56-60 a barrel. The energy index that comprises of around 15% of the total index dropped 9.22%, compared with 14.09% in the previous week, after Indian oil marketing companies cut the price of jet fuel by 17%. The index of manufactured products that includes cooking oil and steel products, with a 63.7% weighting in the inflation basket, dropped to 8.06% compared with 9.09% a week ago.

Apart from others who had voiced similar views in the recent past, it was only earlier this week that the Prime Minister’s Economic Advisory Council (PMEAC) Chairman, Suresh Tendulkar, said: “Inflation seems to be on the decline as international commodity prices are coming down and the domestic harvest is good. Early next year, inflation would be in single digit.”

Automotive goes out of gear with drastic sales decline

Until recently, India's market had been racing ahead, posting double-digit growth, spurred by a fast-growing economy that had created a new, affluent group, Butt high borrowing costs and new tough loan conditions as a result of the global credit crunch has hit the economy growth, with the latest sector to face the brunt is the auto industry.

India's domestic car sales fell by 6.6% in October, the fastest drop in more than three years, as consumer loans dried up amid a global credit crunch, even as a festive season failed to revive the auto industry. according to the Society of Indian Automobile Manufacturers (SIAM). Cumulative vehicle sales growth for the seven months to October stood at 5.64% from 10.07% growth in the April-September period. Earlier this year, SIAM had forecast overall vehicle sales growth of 12-15% for the financial year to March 2009.

Close introspection of the figures released show that, car sales in the domestic market plunged in October with a 6.59% fall to 98,900 cars against 1.05 lakh in the same month last year. Motorcycles sales were down 18.17% to 5.38 lakh against 6.57 lakh last year. Similarly, trucks and buses sales fell 50% to 11,786 vehicles from 23,352 during the same period. Scooters and passenger three-wheelers were the only two segments that posted positive growth of 4.4% and 16%, respectively. Exports also grew 41.16% to 1.44 lakh in October against 1.02 lakh the same month last year.

SIAM will review its sales forecast for the year ending March 31 after the November figures are announced next month. SIAM has already cut its full-year growth forecast to between 8-10% from an earlier estimate of 12-13%.

Automotive Industry in India - India's automotive industry, produces 1.5 mn vehicles annually, and is worth $34 bn a year, contributing 5% of the country's GDP.

Who Will Save Large US Banks?

The US banking giant, Citibank, is once again toying with the ideas of acquiring banks though it’s domestic regional banks now. But with large number of banks still on the FDIC’s list of bank with riskier assets and monthly new additions to the failed banks list (Security Pacific and Franklin Bank, this month), consolidation in the US banking sector has become a needless exercise.

As the US economy scenario is expected to deteriorate further, the number of banks going bust is likely go to higher. A large number of these failed banks are likely to be acquired by big US banks, some of the directive of treasury. This is bound to add more trouble to the large banks, which are already facing credit crisis. The imminent question is- what would happen when these large banks would be on brink of bankruptcy? Will government let them fall?

No. the government already has minor stake in several leading banking firms but this would not their reason for the survival. The US government has put some legislation that almost guarantees the survival of such large firms and puts the “onus” of safeguarding and protecting such organizations on the government. In 1999, Gramm-Leach-Billey (GLB) Act aka Financial Services Modernisation Act was passed that repealed key parts of Glass-Steagall Act. Section 108 of GLB Act states that “Use of subordinated debt to protect the financial system and deposit funds from ‘Too big to fail’ institutions.”

At this moment it is not clear if federal government is pushing large banks to acquire smaller ones knowing that ultimately they would have to save them, or it is these large banks which interested in creating “too big to fail” institutions.

DTH services to open up for Interportability

Government is finally waking up to allow real competition into the DTH market. Till now, there is no portability amongst the DTH player which gives players upper hand in pricing ones the subscriber chooses a particular service as the subscriber can no longer switch to other service without incurring huge cost.

Lack of regulation on the technology front has resulted into lack of uniformity amongst the DTH players, though the two biggest players, Tatasky and Dishtv, use MPEG 2 technology the new entrants into the market are using MPEG 4 technology. The Ministry of Information and Broadcasting has asked the Bureau of Indian Standards (BIS) to draft a norm on DTH setup box technology, which will enable Interportability of services.

This decision will benefit the present subscribers which are estimated at around 6.4 million. But, this decision will have major impact on the future growth of DTH market as consumers will find it more attractive to have DTH service with Interportability feature. DTH segment has attracted two new players in recent months and is expected to heat up the competition and growth of this segment.