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Saturday, January 23, 2010

Edition 8: News

China Economy headed for crash
As most of the world bets on China to help lift the global economy out of recession, experts are warning that China's hyperstimulated economy is headed for a crash, rather than the sustained boom that most economists predict. Its surging real estate sector, buoyed by a flood of speculative capital, looks like "Dubai times 1,000 or worse. Experts even suspects that Beijing is cooking its books, faking, among other things, its eye-popping growth rates of more than 8%. Bubbles are best identified by credit excesses, not valuation excesses. And there's no bigger credit excess than in China.
As America's pre-eminent short-seller Chanos an expert bets big money that companies' strategies will fail Chanos's narrative runs counter to the prevailing wisdom on China. Economists and governments expect Chinese growth momentum to continue this year, buoyed by what remains of a $586 billion government stimulus program that began last year, meant to lift exports and consumption among Chinese consumers.
Still, betting against China will not be easy. Because foreigners are restricted from investing in stocks listed inside China, Chanos has said he is searching for other ways to make his bets, including focusing on construction- and infrastructure-related companies that sell cement, coal and steel.
Bihar Growth story
Despite three years of floods followed by a year of drought, 'backward and benighted' Bihar reports a miraculous figure: 11% GDP growth, second only to Gujarat. The state's economy has never grown so fast so consistently as it has since 2004-2005. A few pointers on what's going right in Bihar:
* Getting anywhere in Bihar has always been an exercise in endurance. But that's changing. More than 6,800 km of roads have been relaid and 1,600 bridges and culverts constructed in the last four years. Journey time in India's 12th largest state, sprawling over 94,163 sq km, has been cut by half today in many places. Now, most of the state's 38 districts from northernmost West Champaran to Kaimur on the western end are a drive of six hours or less from Patna.
* Automobile sales in the state grew 45% in 2009, at a time when sales had dipped 20-25% in several other states during the economic slowdown. Is this buying spree an indication that a section of Biharis have more money to splurge than they did earlier? “A few people had money earlier too, but they didn't flaunt it for fear of attracting extortionists and kidnappers,” says Ranjit Singh, director of a high-end Patna hotel. That fear may have evaporated now.
* Only 317 kidnappings for ransom were reported during the last four years as against 1,393 during the previous four. The kidnapping industry has clearly fallen on hard times. One indication of this is that doctors no longer refuse to go to patients' homes on emergency calls. “Today you can see boards at clinics saying we go on calls,” says Dr Amulya Kumar Singh, who runs a nursing home in Patna.
* Most of Bihar's infamous dons are behind bars. That includes Mohd Shahabuddin, the former RJD MP who had once gone live on TV, daring the state police chief to arrest him. Things are a little different now. A ruling JD(U) MLA, Sunil Pandey, attempted an encore of sorts in early 2006 when he brandished a revolver and talked murder on TV. But Pandey found himself behind bars within no time. Speedy trials have ensured a total of 38,824 convictions between 2006 and September 2009.The convicts included dons and their henchmen.
* Gun-toting strongmen are no longer a common sight on the streets of Bihar. Policemen patrol them now. And places like Siwan, where Shahabuddin once held sway, do not get deserted after dusk. This improvement has shown results. Malls, shops and private educational institutions are coming up. So are mobile service providers and banking firms. It's boom time for real estate with apartment buildings coming up all around. “That's because even non-Biharis for a change want to have a foot in Bihar which has become a better place to live in,” says economist Shaibal Gupta of the Asian Development Research Institute. Adds Faizal Alam of Kalyanpur Cements, “Cement inflow to the state went up 18% to 51 lakh tonnes in 2008-09.” That's an indicator of the construction boom. Ironically, this economic growth has happened without any worthwhile contribution from the manufacturing sector. The state's economy is growing because of a boom in agriculture and services sectors. “It's government-induced growth,” admits Bihar Industries Association (BIA) president S P Sinha. According to former BIA president K P S Keshri, private investments in the manufacturing sector have been as little as Rs 1,500 crore during the last four years.
Many attribute the growth to the fact that the flow of Central funds to states has increased manifold in recent years. In the case of Bihar, it went up from Rs 37,341 crore during the five-year period 2000-2005 to Rs 55,459 crore during the next three years. But equally importantly, the funds are now getting better utilized than during the Lalu-Rabri regime when large chunks remained unspent. Also, adds Gupta, the state made concerted efforts to mobilise internal resources with its own revenue collection going up from Rs 2,919 crore in 2003-04 to Rs 5,256 crore in 2008-09.
The flip side is that much of this growth does not get reflected in social indicators which remain abysmal. But, as Gupta says, it would be unrealistic for anyone to “expect the moon” at this stage. “Right now the fundamentals are getting corrected and therefore you can find mostly infrastructural indicators of growth; one will have to wait for social indicators to become visible,” he says.
While contractors and realtors stand to gain, more than half the state's 8.2 crore people 1.25 crore families still live below the poverty line. For these families to prosper, Bihar desperately needs huge investments and more growth. The State Investment Promotion Board, formed by the Nitish government, has received proposals worth Rs 96,000 crore. But most of them, especially the major ones, remain on paper as Central rules prove a stumbling block. For instance, thermal power plants cannot come up in Bihar because the Centre has so far refused to provide coal linkages to ensure regular supplies to any such new plant. Also, Bihar has a lot of catching up to do with the rest of India. “There cannot be any comparison between Gujarat and Bihar, both of which reportedly grew by over 11%; since our base is low, even a small investment results in impressive growth in percentage,” Gupta points out. State officials admit that crucial sectors like health are still sick with meagre resources in comparison to other states.
From its bleak past, Bihar may be finally moving towards a brighter future, but the common Bihari is not patting himself just yet. Maybe he is still waiting for this high growth to translate into better food on his table and more money in his pocket.
Indian Hockey Players Strike unresolved
The disgruntled national hockey players early this week continued their indefinite boycott of the World Cup preparatory camp to protest the non-payment of their dues and incentives.
The squad, demanding incentives for their performance in the year gone by, had on Sunday decided to go on strike despite reaching a truce with Hockey India officials in New Delhi just a day before.
"We are not training from this morning. We are waiting for Hockey India officials to arrive. We came to know that Hockey India officials are coming to meet the team. The team will have a meeting with them and let's see what happens," said senior forward Prabhjot Singh, who has been appointed by his teammates as their representative.
"Hopefully, things will be resolved by this evening. If all the boys are satisfied with the outcome, we will end the strike immediately," he added.
Hockey India on Sunday 10th jan, reacted sharply to players' decision with treasurer Narinder Batra accusing them of blackmailing the Federation and holding the nation to ransom.
"They agreed to our offer yesterday and now they are back on strike. They can't hold a nation to ransom," he said.
Batra claimed HI listened to every grievances of the players and offered a solution too. "They talked about insurance cover, graded systems and even the alleged poor quality of food they had at the Pune camp. We told them what we can immediately do. We even agreed to compensate for the poor food, arrange a meeting with the sponsor as they demanded and HI president (AK Mattoo) went to the extent of promising them Rs 1 crore each if they win the World Cup. We said we would get the money anyhow for them.

Infy reported a 4.9 percent drop in quarterly profit
Infosys Technologies , India's No. 2 software services exporter, reported a 4.9 percent drop in quarterly profit, smaller than market estimates, sending its stock up 2.5 percent in a flat market.
The company, which kicked off the sector's results, said October-December net profit fell to 15.6 billion rupees ($346 million) from 16.4 billion a year ago.
Infosys raised its revenue forecast for the full year and said revenue in dollars would rise 1.8-2.0 percent, reversing its October forecast for a drop of 1.0-1.3 percent.
A Reuters poll had estimated a net profit of around 14.8 billion rupees, a decline of 4 percent from the previous quarter and down 10 percent year-on-year.
"Global economic recovery seems to be led by the US and the financial services," said S Gopalakrishnan, CEO and managing director of infosys. "Even though IT budgets are expected to be flat in 2010, offshore outsourcing is expected to benefit from this recovery.”
Consolidated results for the quarter ended December 31, 2009:
n Income was Rs 5,741 crore (Rs 57.41 billion) for the quarter ended December 31, 2009; QoQ growth was 2.8%; YoY decline was 0.8%
n Net profit after tax was Rs. 1,582 crore (Rs 15.82 billion) for the quarter ended December 31, 2009; QoQ growth was 2.7%; YoY decline was 3.6%
n Earnings per share decreased to Rs. 27.75 from Rs. 28.66 in the corresponding quarter of the previous year; QoQ growth was 3.3%; YoY decline was 3.2%
"The contribution to our revenues from our top ten clients grew by 12.2% during the quarter. Our clients are taking decisions much faster," said S D Shibulal, chief pperating officer, infosys. "Our focus on New Engagement Models was strengthened by the launch of Flypp, our latest technology platform for telecom service providers.”
Quarter ending March 31, 2010
n Income is expected to be in the range of Rs 5,675 crore (Rs 56.75 billion) and Rs 5,721 crore (Rs 57.21 billion); YoY growth of 0.7% to 1.5%
n Earnings per share is expected to be in the range of Rs 25.62 and Rs 25.83; YoY decline of 9.0% to 8.3%
Fiscal year ending March 31, 2010
n Income is expected to be in the range of Rs 22,473 crore (Rs 224.73 billion) and Rs 22,519 crore (Rs 225.19 billion); YoY growth of 3.6% to 3.8%
n Earnings per share is expected to be in the range of Rs 106.85 and Rs 107.06; YoY growth of 2.2% to 2.4%
Growth has been above expectations and the margins have been really good. On the margins front, if the volumes are really good, then their utilisation will go up and they should be able to offset the adverse impact of the rupee appreciation."
The quarterly numbers are higher than street estimates and the yearly guidance has also been increased, which is quite encouraging. That's the most exciting part. It looks like confidence in business momentum is coming back.
From here on, with the operating environment stable, what's more important how you decide to grow, how you go up the value chain."
Quality of life? India beats China, Russia
India has moved up 35 places to become the 88th best country in the world to live in, leaving behind nations like Russia and China, according to a survey.
The rise has made India the second best place after Bhutan to live in the sub-continent, according to the 2010 Quality of Life Index, published by travel magazine International Living.
Sweden has been dubbed as the costliest country in the world to live in by the index.
In 2009, India was the fourth best country in South Asia after Bhutan, Maldives and Sri Lanka.
The index, published for the 30th year, ranks 194 nations in nine categories: cost of living, culture and leisure, economy, environment, freedom, health, infrastructure, safety and risk, & climate.
India has not only improved its overall position in the tally, but has also gained around 25 points in the cost of living category. This year the country got 65 points compared to 40 last year.
"The figure relates to how much it will cost one to live in style comparable to, or better than, the standard of living you're likely enjoying in the United States," the magazine says.
Iraq tops the cost of living category, securing 100 per cent. This makes it the worst country to live in. The second-worst place to settle down in is Afghanistan, which got 88 points. For the record, Sweden scored a zero in the category.

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