Thursday, March 19, 2009
IMF projects GDP growth at 6.25%
IMF projects GDP growth at 6.25%
The Financial Express, March 19, 2009, page 1
Economy Bureau, New Delhi
The global slowdown will have a deeper impact on India than previously perceived, though the Planning Commission projections are still optimistic. The International Monetary Fund pared its 2008-09 growth estimate for India to 6.25% on Wednesday, while the Centre’s think-tank expects 2009-10 to see just 5% growth in a worst-case scenario. But the Planning Commission expects the recent fiscal stimulus measures to add 1.5-2% of GDP growth in 2009-10.
Echoing IMF’s concerns, the chief statistician of India, Pronab Sen, flatly dismissed any hope of achieving the official GDP growth projection of 7.1% for 2008-09. “7.1% growth is not achievable,” Sen said. “If you had 5.3% growth (in the third quarter), you are looking at 7.4% growth in the fourth quarter (to have 7.1% for the whole fiscal), which does not seem to be possible”, he said.
Meanwhile, Planning Commission member Abhijit Sen said, “We have done a worst case calculation on the basis of no effect of the stimulus and what we know currently about the world economy, on that basis the worst case scenario is about 5% growth.”
Though Abhijit Sen said the impact of any fiscal stimulus is difficult to calculate, he projected the stimulus effect to be between 1.5% and 2%. “It is an optimistic assessment and will take the growth rate to between 6.5% and 7%,” Sen said, before adding that the economy might require more fiscal stimulus measures.
IMF urged India to ease money supply to fight the economic slowdown while cautioning that additional expenditure and more tax reliefs could raise public debt to unsustainable levels. The tax department is already facing a tough time meeting this year’s revenue targets. Corporate advance tax collections for 2008-09 grew by a mere 17.5% to Rs 1,23,400 crore from Rs 1,05,000 crore last year, latest figures show.
IMF, which concluded its India consultations on March 6, said India’s growth could moderate to 6.25% in 2008-09 and 5.25% in 2009-10. It said corporate investment is expected to slow because of weakening profitability and confidence of companies and tighter financing conditions of foreign and non-bank sources.
“The uncertainty surrounding the forecast is unusually large, with significant downside risks. The main upside risk stems from a larger-than-anticipated impact of the stimulus measures that the authorities have already implemented,” IMF said.
The tax department has netted Rs 3,12,800 crore in direct taxes till Tuesday against a target of Rs 3,45,000 crore for 2008-09.
India’s GDP to slowdown this, next fiscal too: IMF
India’s GDP to slowdown this, next fiscal too: IMF
The Hindu Business Line, March 19, 2009, Page 5
2008-09 stimulus should help bolster economic growth.
--------------------------------------------------------------------------------
Outlook
Public debt remains elevated at about 80%.
Centre deficit to rise to nearly 10%.
Inflation may fall further to 3% year-on-year by March.
Current account deficit is projected at about 3%.
--------------------------------------------------------------------------------
Our Bureau
New Delhi, March 18 The International Monetary Fund (IMF) projects India’s economy to slow down to 6.25 per cent GDP growth this fiscal and further to 5.25 per cent in 2009-10, reflecting the ‘deteriorating’ global outlook. This is lower close to one percentage point from the CSO’s advanced estimates of real GDP growth at 7.1 per cent for the current fiscal. This slowdown comes after India clocked an average growth of 8.75 per cent in the past five years.
In a statement issued in Washington on March 17 delineating the deliberations of the Executive Board of the Fund on February 6 after a staff team visited India and held talks with officials on economic developments and policies as part of its exercise under Article IV Agreement for 2008, the Fund concedes that the “uncertainty surrounding the forecast is unusually large with significant downside risks”.
The Directors concurred that the sizeable fiscal stimulus undertaken in 2008-09 should help to bolster economic growth. But, given the high ratio of public debt to GDP, significant further expansion of the deficit could raise concerns about fiscal sustainability.
Public debt remains elevated at about 80 per cent of GDP, they said adding that monetary and structural policies would have to continue to carry most of the burden of adjustment, given the high public debt-GDP ratio.
India should use the limited available fiscal space only for high-quality infrastructure and poverty-related spending and for bank recapitalisation if needed, the Fund said, adding that the general government deficit, covering the State’s and Centre’s deficit, is forecast to rise to nearly 10 per cent of GDP.
The Fund directors advised that any further short-term stimulus should be combined with fiscal reforms to safeguard medium-term debt sustainability as medium-term fiscal consolidation remains a priority, which should be anchored in a fiscal rules framework.
While hailing India’s plans for considering a strengthened successor fiscal framework to replace the extant one when it expires in 2009-10, the Fund called for the new framework to be underpinned by “comprehensive expenditure reforms and measures to broaden the tax base”. The Fund’s senior functionaries also underlined India to take advantage of falling global crude prices by moving expeditiously with its fuel subsidy reform plan, while ensuring that a well-targeted social safety net is in place.
In appreciating the strength and resilience of India’s financial system, reflected in favourable financial soundness signals, the Fund cautioned that escalating credit risk and liquidity pressure could put the financial system under strain. Hence, India should take additional preventive action, including identification of potential bank re-capitalisation needs and measures to promote early loss recognition, full disclosure of bad assets and filling of information gaps. It also emphasised on the importance of persevering with reforms to deepen and further strengthen the financial sector, foster the corporate bond market and improve banking efficiency.
While the corporate balance sheets of India Inc have been strong in recent years, slowing economic growth and tighter financial conditions could increase corporate distress, the Fund warned. Hence, the implementation of reforms to beef up corporate governance and the regulatory framework for corporate restructuring. “These measures are also important to improve the investment climate”, it said.
On inflation, it said with commodity prices waning and demand slackening, inflation is likely to fall further to three per cent year-on-year by March 2009 and to two per cent on an average in 2009-10.
The current account deficit is projected at about three per cent of GDP this fiscal, primarily due to a markedly higher oil import bill.
As export performance has worsened sharply in recent months, softer import growth is keeping the trade deficit in check. For 2009-10 the current account deficit is forecast to narrow to 1.5 per cent of GDP reflecting lower oil prices and weaker domestic demand.
The Hindu Business Line, March 19, 2009, Page 5
2008-09 stimulus should help bolster economic growth.
--------------------------------------------------------------------------------
Outlook
Public debt remains elevated at about 80%.
Centre deficit to rise to nearly 10%.
Inflation may fall further to 3% year-on-year by March.
Current account deficit is projected at about 3%.
--------------------------------------------------------------------------------
Our Bureau
New Delhi, March 18 The International Monetary Fund (IMF) projects India’s economy to slow down to 6.25 per cent GDP growth this fiscal and further to 5.25 per cent in 2009-10, reflecting the ‘deteriorating’ global outlook. This is lower close to one percentage point from the CSO’s advanced estimates of real GDP growth at 7.1 per cent for the current fiscal. This slowdown comes after India clocked an average growth of 8.75 per cent in the past five years.
In a statement issued in Washington on March 17 delineating the deliberations of the Executive Board of the Fund on February 6 after a staff team visited India and held talks with officials on economic developments and policies as part of its exercise under Article IV Agreement for 2008, the Fund concedes that the “uncertainty surrounding the forecast is unusually large with significant downside risks”.
The Directors concurred that the sizeable fiscal stimulus undertaken in 2008-09 should help to bolster economic growth. But, given the high ratio of public debt to GDP, significant further expansion of the deficit could raise concerns about fiscal sustainability.
Public debt remains elevated at about 80 per cent of GDP, they said adding that monetary and structural policies would have to continue to carry most of the burden of adjustment, given the high public debt-GDP ratio.
India should use the limited available fiscal space only for high-quality infrastructure and poverty-related spending and for bank recapitalisation if needed, the Fund said, adding that the general government deficit, covering the State’s and Centre’s deficit, is forecast to rise to nearly 10 per cent of GDP.
The Fund directors advised that any further short-term stimulus should be combined with fiscal reforms to safeguard medium-term debt sustainability as medium-term fiscal consolidation remains a priority, which should be anchored in a fiscal rules framework.
While hailing India’s plans for considering a strengthened successor fiscal framework to replace the extant one when it expires in 2009-10, the Fund called for the new framework to be underpinned by “comprehensive expenditure reforms and measures to broaden the tax base”. The Fund’s senior functionaries also underlined India to take advantage of falling global crude prices by moving expeditiously with its fuel subsidy reform plan, while ensuring that a well-targeted social safety net is in place.
In appreciating the strength and resilience of India’s financial system, reflected in favourable financial soundness signals, the Fund cautioned that escalating credit risk and liquidity pressure could put the financial system under strain. Hence, India should take additional preventive action, including identification of potential bank re-capitalisation needs and measures to promote early loss recognition, full disclosure of bad assets and filling of information gaps. It also emphasised on the importance of persevering with reforms to deepen and further strengthen the financial sector, foster the corporate bond market and improve banking efficiency.
While the corporate balance sheets of India Inc have been strong in recent years, slowing economic growth and tighter financial conditions could increase corporate distress, the Fund warned. Hence, the implementation of reforms to beef up corporate governance and the regulatory framework for corporate restructuring. “These measures are also important to improve the investment climate”, it said.
On inflation, it said with commodity prices waning and demand slackening, inflation is likely to fall further to three per cent year-on-year by March 2009 and to two per cent on an average in 2009-10.
The current account deficit is projected at about three per cent of GDP this fiscal, primarily due to a markedly higher oil import bill.
As export performance has worsened sharply in recent months, softer import growth is keeping the trade deficit in check. For 2009-10 the current account deficit is forecast to narrow to 1.5 per cent of GDP reflecting lower oil prices and weaker domestic demand.
India’s growth could dip to 6.25% in 2008-09: IMF
India’s growth could dip to 6.25% in 2008-09: IMF
Times of India, March 19, 2009, Page 21
Washington: The IMF on Wednesday advised India to initiate more monetary steps to battle the country's slowing economic growth, which the international multilateral agency expects to moderate to 6.25% in the current financial year (2008-09) and fall further by one percentage point in 2009-10.
The Times of India had first reported in its February 28 edition that government's estimate of 7.1% GDP growth for 2008-09 may not be achieved after Q3 (October-December) figure revealed that growth has dipped to 5.3%.
With inflation softening to a six-year low of 2.43%, there is scope for further easing of monetary policy, the IMF said in its review of the economy following Article IV consultations with the Indian authorities. "A number of (IMF) directors saw scope for further monetary easing, in (the) light of the projected decline in inflationary pressures and the need to reinforce confidence and sustain bank credit," the review said.
The IMF expects average inflation to moderate to 2% in 2009-10 from about 8.8% in the current financial year. Inflation has been coming down consistently after touching a peak of 12.9 per cent in August last year. The GDP growth rate in the current fiscal has been projected at 6.25% by the IMF, as against the government's forecast of 7.1 per cent. The IMF expects the growth rate in 2009-10, to fall to 5.25%.
As part of the annual exercise to review the economies of the member countries, the IMF's executive board had held consultations with the Indian authorities on February 6. While suggesting that India focus on monetary measures, the IMF cautioned that additional expenditure and more tax reliefs for fighting economic slowdown could raise public debt to unsustainable levels. Noting that the key short-run policy objective should be to sustain liquidity and credit flows, the review said "monetary and structural policies will have to continue to carry most of the burden of adjustment".
The "sizeable fiscal stimulus" of 2008-09 would support economic growth in India, the review said, adding, "given the high ratio of public debt to GDP, significant further expansion of the deficit could raise concerns about fiscal sustainability". AGENCIES
IMF sees India's inflation hovering around 2%
IMF sees India's inflation hovering around 2%
The Financial Express, March 19, 2009, page 3
Washington, Mar 18 (PTI)
International Monetary Fund (IMF) expects India’s inflation to hover around 2% during 2009-10, mainly on account of declining commodity prices and weakening demand resulting from economic slowdown.
“With commodity prices waning and demand slackening, inflation is expected to fall further to 3% by March 2009 and to 2% on average in 2009-10”, the IMF said in its annual review of the Indian economy.
The inflation rate, as per the provisional government data, has dipped to 2.43 % for the week ended March 1, 2009, much ahead of the IMF’s March-end projection of 3 %.
As per the IMF data, inflation is expected to average around 8.8 % during the current fiscal which witnessed historic increase in crude oil and commodity prices in the international market and subsequent impact on the Indian economy.
The inflation, which peaked to 12.91 % in the second week of August last year, has been declining and the fall became sharper following the global financial meltdown triggered by the collapse of iconic American investment banker Lehman Brothers in September.
IMF holds Article IV consultations with the member countries annually as part of the surveillance and monitoring exercise.
Within seven months since August 2008, the rate of price rise slipped from about 13 % to less than 3 % towards the beginning of March.
Besides global developments and weakening of demand, the low inflation can also be attributed to government’s fiscal initiatives which include reduction in duties and lowering of prices of petroleum products like diesel, petrol and cooking gas.
Indian economy, according to the IMF is expected to moderate to 6.25% in 2008-09 from 9% in the previous fiscal.
Next fiscal (2009-10), according to the review, is likely to be even more difficult with economic growth expected to further slow down to 5.3%.
—PTI
Banks tighten screws on builders
Banks tighten screws on builders
The Economic Times, March 19, 2009, Page 1
Fresh Loans, Restructuring Come With Stricter Conditions
Sugata Ghosh & Rajesh Unnikrishnan MUMBAI
AMID a cash crunch in the property market, banks are setting tougher conditions on builders for fresh money and rolling over old loans. A large number of builders have requested banks for loan rollovers to beat the March-end blues and avert a default. And banks, having shut the doors on builders for months, are slowly releasing funds, but with strict loan covenants.
Some of the lenders have obtained development rights under which the bank will have the right to hire a contractor to complete the construction if the builder leaves the project midway. In some cases, they have the right to trade the floor space index (FSI) available with the borrower if there is a loan default.
The conditions are partly an outcome of the crash in real estate valuations. Wherever possible, lenders have hiked the asset cover—the security required for the loan. But in many cases, builders may not be in a position to pledge additional property for new loans or restructuring existing ones. In such loan exposures, banks derive some comfort from the special rights.
“They (the banks) are extra cautious now,” said Amber Maheshwari, director (investments) at real estate advisor DTZ said. “Though they have been following stringent norms while lending to developers by asking collateral securities and personal guarantees, their focus now is to avoid litigation and involvement of agencies like BIFR or DRT in case developers default,” he said.
The Economic Times, March 19, 2009, Page 1
Fresh Loans, Restructuring Come With Stricter Conditions
Sugata Ghosh & Rajesh Unnikrishnan MUMBAI
AMID a cash crunch in the property market, banks are setting tougher conditions on builders for fresh money and rolling over old loans. A large number of builders have requested banks for loan rollovers to beat the March-end blues and avert a default. And banks, having shut the doors on builders for months, are slowly releasing funds, but with strict loan covenants.
Some of the lenders have obtained development rights under which the bank will have the right to hire a contractor to complete the construction if the builder leaves the project midway. In some cases, they have the right to trade the floor space index (FSI) available with the borrower if there is a loan default.
The conditions are partly an outcome of the crash in real estate valuations. Wherever possible, lenders have hiked the asset cover—the security required for the loan. But in many cases, builders may not be in a position to pledge additional property for new loans or restructuring existing ones. In such loan exposures, banks derive some comfort from the special rights.
“They (the banks) are extra cautious now,” said Amber Maheshwari, director (investments) at real estate advisor DTZ said. “Though they have been following stringent norms while lending to developers by asking collateral securities and personal guarantees, their focus now is to avoid litigation and involvement of agencies like BIFR or DRT in case developers default,” he said.
Developers may get to buy back built-up space in software parks
Developers may get to buy back built-up space in software parks
The Economic Times, March 19, 2009, Page 7
Rajat Guha, NEW DELHI
THE department of industrial policy and promotion (Dipp) is examining a proposal to allow real estate developers to buyback built-up area sold in software technology parks of India (STPI) units and lease out the same to other businesses. As the STPI benefits are expiring in 2010, the government has observed that builders are not expanding in such units rather than carrying out the same business at other special economic zones (SEZs), a senior official in the Dipp told ET.
The issue came up in the last meeting of foreign exchange promotion board (FIPB), when the board took up real estate company Information Technology Park’s request for a clarification whether it could buyback builtup space constructed by ITP itself and lease out the same to other businesses.The company has set up an information technology park under the industrial park policy. The park has a total builtup area of two lakh square metres, out of which, 57,000 sq m space has been sold to various customers in STPI units.
The STPI policy entails exemption from income-tax for IT companies for a period of 10 years for setting up IT units. The tax benefits are expiring in 2010. There are around 6,000 IT units across the country registered under the STPI scheme.
The company has informed the board that as the STPI benefits would expire in a year, most of these units are not expanding and consolidating in SEZs. hence, these units have offered to the company to buyback the built up space sold by the company to them. The company has now sought clearance from the board whether it could buy back the built-up space and lease out to other business units.
The Dipp has now been directed by the FIPB to examine ITP’s proposal in detail, the Dipp official said. The government’s decision on this issue is being watched the industry in general, as many real estate developers have sold spaces in IT parks under the STPI scheme and the scheme ends in 2010.
STPI scheme is a 100% export oriented unit scheme for the development and export of software using data communication links or by physical media or by onsite Consultancy. STPI supports new companies by providing incubation infrastructure with all facilities such as Internet, telephone, fax and power back-up.
The Economic Times, March 19, 2009, Page 7
Rajat Guha, NEW DELHI
THE department of industrial policy and promotion (Dipp) is examining a proposal to allow real estate developers to buyback built-up area sold in software technology parks of India (STPI) units and lease out the same to other businesses. As the STPI benefits are expiring in 2010, the government has observed that builders are not expanding in such units rather than carrying out the same business at other special economic zones (SEZs), a senior official in the Dipp told ET.
The issue came up in the last meeting of foreign exchange promotion board (FIPB), when the board took up real estate company Information Technology Park’s request for a clarification whether it could buyback builtup space constructed by ITP itself and lease out the same to other businesses.The company has set up an information technology park under the industrial park policy. The park has a total builtup area of two lakh square metres, out of which, 57,000 sq m space has been sold to various customers in STPI units.
The STPI policy entails exemption from income-tax for IT companies for a period of 10 years for setting up IT units. The tax benefits are expiring in 2010. There are around 6,000 IT units across the country registered under the STPI scheme.
The company has informed the board that as the STPI benefits would expire in a year, most of these units are not expanding and consolidating in SEZs. hence, these units have offered to the company to buyback the built up space sold by the company to them. The company has now sought clearance from the board whether it could buy back the built-up space and lease out to other business units.
The Dipp has now been directed by the FIPB to examine ITP’s proposal in detail, the Dipp official said. The government’s decision on this issue is being watched the industry in general, as many real estate developers have sold spaces in IT parks under the STPI scheme and the scheme ends in 2010.
STPI scheme is a 100% export oriented unit scheme for the development and export of software using data communication links or by physical media or by onsite Consultancy. STPI supports new companies by providing incubation infrastructure with all facilities such as Internet, telephone, fax and power back-up.
Lodha launches affordable home project in Mumbai
Lodha launches affordable home project in Mumbai
The Hindu Business Line, March 19, 2009, Page 17
Our Bureau, Mumbai
Breaking the sub-Rs 2000 per sqft price barrier in Mumbai, realty major Lodha Group has launched a 6,500 unit affordable home project at Dombivili, 50 km away from the city, at Rs 1,998 a sq ft.
The integrated township project, to be built in two phases at a cost of Rs 950 crore, will be spread over 125 acres with 3,500 residences being developed under the first phase. The residential development will comprise 11 clusters. The project has been planned with 86 per cent of open space with units of one, two and three BHK priced at Rs 11.7 lakh, Rs 14.9 lakh and Rs 24.3 lakh. The first phase is scheduled for delivery in 2011.
The promoters intend to pump in 20 per cent of the project cost as equity. The balance is expected by way of 20 per cent bank funding and 60 per cent internal accruals.
Mr Abhisheck Lodha, Director, Lodha Group, said, “It will be a mini city with all conveniences and utilities available within an integrated residential township. It is the largest initiative by the Lodha Group and will see planned development of 9,000 acres. The township will be a complete self-sustaining eco-system with a residential and commercial hub and world-class amenities and infrastructure.”
This residential project will be part of the 9,000-acre land expanse that the Lodhas intend to develop at Dombivili. From playschool to international universities, medical centres to multi-specialty hospitals, gardens to golf courses and small business offices to SEZ, the promoters intend to encompass all within the large land holding. The entire 9000 acre development will take 10-15 years, said Mr Lodha.
Good response
Mr Hardeep Dayal, Managing Director, Centrum Capital, said the Lodhas had got a good response for their affordable range projects in Thane and going by that they have taken this call.
On pricing and prospects, he said there was a likelihood of PLR being pared further and if it happened soon, it would be a win-win situation for the developer and customers, more so as the project was in the sub-Rs 20 lakh range.
Mr Dayal said Dombivili was well connected, both by road and rail, and as such the basic and social infrastructure was in place with a sizable populace already living there.
Protectionism on rise despite pledges: WB
Protectionism on rise despite pledges: WB
The Economic Times, March 19, 2009, Page 9
AFP WASHINGTON
THE World Bank on said Tuesday that major economies have raised protectionist trade barriers despite their collective pledge to refrain from such actions in the face of the global recession.
A World Bank study showed 17 of the Group of 20 developed and developing countries have implemented trade-restricting measures since G20 leaders signed a pledge at an emergency summit last November to avoid protectionist measures.
"Leaders must not heed the siren-song of protectionist fixes, whether for trade, stimulus packages, or bailouts," said World Bank president Robert Zoellick.
"Economic isolationism can lead to a negative spiral of events such as those we saw in the 1930s, which made a bad situation much, much worse."
At a G20 summit hosted on November 15, 2008 by then-US president George W. Bush in Washington, leaders signed the pledge to avoid raising trade barriers as they forge a coordinated response to the deepening economic slump and an intensifying financial crisis.
The G20 includes the Group of Seven industrialized countries — Britain, Canada, France, Germany, Italy, Japan and the United States — and major developing countries Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, South Africa, Saudi Arabia, South Korea and Turkey, as well as the European Union.
A World Bank official, speaking on condition of anonymity, said the research found three G20 members had not raised protectionist barriers: Japan, South Africa and Saudi Arabia.
But the official cautioned that the three countries did not make the list because of "the way the data was sliced mid-February."
Obama’s anti-outsourcing may hurt global trade
Obama’s anti-outsourcing may hurt global trade
The Economic Times, March 19, 2009, Page 5
US IT Majors Sun, IBM, HP Say India Operations Won’t Get Affected
Harsimran Singh & Shelley Singh NEW DELHI
HIS anti-outsourcing views may have struck a chord with middle-class Americans during his presidential campaign, but Barack Obama is having a tough time selling these policies to some of the largest US corporations.
Top US corporations such as IBM, HP and Sun Microsystems, which of which have large outsourcing operations in India, are giving the cold shoulder to the anti-outsourcing policies of the Obama administration.
The US government’s decision in February to offer an annual tax shield of $5,000 per employee per year to companies that keep jobs in the US had invited criticism from several quarters, most notably from the $60 billion Indian software and outsourcing industry which depends on the US market for 65% of its revenues.
But senior executives at several US corporations, now touring India, also say the antioutsourcing policies and impractical and could adversely impact world trade.
“The local sourcing push by the US administration is unlikely to be effective in a globalised world,” said Marius Haas, senior vicepresident, HP ProCurve, which competes with Cisco in products such as switches and routers and has research facilities in India.
“We have labs spread across Bangalore, Costa Rica and Europe. It’s a competitive economy and you go where the talent is. The local sourcing policy on hardware is unlikely to work as 80% of the world now sources manufacturing from countries like Taiwan and China,” he said.
Microsoft, the world’s top software company, has already aired its opposition to Obama administration’s curb on H-1B visas that provide jobs to non-US professionals in the US.
Indian subsidiaries of US companies such as IBM, Sun, Microsoft, Oracle and HP together employ over 150,000 people. IBM, which has more than 70,000 employees in India, sees no merit in US government’s protectionist policies.
“We manufacture products and deliver services from virtually every country in the world. We are present in more than 170 countries. IBM goes wherever the talent and the market is,” said Edward Orange, IBM’s director – Lotus Business Unit, software group, Asia-Pacific.
Analysts also do not see such policies making a big impact. “Companies won’t give up offshoring strategy because of this,” said Suvojoy Sengupta, partner at consultancy firm Booz & Company.
Sun Microsystems says the US administration’s moves could affect the competitiveness of the industry.
“The policy may shrink global trade in the long run. Not every job can be outsourced. But a job has to be done at the right place and at the right time. Outsourcing is like a bag of trail mix of nuts and dry fruits, which are sourced from all over the world. Curtailing outsourcing will mean affecting that bag of best trail mix,” said Joe Hartley, vicepresident for Sun’s global education, government and healthcare business.
Bangalore-based offshoring advisory company Tholons also played down the impact of the US administration’s anti-outsourcing policies, saying it would be difficult to prove that jobs have been outsourced. “If the US subsidiary of an Indian company or a US company is taking over the outsourced job, like say McDonalds outsourcing to TCS in the US or IBM, and in turn taking IT support from India, it will be very difficult to prove that the job has been offshored. But in the case of BPO work, the blur may be less apparent,” said Avinash Vashishtha, CEO of Tholons.
Some Indian BPO companies based in India also seem unfazed by the new US policies. “It’s in India’s best interest if the US takes some hard measures to revive its economy. It might not impact too much as offshoring still remains a huge cost and quality arbitrage opportunity, with about 40% savings,” said Rohit Kapoor, CEO of EXL Service, a Nasdaq-listed BPO firm based in Noida.
The Economic Times, March 19, 2009, Page 5
US IT Majors Sun, IBM, HP Say India Operations Won’t Get Affected
Harsimran Singh & Shelley Singh NEW DELHI
HIS anti-outsourcing views may have struck a chord with middle-class Americans during his presidential campaign, but Barack Obama is having a tough time selling these policies to some of the largest US corporations.
Top US corporations such as IBM, HP and Sun Microsystems, which of which have large outsourcing operations in India, are giving the cold shoulder to the anti-outsourcing policies of the Obama administration.
The US government’s decision in February to offer an annual tax shield of $5,000 per employee per year to companies that keep jobs in the US had invited criticism from several quarters, most notably from the $60 billion Indian software and outsourcing industry which depends on the US market for 65% of its revenues.
But senior executives at several US corporations, now touring India, also say the antioutsourcing policies and impractical and could adversely impact world trade.
“The local sourcing push by the US administration is unlikely to be effective in a globalised world,” said Marius Haas, senior vicepresident, HP ProCurve, which competes with Cisco in products such as switches and routers and has research facilities in India.
“We have labs spread across Bangalore, Costa Rica and Europe. It’s a competitive economy and you go where the talent is. The local sourcing policy on hardware is unlikely to work as 80% of the world now sources manufacturing from countries like Taiwan and China,” he said.
Microsoft, the world’s top software company, has already aired its opposition to Obama administration’s curb on H-1B visas that provide jobs to non-US professionals in the US.
Indian subsidiaries of US companies such as IBM, Sun, Microsoft, Oracle and HP together employ over 150,000 people. IBM, which has more than 70,000 employees in India, sees no merit in US government’s protectionist policies.
“We manufacture products and deliver services from virtually every country in the world. We are present in more than 170 countries. IBM goes wherever the talent and the market is,” said Edward Orange, IBM’s director – Lotus Business Unit, software group, Asia-Pacific.
Analysts also do not see such policies making a big impact. “Companies won’t give up offshoring strategy because of this,” said Suvojoy Sengupta, partner at consultancy firm Booz & Company.
Sun Microsystems says the US administration’s moves could affect the competitiveness of the industry.
“The policy may shrink global trade in the long run. Not every job can be outsourced. But a job has to be done at the right place and at the right time. Outsourcing is like a bag of trail mix of nuts and dry fruits, which are sourced from all over the world. Curtailing outsourcing will mean affecting that bag of best trail mix,” said Joe Hartley, vicepresident for Sun’s global education, government and healthcare business.
Bangalore-based offshoring advisory company Tholons also played down the impact of the US administration’s anti-outsourcing policies, saying it would be difficult to prove that jobs have been outsourced. “If the US subsidiary of an Indian company or a US company is taking over the outsourced job, like say McDonalds outsourcing to TCS in the US or IBM, and in turn taking IT support from India, it will be very difficult to prove that the job has been offshored. But in the case of BPO work, the blur may be less apparent,” said Avinash Vashishtha, CEO of Tholons.
Some Indian BPO companies based in India also seem unfazed by the new US policies. “It’s in India’s best interest if the US takes some hard measures to revive its economy. It might not impact too much as offshoring still remains a huge cost and quality arbitrage opportunity, with about 40% savings,” said Rohit Kapoor, CEO of EXL Service, a Nasdaq-listed BPO firm based in Noida.
India to oppose protectionism at G – 20 meeting
India to oppose protectionism at G – 20 meeting
The Economic Times, March 19, 2009, Page 10
Nirmala Ganapathy NEW DELHI
INDIA will take a tough position against protectionism at the G-20 summit and also put out the message that tightening of markets and restrictions on services could be met with reciprocal responses from India.
With Indian firms investing in many countries and creating jobs locally, India feels that it has enough leverage to negotiate against protectionism. It is also going to play on the point that economic growth of countries like India and China is an important part of international economic recovery.
`We need to break it down and work with them to use leverage. Indian firms are creating jobs and investing in these countries. Today you have enough to negotiate. It’s a new position,’’ sources said. This is an issue that Prime Minister Manmohan Singh is expected to take up during the G-20 summit, which starts on April 2.
But there is a realisation that it is going to be an uphill task to convince other countries that protectionism in services and finances need to be avoided. Though countries have largely denounced protectionism, there is a trend of countries quietly putting in place protectionist measures particularly in services and finances. India views attempts to cap the H1B visa programme by the US as type of ``trade distortions’’ and hopes that US President Barack Obama takes the lead in stopping this slide towards protectionist measures.
It is understood that India will work at both the multilateral and bilateral level to stop protectionist measures from hurting Indian interests. For a start, India has already raised the issue of protectionist measures seeping in through the latest stimulus package with the US government also with Congress members. Apart from a Buy America clause, the stimulus package also includes a provision to discourage banks which receive bailout money from hiring workers from the H1B visa programme.
`Clearly protectionism is not the way,’’ sources said. New Delhi also believes that just saying everything should be WTO compliant is also not a solution as visas and services are not covered by WTO.
Apart from fighting protectionism, India is also seeking a place on the Financial Stability Forum (FSF), an international body of government and bank officials from 12 countries and a number of financial institutions. The body, which is supposed to look at market stability is expected to be expanded and India along with China are strong contenders. For India, membership in FSF would be another step towards getting a greater say in international, financial matters. This is expected to be discussed and possibly decided at the G-20 summit.
But there are also fears that the G-20 summit could disintegrate into a talk shop if countries stick to their respective positions. India is expected to urge balance on all the key issues that are under discussion including increasing funds for the IMF and steps towards financial structuring. Sources said that ``considerable progress’’ has been made during preparatory meetings. Planning Commission deputy chairman Montek Singh Ahluwalia had led the delegation to the G-20 sherpas meet on March 11.
The Economic Times, March 19, 2009, Page 10
Nirmala Ganapathy NEW DELHI
INDIA will take a tough position against protectionism at the G-20 summit and also put out the message that tightening of markets and restrictions on services could be met with reciprocal responses from India.
With Indian firms investing in many countries and creating jobs locally, India feels that it has enough leverage to negotiate against protectionism. It is also going to play on the point that economic growth of countries like India and China is an important part of international economic recovery.
`We need to break it down and work with them to use leverage. Indian firms are creating jobs and investing in these countries. Today you have enough to negotiate. It’s a new position,’’ sources said. This is an issue that Prime Minister Manmohan Singh is expected to take up during the G-20 summit, which starts on April 2.
But there is a realisation that it is going to be an uphill task to convince other countries that protectionism in services and finances need to be avoided. Though countries have largely denounced protectionism, there is a trend of countries quietly putting in place protectionist measures particularly in services and finances. India views attempts to cap the H1B visa programme by the US as type of ``trade distortions’’ and hopes that US President Barack Obama takes the lead in stopping this slide towards protectionist measures.
It is understood that India will work at both the multilateral and bilateral level to stop protectionist measures from hurting Indian interests. For a start, India has already raised the issue of protectionist measures seeping in through the latest stimulus package with the US government also with Congress members. Apart from a Buy America clause, the stimulus package also includes a provision to discourage banks which receive bailout money from hiring workers from the H1B visa programme.
`Clearly protectionism is not the way,’’ sources said. New Delhi also believes that just saying everything should be WTO compliant is also not a solution as visas and services are not covered by WTO.
Apart from fighting protectionism, India is also seeking a place on the Financial Stability Forum (FSF), an international body of government and bank officials from 12 countries and a number of financial institutions. The body, which is supposed to look at market stability is expected to be expanded and India along with China are strong contenders. For India, membership in FSF would be another step towards getting a greater say in international, financial matters. This is expected to be discussed and possibly decided at the G-20 summit.
But there are also fears that the G-20 summit could disintegrate into a talk shop if countries stick to their respective positions. India is expected to urge balance on all the key issues that are under discussion including increasing funds for the IMF and steps towards financial structuring. Sources said that ``considerable progress’’ has been made during preparatory meetings. Planning Commission deputy chairman Montek Singh Ahluwalia had led the delegation to the G-20 sherpas meet on March 11.
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