Q4 employment outlook up 25%, says Manpower
The Financial Express, September 9, 2009, Page 3
fe Bureaus, New Delhi
Job market in India is coming full circle from the time it started going downhill from September 2008 when the Lehman Brothers debacle took place.
This upbeat trend in India is evident in the recent global quarterly study conducted by Manpower which shows an uptick in the job market here as companies reinitiate expansion plans even while things are not going so well in Europe and the US.
According to Manpower survey, the net employment outlook for India stood at 25% in Q4 compared with 19% in Q3 in the calendar year (CY) 2009. The survey was conducted on 5,700 small, mid and large sized employers across seven sectors of which 25% had intentions of hiring in 2009.
‘Seasonally unadjusted’ responses to employment outlook as answered by employers to whether they would increase, decrease, stay neutral or don’t know between Q3 and Q4 2009 stood at 30% versus 36%, 7% versus 2%, 45% versus 56% and 18% versus 6% respectively. Apart from the up in “increase responses” from 30% to 36% between Q3 and Q4 also noteworthy is the “decrease in hiring” responses that dropped from 7% to 2% and “don’t know” responses that dropped from 18% to 6% thus signifying more opportunities for employment in the forthcoming quarter, said Naresh Malhan managing director of Manpower India. Sectorally too there were clear trailblazers of the seven sectors that comprised the survey respondents. The wholesale and retail sector showed significant improvement in net employment outlook from 21% to 34%, services sector rose from 15% to 25% and finance, insurance and real estate sector went up from 11% to 19% between Q3 and Q4 2009.
The fact that these sectors are amongst the largest employers in the country further validates their positive intent expressed in the study. “Transportation and utilities” on the other hand stood at 16% down from 18% last quarter and showed “least optimistic forecast by employers in this sector”.
Globally countries in Asia and the American region are the ones showing positive employment outlooks this quarter. 17 of 35 countries surveyed expect some positive hiring activity in the quarter ahead. Following India, Brazil had the next highest net employment outlook of 21% followed by Columbia, Peru and China at 8%.
Wednesday, September 9, 2009
Q4 employment outlook up 25%, says Manpower
Nothing Vedic about it
Nothing Vedic about it
The Financial Express, September 9, 2009, Page 7
Sudipta Datta
The swiftness with which the West Bengal government canned a planned IT project after it hit a land hurdle may have surprised many, but there’s no doubting the fact that with Singur still weighing heavy in the air, no one’s prepared to take chances. Yet, Singur—where some farmers resisted the takeover but many willingly gave away 600 acres for the Tata small car project—now seems a simple plot in comparison with the Vedic Village fiasco. Consider how a 7-star luxury spa was allowed to spread its wings on vested land (meant for public good) after the land and land reforms department reached an out-of-court settlement in 2005 with the promoters, leasing out 44 acres for 99 years for a paltry sum of Rs 97 lakh when the market price was much higher. This is just one of the worms flowing out of the can that was prised open after a mob set fire to parts of the spa on August 23, ostensibly after a soccer game went awry. The incident sparked a chain of events, not least widespread allegations of land grab and price anomalies, finally leading to the scrapping of an IT project coming up next to the spa in which IT majors Infosys and Wipro Technologies were promised 90 acres each—and where Raj Kishore Modi, the jailed promoter of Vedic Village, was a partner.
Explaining the reasons for dumping the IT park, slated to come up over 600 acres, the IT department said “the government does not want to be involved in any illegal activity... the IT department cannot proceed with the project.” Both Infosys and Wipro will surely think twice before they set foot in Bengal.
The whole project including a township was planned over 1,200 acres with the government getting 600 acres free from the private parties with the arrangement that Webel, the nodal IT and ITeS agency in the state, would build the infrastructure in the area. For Infy and Wipro’s 180 acres, the IT majors planned an investment of Rs 500 crore each and at least 10,000 jobs.
So, how will the West Bengal government attract industry and create jobs? If it failed to convince the people of the need to give up land for a landmark car factory at Singur, it appears to have looked the other way as Vedic Village promoters went about acquiring land for the IT and township project using all means and, now as it turns out after the arrest of the arson mastermind Gaffar Mollah, sometimes with strong-arm tactics. A huge stockpile of arms and ammunition was found at the luxurious spa premises.
The silence of Trinamool Congress chief Mamata Banerjee in the Vedic Village incident has been loud and clear. Though she has spoken out about the arms haul, she hasn’t really demanded a CBI probe into the land acquisition process as she is often wont to do over any perceived ruling front government misdemeanour. With allegations flying thick and fast that her party MLAs were close to the Vedic promoters, she says the IT project land should be handed over to farmers.
The IT department has clarified that it explored all available options—land acquisition, land purchase and public private partnership—to acquire land, but in vain; it said that it kept everyone in the loop, and had got the Cabinet nod for the public-private partnership because it needed land desperately, having failed repeatedly to deliver on commitments on land. As soon as the Vedic Village drama began to unfold, the housing and land ministries cried out for scrapping the IT project—the same ministries which had okayed the project months ago.
If the Buddhadeb Bhattacharjee government’s pro-industry image is being dragged through the mud, it’s also because there seems to be a terrible hurry—not the CPM’s strong point—to get things done.
Which is great news for potential investors, but not if the end result is a stillborn project. In Singur, if there was a huge communication gap between the government and villagers, for the IT project next to Vedic Village, the government did not want to get involved till the land was acquired for them by private parties, in this case Modi and another real estate investor Amarnath Shroff of the Diamond Group. It doesn’t seem to have worked. While a section of the government feels that investors should directly buy land from farmers—the Videocon Group and JSW Steel have done that —it’s not an easy process either with landholdings so fragmented.
The government will obviously have to find a way out of the mess.
Ironically, the last week has been one of the most active in recent months for West Bengal industry —there have been investments announced in real estate, hospitality, food processing.
But there’s just 1% of fallow land the government can work on for industry, that too in remote areas of Bankura and Birbhum—that is if it can’t win over farmers to the industry cause. That farmland in West Bengal constitutes 62% of the total land is not a problem because even a small amount of this can host an industrial revival. The problem is that politics has become incredibly messy. The road ahead doesn’t look easy for the Trinamool either.
Country should be spending $100 b on infrastructure: Naik
Country should be spending $100 b on infrastructure: Naik
Hindu Business Line, September 9, 2009, Page 3
L&T chief calls for long-term approach for building power plants.
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“Many projects are not viable for the private sector because there is a lot of social responsibility attached to infrastructure and we need to find innovative schemes to marry both.”
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S. Shanker, Mumbai
His steely resolve to take Larsen & Toubro beyond the competition is obvious. Mr A. M. Naik, Chairman and Managing Director, L&T, speaks of growth in a subdued market.
Excerpts from an interview:
Given the slowdown, where do you see growth coming from, in the near term?
I think the Prime Minister’s 100-day programme has begun to move. How long this will last remains to be seen. Well all I know is that accumulated tenders are coming out, maybe for the next 100 days. How long this infrastructure building lasts depends on the kind of resources the Government can mobilise. With the drought, it is possible that some of the money meant for development plans is being diverted, which I can fully appreciate.
What is your take on the private sector’s role in nation building and the viability of public-private partnerships in general?
We have to get diversified funding for infrastructure projects and there is no question more projects have to be built by the private sector.
Many projects are not viable for the private sector because there is a lot of social responsibility attached to infrastructure and we need to find innovative schemes to marry both.
For example, L&T has finished the Vadodara-Baruch six-lane toll highway. However, the rural roads leading to the highway have to be built by the State. Instead of the Government seeking Rs 1,000 crore as concession charges, we could have been asked to complete the byroads leading to the district headquarters and important towns free of charge. This connectivity would help transportation of agriculture products onto the highway. Development should reach out to the under-privileged.
Which sectors, in your view, could take the lead in the near term?
Infrastructure will grow in the near term. India could do with a 25-year growth plan because we have very little to speak of, compared to even under-developed countries. A lot needs to be done for the next 25 to 40 years.
China continues to spend $150 billion on infrastructure building and has spent over $2.5-3 trillion over the last 25 years. Compared with that, we spend $25-30 billion when we should be spending at least $100-150 billion. Only then will it take 30 years to come up to somewhere near what people want it (infrastructure) to be. So, that is something that is near term but which will be relevant for the long term as well.
Next is power. It is unfortunate that over 50,000 MW of power equipment has been ordered by the Indian private sector to China. And why was that? There is only one BHEL (Bharat Heavy Electricals) and hence deliveries will not be on time.
L&T has spent over Rs 3,500 crore to build turbines, boilers and heavy forging shops, besides quite a few associated equipment manufacturing facilities. However, India needs a long-term approach to building power plants.
Since the entire Twelfth Plan requirements of power equipment have been ordered out, we have to see movement away from sub-critical boilers to super-critical and away from Chinese to Indian products. In the olden days, there was only 4,000-5,000 MW of capacity available with BHEL. Today, the public sector company has 10,000-plus MW and L&T 4,000 MW, which can be scaled up to 6,000 MW. But we don’t seem to get orders at this point of time, because of the huge commitments made to China.
What kind of potential do you see from nuclear power?
It will take time. The Indian nuclear power programme, which has got 4X700 MW, has kicked off. We already have received steam generators for two while two others have gone to BHEL. More are expected to follow.
The entry of Areva, Westinghouse and GE will take time. Agreements have to be signed and these will go up to 2011 and thereafter. On the ground, there is potential for four more reactors. Then the 16 to 18 reactors that are to come beyond 2011 to 2020 will take India’s capacity to around 25,000 MW.
As for your shipyard programme, would you take more orders for commercial ships beyond the current level of 10?
We are not taking any more orders for commercial ships. Anyway, the world has seen a great depression in shipbuilding. I think it will take the commercial ship market three to five years to improve.
However, our main purpose was to build a defence shipyard. The bigger ones — the frigates and destroyers and submarines — will be done at Kattupalli, near Chennai, which should be operational in 2011. But at the same time we are ready to build ships today as initial work can always be started at Hazira and when it is comes for assembly, Kattupalli will be ready and possibly waiting for it.
Canara Bank trims home loan rates
The Hindu Business Line, September 9, 2009, Page 6
Our Bureau, Bangalore
Canara Bank has reduced home loan rates by 0.25 per centage points for all fresh home loans from September 10, on account of the festival season. The rates for all new home loans up to Rs 30 lakh would be 8 per cent for the first 12 months, 9 per cent for the next four years, and benchmark prime lending rate minus 2.5 per cent subject to a minimum of 10 per cent thereafter, said a press release.
Similar changes have been announced for all new home loans above Rs 30 lakh and up to Rs 1 crore. The revised rates will be 8.75 per cent for the first 12 months, 9.5 per cent for the next four years and BPLR minus 2 per cent subject to a minimum of 10.5 per cent there after. The offer will be valid till December 31, the release said.
Tuesday, September 8, 2009
FM hints at GDP hiccup
HT Business, Hindustan Times, September 8, 2009, Page 23
The economy is somewhat shaky on the growth path after a dowturn year, Finance Minister Pranab Mukherjee signalled on Monday, and added that a new challenge was looming over developing economies as India becomes a key member world’s elite G20 economies – that of pressures over the climate change issue.
Mukherjee said the second and third quarters of the current financial year are unlikely to see the economy expanding at the pace it did in April-June period, but he stuck to the government’s original growth forecast of more than 6 per cent for the current fiscal year.
“So far as growth is concerned, I am a little doubtful whether the economy will grow at the same level in second quarter and third quarter as in first quarter. Agriculture growth may be a little less,” he told the Forum of Financial Writers.
Early signs of a recovery in India’s economy amid a global downturn emerged last week as gross domestic product (GDP) for April to June quarter grew 6.1 per cent, up from 5.8 per cent in the previous quarter, but the spectre of a drought in nearly half the country, threatened to pull down growth in the subsequent months.
“Financing of climate change was an area where there were divergence of views. They (the developed countries) want it to be within the purview of finance ministries and treasury departments of different countries,” Mukherjee said, speaking of G20 finance ministers' confabulations over the weekend.
Mukherjee said the United Nations Framework Convention on Climate Change (UNFCCC) should be the main channel for international negotiations of climate finance, and the discussion of climate finance should be consistent with the principles of the UNFCCC.
The G20 heads of states are scheduled to meeting in Pittsburgh later this month amid concerns that the developed world could force the matter into the main agenda of discussion.
The World Trade Organisation (WTO) has recently raised climate change issues raising concerns whether trade talks could be linked with it.
WTO director general Pascal Lamy last week said delivering a deal on climate change was a daunting challenge facing the international community.
STREET RETAKES 16K
The Economic Times, September 7, 2009, Page 1
FII frenzy lifts mkt to 15-month high
Our Bureau MUMBAI
A RENEWED burst of purchases by foreign funds pushed major stock indices to a 15-month high on Monday, leading to concerns that the market has run far ahead of itself.
The BSE Sensex and NSE Nifty rose over 2% on Monday and have more than doubled in the past six months, causing market watchers to wonder if stock prices have discounted the economic recovery too quickly.
Many fund managers privately voiced concerns that valuations are slowly expanding into a bubble, but added that strong liquidity and a positive mood in world markets could push stock prices higher for some more time.
“In the short term, we could see the market rising further because there is lot of cash on the sidelines, awaiting a correction,” said Nilesh Shah, chief investment officer and deputy MD, ICICI Prudential AMC.
“But unless this cash is deployed in the market, we are unlikely to see any deep corrections,” he added.
The 30-share Sensex closed at 16,016.32, or 2.1% higher, and the 50-share Nifty gained 2.2% at 4,782.90.
Provisional data showed foreign institutional investors net bought Rs 1,060 crore worth shares on Monday and domestic institutions Rs 150 crore. The mood in world markets was upbeat following a statement over the weekend by the G20 grouping of major economies that the financial markets were stabilising and that the global economy was improving.
India was the best performer in Asia while most European markets gained between 1% and 2%.
FII buying, monsoon revival boost sentiment
FII buying, monsoon revival boost sentiment
The Hindu Business Line, September 8, 2009, Page 1
Our Bureau, Mumbai
The bellwether BSE Sensex on Monday closed above the psychological 16,000-mark for the first time in 15 months on the back of revival in the South-West monsoon, positive global cues and strong FII support. It closed at 16,016, a gain of 327 points or 2 per cent over the previous close.
The NSE Nifty closed at 4,783, a level that was last seen in June 2008. The BSE mid-cap and small-cap indices continued to outperform the benchmarks.
The positive trading momentum was sustained as later in the day the European markets opened in the green. “With the G-20 Finance Ministers agreeing to keep stimulus measures going till there is full economic recovery, the global as well as domestic markets received buying support,” said a broker.
Positive momentum
FIIs bought (net) shares aggregating Rs 1,060 crore, according to the provisional data from stock exchanges. In the first four days of trading this month, FIIs were net sellers.
Select BSE sectoral indices netted gains: Realty (5.49 per cent), Metal (3.95 per cent), Bank (3.10 per cent), Consumer Durables (2.70 per cent) and Automobile (2.45 per cent) .
“Revival of the monsoon, and good response to Oil India IPO on the first day were among the domestic factors that boosted sentiments,” said Mr Mehraboom J. Irani, Senior Vice-President, FCH Centrum Wealth Managers.
“Some of the domestic institutional investors, including insurance companies and bank treasuries bought shares,” Ms Anita Gandhi, a market participant said. They were net buyers to the tune of Rs 150 crore. Proprietary traders (brokers) on the BSE too were net buyers of equities worth Rs 97.5 crore. However, on the BSE, retail investors booked profits, selling (net) Rs 290 crore.
Unctad forecasts gloomy 2009, pegs India’s growth at 5%
Unctad forecasts gloomy 2009, pegs India’s growth at 5%
The Financial Express, September 8, 2009, Page 1
fe Bureaus, New Delhi
Warning of a gloomy global economic outlook, United Nations Conference on Trade & Development (Unctad) on Friday projected that the Indian economy would expand 5% in 2009, lower than the 5.4% growth forecast by the International Monetary Fund in the same period and the near 6% expected by domestic banking regulator RBI in fiscal 2009-10.
According to the UN agency, India’s growth in 2009 will be lower than the 7.3% seen in the previous year, but is next only to China, which is likely to expand by 7.8%. Unctad believes global output in 2009 will dip by more than 2.5%, against a 2% increase last year. This outlook is worse than the 1.4% contraction projected by IMF and 1.7% dip forecast by the World Bank for 2009.
India’s GDP grew 6.1% in the three months ended July, while in the fiscal ended March, it expanded 6.7% in the backdrop of the global economic crisis. “We are globally integrated in a way that was not seen before. This is mainly because of financial and trade integration seen globally,” said Jayati Ghosh of the Centre for Economic Studies & Planning, Jawaharlal Nehru University.
The report further reiterated that this year, global trade would shrink by 11% in real terms and by over 20% in current terms. The World Trade Organisation had forecast a 9% dip in global trade in 2009. The report attributes contraction in global output to a series of factors, including declining incomes, dipping exports and private non-resident investments in the US, European Union and Japan, among others.
The Unctad report also dwelled upon issues related to climate change. It calls for an industrial policy synchronised with enhanced R&D initiatives, an easier patent access regime and FDI policies that promote seamless integration into global supply chains.
According to the international agency, putting a price on emissions through taxes or tradable emission permits could incentivise setting up low-carbon economies. Maintaining that the cost involved in mitigation measures could be misleading, Unctad stressed that corrective measures to undo climate change damages have a potential to be growth stimulators.
Unctad also warned that the prospects of an economic recovery remained uncertain until mid 2009. It maintained that the recent recovery in financial indicators like lower interest rate spreads on new corporate debt and bonds, and increased stock and commodity prices may not be signs of green shoots, as interpreted by many observers.
According to Unctad, the correction in the price of financial assets and commodities globally is more of a correction and is not backed by strong fundamentals.
“There are strong indications that recent improvements in financial markets are largely due to a recovery of risk appetite by financial agents, but this could be reversed at short notice depending on speculators’ mood or possible changes in the macro-economic policy changes,” the report states. Unctad believes that the global GDP contraction could recede by 2010, but that would be dependent on the effectiveness of fiscal and monetary expansionary policies of the big economies.
The global impact of the US housing crisis
The global impact of the US housing crisis
Business Standard, September 8, 2009, Page 9
If house prices keep falling, mortgage-backed securities held globally will continue to decline, Says Martin Feldstein
The bursting of America’s housing bubble in the summer of 2006 triggered the global financial crisis and recession. The sharp fall in house prices that followed caused a dramatic downturn in household wealth, leading to lower consumer spending and an overall fall in GDP. By now, wealth in the form of owner-occupied housing is down about 30 per cent, equivalent to a loss of more than $6 trillion of household wealth.
The fall in house prices also led to a sharp rise in mortgage defaults and foreclosures, which has increased the supply of homes on the market and caused house prices to fall further. As a result, one-third of all American homeowners with mortgages are already “underwater” — their mortgage debt exceeds the value of the house. For one-sixth of these homes, the debt is 20 per cent higher than the price of the house.
In addition, high loan-to-value ratios in the US interact with household financial problems to increase the number of defaults and foreclosures. More specifically, the rising unemployment rate, along with the large number of employees on involuntary part-time work, has increased the number of people who cannot afford their monthly mortgage payments.
Unlike virtually every other country, US residential mortgages are effectively “no recourse” loans. If a homeowner stops making mortgage payments, the creditor can take the property but cannot take other assets or a fraction of wages. Even in those states where creditors have the legal authority to take other assets or wage income, the personal bankruptcy laws are so restrictive that creditors don’t bother to try.
Although it is tempting to think of this as a purely domestic problem affecting the United States, nothing could be further from the truth. When homeowners default, banks lose money, and uncertainty about the extent of future defaults undermines confidence in banks’ capital, making it more difficult for them to raise funds and causing them to reduce their lending in order to conserve existing resources.
As a result, the recession has been deeper and longer than it would otherwise have been. The resulting weakness of the US economy will mean lower US import demand. And, if the downward spiral in house prices continues, the value of mortgage-backed securities held by financial institutions around the world will continue to decline, affecting the supply of credit far beyond the US.
Some recent data suggest that the decline in house prices may be coming to an end. The rate of decline of US house prices fell in the past three months for which we have data (ending in May), and the figures for May show essentially no decline at all. If that trend continues, it will prevent further erosion of household wealth and strengthen the banks’ capital positions.
But the recent data, while encouraging, may be the result of temporary factors rather than an indication that the fall in house prices has actually come to an end. Mortgage interest rates fell below 5 per cent in March and April, but have risen significantly since then. Moreover, a government program of subsidies to first-time homebuyers may have released a backlog of pent-up demand. And banks had a voluntary moratorium on foreclosures, holding supply off the market.
All of this may have caused a temporary improvement in house prices. In short, we will have to wait for the data on house prices in June and July to know whether there has been a permanent turnaround.
The recent rise in existing home sales in the US may also be misleading, since a large proportion are sales of foreclosed properties. Indeed, property that has either been foreclosed or is on the verge of foreclosure now accounts for nearly one-third of all existing home sales. Foreclosed property is generally sold at auction, guaranteeing that there will be a buyer — but driving down prices. Significantly, foreclosures rose 7 per cent month on month in June, and a whopping 32 per cent compared to June 2008.
The Obama administration has enacted legislation aimed at helping individuals who are having difficulty making their monthly mortgage payments because of a decline in their incomes or a rise in the interest rate on their mortgage. For individuals with high monthly mortgage payments relative to their disposable income, the US government will share with the creditor bank the cost of reducing the monthly payment to 31 per cent of disposable income.
This is a new programme, and it remains to be seen how well it will work to prevent future defaults. Some limited previous experience with mortgage modifications is not encouraging. Nearly 50 per cent of those who had their mortgages modified nevertheless defaulted within six months.
Unfortunately, there is no programme to deal with the defaults and foreclosures caused by high loan-to-value ratios. Given the large number of negative-equity homeowners, there is a risk that defaults and foreclosures will continue. If they do, the sale of foreclosed properties will continue to depress house prices, reducing household wealth and hurting financial institutions.
Unless house prices have stopped declining, it is important for the Obama administration to turn to the problem of high loan-to-value ratios. That would help not only the US economy, but also the economies of all of America’s trading partners.
The author, a professor of economics at Harvard, was formerly Chairman of President Ronald Reagan’s Council of Economic Advisors and President of the National Bureau for Economic Research.
Copyright: Project Syndicate, 2009.
www.project-syndicate.org
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