Indian tax law set to come of age

The government has proposed a dramatic makeover of the country’s 48-year tax law, bringing it on a par with the new economy and also with what prevails in the rest of the world.

The draft of a new direct tax code introduced by the finance ministry on Wednesday has suggested significant cuts in tax rates for individuals and companies, pruned exemptions, choked loopholes for foreign companies and radically changed definitions, all of which are likely to have a mixed impact on companies and individuals. Together with greater surveillance, it would ensure greater compliance and thereby reduce the risk of any loss in tax revenues due to a cut in rates.

“The underlying philosophy of the code is the philosophy of the government. (It is) wedded to a well-regulated free market system,” P. Chidambaram, current home minister who was involved in preparing the draft code earlier, said at a press conference called by finance minister Pranab Mukherjee to release the draft code. Mukherjee said he would strive to introduce the draft legislation in the winter session of Parliament.



Source: Livemint

Word of mouth (WOM) is the most trusted form of advertising in India

According to the Nielsen Global Online Consumer Survey, conducted by Nielsen Consumer Research company that provides insights on the preferences of internet consumers across the world, word of mouth is the most trusted form of advertising in India with 93% votes, followed by editorial content such as articles in newspaper with 87% votes and Brand websites with 78% votes. This comes at a time when internet advertising is booming, with newer brands associating themselves with internet and testing new waters.

“The main problem is that there are too many online users and just very few websites, this results in just the same ads on every website or a great clutter. So the ads don’t attract the audiences at all, hence not serving the purpose they should,” says Rammohan Sundaram, Founder of Networkplay.

Alok Kejariwal, CEO, games2win.com, feels that internet is at its nascent stage, so it will take some time for internet advertising to catch. “Any medium takes at least 20-30 years to develop. Further more, internet advertising intrudes personal space. It strikes when you are reading your personal mail or browsing through the net; it gets very irritating.”

According to Sundaram, there are many ads which are placed just to have an online presence. The advertisers don’t get into a deep research as to which site will suit the product, the placement of the ad.

But does this mean that online advertising is not on the right track? “There’s no major flaw in online advertising or its approach, it’s just that people find word of mouth more credible since it’s an unbiased and unpaid review. There’s no hidden motive behind it, which makes people trust it blindly. This difference between the trust on word of mouth and any form of advertising will remain forever,” says Mudit Khosla, Founding General Manager, Strategic Relations Group, Yatra.com
“The only way one can improve the trust is by involving the audiences. In my website we invite our audiences to write comments of services they have used.
This not only gives these audiences a platform to speak up but the others also get a chance to read unbiased opinions on the same website, “asserts Khosla.

Harish Bahl, MD, Quasar Media has a positive outlook, “According to me, the search results are very contradictory. A major portion of online advertising are the social websites, where audiences write blogs, connect and exchange information, or in other words, spread word of mouth. The Nielsen report saying that word of mouth is more trustworthy than online advertising proves that it’s a win-win situation for online advertising.”

“Internet is definitely growing fast and so will internet advertising, it just that products should be sold in a better way to gain the consumers’ trust,” believes Khosla.

Indian entertainment and media industry to reach Rs. 929.5 billion in the next 5 years

The Indian E&M industry is estimated to grow from Rs. 563.9 billion in 2008, at a CAGR of 10.5% for the next five years to reach Rs. 929.5 billion in 2013, says the PricewaterhouseCoopers’s Indian entertainment and media outlook 2009.

Over the next five years, television industry is projected to continue to be the major contributor to the overall industry revenue pie and is estimated to grow at a stable rate of 11.4% cumulatively, from an estimated Rs. 244.7 billion in 2008.

The overall television industry is projected to reach Rs. 420 billion by 2013. In the Television pie, distribution is projected to garner a share of 60% in 2013. On the other hand, television advertising industry is projected to command a share of 41.0% in 2013, having increased from a present share of 39.0% in the total ad industry pie. The relative share of the television content industry is expected to remain constant at 4%.

The Indian film industry is projected to grow at a CAGR of 11.6% over the next five years, reaching to Rs. 185 billion in 2013 from Rs. 107 billion in 2008. The relative shares of the film industry are expected to shift marginally from the traditional revenues to the new emerging revenues.

The Indian film print media industry is projected to grow by 5.6% over 2009-13, reaching to Rs. 213 billion in 2013 from Rs. 162 billion in 2008. The relative shares of newspaper publishing and magazine publishing are not expected to remain the same at around 87%, in favour of newspaper publishing. Magazine publishing is expected to grow at a higher rate of 6.5% as compared with newspaper publishing which is expected to grow at 5.6% for the next five years.

The radio advertising industry is projected to grow at a CAGR of 18% over 2009-13, reaching Rs. 19 billion in 2013 from Rs. 8.3 billion in 2008; more than double its present size. In terms of share of ad pie, it is projected that the radio advertising industry will be able to increase its share from 3.8% to 5.2% in the next five years.

The animation, gaming and VFX industry will continue to maintain its growth pace and is projected to grow at a CAGR of 22% to Rs. 42.5 billion in 2013 from Rs 15.6 billion. In the animation space, domestic demand will create the fillip in its growth, as well as contribution from international co-productions, in the film and television space.

The Indian gaming industry is projected to grow from an estimated size of Rs. 3.9 billion in 2008 to an estimated Rs. 16.3 billion by 2013; translating into a cumulative growth of 32.7% over the next five years . Mobile gaming will dominate the segment with 74% share , driven by the growth in the high end segment of the mobile users, new content by mobile operators and the availability of 3G spectrum that enables easy of play.

Online gaming will be the next highest contributor followed by console gaming. This will be fuelled by the growth of internet users and especially the growth of the target segment of users aged between 15-34 years. The growth in solo gaming will also be aided by falling cost of console prices and availability of local games.
Given the trends of increased internet usage, internet advertising is projected to grow by 32% over the next five years and reach an estimated Rs. 20 billion in 2013 from Rs. 5 billion, currently. The share of the online advertising too is projected to grow from 2.3% in 2008 to 5.5% in 2013 of the overall advertising pie.

The estimated size of the OOH industry is Rs. 15 billion, which is projected to become almost twice its current size in 2013 to 25 billion. Its share in the total ad pie is expected to go down marginally to 6.8% in 2013 from 6.9% in 2008.

The key growth driver for the music industry over the next five years will be digital music, and its share is expected to move from 16% in 2008 to 60% in 2013. Within digital music, mobile music will continue to increase its share and maintain its dominance.

Source: http://www.audiencematters.com/newsdetails.aspx?tbl_type=news&n_detail=2551&news_type=Media

Online advertising market to grow 27% by 2013: Study

Netscribes (India) Pvt. Ltd., a knowledge consulting solutions company, has launched the Online Advertising Market – India Report.

According to the report, the industry has grown at 74% per annum from 2004-08, driven by increasing awareness among advertisers and increase in internet penetration. Online ad networks have started gaining acceptance in the Indian market in the past 2-3 years.

Online advertising in India, largely dominated by search engines and portal, is fast gaining acceptance and offers an ever increasing user base. Increasing awareness among advertisers, low input costs for advertisers, and increase in Internet penetration are driving growth of the online medium and its horizontals.

The market is expected to witness only a 27% p.a. growth from 2008-2013. primarily due the massive advertising budget cuts in the industry.

The developing online advertising market in India is already witnessing stiff competition among domestic as well as international players. Niche and emerging nature coupled with low barriers to entry in this industry could lead to rise in competition. BFSI, Online publishers and IT/Telecom are the major revenue contributors for the online advertising industry in India. Acquisitions and investments by foreign players as well as private equity firms are providing a boost to this industry in the nascent stage.

Indian Commodities Trading Market

Turmoil in financial markets, slower growth in high-income countries, and rising inflation have all adversely affected growth prospects for developing countries over the near term. Most countries have shown impressive resilience in this turbulent environment, and growth for developing countries as a group is expected to moderate from 7.8% in 2007 to a still strong 6.5% in 2008. However, vulnerable countries that depend on foreign capital flows are likely to experience a sharper slowdown. Moreover, despite strong production growth at the aggregate level, higher food and energy prices have caused real incomes to decline, significantly increasing the hardships faced by the very poor, particularly in urban centers.

A recent article in the Wall Street Journal noted that if one were to examine the historical performance of the S&P 500, one would find that the stock market is trading at the same level at which it was doing so nine years ago. Commodities markets, on the other hand, have been in a bull trend. Some of the major drivers that have contributed in this stupendous growth of commodity markets globally are
- Increasing influence of Asian demand, particularly from rapidly industrializing China and India
- Increase in commodities prices in international markets as a result of demand growth, reinforced by tight supply capacities, tense geopolitical conditions (especially with respect to the oil market) and intense speculative activity
- With the rise in prices of crude oil, metals and minerals, commodity prices reached record historical levels in nominal terms in 2006, which increased by more than 30% between 2005 and 2006 (and by 80% from 2000 to 2006).
- Numerous developing countries rely on commodities for export revenues, and commodity production and trade provide employment for more than 2.5 billion people worldwide.
- The considerable rise in prices has had an impact on incomes of developing countries. It is estimated that extra revenues resulting from commodity exports were around 6.7 percentage points of GDP for oil-exporting countries and about 3 percentage points for countries exporting mining products.
- Increases in demand from developing countries stimulated by a particularly vigorous commodity consumption per unit of GDP compared to that of developed countries, faster economic growth, and increasing population
- "Globalization" of securities and commodities markets
- Baby boomers are in the middle of their peak savings years and have been one of the major causes of huge inflows of money into the stock market and into mutual funds.
- The increased use of food crops for production of bio-fuels is an important factor that led to large increases in the prices of vegetable oils and grains in 2007, which in turn contributed to an overall 15 percent increase in the index of agricultural prices and a 20 percent rise in food prices.
- The prices of metals have increased more than other commodity prices over the last four years, largely because of an especially strong demand in China.
- Shortages of equipment and skilled workers have significantly increased development costs, and ore grades are deteriorating.

The report on “Indian Commodities Trading Market” offers an in-depth analysis of the Global Commodities Trading Market vis-à-vis the Indian Commodities Trading Market. It discusses the overall structure of the Global Commodities Market as well as Indian Commodities Market from an insider perspective and provides a comprehensive study on macro and micro factors driving the growth of this market.

The report furnishes up-to-date facts and figures following meticulous observation with an aim to provide you with real insights into the commodity trading market as it stands today; the knowledge one needs to stand out and make informed decisions. The expanse of such insights into the past and present scenario percolates down to every known commodity currently traded. A conscious effort has been made to provide an overview of all there is to know and know of in the volatile market whilst a detailed product-wise and segment-wise is used in conjunction to expand. Taking into account that Price and Risk being the key drivers of the market, the report presents an exclusive section which maps price growth trend behaviour, factors triggering such behaviour, tracking relative performance of commodities , effects on the market players directly or indirectly using composite indexes from leading sources, the use of various hedging tools such as forwards and options and the relative performance in comparison, the implication and significance of the various regulatory bodies, commissions and statutory acts to highlight a few.

Table of Contents

Section I: Commodities Trading – An Overview

1. How Commodities Market Evolved – Historical Perspective

2. How Commodities Trading Market Works
2.1 Involved Parties
2.2 Types of Contracts
2.3 Participants in derivative contracts
2.4 Trading Techniques in Commodities Market
2.4.1 Ready Delivery Market
2.4.2 Specific Delivery Market
2.4.3 Futures Market
2.4.4 Auction Market
2.5 Requirement & Benefits of Commodity Derivatives

Section II: Commodities Market – An Analysis

1. Global Commodities Market – An Overview
1.1 Commodities Trading vis-à-vis Role of Investment Banks
1.1.1 Barclays Capital Commodities - Profile
1.1.2 BNP Paribas Commodity Futures – Profile
1.1.3 Citi Global Commodities – Profile
1.1.4 DB Commodity Services LLC - Profile
1.1.5 Goldman Sachs Commodities – Profile
1.1.6 J.P. Morgan’s Global Commodities Group – Profile
1.1.7 Merrill Lynch Global Commodities (MLCI) - Profile
1.1.8 UBS's Commodities Group
1.2 Energy Trading vis-à-vis Energy Trading In-house Divisions
1.2.1 RBS Sempra Commodities
1.2.2 Chevron’s Supply & Trading
1.2.3 LITASCO (LUKOIL International Trading and Supply Company)
1.2.4 Koch Supply & Trading
1.2.5 AEP Energy Services (Subsidiary of American Electric Power Company, Inc.)
1.2.6 Duke Energy Trading and Marketing (DETM)
1.2.7 Shell Trading (US) Company
1.2.8 Reliant Energy Securities & Commodities Trading Center
1.3 Commodity ETFs and ETNs
1.4 Commodity Trading vis-à-vis Sovereign Wealth Funds (SWFs)
1.4.1 History of SWFs
1.4.2 Driving Factors, Issues, Trends & Opportunities
1.4.3 Sources of Capital
1.4.4 How & where the money is invested – Market Size & Projections
1.4.5 Fund Rankings: Largest Funds by Assets under Management

2. Global Commodities Market Analysis
2.1 Global Commodities Market Size & Forecast
2.2 Commodity Market Profiles – Quick Points (Profile, Producers, Consumers, Largest Markets, Price Performance & Top Companies)
2.2.1 Aluminium Market
2.2.2 Cocoa Market
2.2.3 Coffee Market
2.2.4 Copper Market
2.2.5 Cotton Market
2.2.6 Gold Market
2.2.7 Nickel Market
2.3 Global Commodities Indexes – Performance Analysis
2.3.1 Dow Jones - AIG Commodity Indices
2.3.2 Merrill Lynch Commodity index eXtra (MLCX)
2.3.3 S&P GSCI™ Composite Index
2.3.4 Reuters/Jefferies-CRB® Indices

3. Issues, Trends & Opportunities
3.1 Impact of higher commodity prices
3.2 Movement of oil prices
3.3 Performance of agriculture commodities
3.4 Companies turn to top derivatives dealers for help in hedging
3.5 Carbon to be the biggest global commodity market by 2012
3.6 Renewed interest from investors
3.7 More sophisticated tools & platforms
3.8 Investment banks are major players
3.9 ETFs, changing the equation of Commodities Investment
3.10 China – Major Demand Driver of Global Commodities
3.11 Macro-Economic Driving Factors
3.12 Factors affecting pricing of base metals
3.12.1 Lead (75% y-o-y growth)
3.12.2 Tin (66% y-o-y growth)
3.12.3 Zinc (40% y-o-y decline)
3.12.4 Nickel (4% y-o-y decline)

Section III: Indian Commodities Trading Market

1. Indian Commodities Market – An Overview

2. Indian Commodities Market Size – An Analysis
2.1 MCX vs. SENSEX – A Comparative Analysis

3. Indian Commodities Market – Performance Analysis
3.1 Aluminium Market – Future Contract Value (Jan 07 – Jul 08)
3.2 Coffee Market – Robusta Futures Contract Value (Jan 07 – Aug 08)
3.3 Copper Market – Copper Futures Contract Value (Jan 07 – Jul 08)
3.5 Crude Oil Market – Crude Oil Futures Contract Value (Jan 07 - Aug 08)
3.6 Gold Market – Futures Contract Value (Jan 07 – Aug 08)
3.7 Chana (Chickpea) Market – Futures Contract Value (Jan 07 – May 08)
3.8 Nickel Market – Futures Contract Value (Jan 07 – Jul 08)
3.9 Zinc Market – Futures Contract Value (Jan 07 – Jul 08)
3.10 Lead Market – Price Performance (Jan 07 – Aug 08)
3.11 Cardamom Market – Futures Contract Value (Jan 07 – Jul 08)
3.12 Jeera (Cumin Seed) Market – Futures Contract Value (Jan 07 – Jul 08)
3.13 Lead Market – Futures Contract Value (Jan 07 – Jul 08)
3.14 Mentha Oil Market – Futures Contract Value (Jan 07 – Jul 08)
3.15 Natural Gas Market – Futures Contract Value (Jan 07 – Jul 08)

4. Government Regulations, Initiatives and Reforms
4.1 Setting up a Committee on Role of Futures Trading in 1993
4.2 Setting up of Forward Market Commission in 1953
4.3 Forward Contracts (Regulation) Act, 1952
4.4 Forward Contracts (Regulation) Amendment Bill, 2006
4.5 Forward Contracts (Regulation) Amendment Ordinance, 2008
4.6 Commodities Trading Tax
4.7 Import duty cut & export duty hike in Metals industry

5. Issues, Trends & Opportunities
5.1 Commodity Trends: Hurt by economic slowdown
5.2 Multi Commodity Exchange (MCX) launched currency futures trading
5.2 Hedging ban a slow political process to kill futures market
5.3 Commodity investment goes retail
5.4 Unresolved Issues and Future Prospects
5.5 Scrap now being considered a waste commodity
5.6 Commodity and Equity Markets have been moving in tandem
5.7 Indian Bt Cotton to hit market soon
5.8 Warehousing to take giant leap in India

List of Charts

Chart 1: Mode of Financing in Commodities Trading
Chart 2: Business Operations Model of a Trading Process in a Commodity Exchange
Chart 3: SWFs Market Projections (2007-2012)
Chart 4: Comparison of AUM of SWFs and Asset Managers, Private Equity and Hedge Funds ($ billions)
Chart 5: Sovereign Wealth Fund Deal Volume (1997-2007)
Chart 6: Sector-wise growth: Exchange trade of commodity derivatives by volume (03-06)
Chart 7: World’s leading Commodity Exchanges in developing countries – 2006 Contracts ($millions)
Chart 8: Major base metal commodity exchanges & emerging markets
Chart 9: Base Metal Price Trend – 2006 vs. Present Price
Chart 10: Cocoa Monthly Averages of Daily Prices (Oct 07- Oct 08)
Chart 11: ICO Indicator Prices - Annual & Monthly Averages (1998 to 2008)
Chart 12: Global Cotton Average Price Trend ("A" Index (cents/pound)) – 1988 -2008
Chart 13: Merrill Lynch Commodity index eXtra (MLCX) - Commodity Weightings
Chart 14: MLCX Weights as of January 2008
Chart 15: MLCXTR outperformance vs. SPGCCITR & DJAIGTR
Chart 16: Reuters/Jefferies CRB® Total Return Index: Jan 82 – Sep 08 (monthly close)
Chart 17: Forecast of China's Share of the Growth in Demand for Global Commodities- 2009
Chart 18: Types of Commodities Traded in India
Chart 19: MCX vs. SENSEX – Comparative Analysis (Jan 06-Sep 08)
Chart 20: India's Aluminium Futures Contract in Value (Rs. Crore) (Jan 07 – Jul 08)
Chart 21: India's Coffee Robusta Futures Contract in Value (Rs. Lakhs) (Jan 07 – Aug 08)
Chart 22: India's Copper Futures Contract in Value (Rs. Crore)
Chart 23: India's Crude Oil Futures Contract in Value (Rs. Crore)
Chart 24: India's Gold (1Kg) Futures Contract in Value (Rs. Crore)
Chart 25: India's Gold (100g) Futures contract in Value (Rs. Crore)
Chart 26: India's Chana (Chickpea) Futures Contract in Value (Rs. Crore)
Chart 27: India's Nickel Futures Contract in Value (Rs. Crore)
Chart 28: India's Zinc Futures Contract in Value (Rs. Crore)
Chart 29: India's Lead Futures Contract in Value (Rs. Crore)
Chart 30: India's Cardamom Futures Contract in Value (Rs. Crore)
Chart 31: India's Jeera (Cumin Seed) Futures Contract in Value (Rs. Lakhs)
Chart 32: India's Lead Futures Contract in Value (Rs. Crore)
Chart 33: India's Mentha Oil Futures Contract in Value (Rs. Crore)
Chart 34: India's Natural Gas Futures Contract in Value (Rs. Crore)

List of Tables

Table 1: The Global Economic Outlook (2006-2010)
Table 2: Major Global Commodity Exchanges
Table 3: Major Asian Commodity Exchanges
Table 4: Major European Commodity Exchanges
Table 5: Commodity Traders – List of top banks, Financial Institutions & other top companies
Table 6: Fund Rankings: Largest Funds by Assets under Management
Table 7: Global Commodity Prices – Monthly & Yearly Averages (Jan 06 - Sep 08)
Table 8: Commodity Forecast Nominal Prices (2007-2020)
Table 9: World Cocoa Market Estimates (in million metric tons) – 2002-2008
Table 10: ICO Indicator Prices - Annual & Monthly Averages (1998 to 2008)
Table 11: Global Cotton Average Price Trend ("A" Index (cents/pound)) – 1988 -2008
Table 12: Comparison of Commodity Indexes
Table 13: Dow Jones AIG Total Return Performance %
Table 14: Dow Jones AIG Excess Return Performance %
Table 15: Dow Jones AIG Yearly Returns (1990-2008)
Table 16: DJGI AIG Commodity Index - Commodity Weightings
Table 17: Merrill Lynch Commodity index eXtra (MLCX) - Commodity Weightings
Table 18: S&P GSCI™ Components and Dollar Weights (%)
Table 19: S&P GSCI™ Index Values
Table 20: Commodity Exchanges in India
Table 21: Trend of Commodities in National Commodity & Derivatives Exchange (Oct 08)
Table 22: Trend of Commodities in Multi Commodity Exchange of India (Oct 08)
Table 23: Trend of Metals in Multi Commodity Exchange of India (MCX) and National Commodity & Derivatives Exchange (NCDEX) (Oct 08)
Table 24: Trend of Oil Commodities traded in NYMEX (Oct 08)
Table 25: Trend of Metal commodities traded in NYMEX (Oct 08)

Pages: 186

N-deal spins off 100,000 new jobs

One of the spin offs of the India-U.S. civil nuclear deal coming through will be the creation of 100,000 new jobs for the 30-odd reactors that India hopes to set up to meet its nuclear power deadline of 20,000 MW by 2020, experts say. Congress MP Rahul Gandhi highlighted the fillip the deal is expected to give to employment generation and the energy sector. Interacting with students of Ravindra Bharati in Hyderabad on Saturday, Gandhi said: "The nuclear deal means millions and millions of jobs, and lights in the houses of the poor in this country."

Union Minister of State for Commerce and Power Jairam Ramesh, visiting the Department of Atomic Energy (DAE)'s Kalpakkam campus in Tamil Nadu, said: "Nearly 10,000 MW of nuclear power would be generated from indigenous reactors, 8,000 MW from light water reactors and 2,000 MW from Fast Breeder Reactors (FBR)."

Thousands of engineers, technicians and scientists would be needed to run these establishments, he underlined. "India's 17 nuclear reactors have the capacity to generate 4,120 MW, but in 2007 they could produce only 1,800 MW due to lack of fuel," Ramesh said. By 2020, India is likely to import six light water reactors while six nuclear plants are under construction to beef up generation capacity, said Nuclear Power Corporation of India Ltd Technical Director S.A. Bhardwaj. The total expansion is valued at nearly $300 billion.

"India's Department of Atomic Energy employs about 70,000 experts today," M.R. Srinivasan, former chairperson of the Atomic Energy Commission, told the media at a function in Kalpakkam. The new nuclear power plants on the cards are expected to create at least a 100,000 new jobs in India, experts say. Not just in India, the nuclear deal is expected to give a fillip to the industry in the US also.

In 2007, Ron Somers, president of the US-India Business Council, supporting the Indo-US Nuclear Cooperation Agreement, said: "The deal would create 27,000 high-quality jobs a year for the next 10 years in the US nuclear industry." To strengthen research at universities, the DAE is providing grants for projects through the Board of Research in Nuclear Sciences. The DAE Graduate Fellowship Scheme for the Indian Institutes of Technology (IITs) has been in place since 2002 to promote collaborative research through postgraduate students.

IIT-Kanpur offers a course in nuclear engineering and technology, now IIT-Madras has also decided to offer a similar course from the 2009 academic session. The country's premier institute for nuclear studies and research - The Homi Bhabha National Institute - will provide the necessary guides and teaching staff. India has two hubs for advanced studies in nuclear technology - Mumbai and Kalpakkam. The Mumbai-based Bhabha Institute unifies 10 institutions, four premier centres and six autonomous institutes, each with a research-driven framework.

Bhabha Institute also includes DAE's top research institute, The Bhabha Atomic Research Centre where old horses of the '80s, the Cirus and Dhruva reactors, are still kept going. DAE's other research institute is the Indira Gandhi Centre for Atomic Research (IGCAR), which was set up in 1971.

"The IGCAR has an open door policy for any student keen on science," says institute director Baldev Raj."The IGCAR has tried to strike a balance between networking with institutions with expertise and collaborating with academia for harvesting fresh thoughts," he added. According to the Nuclear Energy Institute, 30 countries worldwide are operating 439 reactors for electricity generation and 34 new nuclear plants were under construction in 14 countries.

Sources: IANS and Silicon India

Commodity market to reach $1.73 trillion by 2010: Assocham

The Indian commodity market is expected to grow by 30 percent and will reach Rs.74,156 billion ($1.73 trillion) in volume by 2010, according to a study by the Associated Chambers of Commerce and Industry of India (Assocham). Assocham found that the Indian commodity market expanded 50 times in a span of five years from Rs.665.3 billion in 2002 to Rs.33,753 billion in 2007 as people's participation in such trade continued to grow. "The growth in commodities derivatives trading would now grow by about 30 percent to reach a projected level of Rs.74,156 billion in the next two years," said Assocham president Sajjan Jindal.

The turnover in proportion to GDP of commodity trade increased from 4.7 percent in 2004 to 20 percent in 2007 and is expected to go up many-fold since commodity markets would remain friendly to subscribers. "The daily average volume of trade in commodities exchanges by December 2007 was over Rs.120 billion," said Jindal.

"Gold, silver and crude recorded the highest turnover in Multi Commodity Exchange (MCX) while in National Commodity & Derivatives Exchange Ltd (NCDEX), soya oil, guar seed and soyabean and in NMCE pepper, rubber and raw jute were the most actively traded commodities on an average. This trend is likely to continue," he added. The study points out that futures trading in commodities results in transparent and fair price discovery on account of large-scale participation of entities associated with different value chains.

It also noted that Indian commodity exchanges are still at a nascent stage of development as there are numerous bottlenecks hampering their growth. "Some of the major problems associated with commodity markets in India include infrastructure, trading system, broking community, controlled market, integration of regional and national exchanges and integration of spot and futures markets," the study said.

To attract active traders to commodity futures, the regulatory authority needs to introduce a more stringent code of conduct in setting standards for brokers, imposing capital adequacy norms and defining qualification criteria, it noted.

For a vibrant futures market, it is imperative that commodity pricing be left to market forces, without monopolistic government control. However, in India, scores of commodities in which futures trading is permitted are still protected under the Essential Commodity Act, 1955. The integration of the spot and futures market is another critical factor for the expansion of the commodity futures market in India. The state governments largely control the spot market in commodities, the study said. The institutional and policy-level issues associated with commodity exchanges have to be addressed by the government in coordination with the Forward Markets Commission in order to take necessary measures to pave the way for a significant expansion and further development of the commodity futures markets, Assocham stressed.

Sources: ASSOCHAM, Silicon India and PTI

Indian Telecom Market

Market Penetration
Every one in four Indians has a phone now, thanks to the scorching pace at which the burgeoning telecom services sector grew in the last fiscal, says an annual survey. With the total wireless subscriber base crossing 261 million as on March 31, wireless connectivity forms 22 percent of the total tele-density at 25 percent across the country, the survey adds. The annual survey by Voice and Data of CyberMedia group revealed that the Indian telecom subscriber base zoomed by 66 percent year-on-year (YoY) in the fiscal under review over the previous year.

"A booming economy, easing of entry barriers and lowering of tariffs fuelled the growth in FY 2008, with 104 million new subscribers getting connected and making India the second fastest growing telecom market in the world," CyberMedia publisher Prasanto K. Roy said Tuesday, citing the survey findings. The trigger for rapid telecom service growth was the revolutionary telecom policies of the present United Progressive Alliance (UPA) and the previous National Democratic Alliance (NDA) governments, resulting in affordable connectivity to a common man.

""With India's telecom tariffs still the lowest in the world, there's enormous and sustained growth beyond the metros. So telcos see huge opportunity in the three-fourths of Indians still untouched by the mobile phone revolution," Roy noted. Thriving in the growing market, the Indian telecom services industry generated Rs.1,306 billion ($31 billion) in 2007-08, registering 21.3 percent growth. Mobile, fixed line, national long distance (NLD), ILD, broadband, VSAT (very small aperture terminal) and radio-trunking constitute the telecom services industry. Growing at 36.4 percent YoY, revenue from mobile service increased to Rs. 766 billion from Rs. 562 billion in the previous fiscal (FY 2007).

Majority of new mobile subscribers is from towns and villages with less than 200,000 population. The mobile network covers about 50 percent of the 600,000 towns and villages across the country. The top five service providers vie for a larger share of the growing telecom pie. State-run BSNL (Bharat Sanchar Nigam Ltd) leads the pack with Rs.353 billion despite 12 percent decline from the previous fiscal," Roy pointed out.

BSNL is followed by Bharti Airtel, with Rs.264 billion, Reliance Communications Rs.186 billion and Vodafone Rs.155 billion, respectively. The top five operators based on cellular subscriber base are Bharti (62 million), Reliance (46 million), Vodafone (44 million), BSNL (41 million) and Idea cellular (24 million).

Prospects (Source: Gartner)
Total cellular services revenue in India is projected to grow at a compound annual growth rate (CAGR) of 18 percent from 2008-2012 to exceed US$37 billion, according to Gartner, Inc. The India mobile subscriber base is set to exceed 737 million connections by 2012 growing at a CAGR of 21 percent in the same period. This growth is poised to continue through the forecast period, and India is expected to remain the world’s second largest wireless market after China in terms of mobile connections.

“The growth in the mobile subscriber base is on the back of a rapidly proliferating rural market, lower handset costs, and low tariff rates in the Indian market,” said Madhusudan Gupta, senior research analyst at Gartner. “Rural telephony will continue to trigger growth and is expected to grow fourfold during the forecast period. Call rates have further dropped to about 1.5 cents per minute narrowing the gap with fixed-line rates. These factors along with an increasing competitive landscape will fuel market growth and encourage the adoption of wireless services in the rural and semi urban provinces of India.”

Cellular market penetration is projected to increase from 19.8 percent in 2007 to 60.7 percent in 2012. Gartner analysts said this growth could be primarily attributed to the increasing focus on the rural market, local consumer durable and electronic companies entering the domestic mobile handset segment, and lower handset prices. Vendors will continue to focus on sub-25$ handsets to capture market share.

The Indian mobile connection market continues to be dominated by prepaid subscribers. Prepaid connections accounted for more than 89 percent of all mobile connections in 2007 and are expected to grow to more than 92 percent of the connection base by 2012. The total services revenue for prepaid connections is expected to grow at 18.9 percent CAGR for the period 2008 - 2012 and the total services revenue for postpaid connections is expected to grow at 15 percent CAGR during the same forecast period. By 2012, the prepaid subscriber base will cross 683 million and postpaid subscriber base will exceed 53 million subscribers. The churn rate in India is 41.0 percent (2008), and despite a maturing market the ratio is expected to go up to 49 percent in 2012.

Revenues – Data revenues driving growth
The revenues from data services will significantly contribute to the growth of overall cellular services revenue in India, with a CAGR of 26.3 percent in the forecast period.

Prepaid subscribers are expected to adopt data services faster than the post-paid segment. Data revenues for the prepaid segment are projected to grow at 29 percent CAGR during the forecast period as compared to 22 percent CAGR for the post paid subscribers during the same period.

The bulk of the revenues will continue to come from voice revenues. However, with the increased growth in data services, the percentage of revenues coming from voice will reduce from 89 percent in 2007 to 85 percent in 2012.

Expected changes in the Indian Telecom landscape
According to Gartner, the industry will witness several changes in the coming year that could revolutionize the face of the telecom industry with the introduction of new technologies such as WiMAX, 3G and Mobile Number Portability (MNP). India will move to its next phase of evolution with the commercial launch of WiMAX by 1Q09 and 3G by 2Q09. With the introduction of MNP in 2008, churn rates are not expected to rise significantly, as India continues to be a prepaid dominated market.

“The Indian wireless market is a vibrant, price-sensitive and high-growth market,” Mr. Gupta said. “With 14 telecom service operators already present and another two set to join, the Indian telecom industry is expected to see some level of M&A activity in 2009. Given the high level of competition and anticipated consolidation, different business models will emerge that could push tariffs further down, with Indian mobile service consumers set to emerge as the biggest beneficiaries.”

Rural India will wrest 40 percent of new telecom market
India's rural telecom connectivity is poised for explosive growth in the next five to 10 years, grabbing a 40 percent share of the new market, a study released in July 08 said. "Of the estimated new 250 million Indian wireless users, in next 5-10 years approximately 100 million will be from rural areas," said the study by the Federation of Indian Chambers of Commerce and Industry (Ficci) and Ernst and Young.

The paper said operators have demonstrated they can achieve profitability by reducing fixed costs, controlling variable costs and carefully tailoring services to the requirements of their customers. A similar model with minor customization could be emulated in the rural areas, it said. The government will likely phase out the Access Deficit Charge (ADC) - a levy imposed on private players in rural areas - and roll out new incentives for mobile networks in rural India, the report said. Passive infrastructure sharing and spectrum hoarding cess on defaulter operators who fail to meet their roll-out obligations are illustrations of proactive government initiative, it observed.

"Erecting wireless telecom towers in India's tough rural terrain is still expensive and logistically challenging, reinforcing the desirability of sharing," the paper said. The paper also noted that the ultra-low cost handset of approximately Rs.840 ($20) to the market with built-in subsidies, lifetime validity and minimal maintenance costs have promoted mobile usage in remote areas. Moreover, operators could learn from business models that have been experimented across the developing world for expanding rural connectivity.

Source: Moneycontrol.com, Silicon India and IANS

Indian Insurance Market

Authors: Nishith Srivastava & Akash Rakyan

Indian economy is the 12th largest in the world, with a GDP of $1.25 trillion and 3rd largest in terms of purchasing power parity. With factors like a stable 8-9 per cent annual growth, rising foreign exchange reserves, a booming capital market and a rapidly expanding FDI inflows, it is on the fulcrum of an ever increasing growth curve.

Insurance is one major sector which has been on a continuous growth curve since the revival of Indian economy. Taking into account the huge population and growing per capita income besides several other driving factors, a huge opportunity is in store for the insurance companies in India. According to the latest research findings, nearly 80% of Indian population is without life insurance cover while health insurance and non-life insurance continues to be below international standards. And this part of the population is also subjected to weak social security and pension systems with hardly any old age income security. As per our findings, insurance in India is primarily used as a means to improve personal finances and for income tax planning; Indians have a tendency to invest in properties and gold followed by bank deposits. They selectively invest in shares also but the percentage is very small--4-5%. This in itself is an indicator that growth potential for the insurance sector is immense. It’s a business growing at the rate of 15-20% per annum and presently is of the order of $47.9 billion.

India is a vast market for life insurance that is directly proportional to the growth in premiums and an increase in life density. With the entry of private sector players backed by foreign expertise, Indian insurance market has become more vibrant. Competition in this market is increasing with companies continues effort to lure the customers with new product offerings. However, the market share of private insurance companies remains very low -- in the 10-15% range. Even to this day, Life Insurance Corporation (LIC) of India dominates Indian insurance sector. The heavy hand of government still dominates the market, with price controls, limits on ownership, and other restraints.

In 2000, Indian insurance market size was $21.71 billion. Between 2000 and 2007, it had an increase of 120% and reached $47.89 billion. Between 2000 and 2007, total premiums maintained an average growth rate of 11.96% and the CAGR growth during this time frame has been 11.96%. It was one of the most consistent growth patterns we have noticed in any other emerging economies in Asian as well as Global markets.

Major Driving Factors
=> Growing demand from semi-urban population
=> Entry of private players following the deregulation
=> Rising demand for retirement provision in the ageing population
=> The opening of the pension sector and the establishment of the new pension regulator
=> Rising per capita incomes among the strong middle class, and spreading affluence
=> Growing consumer class and increase in spending & saving capacity
=> Public private partnerships infrastructure development
=> Dearth of innovative & buyer-friendly insurance products
=> Success of Auto insurance sector

Emerging Areas
=> Healthcare Insurance & Pension Plans
=> Mutual fund linked insurance products
=> Multiple Distribution Networks .i.e. Bancassurance

The upward growth trend started from 2000 was mainly due to economic policies adopted by the then Indian government. This year saw initiation of an era of economic liberalization and globalization in the Indian economy followed by several reforms and long-term policies that created a perfect roadmap for the success of Indian financial markets. On the basis of several macroeconomic factors like increase in literacy rate & per capita income, decrease in death rate and unemployment, better tax rebates, growing GDP etc., we estimate that the Indian insurance sector will grow by $28.65 billion and reach $76.54 billion by 2011 with a CAGR of 12.44% and a growth of 59.82%.

The Indian life insurance market generated total revenues of $41.36 billion in 2007, this representing a compound annual growth rate (CAGR) of 11.84% for the period spanning 2000-2007. Life insurance market had a growth of $22.46 billion within a period of 7 years with a growth rate of 118.24%. Estimated life premiums rose from INR1,470,800 million ($36.77 billion) in 2006 to INR1,301,540 million ($32.54billion) in 2005. We envisage that life premiums in 2011 will be $65.96 billion, a growth larger than they were in 2007. The performance of the market is forecast to accelerate, with an anticipated CAGR of 9.78% for the four-year period 2007-2011 expected to drive the market to a value of $65.96 billion by the end of 2011. There would be a growth of $24.6 billion i.e. 59.48% in the next 4 years.

Non-life premiums in India were $6.53 billion in 2007. Gross written premium (GWP) in the Indian non-life insurance market reached a value of $5.75 billion in 2006, this representing an annual growth of 13.55% for the period spanning 2006-2007. Estimated non-life premiums rose from INR230 billion ($5.75 billion) in 2006 to INR261 billion ($6.53 billion) in 2007. We anticipate that non-life premiums will grow by a CAGR of 9.40% between 2007-2011. We are looking for non-life premiums to rise by $405 million over the five years to the end of 2011 with a growth rate of 62.02%.

Topics covered in the report
=> Trend analysis of Indian economy and growing macroeconomic factors and
=> India’s position in the context of emerging countries
=> Historical growth trends & growth drivers of Insurance & its sub-sectors in India and outlook till 2011.
=> Market size of insurance sector (total, life & non-life) since 2000 till 2007
=> Market forecast of insurance sector (total, life & non-life) between 2007 and 2011
=> Key issues & challenges, major trends & opportunities
=> Government’s initiatives to promote & regulate the insurance market
=> Competitive landscape and market share of top players
=> And many more...


Table of Contents


METHODOLOGY & RESEARCH APPROACH

EXECUTIVE SUMMARY

1. INDIA
1.1. ECONOMY
1.1.1. Performance in FY2007
1.1.2. Growing Per Capita Income
1.1.3. Macroeconomic trends
1.1.4. Future predictions
1.2. GOVERNMENT POLICIES

2. INDIAN INSURANCE SECTOR
2.1. MARKET OVERVIEW
2.1.1.Insurance Sector vs. Macro-economic factors
2.2. MARKET PERFORMANCE & FORECAST (2000-2011)
2.2.1. Indian Insurance Market
2.2.1.1.Indian Life Insurance Market
2.2.1.2. Indian Non-Life Insurance Market
2.3.DRIVING FACTORS
2.3.1. Opening of Pension sector
2.3.2. Growing Per Capita Income & Changing Demographics
2.3.3. Macro-Economic and Demographic Growth Drivers
2.3.4. Other Major Drivers
2.4. TRENDS, ISSUES AND OPPORTUNITIES – AN ANALYSIS
2.4.1. Major Issues
2.4.2. Emerging sectors for Insurance
2.4.3. Emergence of Multiple Distribution Networks
2.4.4. Consolidation of Distribution Strategy
2.4.5. Targeting niche customer base with customized products
2.4.6. Stagnating premium growth and underlying opportunity
2.4.7. The Deregulation of the Insurance Market in India (w.e.f. Jan 1,07)
2.4.8. Proposed stages of removal of the tariffs
2.4.9. Insurance sector driving Indian CRM market
2.4.10. Product Preferences among Consumers
2.4.11. Success of Auto Insurance Sector
2.4.12. Other major hurdles
2.5. GOVERNMENT REGULATIONS
2.5.1. Insurance Acts
2.5.2. Government backed insurance schemes
2.5.3. Reforms in Insurance Sector
2.6. COMPETITIVE LANDSCAPE
2.6.1. Competition in Life Insurance Sector
2.6.1.1. Market Share & Segmentation
2.6.1.2. Life Insurance - Five Forces Analysis
2.6.2. Competition in Non-Life Insurance Sector
2.6.2.1. Market Share & Segmentation
2.6.2.2. Non-Life Insurance - Five Forces Analysis
2.7. COMPANY PROFILES – TOP PLAYERS
2.7.1. Bajaj Allianz General Insurance Co. Ltd
2.7.2. ICICI Lombard General Insurance Company
2.7.3. IFFCO-TOKIO General Insurance (ITGI)
2.7.4. National Insurance Company Limited
2.7.5. The New India Assurance Co. Ltd.
2.7.6. The Oriental Insurance Company Limited
2.7.7. Reliance General Insurance
2.7.8. Royal Sundaram Alliance Insurance Co. Ltd
2.7.9. Tata AIG General
2.7.10.United India Insurance Company Limited
2.7.11.Bajaj Allianz Life Insurance Company Limited
2.7.12.ICICI Prudential Life Insurance Company

Pages: 127

Format: PDF

List of Charts

Chart 1: GDP growth, per capita income and size of country by GDP in 2014f
Chart 2: Macroeconomic Data & Factors
Chart 3: Government Debt- India (% of GDP)
Chart 4: Annual Inflation Rate (CPI) - India %
Chart 5: Total Premium Growth vs. GDP Growth (%) – 2000-2007e
Chart 6: Life Insurance vs. Non-Life Insurance vs. Total Premium vs. GDP (%) – 2000-2008f
Chart 7: India Insurance Market Value ($ billion): 2000-2007e
Chart 8: India Insurance Market Value Forecast ($ billion): 2008-2011f
Chart 9: India Insurance Market: Segment Share (2007e)
Chart 10: India Life Insurance Market Value ($billion): 2000-2007e
Chart 11: Asia-Pacific Life Insurance Market Segmentation: % share in 2006e
Chart 12: India Life Insurance Market Share: % Share, by Value, 2006-2007e
Chart 13: India Life Insurance Market Value Forecast ($billion): 2008-2011f
Chart 14: India Non-Life Insurance Market Value ($billion): 2000-2007e
Chart 15: India Non-Life Insurance Market Value Forecast ($billion): 2007-2011f
Chart 16: Sub-sector share of Non-life Insurance Market in India (2007e)
Chart 17: India Non-life Insurance Market Share: % Share, by Value, 2006-2007e
Chart 18: Market Share of leading life insurance companies in India (% share) – 2007e
Chart 19: India Life Insurance Market Segmentation (%share & $billion value): 2010-2011f
Chart 20: India Non-Life Insurance Market Segmentation (%share & $billion value): 2006-2007e
Chart 21: India Non-Life Insurance Market Segmentation (%share & $billion value): 2010-2011f

List of Tables

Table 1: GDP Growth (2002-07)
Table 2: Total Premium Growth & GDP Growth (%) – 2000-2007
Table 3: Growth (%): Life Insurance vs. Non-Life Insurance vs. Total Premium vs. GDP (%) – 2000-2008f
Table 4: India Insurance Market Value ($billion): 2000-2007e
Table 5: India Insurance Market Value Forecast ($ billion): 2008-2011f
Table 6: India Life Insurance Market Value ($billion): 2000-2007e
Table 7: Asia-Pacific Life Insurance Market Segmentation: % share in 2006
Table 8: India Life Insurance Market Share: % Share, by Value, 2006-2007e
Table 9: India Life Insurance Market Value Forecast ($billion): 2008-2011f
Table 10: India Non-Life Insurance Market Value ($billion): 2000-2007e
Table 11: India Non-Life Insurance Market Value Forecast ($billion): 2007-2011f
Table 12: India Non- Life Insurance Market Share: % Share, by Value, 2006-2007e
Table 13: India Insurance Market Segmentation (%share & $billion values): 2006-2007e
Table 14: India Insurance Market Segmentation (%share & $billion value): 2010-2011f
Table 15: Market Share of leading life insurance companies in India – 2007e
Table 16: India Life Insurance Market Segmentation (%share & $billion value): 2010-2011f
Table 17: India Non-Life Insurance Market Segmentation (%share & $billion value): 2006-2007e
Table 18: India Non-Life Insurance Market Segmentation (%share & $billion value): 2010-2011f

20 Indian firms among world's top 100 in outsourcing

According to Silicon India:

Reflecting strong growth of the Indian industry, 20 Indian firms have successfully made it to the list of top 100 outsourcing companies in the world.

The latest '2008 Global Outsourcing 100', compiled by the International Association of Outsourcing Professionals (IAOP) that features 20 Indian firms has five of them - Infosys (ranked 3), TCS (6), Wipro (7), Genpact (9) and Tech Mahindra (10) among the top 10. All five are leading software service providers.


In the list, Accenture is on the top slot and IBM comes second. Companies on the list averaged $1.7 billion in annual sales and engaged 27,000 employees across the world.

Other Indian companies in the list are HCL Technology (11) Mastek (16), WNS Global Services (19), Hexaware (22), ExlService (26), 24/7 Customer (28), Cambridge (36), ITC Infotech (40), KPIT Cummins (42), Patni (46), Zensar (53), MindTree (54), Mphasis (56), Aditya Birla Minacs (62), FirstSource Solutions (73) and VCustomer (84).

According to IAOP, the key strength of Wipro and TCS is their 'employee management' while 'executive leadership' is cited as the strong point of Infosys and Genpact.

On the other hand, 'outsourcing experience' is attributed as the main strength of Tech Mahindra and HCL Technologies. The power balance in the outsourcing industry is shifting. Global competition in outsourcing is intensifying and that was reflected in this years ranking with companies from 19 countries vying for recognition, IAOP's Managing Director, thought leadership and who head the judges panel, Jagdish Dalal said.

In last year's list, there were five Indian firms in the top 10 - Wipro, Infosys, Genpact, Tech Mahindra and Cambridge.

Profile of Tata Companies - An analysis

Excerpts sourced from Economic Times and TNN


TATA MOTORS

Competencies & Opportunities: Tata Motors has some new offerings on the block. This includes the 200-500 horse power ‘World Truck’ for the global market. It has also taken a huge stride to grow inorganically by acquiring the business of Ford under the brands, Jaguar and Land Rover. New models such as Sumo Grande and the Rs 1-lakh Nano car are likely to give a fillip to the domestic business.

Challenges: Higher interest rate may dampen the demand for cars. Rising cost of key raw materials such as steel and aluminium will put pressure on margins. Turning around of the Jaguar Land Rover business into a higher profitable business is a major challenge. Positioning of the Tata brand over such a wide variety of vehicles segments starting from the cheapest Tata Nano to the luxury brands like Jaguar will not be easy.


TATA STEEL

Competencies & Opportunities: The Corus acquisition will give Tata Steel the access to global markets and higher volumes. The strong outlook for global as well as domestic steel sector will improve sales realisation. Acquisition of iron ore and coking coal mines in different parts of the globe will improve the operating margin of Corus and contribute more towards the bottomline of the combined entity. The new greenfield and brownfield projects in Orissa, Jharkhand and Chhatisgarh will add significantly to the topline.

Challenges: The higher inflation and pressure from the domestic government might force steel producers to reduce domestic steel prices, resulting in lower profit margins. The higher synergy from Corus will come through only if Tata Steel manages to integrate it successfully.


TCS

Competencies & Opportunities: TCS has been focussing on contracts with larger deal size and time span. This helps in increasing client engagement. Broadening of deliverables will also help in improving competence in the global market for IT services. TCS has opened delivery centres in low-cost destinations of Asia and Latin America. Such a multi-shore delivery strategy comes in handy in times of economic slowdown and lower IT spends by the clients. Presence in the domestic market is worthwhile in the scenario of a stronger home economy and depreciating dollar.

Challenges: Exposure to dollar denominated income increases risk of margin erosion given appreciating rupee. Slowdown in the US may impact the IT budgets of the US clients. This may retard the topline growth. Competition from MNCs in India will intensify. TCS has to come up with firm strategies for its domestic business.


TATA POWER

Competencies & Opportunities: Tata Power is India’s largest private sector power utility with installed capacity in excess of 2,300 mw. Over 600 mw new capacity is likely to be added during FY09, with another 8,000 mw capacity to be added over the next five years including a 4,000-mw UMPP at Mundra. TPL has acquired a 30% stake in two major Indonesian coal producers to assure future fuel requirements. It is emerging as an integrated player in India's power sector with investments in power generation, transmission, distribution and fuel supplies (coal mining and transport).

Challenges: Meeting the time and cost deadlines while executing the long gestation projects is a big challenge as the costs of equipment and project implementation services have gone up substantially. Even after the successful completion of its projects, TPL has to manage the regulatory environment well to ensure sufficient return on its investments.


INDIAN HOTELS

Competencies & Opportunities: Indian Hotels runs the largest domestic hotel chain with 71 hotels and an inventory of 10,487 rooms. It enjoys presence across wide range of hotels right from deluxe properties to budget. This puts the company in a bright spot and helps it take advantage of the growing tourism industry in India. Besides, the company has 14 properties overseas and is expanding its global footprint via acquisitions and greenfield ventures. This is likely to result in greater brand recognition abroad. Its recent entry into lucrative segment of business jets will help the company to take advantage of growing opportunities in this space.

Challenges: Its revenue is greatly dependent on India, where average room rates are expected to see a decline beyond FY09 when supply starts coming in. Rising real estate costs have greatly reduced the return on capital on new properties in major cities.


TATA TEA

Competencies & Opportunities: The company has taken initiatives to introduce different variants of tea. It has also forayed into bottled water and other beverages. This is likely to help it transform itself from a tea company to a beverages company. Acquisitions, geographic expansion and new products are the way to go for Tata Tea, which is already the second largest integrated tea company in the world. Its retail foray through ‘Chai Unchai’ beverage stores is likely to open a new route of growth for the company.

Challenges: Tata Tea operates in a labour-intensive tea industry, which has long gestation periods. This can be an imepdiment in improving operational efficiency. The company will have to grapple with the increase in raw material prices. The appreciation in the rupee is likely to drag profitability of the international businesses.


TATA COMMUNICATIONS

Competencies & Opportunities: Utilisation of existing infrastructure to deliver valueadded services is a sound proposition for Tata Communications. The company recently tied up with Telsima to provide WiMAX services in the country. It has also launched its global telepresence network service to offer virtual meeting solutions. These initiatives will fuel future revenue growth. Tata Comm’s strategy to build global tie-ups for high-end technologies will help it keep pace with the fast-changing technology scenario and improve its global presence.

Challenges: Tata Comm needs to increase focus on deploying managed services, given the stiff competition in domestic as well as global enterprise data space from bigger telecom operators. The company has to improve operational processes in order to increase customer base for its broadband and other services rapidly.


TATA CHEMICALS

Competencies & Opportunities: The recent acquisition of US-based General Chemicals has consolidated position of Tata Chemicals (TCL) in the global soda ash market. Post-acquisition, TCL has become the second largest soda ash manufacturer in the world with majority of the production coming from cheaper natural sources. This goes well with its overall global strategy. TCL is already on an expansion spree for its inorganic chemicals and fertilisers plants in India. This will help it to strengthen its domestic presence. TCL is setting up a 30,000-litres-per-day ethanol plant and has ventured into wholesaling of fresh agricultural produce. This diversification would help in mitigating risk from slowdown in the core business.

Challenges: TCL has to see through an effective integration strategy of its soda ash business with the overseas acquisition. Managing overall growth of the company will be a tough task given the diversification into new business domains.


VOLTAS

Competencies & Opportunities: Voltas is a market leader in central air-conditioning and climate control business in India, besides being a major player in booming West Asia. It is also India's leading distributor and re-seller of textile and mining equipment. Recently it went through a corporate restructuring which has transformed it into a leaner and competitive player. The demand for central A/Cs and climate control systems is booming, thanks to rapid growth in retail, real estate and hospitality sectors. It has also got a boost from strong capex in textile, mining and retail sectors where it supplies forklifts.

Challenges: Being a capital goods supplier, it's highly prone to an economic downturn. It faces strong competitors across its product portfolio. The consumer air-conditioner business continues to be a drag on the company's profitability.


TATA TELE (MAHA)

Competencies & Opportunities: The company is aggressively expanding its base in smaller circles. Increasing presence in high-growth telecom circles B and C will help the company grow its subscriber base rapidly from existing five million.

Challenges: Higher competition is likely to put further pressure on the company’s average revenue per user. This necessitates more focus on value-added services. The company currently provides mobile services on CDMA platform. Establishing a GSM footprint would be a challenging task given competition from bigger GSM players. The company needs to expand its operations in the field of managed services to stay competitive. The company lacks brand recognition. It has to establish its brand presence in the highly competitive
markets.


TITAN IND

Competencies & Opportunities: Titan has diversified into a wide consumer-centric product portfolio comprising time pieces, jewellery, eye wear, and precision equipment among others. A good pedigree, reputed brand standing and strong distribution and service network offer good prospects for the company to ride the boom in consumption. Expansion of retail stores, specially in tier II cities, will help the company increase profitability.

Challenges: Record high gold prices can lead to a drop in jewellery demand, restricting the company's growth in the business. International foray may not be very profitable in view of the global economic slowdown. Branded retail segment is fraught with intense competition. Dominance of unorganised players in the lower end of the watch market poses a challenge. Given rising incomes, Titan may have to face competition from international brands in the premium watch category.


TRENT

Competencies & Opportunities: After establishing its foothold in retail space through Westside stores, Trent is taking new initiatives of foraying into the premium segment. Recently, it joined forces with the Benetton Group for the expansion of the Sisley brand in India. It is tying up with designers to mark its presence in a range different from the private labels. This will help the company face stiff competition in the domestic retail space. Trent has reported good growth in the past few years. Revenues have grown consistently (CAGR of 55% from FY04-07). A sustained revenue model is necessary as it facilitates future expansion plans.

Challenges: The roll out of new stores has not been aggressive. The company has added only 19 stores from ’03 till date. Faces competition from aggressive players such as Pantaloon and new entrants including Reliance Retail.

ArcelorMittal to invest $25 bn in India

ArcelorMittal, the world's largest steel maker, is planning to invest nearly $25 billion in the country, according to a top company official. "India is one of the star performers and we are very bullish about it. We are committed to invest nearly $25 billion," Malay Mukherjee, member of the group management board of the company said.

Other investments by the company in India
Besides investing $10 billion each in Orissa and Jharkhand on 12 million tonnes steel project each, the company proposes to have more customer-oriented projects such as service centres in the country. "We are also working in joint venture in Chennai in stainless steel, for the automotive sector," Mukherjee said. ArcelorMittal is putting up two steel plants of 12 million tonnes capacity each in Orissa and Jharkhand at a total cost of $20 billion.

Brain drain is passe, India a hot destination for CEOs

Excerpts sourced from Rediff.com

The Indian office of a leading multinational mobile phone company is facing an unusual challenge. It is losing top executives who have declined senior-level assignments abroad because they do not want to miss opportunities in India.

The brain drain, it seems, is passe. India is becoming one of the hottest destinations for expatriates (both those of Indian origin and foreigners) for top jobs. That is because big business houses in India are ready to offer pay packets that are equivalent to and sometimes more than global benchmarks.

This is a key finding of a study of senior recruitment trends by US-based SpencerStuart, a leading executive search firm that specialises in recruiting CEOs, presidents and COOs for companies globally.

SpencerStuart, which has operations in India and recruits CEOs for almost half the Fortune 500 companies, said for key sectors like retail, real estate, power, oil and gas and refining, transportation and logistics, Indian business houses are offering annual salary packages ranging from $750,000 to $1.5 million - excluding stock options.

Nearly half the CEOs and COOs recruited in these sectors are foreigners (including non-resident Indians).

CEO salaries in these sectors are nearly double what companies pay in other sectors, which could range from $350,000 to $750,000.

"Expats are increasingly finding India a more exciting market in which to work than mature markets. And large Indian companies in certain sectors are willing to match if not better global salaries to get talent which is difficult to get in India," said Anjali Bansal, managing director of SpencerStuart.

In fact, she added, multinationals are finding it difficult to woo Indians at the senior level to take up foreign postings abroad.

As a strategy, SpencerStuart has advised clients to shift regional headquarters from, say, Singapore or Hong Kong to India so that senior Indian executives can operate as heads from India. Several companies are considering this option.

SpencerStuart also said certain countries have been identified for CEO recruitment for India. Contrary to common belief the US is not the favoured recruitment ground.

In real estate the happy hunting grounds include Australia, south east Asia and the UK, amongst others. For oil and gas and power they are Kazakhstan, the North Sea area, Canada and West Asia. For retail the hottest recruitment grounds are West Asia, south east Asia (especially Hong Kong) and Europe.

Bansal said that the recruitment ground is essentially from countries that have seen similar development as India.

India a 'fraud haven,' says report

Terming the country as a 'fraud haven' with about 60 per cent of the firms having detected frauds in past two years, global consultancy major KPMG on Tuesday said that India Inc is still unprepared to handle this menace.

Making the situation even worse, at least 5 per cent companies have had losses exceeding Rs 10 crore (Rs 100 million) and more than double of them have estimated the hit on their bottom lines in the range of Rs 1 crore (Rs 10 million) to Rs 10 crore, KPMG said citing its 'India Fraud Survey Report 2008.'

According to the survey, over 70 per cent of companies believe that fraud in India would further increase in next two years, while over 80 per cent respondents recognised fraud as a problem in the corporate environment in the country.

Indicating about 54 per cent rise in the number of fraud occurrences since the previous survey in 2006, about 60 per cent of respondents confirmed having experienced fraud at their companies, as against just 39 per cent two years ago.

While noting that actual cost of fraud to business was difficult to estimate as not all are discovered, KPMG said that 31 per cent of those surveyed suffered losses of Rs 10 lakh (Rs 1 million) to Rs 1 crore, while 11 per cent put the losses at Rs 1-10 crore and another 5 per cent at more than Rs 10 crore. However, it was less than Rs 10 lakh for about 53 per cent.

The financial services sector has retained its position as the most susceptible to frauds, while real estate and infrastructure surpassed IT and ITeS as the second most risky business in this regard, the survey found.

The report further pointed out that threat of fraud comes mostly from within the organisation. Majority of those surveyed felt that 'employees pose the maximum threat to an organisation and the senior management is more likely to commit fraud as compared to other employees.'

According to other findings of the survey, over 75 per cent of companies believe that fraud remaining undetected is their biggest concern, followed by inadequacy of anti-fraud measures and unethical behaviour of their employees.

KPMG said that the dual impact of two concerns, unethical behaviour of employees and inadequacy of anti-fraud measures, leads to an environment where both inclination and opportunity co-exist. 'This could mean that organisations in India that remain passive in their approach to deal with fraud may be a perfect breeding ground for fraud,' it added.

KPMG said that over 80 per cent of respondents believed that corporate sector pay bribes or make facilitation payments to do business in India. However, 60 per cent did not have adequate knowledge about anti-corruption laws.

Among the respondents, close to 25 per cent were at the level of an executive director, managing director or chief executive officer, while 30 per cent were chief financial officers of companies.

The inherent responsibilities and trust associated with senior positions, ability to over-ride internal controls, internal knowledge and access to confidential information increases the risks, it noted.

After employees, the maximum threat is perceived from suppliers and service providers, KPMG said.

'With the increase in the number of business transactions combined with the lack of effective monitoring, frauds are a real time threat for most corporates in India. It comes as a surprise that even the larger companies operating in India do not have adequate risk management strategies,' KPMG India's Forensic Services head Deepankar Sanwalka said.

Forecasts for the economy & markets in 2008

Author: Abheek Barua, Chief Economist, HDFC Bank
Source: Rediff

Since this is my last piece this year I thought I would write about the forecasts I have made for the global economy and financial markets for 2008. There is an important caveat, of course. The global macroeconomic and financial environment remains terribly volatile and a number of these predictions could go wrong.
Let me get to the forecasts. The jury appears to be still out on whether the US is headed for a recession next year (going by the textbook, a situation in which GDP growth turns negative for two successive quarters) or whether swift action by the US Federal Reserve is likely to prevent such a situation. US consumption data like retail numbers occasionally surprise positively and US inflation is far from dead. However, despite this bit of fuzziness I remain somewhat sanguine about the following trends.

Whether it qualifies technically as recession or not, the US is likely to see a marked slowdown at least in the first half of 2008, which could last well into the second half of the year. Besides, despite central banks' best efforts, it will take a while for American and European banks to resume lending to each other and to even slightly risky borrowers. Thus, I see the credit squeeze in the US and Europe continuing and perhaps even getting worse in the near term.

The US slowdown is likely to have knock-on effects on the global economy and world GDP growth is likely to moderate. More specifically the result of sharp currency appreciation, harder interest rates and a credit squeeze will begin to take a toll on euro-zone growth. The UK is well into a cyclical downturn.

As I have argued in earlier columns, I think it is impossible for Asian economies to remain immune to a downturn in the developed economies and growth rates will soften in this region as well. I honestly don't know much about Latin America but I think it is sensible to assume that what applies to Asia applies to these economies as well.

Global energy and food prices are likely to remain elevated in the first quarter but are likely to dip subsequently as demand compression on the back of slowing world demand begins to reflect in prices. I am, for example, convinced that concerns about fresh oil supplies and oil peaks notwithstanding, slower global growth is fundamentally incompatible with oil prices at over ninety dollars a barrel.

The same logic might just apply to other assets including stocks. If indeed the signs of global slowdown become more acute, large investors might begin to dump equities and hold on to safer assets like treasury bonds. If there is growing aversion to equities as an asset class, Asian markets (including Indian stock markets) will also take a hit. The slide in stock prices will not be due to risk-aversion alone.

If global growth slows, the slowing down will begin to impact the top line and bottom line growth of companies across economies. That in turn will buttress the negative sentiment towards risky assets. The bottom line: be prepared for a "correction" in the Indian stock market next year.

There is a potential offset. The US Fed is likely to follow a policy of phased quarter percentage point cuts in its target interest rate - I expect the American central bank to cut the Fed funds rate thrice next year. Thus while inflation risks will weigh on the Fed's mind, I expect growth concerns to dominate and spur the Fed to cut rates some more. I expect the European Central Bank to hold interest rates until the second half and then start cutting signal rates.

My bank's research team has forecast two rate cuts next year, possibly in the second half. The Bank of England is likely to be swifter with two quarter percentage point cuts in the first half of 2008. We also expect more direct liquidity both through unilateral cash infusion by central banks and perhaps through more co-ordinated intervention.

The question is: what happens to all this liquidity when central banks turn on their cash spigots? If investors remain terribly risk-averse, a lot of it would go into low-risk government bonds.

US treasury bond prices will continue to move up and yields will decline as this process continues. Besides, if US assets keep getting cheaper and cheaper, investors will sniff a bargain and start buying these assets. In fact, some of the bigger funds have already started picking up chunks of the American financial industry where valuations have hit rock-bottom. Asian sovereign investment funds, for instance, are bailing out cash-strapped American banks, picking up significant equity stakes in the process.

Finally, there is also a chance that some of the money will start finding its way into emerging financial markets where growth rates, at least in relative terms, will remain high in comparison with the rest of the world. What happens then? My prediction is that emerging markets including India are likely to get buffeted by the crosswinds of rising global liquidity and cheaper interest rates, on one side, and concerns about slowing growth, on the other. This means two things.

Our stock markets will remain volatile for a while to come and sharp upswings could be followed by a quick downturn. Ditto for the currency markets. The interplay of these opposing forces also means that these markets will be stuck in a range. Thus I do not see the possibility of prolonged phases of decline, nor do I see the prospect of an untrammelled bull run.

What will take the markets out of the doldrums? Since the problems of the US economy lie at the heart of all the problems, it will take some clarity on the situation there to do this. Any strong signal that the US cycle has bottomed out will lead to a quick re-pricing of risk and realignment of asset prices.

Car Models in India

Listed below are some of the major automotive brands and their models on Indian roads:

Latest Cars
Chevrolet Spark | Fiat Grande Punto | Mahindra Ingenio | Mahindra Renault Logan | Maruti Suzuki SX4 | Mitsubishi iCar | Skoda Fabia | Toyota Lexus LS 460

Hyundai Motors India
Hyundai Elantra | Hyundai Accent | Hyundai Getz | Hyundai Santro Xing |
Hyundai Sonata Embera | Hyundai Terracan | Hyundai Tucson | Hyundai Verna

Maruti Udyog
Maruti 800 | Maruti Alto | Maruti Baleno | Maruti Esteem |
Maruti Grand Vitara XL-7 | Maruti Gypsy | Maruti Omni | Maruti Swift | Maruti Suzuki SX4 | Maruti Versa | Maruti Wagon R | Maruti Zen | Zen Estilo

Sports Cars
Ferrari 248 F1 Racing Car | Ferrari F1-2000 | Ferrari F2001 Racing Car | McLaren F1 Racing Car | McLaren SLR 722 Sports Car

Bentley Motors Limited
Bentley Arnage | Bentley Azure | Bentley Brooklands | Bentley Continental Flying Spur | Bentley Continental GT

Lamborghini India
Lamborghini Gallardo | Lamborghini Gallardo Spyder | Lamborghini Murcielago LP640

Mercedes
Mercedes Benz C-Class | Mercedes-Benz CLS | Mercedes Benz E-Class | Mercedes Benz SLK-Class | Mercedes-Benz SL-500

Ford Motors
Ford Endeavour | Ford Fiesta | Ford Fusion | Ford Ikon | Ford Mondeo

Fiat India
Fiat 1.6 Sport Adventure | Fiat Grande Punto | Fiat Palio | Fiat Petra

Honda India
Honda Accord | Honda City ZX | Honda CR-V | Honda Civic

Hindustan Motors
Ambassador Car | Mitsubishi iCar | Mitsubishi Lancer | Lancer Cedia | Mitsubishi Pajero

General Motors
Chevrolet Aveo | Chevrolet Aveo U-VA | Chevrolet Forester | Chevrolet Optra | Chevrolet Spark | Chevy SRV | Chevrolet Tavera | Opel Corsa | Opel Corsa Sail

Skoda Auto
Skoda Fabia | SkodaLaura | Skoda Laurin & Klement | SkodaOctavia | SkodaOctavia Combi | SkodaSuperb

Porsche
Porsche Boxster | Porsche Carrera GT | Porsche Cayenne

Tata Motors
Tata Indica | Indica V2 Xeta | Tata Indigo | Tata Indigo Marina | Tata Indigo SX | Tata Safari | Tata Sumo Victa

Toyota Motors
Toyota Camry | Toyota Corolla | Toyota Innova | Land Cruiser Prado | Toyota Lexus LS 460

Reva

Mahindra & Mahindra
Mahindra Bolero | Mahindra Scorpio | Mahindra Ingenio | Mahindra Renault Logan

BMW
BMW 530i | BMW 760Li

Audi
Audi A4 | Audi A6 | Audi A8 | Audi Q7

Nissan Motors
Nissan X-Trail

Rolls-Royce Motor Cars
Rolls-Royce Phantom

BPO Sector Outlook

According to:

Dick Vleesenbeek
- Talent shortages are driving labour markets to become increasingly more global, competitive, and employee-driven
- BPO predicted to be an $80B industry by 2009/10
- RPO (subset of BPO) estimated to grow into a $20B by 2009/10
- Vendor Management Solutions (Managed Service Provider) Market predicted to grow to be $4.2B by 2009/10
- Clients are searching for true global solutions and partners
- Trend toward complex, comprehensive solutions (workforce management models) to blend the expertise of internal/external partners
- The trend toward solutions providing off-shoring and shared service components continues
- Staffing and consulting firms face an environment of evolving legislation, increasing consolidation, and technological advancements impacting the business

Atul Subbiah
Manager - M&A Strategy at Deloitte Consulting
1. The coming of age of the major Indian suppliers
2. The unbundling of contracts where deal size is getting smaller
3. Contracts are getting shorter and work is being spread across multiple providers
4. Large deals are being split, with an increase in number of multi vendor contracts leveraging the near shore and offshore options
5. Large outsourcing contracts signed in the 1990s are coming up for re-bidding

Sunmeet Jolly
A Dropping Dollar may affect the attractiveness and ROI in Outsourcing Industry. The trend needs to be watched carefully over next 2-3 years. Rising wages in Outsourcing Providing Countries also adds to the marging pressures. But Demand for Outsourced Services will definitely increase as projected by Analyst firms. Its likely to become a high volume game and we can see some consolidation on vendor side.

Deverick McIntyre PMP
Industry Leader on China's IT & outsourcing industry
Packaged ITO+BPO+ Infrastructure Management Outsourcing is a significant new trend. We have seen this type of consolidation especially in the Financial Services industry, where, for example, the IT system supporting the outsourced business process is hosted and administered by the same vendor.

It makes sense for many clients to consolidate the BPO and IT contracts with the one vendor to achieve synergies and manage risks. This is not good news for pure BPO players, however for the large Indian outsourcers such as Infosys, TATA and Wipro, as well as international players IBM, Accenture, Cap Gemini etc, it is a perfect fit with their broad solution sets.

Packaged IT/BPO contracts are much larger than pure BPO deals and this trend has led to the increasing use of sourcing consultants such as TPI, Everest Group or smaller players such as TaidaL for thorough due diligence.

The other equally important new trend is contract pricing based on client business revenue/risk. Mainly seen in ITO contracts, the trend to package ITO with BPO will result in more innovative BPO contracts using client business based pricing. It is an interesting trend which has come about as clients force consulting companies pushing solutions to "put their money where their mouth is" and invest in the outcome. "If this solution is good for my business then partner with us in the upside (and downside) risk"

Hossam Elgamal
General Manager of GNSE Group
the Global Business Process Outsourcing sector and just after the launch of the latest ATKearny report, shows a tough competition between different emerging players and existing well established ones like India.
this competition is certainly in the favor of the business, shaping up the processes, increasing the quality and diversifying the options and resources in such global industry.
the result in the coming 1-3 years would certainly be a more rewarding choice to clients with less risk and a more framed quality of delivery, more important an observation that is taking place currently where giant players (indian ones like Satyam, TATA, WIPRO...) are having competency centers outside India to diversify their offering, minimize the risk, better control the cost and benefit more of the other countries benefits... thus becoming truely global... which in turn would lead those countries of choice to learn from the experience, build the expertise and start becoming important players in that market..

but mostly important is the fact that Clients will benefit further and more clearer from the BPO, which will come to a maturity stage.

a) the emerging significant developments/trends would be the diversifications of the countries for large BPO players, and the globalizations in the true meaning of the services.

b) driving this trend are: 1. the clients experience and need for better risk management, further more options and choices, better quality, managed cost. 2. the Giant BPO players need to maintain competitive advantage, and capitalizing on the globalization opportunity 3. the Awarness of the emerging countries in that industry, their government support, and their industry maturity.

c) as i said, the key players are moving more agressively into a globalized diversified offering, not standing still in one country only. example for that WIPRO and SATYAM moved recently to open competency centers with 1000s of resources in Egypt, as the government is agressively supporting the initiative by providing incentives, and building the capacity of the local resources, while cost is very competitive and mastering arabic as well as different european languages help providing a competitive advantage!!

Source: LinkedIn

Future of IT / ITES / KPOs

We seem to have come a full-circle actually. Outsourcing started with low end menial data entry jobs that were discrete and modularized tasks, not interwoven into the company’s real-time environment. Then we graduated upwards to application maintenance, then onward to application development and then design and system architecture work. Call center and BPO brought about a mission-critical real-time and process driven mode of outsourcing with SLA and metrics based performance measures. With the rise of KPO, the emphasis is now on skills-based and decision-making type of work that is neither “mission-critical” nor “real-time” – yet it is more intimately tied to the top-line performance of companies than ever before in the past. With KPO, there are no metrics, no SLAs, no cultural or accent issues, no time-zone barriers and a productized consulting model that is driving a new breed of companies. With a combination of data aggregation, research, analytical, modeling and consulting skills KPO is redefining the boundaries of outsourcing.

According to me, some of the major drivers were:

• BPO found a niche customer due to a huge demand in back office customer support. BPO was and is mainly successful due to costs effectiveness and the availability of cheap labor – it found a huge pool of workforce as the unemployment rate among English speaking graduates was very high. It created a perfect sector which could find an effective solution to all its workforce requirements among the huge pool of university English speaking graduates.

Slowly countries like India found that although BPO was exploiting the general mass of graduates yet another potential pool of qualified engineering, medical, legal, financial professionals was untapped. There was a clear synergy between the mid-level staff across various companies in US & European regions and this pool in India. Gradually it was realized that the mid-level staff which is mainly involved in offering knowledge based services can be replaced with the pool of talented professionals in countries like India at a much lower cost.

• We can say that BPO has slowly reached to a stagnant point as the factor of realization of using BPO services in new avenues is decreasing. OR we can quote unquote what most industry insiders feel - With the opening of the world economy, many surprises have taken place in the business scenario. This is true for countries across the globe both from outside and within the countries.

The western world has started realizing the potential and the importance of smaller countries of Asia in providing quality services at much lesser rates and are treating this fact as a revolution. Similarly, within the Asian countries revolutionary trends are taking place in terms of expansion and spread of service providers to small cities. BPO is giving place to a new name i.e. Knowledge Process Outsourcing (KPO).

Now coming to what could be the next stage of transformation: - According to NASSCOM, KPO is expected to reach $17 billion by 2010, of which $12 billion would be outsourced to India. In the future, it is envisaged that KPO has a high potential as it is not restricted only to IT or ITES sectors, and includes other sectors like Intellectual Property related services, Business Research & Analytics, LPOutsourcing, Web Dev. Application, CAD/CAM, Finance & Accounting Management, Clinical Research, Publishing, Market Research etc.

Taking into account the huge potential of intellectual property within India, I strongly feel that next stage of KPO could be a more evolved involvement ie Consulting. As of now, we are only creating the groundwork and consultants abroad use our findings to offer advisory services to their clients. In the next 2-3 years, India could become a One Stop Shop for research, analytics as well as Consulting and Advisory services. Hence future IT/ITES SMEs in India would evolve themselves as Consulting Companies.

Top 3 concerns when outsourcing to Asia - Uncensored

Excerpts from one of the discussions going on at LinkedIn. Pretty interesting stuff

Here you go

Senior Software Development Engineer, Toshiba America Electronic Components
In my experience culture, distance & communication are big issues when outsourcing.

First of all, we often outsource software dev to realize cost savings. This savings is often eaten up due to logistical and cultural issues which impede the outsourced projects.

1) Communication issues: Especially with China, communication can be difficult because of the lack of qualified English speakers. I interviewed a team that had daily 10 PM phone conferences from the US to China where only 1 guy on the China side could speak English. The Americans would talk for several minutes, then the one English speaker would translate in 15-20 seconds that content to his team members. A lot was 'lost in translation'.
In another example, members of an American software team had great difficulty working with Indian team members over tele-conference because of the accent issue. The company stateside eventually fired several members of their American staff because they would not cooperate fully with the remote Indian team due to language frustration. This damaged morale of the team, and did little to help the ongoing issues.

2) Culture. Sometimes "yes" does not mean "yes". Teams think they are on the same page with their overseas counterparts, when they are not.

3) Distance (physical and metaphorical) - Software development requires a tight interface between the developers and the stakeholders / customers. When separated by distance, time-zones, culture, and language you are adding a significant project risk that the work being done will not mesh with the (often dynamic) requirements for the end product. Not only are problems more likely to occur, but it will take more time to identify them for all of the above-mentioned reasons.

Executive Producer for Video Games
The 3 biggest concerns would be:
- Cultural background: you will experience vast differences in use of color, shapes, facial features, technical detail etc. from country to country. Don't expect Western style unless you guide extremely well.

- Language barrier: definitely an issue in Japan. Not so problematic in India. Mixed in China.

- Reliability. I don't want to say we've been disappointed so far. But we are fully aware that our legal possibilites are very restricted in China and India. This is not really an issue in Japan though.

CEO Bertin Services
1.As you probably know India is the WW Leader in software development, and gatheres probably 80% of CMMI5 companies in the world... but check what is covered by their CMMI certificate to understand the major concern there : It always looks perfect (english culture). Real Life is often not so bright, although they have competencies and want to make it. dig to make a difference between what they say and what they do.
2. I'd rather go in India than in China, because they're under english culture (easier to work with), software oriented, highly educated, and India is the largest democracy in the world. but they're not so cheap...
3. Outsourcing to Asia will require a lot of lawyers' time to make sure you get a fair Deal, and will take very long in India. Let's also be clear about the risks you'll face to have them copy your production and take the business from you, especially in China.

4. Last but not least : I believe that a key of success of operations set up in Asia I was part of is a very strong involvement of Key people of your company, including having a very reliable peron (at least one) staying down there for a year to ensure everything it going to be taken care of.

Software Development Process Reengineering Manager
NINE offshoring advices.
1. Always take care of your local workers.
2. Focus on core competencies.
3. Work with big established companies.
4. Offshore projects that require minimal interfaces.
5. Do not overemphasize process.
6. Focus on communication.
7. Test offshoring team with some pilot project
8. Read some offshoring articles.
9. Conclusion and evaluation using eSCM.

Reference: LinkedIn

Indian M&A Deals Update (Mar-July 07)

North America and Asia were the favourite hunting grounds of India Inc on global acquisition chase as the takeovers deals in these region touched $7 billion and $4.2 billion in the first four months of 2007-08, according to Assocham Eco Pulse Study (AEP). India Inc's global acquisition deals have been worth $15.3 billion. Deals with US-based companies worth $5.1 billion were accomplished during the period April-July 2007 as tracked by the AEP in Study on Mergers & Acquisitions during April-July 2007-08. Tata Group was at the forefront with their total deal values worth $2.13 billion in steel, hospitality and automotives sector. Essar Group acquired Minnesota Steel for $1.65 billion in the US. Reliance Communication expanded to US communications market by acquiring Yipes for $300 million while Infosys plans to acquire Phillips Global for $200 million. Another big acquisition was that of Globeleq by D S Construction for $542 million.

"The equation of business relations with the western countries is undergoing a significant change. Indian business leaders are aiming inorganic expansion through the most industrialised country of the world", said Venugopal Dhoot, President, Assocham, commenting on the success of Indian entrepreneurs in acquiring high value companies based in US. Metal companies in Canada were traced by the Indian bluechips with the war chest of $1.7 billion. Whereas Essar Global acquired Algoma Steel for $1.58 billion, Aditya Birla acquired announced take over of Utkal Alumina International for $0.19 billion. Among the Asian countries, Vietnam was the largest receiver of the deal money as Tata Steel entered into a joint venture with Vietnam Steel with 65% stake for $3.5 billion. Indonesia, Israel and Singapore are the other nations.

12 August 2007, Excerpts sourced from Financial Express