In a development that should please India Inc, official data on factory output for April showed a 4.1 percent growth, against 2.1 percent for the month before but retail inflation also inched up to 5.01 percent in May due to higher food prices. The retail, or the consumer price indexed (CPI) inflation, in the corresponding month of 2014 was at 8.33 percent, the Central Statistics Office (CSO) data showed. The CPI-urban for May stood at 4.41 percent and rural at 5.52 percent. May’s food inflation stood at 4.8 percent from the previous month’s rate of 5.11 percent. In this connection, the Reserve Bank of India, last week, reduced its repo rate, that is the rate at which it lends to commercial banks, from 7.5 percent to 7.25 percent. Giving reasons for the monetary policy stance, RBI Governor Raghuram Rajan said plans for lower food output needed to be in place, global financial markets were volatile, factory output was recovering unevenly, services sector was emitting mixed signals, fuel inflation was up, exports were down and liquidity had improved. Even as retail inflation came in line with the equities markets and the industry’s expectations, it was the factory output that surprised many. An uptick in manufacturing pushed up India’s factory output to 4.1 percent in April, against 2.1 percent in the month before. Further, among the six sectoral indices, capital goods expanded by 11.1 percent.  The factory output had grown at a slower pace of 2.1 percent in March from 5 percent in February. The factory output had stood at 3.7 percent in April, 2014. According to the CSO data on the Index of Industrial Production (IIP), the healthy growth in the factory output for April was attributed to an uptick in the manufacturing sector. The manufacturing sector, which has the maximum weightage in the IIP, grew by 5.1 percent in the month under review from 2.2 percent in March. For the other two major sub-indices of the IIP, the CSO data showed that the index for the mining sector inched up by 0.6 percent against 0.9 percent in March, while that for electricity segment was down 0.5 percent in April, against a growth of 2 percent in the month before. The three sub-indices of the IIP namely manufacturing, mining and electricity, had registered a growth of 3 percent, 1.7 percent and 11.9 percent in April, 2014 respectively. Friday’s data also showed that among the six use-based classifications of the index, the output of capital goods expanded by 11.1 percent. The capital goods segment is a key indicator of economic activity. Consumer non-durables, intermediate goods, consumer goods and basic goods also posted a healthy performance. These sectors grew by 4.4 percent, 3.3 percent, 3.1 percent and 2.8 percent respectively. The consumer durables segment expanded by just 1.3 percent in April. Even though both the macro economic data were released after the close of equities markets, still it had an affect on investor sentiment which turned anxious leading to subdued trading. The 30-scrip Sensitive Index (Sensex) of the S&P Bombay Stock Exchange (BSE), closed a volatile session up only 54 points or 0.21 percent on June 12. The anxiety over inflation and factory output data, had dented investor sentiments even on Thursday and led the Sensex to plunge nearly 470 points. Terming the April 2015 figures encouraging, industry body Assocham said it is pleased to finally see the green shoots of economic activity getting converted into growth figures for industry. “IIP numbers seem to be healthy and encouraging and seem to provide stem to the underlying growth momentum as the industrial activity is showing signs of revival as indicated by the 4.1 percent growth seen in April 2015 over the corresponding month of 2014,” said Rana Kapoor, president of The Associated Chambers of Commerce and Industry of India. “The manufacturing sector seems to have recorded a better growth rate of 5.1 percent as compared to the 3.0 percent seen in April 2014, he added. Jyotsna Suri, president of industry chamber Federation of Indian Chambers of Commerce and Industry (Ficci) said: “The manufacturing growth seems to be gaining momentum now as is evident from the healthy growth of key sectors like capital goods and also from the fact that growth is more diversified.” “Government has taken several steps in the last few months to improve the business environment and enhance the investor confidence which is now going to yield results,” she added.

WPI deflation persists for 7th consecutive month in May
The wholesale price index-based deflation continued for the seventh month in a row, at 2.36 per cent in May, though the rate of decline in prices moderated from 2.65 per cent in April, official data showed on June 15. However, pulses continued to see surging inflation as the rate of price rise rose to 22.84 per cent against 15.38 per cent over this period. It should be noted that earlier data had shown that retail price inflation increased to 5.01 per cent in May from 4.87 per cent in April. There also, inflation in pulses rose to 16.62 per cent from 12.52 per cent. Pulses have been a matter of worry and the Cabinet had recently allowed imports to tame their prices. Otherwise, the wholesale price index-based food inflation has been on the downward swing. It fell to 3.80 per cent in May from 5.73 per cent in April. This was the fourth month to witness a decline in food inflation. Inflation in onions also remained elevated, though it moderated from 29.97 per cent in April to 20.41 per cent in May. This was the fourth month to witness over 20 per cent inflation in onions, with the rate of price rise at its highest at 36.49 per cent in March in these months. Elsewhere, there was either subdued inflation or deflation among food items. Non-food articles also continued to see deflation at 2.24 per cent in May, with all the broad categories--fibres, oil seeds, minerals--witnessing the rate of decline in prices. The same was the case of fuel and power. Here also deflation stood at 10.51 per cent in May, slightly lower than 13.81 per cent in April. All the major categories--petrol, diesel, cooking gas-- witnessed decline in prices. Manufactured products also saw deflation for the third month in a row, at 0.64 per cent in May, from 0.52 per cent in April. This reflects low domestic demand as well as low prices of import items. In case of processed food items, deflation persisted for the second consecutive month at 0.64 per cent in May against 1.05 per cent in April. Sugar, which is facing glut, saw deflation rising to 9.06 per cent from 8.86 per cent in this period. Last week, the Cabinet had cleared Rs 6,000 crore soft loan to the industry to clear part of their 21,000 crore dues to farmers. However, the industry was not pleased as the problem of over-supply and depressed prices was not taken care of.

Amazon opens India’s largest warehouse near Hyderabad
Global e-commerce major Amazon on June 10 opened its biggest ‘fulfilment centre’ (FC) or warehouse in India, at Kothur in Telangana. Spread over 280,000 square feet, the facility has come up in Mahabubnagar district, about 60 km from Hyderabad. This has taken to 11 Amazon’s FCs in eight states, covering one million square feet of space with a storage capacity of over 2.5 million cubic metres, the company said. The new facility, which has come up with the largest investment by Amazon in any state, will help small and medium businesses (SMBs) in Telangana and the nearby region to gain access to and service customers across the country at low operating costs. Amazon India’s director for operations Akhil Saxena said the FC will also enable faster and quicker delivery of products to amazon.in customers in the region. Amazon has already signed a memorandum of understanding (MoU) with Telangana to train thousands of sellers across the state in e-commerce and take advantage of the digital economy. Amazon India will offer trainings to SMEs through seminars, workshops, video aids and ready reckoners on how to list and manage inventory for an ecommerce business. Telangana’s Information Technology Minister K. Tarakarama Rao, who inaugurated the FC, said Amazon will build a 2.5 million square feet campus in Hyderabad, which will be its biggest campus outside the United States. Saxena said work on the project would begin soon. The state government has allotted 10 acres of land for the campus in the IT corridor of Gachibowli. He declined to share the quantum of investment. An official in the state’s IT department said Amazon will be investing about Rs.1,800 crore in the facility. The minister, who visited the US last month, said he requested Amazon to set up a data centre in Hyderabad and bring Amazon Web Services (AWS), a collection of remote computing services, to Telangana. He expects a delegation from the US to visit Hyderabad soon to study the proposal.

Ford working on plans to ship India-made EcoSport to US
Ford India’s popular compact sport utility vehicle EcoSport may be shipped to the US for sale starting October 2017, multiple people familiar with the process said. Ford has already begun work on developing a face-lifted version of the SUV for the North American markets. It has also kicked off a preliminary tendering process to source components. The request for quotation put out by Ford is for as many as 90,000 units a year, which is more than the number of vehicles it sells in India. No US car maker has ever exported cars made in India back to its home market. If Ford gets the green signal, it will mark a historic first not only for the American car maker but also for India, which has built a robust manufacturing base for car exports thanks to investments by Hyundai, Maruti, Ford and other auto giants over the years. Made-in-India cars have been exported to many markets, including those in Europe. India is already a key export base for Ford Motor — it ships India-made compact vehicles to Europe. Mahindra & Mahindra had plans to take a pickup version of the Scorpio to the US, but that hasn’t happened. Motorcycles made by Royal Enfield and KTM, and Mahindra’s tractors are sold in the US. A Ford India spokesperson said the company “would not like to comment on speculation around future product and manufacturing plans”. In a recent interview with ET, Ford Motor Chief Executive Mark Fields said he wouldn’t rule out the possibility of exporting from India to the US. “In business, you never rule out from the beginning certain opportunities. But it all comes down to making sure first and foremost that wherever the product is manufactured, you want to make sure that it is high quality and meets the expectations of consumers,” he had said. But the biggest threat to India’s chances come from Ford Thailand, which too is competing for the order to supply the SUV for the US and Canadian markets. “The plan for exports to the US from Asia was there right from the start. As the company was globally restructuring operations, the clarity on whether India or Thailand was being studied,” said one of the people. “It seemed that the project will go to Thailand in 2014, but now the company has begun discussions with Indian vendors to source additional US volumes from India.” Ford entered India two decades ago and has so far invested more than $2 billion (Rs 12,800 crore at current exchange rate), but is still struggling to turn profitable — it is currently sitting on accumulated losses of more than Rs 1,000 crore. As local demand didn’t match expectations, it decided to export vehicles from India, starting with the Figo hatchback in 2010. Its plan was to ship 30-40% of total production, but in the past two years it exported more than half the local output. In the fiscal year ended March 31, 2015, Ford India exported 78,814 of the 1.53 lakh vehicles produced in India. The EcoSport accounted for almost 70% of the shipments. Higher utilisation of the manufacturing facility to cater to exports helped Ford India reduce its production cost per car and the company is operationally profitable now, people in the know said. Thanks to demand from some of the overseas markets, the unit operated the Chennai factory 24X7 for the first time in the second half of last year. Once the US volume kicks in, the plant is likely to transform into an EcoSport production base, with a small assembly base for the new Endeavour SUV and Fiesta sedan, the people said. Rakesh Batra, partner and national leader for the auto sector at consultancy firm EY, said if the plan  fructifies, it will be an important milestone for India’s automotive industry. “Certainly, in Ford’s global network, India may have attained the confidence of delivering cost, quality and desired volumes, as the logistic cost of shipping vehicles out of India is quite high. A sizeable volume also helps in improving capacity utilisation and thereby cost per unit, plus rupee depreciation also helps in improving competitiveness of vehicles manufactured in India,” he said. If Ford ships its vehicles to the US from India, it will give confidence to other manufacturers too to explore such opportunities, he said. Japanese two-wheeler maker Yamaha already exports India-made R15 150cc sports bike to its home market, selling it in the entry-level segment.

China’s Dalian Wanda to set up industrial townships in India
The $100-billion Dalian Wanda Group of China is planning to develop industrial townships in India with built-in facilities such as schools, hospitals, shopping malls and recreational centres, a top official of the company has said. Wang Jianlin, chairman of the group, expressed his company’s interest while interacting with the Indian business community convened by the Confederation of Indian Industry (CII) here, according to a statement from the chamber. Wang said that he was impressed with the foreign investment norms of the government and said this was his follow-up visit to India after meeting with Prime Minister Narendra Modi during his China visit in May. He said that he would closely work with the local state governments to attract Chinese investments in the industrial townships set up by the Dalian Wanda Group. Amitabh Kant, secretary, Department of Industrial Policy and Promotion, told the session that areas such as media and entertainment, tourism and culture should also be promoted bilaterally to create people to people awareness. In his opening remarks, Chandrajit Banerjee, director general, CII, said that the centre piece of recent India - China engagement has been their cooperation in the economic sphere and the widening footprint of Chinese businesses in India and vice versa. The $100-billion dollar Chinese company founded in 1988 operates in the areas of commercial property, luxury hotels, culture and tourism and department stores.  As many as 40 senior industry members  from infrastructure, construction, tourism, hospitality, media and entertainment participated in the interactive session.

Wipro wins best outsourcing though leadership award
Indian IT bellwether Wipro Ltd won the best outsourcing thought leadership award for this year from a US-based leading institute, the global software major said on June 9. “The Outsourcing Institute, the largest neutral professional association dedicated to outsourcing, selected us for our though leadership article showcasing a real world use case encompassing innovation, creativity and results,” the city-based company said in a statement here. The institute’s eight-member sourcing executives from Fortune 1,000 enterprises were the judging panel. “The business process leadership awards the Wall Street technology innovation showcases the most innovative work from providers’ across the outsourcing industry,” the statement noted. The company’s seminal piece was recognised for its innovative work titled “Semantics and Ontology – The Future of Data Aggregation”. “Financial institutions are giving more attention to improving quality of data and turning it into a strategic advantage, owing to competitive, regulatory and business pressures,” Wipro’s global head for securities & capital markets Roop Singh said on the occasion.

Passenger car sales up 8 percent in May: SIAM
The domestic passenger car sales grew by 7.73 percent in May and stood at 160,067 units from 148,577 units sold during the corresponding month of 2014, industry data showed on June 10. According to the data furnished by the Society of Indian Automobile Manufacturers (SIAM), the total passenger vehicle sales,  which include cars, utility vehicles and vans, went up by 4.67 percent to 217,671 units from 207,953 units sold in May 2014. SIAM data showed that sales of utility vehicles fell by 2.27 percent at 43,260 units. The off-take of vans declined by 5.06 percent and stood at 14,344 units. The industry data for the last month reported a 3.95 percent growth in the overall commercial vehicles segment sales, which is a key indicator of economic activity. The commercial vehicles segment offtake for May stood at 48,841 units from 46,986 units sold during the corresponding month of 2014. However, the sales of three-wheelers declined by 9.71 percent in the month under review at 36,500 units from 40,425 units sold in May of 2014. Sales of two-wheelers went marginally down last month by 1.25 percent to 1,380,950 units from 1,398,376 units sold in the like month of 2014. Scooter sales in May were up 2.61 percent at 364,073 units, while motorcycle sales declined by 3.04 percent at 953,322 units. Exports for the month under review went up by 3.99 percent at 310,518 units from 298,618 units shipped-out during May 2014. Total automobile sales in May slipped by 0.58 percent at 1,683,962 units from 1,693,740 units sold in the corresponding month of 2014.

RINL targets 4.1 mt steel production in 2015-16
State-owned Rashtriya Ispat Nigam Ltd (RINL) on June 13 said it has targeted production output of 4.1 million tonne (mt) of saleable steel in the ongoing fiscal and would further ramp up the production to 6.5 mt for 2016-17. “The centre has targeted producing 300 mt of steel each year by 2025. To achieve this, we are gradually ramping up our production capacity and undertaking modernization measures”, the company’s chairman and managing director P. Madhusudan told media persons here. He was attending an interactive session with members of the MCC Chamber of Commerce and Industry here. “By the end of the fiscal year 2017, we’ll reach a liquid steel production capacity of 7.3 mt and will raise our capacity further,” he said. The company, popularly known as Vizag Steel, will be modernising one of its blast furnace soon and adding up another two. Madhusudan said the temporary halt in production in one of its furnaces on account of modernisation will not affect production. “Technology will be a key differentiator in the years to come,” he said. He also said RINL is not in need of any additional capital at present in its efforts to either increase production or modernise its facilities. The firm’s present debt is Rs.2,500 crore while its capex stands at Rs.12,000 crore.

India leads emerging economies in growth chart: World Bank
India, with a 7.5 per cent projected growth, may officially surpass China as it is for the first time leading major emerging economies in growth chart, according to latest World Bank figures. “With an expected growth of 7.5 per cent this year, India is, for the first time, leading the World Bank’s growth chart of major economies,” said Kaushik Basu, World Bank Chief Economist and Senior Vice President after the release of the latest Global Economic Prospects (GEP) report on June 10. China is projected to grow at 7.1 per cent. Developing countries are now projected to grow by 4.4 per cent this year, with a likely rise to 5.2 per cent in 2016, and 5.4 per cent in 2017, the report said. In China, the carefully managed slowdown continues, with growth likely to moderate to a still robust 7.1 per cent this year. In India, which is an oil importer, reforms have buoyed confidence and falling oil prices have reduced vulnerabilities, paving the way for the economy to grow by a robust 7.5 per cent rate in 2015, the report said. Basu said slowly but surely the ground beneath the global economy is shifting. “China has avoided the potholes skillfully for now and is easing to a growth rate of 7.1 per cent; Brazil, with its corruption scandal making news, has been less lucky, dipping into negative growth,” he said. The main shadow ove this moving landscape is of the eventual US liftoff, he noted. Growth in South Asia is expected to continue firming to 7.1 per cent this year, led by a cyclical recovery in India and supported by a gradual strengthening of demand in high-income countries. The decline in global oil prices has been a major benefit for the region, driving improvements in fiscal and current accounts, enabling subsidy reforms in some countries, and the easing of monetary policy, the report said. In India, new reforms are improving business and investor confidence and attracting new capital inflows, and should help raise growth to 7.5 per cent this year. According to the report, developing nations face a series of tough challenges in 2015, including the looming prospect of higher borrowing costs as they adapt to a new era of low prices for oil and other key commodities, resulting in a fourth consecutive year of disappointing economic growth this year. “Developing countries were an engine of global growth following the financial crisis, but now they face a more difficult economic environment,” said World Bank Group President Jim Yong Kim.

India among top 5 emerging economies with higher investment commitments: World Bank
Despite a drop in investment commitments of USD 6.2 billion last year, India has figured in top five emerging economies for highest investment commitments in private sector, infrastructure sector, energy, transport and water, according to a World Bank report. “Our update reveals that the top five countries with the highest investment commitments in 2014 are Brazil, Turkey, Peru, Colombia and India,” said Clive Harris, Practice Manager, Public-Private Partnerships, World Bank Group. “These five countries together attracted USD 78 billion, representing 73 per cent of the investment commitments in the developing world in 2014,” Harris said. According to the World Bank, total infrastructure investments in 139 emerging economies – for projects with private participation in the energy, transport and water sectors – rose to USD 107.5 billion in 2014. This was largely by increasing activity in Brazil, according to an update released to the World Bank Group’s “Private Participation in Infrastructure” database, which also said investment commitments declines in China and India. Investment commitments in China in 2014 were USD 2.5 billion, its lowest level since 2010. Investment commitments in India also waned in 2014, dropping to USD 6.2 billion. Sub-Saharan Africa saw an especially steep fall from USD 9.3 billion in 2013 to USD 2.6 billion in 2014 because of a drop in activity in the energy sector. However, 2014’s figure was closer to levels seen before 2012, and the emergence of activities in countries such as Ghana, Kenya, and Senegal is particularly encouraging, the bank said. The increase in the global investment commitments total is mainly due to increasing activity in the Latin America and the Caribbean (LAC) region, which captured USD 69.1 billion – much of which is attributable to investment commitments in Brazil, Colombia and Peru, which together accounted for 55 percent of the global total. Brazil’s large stake is a continuation of a recent trend: Brazil captured 24 per cent of global investment in 2013 and 42 percent in 2012. In 2014, Peru saw the completion of 11 deals totaling USD8.1 billion. Eight of the 11 deals were in energy, while the largest project – the Lima Metro Line 2, at USD 5.3 billion – was in the transport sector. The metro line will stretch 35 kilometres and eventually connect Lima with Callao, including the international airport. According to the Bank, the energy sector had the largest number of new projects, but the sector with the greatest total of investment commitments was the transport sector, receiving USD 55.3 billion, or 51 per cent of total global investment commitments. Consistent with the trend in previous years, roads attracted the most investment commitments with USD 28.5 billion in 33 projects, about the same number as in 2013. Four out of the top five road projects were in Brazil, with the fifth-largest project in Turkey.

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This newsletter is compilation of news articles from various business-e-newspapers and in no way is an endorsement or reflection of Embassy of India, Berne views.