Infrastructure investment to push growth to 8 pc in 3 years: Ahluwalia
Attributing declining growth to global and domestic factors, Planning Commission Deputy Chairman Montek Singh Ahluwalia on March 18 said efforts to revive infrastructure investment would help in reverting to 8 per cent growth in next three years.
“We are working to revive the pace of investment in infrastructure, which we believe can provide the basis for a return of growth back to eight percent over a three year period. Our economic fundamentals are strong and we believe that a return to high growth is possible,” Ahluwalia said while addressing the Strategic Economic Dialogue (SED) forum.
In the October-December quarter, India’s economy grew below expectations at 4.7 per cent on falling out-put in the manufacturing sector.
Growth in the first nine months (April-December) was 4.6 per cent.
The economy must expand by 5.7 per cent in January-March quarter to achieve the estimated GDP expansion of 4.9 per cent in 2013-14.
“GDP growth in India has slowed down to around 5 per cen over the past two years, partly because of the global downturn but also because of the certain domestic constraints, which we have been addressing,” he said.
Ahluwalia congratulated China for achieving 7.7 per cent growth, which was above than the targeted 7.5 per cent.
“Whatever be the outcome of the general election (in India), I am confident that the objective of strengthening bilateral economic relations with China will not be altered,” he said.
FY14 among top 5 years in terms of FII inflows
The financial year, which will end at the close of the current month, is amongst the top five in terms of buying activity by foreign institutional investors (FIIs).
FIIs have been net buyers by Rs 69,228.7 crore this year, the fourth-highest on record and less than Rs 800 crore away from crossing the Rs 70,000 crore mark with little over a week to go.
The highest inflows ever came in the previous financial year, at Rs 1.4 lakh crore. Both FY10 and FY11 saw net buying of Rs 1.1 lakh crore.
Interestingly, the foreign investment may also benefit from the tail-wind of an appreciating currency. The exchange rate for the rupee against the dollar may move towards Rs 59, according to a Barclays Bank Emerging Markets Research
report authored by Siddhartha Sanyal and Rahul Bajoria.
“Investment by foreign institutional investors (FII) into equities remains steady ($11.6 bn FYTD). FII investment in Indian debt has seen large swings outflows of $10.3 bn over April-December have swung to $6 bn of inflows since January. The rupee, which has largely been in a 61-62 range since mid-September, will likely witness a pre-election rally towards 59, in our view,” said the report dated
March 24.
A rising rupee adds to the returns of foreign investors.
India’s forex reserves jump by $1.83 billion
India’s foreign exchange (forex) reserves rose by $1.83 billion to $297.28 billion for the week ended March 14, Reserve Bank of India (RBI) data showed. This is the third consecutive week of increase in the country’s forex reserves as overseas investors poured in money in local bonds and stock markets. According o the RBI’s weekly statistical supplement, foreign currency assets, the biggest component of the forex reserves, jumped by $1.84 billion to $269.81 billion. Foreign currency assets, expressed in US dollar terms, include the effect of appreciation or depreciation of non-US currencies held in reserve such as the pound sterling, euro and yen. The value of special drawing rights (SDRs) fell by $2.6 million to $4.47 billion during the week under review. India’s reserve position with the International Monetary Fund (IMF) declined by $1.1 million to $2.01 billion. The value of gold reserves remained unchanged at $20.97 billion.
Capital goods: Product firms’ performance improves on exports
Capital goods firms making engineering products like ABB India Ltd, Cummins
India Ltd, Voltas Ltd and Siemens Ltd are seeing a gradual improvement in revenue and profitability although state-run Bharat Heavy Electricals Ltd (Bhel) is struggling.
The trump card for the smaller firms is their presence in short-cycle orders with greater emphasis on products and reasonable contribution from exports.
In addition to the Middle East, which was a strong export zone for Indian engineering products, new regions like Africa, South-East Asia and Latin America are panning out well for Indian exports.
An analysis of 38 firms in the power and industrial products sector showed growth in the December quarter revenue against the year-ago period, according to a Motilal Oswal Financial Services Ltd report. This is good news, particularly as the growth comes after a gap of six-eight quarters. Much of this is on account of exports while some credit goes to currency and base effect factors.
Within the capital goods industry, export opportunities have sprung up for switchgears, boilers, turbines, industrial machinery and diesel generator sets where Indian firms are very competitive.
The trend is also mirrored in data at the Centre for Monitoring Indian Economy—while exports from India have increased, imports have fallen, helping narrow the trade deficit. Exports are inching up on the heels of a gradual recovery in the global investment cycle. Global firms like Cummins and Siemens in recent investor conference calls have indicated optimism,
especially about European markets.
However, the domestic capex cycle remains bleak with worsening liquidity and
capacity utilization. Construction, mining, real estate, power, oil and gas and roads remain weak. Hence, big firms like Bhel, which have a high proportion of long-gestation projects, are in a quagmire on account of project delays, policy logjam and poor demand.
The difference in performance is also visible in the financials. While Bhel’s profitability has been sliding for several quarters, that of Voltas, ABB, Cummins
and Siemens is showing stability. On the whole, however, the S&P BSE Capital
Goods index has rallied since September on the hope the sector has hit the abyss and a recovery is in the offing.
That said, it will take several quarters for the whole sector to hit positive all-round growth momentum, which will depend on domestic economic recovery. However, the smaller firms mentioned above may get re-rated in the markets faster than the whole sector.
Biotech could be a $200 bn industry in the next decade: Sam Pitroda
Biotechnology could become a bigger industry than information technology (IT) in India in the coming decade with far-reaching benefits for related sectors, Sam Pitroda, chairman, National Innovation Council said.
But the government will need to increase its investment in the biotechnology industry for it to realize its potential in India, Pitroda said at the foundation day of the Biotechnology Industry Research Assistance Council (BIRAC).
Pitroda cited the example of the booming telecom industry, saying 30 years ago India had only around two million phones and no exports. Today it has 900 million phones, and its exports of soft-ware services are worth $120 billion every year.
Pitroda is credited with helping craft India’s computer and telecom revolution as
a key adviser to former prime minister Rajiv Gandhi in the 1980s. “It is possible
to look at biotech industry as a $200 billion-industry in the next decade. But we have to perhaps invest $30-40 billion in biotech, and not $5 billion,” said Pitroda. The Indian biotech industry reported revenues of $3 billion during 2009-11, according to the Association of Biotechnology Led Enterprises (ABLE).
The reason for this potential for growth is biotechnology’s far-reaching impact on other industries such as agriculture food, pharmaceuticals, environment, sanitation and oceanography. BIRAC is a government-owned not-for-profit company that acts as an interface agency for the department of biotechnology. It facilitates and mentors start-ups that develop biotechnology products.
DISCLAIMER
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.
