November IBCL HomePage Economic Indicator by mikeholy


									                                                               India Economic News
No. 11/09                                                                                                           November, 2009
                    Contents                                       INDIA TO GROW AT 6.5% IN FINANCIAL YEAR 2009-10
India To Grow At 6.5% In Financial                              A key economic think-tank has made the most optimistic official projection yet
Year 2009-10 .....................................1
                                                                for growth in the fiscal year to March 2010, flagged rising food prices as a
Planning Commission Sees Growth
Rebounding To 8% Next Fiscal .......2                           major concern and suggested that tighter monetary and fiscal policies are
Positive Outlook On Investment In                               unlikely in the coming months.
India, Says Survey ...........................2
FDI In India Crosses US$ 100 Billion                            The Prime Minister‟s Economic Advisory Council, headed by former Reserve
Mark ...................................................3       Bank of India Governor Dr. C. Rangarajan, said it sees gross domestic
Audio, Web-Conferencing To Be                                   product (GDP) expanding by 6.5% in 2009-10 as Asia‟s third-largest economy
Opened To 100% FDI........................3
Govt Awards Seven Port Projects
                                                                keeps a watchful eye on inflation and the fiscal deficit while it emerges from a
Worth $ 387 Mln ................................4               slowdown.
Government To Double VGF
Funding For Highway Projects .......4                           “(It is) unlikely that growth will be lower than 6.25 %, but may reach 6.75%,”
IIP Growth Raises Hopes Of                                      the panel said in its Economic Outlook for 2009-10 report to Prime Minister Dr.
Recovery ...........................................5           Manmohan Singh.
MSMES Report Rise In Turnover,
Says CII Survey ................................6
IT Spending In India Will Touch $                               The RBI had forecast in July that India‟s economy this fiscal year would grow
22.6 Bn This Year .............................6                by 6%, with an upward bias, and the Planning Commission said in early
Investment In Food Industry To                                  September that it sees GDP growth at 6.3%. The economy expanded by 6.7%
Shoot Up By 42.5% ..........................6                   in 2008-09 after three years of growing at over 9%.
Indian Pharma Market Set To Grow
12-15% ...............................................7
'Indian Formulation Market To                                   The scaling up of growth forecasts is taking place amid strong recovery by the
Cross $13.7 Billion By 2013' ............7                      industrial sector - which grew at its fastest pace in 22 months in August - and
Suven Life Sciences Granted                                     expectations of a decline in agricultural output.
Patents In 9 Markets .......................8
Indus' Aids Molecule Gets Approval                              “In light of the recent resurgence in the non-farm sector the 6.5% growth rate
For Clinical Trials .............................8              is quite feasible. The manufacturing sector is bouncing back as is evident from
Organised Retail Sales Grow 20% ..9
                                                                the IIP figures and due to its strong correlation with the services sector, we
FMCG Sector May See 13% Growth9
Auto Sales Jump By 14.51% In                                    can expect the services sector to turn around as well,” YES Bank chief
April-Sept ........................................10           economist Mr. Shubhada Rao said.
VW Begins Component Sourcing
From India .......................................10            The improving trend is unlikely to prompt any immediate withdrawal of
Airbus Set To Transfer Majority Of                              stimulus measures or a tightening of monetary policy even though the panel
Engineering, Design Work To India                               made clear its concern about inflation and fiscal deterioration.
Labour Agreement With Denmark 11
Release Of Scientific Research                                  Mr. D.K. Joshi, principal economist at ratings agency Crisil, was also of the
Papers Up 80% Over The Decade:                                  view that a tighter monetary policy is not imminent. “Monetary policy can
Study ...............................................12         support growth for sometime... Thus, interest rates will not shoot up
                                                                immediately,” he said.

                                                                However, the advisory panel said that India may have to start rolling back the
                                                                fiscal stimulus and tighten monetary policy before other nations.
                                                                (Continued on next page)
2                                                                                                      India News

“The timing and the pace of this       interest rate action only by April         may be premature to think of
will depend on the pace of             2010 while liquidity tightening            exiting from the stimulus. “Unless
expansion of various sectors and       measures may precede these                 the world economy firmly recovers
the magnitude of inflationary          some time in Q4FY10.”                      - signals are strong - perhaps it
pressures. Given the present                                                      would be premature to think of exit
inflationary pressures, we may         The risk to the country‟s growth in        policy. Therefore, I would like to
have to act earlier than the US and    the current financial year could           watch the situation for some more
European economies,” it said in        come from the farm sector, where           time,” he said.
the report.                            output may shrink by 2% because
                                       of a poor monsoon. While lower             The panel expects capital inflows
YES Bank‟s Ms Rao observed that        agriculture output may not directly        at $57.3 billion this fiscal as
while inflationary pressures are       impact      overall      GDP    much,      against $9.1 billion in 2008-09.
building up, they have essentially     indirectly its effect on rural             Current account deficit has been
emanated from food articles. “As       consumption,        allied   activities,   projected to fall to 2% of GDP from
such,     efficiency  in    supply     services and the industrial sector         2.6%, aided by revival in goods
management needs to step up,           is significant.                            and     services      exports   and
which should be able to tackle                                                    remittances.        (The Economic
inflation. As far as monetary          Finance Minister Mr. Pranab                Times: October 22, 2009)
tightening is concerned, we expect     Mukherjee, too, declared that it


The Planning Commission expects        The Planning Commission paints a           “If the monsoon had been normal,
the economy to stage a full            rather bright picture for the next         we would have got 7%-plus GDP
recovery by next fiscal and register   couple of years, “In 2010-11, we           growth this year. The monsoon
a growth of 8%. It also expects last   expect GDP could register a                has essentially taken half a
year‟s final GDP number to be          growth of close to 8%, while in            percentage point off growth,”
higher than the revised estimate of    2011-12 it could grow at 8-8.5%,”          explained Mr. Chaudhuri, who is
6.7%.                                  Mr. Chaudhuri said.                        also a member of the EAC. “We
                                                                                  expect that if overall global
“GDP growth in the last fiscal will    The forward-looking estimates are          conditions are unfavorable, the
be revised upwards to 6.9%,”           far more optimistic than the panel‟s       Indian economy could grow at 7%.
Planning Commission member Mr.         projections for the current fiscal.        If, on the other hand, global
Saumitra Chaudhuri said. The           The Planning Commission expects            conditions are favorable, growth
upward revision is likely because      GDP to grow at 6.3% in 2009-10, a          could be close to 9%.” The Plan
of      a     better-than-estimated    shade lower than the 6.5%                  panel hopes that private corporate
performance by the manufacturing       projected by the Prime Minister‟s          investment will pick up in 2010-11.
sector, he explained.                  Economic Advisory Council (EAC).           (The Financial Express: October
                                                                                  23, 2009)


The prospect of a global economy       Chennai, Ahmedabad, Bangalore,             Adviser confidence has recorded
recovery has driven confidence         Pune and Hyderabad.                        the highest growth, up by 15.7
across the board, supported by a                                                  points, followed by corporate (9
sustained confidence in the            Under the Investment Confidence            points) and retail (6.8 points), said
domestic economy, according to a       Index in India, which captures the         the survey report. Among advisors,
survey conducted in September by       confidence of retail, corporate            banks continue to be the most
JP Morgan Asset Management, in         investors and financial advisors on        confident (157.2 points), breaching
association with ValueNotes, a         the    Indian     economic      and        the     150    point     confidence
market research company.               investment     environment,      the       benchmark.
                                       survey‟s findings said appetite for
The survey covered eight cities -      investment is back and advisors            (continued on next page)
Mumbai,   Delhi/NCR,    Kolkata,       across the country are most
India News                                                                                                        3

The indices can move from 0 to          to 48 per cent in July 2009. Retail     consensus among investors and
200, with 0 depicting the most          investor confidence continued to        advisors.
negative outlook, while 200 depicts     be the highest in Chennai, at 164
full and absolute confidence,           points, an increase of four,            The report further added that 35
whereas 100 shows a neutral             whereas Hyderabad remained at           per cent of retail investors and 48
position. The survey is published       the lowest with 130 points.             per cent of companies consider
on a quarterly basis.                                                           inflation  the     most     negative
                                        Around half of corporate treasuries     economic indicator in India, while
According to the survey, 56 per         view GDP growth meeting or              37 per cent of advisors view the
cent of retail investors expect their   exceeding expectations as the           high government borrowings/fiscal
income will increase and they will      biggest      positive     economic      deficit with concern. (Business
make additional investments over        indicator, while there was no clear     Standard: October 21, 2009)
the next six months as compared

                               FDI IN INDIA CROSSES US$ 100 BILLION MARK

India received more than US$ 100        months of the current financial         investment as the economy is
billion foreign direct investment       year amounting to US$ 10.49             growing at 6 per cent. The
(FDI) through equity since 2000 up      billion, according to DIPP. The         investors also want to diversify
to July this year, according to the     major investors accounting for this     their portfolio from China by
data released by the Department         inflow include Singapore, the US,       investing here."
of Industrial Policy and Promotion      the UK and the Netherlands.
(DIPP).                                                                         India's services sector attracted
                                        Mr. Rajiv Kumar, CEO and                the most inflows, accounting for 23
The cumulative FDI inflows since        Director of economic think-tank         per cent of the cumulative equity
2000 and up to July 2009                ICRIER said, "This is a reflection      FDI inflows followed by computer
amounted to US$ 100.33 billion,         that India is being taken as a safe     software,       telecommunication,
with the inflows in the first four      and dynamic destination for             hardware and real estate.

                      AUDIO, WEB-CONFERENCING TO BE OPENED TO 100% FDI

The government has decided to           that deals with      the   country‟s    allow full foreign ownership with
allow full foreign ownership of         internal security.                      prior permission from FIPB and
firms providing tele-conferencing                                               MHA.
and web-conferencing services, a        This clears the ambiguity in the
sub-sector    in    the   country‟s     FDI policy which was so far silent      FIPB combs through foreign
booming telecom industry where          on the foreign ownership limit in       investment proposals in the
foreigners are allowed to hold only     the business of providing audio         telecommunication sector above
up to 74%.                              and web-conferencing services.          49% considering the strategic
                                                                                importance this sector has in the
However, to invest in this segment,     The government had to take a            country‟s security. For investing up
foreigners will have to get             view on whether it falls under          to 49% in Indian telecom
permission from the Foreign             „value added services‟ in the           companies, foreigners need not
Investment     Promotion      Board     telecom industry, for which 74%         got to FIPB. They only need to
(FIPB) - an inter-ministerial body      FDI limit is allowed or in the „other   inform the Reserve Bank of India
that      clears       cross-border     services‟ category, where full          after bringing in funds. (The
investment into India - and the         foreign ownership is allowed            Economic Times: October 19,
Ministry of Home Affairs (MHA)          without any prior approval from         2009)
                                        FIPB. The government decided to
4                                                                                                   India News


In a major thrust to expand             Gammon Infrastructure and Essar       Besides these, container terminals
capacity at important ports in the      Shipping Logistics, respectively.     are proposed to be set up in Tamil
country, the Ministry of Shipping                                             Nadu,         Karnataka        and
has awarded seven projects worth        Others include setting up of          Maharashtra. One new container
over $ 387 million to be developed      mechanized iron ore handling          terminal will be constructed at the
through      the      public-private    facilities at berth 14 at New         Jawaharlal Nehru Port (JNPT),
partnership (PPP) route.                Mangalore port by Sical Logistics,    while another standalone container
                                        development of berth 7 for            handling     facility  would     be
Another 19 projects, estimated to       handling bulk cargo at Mormugao       developed at the NSCIT Terminal
cost around $ 3.8 billion, are          port by a consortium of the Adani     of the same port.
expected to be awarded on similar       Group and Mundra SEZ and
PPP basis by early 2010.                mechanization of berth 2 and 8 at     A senior official at the ministry
                                        Haldia Dock Complex by ABG            said:         “Growing        resource
These 26 projects together will         Infralogistics Ltd. These projects    requirements and concern for
expand capacity at the major ports      on completion will enhance            managerial efficiency has led us to
in the country by 42 per cent, or       capacity at the ports by nearly 42    encourage           private      sector
245.97 million tonnes per annum.        million tonnes per annum.             participation        in     developing
The ministry intends to double                                                infrastructure at ports. We have
capacity at major and non-major         The 19 projects which are under       framed        guidelines    for   PPP
ports in the country to 1,590 mt by     bidding include development of        projects,        formulated      model
2012 from the present 795 mt.           multipurpose cargo berths 14-16 at    documents (RFQs and RFPs) and
                                        Kandla port, development of EQ-       model concession agreements,
                                        10 berth for handling liquid cargo    and made provision for upfront
Of the seven projects awarded,
                                        and WQ-6 for handling dry bulk        tariff fixation by the Tariff Authority
those for the construction of deep
draft iron ore berth and deep draft     cargo at Vizag. Another five          for Major Ports to facilitate the
coal berth at Paradip port have         projects   are   scheduled      for   same.”                       (Business
                                        awarding to develop facilities at     Standard: October 09, 2009)
been entrusted to a consortium of
the Noble Group, MMTC and               Vizag.


The government has decided to           Through      VGF     funding,  the    the proposal to increase VGF for
double the grant to private             government makes funds available      six-lane highways. It would shortly
developers      for   the     Golden    to the private project developer      be made part of the bid
Quadrilateral (GQ) project, in order    and partially meets the costs of      document,” a government official
to attract developers for the six-      developing a project. However, the    said. To achieve the target of
lane GQ highways project through        returns on the commercially           developing 7,000 km of roads
public-private partnership. The         developed project, under the PPP      every year, the government has
government will contribute 20 per       model, accrue to the developer for    relaxed bidding norms that also
cent as viability gap funding           the stipulated time period.           include an exit clause for highway
(VGF), doubling the funding                                                   projects.
amount from the previous figure of      National Highways Authority of
10 for the low-traffic stretches of     India (NHAI) has elaborate plans      VGF funding is another step made
the fifth phase of the National         to develop six-lane roads for the     by the government of India to
Highway Development Programme           6,500 km of GQ and other high         attract investors for developing
(NHDP). For other projects, VGF         density corridors by 2012 under       roads that will, in the coming three
funding has been raised from 5 per      NHDP-V and five projects have         to four years, require investment of
cent to 10 per cent, as stated by       already been awarded to private       an estimated US$ 80 billion, more
an official from the ministry of road   developers for developing 900 km.     than half of which is expected from
transport and highways.                 “The cabinet has already approved     private investors.
India News                                                                                                       5

                                 IIP GROWTH RAISES HOPES OF RECOVERY

Industrial output grew the most in      The August IIP numbers appear to       keep interest rates low. At its last
the past 22 months to achieve a         confirm signals of an upturn           meeting on July 28, the Reserve
growth of 10.4% in August,              emerging from other indices, such      Bank held its reverse repurchase
indicating a steady turnaround in       as the HSBC India Manufacturing        rate at 3.25% and maintained the
the economy but also raising            Purchasing     Managers      Index,    repurchase rate at 4.75%. The
worries that the government and         based on data compiled from            cash reserve ratio, was kept
the central bank would roll back        monthly replies to questionnaires      unchanged at 5.0%.
fiscal and monetary stimulus            sent to purchasing executives. An
measures.                               index above 50 implies expansion       “It is important to nurture this
                                        and the index has indicated this for   economic recovery by continuing
Output at factories, utilities and      the last few months, though the        with the current fiscal and
mines, which account for about          rate of improvement in August and      monetary space which has been
17%       of    GDP,      exceeded      September has slowed over that of      given to industry to recover,
economists‟ expectations of a           July.                                  especially during a year of poor
9.7%      increase     and    were                                             monsoons that could impact
significantly higher than 1.7% in       “The purchasing manager‟s index        agricultural growth. CII hopes that
the same month last year, causing       indicates new orders and rise in       the RBI would give the welcome
some analysts to attribute this         production.       An      inventory    signal of an accommodative
year‟s performance to the low           adjustment effect will also boost      monetary policy when the half
base effect.                            production, with many firms having     yearly review is done,” said Mr
                                        run down stocks earlier this year in   Chandrajit     Banerjee,   Director
 “The good IIP numbers are a            anticipation   of    a   prolonged     General of the Confederation of
result of stimulus packages. These      downturn that looks increasingly       Indian Industry (CII).
numbers were anticipated,” said         unlikely for many sectors,” said Mr.
Mr. Ajay Shankar, Secretary,            Nikhilesh Bhattacharyya, associate     Of the 17 industry groups in the
Department of Industry Policy and       economist        with       Moody‟s    index, 14 showed positive growth.
Promotion.                                               Use-based categories like basic
                                                                               goods grew by 10% against 3.9%
Finance         Minister       Pranab   Leading the August numbers was         in the same period last year.
Mukherjee termed it as a good           the mining sector, which rose          Capital and consumer goods also
sign of recovery. “We are hoping        12.9% compared to just 2.8% in         grew an impressive 8.3 and 8.5%
that when the final figure of second    August       2008.    Manufacturing,   respectively against 0.9 and 6.4%
quarter will be available, there will   which accounts for about 80% of        in August 2008. Intermediate
be some higher growth so that we        industrial output, continued the       goods which had registered a
can make up even higher growth          strong growth trend of July,           decline of 5.5% in August last year
in the third and fourth quarters.”      growing 10.2% in August against        grew by 14.3% this year.
The economy grew 6.1% in the            1.7% in the same month last year.
first quarter of this year, exceeding   Electricity output also grew by        Consumer durables also posted a
most analysts‟ expectation.             10.6% against 0.8% in the              22.3% growth rate against 3.9%
                                        corresponding month in 2008. In        on a year on year basis. Only
                                        aggregate terms, industrial growth     consumer non-durables registered
Expressing the possibility of
                                        stood at 5.8% against 4.3% in          a marginal decline in growth rate
sustained growth in industrial
production from now on, Finance         April-August year ago, though this     to 3.7% during the month against
Secretary Mr. Ashok Chawla said,        is still behind the 2007 figure.       7.3% last year. The growth in
“We expect the trend to continue                                               consumer non-durables is also
and expect better numbers in            Industry is also optimistic about      lower than the 5.7% growth in July.
September.”                             the coming months and expects          (Business Standard: October 13,
                                        the central bank to continue to        2009)
6                                                                                                  India News

Micro,     small   and   medium       quarter and a lower number of           The positive shift in demand and
enterprises      (MSMEs)   have       MSMEs registered a decline in           turnover in the second quarter
reported increase in production,      turnover. About 22% of MSMEs            could be attributed to the „trickle
demand and overall turnover for       surveyed    also    reported an         down affect‟ of the various
the quarter ended September, as       increase in their exports, as           measures announced as part of
per a CII survey.                     compared to only 17% for the            the stimulus packages by the
                                      previous quarter ended June.            government and RBI, the survey
The survey revealed that 45% of                                               said. This includes measures such
the respondents registered an         CII study also highlighted that this    as reduction in CENVAT, interest
increase in turnover for September    positive sentiment is expected to       rate cut of 0.5% for small and 1%
quarter, compared with 38% in         carry forward into the second half      for micro enterprises by PSU
previous quarter. Similarly, 42% of   of the fiscal as well.                  banks besides other initiatives.
MSMEs registered an increase in
their production in Q2, as            “It appears that the worst of the       RBI deputy Governor Mr. K C
compared to 37% in the first          crisis is over and a turnaround         Chakrabarty had said that credit
quarter of the current fiscal.        seems within sight for most of the      flow to MSMEs has more than
Moreover, a higher proportion of      industry,” said CII National MSME       doubled in two years. (The
respondents reported an increase      Council chairman Mr. Salil Singhal.     Economic Times: October 12,
in order books over the previous                                              2009)

                       IT SPENDING IN INDIA WILL TOUCH $ 22.6 BN THIS YEAR

Spending on IT in India will touch    IT industry‟s effect on job creation,   In 2009, local partners in the
$22.6 billion in 2009 and is          company formation, local IT             Microsoft     ecosystem        would
expected to grow to $37.6 billion     spending and tax revenues in            generate more than $9.6 billion in
by 2013, a study by IT research       addition to assessing Microsoft‟s       revenues for themselves. To
firm International Data Corporation   partner ecosystem. The study‟s          generate these revenues, they will
(IDC) and Microsoft Corp stated.      spending figures accounted for          invest $ 3.1 billion in development,
IT as a percentage of GDP will        hardware, software, services and        marketing, training and sales in the
increase from 1.8 per cent to 2.3     data networking expenditures by         Indian economy. The Microsoft
per cent, it said.                    consumers,               businesses,    ecosystem is defined as local
                                      governments and          educational    companies that develop and/or sell
The report said the IT market         institutions within each country.       products that run with or on
would drive the creation of nearly                                            Microsoft software or that service
7,000     new   businesses    and     IT employment included the              and distribute Microsoft software.
324,000 jobs between the end of       number of people employed (full-        (The         Hindu          Business
2009 and the end of 2013. Most        time equivalent) in hardware,           Line: October 12, 2009)
new companies will be small and       software, services or channel
locally owned.                        firms, and those individuals
                                      managing IT resources in an IT-
This study applies IDC‟s Economic     using    organization (that  is,
Impact Model, which assesses the      programmers, help desk, and IT

                      INVESTMENT IN FOOD INDUSTRY TO SHOOT UP BY 42.5%

Investment opportunities in the       Incredible India - Opportunities in     agri produce, the study says. Two
Indian food industry are set to       the Food Industry has noted that        thirds of this is spent on primary
shoot up by a huge 42.5% now to       the food industry accounts for 30%      and      secondary       processed
US$ 181 billion in 2015 and to        of the consumers‟ wallet.               products. Among agri products,
US$ 318 billion by 2020, a FICCI-                                             Fruits and Vegetables (F&V) is the
E&Y study on India's food industry    In fact, 70% of the current food        largest consumption category and
has said. The study, Flavours of      spending by Indian consumer is on       (continued on next page)
India News                                                                                                         7

accounts for over 50% to the total     class to very rich class that is        an     opportunity     to     set   up
consumption. Milk, milk products,      projected to increase at more than      warehouses, cold stores and
meat and meat products account         300% between 2005 and 2015              logistics infrastructure," it said.
for the remaining 30% spend and        even as the youth population
have been growing at a faster rate     catapults annually by 11%. This         The sector would also create a
as compared to agri products.          will lead to an increasing demand       base for exports of value added
                                       for food products to meet demands       food    products      with    current
The key drivers of the sector have     of convenience, health, variety and     shipments of tertiary food products
been identified as an increase in      changing palate, the study says.        only at 9 per cent of overall food
per capita disposable income by                                                exports, it said, adding that launch
8% over the last five years, leading   The study said the growth in food       of new products and increasing
in turn to an additional per capita    sector would help in re-organizing      penetration of processed foods
spend on food by 20% in the same       the supply chain to enable              has a huge investment potential.
period. The current per capita         reduction of post harvest losses,       (The Economic Times: October 27,
invoke on food is 1/6th that of        especially in fruits and vegetables     2009)
China and 1/16th that of the USA;      which now amounts up to 25 per
growth in the size to the middle       cent by value. "This would mean

                             INDIAN PHARMA MARKET SET TO GROW 12-15%

The domestic pharmaceuticals                                                   patient out-of-pocket spending,
market will outshine the global        Though the growth is historically       such as Russia, Mexico and South
market, growing at a compounded        low compared with high single-to        Korea, IMS found, while sales in
annual rate of 12-15% as against a     low double-digit growth seen in the     countries where prescription drugs
global average of 4-7% during          past, but “we‟re seeing a slightly      are largely government funded,
2008-2013.                             more positive outlook for the           such as Germany, Japan, Spain
                                       pharmaceutical     sector   mainly      and Turkey, have been less
In fact the seven emerging             driven by stronger growth in the        affected.
markets of China, Brazil, India,       US market, which has proved to
South Korea, Mexico, Turkey and        be more resilient than expected to      IMS said its latest forecast does
Russia are expected to collectively    the economic downturn,” Mr.             not fully factor in the potential
see drug sales grow by 12-14% in       Murray    Aitken,    Senior    Vice     impact of a severe H1N1 swine flu
2010,       according to    market     President for Healthcare Insight at     pandemic, which could positively
research firm IMS. India alone will    IMS said.                               affect growth through increased
grow at 12-14% next year. The                                                  sales of vaccines and antiviral
global pharmaceutical market will      China alone is expected to              medicines.     (The    Times   of
grow 4-6% next year, exceeding         continue to exceed 20% annual           India: October 11, 2009)
$825 billion on strong prescription    growth. The recession has had a
sales in the US - higher than          more pronounced impact on drug
initially perceived.                   sales in countries with higher


The surging demand in the              companies in clinical research          $13.7 billion by 2013 with a CAGR
domestic market coupled with an        services will further add to the        of 12.2%.
increased     focus    from    the     growth momentum, as per a
multinational       pharmaceutical     detailed research done by Angel         The domestic formulation industry
companies for contract research        Broking.                                had registered a CAGR of 14%
and     manufacturing     services                                             during the financial year 2003-08
(CRAMS) are set to fuel the Indian     Socio-economic factors such as          from around $ 3.9 billion to $ 7.7
pharmaceutical growth in the years     rising income levels, increasing        billion  outpacing    the   global
to come. In addition to that, a        affordability, gradual penetration of   pharmaceutical industry growth
projected CAGR of 10.5% in the         health insurance and the rise in        rate of 7%, said the study.
global generics market and a           chronic diseases would see the          (continued on next page)
growing involvement of Indian          Indian formulation market to touch
8                                                                                                     India News
By 2015, India is expected to rank       to growing patent expiries of major    of high quality generics drugs
among the top 10 global                  blockbuster       drugs,       price   globally. The success can be
pharmaceutical     markets.    The       restrictions and slowdown in new       attributed to the recognition of
industry is typically growing at         product approvals and launches.        process patents over the last three
around 1.5-1.6x the country‟s GDP        Moreover, the decline in R&D           decades. Indian companies are
growth.                                  productivity has resulted in further   also amongst the preferred
                                         deceleration in bringing new           partners for foreign companies,
According to the research, India is      blockbuster drugs to the market.       which are struggling to cope up
primarily a balanced generic                                                    with rising R&D costs, declining
market with no player garnering          Due to its value proposition, high     productivity and approval of new
more than 5% market share. Some          R&D and formulations capabilities      product launches. By developing a
of the key challenges in this            coupled with the cost advantage,       broader range of service offerings,
segment include complex drug             Indian pharma companies are in a       the    Indian   clinical  research
distribution system, diverse market      position to attract huge CRAMS         organizations (CROs) are well
and rural penetration, evolving          opportunities, particularly from the   poised to become major players in
regulatory infrastructure, brand         US and European multinational          the global CRO arena. (The
visibility and uncertainty in pricing    pharma companies.                      Financial Express: October 05,
policies. The second big factor will                                            2009)
be that of CRAMS. Global                 On the generics side, India has
investors are under pressure due         emerged as a prominent supplier


Suven       Life       Sciences,     a   The patent for the candidate           SUVN-502 completed the Phase-I
Hyderabad-based                          (SUVN-502), achieved through           single ascending and multiple
biopharmaceutical            company     internal discovery efforts of Suven,   ascending studies at Switzerland
specializing in central nervous          has been validated in all the nine     and demonstrated to be very safe
system (CNS) diseases, said that         member countries of Eurasia            at all doses tested. The company
its    clinical     candidate      for   (including Russia) and 37 member       is planning to initiate the clinical
Alzheimer‟s disease has secured          countries of Europe including          Phase-II proof-of-concept studies
product patent in India, Mexico,         major markets like Germany,            during 2010 and is targeting
South Africa, Singapore, New             Switzerland, Denmark, Spain,           launching the product by end of
Zealand, Korea, Eurasia, Australia       France, UK, Italy, the Netherlands,    2013 or early 2014. Development
and European markets. The                Poland, Sweden and Finland,            of GlaxoSmithKline‟s molecule,
product patent in all these              Suven said in a press release.         which also falls under the same
countries is valid till June 2023.                                              category, is currently in Phase-II,
                                                                                the release added. (Business
                                                                                Standard: October 15, 2009)


Pune-based research company              plant extracts, has also submitted     “We have also discovered that the
Indus Biotech has received               a dossier to the Drug Controller       same molecule can be used to
approval from the US Food and            General of India (DCGI) and is         cure H1N1 and have filed an
Drug Administration (USFDA) for          awaiting approval to proceed with      application with the USFDA and
clinical trails of its molecule,         phase 3 clinical trails, he added.     the DCGI for that as well. Once the
IND02, which can be used to treat                                               approval for the H1N1 indication is
AIDS and will begin the phase 1          The company said that its              cleared we will start trials for that,”
trials in the US shortly, its            molecule could convert an HIV          Mr Bhaskaran said. Indus Biotech
Managing Director, Mr Sunil              patient into a 'HIV Controller,' a     is the first Indian company to
Bhaskaran, said.                         person who despite being affected      receive IND approval.
                                         with HIV, manages to control the
The 12-year old company, which           progression of the disease and         (continued on next page)
focuses on developing new                protect the immune cells.
chemical entities (NCEs) from
India News                                                                                                            9
Mr. Rajan Srinivasan, Executive          medicine category. Till date we         DCGI who had constituted a
Director at Indus said, “The idea of     have been focusing on the US            committee to look into the
developing drugs based on plant          since the guidelines for botanical      documents we have submitted.”
extracts is so that the toxicology is    drugs are defined and there is no       (The Economic Times: October 27,
low. These are plants that are part      such clarity in India. However, the     2009)
of the food raw chain yet do not fall    discovery of the molecule‟s effect
under the ayurvedic or alternative       on H1N1 made us approach the

                                    ORGANISED RETAIL SALES GROW 20%

The organized retail industry,           something that could lift up the        and unorganized together, is
among the largest job creators in        overall business environment.           valued at $511 billion and is
the services sector, is showing                                                  poised to grow to $833 billion by
early signs of revival, after seeing     Besides     stocking  up    more,       2013. It believes the organized
its worst slowdown in the second         retailers are also on the way to        retail, now making up less than 5%
and the third quarters of 2008-09.       renewed hiring and expansion.           of the total retail market, would
Estimates     by    the     Retailers    Says Mr. Kumar Rajagopalan,             have a CAGR of 40% and would
Association of India (RAI), the          CEO, Retailers Association of           swell to $107 billion by 2013.
apex body of organized, modern           India (RAI): “Now hiring will take
retailers, show the segment has          off at the front-end level of the       Mr. Shubhranshu Pani, managing
grown 20% in the September               branded retail stores by 15% to         director-retail, Jones Lang LaSalle
quarter of this financial year. This     20%, since many retailers have          Meghraj (JLLM), adds, “While
is a leap from the 5% growth it          chalked out plans to expand their       improvement in sales has not been
clocked in the first quarter. Just       stores.”                                as dramatic as the first two
before the meltdown last year, the                                               quarters of last year, it is definitely
retail segment was growing at a                                                  true that there has been significant
                                         Big players like the Future Group,
pace of 35%.                                                                     improvement in buyer sentiment in
                                         Aditya Birla Retail, Reliance Retail,
                                         Trent and Spencer‟s Retail are in       the second quarter. A number of
Indian retail growth had slowed to       the process of adding new stores        factors are at play here, including
12% in the third quarter of FY09,        on the back of lower rentals and        positive sentiment brought about
the quarter that followed the            buoyant consumer demand.                by a strong political regime, a
Lehman Brothers collapse, and                                                    marked upsurge in the economy,
less than 5% during the fourth                                                   stabilization      of      inflationary
                                         Explaining the reasons for the
quarter of FY09. Prompted by the         retail growth, Mr. Rajagopalan          pressures and increased job
rising demand and the coming             said, “There has been a spurt in        security. Retailers are leveraging
festive season, retailers are in the                                             the current market dynamics by
                                         consumer confidence among the
process of building up stocks at                                                 concentrating their presence in
                                         salaried class; the markets are
their branded retail stores by an                                                established              metropolitan
                                         looking better; there is also a
additional 20% to 25%.                                                           catchments, curtailing exuberant
                                         certain     amount     of    impulse
                                         purchase by consumers amidst            expansion plans and focusing on
The revival in organized retail          fear of price hikes during Diwali.”     offering greater value to the
sales points to an increase in                                                   shopper community.”                (The
urban   consumer    spending—                                                    Financial Express: October 05,
                                         CB Richard Ellis estimates that         2009)
                                         India‟s retail market, organized

                                    FMCG SECTOR MAY SEE 13% GROWTH

The July-September quarter for           and may have a lag impact over          done exceedingly well and we
the FMCG sector is expected to           the    October-December    and          expect healthy growth. The delay
post 12-13% growth riding mainly         January-March    quarters, say          in monsoons has not had much
on    margin   expansion     and         analysts.                               impact on our sales which
companies    pushing    volumes.                                                 continue to be robust.”
Delayed monsoons and increased           Godrej group chairman Mr. Adi
commodity prices is not likely to        Godrej said: “The economy has           (continued on next page)
impact sector sales this quarter
10                                                                                                  India News

According to analysts tracking the    stepped      up     investments     in   period last year had seen pressure
sector, a combination of demand       distribution infrastructure.             on margins. But we expect the
coming     from     rural    India,                                            same growth as the previous
companies pushing volumes at          In fiscal 2008-09, most companies        quarter.”    Under pressure from
key price points to retain            had hiked prices to protect              smaller B-brands and private
consumers, and new product            margins towards year-end. But of         labels,      companies       across
launches mainly in the form of        late, prices have stabilized. In fact,   categories     such    as    soaps,
variants have been the key            in the January-March ‟09 quarter,        detergents,             shampoos,
highlights of the July-September      most FMCG companies had                  toothpastes, biscuits and snack
quarter.                              benefited from increased operating       foods have introduced multiple
                                      profit margins, riding on declining      pack sizes and convenient price
Increased ad spends, higher levels    raw material prices. And in the          points of Rs 2, 3, 5 and 10. Apart
of localized promotions, price-offs   April-June ‟09 quarter, companies        from    pushing     volumes,     the
and freebies are also expected to     had      posted    gross      margin     companies      believe    low-priced
aid volume growth in the period.      expansion, aided by the lag impact       packs will prevent consumers from
That apart, companies ranging         of price hikes.                          switching to other brands. (The
from Hindustan Unilever, Godrej                                                Economic Times: September 30,
Consumer       Products,    Nestle,                                            2009)
                                      Angel Broking‟s FMCG analyst Mr.
Dabur,     GlaxoSmithKline,   ITC,    Anand     Shah      said:   “The
Marico and Colgate have all           corresponding     July-September

                              AUTO SALES JUMP BY 14.51% IN APRIL-SEPT

Total domestic car sales in the       grew by 13.46 per cent, by the           since December 2008, the Sixth
country in the first half of the      15.68 per cent spurt in two-             Pay                  Commission‟s
financial year 2009-10 rose by        wheeler sales and by an increase         recommendations, reduced prices
14.51 per cent year-on-year to        of 12.37 per cent in sales of three-     of cars following excise duty cuts,
5,782,920 units, according to         wheelers. A positive sales growth        launches of new car models, lower
automobile sales figures released     in the medium and heavy                  car loan rates by PSU banks and
by    the   Society   of    Indian    commercial     vehicle     segment       improving sentiments in the stock
Automobile Manufacturers (Siam).      (M&HCV), which had been in a             market have all contributed to the
                                      free fall since June 2008, also          increased sales of vehicles in the
The jump in sales for the April-      contributed to the rise in overall       first six months,” Siam Director
September period came from the        vehicle sales.                           General Mr. Dilip Chenoy said.
double-digit growth posted by the                                              (Business Standard: October 14,
passenger      vehicle   segment      "The     stimulus  packages              2009)
(comprising cars and SUVs) which      announced by the government


German auto major Volkswagen          The company has also set a target        plastic-related items and metals for
says it has started sourcing auto     to capture 8-10 per cent of market       the European plants.
components from here for its          share in the passenger car
European factories.                   segment in India by 2014, with a         On VW‟s operations in India,
                                      series of launches and by doubling       Müller said, “We sold 1,800 units
India would become one of the         the number of its dealers.               during January-August this year,”
major sources of components for                                                he said. The company has 15
our global units, said Mr. Jörg       Speaking to the media, Mr. Müller        models and has lined up five more
Müller, President and Managing        said VW had started sourcing             launches, including hatchback and
Director of Volkswagen Group          components from India to its             sedan versions of the Polo next
India.                                Russian plant. He said they were         year from its factory in Pune.
                                      looking at sourcing light systems,       (continued on next page)
India News                                                                                                     11
Localization in the Polo would be      planning to increase the number of     the country. The plan is to employ
50 per cent to start with, to be       dealers to 200 by 2012 from 120,       2,500 people there by the end of
increased to 75 per cent, said         he added.        The Pune plant        2010.                    (Business
Müller.     To     increase   the      represents the largest investment      Standard: October 06, 2009)
penetration, the company is            to date by a German company in


European passenger plane maker         “There is a big push at the top        India is the fastest growing market
Airbus SAS will move 20% of its        level to grow business in India in     for Airbus, with 68% of its future
engineering and design activities      the next three to four years,” Mr.     plane orders coming from the
to low-cost countries, a majority of   Eugen Welte, Head of Operations        country. In 2006, European
it to India, by 2012 to bring down     at Airbus Engineering Centre India     Aeronautic Defence and Space
the cost of making planes and be       Pvt. Ltd, said at an aerospace         Co., or EADS, the parent company
able to compete better against its     symposium in Bangalore. “Around        of Airbus, committed investments
main rival Boeing Co.                  60% will be done internally, 40%       of €2 billion in India over 15 years,
                                       local outsourcing.”    Airbus will     including       for    the     Airbus
Airbus has a 120 people                increase the work it outsources to     engineering centre. EADS spends
engineering centre in Bangalore,       Indian firms to save as much as        about €2 billion per year on
which will grow to 450 employees       40% of costs, he said.                 engineering services like research,
next year.                                                                    modeling, flight physics and
                                       Airbus has also directed its top       aircraft design, it said in a
It outsources work to around 20        suppliers such as aero engine          statement in May 2008.
Indian information technology and      maker Snecma SA to move work
engineering service providers,         to India to drive down costs, either   Boeing too has increased the work
including Infosys Technologies         by setting up captive centres or       it outsources to Indian firms. In
Ltd, Satyam Computer Ltd (now          working with local suppliers. “They    December 2007, Boeing signed a
owned by Tech Mahindra Ltd),           have price reduction target(s)         10-year $1 billion manufacturing
Quality Engineering and Software       every year,” said Mr. Welte.           contract       with     Hindustan
Services Technologies Pvt. Ltd         Airbus has centres in China and        Aeronautics     Ltd  for making
(Quest) and HCL Technologies           Russia as well, but a majority of      subsystems for its fighter planes
Ltd.                                   the work will be done out of India,    such as F-18 Super Hornets and
                                       he added.                              Apache                 helicopters.
                                                                              ( October 09, 2009)

                                   LABOUR AGREEMENT WITH DENMARK

The Ministry of Overseas Indian        Overseas Indian Affairs, Mr.           The agreement is aimed at
affairs      has      signed       a   Vayalar Ravi said. He was in           promoting direct contact between
comprehensive      labor    mobility   Denmark to sign the agreement.         employers in Denmark and state
partnership with the government of                                            managed or private recruiting
Denmark which provides for labor       The labor agreement, which is the      agencies      in   India     without
market         expansion        and    first of its kind for both the         intermediaries. It will also protect
employment facilitation between        countries,    will   provide   the     the welfare of all categories of
the two countries. “We hope that       framework for a larger Indo-           Indian workers under labor and
this agreement will open up the        European        Union       mobility   other laws of Denmark.
Danish labor market for Indian         partnership which will address
professionals. To start with the       skilled labor shortages in EU          (continued on next page)
sectors covered include highly         countries that are facing a
skilled     IT     and      biotech    demographic shift and ageing
professionals and healthcare and       workforce in recent years.
hospitality workers,” Minister of
12                                                                                                India News

“The agreement will help Indian       The Danish embassy in New Delhi        Denmark and the Work in
professionals to tap new overseas     has, meanwhile, set up a Work in       Denmark centre is facilitating the
labor markets. We are currently       Denmark centre, which provides a       recruitment from India. We are
looking   at    developing   skills   window for Danish companies to         encouraging them to also directly
upgrade programmes for our            tap the Indian labor market            tap talent in the various states
workers who want to move              directly. The centre is also helping   through interaction with state-level
overseas under the agreement,”        Indian professionals with work         organizations,” Mr Ravi added.
Mr Ravi said.                         permit and residence permit            (The Economic Times: October 06,
                                      related issues. “Recently, the need    2009)
                                      has emerged for 1,500 nurses in


The annual output of scientific       Mike Boswood, CEO, Healthcare          scientific focus and how its areas
research publications released by     & Science Business, Thomson            of concentration map to the rest of
Indian scientists has grown by        Reuters.                               the world, the report will provide
around 80 per cent in the past                                               policymakers and institutions with
decade, says a study by Thomson       He added that the report which         useful information and insights that
Reuters titled „Global Research       has    analyzed    over   10,000       will     help    them      leverage
Report: India.‟                       research journals between 1998         opportunities for innovation,” said
                                      and 2007, has taken into account       Mr Boswood.
According to the study, the annual    indexed papers which have least
output of publications, which has     one Indian author.                     It added that India has established
risen to nearly 30,000 in 2007 from                                          a stable and growing research
16,500 in 1998, will be at par with   The study further points out that      partnership with countries such as
most G8 nations within seven-         while India‟s research portfolio is    the US, Germany, the UK and
eight years and overtake them         well balanced between the life         Japan. Also, the country has
between 2015 and 2020. “India‟s       sciences and physical sciences, its    hugely increased its collaborative
current rise in science is as         annual growth rate has vaulted in      papers with South Korea, while
impressive as its economic surge      recent years in comparison to well-    doubling the figure in terms of its
of recent years and clearly has the   established countries such as          Asian partners. (The Hindu
potential to become the home for      Japan, France, Germany and the         Business Line: October 08, 2009)
world class research,” said Mr        UK.      “By examining India‟s

Edited by Mr. Ashok C. Kaushik, Marketing Officer, Embassy of India, Buitenrustweg 2,
2517 KD The Hague. Tel: 070-3469771; Fax: 070-3462594;
E-mail:; Web:

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