Why India bought IMF gold

It has been an incredible turnaround for India.

In 1991, New Delhi kick-started the economic reforms process owing mainly to the serious balance of payments crisis it was facing. Then, India — just an inch away from defaulting on its loans — had less than $2 billion in forex reserves (that would not even have taken care of three weeks’ of imports) and had to pledge gold with the International Monetary Fund to get a loan to get out of the crisis.

Today, it is the IMF that has sold gold to India to ‘borrow’ money to loan to poor nations!

That is indeed irrefutable proof that the economic reforms that Manmohan Singh (the then finance minister and current prime minister) set in motion have borne fruit.

On September 18, 2009, the IMF’s executive board approved gold sales strictly limited to 403.3 metric tonnes, representing one eighth of its total holdings.

India and China were seen as the likely buyers the IMF gold, given the two Asian giants’ economic strength even in the face of the global recession that ravaged most economies.

Many analysts were surprised at the speed with which India bought the IMF gold. However, they believe that it is a very smart move as by buying IMF gold, New Delhi is shoring up its bullion reserves and slowly trying to hedge its bets on the US dollar which has been losing value against other currencies.

Some analysts believe that India could be buying the yellow metal to push for a larger voting share in the IMF. India has been angling for a larger say in world economic affairs and for a bigger representation in the IMF.

The RBI, meanwhile, says that the buying of IMF gold was just a part of its foreign exchange reserve management strategy.

The RBI paid on average about $1,045 per ounce for the gold and the transaction would be paid in hard currency and not in IMF Special Drawing Rights, the IMF’s internal unit of account.

IMF, meanwhile, has not given out any details on whether any other central banks had shown interest in buying the remaining 203.3 tonnes of gold on tap for sale.

For long, China has been slowly but steadily building up its stockpile of gold and India does not want to be left behind.

India among top 50 in global competitiveness

India ranks 49 among 133 countries in 2009-10 in the global competitiveness index prepared by the World Economic Forum, an improvement of one position from last year. India’s position is a result of mixed performance across 12 categories covered by the GCI.

India has displayed good performance over the past year in business sophistication, innovation and financial market sophistication. However, areas like infrastructure, primary education, health and the fiscal situation dragged India down.

The review also stated that bureaucracy, over-regulation and corruption still affect functioning markets and labour markets in particular. India lags all BRIC nations in the index.

India has suffered in the basic requirements index and ranks 101 in the health and education index. The fiscal deficit situation has dragged India to the 96th position in the macroeconomic stability pillar, while poor infrastructure performance has brought it down to 76th position in the transport and infrastructure index. India has performed well in areas of sound financial system, efficient goods market and innovation sectors and ranks in the range of 16-30 in the respective indices.

A survey by PricewaterhouseCoopers, which took responses from 300 Indian CEOs, revealed that most expect growth to come from better penetration of existing markets, with 58 per cent citing that as their primary opportunity. Most Indian companies said they would be able to achieve growth organically.

Moreover, 42 per cent said the country’s manufacturing sector is becoming more competitive. As many as 74 per cent believed India to have a strong supply of educated and healthy workers and 56 per cent stated a strong entrepreneurial base existed.

Lack of infrastructure, inflation, red tapism and terrorism were cited as risks in our business competitiveness.

M&M to launch motorcycle next year

 

Mahindra and Mahindra plans to launch a motorcycle next year. The company is also looking at acquisitions in the electronic scooter space.

To increase its penetration, the company is planning to tie-up with cooperatives and grameen banks.

The auto major had entered the two-wheeler market market by acquiring the assets of Pune-based scooter manufacturer Kinetic [ Get Quote ] Motor in 2008.

Speaking to reporters after launching their new scooter brands, Rodeo and Duro, the vice-president, sales and customer care, Sanjiv Mittal, said the company was working on motorcycle models and the first one would be launched in 2010.

The vehicle is in the developmental stage and the objective was to become a full-fledged two-wheeler player.

Mittal said the company’s Madhya Pradesh [ Images ] facility would be sufficient to meet the company’s requirements.

“We just need some small investment to install some machines and the facility can produce up to 400,000 vehicles,” he said.

He added the company had sold around 7,000 scooters last month, of which Rodeo and Duro accounted for 5,600 units and Flyte accounted for the rest.

He declined to comment on the sales target for 2009-10. The company is in the process of ramping up its two-wheeler distribution network by adding 50 more dealers.

The company has 325 dealerships and plans to increase the network to 375 dealers by the end of this financial year, Mittal said.

To increase penetration and to address any financial issues, the company planned to tie up with co-operatives and grameen banks for both finance and marketing.

The company had already tied-up with five finance institutions, he said.

Royal Enfield to double capacity at Chennai plant

Motorbike manufacturer Royal Enfield said on Wednesday that it plans to invest Rs 65 crore to double the capacity of its Chennai plant from 50,000 to one lakh units by 2013.

This is apart from the Rs 65 crore the company has already invested in the plant.

“We will add a production capacity of about 10,000 units in 2010 and by 2013 we aim to reach annual production of one lakh units,” said Mr R L Ravichandran, CEO, Royal Enfield, at the sidelines of a bike launch.

The company has generated revenues of Rs 300 crore in the January-September period, said Mr Siddhartha Lal, Managing Director and CEO, Eicher Motors.

He added that at present monthly sales are 4,500-5,000 units, while it is targeting to sell about 50,000 units in the whole year.

“We are looking at a 25% growth in bike sales and a 20-30% growth in revenues,” he said.

Exports

Mr Lal added that Enfield exported about 1,700 bikes until September in the current calendar year, which is about 5% of the total production.

“We aim to increase exports by about 5% every year. In the next four to five years, exports should be 15% of our total sales,” he said.

On a descending order of export volumes, Enfield’s primary overseas markets are the UK, US, Germany, France and Italy, followed by Japan and Australia. “In the future, we will go to Africa, Latin America and the Middle-East,” he said.

New models

The Eicher Group company launched the Classic 500cc and 350cc motorbikes in the country, priced at Rs 1,24,918 lakh and Rs 98,086 respectively. The bikes are powered by an all-new single cylinder unit construction engine with fuel injection technology.

According to the company, the new engine platform has 15% fewer parts than the previous one, making it lower on maintenance.

“We have doubled our service interval for the new bikes to 6,000 km,” said Mr Ravichandran.

The motorbike, launched overseas in October 2008, has sold more than 2,000 units, said Mr Lal.

Mr Lal added that the product profile for India would still consist mostly of 350cc bikes with the carburettor technology, although it will slowly be replacing its older engines with the new fuel injection-based ones.

“It is mainly a pricing challenge for the company, margins are obviously higher in exports,” he said.

To relaunch Machismo

He said that Machismo would soon be re-launched with a new design and engine change. “We will change from the lean burn engine to the new platform and will announce it shortly,” he said.

On product upgrades to meet the new emission norms which come in place in April next year, Mr Lal said that the company would look to upgrade drivability and design as well, besides the engine.

When asked about the October sales of Eicher Motors, he said that it had shown a growth of around 70%.

“Last month we sold around 2,300 commercial vehicles in Eicher and 50-60 from the Volvo joint venture,” he said.

Pirated Win7 generates $100K in India

LUCKNOW: About 50,000 pirated DVDs of Microsoft Windows 7 are estimated to have been sold here since the official launch on Oct 22, generating unaccounted business of around Rs 50 lakh (nearly $100,000).

The reason for the allure of the pirated versions: These cost Rs 40-Rs 250 in Naza Market in Hazratganj here, drawing buyers from not only the rest of Uttar Pradesh and neighbouring states like Madhya Pradesh, Bihar and Uttarakhand but also Nepal and Bangladesh.

“This is the biggest market in the region,” said a shopkeeper in Hazratganj, claiming at least 50,000 DVDs of the pirated Windows 7 have been sold since hitting the local markets within 24 hours of the official launch, fetching sellers about Rs 50 lakh so far.

The legal version of the new operating system launched by Microsoft Corp costs between $150-$300 (Rs 7,500-Rs15,000) in the international markets. The company, however, tagged its prices 20 percent below international rates in India, where it is available in the Rs 6,000-Rs 11,000 range through official channels.

Despite the discounted company rates, buyers are opting for the pirated version. “Why invest Rs 10,000 when it is available for Rs 250?” asked Pramod Yadav, a student pursuing a Master of Computer Applications (MCA) course.

Added Mohit Singh, who runs a computer hardware and software maintenance company: “We pay for only the DVD as we are regular customers. A DVD hardly costs Rs 20-40.”

Most computer service providers or “regular customers” in Lucknow and elsewhere in India use pirated software, contended Nishant Kumar, a software engineer with HCL Technologies in Greater Noida.

According to him, what makes the pirated operating systems more attractive is that cheap pirated anti-virus software is also freely available.

“A lot of anti-virus software, for example Awast, is available on the Internet,” Kumar said, adding that it was equally effective and has the same service life.

Those selling pirated Windows 7 deny doing anything illegal.

“There are over 200 shops in Naza Market. All have everything you want. We are not doing anything illegal as everything is available on the Internet,” said a shopkeeper not willing to be named.

“We are only transferring and supplying to buyers who include students, professionals and even big business houses.” Those selling authentic software are unhappy.

“Be it software or encyclopaedia, everything is available in pirated form within 24 hours. We do not get the expected business,” Amit Mishra of Newgen Technologies, the authorised distributor of Compaq, HP, Microsoft and Lenovo in Hazratganj, told IANS.

The police express helplessness in combating piracy. “We know what is going on for the past couple of decades. But we cannot act on our own. We need a formal complaint to act or else you (the media) will come down on us,” police spokesperson AK Pathak told IANS.

Besides software, the Naza Market and the Naka Market in the Naka area are also famous for producing CDs and DVDs of newly released Bollywood movies within 24 hours.

“You name the movie and you will have the CD, DVD the next day,” boasted Harnam Singh, a Naka shopowner.

Vodafone launches per-second billing plan in Delhi

Telecom services provider Vodafone Essar today said it has launched a per-second billing plan for its prepaid customers in Delhi and adjoining areas.

As per the plan, the company will charge 1 paise per second for all local and STD calls for its prepaid customers in Delhi and NCR, it said in a statement.

To avail this offer the existing customers of Vodafone have to do a one time recharge of Rs 55. This offer is also available for the new customers with recharge of Rs 54, it added.

Earlier, Bharti Airtel, Aircel and Reliance Communications had announced the per-second tariff, intensifying the competition between operators.

Per-second billing was first started by the entry of Tata DoCoMo in June. Vodafone had already introduced per second billing in some circles earlier this month.

Sanjay Warke, chief executive officer, Vodafone Essar– Delhi said, “Vodafone has always catered to the specific requirements of its customers. This recharge will enable our customers to enjoy calling their loved ones at an affordable call rate.”

RPT-India cbank wants bond issues not below 90 days

MUMBAI, Nov 3 (Reuters) – India’s central bank said on Tuesday borrowers cannot issue non-convertible debentures (NCDs) for less than 90 days.

In its draft guidelines for NCDs, the Reserve Bank of India (RBI) said that companies with a tangible net worth of not less than 40 million rupees could issue papers with maturity of less than one year.

Also, borrowers should have a sanctioned working capital limit from banks and financial institutions and its loan account should be a standard asset.

The RBI said the entities cannot attach a call or put option to bonds within 90 days from the date of issue.

The central bank has posted the draft on its website www.rbi.org.in and invited feedback from market participants by Nov. 20 for finalising the guidelines.

Bonds may be issued to and held by banks, primary dealers, corporates, non-resident Indians, individuals and foreign institutional investors.

Bonds with maturity below one year are right now not regulated by the government or capital market regulator Securities and Exchange Board of India (SEBI).

Since non-convertible debentures are money market instruments, they should be regulated by the RBI, the central bank said.

Bonds may be issued in the denomination of 5,00,000 rupees or multiples thereof, the central bank said.

Dealers said the finalisation of the draft guidelines would dry out the ultra short bond market through which companies and non-banking finance companies funded initial public offers (IPOs).

Typically, during IPO issuances, brokers and financial companies raise short-term money at very high rates of interest by issuing bonds of around seven to 10-day maturity, mainly to mutual funds.

“The daily put-call (DPC) option market will vanish now. This norm will plug the arbitrage that corporates used to make by borrowing Mibor-linked DPC bonds at lower rates and repaying their costly loans,” said a bond dealer.

However, implementation of these draft guidelines would drive borrowers towards the commercial paper, which have a maturity from 14 days to a year, dealers said.

The RBI said such bonds would need to be rated by at least one credit rating agency. (Reporting by Suvashree Dey Choudhury; Editing by Prem Udayabhanu)

Indian rupee extends gains in line with shares

MUMBAI, Nov 4 (Reuters) – The Indian rupee rose further on Wednesday afternoon tracking gains in the local sharemarket which rallied over 3 percent and also buoyed by higher regional currencies.

* At 3:20 p.m., the partially convertible rupee INR=IN was at 47.06/07 per dollar, stronger than its previous close of 47.40/41.

* Shares .BSESN were trading up about 3.3 percent following the finance minister’s comments on Tuesday. [.BO]

* The government will maintain its fiscal stimulus due to uncertainty arising from a poor monsoon and the global outlook, Finance Minister Pranab Mukherjee said on Tuesday, as data showed the summer crop could post a bigger-than-expected fall. [ID:nL3634290]

* Foreigners have bought more than $14 billion of local equities so far this year, after being sellers of more than $13 billion in 2008.

* The dollar retreated from a one-month high against a currency basket on Wednesday as traders braced for a policy decision from the Federal Reserve, which was seen keeping its promise to keep interest rates low. [USD/]

* The dollar index .DXY, a gauge of the U.S. units performance versus six majors, was down 0.4 percent.

* In the currency futures market INRFUTURES, the most traded near-month contracts on the National Stock Exchange and MCX-SX were both quoting at 47.1425 respectively, with the total traded volume on the two exchanges at about $2.4 billion. (Reporting by Swati Bhat; Editing by Sunil Nair)

SC judge withdraws from Ambani gas row

Justice R V Raveendran, part of the three-judge Bench headed by Chief Justice K G Balakrishnan, has recused himself from Reliance Industries (RIL)– Reliance Natural Resources (RNRL) case reports CNBC-TV18’s Nayantara Rai.

Justice Raveendran said that though his conscious is clear, it must seems as if justice is seen and not just done. He had recently learnt that his daughter worked as an associate with AZB & Partners, which has been advising RIL on some global markets, etc, since September 1.

Nifty rallies past 4700 led by realty, metals

MUMBAI: Indian markets ended on a higher note on Wednesday erasing most of the losses in previous session. All the sectoral indices ended in the green led by realty, metals and IT stocks.

National Stock Exchange’s Nifty ended at 4716.85, up 152.95 points or 3.30 per cent. The index touched a high of 4716.70 and low of 4565.

Bombay Stock Exchange’s Sensex was at 15928.08, up 523.14 points or 3.36 per cent. The broader index hit a high of 15927.67 and low of 15487.97.

BSE Midcap Index was up 3.73 per cent and BSE Smallcap Index moved 2.26 per cent higher.

Amongst the sectoral indices, BSE Realty Index surged 10.45 per cent, BSE Metal Index rallied 5.38 per cent and BSE IT Index moved 4.07 per cent higher.

Unitech (12.05%), JP Associates (10.78%), DLF (9.76%), Hindalco Industries (8.72%) and Sterlite Industries (6.46%) were amongst the Nifty gainers.

Losers included, Suzlon (-4.81%), Sun Pharma (-1.17%), ABB (-0.44%), Tata Power (-0.36%) and Grasim (-0.22%)

Market breadth was positive on the BSE with 1759 advances and 950 declines.