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News Updates - May 2008
PE Investors favor India over China - Business Week
(US)
US embarks on India alliance - Forbes magazine
India beats China in social protection - Business Week
(US)
Tiger economies on US heels - The Observer (UK)
India rated most green - McClatchy newspapers
Private
Equity Investors favor India Over China
27
May 2008, Business Week
A report by Four-S Services shows that for the first time, India received
about $19.5 billion worth of private equity investment in 2007, vs. $12.8
billion for China—a flip-flop from 2006. This was a huge change from 2006,
when China received $12.9bn worth of PE investments, nearly 70% more than
the $7.6bn received by India.
However, there was a
qualitative difference in the way funds were deployed in China compared to
India. China's traditional Manufacturing & Infrastructure sectors attracted
$8.3bn, constituting 65% of total funds invested; compared to $6.2bn
constituting 32% of the total for India in 2007, according to a Four-S
Services report.
Interestingly, the
core sectors were the main areas of PE interest. Infrastructure (Engineering
& Construction) sector accounted for a lion's share of the deals in 2007
with nearly $4.0bn worth of investments (20.5% of total PE/VC investments
announced during the Year).
As core development
continues to be a high priority, Infrastructure is expected to be one of the
fastest growing sectors in India, requiring huge investments worth $492bn
over the next 5 years. The major growth driver within the Infrastructure
sector was the Construction industry, accounting for 60.3% of the
investments.
The top four sectors
of Infrastructure, Telecom, BFSI and Real Estate (in that order) received
nearly 72.3% of all PE investments during 2007.
Indian PE performance
rocked last year mainly due to the fact that there are more private
enterprises in India than in China that are attractive to PEs. Though India
has always had a higher percentage of private sector companies compared to
China, it is only in recent years that there has been a spreading of
awareness among the investing community of the strong education system,
English language proficiency, legal & financial structures and democratic
governance in the country, says the report titled Indian Private Equity
Report 2007.
This awareness,
combined with sustained growth, has led to increasing investments in India.
Also, the year saw some mega IPOs in China, drawing large investments from
FIIs & PEs, leading them to limit their private deals and thus maintain
their China exposure at certain levels.
Year 2007 saw Private
Equity (PE) and Venture Capital (VC) investments 'Riding a Wave of Euphoria'
in India. If 2006 was about PE/VC activity 'Bursting into Bloom', by 2007,
the sentiment had risen to ecstatic levels as can be witnessed in the
phenomenal growth of PE/VC investments in India, which hit an unprecedented
$19.5bn in 2007, 2.5 times the $7.6bn figure of 2006, the report adds.
Total PE/VC
investments announced in Indian companies was $19.5bn across 394 deals in
2007, compared to $7.6bn across 298 deals in 2006. The average deal size
nearly doubled compared to 2006 ($41.7mn v/s $21.7mn), as even smaller
investors that earlier used to look for $5-10mn deals began looking for
$20-25mn deals. Also, there was a sectoral shift towards Infrastructure,
Telecom & Real Estate,which witnessed the major big ticket deals of the
year.
IT/ITES sector was the
biggest loser, with investments dropping by 37.5% on YoY basis due to the
slower profitability growth forecast. The slowdown in the sector was based
on the adverse impact of the over 10% appreciation in the rupee and the
depressed conditions in the US economy, which is a major source of revenue
for Indian IT companies. Also, most of the big IT firms were not looking to
raise funds. However, the sector still managed a record 84 small size deals,
mainly in the web-based Information Services Industry and in the BPO/KPO
Industry.
Traditional favourites
like IT/ITES, Manufacturing and Healthcare together comprised only 18.5% of
all investments by value in 2007, compared to 40.6% in 2006, mainly due to
better and bigger opportunities in other areas of the economy and
comparatively slower growth rates in these 3 sectors.
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U.S. Embarks On India
alliance
14 May 2008, Forbes
magazine,
By Oxford Analytica
Ties between the U.S.
and India have made great strides over the past seven years. The Bush
administration aims to seal this perceived "strategic opportunity" by
completing several bilateral initiatives before Bush leaves office.
They include:
--ratification of the
civilian nuclear cooperation agreement;
--additional military
sales following India's purchase of C-130 aircraft--perhaps including some
or all of Delhi's 128 multi-role combat aircraft contract tender;
--further expansion of
trade and investment ties; and
--continued high-level
political exchanges.
The White House hopes
that progress in these areas will lead to accommodation on more contentious
issues, ranging from climate change to the Doha round of global trade talks.
Despite optimistic
pronouncements about Delhi as a "key strategic partner," Washington
recognizes that building relations with India will be a long-term process.
As former Undersecretary of State Nicholas Burns has noted, one key point is
that U.S.-Indian friendship will likely involve "a wider margin of
disagreement than we are accustomed to."
Indeed, there have
been a series of sour notes in recent weeks over concerns such as
Washington's purported advice to India about its relations with Iran and the
apparently foundering state of the U.S.-India nuclear deal.
The nascent U.S.-India
alliance would be a major departure for Washington. Contemporary U.S.
alliances and close partnerships in Europe and Asia have typically been
asymmetrical, with Washington playing the dominant role. These situations
have developed for two reasons:
--The power asymmetry
between the U.S. and the partner when the relationship began was usually so
significant that it was logical that the preponderant party (Washington)
would essentially play a leading role.
--In almost all of
these close partnerships or relationships, the U.S. had been a crucial
component to the partner or ally's national survival, defeat or
rehabilitation during the post-World War II or early Cold War period.
These characteristics
are especially salient in Washington's Asian alliances--such as those with
South Korea and Japan. The key U.S. objective in recent years has been to
adjust these relationships in ways befitting altered power dynamics,
perception and expectation--not to mention the demands of emerging threats
and changing geopolitics.
The dynamics of
building a U.S.-India relationship "from scratch" today are very different.
The U.S. is clearly the preponderant power, but is also seen as needing
Indian assistance in certain areas, such as climate change and terrorism.
Critically, India sees itself as a rising power, which will make rapid gains
relative to the U.S.
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India ranked Above
China in Social Protection
20
May 2008, Business Week
The Asian Development Bank ranks India 10th among 31 Asia-Pacific countries
in providing social security like health care and education. India has fared
better in providing social security like health care, education and child
welfare to its people than China and Malaysia, as per a new index brought
out by the Asian Development Bank.
In a list of 31
Asia-Pacific countries, India ranked at 10th place, above China and
Malaysia, but below Uzbekistan, Mongolia, South Korea and Japan, which
topped the ADB's Social Protection Index (SPI).
Apart from China and
Malaysia, the countries which are ranked below India include Philippines,
Nepal, Indonesia and Bangladesh. Pakistan was ranked at the bottom, next
only to Papua New Guinea.
The ADB, in the new
Index, has established that providing social protection is not subject to
the wealth of a nation. Even poor countries like India can afford to provide
social cover in the form of health insurance, labour market, child
protection, education among other things, if there is government will.
On a scale between
zero and 1, India has scored 0.46 points, with Japan topping the chart with
0.96 points. However, the ranking of India shows that although people are
getting some level of social protection, the impact of social protection
programs on the incomes of the poor is low.
Social protection is
basically a term coined for showing the extent to which Asia-Pacific
countries provide for welfare, labour market, social security, health
insurance, micro-credit, child protection, education, and health support
programmes to their citizens, mainly to those living below the poverty line.
The ranking is
expected to have some effect on international donors who work for supporting
social protection activities.
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Tiger economies are snapping at US heels
4 May 2008, The Observer, By Richard Wachman
But it's not clear whether Beijing or New Delhi will catch up first......
China and India and are moving toward becoming the biggest economies in the
world: with 2.4bn people, or 40 per cent of the world's population and
annual GDP growth rates of between 8 per cent and 10 per cent, experts say
that they could one day overtake the US.
Professor Pieter Bottelier, of the Centre for Strategic International
Studies, says: 'If these two countries continue to grow at the current rate,
they will overtake America, although that probably won't happen for a number
of decades.'
The countries are very different politically: India is the world's biggest
democracy, but China is under tight communist government control.
Economically, China has had a head start. Bill Emmott, former editor of the
Economist, says in his book 'Rivals' that India's time has yet to come; to
date it has been constrained by a poor infrastructure, social divisions, a
caste system and mind-boggling poverty. But it is fast making up for lost
time and no doubt Emmott wouldn't disagree with Steven Roach at US
investment bank Morgan Stanley that 'India is on the cusp of something big'.
Bottelier says the challenges the countries face are quite distinct.
'Generally, China has gone much further than India in trade liberalization
and in opening to foreign investment.' But he says things are starting to
change.
Bottelier adds: 'Issues facing India are much more broad-based, such as
improvement in infrastructure and facilities, effective administration and
labour reforms. Minus points for China include a lack of good quality
software, a low proportion of Chinese who speak English and a less mature
outsourcing industry.'
India is hamstrung by bureaucracy: 'When the Chinese say they are going to
do something, they get on with it and you can see the results much more
quickly than in India where red tape is everywhere,' says one analyst. On
the other hand, the huge increase in trade between the two nations has
fuelled talk of the 'Chindia' effect.
In
2006, trade between India and China reached $18.4bn. However, there is still
mutual distrust. India remains suspicious of China's relationship with
arch-rival Pakistan, while China is concerned about New Delhi's growing ties
with Washington, especially their nuclear agreement allowing India access to
civilian nuclear technology.
Observers expect the US to deepen its ties with India, which Washington
views as a counterweight to China. America's relations with the Chinese are
more strained as a result of tension over Tibet and Taiwan, not to mention
the obvious ideological political divide. But that hasn't stopped US
companies investing heavily in China, more so than British ones which have
been quicker to spot opportunities in India, perhaps because of their
historic affinity.
But these days investors tend to get more excited about India than China.
True, a superficial look would argue in China's favour: its world class
infrastructure, gleaming skyscrapers, huge supply of cheap labour and
ability to direct resources anywhere they are needed. However, a report from
Bloomberg says: 'For all the stories about China churning out millions of
engineers and scientists, innovation isn't at the heart of the economy.
Foreign investment and massive government spending, not ideas or start-ups,
lie behind China's boom.' There is a dearth of internationally known Chinese
companies that operate on a global scale and market their products abroad.
In
contrast, India has fostered globally known and competitive firms like
Infosys and Reliance Industries, and has done a better job protecting
intellectual property rights. China may get more headlines, yet the steady
increase of Indian billionaires (Lakshmi Mittal, to name but one) is a
reminder that India's markets are more developed. The demographics also
favour India which has younger population.
A
report by Deutsche Bank cites surveys indicating that India has better
corporate governance standards and its companies are more commercially
driven. The bank adds: 'Although India started economic reforms a decade
later than China, it is far more advanced in its institutional and financial
infrastructure. This is reflected in contrasting outcomes: foreign direct
investment is considerably lower than in China, but returns on investment
are better on average.'
A
new measure of world economies, published by the International Monetary
Fund, indicates that China and India are closing the gap on America. In a
measure of purchasing power parity, adjusted to take account of exchange
rates, the US is ranked at the top with $13 trillion, China is a close
second at nearly $10 trillion, while India is fourth with $4.2 trillion,
behind Japan.
The Indian academic Jagdish Sheth expects China to become the world's
biggest economy by 2020, and India to overtake Japan to become the third
biggest in just two years' time. That sets the stage for the next leg of the
race between China and India in what promises to be one of the most dramatic
developments of the 21st century.
Top of the page
Indians rated most green
8 May 2008, McClatchy Newspaper (National Geographic), By Queenie Wong
Americans rank last in a new National Geographic-sponsored survey released
Wednesday that compares environmental consumption habits in 14 countries.
Americans were least likely to choose the greener option in three of four
categories — housing, transportation and consumer goods — according to the
assessment. In the fourth category, food, Americans ranked ahead of Japanese
consumers, who eat more meat and seafood.
The new "Greendex" rankings are the first to compare the lifestyles and
behaviors of consumers in multiple countries, according to the National
Geographic Society. It plans to conduct the 100-plus question survey
annually and considers trends more important than yearly scores, said Terry
Garcia, executive vice president of National Geographic's mission programs.
"This is not just a one-time snapshot," Garcia said. "Some of the most
important information may yet be revealed."
U.S. consumers scored 44.9. India and Brazil tied for the top score: 60
points out of 100, because the average household is physically small, most
homes aren't heated, few are air-conditioned and tend to use on-demand water
heaters.
The survey, conducted online by the polling firm GlobeScan, asked a
cross-section of consumers about their house, energy use, transportation,
food, purchases of goods and other activities.
Results were based on 1,000 online respondents per country interviewed in
January and February. The margin of error per country in the survey is plus
or minus 3.1 percentage points 95 percent of the time.
A
separate GlobeScan survey showed consumers in Brazil, Mexico and China to be
most concerned about global warming. In general, people in developing
countries were more worried about harming the environment than those in
developed ones, the survey found. They also live in smaller houses, are more
likely to consume locally produced food and more likely to get to work by
foot, bike or public transportation.
The consumer-choice rankings were adjusted for factors in which individuals
have no control, such as climate and the availability of mass transit.
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