Bharthi-MTN deal based on Rupee convertibility

Bharthi-MTN deal reopens the debate of full convertible rupee. Its been in discussion for good part of decade but I couldn't find good study on impact of this. below article from TheHindu was published in 2003 is still more relevant I think (except the numbers).
Share your thoughts(& links) on pros and cons on this.

Capital account convertibility — Why it's better for India to go slow:

THE international financial system is in a state of introspection, jolted by several financial crises caused by violent capital movements over the last two decades. On their part, Indian policy-makers are also in a state of revisionism and are moving the country to greater capital account openness after several decades of extensive controls.

This article examines the arguments in favour of and against full capital account convertibility and, considering India's experience with partial convertibility in the 1990s, concludes that it would be in India's interests not to move to full capital account convertibility in the near future.

Gains from full mobility: Theoretical arguments...

The proponents of full capital account convertibility advance these arguments in its favour:

An arbitrary (i.e. pre-capital mobility) distribution of capital among different nations is not necessarily efficient, and all countries, irrespective of whether they borrow or lend, stand to gain from the reallocation caused by freer capital mobility. National income goes up in the country experiencing capital outflows due to higher interest incomes, while that in the debtor country increases as the interest paid is less than the increase in output.

Capitalists in the labour-abundant economies tend to lose with a fall in the marginal productivity of capital, and the opposite happens in labour-scarce countries, so that developing nations, which are usually capital-scarce, are doubly blessed under unhindered mobility of capital — the inflow of capital raises the national income and produces a healthy, egalitarian impact on income distribution as well.

It is argued that if there is only a small correlation between the returns on investment in different countries, risk can be reduced by the ownership of income-earning assets across different countries. Free mobility of capital, thus, helps reduce the risks that each country is subjected to.

Finally, it is argued that when full capital account convertibility is in place, government profligacy and distortionary policies are likely to be followed by currency crises that threaten to make the government highly unpopular. Therefore, under capital account convertibility, the salubrious effects of capital mobility are magnified through a change in domestic policy in the right direction.

... the evidence and the counter-arguments

This rosy picture painted by traditional neo-liberal thinking is sullied when we look at what actually happened to developing nations that have gone the full-capital account convertibility way in the 1980s and 1990s.

In a widely quoted study, Dani Rodrik (1998) finds little evidence of any significant impact of capital account convertibility on the growth rate of a country. Worse, a 1999 World Bank survey of 27 capital inflow surges between 1976 and 1996 in 21 emerging market economies found that in about two-thirds of the cases, there was a banking crisis, currency crisis or twin crises in the wake of the surge.

Since the early 1970s, there have been several crises triggered by speculative capital movements: the Southern Cone financial crisis in the late 1970s; the Mexican crisis of 1994-95 and the `Tequila Effect'; the East Asian crisis of 1997; the collapse of the Brazilian real and its impact on the rest of Latin America; the Russian crisis of 1998 and the Argentine crisis of 2001.

Here are the theoretical counter-arguments why full convertibility is correlated with the crises and why, even otherwise, it is not such a good thing:

Contrary to the assumption of the neo-classical model, a large volume of capital inflows into developing countries has actually been used for speculative purposes rather than for financing productive investments.

Capital account convertibility exposes the economy to all sorts of exogenous impulses generated through financial channels, as domestic and foreign investors try to shift their funds into or out of a country. Since financial markets adjust very quickly, even minor disturbances may exacerbate into major ones.

Under flexible exchange rates, capital inflows lead to an appreciation of the domestic currency directly. On the other hand, in a fixed exchange rate regime, increased capital inflows lead to monetary expansion and price inflation (unless there is substantial unutilised capacity), which also causes a real appreciation. In both cases, therefore, capital inflows tend to cause a real appreciation and the possibility of swollen current account deficits because of cheaper imports and uncompetitive exports which, if not controlled in time, will lead to loss of confidence and capital flight.

Because of the massive volume and high mobility of international capital, it has been observed that the government tries to play it safe by keeping interest rates high, thus discouraging domestic private investment. The government also desists from spending on public investment because, through an expansion in government spending, it could send signals of impending increases in fiscal deficits that have the potential of destabilising capital markets and inducing capital flight.

Policy implications for India

The experience with liberalisation of inward capital flows in India has been similar to the economies of Latin America and East Asia, only the magnitude of these flows has not been large enough to cause serious macro and micro management problems.

Based on the experience of other countries, the following issues are of concern for India:

Flexibility in exchange rate: To prevent a nominal appreciation because of the capital inflows, the RBI has been adding billions of dollars to its reserves; the foreign exchange reserves with the RBI are a whopping $69 billion.

However, intervening foreign currency purchases to stabilise the exchange rate and accumulation of forex reserves have implications for domestic monetary management, which can be seriously impaired by divided short-term monetary responses during a capital surge.

On the other hand, the option of a more flexible exchange rate would cause an appreciation in the value of the rupee, which may hurt exports.

Hence, the usual macroeconomic trilemma (Obstfield, M and A. M Taylor 2001) where only two of the three objectives of a fixed exchange rate — capital mobility and an activist monetary policy — can be chosen. Since the government has already liberalised inflows of capital to a large extent, the authorities could attempt to deal with this problem in one of the following ways: It could begin relaxing capital controls, allowing individuals to exchange rupees for dollars. Indeed, some piecemeal measures in this direction have already been taken. But this, perhaps, is a risky proposition.

For one thing, the embrace of full convertibility is itself likely to bring more dollars into the country in the initial phase and add to the existing upward pressure on the rupee. More important, given the lack of regulatory capacity, such convertibility runs the risk of a future financial crisis that may scuttle the growth process.

Alternatively, the government could tap this opportunity to liberalise imports. Further liberalisation will stimulate imports and create the necessary demand for dollars, mopping up the excess supply of dollars and relieving the government of the burden of low-yielding foreign exchange reserves.

Inasmuch as the imports are used as inputs for further exports, the move will kill two birds with one stone — it will relieve the upward pressure on the rupee, and bring the usual efficiency gains. In this regard, therefore, import liberalisation seems to be a distinctly better option.

Banking and capital market regulatory system: The relatively greater contribution of portfolio capital towards India's capital account, and the fact that these inflows could increase to significant levels in the future as India's financial markets get integrated globally, show that an important sphere of concern is their skilful management to facilitate smooth intermediation.

Banks intermediate a substantial amount of funds in India — over 64 per cent of the total financial assets in the country belong to banks. However, many Indian banks are undercapitalised, and their balance sheets characterised by large amounts of non-performing assets (NPAs).

Unless banking standards are duly brushed up, viable competition introduced and government interference reduced, it would be reckless to go in for full capital account convertibility, which requires flexibility, dynamism and foresight in the country's banking and financial institutions.

Transparency and discipline in fiscal and financial policies: It is well known that the last thing that a government wanting to gain the confidence of investors should do is to be fiscally imprudent. However, New Delhi does not seem to be paying heed to this consideration at all.

The ratio of gross fiscal deficit to GDP increased to 10.4 per cent in 1999-2000 from 6.2 per cent in 1996-97 and 8.5 per cent in 1998-99, and has hovered around the 10 per cent figure since then. Such high fiscal deficits can prove to be unsustainable and frighten away investors.

Hence, there is an immediate need for putting brakes on government expenditure, and until that has been satisfactorily done, opening up the capital account fully would carry with it a big risk of sudden loss of faith of investors and capital flight.

Caution on outflows

Whatever the apparent theoretical benefits of capital account convertibility, they have not yet been vindicated by the actual empirical evidence; rather, the experience of the countries in the developing world that have experimented with capital account convertibility has been that of increased market volatility and financial crises.

Moreover, at least a part of the large inflows of capital into India are a consequence of the recessionary conditions elsewhere. The country's macroeconomic fundamentals, though better than before, are not good enough to warrant long-lasting confidence from foreign investors. The reform process is not proceeding with adequate speed, banks are saddled with large volumes of non-performing assets, the financial system is not deep or liquid enough and the country ranks high in the list of corrupt nations.

Once the conditions in the rest of the world improve, and the interest rate differentials between India and the rest of the world narrow further, this capital may move on to greener pastures. Hence, one cannot bank on the continuous supply of foreign capital to finance whatever outflows occur from the country.

Therefore, we believe that India should be extremely cautious in liberalising capital outflows any further.

While it should leave no stone unturned to promote inward FDI, which, because of its very nature, is less susceptible to sudden withdrawals and also tends to promote productive use of capital and economic growth, it should be wary of short-term capital flows that have the potential to destabilise financial markets

The `slow and steady' stance that the RBI has taken towards capital account convertibility is to be appreciated.

It must be emphasised that only over time will the Indian economy be mature enough to be comfortable with full capital account convertibility — financial markets will deepen, macroeconomic and regulatory institutions grow more robust and the government will learn from past mistakes.

The Government would do well to focus at present on the fundamental processes of institutional development and policy reform because, in the long run, these would serve the country better than an early move towards full capital account convertibility.

India's Inflation

India's WPI Inflation rate fell to -1.61% for the week ended on June 6 2009

SONAL VARMA, ECONOMIST, NOMURA: "The only significance is that this is the first negative WPI reading in the history of the series. "What is interesting is the decline in primary article prices this week. The high base effect will keep the WPI inflation in the negative zone for atleast three months. "The inflation momentum has been picking up and a continued rise in commodity prices will exert upward pressure on input costs. With consumer prices still high and signs of the economy stabilising, we judge that the rate cutting cycle is over."

RUPA REGE NITSURE, CHIEF ECONOMIST, BANK OF BARODA: "This is due to the high statistical base, but going forward inflationary risks are already in sight. Oil prices have more than doubled in the last one month and also the fact that primary article prices are not showing any signs of easing. "By end-March 2010 inflation is expected to be between 5.5 percent to 6 percent based on the current trends, when we may see the RBI going back to the tightening cycle."

GUNJAN GULATI, ECONOMIST, JP MORGAN CHASE: "As expected the headline inflation this week reported a negative print, led primarily by the high base last year. "On the overall prices, a sustained and sharp rise in global crude oil prices and delayed seasonal rainfall could likely be a big uncertainty going forward."

SHUBHADA RAO, CHIEF ECONOMIST, YES BANK: "It was a widely anticipated phenomenon. I can attribute this to largely a statistical base. I anticipate the trend to continue for the next couple of weeks. "However, inflation pressures are expected to gradually build up towards third and fourth quarter of the current fiscal. By (fiscal) year-end, we expect inflation to exceed 5.5 percent."

A PRASANNA, CHIEF ECONOMIST, ICICI SECURITIES PRIMARY DEALERSHIP: "It has come in along market expectations. I don't think this number has any significance. It is just a statistical occurance and has no monetary policy implications. "On a seasonally adjusted basis inflation is going up and I think the RBI will be focusing on that." "It could be in the negative zone for 2-3 months."


Source: EconomicTimes

Inclusive Capitalism for India

Knowledge@Wharton posted very interesting article about
The Poor as Stakeholders: Can 'Inclusive Capitalism' Thrive in India?

India Inc. are bound to surrender to social business enterprise unlike most of its western counterparts. It makes business sense as the World Resources Institute has recently put a number on the size of the bottom of the pyramid market: US$ 1.2 trillion in terms of purchasing power parity and 84.8 per cent of the national market. It is, therefore, very much in their interests to target this segment rather than the affluent top of the pyramid. There is also a growing political backlash against policies of rapid industrialization.

Indian Banks are not affected by Credit Crisis..!

Yes Indian banks are not affected by global Credit Crisis but you should know -- Indian Bank Accounts - Are your deposits insured?

Indian financial sector will be largely unaffected in any direct manner on account of deteriorating global markets.

Remember 60s/70s during Indian banking crisis, India goverment nationalized banks. Today that's happening in developed world. Ofcourse I don't think nationalizing assets will solve all problems but I do believe free market cannot regulate itself with third-public-eye. 

Also Thanks to (ReserveBank of India)RBI's stringent regulatory requirements that require banks in India to maintain a cash reserve ratio of 9%, a statutory liquidity ratio of 25% and a capital adequacy ratio of 9% - measures to ensure a bank is not highly leveraged and is adequately capitalised.

Banks in Indian often complain that the regulatory cost of doing business in India is one of the highest anywhere in the world but given the unravelling of the credit crisis, they will have the central bank to thank for India being relatively unscathed.

India’s Home Loan GDP Ratio 5%, versus 50% In US & UK

Despite real estate witnessing boom in last couple of years with 90% of home loans borrowers being the first timers, home loans GDP ratio in India continues to be at meager 5% as against 50% in US and UK and therefore suggested that it be more than doubled in budget proposals for 2008-09.

Above observations are made in a Paper on Reality Check brought out by The Associated Chambers of Commerce and Industry of India (ASSOCHAM), pointing out that since buying a home requires huge investment, especially for first time buyers, higher home loan GDP ratio is necessary as 90% of borrowers are the first time borrowers.

As such, high interest rates coupled with soaring property prices have only impacted the affordability of buyers, demand, however continues to persist and will become stronger and more intense in near future.
The ASSOCHAM President, Mr. Venugopal N. Dhoot said that at present, India has a housing shortage of about 19.4 million units of which 6.7 million is estimated for urban India and those of 12.7 million units in rural India. However, with rising income, swelling middle class and rapid urbanisation, the demand is set to shoot up and is estimated that additional 45 million units would be required for both rural and urban areas by 2012.

As a result of rising income and swelling middle class, India’s per capita income has doubled over the past 20 years. With population growth of about 1.6% per annum and Gross Domestic Product (GDP), growth of 9% per annum, the per capita income is expected to quadruple by the year 2020.

The average real income of urban India and rural India is likely to grow by 5.7% and 3.6% respectively by 2025. Moreover, India’s middle class is expected to expand by more than 10 times from its current size of 50 million to 583 million people in next 18 years.

Therefore, all these estimates work out to make a strong case for higher home loan GDP ratio so that India and its population is able to keep a pace for meeting the demand for housing units, pointed out Mr. Dhoot.

Commenting on impact of rising home loan rates, the ASSOCHAM Paper says that home loan rates have shot up from 7% in 2003 to 12% in 2007 with its impact massively following across the board including genuine buyers, speculators, real estate developers and bankers.

A case in example is that as the home loan rates have gone up sharply, the interest pay out on housing loans has amplified as a borrower of Rs.10 lakh with loan tenure of 20 years has to shell out an extra of Rs.3250 every month on his EMI. The annual additional burden comes out to be as high as 39,000. Loans up to Rs.20 lakh form 80% of total housing loan portfolio, says Mr. Dhoot.

The Paper also points out that share of housing loans in total personal loans have been on its way up since 2000-01. It has increased from 37.2% in 2001-02 to 48.6% in 2004-05. Home loans constituted 52.7% in the total household credit in the year ended March 2006, marginally up from 52.5% in the previous year. Housing together with agriculture accounted for more than two-third of incremental priority sector lending in 2005-06.

Home loans formed 11% of the total outstanding credit of scheduled commercial banks in March 2005 up from just 2.4% in May 1990. The sales value of housing construction has witnessed an exceptional leap from Rs.17.61 crore in 1991 to Rs.4,182.67 crore in the year 2006. Lower interest rate regime has played a pivotal role in the progress.

However, with the repricing of interest rates in the last four years from 7% to 12% and the sky rocketing prices of the property, there has been a slowdown in the residential property market. The phenomenon signifies suppression of demand rather than absence. Though it is necessary to check the flow of speculative money it needs to be appreciated that augmenting the land supply for development would go a long way in easing the demand pressure on prices.

Credits: IRNews

Indian Political Reform...

Everyone is talking about Economy Reform and its importance for growth & Opportunities. But what we need today is Political Reform for better governance.

Yes, with UP election just completed and recently DMk drama, I was thinking India Political system needs Reform. Its hard to believe, why not many is talking about it? and brains of media is not spending time & effort to push such agenda among person (in)directly into Election Commission.

my suggestions:

1) any MP or MLA, elected cannot switch parties after election. Doing so, should trigger new election for that constitution.

2) Collusion cannot be formed after election results. any such collusion will not be allowed to form government. (reelection or president rule if need be)

3) all collusion MUST name leader (CM or PM), cabinet ministers (name & post) BEFORE the election and ofcourse with backup nominees for unavoidable changes. any change after election has to be examined by EC for reasons(which should be non-political) & approval.

4) government should specific measurable agenda/target (for performance appraisal). target/goals, how to measure & when to measure can be mention by party and president/EC will do the checking as specified. failing that should result in recall.

5) all MP, MLAs, CM & PM has to be paid at power with CEOs/CFOs (in millions)

6) President should be elected by people and President role should be head to state (military, civil service, judicial, government) and to make government & civil service more accountable.

Please do comment to add or debate.

India cannot afford villages...

There has been a general tendency to romanticize village life as a return to our roots. What is noticeable, though, is that most people who romanticize village life in India tend to live in cities—in India, or elsewhere. They also seem incapable of noticing the irony implicit in this romanticization, since their forefathers, too, were once villagers —who migrated to cities for good reason.

There was no greater proponent of villages than Mohandas Gandhi, who had been educated in London, and had a law career in urban South Africa. Gandhi’s most vehement critic at the time was Ambedkar, who knew about village life as an untouchable. Attacking Gandhi’s view on the republic of villages as overly sentimental, Ambedkar urged his followers to leave their rural persecution behind, get educated and move to urban centres.

Clearly, anyone who lives in the average Indian village and has access to information and money would like to leave for towns and cities.

The conflating of the development of rural people with the development of villages perhaps explains the misplaced emphasis on the latter. The fact that despite decades of attempts at developing rural areas, nothing much has been achieved in the development of rural people suggests that the answers may lie elsewhere.

Every developed economy has followed a path which begins with agriculture being the main source of income for the majority of the population, and ends with agricultural employment being a very small fraction of the total labour force. The shift has always been from a village-centric, agriculture-based economy to a city-centric, non-agricultural economy—as agriculture becomes more productive, labour is released into manufacturing and services, which have higher productivity and incomes.

At the low levels of economic prosperity seen in rural India, economic growth is a precondition for development. Economic growth, in turn, is a cause and consequence of urbanization. The reason is not hard to see. In urban areas, people aggregate in numbers sufficient for markets to deliver goods and services efficiently and cheaply. Consider the supply of an essential infrastructural service such as electricity. The economics of power generation and distribution do not allow decentralization to the level of villages that are home to a few hundred people. The average cost of per unit of power makes it prohibitive. The only way for a small 1-2MW decentralized plant to provide power for a village of 1,000 people is for the villagers to pay substantial premiums—which is highly improbable. No wonder then that essential services such as uninterrupted electricity are not available at the village level. By comparison, supplying decentralized power for the needs of a few tens of thousands of people is economically feasible.

Villages are not the proper object of analysis when it comes to economic growth, and hence economic development. By insisting on the development of villages, scarce resources, which could have been more efficiently used elsewhere, are wasted. The same resources can be used in the development of cities. It seems to us that the answer to the development of rural people paradoxically lies in urban development.

About 700 million Indians live in villages. Clearly, there is little scope for urbanization in their case by having them migrate to existing cities—those are already bursting at the seams. Practically all Indian towns and cities are unplanned and inefficiently use land and other resources. They are inadequate even for current residents, leave alone the idea of adding hundreds of millions of more people to them. The country requires new urban centres to accommodate the hundreds of millions of people who need to be in such centres.

In fact, the answer to Mumbai’s or Delhi’s problems is, interestingly enough, that these cities lose their centrality to the Indian economy as other regional centres come up and mass migration to large cities ceases. People tend to forget that New York (or London) was once considered an unlivable, hopelessly polluted city. At least part of the solution to the city’s problem lay in the creation of other centres such as Chicago, St. Louis and the cities of the west which relieved the pressure on New York itself.

India has a choice of futures, say, in 2030. Will the majority of Indians continue to live in 600,000 small villages engaged in near-subsistence agriculture or will they be in living in 600 well-planned vibrant cities (or 6,000 towns of 100,000 population, for that matter) working in non-agricultural sectors and enjoying a rich social and cultural life? Looking at current revenue ratio- income from agricultural is slowly declining and service sector is increasing even with 60% India's workforce is in rural agricultural sector.

Depending on how we use our resources, the latter future can be a reality. Achieving that reality would be the greatest challenge for India and arguably, the most rewarding as well. Rather than trying to trap people in villages and agriculture, the focus should be on the creation of new urban centres which will lead to economic growth and development of people.

Source: WSJ's Livemint

Advantage Chennai

PEOPLE who study far but play safe, and a city with little activity are descriptions often used to parody Chennai. The caricatures have had an unlikely spin off: companies providing support for overseas consulting, equity research and finance firms appear attracted by them.

Companies such as Frost & Sullivan, OfficeTiger and Irevna provide support to consultants and analysts overseas. More such work is headed here, say people working in the sector. The reason is that Chennai's caricatures provide it a cost advantage over competing cities such as Bangalore and Mumbai.

The US consultancy Frost & Sullivan's Chennai centre with about 160 people is its biggest operation in India. The Mumbai office deals largely with the Indian practice while a significant number of people in the city provide support to the overseas consultancy.

Mr Anand Rangachary, Deputy Director of Frost & Sullivan's India operations, said it is easier to retain skilled people at a lower cost here. Supporting the view was The World Bank's Vice-President, Mr Fayezul Choudhury, who felt there is stability in the workforce here because the attrition rate is low (the bank has established a back office in Chennai).

The low attrition rate may not stem from a deep-rooted sense of loyalty to employers. People working in the sector feel it could be partly explained by fewer opportunities the city offers in relation to Mumbai or Bangalore.

Another cost-related benefit is in the form of office space. Not only is it cheaper to lease office space here, but also there is room left to build new offices within the city. The World Bank back office centre, for instance, plans to build an office spread over 60,000 sq ft of land within the city.

Stable workforce and inexpensive real estate count only if a city has a communication infrastructure and a pool of qualified people. Chennai gets high marks on both counts.

A person employed in industry said that the metropolis has a large pool of finance professionals such as chartered accountants who are suited for the support jobs. Perhaps the large pool has nudged the World Bank to study the possibility of moving some of its complex work such as monthly valuation of bonds and derivatives here.


The fallout of the influx of new firms is bound to neutralise cost advantages. Mr Rangachary identified the development of the planned information technology corridor in south of the city as a factor that would drive up costs. "It's a good three years before Chennai loses advantages," he added.

Cost advantages that brought companies to the city have a limited shelf life. However, that may not be the end the story. Mr Joseph Sigelman, Co-CEO of OfficeTiger, feels Chennai has other advantages.

Mr Sigelman is sceptical about the importance of cost advantages. He felt locating business in cities such as Chennai is sustainable only if "we actually perform services better than they can be performed anywhere else." He said forces that make this business sustainable such as quality of people are available in Chennai.

Even with the benefit of hindsight, Mr Sigelman said if OfficeTiger had to start all over again the choice would be Chennai.

The search for a low-cost environment may have brought the companies. Improving quality of manpower may help them stay and grow here.

Source: The Hindu

India: Understanding OBC and Quota

Either they support or against OBC Quota, I don't how many people know what makes OBC?

Why and What are we fighting for or against?
Guidelines for Consideration of requests for Inclusion and complaints of under Inclusion in the central list of OBCs - http://ncbc.nic.in/html/guideline.html

Castes is included in almost all measuring indexes. Which means, if you caste is better educated & richer then Government expect your caste people to take care of you or help achieve atleast minimum. Thus encouraging caste biased society.

Is this vision Government has for the people? instead of encourage society which is not built on caste?

It also mentions Communities- What that means ?

India's population of other backward classes
According to national election studies - OBC population of our country is between 40-44 percent. According to Mandal Commission - has estimated the OBC population in the country at 52 percent. and regarding National Sample Survey - reports had problems since Many of the respondents were not aware of their status in terms of caste.

When the question on the size of OBC population was placed before Human Resource Development Minister Arjun Singh recently, he did not have the precise figures and he said, "I think, that should be decided by people who are more knowledgeable. But the point is the OBCs form a fairly sizeable percentage of our population". I think, he should be fired for this answer.

Is it irrational to ask for statistics to find better or clear solutions? May be after the survey, we might find 50% Quota is not enough. might required to be 80%. This way, both group can base the argument on fact instead of shying away from it.

Creamy Layer
Politicians should understand that the concept of excluding creamy layer from reservations is now firmly established. It is pointless for them to argue that creamy layer does not apply to quotas defined under Article 16 (4) and Article 15 (5). This is because the Indira Sawhney judgment does not provide for exceptions to the creamy layer principle. The order observed that "determination of creamy layer is a part of constitutional scheme".

These yardsticks for creamy layer cut-off can hardly be considered unrealistic, considering that all-India poverty among OBCs on the basis of a poverty line defined by a monthly per capita expenditure of Rs 361 for rural areas and Rs 567 for urban areas is broadly at 19 per cent in rural areas and 25-35 per cent in urban areas.

for example - In Karnataka, a family whose income exceeds Rs 2 lakh a year is excluded from quota. Similarly, a family who has one member in Class-I or Class-II service is considered a creamy layer.

But India's annual per capita income, notwithstanding its billionaires, estimated to be Rs 26,000, thus Karnataka ceiling does look reasonable.

Don't Change Quote, Change OBC definition to include people in need and exclude cream layer.

Yes, Iam not against OBC Quota BUT against the OBC definition. Instead of fight for wrong reasons, lets us first understand what are we fight for? and who are we fighting against (poor people belong to different(/'s0-called-forward') caste)?

as Time's article mentioned - The mandate in the preamble, ‘We the people', empowers both the legislature and the judiciary equally. A legislature elected for particular period cannot assume the mandate of sovereignty of the people exclusively to itself. Both wings must display humility in the exercise of their powers in order to avoid unnecessary collision.

also for read, Indian Express - A to Z of OBC

appreciate your rational comments in a language which wouldn't hurt others feelings.

Population, not free trade, behind China and India booms

An academic paper has challenged widely-held views about the emergence of China and India on to the world stage, one of the most important economic phenomena of recent years.

The reasons for the growth of these countries are usually thought to be globalisation, free trade and high wages in developed countries. But a paper by Professor Paul Sharp of the University of Copenhagen suggests the answer is much more prosaic. Drawing on a study of 19th century America for the Economic History Society's annual conference at the weekend, Prof Sharp said America's emergence in the 1800s was due to phenomenal population growth, not the free trade that was sweeping the globe at that time.

The increase in wheat trade between Britain and the United States in the nineteenth century had little to do with falling barriers to trade, but was linked to a rise in production in the US. This was almost certainly the result of large-scale population growth as immigrants flocked to America and became farmers. Prof Sharp's statistical analysis shows that a 1% increase in US production led to a 3% increase in UK imports. US production increased well over 1,000% in the nineteenth century.

The populations of China and India have been outpacing those of western economies for years, so it should be little surprise that most electrical appliances are manufactured in China or that an increasing amount of software outsourcing goes to India.

Source: Guardian

U.S., Immigrants == Future Entrepreneurs

A new study found that one in four technology and engineering companies founded in the U.S. between 1995 and 2005 had at least one founder who was foreign-born. Many of them were from India and China. Nationwide, immigrant-founded companies generated $52 billion in sales in 2005 and employed 450,000 people. Non-citizen immigrants living in the U.S. also are increasingly being named as inventors or co-inventors on patents.

Research shows that immigrants have become a significant driving force in the creation of new businesses and intellectual property in the U.S. -- and that their contributions have increased over the past decade.

If anyone thinking that U.S. is losing its edge due to immigrants this was proved wrong by study. Infact, advantages the U.S. has, is something unique to be able to bring in the world's best and brightest.

The study also found that:

* Indians were the most dominant ethnic group, heading up 26% of the companies that were founded by immigrants.

* California led the way with immigrant entrepreneurs. There, 39% of tech companies were immigrant-founded. New Jersey was close behind, with 38%, and Georgia and Massachusetts also had a healthy number of tech companies founded by immigrants. Immigrant-founded companies were much less common in Washington, North Carolina and Texas.

* Chinese (either mainland or born in Taiwan) were most likely to set up their companies in California. Nearly half of the companies founded by mainland Chinese and 81% of companies headed by Taiwan-born immigrants were in California. Indian-founded companies were well represented in both California and New Jersey, while British entrepreneurs favored California and Georgia.

* The immigrant mix differed from state to state. In Florida, 35% of immigrant-founded companies were started by people from Cuba, Columbia, Brazil, Venezuela or Guatemala. In Massachusetts, Israelis were the biggest founding group, accounting for 17% of immigrant-founded startups. In New Jersey, Indians headed 47% of the new companies started by immigrants. The researchers suggested that the ethnic clustering of start-up companies reflected the tendency of immigrants to form social and business networks.

* Immigrants were most likely to start companies in the semiconductor, computer, communications and software fields. They were least likely to start companies in defense/aerospace and environmental industries.

* While immigrants are making their mark all over the country, Silicon Valley remains a hotbed of entrepreneurship. Just over 52% of start-up companies there had immigrant founders, with the highest proportion from India, followed by China and Taiwan. By comparison, just under 19% of startups in Research Triangle Park, N.C., another high-tech center in the country, had an immigrant founder.

Immigrant entrepreneurs may be especially attractive to investors since they bring certain advantages to the business equation, For instance, there may be a chance for enhanced revenues because the immigrant's ties to the homeland afford a "pathway to lucrative, larger markets." On the cost side, the immigrant may have access to lower-cost workers, supplies and manufacturing facilities in the home country.

I hope U.S. government will take these fact has input and reflect in Immigration Policies accordingly.

Editorial Reviews: Planet India

Planet India: How the Fastest Growing Democracy Is Transforming America and the World

Book Description: India is everywhere: on magazine covers and cinema marquees, at the gym and in the kitchen, in corporate boardrooms and on Capitol Hill. Through incisive reportage and illuminating analysis, Mira Kamdar explores India's astonishing transformation from a developing country into a global powerhouse. She takes us inside India, reporting on the people, companies, and policies defining the new India and revealing how it will profoundly affect our future -- financially, culturally, politically.

The world's fastest-growing democracy, India has the youngest population on the planet, and a middle class as big as the population of the entire United States. Its market has the potential to become the world's largest. As one film producer told Kamdar when they met in New York, "Who needs the American audience? There are only 300 million people here." Not only is India the ideal market for the next new thing, but with a highly skilled English-speaking workforce, elite educational institutions, and growing foreign investment, India is emerging as an innovator of the technology that is driving the next phase of the global economy.

While India is celebrating its meteoric rise, it is also racing against time to bring the benefits of the twenty-first century to the 800 million Indians who live on less than two dollars per day, to find the sustainable energy to fuel its explosive economic growth, and to navigate international and domestic politics to ensure India's security and its status as a global power. India is the world in microcosm: the challenges it faces are universal -- from combating terrorism, poverty, and disease to protecting the environment and creating jobs. The urgency of these challenges for India is spurring innovative solutions, which will catapult it to the top of the new world order. If India succeeds, it will not only save itself, it will save us all. If it fails, we will all suffer. As goes India, so goes the world.

Mira Kamdar tells the dramatic story of a nation in the midst of redefining itself and our world. Provocative, timely, and essential, Planet India is the groundbreaking book that will convince Americans just how high the stakes are -- what there is to lose, and what there is to gain from India's meteoric rise.

Introduction: Life on Planet India

I remember the last time the world was talking about India. It was a fleeting fashion moment following the Beatles' trip to Rishikesh. Nehru collars and beads came into fashion, along with paisley motifs in psychedelic colors. Transcendental Meditation became the latest fad for stress relief. Laugh-In replaced Leave It to Beaver as the iconic American show. India was suddenly cool. Countercultural types embraced India as the antithesis of the West, lost to the empty materialism of the famous "plastics" scene in the movie The Graduate. India wasn't backward; it was wise and spiritual. But then the West moved on. Plastics prevailed, and India faded into the background.

My Indian father's family lived in Bombay. Every few years, we prepared for the incredible journey to the other side of the world. We collected precious supplies for our relatives in India: jeans and sneakers for our growing cousins, huge jars of Tang, later giant bottles of Tylenol, plastic bags of California-grown almonds and pistachios. Our family mailed us lists, and we stuffed whatever we could into our suitcases.

Living in Bombay in 1967 and 1968, I felt like I had been exiled from the real world. My grandparents' flat in Juhu, though surrounded by the homes of Bollywood stars, had no television. Across the main road near the apartment building was a reeking slum. The only relief from the paralyzing heat was to sit under a crazily beating fan. Everything was different: the food, the language, the climate, the rules of what could and couldn't be worn, what could and couldn't be said. There was no privacy. From early morning until late at night, I could hear neighboring housewives banging pots, parents screaming at children, Hindi film songs blasting, and bicyclists ringing their little bells.

In the morning the milkman came around with his cow. My grandmother or one of my aunts brought a brass pot down to him and he squatted next to the cow and sent warm streams of milk into the pot. I learned to keep a keen eye on the milkman to make sure he didn't, via a well-concealed tube, water down the milk. We took the milk upstairs and boiled it. While I sipped hot milk mixed with Ovaltine, I dreamed of dragging my fingers through the condensation on the outside of a tall glass of cold milk.

My aunt and uncle live in Gurgaon now, a booming suburb south of New Delhi. They have two refrigerators and buy pasteurized milk in sealed plastic bags. A huge, flat-screen television with cable brings hundreds of Indian and foreign channels into their living room. They keep in touch with family dispersed around the world via e-mail and telephone. Air conditioners in the bedrooms keep the apartment pleasantly cool. A late-model Honda four-door sedan is parked downstairs.

From the rooftop terrace of my aunt and uncle's flat, I can see buildings going up everywhere, the little tarps of the migrant construction workers dotting vacant lots. Women in full gathered skirts and flowing half-saris, arms covered with bangles up to their shoulders, carry loads of freshly mixed cement in baskets on their heads to the men who transfer the burden onto their own heads before scrambling barefoot up rickety scaffolding to deliver the wet mass. Near the tarps, a child runs crazily next to an old tire he urges forward with a stick. Beyond him, a Citibank office tower rises into view.

On a recent trip to India, I sat in the new Bombay domestic airport waiting for a flight on Kingfisher Airlines, whose slogan is "Fly the Good Times," my laptop propped on my knees. I typed in the code from the card I had just bought from a Tata Indicom kiosk and immediately got a strong wireless connection. On the way to the airport from the old family flat in Juhu, I had passed forlorn groups of destitute families, huddled under an unfinished highway overpass on thin mats of filthy cotton, the little babies naked and snot-nosed. It was the kind of scene that profoundly shocks first-time visitors to India and to which I have never become immune.

As I checked my e-mail in the gleaming terminal among the Indian and foreign businessmen and families waiting for one of the many flights departing for every part of the country, I thought about the India I lived in forty years ago and India today, and I wondered where India would be forty years from now.

"'Where are we headed with our billions?' That is the question India is asking itself," a friend told me in New Delhi over a drink. It is a question the entire world should be asking.

Half my family is Indian. During most of my lifetime, India changed, but did so almost imperceptibly. Then, suddenly, the changes began to come with dizzying speed. With each arrival, I felt I was watching time-lapse photography. No democracy in history has undergone a transformation of India's magnitude or velocity.

Traveling the length and breadth of the country, I witnessed the churning of India's incredible metamorphosis. I interviewed hundreds of people who shared their visions of India's future, most utopian, some grim, with me. I talked to the people in the culture industries who are reimagining India's ancient stories for a new global audience. I met businessmen who are dedicated to including the poor in India's booming economy, even as they take their companies global. I listened to household servants, taxi drivers, farmers, and street vendors talk about their daily struggles, their frustrations, their faith that their children's lives would be better. Everywhere, I was stunned by the pride, the bullishness, the sense that this moment belongs to India. I caught a glimpse of India's future, its possibilities and its perils, and in that future I saw our own, for as goes India, so goes the world.

The World in Microcosm

No other country matters more to the future of our planet than India. There is no challenge we face, no opportunity we covet where India does not have critical relevance. From combating global terror to finding cures for dangerous pandemics, from dealing with the energy crisis to averting the worst scenarios of global warming, from rebalancing stark global inequalities to spurring the vital innovation needed to create jobs and improve lives -- India is now a pivotal player. The world is undergoing a process of profound recalibration in which the rise of Asia is the most important factor. India holds the key to this new world.

India is at once an ancient Asian civilization, a modern nation grounded in Enlightenment values and democratic institutions, and a rising twenty-first-century power. With a population of 1.2 billion, India is the world's largest democracy. It is an open, vibrant society. India's diverse population includes Hindus, Muslims, Sikhs, Christians, Buddhists, Jains, Zoroastrians, Jews, and animists. There are twenty-two official languages in India. Three hundred fifty million Indians speak English.

India is the world in microcosm. Its geography encompasses every climate, from the snowcapped Himalayas to palm-fringed beaches to deserts where nomads and camels roam. A developing country, India is divided among a tiny affluent minority, a rising middle class, and 800 million people who live on less than $2 per day. India faces all the critical problems of our time -- extreme social inequality, employment insecurity, a growing energy crisis, severe water shortages, a degraded environment, global warming, a galloping HIV/AIDS epidemic, terrorist attacks -- on a scale that defies the imagination.

India's goal is breathtaking in scope: transform a developing country of more than 1 billion people into a developed nation and global leader by 2020, and do this as a democracy in an era of resource scarcity and environmental degradation. The world has to cheer India on. If India fails, there is a real risk that our world will become hostage to political chaos, war over dwindling resources, a poisoned environment, and galloping disease. Wealthy enclaves will employ private companies to supply their needs and private militias to protect them from the poor massing at their gates. But, if India succeeds, it will demonstrate that it is possible to lift hundreds of millions of people out of poverty. It will prove that multiethnic, multireligious democracy is not a luxury for rich societies. It will show us how to save our environment, and how to manage in a fractious, multipolar world. India's gambit is truly the venture of the century.

In Search of a New Paradigm

"Our biggest challenge is the challenge nobody has solved in the world: how to grow equity," Mukesh Ambani, chairman of Reliance Industry, India's biggest company, told me. Can liberal democracies forge a global market economy that is environmentally sustainable and reduces inequality? The United States has failed to achieve this. While it has proven its capacity to generate vast wealth, the so-called Washington consensus has advanced corporate interests over the welfare of average citizens and small businesses, exacerbated gaps between the affluent and the poor, and operated with stunning disregard for the environment. America's prosperity is dependent on overconsumption of the world's resources -- with just 6 percent of the world's population, the United States consumes 30 percent of the earth's resources. And it produces a disproportionate share -- 25 percent -- of dangerous greenhouse gases.

American technological, economic, and strategic dominance is being challenged for the first time since the fall of the Soviet Union. Ironically, the communication and information technologies that propelled America to the forefront during the 1990s are now contributing to the erosion of American dominance. These technologies have created a world where time and space are compressed as never before, where ideas, money, services, and people are constantly in motion, freed from the constraints of national boundaries.

The process of globalization spurred by these technological innovations...

Excerpt. © Reprinted by permission. All rights reserved by publisher.
Source: Amazon

India: Budget 2007-08 Highlights

India's Union Budget 2007-08 Key Highlights/Summary:

• Income tax exemption hiked by Rs 10,000.
• Five-Year tax holiday for 2,3 & 4 Star Hotels.
• No excise duty on instant food mixes.
• 15 specified machinery import duty to be reduced from 7.5 % to 5%.
• ESOPS to attract FBT.
• MAT extended to IT companies.
• Duty on sunflower oil down by 15%.
• Excise duty for plywood down from 16 % to 8%.
• Water purification devices fully exempted from excise.
• Private importers of aircraft : 3% import duty to be levied including helicopters.
• Tax exemption for senior citizens : Rs 1.95 lakh.
• Income tax exemption : for women Rs 1.45 lakh.
• Education cess : service tax now at 3%.
• No change in corporate income tax.
• Bank cash transaction tax : limit raised to Rs 50, 000.
• Service tax exemption on tech buz incubators.
• DoT to review Telecom tax structure.
• Effective corporate tax rate at 19.5 per cent.
• Tax exemption limit : raised to Rs 1.1 lakh.
• Cement excise: Rs.350/tn on Rs.190/bag .
• Excise cut on cement (till Rs 190/bag) to 350/mt.
• Duty on mouth freshners is to be cut by 45%.
• Excise Duty : Bio-Diesel fully exmpted.
• Import duty : cut on medical equipments to 7.5 per cent.
• No change in service tax rate.
• e-filing of returns has been a success.
• Excise duty : raised to 5% on cigarettes, tobacco.
• 20,000 hotels more for Commonwealth Games.
• Coking coal : exempted from customs duty
• Losses on CST,VAT Rs 5495crore to be compensated.
• Reduction in customs duty on Polyester & Fibre by 7.5%.
• Centre to give Rs 1.42 lakh crore to states in '08 taxes.
• National level goods & services tax to be introduced from Apr 1
• Central Sales Tax : 1% cut
• Physically-challenged : 1 lakh jobs for them.
• Gross tax revenue : increased by 19.9%, 20% and 27.8% in first 3 years of UPA Govt.
• UPA Govt promises tax rate to be stable.
• SMEs : Government to encourage banks to lend SMEs.
• Inflation between 5.2% and 5.4% in 2007.
• Micro irrigation in Andhra Pradesh and Tamil Nadu to benefit.
• Mumbai will become a world class financial city.
• To study climate change Govt. to appoint committee.
• Defence : allocation up at 96000 crore.
• e-governence programme : Allocation raised to 719 crore.
• Overseas investment: even allowed by individuals via MFs.
• Rural electrification : Rs 3983 crore.
• PAN: sole identification number for markets.
• Weather-based crop insurance scheme.
• Tech upgradation scheme : Allocation up from 535 to 911 crore.
• North-East: Rs 14365 crore allocated
• Textile parks : Allocation up from Rs 189cr to Rs 425cr.
• Farm credit growth doubled in two years.
• Average inflation seen between 5.2%-5.4%.
• Tourist infrastructure : Allocation up at Rs.520 crore.
• Women-specific programme : Rs 8795 crore.
• National Highway Development Programme : allocation up from 9948 to 10667 crore.
• Fertiliser sector : Rs 22452 crore subsidy.
• For NABARD : Rs 1800 crore allocation.
• NABARD to issue rural bonds worth 5000 crore.
• FDI in Apr-Jan at $12.5 per cent.
• Central PSUs to invest Rs 1.6 lakh crore in year 2007-08.
• 7 UMPPs under review. 2 of it will be approved by July.
• Power capacity addition needs to be boosted.
• Social security scheme for unorganised workers.
• Aam Aadmi Bima Yojna Scheme will be started.
• Special funds for coffee and rubber.
• Rs 11,000 crore for irrigation project.
• Govt to scale up production of certified seeds.
• Rural banking to benefit.
• Bharat Nirman allocation up 31.6% to Rs.24600 crore.
• Education allocation up 34.2%;school education 35%.
• Allocation to health hiked by 21.9% to Rs 15291cr.
• 24 lakh hectares under new irrigation projects.
• XI Plan target of 4% Growth in agriculture sector.
• Rs. 2800 crore for Sampurna Grameen Yojana.
• The strategy for polio eradication is revised.
• Rs 1290 crores proposed for polio eradication.
• The National Rural Employment Guarantee Scheme - initial allocation Rs. 12000 crore.
• National Aids Programme scheme will start in 2007-08.
• 1 lac scholarship to be introduce every year.
• National Means and Education Scheme for students above class 8.

Overall.. mixed reaction so far and 6 out of 10 rating.

Indo-US relationship.. complication & opportunities

Best explained by Stephen Cohen, Washington seems to understand very little about the complexities and ambiguities present on the Indian of this putative alliance. India is a democracy; while there was continuity between the past conservative nationalist BJP-led coalition and the current left-liberal Congress-led coalition, the fact is that India is likely to remain governed for many years by ideologically diverse coalitions of uncertain durability. This means that US-Indian relations will remain hostage to Indian domestic politics. Further, there are important differences within the Indian strategic elite as to the wisdom of the growing American tie. India has four schools of thought in India regarding relations with America. These derive from differing readings of the past and differing visions of the future.

The Enthusiasts tend to look upon past strains in the U.S.-Indian relationship as stemming from the Cold War or America's ignorance of India's importance. They believe that times have changed, and emphasize the many benefits that will accrue to India if it were to join with the United States in a quasi-alliance relationship. The Vajpayee government invented the term "natural alliance" which has been adopted by Prime Minister Singh's government ,and American officials. The Enthusiasts, found in the Indian business community, in a few corners of the foreign ministry, and among some politicians, are confident that they can manage the Americans via the growing India lobby, by more gracious diplomacy, and by holding out the prospect of collaboration on a number of issues of mutual importance, notably terrorism, containing China, and coping with Islamic radicalism. They see the US-Israel relationship as a model, and for that reason have strongly cultivated Indian-Israeli ties. In the distant future, they see this new alliance as ensuring that American support for Pakistan will wither away.

The Free Riders resemble the Enthusiasts in much of their analysis of the past, and acknowledge the major changes in the international order and in American perceptions of India, but they do not envision a long-lasting, open ended or durable alliance relationship with Washington. They might ride the American bus for a few stops, but not to the end of the line. Widely distributed in the Indian strategic community, the Free Riders believe that sooner or later as India gains strength from the American connection, strains will appear. In their view Indian national interests require a close connection to Washington but that in the long run America is too fickle and too powerful to be trusted. The US can be used, however, to establish India at the global level as a major power (symbolized by admission to the nuclear club, and a Security Council Seat), and to make India the dominant power in South Asia. For some Free Riders, Washington's acquisition of bases in Afghanistan and Pakistan are warning signs that Washington might still be interested in challenging Indian dominance.

The Doubters not only have a different reading of history than the first two groups, they see the future as far more troubling. From their perspective, Washington remains a potential threat to Indian interests, just as it was during much of the Cold War, when it armed and supported Pakistan. While the Enthusiasts and Free Riders might point to the threat to India from a "rising" China, and conclude that Washington sees India as a potential balancer, the Doubters, found among many diplomats and soldiers who came to political maturity during the worst period of US-Indian relations (the 1970s), do not believe that the Americans will consistently hold this view. The doubters favour continued restrictions on American scholars in India, are wary of American attempts to broker an agreement on Kashmir, and are alarmed by the rising "American lobby" in New Delhi and Mumbai, as distorting an independent analysis of Indian-American relations.

Finally, the Hostiles see America as not only a dominant superpower, but as intrinsically opposed to India. From the left we hear that America seeks to dominate Indian markets, exploit Indian labour and manpower, and pollute the Indian landscape, to its own benefit and India's detriment. On the right the arguments include a fear of cultural pollution from Hollywood and materialistic America, a concern that American technology will wipe out indigenous skills and entrepreneurs, and finally that Washington will never really abandon Pakistan because it needs to appease Muslim opinion, and because it fears a rising Hindu India.

These four opinion clusters overlap, and a major Indian debate on relations with America is now underway. Washington must understand this debate, for it will influence future Indian policy decisions. How America responds to these Indian demands will shape the balance of influence among these four schools. Burying Indian-US differences under labels ("natural allies" being one of them), does injustice to the prospect of two democratic states discussing their real differences and their real shared interests, and forging a relationship that is both durable and mutually beneficial.

Wage Inflation...not to Worry

Widely acknowledged by the outsourcers themselves and until now kept at bay by strong growth, the continual increase in salaries at top Indian companies (tech specially) is changing from annoyance to a present danger. Indian companies are no longer merely competing with one another for the best and the brightest, they must also compete with other MNC opened shops in india.

Why its not to worry? because:

• The rising costs will turn away the benefits of India. Even if the wage inflation rate continues to grow at the present rate, then only in 2032 will there be an overlap with the rates of U.S.
• wages paid to workers in India represent such a small percentage of total costs for companies that operate there, a 15% increase in salaries results in no more than a 2% rise in prices charged for IT services, says Narayanan. That's well below the current U.S. inflation rate.
• IT suppliers in India, for example, are lowering their costs by moving to 'tier two' cities--away from traditional high-tech centres- and opening delivery centres in other countries.

RBI is keeping eye on it - the wage disparity between the U.S. and India remains vast, and it's going to take many years of double-digit inflation in India for that to change. till then relax.

but our worries are : Remaining in position of low-cost workfoce is NOT something great and to be proud of. heap low-cost IT work which only means the nation will remain a poor developing country for another decade or so.

• The cost of outsourcing to India is the cost of maintaining a sufficient stable quality of product from India.
• Wage inflation isn't the issue here - staff stability is. As wages go up, and the supply of qualified labor goes down in India, the job hopping that will occur will be as bad there as it was here in the early 90's. This will have a further deleterious effect on product quality and quantity out of India.
• This will put almost instant pressure on margins for companies. They will have to work incentives and bonuses just to get key staff that are trained and up to speed on key client projects to stay on board.
  

The timeframe will be compressed. It's not going to take India as much time. Witness the evolution of the middle classes in the Asian Tigers in the 90's. It didn't take long for China to start robbing Malaysia, Taiwan, and Thailand of manufacturing business that made its way originally from Mexico.

In other words, India's future as the tech industry's top outsourcing hub rests not so much on whether it can continue to offer the lowest costs--that seems probable--but whether it will produce enough skilled graduates to ensure that the work is done at acceptable quality levels.

Indian Internet Report: Mumbai mosted connected..

2006: Mumbai with 3.24 million ever users and 2.6 million active users, leads the pack of top 8 internet using metros. Delhi is second with 2.66 and 1.80 million of ever and active users respectively. This was revealed by the Internet in India (I-Cube) study jointly undertaken by the Internet And Mobile Association of India (IAMAI) and IMRB International. The study also found that the difference between ever user and active users was the lowest in Pune with a 90 per cent conversion rate, and highest in Delhi with a poor 67 per cent conversion rate. Interestingly, Kolkata, with 1.34 million ever and 1.05 million active users is ahead of tech centres such as Bangalore (1.31 and 0.97 million) and Hyderabad (1.29 and 0.95 million). Ahmedabad has the lowest number of users among the top 8 metros.

The Internet Users Base across Top 8 metros

Top 8 Metros (figures in million)	Ever Internet Users (13.12mn of 17.36 mn)	Active Internet Users (10.21mn of 13.23 mn)	% of Active Internet users
Mumbai	3.24 mn	2.6 mn	82%
Delhi	2.66 mn	1.80 mn	67%
Kolkata	1.34 mn	1.05 mn	78%
Chennai	1.48 mn	1.26 mn	85%
Bangalore	1.31 mn	0.97 mn	74%
Hyderabad	1.29 mn	0.95 mn	74%
Ahmedabad	0.78 mn	0.59 mn	75%
Pune	1.02 mn	0.92 mn	90%

While top metros continue their dominance, there is a clear cut trend of small metros, non-metros and small towns catching up fast. Among the ever user category, the share of top 8 metros has declined from 58 per cent in 2001 to 41 per cent in 2006. The corresponding decline in the active users is from 90 per cent in 2001 to 77 per cent in 2006.

Source: I-Cube 2006

Source: I-Cube 2006

In terms of access points, proportion of users accessing from home is the highest in Hyderabad and lowest in Pune. The proportion of users accessing from offices is highest in Mumbai and lowest in Hyderabad. Cyber cafes continue to be the most important access point in Pune and Bangalore. While except in Bangalore, access from schools continues to be dismal.

Source: Main access point across Top 8 metros, I-Cube 2006

Among the various town classes, cyber cafes continue to serve as access points to 50 per cent of users in non-metros with home use showing a healthy 30 plus per cent in all four town classes.

Source: Town Class Distribution of Main Internet Access Point, I-Cube 2

The trend in Internet application usage in India is very interesting and demonstrates the evolution of Internet as a media. Traditional favorites e-mail & chat continue to be dominant across top 8 metros, especially in Chennai, Delhi and Hyderabad except in Mumbai, where information search dominates Proportion of users accessing internet mainly for jobs and matrimony and e-commerce is highest in Kolkata, followed by Ahmedabad and Pune. Proportion of internet users accessing internet mainly for financial or business information is significant in Mumbai and Pune. This may be associated with Mumbai being the nerve centre of the commercial and business activities in India. This justifies the higher proportion of office access from Mumbai.

Source: Main online applications used across Top 8 metros, I-Cube 2006

The proportion of internet users accessing internet for information search is significant in non metros. As observed earlier, almost 40% of the internet users are school/ college going students. Lack of availability and accessibility of reliable sources for information is driving users from non metros towards Internet, mainly for education. The low figures for communication in non metros can be explained with the fact that not many people are comfortable communicating in English in these towns. The regional languages mainly come in use at time of communicating. But with portals and vortals increasingly providing a regional language interface, the scenario is bound to change. Language flexibility would mark the future of information and communication technology especially in a multi-lingual country like India.

Credits: Internet & Mobile Association of India

Tata-Corus deal closed, so What that means..??

India's Tata Steel has won the bidding war for Anglo-Dutch steelmaker Corus Group with an $12.1 billion auction offer that trumped Brazilian rival Companhia Siderurgica Nacional.

What this means to Tata Steel?
with the trade barriers having been lowered, though not eliminated, most businesses have to align/ benchmark themselves against global practices. National beliefs, markets and boundaries have a role in shaping corporate strategy. But there are other forces as well - customers, technology, investors ! For many of the people in these the national borders, increasingly just mean additional/ specific documentation to be undertaken

For the tata’s this would mean that they would have about 50% of their revenues come from international customers/ operations. For a group which is as diversified and integrated into India as Tata, this is a significant change in their perceptions of business opportunities. Being a global company, does have advantages, but also different benchmarks and expectations. The next 5 years would show whether they have been able to graduate from an Indian Group to a Global group, keeping their core-values intact.

What this means to India?
A decade back, when pessimists thought that opening up of Indian economy will lead to the opposite result - all Indian companies being bought out by maruding foreigners but for the past few years, India Inc. has been looking abroad and lots of great buys have happened.

Tatas themselves have led the pack (with the acquiring of Tyco, Tetley, Daewoo’s Truck business and now Corus), like how they did in the last century - whether it be starting a premier institution - IISc & TIFR or starting aviation industry, steel production, Motors, Sofware services/Outsourcing (TCS)

It seems the phenomenon is spreading throughout, whether it is Pharma, Software/ITeS, Steel, Electronics, Beverages/FMCG… Even public sector companies like IOC and ONGC are refreshingly aggressive in this business. In the future, I would like to see mammoth companies like Indian Railways, SBI (and other group of Indian banks are much healthier than most Asian banks), BSNL, Power Corporations to be removed off their Shackles and enter the world economy in a big way.

and Interesting trend to notice.. Now, India's FDI outflow is MORE than inflow. For long, Indians have obsessed about the amount of inbound FDI, especially when compared to China (India has received less in FDI inflows since 1991 than China will receive this year alone). Interestingly enough, with Tata-Corus deal and if Videocon takeover of Daewoo Electronics does go through, India’s FDI outflows will, for the first time, exceed FDI inflows. Effectively, the projections for 2006 are that India will receive $9 billion in inflows while outflows stand at $19 billion, spread across 100+ deals, turning India into a net exporter of capital (to be precise though, a lot of the external acquisitions are not funded by domestic capital, but from foreign sources). At the very least, the investment bankers among you, especially those working on outbound M&A deals, can expect a big, fat bonus this year.

We have just started as a trickle and it doesnt take a long time to become a flood, as all the individual droplets are getting bigger and their distance is getting smaller. I hope the Indian govt doesnt do any stupid things, as often as they do in the past, and be a silent pusher of Indian companies into the global arena.

Certainly interesting times ahead both for Tatas and India.

Buy StarTV programs at Indya.com

Indya.com and Star TV team-up to sale Star TV content. Download to own service is powerered by Direct2Drive, and according to the release, the purchased content can be played on up to two Windows Media compatible devices. The service seems to be targeting the global south asian community. Episodes will be put up the same week as they are aired on TV. STAR intends to put up 2000 hours of content within six months and there are deals with other content providers in the works. They also intend to do a prepaid subscription system within the next three months.

Iam not sure about pricing model and dont like to limiting the content to just two windows media devices.

wonder WHO will buy when so many are available in YouTube for free...

India: 2007 “Year Of Broadband”

India’s largest telco Bharat Sanchar Nigam (BSNL) plans to provide a speed of up to 2 mbps for its broadband subscribers, says a report in Myiris.com. This was stated by Communication and IT Minister, Dayanidhi Maran. And all those who are using 256 kbps connection currently can migrate to the improved speed at no extra cost. Nor will they have to change their consumer premise equipment. Maran also announced that the government is declaring the year 2007 as the “Year of Broadband” in India. He also said that it’s now upto the private operators to match the BSNL challenge. Currently no telco is offering more than 1 mbps for home users.

Reliance to distribute Indian Mobile Content Globally

Reliance Communications has signed up with Canadian telco Telus and is in talks with others for the distribution of mobile content across the globe, reports Business Standard. Reliance will offer the usual stuff - games, devotional songs, ringtones, ring-back tones, music and wallpapers, all targeting the ethnic Asian community in US, UK, Canada, Middle East, Singapore and Malaysia. Teleus and Reliance will set up a content portal called ‘Apna Des’. The revenue share for content providers would be around 25 per cent for generic content, and around 80 per cent for premium content. According to analysts South Asian content is expected to be $3Bn by the end of 2008. The other telco’s that Reliance is reportedly in touch with are T-Mobile and AT&T in the US, Vodaphone and Orange in the UK, Singapore Telecom Mobile in Singapore and Telekom Malaysia in Malaysia.