Indian Current Affairs: 17.01.2007

Banks in India are required to lend 40% of total disbursements to segments like farmers and small businessmen, who constitute, along with a few other categories, the priority sector.
Even indirect farm credit and home loans below Rs. 10 lakhs are included in the priority sector.
Government has told the IBA (Indian Banks’ Association) to earmark 15% of the 40% (i.e., 6% of total advances) to borrowers from minority communities.
The Banks are in a quandary, because identifying the minority group borrowers with the right loan demand, risk appetite and repayment capability won’t be easy. Moreover, there is already a mechanism of disbursal to minority community through respective state development commissioners for minorities. Such loans also carry an element of government subsidy.

Low cost carriers (airlines) are advertising on railway trains to attract customers

About 3% of railway travelers are high-paying commuters, who can easily afford to fly a low-cost carrier. Even if 1% of these start using airlines, aviation sector could grow at about 35%, say estimates.
LCCs plan to target the 49 mn upper class rail trips against 19.4 mn air trips in 2006.

The value of celebrity endorsements in India is pegged at Rs. 250 crores per annum and is stated to be growing at 20% per annum.

There are 38.5 mn Indians online as of now and this number is set to grow to 100 mn by 2007-08.
The online travel industry is expected to become a $2 bn industry by 2008. Last year it had seen revenues of $800 mn.
It appears there are 4.5 to 5 lakh rail bookings happening daily. 20 to 25000 of them are happening through the IRCTC web site.

IIM, Ahmedabad – Chaos
IIM, Bangalore – Unmaad
IIT, Madras – Saarang
IIT, Kharagpur – Spring Fest
St. Xavier’s College, Mumbai – Malhar
IIM, Calcutta – Carpe Diem
These festivals have become multi million rupee extravaganzas sponsored by corporates.

At present there is a limit of $18 bn on ECBs. That is, all the ECBs (External Commercial Borrowings) of corporates in India cannot exceed $18 bn in a year.
But with funding for infrastructure needing more resources, the government is set to relax this ceiling to $22 bn in the current year.
Entitites wanting to raise ECBs can raise it for a tenure of up to 10 years instead of the earlier 3 to 5 years.
Companies can usually raise ECBs up to $500 mn under the automatic route. Beyond this, they have to seek the approval of the government.

India and ASEAN economies have agreed to reduce duties of 700 sensitive manufacture products to either 0 or 5% duty by 2018.
The FTA is likely to be finalized sometime in July 2007. If finalized by July, it will get implemented from January, 2008.

In a clear attempt to ensure that local governments collect the property taxes due from within their respective jurisdictions, the Centre has made it clear to State governments that they should bring at least 90% of properties in their cities under the property tax net, failing which they may be denied their share of the urban infrastructure fund.
The Centre has earmarked a corpus of Rs. 50,000 crores to finance various essential infrastructure projects like roads, drainage and solid waste management.
As per the Central government assistance plan, an equal amount has to be put in by the state authorities as well.

In a thought provoking article today, SSA Aiyar has brought in a new dimension to the way we should look at microfranchising.
He says that in Bangladesh (where microfinance is a great success), there is a silent revolution occurring in the area of microfranchising. In this, rural women are tied up with huge (usually seen as mean and bad) MNCs for a telephone franchising operation.
Similar instances of cooperation can be seen back here in India in the ITC’s eChoupal model and HP’s efforts at turning rural women as digital photographers to cover weddings and other celebrations. In this latter model, the idea is to make the rural women use HP’s digital printers to take printouts and promote its photo printers.

Here is an account of how are rules being twisted and financial tools manipulated to bring in foreign money into real estate:

The rules regarding investment in realty by foreign investors says something like this:

The investment would be subject to a minimum capitalization of $5 mn for joint ventures. Original investment cannot be repatriated before a period of three years from completion of minimum capitalization.
FDI cannot come into ‘ready projects’.

The catch word here is ‘original investment’. This is being read to mean that an investor can pump in $5 mn now and then any subsequent amount of money invested in, will not be attracting this provision of bar on repatriation.
There is no clear definition of what a ‘ready project’ is. FDI made at a stage where only some minor works are still left unfinished, will make it an investment in a ‘new project’.
The FDI that is flowing in is not really equity. Mostly it is pure loan, camouflaged as equity. The foreign investor is borrowing in foreign markets (where the rates are lower than in India) at ~6% and lending to the Indian developers at 12%, to make a clear spread. This lending is done in the form of their participation in the optionally convertible debentures or preference shares – both of which resemble equity, but are nothing but loans.

Indian Current Affairs