Gold and Silver: Is your investment safe?

James Turk, a renowned authority on gold and the precious metal markets and co-author of "The Collapse of the Dollar," is founder and chairman of GoldMoney®, a patented gold-based electronic money, transferred over the Internet. Here he discusses how GoldMoney works, and why it’s better than storing physical metal in a bank or purchasing an ETF
Can you explain what "GoldMoney" is? And what is the difference between buying gold bullion and GoldMoney?

JT: GoldMoney is a very convenient, economic and safe way to buy gold and silver on-line and have that gold and silver stored for you in vaults in Zurich or London. A Swiss company called VIA MAT International, which is a major European secure storage and transport company, operates the vaults. And they have specialized bullion vaults where our customers’ gold is stored. Then, you can use GoldMoney as a form of payment or just let it sit there in your account as a form of savings.

There are two ways to view it: it’s like on-line banking but your account is denominated in goldgrams and mills, rather than dollars and cents. In contrast to banking, where the bank has an obligation to you, there’s no liability created by GoldMoney. You do not ‘deposit’ your gold, as you deposit money in a bank. We’re just simply storing in a secure vault gold that you own.

It’s also like PayPal in the sense that you can click gold from your account to someone else’s account, if you want to use it as currency. But you do not need to use that feature and can just use GoldMoney as a savings account, but where you are saving real, sound money – gold and silver.

The key behind GoldMoney is the governance procedures that we put in place. People often ask me what three questions they should be asking before they buy gold. It’s always: "Is your gold safe?" "Is your gold safe?" "Is your gold safe?" You do not want to take risks with your bullion, which should be viewed as the bedrock asset in your portfolio. So what we have done with GoldMoney is that we’ve taken all the steps necessary to provide customers assurances of integrity that, in fact, their gold is safe.

These governance procedures are disclosed on the website. One the most important of these is the regular audits by one of the Big-4 auditing firms, which establishes that the weight of gold and silver in the vault is exactly the amount recorded in customers’ accounts and that there is always this one-for-one relationship. It means that we’re actually storing gold and silver that you own. This audit report is available to our customers upon request.

And regarding your question about the difference between buying gold bullion and GoldMoney, there is no difference. When you buy gold bullion, there are two ways of doing it. You can buy gold in bars and coins and store them yourself, or you can buy them in GoldMoney and have the gold stored for you in vaults in Zurich and London. It’s just a question of diversification, convenience, and economics.

Because of our economies of scale, you get more gold for your money when you’re actually buying it in GoldMoney, plus you have the opportunity to store it in countries where you don’t live. And I do recommend that geographic diversification. However, I also recommend that people consider having some gold where they live, too, because a little bit of gold on hand never hurts just in case.

I do not recommend putting your gold or silver in a bank, however, because you want to keep it some place safe. Banks are not a safe place to store gold and silver, because when gold was confiscated in 1933, the federal government went right to the banks and took all the gold and silver that was stored there.

TGR: With GoldMoney, is there a 1099?

JT: No, because we’re not a U.S. company; we operate in the British Channel Islands, and there’s no reporting outside of the British Channel Islands. In our User Agreement, we say that our user is responsible for complying with any rules or regulations from wherever he accesses GoldMoney. We have customers in over 100 different countries around the world. We couldn’t possibly comply with reporting requirements in all those different countries. So, what we do is comply with the laws in Jersey, Channel Islands, where we operate.

Jersey is a major financial center. It is located in the English Channel, so it’s located in a politically safe jurisdiction. It’s a sovereign country, and we comply with the laws of that country.

TGR: James, whether it’s an ETF or GoldMoney, this is all co-mingled. It’s not like there would be a separate account that had X amount ounces of gold and silver in my name?

JT: Well, let me first of all deal with GoldMoney, and then I will deal with the ETF. All the gold and silver stored in GoldMoney is allocated. What that means is VIA MAT has one account—the account is in the name of the customers of GoldMoney. VIA MAT doesn’t know who those customers are, but they know it is the customers of GoldMoney, and it’s allocated. There are bars with refinery serial numbers specifically allocated sitting in the VIA MAT vault, clearly distinct from other gold and silver sitting in the VIA MAT vault.

And we report those bar serial numbers on the GoldMoney website, so that if you have enough gold or silver in your account to take up a whole bar, you can go to the GoldMoney website and say I want this bar with this serial number. It will be taken out of your account for free, and then VIA MAT, at your expense, will ship it to wherever you want in the world. So, all the gold and silver is allocated, and it is allocated on behalf of GoldMoney’s customers.

With ETFs, on the other hand, because of the absence of the audit, you don’t really know that it’s allocated, and I have some serious reservations about whether it is, particularly with the silver ETF. I have read the custodial agreement, and it is not an allocated bullion storage agreement; it’s a metal account. A metal account is a depository relationship that the ETF would have with the custodian. That’s very different from an allocated bullion storage account agreement. So I have some serious reservations as to whether the silver in the SLV ETF is allocated or not.
There’s a lot of uncertainty about storage when you’re involved in storing metal, as I discussed earlier in regard to the banks, and there’s still a lot of uncertainly with ETFs whether the gold and silver really are there. But even if they are there, you don’t own gold or silver with an ETF. You own shares in a fund that supposedly owns the gold and silver.

That’s different from owning the gold and silver yourself. With GoldMoney, you own the gold and silver; you have access to it 24/7 through your account on-line, and you can have that gold and silver sent to you, if you want, if you have enough gold and silver in your account to take delivery of a bar. Or you can use that gold and silver and go to KITCO and buy small bars or coins with it if you want to have something in hand. But you cannot do that with an ETF.

TGR: Can you give me a rough idea of the number of public companies—gold companies—that use GoldMoney? Do you have a sense of that?

JT: Not a lot, and there’s a specific reason for that. Our operating system isn’t really very friendly from a company point of view, and this is actually something we’re working on over the balance of this year and next year. For example, companies want access with dual passwords, and we do not have that capability. We have been operating for seven years, and we have focused primarily on the retail market rather than the corporate market.

The reason is that the retail market opportunities made more sense in trying to build GoldMoney from scratch the way we have. We’re now storing about $350 million dollars in gold, silver, and recently we have added currency too, because people can put money into segregated funds accounts at our banks in Jersey and earn interest on their money until they’re ready to buy gold and silver.

What we are going to do later this year and next year is what I call corporate enhancements. What this means is we’re going to make GoldMoney more friendly to corporate chief financial officers. It will be more bank-like in that we will have A & B signatures, and dual passwords and those types of things that will make it easier for a corporation to fit it into their treasury function.

Once we have done this additional software development, we will then be talking to gold mining companies about using GoldMoney as a way of paying suppliers, i.e. paying their contractors in gold, rather than by going the expensive way by paying with bank wire transfers.

Recently one of our customers wrote to me and said they had done a wire transfer that ended up costing $55 to do the transaction, which is pretty outrageous. In GoldMoney you can click gold from your account to someone else’s account, and a maximum it will cost you is $2.50 at current exchange rates. And it’s efficient; you can make a goldgram payment 24/7, and payments are completed outside the banking system.

So, the idea is once we have these corporate enhancements in place, we’re going to begin actively marketing GoldMoney among the mining companies, and then eventually among the natural resource companies of all sorts.

Crude Shock: Get ready for Rs 75 per litre of petrol

The impact of zooming crude oil prices that is the most talked about issue across the globe these days is going to hit you soon in India. Fill in more petrol in your cars soon; for the Indian government is all set to hike the prices of petroleum products.

It will not be a simple hike of a few rupees. If officials in the Ministry of Petroleum are to be believed, petrol prices will be hiked anything between Rs 10-Rs20 per litre soon.

If it is hiked so, it will be the first time in history that Indians will get such a huge increase in their fuel bills. In a city like Mumbai, this would mean that you will have to shell out nearly Rs 70 per litre of petrol.

In the past few months, India’s state-owned oil companies have been reeling under the rising crude oil prices across the globe. Companies like Indian Oil, ONGC and Bharat Petroleum have been incurring losses of several hundreds of crores as they continue to dole out subsidsed petrol, diesel and cooking gas to the people.

But now, officials said, the impact of the rising oil prices is such that there is no option but to decontrol petrol prices, a move that may see rates being hiked anything between Rs 10-20 a litre.

In India, petrol is currently being sold at a loss of Rs 16.34 a litre and diesel at Rs 23.49 per litre. Officials said deregulating petrol price would mean that its prices would move in tandem with global crude oil prices.

The rise in global oil prices that last week touched an all time high of $135 a barrel has forced the government to consider options to save state-run firms that expect a revenue loss of Rs 200,000 crore (Rs 2000 billion) this fiscal on sale of petrol, diesel, domestic LPG and kerosene.

Officials said deregulating petrol would lower the revenue losses by just Rs 20,000 crore (Rs 200 billion). Half of the current estimates are on account of diesel rates.

Monsoon, fuel price decision to dictate market trend

The forthcoming week will be keenly watched by market players, not just for news on hike in fuel prices and advance tax declaration from corporate but the onset of monsoon.

If rains hit Mumbai in a couple of days, it will not only give relief to the financial capital which is reeling under hot and humid conditions, but boost stock prices, especially of the FMCG sector.

India Meteorological Department had earlier forecast that the southwest monsoon will hit the Kerala coast on May 29, four days ahead of its normal June 1 onset. Kerala has already experienced a spell of rain but the IMD was waiting for the weather system to be more fully entrenched to declare the onset.

"Traders would probably be looking at two triggers which will decide the trend for the June future & options series--one being the monsoon and second the advance tax figures. The markets should remain positive on these expectations,” said an analyst with a Mumbai-based brokerage firm.
This week, the BSE Sensex and Nifty moved in a narrow range. The 30-share Sensex ended 1.41 per cent lower at 16,316.26 while the 50-share Nifty closed 1.5 per cent down at 4946.55 from the previous week.

On Friday, surprisingly strong economic growth of 8.8 per cent in the Jan-March quarter outstripped forecasts of 8.2 per cent, indicating the country’s momentum still remained intact.

The strong data comes in at a time when the government is debating whether to raise fuel prices to tackle mounting losses of state oil firms -- a move which would also put pressure on prices. The impending decision on fuel price hike is expected to weigh on sentiment, say analysts.

"The market will remain rangebound with a negative bias next week with the decision on fuel price hike dominating sentiment. Also, the market is waiting for the onset of monsoon," said Ambareesh Baliga, head of research at Karvy Stock Broking.

Inflation in the 12 months to May 17 rose 8.1 per cent, up from 7.82 per cent a week earlier. The finance minister expressed his concern on inflation. He said there was no sign of inflation declining and more steps would be taken if needed to arrest inflation.

Meanwhile, the cooling of crude oil price provided some solace to equities across the globe. Crude oil price fell towards $125 a barrel, after having traded near $135 a week ago.

US stock index futures edged up, signalling that Wall Street may extend the previous session’s gains, with the focus on lower oil prices and economic data.

India's food inflation lowest among 15 nations

India has been better off in managing food inflation compared to several other developing countries in 2007-08, even as the government faces public and political anguish over sharp rise in prices.

Prices of food articles rose by 5.8 per cent in India, the lowest increase among 15 developing countries for the period ending February 2007-08, a joint report of the Organisation for Economic Cooperation and Development (OECD) and Food and Agriculture Organisation (FAO) has said.

Food prices showed the highest increase at 25.6 per cent in Sri Lanka, followed by Kenya at 24.6 per cent and China 23.3 per cent, the report entitled ’Agriculture Outlook 2008’ said.

A record foodgrain production estimates at 227.32 million tons during 2007-08, against 217.28 million tons last year has helped India keep food inflation under control, experts said.

However, recent negative yield shocks in key food commodities like pulses and oilseeds have contributed to the price increase, they said, adding that global price rise had a spill-over affect on domestic rates as well.

However, India’s food inflation still remains higher than the developed countries like the US and Japan during the review period, the report said.

Rate of rise in food prices stood at 1.4 per cent in Japan, at 5.1 per cent in the US and at 5 per cent in France, it noted.

For developed countries, where the price rise in food items is moderate and the share of food in the total consumer basket is small, the contribution of food price inflation to overall inflation is correspondingly moderate.

But as would be expected, the impact of food price inflation on overall inflation in developing countries is much larger, the report added.

Bill Gates signals end of computer mouse era

Microsoft is developing a system that could spell the end the use of computer mouse, Microsoft Chairman Bill Gates has said.

"The way you interact with the system will change dramatically," the billionaire said at a conference in Canada, according to a report in The Daily Telegraph.

He said that computer users of the future will control their machines by voice and pen as well as touch.

Users of Windows 7 will issue commands by touching the screen rather than by the traditional keyboard and mouse combination that has dominated since the 1970s.

Windows 7 is due to be released in 2010 and is Microsoft’s attempt to catch up with Apple, whose touch screen iPhone has proved popular.

Touch screens are appearing on a host of other devices, including sat-navs, mobile phones and remote controls. A touchscreen BlackBerry is expected shortly.

CPI(M) says to protest any fuel price increase

India’s main communist party, an important government ally, said on Friday it would protest in the streets if ministers agree to raise retail fuel prices to help ease mounting losses of state oil firms.

India is debating how best to bail out oil retailers and refiners losing tens of millions of dollars a day due to crude oil’s record run while having to sell petrol and diesel at cheap, government-set rates.

The ruling Congress Party-led coalition is widely expected to raise prices over the weekend, but wary of upsetting voters in a year dotted with important elections, the size of the hike is likely to far less than the 15-20 percent increases sought by the oil ministry.

"We will go to the streets if the government does not listen, we are totally opposed to any price rise," said Prakash Karat, head of the Communist Party of India (Marxist), the largest among the left parties.

Congress has lost a string of state elections and has been widely criticised by opposition parties and the left for fast rising food and other commodity prices which pushed inflation over 8 percent in mid-May to a new 3-½ year high.

The country’s oil minister, Murli Deora, said on Thursday some communist leaders had been helpful and cooperating on the issue of raising petroleum prices but Karat ruled out any negotiations over the issue.

The left has proposed a cut in excise and import duties on crude oil and petroleum products to tide over the crisis.

Yusuf Pathan, Ojha in one-day squad

Indian selectors named uncapped Yusuf Pathan and Pragyan Ojha on Friday in a 15-player squad for next month’s one-day tri-series in Bangladesh and the Asia Cup in Pakistan.

The 25-year-old Pathan, who joins younger brother and all-rounder Irfan in the squad, is a hard-hitting batsman and off spinner while Ojha, 21, is a left-arm spinner.

Master batsman Sachin Tendulkar will miss the trips due to a persistent groin injury while leading off spinner Harbhajan Singh has been banned for five one-dayers after being found guilty of slapping compatriot Shanthakumaran Sreesanth in a domestic Twenty20 game.

The selectors ignored former captains and experienced batsmen Rahul Dravid and Saurav Ganguly, who also missed the victorious tri-series campaign in Australia in January.

The Bangladesh tri-series, also involving Pakistan, will be played from June 8-14, with the six-team Asia Cup scheduled from June 24-July 6.

India squad: Mahendra Singh Dhoni (captain), Virender Sehwag, Gautam Gambhir, Robin Uthappa, Yuvraj Singh, Rohit Sharma, Irfan Pathan, Suresh Raina, Praveen Kumar, Piyush Chawla, Yusuf Pathan, Pragyan Ojha, Shanthakumaran Sreesanth, Ishant Sharma, RP Singh.

Malaysia issues new visa rule for Indians, Bangladeshis

Malaysia is introducing new visa rules for Indian and Bangladeshi tourists in an effort to curb illegal immigration, The New Straits Times reported Friday.

Visitors from the two countries will have to obtain a two-week pass and a return ticket before they can enter Malaysia, the report said, quoting Home Minister Syed Hamid Albar.

"The social visit pass replaces the visas-on-arrival (VOA), which was discontinued in April," Syed Hamid said, adding the social visit pass must be obtained in advance from the tourists’ home country.

Malaysia first introduced the visa-friendly programme, allowing visitors from 24 countries to stay for one month when they arrived, in 2006 to boost its tourism industry.

But immigration officials last year called for the programme to be scrapped after many visitors were found to have overstayed.

Media reports have said that most of the overstayers are Indians who remained in Malaysia to work in restaurants and on plantations.

India's per capita income moves up to Rs 32,299

Per capita income of Indians for the first time breached Rs 30,000 mark and has reached to Rs 32,299 during 2007-08 indicating their growing purchasing power.
The revised estimates, which were released by the government today, indicate that per capita income at current prices rose by 12.3 per cent from Rs 29,642 to Rs 32,299 during the year.
At constant prices (1999-2000 prices), which is worked out after taking into account the erosion in purchasing power of rupee, the per capita income moved up to Rs 24,321 representing an increase of 7.8 per cent during 2007-08.
"This is an important aspect of growth... More money is available in the hands of people. It is a very good sign," Finance Minister P Chidambaram told reporters soon after release of the data.
However, there has been a deceleration in the growth of per capita income at current prices, which rose by 12.3 per cent during 2007-08 as compared to an increase of 14.2 per cent during the previous fiscal.
Similarly, in case of per capita income at constant prices, the rate of increase decelerated to 7.8 per cent as compared to 8.1 per cent in the previous fiscal.
According to the estimates, India’s population at the end of 2007-08 has been estimated at 113.8 crore, up from 112.2 crore at the end of the previous fiscal.

India's GDP beats forecasts, inflation still rising

Surprisingly strong Indian growth and a jump in inflation above 8 percent put an interest rate rise back on the agenda on Friday, although many analysts thought the Reserve Bank of India would remain focused on cash management.

The finance minister said there was no sign of inflation declining and more steps would be taken if needed after wholesale price inflation rose 8.1 percent in the 12 months to May 17, its highest in more than 3-½ years.

Annual growth of 8.8 percent in the Jan-March quarter outstripped forecasts for 8.2 percent, showing momentum remained strong in Asia’s third-largest economy in the fiscal second half despite policy tightenings, although economists expected it would lose height in 2008/09.

The strong data comes as the government is debating whether to raise state-set retail fuel prices to tackle mounting losses at state oil firms forced to sell fuel at discounted rates, a move which would also put pressure on prices.

"Monetary policy will continue to remain tight and it seems the Reserve Bank of India’s first priority is to target liquidity," said A. Prasanna, economist at ICICI Primary Dealership in Mumbai."But with inflation continuously surprising on the upside and a fuel price increase in the offing, a repo rate hike cannot be ruled out."

The RBI has left its key lending rate, the repo rate, unchanged at 7.75 percent for over a year. But it has been tightening cash conditions over the past 18 months, most recently in April and May when it raised the cash reserve ratio, the amount of funds banks must deposit with it, by 75 basis points to a seven-year high of 8.25 percent.

The rupee took both sets of data largely in its stride, edging up to 42.52 per dollar, while the benchmark 10-year bond yield rose to 8.11 percent from 8.08 percent shortly before the price data came through.

INFLATION

The WPI is India’s most widely watched price measure and the mid-May reading outstripped forecasts for an annual rise of 7.96 percent and the previous week’s 7.82 percent.

Finance Minister Palaniappan Chidambaram said on Friday price pressures stemmed largely from abroad, particularly oil, and there were no easy solutions. The government has already curbed some exports and lowered duty on some imports to keep domestic supplies up and import prices down.

"We will take more measures if needed," he said. "We will take corrective measures to control inflation."

He expected the economy would grow 8.5 percent in 2008/09 after data on Friday showed 2007/08 growth at 9.0 percent, higher than a first estimate of 8.7 percent.

"The current financial year appears even more difficult than the year that has come to an end, but I am confident we will maintain growth," he said.

Growth for the December quarter was revised up to 8.8 percent and the full-year reading gave India its third successive fiscal year of expansion at 9 percent or above, to be the world’s fastest-growing major economy after China.

"Even though the industrial sector has been hurt by past interest rate hikes, the services sector continues to grow at a fast pace," said Sonal Varma, economist at Lehman Brothers.Varma expected high oil prices, financial market turbulence and slowing world demand would provide headwinds to the economy in the fiscal year to the end of March 2009.

"The question is whether the services sector can sustain this pace, despite industry slowing down. We have our doubts," she said.

Manufacturing grew an annual 5.8 percent in the quarter, slowing from 9.6 percent in the December quarter, while services grew 11.2 percent in the quarter.Farm output grew an annual 2.9 percent in the March quarter compared with 6 percent in the prior three months.

Govt moves closer to fuel price decision

The government is expected to take a decision on whether to raise fuel prices in the next two to three days, with key political leaders expressing a willingness to tackle mounting losses at state oil firms, the oil minister said.

The cabinet was earlier scheduled to meet later on Thursday to discuss a response, which could involve raising fuel prices, cutting taxes on oil products and issuing more bonds to help state firms selling fuels below cost, but the minister, Murli Deora, told reporters the meeting had been postponed.

"Today’s cabinet meeting has been postponed ... The decision can be taken in two to three days," Deora said.

If India raises prices, it would be the latest Asian nation to decide it can no longer shield consumers from crude’s record run, following the likes of Taiwan, Sri Lanka and Indonesia.Deora said Prime Minister Manmohan Singh and Finance Minister Palaniappan Chidambaram were keen to rescue oil firms, which are selling fuel at low state-administered prices and losing tens of millions of dollars a day as a result.

State-run firms, Indian Oil Corp, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd, have said their borrowings were close to the maximum allowed, threatening their ability to import crude in a few months.India imports 70 percent of the oil it consumes.

India’s central bank raised borrowing limits for these companies late on Thursday, but the director for finance at IOC, S.V. Narasimhan, said this was only a short-term measure and the companies needed to reduce their debt in the long run.

Singh and ruling Congress Party chief Sonia Gandhi met in the evening for talks on the issue.India’s leftist parties, key allies of the federal government, have opposed a price rise, but Deora said some communist leaders had been helpful.

"I spoke to some of them. As far as this problem is concerned, they are very cooperative," he said.Congress and its coalition allies are worried that higher petrol and diesel prices could push inflation beyond current 3-1/2 year highs around an annual 8 percent, and upset poor consumers in a year dotted with elections.

But the scale of the losses at state-run oil refiners and retailers may force its hand.Oil ministry officials have described a rise in prices as "inevitable".Oil prices, trading just below $130 a barrel at 1115 GMT, have doubled since last year, but after earlier reductions Indian state oil firms have to sell fuels at prices lower than two years ago as the government is keen to tame inflation.

Wall Street to cut 25,000 jobs

New York City’s financial sector might only slice 15,000 to 25,000 jobs in the current downturn, which could prove shorter than the mayor has predicted, the city comptroller said on Thursday.

In contrast, the financial sector that is such a vital part of the city’s Economy slashed 40,200 jobs in the previous 2000 to 2003 retreat that straddled the September 11, 2001 air attacks, Comptroller William Thompson said in his report.

Battered by profit-gouging subprime mortgage loans, New York Stock Exchange member firms that do business with the public lost $7.3 billion last year, and the current job-losing cycle that began in August 2007 should run through March 2009, the Democrat added.

Though banks and brokerages employ less than 10 percent of the city’s workforce, they earn more than 30 percent of all wages and salaries, he said. And each Wall Streeter helps create 1.5 jobs in other sectors, from restaurants to shops.

The latest job-loss estimates were milder than several others. For example, Wall Street could shed one in five jobs if this cycle in an industry known for its volatility mirrors previous ones, according to a state labor department analyst. That works out to 36,000 of lay-offs.

Similarly, the city’s Independent Budget Office, predicted 33,300 job cuts.

If the comptroller’s new forecasts prove accurate, the city’s overall Economy will still gain a few jobs this year, with employers hiring 3,800 workers. In contrast, Mayor Michael Bloomberg has predicted a loss of 10,700 jobs.

Both politicians, however, see the city of over 8 million people losing lots of jobs in 2009. Some 49,800 people will lost their jobs, according to the comptroller, topping the independent mayor’s prediction of 46,300 cuts.

By 2010, Thompson and Bloomberg also agree that employers will resume hiring, with the comptroller predicting an increase of 29,800 jobs and the mayor forecasting 26,700 additions.

India's GDP Growth Holds at Slowest Pace Since 2005

India’s economic growth held at the weakest pace since 2005 as the highest interest rates in six years discouraged consumer spending and investment.

Asia’s third-largest economy expanded 8.8 percent in the three months to March 31 from a year earlier, matching the revised gain of the previous quarter, the statistics office said today in New Delhi. Analysts forecast an 8.1 percent increase.

Reserve Bank of India Governor Yaga Venugopal Reddy has kept borrowing costs high to slow inflation, which has doubled in the past four months. That’s hurt the nation’s economic expansion, prompting the finance ministry yesterday to ease companies’ overseas borrowing rules to spur investments.

``Both growth and inflation are causes of concern,’’ said Sanjay Peters, an economics professor at ESADE Business School in Barcelona. ``Reining in inflation at the cost of growth is an unviable justification -- growth is key to cutting poverty.’’

India’s benchmark Sensitive index was almost unchanged after the data was released, rising 0.5 percent to 16,404.75 at 11:10 a.m. in Mumbai. The key 10-year bond yield rose to 8.08 percent from 8.05 percent before the report.

India’s economy expanded 9 percent in the year ended March 31, the least in three years, today’s report said. Prime Minister Manmohan Singh wants to accelerate growth to 10 percent by 2012 and sustain that pace to reduce poverty in the world’s second most populous country. The World Bank estimates about half the nation’s 1.1 billion people live on less than $2 a day.

Electoral Losses

Still, India is unwilling to risk an inflation flare-up from lower interest rates at a time when the government is bracing for national elections due by May 2009, analysts said. Singh’s Congress party has already lost ground in nine of 11 provincial polls held since January 2007 amid rising prices.

Higher fuel prices may also stoke inflation. India’s Cabinet is due to meet in coming days to seek ways to cut losses at state-run refiners that have risen to more than $1 billion a week as crude oil costs soar. The meeting will consider ``all options,’’ including an increase in fuel prices, Oil Minister Murli Deora said yesterday.

To boost growth, the finance ministry yesterday raised the limit on overseas borrowing by companies for domestic spending. Infrastructure companies can borrow as much as $100 million overseas, up from a previous limit of $20 million, while other companies can borrow as much as $50 million, compared with an earlier cap of $20 million.

Rising Incomes

India’s expansion, to be sure, is still the second-fastest after China among the world’s major economies, spurred by rising incomes. The South Asian country is growing at more than three times the pace of the U.S. and the nations sharing the euro.

The Reserve Bank of India, whose priority is to keep prices in check, has raised its key overnight lending rate seven times in the past 2 1/2 years and increased the cash reserve ratio, or the proportion of deposits lenders must set aside, seven times since December 2006 to slow money supply and cool inflation.

That’s yet to put a dent in India’s inflation rate, which stood at 7.82 percent in the week to May 10. The Federation of Indian Chambers of Commerce and Industry say relying on monetary tools isn’t the correct way to tackle inflation, which is ``largely driven by supply-side factors.’’

``It is supply shortage that is aggravating inflation in the case of food products, and the inflationary pressure in the case of manufactured products is the result of continuous cost buildups of raw materials and oil products,’’ the trade body said in a report on May 24. ``Rising interest rates, besides curtailing demand, are also adding to the cost of companies.’’

Cars, Motorcycles

Tata Motors Ltd.’s profit in the year ended March 31 gained at the slowest pace in at least five years as steel and other input costs increased and consumer demand diminished. Bajaj Auto Ltd., India’s second-biggest motorcycle maker, expects sales to remain sluggish this year. Industry accounts for a quarter of India’s $912 billion economy.

``The year ahead is a challenging year,’’ said C. Ramakrishnan, chief financial officer at Tata Motors, the Indian automaker that’s buying Ford Motor Co.’s Jaguar and Land Rover units. ``High interest rates, raw material costs and credit availability continue to be challenges.’’

As industry slows, demand for services such as travel and banking, which make up 55 percent of the economy, may also wane. Airbus SAS, the world’s largest planemaker, said this week that India is among the weakest airliner markets right now and the country’s carriers may cancel or delay plane orders in the next 12 months.

The Business Confidence Index, prepared by the New Delhi- based National Council of Applied Economic Research, fell 3.4 percent in the current quarter ending June 30, because of concerns over accelerating inflation hurting the investment climate and slowing the economy.

Reliance Power goes ex-date; share tumbles

India’s economy grew 8.8 percent in the March quarter from a year earlier, led by strong expansion in the services sector, and the pace of growth was faster than market expectations.

The annual growth for India’s fiscal fourth quarter was higher than the median forecast in a Reuters poll of 8.2 percent, and matched an upwardly revised 8.8 percent in the October-December quarter.

That left full fiscal-year growth at 9.0 percent and showed growth was still robust despite tightening of monetary policy and strengthening of the currency in 2007.

The government had earlier estimated annual growth of 8.7 percent for the whole of 2007/08.

Reliance Power goes ex-date; share tumbles

Shares of Reliance Power plunged on Friday as it began to trade ex-date. The street was expecting the stock to quote around Rs 270 per share post bonus issue. However, contrary to market expectation, the stock tumbled even further.

At 10:28 am, the stock was trading at Rs 248.45, down 39.34 per cent from its previous close of Rs 409.55 on the BSE. It may look like a sharp fall, but factoring in the issue of 3 bonus shares for every 5 held, the slide is just 3 per cent.

The cost of 5 shares at Thursday’s closing price would be Rs 2,047.75. Adding 3 bonus shares for every 5 held, the average price of a Reliance Power share turns out to be Rs 256.

For retail investors, who had bought the shares at IPO price of Rs 430, the average price post bonus would have been around Rs 270 per share. However, the stock is down around 8 per cent from the IPO price.

"Since it will take a couple of years for the facilities to become operational, we expect the stock to remain rangebound for the next 6-8 months between Rs 240-Rs 270 per share," said an analyst from a local brokerage firm.

India okays $193 mln foreign investments

India on Thursday approved 14 foreign direct investment proposals totally worth 8.26 billion rupees ($193 million), including in electrical-products maker Havells India Ltd.

Finance Minister Palaniappan Chidambaram approved the issue of shares and convertible warrants by Havells for 2.78 billion rupees, the government said in a statement.

Rupee softens as oil cos buy

The rupee eased on Thursday after global crude prices inched up toward record highs, pushing up dollar demand from oil refiners to meet their month-end import commitments. The partially convertible rupee ended at 42.785/795 per dollar on Thursday off an intraday low of 42.93, and 0.12 percent weaker from its previous close of 42.73/74. It hit a 13-month low of 43.21 last week.

"The rupee weakened due to month-end dollar demand from oil companies, but a lot of state-run banks were selling below the 42.90 level," L. Subramanian, chief currency dealer at ICICI Bank, said. Oil was trading around $130 a barrel on Thursday after hitting a record $135 last week. India imports more than two-thirds of its oil needs and higher prices inflate the trade deficit. Refiners are the biggest buyers of dollars in the local market. A $10 per barrel increase in oil prices widens India’s trade deficit by $6-$7 billion, JP Morgan said.

India’s main stock index ended down 1.3 percent and equity outflows have also weighed on the rupee. Foreigners have sold $3.74 billion of stocks so far in 2008, with the index down 19.6 percent since the start of the year, after pumping in a record $17.4 billion in 2007. "State-run banks are not expected to allow the rupee to depreciate too much and 42.50 to 43 should be the range for the rupee in the next few days," Subramanian said. Dealers also said the central bank may have intervened in the market at 42.75-42.93 levels to prevent the rupee from falling sharply.

Want to attend meeting in two places at one time?

Business executives will soon be able to make presentations in distant countries through their virtual presence in the meeting halls, thanks to Australian telecommunications and media company Telstra’s new technology that can create a person’s hologram.

The company used a hologram to beam its Chief Technology Officer, Dr Hugh Bradlow, live into Adelaide from Melbourne to give a speech at a major function for senior business executives. Dr Bradlow addressed and interacted with the audience for around 15 minutes and conducted a realtime media conference following the function.

He revealed that their Musion Eyeliner System enabled them to beam his mobile three-dimensional image from one city to the other to give a live business presentation. “In Melbourne, we have a high definition video camera which is filming me as I stand here,” Dr Bradlow said. “That signal is being taped across the network and the far end is using a very smart optical projection system to create a holograph, or my virtual presence, in Adelaide.”

Dr Bradlow said that a big, flat panel LCD screen enabled him to see who he was talking to in Adelaide , and thus facilitated the real time interaction. “It has the look and feel of being in the same room together,” he said.

“You can envisage this being used in education, in entertainment, in news media as a holographic system, but the whole class of telepresence systems is going to be across all businesses ,” he added. David Thodey, Telstra’s group managing director for enterprise and government, added: “We’ve all seen this sort of thing in futuristic sci-fi movies, but the reality is that it can be done here.”

He also said that the new technology may start entering business houses in four to five years, and eventually in homes.

“In the next few years, as your broadband speeds start to go faster, a step from there to a hologram is not very far,” Thodey said. “I think it is at least four or five years away (for business) before that will be the case because the technology has to come down in price,” he added. “This next generation network is changing the way we live and work.”

Banking on weak rupee, Indian expats hike remittances

Buoyed by a decline in the value of rupee, Indian expats in Kuwait are turning all stops to send maximum remittances back home. The remittances by Indian expats there have increased substantially in last three weeks, media reports said.

While the rupee jumped by 12 per cent last year, the surge in oil prices and other factors led to its decline by 8.2 per cent in 2008. A Kuwaiti Dinar (KD), which fetched Rs 143.5 in January, is now pegged at Rs 162.

Titus E D, the director and general manager of Bahrain Exchange Company (BEC), said the current situation presented an opportune time for Indian expatriates."This is a win-win situation and NRIs should try to capitalise by remitting maximum money. The depreciation of rupee would not last for long. By the year end, I believe, the currency would rise against the dollar due to poor showing by the greenback," he told ’Arab Times’.

A substantial number of Indians are remitting their money through the door-to-door medium which is an efficient service, Titus said.A contract worker from Bihar said he remitted Rs 50,000 to his bank account in India recently.

"I borrowed KD 100 from friends since I did not want to miss out on this golden opportunity. Thanks to the weak rupee, the purchasing power of my family back home has increased substantially. I am planning to borrow more money to be sent home," he added. Another NRI worker, Mohammad Iqbal, said he had saved around KD 350 for his upcoming vacation and had already sent the entire amount to his bank account in Mumbai to capitalise on the weak rupee.

TDSAT directs BSNL to restore Airtel connection

Telecom tribunal TDSAT on Thursday asked public sector operator BSNL to restore connection to Bharti Airtel in parts of Bangalore, as sought by the latter, on payment of 65 per cent of the disputed sum.

The PSU had disconnected Bharti Airtel from its points of interconnection in Malleswaram, located in north-west Bangalore last week, over non payment of dues of Rs 66 crore.

During the proceedings on Thursday, TDSAT chairman Justice Arun Kumar directed BSNL to restore Airtel’s connection to its network within 48 hours of payment of Rs 35 crore.

BSNL had demanded "Rs 66.30 crore, out of which the petitioner (Airtel) has already paid Rs 4.7 crore... (It) would pay Rs 35 crore within two weeks from today and respondent (BSNL) is directed to restore POIs (point of interconnection)" Justice Kumar said.

If Airtel pays the amount earlier, then BSNL would have to restore POIs within 24 hours.

However, Justice Kumar declined Airtel’s plea for an immediate restoration as BSNL said it would not restore the connection without getting the money.

"It is a matter of disconnection. In such cases there is urgency to every one, even to us," submitted BSNL’s counsel, opposing Airtel’s plea to restore the POIs immediately on submission of an undertaking.

BSNL also rejected Airtel’s plea for restoration after payment of only 50 per cent of the disputed sum.

On this, TDSAT Chairmam told both telecom operators, "do not fight for a few crores".

India may end wheat, basmati rice export bans

India will review bans on exports of wheat and basmati rice, but shipments of other grades of rice will not be allowed at least until November, the country’s farm minister, Sharad Pawar, told Reuters.

India last exported wheat in the 2003/04 fiscal year and became an importer in the past two years, but a bumper crop has helped the government purchase from local farmers a record 24.8 million tonnes of the staple this year.

Pawar said on Thursday that a government panel, called the empowered group of ministers (EGOM), would soon consider lifting the ban on wheat exports.

"We will think. There is an EGOM. We will discuss it in the EGOM," Pawar said.

He said India had 5.8 million tonnes of wheat on April 1 against a target of 4 million tonnes and the record procurement had helped stocks swell so much that the government had enough supplies for 21 months for subsidised supply to the poor and other welfare schemes.

But controls on non-basmati rice exports would continue at least until November, when summer-sown paddy would be harvested as the government would take no chances with domestic supply, Pawar said.

The United Nations’ Food and Agriculture Organisation raised on Thursday its rice output forecast for 2008 by 1 million tonnes to 667 million tonnes on the back of improved outlook from Cambodia, but said food prices would remain high for a decade.

Pawar said he favoured lifting the ban only for basmati rice exports as the premium grade of grain was either exported or consumed by the rich, not used for subsidised supply to the poor.

"If farmers want to earn a little bit of money, basmati is the crop where they can earn some money. Not a single grain of basmati comes to my kitty for the public distribution system."

Pawar said rival suppliers may push out India from the international basmati market if exports were not resumed and that would hurt Indian farmers, who would find it difficult to regain their market share.

He said the government was keen, but not in a hurry, to help neighbouring countries, which have asked the Indian government to supply rice.

"For the time being, no. We are eager to help. I have got requests from many neighbouring countries. Procurement will take at least three months to get completed and then we will access the situation," he said.

Rice prices have eased from record highs set in late April on signs that global supplies will improve and expectations that Vietnam will lift export curbs from July. Cambodia decided on Monday to lift a two-month export ban.

Finance ministry, RBI not in favour of monthly inflation data

The finance ministry and Reserve Bank have reservations on the computation of inflation data on a monthly basis, a senior Government official said ON Thursday.

"Everybody from the committee (on new WPI series) has supported moving to a monthly data, except for the finance ministry and RBI, which want it on a weekly basis," Mr Pronab Sen, Secretary, Ministry of Statistics and Programme Implementation said here.

The Finance Minister, Mr P Chidambaram will have to meet the Reserve Bank to reach a consensus on the committee’s suggestions to have a new series of WPI on a monthly basis, he said on the sidelines of a function to release the results of the Fifth Econo mic Census.

A committee, headed by Planning Commission member, Mr Abhijit Sen that is formulating the new WPI series has advocated a monthly release of data with a two-week lag, Mr Pronab said.

Professing the need for a monthly data, he said weekly figures on wholesale prices released by the Government create huge volatility in both commodities and stock markets.

"Every body is reacting to the current weekly rather than the revised figures, which are a month old, and that creates volatility that is completely unnecessary," Mr Pronab added.

The Abijit Sen committee is expected to submit its report soon. The new series is likely to have a base year of 2004-05 instead of 1993-94, which is followed at present, and the number of items covered under the index would be increased to 900 from 450.

"Increase in the number of items would make the WPI more comprehensive," Mr Pronab added. The Government, in due course also plans to move towards a Producer Price Index, comprising the Wholesale Price Index and the proposed Service Price Index. - PTI

RComm jumps; Macquarie says MTN deal positive

Shares in Reliance Communications, which is in talks with South Africa’s MTN, rose more than 6 percent on Thursday after a brokerage said the deal was positive and it expected a rebound in the stock.

The stock rose as much as 6.5 percent to 587.70, taking it to its highest since last Friday, the last day of trading before the talks about a possible tie-up with MTN were announced. The stock had lost 3.6 percent on Monday.

Macquarie Research analysts referred to media reports of a share swap between Anil Dhirubhai Ambani Group (ADAG), 66 percent owner of Reliance Communications, and MTN, that would see MTN become the largest shareholder in Reliance Communications and ADAG in turn becoming the biggest controlling shareholder in MTN.

"This deal structure would require no equity dilution and/or issuance of new debt at RCOM, which makes the deal doable," Macquarie Research analysts said in a report.

Macquarie has an outperform rating on Reliance Communications stock with a 12-month price target of 865 rupees, 57 percent higher than its Wednesday closing price of 551.6 rupees.

"We see the deal as positive for RCOM due to the ramp-up in non-wireless businesses and we expect the sale of shares to MTN to be at a premium to RCOM’s current price," the report said.

A deal with MTN would help Reliance Communications’ international unit, Reliance Globalcom, to tap emerging markets in Africa and the Middle East for its non-wireless businesses.

If MTN acquired a stake of 15 percent or more in Reliance Communications, Indian law would require it to make an open offer for a further 20 percent.

"We believe the open offer is likely at a premium to RCOM’s current stock price," the analysts said.

Reliance Communications stepped into a gap left by India’s top mobile firm, Bharti Airtel, which said at the weekend it had ended talks with MTN after failing to agree how to structure a deal.

The Macquarie analysts said a merger of Bharti and MTN would have required significant equity dilution and debt issuance by the Indian mobile firm.

Separately, JPMorgan analysts said that given India’s 74 percent limit on foreign ownership in telecom companies, MTN would be able to acquire about 61 percent of Reliance Communications, and in turn ADAG would be able to own 33 percent stake in MTN Group.

India Inc mops $4.2 bn via IPOs in '08

A turbulent stock market notwithstanding, India Inc has raised more than four billion dollars through IPOs in 2008, but had it not been for Anil Ambani-led Reliance Power, this amount would have been just about one-fourth.

The 4.2-billion-dollar raised through 21 IPOs since the beginning of 2008 marks an increase of 62 per cent from 2.6 billion dollars raised through 50 deals in the same period in 2007, according to global deal data provider Dealogic.

However, excluding the Reliance Power IPO, that mopped up a record three billion dollars, the Indian IPO market fell by 52 per cent in volume in 2008 as against the same period in 2007, Dealogic said.

About four billion dollar raised through IPOs in the first quarter of 2008 is also the second highest for a quarter in the Indian capital’s history after over five billion dollar raised in fourth quarter of 2006.

Besides, Deutsche Bank has been ranked as the leading bookrunner of the Indian IPOs, accounting for 16 per cent market share so far in 2008, it added.

Reliance Power IPO issue managers were ABN Amro, Deutsche Bank, Enam Financial Consultants, ICICI Bank, JM Financial, JP Morgan, Kotak Mahindra Finance and UBS.

Although, firms managed to raise 4.2 billion dollars this year also witnessed three IPO withdrawals including that of Emaar MGF, Wockhardt and SVEC Constructions.

The three IPOs had to be withdrawn because of the low response received from investors due to meltdown in the secondary Markets and weak global cues.

Other successful IPOs in the first five months include state-run Rural Electrification Corporation (REC), Future Capital Holdings, Anu Laboratories and Gammon Infrastructure projects.

Meanwhile, a host of firms have filed their draft prospectus with market regulator SEBI recently for entering the capital market and experts believe the coming months may lead to improved situations in the primary Markets.

Around four draft offers have been filed by firms in May itself which include -- Adani Power, retail firm Gini and Jony, Infinite Computer Solutions and Triveni Infrastructure Development Company.

Besides, in April, six firms including Bharat Oman Refinery, Rites Ltd and VRL Logistics had filed their draft offers with the regulator.

Employment grows @ 2.78% in '98-05 period

Employment generation in the country has increased considerably in the eight-year period ending 2005 as compared to 1990-98, says Economic Census released by the government Thursday.

The employment grew at the rate of 2.78 per cent in 1998-2005, which is much higher than the 1.75 per cent recorded during 1990-98, the fifth Economic Census report said.

The report, compiled by the Central Statistical Organisation (CSO), said that Jammu and Kashmir emerged as the state with maximum employment growth of 6.82 per cent followed by Andhra Pradesh (5.87 per cent), Kerala (5.86 per cent) and Haryana (5.35 per cent).

The report further said, Maharashtra and Andhra Pradesh were the two main employment-providing states followed by Tamil Nadu, West Bengal and Uttar Pradesh.

Andhra Pradesh provided maximum employment in the rural areas (13.14 per cent of the total rural employment), followed by West Bengal, Tamil Nadu, UP, Kerala and Maharashtra.

Among the urban-employment providers, Maharashtra topped the list providing the maximum employment at 14.10 per cent of total urban employment.

Referring to the non-agricultural activities, the report observed that such activities in the rural areas were more compared to urban areas, evident by the fact that number of non-agricultural establishments in rural areas was 19.83 million as against 15.92 million in the urban areas.

In non-agricultural activities, the manufacturing sector scored the maximum with 25.48 million workers engaged in it.

This was followed by retail trade (25.14 million workers) and education (7.49 million workers).

Other major area of employment was farming of animals, which employed 9.2 million workers.

Also, the report observed, number of establishments grew significantly during the period. Rural areas showed a higher growth rate (5.37 per cent) compared to urban areas (3.69 per cent).

Pointing out that there was positive growth in all the states except Lakshadweep and Andaman and Nicobar (A&N) Islands, the report said highest growth rate in establishments was marked in Mizoram, Tripura, Kerala and Tamil Nadu which grew above 8 per cent.

Interestingly, Delhi and Goa registered a negative growth rate in rural areas, while Bihar, Nagaland, Lakshadweep and A&N Islands saw a negative growth in urban areas, the report said.

Fuel price hike decision by May 31

A decision on raising retail fuel prices and partly compensating revenue losses of oil firms will be taken by Saturday, even as Prime Minister Manmohan Singh on Thursday assessed the problems caused by the spike in crude prices.

"Hopefully, by day after tomorrow, we will have a solution," Petroleum Minister Murli Deora told reporters after a meeting with the Prime Minister and key ministers in New Delhi.

A meeting of the Cabinet, which was to have taken up the matter, has been postponed, he said.

Any hike in prices would be accompanied by a duty rejig to help state-run oil Companies curtail revenue losses that are pegged at Rs 225,000 crore for this fiscal on account of crude prices touching a record level in the global market.

"The Prime Minister and Finance Minister saw papers of revenue losses and the price increase in the international market. They realised very much that we need to help (PSU oil Companies) on a war-footing," Deora said.

Singh would also discuss the issue with Congress President and UPA Chairperson Sonia Gandhi, the Petroleum Minister said, adding that these decisions (price hike) were outside his jurisdiction.

The Petroleum Ministry has been pushing for a combination of duty cuts and price hike (Rs 10 per litre in petrol, Rs 5 a litre in diesel and Rs 50 per LPG cylinder) to bail out PSUs IOC, HPCL and BPCL that are on the verge of running out of cash in the next 2-3 months to import crude.

"Somethings have been agreed at today’s meeting, but I cannot say what the Cabinet will decide," Deora said after the meeting that was attended by External Affairs Minister Pranab Mukherjee, Finance Minister P Chidambaram, Planning Commission Deputy Chairman Montek Singh Ahluwalia and Prime Minister’s Principal Secretary T K Nair.

Mumbai world's 4th most expensive office mkt

India’s top two cities, Delhi and Mumbai, continue to be amongst the ten most expensive office Markets of the world in the league of other places like London, Moscow, Tokyo, Paris and Singapore.

According to a latest study by realty consultant CB Richard Ellis, Mumbai has been ranked 4th in the list of 50 most expensive office Markets, slipping from its last year’s second position. On the other hand, Delhi moved up a place to 7th from last year’s rankings.

"The drop is not due to rentals in Mumbai falling, but because of a significant increase in rentals in London and Moscow," CB Richard Ellis Chairman and Managing Director (South Asia) Anshuman Magazine said.

He said the positions of Mumbai and Delhi were still very high and was reflective of the tight supply of prime office space and of demand remaining constantly active.

London topped the list of most expensive office Markets, followed by Moscow and Tokyo. In May, the monthly rentals in Mumbai and New Delhi were recorded at 210.97 dollar per sq ft and 145.16 dollar per sq ft respectively. The rentals in London stood at 299.54 dollar a sq ft in a month, the consultant estimated.

Paris, Singapore and Dubai also found places in the list at 8th, 9th and 10th positions respectively.

Besides, Mumbai also found a berth at 8th place in the list of world’s top 50 fastest growing Markets in terms of occupancy costs with 40.7 per cent rise in the last one year.

The top three positions were held by Ho Chi Minh City (94.4 per cent), Moscow (92.7 per cent) and Singapore (86 per cent) respectively, CBRE said.

Bangalore and New Delhi were also included in the list with 22.6 per cent and 15.3 per cent increase in cost, which in turn placed the cities in 22nd and 45th positions, it added.

IOC Q4 net loss at Rs 414 cr

State-run Indian Oil Corp on Wednesday announced a standalone net loss of Rs 414.27 crore for the quarter ended March 31, against a net profit of Rs 1,502.69 crore in the corresponding period last year.

The total income of the company rose to Rs 71,792.82 crore for the quarter under review, from Rs 53,818.75 crore in the same period a year-ago, IOC said in a filing to the Bombay Stock Exchange.

The company’s board has declared a dividend of 55 per cent for the year 2007-08. That is, for every share of face value Rs 10 the shareholder would get a dividend of Rs 5.50.

For the year ended March 31, 2008, IOC reported a consolidated net profit of Rs 7,912.74 crore, against a net profit of Rs 7,867.45 crore in the year-ago period.

The total income rose to Rs 2,32,558.62 crore in FY’08, from Rs 2,02,694 crore in the year-ago period.

IOC announced a standalone net profit of Rs 6,962.58 crore for FY’08, a 7.16 per cent decline over the previous fiscal. The firm had a net profit of Rs 7,499.47 crore in FY’07.

The total income rose to Rs 2,49,169.16 crore in FY’08, from Rs 2,17,533.82 crore in the year-ago period.

Shares of IOC closed at Rs 428, up 1.53 per cent on the BSE.

BCCI moves HC against Rediff's online game

The Madras High Court has ordered notice to Web portal Rediff.com and its owner Mr Sandeep Goyal, on a petition from the Board of Control for Cricket in India (BCCI), seeking the court to restrain the former from using the domain name indianfant asyleague.com, in an online cricket game in Rediff.com.

The BCCI moved the court yesterday praying for restraining the respondent from using the trademark or domain name Indian Fantasy League and a logo depicting a batsman playing a shot in the game, as they were deceptively similar to BCCI’s Indian Premier L eague (IPL) trademark and the logo.

Justice Mr M Sathiyanarayanan, before whom the case came up, posted to June 10, for further hearing in the case.

The BCCI also sought a direction to Mr Goyal and Rediff.com to render a true and faithful account of all profits earned by them by using the impugned trademark "IFL" as well as the logo, and claimed damages to the tune of Rs 10 lakh.

The cash-rich IPL has just entered its last stages, with all semifinalists being spotted with Chennai Super Kings’ win over Deccan Chargers last night. - PTI

6th Pay Commission: Arrears payment in instalment suggested

The Prime Minister’s Economic Advisory Council (EAC) wants the Government to pay its employees in phased manner and deposit part of the estimated arrear of 18,000 crore in their Provident Fund while implementing the Sixth Pay panel report to m inimise its impact on inflation.

"Since the payment of arrears in cash could result in marginal rise in inflation rate due to spurt in demand for various products, EAC has said that the Government should consider depositing part of the arrears due to employees in provident fund and pay the remaining amount in a phased manner," official sources said.

The Council headed by noted economist and former Reserve Bank Governor, Dr C Rangarajan, is of the opinion that the payment of arrears in one go could result in further rise in prices, especially of manufactured goods and consumer products.

"The Government had paid the arrears in a phased manner while implementing the report of previous Pay Commissions, so it can consider it again," Dr Rangarajan had earlier told PTI.

The council, which advises Prime Minister, Mr Manmohan Singh on important economic matters, had earlier said the inflation rate could come down to 5 to 5.5 per cent after about four months following good monsoon and measures taken by the Government.

Inflation, however, has already crossed 8 per cent mark, and the analysts fear that it could soon touch 10 per cent mark if the hike in international crude oil prices is partly passed on to the consumers. - PTI

Microsoft no longer keen to merge: Yahoo

Yahoo Inc Chief Executive Jerry Yang said on Wednesday a potential deal with Microsoft has tremendous power, but the software giant appears no longer interested in a full merger. In his most public comments to date about his thinking on the four-month-old, on-again, off-again Microsoft merger saga, Yang signaled his company remained open to a potential deal, but said Microsoft had ruled out a merger for now.

Earlier this month, Microsoft walked away from a proposal to acquire Yahoo for $47.5 billion, or $33 per share, after Yahoo rebuffed its offer, saying it would only settle for $37 a share."We did not walk away from that proposal. Microsoft did," Yang said during an on-stage interview at the D: All Things Digital conference taking place near San Diego on Wednesday. He said he had felt a combination with Microsoft would have had a "tremendous amount of power."

In mid-May the two Companies said they had begun discussions on an unspecified deal that is short of a merger."Microsoft is no longer interested in buying the company, and we are talking about other things. We definitely have to understand what they’re proposing...they clearly have an interest in Yahoo, and we need to understand more," Yang said.

Last week, a source familiar with the latest round of discussions said Microsoft has proposed buying Yahoo’s search business and taking a minority stake in the Web pioneer, but has stopped stopping short of reinitiating full merger negotiations. As part of such a deal, Yahoo would sell its Asian assets including significant minority stakes in Yahoo Japan and China’s Alibaba Group, while Microsoft would buy a chunk of what remains of the company, the source said.

In an on-stage interview at the "D" conference on Tuesday, Microsoft Chief Executive Steve Ballmer suggested discussions had broken down largely over price. "It became clear there was a difference between the bid and ask," he said, using stock trader terms.In its original unsolicited takeover offer in late January, Microsoft offered $31 a share in a half-cash, half-stock bid, to buy Yahoo, which valued it at $44.6 billion. Yahoo responded by saying it was open to a deal but the offer was too low.

Ballmer repeated on Tuesday that Microsoft had "moved on" but stopped short of saying the mating dance between Microsoft and Yahoo was over. "We are not rebidding for the company," he said, but added: "We reserve the right to do so."

In the Wednesday interview conducted by Wall Street Journal technology columnist Walt Mossberg, Yang said a merger with Microsoft would involve a variety of issues beyond price. He said discussions between the two had never thoroughly explored such non-price hurdles, including regulatory issues.

Yahoo President Susan Decker, appearing alongside Yang on stage, said price had always been the biggest barrier to reaching agreement on a deal with Microsoft."We never got through the price door ... once we could have gone through it, then other issues could have been discussed."

Yang argued a competing deal between Yahoo and Google made sense but no deal had been reached. Last month, the Companies conducted a two-week test where Yahoo hired Google to run advertising sales alongside Yahoo search results.

"It makes a lot of sense, but if we do something, we will talk about it," Yang said, adding the "level at which Yahoo can fully partner with Google has not been fully appreciated by the marketplace." In the wake of the breakdown of the Microsoft takeover talks, Yang defended his one year on the job as CEO and said he believed he was the right person to lead Yahoo into a new era of growth, even if the company must invest heavily to do so.

"I do think I am the best person to lead Yahoo," Yang said. He compared conflicting media reports about who was responsible for the failure to reach a deal to a romance gone bad: "It’s like you break up with your girlfriend in high school ... it pretty quickly becomes ’he said, she said’."

Yang reiterated what the company has been saying over the past year: that it "has a lot of work to do" and needs to make investments to reach management’s vision of a new Yahoo.

Its strategy involves tapping the underlying social connections of its roughly 500 million monthly visitors to become a "must buy" for advertisers.

One audience member complained to Yang she was having a hard time finding Yahoo mobile services on US smartphones. She was apologetic for drifting off the topic of Microsoft.

Yang was only too happy to answer: "Of all the questions I have been getting for the past four months, I am glad to get a technical question."

Impose tax on private oil cos: Left to Govt

Opposing any move to hike petrol prices, the CPI(M) on Wednesday asked the government to impose a ’windfall profit tax’ on private and JV oil firms as well as private refineries and not burden the common people.

"In no case can the UPA government pamper the private oil Companies to make windfall profits and, at the same time, increase the price of petrol and diesel and burden the people further when they are suffering from steep price rise of essential commodities," CPI(M) Politburo said in a statement.

It recommended the imposition of ’windfall profit tax’ on private and joint venture oil producing firms as well as private standalone refineries ‘earning huge profits through import parity policy of pricing’.

“With crude prices exceeding 100 USD per barrel, it is necessary that windfall gains be recovered from all private and joint venture oil producing Companies like M/S Cairns, Reliance, Essar etc. extracting oil and gas in India," the statement said.

It added that when these contractors participated in the New Exploration Licensing Policy, "none of them could have envisaged crude prices beyond 30 USD a barrel."

"It would be a failure on government’s part to allow upstream contractors additional gain of 70-80 USD per barrel without any extra work," the party said, adding that many other countries had "renegotiated their contracts with a threat of imposing windfall taxes on such profits."

"It is time that the government takes charge and recovers unintended gains from upstream contractors," it said.

IndianOil can afford crude only up to Sept

State-run refiner and retailer Indian Oil Corp will only be able to afford to buy crude at the current sky-high rates up until the end of September, company chairman S. Behuria said on Wednesday.

Oil firms are losing millions of dollars each day as they must sell their fuel at discounted rates set by the government and far below oil’s surge to around $130 a barrel on the world market. They have appealed for price hikes and duty cuts.

Rel Money eyes 50% revenues from overseas

India’s Reliance Money, which on Wednesday announced its foray into China and Hong Kong, expects to generate 50 per cent of its revenues from overseas Markets in the next five years.

The financial products distribution firm has embarked on its plans for global expansion with an aim to set shop in about half a dozen locations overseas by the end of the current fiscal.

"Over the next five years, 50 per cent of our revenues will come from overseas Markets," Reliance Money Director and CEO Sudip Bandyopadhyay said in Hong Kong.

The company on Wednesday, launched its bouquet of financial services for retail investors in Hong Kong and China and has also tied up with leading broking firm in the region, Goldride Securities.

"Hong Kong will be our base for the East Asian region and going forward we will like to expand our presence in London and some neighbouring countries of India," Bandyopadhyay said.

"We will utilise the partnership with Goldride to expand our presence in countries such as Philippines and Kazakhstan," he added.

The company’s foray would also help Indian investors to invest in Hong Kong and Chinese Markets in addition to reaching out to the large base of Non-Resident Indians and Persons of Indian origin in the region to transact in Indian financial instruments.

Reliance Money now has a presence in UAE, Oman, Hong Kong and Singapore.

Fed looks ahead to rate increases

Two Federal Reserve policy makers warned on Wednesday that interest rate increases might be needed before too long to curb inflation, even as the United States struggles with a weak Economy.

The remarks solidified expectations that the Federal Open Market Committee has ended an aggressive rate-cutting campaign and could start to reverse its policy course late this year. Dallas Fed President Richard Fisher and Minneapolis Fed President Gary Stern, both voting members of the FOMC in 2008, said they are keeping a close eye on inflation expectations being dialled into financial Markets.

"If inflationary developments and, more important, inflation expectations, continue to worsen, I would expect a change of course in monetary policy to occur sooner rather than later, Fisher said in San Francisco. Rate increases could be made "even in the face of an anemic economic scenario," Fisher told the Commonwealth Club of California, adding that he did not expect a recession.

Fisher said it would be "unacceptable" for the Fed to be viewed as resigned to higher levels of inflation.That is a particular risk as the lagged impact of the Fed’s interest rate cuts starts to kick in, boosting economic growth at a time inflation is already "too high" and commodity prices are being pushed up by strong global demand. Earlier, Stern vowed that the Fed would act in an "appropriate and timely" way.

"The key to maintaining low inflation and inflation expectations is likely to be the timeliness and magnitude of decisions we make to reverse course" on interest rates, Stern told a local business group in Altoona, Wisconsin.

SO FAR SO GOOD?

The Fed monitors inflation expectations as a test of what assumptions are priced into Markets and, by implication, consumer behavior. Central bank officials have expressed concern the United States may face early signs of stagflation, the damaging combination of weak growth and wage-price spiral that hit the world’s biggest Economy in the late 1970s and early 1980s.

Stern suggested the Fed had been able to hold the line. "Inflation expectations have remained reasonably well anchored so far, which is encouraging," he said.

Headline inflation, which includes food and energy prices, "is clearly too rapid for comfort," he said, adding that core measures "have been better behaved."The Fed lowered its federal funds rate to 2.0 percent in April, the latest in a string of cuts started in mid-September, when the rate was at 5.25 percent, to shield the US Economy from the fallout of a housing and credit crisis.

Fisher has been one of the Fed’s most vocal policy hawks this year, and on Wednesday termed inflation "a sinister beast" and the "enemy of capitalism." He has tallied three straight dissents against the FOMC’s decisions to lower interest rates.

"Growth cannot be sustained if Markets are undermined by inflation," Fisher said. "Stable prices go hand in hand with achieving sustainable economic growth."But Stern said the Fed was still walking a policy tightrope given the combination of weak growth and rising inflation pressures, that demands delicate action.

"We are seeing challenges on both sides of that (dual mandate) and I think we are simply going to have to navigate the minefield," he said.In particular, Stern said it was unclear if federal tax rebate checks now being mailed to millions of Americans would have an impact beyond one or two quarters.

Some forecasters fear that the United States faces a "double-dip" slowdown, with growth likely to pick up in the next few quarters on the back of the stimulus package, before fading again in late 2008 or early 2009.

Fisher said figures like Wednesday’s stronger-than-expected April durable goods orders, while hard to view in isolation, were a sign that the most disastrous outcomes predicted for the Economy have not played out.

"We’ll have anemic growth for a while, but to me, inflation is the bigger risk," he said.

ANOTHER ONE BITES THE DUST

Separately, the FOMC will lose a voter with the departure of Frederic Mishkin, effective Aug. 31. The Fed’s usual line-up of seven governors, including the chairman and vice chairman, will dwindle to four because of two vacancies that have been unfilled for months.

"This will mean the departure of an influential dove," said David Sloan, analyst at 4CAST Ltd in New York.Mishkin, seen as an ally to Fed Chairman Ben Bernanke in his support of formal inflation targets, will return to his teaching post at Columbia University’s Graduate School of Business.

Rupee too high but RBI will prop it up

The Indian rupee is overvalued and should fall by 10 percent to about 48 per dollar but the central bank will support it to help state-run oil importers, a member of India’s convertibility panel said on Wednesday.

A.V. Rajwade, member of a 2006 central bank-appointed panel on capital account convertibility, said there was little historical evidence that a stronger rupee was effective in curbing inflation and many exporters were not strong enough to shield themselves from sharp currency gains.

The rupee rose more than 12 percent against the dollar in 2007 and touched its highest level in nearly 10 years at 39.16 per dollar in November.

But it has fallen nearly 9 percent so far in 2008 because of portfolio outflows and higher oil import costs, and hit a 13-month low of 43.21 last week. It stood at 42.85 on Wednesday. "The rupee had become absurdly overvalued in my view, probably around 15 to 18 percent, but the central bank will intervene by selling dollars to arrest the rupee’s fall to help oil Companies," Rajwade said. "They will have to keep intervening if they want to keep the rupee around 43 level or it will keep slipping," he said.

State-run oil retailers are losing millions of dollars a day selling fuel at discounted rates set by the government. The falling rupee has also increased import costs and with oil prices rising, India’s trade and current account deficits are widening. Economists estimate the trade deficit was $90 billion in 2007/08.

"You cannot have the rupee going up when the trade deficit is at $100 billion," Rajwade said.

Traders say the central bank intervened last week to slow the rupee’s fall, but analysts have been surprised that it did not step in sooner while inflation is running at 3-½ year high.

Other central banks in South Korea, Taiwan, Philippines and Indonesia have been propping up their currencies to temper the inflationary impact of rising oil prices. But Rajwade said China’s yuan and Brazil’s real had risen in the past few years and Brazil’s inflation was still 5 percent. "The yuan has appreciated about 15-18 percent and the inflation rate is very similar to India’s, so currency appreciation does not necessarily lead to lower inflation," he said.

The Reserve Bank of India bought $20.3 billion in the first quarter of 2008 to keep the rupee down and has been a net buyer of dollars in the currency market for more than two years. Rajwade said dollar selling by the central bank may drain rupee liquidity from the money Markets at a time when cash is already tight, eventually pushing bond yields higher.

The government gives bonds to oil retailers to compensate them for their losses, but Rajwade said this was inflationary in the long term as it did little to check demand-side pressures. Furthermore, monetary steps would do little to check high commodity prices as this was a supply-driven problem, he said. "None of these are very susceptible to monetary policy as you do not eat less because interest rates go up."

Giving incentives to farmers to produce more would help bridge the supply-demand gap rather than using price controls and subsidies, he said.

India's Economy Probably Grew at Slowest Pace in 2 1/2 Years

India’s economy probably grew last quarter at the slowest pace in 2 1/2 years as the highest interest rates since 2002 restrained consumer spending.

Asia’s third-largest economy expanded 8.1 percent in the three months to March 31 from a year earlier, less than the previous quarter’s 8.4 percent gain, according to the median forecast of 20 analysts in a Bloomberg News survey. The figures are due tomorrow around noon in New Delhi.

Reserve Bank of India Governor Yaga Venugopal Reddy twice last month unexpectedly ordered lenders to set aside more funds amid concern surging global oil and commodity prices may further stoke inflation. Finance Minister Palaniappan Chidambaram says India can afford a moderation in growth and that fighting inflation is now his top priority.

``The government and the central bank will use all possible tools to keep inflation in check,’’ said D. H. Pai Panandiker, president at RPG Foundation, an economic policy group in New Delhi. ``They won’t take a chance with inflation now.’’

Reddy has raised the central bank’s cash reserve ratio seven times since December 2006 and increased its key overnight lending rate seven times in the past 2 1/2 years. That’s yet to put a dent in India’s inflation rate, which climbed to more than 8 percent in March, the highest in almost four years.

Higher borrowing costs are discouraging consumers in the South Asian nation from taking out loans to purchase motor vehicles produced by Maruti Suzuki India Ltd., the maker of half the cars in India, and refrigerators made by Samsung India Electronics Ltd. and other companies.

Rice, Lentils

The 52 percent of the Indian population of 1.1 billion people that survive on less than $2 a day also have less to spend on consumer goods because of the higher prices they are paying for food staples such as rice and lentils.

India’s consumer-goods production fell 0.1 percent in March from a year earlier, after increasing an average 7.2 percent in the previous 12 months. Industrial output gained 3 percent in March, the slowest pace since 2002.

``The biggest drag on growth is industry,’’ said Sujan Hajra, chief economist at Anand Rathi Securities Ltd. in Mumbai.

Still, the slowest economic growth since 2005 may not be enough to prompt the central bank from reducing borrowing costs. India is unwilling to risk an inflation flare-up from lower interest rates at a time when the government is bracing to face elections due by May 2009, analysts said.

Rising prices have already hurt the government’s popularity. Prime Minister Manmohan Singh’s Indian National Congress party this week lost elections in the southern state of Karnataka to rival Bharatiya Janata Party, its ninth setback in the 11 provincial polls held since January 2007.

India’s GDP Forecasts

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GDP YoY%
Company Jan-March
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Median 8.1%
Average 8.1%
High 8.6%
Low 7.4%
Number of Estimates 20
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Anand Rathi Securities 7.8%
Citi 8.3%
DBS Group 8.1%
Dun & Bradstreet Info. 8.1%
Edelweiss Securities 8.1%
Forecast Singapore 8.1%
Goldman Sachs 8.6%
HSBC Singapore 7.5%
ICICI Bank 8.2%
ICICI Securities 8.3%
IDBI Gilts Ltd. 8.2%
JPMorgan Chase Bank 8.2%
Kotak Mahindra Bank 7.9%
Kotak Securities Ltd. 7.4%
Lehman Brothers 8.2%
Securities Trading Corp. Of India 8.0%
Standard Chartered Bank 8.1%
Thomson IFR 8.1%
UBS 7.9%
Yes Bank 8.5%
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