Rupee gains 12 paise versus dollar

The Indian rupee gained another 12 paise to Rs. 45.18 per US dollar in early trade on Friday on sustained selling of dollars by banks and exporters amid dollar weakness overseas and firm domestic equity markets.

At the Interbank Foreign Exchange, the domestic unit opened higher at 45.19/20 per dollar as against Thursday’s closing level of 45.30/32 per dollar and improved further to 45.18 before quoting at 45.24/25 per dollar at 10.30 a.m.

It hovered in a range between 45.18 and 45.25 per dollar in morning deals.

Sustained selling of dollars by banks and exporters amid dollar weakness overseas and firm equity markets mainly boosted the rupee value against the dollar, a forex dealer said.

The euro rose against the dollar yesterday on the back of a report that China and other Asian investors are interested in buying Portuguese bailout bonds.

Meanwhile, oil was higher in Asian trade today as the U.S. currency weakened against the euro, boosting investor appetite for dollar-priced commodities, including crude, analysts said.

New York’s main contract, light sweet crude for July delivery, gained 29 cents to $100.52 a barrel.

Asian economic recovery solid

Asian economic recovery solid but inflation a risk

Asia's developing economies are expected to grow by just under 8% in 2011, according to the Asian Development Bank (ADB).

In its annual Asian Development Outlook it predicted that the region would expand solidly over the next two years.

However, growth rates would be slower than in 2010, it said.

And it warned that inflation would pose a challenge for many Asian countries and could lead to social tensions.

The ADB also said that stronger economic links between developing countries could offset reduced demand for goods and services from recession-hit richer countries.

"Developing Asia, having shown resilience throughout the global recession, is now consolidating its recovery and rapid expansion in the region's two giants - the People's Republic of China and India - will continue to lift regional and global growth," said Changyong Rhee, the ADB's chief economist.

Asia, excluding Japan, would grow by 7.8% in 2011 and 7.7% in 2012, down from 9% in 2010 when the region rebounded strongly from the global financial crisis, ADB predicted.

Mr Rhee said despite some short-term trade disruption, he expected last month's earthquake in Japan to have a minimal effect on the region as a whole.

He added that some countries could benefit from increased demand from Japan for construction materials as the country begins to rebuild the areas devastated by the quake.

"Under the assumption there is no further deterioration in the nuclear situation, I really don't think the impact will be that great,"

China and India would continue to drive the global and regional economic recovery, the ADB said.

But, like the rest of the region, the two countries would see slower rates of growth than last year, it added.

Economic growth in China was expected to moderate to 9.6% from 10.3% in 2010 as tighter monetary policy takes effect and as demand for exports in major markets such as the US and Europe remained sluggish.

India's economy was expected to expand by 8.2% in the year to March 2012, down from an expected 8.6% in the year to March 2011.

Mr Rhee said that inflation would be a headache for policy makers in the region as geopolitical tensions in the Middle East and the nuclear crisis in Japan had raised expectations of higher oil prices.

The report said that countries could not rely on tighter monetary policy alone to tackle inflation, but might also have to consider more flexible exchange rates.

Inflation in the 45 Asian economies covered by the report was forecast to rise to 5.3% in 2011, from 4.4% in 2010.

"Developing Asia is home to two-thirds of the world's poor and it is they who are most vulnerable to the effects of price increases," said Mr Rhee.

The report also warned that inflation, especially if driven by food prices, could exacerbate inequality and lead to social tensions.

With Europe, the US and Japan still struggling to recover from the effects of the global financial crisis, the ADB said the region would need to look to other developing countries to foster economic growth.

"Growing South-South relations at a time of modest growth in industrial economies could be a potential new driver of global growth," said Mr Rhee.

"But only if these economies become more open to trade and capital flows with each other."

China is world's second economy

China overtakes Japan as world's second-biggest economy

Japan's economy was worth $5.474 trillion (£3.414 trillion) at the end of 2010, figures from Tokyo have shown. China's economy was closer to $5.8 trillion in the same period.

World's 10 biggest economies

• US
• China
• Japan
• Germany
• France
• UK
• Italy
• Brazil
• Canada
• Russia

Japan has been hit by a drop in exports and consumer demand, while China has enjoyed a manufacturing boom.

At its current rate of growth, analysts see China replacing the US as the world's top economy in about a decade.

"It's realistic to say that within 10 years China will be roughly the same size as the US economy," said Tom Miller of GK Dragonomics, a Beijing-based economic consultancy.

The US economy is currently almost three times the size of the Chinese economy in dollar terms. The UK's economy is estimated to be the world's sixth largest.

Japan played down the significance of the shift in the economic league table, and the fact that it has been replaced as the second-largest economy for the first time in more than four decades.

"As an economy, we are not competing for rankings but working to improve citizens' lives," said Economics Minister Kaoru Yosano.

The minister added that China's booming economy was welcome news for Japan as a neighbouring country.

China is now Japan's main trading partner and is increasingly important to companies such as electronics firm Sony and carmakers like Honda and Toyota.

However, Mr Yosano said that Japan needed to watch closely "risks from overseas economies and currency moves".

Negative demand

The yen has been strengthening against other currencies, recently touching a 15-year high against the dollar, and the fear is that the currency's gains may hurt foreign demand for Japanese products.

According to the latest figures from Tokyo, Japan's economy contracted at an annualised rate of 1.1% in the final three months of 2010. Growth declined 0.3% from the previous quarter.

It was the first time in five quarters that the economy had contracted and it was caused by a dip in domestic and export demand, analysts said.

Consumer spending fell 0.7% in the final three months of 2010, the figures showed.

Analysts said that while demand had been picking up since the start of the year, there would not be a sudden revival in Japan's economic fortunes.

Not least because government plans to boost consumer spending by giving incentives to buy products such as consumer durables had either finished or were about to end.

"The main reasons for the contraction are the expiry of government stimulus measures and negative external demand," said Takeshi Minami, chief economist at Norinchukin Research Institute.

"It is going to be difficult for the economy to emerge from a lull in the January-March period.

"We are unlikely to see the economy worsen, but the recovery will not be strong enough for people to actually feel it is happening."

'Lost decade'

Japan has been struggling to come to terms with what many analysts call the "lost decade" of the 1990s when a property market and asset crash turned the economy on its head.

Domestic demand tumbled and exports also dropped as consumers looked for cheaper products from other emerging markets, and China in particular.

Today, Japan's biggest headaches are an ageing population that is spending less, and a workforce that is relatively expensive and inflexible to operate.

By contrast, the majority of China's growth has been funded by a long-running manufacturing boom and the subsequent expansion of its domestic industries and infrastructure.

"There was an emphasis on infrastructure," said Duncan Innes-Ker of the Economist Intelligence Unit (EIU) in Beijing.

"They were building way ahead of where people thought the demand would be. And because the infrastructure was there, companies went there."

Whole picture

Most economists agree that while China as a whole is growing, and the average person is getting wealthier, comparing only the size of its economy to Japan's does not paint an accurate enough picture.

"Most people in China are still poor, more people live in the countryside than in cities," said Mr Miller of GK Dragonomics.

"The average Japanese person is much much richer than the average Chinese person."

The International Monetary Fund estimates that GDP per head of the population is almost $34,000 in Japan, while in the People's Republic of China it is just over $7,500.

Dave Lindahl Scam

India's economic growth under 'threat'

India's economic growth under 'threat' from inflation

India's prime minister has warned that the country's rapid economic growth is under "serious threat" from inflation.

Manmohan Singh said getting inflation under control was a matter of urgency, raising the prospect of an eighth interest rate rise in under 12 months.

Emerging markets like India, where GDP growth is running at 8.5%, are helping to drive global economic recovery.

But Mr Singh said India's inflation rate of 8.4% - and food price inflation of 17% - was unsustainable.

"Inflation poses a serious threat to the growth momentum. Whatever be the cause, the fact remains that inflation is something which needs to be tackled with great urgency," he said.

Analysts believe that surging food and oil prices mean that India's central bank may have to raise interest rates before its next policy meeting, which is scheduled for 17 March.

India's stock market has fallen this year on fears that high inflation will scare off foreign investors.

Wages in India are also rising as workers demand pay that keeps up with the cost of living.

Read more:

Dave Lindahl Scam

Outlook for 2011 US economy is brightening.

Employers will hire more workers this year, and the economy will grow faster than envisioned three months ago, according to an Associated Press survey that found growing optimism among leading economists.

But unemployment will stay chronically high — nearly 9 percent by year's end, the latest quarterly AP Economy Survey shows. A majority of economists say it will be 2016 or later before unemployment drops to a historically normal rate of around 5 percent.

Economists have become more confident 19 months after the worst recession since the Great Depression ended. Lower Social Security taxes and higher stock prices will embolden Americans to spend more and help power the economy, they say.

"People will finally recognize that an economic recovery is under way," said Lynn Reaser, a board member of the National Association for Business Economics. "This won't be a recovery seen only by economists."

The gains this year will be enough to withstand the threats still clouding the economy, the AP survey found. A majority of the economists doubt, for example, that falling home prices and higher mortgage rates will pose a major risk to the economy in 2011.

The AP survey collected the views of 42 private, corporate and academic economists on a range of indicators. Among their forecasts:

• The economy will grow 3.2 percent this year, compared with the 2.7 percent they forecast in October. That would top last year's estimated growth of less than 3 percent.

• Employers will create a net total of 2.2 million jobs. Three months ago, the economists predicted 1.6 million jobs would be added in 2011. Last year, employers added roughly 1.1 million.

• Consumers will spend 3.2 percent more this year than last year. That's stronger than the 2.5 percent growth the economists had forecast in October. And it's nearly double the spending growth that's estimated for 2010.

• Inflation will be 1.8 percent this year, barely more than the 1.7 percent the economists forecast in the previous survey and up only slightly from 1.5 percent last year. The 1.8 percent forecast falls within the range of inflation the Federal Reserve thinks a healthy economy needs.

Among the reasons for the economists' growing optimism: an extension of income-tax cuts, a cut in Social Security taxes for workers, easier access to loans, higher stock prices and a government that seems more sympathetic to the priorities of businesses.

The brighter outlook is also evident among people responsible for hiring.

Jerry Huddleston, human resources manager of the Ozark Natural Foods grocery store in Fayetteville, Ark., said he plans to hire for busy weekend shifts because sales are improving.

The store is generally slow to add jobs. But Huddleston said business is picking up. Customers seem more willing to pay more for organic milk, vitamin supplements and pre-made vegetarian meals.

"I think people are starting to be more confident that the job they have is the job they will have tomorrow," he said.

As the economy gradually strengthens, the economists expect interest rates will tick up, as they already have begun to do. They think the yield on the 10-year Treasury note, now at 3.4 percent, will reach 3.6 percent by midyear and 3.9 percent by year's end. Those higher rates would force up mortgage rates, which tend to track the 10-year Treasury yield.

Yet when asked about a range of threats — from falling home prices and rising energy prices to state budget woes and Europe's debt crisis — the economists called each a minor risk rather than a major risk to the economy.

In the spring and summer, many analysts had feared the economy might slide back into a "double-dip" recession.

"Consumers and businesses are in a better mood," said Nariman Behravesh, chief economist at IHS Global Insight. "They are spending a little more freely. Not a lot more freely, but a little more freely."

That helps explain why Behravesh has lifted his forecast for economic growth in 2011 to 3.2 percent, from 2.2 percent in October.

Still, the Fed said Wednesday that the economy isn't growing fast enough to lower unemployment and still needs help from the Fed's $600 billion Treasury bond-purchase program. The bond purchases are intended to lower rates on loans and boost stock prices, spurring more spending and invigorating the economy.

President Barack Obama still faces risks from voters skeptical of his economic stewardship, according to a new Associated Press-GfK poll. More than half disapprove of how he's handled the economy. Just 35 percent say it's improved on his watch; 40 percent had said so a year ago.

Yet public sentiment may brighten if the economists prove correct in their forecasts. Rajeev Dhawan, director of Georgia State University's Economic Forecasting Center, has raised his estimate for growth this year to 2.7 percent, from 1.8 percent three months ago.

This year "will be better than 2010 in terms of hiring, spending and economic growth," Dhawan said. "Yet unemployment will decline only slowly. At least we're not going backward."

Dave Lindahl Scam

US economic growth

US economic growth revised up to 2.6% for third quarter.

The US economy grew at an annualised pace of 2.6% in the third quarter of 2010, slightly faster than the previous estimate of 2.5%, figures have shown.

However, the rate was lower than expectations, with some analysts expecting a figure closer to 3%.

Earlier this month, the US Federal Reserve said the US recovery was still too slow to bring down the country's high level of unemployment.

Separately, figures showed home sales continuing to recover.

Sales of previously-owned homes rose by 5.6% in November compared with the previous month, to a seasonally adjusted annual rate of 4.68 million units last month, according the National Association of Realtors.

However, the increase was less than analysts had hoped for, and overall sales were down 27.9% from a year ago.

The GDP data from the Commerce Department showed that the third-quarter growth rate was revised up after an increase in the pace of businesses building up inventories.

However, this increase was offset by a downward revision to consumer spending, which grew at an annual pace of 2.4% in the quarter, down from a previous estimate of 2.8%.

Consumer spending is watched closely as it accounts for about 70% of the US economy's total economic output.

"Clearly the economy continues to improve and grow but at a slow, modest pace and that is restraining employment growth and a recovery in the housing market," said Tim Ghriskey, chief investment officer at Solaris Asset Management.

Figures released earlier this month showed the unemployment rate in the US rising to 9.8%, its highest rate since April.

High unemployment, along with a weak housing market, is undermining economic growth.

'Employment growth'

Last month, the Fed said it would pump $600bn (£390bn) into the economy.

The policy, dubbed QE2 because it is the second round of quantitative easing, is designed to boost the economy's fragile recovery.

The government has also done its part to stimulate growth, by extending tax cuts enacted by President George W Bush that were set to expire this year.

However, some analysts argue that there may be some reason for cheer in the current quarter.

"More recent data suggests we're seeing reasonably healthy retail sales growth, pretty healthy investment spending [and] some growth in employment," said Zach Pandl at Normura Securities in New York.

Read more:

US economic growth

The US economic recovery is still too slow to bring down the country's high level of unemployment, the Federal Reserve has warned.

The central bank made the comment as it reaffirmed its commitment to continue purchasing $600bn (£380bn) in bonds to stimulate the economy.

The Federal Reserve also kept US interest rates on hold at between 0% and 0.25%, as had been widely expected.

US unemployment hit 9.8% in November, its highest level since April.

Just 39,000 jobs were created last month, down from 172,000 in October, meaning 15.1 million people were without work.

The US unemployment rate has now been above 9% for 19 months, the longest stretch on record.

The most recent data showed that the US economy grew by an annualised rate of 2.5% between July and September.

However this is not sufficient growth to allow job creation to keep up with the growing US working-age population.

The Fed's latest $600bn stimulus package was announced at the start of November.

The central bank had already pumped $1.75tn into the economy since the recession.

China's economic growth in 2010

China's rapid economic growth slows further.

China's economy News Updates! China's rapid growth slowed in the latest quarter as Beijing steered its expansion to a more sustainable level, possibly cutting its contribution to a global recovery.

The world's second-largest economy grew 9.6 percent in the July-September quarter over a year earlier, official figures showed Thursday. That was down from the previous quarter's 10.3 percent but still by far the highest of any major economy.

Politically sensitive inflation edged up in September on higher food costs but incomes also rose strongly.

The growth decline might dent a global recovery as China's appetite for iron ore, factory machinery and other imports weakens. That might hurt the United States, Australia, Europe and other economies that are looking to relatively robust China to power exports.

"Short-term the slowdown means China will have less demand for goods from the rest of the world," said Alistair Thornton, China analyst for IHS Global Insight. "But long-term, the slowdown could be a benefit to the world economy because the Chinese economy cannot keep going at such a high pace and in such an unbalanced way."

Asian stock markets were mixed amid concern slower Chinese growth might mean less demand for raw materials and industrial components from neighboring economies.

Beijing is trying to restore normal economic conditions following a huge stimulus that helped China quickly rebound from the global crisis. Communist leaders want to guide growth to a manageable pace and encouraging Chinese consumer spending to rebalance the economy away from heavy reliance on exports and investment. Beijing's growth target for the year is 8 percent, while the World Bank is forecasting 9.5 percent.

September's inflation rate rose to 3.6 percent over a year earlier from August's 3.5 percent — above the 3 percent official target. Driving inflation higher was a 6.1 percent jump in food costs due to shortages of vegetables and other items.

Analysts say inflation should fall back as food supplies recover. Helping to offset higher prices, urban incomes grew 7.5 percent in the first nine months of 2010 over a year earlier and rural incomes rose 9.7 percent.

"Continued fast income growth means rising food prices are not a significant social or economic problem," said CLSA analyst Andy Rothman in a report.

The government, which has clamped down on bank lending and real estate investment, said the latest economic growth rate was in line with its efforts.

China's growth soared to 11.9 percent in the first three months of the year on a flood of stimulus spending and bank lending. But Chinese leaders worry growth overshot safe levels and are trying to cool a surge in housing costs and stock speculation.

"These data point to a soft landing for the Chinese economy," said Tom Orlik, an analyst in Beijing for Stone & McCarthy Research Associates.

Beijing triggered a fall in global markets this week with a surprise interest rate hike that analysts said might be aimed at curbing bank lending and encouraging consumer spending by paying more on savings.

"This is a signal that they are getting the ball rolling with meaningful policy changes in rebalancing," said Orlik.

The slowdown also was reflected in a sharp decline in China's explosive industrial growth.

The rise in factory output measured by added value fell to 13.5 percent in the latest quarter, down from the previous quarter's 15.9 percent and 19.6 percent in the first three months of the year.

Growth in spending on factories and other fixed assets also eased, rising 24 percent in September over a year ago, down from the 26.7 percent rate in the first eight months of the year.

A new five-year economic blueprint issued this week by the Communist Party's ruling inner circle reflects the emphasis on quality over quantity. It calls for "inclusive growth" that spreads prosperity to the countryside and urban poor who have missed out on China's boom.

"They feel they don't need these double-digit growth rates," said Thornton. "This could be the last year that we see double-digit growth, ever, in China."

Easy way to get more income

The Easiest Financial Lesson You'll Ever Learn.

Finance News Updates! Saving and investing wisely is not an easy achievement. How much do you need to save for retirement? Where should you put your money? There are thousands of financial advisors who offer differing opinions on these matters. But if there is one utterly clear maxim of saving for retirement it's this: contribute at least enough money to your 401(k) to maximize your employer's contribution.

Much to my shock and dismay, 39% of 401(k) participants don't follow this totally noncontroversial advice, according to a new study by Financial Engines, via the NY Times Bucks blog. That's crazy. Here's why maxing out your 401(k) is the biggest financial no-brainer you'll ever encounter.

When your company promises to match some contribution to a 401(k), it's like giving you a raise. Refusing the match is like telling your company that you don't want extra money. Imagine an example where you make $1,000 per paycheck. Now imagine if your company agrees to match 50 cents per dollar up to 6% of your 401(k) contribution per paycheck. That means you can put up to $60 per paycheck into your 401(k) and your company will also contribute $30.

Did you see what just happened? You got a 3% raise. Sure, you had to contribute $60 of your gross income as well, but this money just becomes savings -- something you will surely need some day anyway. Unless you are one of the few people who believe Social Security alone will be sufficient to allow for a pleasant, comfortable retirement at a reasonable age.

Moreover, that $60 you contribute doesn't reduce your take home pay by 6%, because it's taken pre-tax. For example, let's say after all taxes are taken, your income would normally have been 30% lower. If you didn't contribute to your 401(k), your after-tax income would be $700. If you contribute $60 pre-tax, however, your after-tax income is $658 -- only $42 less, instead of $60. This is the second reason why it's so great to contribute to a 401(k): you can delay taxes on that money, so you won't feel like you're saving as much as you actually are.

Let's reflect on this scenario where you contribute to your 401(k) as described above. Your after-tax income declines by $42, but you save $90. This is one of the best deals you'll ever get, and it's virtually impossible to beat.

Let's consider poor reasons not to contribute enough to receive your full employer match:

I Want More Freedom Investing

Maybe you don't like your employer's 401(k) plan. You hate mutual funds. You think you can do better on Scottrade. Good luck with that. In the example above, imagine if you decided to shun your 401(k) and invest $42 (the difference in after-tax income) from each paycheck yourself instead. You would need an investment that would more than double your money -- even if you saved your 401(k) as pure cash. The return would have to be 114% to get $90.

I Worry About Losing Money in the Market

Investing is hard, so this is a fair point. But you would have to do incredibly poorly to lose more than you gain from your 401(k) match. For that $90 savings to decline below your $42 contribution, it would have to decline by more than 53%. Even from the Dow's peak prior to the financial crisis to the bottom it hit in early 2009, the market lost less than 50% -- and that's about as bad as it gets. Moreover, you can generally diversify your 401(k) holdings to include stocks, bonds, and cash.

I Can't Afford to Contribute That Much

Saving isn't a financial constraint: it's a choice. Unless you're living very near the poverty line, then it's possible to find ways to cut expenses. And slicing 4% off your take home pay won't require most people to dramatically change their lifestyle. Go out to dinner less often or wait until a movie comes out on video to see it. Move a few miles further out of town to get a cheaper rent. Remember, you aren't actually lowering your income by contributing to a 401(k); you just don't spend as much of your money immediately. In fact, you're actually implicitly increasing your income by maximizing your employer's match.

I Don't Want My Savings Tied Up

If you need to get at your 401(k) money for some reason before you retire, you will get hit with a penalty and be forced to pay taxes on it immediately. That means the money is essentially tied up. But this isn't a good reason to fail to contribute up to your full employer match.

First, some 401(k) plans allow leeway for when a true emergency hits, where the penalty won't apply. Second, even if a penalty does apply, will it really be greater than your employer match? In the example above, a 10% penalty tax would apply beyond the usual income tax that you would have paid anyway on the income that you contributed. For the example, that penalty would be $9, and you would also need to pay something like $9 in taxes on the employer's contribution. But your employer contributed $30. So again, even if you try to get at your money early, you're still $12 ahead by maximizing your employer contribution.

If you don't already contribute enough to your 401(k) to maximize your employer match, then you should. It's easily the smartest, easiest financial decision you'll ever make. You may want to ultimately save more than that through other methods, but this is the bare minimum saving that you should do.

Read more >>

Japan Economy 2010 Goes slow down

Japan GDP figures show sharp slowing of economic growth.

Japan relies on exports for growth but the strong yen is making that more difficult

Economic growth in Japan weakened significantly in the last financial quarter, official figures show.

Between April and June this year gross domestic product - the sum of the nation's goods and services - grew by 0.1%, much lower than expected.

Analysts say the country's export-led recovery appears to be faltering as the value of the yen appreciates.

Germany and the US recently reported far superior GDP figures for the same period.

Germany registered a 2.2% rise, while the US economy grew at an annualised rate of 2.4%.

The BBC's Roland Buerk in Tokyo says Japan remains one of the wealthiest and most prosperous countries in the world, but the trajectory of its economy has been clear for years.

World Bank figures show that in the first eight years of this century Japan's economy expanded by just 5% while China's grew by 261%.

The GDP figures give further credibility to the widely held belief that China will soon overtake Japan as the world's second biggest economy.

That will become clearer early in 2011, when GDP figures for the whole of 2010 become available for each country.

Japanese shares closed lower after the announcement, with the benchmark Nikkei 225 index falling 0.6% to 9,196.67.

Read Full Story >>

Japan economy 2010

Japan economic growth slows down.

Economic growth in Japan weakened significantly in the last financial quarter, official figures show.

Between April and June this year gross domestic product - the sum of the nation's goods and services - grew by 0.1%, much lower than expected.

Analysts say the country's export-led recovery appears to be faltering as the value of the yen appreciates.

Japan's close rivals, Germany and the US, recently reported far superior GDP figures for the same period.

Germany registered a 2.2% rise, while the US economy grew at an annualised rate of 2.4%.

World Bank figures show that in the first eight years of this century Japan's economy expanded by just 5% while China's grew by 261%.

The GDP figures give further credibility to the widely held belief that China will soon overtake Japan as the world's second biggest economy.

That will become clearer early in 2011, when GDP figures for the whole of 2010 become available for each country.

Japanese shares closed lower after the announcement, with the benchmark Nikkei 225 index falling 0.6% to 9,196.67.

Dr Seijiro Takeshita, director of Mizuho International, said Japan's government had made a mistake in its policy choice.

"The problem for Japan was they were going for short-termism as far as policy was concerned. They were trying to put a bandage over a deep wound," he told the BBC.

"Private consumption didn't take off because our economy is still so dependent on external demand or exports.

"What they should have done is made much more transformation into the domestic side, which would have induced much more spending and most importantly created more jobs in the Japanese workplace."

Japan has relied on exports for growth, but the problem is that the yen has been rising, making Japan less competitive abroad, the BBC's Roland Buerk says.

For Full Story

BP puts oil spill cost at $32.2bn

BP to set aside $32.2bn to cover oil spill costs.

BP says it has set aside $32.2bn (£20.8bn) to cover the costs linked to the oil spill in the Gulf of Mexico. The company said the charge gave it a loss of $17bn for the three months between April and June - a UK record.

BP's chairman said the costs estimate was based on the company's belief that it was not grossly negligent, and added the bill could be higher. BP also said Bob Dudley, head of the Gulf clean-up operation, will replace Tony Hayward as chief executive

Mr Hayward will leave his post by mutual agreement in October. He is likely to retain a role within the company. BP plans to nominate him as a non-executive director of its Russian joint venture, TNK-BP.

BP also announced it would increase its asset sales over the next 18 months to $30bn, a total that includes the $7bn-worth earmarked for sale last week. The $32.2bn cost of the clean-up includes the $20bn already set aside in an escrow account for compensation claims.

"That estimate is also based on our belief that we are not grossly negligent," BP chairman Carl-Henric Svanberg told the BBC's business editor Robert Peston.

"Of course we will not know precisely because it depends on how many claims are coming in and [other] things that could happen."

But he insisted that the company was in good financial shape, with strong cashflow. "It's of course a huge loss that overshadows everything else, but the underlying performance of the company is actually strong," he told the BBC.

"There is no worry about our financial position and our ability to get through this. It's of course a tragedy and it has large consequences, but we have no doubt that we will be able to rebuild the company," he said.

Stripping out the oil spill costs, BP made a second quarter profit, on a replacement cost basis, of $5bn, compared with $2.9bn for the second quarter of 2009. Bob Dudley, currently managing director and a US citizen, told ABC's Good Morning America programme, that BP would become a leaner organisation.

"It will be smaller and financially, it will grow. We're going to learn a lot from this incident and this accident... There's no question that we will change as a company."

The announcements were welcomed by most investors for their clear-cut approach. Peter Hitchens, of Panmure Gordon stockbrokers, said: "It's basically a kitchen sink job...

"I think it's the board trying to wipe the slate clean."

News Credit : bbc.co.uk/news/business

Japan's economy rebounds in February

Japan's economy is leaping to life, with surging exports to China and the United States and rising expectations for robust growth throughout the coming year.

As China and much of Asia stormed back from recession in the past year, Japan had stood out as the weak sister in the region, with stagnant employment, creeping deflation and a humiliating quality-and-credibility scandal at Toyota, the country's largest and most-respected company.

But data released Wednesday by the Finance Ministry shows that, when the world is in a buying mood, the world's second-largest economy has lost none of its ability to export high-quality consumer electronics, automobiles, heavy equipment and assembly-line machinery.

Exports in February increased at the fastest pace in three decades, jumping 45 percent from a year ago, as shipments to all regions of the world rose, according to the government. Exports have risen sharply for three consecutive months.

Unemployment is also beginning to fall, as consumer confidence rises, along with demand for services and imported goods.

As in January, the fastest growth was in Japan's exports to China, its largest trading partner, and to other parts of Asia. These shipments rose 56 percent.

The pace of increasing exports has led some major Japanese manufacturers, such as Mitsubishi Electric, to reverse earlier estimates of annual operating losses and predict substantial increases in net income. Komatsu, the world's second-largest maker of earth-moving equipment, predicted a 50-percent increase in sales to China in the coming year.

As important, exports to the United States are also rising rapidly from disastrous declines in 2009, when many Japanese companies found it all but impossible to sell cars and electronics to recession-panicked U.S. consumers.

Exports to the United States in February rose 50 percent over the previous year -- and automobile sales rose by a record 130 percent.

Finance Ministry officials told the Kyodo news service that the latest car sale figures suggest that Toyota's quality problems have not harmed overall exports of Japanese cars and other manufactured products to the United States.

It remains unclear how Toyota, after several rounds of massive recalls and a steady drip of bad publicity, will fare this year in the U.S. and other overseas market.

Indian economy to grow 8.5 per cent

Indian economy to grow 8.5 per cent next fiscal: Manmohan Singh.

Prime Minister Dr. Manmohan Singh today said that the Indian economy would grow at 8.5 percent during the next fiscal.

Inaugurating a conference on building infrastructure hosted by the Planning Commission here, Dr Singh said: “Despite adverse global situation, the Indian economy grew by 6.7 percent during fiscal 2008-09, and it has accelerated to 7.2 per cent in the fiscal year which is about to end in a few days time.”

“These rates are well above those seen in the developed world, and reflect the underlying strengths of our economy. We expect to achieve 8.5 per cent growth rate in 2010-11 and I hope we can achieve a growth rate of nine per cent in 2011-12,” he added.

He further said that investment in infrastructure should be doubled to about Rs 41 lakh crore during the 12th Five Year Plan ending 2017 from the prevailing level, and directed concerned authorities to work out the details.

“Preliminary exercises suggest that investment in infrastructure will have to expand to 1,000 billion dollars in the 12th Five Year Plan,” he said.

“I urged the Finance Ministry and the Planning Commission to draw a plan of action for achieving this level of investment,” he added.

“We also need to review the approach that should guide our regulatory institutions in different sectors. I have asked Planning Commission to prepare a draft bill outlining the next stage of regulatory reform,” he said.

Dr Singh said growth rate of ten per cent looked ambitious, but it was not impossible and was something that had indeed been achieved by some emerging economies.

“For this we will make continued improvements in our policy regime and in our implementation procedures,” he added

He further said that the Eleventh Plan had estimated that we would need to invest over Rs.20 lakh crore in infrastructure over the five year period. This was more than double the realised investment during the Tenth Five Year Plan.

India Union Budget Highlights 2010 - News Updates

India Union Budget Highlights 2010: Sensex Up, Experts Down.

In the aftermath of India’s Union Budget 2010 announcement the Wall Street Journal, increasingly vitriolic as it has become under Rupert Murdoch, said that investors had reacted with a yawn to Finance Minister Pranab Mukherjee’s presentation.

How gratifying then that the key Indian stock market index
, the Sensex, had it’s best two day rally for more than two years, beating even last year’s post election buzz. The market today crossed 17,000, the first time it has done so since it slumped at the start of the year. Take that, WSJ.

One of the experts on Emerging Markets investing, Mark Mobius, who manages over $34 billion of assets mainly in BRIC (Brazil Russia India China) countries for Templeton Asset Management, helped to explain the surge by saying that India will outpace other emerging markets in the next few years.

Union Budget 2010: Is Indian auto sector out of woods?

By the time you read this article, you would have seen price rise across the board!! What's the reason? Is it due to the partial rollback of
fiscal stimulus package further flared by much feared increase in prices of petroleum products? This would have thrown up many questions in the readers' mind on the sustainability of the Indian growth story, given the strong performance in the recent month running up to the Budget.

While one may conclude that FM has done something unwarranted, the answer is not so simple. If product prices are rising, share prices are rising as well. So, what is it in the Budget that has thrown up this contradictory phenomenon: rise in product prices coupled with share prices? Auto sector, which is immediately impacted due to 2 per cent rise in excise duties and increase in prices of petroleum products, could be a good example to analyse this.

Auto companies have passed on the increase in excise duty to the customers. Still auto majors have gained in stock markets. Well, possible reason could be increase in disposable income of consumers with significant relief on personal taxation. It would be important to consider two more aspects typical to the Indian auto market. Many car buyers in India are first time buyers. Since, FM has not fully rolled back excise duty benefits provided under stimulus package, price hike may not be significant enough to change minds of first time car buyers. Indian auto market is largely driven by credit market and increase in EMI may not be significant given the modest rise in excise duty. Thus, significant relief on personal taxation front could possibly outweigh negative factors. In addition, the excise duty rollback is only one third of the total cut (6 per cent) doled out through the stimulus package. Hence, this partial rollback was factored in. There were no further negative surprises in the budget. This may be reason for positive sentiments in stock market.

It would be important to touch upon other significant budget proposals relevant for auto sector. While corporate income tax rates remain unchanged, reduction of surcharge on domestic companies from 10 to 7.5 per cent would lessen the tax burden. However, Minimum Alternate Tax (MAT) increases from 15 to 18 per cent, offsetting the benefit due to reduction in surcharge.

One of the budget proposals enhances weighted deduction for eligible companies having an approved in-house R&D unit from 150 to 200 per cent of the expenditure incurred. This would stimulate additional investment in R&D activity paving way for innovation. With the growing trend towards providing advanced driver assistance features, safety and comfort features in vehicles, continuous innovation and adoption of new systems will be vital to retain competitiveness in the automotive industry. Certain companies were required to call back large number of vehicles in recent past due to technology issues. This tax measure could possibly work as a fillip to increase focus on R&D in long term resulting in better technology products.

Union Budget 2010: Woes of the new perquisite valuation rules

The Central Board of Direct Taxes (CBDT) announced the new perquisite valuation rules on December 18, 2009, after keeping the whole country
waiting for almost six long months (from July 2009 when Budget 2009 was released). The finance minister had axed Fringe Benefit Tax (FBT), finally giving in to the long-standing demand of the corporate India. So, what does this mean for the common man? This means that he would have to bear the tax burden on most of the employer provided benefits!

As such, the rules are largely similar to the rules that were prevalent before the introduction of FBT by the Finance Act 2005. However, they have not brought good news for the employees in the New Year. Not only do they seek to tax most of the employer provided benefits, they have also come into force with retrospective effect from April 1, 2009.

Employees will have to pay tax on the perquisites provided to them during this financial year, over a period of three months (January-to-March). Whether there would be any relaxation on the employers for not complying with the provisions of deducting tax on the perquisites provided for prior months is still not clear.

Under the FBT regime, costs incurred by an employer towards a motor car provided to employees for personal or official use and the expenses borne on running and maintenance were subject to FBT in the hands of the employer. This benefit would now be fully taxable in the hands of the employees, where the car provided (owned or hired by the employer) is for personal use. However, only small notional perquisite values would be taxable where the car is provided for both personal and official use.

The value of meals (free food and non-alcoholic beverages) provided to employees is also a taxable benefit now. However, a limit of Rs 50 per meal has been fixed up to which the benefit will not be taxed, if the meals are provided during working hours at office premises or through paid vouchers. While setting the limit of Rs 50 per meal, the government has definitely not considered the ever rising food prices (even with the annual inflation in food prices rising to almost 18 per cent).

Another benefit, which was earlier subject to FBT and is now taxable in the hands of the employees, is shares allotted to them under a stock incentive plan. The employee will have to pay tax on the difference between the Fair Market Value (FMV) of the shares on the date of exercise and the price paid by him/her. This will cause some hardship to employees who do not want to sell their shares, but just wish to exercise and hold. They may be forced to sell their shares; else they may be out of pocket bearing the tax burden.

The method of valuation of the FMV on the date of exercise has also been notified in the rules and is pretty much a replica of the rules which existed in the FBT regime. This was one aspect on which employers had hoped for changes, especially for shares listed outside India. The rules still require the employers to obtain a valuation certificate from a merchant banker on the date of exercise, for shares listed outside India.

Union Budget 2010: Impact on retail and consumer products

On one hand where the FM has given clarity on likely introduction of DTC & GST by April 1, 2011, on the other hand the FM has made only a
reference to Prime Minister's remarks on opening up of retail trade without announcing any further policy change in this regard.

However, reduction in over all income tax slabs for individuals and 30 per cent levy on income exceeding Rs 8 lakhs will definitely result in ensuring higher purchasing power in the hands of consumer and consequently increasing the demand for consumer goods. From a corporate perspective, reduction in surcharge from 10 per cent to 7.5 per cent will result in higher disposable cash in the hands of corporate and will help in fuelling expansion/ reduced prices of goods. However, increase in MAT rate from 15 per cent to 18 per cent will act a dampener for the companies which are still falling under MAT regime.

Enhancing the exemption limit for tax audit and presumptive taxation under section 44AD from Rs 40 lakhs to Rs 60 lakhs for persons carrying on business or profession will help in reducing the compliance cost for small retail players.

Exemption from Special Additional Duty ('SAD') is a key winner in today's budget and is sure to spread cheer amongst the various stake holders as claiming refund for SAD was posing lot of administrative difficulty.

Gems & Jewellery

Increase in Customs duty on precious metals will have an impact on the pricing for consumers and will act as a negative. However, refined serially numbered gold bars made from the ore/concentrate stage will now attract excise duty of Rs 280 per 10 grams (instead of 8% ad valorem) with Cenvat credit facility on inputs and capital goods, which will certainly act as a breather.

Textiles

Roll back of stimulus and increase in general excise duty rates from 8 per cent to 10 per cent will adversely affect textiles. However, extension of interest subvention of 2 per cent for exports for one more year covering handicrafts, carpets etc is a welcome measure.

Food Processing

In this budget, providing necessary stimulus to food processing sector has been the mantra of the FM. The FM has expanded the definition of "infrastructure" under the ECB policy to include cold storage or cold room facility, farm level pre-cooling, preservation or storage of agricultural and allied produce, marine products and meat.

The Finance minister has provided concessional custom duty of 5 per cent under project import scheme with full exemption from service tax to the initial setting up and expansion of cold storage and cold rooms for agricultural and related sectors produce.

The FM has also provided central excise exemption to specified equipment for preservation, storage and processing of agriculture and related sectors and service tax exemption to storage and warehousing of their produce.

The FM concluded his budget speech by quoting "Our actions today will determine our tomorrow". The initiative of the FM to extend sops to food processing sector gives a clear cut indication of the government's effort to contain spiraling food inflation. Overall, the budget will usher in more purchasing power and overall growth. However, the hope on FDI opening in retail continues to be next big dream.

Union Budget 2010: Rough deal for media and entertainment industry

When the Finance Minister in his budget speech acknowledged that the film industry has been experiencing difficulties, it appeared that the
entertainment sector, and more specifically Film Industry, should finally be getting a respite from controversies relating to valuation of the content being imported. While the FM did rationalise the customs duty structure, on the flip side, he has slapped entire media and entertainment (M&E) sector with service tax. This, no doubt, is a big blow to the M&E sector, which is already burdened with one of the most unfavourable tax regime in India (only tobacco and alcohol could be considered to be in the same league!).

An analysis of the indirect tax impact on the M&E sector is below.

Customs duty: There was an anomaly in Customs Tariffs which granted an exemption on the royalty value on import of movies on cinematographic film reels only. However, when the same movie was imported on other media such as a betacam tapes (by broadcasters), stamper (by home entertainment companies) or on VCDs or DVDs, the said import was liable to customs duties on the entire value including royalty or license fee that was payable as a condition of sale. The Government has tried to rectify this anomaly.

Now, similar to cinematographic film reels, customs duty will be payable on the cost of the media (such as betacam tapes, stampes, VCDs, DVDs) and value of freight and insurance. While the exemption appears to be intended for all types of content being imported, at a ground level, there are some apprehensions that the revenue could seek to restrict the exemption only to certain content being imported on media. Hopefully, the Government will clarify its intentions.

Import of promotional materials like trailors, making of the film etc imported free of cost in the form of Electronic Promotion Kits / Betacams has been exempted from custom duties.

Service tax: The service tax ambit has been extended to a number of areas in the M&E sector:

# Temporary transfer or permitting the use or exploitation of all copyrights except original literary, dramatic, musical and artistic works.

# Grant of rights to exploit any event including events relating to art, entertainment, business, sports or marriage is also covered within the service tax net. Thus, exploitation rights granted by any person in events such as company sponsored cricket match, film award functions, celebrities' marriages, beauty contests or music concerts is proposed to be liable to service tax.

# Contracts for promotion or marketing of a brand (of goods, services, event or endorsement of name) of a business entity are made liable to service tax. Prior to this amendment, endorsement of goods or services was considered as taxable business auxiliary services. However, promotion of brand (without reference to a particular good or service provided) of a business entity is now proposed to be a taxable service.

# Sponsorship received for a sports event, hitherto excluded from service tax, is now proposed to be made taxable.

News Credit : Economic times

Australian economy at end of 2009

Australian economy ends 2009 with strong growth.

Australia's economy grew strongly in the final three months of 2009, capping a year in which it was the only major economy to avoid recession.

The nation grew 0.9% from the July-to-October quarter, its biggest expansion since March 2008, the government's statistics bureau said.

Australia's growth was "the envy of the developed world," Treasurer Wayne Swan said.

For the whole of 2009, Australia's economy expanded 2.7%.

By contrast, the economies of the UK, Germany and Japan shrank 5% in 2009, and the US contracted by 2.4%.

In the fourth quarter of 2009, Australia said machinery and equipment spending surged almost 11% from the previous three months.

It avoided the worst of the slump due to huge government spending and massive Chinese demand for its commodities.

Stimulus spending

Since the end of 2008, the government has introduced a number of multi-billion dollar stimulus packages, including increased infrastructure spending and cash handouts to most Australians to lift consumer spending.

Australia's economy only contracted in the final three months of 2008.

It therefore avoided recession, which is generally defined as two consecutive quarters of negative growth.

This week, the central bank has raised interest rates, for the fourth time since October, to 4% from 3.75% to cool its growing economy.

Australia was also the first developed nation to raise interest rates - from 50-year lows - as the economic crisis eased.

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Japan still world's 2nd largest economy,
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US economic growth modest

US economic growth modest, says Fed's Beige Book

The US economy has continued to grow this year, but only at a "modest" pace, according to the Federal Reserve's influential Beige Book.

Despite a "slight improvement" in consumer spending, growth was hampered by "severe snowstorms" in many parts of the country, it found.

The book also reported labour markets remaining weak across the country.

But the book did highlight growth in the manufacturing sector, and an increase in demand for services.

"Manufacturing activity strengthened in most regions, particularly in the hi-tech equipment, automobile and metal industries," it said.

The report painted a more downbeat picture of the property sector and the jobs market.

"Most districts characterised commercial real estate and construction activity as weak or having declined further," it said.

And although some districts "reported an uptick in hiring or a slowdown in layoffs, labour markets generally remained soft throughout the nation".

Leading US stocks lost early gains sparked by Greece's additional austerity measures after the book was published.

The main Dow Jones index closed down 9 points, at 10,396.76.

The Beige Book, compiled eight times a year and used to help set interest rates, is based on a survey of business views from around the US.

Last week, revised figures showed that the US economy grew at an annualised rate of 5.9% in the last three months of 2009, faster than the preliminary estimate of 5.7%.

Japan still world's 2nd largest economy

Japan, China in Race to Be World's No. 2 Economy.

Retaining its position as the world's second largest economy, Japan's economy grew at a faster-than-expected pace of 1.1% in the last three months of 2009.

China, the fastest growing large economy, clocked a growth rate of 10.7% in the quarter ending December 31, 2009, bringing it within sniffing distance of surpassing Japan as the world's second largest economy.

The Japanese cabinet office today said the "island nation's economy, which is primarily export-driven, rose 1.1% in the fourth quarter of 2009".

On an annual basis, the country's gross domestic product (GDP) expanded at a much higher pace at 4.6%.

For the whole of 2009, the Japanese economy shrank 5% and is valued at 474.92 trillion yen (about US$5.1 trillion), according to official data.

Last month, China said its 2009 GDP was "33,535.3 billion yuan (about US$4.91 trillion), up by 8.7% at comparable prices".

Severely hit by the global financial meltdown, the Japanese economy has slumped into one of its worst recessions in recent history. This has brought down the GDP gap (in US dollar terms) between Japan and China to a narrow range.

Japan climbed out of recession in the June quarter of 2009 after clocking a growth of 1.3%.

Meanwhile, the better-than-expected Japanese growth in December quarter was mainly driven by better exports and the effects of stimulus measures.

In 2009, the Chinese economy expanded at a stunning rate of 8.7%, primarily on the back of improved domestic output driven by government stimulus and a tightly held yuan.

Despite the GDP rising at a good rate in the December quarter, the export-driven Japanese economy is expected to see sluggish growth in the near term.

Going by the latest figures, the Japanese economy witnessed zero growth in the September quarter of 2009. Interestingly, preliminary estimates had pegged the GDP to expand at 1.2% for that period. The figure was later revised to 0.3%.

To bolster the recession-hit economy, Japan had unveiled stimulus measures worth over US$130 billion.

Japan still world's second economy

February 15 2010 : Japan has held its title as the world's second-biggest economy after fourth-quarter growth beat expectations and kept the country just ahead of a surging China.

Real gross domestic product grew at an annual pace of 4.6% in the October-December period, the government said.

The average forecast of 15 economists polled by The Associated Press was annual growth of 3.4%.

Japan's nominal GDP for the 2009 calendar year came to about 5.1 trillion US dollars (£3.25 trillion), topping China's domestic output of 4.9 trillion US dollars (£3.1 trillion).

On the surface, the results reflect how Japan has benefited from government stimulus measures at home and around the world, which have bolstered global trade and persuaded Japanese households to boost spending. GDP, or the total value of the nation's goods and services, has climbed now for three straight quarters and looks unlikely to retreat this year.

Consumer spending, which accounts for about 60% of the economy, rose 0.7% from the previous quarter as shoppers took advantage of incentives on cars and home appliances. More confident companies are also starting to invest in factories and equipment.

"There is some brightness breaking through the clouds," Finance Minister Naoto Kan told reporters, according to Kyodo News agency.

The outlook, however, is hardly sunny as Japan prepares to lose its number two spot in global economic pecking order after the US - a position it has held for more than four decades.

Analysts predict that consumer demand will almost certainly decelerate, hindering growth in the months ahead. Exacerbating woes is a viscous cycle of falling prices and wages, along with a shrinking population and tax base.

However, China's red-hot economy is expanding at a furious pace. Fourth quarter growth jumped to 10.7%, bringing overall 2009 growth to 8.7%.

Indian Economy in 2009-10

Economy to grow by 7.2% in 2009-10: Govt.

February 08 2010 : The government on Monday estimated the economy to grow by 7.2 per cent in financial year 2009-10, against 6.7 per cent a year ago, despite contraction in farm production.

The projected GDP figure for the current fiscal, as put out by the advanced estimates of the Central Statistical Organisation, is lower than the Reserve Bank of India and the Finance Ministry's forecasts.

The Finance Ministry pegged GDP growth at 7.75 per cent in the mid-term economic review, while the RBI projected the economy to grow by 7.5 per cent in its quarterly monetary policy review last month.

However, the economy is likely to grow at a higher pace in the second half than seven per cent in the first half.

According to the data released today, agriculture and allied activities are, however, projected to shrink by 0.2 per cent this fiscal against 1.6 per cent a year ago.

The projected growth this fiscal is likely to be driven by 8.9 per cent expansion in the manufacturing sector against 3.2 per cent a year ago. This sector in particular had got various stimulus doses from the government in the wake of the global financial crisis.

According to the advanced estimates, mining and quarrying is likely to grow by 8.7 per cent compared with 1.6 per cent a year ago, while electricity, gas and water supply by 8.2 per cent against 3.9 per cent.

Trade, hotel, transport and communication is also projected to rise by 8.3 per cent against 7.6 per cent last year and construction by 6.5 per cent in FY'10 from 5.9 per cent in FY'09.

However, financing, insurance, real estate and business services are likely witness fall in expansion and grow by 9.9 per cent this fiscal against 10.1 per cent last fiscal and community social and personal services by 8.2 per cent compared with 13.9 per cent.

Advanced estimates are released before the end of a fiscal year to enable the government estimate various figures like fiscal deficit in the Budget.

IT, BPO exports to touch $50 billion in 2009-10

Amid signs of fast recovery from the impact of global economic slowdown, the information technology and business process outsourcing (BPO) industry would see its exports reach $50 billion in the current financial year, registering a growth of over 5 per cent. Similarly, export revenues are likely to grow at 13-15 per cent next fiscal to cross $57 billion, with the US remaining the dominant market.

In its yearly performance report, the National Association of Software and Service Companies (Nasscom) has said the domestic IT-BPO market is likely to reach Rs.66,200 crore, clocking a growth of 12 per cent, while in the next fiscal domestic revenues are likely to grow by 15-17 per cent to touch Rs.76,100-77,500 crore, particularly due to government IT spending.

The report also said the industry would continue to remain a net hirer where direct employment in Indian IT-BPO is estimated to cross 23-lakh and indirect job estimated to reach 82-lakh. “This fiscal over 90,000 new jobs will be added, while in the next fiscal this can go up to 1.5-lakh,” said Nasscom President Som Mittal.

Declining that the U.S. government’s “protectionist move” would have any major impact on the Indian IT industry, he pointed out that the industry was rapidly expanding into tier II and II cities, while 58 per cent employee workforce originate from these cites.

Significantly, before the recession, the industry was adding almost three-lakh jobs annually.

Strong performance

According to Nasscom Chairman and Genpact’s President and CEO Pramod Bhasin, “the performance of the Indian IT-BPO industry this year is far stronger than what is reflected through the growth numbers.

“The industry has reinvented itself by increasing its cost efficiencies, utilisation rates, diversification into new verticals and creating new business and pricing models, which is going to help industry in the log run and improve its margins.”

Pointing out that new areas such as engineering services, software and product development, and research and development have displayed phenomenal momentum, Mr. Bhasin said there has been a rebound in IT spending globally. “Though Europe is still a laggard, the U.S. is moving faster, while Latin America and Asia Pacific regions are expanding well. We are also looking at newer geographies to expand our base,” he added when asked about the recovery of global economy from recession.

Economic Growth verticals

Mr. Mittal said e-governance had emerged as one of the biggest growth verticals for the domestic IT-BPO sector as government IT spend was expected to reach nearly Rs.25,000 crore by 2011 from around Rs.15,000 crore in the last fiscal.

“Coming years are going to represent a significant shift in terms of business models, service lines, customers and talent structure. There will be increased focus on higher end offerings such as system integration consulting, business intelligence, knowledge services and vertical special BPO services,” he added.