China exports, imports grew faster-than-expected in July
•
From K J M Varma
Beijing, Aug 10 (PTI) China reported faster-than-expected growth in exports, imports and its trade surplus in July, but analysts said the picture could become worse in the coming months amid uncertainty in the global economy triggered by the US debt crisis and escalating inflation.
China''s trade surplus rose sharply to USD 31.48 billion in July from USD 22.27 billion in June and USD 28.7 billion in the same month a year ago.
Exports rose 20.4 per cent year-on-year in July to reach USD 175.128 billion, a new record, China''s General Administration of Customs (GAC) said.
Imports also increased by 2.9 per cent to USD 143.64 billion in July. China''s imports had registered a growth rate of 19.3 per cent in June.
The readings suggest that both China''s export competitiveness and domestic demand are in relatively good shape, Bank of America-Merrill Lynch economist Lu Ting said.
Exports to the European Union (EU) and Japan rose by 22.3 per cent and 27.2 per cent year-on-year in July from 11.4 per cent and 20 per cent in June.
Growth in overseas shipments to the United States stood at 9.5 per cent in July, 2011, down slightly from 9.8 per cent in June, but down significantly from the average 13.3 per cent growth rate witnessed in the second quarter and 21.4 per cent in the first quarter, which indicated the US weakness has been weighing on its imports from China, Xinhua quoted Lu as saying.
The pain of the external turmoil will gradually be felt by Chinese exporters during the rest of the year, as the sovereign debt crisis in the EU and credit downgrade in the United States has generated more uncertainty about the recovery of the global economy, analysts said.
According to Lu, China''s export and import growth will slow to 16 per cent and 23 per cent, respectively, in the second half of this year from 24 per cent and 27.6 per cent in the first half.
The trade surplus will increase to USD 97.2 billion, up from USD 46 billion in the first half.
Import growth will trend down on the back of declining commodity prices and soft landing of the domestic economy, he said.
On the domestic front, China''s inflation rate accelerated to 6.5 per cent, a 37-month high, in July on surging food costs, while its Producer Price Index (PPI), a major measure of inflation at the wholesale level, rose by 7.5 per cent amid deepening worries over the downgrade of US debt.
Monday, August 29, 2011
Wednesday, April 21, 2010
March 2010
Singapore exports jump by a quarter
Non-oil exports in March rose by 26.6% compared with a year earlier
Singapore has reported a rise in exports of more than a quarter as shipments of electronic goods to the rest of Asia jumped sharply.
Non-oil exports in March rose by 26.6% compared with a year earlier, faster than analysts had expected.
Exports of electronics goods rose by 39.4%.
Separately, Singapore's Prime Minister Lee Hsien Loong said that China should allow the yuan to appreciate against other global currencies.
Analysts said the export figures bode well for Singapore's economic growth prospects this year.
"These export figures show that there is sustainable growth. We may see a pull back in the next two quarters, but by the end of the year we will only see a significant rise in GDP," said Robert Prior-Wandesforde at HSBC.
Weak yuan
Prime Minister Lee's comments on the yuan come days after Singapore allowed its own currency, the Singapore dollar, to rise against the US dollar in a bid to tackle inflation and control economic growth.
China has come under pressure in recent months, particularly from the US, to allow the yuan to strengthen.
The US has accused China of deliberately keeping the yuan weak to make Chinese exports cheaper, making it much harder for US firms to be competitive.
"[China] shifted to a more conservative position over the last two years, and fixed to the US dollar," Prime Minister Lee told Bloomberg TV.
"I think they should revert to where they were before the crisis and allow the yuan to go up gently."
Taiwan March Export Orders Rise More Than Estimated (Update2)
April 20, 2010, 5:02 AM EDT
(Adds economist’s comment in fourth paragraph.)
The value of export orders climbed to $34.39 billion last month from $27.41 billion in February, today’s report showed.
By Chinmei Sung and Janet Ong
April 20 (Bloomberg) -- Taiwan’s export orders rose faster than economists expected in March as the global economic recovery boosted demand for computers and mobile phones.
Vice Premier Eric Chu said last month that the economy may expand by more than 4.8 percent this year and the government is aiming to cut the jobless rate to less than 5 percent. Rising orders may spur companies to hire, with Taiwan Semiconductor Manufacturing Co., the world’s largest contract maker of chips, last week raising its estimate of global semiconductor sales.
“Demand has picked up, having returned to levels in 2008,” said Renee Yang, an economist at Yuanta Securities Co. in Taipei. “Companies are relatively optimistic, at least for April and May.”
Taiwan’s economy expanded 9.2 percent in the three months through December after five consecutive quarters of contraction. Its unemployment rate fell for a sixth consecutive month in February to 5.65 percent.
President Ma Ying-jeou is negotiating a trade accord with China that would cut import duties on Taiwanese goods in the world’s fastest-growing major economy and help cement the recovery.
Technology Spending
China’s economy expanded 11.9 percent from a year earlier, the biggest gain since the second quarter of 2007, the statistics bureau in Beijing said last week.
Morris Chang, chairman of Taiwan Semiconductor, said last week that worldwide semiconductor sales will rise 22 percent this year, compared with a January prediction of an 18 percent increase.
Today’s figures were released after the close of trading on the stock exchange. The Taiex index rose 0.6 percent to 7,900.42. The Taiwan dollar gained 0.1 percent to NT$31.447 at the 4 p.m. close, according to Taipei Forex Inc.
The value of export orders climbed to $34.39 billion last month from $27.41 billion in February, today’s report showed.
Export orders from China and Hong Kong combined increased 59.7 percent last month, after a 49.4 percent gain in February. Orders from the U.S. climbed 18.2 percent from a year earlier, after a 13.5 percent advance in February.
Orders for electronics rose 39.1 percent last month, after a 40.9 percent increase in February, today’s report showed. Demand for information technology and communications products climbed 40.3 percent in March, after gaining 43.8 percent a month earlier.
--With assistance from Jay Wang in Singapore and Yu-Huay Sun in Taipei. Editors: Michael Heath, Stephanie Phang
To contact the reporters on this story: Chinmei Sung in Taipei at csung4@bloomberg.net; Janet Ong in Taipei at jong3@bloomberg.net
Japan's exports rise over 40 percent from year ago
(AP) – 1 hour ago
TOKYO — Japan's exports jumped 43.5 in March from a year earlier as a recovering global economy drove demand for the nation's cars and gadgets.
The result the government released Thursday marks the fourth straight month of gains.
Shipments rose worldwide, with those to Asia up almost 53 percent. Exports to the U.S. grew 30 percent.
Imports rose 20.7 percent, leading to a trade surplus of 948.9 billion yen ($10.2 billion), according to the finance ministry.
Japan Sees Y948.9 Billion Trade Surplus In March
(RTTNews) - Japan posted a trade surplus of 948.9 billion yen in March, the Ministry of Finance said on Thursday. That was below analyst expectations for a 975.4 billion yen surplus following the revised 649.6 billion yen surplus in February.
Exports surged an annual 43.5 percent to 6.004 trillion yen - slightly below forecasts for a 45.9 percent increase on year after the 45.3 percent annual gain a month earlier.
Exports to China jumped 47.7 percent on year, the data showed, while exports to Asia surged 52.9 percent on year. Exports to the United States added an annual 29.5 percent, while exports to Europe collected 26.7 percent on year.
Imports jumped 20.7 percent on year to 5.055 trillion yen - roughly in line with expectations for a 21.0 percent increase after the 29.5 percent annual expansion in the previous month.
Among the imports, Japan imported 19 million kiloliters of crude oil in March, up 4.9 percent on year. The crude import bill came in at 825 billion yen, up 68.9 percent on year.
Imports of naphtha and gasoline were up an annual 13.7 percent to 2.1 million kiloliters, while imports of LNG jumped 15.9 percent on year to 6.7 million tons.
The adjusted trade surplus for March came in at 666.2 billion yen - topping forecasts for a 602.7 billion yen surplus after the revised 471.8 billion yen surplus in February.
Provisional data for fiscal year 2009 ending in March 2010 showed that exports plunged 17.1 percent on year to 59.013 trillion yen, marking the sharpest decline on record. Imports shed an annual 25.2 percent to 53.78 trillion yen, resulting in a trade surplus of 5.233 trillion yen.
The yen was little changed against its major opponents following the release of the data, quoted at 86.94 against the Swiss franc, 143.41 against the pound, 124.53 against the euro and 93.02 against the U.S. dollar.
Non-oil exports in March rose by 26.6% compared with a year earlier
Singapore has reported a rise in exports of more than a quarter as shipments of electronic goods to the rest of Asia jumped sharply.
Non-oil exports in March rose by 26.6% compared with a year earlier, faster than analysts had expected.
Exports of electronics goods rose by 39.4%.
Separately, Singapore's Prime Minister Lee Hsien Loong said that China should allow the yuan to appreciate against other global currencies.
Analysts said the export figures bode well for Singapore's economic growth prospects this year.
"These export figures show that there is sustainable growth. We may see a pull back in the next two quarters, but by the end of the year we will only see a significant rise in GDP," said Robert Prior-Wandesforde at HSBC.
Weak yuan
Prime Minister Lee's comments on the yuan come days after Singapore allowed its own currency, the Singapore dollar, to rise against the US dollar in a bid to tackle inflation and control economic growth.
China has come under pressure in recent months, particularly from the US, to allow the yuan to strengthen.
The US has accused China of deliberately keeping the yuan weak to make Chinese exports cheaper, making it much harder for US firms to be competitive.
"[China] shifted to a more conservative position over the last two years, and fixed to the US dollar," Prime Minister Lee told Bloomberg TV.
"I think they should revert to where they were before the crisis and allow the yuan to go up gently."
Taiwan March Export Orders Rise More Than Estimated (Update2)
April 20, 2010, 5:02 AM EDT
(Adds economist’s comment in fourth paragraph.)
The value of export orders climbed to $34.39 billion last month from $27.41 billion in February, today’s report showed.
By Chinmei Sung and Janet Ong
April 20 (Bloomberg) -- Taiwan’s export orders rose faster than economists expected in March as the global economic recovery boosted demand for computers and mobile phones.
Vice Premier Eric Chu said last month that the economy may expand by more than 4.8 percent this year and the government is aiming to cut the jobless rate to less than 5 percent. Rising orders may spur companies to hire, with Taiwan Semiconductor Manufacturing Co., the world’s largest contract maker of chips, last week raising its estimate of global semiconductor sales.
“Demand has picked up, having returned to levels in 2008,” said Renee Yang, an economist at Yuanta Securities Co. in Taipei. “Companies are relatively optimistic, at least for April and May.”
Taiwan’s economy expanded 9.2 percent in the three months through December after five consecutive quarters of contraction. Its unemployment rate fell for a sixth consecutive month in February to 5.65 percent.
President Ma Ying-jeou is negotiating a trade accord with China that would cut import duties on Taiwanese goods in the world’s fastest-growing major economy and help cement the recovery.
Technology Spending
China’s economy expanded 11.9 percent from a year earlier, the biggest gain since the second quarter of 2007, the statistics bureau in Beijing said last week.
Morris Chang, chairman of Taiwan Semiconductor, said last week that worldwide semiconductor sales will rise 22 percent this year, compared with a January prediction of an 18 percent increase.
Today’s figures were released after the close of trading on the stock exchange. The Taiex index rose 0.6 percent to 7,900.42. The Taiwan dollar gained 0.1 percent to NT$31.447 at the 4 p.m. close, according to Taipei Forex Inc.
The value of export orders climbed to $34.39 billion last month from $27.41 billion in February, today’s report showed.
Export orders from China and Hong Kong combined increased 59.7 percent last month, after a 49.4 percent gain in February. Orders from the U.S. climbed 18.2 percent from a year earlier, after a 13.5 percent advance in February.
Orders for electronics rose 39.1 percent last month, after a 40.9 percent increase in February, today’s report showed. Demand for information technology and communications products climbed 40.3 percent in March, after gaining 43.8 percent a month earlier.
--With assistance from Jay Wang in Singapore and Yu-Huay Sun in Taipei. Editors: Michael Heath, Stephanie Phang
To contact the reporters on this story: Chinmei Sung in Taipei at csung4@bloomberg.net; Janet Ong in Taipei at jong3@bloomberg.net
Japan's exports rise over 40 percent from year ago
(AP) – 1 hour ago
TOKYO — Japan's exports jumped 43.5 in March from a year earlier as a recovering global economy drove demand for the nation's cars and gadgets.
The result the government released Thursday marks the fourth straight month of gains.
Shipments rose worldwide, with those to Asia up almost 53 percent. Exports to the U.S. grew 30 percent.
Imports rose 20.7 percent, leading to a trade surplus of 948.9 billion yen ($10.2 billion), according to the finance ministry.
Japan Sees Y948.9 Billion Trade Surplus In March
(RTTNews) - Japan posted a trade surplus of 948.9 billion yen in March, the Ministry of Finance said on Thursday. That was below analyst expectations for a 975.4 billion yen surplus following the revised 649.6 billion yen surplus in February.
Exports surged an annual 43.5 percent to 6.004 trillion yen - slightly below forecasts for a 45.9 percent increase on year after the 45.3 percent annual gain a month earlier.
Exports to China jumped 47.7 percent on year, the data showed, while exports to Asia surged 52.9 percent on year. Exports to the United States added an annual 29.5 percent, while exports to Europe collected 26.7 percent on year.
Imports jumped 20.7 percent on year to 5.055 trillion yen - roughly in line with expectations for a 21.0 percent increase after the 29.5 percent annual expansion in the previous month.
Among the imports, Japan imported 19 million kiloliters of crude oil in March, up 4.9 percent on year. The crude import bill came in at 825 billion yen, up 68.9 percent on year.
Imports of naphtha and gasoline were up an annual 13.7 percent to 2.1 million kiloliters, while imports of LNG jumped 15.9 percent on year to 6.7 million tons.
The adjusted trade surplus for March came in at 666.2 billion yen - topping forecasts for a 602.7 billion yen surplus after the revised 471.8 billion yen surplus in February.
Provisional data for fiscal year 2009 ending in March 2010 showed that exports plunged 17.1 percent on year to 59.013 trillion yen, marking the sharpest decline on record. Imports shed an annual 25.2 percent to 53.78 trillion yen, resulting in a trade surplus of 5.233 trillion yen.
The yen was little changed against its major opponents following the release of the data, quoted at 86.94 against the Swiss franc, 143.41 against the pound, 124.53 against the euro and 93.02 against the U.S. dollar.
Tuesday, March 2, 2010
February 2010
South Korea
Y-o-Y
South Korea's trade swings to surplus last month
SEOUL -- South Korea reported a trade surplus of US$2.33 billion in February, helped by improving overseas demand for semiconductors and other key export items.
Exports were worth US$33.27 billion in February, up 31 percent from a year earlier, while imports rose 36.9 percent to 30.94 billion, the Ministry of Knowledge Economy said on Monday.
The February surplus followed a US$460 million deficit the previous month.
In February, shipments of semiconductors, displays, ships and cars made solid gains, the ministry said.
Exports of semiconductors surged 118.4 percent from a year earlier, while shipments of cars and ships grew 32.9 percent and 15 percent each, it said.
The ministry forecast a monthly trade surplus of more than one billion dollars from March despite external risks and debt concerns in some European nations
Y-o-Y
South Korea's trade swings to surplus last month
SEOUL -- South Korea reported a trade surplus of US$2.33 billion in February, helped by improving overseas demand for semiconductors and other key export items.
Exports were worth US$33.27 billion in February, up 31 percent from a year earlier, while imports rose 36.9 percent to 30.94 billion, the Ministry of Knowledge Economy said on Monday.
The February surplus followed a US$460 million deficit the previous month.
In February, shipments of semiconductors, displays, ships and cars made solid gains, the ministry said.
Exports of semiconductors surged 118.4 percent from a year earlier, while shipments of cars and ships grew 32.9 percent and 15 percent each, it said.
The ministry forecast a monthly trade surplus of more than one billion dollars from March despite external risks and debt concerns in some European nations
Wednesday, February 3, 2010
January 2010 figures
JAPAN (YEN)
Export Jan 2010: M-o-M (-45.7%);
Import Dec 2009: M-o-M (%);
Total Trade 2009:
Taiwan
Export Dec 2009: Y-o-Y (+75.8%);
Import Dec 2009: M-o-M ();
CHINA
Export Dec 2009 M-o-M (-16.3%) Y-o-Y (+21%)
Import Dec 2009 M-o-M (-15.1%) Y-o-Y (+85.5%)
JAPAN
Tuesday, February 24, 2009
Japan Exports Fall By 46% in January, Producing Record Trade Deficit
Japan has been hit by a double-whammy: the global fall in trade, made worse by its (formerly) rising yen.
While deteriorating conditions in China generally get more media attention, the falloff in Japan is stunning and serious. Japan has spent more than a decade stagnant, but the overall growth figures mask the fact that the domestic economy contracted, while the export sector exhibited good growth.
The export plunge (December’s results horrid too, a 35% fall in exports), means that Japan’s only engine of growth has gone into stall. China, by contrast, is not as dependent of trade for its overall performance as is popularly believed (commercial real estate and infrastructure spending have also been important sources, although CRE has taken a dive too).
The fact that Japan is now running trade deficits also means they will not be accumulating foreign exchange reserves, specifically buying Treasuries (Japan could still buy Treasuries to lower the value of its currency, but the terrible economic news has already put the yen on a downward path).
From Bloomberg:
Japan’s exports plunged 45.7 percent in January, resulting in a record trade deficit, as recessions in the U.S. and Europe smothered demand for the country’s cars and electronics…
Gross domestic product shrank at an annual 12.7 percent pace last quarter, the most since the 1974 oil shock, and economists predict the slump will drag into this quarter. Toyota Motor Corp., Sony Corp. and Hitachi Ltd. — all of which forecast losses — are firing thousands of workers, heightening the risk the recession will deepen.
“The drop in exports is unbelievably bad,” said Yasuhide Yajima, a senior economist at NLI Research Institute in Tokyo. “The pressure on companies to cut jobs and investment is rising and that will make the recession deep and protracted.”…
Japan’s economy, the world’s second largest, may shrink a record 4 percent in the year starting April 1, faster than this year’s projected decline of 2.9 percent, according to the median estimate of 15 economists surveyed by Bloomberg News. The worst contraction to date was fiscal 1998’s 1.5 percent drop.
TAIWAN
Taipei - Taiwan's exports and imports leaped to a three-decade high in January, posting record increases thanks to the global economic recovery, the Finance Ministry said Monday. In January, Taiwan's exports totalled 21.75 billion US dollars, up 75.8 per cent from the same period last year, marking its biggest single-month increase since August 1976, the ministry said in a statement.
Imports amounted to 19.25 billion US dollars, representing a 114.7 per cent year-on-year increase, the biggest since September 1974, it said.
The ministry cited the bottoming out of the world's financial crisis, strong increases in global demand and the relatively low comparison basis against last year as the major reasons for the sharp increases.
China remained Taiwan's biggest export market, with the island shipping goods worth 9.54 billion US dollars, accounting for 43.9 per cent of the total value of Taiwan's exports.
Europe followed second, buying goods worth 2.43 billion dollars from Taiwan, or 11.2 per cent of the island's exports, followed by the United States with 2.22 billion dollars and Japan's 1.47 billion dollars.
Read more: http://www.earthtimes.org/articles/show/308082,taiwans-exports-imports-jump-sharply-in-january.html#ixzz0f5f3YfXn
CHINA
China's exports and imports surged on a yearly basis in January, government data showed on Wednesday, a day after Germany conceded its top exporter title to the Asian nation.
Exports surged 21% year-on-year to $109.48 billion in January, the General Administration of Customs said. This came below expectations for a 28% increase following the 17.7% gain in the previous month.
Imports jumped 85.5% to $95.31 billion, faster than the 55.9% increase a month ago. Economists were looking for an 85.2% rise.
On a monthly basis, however, exports slumped 16.3% while imports were down 15.1%.
The strong nature of the year-on-year numbers is due partly to comparison with low activity in January 2009, when Chinese firms were inactive for the Lunar New Year holiday. This year, the holiday falls in February.
China's trade surplus stood at $14.17 billion in January, down sharply from the $18.43 billion surplus recorded in December.
Export Jan 2010: M-o-M (-45.7%);
Import Dec 2009: M-o-M (%);
Total Trade 2009:
Taiwan
Export Dec 2009: Y-o-Y (+75.8%);
Import Dec 2009: M-o-M ();
CHINA
Export Dec 2009 M-o-M (-16.3%) Y-o-Y (+21%)
Import Dec 2009 M-o-M (-15.1%) Y-o-Y (+85.5%)
JAPAN
Tuesday, February 24, 2009
Japan Exports Fall By 46% in January, Producing Record Trade Deficit
Japan has been hit by a double-whammy: the global fall in trade, made worse by its (formerly) rising yen.
While deteriorating conditions in China generally get more media attention, the falloff in Japan is stunning and serious. Japan has spent more than a decade stagnant, but the overall growth figures mask the fact that the domestic economy contracted, while the export sector exhibited good growth.
The export plunge (December’s results horrid too, a 35% fall in exports), means that Japan’s only engine of growth has gone into stall. China, by contrast, is not as dependent of trade for its overall performance as is popularly believed (commercial real estate and infrastructure spending have also been important sources, although CRE has taken a dive too).
The fact that Japan is now running trade deficits also means they will not be accumulating foreign exchange reserves, specifically buying Treasuries (Japan could still buy Treasuries to lower the value of its currency, but the terrible economic news has already put the yen on a downward path).
From Bloomberg:
Japan’s exports plunged 45.7 percent in January, resulting in a record trade deficit, as recessions in the U.S. and Europe smothered demand for the country’s cars and electronics…
Gross domestic product shrank at an annual 12.7 percent pace last quarter, the most since the 1974 oil shock, and economists predict the slump will drag into this quarter. Toyota Motor Corp., Sony Corp. and Hitachi Ltd. — all of which forecast losses — are firing thousands of workers, heightening the risk the recession will deepen.
“The drop in exports is unbelievably bad,” said Yasuhide Yajima, a senior economist at NLI Research Institute in Tokyo. “The pressure on companies to cut jobs and investment is rising and that will make the recession deep and protracted.”…
Japan’s economy, the world’s second largest, may shrink a record 4 percent in the year starting April 1, faster than this year’s projected decline of 2.9 percent, according to the median estimate of 15 economists surveyed by Bloomberg News. The worst contraction to date was fiscal 1998’s 1.5 percent drop.
TAIWAN
Taipei - Taiwan's exports and imports leaped to a three-decade high in January, posting record increases thanks to the global economic recovery, the Finance Ministry said Monday. In January, Taiwan's exports totalled 21.75 billion US dollars, up 75.8 per cent from the same period last year, marking its biggest single-month increase since August 1976, the ministry said in a statement.
Imports amounted to 19.25 billion US dollars, representing a 114.7 per cent year-on-year increase, the biggest since September 1974, it said.
The ministry cited the bottoming out of the world's financial crisis, strong increases in global demand and the relatively low comparison basis against last year as the major reasons for the sharp increases.
China remained Taiwan's biggest export market, with the island shipping goods worth 9.54 billion US dollars, accounting for 43.9 per cent of the total value of Taiwan's exports.
Europe followed second, buying goods worth 2.43 billion dollars from Taiwan, or 11.2 per cent of the island's exports, followed by the United States with 2.22 billion dollars and Japan's 1.47 billion dollars.
Read more: http://www.earthtimes.org/articles/show/308082,taiwans-exports-imports-jump-sharply-in-january.html#ixzz0f5f3YfXn
CHINA
China's exports and imports surged on a yearly basis in January, government data showed on Wednesday, a day after Germany conceded its top exporter title to the Asian nation.
Exports surged 21% year-on-year to $109.48 billion in January, the General Administration of Customs said. This came below expectations for a 28% increase following the 17.7% gain in the previous month.
Imports jumped 85.5% to $95.31 billion, faster than the 55.9% increase a month ago. Economists were looking for an 85.2% rise.
On a monthly basis, however, exports slumped 16.3% while imports were down 15.1%.
The strong nature of the year-on-year numbers is due partly to comparison with low activity in January 2009, when Chinese firms were inactive for the Lunar New Year holiday. This year, the holiday falls in February.
China's trade surplus stood at $14.17 billion in January, down sharply from the $18.43 billion surplus recorded in December.
Monday, February 1, 2010
Trade 2009 (Jan-Dec)
SINGAPORE (IN SPORE DOLLAR)
Export (NODX) Dec 2009: M-o-m (+1.7%); Y-o-Y (+26%)
(NORX) Dec 2009: M-o-M (+1.4%); Y-o-Y (+12%)
Import (NORX) Dec 2009: M-o-M (+5.3%); Y-o-Y (+16%)
Total Trade Dec 2009: M-o-M (+3.4%), Y-o-Y (+20%)
Total Trade 2009: (-19%) , Export (-18%);(Import (21%)
Due to decline of export of E&E (part of pc), petrochemical, heating and cooling
Due to lower exports to USA, EU27 and Malaysia.
INDONESIA (IN USD)
Export Dec 2009: M-o-m (+23.69%); Y-o-Y (+49.85%)
(NON OIL) Dec 2009: M-o-M (+28.30%); Y-o-Y (+44.55%)
Import Dec 2009: M-o-M (+17.15%);
(Nonoil)Dec 2009; M-o-M (+17.75%)
Total Trade 2009: (%) , Export (-14.98%);(Import (-25.03%)
THAILAND (BATH)
Export Dec 2009: M-o-M (+26.2%);
Import Dec 2009: M-o-M (+25.3%);
Total Trade 2009: (-19.8%) Export(-14.2%), Import (-25.3%)
JAPAN (YEN)
Export Dec 2009: M-o-M (+12.1%);
Import Dec 2009: M-o-M (-5.5%);
Total Trade 2009:
CHINA
Export Dec 2009 M-o-M (+17.7%) Y-o-Y
Import Dec 2009 M-o-M
Total Trade 2009: (%), Export (-16% =$1.2 trillion), Import (-11.2% =$1.01 trillion)
Export (NODX) Dec 2009: M-o-m (+1.7%); Y-o-Y (+26%)
(NORX) Dec 2009: M-o-M (+1.4%); Y-o-Y (+12%)
Import (NORX) Dec 2009: M-o-M (+5.3%); Y-o-Y (+16%)
Total Trade Dec 2009: M-o-M (+3.4%), Y-o-Y (+20%)
Total Trade 2009: (-19%) , Export (-18%);(Import (21%)
Due to decline of export of E&E (part of pc), petrochemical, heating and cooling
Due to lower exports to USA, EU27 and Malaysia.
INDONESIA (IN USD)
Export Dec 2009: M-o-m (+23.69%); Y-o-Y (+49.85%)
(NON OIL) Dec 2009: M-o-M (+28.30%); Y-o-Y (+44.55%)
Import Dec 2009: M-o-M (+17.15%);
(Nonoil)Dec 2009; M-o-M (+17.75%)
Total Trade 2009: (%) , Export (-14.98%);(Import (-25.03%)
THAILAND (BATH)
Export Dec 2009: M-o-M (+26.2%);
Import Dec 2009: M-o-M (+25.3%);
Total Trade 2009: (-19.8%) Export(-14.2%), Import (-25.3%)
JAPAN (YEN)
Export Dec 2009: M-o-M (+12.1%);
Import Dec 2009: M-o-M (-5.5%);
Total Trade 2009:
CHINA
Export Dec 2009 M-o-M (+17.7%) Y-o-Y
Import Dec 2009 M-o-M
Total Trade 2009: (%), Export (-16% =$1.2 trillion), Import (-11.2% =$1.01 trillion)
Monday, January 25, 2010
India in 2008
An Increasingly Affluent Middle India Is Harder to Ignore
Published: July 10, 2008 in India Knowledge@Wharton
C.K. Prahalad, professor of strategy at the University of Michigan's Stephen M. Ross School of Business, is looking for the fortune at the bottom of the pyramid. He says that huge markets exist among the poor in countries such as India, and that multinationals should tailor their plans and products to these consumers. At the other end of the spectrum, luxury goods manufacturers are pouring into India.
Somewhere between these extremes is the real Indian market. It does not lie in the metros or the villages. "The Indian urban growth story until now has been driven largely by metros," says Ashok Rajgopal, a partner in the media and entertainment practice at Ernst & Young, a global assurance, tax, transaction and advisory-services firm. "This is now moving beyond metros into smaller towns."
Several recent studies bolster the case for the rise of Middle India. According to the 2008 edition of the RK Swamy BBDO Guide to Market Planning, 51 districts in India have at least one town with a population of more than 500,000. Together, they have twice the market potential of the four metros (Mumbai, Delhi, Chennai and Kolkata) combined.
According to a study this year (2008) by the Future Group, an Indian retailer, and the National Council of Applied Economic Research (NCAER), the ratio of spending to earning is higher in Tier II towns such as Nagpur, Jaipur, Surat and Coimbatore than it is in the metros. An earlier NCAER study, in 2004, had shown a higher percentage of the rich in Middle India than in some metros. For instance, the North Indian state of Haryana had a small-town crorepati density of 280. (Crorepati density is defined as the number of families who annually earn more than Rs1 crore -- about $250,000 -- per 1 million people.) The relative numbers for Kolkata, Hyderabad and Chennai were 180, 191 and 291, respectively. Anecdotal evidence suggests that the growth of the small-town rich continues.
Amid this data come two studies that attempt to look beyond the numbers: "The Bunty Syndrome," by advertising agency Euro RSCG India in October 2007, and "The Dhoni Effect: Rise of Small Town India," by Ernst & Young in March 2008.
The titles require some explanation. "Bunty and Babli are popular names for boys and girls in small-town India," says Suman Srivastava, CEO of Euro RSCG India. "Contrary to popular belief, it is not the urban Indian who drives trends, but the long-ignored Buntys and Bablis. They are on the move. There is a sense of urgency, excitement and confidence as they race ahead. Marketers and their agencies cannot afford to ignore them. They are the future market, not just of India, but the world." (The names Bunty and Babli draw their inspiration from the success of a 2005 Bollywood film titled Bunty Aur Babli. The movie follows the wild road trip of its two ambitious title characters, whose origins lie in small Indian towns.)
Coming of Age
"The Dhoni Effect" draws its name from India's cricket captain Mahendra Singh Dhoni. Cricket is a religion in India, and Dhoni, from the small town of Ranchi in Eastern India, is one of its flashier successes in recent times. His very name conjures up the coming of age of Middle India.
"The Dhoni Effect identifies a phenomenon where rapidly growing small towns of India are taking center stage," says Rajgopal of Ernst & Young. "This research highlights the growing affluence levels, increased awareness due to media penetration, improved physical connectivity, and significant changes in consumption patterns with high aspiration levels of small-town India that are compelling marketers to take notice."
All this is giving rise to new markets and products. Spending power moved from downtown Mumbai's Marine Lines to the distant suburb of Malad many years ago. Now it is going further, to Madurai and Moradabad. And demands are different. One example: In the last few years, the male skin whitening category, which didn't even exist a decade ago, has grown 150% annually to $100 million. Most of this growth has come from Middle India.
While the studies have similar broad conclusions, their methodologies are different. Consider, first, the Dhoni Effect. "We are focusing on the Tier I, II and III towns, which are the key urban towns, and the rest of urban India besides the metros," Rajgopal explains. "These towns are very critical, as the next round of growth will come from them."
The study divided India into four sections: the top six metros (Mumbai, Delhi, Bangalore, Hyderabad, Chennai and Kolkata), the key urban towns (22 chosen cities), the rest of urban India (urban cities not part of the key urban towns), and rural India. Big advertisers, media planning experts and marketing consultancies provided qualitative inputs. Published data provided quantitative inputs.
The key findings:
• Increasing affluence has led to increased consumption growth in key urban towns and rural markets, which have been relatively untapped until now. A separate study of 100 cities' consumption spending by research agency Indicus Analytics shows that metros constitute about 30% of the total consumption market. This implies that the key urban towns, the rest of urban India and rural India together garner almost 70%. Given the larger consumer base of these markets, an increase in share of relevant consumers would imply larger numbers being added in these markets than in the metros. This is evident in product categories such as telecom, where subscriber growth in the four metros is a scorching 58% but in the rest of India it is even higher, at 93%.
• The relevant consumer base is large and growing, as are affluence levels. Towns such as Chandigarh, Ahmedabad, Jaipur, Lucknow, Indore and Pune have three-quarters or more of the affluence levels of Mumbai. On growth potential they do even better. That small-town urban India is attractive in terms of purchasing power, time spent on media, and product consumption comes across clearly.
• Physical reach has increased to less-developed sections of the key urban towns. Logistics has traditionally been the big challenge for marketing beyond metros, especially in Tier III and Tier IV towns and rural India. Recent investments and developments in infrastructure and connectivity have brought marketers into closer contact with key urban towns, the rest of urban India and rural areas. The movement of organized retail into smaller towns has made things easier and more cost-effective for marketers.
• Media reach has increased significantly. Rising disposable incomes, easier access to credit and improved retail reach have helped push television, satellite and radio in the key urban towns in absolute terms.
The study points out some problem areas. Limited measurement tools for judging media effectiveness beyond metros reduce marketers' inclination to invest in media in the key urban towns. Second, as key urban towns have traditionally been price-sensitive and volume-driven, marketers have relied on price promotions over advertising spending. And third, there is a skew toward decision-makers' markets, which leads to a disproportionate focus on metros by media planners and marketers.
The Dhoni Effect suggests that advertising money may not be going to the right places. "Clearly, a realignment of media spends toward small-town urban India is the need of the day," Rajgopal says. "Investment in these future growth areas would definitely reap benefits in the years to come."
Sanjeev Kotnala, associate vice president and national head of communication at DB Corp., publishers of Hindi daily newspaper Dainik Bhaskar, says the media must wake up to this new reality. It is a mistake to assume that Middle India is made up of the poorer cousins of the people in the metros, Kotnala says, because the people there think very differently.
If they were not different, Kotnala says, Dainik Bhaskar would have it easy. "We could edit the paper in one place and print all over," he says. Instead, the newspaper has more than 30 editions. Or take Dhoni. "We did a fast check over the phone to get the reaction of people to his name," Kotnala says. "In the metros, he is perceived as a star and an icon. In the small towns the associations are with 'captain,' 'rich' and 'long hair.'" (Dhoni was appointed Dainik Bhaskar's brand ambassador in June.)
India's Many Small Millions
Exploring the differences between Metro India and Middle India is what the second study -- the Bunty Syndrome -- is all about. This is part of an ongoing study on what the agency calls "prosumers." Prosumers are the 20% to 30% of all consumers who can be thought of as being opinion spreaders. (This is different from opinion leaders, a tiny minority.)
"India's rapid economic growth has set the tone for a fundamental change in the country's consumer set," says Srivastava. "The same energy that lifted hundreds of millions of people out of desperate poverty has created a 300 million-plus middle class, a middle class that's not prudent about spending any more. We've quickly moved from being a savings-oriented nation to a nation that's willing to indulge. Sample this: The share of wallet for personal grooming in urban India is a whopping 9%." Entertainment, Srivastava says, accounts for close to 5% of wallet share across all socio-economic categories.
But it is easy to go wrong in this market. "The Indian billion is made up of many small millions, and each million is a different million," Srivastava says. "Marketers must [acknowledge] these differences and myths lest they miss the great opportunity that is India."
What are some of these myths?
Myth: The Indian middle class lives in the metros.
Reality: Of the 80 million households that constitute the Indian middle class, only 25 million are in Tier I cities. Close to 55 million belong to the smaller towns. Mercedes sells more cars in small-town Ludhiana than it does in Mumbai.
Myth: India is a "price sensitive" market.
Reality: For products such as Vim Bar dishwashing detergent and Head & Shoulders shampoo, the Indian market easily absorbed price hikes of 13% and 18%, respectively, in 2007. Yet for years, candy manufacturers have been trying in vain to increase prices from 50p to Re 1. Value sensitivity, not price sensitivity, is the buzzword.
Myth: Imported is always premium.
Reality: Euro RSCG's brand momentum study in 2004 showed that eight of the top 10 brands in the country were of Indian origin. The days of "imported equals premium" are long past.
"The Indian middle class does not follow the norms that most mature markets do," Srivastava says. "The probable reason is that the core of the market has shifted from being middle aged and urban to young and Tier II. Many rules of the game are being challenged, the primary one being the quintessential 'trickle-down theory.' Attitudes and behavioral trends that got formed in the Tier I markets would trickle down into the small towns and rural markets. What sold in Tier I would also percolate down and sell in Tier II cities."
The Bunty Syndrome draws on quantitative studies performed by Euro RSCG in 2005 and 2007. It attempts to understand the attitude and behavior of youth in Tier I and II cities. "It studies their attitude toward and interaction with various categories, as well as creates a psychographic picture of their attitude toward life," Srivastava says. "Marketers need this lens to view the market, as it will allow them to communicate better with what we believe is the new future market for India."
What defines a Bunty consumer? Here are some characteristics:
• High confidence in their abilities, much higher than that of their counterparts in Tier I cities.
• Reemergence of Gandhian values. Social conscience is at an all-time high.
• Pride of being Indian. Youth in Tier II cities have always been proud of being Indian, and that belief has become even stronger.
• Walking on the wild side. The desire to experience the unknown -- a constant need for adventure -- is much more prevalent among youth in Tier II cities.
• Family as the cornerstone of existence. With rapid nuclearization of families and the advent of social networking, one might expect to see increased importance of friends over family. But the opposite is true. Even in the selection of role models, parents seem to trump the more prolific cricketers and Bollywood stars.
A Middle India All Its Own
The Dhonis, Buntys and Bablis -- and the efforts to track them -- have brought a newfound realization that there is indeed a growing Middle India, and one that is different. "I believe that the overall evidence does indicate the presence of a Middle India which has its own characteristics," says Sridhar Samu, assistant professor of marketing at the Hyderabad-based Indian School of Business (ISB). "It is not a smaller version of metro India. It is different in the values and the relationships between people."
"I believe that the difference in attitudes comes from the aspirations of the people living in these types of regions," Samu says. "People in Middle India are more willing to make the trade-off between the better quality of life available there versus the opportunities available in the metros. Of course, some of them are forced to live there because of their jobs, and these people may be waiting to get the opportunity to move to a metro. But large numbers of people living in Middle India live there by choice, and they seem to value the quality of life more than the conveniences in a metro."
Roopa Purushothaman, chief economist at Future Capital Holdings (and co-author of the 2003 BRIC -- Brazil, Russia, India and China -- report by Goldman Sachs) makes a further distinction. She cuts Middle India down the middle. "There are certain differences between the Tier II and Tier III cities," she says. "For instance, penetration of financial services is quite high in Tier II cities. In the smaller Tier III cities, however, penetration of financial services is not high at all. Here, it is penetration of consumer durables that is very high. The Tier III cities may be a good place to test-market or launch new higher-end products and consumer durables. Typically these places are not even on the radar screens of marketers because the population numbers are not high enough."
Is the growth of Middle India a sort of natural progression that has happened in other countries? Are there lessons Indian marketers can draw from elsewhere? Opinion is divided.
"This is quite like how other countries too have evolved," Purushothaman says. "In terms of income distribution, the middle class in the smaller cities looks like the middle class in the mega cities at the turn of the century. There is a growing aspirant class in these locations, and this is what is bringing about faster changes in the consumer pattern."
Others differ in the details. "This middle segment is similar to certain other developing countries in Africa, or Vietnam, Indonesia and Malaysia," says Harish Bijoor, CEO of Harish Bijoor Consults, a brand and business strategy consulting firm. Bijoor is also a visiting faculty member at ISB. "Over time, there is a creeping globalization that gobbles up the middle segment and everything becomes urban. Today, India is 26% urban and 74% rural. My prognosis is that by 2046, India will be 2% rural and 98% urban." Adds Samu, of ISB: "This pattern seems to follow to some extent what happened in the U.S., though not completely. In the U.S. market, people migrated to the suburbs in order to get away from the metros. In India, this does not seem to have happened; rather, the smaller cities became bigger and became Middle India."
Srivastava calls the Bunty Syndrome unique because of factors peculiar to India: the change from an agrarian to a service economy, the growth of backward castes, nuclearization of families, greater world travel, a media boom, and the speed of change being fastest in the smaller cities. "All emerging markets are facing some degree of remixing as global culture clashes with local cultures," Srivastava says. "The Bunty Syndrome is our own take on this remixing."
Bijoor's company did a typecasting exercise recently across nine countries to assess how many "types" of people exist in different cities. (Types were classified by their similar marketing behavior.) In New York, they found 14 different types of people. In Boston, they found 9 and in Tokyo 11. In Middle India, the diversity was awesome. In Bhopal, they found 213 types and in Vijayawada 171 types.
This may be one of the reasons why marketing in India is regarded as much more difficult than fighting for pieces of market share in the West. "Marketing companies have a big responsibility toward these people and need to tailor their products and services," says Samu of ISB. "Companies need to devise innovative strategies. Advertising could also be different and may need to use local references." While having a celebrity such as film star Shah Rukh Khan, for example, may attract people's attention, it is more than likely that they would treat such ads as merely entertainment. "Local ads may have more of an impact," Samu says, "especially given the language differences."
The Bunty Syndrome study provides examples of how companies are adapting to the needs and demands of Middle India. Consider how some of the Bunty traits defined earlier are being tapped:
• Confidence: Grasim, a brand of suits, through the message of "be self-made," has saluted the "We'll get there no matter what" spirit of the youth. The message is enhanced by the use of a celebrity (the actor Akshay Kumar) who has made a name for himself on his own in a field where relatives already in the profession are seen as a prerequisite for creating equity in the industry.
• Gandhian values: Idea, a mobile-services brand, has propagated caste equality, while Tata Tea has tried to appeal to the young in Tier II cities with a call to "wake up to the issues."
• Pride: Durables brand Voltas has challenged the monopoly of Korean brands in the air-conditioner space by projecting itself as "India's own AC."
• Family values: The concept of being able to give back to parents has been used to good effect by MasterCard and HDFC Bank.
One Marketer's Experience
Suparna Mitra, head of marketing for the watches division of Titan Industries, sheds light on her company's Middle India experience: "Titan has been aware of and has been addressing this market for some time now. It was one of the first companies to set up exclusive stores in these towns and has an early-mover advantage. For Titan, 50% of watch sales come from the top 10 towns [including metros] and the 11th to 100th towns account for another 35%.
"At this point there are some differences in the products being sold in the metros and in the smaller towns. For instance, the average price in the top 10 towns is 10% higher than the products sold in Middle India. There are also different levels of acceptability in terms of styles and modernity, etc. But, given the exposure, increasing disposal incomes, and similar levels of aspirations, it is just a matter of time before this changes.
"We are already seeing it happen. For instance, last year Titan had a high-priced collection called Raga Crystals as part of its sub-brand Raga, which is aimed at women. This collection, which was studded with Swarovski crystals, was priced at around $200 at the top end of the range. We estimated a certain amount of sales, most of it from the metros. But when we actually introduced the product, we found that it was selling right down to smaller towns.
"While the realities of the Middle India consumer may be different from the urban or metro consumer, his expectations and aspirations are the same," Mitra says. "A marketer has to aim at the aspirations and not at the realities."
Here's what you think...
Total Comments: 3
#1 A Well Researched and Concluded Article
This article gives an excellent analysis of the young India and I absolutely love the terms used - "The Dhoni Syndrome" and "Bunty and Bubly Effect". It completely summarizes the kind of young India that is set to take the country forward.
I however do not agree with the example and reasoning given for the myth "India is a price sensitive nation". I think it is a fact and not a myth as what is suggested here. The argument given is that Indian consumers are value sensitive, but I ask does not price contribute to the value and is it not an important factor in buying sensitivity of a consumer? I feel this is a fact not only for India but for all the consumers. You increase the price of coke in USA by a dollar and see what happens. To say that price of candies in India cannot increase is not a correct example. The fact is, the manufacturing of candies in India has improved tremendously and to sustain growth in sales and profit, price change was not required.
By: Nitesh Naveen, Student, Class of 2008, PGPEX, IIM Calcutta
Sent: 04:48 PM Tue Jul.15.2008 - GB
#2 Well Concluded Article
The article is right about the concluding statement: Although the realities differ in metro and non-metro cities, the aspirations remain the same. I used to get surprised when I'd see the latest model luxury cars in smaller cities where the roads are not at all suited for those vehicles, but not anymore ...
By: Merrin Kurian,
Sent: 12:18 PM Thu Apr.02.2009 - AU
#3 Middle India Fellows Are Not the Poor Cousins
Nice to find an article about what is really happening in Middle India rather than what we feel good to think about this market.
We have been traveling for months across villages and towns in India to gather insights into consumer trends, to find out consumers' emotional drivers.
In fact, the gap between consumer expectations and product and service offers is quite huge. In South India, we found 21 consumer macro segments. We have not yet finished our North India research but it would be something similar, with a wider variety of micro segments.
Contextual innovation can provide sustainable design solutions to respond to people’s diversity.
By: Patrick Roupin, Kovent, Managing Director - www.kovent.com
Sent: 01:33 AM Fri Jul.10.2009 - -
Thursday, January 14, 2010 10:50 am IST
Consumption will drive the India story
Kishore Biyani
For India, a country and a population of 1.2 billion people, assumption can be the next big event which can boost the GDP and the economy. With a trillion-dollar economy now in consumption, close to 350 million dollars and with the growth of the economy around 6-7 per cent, we add up around 25-30 billion dollars of new consumption every year. Can this consumption be the next driver for India's economic growth?
With India's consumption which is the largest canvas for any industry today, we are seeing a growth with India's demographic of 70 per cent below 35 years of age. New categories of consumption are being created, a lot of new brands are being launched and modern retail formats are getting established. Consumption is growing faster than India's GDP rate. While India's growth is about 7 per cent, its consumption growth is about 10 per cent. So, I think consumption growth can be further accelerated inducing with various options and schemes for the consumers as India has now adapted to the world consumption patterns.
Being youthful, India has adapted to technologies. We have taken to mobile phones, we have adopted computers and I think it is only a matter of time before a few more value-added products and services woo the Indian consumer. The emergence of value-added products can create jobs, boost manufacturing and services and help in fuelling the economy.
How can we encourage value-added product consumption? Although India has majorly been a commodity-led economy, in the last few years, we have moved into value-added consumption. With the fueling of major incentives given by the government in terms of excise reduction and various other incentives, consumption can grow to the next level. The consumption growth can be much more at least 5% more than the GDP rate and that's where India's economy could have arrived.
There have been a lot of reports about India's consumption going down and modern retail faltering. Personally, I feel that we went into a lot of excesses which we have seen in action. Earlier we have seen a dip in sales in electronics and furniture and some dip in sales of high-priced products. However, looking at the trends of the last couple of weeks, we see that consumers are now back in the mall and are buying high-priced tickets. We feel very confident that in retail we are back to what we were maybe six or eight months ago. We expect the government to help us make our economy be driven by consumption which will ultimately drive the country's GDP.
From the savings point of view, the government has done enough. Now it needs to drive India through consumption. The government did take a lot of measures in the stimulus package (basically by reducing excise duty and by doing a lot of other incentives) to drive and fuel consumption in the country. I think in this Budget the government can take it forward and make all of us in the industry believe that saving is not the only way and investment is not the only way to drive India's economy. India's growth is going to be driven out of consumption.
— IndiaRetailing Bureau
Retail in India - looking forward
By Diljeet Titus, Founder & Managing Director, Titus & Co
12 Aug 2009
Tracking the reforms
Liberalisation has always been treated with caution by Indian government. It has evolved with time through constant reforms. Allowing international investors to enter Indian retail business was another step in this direction. Companies relied on franchise route before retail sector was opened to international investors. Press Note 3 (2006) which liberalised single-brand retail by FDI up to 51 per cent gave tremendous boost to the sector. 100 per cent FDI in ‘cash and carry’ wholesale trading has led to supermarkets and cash-and-carry becoming the fastest growing segments in retail. Liberalisation of FDI in multi brand retail is still awaited.
According to FICCI in its report ‘Organised retail: Unfinished agenda & the challenges ahead’, retail sector is projected to have a turnover of $430 billion by 2010 with organised retail sector having a $90 billion share. Even after the restrictions placed on investment in Indian retail market, there has been a phenomenal rise in the number of large multinationals entering Indian market under both single brand wholesale and 'cash and carry' model. As per Global Emerging Markets Survey (GEMS) ‘India is considered particularly attractive because of the size of its market compared to low presence of international retailers’. Retail sector being the second largest sector of the Indian economy after agriculture, has significant growth prospect. Vital measures were expected to be taken for further liberalisation of the sector to meet the demands of international investors and benefits to Indian economy.
Budget offerings
Prevailing reformist mindset led to several expectations from the UPA Government in the Budget 2009-10. However, apart from implementation of certain benefits and concessions which can aid retail sector indirectly, this budget didn’t offer any substantial benefits for the retail sector. It focused mainly on benefits to poor and middle class in its effort to stimulate economy’s growth.
Some of the measures which provide indirect benefit to the retail market include abolition of Fringe Benefit Tax, Commodity Transaction Tax, increase in the threshold limit and removal of surcharge of individual tax payers. These measures would leave both consumers and retail sector with more cash flow and allow the retail traders more flexibility in their policy formation. Measures undertaken such as simplification of tax scheme for small business houses, increase in expenditure towards infrastructure and reduction in the custom duty would also be beneficial for the retail sector in an indirect manner.
Need of the hour
Although investments in India under single brand retail are increasing even with the prevailing restrictions, there is a need to allow 100 per cent FDI in single brand retail. The investing companies face bureaucratic problems in obtaining clearances. Apart from the procedural difficulties, finding an Indian minority partner is another hurdle they come across. Such companies also often face incompatibility issues with their joint venture partners. Many multinationals like IKEA have kept away from entering the Indian market due to these difficulties which are the result of the current restrictive FDI norms. Opening Indian retail market fully to foreign investment would help remove such difficulties and consequently encourage investments.
Suggestion given by Economic Survey Report 2009 to open multi brand retail to FDI also needs to be implemented. This should bring tremendous amount of investment into the country by leading global multinationals. At the same time, since radical changes can pose some risk to a developing economy like India, FDI in multi brand retail may be opened also in a phased manner as under:
• Initial stage: 26 per cent FDI - 2 years
• Establishment Phase: 49 per cent FDI - 2 years
• Mature Phase: 100 per cent FDI - 2 years
Further safeguard measures could include restricting FDI in retail initially to major cities and SEZ as well as to certain sectors. Such steps could reduce risks to the local markets and at the same time boost investments.
Giving ‘Industry Status’ to retail sector would facilitate better regulation and growth as well as allow fiscal benefits in its favour by bringing it under a separate Ministry. Additional measures could also have been taken such as removal of 12.5 per cent Service Tax on rentals, permitting set off of Service Tax against Sales Tax and allowing single window clearance for licences towards the benefit of retail sector.
Various reports have negated the detrimental effect of organised retail stores on the unorganised sector in India. The Report of Indian Council for Research on International Economic Relations (ICRIER) observed that farmers would benefit significantly by selling directly to organised retailers. The report also stated that “Profit realisation for farmers selling directly to organised retailers is about 60 per cent higher than that received from selling in the unorganised market”. Moreover, since indigenous organised retails have already made their presence in the country, allowing foreign investors would infuse more funds which are scarce at present. It would also permit fair competition which would lead to better development of the sector.
Parliamentary Standing Committee on Commerce expressed a need for providing adequate protection to small retailers in its report on Foreign and Domestic Investments in the Retail Sector. The Committee’s recommendation of setting up a Retail Regulatory Authority for looking into anti-competitive behaviour and abuse of dominance of the large retailers can be helpful. Establishment of suggested National Commission would also help in studying the problems of the retail sector and to evolve policies that will enable it to cope with FDI.
Way to go!
India is one of the fastest growing economies in the world today. Topping the Global Retail Development Index for the third consecutive year as the most attractive market for retail investment, India has one of the most vibrant retail sectors in the world. Currently, there are 12 million retail outlets in India, which is estimated to triple by 2015. As per the study conducted by the ICRIER, retail sector is expected to contribute to 22 per cent of India's GDP by 2010 which illustrates the strong fundamentals of the sector. Conservative steps taken by the industry players have to an extent diminished the effects of recession considerably on the Indian economy and kept it protected. However, gradual changes and calculated risks are essential for India to realise its potential and to come at par with leading economies.
In the event that the government opens up Foreign Direct Investment in retail, number of international retailers will immediately start trickling in. FDI is essential as it will bring liquidity and bolster the infrastructure of the sector. Increase in investment in retail sector would also encourage fair competition, prices reduction, aid consumer satisfaction, technological advancements and accelerate overall growth of Indian economy. Corporate India is eager to hear the government’s response to their request for industry status for retail. Foreign investors are hopeful government would undertake economic reforms by considering 100 per cent FDI at least. The government is expected to amend retail investment policy, especially since the recent budget was silent on the matter. With the changing dynamics of the world, the country's retail sector must orient itself to meet the needs of the market.
Published: July 10, 2008 in India Knowledge@Wharton
C.K. Prahalad, professor of strategy at the University of Michigan's Stephen M. Ross School of Business, is looking for the fortune at the bottom of the pyramid. He says that huge markets exist among the poor in countries such as India, and that multinationals should tailor their plans and products to these consumers. At the other end of the spectrum, luxury goods manufacturers are pouring into India.
Somewhere between these extremes is the real Indian market. It does not lie in the metros or the villages. "The Indian urban growth story until now has been driven largely by metros," says Ashok Rajgopal, a partner in the media and entertainment practice at Ernst & Young, a global assurance, tax, transaction and advisory-services firm. "This is now moving beyond metros into smaller towns."
Several recent studies bolster the case for the rise of Middle India. According to the 2008 edition of the RK Swamy BBDO Guide to Market Planning, 51 districts in India have at least one town with a population of more than 500,000. Together, they have twice the market potential of the four metros (Mumbai, Delhi, Chennai and Kolkata) combined.
According to a study this year (2008) by the Future Group, an Indian retailer, and the National Council of Applied Economic Research (NCAER), the ratio of spending to earning is higher in Tier II towns such as Nagpur, Jaipur, Surat and Coimbatore than it is in the metros. An earlier NCAER study, in 2004, had shown a higher percentage of the rich in Middle India than in some metros. For instance, the North Indian state of Haryana had a small-town crorepati density of 280. (Crorepati density is defined as the number of families who annually earn more than Rs1 crore -- about $250,000 -- per 1 million people.) The relative numbers for Kolkata, Hyderabad and Chennai were 180, 191 and 291, respectively. Anecdotal evidence suggests that the growth of the small-town rich continues.
Amid this data come two studies that attempt to look beyond the numbers: "The Bunty Syndrome," by advertising agency Euro RSCG India in October 2007, and "The Dhoni Effect: Rise of Small Town India," by Ernst & Young in March 2008.
The titles require some explanation. "Bunty and Babli are popular names for boys and girls in small-town India," says Suman Srivastava, CEO of Euro RSCG India. "Contrary to popular belief, it is not the urban Indian who drives trends, but the long-ignored Buntys and Bablis. They are on the move. There is a sense of urgency, excitement and confidence as they race ahead. Marketers and their agencies cannot afford to ignore them. They are the future market, not just of India, but the world." (The names Bunty and Babli draw their inspiration from the success of a 2005 Bollywood film titled Bunty Aur Babli. The movie follows the wild road trip of its two ambitious title characters, whose origins lie in small Indian towns.)
Coming of Age
"The Dhoni Effect" draws its name from India's cricket captain Mahendra Singh Dhoni. Cricket is a religion in India, and Dhoni, from the small town of Ranchi in Eastern India, is one of its flashier successes in recent times. His very name conjures up the coming of age of Middle India.
"The Dhoni Effect identifies a phenomenon where rapidly growing small towns of India are taking center stage," says Rajgopal of Ernst & Young. "This research highlights the growing affluence levels, increased awareness due to media penetration, improved physical connectivity, and significant changes in consumption patterns with high aspiration levels of small-town India that are compelling marketers to take notice."
All this is giving rise to new markets and products. Spending power moved from downtown Mumbai's Marine Lines to the distant suburb of Malad many years ago. Now it is going further, to Madurai and Moradabad. And demands are different. One example: In the last few years, the male skin whitening category, which didn't even exist a decade ago, has grown 150% annually to $100 million. Most of this growth has come from Middle India.
While the studies have similar broad conclusions, their methodologies are different. Consider, first, the Dhoni Effect. "We are focusing on the Tier I, II and III towns, which are the key urban towns, and the rest of urban India besides the metros," Rajgopal explains. "These towns are very critical, as the next round of growth will come from them."
The study divided India into four sections: the top six metros (Mumbai, Delhi, Bangalore, Hyderabad, Chennai and Kolkata), the key urban towns (22 chosen cities), the rest of urban India (urban cities not part of the key urban towns), and rural India. Big advertisers, media planning experts and marketing consultancies provided qualitative inputs. Published data provided quantitative inputs.
The key findings:
• Increasing affluence has led to increased consumption growth in key urban towns and rural markets, which have been relatively untapped until now. A separate study of 100 cities' consumption spending by research agency Indicus Analytics shows that metros constitute about 30% of the total consumption market. This implies that the key urban towns, the rest of urban India and rural India together garner almost 70%. Given the larger consumer base of these markets, an increase in share of relevant consumers would imply larger numbers being added in these markets than in the metros. This is evident in product categories such as telecom, where subscriber growth in the four metros is a scorching 58% but in the rest of India it is even higher, at 93%.
• The relevant consumer base is large and growing, as are affluence levels. Towns such as Chandigarh, Ahmedabad, Jaipur, Lucknow, Indore and Pune have three-quarters or more of the affluence levels of Mumbai. On growth potential they do even better. That small-town urban India is attractive in terms of purchasing power, time spent on media, and product consumption comes across clearly.
• Physical reach has increased to less-developed sections of the key urban towns. Logistics has traditionally been the big challenge for marketing beyond metros, especially in Tier III and Tier IV towns and rural India. Recent investments and developments in infrastructure and connectivity have brought marketers into closer contact with key urban towns, the rest of urban India and rural areas. The movement of organized retail into smaller towns has made things easier and more cost-effective for marketers.
• Media reach has increased significantly. Rising disposable incomes, easier access to credit and improved retail reach have helped push television, satellite and radio in the key urban towns in absolute terms.
The study points out some problem areas. Limited measurement tools for judging media effectiveness beyond metros reduce marketers' inclination to invest in media in the key urban towns. Second, as key urban towns have traditionally been price-sensitive and volume-driven, marketers have relied on price promotions over advertising spending. And third, there is a skew toward decision-makers' markets, which leads to a disproportionate focus on metros by media planners and marketers.
The Dhoni Effect suggests that advertising money may not be going to the right places. "Clearly, a realignment of media spends toward small-town urban India is the need of the day," Rajgopal says. "Investment in these future growth areas would definitely reap benefits in the years to come."
Sanjeev Kotnala, associate vice president and national head of communication at DB Corp., publishers of Hindi daily newspaper Dainik Bhaskar, says the media must wake up to this new reality. It is a mistake to assume that Middle India is made up of the poorer cousins of the people in the metros, Kotnala says, because the people there think very differently.
If they were not different, Kotnala says, Dainik Bhaskar would have it easy. "We could edit the paper in one place and print all over," he says. Instead, the newspaper has more than 30 editions. Or take Dhoni. "We did a fast check over the phone to get the reaction of people to his name," Kotnala says. "In the metros, he is perceived as a star and an icon. In the small towns the associations are with 'captain,' 'rich' and 'long hair.'" (Dhoni was appointed Dainik Bhaskar's brand ambassador in June.)
India's Many Small Millions
Exploring the differences between Metro India and Middle India is what the second study -- the Bunty Syndrome -- is all about. This is part of an ongoing study on what the agency calls "prosumers." Prosumers are the 20% to 30% of all consumers who can be thought of as being opinion spreaders. (This is different from opinion leaders, a tiny minority.)
"India's rapid economic growth has set the tone for a fundamental change in the country's consumer set," says Srivastava. "The same energy that lifted hundreds of millions of people out of desperate poverty has created a 300 million-plus middle class, a middle class that's not prudent about spending any more. We've quickly moved from being a savings-oriented nation to a nation that's willing to indulge. Sample this: The share of wallet for personal grooming in urban India is a whopping 9%." Entertainment, Srivastava says, accounts for close to 5% of wallet share across all socio-economic categories.
But it is easy to go wrong in this market. "The Indian billion is made up of many small millions, and each million is a different million," Srivastava says. "Marketers must [acknowledge] these differences and myths lest they miss the great opportunity that is India."
What are some of these myths?
Myth: The Indian middle class lives in the metros.
Reality: Of the 80 million households that constitute the Indian middle class, only 25 million are in Tier I cities. Close to 55 million belong to the smaller towns. Mercedes sells more cars in small-town Ludhiana than it does in Mumbai.
Myth: India is a "price sensitive" market.
Reality: For products such as Vim Bar dishwashing detergent and Head & Shoulders shampoo, the Indian market easily absorbed price hikes of 13% and 18%, respectively, in 2007. Yet for years, candy manufacturers have been trying in vain to increase prices from 50p to Re 1. Value sensitivity, not price sensitivity, is the buzzword.
Myth: Imported is always premium.
Reality: Euro RSCG's brand momentum study in 2004 showed that eight of the top 10 brands in the country were of Indian origin. The days of "imported equals premium" are long past.
"The Indian middle class does not follow the norms that most mature markets do," Srivastava says. "The probable reason is that the core of the market has shifted from being middle aged and urban to young and Tier II. Many rules of the game are being challenged, the primary one being the quintessential 'trickle-down theory.' Attitudes and behavioral trends that got formed in the Tier I markets would trickle down into the small towns and rural markets. What sold in Tier I would also percolate down and sell in Tier II cities."
The Bunty Syndrome draws on quantitative studies performed by Euro RSCG in 2005 and 2007. It attempts to understand the attitude and behavior of youth in Tier I and II cities. "It studies their attitude toward and interaction with various categories, as well as creates a psychographic picture of their attitude toward life," Srivastava says. "Marketers need this lens to view the market, as it will allow them to communicate better with what we believe is the new future market for India."
What defines a Bunty consumer? Here are some characteristics:
• High confidence in their abilities, much higher than that of their counterparts in Tier I cities.
• Reemergence of Gandhian values. Social conscience is at an all-time high.
• Pride of being Indian. Youth in Tier II cities have always been proud of being Indian, and that belief has become even stronger.
• Walking on the wild side. The desire to experience the unknown -- a constant need for adventure -- is much more prevalent among youth in Tier II cities.
• Family as the cornerstone of existence. With rapid nuclearization of families and the advent of social networking, one might expect to see increased importance of friends over family. But the opposite is true. Even in the selection of role models, parents seem to trump the more prolific cricketers and Bollywood stars.
A Middle India All Its Own
The Dhonis, Buntys and Bablis -- and the efforts to track them -- have brought a newfound realization that there is indeed a growing Middle India, and one that is different. "I believe that the overall evidence does indicate the presence of a Middle India which has its own characteristics," says Sridhar Samu, assistant professor of marketing at the Hyderabad-based Indian School of Business (ISB). "It is not a smaller version of metro India. It is different in the values and the relationships between people."
"I believe that the difference in attitudes comes from the aspirations of the people living in these types of regions," Samu says. "People in Middle India are more willing to make the trade-off between the better quality of life available there versus the opportunities available in the metros. Of course, some of them are forced to live there because of their jobs, and these people may be waiting to get the opportunity to move to a metro. But large numbers of people living in Middle India live there by choice, and they seem to value the quality of life more than the conveniences in a metro."
Roopa Purushothaman, chief economist at Future Capital Holdings (and co-author of the 2003 BRIC -- Brazil, Russia, India and China -- report by Goldman Sachs) makes a further distinction. She cuts Middle India down the middle. "There are certain differences between the Tier II and Tier III cities," she says. "For instance, penetration of financial services is quite high in Tier II cities. In the smaller Tier III cities, however, penetration of financial services is not high at all. Here, it is penetration of consumer durables that is very high. The Tier III cities may be a good place to test-market or launch new higher-end products and consumer durables. Typically these places are not even on the radar screens of marketers because the population numbers are not high enough."
Is the growth of Middle India a sort of natural progression that has happened in other countries? Are there lessons Indian marketers can draw from elsewhere? Opinion is divided.
"This is quite like how other countries too have evolved," Purushothaman says. "In terms of income distribution, the middle class in the smaller cities looks like the middle class in the mega cities at the turn of the century. There is a growing aspirant class in these locations, and this is what is bringing about faster changes in the consumer pattern."
Others differ in the details. "This middle segment is similar to certain other developing countries in Africa, or Vietnam, Indonesia and Malaysia," says Harish Bijoor, CEO of Harish Bijoor Consults, a brand and business strategy consulting firm. Bijoor is also a visiting faculty member at ISB. "Over time, there is a creeping globalization that gobbles up the middle segment and everything becomes urban. Today, India is 26% urban and 74% rural. My prognosis is that by 2046, India will be 2% rural and 98% urban." Adds Samu, of ISB: "This pattern seems to follow to some extent what happened in the U.S., though not completely. In the U.S. market, people migrated to the suburbs in order to get away from the metros. In India, this does not seem to have happened; rather, the smaller cities became bigger and became Middle India."
Srivastava calls the Bunty Syndrome unique because of factors peculiar to India: the change from an agrarian to a service economy, the growth of backward castes, nuclearization of families, greater world travel, a media boom, and the speed of change being fastest in the smaller cities. "All emerging markets are facing some degree of remixing as global culture clashes with local cultures," Srivastava says. "The Bunty Syndrome is our own take on this remixing."
Bijoor's company did a typecasting exercise recently across nine countries to assess how many "types" of people exist in different cities. (Types were classified by their similar marketing behavior.) In New York, they found 14 different types of people. In Boston, they found 9 and in Tokyo 11. In Middle India, the diversity was awesome. In Bhopal, they found 213 types and in Vijayawada 171 types.
This may be one of the reasons why marketing in India is regarded as much more difficult than fighting for pieces of market share in the West. "Marketing companies have a big responsibility toward these people and need to tailor their products and services," says Samu of ISB. "Companies need to devise innovative strategies. Advertising could also be different and may need to use local references." While having a celebrity such as film star Shah Rukh Khan, for example, may attract people's attention, it is more than likely that they would treat such ads as merely entertainment. "Local ads may have more of an impact," Samu says, "especially given the language differences."
The Bunty Syndrome study provides examples of how companies are adapting to the needs and demands of Middle India. Consider how some of the Bunty traits defined earlier are being tapped:
• Confidence: Grasim, a brand of suits, through the message of "be self-made," has saluted the "We'll get there no matter what" spirit of the youth. The message is enhanced by the use of a celebrity (the actor Akshay Kumar) who has made a name for himself on his own in a field where relatives already in the profession are seen as a prerequisite for creating equity in the industry.
• Gandhian values: Idea, a mobile-services brand, has propagated caste equality, while Tata Tea has tried to appeal to the young in Tier II cities with a call to "wake up to the issues."
• Pride: Durables brand Voltas has challenged the monopoly of Korean brands in the air-conditioner space by projecting itself as "India's own AC."
• Family values: The concept of being able to give back to parents has been used to good effect by MasterCard and HDFC Bank.
One Marketer's Experience
Suparna Mitra, head of marketing for the watches division of Titan Industries, sheds light on her company's Middle India experience: "Titan has been aware of and has been addressing this market for some time now. It was one of the first companies to set up exclusive stores in these towns and has an early-mover advantage. For Titan, 50% of watch sales come from the top 10 towns [including metros] and the 11th to 100th towns account for another 35%.
"At this point there are some differences in the products being sold in the metros and in the smaller towns. For instance, the average price in the top 10 towns is 10% higher than the products sold in Middle India. There are also different levels of acceptability in terms of styles and modernity, etc. But, given the exposure, increasing disposal incomes, and similar levels of aspirations, it is just a matter of time before this changes.
"We are already seeing it happen. For instance, last year Titan had a high-priced collection called Raga Crystals as part of its sub-brand Raga, which is aimed at women. This collection, which was studded with Swarovski crystals, was priced at around $200 at the top end of the range. We estimated a certain amount of sales, most of it from the metros. But when we actually introduced the product, we found that it was selling right down to smaller towns.
"While the realities of the Middle India consumer may be different from the urban or metro consumer, his expectations and aspirations are the same," Mitra says. "A marketer has to aim at the aspirations and not at the realities."
Here's what you think...
Total Comments: 3
#1 A Well Researched and Concluded Article
This article gives an excellent analysis of the young India and I absolutely love the terms used - "The Dhoni Syndrome" and "Bunty and Bubly Effect". It completely summarizes the kind of young India that is set to take the country forward.
I however do not agree with the example and reasoning given for the myth "India is a price sensitive nation". I think it is a fact and not a myth as what is suggested here. The argument given is that Indian consumers are value sensitive, but I ask does not price contribute to the value and is it not an important factor in buying sensitivity of a consumer? I feel this is a fact not only for India but for all the consumers. You increase the price of coke in USA by a dollar and see what happens. To say that price of candies in India cannot increase is not a correct example. The fact is, the manufacturing of candies in India has improved tremendously and to sustain growth in sales and profit, price change was not required.
By: Nitesh Naveen, Student, Class of 2008, PGPEX, IIM Calcutta
Sent: 04:48 PM Tue Jul.15.2008 - GB
#2 Well Concluded Article
The article is right about the concluding statement: Although the realities differ in metro and non-metro cities, the aspirations remain the same. I used to get surprised when I'd see the latest model luxury cars in smaller cities where the roads are not at all suited for those vehicles, but not anymore ...
By: Merrin Kurian,
Sent: 12:18 PM Thu Apr.02.2009 - AU
#3 Middle India Fellows Are Not the Poor Cousins
Nice to find an article about what is really happening in Middle India rather than what we feel good to think about this market.
We have been traveling for months across villages and towns in India to gather insights into consumer trends, to find out consumers' emotional drivers.
In fact, the gap between consumer expectations and product and service offers is quite huge. In South India, we found 21 consumer macro segments. We have not yet finished our North India research but it would be something similar, with a wider variety of micro segments.
Contextual innovation can provide sustainable design solutions to respond to people’s diversity.
By: Patrick Roupin, Kovent, Managing Director - www.kovent.com
Sent: 01:33 AM Fri Jul.10.2009 - -
Thursday, January 14, 2010 10:50 am IST
Consumption will drive the India story
Kishore Biyani
For India, a country and a population of 1.2 billion people, assumption can be the next big event which can boost the GDP and the economy. With a trillion-dollar economy now in consumption, close to 350 million dollars and with the growth of the economy around 6-7 per cent, we add up around 25-30 billion dollars of new consumption every year. Can this consumption be the next driver for India's economic growth?
With India's consumption which is the largest canvas for any industry today, we are seeing a growth with India's demographic of 70 per cent below 35 years of age. New categories of consumption are being created, a lot of new brands are being launched and modern retail formats are getting established. Consumption is growing faster than India's GDP rate. While India's growth is about 7 per cent, its consumption growth is about 10 per cent. So, I think consumption growth can be further accelerated inducing with various options and schemes for the consumers as India has now adapted to the world consumption patterns.
Being youthful, India has adapted to technologies. We have taken to mobile phones, we have adopted computers and I think it is only a matter of time before a few more value-added products and services woo the Indian consumer. The emergence of value-added products can create jobs, boost manufacturing and services and help in fuelling the economy.
How can we encourage value-added product consumption? Although India has majorly been a commodity-led economy, in the last few years, we have moved into value-added consumption. With the fueling of major incentives given by the government in terms of excise reduction and various other incentives, consumption can grow to the next level. The consumption growth can be much more at least 5% more than the GDP rate and that's where India's economy could have arrived.
There have been a lot of reports about India's consumption going down and modern retail faltering. Personally, I feel that we went into a lot of excesses which we have seen in action. Earlier we have seen a dip in sales in electronics and furniture and some dip in sales of high-priced products. However, looking at the trends of the last couple of weeks, we see that consumers are now back in the mall and are buying high-priced tickets. We feel very confident that in retail we are back to what we were maybe six or eight months ago. We expect the government to help us make our economy be driven by consumption which will ultimately drive the country's GDP.
From the savings point of view, the government has done enough. Now it needs to drive India through consumption. The government did take a lot of measures in the stimulus package (basically by reducing excise duty and by doing a lot of other incentives) to drive and fuel consumption in the country. I think in this Budget the government can take it forward and make all of us in the industry believe that saving is not the only way and investment is not the only way to drive India's economy. India's growth is going to be driven out of consumption.
— IndiaRetailing Bureau
Retail in India - looking forward
By Diljeet Titus, Founder & Managing Director, Titus & Co
12 Aug 2009
Tracking the reforms
Liberalisation has always been treated with caution by Indian government. It has evolved with time through constant reforms. Allowing international investors to enter Indian retail business was another step in this direction. Companies relied on franchise route before retail sector was opened to international investors. Press Note 3 (2006) which liberalised single-brand retail by FDI up to 51 per cent gave tremendous boost to the sector. 100 per cent FDI in ‘cash and carry’ wholesale trading has led to supermarkets and cash-and-carry becoming the fastest growing segments in retail. Liberalisation of FDI in multi brand retail is still awaited.
According to FICCI in its report ‘Organised retail: Unfinished agenda & the challenges ahead’, retail sector is projected to have a turnover of $430 billion by 2010 with organised retail sector having a $90 billion share. Even after the restrictions placed on investment in Indian retail market, there has been a phenomenal rise in the number of large multinationals entering Indian market under both single brand wholesale and 'cash and carry' model. As per Global Emerging Markets Survey (GEMS) ‘India is considered particularly attractive because of the size of its market compared to low presence of international retailers’. Retail sector being the second largest sector of the Indian economy after agriculture, has significant growth prospect. Vital measures were expected to be taken for further liberalisation of the sector to meet the demands of international investors and benefits to Indian economy.
Budget offerings
Prevailing reformist mindset led to several expectations from the UPA Government in the Budget 2009-10. However, apart from implementation of certain benefits and concessions which can aid retail sector indirectly, this budget didn’t offer any substantial benefits for the retail sector. It focused mainly on benefits to poor and middle class in its effort to stimulate economy’s growth.
Some of the measures which provide indirect benefit to the retail market include abolition of Fringe Benefit Tax, Commodity Transaction Tax, increase in the threshold limit and removal of surcharge of individual tax payers. These measures would leave both consumers and retail sector with more cash flow and allow the retail traders more flexibility in their policy formation. Measures undertaken such as simplification of tax scheme for small business houses, increase in expenditure towards infrastructure and reduction in the custom duty would also be beneficial for the retail sector in an indirect manner.
Need of the hour
Although investments in India under single brand retail are increasing even with the prevailing restrictions, there is a need to allow 100 per cent FDI in single brand retail. The investing companies face bureaucratic problems in obtaining clearances. Apart from the procedural difficulties, finding an Indian minority partner is another hurdle they come across. Such companies also often face incompatibility issues with their joint venture partners. Many multinationals like IKEA have kept away from entering the Indian market due to these difficulties which are the result of the current restrictive FDI norms. Opening Indian retail market fully to foreign investment would help remove such difficulties and consequently encourage investments.
Suggestion given by Economic Survey Report 2009 to open multi brand retail to FDI also needs to be implemented. This should bring tremendous amount of investment into the country by leading global multinationals. At the same time, since radical changes can pose some risk to a developing economy like India, FDI in multi brand retail may be opened also in a phased manner as under:
• Initial stage: 26 per cent FDI - 2 years
• Establishment Phase: 49 per cent FDI - 2 years
• Mature Phase: 100 per cent FDI - 2 years
Further safeguard measures could include restricting FDI in retail initially to major cities and SEZ as well as to certain sectors. Such steps could reduce risks to the local markets and at the same time boost investments.
Giving ‘Industry Status’ to retail sector would facilitate better regulation and growth as well as allow fiscal benefits in its favour by bringing it under a separate Ministry. Additional measures could also have been taken such as removal of 12.5 per cent Service Tax on rentals, permitting set off of Service Tax against Sales Tax and allowing single window clearance for licences towards the benefit of retail sector.
Various reports have negated the detrimental effect of organised retail stores on the unorganised sector in India. The Report of Indian Council for Research on International Economic Relations (ICRIER) observed that farmers would benefit significantly by selling directly to organised retailers. The report also stated that “Profit realisation for farmers selling directly to organised retailers is about 60 per cent higher than that received from selling in the unorganised market”. Moreover, since indigenous organised retails have already made their presence in the country, allowing foreign investors would infuse more funds which are scarce at present. It would also permit fair competition which would lead to better development of the sector.
Parliamentary Standing Committee on Commerce expressed a need for providing adequate protection to small retailers in its report on Foreign and Domestic Investments in the Retail Sector. The Committee’s recommendation of setting up a Retail Regulatory Authority for looking into anti-competitive behaviour and abuse of dominance of the large retailers can be helpful. Establishment of suggested National Commission would also help in studying the problems of the retail sector and to evolve policies that will enable it to cope with FDI.
Way to go!
India is one of the fastest growing economies in the world today. Topping the Global Retail Development Index for the third consecutive year as the most attractive market for retail investment, India has one of the most vibrant retail sectors in the world. Currently, there are 12 million retail outlets in India, which is estimated to triple by 2015. As per the study conducted by the ICRIER, retail sector is expected to contribute to 22 per cent of India's GDP by 2010 which illustrates the strong fundamentals of the sector. Conservative steps taken by the industry players have to an extent diminished the effects of recession considerably on the Indian economy and kept it protected. However, gradual changes and calculated risks are essential for India to realise its potential and to come at par with leading economies.
In the event that the government opens up Foreign Direct Investment in retail, number of international retailers will immediately start trickling in. FDI is essential as it will bring liquidity and bolster the infrastructure of the sector. Increase in investment in retail sector would also encourage fair competition, prices reduction, aid consumer satisfaction, technological advancements and accelerate overall growth of Indian economy. Corporate India is eager to hear the government’s response to their request for industry status for retail. Foreign investors are hopeful government would undertake economic reforms by considering 100 per cent FDI at least. The government is expected to amend retail investment policy, especially since the recent budget was silent on the matter. With the changing dynamics of the world, the country's retail sector must orient itself to meet the needs of the market.
Wednesday, January 13, 2010
China Again
Asian Currencies Drop on Concern China Policy to Crimp Recovery
January 13, 2010, 03:29 AM EST Story Tools
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By David Yong
Jan. 13 (Bloomberg) -- Asian currencies declined, led by the Philippine peso and Malaysian ringgit, on concern China’s moves to tighten lending will cool demand for regional exports and curtail a global economic recovery.
South Korea’s won, the Indonesian rupiah, Taiwan dollar and the peso all retreated from the strongest levels in at least 16 months as Asian stocks slumped. The People’s Bank of China unexpectedly raised the amount of funds banks must set aside as reserves to 16 percent from 15.5 percent yesterday as it seeks to curb loans and inflation. The Thai baht slid after the Bank of Thailand maintained borrowing costs at a five-year low.
“The tightening in China is trimming expectations that we have more growth on the road, and markets are going to be less supported,” said Sebastien Barbe, a Hong Kong-based strategist at Calyon. “It means all the support from China in the last year is going to moderate for Asia.”
The peso weakened 0.4 percent to 45.845 per dollar as of 4:16 p.m. in Manila, according to data compiled by Bloomberg. The ringgit fell 0.3 percent to 3.3510 and the won dropped 0.2 percent to 1,125.45.
The MSCI Asia-Pacific Index of regional equities slumped 1.5 percent, the biggest loss since November. India’s Sensitive Index was little changed, while benchmarks tumbled across the remainder of Asia’s 10 biggest economies.
‘Negative Expectations’
“The speed of the policy move surprised the market,” said Hideki Hayashi, a Tokyo-based economist at Mizuho Securities Co. in Japan. “Further restrictive policy actions could create more negative expectations.”
China, including Hong Kong, accounted for 17 percent of goods shipments from Malaysia in the first 11 months of 2009, official statistics showed. Chinese trade data released Jan. 10 showed imports from Malaysia more than doubled from a year earlier in December to $4.05 billion and jumped 68 percent from Korea to $10.9 billion.Twelve-month non-deliverable yuan forwards were little changed at 6.6260 per dollar in Hong Kong. The contract earlier advanced as much as 0.4 percent on speculation the government will allow the currency to resume appreciation as part of its tightening policy. The spot rate was steady at 6.8270.
Yuan Band
China should widen the yuan’s trading band against the dollar this year to allow greater exchange-rate swings that may discourage inflows of speculative capital, Industrial Bank Co. and ING Groep NV said.
“A wider trading band will help add volatility to the yuan and defuse currency speculation,” Lu Zhengwei, chief economist at Industrial Bank, a Fuzhou-based lender, said in an interview from Shanghai. The permitted movement from the central bank’s daily fixing rate should be widened to 1 percent in the second half and to 3 percent next year from 0.5 percent now, he said.
Taiwan’s dollar fell after the central bank highlighted the benefits of capital controls in a press release late yesterday, having sent a similar document to reporters in October. The currency traded at NT$31.809 from NT$31.790 yesterday.
Taiwan Controls
The Central Bank of the Republic of China (Taiwan) sent a statement to media on the island citing comments from Joseph Stiglitz, the Nobel Prize-winning economist, that emerging- market countries should consider controlling inflows of capital.
The risk is that “the central bank will impose capital controls,” said Henry Lin, a foreign-exchange trader at Shin Kong Commercial Bank in Taipei. The local dollar could weaken to NT$32 this week, he said.
The government won’t follow Brazil’s plan of taxing foreign capital inflows because such a move would be “too slow” as time is needed to enact a law, Deputy Finance Minister Chang Sheng-ford said in a telephone interview today. “Hot money comes and goes quickly. The government should use administrative measures” instead, he said.
Thailand’s central bank today kept its seven-day repurchase rate at 1.25 percent for a sixth straight meeting, the lowest level since July 2004, as predicted by all 20 economists in a Bloomberg survey.
The baht traded at 33.05 per dollar in Bangkok, from 33.03 yesterday, when it reached 32.97, the strongest level since June 2008, according to data compiled by Bloomberg.
Elsewhere in Asian trading, Singapore’s dollar was little changed at S$1.3900 and Vietnam’s dong was at 18,479 from 18,474. The rupiah was little changed at 9,190, after earlier dropping as much as 0.4 percent to 9,213.
--With assistance from Bob Chen in Hong Kong, Chinmei Sung in Taipei and Judy Chen in Shanghai. Editors: Simon Harvey, James Regan
Why China’s unexpected export, import growth is a good sign for others
China vaulted past Germany to become the world’s biggest exporter last month as its export, import volume jumped by 18 and 56 percent. The increases are a positive sign for global trade, especially for countries that sell to China.
In this Sept. 11, 2009 file photo, cargo sits at a container terminal in the port of Dalian, China.
Elizabeth Dalziel/AP/File
Beijing
China’s surprisingly strong export and import performance in December offers further evidence of a global trade pickup, experts here say.
China’s December exports rose 18 percent from a year earlier, after dropping for 13 straight months, according to Customs figures. Imports rose even more sharply, by 56 percent.
That is good news for exporters of the sort of raw materials that China is devouring as its economic growth continues to outpace the rest of the world.
Australia, which sells the Chinese steel industry much of its iron ore, saw its exports to Beijing double in December. Chinese iron ore imports notched up their second-ever highest monthly total, and crude oil imports hit a monthly record.
The figures were also encouraging for manufacturers of the machinery that Chinese firms are buying as they channel government stimulus money into investment. Japan, Germany, South Korea, and other Asian countries such as Thailand stand to benefit from China’s buying spree.
“It seems very clear that what we are seeing are basically imports of raw materials and capital goods,” says Arthur Kroeber, head of Dragonomics, a Beijing-based economics research firm. “These are all investment-related.
“There is no sign that China is taking over from the US as the driver of demand for consumer goods,” he adds.
The Customs figures showed that China’s exports fell last year by 16 percent from their 2008 levels – the first annual drop since 1983, when economic reforms were just getting underway. But that fall was still not as steep as Germany’s, allowing China to take over the No. 1 spot in the world exporters’ league.
China’s newly reinvigorated export performance seems likely to herald fresh trade tensions with the US, which has already slapped extra tariffs on Chinese tires and steel products, which Washington deemed were being sold at unfairly low prices.
Some economists have suggested that the encouraging export figures might induce Beijing to allow its currency, the renminbi, to rise later this year. Chinese Prime Minister Wen Jiabao, however, apparently unwilling to do anything that might dent exports and thus jobs, said last month his government “absolutely would not yield” to Western calls for a revaluation of the renminbi.
December’s trade figures indicate that Chinese industrial output increased by 25 percent year on year, and that its GDP grew at an annual rate of 11 percent in the last quarter of 2009
January 13, 2010, 03:29 AM EST Story Tools
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By David Yong
Jan. 13 (Bloomberg) -- Asian currencies declined, led by the Philippine peso and Malaysian ringgit, on concern China’s moves to tighten lending will cool demand for regional exports and curtail a global economic recovery.
South Korea’s won, the Indonesian rupiah, Taiwan dollar and the peso all retreated from the strongest levels in at least 16 months as Asian stocks slumped. The People’s Bank of China unexpectedly raised the amount of funds banks must set aside as reserves to 16 percent from 15.5 percent yesterday as it seeks to curb loans and inflation. The Thai baht slid after the Bank of Thailand maintained borrowing costs at a five-year low.
“The tightening in China is trimming expectations that we have more growth on the road, and markets are going to be less supported,” said Sebastien Barbe, a Hong Kong-based strategist at Calyon. “It means all the support from China in the last year is going to moderate for Asia.”
The peso weakened 0.4 percent to 45.845 per dollar as of 4:16 p.m. in Manila, according to data compiled by Bloomberg. The ringgit fell 0.3 percent to 3.3510 and the won dropped 0.2 percent to 1,125.45.
The MSCI Asia-Pacific Index of regional equities slumped 1.5 percent, the biggest loss since November. India’s Sensitive Index was little changed, while benchmarks tumbled across the remainder of Asia’s 10 biggest economies.
‘Negative Expectations’
“The speed of the policy move surprised the market,” said Hideki Hayashi, a Tokyo-based economist at Mizuho Securities Co. in Japan. “Further restrictive policy actions could create more negative expectations.”
China, including Hong Kong, accounted for 17 percent of goods shipments from Malaysia in the first 11 months of 2009, official statistics showed. Chinese trade data released Jan. 10 showed imports from Malaysia more than doubled from a year earlier in December to $4.05 billion and jumped 68 percent from Korea to $10.9 billion.Twelve-month non-deliverable yuan forwards were little changed at 6.6260 per dollar in Hong Kong. The contract earlier advanced as much as 0.4 percent on speculation the government will allow the currency to resume appreciation as part of its tightening policy. The spot rate was steady at 6.8270.
Yuan Band
China should widen the yuan’s trading band against the dollar this year to allow greater exchange-rate swings that may discourage inflows of speculative capital, Industrial Bank Co. and ING Groep NV said.
“A wider trading band will help add volatility to the yuan and defuse currency speculation,” Lu Zhengwei, chief economist at Industrial Bank, a Fuzhou-based lender, said in an interview from Shanghai. The permitted movement from the central bank’s daily fixing rate should be widened to 1 percent in the second half and to 3 percent next year from 0.5 percent now, he said.
Taiwan’s dollar fell after the central bank highlighted the benefits of capital controls in a press release late yesterday, having sent a similar document to reporters in October. The currency traded at NT$31.809 from NT$31.790 yesterday.
Taiwan Controls
The Central Bank of the Republic of China (Taiwan) sent a statement to media on the island citing comments from Joseph Stiglitz, the Nobel Prize-winning economist, that emerging- market countries should consider controlling inflows of capital.
The risk is that “the central bank will impose capital controls,” said Henry Lin, a foreign-exchange trader at Shin Kong Commercial Bank in Taipei. The local dollar could weaken to NT$32 this week, he said.
The government won’t follow Brazil’s plan of taxing foreign capital inflows because such a move would be “too slow” as time is needed to enact a law, Deputy Finance Minister Chang Sheng-ford said in a telephone interview today. “Hot money comes and goes quickly. The government should use administrative measures” instead, he said.
Thailand’s central bank today kept its seven-day repurchase rate at 1.25 percent for a sixth straight meeting, the lowest level since July 2004, as predicted by all 20 economists in a Bloomberg survey.
The baht traded at 33.05 per dollar in Bangkok, from 33.03 yesterday, when it reached 32.97, the strongest level since June 2008, according to data compiled by Bloomberg.
Elsewhere in Asian trading, Singapore’s dollar was little changed at S$1.3900 and Vietnam’s dong was at 18,479 from 18,474. The rupiah was little changed at 9,190, after earlier dropping as much as 0.4 percent to 9,213.
--With assistance from Bob Chen in Hong Kong, Chinmei Sung in Taipei and Judy Chen in Shanghai. Editors: Simon Harvey, James Regan
Why China’s unexpected export, import growth is a good sign for others
China vaulted past Germany to become the world’s biggest exporter last month as its export, import volume jumped by 18 and 56 percent. The increases are a positive sign for global trade, especially for countries that sell to China.
In this Sept. 11, 2009 file photo, cargo sits at a container terminal in the port of Dalian, China.
Elizabeth Dalziel/AP/File
Beijing
China’s surprisingly strong export and import performance in December offers further evidence of a global trade pickup, experts here say.
China’s December exports rose 18 percent from a year earlier, after dropping for 13 straight months, according to Customs figures. Imports rose even more sharply, by 56 percent.
That is good news for exporters of the sort of raw materials that China is devouring as its economic growth continues to outpace the rest of the world.
Australia, which sells the Chinese steel industry much of its iron ore, saw its exports to Beijing double in December. Chinese iron ore imports notched up their second-ever highest monthly total, and crude oil imports hit a monthly record.
The figures were also encouraging for manufacturers of the machinery that Chinese firms are buying as they channel government stimulus money into investment. Japan, Germany, South Korea, and other Asian countries such as Thailand stand to benefit from China’s buying spree.
“It seems very clear that what we are seeing are basically imports of raw materials and capital goods,” says Arthur Kroeber, head of Dragonomics, a Beijing-based economics research firm. “These are all investment-related.
“There is no sign that China is taking over from the US as the driver of demand for consumer goods,” he adds.
The Customs figures showed that China’s exports fell last year by 16 percent from their 2008 levels – the first annual drop since 1983, when economic reforms were just getting underway. But that fall was still not as steep as Germany’s, allowing China to take over the No. 1 spot in the world exporters’ league.
China’s newly reinvigorated export performance seems likely to herald fresh trade tensions with the US, which has already slapped extra tariffs on Chinese tires and steel products, which Washington deemed were being sold at unfairly low prices.
Some economists have suggested that the encouraging export figures might induce Beijing to allow its currency, the renminbi, to rise later this year. Chinese Prime Minister Wen Jiabao, however, apparently unwilling to do anything that might dent exports and thus jobs, said last month his government “absolutely would not yield” to Western calls for a revaluation of the renminbi.
December’s trade figures indicate that Chinese industrial output increased by 25 percent year on year, and that its GDP grew at an annual rate of 11 percent in the last quarter of 2009
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