India recently joined the global solar trade wars with the Ministry of Commerce starting an investigation into dumping of solar cells on a complaint made by Indian solar manufacturers association. Note Indian domestic solar producers have been almost been completely wiped out by imports of Chinese solar panels and First Solar (US solar thin film producers). The prices of imported solar panels are much lower than that of the costs of the small Indian solar cell and module makers. While one of the objectives of India’s solar policy was to promote the use of indigenous solar production, that has not happened despite a rapidly growing market. The Indian market has been taken over by imports almost completely leaving almost nothing for the domestic guys.

Indian solar developers and power supplies like Welspun Energy, Reliance Power have benefited enormously from the currently overcapacity and crash in solar panel prices globally. Solar Panel price has crashed to 65-70c/watt in 2012 from $4/watt in 2008. This has not only reduced the solar electricity price to Rs 7-8/KwH from Rs 16/KwH but also generated handsome profits for the developers. The import duties on solar products will put a major setback as the pries of solar systems will rise if domestic panels are used. To ward off this danger, Indian solar developers who are a much more influential group than the small solar manufactures are planning to:

1) Revive their lobby Solar Independent Power Producers’ Association

2) Appoint a Consultancy to show how cheap imports are benefiting India

3) Hire a Legal Firm to fight the Case in Court.

Like the duties on imports of Chinese telecom and power equipment, the Indian consumers of these products will fight tooth and nail to prevent duties on imports of solar equipment.

Read our earlier article on how First Solar benefited from a Loophole:

How USA’s First Solar hit the Jackpot in India through a Loophole in Solar Subsidy Policy.

US based thin film solar panel manufacturer First Solar has captured the lead marketshare in India’s solar panel market. This is quite surprising since First Solar’s competitive position is being eroded globally by Chinese crystalline solar panels which are cheaper and of higher efficiency. In fact First Solar has mostly stopped selling solar panels because they are no longer competitive. The reason for First Solar’s spectacular success in India is due to India’s solar subsidy policy JNNSM. The policy which was meant to support India’s domestic solar panel companies though a “domestic content” provision has ironically helped First Solar become the undisputed leader in winning most of the JNNSM projects. The reason is that JNNSM excludes thin film solar panels from the domestic content provision which means that solar developers can buy thin film technology from foreign companies. Given that the cost structure and scale of Indian solar manufacturers is clearly no match to that of the global solar companies, First Solar has benefited hugely . The company recently won a 50 MW solar panel supply contract to Kiran and Mahindra Solar companies which won the bid under JNNSM.

Despite talks about making the conditions more stringent and imposition of duties on solar panel imports, nothing has been done till now. Note USA is strongly opposed to this as it knows First Solar will lose an important market where it is still being able to compete

USA opposed India’s domestic content requirements in Solar Energy (in vain)

USA has opposed India’s Local Content Requirements for the Federal Solar Energy JNNSM program. Note according to the JNNSM rules,solar panels will have to be produced in India for the first year and solar cells will also have to produced from the second year. There is also a proposal that the local content requirements may be extended beyond 2013 and will also include solar inverters. US administration is opposed to these rules as it will lead to export hurdles for its solar companies Sunpower and First Solar. India installers and developers have also opposed the move as it will lead to lesser choice amongst suppliers and probably higher costs.

Note India solar cell/module manufacturers are heavily in favor of the domestic content rules as it will be difficult for them to compete with much larger and lower cost Chinese companies. Note China has not protested against these moves as it promoted its Domestic Wind Energy Industry in 2006 through this policy. Ontario, Canada too is following the same policy and has been take to the WTO by Japan. Note USA has not been a party to the Japanese move, as its companies have won large contracts in the region. There are both pros and cons to the domestic content policy for solar energy but one thing is for sure if free imports are allowed, Indian companies are not in a position to compete with the foreign ones on cost.

Indian Solar Panel Manufacturers closing down

Solar Companies around the world are facing hard times with bankruptcies galore. Not only hundreds of small installers, erstwhile behemohts like Q-Cells have defaulted on debt and declared bankruptcy. So its not a great surprise that Indian solar companies which were never very competitive anyway are facing equally bad times. The biggest and oldest solar panel companies like Moser Baer and Tata BP Solar are facing survival questions. These companies have seen departure of top executives and are looking for CDR resolutions. Moser Baer which had invested hundreds of millions in investments into crystalline silicon and thin film solar is having difficulty in paying back its debt. The stock price has cratered to almost nothing as well. The company which had invested into exotic solar technologies as well as the mainstream has managed to fail everywhere. The company had even invested in a polysilicon startup as well as concentrated solar power technologies. It shut down its thin film equipment plant a year ago as Applied Materials the equipment supplier itself got out of the business. The company is now mainly into the EPC business. Other companies like Indosolar are also looking like a write-off. When the biggest solar panel companies like Suntech are themselves in such trouble, it is a surprise that these companies are managing to produce anything at all.

Indian Power and Infrastructure Companies like GMR, Lanco, GVK, Reliance Infrastructure have been making continued losses in the past couple of years and have been unable to reduce their massive debt burdens. These companies had expanded rapidly during the boom into power, construction, real estate, infrastructure like roads, ports and airports. However macroeconomic and governance problems coupled with their high leverage has put them into a tight spot right now. Lack of fuel for their power plants, delays in execution of projects, increasing receivables from financially distressed government companies, geopolitical risks have all combined such that some of the top companies like Lanco is being unable to pay salaries to its staff.

GVK another top infra conglomerate from AP has seen its profitable airport in Maldives being taken over by the government there. The coal mines that these companies bought in Indonesia and Australia for millions of dollars are facing increased taxes and duties. Burdened by high debt, these companies are looking at Chinese banks to help them survive. Chinese Government supports its companies through its massive state owned banks which lend money more on strategic merits than commercial ones. Vendor financing is the biggest selling advantage Chinese companies have, while selling to cash strapped customers. The big telecom firms like ZTE, Huawei have used Chinese loans to sell equipment to India’s telecom companies. Now power equipment firms in China are using the power of the Chinese banks to sell capital equipment to loss making Indian private electricity firms.

Lanco delays giving salaries

Lanco Infratech Ltd has been forced to delay salary payments to its employees after creditors refused to extend new loans to the debt-laden infrastructure builder battling cash-flow problems, two persons aware of the development said.Gurgaon-based Lanco Infratech has 16 operating group companies with a combined salary bill of around Rs.75 crore per month. The company, which has 6,800 employees, has been delaying salaries by nearly a month to around 3,000 employees at some of its group companies, the people said.

Looks to Chinese Bank for $2 billion Loan

India’s Lanco Infratech Ltd. Monday said it has signed a pact with China Development Bank to raise $2 billion in debt to fund power projects. China Development Bank will provide $600 million from its own funds and will help raise the rest from a syndicate of Chinese banks and financial institutions, Lanco said. It added that it will use the money to finance the construction of two power projects of 660 megawatt each being set up in India’s Uttar Pradesh state.

Meanwhile Reliance Power ties up with Chinese Ming Yang to build Wind Farms

China Ming Yang Wind Power Group Limited (Ming Yang) has announced that Guangdong Mingyang Wind Power Industry Group Limited (Guangdong Mingyang), a subsidiary of Ming Yang, has entered into a financing framework agreement with Reliance Power Limited and China Development Bank Corporation (CDB). Under the Framework Agreement, being the coordinating bank and lead potential lender, CDB will act as the lead arranger to coordinate the provision of financing facilities to Reliance Power to support future renewable energy projects. The amount, terms and conditions of the financing facilities will be subject to the potential lenders’ respective internal approval procedures and further assessment of the projects. On July 2, 2012, Ming Yang announced that it has signed a Memorandum of Understanding with Reliance Power to co-develop up to 2,500MW renewable energy projects in India within three years.

Its been a while since Technology Wars were written about in greenworldinvestor . However we could not stop ourselvers into writing about the biggest Technology War currently taking place publicly between Samsung and Apple.

Tablets become Ground Zero of Technology Wars as Smartphone becomes  Samsung and Apple Duopoly

Consolidation in the technology market is creating Technology Behemoths competing in large parts of the technology spectrum. Microsoft is entering the  tablet market with Surface  to counter its prime competitor  Google which recently launched the Nexus Table. It will also go head to head  with Apple another one of its competitors in the MP3 player and PC market. Its interesting that Microsoft is launching tablets to protect its turf in other technology area. The Technology War between these Behemoths is now being fought on multiple levels and segments. The tablet market is seeing the largest number of players fighting it out for consumer mind share. The list has every major technology company – HP, RIMM, Apple, HTC, Nokia, Motorola, Sony Ericsson, Google, Microsoft, Dell, Acer.

Earlier Smartphones were the Ground Zero of the Technology Wars but now the battleground has shifted into Tablets as Apple and Samsung have decisively moved ahead of the others in Smartphones.

Apple & Samsung over Tablets

Apple vs. Samsung has been one of the most debated topics in the minds of people for now. As technology and consumer products major Samsung airs TV ads poking fun at those who eagerly waited for the launch of iPhone5 by the world’s most innovative and successful company Apple Inc., the legal shots between the companies continue. It’s been almost over a month when the California jury recommended Samsung pay over $1 billion in damages to Apple for patent infringement whereas the judge lifted the ban on Samsung’s most innovative product Galaxy Tab 10.1. The titanic tussle between the two tech giants continues and has led to one of the biggest penalties for patent violations in legal history.

The patent-related lawsuits have been turning into tsunami issues for the entire tech industry. The patents which are actually meant to safeguard and cover the look and feel of devices are increasingly being “weaponised” by their holders. Such tussle over the patent infringement issues has compelled the juries to award huge damages in intellectual-property dispute and penalize companies for that matter in order to safeguard and implement a law against violation of such issues in future. The legal battle between Samsung and Apple is also intriguing because the archenemies work closely together.

Apple & Samsung over Smartphones

Samsung happens to be one of the biggest suppliers of components such as memory chips for Apple’s gadgets but the company manufactured phones and tablets have always used the free android based operating system provided by tech giant Google which compete head-on with Apple’s iPhones and iPad tablets. Apart from tablets, smartphone arena is also not left behind by the two rivals. The tension between the firms has grown manifold with the increased penetration of smartphone in the world. Statistics show that Android based Samsung phones are capturing the market at a higher pace than the Apple products. This not only leads apple into an endangered area but also threatens about its OS being completely washed off the market. Around 40% of the people globally use Android based phones and the android user base has increased manifold as compared to Apple’s iOS.

The fight between the two companies had been brewing for some time and was supposedly a litmus test for Apple’s determination to thwart the progress of Android, an operating system marketed by search engine giant Google Inc. As a matter of fact Apple Inc. has not sued Google for the fact that the company distributes its Android operating system free of cost and doesn’t earn profit directly from sharing the OS while sharing the same with the phone manufacturers. Samsung which chose Android as its Operating system is now making huge revenues upon which the counter party Apple calculate damages as Samsung is known to be the world leader for the Android based products.

Different Court Rulings regarding Apple & Samsung Battle

Apple bombarded a list of lawsuits against its rival around the world, claiming that Samsung’s devices breach various patents held by the company. Across many cases being heard over many a places across the worlds between the two companies, a court in South Korea said both firms were guilty of patent violations against the other and banned some of their devices from sale in the country. On the contrary owing to the fact that America is known to be the world’s largest market for consumer electronics, such ruling by the Californian court would have resulted in a greater impact for the company, tech industry, US economy and the global economy at large thus leading the jury in San Jose to conclude Samsung’s violation of Apple’s several utility patents. Some of the things covered under the patents breaching by Samsung included:

  • Bounce-back scrolling (which makes on-screen icons and web pages rebound if swiped too far
  • Tap-to-zoom functionality (Makes it easy to zero in on).

Apart from the utility the court also ruled that the South Korean company has copied the look and design of iPhone which includes the rounded corners of icons, thus breaching Apple’s design patents as well. Adding fuel to the fire the jurors also tossed out the South Korean firm’s claims which stated Apple ripping off some of the company’s own innovations.

Does Samsung Win?

It is said that the mobile phone company Samsung is willing to change the design of their phones to sell in America whereas the same design shall continue for the rest of the world. Analysts also declared tech giant Samsung as the winner of the patent case as for a minimal amount which is to be paid by Samsung as penalty to Apple, it is successful in capturing the market share making itself the market mover in the industry. Thus small price paid for copying stuff has helped the company reap huge benefits for coming many years and helped become a powerhouse in mobile devices segment. On the contrary for many the result of the case could also spark a new round of innovation in the long run, as firms would definitely try to protect themselves and their offerings from the rival Apple Inc. The patents war between the two tech giants is not yet over and is expected to get fiercer in days to come.

Patrick Moorhead, the world famous Tech industry analyst, said “Samsung views Apple as a threat to their long-term survival and will do what it takes weaken them. Samsung will spend billions to do this as their company is under attack.”

Despite being the fact that public does not follow the legal dispute, Samsung has taken up the entire advertising medium to push its Galaxy S III over Apple’s new iPhone 5. One cannot just escape ads be it print media or the video ad space all over, Samsung has made it felt everywhere and its rightly said “Ultimately there’s no avoiding the war”.

Also Read on GWI:

Apple facing threats from Chinese domestic Technology Companies

Read Step by Step How Apple is killing Personal Computers and Win Intel Duopoly along with HP, Dell

Mobile Phone Companies in India

Japan increases Solar Panel Efficiency Criteria to curtail foreign imports

Asian countries like Japan and China routinely erect non explicit barriers to imports to protect their domestic firms. This is not isolated to solar panels but extends to other industries as well. The governments and the financial institutions exhibit a strong nationalistic streak to support their companies over foreign competition. It is notoriously difficult to sell foreign brands in Japan be it mobile phones or cars. China too has protected its domestic companies through a variety of ruses like staring its own telecom standards, mandating local procurement by state owned companies, domestic content requirements for wind turbines etc.

Japan has become a magnet for solar panel producers around the world, thanks to a very generous government subsidy which has led to a huge PV Panel boom. Goldman Sachs and gambling parlor operators too have joined the fray along with a large number of conglomerates and industrial powerhouses like Mitsui, Sumitomo, Mitsubishi, Softbank etc. To protect the Japanese solar panel companies like Kyocera, Sharp, Panasonic, the Government is going to only allow import of solar panels which have a high threshold with respect to efficiency. This will lead to the elimination of a vast majority of Chinese, Korea and Taiwanese players who sell panels cheaply but have lower efficiency. Note Japanese solar panel makers make mostly high efficiency solar modules with Sanyo having one of the highest commercial efficiency solar panels in the market.

Note Japan has already curtailed imports of solar inverters through a registration requirement which has led to a boom for Japanese solar inverter companies as demand is greater than the current supply.

Japanese solar inverter manufacturers

While Japanese solar panel companies are sweating due to cheap Asian solar panel imports, the solar inverter companies in Japan are facing the happy problem of supply shortages. The reason is that the Japan requires that PV inverters be certified by Japan Electrical Safety & Environment Technology Laboratories (JET). Most of the big global solar inverter companies lack this, which means that the local companies have a massive advantage. The Japanese solar market is set to boom due to very generous subsidies set by the Government which would imply returns of around 30%. While global solar panel majors are salivating at the prospect of the huge growth, solar inverter companies face a big barrier in the form of the JET certification.

Japanese Solar Bubble

Solar Energy in Japan is seeing a huge boom in solar installations as the generous subsidy announced by the Government sees the entry of newer players each day. The growth is driven by assured returns in excess of 30% which is attracting all sorts of investors from Japan where the interest rates are as low as 1%. The Solar Bubble is growing bigger and bigger each day as the surge in solar installations refuses to stop. The Government in Japan has refused to learn from the solar bubble bursting in Spain, Italy, Czech and Bulgaria.

The bureaucrats are blind to the bubble forming in front of them. Instead Kazuhiro Ueta, the head of the five member solar panel thinks they have a late mover advantage. But they are not using the advantage by setting the solar feed in tariffs so that the rate of return is around 5-8%. Instead they have kept it at the highest rate in the world.

The setting of a crazily high Feed in Tariff of 52c/KwH, solar demand is set to increase exponentially in Japan. Note Japan is already one of the biggest markets globally and has a large solar manufacturing industry. This is ideal grounds for a subsidy led solar boom like what happened in Spain in 2008 and Czech in 2010 with pernicious results. You know there is a bubble when Gamblers and Goldman Sachs start investing massive amounts to reap the early mover advantage of the Solar Bubble.


The Japan government will reportedly hike energy efficiency standards for imported PV modules in 2013 from 250W currently to 255-260W for a module made of 60 monocrystalline silicon solar cells and from 235-240W to 245W for one made of 60 polycrystalline solar cells, according to Taiwan-based makers.

As the Japan government began to offer a feed-in tariff rate of JPY42 (US$0.53)/kWh for electricity generated by PV systems in July 2012, Japan has become a target market for Taiwan- and China-based solar cell or PV module makers because production costs in Japan are significantly higher, the sources pointed out.

The hike in energy efficiency standards for PV modules is equivalent to an increase in energy conversion rate for monocrystalline silicon solar cells from 18.2% currently to 18.8%, and that for polycrystalline ones from 16.8-17.1% to 17.4%, the sources indicated.

Infrastructure: The roots of growth for emerging markets

When you don’t invest in infrastructure, you are going to pay sooner or later

–      Mike Parker

Infrastructure, in general, defined as the set of interconnected structural elements that provide framework supporting an entire structure of development.

A well-knit and coordinated system of transport plays an important role in the sustained economic growth of a country.  It also helps a nation develop a stature in today’s world where globalization is the buzzword. Evidence also suggests that creation of infrastructure, through its direct and indirect effects, has a significant impact on poverty reduction.

Now when the need of infrastructure is defined, its working is a mandate to be discussed. To accelerate the pace of infrastructure development Government has taken the initiative and has started a host of projects and schemes with the sole motive to upgrade physical infrastructure in all crucial sectors.

In the Indian context, though there has been some improvement in infrastructure development in transport, communication and energy sectors in recent years, there are still significant gaps that need to be bridged. The current economic slowdown provides an opportunity for countries like India that have a substantial degree of unmet infrastructure requirements. This is reinforced by the understanding that spending on infrastructure has large multiplier effects.

Indian Economy

Post Independence Era (1947-1975):

Indian Economy was known to be an agrarian economy wherein the major part of the revenue, to an extent of 70%, was generated from the agriculture sector. The main objective of planning in India at this stage was to initiate a process of development which will raise living for a richer, more varied life. The sole problem of development of an under developed economy is one of utilizing the potential resources available to the community effectively. An underdeveloped economy is characterized by the co-existence of unutilized or underutilized manpower on the one hand and of unexploited natural resources on the other.

Indian economy, post independence, was somewhat more focused towards increasing the investment the reason being accounted to the fact that being a fresh, new economy freed from the British Raj it was necessary for the government to stabilize itself so as to control its economy in future. A somewhat low rate of capital formation might have been adequate for countries like the U.K. and the U.S.A., wherein the modern industrialization took root early. On the other side the under developed countries which make a late start have to aim at comparable development within a briefer period.

The First Five Year Plan involves an outlay on development by public authorities of around ` 2069 Crores over the period of 1951—56. The main considerations that have been taken into account are:

  1. Need for initiating a process of development that will form the basis of the much larger effort needed in the future
  2. Total resources likely to be available to the country for the purpose of development
  1. The close relationship between the rates of development and the requirements of resources in the public and in the private sectors
  2. The necessity of completing the schemes of development initiated by the Central and State Governments prior to the commencement of the Plan ; and
  3. The need to correct the mal adjustments in the economy caused by the war and the partition.

Following the budgetary plan formulated by the Planning Commission, since its inception in the year 1950, for the year 1951-1956 which is the First Five Year Plan of and for the Indian Economy. It is seen from the chart that a major portion of the plan was focused on areas like agriculture and irrigation.

Sector Amount




Transport and Communications




Social Services

















Table 1: Sector wise Plan for 1st Five Year Plan

Chart 1: Sector wise Plan for 1st Five year Plan (Percentage wise)

Thus we can see that Indian economy was not focused into infrastructure development rather the development of the economy so as to ensure utmost utilization of the resources.

During the period of 1947-1965, the rate of growth of the Indian economy in the first three decades after independence was derisively referred to as the Hindu rate of growth by economists, because of the unfavorable growth rate. Since 1965, after the number of revolution in  the agricultural sector like the Green Revolution, Yellow Revolution or the White Revolution which enhanced the use of high-yielding varieties of seeds, increased fertilisers and improved irrigation facilities collectively contributed to the improved condition of agriculture by increasing crop productivity, crop patterns and strengthening forward and backward linkages between agriculture and industry.

Liberalization of Economy (1991)

Liberalization Period- Is it liberalized or Paralyzed?

The major breakthrough in the economy came during the year 1991, when Dr. Manmohan Singh served as the Finance Minister and incorporated the Policy of Liberalization, Privatization and Globalization. In 1991, after India faced a balance of payments crisis, it had to pledge 67 tons of gold to Union Bank of Switzerland and Bank of England as part of a bailout deal with the International Monetary Fund (IMF). In addition to the bailout, IMF required Indian government to undertake a series of structural economic reforms. As a result of which, the government of P. V. Narasimha Rao and finance minister Manmohan Singh started breakthrough reforms.

The new neo-liberal policies included

  • Opening for international trade and investment,
  • Deregulation,
  • Initiation of privatization,
  • Tax reforms, and
  • Inflation-controlling measures

The main objective of the government was to transform the economic system from socialism to capitalism so that a high economic growth is achieved and industrialization can be seen in the nation which was, at the end of the day, intended for the well-being of Indian citizens. Today India is mainly characterized as a market economy.

Figure 1 Timeline of Development of Indian Economy

Following is the chart of trend of gross domestic product:

Year GDP w.r.t  year 1975 w.r.t year 1990
1975 8,42,210 1 0.151949
1980 13,80,334 1.638943 0.249036
1985 27,29,350 3.2407 0.492422
1990 55,42,706 6.581145 1
1995 1,15,71,882 13.7399 2.087768
2000 2,07,91,898 24.68731 3.75121

 Table 2: India’s GDP

The figures itself shows how the GDP of the economy in 2000 grew by more than 24 times than that of the GDP in the year 1975. Thus the trio policy of LPG came out to be a boon for the nation where in the infrastructure was also taken care of in the second generation reforms. The Indian economy which generated around 70% of its revenue from the agriculture sector has now turned the scenario with the services sector taking the lead with 57%.

Sector Contribution (%)
Agriculture 14.9
Services 56.6
Manufacturing 28.5
Total 100




Table 3: Sector wise contribution to GDP


Chart 3: Sector wise contribution to GDP (Percentage)

Sector Workforce
Agriculture 52
Services 34
Manufacturing 14
Total 100




Table 4: Sector wise workforce distribution


Chart 4: Sector wise workforce distribution

In the past, development of infrastructure was completely in the hands of the public sector which was characterized by:

  • Slow Progress,
  • Poor Quality, and
  • Inefficiency

Infrastructure deals with the availability of power, construction, transportation, telecommunication or real estate etc.; it was seen that India’s low spending on these categories at $31 billion or 6% of GDP in 2002 had prevented India from sustaining higher growth rates. With changing policy and reforms, certain minimal infrastructure was required in order to sustain the pace of development. This has prompted the government to partially open up infrastructure to the private sector allowing foreign investment, and most public infrastructure, barring railways, is today constructed and maintained by private contractors, in exchange for tax and other concessions from the government.

  • ElectricityAs of 2006-07 the electricity generation capacity was at 652.2 kWh, against an installed capacity of 128400 MW. In 2007, electricity demand exceeded supply by 15%. Major notable lacks of infrastructure in electricity dimension can be
    • Some 600 million Indians have no electricity at all
    • 80% of Indian villages have at least an electricity line, wherein just 44% of rural households have access to electricity
    • The stolen electricity amounts to 1.5% of GDP.

The reforms brought about by the Electricity Act of 2003 caused the separation of generation, transmission and distribution aspects of electricity, abolishing licensing requirements in generation and opening up the sector to private players, thereby paving the way for creating a competitive market-based electricity sector.

  • Water Supply – Notable improvements in water supply infrastructure, both in urban and rural areas, have taken place over the past decade. The proportion of the population having access to safe drinking water has risen considerably as shown below:
Year Rural Urban
1991 66% 82%
2001 91% 98%

Table 5: Change in Water Supply

However, quality and availability of water supply remains a major problem even in urban India, with most cities getting water for only a few hours during the day.

  • Transport – India has the world’s third largest road network, covering about 3.3 million kilometres and carrying 65% of freight and 80% of passenger traffic. In terms of road length, India has one of the largest road networks in the world. The national highways account for less than 2% of the total road network but carry 40% of the movement of goods and passengers.
  • Telecommunication – India has a national teledensity rate of 67.67% with 806.1 million telephone subscribers, two-thirds of them in urban areas, but Internet use is rare—there were only 10.29 million broadband lines in India in September 2010.

Thus we can see that India after getting liberalised has developed to a great extent in terms of infrastructure wherein the country which didn’t had metalled roads is now having one of the largest and dense transport system including all the roadways, railways, airways and yes not to forget the waterways.

Approach to 12th Year Plan

The Indian economy which is now on the verge of releasing the Twelfth Five Year Plan for the period of 2012-2017, which can be characterized by strong macro i.e., the overall fundamentals and is also characterized by a successful and good performance over the ongoing Eleventh Plan period. At the same time looking at the other side of the coin the economy can be seen clouded by some slowdown in growth in the current year which can be accounted to the fact of continuously growing concern about inflation and a sudden increase in uncertainty about the global economy.

Plan of Action

The twelfth year plan commencing April 1, 2012 projects a total investment of Rs 41 trillion (at 2006-07 prices) in infrastructure. This would account to approximately 10% of India’s GDP during the period and is twice the targeted levels during the eleventh five year plan. Following is the brief intended plan of financing of Infrastructure projects during the plan. The Sources of Financing is categorically divided into the Equity and Debt Financing.

Sources of Equity Finance
Corporates’ internal accruals 329
IPOs 93
Private Equities 65
FDI 74
QIP 17
Shortfall 135
Total available sources 578
Total requirement 713



  All Figures in Crores



Table 6: Source of Equity finance

Chart 6: Source of Equity finance (Percentage)

The equity financing includes IPO’s, private equities, Foreign Direct Investment or the QIP (Qualified Institutional Placement). The equity finance, as per the Planning Commission projection, is expected to raise around 29% of the total amount chart projected for financing inclusive of both debt and equity.

Sources of Debt Finance
Commercial banks 931
NBFCs 168
Insurance/pensions 116
ECB 179
Private Placements 158
Shortfall 230
Total available resources 1552
Total requirements 1782



        All Figures in Crores




Table 7: Source of Debt finance

Chart 7: Source of Debt finance (Percentage)

Key Challenges

There are several other external challenges arising from the fact that the current stature of the global economic environment is less favorable than it was at the start of the Eleventh Plan. The global slowdown and the European Crisis along with the fear of the double dip recession have added fuel to the fire. Apart from this, the downgrading of US economy from it’s ever since AAA to AA+ by the Standard & Poor’s have done the remaining icing. These global challenges call for renewed efforts on multiple fronts.

Performance and Key areas

As far as the Indian economy performance is considered it has performed well on the growth front which is 8.2 percent as seen in the first four years where as the growth in the final year of the Eleventh Plan saw a growth of 8.5 percent in contrast to the projected 9 percent.

This slight underperformance can be owed to the strong rebound from the crisis thus the actual growth in 2011-12 is likely to be around 8.0 percent which would lead to achieve an average GDP growth of around 8.2 percent over the Eleventh Plan period, lower than the targeted 9.0 percent, but better than the 7.8 percent growth as seen in the Tenth Plan.

This increase accounted for an increase of nearly 35 percent in per capita GDP. The slowdown in 2011-12 is a matter of concern, but can be reversed if the investment climate is turned around and if fiscal policy is strengthen alongside.

One of the major shortcomings of 11th Plan was inadequate infrastructure which resulted as a major constraint on rapid growth of the economy. The Plan had, therefore, emphasized the need for a massive expansion in investment in infrastructure based on a combination of public and private investment, the latter through various forms of public?private?partnerships. The total investment in infrastructure which includes roads, railways, ports, airports, electricity, telecommunications, oil gas pipelines and irrigation is estimated to have increased from 5.7 percent of GDP in the base year of the Eleventh Plan to around 8.0 percent in the last year of the Plan. A large number of PPP projects have taken off, and many of them are currently operational in both the Center and the States.

As far as Urbanization is concerned as compared to other developing countries, India has been slow to urbanize, but the pace of urbanization is expected to accelerate over the next two decades. According to the 2011 Census an increase was seen in the urban population from 27.8 percent in 2001 to 31.2

percent in 2011, and is likely to exceed 40 percent by 2030. This would generate a heavy demand for better quality infrastructure in urban areas, especially water, sewerage, public transport and low cost housing. Since it takes time to create urban infrastructure, we must introduce a sufficiently long term focus on urban planning in the Twelfth Plan.

Public Private Partnerships (PPP) in Infrastructure

With the government spending or investment becoming a constraint, the Public Private Partnerships (PPPs) are increasingly becoming the preferred mode for construction of infrastructure projects, both in developed and developing countries. The adoption of standardized documents such as model concession agreements and bidding documents for award of PPP projects have streamlined and accelerated decision?making by agencies in a manner that is fair, transparent and competitive.

How PPP has affected India

India currently has 1,017 PPP projects accounting for an investment of Rs. 486,603 Crore. According to the Private Participation in Infrastructure (PPI) database of the World Bank, India is second only to China in terms of number of PPP projects and in terms of investments, it is second to Brazil.

Few PPP Projects

Major PPP projects undertaken thus far are: Delhi, Mumbai, Hyderabad and Bangalore airports; 4 ultra-mega power projects at Sasan (Madhya Pradesh), Mundra (Gujarat), Krishnapatnam (Andhra Pradesh) and Tilaiya (Jharkhand); container terminals at Mumbai, Chennai and Tuticorin ports; 15 concessions for operation of container trains; Jhajjar power transmission project in Haryana and 298 national and state highway projects.

There have been 758 PPP projects in main sectors of focus where a contract has been awarded and projects are underway – in the sense that they are either operational, have reached construction stage, or at least construction/implementation is imminent. The total project cost is estimated to be about Rs. 383,332.06 Crore.

Sector Total Number of Projects Based on 100 Crore Between 100 to 250 Crore Between 251 to 500 Crore More than 500 Crore Value of Contracts
Airports 5 303.0 18,808.0 19,111.0
Education 17 424.2 365.5 460.0 600.0 1,849.7
Energy 56 337.6 934.0 3,083.0 62,890.0 67,244.6
Health Care 8 315.0 343.0 275.0 900.0 1,833.0
Ports 61 86.0 1,745.3 4,304.8 74,902.1 81,038.2
Railways 4 102.2 873.0 594.3 1,569.6
Roads 405 4,364.6 11,696.5 38,520.5 122,143.3 176,724.9
Tourism 50 1,132.6 1,503.5 800.0 1,050.0 4,486.1
Urban Development 152 2,812.0 3,136.9 6,688.2 16,838.0 29,475.0
Total 758 9,471.9 19,826.9 55,307.5 298,725.8 383,332.1

Source: Planning Commission


Thus we can see that there is a drastic change in the Indian Economy since Independence and a lot has been done towards the development of the Nations’ Infrastructure but still a lot more needs to be done. According to the report published by the standards and poor’s, it is said that lack of infrastructure on the face of Transport and lack of funding is a hindrance to the growth of Indian Economy. The report says that the inadequate infrastructure is a major roadblock for the country’s economic development and if the same condition prevails the forecasted economic growth for the coming twelfth five-year plan would be impossible to achieve.

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HSBC’s Wealth & Personal Banking division Closes

India’s largest distributor of Mutual Funds HSBC has closed down its wealth and personal banking division due to growing customer backlash. Note Asset Management Companies in India are poor performers charging very high expense fees. They mainly depend on distributors to sell mutual funds to retail investors who are highly suspicious of the equity market. Given the hazards of investing in Indian stock markets this is not at all surprising. Most of the personal and wealth bankers in the country mostly mis-sell financial products to citizens who are not financially literate. They mostly go by the words of the bankers since big banks like HSBC, HDFC and others have recognizable brand names. However there are a lot of bad mice in the industry and Citibank was in the news for defrauding a top Venture Capitalist. Note if a financially savvy investor could be defrauded by the wealth bankers, then the state of the layman can be guessed.

HSBC found a large number of customer complaints and rampant misspelling of products by the Indian division. Churning of mutual fund portfolios without any rhyme or reason is the favorite tactic of the bankers. Investors not knowing better go along with these bad practices. Maybe with HSBC shutting down the division, other banks will clean up their act. However I doubt that will happen.

Private Banking in India – Another corruption ridden sector

Note Real Estate, Telecom and a number of sectors in India are notorious for the corruption and graft in their dealings. Now Private Banking also joins this infamous bandwagon. Recently a Citibank manager was caught defrauding wealthy customers and companies millions of dollars through stupid investments in stock futures. Some of the company officials were complicit in the fraud. Now Standard Chartered another foreign bank with a big presence has been caught doing the same thing. Note a lot of customers are not that knowledgeable about finance and financial products which have numerous regulations and hidden rules.So cheating is not that difficult for corrupt bank officials. Standard Chartered has been caught in illegally buying up shares in an Indian bank through unethical means as well. Note these banks have been instrumental in causing the Great Financial Crisis in 2008 which led to a huge economic collapse. Now these banks have started their shenanigans in India as well. RBI is right in not granting these banks faster access to India’s financial markets despite strong political pressure from the West. It would not hurt to slap these banks with huge penalties and ban them from opening more branches in India. Putting a small penalty will not deter them from future fraud.

Why not to invest in Mutual Funds in India

I have always said that investing in Indian mutual funds is a dumb idea given the lack of regulation, under performance, high fees and front running and fraud conducted by mutual fund managers. It is best to invest in a good ETF with low fees such as the Nifty Bees ETF which was one of the first ETFs to track India’s benchmark Nifty 50. However lack of sophistication amongst retail investors have not allowed these ETFs to gain popularity. Now there is one more reason to stay away from the chills of the Indian mutual industry as the stock market regulator SEBI has said that 50% of the MFs under perform the benchmark and some fund houses have underperformed over their entire history. It also cites the example of a fund trading circulatory with an investing bank flouting regulations. However lack of criminal cases against these white collar crimes emboldens the fund managers to keep indulging in frauds enriching themselves at the expense of the investors. Note insider trading is quite rampant in India and the fund managers are known to be active participants along with the promoters of the companies.


HSBC, the word’s third-largest bank, has stopped selling insurance and mutual fund products in India. Amid mounting allegations of mis-selling and certain sharp practices, the London headquarters of the British bank, which carried out a “culture audit” of the Indian retail banking and wealth management practices, has ordered a suspension of sales.