Electronically Yours

Bulletin No.17	January, 2006
Monthly News Update of IACC- H.O.
From President's Desk
B Prabhakar National President, IACC	Budget is round the corner. The Finance Minister and his team of officers are glued to working out the Budget details. Industry is keenly looking forward to have a growth -oriented Budget, which can trigger investments both from within and abroad. The Finance Minister is on record that there may not be major tax hikes. This enhances the comfort level of industry as also the common man. Any increase in both direct and indirect tax mostly affects the common man because of the cascading effect. How then the Finance Minister can realize the resources for infrastructure and improvement of the social sectors like education, health etc? The answer lies in enhancing the tax base by bringing more people in the tax net. That will also help the Administration to maintain a healthy tax GDP ratio, which is now hovering around 10 per cent. Ideally the tax GDP ratio should be 14 per cent or so. For that we may have to go a long way. But the route to achieve that ratio is by widening the tax base and not enhancing the tax rates, which will have an adverse impact on investment and building up the aggregate demand since it will reduce the purchasing power with the people Investment, both domestic and FDI are critical to ensure a sustained growth rate of 8 per cent for at least 3-4 years. Growth of that magnitude only can address the backlog of unemployment and ensure a fair distribution of income. Investment is a function of returns and expectations. Happily, there is a widespread recognition of India as an attractive investment destination world over. This is triggered by the size of our continental market and reform process that is in the right track - be it fiscal, financial or physical. And yet at the same time, there are bickerings within the ruling coalition about insulating the reform process to certain segments. That will again limit the scope of reforms to certain sections of the society and alienating the common man from the mainstream. Cutting across political spectrum, there should be a realization that reforms are for the people, for enhancing their quality of life and for bridging the urban rural divide. Viewed from this perspective, it is necessary that there should be a political consensus for opening up the retail sector, enhancing the threshold limit for investment in the insurance and banking sector, etc. That will send the signals to the global investors that India is ripe for investing in infrastructure, energy, roads, bridges etc where the investment requirement is high, gestation period is long and return on investment is time bound and longish. Yes, it is a difficult task for the Finance Minister given that he has to address to the political aspirations of a rainbow coalition. But there is a silver lining. The Government, in a limited time of its incumbency, has demonstrated dexterity in calibrating reforms, though at times, strategically, roll back the package due to political compulsions. And yet, it is still in the reform mode. That is the good news.
Policy framework
Simplified Mining Policy	The Government of India is now working on a simplified mining policy. The new policy will address to the issues like requirement of many approvals and lack of transparency in the system.
Indian Holdings of US treasuries	Indian institutions and RBI's holdings of US Treasuries rose to US$ 400 million to US$ 14.4 billion in November 2005. Indian institution's preference for short tenor securities was driven by caution to avert losses in the event of steep depreciation. The incremental holdings were mostly in the form of highly liquid treasury bills and bank deposits.
Corporate Updates
HCL Tech Bags European Deal	HCL Technologies has bagged a US$ 330 million five year's co-sourcing deal to provide total outsourcing services to Europe's leading electrical retailer DSG International. The outsourcing deal would entail system development, application delivery and infrastructure support. DSG International trades in 14 countries and serves 100 million customers each year.
Pahwa Group Acquires Global Rights from Bry -Air Inc	Pahwa group company Bry-Air (Asia) pvt Ltd manufacturers of dehumifiders and industrial air treatment equipment has acquired the global business interests and marketing rights from Bry- Air Inc, US. The acquisition includes the Bry-Air brand and all trademarks from Bry-Air Inc. (Business Line, January 20, 2006)
Reliance Life	Reliance Life Sciences is setting up world-scale manufacturing facilities for biopharmaceutical and cell based products at its recently completed 25-acre campus in Navi Mumbai. It will be first such facility complying with US Food and Drug Administration and European Medicines Evaluation Agency standards in India.
Corporate Updates
Genpact Wins Contract	Genpact, formerly known as GE Capital International Services closed a US 60 million 7 year outsourcing deal with Germany's Linde Group to offer a host of financial and accounting services. (Economic Times, dated20th January 2006)
Destination Gurgaon	The number Fortune 500 companies having a base in Gurgaon is expected to double by 2010. At present 20 per cent of such companies including Microsoft, Alcatel, Wipro, TCS, IBM etc have an operational base in Gurgaon (Economic Times, dated 20th January 2006)
AIG to Own Asset Management Co	American International Group, the US based insurance firm is about to roll out its asset management business in India. AIG, which has partnered with Tatas for a life insurance venture in India has signed Franklin Templeton India's former president Ravi mehrotra to set up an asset management business in India.
People to People
Pune Business School to Scout US market	International School of Business and Media is planning to enter the US market with various industry-oriented courses. The School is currently offering a number of courses in the field of business management, marketing and finance. (Business Standard, dated 3rd January 2006)
H-1B Visas	According to US Citizenship and Immigration Services, the quota of 20,000 visas, available under this category, has been exhausted as on January 17, 2006. Under the current law, while the annual cap on the H-1 B category is 65,000 down from 195,000. Congress has created an exemption for 20,000 foreign nationals earning advanced degrees from US universities.
HI-B professionals	The wages for Hi-B workers in computer programming occupation are overwhelmingly concentrated at the bottom of the US pay scale, despite a Federal stipulation that US employers must pay them the same salary. The temporary visa program enables US employers to hire professionals for a period of upto six years at the same salary level as other employees with same skills and qualification. (Business Line dated 1st January 2006)