General Awareness Updates – November 2009

Economy & Business

World food produce should be up by 70% to feed all

The global food production must shoot up by 70 per cent to be able to feed an additional 2.3 billion people by 2050, the Food and Agriculture Organisation (FAO) said. According to the UN body, which is based in Rome, “world population is expected to grow by over a third (or 2.3 billion people) between 2009 and 2050”.

Therefore, feeding a world population of 9.1 billion in 2050 from the current 6.8 billion would require overall 70 per cent surge in food production. “The demand for food is expected to continue to grow as a result of population growth and rising incomes,” the FAO said. The demand for cereals (for food and animal feed) is projected to reach some 3 billion tonnes by 2050. Annual cereal production will have to grow by almost a billion tonnes from the current 2 billion tonnes and meat output by over 200 million tonnes, it said.

The paper noted that “the production of bio-fuels could also increase the demand for agricultural commodities, depending on energy prices and government policies.” The FAO has said that “feeding everyone in the world by then will not be automatic and several significant challenges have to be met.” The UN body called for stronger interventions to make faster progress towards reducing and finally eliminating the number of hungry and poor people.

India receives $100bn in FDI this decade

India has crossed the U.S.$100 billion milestone in foreign direct investment (FDI) through equity since 2000 up to July this year testifying the country’s increasing profile as a safe and sound investment destination in the midst of the global financial crisis.

As much as 44 per cent of the money came through the Mauritius route, apparently because the investors wanted to take advantage of India’s double taxation avoidance treaty with the island nation. The other big investors included Singapore, the U.S., UK and the Netherlands. India’s services sector topped the table, receiving 23% of the cumulative equity FDI inflows followed by computer software, hardware, telecommunication and real estate.

The cumulative FDI inflows since 2000 and up to July 2009 amounted to U.S.$100.33 billion. The inflows in the first four months of the current financial year were U.S.$10.49 billion, according to data compiled by the Department of Industrial Policy and Promotion (DIPP).

India reached the U.S.$100 billion mark at a time when the global financial crisis has had a dampening impact on FDI flows, which are expected to fall this year. According to the UNCTAD’s World Investment Report 2009, global FDI flows will shrink by 30 per cent in 2009 and recover only marginally during the next year, the report found the pattern of FDI flows had been varied.

13 Indian biz units in Forbes Top 50 in Asia

As many as 13 Indian companies, including Reliance Industries (RIL), Infosys Technologies and Tata Steel, have made it to the list of Forbes’ 50 best listed companies in the Asia-Pacific region.

“Our list is a mix of giant, established companies this year which includes Australian miner BHP Billiton, Hong Kong conglomerate Noble Group and Indian oil and gas heavyweight RIL and smaller outfits such as Agile Property Holdings, Anhui Conch Cement and Digital China Holdings,” Forbes Asia said.

The Forbes list has four Indian entities – RIL, Bharti Airtel, Infosys Technologies, and Tata Consultancy Services – among the top 10 firms in terms of market value, while RIL and Tata Steel feature in the top 10 league in terms of sales.

The Indian league has four newcomers this year – Adani Enterprises, Axis Bank, Jindal Steel & Power, and Tata Consultancy Services – and among the Indian firms returning to the list include Bharat Heavy Electricals, L&T, and RIL.

China has again outdone the rest of the Asia-Pacific with the most number of firms (16) represented in the league, followed by India with 13 entities. “The mainland firms together with five from Taiwan and three from Hong Kong account for almost half of the entries, giving Greater China the biggest regional representation on the list,” Forbes said.

Taiwan moved up the ranking this year and is in the third place with five companies on the list, all of which are from the technology sector. Japan and Australia share the fourth place with four companies each on the list. The list included companies that have revenue and market capitalisation of at least U.S.$3 billion and a five year record of operating profitability and return on equity.

The other criteria for being in the list include long term profitability, sales and earnings growth, stock price appreciation, projects earnings, quality of management and entrepreneurial skills.

India ’s current account deficit stood at U.S.$5.8 billion in the first quarter of the current fiscal as compared to U.S.$9 billion a year ago, the Reserve Bank of India (RBI) has said. The RBI said in a statement that the capital account “showed a turnaround from a negative balance in the last two quarters of 2008-09 to a positive balance of U.S.$6.7 billion during the first quarter of 2009-10”.

Private transfer receipts, comprising mainly remittances from Indians working overseas and local withdrawals from NRI (non-resident Indian) rupee deposits, increased by 9.4 per cent to U.S.$13.3 billion during April-June quarter from U.S.$12.2 billion a year ago. Gross capital inflows to India revived during the June quarter as compared to the corresponding period of last year.

The gross inflows were at U.S.$78.5 billion as compared to U.S.$90.9 billion in April-June 2008-09 mainly led by inflows under FIIs, FDI and NRI deposits. Gross capital outflows during the first quarter this fiscal stood lower at U.S.$71.8 billion as against U.S.$79.7 billion in the corresponding period last fiscal. India’s external debt stood at U.S.$227.7 billion at the end of June 2009. “The increase in external debt by U.S.$3.7 billion over the last fiscal was mainly due to increase in long-term external debt, particularly non-resident Indian (NRI) deposits,” the RBI said.

India’s exports fell by annual 19.4 per cent in August for the 11th straight month, but exporters bleeding under the global recession foresee better times around Christmas. The country’s overseas shipments aggregated U.S.$14.28 billion in August this fiscal against U.S.$17.72 billion a year ago. However, the decline improved by nine percentage points from 28.4 per cent in July as demand for merchandise picked up in the big global markets ahead of Christmas.

Imports saw a drastic drop of 32.4 per cent in August this year to U.S.$22.66 billion, mainly due to a sharp fall in crude oil prices to U.S.$70 per barrel from a peak of U.S.$147 per barrel last year. As a result, the country’s trade gap narrowed to U.S.$8.37 billion against U.S.$15.78 billion in the same month in 2008.

Exports during the April-August period of the current fiscal dropped 31 per cent to U.S.$64.12 billion from U.S.$92.95 billion in the same period last year. While the country’s oil import bill declined by 45.5 per cent to U.S.$6.28 billion from U.S.$ 11.52 in August 2008, non-oil imports were down by 25.5 per cent to U.S.$16.38 billion in August 2009 from U.S.$21.99 billion a year ago.

Oil imports in the April-August period dipped by 47.4 per cent to U.S.$28.27 billion from U.S.$53.74 billion in the same period last year. Non-oil imports in the first five months of this financial year declined by 25.9 per cent to U.S.$74.02 billion from U.S.$99.94 billion. The trade gap during the period was U.S.$38.17 billion, down from U.S.$60.73 billion in April-August 2008-09.

The U.S.$23 billion deal for the merger of Bharti Airtel and South African giant MTN has fallen through. Sunil Mittal-led Bharti called off discussions with MTN citing the South African government’s rejection of the proposed merger structure, which would have created the world’s third largest telecom company with combined revenues of over U.S.$20 billion annually and a subscriber base of over 200 million.

The issue of dual listing of MTN to maintain its identity in the merged company appears to have been the deal-breaker during the tough negotiations lasting well over four months. Dual-listing would come under Capital Account Convertibility, which, as of now, is not allowed in India.

Dell Inc has acquired computer services maker Perot Systems Corp in a U.S.$3.9 billion cash transaction. Dell is the world’s largest direct retailer of PCs.

India owed U.S.$82.5 billion to foreigners as on June-end this year, 39 per cent higher than U.S.$59.4 billion three months back, in terms of the country’s assets and liabilities to the international community. The total external financial assets increased by U.S.$10.2 billion to U.S.$360.2 billion as at June-end 2009 over the previous quarter, the central bank said in a statement.

Among the external financial assets, reserve assets, including foreign currency assets, IMF reserve position, Special Drawing Rights and gold, improved by U.S.$13.2 billion over the March-end and stood at U.S.$265.1 billion at June-end. Direct investment abroad moved up by U.S.$2.6 billion over the previous quarter to U.S.$69.9 billion as at end-June 2009. Meanwhile, the total external financial liabilities increased significantly by U.S.$33.3 billion to U.S.$442.7 billion as at June-end over the previous quarter.

“This considerable rise in liabilities was mainly due to inflow on account of direct investment and portfolio equity investment in India during April-June 2009 and also due to effect of valuation changes,” the RBI said.