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Tata's loss may be China's gain - Views on News from Equitymaster
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  • Nov 6, 2008

    Tata's loss may be China's gain

    After the loss of face and word to the Tata's, the West Bengal government is set to showcase Singur land to a Chinese automobile manufacturer. The company, First Automobile Works (FAW), is the biggest car manufacturer in China and produces 2 m cars every year. FAW has expressed interest in opening an automobile manufacturing unit in the state in collaboration with Ural India, which already has a footfall in the state in heavy truck and vehicles manufacturing.

    The company has asked for 600 acres of land and the state government is considering offering the 645 acres of Singur land, where Tata Motors was supposed to set up its ‘Nano' plant. The state government had leased out 997 acres of land to the Tata Motors, out of which 645 acres was reserved for the plant and rest for vendors' park for automobile parts. Since the opposition party has not demanded land from the mother plant, but from the 230 acres allotted for ancillary units, the same is set to be offered to the Chinese manufacturer. Further, once bitten twice shy, the state government has also lined up back-up lands in other parts of the state for the FAW team to consider.

    Capex on the roll
    As we worry about the capital outflows and the swift depreciation of the rupee against the US dollar, India continues to remain a hot destination for long term capital investment in the form of FDI (foreign direct investments). The cumulative FDI inflow of US$ 17.2 bn during April to September 2008 (1HFY09) has shown an impressive growth rate of 137% YoY. While this may sound enthusing enough, what is surely set to cheer investors is that fresh infrastructure investments announced in 1HFY09 alone were 23% higher than that announced in FY06 and nearly 61% of that in FY08.

    Even in terms of commissioning of infrastructure projects, as per the CMIE (Centre for Monitoring Indian Economy), Rs 25,000 bn worth of projects are expected to be commissioned in 2HFY09. Of this, one fifth is to be concentrated in the electricity sector. While there are issues about delays in some projects, it is only a matter of time before the capex starts rolling. Interestingly, even sectors like construction activities and housing and real estate that had appeared to have lost investment appetite in the past few months, have received the maximum FDI investments in the past few months. As per the CMIE, even if half of the scheduled projects get commissioned successfully in 2HFY09, it will be the highest ever annual commissioning of projects in India's economic history.

    Stepping into the shoes of the President of America
    This is something that every soul on this earth may want to do - even if for a day. But probably not if countries across the world are expecting you to solve their problems. As historians draw parallels between the election of Barack Obama to that of Abraham Lincoln at the start of the Civil War, or Franklin Roosevelt in the throes of the Great Depression, the role of the new US President is certainly less enviable. Besides, restoring jobs and making decisions about how to invest the US$ 700 bn to shore up the US financial system, the new President will also deliberate upon a possible package of US$ 100 bn for public works, unemployment benefits, winter heating assistance, food stamps and aid to cities. That said, countries that export to the US will look for favourable policies so as to sustain the trade relations in the midst of an economic slump.



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