By Kartik Goyal - May 11, 2012
Indian industrial production unexpectedly contracted in March as weaker domestic demand and tumbling exports hurt the economy, undermining the central bank’s efforts to shore up a sliding rupee.
Production at factories, utilities and mines declined 3.5 percent from a year earlier, the Central Statistical Office said in a statement in New Delhi today, compared with a 4.1 percent increase in February. The median of 32 estimates in a Bloomberg News survey was for a 1.7 percent gain.
The report may stoke concern India’s outlook has worsened because of trade and fiscal deficits, political gridlock, elevated inflation and the threat to global growth from Europe’s debt crisis. The risks have pushed the nation’s currency toward a record low, prompting the central bank to say yesterday exporters must convert half their foreign-currency earnings into rupees as it stepped up efforts to check the decline.
“The contraction in output data reconfirms weakening demand both domestically and externally,” said Radhika Rao, an economist at Forecast Pte in Singapore. “Even though growth is slowing, from the policy perspective, the focus will be more on inflation, especially due to the impact of the huge decline in the rupee on prices.”
The currency weakened 0.4 percent to 53.635 per dollar at the close. It is down 16.7 percent in the past year, the most in Asia. The BSE India Sensitive Index slid 0.8 percent. The yield on the 8.79 percent note due November 2021 rose one basis point, or 0.01 percentage point, to 8.57 percent.
Interest Rates
The central bank lowered interest rates last month for the first time since 2009, by 50 basis points to 8 percent, to bolster spending at home. It also flagged price pressures from the fiscal deficit, energy costs and a weaker rupee.
“We are in a scenario where the tendency for interest rates is going to be downwards,” central bank Deputy Governor Subir Gokarn said in the southern Indian city of Bangalore today. “The pace and the magnitude is obviously going to be determined by how inflation goes but the direction is now fairly evident.”
The deputy governor also said the monetary authority will continue to try and curb volatility in the rupee.
Manufacturing contracted 4.4 percent in March from a year earlier after a 3.9 percent advance in February, today’s report showed. Mining fell 1.3 percent, compared with a 2.7 percent gain in the previous month. Electricity output rose 2.7 percent.
‘Very Bad’
The latest industrial production report is “very bad,” Finance Minister Pranab Mukherjee said in New Delhi today, adding the recovery in investment remains frail.
Inflation, as measured by the benchmark wholesale-price index, moderated to a 29-month low of 6.67 percent in April, according to the median estimate in a Bloomberg News survey ahead of a report due next week.
While the gauge has cooled after the Reserve Bank raised rates by a record 3.75 percentage points from mid-March 2010 to October last year, India still has the highest inflation in the so-called BRIC group of biggest emerging markets that also includes Brazil, Russia and China.
The central bank’s scope to cut interest rates further to boost growth is constrained by the threat of price increases, Ashima Goyal, a member of the bank’s technical advisory committee, said in an interview in Mumbai on May 8.
Reserve Bank of India Governor Duvvuri Subbarao has also cut the amount of deposits lenders must set aside as reserves twice this year by a combined 125 basis points, to 4.75 percent, to ease cash shortages in the banking system.
Asia’s third-largest economy probably expanded 6.9 percent in the 12 months through March 2012, the least in three years, government estimates show. Merchandise exports rose 3.2 percent in April from a year earlier, after shrinking 5.71 percent in March, according to commerce ministry data.
Faltering efforts to liberalize the economy and uncertainty over tax changes have also damaged sentiment. Standard & Poor’s cut India’s credit outlook to negative from stable last month, putting at risk its investment grade status.
Steel production by companies including Tata Steel Ltd., the biggest producer of the alloy, grew 2.3 percent in March from a year earlier, slower than the 4.7 gain in February, the commerce ministry said in an April 30 report.
To contact the reporter on this story: Kartik Goyal in Mumbai at kgoyal@bloomberg.net
To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net.
Friday, May 11, 2012
Thursday, May 10, 2012
Gold Bulls Weakest in Month as Investors Buy Dollar By Nicholas Larkin - May 10, 2012
Gold traders are the least bullish in five weeks after the metal erased almost all of this year’s gains, as political turmoil in Europe and mounting optimism about the U.S. economy drives investors to favor the dollar.
Fourteen of 32 analysts surveyed by Bloomberg expect prices to gain next week and six were neutral, the lowest proportion since April 6. Bullion futures slid to a four-month low of $1,578.50 an ounce this week and hedge funds are making their smallest bet on a rally in about three years, Commodity Futures Trading Commission data show.
The Dollar Index, a measure against six major counterparts, rose for eight consecutive days through May 9, the longest winning streak since September 2008. Gold fell on seven of those days, a sign that investors are favoring the currency over the metal to protect their wealth amid concern that Greece may have to leave the euro. The U.S. economy will accelerate this quarter and in the following three months, according to the mean of 72 economists surveyed by Bloomberg.
“When the market gets very nervous, then they buy dollars and gold finds it difficult to rally,” said Jesper Dannesboe, an analyst at Societe Generale SA in London. “Given what’s going on in the markets at the moment, any rally will probably just be a bounce before another setback.”
Flight to Safety
Gold had risen as much as 14 percent to $1,792.70 by Feb. 28 on the Comex in New York, before tumbling to $1,586.50 today. This year’s gain of 1.3 percent compares with a 0.3 percent decline in the Standard & Poor’s GSCI gauge of 24 commodities and a 5.3 percent advance in the MSCI All-Country World Index (MXWD) of equities. Treasuries returned 0.5 percent, a Bank of America Corp. index shows.
Bullion reached a record $1,923.70 in September. Prices slumped as the dollar became the “flight-to-safety asset,” Goldman Sachs Group Inc. said in a May 9 report. Barclays Plc cut its 2012 forecast by 8 percent to $1,716 yesterday because of political uncertainty in Europe and concern that China’s economy will continue to slow.
Some investors may be retreating to cash after $3.13 trillion was wiped from the value of global equities since late March and commodities slumped to their lowest this year. Prices have plunged before during gold’s almost sixfold rally since the end of 2000. It slid to within about 1 percentage point of a bear market on Dec. 29.
August Peak
Speculators held a net-long position of 116,061 U.S. futures and options as of May 1, CFTC data show. While that’s 7.9 percent more than a week earlier, it’s still 54 percent less than the peak in August. They held 107,600 contracts on April 24, the fewest since January 2009, the data show.
Open interest, or contracts outstanding, in U.S. futures rose 1.4 percent in the week ended May 8, as prices slipped 3.5 percent, bourse data show. Rising open interest at a time of declining prices probably means traders added to bets on lower prices, Edel Tully, an analyst at UBS AG in London, wrote in a report yesterday. Open interest dropped 13 percent since the end of February and averaged 426,554 so far this year, 14 percent less than last year’s average, data compiled by Bloomberg show.
The U.S. Mint sold 230,500 ounces of gold coins in the first four months, 43 percent less than a year earlier, data on its website show. Holdings in gold-backed exchange-traded products rose 1.1 percent to 2,382 metric tons this year, valued at about $122 billion, data compiled by Bloomberg show.
Federal Reserve
Record-low interest rates from Europe to the U.S. may sustain demand for bullion, which generally earns investors returns only through price gains. The Federal Reserve has pledged rates at “exceptionally low levels” at least through late 2014 and the Bank of England kept its benchmark rate at 0.5 percent yesterday, where it has been since March 2009.
Europe’s financial turmoil is reigniting on the second anniversary of policy makers’ first attempt to curb Greece’s debt crisis. The country struggled to form a government after voters swung behind anti-bailout parties. Fifty-seven percent of investors, analysts and traders who are Bloomberg subscribers said at least one country will abandon the euro by year-end, a survey published yesterday showed.
The International Monetary Fund forecast last month that the 17-nation euro region would contract 0.3 percent this year as the U.S. expands 2.1 percent.
“Financial turmoil and easy money should see gold rally,” said Adrian Day, the president of Adrian Day Asset Management in Annapolis, Maryland. “Once the liquidation phase is over, gold could rebound smartly.”
Indian Demand
Demand for physical gold in India, last year’s biggest buyer, was almost double the daily average when gold traded close to $1,580, Tully of UBS wrote in her note. India’s government said May 7 it withdrew an excise duty on precious metals jewelry after jewelers closed stores in the longest-ever strike through early April.
Volumes on the benchmark contract on the Shanghai Gold Exchange doubled to 7,734.4 kilograms (7.73 tons) on May 9 from the previous day and were the highest in almost two weeks. China’s gold imports from Hong Kong surged more than sixfold to 135,529 kilograms in the first quarter, according to export data from the Census and Statistics Department of the Hong Kong government. China doesn’t publish the country’s gold trade data.
This week’s decline took gold’s 14-day relative-strength index to 33.3, near a level of 30 that indicates to some analysts who study trading charts that a rebound may be due. Goldman expects prices to advance to $1,840 in six months and $1,940 in 12 months.
London Metal Exchange
In other commodities, 14 of 28 traders and analysts surveyed by Bloomberg expect copper to climb next week and two were neutral. The metal for delivery in three months, the London Metal Exchange’s benchmark contract, rose 6.4 percent to $8,084.75 a ton this year.
Six of 14 people surveyed said raw sugar will decline next week and three were neutral. The commodity dropped 12 percent to 20.45 cents a pound since the start of January on ICE Futures U.S. in New York.
Ten of 25 people surveyed anticipate higher corn prices next week and six were neutral, while 11 of 26 said soybeans will advance and six predicted little change. Corn slipped 9.2 percent to $5.87 a bushel this year as soybeans climbed 20 percent to $14.4375 a bushel.
“Uncertainties surrounding the future of Greece will negatively impact commodity prices,” said Bayram Dincer, an analyst at LGT Capital Management in Pfaeffikon, Switzerland. “We don’t expect that current economic activity is very commodity-price supportive.”
Gold survey results: Bullish: 14 Bearish: 12 Hold: 6
Copper survey results: Bullish: 14 Bearish: 12 Hold: 2
Corn survey results: Bullish: 10 Bearish: 9 Hold: 6
Soybean survey results: Bullish: 11 Bearish: 9 Hold: 6
Raw sugar survey results: Bullish: 5 Bearish: 6 Hold: 3
White sugar survey results: Bullish: 5 Bearish: 5 Hold: 4
White sugar premium results: Widen: 4 Narrow: 4 Neutral: 6
To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net
To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Fourteen of 32 analysts surveyed by Bloomberg expect prices to gain next week and six were neutral, the lowest proportion since April 6. Bullion futures slid to a four-month low of $1,578.50 an ounce this week and hedge funds are making their smallest bet on a rally in about three years, Commodity Futures Trading Commission data show.
The Dollar Index, a measure against six major counterparts, rose for eight consecutive days through May 9, the longest winning streak since September 2008. Gold fell on seven of those days, a sign that investors are favoring the currency over the metal to protect their wealth amid concern that Greece may have to leave the euro. The U.S. economy will accelerate this quarter and in the following three months, according to the mean of 72 economists surveyed by Bloomberg.
“When the market gets very nervous, then they buy dollars and gold finds it difficult to rally,” said Jesper Dannesboe, an analyst at Societe Generale SA in London. “Given what’s going on in the markets at the moment, any rally will probably just be a bounce before another setback.”
Flight to Safety
Gold had risen as much as 14 percent to $1,792.70 by Feb. 28 on the Comex in New York, before tumbling to $1,586.50 today. This year’s gain of 1.3 percent compares with a 0.3 percent decline in the Standard & Poor’s GSCI gauge of 24 commodities and a 5.3 percent advance in the MSCI All-Country World Index (MXWD) of equities. Treasuries returned 0.5 percent, a Bank of America Corp. index shows.
Bullion reached a record $1,923.70 in September. Prices slumped as the dollar became the “flight-to-safety asset,” Goldman Sachs Group Inc. said in a May 9 report. Barclays Plc cut its 2012 forecast by 8 percent to $1,716 yesterday because of political uncertainty in Europe and concern that China’s economy will continue to slow.
Some investors may be retreating to cash after $3.13 trillion was wiped from the value of global equities since late March and commodities slumped to their lowest this year. Prices have plunged before during gold’s almost sixfold rally since the end of 2000. It slid to within about 1 percentage point of a bear market on Dec. 29.
August Peak
Speculators held a net-long position of 116,061 U.S. futures and options as of May 1, CFTC data show. While that’s 7.9 percent more than a week earlier, it’s still 54 percent less than the peak in August. They held 107,600 contracts on April 24, the fewest since January 2009, the data show.
Open interest, or contracts outstanding, in U.S. futures rose 1.4 percent in the week ended May 8, as prices slipped 3.5 percent, bourse data show. Rising open interest at a time of declining prices probably means traders added to bets on lower prices, Edel Tully, an analyst at UBS AG in London, wrote in a report yesterday. Open interest dropped 13 percent since the end of February and averaged 426,554 so far this year, 14 percent less than last year’s average, data compiled by Bloomberg show.
The U.S. Mint sold 230,500 ounces of gold coins in the first four months, 43 percent less than a year earlier, data on its website show. Holdings in gold-backed exchange-traded products rose 1.1 percent to 2,382 metric tons this year, valued at about $122 billion, data compiled by Bloomberg show.
Federal Reserve
Record-low interest rates from Europe to the U.S. may sustain demand for bullion, which generally earns investors returns only through price gains. The Federal Reserve has pledged rates at “exceptionally low levels” at least through late 2014 and the Bank of England kept its benchmark rate at 0.5 percent yesterday, where it has been since March 2009.
Europe’s financial turmoil is reigniting on the second anniversary of policy makers’ first attempt to curb Greece’s debt crisis. The country struggled to form a government after voters swung behind anti-bailout parties. Fifty-seven percent of investors, analysts and traders who are Bloomberg subscribers said at least one country will abandon the euro by year-end, a survey published yesterday showed.
The International Monetary Fund forecast last month that the 17-nation euro region would contract 0.3 percent this year as the U.S. expands 2.1 percent.
“Financial turmoil and easy money should see gold rally,” said Adrian Day, the president of Adrian Day Asset Management in Annapolis, Maryland. “Once the liquidation phase is over, gold could rebound smartly.”
Indian Demand
Demand for physical gold in India, last year’s biggest buyer, was almost double the daily average when gold traded close to $1,580, Tully of UBS wrote in her note. India’s government said May 7 it withdrew an excise duty on precious metals jewelry after jewelers closed stores in the longest-ever strike through early April.
Volumes on the benchmark contract on the Shanghai Gold Exchange doubled to 7,734.4 kilograms (7.73 tons) on May 9 from the previous day and were the highest in almost two weeks. China’s gold imports from Hong Kong surged more than sixfold to 135,529 kilograms in the first quarter, according to export data from the Census and Statistics Department of the Hong Kong government. China doesn’t publish the country’s gold trade data.
This week’s decline took gold’s 14-day relative-strength index to 33.3, near a level of 30 that indicates to some analysts who study trading charts that a rebound may be due. Goldman expects prices to advance to $1,840 in six months and $1,940 in 12 months.
London Metal Exchange
In other commodities, 14 of 28 traders and analysts surveyed by Bloomberg expect copper to climb next week and two were neutral. The metal for delivery in three months, the London Metal Exchange’s benchmark contract, rose 6.4 percent to $8,084.75 a ton this year.
Six of 14 people surveyed said raw sugar will decline next week and three were neutral. The commodity dropped 12 percent to 20.45 cents a pound since the start of January on ICE Futures U.S. in New York.
Ten of 25 people surveyed anticipate higher corn prices next week and six were neutral, while 11 of 26 said soybeans will advance and six predicted little change. Corn slipped 9.2 percent to $5.87 a bushel this year as soybeans climbed 20 percent to $14.4375 a bushel.
“Uncertainties surrounding the future of Greece will negatively impact commodity prices,” said Bayram Dincer, an analyst at LGT Capital Management in Pfaeffikon, Switzerland. “We don’t expect that current economic activity is very commodity-price supportive.”
Gold survey results: Bullish: 14 Bearish: 12 Hold: 6
Copper survey results: Bullish: 14 Bearish: 12 Hold: 2
Corn survey results: Bullish: 10 Bearish: 9 Hold: 6
Soybean survey results: Bullish: 11 Bearish: 9 Hold: 6
Raw sugar survey results: Bullish: 5 Bearish: 6 Hold: 3
White sugar survey results: Bullish: 5 Bearish: 5 Hold: 4
White sugar premium results: Widen: 4 Narrow: 4 Neutral: 6
To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net
To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Wednesday, May 9, 2012
India Needs Course Correction to Lure Foreign Investment
By the Editors - May 9, 2012
Just because you can now go to Dunkin’ Donuts in New Delhi, with the first Starbucks soon to follow, doesn’t mean it’s morning for foreign investors in India. In fact, judging by some of the government’s recent moves, dawn has been postponed by a few years.
Wednesday, India’s Finance Secretary R.S. Gujral told Bloomberg News that if plans to amend India’s tax law go through, Vodafone Group Plc will face a retroactive tax bill of as much as $3.72 billion for its 2007 purchase of Hutchison Whampoa Ltd.’s Indian cellular operations. Changes to the law would override a decision issued this year by India’s Supreme Court releasing Vodafone from any tax obligation, and they might also expose companies such as Kraft (KFT) Foods Inc., AT&T Inc. and SABMiller Plc. to similar retroactive penalties and levies for previous transactions.
The government has also reportedly decided against lifting a 26 percent cap on foreign investment in the insurance business. And though single-brand niche retailers such as Dunkin’ Donuts and Starbucks can now own as much as 100 percent of their ventures (provided they source 30 percent of content locally), there is as yet no joy for multibrand retailers such as Wal-Mart Stores Inc., which remain locked out of the consumer market.
These misguided decisions have taken place against a background of a cooling economy and a deepening political paralysis. India grew by less than 7 percent last year, the slowest pace in three years, and it is saddled with a fiscal deficit and inflation rate that are the highest among the big developing economies, not to mention a swelling trade deficit driven by oil imports. Its fractious ruling coalition of frenemies can’t agree on whether to order a tall or a grande, let alone on what further reforms to adopt.
Faced with those circumstances, Finance Minister Pranab Mukherjee chose to make higher taxes on foreign investors a crucial part of his effort this fiscal year to close his country’s budget gap. But that’s exactly the wrong way to attract the capital that India needs: Its 12th Five Year Plan calls for $1 trillion in infrastructure investment over the next five years. Remarkably, in the face of widespread investor unease, some government ministers have argued that these tax changes “will not have any impact on foreign investment flow in the country.”
The prospect of a new rule on tax avoidance in Mukherjee’s budget spurred the outflow of hundreds of millions of dollars from India’s exchanges. Despite his subsequent decision to postpone the rule’s implementation until 2013, foreign portfolio investors have not been reassured. The proposed Vodafone provision, which could net India billions in retroactive revenue, sends investors exactly the wrong signal, not least because it overturns a seemingly settled court verdict. The government should drop the retroactive provisions of the law, and focus more on curbing the subsidies that eat up more than 2 percent of gross domestic product.
Secretary of State Hillary Clinton made the case for continued opening of the Indian economy in her just concluded trip. In fact, we give her major props for going into the lion’s den -- a visit with Mamata Banerjee, chief minister of West Bengal, leader of coalition member All India Trinamool Congress, one of Time magazine’s “100 Most Influential People” in 2012, and a reflexive opponent of economic liberalization. But given India’s fragmented polity and the sclerotic state of its national parties and their central leadership, don’t expect much, if any, change until national elections in 2014 -- and then hope that it’s for the better.
Read more opinion online from Bloomberg View.
Today’s highlights: the View editors on monitoring mad-cow disease; A.A. Gill on London’s shareholder revolt; Ezra Klein on Richard Lugar’s concession speech; Noah Feldman on Israel’s new coalition; Caroline Baum on the nature of U.S. unemployment; Reid Hastie on the failure of narrative thinking; Sam Sherraden on China’s liberalization.
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Just because you can now go to Dunkin’ Donuts in New Delhi, with the first Starbucks soon to follow, doesn’t mean it’s morning for foreign investors in India. In fact, judging by some of the government’s recent moves, dawn has been postponed by a few years.
Wednesday, India’s Finance Secretary R.S. Gujral told Bloomberg News that if plans to amend India’s tax law go through, Vodafone Group Plc will face a retroactive tax bill of as much as $3.72 billion for its 2007 purchase of Hutchison Whampoa Ltd.’s Indian cellular operations. Changes to the law would override a decision issued this year by India’s Supreme Court releasing Vodafone from any tax obligation, and they might also expose companies such as Kraft (KFT) Foods Inc., AT&T Inc. and SABMiller Plc. to similar retroactive penalties and levies for previous transactions.
The government has also reportedly decided against lifting a 26 percent cap on foreign investment in the insurance business. And though single-brand niche retailers such as Dunkin’ Donuts and Starbucks can now own as much as 100 percent of their ventures (provided they source 30 percent of content locally), there is as yet no joy for multibrand retailers such as Wal-Mart Stores Inc., which remain locked out of the consumer market.
These misguided decisions have taken place against a background of a cooling economy and a deepening political paralysis. India grew by less than 7 percent last year, the slowest pace in three years, and it is saddled with a fiscal deficit and inflation rate that are the highest among the big developing economies, not to mention a swelling trade deficit driven by oil imports. Its fractious ruling coalition of frenemies can’t agree on whether to order a tall or a grande, let alone on what further reforms to adopt.
Faced with those circumstances, Finance Minister Pranab Mukherjee chose to make higher taxes on foreign investors a crucial part of his effort this fiscal year to close his country’s budget gap. But that’s exactly the wrong way to attract the capital that India needs: Its 12th Five Year Plan calls for $1 trillion in infrastructure investment over the next five years. Remarkably, in the face of widespread investor unease, some government ministers have argued that these tax changes “will not have any impact on foreign investment flow in the country.”
The prospect of a new rule on tax avoidance in Mukherjee’s budget spurred the outflow of hundreds of millions of dollars from India’s exchanges. Despite his subsequent decision to postpone the rule’s implementation until 2013, foreign portfolio investors have not been reassured. The proposed Vodafone provision, which could net India billions in retroactive revenue, sends investors exactly the wrong signal, not least because it overturns a seemingly settled court verdict. The government should drop the retroactive provisions of the law, and focus more on curbing the subsidies that eat up more than 2 percent of gross domestic product.
Secretary of State Hillary Clinton made the case for continued opening of the Indian economy in her just concluded trip. In fact, we give her major props for going into the lion’s den -- a visit with Mamata Banerjee, chief minister of West Bengal, leader of coalition member All India Trinamool Congress, one of Time magazine’s “100 Most Influential People” in 2012, and a reflexive opponent of economic liberalization. But given India’s fragmented polity and the sclerotic state of its national parties and their central leadership, don’t expect much, if any, change until national elections in 2014 -- and then hope that it’s for the better.
Read more opinion online from Bloomberg View.
Today’s highlights: the View editors on monitoring mad-cow disease; A.A. Gill on London’s shareholder revolt; Ezra Klein on Richard Lugar’s concession speech; Noah Feldman on Israel’s new coalition; Caroline Baum on the nature of U.S. unemployment; Reid Hastie on the failure of narrative thinking; Sam Sherraden on China’s liberalization.
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Tuesday, May 8, 2012
Jimmy Choos Luring Indian Women Graduates Away From Work: Jobs By Rina Chandran - May 8, 2012
After graduating at the top of her class in international business at Ohio State University in Columbus, Bavleen Sawhney had the chance to join a top Indian bank or consulting firm. Instead, she became a personal shopper.
“I’ve told my dad I don’t want to work,” said Sawhney, 22, who travels around New Delhi’s malls in a chauffeured sedan to browse shoes by Jimmy Choo Ltd. and handbags from Bottega Veneta Srl for wealthy clients. “A nine-to-five job doesn’t suit me.”
While India has a slew of handicaps that disadvantage women in the workforce, from low education levels to early marriage and gender bias, Sawhney is among a growing group of key potential managers who are opting out as a surfeit of cheap domestic labor allows more middle-class graduates to stay home. That’s compounding one of India’s worst skills deficits: a shortage of technical, professional and managerial staff that Prime Minister Manmohan Singh says is constraining growth.
“Increasing women’s participation in the workforce could be one of the most powerful ways to boost growth, incomes and consumption” in India, said Roopa Purushothaman, managing director and head of research at Everstone Capital Advisors in Mumbai. “As women become more educated, it appears that they work less and less,” she said.
The number of women studying for commerce-related degrees in Indian universities per 100 men almost quadrupled to 63 from 1980 to 2002, while the ratio in engineering and technical degrees rose to 33 from eight, based on census data, according to Everstone, which advises on $1.6 billion of private equity and real estate assets primarily focused on India. Once women leave college, those gains disappear.
Staying Home
The rate of India’s female graduates entering the workforce is only about 22 percent, lower even than the rate of illiterate women finding a job, according to Everstone. In South Korea, the ratio of female graduates working is more than 40 percent.
In the World Economic Forum’s ranking of gender parity in economic participation, India is above only Turkey, Saudi Arabia, Pakistan and Yemen, a gap that “will be detrimental to India’s growth,” the Geneva-based organization said in a 2011 report.
If even half of India’s working-age women were employed, incomes would rise by more than 12 percent by 2025 and gross domestic product would increase by $110 billion in a decade, said Purushothaman. She was one of the authors of the 2003 report from Goldman Sachs Group Inc. with Jim O’Neill that coined the term BRIC for the emerging economic powerhouses of Brazil, Russia, India and China.
Biased Boardrooms
The low numbers of women graduates in work are reflected in India’s boardrooms. Of 1,112 directors in the 100 companies on the BSE 100 index, 59, or 5.3 percent, are women -- less than half the ratios in the U.S. and U.K. -- according to Hong Kong- based Community Business, a non-profit organization that surveyed gender in the workplace in six Asian countries in 2009 and 2011. The BSE 100 is a weighted index of 100 stocks selected from the nation’s five major exchanges: Mumbai, Calcutta, Delhi, Ahmedabad and Chennai.
Indian women hold 9 percent of jobs at the director level or higher -- behind all countries except the United Arab Emirates and Japan, according to a 2011 report by Grant Thornton International Ltd. Worldwide, women managers average 20 percent of executive jobs, the London-based consultants wrote.
Addressing the gap is an uphill task in a country with a tradition of women staying at home and where a lifestyle with full-time domestic servants is relatively cheap. A helper in India’s capital will cook and clean for as little as 8,000 rupees ($151) a month, a cost affordable even for many graduate trainees. Added to that, most companies don’t provide the facilities and flexibility that would attract women trying to balance a career and family, said Aparna Banerji, diversity and inclusion manager at Community Business.
Staff Shortage
“The government and companies need to do a lot more to get women into the workforce and keep them there,” Banerji said.
Some of India’s most successful companies are taking steps to try to recruit and keep female graduates amid a shortage of skilled staff. Information technology and financial services companies have the most women on their boards, data compiled by Bloomberg shows. The top three technology companies by revenue, Tata Consultancy Services Ltd. (TCS), Infosys Ltd. (INFO) and Wipro Ltd. (WPRO), had the highest percentage of female staff in the workforce -- up to 34 percent.
Software services companies have attracted female graduates with their portrayal of a youthful, less hierarchical workplace, offering pick-up and drop-off services for those on late shifts and flexible hours.
Seeking Talent
Multinationals such as Procter & Gamble India offer additional maternity leave, while lender ICICI Ltd. (ICICIBC), which has produced seven of the country’s 14 top female financial services executives, gives young mothers extended time off and more options when they return to work.
“Having more women is really about having the best talent,” said Naina Lal Kidwai, country head of HSBC Holdings Plc (HSBA) in India, which offers flexible hours and sabbaticals to some executives. That has enabled the bank to retain senior women managers who may have otherwise quit, said Kidwai, who joined the board of the lender’s Asia-Pacific operations in 2010.
“Especially for women for whom the economic need is less, the challenge is finding them work that is interesting and challenging, and also making them feel rewarded,” said Kidwai.
In an effort to lure back women who have quit work, Mumbai- based Tata Group introduced a Second Career Internship Program on International Women’s Day in 2008. More than 125 women have completed the course at India’s biggest business group, with about one-fifth taking full-time jobs within the group and a quarter finding work elsewhere, according to Radhakrishnan Nair, a vice president at Tata Group Human Resources.
Untapped Pool
“This is a huge, untapped talent pool with very valuable experience and skills,” Nair said in an e-mail. Initiatives such as SCIP “are necessary to meet the talent crunch.”
Ruma Rao, 35, who took the course in 2009 after an 18-month break from her previous sales job to have a child, now works in Tata’s human resources department, with flexible hours that give her more time with her young daughter.
“Women should be encouraged to stay in the workforce,” Rao said by telephone. “A lot of women would opt to keep working if companies offered more options, more flexibility.”
Meanwhile, India has tried to tackle the inequality in basic education and has stepped up enforcement of working rights for women. A drive to get families to send their daughters to school improved women’s literacy levels to 65.5 percent in 2011, from 53.4 percent in 2001. The government has clamped down on marriages below the legal age of 18 for women, outlawed pay discrimination and mandated maternity leave of up to 12 weeks.
Constraining Growth
At a conference in January, Prime Minister Singh said India would only reap the benefit of its young population provided they had the education and skills to earn a decent livelihood. “There is a significant gap between the requirement and the supply which, unless checked, will constrain our economic growth,” he said.
Parliament is debating a bill that would reserve a third of its seats for women, a proposal backed by Sonia Gandhi, leader of the ruling Congress Party, and Pratibha Devisingh Patil, the country’s first female president, who is nearing the end of her term in office.
Banerji at Community Business said the country has made “real progress” to overcome traditional cultural gender bias. “Consider that women were not even allowed out of their homes during the time of our grandmothers,” she said.
Those like Sawhney, from the rising generation of wealthy middle class, provide the government and companies with a new challenge.
“I wasn’t brought up in an environment where I am expected to go to an office every day,” she said. “I would have quit within a week if I’d joined a bank.”
To contact the reporter on this story: Rina Chandran in Singapore at rchandran12@bloomberg.net
To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
“I’ve told my dad I don’t want to work,” said Sawhney, 22, who travels around New Delhi’s malls in a chauffeured sedan to browse shoes by Jimmy Choo Ltd. and handbags from Bottega Veneta Srl for wealthy clients. “A nine-to-five job doesn’t suit me.”
While India has a slew of handicaps that disadvantage women in the workforce, from low education levels to early marriage and gender bias, Sawhney is among a growing group of key potential managers who are opting out as a surfeit of cheap domestic labor allows more middle-class graduates to stay home. That’s compounding one of India’s worst skills deficits: a shortage of technical, professional and managerial staff that Prime Minister Manmohan Singh says is constraining growth.
“Increasing women’s participation in the workforce could be one of the most powerful ways to boost growth, incomes and consumption” in India, said Roopa Purushothaman, managing director and head of research at Everstone Capital Advisors in Mumbai. “As women become more educated, it appears that they work less and less,” she said.
The number of women studying for commerce-related degrees in Indian universities per 100 men almost quadrupled to 63 from 1980 to 2002, while the ratio in engineering and technical degrees rose to 33 from eight, based on census data, according to Everstone, which advises on $1.6 billion of private equity and real estate assets primarily focused on India. Once women leave college, those gains disappear.
Staying Home
The rate of India’s female graduates entering the workforce is only about 22 percent, lower even than the rate of illiterate women finding a job, according to Everstone. In South Korea, the ratio of female graduates working is more than 40 percent.
In the World Economic Forum’s ranking of gender parity in economic participation, India is above only Turkey, Saudi Arabia, Pakistan and Yemen, a gap that “will be detrimental to India’s growth,” the Geneva-based organization said in a 2011 report.
If even half of India’s working-age women were employed, incomes would rise by more than 12 percent by 2025 and gross domestic product would increase by $110 billion in a decade, said Purushothaman. She was one of the authors of the 2003 report from Goldman Sachs Group Inc. with Jim O’Neill that coined the term BRIC for the emerging economic powerhouses of Brazil, Russia, India and China.
Biased Boardrooms
The low numbers of women graduates in work are reflected in India’s boardrooms. Of 1,112 directors in the 100 companies on the BSE 100 index, 59, or 5.3 percent, are women -- less than half the ratios in the U.S. and U.K. -- according to Hong Kong- based Community Business, a non-profit organization that surveyed gender in the workplace in six Asian countries in 2009 and 2011. The BSE 100 is a weighted index of 100 stocks selected from the nation’s five major exchanges: Mumbai, Calcutta, Delhi, Ahmedabad and Chennai.
Indian women hold 9 percent of jobs at the director level or higher -- behind all countries except the United Arab Emirates and Japan, according to a 2011 report by Grant Thornton International Ltd. Worldwide, women managers average 20 percent of executive jobs, the London-based consultants wrote.
Addressing the gap is an uphill task in a country with a tradition of women staying at home and where a lifestyle with full-time domestic servants is relatively cheap. A helper in India’s capital will cook and clean for as little as 8,000 rupees ($151) a month, a cost affordable even for many graduate trainees. Added to that, most companies don’t provide the facilities and flexibility that would attract women trying to balance a career and family, said Aparna Banerji, diversity and inclusion manager at Community Business.
Staff Shortage
“The government and companies need to do a lot more to get women into the workforce and keep them there,” Banerji said.
Some of India’s most successful companies are taking steps to try to recruit and keep female graduates amid a shortage of skilled staff. Information technology and financial services companies have the most women on their boards, data compiled by Bloomberg shows. The top three technology companies by revenue, Tata Consultancy Services Ltd. (TCS), Infosys Ltd. (INFO) and Wipro Ltd. (WPRO), had the highest percentage of female staff in the workforce -- up to 34 percent.
Software services companies have attracted female graduates with their portrayal of a youthful, less hierarchical workplace, offering pick-up and drop-off services for those on late shifts and flexible hours.
Seeking Talent
Multinationals such as Procter & Gamble India offer additional maternity leave, while lender ICICI Ltd. (ICICIBC), which has produced seven of the country’s 14 top female financial services executives, gives young mothers extended time off and more options when they return to work.
“Having more women is really about having the best talent,” said Naina Lal Kidwai, country head of HSBC Holdings Plc (HSBA) in India, which offers flexible hours and sabbaticals to some executives. That has enabled the bank to retain senior women managers who may have otherwise quit, said Kidwai, who joined the board of the lender’s Asia-Pacific operations in 2010.
“Especially for women for whom the economic need is less, the challenge is finding them work that is interesting and challenging, and also making them feel rewarded,” said Kidwai.
In an effort to lure back women who have quit work, Mumbai- based Tata Group introduced a Second Career Internship Program on International Women’s Day in 2008. More than 125 women have completed the course at India’s biggest business group, with about one-fifth taking full-time jobs within the group and a quarter finding work elsewhere, according to Radhakrishnan Nair, a vice president at Tata Group Human Resources.
Untapped Pool
“This is a huge, untapped talent pool with very valuable experience and skills,” Nair said in an e-mail. Initiatives such as SCIP “are necessary to meet the talent crunch.”
Ruma Rao, 35, who took the course in 2009 after an 18-month break from her previous sales job to have a child, now works in Tata’s human resources department, with flexible hours that give her more time with her young daughter.
“Women should be encouraged to stay in the workforce,” Rao said by telephone. “A lot of women would opt to keep working if companies offered more options, more flexibility.”
Meanwhile, India has tried to tackle the inequality in basic education and has stepped up enforcement of working rights for women. A drive to get families to send their daughters to school improved women’s literacy levels to 65.5 percent in 2011, from 53.4 percent in 2001. The government has clamped down on marriages below the legal age of 18 for women, outlawed pay discrimination and mandated maternity leave of up to 12 weeks.
Constraining Growth
At a conference in January, Prime Minister Singh said India would only reap the benefit of its young population provided they had the education and skills to earn a decent livelihood. “There is a significant gap between the requirement and the supply which, unless checked, will constrain our economic growth,” he said.
Parliament is debating a bill that would reserve a third of its seats for women, a proposal backed by Sonia Gandhi, leader of the ruling Congress Party, and Pratibha Devisingh Patil, the country’s first female president, who is nearing the end of her term in office.
Banerji at Community Business said the country has made “real progress” to overcome traditional cultural gender bias. “Consider that women were not even allowed out of their homes during the time of our grandmothers,” she said.
Those like Sawhney, from the rising generation of wealthy middle class, provide the government and companies with a new challenge.
“I wasn’t brought up in an environment where I am expected to go to an office every day,” she said. “I would have quit within a week if I’d joined a bank.”
To contact the reporter on this story: Rina Chandran in Singapore at rchandran12@bloomberg.net
To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Monday, May 7, 2012
India Defers Tax Avoidance Rule in Boost for Currency By Tushar Dhara and Unni Krishnan - May 7, 2012
Indian Finance Minister Pranab Mukherjee retreated on tax proposals to salvage investor confidence in Asia’s third-largest economy, lifting stocks from a four-month low and buoying the nation’s currency.
The applicability of a new rule to reduce tax avoidance will be delayed until the fiscal year beginning April 2013, Mukherjee said in parliament yesterday. The clampdown in the planned General Anti-Avoidance Rule, or GAAR, had stoked concern that foreign investment will decline, hurting growth.
The postponement follows a series of policy reversals by Prime MinisterManmohan Singh’s government, which is struggling to revive an economy expanding at the slowest pace since 2009. While the earlier setbacks dimmed the outlook for investment, stocks and the rupee rose as Mukherjee backed down from the anti-avoidance measure less than two months after announcing it in India’s annual budget.
“It’s a flip flop in the positive sense since the finance minister wouldn’t want to tarnish the image of the economy,” said Jay Shankar, chief economist at Religare Capital Markets Ltd. in Mumbai. “But it shows the indecisiveness and lack of leadership in the government.”
The rupee strengthened 1.1 percent to 52.9150 per dollar yesterday, while the BSE India Sensitive Index of stocks rose 0.5 percent, erasing earlier losses. The currency weakened 16 percent last year, the worst performance in Asia.
Short-Term Boost
In the March 16 budget, Mukherjee unveiled GAAR to target avoidance by companies that use tax treaties between India and other countries. Foreign funds that route investments into India via other nations were concerned the new rule may apply to their holdings.
The burden of proving tax evasion under GAAR will be on the revenue department and steps will be taken to ensure it’s applied objectively, he said.
The deferral of the rule “should be positive in the short term,” said Prasanna Ananthasubramanian, chief economist at Mumbai-based ICICI Securities Primary Dealership Ltd. “I expect capital flows should pick up because the India-related uncertainty has gone away.”
Mukherjee in the budget also proposed retrospective clarifications to ensure the taxation of deals conducted overseas in which an Indian business is transferred. That plan followed a ruling in January by India’s Supreme Court that Vodafone Group Plc (VOD) doesn’t have to pay $2.2 billion in tax on its purchase, conducted offshore, of the Indian business of Hutchison Whampoa Ltd. (13) in 2007.
Foreign Investment
The retrospective clarification won’t override India’s double-taxation agreements and cases where assessment orders have already been finalized won’t be reopened, he said.
U.S. Treasury Secretary Timothy F. Geithner discussed the tax plans with Mukherjee last month after American trade and lobby groups said they may lead to retroactive bills for periods of as much as 50 years and deter foreign investment.
The Indian finance minister also said yesterday that the long-term capital gains tax rate for non-resident investors and private equity firms will be reduced to 10 percent from 20 percent. Proceeds from initial public offerings will be exempt from the levy, while being subject to a securities transaction tax of 0.2 percent, he said.
Mukherjee, who faces the widest fiscal deficit among the biggest emerging economies, was introducing changes to his budget in parliament. He has said he aims to narrow the shortfall to 5.1 percent of gross domestic product this fiscal year from 5.9 percent in the 12 months through March 2012.
Challenging Periods
Singh’s administration is facing one of the most challenging periods since taking office in 2004 as opposition from within the ruling coalition stymies efforts to further open up the economy. Among the setbacks was the suspension in December of plans to open India’s retail industry to foreign companies such as Wal-Mart Stores Inc. (WMT)
India is also grappling with the fastest inflation in the so-called BRIC group of biggest emerging nations that also includes Brazil, Russia and China. India also has a record trade deficit that’s pressured the rupee.
Standard & Poor’s lowered India sovereign credit outlook to negative from stable on April 25, citing weaker investment and a deterioration in the current account, the broadest measure of trade. The move took the economy a step closer to so-called junk status.
Governor Duvvuri Subbarao cut India’s repurchase rate by a greater-than-forecast half a percentage point on April 17 to 8 percent, seeking to bolster expansion with the first reduction since 2009. Inflation was 6.89 percent in March.
The government estimates that India’s economy expanded 6.9 percent in 2011-2012, the slowest pace since in three fiscal years, hurt by costlier credit, inflation and slower exports.
To contact the reporters on this story: Tushar Dhara in New Delhi at tdhara1@bloomberg.net; Unni Krishnan in New Delhi at ukrishnan2@bloomberg.net
To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
The applicability of a new rule to reduce tax avoidance will be delayed until the fiscal year beginning April 2013, Mukherjee said in parliament yesterday. The clampdown in the planned General Anti-Avoidance Rule, or GAAR, had stoked concern that foreign investment will decline, hurting growth.
The postponement follows a series of policy reversals by Prime MinisterManmohan Singh’s government, which is struggling to revive an economy expanding at the slowest pace since 2009. While the earlier setbacks dimmed the outlook for investment, stocks and the rupee rose as Mukherjee backed down from the anti-avoidance measure less than two months after announcing it in India’s annual budget.
“It’s a flip flop in the positive sense since the finance minister wouldn’t want to tarnish the image of the economy,” said Jay Shankar, chief economist at Religare Capital Markets Ltd. in Mumbai. “But it shows the indecisiveness and lack of leadership in the government.”
The rupee strengthened 1.1 percent to 52.9150 per dollar yesterday, while the BSE India Sensitive Index of stocks rose 0.5 percent, erasing earlier losses. The currency weakened 16 percent last year, the worst performance in Asia.
Short-Term Boost
In the March 16 budget, Mukherjee unveiled GAAR to target avoidance by companies that use tax treaties between India and other countries. Foreign funds that route investments into India via other nations were concerned the new rule may apply to their holdings.
The burden of proving tax evasion under GAAR will be on the revenue department and steps will be taken to ensure it’s applied objectively, he said.
The deferral of the rule “should be positive in the short term,” said Prasanna Ananthasubramanian, chief economist at Mumbai-based ICICI Securities Primary Dealership Ltd. “I expect capital flows should pick up because the India-related uncertainty has gone away.”
Mukherjee in the budget also proposed retrospective clarifications to ensure the taxation of deals conducted overseas in which an Indian business is transferred. That plan followed a ruling in January by India’s Supreme Court that Vodafone Group Plc (VOD) doesn’t have to pay $2.2 billion in tax on its purchase, conducted offshore, of the Indian business of Hutchison Whampoa Ltd. (13) in 2007.
Foreign Investment
The retrospective clarification won’t override India’s double-taxation agreements and cases where assessment orders have already been finalized won’t be reopened, he said.
U.S. Treasury Secretary Timothy F. Geithner discussed the tax plans with Mukherjee last month after American trade and lobby groups said they may lead to retroactive bills for periods of as much as 50 years and deter foreign investment.
The Indian finance minister also said yesterday that the long-term capital gains tax rate for non-resident investors and private equity firms will be reduced to 10 percent from 20 percent. Proceeds from initial public offerings will be exempt from the levy, while being subject to a securities transaction tax of 0.2 percent, he said.
Mukherjee, who faces the widest fiscal deficit among the biggest emerging economies, was introducing changes to his budget in parliament. He has said he aims to narrow the shortfall to 5.1 percent of gross domestic product this fiscal year from 5.9 percent in the 12 months through March 2012.
Challenging Periods
Singh’s administration is facing one of the most challenging periods since taking office in 2004 as opposition from within the ruling coalition stymies efforts to further open up the economy. Among the setbacks was the suspension in December of plans to open India’s retail industry to foreign companies such as Wal-Mart Stores Inc. (WMT)
India is also grappling with the fastest inflation in the so-called BRIC group of biggest emerging nations that also includes Brazil, Russia and China. India also has a record trade deficit that’s pressured the rupee.
Standard & Poor’s lowered India sovereign credit outlook to negative from stable on April 25, citing weaker investment and a deterioration in the current account, the broadest measure of trade. The move took the economy a step closer to so-called junk status.
Governor Duvvuri Subbarao cut India’s repurchase rate by a greater-than-forecast half a percentage point on April 17 to 8 percent, seeking to bolster expansion with the first reduction since 2009. Inflation was 6.89 percent in March.
The government estimates that India’s economy expanded 6.9 percent in 2011-2012, the slowest pace since in three fiscal years, hurt by costlier credit, inflation and slower exports.
To contact the reporters on this story: Tushar Dhara in New Delhi at tdhara1@bloomberg.net; Unni Krishnan in New Delhi at ukrishnan2@bloomberg.net
To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Sunday, May 6, 2012
Hollande Vows to Fight Austerity After Beating Sarkozy By Helene Fouquet - May 6, 2012
Francois Hollande, who defeated French President Nicolas Sarkozy to become the first Socialist in 17 years to control Europe’s second-biggest economy, pledged to push for less austerity and more growth in the region.
“Austerity is not inevitable,” he told supporters in Tulle, France, last night after he got about 52 percent against about 48 percent for Sarkozy.
Hollande inherits an economy that is barely growing, with jobless claims at their highest in 12 years and a rising debt load that makes France vulnerable to the financial crisis that has rocked the euro region the past two years. Sarkozy became the ninth euro leader to fall in that time and the first French president in more than 30 years to fail to win re-election.
“Hollande’s bet was that rejection of Nicolas Sarkozy was enough to get him elected,” Dominique Reynie, senior researcher at Paris’s Institute of Political Studies, said before the vote. “The message was that if you don’t like Sarkozy then I’m your best bet.”
Sarkozy’s departure may sharpen tensions with key allies as Hollande has advocated a more aggressive European Central Bank role in spurring growth -- a measure opposed by Germany -- and an accelerated withdrawal from Afghanistan.
Hollande’s comments were echoed in Greece, where voters flocked to anti-bailout groups, leaving the two main parties, New Democracy and Pasok, a seat short of a majority if they govern together, an Interior Ministry projection showed.
French Yields
In France, the campaign isn’t over. The country elects its lower house of parliament in five weeks, prompting calls from backers of both Hollande and Sarkozy to keep fighting.
While Socialists stand ready to dominate policy making for the first time since 1993 -- holding both the presidency and the Cabinet -- bond yields suggest Hollande may maintain market confidence. Ten-year French debt yields 124 basis points more than comparable German securities. That’s down from 145 basis points after he won the first round April 22 and lower than the 133 basis points at the start of the year.
Hollande supporters gathered yesterday to celebrate with music, tears of joy and impossibly clotted crowds. Paris’s Bastille square drew thousands of people. Hollande was in rainy Tulle, his home district in central France, where crowds were entertained by giant video screens and Stevie Wonder songs.
“It’s where presidents grow like mushrooms,” said 65- year-old retiree Andre Laurier, noting Tulle’s the region of Jacques Chirac and Georges Pompidou as well.
Hollande’s Task
Conceding defeat yesterday, Sarkozy said, “after 35 years of politics, after 10 years at the highest levels of government, after five years as head of state, I will become a Frenchman among the French.”
Hollande faces the task of increasing competitiveness, cutting the budget deficit and spurring growth while keeping the region’s financial woes at bay. Campaigning against the most unpopular president in postwar France, he avoided specifics.
“We expect resistance to change and proposals to preserve France’s social model to prevail once Parliament reconvenes after June 26,” Natacha Valla, a Paris-based economist at Goldman Sachs Group Inc., wrote on May 4.
Hollande sought to portray himself as the anti-Sarkozy leader, calling himself “normal” to contrast with the incumbent known in the media as “President bling-bling.”
Hollande is the second Socialist president of the Fifth Republic, established in 1958. Francois Mitterrand was first.
His path to power followed a traditional French route. He graduated from the Institute for Political Sciences in Paris and the National School of Administration, schools that trained all post-war presidents, except Sarkozy and Charles de Gaulle.
Fall Into Line
He was educated at HEC-Paris, a business school where he befriended some who were to become corporate leaders, such as Axa SA (CS) Chief Executive Officer Henri de Castries. His social circle includes Jean-Bernard Levy, CEO of Vivendi SA, and Jean- Louis Beffa, former CEO of Cie. de Saint-Gobain.
In the early 1980s, Hollande went to work for Mitterrand, helping him nationalize companies. A decade later, he helped Prime Minister Lionel Jospin sell them to help the Socialist government cut its debts to join the euro.
“The pressure to clarify the position after a change in government will be high and it will be immediate,” said Steven Major, head of fixed-income research at HSBC Holdings Plc in London. Investors are “looking through the election and reasoning that the government will fall into line.”
Hollande has proposed higher taxes for big companies and cuts for small and medium-sized businesses; a 75 percent levy on incomes above 1 million euros a year and special taxes on banks and oil companies.
More Spending
His platform would raise spending by 20 billion euros ($26.3 billion) over his five-year term and the retirement age for those who started working at 18 years old pushed back to 60 from 62. He said he would discuss with France’s banks the split of their retail and investment activities.
Tax increases and eliminating loopholes would seek to raise 29 billion euros. The budget plan aims to eliminate the deficit in 2017, one year later than under Sarkozy’s plan, with a 3 percent of gross domestic product deficit target for 2013.
Minutes after Hollande’s victory was announced, political leaders were already fighting over the legislative elections set for June 10 and June 17.
“We need a majority in parliament,” Jean-Marc Ayrault, who heads the Socialist Party in the National Assembly, said on France 2 television. Former Prime Minister Jean-Pierre Raffarin said, “What’s very important now is to put together a great opposition force.”
Against Austerity
Outside of France, Hollande has called for re-negotiating the German-inspired deficit rules that leaders agreed upon in December. At the same time, he reached out to France’s neighbor and biggest trade partner.
A German government spokesman said that diplomatic contacts had been made with the Hollande camp. Pierre Moscovici, his campaign chief and a possible key member of the future government, told Frankfurter Allgemeine Zeitung newspaper on May 5 that the new government would not create a “crisis” with its main partner.
German Finance Minister Wolfgang Schaeuble indicated May 4 enough flexibility to allow Hollande to “save face.”
“I’ve said that everybody who gets freshly elected into office must be able to save face,” Schaeuble said. “So we will discuss this with Hollande in a very friendly way. But we won’t change our principles.”
Concern of a Franco-German cleavage undermining economic policy making in the euro region is “exaggerated,” Morgan Stanley chief economist Joachim Fels wrote in a note yesterday.
A native of Rouen, the Norman city where Joan of Arc was burned at the stake by the English in the 15th century, Hollande has spent his career mainly behind the scenes and kept his position as party leader even after two humiliating Socialist losses under his watch -- in 2002 and 2007.
In 2007, Segolene Royal, the mother of his four children, lost to Sarkozy. In the subsequent months, she announced their separation. Hollande now lives with Valerie Trierweiler, a journalist for Paris Match magazine.
To contact the reporter on this story: Helene Fouquet in Paris at hfouquet1@bloomberg.net
To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
“Austerity is not inevitable,” he told supporters in Tulle, France, last night after he got about 52 percent against about 48 percent for Sarkozy.
Hollande inherits an economy that is barely growing, with jobless claims at their highest in 12 years and a rising debt load that makes France vulnerable to the financial crisis that has rocked the euro region the past two years. Sarkozy became the ninth euro leader to fall in that time and the first French president in more than 30 years to fail to win re-election.
“Hollande’s bet was that rejection of Nicolas Sarkozy was enough to get him elected,” Dominique Reynie, senior researcher at Paris’s Institute of Political Studies, said before the vote. “The message was that if you don’t like Sarkozy then I’m your best bet.”
Sarkozy’s departure may sharpen tensions with key allies as Hollande has advocated a more aggressive European Central Bank role in spurring growth -- a measure opposed by Germany -- and an accelerated withdrawal from Afghanistan.
Hollande’s comments were echoed in Greece, where voters flocked to anti-bailout groups, leaving the two main parties, New Democracy and Pasok, a seat short of a majority if they govern together, an Interior Ministry projection showed.
French Yields
In France, the campaign isn’t over. The country elects its lower house of parliament in five weeks, prompting calls from backers of both Hollande and Sarkozy to keep fighting.
While Socialists stand ready to dominate policy making for the first time since 1993 -- holding both the presidency and the Cabinet -- bond yields suggest Hollande may maintain market confidence. Ten-year French debt yields 124 basis points more than comparable German securities. That’s down from 145 basis points after he won the first round April 22 and lower than the 133 basis points at the start of the year.
Hollande supporters gathered yesterday to celebrate with music, tears of joy and impossibly clotted crowds. Paris’s Bastille square drew thousands of people. Hollande was in rainy Tulle, his home district in central France, where crowds were entertained by giant video screens and Stevie Wonder songs.
“It’s where presidents grow like mushrooms,” said 65- year-old retiree Andre Laurier, noting Tulle’s the region of Jacques Chirac and Georges Pompidou as well.
Hollande’s Task
Conceding defeat yesterday, Sarkozy said, “after 35 years of politics, after 10 years at the highest levels of government, after five years as head of state, I will become a Frenchman among the French.”
Hollande faces the task of increasing competitiveness, cutting the budget deficit and spurring growth while keeping the region’s financial woes at bay. Campaigning against the most unpopular president in postwar France, he avoided specifics.
“We expect resistance to change and proposals to preserve France’s social model to prevail once Parliament reconvenes after June 26,” Natacha Valla, a Paris-based economist at Goldman Sachs Group Inc., wrote on May 4.
Hollande sought to portray himself as the anti-Sarkozy leader, calling himself “normal” to contrast with the incumbent known in the media as “President bling-bling.”
Hollande is the second Socialist president of the Fifth Republic, established in 1958. Francois Mitterrand was first.
His path to power followed a traditional French route. He graduated from the Institute for Political Sciences in Paris and the National School of Administration, schools that trained all post-war presidents, except Sarkozy and Charles de Gaulle.
Fall Into Line
He was educated at HEC-Paris, a business school where he befriended some who were to become corporate leaders, such as Axa SA (CS) Chief Executive Officer Henri de Castries. His social circle includes Jean-Bernard Levy, CEO of Vivendi SA, and Jean- Louis Beffa, former CEO of Cie. de Saint-Gobain.
In the early 1980s, Hollande went to work for Mitterrand, helping him nationalize companies. A decade later, he helped Prime Minister Lionel Jospin sell them to help the Socialist government cut its debts to join the euro.
“The pressure to clarify the position after a change in government will be high and it will be immediate,” said Steven Major, head of fixed-income research at HSBC Holdings Plc in London. Investors are “looking through the election and reasoning that the government will fall into line.”
Hollande has proposed higher taxes for big companies and cuts for small and medium-sized businesses; a 75 percent levy on incomes above 1 million euros a year and special taxes on banks and oil companies.
More Spending
His platform would raise spending by 20 billion euros ($26.3 billion) over his five-year term and the retirement age for those who started working at 18 years old pushed back to 60 from 62. He said he would discuss with France’s banks the split of their retail and investment activities.
Tax increases and eliminating loopholes would seek to raise 29 billion euros. The budget plan aims to eliminate the deficit in 2017, one year later than under Sarkozy’s plan, with a 3 percent of gross domestic product deficit target for 2013.
Minutes after Hollande’s victory was announced, political leaders were already fighting over the legislative elections set for June 10 and June 17.
“We need a majority in parliament,” Jean-Marc Ayrault, who heads the Socialist Party in the National Assembly, said on France 2 television. Former Prime Minister Jean-Pierre Raffarin said, “What’s very important now is to put together a great opposition force.”
Against Austerity
Outside of France, Hollande has called for re-negotiating the German-inspired deficit rules that leaders agreed upon in December. At the same time, he reached out to France’s neighbor and biggest trade partner.
A German government spokesman said that diplomatic contacts had been made with the Hollande camp. Pierre Moscovici, his campaign chief and a possible key member of the future government, told Frankfurter Allgemeine Zeitung newspaper on May 5 that the new government would not create a “crisis” with its main partner.
German Finance Minister Wolfgang Schaeuble indicated May 4 enough flexibility to allow Hollande to “save face.”
“I’ve said that everybody who gets freshly elected into office must be able to save face,” Schaeuble said. “So we will discuss this with Hollande in a very friendly way. But we won’t change our principles.”
Concern of a Franco-German cleavage undermining economic policy making in the euro region is “exaggerated,” Morgan Stanley chief economist Joachim Fels wrote in a note yesterday.
A native of Rouen, the Norman city where Joan of Arc was burned at the stake by the English in the 15th century, Hollande has spent his career mainly behind the scenes and kept his position as party leader even after two humiliating Socialist losses under his watch -- in 2002 and 2007.
In 2007, Segolene Royal, the mother of his four children, lost to Sarkozy. In the subsequent months, she announced their separation. Hollande now lives with Valerie Trierweiler, a journalist for Paris Match magazine.
To contact the reporter on this story: Helene Fouquet in Paris at hfouquet1@bloomberg.net
To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
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