India is considering introducing the teaching of Mandarin in state schools, a move that would represent a policy shift for a country that has long played down the importance of learning the Chinese language.
China is India’s largest trading partner and neighbour across the Himalayas. Yet the country’s languages are barely taught in India. According to Chinese diplomats, India responded tepidly to a proposal by Beijing to establish Confucius Institutes, which teach Chinese, in the country’s main centres of learning.
The change is being driven by Kapil Sibal, minister of human resources development, who has tried to push for widespread reform in India’s education sector since taking over the portfolio last year.
Mr Sibal has held talks with Chinese officials on the practicalities of giving Indian teachers the skills to teach Mandarin courses, the possibility of Chinese teachers coming to India and the expansion of university student exchanges. He has also consulted India’s Central Board of Secondary Education (CBSE) about broadening language training within the national curriculum. Mr Sibal, who attended the World Economic Forum in Tianjin, favours Mandarin teaching in primary schools to instil an early interest in China, the world’s fastest growing large economy.
An estimated 60 per cent of India’s 1.2bn population is under the age of 25. Mr Sibal said India’s “demographic dividend” could help the country dominate the global services industry and, in the future, export talent to countries with ageing societies.
While many Indians speak English, Mandarin would give them greater international competitiveness. Should Mr Sibal’s proposal gain traction, India could at a stroke increase massively the number of the world’s Mandarin speakers.
Arun Kapur, director at Vasant Valley, a large secondary school in New Delhi, welcomed the promotion of Mandarin.
“We have other foreign languages. I’m surprised CBSE did not introduce Mandarin earlier, especially since it has so many people speaking it,” he said. “Why has it taken CBSE so long? With so many speakers [of Mandarin], it’s good for India to know what the world is saying.”
New Delhi’s interest in promoting Mandarin comes as the number of students learning the language across the globe continues to grow.
Mandarin is now the fourth most studied A-level language in the UK after French, Spanish and German.
China is keen for foreigners to learn Mandarin. In recent years, Beijing has funded programmes “enhancing its cultural and soft power and international competitiveness”, in the words of one senior Chinese propaganda official.
A key element in this strategy to increase China’s global influence is the funding of the Confucius Institutes. Established in 2004, the institutions provide Chinese language and culture classes but present a world view that is in line with Chinese Communist party objectives.
By the end of last year, the Chinese government had helped fund and establish 282 Confucius Institutes and 272 Confucius Classrooms in 88 countries.
A total of 260,000 people worldwide were enrolled in Confucius Centres last year. According to the Confucius Institute Headquarters in Beijing, another 250 institutions from more than 50 countries have expressed interest in establishing their own Confucius Institutes or classrooms.
In the US, the Asia Society identified 263 Chinese language programmes in elementary and secondary schools in 2004 and 779 such programmes in 2008, an almost 200 per cent increase. In Japan, apart from English, Chinese is the foreign language of choice.
Monday, September 27, 2010
Regulators Call Health Claims in Pom Juice Ads Deceptive
WASHINGTON — Pom Wonderful, the pricey and popular pomegranate juice sold in the distinctly curvaceous bottle, is advertised as helping to reduce the risk of heart disease, prostate cancer and impotence. But according to the Federal Trade Commission, the evidence does not back up those claims.
The Resnicks at the opening of the Lynda and Stewart Resnick pavilion at the Los Angeles County Museum of Art last weekend.
On Monday, the F.T.C. charged Pom Wonderful, which markets the juice, and the company’s owners, the billionaire philanthropists Lynda and Stewart Resnick of Los Angeles, with making false and unsubstantiated claims about the power of their pomegranate elixir.
In a complaint that seeks to prevent the company from making any further medical claims unless they are substantiated by the Food and Drug Administration, the commission said the company ignored evidence that contradicted its claims that the juice could help prevent or treat heart disease, reduce the risk of prostate cancer and overcome erectile dysfunction.
The Resnicks said Monday that they planned to contest the charges. Their company has sued the commission in federal district court, claiming that the commission had exceeded its authority and was trampling Pom’s First Amendment rights.
“We stand behind the vast body of scientific research documenting the healthy properties of Wonderful variety pomegranate,” the company said Monday in a statement. “Our research is unprecedented among food and beverage companies, and we take pride in having initiated a program of modern scientific research to investigate the health benefits of this ancient and revered fruit.”
That ancient, revered status as a folk medicine led the Resnicks in 1998 to begin financing research into whether pomegranates and their antioxidants had health benefits, according to a 2008 profile in The New Yorker magazine.
The F.T.C. complaint comes at an awkward time for the Resnicks, whose other business ventures include Teleflora, the flower-delivery service; Fiji Water; Suterra, a maker of environmentally sensitive pest-control products; and Neptune Pacific Line, an Australian shipper. The couple also formerly owned the Franklin Mint, the marketer of commemorative coins, plates and dolls.
Last weekend, the Los Angeles County Museum of Art opened the Resnick Pavilion, a freestanding exhibition space that was financed in part by the couple’s $45 million gift to the museum, where Mrs. Resnick is vice chairman of the board and oversees the acquisitions committee.
Pom Wonderful claims to have spent $34 million on pomegranate research, including 19 clinical trials and multiple studies published in peer-reviewed journals.
In addition to the Resnicks and the company, the commission also charged Matthew Tupper, the president and chief operating officer of Pom Wonderful, and Roll International, which provides administrative services to POM and which, like POM, is owned by a Resnick trust. The charges will be heard by an administrative law judge in Washington next May.
The commission also settled on Monday a related false advertising case against Dr. Mark Dreher, Pom Wonderful’s former vice president of science and regulatory affairs, who also appeared in various media as an expert endorser of Pom Wonderful’s products. Without admitting or denying the charges, Dr. Dreher agreed not to engage in similar acts and to cooperate with further investigations.
The commission does not have statutory authority to assess fines for violations of its regulations, although it can being a lawsuit against someone who violates a consent order. Instead, the commission can order businesses to stop illegal marketing activities and can halt anticompetitive practices.
While not disputing that the company’s medical studies exist, the commission says that the company’s advertising claims overstate the results and ignore that the pomegranate products often showed no more efficacy than a placebo. In addition to the juice, Pom Wonderful sells POMx pill and liquid supplements.
The commission cited examples of Pom advertising that said the products produced “improved heart and prostate health and better erectile function.” Among the results of various studies were a reduction in plaque buildup in the carotid artery and in blood pressure, and slower progression of an indicator for prostate cancer.
Those results ignored the fact, the commission contended, that as early as May 2007 the company knew that a large study financed by the company showed no significant difference in arterial plaque buildup after 18 months between patients who drank Pom and those who drank a placebo.
The commission also stated that the company’s prostate-related claims relied on a study that itself notes uncertainty as to whether the outcomes cited by the company were relevant as an indication of clinical benefit. It also said the company’s studies on erectile function produced no statistically significant results. Pom strongly disputed the commission’s assertions. “We do not make claims that our products act as drugs,” the company said. “What we do, rather, is communicate, through advertising, the promising science relating to pomegranates. Consumers and their health providers have a right to know about this research and its results.”
The commission proposed an order that would require the company to get F.D.A. approval before it makes any future claims that its products prevent or treat serious diseases.
In its federal lawsuit, Pom Wonderful accused the commission of applying a new standard for deceptive advertising to the food and dietary supplement industry that overturns 20 years of commission policy. That policy was laid out earlier this year by the commission in separate deceptive advertising actions against Nestlé HealthCare Nutrition and Iovate Health Sciences.
Pom also said that the commission was, in seeking to require F.D.A. oversight over the company’s claims, treating pomegranate juice as a drug although the products “do not carry the risks associated with pharmaceutical drugs.”
“It’s a shame that the government is unable to understand this fundamental distinction,” the company said, “and instead is wasting taxpayer resources to persecute the pomegranate.”
The Resnicks at the opening of the Lynda and Stewart Resnick pavilion at the Los Angeles County Museum of Art last weekend.
On Monday, the F.T.C. charged Pom Wonderful, which markets the juice, and the company’s owners, the billionaire philanthropists Lynda and Stewart Resnick of Los Angeles, with making false and unsubstantiated claims about the power of their pomegranate elixir.
In a complaint that seeks to prevent the company from making any further medical claims unless they are substantiated by the Food and Drug Administration, the commission said the company ignored evidence that contradicted its claims that the juice could help prevent or treat heart disease, reduce the risk of prostate cancer and overcome erectile dysfunction.
The Resnicks said Monday that they planned to contest the charges. Their company has sued the commission in federal district court, claiming that the commission had exceeded its authority and was trampling Pom’s First Amendment rights.
“We stand behind the vast body of scientific research documenting the healthy properties of Wonderful variety pomegranate,” the company said Monday in a statement. “Our research is unprecedented among food and beverage companies, and we take pride in having initiated a program of modern scientific research to investigate the health benefits of this ancient and revered fruit.”
That ancient, revered status as a folk medicine led the Resnicks in 1998 to begin financing research into whether pomegranates and their antioxidants had health benefits, according to a 2008 profile in The New Yorker magazine.
The F.T.C. complaint comes at an awkward time for the Resnicks, whose other business ventures include Teleflora, the flower-delivery service; Fiji Water; Suterra, a maker of environmentally sensitive pest-control products; and Neptune Pacific Line, an Australian shipper. The couple also formerly owned the Franklin Mint, the marketer of commemorative coins, plates and dolls.
Last weekend, the Los Angeles County Museum of Art opened the Resnick Pavilion, a freestanding exhibition space that was financed in part by the couple’s $45 million gift to the museum, where Mrs. Resnick is vice chairman of the board and oversees the acquisitions committee.
Pom Wonderful claims to have spent $34 million on pomegranate research, including 19 clinical trials and multiple studies published in peer-reviewed journals.
In addition to the Resnicks and the company, the commission also charged Matthew Tupper, the president and chief operating officer of Pom Wonderful, and Roll International, which provides administrative services to POM and which, like POM, is owned by a Resnick trust. The charges will be heard by an administrative law judge in Washington next May.
The commission also settled on Monday a related false advertising case against Dr. Mark Dreher, Pom Wonderful’s former vice president of science and regulatory affairs, who also appeared in various media as an expert endorser of Pom Wonderful’s products. Without admitting or denying the charges, Dr. Dreher agreed not to engage in similar acts and to cooperate with further investigations.
The commission does not have statutory authority to assess fines for violations of its regulations, although it can being a lawsuit against someone who violates a consent order. Instead, the commission can order businesses to stop illegal marketing activities and can halt anticompetitive practices.
While not disputing that the company’s medical studies exist, the commission says that the company’s advertising claims overstate the results and ignore that the pomegranate products often showed no more efficacy than a placebo. In addition to the juice, Pom Wonderful sells POMx pill and liquid supplements.
The commission cited examples of Pom advertising that said the products produced “improved heart and prostate health and better erectile function.” Among the results of various studies were a reduction in plaque buildup in the carotid artery and in blood pressure, and slower progression of an indicator for prostate cancer.
Those results ignored the fact, the commission contended, that as early as May 2007 the company knew that a large study financed by the company showed no significant difference in arterial plaque buildup after 18 months between patients who drank Pom and those who drank a placebo.
The commission also stated that the company’s prostate-related claims relied on a study that itself notes uncertainty as to whether the outcomes cited by the company were relevant as an indication of clinical benefit. It also said the company’s studies on erectile function produced no statistically significant results. Pom strongly disputed the commission’s assertions. “We do not make claims that our products act as drugs,” the company said. “What we do, rather, is communicate, through advertising, the promising science relating to pomegranates. Consumers and their health providers have a right to know about this research and its results.”
The commission proposed an order that would require the company to get F.D.A. approval before it makes any future claims that its products prevent or treat serious diseases.
In its federal lawsuit, Pom Wonderful accused the commission of applying a new standard for deceptive advertising to the food and dietary supplement industry that overturns 20 years of commission policy. That policy was laid out earlier this year by the commission in separate deceptive advertising actions against Nestlé HealthCare Nutrition and Iovate Health Sciences.
Pom also said that the commission was, in seeking to require F.D.A. oversight over the company’s claims, treating pomegranate juice as a drug although the products “do not carry the risks associated with pharmaceutical drugs.”
“It’s a shame that the government is unable to understand this fundamental distinction,” the company said, “and instead is wasting taxpayer resources to persecute the pomegranate.”
Mukherjee Cutting Bond Goal Boosts Demand to Four-Month High: India Credit
India’s combination of reducing targets for debt sales this fiscal year and opening its market to more foreign investment is driving demand at the nation’s bond auctions to a four-month high.
The finance ministry received bids for 2.3 times the 40 billion rupees ($889 million) of 10-year debt on offer at a Sept. 24 sale, the most since May 28, central bank data show. The benchmark 2020 bond may hold its gains even after yields fell almost a quarter-percentage point in the past month as the government cuts borrowing for the first time in four years.
Bond investors are clamoring for India debt as governments in developed economies from the U.K. to Germany step up borrowing in response to faltering growth. Policy makers forecast Asia’s third-biggest economy will grow 8.5 percent, almost four times as much as advanced nations, as Finance Minister Pranab Mukherjee aims to raise 1.46 trillion rupees from sales of state-owned assets and mobile-phone licenses.
“We’ve had many pleasant surprises this year on the fiscal front,” A. Balasubramanian, who oversees the equivalent of $13.6 billion in debt as chief executive officer at Birla Sun Life Asset Management Co. in Mumbai, said in a Sept. 23 telephone interview. “The risk-reward is in favor of investing in government bonds.”
Easing Limits
The nation’s 7.8 percent bond due in May 2020 gained for a sixth day yesterday, the longest winning streak since March, after the government said Sept. 23 it will cut borrowing by 2 percent to 4.47 trillion rupees in the current fiscal year. The same day, the finance ministry doubled the quota for foreigners buying government bonds to $10 billion and raised the limit on corporate debt by 33 percent to $20 billion.
Overseas holdings of India’s corporate and government debt more than doubled in 2010 to a record $17.7 billion as of Sept. 24, according to data provided by the Securities and Exchange Board of India.
The 10-year note yield has slid 21 basis points, or 0.21 percentage point, to 7.86 percent from a four-month high of 8.07 percent on Aug. 25 as the price of the security rose. The yield may drop to 7.5 percent by the end of March, according to Balasubramanian and Ramit Bhasin, the Mumbai-based head of markets in India at Royal Bank of Scotland NV.
If those estimates prove accurate, investors would realize an annualized return of more than 12 percent for the period.
Yield Difference
India’s 10-year bond yield is the highest among major economies except Brazil, where similar-maturity notes pay 11.59 percent. Comparable securities offer 7.62 percent in Russia, 3.32 percent in China and 2.54 percent in the U.S.
The difference in yields between India’s debt due in a decade and 10-year Treasuries was 5.33 percentage points. The measure, which has averaged 3.17 points in the past decade, reached a two-year high of 5.56 points on Aug. 26.
Mukherjee aims to narrow the budget deficit to 5.5 percent of gross domestic product in the year ending March 31, from a 16-year high of 6.9 percent in fiscal 2010. The federal government plans to sell 110 billion rupees of bonds on Oct. 1, part of a plan to raise 1.63 trillion rupees in the second half.
“The fiscal story is positive so far because tax collections have been better than it was last year, probably well in line with the target,” helping the government pare its borrowings, said Rajeev Radhakrishnan, a Mumbai-based money manager at SBI Funds Management Pvt. The firm is a unit of the nation’s biggest bank, with $4.9 billion assets in debt.
Taxes collected from companies are poised to rise 18 percent to 3 trillion rupees this year, budget estimates show.
Inflation, Rates
The benchmark yield is unlikely to drop below 7.75 percent by the end of March as inflation near 10 percent prompts the central bank to raise interest rates by a further 50 basis points, following a 125 basis-point increase in the repurchase rate since March 19, said Manoj Swain, chief executive officer of Morgan Stanley India Primary Dealer in Mumbai.
Inflation as measured by wholesale prices held above 10 percent for four months since March before slowing to 8.5 percent in August, according to commerce ministry data.
“Monetary aspects are negative,” Swain said in a telephone interview yesterday. “There’s hardly any room for a rally in a big way, though demand would also be better than earlier” after the government raised the limit for foreigners, Swain said.
Debt Returns
The fixed average coupon that India pays on its 20.324 trillion of government bonds outstanding with a weighted average maturity of 10 years is 7.85 percent, according to data compiled by Bloomberg. The rate was 7.89 percent in the year ended March 2010, according to the central bank’s annual report.
India’s government securities returned 3.6 percent this year, the second-worst among 10 local-currency debt markets outside Japan, according to indexes compiled by London-based HSBC Holdings Plc, Europe’s largest bank.
Asia’s third-biggest economy expanded 8.8 percent last quarter from a year earlier, the best since 2007 and the fastest pace among major economies excluding China. It is set for a 9.4 percent gain in 2010, outpacing 2.6 percent growth in advanced countries, the International Monetary Fund forecast in July.
India’s economic outlook led Moody’s Investors Service to raise the nation’s local-currency rating on July 26 by one level to Ba1, the highest non-investment grade, and affirm the nation’s foreign-currency debt rating of Baa3. Standard & Poor’s and Fitch Ratings rate India’s local-currency debt BBB-, the lowest investment grade.
License Fees
Accelerated investment inflows helped the rupee strengthen 4.6 percent against the dollar this month, the best performance among Asia’s 10-most traded currencies. The currency traded at 45.015 per dollar yesterday.
Phone companies, including Reliance Communications Ltd., Vodafone Group Plc’s Indian unit, and Bharti Airtel Ltd., paid the government 677.2 billion rupees this year for permits of mobile-phone licenses. Indian companies also spent 385.4 billion rupees to buy wireless-broadband Internet licenses in an auction held in June.
Policy makers want to raise 400 billion rupees by selling shares in state-owned companies in the year ending March 2011. The government plans to divest 10 percent in Indian Oil Corp., the nation’s second-biggest refiner, and 5 percent in Oil and Natural Gas Corp., its biggest explorer, Secretary S. Sundareshan, the top bureaucrat in the oil ministry, told reporters in New Delhi on Sept. 6.
The revenue, should the government meet its goals, “would be a huge positive on the fiscal side, which will open up the possibility of some more reduction in borrowing,” said SBI Funds Management’s Radhakrishnan.
The finance ministry received bids for 2.3 times the 40 billion rupees ($889 million) of 10-year debt on offer at a Sept. 24 sale, the most since May 28, central bank data show. The benchmark 2020 bond may hold its gains even after yields fell almost a quarter-percentage point in the past month as the government cuts borrowing for the first time in four years.
Bond investors are clamoring for India debt as governments in developed economies from the U.K. to Germany step up borrowing in response to faltering growth. Policy makers forecast Asia’s third-biggest economy will grow 8.5 percent, almost four times as much as advanced nations, as Finance Minister Pranab Mukherjee aims to raise 1.46 trillion rupees from sales of state-owned assets and mobile-phone licenses.
“We’ve had many pleasant surprises this year on the fiscal front,” A. Balasubramanian, who oversees the equivalent of $13.6 billion in debt as chief executive officer at Birla Sun Life Asset Management Co. in Mumbai, said in a Sept. 23 telephone interview. “The risk-reward is in favor of investing in government bonds.”
Easing Limits
The nation’s 7.8 percent bond due in May 2020 gained for a sixth day yesterday, the longest winning streak since March, after the government said Sept. 23 it will cut borrowing by 2 percent to 4.47 trillion rupees in the current fiscal year. The same day, the finance ministry doubled the quota for foreigners buying government bonds to $10 billion and raised the limit on corporate debt by 33 percent to $20 billion.
Overseas holdings of India’s corporate and government debt more than doubled in 2010 to a record $17.7 billion as of Sept. 24, according to data provided by the Securities and Exchange Board of India.
The 10-year note yield has slid 21 basis points, or 0.21 percentage point, to 7.86 percent from a four-month high of 8.07 percent on Aug. 25 as the price of the security rose. The yield may drop to 7.5 percent by the end of March, according to Balasubramanian and Ramit Bhasin, the Mumbai-based head of markets in India at Royal Bank of Scotland NV.
If those estimates prove accurate, investors would realize an annualized return of more than 12 percent for the period.
Yield Difference
India’s 10-year bond yield is the highest among major economies except Brazil, where similar-maturity notes pay 11.59 percent. Comparable securities offer 7.62 percent in Russia, 3.32 percent in China and 2.54 percent in the U.S.
The difference in yields between India’s debt due in a decade and 10-year Treasuries was 5.33 percentage points. The measure, which has averaged 3.17 points in the past decade, reached a two-year high of 5.56 points on Aug. 26.
Mukherjee aims to narrow the budget deficit to 5.5 percent of gross domestic product in the year ending March 31, from a 16-year high of 6.9 percent in fiscal 2010. The federal government plans to sell 110 billion rupees of bonds on Oct. 1, part of a plan to raise 1.63 trillion rupees in the second half.
“The fiscal story is positive so far because tax collections have been better than it was last year, probably well in line with the target,” helping the government pare its borrowings, said Rajeev Radhakrishnan, a Mumbai-based money manager at SBI Funds Management Pvt. The firm is a unit of the nation’s biggest bank, with $4.9 billion assets in debt.
Taxes collected from companies are poised to rise 18 percent to 3 trillion rupees this year, budget estimates show.
Inflation, Rates
The benchmark yield is unlikely to drop below 7.75 percent by the end of March as inflation near 10 percent prompts the central bank to raise interest rates by a further 50 basis points, following a 125 basis-point increase in the repurchase rate since March 19, said Manoj Swain, chief executive officer of Morgan Stanley India Primary Dealer in Mumbai.
Inflation as measured by wholesale prices held above 10 percent for four months since March before slowing to 8.5 percent in August, according to commerce ministry data.
“Monetary aspects are negative,” Swain said in a telephone interview yesterday. “There’s hardly any room for a rally in a big way, though demand would also be better than earlier” after the government raised the limit for foreigners, Swain said.
Debt Returns
The fixed average coupon that India pays on its 20.324 trillion of government bonds outstanding with a weighted average maturity of 10 years is 7.85 percent, according to data compiled by Bloomberg. The rate was 7.89 percent in the year ended March 2010, according to the central bank’s annual report.
India’s government securities returned 3.6 percent this year, the second-worst among 10 local-currency debt markets outside Japan, according to indexes compiled by London-based HSBC Holdings Plc, Europe’s largest bank.
Asia’s third-biggest economy expanded 8.8 percent last quarter from a year earlier, the best since 2007 and the fastest pace among major economies excluding China. It is set for a 9.4 percent gain in 2010, outpacing 2.6 percent growth in advanced countries, the International Monetary Fund forecast in July.
India’s economic outlook led Moody’s Investors Service to raise the nation’s local-currency rating on July 26 by one level to Ba1, the highest non-investment grade, and affirm the nation’s foreign-currency debt rating of Baa3. Standard & Poor’s and Fitch Ratings rate India’s local-currency debt BBB-, the lowest investment grade.
License Fees
Accelerated investment inflows helped the rupee strengthen 4.6 percent against the dollar this month, the best performance among Asia’s 10-most traded currencies. The currency traded at 45.015 per dollar yesterday.
Phone companies, including Reliance Communications Ltd., Vodafone Group Plc’s Indian unit, and Bharti Airtel Ltd., paid the government 677.2 billion rupees this year for permits of mobile-phone licenses. Indian companies also spent 385.4 billion rupees to buy wireless-broadband Internet licenses in an auction held in June.
Policy makers want to raise 400 billion rupees by selling shares in state-owned companies in the year ending March 2011. The government plans to divest 10 percent in Indian Oil Corp., the nation’s second-biggest refiner, and 5 percent in Oil and Natural Gas Corp., its biggest explorer, Secretary S. Sundareshan, the top bureaucrat in the oil ministry, told reporters in New Delhi on Sept. 6.
The revenue, should the government meet its goals, “would be a huge positive on the fiscal side, which will open up the possibility of some more reduction in borrowing,” said SBI Funds Management’s Radhakrishnan.
Sunday, September 26, 2010
Reliance Builds Indonesia Rail Lines to Move Coal to Ports, Standard Says
Reliance Power Ltd., is speeding up the construction of railway lines from coal mines to ports in Indonesia’s South Sumatra region, the Business Standard reported, citing an unidentified official at the Indian company.
Coal from the mines, which are owned by a Reliance subsidiary, is meant for the company’s proposed power plant in Krishnapatnam town, southern India.
Coal from the mines, which are owned by a Reliance subsidiary, is meant for the company’s proposed power plant in Krishnapatnam town, southern India.
India calls on lenders to cut rates for poor
New Delhi is moving to tighten regulation of India’s booming micro-finance industry amid public concern that local companies are charging poor borrowers with usurious rates of interest.
The finance ministry has requested state-owned commercial banks – which provide funding to an industry that lends tiny sums to the poor – to cap the rates the micro-finance companies can charge to end-users.
In a letter, the ministry suggests that poor borrowers should not be charged more than 24 per cent interest for a micro-loan.
Local micro-finance providers such as SKS, Basix and Spandana – which pay interest rates of 11-15 per cent for bank loans and other debt financing – charge rates of up to 30 per cent for loans extended to India’s version of “subprime” borrowers in rural areas and urban slums.
Alok Prasad, chief executive officer of India’s Micro-finance Institutions Network, which represents the country’s 44 biggest profit-oriented micro-finance companies, called the finance ministry directive “a bit ominous” for the industry, which has grown at a blistering pace by reaching out to those with no other access to the formal financial system. “A cap like this is very, very counter-productive,” Mr Prasad said. “We may end up creating a situation where access to formal funding to the poor gets diminished.”
Traditionally, impoverished Indians have relied on unscrupulous local money-lenders, who charge rates of up to 36 per cent a year and are notorious for brutal tactics against defaulters.
In recent years modern micro-finance specialists are credited with providing a better deal for the poor. These companies have seen their loan portfolio grow by 60-70 per cent a year for the last five years, with the biggest companies expanding even faster.
The industry now has about 30m borrowers, with an outstanding loan portfolio estimated at roughly $6.5bn. The average loan size is $250.
However, the recent $350m IPO by Hyderabad-based SKS, India’s biggest micro-finance company, has put a spotlight on the fortunes being made in the sector and has led to the public backlash.
Mr Prasad said the proposed interest rate cap would be difficult to implement and would hurt smaller micro-finance players.
If New Delhi was really concerned with reducing borrowing costs for the poor, he said, it should urge commercial banks to drop lending rates to micro-finance institutions.
The finance ministry has requested state-owned commercial banks – which provide funding to an industry that lends tiny sums to the poor – to cap the rates the micro-finance companies can charge to end-users.
In a letter, the ministry suggests that poor borrowers should not be charged more than 24 per cent interest for a micro-loan.
Local micro-finance providers such as SKS, Basix and Spandana – which pay interest rates of 11-15 per cent for bank loans and other debt financing – charge rates of up to 30 per cent for loans extended to India’s version of “subprime” borrowers in rural areas and urban slums.
Alok Prasad, chief executive officer of India’s Micro-finance Institutions Network, which represents the country’s 44 biggest profit-oriented micro-finance companies, called the finance ministry directive “a bit ominous” for the industry, which has grown at a blistering pace by reaching out to those with no other access to the formal financial system. “A cap like this is very, very counter-productive,” Mr Prasad said. “We may end up creating a situation where access to formal funding to the poor gets diminished.”
Traditionally, impoverished Indians have relied on unscrupulous local money-lenders, who charge rates of up to 36 per cent a year and are notorious for brutal tactics against defaulters.
In recent years modern micro-finance specialists are credited with providing a better deal for the poor. These companies have seen their loan portfolio grow by 60-70 per cent a year for the last five years, with the biggest companies expanding even faster.
The industry now has about 30m borrowers, with an outstanding loan portfolio estimated at roughly $6.5bn. The average loan size is $250.
However, the recent $350m IPO by Hyderabad-based SKS, India’s biggest micro-finance company, has put a spotlight on the fortunes being made in the sector and has led to the public backlash.
Mr Prasad said the proposed interest rate cap would be difficult to implement and would hurt smaller micro-finance players.
If New Delhi was really concerned with reducing borrowing costs for the poor, he said, it should urge commercial banks to drop lending rates to micro-finance institutions.
Bills Yielding 26 Times Treasuries Beat Stocks, Bonds, Gold: India Credit
India’s money market rates at a two-year high are making the shortest-term debt investments more popular than stocks, bonds and gold amid a cash crunch at banks.
The yield on one-year treasury bills rose to 6.55 percent on Sept. 24, about the highest level since December 2008 and 26 times the rate on similar-maturity U.S. Treasuries, data compiled by Bloomberg show. Short-term debt funds took in 532 billion rupees ($11.8 billion) in the first eight months of the year, or 75 percent of the amount asset managers raised, according to the Association of Mutual Funds in India.
India’s bills pay the most in Asia except Vietnam as central bank Governor Duvvuri Subbarao cuts money-supply growth to the slowest rate since 2005 to fight inflation. While policy makers in the U.S. and Japan are injecting cash into economies where rates are already near zero, the Reserve Bank of India has raised borrowing costs five times this year, more than any other monetary authority in the region.
“Short-term debt yields look quite attractive,” Navneet Munot, who oversees $8.5 billion as chief investment officer at Mumbai-based SBI Funds Management Pvt., a unit of the nation’s largest lender, said in a Sept. 23 phone interview. “Yields are now at a peak because the worst of inflation is behind us.”
Bills Versus Bonds
Rates on one-year government debt in India have jumped 1.97 percentage points this year, heading for a record annual surge and dwarfing the 28 basis-point increase in the yield on 10-year debt to 7.87 percent, data compiled by Bloomberg show. The difference, or yield curve, narrowed to 1.32 percentage points from a record 3.44 percentage points in December 2009.
India’s treasury bills returned an annualized 3.6 percent since Dec. 31, beating the 3.2 percent for bonds, Bloomberg calculations based on indexes compiled by the National Stock Exchange of India Ltd. and Bank of America Merrill Lynch show. Gains in the benchmark Sensitive Index of the nation’s shares slowed to 15 percent this year from 74 percent in the year- earlier period. Gold has advanced 18 percent in 2010.
Indians added 254 billion rupees to bond funds and pulled out 76 billion rupees from equities in the eight months through August, according to data from the Association of Mutual Funds.
The government and banks are paying higher rates for short- term borrowing because the central bank is restricting funds as demand for credit increases. Bank notes, or certificates of deposit, due in a year offer 8.07 percent, exceeding 10-year bond yields across Asia excluding Pakistan. Comparable company debt has a rate of 8.43 percent, Bloomberg data show.
Money Supply, Rates
Annual growth in bank lending accelerated to 20 percent in August from a 12-year low of 9.5 percent in October 2009, according to central bank data.
Yearly expansion in money supply slowed to 15 percent this month from 20 percent a year earlier as Subbarao raised the benchmark reverse repurchase rate by 1.75 percentage points this year to 5 percent, Reserve Bank data show. The measure is set for the biggest annual increase since it was introduced in 2000.
The central bank will boost rates at least 50 basis points more in the year ending March 31, ING Investment Management Pvt., an Indian venture of the biggest Dutch financial-services company, forecasts.
Rising borrowing costs have helped lower the nation’s inflation rate, measured by wholesale prices, to 8.5 percent in August from a 20-month high of 11 percent in April. The central bank estimates the pace of price gains, still the fastest in Asia except Pakistan, will slow to 6 percent by March.
ING Forecast
“We’ll see more inflows into short-term debt funds as the RBI continues to keep liquidity tight,” K. Ramanathan, who helps manage the equivalent of $316 million in Mumbai at ING Investment, said in an interview on Sept. 18. “As the central bank raises interest rates, money-market rates will climb.”
The difference between India’s one- and 10-year bond yields will shrink to 1 percentage point as the shorter-term rate increases faster, he said, without specifying a time frame.
India’s reverse repo rate of 5 percent is the highest in Asia excluding Indonesia and compares with benchmark rates of zero to 0.25 percent in the U.S., 7.75 percent in Russia and 10.75 percent in Brazil. Asia’s third-biggest economy grew 8.8 percent last quarter from a year earlier, the most since 2007.
The Reserve Bank’s decision on whether to raise rates further will depend on the pace of price increases as borrowing costs are near their “neutral” level, Governor Subbarao said on Sept. 20 in the southern city of Hyderabad.
Cash at Banks
Cash at India’s banks declined in the year that began April as the government pursued a $99 billion borrowing program and companies paid $23 billion in license fees for wireless-phone services. The rate at which banks lend to one another overnight rose to as high as 6.4 percent on Sept. 22 from 3.3 percent at the start of the year, data compiled by Bloomberg show.
Investors may benefit from the surge in money-market rates by agreeing to receive fixed one-year rates in exchange for variable payments in a so-called interest-rate swap, according to Credit Agricole Corporate and Investment Bank, a unit of France’s second-biggest bank. The one-year swap rate, which has gained 1.38 percentage points this year, was at 6.45 percent on Sept. 24, according to data compiled by Bloomberg.
“We believe that the market is overestimating the hawkish bias of the Reserve Bank and underestimating the potential for improvement in liquidity in the second half of 2011,” Darius Kowalczyk and Frances Cheung, Hong Kong-based strategists at Credit Agricole CIB, wrote in a research note on Sept. 22.
Relative Yields
India’s 10-year bond yield is the highest among major economies except Brazil, where similar-maturity notes pay 11.96 percent. Comparable securities offer 7.62 percent in Russia and 3.23 percent in China and 2.57 percent in the U.S., according to data compiled by Bloomberg.
The difference in yields between India’s debt due in a decade and 10-year Treasuries was 5.26 percentage points on Sept. 24, little changed from a week earlier. The measure, which has averaged 3.18 points in the past decade, reached a two-year high of 5.56 points on Aug. 26.
One-year bills now yield 6.26 percentage points more than the three-month dollar London interbank offered rate, a measure of funding costs for global investors that is currently 0.29 percent, Bloomberg data show. The spread is about the widest since September 2008.
Foreign holdings of India’s corporate and government debt more than doubled in 2010 to a record $17.4 billion on Sept. 23 as yields climbed. Accelerated investment inflows helped the rupee strengthen 4 percent against the dollar this month, the best performance among Asia’s 10-most traded currencies.
“The strong capital inflows will help ease the cash crunch in the coming months,” SBI Funds’ Munot said. “That will boost short-term debt prices, and investors who already own them will gain.”
Indian banks’ loans rose 315 billion rupees in the two weeks ended Sept. 10, raising outstanding advances to 33.8 trillion rupees, central bank data showed Sept. 24. Loans to industry and consumers rose 277 billion rupees during the period, while food credit rose 38.3 billion rupees. Credit rose 19.8 percent, or by 5.58 trillion rupees, in the 12 months through Sept. 10.
The yield on one-year treasury bills rose to 6.55 percent on Sept. 24, about the highest level since December 2008 and 26 times the rate on similar-maturity U.S. Treasuries, data compiled by Bloomberg show. Short-term debt funds took in 532 billion rupees ($11.8 billion) in the first eight months of the year, or 75 percent of the amount asset managers raised, according to the Association of Mutual Funds in India.
India’s bills pay the most in Asia except Vietnam as central bank Governor Duvvuri Subbarao cuts money-supply growth to the slowest rate since 2005 to fight inflation. While policy makers in the U.S. and Japan are injecting cash into economies where rates are already near zero, the Reserve Bank of India has raised borrowing costs five times this year, more than any other monetary authority in the region.
“Short-term debt yields look quite attractive,” Navneet Munot, who oversees $8.5 billion as chief investment officer at Mumbai-based SBI Funds Management Pvt., a unit of the nation’s largest lender, said in a Sept. 23 phone interview. “Yields are now at a peak because the worst of inflation is behind us.”
Bills Versus Bonds
Rates on one-year government debt in India have jumped 1.97 percentage points this year, heading for a record annual surge and dwarfing the 28 basis-point increase in the yield on 10-year debt to 7.87 percent, data compiled by Bloomberg show. The difference, or yield curve, narrowed to 1.32 percentage points from a record 3.44 percentage points in December 2009.
India’s treasury bills returned an annualized 3.6 percent since Dec. 31, beating the 3.2 percent for bonds, Bloomberg calculations based on indexes compiled by the National Stock Exchange of India Ltd. and Bank of America Merrill Lynch show. Gains in the benchmark Sensitive Index of the nation’s shares slowed to 15 percent this year from 74 percent in the year- earlier period. Gold has advanced 18 percent in 2010.
Indians added 254 billion rupees to bond funds and pulled out 76 billion rupees from equities in the eight months through August, according to data from the Association of Mutual Funds.
The government and banks are paying higher rates for short- term borrowing because the central bank is restricting funds as demand for credit increases. Bank notes, or certificates of deposit, due in a year offer 8.07 percent, exceeding 10-year bond yields across Asia excluding Pakistan. Comparable company debt has a rate of 8.43 percent, Bloomberg data show.
Money Supply, Rates
Annual growth in bank lending accelerated to 20 percent in August from a 12-year low of 9.5 percent in October 2009, according to central bank data.
Yearly expansion in money supply slowed to 15 percent this month from 20 percent a year earlier as Subbarao raised the benchmark reverse repurchase rate by 1.75 percentage points this year to 5 percent, Reserve Bank data show. The measure is set for the biggest annual increase since it was introduced in 2000.
The central bank will boost rates at least 50 basis points more in the year ending March 31, ING Investment Management Pvt., an Indian venture of the biggest Dutch financial-services company, forecasts.
Rising borrowing costs have helped lower the nation’s inflation rate, measured by wholesale prices, to 8.5 percent in August from a 20-month high of 11 percent in April. The central bank estimates the pace of price gains, still the fastest in Asia except Pakistan, will slow to 6 percent by March.
ING Forecast
“We’ll see more inflows into short-term debt funds as the RBI continues to keep liquidity tight,” K. Ramanathan, who helps manage the equivalent of $316 million in Mumbai at ING Investment, said in an interview on Sept. 18. “As the central bank raises interest rates, money-market rates will climb.”
The difference between India’s one- and 10-year bond yields will shrink to 1 percentage point as the shorter-term rate increases faster, he said, without specifying a time frame.
India’s reverse repo rate of 5 percent is the highest in Asia excluding Indonesia and compares with benchmark rates of zero to 0.25 percent in the U.S., 7.75 percent in Russia and 10.75 percent in Brazil. Asia’s third-biggest economy grew 8.8 percent last quarter from a year earlier, the most since 2007.
The Reserve Bank’s decision on whether to raise rates further will depend on the pace of price increases as borrowing costs are near their “neutral” level, Governor Subbarao said on Sept. 20 in the southern city of Hyderabad.
Cash at Banks
Cash at India’s banks declined in the year that began April as the government pursued a $99 billion borrowing program and companies paid $23 billion in license fees for wireless-phone services. The rate at which banks lend to one another overnight rose to as high as 6.4 percent on Sept. 22 from 3.3 percent at the start of the year, data compiled by Bloomberg show.
Investors may benefit from the surge in money-market rates by agreeing to receive fixed one-year rates in exchange for variable payments in a so-called interest-rate swap, according to Credit Agricole Corporate and Investment Bank, a unit of France’s second-biggest bank. The one-year swap rate, which has gained 1.38 percentage points this year, was at 6.45 percent on Sept. 24, according to data compiled by Bloomberg.
“We believe that the market is overestimating the hawkish bias of the Reserve Bank and underestimating the potential for improvement in liquidity in the second half of 2011,” Darius Kowalczyk and Frances Cheung, Hong Kong-based strategists at Credit Agricole CIB, wrote in a research note on Sept. 22.
Relative Yields
India’s 10-year bond yield is the highest among major economies except Brazil, where similar-maturity notes pay 11.96 percent. Comparable securities offer 7.62 percent in Russia and 3.23 percent in China and 2.57 percent in the U.S., according to data compiled by Bloomberg.
The difference in yields between India’s debt due in a decade and 10-year Treasuries was 5.26 percentage points on Sept. 24, little changed from a week earlier. The measure, which has averaged 3.18 points in the past decade, reached a two-year high of 5.56 points on Aug. 26.
One-year bills now yield 6.26 percentage points more than the three-month dollar London interbank offered rate, a measure of funding costs for global investors that is currently 0.29 percent, Bloomberg data show. The spread is about the widest since September 2008.
Foreign holdings of India’s corporate and government debt more than doubled in 2010 to a record $17.4 billion on Sept. 23 as yields climbed. Accelerated investment inflows helped the rupee strengthen 4 percent against the dollar this month, the best performance among Asia’s 10-most traded currencies.
“The strong capital inflows will help ease the cash crunch in the coming months,” SBI Funds’ Munot said. “That will boost short-term debt prices, and investors who already own them will gain.”
Indian banks’ loans rose 315 billion rupees in the two weeks ended Sept. 10, raising outstanding advances to 33.8 trillion rupees, central bank data showed Sept. 24. Loans to industry and consumers rose 277 billion rupees during the period, while food credit rose 38.3 billion rupees. Credit rose 19.8 percent, or by 5.58 trillion rupees, in the 12 months through Sept. 10.
Anger as a Private Company Takes Over Libraries
SANTA CLARITA, Calif. — A private company in Maryland has taken over public libraries in ailing cities in California, Oregon, Tennessee and Texas, growing into the country’s fifth-largest library system.
The basic pitch that the company Library Systems & Services makes to cities is that it fixes broken libraries — often by cleaning house.
Readers' Comments
Now the company, Library Systems & Services, has been hired for the first time to run a system in a relatively healthy city, setting off an intense and often acrimonious debate about the role of outsourcing in a ravaged economy.
A $4 million deal to run the three libraries here is a chance for the company to demonstrate that a dose of private management can be good for communities, whatever their financial situation. But in an era when outsourcing is most often an act of budget desperation — with janitors, police forces and even entire city halls farmed out in one town or another — the contract in Santa Clarita has touched a deep nerve and begun a round of second-guessing.
Can a municipal service like a library hold so central a place that it should be entrusted to a profit-driven contractor only as a last resort — and maybe not even then?
“There’s this American flag, apple pie thing about libraries,” said Frank A. Pezzanite, the outsourcing company’s chief executive. He has pledged to save $1 million a year in Santa Clarita, mainly by cutting overhead and replacing unionized employees. “Somehow they have been put in the category of a sacred organization.”
The company, known as L.S.S.I., runs 14 library systems operating 63 locations. Its basic pitch to cities is that it fixes broken libraries — more often than not by cleaning house.
“A lot of libraries are atrocious,” Mr. Pezzanite said. “Their policies are all about job security. That’s why the profession is nervous about us. You can go to a library for 35 years and never have to do anything and then have your retirement. We’re not running our company that way. You come to us, you’re going to have to work.”
The members of the Santa Clarita City Council who voted to hire L.S.S.I. acknowledge there was no immediate threat to the libraries. The council members say they want to ensure the libraries’ long-term survival in a state with increasingly shaky finances.
Until now, the three branch locations have been part of the Los Angeles County library system. Under the new contract, the branches will be withdrawn from county control and all operations — including hiring staff and buying books — ceded to L.S.S.I.
“The libraries are still going to be public libraries,” said the mayor pro tem, Marsha McLean. “When people say we’re privatizing libraries, that is just not a true statement, period.”
Library employees are furious about the contract. But the reaction has been mostly led by patrons who say they cannot imagine Santa Clarita with libraries run for profit.
“A library is the heart of the community,” said one opponent, Jane Hanson. “I’m in favor of private enterprise, but I can’t feel comfortable with what the city is doing here.”
Mrs. Hanson and her husband, Tom, go to their local branch every week or two to pick up tapes for the car and books to read after dinner. Mrs. Hanson recently checked out Willa Cather’s classic “Death Comes for the Archbishop,” although she was only mildly in favor of its episodic style; she has higher hopes for her current choice, on the shadowy world of North Korea.
The suggestion that a library is different — and somehow off limits to the outsourcing fever — has been echoed wherever L.S.S.I. has gone. The head of the county library system, Margaret Donnellan Todd, says L.S.S.I. is viewed as an unwelcome outsider.
“There is no local connection,” she said. “People are receiving superb service in Santa Clarita. I challenge that L.S.S.I. will be able to do much better.”
As a recent afternoon shaded into evening, there were more than a hundred patrons at the main Santa Clarita library. Students were doing their homework. Old men paged through newspapers. Children gathered up arm’s loads of picture books. It was a portrait of civic harmony and engagement.
The basic pitch that the company Library Systems & Services makes to cities is that it fixes broken libraries — often by cleaning house.
Readers' Comments
Now the company, Library Systems & Services, has been hired for the first time to run a system in a relatively healthy city, setting off an intense and often acrimonious debate about the role of outsourcing in a ravaged economy.
A $4 million deal to run the three libraries here is a chance for the company to demonstrate that a dose of private management can be good for communities, whatever their financial situation. But in an era when outsourcing is most often an act of budget desperation — with janitors, police forces and even entire city halls farmed out in one town or another — the contract in Santa Clarita has touched a deep nerve and begun a round of second-guessing.
Can a municipal service like a library hold so central a place that it should be entrusted to a profit-driven contractor only as a last resort — and maybe not even then?
“There’s this American flag, apple pie thing about libraries,” said Frank A. Pezzanite, the outsourcing company’s chief executive. He has pledged to save $1 million a year in Santa Clarita, mainly by cutting overhead and replacing unionized employees. “Somehow they have been put in the category of a sacred organization.”
The company, known as L.S.S.I., runs 14 library systems operating 63 locations. Its basic pitch to cities is that it fixes broken libraries — more often than not by cleaning house.
“A lot of libraries are atrocious,” Mr. Pezzanite said. “Their policies are all about job security. That’s why the profession is nervous about us. You can go to a library for 35 years and never have to do anything and then have your retirement. We’re not running our company that way. You come to us, you’re going to have to work.”
The members of the Santa Clarita City Council who voted to hire L.S.S.I. acknowledge there was no immediate threat to the libraries. The council members say they want to ensure the libraries’ long-term survival in a state with increasingly shaky finances.
Until now, the three branch locations have been part of the Los Angeles County library system. Under the new contract, the branches will be withdrawn from county control and all operations — including hiring staff and buying books — ceded to L.S.S.I.
“The libraries are still going to be public libraries,” said the mayor pro tem, Marsha McLean. “When people say we’re privatizing libraries, that is just not a true statement, period.”
Library employees are furious about the contract. But the reaction has been mostly led by patrons who say they cannot imagine Santa Clarita with libraries run for profit.
“A library is the heart of the community,” said one opponent, Jane Hanson. “I’m in favor of private enterprise, but I can’t feel comfortable with what the city is doing here.”
Mrs. Hanson and her husband, Tom, go to their local branch every week or two to pick up tapes for the car and books to read after dinner. Mrs. Hanson recently checked out Willa Cather’s classic “Death Comes for the Archbishop,” although she was only mildly in favor of its episodic style; she has higher hopes for her current choice, on the shadowy world of North Korea.
The suggestion that a library is different — and somehow off limits to the outsourcing fever — has been echoed wherever L.S.S.I. has gone. The head of the county library system, Margaret Donnellan Todd, says L.S.S.I. is viewed as an unwelcome outsider.
“There is no local connection,” she said. “People are receiving superb service in Santa Clarita. I challenge that L.S.S.I. will be able to do much better.”
As a recent afternoon shaded into evening, there were more than a hundred patrons at the main Santa Clarita library. Students were doing their homework. Old men paged through newspapers. Children gathered up arm’s loads of picture books. It was a portrait of civic harmony and engagement.
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