Table of Contents

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Executive summary

India: The new economic powerhouse of the world economy

SECTION 01

INDIA’S ECONOMIC POLICY

Chapter 01

THE INDIAN POLITICAL SYSTEM

  • Overview
    • Political division
  • Complications of coalition government
    • Threats to survival
  • Viewpoint: P. Chidambaram, Finance Minister
    • Coalition politics
  • Foreign direct investment
    • National Common Minimum Programme
    • Political consensus key to reforms
    • Important position of the Left
  • Viewpoint: Sitaram Yechuri,
    • CPI(M)
    • CPI(M) demands
    • Growth not dispersed
    • Economic reforms have failed
    • Opposition to the FRBM Act
    • On privatisation
    • On foreign investments
    • On rupee convertibility
    • On FIIs
    • An uneasy partnership
  • The BJP experience
  • Viewpoint: Yashwant Sinha,
    • BJP
    • Political foresight
    • Tapering momentum
    • On the Congress-led coalition government
    • On fiscal matters
  • Outlook - snap polls?

Chapter 02

THE INDIAN ECONOMY

  • Overview
    • Strong growth momentum
    • Corporate strength
  • Viewpoint: Mahesh Vyas, Managing Director and CEO, Center For Monitoring Indian Economy
    • New growth forecasts
  • Viewpoint: Subir Gokarn, executive director and chief economist, CRISIL
    • Market confidence
  • Viewpoint: V Ananth Nageswaran, chief economist, Julius Baer
  • Future challenges
  • Weakness in the agricultural sector
    • Investment in infrastructure
  • Reforms needed
    • Legal reform
    • Business reform
    • Barriers to reform
  • Fiscal legislation
  • The threat of terrorism
  • Social disruption
  • The future planned
  • Five-year schedules
    • The 11th Plan
  • India and China - comparisons
  • Viewpoint: Chetan Ahya, economist, Morgan Stanley
    • Economic prospects

Chapter 03

MONETARY POLICY

  • Overview
    • Balancing growth and ensuring price stability
    • Monetary policy objectives
    • Highlights of October 2006 monetary policy announcement
    • Main points
  • Developmental and regulatory policies
    • Financial markets
  • Credit delivery
    • Prudential measures
  • Institutional developments
    • Inflation drivers
  • Economy drivers
    • Bank credit growth
    • Consumer debt risk
    • Money supply
  • Pressure signs
    • The RBI on market-related issues
  • Challenges facing the Indian banking sector
    • Banking consolidation
  • Credit quality concerns
  • Development capital issues
  • Foreign investments in debt
    • Outlook
  • Tightening cycle possible

Chapter 04

CURRENCY CONVERTIBILITY

  • Progress towards FCAC
    • Restrictions and controls
  • Risks and benefits of liberalisation
  • The case for FCAC
  • Progress in the opening up of the economy
  • Viewpoint: Sanjeev Sanyal, economist, Deutsche Bank
    • Timing and sequencing of measures
    • New Tarapore committee report
    • Monetary policy objectives
  • Strengthening the banking system
    • Monetary policy instruments and operations
    • Exchange rate management
  • Development of financial markets
    • Money market
    • Government securities market
    • Corporate bond and securitised debt market
    • Foreign exchange market
    • Gold market
  • Relaxations on capital account
  • Regulatory and supervisory issues in banking
  • Other viewpoints
    • Capital account convertibility
    • RBI follows up with another committee
    • The last word on convertibility

SECTION 02

INDIA’S CAPITAL MARKETS

Chapter 05

SYNDICATED LOANS

  • Overview
    • Significant rise in volumes
  • Viewpoint: Farhan Faruqui, Managing Director, head of global loans and leveraged finance Asia Pacific, Citigroup
    • ECB policy
  • Cost-effective option
    • New guidelines
    • Impact of changes
    • Regulators reverse decision
  • Updated ECB guidelines (as of October 2006)
    • Guidelines for external commercial borrowing
    • Automatic Route
    • Approval Route
  • Reporting arrangements and dissemination of information
    • Improving loans outlook
  • Viewpoint: Birendra Baid, Managing Director, financial institutions/syndication & asset sales, RZB Austria, Singapore branch
  • Enthusiasm for borrowing
    • Ratings boost
    • Increase in loans to corporates
    • Further deals
  • Funding overseas acquisitions
  • Viewpoint: Richard Palmer, head of Asia-Pacific loan origination and structuring, Barclays Capital
  • Loan volumes rising
  • Loan pricing falling
    • Viewpoint: Boey Yin Chong, DBS Bank
  • Viewpoint: Jose Cortes, head of high yield syndications, Asia Pacific, Lehman Brothers, Hong Kong
  • Opportunities in leveraged financings
  • Viewpoint: Amit Khattar, director, fixed income, emerging markets loan syndication group, Credit Suisse, Singapore
  • Restrictions on LBOs
  • Limited successes
    • Software Development
  • Systems’ LBO
  • Outlook: Rupee loans
  • Record levels
    • Foreign bank participation

Chapter 06

CORPORATE BONDS

  • The role of Gsecs
  • Need to develop the bond market
  • Obstacles to investment
  • Limited funding options
  • Moves to reform the bond market
  • Viewpoint: Sanjay Phadke, vice president (debt capital markets), JPMorgan
  • Bond market evolution
    • Types of issue
    • Pension bonds
    • Municipal bonds
    • Infrastructure project financing
  • Regulatory measures
  • Viewpoint: Indraneel Basu, principal, debt capital markets, Infrastructure Development Finance Corp (IDFC)
  • Market innovation
    • Swaps
    • RBI intervention
  • Viewpoint: Kaustubh Kulkarni, head of DCM (India and South Asia), Standard Chartered Bank
  • Quasi-sovereign bonds
  • Compensation funding
  • Offshore issuers
  • Indian issuers in the offshore market
  • Viewpoint: N. Shankar, executive director, Exim Bank of India
  • Initial success
  • Market selectivity
    • Return to favour
  • Further bond issuance
    • Subordinated debt issuance
  • Hybrid issues
    • Cost and currency limitations
  • Prospects for offshore bonds
  • Viewpoint: Rajeev Ahuja, head of fixed income capital markets, Citigroup, India
  • The derivatives market
    • Legislative reform
    • Derivatives trading
  • Moves to develop the bond market
  • Viewpoint: Dr R.H. Patil, Chairman, Clearing Corp of India
  • Implementing the reforms
  • Outlook for bonds - firm action needed

Chapter 07

THE SECURITISATION MARKET

  • Potential for securitisation
    • Organising the market
  • Development of securitisation
    • Gradual acceptance
  • Viewpoint: Nithya Easwaran, director (securitisation),
  • Citigroup India
  • ABS domination of issuance volumes
    • Product innovation
    • Successful transactions
    • Direct assignment deals
  • MBS issuance is less popular
    • Investor support
  • Viewpoint: RV Verma, executive director, NHB
  • Viewpoint: VS Rangan, General Manager at HDFC
  • CDO market remains underdeveloped
    • Challenges to overcome
    • Shedding loan exposure to group
    • NPA securitisation market to grow
  • Prashant Purker, general manager, ICICI Bank
  • Offshore securitisation
  • Viewpoint: William Ross, Managing Director, head of ABS & structured bonds, Asia Pacific, HSBC
  • Viewpoint: Raj Shourie, Managing Director, head of securitised products group Asia, Deutsche Bank
  • Recommendations to develop the securitisation market
    • RBI guidelines
    • Market response
    • New deals
  • Viewpoint: Graham Metcalf, head of Asia Pacific at monoline insurer MBIA
  • Future potential

Chapter 08

THE EQUITY MARKET

  • Unprecedented growth
    • Market structure
  • Exchange development
    • Strong economic drivers
  • Viewpoint: Bharat Shah, President, Ventura Securities
  • The primary market
    • Scams in the Indian equity markets
    • Reviving the primary market
  • Important recent IPOs
    • Sector confidence
    • Auction innovation
    • Shares in demand
  • Further sales
  • Viewpoint: A. Rajagopal, fund manager, UBS
  • Offshore fundraising
    • Global interest
    • Recent successes
  • SEBI rules on institutional investors
  • The CB market
    • Drivers of CB issuance
    • Unrealistic offers
    • Aggressive competition
    • CB issuance revival
    • Investment risks
    • Growing investor caution
    • Market retrenchment
    • Banking consolidation
    • Unrealistic pricing expectations
    • Market realism takes over
    • Statistics on the evolution of Indian equity markets
  • Future challenges
  • Viewpoint: Paritosh Sharma, resident advisor, USAID FIRE project- capital markets

Chapter 09

INDIA’S CREDIT RATING

  • Gradual moves towards investment grade
    • The importance of international ratings
  • Moody’s upgrades first
  • Adequate capacity
  • Fitch follows the trend
  • Positive structural reforms
    • S&P is cautious but positive
  • Encouraging prospects
  • Viewpoint: Ping Chew, director (sovereign and financial services rating) S&P
  • Gaining a better understanding of India
    • The local rating market
    • CRISIL - S&P’s India link
    • Viewpoint: Roopa Kudva, chief rating officer, CRISIL
    • Viewpoint: S&P spokesman ICRA - Moody’s partner
    • Viewpoint: Chetan Modi, representative director, Moody's India
    • Fitch India - Fitch’s direct interest
    • Viewpoint: Amit Tandon, Managing Director, Fitch India
    • CARE - wholly Indian
    • Viewpoint: Amol Patil, deputy manager, CARE
  • Competition between rating agencies
    • Different rating approaches
  • Outlook - investment grade rating for India?

SECTION 03

PROFILES

Chapter 10

BANK PROFILES

  • Introduction - the Indian banking sector
    • The financial sector
    • Public sector banks
    • Private sector banks
    • Foreign banks
    • Development institutions
State Bank of India
  • Financial results
  • Punjab National Bank
    • Financial results
  • Canara Bank
  • ICICI Bank
    • Viewpoint: Kalpana Morparia, Joint Managing Director, ICICI Bank
    • Financial results
  • HDFC Bank
    • Financial results
  • UTI Bank
    • Financial results
  • Citigroup, India
    • Viewpoint: Sanjay Nayar, CEO, Citigroup, India
    • Financial results
  • Standard Chartered Bank, India
    • Viewpoint: Sanjeev Agrawal, chief financial officer, India & South Asia, SCB
    • Financial results
  • HSBC India
    • Viewpoint: Malini Thadani, senior vice-president and head, public affairs, HSBC India
  • Nabard
  • SIDBI
  • IRFC
  • Power Finance Corp
  • Kotak Mahindra Bank
  • Deutsche Bank
  • ABN AMRO

Chapter 11

CORPORATE PROFILES

  • Indian corporate sector
  • Gurus of Indian corporate world
  • Tata Group of companies
    • Strategy of going global
    • Recent market tap
  • Reliance Industries
    • Financial results
  • Reliance Anil Dhirubhai
    • Ambani Group: Recent market tap
    • Aditya Birla Group
  • Recent market tap
    • Indian Oil Corp
  • New age companies
    • Infosys
    • Wipro
  • Key Indian sectors
  • Automobile sector:
    • Maruti Udyog
    • Bajaj Auto
    • Mahindra & Mahindra
  • Telecommunications
    • MTNL
    • BSNL
    • Bharti Airtel

APPENDIX I

The main recommendation of the 2006 Tarapore Committee report

APPENDIX II

Extant status on the capitl account

APPENDIX III

Regional variation in stamp duty

List of tables and figures

  • Table 1.1 Disinvestment, 1991-2005 (Rs crore)
  • Table 2.1 GDP, Q1 (April-June)
  • 2004-05, 2005-06, 2006-07 (Rs crore)
  • Table 2.2 India foreign trade, 1970-2006(p) (US$m)
  • Table 2.3 Index of industrial production Table missing
  • Table 2.4 Growth and investment rates, 1950-2006 (%)
  • Table 2.5 GDP forecasts, 2006-07 (%)
  • Table 2.6 Socio-economic indicators
  • Table 2.7 Doing business - India versus select countries, 2006
  • Table 2.8 Central government fiscal indicators, 1970-2007(e) (%)
  • Table 2.9 India balance of payments, 1990-2006 (US$m)
  • Table 2.10 Components of external debt, Mar-June 2006 (US$m, %)
  • Table 2.11 Indicators of debt sustainability, Mar-June 2006 (%)
  • Table 2.13 11th Plan growth projections (%)
  • Table 2.14 11th Plan projections, alternative scenarios (%)
  • Table 2.15 Foreign investment inflows, 1990-2006(p) (Rs crore, US$m)
  • Table 3.1 Chronology of the RBI revisions cash reserve ratio, 1989-2004 (%, bp)
  • Table 3.2 Changes in repo and reverse repo, 2000-06 (bp, %)
  • Table 3.3 Structure of interest rates, 1970-2006 (%)
  • Table 3.4 WPI annual variation, 1990-91 to 2006-07(p) (%)
  • Table 3.5 CPI annual variation, 1990-91 to 2006-07(p) (%)
  • Table 3.6 Bank credit, scheduled commercial banks, 1950-2006 (Rs crore)
  • Table 3.7 Monetary indicators, 2005, 2006 (Rs crore, %)
  • Table 4.1 Select macroeconomic indicators, 1996-97 vs 2005-2006 (%, US$)
  • Table 4.2 Sector limits on foreign investments into India, as on 26 February 2006 (%)
  • Table 4.4 Recommendations of the 1997 Tarapore report
  • Table 4.5 Position of foreign exchange reserves, Q1 2006 vs Q1 2005 (US$bn)
  • Table 4.6 Foreign exchange reserves, 1950-2006 (Rs crore, US$m)
  • Table 5.1 Foreign currency loan volumes, 1983-2006 (US$m)
  • Table 5.2 Indian issuers - league tables, 1995-2006 (US$m)
  • Table 5.3 Foreign issuers - league tables, 1983-2006 (US$m)
  • Table 6.1 Market borrowings of central and state governments, 1980-2006 (Rs crore)
  • Table 6.2 Financing of central government gross fiscal deficit, 1990-2007(e) (Rs crore)
  • Table 6.3 Private placement debt volumes, 1995-Sept 2006 (Rs.m)
  • Table 6.4 Breakdown of issuance, April-June 2006 (Rs crore)
  • Table 6.5 Stamp duty structure
  • Table 6.6 Public sector issuance of bonds, 1985-2006(p) (Rs crore)
  • Table 6.7 Overseas bond issues, 1990-2006 (US$m, Rs.m)
  • Table 6.8 Indian offshore bonds - top bookrunners, 1991-2006
  • Table 7.1 Stamp duty structure, by state
  • Table 7.2 Indian securitisations - top bookrunners, 1991-2006
  • Table 8.1 BSE/NSE levels, 2004-05, 2005-06
  • Table 8.3 Household sector financial saving, 2003(p)-06(e) (Rs crore)
  • Table 8.3 Mobilisation of resources by sector, 2004-05, 2005-06 (Rs crore, %)
  • Table 8.4 Market capitalisation of BSE, 2003-Mar 2006 (Rs crore)
  • Table 8.5 Market capitalisation of NSE, 2003-Mar 2006 (Rs crore)
  • Table 8.6 Turnover of BSE/NSE - cash segment, 2003-Mar 2006 (Rs crore)
  • Table 8.7 P/E ratio, return, volatility of select international indices, 2005, 2006
  • Table 8.8 Select ratios relating to capital market, 2002-06 (%)
  • Table 8.9 Corporate sector performance, 2003-07(p) (%)
  • Table 8.10 Trends in mutual fund transactions, 2000-06 (Rs crore)
  • Table 8.11 FII investment flows, Nov 2006 (Rs crore, US$m)
  • Table 8.13 Global Common Stock league table 1991 - 2006
  • Table 8.14 Global rights and rights offerings league table 1991 - 2006
  • Table 8.15 Global intial public offerings league table 1991 - 2006
  • Table 9.1 India foreign currency sovereign ratings, 1990-2006
  • Table 9.2 Government of India accounts, end-Sept 2006 (Rs crore, %)
  • Table 9.3 Combined deficits of central and state governments, 1980-2007(e) (%)
  • Table 9.4 CRISIL - 10 years’ highlights, Mar 1997-Dec 2005 (Rs lakh)
  • Table 10.1 SBI - Key financial indicators, 2002-06 (%)
  • Table 10.2 SBI - Financial highlights, 2002-06 (Rs bn)
  • Table 10.3 SBI - Half-year results to 30 Sept 2006 (Rs crore)
  • Table 10.4 PNB - Half-year results to 30 Sept 2006 (Rs crore)
  • Table 10.5 Canara Bank - Halfyear results to 30 Sept 2006 (Rs crore)
  • Table 10.6 ICICI Bank - Halfyear results to 30 September 2006 (Rs crore)
  • Table 10.7 HDFC Bank - Quarter and half-year results to 30 Sept 2006 (Rs lacs)
  • Table 10.8 UTI Bank - First quarter results to 30 June 2006 (Rs crore)
  • Table 10.9 Citigroup India - Financial highlights, 2002-06 (Rs crore)
  • Table 10.10 Standard Chartered Bank - Financial highlights, 2002-06 (Rs crore)
  • Table 10.12 Nabard - Half-year results to 30 Sept 2006 (Rs crore)
  • Table 10.13 SIDBI - First quarter results to 30 June 2006 (Rs crore)
  • Table 10.14 IRFC - Financial results to 31 Mar 2005 (Rs crore)
  • Table 10.15 PFC - Financial results to 31 Mar 2006 (Rs.m)
  • Table 11.1 Tata group financial highlights 2005-6 (US$bn)
  • Table 11.2 reliance Group unaudited financial results for the half year to Sep 30 2006 (Rs. Crore)
  • Table 11.3 Aditya Birla group profit and loss account (Rs. crore)
  • Table 11.4 Aditya Birla group financials (Rs. crore)
  • Table 11.5 Aditya Birla Group cashflow (Rs. Crore)
  • Table 11.6 Indian Oil performance at a glance 2001- 2006 (US$m/Rs. Crore)
  • Table 11.7 Infosys Technologies unaudited consolidated statements of income (US$m)
  • Table 11.8 WIPRO and subsidiaries consolidated statements of income
  • Table 11.10 Bajaj Auto summary of financials 2006-7
  • Table 11.9 Maruti Udyog unaudited financial results
  • Table 11.11 Mahindra and Mahindra Group financial results H1 2006-7 (Rs. crore)
  • Table 11.12 MTNL financial results 2004 - 06
  • Table 11.13 Bharat Sanchar Nigam Ltd, P%L account 2006
  • Table 11.14 Bharti Airtel performancwe at a glance 2003- 06
  • Figure 2.1 India external debt, June 2005-June 2006 (US$bn)
  • Figure 2.2 External debt composition by currency, June 2006 (%)
  • Figure 5.1 Loan market liquidity, by bank nationality, 2005, 2006 (%)
  • Figure 5.2 Indian syndicated loan 5-year pricing
  • Figure 5.3 Maturity profile, 2005, 2006 (%)
  • Figure 5.4 Structure of Gecis LBO
  • Figure 5.5 KKR/Flextronics legal structure and cash flow considerations
  • Figure 7.1 Issuance volumes in the Indian structured finance market, 2002-06 (Rs.bn)
  • Figure 7.2 ABS market volumes, 2002-06 (Rs.bn)
  • Figure 7.3 ABS market composition
  • Figure 7.4 MBS market volumes, 2002-06 (Rs.bn)
  • Figure 8.1 Year-on-year returns in international indices, 2005-06 (%)
  • Figure 8.2 Sectoral share of total resource mobilisation, 2004-05, 2005-06 (%)
  • Figure 8.2 Annualised volatility of international indices, 2005-06 (%)
  • Figure 8.3 P/E ratios of international indices, 2003-Mar 2006