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NOVEMBER 5, 2006
 Cover Story
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The Building Boom
Is an asset price bubble building up in the real estate market? Flats in posh Mumbai areas sell at the rate of Rs 50,000-70,000 a sq. ft. and housing plots in Gurgaon are going for Rs 1 lakh a sq. yard. This may sound like music to those who have been clinging on to their assets, it portends danger to buyers. The high real estate prices keep the majority out of the housing market and make the dream of owning a house more distant.


The Learning Curve
India's investment in education-as a percentage of GDP-is lower than not just of countries in the West but also some of the emerging economies, including China. The percentage of population in the relevant age group enrolled in higher education too is the lowest among countries with which it must compete. Clearly, there is a need to scale up substantially the physical infrastructure and attract better faculty by offering market wages.
More Net Specials
Business Today,  October 22, 2006
 
 
TOP OF MIND
Mobile Blogging
 

What? Can't access a computer, but want to share your thoughts with the world? Who needs a computer? You can now blog away through your mobile phone.

How does it work? After you register your number with the service, you can shoot a photo or send an SMS or an MMS to a short code. Your friends can view your mobile blog either through their phones or on a web-browser.

When was it launched? Actually, Nokia India already hosts a mobile blogging service which it launched alongside its N-series phones. Users could send pictures and text via SMS or MMS to Nokia's short code (5555).

More Cores, More Power?
Economy Watch
P-WATCH

Who else? Reliance Communications wants to enable M-blogging for users who have multimedia phones. Other service providers are also looking at m-logging options.

How expensive? Well, as of now there are no discounts on data access/sending charges for mobile bloggers, so expect M-logging to burn a largish hole in your wallet.


More Cores, More Power?

What is it? Quad-core processors mean that each chip will have four processing cores, up from the two processing cores on chips such as the Intel Core 2 Duo or a single core on regular Pentium 4 chips.

Is it faster? Initial benchmark tests on Intel's 'Kentsfield' chip (officially called Intel Core 2 Extreme QX6700) have said the chip doesn't run non-threaded applications much faster, but applications which do have 'threaded' software code, allowing for different threads of code to be processed simultaneously, run much faster. If you plan to get Microsoft Vista, a four-core machine might come in handy.

For what? Initial chipset sales are expected only for enthusiasts, but Intel expects that its server-spec 'Clovertown' will see widespread adoption. AMD is also releasing its quad-core chips codenamed 'Barcelona' by early 2007. It claims that unlike Intel, which, it alleges, has sandwiched two duo-core processors together, AMD will have a true 'quad-core'.

And costs? Expect quad-core processors to cost a hefty premium over current processors. PCs with quad-core chipsets will cost about Rs 1 lakh.

The catch? The Sony Playstation 3, out later this year, will have an eight-core processor.


ECONOMY WATCH

INDUSTRIAL OUTPUT

Status: Up 10.6 per cent in the first four (April-July) months of 2006-07.

Impact: Industrial production has been on an upswing in the last three years mainly due to the robust performance of the manufacturing sector. This buoyancy is a key drive of the higher GDP figure which, in turn, are resulting in higher income levels, employment and better infrastructure facilities.

STATE BORROWINGS

Status: Rs 23,663 crore proposed for 2006-07, up 8.90 per cent.

Impact: The mar4ginal rise in state borrowings will not affect their fiscal deficits as the long-term trendline points south. Result: reduced overdraft burden as state governments often resort to this to bridge gaps in their finances.


P-WATCH
A bird's eye view of what's hot and what's not on the government's policy radar.

NETTING THE NET PLAYERS

RISING COSTS?
» Govt plans to rein in internet telephony
» Yahoo, MSN operations may cost more
» Net cos may be required to set up infrastructure
» Consumer not likely to be affected

Internet companies are likely to earn less from their Indian operations. The government plans to rein in internet voice telephony offered by internet companies like Yahoo, msn, Skype, Net2Phone and Vonet, and treat the latter as Internet Service Providers (ISP). The new bill: service tax to the tune of 12.24 per cent of revenues and another 6 per cent revenues towards licence fees.

The move is not likely to make the services more expensive for subscribers, industry sources say. "They (internet companies) are charging the consumers more or less the same amount as we do, but they are enjoying the tax benefits," says Rajesh Chharia, President, Internet Service Providers Association of India (ISPAI). If the internet companies are brought under the licensing regime, not only will they have to pay taxes, they will be required to set up infrastructure in the country. Even though the policy is still in the works, it appears to be another move towards a level playing field.

INSURANCE REFORMS GATHER PACE

If politicians and bureaucrats are to be believed, a consensus on reforms in the financial sector is round the corner. The long-pending Insurance Bill, which will enable a hike in foreign direct investment in the sector, is expected to be tabled in the upcoming winter session of Parliament. The proposal to increase FDI to 49 per cent from the present 26 per cent has been hanging fire for quite some time.

Apart from Insurance Act, 1938, the government plans to amend Life Insurance Corporation of India Act, 1956, which will lead to an increase in the minimum equity capital for LIC (presently Rs 5 crore) to levels commensurate with the private insurers (Rs 100 crore).

So, once again the wait begins for the play out during the ensuing Parliament session.

DRIVE EASY IN LEAN TIMES?

Remember 'happy hours' at the bar? That's how pricing is likely to be decided on the toll highways. Travel during off-peak hours will be less expensive. "The idea is to regulate congestion in view of increasing traffic," sources in the National Highaway Authority of India said. The rationale behind levying a higher toll is to enhance project viability, as bridges in roads are high cost structures. Meanwhile, the government has resolved the issue of determing the annual inflation-linked increase in toll rates-this has been now decided at 3 per cent. The tolling policy will be given a final shape following a meeting of the committee of secretaries, which is scheduled shortly. Evidently, the roads sector is maturing.

FIRST MOVER ADVANTAGE

Those who heat up the city homes first will get an incentive-a licence to have distribution monopoly for a specified period, depending on the extent of investment.

Apart from this salient feature, the proposed city gas pipeline policy also disallows multiple players in any city for piping cooking gas to homes.

The policy may, however, displease companies like Reliance which had been seeking open competition in the sector. Few can argue on that count.

Shine: Less taxing times

OUTSOURCE AND GAIN

Outsourcing in manufacturing is likely to get more attractive with the tax authorities planning to keep out contract manufacturing from the Tax Deduction at Source (TDS) net. However, this is applicable only in cases where the entire product is outsourced.

In the event that a part is outsourced, TDS kicks in. Hence, 'contract on sale' will not attract TDS while 'contract on work' will attract it.

Surely the festive season augurs well for those outsourcing their manufacturing.

 

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