CURRENT EVENTS

Intel CEO Sees Orders Picking Up

Intel Corp. executives said conditions in its existing

businesses aren't as bad as people think, while efforts

to move into new sectors are starting to gain traction.

The company also discussed an effort to spur the

creation of thin, light notebook computers at much

lower price points than current systems in that

category, yet not as inexpensive as a breed of

portables called netbooks that emerged in 2008.

Paul Otellini, Intel's Chief Executive Officer, said demand for its computer chips appeared to

have "bottomed out" in the first quarter. At a meeting with analysts, he said that the

company's recent order pattern indicates business in the current period is "a little better" than

the company expected.

Mr. Otellini noted that the market research firm Gartner Inc. predicts personal computer unit

sales will decline about 10% this year. More broadly, Mr. Otellini argued that the most telling

measure of high-tech health is the growth of Internet traffic, which continued to grow in the

current downturn - just as it did when the initial Internet boom turned to a bust in late 2000.

He predicted traffic growth will continue, justifying the company's massive investments in

factories that turn silicon wafers into chips.

"There is no recession in the growth of the Internet," he said. "This is the fundamental driver

of Intel Silicon." Sean Maloney, an Intel Executive Vice President in charge of sales and

marketing, noted that computer demand at the moment appears to be strongest for products

sold to consumers. By contrast, demand for computers purchased by companies --

particularly PCs -- remains weak, he said.

Perhaps the biggest criticism of Intel's performance in the last decade is its failure to diversify

effectively. The company continues to make most of its money from sales of chips that serve

as calculating engines for desktop and portable PCs and server systems.

Mr. Otellini and other Intel executives cited evidence that they said points to progress in

moving to four new markets. The first is represented by netbooks, portables that often cost

 

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$300 or less and typically use a low-end Intel chip called Atom. Mr. Otellini said the first

four quarters of sales in that market have taken off faster than two well-known hits, Nintendo

Corporation Wii video game console and Apple Inc.'s iPhone.

Intel is also targeting chips for smartphones, for consumer electronics products and for socalled

"embedded applications," which include industrial and office equipment. By 2011, the

combination of the new sectors with existing businesses will represent a market that

consumes about 1 billion chips a year, while sectors Intel now serves consume about a third

of that total, Mr. Otellini said.

While Intel has discussed using its chips to target those new sectors before, Mr. Otellini and

other executives put new emphasis on how software will help take its technology into new

markets. One example is Moblin, a version of Linux that Intel has been pushing for

smartphones and netbooks.

Renee James, the Vice President of Intel's software efforts, noted other new initiatives that

include tools to help programmers exploit chips that come with multiple processing units. She

also noted that the company had purchased a company called Opened Hand Ltd., a Londonbased

startup she said would aid development of new software around a popular low-end chip

called Atom.

Mr. Maloney said Atom-based netbooks are not as good at certain chores consumers want to

do, like playing high-quality video, he said.

Besides driving the growth of netbooks, Mr. Maloney said Intel is trying to spur demand by

trying to take thin and light laptops into mainstream price points. He didn't quantify system

pricing, but such portables typically cost well over $1,000, while most laptops sold cost well

below that.

The issue for the notebook PC industry over the next year and a half is that "thin is in," Mr.

Maloney said. He said these new laptops, will be about 50% of the weight of conventional

portables, similar to better performance and "radically better" battery life.

Intel's analyst meeting took place the day before European Union antitrust regulators is

expected to fine the company for tactics it has used in countering rival Advanced Micro

Devices Inc. Asked about the possible EU action; Mr. Otellini characterized that possibility

as a rumor. "I can assure that you when it's anything but a rumor we will comment," he said.

China Looms Large in India's Election

Call it the Giant-Next-Door complex. While the world worries about India and China eating

its lunch, India, for its part, keeps a wary eye on China. For India it's a decades-old habit, this

anxious concern about its larger, more prosperous neighbor. India came out on the losing side

of a border war in the 1960s between the two Asian giants, and many Indians have question

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ned Chinese motives ever since. Just in the past year, New

Delhi has clashed with Beijing over trade issues, banning

Chinese toy imports amid allegations of tainted chemicals,

and fretted publicly over China's overt support of India's

archrival, Pakistan. The Chinese, for their part, have

continued to challenge Indian ownership of the northeastern

Indian state of Arunachal Pradesh, which the Chinese refer to

as South Tibet. In another border dispute, China claims the

Siachen glacier, which makes up almost one-third of the

disputed state of Kashmir, which Pakistan also claims.

Beijing has also repeated protests about India's providing

sanctuary to the Dalai Lama.

With India's month long national elections wrapping up on May 16, China is again figuring

prominently in the national conversation. Indian Prime Minister Manmohan Singh has

repeatedly said (during the release of the Congress Party's election manifesto) that "with the

right set of reforms and the right political party, India can do even better than China." After

the Chinese Foreign Ministry in April referred to Nepal and Sri Lanka as "friendly neighbors

of China" that Beijing wants to help "maintain their sovereignty," India's Home Minister, P.

Chidambaram, issued a furious response, speaking in the press conference that "China is

fishing in troubled waters." This wasn't the first time Chidambaram had targeted China. Last

year, while lobbying members of Parliament to support a controversial nuclear-power deal

with the U.S., he raised the Chinese bogeyman. "I don't want to be envious of China," he told

his colleagues, arguing the deal would allow India to erase its electricity shortfalls and catch

up with China's economy.

Info Tech Rivalry

Opposition leader L.K. Advani, of the Bharatiya Janata Party, also sees the advantages of

playing the China card and regularly blames Congress for holding back India's growth,

pointing to how much better the Chinese have done. Advani promises to do more for the one

sector in which India has an undeniable lead over China—the IT industry. "If China can beat

the world in the Physical infrastructure, India can beat the world in IT infrastructure," he

wrote in a manifesto that detailed plans to enhance rural access to IT services. Advani, 81,

told in an election rally on May 3 that his party had advocated back in the 1960s the need for

India to develop nuclear weapons to match China's. India lost a short war with China in 1965

but defeated Pakistan in three separate wars. "The same victory could have happened in case

of China, had India had an atom bomb," he said, according to the Press Trust of India.

India's China fixation is part insecurity, part blindness, says Razeen Sally, a professor at the

London School of Economics who has written extensively about India. While the world

lumps India and China together, he argues, the countries are worlds apart. "If you look at the

hard numbers, China is not only ahead of India, but it has also been widening" the gap, Sally

says. "On every big measure you look at—living standards, international trade, foreign

investments, infrastructure, the business climate, trading procedures, all the way to carbon

emissions—you see not just that China is further ahead from India, but the gap has grown."

 

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China entered the 1980s with many of the same problems that plagued India. Both had a

large, impoverished rural population, few exports, and a weak currency. But in the years

since then, China has expanded its economy to approximately three times that of India's, to

$3.42 trillion, in 2008. Only the U.S., Japan, and Germany are larger. China exports about 10

times as many goods as India, spends six times as much on infrastructure, and has a lower

percentage of its population living in poverty. "The challenges are very similar: basically the

ability to move hundreds of millions out of subsistence agriculture to non-agriculture jobs,

and to sustain that for a long time," says Subir Gokarn, Asia Pacific Chief Economist for

Standard & Poor's, which, like BusinessWeek, is a unit of The McGraw-Hill Companies

(MHP). "India has not had the same success in translating growth into non-agricultural

employment."

Towering Chinese Economic Clout

The two countries' response to the global recession shows how India's slower rate of growth

puts it at a disadvantage to China. Both countries announced big fiscal stimulus packages last

year, but China's was more than 10 times larger than India's—$568 billion compared with

India's $50 billion. Even that relatively small amount put India's budget deficit at more than

10% of gross domestic product and prompted a scolding from ratings agencies that

downgraded the outlook on Indian government debt. Beijing received no such reprimand.

China's stimulus package was infrastructure-focused, but India's was more along the lines of

tax breaks.

Politicians from Singh's government argue that, despite the less ambitious focus of India's

plan, the stimulus nonetheless has proved effective. India's banks are lending again, some

economic activity is picking up, and India's benchmark Sensex stock index is up 26% for the

year, after falling 52% in 2008. Members of the opposition still call for India to take a page

from Beijing's playbook and start spending a lot more on infrastructure projects. India's

infrastructure needs for the next five years are estimated at more than $500 billion, which

includes roads, airports, railroads, and power projects. In India government has to come out at

the forefront," says Arun Jaitley, the BJP General Secretary. "Whether through a publicprivate

partnership model or just through public spending, you have to prime up the economy

through infrastructure spending."

Economists say India needs to make further reforms, though, if the country hopes to close the

gap with China. "The aspiration to do things the way the Chinese do is a realistic one, not a

fantasy" says Gokarn. "But there are certain kinds of investments that you have to make in

your infrastructure, in your labor markets, and in other areas. Only that will allow this

transition to happen."

 

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India gets 43% FDI through Mauritius route

Mauritius, considered a tax haven for Global Inc,

accounted for 43 percent of cumulative foreign fund

inflow into India, even as money parked overseas for tax

avoidance has become an issue in the Lok Sabha polls.

Of the total $81 billion FDI that has come into India since

April 2000, $35.18 billion was routed through the

Mauritius route, according to figures available with the

Department of Industrial Policy and Promotion.

The Organisation of Economic Cooperation and

Development (OECD) which has drawn a global list of tax

havens, has not included Mauritius among the preferred jurisdictions of the tax get-aways.

However, the tiny nation in the Indian Ocean, which levies effective corporate tax of less

than three percent, is considered the best place for avoiding taxes.

Though India has a Double Taxation Avoidance Agreement with about 65 countries like

the US, UK, Japan, France, and Germany, it is Mauritius which is the most preferred

route for FDI inflows.

Even though India offers several exemptions and relief's to companies on the corporation

tax of 30 percent, the effective rate in the country for the corporate is not less than 20

percent.

ICWAI makes six standards mandatory

The Institute of Cost and Works Accountants of India

(ICWAI), the apex body regulating the cost accounting

profession in the country, had made six cost accounting

standards (CAS) mandatory from April 1, 2010. These

standards are for classifications of costs, capacity

determination, overheads, cost of production

production for captive consumption, determination of

average cost of transportation and material cost.

 

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These standards would bring in principle based accounting to give greater freedom to

companies to treat different components of cost in an effective manner, bringing in flexibility

and reducing compliance costs for companies.

"These standards would be applicable for all cost accountants in practice," said Kunal

Banerjee, President of ICWAI. At present, these standards are recommendatory only.

However, from April next year, all practising cost accountants will have to make use of these

standards while carrying out cost audits.

However, the standards are not mandatory for corporate entities, as they are governed under

the Companies Act. Only cost accountants are covered under the ICWAI Act.

If a company is not following these standards, cost accountants are asked to make a suitable

disclosure or qualification while undertaking cost audit.

To make companies also follow the cost accounting standards, an expert group constituted by

the Ministry of Corporate Affairs (MCA) to review the working of the cost accounting

profession in India recommended that cost accounting standards should be part of the existing

National Advisory Committee on Accounting Standards (NACAS) or a similar body should

be set up.

NACAS was set up under the companies act and accounting standards prepared by the

Institute of Chartered Accountants of India (ICAI) are notified after they are referred to the

body.

The government has prescribed cost accounting records rules (CARR) in 43 industries. The

companies which are covered by CARR are required to maintain the cost data in the manner

prescribed under these rules.

Cost audit, supported by cost accounting standards, can provide relevant and credible cost

and revenue data to regulators to support their decisions.

As of now, the institute has come out with six standards only, though there would be 39 cost

accounting standards in all. Banerjee said the institute would bring out four more standards

soon.

Indian Government transfers Rs 28,000 crore from MSS

accounts

The Reserve Bank of India (RBI) said the government had transferred Rs 28,000 crore from

the account maintained for the Market Stabilisation Scheme (MSS) to the normal cash

account to fund expenditure. The decision to transfer the funds was taken after reviewing the

cash position, the RBI said.

 

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It may be recalled that the outstanding borrowing of the government from the RBI was Rs

40412 crore. This was more than the limit of Rs 20000 crore set under the agreement for

Ways and Means Advances (WMA). After the transfer, the government is now backing

within the WMA limit of Rs 20,000 crore.

According to the agreement with the RBI, if the WMA

borrowing stays above Rs 20,000 crore in April-September

for 10 successive business days, the government will have to

draw it down by issuing securities to the market.

While borrowing under WMA is at the repo rate, currently

4.75 per cent, any overdraft is at 2 per cent above repo, or

6.75 per cent.

In a parallel operation, an equivalent amount of government

securities in the MSS portfolio will now form part of the

normal borrowing of the government of India for fiscal year

2009-10.

The RBI said based on the emerging fund requirements of the government, Rs 33,000 crore

of MSS balances would be de-sequestered against the approved market borrowing

programme or bought back in the fiscal year 2009-10. The MSS outstanding as on May 2,

2009, is Rs 42,773 crore (face value).

Tata Sons raises Rs 633 crore by selling nearly 1% TCS

shares

Tata Sons, the primary holding company of the Tata group raised Rs

633.4 crore by selling 10.32 million shares of Tata Consultancy

Services in a bulk deal on the National Stock Exchange. The shares,

amounting to 1.05 per cent stake in India's largest software exporter,

were held by Tata Ltd, a UK-based subsidiary of Tata Sons. The shares

were sold at Rs 615 per share.

The holding company of one of India's largest business houses has

raised the money when its companies are facing a fund crunch. Tata

Motors, the country's largest commercial vehicle maker, is in the

process of raising a $2 billion loan to refinance the remaining part of

the bridge loan it took to acquire Jaguar and Land Rover brands last

year.

"With Tata Sons' increased participation in its group companies' investment requirements,

Crisil expects the company's capital structure to deteriorate from the present level over the

medium term," said the Mumbai-based credit rating agency in a note last month.

 

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The company is also in the process of raising Rs 500 crore through issuance of bonds. Crisil

has assigned AAA rating to the non-convertible debenture issue of the company.

"Tata Sons' superior financial flexibility arises from its ability to raise additional funds by

sale or pledge of shares of Tata Consultancy Services Ltd," the Crisil had said in its note.

Tata Sons continues to directly hold 73.75 per cent in TCS. The stake was valued Rs 45,835

crore on Wednesday. Tata Sons is expected to continue to fund its participation in group

companies through a judicious mix of debt and sale of investments. As the group's primary

holding company, the earnings of Tata Sons primarily come from dividends and sale of

investments. Tata Sons had Rs 2,892 crore as cash and cash equivalents by the end of March

31, 2009, showing high liquidity.

Need to Change Archaic Juvenile Act: Kasab's Lawyer

The trial of Ajmal Amir Kasab, the sole surviving terrorist caught in

the November 26 attacks, has thrown up the possibility of minors

being used for terror attacks and time has come for the country to

strengthen the Juvenile Justice Act to deal with such impending

menace, special public prosecutor Ujjwal Nikam has said.

After Kasab unsuccessfully attempted to plead that he was a juvenile, a

possibility arises that terror groups might use minors to carry out suicide attacks, he warned.

"Juvenile offenders are likely to infiltrate into the country. Time has come to change the

archaic Juvenile Justice Act to ensure that terror suspect below the age of 18 should be tried

under the stringent laws," said Nikam.

Recently, the Act was amended to increase the age of juvenile from 16 to 18 years. Even that

would not suffice for a juvenile terrorist as there was no provision under the Act to award

rigorous imprisonment like death penalty, Nikam said. A juvenile convict cannot be tried in a

regular court but only before a juvenile authority which does not award punishment even if

guilt is proved, said Nikam.

Nikam said similar to Kasab, who had attempted to prove himself to be a juvenile to escape

punishment taking advantage of the lenient Act, "Many young people are being brainwashed

And used by terror groups and our existing laws are inadequate," Nikam said.

Nikam justified the need for examining FBI officials in Kasab trial saying it would help them

provide the evidence in regard to phone calls made to Karachi during the attacks. The public

prosecutor also favoured setting up of special courts to try terror cases just as was done in the

case of 1993 Mumbai serial bomb blasts for speedy disposal.

 

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"There is a requirement that an anti-terror court should handle only one case. As of now, the

condition is such that most anti-terror courts are handling multiple cases which delays the

judgement", Nikam said. However, he opposed holding summary trials saying that trials

should be held in a transparent manner giving a fair opportunity to an accused to defend

himself.

Kasab, a resident of Faridkot in Pakistan, and two other alleged Indian Lashkar-e-Toiba

operatives are facing trial for their alleged involvement in Mumbai terror attacks that killed

166 persons and injured 234.

Nikam said police had accumulated sufficient evidence against all the three accused. "In the

case of Faheem Ansari and Sabauddin Ahmed, there were no confessions and we will be

relying purely on evidence obtained to prove their guilt".

Sharing his thoughts on the behaviour of Kasab during the trial, Nikam said he is not only

been trained in terror warfare but also given training to escape the clutches of law by

"dishonest" means. "Kasab said his age was 21 years to the Jailor and Doctor who examined

him after his arrest but in the court he pleaded he was 17," he added.

DLF promoters raise Rs 3,860 crore by selling 10% stake

The money raised will be used to buy back DE Shaw stake in

DLF Assets ad also to invest in DLF Assets. Promoters of the

country's largest real estate firm DLF Ltd have sold shares

worth Rs 3,860 crore ($780 million) representing 9.9% to

institutional investors in the open market. The funds raised

will be pumped into another privately held realty firm DLF Assets Ltd (DAL), which owes

the public listed firm around Rs 4,900 crore ($1 billion). DLF Assets purchases commercial

properties from DLF and leases them out.

The transaction was done at a price of Rs 230 per share, a discount of 2.6% to the previous

day's closing price. It was executed by Deutsche Bank and JP Morgan. More importantly, this

could boost the share price as the free float has gone up from 11.4% to 21.3% which would

bring in new investors in the company.

After this transaction promoters holding will go down from 88.6% to 78.7%. DLF, Vice

Chairman, Rajiv Singh, has said that the promoters are not looking to dilute any more holding

in the near future.

Details of who were the buyers in the deal is not available yet but large existing institutional

shareholders of DLF-- Capital International Fund, HSBC Holdings and Fidelity were among

those who picked the stake