News Corp. (NWS), the media giant owned by Rupert Murdoch, will strengthen its presence in India with the creation of six regional television channels.

Murdoch has in the past warned that an advertising slowdown in the newspaper and television industries would have a decidedly negative impact on U.S. media businesses. At the same time, however, India’s entertainment market is just beginning to realize its potential.

About 17 million viewers joined India’s burgeoning television market in the first half of 2008. Television advertising responded to the broader audience, growing 26% in the first six months of the year.

The media and entertainment market in India is expected to grow by 18.5% by 2012, according to consultancy firm PwC. That’s the fastest among the BRIC countries (Brazil, Russia, India and China), as China’s rate of growth over the next four years is projected at 14.6%.

Annual revenue for television in India is expected to double to $11.6 billion in that time, as well, according to Media Partners Asia.

"In the long term, the media and advertising outlook for Asia is tremendous as wealth is created and people get educated and you see the emergence of a wealthy middle class," Reuters quoted Murdoch as saying earlier this week.

News Corp. aims to exploit that remarkable growth potential with a $100 million investment through Star India, a wholly owned subsidiary of the company. Star India broadcasts entertainment and music on channels such as Star One and Star Plus. It also has a 26% stake in Media Content & Communication Services India, an operator of three news channels.

The move could be a precursor to an expansion into India’s movie business as well. The Indian film industry, known as "Bollywood," produces about 1,000 movies a year, making it one of the most prolific in the world. Warner Group (TWX), The Walt Disney Co. (DIS), Sony Pictures Entertainment (ADR: SNE), and Viacom Inc. (VIA) already have already undertaken joint ventures in India and News Corp.’s 20th Century Fox movie studios won’t want to stand on the sidelines much longer.

News Corp. also plans to nearly triple the size of its editorial staff at its Indian Dow Jones from 25 employees to 70, although government regulations make it difficult to do business, particularly in print.  

"We don’t see ourselves taking a stake in print… because they are not available and because we won’t want to take just a 26% stake," Murdoch said.

Foreign investment in news publishing and broadcasting is limited to 26% by the government.

Still, Murdoch remains positives about India’s prospects.

"We are happy here," he said "The slower expansion of the economy may slow growth a bit, but in the long term there is a lot of growth to be had."

News and Related Story Links:

• Reuters:
  Murdoch says U.S. TV advertising good; eyes Asia.

• Campaign India:
  TV advertising grows 26% in H1 2008: TAM.

• Money Morning Special Investment Report:
  Special Report: Hit the BRICs for a Global-Investing Double Play (Part I).

• Money Morning Special Investment Report:
  Special Report: Hit the BRICs for a Global-Investing Double Play (Part II).

Soaring oil prices have forced Indian authorities to raise subsidized fuel prices and risk propelling inflation that is already running at a three-year high. 

The Indian government subsidizes most fuel costs, meaning state oil firms are forced to sell fuel at hugely discounted rates to shield consumers from inflation. But with the price of oil soaring to a recent high of $135 a barrel, refineries have been unable to cover costs and pressed to the point of bankruptcy.

The inability to pass high prices onto consumers cost state-run refiners about $43 billion for the year ended March 31, Serangulam V. Narasimhan, finance director at Indian Oil Corp. Ltd., said last month. The companies lost roughly $18 billion the year prior.

The Indian government had tried to cope with the matter by scrapping a 5% import tax on crude oil and cutting the import tax on gasoline and diesel to 2.5% from 7.5%, but the measures proved ineffective. So, yesterday (Wednesday), the government attempted to ease the burden on the refiners by boosting its subsidized fuel prices for the first time since February.

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The price of gasoline will rise 11% in the Indian capital of New Delhi to $1.17 (50.6 rupees) per liter. Indian drivers will pay 9% more for diesel, and families will be charged an additional 17% per cylinder of cooking gas, India’s Oil Minister Murli Deora told reporters.

Still, as Deora also pointed out, even with the price hike, India’s state-owned oil companies are projected to lose a total of $58.4 billion this fiscal year, which runs from April through March 2009.

“The prices should have been raised higher for a real impact,” Ballabh Modani an analyst with Mumbai-based Enam Securities Pvt. told Bloomberg News. “There’s no point in an ad hoc increase.”

While the companies still stand to lose a significant amount of money, the Indian government must tread carefully when raising prices, as wholesale prices are already at a three-and-a-half-year peak of 8.1%.

The hike in fuel prices was India’s biggest in 12 years, and is expected to add another between 0.5% and 0.6% to wholesale prices. If the government had pushed prices any higher, it would have been risking social unrest among the nation’s poor who are already coping with high food prices.

“Already milk, vegetables, wheat – the price of everything has gone up so much,” Balaram, an office driver earning a little over $100 a month, told Reuters. “And now gas and petrol. With my salary, after paying my rent and my expenses, what will I send home? How will I feed my family and what will I save?”

Together, food and fuel account for about 75% of household spending for poor families in Asia. And India, despite its growing reputation for economic success, currently has the largest number of people living in abject poverty: more than 350 million, or about a third of the population.

News and Related Story Links:

• Reuters:
   India’s fuel price hike divides rich and poor

• Bloomberg:
  India, Malaysia Raise Fuel Prices, Risking Inflation

• Money Morning:
  India and Other Emerging Economies Continue to Struggle With Inflation

India’s wholesale price index rose 7.82% for in the week ended May 10, the Ministry of Commerce and Industry reported. It marked the 13th straight week that the inflation rate has been above the central bank’s 5.5% target, highlighting the increased pressures many developing nations are under given soaring commodities prices.

The rate of inflation for the week ended May 15 is expected to be 8.02%, the highest level since September 2004, according to Bloomberg News.

"The current high level of inflation is totally unacceptable, especially in terms of impact on inflationary expectations," Reserve Bank of India (RBI) Governor Yaga Venugopal Reddy told reporters last week.

Authorities have tried their best to rein inflation in without compromising economic growth. The central bank has left its key interest unchanged but has tightened cash conditions by raising its cash reserve ratio – the amount of cash banks must keep on hand – by 25 basis points to 8.25% as recently as April 29.

The government has stepped in over the past two months to reduce import duties, ban futures trading, halt the export of cement, rice, wheat, and edible oil, and implored steelmakers and cement companies to cut prices. 

However, such measures have proved largely ineffective as commodity prices continue to soar. Oil, which climbed to a new record over $135 a barrel last week, is particularly problematic, as state oil firms currently sell fuel at hugely discounted rates. 

Selling fuel at such steep discounts cost state-run refiners about $43 billion for the year ended March 31, Serangulam V. Narasimhan, finance director at Indian Oil Corp. Ltd., said May 9. The companies lost roughly $18 billion the year before.

The government in February raised gasoline and diesel prices for the first time in nearly two years in an effort to reduce refiners’ losses, but the increase has achieved little. Another "price hike is inevitable," although the "specific quantity of the price increase" was still being worked out, Petroleum Secretary M.S. Srinivasan told the AFP.

"We expect a decision in three-to-four days time," Srinivasan said.

The Press Trust of India reported, without naming sources, that the petroleum ministry was seeking a 10-rupee-a-liter increase in petrol prices and a five-rupee-a-liter hike in diesel prices.

Based on current pump prices in New Delhi, this would represent a 22% increase for petrol and 16% on diesel, according to AFP.

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India isn’t the only developing nation fending off inflation. Consumer prices in China jumped 10.3% in April from a year earlier. Inflation has soared throughout Eastern Europe, rising 17.5% in Latvia, 11.4% in Estonia and a staggering 30.2% in the Ukraine, according to Bloomberg News data.

"Inflation, now in double digits in many countries, is the region’s most pressing current problem," the European Bank for Reconstruction and Development said in a recent economic outlook report. "If left unaddressed, inflation could risk price-wage spirals, exchange rate re-alignments, or could force a belated and sharp response by monetary policy."
News and Related Story Links:

• Bloomberg:
  India’s Inflation Holds Above Target for Third Month

• AFP:
  India petroleum ministry says fuel price hike ‘inevitable’

• Money Morning:
  Cashing in on Commodities: What’s Driving the Oil Bull, How Much Further It Will Go, and How Investors Can Profit

• Money Morning:
  Inflation Threatens Eastern Europe, But Region Still Expected to Grow

Of the emerging BRIC (Brazil, Russia, China and India) nations, India’s stocks are priced the cheapest as government measures to curb inflation have turned away investors, Bloomberg News reported using its own compiled data.

Making matters worse, India has the fewest natural commodities of the four-nation bloc – meaning it’s paying a premium to provide for its soaring population.

Year-to-date, the price-to-earnings ratio for India’s market has dropped 33%. And for the first time since 2000, foreign investors turned net sellers, Bloomberg reported.

Last Friday, India’s government released data that showed that the country’s annual inflation rate rose to a near four-year high at 7.61%, AFP reported.

"I’m just not finding a compelling reason to be in India," said Uri Landesman, who oversees $5.5 billion as head of global growth and international equities at ING Groep NV’s (ING) asset management unit in New York, told Bloomberg. "With little natural resources given their population, inflation might be a problem and the government might end up quashing some of the [gross domestic product] growth."

Separate data from the International Monetary Fund showed that among the BRIC nations, India is the only one projected to see slowed economic growth for the second straight year.

But there is still plenty of India to like.

When it comes to inflation, it’s not uncommon for the media to report the bad news first. After India’s current inflation wave passes, it’s expected to significantly drop from 7.6% to 6% in the next three to four months, C. Rangarajan, chairman of Prime Minister Manmohan Singh’s Economic Advisory Council, told Reuters.

And let’s not forget the obvious: India is the second most populous country in the world and home to one of the fastest rising middle classes in the planet.

Growth may be slowing there, but the fact remains that India is one of the fastest growing economies and one that will continue growing for the next few decades.

There will be plenty of opportunities to profit from the country’s growing demand for food, commodities, real estate, transportation, banking, electronics, etc.

One of India’s titans on top of the trend is Tata Motors Ltd. (TTM), which recently sealed both ends of the consumer spectrum with its forthcoming $2,500 Nano and its recent $2.3 billion acquisition of the Jaguar and Land Rover brands from Ford Motor Co. (F).

India is also the world’s hottest mobile phone market, and Britain’s Vodafone Group PLC (VOD) disclosed plans for a $6 billion investment in India’s mobile phone market over the next three years. Vodafone currently has 40 million subscribers in India and has set a target of 100 million.

Five Ways to Tap India’s Long-Term Growth

There is no doubt about India’s long-term growth potential. Investors should position some of their non-U.S. investments in Indian stocks and also "buy on dips" in years when growth slows and the India stock market [The National Stock Exchange of India Ltd.] backtracks – such as now.

For sound exposure to India, the simplest method is via an Exchange Traded Note, or ETN – in this case, the Barclays IPath India Index ETN (INP), whose returns are linked to the Morgan Stanley Capital International India Index (unlike a conventional ETF, an ETN is technically a 30-year note, meaning it distributes assets to holders at the end of 30 years).

You might also consider the Morgan Stanley India Investment Fund Inc. (IIF) or the India Fund Inc. (IFN). Both are actively managed funds investing in India.

Individual shares to look at would include Infosys Technologies Ltd. (INFY), a Bangalore-based software and information technology giant. 

Another is the pharmaceutical company Dr. Reddy’s Laboratories Ltd. (RDY). As many U.S. pharmaceutical patents expire in the next five years, this major generic-drugs manufacturer can expect to benefit. 

News and Related Story Links:

• Bloomberg News:
  India Cheapest BRIC Market, May Get Cheaper on Costs

• International Monetary Fund:
  IMF Data Mapper

• Reuters:
  India’s inflation to ease in coming months-adviser

• Money Morning:
  Tata’s Secret to Success and Three Ways to Profit From it

• Money Morning:
  Outlook 2008: Five Ways to Profit Even If India’s Growth Slows in the New Year

• Money Morning:
  Snapshot From India: Advice on Stocks, the Rupee, High Tech and Real Estate

• Money Morning:
  10 Global Trends to Follow for the Next 18 Months

• Money Morning:
  Asian Development Bank: Inflation, Deceleration Threaten Asian Economies

After a visit to Sri Lanka, Iranian Prime Minister Mahmoud Ahmadinejad stopped off in India yesterday (Tuesday) to put the finishing touches on an agreement that will bring Iranian gas to Pakistan and India through a $7.6 billion pipeline.

The 1,615-mile pipeline will transport 30 million cubic meters of natural gas to Pakistan and India upon completion of its first phase. Capacity will later increase to 45 million cubic meters.

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It will be integral in shoring up India’s energy grid, as the country currently imports 70% of its petroleum needs. India’s current gas supplies of 85 million cubic meters a day fall well short of the country’s potential demand of 170 million cubic meters a day, according to government statistics. What’s more is that demand could grow to 400 million cubic meters a day by 2025.

The possibility of a pipeline has been a point of discussion since 1994, but talks ground to a halt during price negotiations. India balked at the price of the gas, and Pakistan has expressed dissatisfaction with the proposed transit fees. Now, Ahmadinejad and Pakistan’s President have "resolved all issues" related to the pipeline, the Associated Press of Pakistan recently reported, and that leaves New Dehli’s cooperation as the last surviving hurdle. And Ahmadinejad’s stopover in India has been widely interpreted as a landmark development that will usher in a new era of energy cooperation.

"There will be a proposed review that will be taking place which will discuss the price, review the price, certification and project structure," Manu Srivastava, director of India’s Ministry of Petroleum, told Bloomberg News. Though he cautioned that, "there are a lot of issues to be resolved."

Still, with India’s need and Iran’s availability, the deal seems to be a near certainty at this point. Particularly since India’s communist party torpedoed a historic nuclear power agreement with the United States. The deal would have opened the door to peaceful cooperation between the United States and India concerning nuclear power as an alternative to fossil fuels. But without it, India has no choice but to improve ties with Tehran.

The State Department’s Sean McCormack said Monday in Washington that the United States would "counsel against" the pipeline plan.

"Given where Iran is in the international system, being under sanctions, and given its actions within the international system, is now really the time to conclude a pipline deal with the Iranian government?" he said.

However, insinuations from the United States that India should turn its back on Tehran or use its leverage to pressure Iran into abandoning its alleged nuclear ambitions have not been welcomed by policymakers.

"India and Iran are ancient civilizations whose relations span centuries," India’s Foreign Ministry said last week. "Neither country needs any guidance on the future conduct of bilateral relations."

News and Related Story Links:

• Asia Times Online:
  Iran holds key to India’s energy insecurity

• Associated Press:
  Iran president to visit India for talks on gas pipeline

• Bloomberg:
  Iran Says Ministers to Discuss Gas Pipeline to Pakistan, India

Let me explain …

India’s economy expanded at a breezy 9% clip last year. The rate of growth is expected to throttle back to about 8% this year, but that’s still excellent, justifying fairly lofty price-earnings ratios in the local stock market. Even so, market valuations there do not now appear excessive; the overall market is trading at about 18 times earnings, which is not particularly high given the economy’s growth potential.

As with China, if India can get its house in order – both politically and economically – we’re looking at the very real prospect of very rapid growth before that country’s standard of living starts to approach that of the West, causing India’s rate of growth to slow dramatically.

The bottom line: With 1.1 billion potential Indian consumers, we’re looking at a huge potential purchasing power for all kinds of consumer products.
Now, there are some potential pitfalls to be concerned about in the near term.

For instance, the current Indian government, in office since 2004, is a coalition between the Congress Party, which had ruled India for most of the period since independence, though without any great success, and the Communists (who are a pretty mild lot, but are nevertheless pro-government and fairly anti-market).

Although India Prime Minister Manmohan Singh is a moderate, the government as a whole has seen India’s economic emergence as an opportunity to fund favorite projects and social programs. For instance, this year’s budget proposes an 18% increase in public spending for the 12 months that end next March, over and above the 24% increase in public spending for the year-to-March 2008. Even after several years of rapid growth, the state budget deficit (the federal shortfall plus the local deficit) is around 7% of Gross Domestic Product (GDP). With any kind of downturn at all, that 7% could quickly swell to 10% – a point at which deficits become difficult to finance.

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Now there is some hope on the horizon – an election is due in May 2009, at the latest, and the center-right opposition is currently leading in opinion polls. Even so, shrewd investing veterans know better than to rely on that alone for their investment profits.

The other current problem is inflation, right now running at 8% per annum, which means that it’s higher than the level of short-term domestic interest rates. Higher commodity and energy prices have affected India as they have other countries: India’s position is made more difficult by the poverty that afflicts much of the population. The Indian government, like the good socialists that they are, has seen fit to restrict exports of rice and to subsidize other foods and gasoline (the latter makes no sense socially, since automobiles are largely owned by the middle classes, not the poor). Needless to say, these subsidies and restrictions make the budget deficit worse; and they will pose an additional problem in the future, when they are lifted and consumer prices soar in response.

Having described some of the challenges that India faces, let’s be clear on a very key point: No market is perfect. Ironically, if it were, it would be a much less alluring investment opportunity. I mean, let’s face it: If India didn’t face the problems that we’ve detailed here, the market would be trading at a hefty 40 times earnings, well above its current multiple of 18.

The underlying truth remains that economic growth has achieved real momentum in India, that any government we can picture will do no more than slow the country’s economy incrementally, and that the economics of providing manufacturing and services from a base in India – especially in the era of the Internet – is so compelling from a cost and logistical standpoint that it must inevitably continue to produce huge profits for long-term investors for decades to come.

When it comes to India, it’s almost as if the central question no longer is "how much should I invest in India?" but rather "how can I afford not to invest in India?"

Let’s take a look at how best to invest in this fast-growing economy.

India Profit Plays

The simplest way to invest in India is via an Exchange Traded Note (ETN), in this case the Barclays IPath India Index ETN (INP), whose returns are linked to the Morgan Stanley Capital International India Index (unlike a conventional ETF, an ETN is technically a 30-year note, so it distributes assets to holders at the end of 30 years). In January, INP was trading at about a 15% premium to its net asset value (NAV). But now it’s trading very close to its NAV, having slipped backward.

As an alternative you might consider the Morgan Stanley India Investment Fund (IIF) or the India Fund (IFN), both actively managed funds investing in India, which currently trade at discounts to NAV of 2.0% and 0.3% respectively.

Individual shares to look at would include Infosys Technologies Ltd., (INFY) the India-based software giant, which following the fall in the Indian market has declined to a fairly reasonable 19 times earnings, or 16 times next year’s earnings.

Another possibility is the pharmaceutical company, Dr. Reddy’s Laboratories Ltd. (RDY), which, as a major generic drugs manufacturer, can expect to benefit from the expiration of many U.S. pharmaceutical patents in the next five years, and right now carries a P/E ratio of only 15.

Finally, you might consider an India-based automaker that’s been in the news a lot recently: Tata Motors Ltd. (TTM), which is trading at only 11 times earnings, reflecting the risk involved in a medium-sized company taking on the world automotive industry. In the luxury end of the market, Tata recently bought Jaguar and Land Rover from Ford Motor Co. (F), for $2.3 billion. At the economy end of the market, Tata has announced the Nano, a car for the Indian market that will sell for $2,500 – 40% cheaper than any other car on the world market. And that’s after Tata had a smash hit with a light truck designed for the India market, as well.

As I’ve previously articulated in several Money Morning articles, it is highly likely that – years from now – the worldwide center of auto-making will migrate from Detroit to someplace in either China or India, or both, thanks to the combined allure of low costs and potentially huge consumer markets. That means that Tata, as India’s largest manufacturer, is likely to be a key player in the global auto market of the future.

So if you know what the ultimate outcome of that global game is going to be, why not deal yourself a winning hand right now, and then sit back and wait for this scenario (and your profits) to play out?
News and Related Story Links:

• Wikipedia:
  Manmohan Singh.

• Money Morning Economic Analysis:
  Analysts Cut India’s 2008 GDP Forecast; Businesses Still Attracted to the Market.

• Money Morning Economic Forecast Series:
  Outlook 2008: Five Ways to Profit Even If India’s Growth Slows in the New Year.

• Money Morning Investment Travelogue:
  Snapshot From India: Advice on Stocks, the Rupee, High Tech and Real Estate.

• Money Morning Currency Analysis:
  Goldman Sachs, India Expert Rahemtulla Both Predict a Stronger Indian Rupee, See Investment Opportunities.

• The New York Times:
  Tata Nano: The World’s Cheapest Car.

• Money Morning Global Investing Analysis:
  Auto Industry moves to India and China.
• Money Morning News Analysis:
  Tata Targets Jaguar and Land Rover for Long-Term Returns

• Money Morning News Analysis:
  Pimp My Ride: Tata Motors Looks to Burnish its Brand.

• Bombay Stock Exchange Ltd:
  SENSEX: The Barometer of Indian Capital Markets.

The market for mobile TV services in India will reach $360 million this year, as an estimated 12 million consumers sign up for this new entertainment offering in its first year of existence, market researcher Springboard Research announced in a new study released this week.

According to the report, "Mobile TV in India: Understanding the Mobile Entertainment Needs of Indian Users," mobile TV could achieve a penetration rate of 5% to 6% of the total mobile-communications subscriber base in India this year. This is the first year that mobile TV services are being offered, says Springboard, a top provider of advisory services on new and innovative information-technology products and services.

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"The market is ripe for the launch of mobile TV services and we believe that India will have around 12 million mobile TV subscribers within the first year of launch of service," Ravi Shekhar Pandey, Springboard’s manager of syndicated research, said in an interview with the International Business Times. "Mobile telephone operators will have an advantage over standalone mobile TV operators in that the former already have users subscribing to their value-added services. However, the success of either operator will be dependent on content offered and price charged for the service."

Subscription-based mobile TV is available in the United States, through such services as the V-Cast Mobile TV service offered by the Verizon Wireless unit of Verizon Inc. (VZ), or the MobiTV service offered by Cingular Wireless, now a unit of AT&T Inc. (T). However, those two services are each unique to their respective carriers, since the two companies employ different wireless technology standards. The Cingular service debuted in 2006, while V-Cast first became available in 2007.

When it comes to tech-based products and services aimed at the consumer market, Asian countries tend to be the world’s "early adopters" – with such wares appearing in markets like Japan, Korea or India months or even years before similar offerings appear for sale in the U.S. market.

Japan is typically the best example of this trend. Take global-positioning systems. Consumers and cab-drivers were adding portable GPS units into their cars as early as the middle 1990s; those same products didn’t really make a splash in the U.S. market until the early part of this decade, and it’s only been in the past couple of years where the prices have dropped to the point where they’re becoming a ubiquitous add-on, or where automakers are offering them as an option on new model cars and trucks.

Indeed, among the many things that the Japanese metropolis of Tokyo is known for is the "Akihabara Electric Town," a massive gadgets bazaar that’s a 10-minute train trip from the downtown. A bustling, overcrowded community before World War II, the area was wiped away by a fire and kept clear – eventually evolving into what many believe is now the largest concentration of electronics vendors anywhere on earth.

One of the town’s early claims to fame was for being the home to one of the first stores devoted to personal robots and robotics. Western tourists who visit Japan invariably visit Akihabara, and are typically stunned to find electronic products that aren’t available in their home market – and that don’t actually show up there for months or years.

India’s mobile-TV services are yet another example of an innovative, tech-based service that many American consumers have never even heard of.

In India, public-service broadcaster Doordarshan is the only company currently offering limited mobile TV service. Nokia Corp. (NOK), Spice Communication’s Spice Telecom unit, U.S.-based Qualcomm Inc. (QCOM) and South Korea’s Samsung are few of the stakeholders actively promoting the adoption of mobile TV in India.

In its report, market-researcher Springboard recommends that mobile-service providers should offer an "on-demand" pay-per-view option that does not bind users to a monthly subscription for mobile TV. Springboard also concludes that a close collaboration between mobile operators and broadcasters will create a profitable business model for mobile TV service in India.

That model makes sense, since "mobile TV marries the two dominant consumption trends of entertainment and mobile telephony in India," said Pandey, the Springboard Research manager.

In the U.S. and European markets, mobile TV has so far been a "mixed bag," according to a new study. The business potential is very large – an estimated $270 million in the next 12 months – but only if carriers can improve the quality of their offerings and the reliability of their service, both of which have been less than satisfactory.

The so-called "M: Metrics Study," commissioned by networking leader Tellabs Inc. (TLAB) – and released at the "Mobile World Congress" in Barcelona back in mid-February – found that the mobile TV market grew at an impressive 36% in 2007. However, the population of "former" mobile TV subscribers – those who cancelled out of dissatisfaction or other reasons – grew at nearly double that rate (68%).

However, the study also found that 60% of the former subscribers say that they would pay to watch mobile TV again if service quality and reliability significantly improved in the coming year. And by regaining just half the potential market lost due to those quality and reliability issues, mobile operators would achieve the $270 million revenue target, the study concluded.

At the Mobile World Congress, carriers were looking at market opportunities, crucial at a time when such things as airtime have become little more than a commodity service whose success or failure turns largely on service quality and price.

"Users decide which new services succeed, not the industry," said Tellabs Vice President Pat Dolan. "It’s challenging for operators to make a living as mere pipe vendors. By offering mobile content users enjoy, operators can increase revenue. Yet this necessitates network enhancements, as acceptance of high-bandwidth services depends on the quality, reliability and capacity of the mobile backhaul. Tellabs is working with many operators in addressing these issues, and we are confident the industry will progress further."

According to Tellabs, the research that it commissioned on Mobile TV users’ attitudes was conducted in the United Kingdom, Germany, Italy, France, Spain and, for the first time, the United States.

News and Related Story Links:

• International Business Times (India):
  India’s Mobile TV market set to touch $360 million in 2008.

• Japan Travel and Tourism:
  Akihabara – Japan’s Electronic Shopping Capitol.

• Wikipedia:
  Akihabara.

• Wikipedia:
  Doordarshan.

• MSNBC:
  Verizon Wireless launches live cell TV.

• Cnet.com:
  Cingular launches mobile-TV service.

• PRNewswire:
  Ongoing Fall in Viewer Retention Overshadows 36% Mobile TV Growth.

The first ever India-Africa summit concluded yesterday (Wednesday), having laid the groundwork for future cooperation between the regions.

In the years ahead, India will be competing with China for influence in a resource-rich continent that boasts strong supplies of gold, silver, cotton, cocoa, and copper and aluminum ore.

The two-day summit – attended by eight heads of African states and delegations from 14 African countries – culminated with the signing of the Delhi Declaration and the Africa-India Framework for Cooperation, two documents designed to build political and financial synergy. The accords stressed cooperation in agriculture, food security, technology, trade, energy and education.

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On Tuesday, Indian Prime Minister Manmohan Singh announced duty-free access to Indian markets for the world’s 50 least-developed countries, 34 of which are located in Africa. Singh also said India would more than double the size of credit lines to projects in Africa, from $2.15 billion in 2003 to 2004 to $5.4 billion in 2008 to 2009, and boost grants and aid to the continent to $500 million in the next five to six years.

"It sounds like something Beijing did a few years ago," Philip Aves, an economist at South Africa’s Institute of International Affairs, told the Financial Times. "It’s a mini-China approach to dealing with Africa. It has all the same elements, except on a much smaller scale."

In 2006, Beijing hosted the China-Africa Cooperation Forum, an event attended by more than 40 African heads of state.

However, Prime Minister Singh was also careful to point out that while China has clearly established economic and political inroads in the region, this is not a competition.

"We are not in any race or competition with China or any other country. The desire of India and Africa to work together is not new," Singh said. "We are willing to offer whatever help we can to build capabilities in Africa. We share a colonial past and have been partners for a long time."

Still, it’s hard to ignore the parallels between China and India. Both countries are undergoing a major financial and industrial reformation as their economies grow at an unprecedented pace. India has a population of 1.1 billion people, while China is home to 1.3 billion. In the next several years those populations will grow into the largest consumer class the world has ever known and the growing need for resources and infrastructure make Africa, with its vast resources and proximity, an ideal partner.

India’s trade with Africa has soared from $967 million in 1991 to $30 billion in 2007 and 2008. However, the value of China’s trade with Africa, smaller than that of India as recently as 1999, has blossomed to $55 billion. African exports to China grew 48% between 1999 and 2004, versus a 14% jump in exports to India.

India also lags China in terms of direct investment. Chinese corporations have made large-scale investments in Africa over the past decade, and those investments are paying off. For example, Chinese companies built 80% of all new roads in the city of Rwanda. And China’s Civil Engineering Construction Corporation is building an $8.3 billion railroad linking Lagos and Kano.

However, while India trails China significantly in terms of infrastructure, trade and investment, there may be an opportunity for India to capitalize on the Chinese developments. Indian multinationals like Videocon Industries Ltd., Suzion Energy Ltd., The Indian Hotels Company, and Tata Motors Ltd. (TTM) are moving parts of their businesses to Africa, bringing jobs and expertise with them. 

"Anyone who has lived in both India and China will agree that the Chinese have been far more successful at creating mass urban and cross-country infrastructure," said Dr. Aditya Dev Sood of the Center for Knowledge Societies. "On the other hand, just having quality infrastructure is not enough for Africa – the continent needs jobs, and that’s something Indian service sector companies can provide."

Regardless of which country ends up with a bigger stake in the continent, Africa appears to be the biggest winner so far with two of the world’s fastest growing economies competing to infuse the region with jobs, capital, and infrastructure. 

News and Related Story Links:

• Financial Times:
  India follows China’s path in Africa

• CKS:
  Emerging Economy Report

• BusinessWire:
  ‘The Tata-fication of Africa: Indian Corporations Will Drive Innovation and Investment in Africa’ Emerging Economy Report by CKS

• Money Morning:
  Is China Annexing Africa?

• Money Morning:
  Despite Economic Challenges, Investors See Profit Potential in South Africa

The U.S. financial services sector has been devastated by the widespread collapse of mortgage-backed assets, but banking, financial, services, and insurance (BFSI) operations in India have been markedly less affected.

The BFSI segment has historically been the highest spender on technology and accounts for a substantial portion of revenues generated at world-renowned Indian information technologies companies. If quarterly results are any indication, BFSI operations for Indian IT service providers such as Infosys Technologies (INFY), Wipro Ltd. (WIT), and Tecsys Inc. (TCS) – India’s three largest IT firms – are flourishing.

Infosys’ BFSI segment recorded 7% sequential growth in the October-December quarter while Wipro Technologies posted 9.8% growth. Meanwhile BFSI at TCS accounted for 44% of the company’s third quarter revenue. The three companies have reported a surge of 20%-25% in their collective third quarter profit, and added 57,554 people to their payrolls in 2007.

The BFSI segment for Cognizant Technology Solutions, another high-powered Indian IT firm, accounted for 47% of the company’s revenue, an increase of 7% for the quarter.

That doesn’t mean that the Indian economy is invulnerable to the faltering U.S. economy.

"The environment for the industry as a whole is cautious and positive," Kris Gopalakrishnan told Reuters in an interview.

But BFSI-related revenue is the bright spot in a struggling IT market, as a 12% rise in the rupee against the dollar in 2007, soaring wages, and growth worries in the United States hammered IT shares last year.

The Reserve Bank of India (RBI) estimates that the dollar’s declining value added $7 billion to India’s external debt.

The U.S. Federal Reserve has slashed its key rate by 1.25% in the past two weeks greatly increasing liquidity and further weakening the dollar. Its widely expected that the RBI will hold rates steady at a six-year high of 7.75% for the for the next several months at least, as it struggles to curb inflation.

However, if conditions in the U.S. continue to deteriorate, the Reserve Bank could reverse its course. "India cannot be totally immune to global developments," Governor Yaga Venugopal Reddy said earlier this week. "While the focus has generally been on managing excess capital inflows, it is essential not to exclude the possibility of some change in course, due to any abrupt changes in sentiment," he said in a statement.

News and Related Story Links:

• The Economic Times:
  IT firms not to be affected by looming US credit turmoil

• Bloomberg:
  India May Keep Rates at Six-Year High Amid Inflation

• Money Morning:
  Analysts Cut India’s 2008 GDP Forecast; Businesses Still Attracted to the Market

India’s poor domestic infrastructure, high population and threatening levels of unemployment will slow the country’s real gross domestic product [GDP] growth, Moody’s Economy.com said in a report.

It forecasted India’s real GDP to slow to 8.0% in 2008, down from the 8.8% it posted in 2007, Thomson Financial reported. Other reasons for the slowdown are slowing consumer spending, reduced demand for housing and government controls to tighten monetary policy, the econometric-research unit of Moody’s Corp. (MCO) reported.

That’s a full percentage point below the forecast from India’s government.

The Challenges Posed by Growth

Growing 8.0% a year isn’t a problem, per se, but it can create problems if that economic expansion isn’t properly managed.

That’s why the government has been particularly strict on controlling inflation; since October 2004, the Reserve Bank of India has raised its benchmark interest rate nine times. It also capped retail fuel prices. Both tactics have helped the country hold inflation below its year-end target for the eighth month.

However, one of the government’s shortfalls is its expectancy that the country’s strong organic growth can keep pace with the demands of its soaring population. Moody’s said that while wages are increasing, fewer labor-intensive jobs are being created, which could spark an escalation in unemployment for the country’s poor and blue-collar working classes.

Nor can the government keep pace with the country’s exploding growth, notes Karim Rahemtulla, an expert on India investing who recently led an investors’ trip to that country, exploring its financial hotspots, stock exchanges and promising companies.

"The roads are a mess. The power grid is a mess. Everything is a mess. I noticed it as soon as I set off for my hotel," he wrote of his trip in a November essay for Money Morning. "The Taj Mahal Hotel in Mumbai is a fabulous place, but despite being just 15 miles from the airport, it took an hour-and-a-half to get there."

Branson Wants Some Air Time

Some of the growth obstacles are of the country’s own making. One example: India doesn’t allow foreign airlines to take stakes in local carriers.

That apparent roadblock prompted Virgin Group Ltd.’s billionaire chairman, Sir Richard Branson, and U.K. Prime Minister Gordon Brown, to visit India last week to lobby its government to loosen trade restrictions between the countries. Aviation, an industry that’s growing more than 25% annually in India, was on the agenda.

Branson, who said he has been "lobbying [to try] to get international flights to and from India" for 15 years, didn’t just make appeals to the government on this trip: He also appealed to the country’s growing consumer base via the media.

"There should be no barriers to the entry of any company… this is in the interest of the consumer," Branson told reporters in New Delhi.

Branson also hinted at coming back to India in a few weeks to develop a mobile-phone venture, but provided no details.

India is the world’s hottest mobile phone market, and industry heavyweights are salivating over the region’s possibilities – not just because of its growing population, but also because there are hundreds of millions of people without mobile phones, meaning the market still has tremendous new-customer potential.

And Branson’s not alone. Even before he mentioned his own interest, Britain’s Vodafone Group PLC (VOD) disclosed plans for a $6 billion investment in India’s mobile phone market over the next three years. Vodafone currently has 40 million subscribers in India and has set a target of 100 million.

News and Related Story Links:

• Thomson Financial News:
  Indian growth to moderate in 2008 on tight monetary policy – Moody’s Economy.com

• Money Morning:
  India Forecasts 9% GDP Growth and $30 Billion in Overseas Investment in 2008

• Money Morning:
  Snapshot From India: Advice on Stocks, the Rupee, High Tech and Real Estate

• Wikipedia:
  Richard Branson

• Thomson Financial News:
  Branson Wants A Slice Of Indian Aviation

• Money Morning Economic Analysis:
  Goldman Sachs, India Expert Rahemtulla Both Predict a Stronger Indian Rupee, See Investment Opportunities

• Money Morning Special Investment Research Report:
  Outlook 2008: Five Ways to Profit Even If India’s Growth Slows in the New Year.