2G-BASICS

2G (or 2-G) is short for second-generation wireless telephone technology. Three primary benefits of 2G networks over their predecessors were that phone conversations were digitally encrypted; 2G systems were significantly more efficient on the spectrum allowing for far greater mobile phone penetration levels; and 2G introduced data services for mobile, starting with SMS text messages2G technologies can be divided into TDMA-based and CDMA-based standards depending on the type of multiplexing used

Capacity

Using digital signals between the handsets and the towers increases system capacity in two key ways:

1. Digital voice data can be compressed and multiplexed much more effectively than analog voice encodings through the use of various codecs, allowing more calls to be packed into the same amount of radio bandwidth.

2. The digital systems were designed to emit less radio power from the handsets. This meant that cells could be smaller; so more cells could be placed in the same amount of space. This was also made possible by cell towers and related equipment getting less expensive.

Advantages

1. The lower power emissions helped address health concerns.

2. Going all-digital allowed for the introduction of digital data services, such as SMS and email.

3. Greatly reduced fraud. With analog systems it was possible to have two or more "cloned" handsets that had the same phone number.

4. Enhanced privacy. A key digital advantage not often mentioned is that digital cellular calls are much harder to eavesdrop on by use of radio scanners. While the security algorithms used have proved not to be as secure as initially advertised, 2G phones are immensely more private than 1G phones, which have no protection against eavesdropping.

Disadvantages

1. In less populous areas, the weaker digital signal may not be sufficient to reach a cell tower. This tends to be a particular problem on 2G systems deployed on higher frequencies, but is mostly not a problem on 2G systems deployed on lower frequencies. National regulations differ greatly among countries which dictate where 2G can be deployed.

2. Analog has a smooth decay curve, digital a jagged steppy one. This can be both an advantage and a disadvantage. Under good conditions, digital will sound better. Under slightly worse conditions, analog will experience static, while digital has occasional dropouts. As conditions worsen, though, digital will start to completely fail, by dropping calls or being unintelligible, while analog slowly gets worse, generally holding a call longer and allowing at least a few words to get through.

3. While digital calls tend to be free of static and background noise, the lossy compression used by the codecs takes a toll; the range of sound that they convey is reduced. You'll hear less of the tonality of someone's voice talking on a digital cellphone, but you will hear it more clearly.

FDI in India

Foreign Direct Investment (FDI) flows are usually preferred over other forms of external finance because they are non-debt creating, non-volatile and their returns depend on the performance of the projects financed by the investors. FDI also facilitates international trade and transfer of knowledge, skills and technology. In a world of increased competition and rapid technological change, their complimentary and catalytic role can be very valuable

In recent years privatization and dis-investment of public enterprises have become an important channel for the flow of FDI into many emerging economies. FDI plays a pivotal role in the development of India's economy. It is an integral part of the global economic system. Advantages of FDI can be enjoyed to full extent through various national policies and international investment architecture. Both the factors contribute enormously to the maximum FDI inflows in India, which stimulates the economic development of the country.

Enhanced international response and powerful sectoral productivity ratios in India are incessantly drawing the attention of the global investors in India. Other aspects being characterized to the resumption in foreign direct investment (FDI) recently entail growing client assurance in the market.

India proudly features in the third slot of global direct investment destinations, despite of the recession and as per the latest report by United Nations Conference on Trade and Development (UNCTAD), it will retain its slot in the next two years.

India drew FDI influx of US$ 1.74 billion during November 2009 which is 60% more than US$ 1.08 billion procured in the previous fiscal. As per the information produced by Department of Industrial Policy and Promotion (DIPP), the collective amount of FDI influx 1991 to 2009 stood at US$ 127.46 billion

The services industry entailing fiscal and non-fiscal services drew FDI valued US$ 3.54 billion during 2009-10, while software and hardware industry acquired around US$ 595 million. In the same period the telecommunications industry obtained US$ 2.36 billion of FDI.

FDI Scenario in India

The aggregate cost of 32 domestic mergers and acquisition (M&A) agreements in India in January 2010 stood at US$ 2,167 million against 8 deals amounting to US$ 1,324 million and 28 deals amounting to US$ 223 million in 2009 and 2008, respectively.

In the fiscal year 2009, developing economies gained a massive share of 51.6% FDI, more than what the developed nations gained, as per the survey by Ernst & Young on globalization. This was chiefly because of major decline in FDI into industrial markets, that was 50% less than FDI in 2008. From 4% of 2004 to 8% of 2005, the nation's endowments in infrastructure industry doubled, as per the report by Planning Commission of India.

With the fiscal structure gaining momentum, endowment proposals in India Inc witnessed an upsurge of around 16% in 2009 to US$ 345.3, as per the report conducted by a premiere sectoral body. In 2009, nine tenders contributing total FDI of US$ 112.25 million was sanctioned by the central administration. Among the sanctioned tenders, Mitsui and Company of Japan is expected to contribute US$ 69.83 million to set-up a fully governed subsidiary in the warehousing industry.

In January 2010, the Indian government gave its consent to 14 FDI tenders which are likely to bring foreign investment amounting to US$ 157.89 million. These encompass:

• US$ 58.82 million worth FDI tender by Asset Reconstruction Company

• FDI valuing US$ 44.39 million by Standard Chartered Bank that is likely to elevate to 100% from 74.9% in its portfolio management arm

• Tenders by SaharaOne, KS Oils and NDTV Imagine

• NDTV Lifestyle tender worth US$ 54.28 million

• Tender by India Infrastructure Development Fund based in Mauritius that is likely to bring US$ 517.29 million

FDI in India - Policy Initiatives

The Indian government has assured to release an improvised FDI policy in every six months. The offers announced by Union Finance Minister, Pranab Mukherjee, in Union Budget 2010-11, to enhance investment ambiance in India on February 26, 2010 entail:

• Measures implemented to un-complicate the FDI system

• System for computation of indirect foreign investment in Indian firms has been comprehensively classified.

• Entire liberalization of costing and imbursement of technology transmit charges and trademark, and royalty expenses.

Additionally, the Indian government has permitted the Foreign Investment Promotion Board (FIPB), to sanction FDI tenders of up to US$ 358.3 million. Previously all the tenders that entailed foreign direct investment of more than US$ 129.16 million were presented in front of Cabinet Committee of Economic Affairs (CCEA) for authorization. As the Union Home Minister, Mr P Chidambaram, the exemption would accelerate foreign direct investment inflow.

An Overview of Advantages of FDI-

Foreign Direct Investment in India is allowed through four basic routes namely, financial collaborations, technical collaborations and joint ventures, capital markets via Euro issues, and private placements or preferential allotments.

FDI inflow helps the developing countries to develop a transparent, broad, and effective policy environment for investment issues as well as, builds human and institutional capacities to execute the same.

Benefits of Foreign Direct Investment-

Attracting foreign direct investment has become an integral part of the economic development strategies for India. FDI ensures a huge amount of domestic capital, production level, and employment opportunities in the developing countries, which is a major step towards the economic growth of the country. FDI has been a booming factor that has bolstered the economic life of India, but on the other hand it is also being blamed for ousting domestic inflows. FDI is also claimed to have lowered few regulatory standards in terms of investment patterns. The effects of FDI are by and large transformative. The incorporation of a range of well-composed and relevant policies will boost up the profit ratio from Foreign Direct Investment higher. Some of the biggest advantages of FDI enjoyed by India have been listed as under:

Economic growth- This is one of the major sectors, which is enormously benefited from foreign direct investment. A remarkable inflow of FDI in various industrial units in India has boosted the economic life of country.

Trade- Foreign Direct Investments have opened a wide spectrum of opportunities in the trading of goods and services in India both in terms of import and export production. Products of superior quality are manufactured by various industries in India due to greater amount of FDI inflows in the country.

Employment and skill levels- FDI has also ensured a number of employment opportunities by aiding the setting up of industrial units in various corners of India.

Technology diffusion and knowledge transfer- FDI apparently helps in the outsourcing of knowledge from India especially in the Information Technology sector. It helps in developing the know-how process in India in terms of enhancing the technological advancement in India.

Linkages and spillover to domestic firms- Various foreign firms are now occupying a position in the Indian market through Joint Ventures and collaboration concerns. The maximum amount of the profits gained by the foreign firms through these joint ventures is spent on the Indian market.

INFRASTRUCTURE PROJECTS & MODE OF EXECUTION

i) Build-and-Transfer (BT) – A contractual arrangement whereby the Developer undertakes the financing and construction of a given infrastructure or development facility and after its completion hands it over to the Government, Government Agency or the Local Authority. The Government, Government Agency or the Local Authority would reimburse the total Project investment, on the basis of an agreed schedule. This arrangement may be employed in the construction of any infrastructure or development Projects, including critical facilities, which for security or strategic reasons, must be operated directly by the Government or Government Agency or the Local Authority.

(ii) Build-Lease-and-Transfer (BLT) – A contractual arrangement whereby a Developer undertakes to finance and construct Infrastructure Project and upon its completion hands it over to the Government or Government Agency or the Local Authority concerned on a lease arrangement for a fixed period, after which ownership of the facility is automatically transferred to the Government or Government Agency or the Local Authority concerned.

(iii) Build-Operate-and-Transfer (BOT)–A contractual arrangement whereby the Developer undertakes the construction, including financing, of a given infrastructure facility, and the operation and maintenance thereof. The Developer operates the facility over a fixed term during which he is allowed to a charge facility users appropriate tolls, fees, rentals and charges not exceeding those proposed in the bid or as negotiated and incorporated in the Contract to enable the recovery of investment in the Project. The Developer transfers the facility to the Government or Government Agency or the Local Authority concerned at the end of the fixed term that shall be specified in the Concession Agreement. This shall include a supply-and-operate situation which is a Contractual arrangement whereby the supplier of equipment and machinery for a given infrastructure facility, if the interest of the Government, Government Agency or the Local Authority so requires, operates the facility providing in the process technology transfer and training to Government, Government Agency or the Local Authority nominated individuals.

(iv) Build-Own-and-Operate (BOO) – A contractual arrangement whereby a Developer is authorized to finance, construct, own, operate and maintain an Infrastructure or Development facility from which the Developer is allowed to recover this total investment by collecting user levies from facility users. Under his Project, the Developer owns the assets of the facility and may choose to assign its operation and maintenance to a facility operator. The Transfer of the facility to the Government, Government Agency or the Local Authority is not envisaged in this structure; however, the Government, Government Agency or Local Authority may terminate its obligations after specified time period..

(v) Build-Own-Operate-Transfer (BOOT) – A contractual arrangement whereby a Developer is authorized to finance, construct, maintain and operate a Project and whereby such Project is to vest in the Developer for a specified period. During the operation period, the Developer will be permitted to charge user levies specified in the Concession Agreement, to recover the investment made in the Project. The Developer is liable to transfer the Project to the Government, Government Agency or the Local Authority after the expiry of the specified period of operation.

(vi) Build-Transfer-and-Operate (BTO ) – A contractual arrangement whereby the Government or Government Agency or the Local Authority contracts out an infrastructure facility to a Developer to construct the facility on a turn-key basis, assuming cost overruns, delays and specified performance risks. Once the facility is commissioned satisfactorily, the Developer is given the right to operate the facility and collect user levies under a Concession Agreement. The title of the facilities always vests with the Government, Government Agency or the Local Authority in this arrangement.

(vii) Contract-Add-and-Operate ( CAO ) – A contractual arrangement whereby the Developer adds to an existing infrastructure facility which it rents from the Government, Government Agency or the Local Authority and operates the expanded Project and collects user levies, to recover the investment over an agreed franchise period. There may or may not be a transfer arrangement with regard to the added facility provided by the Developer.

(viii) Develop-Operate-and-Transfer (DOT) – A contractual arrangement whereby favorable conditions external to a new Infrastructure Project, which is to be built by a Developer, are integrated into the BOT arrangement by giving that entity the right to develop adjoining property and thus, enjoy some of the benefits the investment creates such as higher

INDIAN ECONOMY SEPTEMBER 2010

The overall mood of the industry looks promising with growth at 10.6 per cent for the five month period , April- to August 2010. However, growth slipped to 5.6 per cent for the month of August 2010 from 10 percent plus in the previous year.

Capital goods production remained volatile as growth dipped into the negative zone on two occasions during the present fiscal after a steep rise. However, the average growth stood at 29 per cent during the period April- August as against 3.4 percent increase in the corresponding period of previous year. Output in the basic and intermediate goods rose but not as much as seen in the previous year. Consumer goods segment went up by 8.6 percent during the period from April to August in 2010-11, as against 3.6 percent increase in output in the previous year and the rise was seen on account of consumer durables segment.

8 of the 17 industry segments were seen to surpass the growth rate during the first five months of FY11 as compared to the growth observed in the previous year.

The six core infrastructure industries continues to remain positive cumulatively up to August 2010, however the pace of growth is slightly lower as compared to the growth posted in the previous year. Growth in the overall infrastructure industries mainly came from crude petroleum, petroleum refinery and steel.

Government’s efforts in taming inflation brought positive results. In September 2010 the rate of inflation was brought under 10 per cent. Currently the rate of inflation averaged for the month of September 2010 was 8.62 percent, this has come down from 9.55 percent in August and 10.3 in July 2010.

During the month of September the confidence of the foreign investors in the Indian stock market was seen to go up. The index Sensex was observed to swing between 19-20 K and Nifty was seen move between 5- 6 K points.

In August FY 11, M3 decelerated to 15 percent calculated on a Y-o-Y basis as compared to 19 percent in the previous year. The percentage changed in the net bank credit to the government halved as compared to the increase observed in the previous year. However, borrowings by the commercial sector were seen to increase by 18.3 per cent vis-a-vis the increase of 13.8 percent in the previous year.

Highlights – September 2010

2 : PageInvestments in the government securities slowed compared to the previous year and so were the aggregate deposits. The total credit off-take increased which was on account non-food segment.

Fiscal deficit up to August this year was lower at Rs 151425 crores compared to the fiscal deficit recorded in the previous year which was at Rs 182290 crores . The reasons for low fiscal deficits were increase in the revenue receipts ( non tax source ) on account of disinvestments in the PSUs and auction of 3G and BWA spectrum.

Total merchandise trade from April – August FY11 stood at USD 227 billion compared to the total trade of USD 171.9 billion in the corresponding period of previous year.

The trade deficit widened by 56 billion ( upto August) as the merchandise exports cumulatively from April to August 2010-11 rose to USD 85 billion as compared to USD 66 billion in the 2009-10. Imports were also seen to increase by 33 per cent to USD 141 billion.

FDI is an area which requires special attention because of its inherent long term investment intentions. Presently the FDI investments received up to August this year is running behind the investments received in the previous year.

Current state of Indian Economy August 2010

Highlights – August 2010
July 2010 overall industrial growth numbers continued on the path of buoyancy. The high growth in the overall industrial output was solely on account of the heavyweight manufacturing sector. The other two sectors also remained in the positive zone in

July and during the period from April – July 2010. However, the growth in output was lower than the growth seen in the corresponding period of previous year (FY10). Going by the use-based classification we see a huge rise in the production of capital goods which rose by 63 percent in July 2010 as compared to the rise of 1.7 percent in the same month of previous year. The growth in the consumer goods output swelled only on account the durables segment.

The industry segments that registered a sizable increase in output were food products, cotton textiles, jute products, paper products , rubber and plastic products, petroleum , coal and tar, metal products and among the capital goods were the machinery and equipment , transport equipment and parts.
The growth momentum of the six core infrastructure industries was maintained with the increase in petroleum products ( crude petroleum and petroleum refinery). Production in coal and power remained positive, however, the growth numbers were not higher than the previous year. The two segments that were found in the negative territory were cement and finished steel.

The moderation in overall inflation could be observed in July 2010, 10 percent in July from 11 percent in the previous month. However, inflation was found to be much higher when compared with the inflation recorded in July last year and may require more time and steps by the government to cool down to targeted levels. The prices of items / article groups that fueled the overall price to rise to such levels were the food and non-food articles (primary goods), fuel products, beverages, textiles, wood, rubber, chemicals , basic metals , machinery and transport equipments.

The broad money supply rose by 3.4 percent over the period from April to July 2010-11, this was lower than the M3 recorded in same period of previous year. The aggregate deposits was also seen to expand slowly by 3.3 percent during the period from April to July of the current fiscal as compared to the expansion of 6.2 percent during the same period of 2009-10. The bank credit rose by 3.5 percent calculated in July over April 2010.
The total revenue of the government stepped up sharply this year with more than twofold increase, from the Rs 105378 crores up to July 2009-10 to Rs 238524 crores up to the month of
2:Page
July of current fiscal . Consequently, the magnitude of fiscal deficit has contracted by almost 43 percent during this period of 2010-11 over the previous year.
According to RBI, government acquired higher than anticipated revenue in July from the auction of 3G and BWG and revenue from taxes helped the holding back of fiscal deficit within the targeted level of 5.5 %.

The buoyancy in tax collection in July has been on account of impressive collection in the direct and indirect taxes. However, in growth terms the indirect tax was observed to be much higher as compared to the growth in direct taxes.

The indices continue to swing between 16 K to 17K points. In July 2010 it rose to the level of 17.5 K points and currently in September 2010 we saw the Indian stock market rise to the level of 20 K points again.
The overall merchandise exports slowed to 13 percent in the fourth month ( July) of the present fiscal as compared to the 30 plus percent growth registered in the previous month of this year. It is early for any comment on the trend without the trade numbers of August and September.

The total foreign investment swelled to 10.8 billion up to July on the back of inflows in the portfolio investment category. High investment activity by the FIIs was witnessed during the month, this high inflows is what has led to increased portfolio investments ( USD 9.1 billion). FDI received during the month was only USD 1.7 billion .
Further increase in the forex reserves has been witnessed; this has been observed to rise from USD 275 billion to USD 284 billion and enough to cover 11 months of imports.

ADB hikes GDP forecast to 8.5% but warns about inflation

The Asian Development Bank (ADB) raised India’s growth forecast for the current fiscal to 8.5 per cent from 8.2 per cent but expressed concern over persistent high inflation and rising value of rupee which could undermine future economic expansion.

“Growth is being supported by robust investment, increased capital inflows, and stronger industrial output, buoyed by rising consumer demand,” said ADB Outlook Update.

The multilateral lending agency had projected a growth rate of 8.2 per cent for 2010-11 in April. For the next financial year (2011-12), ADB has retained its earlier projection of 8.7 per cent.

ADB’s growth projection for current fiscal is the same as had been forecast by the Finance Ministry, the Reserve Bank of India and the Prime Minister’s Economic Advisory Council.

The multilateral lending agency, however, expects the average inflation to be 7.5 per cent during the current fiscal as against its earlier projection of 5.5 per cent. “High food prices (will) remain a near-term concern”, it added.

The rate of price rise, according to ADB, is likely to be at the same level during the next fiscal. The inflation, according to the new Wholesale Price Index with base year 2004-05 was 8.5 per cent in August and food inflation was 15.10 per cent for week ended September 4.

ADB also warned that the raising value of rupee does not augur well for the Indian economy in the coming years. Rupee appreciated more than 11 per cent in real terms between August 2009 and August 2010, it added, stating that this “poses an additional challenge for policy makers as they seek to maintain high growth while winding back the monetary and fiscal stimulus measures used to help the economy recover from the global economic crisis“.

High inflation and rupee’s sharp appreciation, it added, could erode India’s export competitiveness and its plans to further expand economic growth to 9-10 per cent in coming years.

Pointing out that RBI was projecting overall inflation to moderate to 6 per cent by March-end, the report said, “if price pressures do not abate as expected, the central bank will be hard pressed to intervene in the foreign exchange market to dampen rupee appreciation.”

CURRENT AFFAIRS 2010

IMD unveils high-tech weather forecasting system A state-of-the-art Integrated Forecasting and Communication System was unveiled at the India Meteorology Department (IMD) today that is expected to provide more accurate weather data. Dynamic weather prediction models using super computers and very highly sophisticated software will start giving us more and more accurate data. Agriculture, like so many sectors of Indian economy, is highly dependent on weather and climate and it was good that the IMD was moving away from he conventional forms of weather forecast to an advanced one. "Increasing socio-economic benefits of meteorology in all fields, saving lives and protecting goods in a changing climate is the permanent mission of the India Meteorological Department." The governments took it as one of its priorities and a Rs 1,000 crore programme was sanctioned by Planning Commission in 2007 and crucial components including setting up of automatic weather stations, Doppler Radars, connecting them with most high speed digital inter-connecting systems and network as well as buying super computers for numerical weather prediction were completed.

INDIAN ECONOMY-OVERVIEW2010

Farm sector may achieve 3-3.5 pc growth in 11th plan

India's farm sector is likely to grow by 3-3.5 per cent annually during the 11th Five-Year Plan ending 2011-12, lower than the target of four per cent, the Planning Commission said.

"The rate of growth in agriculture in the Eleventh Plan is likely to be better than in the Tenth Plan. However, it may not reach the target of four per cent per year and instead range between 3 to 3.5 per cent per year," according to a Commission's note for discussion in the National Development Council meeting on July 24.

The Plan Panel, however, noted that agriculture production in 2010-11 would be better compared to last year, when the crop was severely hit by the worst drought in 32 years.

The agriculture sector, which contributes 17 per cent to GDP and employs 60 per cent of the population, grew by 0.2 per cent in 2009-10 fiscal. In the first three year of the current plan period, the average growth was 2.2 per cent.

The Planning Commission emphasised on undertaking steps to increase production so that the four per cent growth target is "at least achieved in the Twelfth Plan period".

"Food Security will continue to be an important concern and we need to plan for growth in foodgrain production of around 2 to 2.5 per cent per year," the note said.

The allied sectors (including dairy and fisheries) will have to grow at 6-7 per cent, it added. Highlighting important steps taken in the last few years, Plan Panel said that greater efforts were needed to achieve the targeted growth. The Commission noted that bio-technology holds great potential for expanding agri-productivity, but it also "raises concerns about safety in connection with the introduction of GM technology in foods".

The panel suggested that it was essential to establish a regulatory system that will ensure that safety is not compromised.

"The central government should expedite the establishment of statutory Bio-technology Regulatory Board, with appropriate scientific expertise as quickly as possible," the note said. The panel asked states to pay more attention to agriculture development by strengthening research, extension system, state agri-universities and encouraging private sector in seed development.

Describing extension service as the "weakest link", the panel said states should strengthen the extension system. "It is not an exaggeration to say that the extension service has collapsed in most states with large unfilled vacancies and also poor accountability of personnel where they exist," the note said.