Backed by splendid year-on-year growth in manufacturing sector and rising farm output, Indian economy grew at the fastest rate in the past three years in the June-ending quarter. While the economy expanded by 8.8%, the manufacturing sector grew by 12.4% and annual farm output rose by 2.8%.

The latest growth figures reiterates the fact that Asia’s third-largest economy did not lose momentum during the period, despite the slow pace of global recovery and concerns of another round of economic downturn. The country also had to deal with the near double-digit inflation, which demanded strong fiscal measures.

The Reserve Bank of India was in a dilemma earlier whether to go all out in containing the runaway inflation without harming the amazing run of the economy. The central bank has stated time and again that containing inflation is being giving precedence to other policy objectives and followed it up by hiking interest rates four times in the last four months. The fact that economy is sound and steady gives RBI ample space to maneuver and focus on inflation-control fiscal tightening measures.

The consistency in economic growth is mostly due to the buoyancy in the domestic consumer market. This is thoroughly reflected in the automobile sales, which rose by 38% in July, forcing car manufacturers to run their factories to the optimum capacity.

The manufacturing sector witnessed a robust growth of 12.4% y-o-y. This growth is substantial when compared to the growth percentage of 3.4% for the same period last year. The agriculture sector expanded by a healthy 2.8% during the quarter. The trend is expected to continue on good monsoon forecast.

The sturdy growth may prompt RBI to go in for another rate hike during its quarterly policy review scheduled on September 16.

In response to the discussion paper circulated by the Department of Industrial Policy and Promotion (DIPP) on permitting 100 per cent FDI in multi-brand retail, the Consumer Affairs Ministry has disclosed its views through a letter to the Commerce Ministry. While recommending 49% foreign investment in multi-brand retail, the ministry wants enforcement of a law at the state-level to protect small stores from the onslaught of big brands.

The Consumer Affairs Ministry has also put in a recommendation to set aside a significant chunk of investments for the development of back-end infrastructure, logistics and agro-processing, which is the dire need of the hour. To regulate the fiscal and social aspects of the retail sector, the ministry has sought legislation of the National Shopping Mall Regulation Act. This should also allow local stores to become franchises of multi-brand retail stores.

Meanwhile, the discussion on the topic is gaining momentum in the country with clearly demarcated supporters and opponents. The feedbacks received by DIPP till date reveals a huge chasm between the two groups. While the retailers and industry, both domestic and overseas, favor the introduction of FDI in multi-brand retail, the unorganized sector comprising of farmers, traders and shopkeepers are resisting the move with all their might.

At present, India allows 51% FDI in single-brand retailing and 100% FDI in wholesale or cash-and-carry operation. With Indian economy expanding at an amazing rate, backed by the growing domestic consumption, top international retailers are eagerly waiting for the legislation to enter multi-brand retail segment to exploit the opportunity. Global retailers Walmart and Carrefour are leaving no stones unturned to strengthen their case.

As Honda prepares to launch its lowest price car by next year in India,  Honda Motor Co is gearing up to increase their dealerships by 28 percent  and to increase advertising.  From the current outlets of 117 in 71 cities, Honda’s local unit will increase the outlets to 150 in 90 cities by 2012 March.

In an interview in Greater Noida, the Vice President for Marketing, Jnaneswar Sen confirmed this yesterday. According to Mr. Sen, in the second half of 2011, Honda Siel Cars India Ltd proposes to launch a car for less than Rs. 5,00,000

This Tokyo based car maker has witnesses a decline of 4 percent in their sales figures in India in the last four months despite the increase of almost 35 per cent worldwide. According to the Society of Indian automobile Manufacturers, cars that were less than four meters and prices less than Rs 50,00,000 accounted for close to 70 percent of the sales.

The car maker believes that opening more dealerships would get them closer to the customers and when combined with their aggressive advertising, they would be able to beat their rivals. The small car to be launched by the auto major would compete with Volkswagen AG’s Polo, Maruti Suzuki’s Swift, Nissan Motor Co.’s Micra and Hyundai Motor Co.’s i20.

Mr Sen also said “This is the fastest growing segment. If you consider the population of the country and the car penetration, the auto industry is barely scratching the surface. There is space for everybody.”

As per the reports from the consulting firm Ernst & young, India has close to eight cars per thousand people when compared to 24 in china, 231 in Russia and 435 in America.

It was also anticipated that the sales growth for cars in India would reduce to almost half this year due to the increase in the interest rates and new emission rules. However the car sales have grown by 25 percent as against the earlier forecast of 12 per cent.

Mr. Sen also said that Honda first plans to manufacture its small car at its factory in Greater Noida. Currently the plan has a capacity of producing 100,000 cars where as only 61,000 vehicles were being manufactured as of now.
In the later stages, the company will manufacture cars in western Rajasthan in its second plant once the demand picks up.

Delayed roll out services will now cost the new players, as the telecom department is on the verge of deciding the quantum of penalty. This could also include Etisalat DB, Loop, Sistema, Videocon, S Tel and Uninnor.  There are talks that Aircel Cellular might also be penalized for delayed roll outs.

Telecom regulations in India specified that the telecom companies cannot delay commercial launch of their services and deadlines have to be met. However, despite bagging licenses in 2008, January, these companies have missed their deadlines several times for commercial launches. The Department of Telecom, DoT which is the telecom regulator in India can exercise their powers and cancel the licenses of these companies for not having launched their services in circles, despite having received their licenses a year back. DoT is also in the process of examining several other proposals that will permit these new players to exit or sell out, thus leading to the consolidation in the telecom market.

Several new entrants have preferred not to comment on the current development. Shahid Usamn Balwa, the promoter of Etisalat DB has commented that as the company has fulfilled all their requirements this would not be appropriate to them. In case of Unnior, the other new entrant a source close to Uninor has commented “Technically, Uninor has completed rollouts in all 22 circles — the deals with tower companies shows its intent” and that the company had met all its commercial agreements and currently has 22,000 telecom towers across the country.

Finance ministry is being consulted by DoT to determine the amount of penalties’ that has to be levied on the telecos who have default their agreements as there have been changes in the calculation method. Barring Sistema Shyam, the Central Vigilance Commission is currently probing into the matter further to determine their reasons for the delay by these new players. The office of the Prime minister as asked for an explanation for the department of telecom for these delays.

Service providers like Etisalat DB has not yet offered full fledged services across the circles even after almost three years of presence in India, where as the service provider Loop Mobile currently offers services only in Mumbai. They both have committed only to technical launches in several circles and not full fledged services as yet. Out of the 22 circles, Videocon is currently offering services in just 5 circles and even though S Tel is offering services in all the six circles they have not been able to meet deadlines. Uninnor has also missed several of their deadlines in more than half of the circles.