India gains more say in the World Bank

The country is now the seventh largest member in terms of voting power, with the United States leading the table with 15.85%, Japan (6.84%), China (4.42%), Germany (4%), France (3.75%) and the United Kingdom (3.75%)

India saw its say in the World Bank increasing a bit after member nations approved a shift in voting rights, while China’s voice in the funding agency grew louder than that of Germany, France and the UK.

Both India and China has enjoyed an identical 2.77% voting rights. While India’s voting power stands increased to 2.91%, China leaped to 4.42%—placing it third overall.

India is now the seventh largest member in terms of voting power, with the United States leading the table with 15.85%, Japan (6.84%), China (4.42%), Germany (4%), France (3.75%) and the United Kingdom (3.75%).

Membership of the financial institution gives certain voting rights that are the same for all countries, but additional votes are granted depending on a country’s financial contributions to the organisation.

Since 2008, emerging economies have overall gained 4.59% in voting rights.

“The change in voting power helps us better reflect the realities of a new multi-polar global economy where developing countries are now key global players,” said World Bank president Robert B Zoellick.

The member-nations also agreed to raise more funds for global aid at the annual spring meeting of the World Bank and the International Monetary Fund (IMF).

The change gives emerging nations more say in how the bank is run and how its funds are disbursed.

“This change in voting share, giving developing countries over 47%, is a significant step,” Mr Zoellick told reporters, hoping that shareholders will review the approach in 2015.

Mr Zoellick said that at a time when multilateral agreements between developed and developing countries have proved elusive, this accord is all the more significant.

This increase fulfils the Development Committee commitment in Istanbul in October 2009 to generate a significant increase of at least 3 percentage points in Developing and Transition Countries’ (DTCs) voting power.

“We, in calculating this, looked at the size of the world economy, using purchasing power but also exchange rate measures, but also, as a development institution, the contribution to development including the contribution to IDA, our fund for the poorest, the World Bank head said.

The governments also approved over $90 billion in extra money for the World Bank’s various arms that provide aid and capital to member countries.

Mr Zoellick said that the shift in voting powers was designed to try to reflect past contributions, citing the example of Japan that has been “a very gracious contributor” and to encourage new ones, including developing and transition countries.

The 186 countries that own the World Bank Group also endorsed boosting its capital by more than $86 billion for the International Bank for Reconstruction and Development (IBRD), the arm that lends to developing countries.

The increase would come from a general capital increase and a selective capital increase linked to the change in voting powers, including $5.10 billion in paid-in capital.

It further agreed on a $200-million increase in the capital of the International Finance Corporation (IFC), the World Bank Group’s private sector arm, as part of an increase in shares for developing and transition countries.

IFC will also, subject to board approval, consider raising additional capital through issuing a hybrid bond to shareholding countries and through retaining earnings.

The IBRD 2010 realignment will result from a selective capital increase of $27.80 billion, including paid-in capital of $1.60 billion.

Noting that this represents a dynamic transformation for the World Bank Group, Mr Zoellick said that the additional capital means that the bank will no longer face the possibility that it would have to cut back its lending later this year.

“We came into this crisis well-capitalised, thanks to sound financial policies. We have provided a record $105 billion in financial support since the crisis began to bite in July of 2008. This additional capital means that we will be able to continue to play the role that is demanded of us,” he said.


Compact car sales grow, but margins remain stressed: CRISIL

The ratings agency has said that costs have increased as manufacturers have stepped up product development expenditure, and incurred higher marketing and selling expenses

Ratings agency CRISIL has said that according to its research study, during FY11, margins of car manufacturers will be under pressure despite sustained growth in compact car volumes.

CRISIL has said that cost pressure has been mounting on car manufacturers with a decline in sales per model. Costs have increased as manufacturers have stepped up product development expenditure, and incurred higher marketing and selling expenses per unit of sales.

“To maintain margins and benefit from scale efficiency, car manufacturers would need to increase sales per model in the compact car segment rather than focus on overall sales by introducing more models,” said Manoj Mohta, head for research, CRISIL.

During FY11, total sales of compact cars are expected to increase by 11%-13%. However, sales per model or variant will be 6% to 7% lower than the previous year due to growing competition and new model launches, the ratings agency said in a release.

“While total sales in the compact car segment have increased 14% each year from 2006-07 to 2009-10, average sales per model have declined 12%,” said Mr Mohta.

Over the past five years, competition has been intensifying in the compact car segment with an increase in the number of models and manufacturers. The number of compact car models increased to 21 from nine and the number of players to eight from five, between March 2005 and March 2010. The launch of four new models and entry of three players this fiscal will further intensify competition, it added.

Also, manufacturers have been offering more value-added features in compact car models such as power windows, power steering and electronic devices to maintain market share. These factors have added to the manufacturers' costs without a commensurate increase in realisations, the ratings agency added.


SAIL, JSPL and Tata Steel to benefit most from rise in iron ore prices

With captive mines under their belts, SAIL, JSPL and Tata Steel could emerge as the biggest winners due to rising iron ore prices. These companies are well placed to cash in on the subsequent rise in steel prices, while their raw material costs will remain comparatively on the lower side

With iron ore prices skyrocketing, steel companies like Steel Authority of India (SAIL), Jindal Steel and Power ltd (JSPL) and Tata Steel are likely to make the most of the situation.

All three companies have access to assured iron ore supplies from their own private mines. Unlike others, these companies are not dependent on external iron ore purchases.

Last week, we had reported on how iron prices in the spot market had increased due to low supply from Indian mines. Softening of iron ore prices looks unlikely as supply bottlenecks continue to haunt Indian mining activities. Iron ore prices have touched a high of $192 per tonne, moving closer to the all-time high of $200 per tonne reached in 2008. Industry sources expect a further increase of 10% to 20%.

Amid such a scenario, SAIL, JSPL and Tata Steel are expected to emerge as the biggest winners. According to a PTI report published last week, steel companies like Tata Steel, SAIL and JSW Steel have increased the prices of their products by about Rs6,000 a tonne since February 2010. This increase for Tata Steel and SAIL will go straight to their respective bottom-lines.

Among the smaller steel companies, Prakash Industries and Ispat industries are expected to benefit. Both these companies don’t have access to their own iron ore mines, but have reportedly enough raw material supply through long-term contracts. However, there are concerns on whether Prakash Industries will be able to use its long-term deals to its advantage.

SAIL, JSPL and Tata Steel will be able to jack up their selling prices, and will enjoy greater margins, thanks to lower input costs.

Last week, steel secretary Atul Chaturvedi had indicated that further fluctuation in steel prices was likely. “Steel prices could rise or fall by Rs2,000-Rs2,500 a tonne mainly due to fluctuation in prices of raw material in the next six months,” Mr Chaturvedi was quoted as saying. On an average, any change in iron ore prices could lead to a doubling of steel prices.



Shadi Katyal

7 years ago

True they will have a better profit margin but that does not mean that they will sell their products at below market prices. I fail to understand what the writer is trying to tell us.

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