ASEAN to sign discounted oil deal: official

Southeast Asian nations are to sign an energy security agreement on Sunday that will allow their members to buy oil at a discounted price during times of crisis, a senior official said.

"Under the agreement, oil exporting states will supply petroleum to a country that is facing a shortage at a lower price," said S. Pushpanathan, deputy secretary-general of the Association of Southeast Asian Nations (ASEAN).


"The high price of oil is not an issue now, but should there be a crisis in the future, ASEAN can provide self-help," he said on Saturday.


It was not immediately clear how large a price reduction the deal would involve, when it would kick in or who would administer the pact.


Pushpanathan said oil price volatility posed a challenge to sustainable economic growth in the 10 ASEAN member states.



The agreement would be signed at the bloc's annual summit in the Thai beach resort of Hua Hin, he added.


"Given that ASEAN is increasingly dependent on petroleum resources from outside the region, it is important for ASEAN member states to enhance the ability to respond to an energy emergency situation by ensuring the physical availability of oil," he said.


Oil prices have slumped since hitting a record high above 147 dollars in July, as the global economic slowdown has hammered world energy demand.



Prices have recently fallen to near five-year lows.

India begins aircraft carrier construction; to go in for more

Joining an elite club of nations capable of building large warships, India on Saturday began the construction of its first indigenous aircraft carrier at the Cochin Shipyard in Kochi and will go in for 2 to 3 more carriers in the heavier class.

Pressing a remote to lower the keel the ship's backbone into the construction dock of the shipyard, Defence Minister A K Antony said, "The Navy's carrier will showcase India's technological prowess and warships' building capabilities to the world. It will be the largest ever warship to be built in India."


The 40,000-tonne carrier will operate nearly 30 aircraft including the Russian MiG-29Ks fighters, Kamov-31 helicopters and the indigenous Light Combat Aircraft (LCA).


"This is a crucial milestone and an occasion to cherish in the shipbuilding traditions and maritime history of the nation. The culmination of this prestigious project, sometime in 2014, will transform India into an aircraft-building nation," Antony said.


He said that India will certainly produce more indigenous aircraft carrier, but in the heavier class category to meet the future challenges and needs of maritime security.



"We hope to operate two to three aircraft carriers simultaneously in the not too distant future," Mukherjee said.



"Our ever expanding maritime responsibilities require enhanced 'blue water' capabilities and to achieve this, integral air cover is a must. Our navy is one of the few carrier-operating navies worldwide," Antony said.


Among the naval powers of the world, only the US, Russia, France and the UK have carrier building capability. Even out of these four, UK is yet to build a carrier with a 40,000 tonne displacement.


India already possesses an aircraft carrier in the 29,000-tonne class, the INS Viraat bought from the British navy and it has seen 50 years of cumulative naval service.



The 45,000-tonne Admiral Gorshkov aircraft carrier was purchased from Russia in 2004 and has been re-christened as INS Vikramaditya and is likely to join Indian Navy in 2012 after repair and refit in the Russian shipyard Sevmash.


The uncertainty, conflict and threats from maritime terrorism, piracy, narcotics, smuggling and low-intensity conflict were perpetrated by both state and non-state actors, he said, adding "the security of the sea lanes and offshore infrastructure will have to be ensured for sustainable development".



Designed by the Navy's Design Organisation since January 2003 after the government sanction came, the project had gained stream in 2006 when the construction of the warships' building blocks began.


The shipyard has already completed about 8,100 tonne of work with steel, developed by DRDO and produced by SAIL.


"The Project-71, as the integrated aircraft carrier is called in the Navy parlance, was initially sanctioned Rs 3,260 crore by the government, but the project cost was likely to increase as the warship construction progressed," Cochin Shipyard's (CSL) Chairman and Managing Director Commodore (retired) M Jitendran told reporters earlier in the day.


Jitendran said the CSL had already built around 400 blocks of the total 874 blocks that would form the fully constructed carrier when it would be delivered in 2014.


He said the Navy and the CSL had jointly designed the carrier, but taken help from Russia's NBD for the aviation aspects of the warship and Italy's Fincantieri for the propulsion system integration.


Asked about the carrier's contract, Jitendran said they were expected to complete work on the warship by December 2010 and launch it into the water, but the delivery would take place on schedule in the middle of the next decade.


On plans for construction of heavier aircraft carrier in the future, he said the CSL currently did not possess the construction dock to build warships heavier than 40,000 tonnes, but if the government intended to give it the orders, expanding the shipyard was possible.



India 'safe' in the hands of armed forces: Antony


Addressing a function in Kochi after laying the keel of India's first Indigenous Aircraft Carrier (IAC), he said this was his last public function as the Defence Minister.


He said, "when I look back, I feel satisfied that I tried my level best to protect national interest and security. I got total support and cooperation from all my colleagues."


Stating that rapid industrial growth was increasing country's dependence on sea route he said "this necessitates security of our sealink communication and offshore infrastructure".


"The task of defending seafront security of the offshore installations and safeguard of the sealines make the task extremely challenging".


" Indian Navy has to take the lead in safeguarding the nation's vital security interest," he said.


Praising the Indian Naval designers, he said they proved that they could design a world class aircraft carrier.



Neither Chief Minister, V S Achutanandan, nor any of his Cabinet colleagues attended the function.


Replying to a query, Antony said "there is no proposal with the government to privatise the Cochin Shipyard Ltd."



He added that any such move would be opposed.

US increases stake in Citigroup

Citigroup and the US Treasury have reached a deal that sees the government substantially increase its stake in the ailing bank from 8% to 40%.

The deal does not require extra taxpayer investment, but is dependent on Citi raising extra private capital.

Citi shares ended down more 39% as investors worried about their stake in the bank being diluted by the move.

As one of the banks hardest hit by the continuing credit crisis, Citi has already gained $45bn in Treasury cash.

It also has guarantees protecting it from the bulk of losses on $306bn (£216bn) of risky investments.

The latest agreement involves the government converting some of its preferred stock in Citi to common shares.

As part of the deal, the bank will suspend paying dividends and will also install new independent directors on its board.

Battered

The bank made an $8.29bn loss in the final three months of 2008, and was forced to split into two new firms.

The government will only raise its stake to match that put up by private investors, and it has said it preferred banks to remain in private hands.

The treasury's Capital Assistance Programme allows banks such as Citi to borrow money from the government if they need more capital.

Last week, Citigroup's share price fell below $2 to an 18-year low.

In November, the US Treasury announced a $45bn rescue plan for the bank, accompanied by a $306bn guarantee for Citi's most risky loans, as part of its Troubled Asset Relief Program (Tarp).

At present the government's preferred shares represent a 7.8% holding in the company.

The move means Citi shareholders will see their stakes diluted and the government will have a much larger influence over the bank.

Citigroup, which two years ago was worth $273bn and is now worth about £20bn, was brought to its knees by five quarterly losses in a row.

It has been battered by the meltdown in sub-prime mortgages - made to people on low incomes or with poor credit ratings.

A cost-cutting exercise last year resulted in some 52,000 jobs being slashed, bringing the Citi workforce down to about 323,000 people.

Avoiding sell-off

Analyst Peter Kenny, managing director at Knight Equity Markets in New Jersey said he did not think shares would be too badly hit by the announcement.

"We are talking about a form of nationalisation, and to the extent that the market is going to accept it," he said.

"The problem is that there is so much going on in terms of trying to manage the continuing and unfolding drama around the credit crisis.

The bottom line is that it's not like the government has much of a choice. Citi wasn't negotiating. The government was saying, 'This is what you have to do.'

"The government didn't want to have to take any more than it had to. This is the least they can do, and the most they can do without causing a wholesale sell-off."

US economy suffers sharp nosedive

The US economy shrank by 6.2% in the last three months of 2008, official figures have shown, a far sharper fall than had previously been reported.

Plunging exports and the biggest fall in consumer spending in 28 years dragged the annualised figure down from an earlier estimate of 3.8%.

The decline was much worse than analysts had expected, sending US stocks spiralling lower.

In 2008 as a whole, the economy grew by 1.1%, the slowest pace since 2001.

The blue-chip Dow Jones industrial average dropped 119.15 points, or 1.66%, to 7,062.93. The broader Standard & Poor's 500 Index fell 2.36% to 735.09 - a 12-year low.

Recession warning

Consumer spending, which accounts for about two-thirds of domestic economic activity, fell by a rate of 4.3% in the final quarter - the biggest fall since the second quarter of 1980. This was a revision of the earlier figure of 3.5%.

With rising unemployment, sliding home values, increasing numbers of repossessions and the slumping value of investments, observers say many US consumers are hanging on to whatever disposable cash they have.

Meanwhile, exports - which had until recently been supporting the economy - fell at the sharpest rate since 1970 at an annual rate of 23.6%, down from 19.7%.

Earlier this week, Federal Reserve chief Ben Bernanke warned Congress that without the right policies from the government, the US recession could last into 2010.

But he said if the Obama administration and the central bank can restore some measure of financial stability, 2010 could be a year of recovery.

President Obama recently signed a $787bn (£556m) recovery package of increased government spending and tax cuts, and unveiled a $75bn scheme to stem repossessions.

No good news

The latest GDP figures were "just awful" said Matt Esteve, a currency trader at Tempus Consulting in Washington DC. "It shows the weak state of the world's largest economy."

And Boris Schlossberg, director of currency research at GFT Forex said there was "doom all over".

He predicted that the dollar would not weaken too much against the euro because "there's no good news on the other side of the Atlantic, either".

Japan's industrial output plunges

Japan's industrial production fell by 10% in January - the biggest monthly drop since records began more than half a century ago, the government says.

It is the fourth successive month that factory output has fallen, as the world's second-biggest economy suffers its worst recession in decades.

The latest figures come days after the government said exports plunged 45.7% in January compared with a year ago.

Japan's economy is suffering because of falling demand for its products abroad.

Consumers around the world afraid of losing their jobs in the global downturn no longer want to buy Japanese electronic gadgets and cars, the BBC's Roland Buerk in Tokyo says.

The country's car production plunged a record 41% year-on-year in January, according to the Japan Automobile Manufacturers' Association.

It said 576,539 vehicles were produced in January compared with 976,975 for the same month of 2008.

Painfully exposed

The Japanese themselves are also shopping less, with average household spending falling 5.9% in January compared with the same month a year ago, our correspondent says.

Jobs are also being slashed - the number of people unemployed rose by more than 200,000.

"The recession is having an increasing impact on the real economy," Finance Minister Kaoru Yosano said.

Japan was once seen as relatively immune to the global crisis because its banks were not as exposed to bad loans as those in the US and Europe, our correspondent says.

But he says that Japan's reliance on foreign markets to drive its economy out of a long slump in the 1990s has left it painfully exposed.

Oil prices slide in Asian trade

Oil prices slid in Asian trade on Friday as investor pessimism returned after the release of more weak US economic data, dealers said.

New York's main contract, light sweet crude for April delivery, fell 69 cents to USD 44.53 a barrel.


Brent North Sea crude for April delivery shed 45 cents to USD 46.06.


Oil prices fell due to "an over-reaction to gasoline stocks in the past few days... and fresh weak economic data out of the US that dented market sentiment," said Mark Pervan, senior commodities analyst for ANZ bank in Melbourne.


Pervan said the US Durable Goods report released late Thursday showed a plunge in orders of goods for the transportation sector, which dampened sentiment amongst oil traders.


US data also released on Thursday showed jobless claims surged to 667,000 in the past week, the highest jump in over 26 years.


Oil prices had surged in recent days in reaction to the rise in US gasoline stocks and indications of production cuts by the Organisation of the Petroleum Exporting Countries (OPEC).

Indian economy in sharp slowdown

India's economy grew by less than expected in the last three months of 2008, official figures have shown.

The country's gross domestic product (GDP) grew by 5.3%, compared with 7.6% in the previous three months and 8.9% in the same period a year earlier.

Agriculture, which makes up about a fifth of the economy was one of the sectors to see growth fall.

The global recession has cut demand for exports, and economists are calling for further measures to boost growth.

These have included a clamour for further interest rate cuts.

The data saw India's main stock exchange index, the Sensex fall by 2% on Friday.

Domestic demand

Observers say the data will come as a blow to the Congress-led government, which faces general elections by May.

It has predicted that the economy, which grew by 9% overall to March 2008, will expand by 7.1% in the 12 months to March this year.

However analysts say this will probably be revised down.

The sharp slowdown in both China and India, which have been among the world's fastest-growing economies, will have a significant impact on the world economy, with the major industrial countries already mired in recession.

India's economy is Asia's third-largest, and is largely driven by domestic demand. It has seen strong growth of 9% or more in the past three years.

But the slowdown has "dismissed speculation India is more resilient in this global turmoil because its economy is more domestically oriented," said Sherman Chan, an economist at Moody's Economy.com.

Meanwhile Rupa Rege Nitsure, chief economist at Bank of Baroda in Mumbai said the growth figure was "way below my pessimistic expectations".

"Whatever the government is doing is not going to be very effective as large scale demand stimulus across the world has not proved to be effective in restoring business confidence."

Obama unveils his $3.6tn budget

President Barack Obama has unveiled a $3.6tn (£2.5tn) budget for 2010, aiming to pull the US out of financial crisis.

He has predicted the budget deficit for the current year will be $1.75tn, which is 12.3% of annual output and the biggest since World War II.

Planned spending includes $634bn to pay for healthcare reform and an extra $250bn to be set aside, in case it is needed to bail out US banks.

Mr Obama hopes to save money by cutting subsidies and tax breaks.

These announcements are an overview. There will be more details in April.

The $3.6tn of planned spending is still well below the spending of $3.7tn, which is forecast for the year to the end of September 2008 and includes economic stimulus packages.

Eliminate waste

The president promised to roll back tax cuts for the very wealthy and businesses that move jobs overseas.

He added that instead, he would bring in tax cuts that would benefit 95% of hard-working families. "There are some hard choices that lie ahead," he said, adding that there were areas where the government would like to spend money in normal economic times, but would be unable to at the moment.

"Each and every one of us has to compromise on certain things we care about, but which we simply cannot afford right now," he said.

He predicted that some of his decisions would be unpopular with special interest lobbying groups in Washington.

Healthcare subsidies

He also promised that his budgets would be an honest accounting of the country's economic situation and include "the full cost of fighting in Iraq and Afghanistan".

He projected spending of $200bn to fight those two wars over the next 18 months.

There are expected to be savings from the winding-down of the war in Iraq, but increased spending as a result of sending more troops to Afghanistan.

The president said he would introduce a scheme to give a subsidy to recently-unemployed people to help them maintain their healthcare funding.

Providing easier access to healthcare was one of his key election promises.

He has promised to halve the budget deficit by the end of his term in 2013 and said one of the ways he would do so would be by cutting back on waste in government.

"We're going to go through our books page by page, line by line to eliminate waste and inefficiency," he said.

"This is a process that will take time, but in the last 30 days alone, we have already identified $2tn in deficit reductions that will help us cut our deficit in half by the end of my first term."

Eastern Europe banks get bail-out

The banking sectors in Central and Eastern Europe are to get a 24.5bn euro ($31bn; £21.8bn) rescue package to support them in the economic crisis.

The European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB) and the World Bank have pledged the investment.

The funds are particularly aimed at helping small firms survive.

Countries such as Latvia and Hungary have seen their economies particularly hit by the global economic slump.

The two-year joint initiative will include equity and debt financing, and access to credit and risk insurance aimed at encouraging lending, the three groups said in a joint statement.

This initiative is on top of national government responses and was designed to "deploy rapid, large-scale and coordinated financial assistance... to support lending to the real economy through private banking groups, in particular to small-and medium-sized enterprises."

'Diverse challenges'

The EBRD will provide up to 6bn euros for the financial sector, the EIB will put up 11bn euros of lending facilities, while the World Bank will provide about 7.5bn euros.

"The response takes into account the different macroeconomic circumstances in, and financial pressures on countries in Eastern Europe, acknowledging the diversity of challenges stemming from the global financial retrenchment," the groups added.

Founded in 1991, the EBRD aims to assist the transition of former communist nations to market economies - investing across 30 countries including Ukraine, Moldova and Russia.

"The institutions are working together to find practical, efficient and timely solutions to the crisis in eastern Europe," said EBRD President Thomas Mirow.

"We are acting because we have a special responsibility for the region and because it makes economic sense.

"For many years the growing integration of Europe has been a source of prosperity and mutual benefit, and we must not allow this process to be reversed."

Exposure outgrown?

Earlier this week, ratings agency Moody's said that faltering economic conditions in Eastern and Central Europe would hit the local subsidiaries of Western banks.

Austria, whose banks have large exposure to Eastern Europe, has seen the cost of insuring its debt rocket.

On Friday, the country's Erste Group Bank signed a long-expected deal to get up to 2.7bn euros of government support.

But the talks to secure the funding have been going on since October, with some analysts saying that the mounting problems in emerging Europe meaning Erste's exposure may already have outgrown the government injection.

Vodafone announces 500 job cuts

Mobile phone operator Vodafone has announced plans to cut about 500 jobs in the UK in an effort to reduce costs.

Vodafone, the world's largest mobile phone company by income, is shedding jobs as part of previously-announced plans for £1bn ($1.4bn) of cost cuts.

Vodafone, which employs 10,000 workers in the UK, faces rising raw material prices and increasing competition.

The 500 job losses include 170 posts at Vodafone's head office in Newbury, Berkshire, in back-office type roles.

All the group's operations are set to be affected, including a reorganisation of some of its call centres.

Vodafone has call centres and offices in Newark, Banbury, Theale, Trowbridge, London, Warrington, Stoke-on-Trent and Hayes.

Vodafone UK has today announced reductions to its operating costs in order for it to compete more effectively in the UK market," the company said.

"As customers look for best value in their mobile services, Vodafone intends to reduce its cost base whilst continuing to invest in new products and services to meet changing customer needs."

Vodafone said it did not intend to close any stores, but planned to cut costs by offering more online services, as it believed its 19 million UK customers wanted a greater focus on value for money.

The company said in November last year that it expected to reduce its worldwide operating costs by £1bn a year by 2011.

Earlier this month, the firm reported revenue of £10.47bn for the last three months of 2008, up 14.3% on the same period a year ago, and raised its forecast for full-year revenues after benefiting from the weaker pound.

France set to help merging banks

The French government could provide up to 5bn euros ($6.4bn, £4.4bn) in loans to two merging French banks, Finance Minister Christine Lagarde has said.

Banque Populaire and Caisse d'Epargne are expected to finalise the merger deal, which was announced last October, later this week.

The merged group would be France's second biggest retail bank after Credit Agricole with 480bn euros in deposits.

Ms Lagarde said the state might become a direct shareholder of the new group.

"[The loans] could be converted into shares when they come due," she said, calling the merger "an intelligent marriage".

Losses

The government plans to provide the banks with subordinated loans, which do not have to be paid back until after all creditors are reimbursed.

Caisse d'Epargne and Banque Populaire have been hit hard by losses at their investment banking subsidiary Natixis.

Natixis said in December it could potentially lose up to 450m euros, as one of the victims of an alleged fraud involving investor Bernard Madoff costing $50bn.

Meanwhile, at the end of October French police detained a trader for questioning over the loss of 751m euros at Caisse d'Epargne.

The bank's top three executives resigned that month after the loss came to light.

Asian stocks rattled by US falls

Asian stocks fell sharply on Tuesday amid renewed fears over the health of the global financial sector and after US stocks hit a near 12-year low.

Japan's Nikkei index closed down 1.46%, the Hong Kong index closed down 2.9% and the Shanghai index fell 4.3%.

South Korean Kospi share index dropped 3.2%, while indexes in Singapore and Taiwan shed more than 1%.

Most Asian indexes had risen on Monday on hopes the US government was to increase its stake in Citigroup.

However, no formal move was made. US regulators said they were considering boosting government ownership in financial institutions, but without going all the way and nationalising them.

On Monday in the US, the Dow Jones Industrial Average closed down 250.9 points, or 3.4%, at 7,114.8, its lowest level since October 1997.

The tech-heavy Nasdaq index closed down 3.7%, while the Standard & Poor's 500 index fell 3.5% to 743.33, its lowest finish since 11 April, 1997.

No end in sight?

"Investors are just selling out in disgust across the board - disgust with the market, disgust with the financial problems," said Lorraine Tan, director of equities research at Standard & Poor's in Singapore.

"The government seems to keep throwing in money, but there doesn't seem to be any end to the declines or solutions to the problems," she said.

The Shanghai benchmark index fell as China's central bank said the country's economic downturn could worsen.

Meanwhile the index of Asia-Pacific stocks outside Japan, the MSCI, also fell, by 2.3%. And Australia's stock market was also down, by 0.6%. The Indian Sensex was down slightly, by 0.24%.

Among Asian financial shares, Nomura Holdings, Japan's biggest broker, lost 9.3% after announcing plans to raise $3.3bn.

Also in Japan, finance minister Kaoru Yosano said the government would consider a call to buy shares directly to support the stock market, which fell to near 26-year lows on Tuesday.

Gold remains unchanged at Rs 15,700; silver coins rise

Gold maintained an unchanged level at Rs 15,700 per 10 gram as retailers and stockists refrained from buying at record high levels amid reports of the metal remaining high on the overseas front.

However, silver coins maintained an upward march in the national capital on sustained buying by stockists to meet marriage season demand on Friday.



Marketmen said there was hardly any worthwhile buying activity in the market as people postponed their decision of buying for the current marriage season.

Slump hits China multinationals

Nearly 70% of multinational companies in China plan to cut recruitment this year, and more than a quarter have laid off staff already, a survey suggests.

Of the more than 350 companies questioned in different sectors across the country, finance, communications and IT firms were the hardest hit.

Two years ago the multinationals were competing to hire the brightest talent from China's universities.

But since the financial crisis, jobs there no longer look so secure.

Jobs in multinational companies are highly prized in China especially white collar jobs.

For a start the pay is often better than you might get as a public servant or the employee of a state-owned enterprise.

The jobs tend to be concentrated at the moment in the larger cities like Beijing or Shanghai, or in the areas where there are many factories making goods for export.

'Safer' alternatives

Since the financial crisis, jobs are less secure in multinational firms whose parent companies have run into trouble overseas like CitiGroup or Motorola.

This year there was a record number of applications for the civil service. More than 750,000 people applied for just 13,500 places.

The surveys of the multinationals reported in the state media suggest that those applicants were wise to seek safer alternatives.

Almost seven out of 10 of the firms polled made clear they planned to recruit fewer staff in the year ahead - that will make life even harder for this year's graduates.

There are fewer jobs available than before and they will be competing with other unemployed graduates from previous years and with newly laid-off workers who already have experience.

The graduate employment market has always been tough in China but this year it is looking like it will be tougher than ever.

Economy fears send stocks falling

Global stock markets fell on Friday amid fears over the state of the world economy and the banking industry, with finance firms among the main fallers.

The Dow Jones index was 1.8% lower in afternoon trade on Friday after seeing its lowest close since 9 October 2002.

Investors are worried over how long the slowdown will last, despite government intervention to boost their economies.

France's Cac 40 fell 4.25% to its lowest since April 2003, the FTSE 100 shed 3.2% and Germany's Dax shed 4.7%.

The Paris-based benchmark index ended at 2,750.55. The FTSE closed at 3889.06.

The Dow Jones industrial average declined 133.25 points to 7,332.70 just after noon in New York, while the Standard & Poor's 500 Index fell 1.84% to 764.58.

Japan's Nikkei index ended 1.8% down and Hong Kong's Hang Seng shed 2.49%.

'Lack of clarity'

South Korea was among the worst hit in Asia. Its main stock index fell 3.7%, while its currency, the won, weakened on fears about the health of local banks.

This week , US President Barack Obama signed a $787bn (£548bn) stimulus plan into law, but there is uncertainty over how much this will help boost the ailing banking sector.

Bank of America shares fell nearly 17%, while Citigroup shed more than 21%.

"We're going through a tug of war between optimism and pessimism," said Wasif Latif, portfolio manager at USAA Investment Management CoLatif.

"When there is a lack of clarity, it becomes more of an emotional or psychological environment. The mood can sway on any given day, based on the flow of news coming out."

ILO suspects unemployment in Asia to surge by 23 million

The number of people out of work in Asia could surge by 23.3 million in 2009 as the global financial crisis continues to batter the region's economies, says an ILO study.

The crisis could also force rural-to-urban migration to slow down, with many facing the prospect of returning to low paying agricultural sector as factories and firms slash jobs, the International Labour Organization (ILO) report said.

"A dramatic increase in working poverty of more than 140 million people by 2009 is projected under this scenario, representing regression of the Asia and Pacific region to a working poverty rate of 2004," the study said.

"These projections are not just numbers, they carry with them a real risk that children may be forced to withdraw from school in order to work and support their families," it said.

It said the region's robust growth in the past was not matched by "broad-based gains in real wages," leading to sharp inequalities in many countries.

"The substantial growth slowdown taking place is likely to lead to stagnant or falling real wages, with the potential for increased incidences of wage related disputes," the study said.

As Asia moves to spend about 3.9 percent of its gross domestic product (GDP) on stimulus packages, there is also a need to protect employment and support household purchasing power, it said.

Obama signs USD 787 billion stimulus package

US President Barack Obama has signed into law the USD 787 billion economic stimulus package, which according to him would rejuvenate the American economy and create as many as three to four million jobs in the next two years.

Minutes before he put his signature on the 1,534-page American Recovery and Reinvestment Act in Denver, Colorado, Obama said: "We have begun the essential work of keeping the American dream alive."



The stimulus bill was passed last week by the US Congress House of Representative and Senate - without much support from the opposition Republicans. While no Republican voted in its favour, only three Senators supported the bill in the Senate.



Obama cautioned Americans not to immediately expect miracles with the passage of the bill, as the US has a long way to go in reviving its economy.



"Today does not mark the end of our economic troubles. Nor does it constitute all of what we must do to turn our economy around," he said.



"But it does mark the beginning of the end the beginning of what we need to do to create jobs for Americans scrambling in the wake of layoffs; to provide relief for families worried they won't be able to pay next month's bills; and to set our economy on a firmer foundation, paving the way to long-term growth and prosperity," Obama said.



Terming it as the sweeping economic recovery package in the US history, Obama said: "What makes this recovery plan so important is not just that it will create or save three and a half million jobs over the next two years.



It's that we are putting Americans to work doing the work that America needs done in critical areas that have been neglected for too long work that will bring real and lasting change for generations to come."



The money would be used to not only save and create three to four million jobs, but also would result in mega

investment into modern infrastructure projects, funding projects which would help the US become energy independent, education and push more funding into scientific research.



"It will make the most significant investment in America's roads, bridges, mass transit, and other infrastructure since the construction of the interstate highway system. It will make investments to foster reform in education, double renewable energy while fostering efficiency in the use of our energy, and improve quality while bringing down costs in healthcare," Obama said.



Middle-class families will get tax cuts and the most vulnerable will get the largest increase in assistance, in decades, he said. "With this Act we begin the process of restoring the economy and making America a stronger and more prosperous Nation," he added.

US tycoon charged over $8bn fraud

Texan billionaire and cricket promoter Sir Allen Stanford has been charged over a $8bn (£5.6bn) investment fraud, US financial regulators say.

The Securities and Exchange Commission said the financier had orchestrated "a fraudulent, multi-billion dollar investment scheme".

The SEC said the fraud was "based on false promises and fabricated historical return data".

English cricket bosses have pulled out of sponsorship talks with Sir Allen.

The charges against Sir Allen, three of his companies and two executives of those companies followed a raid by US marshals on the Houston, Texas, offices of Stanford Financial Group.

A US judge has frozen the assets of Sir Allen and the other defendants as well as those of the Stanford Group, its Antigua-based subsidiary Stanford International Bank (SIB) and another subsidiary, investment advisor Stanford Capital Management.

A receiver has been appointed to "preserve assets for investors", the SEC said.

'Close circle'

Sir Allen last year promoted the Stanford cricket series which saw a West Indian all-star team - the Stanford Superstars - beat an England team for a $20m prize.

The England and Wales Cricket Board (ECB) suspended sponsorship negotiations with him following the fraud charges.

The ECB has a five-year deal to play games against the Stanford Superstars.

The SEC said that the Stanford International Bank - the largest in the Caribbean - sold approximately $8bn worth of certificates of deposit to investors, promising "improbable and unsubstantiated high interest rates".

The bank was "operated by a close circle of Stanford's family and friends", the SEC said in a statement.

"We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world," said Rose Romero of the SEC.

The SEC began investigating Stanford Group last year and intensified their probe following the arrest of US financier Bernard Madoff in December over an alleged $50bn (£35bn) investment fraud.

In the wake of that scandal, SIB falsely told its investors it had no exposure to the funds involved in the alleged Madoff fraud.

The Stanford Group lists its worth as more than $40bn. Antigua and Barbuda granted Sir Allen citizenship about 10 years ago and knighted him in 2006.

Forbes magazine lists him as the world's 605th richest man, with assets of $2.2bn.

Japan finance minister steps down

Japan's Finance Minister Shoichi Nakagawa has resigned, amid claims that he was drunk at a recent G7 meeting.

Mr Nakagawa said earlier that he would wait until parliament had approved a supplementary budget to step down.

But he brought forward his departure after calls for his immediate exit escalated.

Prime Minister Taro Aso said he respected Mr Nakagawa's decision and named Economics Minister Kaoru Yosano to take over the finance portfolio.

At a news conference just hours after his appointment, Mr Yosano said the country's economy had deteriorated "beyond expectation".

Mr Yosano said his priority was to "smooth" the financial system as well as stimulating demand.

He said he would decide whether to take additional steps after consulting not only the government but business leaders, academics and the media.

'Embarrassing'

Mr Nakagawa's departure is seen as a major blow to Mr Aso's government in an election year.

The prime minister was already facing plummeting support; a poll by broadcaster NTV on Sunday put backing for his cabinet at 9.7%.


Voters are worried both about the economy and Mr Aso's leadership credentials in the wake of a series of gaffes, analysts say.

Mr Nakagawa apologised for "causing such a big fuss" and told journalists: "I decided that it would be better for the country if I quit."

He has already apologised for his behaviour at last weekend's news conference in Rome but blamed cold remedies for a slurred performance there.

He said he had not drunk more than a sip of alcohol before facing the media.

The news conference in Rome followed a meeting of finance ministers focussing on the current world economic crisis.

Footage showed Mr Nakagawa slurring his speech and closing his eyes repeatedly as if he was dozing off.

At one point, he mistook a question aimed at the governor of the Bank of Japan as one intended for him.

"It's embarrassing," said Democratic Party Secretary General Yukio Hatoyama. "This has sent a message to the whole world. He's damaged the national interest."

He explained that he had sipped wine at a luncheon toast on the day of the news conference, but had not consumed an entire glass.

He said he had taken too much medicine, including cold remedy, and that had made him drowsy.

Mr Nakagawa has denied reports - including the view of a former prime minister - that he is a regular drinker.

US car giants seek $21bn funding

Troubled US carmakers GM and Chrysler have asked the US government for another $21.6bn (£15.2bn) in support, on top of the $17.4bn already received.

The auto giants also plan to axe 47,000 and 3,000 jobs respectively, as well as shedding a number of car models.

The moves form part of their drastic restructuring plans submitted to the US Treasury Department on Tuesday night.

It came as the United Auto Workers (UAW) union reached agreement with GM, Chrysler and Ford on contract changes.

Plant closures

The UAW is one of a number of stakeholders whose agreement is needed before the proposed plans can be pushed through.

General Motors said it would try to borrow up to $16.6bn more from the government, on top of the $13.4bn it has already received.

Its plan includes cutting 47,000 jobs and closing five more US factories.

GM says that it could be in profit within two years and fully repay its loans by 2017.

'Lot of work'

In December GM had said it would cut the number of plants from 47 in 2008 to 38 by 2012, but has now added another five factories facing the axe, which would leave it with 33 facilities.

The carmaker's brands would also be reduced from eight to four - Chevrolet, Buick, Cadillac and GMC.

GM chief executive Rick Wagoner said the company's plan was "comprehensive, responsive, achievable and flexible".

"We have a lot of work in front of us, but I am confident it will result in a profitable General Motors," he added.

Models cut

The plan came after Chrysler, which was given a $4bn loan by the US government at the end of 2008, revealed its own survival plan.

Chrysler has asked for another $5bn funding, and plans to cut 3,000 posts.

The firm will also cut three car models in 2009 - the Chrysler Aspen and PT Cruiser, and the Dodge Durango.

Unveiling its proposals, Chrysler said it now expects the current downturn in the US car market to last another three years.

'Said right things'

The US's third biggest carmaker said its radical surgery had the support of the United Auto Workers (UAW) union, dealers, and suppliers.

The UAW says it has also reached tentative agreement with Ford and General Motors to help cut those firms' labour costs.

Meanwhile, Chrysler also said it planned to cut outstanding debt by $5bn and reduce fixed costs by $700m in 2009.

Analyst Lincoln Merrihew, of TNS Automotive Consulting, said: "I'm curious to see how the government responds to this plan, but Chrysler has said all the right things."

Jet fuel prices cut by 3.7%

State-run oil companies have announced a slash of 3.7 per cent in prices of Aviation Turbine Fuel (ATF), the tenth reduction since September which comes into effect from last midnight.

ATF prices in Delhi were slashed to Rs 29,158 per kilolitre from Rs 30,288 per kilolitre. After this Rs 1,130 a kilolitre reduction, jet fuel is priced at early 2005 levels.



In country's financial capital Mumbai, ATF rates came down by Rs 1,191 per kl to Rs 29,985 per kl on Sunday.



ATF prices had peaked to Rs 71,028.26 per kl in Delhi in August 2008 on account of global crude oil prices touching historic high of 147 dollars a barrel. But they have since been slashed every month till October and twice in November.


State-run Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum revise ATF rates on the 1st and 16th of every month based on the average international jet fuel rates in the preceding fortnight

Europe hit by economic slowdown

European economies contracted in the fourth quarter of last year, with some countries registering the worst figures in decades, official data shows.

The eurozone economy shrank by 1.5% in the previous quarter and 1.2% on the year, Eurostat said.

Germany's economy shrank by 2.1% compared with the previous quarter, its worst quarterly performance since 1990.

France shrank by 1.2%, initial data shows, while Italy registered a drop of 1.8%, the steepest drop since 1980.

The data puts pressure on the European Central Bank to cut interest rates.

In the whole of 2008, the economy in the 15 countries using the euro grew by 0.7% against the previous year, Eurostat said. Slovakia joined the eurozone on 1 January 2009, making it a 16-country club.

The Dutch economy shrank 0.9% during the quarter while the Austrian economy eased by 0.2%, the first drop in nearly eight years. In the same quarter, Portugal's economy contracted by 2% on the previous quarter and 2.1% on the previous year.

"These are huge contractions in Europe, the largest in living memory in most cases," said Ken Wattret, economist at BNP Paribas.

Companies have cut investment and exports have dropped as the global recession has taken hold.

European companies hit by the slowdown include Air-France KLM, which reported a third-quarter operating loss on Friday, and Michelin, whose final-year profits fell as the crisis in the global car industry took its toll on the tyre maker.

The decline in demand for cars was further highlighted by data released on Friday.

The number of new cars sold in Europe in January was down 27% compared with January 2008, the European carmakers' association, Acea, said.

G7 pledges to avoid protectionism

Leading industrial countries have pledged to avoid protectionism as they battle the global economic crisis.

Finance ministers at a G7 meeting in Italy said raising barriers to free trade would make the downturn worse.

Hours earlier, the US Congress approved an $787bn economic recovery plan that includes a 'Buy American' clause.

G7 ministers said stabilising the world economy and financial markets was their priority. They said they would work together to support growth and jobs.

The 'Buy American' clause has raised fears that protectionism could be growing in the world's largest economy.

But in a statement after the meeting, new US Treasury Secretary Timothy Geithner dismissed such concerns.

"All countries need to sustain a commitment to open trade and investment policies which are essential to economic growth and prosperity," he said.

Ministers also called for urgent reform to the International Monetary Fund, saying the crisis had shown weaknesses in the world financial system.

"We agree that a reformed IMF, endowed with additional resources, is crucial to respond effectively and and flexibly to the current crisis," the ministers' statement said.

Other points included:

* Praise for recent economic moves by China;
* Help for banks; and
* The need for a speedy end to the Doha talks on world trade

The G7 comprises the US, the UK, Japan, Germany, France, Italy and Canada.

The BBC's correspondent at the meeting says it was billed as a meeting to discuss the broad issues of the economic crisis, not to decide major policy initiatives - and that's what it was.

Britain's Chancellor of Exchequer (Finance Minister), Alistair Darling, said it was a stepping stone to a meeting in London in April of the G20 group, which also includes big emerging economies such as China and India.

Japan's economy in quarterly dive

Japan's economy contracted by 3.3% in the last quarter of last year - its worst showing since the oil crisis of the 1970s, official figures show.

It comes as the country faces its worst economic crisis since the end of World War II, said Economic and Fiscal Policy Minister Kaoru Yosano.

The slowdown in the world's second-biggest economy is steeper than in the US or Europe.

Japan has been hit particularly hard by falling global demand for its products.

Exports, particularly of electronics and cars, have slumped and production has been slashed.

Consumers have cut back too, alarmed by rising unemployment.

Now the government has confirmed that in October to December last year Japan's gross domestic product fell by 3.3%.

It is the equivalent of an annual decline of 12.7% - the worst figures since the 1970s.

Worst since war

"This is the worst economic crisis in the post-war era. There is no doubt about it," Mr Yosano said at a news conference.

"The Japanese economy, whose growth is heavily dependent on exports of automobiles, machinery, and IT equipment, was literally battered" by the global downturn, he said.

He said the government would consider new stimulus measures to aid the economy.

"Japan alone won't be able to recover. The economy has no border. It is our responsibility to rebuild the domestic economy for other countries," he added.

Prime Minister Taro Aso is hampered in his response by a divided parliament and a fractious ruling party.

There were reports over the weekend that he is considering another stimulus package of government spending worth 20 trillion yen ($218bn; £152bn).

But the latest opinion poll has showed fewer than 10% of people support the prime minister, who must call a general election by September.

Wine and spirits firm bucks trend

Drinks maker Pernod Ricard has reported a rise in half year net profits as consumers continue to buy wine and spirits despite the economic downturn.

The French group said profits rose 5% to 615m euros ($793m; £547m) for the six months to the end of December 2008.

Sales for the period rose 13% to 4.2bn euros, and the firm forecast "strong organic growth" for the full year.

Shares in Pernod, whose brands include Jacob's Creek wine and Absolut vodka, were up 6% in early trade.

"Although visibility is limited for the second half of the year, we anticipate that the wine and spirits sector will on the whole continue to show excellent resilience," Pernod said.

Pernod is the second biggest alcoholic drinks group in the world after Diageo.

On Thursday Diageo reported a 3.2% rise in half-year profits but cut its forecast for the full year.

Microsoft to launch retail chain

Computer software giant Microsoft has announced plans to open its own stores, at a time when many other retailers are struggling in the economic downturn.

The company plans to sell computers installed with Microsoft software and other products, Microsoft chief operating officer Kevin Turner said.

The stores will also promote new operating system Windows 7 and updates of Windows Live and Windows Mobile.

Ex-Wal-Mart executive David Porter will head the new retail division.

The company's rival Apple already has high-profile stores located around the world.

'Tremendous opportunities'

"This is an exciting time with our strong line-up of upcoming product releases," Mr Turner said in a statement.

"There are tremendous opportunities ahead to create a world-class shopping experience for our customers."

Mr Porter, corporate vice-president of retail stores, will devise a strategy outlining when the stores would be launched and where they would be located.

The decision comes after Microsoft launched a $300 million (£207m) advertising campaign last autumn in a bid to revive its Windows Vista operating system, which was widely criticized for being too slow.

In January the company cut 1,400 jobs and said it would axe 3,600 more workers over the next 18 months.

Oil rises on stimulus plan hopes

Oil prices jumped after a week of falling crude prices on hopes US President Barack Obama's stimulus plan will revive the economy and demand.

US crude for March delivery rose $3.53 to $37.51 a barrel. Brent oil added $1.22 to $44.81 a barrel.

"It looks like a bounce on stimulus hopes," said Tom Bentz at BNP Paribas Commodity Futures.

In earlier trade prices dipped below $34 as oil producers' cartel Opec warned that demand would fall in 2009.

The House of Representatives has approved Mr Obama's revised emergency plan, including tax cuts and spending aimed at rescuing the US economy, and the Senate is expected to do so later.

But analysts have questioned how much the oil price will benefit from it.

'Steep decline'

The global slowdown has seen oil prices fall more than $110 off the highs seen in July last year and Opec forecasts that demand will fall by 0.67% in 2009.

Opec now forecasts that global oil demand will fall by 580,000 barrels a day to average 85.13 million barrels a day. It had earlier forecast that demand would fall by 180,000 barrels a day.

"World oil demand continues its steep decline from last year and is expected to follow this strong negative pattern at least for the first three quarters of the year," the oil producers' cartel said in its February report.

Oil demand in industrialised countries "is experiencing a steep decline resulting from the region's economic depression", the cartel said.

Earlier this week, the Energy Information Administration reported a seventh consecutive weekly increase in nationwide crude oil stocks as the economic crisis crushed business and consumer demand for fuel.

And rising unemployment has led to further fears of weakening demand for oil among US consumers.

New claims for unemployment benefit remain close to record highs.

The US jobless rate rose to 7.6% in January, up from 7.2% in December, according to official figures - the highest level since 1992.

The rapid rise in unemployment suggests the US recession is deepening.

US Congress passes stimulus plan

The US Senate has voted in favour of Barack Obama's $787bn (£548bn) economic stimulus plan - clearing the way for it to be signed into law.

The vote came hours after the House of Representatives passed the measure without Republican backing.

Mr Obama has said the plan - a package of tax cuts and spending - will "save or create more than 3.5 million jobs".

Republicans argue the tax cuts are insufficient, and that the economy will be saddled with debt for years to come.

Members of both houses of Congress reached a deal over the content of the stimulus package on Wednesday.

All 176 Republicans and seven Democrats voted against the revised package in the House. It was backed by 246 House Democrats.

In the Senate just three Republicans voted for the package.

The rebel votes were however enough under Congress rules to stop the Republican Party using blocking tactics to delay the stimulus plan, and it passed 60-38.

'Shot in the arm'

The approved version of the plan is split into 36% for tax cuts and 64% percent in spending and money for social programmes.

Running to more than 1,000 pages, it includes new road building, cash to pay police in hard-up cities, and tax breaks for consumers buying houses and cars.

The package also imposes new limits on cash bonuses and other incentive compensation for executives on Wall Street, which are much tougher than those proposed by the Obama administration last week.

The provision, inserted by Senate Democrats, targets senior executives at financial institutions receiving government bail-out funds.

The colossal package is all to be funded with borrowed money.

Republicans had insisted on larger tax cuts instead of big spending programmes.

Republican Senate minority leader Mitch McConnell said: "This isn't Monopoly money. It's real. It adds up, and it has to be paid back, by our children and by their children."

The Democratic leader of the Senate, Harry Reid, praised the three Republicans who had voted for the bill and said it was the most important piece of legislation he had worked on.

"The country is in trouble and we're so fortunate we were able to get it passed," he said.

"It's going to give this country a shot in the arm."

Earlier, Mr Obama had said that in the longer term the government needed to rein in spending, and that "we are going to have to once again live within our means".

The president told members of the Business Council in Washington that the package was "only the beginning of what I think all of you understand is going to be a long and difficult process of turning our economy around."

Presidential pressure

"We have a once-in-a-generation chance to act boldly, and turn adversity into opportunity, and to use this crisis as a chance to transform our economy for the twenty-first century," Mr Obama said.

Among the measures in the approved package is a "Buy American" clause that had caused alarm among US trading partners.

The EU and Canada said that provisions favouring American-produced materials for government projects risked provoking retaliatory protectionist measures.

In the face of this reaction, the clause was softened to a version requiring the government not to violate trade agreements.

Last week, the House had approved an earlier $825bn version of the package without any Republican support.

The Senate voted to approve a different $838bn version on Tuesday, with few Republicans opting to back it.

The two versions had to be reconciled in a joint House-Senate committee before facing final votes in the two chambers.

President Obama increased the pressure on Congress this week, saying he wanted the bill on his desk ready to sign by the weekend.

Satyam getting new contracts: Murty

Even as a few customers have left in the wake of the financial fraud committed by its erstwhile promoter, Satyam Computer on Wednesday said it is continuously getting new software services orders and existing clients have showed faith in the company.

"A significant majority of our clients have indicated their support for Satyam, and are staying with us. Orders continue to come in, and the organisation is (making) efforts to grow new businesses," Satyam Computer CEO A S Murty told a news agency.

Asked if he visualises Satyam regaining its earlier position of the fourth-largest software exporter, the CEO said, "The board and senior management have been in constant contact with customers and associates to assure them of business continuity. To this point, our efforts to provide clear, consistent and forthright communications are working."

Earlier Infosys, TCS and mid-sized IT firm Infotech had said some Satyam clients have approached them.



In January, State Farm Insurance Co of the US terminated its contract with Satyam. Its other key customers -- GE, Nestle, Coca Cola, and National Australia Bank -- had earlier said it would suspend new contracts given to Satyam.



On working alongside the rivals, Murty said, "We continue to compete for new businesses with Infosys and TCS and other companies in all the markets we serve.


"With a new management at the helm of affairs, Satyam Computer is also looking at long-term strategic options and reviewing its legal liabilities.

"My immediate short-term priority as CEO would be to initiate and continue measures that will instill confidence in all our stakeholders, customers, associates, alliance partners, vendors, etc. and to ensure business continuity."

The CEO said his priorities are also to address key customer concerns, focus on delivery, reinforce associate confidence and introduce key retention measures.

With Satyam's market value plunging to less than $700 million from $7 billion in May 2008, the company is weighing long-term strategic options.

"Our other priorities are evaluating long-term strategic options, assessing and managing legal liabilities and resuming investments in identified areas," Murty said, adding the company recently got a financial commitment of Rs 600 crore for working capital needs and has receivables of up to Rs 1,700 crore.

BK Modi's Spice Corp and L&T Infotech, which is a 12 percent shareholder, are among the possible firms interested in taking over the scam-hit company.



The focus is on assessing the company's financial position and taking measures to ensure business continuity as well as evaluating cost-rationalisation alternatives, he added. He, however, did not elaborate on cost-control measures. It could mean staff reduction wherever possible.


Murty said, "We are in the process of creating detailed plans for the next 30, 60, and 90 days. Having secured funding, our immediate focus remains on working closely with our associates, customers and partners, determining Satyam's strategic options, and providing stability and leadership.”

“When these are achieved, we will turn our attention to medium- and long-term programs. The options will address the interests of all stakeholders", he said.

The company has formed a task force to look at cost optimisation, which will involve exploring options such as optimising infrastructure spend, non-billable travel, and balancing onsite-offshore people-related costs and sabbatical to keep expenses in tune with revenue.

Large-scale layoff is definitely not among the options Satyam is considering at this time, company officials said.

Satyam's founder B Ramalinga Raju on 7th January confessed to doctoring the accounts of the firm, resulting in a Rs 7,800 crore fraud.


Satyam Computer was trading at Rs 42.35, down 4.19 percent, in morning trade on the Bombay Stock Exchange.

Govt infuses Rs 3,800 cr in 3 banks to raise capital adequacy

The government on Wenesday announced a Rs 3,800-crore fund infusion into state-run lenders - UCO Bank, Central Bank of India and Vijaya Bank - to shore up their capital adequacy.

Under the recapitalisation package Central Bank of India will get Rs 1,400 crore, while UCO Bank and Vijaya Bank will get Rs 1,200 crore each, Home Minister P Chidambaram told reporters after the cabinet meeting.

The capital infusion would be done in two tranches, he said, adding the first tranche would be made available during the current fiscal and the remaining in 2009-10.

As part of the first tranche, UCO Bank will get Rs 450 crore, while Central Bank of India and Vijaya Bank will get Rs 700 and Rs 500 crore, respectively, in the current fiscal.

Spelling out the reason for the capital infusion, Chidambaram said, this will help banks raise capital adequacy over 12 per cent much above the Basel II norms of 9 per cent.

In the next tranche, UCO Bank will get Rs 750 crore, while Central Bank of India and Vijaya Bank to get Rs 700 crore each, he said.

The amount would be form a part of Tier I Capital, he said, adding the infusion would increase the government holding in the three state-run banks.

The increase in the government's holding in these banks would depend on the instruments that they subscribe to, Chidambaram said, adding, such decisions would be taken by respective boards.

Under Tier I, banks can raise capital as equity and innovative instruments like perpetual non-cumulative preference shares and perpetual bonds.

The government holding in Central Bank of India currently stands at 80.20 per cent, UCO Bank 75.98 per cent, while in Vijaya Bank it is 53.87 per cent.

When asked whether these banks would be allowed to tap the primary market, Chidambaram said, accessing capital market is not a viable option."

Last year in November, the government restructured the capital structure of UCO Bank by converting Rs 250 crore equity into preference shares, to enable the bank raise fund in the market when required.

This conversion of equity into perpetual non-cumulative preference shares is in accordance with RBI circular dated 29th October, 2007.

Foreign investment via Indian firm out of FDI cap purview: Chidambaram

Foreign investment through an investing Indian company will not be taken into account in determining the sector FDI cap, the government on Wednesday said.

The Cabinet Committee on Economic Affairs (CCEA) approved the changes in the guidelines for calculating total foreign investment, direct and indirect, in Indian companies.

"The objective is to make it simple and transparent, according to the Department of Industrial Policy and Promotion (DIPP)," Home Minister P Chidambaram told reporters after the CCEA meeting.

Intel announces $7bn plant plan

Computer chipmaker Intel has announced plans to build new plants worth $7bn (£4.78bn) weeks after announcing the closure of five plants.

The world's biggest chipmaker says the investment will fund 7,000 jobs in Oregon, Arizona and New Mexico.

Last month, Intel said it was cutting up to 6,000 jobs in response to slowing consumer demand for computers.

It also aims to increase production of faster chips. Two of the plants being closed make older-style chips.

"Spending this money will lower our costs and give us more competitive products. It's something that's fundamental to our business model," said Intel chief executive Paul Otellini.

"From our perspective this is a cheaper, better technology," he said.

Nanometer race

Intel has the advantage of the being the largest chipmaker and is using its bigger purse to expand while some of its rivals scale down.

California-based Intel is hoping to boost its fortunes by using the new plants to produce 32 nanometer chip technology, which will lead to its products performing faster and more efficiently.

A nanometer is one billionth of a meter and the majority of Intel's chips use 45 nanometer technology.

Intel's nearest competitor, Advanced Micro Devices (AMD) is already busy upgrading plants, though it is still lags some way behind Intel. AMD is phasing in 45 nanometer technology to replace 65 nanometers.

Intel said in January it would close five plants in California, Oregon, Malaysia and the Philippines with the loss of between 5,000 and 6,000 jobs.

It said the two US factories were based on older microchip technology.

Intel's plans come as joblessness in the US soars. In January the US unemployment rate reached 7.6%, the highest level since 1992.

GM confirms 10,000 jobs are to go

US carmaker General Motors has confirmed it is cutting 10,000 jobs from its workforce by the end of 2009.

GM said it would reduce its global salaried staff to about 63,000 from its current level of 73,000.

The company said it was forced to act by a "severe drop" in vehicle sales worldwide and by the need to restructure "for long-term viability".

About 3,400 cuts will be made in the US. These had already been outlined in a plan put forward to the government.

Restructuring plan

The cost-cutting was part of an initial restructuring plan GM submitted to Congress on 2 December 2008 as part of a request for aid.

The chief executives of Ford and GM also offered to work for $1 a year to persuade Congress to approve the emergency aid.

At the end of last year, the US government gave GM $10.4bn in loans and Chrysler $4bn. A further $4bn was to be provided to both firms at a later date.

GM's car loan arm GMAC also received a $5bn rescue package from the US government.

Under the terms of the deal, the US Treasury agreed to buy shares in GMAC.

Pay cuts

On Monday, GM also announced "a temporary pay reduction for a majority of US salaried employees" from 1 May to the end of the year, when it will be reviewed.

Executives' pay will be cut by 10%, while "many others" will see reductions of 3% to 7%, the carmaker said.

"Other countries are currently reviewing compensation and benefits for salaried employees," GM said.

China's exports see sharp decline

China's exports fell more than expected in January, down 17.5% from a year earlier, marking the biggest drop in more than 10 years, figures have shown.

Imports were down 43.1% in the month compared with a year ago, as China's economy continued to be hit by the global economic slowdown.

Analysts say the slowdown could prompt more factory closures and job losses.

China's global trade surplus widened to $39.1bn last month, after recording a surplus of $39bn in December.

Jobs pressure

"The numbers are terrible. The environment is awful," said Ken Peng, an economist at Citigroup.

"The pressure on unemployment will be huge," he added.

Some analysts argue that this worsening trend will continue, as the world economy contracts.

Last month, China's crude oil imports fell to their lowest level for 15 months - down 8% year-on-year.

The country shipped in 12.82 million tonnes of crude oil, nearly 11% lower than in December.

Shares fall after US banking plan

Global investors have given the $1.5 trillion (£1.02 trillion) US bank bail-out plan a muted response, following sharp falls overnight on Wall Street.

Analysts says there is scepticism over whether the proposal will work, and worries over both a perceived lack of detail and the sums of money involved.

At the core of the plan is a new $500bn fund to absorb toxic bank assets.

The UK's FTSE 100 was down 0.4% in early trading. America's main Dow Jones slumped 4.6% on Tuesday.

"This is not a clear-cut plan," said analyst Bucky Hellwig.

Mr Hellwig, who works for Morgan Asset Management, added that it wasn't "what investors are looking for", and that the package was "convoluted".

Dow slump

In early Wednesday trading in London, the FTSE 100 was 0.4%, or 18 points, lower at 4,195, while France's Cac had lost 1%.

Hong Kong's Hang Seng index was down 431 points, or 3.1%, in afternoon trading at 13,450.

Meanwhile, the top index of Australian shares closed down 10.3 points, or 0.3%, at 3,418. The Japanese stock market was closed for a public holiday.

The falls came after the US Dow Jones index slumped 382 points, or 4.6%, to 7,889 on Tuesday.

Mr Geithner said the new bank bail-out package was vital as "critical parts of our financial system are damaged".

"Instead of catalyzing recovery, the financial system is working against recovery, and that's the dangerous dynamic we need to change," he added.

Oil holds above USD 40 as stimulus, bank plans mulled

Oil prices hovered near USD 40 a barrel in Asia on Monday as investors weighed a massive stimulus package and a bank rescue plan from the US this week against soaring unemployment and falling demand for crude.

Light, sweet crude for March delivery rose 9 cents to USD 40.26 a barrel by midday in Singapore on the New York Mercantile Exchange.



The contract fell USD 1.00 on Friday to USD 40.17 a barrel after the Labor Department said the US lost 598,000

jobs in January and the unemployment rate rose to 7.6 per cent, the highest since 1992.



For all of 2008, the economy lost a net total of 2.9 million jobs, according to revised figures, marking the biggest annual loss on record.



"Considering the staggering magnitude of the jobs data, oil held up quite well," said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore.



"The downward momentum in oil pricing appears to have been broken as the USD 40 level has proven to be a very strong support level."



Investors will be watching as a huge stimulus bill makes its way through the US legislature this week.



A USD 827 billion stimulus package will likely pass the Senate by Tuesday, though it will have to be reconciled with a version the House of Representatives approved earlier that's about USD 7 billion apart in cost and overlaps in numerous ways.

India's GDP expansion to be slower at 7.1% in FY'09

India's economy is expected to expand by 7.1 percent in 2008-09, slower than last year's 9 percent, as the global financial crisis hammered manufacturing, financial services and farm sector output.

Mining and other services may, however, act as a prop to the economy, say the estimates released on Monday by the Central Statistical Organisation.

Whether or not growth will slow down further next year would depend on continuation of fiscal stimulus, Planning Commission Deputy Chairman Montek Singh Ahluwalia said.

"We can continue the fiscal stimulus in the next year. It can be done as part of the full budget...In my view there would be a continuing need for fiscal stimulus and I hope we can do that," he said.

Farm sector output is projected to grow by 2.6 per cent in FY'09, slower than last year's 4.9 per cent, manufacturing by 4.1 per cent, down from 8.2 per cent, construction by 6.5 per cent against last year's 10.1 per cent and financing, insurance, real estate, business services by 8.6 per cent against 11.7 per cent.

Commenting on the outlook for the Indian economy, Ahluwalia said, "The Indian economy should not be slowing down like the rest of the world."

The estimates match the one projected by the Prime Minister's Economic Advisory Council and are a tad higher than what the Reserve Bank has estimated.

Manufacturing sector growth is likely to drop by half in percentage terms this fiscal. The sector comprises 80 per cent of the country's industrial output, which in turn contributes 25 per cent to the GDP.

However, mining and quarrying would grow 4.7 per cent, up from 3.3 per cent; trade, hotels, transport and communication by 10.3 per cent from 12.4 per cent; and community, social and personal services by 8.6 per cent from 11.7 per cent.

Electricity, gas and water supply is likely to grow by 4.3 per cent from 5.3 per cent a year ago.

Enthused by the numbers, Finance Secretary Arun Ramanathan said, "There is room for optimism. That is what (GDP) numbers indicate."

Ahluwalia expects growth to be the same next fiscal. "I think it should be similar to this year -- seven per cent or more would be a reasonable outlook for next year."

The final growth figures may not be exactly as projected by advance estimates of the CSO.

"The possibility of agriculture figures revising is there. There will be some upward revision in the agriculture figures. There is possibility that there will be some downward revision in services... Net net even with the revision, the GDP would be between 6.8 and 7.1 per cent," HDFC Bank Chief Economist Abheek Barua said.

If the national income is evenly distributed among the people, each person will get Rs 38,084 during 2008-09.

In other words, per capita income during the current fiscal grew by 14.4 per cent from Rs 33,283 in 2007-08.

The CSO numbers present a gloomy picture for steel, which is projected to grow by 2.7 per cent in the April-December period of the current fiscal against 6.4 per cent a year ago.

Cement production is also slated to expand by seven per cent in the first nine months of this fiscal against 7.7 per cent in the corresponding period of 2007-08.

Also, the production of commercial vehicles witnessed a fall of 15.5 per cent against the growth of 4.8 per cent in April-December 2007-08.

Passengers handled in civil aviation decreased by 6.3 per cent against the growth of 20.4 per cent over the period.

The farm sector growth is based on anticipated growth of six per cent in horticulture crops, 5.5 per cent in livestock products and six per cent in fisheries.

Crisil Chief Economist D K Joshi described the farm growth as on the lines of trend growth rate. "The trend growth rate has been 3 per cent... last year we achieved exceptional growth, now we are back to trend... and then base is also much...Our expectation was 2.5 per cent," he said.

Many economists attributed the good numbers for community, social and personal services to increase in government expenditure.

Crisil's chief economist said, "The private consumption has gone down and the government consumption has gone up. Lots of government spending, subsidies, oil bonds... so increased government expenditure is what is responsible for this."

Private final consumption expenditure at current and constant prices are estimated to grow by 55.1 per cent and 57 per cent, respectively, in FY09 against 55 per cent and 57.2 per cent last fiscal, while government final consumption expenditure may grow by 11.1 per cent and 10.6 per cent, respectively, against 10.1 per cent and 9.8 per cent in FY08.

Part of the growth maintained by this category reflects the implementation of pay revision for government employees as well.

"The growth in community, social and personal services partly reflects the pay hike which have been implemented and also it constitutes largely of the government services," Abheek Barua said.

The country's total national income is likely to be Rs 29,61,249 crore in the current fiscal, showing a rise of 7.1 per cent against 9.1 per cent a year ago.

Gross fixed capital formation, which represents fixed assets bought by the government, businesses and households on net basis, is estimated to grow by 34.6 and 32.1 per cent this fiscal against 34 per cent and 31.6 per cent last year.

Good GFCF numbers indicate that future business activity will remain strong.