The Tribune, Chandigarh, India

IKEA hits a snag with $1.9 bn India venture
Govt rejects request to ease norms for foreign retailers on sourcing 30% of goods locally

New Delhi/Stockholm, July 7
India has rebuffed a request by IKEA to relax rules on buying goods locally, a government source said on Friday, raising the prospect of a delay in the world's largest furniture maker entering the Indian retail market.

IKEA, famous for its self-build flatpacks and huge stores, said last month it would invest 1.5 billion euros (US $1.86 billion) and open 25 outlets, throwing a lifeline to the government in India where economic growth has slowed sharply.

But the Swedish multinational sought a 10-year window to comply with rules that foreign retailers source 30 percent from local small and medium-sized firms, a requirement which overseas companies say discourages investment.

When contacted by Reuters, IKEA said a short delay in its formal application to enter the Indian market would not affect its decision to open stores, and hoped to start operations soon.

The stakes are high for both sides.

India offers IKEA a huge new market while the government is battling heavy criticism over its management of Asia's third-largest economy where growth has slipped to its weakest pace in nine years. Prime Minister Manmohan Singh said Friday IKEA's planned entry was proof that investors still had confidence in India.

WINDOW: A government source involved in formulating retail policy called IKEA's proposed phase-in period "too long". "They'll rework it, I'm sure," the source added, speaking on condition of anonymity because of the sensitivity of the matter.

An IKEA spokesman said the time period to implement the sourcing rules was "not set in stone". The requirements underscore the potential pitfalls for foreign retailers as they seek entry to a market of 1.2 billion people with a swelling middle class.

A plan to open India's retail sector to foreign supermarkets such as Wal-Mart stalled last year after a fierce political backlash, although the government is now pushing to revive it.

IKEA announced its plans to invest in India over a period of 15-20 years after the government removed foreign investment caps in single-brand retail in January.

Apart from IKEA, Coca-Cola Co is the only other foreign firm to announce big India investments in recent months. Coke last month announced a further $3 billion in investment in India over the next eight years as the world's biggest soft drinks maker seeks to expand in a country where its flagship brand trails rival Pepsi.

The Indian government's requirement that foreign retailers source locally is designed to ensure that domestic manufacturers share the benefit of an influx of foreign capital. — Reuters

Indian M&A deals plunge 72% in Q2

New Delhi, July 7
The value of merger and acquisition deals in the country during the second quarter of this year plunged 72 per cent to $3 billion over the first quarter, impacted by adverse global and domestic factors, says an Ernst & Young report.

In the January-March quarter of 2012, deal valuations involving domestic companies stood $10.5 billion.

"Although the year started with a resurgence in M&A activity, the number of deals have now declined significantly, as continued global economic uncertainty restrained expansion plans of companies," the report said.

The number of M&As involving domestic entities during the April-June period also dropped to 168 during the April-June quarter from 230 deals in the January-March quarter.

"The current domestic economic woes coupled with tight global liquidity conditions have weakened merger and acquisitions in the latest quarter. The transaction activity is expected to remain at the same level in the third quarter too," Ernst & Young India partner and national director for transaction advisory services Ranjan Biswas said in the report. — PTI

Yahoo, Facebook form strategic alliance, resolve patent disputes

New York City, July 7
Internet pioneer Yahoo! and social network Facebook have settled all the pending patent claims and announced a strategic alliance entailing new advertising and distribution partnership.

Under the agreements, which include a patent portfolio cross-licence, the parties will work together "to bring consumers and advertisers premium media experiences promoted and distributed across both Yahoo! and Facebook," both the companies said in release.

The deal comes after Yahoo! filed suit against Facebook in March, accusing the social networking giant of infringing on as many as 10 patents, while, Facebook had accused Yahoo! of infringing on its patented technology.

Announcing the alliance, Yahoo! interim CEO Ross Levinsohn said, "We are excited to develop a deeper partnership with Facebook, and I'm grateful to Sheryl (Facebook COO) and her team for working hard together with our team to develop this dynamic agreement."

In a similar vein, Facebook chief operating officer Sheryl Sandberg said, "I'm pleased we were able to resolve this in a positive manner and look forward to partnering closely with Ross and the leadership at Yahoo!." Sandberg further noted that "together, we can provide users with engaging social experiences while creating value for marketers".

Yahoo! and Facebook will also work together to bring Yahoo!'s large media event coverage to Facebook users by collaborating on social integrations on the Yahoo! site, the statement added. — PTI

Gold tumbles on reduced offtake, weak global mkts

New Delhi, July 7
While gold plunged by Rs 170 to Rs 30,030 per 10 gm, silver lost Rs 450 to Rs 52,850 per kg. Trading sentiment turned bearish after gold fell the most in two weeks in global markets as the US dollar gained, eroding the demand for the metal as investment.

Gold in New York, which normally sets the price trend on the domestic market, fell 1.9% to $1,578.90 an ounce, the biggest drop since June 21.

In addition, traders said reduced offtake by stockists and jewellers at existing higher levels pushed down prices.

Gold of 99.9% and 99.5% purity tumbled by Rs 170 each to Rs 30,030 and Rs 29,830 per 10 gms, respectively. Sovereign remained flat at Rs 24,450 per 8 gms.

Similarly, silver ready dropped by Rs 450 to Rs 52,850 per kg and weekly-based delivery by Rs 445 to Rs 53,125 per kg. Silver coins also fell by Rs 1,000 to Rs 61,000 (buying) and Rs 62,000 (selling) of 100 pieces. — PTI

Is the US economy losing steam?

Washington, D.C., July 7
US employers hired at a dismal pace in June, raising pressure on the Federal Reserve to do more to boost the economy and dealing another setback to President Barack Obama's reelection bid.

The Labor Department said on Friday that non-farm payrolls grew by just 80,000 jobs in June, the third straight month below 100,000.

Job creation was too weak to bring down the country's 8.2 per cent jobless rate and the report fueled concerns that Europe's debt crisis was shifting the US economy into low gear. "We're just crawling forward here," said Nigel Gault, an economist at IHS Global Insight in Lexington, Massachusetts.

While Obama holds a narrow lead in most national polls, many voters are critical of his handling of the economy. Speaking at a campaign rally in Ohio, Obama said the pace of job creation needs to pick up.

US stocks closed about 1 per cent lower, while yields on US government debt fell on bets the Fed would launch a new round of bond purchases to lower borrowing costs and spur hiring. The dollar fell against the yen, but rose against the euro as investors sought a safe haven.

HIRING STRIKE: Last month, the Fed extended a program aimed at keeping long-term interest rates down and said it was prepared to do more to spur the economic recovery if needed.

The somber jobs report could move the US central bank closer to a third round of so-called quantitative easing, or QE3. — Reuters

Bank rate rigging probe stepped up

London/Frankfurt, July 7
A global investigation into manipulation of interbank lending rates widened on Friday with Britain's fraud squad taking up the case and sources telling Reuters that Germany's markets regulator had launched a probe into Deutsche Bank.

Authorities in the United States, Europe, Japan and Canada are examining more than a dozen big banks over suspected rigging of the London Interbank Offered Rate (Libor). Britain's Barclays has so far been the only bank to admit wrongdoing. — Reuters

Investor Guidance
Tax benefit on group Mediclaim
By A.N. Shanbhag

Q: The company in which I work provides group Mediclaim policy underwritten by various insurers for its 900 odd employees every year. My firm deducts part of premium from my salary and pays the balance borne by the employer, yet it doesn't give tax benefit for the deduction from the employee's salary under Sec. 80D of the Income Tax Act. My employer isn't sure whether the policy confirms to the requirement of subsection 5 of Sec. 80D, which states the policy should be approved by the central government and, in case the scheme has been underwritten by any other insurer, it should be okayed by IRDA.

— Amar Ramani

A: That it is mandatory for all insurance products to be okayed by IRDA is absolutely correct. However, it not possible to comment on your case without having the benefit of the details of the contract between your employer and the insurer. Normally, deduction is available on the amount of recovery of the premium made from the employee by the employer. It is possible for you to claim Sec. 80D tax deduction through your tax returns if your employer doesn't offer it through your salary.

However, it would be advisable to double check with your tax consultant before taking any step. You will do well by claiming the deduction through your income tax returns.