Happy New Year

3 stages of approval

There are three stages of approval required for getting a licence for an insurance company. R1 is the preliminary approval, wherein the regulator evaluates the promoters. In the second stage (R2), Irda looks into the business model of the company and in the third (R3), at the formation of the company.

Edelweiss, Religare get in-principle nod for insurance JVs

   The Insurance Regulatory and Development Authority (Irda) has given an in-principle approval to the proposed insurance ventures of Religare Enterprises and financial services firm Edelweiss Capital.

  

   Edelweiss has formed a joint venture with Japanese insurer Tokio Marine Holdings to enter the life insurance space.

  

   Two public sector lenders, Corporation Bank and Union Bank of India, have picked up five per cent and seven per cent, respectively, in Religare’s standalone health insurance venture.

  

   Both can possibly start operation in the next financial year. Irda is likely to approve the other two licences, R2 and R3, in the next six months. R1, R2 and R3 are the different stages of approval granted by Irda, with R3 being the final go-ahead.

  

  Earlier, Religare Enterprises had formed a JV with Switzerland-based Swiss Re to enter the health insurance space. The company, however, parted ways with Swiss Re and decided to seek a licence from Irda after looking for a partner for a couple of months.

  

  Religare already has a presence in life insurance. In early 2008, it entered into a tie-up with the Netherlands-based insurer, Aegon.

Happy Reading

Universal Life Insurance (ULP)- an introduction

Universal insurance policy-

Universal Life insurance is a type of permanent life insurance policy. Unlike other insurance policies one can change the policy amount .At times the insured finds it difficult to pay the premiums because of some financial commitments. On such occasions the insured is not able to change the policy amount this policy allows the insured to change the policy amount.

Some of the advantages of this policy are as follows:

Innumerable death benefits-This policy allows flexibility in the amount of death benefits. You are free to change them to suit your convenience. There is another special feature associated with universal life insurance policy. The policy provides for lapse protection which entails you to enjoy the benefits as long as you pay the premiums regularly. Even if it does not have the provision of lapse protection the maturity amount will be paid in the event of death after deducting the money borrowed.

Premium Options

The insured is at liberty to make his choice in paying the premiums. You can either pay the premium at regular intervals or in one stroke. However you cannot change the amount of premiums to be paid.. You cannot pay less or more that the prescribed limits. Your dependents will not be able to enjoy the death benefits if you fail to pay the premiums. 

Death benefits

There are two types of benefits during death when a person chooses a universal insurance policy. When a person invests in this policy the increase or decrease of his cash value does not influence the policy amount. Moreover when there is an increase in cash value the insurance company creates an extra insurance policy for the increased amount.

Catastrophe Bonds

      

            Reinsurance is something you have read before but I think very few of us know about the catastrophe bonds which are similar arrangement as Reinsurance and Retrocession.

             Catastrophe Bonds commonly known as CAT Bonds are high-yield debt instrument that is usually insurance linked and meant to raise money in case of a catastrophe such as a hurricane or earthquake. It has a special condition that states that if the issuer (insurance or Reinsurance Company) suffers a loss from a particular pre-defined catastrophe, then the issuer's obligation to pay interest and/or repay the principal money is either deferred or completely forgiven. For example, if an insurer has built up a portfolio of risks by insuring properties in Florida, then it might wish to pass some of this risk. It could simply purchase traditional catastrophe reinsurance, which would pass the risk on to reinsurers. Or it could sponsor a cat bond, which would pass the risk on to investors. In consultation with an investment bank, it would create a special purpose entity that would issue the cat bond. Investors would buy the bond. If no hurricane hit Florida, then the investors would make a healthy return on their investment. But if a hurricane were to hit Florida and trigger the cat bond, then the principal initially paid by the investors would be forgiven, and instead used by the sponsor to pay its claims to policyholders.

             Insurers can use these as an alternative to reinsurance. Insurance or reinsurance companies can issue these bonds and place them with various investors. This helps them transfer a part of the risks to the investors. The insurance company can further invest the money generated from selling the bonds. Cat bonds can be issued by the Government or financial institutions. Investors can get a slightly higher return when compared to other securities and it also offers them an opportunity to diversify their investments. Cat bonds are popular in some of the markets abroad, especially in the United States, Japan and Europe.

             Major investment banks and other dealers that are active in the issuance of catastrophe bonds are Aon Benfield Securities, Inc., Swiss Re Capital Markets, Munich Re Capital Markets, Barclays Capital, Deutsche Bank, BNP Paribas, Goldman Sachs, Merrill Lynch, GC Securities, JP Morgan, and Willis Capital Markets.

Happy Reading

Top 10 Insurance Brokers by Revenue

Most of the top 10 insurance brokers have their headquarters in the United States, with 2 notable exceptions.

JLT Group has its home office in the United Kingdom and boasts a significant presence in Asia. Gras Savoye is based in France.

1.Marsh and McLennan …             US$11.5 billion in 2008 sales (700 offices worldwide)
2.Aon Corp …                                    $7.3 billion (397)
3.Willis Group …                                 $3.4 billion (400)
4.Wells Fargo …                                 $1.7 billion (213)
5.Arthur J. Gallagher …                       $1.6 billion (200)
6.JLT Group …                                   $992.8 million (76)
7.Brown and Brown …                       $966 million (132)
8.BB and T Insurance Services …       $962.1 million (109)
9.Gras Savoye and Cie …                   $786.4 million (102)
10.Lockton …                                    $778.4 million (48).

Willis Group (up 36.5%) and Wells Fargo (up 36%) grew their insurance brokerage revenues at the fastest pace.

15 minutes can save you 15%

US direct insurer Geico (formerly Government Employees Insurance Company) is a wholly-owned subsidiary of Berkshire. Geico’s speciality is that it sells covers or insurance policies either through the internet or the telephone. Considering the high cost of distribution in retail, Geico is able to generate substantial savings by selling online and pass on the savings to buyers in the form of discounts. The company’s tagline in all its advertisement is — 15 minutes can save you 15%.

PNB still interested in insurance sector, seeks JV partner

Punjab National Bank today said its plans to foray into insurance business are alive and is looking for a joint venture partner.

"PNB has decided to have a fresh comprehensive re-look at its strategy for insurance business in India with a view to provide full range of financial products to its Indian customers and to realise full value of Bank's reach and customer base," the bank said in a statement here.

The bank said it is looking for opportunities in both life and non-life business.

It invited expression of interest (EoI) for strategic partnership in life insurance and non-life insurance business from Indian and international companies.

For more information visit:

http://economictimes.indiatimes.com/personal-finance/insurance/pnb-still-interested-in-insurance-sector-seeks-jv-partner/articleshow/7187164.cms

Changes in insurance sector in 2011

Below is a slide show on how the industry people percieve the insurance sectoe to be in the upcoming year.

http://economictimes.indiatimes.com/quickiearticleshow/7181702.cms

Private life insurers fail to meet break-even targets

MUMBAI: The Insurance Regulatory and Development Authority (Irda) in its annual report has said private life insurers have failed to meet the breakeven targets indicated by them at the time of seeking a licence. However, companies have started taking corrective action and have reduced their operating expenses considerably.
According to Irda, the experience of the insurance markets globally indicates that companies in the life sector take 7-10 years to break even. In India, several insurance companies will complete 10 years of operations in the current fiscal.

The regulator has pointed out that the increase in expenses was largely because of the insurance companies’ inability to control procurement costs.What made things worse was that lapse rates affected profitability and rendered all pricings insufficient. On the positive side, death claims have been few, and companies have not had an adverse experience.
The other bright spot is that companies are now focusing on cutting costs. Operating expenses, as a percentage of gross premium underwritten, have declined sharply for private insurers from 25.99 % in 2008-09 to 20.86 % in 2009-10 . For the industry as a whole, the operating expenses ratio declined from 11.65 % in 2008-09 to 10.85 % in 2009-10 .
 During 2009-10 , out of the 22 private life companies, seven revealed profit after tax as compared to four in the previous two years. Of the seven companies which reported profit in 2009-10 , three companies showed profits continuously for the past two years.

The eight companies that have reported profits in 2009-10 include LIC, ICICI Prudential, Kotak Mahindra, SBI, MetLife, Bajaj Allianz , Sahara India and Aegon Religare.


http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/private-life-insurers-fail-to-meet-break-even-targets/articleshow/7142703.cms?curpg=2

Birla Sun Life Insurance Launches New Campaign

Conceptualized by JWT, the campaign uses mix of online, TV, Print, Radio and OOH; watch the TVCs here.

Birla Sun Life Insurance Company Ltd. (BSLI) has partnered with Career Launcher, India’s leading education services provider to launch www.NotJobsButPassion.com, a comprehensive online property that aims to encourage parents to identify children’s innate strengths and help them find their real passion enabling them to pursue their career accordingly. The website acts as a one stop solution for parents to address career related concerns of their budding juniors.

To mark the launch, a 360 degree campaign has been rolled out which includes two TVCs. The campaign has been conceptualized by JWT.

For more information visit:

http://www.bestmediainfo.com/2010/12/birla-sun-life-insurance-launches-new-campaign/

ICICI Lombard to offer weather insurance

ICICI Lombard General Insurance Company Ltd has been given the mandate to

provide weather-based crop insurance for the ongoing Rabi season in Tamil

Nadu. It would cover Villupuram and Dindigul districts in the state.

The crops that ICICI Lombard would cover for the season are paddy, maize,

vegetables, flowers, groundnut, gingelly, mango, tomato, chillies, tapioca and

pulses. In Tamil Nadu, for the last Rabi season, ICICI Lombard had covered

1,384 farmers and 22,382 acres of land, according to a company release.

The weather-based crop insurance provides cover against weather-related risks

faced by crops such as excess or deficit rainfall, variations in temperature and

fluctuations in humidity.

This scheme facilitates immediate compensation based on certified data

collected from independent third-party bodies such as the Tamil Nadu Agriculture

University (TNAU), Tamil Nadu Water Resources Department (TNWRD), Central

Tobacco Research Institute (CTRI). This transparent and objective method of

claim settlement removes the need for carrying out field surveys, it said.

“This is a unique insurance scheme, where the beneficiary is not required to file a

claim for loss to receive a payout. Instead, ICICI Lombard proactively intimates

and settles the claim amount to the beneficiary based on certified data collected

from independent third party bodies,” it said.

Origin Of Life Insurance Companies In India

1. ICICI Prudential - ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, one of the foremost financial services companies of India and Prudential plc, one of the leading international financial services group headquartered in the United Kingdom. ICICI Prudential was amongst the first private sector life insurance companies to begin operations in December 2000.

2.Bajaj Allianz - Bajaj Allianz Life Insurance Company Limited is a joint venture between Allianz AG of Germany, one of the world's largest Life Insurance companies and Bajaj Auto, one of the biggest 2- &- 3 wheeler manufacturers in the world.

3.Tata AIG - Tata AIG Life Insurance Company Limited (Tata AIG Life) is a joint venture company, formed by the Tata Group and American International Group, Inc. (AIG). Tata AIG Life Insurance Company was licensed to operate in India on February 12, 2001 and started operations on April 1, 2001.

4.SBI Life - SBI Life Insurance is a joint venture life insurance company between State Bank of India (SBI), the largest state-owned banking and financial services company in India, and BNP Paribas Assurance,France. SBI started SBI Life as a joint venture with BNP Paribas in 2001.

5.IDBI Federal - IDBI Federal Life Insurance Co. Ltd.,(formally IDBI Fortis Life Insurance) is a joint venture between three financial companies –  IDBI Bank, India’s private sector bank, Federal Bank of India and European insurer Ageas (formerly Fortis) headquatered at Belgium & Netherlands. It was formed on March 2008. In this venture, IDBI Bank owns 48% equity while Federal Bank and Ageas own 26% equity each.

6.IndiaFirst - IndiaFirst Life Insurance Company is a life insurance company in India. It is a joint venture between Bank of Baroda, Andhra Bank and Legal and General (UK).It was formed on 2009. IndiaFirst is the first life insurance company to be recommended for ISO certification within 7 months of inception.

7.LIC - The Life Insurance Corporation of India (LIC) is the largest state-owned life insurance company in India, and also the country's largest investor. It is fully owned by the Government of India. It also funds close to 24.6% of the Indian Government's expenses. It has assets estimate 9.31 trillion (US$205.75 billion). It was founded in 1956 with the merger of more than 200 insurance companies and provident societies.

8.Metlife - MetLife India Insurance Company Limited (MetLife) is an affiliate of MetLife, Inc.(US) and was incorporated as a joint venture between MetLife International Holdings, Inc., The Jammu and Kashmir Bank, M. Pallonji and Co. Private Limited and other private investors.It was formed on 2001.

9.Max New York - Max New York Life Insurance Company Ltd. is a joint venture between Max India Limited, one of India's leading multi-business corporations and New York Life International(US), the international arm of New York Life, a Fortune 100 company.Incorporated in 2000, Max New York Life started commercial operation in April 2001.

10.Sahara Life - Sahara India Life Insurance Company Ltd.- has been granted licence by the insurance regulator – the IRDA on 6th February 2004 and started operations on 30th october 2004. With this approval Sahara India Life Insurance Company Ltd. becomes the first wholly and purely Indian company, without any foreign collaboration to enter the Indian Life insurance market. The launch is with an initial paid up capital of 157 crores.

11.HDFC Standard Life - HDFC Standard Life is a joint venture between Housing Development Finance Corporation Limited (HDFC), India’s leading housing finance institution and Standard Life plc, the leading provider of financial services in the United Kingdom. It got license from Irda on 23rd october 2000 probably first private life insurer to got license.First branch opened in Churchgate on 1st November 2000.

12.Birla SunLife - Established in 2000, Birla Sun Life Insurance Company Limited (BSLI) is a joint venture between the Aditya Birla Group, a well known and trusted name globally amongst Indian conglomerates and Sun Life Financial Inc, leading international financial services organization from Canada.BSLI has several firsts to its credit. It was the first Indian Insurance Company to introduce “Free Look Period” and the same was made mandatory by IRDA for all other life insurance companies. Additionally, BSLI pioneered the launch of Unit Linked Life Insurance plans amongst the private players in India.

13.Kotak Life - Kotak Mahindra Old Mutual Life Insurance Ltd is a joint venture between Kotak Mahindra Bank Ltd.(India), its affiliates and Old Mutual(UK). It was incorporated in 2001.

14.Aviva Life - Aviva India is a joint venture between one of the country’s oldest and largest groups, Dabur, and Aviva plc, the UK's largest insurance group.It started its operation on july 2002. Apart from agents, it sells its products through Banks such as Royal Bank of Scotland(RBS),Punjab & Sind Bank and Indusland Bank.

15.Reliance Life - Reliance Life Insurance Company Limited is officially launched on February 1, 2006 after acquiring 100% stake in AMP sanmar life insurance company by ADAG group. It is 100% Reliance holding company.

16.ING Vysya - ING Vysya Life Insurance Co Ltd is the result of a joint venture between the world's second largest life insurance company - ING Insurance(Netherlands) and one of the largest private sector banks in India - Vysya Bank. Another stakeholder in the JV is GMR Group. It has established its foothold in the private life insurance industry in India in September 2001.

17.Shriram Life - Shriram Life Insurance Co Ltd is a joint venture between Shriram Group of Companies India and SANLAM Company of South Africa. The enterprise started its activities in India in December 2005.

18.Bharti AXA - Bharti AXA Life is a life insurance player that was started in 2006. It brings together strong financial expertise of the Paris-headquartered AXA Group, and Bharti Enterprises - one of India's leading business groups.

19.Future Generali - Future Generali is a joint venture between the India-based Future Group and the Italy-based Generali Group.It started its operations in october, 2007.

20.AEGON Religare - AEGON, an international life insurance company located in netherlands, Religare, a global financial services group and Bennett, Coleman & company, India’s largest media house, have come together to launch AEGON Religare Life Insurance Company Limited (ARLI).ARLI launched its pan-India operations in July, 2008. Shareholding of AEGON Religare is 44% -Religare, 30%- Bennett,Coleman & company, 26%-AEGON.

21.DLF Pramerica - DLF Pramerica Life Insurance Company Ltd. (DPLI) has been formed by the collaboration between DLF Limited and Prudential International Insurance Holdings, Ltd. (a fully owned subsidiary of Prudential Financial, Inc.) of US. It was launched on 1st september, 2008.

22.Canara HSBC - The Company was launched on 16 June 2008 and is a Joint Venture between Canara Bank (holding 51%), HSBC Insurance (Asia Pacific) Ltd (holding 26%), the Asian insurance arm of one of the world's largest banking and financial services groups - HSBC and Oriental Bank of Commerce (holding 23%). 

23.Star Union Dai-ichi - Bank of India and Union Bank of India, two leading Public Sector Banks in India and the Dai-ichi Mutual Life Insurance Company, a leading Japanese Company in the Life Insurance market, have floated a Joint Venture Company, "Star Union Dai-ichi Life Insurance Co. Ltd.". Company has a capital stake of 51% by BOI, 26% by Dai-ichi Life and 23% by Union Bank. It was Registered on September 25, 2007, with the Registrar of Companies in Maharashtra, the company gained its license on December 26, 2008, by the IRDA.

Soon, insurance cover for the mentally ill

In a first in the country, the treatment of the mentally ill may soon come under the health

insurance cover. This is part of the comprehensive legislation the Union health ministry is

planning to protect the rights of persons suffering from mental illness.

At present, the health insurance schemes do not cover any mental illness, psychosomatic

dysfunction or problems connected to psychiatric conditions, disorganisation of personality or

mind even if it is caused or aggravated by accident.

Under Section 10 — right to equality and non-discrimination — of the proposed Mental Health

Care Act (MHCA) 2010 prepared by the health ministry, persons with mental illness will have to

be treated as equal to persons with physical illness in the provision of all healthcare. Accordingly,

the public and private insurance providers shall make provisions for medical insurance for

treatment of mental illness on the same basis as is available for treatment of physical illness,

failing which will be seen as discrimination.

“Families get wiped away under financial burden and debt while taking care of treatment of

persons with mental illness. Mental health has to be treated like any other illness, hence, it has to

be covered under insurance,” said Dinesh Trivedi, minister of state for health and family welfare.

The draft of the MHCA says the proposed legislation aims to regulate and improve accessibility to

mental healthcare by mandating sufficient provision of quality public mental health services.

Besides banning certain acts like chaining or giving electric shocks without anaesthesia, the

proposed act also encourages people to come forward and report inhuman treatment of such

persons in the neighbourhood.

The ambit of Right to Information will be extended to persons with mental illness and their families

to seek information with regard to their treatment etc and they can make complaints against care

givers.

The government has acknowledged that the previous law, Mental Health Act (MHA) 1987, failed

to protect the rights of mentally ill persons. The updated, amended and comprehensive law is

more rights based. It prohibits discrimination of persons with mental illness and aims to ensure

the environment around such persons is conducive to facilitate recovery, rehabilitation and full

participation in society.

Accordingly, such persons need to be provided treatment in a manner which helps them live in

the community and with their families. Long-term hospital-based mental health treatment shall be

used only in exceptional circumstances, for as short a duration as possible, and only as a last

resort when other means have failed.

No person with mental illness can be kept in a mental health facility merely because he/she does

not have a family, is not accepted by them, or is homeless. In such cases, the government will

more restrictive mental health facility, the draft act prescribes.

Similarly, they cannot be subjected to any cruel, inhuman or degrading treatment in a mental

health facility, including the compulsory tonsuring. Patients can be allowed to wear own personal

clothes too.

Besides, electro-convulsive therapy without the use of muscle relaxants and anaesthesia, electroconvulsive

therapy for minors, sterilisation of men or women, and chaining will be prohibited

treatments. In fact, physical restraint or seclusion can only be used when it is the only means to

prevent imminent and immediate harm to person concerned or to others, that too if it is authorised

by the psychiatrist in charge of the person’s treatment.

Every mentally ill person will have a right to make an ‘advance directive’ in writing, specifying the

way he/she wishes to be cared for and treated for a mental illness. This directive can be made by

a person irrespective of their mental illness history. However, it shall not apply to any emergency

treatment.

Mental illness shall be determined in accordance with nationally and internationally accepted

medical standards of the World Health Organisation.

http://www.dnaindia.com/money/report_soon-insurance-cover-for-the-mentallyill_1486598

Who is Binayak Sen?

Hi friends,
We have all been reading about Binayak Sen's life term sedition in news these days.
But who's Binayak Sen and why has the person got a high frenzy audience in the public that set up a campaign to free him.The following article appeared in the hindustan times--

Binayak Sen has played mutiple roles over the years; academician, pediatrician, public health specialist, human rights activist and now, according to a Chattisgarh court, a Maoist and a traitor.Here is a brief sketch of his life and works. --He started his academic career at Christian Medical

College, Vellore, doing his MBBS and later on, an M.D in Pediatrics. He then went on to join the the Centre for Social Medicine and Community Health at the Jawaharlal Nehru University, New Delhi, one of India's most prestigious universities, as a faculty member.
-- His next stop was in Hoshangabad district of MP, where he began his commitment to rural health programmes, working in a community based rural health centre focusing on tuberculosis.
-- In the seventies, he joined the Medico Friend Circle, a national organisation of health workers trying to evolve an alternative health system to cater to economically weak sections of rural India.
-- Dr Sen further extended his ambit working with mine workers in Dalli Rajahara. His work included helping the workers set up and sustain a hospital of their own called Shaheed Hospital under the banner of the Chhattisgarh Mukti Morcha. This was followed by a mission hospital in Tilda where Sen focussed on his specialty; Pediatrics and later, Community Health.
-- In the late eighties he moved to Raipur, developing models of primary health care in Chhattisgarh. Ironically, he was a member of the state advisory committee which pioneered a community based health worker programme across the state called the Mitanin programme. Alongside, he consulted a weekly clinic in a tribal community in Dhamtari district. He also acted as an advisor to the Jan Swasthya Sahyog, a health care organization working on rural low cost models of community health in the Bilaspur district of the state.
-- Dr Sen and his wife, Dr Ilina Sen, then went on to create 'Rupantar', an NGO which trains, deploys and monitors community health workers spread across 20 villages. Rupantar then branched out to cover alcohol abuse, violence against women and food security.
-- While working in Chattisgarh, Dr Sen extended his expertise and dedication to human rights movements, albeit in his own way. He served as the General Secretary of the state Peoples' Union for Civil Liberties (PUCL) Committee for five years and as Vice President of the National Committee for the three years. His work was vast in scope, covering fake encounters, custodial deaths, hunger deaths, malnutrition, and dysentery.
-- Dr Sen is also responsible for one of the first few voices against Salwa Judum, the state sponsored reactionary peoples movement. His fact finding team, was one of the first few to study and highlight the excesses and dangers posed by the Salwa Judum, instantly bringing him under the state government's scanner.

Felicitations

Recognising his contribution to the field of community health care, Dr Sen has been graced with the following (chronologically)
-- In 2004 Dr Sen was decorated with the Paul Harrison award for a lifetime of service to the rural poor, and award given annually by his alma mater, the Christian Medical College, Vellore.
-- In 2007 he was awarded the RR Keithan Gold Medal by The Indian Academy of Social Sciences (ISSA) for "his outstanding contribution to the advancement of science of Nature-Man-Society and his honest and sincere application for the improvement of quality of life of the poor, the downtrodden and the oppressed people of Chhattisgarh."
-- Surprisingly or maybe not in April, 2008, while he was still incarcerated, the Global Health Council nominated him as the winner of the 2008 Jonathan Mann Award for Global Health and Human Rights.
Charges
On May 14, 2007, Dr Sen, was arrested under the provisions of the Chhattisgarh Special Public Security Act, 2005, (CSPSA) and the Unlawful Activities (Prevention) Act, 1967. The allegations claimed that he had acted as a courier for a Maoist leader Narayan Sanyal lodged in the Raipur Jail and then absconded. The charges against him were as follow:
   a) Treason
   b) Criminal Conspiracy
   c) Sedition, anti-national activities and making war against the nation
   d) Knowingly using the proceeds of terrorism
   e) Links with the Maoists

Service sector in India is facing the shortage of skilled labor says ASSOCHAM

New Delhi: The rapid economic growth in the country has greatly increased the demand for

skilled labor and approximately 10 to 15 million jobs are expected to be created in India by next

year, in which 75 per cent of these new jobs will require vocational training to enhance the

employability wrapper, if not addressed properly can lead to a slowdown in the country’s

economic growth, according to the ASSOCHAM.

The year 2011 is likely to be a boom for skilled worker in IT & ITES, biotechnology and services

sector as against the 15 per cent hike in their salaries in 2010, is expected to be registering 30 to

40 percent growth in salaries, said Mr. D S Rawat, Secretary General, ASSOCHAM while

releasing the ASSOCHAM paper.

The share of the services sector is steadily increasing and this is confirmed by the fact that

services contribute to nearly two-third in the GDP. The high growth service sector industries

include information technology, academic and biotechology sectors. Due to the high demand of

India’s vaunted IT outsourcing sector, companies have been forced to raise wages by 10 to 15

per cent during the year 2010.

The employers are trying to catch up the highly skilled manpower and the salaries are going

through the roof. Companies are not only facing the problem of retention difficult and job hoping

extensive, but there is a clear shortage of qualified and skilled manpower. Mainly IT/ITES,

academics, engineering, HR, hospitality, insurance and biotechnology sectors, which are driven

by the highly skilled manpower but the supply of capable labor is not up to the demand at the

point.

About 90 per cent of the current jobs in these sectors are skill-based and require vocational and

management training but only 6 per cent of the population receive any form of vocational training”

says the chamber study for 2011.

The IT/ITES industry which provides direct employment to the about 2.23 million and indirect

employment to the 8 million people will be experiencing of the shortage of skilled manpower. It is

expected that the salaries in this sector will be growing at a par of 30-40 per cent during the year

2011, according to the study of ASSOCHAM.

Growth rate of India is the second highest in the world after that of China. The youth force of India

is contributing lot to the same. It is believed that principal reason behind Indian progress is its

youth force, highest in number in the world. However, there is a problem, the huge numbers of

Indian youth are not only unemployed but unemployable,whereas a large numbers of white collar jobs are waiting for suitable candidates.

Assocham revealed that with the growing demand of services sector, which employs lakhs of

people every year, is expected to add more over the coming years. Similarly, the IT and ITES

industry will also need skilled manpower, and, the growing market of the biotech industry in India

will also need highly skilled professionals. Not only in India, the developed world too facing skill

manpower shortages.

Job generating service sectors (January-November 2010)

Sectors          Growth in %age as compare to the 2009    Share in %age

IT/ Enabled           31.9                                                                        40.3
Academics              85.5                                                                        12.4

Engineering           110.4                                                                        5.6

Insurance               19.9                                                                         5.0

Hospitality              38.2                                                                         3.3

Biotechnology         46.0                                                                        2.7

HR                           16.7                                                                         2.5

Source: Newspapers and job portals

This is further stretched due to the fact that most of the growth has been in the services sector

which, being a dynamic sector is continuously evolving. Thus, not only is there a shortage of

skilled labor, a constant up-gradation required on new skill types is visibly low.

The skills shortage spans all levels, from management to frontline operations, and all sectors,

from IT to fast food. This shortfall can be met by India, where both educated unemployment and

the number of people joining the workforce are on the rise. In short, the opportunities before India

are huge, provided skilled workforce gears up to take these on.

Sombre market outlook for early part of 2011

Inflation, rate pressure and scams dampen mood, though demand remains strong.

The Indian equity market’s near-term outlook for 2011 looks gloomy, while the year as a whole

might give a moderate return of 15-20 per cent from current levels.

Market participants are worried due to rising inflation, increasing pressure on interest rates and

the repeated unearthing of scams on the financial and political front. All these have spoilt the

sentiment.

Before going up, the Bombay Stock Exchange’s benchmark Sensex might correct by five to 15

per cent. The interest rate increase by China last evening could act as a trigger for a fall when the

market here opens tomorrow.

Apart from China, analysts’ major fear is on corporate earnings, as they might go down in the

coming quarters.

In 2010 so far, the equity market (Sensex) has risen by 15.6 per cent. However, smallcap and

midcap indices have underperformed, with returns from 11 to 14 per cent and a faster correction

in the last month, reflecting the impact on small investors’ psychology. In absolute terms, 43 per

cent of stocks (of nearly 3,000 active scrips) are trading at lower levels compared to where they

were at the beginning of the year.

From November 11, when the markets peaked out, the Sensex is down 3.8 per cent, the BSE

smallcap index is down 16.8 per cent and the midcap index 12.6 per cent.

Inflation is high and food inflation has again begun raising its head. Global crude oil prices have

crossed a major barrier of $90 a barrel and according to a Barclays commodity analyst, “all

indications suggest that crude oil will trade for a sustained period above $100 during most of

2011”.

Petrol pricing reflects market rates and any rise in diesel will be inflationary; yet, if prices are not

raised, it will add to the subsidy and oil companies’ under-recovery will go up.

Pradeep Shah, chairman, IndAsia Fund Advisors said, “The economy has fundamentally peaked

out, at least for the time being.” A possible rise in interest rates will add pressure on companies’

earnings. Vikash Khemani, managing director, institutional sales, Edelweiss Capital, said: “We

see the possibility of corporate earnings downgraded for the coming quarters.”

FII sentiment

All these factors might have been conceded by investors, particularly those abroad. However,

scams have spoiled the sentiment. A combination of these factors might result in foreign

institutional investors (FIIs) paying less attention to India and certainly not paying a premium for

India over China.

new perspective

Rajesh Bhayani / Mumbai December 27, 2010, 0:04 IST