International
Friday Newspaper Review - Irish Business News and International Stories
By Finfacts Team
Sep 1, 2006, 08:09

The Irish Independent also reports that a Fianna Fail councillor, who is married to a prominent TD, was under growing pressure last night to reverse her decision to accept lavish Ryder Cup hospitality from the country's biggest building firm.

The Irish Times reports that consumers and businesses are heading towards record borrowing of €300 billion, according to the latest figures from the Central Bank. Private sector credit figures issued yesterday show new borrowings amounted to €4.9 billion in July, bringing total lending to €293.4 billion.

The figures show no real evidence that rising interest rates are helping to ease borrowing growth, although economists say this may still come later in the year. The Central Bank said the €300 billion level could be breached by this month.

There were strong signals yesterday that interest rates could rise further next month, having already seen four quarter-point increases this year. Another increase of this magnitude would leave rates at 3.25 per cent, lifting average mortgage repayments by about €35.

European Central Bank president Jean-Claude Trichet prepared the markets for another rise on October 5th by warning of inflation risks and saying there was a need for "strong vigilance".

The July borrowing figures mean that private-sector credit is now showing annual growth of 29.2 per cent, marking a slight decline on the 30.3 per cent recorded in June.

The Central Bank said the July rise would have been larger had it included an increase in securitised mortgages.

These securitisations involve lenders removing loans from their books and are thus not included in the Central Bank's overall figures.

When securitisations are included, however, the numbers show residential mortgages grew by €2.4 billion in July, the highest monthly increase so far this year.

This lifted households' total mortgage borrowing to €113.2 billion, with the increase coming as house prices climbed by 15.4 per cent year on year. Annual mortgage growth rose to 29.3 per cent from 29.1 per cent .

Mr Trichet declined to comment directly on Irish housing yesterday, but did acknowledge that markets were "abnormal" in some countries. He also noted that national regulators should look at circumstances in their own markets.

Austin Hughes, chief economist at IIB Bank, said the bank's figures implied a "bumper summer" for the Irish property market.

"Viewed from an ECB perspective there may be a concern that numbers such as these indicate money is still too cheap," he said.

A further breakdown of the Irish private sector numbers for July shows credit card debt remained fairly steady over the month, with customers appearing to pay their bills as they spent.

The annual growth rate in credit card borrowing, which has been steadily rising all year, fell from 18 per cent in June to 17.1 per cent.

The Central Bank noted, however, that it was traditional for credit card debt to post either a steady or a lower annual rate of expansion over the summer.

Overdrafts expanded by €222 million while short-term loans grew by €187 million. Alan McQuaid, chief economist at Bloxham Stockbrokers, said that while anecdotal evidence pointed to some impact from rising interest rates, official figures still demonstrated "soaring demand" for debt.

"There is no doubt that the SSIA funds will act as a buffer against higher interest rates in the coming months, with the monthly contributions simply being diverted to cover increased mortgage repayments," he said.

Mr McQuaid expects credit growth to ease as the year progresses, but says it will still be "very high" by euro zone standards even then.

The Irish Times also reports that Aer Lingus will tell investors on its upcoming investment roadshow that its growth will come from short-haul flights of more than two hours' duration.

The airline believes it has an advantage over Ryanair on such routes, which would see it add services to Greece, Turkey and Scandinavia.

It will also tell investors not to expect dividend payments during a roadshow expected to take in Dublin, London, New York and possibly Tokyo.

The airline's analysis indicates that passengers are less likely to chose low-cost carriers like Ryanair on routes of more than two hours because of concerns over service levels and other factors.

The airline will cite Berlin, Faro, Malaga, Rome and Tenerife as examples of these kind of routes where it holds its own against Ryanair and other low-cost carriers with its "low fare, way better" proposition.

However, Deutsche Bank appears to cast doubt on this claim in an unpublished research note circulated to clients. It says regional airlines such as Aer Lingus are in danger of being squeezed between low-cost carriers and global long-haul players like British Airways, Air France and Lufthansa.

Although Aer Lingus has decided to go to market on the back of expanding its short-haul route network, it will not make any commitment to operating a new hub outside Ireland. It is understood that 40 per cent of the short-haul expansion will involve new services to destinations it already serves.

However, the airline will also highlight the potential upside of an Open Skies agreement between the EU and the US giving it access to more US destinations. But the flotation prospectus will not specify a precise date when it expects such an agreement will be reached.

Investors will be told that capital investment will take a priority and it would be unusual for a strongly growing airline to pay dividends. The airline expects to get €400-€500 million from the sale, which includes money for the supplementary pension fund.

Aer Lingus will also emphasis that the current management team have been in place for almost 22 months, since the departure of Willie Walsh and two senior management. They will also point out to investors that they current management implemented the successful strategies of Mr Walsh and his team.

The research from Deutsche notes the strong margins Aer Lingus has and its reasonable level of profits, which are expected to fall this year from last years €72.4 million. The prospectus will contain the accounts for the first half of the year, which are broadly in line with 2005 at the operating profit level. Deutsche also notes its past performance in fending off competition from Ryanair. However, the bank's London-based analysts caution that Aer Lingus is a "regional" carrier and as a result may find it hard to find a niche in future.

The Irish Examiner reports that the European Commission has given the go-ahead for the Government to provide state aid for a €300 million investment in the Irish dairy processing sector.

Agriculture and Food Minister Mary Coughlan recently announced the investment fund comprised of €100m from the Exchequer and €200m from the industry.

The package will provide financial assistance in support of capital investment into the marketing and processing of dairy products.

It required the approval of the European Commission, which has now declared it to be compatible with EU guidelines for State aid in the agriculture sector.

Ms Coughlan said the investment package is capable of taking the Irish dairy sector forward in a cohesive and strategic manner.

Ms Coughlan predicted it will lead to the sustained development of the sector into the future as envisaged under the AgriVision 2015 Action Plan.

She said she recognised the contribution of the dairy sector to the agriculture economy. It accounted for some 30% of output and €2 billion of total agri-food exports last year.

“The sector has seen enormous change in recent years, particularly as a result of the mid-term reform of the Common Agricultural Policy (CAP),” she said.

“This investment fund is designed to assist companies as they confront the key challenges facing the Irish dairy sector and seek to maintain or strengthen their position in increasingly competitive markets.”

Ms Coughlan said she was very pleased with the sector’s positive response.

Enterprise Ireland will manage all aspects of the scheme from the application process through to the assessment of projects and the awarding of grant aid.

The Financial Times reports that the Federal Reserve and the European Central Bank painted contrasting pictures of the US and European economies on Thursday, with Ben Bernanke, Fed chairman, depicting a US economy that could continue to grow rapidly without generating inflation, while the ECB hinted that further interest rate rises were needed to stem inflationary pressure in the eurozone.

Together, the statement by Jean-Claude Trichet, ECB president, and the speech by Mr Bernanke indicated that European interest rates were likely to rise while there was no urgency for further US rate rises.

Mr Bernanke gave an optimistic assessment of the US economy’s ability to continue rapid economic growth without triggering further inflationary pressures.

He said recent downward revisions to official statistics on US national income and output did “not appear to require a significant rethinking of long-term productivity trends”.

His comments showed that he thinks the US economy can still grow a little over 3 per cent a year without stoking inflation and interest rates.

Many economists have recently said that downward revisions to recent years’ data imply that the underlying speed limit of the US economy had fallen to 3 per cent or below.

Bond and equity markets were little moved by Mr Bernanke’s optimism.

But Mr Bernanke’s belief in the strong prospects for long-term US productivity performance was tinged with a warning that new technology alone would not secure the US a competitive advantage.

Across the Atlantic, Mr Trichet announced big upward revisions to the ECB’s inflation forecasts for this year and next and called for “strong vigilance” to defend price stability – code words used to signal an interest rate increase in early October.

He added that he expected “a progressive withdrawal of monetary accommodation”, implying more than one rise in borrowing costs was likely.

Mr Trichet’s comments followed the unexpected strength of the eurozone recovery in the second quarter, and ECB fears about the impact on inflation in 2007 of oil prices and a three percentage point rise in the German consumer tax rate next year.

Eurozone consumers’ fears about inflation increased in August to the highest level since the introduction of euro notes and coins in 2002, according to a European Commission survey yesterday.

The ECB left its main interest rate unchanged at 3 per cent. But a quarter percentage point rise is now expected at the bank’s meeting in Paris on October 5.

The FT also says that few ideas express an underlying belief in American culture better than the notion that “you get what you pay for”. On healthcare the US spends more than any other country on earth – and more than twice as much per head as the UK – so Americans expect a healthy society.

This article of faith was shaken when an international study by renowned researchers concluded this year that Americans were “much less healthy” than their English counterparts. The comparison of late-middle-aged white populations in the US and England, funded by government research agencies in both countries, appeared in May in the Journal of the American Medical Association.

The findings are still reverberating among health policy professionals on both sides of the Atlantic, with much debate but little agreement about why Americans in the 55-64 age group are sicker than English people. Although the study echoes previous research in showing that, in both countries, rates of disease increase as socio-economic status declines, the national differences were so great that those at the top of the income and education scale in the US suffered diabetes and heart disease at a similar rate to those at the bottom of the scale in England.

Sir Michael Marmot, the study leader and professor of epidemiology at University College London, says: “I know that our results have caused a lot of anguished brow-beating among our American colleagues. But I do not think differences between the healthcare systems can explain why middle-aged Americans are less healthy than middle-aged English people.”

James Smith of the Rand Corporation in California, another of the report’s authors, adds that since the study came out his inbox has filled with e-mails suggesting causes ranging from the American habit of driving everywhere to the British penchant for drinking tea. “But I don’t think any of these single-cause explanations is going to turn out to be the answer,” he says. “We have to go beyond first-order explanations such as obesity, smoking and drinking to something more profound.”

The approach to healthcare is one of the widest social divides between the US and the UK. Indeed, the American system, based on private insurance and free-market pricing of drugs, devices and services, differs markedly from those of most other industrialised societies, where forms of “socialised medicine” predominate.

But answers to why Americans are significantly less healthy than the British may lie in a different cultural divide. Many experts agree with Sir Michael that social differences, rather than healthcare systems, are responsible. They point particularly to the intense competition, economic insecurity and high levels of stress that run through American society.

Ian Morrison, health policy expert and author of Healthcare in the New Millennium and The Second Curve, says: “What I think is really important is that medical care doesn’t really produce health.” Robert Sapolsky, a neurobiology professor and stress expert at Stanford University, agrees. “Throw in the absence of safety nets and it is a pretty corrosive system.”

David Cutler, professor of applied economics at Harvard University, also thinks the stress explanation might be on the right track. “In a hypercompetitive society everyone feels worse,” he says. “I think of this [research] as a great appetiser – and I want the main course.”

The study, entitled “Disease and Disadvantage in the United States and England”, compared two sets of data, each containing information on about 8,000 people. The first looked at self-reported health and disease among 55- to 64-year-olds in 2002. It found that the US population suffered more diabetes, hypertension, heart disease, heart attacks, stroke, lung disease and cancer than its English equivalent. The biggest difference was in diabetes, for which the US rate was twice as high.

To guard against any bias from self-reporting, the second batch of data used objective medical test results for people aged 40 to 70. These confirmed the higher rates of disease among Americans at all income levels.

The research was limited to non-Hispanic whites to make sure health differences were not due to special factors in minority ethnic and racial groups. “This study challenges the theory that the greater heterogeneity of the population is the major reason the US is behind other industrialised nations in some important health measures,” says Richard Suzman, director of behavioural and social research at the National Institute on Ageing, the main US agency funding the project. “By focusing on the comparable white populations, this study still finds the US lagging.”

The scientists say lifestyle factors – particularly the fact that Americans are fatter on average than the English and take less exercise – could account for only a fraction of the health differences they found. Smoking rates were similar in the two countries and there was more heavy drinking in the English group.

However, Dr Smith concedes it is impossible to assess all the risk factors. “I’m sure that exercise is an extremely important factor in the equation,” he says. “Unfortunately there are no comparable data for exercise rates in the two countries, so we could not include it in our study.”

Different childhood experiences may also provide a partial explanation. Evidence is growing that children’s diseases, diet and lifestyle have a big influence on their health in late adulthood. “The group we studied grew up during the postwar rationing period,” Dr Smith observes. Although both countries rationed food in the 1940s and early 1950s, dietary restrictions were much tighter in the UK than the US.

Even so, this summer’s discussion of transatlantic health differences always comes back to the higher levels of stress in the US. Prof Sapolsky provides a biological explanation of the damage this can do. The body reacts to stress by increasing blood pressure and heart rate to transfer energy to muscles, and by enhancing immune defences, cognition and sensory functions. At the same time, it defers longer-term processes not needed for immediate survival, such as growth, tissue repair and reproduction. Chronic stress can cause disease, he says. If energy is constantly mobilised and not stored, it can bring an increased risk of insulin-resistant diabetes. Persistent hypertension can damage blood vessels and, if combined with metabolic stress responses, lead to clogged arteries.

One theory put forward to explain poor American health is that greater income inequality in a society creates poorer health for everyone. The US has one of the widest ranges of income between rich and poor in the industrialised world. But this explanation is hotly contested. Even if it is a factor, it is still insufficient to explain all the differences in the Marmot study, says Timothy Smeeding, an international health economics professor at Syracuse University: “The cross-country [income inequality] stuff doesn’t hold a lot of sway.”

Despite seeing a need for more studies about stress and its corrosive effect on American health, experts warn that these should not distract from the need to improve healthcare access and quality in the US. “The more you learn here, you’re almost tempted to say the problem is so big you can’t do anything about it,” Prof Cutler warns. “We’ve got to find some way to get people better care.”

Indeed, it is possible to argue from the Marmot study and other research that the expensive US healthcare system is actually saving lives and making up for some damage done by other factors. “Life expectancy at the age of 60 is not very different in England and the US,” says Dr Smith. “There seems to be more morbidity in the US but an American who becomes sick is more likely to be treated successfully.”

A new study by Prof Cutler and colleagues, published yesterday in the New England Journal of Medicine, concludes that the huge increases in US healthcare spending over the past 45 years have, on the whole, been cost-effective. Average life expectancy from birth has increased by seven years since 1960, at a cost of $19,000 for each individual’s added year.

“The rising cost of healthcare has been the source of a lot of sabre-rattling in the media and the public square, without anyone seriously analysing and discussing the benefits gained,” says Prof Cutler. “But the dramatic increase in life expectancy that we’ve seen over the last decades shows that rising medical costs have been largely justified.”

Akey piece of American mythology is that the country and its culture are a grand experiment. But the experiment is generating some unexpected data along the way, as the Marmot study shows. results could challenge another key part of US mythology: that its go-getting way of life is best.

There is more to find out about American stress and health – so long as the US does not dismiss the evidence as an unwelcome challenge to its go-getting way of life. England, for its part, may have only a brief opportunity to feel superior if, as Prof Cutler says, talk of the UK “becoming the next US” in health is correct.

A frequent piece of folk advice on both sides of the Atlantic is to avoid an obsession with “keeping up with the Joneses”. If status anxiety is indeed harming Americans’ health, it is perhaps wiser advice than anyone imagined.

The New York Times reports that India’s economic advancement no longer rests on telephone call centers and computer programmers.

Among villages with thatch-roofed huts and dirt roads on the outskirts of this city in central India, John Deere and LG Electronics have recently built factories turning out tractors and color television sets for sale in India and for export to the United States.

In Hazira, in northwestern India, where some residents still rely on camels to carry traders’ goods, the Essar Group is making steel to be used for ventilation shafts in Philadelphia, high-rise structural beams in Chicago and car engine mountings in Detroit.

For decades, India followed a route to economic development strikingly different from that of countries like Japan, South Korea or China. While its Asian rivals placed their bets on manufacturing and exports, India focused on its domestic economy and grew more slowly with an emphasis on services.

But all that is starting to change.

India’s annual growth in manufacturing output, at 9 percent and accelerating, is close to catching growth in services, at 10 percent. Exports of manufactured goods to the United States are now rising faster in percentage terms than China’s, although from a much smaller base. More than two-thirds of foreign investment in the last year has gone into manufacturing in India, not services.

“Saying we are a back office and China is a factory is a backhanded compliment,” said Kamal Nath, India’s minister of commerce and industry. “It’s not really correct.”

Indeed, in interviews at 18 Indian factories and other businesses in 10 cities and villages scattered across the length and breadth of the nation, the picture that emerges is of a country being driven by advances in manufacturing to a much brisker pace of economic growth.

A prime reason India is now developing into the world’s next big industrial power is that a number of global manufacturers are already looking ahead to a serious demographic squeeze facing China. Because of China’s “one child” policy, family sizes have been shrinking there since the 1980’s, so fewer young people will be available soon for factory labor.

India is not expected to pass China in total population until 2030. But India will have more young workers aged 20 to 24 by 2013; the International Labor Organization predicts that by 2020, India will have 116 million workers in this age bracket to China’s 94 million.

India’s young population will also make it a huge and growing market for years to come, while the engineering skills and English skills of its educated elite will make it competitive across a wide range of industries. So even though India remains a difficult place to do business, several multinationals have been placing big bets on India in hopes of taking advantage of this shifting global dynamic.

General Motors and Motorola are preparing to build plants in western and southern India. Posco of South Korea and Mittal Steel of the Netherlands have each announced plans to erect giant steel mills in eastern India, where Reliance of India will soon construct one of the world’s largest coal-fired power plants.

They are finding India’s labor force well suited to their goals. When LG set out in 2005 to fill 458 assembly line jobs at its factory here at a starting wage of $90 a month, it required that each applicant have at least 15 years of education — usually high school plus technical college.

Seeking a young work force, the company decided that no more than 1 percent of the workers could have had any prior work experience. Despite the limitation, 55,000 young people met its criteria for interviews.

“In the villages there is little income,” said Siddu Matheapattu, 24, in between applying sealant to refrigerator frames. “Here I can earn more.”

By contrast, cities in the export-oriented Guangdong Province in southeastern China raised monthly minimum wages this summer by 18 percent, to $70 to $100 a month, after factories reported that they had one million more jobs than workers to fill them. Factories elsewhere in China face less severe labor shortages, but they also are being forced to raise wages.

As India has deregulated its economy, output has gradually accelerated to a growth rate of 8 percent a year, feeding a national euphoria and a few hopes of someday even beating China’s annual growth of more than 10 percent.

Plenty of obstacles remain, however, notably India’s weak infrastructure. China invests $7 on roads, ports, electricity and other backbones of a modern economy for every dollar spent by India — and it shows. Ports here are struggling to handle rising exports, blackouts are frequent and dirt roads are common even in Bangalore, the center of the country’s sophisticated computer programming industry.

Pervasive corruption has slowed many efforts to fix these problems. India’s labor laws, little changed since they were enacted just after independence in 1947, also continue to discourage companies from hiring workers, by making it very difficult to lay off employees even if a company’s fortunes sour or the economy slows.

Still, a new optimism prevails in India, bordering at times on euphoria.

“The Chinese are very good at copying things, but Indians believe in quality work, we believe in meeting pollution norms,” said S. S. Pathania, the assistant general manager of the Hero Honda motorcycle factory in Gurgaon, 30 miles south of New Delhi. “I think India will pass China very soon.”

An Unexpected Boom In Manufacturing

Sprawling across more than a square mile next to a gray tidal estuary, the scale of the Essar Group’s complex in Hazira is already impressive. Essar has its own port to bring in iron ore and its own large gas-fired power plant for electricity. At the steel mill, giant buckets pour 150 tons of molten metal at a time to form slabs 2 yards wide and up to 10 yards long.

But the complex is just starting to grow. Essar is quintupling steel production and pushing forward a sevenfold increase in power generation, most of it for sale to a national grid desperately short of electricity.

Growth on that scale, especially in industries like steel and power but also in areas like car parts and household appliances, is what India has long lacked. Industrial production accounts for only a fifth of India’s economic output, compared with two-fifths of China’s. But this ratio is starting to rise in India as manufacturing, led by exports, grows faster than agriculture and even some service industries.

Until recently, legislation effectively barred companies with more than 100 employees from competing in many industries. The laws were intended to protect tiny businesses in villages, often employing women and minorities; high tariffs were placed on imports as well.

But a result was hundreds of thousands of businesses too small to be competitive; India lags behind even the impoverished Bangladesh next door in exports of garments, a big creator of jobs for China. The Indian government has responded by narrowing the list of protected industries to 326 categories of goods from 20,000 and has lowered tariffs.

Comparing factories in India to their competitors in China, many of the Indian factories are smaller but some appear more efficient.

India’s stronger financial system demands higher interest rates than China’s state-owned banks, making it costlier to hold the small mountains of components awaiting assembly that are often seen in Chinese factories. The Confederation of Indian Industry, a national trade group, has also been highly successful in pushing companies to adopt the latest Japanese lean manufacturing techniques.

The drawback is that the nation’s manufacturing boom, built on higher-quality goods made under more modern conditions than in China, is not likely to create as many factory jobs as India needs.

The Essar steel mill, for example, has been replacing old, labor-intensive equipment with more modern gear. “We were having it all done manually, but because the customers demand very high quality, we have to do it automatically,” yelled Rajesh Pandita, an Essar manager, over the roar of a house-size machine that was stretching a minivan-size coil of steel back and forth through large rollers until it was little thicker than plastic kitchen wrap.

The Whirlpool factory in Pune uses machines, not people, to fold the steel exteriors of refrigerators. It has some of the highest productivity per worker of any Whirlpool factory in the world, with just 208 line workers producing up to 33,000 refrigerators a month.

Labor laws, however, discourage flexibility. They still ban companies from allowing manufacturing workers to put in more than 54 hours of overtime in a three-month period even if the workers want to earn extra money. Firing workers is extremely difficult.

“Companies think twice, 10 times before they hire new people,” said Sunil Kant Munjal, the chairman of the Hero Group, one of the world’s largest manufacturers of inexpensive motorcycles.

Hero in Gurgaon, on the southern outskirts of New Delhi, and its archrival, the Lifan Group in Chongqing, a city in western China, produce comparable motorcycles but the similarity ends there. Hero markets heavily to its domestic market, protected from foreign competition by high import tariffs, while Lifan emphasizes exports.

With scant ventilation, Lifan’s factories are filled with diesel exhaust as workers test engines and ride finished bikes at breakneck speed out the doors, zigzagging past co-workers. Hero’s factory in Gurgaon, where Honda holds a minority stake, has far better safety standards and excellent ventilation.

The Lifan factory pays less than $100 a month. The heavily unionized Hero factory pays $150 a month plus bonuses of up to $370 a month; nearly half the workers earn the top bonus, Mr. Pathania said.

Lifan’s labor force is quiescent — would-be organizers of independent labor unions face long jail terms or worse in China. Hero’s workers staged a successful nonviolent protest in 2005 to call for more contract workers to be eligible for the bonuses as well.

Bad Roads and Blackouts Take a Toll on Efficiency

But the biggest question mark hanging over the rise of manufacturing in India lies in whether the country has enough roads, ports and electricity-generating plants to move huge quantities of goods and power the factories that make them.

Captain Abhay Srivastava, an operations manager at India’s busiest port, was on duty on a recent afternoon when a phone call suddenly came in from the docks below. An enormous container ship from Qatar needed to slide 35 feet backward along the privately managed dock at the Nhava Sheva port near Mumbai to allow another large vessel to squeeze into the dock in front of it.

Captain Srivastava grabbed his white hard hat and dashed for the elevator. As soon as he reached the water’s edge, a dozen laborers in orange jumpsuits began straining to arrange a cat’s cradle of heavy, five-inch-thick ropes that would allow the ship to use its powerful winches to pull itself out of the way.

“They are efficient people; they don’t speak a lot,” said Captain Srivastava, who has visited most of the world’s major ports either as a ship captain or for port training exercises. “You go to some places and they just stand around.”

The efficiency of the Nhava Sheva port — it approaches West Coast ports in the United States in the number of containers moved per hour — shows that India is capable of producing world-class facilities.

But big as it is, Nhava Sheva is too small to handle the crush of traffic. John Deere tractors wait in a container at the dock for one to four days before being loaded on a ship.

“If this pace of growth continues, we will see more congestion at the port,” said Raj Kalathur, the managing director and chief executive of Deere’s operations in India.

Similar worries prevail in Chennai, formerly Madras. “Another four or five years, we’ll be choked,” said M. Rafeeque Ahmed, the chairman of the Farida Group, a 9,000-employee shoe manufacturer in Chennai that needs the port for exports.

Infrastructure improvements are particularly important because manufacturing companies are buying more and more components from far-flung suppliers. Making sure all those parts arrive on time requires a reliable transportation system.

“Manufacturing is no longer done all under one roof,” said Victor Fung, the chairman of the Li & Fung Group, a large Hong Kong-based company that buys goods from factories across Asia for sale to retailers and wholesalers in the United States and Europe.

Indian officials are talking about expansion. Planning is under way for new wharves at Nhava Sheva, but the years-long task of construction has not yet started.

China has faced capacity problems, too. A surge in steel production in early 2004 overwhelmed bulk cargo ports. Inflation quintupled in a year, to 5.3 percent, as bottlenecks at ports, highways, railroads and elsewhere in China drove up companies’ costs.

The Chinese response was swift and decisive. The pace of port investment nearly tripled in six months. Work crews labored around the clock to erect more cranes and expand wharves.

The Chinese economy grew at a breathtaking pace of 11.3 percent in the second quarter of 2006, but consumer prices were just 1 percent higher in July than a year earlier.

By contrast, India is struggling with 8 percent inflation this summer as bottlenecks have appeared after three years of 8 percent growth.

Belatedly, India’s roads and ports are improving. Just four years ago, Sona Koyo Steering Systems, an auto parts manufacturer, incurred hefty financing costs to keep a month’s inventory on hand in case deliveries were delayed. Now its factory in Gurgaon makes six deliveries a day to a nearby Maruti car assembly plant; the eight-mile drive takes an hour or more because of traffic jams, but the deliveries get through.

“I’m not going to deny infrastructure is bad,” said Surinder Kapur, Sona’s chairman and managing director. “But a lot of our vendors are around us, a lot of our customers are close to us.”

India is also starting to address chronic power shortages. But it is still a serious problem in northern India, where Mr. Kapur has his steering systems factory. He receives electricity from the national grid just seven or eight hours a day. So the factory has three enormous diesel generators, one bigger than a typical Manhattan living room, operating at four times what an industrial user in the United States usually pays.

Despite such obstacles, India’s manufacturing sector appears poised for further growth. In a country where the national symbol has shifted from government bureaucrats at aging desks to call center operators in cubicles, it looks as if the next icon will be the laptop-toting engineer on a factory floor.

“The old philosophy was, ‘I should work in an office, come in at 10 and leave at 4,’ ” said Nitin Kulkarni, 35, an engineer at the Hazira steel mill. But in recent years, he added, “there has been a revolution.”

The NYT also reports that a federal judge in Manhattan ordered a Canadian company yesterday to stop distributing its generic version of the blockbuster anticlotting drug Plavix, granting a reprieve to Bristol-Myers Squibb and Sanofi-Aventis, which co-market the brand-name drug.

The Plavix marketers had seen a drastic erosion of their United States sales since the Canadian company, Apotex, introduced its generic version on Aug. 8 in a challenge to the patent held by the big companies. Analysts say that the large supplies of the generic drug already on the market could continue to impinge on sales of Plavix for several months.

While ordering Apotex to stop shipments, United States District Judge Sidney H. Stein declined a request by Bristol-Myers and Sanofi to recall the generic pills already on the market. The judge ruled that the companies had negotiated away that right in their attempts earlier this year to settle the patent dispute with Apotex.

Judge Stein did say that the patent was likely to be enforceable, based on the evidence and testimony so far. He also observed that Bristol-Myers and Sanofi had suffered “irreparable harm” as a result of the patent infringement.

He nonetheless required Bristol-Myers and Sanofi to post a $400 million bond to compensate Apotex in the event the generic company won in a trial on the validity of the patent, now set to begin in his court next January.

Shares of Bristol-Myers were up more than 9 percent in after-hours trading on the New York Stock Exchange. Shares of Sanofi were little changed.

Bernard C. Sherman, the chief executive of Apotex, a private company based in Toronto, said yesterday that it planned to appeal. “We believe that the ruling is erroneous in many respects,” he said.

Mr. Sherman said that the volume of the Apotex drug already on the market amounted to about three months’ worth of sales, while some analysts have estimated the amount at even more. A spokesman for Bristol-Myers, Tony Plohoros, said the company was trying to assess the amount of generic inventory in wholesale channels. Neither Sanofi nor Bristol-Myers had issued any other statement about the ruling, but in a letter to employees being sent last night, the Bristol-Myers chief executive, Peter R. Dolan, said it was “certainly good news that the preliminary injunction has been granted, but unfortunately the economic and other consequences of the intrusion of the generic product that competes with Plavix in the U.S. market are impossible to fully reverse.”

A Deutsche Bank analyst, Barbara Ryan, said the ruling was relatively good news for Bristol-Myers, which derives 30 percent of its profit from sales of Plavix. The drug, used by 48 million Americans, primarily to prevent the recurrence of stroke and heart attack, had United States sales last year of $3.5 billion.

But Ms. Ryan said that Mr. Dolan remained on the hot seat. She predicted that he could be replaced or that control of the company might even change, possibly before the patent trial, partly as a result of the company’s mishandling of the Plavix case.

“I think that Peter Dolan is clearly under significant pressure, and this it not an isolated situation,” Ms. Ryan said, citing shareholder displeasure over Plavix as well as several other management missteps.

For Bristol-Myers, which is based in New York, the ruling very likely means the company can preserve its 5.1 percent dividends, according to David S. Moskowitz, an analyst with Friedman, Billings, Ramsey.

But the situation also seems to suggest that Bristol-Myers and Sanofi, a French company, should never have entered negotiations they began last year with Apotex, which created the opening that has allowed the generic maker to ship its product for more than three weeks.

The patent covering Plavix gives market exclusivity to Bristol-Myers and Sanofi until the end of 2011. Apotex began challenging that patent in 2002, arguing that it was not valid. The case has been pending in court ever since and originally was set to go to trial in June.

But the dynamic changed earlier this year, after the Food and Drug Administration approved Apotex’s version of the drug. Despite that approval, under federal law Apotex would have run the risk of paying financial damages amounting to three times the generic’s total sales, if it brought its product to market but then eventually lost the patent case.

Bristol-Myers and Sanofi began negotiations with Mr. Sherman to settle the dispute. Under an agreement reached in March, the companies granted Apotex exclusive generic rights for a six-month period that was to begin in September 2011.

That settlement deal was rejected by the Federal Trade Commission and state attorneys general who viewed it as restricting competition.

It was during efforts to renegotiate the deal that Bristol-Myers and Sanofi agreed to provisions that made it easier for Apotex to market its generic immediately if the revised agreement was also turned down. Those concessions included a waiver by the big companies of their rights to collect triple Apotex’s sales of the generic, as well as an agreement that they would not go to court to challenge distribution of the Apotex product until five days after it began shipment.

After the second agreement was also rejected, Mr. Sherman’s company began shipping its product to the United States on Aug. 8.

Under terms of the agreement Mr. Sherman negotiated, Apotex is liable to repay Bristol-Myers and Sanofi for only half of the generic drug’s sales should Apotex lose at the patent trial. The negotiations, and accusations by Mr. Sherman that the companies entered a secret side deal, are the subject of a Justice Department investigation.

In his 57-page ruling, Judge Stein wrote, “The public interest in lower-priced drugs is balanced by a significant public interest in encouraging the massive investment in research and development that is required before a new drug can be developed and brought to market.”