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Economic News
for
the week of October 3 - 9, 1999
Finance
Minister warns of immediate belt-tightening fiscal measures
Moody's
Investors Service raise India's outlook
Inflation falls below 2%
India's mineral production increases by 3% in July
Foreign Institutional Investors pump in Rs. 15.18 billion to venture capital
funding in India
Economic recovery unlikely to be sustained: NCAER
Verma panel favors recaptilization
Securities & Exchange Board of India tightens IPO norms for Information
Technology companies
Cement prices to rise following hike in diesel
prices
India & Cuba sign on Science & Technology
Agreement
Tata's disinvestment stake in Goodlass Nerolac
Japanese company ties up with Metro to capture sewing machine market
TVS-Suzuki posts 24% growth in sales in first half of the current financial
year
Delphi plans to produce Multi-Point-Fuel-Injection kits in India
NIIT Forecasts 40% revenue via E-commerce by 2002
Samsung launches lightest mobile phone handset in India
Reliance Industries Ltd. among top 50 emerging market transnationals
Steel Authority of India Ltd. not to default on debt repayments
India's Power Finance Corporation joins elite club of financial institutions
for power funding
Oracle
to restructure OECP programme
International conference on transport from October
25 to 27, 1999
Finance
Minister warns of immediate belt-tightening fiscal measures
Finance Minister Yashwant Sinha has cautioned the
new government will have to take immediate "belt-tightening"
measures to tackle widening fiscal deficit even as the economy is poised for
a 7 per cent growth.
Moody's
Investors Service raise India's outlook
Moody's Investors Service has said it raised the
outlook to positive from stable for India's Ba2 rating on foreign and
domestic currency debt. Moody's pointed out that the country's Balance of
Payments was "resilient" through the Asian and Russian crises, as
well as through the international sanctions that were imposed following
India's May 1998 nuclear tests.
The ratings agency added that external debt maturity structure had improved and foreign reserves strengthened in recent years, reducing the country's vulnerability to external shocks.
Moody's noted "a stronger consensus has emerged across the political spectrum concerning the necessity for structural reform, although frequent political upheavals since 1996 have interrupted legislative advances and policy implementation."
The
ratings agency said the new government that emerges from the latest election
is likely to stay in office longer than its recent predecessors even though
its margin of victory appears to be quite small. A longer-lasting government
would be able to undertake a more aggressive economic restructuring during
its term of office, Moody's said.
Inflation
falls below 2%
After hovering a little over two per cent mark for a couple of weeks, inflation in India again dropped to 1.88 per cent for the week ended September 25, mainly on account of a decline in prices of manufactured products. Annual rate of inflation, based on Wholesale Price Index (WPI), declined by 0.14 percentage points to 1.88 per cent (provisional) from 2.02 per cent (p) in the previous week.
In comparison, inflation rate was sharply higher at 8.84 per cent during the same period last year due to a spurt in prices of agricultural produce. Thanks to a record agricultural production this year, prices have been ruling much below last year's levels. Inflation, however, is expected to move up sharply in the next couple of weeks due to the 35 per cent hike in diesel price effected this week. Analysts expect it to go up by about two percentage points in the next few weeks due to direct and indirect effect of the diesel price hike. During the reference week, inflation rate fell to 1.88 per cent after staying over two per cent mark for two weeks.
The
overall index (Base: 1981-82=100) also moved down by 0.1 per cent to 363.8
(provisional) as against 364.0 (p) in the previous week.
India's
mineral production increases by 3% in July
India's mineral Production has increased by three
per cent in July this year compared to July last year, according to official
figures based on Index of mineral production released. The Index in July
this year was 118 compared to 115 in June. In value terms, production
increased to Rs 30.75 billion in July compared to Rs 30.01 billion in June
this year, an official statement said.
Out of the total production, Coal contribution was
highest at Rs 13.43 billion i.e. 44 per cent of the total production
followed by petroleum (crude) at Rs 9.64 billion, natural gas Rs 3.34
billion and iron ore Rs 1.26 billion. In terms of volume, coal production
was 2.26 million tonnes, petroleum (crude) 2.8 million tonnes, natural gas
173.2 million cubic meters, it said. Among the metals, lead increased by
eight per cent, chromite by seven per cent. However copper ore production
decreased by 22 per cent, bauxite by 14 per cent and zinc by two per cent.
Foreign
Institutional Investors pump in Rs. 15.18 billion to venture capital funding
in India
Boosted by the industrial resurgence, Foreign
Institutional Investors (FIIs) have pumped in a whopping Rs 15.18 billion
for venture capital funding, thus recording the highest funding by foreign
investors for start-up firms in India. FIIs have contributed Rs 15.17
billion precisely, accounting for 50.8 per cent of the total venture capital
funds made available to Indian entrepreneurs in 1998, Vishnu Varshney,
chairman of apex body Indian Venture Capital Association (IVCA), said.
IVCA
is an association of premier venture capital companies in India and has 21
active members. Disappointingly, mutual funds, which have large reserves at
their disposal, have contributed just Rs 4.5 million, a mere 0.01 per cent
of the total venture capital funds made available during the same period.
Domestic financial institutions pooled in Rs 7.72 billion while multilateral
agencies contributed Rs 2.29 billion. Nationalized banks Rs 430.3 million,
other banks Rs 1.70 billion, state-owned Rs 620.3 million, NRIs Rs 310.3
million, state financial institutions Rs 360.5 million and insurance
companies Rs 60.25 million. Varshney said the pool of funds available for
venture capital activity in India has gone up from Rs 25.59 billion in 1997
to Rs 29.88 billion last year.
Economic
recovery unlikely to be sustained: NCAER
The recovery in the Indian economy, since the
beginning of the current fiscal, is unlikely to be sustained due to below
normal rains, worsening fiscal situation and increase in international oil
prices, National Council for Applied Economic Research (NCAER), a private
think tank has said. "Some business cycle indicators suggest that the
recovery may be short-lived," NCAER said in its quarterly "Macro
Track" update. It said the increase in world oil prices will adversely
impact both the trade deficit and domestic price levels. The independent
economic think-tank also said that the worsening fiscal scenario will not
permit the high level of public investment needed to support an industrial
recovery.
Due to below normal monsoons, NCAER has projected agricultural growth of three per cent in the current fiscal, significantly lower than last year's six per cent growth. However, it has forecasted a higher Gross Domestic Product (GDP) growth of 5.9 per cent, up from 5.7 per cent in 1998-99. While industrial growth is expected to be at 5.7 per cent, an improvement over 4.3 per cent growth witnessed in 1998-99.
NCAER
has also expressed concern over the low level of bank credit to the
commercial sector along with lower growth in imports, which is expected to
accompany industrial recovery.
Verma
panel favors recaptilization
The MS Verma committee on weak banks has ruled out
privatization, mergers and acquisitions while recommending conditional
recapitalisation. "Recapitalisation must be accompanied by strict
conditions relating to the operating as well as managerial aspects of the
recipient bank's working," according to the Verma report. It outlines a
four-old strategy involving operational, organizational, financial and
systemic restructuring. The report recommends that weak banks cut staff
strength by as much as 25 per cent in order to reduce costs which are
grossly out of line with the income streams. The committee has suggested a
five-year wage freeze in these banks, with retrospective effect from the
last wage settlement, effective Nov 1997, currently under negotiation.
The
entire exercise is expected to cost the exchequer Rs 55 billion over three
years, with a tax outflow of Rs 13 to 14 billion. The government would have
to bear a direct cost of Rs 30 billion for recapitalisation the banks and
another Rs 10 billion to fund the ARF. Based on 7 criteria, the committee
has identified the Calcutta (east)-based UCO Bank and United Bank, the
Chennai (south)-based Indian Bank as weak.
Securities
& Exchange Board of India tightens IPO norms for Information Technology
companies
The Securities and Exchange Board of India (SEBI),
the stock market regulator made it mandatory for Information Technology (IT)
companies proposing to tap the primary market to furnish a three year track
record of profitability out of their IT activities. "This would
restrict initial public offers (IPO) by companies that have changed their
names to reflect activities in the IT sector or recently entered the IT
business", according to the SEBI chairman D R Mehta.
A company that does not fulfil this criterion, can
access the market provided the project is appraised and financed upto ten
per cent by a bank or financial institution, SEBI senior executive director
O P Gahrohtra said. During the period April to September 1999, SEBI received
46 IPO applications amounting to Rs 59.5138 billion of which 21 were
software companies offering capital of Rs 5.0987 billion, he said adding
that so far this year, 11 software companies had raised Rs 4.6494 billion.
The SEBI board also reviewed the guidelines for public issues being made through the 100 per cent book-building route and made reservation of 15 per cent for individual investors optional.
Instead,
25 per cent of the issue may be offered to the public at the price as
determined through book-building, he said.
Cement
prices to rise following hike in diesel prices
Cement prices in India are expected to go up in the immediate future following a steep hike in diesel prices earlier this week, according to a top official of Cement Manufacturers Association (CMA). The demand for basic construction material is however not expected to be dampened by the prospective cement price rise, Secretary General of CMA, R Partha Sarathy told PTI. "Cement companies will effect price rise straight away. More to make up for the hike in transportation costs, a fallout of rise in diesel prices," Partha Sarathy said.
Ruling
out any adverse impact on demand from the construction sector he said,
"growth momentum set in fourth quarter (Jan-Mar 99) of previous fiscal
would continue." Rates of basic construction material (cement) have
been ruling low due to long drawn economic slowdown, and price war among
companies to fight intense competition, he said. Dispatches from big size
cement plants, reflecting strong demand for construction material in first
half of 1999-2000 (Apr-Sept) grew by 20.10 per cent to touch 45.18 million
tonnes over same period last year, according to CMA statistics. Likewise
cement production in Apr-Sept of the current fiscal recorded an impressive
20.41 per cent growth at 37.68 million tonnes over the same period last
year. Cement production in the month of September stood at 6.68 million
tonnes while dispatches during the same month came to 6.69 million tonnes,
CMA said.
India
Cuba sign on Science & Technology Agreement
India and Cuba have signed an agreement on
co-operation in science and technology in the two countries. The agreement
was signed in Havana last week by V S Ramamurthy, secretary, Department of
Science and Technology (DST) and Cuban vice-minister for science, technology
and environment (CITMA) Daniel Codorniu Pujels, according to an official
release here. The agreement included collaborative research in cancer radio
immunotherapy, mutation in ornamental plants, industrial utilization of
medicinal plants, biobleaching for recovery of nickel and cobalt from low
grade laterite ores, screening of hearing problems in children and sugar
industry problems, the release said.
The
agreement, an extension of a 1978 pact between the two countries, also
included exchange of scientists between the two countries and holding of
joint workshops. Under the agreement two workshops on biotechnology and
medical instrumentation would be organized in India and Cuba respectively.
Tata's
disinvestment stake in Goodlass Nerolac
Tata Group's Forbes Gokak Ltd (FGL) has announced the divestment of
the entire shareholding of the company and its associates in Goodlass
Nerolac Paints Ltd (GNP) to foreign collaborator Kansai Paint Co Ltd of
Japan. The 28.56 per cent shareholding of the main promoters- Forbes Gokak
and associates-in GNP would be divested at a price of Rs 250 per share
aggregating Rs 985.6 million, according to the Forbes Gokak. It said In
order to maintain GNP's position in the paint industry, it would need to
continue to grow and make large investments as was being done by its main
competitors. FGL said the divestment would enable utilization of the
realized funds in a manner which would directly benefit FGL's own
shareholders. The proposed transfer of FGL group's shareholding to Kansai is
in accordance with the terms of the original shareholders' agreement under
which either party is required to offer its shareholding to the other in the
first instance. The transfer of shares is subject to relevant government and
other approvals. The FGL group, as the main promoter, has had the investment
in GNP since 1976 and Kansai had bought out the shares of the earlier
collaborator, Cooksons of the UK, in 1986.
Japanese
company ties up with Metro to capture sewing machine market
Japanese office automation leader Brother Industries
has consolidated its position in the Indian market through a strategic
alliance with Metro Appliances to market its sewing machine under a joint
brand name. The company has entered into a strategic partnership with Metro
Appliances Ltd, known for Ortem fans, to market its home sewing machine in
the country, Toshio Iwata, according to the Chief-Overseas Marketing Group
of Brother Industries Ltd.
As
per the tie-up, Brother would introduce three models of its sewing machines
with latest features in the Indian market. The company would launch a few
more models after gauging the response. The feasibility study of the sewing
machine market in India has found that it was growing and there was enough
space for the Japanese brand to compete with the already established names
like Usha, Iwata said. Chhabra said the company would import the machines
from Brother's factory in Taiwan and sell them through its vast dealer
network in the country. He said the company planned to sell 3600 Brother
machines in the first year and capture a good share of Indian market through
its dealer network which currently has a strength of 25 and is expected to
cross 100 by March.
TVS-Suzuki
posts 24% growth in sales in first half of the current financial year
Country's two-wheeler major TVS-Suzuki has announced
a 24 per cent growth in its sales volume in the first half of the current
financial year, selling over 413,000 units during the period. Led by robust
growth in scooter and motorcycle segments, the company managed to sell
4,13,244 units between April and September this year compared to 3,34,377
units over the same period in 1998-99, according to the company statement.
Commenting on the performance, TVS-Suzuki President C P Raman said it was on
account of the strong growth shown in all the product segments of the
company, right from mopeds to the scooterettes, scooters and motorcycles.
During September, the company sold 69,331 units compared to 61,430 units
last year, a growth of 13 per cent.
Raman
said sales during the last month could have been higher in all segments but
for the number of holidays which resulted in restricted supply from various
outlets in the country. TVS-Suzuki had sold over 700,000 vehicles in the
last financial year to gross a revenue of about Rs 13.13 billion and a post
tax profit of over Rs 820 million despite sluggish markets in the wake of
the global industrial slowdown.
Delphi
plans to produce Multi-Point-Fuel-Injection kits in India
Lured by the growing demand for advanced car fuel
injection systems for meeting Euro-II norms, world's largest auto-component
manufacturer Delphi Automotive Systems is considering a proposal to set up a
plant in India for manufacturing these kits. "We are evaluating the
idea of starting production of Multi-Point-Fuel-Injection (MPFI) system here
in India but no final decision has been taken yet in this regard,"
according to the Delphi (India) Managing Director Dr Anil Verma. The company
is internally studying the market and also in consultation with almost all
automobile manufacturers operating in India to know the size of the market
for these fuel injection kits and viability of the project.
The demand for injection systems has gone up tremendously following the Supreme Court directive according to which only Euro-II emission norms compliant passenger cars would be allowed to be registered in the National Capital region (NCR), the biggest car market in the country, from April 1, 2000.
MPFI
system, which replaces traditional carburator of cars, is an essential part
of any vehicle to meet the stringent Euro-II norms. It uses electronically
controlled fuel injection kits to maximize burning of fuel and to minimize
emissions. At present all auto-manufacturers are importing these kits as no
company is producing it in India.
NIIT
Forecasts 40% revenue via E-commerce by 2002
Infotech major NIIT today said E-commerce will contribute 30 to 40 per cent of its total revenue by 2002 and an exclusive three-year business plan is being worked out as part of its next phase of globalization.
"E-commerce will be our thrust area of business
in the coming years. It includes both our on-line multimedia education
courseware and a wide range of software that we would offer others in
building a strong E-commerce infrastructure," Rajendra S Pawar,
Executive Chairman of NIIT, said. Pawar, who took over the mantle of the
company from Shiv Nadar last week, said the business plan was being
formalized and would be revealed only after the NIIT's director board
meeting on October 15. The annual results will also be made public on the
same day. Stating that the company's global growth would depend on the
internet economy, Pawar said NIIT had strengthened its internal system by
implementing Enterprise Resource Planning (ERP) to backup its global
operations.
Currently, NIIT has presence in 30 countries and operates through 18 fully-owned subsidiaries. The company had also earmarked 100 million dollars for its US acquisition to be completed by year-end.
The total revenue of NIIT and Subsidiaries in the last fiscal (year ended September 1998) was at Rs 648.40 crore. According to sources, the company is likely to register 40 to 50 per cent growth in revenues in the just concluded fiscal. When contacted S Rajendran, chief operating officer of NIIT, said E-commerce was contributing 15 per cent of its total revenue this year and would increase to 30 to 40 per cent of the global revenue in the next three years.
Samsung
launches lightest mobile phone handset in India
South Korean electronics major Samsung has launched its lightest mobile phone weighing just 97 gm in India and announced plans to introduce five more state-of-the-art handsets by the year-end. The 97 gm model named SGH-600 is priced at Rs 21,500 and has features like voice dialing by which a user can store frequently called numbers in phone's memory and initiate a call by just saying the number. Launching the product, Managing Director of Indian Operations of Samsung Electronics K S Kim said the company planned to sell at least 50,000 sets next year. The SGH-600 handset can also be connected to a Personal Computer for updating the phone book or organizing short messages. Samsung Electronics plans to capture at least 50 per cent of the high end mobile phone market in India by 2001. Quit. The 17 billion dollar Samsung Electronic is targeting sales figure of 14 million handsets worldwide this year including 10 million CDMA (Code Division Multiple Access) handsets during the year.
Reliance
Industries Ltd. among top 50 emerging market transnationals
Reliance
Industries Ltd (RIL), India's petrochem major has been ranked 32nd in the
World Investment Report 1999 list of top 50 transnational companies from
among developing countries. The domestic petrochemical giant, which is the
only Indian company to be featured on the list, has also been listed among
the Top 50 in the Chemicals sector from the Asia-Pacific, according to the
RIL statement.
The WIR 1999, prepared by the United Nations Conference on Trade and
Development (UNCTAD), has been recognized as the most comprehensive source
of information as well as analysis regarding Foreign Direct Investment (FDI)
around the world. The list of top 50 transnational, ranked on the basis of
foreign assets, consists of 32 companies from the Asia-Pacific, 13 from
Latin America, three from Africa, one from the Middle East and one from the
Caribbean region.
Steel
Authority of India Ltd. not to default on debt repayments
India's state-owned Steel Authority of India Ltd
(SAIL) has claimed that it would not default on any of its payment
obligations during the current fiscal as it had resources to fulfil all its
debt commitments. "We have been honoring all our commitments on debt
and on no occasion have we defaulted. This year also we will meet all of our
obligations," according to the SAIL financial director Virender Singh
Jain. Asked if SAIL, which posted net loss of Rs.15.74 billion in the last
fiscal and is expected to take a knock of about Rs.12 billion in
April-September this year, could face the financial crisis like Essar steel,
Jain said "our net worth is over Rs.63 billion."
Essar recently defaulted on its external commitments and had to take recourse to restructuring the group drastically. SAIL's total repayment of debts due in the current financial year is in the range of about Rs 15 billion of which Rs 2 billion have already been paid, Jain said. Stating that SAIL was expecting clearance of a revival package from the government soon, Jain said even otherwise an internal exercise had been undertaken to meet any contingency. SAIL has not so far approached banks or financial institutions to raise money from the market, he said adding that "first we are trying to work out with the government for the approval of business and financial restructuring plan submitted by SAIL."
India's
Power Finance Corporation joins elite club of financial institutions for
power funding
India's state-owned Power Finance Corporation (PFC) has finally joined the "elite club" of financial institutions (FIs) for collectively deciding on financing power projects. "IDBI has asked PFC to participate in meetings of FIs, held for deciding lending to power projects, Director Finance of PFC T N Thakur said.
PFC, which had earlier approached RBI for granting it the Development Financial Institution (DFI) status, had also written to IDBI on attending the meetings for assessing the projects and deciding on lending parameters. IDBI had said most of the large private sector power projects needed funds of a huge magnitude for which the financial institution has sought the assistance of PFC.
Oracle to restructure OECP programme
US-based Infotech major Oracle Corporation has said
it will revamp its career education programme in India and would soon
introduce a new curriculum exclusively focusing on business aspect of
E-commerce. "We plan to introduce a new curriculum in three to six
months time aimed at moulding business technologists who can fill the gaps
that exists in E-business field," according to the Andrew Killen,
Vice-president (Education) Oracle Asia Pacific. "The programme is in
its initial stage and we are sure of introducing it by first quarter of
2000," Andrew said, adding that the curriculum is targeting industry
and corporate segment in the initial phase. He said the company, being the
second largest software company and the largest information management
solution providers, would design the new course to enable technologists to
understand more of the business stand point of E-commerce.
According to him, the need for Oracle certified professionals are of great
demand in the Infotech arena and more than 75 per cent of those registered
from India has so far successfully completed the course to become Oracle
Certified Professionals (OCP).
International
conference on transport from October 25 to 27, 1999
An international conference will be held in New Delhi later this month to discuss deregulation and privatization of the Transport Industry in South Asia, including India. As many as 22 countries are likely to participate in the three-day conference-cum-exposition to be held from 25 to 27 October.
Some of the countries which have already sent their confirmation
for the participation in the conference are the US, Britain, Malaysia,
Vietnam, New Zealand, Australia, Uganda, Sri Lanka, Pakistan, Bangladesh and
Nepal, according to the organizers of the conference.