For the week of October 17 - 24, 1999
President
sets 7-8% economic growth target
Core sectors record 6.6% growth in first half
Inflation
rate rises to 1.95%
Moody's
expresses concern over India's fiscal deficit
Cabinet
clears Insurance Bill
Indian
government to go beyond Drug Price Control Order for cheaper availability
of drug
Indian
cabinet to replace FOREX regulation act
Indian
cabinet approves amendment in SCRA for derivatives trading
Jewelry
and Watch Exhibition to commence from Oct 22
Drop
in earnings from service export may widen trade deficit
Primary
market yet to show signs of revival
Indian
economy on firm path to recovery: CII Study
India,
US for building forward looking relationship
Atlas
targets Rs. 5 billion sales in next 5 years
President
sets 7-8% economic growth target
President
K R Narayanan has outlined bold second generation economic reforms,
including financial sector liberalization, regulatory mechanisms and new
policies for agriculture, aviation, infrastructure and foreign investment
to achieve 7-8 per cent growth. Setting a target of 10 million jobs and 2
million houses a year, government would evolve a programme to achieve
'fiscal rectitude' through improved expenditure management, deep tax
reforms, restructuring and disinvestment of public enterprises and review
of subsidies, Narayanan said. An Expenditure Commission would be set up
shortly "to review all direct and indirect subsidies, examine all
on-going expenditure streams and schemes as well as lay down the road for
downsizing the government," he said. The new legislations on
bankruptcy, debt recovery, foreclosure and mergers would be enacted to
underpin financial sector reforms, he said a taskforce on Tax Reforms
would be constituted to recommend a time-bound programme for changes in
direct and indirect tax structures.
He promised that FDI clearances would be made automatic except for a small
negative list by having a transparent policy. He said India's interests at
the new round of World Trade Organization (WTO) negotiations would be
protected and Government was in the process of preparing a
well-thought-out strategy for the forthcoming ministerial conference at
Seattle. Narayanan said that the new ministry of Information Technology
would implement a comprehensive action plan to make India an IT superpower
and achieve a software export target of 50 billion dollars by the year
2008. "A legislation to promote E-Commerce will be introduced soon. A
task force for pharmaceutical and other knowledge-based enterprises will
be constituted for making India a world leader in this sector," he
said adding India would be Y2K compliant in all critical computer systems
by the year end. Terming "faster growth with employment and
equity" as the broad theme of his government's economic agenda,
Narayanan said poverty and unemployment could be eradicated only through a
speedy 7-8 per cent economic growth.
Overcoming the adverse global economic environment last year, India was
set to achieve a six per cent growth in the current fiscal coupled with
the two decade low inflation of 2 per cent in the last few months, he
said.
Core
sectors record 6.6% growth in first half
Reflecting revival in industry, six core sectors including power, steel and cement recorded a strong 6.6 per cent growth during April-September 1999, up from 3.6 per cent in the corresponding period last year.
Accounting for more than one-fourth of the total weight of Index for Industrial Production (IIP), these industries had recorded a 5.9 per cent growth in the five months from April to August this year. The month of September saw a significant growth of 10.3 per cent compared to same period last year. While the power sector grew by 7.4 per cent during the six month period, steel recorded a growth of 4.3 per cent and crude petroleum one per cent. Petroleum refinery products sector registered a growth of 19.1 per cent with the cement sector growing by 18.8 per cent in the six months over the same period last year.
Only coal witnessed a negative growth rate of 2.7 per cent during
April-September this year. Steel sector, which witnessed negative growth
last year has started showing recovery since May 1999 and grew at a rate
of 2.4 per cent in the month of September 1999 as against 0.5 per cent
recorded in September last year.
Inflation
rate rises to 1.95%
Inflation rate rose marginally by 0.7 percentage points to 1.95 per cent for the week ended October 2, as vegetable prices shot up by a hefty 18 per cent. The rise is mainly on account of a 1.4 per cent increase in food articles especially vegetables. Though the vegetable prices have been rising this year, it is still way below the prices of last year thanks to a good agricultural production. The annual rate of inflation, based on Wholesale Price Index (WPI), rose to 1.95 per cent (provisional) compared to 1.88 per cent (provisional) in the previous week and 8.32 per cent in the corresponding week last year.
The rising trend in inflation is likely to get an added momentum in the
coming weeks once the effect of the recent 35 per cent hike in diesel
price starts getting reflected in WPI. Analysts expect the diesel prices
to push up inflation rate by about two percentage points in the next few
weeks.
Moody's
expresses concern over India's fiscal deficit
Global
credit rating firm Moody's Investor Service has warned that India's
large-scale fiscal deficit is not only "worrisome" but is a
"major negative factor" as well. Lack of transparency and
disclosure norms in the financial sector are other areas of concern,
according to the Moody's Investors Service Managing Director and Co-head
of Sovereign Risk Unit David H Levey. Levey, who is in India to conduct
training programme for ICRA analysts, said slippage in the fiscal deficit
was a matter of concern in the light of a heavy public sector debt and
debt servicing burden. He said Moody's was closely watching fiscal
developments in the country before further reviewing India's sovereign
rating. However, he refused to say when Moody's would review India's
rating next and said there was no fixed schedule for the review.
"Whenever we find some developments, we review the ratings," he
added. The Moody's chief said poor transparency and disclosures in the
Indian financial sector along with inadequate bankruptcy laws were raising
concern. Moody's had earlier this month raised the country's outlook to
positive from stable with Ba2 rating, indicating speculative grade, on
foreign and domestic debts due to improved balance of payment situation.
NAFED
fears fall in Kharif-99 production
National
Agricultural Cooperative Marketing Federation of India (NAFED) has feared
a five million tonnes shortfall in the targeted kharif production this
year in the wake of south west monsoon affecting 20 to 30 per cent of the
crop. The estimated kharif production for the year 1999-2000 is likely to
be 102.70 million tonnes as against the target of 107.60 million tonnes (mt),
according to NAFED in its discussion paper.
The estimates were, however, marginally higher than the 102.67 mt produced
during the last kharif season. The total oilseed output has been estimated
at 12 mt, about 26 per cent less than the record production of 16.3 mt
last year, it said. The oilseed production, according to NAFED has
suffered a setback owing to fall in area under soybean in the central
state of Madhya Pradesh and poor rainfall in groundnut growing areas of
Kutch and Saurashtra in the western state of Gujarat and parts of Andhra
Pradesh in south. While the advance projection for soybean was estimated
at 5.9 mt against seven million tonnes in 1998-99, the groundnut
production target stood at 4.5 mt, around 2.6 mt less than the total
production of 7.1 mt in the year 1998-99. The targets for the production
of pulses during 1999-2000 was fixed at 15.5 mt including both kharif and
rabi crops. However, the overall projections for kharif-99 crops would be
broadly assessed on the information made available by the state
cooperative federations, NAFED said.
Cabinet
clears Insurance Bill
The
Cabinet on Wednesday has cleared the much-delayed bill to open up the
insurance sector, expected to be introduced in recent session of Lower
House of Parliament. Besides the introduction of the Insurance Regulatory
Authority (IRA) bill, expected to be introduced on the last day of the
session, October 29, the first Cabinet meeting after Elections discussed
the difficult fiscal situation with the deficit likely to shoot up much
beyond the targeted level of four per cent of GDP.
Textile
Policy Highlights
Following are the highlights of the report of Expert Committee on Textile policy:
* Place cotton and cotton yarn exports under OGL
* Quantitative ceiling on cotton yarn exports should go
* Encourage man-made fiber consumption to save cotton for value added textile exports
* Transfer administrative control of synthetic fibers to
textile ministry from chemicals and petrochemical ministry
* Reduce import duty on apparel grade wool
* Shift focus to silk varieties other than mulberry
* Scrap hank yarn obligation
* Revive viable NTC mills through privatization, close rest
* Change definition of sickness in textile mills
* Dereserve hosiery and knitting items from SSI purview
* Remove garment sector from SSI reservation
* Allow 100 per cent FDI in apparel sector
* Treat technical textiles as priority area to capture 10 per
cent world market
* Remove all textile items from Essential Commodities Act
except cotton seeds and fiber and raw Jute and textiles
* Do away with Handloom Reservation Act
* Retain Jute Packaging materials Act till 2002
* Make Industrial Disputes act uniform throughout the country
* Modify definition of "Strike" to include go slow, mass
casual leave and work-to-rule
* Prior permission of state government for retrenchment not
required
* 60 days average wages for every completed year of service
versus 15 days at present
* Make VRS more attractive
* Link bonus to productivity and efficiency
* Make contract labor more flexible
* Reduce employers contribution to Provident Fund
* Ban outsiders from trade union
* Make export promotion schemes WTO compliant
* Export thrust to be on value-added goods
* Cut customs on textile machinery to 16.5 percent from 27.25 percent
* Eliminate excise on textile machinery
* Uniform excise duty structure for fabrics, yarns and fabrics
in three phases
* 2-tier VAT system to substitute excise in long term
* Delay binding tariffs with WTO commitments.
Indian
government to go beyond Drug Price Control Order for cheaper availability
of drug
The Indian government will evolve a long term plan for pharmaceuticals sector going beyond the Drug Price Control Order (DPCO) to attain the twin objective of making medicines easily available and at affordable prices, according to the new chemicals and fertilizer Minister S Prabhu. "Our basic objective is to make drugs available to 80 per cent of the Indian people who have been deprived of life-saving medicines," Prabhu said. Stating that Drugs Price Control Order was a short term solution in this direction, Prabhu said that he was prepared to go beyond DPCO to ensure medicines for masses to attain the goal of health for all. Prabhu said in the present scenario, there was no incentive for the chemicals industry to invest in R&D activities, which was necessary to make the industry competitive.
Indian
government clears telecom package
Ending
months' of suspense, the federal cabinet cleared the telecom
bailout package, paving way for the operators to offer service under
revenue sharing pattern instead of the license fee system. The package
will now go to the Parliament since the High court in the capital city of
Delhi which heard the issue over a case filed the Delhi Science Forum had
ruled in August last that the final implementation of the package would be
subject to approval by the new house.
The package provides for shifting the operators, who are under the license
fee system by which they pay a lumpsum amount, decided at the time of
bidding to the government, to a revenue sharing pattern where a percentage
of revenue would have to paid to the government. Although a revenue share
of 15 per cent has been fixed by the government as an interim arrangement,
the Telecom Regulatory Authority of India (TRAI) will decide the final
pattern of revenue share between government and operators after studying
various issues involved. After the package was approved by the BJP
government just before it lost vote of confidence in the Parliament,
Department of Telecom began implementing the package with all the
operators undertaking that they were willing to migrate to the new system.
Indian
cabinet to replace forex regulation act
The
Indian cabinet on Thursday approved the long awaited legislations to
replace the draconian Foreign Exchange Regulation Act, cyberlaws, telecom
bailout package and amendment to securities act to allow derivatives
trading in stock exchanges. In its first meeting on Wednesday, after the
ruling NDA government assumed office, the cabinet approved the bill to
open the Insurance sector to the private and foreign investors. These are
among the 14 pending economic legislations whose non-implementation was
delaying the reform process. The twin legislation Foreign Exchange
management Act (FEMA) and Money laundering bill is now expected to be
introduced in the current session of Parliament. FEMA has already been
introduced in the last Lok Sabha but could not make progress because of
dissolution of the house following the fall of Vajpayee government. While
FEMA seeks to ease foreign exchange regulations, Money laundering bill
attempts to provide stringent punishment to malpractices in Foreign
Exchange transactions. Cabinet also cleared a bill on cyberlaws to
facilitate a secure regulatory environment for E-Commerce by providing
legal infrastructure governing Electronic Contracting, Security and
Integrity of electronic transactions. This bill also provides legal
framework for electronic signature to facilitate electronic governance.
The bill was prepared by the department of electronics and commerce
minister which was subsequently vetted by law ministry.
Indian
cabinet approves amendment in SCRA for derivatives trading
The
federal Cabinet is understood to have approved on Thursday the
much-awaited bill to allow derivatives trading on the stock exchanges. The
bill seeks to amend the securities contract regulation act to treat
derivatives as securities to allow futures and options trading with Bombay
and National Stock Exchanges already geared for it. The amendment has been
recommended by L.C. Gupta committee appointed by the market regulator
securities and exchange board of India (SEBI) to go into derivatives
trading through index futures. Though ministers coming out of the marathon
cabinet meeting were tightlipped, sources indicated that this SCRA
amendment has been cleared by cabinet for its reintroduction in the
Parliament. The amendment like the Insurance Regulatory Authority (IRA)
bill to open up insurance sector was introduced in the last Lok Sabha but
could not be passed before the dissolution of the house after fall of the
ruling Vajpayee government. At present SCR act do not consider derivatives
as securities preventing hedging in the stock markets. Derivatives are
forward or future contracts and are meant essentially to facilitate
hedging of price risk of cash assets. Derivatives are useful instruments
in reallocating risk either across time or among individuals with
different risk bearing preferences.
Insurance
bill to be placed during budget session
The
Indian government would seek passage of Insurance bill to allow private
sector participation in the sector during the budget session, according to
the federal Power Minister P R Kumaramangalam. "We would try to
introduce the bill during the winter session itself, but as the session is
short for a period of only two to two-and-half weeks, its passage is
likely in the budget session," Kumaramangalam said. The federal
Cabinet had cleared yesterday the bill for Insurance Regulatory Authority
as part of opening up of insurance sector for private participation.
Stating that the government was committed to carry on the reform process
and show results, Kumaramangalam said that India and U.S could strengthen
relationships by cooperation in infrastructure and knowledge-based
industries. In the infrastructure area alone, the two countries could
explore jointly working in sectors like Power, Telecom and Surface
transport, he said.
Jewelry
and Watch Exhibition to commence from Oct 22
The Fourth Delhi International Jewelry and watch exhibition, providing a platform for one-to one interaction among various jewelry manufacturers will commence here from October 22. The fair, supported by the World Gold Council, would showcase 100,000 designs worth Rs 8 billion in gold, platinum, stones and gems, besides presenting some exclusively crafted pieces for the exhibition. The show would also provide opportunities for joint ventures and other techno-commercial ventures.
A workshop by the Italian Trade Commission would also be held to encourage
technology transfers and interaction between Indian and Italian jewelers.
The four day fair from Oct 22-25 will include 120 participants from all
over the country besides that from Singapore, Hong kong, Italy, Indonesia
and Fiji islands.
Drop
in earnings from service export may widen trade deficit
Steady
decline in net earnings from services exports like software and royalty
payments is likely to widen the trade deficit further, according to the
leading chamber. Net earnings from invisible sector exports were down from
2.6 billion US dollars in 1997-98 to 1.7 billion dollars in 1998-99, a
decline of about 35 per cent, Associated Chambers of Commerce and Industry
(ASSOCHAM) said in a statement. Such a decline continued in the first
quarter of 1999-2000 and would cause deterioration in the current account
position, according to the ASSOCHAM president K P Singh. Exports of
miscellaneous services had declined by 17 per cent in April-June 1999 but
imports surged by 62 per cent during the period, it said. Inflow of net
earning from export of services including software, payments for technical
know-how and royalty had shown marked decline over last two years, it
added.
Primary
market yet to show signs of revival
The primary market is yet to show signs of revival with 21 public issues
raising a meager Rs 34 billion in the first half of current fiscal, says a
study. Prime, an independent primary market monitor, said a revival in the
Initial Public Offer (IPO) market was yet to be witnessed as 74 per cent
of the total amount raised during the period was through debt. In the
corresponding period (April-September) last year, total mobilization was
Rs 30.18 billion. The Prime study said equity offerings continue to be
scarce and the ones that were made had been from the software sector. Only
17 equity issues hit the market raising Rs 8.74 billion. It said adding
that this compares favorably with Rs 3.32 billion raised through equity in
the corresponding period last year. According to Prithvi Haldea of Prime,
several areas relating to issuers, investors and the regulations need to
be addressed in order to achieve a sustained and healthy growth.
Of Immediate concern was the sign of alarming frenzy in the market for
specific sectors, Haldea said.
The response to the software issues appeared to be heartening though it
could send some disturbing signals with oversubscriptions in the range of
20-60 times, he added.
Indian
economy on firm path to recovery: CII Study
The Indian economy appeared to be on a firm path to recovery with cement, refineries and automobile industries showing double digit growth rates in the first half of the current fiscal, according to a CII survey.
With more than 80 industries showing moderate to high growth and another
21 sectors recording an excellent performance of over 20 per cent growth,
industrial recovery has speeded up during the first six months of
1999-2000, the ASCON-CII survey of 120 industries said. While cement
clocked an impressive 20 per cent growth in production after a dismal
performance last year, automobiles and components recorded 12 per cent and
25 per cent growth in production respectively. Among capital goods,
production of telecom cables saw a 80 per cent growth rate even as
distribution transformer and motor starters touched 25 per cent growth in
production. However, textile machinery and wagons continued to show
negative growth for the third successive quarter with pig iron recording a
negative growth rate of 29 per cent. Consumer durables continued to propel
the industrial recovery with a majority of the product segments including
computer hardware clocking excellent growth of over 20 per cent. Sales
figures also showed improvement with 60 of the 75 industrial segments
reporting moderate to high growth even as 50 per cent of major industrial
sectors led by construction projects and multi-utility vehicles bettered
their exports performance.
ASSOCHAM
spells strategy for 5% growth in agriculture sector
Focus on agricultural exports, reduced dependence on rainfall and private sector involvement are some of the measures that can ensure an annual five per cent growth in the agriculture sector alongwith an increase in productivity as per international standards, according to the leading chamber. Recommending a seven point strategy, the Associated Chambers of Commerce and Industry of India (ASSOCHAM) has called for an early announcement of the agriculture policy. In a paper on 'Agriculture-competing for the future, the chamber said the investments in irrigation and water conservation should get the highest priority in any policy agenda for the agriculture sector. To generate resources, expenditure on subsidies should be curtailed and money saved should be diverted to create productive infrastructure - irrigation facilities and watersheds in dry land areas, it has said. Special attention needs to be given for building roads, markets, other transportation facilities, cold storage and handling facilities at the railheads, sea and airports along with increased investment in cold storage facilities, it pointed. Restrictions on movement of various agricultural commodities should be completely removed. Various laws and regulations, which continue to stifle the growth of agriculture sector, need to be reviewed and amended or done away with.
India,
US for building forward looking relationship
India and the United States has held official-level parleys to lay the groundwork for the visit of U S President Bill Clinton here early next year, with both sides underscoring the need for reviving the structured bilateral dialogue and building the basis for a ''forward-looking'' relationship. Bruce Reidel, Senior Director for North-east and South Asia, accompanied by Mat Daley, Deputy Assistant Secretary in the State Department, called on External Affairs Minister Jaswant Singh and held separate meetings with Prime Minister's Principle Secretary Brajesh Mishra, Foreign Secretary K Raghunath and senior officials in the foreign office. Expressing satisfaction over his brief visit, Reidel said he had ''very good discussions'' with Indian leaders and officials. Asked whether Washington wanted the Indian Government to quickly resume talks with Pakistan despite military rule there, he said ''that's a decision for your Government to make''. On U.S. view on the military coup in Pakistan, Reidel said "We would like to see a restoration of democracy just as quickly as possible and the maintenance of peace and stability in the region." The developments in Pakistan figured prominently during the parleys with both sides giving their perceptions of the evolving situation. They agreed to stay in touch on the subject, an external affairs ministry spokesman told reporters.
Atlas
targets Rs. 5 billion sales in next 5 years
Major cycle manufacturer 'Atlas' has drawn up an expansion plan to raise its net sales to Rs 5 billion by 2004 from the current Rs 3.30 billion, according to a top company official. "We are sure that with the current introduction of sophisticated models like mountain bikes, all terrain bikes and exercisers in the market, more than 30 per cent of our revenue would come from this growing segment," according to the president of Atlas Cycle Industries Ltd. Bishamber Das Kapur. Atlas, which has been competing with the rival cycle maker 'Hero' to reach the numero uno position in the industry, has been able to achieve an average growth rate of 10 to 15 per cent due to constant innovation and technology upgradation, he said.
"We achieved sales worth Rs 3.30 billion in 1998-99. As our sales are growing at the rate of around 15 per cent every year, we are confident of reaching a target of Rs 500 within next five years," Kapur said.
He said in spite of the cycle industry not doing well in the last few years due to recession, Atlas has been consistently showing a rise in profit from Rs four crore in 1996-97 to Rs 90 million in 1998-99 and is well set to achieve a profit of Rs 120 million in the year 2000. Atlas produces about 3.4 million cycles per year out of total Indian output of one crore cycles.