Current Economic Statistics and Review For the
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Theme
of the week: India’s Foreign Trade: Performance and Structural Changes* Introduction International
trade, according to its proponents, plays a positive role in influencing
many economic activities and in turn promotes economic progress of the
participating country. Adam Smith, David Ricardo, J.S Mill, Alfred
Marshall and D.H Robertson were some of the leading supporters of free
trade as a means of promoting economic development. D.H Robertson argued
that trade is an ‘engine of growth’. His argument was based on the
transmission of positive effects from one country to another,
particularly from developed to less developed countries. Advanced
economies with high growth rates and expanding manufacturing sector were
expected to raise their demand for primary goods, in turn raising demand
for exports from less developed countries (less developed economies were
traditionally known to export primary goods). Increased demand for their
exportable were expected to accelerate growth of less developed
countries. Technology, skill and capital were expected to flow from
developed nations to less developed economies with the expansion of
trade. These positive benefits of trade were expected to lead to a
virtuous link between developed and newly developing economies. With
fears of external dominance, the Indian planners adopted a somewhat
introvert external trade (and external investment) strategy. Far from
viewing foreign trade as an engine of growth, Indian planners sought to
minimise import demand by adopting an import substitution policy and
gave secondary place to exports primarily as a source to generate the
foreign exchange earnings to meet that part of the import bill not
covered by external assistance. There were controls over both imports
and exports. However, the early 1990s saw a metamorphic change in
perception towards the external sector and its role in overall
development, which resulted in radical liberalisation of foreign trade
policies. Trends
in Merchandise Trade The
year 1991 was marked with external sector crisis. Among other problems
of crisis dimensions faced by the country during that year, India’s
foreign trade looked up in the next two years only to face another
downturn in 2001-02, (Tables 1 and 2) arising out of a deceleration in
the global economic activity. The year 2001-02 was marked by an economic
slowdown in major industrial countries and also in east Asia. World
trade prices also declined for both fuel and non-fuel commodities. These
recessionary conditions combined with the adverse impact of September
11, 2001 attack created unfavourable conditions for world trade in
general. Its impact was also observed on Indian merchandise trade
performance, with exports registering a decline of 0.6 per cent (Table
2) and imports registering a very low growth of 2.9 per cent (Table
3). Since
2002-03, Both
external and domestic factors have contributed to the satisfactory
performance of exports since 2002-03. Improved global growth and
recovery in world trade have aided the strengthening of Indian exports.
On the other hand, firming up of domestic economic activity, especially
in the manufacturing sector, provided a strong base for sector-specific
exports. The
ratio of exports to GDP has increased from 7.2 per cent in 1992-93 to
11.5 per cent in 2004-05 and that of imports to GDP has galloped from
8.5 per cent to 15.5 per cent. During the decade of the 1990 (excluding
the year 1990-91), the ratio of exports to GDP was at an average of 8.2
per cent, which has increased to 10.2 per cent in just five years of the
new millennium. Similarly, the average ratio of imports to GDP has
increased from 9.7 per cent to 12.4 per cent during the same period.
Changes in the Commodity-wise Composition of TradeExports Over
the years the commodity composition of The
share of agriculture and allied products has displayed a declining
trend. From a peak of 13.7 per cent in 1996-97, it has come down to 7.6
per cent in 2004-05. However, exports of processed agricultural products
has shown a marked improvement in recent years. The
share of traditional export items such as tea, coffee, handicrafts and
carpet has declined. In recent years, Exports
of petroleum products have also increased in the recent years. The share
of petroleum products has gone up remarkably from a miniscule 0.1 per
cent in 1999-00 to 8.6 per cent in 2004-05. Export earnings from
petroleum products has also witnessed a healthy growth due to high
international oil prices as deterred by the low earnings in domestic
sales (from past 2 years), oil companies have been exporting instead of
selling their products in domestic market. Ores
and minerals is another commodity group whose share in total exports has
also risen, over the years. As
mentioned earlier, 2000-01; the year of global recession which
compressed the world trade, has been marked by a decline in value of
exports and this decline has been spread across both the agricultural
and manufactured commodity groups. Most of the commodity groups have
registered a substantial slowdown in their growth and some of the groups
have registered a decline. ImportsThe
commodity structure of Imports of capital goods, namely, machinery, electronic goods, project goods, registered a sharp rise in the initial reform years but exhibited a declining trend thereafter from 1996-97 to 2000-01. Again, as mentioned earlier, this period was related with lack of investment demand associated with sluggish pace of domestic activity arising out of a slowdown in the global economy. However, a turnaround in the global as well as domestic economy thereafter has resulted in a rise of such imports. Growth in the import of iron and steel has also moved in tandem with the global and domestic economic activity (although its share in total exports has declined over the years). A high growth rate in iron and steel imports is indicative of a rise in manufacturing activity in the country Of late, a pick-up in domestic industrial activity has resulted in higher demand for metalliferous ores and metal scrap, which are important raw materials for the steel industry. Imports
have also been driven by an increase in the imports of mainly
export-related items like pearls, precious and semi-precious stones and
electronic goods. Reflecting
the impact of a series of policy measures undertaken in the post-reform
years starting with the repeal of Gold Control Order in 1991 for
liberalising the imports of gold and silver, these imports showed a sharp
rise. Disparity
between DGCI&S and the Reserve Bank Data As
pointed out by Reserve Bank of India (RBI), there exists a significant
divergence between the merchandise transactions, particularly on imports,
as compiled by Director General of Commercial Intelligence and Statistics
(DGCI&S) and the RBI. This divergence is revealed by customs data
gathered by DGCI&S and the balance of payments data published by the
RBI (Table 4). One source of divergence arises out of difference in timing
and valuation; custom data is based on the shipment of goods and the
booking, where as RBI data is based on payment basis. Apart from this
difference, a major cause for the difference is that the customs data do
not cover import of defence stores including defence equipment, while the
RBI data cover the same as and when these imports are paid for. Besides,
RBI data have a lead in payments in regard to imports under external
assistance and commercial borrowings as the RBI records them when the
payments are made to suppliers while the DGCI&S data cover them when
goods arrive in the country.
As the data in Table 4 show, the difference between the two sources has got widened. Also, the growth rate calculated on the basis of these two sets of data differs
and
for some years this difference is quite substantial. For example, for
1998-99 and 2001-02 as per DGCI&S custom data growth in imports is low
but positive, whereas, as per RBIs BOP data, there has occurred a decline
in their growth rate. Table
5 gives various ratios as calculated in Table 1 but only for 5 years, just
to make a point on disparity in the data. It is clear from the two tables
that these ratios differ as the ratios given in Table 1 are based on DGCI&S
data whereas ratios given in Table 5 are based on the RBI data. Authenticity
of DGCI&S Data: Rise of a Controversy
There
has arisen a controversy regarding the authenticity of the DGCI&S data
after a startling revelation by an internal investigation conducted by the
Commerce Department, detecting irregularities in the manner in which Conclusion *
This note is prepared by Abhilasha Maheshwa
Highlights of Current Economic Scene AGRICULTURE With the amendments made in the current law on agriculture and marketing by the Central Government, almost all the states are set to amend the relevant Agricultural Produce Marketing Committee (APMC) Act by March 2006. While the present APMC undertakes direct marketing to corporates and setting up of farmers / consumer markets, the new consensus redefines the APMC Act by promoting alterative marketing system and contract farming. This would mean direct purchasing of the commodities at market-defined prices by trading houses and corporates from farmers either through individual purchase contracts or from farmer/consumer markets. Marine
exports from the country registered a 9.2 per cent increase in quantity
and a 12.5 per cent rise in value terms for the first quarter of this
fiscal year. As per the provisional figures available with Marine Products
Export Development Authority (MPEDA), total export during April-June 2005
stood at 85,925 tonnes worth Rs. 1409 crore compared to 78,669 tonnes
worth Rs. 1252 crore during the same period last year. Exports to According
to RBI annual report 2004-2005 agriculture and allied activities have
contributed 1.1 per cent to real GDP growth during financial year 2004-05.
This is a drastic drop in contribution compared to 9.6 per cent in
2003-04. Kharif production fell by 12 per cent while Rabi production
surged by 4 per cent during financial year 2004-05 over the previous year.
Overall agricultural index has registered a decline of 1.2 per cent. The
total foodgrains production during 2004-2005 was estimated at 205 million
tonnes, 4 per cent lower from the previous year. While agricultural
production has declined, milk production has moved up by 3.3 per cent
reflecting a more stable expansion of dairying activities. With the
production of 91 million tonnes during 2004-05, INFRASTRUCTUREElectricityThe
power ministry is set to launch a Partnership for Excellence Programme
from September 2005, wherein performing utilities such as National Thermal
Power Corporation (NTPC), Andhra Pradesh Generation Company (APGenco),
Karnataka Power Company Limited (KPCL) and Rajasthan Generation Company (RGenco)
would help 26 power stations across the country, with Plant Load Factor (PLF)
below 60 per cent, to improve PLF and consequently improve power
availability. Non-Conventional EnergyGrid
interactive wind power generation projects, which are largely commercial
projects through private sector investment, will be granted preferential
tariffs in potential states by the central government. A total of 211
sites have been identified in 13 states and union territories for setting
up wind power projects. By June 2005 CoalIn order to win captive mining blocks of coal, companies producing power, cement and iron and steel may have to go through a competitive bidding process as outlined in the New Exploration and Licensing Policy for the petroleum sector, without the government showing any bias for Coal India Limited. Petroleum and Petroleum ProductsUS crude futures touched a record peak of $ 7.80 a barrel, the highest price since NYMEX began trading contracts in 1983, as one of the biggest hurricanes in US history, Katrina, disrupted oil and gas production in Gulf of Mexico, home to around 1.5 million barrels per day of US crude, amounting to a quarter of total US oil and gas production. According to ONGC, about 60 per cent of the production at Bombay High, post the devastating fire on 27th August, has been restored and is expected to reach near normal by March 2006. The decision on expected hike in petroleum products would be taken only after September 6, with petrol prices likely to be raised in the range of Rs 2-2.50 a litre, diesel prices by around Rs 2 and LPG is hike expected to be around Rs 10. According to an Assocham study, hard times will continue for the global and domestic petroleum industry as a surge in crude prices will continue grow with supplies further tightening and prices soaring above $90 a barrel in the near future. It estimates increasingly shrinking production to stagnate at 2 million barrel a day from the existing 3 million barrel a day with most oil and natural gas basins aging and generating lesser production than their prime time, particularly in north America and north-western Europe, which account for 60 per cent of current oil and natural gas production and where more then 50 per cent of the reserves have been extracted. SteelAfter witnessing a downward trend for last three months domestic steel prices have shot up once again on the back of hardening international prices and rising demand; the domestic primary producers, who had reduced steel prices in June, July and August between Rs 500 to Rs 2000 per tonne, have hiked prices by Rs 500 to Rs 1000 per tonne. Government is going ahead with plans to consolidate steel capacities available in the public sector by merging smaller companies with Steel Authority of India Limited (SAIL). Government has decided to form a group of ministers to finalise action plans and monitor implementation of the yet to be announced National Steel Policy, headed by the steel minister and having representation from mine and coal ministries. RoadsMinistry
of roads, highways and shipping has invited private investors for phase
IIIA of NHDP, which involves four-laning of 10000 km of national highways.
The total investment is estimated at Rs 55000 crore, with around Rs 30000
crore required from private investors under the BOT model and the rest of
the amount being made available through viability gap funding. The
minister has invited ADB for participation and has suggested to the bank
the adoption of a programme based lending approach instead of the
project-based approach currently used by them. INDUSTRY PharmaceuticalsThe government is
planning to put in place a Settlement Commission to resolve cases against
pharma companies for alleged violation of pricing norms; the government is
currently seeking paybacks in excess of Rs 900 crore from them, Rs 465
crore worth outstanding demands from National Pharmaceutical Pricing
Authority and Rs 450 crore long pending claims by the government under the
Drug Price Equalisation Account. ChemicalsThe
paint industry in The paints industry may raise prices by at least 5 per cent by September-October 2005, in the wake of input prices of petroleum based solvents like mineral oil turpentine growing at 7 per cent. The hike is being resisted due to present high volume growth, intense competition in decorative segment and possible entry of foreign companies into the segment. TextilesTextile
manufacturers, on massive expansion drives post abolition of export
quotas, are importing machinery, due to inability of domestic textile
machinery sector to meet their demand in terms of both quality and
quantity. An estimated Rs 2000 crore worth of machinery has been imported
in the last 18 months. AutomobilesThe government is planning an overhaul of the tax structure for automobiles so as to give a fillip to manufacturing of small cars and discourage use of old commercial vehicles. CORPORATE
SECTOR The
The excise and customs department has given Reliance Industries a month to pay the Rs 9,500 crore unpaid dues, for which a showcause notice has been issued to the company. Welspun
Jai Prakash associates has won Rs 1,925 crore irrigation project in Andhra Pradesh. The project will be completed with in the next five years. Bajaj Hindustan has decided to buy 55 per cent stock in Pratappur Sugar at Rs 55 per share. The Cabinet Committee on Economic Affairs has approved the sale of 8 per cent government equity in Maruti Udyog Limited to public sector banks and financial institutions. Grasim
Cement of the AV Birla group has approached the heavy industry department
with a proposal to buy Cement Corporation of Bharti Tele-Ventures will invest Rs 1500 crore in 2005-06 for expanding its broadband and fixed lines services. Pantaloon Retail (India) and Liberty Shoes have decided to set up a 51:49 joint venture company to launch a chain of footwear stores across the country. Chennai-based
BPO firm, Lason Indian
Oil Corporation is bidding to acquire a 51 per cent majority stake in the
Tupras refinery, the largest refinery in Reliance Industries Limited has increased polymers and polyester prices between one per cent to seven per cent. The price rise will be effective from September 1, 2005. The Aditya Birla group’s cement production for April-August 2005 has increased by 10.4 per cent at 114.1 lakh metric tonne as compared to 103.5 lakh metric tonne during the same period earlier year. The
Oil and Natural Gas Corporation (ONGC) has decided to set up an export
oriented oil refinery and a special economic zone with an investment of Rs
7,000 crore at BANKING Canara
Bank has reduced its interest rates on loans to teachers to 10.75 per cent
from the existing 12 per cent on the occasion of Teacher’s day on
September 3, 2005. The reduced rates will be offered during the entire
month of September to all teaching and non-teaching staff of schools,
colleges and universities. The
Reserve Bank of India (RBI) has modified the structure of fees paid for
government business to banks. According to the new norm, banks will be
paid fees on the basis of the number of transactions and not on the amount
of business. Earlier, banks used to get paid 11.80 paise per Rs.100 of
government business done. Under the revised framework, banks will be at a
rate of Rs.60 for pension payment and Rs.45 for others. Various government
business handled by banks include pension payments, collection of taxes,
soliciting and servicing of relief and savings bonds, public provident
funds and senior citizen saving scheme. According to bankers, this will
drastically bring down the income on government business handled by the
banks and affect their profitability. The State Bank of HOUSING Housing Development Finance Corporation Ltd. (HDFC) has raised $500 million through zero coupon foreign currency convertible bonds (FCCBs) with a tenure of five years. HDFC’s FCCB issue is the first after the government relaxed external commercial borrowing norms (ECBs) in June 2005. The government had allowed housing finance companies to raise funds abroad through issue of FCCBs. INSURANCE Infosys
Technologies has bought the world’s largest group life insurance policy
from Life Insurance Corporation of India (LIC) for a sum assured of around
Rs.6,000 crore. LIC will be reinsuring this group cover with Swiss Re due
to the huge amount of sum assured. Infosys has had a group policy with LIC
for several years. However, this year, the software company decided to
hike the sum assured several-fold. The cover ranges from Rs.10 lakh to
Rs.40 lakh, with the sum insured increasing with seniority. At the same
time, the employee head count has increased considerably to 38,000. As a
result, the sum insured has augmented more than four times, from Rs.1,300
crore a couple of years ago, to close to Rs.6,000 crore. However, Infosys
will have to pay the fringe benefit tax on the premium, since the benefit
of this policy flows directly to employees. INFORMATION
TECHNOLOGY Hyderabad-based $4.4 million Virinchi Technologies Ltd., a provider of web-enabled enterprise-wide solutions, has entered into an agreement to acquire KSoft Systems Inc. for $2.66 million in a cash-stock deal. KSoft is a $3.7 million company that provides enterprise business solutions focusing on SAP implementation and business intelligence. With this acquisition, KSoft will become wholly owned subsidiary of Virinchi. IT
major Tata Consultancy Services (TCS) has completed implementation of core
banking solutions (CBS) in over 4,000 branches in State Bank of TCS
has won a major consulting project from Bank Negara Indonesia (BNI), FINANCIAL MARKETS Capital
Markets Primary
Market The
Talbros Automative ComponentsLtd issue which opened on September 1 to
September 9 has been oversubscribed. Secondary
Market The
continued FII as well as mutual funds purchases has propelled the stock
indices higher into the unprecendented territory. the BSE sensex touched
an all-time high of 7928 before closing for the week at 7899 at a gain of
2.86 per cent over the previous week’s close. Similarly, NSE nifty
rebounded 2.5 per cent to 2415 points. The bullishness in the market is
not restricted to the large cap but also to the mid and small cap stocks.
Moreover, the liquidity flows to the mid-cap and small cap has been more
than that to the large cap. While BSE sensex has gained 2.86 per cent over
the previous week, BSE mid-cap and small-cap have gained 3.64 per cent and
5.56 per cent, respectively.
For
the whole month of August, the FIIs have been net buyers of equities to
the extent of Rs 5051 crore with purchases of Rs 27,837 crore and sales of
Rs 22,786 crore, while in debt they have been net sellers to the extent of
Rs 430 crore with purchase of Rs 521 crore and sales of Rs 951 crore. In
the first eight months of the calendar year, FIIs net investment in
equities has been Rs 32,854 crore and in dollar terms, it is $ 7,527
million. The
Sebi initiated an inquiry into nearly 1,000 re-listed companies in the
current calendar year across all exchanges. Regulations In
order to facilitate execution of bulk deals, the stock exchanges are being
permitted to provide a separate trading window. A trade, with a minimum
quantity of 5,00,000 shares or minimum value of Rs.5 crore executed
through a single transaction on this separate window of the stock exchange
will constitute a “block deal”.
The said window will be kept open for trading for a limited time
period of 35
minutes from the beginning of trading hours i.e. from 9.55 a.m. to 10.30
a.m. A single block deal order
in this window has to be for a minimum quantity of 5 lakh shares or
minimum value of Rs 5 crore. Also orders may be placed in this window at a
price not exceeding ±
1 % from the ruling market price / previous day closing price.
Every trade executed in this window must result in delivery and
shall not be squared off or reversed. Disclosure of all trades in this
window and its dissemination to general public has been mandated. As
part of the corporatisation and demutualisation initiative, the stock
exchanges that were set up as Association of Persons will have to
incorporate a for-profit company limited by shares and demutualise. The
exchanges which were set up as companies limited by guarantee will have to
convert / re-register themselves to companies limited by shares and
demutualise, while the stock exchanges that are already companies limited
by share will have to only demutualise. Thus Sebi has issued orders for 10
stock exchanges which include the Calcutta Stock Exchange Association
Limited, the Delhi Stock Exchange Association Ltd, and others. Derivatives
The
total derivatives turnover during the week ranged between Rs 12,269 crore
and Rs 13,809 crore. The stock futures turnover ranged between Rs 6,576
crore and Rs 8,601 crore. Government
Securities Market Primary
Market The
government is to re-issue 5.69 per cent 2018 for a notified amount of Rs
5,000 crore and is also to re-issue a fresh 30-year security for a
notified amount of Rs 3,000 crore on September 8. In
order to mop up the sloshing liquidity in the system, the RBI has enhanced
the notified amount of 91-day treasury bills under MSS from Rs 1,500 crore
to Rs 3,500 crore each for all the auction to be held between August 31
and September 28. Secondary
Market With
the international oil prices touching an all-time high of $70.85 due to
the impact of Hurricane Katrina in the Collateralised
Borrowing and Lending Obligation (CBLO) segment clocked the highest volume
of Rs 15,082 crore with the highest number of trades 302 on September 1. The
weighted average YTM of 8.07 per cent 2017 has edged down marginally
from7.21 per cent on August 26 to 7.18 per cent on September 2.
Foreign
Exchange Market With
the sharp surge in global oil prices, the rupee depreciated and touched a
low of Rs 44.12 on September 1, but rose to Rs 43.95 on September 2. The
six-month forward premia fell from 0.64 per cent on August 26 to 0.45 per
cent on September 2. Commodities
Futures derivative The
NCDEXAGRI index has risen from 1251.15 on August 26 to 1263.32 on
September3. INFLATION
The
annual point-to-point inflation rate based on wholesale price index has
declined to 3.08 per cent during the week ended August 20, 2005 from 3.13
per cent registered during the previous week. The inflation rate was at
8.46 per cent in the corresponding week last year. The WPI in the week under review has risen marginally by 0.1 per cent to 194.3 from the previous week’s level of 194.1 (Base: 1993-94=100). The index of primary articles’ group has increased by 0.2 per cent to 191.6 from the previous week’s level of 191.3, mainly due to an increase in the price indices of food articles. The higher prices of food articles have been evident due to the higher prices of fruits and vegetables, condiments and spices and gram. The index of fuel, power, light and lubricants group has also risen marginally to 304 from the previous week’s level of 303.9, mainly due to higher prices of furnace oil. The heavy-weighted manufactured products’ group constituting 63.7 per cent of total weight, has also increased a tad by 0.1 per cent to 170.7 from 170.5 of the previous week’s level. The latest final index of WPI for the week ended June 25, 2005 has been revised upwards; as a result both, the absolute index and the implied inflation rate moved up to 194.2 and 4.30 per cent instead of the provisional levels of 193.9 and 4.14 per cent, respectively. The contained rate of inflation during last two months, i.e. June and July including the first three weeks of August is attributed mainly to the high base effect. The recent hike in the prices of petroleum products by the government, which was effective from September 6th, may fuel inflationary pressures on the economy in the near future through its cascading effects on the related sectors like transport. LABOUR According to the chairman of the interim Pension Fund Regulatory and Development Authority (PFRDA), the Public Provident Fund (PPF) as a post-retirement saving scheme, will have no utility once the New Pension Scheme (NPS) comes into force. He further added that the government might think of phasing it out within next two to four years. According to the Rakesh Mohan Committee report on the administered interest rates and rationalisation of savings instruments, which was formed on January 24 this year, it is desirable to continue the same in its present form for some time, since PPF is a longer-term savings scheme providing old-age security to the unorganised sector. The Pension Fund Regulatory and Development Authority (PFRDA) would be finalising the draft regulation for pension funds in next ten days. The draft regulation would cover the issues like number of pension fund managers, central record-keeping agencies, base minimum capital requirement for pension fund managers and possible charges that could be levied by them. According to the Chairman of interim PFRDA, the base minimum capital for pension fund managers should be less than that of insurance companies and should be fixed at less than Rs. 100 crore. He added that PFRDA is not in favour of putting a cap on the number of pension fund managers. On the contrary, there could be several public fund managers like LIC, PNB and SBI, which have acquired expertise to operate in this field. He indicated that the pension sector FDI can be kept at the level of 26 per cent, as fixed for the insurance sector. The PFRDA Bill would be tabled in the parliament in November during the winter session. PUBLIC
FINANCE The
revenue department in its explanatory note has clarified
that medical reimbursement up to Rs. 15,000 for treatment in an
unapproved hospital would attract fringe benefit tax. Further, it has also
stated that employee stock options have been excluded from FBT ambit along
with gratuity and provident fund contributions. The note also clarified
that food, beverages, tour and travel and boarding and lodging expanses
for in-house training sessions would fall under the ambit of FBT. While,
non-profit universities and hospitals, charitable trusts and law firms
having retainer-relationship arrangements are not liable to pay FBT. The
note also clarified that while provisions for double taxation avoidance
agreements (DTAA) would not be allowed exemption from FBT, foreign
companies with employees in Petroleum minister’s proposal to restore the price band mechanism for a change in petroleum prices has been rejected by the Finance Ministry on the grounds that it would lead to ad-hocism in fiscal policies, thereby having a serious macroeconomic consequence. Further, the Finance ministry also stated that it anticipated a shortfall of Rs. 3,628 crore in indirect tax collection from petroleum sector, targeted at Rs. 56,000 crore this year. Corporate tax from the refining, petrochemical and oil marketing sector during 2004-05 declined to Rs. 1,639 crore from the Rs. 3,842 crore in 2003-04, in wake of losses suffered by the oil companies. Finance
Minister has directed the Chief Commissioners of Customs and Excise to
undertake measures to improve excise duty collections and take strict
actions against the evaders. As per the data available with the finance
ministry up to July 2005, only four excise zones- The Federation of Indian Chambers of Commerce (Ficci) has urged the government to keep superannuation funds outside the purview of fringe benefit tax. Since including employees’ superannuation funds within the ambit of FBT is making the corporates to discontinue the scheme and take over the liability to pay pension without funding the same, which is undesirable in terms of employees social security. The revenue department has increased the internal target for custom duty collections by Rs. 7,000 crore to Rs. 60,000 crore for 2005-06. The overall target of Rs. 1,92,215 crore from the indirect taxes for 2005-06 has also been increased internally by Rs. 5,000 crore, after factoring a shortfall of around Rs. 2,000 crore, owing to lower excise duty collections. According to data release by Controller General of Accounts (CAG), fiscal deficit during April-July has risen to Rs. 77,480 crore, accounting for 51.3 per cent of the budgeted estimate, on increase in plan expenditure coupled with a near stagnant tax revenue. The deficit in the same period last year accounted for only 36.7 per cent of the budget estimate. The plan expenditure at Rs. 37,632 crore was 26.2 per cent of the budget estimate compared to 20.8 per cent in the corresponding period in the previous year. CAG
in its report for the year ended March 31,2004 has rapped the CREDIT
RATINGS Icra has upgraded the ratings assigned to Sundaram Home Finance Ltd.’s (SHF) Rs. 500 million non-convertible debenture programme from ‘LAA-‘ to ‘LAA’. It has also upgraded the rating assigned to SHF’s fixed deposit programme to MAA from the existing MAA-. Both the upgradation takes into account SHF’s strong parentage, its ability to raise low cost funds from diverse sources, and improvement achieved in its asset quality through persistent initiatives. Following Cadila Healthcare Limited’s (CHL) announcement that it will invest upto Rs. 400 million in the equity of a European biotech company, Crisil has reaffirmed the outstanding ratings assigned to CHL’s two non-convertible debenture issues of Rs. 600 million and Rs. 700 million at AA+/Stable, respectively. It has also reaffirmed the P1+ rating assigned to CHL’s Rs. 600 million commercial paper programme. Crisil
has assigned AAA/Stable and P1+ rating to Power Grid Corporation of India
Limited’s (PGCIL) Rs. 20.00 billion bond programme and Rs. 6.50 billion
short-term debt programme, respectively. Meanwhile, the agency has also
reaffirmed the AAA/Stable rating assigned to PGCIL’s Rs. 7.50 billion
bond programme. The ratings on PGCIL’s bonds programme continues to
reflect PGCIL's critical role in inter-state power transmission in In an another exercise, Crisil has assigned AAA rating to Citicorp Finance Ltd.’s Rs. 5.5 billion non-convertible debenture programme, while it has also reaffirmed the AAA rating on the company’s Rs. 5 billion non-convertible debenture programme. The ratings reflects Citicorp Finance's good market position in the commercial vehicle (CV) financing business, its superior risk management systems and a diversified low cost resource base. In addition, the rating also factors in satisfactory gearing levels in the company’s asset financing business. Meanwhile, Crisil has withdrawn the P+ (SO) rating assigned to the Rs. 1398.3 million Series A1 pass through certificates issued by UBL Trust Series 7 originated by IndusInd Bank Limited, as all the payouts under these instruments have been made out in full as scheduled. EXTERNAL
SECTOR A
large number of developers of special economic zones (SEZ) have strongly
demanded that the minimum area for sector specific single product or
port/airport based SEZs should not be less than 500 hectares as otherwise. A
developer or a co-developer of a special economic zone may now have to
hold at least 26 per cent stake in the entity proposing to create the
basic infrastructure in the designated area. According to the draft SEZ
rules, 2005, the government has also proposed that multi-product SEZs be
spread across at least 1000 hectare, while the sector specific zones,
including ports or airports, have a minimum area of 100 hectare. The SEZs
for information technology and gems and jewellery may have an area of 10
hectares but the entire area should be used for developing the processing
area. The
Jharkhand government has initiated the process for establishing a Special
Economic Zone in Adityapur, near According to the study carried by Icrier, more FDI is needed in export-oriented industries to perk up the employment level in the organized sector. The study has been carried out to examine the impact of FDI, trade and technology on wages and employment in the Indian manufacturing industries in the post-reform period.
*These statistics and the accompanying review are a product arising from the work undertaken under the joint ICICI research centre.org-EPWRF Data Base Project. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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