Current Economic Statistics and Review For the
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Theme
of the week: A
Brief Profile Of Social Concerns I Quantitative
Indicators
There
is undoubtedly a universal recognition that Likewise, the official measures of poverty shows a steady decline in the poverty head-count ratio, from about 55 per cent in 1973-74 to 44.5 per cent in 1983 and to 26 per cent in 1999-2000. On the human development front too, the country has made significant progress in the last three decades or so. The average life expectancy at birth has gone up from 45.6 years in 1970-71 to 50.4 years in 1980-81, to 58.7 years in 1990-91 and to 63.3 years in 2000-01 (approximate years of reporting). The infant mortality rate (per 1,000 live births) has dropped from 110 in 1981 to 80 in 1991 and to 63 in 2002. Maternal mortality (per 100,000 live births) has dropped from 437 in 1992-93 to 407 in 1998. The improvement in literacy rate has been much more rapid, from 34.45 per cent in 1971 to 52.20 per cent in 1991 and to 65.38 per cent in 2001. Serious
caveats and concerns
Though
achievements have thus been quite significant on many fronts, recognisedly
the gaps remain quite large and disquieting.
There is the first set of questions that casts doubt on the
conventional poverty estimates. To
begin with, the number of the poor still exceeds 260 million, said to be
one in fifth of the global poor. There are wide inter-regional disparities
in poverty levels, with over 48 per cent of the poor concentrated in three
states of UP, MP and ---- social deprivations
The second
set of concerns relates to the extent of social deprivations.
The proportions of people below the poverty line based on income
poverty or nutritional standards have no doubt come down but the extent
and nature of social deprivations have remained substantial.
A more disquieting feature in this respect has been the poorer
performance in the 1990s as compared with that in the 1980s.
The trends in the Human Development Index (HDI) as measured by the
UNDP, presented in Table 1, portray how
The extent
of such social deprivation in India is also evident rather indirectly from
a World Bank study which measures the number of poor people by countries
and regions based on two international poverty lines, namely, US $ 1.08
per day and US $ 2.15 per day (both 1993 PPP) (Chen and Ravallion 2004).
As per this study, nearly 360 million people were below the $1.08 a
day poverty line in India 2001 as against 380-400 million in the first
half of the 1990s (Table 3). But,
when we double the poverty line to $ 2.15 a day which would capture the
additional social and economic standards required for a decent living, the
proportion of people below the poverty line in
----
Reduced employment growth The third set of caution concerns the deteriorating employment growth situation. First, there has occurred significant deterioration in the growth of employment in the national economy as a whole in the 1990s (Table 4). Second, the decline in the rate of employment growth in the rural areas has been sharper than that in the urban areas (Table 5). Third, informal sector employment has received a setback during the 1990s. Employment growth in agriculture has been niggardly during 1993-94 to 1999-2000, that is, 0.05 per cent per annum as against 1.39 per cent per annum during 1983 to 1993-94. Rural non-farm employment, which had grown by 3.23 per cent during 1983 to 1993-94, grew by 2.31 per cent during the next period. Likewise, non-farm employment in the informal sector, as revealed by the Economic Censuses of 1980, 1990 and 1998, has experienced noticeably slackened growth during 1990-98 as compared with 1980-1990 (EPWRF, 2002). ------
Swelling of informal sector self-employment
Apart
from the farm sector, the growing magnitude of non-farm informal sector
employment speaks of the way the workers are swelling the ranks of low
productivity, low income households. The 55th Round of the
National Sample Survey Organisation (NSSO) revealed non-farm employment of
160 million, during 1999-2000, of whom only 28 million were in the
organised sector; the unorganised labour force was thus placed at 132
million. This has been growing
at over 2.50 per cent per annum. The
NSSO’s survey of Informal Sector
in India, 1999-2000 (May 2001) has made an estimate of 44.41 million as the
number of non-agricultural enterprises, of which 25.07 million (or 56 per
cent) were located in rural areas and 19.34 million (44 per cent) in urban
areas. The total number of
non-agricultural workers estimated was 79.78 million. The survey had left
out a few activities. The
census survey of the small-scale industry (SSI) sector for 2001-02 has
captured only 10.52 million enterprises, of which only 1.38 million (or
13.1 per cent) were registered; 9.15 million or 87 per cent were not so
registered. The numbers of
employment in these SSI segments were 6.17 million and 18.77 million,
respectively, together constituting only 24.93 million (SIDO 2004).
Thus, over 110 million of workers are outside the pale of the SSI
sector – registered or unregistered, and eking out a living in low
productivity and low income jobs.
----
growing inequalities Above all, the final set of caution to be exercised in appreciating the development process so far emanates from the recognisedly large and growing inter-sectoral and inter-regional, even inter-class, inequalities in the Indian economy – much more in the recent period than in the past. There are very many direct and indirect evidences in this respect. The first and foremost of this inequality sub-set has been the widening disparity between agricultural and non-agricultural sectors or between rural and urban sectors. For instance, the share of ‘agriculture and allied activities’ in total nominal GDP, which has shown a secular decline, has fallen from 38.9 per cent in 1980-81 to 31.3 per cent in 1990-91 and further to 22.8 per cent in 2003-04 (EPWRF 2004:38 and CSO 2005), but at the same time, the dependence of people on the agricultural sector has hardly come down. As per the data generated in different rounds of nationwide field surveys conducted by the National Sample Survey Organisation (NSSO), the share of agriculture in total employment has remained at 59.8 per cent in 1999-2000 as against 64.8 per cent in 1993-94 and 68.4 per cent in 1983. The 2001 population census places the agricultural workforce (main and marginal) at 58.4 per cent for the country as a whole (Census 2001 Electronic data). As the average number of non-employed dependents is probably somewhat higher amongst farm households as compared with non-farm households, the resulting proportion of people dependent on agriculture should be still higher beyond 60 per cent in 1999-2000/2000-01 when the agricultural share in GDP was just 25-26 per cent (EPWRF 2004: 38). A detailed study on inter-state disparities in the growth of state domestic product (EPWRF 2002 and Shetty 2003) suggests growing inequalities amongst states. First, it was observed that Gini coefficients worked out for the distribution of average per capita gross SDP amongst Indian states have experienced steady uptrend from 1980-81 to 2000-01. Gini coefficients appear significantly lower for the 16 major states (possessing 90 percent of the population) than for all the 27 states and union territories, suggesting presence of wider disparities amongst smaller states and between smaller states and major ones. Secondly, the study showed an amazing constancy in the relative position of states in terms of their rankings based on per capita incomes during the period of two decades. Even the spread between the top five and bottom six has got widened during the period (Shetty 2003: 5195-5197).
Finally, a
study on inter-class inequality in Insofar as the above issue of growing inequality is concerned, all other important studies have come to similar conclusions, though they have adopted different sets of data and different methods of analysis (For instance, Kurian 2000, Cassen 2002, and Deaton and Dreze 2002). Need
for public policies to promote growth with equality
In view of
the above, there is cause for growing concern about the vast gap that
exists in satisfying the economic and social aspirations of the vast
masses of people in References Banerjee,
Abhijit (2001): Top Indian Incomes,
1922-2000 (incomplete version: first draft: December 2001), MIT, Cassen,
R.H (2002) ‘Well-Being in
the 1990s: Towards a Balance Sheet’, EPW,
Vol XXXVII, No 27, July 6. Chen,
Shaohua and Martin Ravallion (2004): ‘How Have the World’s Poorest
Fared Since the Early 1980s?’, The
World Bank Research Observer, Volume 19, Number 12,
Fall 2004, Oxford University Press. CSO
(2005a): Press Note of Quick
Estimates of National Income, Consumption Expenditure, Saving and Capital
Formation, 2003-04, January 31. -(2005b):
Press Note of Advance Estimates
National Income, 2004-05, February 7. Deaton,
Angus (2003): ‘Adjusted Indian Poverty Estimates for 1999-2000’, EPW, Vol XXXVIII, No 4, January 25-31. -
(2001):
‘Adjusted Indian Poverty Estimates for 1999-2000’, SARVEKSHANA,
Journal of National Sample Survey Organisation, Vol.XXIV, No.2&3, 85th
Issue, October 2000 – March 2001. Deaton,
Angus and Jean Dreze (2002): ‘Poverty and Inequality in EPWRF
(2004): National
Accounts Statistics of -
(2002): Annual Survey of Industries
1973-74 to 1997-98, April Government
of Krishna,
Anirudh, Mahesh Kapila, Sharad Pathak, Mahendra Porwal, Kiranpal Singh,
Virpal Singh (2004): ‘Falling into Poverty in Villages of Andhra
Pradesh: Why Poverty Avoidance Policies Are Needed’, EPW,
Vol XXXIX, No 29, July 17-23. Kurian,
N. J. (2000): ‘Widening Regional Disparities in Ray,
Ranjan and Geoffrey Lancaster (2005): ‘On Setting the Poverty Line Based
on Estimated Nutrient Prices: Condition of Socially Disadvantaged Groups
during the Reform Period’, EPW,
Vol XL, No 1, January 1. Shetty,
S L (2003): ‘Growth of SDP and Structural Changes in State Economies:
Interstate Comparisons’, EPW, Vol XXXVIII, No 49, December 6. Small
Industries Development Organisation, (SIDO) (2004):
Third All-India Census of
SSIs 2001-2002, Ministry of Small Scale Industries, Government of
India UNDP
(2003): Human Development Report
2003,
Highlights of Current Economic Scene AGRICULTURE Punjab Government has decided to supply power free of cost to those farmers, who have cleared their bills as on August 31, 2005, under the “Energy Bonus Scheme”. The scheme is implemented from September 1, 2005. However, the bills would be issued to the farmers to let them know, how much power they have consumed, but the amount payable would be nil. The free power would put an additional burden of Rs 439 crore on the state treasury. The kharif 2005-06 sowing is almost over and nearing a normal year production. The kharif sugarcane acreage stands at 41.37 lakh hectares so far as against 37.50 lakh hectares in 2004-2005. The kharif sugarcane acreage this year has gone up by 10.32 percent compared to last year as a result of higher purchasing prices announced by several state governments as well as higher statutory minimum prices set by the central government. The normal area under kharif sugarcane is 43 lakh hectares. According
to data released by the Solvent Extractors’ Association of India,
Oilmeals exports of Seasonal uncertainties and outbreak of bird flu have lead the poultry farming business to undergo many changes. Poultry farmers, in and around Mumbai, have taken to contract farming and hedging, in order to protect their business from losses. Almost all the open farms in Khopoli- Pune belt have now turned to contract farming. The open farms, which were owned and controlled by individual farmers, have been replaced by contract farming. Poultry companies provide the farmers with free chicks, medicines and feeding products. The only requirement from the farmers’ side is to provide the shed with good capacity. The companies have also set down some standards for the chicks that are bred, in terms of standard weight of the bird. INFRASTRUCTUREElectricity
The
union power secretary has stated that in order to support a 10 per cent
growth envisaged for the economy, capacity generation in the power sector
needed to grow at 8-9 per cent i.e. there is a need to generate 4 lakh Mw
of electricity by 2025 from the present 1.25 lakh Mw. The
western region, comprising Maharashtra, Gujarat, Madhya Pradesh,
Chhatisgarh and Goa, is reeling under a daily power shortage of 7045 Mw;
the daily demand has shot up to a level of 31448 Mw though actual
availability is just 24400 Mw. The region is expected to face a daily
shortfall of over 9000 Mw by October-November, mainly due to increasing
power demand in the rabi season and non availability of power across the
country to meet demand. Non-Conventional
Energy
Maharashtra State Power Generation Company plans an internal assessment survey to explore the option of nuclear power generation to meet the ever-increasing power demand in the state. Petroleum
and Petroleum Products
US government figures estimate hurricane Katrina to have closed down 91 per cent of daily crude production and 83 per cent of natural gas production from the Gulf of Mexico, which accounts for about a quarter of US oil and gas production. The government announced a rise in prices of petrol and diesel by Rs 3 a litre and Rs 2 a litre respectively, while leaving the prices of LPG and kerosene untouched. The government has announced a new subsidy sharing package to offset under-recoveries of oil marketing companies, projected at Rs 40000 crore for the current fiscal year; wherein the consumers will bear 12-13 per cent of the total under-recovery burden, the government around 36 per cent of the burden while the share of the oil industry, including upstream companies (ONGC, GAIL and OIL) and refineries (state owned and private) will be the largest of around 52 per cent. A
major fire has completely destroyed an exploration rig owned by ONGC in an
east At the Indian oil and gas review symposium, oil firms have put forth a dual price policy allowing them to sell fuel to two-wheelers at a lower price and to four-wheelers at the import parity price and also a differential pricing system for petroleum products in cities and towns against rural areas. Steel
Essar
Steel Limited has commenced operations at its 1.2 million tonne per annum
cold rolling complex in Hazira (Gujarat) resulting in an increase in
capacity from 2 million tonne (MT) to 3 MT and plans to increase its
production to 4.6 MT by the end of the year and 5.5 MT by September 2006.
This will make Essar Steel one of the largest integrated steel producers
in the country and the largest producer of flat steel. INDUSTRY Overall
According
to the Monthly Monitor of the Pharmaceuticals
The government plans the revival of three pharmaceutical and chemical units in the public sector, viz. Indian Drugs and Pharmaceutical Limited (cost estimated at Rs 200 crore), Hindustan Antibiotics Limited (cost estimated at Rs 136 crore) and Bengal Chemicals and Pharmaceuticals Limited (details still to be worked out). Good Manufacturing Practices (GMP) Norms, specified in Schedule M of Drugs and Cosmetics Act, that came into effect from July 1, if strictly enforced, would result in the shutting down of over 2000 small-scale drug companies. The government, in its new Drug Price Control Order, which is expected to be released by the first week of October, is considering a liberal price structure for R & D oriented companies; it plans a shift from a cost-based price control regime to a system of ceiling prices based on market prices of leading brands. SME
SME
Rating Agency of India Limited (Smera), promoted by SIDBI, Dun &
Bradstreet and a host of public and private sector banks has been set-up,
with an initial capital of Rs 5 crore and will rate 250 SMEs to begin
with. ConstructionA
CII survey proclaims a boom time for the construction sector and a
resultant ripple effect boosting demand in core sectors of cement and
steel. It suggests two issues that require attention are: 1) promotion of
a construction equipment bank to facilitate sharing, leasing and hiring of
costly equipment so as to avoid locking of capital funds and increased
projects costs and 2) need to standardise and develop a fair and equitable
contract document, providing incentives for timely completion of jobs and
disincentives for delays. Automobiles
Automobile
manufacturer, Skoda, has registered a 29 per cent jump in sales from 603
units in August 2004 to 775 units in August this year. It has sold over
21500 units in CORPORATE
SECTOR Thermax’ cogen division has announced an investment of Rs 400 crore for the construction of seven captive power and cogen projects. Marico limited has entered the baby care segment with the launch of baby massage oil, Sparsh. Maruti
Udyog limited will launch five new models over the next five years. Its
diesel engine plant at Manesar in Haryana, will begin to produce diesel
powered cars by the end of 2006. LG
has decided to set up a CDMA mobile phone plant in Pune. It will be an
extension to the existing GSM facility that the company already has in
Pune. Nagarjuna
construction company limited has secured Rs 177 crore order from Hyderabad
Metropolitan water supply and sewerage board, for execution of Krishna
drinking water supply project (phase-2). TISCO
has decided to invest Rs 100,000 crore to set up its plant in Jharkhand.
The plant will be 12 million tonne steel plant, which will be set up in
two phases of six million tonne each. Mahindra
British Telecom (MBT) has planned to invest Rs 250 crore to set up a new
technology centre at Pune. The MBT group has also decided to hire 1500
people in the next six months. Telecom
Dispute Settlement and Appellate Tribunal has advised Tata Teleservices to
pay Rs 450 crore as access deficit charge to BSNL. Essar
Steel has commissioned a 1.2 million tonne cold rolling mill. With this
mill the company has become the largest integrated steel manufacture at LG
Electronics has signed a Memorandum of Understanding with the Maharashtra
Government to invest Rs 400 crore to produce DVD writers. Satyam
computer services limited and Mainstay Partners LLC, a BANKING The
Reserve Bank of India (RBI) has decided to allow gold loans to domestic
jewellery manufacturers. Earlier, the loan was restricted to jewellery
exporters. The provision to expand the ambit of gold loans would, however,
be subject to the condition that any loan borrowing or other non-funded
commitments for providing loans to domestic jewellery manufacturers will
be taken into account for the purpose of overall ceiling, presently 25 per
cent of Tier I capital in respect of aggregate borrowing for non-export
purposes. Also, the loans extended to exporters of jewellery will continue
to be out of the 25 per cent ceiling. The tenor of the loan for the
domestic jewellery manufacturers will not exceed 90 days. The interest
charged to the borrowers will be linked to the international gold interest
rate. The RBI has also asked the nominated banks to subject the loan to
the capital adequacy norms. The nominated banks can extend loans to
domestic jewellery manufacturers by accepting stand-by letter of credit
(LC) or bank guarantee (BG) issued by their bankers in favour of the
nominated banks. The bank issuing the stand-by LC/BG need to ensure that
adequate margin is available. The
RBI has cancelled the certificate of registration issued to Indian
Finances Pvt. Ltd. Allahabad for carrying on the business of a non-banking
financial institution as the company has opted to exit from the business. In
a bid to keep a more stringent eye on non-banking financial companies (NBFCs)
the RBI has decided to make filing of financial returns a monthly affair
instead of the prevailing quarterly system. Further, the RBI has also
enhanced the ambit of the financial parameters currently reported, to
include additional information, particularly with respect to the
company’s capital market exposure. The directives are applicable for all
NBFCs having an assets size of Rs.100 crore. INFORMATION
TECHNOLOGY US-based
Product Lifecycle Management services and software provider, UGS Corp is
setting up a PLM centre at Pune to service offshore clients. UGS is
looking to Nasdaq-100
company, Cognizant Technology Solutions, will invest $76 million in
expanding its Tata Consultancy Services (TCS) and Infosys Technologies have together won outsourcing contract worth $400 million from Dutch bank ABN Amro. The contracts, the largest the two companies have ever won, are part of a $2.2 billion outsourcing deal signed by the bank. IBM, also part of the deal, gets the lion’s share of the business - $1.8 billion. While TCS and Infosys will handle application support and enhancement for ABN, IBM will look after the entire information technology infrastructure of the bank. The bank has also roped in Accenture and Patni as its preferred vendors along with IBM, Infosys and TCS for various future software development works. TCS gets a share of $260 million and Infosys gets $140 million worth of the business over the next 5 years. Sales
of PC including desktops and laptops crossed one million units in the
first quarter of 2005, according to Manufacturers Association of
Information Technology (MAIT). Sales of notebook PCs, servers and
peripherals also witnessed robust growth. The desktop market grossed 9.38
lakh units in the first quarter of the current fiscal, a growth of 5 per
cent over the corresponding quarter last year. It was primarily banks,
financial institutions, insurance companies and educational institutes
that provided momentum to sales growth of desktops. TELECOMIn
a move that could make calls dearer by as much as 75 per cent for many of
the 6 million fixed wireless subscribers, the Telecom Disputes Settlement
and Appellate Tribunal (TDSAT) described Tata Tele-Services Ltd. (TTSL)
Walky as akin to a wireless in local loop mobile (WLL-M) service. Other
telecom companies including Reliance Infocomm, MTNL, Shyam Telelink and
HFCL would have to fork out access deficit charge (ADC) to state-owned
BSNL, just like any other mobile service provider. BSNL, which has dragged
TDSAT to the tribunal, is expected to net Rs.450 crore as ADC from fixed
wireless telephone service providers: Rs.300 crore from TTSL, Rs.40 crore
from MTNL and the balance from others. If these companies choose to pass
on the ADC to subscribers, it could increase call rates from Rs.1.20 per
three minutes to Rs.2.10, a 75 per cent rise. Turning down the TTSL
petition, the TDSAT order said, Walky should not be regarded as anything
else but WLL-M. As per the licensing conditions, fixed wireless service
has to be provided within the subscriber premises, wherever it is not, it
has to be treated as WLL-M. INFLATIONThe annual point-to-point inflation rate based on wholesale price index has declined marginally to 3.01 per cent during the week ended August 27, 2005 from 3.08 per cent registered during the previous week. The inflation rate was at 8.74 per cent in the corresponding week last year. The WPI in the week under review has risen by 0.3 per cent to 194.9 from the previous week’s level of 194.3 (Base: 1993-94=100). The index of primary articles’ group has increased considerably by 0.9 per cent to 193.4 from the previous week’s level of 191.6, due to a substantial increase of 1.5 per cent in the price indices of food articles. The higher prices of food articles have been evident due to the higher prices of fish-inland, condiments, spices and bajra. The index of fuel, power, light and lubricants group has risen marginally to 304.1 from the previous week’s level of 304, mainly due to higher prices of aviation turbine fuel. The heavy-weighted manufactured products’ group constituting 63.7 per cent of total weight, has also increased by 0.2 per cent to 171 from 170.7 of the previous week’s level, mainly due to the higher price indices of ‘chemicals and chemicals products’ and ‘basic metals alloys and metal products’. The latest final index of WPI for the week ended July 2, 2005 has been revised upwards; as a result both, the absolute index and the implied inflation rate moved up to 193.7 and 4.14 per cent instead of the provisional levels of 193.6 and 4.09 per cent, respectively. The current contained rate of inflation, which is attributed mainly to the high base effect, is not an issue of concern. However, the recent hike in the prices of petroleum products by the government, which was effective from September 6th, may stimulate inflationary pressures on the economy in the near future, through its cascading effects on the related sectors like transport. LABOUR The Pension Fund Regulatory Development Authority (PFRDA) has released it’s draft investment norms for pension fund managers with regard to the New Pension System (NPS) to be tabled in the parliament. The following norms are included in the draft: 1.Allows investments in equity shares as long as they are part of an approved index. 2. Rated corporate debt can be invested in, but few investment opportunities exist. 3. Government debt securities will be the main investment of the safe risk-free schemes. 4.
Investments in micro finance companies that are guaranteed by the Reserve
Bank of The draft rules does not specify the number of pension fund managers, though the finance ministry is keen on having finite number of fund managers at six or nine. It doesn’t even specify the capital requirements for fund managers to enter into the pension business. Interestingly, the draft norms have strong consumer focus, while simultaneously trying to allay apprehensions of the left parties. FINANCIAL
MARKET Capital
Markets Primary
Market Sasken
Technologies has been listed on stock exchanges at a premium of 76 per
cent ay Rs 460 as against the issue price of Rs 260 per share. Idea
Cellular and Aircel Cellular are planning to enter the market with IPOs
for Rs 2,000 crore and Rs 6,000 crore, respectively. Secondary
Market The
BSE sensex crossed the psychologically important benchmark of 8,000 on
September 8 buoyed by strong FII inflows and easing of global oil prices;
the sensex ended the day at 8052.56 up by 105.78 points and NSE nifty rose
by 25.80 points to close at 2454.45 points. The journey of BSE sensex
between 7000 and 8000 mark took 55 trading sessions (79 days); this is the
third fastest four-digit rally of the index. The first one being between
3000 and 4000 mark from February 29, 1992 to March 30, 1992 in 30 days and
the next one took 45 days to move from 2000 points to 3000 points again in
1992. Over
the week, the BSE sensex and NSE nifty have gained 2.03 per cent and 1.64
per cent, respectively. The turnover in BSE rose by 23 per cent due to
block deals while the turnover on NSE increased by 5 per cent. All the
sectoral indices of BSE have registered gains during the week.
The
1000-point rally of the BSE sensex between June 21 and September 8 saw as
many as 390 scrips gaining over 100 per cent each. As many as 611 scrips
appreciated between 50 and 100 per cent, while 669 scrips appreciated
between 25 and 50 per cent. the major gainers in the current rally were
from T group with share prices of 161 companies in this group gaining over
100 per cent since June 21. The
number of companies with market capitalization over US $ 10 billion has
increased to 11 as of September this year as against 7 in the previous
year and three in 2003. With
the BSE sensex touching an all-time high, the price to earnings multiple
(P/E) stood at 14.64 times. On June 21, wherein the index touched 7000
mark, the P/E hovered around 12.54 times and at 6000 sensex level, the P/E
stood at 12.16 times.
Following
the BSE sensex touching 8000 mark, the Finance minister has cautioned
investors to take informed investment decisions and said further that the
rise in the indices is not a cause of concern and the stock market
movements have been orderly. Sebi
chairman has said that the regulator was trying to find out why a few
stocks with no trading record have suddenly started going up with a
scorching pace. He said that they were examining whether there are any
manipulations or unethical practices involved in recent movements. Between September 1 and 9, FIIs have been net buyers of equities to the extent of Rs 1,780 crore with purchases of Rs 7,366 crore and sales of Rs 5,586 crore. During the week under review, the highest net investment of Rs 543 crore has been made on September 9. Among
the Asian emerging markets, Mutual
funds have also been net buyers of equities of Rs 511 crore with purchase
of Rs 1,535 crore and sales of Rs 1,024 crore. The
Securities Appellate Tribunal (SAT) has set aside the Sebi’s order
passed in May 2005 banning UBS Securities Asia and its associates from
issuing offshore derivative instrument with underlying Indian securities
for one year. SAT has said that the regulations were not clear on the
“know-your-client” norms, which currently required only first-level
information about registered FII clients. AMFI
chairman, A P Kurian, has said that there will be no third party assurance
in the proposed capital guarantee product, which will try to ensure that
the capital is protected. Derivatives Despite
the bullishness witnessed in cash market, the derivatives market displayed
caution, as investors are skeptical about the future outlook of the
market. The daily derivatives turnover has hovered around a lower range of
Rs 10,818 crore to Rs 12,047 crore during the week as compared to a range
between Rs 12,269 crore and Rs 13,809 crore
in the previous week. The
discount on nifty futures has widened marginally, it indicates that a
section of investors were taking short positions in Nifty futures as the
cash market is touching new heights. Government
Securities Market Primary
Market The
RBI auctioned 5.69 per cent 2018 and 7.40 per cent 2035 for notified
amounts of Rs5,000 crore and Rs 3,000 crore, respectively, at cut-off
yields of 7.23 per cent for the 13-year stock and 7.40 per cent for the
30-year paper. The
government has issued 7 per cent oil companies government of Eleven
state governments have offered to sell 7.53 per cent 2015 state
development loan aggregating around Rs 2,900 crore on September 13 by way
of tap. The
yield set at the 91-day treasury bills auction has eased to 5.16 per cent
in this week as compared to 5.20 per cent in the previous week. Secondary
Market Liquidity
in the system continued to remain in surplus despite the outflows on
account of central loan floatation’s as indicated by the reverse repo
bids being tendered during the week amounting to
Rs 49,000 crore as compared to Rs 26,000 crore in the previous
week. Further as the prices were set below the market expectations and
international crude oil prices eased, the markets turned buoyant. The
weighted average YTM on 8.07 per cent 2017 has eased from 7.18 per cent on
September 2 to 7.11 per cent on September 9. Further, following the hike
in domestic fuel prices, the RBI deputy governor and
finance minister assured the market that they would keep the
inflation under check. Bond
Market The
RBI has issued detailed guidelines for debt restructuring mechanism for
small and medium enterprises with
outstanding upto Rs 10 crore. Foreign
Exchange Market RBI
is planning to introduce a new six-country trade-weighted real effective
exchange rate (REER) for the rupee which would include Chinese yuan and
Hongkong dollar. The
rupee-dollar exchange rate has appreciated from Rs43.95 on September 2 to
Rs 43.81 on September 9. With
the improvement in cash dollar situation, the six-month annualised forward
premia has increased from 0.45 per cent on September 2 to 0.58 per cent on
September 9. Commodities
Futures derivatives NCDEX
and the International Petroleum Exchange (IPE), The
NCDEX AGRI index during the week has fallen from 1263 on September 3 to
1238 on September 10. Multi
Commodity Exchange (MCX) is planning to launch T+7 or weekly contracts in
all its agricultural commodities. CREDIT
RATING Care
has assigned ‘AA’ rating to the proposed tier-II capital bond issue of
UCO Bank of Rs. 150 crore (including
a greenshoe option of Rs. 50 crore), while it has also reaffirmed the
‘AA’ rating assigned to the bank’s outstanding Tier-II capital bond
aggregating Rs. 1000 crore. The rating draws strength from the government
of Care
has assigned ‘A’ rating to the proposed long-term borrowing programme
of Rs. 100 crore and ‘PR1+’ rating to the ongoing commercial paper
programme upto Rs. 150 crore of CESC. The rating takes into account CESC
Ltd’s strong transmission and distribution network, satisfactory Plant
Load Factor and backup of West Bengal State Electricity Board (WBSEB). The
rating also factors in the improving profitability and substantial cash
accruals earned by the company during the last few years, enabling
prepayment of loans apart from substantial loan repayments. Care
has assigned ‘A+’ rating to Emami Paper Mills Ltd.’s (EPML) proposed
term borrowing/ non-convertible debenture issue aggregating Rs. 12.5 crore.
The rating draws strength from, inter alia, EPML’s satisfactory track
record, experience of promoters, group support, professional management of
the company, EPML’s leading position among the paper manufacturers in
Eastern India, good clientele and positive outlook of the paper industry. Care
has retained the ‘PR1+’ rating assigned to the ongoing commercial
paper programme of Simplex Concrete Piles (India) Limited for an amount of
Rs. 100 crore. The rating factors in, amongst others, the long and
satisfactory track record of the company for over eight decades, proven
engineering capabilities & strong technical tie-ups, leadership in
concrete piling, healthy order book position with diversified project mix,
improving profitability and financial position. The rating also draws
strength from the proposed equity infusion induced by Governments thrust
on infrastructure creation vis-ŕ-vis favourable outlook for the industry. Icra
has assigned an ‘A1+’ rating to the Rs. 100 million commercial paper
programme of Saraswati Sugar Mills Limited (SSML); a wholly owned
subsidiary of the Saraswati Industrial Syndicate Limited. The rating takes
into account the improved profitability and cash accruals of the
consolidated SISL following an upturn in both its sugar and engineering
businesses, its moderate gearing levels and availability of adequate bank
limits to fund the working capital intensive sugar operations. Icra
has assigned an ‘LAA+’ rating to the Rs. 0.50 billion long-term
subordinate bonds programme of Kotak Mahindra Bank Limited (KMBL), while
it has also reaffirmed the ‘LAA+’rating to the outstanding Rs. 1.50
billion long-term subordinate bonds programme of KMBL. The rating factors
KMBL’s strong position in the commercial vehicle finance and improving
franchise in the other retail asset segments such as personal loans and
mortgage finance. The rating also takes into account the improving
financial performance and the ability of the bank to maintain its asset
quality with negligible losses and delinquencies despite its greater focus
on the non-salaried individual segment. Crisil
has reaffirmed the ‘AAA/Stable’ and ‘FAAA/Stable’ rating assigned
to Canbank Factors Limited’s (CFL) Rs. 1.5 billion short-term debt
programme and Rs. 250 million non-convertible debenture programme,
respectively. The ratings on CFL continue to be based on Canara Bank's
majority ownership of the company and on CFL's strong market position in
the domestic factoring business. Crisil
has placed the rating assigned to Jindal Saw Limited's (JSL) fixed deposit
programme on 'Rating watch with Positive implications'. This is in
anticipation of a reduction in the company's outstanding debt, following
its upcoming GDR issue of US$ 75 million. The rating continues to reflect
JSL’s leadership in the submerged arc-welded (saw) pipes industry,
healthy growth prospects of end-user segments and a strong order book
position. PUBLIC
FINANCE The government has hiked the prices of petrol and diesel on September 06 by Rs. 3 a litre and Rs. 2 a litre, respectively. While the prices of cooking gas and kerosene have been left unchanged. The union Cabinet has also decided that the government will take over a part of the under-recoveries on its books for which bonds of Rs. 10,000-12,000 crore would be issued to the oil companies. The government has provided Rs. 3,750 crore of oil subsidy during the current financial year. Central Board of Direct Taxes has been directed by the Finance Minister to study the proposal wherein all assessees who have declared a taxable income that is twice or more of the income filed in the previous year will be exempted from scrutiny. The proposal, which is mooted with the objective of increasing voluntary tax compliance and deepening the tax base, would be announced in the next budget, if approved. As per Controller General of Accounts data, tax collection through the fringe benefit tax (FBT) has been only Rs. 641 crore up to August 31. The government has collected Rs. 60 crore through the banking cash transaction tax (BCC) and Rs. 770 crore by the way of securities transaction tax (STET) up to August 31. The overall direct tax collection of Rs. 28,600 crore, inclusive of FBT, BCC and STET, has registered a 35 per cent growth during the first five months of the current fiscal year over the previous year’s collection of Rs. 21,200 crore. Income tax collection has increased to Rs. 13,822 crore, a raise of 8.84 per cent, compared with Rs. 12,700 crore last year. Corporation tax collection during April-August was Rs. 13,258 crore, an increase of 58 per cent, compared to Rs. 8,400 crore during the same period last year. A
lower advance tax remittances from the corporate assessees, despite the
industry showing a positive growth for the first quarter in Andhra Pradesh
has prompted the Income Tax Department to thoroughly analyse the balance
sheets of all the corporate assessees. The department had reported a 37
per cent growth in tax collections at Rs. 788 crore for the first quarter
ending June, as against Rs. 574 crore in the corresponding period last
year. The Income Tax department has already initiated raids in case of
gold merchants and big builders and about 15 big cases are in advance
stage of inquiry. The department has fixed a target of Rs. 6,400 crore in
tax collections for the year 2005-06, which is a 33 per cent growth as
against Rs. 4,800 crore collected last year.
The
government has cleared 10 proposals to set up SEZs including Reliance
Industries zone at Planning commission is in favour of foreign direct investment in retail market as it would strengthen the domestic supply chain and create more employment. The government is planning to allow foreign currency non-resident accounts and non-resident external accounts to be maintained with overseas banking units in SEZs. According
to an Assocham Eco Pulse (AEP) study, foreign investors prefer to go to
rich Indian states with higher GDP income and maximum number of higher
educational institutes. Out of the 10 states led by
*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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