Current Economic Statistics and Review For the Week 
Ended October 29, 2005 (44^rh Weekly Report of 2005)

I

Theme of the week:

Mid-Term Review of Annual Credit and Monetary Policy Statement

The annual credit and monetary policy statements of the Reserve Bank of India (RBI) and their follow-up in the form of mid-reviews have come to occupy an important place in the scheme of macro-economic policy discourses in India . The obvious reason for it has been the dominance that the banking and financial sector has acquired in the post-reform period. With the decontrol of the industrial sector, with the reduction of the role of the public sector, and with the fiscal policy taking a back seat in the area of macro-economic policies, the central banks role in macro-economic management has increased rather tremendously. Apart from the banking and financial system mobilising savings and dispensing credit, the entire funds transfer and payment system has acquired a modern and sophisticated outlook. Significant structural, institutional and instrumental reforms have been the mainstay of the liberalisation process in the financial sector. During the past decade or so, each of the annual or mid-term policy statements have been taking steps forward in bringing about these reforms. The latest policy statement also has sought to make such an advance, apart from undertaking monetary policy measures and measures for improved credit delivery. The latter measures are undertaken against the backdrop of evolving changes in the macroeconomic scene.

I

The Macro Economic Scene

The relatively bright prospects for sustained economic growth forms the backdrop for the latest mid-term credit and monetary policy review. First, with improved south-west monsoon after June, the area coverage reported under various crops has shown an improvement and hence the kharif output may register an improvement.  Even the outlook for rabi output has brightened with enhanced precipitation and improved water storage levels.  Second, for once in seven to eight years, there is a distinct sign of improvement in industrial investment. This trend of rising investment was seen in selective sectors in 2004-05 but in 2005-06 so far the trend seems to have been more widespread; petroleum, coal, power, cotton textiles, drugs and pharmaceuticals, iron and steel, other metal and metal products, cement, automobiles and automobile spares and other engineering products, are all showing signs of receiving additional investment. There are any number of indicators which suggest signs of improved investment. Apart from a surge in non-food credit growth, internal resources available for investment have expanded with improved profitability of the corporate sector which has also been facilitated by reduced interest costs.  Domestic production and imports of capital goods have risen sharply.  Various business expectations surveys including the RBI’s business outlook survey, have presented an optimistic picture of the investment climate.  Thus, based on the overall assessment of a pick-up in agricultural output and further momentum in industrial and services sectors, the overall GDP growth in 2005-06 has been placed higher at 7.0-7.5 per cent as against 7.0 per cent projected earlier.

Emerging risks and concerns, rather overplayed

            Even though growth prospects appear bright, the policy statement has rightly highlighted a number of concerns on the macro-economic scene. First, infrastructure constraints appear as a threat to the growth process.  Second, in the expansion of non-food credit, while it has been supportive of a relatively broadbased industrial growth, the credit quality has nevertheless been poor in that the shares of housing and real estate in the total credit have been rising and are high.

            But, the three other concerns, which have constituted the most decisive  issues against which the latest credit policy has been formulated and which have been repeatedly emphasised in the policy statement, are: petroleum price increases and the partial pass-through effected so far; the potential inflationary pressures in the domestic economy; and the uncertainties in the international economic scene including the firming up of interest rates and the tightening or withdrawal of the accommodative stance.  In all of them, the primary source of the trouble is the threat from petroleum prices.

            While the concerns are valid, they have been apparently overplayed, and in the process, the risk of adversely affecting industrial recovery is equally potent.  First, in respect of many aspects of global uncertainties, it is necessary to insulate the domestic economy from them, for otherwise the domestic economy will have limited capability to absorb shocks of cyclical policy changes when business cycles of advanced economies are less relevant to the long-term development process of a developing economy.  Second, what appears to be more overplayed is the subject of domestic inflation.  Recognisedly, the current inflation rate of about 4 per cent is not high.  It is true that the pass-through effects of petroleum price increases have been only partially accommodated so far, but as against that the core annual inflation rate is only around 2.5 per cent and hence there is still considerable leeway on the inflation front so that the policy measures initiated on account of inflation do not harm the development processes.  Finally, the same argument applies to the concerns expressed regarding the possible effects of petroleum price increases.  It may be that the crude price rise so far occurred is of a permanent nature, but such price rise has also one-time effect.  Such one-time increase in inflation rate gets absorbed in the system and there is always scope for containing the inflation rate at that level.

            Overall, the fears of inflation and the consequences of rise in interest rates in America , seem to have induced the RBI to adopt a hardening posture on the domestic interest rates.  Liquidity conditions do not favour the uptrend in interest rates and yet the market rates have gone up by about 2 percentage points over the past two years.  The domestic money market has been placing tremendous pressure on the authorities to raise rates of interest – a situation in which the treasury market operators get increased opportunities to indulge in layers of money market transactions.

II

Monetary Measures

            The singular measure raising the RBI’s fixed reverse repo rate by 25 basis points to 5.25 per cent, has confirmed the general perception that the RBI has fallen in line with the market pressures.  Also, with the repo rate being linked to the reverse repo rate, the fixed repo rate also stands increased to 6.25 per cent.  Subsequent to the policy announcement, there have been further indications of increases in short-term as well as long-term interest rates.  Fortunately, apparently with finance ministry pressures, the Bank rate has been kept unchanged.

            While the signals imparted on higher interest rates may have some adverse consequences eventually on the long-term interest rate structure, some of the other measures proposed may produce beneficial effects.  The first one concerns the operation of the benchmark prime lending rate (BPLR).  Recognising that the banks adopt an extremely iniquitous system of BPLR with about 70 per cent of bank loans being rendered at sub-BPLRs, the RBI has suggested a review of the system with a view to putting in place a new system of “pricing of credit through a well-structured and segment-wise analysis of costs at various stages of intermediation in the whole credit cycle”.  The Indian Bank Association (IBA) has been asked to undertake this review and issue transport guidelines for appropriate pricing of credit.

            Two other reforms proposed are aimed at putting an end to the only two regulated interest rates, namely, (i) the interest rate on saving deposit rates, and (ii) lending rates on small loans up to Rs 2 lakh.  There have been demands for liberalising small loan rates on the ground that banks are reluctant to provide credit to small borrowers because such loans are uneconomic and also carry relatively high risk.  But, this is not borne out of facts.  Loan delinquencies as much in big loan accounts as in small loan accounts.  The IBA will have to have a detailed look at risk-return profiles of different categories of borrowers before deciding on appropriate guidelines on the operation of the BPLR system.  This system is also relevant for small borrowal accounts as the prescribed rate for such accounts is BPLR or less in respect of each bank.  In reality what seems to have happened is that banks have generally charged sub-BPLRs for a large proportion of big-size accounts, while charging BPLRs for small accounts.

III

Improvements in Credit Delivery Arrangements

            The latest monetary policy statement has addressed the details of sectoral credit delivery issues.  First, considerable advance has taken place in the quicker delivery of bank credit for agriculture.  The target of Rs 55,616 crore (a rise of 30 per cent) proposed for farm credit during 2004-05 has been crossed and a total credit of Rs 65,218 crore has been rendered in the year. PSU banks are required to formulate special agricultural credit plans (SACPs) in order to achieve distinct improvement in the flow of credit to agriculture.

            Second, a large policy package has been announced for stepping up credit to small and medium enterprises (SMEs).  A major definitional clarity issued concerns the SSI and medium enterprises, with those in excess of SSI investment categories and up to Rs 10 crore, would be treated as medium enterprises but only SSI financing would be included as priority sector lending.

            Third, the system of micro-finance would be given considerable impetus.  By end- July 2005, as many as 16,53,047 SHGs were linked to banks and a total amount of Rs 7,063 crore was the credit flow.

            Fourth, a major advance has been proposed in the system of agency banking.  Banks have been asked to use the core competencies of non-banking financial companies (NBFCs) in extending credit to small borrowers,

            Finally, based on an internal group report, a number of proposals have been made to restructure and improve the working of the Regional Rural Banks (RRBs).  Apart from merger and amalgamation of RRBs, change of sponsor banks, and strengthening of balance sheets as well as regulatory and supervisory systems have been proposed.

Highlights of  Current Economic Scene

AGRICULTURE     

The Mid-term Monetary review by the Reserve Bank of India for 2005-06 has revealed that agricultural sector growth has been sluggish. It has stood on an average, at just 1.5 per cent a year in the first three years of the current plan, against the target growth rate of 4 per cent on an average per year. The contribution of agriculture to the country’s total GDP has also dropped to 22 per cent but the population dependent on agriculture has remained at the same level of 65 per cent indicating the growing gap between rural India and urban areas.

The government has planed to set up of a Special Purpose Tea Fund to revive tea industry in the country through a massive programme of rejuvenation and replantation. Over 2 lakh hectares, which fall in the vulnerable category of low yielding areas, are chosen for this purpose. The strategy has been devised to increase the competitiveness of the tea industry, overcoming the obstacles like consistent depression in prices in both the domestic and international markets, rising cost of production, low productivity due to old age of tea bushes and sluggish growth in domestic demand for tea.    

The government has announced subsidy on exports of pepper from India . A total subsidy of Rs 7 per kg for consignment up to 20,000 tonne has been sanctioned and will be given on first-come-first-serve basis. The subsidy has been fixed at Rs 5 per kg for international freight and Rs 2 per kg for internal transport, totaling to Rs 7 per kg. The subsidy has been applicable for value-added pepper products, provided value addition is done exclusively from domestically produced pepper. The scheme is valid upto end of fiscal year 2005-06.

Oversupply of Soya and cottonseeds, coupled with lack of demand, pushed down edible oil prices by Rs 15-20 during week ended on October 29, 2005. Global bird flu scare and huge mustard arrivals have also contributed to this decline. States like Madhya Pradesh, Maharashtra have witnessed almost double increase in the arrivals of soya seeds. Soyoil is also seen flooding in the market, with the imports rising over 100 per cent on year.

With arrival 500 tonnes of onions from Pakistan , wholesale prices of onions have fallen at Lasalgaon mandi. Fresh supply of onions from southern part of the country, although in small quantities, is further expected to reduce and stabilize the price. In addition to this, National Agricultural Marketing Federation has placed import orders for 700 metric tonnes and 2000 metric tonnes from Pakistan and China , respectively, to curb the price hike of onions.

Government of Maharashtra has introduced the concept of agricultural-tourism for the first time to promote tourism industry. One agri-tourism unit is almost set to operate in Shahada in Nadurbar district, while the other has been planned to set up at Alibagh in Raigad district. Agri-tourism package comprises of living with farmers, eating village food, ploughing with oxen apart from horse rides, bullock cart rides, fishing, enjoying folk music and dance performances. Agri Tourism Development Corporation is planning to set up at least 22 agri-tourism units in Satara, Sangli, Aurangabad , Kolhapur and Ahmednagar districts.

INDUSTRY

Pharmaceuticals

The government of Andhra Pradesh is setting up an exclusive pharma park, to be called Jawaharlal Nehru Pharma City (JNPC), near Vishakhapatnam under public-private partnership involving Andhra Pradesh Industrial Infrastructure Corporation Limited (APIIC) and Ramky Pharma City India (RPC). The park plans to meet the increasing demands of bulk drug manufacturers regarding environmental issues; out of the total cost of Rs 313 crore Rs 150 crore have been invested in setting up of infrastructure for effluent and solid waste treatment.

INFRASTRUCTURE

Index of Infrastructure Industries

The growth of the six core infrastructure industries has slipped to 4.4 per cent during the first six months of 2005-06 against a 5.3 per cent rise in the same period last year. For the stand-alone month of September, the infrastructure index rose by 1.8 per cent as against 0.2 per cent in September 2004.

Electricity/Power

Electricity generation has dropped by 0.6 per cent in September 2005 as against a growth of 7.6 per cent in September 2004.

The power ministry has planned for further capacity addition of 11,500 megawatts by 10 independent power producers (IIPs), in order to meet the increasing demand for power by states.

Petroleum and Petroleum Products

Crude petroleum production has fallen by 7.3 per cent in September 2005 as against 2.5 per cent growth in the same month previous year; while output of petroleum products has fallen by 0.3 per cent in September 2005 same as that in the corresponding month of 2004.

Steel

The finished steel sector has grown by 5.9 per cent in September 2005 against a negative growth of 14.1 per cent in September 2004.

Coal

Coal production has grown by 4.6 per cent in September 2005, slower than the 9.3 per cent growth in the corresponding month of the last fiscal year.

Cement

The growth in cement production has slowed down from 10 per cent in September 2004 to 4.9 per cent in September 2005.

Cement prices, currently around Rs 155-165 per a 50 kg bag, are expected to rise by Rs 5-7 per bag on the back of better demand in both domestic and overseas market as well as rising cost of raw materials including limestone and coal. The average price of cement in India .

Railways

As a result of successive deliberations between the rail and coal ministries, the railways are planning to set up an exclusive coal freight corridor to cater to the projected demand from the sector for linking North-South and East-West parts of the country, connecting most coal producing areas with consumption centres.

Roads

While golden quadrilateral (GQ), the first phase of national highway development programme (NHDP), saw an upsurge of joint ventures between Indian and overseas companies; foreign participation has waned for north-south-east-west (NSEW), the second phase of NHDP. Out of the total 128 projects under GQ, 32 were joint venture with foreign collaborations and 8 solo projects by foreign companies. The corresponding figures for the total of 197 NSEW projects are 8 joint ventures and 6 solo projects.

INFLATION

The annual point-to-point inflation rate based on wholesale price index has gone up to 4.71 per cent during the week ended October 15, 2005 from 4.62 per cent registered during the previous week. The inflation rate was at 7.21 per cent in the corresponding week last year.

The WPI in the week under review has risen by 0.3 per cent to 197.7 from the previous week’s level of 197.2 (Base: 1993-94=100). The index of primary articles’ group has increased considerably by 1 per cent to 196.9 from the previous week’s level of 195, due to an increase in the price indices of food articles, non-food articles and especially minerals by 22.7 per cent to 348.2 from 283.7. The higher prices of minerals have been evident due to the higher prices of vermiculite, iron ore, barytes and magnesite. The index of ‘fuel, power, light and lubricants’ group has remained unchanged at the previous week’s level of 315.  The index of manufactured products’ group constituting the maximum of 63.7 per cent of total weight, has risen by 0.1 per cent to 171.8 from 171.6 of the previous week’s level, primarily due to increase in the prices of ‘beverages, tobacco and tobacco products’, textiles, ‘non-metallic mineral products’, base metals and ‘machinery and machine tools’.

The latest final index of WPI for the week ended August 20, 2005 has been revised upwards; as a result both, the absolute index and the implied inflation rate moved up to 195.5 and 3.71 per cent instead of the provisional levels of 194.3 and 3.08 per cent, respectively.

The high base effect has been at the forefront in bringing down the headline inflation rates in the past couple of months. However, the rate of inflation has now gradually started firming up due to the reducing impact of high base effect coupled with rising prices of food articles and minerals under the group ‘Primary articles’. The hike in the prices of petroleum products by the government, which has been effective from September 6th, and its consequent spiraling effects on the related sectors like transport, has also been partly responsible in stimulating inflationary pressures on the economy.

BANKING

The RBI now has permitted banks to incorporate cheque truncation facilities in their ATMs. This will greatly reduce the settlement time for inter-city cheques, and is expected to increase cheque-based transactions by 15-20 per cent instantly on ATMs. With cheque truncation solutions incorporated in an ATM, the customer has to merely insert just the cheque leaf into a slot and the machine’s imaging system will transmit the image either to the presenting bank, or directly to the drawee bank, and the transaction will be concluded instantly.

Mangalore-based Corporation Bank has reported a net profit of Rs.105.6 crore for the second quarter ended September 30, 2005, thus registering an increase of 286 per cent from 27.39 crore in the same quarter of the previous financial year. The bank has attributed this result to robust growth in interest earning and other income.

In a move to enhance the credit flow to the weaker section of the textile industry, the RBI has allowed the banks to issue bank guarantees or standby letters of credit, in respect of external commercial borrowings (ECBs) raised by textile companies.

Cosmos Co-operative Bank and Shamrao Vithal Co-operative Bank will be among the scheduled urban co-operative banks (UCBs) to apply for licence to conduct foreign exchange business, with the RBI allowing UCBs to participate in the forex market. Currently, Saraswat Co-op Bank and Bombay Mercantile Co-op Bank are the only two scheduled UCBs authorised to conduct forex business. These banks were granted the licences in the mid-1970s.

PUBLIC FINANCE

The tax department is introducing fully online tax information network (TIN). The government has already been mandated to move towards paper-less filing of tax deduction at source from this year but this has been delayed as TIN as yet has not been operational. Presently both hard copies and soft copies are to be filed. The plan intended is to do away with hard copy of TDS (tax deducted at source) while filing returns. The process is to work out a paperless filing of income tax returns. Once, TIN is implemented it would be difficult to hide income from other sources. Thus, with the new system in place, the salaried class may be exempted from filing income-tax returns from next year provided they had income from other sources.

The Finance Minister said that the income-tax department had gathered sufficient information on large spenders and it intends to use it for tracking tax evaders. The information so far revealed is that 125,511 entities  (individuals and firms) have transacted or made cash deposits of Rs 10 lakh or more in the last financial year. Similarly, 323,563 entities had made credit card payment aggregating over Rs 2 lakh  or more during the year. Also, 400,966 entities have purchased mutual fund units worth Rs 2 lakh  or more in the last financial year. The minister is also of the view that information on large scale transactions, high-value property sales and investments in RBI Bonds would also help in tracking tax evaders.

The Finance Minister had mentioned that those with mobile bill in excess of Rs 1,000 a month would be sent an SMS to file their tax returns before October 31.

As government plans to stick to the timetable of aligning tariffs to the Asean level, peak customs duty would be reduced by another 5 per cent in the next budget. A reduction is necessary as the government has signed Free Trade Agreement (FTA) with several Asean nations. Since, it would be discriminatory for non-signatory countries, the move has been adopted to relax custom duty.

The proposed service tax on the sale of advertising space in newspaper has been requested to be reduced by the Indian Newspaper Society.

 It is likely that BJP ruled states would implement the Value Added Tax (VAT) after the completion of Bihar elections.

FINANCIAL  MARKET

Capital Markets

Primary Market

Prithvi Information Solutions Ltd offered 50 lakh shares of Rs 10 each in a price range of Rs 250 – Rs 270 per share. The issue was open for subscriptions between October 25 and 28. The issue has been oversubscribed with the highest bids received in the non-institutional category. 

Secondary Market

The BSE Sensex corrected for the fourth week in a row, losing 382.14 points, closing 7685.64. The trend continued for the whole month of October, when it lost a whopping 947.37 points. The fall can be attributed to a number of factors like subdued to weak global markets, FIIs offloading in the equity segment and disappointing second quarter results from some of the major companies like SBI     and  Bharati Televentures.

The Sensex was volatile for the major part of the week. It lost 148.15 points on Monday but gained 70.94 points on Tuesday on the back of the announcement of a favourable credit policy. On Wednesday, it was down by 17.05 points, while on Thursday it nose-dived 176.20 points due to disappointing second quarter results from SBI and Bharti Televentures and also due to the expiry of October 2005 derivatives contracts. On Friday again, there was a dip by 112 points.

For the whole month of October, FIIs have been net sellers of equities to the extent of Rs 3476.20 crore with sales of Rs 29100.70 crore and purchases of Rs 25624.50 crore. They have been net sellers of debt also to the extent of Rs873.50 crore with sales of Rs 1494.50 crore and purchases of Rs 621.10 crore.

While mutual funds have been net buyers of equities to the extent of Rs 2502.59 crore with purchases of Rs 8251.57 crore and sales of Rs 5748.98 crore. In case of debt securities also, they have been net buyers to the extent of Rs 2003.88 crore with purchases of Rs 7156.26 crore and sales of Rs 5152.38 crore.

Bank stocks gained on Tuesday as the RBI kept the bank rate unchanged. RBI Governor YV Reddy reviewed the Credit Policy on Tuesday. The central bank brought about a few changes in the credit policy by hiking the reverse repo rate by 25 bps to 5.25 per cent. The repo rate was also raised by 25 bps to 6.25 per cent. It had, however, kept the bank rate and CRR unchanged.

Derivatives

The derivatives segment of NSE witnessed a lot of action amid expiry of October contracts and rollover to November contracts. The daily trading volume was high in the range of Rs 16,879 crore to RS 32,810 crore.  However, the rollover has been at a lower level which indicates cautious sentiments among the market participants.

Government Securities Market

Primary Market

The yield on 91-day treasury bills increased during the week to 5.57 per cent from 5.53 per cent set in the previous week.

Secondary Market

As a proactive measure to combat inflationary expectations against the growth momentum, the RBI in its mid-term review of monetary and credit policy hiked both the reverse repo rate and repo rate by 25 basis points each. 

Inflation figures increased marginally to 4.71 per cent for the week ended October 15 from 4.62 per cent in the previous week. The rise was largely due to increase in the prices of essential food, non-food, minerals and manufacturing items. Despite the rate hike and rise in inflation rate, the 10-year benchmark paper closed the week at 7.08 per cent down by 7 basis points from last weeks closing of 7.15 per cent. Also, the yield on 8.07 per cent 2017 eased from 7.30 per cent on October 21 to 7.17 per cent on October 28.

Foreign Exchange Market

The rupee gained some strength on the rate hike by RBI, but slid again at the end of the week due to the month-end demand for dollars. The week began with the rupee dollar exchange rate ruling at Rs 45.14 on October 24, it rose to Rs 44.94 on October 26 following the announcement of the credit policy. But as the month-end demand for dollars intensified, the rupee fell back to Rs 45.09 on Friday, October 28.

The six-month forward premia eased lower as the interest rate differential changed with the firming up of domestic interest rate from 0.50 per cent on October 21 to 0.40 per cent on October 28.

Commodities Futures

MCX has announced constitution of an advisory board for National Spot Exchange for Agricultural produce(NSEAP) in order to empower the producers to decide when to sell their produce. 

MCX has signed a licensing agreement with the London Metal Exchange (LME) that will allow MCX to use LME prices as the basis for settling MKCX futures contracts.

NCDEX has launched the furnace oil futures contracts in association with the oil marketing company Bharat petroleum.

CREDIT  RATINGS

Crisil has reaffirmed the ‘AAA (SO)’ rating assigned to pass through certificates aggregating to Rs/ 285.16 million issued under the securitisation programme of Centurion Bank. Similarly, the agency has also reaffirmed the ‘AAA (SO)’ rating assigned to Centurion Bank’s another series of Rs. 553.63 million worth pass through certificates.

Crisil has assigned a provisional rating of ‘P1+(SO) to pass through certificates (PTCs) backed by loan receivables from Balkrishna Industries Limited (BIL), originated by Rabo India Finance Private Limited (RIFPL). RIFPL has transferred the loan to the trust "BIL RIF 2005" and has appointed IL&FS Trust Company Ltd. as the trustee. The PTCs have been issued by the trust.

Crisil has reaffirmed the P1+ rating assigned to Atlas COPCO ( India ) Limited’s Rs. 90 million commercial paper programme. The assigned rating reflects the company's leadership position in the domestic compressor and construction and mining equipment, segments.

Crisil has reaffirmed the FA-/Stable rating assigned to Ecoplast Limited’s fixed deposit programme. The rating continues to reflect the company’s strong product development capabilities as well as its long relationship with its key customers in the FMCG segment. The rating also draws comfort from the company’s demonstrated ability to shift sales between domestic and export market to take advantage of the prevailing market conditions.

Icra has withdrawn ‘LBB (SO)’ rating assigned to the RS. 100 crore non-convertible debenture programme of Jindal Steel Limited at the request of the company since there is no amount outstanding against the rated instrument at present. Similarly, the agency has also withdrawn the ‘A1+’ rating assigned to the Rs.100 crore short-term debt programme of The Bombay Dyeing & Manufacturing Company Limited at the request of the company since there is no outstanding instrument against this rating.

CORPORATE SECTOR

Sundaram Finance has signed an agreement with BNP Paribas Asset management to sell 49.9 per cent equity in its wholly-owned asset management company, Sundaram Asset Management Company for Rs 100.4 crore.

Reliance Capital has planned to buy 14.8 per cent shares in the Kinetic Engineering Limited for Rs 12.7 crore.

Nicholas Piramal India has signed an acquisition deal with UK-based Avecia Pharmaceuticals for nearly Rs 76 crore.

C K Birla group flagship, Hindustan Motors Limited, is planning to make an entry into mini trucks segment. This segment is now ruled by Tata Motors, Mahindra & Mahindra and Force Motors.

Dabur India Limited has declared its results for July-September 2005-06, by 10 per cent increase in its net sales to Rs 332.9 crore. Net profit has risen by 21 per cent to Rs 52.1 crore for the same quarter.

Elder Pharma has posted an increase of 19 per cent in its net profit to Rs 7.3 crore for the quarter ended September 2005. The company’s net profit for the half year for the financial year 2005, has stood at 14.3 crore from Rs 11.5 crore for the same period previous year.

Anil Ambani controlled Reliance Capital has posted around six fold rise (527 per cent) in its net profit to Rs 157 crore for July-September 2005.

Godrej Industries Limited has reported a nominal (3.5 per cent) increase in its net sales to Rs 197 crore for the quarter ended September 2005, however, net profit has declined by 66 per cent to Rs 12.6 crore.

JB Chemicals and Pharmaceuticals has recorded a 11.7 per cent increase in its net profits to Rs 24.5 crore for July-September 2005.

Proctor and Gamble Hygiene and Healthcare has posted a net profit of Rs 25.8 crore for the quarter ended September 2005, down 12.8 per cent for the corresponding quarter previous year.

Cement major Birla Corporation reported a 35.7 per cent rise in the net profit at Rs 18.2 crore for the second quarter of 2005. 

Rajesh Exports has reported a whooping 121 per cent jump in its net profit at     Rs 16.9 crore for the quarter ended September 2005 against Rs 7.7 crore for the corresponding period previous year.

Century Textiles and Industries Limited has registered a 48.1 per cent decrease in its net profit at Rs 7.4 crore for the second quarter ended 2005.

Reliance group company, Indian Petrochemicals Corporation Limited, has recorded a 120 per cent jump in the net profit at Rs 303 crore for its second quarter ended September 2005.

Tata Motors has posted net profit of Rs 337.9 crore for the quarter ended September 2005, a 9.3 per cent growth compared to Rs 309.2 crore registered in the same quarter previous year. For the first half of the financial year 2005, the company has recorded 14.6 per cent growth in its net profit to Rs 610.5 crore.

Reliance Industries has announced a 42 per cent growth in net profit at Rs 2,481 crore for July-September 2005.

Bharti Tele-Ventures has reported a 43 per cent jump in the net profit to Rs 521 crore for the second quarter of 2005.

India ’s biggest tobacco maker ITC Limited’s net profit has risen by 17 per cent on strong sales of cigarettes and fast growth of its paperboards and other consumer goods business.

Colgate Palmolive ( India ) has posted a 10 per cent rise in its net sales at Rs 278 crore for the quarter ended September 2005 and net profit up by 14.5 per cent at Rs 30.9 crore.

Bajaj Electricals has reported a 44 per cent growth in its net profit to Rs 4.9 crore for the second quarter of 2005 against Rs 3.4 crore for the second quarter of 2004.

Chennai Petroleum Corporation’s net sales have climbed up to 84 per cent to     Rs 5458.6 crore as well; net profit has stood at Rs 196.4 crore for July-September 2005. 

Gujrat Alkalies and Chemicals Limited has reported 59 per cent rise in its net profit to Rs 57.6 crore for the quarter ended September 2005.

Ballarpur Industries has registered a 10.2 per cent increase in its net profit to      Rs 44.2 crore for the second quarter of 2005.

LABOUR

According to the Union Labour Minister K Chandrasekhar Rao, the Employees Provident Fund’s (EPF) board meeting is likely to be held in November to suggest interest rate for its four crore subscribers for the financial year 2005-06. Trade unions have already pitched for 9.5 per cent interest rate this year, while the EPF Board has clarified that it might not be possible to offer a rate over and above 8 per cent, especially when it has already dipped into its reserves to pay investors. The EPF Board on May 28 had recommended a rate of 9.5 per cent for 2004-05, leaving Rs. 716 crore deficit, which would be covered from it’s special reserves of Rs. 950 crore. The EPF’s corpus stands at Rs. 79,764.48 crore as on March 3, 2005 of which 65.3 per cent is in special deposit scheme, 14.02 per cent in public sector or financial institutions, 11.52 in central government securities, 8.67 per cent in state government loans and 0.48 per cent in government guaranteed securities.       

EXTERNAL SECTOR

Exports from Punjab have shown a growth of 20.1 per cent during 2004-05 over 2003-04. According to available data, the state’s export turnover has risen to Rs 10729 crore as compared to Rs 8933 crore during 2003-04. Of the total exports from Punjab , textiles, readymade garments, cycle and cycle parts constitute 50 per cent. However, only three districts, namely, Ludhiana , Jalandhar and Amritsar account for 96 per cent of the total turnover, while the remaining 13 constitute only 4 per cent of exports.

India is emerging as the biggest gainer in the war triggered by the restrictions imposed on a few items exported by China , by the US and the EU. In the absence of Chinese products, made-in-India skirts and blouses are on a high demand in these markets. This has resulted in a 20 per cent increase in the export of these items in the last three months, compared with the corresponding period of last year.

The Directorate General of Foreign Trade (DGFT) has restricted the import of second hand diesel generating sets and placed them on par with other restricted second-hand capital goods such as photocopiers, laptops, computers and air conditioners, which can be imported only against a license.

To rein in onion prices, Nafed has finalised imports of 2000 tonnes from China and 650 tonnes from Pakistan . The prices of onion have skyrocketed due to scarcity of suppl

INFORMATION TECHNOLOGY

Wipro, the third largest IT company, has registered a 16 per cent growth in net profit at Rs.478 crore in the second quarter ending September 2005 against Rs.411.7 crore in the corresponding quarter the previous year. Among the three IT majors, Wipro’s profit growth is lower than that of Infosys and TCS which posted a growth of 35.57 per cent and 20.70 per cent respectively in their consolidated net profits.

The world’s largest maker of networking equipment, Cisco Systems has announced its plans to invest $1.1 billion in India over the next three years, the largest sum ever invested by an IT company in India in one go. The investment will be made in areas of R&D, e-governance and expansion in manufacturing, finance and telecom verticals. Cisco supplies over 85 per cent of routers and switches deployed on the internet worldwide. While $750 million will be allocated to R&D, $150 million will be dedicated to provide leasing and other financial solutions to the company’s customers and partners. This is the largest commitment that Cisco has made to a country outside the US . Cisco will invest $100 million as venture capital in Indian start up companies. $100 million will be invested in customer support operations. In addition, Cisco will invest $10 million to establish Rural Connectivity Program and set up Asia ’s first IP-based hi-tech network lab with BSNL in Chennai. Cisco employs 3,500 people in India directly and indirectly. These include 1,400 people that it employs directly and 2,100 across its partners. It would double its headcount from 1,400 to 2,800 in the next three years.

TELECOM

India ’s largest telecom services provider Bharti Tele-Ventures Ltd. (BTVLs) net profit has increased by 43 per cent to Rs.521 crore in the second quarter of the current fiscal. BTVL recorded the highest ever, net addition of 19.4 lakh customers in a single quarter during July – September 2005.

In India’s largest FDI deal till date, Vodafone – the world’s fourth largest telecom company worth $62.9 billion has agreed to pick up 10 per cent stake in Bharti Tele-Ventures Ltd. (BTVL), India’s largest private sector telecom services company for Rs.6700 crore ($1.48 billion). This is Vodafone’s second entry into the Indian telecom sector. In June 2003, the company has exited India by selling its entire 20.76 per cent stake in RPG Cellular to Aircel. It has reasoned that the RPG Cellular stake did not give it a strong enough position in India .

*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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