Current Economic Statistics and Review For the
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I Theme
of the week: Hopes of Investment Boom: Need for Caution
The relationship between investment (capital formation) and economic growth (output) is known to be very crucial; it not only augments the productive capacity but also contributes to widening of effective demand in the economy and in a capital-deficient developing country like ours, this relationship assumes special importance. Studies have typically shown that capital accumulation contributes up to 60 to 70 per cent of the growth in per capita output and continues to be the primary engine of growth. A slowdown in the rate of investment leads to a decline in the pace of growth as witnessed in the Indian context when a deceleration in the growth rate during the second half of 1990s was associated with a fall in the rate of investment (RBI 2001) The
rate of investment in This
declining trend in public and private corporate sector investments has
continued till 2003-04 (the year till actual data is available). For the
subsequent period, there are no firm data on saving and investment. The
mid-term appraisal of the tenth Five Year Plan (2002-03 to 2006-07) has
emphasised that “ increasingly future growth prospects will now depend
on sustained growth of private investment and also public investment in
critical infrastructure” (p 34).However, at present there seem to be
signs of revival in the investment. This sentiment is echoed in RBI’s
mid-term review of credit policy as well. “Domestic
production and imports of capital goods have risen strongly in tandem,
indicative of ongoing capacity expansion. With continued business
expansion and lower interest costs, corporate profitability is high and
there is an expansion in internal resources available for investment.
These factors have found reflection in upbeat sentiments and a brightened
investment climate” (statement by Dr Y.V Reddy, Governor of the Reserve
Bank). This better outlook for investment is supported by indicators
suggesting signs of improved investment and these indicators are discussed
below in brief.
CMIE’s
Quarterly Survey of Investment Projects One
important indicator in this respect has been the CMIE’s quarterly survey
of investment projects. As per the latest 43rd quarterly survey
in this series. The total investment, consisting of announcement,
proposed and under implementation together, has shown an impressive rise
of 88 per cent over the year October 2005-October 2004 or of 54 per cent
growth during April- October 2005 (Table 2). However, a caveat found in
these data is that a large number of projects, 1070 with project cost of
Rs 79,638 crore got deleted from the live list of projects due to
cancellation and completions as compared with a lower number of 292 with
project cost of Rs 21,583 crore a year ago. More importantly, projects
under implementation have grown by 13.2 per cent from Rs 750,791 crore to
Rs 849.710 crore between October 2004 and October 2005.
Industry-wise,
manufacturing sector has witnessed the maximum rise in investment and its
share in total investment has also risen to almost 31 per cent in October
2005 when compared to about 20 per cent.
Table 3 thus suggests a
steady rise in investment in the manufacturing sector since April 2004.
Its share in total investment (industry-wise) has risen noteworthily from
23 per cent in October 2004 to around 31 per cent in October 2005.
However, if one observes carefully, it is revealed that this rise is not
widespread but selective and sectoral, concentrated in few segments in the
manufacturing sector. A bulk of investment is in metal and metal products
and particularly in the steel sector. In fact, CMIEs 43rd
Quarterly Survey of Investment Projects states that new projects
announced are concentrated in steel sector. Thus, though investment is
showing a rising trend it is essentially restricted to the ferrous metals
group. Such
concentration is also evident from state-wise distribution of investment
projects. As is evident from Table 4, almost 50 per cent of the total
investment is concentrated in five states, with Orissa emerging as a major
destination. Investment in Orissa has risen more than two fold in a span
of just one year (July 2004 over July 2005) and its share in total
investment has risen from just 4.4 per cent to 11.4 during the same
period. Orissa government has signed a Memorandum of Understanding (MoU)
with various steel companies to establish new plants in the state. The
companies that have been eager in setting up plants in Orissa are mostly
steel companies such as, Magnitogorsk Iron and Steel Works (MMK), TISCO,
Essar Steel, Bhushand Steel and Strips, JSW Steel, etc. The companies are
showing great interest in setting up plants in states like Orissa and
Jharkhand because of availability of unexploited coal mines and iron ore.
Thus,
while there is evidence of an improvement in industrial projects under
implementation, particularly in the manufacturing sector, the improvement
is not widespread; it is rather concentrated in the steel sector and in
only few states. The second indicator arises from the RBI’s study on corporate investment growth based on project assistance sanctioned by financial institutions and banks. This study shows a buoyant rise in the corporate sector’s capital expenditure from Rs 69,160 crore in 2004-05, a rise of 40.6 per cent, from Rs 49,157 crore in 2003-04 which had shown a rise of 17.7 per cent over that in 2002-03. For 2005-06, further details are not available but the RBI study does state that the prospects are bright for sustaining the investment momentum during that year from. What is however, disappointing that the projects, for which financial assistance was sanctioned in 2003-04 and 2004-05 and the project costs of which have shown sizeable increases, are again as in the case of CMIE data concentrated in a few industries in 2002-03, of the total project cost, 39.3 per cent was in telecommunication and 13.2 per cent was in power. Amongst the major manufacturing industries, 17.1 per cent was in metal and metal products; the next highest was in textiles at 5.0 per cent. Likewise, in 2004-05, 16.3 per cent was in telecom and 14.1 per cent in power, thus absorbing over 30 per cent in two major infrastructure areas. In the manufacturing sector again, metals and metal products accounted for 28.1 per cent of the total project cost in 2004-05 and textiles 7.7 per cent (Table 5).
While
the above set of indicators presents direct evidence of possible
investments actually taking place, the prospects for investment may also
be looked at from the financing angles. There are two key sources of funds
in this respect: capital raised from the market and non-food bank credit
(which has a term credit component) Companies planning to expand or set up
new ventures come to the market to raise funds. At present, the Indian
stock markets are booming and have entered a phase where they can mobilise
huge amounts of funds. After various scams, namely, Harshad Mehta and
Ketan Parekh scam, SEBI has tightened the rules and regulations for
operating in the market and this has helped develop faith in the market
and over the years there has been a rise in the amount raised. Table
6 suggests that in 2002-03, the amount mobilised was less possibly due to
the fact that it was the year of recovery (from mid 2002 the economy had
started recovering) from the recessionary conditions faced by the economy
lasting from 1998-99 to 2000-01. However, the next two years have
witnessed a rise in amounts mobilised. Now, for April-September 2005, the
resource mobilisation has shown a decline, despite a rise in the number of
issues as compared to April-September 2004, despite
a buoyant stock market. The possible reason could be prominence of
banks and financial institutions in raising funds, which raise small
amounts. This in turn is indicative of the fact that not many companies
are coming to the market and taking advantage of this boom.
A
more noteworthy indicator has been the phenomenal expansion in non-food
bank credit. On a year-on-year basis, non-food credit growth at 33.6 per
cent as on October 28 on a comparable basis has been on top of a growth of
28.2 per cent a year ago. However, in recent years non-food credit has
witnessed a structural shift towards the non-agriculture non-industrial
sector. According to RBI’s mid-term review of credit policy “ Credit
to industry increased by 21 per cent whereas credit off-take by
non-agriculture and non-industrial sector increased by over 35 per cent
each (during April-August 2005). The growth in credit to non-agricultural
non-industrial sector is led by housing, real estate and personal loans.
With in the industrial sector, significant
increase in credit off-take has been recorded by petroleum, coal products,
power, roads and ports, cotton textiles, drugs and pharmaceuticals, gems
and jewellery, iron and steel, other metal and metal products, automobiles
and engineering”. Finally,
though FDI flows have risen on a yearly basis Table 5 shows that between
Jan to July 2005 it has actually fallen as compared to the corresponding
period previous year. Even external commercial borrowings have risen on an
annual basis (however from a negative value implying net outflow or
repayment) but they have fallen over the quarter: April-June 2005. Another
indicator is Index of capital goods which has shown a rise but on a low
base. The year before 2002-03 was marked by recession the world economy as
well as Indian economy. Because of the recessionary condition investment
and manufacturing activities had declined and manufacturing activity has
been reflected in low growth of capital goods industry in 2001-02. From
middle of 2002 the world economy has started looking up.
Conclusion Even
though investment activity seems to be picking up but it seems that this
revival is sectoral and not wide-spread. There are constraints in terms of
infrastructure bottlenecks and share of infrastructure industries namely
mining and electricity in total investment (industry-wise) has come down.
RBI’s in its study (RBI Bulletin, August 2005) has indicated encouraging
prospects for corporate sector investment “…., the year 2005-06 may
witness an increase in corporate investment when compared to that in
2004-05”. However, declining corporate sector profits (for quarter
ending September 2005) have cast doubts over this optimism. Though there
has been a rise in non-food credit but again shares of housing and retail
sectors are high. Various business expectation surveys including the RBIs
business outlook survey, have presented an optimistic picture of
investment climate however, this optimism may be short lived. References Planning
Commission (2005): Mid-Term Appraisal of 10th Five-Year Plan
(2002-07) RBI
(2001): Report on Currency and Finance 2000-01 RBI
(2005): RBI Bulletin August 2005
Highlights of Current Economic Scene AGRICULTURE National
Agricultural Co-operative marketing Federation of India (Nafed) has
planned to set up biofertiliser plants in Andhra Pradesh government has decided to provide free power to those farmers, who will take up crop diversification. Government wants the farmers to take up cultivation of horticulture products or wetland crops like oilseeds, grains, maize etc. instead of paddy on the wetlands, since the former use less groundwater than paddy. Another reason is that, it would be difficult for the government to provide Minimum Support Price for paddy for kharif and rabi, both the seasons rather than paying for the cost of power or loss of water. The government has decided not to import wheat at least till December 2005, since the country has sufficient stocks of wheat and rice. In addition to this, their prices are also under control and government has managed the distribution system by replacing wheat with rice for southern and eastern states where people consume more rice. The Agriculture Ministry has decided provide electronic connectivity to important wholesale markets through out the country to ultimately put in place a national atlas of agriculture markets on the electronic based GIS platform. The atlas will contain the information on the entire agricultural marketing infrastructure including warehouses, cold storages, markets and other related infrastructure. Besides, the commodity profiles indicating the post harvest requirements for each of them would also be available on the national agriculture market atlas. INDUSTRY Index of Industrial ProductionThe industrial sector has grown at a robust 8.8 per cent in the first half of 2005-06 against the 8.3 per cent growth registered during the same half of the previous year. This is mainly on the back of strong manufacturing sector growth at 9.9 per cent during April-September 2005 as compared to the 8.8 per cent during the corresponding period of 2004. However, there was a decline in mining activities and electricity generation from 5.1 per cent and 7.8 per cent respectively during April-September 2004 to 1.3 per cent and 4.8 per cent respectively in the same period of the current fiscal. Automobiles
A common testing and training facility for small and medium auto-components manufacturing units is being developed by Maharashtra Chamber for Commerce, Industries and Agriculture (MCCIA) and the Pimpri-Chinchwad Municipal Corporation (PCMC). It is expected to begin operations by mid-November 2005. The commerce ministry is to fund 75 per cent of the total cost of the projects, estimated to be Rs 67 crore. PharmaceuticalsA new drug pricing policy, being currently mooted, is set to recommend fiscal incentives including excise waivers to generic or unbranded drugs and remove them from the ambit of price control. INFRASTRUCTURE
Power The
power ministry plans to float global tenders inviting the private sector
to put in competitive bids for setting up four ultra mega projects of 5000
megawatt (MW) capacity each, which could in the future be expanded to
8000-10000 MW. They are to be hydro projects and pit-head coal and
imported coal-based thermal power projects, entailing an investment of
about Rs 80000 crore. Petroleum,
Petroleum Products and Natural Gas
The government is likely to, shortly, issue Rs 15794 crore worth of bonds to oil marketing companies for partly offsetting their under-recoveries on sale of petroleum products in the domestic markets. However, the finance ministry has ruled out any reimbursement to the oil public sector units (ONGC, GAIL, OIL) of the subsidy burden being borne by them since it feels that under the present sharing mechanism the investible surplus of these companies is not reduce considerably as they are in a financially sound position. A memorandum of agreement for the use of a new technology for transportation of natural gas has been signed between state-owned GAIL India with Antwerp-based Exmar Marine for its on-board LNG re-gasification technology for import of liquefied natural gas (LNG). Mining
The centre has called upon all mineral-bearing states to launch an immediate crack-down on illegal mining activities and deal firmly with offenders, following a series of disastrous accidents that led to many deaths of people engaged in illegal mining. Ports
The
centre has approved the plan of Jawaharlal Nehru Port Trust (JNPT) to
extend its existing container freight station (CFS) facilities over 300
hectares of land to facilitate handling of increasing traffic INFLATION
The annual point-to-point inflation rate based on wholesale price index has gone up to 4.75 per cent during the week ended October 29, 2005 from 4.49 per cent registered during the previous week. The inflation rate was at 6.95 per cent in the corresponding week last year.
The WPI in the week under review has risen to 198.3 from the previous week’s level of 197.7 (Base: 1993-94=100). The index of primary articles’ group has risen considerably by 1.3 per cent to 199.3 from the previous week’s level of 196.7, mainly due to an increase in the price indices of food articles by 1.8 per cent to 201.5 from 197.9 in the previous week. The higher prices of food articles are attributed to the increase in the prices of pork, fruits and vegetables and urad, gram and bajra. The index of ‘fuel, power, light and lubricants’ group has declined by 0.7 per cent to 312.4 from the previous week’s level of 314.7. The index of manufactured products’ group constituting the maximum of 63.7 per cent of total weight, has risen by 0.3 per cent to 172.5 from 172 of the previous week’s level, primarily due to increase in the prices of food products, ‘chemical and chemical products, base metals and ‘machinery and machine tools’.
The latest final index of WPI for the week ended September 3, 2005 has been revised upwards; as a result both, the absolute index and the implied inflation rate moved up to 196.6 and 3.64 per cent instead of the provisional levels of 195.7 and 3.16 per cent, respectively.
Overall,
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’ in the last
couple of weeks. The hike in the prices of petroleum products by the
government, which has been effective from September 6th, and its
consequent spiralling effects on the related sectors like transport, has
also been partly responsible in stimulating inflationary pressures on the
economy. However, the Reserve Bank of India has assured in it’s Mid-Term
Review 2005-06, that it would keep a close watch on inflationary movements
in the near future and if necessary, would use fiscal and monetary
measures in order to contain the same. BANKING Federal
Bank has called off the proposed merger with Lord Krishna Bank (LKB) on
issue of valuation a month after the boards of the two banks agreed in
principle for a merger. Federal Bank is learnt to have offered upto Rs.250
crore which was not acceptable to LKB which demanded at least Rs.350 crore,
the amount HDFC banks is said to be have offered some time ago. Though LKB
had officially presented a net worth of Rs.160 crore, Federal Bank after
due diligence had brought it down to around Rs.100 crore, on grounds of
under provisioning on many counts, including salaries and allowances.
Federal Bank was willing to pay Rs.100 crore in cash and up to another
Rs.150 crore through share swap. The
country’s largest bank, the State Bank of India (SBI) in its third
acquisition in last four months has acquired a majority stake of 76 per
cent in an Indonesian Bank – PT Bank IndoMonex, subject to regulatory
approvals and processes. With the proposed acquisition, SBI would increase
its presence in the ASEAN region. The
government has allowed foreign direct investments (FDI) up to 49 per cent
in asset reconstruction companies (ARCs) that buy stressed assets from
banks and financial institutions. The move is aimed at imparting the
requisite liquidity in the business of asset reconstruction in the form of
FDI by foreign banks. It could also lead to a spurt in the number of ARCs
in the country, where the banking sector is saddled with NPAs in excess of
Rs.60,000 crore. According to a finance ministry release, the Foreign
Investments Promotion Board (FIPB) would now consider proposals to infuse
FDI in ARCs registered with RBI. It was, however, clarified that foreign
institutional investors FIIs would continue to be barred. The new FDI
policy would be reviewed after two years, the release added. Currently,
Arcil is the only one ARC operator in PUBLIC
FINANCE Advance direct tax collections during April-October 2005 have increased by 28 per cent to Rs 66,000 crore. Fringe benefit tax (FBT) collection till the end of the month, despite challenges to the tax in various high courts, increased to Rs 1,700 crore while securities transaction tax (STT) collection increased to Rs 1,300 crore. Active trading in the stock market in October generated about Rs 300 crore in that month alone. The corporation tax collection after two instalments of advance tax was up by 26 per cent to Rs 38,000 crore while total of personal income tax was up 30 per cent to Rs 28,000 crore. The three new taxes, Banking Cash Transaction Tax (BCTT), FBT and STT contributed about Rs 3,120 crore to the government exchequer. If this amount is deducted from the personal income tax for the purpose of comparison with last year’s personal tax collection, growth in revenue collection under this tax head would be about 16 per cent. Direct
taxes collected from Mumbai was about Rs 16,000 crore during
April-October, about 16 per cent more than during the same period last
year. Fringe
Benefit Tax (FBT) is facing opposition from several parties. This tax is
being challenged before courts in The Central Board of Direct Taxes (CBDT) notified amendments to Income Tax rules to allow recognised provident funds, approved superannuating funds and approved gratuity funds to invest a part of their corpus in equity shares of companies and equity linked schemes of mutual funds. FINANCIAL
MARKET Capital
Markets Primary
Market The
public offer issue of Pyramid Retail has been oversubscribed as on
November 14 with the section reserved for qualified institutional buyers
being oversubscribed by 5.12 times, as per the data put out by NSE, no
bids have been tendered by FIIs in this category as they are not allowed
to invest in retail sector. In case of non-institutional and retail
investors, the issue is yet to be oversubscribed in these categories. The
offer of Bombay Rayon Fashions Ltd to sell 1.34 crore shares of Rs 10 each
in the price band of Rs 60-70 per shares is open for subscription during
November 11 and 17. AIA Engineering, a niche player in the value-added high chrome metallurgy segment catering to cement, mining and thermal power industries, is entering the capital market with its initial public offering of 47 lakh equity shares of Rs. 10 each through the book-building process. It has fixed the price band at Rs. 275-315 per share. If fully subscribed the company would raise Rs. 129 crore at the lower-end and Rs. 148 crore at the upper-end of the price band. The issue will remain open from November 17 to 22 Secondary
Market Between
November 1 and 11, the FIIs have turned net buyers of equities to the
extent of Rs 1388 crore with purchase of Rs 8554 crore and sales of Rs
7166 crore. During the same period, mutual funds have been net sellers to
the extent of Rs 125 crore with sales of Rs 1827 crore and purchases of Rs
1702 crore In
a bid to encourage more investors to hold securities in the demat form,
the SEBI has waived demat charges except the statutory ones with effect
from January 9, 2006. The
Union Government is looking at disinvesting a small portion of equity in
profit making public sector enterprises other than the `Navratnas,'. Derivatives
FIIs
net investments in the futures instruments till November 09, has been Rs.
1323.70 crore, with purchase worth Rs. 2992.40 crore and sales of Rs.
1668.70 crore. Meanwhile, they have been net sellers to the tune of Rs.
47.27 crore in the options segment till November 09. Government
Securities Market Primary
Market RBI
, under regular auction has mopped
up Rs. 500 and Rs. 1000 crore through 91-day treasury bills and 364-day
treasury bills. The cut-off yields for 91-day and 364-day
treasury bills were 5.8189 per cent and 5.9823 per cent,
respectively. RBI
,reissued the 7.49 per cent-2017 paper and 7.40 per cent-2035 paper for a
notified amount of Rs. 5,000 and Rs. 3,000 crore, respectively. The
cut-off yield for 7.49 per cent-2017 paper and 7.40 per cent-2035 paper
were 7.3258 per cent and 7.72825 per cent, respectively. The
interest rate on the Floating Rate bond, 2021 has been
fixed at 5.96 per cent per annum for the year (November 10, 2005 to
November 9,2005) Andhra
Pradesh government has announced the sale of a ten year Andhra Pradesh
State Development Loan for a notified amount of Rs. 375 crore through a
yield based auction using multiple price auction method on November
17,2005. Secondary
Market Due
to the outflows on account of loan floatation’s, the liquidity in the
market remained tight as reflected by the fall in average deployments in
LAF reverse repo and RBI also had to lend money through repo. As a result
of this tightness, the call rates ruled firm in the range of 5.50-7 per
cent as against a range of 5.10 –5.75 per cent in the previous week.
Despite the tight liquidity conditions and depreciating rupee, the central
loan floations were oversubscribed with cut-off yield for the 12-year in
line with the market expectations and that on 30-year paper being above
market expectation. Thus, the yield curve move upwards.
Bond
Market RBI
has modified the external commercial borrowing (ECB) policy to treat
special purpose vehicles (SPVs) or any other entity set up to finance
infrastructure companies/projects exclusively as financial institutions
and ECB by such entities will be considered under the approved route on a
case by case basis. Foreign
Exchange Market RBI
is replacing its five-country indices of NEER and REER with new
six-country indices. It is also revising its thirty six-country indices.
The new REER and NEER figures will be published in December 2005. Amidst
deteriorating trade deficit and slowing down of FII inflows, the rupee
depreciated from Rs 45.41 to Rs 45.99 but recouped some of its losses to
reach Rs 45.77 as the international crude oil prices remaining easy during
the week. Commodities
Futures With
a view to facilitate introduction of option trading in commodities as well
as to provide greater autonomy to the Forward Market Commission, the
government is set to put up a Bill to amend the Forward Contracts
(Regulation) Act, 1950. The amended law will provide for setting up of a
Forward Market Appellate Tribunal on the lines of the Security Appellate
Tribunal (SAT) set up under Sebi Act.
CREDIT
RATINGS Crisil has reaffirmed the ‘P1+’ and ‘FAA-/Stabke’ ratings assigned to Rs. 200 million commercial paper programme and fixed deposit programme of Addison and Company Limited. The ratings continue to reflect the company’s strong association with the Amalgamations group and in particular, with Simpson and Company, its holding company. The ratings are further supported by the company’s sustained market leadership in the high-speed steel cutting tools industry. Crisil has reaffirmed the ‘AA-/Stable’, ‘FAA/Stable’ and ‘P1+’ ratings assigned to India Glycols Limited’s Rs. 100 million NCD issue, fixed deposit programme and Rs. 500 million commercial paper programme, respectively. The reaffirmation takes into account the company’s leadership in the specialty ethylene oxide derivative markets and vertically integrated operations that engender cost competitiveness. Crisil has reaffirmed Dhandapani Finance Limited’s fixed deposit programme at ‘FA+/Stable’. The rating continues to reflect the company’s healthy capital adequacy, adequate earnings profile due to high lending rates, good risk control mechanisms and reasonable liquidity positions. CRISIL has reaffirmed 'Grade 1' to Lal Bahadur Shastri College of Advanced Maritime Studies & Research's (LBS) simulator, non-simulator modular, and competency courses. This grading denotes that LBS' quality of education imparted in respect of the courses offered by the institute vis-à-vis the course objectives as stated by Director General of Shipping is outstanding. The assigned grade reflects LBS' competent and professional management, well-qualified and experienced faculty, and a good infrastructure, with emphasis on practical training facilities. Strong process quality and low dependence on government funding support the grading assigned to the courses at LBS. Icra
has reaffirmed the ‘LAA+’ rating assigned to the Rs. 1250 million
non-convertible debenture programme of Tata Chemicals Limited (TCL). The
rating reflects TCL's strong competitive position in its main businesses
and the favourable financial risk profile arising from its low gearing and
its strong liquidity position. The rating also draws comfort from the
financial flexibility enjoyed by the company by virtue of its strong
investment portfolio and from belonging to the Tata group In
an another exercise, the agency has reaffirmed the ‘A1+’ rating
assigned to the Rs. 3 billion commercial papers/short-term debt programme
of Mangalore Refinery and Petrochemicals Limited (MRPL). The rating takes
into account the strong operational and financial performance of the
company in the last few years and strengths derived from its majority
shareholding by ONGC. Care
has assigned a ‘BBB’ rating to the proposed FCD issue of Rs. 105 crore
of Soma Textiles and Industries Limited. The rating factors in Soma
Textile and Industries Limited’s long standing position in the textile
industry, improvement in margins on account of shift in the product mix
towards high value added products and improved prospects of domestic
textile industry, especially the revival of denim market. Care
has reaffirmed the ‘PR1+’ rating assigned to the outstanding
commercial paper programme of Chennai Petroleum Corporation Limited for an
amount of Rs. 150 crore. The rating takes into account the strong
parentage of the company, strong and improving financials and successful
completion of capacity expansion project. CORPORATE
SECTOR Balrampur Chini Mills, the country’s largest integrated sugar company has acquired Rauzagaon unit of Dhampur Sugar for Rs 182 crore. Larsen
and Toubro has recently despatched a gas injection platform for the Bunduq
company in Welspun Gujarat Stahl Rohren has received an order of Rs 301.5 crore from Story Transgas, a Canadian gas company. Dr.
Reddy’s Laboratories Limited will acquire Roche’s API (active
pharmaceutical ingredients) business in ICI
India has announced that it would transfer its rubber chemical business to
a Wipro has acquired a 3.8 per cent shares in silk yarn and fabrics maker Himatsingka Seide for Rs 108.8 crore. Aurobindo Pharmaceuticals has received tentative approval from the US Food and Drug Administration (USFDA) for its 10mg oral solution of the HIV/AIDS drug, Lamivudine. Reliance Infocomm has decided to raise $ 500 million from overseas markets to refinance high-cost debt. The company had taken high-cost loans in the past while rolling out networks across the country. Hindustan Coca-Cola Holdings (HCCH) will make an investment of $ 120 million (Rs 552 crore) in its bottling subsidiary Hindustan Coca-Cola Beverages (HCCB) to increase its urban and rural penetration and diversify its range of range of beverages. Tata
Steel has recently announced formation of an equal joint venture with the
Australian company BlueScope Steel to foray into the zinc and aluminium
metallic coated steel, painted steel and roll-formed steel products in Aditya
Birla group company, Grasim The Jiwrajka family controlled Alok group has acquired 16 per cent shares in British retail firm, Hamserd Group, for Rs 30 crore. Kribhco and Shyam Telecom group has acquired Oswal Chemicals and Fertilisers Limited’s 8.5 lakh tonne urea plant at Shahjahanpur in Utter Pradesh in a deal of Rs 1900 crore. The Jharkhand government and JSW Steel have signed a memorandum of understanding for a 10 million tonne steel plant with an investment of Rs 35,000 crore. Ashok
Leyland Limited has reported a 27.6 per cent growth in its sales during
October 2005 to 4,281 units from 3,356 units sold in October 2004. Exports
have increased to 360 units in October 2005 from 219 units in October
2004. LABOUR In a view of social security scheme for 37 crore unorganised workers in the country, the Labour Minister is expected to work out details of a cess for building a social security fund. Both the Arjun Sengupta Commission set up last year for working on social security for the sector and the National Advisory Council, in its draft unorgansied sector workers social security bill 2005, had recommended the cess as a very valid method of gathering resources for this purpose. It had suggested that the funds created would support schemes including health, life and permanent disability insurance or maternity insurance and old age pension. Such a social security fund means a special cess on select commodities or on services for the purpose. A much talked-about Empoyees’ Provident Fund Organisation’s (EPFO) interest rate on the EPF accounts by over four crore subscribers is once again gathering steam. The Labour Ministry has called the meeting to take the decision regarding the interest rate. The Finance and investment sub-committee of the EPFO had recommended a rate of eight per cent in September. However, the trade unions representatives in the Central Board of Trustees (CBT) did not have consensus on the EPF rate with trade unions demanding at least 9.5 per cent. According to Hind Mazdoor Sabha, a certain minimum rate should be fixed with a consensus on the rate after a discussion among CBT members. It further insisted that the rate should not drop below this level under any circumstances. According to a representative in CBT, it seems that the labour minister would reduce the rate to eight per cent from the current rate of 9.5 per cent. . SOCIAL
SECTOR The Ministry of Human Resource Development (HRD) is in a better position to demand funds for its education programme ‘Sarva Shiksha Abhiyan’, since it has already managed to spend 61 per cent of the funds allocated to the programme. The Ministry has released Rs.3801 crore till September. The funding of the programme is based on a 75:25 sharing pattern between the center and the states. The states have released 27 per cent (Rs.1071 crore) of their share, higher than the predetermined one. Together with the opening balance on April 1, the ‘Sarva Shiksha Abhiyan’ had Rs. 6156.4 crore in its kitty to spend and Rs. 3337.5 crore had been already spent till the end of September. Further, as of now, Rs.2779 crore is in the process of being sanctioned and spent. It is interesting to note that there is a considerable acceleration in spending by states. In the first quarter of the year, the all-India expenditure on the programme stood at Rs.778.9 crore, while the second quarter saw a steep increase to Rs. 2558.6 crore. At present, the utilisation rate (expenditure vs funds available) at national level is 54.2 per cent. EXTERNAL
SECTOR According to Director General of Foreign Trade (DGFT), the exports revenue is expected to grow by 20 per cent in 2005-06 The
government has allowed 49 per cent foreign direct investment (FDI) in
asset reconstruction companies (ARCs) but barred foreign institutional
investors from equity participation in firms buying non-performing assets
of the banking sector. This decision paves the way for the entry of CDC
into the arena. CDC, formerly Commonwealth Development Corporation, is an
agency of the HOUSING Bank
of India has added life insurance cover to the home loan scheme to the
housing loan borrowers against risk of death during the tenure of the loan
by having a group insurance scheme in tie-up with ICICI Prudential Life
Insurance. As a result, in case of premature death of the borrower, the
liabilities of unpaid loan are no more passed on to the legal heirs. INFORMATION TECHNOLOGY Tata
Consultancy Services (TCS), the $2.2 billion software services provider,
has acquired 100 per cent equity in Comicrom, a BPO firm based in WNS
Global Services, HCL Technologies has signed a 5-year deal estimated at $100 million with US-based Autodesk Inc to provide offshore application and data centre services. The company will support Autodesk in meeting the global business requirements. With 6 million users, Autodesk is the world’s leading software services company, providing solutions for building, manufacturing, infrastructure, media and entertainment and wireless data services sector. TELECOM In
its notification on enhancing the FDI limit in the telecom sector to 74
per cent from 49 per cent, the government said that the Indian promoter in
telecom companies should hold at least 10 per cent equity in the licensee
company, as it would reflect the seriousness of the Indian investor. The
notification also clarifies that any foreign component in the holding of
Indian company would be proportionately counted towards the composite FDI. As per the data compiled by the Telecom Regulatory Authority of India (Trai) India has added 3.24 million telephone subscribers in October 2005 up 2.9 per cent over September - as the country’s total telecom subscriber base reached 116.12 million. As a result, teledensity has touched 10.6 per cent from 10.3 per cent at the end of September 2005.
*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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