Daily Excelsior...Business

Economy on tailspin
but some hopes of
revival as year closes

NEW DELHI, Dec 24: Marred by stock scam and Sept 11 terrorist attack, economic reforms took a backseat in 2001 making prospects of ....more

Govt clears 58 FDI
proposals worth Rs 815 cr

NEW DELHI, Dec 24: Government today approved 58 Foreign Direct Investment (FDI) proposals worth Rs 815 crore, ...more

CRISIL assigns PFAAA
rating to GE shipping’s
Rs 950 mln

MUMBAI, Dec 24: The Great Eastern Shipping Company Ltd’s (GE Shipping) Rs 950 million preference share programme has been assigned a ....more

Record 40 pc growth in
FDI inflows in Jan-Sept 2001

NEW DELHI, Dec 24: Foreign Direct Investments (FDI) accelerated to 40 per cent in dollar terms for the first nine months of this calendar year with the ....more

Indonesia to back OPEC
oil cut at December meet

JAKARTA, Dec 24: Indonesia said on Monday it would back an expected cut in OPEC output when the oil cartel holds an extraordinary meeting in cairo on December 28........more

US clears Israeli Phalcon sale to India: Report

JERUSALEM, Dec 24: The US has cleared the sale of one billion dollar Israeli Phalcon early warning radar system to India, according to American .........more

Economy on tailspin but some
hopes of revival as year closes

NEW DELHI, Dec 24: Marred by stock scam and Sept 11 terrorist attack, economic reforms took a backseat in 2001 making prospects of recovery more difficult as the year closes with projections of a lowest ever growth of less than five per cent in a decade.

The year started with Finance Minister Yashwant Sinha unveiling a blueprint for the second phase of economic reforms in the budget but it remained only on paper as the major promises like labour, fiscal, financial sector reforms and privatisation remained unfulfilled.

Soon after the budget, the stock scam surfaced after the black Friday in the capital markets in March followed by UTI fiasco forcing the Government to go on back-foot on economic issues derailing reforms meant to spur demand and investment.

The Government claims that the economy is on road to recovery and has done reasonably well considering the global recession aggravated by the Sept 11 attack but analysts armed with statistics see it otherwise painting a gloomy picture. They say that the much needed push to growth would have to wait for at least one more year.

With revenue collections at less than half of the targeted Rs 2,27,000 crore this year, exports recording negative two per cent growth, industrial growth low at 1.9 per cent and disinvestment receipts at a mere Rs 200 odd crore against target of Rs 12,000 crore, the fiscal deficit is bound to go beyond targeted 4.7 per cent of GDP this financial year.

But the silver-lining is that foreign exchange reserves continue to swell at over record 47 billion dollars. Inflation remains at moderate level of over 2.5 per cent and with good monsoon for the 13th consecutive year, agriculture, considered to be backbone of the economy, is showing signs of recovery.

The year also saw launch of new round of trade negotiations at WTO ministerial in Doha where India put up a brave fight for increased market access to developing countries exports but the gains were not commensurate with the tough posturing, analysts say.

With exports recording a negative growth, the 12 per cent growth projected for this year seems a far cry. Rightly Government itself scaled down the target to three per cent, one forth of the original target. The medium term export strategy, promised to be unveiled this year, has not seen the light of the day so far.

On disinvestment and privatisation, Government announced an ambitious plan of strategic sale in 27 leading Public Sector Undertakings but so far only two small companies Hindustan Teleprintes and Computer Maintenance Corporation have been divested for a mere Rs 207 crore. Even formation of a separate ministry last year has not hastened the process, analysts argue. Sinha always quotes World Bank and IMF forecast to say large economies like China, India and Brazil have potential of staying well above the world’s sedate growth in 2002. But the extent to which they would be successful was largely up to their own efficiency or inefficiency in the use of domestic financial and physical resources, the analysts say.

Government’s mantra this year is pump-priming of the economy even at the risk of mounting fiscal deficit by boosting investment in infrastructure and social sectors to reverse the economic slowdown. But so far this is not visible excepting in the ambitious highway project to link four metros and create north-south-east-west corridor.

Because of non-action by Government, the growth prospects for 2001-02, appear to be bleak. Fiscal first quarter of April to June this year, GDP growth has been estimated by the Central Statistical Organisation at 4.4 per cent.

GDP arising from the non-agricultural sector was reported to have risen to 5.1 per cent, which was lower than the 5.4 per cent recorded in the previous 15 quarters. It was much less than eight per cent recorded in the first quarter of the previous year.

The Reserve Bank of India on its part brought down its April estimates for GDP growth in 2001-02 of 6-6.5 per cent, to the significantly lower band of 5 to 6 per cent in its mid-term review monetary and credit policy in October end this year. Now all pointers say the growth could be less than five per cent this year, lowest ever in a decade.

Though monsoon has been good for the 13th year in a row, concerns have been expressed both in official and unofficial circles about the decline in public investment in agriculture and consequential fall in productivity. If Government was serious about pump-priming, it should immediately step up investment in agriculture on which 70 per cent of the population depended.

With good rains, the outlook for the winter crop is, however, strong and Government agencies expect the rabi foodgrain harvest to cross 107 million tones, 15 per cent more than last year. Side by side with overflowing granaries, starvation deaths too are reported indicating faulty distribution system.

The latest ICRA bulletin warns that the movement on economic reforms continues to be "glacial" despite official statements to the contrary.

Banks are flush with money and the lowering of interest rates to a record six per cent this year has not enthused business community to step up investment.

Weak credit flows are a manifestation of structural deficiencies in industry, which is the principal borrower. At the same time non-performing assets of banks have mounted to Rs 56,000 crore.

ICRA says the total bank credit on year-to-date basis to the commercial sector up to the end of October 2001, was Rs 24,227 crore. This was not only much lower than that in the last year, but was only marginally more than that at the same point in time in 1999.

This weak trend in credit and other financing off-take has been in evidence right through the the present fiscal. Measured on year-on-year basis, the flow of total bank accommodation to the commercial sector at 12.5 per cent in early October this year, was 30 to 40 per cent less than in two previous years.

The progressive lowering of base lending rates, prime lending rate and restrictions on the size of the risk spread that banks may charge has also perhaps further impeded the flow of finance, by under-pricing the risk of the credit.

Another unwelcome trend in the banking sector is that a significant part of non-food credit has been extended to central energy utilities, mainly for financing of the arrears payments by the State Electricity Boards, which in other words cash losses of SEBs. The quasi-fiscal account - the oil pool deficit has also been financed from the banking system, which is not good.

The rapid and progressive weakening of tax collections this year coupled with not much headway in expenditure control is expected to seriously affect the Government efforts to control fiscal deficit.

With plethora of scandals in 2001, stock market crash and terrorists attacks have left the reform process incomplete this year and low growth, mainly due to structural deficiencies, is, therefore likely to continue in the coming year. (PTI)

Govt clears 58 FDI proposals worth Rs 815 cr

NEW DELHI, Dec 24: Government today approved 58 Foreign Direct Investment (FDI) proposals worth Rs 815 crore, including the Rs 452 crore investment by Dutch Major Brentwood investment holdings and nine collaborators in Bharti televentures.

Brentwood’s investment will be used for "infusion of additional funds through an Initial Public Offer (IPO) and increase in (Bharti’s) paid-up capital", an official release said here.

The FDI proposals were approved by the Commerce and Industry Minister Murasoli Maran based on recommendations of the Foreign Investment Promotion Board (FIPB), it said.

Other proposals cleared include a Rs 110.40 crore proposal of New Zealand-based Fonterra Cooperative group for acquiring 49 per cent equity stake in dairy major Britannia Industries.

Another Dutch major, Koninklijke Phillips Electronics, has been allowed to bring in a total of Rs 105.50 crore to convert two of its companies in India into wholly owned subsidiaries.

The approval involves enhancing equity in the consumer appliances arm and the lighting company from 74 per cent and 76.4 per cent to 100 per cent respectively.

Global advertising major WPP’s mauritius arm has been allowed to increase its equity stake in India’s top agency Hindustan Thomson associates to 74 per cent from 60 per cent with Rs 57.60 crore investment.

Among the other proposals cleared today are:

German Chemicals Company Sika Finanz AG’s Rs 28 crore FDI for increasing equity to 60 per cent in the Indian arm from the present 40 per cent.

Korean auto-part company Hwashin’s Rs 25.50 crore proposal for setting up an Indian arm in Chennai to manufacture automobile parts.

Mauritius-based Amaind Investments’ Rs 10.16 crore proposal to increase equity to 22 per cent from six per cent in Taj Kerala Hotels and Resorts. (PTI)

Record 40 pc growth in FDI inflows in Jan-Sept 2001

NEW DELHI, Dec 24: Foreign Direct Investments (FDI) accelerated to 40 per cent in dollar terms for the first nine months of this calendar year with the United States continuing to account for the largest inflow.

The FDI inflows for January-September 2001 amounted to 3.6 billion dollars, up from 2.6 billion dollars during the corresponding period last year.

In rupee terms, FDI inflows were valued at Rs 16,306.47 crore during January-September 2001, an increase of 46.71 per cent over Rs 11,114.93 crore recorded during 2000.

The largest infows are from US, followed by Mauritius, Germany, Japan, the UK and the Netherlands.

The top five states in India attracting FDI approvals are Maharashtra (with a share of 17.07 per cent of the total FDI approved), Delhi (12.28 per cent), Tamil Nadu (8.35 per cent), Karnataka (7.80 per cent) and Gujarat (6.45 per cent).

The year also witnessed some major policy initiatives by the Government to further ease the country’s FDI regime. These include permitting FDI upto 100 per cent with prior approval of the Government for development of integrated townships, including housing, commecial premises, hotels, resorts, city and regional-level urban infrastructure facilities in all metros FDI upto 100 per cent on the automatic route for mass rapid transport systems in all metro cities, including associated commercial development of real estate placing on the automatic route FDI upto 100 per cent in drugs and pharmaceuticals (with some exceptions) and opening up of the defence industry sector upto 100 per cent for domestic private sector participation with FDI permitted up to 26 per cent, both subject to licensing.

The Government had also during the year allowed on automatic route the FDI upto 100 per cent in all manufacturing activities in Special Economic Zones (SEZs) except for some activities permitted fdi upto 74 per cent for telecom services such as internet services providers with gateways, radio paging and end-to-end bandwidth subject to licensing and security requirements and several initiatives relating to the Non-Banking Financial Companies (NBFCS).

Some of the major FDI policy initiatives taken during the year 2000 including the easing of norms for payment of royalty have contributed to the recent upward trend in FDI inflows.

On the industrial front, the Department of Industrial Policy and Promotion (DIPP), in a major initiative to improve the competitiveness of the Indian industry, has worked out the modalities for carrying out studies to upgrade competitiveness of the Indian paper, cement and capital goods industries.

The Central Pulp and Paper Research Institute, Saharanpur, which has been asked to carry out a study in respect of the paper industry, has approached McKinsey, Accenture and Jakko Poyry for studies on the pulp and paper industry. The national council for cement and building materials is negotiating for a similar study with pricewaterhousecoopers, KPMG, Arthur Anderson and Boston Consultancy. The Central Manufacturing Technology Institute have already finalised with the pricewaterhousecoopers to do a study on the global competitiveness of the Indian electrical and machine tools industry which will focus on the capital goods sector. (UNI)

US clears Israeli Phalcon sale to India: Report

JERUSALEM, Dec 24: The US has cleared the sale of one billion dollar Israeli Phalcon early warning radar system to India, according to American administration sources. The Defence Ministry has updated the US on the advanced negotiations about the deal with India though the foreign ministry fears that the sale could anger China with which Israel cancelled a signed deal last year under US pressure.

The controversial deal with Beijing, which included the installation of a phalcon early warning radar on a Russian-built aircraft by Israel aircraft industries, was scrapped last year following intense pressure from bill Clinton administration with Beijing expressing anger over the move and demanding renewal of the sale.

English daily Ha’aretz quoted sources in the US administration as saying that Washington took a positive view of the developing relation between Israel and India "in a range of fields."

Israel coordinated matters with us before and Washington expressed happiness. "Advance dialogue on the particulars (of the deal) before decisions are taken will ensure that there won’t be any surprises in the future," said the US sources.

Earlier, the US had opposed the phalcon plane sale to India contending that the deal could escalate tension in the subcontinent. The US has okayed the deal now but it wishes to be informed advance on sales of strategic significance, such as those involving early-warning aircraft that would extend the Indian Air Force’s range of action. (PTI)