The Indian rupee on April 29 tumbled by 32 paise to six-week low at 40.48/49 against the greenback on heavy dollar demand from oil refiners as well as hectic forward coverings by investors amid US dollar gaining strength against rival currencies. At the Interbank Foreign Exchange, the domestic unit continuously moved downwards after resuming steady at 40.15/16 a dollar from its last close of 40.16/17 a dollar. The benchmark six-month forward dollar premiums payable in October ended at 45-1/2 - 47-1/2 paise, down from 54 - 56 paise on April 28 and the far-forward maturing in April dipped to 75-1/2 - 77-1/2 paise from 88 - 90 paise previously
Wednesday, April 30, 2008
Economists Foresee More CRR Hikes
Yaga Venugopal Reddy proved his penchant for surprising the street once again by hiking the much-used cash reserve ratio. Economists say he's not done yet.
They are forecasting that Reddy will wield his favourite —- and blunt —- weapon more often as the inflation battle gets murkier in the next few months.
At the annual monetary policy review on Tuesday, Reddy announced a 25 basis points CRR hike effective May 24.
The is the second hike in April after the 50 basis point hike on April 17.
Economists are predicting more CRR hikes because they expect inflation to surge in the next couple of months.
Robert Prior-Wandesforde, India economist at HSBC, said the wholesale price index will hit 8% later this year, prompting the RBI to step up its fight.
"The RBI is clearly intent on sending a strong signal that it views inflation as uncomfortably high and is prepared to back up the government's various measures (such as scrapping import duties on edible oils and maize as well as banning exports of rice, pulses and cement) with monetary action of its own…..against this background, the danger is that further policy tightening will be forthcoming," Wandesforde wrote minutes after the monetary policy was announced.
The CRR rate hike was not expected among economists before the policy.
Analysts were equally divided among those which expected no change in rates and those that expected a repo rate hike.
Tushar Poddar, India economist at US investment bank Goldman Sachs, expects the tightening bias in the policy will continue in the near term.
"The reduction in broad money growth will entail more tightening, possibly through further CRR hikes. The current CRR hike and prospects for more will be negative for banks as it would hurt their margins," Poddar wrote after the policy.
Broad money supply or M3 is running high at over 20%. The RBI's target is to bring it down to at least 17%, which will mean sucking out more extra money from the banking system.
However, economists also warn that further rate hikes by the RBI is likely to impede growth in the short term, while at the same time not being an instant medicine for inflation cure.
Lehman Brothers' India economist Sonal Varma, expects growth to be "quite a bit weaker than the RBI expectation of 8-8.5%. "We expect at least one more 50bp hike in CRR in 2008," Varma said after the policy.
"If further tightening is forthcoming then we will need to think seriously about downgrading our 7.8% growth projection for 200910 (given the lags with which policy operates it will have little impact on 200809, where we expect growth to average 7%)," Wandesforde said.
They are forecasting that Reddy will wield his favourite —- and blunt —- weapon more often as the inflation battle gets murkier in the next few months.
At the annual monetary policy review on Tuesday, Reddy announced a 25 basis points CRR hike effective May 24.
The is the second hike in April after the 50 basis point hike on April 17.
Economists are predicting more CRR hikes because they expect inflation to surge in the next couple of months.
Robert Prior-Wandesforde, India economist at HSBC, said the wholesale price index will hit 8% later this year, prompting the RBI to step up its fight.
"The RBI is clearly intent on sending a strong signal that it views inflation as uncomfortably high and is prepared to back up the government's various measures (such as scrapping import duties on edible oils and maize as well as banning exports of rice, pulses and cement) with monetary action of its own…..against this background, the danger is that further policy tightening will be forthcoming," Wandesforde wrote minutes after the monetary policy was announced.
The CRR rate hike was not expected among economists before the policy.
Analysts were equally divided among those which expected no change in rates and those that expected a repo rate hike.
Tushar Poddar, India economist at US investment bank Goldman Sachs, expects the tightening bias in the policy will continue in the near term.
"The reduction in broad money growth will entail more tightening, possibly through further CRR hikes. The current CRR hike and prospects for more will be negative for banks as it would hurt their margins," Poddar wrote after the policy.
Broad money supply or M3 is running high at over 20%. The RBI's target is to bring it down to at least 17%, which will mean sucking out more extra money from the banking system.
However, economists also warn that further rate hikes by the RBI is likely to impede growth in the short term, while at the same time not being an instant medicine for inflation cure.
Lehman Brothers' India economist Sonal Varma, expects growth to be "quite a bit weaker than the RBI expectation of 8-8.5%. "We expect at least one more 50bp hike in CRR in 2008," Varma said after the policy.
"If further tightening is forthcoming then we will need to think seriously about downgrading our 7.8% growth projection for 200910 (given the lags with which policy operates it will have little impact on 200809, where we expect growth to average 7%)," Wandesforde said.
Tuesday, April 29, 2008
Wages Are Forecast To Rise By 14.4 Per Cent
The explosive rate of growth in India has created a phenomenal demand for talent so much that wages are forecast to rise by 14.4 per cent during the year 2008, says a latest report. ''Wages are forecast to rise by 14.4 per cent during 2008, the fifth successive year of double-digit growth. This far outstrips wage inflation in China (8.6 per cent in 2007) and is second only to Sri Lanka, where wage growth has been driven by high inflation,'''' global management consultancy firm HayGroup said. The high level of demand for experienced employees is driving wage inflation and creating a culture of job-hopping. Staff turnover of 20 per cent or more is not unusual in high-demand sectors such as the service industry, as talented workers jump from employer to employer, following the promise of even higher wages.
''''Reward programs of companies are in crisis as wage inflation is witnessing an upward spiraling and staff turnover rates hit new highs,'''' the HR consultancy firm said. ''''In an environment where employees can achieve a pay rise of between 40 per cent and 50 per cent by moving to a competitor, they are unlikely to stay put,'''' HayGroup added. In the year 2007, the middle management level witnessed the maximum increase in average annual base salary (16 per cent), while supervisory, senior management and the executive level had an average annual increase of 14 per cent in their base salaries.
''''Reward programs of companies are in crisis as wage inflation is witnessing an upward spiraling and staff turnover rates hit new highs,'''' the HR consultancy firm said. ''''In an environment where employees can achieve a pay rise of between 40 per cent and 50 per cent by moving to a competitor, they are unlikely to stay put,'''' HayGroup added. In the year 2007, the middle management level witnessed the maximum increase in average annual base salary (16 per cent), while supervisory, senior management and the executive level had an average annual increase of 14 per cent in their base salaries.
Physical And Social Infrastructure Development
The annual Plan of Tripura for the fiscal 2008-09 has been estimated at Rs 1,450 crore, inclusive of the additional Central assistance of Rs 110 crore of projects of particular interest to the State. This was accorded here at a meeting between the Planning Commission Deputy Chairman, Mr Montek Singh Ahluwalia, and the Chief Minister of Tripura, Mr Manik Sarkar. Mr Ahluwalia said that despite constraints the State has been performing fine in all sectors. The State was recommended to connect education with employability and to explore the possibilities for further expanding public private partnership in the development of both physical and social infrastructure.
Indian Rupee At 40.16/17 Per Dollar
The Indian rupee on April 28 weakened by four paise to end at 40.16/17 per dollar on sustained demand for the greenback by oil refiners amid a fresh surge in global crude oil prices. Dealers said the market was cautious ahead of April 29''s announcement of annual credit policy by the Reserve Bank and the meeting of the US Federal Reserve on April 29-30. The domestic unit moved in a wide range of 40.1 and 40.2150 during the day after resuming on a promising note at 40.10/12 a dollar from its last close of 40.12/13.
Monday, April 28, 2008
Many Steps To Rein In Inflation
With inflation again rising to 7.33 per cent for the week ended April 12, up from 7.14 per cent, the United Progressive Alliance government has once again come under pressure to take some more fiscal and administrative measures to rein in prices.
The rise in inflation could result in the Reserve Bank of India (RBI) further tightening the money supply when it announces the annual monetary policy on April 29. The RBI had already announced a 0.50 per cent hike in Cash Reserve Ratio (mandatory cash deposits of banks), which would suck out Rs. 18,500 crore from the system.
In the Lok Sabha, Union Finance Minister P. Chidambaram said financial, monetary and administrative measures had been initiated to check inflation and more steps would be taken. Inflation rose, despite the high base of 6.34 per cent during this period last year, as global commodity prices continued to rise. It stood at 7.14 per cent the previous week. Among all important food items, the prices of jaggery (gur) surged by 12 per cent, followed by fish marine, sooji, oil cakes, maida, khandsari and coconut oil. However, vegetables turned cheaper, so did imported edible oil, on which the Centre cut duties on March 31.
The rise in inflation could result in the Reserve Bank of India (RBI) further tightening the money supply when it announces the annual monetary policy on April 29. The RBI had already announced a 0.50 per cent hike in Cash Reserve Ratio (mandatory cash deposits of banks), which would suck out Rs. 18,500 crore from the system.
In the Lok Sabha, Union Finance Minister P. Chidambaram said financial, monetary and administrative measures had been initiated to check inflation and more steps would be taken. Inflation rose, despite the high base of 6.34 per cent during this period last year, as global commodity prices continued to rise. It stood at 7.14 per cent the previous week. Among all important food items, the prices of jaggery (gur) surged by 12 per cent, followed by fish marine, sooji, oil cakes, maida, khandsari and coconut oil. However, vegetables turned cheaper, so did imported edible oil, on which the Centre cut duties on March 31.
Ahmadinejad Visit To Boost Indo-Iran Ties
When Iranian President Mahmoud Ahmadinejad stops over in New Delhi on Tuesday for a few hours, the visit - his first after assuming power in Tehran nearly three years ago - will be watched keenly not only in this country but the rest of the world, particularly the United States. With the India-US nuclear deal slipping into limbo, the Manmohan Singh government has shrewdly sensed the importance of reaffirming its ties with Iran, both as a placatory gesture towards its Leftist allies opposing the nuclear deal and as a pragmatic alternative source of energy for the country''s growing economy.
With decks cleared for the construction of the US-backed Turkmenistan-Afghanistan-Pakistan-India pipeline, India is now focusing on the pricing issue with Tehran and transit fee with Islamabad to get the $7 billion Iran-Pakistan-India pipelines off the ground. This could prove crucial for the country''s energy security if the nuclear deal does not get through. Oil ministers of India and Pakistan met in Islamabad last week and agreed to sign a bilateral agreement and to start construction of the pipeline by 2010. India also wants to put back on track a floundering $25 billion deal for getting 5 million tonnes a year of LNG from Iran for the next 25 years.
With decks cleared for the construction of the US-backed Turkmenistan-Afghanistan-Pakistan-India pipeline, India is now focusing on the pricing issue with Tehran and transit fee with Islamabad to get the $7 billion Iran-Pakistan-India pipelines off the ground. This could prove crucial for the country''s energy security if the nuclear deal does not get through. Oil ministers of India and Pakistan met in Islamabad last week and agreed to sign a bilateral agreement and to start construction of the pipeline by 2010. India also wants to put back on track a floundering $25 billion deal for getting 5 million tonnes a year of LNG from Iran for the next 25 years.
Smes Asked For Help To Face Inflation
Hit by increasing input costs and rentals, the small and medium enterprises (SMEs) in Karnataka have asked a hand-holding exercise by the government to wriggle out of the economic crisis. The SMEs have asked the government to help decrease interest rates on bank loans and to create more industrial estates. The rates of raw materials comprising steel and polymers have gone up by 35-40 per cent in the last coule of months and that has made it difficult for SMEs to survive, said Karnataka Small Scale Industries Association (KASSIA).
Rs. 1,600-Crore Package For J&K Refugees
Prime Minister Manmohan Singh on April 25 announced a Rs. 1,600-crore economic package for refugees in Jammu and Kashmir and offered sops for migrants willing to return to the State. Speaking in this Harappan city, which symbolises the common civilisational heritage of India and Pakistan, Dr. Singh said more steps would be taken to improve relations so that the neighbours could live in a relationship of permanent friendship.
He sent a clear message to Pakistan that his government was committed to improving relations with that country and the peace process would continue with the new democratic regime there. Earlier, Dr. Singh inaugurated the country''s longest cantilever bridge over the Chenab which connects Rajouri and Poonch districts with the rest of the country.
He sent a clear message to Pakistan that his government was committed to improving relations with that country and the peace process would continue with the new democratic regime there. Earlier, Dr. Singh inaugurated the country''s longest cantilever bridge over the Chenab which connects Rajouri and Poonch districts with the rest of the country.
Rupee Gains 5 Paise Against Dollar
The Indian rupee gained five paise on Friday at 40.12/13 against the greenback as the strong equity markets raised hopes of fresh capital inflows, major driver behind the local currency, amid easing oil prices.
The domestic unit moved widely in a range of 40.1050 and 40.2450 on alternate bouts of dollar buying and selling during the day after resuming steady at its overnight closing level of 40.17/18 a dollar. Rupee drew support from strong equity market where the benchmark Sensex on Bombay Stock Exchange rose by 405 points or 2.42 per cent at at 17,125.98 points, a level not seen in almost two months.
Forex dealers said oil companies were buying dollars ahead of the month-end for their monthly import payments. However, demand for the American currency was well matched as exporters sold dollar at the day''s higher levels, said a dealer with a foreign bank. A fall in global oil prices also had a soothing impact on the rupee sentiment. World oil prices, which had threatened to break the symbolic 120-dollar-a-barrel level, were traded at USD 115.60 per barrel in Asian trade today following a recovery US dollar and rise in US crude stockpiles.
The domestic unit moved widely in a range of 40.1050 and 40.2450 on alternate bouts of dollar buying and selling during the day after resuming steady at its overnight closing level of 40.17/18 a dollar. Rupee drew support from strong equity market where the benchmark Sensex on Bombay Stock Exchange rose by 405 points or 2.42 per cent at at 17,125.98 points, a level not seen in almost two months.
Forex dealers said oil companies were buying dollars ahead of the month-end for their monthly import payments. However, demand for the American currency was well matched as exporters sold dollar at the day''s higher levels, said a dealer with a foreign bank. A fall in global oil prices also had a soothing impact on the rupee sentiment. World oil prices, which had threatened to break the symbolic 120-dollar-a-barrel level, were traded at USD 115.60 per barrel in Asian trade today following a recovery US dollar and rise in US crude stockpiles.
Saturday, April 26, 2008
Inflation Climbs To 7.33% But Price Line Holds Steady
NEW DELHI: Inflation climbed to 7.33% for the week ended April 12, as measured by change in the wholesale price index (WPI) from the level of the WPI for the corresponding week in 2007. This is higher than the previous week’s 7.14%, but lower than the 7.41% peak reached in the week ended March 29.
What is heartening, however, is the price index has hardly budged from the level attained at the end of the previous week, suggesting that the measures initiated by the government to hold the price line have begun to take effect. The change in the WPI from the level attained for the week ended May 5 was just 0.13%.
The index for fuels and manufacturing remained static. While the index for primary articles moved up 0.47% over the week, that for the all-important sub-category of foods moved up a mere 0.04%.
The picture of a virtually-static price index yielding significant levels of inflation on a year-on-year basis has led experts to say the effect of a low base, against which the comparison is being made, is responsible for the high level of inflation this week. Looking at the change over a year, the price index has moved up for all the categories including primary articles (8.17%), manufactured goods (7.16%) and fuel, power, light and lubricants group (6.81%). Experts say the low base effect will continue till October.
“This week, the rise in inflation can be attributed to low base effect to some extent. Last year, during the week ended April 14, 2007, the index fell marginally to 211.4 from 211.5 the previous week. Despite this, WPI rose 0.1%, only the inflation went up to 7.33%,” Crisil chief economist D K Joshi said.
“Last year, from April onwards, the inflation rate had started to decline. While in April 2007, it was ruling at 6%, by end-October 2007, it came down to 3.1%. Thus, it is highly likely that till October, even a small increase in the index during the corresponding week this year will lead to higher inflation. The trend may persist till the year-end,” Axis Bank vice-president Saugata Bhattacharya said.
“It doesn’t mean the fiscal measures taken by the government will not yield result. The better food crop projection indicates that prices may soften. However, high global commodity prices can neutralise the cooling-off effect on prices due to the slew of fiscal measures taken by the government,” he said.
This week, while crude touched the all-time high of $118 per barrel mark, rice prices too continue to remain at higher level of $1,200 per tonne in the international market. However, wheat prices softened to $9 per bushel from $12 a bushel in the backdrop of expected better crop this year.
Despite the fiscal measures that government could have taken to rein in price rise, inflation continues to remain at three-year-high level. It is expected RBI may announce a change in one of its policy rates, the repo rate. These are the rates at which RBI lends (repo) and borrows (reverse repo) from the banks in order to manage the liquidity and maintain the price stability.
The finance minister P Chidambaram on Friday said in Lok Sabha that every measure within the power of the government was being taken and would be taken to calm inflation. “I am confident inflation will moderate over time,” Mr Chidambaram said, adding that it was being largely driven by high international commodity and food prices. Earlier, he said the central bank may introduce more measures in its April 29 monetary policy announcement to contain inflation.
“Though the measures to contain inflation may result in moderation in the economic growth, it is the endeavour of the government to sustain the momentum of high growth with price stability,” he added.
While the government has asked the steel industry to hold the price line, so far no step has been taken regarding containing the iron ore prices, the main input of steel industry that has surged 47.09% over a year.
Prime minister Manmohan Singh on Wednesday said the government will take all possible steps to curb inflation, including increasing the procurement of food grain.
Standard and Poor’s chief economist Subir Gokarn said, “It’s almost three weeks since government started its anti-inflation campaign. However, the inflation continues to maintain its three-high level this week too. Thus, it is highly likely that RBI may go for repo rate hike and it will mean that the growth forecasts may correspondingly go down.”
Higher food and energy cost are stoking inflation across the region. Prices in Singapore jumped the most in 26 years in March, Japan’s rose at the fastest pace in a decade, and inflation in Australia topped 4% for the first time in seven years. Vietnamese consumer prices rose in April at the fastest pace since at least 1992.
On April 17, RBI raised cash reserve ratio to a seven-year high of 8% from 7.5%. The move reduces the supply of money in the financial system by forcing commercial banks to park more money with the central bank.
“At this point, we are talking about a GDP growth rate of 8.1%, assuming no increase in interest rates. However, if interest rates are hiked, I think a more pessimistic forecast may be justifiable, around 8%, or 7.5-8% if they take the range,” Mr Gokarn said.
It is expected RBI may prefer to go for sector-specific measures like raising the margin for collaterised credit to traders in commodities or bring down the tenure of such credit facilities so that further rollover or continuation can be done only after the end-use supervision. Meanwhile, RBI may ease the credit flow to the agricultural sector to boost production which has slowed down.
Some even expressed the possibility of further add-ons in the list of commodities that are barred from trading in the commodities exchange.
“There is no doubt this time that the pressure on prices is the outcome of the supply-side pressures. However, steep rise in prices can be attributed to some extent to futures trading in international market. Futures reflect what people think will happen. Now, as in the past year, the perception that prices of food commodities will continue to rise in the backdrop of strong demand and low supply remained strong, traders hold their deliveries that created shortage and thus led to price rise in spot market,” HDFC bank chief economist Abheek Barua said.
During the week under review the index of primary articles which mainly includes food items and non food industrial inputs went up by 0.5% week-on week. although price lower prices of gram(3%) and barley, arhar, masur, pork and condiments and spices (1% each) declined, the index of mineral group rose by 5.8% as compared to previous week due to higher prices of iron ore (6%) and other minerals (7%). The Y-o-Y rise in iron ore prices went up to 47.09%.
However, the index of manufactured goods includes base metals and alloys steel and iron, cement, remained unchanged week-on week. While the prices index of edible oils went down by 1.6% on week on week basis the index of basic metals and alloys remained consta alnog with of sttl and ioron. However Year on Year rise is significant-edible oils (14.69%) , metals and alloys (20.14%) and steel and iron (34.15%).
What is heartening, however, is the price index has hardly budged from the level attained at the end of the previous week, suggesting that the measures initiated by the government to hold the price line have begun to take effect. The change in the WPI from the level attained for the week ended May 5 was just 0.13%.
The index for fuels and manufacturing remained static. While the index for primary articles moved up 0.47% over the week, that for the all-important sub-category of foods moved up a mere 0.04%.
The picture of a virtually-static price index yielding significant levels of inflation on a year-on-year basis has led experts to say the effect of a low base, against which the comparison is being made, is responsible for the high level of inflation this week. Looking at the change over a year, the price index has moved up for all the categories including primary articles (8.17%), manufactured goods (7.16%) and fuel, power, light and lubricants group (6.81%). Experts say the low base effect will continue till October.
“This week, the rise in inflation can be attributed to low base effect to some extent. Last year, during the week ended April 14, 2007, the index fell marginally to 211.4 from 211.5 the previous week. Despite this, WPI rose 0.1%, only the inflation went up to 7.33%,” Crisil chief economist D K Joshi said.
“Last year, from April onwards, the inflation rate had started to decline. While in April 2007, it was ruling at 6%, by end-October 2007, it came down to 3.1%. Thus, it is highly likely that till October, even a small increase in the index during the corresponding week this year will lead to higher inflation. The trend may persist till the year-end,” Axis Bank vice-president Saugata Bhattacharya said.
“It doesn’t mean the fiscal measures taken by the government will not yield result. The better food crop projection indicates that prices may soften. However, high global commodity prices can neutralise the cooling-off effect on prices due to the slew of fiscal measures taken by the government,” he said.
This week, while crude touched the all-time high of $118 per barrel mark, rice prices too continue to remain at higher level of $1,200 per tonne in the international market. However, wheat prices softened to $9 per bushel from $12 a bushel in the backdrop of expected better crop this year.
Despite the fiscal measures that government could have taken to rein in price rise, inflation continues to remain at three-year-high level. It is expected RBI may announce a change in one of its policy rates, the repo rate. These are the rates at which RBI lends (repo) and borrows (reverse repo) from the banks in order to manage the liquidity and maintain the price stability.
The finance minister P Chidambaram on Friday said in Lok Sabha that every measure within the power of the government was being taken and would be taken to calm inflation. “I am confident inflation will moderate over time,” Mr Chidambaram said, adding that it was being largely driven by high international commodity and food prices. Earlier, he said the central bank may introduce more measures in its April 29 monetary policy announcement to contain inflation.
“Though the measures to contain inflation may result in moderation in the economic growth, it is the endeavour of the government to sustain the momentum of high growth with price stability,” he added.
While the government has asked the steel industry to hold the price line, so far no step has been taken regarding containing the iron ore prices, the main input of steel industry that has surged 47.09% over a year.
Prime minister Manmohan Singh on Wednesday said the government will take all possible steps to curb inflation, including increasing the procurement of food grain.
Standard and Poor’s chief economist Subir Gokarn said, “It’s almost three weeks since government started its anti-inflation campaign. However, the inflation continues to maintain its three-high level this week too. Thus, it is highly likely that RBI may go for repo rate hike and it will mean that the growth forecasts may correspondingly go down.”
Higher food and energy cost are stoking inflation across the region. Prices in Singapore jumped the most in 26 years in March, Japan’s rose at the fastest pace in a decade, and inflation in Australia topped 4% for the first time in seven years. Vietnamese consumer prices rose in April at the fastest pace since at least 1992.
On April 17, RBI raised cash reserve ratio to a seven-year high of 8% from 7.5%. The move reduces the supply of money in the financial system by forcing commercial banks to park more money with the central bank.
“At this point, we are talking about a GDP growth rate of 8.1%, assuming no increase in interest rates. However, if interest rates are hiked, I think a more pessimistic forecast may be justifiable, around 8%, or 7.5-8% if they take the range,” Mr Gokarn said.
It is expected RBI may prefer to go for sector-specific measures like raising the margin for collaterised credit to traders in commodities or bring down the tenure of such credit facilities so that further rollover or continuation can be done only after the end-use supervision. Meanwhile, RBI may ease the credit flow to the agricultural sector to boost production which has slowed down.
Some even expressed the possibility of further add-ons in the list of commodities that are barred from trading in the commodities exchange.
“There is no doubt this time that the pressure on prices is the outcome of the supply-side pressures. However, steep rise in prices can be attributed to some extent to futures trading in international market. Futures reflect what people think will happen. Now, as in the past year, the perception that prices of food commodities will continue to rise in the backdrop of strong demand and low supply remained strong, traders hold their deliveries that created shortage and thus led to price rise in spot market,” HDFC bank chief economist Abheek Barua said.
During the week under review the index of primary articles which mainly includes food items and non food industrial inputs went up by 0.5% week-on week. although price lower prices of gram(3%) and barley, arhar, masur, pork and condiments and spices (1% each) declined, the index of mineral group rose by 5.8% as compared to previous week due to higher prices of iron ore (6%) and other minerals (7%). The Y-o-Y rise in iron ore prices went up to 47.09%.
However, the index of manufactured goods includes base metals and alloys steel and iron, cement, remained unchanged week-on week. While the prices index of edible oils went down by 1.6% on week on week basis the index of basic metals and alloys remained consta alnog with of sttl and ioron. However Year on Year rise is significant-edible oils (14.69%) , metals and alloys (20.14%) and steel and iron (34.15%).
Large CCI Pay Checks Irk Finmin
NEW DELHI: Despite the government’s oft-repeated concern about cartels pushing up prices of key commodities, the competition regulator will not get the teeth to investigate them soon.
The finance ministry has raised objections to the proposed pay scale of the members and the chairman of the Competition Commission of India (CCI), which is more attractive than that of government officials. The ministry of corporate affairs wants to hire experts who could do complex economic analysis for investigation and adjudication, which may not be possible with the pay scale that exists.
A regulator can effectively function only from a position of strength, for which the right set of skills is very essential. The government needs to offer competitive package for the brightest minds in town, the ministry believes.
Some sections of the government are already trying to tackle the difficulty in hiring talent.
The capital market regulator, for example, is considering to set up a specialised arm to track down complex market manipulations. Sebi wants to set up a separate legal entity because it would not be possible to offer high salaries to professionals if they are administratively a part of Sebi.
The government is also contemplating to let six key ministries, which execute public-private partnerships in infrastructure, hire professional transaction advisors at attractive pay packets.
The finance ministry is understood to have favoured this idea. The ministry of corporate affairs’ proposals were made before the sixth-pay commission submitted its report to the government, recommending higher salaries for officials in regulators like the CCI, Sebi and the Central Electricity Regulatory Commission.
The finance ministry has raised objections to the proposed pay scale of the members and the chairman of the Competition Commission of India (CCI), which is more attractive than that of government officials. The ministry of corporate affairs wants to hire experts who could do complex economic analysis for investigation and adjudication, which may not be possible with the pay scale that exists.
A regulator can effectively function only from a position of strength, for which the right set of skills is very essential. The government needs to offer competitive package for the brightest minds in town, the ministry believes.
Some sections of the government are already trying to tackle the difficulty in hiring talent.
The capital market regulator, for example, is considering to set up a specialised arm to track down complex market manipulations. Sebi wants to set up a separate legal entity because it would not be possible to offer high salaries to professionals if they are administratively a part of Sebi.
The government is also contemplating to let six key ministries, which execute public-private partnerships in infrastructure, hire professional transaction advisors at attractive pay packets.
The finance ministry is understood to have favoured this idea. The ministry of corporate affairs’ proposals were made before the sixth-pay commission submitted its report to the government, recommending higher salaries for officials in regulators like the CCI, Sebi and the Central Electricity Regulatory Commission.
Centre To Clear Drawback Dues Worth Rs 500 Cr
NEW DELHI: In a month-long drive to honour pending dues, claims of drawback payment worth Rs 500 crore will be examined and cleared in May. These pending claims are the reimbursements made to exporters by the government in lieu of taxes paid on inputs.
Exporters have asked the Central Board of Excise & Customs (CBEC) to honour claims on the basis of proof of shipments made and payments received and not to demand unnecessary documents that lead to delays.
The drawback clearance month is jointly organised by the customs department and the Delhi Exporters Association (DEA). During the month, customs officials dedicatedly worked towards clearing all past claims and making payments.
Exporters, however, say a lot of claims are unduly postponed further when customs officials ask for additional documentary proof of transactions. “Once goods have been shipped and the payments realised, there is no need for Customs to ask for additional documentary proof. Drawback should be given instantly,” said DEA president SP Agarwal.
Mr Agarwal said that CBEC chairman PC Jha agreed to get the issue examined and take appropriate action. Another issue raised by exporters was the absence of a proper mechanism of intimating exporters if their claims were rejected by the Customs for some reason.
“On several occasions, exporters get to know that their claims have been rejected and they are supposed to file supplementary claims only when they enquire about delayed payments.
There is also a risk of the claim lapsing if exporters don’t take action on time,” Mr Agarwal said. DEA has asked CBEC to ensure that intimations of rejections are made in a timely manner.
Exporters have asked the Central Board of Excise & Customs (CBEC) to honour claims on the basis of proof of shipments made and payments received and not to demand unnecessary documents that lead to delays.
The drawback clearance month is jointly organised by the customs department and the Delhi Exporters Association (DEA). During the month, customs officials dedicatedly worked towards clearing all past claims and making payments.
Exporters, however, say a lot of claims are unduly postponed further when customs officials ask for additional documentary proof of transactions. “Once goods have been shipped and the payments realised, there is no need for Customs to ask for additional documentary proof. Drawback should be given instantly,” said DEA president SP Agarwal.
Mr Agarwal said that CBEC chairman PC Jha agreed to get the issue examined and take appropriate action. Another issue raised by exporters was the absence of a proper mechanism of intimating exporters if their claims were rejected by the Customs for some reason.
“On several occasions, exporters get to know that their claims have been rejected and they are supposed to file supplementary claims only when they enquire about delayed payments.
There is also a risk of the claim lapsing if exporters don’t take action on time,” Mr Agarwal said. DEA has asked CBEC to ensure that intimations of rejections are made in a timely manner.
Sugar Mills To Get Free Play
NEW DELHI: The government may go in for total decontrol of sugar in one sweep. By scrapping all curbs in one go, instead of the earlier plan for phased decontrol, the Centre will let Indian sugar mills compete more efficiently from the next season onwards.
The liberalisation will mean mills will be able to sell sugar freely in the market. With no cane area reservation, mills will benefit from a direct link between the prices of cane and sugar. The matter is now under the consideration of Prime Minister Manmohan Singh.
Agriculture minister Sharad Pawar had earlier suggested a two-phase roadmap for decontrolling sugar. But the Prime Minister’s Economic Advisory Committee had rejected his proposal, calling it “distorting” in its present form. Instead, it had argued for decontrol at one go.
In his comments sent to the Prime Minister, the panel’s chairman, C Rangarajan, had stated: “The Pawar proposal takes up the easier part of the regulatory reform, involving the net fiscal outgo, in the first phase. While the more difficult aspect of doing away with the cane reservation system and the distribution criteria between factories have been proposed in the second phase, after the receipt of the report of the expert group on the sugar industry.”
“It is advisable that a decision on the regulatory reform of the sugar industry be taken at one go and implemented together,” Mr Rangarajan said in his report. As the expert group on the sugar industry will be submitting its report in the next few months, a view on the entire gamut of reforms will be taken simultaneously.
According to the proposal made by the ministry of agriculture, phase one would have focused on removing the 10% levy on mills, with the government switching to buying sugar from the open market for the fair-price shops.
This would have allowed mills to sell their entire produce freely in the market, by doing away with the monthly release-order mechanism. In turn, the government would have used customs tariffs to stabilise prices.
According to the proposal, the Central Sales Tax (CST) Act would also have been amended to include denatured alcohol on the list of goods of special importance, to make ethanol production and movement ‘hassle-free’ across the country.
In phase two, the ministry had proposed doing away with the cane reservation system and the distance criteria between mills. This would set up a framework for a uniform cane price, linked to sugar prices within the statutory minimum price system. It would have also done away with all the remaining curbs on the industry, including repealing/amending of the Sugarcane Control Order; the Sugar Control Order, 1966; the Levy Sugar Supply Control Order, 1979; and the Sugar Packing and Marking Order, 1970.
The current proposal to decontrol the sugar industry in one go may be well timed. The industry is banking on prices to climb in 2009, as low cane planting and lower sugar production globally will reduce the excess supply. Also, with crude oil prices hovering around $120/barrel, the ethanol industry in Brazil may consume more cane than the sugar factories.
Such a scenario would make it easier for Indian mills to compete more efficiently, without any likelihood of a steep fall in sugar prices. Farmers will be able to get better prices for cane once their fortunes are no longer tied to just one mill. Consumers, too, will get a better deal as supply will no longer be artificially controlled by the government.
The liberalisation will mean mills will be able to sell sugar freely in the market. With no cane area reservation, mills will benefit from a direct link between the prices of cane and sugar. The matter is now under the consideration of Prime Minister Manmohan Singh.
Agriculture minister Sharad Pawar had earlier suggested a two-phase roadmap for decontrolling sugar. But the Prime Minister’s Economic Advisory Committee had rejected his proposal, calling it “distorting” in its present form. Instead, it had argued for decontrol at one go.
In his comments sent to the Prime Minister, the panel’s chairman, C Rangarajan, had stated: “The Pawar proposal takes up the easier part of the regulatory reform, involving the net fiscal outgo, in the first phase. While the more difficult aspect of doing away with the cane reservation system and the distribution criteria between factories have been proposed in the second phase, after the receipt of the report of the expert group on the sugar industry.”
“It is advisable that a decision on the regulatory reform of the sugar industry be taken at one go and implemented together,” Mr Rangarajan said in his report. As the expert group on the sugar industry will be submitting its report in the next few months, a view on the entire gamut of reforms will be taken simultaneously.
According to the proposal made by the ministry of agriculture, phase one would have focused on removing the 10% levy on mills, with the government switching to buying sugar from the open market for the fair-price shops.
This would have allowed mills to sell their entire produce freely in the market, by doing away with the monthly release-order mechanism. In turn, the government would have used customs tariffs to stabilise prices.
According to the proposal, the Central Sales Tax (CST) Act would also have been amended to include denatured alcohol on the list of goods of special importance, to make ethanol production and movement ‘hassle-free’ across the country.
In phase two, the ministry had proposed doing away with the cane reservation system and the distance criteria between mills. This would set up a framework for a uniform cane price, linked to sugar prices within the statutory minimum price system. It would have also done away with all the remaining curbs on the industry, including repealing/amending of the Sugarcane Control Order; the Sugar Control Order, 1966; the Levy Sugar Supply Control Order, 1979; and the Sugar Packing and Marking Order, 1970.
The current proposal to decontrol the sugar industry in one go may be well timed. The industry is banking on prices to climb in 2009, as low cane planting and lower sugar production globally will reduce the excess supply. Also, with crude oil prices hovering around $120/barrel, the ethanol industry in Brazil may consume more cane than the sugar factories.
Such a scenario would make it easier for Indian mills to compete more efficiently, without any likelihood of a steep fall in sugar prices. Farmers will be able to get better prices for cane once their fortunes are no longer tied to just one mill. Consumers, too, will get a better deal as supply will no longer be artificially controlled by the government.
Govt Sifting Through Farm Loan Waiver Suggestions: FM
NEW DELHI: Finance Minister P Chidambaram on Wednesday said “every” suggestion made on the ambitious farm waiver scheme is under examination. He said he will discuss the implementation of the scheme with the CEOs of state-owned banks in his meeting on May 1.
“Every suggestion is under examination,” he said replying supplementaries in the Lok Sabha on the farm loan waiver scheme. Members had asked the minister whether the government was considering seeking increasing the land holding limit from two hectares to five hectares for farmers to be eligible for the scheme.
“I can only do what is doable and affordable,” Mr Chidambaram said in reply to demands from several members to consider extending the scheme to farmers with landholdings up to five hectares. “The loans will be waived by June 30, 2008,” he said.
On concerns that banks were not sanctioning loans to farmers citing the scheme, Mr Chidambaram said the banks were being sensitised on the matter. The minister said he has convened a meeting of chairmen and managing directors of all banks in the first week of May to discuss writing off agricultural debts. Mr Chidambaram said that the RBI guidelines on the loan waiver were being formulated.
It may be pointed that Agriculture Minister Sharad Pawar had on April 21 ruled out taking “new responsibilities” like increasing the coverage of farm loan waiver scheme until the present package to write off Rs 60,000 crore agriculture debts is implemented.
Days after the budgetary announcement, Congress General Secretary Rahul Gandhi had specifically suggested that there should not be one landholding ceiling nor should there be a single cut-off date.
The government is also working on expanding the national crop insurance scheme which was introduced by the previous NDA government. Mr Chidambaram said that the agriculture ministry and the Planning Commission are yet to agree on the modifications for the insurance scheme. He said that the government was ready to fund the scheme as soon the Ministry of Agriculture and the Planning Commission agree on the modifications.
“If we receive a modified scheme government will be ready to fund it,” he said intervening in the debate on Finance Bill in the Lok Sabha and added “we want to move from large unit to small unit under the crop insurance.”
A member of the opposition party alleged that though government had announced Rs 60,000 crore farm loan waiver in the budget, yet it was not ready to provide about Rs 10,000 crore for the national crop insurance.
The crop insurance, if implemented at the village level, could save the lives of thousands of farmers who were forced to commit suicide every year due to failure of crop, he said. There were suggestions that the village should be made the unit area under the crop insurance scheme as against the block as per existing rules.
“Every suggestion is under examination,” he said replying supplementaries in the Lok Sabha on the farm loan waiver scheme. Members had asked the minister whether the government was considering seeking increasing the land holding limit from two hectares to five hectares for farmers to be eligible for the scheme.
“I can only do what is doable and affordable,” Mr Chidambaram said in reply to demands from several members to consider extending the scheme to farmers with landholdings up to five hectares. “The loans will be waived by June 30, 2008,” he said.
On concerns that banks were not sanctioning loans to farmers citing the scheme, Mr Chidambaram said the banks were being sensitised on the matter. The minister said he has convened a meeting of chairmen and managing directors of all banks in the first week of May to discuss writing off agricultural debts. Mr Chidambaram said that the RBI guidelines on the loan waiver were being formulated.
It may be pointed that Agriculture Minister Sharad Pawar had on April 21 ruled out taking “new responsibilities” like increasing the coverage of farm loan waiver scheme until the present package to write off Rs 60,000 crore agriculture debts is implemented.
Days after the budgetary announcement, Congress General Secretary Rahul Gandhi had specifically suggested that there should not be one landholding ceiling nor should there be a single cut-off date.
The government is also working on expanding the national crop insurance scheme which was introduced by the previous NDA government. Mr Chidambaram said that the agriculture ministry and the Planning Commission are yet to agree on the modifications for the insurance scheme. He said that the government was ready to fund the scheme as soon the Ministry of Agriculture and the Planning Commission agree on the modifications.
“If we receive a modified scheme government will be ready to fund it,” he said intervening in the debate on Finance Bill in the Lok Sabha and added “we want to move from large unit to small unit under the crop insurance.”
A member of the opposition party alleged that though government had announced Rs 60,000 crore farm loan waiver in the budget, yet it was not ready to provide about Rs 10,000 crore for the national crop insurance.
The crop insurance, if implemented at the village level, could save the lives of thousands of farmers who were forced to commit suicide every year due to failure of crop, he said. There were suggestions that the village should be made the unit area under the crop insurance scheme as against the block as per existing rules.
Friday, April 25, 2008
Oil Prices Fall Further
SINGAPORE: World oil prices, which had threatened to break the symbolic $120 a barrel level, fell further on Friday after a strengthening US dollar and rising US crude stockpiles prompted traders to lock in profits, dealers said.
New York's main oil futures contract, light sweet crude for delivery in June, slid 46 cents to $115.60 per barrel.
The benchmark contract closed down $2.24 at $116.06 a barrel during floor trading yesterday at the New York Mercantile Exchange.
The May contract had struck a record high of $119.90 before expiring on Tuesday.
London's Brent North Sea crude for June delivery yesterday settled $2.12 lower at $114.34 a barrel after earlier hitting a record intraday peak of $116.87.
In the foreign exchange market yesterday, the dollar gained in value against the euro amid speculation the US Federal Reserve soon might end its campaign of cutting interest rates.
The single European currency traded below $1.57 today, three days after it had crossed $1.60 for the first time.
"It seems that a larger-than-expected increase in US crude inventories during last week and a stronger dollar were good excuses for some investors to book profits," Sucden analyst Andrey Kryuchenkov said.
A stronger US currency makes dollar-priced crude more expensive for foreign buyers, tending to discourage demand.
Most analysts expect the Fed to lower its key interest rate by a quarter point at its policy-setting meeting next Tuesday and Wednesday.
New York's main oil futures contract, light sweet crude for delivery in June, slid 46 cents to $115.60 per barrel.
The benchmark contract closed down $2.24 at $116.06 a barrel during floor trading yesterday at the New York Mercantile Exchange.
The May contract had struck a record high of $119.90 before expiring on Tuesday.
London's Brent North Sea crude for June delivery yesterday settled $2.12 lower at $114.34 a barrel after earlier hitting a record intraday peak of $116.87.
In the foreign exchange market yesterday, the dollar gained in value against the euro amid speculation the US Federal Reserve soon might end its campaign of cutting interest rates.
The single European currency traded below $1.57 today, three days after it had crossed $1.60 for the first time.
"It seems that a larger-than-expected increase in US crude inventories during last week and a stronger dollar were good excuses for some investors to book profits," Sucden analyst Andrey Kryuchenkov said.
A stronger US currency makes dollar-priced crude more expensive for foreign buyers, tending to discourage demand.
Most analysts expect the Fed to lower its key interest rate by a quarter point at its policy-setting meeting next Tuesday and Wednesday.
US Subsidy Fuels Food Vs Energy Debate
NEW DELHI: When nations meet under the aegis of the United Nations’ Food and Agriculture Organisation (FAO) in early June to discuss the food crisis facing the world, the US, among the world’s largest producers and consumers of biofuels, is sure to come under pressure to gradually reduce the quantum of subsidies to biofuel raw materials, such as corn. Actually, the countries hit by the global food crisis are not going to brandish their sword for overnight dismantling of all subsidies for biofuels, which is clearly an impractical proposition at this juncture.
Instead, they would pitch for the establishment of a global market/trade regime with transparent standards for biofuels.
Concomitantly, this set of countries, including India, would also make a case for the lowering of trade barriers against imports from more natural biofuel exporters, such as Brazil which uses the relatively more efficient (since molasses are a byproduct) sugarcane route to biofuel.
Implicit in all this is the acknowledgement that subsidies for biofuels are anti-poor and that biofuels are among the key guzzlers of food acreage worldwide. Commodity analysts are already suggesting that some degree of automatic correction on the biofuel front, primarily in reaction to exceedingly high world food staple prices last year, would ensure that only a moderate hike in prices happens in 2008 compared to the major spikes seen worldwide, including in India, in 2007.
But with increased demand for alternative fuel likely in the future, prices will be driven up for such produce, and is therefore likely to remain a big threat in the coming years to area under food crops.
Thanks to the US’ heavy subsidies to farmers for growing energy crops, mainly maize, often at the expense of soyabean and wheat, US farmers have massively shifted their cultivation towards biofuel feedstocks. About 30% of US’ maize produce will go into ethanol in 2008, rather than into the world food and feed market, according to an April 2008 IFPRI paper Rising Food Prices: What Should Be Done? Even the growing world population demands more food of different kind and rapid climatic changes.
Speculative capital attracted by fast moving commodity prices added to the pressure on food prices. In short, the agenda is likely to tackle head-on the current worrying mismatch between agriculture and energy and seek to establish a more balanced equation between the two which focuses on the food needs of the poor worldwide and insulates them sufficiently from severe adverse fallout from the ongoing crisis.
Brazil and the US dominate today’s ethanol market. Ethanol accounts for over 90% of the biofuel production currently. The EU, on the other hand, is the world’s largest producer and consumer of biodiesel. With oil prices shooting up (now it is $119/barrel), both regions have contributed to boosting ethanol and biofuel production from nil in 1991 to over 35 billion litres and over 3.5 billion litres, respectively by 2005.
But with key countries such as the US, EU, Brazil, India and China set to jack up their ethanol production by 16, 45, 8, 15 and 3%, respectively by 2010-11 and the USA, EU, Malaysia, Indonesia and Thailand set to notch up annual production of biodiesel by 19, 37, 248, 143 and 70%, respectively in the same period, it is high time that the real cost to world food security from the biofuel boom is assessed threadbare by a global forum.
That macro cost-benefit analysis would necessarily also consider the fact that while net production costs differ widely among nations, the cost of feedstock is still as high as 50-70% for ethanol and 70-80% for biodiesel. The prices of corn, rice, sugar, wheat, oilseeds have flared up in consonance with the price of crude oil between 1999 and 2007.
IFPRI projects that on the basis of actual plans and assumed expansions, the price of corn and oilseeds will go up by 3% and 8% respectively. If the expansion plans on biofuels are doubled by key countries, that could push up corn and oilseed prices by 13% and 17%, respectively. However, if ongoing research for alternative sources of eco-friendly fuel is neglected and does not bear fruit and biofuel expansion plans are nonetheless pursued, corn and oilseeds prices could go up between 20-41% and 26-71%, respectively by 2020.
An intelligent, commonly agreed biofuel policy with accountability by nations would have to be formulated. “Biofuel subsidies in the US and ethanol and biodiesel subsidies in the EU have proven to be misguided policies that have distorted world food markets. Subsidies on biofuel crops also act as an implicit tax on staple foods, on which the poor depend the most. Developed country farmers should make decisions about what to cultivate based not on subsidies but on world market prices for various commodities,” argues IFPRI DG Joachim von Braun.
Significantly, some analysts have argued for continued subsidies by the US, arguing that this is what keeps global food prices buoyant and presents a golden opportunity to developing countries with significant food output such as India to hike production and sell to the world.
In an April 10 paper by Heidi Fritschel republished in the ISN Security Watch article on The Price of Food: Global Crisis Ingredients, David King, secretary general of the International Federation of Agricultural Producers (IFAP) contends: “We agree that rising food prices are a golden opportunity to improve the poor farmers’ livelihood. However, this opportunity will not be realised if farmers are not organised in the market, constitute partners on policies to attract investment for modernising agriculture and provided with improved technology and infrastructure.”
Unfortunately, investments in agricultural infrastructure, institutions and science and technology take time to put into operation and bear fruit, points out Fritschel. In fact, there is no guarantee that small farmers will benefit from production increases and high prices. IFPRI researchers have suggested that high food prices may attract better-placed large farmers to compete for small farmer land and oust them.
Instead, they would pitch for the establishment of a global market/trade regime with transparent standards for biofuels.
Concomitantly, this set of countries, including India, would also make a case for the lowering of trade barriers against imports from more natural biofuel exporters, such as Brazil which uses the relatively more efficient (since molasses are a byproduct) sugarcane route to biofuel.
Implicit in all this is the acknowledgement that subsidies for biofuels are anti-poor and that biofuels are among the key guzzlers of food acreage worldwide. Commodity analysts are already suggesting that some degree of automatic correction on the biofuel front, primarily in reaction to exceedingly high world food staple prices last year, would ensure that only a moderate hike in prices happens in 2008 compared to the major spikes seen worldwide, including in India, in 2007.
But with increased demand for alternative fuel likely in the future, prices will be driven up for such produce, and is therefore likely to remain a big threat in the coming years to area under food crops.
Thanks to the US’ heavy subsidies to farmers for growing energy crops, mainly maize, often at the expense of soyabean and wheat, US farmers have massively shifted their cultivation towards biofuel feedstocks. About 30% of US’ maize produce will go into ethanol in 2008, rather than into the world food and feed market, according to an April 2008 IFPRI paper Rising Food Prices: What Should Be Done? Even the growing world population demands more food of different kind and rapid climatic changes.
Speculative capital attracted by fast moving commodity prices added to the pressure on food prices. In short, the agenda is likely to tackle head-on the current worrying mismatch between agriculture and energy and seek to establish a more balanced equation between the two which focuses on the food needs of the poor worldwide and insulates them sufficiently from severe adverse fallout from the ongoing crisis.
Brazil and the US dominate today’s ethanol market. Ethanol accounts for over 90% of the biofuel production currently. The EU, on the other hand, is the world’s largest producer and consumer of biodiesel. With oil prices shooting up (now it is $119/barrel), both regions have contributed to boosting ethanol and biofuel production from nil in 1991 to over 35 billion litres and over 3.5 billion litres, respectively by 2005.
But with key countries such as the US, EU, Brazil, India and China set to jack up their ethanol production by 16, 45, 8, 15 and 3%, respectively by 2010-11 and the USA, EU, Malaysia, Indonesia and Thailand set to notch up annual production of biodiesel by 19, 37, 248, 143 and 70%, respectively in the same period, it is high time that the real cost to world food security from the biofuel boom is assessed threadbare by a global forum.
That macro cost-benefit analysis would necessarily also consider the fact that while net production costs differ widely among nations, the cost of feedstock is still as high as 50-70% for ethanol and 70-80% for biodiesel. The prices of corn, rice, sugar, wheat, oilseeds have flared up in consonance with the price of crude oil between 1999 and 2007.
IFPRI projects that on the basis of actual plans and assumed expansions, the price of corn and oilseeds will go up by 3% and 8% respectively. If the expansion plans on biofuels are doubled by key countries, that could push up corn and oilseed prices by 13% and 17%, respectively. However, if ongoing research for alternative sources of eco-friendly fuel is neglected and does not bear fruit and biofuel expansion plans are nonetheless pursued, corn and oilseeds prices could go up between 20-41% and 26-71%, respectively by 2020.
An intelligent, commonly agreed biofuel policy with accountability by nations would have to be formulated. “Biofuel subsidies in the US and ethanol and biodiesel subsidies in the EU have proven to be misguided policies that have distorted world food markets. Subsidies on biofuel crops also act as an implicit tax on staple foods, on which the poor depend the most. Developed country farmers should make decisions about what to cultivate based not on subsidies but on world market prices for various commodities,” argues IFPRI DG Joachim von Braun.
Significantly, some analysts have argued for continued subsidies by the US, arguing that this is what keeps global food prices buoyant and presents a golden opportunity to developing countries with significant food output such as India to hike production and sell to the world.
In an April 10 paper by Heidi Fritschel republished in the ISN Security Watch article on The Price of Food: Global Crisis Ingredients, David King, secretary general of the International Federation of Agricultural Producers (IFAP) contends: “We agree that rising food prices are a golden opportunity to improve the poor farmers’ livelihood. However, this opportunity will not be realised if farmers are not organised in the market, constitute partners on policies to attract investment for modernising agriculture and provided with improved technology and infrastructure.”
Unfortunately, investments in agricultural infrastructure, institutions and science and technology take time to put into operation and bear fruit, points out Fritschel. In fact, there is no guarantee that small farmers will benefit from production increases and high prices. IFPRI researchers have suggested that high food prices may attract better-placed large farmers to compete for small farmer land and oust them.
FM In Pier Over Tax Code Delay
The Parliamentary Standing Committee on Finance has passed stenoses against the finance ministry for the delay in bringing in the draft direct tax code for legislation to replace the voluminous Income Tax Act, 1961.
The committee doubts to find that even one year after its recommendation, the amendment Bill is yet to be introduced in Parliament. The Bill will be introduced in Parliament after the feedback and suitable amendments.
The committee thinks that fairly long time has already been taken by the department on this matter. The committee had in 2006-07 suggested that the Bill amending the direct tax laws should be introduced for effective administration of the same laws.
The committee doubts to find that even one year after its recommendation, the amendment Bill is yet to be introduced in Parliament. The Bill will be introduced in Parliament after the feedback and suitable amendments.
The committee thinks that fairly long time has already been taken by the department on this matter. The committee had in 2006-07 suggested that the Bill amending the direct tax laws should be introduced for effective administration of the same laws.
Gujarat Sezs Looks For Rs 74,000cr Exports In 2009-10
The special economic zones (SEZs) based in Gujarat have anticipated exports to the tune of Rs 74,190.24 crore for the fiscal 2009-10. The expected exports from all SEZs in the country for 2007-08 are to the tune of Rs 67,088 crore. Of the 50-odd SEZs approved, so far, in Gujarat by the Centre, notifications have been issued for 20. Of these, six are multi-products, two for pharmaceuticals, apparel and IT-ITeS, and engineering products each, and one each concentrating on gems and jewellery, high-tech engineering products, power, textile garments, electronics products and chemicals. The multi-product SEZ, being established by Reliance Infrastructure Ltd at Jamnagar in a 1,765-hectare area, is projected to export products worth Rs 45,029 crore, while the Kandla SEZ, also a multi-product zone, would export products worth Rs 4,407 crore. In Gujarat, most of the SEZs are coming in the core manufacturing sector, while in other States these are mainly in the IT and ITeS-related services. By December 2009, investments to the tune of Rs 2,59,159 crore are hoped in these SEZs where 22 lakh new jobs are likely to be created.
Rupee Tumbles To Five-Week Low
The Indian rupee tumbled by another 12 paise to nearly five-week low of 40.17/18 against the American currency on April 24 as oil companies stepped up dollar purchases after oil prices hit a new record high April 24.Forex dealers said the local currency buckled under pressure after a promising start at 40.00/01 a dollar as oil refiners frantically covered dollars to meet their month-end import bills amid inadequate supplies. At the Interbank Foreign Exchange (forex) market, the rupee moved in a wide range of 40.00 and 40.1850 during the day as all factors worked against the Indian unit. Earlier in the month, the central bank preferred to hold rupee to around 39.90 level against dollar before raising the Cash Reserve Ratio by 50 basis points to 8.0 per cent in a bid to contain rising inflation rate.
Thursday, April 24, 2008
Montek Expects Inflation To Come Down
India''s top policy makers say inflation rate could fall substantially in the next two months as the impact of fiscal and monetary measures to tame inflation kicks in. Policy makers also caution that the government can''t be in an over reactive mode and the price trends in the next 2-3 weeks will give a definitive indicator. Montek Singh Ahluwalia, Deputy Chairman, Planning Commission, said that there is nothing alarming and inflation will fall in the next 60 days. Going by last week''s data and taking into account the gestation effect of all measures already taken, Montek says the most worrying phase on inflation may have passed. ''''I am hopeful that reduction in duties will lead to significant imports and thus curbing price rise, which will be evident in some weeks. Data on food grain production too suggests there will be a softening of prices in this area and the impact of monetary measures will roll out in some months,'''' said Ahluwalia.
Gold Rises On Firm Global Trend
Falling dollar demand against euro and rising crude oil prices pushed up demand of the silver and gold in the bullion market in New Delhi on April 23 to Rs 23,450 and Rs 112,080 respectively. Both the precious metals, silver and gold, rose on emergence of buying by stockists and jewellery fabricators on reports of a firm trend in the overseas market, traders said. Buying activity of gold was also boosted by the ongoing marriage season on reports of the precious metal rising in London. Gold rose following weakening of dollar against euro, which enhanced its demand as a safe haven for investors. Reports that it might continue to rise for next six years, as per a London-based bullion analyst company, also influenced trading sentiment. Standard gold and ornaments rose by Rs 80 each at Rs 12,080 and Rs 11,930 per 10 gram respectively. Sovereign, on the other hand, fell by Rs 25 at Rs 9850 per piece of eight gram on reduced offtake.
Direct Tax Collections Exceed Revised Estimates
The Centre''s net direct tax collections have crossed the revised estimate for 2007-08 and reached about Rs 3,09,065 crore, the Chairman of the Central Board of Direct Taxes (CBDT), Mr P.K. Misra, has said. The CBDT hopes the direct tax collections to surpass Rs 3,12,000 crore in 2007-08. Personal income-tax collections in 2007-08 have grew by 44 per cent to Rs 1,10,229 crore. Corporate tax collections increased 33 per cent to Rs 1,89,302 crore.
Rupee Ends At 40.05 Against Dollar
The rupee ended lower against the dollar on April 23 as there was offshore-related purchasing and short covering by traders. The rupee opened at 39.95/96 and reached a low of 40.08, before closing at 40.05/06, against the previous close of 39.95/96. The six-month premia closed at 2.33 per cent (2.86 per cent) and the 12-month at 1.99 per cent (2.26 per cent).
Wednesday, April 23, 2008
Rupee Ends At 39.96 Against Dollar
The rupee was range-bound against the dollar on April 22 as banks were wary of taking positions ahead of the monetary policy. The rupee opened at 39.94/95 and ended at 39.95/96, the same as the previous close. In the forward premia, the six-month premium closed at 2.86 per cent (3.09 per cent) and the 12-month at 2.26 per cent (2.38 per cent).
Canada Setting Up Trade Office In Hyderabad, Kolkata
Canada is to set up two new trade offices in Hyderabad and Kolkata, the Prime Minister, Mr Stephen Harper, has said. These new trade offices will expand Canada''s reach in India beyond our traditional concentration on the North. India''s boom is not just happening in the northern region, and Canada requires to be where all the action is, the Prime Minister said in a statement. The Prime Minister added that to further heighten trade and investment alliance, the Government will also post additional commissioners at the established offices in Mumbai and Delhi.
Govt Mulls Further Export Ban To Curb Inflation
Hinting at hard measures like further ban on exports to control rising prices, Finance Minister P Chidambaram has said inflation is also being stoked by cartel like behaviour in some sectors of Indian economy. Listing out a number of steps, including exports ban on non-basmati rice taken by the government, he told the Wall Street Journal in an interview that the government would consider further bans. Noting that soaring prices of rice and other basic food items are a matter of worry, Chindambaram said inflation is also being stoked by a mismatch of supply and demand and by cartel-like behaviour in some sectors of the economy.
The daily said that Indian government has cut some exports and taken actions to reduce food prices, such as banning the exports of non-basmati rice and hiking the export price of basmati variety. "As a short-term measure we will consider such bans, too," Chidambaram was quoted as saying. The minister told the daily that ministries of Steel and Commerce have proposed some export bans in steel, but further ban on food exports are less likely since "all export of food items is virtually banned" already.
The daily said that Indian government has cut some exports and taken actions to reduce food prices, such as banning the exports of non-basmati rice and hiking the export price of basmati variety. "As a short-term measure we will consider such bans, too," Chidambaram was quoted as saying. The minister told the daily that ministries of Steel and Commerce have proposed some export bans in steel, but further ban on food exports are less likely since "all export of food items is virtually banned" already.
Crisil Revises GDP Growth Forecast To 8.1pc
Rating agency Crisil has changed its GDP growth forecast to 8.1 per cent for 2008-09 from the earlier forecast of 8.5 per cent in view of the worsening inflation, interest rate and global growth outlook. Growth for sectors such as industry and services has also been adapted downwards to 8 per cent and 9.8 per cent respectively. As the current inflationary expectations are way beyond the Reserve Bank of India''s comfort zone of 4-5-5 per cent, a cut in key interest rates has been ruled out. Also, the recent reducing of global growth projections has led to revising growth projections downwards for 2008-09. The report said that inflation will remain high in the next few months due to high commodity prices globally.
Tuesday, April 22, 2008
AP Annual Plan Pegged At Rs 44,000cr
The annual plan outlay of Andhra Pradesh for 2008-09 has been estimated at Rs 44,000 crore, comprehensive of additional Central assistance of Rs 165 crore for projects of special interest to the State. This was accorded here on April 21 at a meeting between the Planning Commission Deputy Chairman, Mr Montek Singh Ahluwalia, and the Andhra Pradesh Chief Minister, Dr Y.S. Rajasekhara Reddy. Mr Ahluwalia said that the State was doing well in all sectors of economy and adverted to the State''s efforts for boosting private sector participation in social sectors including education and health in this regard. Complimenting the State on focused attention to agriculture and allied areas, he said fund flow to irrigation sector has gone up substantially during the last four years with the State posting impressive increase in yields.
The State Government was appreciated for introducing agriculture insurance scheme with village as a unit, loan to farmers on three per cent interest and aggressive agriculture extension programme. The Chief Minister said that last four years, the economy has climbed an accelerated growth trajectory because of bold policy initiative in major areas. The GSDP has registered the highest ever plan growth of 7.42 per cent. The growth rate for 2007-08 (first year of the Eleventh Plan) was expected to be 10.37 per cent.
The State Government was appreciated for introducing agriculture insurance scheme with village as a unit, loan to farmers on three per cent interest and aggressive agriculture extension programme. The Chief Minister said that last four years, the economy has climbed an accelerated growth trajectory because of bold policy initiative in major areas. The GSDP has registered the highest ever plan growth of 7.42 per cent. The growth rate for 2007-08 (first year of the Eleventh Plan) was expected to be 10.37 per cent.
Rupee Ends At 39.95 Against Dollar
The rupee opened higher at 39.82/83, on April 21, which was also the day''s high, as dealers unwound positions after the Reserve Bank of India hiked CRR last week. It closed lower at 39.95/96, against April 17 close of 39.92. The six-month premia opened at 3.09 per cent (2.65 per cent) and the 12-month at 2.38 per cent (1.96 per cent).
PM Assures Armed Forces Of Pay Hike
Prime Minister Manmohan Singh has for the first time reassured the defence services that their grievances over the Pay Commission report will be dealt with. The military has been extremely upset with marginal pay hikes proposals for mid-level officers and jawans. Several officers in all three services have already put in their papers. The Pay Commission has recently submitted its report and some apprehensions have been expressed by certain sections of the civil services on parts of the report, he said addressing senior officers on the Civil Services Day in New Delhi. ''''They will quit in droves if you don''t pay them more,'''' that''s what the service chiefs had told Defence Minister AK Antony after the sixth Pay Commission''s recommendations set off a storm of protests in the armed forces a month ago. So the prime minister''s words on April 21 were reassuring.
''''Some concerns and apprehensions have been expressed by some sections of the civil services on some parts of the report. Government has already set in motion a mechanism for hearing and redressing these grievances. I would like our civil and defence services to be properly rewarded,'''' said Manmohan. The Prime Minister''s words are, perhaps, also meant to egg on the committee of secretaries which was set up after the service chiefs complained. ''The fundamental issue is a fresh IIM graduate starts with a Rs 50,000 or Rs 60,000 a month, but a colonel from the Army, after 26-27 years, 10-15 years of separation, really doing things by the country, takes home a salary of about Rs 25,000 or Rs 26,000,'''' said Col Gopal Karunakaran.
''''Some concerns and apprehensions have been expressed by some sections of the civil services on some parts of the report. Government has already set in motion a mechanism for hearing and redressing these grievances. I would like our civil and defence services to be properly rewarded,'''' said Manmohan. The Prime Minister''s words are, perhaps, also meant to egg on the committee of secretaries which was set up after the service chiefs complained. ''The fundamental issue is a fresh IIM graduate starts with a Rs 50,000 or Rs 60,000 a month, but a colonel from the Army, after 26-27 years, 10-15 years of separation, really doing things by the country, takes home a salary of about Rs 25,000 or Rs 26,000,'''' said Col Gopal Karunakaran.
Monday, April 21, 2008
Govt Shows Interest To Tap Infrastructure Funds From Arab
Bullish on bilateral cooperation in infrastructure projects, India will take a team to Saudi Arabia in May that will be headed by the Deputy Chairman of Planning Commission, Mr Montek Singh Ahluwalia.
The effort would be to attract infrastructure funds for India from the Arab countries. The move to beef up cooperation between the two regions would be followed by a series of events, including an Indo-Arab Festival and a partnership conference in November and an Arab cultural festival, to be organised by the FICCI here under the Ministry of External Affairs.
The effort would be to attract infrastructure funds for India from the Arab countries. The move to beef up cooperation between the two regions would be followed by a series of events, including an Indo-Arab Festival and a partnership conference in November and an Arab cultural festival, to be organised by the FICCI here under the Ministry of External Affairs.
PM, FM Confident Of Bringing Down Inflation Rate
Prime Minister Manmohan Singh and Finance Minister P Chidambaram today expressed confidence that inflation will come down in the wake of Reserve Bank''s decision last night to hike Cash Reserve Ratio (CRR).
"Let us hope so," the Prime Minister said in response to a question on whether inflation would come down following measures taken to contain spiralling prices. Chidambaram, however, had a word of caution, saying miracles should not be expected on the price front. Pointing out that the Government does not have control over prices of imported items, he exuded confidence that international prices would moderate in the next few weeks.
"I am confident that the international prices would also moderate in the next few weeks," he told reporters on the sidelines of a function to release commemorative coins on 1857 War of Independence. Chidambaram said the RBI''s decision to hike CRR would suck out over Rs 18,000 crore, reducing liquidity to that extent. The Reserve Bank yesterday had announced a 0.5 per cent hike in CRR in two phases-- first phase on April 26 and the second on May 10-- to tame the soaring inflation that is hovering above seven per cent. CRR is the mandatory cash deposit that banks keep with the central bank at all times.
"Let us hope so," the Prime Minister said in response to a question on whether inflation would come down following measures taken to contain spiralling prices. Chidambaram, however, had a word of caution, saying miracles should not be expected on the price front. Pointing out that the Government does not have control over prices of imported items, he exuded confidence that international prices would moderate in the next few weeks.
"I am confident that the international prices would also moderate in the next few weeks," he told reporters on the sidelines of a function to release commemorative coins on 1857 War of Independence. Chidambaram said the RBI''s decision to hike CRR would suck out over Rs 18,000 crore, reducing liquidity to that extent. The Reserve Bank yesterday had announced a 0.5 per cent hike in CRR in two phases-- first phase on April 26 and the second on May 10-- to tame the soaring inflation that is hovering above seven per cent. CRR is the mandatory cash deposit that banks keep with the central bank at all times.
Rupee Ends At 39.92 Against Dollar
The rupee opened at 39.93/94 and closed at 39.92/92, increased by about four paise from the previous close of 39.96. There was no affect of the lower inflation figures, either on the spot rupee or the forward premia, as the market had factored it in, said the chief forex dealer with a public sector bank. In the forwards market, the six-month closed at 2.65 per cent (2.41 per cent) and the 12-month at 1.96 per cent (1.77 per cent).
RPT-Indian Inflation Declining Further -Trade Minister
India''s inflation should decline further in the coming weeks and the government may consider more steps, such as banning futures trading in some essential commodities, the trade minister said on April 20.The fact of the matter is this: we have taken steps (and) the decline has started, Kamal Nath told the news channel CNN-IBN in an interview aired on Sunday, according to a transcript provided by the channel.
The decline is small and we expect the decline in inflation to be much more.Inflation hit a three-year high at the end of March, with the wholesale price index rising by 7.41 percent over the preceding year. The rate slowed slightly to 7.14 percent in the 12 months to April 5, according to government data. The government has already ordered several duty cuts and export bans in recent weeks to ease price pressures. On Thursday, the Reserve Bank of India raised the cash reserve ratio by 50 basis points to 8 percent to calm inflation in Asia''s third largest economy.
The decline is small and we expect the decline in inflation to be much more.Inflation hit a three-year high at the end of March, with the wholesale price index rising by 7.41 percent over the preceding year. The rate slowed slightly to 7.14 percent in the 12 months to April 5, according to government data. The government has already ordered several duty cuts and export bans in recent weeks to ease price pressures. On Thursday, the Reserve Bank of India raised the cash reserve ratio by 50 basis points to 8 percent to calm inflation in Asia''s third largest economy.
Crop Production Projected To Grow By 2.3 Pc In FY 09
Agricultural crop production is projected to grow at a modest rate of 2.3 per cent in FY 09, the Centre for Monitoring Indian Economy (CMIE) said in its monthly report here.
However, the collection of non-foodgrain crops would witness a slowdown in the growth from an estimated 4.9 per cent in FY 08 to 3.5 per cent in FY 09. At 2.3 per cent, crop production in FY 09 would be the lowest rate of growth in the past three years. Nevertheless, this would be a substantial improvement over the past trend as it would be the fourth consecutive year of an increase in crop production. India has not seen four consecutive years of positive growth in agricultural crop in the past.
CMIE expects higher output of rice and wheat during FY 09. Wheat production is projected to rise by 1.2 per cent to 76.5-million tonnes. Firm wheat prices are expected to attract farmers to sow larger areas under crop in the next season. The price of wheat is expected to remain firm during the current season even as the fresh crop arrives in the market. This is because of the MSP for rabi-marketing season FY 09 that has been fixed at Rs 1,000 per quintal. Wheat prices are unlikely to fall below this level.
However, the collection of non-foodgrain crops would witness a slowdown in the growth from an estimated 4.9 per cent in FY 08 to 3.5 per cent in FY 09. At 2.3 per cent, crop production in FY 09 would be the lowest rate of growth in the past three years. Nevertheless, this would be a substantial improvement over the past trend as it would be the fourth consecutive year of an increase in crop production. India has not seen four consecutive years of positive growth in agricultural crop in the past.
CMIE expects higher output of rice and wheat during FY 09. Wheat production is projected to rise by 1.2 per cent to 76.5-million tonnes. Firm wheat prices are expected to attract farmers to sow larger areas under crop in the next season. The price of wheat is expected to remain firm during the current season even as the fresh crop arrives in the market. This is because of the MSP for rabi-marketing season FY 09 that has been fixed at Rs 1,000 per quintal. Wheat prices are unlikely to fall below this level.
Saturday, April 19, 2008
Greaves Cotton Inks Deal With German Co
CHENNAI: Mumbai-based engine and construction equipment maker Greaves Cotton has inked a technical collaboration agreement with German company Bomag to manufacture models of 19-tonne vibratory soil compactors in India. This would help in meeting the growing demand from contractors building roads, airports, dam and irrigation projects, by helping in the faster completion of compaction jobs, a company release said.
Greaves Cotton also opened a plant at Gummidipoondi, near Chennai on Friday. The new facility, set up at an investment of Rs 20 crore, will manufacture road compaction equipment. The new plant is the fourth manufacturing unit of the company’s infrastructure equipment group.
Greaves Cotton also opened a plant at Gummidipoondi, near Chennai on Friday. The new facility, set up at an investment of Rs 20 crore, will manufacture road compaction equipment. The new plant is the fourth manufacturing unit of the company’s infrastructure equipment group.
Tata's Nano Model For Apparel May See $ 3bn Take Rural Roads
NEW DELHI: Ratan Tata-led Investment Commission has suggested a rural industrialisation model based on garmenting business. It said a 10-year tax holiday with a flexible labour law regime for rural apparel units could draw $2-3 billion investment with a potential to generate employment for two million.
The commission has suggested a flexible labour law for rural apparel units without restrictions on hiring and retrenchment. It also suggested relaxation of overtime restrictions for women.
The proposed flexible labour norms for the rural garment units also include extension of working time up to 12 hours — with a maximum limit of 60 hours per week — with payment for overtime. According to the panel, such units should be located at a radius of at least 50 km from a city with population of more than one million.
The government is looking at the possibility of implementing the idea as availability of land and labour in rural areas is not a major problem. “The government is considering its (the commission's) suggestions pertaining to the textile sector. Land and labour, two major factors for developing a garment unit in rural areas, would not be a problem.
Transportation of raw material and finished products is also easy due to the light weight of textile items. The only concern is attracting investors. This too could be worked out,” a textile ministry official said.
Besides specific incentives, the commission is in favour of providing all benefits available to units in apparel parks or special economic zones (SEZ) to the garment units located in the rural areas.
Specifying the tax incentive package, it said income-tax holiday would be available to every unit that employs 1,000 or more workers. For units employing women on a large scale, the proposed limit is 500. To take care of workers, the commission favoured mandatory health insurance and medical benefits to workers.
The panel said the success of the model depends on a coordinated effort by the ministries of textiles, rural development, power and finance. It recommended the government should prioritise road development under the Pradhan Mantri Gram Sadak Yojana to provide better connectivity between rural areas and urban markets. Better infrastructure would help in attracting investors, it said.
Other incentives include subsidised power for export-oriented units. Other units could also be provided relatively cheap power by waiving demand charges and electricity duty levied by states. Such moves would reduce power cost by 15%, it said.
The commission has suggested a flexible labour law for rural apparel units without restrictions on hiring and retrenchment. It also suggested relaxation of overtime restrictions for women.
The proposed flexible labour norms for the rural garment units also include extension of working time up to 12 hours — with a maximum limit of 60 hours per week — with payment for overtime. According to the panel, such units should be located at a radius of at least 50 km from a city with population of more than one million.
The government is looking at the possibility of implementing the idea as availability of land and labour in rural areas is not a major problem. “The government is considering its (the commission's) suggestions pertaining to the textile sector. Land and labour, two major factors for developing a garment unit in rural areas, would not be a problem.
Transportation of raw material and finished products is also easy due to the light weight of textile items. The only concern is attracting investors. This too could be worked out,” a textile ministry official said.
Besides specific incentives, the commission is in favour of providing all benefits available to units in apparel parks or special economic zones (SEZ) to the garment units located in the rural areas.
Specifying the tax incentive package, it said income-tax holiday would be available to every unit that employs 1,000 or more workers. For units employing women on a large scale, the proposed limit is 500. To take care of workers, the commission favoured mandatory health insurance and medical benefits to workers.
The panel said the success of the model depends on a coordinated effort by the ministries of textiles, rural development, power and finance. It recommended the government should prioritise road development under the Pradhan Mantri Gram Sadak Yojana to provide better connectivity between rural areas and urban markets. Better infrastructure would help in attracting investors, it said.
Other incentives include subsidised power for export-oriented units. Other units could also be provided relatively cheap power by waiving demand charges and electricity duty levied by states. Such moves would reduce power cost by 15%, it said.
Azad Takes Up Sop Exemption Issue With PM
NEW DELHI: The Centre’s move to restrict area-based excise exemption benefits in Jammu & Kashmir, Kutch and the North-East has drawn the ire of the concerned state governments. Jammu & Kashmir chief minister Ghulam Nabi Azad has taken up the issue with prime minister Manmohan Singh. In a letter to the prime minister, Mr Azad has sought reinstatement of the benefits pointing at the impact of the move on the industry in the state.
The Centre’s special area-based exemption package, aimed at encouraging investments in specific region, is applicable in hill states of North-East, Uttarakhand, Himachal Pradesh and J&K. All manufacturing units set up in these regions between 2003 and 2010 are exempt from excise duty for 10 years and income tax for the first five years, followed by a 50% income tax waiver in the remaining five years.
While in the case of Himachal and Uttarakhand, there is a complete waiver and the manufacturers do not pay any duty at all, in the case of North-East, J&K and Kutch, the benefit is provided through duty rebate.
The decision to restrict the sop was taken by the Cabinet. Subsequently, the Central Board of Excise and Customs (CBEC) had on March 28 issued a notification which restricts the excise exemption benefit only to value addition carried in the state.
The government has provided rates at which the rebate would be in relation to the value-addition specified with the item. A large number of FMCG, pharma and metal companies which had set up units in these states are understood to be bearing the brunt of the move.
The area-based excise exemption is prone to rampant misuse and the CBEC move was primarily aimed at plugging the loophole to allow only genuine manufacturers to avail the benefit.
The Centre’s special area-based exemption package, aimed at encouraging investments in specific region, is applicable in hill states of North-East, Uttarakhand, Himachal Pradesh and J&K. All manufacturing units set up in these regions between 2003 and 2010 are exempt from excise duty for 10 years and income tax for the first five years, followed by a 50% income tax waiver in the remaining five years.
While in the case of Himachal and Uttarakhand, there is a complete waiver and the manufacturers do not pay any duty at all, in the case of North-East, J&K and Kutch, the benefit is provided through duty rebate.
The decision to restrict the sop was taken by the Cabinet. Subsequently, the Central Board of Excise and Customs (CBEC) had on March 28 issued a notification which restricts the excise exemption benefit only to value addition carried in the state.
The government has provided rates at which the rebate would be in relation to the value-addition specified with the item. A large number of FMCG, pharma and metal companies which had set up units in these states are understood to be bearing the brunt of the move.
The area-based excise exemption is prone to rampant misuse and the CBEC move was primarily aimed at plugging the loophole to allow only genuine manufacturers to avail the benefit.
Oil Hits New Record $117 A Barrel
NEW YORK: Oil prices hit a record high $117 a barrel on Friday as jitters over Nigerian oil supplies outweighed a rally in the dollar and fears of an economic slowdown in giant energy consumer China.
US light crude settled up $1.83 at $116.96 a barrel, before hitting a record $117. London Brent crude gained $1.49 to $113.92.
Oil prices have more than quadrupled since 2002 as supply struggles to keep up with booming demand, especially in China and other emerging economies.
"The bulls still hold the cards," said Mike Fitzpatrick of MF Global in New York.
A Nigerian rebel group said Friday it had sabotaged a major oil pipeline operated by Royal Dutch Shell and vowed to step up attacks on oil installations.
Shell officials, which is currently pumping 400,000 barrels per day below capacity in the OPEC nation due to sabotage and security concerns, confirmed a small amount of production had been shut in.
Strikers at the major southern French oil port of Fos-Lavera vowed to remain on picket lines through Saturday. The strike trapped 23 vessels, including four crude oil tankers and six refined products tankers in the port.
A similar strike March lasted 17 days and forced four oil refineries with 603,000 barrels per day of combined capacity to curtail operations, helping spur a late spring rally in European diesel prices.
A British union will launch a two-day strike from April 27 at Ineos Grangemouth refinery, forcing it to shut down with an impact on the North Sea Forties pipeline system, which terminates there, both sides said on Friday.
Strong demand for diesel fuel in emerging markets has been offsetting weakness in U.S. oil demand, analysts at Goldman Sachs said in a research note released Friday.
Goldman expects US crude oil futures to average $105 a barrel this year and end the year at $115 a barrel, driven by tight distillate supplies and continued increases in the cost of building new oil production capacity.
Oil had fallen as low as $112.72 overnight after the dollar rallied against other major currencies as Citigroup, the biggest U.S. bank, delivered better than expected quarterly results.
A sharp fall in China's stock market on Friday spurred concerns over a possible economic slowdown in China, the world's second largest consumer of oil.
China's stock market fell nearly 4 per cent to a 12-month closing low as the biggest stock, PetroChina slid below its October initial public offering price in Shanghai.
US light crude settled up $1.83 at $116.96 a barrel, before hitting a record $117. London Brent crude gained $1.49 to $113.92.
Oil prices have more than quadrupled since 2002 as supply struggles to keep up with booming demand, especially in China and other emerging economies.
"The bulls still hold the cards," said Mike Fitzpatrick of MF Global in New York.
A Nigerian rebel group said Friday it had sabotaged a major oil pipeline operated by Royal Dutch Shell and vowed to step up attacks on oil installations.
Shell officials, which is currently pumping 400,000 barrels per day below capacity in the OPEC nation due to sabotage and security concerns, confirmed a small amount of production had been shut in.
Strikers at the major southern French oil port of Fos-Lavera vowed to remain on picket lines through Saturday. The strike trapped 23 vessels, including four crude oil tankers and six refined products tankers in the port.
A similar strike March lasted 17 days and forced four oil refineries with 603,000 barrels per day of combined capacity to curtail operations, helping spur a late spring rally in European diesel prices.
A British union will launch a two-day strike from April 27 at Ineos Grangemouth refinery, forcing it to shut down with an impact on the North Sea Forties pipeline system, which terminates there, both sides said on Friday.
Strong demand for diesel fuel in emerging markets has been offsetting weakness in U.S. oil demand, analysts at Goldman Sachs said in a research note released Friday.
Goldman expects US crude oil futures to average $105 a barrel this year and end the year at $115 a barrel, driven by tight distillate supplies and continued increases in the cost of building new oil production capacity.
Oil had fallen as low as $112.72 overnight after the dollar rallied against other major currencies as Citigroup, the biggest U.S. bank, delivered better than expected quarterly results.
A sharp fall in China's stock market on Friday spurred concerns over a possible economic slowdown in China, the world's second largest consumer of oil.
China's stock market fell nearly 4 per cent to a 12-month closing low as the biggest stock, PetroChina slid below its October initial public offering price in Shanghai.
US Small Business Agency To Promote Exports To India
WASHINGTON: With the demand for US products and services on the rise in India, a US government agency helping small business concerns and an Indian-American trade association have joined hands to advance export opportunities there.
A strategic alliance memorandum (SAM) signed by the US Small Business Administration (SBA) and the US-India Business Alliance (USIBA) will allow them to share resources to help start, maintain, and expand small businesses, particularly through trade with India.
The first of its kind agreement for SBA and the US-India business community will last for two years.
"The strategic alliance memorandum will further align the SBA and USIBA missions to support America's small businesses," SBA administrator Steve Preston said Friday.
"Working together, we can strengthen US small businesses by helping them access growing markets like India, where business and consumer demand for US products and services is on the rise," he added.
"USIBA is excited about administrator Preston's enthusiastic promotion of a trade agenda," said Sanjay Puri, president and CEO of the USIBA, which works for increasing commerce between the US and India.
"This agreement with SBA will extend each organization's efforts to foster and facilitate further involvement by the US small business community in trade with India. We look forward to an enduring and impacting institutional relationship that will continue to contribute in a meaningful fashion for many years to come," he said.
The SBA and USIBA alliance will strengthen and expand small business exporting opportunities through education, advocacy and matchmaking opportunities.
SBA will provide USIBA with timely information on the agency's programmes, services and resource partners, update them on events that will advance their mission and provide speakers at USIBA events.
It would also invite them to SBA-sponsored events and provide a hyperlink from SBA's website to USIBA's website, and assign a point of contact to serve as a liaison between SBA and USIBA.
As part of the pooling of resources, USIBA will cooperate with SBA and its resource partners to provide information to members about its businesses development programmes and services.
It would also disseminate current SBA news and information, provide speakers for SBA-sponsored events and provide a hyperlink from USIBA's website to SBA's website and assign a point of contact to serve as a liaison between USIBA and SBA.
A strategic alliance memorandum (SAM) signed by the US Small Business Administration (SBA) and the US-India Business Alliance (USIBA) will allow them to share resources to help start, maintain, and expand small businesses, particularly through trade with India.
The first of its kind agreement for SBA and the US-India business community will last for two years.
"The strategic alliance memorandum will further align the SBA and USIBA missions to support America's small businesses," SBA administrator Steve Preston said Friday.
"Working together, we can strengthen US small businesses by helping them access growing markets like India, where business and consumer demand for US products and services is on the rise," he added.
"USIBA is excited about administrator Preston's enthusiastic promotion of a trade agenda," said Sanjay Puri, president and CEO of the USIBA, which works for increasing commerce between the US and India.
"This agreement with SBA will extend each organization's efforts to foster and facilitate further involvement by the US small business community in trade with India. We look forward to an enduring and impacting institutional relationship that will continue to contribute in a meaningful fashion for many years to come," he said.
The SBA and USIBA alliance will strengthen and expand small business exporting opportunities through education, advocacy and matchmaking opportunities.
SBA will provide USIBA with timely information on the agency's programmes, services and resource partners, update them on events that will advance their mission and provide speakers at USIBA events.
It would also invite them to SBA-sponsored events and provide a hyperlink from SBA's website to USIBA's website, and assign a point of contact to serve as a liaison between SBA and USIBA.
As part of the pooling of resources, USIBA will cooperate with SBA and its resource partners to provide information to members about its businesses development programmes and services.
It would also disseminate current SBA news and information, provide speakers for SBA-sponsored events and provide a hyperlink from USIBA's website to SBA's website and assign a point of contact to serve as a liaison between USIBA and SBA.
Friday, April 18, 2008
Gold Rises By Rs 175 On Increased Demand
Gold prices rose by Rs 175 to Rs 12,385 per 10 gram in the bullion market in New Delhi on April 17 on emergence of buying by jewellers and retail customers amid a steep rise in its prices in global markets. Marketmen said ongoing heavy buying for the current marriage season and reports of the precious metal rising in the international markets following a record rise in crude oil, mainly influenced gold prices in the domestic market. They said crude oil rose to a record in New York, adding to prospects of faster inflation and reducing the likelihood that the European Central Bank will cut interest rates.
Inflation Eases To 7.14 Percent
The inflation has eased to 7.14 per cent during the first week of current fiscal, down by 0.27 per cent from the previous week, coinciding with government''s numerous steps in April to tackle surging prices. The wholesale price based inflation came down despite increase in prices of vegetables, pulses, tea, coconut oil and oil cakes. The prices of fruits, gur, cotton seed oil and other edible oils, however, declined during the week ending April 5.
The prices of steel alloys and aviation turbine fuel also increased during the week. The inflation was down because of base effect, as it was quite high at 6.44 per cent in the corresponding week last year. It declined in the first week of the current fiscal after touching the 40-month high of 7.41 per cent for the week ended March 29. The inflation for the week ended February 9 was revised to 4.98 per cent as compared to provision figure of 4.35 per cent.
The prices of steel alloys and aviation turbine fuel also increased during the week. The inflation was down because of base effect, as it was quite high at 6.44 per cent in the corresponding week last year. It declined in the first week of the current fiscal after touching the 40-month high of 7.41 per cent for the week ended March 29. The inflation for the week ended February 9 was revised to 4.98 per cent as compared to provision figure of 4.35 per cent.
Rupee Ends At 39.92 Against Dollar
The rupee opened at 39.93/94 and closed at 39.92/92, increased by about four paise from the previous close of 39.96. There was no affect of the lower inflation figures, either on the spot rupee or the forward premia, as the market had factored it in, said the chief forex dealer with a public sector bank. In the forwards market, the six-month closed at 2.65 per cent (2.41 per cent) and the 12-month at 1.96 per cent (1.77 per cent).
Indian Economy To Grow At 7.5% This Fiscal: Experts
Experts feel that economic growth rate is likely to moderate to 7-7.5 per cent during the current fiscal, against 8.7 per cent during 2007-08, though it may be slightly better in case the core sector improves further. The growth rate of 7 to 7.5 is an intrinsic growth rate for the country and we are settling down at this sustainable figure for this fiscal," said Citi CEO Sanjay Nayyar at a panel discussion in New Delhi. Standard and Poor''s Chief Economist (Asia Pacific) Subir Gokaran and economist Omkar Goswami agreed with the growth numbers projected by Nayyar for the current fiscal.Gokaran said the most pressing worry at present is the spiralling food prices and reducing food stock across the world. To drive his point, he cited an FAO outlook which said global stock of cereals for 2008 is going to be the lowest in the last 25 years.
Canada Eyes At More Tie-Ups
The Canadian Secretary of State for Foreign Affairs and International Trade, Ms Helen Guergis, said that her country targets to create new links in India in sectors such as agriculture, mining, life sciences, information and communication technology, financial services and infrastructure. Canada can assist India as it continues its incredible economic ascent. The Secretary of State also called on India to look at opportunities in Canada. Ms Guergis said that last year trade between India and Canada touched an all-time record of $ 3.74 billion. This upward trend is continuing with a 59 per cent growth in Canadian exports this past January alone.
Thursday, April 17, 2008
Oil Prices Steady Near Record Highs
SINGAPORE: Oil prices held steady near record highs in Asian trading on Thursday, boosted by a decline in US energy reserves and a weakening dollar that attracted investors to commodities, analysts said.
New York's main oil futures contract, light sweet crude for delivery in May, was 10 cents lower at $114.83 per barrel after a record close of $114.93 at the New York Mercantile Exchange on Wednesday.
In electronic trading after Wednesday's session, the price crossed 115 dollars for the first time and reached a high of 115.21.
Brent North Sea crude for June was six cents higher at 112.72, from a record close of 112.66 on Wednesday in London.
London Brent had surged even higher in after-hours trading, where it struck a record peak of $112.83.
Both futures contracts also hit record highs on Tuesday in a market worried about tight supplies.
Those concerns were accentuated on Wednesday by the weekly report from the US Department of Energy that showed US energy stockpiles tumbled in the week ending April 11.
Oil futures also gained support after the dollar plunged to an all-time low against the euro, traders said.
The US dollar on Thursday morning traded at 1.5936 to the euro after falling to a record 1.5979 on Wednesday as two US government economic reports raised the odds of further interest rate cuts ahead.
New York's main oil futures contract, light sweet crude for delivery in May, was 10 cents lower at $114.83 per barrel after a record close of $114.93 at the New York Mercantile Exchange on Wednesday.
In electronic trading after Wednesday's session, the price crossed 115 dollars for the first time and reached a high of 115.21.
Brent North Sea crude for June was six cents higher at 112.72, from a record close of 112.66 on Wednesday in London.
London Brent had surged even higher in after-hours trading, where it struck a record peak of $112.83.
Both futures contracts also hit record highs on Tuesday in a market worried about tight supplies.
Those concerns were accentuated on Wednesday by the weekly report from the US Department of Energy that showed US energy stockpiles tumbled in the week ending April 11.
Oil futures also gained support after the dollar plunged to an all-time low against the euro, traders said.
The US dollar on Thursday morning traded at 1.5936 to the euro after falling to a record 1.5979 on Wednesday as two US government economic reports raised the odds of further interest rate cuts ahead.
Rupee Ends 39.96 Against Dollar
The rupee remained firm against the dollar on April 16 as demand for the greenback was balanced by supply. It opened at 39.94/95 and ended the day at 39.96, unchanged from April 15 close at 39.96. Market participants hope the rupee to remain range-bound between 39.90 and 40-10. In the forward premia market, the 6-month closed at 2.41 per cent (2.22) and the 12-month at 1.77 per cent (1.65).
Service Tax Return Preparers Likely To File For Cos As Well
The self-employed people who will be trained to become service tax return preparers are likely to be permitted to file returns for companies as well as individual service providers. They are also likely to be paid a fixed sum per return for each new assessee, as against the income-tax return preparers, who get a variable percentage of the tax paid. The new service tax return preparer scheme was declared in Budget 2008-09 to assist service-tax payers and bring in new assessees under the tax net. The Central Board of Excise and Customs (CBEC) formed a committee to prepare the broad contours of the scheme. The board likely to give preference to income-tax return preparers as they have been selected via a proper screening process and have some experience. The income-tax department had trained 3,700 tax return preparers in 2007.
FM Likely To Reinstate Tax Holiday On Oil, Gas Production
The finance ministry is likely to continue providing a seven-year income-tax holiday on production of oil and gas. The continuation of the tax holiday will come as a relief to oil and gas companies, which have already infused huge money in exploration of hydrocarbons. It will also assist the petroleum ministry, which has been promising the tax holiday while marketing the auction of oil and gas block under the New Exploration and Licensing Policy (Nelp). Petroleum Minister Murli Deora met Finance Minister P Chidambaram. The proposal to remove the income tax holiday had put in question the auction of oil and gas blocks under Nelp VII.
States Arrive At CST Relief Formula
State Finance Ministers on April 16 has announced the contours of the compensation package that they would demand from the Centre for the decrease in central sales tax (CST) ceiling rate from 3 per cent to 2 per cent. With the Centre and the States yet to accord on the compensation package, there is still uncertainty on the date from which CST rate would be cut to 2 per cent. States are likely to submit their stance on the compensation package in writing to the Union Finance Minister, Mr P. Chidambaram, in the next few days.
Wednesday, April 16, 2008
World's 2nd Discovery Park To Come Up In India
AMETHI: The second discovery park of the world would be set up in this district and the project has been approved by the union ministries of information and broadcasting and science and technology.
Director of the Rajiv Gandhi Information Technology Institute, Amethi, Dr Murlidhar Tewari told newspersons here today that "the union government has already sanctioned Rs five crore for the pilot project of the park."
Tewari said that 50-acre land needed for the pilot project has also been made available. He said this would be the second discovery park of the world as one such park is already in USA.
A total of 100 acre land would be required for the project which would require an expenditure of Rs 250 crore, Tewari said. He said that the park would have nine research centres that would help rural development in a big way.
"It would have high grade research centres for information technology, micro technology and nano technology", he said adding that in the first phase the reserach centres for e-agriculture, bio-informatics and bio-fuel would be established.
The pilot project would be inaugurated by local MP, Rahul Gandhi and Union Science and Technology Minister Kapil Sibal soon.
Tewari said there was a great scope for development in the area of agriculture through information technology but said that shortage of electricity could prove to be a major impediment.
Director of the Rajiv Gandhi Information Technology Institute, Amethi, Dr Murlidhar Tewari told newspersons here today that "the union government has already sanctioned Rs five crore for the pilot project of the park."
Tewari said that 50-acre land needed for the pilot project has also been made available. He said this would be the second discovery park of the world as one such park is already in USA.
A total of 100 acre land would be required for the project which would require an expenditure of Rs 250 crore, Tewari said. He said that the park would have nine research centres that would help rural development in a big way.
"It would have high grade research centres for information technology, micro technology and nano technology", he said adding that in the first phase the reserach centres for e-agriculture, bio-informatics and bio-fuel would be established.
The pilot project would be inaugurated by local MP, Rahul Gandhi and Union Science and Technology Minister Kapil Sibal soon.
Tewari said there was a great scope for development in the area of agriculture through information technology but said that shortage of electricity could prove to be a major impediment.
Oil Prices Ease After Record Highs
SINGAPORE: Oil prices eased in Asian trade on Wednesday after a series of record highs driven by supply worries, dealers said.
In morning trade, New York's main oil contract, light sweet crude for delivery in May, was 30 cents lower at $113.49.
The contract earlier topped 114 dollars a barrel for the first time, hitting 114.08, after floor trading closed on Tuesday at the New York Mercantile Exchange.
Brent North Sea Crude for June delivery was 38 cents lower at $111.20 a barrel.
Brent for May expired on Tuesday at a record $111.31 a barrel after reaching an intraday high of $112.08.
Analysts said gains were underpinned by expectations that an inventory report from the US Department of Energy (DoE), due later Wednesday, would show further declines in US gasoline and heating oil inventories.
Recent production stoppages have added to supply worries, analysts said.
In morning trade, New York's main oil contract, light sweet crude for delivery in May, was 30 cents lower at $113.49.
The contract earlier topped 114 dollars a barrel for the first time, hitting 114.08, after floor trading closed on Tuesday at the New York Mercantile Exchange.
Brent North Sea Crude for June delivery was 38 cents lower at $111.20 a barrel.
Brent for May expired on Tuesday at a record $111.31 a barrel after reaching an intraday high of $112.08.
Analysts said gains were underpinned by expectations that an inventory report from the US Department of Energy (DoE), due later Wednesday, would show further declines in US gasoline and heating oil inventories.
Recent production stoppages have added to supply worries, analysts said.
Rupee At 39.96 Against US Dollar
The US dollar edged up against the rupee at Rs 39.96/97 per dollar at the close of the Interbank Foreign Exchange (Forex) market in Mumbai on April 15. The Indian rupee was virtually flat against the American dollar in morning trading on April 15 amid steady to better equity markets as well as fears of the central bank intervention. The rupee witnessed lacklustre activity at the Interbank Foreign Exchange (forex) market in early trade.High inflation rate Despite high inflation rate, the Indian unit failed to spark a surge in the light of apprehensions about a possible intervention by the central bank to keep the rupee between 39.90 and 40.00 levels. Meanwhile, the central bank fixed the reference rate for US dollar at Rs 39.96 and for the single European unit at Rs 63.22 per euro.
Rs 25kcr Plan To Encourage Farm Production Says Pawar
Amid worries over reducing food stocks and slow farm growth, the Centre has undertaken an ambitious Rs 25,000 crore plan to plough more funds into farms to improve agriculture output across the country. Under the scheme, the Centre will approve matching grants to states that make additional allocations for agri sector, Union agriculture minister Sharad Pawar said. The exercise is targeted at attaining 4% growth in the agriculture and allied sectors, Mr Pawar said. The idea is to boost and incentivise states to take extra efforts to boost agriculture. The government also desires to accelerate implementation of the scheme in the wake of recent reports about impending food shortage.
Sezs To Boost India''s Infrastructure
The qualities or otherwise of special economic zones (SEZs) are under a raging discuss in India but the realty industry is upbeat about the prospect of such zones and says it will drive infrastructure development in the country. Encouraging special economic zones is the best solution to create these pockets of growth. To meet the demand for housing infrastructure, the government must also develop special residential zones. The incentives make development of SEZs a highly profitable proposition. Little wonder many developers are establishing projects under the special scheme not just in metropolitan cities but also in smaller towns.
Tuesday, April 15, 2008
Inflation To Hit Economic Growth
Inflation numbers continue to be a worry, but industrial data numbers may give some hope. The finance ministry''s biggest concern now is the fact that rising inflation will start eating into the economic growth numbers.
But on April 11, the fresh set of industrial growth numbers for the month of February does not support this fear. One big respite, for investors, policymakers and the government, as India''s industrial growth is back on track chugging along at nearly 9 per cent.
In February this year, industry grew 8.6 per cent against 5.8 per cent in the previous month. Not just this, even consumer non-durables that is mostly the FMCG market, has grown at a rapid clip of 11 per cent reflecting largely the consumption rate of masses and changes in lifestyle.But the big worry for the government is about the other big number. Inflation is high at 7.4 per cent for March 29 driven largely by vegetable prices and the prices of steel and other metals. So, expect the government''s drive to cool inflation to continue and perhaps some action soon from the RBI.
But on April 11, the fresh set of industrial growth numbers for the month of February does not support this fear. One big respite, for investors, policymakers and the government, as India''s industrial growth is back on track chugging along at nearly 9 per cent.
In February this year, industry grew 8.6 per cent against 5.8 per cent in the previous month. Not just this, even consumer non-durables that is mostly the FMCG market, has grown at a rapid clip of 11 per cent reflecting largely the consumption rate of masses and changes in lifestyle.But the big worry for the government is about the other big number. Inflation is high at 7.4 per cent for March 29 driven largely by vegetable prices and the prices of steel and other metals. So, expect the government''s drive to cool inflation to continue and perhaps some action soon from the RBI.
Egom On Sezs To Assemble On April 29 Over Taxes, Sops
With the unrest on special economic zones (SEZs) petering out, an empowered Group of Ministers (eGoM) is likely to assemble here on April 29 to solve many of the issues faced by the SEZs, mostly connecting to taxation and export incentives. However, the eGoM, headed by External Affairs Minister Pranab Mukherjee, is not likely to take up the contentious demand of developers to lift the 5,000 hectare land ceiling. The land issue is not likely to come up, especially because Parliament would be in session. While the commerce ministry officials have called a meeting on April 30 of developers from Goa whose SEZ projects were trashed by the state government, the issue may also be discussed at the eGoM meeting.
Rupee Ends Flat At 39.95 A Dollar
The Indian rupee on Friday ended flat at 39.95 against a US dollar after showing signs of strengthening on dollar selling by exporters.The rupee moved in a relatively small range of 39.91 and 39.98 during the day after resuming higher at 39.91/92 a dollar from its previous close of 39.94/95 a dollar.
Forex dealers said rising inflation rate failed to spark a surge in rupee as traders seemed discouraged by possibility of central bank intervention to keep the local currency above 39.90 level.Meanwhile, inflation soared to 40-month high of 7.41 per cent raising possibility of stringent monetary measures in the quarterly review of the Reserve Bank of India.
Analysts said high inflation could help rupee to appreciate as a robust rupee would help contain inflation.Indian benchmark Sensex ended up 113 points, or 0.72 per cent, while Asian indices gained about 1.0 to 2.5 per cent. The capital inflows, a key driver of the rupee, are likely to pick up if net purchases by Foreign Institutional investors in the last four days is any indication, commented a dealer with bank.
Forex dealers said rising inflation rate failed to spark a surge in rupee as traders seemed discouraged by possibility of central bank intervention to keep the local currency above 39.90 level.Meanwhile, inflation soared to 40-month high of 7.41 per cent raising possibility of stringent monetary measures in the quarterly review of the Reserve Bank of India.
Analysts said high inflation could help rupee to appreciate as a robust rupee would help contain inflation.Indian benchmark Sensex ended up 113 points, or 0.72 per cent, while Asian indices gained about 1.0 to 2.5 per cent. The capital inflows, a key driver of the rupee, are likely to pick up if net purchases by Foreign Institutional investors in the last four days is any indication, commented a dealer with bank.
Glondon Business Expects On India Tour
The Lord Mayor of the City of London, Mr Alderman David Lewis, in India, leading a business delegation, includes around 50 city representatives. The delegation is on 11-day tour of India beginning from April13 and Chennai is its first port of call. The Mayor of the City of London is a position different from London''s Mayor. On April 14, Mayor Lewis will meet several young entrepreneurs and businessmen in Chennai to discuss enterprise and raising capital for early stage business, especially how the City can help. Later in the day, Mayor Lewis will deliver the keynote address at a seminar on Maritime India''s Growth Potential, organised by The British Deputy High Commission, Chennai, and Maritime London in association with the Institute of Chartered Shipbrokers Madras Branch.
India-Oman Plan Alliance For Core Projects
India and Oman have started talks to set up a joint holding company with an initial corpus of $100 million for making investments in the infrastructure sector. Major business houses and investment institutions of both sides are also hoped to contribute in the company. The initial corpus will serve as the seed capital and would be scaled up later. The proposal comes in the backdrop of India establishing an overseas financing vehicle in London to fund forex requirements of infrastructure companies. The offshore subsidiary of India Infrastructure Finance Company would borrow foreign currency up to $5 billion from the Reserve Bank of India and provide foreign currency loans to Indian comp
Slew Of Measures To Sustain Export Growth
Union Commerce and Industry Minister Kamal Nath on Friday announced various measures to check spiralling inflation, extended sops to exporters to sustain growth in the export sector and gave relief to sectors hit by rupee appreciation vis-a-vis dollar in the current fiscal. Releasing the annual supplement of the Foreign Trade Policy (FTP) here on Friday, Mr. Kamal Nath said: "To curb inflation on essential items, the Government has banned export of non-basmati rice, edible oils and pulses. Now we are banning export of cement too, while tax incentives and the promotional scheme on export of rice and primary steel items are being withdrawn."
Lauding exporters for their resilience and hard work in sustaining the growth momentum, Mr. Kamal Nath announced a slew of ''innovative steps'' that included extension of the ''Duty Entitlement Passbook'' (DEPB) scheme till May 2009; extension of the interest subvention scheme where exporters are given bank credit at a reduced rate of 6 per cent; reduction of customs duty payable under the ''Export Promotion Capital Goods'' (EPCG) scheme from 5 per cent to 3 per cent; and lowering of average export obligation under the EPCG scheme. "The Interest subvention scheme would mean an outgo of Rs. 1,050 crore from the Central Exchequer in the current year," he added.
Lauding exporters for their resilience and hard work in sustaining the growth momentum, Mr. Kamal Nath announced a slew of ''innovative steps'' that included extension of the ''Duty Entitlement Passbook'' (DEPB) scheme till May 2009; extension of the interest subvention scheme where exporters are given bank credit at a reduced rate of 6 per cent; reduction of customs duty payable under the ''Export Promotion Capital Goods'' (EPCG) scheme from 5 per cent to 3 per cent; and lowering of average export obligation under the EPCG scheme. "The Interest subvention scheme would mean an outgo of Rs. 1,050 crore from the Central Exchequer in the current year," he added.
Monday, April 14, 2008
Economy: The party is over
The going has been good in India in the last three years.
GDP growth has averaged more than 9%, creating millions of jobs and billions of dollars in investments.
However, the rise in inflation together with high interest rates and a potential global recession threaten to halt the Indian party this year.
Already economists are predicting a slowdown in GDP growth in 2008-09, as higher inflation is likely to force the Reserve Bank of India to hike interest rates, which will impact borrowing both for consumers and companies.
Wholesale prices shot up to 7.41% in the week ended March 28 from just 3.80% on January 12. It is also beyond RBI's self-imposed target of 5-5.50%.
The higher inflation has dashed all hopes of lower interest rates. Growth is also likely to be relatively lower than the previous years.
Dharmakirti Joshi, principal economist at rating agency Crisil, sees inflation dominating all macroeconomic calculations in 2008-09.
"Inflation is now out of the comfort zone and is beginning to hurt. There is no way interest rates are going to come down soon unless inflation declines and stays below 5% for some time," Joshi said.
Higher inflation is likely to force the RBI to hike the cash reserve ratio (CRR) — or the portion of deposits that the banks have to compulsorily park with the RBI as a safety measure — when its holds its annual monetary policy meeting on April 29. The CRR is currently at 7.75%.
Economists such as Sonal Varma and Rob Subbaraman of Lehman Brothers, who had previously expected the RBI to cut rates in by the end of 2008, are now not expecting any rate cut this year because inflation has risen faster than they had forecast.
HDFC Bank chief economist Abheek Barua expects higher interest rates in the short term.
"The RBI governor has been somewhat more hawkish than usual in the statements after the inflation data release and we expect the central bank to follow through with monetary action. The RBI could choose to excise some of this liquidity through a 50 bps (0.50%) increase in CRR," Barua wrote in a note released on Tuesday.
Higher interest rates and increasing expenses would directly mean that demand for goods and services would lessen, which could put pressure on economic growth.
The Indian economy grew by 9.4% in 2005-06 and 9.6% in '06-07. But growth is expected to be 8.7% in '07-08 courtesy interest rate hikes by the RBI.
In 2008-09, growth is likely to slow down further as high borrowing rates are likely to choke consumers and investments. And this time there will also be the rising prices to deal with.
Growth forecasts for 2008-09 are quite divergent: HSBC India economist Robert Prior-Wandesforde predicts 7% while HDFC's Barua pegs it at an optimistic 8-8.5%.
Wandesforde says higher interest rates, a stronger currency, and weaker global growth, has impacted on economic growth and will continue to do so this year.
Barua is banking on a strong pace of infrastructure development and expectations that retail lending rates are unlikely to go much higher from current levels.
Lehman's Varma and Subbaraman have predicted that measures to curb inflation will come at the cost of GDP growth.
"Growth is already facing headwinds from weakening foreign demand and tight monetary conditions. As a result, we have cut our GDP growth forecast for FY09 (Apr-08 to Mar-09) from 8.3% y-o-y to 7.6%, which is well down from 8.7% in FY08," they wrote in a note on April 11.
Besides, slowing global growth will also pull growth down. The International Monetary Fund (IMF) has predicted a 0.50% drop in global growth to 3.7% this year because of a mild recession in the US. India's growth projection has also been cut to 7.9%.
Slower growth is a consensus among economists. But which sectors will be hit the hardest? Crisil's Joshi says the sectors, which are already reeling under higher rates may feel the pinch. "Sectors like consumer loans, real estate and auto will feel the pinch.
However, some other sectors like pharmaceuticals, food and beverages and consumer non-durables may just not be impacted that much," Joshi said.
Loan growth has been hit in the banking sector as interest rates for housing, cars, and consumer durables have gone out of the reach of consumers. This in turn has had a ripple effect on the real estate and auto sectors.
Lower demand for houses means home prices have fallen but the middle class still can't afford them because of high interest rates.
Barua points out that lower growth is also impacting investment demand together with consumption and export sectors.
"Some of the expansion plans for companies are being put on hold because of the sluggish IPO market. The problems of some of the export-oriented sectors -- textiles and auto components -- are feeding through to other sectors. There appears to be a compression in sectors like textile machinery and machine tools," Barua wrote in HDFC's newsletter Ecotalk.
However, commodity segments like petroleum products, primary commodity exports and metal exports are expected to make strong gains thanks to record oil and metal prices.
Barua sees a "continued momentum" in infrastructure segments such as roads, ports, airports, urban infrastructure, telecom where either the government is a major partner (the Bharat Nirman programme for instance) or where there is sufficient clarity in the regulatory regime to sustain private sector interest (ports , telecom).
GDP growth has averaged more than 9%, creating millions of jobs and billions of dollars in investments.
However, the rise in inflation together with high interest rates and a potential global recession threaten to halt the Indian party this year.
Already economists are predicting a slowdown in GDP growth in 2008-09, as higher inflation is likely to force the Reserve Bank of India to hike interest rates, which will impact borrowing both for consumers and companies.
Wholesale prices shot up to 7.41% in the week ended March 28 from just 3.80% on January 12. It is also beyond RBI's self-imposed target of 5-5.50%.
The higher inflation has dashed all hopes of lower interest rates. Growth is also likely to be relatively lower than the previous years.
Dharmakirti Joshi, principal economist at rating agency Crisil, sees inflation dominating all macroeconomic calculations in 2008-09.
"Inflation is now out of the comfort zone and is beginning to hurt. There is no way interest rates are going to come down soon unless inflation declines and stays below 5% for some time," Joshi said.
Higher inflation is likely to force the RBI to hike the cash reserve ratio (CRR) — or the portion of deposits that the banks have to compulsorily park with the RBI as a safety measure — when its holds its annual monetary policy meeting on April 29. The CRR is currently at 7.75%.
Economists such as Sonal Varma and Rob Subbaraman of Lehman Brothers, who had previously expected the RBI to cut rates in by the end of 2008, are now not expecting any rate cut this year because inflation has risen faster than they had forecast.
HDFC Bank chief economist Abheek Barua expects higher interest rates in the short term.
"The RBI governor has been somewhat more hawkish than usual in the statements after the inflation data release and we expect the central bank to follow through with monetary action. The RBI could choose to excise some of this liquidity through a 50 bps (0.50%) increase in CRR," Barua wrote in a note released on Tuesday.
Higher interest rates and increasing expenses would directly mean that demand for goods and services would lessen, which could put pressure on economic growth.
The Indian economy grew by 9.4% in 2005-06 and 9.6% in '06-07. But growth is expected to be 8.7% in '07-08 courtesy interest rate hikes by the RBI.
In 2008-09, growth is likely to slow down further as high borrowing rates are likely to choke consumers and investments. And this time there will also be the rising prices to deal with.
Growth forecasts for 2008-09 are quite divergent: HSBC India economist Robert Prior-Wandesforde predicts 7% while HDFC's Barua pegs it at an optimistic 8-8.5%.
Wandesforde says higher interest rates, a stronger currency, and weaker global growth, has impacted on economic growth and will continue to do so this year.
Barua is banking on a strong pace of infrastructure development and expectations that retail lending rates are unlikely to go much higher from current levels.
Lehman's Varma and Subbaraman have predicted that measures to curb inflation will come at the cost of GDP growth.
"Growth is already facing headwinds from weakening foreign demand and tight monetary conditions. As a result, we have cut our GDP growth forecast for FY09 (Apr-08 to Mar-09) from 8.3% y-o-y to 7.6%, which is well down from 8.7% in FY08," they wrote in a note on April 11.
Besides, slowing global growth will also pull growth down. The International Monetary Fund (IMF) has predicted a 0.50% drop in global growth to 3.7% this year because of a mild recession in the US. India's growth projection has also been cut to 7.9%.
Slower growth is a consensus among economists. But which sectors will be hit the hardest? Crisil's Joshi says the sectors, which are already reeling under higher rates may feel the pinch. "Sectors like consumer loans, real estate and auto will feel the pinch.
However, some other sectors like pharmaceuticals, food and beverages and consumer non-durables may just not be impacted that much," Joshi said.
Loan growth has been hit in the banking sector as interest rates for housing, cars, and consumer durables have gone out of the reach of consumers. This in turn has had a ripple effect on the real estate and auto sectors.
Lower demand for houses means home prices have fallen but the middle class still can't afford them because of high interest rates.
Barua points out that lower growth is also impacting investment demand together with consumption and export sectors.
"Some of the expansion plans for companies are being put on hold because of the sluggish IPO market. The problems of some of the export-oriented sectors -- textiles and auto components -- are feeding through to other sectors. There appears to be a compression in sectors like textile machinery and machine tools," Barua wrote in HDFC's newsletter Ecotalk.
However, commodity segments like petroleum products, primary commodity exports and metal exports are expected to make strong gains thanks to record oil and metal prices.
Barua sees a "continued momentum" in infrastructure segments such as roads, ports, airports, urban infrastructure, telecom where either the government is a major partner (the Bharat Nirman programme for instance) or where there is sufficient clarity in the regulatory regime to sustain private sector interest (ports , telecom).
Saturday, April 12, 2008
Banks In A Spot As Govt Sits On Crop-Loan Interest Subsidies
KOLKATA: Even as the country goes gaga over the massive Rs 60,000-crore farm loan-waiver scheme, the government is yet to release funds towards interest subsidy on short-term crop loans. This has put lending banks in a spot, especially weaker entities such as regional rural banks (RRBs) and agriculture credit co-operative societies.
The government gives an interest subsidy of 2% to banks for providing short-term crop loans to farmers at 7%. Under the scheme, farmers are entitled to get soft loans with an upper limit of Rs 3 lakh. The scheme has been in vogue since April 2006. Since then, the government has released funds only once, covering claims for the April-December 2006 period, albeit after half-an-year of the claims being submitted to the government.
The subsidy claims for January-to-September 2007 is yet to be released. Confirming this, senior bank officials said: “The government takes at least three to four months to settle claims.” This comes as a jolt to RRBs and co-operative banks, which are hamstrung with lack of resources. Mainstream commercial banks, on the other hand, are normally in a position to withstand the loss due to the delay in claim settlement.
According to a source, RRBs, co-operative banks and National Bank for Agriculture & Rural Development (Nabard) are supposed to get Rs 756 crore cumulatively from the government as interest subsidy under the 7% crop-loan scheme for the January-July 2007 period.
In a letter issued on April 2, Nabard has informed a co-operative bank: “The pending claim for the January-July 2007 period under the interest subvention scheme 2006-07 will be settled after receipt of funds from the government.”
Meanwhile, a senior Nabard official clarified to ET: “The government has technically released the fund for the period under review. It is lying with RBI for clearance. The government releases the fund to commercial banks through RBI and to RRBs and agriculture co-operative credit agencies through Nabard.
When contacted, West Bengal State Co-operative Bank chairman Samir Ghosh said: “Since the government does not pay any interest on the claimed amount of interest subvention for this delayed period, the short-term credit co-operative structure suffers significant losses.”
The government gives an interest subsidy of 2% to banks for providing short-term crop loans to farmers at 7%. Under the scheme, farmers are entitled to get soft loans with an upper limit of Rs 3 lakh. The scheme has been in vogue since April 2006. Since then, the government has released funds only once, covering claims for the April-December 2006 period, albeit after half-an-year of the claims being submitted to the government.
The subsidy claims for January-to-September 2007 is yet to be released. Confirming this, senior bank officials said: “The government takes at least three to four months to settle claims.” This comes as a jolt to RRBs and co-operative banks, which are hamstrung with lack of resources. Mainstream commercial banks, on the other hand, are normally in a position to withstand the loss due to the delay in claim settlement.
According to a source, RRBs, co-operative banks and National Bank for Agriculture & Rural Development (Nabard) are supposed to get Rs 756 crore cumulatively from the government as interest subsidy under the 7% crop-loan scheme for the January-July 2007 period.
In a letter issued on April 2, Nabard has informed a co-operative bank: “The pending claim for the January-July 2007 period under the interest subvention scheme 2006-07 will be settled after receipt of funds from the government.”
Meanwhile, a senior Nabard official clarified to ET: “The government has technically released the fund for the period under review. It is lying with RBI for clearance. The government releases the fund to commercial banks through RBI and to RRBs and agriculture co-operative credit agencies through Nabard.
When contacted, West Bengal State Co-operative Bank chairman Samir Ghosh said: “Since the government does not pay any interest on the claimed amount of interest subvention for this delayed period, the short-term credit co-operative structure suffers significant losses.”
Sops Under FPS For Steel Products Withdrawn
NEW DELHI: In a clear indication that primary steel exports may face a complete ban, the government on Friday withdrew export incentives under focus product scheme (FPS) available to certain steel products. The move comes close on the heels of the government withdrawing DEPB benefit on steel products in its bid to improve steel availability in the market and contain its rising prices.
Under FPS scheme the government aimed at giving a thrust to manufacture and export certain products including steel. However, the withdrawal of this benefit for the steel products would have a limited impact on the sector. It is expected that out of total steel exports of about 4-4.5 million tonnes, the withdrawal of the FPS incentive would impact only over 10% of exports.
“The measures (to make exports less attractive) in the FTP will not help in curbing inflation in the short term. Rather than supply constraints, there are other factors which add to inflation. The government should address major issues such as rising input prices for the steel sector. Only this can stabilise steel prices in the long run,” said Moosa Raza, president, Indian Steel Alliance.
Commerce secretary, G K Pillai, however, said that the measures were part of packages that are being worked out by the government to contain rising prices of steel. He said that export incentives have been withdrawn on steel products as these are not desirable for products that may be considered for an export ban. It is expected that CCP meeting next week may consider a complete ban of steel exports as part of large fiscal package aimed at softening inflation.
Under FPS scheme the government aimed at giving a thrust to manufacture and export certain products including steel. However, the withdrawal of this benefit for the steel products would have a limited impact on the sector. It is expected that out of total steel exports of about 4-4.5 million tonnes, the withdrawal of the FPS incentive would impact only over 10% of exports.
“The measures (to make exports less attractive) in the FTP will not help in curbing inflation in the short term. Rather than supply constraints, there are other factors which add to inflation. The government should address major issues such as rising input prices for the steel sector. Only this can stabilise steel prices in the long run,” said Moosa Raza, president, Indian Steel Alliance.
Commerce secretary, G K Pillai, however, said that the measures were part of packages that are being worked out by the government to contain rising prices of steel. He said that export incentives have been withdrawn on steel products as these are not desirable for products that may be considered for an export ban. It is expected that CCP meeting next week may consider a complete ban of steel exports as part of large fiscal package aimed at softening inflation.
Sugar Exporters May Be Denied Competitive Price Advantage
NEW DELHI: With the government having already banned the export of rice, cut duty drastically for edible oil imports and announced the possibility of wheat imports should the need arise, there was little that the foreign trade policy could do to boost trade in the farm sector.
So, it falls sorrily between two stools: addressing inflation/ supply side constraints hampering the agri and horticulture sectors one the one hand and boosting exports on the other. In the case of sugar, which is currently in surplus, the policy actually disincentivises exports under the Focus Market Scheme (FMS). The trade policy document demonstrates how policy makers are only able to view agricultural trade in the piecemeal.
Trade watchers reckon that sugar exporters could be denied a potential competitive price advantage of around Rs 2000/tonne, thanks to its being dropped in the current year under the Focus Market Scheme (FMS).
The Scheme entitles exporters of products to notified countries to duty free scrip equivalent to 2.5% of the FOB value of exports for each licensing year commencing April 1, 2006.. Along with sugar, cereals of all types have also been dropped from the list.
The policy announced an additional duty -free credit scrip of 2.5% ( in addition to the existing level(5%/3.5%)in the Vishesh Krishi and Gram Udyog Yojana (VKGUY)) for specified flowers, fruits and vegetables (listed in table 13 of appendix 37), aimed at neutralising the high transport cost disadvantage suffered by exporters; it withdrew benefits under the Duty Entitlement Pass Book (DEPB) scheme on the export of rice, edible oils and pulses with a view to curbing inflation in essential commodities and hiking domestic supply.
It has also allowed duty free import of specified specialised inputs/chemicals and flavouring oils to the extent of 1% of FOB value of the preceding financial year’s export under the VKGUY scheme .But trade analysts expected that to be pegged at no less than 3%. The additional duty-free credit scrip of 2.5% on select f&v and flowers is viewed as a positive move.
The food group carries a weightage of only 14% in the WPI but its political and economic impact far outweighs its weightage. Within the group, fruit and vegetable prices have shot up more significantly compared to cereals over the last several weeks.
So, the move is viewed as positive. India exports grapes, mango, lychees, headed cabbage, spinach, bitter gourd,, beans and cauliflower among others. Roses and tulips dominate flower exports but bulb imports ( in a trade where rapid changes dictate preferences ) crucial to quality produce, has not been addressed.
Under the VKGUY, there is a pathetic attempt to “incentivise” rural infrastructure. The policy allows import of capital goods/equipment against exports by Status Holders in 2008-09 (w.e.f from April 1). On the face of it, this could help retail houses, food processing companies and farmer coops given that cold storage units, pre-cooling units etc are involved. Duty free credit scrip equal to 10% of the FOB value of agricultural exports is allowed, but there’s a key catch: the total benefits of all status holders put together should not exceed Rs 100 crore.
So, it falls sorrily between two stools: addressing inflation/ supply side constraints hampering the agri and horticulture sectors one the one hand and boosting exports on the other. In the case of sugar, which is currently in surplus, the policy actually disincentivises exports under the Focus Market Scheme (FMS). The trade policy document demonstrates how policy makers are only able to view agricultural trade in the piecemeal.
Trade watchers reckon that sugar exporters could be denied a potential competitive price advantage of around Rs 2000/tonne, thanks to its being dropped in the current year under the Focus Market Scheme (FMS).
The Scheme entitles exporters of products to notified countries to duty free scrip equivalent to 2.5% of the FOB value of exports for each licensing year commencing April 1, 2006.. Along with sugar, cereals of all types have also been dropped from the list.
The policy announced an additional duty -free credit scrip of 2.5% ( in addition to the existing level(5%/3.5%)in the Vishesh Krishi and Gram Udyog Yojana (VKGUY)) for specified flowers, fruits and vegetables (listed in table 13 of appendix 37), aimed at neutralising the high transport cost disadvantage suffered by exporters; it withdrew benefits under the Duty Entitlement Pass Book (DEPB) scheme on the export of rice, edible oils and pulses with a view to curbing inflation in essential commodities and hiking domestic supply.
It has also allowed duty free import of specified specialised inputs/chemicals and flavouring oils to the extent of 1% of FOB value of the preceding financial year’s export under the VKGUY scheme .But trade analysts expected that to be pegged at no less than 3%. The additional duty-free credit scrip of 2.5% on select f&v and flowers is viewed as a positive move.
The food group carries a weightage of only 14% in the WPI but its political and economic impact far outweighs its weightage. Within the group, fruit and vegetable prices have shot up more significantly compared to cereals over the last several weeks.
So, the move is viewed as positive. India exports grapes, mango, lychees, headed cabbage, spinach, bitter gourd,, beans and cauliflower among others. Roses and tulips dominate flower exports but bulb imports ( in a trade where rapid changes dictate preferences ) crucial to quality produce, has not been addressed.
Under the VKGUY, there is a pathetic attempt to “incentivise” rural infrastructure. The policy allows import of capital goods/equipment against exports by Status Holders in 2008-09 (w.e.f from April 1). On the face of it, this could help retail houses, food processing companies and farmer coops given that cold storage units, pre-cooling units etc are involved. Duty free credit scrip equal to 10% of the FOB value of agricultural exports is allowed, but there’s a key catch: the total benefits of all status holders put together should not exceed Rs 100 crore.
SEZ Exports Likely To Touch Rs 1,25,000 Cr In 2008-09
NEW DELHI: Despite initial reservations of the finance ministry, they are proving to be key engines of export growth. The government expects exports from special economic zones (SEZs) to touch Rs 1,25,000 crore during 2008-09, an increase of more than 86% over the last fiscal.
“The government sees SEZs as vehicles of industrialisation and employment generation,” commerce minister Kamal Nath said while announcing the Foreign Trade Policy for 2008-09 here on Friday. In the last three years, the exports from SEZs have shown an increase of over 150%. It is projected that the exports from SEZs would reach Rs 1,25,000 crore by the end of 2008-09.
According to government estimates, export gains from SEZs in 2007-08 would total to about Rs 67,088 crore, a growth of 200% over two years. Exports from SEZs in 2003-04 was just Rs 13,854 crore. SEZs currently provide employment to more than 2.8 lakh people. According to government data, till December 2007, newly-notified SEZs provided employment to about 61,000 people. Meanwhile, private sector provided employment to about 36,463 people as per the data available till December 2007. Companies operating in these zones include Nokia, Mahindra and Mahindra and Wipro.
The incremental employment generated by these SEZs since February 2006 is 1.5 lakh. Of this, about 61,000 have found employment in the newly notified SEZs, private SEZs and government owned SEZs have given employment to to around 85,000.
Pointing out the massive increase in exports and employment, the minister said: “Development of this nature reassures us of the validity of the basic policy relating to SEZs, notwithstanding the scepticism expressed by a few persons.”
According to the pre-budget Survey, exports from the tax-free zones increased to Rs 34,615 crore in 2006-07 from Rs 22,840 crore, regisetering a growth of 52%.
Till now the government has granted 453 formal approvals for setting up of SEZs, of which 207 have been notified, while others are at various stages of implementation and operation. The minister also said that approvals are not restricted to a few states but spread over 19 states and 3 union territories.
The new SEZs have come up in all the sectors like engineering, textiles, IT, telecommunication, multi-products, shoes, gems & jewellery, non conventional energy, bio technology and pharmaceuticals. The news SEZs have come in states like Tamilnadu, Rajasthan, Gujarat, Andhra Pradesh, Punjab, Uttar Pradesh, Maharashtra and Karnataka.
“The government sees SEZs as vehicles of industrialisation and employment generation,” commerce minister Kamal Nath said while announcing the Foreign Trade Policy for 2008-09 here on Friday. In the last three years, the exports from SEZs have shown an increase of over 150%. It is projected that the exports from SEZs would reach Rs 1,25,000 crore by the end of 2008-09.
According to government estimates, export gains from SEZs in 2007-08 would total to about Rs 67,088 crore, a growth of 200% over two years. Exports from SEZs in 2003-04 was just Rs 13,854 crore. SEZs currently provide employment to more than 2.8 lakh people. According to government data, till December 2007, newly-notified SEZs provided employment to about 61,000 people. Meanwhile, private sector provided employment to about 36,463 people as per the data available till December 2007. Companies operating in these zones include Nokia, Mahindra and Mahindra and Wipro.
The incremental employment generated by these SEZs since February 2006 is 1.5 lakh. Of this, about 61,000 have found employment in the newly notified SEZs, private SEZs and government owned SEZs have given employment to to around 85,000.
Pointing out the massive increase in exports and employment, the minister said: “Development of this nature reassures us of the validity of the basic policy relating to SEZs, notwithstanding the scepticism expressed by a few persons.”
According to the pre-budget Survey, exports from the tax-free zones increased to Rs 34,615 crore in 2006-07 from Rs 22,840 crore, regisetering a growth of 52%.
Till now the government has granted 453 formal approvals for setting up of SEZs, of which 207 have been notified, while others are at various stages of implementation and operation. The minister also said that approvals are not restricted to a few states but spread over 19 states and 3 union territories.
The new SEZs have come up in all the sectors like engineering, textiles, IT, telecommunication, multi-products, shoes, gems & jewellery, non conventional energy, bio technology and pharmaceuticals. The news SEZs have come in states like Tamilnadu, Rajasthan, Gujarat, Andhra Pradesh, Punjab, Uttar Pradesh, Maharashtra and Karnataka.
Industrial Growth Jumps 8.6% In Feb
NEW DELHI: India’s growth story remains robust, if you go by industrial production. The Index of Industrial Production (IIP) rose 8.6% in February 2008, with capital goods growth rebounding to double-digit levels after falling to an inexplicable low of 2.1% in January, and consumer durables climbing out of negative territory.
This comes as good news, as the IIP growth rate had dipped to 5.8% in January from 7.7% in December. Industrial growth at 8.6% in February 2008 is still lower than the 11% achieved in February 2007.
The data is sure to give policymakers more room for manoeuvre, as they try to balance growth and inflation and come under pressure to tighten monetary policy to control inflation.
Ministry of statistics and programme implementation secretary Pranab Sen said, “The February number reaffirms the belief that India’s growth story is very much on track. Although growth is a tad lower compared with previous months due to high base effect, cumulative growth for the April-December period indicates that investment-led growth is very much intact.”
The growth figures in some of the vital sectors like capital goods have brought cheer and confidence in the economy.
Prime Minister’s economic advisory council member Saumitra Chaudhuri said, “Capital goods growth, which, by falling to 2.1% in January, 2007-08, had policymakers worried, is back in double digit at 10.4% in February 2007-08. However, it is lower than 18% witnessed in February 2006-07.”
The story in consumer durable sector, which includes automobile and whitegoods, has also bettered. From a negative 3.1% in January, the growth in consumer durables sector bounced back with 3.3% growth in February 2007-08, and is near double of 1.8% in February 2006-07.
The sector has shown negative growth in seven months and positive growth in just four months, with February being the fourth month in 2007-08 fiscal. While the cumulative growth in consumer durables since April still continues to be in the negative at 1.0% compared to 9.7% in February 2006-07, the industry, it seems, is shedding its blues on some pick-up in the demand.
Mr Sen said, “The consumer durables sector is bearing the brunt of higher interest, as demand is interest-sensitive. And one can expect a bounceback only if interest rates come down from the prevailing levels. Besides, implementation of the 6th Pay Commission recommendation could also provide some impetus.”
The consumer non-durable sector, comprising largely FMCG products, grew by a whopping 11% in February 2007-08 compared with 9.3% in the same month in 2006-07. The sector’s performance is expected to better with customs duty cuts in edible oils and excise duty cuts in the budget start playing on the demand.
Basic goods and intermediate goods grew by 7.3% (10.7%) and 8.2% (13.3%), respectively, in the month under consideration. Manufacturing, which occupies the highest weightage of about 80% in the Index of Industrial Production, grew at 8.6% against 12% in February, 2007, much higher than 5.9% in January.
As many as 15 out of the 17 industry groups showed positive growth in February 2007-08. Wood and wood products, including furniture and fixture, showed negative growth of 13.8% besides textile products, including wearing apparel which showed a negative growth of 1.7%.
For the first 11 months of last fiscal, industrial growth stood at 8.7% against 11.2% in 2006-07, according to data released by the government. Mining and electricity also did their bit for this turnaround.
In February, electricity generation grew by 9.8% from a low of 3.3% a year-ago while mining output managed to maintain the growth rate of 7.5% in February 2007-08. Mining and electricity had dropped to 1.8% and 3.3% in January 2007-08.
This comes as good news, as the IIP growth rate had dipped to 5.8% in January from 7.7% in December. Industrial growth at 8.6% in February 2008 is still lower than the 11% achieved in February 2007.
The data is sure to give policymakers more room for manoeuvre, as they try to balance growth and inflation and come under pressure to tighten monetary policy to control inflation.
Ministry of statistics and programme implementation secretary Pranab Sen said, “The February number reaffirms the belief that India’s growth story is very much on track. Although growth is a tad lower compared with previous months due to high base effect, cumulative growth for the April-December period indicates that investment-led growth is very much intact.”
The growth figures in some of the vital sectors like capital goods have brought cheer and confidence in the economy.
Prime Minister’s economic advisory council member Saumitra Chaudhuri said, “Capital goods growth, which, by falling to 2.1% in January, 2007-08, had policymakers worried, is back in double digit at 10.4% in February 2007-08. However, it is lower than 18% witnessed in February 2006-07.”
The story in consumer durable sector, which includes automobile and whitegoods, has also bettered. From a negative 3.1% in January, the growth in consumer durables sector bounced back with 3.3% growth in February 2007-08, and is near double of 1.8% in February 2006-07.
The sector has shown negative growth in seven months and positive growth in just four months, with February being the fourth month in 2007-08 fiscal. While the cumulative growth in consumer durables since April still continues to be in the negative at 1.0% compared to 9.7% in February 2006-07, the industry, it seems, is shedding its blues on some pick-up in the demand.
Mr Sen said, “The consumer durables sector is bearing the brunt of higher interest, as demand is interest-sensitive. And one can expect a bounceback only if interest rates come down from the prevailing levels. Besides, implementation of the 6th Pay Commission recommendation could also provide some impetus.”
The consumer non-durable sector, comprising largely FMCG products, grew by a whopping 11% in February 2007-08 compared with 9.3% in the same month in 2006-07. The sector’s performance is expected to better with customs duty cuts in edible oils and excise duty cuts in the budget start playing on the demand.
Basic goods and intermediate goods grew by 7.3% (10.7%) and 8.2% (13.3%), respectively, in the month under consideration. Manufacturing, which occupies the highest weightage of about 80% in the Index of Industrial Production, grew at 8.6% against 12% in February, 2007, much higher than 5.9% in January.
As many as 15 out of the 17 industry groups showed positive growth in February 2007-08. Wood and wood products, including furniture and fixture, showed negative growth of 13.8% besides textile products, including wearing apparel which showed a negative growth of 1.7%.
For the first 11 months of last fiscal, industrial growth stood at 8.7% against 11.2% in 2006-07, according to data released by the government. Mining and electricity also did their bit for this turnaround.
In February, electricity generation grew by 9.8% from a low of 3.3% a year-ago while mining output managed to maintain the growth rate of 7.5% in February 2007-08. Mining and electricity had dropped to 1.8% and 3.3% in January 2007-08.
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