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KOLKATA: To hasten implementation of special economic zone (SEZ) projects, the Union commerce ministry has asked states to come up with a single-window clearance mechanism for SEZ project developers. Nearly every state government has been asked to set up a high-powered committee for SEZs and come up with a governance structure for SEZs.
As a first step, the commerce ministry has convened a meeting of state governments of Maharashtra, Andhra Pradesh, Tamil Nadu, Gujarat, Haryana and Karnataka to review the progress of relevant SEZs that have received formal clearances. These six states have collectively put in the maximum number of SEZ applications to the commerce ministry.
The commerce ministry directive to the states comes on the heels of Union commerce minister Kamal Nath’s recent announcement that there should be a coordinated effort by all stakeholders so that the SEZ scheme can fulfil its objectives. Incidentally, the single-window scheme gains more importance for multi-product SEZs, for which the developer has to seek clearances from various departments.
Commerce ministry officials told ET: “The Board of Approval (BoA) has formally approved 366 SEZs. We expect an investment of Rs 3,00,000 crore in these SEZs and an employment for 4 million people. The government is keen to see these things happen as fast as possible. The government wants to step up activities for SEZs which have received formal approval, before taking up fresh applications on October 19,” they added. The agenda for the meeting has not yet been fixed.
Incidentally, a section of developers has stressed the difficulties in setting up SEZs. An SEZ developer told ET: “The Centre has deputed development commissioners in various regions who are meant to coordinate with state governments. However, it’s not that simple, as the multiplicity of authorities and separate rules in states make the task difficult.
Sometimes, a single development commissioner has to look after a number of states. We strongly feel each state government should depute a competent authority at the development commissioner’s office to facilitate setting up of SEZs in the sate through single-window mechanism.”
The massive surge in investment by foreign institutional investors (FII) after the Fed rate cut has prompted RBI to propose further liberalisation in norms of foreign investment by Indian companies, residents and mutual funds (ET September 25).
FII inflows stood at a staggering $1.5 billion and the Central bank proposed to increase outward investment to control liquidity and rein in rupee. May be further liberalisation of norms would increase outflow of funds and help to control the liquidity position, but the fact is that India’s investment abroad has already been increasing rapidly.
In five years, between 2001-02 and 2006-07, total international assets of India has increased at an annual compound rate of 24.2% against 12.6% annual rise in total international liabilities. The net international liabilities as a result, have gone down by over 40% from Rs 3,37,285 crore in 2001-02 to Rs 1,97,390 crore in 2006-07.
India’s direct investment abroad, of which equity capital and reinvested earnings account for 90%, has increased by more than five times from Rs 19,550 crore in 2001-02 to Rs 1,04,494 crore last year. In 2006-07 alone the direct investment outflows increased by 80% over 2005-06. In contrast, direct investment inflows to India during 2001-02 to 2006-07 has increased by about two and a half times from Rs 1,21,043 crore to Rs 3,15,339 crore.
And if in actual terms, the net inflows of direct investment have more than doubled during this period what is significant is that direct investment outflow from India is growing at a faster rate now and more liberalisation of norms will boost its growth further narrowing down the gap.
In fact, the outflow under direct investment had stagnated during the early part of the current decade and only during the last two years after liberalisation of norms of outward investment, it has grown rapidly. But if India’s direct investment abroad is rising at a higher rate than inflows, the gap between inflows and outflows of portfolio investment has been widening rapidly over the years. Not surprising. For, the recent spurt in stock prices has made Indian bourses most sought-after investment destinations of late.
Total inflows of portfolio investment has more than doubled during the last five years from Rs 1,53,915 crore in 2001-02 to Rs 3,49,841 crore in 2006-07. Investment in equity securities which accounts for about 70% of the total portfolio investment has gone up three times during the period from Rs 90,833 crore to Rs 2,75,812 crore.
Total outflow under portfolio investment during the same period in contrast, has increased by only 8% from Rs 3,188 crore to Rs 3,441 crore. Investment in equity has remained unchanged during the period. May be RBI’s recent proposals will pave the way for higher portfolio investment abroad. For, although the government had made a case for a liberal dispensation for Indian mutual funds to invest abroad in the past, the enabling approvals for investing in a range of products overseas were yet to be granted.
The biggest component of India’s international liabilities was, however, loan which accounts for 28% of aggregate liabilities in 2006-07. This may be due to ongoing technological upgrading and expansion of domestic industrial activities, RBI has observed. Higher investment demand by Indian companies are reflected in increase of external commercial borrowings.
NEW DELHI: The top 20 private equity investors in the country have invested $5.4 billion in 551 deals over the past 15 years. Leading the pack are Warburg Pincus (80 deals worth $1.1 billion), ICICI Venture Funds (158 deals worth $542 million) and Carlyle (21 deals worth $510.8 million).
In terms of the number of deals, India’s largest PE fund ICICI Venture is on top of the heap, followed by Warburg Pincus, IL&FS Investment Managers and Intel Capital, according to data compiled by research outfit Thomson Financial.
The data, however, does not include the recent investments by buyout fund Blackstone in Intelenet ($109 million), Eenadu Group ($275 million), Nagarjuna Construction ($150 million) and Gokaldas Exports ($165 million).
If these figures are added, Blackstone will figure among the top three PE investors in the country. It will also take the cumulative investments by the top 20 PE majors to over $6 billion.
The massive surge in investment by foreign institutional investors (FII) after the Fed rate cut has prompted RBI to propose further liberalisation in norms of foreign investment by Indian companies, residents and mutual funds (ET, September 25). FII inflows stood at a staggering $1.5 billion and the Central bank proposed to increase outward investment to control liquidity and rein in rupee.
Maybe further liberalisation of norms would increase outflow of funds and help to control the liquidity position, but the fact is that India’s investment abroad has already been increasing rapidly. In five years, between 2001-02 and 2006-07, total international assets of India has increased at an annual compound rate of 24.2% against 12.6% annual rise in total international liabilities. The net international liabilities as a result, have gone down by over 40% from Rs 3,37,285 crore in 2001-02 to Rs 1,97,390 crore in 2006-07.
India’s direct investment abroad, of which equity capital and reinvested earnings account for 90%, has increased by more than five times from Rs 19,550 crore in 2001-02 to Rs 1,04,494 crore last year. In 2006-07 alone the direct investment outflows increased by 80% over 2005-06. In contrast, direct investment inflows to India during 2001-02 to 2006-07 has increased by about two and a half times from Rs 1,21,043 crore to Rs 3,15,339 crore.
And if in actual terms, the net inflows of direct investment have more than doubled during this period what is significant is that direct investment outflow from India is growing at a faster rate now and more liberalisation of norms will boost its growth further narrowing down the gap. In fact, the outflow under direct investment had stagnated during the early part of the current decade and only during the last two years after liberalisation of norms of outward investment, it has grown rapidly.
But if India’s direct investment abroad is rising at a higher rate than inflows, the gap between inflows and outflows of portfolio investment has been widening rapidly over the years. Not surprising. For, the recent spurt in stock prices has made Indian bourses most sought-after investment destinations of late.
Total inflows of portfolio investment has more than doubled during the last five years from Rs 1,53,915 crore in 2001-02 to Rs 3,49,841 crore in 2006-07. Investment in equity securities which accounts for about 70% of the total portfolio investment has gone up three times during the period from Rs 90,833 crore to Rs 2,75,812 crore. Total outflow under portfolio investment during the same period in contrast, has increased by only 8% from Rs 3,188 crore to Rs 3,441 crore. Investment in equity has remained unchanged during the period.
May be RBI’s recent proposals will pave the way for higher portfolio investment abroad. For, although the government had made a case for a liberal dispensation for Indian mutual funds to invest abroad in the past, the enabling approvals for investing in a range of products overseas were yet to be granted.
The biggest component of India’s international liabilities was, however, loan which accounts for 28% of aggregate liabilities in 2006-07. This may be due to ongoing technological upgrading and expansion of domestic industrial activities, RBI has observed. Higher investment demand by Indian companies are reflected in increase of external commercial borrowings.
AHMEDABAD: The ministry of commerce and industry has lifted the ban on import of edible oil sourced from genetically modified (GM) oilseeds. The move has come due to the country’s failure to meet the demands in the domestic market. India is the world’s leading importer of edible oils.
For this, the directorate general of foreign trade (DGFT) has deleted a condition on import of edible oils sourced from GM oilseeds. Prior to this, an importer was supposed to furnish a certificate in the format prescribed by the department of commerce and ministry of environment and forests and declare that he was not importing edible oil sourced from GM oilseeds.
The stringent criteria for import of edible oil was believed to be aimed at protecting farmers’ interests. However, according to a DGFT official, there was no scientific process to certify if the oil was sourced from normal or GM seeds.
“There was demand in the market and it was also not possible to segregate the normal edible oil from the oil sourced from GM oilseeds. We have already communicated the decision to the State Trading Corporation and MMTC,” said director general of foreign trade RS Gujral.
Similarly, the ministry of environment and forests has also issued a notification granting limited exemption for producers from seeking approval of the Genetic Engineering Approval Committee (GEAC) to produce, sell, import or use food stuffs, ingredients in food stuffs and additives, including processing aids derived from living modified organisms, where the end product is not a living modified organism.
According to this, GEAC approval would not be required for import of genetic modified soybean oil as the oil is not a living modified organism.
Meanwhile, the DGFT has begun a trial run of online filing of various documents by foreign traders. “We have started accepting trials on the online platform for certain procedures. We are expecting the project to be implemented in the next 3-6 months,” said Mr Gujral.
The DGFT has already put the duty entitlement passbook scheme online and plans to do the same with certain other documentation to save foreign traders time.
NEW DELHI: There are no such things as limits to growth, noted Reagan, because there are no limits to the human capacity for intelligence, imagination and wonder. Economic change may seem inevitable, but growth is by and large intentional. Consider, for instance, the growth performance of the Indian economy.
In the last two years, GDP growth has accelerated by over 9% per annum, and the top economic managers appear optimistic about the growth momentum. But the mavens are already crunching numbers and poring over figures to decipher if the recent growth performance has been above potential — that is, whether the economy is “exceeding its speed limit”.
A new research paper says that the “recent shift” to a more investment-intensive growth pattern, together with sustained productivity gains, “seem to have raised India’s medium-term’’ growth potential. It adds that given the large room for catch up in productivity levels across sectors, potential growth could actually be higher.
However, to reap the economic gains, policy reform would be required to bring about improvements in labour market conditions for better job creation, along with proactive financial sector reforms for “sustaining investment efficiency”.
The study incorporates recent growth accounting analyses that estimate total-factor productivity (TFP). Now growth in TFP represents output growth not accounted for by the growth in inputs, and essentially implies technical change and efficiency improvement. And the latest estimate of TFP for India cited in the paper is in 3.2-3.5% range, much higher than the long-term trend “as well as international experience”. As the paper puts it, the obvious query is whether such a fast pace of TFP growth can really be sustained.
It is true that aggregate productivity growth for an economy is explained by resource re-allocation across sectors, say the shift of labour from low-productivity agriculture to the nonfarm sector. There could also be productivity growth within sectors and industries. It is also the case that such factors as trade openness and the development of the banking and financial sector can substantially explain the inter-sectoral shift of resources, with the objective to seek higher productivity gains.
Also, key economic aspects, such as the business environment and overall institutional quality, do affect productivity growth. Hence, the critical role for policymaking: of the need for proactive guidelines, norms and legislation to incentivise efficiency improvement. The study finds that the untapped potential for productivity improvement is high.
The paper notes that involvement in low-productivity agriculture at 57% of total employment is large in India, as against the figure of 47% in China and 34% on average in Asia. Note that non-farm labour productivity is 4-5 times that in agriculture. Also, the shift to nonfarm jobs has been slower in India than in other Asian economies, as pointed out in the paper.
MUMBAI: Hours after RBI governor YV Reddy comes out with his mid-term policy review on October 30, the federal open market committee (FOMC) will meet to decide on interest rates in the US. Market participants may, therefore, hesitate to take a view either on the exchange rate or interest rates, immediately after Reddy announces his policy.
While this is not the first time that the meeting of the two policymakers has coincided, this time all eyes are on the Fed, which is widely expected to announce some more rate measures. The Fed meeting earlier this month resulted in a rate cut that sent markets rallying worldwide and the dollar slipping to a new low.
The challenge for Reddy would be to take a call on global capital flows without knowing whether the Fed will cut rates once again or not. A second rate cut would further widen the gap between interest rates in India and in the US. A rate cut would also put upward pressure on the rupee as global funds would exit dollar debt and seek better returns in emerging markets.
HDFC Bank chief economist Abheek Barua points out: “The RBI governor is not constrained to make all announcements on the day of the policy itself. He could well wait for the Fed to announce its decision and then, in the event of a rate cut in the US, announce a cut in the repo rate in November or December.” He further added that the one key challenge before Dr Reddy would be to manage the huge inflows entering into the country, and this could be regardless of whether the Fed cuts rates further or not.
The inflows from FIIs into India got accelerated after the Federal Reserve cut rates by 50 basis points last week. This saw the rupee breach the 40-mark versus the greenback after a long span of nine years.
A rising rupee spells doom for exporters and hence, calls for active intervention from the central bank so that export competitiveness remains protected. Spells of continuous intervention will in turn increase the cash flows in the banking system and this could see inflation rearing its head once again. Thus to tackle the anticipated liquidity issue, RBI could look at either hiking the cash reserve ratio (CRR) or else, resort to issuing bonds under the market stabilisation route.
ICICI Bank chief economist Samiran Chakraborty explained, “RBI is more likely to take a decision, based on the 50-bps cut which the Fed has already announced. At the current juncture, the central bank may not go in for a cut in rates, as it would prefer to wait for further action from the Fed. Even though current inflation numbers are benign, rising oil and food prices will raise inflationary concerns
