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| Tuesday, February 29, 2000, Chandigarh, India  
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Reform financial & labour sectors: Economic Survey NEW DELHI, Feb 28 (PTI) — The Economic Survey (1999-2000) today asked the Government to intensify reforms, especially in financial and labour sectors, to give a fillip to industry which was experiencing a turnaround in the current fiscal after a two-year downtrend. Stating that industrial growth improved to 6.2 per cent in April-December 1999 compared to 3.7 per cent in the same period last year, the pre-Budget survey outlined the reform strategy emphasising promotion of the small scale sector, restructuring of public sector and improvement in corporate governance. It expressed concern over infrastructure shortfalls and said “constraints in roads, power and telecom need to be removed by creating higher capacities for sustained industrial growth.” Attributing the improved industrial performance mainly to the growth in manufacturing sector, it said “further, various policy measures of the Union Budget (1999-2000), including those aimed at specific sectors like housing, information technology and infrastructure, have bolstered the revival.” A low inflation and an increased demand led to improved capacity utilisation and the trend was supported by a pick up in exports and good agriculture performance, which created a strong rural demand, to help industry record impressive performance during the year. It also called for legislative reforms to facilitate rapid redeployment of investment from unproductive to productive lines of activity in view of the rapidly changing domestic and international economic environment. Stating there were clear “feel good” factors in the economy, the survey said industrial production was likely to be reinforced by better performance by the infrastructure industries. “Industrial recovery is also helped by the improved perceptions of international credit rating agencies and investors, rise in Business Confidence Index, better corporate performance and bullish sentiments in stock markets,” it said. The broad-based nature of the recovery was evident from good performance of basic, intermediate and consumer goods, and added there was still scope for continued recovery. On public sector, it said the Government intended to encourage marginally profit-making enterprises to promote Voluntary Retirement Scheme (VRS) by raising money from banks against government guarantees and interest subsidy. PSEs would also be encouraged to issue bonds to workers opting for VRS with the Government guaranteeing the repayment of such bonds and fully reimbursing interest payments. The year was bad on Foreign Direct Investment front with the total approvals falling to Rs 23,795 crore during January-October 1999 from Rs 24,454 crore during the same period. The actual inflow of FDI was also lower during the year at Rs 11,093 crore (January-October 1999) compared to Rs 11,607 crore in the same period of the previous year. Core and infrastructure sectors accounted for more than half of the FDI approvals at 57.7 per cent, followed by consumer goods (12.9 per cent) and capital goods and machinery (10.8 per cent). The growth in sanctions by All India Financial Institutions was significantly lower during the current year. Sanctions by AIFIs grew by 15.5 per cent (April-December) compared to 26 per cent in the same period of the previous year. However, disbursements showed a higher growth during the year at 17.2 per cent as against 13.6 per cent in April-December 1998. During the current fiscal (April-November), capital goods imports declined by 29.8 per cent to $ 3.45 billion from $ 4.92 billion in the same period a year ago. The Government set up a
Second Labour Commission to review the existing labour
laws and legislations in view of the sweeping changes in
the economy after liberalisation. NEW DELHI, Feb 28 (UNI) — The economic survey 1999-2000 suggests drawing up of an organisational format to reduce the dependence of the infrastructure sector on government funds in order to check the widening gap between demand and supply which threatens the sustainability of economic growth. A series of measures suggested by the survey, placed in the Parliament today, include privatisation of power distribution as part of reforming the loss-making state electricity Boards (SEBs) and setting up of a statutory road cess to avoid a direct toll on road users. Giving an overall view, the survey says the performance of most of the infrastructure and core industries has improved during the period, with electricity generation, petroleum products, transport and telecommunication “doing well.” The steel industry is showing signs of recovery and the growth prospects of the cement industry look good. However, the demand for infrastructure facilities and services continues to outpace supply. “The signs of shortfalls in capacity are more clearly reflected in sectors such as roads, power and telecom. In aggregate sense, the widening gap between demand and supply of infrastructure continues to raise questions concerning the sustainability of economic growth in future.” In order to sustain infrastructure growth, it is necessary to evolve an organisational format which will yield finances from the capital markets and result in the generation of internal resources on a self-sustaining basis. The potential for commercialisation and competition in infrastructure is more widespread than is commonly perceived, according to the survey. It says private power projects cannot be sustained purely through credit enhancements like government guarantees and escrow mechanisms. This can only be done through reform of the SEBs structure to bring efficiencies in generation, transmission and distribution operations. While the potential for independent power projects is well known, the opportunities in power distribution are not so widely recognised. Privatisation of distribution would bring forth better monitoring of power supplied because the private entrepreneurs would have a stake in it. This, in turn, would be reflected in improved revenues by cutting distribution losses that originate from uncharged supplies. On the road sector, it says a significant policy issue under consideration is on the desirability of shifting to annuity-based payments to operators and doing away with direct tolling. Annuity-based payments would imply that the government would have the advantage of deferred payments. On Railway, the surveys
suggests that the sector needs to regain its share in
freight traffic through qualitative capacity augmentation
aided by corrective pricing policies and organisational
changes. |
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THE survey has advocated a four-point strategy for fiscal reforms of States whose finances are in a shambles with deficits reaching critical levels. The strategy is to reduce non-plan revenue expenditure, reforms in pricing and subsidies, institutional reforms and bringing down the government’s role in non-essential areas. “Several state governments are struggling to find resource to meet their wage bills and have little left over for economic and social development,” the survey said, adding that the objective of fiscal reforms is to wipe out the revenue deficit in the medium-term. Appropriate taxation, expenditure measures and downsizing of government were essential for reduction in non-plan expenditure. External debt rises: The country’s external debt has risen by one billion dollars to $ 98.87 billion at the end of September 1999, though the ratio of external debt to GDP has gone down from 23.5 per cent in 1998-99 to 22.3 per cent, the Economic Survey today said. In line with the declining trend witnessed in recent years, the external debt to gross domestic product (GDP) ratio at the end of September 1999 was 22.3 per cent compared to 41 per cent in 1991-92 and 23.5 per cent in 1998-99. The absolute value of external debt at $ 98.87 billion in September 1999 went up marginally from $ 97.68 billion in March 1999. The share of short-term debt to foreign exchange reserves has declined from 17.2 per cent in March 1998 to 13.9 per cent in September 1999. Similarly the debt service ratio fell from 19.1 per cent in 1997-98 to 18.7 per cent in 1998-99, it said. Below poverty line: The number of poor people in India has remained more or less stable around 320 million despite a good decline in the percentage of people below the poverty line. The survey quoted the latest estimates of poverty by the National Samples Survey (NSS) which found that the percentage of people below poverty line came down from 54.9 in 1973-74 to 36 in 1993-94. In the rural areas, the decline is from 56.4 per cent to 37.3 per cent during this period. (Persons who do not have the purchasing power to meet their own specified minimum calorie requirement of food are counted as those below the poverty line). Inflation rate drops: Despite low levels of inflation at around 3 per cent in 1999-2000 due to strong agricultural growth and import liberalisation, real interest rate has risen sharply on account of market rigidities. “Inflation rates dropped to international levels of 2 to 3 per cent for the first time in decades. The strong agricultural growth in 1998-99, the increasing openness of the economy to manufactured imports along with fall in international prices have contributed greatly to this decline,” the pre-Budget survey said. “Continuance of
high real interest rates suggests that expectation
formation mechanisms based on historical experience have
not fully taken account of the structural effects of
economic liberalisation on the inflationary
process.” |
Lift controls on agriculture exports NEW DELHI, Feb 28 (PTI) — The Economic Survey today predicted a four million tonne fall in foodgrain production at 199.1 MT in the current fiscal mainly due to erratic rainfall and asked the government to shift agriculture support from subsidies to investment. “More rapid development of agriculture requires continued reform of policies for agricultural trade, pricing and marketing,” the survey tabled in Parliament said and suggested the removal of the remaining controls on agricultural exports, encouragement of forward market and an urgent review of the state-level laws and regulations that were constraining private investment. Emphasising the need for effective public programmes for irrigation, agricultural research and rural credit for more rapid growth, the survey said the existing policies must be reformed to encourage more private investment in areas such as irrigation, storage and transportation. Noting that public investment in agriculture had been declining in the 1990s, it said there was need to shift the emphasis of public support for agriculture from subsidies to investment in rural and agricultural infrastructure and effective research and extension. It further said that with the removal of exports and import controls on agricultural products and their replacement by a rational and stable tariff structure, sharp fluctuations in agricultural prices arising from domestic supply shocks could be greatly moderated. The survey projected a sharp decline in the growth rate of agriculture and the allied sectors at 0.8 per cent during the current fiscal compared to 7.2 per cent in 1998-99. Expressing concern over the lower growth in foodgrain production, the survey said the overall growth rate had decelerated to 1.80 per cent per annum during the nineties which was just equal to the annual population growth. “Higher growth of the economy can be sustained only if agriculture and allied activities grow at an average annual rate of 4 per cent,” it said adding the policy framework must encourage high investment in rural assets and supportive infrastructure to ensure targeted growth. The survey estimated that rice production would go up by 1.7 per cent to 87.5 MT in 1999-2000 against 86 MT in the previous year. However, the production of wheat, coarse cereals and pulses would decline by 2.9 per cent, 7 per cent and 8.2 per cent, respectively, to 68.7 MT, 29.2 MT and 13.5 MT. Oilseed production would drop by 14.2 per cent to 21.6 MT during the reference period against 25.2 MT in the last fiscal. The survey estimated an increase of 14.3 per cent in fertiliser subsidy to Rs 13,250 crore during 1999-2000, including Rs 8,000 crore for indigenously produced fertilisers, mostly urea. The estimated fertiliser production at 14.41 MT during 1999-2000 against 13.6 MT last year, was likely to improve fertiliser consumption by 13.7 per cent to 19.1 million tonnes, the survey said. It, however, noted that the consumption ratio of nitrogen, phosphate and potash had deteriorated to 7.1:2.8:1 compared to the ideal ratio of 4:2:1. Stating that providing better access to institutional credit for small and marginal farmers and other weaker sections was one of the major objectives of the government, it said the total credit flow to these sectors was likely to go up to Rs 44,675 crore in 1999-2000 against Rs 36,897 crore in the previous fiscal. Highlighting the need for improvement in the functioning of agro-food processing industries to meet high international standards of quality, the survey asked the government to pay special attention to this area by providing a thrust to agricultural exports through enhanced public investment and building a conducive policy environment. According to the survey, Rs 39.80 crore worth of commodities had been graded for exports during the current fiscal. The survey pointed out that one of the reasons for the slow growth in foodgrain production during the nineties was the lack of any significant breakthrough in seed technology, particularly pulses and coarse cereals. It called for more
investment in research, breeder seed production,
multiplication and distribution to push up production. |
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NEW DELHI, Feb 28 (PTI) — The Economic Survey today asked the government to immediately take measures to contain the burgeoning food subsidy by matching increase in supply and procurement prices and indicated that the food subsidy bill would overshoot the target of Rs 8200 crore in 1999-2000. “If it is not possible to reduce the food subsidy burden, an attempt to limit the subsidy to the present levels is now imperative in order to ensure fiscal discipline,” the Economic Survey for 1999-2000 said. Stating that one of the major areas of concern before the government was the burgeoning fiscal deficit, the survey said food grain supply through the public distribution system (PDS) continued to exert pressure on state exchequer. “Some increase in issue prices for households above the poverty line in January 1999 may help reduce the subsidy burden to Rs 8,200 crore,” the survey said. Major subsidies, including food and fertiliser subsidies, are estimated to be around Rs 22,440 crore in 1999-2000 or 1.2 per cent of the GDP, absorbing about 12 per cent of the revenue receipts of the Centre. The Economic Survey said the gap between the economic cost incurred by the Food Corporation towards procurement, storage, distribution and wastage of food grains and its average realisation based on the issue prices under the PDS had been widening over the years. “In the past, the government used to make adjustments in the PDS issue price of rice and wheat subsequent to an increase in the MSP with much shorter time lag. However, the issue prices had not been adjusted in line with the increasing MSP since February 1994,” the survey pointed out. On the contrary, the issue prices for families below the poverty line were actually reduced from June, 1997, pushing up the food subsidy bill to Rs 8,700 crore in 1998-99, it said. While the MSP of wheat and paddy were raised to Rs 550 and Rs 440 a quintal in 1998-1999 from Rs 510 and Rs 415 a quintal respectively, the issue prices of these continue unchanged at Rs 250 and 350 a quintal. Stating that the
economic costs of grains procured by the FCI was above
the market prices in recent years, the survey warned that
“this is a cause for concern, and if not checked, it
may keep on raising the burden of food subsidy and
measures to economise costs by FCI need to be
highlighted.” |
Government control hinders IT growth NEW DELHI, Feb 28 (PTI) — India’s early lead in the global information technology (IT) boom is unlikely to last unless existing infrastructural bottlenecks and Government control is removed, Economic Survey said today. “The information technology revolution sweeping across the world provides tremendous opportunities for India.... But our early lead in this area will not last if we do not move swiftly to banish existing bottlenecks to future growth and development of this sector.” Pegging the future IT growth largely on software sector development, the Survey prescribed rapid progress in telecom, availability of skilled manpower, strong venture capital finance base and liberal policy approach towards e-commerce as necessary initiatives to boost IT growth. As part of the Government’s efforts to catalyse IT growth, the Ministry of Information Technology was set up in December 1999 “as a nodal agency for facilitating all initiatives in the Central and State Governments, academia, private sector and successful IT professionals abroad,” It said the ministry would implement a comprehensive action plan to achieve the $ 50 billion software export target by 2008. The Ministry’s initiatives would also include bringing about internet revolution particularly via Indian languages, IT-enabled services, IT education, electronics and computer hardware manufacturing and exports, silicon facility, electronic commerce and Internet based enterprises. To realise its aim of making India an IT superpower, the Government has introduced the IT Bill in Parliament last year, asked each of its Ministries to allocate 2 to 3 per cent of their respective budgets for IT promotion and set up a Rs 100 crore IT Venture Capital fund. The IT Bill provides legal framework for promoting electronic commerce in the country, covering aspects including recognition of electronic contracts, prevention of computer crimes and electronic filing, it says. “Amendments have been proposed in the Indian Evidence Act, Indian Penal Act and the RBI Act. Also, the mechanism of digital signature has been proposed for addressing jurisdiction, authentication and origination in the IT Bill,” it adds. The Venture Capital fund would have contributions from the Ministry, SIDBI, financial institutions, private sector and (NRIs), it says, adding this would promote software sector growth. “Software industry emerged as one of the fastest growing sectors with compounded annual growth rate exceeding 50 per cent in the last five years and a likely turnover of $ 4 billion and $ 2.6 billion exports during 1998-99.” Other measures taken to
develop India’s roadmap for e-commerce include
setting up mechanism and infrastructure for implementing
cyber laws and other security guidelines. Nasscom offers HP IT institute SHIMLA, Feb 28 — The Himachal Government will soon formulate a comprehensive information and technology policy, Chief Minister Prem Kumar Dhumal, said here today. Speaking at a presentation on “Emerging information technology in India”, organised by Department of Science and Technology in collaboration with (Nasscom), he said the Government would provide all possible incentives to develop the IT industry. Mr Dewang Mehta, President of Nasscom, said that making computer education compulsory at all levels and providing Internet connectivity to all schools in the country was essential to ensure that benefits of the ongoing IT revolution percolated down to villages. Referring to the scope for the development of the industry in Himachal, he said a survey conducted by McKinsey revealed that conditions in the state were ideal. The cost of software development would be just 63 per cent of that in Andhra Pradesh. Mr Mehta said that Nasscom was ready to invest up to Rs 15 crore to set up an institute of information and technology in the state so that required manpower could be trained in the State. |
Private entry into education critical NEW DELHI, Feb 28 (PTI) — The Economic Survey today asked the Government to take urgent measures for reducing regional disparities and promote rapid, sustainable and broad-based economic growth in rural areas and encourage private investment in education sector.The regional disparities needed to be resolved through a combination of Central Government policies and more determined efforts by lagging States to avail of opportunities for faster development. The Central Government expenditure on social services has only marginally increased from 1.5 per cent in 1993-94 to 1.7 per cent in 1999-2000 as a ratio to GDP at current market prices, it said adding India’s social indicators still compared unfavourably with many other developing countries. The survey also said that given the severe fiscal constraints on the Government, private entry into higher education would be critical to ensure that supply kept pace with demand. “Dedicated, high quality, long term private investment in higher education and skill generation will only occur if there is a rational and stable policy framework in place,” it said. It estimated that 330
million people would be added to the country’s
population in the next 20-year period, and said India
needed more technical universities and teaching hospitals
to meet the needs of the expanding population. |
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NEW DELHI, Feb 28 (PTI) — Max India today said that it would put up a proposal for issuing one bonus share for every share held before its shareholders, to enhance its equity base to Rs 23.06 crore and fund the company’s massive restructuring plans. The company, which at
present has a Rs 11.53 crore equity base, would convene
an extraordinary general meeting (EGM) on March 29 for
getting shareholder nod for this 1:1 bonus issue, a Max
India statement said here today MUMBAI, Feb 28 (PTI) — The net income of UTI has soared by 240 per cent to Rs 6,046 crore on the back of a spectacular turnaround made by its flagship fund, Unit Scheme-64, whose net income zoomed by 198 per cent to Rs 1,189 crore, for the half year ended December 31, 1999 compared to the similar period last year. Aggregate investible funds of UTI increased to a market value of Rs 72,698 crore, registering a robust 51 per cent rise while that under US-64 stood at Rs 19,923 crore (Rs 12,433 crore on December 31, 1998), P.S. Subramanyam, UTI Chairman told newspersons here today. This has resulted in a reserves and surplus position of Rs 3,581 crore compared to a negative position of Rs 2,597 crore last year. Reserves and surplus of UTI stood at Rs 8,716 crore after an income distribution of Rs 4,120 crore compared to a negative position of Rs 661 crore in December 31, 1998. Unit capital under all
the schemes of UTI rose by 15 per cent to Rs 55,619 crore
Rs 48,404 crore), he said. |
SBI gets
22 kg of gold from temple CHANDIGARH, Feb 28 — SBI Sector-17, Chandigarh branch today mobilised a deposit of 22 kg of gold valued at about Rs 1.10 crore from Mata Nainadevi Trust. The gold was accepted by Mr D.L. Manwani, GM (Development & Personal Banking), from Mr S.S. Chauhan, temple officer. Mr Manwani said that the gold has been placed with the bank under SBI’s Gold Deposit scheme for a period of 7 years at the rate of 4 per cent cent annum and at the end of the stipulated period, the gold will be returned to the temple trust who can either reinvest or exchange it for rupees equivalent at the rates prevailing at the material time. Under the scheme the
Branch has so far mobilised approximately 65 kg of gold. |
SBP to
issue 10,000 kisan credit cards JALANDHAR, Feb 28 — The 100th computerised branch of the Sate Bank of Patiala was inaugurated by Mr R.S. Nanda, General Manager (Planning and Development) of the bank, at Patel chowk here today. Mr Nanda, said the branches of the bank in Chandigarh, Mohali and Panchkula were being interconnected. In the second phase the branches of the bank in Ludhiana, Delhi and Jalandhar would be interlined with the help of computers. Mr S.P. Mittal, Deputy
General Manager, said the bank had issued 8,000 kisan
credit cards so far and was planning to issue 10,000 more
such cards by March this year. |
More foreign funds inflow expected NEW DELHI, Feb 28 (PTI) — The Economic Survey today expressed confidence that the opening up of the insurance sector and introduction of derivatives trading would further encourage foreign investors to invest in the domestic stock market. Attributing the stock market revival to the steps taken in the last Budget, the survey said: “The passing of the Insurance Regulatory Development Authority Bill, opening insurance to private participation, should not only raise resource mobilisation but will also encourage foreign institutional investors, who play a significant role in the Indian stock market.” It said the revival in the capital markets were reflected by the rise in the share of equity in the total resource mobilisation this year. Equity constituted 61 per cent of total resource mobilisation from the primary market during April-December 1999 as against a much lower share of 18 per cent in the corresponding period previous year. The phenomenal spurt in
information technology (IT) stocks witnessed in leading
markets abroad was mirrored in the Indian market, and
contributed significantly to stock market buoyancy. |
Lower interest rate on savings likely NEW DELHI, Feb 28 (PTI) — The Economic Survey today gave a subtle hint of lower interest rate regime on contractual savings saying the recent rate cuts on these schemes was a move towards real interest rate regime. “Recent trends in real interest rates (nominal interest rate minus inflation rate) on contractual savings like Public Provident Funds (PPFs), small savings etc vis-a-vis interest rates on deposits of more than one year maturity with public sector banks assume relevance in relation to the need for moving to a low interest rate regime.” Real interest rates on
contractual savings like PPFs and other small scale
savings schemes has been hovering at 8-8.5 per cent
during December 1999, up from around 5 per cent in April. LSE counters for 15 more cities LUDHIANA, Feb 28 — The Ludhiana Stock Exchange has embarked on an ambitious plant to increase its coverage by allowing trading at remote sites through VSATs. Mr Vishwanath Dhiri, President of the exchange, talking to this correspondent today, said a total of 25 VSAT counters in 15 cities of northern region had been installed and the process of setting up 12 more counters for a principal broker, sub-broker or a large investor was on the cards. The new members will have the facility to apply for trading on the National Stock Exchange through the subsidiary, LSE Securities Limited, on contribution to the Infrastructure Development Fund (NSE) and Interest Free Security Deposit (NSE). Of the 290 members presently enrolled with the LSE, 208 have already become sub-brokers with this subsidiary for trading on the NSE and LSE Securities will commence trading by April 2000. The LSE has a settlement
guarantee fund with a corpus of Rs 11.31 crore and the
daily trading volume in the exchange had increased to Rs
54 crore this financial year. |
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