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| Tuesday, February 20, 2001, Chandigarh, India   
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Economy: what next? More rate cuts needed to revive economy New Delhi, February 19 The government today declared that it will provide protection to agriculture and industry from the flood of free imports that are likely to follow the removal of Quantitative Restrictions in April as per the World Trade Organisation Commitment. CII seeks curbs on imported
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No plans to make cars in India: Toyota M&M tractor
unveiled Belarus offer to
Haryana New technology for
potato storage urged
Cheaper chicken legs
from USA? No thanks
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Economy:
what next?
Q: How do you react to the way the economy is moving? The Indian Economy in the last two years has witnessed stagnation and even recession because of the domestic industry not being provided a level playing field with the business and industry abroad due to liberal imports, removal of quantitative restrictions in two stages coupled with withdrawal of the tax incentives. Last year’s Budget in which the government’s firm view to withdraw the incentives for new industries has immediately been reflected in the slowdown and stagnation of the Indian economy in all spheres. The levy of surcharge being continued coupled with the enhancement of tax on dividends distributed by companies and mutual funds by doubling the same besides the continuance of MAT has led to the corporate investments and growth being retarded. Reversal of this trend is possible only if the tax on dividends is totally abolished coupled with the abolition of Minimum Alternate Tax on all companies. The tax incentives for existing and new industries with special emphasis on those intended to promote the growth of infrastructure development would be most essential and the exemption should be of the entire income of the taxpayers from the industries eligible for the tax relief. Export incentives should not also be curtailed and the tax relief should be based on the foreign exchange earnings and not merely on the profits of the export activity artificially worked out because the incentives related to the export earnings and in most cases profits may or may not be derived and hence, the need for changing the basis of relief for export of goods services, software, etc is imperative. The tax laws are presently one sided and many functions of the revenue authorities affecting the tax payers adversely are unilaterally taken. The tax payers do not have equal protection or say in matters of tax administration and the tax payers are kept at the mercy of revenue functionary at various levels who often misuse their authority, power or position to cause hardship and harassment to tax payers on the one hand and for gaining undue advantage for themselves, both legally and illegally. Q: What measures would you suggest to rein in the burgeoning fiscal deficit? The volume of revenue deficit increasing year by year is a matter of grave concern to everyone and no amount of speech inside or outside the Parliament would help to reduce or avoid the same. The only effective and meaningful solution is to ensure without exception that no governmental department or functionary spends more than what is most essential and there is curtailment of expenses on revenue as well as capital account by 10 per cent each year by all departments at all levels so that in a five year period the deficit budget would be converted-into a surplus budget and the effective deficit would be removed in the first year itself. What is needed is the will and sincerity in implementing the proposal by all. The major cause of deficit and area of huge concern to all is the expenditure on governmental establishment and wasteful travels, telephones, personnel and other costs most of which are avoidable. Meetings and travels should be curtailed to the minimum and the government should not be a source of being a burden to the people. The government employees who are already overpaid at higher levels should be given a freeze on the salaries, allowances and benefits given to them because most of the persons do not deserve even a portion of what they are being paid. The governmental expenditure on non-productive and wasteful acitivities must be totally stopped and the establishment cost of every department must be reduced each year by 10 per cent without any exception. There should be freeze on employment at all levels barring Judiciary and the age of retirement for those in service in the government should be reduced from 60 to 58 immediately with effect from April 1, 2001 and thereafter the age of retirement should be brought down to 55 by reducing it by one in each year in the immediately following three years so that the surplus governmental employees are not a burden for the economy. There should be a voluntary retirement scheme by which anyone in government service who has completed 20 years of service or who has completed 50 years of age would have the option to leave the job and would be given retirement benefits as if the superannuation has taken place at the age of 55 and Rule 56-J of the Fundamental Rules should be liberally invoked to terminate the services of government employees wherever they are found deficient in service or they are found to have found to have indulged in any activity unauthorised by law so that service disputes and/or for reinstatement in service do not continue. Q: What measures would you suggest for meeting expenditure requirements for disaster management? The government should have a national calamity fund to which 2 per cent of the total revenue collection, both of direct and indirect taxes should be handed over by the central as well as state governments and all natural calamities should be financed to provide relief and rehabilitation by proper and effective use of those funds, without additional burden of tax on the citizens. The fund should be carefully preserved and should not be mixed up with others and the money should be earmarked and kept in a separate bank account not accessable to the governments in power in normal circumstances as otherwise the funds would be frittered away by those in power. The National calamities by cyclone, earthquake, fire, floods etc cannot be prevented by human beings except to the extent that they could if predictable be used to reduce or minimise the losses of life and property. The schemes for revival and rehabilitation of all those who are victims of natural calamities must be drawn up and remain ready to be utilised any time the calamity breaks out with suitable modifications in the schemes having regard to the ground realities of the situation. There is no need to impose special or additional levies of taxes nor resort to special ways and means of mobilising funds since in most cases of such fund
collection drive it is difficult to ensure that the funds so collected have actually reached the needy and that the relief has been provided in time. |
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More rate cuts needed to revive economy
Bombay, February 19 While the cut was welcome and expected to lead to softer bank lending rates, the size of the reduction may not be enough to accelerate economic growth, they said. Late on Friday the Reserve Bank of India cut the rate at which it lends money to commercial banks by half a point to 7.5 per cent, and announced the bank cash reserve ratio will be pared to 8.0 per cent from 8.5 per cent in two stages. The two cuts will release a total of 41 billion rupees ($881 million) for lending. “I am a bit disappointed with only a 50-basis-point cut,” said R Ravimohan, Managing Director of Credit Rating Information Services of India Ltd, the country’s leading rating agency. “To boost investment and spur growth in our economy, we need to cut rates by another 100-150 basis points,” Ravimohan said. The RBI’s move is expected to lend support to Finance Minister Yashwant Sinha as he puts the finishing touches on the national Budget for 2001/01 (April-March), due to be presented to Parliament on February 28. Sinha is under pressure to produce a Budget which will reverse the current slowdown. He is expected to use the Budget to continue with reforms of India’s complex tax structure, accelerate privatisation of state-run firms and rein in the fiscal deficit. Rates too high India’s GDP growth is expected to slow to 6.0 per cent in the current year to March from 6.4 per cent last year and 6.6 per cent in 1998/99. While this rate is still impressive given sluggish global trends, it is a far cry from the annual average of over 7.5 per cent for three straight years in the mid-1990s and well below the 10 per cent economists say is required to meet the needs of a growing population, which is already over a billion strong. Analysts said the RBI’s latest moves would do little to reverse the current industrial slowdown. “What has been announced is not enough to improve the situation considering the industrial slowdown,” said D.H. Pai Panandikar, Director-General of the RPG Foundation, an economic thinktank funded by a corporate group. The index of industrial production rose by 5.7 per cent in April-December 2000, down from 6.4 a year earlier; in December alone, the index rose 3.4 per cent, down from 8.1 in 1999. “The RBI should have announced at least a one per cent cut in bank rate and CRR,” Panandikar said. One major beneficiary of the lower rate is the government, which will now also pay less to borrow, welcome news given that in 2000/01 interest payments of some 1.013 trillion rupees will eat up nearly half its revenue receipts. On Saturday, the State Bank of India (SBI), toed the RBI’s line by cutting its prime lending rate for loans up to one year to 11.5 per cent from 12 per cent. It left its medium-term lending rate unchanged at 12.0 per cent. Other banks are expected to review rates in coming weeks. Leading state-run banks currently charge their best borrowers a prime lending rate of 12.0-13.0 per cent. But the prime rate is available only to top-rated borrowers and most corporations typically pay a premium of 100-350 basis points above the prime rate. Further rate cuts India’s fiscal deficit is expected to be 5.1 per cent of GDP in 2000/01, down from 5.6 per cent a year earlier. Analysts are hoping this figure will come down further in coming years as the government has introduced legislation in Parliament that aims to reduce the deficit and set a statutory cap on borrowings. The government’s budgeted gross borrowings for 2000/01 are a staggering 1.17 trillion rupees. Markets had been speculating over a rate cut ever since the Federal Reserve first indicated an easing monetary stance in December and followed it up with two reductions in January.
Reuters
PNB cuts PLR New Delhi, February 19 The asset liability management committee of the bank has, however, decided against changing the prime term lending rate which at present is 12 per cent, a press note by the bank said.
UNI
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President promises WTO protection New Delhi, February 19 The President, Mr K.R. Narayanan, who dealt at length on the various aspects of the economy in his address to Parliament said “while removing most Quantitative Restrictions in April, as per our WTO commitment, we will see that the transition will not be painful to Indian agriculture and industry, especially to the small-scale sector.” Mr Narayanan said there was a need to set an ambitious target of 9 per cent annual growth for the next 10 years to double per capita income and halve poverty. Hinting at changes in labour laws to keep up with the needs of a competitive global market, the President said “there is growing recognition that amendments to some of our labour laws cannot be delayed any more. In implementing these much-needed labour reforms, the government pledges not to dilute its commitment to workers welfare in any way, he added. Pointing out that the agenda of economic reforms has been sustained by a growing national consensus, the President said there was a need to widen the scope of the reforms process to fortify self reliance, create more employment opportunity and to rapidly remove poverty. He said the policy of emphasising higher farm production through subsidy on inputs rather than through building new capital assets in irrigation, power, and rural infrastructure, has considerably reduced public investments in agriculture. Besides inducing inefficient use of scarce resources, this has also degraded soil, water resources, canals, and roads. In turn, this has caused farm productivity and the kisans’ profitability to stagnate. He said that Information Technology has emerged as one of the fastest growing sectors and the target of $ 50 billion software exports by 2008 was achievable. “ The Knowledge Economy presents India with an epochal opportunity to remove poverty and create prosperity for all our citizens, provided we quickly harness our rich human capital by improving education at all levels”, he added. In this regard he said the Government has drawn up a programme to double the intake of students in IITs and other premier engineering institutions in 2002 and treble it in 2003. Referring to the poor state of finances of the Indian Railways, the President said an expert committee on Railways has just completed a comprehensive study of the operations, organisation, finances, investment, tariffs, and other policy issues. The Government would review the recommendations of this committee and initiate necessary action expeditiously. Spelling out the Government’s policy on public sector units, the President said they included revival of potentially viable enterprises; closing down of those PSUs that cannot be revived; and bringing down Government equity in non-strategic PSUs to 26 per cent or lower. Calling for reforms in the power sector, the President said to make power affordable to all there was a need to set a target of installing additional capacity of 100,000 megawatts by 2012, which would require an investment of around Rs 800,000 crore. He said plans were also afoot to add 10,000 megawatts from renewables over the next 12 years.
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CII seeks curbs on imported vehicles New Delhi, February 19 Regarding the contentious issue of import of second-hand vehicles the CII said that besides dual rate of advalorem or specific duty, there is a need to impose additional conditions such as maximum age of old vehicles, emission norms and features to restrict import of unwanted vehicles. Underlining the need for careful examination regarding dereservation of investment limits in the small scale sector, the CII said that with the removal of QRs almost all the items reserved for the sector would be in free category.
No plans to make cars in India: Toyota Tokyo, February 19 “We have not decided to introduce new models or to produce the Yaris in India. We have no plans to make any announcement on India,” a Toyota Motor spokesman said. The Business Line daily in India reported on Monday that the Japanese automaker’s Indian arm, Toyota Kirloskar Motors Ltd (TKML), which began selling its Qualis model in the Indian market just over a year ago, is firming up plans to begin importing the popular Corolla, Camry and Land Cruiser models. It also said the world’s third-largest automaker had been conducting feasibility studies and was inclined to begin making the Yaris in India. The report quoted an unidentified source as saying Toyota was preparing to make an announcement to that effect in June. “As a global automaker, we always consider and study various possibilities on sales and production expansion. But there is nothing concrete which we can disclose on our Indian expansion,” the spokesman said. The Yaris is Toyota’s entry in the so-called B-segment of the global auto industry, small cars with engines ranging from one to 1.8 litres produced at factories around the world from a common platform and using common parts. The B-segment is the most brutally price competitive sector of the auto industry, and analysts say having a competitively priced model holds the key to being one of the four to six global auto giants to survive. Other automakers are expected to either fail, be absorbed or become small niche players.
Reuters
Bathinda, February 19 “While handling over the keys of 151 tractors to farmers, Bapat claimed this was by for the highest sale figure in a single day in Punjab. “The tractor has undergone rigorous field tests for over 4,000 hours and has surpassed all previous benchamarks of performance,” he added. Mahindra Arjun has an all new 60 HP engine developed in collaboration with AVL, Austria. “This new engine provides higher pulling power, low fuel consumption, a very low smoke level, noise reduction and smoother pick up, he said.
UNI
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Belarus offer to
Haryana New Delhi, February 19 He said a special training programme in engineering for the youth of Haryana would be introduced in Belarus and a separate faculty would also be set up for Indian students.
New technology for
potato storage urged Chandigarh, February 19 Possibilities of exports to potato importing countries like Mauritius, Dubai, Kuwait and Singapore are also being explored. This was stated by Mr. D S Bains, MD, Markfed, while speaking at a national seminar on production, processing , storage and of
potatoes here today. Mr Bains emphasised the usage of new technology for proper storage and treatment facilities of the crop. He said that Markfed had expertise in handling various agri-products and added that the past experience showed , sustainability and profitability in such activities needs to be long term and also needs to have a strong infrastructural backing. Mr G S Kalkat, Vice-Chancellor, Punjab Agriculture University (PAU) , who was the chief guest, emphasised the need for proper grading and branding of potatoes in order to compete globally and increase exports. He said that the government needs to ensure proper marketing and pricing of the produce. Dr R Ezekiel, Dr. Sarjeet Singh, Dr. HC Sharma and Dr. P S Dahiya from the Central Potato Research Institute(CPRI) Shimla, Dr. KG Iyer, PU, Chandigarh, Dr. P S Rangi from PAU, Ludhiana, Dr S Anand and Mr. Mr Pankuj Verma U P L, Mumbai, also spoke. ICICI Bank offers quake relief Chandigarh, February 19 |
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Cheaper chicken legs from USA? No thanks Chandigarh, February 19 In the past four to six weeks, nearly 20 to 30 per cent of the broiler farms and broiler Hatcheries of Punjab, Haryana, Chandigarh, Jammu and Kashmir, Delhi, Rajasthan and North Uttar Pradesh have either closed down or reduced their production level to the bare minimum in anticipation of arrival of cheaper chicken legs, popularly known as “drum sticks” from the USA and other countries. Though the government had hiked import duty on chicken legs from 35 per cent to 100 per cent, still the rate at which the USA was prepared to export drum sticks to India were much cheaper than the actual cost of production in India. In case of India’s agricultural products, the bound rates are as high as 150 to 300 per cent. Currently, the rates applicable on various farm products, are low and the government can put the ante as a preventive measure. In case of broilers and chicken legs, the bound rate was 300 per cent. “What we learn or gather from newspaper reports is that the United States wanted to export drum sticks to India at Rs 15 a kg. The US wants to clear the backlog of its stocks of drum sticks which have been reportedly piling up for almost two years. Against the present US rate of Rs 18 a kg for drum sicks, the wholesale rate of broiler chicken in India varies between Rs 50 and Rs 52 a kg,” says Mr Surjit Singh, President, North Zone Broiler Breeders Association, maintaining that after imposition of 300 per cent import duty, the US drum sticks would still be very competitive. “But this gives us a hope of survival and staying in the market,” says Mr Singh claiming that at present, the daily production of broilers in North India alone was to the tune of three lakh kg. “There are 180 to 200 broiler breeders in North India and nearly 8,000 to 10,000 broiler farms in the region. But after the reports of imports of drum sticks from the United States started pouring in, most of the broiler farms decided to close down. Even 25 to 30 per cent broiler hatcheries have stopped production and have even started selling the parental stock. The selling price of a broiler chick has slumped from Rs 13 to Rs 7 a piece,” says Mr Singh. At present, the broiler farms supply chicken at a rate of Rs 24 to Rs 26 a kg. In the bulk market in Delhi, which is the only recognised bulk market in North India, the lumpsum rate was between Rs 26 and Rs 30 a kg for broilers. In the local wholesale market, the rate quoted was Rs 50 to Rs 52 a kg while in the retail market, it varied greatly between Rs 70 and Rs 100 a kg. “Unfortunately, the consumer does not know that it was the retailer which was making a quick buck as the demand for broiler has been constantly on the rise but the broiler farmer was just sustaining himself to stay in the business. But once the American supplies start hitting the local market without imposition of the anti-dumping or bound duty, the local industry would be completely wiped out. “The present is very ticklish situation. With both hatcheries and farms deciding against new chicks, the supply would be affected in coming months and may promise a good market to the importers,” cautions Mr Surjit Singh advising broiler breeders and farmers to continue their production. He said that while on an average an Indian drum stick was 70 to 90 gram in weight, an American drum stick weighed between 160 and 180 gm and lacked the flavour and aroma of Indian broilers. |
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