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Wednesday,
December 4, 2002, Chandigarh, India  
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MID-YEAR ECONOMIC REVIEW
IRDA opposes hike in FDI limit
Private
banks eye rural market |
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UTI’s bifurcation okayed
SEBI: ratings for firms
optional for now
Reduce tax on yarn, paper: industry
Ind-Swift to up stake in arm
HDFC approves 1:1 bonus
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MID-YEAR
ECONOMIC REVIEW New Delhi, December 3 The report, first of its kind, projects an economic growth rate between 5 and 5.5 per cent during the current fiscal and identifies fiscal consolidation, rapid improvement in infrastructure, accelerating structural reforms and employment-centric investment as the critical and priority areas. At the same time, the report cautioned that robust growth in the first half of the current fiscal notwithstanding, the remainder of the year could, however, see some pressures on both revenue and expenditure. “A harsh drought in 14 states of the Union is likely to dampen this year’s GDP growth expectations”, it said adding that high international oil prices, uncertainty about recovery of world growth and trade, and tense situation on the western border combined with imponderables arising from the situation in the Gulf and
elsewhere compounded the weakness”, it pointed out. The Finance Minister, however, clarified that the report was essentially aimed at making the exercise of budget preparation more transparent. “I must clarify that while the report indicates some possible courses of action, it does not purport to be a budget or a forerunner to the budget”, Mr Singh said. “It is, as I promised, a part of the process of making the entire decision making in Finance Ministry including budget making as open as possible”, he noted. The half-year economic report card of sorts, which runs into 33 pages, gives a broad indication of the policy direction that may be unveiled in the next Budget. “There is a need for purposeful movement towards fiscal consolidation with a modern and efficient fiscal order that is of global standards”, the report said. Enhancement of revenues will require restructuring of the tax system with a move to a “stable, impersonal and efficient tax administration with a minimum interface between the assessee and the tax official”, it said and underlined the need for the tax system to be with “minimum exemptions in the field of Central excise and State sales tax” and a move to VAT. In non-tax revenue, the report said that there was a “clear need for better cost recovery through appropriate user charges”. On the critical issue of subsidies and interest rates on small savings, the report reiterated the Finance Ministry’s standpoint that there was a need to revise the rate of interest on small savings in line with movements in market-related interest rates. “Any successful expenditure rationalisation and reprioritisation programme must address the issue of subsidies, through a rationalisation of the prices of food, fertilisers, LPG and kerosene”, it said. Briefing newspersons Finance Secretary S Narayan said that subsidies, wages, salaries and pensions and defence were the major areas that need to be addressed for better expenditure management. “It is critical to contain the growth of wages and salaries and pensions. Following the Expenditure Reforms Commission’s recommendations, around 23,416 posts have been identified for abolition by various Ministries/Departments of the Central Government..... It is imperative to abolish all the posts that have been identified”, it said. The politically contentious issue of disinvestment has been termed as an “integral part” of the reform process. Disinvestment receipts has been estimated at Rs 3,022 crore during the first half of the current fiscal this year, much below the targetted Rs 12,000 crore. “ (This) indicates a slower than estimated pick up in the momentum of such receipts”, it stated. The fiscal deficit, as a proportion of GDP, has gone up from 4.1 per cent in 1996-97 to 5.9 per cent in 2001-02 for the Central Government. The combined fiscal deficit of the Centre and the states has grown from 9.6 per cent in 1999-2000 to 9.9 per cent in 2001-02. “While the rate of interest continues to be below the rate of growth of the economy, high primary deficits (fiscal deficit less interest payments) have led to progressive increases in both the deficit-to-GDP and debt-to-GDP ratios”, the report said. Fiscal deficit for the first half of the current year stood at Rs 57,746 crore which was marginally higher that the deficit of the corresponding period of the previous year. Revenue receipts during the first half of the current fiscal increased by 15.9 per cent while total receipts was 37.5 per cent. Foreign exchange reserves crossed $ 66 billion by the middle of November 2002 and bank credit to the commercial sector increased by 11.3 per cent as compared with 4.4 per cent in the previous year. Foodgrain stock as on October 1, 2002 stood at 51.4 million tonnes. During the period April-September 2002, industrial production grew by 5.2 per cent compared to 2.4 per cent in the corresponding period of the previous year. For accelerating investment, the report has identified FDI as a high priority area and said that the implementation of proposals made by the Steering Committee on FDI will be important in this context. Financial intermediation, by channelling savings into most productive investment opportunities, is critical for accelerating investment. “Reduction in NPAs leads to better financial intermediation and tighter intermediation spreads; and needs to be speeded up through rigorous implementation of the Securitisation, Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance 2002 and formation of asset reconstruction companies (ARCs)”, it said. The capital market remained subdued during the first half of the current year and country’s leading bourse index - NSE-50, which captures the behaviour of the top 50 liquid stocks, makes up roughly half of the market capitalisation of the country, droppped 15.4 per cent, the report said. The mid-year economic review hinted at putting in place a decentralised foodgrain procurement system as a part of the overall structural reforms process. Accumulation of large food stocks has posed serious issues with regard to the current food management policy. There is a need to remove intermediaries by moving to a more decentralised system of procurement”, the report said.
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IRDA opposes hike in FDI limit New Delhi, December 3 The government has recently consulted IRDA on the N.K. Singh panel’s suggestion of hiking FDI limit in insurance to 49 per cent from 26 per cent, to which the regulator expressed its apprehension. “Any decision on FDI will be taken by the government only. But the 26 per cent FDI limit has not been any hinderance to foreign players to come to India,” IRDA Chairman N. Rangachary said on the sidelines of International Banking Summit here. He said the Section 6AA of IRDA Act provides that Indian promoters have to bring down their stakes to 26 per cent after 10 years of operations, which is equal to that of foreign partner, through initial public offers. He also said that the regulator was not considering any relaxation for entry level capital requirement for health insurance companies.
PTI |
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Private banks eye rural market Chandigarh, December 3 Despite their best efforts, cooperative and commercial banks are able to provide about Rs 6,500 crore annual credit for cropping operations. According to information, Hindustan Lever, ICICI and HDFC banks, Mahindra Shubhlabh Services (MSSL), Rabobank International and Cargil India are closely watching this lucrative rural market. MSSL has already decided to enter agri-business in Punjab within next six months. Officials of ICICI Bank and HDFC Bank disclosed that they are looking for strategic partnership with marketing giants to enter in a big way. Mr Kairas Vakharia, CEO, Mahindra Shubhlabh, said in the initial stage, the company will provide total support services to farmers in the cotton belt and the areas, where farmers are ready to take risks in non-traditional crops. In collaboration with other companies, MSSL will provide financial, consultancy and marketing support to farmers. He was here to participate in the International Food and Agricultural Conference on creating agri-business on the sidelines of the Agro-Tech 2002. Talking to TNS, he said in comparison to money lenders and commission agents, the company will offer credit to farmers at 12.5 per cent rate of interest. He said over 40 per cent of the agricultural credit was served by commission agents and money lenders at 24 to 30 per cent rate of interest. The company was hopeful to tap the huge potential of the rural market by providing easy credit at a lower rate of interest. Mr G.R. Chinthala, DGM, Nabard, admitted that though the distribution of over 9 lakh “kisan credit cards” is a major initiative to smoothen the process of agri-credit, but farmers will still be dependent on the informal sector for credit requirements. |
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UTI’s bifurcation okayed New Delhi, December 3 The Unit Trust of India (Transfer of Undertaking and Repeal) Bill 2002, already passed by the Lok Sabha, was approved by the Upper House by a voice vote after the mover of the statutory resolution opposing the Presidential Ordinance of October 29, Manmohan Singh (Cong), withdrew it and Left parties walked out in protest. The Minister said UTI-I would not be floating any new scheme and all existing commitments would be met by the government, while the UTI-II would be started as a SEBI regulated, asset managed and market competing scheme. He assured the House that there would be no retrenchment of UTI employees. All of them would be put on the UTI-II attendance register with an option that they could take six months to decide if they wanted to take voluntary retirement. Singh said the employees may also be considered for absorption in the newly set up UTI Bank in which the State Bank and the Punjab National Bank would have investments. While informing the House that the process has already been started to punish the guilty responsible for mismanaging UTI affairs, the Minister said the matter has already been referred to the Central Bureau of Investigation and “nobody will be spared if found guilty”. Earlier, leader of the Opposition and former Finance Minister Manmohan Singh today said that the government’s move to divide Unit Trust of India into two parts must not transform the financial institution into a ‘’departmental undertaking’’. Moving the statutory resolution disapproving the UTI (Transfer of Undertaking and Repeal) Ordinance, 2002 promulgated by the President on October 29, 2002, Mr Singh said that both the Units must be run by a technocrat and not only Unit-I that the government proposes to be managed by a administrator. Mr Singh also said that the government should have waited for the Joint Parliamentary probe Committee report before going ahead with the Ordinance. The Leader of the Opposition in the House said, ‘’the whole economy is in a tailspin. The capital markets are in a disarray, with investors losing confidence, the customs duty structure has become more complex and the whole disinvestment process has contributed to the instability in the capital market.’’ Mr Singh said that a holistic approach to tackle these issues was the need of the hour to prop up the economy. UTI had become a matter of deep concern and ‘’we had expected that the government will put forward a Bill... all this move has been scuttled.’’ He said there was an urgent need to restructure the UTI. US-64, the flagship scheme had enjoyed the confidence of investors. The CAGR by Rakesh Mohan Committee had termed it as an investment which is as safe as the banks. Today the plight of a large number of pensioners and charitable trusts are bad due to the failure of the UTI scheme. He pointed out that the last 4 to 5 years had seen a steep decline in dividend rate, from a high of 26 per cent in 1993-94 to zero in 2001-02. Similar is the case of the net asset value which too plunged.
PTI, UNI |
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SEBI: ratings for firms optional for now New Delhi, December 3 The possibility of making the ratings mandatory will be
assessed only after the SEBI-appointed Narayanamurthy Committee submits its recommendations, said Mr G.N. Bajpai, talking to newspersons after addressing the inaugural session of
FICCI on ‘Models and Dimensions of Corporate Governance: Fulcrum for Sustainable Wealth Creation’, here today. Companies which go in for these ratings will be at an advantage as they will mop up resources from the market, said Mr Bajpai, adding that the ratings will also be beneficial for investors who are more clear regarding the performance of the company they have invested in. When asked as to when the committee will submit its report, he said it will be done very soon. Listing body to check
dubious firms
PTI adds: SEBI said today it will implement demutualisation of bourses and set up a central listing authority this fiscal following the acceptance of the Kania Committee recommendations. “We have accepted the Kania Committee report on demutualisation of bourses. We will review and approve them within this fiscal”, SEBI Chairman G.N. Bajpai said on the sidelines of FICCI seminar on Corporate Governance here. Allaying fears about the closure of regional loss-making bourses, he said it is now up to them to adopt the appropriate model for corporatisation of exchanges. The SEBI Board approved the report last week. Some local exchanges like the Delhi Stock Exchange are preparing the draft and will submit their plans within two months. The SEBI chief also said the proposed authority will also be set up this fiscal. The authority would have representation from the regional bourses. The move comes in the wake of listing of dubious companies in smaller exchanges taking advantage of slack listing criteria. The authority will frame uniform criteria of listing for companies which will prevent unscrupulous promoters from entering the capital market through smaller exchanges. The government has to introduce legislation on corporatisation of bourses along with addressing other issues relating to taxation of their income and surplus. Asked about the reduction in the limit for investment in derivative instruments, Bajpai said the regulator recommended it to be lowered to Rs 1 lakh instead of the present limit of Rs 2 lakh. |
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Reduce tax on yarn, paper: industry Chandigarh, December 3 Mr Amrit Lal Jain, in a press release here today, said after a number of meetings with Capt Amarinder Singh, his Cabinet colleagues and higher officials of the Excise and Taxation Department, the industry was informed that the government would reduce the tax on yarn from 4 per cent to 2 per cent at the next Cabinet meeting. However, no decision has been taken so far. Mr Jain said they had demanded that the government should decrease the sales tax on paper from 8.8 per cent to 4 per cent, on the pattern of Gujarat and Rajasthan. Due to indecision of the government the powerloom industry of Ludhiana and Amritsar had been hit. The mandal has also urged the state government to withdraw exim form no 36 that was causing harassment to traders. Among others Mr Piare Lal Seth, Mr S.K. Wadhwa, Mr Manohar Lal Bhatia, Mr Mohinder Aggarwal and Mr Sunil Mehra also condemned the delay in the decision. |
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Ind-Swift to up stake in arm
Mumbai, December 3 Punjab State Industrial Development Corporation (PSIDC) is the company’s partner in the joint venture. The group will consolidate its business activities through mergers and acquisitions to double its turnover to Rs 500 crore by 2005, Joint Managing Director V.K. Mehta told reporters here today. According to the buy-back agreement, the Chandigarh-based group would purchase PSDIC’s 25.56 lakh shares at Rs 32 per share, 20 per cent above current market price, he said. Though the group is planning to merge ISL and other companies, no time frame has been fixed for such consolidation, Mehta said. With a focus on innovation, ISL spends three per cent of turnover on
research and development, he said. To compete internationally, Ind-Swift was focusing on filing patents for manufacturing active pharmaceutical ingredients, another joint MD Munjal said. ISL has earmarked Rs 50 crore to expand and upgrade drug making units including a new Food Drug Administration (FDA) approved facility in the next three years, he added.
PTI |
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HDFC approves 1:1 bonus Mumbai, December 3 Informing this to Bombay Stock Exchange, HDFC said it approved capitalisation of a part of the reserves of the corporation to the persons holding shares as on December 16, 2002, which is the record date. HDFC’s current paid-up equity share capital is Rs 121.96 crore divided into 12,19,60,713 equity shares of Rs 10 each. Accordingly, the same number of equity shares of Rs 10 each will be issued as bonus shares by capitalising Rs 50 crore from the capital redemption reserve account and Rs 71.96 crore from the securities premium account.
UNI |
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