ECONOMIC SCENE
Moody's rating outlook positive for India

Moody's investors service has placed India among 15 countries to have a positive rating outlook for the year 2000. 

In its global credit rating trends titled "Global Outlook 2000", Mexico, Turkey, Malaysia, Thailand and Indonesia were the other emerging markets chosen by Moody's to have a positive rating outlook. On the contrary, Pakistan was given a negative rating outlook, alongwith Japan and Vietnam. Among the developed nations selected by Moody's having a positive rating outlook were Italy, Spain and Greece. 

The report says that the year would witness accelerated economic growth, which the IMF estimates put at 3.8 per cent as compared to 2.8 per cent in 1999. 

For debt issues outside the US, the year would be particularly favourable due to rising commodity and product prices and continued recovery of trade and rising investor confidence now that the worst of the global economic crisis was over. 

Manmohan Singh on the state of Indian Economy

In his inaugural address at the annual conference of the Indian Economic Association in Amritsar on December 27, Dr. Manmohan Singh said removing fiscal deficit in states and the Centre should be accorded top priority, otherwise "all our dreams of getting rid of poverty would turn into a wishful thinking". 

Dr. Singh said the governments should also take measures to improve the tax on GDP ratio by beefing up tax administration. The second biggest challenge Dr. Singh said was to achieve at least 7-8 per cent growth rate. Investments in power, roads, communication and other fields have to be stepped up. Physical infrastructure has to be of global standards. He said that transmission and distribution losses in power were to the tune of about 30 to 35 per cent. 

On the country's social capital Dr. Singh said that state of education and health was abysmally poor. The average infant mortality rate in India was 70 per 1,000 persons except for Kerala, where the rate was 14 to 15 per 1,000 persons. Samewas the case with education as literacy rate was far below expectations at 62 per cent as against full literacy in countries like South Korea. The dropout rate from schools was very high, indicating that there was a need for implementing compulsory education. 

On agriculture, Dr. Singh said economists should look at the structural changes taking place following the reduction in the number of people who are dependent on agriculture for a living. The dependence level has gone down to 63 per cent in recent years from about 70 per cent earlier. For an agrarian economy like India, this is a matter of concern, Dr. Singh said and called for implementation of new technologies in this area to reduce the political and social tension that may emerge because of this phenomenon. 

Advance estimates place GDP growth at 5.9%

Poor performance in agriculture is likely to bring the GDP growth rate for 1999-2000 to 5.9 per cent from the estimated 6.8 per cent during 1998-99. 

As per the advanced estimates of national income (1999-2000) released in New Delhi on February 4, by the Central Statistical Organisation, GDP for the current fiscal is expected to attain a level of Rs.11,45,436 crore, against the quick estimates of GDP for 1998-99 of Rs.10,81.834 crore. Both figures are at constant prices (1993-94). 

While growth in manuacturing was impressive, going up from 3.6 per cent in 1998-99 to 7.0 per cent in the current year, agriculture, forestry and fishing performed badly, with the growth rate coming down from 7.2 per cent in 1998-99 to 0.8 per cent in the current fiscal. 

Addressing a seminar in New Delhi on February 5, on "Smuggling and Drug Trafficking" organised by the finance ministry, the Finance Minister, Shri Yashwant Sinha said that economic growth would be more than 6 per cent, this fiscal. 

The National Council of Applied Economic Research (NCAER) however, has projected the GDP growth during 1999-2000 at 6 per cent, with industry likely to grow at 6.5 per cent exports at 15 per cent and imports at 16 per cent. The Council has placed the trade deficit at 2.4 per cent of GDP and current account deficit at 1.9 per cent of GDP.Environment costs 10% of GDP

The annual loss to the Indian economy on account of environmental degradation is about 10 per cent of the country's gross domestic product (GDP), according to a study by the Tata Energy Research Institute (Teri). 

The ministry of environment and forests also has made its own assessment. According to it, the loss to the economy because of environmental degradation, as in 1995, comes to 4.53 per cent of the GDP. Teri's study, therefore, implies that the economic loss to the country for lack of environmental concern has substantially increased since it was last assessed in 1995. 

Teri has, therefore, planned a series of high level conferences which will focus upon how resources can be exploited and used in a maner that causes least danger to the environment and which also accelerates the wheels of development and economic growth. 

Annual FDI inflow in 1999 second highest ever

India raked in as much as $ 4.016 billion during the calendar year 1999. Significantly, the GDR and foreign currency bond route has proven to be the primary route for foreign investment inflows with over $ 1.5 billion being raised during 1999. 

In the post liberalised era, this is the largest sum ever raised through the foreign offering route in a calendar year, the previous best being 1997 when about half this amount was raised from GDRs or foreign currency convertible bonds (FCCBs). 

Exports log in 12.93% growth in April/December

Exports have registered a 14.69 per cent growth in December 1999 over the same month in 1998, maintaining the double digit figure recorded in the previous months of the current fiscal. 

Exports in December were valued at $ 3,194.68 million against $2,785.38 million in December 1998, as per the provisional trade data released by the commerce ministry on Tuesday. 

The cumulative export growth in April-December 1999 at 12.93 per cent was by far the best performance in the current fiscal, exports were valued at $ 27,419.28 million against $24,279.08 million in April-December 1998. 

Total imports in nine months were estimated toilet items, central sales tax and consignment tax will be shared with the states. 

l Another 3 per cent will be assigned in lieu of duties from tobacco, cotton and sugar, and grants in lieu of tax on railway passenger fares. 

l Sharing to be done on the basis of net receipts and not gross receipts. 

l 85th amendment proposed to the Constitution to enable new devolution formula. 

IRDA introduces combined agency system

The Insurance Regulatory and Development Authority (IRDA) will permit insurance companies to pay a higher agency commission of up to 15 per cent in the non-life sector. 

This was disclosed by IRDA Chairman, Shri N.I. Rangachary while speaking at a seminar on distribution of life insurance in new environment organised by the Jeevan Vidya Trust in Mumbai on January 25. 

At present, commissions on non-life insurance business on traditional business is at 5 per cent, while on some select business, it is 10 per cent. Commission on non traditional business is 15 per cent. 

The GIC classifies business on the basis of traditional and non traditional for commission purposes. 

The IRDA has also proposed to allow an agent to obtain a combined agency of one life insurance company and one non life company. 

To obtain a combined agency licence, an agent would, however, have to undergo a slightly longer duration of training. "The idea behind having agents stick to one company is that companies will be investing in training new agents". 

The entry norms include a minimum educational qualification followed by training and professional qualification through accredited institutions. 

Shri Rangachary said that IRDA would be accrediting institutions that impart training for insurance agents. 

India getting increasingly aligned to the world trade

India's export performance has become increasingly aligned with its imports in the 1990s as a result of the trade liberalisation measures and market-based exchange rate regime. In its currency and finance report for 1998-99, the Reserve Bank of India (RBI) has said that, on an average, the export-import ratio has increased from 65.1 per cent in the 1980s to 87 per cent in the 1990s. The divergence between export and import performance, which was most pronounced in the 1980s, has been reduced to a significant extent. 

ADB steps up loan to India to $ 1b

The Asian Development Bank (ADB) is stepping up its lending amount to India to $ 1billion in the current financial year from $ 625 million in the previous year. It is also planning to invest in non banking financial sectors, particularly insurance according to ADB Programme Director, 
Mr. Yoshihiro Iwasaki. 

According to ADB President Mr. Tadao Chino, 50 per cent of the $ 1 billion loan would go to states to encourage private sector participation at the state level. 

"The government needs to develop a strong capacity to create and sustain the legal, regulatory and institutional frameworks, that are conducive to enhanced private sector activities". 

ADB approves $ 625 m loan package

The Asian Development Bank (ADB) on December 17 approved a $ 625 million loan package for India, including $ 200 million under the Urban and Environment Infrastructure project. 

The fund will be used to improve urban infrastructure alongwith water support management and water management. With this $200 million loan, total loans given by ADB to India this year has touched $ 625 million. 

The ADB board had announced earlier the clearance of a $ 250 million loan for Madhya Pradesh ending the sanctions while another $175 million was ear-marked for Karnataka Development Programmes. The total loan given by ADB to India since 1986 is $ 7.7 billion. 

ADB had also approved another loan of Rs.625 crore for the victims of Orissa Cyclone, which was in addition to the Rs.500 crore already disbursed for the cyclone victims last month.