ECONOMIC SCENE

Medium term export strategy for 2002-2003

The mid term export strategy, announced by the commerce and industry minister Shri Murasoli Maran in New Delhi on 30.01.2002 stresses on the need to focus on key markets and select items, provide incentives compatible with WTO norms, undertake aggressive market and select items, provide incentives compatible with WTO norms, undertake aggressive market promotion, speed up data collection, reduce transaction costs, liberalise FDI inflows and involve state governments in export promotion.

Proposing a mix of fiscal incentives and positive export climate through free trade agreements with other countries, Shri Maran said the new strategy  should help India to increase its share in world exports to 1 percent within the next five years.  At present it is 0.6 percent.

Instead of going by the earlier strategy of focusing on the supply side strengths, the commerce department has now moved on to a strategy based on demand in key markets.   Detailed studies have been done to work out the comparative strengths of rival exporters, including China.   The country-commodity matrix has been expanded to include 25 countries and 220 export products.   Till now, the commerce department has been working with a matrix made of 15 countries and 15 commodities. 

The policy document also states that export schemes  need to be devised in such a manner that help the exporters get back taxes borne by them efficiently and quickly.  “Schemes of reimbursement need to be transparent and comprehensive to work effectively.   Such a system is possible if a comprehensive VAT system is introduced at every level.   Lower customs and excise duties for major inputs needed for exports can minimise the need for duty drawback.

The strategy also aims at providing an effective and responsive trade defence mechanism such as continuation of anti-dumping and safeguard duties to provide protection against unfair trade practices, evolving WTO-compatible policies by extending non-actionable subsidies and supporting the farm sector and continually evaluating the foreign direct investment policy. 

The policy paper also defines strategies for each of the 7 identified major sectors, namely, engineering/electrical/electronics and allied products; textiles, gems and jewellery, chemicals and allied products, including cement, agriculture and allied products, including plantations and marine products, leather and footwear and other items. 

Percapita income to grow by 6.25% in 10th Plan period

According to the Planning Commission’s projections of statewise growth targets, if the country’s population grows by 1.7percent per year during the Tenth-Plan period (2002-03 to 2006-07), and the economy achieves the targetted 8 percent growth, per capita income in the country should go up from Rs.10,561 in 2001-02 to Rs.14,297 over the five year period. 

The Plan body has worked out the rates at which different states would be required to grow in order for the country to achieve an 8 percent growth during the Tenth-Plan period.

Karnataka is expected to achieve the highest per capital income growth of  8.74 percent over the Tenth-Plan period followed by Gujarat which is expected to achieve an 8.38 percent growth in income per person per year. 

Tamilnadu comes in a close third with a projected per head income growth of 8.33 percent.

Delhi, which has the highest percapita income in the country, is expected to see income growing at 7.28 percent to touch Rs.37,579 in the final year of the Tenth Plan. 

Bihar, with the lowest per capita income among the 16 large states in the country, is expected to achieve a 4.33 percent growth in this period, with per head incomes going upto Rs.5,835 in the terminal year of the Plan.

Government fixes 2002-03 plan size at Rs.1,60,000 cr

The government has finalised the plan size for the next fiscal at Rs.1,60,000 crore.   Of this, Rs.1,13,000 crore will be in the form of gross budgetary support (GBS) and Rs.47,000 crore will be in the form of internal and extra budgetary resources (IEBR). 

Govt. cuts rates on company deposits by 1.5%

To safeguard depositors and investors  from companies offering unrealistic returns, the government has effected a ceiling of 12.5 percent on company deposits in view of the softer interest regime.

Through this move, the Department of Company Affairs (DCA) has reduced the interest by 1.5 percent on public deposits by companies to 12.5 percent from the existing 14 percent. The DCA has issued a notification effecting amendments to Section 58A of Companies (Acceptance of Deposits) Rules, 1975 after consultations with the Reserve Bank of India. 

New pharma policy approved

The Cabinet on February 05, 2002 approved the pharmaceutical, policy 2002 which aims at making available good quality essential drugs, creating an incentive framework for research and development, and considerably reducing the span of price control.

The new policy envisages a three-tier structure in order to determine whether a drug will be governed by the drug price control order (DPCO) or not, and it will also bring down the span of control from the current 38 percent to around 22 percent. 

The policy is expected to benefit the domestic pharma companies, besides bringing some leading multinational brands under the price control.

In the pharma policy 2002, items appearing in the list of essential drugs in the current national essential drug list of the health and family welfare ministry and other items considered important on account of their use in various health programmes, in emergency care etc. have been kept under the DPCO and will form the total basket from which selection of bulk drugs will be made for price control in accordance with the criteria laid down. However, items like sera and vacines, and blood products have been excluded from DPCO.

The objective of the policy includes strengthening of the indigenous capability for cost effective quality production and exports by reducing the existing sectoral trade barriers and also encourage R&D in a manner compatible with the local needs while focussing mainly on diseases endemic to the country. 

A reorientation of the objectives of the existing drug policy became necessary for improving R&D incentives and to reduce the rigours of price control.   It is also aimed at promoting new investments and encouraging new technologies and introduction of new drugs. 

The policy will reorient the pricing mechanism to help the sector meet the challenges.   Items appearing as essential drugs in the current national essential drugs list and other items considered important by the government, will form the total basket from which the selection of bulk drugs will be made for price control, with a view to reduce considerably the span of price control. 

The policy also stresses on improvement of regulatory standards and strengthening of the quality control regime. 

Japan extends Rs.2,040 cr loan for first time since Pokhran II

After a gap of more than three years, Japan has signed an agreement with the government on February 12, 2002 to provide Rs.2,040 crore official development assistance (ODA) loan for the Simhadri thermal power station project-III of National Thermal Power Corporation (NTPC) in Andhra Pradesh, and Delhi rapid transport project-III of Delhi Metro Rail Corporation (DMRC). 

The loan will carry on interest rate of 1.8 percent with a repayment period of 30 years, including a grace period of 10 years. 

The objective of  NTPC’s Simadhari project is to construct a 1,000 mw coal-fired thermal station to cope with growing power demand and to assrue stable power supply in Andhra Pradesh. 

The objective of the Delhi mass rapid transport system project (III) is to construct a new computer railway transportation system in national capital territory.

Besides this, Tokyo has also agreed to extend debt relief grant assistance of Rs.2.3 crore to be used for import of essential commodities by the government.