ECONOMIC SCENE

Import of 300 sensitive items - Data for April-October, 2002

The total import of 300 sensitive tariff lines for the period April-October, 2002 has been Rs.7,805/- crore against Rs.6,671 crore for the corresponding period of last year thereby showing a growth of 17%. However, this growth is almost entirely due to significant increase in the import of crude palm oil, but for which import of all other sensitive items together show negative growth.

Imports of cotton & silk, alcoholic beverages and poultry have shown a decline at broad group level during the period. Imports of edible oil, fruits and and vegetables, automobiles, milk and milk products, SSI products and food grains have shown increase during the same period. 

Fiscal deficit of States and Centre increases

The consolidated fiscal deficit of the Centre and States has increased to 9.9% of the GDP, according to the revised estimates for 2001-02.

The combined revenue deficit of States and the Centre, as a proportion of the GDP, has also increased to 2.6% of the GDP, according to revised estimates for 2001-02. Both the Centre as well as states spend a major portion of their revenue to service debt and meet expenditure on account of salaries and high overheads. 

Garment exports up 7% in 2002

Garment exports from the country to quota countries including the United States and the European Union in January-November, 2002 rose 7.81 percent in terms of value over the previous year and 9.35 percent in volume, according to provisional data compiled by Apparel Export Promotion Council (AEPC).

In terms of the fiscal year 2002-2003, exports to quota countries during the April-November period grew 11.01 percent in quantity terms to 704.9 million pieces, with 14.24 percent rise in value to $ 2.64 billion. Exports to US during April-November 2002-2003 grew 40% in terms of quantity and 17.17% in value over the previous year. Readymade exports to EU during April-November 2002-2003 fell one percent in quantity, but rose 14.67 percent in value.

Mid-Year review of economy

The government's mid-year review forecast a bearish outlook on economic growth and said achieving a 5.5 percent GDP growth in the current fiscal was contingent upon a one percent increase in agriculture output.

It has recommended a tough dose of reforms, including a cut in small savings rates to align them to market interest rates, levy of user charges, abolition of all the 23,416 posts identified as surplus, reprioritising food, fertiliser, cooking gas and kerosene subsidies and rationalising the Centre's outgo on salaries and wages.

The 33 page document, the first of its kind presented by any finance minister, has however, sounded an alarm bell on the government's expenditure management by drawing attention to disconcerting trends where revenue spend jumped 13.5 percent against a moderate 3.6 percent increase in capital expenditure in the first half of 2002-2003. It has also warned about pressures on revenue collections for the remainder of the year.

The mid-year review said the drought in 14 states was likely to dampen this year's growth expectations and an unanticipated weakening of the growth momentum might affect revenue collections unless appropriate corrective measures were taken.

According to the review, areas which need to be urgently addressed are accelerating investment and structural reforms, rapid improvement in infrastructure and continuous progress in fiscal consolidation. It accorded high priority to acceleration of foreign direct investment (FDI) and said implementation of the proposals of Shri N.K. Singh steering committee was important.

The review further stated that besides the productive potential of the public sector enterprises, disinvestment also galvanised them to promote high-quality employment and competition in the market place.

Taking credit for the recent gains made from the government's policies, the review pointed out that the enactment and enforcement of the Securitisation Bill, cleared by Parliament last week, was expected to further reduce the lending rates.

It noted that signs of resurgence were visible in the high value-additive and employment-sensitive sectors like steel and textiles. It, however, said the overall growth of the industry was constrained due to competition from cheap imports, prohibitive barriers in the form of anti-dumping and countervailing duty petititons moved by the European Union, the US and Canada and slow revival of demand.

Finance Secretary, Shri S. Narayan said the government was worried about the mounting fiscal deficit. Faster investment in the economy was possible only if the deficit declined. Apart from the central finances, the biggest challenge was to manage the states' deficits too.

Indian tea exports rise

Indian tea exports rose slightly over 2% in January-October, 2002 to 157 million kg. over the year ago period, state-run Tea Board official said. India, the world's largest producer of tea, exported 153.5 million kg. in January-October, 2001. But earnings from India tea exports in the first nine months of 2002 fell more than 6% to Rs.13.3 bn ($275.7 m) from Rs.14.2 bn in the year ago period because of low global prices and sluggish domestic demand.

India exported 19.9 million kg. of tea in October 2002 up 5% from 18.9 million kg. in the same month last year. Indian tea accounts for nearly 15% of world tea trade but India's exports have been hit in recent years by stiff competition from Indonesia, Sri Lanka and new entrants such as Vietnam and Bangaladesh. Indian exports have also been hit by lower demand from traditional buyers such as Russia and Britain.

Reserves cross $ 65-b mark

India's foreign exchange reserves crossed the $ 65 billion mark during the week ended November 08, 2002 to touch $ 65.376 billion, a $755 million increase over the previous week's position of $ 64.621 billion. The rise in reserves was primarily due to the RBI's continued absorption of dollars from the currency markets to keep the rupee's gains under check. Some part of the increases in reserves was due to an appreciation of non-US currencies such as euro, pound sterling and the Japanese yen against the US dollar in recent months. At its current level, foreign exchange reserves have grown $ 11,222 bn since the start of the financial year, the highest rise in reserves since 1993-94.

Textile exports show a welcome revival

For the period April-August, 2002, exports of synthetic and rayon textiles registered a 30.61 percent rise at Rs.2,794.54 crore over the same period last year. The major market currently for this segment is UAE/Middle East.

According to Apparel Export Promotion Council, apparel exports registered a rise of 0.38 percent to Rs.9,000.12 crore during the period April-August 2002-2003 as against Rs.8,966.30 crore in the corresponding period of the previous year.

The cotton textiles constitute about 60 percent of total exports. When the quotas are abolished at the end of 2004, exporters such as India, China will be forced to compete on the basis of quality and price alone instead of quotas.

Policy for competition

The competion Bill of India, 2001 passed by the Lok Sabha in December 2002 enables the government of India to constitute the Competition Commission of India (CCI) which will then replace the existing Monopolies and Restrictive Trade Practices Commission (MRTPC). The winding up of the MRTPC signals the end of an era in India's economic policy. The MRTPC was created in the heyday of the licence raj and inward-oriented industrialisation based on a limiting definition of monopoly which had a negative impact on the competitiveness of Indian industry.

With a fundamental change in industrial policy in the early 1990s, much of the rationale for the "monopolies" part of MRTPC ceased to exist. It is the curbing of restrictive trade practices which remains a relevant policy objective. It is this role that the CCI will now perform in an expanded manner, even though purely trade practice-related issues will henceforth be referred to the consumer courts. 

The CCI also conforms to the concept of competition espoused by the World Trade Organisation. All market economies require regulators to ensure that competitive conditions prevail in the market and that consumers are protected from the negative consequence of restrictive trade practices. The CCI will monitor price-fixing, output restriction, market allocation and bid rigging. It will also regulate big time mergers and acquisitions and advocate polices to promote competition. The CCI's effectiveness will depend largely on its composition.

Asian economy to grow at 5.6% in 2003 : ADB

Asia's economic growth is expected to remain flat in 2003 with India, China, South Korea and Vietnam projected to lead the region's growth, the Asian Development Bank (ADB) said on December 12, 2003.

The bank forecast that the region would expand 5.6% next year, the same as expected in 2002, with the threat of a war in Iraq, a faltering US economy and deflationary concerns in the region posing major risks.

While India, China, South Korea and Vietnam are projected to lead the region's growth, the export-driven Southeast Asian economies would do moderately well. 

In South Asia, India, the only country in the region for which a projection is available, is expected to see its economic growth improve to 5.5 - 6% next year.

Year-end shipment procedure renewed

The government has decided to adopt the same procedure followed during the past few years in respect of year-end shipments during 2002.

The exporters have been told to get shipments cleared by customs by December 31 and export orders passed on or after January 01, 2003, but not later than January 7, 2003.

Exporters have also been requested to obtain fresh visas for 2003 from Apparel Export Promotion Council's (AEPC) regional offices after surrendering the ones issued for this year.

Earlier, the Apparel Export Promotional Council had issued a circular whereby the council made it incumbent upon the exporters to ensure that their consignments were placed in the carrier actually sailing on or before the midnight of December 31.

Any failure would result in surrendering an equal quantity of the 2003 quota from their own entitlements or from the quota procured from the market, the circular from the apparel export promotion body had warned.

Tenth Plan approved

The National Development Council (NDC) on December 21, 2003 approved the 10th Plan envisaging a gross domestic product (GDP) growth rate of 8% and decided to set up four empowered sub-committee to remove barriers to trade and investment and improve governance.

The NDC also accepted the proposal of Prime Minister Shri Atal Bihari Vajpayee to formulate a priority agenda for action in the coming years which is as under :

Agenda for an 8% growth

  • Rapid privatisation to fetch Rs.16,000 cr annually.
  • Encouragement to FDI to achieve $ 7.5 bn per annum
  • Opening of civil aviation sector after putting in place a regulatory framework.
  • Creation of 50 million jobs during the plan.
  • 5% reduction in poverty ratio by 2007.
  • Emphasis on completion of partially completed projects.
  • Progressive cut in fertiliser subsidy.
  • Elimination of oil subsidy, better targeting of food subsidy.
  • Curtailment of pay and allowance bill of govt.
  • Legal, procedural changes for facilitating quick transfer of assets.
  • Lowering of import tariffs to remove anti-export lias.
  • Rationalisation of domestic tax regime, introduction of VAT.
The time-bound implementation of the agenda would be monitored by the Cabinet committee on economic reforms and the committee of secretaries.

One of the empowered sub-committees will be headed by the Prime Minister. The committee will work towards removal of barriers to internal trade. The other committee, to be headed by the commerce minister, is aimed at creating an investor-friendly environment.

The Prime Minister also set up two sub-committees on financial and administrative empowerment of panchayati raj institutions and governance reforms.

Reserves rise by $ 682 million

The country's foreign exchange reserves increased by $ 203 billion in 2002 touching the $68.43 bn mark on December 13, 2002. 

Centre to offset state revenue losses initially

The value added tax regime will be implemented nation-wide from April 1, 2003 and the centre will fully compensate states for any revenue losses in the first year, finance minister, Shri Jaswant Singh said.

The draft report on the constitution amendment on service tax would be sent to the empowered committee of state finance ministers on VAT for approval. The amendment Bill is to be introduced in the Budget session of Parliament. Service tax is expected to become a major source of revenue for the states. 

Third World trade stake high : Stern

Developed countries call for reduction in barriers to trade while erecting barriers where developing countries have a comparative advantage. Removal of these barriers will result in significant gains for the developed and developing countries, said Nicholas Stern, senior Vice-President and Chief Economist at the World Bank. Developing countries have more to gain from trade liberalisation than high-income countries.Stern said while developing countries stood to gain $ 116 billion from removing barriers in agriculture, textiles and other sectors, high-income countries would gain only $ 76 billion. 

India tops in micro-finance

India has overtaken Bangladesh in micro-finance by extending Rs.1,200 crore till date to over 80 lakh families to alleviate poverty of over four crore rural poor; according to National Bank for Agriculture and Rural Development. Contrary to the perception that Bangladesh Grameen Bank was the largest micro-finance entity in the world, India's achievement was endorsed at a two-day seminar which concluded in New Delhi on November 26, 2002.

Auto part exports grow 35%

Auto components industry exports have grown at the rate of 35% higher than many other high-performing export industries like software, which are growing by 30%.

According to Automative Components Manufacturers Association (ACMA), the total export of auto components from India is expected to touch around Rs.4,000 crore during 2002-2003 as compared to a little over Rs.2,800 crore during the last fiscal. In comparison, total domestic sales of auto components would grow by a mere 10 - 12% during 2002-2003, with most of the growth coming from the commercial vehicles and motorcycles segment. The total industry output during 2002-2003 is expected to touch Rs.24,000 crore as against Rs.20,000 crore last fiscal. 

Major export growth during the year has come from forgings and castings - product segments in which India has of late emerged as a major sourcing base. 
 

The mission is to build a culture of quality and productivity and build `robust' organisations that stand the test of time. Profitability is important, but as a sub-set of the larger goal. Quality is a moving targetů. The journey for quality has just begun - Venu Srnivasa