Economy to grow at 5.9% this fiscal
Confusion over merger of refineries
Venture capital flows set to swell by 120%
New policy on FDI to enable return of Piaggio
SAIL, Voest may seal quid pro quo deal
Govt plans comprehensive legislation on insurance
Foreign Exchange, Bullion, Stock Indices

 
 
ECONOMY TO GROW AT 5.9% THIS FISCAL 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Feb 4 
Buffeted by a slowdown in the agriculture sector, the growth in gross domestic product (GDP) in 1999-2000 is estimated lower at 5.9 per cent compared with 6.8 per cent in 1998-99.

According to the latest advance estimates of national income released by Central Statistical Organisation (CSO), the gross domestic product (GDP) is likely to decline due to a poor 0.8 per cent growth in the agriculture sector as against the robust 7.2 per cent it recorded last year. However, growth in the manufacturing sector is expected to be better at 7 per cent this year.

The slump in agriculture will be caused largely by negative growth rates in the production of several key crops. In precise terms, the rates are forecast at minus 2.9 per cent for wheat, minus 7.1 per cent for coarse cereals, minus 8.1 per cent for pulses, minus 14.2 per cent for oilseeds and minus 0.4 per cent for cotton. The corresponding growth figures in the previous year were estimated at 6.7 per cent, 3.5 per cent, 14.1 per cent, 18.2 per cent and 12.3 per cent.

However, the production of rice, sugarcane, jute and mesta are expected to register growth rates of 1.7 per cent, 6.6 per cent and 9.4 per cent respectively compared with 4.2 per cent, 5.8 per cent and (-)12.1 per cent in the last financial year.

The CSO, however, released rosier estimates for a few sectors. These include mining and quarrying which will grow at the rate of 0.4 per cent this fiscal (-0.5 per cent last year), electricity, gas and water supply by 8 per cent (7.9 per cent) and construction by 9 per cent (5.7 per cent).

Other segments like trade, hotels, transport and communications are estimated to grow at 5.9 per cent (8.1 per cent); finance, insurance, real estate and business services will grow at the rate 10.5 per cent (6.1 per cent) while community, social and personal services will record a 9.8 per cent growth (10.9 per cent).

The growth in GDP — national income as we know it — is forecast at 5.9 per cent for this financial year. The GDP at factor cost is estimated to grow to Rs 11,45,436 crore in 1999-2000 from Rs 10,81,834 crore last fiscal — based on 1993-94 prices. The GDP at current prices is expected to increase by 9.6 per cent compared with 16.5 per cent last year.

The GDP at factor cost (current prices) is likely to be Rs 17,66,589 crore during 1999-2000, showing a growth rate of 9.6 per cent over the 1998-99 quick estimate of Rs 16,12,383 crore.

The NNP at factor cost (current prices) is expected to be Rs 15,69,868 crore during the current year compared with Rs 14,31,527 crore during 1998-99, showing a rise of 9.7 per cent. The per capita income in real terms (1993-94 prices) during the current financial year is likely to be Rs 10,151 compared with Rs 9,739 for the previous year. The current growth rate in per capita income is estimated at 4.2 per cent as against the previous year’s estimate of 5 per cent.    


 
 
CONFUSION OVER MERGER OF REFINERIES 
 
 
FROM R. SASANKAN
 
New Delhi, Feb 4 
Nitish Sengupta, a former bureaucrat who headed the committee on the future of stand-alone refineries, appears to have gone beyond his jurisdiction to come up with a fresh set of proposals.

These unsolicited proposals in his personal capacity have created a lot of confusion in the government and industry circles.

Sengupta recently sent a letter to the ministry of petroleum and natural gas making certain recommendations which are in sharp contradiction to the committee’s report submitted a few months ago.

Official circles are speculating on the provocation for Sengupta to send this letter without consulting other members of the committee. The panel’s report was virtually dumped by the ministry of petroleum and natural gas.

The committee, under the chairmanship of Sengupta, had recommended that Cochin Refineries and IBP should merge with Bharat Petroleum. MRL could go either to IOC or BPCL. However, in his letter, he has suggested open disinvestment for IBP.

He is of the view that IBP should not go to any of the PSUs. This is the first time that the chairman of a committee has contradicted the collective recommendation through his personal views, said a senior official in the government. If he differed with others on the panel, he should have submitted a dissenting note, the official said. Sengupta feels that MRL can be taken over by IOC.

The mega-merger of HPCL, BPCL and CRL he has proposed in his letter is not being taken seriously by the ministry. This has no relevance other than being the personal view of a former bureaucrat who had no previous experience whatsoever in the oil sector.

The merger proposal has already met with resistance from the groups finalising the Hydrocarbon Vision 2020.

They feel the mergers proposed by the Sengupta committee will limit the entry points. This would not be in the interest of consumers.

It now appears that the government will take a decision on the future of stand-alone refineries only after studying the report on Hydrocarbon Vision 2020.    


 
 
VENTURE CAPITAL FLOWS SET TO SWELL BY 120% 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb 4 
The tide of venture capital inflows is expected to swell by a staggering 120 per cent to Rs 3,200 crore in the next financial year, something that could propel the country to one of the world’s top five destinations for technology ventures, Nasscom president Dewang Mehta said here today.

This year alone, inflows surged by more than 100 per cent over the last year to touch Rs 1,400 crore. “Of the estimated $ 30 billion worth of venture capital invested in the US in 1999, approximately 80 per cent went to technology firms,” Mehta said while speaking on the prospects of venture capital in the country.

India, with its strengths in innovation and infotech, has attracted several venture capital funds. In 1999 alone, 11 were registered with the Sebi, taking their total number to 19. Between 1996 and 1999, venture capital investment into high-tech firms in India zoomed by over 2000 per cent from 70 crore to Rs 1400 crore. Nasscom expects a figure of Rs 45,000 crore by 2008.

“The association and McKinsey have forged a strategy to catapult India to the top five global locations for technology ventures in the world,” Mehta said.

According to the Nasscom president, venture-backed IPOs in India now offer a 44.6 per cent return in the five-year period following the listing while non-venture backed IPOs give investors a yield of 22.5 per cent over the same period.

Mehta lauded the series of initiatives launched by the government to boost venture capital flows, including those which treat investments by venture funds on par with foreign institutional investors (FIIs) and permit more than 40 per cent of their paid-up equity to be pumped into a single start-up. These measures, he said, will provide a fillip to the process of promoting and funding entrepreneurship in India.

Mehta also made a strong pitch for the creation of funds similar to Israel’s Yozma, which will give exit options to Indian entrepreneurs and allow them to enjoy the benefits of their success. He also said a regulatory framework which stimulates competition and protects entrepreneurs from the inevitable risks associated with start-up companies.

To facilitate wealth generation and promote the spirit of entrepreneurship within the country, special venture capital clinics are being held at Nasscom 2000, Mehta said.

Budding entrepreneurs are advised on issues such as challenges for spider (dotcom) companies. Leading industry figures including Jason Pontin, editor in chief of Red Herring Magazine and Ajit Balakrishnan, CEO of Rediff.com, take part in the interface.    


 
 
NEW POLICY ON FDI TO ENABLE RETURN OF PIAGGIO 
 
 
FROM NANDITA ROY
 
New Delhi, Feb 4 
Italian automaker Piaggio’s dream of a second homecoming in the Indian two-wheeler market may finally come true.

Thanks to the government’s new foreign direct investment (FDI) policy, which allows foreign car manufacturers to set up 100 per cent subsidiaries through the automatic route, Piaggio’s plan for a subsidiary can now sail through.

Earlier, 100 per cent foreign investment in the automobile sector was allowed only on a case-to-case basis through the Foreign Investment Promotion Board (FIPB). However, the new policy permits 100 per cent foreign investment by automobile companies through the automatic route, provided they do not attract any clause under the negative list.

Hence, the government will find it difficult to stop the company from setting up shop through the automatic route, since Piaggio at present, does not have any existing tie up in the country, nor does it attract any other clause in the negative list.

Piaggio plans to invest around $ 11 million in the first phase. Depending on the requirements of the project, the company has also envisaged foreign investment to the tune of nearly Rs 220 crore or approximately $ 50 million, over a period of time.

Piaggio’s proposal to set up a 100 per cent subsidiary has been pending before the FIPB for quite some time . Commerce and industry ministry Murasoli Maran had deferred the proposal owing to opposition from the ministry of heavy industries.

The ministry opposed it because the company was already in talks with the government for a stake in Scooters India, a public sector undertaking, which has been scouting for a joint venture partner. Piaggio had evinced interest in acquiring a stake in Scooters India for entering the domestic two-wheeler market, following its break with LML Ltd.    


 
 
SAIL, VOEST MAY SEAL QUID PRO QUO DEAL 
 
 
BY A STAFF REPORTER
 
Calcutta, Feb 4 
Voest Alpine Industrieanlagenbau is likely to enter into a quid pro quo deal with Steel Authority of India Ltd whereby the Austrian steel major will buy latter’s steel in return for modernisation contracts at the Bokaro and Rourkela plants of the public sector steel major. Voest is vying for SAIL’s proposed automation projects through its group company VAI Automation.

SAIL chairman Arvind Pande is believed to have told VAI Automation that if it agrees to buy steel from the Indian company, it will be considered for the projects. VAI Automation chairman, Gunter Rigler said the company had decided, in principle, to respond to the offer made by Pande. “The details of the arrangement regarding the prices and the quantum of steel to be bought will have to be finalised,” he said.

Voest Alpine, which itself produces around four million tonnes of steel in Europe, has such product buyback arrangements in Russia. It undertook the modernisation programme for a big Russian company with a buyback arrangement for third country sales.    


 
 
GOVT PLANS COMPREHENSIVE LEGISLATION ON INSURANCE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb 4 
The Union government is working on a draft umbrella Insurance Act that will be codified by unifying the Insurance Act of 1938, General Insurance Business (Nationalisation) Act of 1972, and the Life Insurance Corporation Act Act of 1956.

“We are working on a comprehensive Insurance Act so that there is no need for separate acts to govern the life and general insurance sectors,” B K Chaturvedi, special secretary (insurance) in the Union finance ministry, said at a convention on financial services organised by the Bombay Management Association here today.

Chaturvedi said there was no possibility of any change in the 26 per cent equity cap on foreign investments in the insurance sector over the next few years and advised financial services outfits to draw up their business strategies with that in mind. There will be no restriction on the number of players in the liberalised insurance regime, he said.

Clarifying the roles that the Insurance Regulatory and Development Authority and the government would perform, he said insurance regulator would have an autonomous role and the government’s position would be restricted to taking up policy issues like inadequate coverage of geographic areas and social commitments.

Outlining the timetable for the private sector’s operations in the sector, H. Ansari, a member of the IRDA, said the bill was passed in the Parliament last year and the regulations governing private sector’s participation in the insurance sector would be ready by the end of March. While applications would be invited by the government by June this year, the licences would be issued to companies by September-October.

Meanwhile, in Hyderabad, IRDA chairman N. Rangachari urged prospective private insurance companies to tap the rural sector.

“The rural sector is as much developed as its urban counterpart. Since investments from this sector in non-banking financial companies are huge, there is no doubt that insurance companies can raise resources from rural areas,” he told the India Finance Forum- 2000 which commenced today.    


 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 
Foreign Exchange
US $1	Rs 43.61	HK $1	Rs. 5.55*
UK £1	Rs 69.49	SW Fr 1	Rs. 26.50*
Euro	Rs 43.43	Sing $1	Rs. 25.50*
Yen 100	Rs 40.47	Aus $1	Rs. 27.25*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta		Bombay
Gold Std (10gm)	Rs. 4575	Gold Std (10 gm)	Rs 4530
Gold 22 carat	Rs. 4320	Gold 22 carat	Rs 4190
Silver bar (Kg)	Rs. 8050	Silver (Kg)	Rs 8145
Silver portion	Rs. 8150	Silver portion	Rs 8150

Stock Indices

Sensex	5313.59	-26.60
BSE-100	3121.30	+32.51
S&P CNX Nifty	1599.75	-1.85
Calcutta	139.06	-0.10
Skindia GDR	NA	NA
   
 

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