Govt sees 5% inflation next fiscal
Sensex surges 195 as market fears evaporate
Budget paves way for lower interest rate regime: S
Exports grow by 11 per cent in 10 months
Jute strike on March 22
Small savings cloak actual fiscal deficit
Dr Reddy’s, ARL close to merger
Santro price hike to be marginal
Foreign Exchange, Bullion, Stock Indices

New Delhi, March 1 
The government is projecting an annual inflation rate of 5 per cent and a GDP growth rate of 7 per cent for the 2000-01 fiscal.

Considering the fact that inflation had been contained at 3 per cent this year, it implies that the government expects greater inflationary pressures to be unleashed in the coming fiscal. GDP growth was pegged at 5.9 per cent this year.

The government has also assumed a moderate 7 per cent growth rate for industry, anticipating a higher service and farm sector growth this year.

The government also expects the country’s total import bill to be around $ 54 billion, with oil imports accounting for $ 13.64 billion, gold $ 4.25 billion and non-oil imports $ 35.83 billion. Non-oil imports are expected to grow at 10 per cent, finance ministry officials told newspersons at a press briefing here today.

Officials said the new single value added excise duty of 16 per cent is expected to account for 86 per cent of the excise target of Rs 68,000 crore, while the three special excise duties are expected to net the remaining 14 per cent. All goods will attract the single VAT rate with about 40-45 per cent of them also attracting the special excise rates.

Finance Secretary P. G. Mankad said that most of the raw materials and other intermediaries would not attract the special additional excise duty that would be charged in addition to the 16 per cent CENVAT.

The highest special additional excise duty rate of 24 per cent was applicable to a few items like cars, pan masala, aerated water and some tobacco products. Products like airconditioners, cosmetics and tyres would come under the 16 per cent special duty.

Regarding the food subsidy, the secretary asserted that the government’s measures will not affect people below the poverty line. Though there would be a slight increase in the prices of wheat and rice issued under the PDS as the subsidy element would be 50 per cent of economic cost, allocation for people below the poverty line has been increased from 10 kg to 20 kg.

Prices of wheat will go up from Rs 2.50 per kg to Rs 4.20 per kg and rice from Rs 3.50 a kg to Rs 5.90 per kg for people in this category and the new prices will be effective from April 1, 2000.

Expenditure secretary, C. M. Vasudev, said the food subsidy for people below the poverty line has in fact been raised to Rs 7,457 crore this year from Rs 5,240 crore.

Officials added that the government will soon bring in a legislation to allow the securitisation of state electricity board (SEB) debts, estimated at Rs 20,000 crore, through tax-free bonds.

Economic affairs secretary, E.A.S. Sarma said that the bonds would be guaranteed by the centre to the extent of 15 per cent of the state’s share of the Central plan allocation. Besides, the state government will extend a guarantee to the bonds.    

Mumbai, March 1 
The Bombay Stock Exchange (BSE) sensex today surged 195.14 points on the back of software and bank scrips in a rebound that gave many the feeling the markets overreacted to the budget on Tuesday when it slumped 294 points to 5446.98.

The benchmark 30-share index opened higher at 5464.65 and fluctuated in a range of 5512.68 and 5341.61 in the initial stages. It later moved up to the day’s high of 5681.11 before closing at 5642.12, up 3.58 per cent over its previous finish. The BSE-100 index also recovered smartly by 157.61 points to 3450.90 from 3293.29 on Tuesday.

Brokers said the rally in infotech scrips was triggered by Tuesday’s gains on the Nasdaq. Clarifications by finance minister Yashwant Sinha that tax concessions currently being enjoyed by export processing zones and technology parks would continue, helped other shares. Only units set up after April 1 this year, Sinha said, will be covered under the proposed 20 per cent tax scheme.

Further, the bourses have realised that the impact of the budget on software majors would not be as strong as it was initially though to be.

Apart from software stocks, bank shares also attracted huge buying orders because of the budget proposal to bring down the government’s stake in nationalised banks to 33 per cent. The removal of 2 per cent interest tax also helped matters.

Brokers said heavy buying was witnessed in the shares of companies in which foreign institutional investors (FIIs) hold substantial stakes. This happened because the cap on FII investments has been raised from 30 per cent to 40 per cent.

With the realisation that the tax impact on infotech companies would be marginal (at the most 3 per cent), brokers predicted sustained in some of the major software companies in future.

“Yesterday’s was a purely an knee-jerk reaction. But today, after going through the fine print of the budget, the markets realised it was not as bad as it was initially perceived to be. Therefore, investors purchased sector-specific stocks,” an analyst at Khandwala Securities said.

Further, Sinha’s statement that the reform process would be quicker once the budgetary measures announced were implemented enthused marketmen.

His remarks about having created a conducive environment for the Reserve Bank to cut interest rates also encouraged investors.

In the specified group, thirty four scrips, including all infotech shares, were locked in their upper-end circuit filters at the close. However, 40 shares suffered losses.    

New Delhi, March 1 
For finance minister Yashwant Sinha, it was time to rise in defence against baiters who panned his budget as a tepid piece of work that offered little more than half-baked reform recipes and succeeded in doing nothing more than spooking stock markets into a headlong plunge.

Having swatted criticism from industry and battled brickbats from an angry Opposition on Tuesday, the finance minister emerged this morning at a Ficci interactive session to announce something he thought would be music to the ears of industry: a cut in interest rates.

He said his budget had created conditions conducive for the Reserve Bank of India (RBI) to lower interest rates, but made it clear that the Centre would keep its hands off the issue. “We displayed enough courage to create a situation in which the RBI can act, if it wishes to do so.”

He said he had not intervened during his last two years as the finance minister in the affairs of the central bank, but had created the right conditions for it to slash rates by reducing rates on post office savings and employees provident fund to 11 per cent in January. In the budget, interest on general provident fund was also brought by one percentage point to 11 per cent.

The finance minister said the decision to abolish the two per cent interest tax was taken to encourage more offtake of funds by industry. “The decision to amend the RBI Act is aimed at giving greater autonomy to the central bank in taking its deciding,” Sinha said.

The minister warned a disgruntled industry that the fiscal deficit would have ballooned further had he not raised additional resources by way of a tax hikes on dividend and personal income. He justified his budget proposals, saying the measures were necessary to raise funds for the much-needed increase in defence allocation, interim recommendation of the Finance Commission and plan allocations for development.

“Don’t forget the circumstances in which the budget was presented. I had to make way for an additional Rs 36,000 crore, which was absolutely necessary. The burden has to be equitably distributed. I had no options, but to present the budget the way it was,’ Sinha told industrialists at a Ficci seminar organised to discuss the budget in all its aspects.

Sinha said he was aware the industry was not happy with the budget but he allayed fears, saying: “Once you read the fine print of the budget, the feel good factor would be back in place. Don’t go by the slide in the the stock market, where a bunch of brokers are playing the game. You are not brokers, and I am sure you will analyse each and every point of the budget before you come to a conclusion,” Sinha told leading industrialists present at the seminar.

Sinha wondered if the industry’s meaning of a tough budget was that it should be harsh on others, but soft on companies. “The mindset that I am special and that I need to be treated specially has to go. Income is an income and it has to be taxed.”    

New Delhi, March 1 
India’s exports grew by 11.3 per cent during April-January 2000 at $ 30221.41 million as against $ 27148.12 million during the same period last year.

In rupee terms, exports grew by 14.73 per cent during this period.

However, exports in the month of January dipped by 2.33 per cent at $ 2787.39 million as against $ 2853.82 million in the previous corresponding period.

The trade deficit during this period was higher at $ 7920.68 million, as against a deficit of $ 7830.04 million during the same period last year.

India’s imports in the period under review were up by 9.05 per cent at $ 38142.09 million, as against $ 34978.16 million in the corresponding period last year. Oil imports during same period were higher by 59.48 per cent at $ 7824.71 million as against $ 4906.35 million in the previous corresponding period. Non-oil imports were up by 0.82 per cent at $ 30317.38 million as against $ 30071.81 million in the previous corresponding period.    

Calcutta, March 1 
Central trade unions in the jute industry, including the Citu and Intuc, would jointly organise a strike in the jute mills of West Bengal on March 22 to press for their demands for the revival of the industry.

Prior to the strike, the unions would hold protest rallies and mass deputations in all jute mills in the state on March 6, Citu state president Niren Ghosh and his Intuc counterpart Subrata Mukherjee told a joint press conference here today. The trade unions would take out processions at various locations in the state between March 8 and 10, besides holding an hour’s cease-work per shift from March 12 to 14.

Rallies would be organised at Howrah, Hooghly, Barrackpore and Budge Budge, they said.    

New Delhi, March 1 
Fiscal deficit is a sensitive area in any budget. Since it is also a major source of embarrassment, finance ministers invariably resort to some sort of manipulation to conceal its real size. Manmohan Singh did it. So did Palaniappan Chidambaram.

However, the present finance minister, Yashwant Sinha, has outdone both of them. He has estimated the fiscal deficit for 2000-01 at 5.1 per cent of the gross domestic product (GDP). Sounds like a fiscal miracle? How did he arrive at such a low figure when the revised estimate of the fiscal deficit for the current year is 5.6 per cent of the GDP ?

Had he applied the yardstick used by his illustrious predecessors, fiscal deficit in the current year should have been substantially higher. At least, 6.9 per cent of the GDP as against the 5.6 per cent acknowledged by the finance minister. Using the same standard, it should have been estimated at 7 per cent next year.

The secret lies in the fact that during the regimes of Singh and Chidambaram, small savings transferred to states were treated as the Centre’s borrowing and routed through the budget.

Sinha changed this. Now, only 25 per cent of the small savings accruing to the Centre is treated as its borrowing while the remaining 75 per cent is transferred to states through a public deposit account.

This innovative methodology allowed him to exclude Rs 24,000 crore of small savings from the Centre’s borrowing in 2000-01. But for this, fiscal deficit for the next year should have been close to 7 per cent of the GDP.

The methodology for calculating GDP has also changed in the last two years. This has pushed up the total size of the GDP at least by 10 per cent over what it should have been under the previous arrangement. The size of the GDP being bigger, the ratio of fiscal deficit to GDP becomes smaller.

Sinha also does not seem to have taken into consideration the likely shortfall in tax revenues in calculating the deficit. Last year, the actual tax revenue was Rs 7,000 crore less than the revised estimate. This year also, the revenue shortfall on the basis of the actual collections, should be far more than what has been acknowledged by the finance minister. Next year cannot be very different.    

Mumbai, March 1 
The Hyderabad-based pharmaceutical major, Dr Reddy’s Laboratories (DRL), is considering a proposal to merge American Remedies (ARL) — a company it acquired in November last year — with itself.

The company today informed stock exchanges that its board will meet on March 6 to consider the issue of merging ARL, a Chennai-based firm in which it holds a stake of 85 per cent.

DRL had acquired the controlling stake at a price of Rs 175 per share. It first purchased a 45 per cent stake, then pushed it up by acquiring another 20 per cent from the promoters’ associates.

Dr Reddy’s Labs, promoted by Anji Reddy, also made an open offer for the purchase of an additional 20 per cent stake from ARL shareholders — an exercise that took its stake to 85 per cent.

The acquisition of American Remedies has cost DRL close to Rs 80 crore.

With the acquisition, Dr Reddy’s Laboratories is expected to sell formulations worth Rs 350 crore in the domestic market this fiscal. This will make it the fifth largest pharmaceutical company in the country under the ORG rankings.

ARL is a 14-year-old listed company promoted by four professionals. Its sales in 1998-99 touched Rs 92 crore while its net profit was pegged at Rs 40 lakh.

The company’s major brands include Mucolite, Antoxid, BioE, Becozinc, GLA and Optisulin — all of which contribute around 60 per cent to total sales.

On the other hand, Dr Reddy’s had achieved a turnover of Rs 425.85 crore in the previous financial year.

The company, with a sharp research-oriented focus, is strong in the areas of haemostatics and oncology, apart from gastro-intestinals, anti-infectives, cardiovasculars and pain management.

On the Bombay Stock Exchange (BSE), American Remedies closed at Rs 140 today after opening at Rs 133.95.

Dr Reddy’s shares, however, witnessed a lot of volatility. It opened at Rs 1475.75, hit an intra-day high of Rs 1,560, before being hammered to Rs 1,426. The scrip finally recovered to Rs 1,503.

The acquisition of American Remedies was seen to be a strategic fit given that its brand portfolio complements that of DRL. For instance, Antoxid, a reputed brand from the ARL stable, is an add-on with DRL’s cardio therapy product.

For Dr Reddy’s, ARL was the first acquisition. Earlier, the company largely believed in growing organically, helped by a few brand purchases. In 1998, the company had acquired five brands and obtained manufacturing and marketing rights to six brands from Dolphin Laboratories. This included Styptovit, Styptochrome, Styptomet and Doxt. It also obtained a 7 per cent stake in SOL Pharmaceuticals to enlarge its presence in the anti-biotics segment.

Research activities at Dr Reddy’s Research Foundation in Hyderabad received a boost recently with the licensing of a second anti-diabetic molecule DRF 2725 to Novo Nordisk. The company is now believed to be in the advanced stage of negotiations to license its second anti-cancer molecule.    

New Delhi, March 1 
Santro, the small car from the Hyundai Motors India Ltd stable, will be dearer due to the railway freight hike.

The price of the Santro will be marginally increased for customers in Delhi Punjab and Haryana.

“We are still assessing the impact of the freight hike. We may not be able to hold on to it,” said B.V. R. Subbu, director sales and marketing HMIL.

However, a company executive claimed that there would not be any major impact in the prices of its passenger cars. “The budget would effect those companies which depend upon import of completely knocked down units (CKDs). We have a high level of indigenisation and the duties would not have any impact. We will soon announce the impact, if any,” said a senior company executive. The company also plans to focus on increasing production of the Accent at the expense of the Santro.

The company sold 4,202 Accents in February 2000, as against 1,244 units in January, while Santro sales fell by 10 per cent at 6,203 units sold during February as against 7,240 units in January.

“We have a flexible system and can change the production based on the demand. We are keeping our options open. If the waiting list for the Santro goes up we will shift the production to Santro. Normally we have a waiting list of two weeks as the customer tends to drift away beyond that,” said Subbu.

HMIL manufactures both Santro and Accent on the same flexible production lines at its Chennai plant, which currently operates on a two-shift basis. The Chennai plant has a total production capacity of 1.23 lakh units on a three-shift basis.

“We plan to run the plant at full capacity from May-June to meet the growing demand. We expect the providers of auxiliaries to be ready with their consignment by then,” said Subbu.

The company has sold 84,887 units till February 2000, with 50 per cent of the sales recorded in the north, 23 per cent in the south, 21 per cent in the west and six per cent in the east.    

Foreign Exchange
US $1	Rs 43.43	HK $1	Rs. 5.55*
UK £1	Rs 69.69	SW Fr 1	Rs. 25.90
Euro	Rs 42.42	Sing $1	Rs. 25.05
Yen 100	Rs 40.40	Aus $1	Rs. 26.20*
*SBI TC buying rates; others are forex market closing rates


Calcutta		Bombay
Gold Std (10gm)	Rs 4675	Gold Std (10 gm)	Rs 4630
Gold 22 carat	Rs 4415	Gold 22 carat	Rs 4280
Silver bar (Kg)	Rs 7950	Silver (Kg)	Rs 8040
Silver portion	Rs 8050	Silver portion	Rs 8045

Stock Indices

Sensex	5642.12	+195.14
BSE-100	3450.90	+157.61
S&P CNX Nifty	1712.70	+57.90
Calcutta	141.75	+2.09
Skindia GDR	1542.73	-57.62

Maintained by Web Development Company