Rupee woes shrugged off in 6.5% growth forecast
World Bank offers $ 62 m for telecom reform
Revenue doles to come with stiff riders
Hind Motors’ price cuts perk up sales
ICICI Global lifts 25% in Miditech
Singapore taps NIIT talent
Hughes Tele offer price Rs 12
Foreign Exchange, Bullion, Stock Indices

 
 
RUPEE WOES SHRUGGED OFF IN 6.5% GROWTH FORECAST 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Aug 28: 
The Reserve Bank of India (RBI) has expressed confidence that the country will achieve a growth rate of 6.5 per cent despite the pressure on the rupee and the mounting rate of inflation, but it has warned that the burgeoning fiscal deficit could undo much of the gains.

Releasing its annual report for 1999-2000, the RBI said while fresh challenges to fiscal and monetary management emerged in the current financial year, the prospects of ‘yet another year of good real output growth ‘seem to be realistic’.

The heady projections — though less than the government’s over 7 per cent growth estimate for this fiscal — come at a time when the economy has been buffeted by the adverse consequences of a weak rupee, and an increase in the rate of inflation caused largely by a hike in administered prices.

Despite these developments, the RBI says real GDP growth will touch 6.5 per cent, up from 6.4 per cent last year, if industry continues to recover and services remain buoyant; good monsoons have already raised hopes of a robust growth in farm output.

“Growth of this magnitude should have favourable effects on inflationary expectations, particularly if fiscal deficit and monetary expansion are kept at reasonable levels,” the report states. The economy, says the central bank, can achieve an average annual growth rate of seven to eight per cent only if enough real investment leads to improvements in technology and higher productivity.

Warning the government on its worsening fiscal predicament, the report says the combined gross fiscal deficit of the central and state governments at 9.9 per cent of the GDP for 1999-2000 as against 8.9 per cent a year ago, was too high to be sustained.

Progress in narrowing the fiscal gap, it says, can only be made by increasing tax revenues, cutting administrative expenditure, selling the government’s stake in public sector companies and reducing the size of the government itself.

The report said administrative reforms must focus on wages, salaries and pensions. Citing the fact that the Centre’s expenditure had risen from Rs 11,069 crore in 1991-92 to Rs 32,433 crore in 1999-2000, the RBI said a high wage bill would make fiscal management difficult unless the government itself shrivels.

The fall in the tax-GDP ratio from 16.4 per cent in 1985-86 to 14.1 per cent in 1999-2000 underscores the need to boost tax collections. According to the report, the structural shift in the composition of GDP has limited the growth in taxes.

While agriculture has remained out of the tax net, many areas of the services sector have not been taxed optimally. Business cycles in manufacturing have also made tax collections erratic.

E-commerce tax

The report urges the government to develop a mechanism to tax transactions conducted in Cyberspace. There is, it says, a need to plug revenue leakages in e-commerce deals.

Cut petro imports

The RBI has warned that the share of petroleum in the country’s total import basket is too high, and therefore makes the country vulnerable to oil price shocks.

According to the report, petroleum products should not make up more than one-fifth of the total imports to insulate the economy from cost-push inflationary pressures arising from oil-price spikes.

Govt borrowings

The report says the steady increase in the stock of debt caused by the high level of fiscal deficit has pushed up interest rates on fresh borrowings. The rise in yields on government securities has limited the scope for debt management. In the current year, the stock of domestic debt is expected to grow at 15.4 per cent    

 
 
WORLD BANK OFFERS $ 62 M FOR TELECOM REFORM 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Aug 28: 
The World Bank today offered a $ 62 million loan to modernise the Indian telecommunications sector.

The loan, to be extended under the ‘Telecommunications Sector Reforms Technical Assistance Project,’ will also have a $ 10 million contribution from the Indian government. The project comprises Automation of Spectrum Management and Monitoring System (ASMMS) for the wireless planning and co-ordination (WPC) wing; building capacity in the department of telecommunications (DoT) and Telecom Engineering Centre (TEC) for licensing and policy aspects.

The bank’s loan will also be used to build capacity for the Telecom Regulatory Authority of India (Trai), Telecom Disputes Settlement Appellate Tribunal (TDSAT) to enable it to undertake its regulatory responsibilities which include sector regulation, development and adaptation of a new tariff and interconnection regime and competition in long distance and international services. “The telecom sector reform is expected to bring a number of benefits. The automation and modernisation of spectrum management will result in efficient use of this scarce resource, faster assignment of frequencies and more effective monitoring of unauthorised operations,” an official release said.

While the strengthening of TEC will provide better support to DoT for policy and licensing functions, the Trai/TDSAT component of the project is expected to result in better regulation of the telecom sector.    


 
 
REVENUE DOLES TO COME WITH STIFF RIDERS 
 
 
FROM R. SASANKAN
 
New Delhi, Aug 28: 
The Eleventh Finance Commission, embarrassed by the ruckus created by Andhra chief minister Chandrababu Naidu and others, is now preparing the ground for tightening the screws on financially weak states.

The commission is not going to modify its recommendations, which have already been accepted by the Cabinet. Nor are the so-called affluent states getting anything more than what has been recommended.

However, the commission will try to make up for its alleged lapses by imposing stringent conditions on weaker states, which are the exclusive beneficiaries of its revenue-gap grant.

The commission has almost finalised its supplementary report — to be submitted on Thursday — in response to an additional terms of reference given to it in May this year.

It was asked to draw up a fiscal reforms programme to reduce the massive revenue deficit of states.

The revenue-gap grants will be linked to linked to the progress in implementing the plan.

Sources close to the commission say these states are being asked to raise their tax to state domestic product (SDP) ratio, bring down the revenue deficit as a percentage of the SDP, and cut interest burden.

In addition, they are being told to achieve targets in social sectors such as literacy and primary health.

The commission recommended a revenue-gap grant of Rs 35,000 crore for 15 states — 10 special category states and five non-special category states for the next five years.

For the current financial year, the amount proposed is Rs 10,000 crore.

The recommendation of a revenue-gap grant is not unprecedented. The Tenth Finance Commission had also made a similar recommendation.

Naidu, however, conveniently forgot the fact that the commission, in which a retired senior bureaucrat from the state was a member, handed a bonanza of Rs 636 crore to Andhra to compensate the revenue losses arising from enforcement of prohibition.

This was an unhealthy precedent. This time around, Andhra did not get it because there was no prohibition there.

Official circles in the capital dispute Naidu’s claim that he is a performer. They point to the state’s flagging finances. His administration is subsidising the power sector to the extent of Rs 3,000 crore every year.

The World Bank, which is financing the power sector, advised him either to charge consumers realistic tariffs, or provide funds from the budget. Naidu opted for latter.

Naidu has certainly succeeded in attracting private investment, mostly foreign, but Tamil Nadu’s performance has been better. Unlike his Andhra counterpart, M Karunanidhi does not, normally, crow about his state’s virtues.    


 
 
HIND MOTORS’ PRICE CUTS PERK UP SALES 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, Aug 28: 
Hindustan Motors (HM) has slashed the prices of flagship Ambassador and trekker models by Rs 30,000 and Rs 16,000, the latest in the chain of auto makers to have done so in an effort to rev up sales and cut mounting inventories. The reduced prices, introduced from August 1 and initially open till August 27, was extended till the end of this month. The management will meet on Thursday to decide whether it should continue with lower prices beyond this month.

Before the revisions, the ex-showroom price of Ambassador petrol version was Rs 2.8 lakh, Ambassador Nova (deluxe) Rs 3.70 lakh, Ambassador 1800 ISZ Rs 3.77 lakh and Ambassador 2000 Rs 4.31 lakh; the trekker costs a little below Rs 2 lakh.

“Initially, we decided to offer lower prices till August 27. But the HM management resolved this morning to continue it till the month-end,” sources said. The move to scale down prices was taken by the new management under president B. K. Chaturbedi to boost HM’s falling market share. There are already clear indications that the price-cut gambit is paying off. The company sold 1,683 cars till August 27. The figure includes 1,580 Ambassadors, 10 Contessas and 94 trekkers. In stark contrast, its sales were languishing below 1,400 till last month; it was only 1,240 in June, 1,450 in April, 1,400 in May, 1,240 in June and 1,464 in July.

Encouraged by the uptrend, the company has set a production target of 24,000-25,000 cars for the current financial year. “The price cuts have given the HM management the feeling that it can sell 2,000 cars this month,” the sources said.

A senior company official said the price cuts have been prompted by similar reductions made by Maruti Udyog, the largest country’s car manufacturer, in June. “Even we have to take such steps to boost sales,” the official further added.

Meanwhile, the employees at HM’s Uttarpara factory are happy that the price reductions have pushed up sales. “We are ready to cooperate with the new management in increasing production. We do not want to put a stop to production. In June, the management had to stop the production for two days because of piling inventories. However, the inventory position is under control this month,” employees said.    


 
 
ICICI GLOBAL LIFTS 25% IN MIDITECH 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, Aug 28: 
ICICI Global Opportunities Fund has decided to take a 25 per cent stake in software production house Miditech Pvt Ltd.

Miditech, owned by the Alva brothers, Nikhil and Niret, sons of Congress leader Margaret Alva, makes television software on environment, natural history, travel, lifestyle and culture. Prominent among its programmes include ‘Living on the Edge,’ screened on Doordarshan and ‘Wheels’ for BBC.

Miditech has drawn up grand expansion plans for the next two years, which include increasing its software production base, focussing on regional programming, a foray into news and current affairs and venturing into internet. It plans to spend over Rs 90 crore in the next two years on its expansion plans. Miditech also plans to go ahead with a public issue in a couple of years time.

Hughes Tele offer price Rs 12 From Our Correspondent Mumbai, Aug 28: Hughes Telecom India Ltd, the private telecommunications services provider for the Maharashtra telecom circle, will issue an initial public offer to raise up to Rs 749.21 crore. With this, Hughes Telecom has become the first private telecom major in the country to enter the primary markets.

Ninety per cent of the offer will be made via book-building. The bids with a floor price of Rs 12 per share will open on August 29 and close on September 5, 2000.

The remaining 10 per cent will be offered as a fixed price offer at the price discovered through the book-building process. The subscription to the fixed price portion will be open from September 20 to 25.

The company has more than 27,000 lines spread over Mumbai, Navi Mumbai and Pune. It services the business, multi-line residential and public call office sectors.    


 
 
SINGAPORE TAPS NIIT TALENT 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Aug 28 
Singapore will recruit 1,000 professionals from NIIT’s global training centres in China, India, Indonesia and Malaysia within a year as part of a larger understanding signed today between the City State’s Infocom Development Authority (IDA) and NIIT Asia Pacific Pte.

Under the agreement, infocom talent will be sourced from abroad to meet the requirement of skilled manpower in the key information and communication industries. Much of what is now called the new economy faces an acute shortage of trained professionals. Even brick-n-mortar companies, trying to reap the benefits of the digital boom, need more infotech talent today than they ever have in the past, said Kaizad Heerjee, assistant chief executive, IDA Online Development

“In order to meet the shortage of talent, IDA forges strategic alliances with industry partners, such as NIIT, to bring people specialising in information technology to Singapore,” Heerjee said.

According to projections, Singapore’s infocom industry will grow at an annual rate of 10 per cent over the next two years. Based on this estimate, it will require 10,000 professionals every year. In 10 years, the figure will go up to 2.5 lakh.

“The strategic partnership between IDA and NIIT reinforces our commitment to the Singapore market,” Suren Singh Rasaily, senior vice-president and head of NIIT’s Education & Training Business said.

FDI in e-commerce

The alliance between NIIT and IDA came on a day when the government said foreign stake in e-commerce firms listed abroad must be reduced to 74 per cent in five years. At the same time, it allowed local infotech companies to acquire foreign firms up to 10 times the value of their exports in the previous year.

The foreign stake, it said, should be divested to Indian investors. In addition, these companies should be engaged in business to business (B2B) commerce, not in retail trading.

The announcement linking foreign buyouts to the quantum of exports was made today by Infosys chief N R Narayana Murthy, whose company had asked the government to allow local infotech firms to make automatic acquisitions abroad.

Murthy, speaking at the Foreign Correspondents’ Club of South Asia, said the government was not planting hurdles to Infosys’ acquisitions. “    


 
 
HUGHES TELE OFFER PRICE RS 12 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Aug 28: 
Hughes Telecom India Ltd, the private telecommunications services provider for the Maharashtra telecom circle, will issue an initial public offer to raise up to Rs 749.21 crore. With this, Hughes Telecom has become the first private telecom major in the country to enter the primary markets.

Ninety per cent of the offer will be made via book-building. The bids with a floor price of Rs 12 per share will open on August 29 and close on September 5, 2000.

The remaining 10 per cent will be offered as a fixed price offer at the price discovered through the book-building process. The subscription to the fixed price portion will be open from September 20 to 25.

The company has more than 27,000 lines spread over Mumbai, Navi Mumbai and Pune. It services the business, multi-line residential and public call office sectors.    


 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 45.79	HK $1	Rs. 5.80*
UK £1	Rs. 67.41	SW Fr 1	Rs. 26.45*
Euro	Rs. 41.25	Sing $1	Rs. 26.30*
Yen 100	Rs. 43.06	Aus $1	Rs. 5.80*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta	Bombay

Gold Std (10gm)	Rs. 4550	Gold Std (10 gm	4530
Gold 22 carat	Rs. 4295	Gold 22 carat	4190
Silver bar (Kg)	Rs.7900	Silver (Kg)	8030
Silver portion	Rs. 8000	Silver portion	8035

Stock Indices

Sensex	4395.81	-21.05
BSE-100	2252.33	-7.79
S&P CNX Nifty1369.85	11.40	
Calcutta	121.16	+0.52
Skindia GDR757.49	9.37	
   
 

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