Finance ministry officials blame lower tax collections (which are expected to fall short of targets by as much as Rs 15,000 crore through the fiscal), higher fertiliser subsidies and a spurt in defence expenditure for the predicament. They say things could have been worse if the expenditure was not kept in leash.

A rise in fiscal deficit typically means higher inflation. Though this could wreak havoc on middle-income households’ budgets, there is a feeling that it could also spur growth, if the excess money in the market is mopped up and shovelled into productive investments.

Economists who interacted with Yashwant Sinha today on the budget told the finance minister that overshooting the target for fiscal deficit should not be considered a sin as long as he was able to ensure that the additional expenditure paid off in the long run.

B. B. Bhattacharya of the Institute of Economic Growth told Sinha that a modest rise in fiscal deficit will not hurt the economy, but insisted this could be tolerated only if the money is spent on infrastructure development. “It is the quality of expenditure which counts.”

But the problem is that while the government will accept the first part of Bhattacharya’s policy prescription, it will be unable to guarantee that the excess amount flows into productive avenues.

“The excess deficit is mainly because of lack of income, not because of excess expenditure, this year. Tax collections in April-December were 2.5 per cent, or Rs 3,000 crore, below the figure for first nine months of 2000,” a senior finance ministry official said. This is almost Rs 10,000 crore less than the internal targets set for the revenue department. “The figure is expected to worsen in the months ahead,” officials added.

The main culprit is customs collections which, at Rs 29,744 crore during April-December, was 14.3 per cent below the mop-up during the first three quarters of 2000.

Even direct tax collections have flagged: Corporate tax mop-up at Rs 22,776 crore was down 4.17 per cent compared with the same period last year. Revenues from excise, which were expected to grow at least by 8-10 per cent, increased by a modest 3.3 per cent during the period.

“Among other things we pointed out that never had workers been attacked by policy initiatives in such a manner,” Dasgupta said. The veteran trade union leader and former Rajya Sabha MP added that the unions planned to meet and decide on a course of sectoral strikes and later even a general strike.

In a communication sent to stock exchanges, the company said it had decided to sell the stake at its board meeting today. “The board has authorised the managing director and the executive director to finalise the deal,” it added.

Market and industry circles expect ICL chief N. Srinivasan to garner at least Rs 200 crore from the stake sale. Though the identity of the buyer has been kept under wraps, there are growing indications that Italcementi and Lafarge will be the main contenders in the fray.

The figure of Rs 200 crore is based on a economic value of at least $ 40 per tonne that ICL may get for Sri Vishnu’s 1.5 million tonne unit.

ICL, along with group company ICL Securities, had acquired an 88.5 per cent stake in Sri Vishnu Cements by buying out B. V. Raju and his associates for Rs 115 crore in 1999. After taking into account the debts, Sri Vishnu was valued at Rs 170 crore. The promoters later raised their stake to 94 per cent through an open offer.

Market circles say the promoters may also offload the stake that is now with ICL Securities to foreign investors.

Analysts say India Cements’ decision today is a text-book example of how takeovers aimed at boosting market-share can go awry. The company had acquired Sri Vishnu, which owned a part of Raasi Cement, a company the Chennai-based cement major snapped up later.

ICL was saddled with massive debts as a result of that deal. Forced to service a staggering loan burden of Rs 1,800 crore, the company’s bottomline has taken a beating. Interest costs stood at Rs 190.2 crore in March 2001, a spurt of 12 per cent over the previous year’s Rs 170.4 crore.

ICL has put its stake on the block at a time when the Birlas-owned Grasim Industries have taken control of Larsen & Toubro in a surprise deal with the Ambanis.

The churning has thrown up a four key players: ACC, Gujarat Ambuja, L&T and Grasim, which controls close to 50 per cent of the industry’s capacity. This is a reality that could either keep foreign players away from Sri Vishnu, or force India Cements to settle for a lower price.

Foreign majors like Lafarge, Cemex, Italcementi have been on the prowl for acquisitions, but have been outpaced by the likes of Gujarat Ambuja and Grasim Industries in the race to gobble up local cement companies.

Sources say another factor that could hit the valuation of ICL’s stake from the earlier estimated $ 80 per tonne is the fierce competition in the southern region – an area where new units are being set up and capacities being hiked. “In addition, the capacity of 1.5 million tonnes being offered is not large enough,” an analyst said.

The company’s income, for the third quarter, jumped 23.04 per cent touching Rs 660.81 crore, from Rs 537.07 crore in October-December of 2000. The net profit rise amounted to 23.87 per cent over the corresponding period last year.

Though the Nasdaq-listed company’s performance is in line with the expectations of analysts who had projected a third quarter revenue of Rs 640-656 crore, the results failed to cheer the stock markets. On the Bombay Stock Exchange (BSE), the Infosys scrip was hammered to a day’s low of Rs 4188 after it opened at Rs 4,425. It, however, recovered to close at Rs 4,254.20.

Commenting on the Infosys’ performance chairman and CEO N.R. Narayana Murthy said “this quarter was one of the most challenging, both for Infosys and the Indian software industry.” Quarter-on-quarter growth (October-December 2001 compared with July-September 2001) in net profit was 2.22 per cent and in total income 1.64 per cent.

Stating that software spending continued to weaken globally and events of September 11 created a lot of uncertainty in the external environment, Murthy said, “short-term uncertainties continue to remain and we are cautious about long-term opportunities.”

Giving its outlook for the quarter ending March 31 this year, the company said its income was expected to be between Rs 636-660 crore. The infotech major admitted that while increasing its business volumes, its quarterly revenue growth was impacted due to continued pricing pressures.

The infotech firm has already added 33 new customers during the quarter compared to 28 in the previous quarter.

Nandan Nilekani said despite the downturn, the “company was able to demand a good market mainly because of the teamwork and a cautious approach.”

The appointment will take effect from March 31. He would be redesignated as CEO, president and MD.

Nilekani succeeds N.R. Narayana Murthy, chairman and CEO, who would continue to be the chairman of the board and would be redesignated as chairman and chief mentor.

Murthy said, “To give place to new ideas, new thoughts and new leadership, is the Infosyian credo and is a good trend,” and added that he would contribute to developing leadership and also focus on “connecting with top leaders outside the world.”

In the last nine months, their holding shot up 9.1 per cent to 38 per cent, taking their total foreign stake in the company to 41.83 per cent from 32.8 per cent in April. A little over 3 per cent of the company’s stock is traded as American Depository Receipts.

The increase in foreign institutions’ stake has happened even as domestic mutual funds cut their holding by 6.1 per cent over the last nine months. The mutual funds, including Unit Trust of India, now hold 7.36 per cent in the country’s software bellwether. The company’s promoters and their associates control 28.83 per cent, employees have 7.83 per cent, while 13.33 per cent is widely dispersed. Banks and financial institutions own a shade below 1 per cent.

FIIs’ interest in Infosys has grown despite the fact that many foreign funds have burnt their fingers in technology stocks.

The sharp swings in Infosys over the last nine months have been attributed to brisk FII buying. At the beginning of the financial year, the stock was trading at around Rs 5,600. After the market crash in March, the stock tumbled and dipped below the Rs 3,000-mark.

After the attacks on the US, the stock plunged to Rs 2,200, but has since made a steady recovery.

Talking to The Telegraph, Neeraj Swaroop, country head (marketing and retail assets), said: “We are always looking at good acquisitions. If we find one we will surely look into it. However, at the moment we are primarily focussing on the organic growth of the bank.”

The company had acquired TimesBank in February 2000. According to the company, the acquisition added significant value to HDFC Bank in terms of increased branch network, expanded geographic reach, enhanced customer base, skilled manpower and the opportunity to cross-sell and leverage alternative delivery channels.

Swaroop said the bank is also actively considering the business of distribution of insurance products once the IRDA guidelines are in place. “We have spoken to all private insurers. Once IRDA guideline is in place we will finalise the deal with them,” he said.

Commenting on the credit card business which the bank launched only a month ago he said, “We know that nationalised banks have burnt their fingers in the credit card business. We are taking cautious steps. We are meeting agents in the metros and assuring them some sort of a commission so that they can boost their customers to deal in plastic money.”

The bank has also started providing loans for buying commercial vehicles and two wheelers. Swaroop said that in the first nine months of this fiscal the bank has disbursed Rs 750 crore in the retail sector. The growth has mainly come from car financing, loans against shares and personal loans. The bank expects a growth of 30 to 35 per cent in the coming year in the retail business.

The bank has a large business in RBI relief bonds. It is also doing third party business for mutual funds. The bank, which currently has 143 branches, plans to add another 30 branches within the next four months.

Poor domestic demand is the biggest trip wire for large projects, says a survey conducted by the Centre for Monitoring Indian Economy (CMIE) titled “Problems and progress in implementation of major investment projects in India” which has been prepared on behalf of the ministry of commerce and industry.

The study, which covered 304 projects envisaging a total investment of Rs 3,51,023 crore, accounting in value terms for 47 per cent of the total investment in all projects in India (excluding power, telecommunications and irrigation projects), is the most comprehensive in recent years and addresses an issue that has been bothering policy makers who have been trying to list all factors that bedevil large projects in the country.

Poor demand was the single most important reason for delay in implementing projects. Almost 27 per cent of the projects consider domestic demand to be a problem.

Overall, 28 per cent of the companies covered in the survey said they were postponing their initial investment decisions or their expansion plans because of their adverse perception with regard to domestic demand, overseas demand and competition from imports.

The survey shatters a couple of myths as well: for instance, it claims that Indian companies find it harder to work their way through the labyrinthine process of obtaining government approvals than their foreign counterparts. Another interesting finding is that it’s harder to get a clearance from local authorities than the state and Union governments.

The study said 57 per cent of the respondents do not find government clearances to be a problem. On an average, only 19 per cent of the respondents consider government clearances to be a problem.

The survey says that by and large, government clearances are not a problem for most investment projects in India including those that involve Foreign Direct Investment (FDI).

However, 31 per cent of the respondents consider funding to be a limitation. This is seen as an acute problem for private sector projects; nearly 52 per cent of the private sector projects did not find it easy to raise loans.

Industry says it is less worried about the cost of funds, than the availability of credit itself.

This is surprising considering the fact that banks claim that they are flush with funds and are keen to shovel money into good infrastructure projects.

The decline in the prime lending rate (PLR) by nearly 4 percentage points over the past five years appears to have eased the cost problems for project promoters.

The results of the survey were presented to Union commerce minister Murasoli Maran last evening.

The other findings of the study which covered the period May to October 2001are:

a) Only 11 per cent of the projects consider infrastructure to be a problem. The percentage is slightly higher at 19 per cent for power and 15.5 per cent with respect to land availability for Indian private sector projects. On an average, FDI projects find infrastructure much less of a problem compared with government and Indian private sector projects.

b) 22% of the projects in the manufacturing sector consider demand to be a serious problem.

The department of industrial policy and promotion in the commerce ministry had commissioned CMIE in April 2001 to identify the underlying causes for slow implementation of major investment projects in the country.

The move comes days after the closure of its voluntary retirement scheme, which was accepted by around 1,171 employees. The separation package drew to a close on December 31, and left Uttarpara’s staff-strength at 7,800, down from 9,000 earlier. The aim was to prune the number to 4,500, an unfinished task that the company says will be done in a phased manner as part of a wider cost-cutting exercise.

The layoffs come as the company sold only 9,000 cars till December, miles way from the target of 15,500 set for this fiscal. “Cost cutting is under way at all levels. Our goal is to sell nearly 15,500 by the end of the current financial year. Sales generally pick up in the last three months of a financial year. We hope to hit the target. The sluggish trend in the passenger car segment has affected our sales,” senior officials of the company told The Telegraph.

HM sold 19,992 cars in 2000-01 and 21,970 in 1999-2000. The production target for January is 2,000-2,100 cars. No vehicles rolled out on 76 of the 239 working days between April and December. “We expect fewer non-productive days in the three months to March given the need to rev up sales,” the officials said. The non-productive days are being set off against privilege leaves of employees, whose dearness allowance has also been frozen. “Workers are jittery about their future. We requested the state government to co-operate, but it has not helped us so far. This has emboldened the management to take recourse to anti-labour measures,” said Ajit Chakraborty of the Intuc union.

Foreign Exchange

US $1	Rs. 48.37	HK $1	Rs. 6.10*
UK £1	Rs. 69.89	SW Fr 1	Rs. 28.75*
Euro	Rs. 43.19	Sing $1	Rs. 25.85*
Yen 100	Rs. 36.51	Aus $1	Rs. 25.00*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta	Bombay

Gold Std (10gm)	NA	Gold Std (10 gm)	Rs. 4730
Gold 22 carat	NA	Gold 22 carat	NA
Silver bar (Kg)	NA	Silver (Kg)	Rs. 8020
Silver portion	NA	Silver portion	NA

Stock Indices

Sensex	3381.96		-18.93
BSE-100	1603.40		-17.38
S&P CNX Nifty	1098.20		-4.60
Calcutta	NA		—
Skindia GDR	NA		—