See fiscal deficit at 3% by FY17: Chidambaram
Finance Minister P Chidambaram on Monday said the country is capable of absorbing $50 billion in foreign direct investment annually. The minister is currently in Japan for a roadshow to promote India as an investment destination. Pitching India to investors, he said the country's banking system is sound and rules surrounding foreign investment are clear. "The bulk of foreign investment is through the automatic route." He added that the current limits on FDI are outdated and promised to announce a new trade policy in 3-4 days. Accordiang to him, India requires a growth rate of at least 8%. He expects infrastructure projects to accelerate growth in FY14. "In the last two months, the investment panel had cleared projects worth $14 billion." Rising oil prices, Chidambaram said, is leading to high inflation. He reiterated his promise to curb inflation with supply-side and monetary measures. "The government’s tolerance level for inflation is between 4% and 5%." On the fiscal deficit front, Chidambaram said his government aims to cut it down to 3% of GDP by FY17. Allaying fears on the government's stability, he said the UPA was not in minority after the exit of DMK. "The Indian government is in majority. It will continue with the reforms process."
India was growing above 9% before global crisis: PM
Prime Minister, Dr. Manmohan Singh, speaking at the CII National Conference and Annual General Meeting, in New Delhi said he has always believed that both government and business have to be partners in writing the story of development of this ancient land of ours, and CII has been a greatly valued partner over the past many years. As different governments have steered the economy through the complex task of implementing economic reforms, CII has consistently pushed the business case for reforms and helped our country to achieve its full economic potential, he added.
Following is the extract from his speech:
I benefited greatly from this partnership as the Finance Minister in the 1990s and I welcome it today as Prime Minister. I thank my friend Shri Adi Godrej for giving me this opportunity to share my thoughts with captains of Indian industry, at a time when I know Industry is deeply interested in the state of our economy. I last addressed your Annual session seven years ago in 2007. That was just before the global economic crisis, when the world was booming, the collapse of Lehman Brothers was a year away, and India was experiencing growth at over 9 percent per annum. Circumstances have changed since then, not just in India but all over the world. In my last address I chose to strike a contrarian note. At a time when everything seemed to be going exceptionally well, I struck a note of caution. I said that while we have achieved much, we also have a great deal more to do to create a growth process that is truly inclusive. I also said that while the visible growth and prosperity of Indian big business, including especially its presence abroad, was in many ways a projection of India’s success, there was also need to reflect on the social responsibilities of business. I specifically mentioned the need for restraint in the matter of paying salaries and conspicuous consumption...Read More
Rahul Gandhi: India Inc, govt must partner on infra, edu dvpt
Rahul Gandhi, Vice President, Indian National Congress (INC), called upon the business community to go for "smart interventions" in societal development to bring about qualitative changes in the lifestyles of common man and to propel ideations that can spur inclusive growth. Addressing the India Inc. at the CII’s Annual General Meeting and National Conference 2013, today in New Delhi, Gandhi said that "India has an unstoppable tide of human aspirations". Riding on the tide needs a boat and it is a joint endeavor of the government, business and civil society to create structures that address the aspirational paradigms of the common man". This is the first time since taking over as the Vice-President of INC, he is addressing a business congregation. Giving a clarion call to the Indian Industry to partner with the government in all its developmental activities, Gandhi wanted them to be intensely involved in infrastructural development, education, and the overall growth process, which is a win-win situation for everybody. "Harmony and development pre-supposes development of all and exclusion of none. Dalits, minorities, deprived people, destitutes and women are all important links in our societal structure and we have to reach out to them with compassion and empathy", he added. Taking a dig at the current milieu of political environment, Gandhi, said that "presently the governance dependent on a few elected representatives and that too MPs and MLAs. The majority of the peoples’ leaders like pradhans of gram panchayats are denied of any say in the political process that goes into decision making. This is very frustrating", adding that for a harmonious development, ideations have to move from all directions and the voice of the grass-roots level people has to be heard, recognized and acted upon...Read More
Poverty line should identify the right people: RBI
Thank you very much Governor Subbarao for this generous introduction and thank you very much for inviting me to give this oration. I am a great fan of Professor Suresh Tendulkar. He was a one of a kind, very straight forward, very direct. When I said something he would disagree with, he would listen and come out and say that it does not make any sense and I had to defend myself there. It was always an honour defending myself against him. He had perceptive things to say and he was always unfailingly interested in what the discussion was on which I think is often not the case. We worked in different areas. His one big area was measurement of poverty, my work on the most part has been more on how to do something about poverty, what are effective and ineffective interventions. So the places where I thought our parts crossed little more are how to find the poor per say, how to set the poverty line. Suppose you set the poverty line and you don’t know who is out there. Potentially, several hundred million poor people live in several hundred thousand villages. I mean how to find them is the question.
I am going to spend all the time talking about how do we go about the view that we need to do something about the poor. For example, we need to provide them with bank accounts then how do you go from there to actually giving the bank accounts if you don’t know where they live or who are they. That’s the question we will look at. I think it is a hard question for several reasons. If you want to go and find the poor it’s not enough to just survey them. A sample survey like NSS is an excellent survey which gives you in which state or which district more poor people live. But it does not tell you who those poor people are. So you really need a census if you really want to implement a NSS method of identifying the poor. You want to go to every single person or maybe you leave out the rich areas of the city and just go to the places where the poor live. You need to go a lot of places, interview household by household, collect data about all those households. That’s an amazingly elaborate task, especially if they want to do it frequently because after all poor people become rich and rich people become poor. So you have to do it often. So no country does that...Read More
March factory output index at 52, slowest in 16 months
Indian manufacturing business conditions continued to improve in March, but persistent power cuts weighed on growth. Moreover, the volume of incoming new work increased moderately and at the slowest pace in 16 months. Export orders expanded slightly, with the rate of growth easing to the slowest in seven months. The seasonally adjusted HSBC Purchasing Managers’ Index (PMI) – a composite indicator designed to give a single-figure snapshot of operating conditions in the manufacturing economy – posted 52.0 in March (down from 54.2 in February), indicating an improvement in overall business conditions. However, the PMI was down to the lowest reading in 16 months. March data signalled higher volumes of incoming new work in the Indian goods-producing sector. Growth in total new orders was, however, only moderate and the slowest in 16 months. Export orders rose slightly with the rate of expansion also easing. Output increased modestly, as persistent power shortages hampered production. The pace of growth was the slowest in 16 months.
Subsequently, Indian manufacturers depleted their stocks of finished goods to meet order requirements. Post-production inventories, however, fell only slightly. In contrast, holdings of raw materials and semi manufactured goods were accumulated, albeit slightly. Meanwhile, purchasing activity rose solidly, but at the slowest pace since October last year. Average lead times in the Indian goods-producing sector lengthened for the third consecutive month, amid reports of power cuts and delayed payments to suppliers. Vendor performance deteriorated moderately, but at the fastest pace in over two years. Backlogs of work also rose, though only slightly. Meanwhile, firms increased their payroll numbers over the month. The rate of job creation was only moderate, but the fastest since last October. Input prices increased during March, as has been the case in each month since April 2009. The rate of cost inflation was solid, but eased to the slowest in 32 months. Anecdotal evidence suggested that raw materials had increased in price, with some mentions of unfavourable exchange rates. Subsequently, average tariffs rose, but the rate of increase was moderate and the slowest since October 2012. Monitored firms indicated that increased competition had prevented them from passing on to clients the full burden of cost inflation...Read More
Sugar finally decontrolled: A 360 degree view
The Cabinet Committee on Economic Affairs has given a much-needed boost to India’s Rs 80,000 crore sugar industry. Sugar prices will now be market-linked but state controls like distance between sugar mills, sugarcane area reservation and setting of cane prices (over and above the government’s fair & remunerative price will continue to remain.
CCEA accepted the recommendations made by the Rangarajan Committee on sugar reforms at its meet held on Thursday. The meeting was presided by Prime Minister Manmohan Singh.
The timing of the sugar decontrol is bold considering the coalition government lacks the requisite numbers in Parliament and is facing general elections next year. Coalition partner DMK had in March withdrew support to the United Progressive Alliance.
Mulayam Singh Yadav’s Samajwadi Party and Mayawati’s Bahujan Sawajwadi Party – representing India’s largest sugarcane producing state – are helping to prop the government up. A new state government in Uttar Pradesh may have provided Mulayam with the leeway to green nod the government’s decision.
Benefits to industry:
- In the past, sugar mills had to sell 10% of their total production -- below market prices -- to the government under the levy quota mechanism. This has been done away with.
- This levy ensured that 10% of the output was available to the government to supply to the poor through the public distribution system.
- Now, states will be required to buy sugar at market prices for public distribution. The Centre, in turn, would compensate states for the difference between the market and regulated price. However, the Cabinet has fixed a ceiling of two years on such payments. This may lead to huge heart burn between the Centre and states.
- Surprisingly, the policy was silent on an excise duty levy of Rs 150 per quintal to help the government meet its sugar subsidy burden.
- The Cabinet has also done away with the release mechanism. Under the regulated release mechanism, the Centre had the power to fix the amount of sugar mill owners could release in the open market.
Short-term impact on government finances:
- According to analysts, this shift in compensation will result in an additional subsidy burden of Rs 2,700-3,000 crore. This subsidy was earlier borne by the industry.
- However, government officials peg this much lower. Food Minster KV Thomas does not see the Centre’s subsidy burden exceeding Rs 2,700 crore. "According to our estimate, the current market price of sugar is Rs 32 per kg while the same under PDS is Rs 13.5. For this, the Centre will bear an additional subsidy burden of around Rs 2,700 crore," he explained.
- The government already walking a tight rope on handling its rising fiscal deficit will have to be extra cautious as rating agencies have threatened to cut its sovereign downgrade.
What does this mean to the common man?
- The government’s move may not go to well with citizens already facing rising prices of day-to-day essentials as any price fluctuations will leave a sour taste.
Should investors buy now?
- Bhavesh Gandhi, Associate Vice-President, India Infoline and a close tracker of the sugar space, feels the long awaited move will bring much needed relief to the industry. He sees better inventory management in sugar companies post the removal of the release mechanism.
Among sugar plays, he is positive on Balrampur Chini. "We are advising investors to buy Balrampur Chini with a 9-12 month target of Rs 60 per share."
SC rejects Novartis' Glivec patent plea
The Supreme Court has rejected Novartis' Glivec patent plea. Upholding the Tribunal, Patent body order on the cancer treatment drug; it said the drug is not eligible for patent in India. Novartis will also have to pay cost for filing the case. The company had argued that the molecule imatinib, on which Glivec is based, required years of research and modification to make it an effective, safe leukemia treatment. The drug is Novartis' top seller clocking in sales of $4.7 billion last year.
Calling the case 'not maintainable', the apex court said repetitive patents are not permissible on the same drug. Post the Court ruling, Novartis India shares plummeted 5.5%. It is currently (11 AM) trading down 4.38% at Rs 572 per share on the Bombay Stock Exchange. In 2006, the Indian Patent Office had denied patent to the company which was upheld by the Indian Intellectual Property Appellate Board. Commenting on the judgement, Novartis said it was never granted an original patent for Glivec. "We believe original innovation should be recognised."
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