Volume 25 – No.7 – October 2011
In this issue 4 President’s message 4 Chamber’s activities • Meeting with Belgian
Ambassador • MCCI & MMA Video Discussion
on “ It’s not my problem”
4 General Committee 4 Article on MCCI featured in Business India
4 SPOT LIGHT Public Private Partnership (PPP)
4 Economic Review
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CHAMBER’S ACTIVITIES 18th October 2011
European market. In Tamil Nadu,
visas were issued within 24 hours and
Meeting with Ambassador for Belgium:
particularly Chennai has a number of
said they had issued 35000 visas till
automobile and auto components
September 2011 and expected to issue
manufacturing
companies and
another 10000 visas before December
The Chamber had organised an
most of the leading companies are
2011. The Ambassador invited SMEs
interaction meeting with the visiting
members of the Chamber. He further
to set up their units in Belgium and
Delegation from Belgium on 18th
highlighted to them that the Madras
business licenses would be issued
October 2011 in the Conference
Chamber was instrumental in setting
within 3 to 4 working days and
room of the Chamber.
up the Chennai Port and we continue
there was no minimum investment
to be actively involved in trying to sort
stipulated. The Ambassador
the current issues concerning the port
informed that a delegation headed
and represent the interests of traders
by Kris Peeters, Minister –President of
and exporters . In fact we had taken up
the Flanders regions along with a 35
a detailed study on Port infrastructure
member team would be visiting India
which was completed and findings
and they are planning to visit Chennai
to be presented for more discussion.
between 12 and 18th November
Antwerp
The President then requested the
2011. The areas of business interest
President,
The Ambassador appreciated the
MCCI and Mr.T.Shivaraman, Vice-
Madras Chamber’s role towards the
President, MCCI along with the other
development of Tamil Nadu economy
members of MCCI were present.
as well as national economy. He said,
Mr.T.T.Srinivasaraghavan,
Belgium which had a highly diversified
H.E.Mr.Pierre
Vaesen,
Ambassador
for Belgium, H.E.Mr.Karl Van Den Bossche, the new Consul General for
Belgium,
Mr.Jayant
Nadigar,
Trade Commissioner, Bangalore Mrs. Fruithof, Future Trade Commissioner for Chennai and Mr.Raj Khalid, India Representative
of
Port
participated in
the
Mr.T.T.Srinivasaraghavan,
welcomed
the
meeting. Ambassador to address.
President
Ambassador
and
his team. He gave an overview of
for the delegation from Flanders are
economy was keen to strengthen bilateral
trade
ties
with
India.
activities. Currently there were 150 Belgian The President highlighted that the companies that had investments in Madras Chamber was one of the India and about half the number of the
Chamber’s
various
oldest chambers in the Country and had recently completed 175 years of service to the trade and industry on 29th September 2011. The history of the Chamber began with European connections and after independence Indians took over the position and got involved in the MCCI’s activities. He explained that the membership base is strong and nearly about 70% of the members are in the manufacturing and
the
rest
of
them
include
professional firms, service and other industries. Most of our manufacturing companies have business with the
2
Indian companies in Belgium and their
proportion was increasing. Flanders
utilising Port Antwerp, Chemicals, pharmaceuticals,
biotechnology,
logistics, automotives and renewable energy. The
Ambassador
also
informed that India and Belgium already have a double taxation treaty in place, the proposed Free Trade agreement between India and the EU could significantly improve trade and the FTA should be ready by the year end. Mr.Raj Khalid requested the members
have a trade office in Bangalore. to consider setting up warehouses Around 20 out of 250 Belgium firms
in the Port of Antwerp which he told
have invested in Chennai and a trade
is very cost effective. From there,
office
and
the products could be traded locally
Wallonia regions would soon be in
representing
Brussles
and could be sent to other European
Chennai. The main purpose of the
countries as well.
office is to attract investments into Belgium. The Ambassador told that they are ready to lend a helping hand to Indian firms interested in setting up their units in Belgium particularly in areas like logistics, car assembly, bio-
The Ambassador and his team of officials then interacted with the members and the meeting was concluded with vote of thanks. The President presented MCCI Coffee
technology and infrastructure sector. Table Book – Championing Enterprise The Consul General mentioned that to the Ambassador.
CHAMBER’S ACTIVITIES 20th October 2011:
A
MCCI & MMA – Video discussion “That’s not my problem” :
highlighted the need for employees
my problem’ could lead to unforeseen
to put out small office fires before
consequences. The key issues were:
The
that followed the importance of taking
monthly
video
discussion
lively
animated
video
that consequences. Thinking that ‘it is not
they blaze out of control was shown. Through the video, and the discussions
- H ow to see needs and take
responsibility
meeting was organised on 20th
responsibility
acknowledging
- H ow to face up the problems
October in the Conference room of
problems, and taking action before
the Chamber. The title for the video
a crisis is reached is stressed upon.
- H ow to accept and manage
discussion was -“That’s not my
The video demonstrated, what can
problem”. Ms.Sandhya Sankar, a well
happen when we are not personally
known corporate trainer coordinated
motivated to fix a problem before
the discussion.
it gets out of hand with escalating
participated.
The 4th meeting of the General
fitter, electrician, computer skills, soft
and
Committee met on 15th October in
skills and week end courses for the
of the Committee offered his help to
the Conference room of MCCI. The
engineering students have already
negotiate in this regard.
President and 14 members of the
been initiated and the modules and
General Committee attended the
syllabus have also been worked out.
meeting and the following matters
Work tables, drilling machines and
were discussed.
other required infrastructure facilities
by
responsibility
About
25
members
representing
both organisations (MCCI & MMA)
15th October 2011:
GENERAL COMMITTEE
The members of the Committee appreciated
the
President
and
the Chamber Secretariat for their wonderful work done in connection with the 175th year celebrations held on 29th September 2011 at Park Sheraton Hotel. The President thanked the members for their valuable support and for their presence in the function
were developed at the premises and the course would be commenced by this month end. It was informed that after local bodies’ elections, Mr.Pradhan
and
Ms.K.Saraswathi
would meet the local village officials, Panchayat
officials
and
other
Mr.S.G.Prabhakaran,
Member
MCCI Port Study and the present problems in Chennai Port were discussed at the meeting. Mr.Krishnan, Chairman of the Logistics Committee apprised the members that the exim trade was greatly affected by imposing congestion surcharge. Operations of the Chennai Port and related issues would be discussed & highlighted at the proposed Port Seminar.
connected people in this regard. The President reported various meetings organised by the Chamber during the month.
function and also for contributing
The members felt that the Chamber
towards advertorial support in the
could try and purchase the other
The 6 new companies joined as
Hindu.
vacant land which is available behind
members were approved and the
MCCI land at Koppur Village which
names of the new members would be
might be useful for expansion of Skill
published elsewhere in the bulletin.
With regard to the progress of skill development centre the members were updated. The Committee was informed that basic courses like
Development Centre at a later stage. It was agreed to explore the possibility
3
Special article on MCCI featured in Business India - 13th November issue
4
5
COMMERCIAL HOLIDAYS 2012 1st January
Sunday
New Year’s Day
15th January
Sunday
Pongal
16th January
Monday
Thiruvalluvar Day
26th January
Thursday
Republic Day
6th April
Friday
Good Friday
13th April
Friday
Tamil New Year’s Day
1st May
Tuesday
May Day
15th August
Wednesday
Independence Day
20th August
Monday
Ramzan
19th September
Wednesday
Vinayaka Chathurthi
2nd October
Tuesday
Gandhi Jayanthi
23rd October
Tuesday
Ayudha Pooja
13th November
Tuesday
Deepavali
25th December
Tuesday
Christmas
Charter Party Holidays 2012 15th January
Sunday
Pongal
26th January
Thursday
Republic Day
1st May
Tuesday
May Day
15th August
Wednesday
Independence Day
2nd October
Tuesday
Gandhi Jayanthi
13th November
Tuesday
Deepavali
and any other day which the Chennai Port Trust declares as a closed holiday during the year. Note: These Charter Party Holidays will also be applicable to Ennore Port.
7
SPOTLIGHT
PUBLIC PRIVATE PARTNERSHIPS – THE NEXT WAVE By Arslan Aziz, Lead Consultant – Public Policy, Athena Infonomics India Pvt. Ltd.
Public
Private
Partnerships
have
public funds for addressing chronic
private sector, outcome specifications
increasingly emerged as a viable mode
infrastructure investment deficit. The
among others. A quick comparison
of developing public infrastructure
first PPPs followed as a consequence
across international definitions of PPPs
Figure 1: Infrastructure Spending Targets in 11th and 12th Five year plans
11th plan
coincides
Sector-wise breakup Gas
20.6 7.7 6.7 Total
Central
6.2
State
Private
Telecommunications Airport Port
with
international
best
definitions
and practices.
potential returns or benefits
Railways
for all the stakeholders in a PPP project is presented in Figure 2. To enable the next wave
Sector-wise breakup Gas
42.7 12
Telecommunications
9.7
Central
21
State
Private
Water Sanitation &Irrigation
through
Public Private Partnerships, success factors that need
Roads Railways
The 12th five year plan envisages a
the National Highway Development
threefold jump in the size of private
Program – Phase I in 1999, which has
investments in infrastructure sectors,
since then grown in scope and size to
from about Rs 6 lakh Crore in the
cover most sectors across transport,
11th five year plan to over Rs 20 lakh
logistics and utilities.
in experimenting with PPPs in social
investments
to be enhanced.
Airport Port
of economic liberalization through
there has been increasing interest
of
this article outlines six key Power
through private sector resources.
Crore in the 12th plan. In addition,
Public Sector Capacity The role of the public sector
in any public private partnership is critical in enabling the project from achieving its objectives. Apart from being a partner, the public sector entity also has the responsibility to govern and monitor the entire process.
Given
the
very
long
The recent draft for consultation of a
gestation periods of infrastructure
National Public Private Partnerships
projects, this requires a sustained level
Policy
defining
of political commitment irrespective
features of PPPs including investments
of the particular government in
by private sector, optimal risk sharing
power. Similarly important is a strong
evolved
between the public and private sector,
commitment from the bureaucracy
in India to overcome the lack of
performance linked payments to the
that implements such projects on
sectors
such
as
healthcare
and
education. PPPs
8
the
incurred, risks borne and
Roads
Water Sanitation &Irrigation
that
An analysis of the costs
Power
12th plan
Total
reveals
Indian approach broadly
have
historically
highlights
certain
SPOTLIGHT Figure 2: PPP Stakeholder analysis Public Sector
hand, the supply of both debt and equity are near
Lenders
Cost Incurred
Return/Benefit
Project Identification Monitoring
Fulfilment of mandate to provide public infrastructure
Risk Borne
Cost Incurred Cost of capital Opportunity Cost
current financial system. The inherent asset-liability
Risk
mismatch issue for long-
Financial viablity risk Currency Risk? Asset - liability tenure mismatch
Con trac t
Tax
Return on investment
VGF Debt Protection
Political Risk? Regulatory Risk? Residual Asset value risk
their upper limits in the
Return/Benefit
term infrastructure loans, lack of a deep and liquid bond market, the inability
Repayments
Debt
Public /User
of infrastructure projects
Private developer
Cost Incurred
Cost Incurred
Return/Benefit
Tax User changes Displacement
Usage of quality infrastructure Time and cost savings Employment opportunities Improved living standard
Risk Borne Environmental/ social impact Exclusion
Access
User charges
Return/Benefit
Opportunity cost of investment Debt repayments Technical & human resourses
Risk Borne
from receiving investment
Return on investment Increased technical competence Enhanced brand equity
grade rating that limits the pool of funds that can invest in them, are some
Financial risk Developmental risk Operational risk Technology risk Non-profitionam force majeure risk
of the issues that need to be urgently resolved if adequate debt financing
the government’s behalf to ensure
transaction advisors are engaged
transparency and objectivity of the
by the government agency to assist
is to become available.
process.
in this process. There is a need for
Risk Sharing
Adequate and coordinated planning across different central and state governments
and
the
associated
ministries is essential for smooth
an objective and efficient process of leveraging the expertise of such consultants and translate it into effective structuring of contracts.
Exhaustive
identification
of
risks,
allocation to party best suited to manage or mitigate that risk, as well as accurate pricing of risks is essential
functioning of a process. A national
Private Sector Capacity
PPP policy can outline a mature
Harnessing private sector efficiency
risks during the land acquisition and
and technical competence is one of
getting
the key factors of a mature rationale
different regulatory authorities are
for
best managed by the sponsoring
rationale for PPPs, as well as clearly outline the roles and responsibilities of different agencies to improve coordination across agencies.
implementing
to any successful project. Early stage
infrastructure
requisite
clearances
from
Private
government authority. Private sector
Public Private Partnerships involve a
Partnerships. A broad and deep shelf
developers as well as financiers can
range of stakeholders and affected
of commercially viable projects need
split the risks in the subsequent stages
parties
diverge.
to be identified and information be
of the project depending on the
Managing multiple stakeholders and
made publicly available. Adequate
pricing of the risks.
aligning their incentives towards a
checks and balances must be put in
Social Inclusion
common goal requires a pragmatic
place to ensure the private sectors
approach
deliver on the promised outcomes
whose
interests
that
projects
appreciates
the
through
Public
nuances of the complexities involved.
with the desired quality of service.
A thorough technical understanding
Availability of Adequate Financing
of
the
feasibility,
viability,
social
and environmental impact is an essential starting point for the public sector.
Consultants,
independent
engineers, financial consultants and
Increasing participation of private sector
in
providing
what
were
traditionally considered public services requires a careful management of the social inclusion issue. Existing
While on the one hand a quantum
experience
leap
are
projects have suffered long delays
envisaged in infrastructure in the
due to rights of affected communities
12th Five Year Plan, on the other
not being managed appropriately.
in
total
investments
suggests
that
many
9
SPOTLIGHT
Disputes regarding user charges and
Internalizing the negative externalities
compensation given to land owners
of large infrastructure projects is
have stalled or delayed many projects.
a
If social sectors such as healthcare and education are brought into the ambit of Public Private Partnerships, it must be ensured that addressing problem of lack of quality does not result in the creation of a problem of exclusion.
Sustainability
daunting
yet
necessary
task.
Depleting water resources, pollution, deforestation and adverse impact on biodiversity are costs that need to be factored into the total project cost. While this would decrease an individual project’s commercial viability, in the long-run and at a macro-level, such an approach
Increasing population and depleting
would contribute to more sustainable
natural resources in the country
development.
Conclusion Public
Private
Partnerships
have
the potential to be a significant contributor to delivering inclusive development to the nation. However, the process needs to be diligently planned and executed to ensure the potential is realized. Focus on the six success factors described in this article can help different stakeholders to identify capacities that need to be built.
make sustainability an urgent priority.
PPP MODEL IN CLUSTER DEVELOPMENT (Source: ASSOCHAM Publication on Cluster Development)
The Scope of PPP Model
PPM Model is one of the best global
partnership
practices and well acceptable model
and one or more private players on
worldwide. It is one of the most
particular project and specially focusing
successful model not only inn India
on financing, designing, implementing
even well acceptable in world also. It
and operating facilities and services
has been implementing by and large
which are traditionally provided by
all sectors more particularly telecom,
government / public enterprises.
construction, Infrastructure, road ways,
These collaborative ventures are built
agriculture, education etc., Wherever
around the expertise and capacity of
this model has been implemented,
the project partners and are based
most of the places showed fabulous
on a contractual agreement, which
result, better productivity & profitability,
ensures
enhanced
efficiency,
agreed allocation of resources, risks and
managerial expertise and many more
returns. This approach of developing
benefits. PPP model is not only assisting
and
and assuring a high degree of comfort
infrastructure by the private sector
level to funding institution for infusing
under terms and conditions agreeable
the adequate fund in cluster zone but
to both the government and the private
also creating a new avenue to allure PE/
sector is called PPP or P3 model.
VC investor and FDI etc.
of these major challenges could be
About PPP Model :
Role and Responsibilities of Public / Private Sector :
covered
(Public
There is no standard or formal concept
PPP Model, it doesn’t mean that there
Private Partnership) Model in Cluster
of PPP model. However, it broadly
is reduced and less responsibility and
development.
refers to as a contractual long term
accountability has with government.
There are more than 6500 clusters running pan India but only around 450 clusters are recognized and getting government support. There are 490,000 firms operating, employing 75,00,000 employment with annual output of Rs.157,000 crores. However even getting recognition by government and having such a enormous contribution to the economy, they aren’t properly privileged to explore their full potential for grown up themselves. They have still major challenges remain with them like limited size and scale, obsolete technology, non-availability of finance, traditional marketing systems, inability to meet environmental compliances, Poor infrastructure etc. ASSOCHAM
10
by
believes adopting
certain PPP
parts
operational
between
appropriate
operating
public
Government
and
mutually
utilities
and
SPOTLIGHT
SME Entrepreneurs
Government
Private Agencies
Enterprises
(Comprehensive role-play of PPP Model and shows ability to bring key stakeholders together strongly Positions into clusters to make a purposeful intervention in the SME segment)
Government actively remains involved
adequate and timely delivery of services
enterprises and private agencies under
throughout the project life cycle.
to customers and cost effectiveness in
single
Government is very much accountable
the market.
through integration and cross transfer
to meet its committed services towards
The major objective of such model
of private and public sectors skills,
its SME stakeholders or beneficiaries.
is to bring more value addition and
expertise knowledge, best experiences
The responsibilities also remain with
effectiveness by synergizing the best
etc., contributed and shared with SME
Government to govern and regulate
part of two or more partners – Public
entrepreneurs.
the price stability, robust competition,
umbrella
more
particularly
11
PPP Model in Cluster Development : There are three major components of
What Governments should do in a PPP project
PPP model during implementation in
• Maintain Transparency should
cluster development. These are:
• Government / Public Enterprises
• Protect officers who take the
• Private Agencies
• SME Stakeholders
• Align the economic interest
Under PPP model, Government is defined
paramount. initiative on PPP ; of all SME Stakeholders;
as facilitator / enabler and committed
• Define PPP project on
to provide stable governance, citizen
support with economic imbalanced,
• Induct the Private sector as partners;
social
• Establish frameworks that
unrest
and
politics
free
environment to private agencies and other engaged entrepreneurs. Whereas Private players are defined as financer, builder and operator of services or
a holistic basis;
permit failures; and
• Encourage plurality of approaches.
innovative methodology, appropriate set up skill, managerial effectiveness,
• Offer a project without
global best practices etc among clusters.
SME stakeholders who are defined as
• Make commitments that cannot
targeted beneficiaries of this model.
There are major 5 important steps
• Change goalposts after award of
towards
concession and revisit
project design;
among effective operational efficiencies,
implementation
of
methodology:
PPP
detailed project development; be kept;
• Not recognize that each project is a Project Execution
business and not a mere asset;
• Regret that the business is profitable Project Financing
Need Assessment of Project
12
private initiatives; and
• Not fully exploit the capacity of the
Capacity Building
within the framework agreement;
• Superimpose public process on
Project Development
BSD & Associates Chartered Accountant firm
….and what governments should not do
facilities and committed to bring
A warm welcome to our following new members:
business to grown in the state
Express Infrastructure Pvt.Ltd. Leasing, Construction and Malls
Raj Petro Specialities Pvt.Ltd. Manufacturer and exporter for petroleum speciality products
Satva Logistics Pvt. Ltd. Logistics Services
Walker Chandiok & Co. Chartered Accountant Firm
Winsar Infosoft Pvt Ltd. Software development
17
ECONOMIC REVIEW
Contents 1. Macroeconomy
1.1 Industrial Production in September 2011
1.2 Wholesale Prices of Primary Articles and Energy
1.3 Indirect Tax Revenue in October Drops by 2.5 percent
1.4 Trade Deficit Widens in October
2. Corporate Sector
2.1 Automobile Industry in Red
2.2 High input costs affects aviation sector
3. Global Developments
4.1 Emerging Economies are Seen as Saviors of Europe
4.2 Inflation in China Cools in October
4. Data Appendix
1. Macroeconomy 1.1 Growth in Industrial Production Further Slips
mining output and poor performance
As per the new series with base year
in
Electricity
2004-05, the IIP registered 1.9 per cent
generation grew at a healthy 9 percent.
growth in September as against 6.1 per
manufacturing
sector.
cent recorded during the same month
India’s industrial output further slowed down in September to 1.9 percent on
With this, the slump in industrial
of the previous year. Consequently, the
year on year basis. The growth rate for
production has continued for three
first half (April-September) of 2011-12
August too was revised downwards
consecutive months and this will make it
fiscal witnessed the cumulative growth
from 4.1 per cent to 3.6 percent,
further difficult to achieve the targeted 8
of IIP at 5.0 per cent as against 8.2 per
according to official figures released by
per cent economic growth in the current
cent during the corresponding period of
Central Statistical Organization (CSO)
fiscal. In July, the industrial output
the previous year.
on 11th November, 2011. Growth rate
growth slumped to 3.8 per cent. This
of industrial production has declined
was followed by 3.6 percent in August
Sector wise, the Mining output further
mainly because of negative growth in
and now 1.9 percent in September.
slumped by 5.6 per cent in September, registering -1.0 per cent cumulative
14
ECONOMIC REVIEW growth in the first six months of 2011-
posted the poorest growth during the
intermediate goods mere increased by
12. Manufacturing production also
month under review. Production of
1.4 percent. Production of Basic goods,
grew at a sluggish rate of 2.1 per cent in
capital goods declined by 6.8 percent
which comprises of nearly half the
September. Manufacturing sector which,
production growth as compared to 7.2
total weightage of IIP Index, showed
constitutes over three-fourths of the IIP
per cent during the same month last year.
somewhat decent growth rate of 4.5
index, registered cumulative a growth of
Capital goods production in the first six
percent compared to 3.5 per cent
5.4 per cent in April-September period.
months of the current fiscal increased by
during the last year.
On the other hand, Electricity output
mere 4.6 percent as compared to 16.4
continued to register a decent growth
percent during corresponding period in
To add to the above, production of
of 9.0 per cent during the month under
the previous year.
Consumer non-durable goods declined
review. The electricity sector registered a
by 1.3 per cent compared to 5.8 per
cumulative growth of 9.4 per cent so far
Output
in the current fiscal.
industries
of
intermediate
increased
by
goods
mere
cent in September last year. Growth in
1.5
the production of consumer durable
percent as compared to 4.6 per cent in
goods too has slowed down drastically.
As regards the use-based classification
September 2010. The first half of 2011-
Please refer Tables 1 and 2 for details.
of industries, capital goods industries
12 fiscal has seen the production of
Table 1
Index of Industrial Production (Sectoral, base 2004-05)
March
Mining
September Apr-Sep
2010- 2011- 4.3 7.2
Manufacturing
2011 2012 -5.6 -1
2010- 2011- 6.9 8.8
2011 2012 2.1 5.4
Electricity 2010- 2011- 4.3 7.2
2011 2012 -5.6 -1
General 2010- 2011- 6.9 8.8
2011 2012 2.1 5.4
Table 2
Index of Industrial Production (Use based, base 2004-05)
Month Basic Goods
Capital Goods
Intermediate Goods
Consumer Goods
2010- 2011- 2010- 2011- 2010- 2011- 2010- 2011 2012 2011 2012 2011- 2012 2011-
2011 2012
Consumer Durables
Consumer Non- durables
2010- 2011 2010- 2011 2011- 2012 2011 2012
September
3.5
4.5
7.2
-6.8
4.6
1.5
9.7
3.5
14.2
8.7
5.8
-1.3
Apr- Sep
4.7
6.9
16.4
4.6
8.4
1.4
9.1
4.5
15.9
5.2
3.8
3.8
15
ECONOMIC REVIEW Table 3
Wholesale Price Index and Rates of Inflation (Base Year 2004-05) Commodities /Major Groups/ Groups/ Sub- Groups Primary Articles
Weight
WPI
Latest Week over week
Year on year
52 week Average
Oct 29, 2010
2011- 2012
2010- 2011
2011- 2012
2010- 2011
2010- 2011
20112012
20.12
204.7
0.44
-0.15
10.26
8.65
16.71
11.43
13.86
Food Articles 14.34 Non- Food 4.26 Articles Fuel & Power 14.91
201.7 177.5
0.11 0.18
-0.25 0.17
9.73 10.76
12.62 -7.41
12.68 24.29
11.81 6.41
10.57 21.39
169.8
0.00
0.00
5.85
7.54
10.67
14.50
12.52
1.2 Wholesale Prices of Primary Articles and Energy
Build-up in overall inflation during the
provide a relief to consumers from the
week, financial year so far, and year on
hike in petrol prices that month. The cut
year growth rate is given in Table 3.
meant an annual loss of. 49,000 crore
indicated a state of no respite from
1.3 Indirect Tax Revenue in October Drops by 2.5 percent
hyper inflationary pressures to both
Indirect tax collections in October
percent increase to 2.01 lakh crore from
households
While
dropped by 2.5% to 30,278 crore. This
1.70 lakh crore during the corresponding
the price index of primary articles
was mainly attributed to the slowing
period in the last financial year. The
declined insignificantly by 0.1 percent
economy and cut in customs and
increase during the first seven months
over that week, the price index of
excise duties on petroleum products a
of the current fiscal was on account of
fuel & power remained unchanged.
few months ago. Indirect tax revenue
higher collections from customs, central
comprises
from
excise and service tax which rose by
Prices of food articles declined slightly
customs, excise and service taxes.
16.6 percent, 10.6 percent and 33.6
during the week mainly due to the
During October 2011, realisations from
percent respectively. This development
lesser rise in the prices of fish-inland,
customs dropped by 11.6 percent. The
confirms the fears of slow down and the
bajra, fruits and vegetables, moong and
central excise collections during the
need for the government to prune its
spices. At the same time, prices of gram,
same month dropped 5.3 percent. On
non-development expenditure.
egg, marine fish, ragi and chicken
the other hand, service tax collections
along with others have moved up.
during the month rose by 18.4 percent.
The wholesale price index (WPI) for the week ended on 29th October 2011
16
Build up form end March
and
Corporates.
revenues
raised
to the central exchequer. However, if we consider the 2011-12 fiscal so far, the indirect tax collection showed 17.8
In June, the government had slashed
1.4 Trade Deficit Widens in October
customs and central excise duties to
India’s exports growth slumped in
ECONOMIC REVIEW October, as demand slackened from the
Further, the current account deficit is
the
developed markets. Exports grew 12.4
likely to be about 3 percent of GDP. The
Manufacturers. However, truck and
percent to $19.9 billion in October from
debt crisis in the
bus sales held up, rising 19% to 61,800
a year ago, much slower than 36.5%
European Union has started resulting
vehicles, helped by robust demand for
in September and 52 percent in
in lower demand from the zone. Export
vehicles from Tata Motors and Ashok
the
The
of electronic goods, which go mostly to
Leyland.
slowdown was across the board.
the region, dropped 18 percent drop in
April-September
period.
October.
over the same period of the previous fiscal.
Indian
Automobile
for the current financial year to between
2. Corporate Sector
2 and 4% from an initial forecast of 16-
representing 46% growth, while imports stood at $273.5 billion, increasing 31%
of
SIAM has cut its sales growth forecast
Exports in the first seven months of the fiscal came in at $179.8 billion,
Society
18%. “Demand for petrol cars has been
2.1 Automobile Industry in Red
hit hard. Though customers are keen to purchase diesel cars, production is
Passenger car sales in India fell 23.8
a major constraint,” Mathur said. The
While exports in the remaining months
percent in October on year over year
automobile market relies heavily on
of the fiscal are expected to be relatively
basis.
monthly
demand from the middle class whose
low, compared with the high growth
percentage decline since December
ranks have been growing. The Reserve
phase in the first half of the fiscal, high
2000. Rising interest rates and fuel costs,
Bank of India increased interest rates
global oil prices and fertilizer imports
coupled with the fallout of the strike
by 25 basis points last month, making
will check a sharp slowdown in imports,
at Maruti-Suzuki, India’s largest car
it more expensive to take loans to buy
putting pressure on the country’s
manufacturer, drove down sales for a
cars.
current account deficit and balance of
fourth consecutive month. The two-
payments.
wheeler
major
“Traditionally sales get a boost in the
As a direct result, trade deficit for
barometer of consumer sentiment, also
festival season, but this year the general
October 2011 remained high as exports
stalled, posting a marginal monthly
weak
stood at $19.6 billion, while imports
increase of just 2 percent in October.
spoilsport with the market. We don’t
This
is
thebiggest
segment,
another
increased 36.7 percent to $39.5 billion.
customer
sentiment
played
expect any major upswing in the near
The country’s trade deficit climbed
“The auto industry is facing the double
future as uncertain macro economic
to $93.7 billion in the April-October
whammy of high interest rates and
environment will continue to affect the
period, against $72 billion in the year-
rising fuel prices. For any recovery to
industry,” said Hyundai Motor India
ago period. At this rate, India’s annual
happen, interest rates have to come
source. The strike at Maruti during the
trade deficit is expected to reach $150
down and fuel prices need to cool,” said
festival season also proved to be an
billion.
Vishnu
impediment. The company’s profits
Mathur,
director-general
of
17
ECONOMIC REVIEW dipped by up to 60% for the quarter
airlines and Spice Jet has all posted
ended September. Thecompany posted
heavy losses in the July-September 2011
a 55% drop in production to 50,487 cars
quarter. Leaving apart the infamous
last month, pulling down the growth
mismanagement
rate for the industry.
government bailouts of the public sector
and
repeated
3. Global Developments 4.1 Emerging Economies are Seen as Saviors of Europe
airliner ‘Air India’s’ case, the financial
2.2 High Input Costs Affects Aviation Sector
difficulties faced by the Kingfisher airlines
Christine Lagarde, the head of the
and the poor results posted by the Jet
International Monetary Fund, told a
Increasing fuel prices, unfavourable
airlines and Spice Jet presently needs
financial forum in Beijing that European
currency movements, rising interest
policy attention. The industry, mainly
plans to bolster a rescue package
rates, geopolitical uncertainty at the
owing to slower demand growth, low
for Greece were a “step in the right
macro level have affected the civil
degree of pricing power coupled with
direction”,but that the outlook for the
aviation industry in India. Apart from
diversion of resources have registered
world economy remained dangerous
the ailing public sector Air India, the
financial losses.
and uncertain. Advanced economies
Kingfisher Airlines followed by Jet
have a “special responsibility” to restore
4. Data Appendix Latest Financial Information Item
Oct. 28, 2011
Nov. 4, 2011 #
Percentage Change
Deposits of Scheduled Commercial
350870
341527
-2.7
1390514
1378936
-0.8
36153
52063
44.0
3745
870
-76.8
Banks with RBI (Rs.Crore) Foreign Currency Assets of RBI (Rs.Crore) Advances of RBI to the Central Government (Rs.Crore) Advances of RBI to the Scheduled Commercial Banks (Rs.Crore)
BSE Sensitive Index and NSE Nifty Index of Ordinary Share Prices
18
Index
Oct. 28, 2011
Nov. 4, 2011 #
Percentage Change
BSE SENSEX (1978-79=100)
17593.7
17192.8
-2.3
S & P CNX NIFTY (3.11.1995=1000)
5292.3
5168.9
-2.3
confidence and lift growth, while China
in the past week, is in the form of
vehicle, preferring to contribute via the
should boost consumption and allow
the European Union boosting the
IMF.
its currency to rise.
European
Financial
Stability
Fund
present €440 billion.
4.2 Inflation in China Cools in October
advanced economies and particularly so
Also, the policymakers are hopeful that
China’s annual inflation rate fell sharply
in the European Union and the United
big emerging economies, led by China,
in October to 5.5 percent in a further
States,” Lagarde said. “Our sense is that
will invest some of their vast foreign
pullback from July’s three-year peak,
if we do not act boldly and if we do not
exchange reserves to help end the debt
giving Beijing more room to fine-tune
act together, the economy around the
crisis.
policy to help an economy feeling
(EFSF) to around 1 trillion euros from its “There are clearly clouds on the horizon. Clouds on the horizon particularly in the
world runs the risk of downward spiral
the chill of a global slowdown.
of uncertainty, financial instability and
But there is scepticism in emerging
Other data, including figures showing
potential collapse of global demand...
economies, where public opinion is
industrial output in October grew
we could run the risk of what some
firmly against bailing out countries that
at its weakest annual pace in a year,
commentators are already calling the
still enjoy far higher average incomes.
provided the latest evidence of a
lost decade.”
Also, emerging economies including
modest slowdown in the world’s
China opine that European plans are
second-biggest economy.
The “lost decade” reference carries echoes
of
Japan’s
experience
“not complete and not firm”.
of
Industrial output rose in October by
persistent deflation, mounting debts
The lack of political will in Europe and
13.2 percent from a year earlier, slightly
and economic impotence through
a lack of coordination between EU
below expectations for a 13.4% rise and
the 1990s and beyond after its real
members is also seen as other hurdles.
the weakest pace since October 2010,
estate bubble burst — an outcome
suggesting factories were bearing the
many analysts fear could be repeated
Before arriving in Beijing, Lagarde had
brunt of the economic slowdown.
given the debt and property origins of
spent two days in Moscow, trying to
Europe’s problems.
convince Russia to chip in some of its
Inflation fell from 6.1 percent in
petro dollars to boost bailout funds for
September and marked the third
The solution for the ongoing public
the euro zone. But the so-called BRIC
straight decline since a peak of 6.5% in
debt crisis in Europe, which has seen
nations, comprising Brazil, Russia, India
July, bolstering expectations that price
the prime ministers of Greece and Italy
and China, have so far been reluctant
pressures were on a solid downtrend.
forced to announce plan to resign
to invest directly in Europe’s rescue
19
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