Indian Economy: Growth -2

[Guest]

http://ia.rediff.com/money/2006/feb/09im...&file=.htm

Now this argument will be repeated ad-nauseum until everybody talks about "multiple Indias". Watch out for Vir Sanghvi types flaunt this report in his next lifafa piece.

[Guest]

The growth of the Indian economy has been quite good during the last few years. Today, India is much talked about in the world capitals as one of the fastest growing economies in the world. The quantum of Foreign Direct Investment has also increased steadily over the years. So is the came with the growth of Indian exports and the presence of the service sector is also noticeable in all the USA as well as in the EU.
Therefore, the normal expectation should have been that the poverty level amongst the poor people of India must have got drastically reduced. However , that has not been possible and a sizable section of the general population continues to be below the poverty line. India continues to be the home for the largest number of under nourished children..
The main reason has been that the fruits of India’s economic development has not reached the masses in the extent it should had been due to a variety of reasons. Let us hope that this year’s budget will prove more funds to improve the basic infrastructure like health and education facilities for the rural poor and housing for the urban slum dwellers.

[Guest]

According to planning commission..

Rural
SCs STs All-population
1993-94 48.11 51.94 37.27
1999-00 36.25 45.86 27.11

Urban
SCs STs All-Population
49.48 41.14 32.36
38.47 34.75 23.65

The idea that the aam-aadmi is not benefitting is a myth.

[Guest]

No it is not a myth. But the speed needs to be accelerated particularly when the litracy rate of the nation remains at 65 percent.

[Guest]

Even the literacy rate has changed from close to 50% in 91 to 65% in 2001 census.

[Guest]

Yes there has been improvement in the figures in all parameters since 15th August 1947. The point I am trying to convey is that the distribution of the fruits of our nation’s development needs to be distributed more equitably. The rural economy and infrastructure in certain parts of the country still needs the attention .We are moving in the right direction but some of the programes need more fine tuning. Secondly, political instability in some of the States and the associated high level of corruption are major limitations in the effective implementation of a number of projects.
If we can attract more private investment in the food processing industry, perhaps it may generate more employment in the rural sector.

Incidentally, while India is trying to attract foreign direct investment for its economic growth, it is at the same time going out to make investments abroad. I just came across some interesting data in the IHT which may be of interest to other members of the forum.
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(1)Year (2)Deal Value(in million $)(3)No of Foreign acquisitions by Indian Companies (4)Average deal size

(1) (2) (3) (4)
2005 3,696 134 27.6
2004 1,532 51 30
2003 852 50 17
2002 1,005 29 34.7
2001 384 32 12


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[Guest]

Indian population is huge, even India is showing big gain for last 6-7 years but its still little comparitive to population growth and no of people below poverty. To make difference India need 15+ pc growth rate for 10 years to see sea change difference. With below 10pc it will take time.
Overall its is improving, in 70s less than 30pc of population was using soap.

[Guest]

The latest views of IMF expert on Indian economy>
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<b>Opening Remarks by Wanda Tseng, Deputy Director, Asia and Pacific Department, in a Conference Call with Journalists on the Completion of the 2005 Article IV Review of the India Economy
Washington, D.C.
February 21, 2006

Thank you very much for attending this event. The IMF's annual consultation with India was concluded on February 6. The Public Information Notice, along with the staff report and a set of background papers will be available on the IMF website later this morning. This is the second-consecutive year that the full set of staff papers are available to a wide audience, and we would like to highlight the key issues in this year's discussions.

This is a time of great optimism about India, both within the country and internationally. Growth is set to exceed 7½ percent for a third consecutive year in 2005/06; we expect some moderation in this year to about 7 percent in 2006/07. And India is increasingly opening its economy and reaping the benefits of globalization. The IMF focused its discussions with India this year on how to ensure that that the growth momentum can be sustained, and even accelerated, over the longer term and how to manage short-term risks associated with the rapid growth. Let me highlight a few points:

First, while India appears poised to grow rapidly in the future, such an outcome is by no means assured. One of the critical challenges facing India is how to further develop manufacturing in order to create jobs for the more than 100 million people set to join the labor force in the next decade. To do so, India needs to enhance its integration with the global economy, by continuing to lower trade tariffs, loosen sectoral limits on foreign direct investment, improve the business climate, make more flexible its labor laws, and eliminate reservation of production to the small-scale sector. What we highlighted in this year's discussions is that moving faster on these longstanding reforms in the current environment of optimism will have large pay-offs.

Also critical to sustaining and raising growth are ongoing efforts to improve India's economic infrastructure. A number of positive steps have been taken in this regard, including the recent decision to award concessions for the modernization of Delhi and Mumbai airports. Further progress in closing India's infrastructure gap will depend on creating a regulatory environment conducive to private participation and on freeing up fiscal resources where public provision of infrastructure is needed.

Second, the upcoming 2006/07 budget presents an opportunity for the government to make a strong statement about its intentions to accelerate fiscal adjustment and to do so in a way that supports growth. Continued tax reform will be critical if the government is to achieve its deficit targets and raise spending on much-needed infrastructure and social services. The introduction of the state VAT and the broadening of the services tax base last year were important, but further tax base broadening is needed. There are several options available, such as broadening the corporate income tax base, especially by trimming existing exemptions, and reforming the personal income tax. More can also be done to promote greater spending efficiency, especially by improved targeting of subsidies to the most needy. The current positive economic environment presents an excellent opportunity to make these plans a reality.

Third, while inflation has remained contained, underlying pressures point to upside risks. Domestic demand remains strong, as evidenced by a widening trade deficit and rapid credit growth. And India still needs to pass-through more of the rise in the past year in global oil prices. In this light, monetary policy should remain focused on keeping inflation expectations in check. The Reserve Bank of India is rightly focused on monitoring inflationary pressures closely. Fiscal policy can also help counter demand pressures, pointing to the importance of presenting a prudent budget for next year.</b>
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[Naresh]

<b>Finland bars Ranbaxy generic drug</b>

NEW DELHI: In another setback to India's biggest drugmaker Ranbaxy Laboratories Ltd, a court in Finland has prohibited it from marketing its generic version of Pfizer's cholesterol lowering drug Lipitor in the country.

The Helsinki Court of Appeal in Finland had granted a preliminary injunction against Ranbaxy Laboratories Ltd. prohibiting it from marketing a generic version of Lipitor.

The ruling involves Pfizer's patent (FI94958) that covers processes and intermediate compounds used to make atorvastain, the active ingredient in Lipitor.

"This decision is another significant milestone in our defense of Lipitor patents around the world," Pfizer Vice-Chairman and General Counsel Jeffrey Kindler in a statement on the company's website.

"It's also an important outcome for Pfizer and other medical innovators who invest in high-risk research to develop life-saving medicines for millions of patients," he added.

When contacted, Ranbaxy officials here declined to make a comment on the ruling, stating: "We are yet to read the details of the ruling and are not in a position to say anything."

The decision of the Helsinki court reverses an earlier lower court ruling and is subject to a possible appeal to the Finnish Supreme Court.

It will remain in place during further judicial proceedings including a full patent infringement trial that has not yet been scheduled. The patent expires in February, 2009.

This is the latest in a series of litigation between Ranbaxy and Pfizer on patent infringement over Lipitor in various markets, including US and UK.

Cheers <!--emo&:beer--><img src='style_emoticons/<#EMO_DIR#>/cheers.gif' border='0' style='vertical-align:middle' alt='cheers.gif' /><!--endemo-->

[Guest]

<b>Around Asia's Markets: From gold to sugar - India rises in futures</b><!--QuoteBegin-->QUOTE<!--QuoteEBegin--><b>Average daily trading in India's 25 commodities exchanges this fiscal year probably will more than triple to $1.48 billion, from $445 million a year earlier, said S. Sundareshan, chairman of the Forward Markets Commission, the market regulator in Mumbai. Trading on the National Stock Exchange and the Mumbai Stock Exchange has risen 35 percent to $2.6 billion daily</b>.

The commodities boom has prompted the government to promise access to overseas investors, who can trade futures only through local companies. To get a share of the business, the London- based Man Group acquired a local brokerage firm, while Fidelity International, a unit of the world's biggest money manager, bought 9 percent of an exchange.

"This is the right time to be in India," said Adam Leetham, a sugar trader at C. Czarnikow Sugar (India) in Gurgaon, near New Delhi, which has traded since 1861. "It's a question of the government letting go and letting the markets have a go."

India is the second-biggest producer of sugar and rice, after Brazil and China, respectively, and trades futures in more than 80 commodities. It is the biggest user of gold and is home to the world's third-largest bullion bourse after exchanges in London and New York.

<b>"India represents 30 percent of the world demand for gold," said Yingxi Yu, a precious metals analyst at Barclays Capital in London. "A futures market that is open could serve as a better indication of demand from Indian consumers and also increase consumer interest in the metal."</b>

A more open market would lead to increased trading, which in turn would mean more commissions for brokers. Trading on the London Metal Exchange increased 9.4 percent last year to a record 78.6 million futures and options. The exchange estimates the annual value of the contracts is about $4.5 trillion.

Man Group in November agreed to buy Refco's 70 percent stake in its Indian unit after Refco filed for bankruptcy. The unit controlled about 1.5 percent of the daily trading on Multi Commodity Exchange of India and National Commodity & Derivatives Exchange.

Exchanges are pushing to open the markets to overseas traders and investors this year. The government has responded with a plan to allow foreign institutional investors and mutual funds to trade oil and gold only. Sundareshan at the futures commission said in an interview last week that final approval could be forthcoming "in the next few months."

Agricultural futures that trade around the world also should be included because they are commodities that have a "global benchmark," said Jignesh Shah, managing director of Multi Commodity Exchange in Mumbai. "The recommendation is to go for commodities such as soy and cotton, which you can benchmark against global prices."

<b>India is the largest consumer of sugar, putting the country in a position to wrest the global benchmark price for refined sugar from London.</b>

The rise of India's commodities futures markets has been helped by a global increase in prices of everything from oil to metals to farm products, led by demand from China.

"Everybody says, 'China, China, China,'" said Shah. "But in history, it used to be 'India, India, India.' The basis for India has been as a trading hub in the last century. This has re- emerged in the modern form as futures trading."

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[Guest]

<b>Time for Robust India Taiwan Economic Partnership</b>

By: Mukul Asher

TinyURL: http://tinyurl.com/lcx3s

[Guest]

Prediction of India's Economic Growth:-
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ECONOMY PROJECTED TO GROW AT 8.1% IN 2005-06


INDUSTRY AND SERVICES PROPEL OVERALL GROWTH



BETTER PRODUCTIVITY IN EXPENDITURE, DEEPENING THE REFORM PROCESS STRESSED

New Delhi: Phalguna 8, 1927

February 27, 2006
In a robust demonstration of its nascent strength, the Indian economy, after growing at 8.5 per cent and 7.5 per cent in the two previous years, is projected to grow at 8.1 per cent in the current year 2005-06. Some significant dimensions of the dynamic growth in recent years are: a new industrial resurgence; a pick up in investment; modest inflation in spite of spiraling global crude prices; rapid growth in exports and imports with a widening of the current account deficit; laying of some institutional foundations for faster development of physical infrastructure; progress in fiscal consolidation; and the launching of the National Rural Employment Guarantee (NREG) Scheme for inclusive growth and social security.

According to the Economic Survey for 2005-06 presented by the Finance Minister, Shri P. Chidambaram in Parliament today, the growth trend for the last three years appears to indicate the beginning of a new phase of cyclical upswing in the economy from 2003-04. The initial momentum to this new phase of expansion, in 2003-04, was provided by agriculture, though in later years performance of this sector remained subdued. In contrast, industry and services have continued to expand steadily. These sectors have acted as the twin engines propelling overall growth of the economy.

Overall industrial recovery that commenced from the second quarter of 2002-03 continues. After an acceleration of growth of industrial GDP at constant 1999-2000 prices from 7.0 per cent in 2002-03 to 7.6 per cent and 8.6 per cent in the next two years, the industrial resurgence is manifest in the projected step up in its growth to 9.0 per cent in the current year. Industrial growth is driven by robust performances from manufacturing and construction sectors. Substantive commercial bank credit flows to the housing and real estate and retail sectors continue to provide support to the boom in construction and consumer durables.



Services sector growth continued to be broad-based. Among the sub-sectors of services, ‘trade, hotels, transport and communication services’ continued to lead by growing at double-digit rates for the third successive year. Impressive progress in expanding railway passenger network and production of commercial vehicles, and fast addition to existing stock of telephone connections, particularly mobiles, played key roles in such growth. Growth in financial services (comprising banking, insurance and real estate services) also maintained the momentum with progressive maturing of Indian financial markets and the ongoing construction boom.

A pick-up in investment, reflecting the high business optimism, not only strengthened industrial performance but also reinforced the growth outlook itself. The rally in gross domestic capital formation (GDCF) that had commenced in 2002-03 continued and as a proportion of GDP it reached a high of 30.1 per cent in 2004-05. Stock market index returns of 11 per cent in 2004 followed by 36 per cent in 2005 provide a good measure of investor sentiments.



The increasing trend in gross domestic savings, which provided most of the resources for investment, as a proportion of GDP observed since 2001-02 continued with the savings ratio rising from 26.5 per cent in 2002-03 to 28.9 per cent in 2003-04 and further to 29.1 per cent in 2004-05.

Bank credit disbursal during 2004-05 was well diversified across different sectors of the economy, with flows to housing and retail sector particularly strong and a substantial pick up in flows to agriculture. Total outstanding credit to priority sectors on March 31, 2005 was Rs. 3, 45,627 crore. Credit to small-scale industries increased from Rs 76,114 crore at end-March 2005 to Rs. 78,780 crore at end-October, 2005.

From 1993-94 to 2003-04, net capital stock in industries (comprising mining, manufacturing and electricity sectors, and at constant prices), which proxies capacity addition, increased at an average rate of 6.7 per cent per annum.

The virtuous expansion in the current phase of economic upturn has been maintained without an undue escalation of domestic prices. Inflation measured by a point-to-point increase in the Wholesale Price Index (WPI) declined from 5.7 per cent on April 2, 2005, to a low of 3.3 per cent on August 27, 2005. Despite increasing thereafter, prices have remained at comfortable levels with the WPI-inflation at 4.1 per cent on February 4, 2006 vis-à-vis 5.0 per cent on February 5, 2005. Price stability was maintained despite an increase of 44.5 per cent in average headline world price of Indian basket of crude petroleum from US$37.3 per barrel in April-November 2004 to US$53.9 per barrel in April-November 2005, and US$58.10 per barrel on February 13, 2005.

In a marked departure from the trend observed in recent years, the pace of accretion to foreign exchange reserves has slowed sharply during the current year so far. Until February 10, 2006, there was a reduction of US$1.1 billion from the end-March 2005 level of US$141.5 billion of foreign exchange reserves. Three key factors were instrumental behind this turnaround: an outgo of US$7.1 billion on IMD redemption; valuation losses from a weakened dollar vis-à-vis other major currencies; and a widening deficit in the current account of the balance of payments (BOP).

During 2004-05, the Rupee had appreciated against the US dollar (2.2 per cent) in nominal terms, while depreciating against the Euro (-4.5 per cent), Pound (-6.3 per cent), and the Japanese Yen (-2.6 per cent). However, in the first ten months of 2005-06, on average, the Rupee has strengthened against all major currencies.

The embryonic deficit in the current account of the BOP, which emerged in 2004-05 after three consecutive years of surpluses, has assumed much larger dimensions during the current year. During April-September 2005-06, the current account deficit enlarged to around US$13.0 billion. While net invisibles continued to rise, it was not enough to neutralize the rapidly expanding trade deficit, which at US$31.6 billion during April-September 2005-06 was only around US$5.0 billion less than that recorded in twelve months of 2004-05. While the surge ahead in merchandise exports observed since 2002-03 continued, such growth was surpassed by an even faster rise in merchandise imports. The heavy demand for imports arising from increasing buoyancy and robustness of Indian industry may have led to a sustained rise in growth of merchandise imports.

During April-September 2005, foreign investment flows at US$7.4 billion were nearly US$5.0 billion higher than such flows of US$2.5 billion in the first half of 2004-05. Within foreign investment, portfolio flows, comprising mainly foreign institutional investor (FII) investment, were the dominant variety. At US$4.2 billion during April-September 2005, FII flows (net) were higher than not only the FDI flows of US$2.3 billion, but also the FII flows of US$339 million in April-September 2004.

Infrastructural inadequacies continued to constrain the full potential for industrial resurgence, pick up in investment and buoyant exports. The growth of power generation in April-December 2005 at 4.7 per cent was lower than not only the annual target but also the 6.5 per cent achieved in the same period of the previous year. In the first three quarters of the current financial year, the overall index of six core industries – coal, electricity, crude petroleum, refinery throughput, steel, and cement – having a direct bearing on infrastructure, registered a growth of 4.5 per cent, relative to the 6.4 per cent registered during April-December, 2004.

Overall investment in infrastructure continued to remain far below the requirement, and net capital stock, for example, in electricity, gas and water supply grew at a compound annual rate of 3.7 per cent between 1993-94 and 2003-04. The recently introduced public-private partnership (PPP) model had limited success in the area of electricity and mining, and the dominance of the public sector continued.

Indications are that the slower progress in fiscal consolidation at the Centre in the current year may be made up by faster progress on this front by the State Governments and result in an overall improvement in the financial health of the General Government, that is the Centre and the States combined. Buoyant revenues in the States and significant improvement in the combined fiscal position of States in 2004-05 (RE) indicate that the process of deepening of the fiscal reforms and restructuring of public finances as envisaged by the Tenth Finance Commission (TFC) have had a head start.

Total foodgrains production is projected to increase by 2.3 per cent from 204.6 MT in 2004-05 to 209.3 MT in 2005-06. The decline in the kharif output of coarse cereals since 2003-04 is expected to continue in the current year.

The pick up in industrial output observed since the second quarter of 2003-04 has continued. As per the index of industrial production (IIP), during the period April-December, 2005, growth was 7.8 per cent compared to a growth of 8.6 per cent in the corresponding period of 2004. The current year has been characterised by vigorous growth of manufacturing. Within manufacturing, a faster growth of the capital goods sector at 15.7 per cent in April-December 2005 relative to the growth in 13.8 per cent in the corresponding period of the previous year provided strong corroborative evidence on the investment rally in the economy. Consumer goods, both the durables and non-durables segments, recorded improved performance with double-digit growth in the last two years. Performance of 17 industries at the two-digit level during April-December 2005 underlined a fairly broad-based pattern of growth within manufacturing. Seven industries, accounting for almost 34 per cent of the total weight in IIP, grew at more than 10 per cent.

India’s relative global ranking on Human Development Index has remained at a low of 127 among 177 countries for three years in a row. In areas of education and health, there are some indications of progress, albeit slow. For example, between 1991-95 to 2001-06, life expectancy at birth is estimated to have improved from 59.7 years to 63.9 years for males and from 60.9 years to 66.9 years for females. Similarly, in education, gross enrolment ratio – the proportion of children in the 6-14 years age group actually enrolled in elementary schools – is estimated to have increased progressively from 32.1 in 1950-51 to 82.4 in 2001-02 and further to 84.9 in 2003-04.

While the results of the 61st round of the large-scale NSSO survey conducted during 2004-2005 are still awaited, the annual thin-sample surveys available for the period beyond 1999-2000 point towards a continued reduction in the incidence of poverty.





Issues and Priorities

The encouraging signs of a pick up in investment and acceleration in growth pointed out by the last Survey have strengthened in 2005-06. The odds, however, are loaded heavily in favour of a continuation of the growth momentum observed in the last three years. A virtuous cycle of growth and savings, that appears to be already underway, is likely to continue for some years to come. Household savings rate will increase with accelerating income growth, particularly with the reinforcement of benign demographic dynamics. The investment rate in the Indian economy is likely to rise with rising domestic savings rate in the years to come.

The ‘demographic dividend’ will also pay off in terms of a larger and younger labour force gainfully employed in production, and generating a larger national income, particularly in a world where many countries are transiting to ageing societies. The multi-pronged challenge lies in providing an appropriate policy framework to harness the dormant talent pool of Indian work-force and entrepreneurs to position the economy on a sustained high-growth trajectory.

Speedy provision of quality infrastructure through appropriate policy stimulus constitutes the first and foremost component of this challenge. India’s growth prospects are intricately intertwined with the rapid development of physical infrastructure such as power, roads, ports, and airports, and efficient delivery of such services. A reversal of the slowdown in the mining sector, particularly coal, is critical in this context.

The total investment required in infrastructure is enormous. The Committee on Infrastructure, headed by the Prime Minister, has estimated the investment requirements as: Rs. 1,72,000 crore in the National Highways sector by 2012; Rs. 40,000 crore for Airports by 2010; and Rs. 50,000 crore for Ports by 2012. A substantial share of this investment is expected to come from the private sector. It is important that the India Infrastructure Finance Company Limited (IIFCL), incorporated on January 5, 2006, not only becomes operational but starts lending funds, especially debt of longer term maturity, directly to the eligible projects to supplement other resources from banks and financial institutions from an early date.

Policies and institutions need to be geared up to meet the specific requirements of the infrastructure sectors in India. A well-defined regulatory architecture has to be in place, to increase the comfort level of the different players in the market. Issues of span of control, and conflicting domains need to be delineated and fleshed out. For example, an energy regulator, cutting across line ministries, needs to be in harness to tap the synergy of the different sectors. The need for faster consolidation as per the Fiscal Responsibility and Budget Management Act (FRBMA) to open up fiscal space for higher outlays on infrastructure, both physical and social, continues.

In the aftermath of the implementation of the Fifth Pay Commission's recommendations, the general government's fiscal deficit had increased in each of the five years to reach a peak of 9.9 per cent in 2001-02. With the announcement of the impending constitution of the Sixth Pay Commission, there is need to exercise caution to avoid a repetition of a similar deterioration in the medium term.

While significant progress has been made in the rationalisation of duties, reduction in the rates of taxes and other reforms, including procedural, the reform of the tax system still remains an unfinished task. The process of simplification and digitization of tax administration, which has been initiated, remains a pre-requisite for a transparent and hassle-free tax system.

In the context of public finance, appropriate pricing of petroleum products assumes significance, particularly with the petroleum-marketing sector dominated by public sector oil companies. With medium-term prospects of crude prices remaining high, the continuance of incomplete pass-throughs is not sustainable without serious consequences to the financial health of oil companies and the exchequer. Besides, the perverse incentives for fuel switching and distortions arising from differential tax rates need to be addressed.

If efficiently implemented, NREGS will decisively address the unemployment situation in the rural areas and change the poverty scenario in the country in a tangible manner. The choice of projects under the scheme is also crucial to ensure that need based and good quality assets and infrastructure are created in the rural areas. With the NREGS serving as a broad based safety net, the entire gamut of expenditure based on anti-poverty initiatives need to be revisited.

Wage employment programmes to provide employment on a day-to-day basis must get transformed to creation of permanent and quality jobs in the growth sectors and productive processes of the economy. It is in this context that labour reforms to accelerate investment, particularly in industry and export-oriented sectors, remain an unfinished important agenda. Furthermore, there is need to vigorously pursue the development of the small and medium enterprises (SMEs) by facilitating provision of adequate bank credit and of clusters with adequate infrastructure; and through removal of limitations of scale by rapid removal of items from the ambit of small-scale reservation. There is a need for a paradigm shift to encourage the banks to look at provision of credit to SME and agriculture more as an opportunity for profit rather than as a social obligation under directed subsidised credit.

The Survey calls for a shift in emphasis and focuses attention on the quality of outcome of the various social sector programmes dealing with health and education rather than their quantity or mere coverage.

While the worry about rapidly growing imports and the burgeoning current account deficit appears to be somewhat misplaced, the possible risks to an otherwise rosy outlook arise from: inflation; interest rate; and fiscal stance. In a capital-scarce economy like India, a current account surplus is symptomatic of insufficient investment. There is clear need to enhance investment. Higher investment is likely to result in higher imports of basic, intermediate and capital goods and trade and current account deficit. Such a deficit, however, is unlikely to pose a balance of payments problem as the commodity composition of non-oil imports, with the exception of gold and silver, is biased in favour of capital and other essential inputs and is likely to add to the export momentum in the future.

High and volatile international petroleum prices impart an element of uncertainty in the inflation outlook not only for India but also the world economy. With increasing dependence on imported crude and growing openness, India is no longer insulated from the rest of the world in price developments. This inflation uncertainty, together with the unresolved global macroeconomic imbalances, casts its shadow on the interest rate scenario. A continued firming up of global interest rates beyond a point poses the risk of dampening the domestic investment boom. The fiscal risk, both at the Central and State levels, arise from the argument that the fiscal adjustment process in India has led to expenditure compression of the wrong kind. It is important to safeguard against this argument as the solution lies in not increasing the deficits, but in meeting squarely the challenge of improving the quality of expenditure. Expansionary fiscal policies of the past have resulted in the present expenditure profile and any solution for correction of the same through higher fiscal deficit is reductionism. The journey for sustained economic growth and stability is a long one and quick fix solutions for higher fiscal deficit to temporarily prop up growth through expansionary policies, albeit in increasing productive capacity, would prove to be counterproductive. Instead, there is much scope for better productivity in expenditure and greater growth dividend through deepening the reform process that could harness higher savings and investment.
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[Guest]

<span style='font-family:Courier'><!--emo&:clapping--><img src='style_emoticons/<#EMO_DIR#>/clap.gif' border='0' style='vertical-align:middle' alt='clap.gif' /><!--endemo--> Dateline Washington
‘India doesn’t need US help to become world power’
by Ashish Kumar Sen




Richard Celeste


Mr Richard Celeste served as the U.S. Ambassador in New Delhi at the time of President Bill Clinton’s visit to India in March, 2000. The trip, the first by a U.S. President in over two decades, marked an upswing in U.S.-India relations.

Mr Celeste, who currently serves as President of Colorado College, and his wife Jacqueline Lundquist, forged their own special bonds with India. On the eve of U.S. President George W. Bush’s visit to India, Mr. Celeste discusses the transformation of the U.S.-India relationship and some of the challenges ahead in an interview.

Excerpts:

Q. In what way has the U.S.-India relationship evolved since President Clinton’s visit to India?

A: President Clinton’s visit was historic — the first [to India] by a U.S. President in 22 years. Staying five days and travelling well beyond the official venues in Delhi, Clinton captured the imagination and affection of ordinary Indians. In his remarkable speech in the Central Hall of Parliament, Clinton laid out the framework for an emerging partnership — one welcomed and strengthened by Prime Minister [Atal Bihari] Vajpayee on his reciprocal visit to the U.S. in September, 2000.

Q. Some analysts describe President Clinton and his administration as pioneers of the new U.S.-India relationship. Could you describe the role you played in this change and the challenges you faced?

A: I worked hard to keep a high-level dialogue going between our two nations in the difficult aftermath of India’s decision to declare and demonstrate its nuclear capability.

Q. What expectations do you have from President Bush’s visit to India?

A: I believe that President Bush is every bit as committed to a strong relationship between the United States and India as President Clinton was. He has recognised the importance of our cooperation in fighting global terrorism; he has been a powerful advocate for reopening and expanding high-tech collaboration between our nations, including the arena of civilian nuclear energy; he will promote more open markets and expanded cooperation in science (especially health care) and education.

Q. The U.S. and India are now hailed as natural allies. What in your opinion was the turning point in this relationship?

A: Certainly the end of the Cold War and India’s decision to open its economy to global markets were important enabling factors. I would cite two more recent factors that mark late 1999 and early 2000 as the turning point in my mind.

One factor was political leadership-the Vajpayee speech to the Asia Society in September 1999 when he first referred to our two nations as “natural allies” (to the surprise of many, remember) and then the Clinton visit in March 2000.

The other factor is the Y2K crisis that obliged business leaders in the U.S. to scour the world for IT skills and introduced India’s enormously talented manpower to our business leaders. Today the 24/7 bond between companies in the US and service providers in India is the stuff of books and myth-making.

Q. Secretary of State Condoleezza Rice has said the Bush administration wants to help turn India into a “major world power in the 21st century.” Why does India matter to the U.S.?

A: India does not need our “help” to become a major world power: that is bound to happen and the only question is how soon. The fact is that the political and economic systems of our nations are complementary in many ways. We need to explore them and expand them in ways that benefit the people of both lands.

India and the U.S. have deep intellectual ties, nurtured by several generations of scientific collaboration. We have deep genetic ties with over two million Americans of Indian origin who have assumed leadership roles in every profession and even every level of political life. We have shared strategic interests - particularly in fighting terrorists who have repeatedly threatened both countries.

Q. To what extent is the threat of China responsible for the closer relationship between the U.S. and India?

A: I do not think the leaders of the United States or of India see China as a “threat.” I do think that we see China as a challenge. Part of that challenge is how China transforms itself into a modern democratic state, because without that its growing market economy is going to generate social stresses that may explode.

In India, those stresses simply lead to an election defeat for the incumbents. The other part of the challenge is how China resolves disputes along its borders. This directly impacts India, of course. But it also impacts the U.S. because of our historic relationship with Taiwan.

Q. What are some of the areas in which India and the U.S. can continue to build on their relationship?

A: Clearly there is a great opportunity for India to encourage more foreign direct investment, especially in retail, real estate and infrastructure. We should nurture robust collaborations in science and technology-and I would put health care, nanotechnology, alternative energy and information security at the top of the list.

Q. What are some of the challenges that face the U.S.-India relationship?

A: We need to find a way to cooperate in curbing nuclear proliferation, and preventing rogue states or terrorist groups from obtaining weapons of mass destruction. We need to protect each other’s intellectual property in an age where that will drive commercial value. We need to invest in trade and development strategies that spread the fruits of economic growth more broadly to those at the margins of both societies. </span>

[Guest]

<!--QuoteBegin-->QUOTE<!--QuoteEBegin--><b>Rs 72,000 crore! </b>
Pioneer.com
Amit Goel / New Delhi
That's the additional tax burden on aam aadmi----- An increase of Rs 72,000 crore in tax collections in 2006-07 - that is Mr P Chidambaram's Budget for you, ironically described as a Budget for the common man by none other than Prime Minister Manmohan Singh.

According to Budget proposals presented by the Finance Minister, total tax collections during 2006-07 will be Rs 4,42,153 crore in 2006-07, up from Rs 3,70,141 crore in 2005-06. This figure could be higher given Mr Chidambaram's track record of underplaying tax collections and overplaying expenditure on education, health, farm and social sectors. In other words, he collects more taxes than he proposes to and spends much lesser on many of these sectors than he promises.

In the last Budget, Mr Chidambaram had projected Rs 17,000 crore collection by way of service tax but he ended up collecting Rs 24,000 crore, more than 40 per cent higher. In 2006-07, he expects to collect Rs 34,000 crore, which the experts feel could touch Rs 50,000 crore as he has increased the rate from 10 per cent to 12 per cent and brought in more industries under the service tax net.

On Budget eve, Mr P Chidambaram said, "I did not burn the midnight oil to prepare the Budget. I am a satisfied man because I have been guided by three factors in preparing the Budget - the PM, who is an acknowledged expert himself; two, the common minimum programme (CMP) of the UPA Government and three, by my conscience."

Knowing Mr Chidambaram, the 2006-07 Budget clearly does not reflect his conscience. It also does not reflect the conscience of the PM. The third factor, that is, the CMP, seems to be the case that has played a major role in this Budget. Taxing the already taxed and putting the collections in unproductive areas seems to be the objective of the Budget.

<b>Most part of his two-hour Budget speech sounded like a politician tapping for votes and desperately trying to hang on to power by pleasing those who can bring him down.</b> Consider this: All these years the country was made to believe that the Government will exit from the business of business, that is, it will disinvest from PSUs. This exercise was started by the present PM himself in 1991. It was more aggressively pursued by the BJP Government or to be more specific, by Mr Arun Shourie as its Disinvestment Minister. Then came the UPA Government supported by the Left parties. <b>In twenty months, P Chidambaram has done a complete reversal of the 15-year-old disinvestment policy. He has provided for investing Rs 16,000 crore as equity in PSUs - so why were PSUs disinvested in the first place?</b>

Two, he has heavily provided for investments in education, health and employment. Good intentions, no doubt, but past experiences have shown that this money seldom reaches those it has been earmarked for. Funds have never been a constraint, they have always been provided for. It has been the utilisation which has been the issue. The FM's speech has no word on that but a lot of money earmarked for something called "Bharat Nirman" - Rs 1,72,000 crore, in fact.

Service tax, which is becoming a major issue with the salaried class or middle class, has been increased to 12 per cent and Mr Chidambaram has clearly started that it will be brought at par with excise duty on manufactured goods. <b>The Finance Minister collected Rs 23,000 crore from service tax alone in 2005-06, when it was levied at the rate of 10 per cent. He has now increased it by 2 per cent and included several more sectors like executive class air travel, ATM operations, share transfer agents, public relations services, credit and debit cards, registrars and bankers of public issues of equity shares, business support services.</b> From this, the FM expects to rake in Rs 34,500 crore in 2006-07.

This extra burden on the common has been levied without providing relief in Income-Tax slabs, which have remained unchanged. The total revenue expected from I-T in 2006-07 is Rs 77,409 crore.

This is in addition to the excise duty which the common man pays on the purchase of goods. <b>The Government's total collection of excise duty for 2006-07 is expected to be around Rs 119,000 crore, up from Rs 112,000 crore in 2005-06.</b> He has also levied a special countervailing duty of 4 per cent on all imports to collect an additional Rs 8,000 crore.

Even while Mr Chidambaram poses to be farmer-friendly by announcing a series of measures, a close look at the subsidies tell a different story.<b> The total subsidies bill of the Government for 2006-07 is pegged at Rs 46,213 crore, down by Rs 600 crore from the 2005-06 figure of Rs 46,874 crore.</b>

But it's not all bad news. The good news is that small cars (up to 1,500 cc) will now get cheaper as the excise duty on them has been slashed from 24% to 16%

Quickly responding to the FM's statement, car major Hyundai announced a Rs 23,000 cut on Santro prices. This apart, Maruti announced its small car prices to dive by Rs 13,000 to Rs 22,000.

<b>* Service tax now 12% </b>
<b>* ATM tax may be passed on</b>
<b>* Pay more for computers </b>
* No new incentives on savings
* Token changes in FBT
* Oil companies left gasping
*<b> Pasta tax-free, not idli-dosa </b>
* PM says common man's Budget

<b>Sensex record</b>
Mumbai: Markets closed on a firm note on Budget day, with Sensex and Nifty scaling new all-time highs at both intraday and closing levels. The Sensex settled with a gain of 88.15 points at a new record closing high of 10,370.24, after scaling an all-time intraday high of 10,422.65. The NSE Nifty closed 7.25 points up at 3,074.70.

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[Guest]

India’s staple food, Pasta is tax-free. <!--emo&:cool--><img src='style_emoticons/<#EMO_DIR#>/specool.gif' border='0' style='vertical-align:middle' alt='specool.gif' /><!--endemo-->
Service charge on ATM withdraw is stupidity <!--emo&--><img src='style_emoticons/<#EMO_DIR#>/biggrin.gif' border='0' style='vertical-align:middle' alt='biggrin.gif' /><!--endemo-->
Infrastructure is not important or nothing major efforts on mass transportation.
Typical commie budget. <!--emo&:clapping--><img src='style_emoticons/<#EMO_DIR#>/clap.gif' border='0' style='vertical-align:middle' alt='clap.gif' /><!--endemo-->
Investment in public sector. <!--emo&:guitar--><img src='style_emoticons/<#EMO_DIR#>/guitar.gif' border='0' style='vertical-align:middle' alt='guitar.gif' /><!--endemo-->
Congress is targeting to take back country to golden old days of 2% growth rate.
<!--emo&:flush--><img src='style_emoticons/<#EMO_DIR#>/Flush.gif' border='0' style='vertical-align:middle' alt='Flush.gif' /><!--endemo-->

[Guest]

SB/AK/OK/MRS/CS
The following are the authentic highlights of the Indian Budget for 2006-2007
<!--QuoteBegin-->QUOTE<!--QuoteEBegin--><b>
Press Information Bureau
Government of India

Tuesday, February 28, 2006
  Ministry of Finance   
 
[B]GENERAL BUDGET 2006-07: HIGHLIGHTS </b>
--------------------------------------------------------------------------------
   12:49 IST   
   GENERAL BUDGET 2006-07
<b>HIGHLIGHTS</b>

New Delhi, Phalguna 9, 1927
February 28, 2006
<b>BUDGET AIMS AT ENSURING A HIGH GROWTH RATE</b>

FOCUS ON THE COMMON MAN

MAJOR THRUST ON TAKING FORWARD THE AGENDA OF NCMP
PLAN EXPENDITURE UP BY 20.4 PER CENT

TOTAL REVENUE RECEIPTS ESTIMATED AT Rs.4,03,465 CRORE

REVENUE DEFICIT TO BE 2.1 PER CENT OF GDP AND FISCAL DEFICIT ESTIMATED AT 3.8 PER CENT OF GDP

BUDGETARY SUPPORT TO BHARAT NIRMAN INCREASED BY 54 PER CENT

Rs.12,041 CRORE ALLOCATED FOR NORTH-EASTERN REGION

1,50,000 ADDITIONAL TEACHERS AND 5,00,000 ADDITIONAL CLASSROOMS TO BE ADDED UNDER SARVA SIKSHA ABHIYAN

Rs.4,813 CRORE FOR MID-DAY MEAL SCHEME

PROVISION FOR RAJIV GANDHI NATIONAL DRINKING WATER MISSION INCREASED TO Rs.4,680 CRORE

RURAL SANITATION CAMPAIGN TO HAVE AN OUTLAY OF Rs.720 CRORE

NATIONAL RURAL HEALTH MISSION ALLOCATION INCREASED TO Rs.8,207 CRORE

TOTAL ALLOCATION FOR RURAL EMPLOYMENT TO BE Rs.14,300 CRORE

INCREASE OF Rs.6,000 CRORE IN DEFENCE ALLOCATION

Rs.28,737 CRORE FOR PROGRAMMES FOR THE BENEFIT OF WOMEN AND CHILDREN

A SEPARATE STATEMENT ON THE SCHEMES FOR SCHEDULED CASTES AND SCHEDULED TRIBES

A NUMBER OF SCHEMES FOR THE WELFARE OF THE MINORITIES

INCENTIVES FOR EDUCATION OF GIRLS FROM SC, ST, OBC AND MINORITY COMMUNITIES

AN EXPERT BODY TO BE CONSTITUTED FOR DEVELOPING INDIA AS A HUB FOR GEMS AND JEWELLERY INDUSTRY

MAJOR THRUST TO AGRICULTURE SECTOR

IRRIGATION OUTLAY INCREASED TO Rs.7,121 CRORE

RELIEF TO FARMERS AVAILING CROP LOANS FROM SCHEDULED COMMERCIAL BANKS

CORPUS OF RURAL INFRASTRUCTURE DEVELOPMENT FUND TO BE INCREASED TO Rs.10,000 CRORE

MAJOR THRUST TO MANUFACTURING INDUSTRIES LIKE TEXTILES, FOOD PROCESSING, LEATHER, PETROLEUM AND CHEMICALS

PLAN ALLOCATION FOR TOURISM INCREASED TO Rs.830 CRORE

EMPHASIS ON TELECOMMUNICATION, POWER, COAL, ROAD TRANSPORT AND OTHER COMPONENTS OF INFRASTRUCTURE SECTOR

BIG BOOST TO FINANCIAL SECTORS

CUSTOM DUTY REDUCED ON A NUMBER OF ITEMS

AERATED DRINKS AND SMALL CARS TO HAVE REDUCED EXCISE DUTY OF 16 PER CENT

SERVICE TAX NET WIDENED

NO CHANGE IN THE RATES OF PERSONAL INCOME TAX OR CORPORATE INCOME TAX – NO NEW TAX IMPOSED

FRINGE BENEFIT TAX RATIONALISED IN CERTAIN CASES

DIRECT TAX PROPOSALS TO YIELD A GAIN OF Rs.4,000 CRORE

INDIRECT TAXES TO BRING Rs.2,000 CRORE GAIN

TAX EXPENDITURE STATEMENT – A NEW INNOVATION

TAX ADMINISTRATION TO BE MODERNISED

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<b>From the above provisions one can see that there has been substantial allocations made for Rural Health Services, Education for the Masses, Mid Day Meal Programme, Welfare of women and Children ,Rural Emplyment Scheme etc. This is a serious effort to improve the condition of the poorest of the poor in the Indian society. It is quite natural that the Budget will receive most critical comments by the urban elite as represented by a section of the powerful print media.</b>

[ramana]

I have a request. What is the size of the GOI budget as a percentage of the GDP? The US govt budget is about 20% of the US GDP.

[Naresh]

<!--QuoteBegin-ramana+Mar 2 2006, 01:08 AM-->QUOTE(ramana @ Mar 2 2006, 01:08 AM)<!--QuoteEBegin-->I have a request. What is the size of the GOI budget as a percentage of the GDP? The US govt budget is about 20% of the US GDP.
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<b>ramana : </b>

TOTAL REVENUE RECEIPTS ESTIMATED AT Rs.4,03,465 CRORE i.e. I R 4,034.65 Billion

REVENUE DEFICIT ESTIMATED AT RS.84,727 CRORE i.e. I R 847.27 Billion

I, therefore, take it that the total Budget Expenditure is I R 4,881.92

The Provisional GDP figure for 2005-2006 is I R 32,006 Billion

Thus the GOI Budget would be about 15.25% of the Provisional GDP

E & O E

Cheers <!--emo&:beer--><img src='style_emoticons/<#EMO_DIR#>/cheers.gif' border='0' style='vertical-align:middle' alt='cheers.gif' /><!--endemo-->

[ramana]

So compared to the US the GOI is quite efficeint in monetray terms. Or the cost of govt is not as much a burden on overall economy as in advanced states.

Alternately the GOI can spend some more on key sectors like education and health care to improve the quality of life factors.

[agnivayu]

But it's bad in some ways, like India's defense budget is only $19.8 Billion , which is only 2.4% of GDP. Even at 3% of GDP, India's defense budget would be $25 Billion. At $30 Billion (which is what it should be), it's still only 3.6% of GDP.


Remember China's defense budget is around 60-70 Billion, Pakistan is probably around 7-8 Billion.



<!--QuoteBegin-ramana+Mar 2 2006, 02:28 AM-->QUOTE(ramana @ Mar 2 2006, 02:28 AM)<!--QuoteEBegin-->So compared to the US the GOI is quite efficeint in monetray terms. Or the cost of govt is not as much a burden on overall economy as in advanced states.

Alternately the GOI can spend some more on key sectors like education and health care to improve the quality of life factors.
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