Current Economic Statistics and Review For the Week Ended September 15

The Indian pharmaceutical industry (IPI) is, currently, one of the most dynamically growing and technologically vibrant segments of the Indian manufacturing sector. It figures among the largest and most advanced pharma industries amongst the developing world. The total size of the industry, comprising over ten thousand small, medium and large producers, is currently estimated at $ 7 billion with exports accounting for $ 2.5 billion. It manufactures bulk drugs, belonging to several major therapeutic groups, requiring various manufacturing processes and has developed excellent facilities for production of all dosage forms like tablets, capsules, liquids, ointments, orals and injectibles. This achievement is claimed to be strengthened by an assurance with regard to the quality of the products, though this remains an issue of fiery debate.

The Indian pharmaceutical industry which contributes 8 per cent to global pharmaceutical sales volume, stands 4^th in the world for the quantity of pharmaceutical trade; however, in terms of value, it ranks 13^thglobally and contributes only 1 per cent to global sales value. This clearly highlights India ’s leadership in low price product segment of the global pharma industry and indicates an enormous untapped global potential for high end products.

Brief Historical Overview

At the dawn of independence, the Indian pharmaceutical industry was almost rudimentary with barely any technological base to start local production and was merely processing imported bulk drugs into formulations. The industry was subjected to innumerable and rigid controls in the realm of pricing, industrial licensing as well as raw material allocation. The sluggish activity continued till product patents on pharmaceuticals were abolished in 1972.

With specific objectives of self-sufficiency in drug production, self-reliance in drug technology and accessibility of quality drugs at reasonable prices certain strategic policy interventions were undertaken in the form of the Patents Act of 1970, which envisaged a soft Intellectual Property Rights (IPR) regime and recognised process patents. This is believed to be the defining move for rapid growth of the indigenous pharmaceutical industry. The provision of process patents with a maximum duration of patenting reduced to seven years and the compulsory licensing[1] after three years from grant of patent boosted local innovation, mainly in process and formulation development, using the technique of reverse engineering. The industry accumulated technological capability, enabling it to produce bulk drugs from as basic a stage as possible, resulting in a high degree of self-sufficiency concerning requirements of basic raw materials and intermediates for the industry. During the ensuing 25 years, domestic pharma companies gained a firm footing in the market. Their share of the domestic market rose from barely 10 per cent in the early seventies to over 80 per cent currently. India has also emerged as a major supplier of drugs to the international markets, particularly over the last decade.

Since the early nineties, along with the macroeconomic liberalisation and in view of the agreement at World Trade Organisation (WTO) on Trade Related Aspects of Intellectual Property Rights (TRIPS), the stance of policy makers regarding the Indian pharmaceutical industry began to undergo significant changes, which were finally demonstrated in the form of a new Patent Act of 2004.

Current Scenario

At present, the industry is characterised by a high degree of fragmentation, consisting of about 300 large and medium-scale industrial companies including 45 Multinational Companies (MNCs) and about 10,000 small-scale enterprises in operation, which form the core of the pharmaceutical industry in India . These units produce varieties of formulations, i.e., medicines ready for consumption by patients and about 350 bulk drugs i.e. chemicals having therapeutic value and used for production of formulations. Today, the domestic pharma industry is in a strong position to fulfill the country’s major requirement of the bulk drugs and almost all the demands for formulations. The distributions of end-products are carried out with well-organised channel of chemist shops throughout the country.

The production of drugs and pharmaceuticals in the country is growing at a fast pace. The overall production of the pharmaceutical industry has grown at a compounded annual growth rate (CAGR) of 15.8 per cent during the calendar years of 1994-2004. The value of production in 2004 alone has been estimated at approximately Rs 35750 crore, of which formulations accounted for 78 per cent and bulk drugs for the remaining 22 per cent.

India

’s pharmaceutical exports have grown at a 23 per cent CAGR in the span of 1994-2004. The country is a net exporter of pharmaceutical products, its largest export markets being the US followed by Germany , Russia , UK and China . The factors that have facilitated acceleration of exports include cost competitiveness, established quality and certification of manufacturing facilities by United States Food and Drug Authority (US FDA) and the United Kingdom Medicines and Healthcare Products Regulatory Agency. India , today, has the largest number of US FDA approved drug-manufacturing facilities outside the US . In addition, Drug Master Files[2] (DMFs) filed by Indian companies with the FDA number 126, higher than Spain , Italy , China and Israel put together.

India’s exports of drugs and pharmaceuticals were valued at Rs 14110 crore in 2004 as against imports of Rs 4010 crore; bulk drugs account for over 70 per cent of imports of pharmaceutical products into the country mainly on account of price differentials in the international markets.

Changing Market Structures

The composition of drug consumption in India over the last decade appears to have altered as a result of rising disposable incomes and change in urban lifestyles. Antibiotics are losing ground to lifestyle-related drug segments like anti-diabetes, central nervous system (CNS) and cardiovascular system (CVS) related drugs. While there is a growing market for drugs for the so-called lifestyle diseases, there remains a large and even growing demand for medicines for curing and preventing infectious and communicable diseases.

The structure of exports markets for Indian pharmaceuticals, too, is changing dynamically. Though the US remains its biggest market, the price erosions, up to 95 per cent in certain drug segments, in the US generics market has resulted in Indian pharma majors suffering huge reverses in the US market. In response, India is looking beyond the American market, and is currently on a drive to tap on the pharma markets in Europe and Japan , mainly through the route of joint ventures, mergers and acquisitions.

The Indian pharmaceutical segment has been subject to a high level of regulation with regards to three aspects: patents, prices and product quality. The outlook on the effects of these cover vast grounds ranging from opinions that the regulations have fuelled the bright growth prospects of the industry to comments regarding the industry having posted high growth and vibrant dynamism despite highly restrictive regulations. Irrespective of the stance taken on this issue, the fact remains that there is a slow though gradual shift in strategies with regard to each of these regulations.

The patents regime has now been aligned to international requirements with introduction of product patents since January 2005. On the issue of price controls, drug price controls are exercised through the Drug Price Control Order (DPCO) of 1995. On issues regarding regulatory pricing environment, the country remains uncertain - price regulation may continue for essential and life-saving drugs in the medium-term, in view of the governments’ intention towards providing access to healthcare at low cost. For other products market forces will influence prices or some indirect form of price controls may be used. The main issues related to, and implications of, the new patent regime as well as concerns on the subject of the drug price control and the latest debates on the topic, are discussed in some details in later sections.

For the domestic market, Drug Cosmetic Act, 1940 and Drug Cosmetic Rules, 1945 regulate the import, manufacture, distribution and sales of drugs in India . Good Manufacturing Practices (GMP) as given in Schedule M of the Act pertain to manufacturing practices and quality norms in the country. It was amended to provide for upgradation of manufacturing facilities by December 2004. Besides these, norms prevalent in export destinations also affect performance of the Indian manufacturing companies, given their significant dependence on exports for revenues and growth.

The Patent Act of 1970 was the first legislative interventions made in the area of patent policy in the post-independence period. One of the main provisions of the Act was that only process patents, and not product patents, were to be granted. This resulted in the use of reverse engineering technologies by research units across the country to build indigenous capabilities and their cheap dissemination to the Indian pharmaceutical industry. The industry has also experienced remarkable growth on the back of the dynamism and vitality of foreign collaborated companies, which played an important and positive role in the domestic market. The outcome was the establishment of self-sufficiency of domestic players in the production of bulk drugs and relative lowering of drug prices in India in comparison to the markets. The industry grew from just a handful of MNC players to more than ten thousand licensed pharmaceutical companies. There was a gradual shift from import dependence of the industry for bulk drugs and formulations to the transformation of India as a net exporter in the global markets today.

The emergence of Trade-Related Aspects of Intellectual Property Rights (TRIPS) at the World Trade Organisation (WTO) has played a catalytic role in changing India 's patent policy. India signed the TRIPS Agreement in 1994, wherein it was given a 10-year transition period till January 2005 to become compliant with regulations laid down by the WTO and meet minimum standards regarding Intellectual Property Rights (IPRs) and shift over to a regime of product patenting in line with its WTO partners. The TRIPS Agreement claims to establish common international rules for the minimum protection provided by a government to the intellectual property from other WTO members. In the most simplified form, the TRIPS Agreement for the Indian pharma industry translates into a situation in which Indian companies can no longer clone any drug or medicine patented after 1995.

Yet, in spite of bilateral and multilateral trade pressure, the shift did not immediately follow India ’s signing of the TRIPS Agreement in 1994, but only after a domestic constituency supporting patent reforms emerged. The first steps towards TRIPS compliance came with an Exclusive Marketing Rights (EMR) Agreement for new products as part of signing the Patent Co-operation Treaty in December 1998 at the Paris Convention, which was then supplemented in 1999 by an amendment to the Patents Act. This gave inventors the right to file for patents for new products in India , for which they would be granted EMR, if they had filed an application in a WTO member state. A second amendment to the Patents Act in 1999 increased patent protection to 20 years from filing, bringing India in line with the term of protection granted by the majority of other countries.

The final transition came about via amendment of the Patent Act in 2004, which declared a complete shift to a product patents regime effective from the 1^st January 2005, just in time to meet the deadline set in the WTO obligation. This laid the foundation for redefining the balance towards the rights of patent holders and led to a strategy aimed at raising the patent activity of domestic actors.

The passing of the Patents Amendment Act in the Parliament, to meet India ’s TRIPS obligations, has raised concerns over its effect on access to, and prices of, medicines. The Doha Declaration acknowledged the gravity of public health problems in many developing and least developed countries, and stated that the TRIPS Agreement could and should be interpreted and implemented in a manner supportive of WTO members’ right to protect public health and, in particular, to promote access to medicines for all. As a follow-up to the Declaration, a number of flexibilities were granted to member-countries, which provided them with wide discretionary powers so as to prevent abuses resulting from the exercise of exclusive rights by the patent holder. Therefore, the main question is whether India has incorporated these flexibilities in the amendments.

A number of post-product patent options permitted under Article 30 and 31 of the TRIPS Agreement have been incorporated in the amended law. They include compulsory licensing, parallel importation, and limited patentability exceptions. For example, Section 3(d) of the new Act, which seeks to prevent the extension of patent life by making minimal changes to the patented molecule. The provision on compulsory licence is crucial for a health-sensitive patent law. Another option for India is to encourage parallel imports from countries where drugs are cheaper. Patent protection historically implies that any use of the patented product, including experimental use or clinical testing, is prohibited. Therefore, generic drug manufacturers must wait until the patent expiry to perform regulatory testing, thus extending the effective duration of patent right enjoyed by the patent-holder. Some countries have attempted to rectify this through the implementation of experimental use exceptions to patent infringement. A provision to this effect was introduced through the Third Patent Amendment Act 2002, in Section 107A (a).

It has been clarified that the new patent regime will not affect prices of 350 essential (life saving) drugs available in the market. About 97 per cent of the drugs currently available in the market are already off patent and are not likely to be patented in India . Hence, all fears relating to drug prices witnessing a sharp rise under the new dispensation appear to be highly exaggerated. Only about 3 per cent of the domestic pharma market is likely to come under the newly patented drugs and it is only on these drugs that the government cannot have any control. Here, too, the ability of the patent owner to price the product above marginal cost is largely governed by the availability of close substitutes. Also, even when product patents are granted, India has provisions to protect consumer interest with regard to pricing in the form of a drug price control mechanism.

Many countries employ direct price control systems to obtain cheaper medicines. All these systems are not uniform in nature, but a common feature is the compromise arrived after taking into consideration the consumers’ ability to purchase and the manufacturers’ expected profit margin. India had introduced a price regulatory policy, the Drug Price Control Order (DPCO), as early as in 1970 with the objective of protecting the interests of consumers and ensuring a restricted, but reasonable, return to producers. Although one could argue that the introduction of the product patent could affect prices of some products, adequate flexibilities seem to have been adopted by the government to ensure that the adverse effects are minimised. However, the extent of the usefulness of these measures will be known only when these are actually used.

Product Patents: New Prospects

The Indian pharmaceutical sector made had rapid strides in the age of process patents. The climate for specilisation in reverse engineering techniques served an important social purpose of making medicines available at significantly lower costs. Indian companies became well positioned to expand their global presence based on growing competitiveness, strong manufacturing base, availability of skilled manpower and an expanding biotech industry. Now the pharma industry in India has come of age, enjoyed the benefits of reverse engineering for long, is larger seeking global opportunities and is poised to face enhanced competition.

In the light of India 's WTO commitment to initiate pharmaceutical product patent protection in 2005 – a bargain struck in 1994 – the newly modified amendments to the Patents Act appear to strike a reasonable balance in India ’s best interests. The country now has many options. It can protect its own consumers through liberal compulsory licensing, but still allow Indian inventors to seek the higher levels of intellectual property protection in the North American or European markets. In addition, they may still take advantage of looser patenting standards in the OECD countries and Indian companies will be able to sell their products in those foreign markets at high prices.

For the coming short-term period, generic drugs[4] will be the key drivers of growth for the Indian pharma industry. Indian companies being one of the most cost effective manufacturers of generic drug can continue to thrive in the area notwithstanding the introduction of product patents. Its highly successful generic producers should be able to continue leading the world in the development and refinement of efficient production processes. Indian companies can emerge as preferred partners, alliance members, manufacturers and suppliers to foreign companies. However, it is important to offer a wider range of products that are differentiated, to invest continuously in R&D and maintain a healthy product pipeline as well as prudent launch timing to mitigate the risks associated with volatility in profit realizations in regulated markets.

Another promising area for the domestic pharma sector is outsourcing of R&D and manufacturing activities, due to the spiraling costs in developed countries and expiring patents. Drugs worth $ 60 billion are to go off patent by 2010, thus providing opportunities for cheaper generic versions of these drugs in countries such as India and China , which incur lower R&D costs. There are also opportunities in the field of contract research that will be serviced by companies in research space or offshoots of pharma companies.

Under the product patent regime, India is not only opening its border to exports but is also increasing its potential to become a global centre for R&D, contract research, manufacturing, clinical research and alliances with global pharmaceutical companies. As the associated levels of foreign investment in India increase, the demand for timely reliable access to Indian patent information will also grow. On the flip side, there could be an increasing dependence on exports and resultantly Indian pharma companies would face higher exposure to regulatory policies in export markets. Certain handicaps in the current situation, which need to be addressed on an urgent basis, are low R&D investment, absence of dynamic linkages between industry and academia, absence of an innovation culture and inadequate regulatory standards.

Product Patent Regime: Some Strategic Suggestions

§ Partnerships with generic drug companies as well as innovators for supply of bulk drugs and formulations.

§ Strategies of consolidation to achieve economies of scale through acquisitions abroad may play an important role.

§ Expansion of product portfolio for treatment of chronic ailments; launch of products for over-the-counter segment; and formation of alliances for manufacturing, marketing and distribution of third-party patented molecules in India .

In the era of process patents, Indian pharma industry had invested in R&D, most often directed at either reverse engineering (which is of little use in new patents regime), new delivery systems for old drugs, cosmetic changes to old drugs, or in the case of a few firms, new drug discovery which were mostly sold for further development to the large multinational corporations. In other words, analysts point out that the Indian drug industry was not looking beyond its nose. With the introduction of the product patents, all this is set to change. The single most important aspect for survival and healthy growth in an era of product patenting is increased R&D expenditure as well as maintaining a continuous product pipeline. The Indian pharmaceutical industry has gradually begun to shift focus to research for New Chemical Entities (NCEs) and novel drug delivery systems (NDDSs).

The R&D allocations of Indian pharma majors have increased. The R&D expenditure for new drugs is currently a $ 1.01 million segment of the $ 5 million pharma sector. Although R&D expenditure as a percentage of sales for the industry is very low at 2 per cent, the share of prominent drug companies has gone up to 6-8 per cent of net sales during FY 2004. Yet this is much lower as compared to expenditure of 14-18 per cent of sales allocated for R&D by global pharma companies. There is a long way to go for the Indian pharma industry by way of increased R&D expenditure and activity.

It is commented that Indian industry cannot be expected to invest vast resources on drugs that multinationals with markets in developed countries will not be interested in developing. Pertinent here is the fact that a large proportion of pharmaceutical research in the US , the UK and Europe is prompted through state investment either in government institutions or in universities in state-funded projects. India unfortunately has an inadequate and insufficient base in medical research. It would be unrealistic to expect the drug industry to change its directions and patterns of research without an adequate support base. With a well-tailored policy of price controls and incentives, it would be possible to push the drug sector towards drug research in essential areas and ensure that the benefits of state funding does not accrue solely to industry. The potential market for essential medicines, old and new, in India is vast and the poor purchasing power of the drug consumer may be overcome by an expanded and efficient state health sector. The Indian drug industry not only needs to actively influence the government to formulate a rational drug policy, but also to raise its investment in health care and in health and medical research.

Indian pharmaceutical companies are responding in very innovative ways to fund investments in both research and for expansion in the scale of operations. An inventive deal that has been struck between Dr. Reddy’s Laboratories (DRL) and ICICI Ventures is a model of risk capital funding to support R&D activity in the pharma sector through cost sharing arrangements. As per the deal ICICI Ventures will fund the development, registration and legal costs related to commercialisation of ANDAs by DRL; and post commercialisation Dr Reddy’s will pay ICICI Ventures royalty on net sales for five years. Another encouraging development is the interest expressed by EXIM Bank in funding, or even picking up 25 per cent stake in M&A in the pharma sector.

Mergers and Acquisitions: Emerging Trend

As stated earlier, presently, India has 300 large and moderate sized pharma companies and a host of small pharma companies. It is critical for smaller companies to go for mergers and consolidation, enabling them to increase their R&D expenditure. Also, there is need for geographical diversification of current pharma giants focusing on improved presence in regulated oversees markets. Indian companies have already begun action in this direction. There has been increased M&A activity, resulting in acquiring brands, facilities and businesses overseas to gain ready access to markets using acquired entities’ existing product portfolio, manufacturing facilities and relations with trade.

The Indian pharmaceutical industry has emerged as one of the most aggressive overseas investors. Since January 2004, Indian pharma companies have made 18 international acquisitions with an aggregate deal value of more than Rs 2100 crore (approximately $ 500 million). While US is the largest generic market in the world, the bulk of overseas acquisitions have happened in Europe . The objectives behind the acquisitions might be varied - entry into a new market, access to manufacturing assets, shoring of product pipelines, cost reduction, avoidance of replication of research spend, tool for marketing consolidation, and such others.

Drug price control is a mechanism or a policy, which ensures that essential and life-saving medicines are available at reasonable prices. Control over the price of drugs to the consumer exists in most countries. In India , the issuance of the Drug Price Control Order (DPCO) in 1970 was the first structured price control mechanism. Later the government, under Section 3 of the Essential Commodities Act, issued the DPCO of 1995, which provides the list of price-controlled drugs, procedures for fixation of drug prices, method of implementation of prices fixed by the government and penalties for contravention of provisions. As of now, 74 bulk drugs are under price control and there is no price control on 70-75 per cent of the retail pharmaceutical market.

The basic parameters by which a drug is liable to invite price control are its mass consumption nature and absence of sufficient competition. Under DPCO 1995, any bulk drug and its formulations would invite price control, if it has an annual turnover of Rs 4 crore or more, if there are less than five bulk drug producers or less than 10 formulators, or if a single formulator has a market share of 40 per cent or more. As per the Pharmaceutical Policy of 2002, any bulk drug (and its formulations) will be under price control if the moving annual total (MAT) value of the bulk drug as on 31^st March 2001, was more than Rs 25 crore and the market share of any single formulator was 50 per cent or more. A bulk drug with an MAT value Rs 10-25 crore will invite control if a single formulator commands a market share of 90 per cent or more.

The price control over drugs and formulations spanning over more than three decades are strongly opposed by the pharma industry, which argues that rigorous price controls stifle their growth, and deem it unfair in the light of abolition of price controls in a large number of industries. On the other hand, a Supreme Court judgment, in favour of public interest asked the government to form a criterion that would bring all essential and life-saving drugs, as per World Health Organisation (WHO) definition, under price control. This brings over 300 drugs under the price control regime and also means a reversal of the government’s policy of progressive liberalisation of drug pricing since 1979.

The government, on the one hand, claims willingness to provide a stable policy environment to the pharmaceutical industry, and on the other hand, promises the availability of essential and life saving drugs at reasonable prices to the public. The Sen Task Force, appointed by the government to formulate a new pricing policy, submitted its report around mid-September this year. The task force has proposed that the government determine ceiling price for all but 40 of the 354 essential drugs on the basis of a weighted average of the top three brands by value. It suggests essentiality of drug as the sole criteria for price control and hence argues for no control on prices of bulk drugs and unbranded formulations and also compulsory price negotiation for patented drugs before they are approved for marketing. The implementation of these recommendations is currently being keenly debated. Along side, the report supports halving of excise duty on all drugs from the current 16 per cent to 8 per cent and suggests a dual regulatory system for pricing and quality of drugs. It recommends a favourable fiscal regime rather than tampering with the price system in order to encourage R&D by drug companies. The task force has also proposed a time-bound process of de-branding for selected drugs whereby a product shall carry the generic name along with the manufacturer’s identification. The industry has opposed this move to de-brand select drugs arguing that this will lead to malpractices in the business and proliferation of spurious drugs in the market.

The post-2005 product patent regime period will experience the gradual erosion of multi-source products and an increasing dependence on single-source patented products of foreign companies. It is commented that at that point, the government would be very ineffective in controlling the prices of single-source products. The issue is complicated and tricky to simply conclude that the government has no role to play or the government should not intervene to make medicines available at reasonable prices. The government needs to prioritise on allocating adequate funds for the health care sector, developing a functional delivery mechanism for providing health services, and frame policies appropriate to the needs of the sector as well as the public. It could focus on all anti-competitive practices, work to promote competition, set-up a transparent mechanism to monitor prices of essential medicines and regulate them through mechanisms such as reference pricing by partnering the trade, industry and the medical profession.

Summing Up

In the post-reform and post-WTO regime, the Indian pharmaceutical industry is the one that is holding out tremendous promise and potential. In many ways, it can also be proud of establishing, under the erstwhile process patents regime, a vast production base for bulk drugs as well as good reputation across the international pharma market. Some attribute its achievements to a conducive regulatory and legal framework, while others opine its dynamic growth to have occurred despite restrictive policies and stifling government interventions. There appear to be grains of truth on both sides of the debate. On the one hand, regulatory controls are untenable in an era of liberalisation and globalisation and arguments of the pharma industry players seem justifiable in that light. On the other hand, there are issues regarding the importance of the sector for public health care, an area in which the welfare state cannot shirk its responsibility. Also important here are concerns regarding the sustenance of small and medium enterprises, which form a significant part of the domestic pharma scene.

It is important here to develop a policy climate that taps the huge potential of the pharma industry by aligning domestic standards to global norms so as to provide the right incentives for strengthening the position of the Indian pharmaceutical industry in the world markets. At the same time, there is need to address public health care related issues with more innovative techniques and alternative policies that sustain a delicate balance between freedom for manufacturing units and availability of good quality drugs at reasonable prices to the vast population.

Sources

[1] Compulsory licensing is generally defined as the grant of a licence by a government to a third party to use a patent without an authorisation of the patent-holder, on payment of royalty fees to the patentee. It is notable that compulsory licence provisions of the amended Act have sought to ensure that the benefits of the patented invention could be made available at affordable prices to the public.

[2] A drug master file (DMF) is a submission to the US FDA, used to provide confidential, detailed information about facilities, processes, or articles used in the manufacturing, processing, packaging and storing of human drugs. The information contained in a DMF may be used to support new drug applications, abbreviated new drug applications, etc. A DMF has to be approved by the US FDA for a drug to enter the US market.

[3] Patents are necessary due to the economic rationale of enabling pioneer firms lead time to recoup sunk cost on R&D, assuming there are significant sunk costs associated with innovation that cannot be recovered by mere realisation of marginal costs, which are low. Given the competitive nature of the industry, drug costs would be driven down to marginal costs and resultantly fixed costs cannot be apportioned and recovered, proving to be a large enough disincentive for any amount of investment. There are no fixed paradigms or any model on patent design that would fit the need of all countries. Patent law design is critical in harmonising the somewhat divergent interests of pricing drugs cheaply and at the same time providing incentives for investments in R&D.

[4] A generic drug is a product sold under the chemical name of a branded drug, after the expiry of the patent for a branded drug. Drug patents are issued to the innovator for a fixed period (20 years) from the time of filing. Once the patent expires, other companies can manufacture and market the drug if they are able to prove that the active ingredients in their product (generic) and the branded products are the same. Active pharmaceutical ingredient (API) refers to any substance or a mixture of substances intended to be used in the manufacture of a drug, which becomes an active ingredient of the drug. APIs are intended to cause direct effects in the diagnosis, cure, mitigation, treatment or prevention of a disease or the affect the structure and function of the body. Both the branded and the generic versions must have the same potency, be available in the same dosage forms (i.e. table, liquid, injectable) and be demonstrated as safe and effective. Generic drugs are, usually, far cheaper than branded drugs, sometimes up to 90 per cent. In India , unlike in other markets, doctors prescribe branded generics.

[5] New chemical entities (NCEs) refer to any molecular compound (excluding diagnostic agents, vaccines, etc) not previously approved for use in humans. The discovery of an NCE results in a new drug application (NDA), which is an application to the FDA in the US (or DCGI in India ) for a licence to market a new drug. The innovator submits NDAs after completing clinical trials for new drugs. Another form of application is for ANDAs, the abbreviation for new drug applications made for clearance of a generic version of a branded drug, after it is granted clearance for bio-equivalence. ANDAs provide for a six-month exclusivity period for generic drugs (under the Hatch-Waxman Act, USA ) and can be substantive profit boosters.

[6] Novel drug delivery systems (NDDSs) are alternative methods of delivering a drug. For instance, if a drug exists in tablet form, a slow releasable tablet or an oral solution would be considered an NDDS and vice versa. NDDS are either same molecules or modified molecules or assortment of molecules. The Indian patents law tightened the definition of an invention and includes a long negative list of ‘frivolous modifications’ that are ineligible for patents, while in other major pharma markets, patents are usually granted for analogues and derivatives.

Coffee exports during April – September, 2005 has registered a drastic fall of around 35 per cent to 74,564 tonnes compared to 1,14,489 tonnes during the corresponding period last year. In value terms, exports have been down by 8 per cent to Rs 540.60 crore. The decline in exports is considered to be a result of high volatility in the global coffee prices. However, the average unit value realisation for the first half of fiscal year 2005-06 has stood at Rs 72,501 a tonne, nearly 41 per cent higher compared with Rs 51,544 during the same period last fiscal.

The Department of Horticulture of Andhra Pradesh has launched a number of integrated programmes to raise productivity levels and has allocated Rs 87.18 crore for their implementation. The key strategies for the overall development include emphasis on knowledge inputs, adoption of modern technologies, sustainable farming practices, organic farming and stress on post-production technologies. The department has proposed to set up three bio-control laboratories as well as state horticulture board. It has planned to set up agri export zones (AEZ) for mango, banana and KP onions.

The procurement of cotton by the government agencies, viz. Cotton Corporation of India and Markfed, has forced the farmers to sell their produce at a price much below the minimum support price (MSP). Although the procurement process started with the MSP, the cotton was purchased at very low price on account of its excessive content of moisture and poor quality, infuriating the farmers.

Food Corporation of India (FCI) has increased the wheat OMSS (open market sale scheme) price by Rs 15 per 100 kg for all states for the October- December period of fiscal year 2005-06. OMSS sale price is basically the rate at which FCI sells stock in the open market. Though the corporation barely sells 1.5-2 lakh tonne wheat in the open market in the whole season, the OMSS sale price acts as a cap on the market. According to some players in the industry, this price hike may push up the cost of raw materials for flour millers and biscuits manufacturers, which finally may be passed on to the consumers. On the contrary some experts have anticipated not much change in the price level since the hike in the wheat OMSS price is lower than the expected one.

Pharmaceuticals

The spate of acquisitions by the Indian pharmaceutical companies is now being accompanied by frenzied fund raising by them, through both equity as well as debt. Some industry analysts are expressing the impeding fear of possible consequences, if these acquisitions do not bear fruit.

INFRASTRUCTURE

A proposed India Infrastructure Finance Company (IIFC), a special purpose vehicle (SPV) for core sector funding, will be a commercially run organisation that will function as a NBFC under RBI supervision. It will have a paid up capital of Rs 10 crore and authorised capital of Rs 1000 crore; will limit its funding of any project to 20 per cent of its total cost, excluding the cost of land; will offer loans with tenure of 20 years or more; and will be allowed to refinance old projects.

Petroleum and Petroleum Products

The petroleum ministry is considering a proposal to recast ONGC Videsh Limited (OVL) as an independent entity, out of ONGC’s ambit, and further plans to restructure OVL into a Single Special Purpose Delivery Vehicle with substantial financial muscle and presence in the total value chain of oil and gas business. In response, ONGC has commented that consolidation would a more logical choice and hence it may consider merging OVL with itself, if the ministry pushes for hiving OVL into a separate entity.

In order to combat LPG shortage in the country, oil marketing companies have lined up imports of 1.82 lakh tonne to meet the October demand and efforts are on to import an additional 1.69 lakh tonne for November and December.

Coal

As part of the strategies being worked out by the prime minister’s energy coordination committee towards long-term energy security, the government is promoting acquisition of coal mines abroad to meet the country’s growing demand for coal. Australia , Indonesia , Mozambique and Zimbabwe are the countries being considered as countries where mine acquisition is a viable option. The government is also planning to remove the cap on foreign investment in coal and mining for steel and cement companies, which are currently allowed up to 74 per cent foreign direct investment in coal mining.

According to the Central Mine Planning and Design Institute Limited (CMPDIL), it is possible to convert coal to oil at a price of $ 35 a barrel. In the wake of spiralling international crude prices, a task force comprising of CIL and OIL representatives has been set up to prepare a blueprint for a new initiative to produce oil out of coal, likely to be implemented by two joint venture companies – one for production of coal and the other for setting up a coal liquefaction plant and its upstream activities.

Steel

In response to the booming demand from automobiles and components segment, leading steel alloy manufacturers have lined up massive expansion plans, which are expected to double the current 2.12 million tonne domestic alloy market in a span of two years.

Airways

Domestic airlines are set to increase fares by about 10 per cent as a result of jet fuel prices reaching an all time high of Rs 38860 a kilo litre; jet fuel accounts for 30 per cent of the operational costs for the airlines.

Favouring the centre-state cooperation model adopted by the north-eastern states to develop aviation infrastructure, the civil aviation minister has asked all state governments to tie up with public sector carriers to provide intra-state and regional air connectivity across the country.

The Centre for Asia-Pacific Aviation opines the merger and restructuring of Air-India and Indian Airlines to help them compete efficiently with private players and low cost carriers.

INFLATION

The annual point-to-point inflation rate based on wholesale price index has gone up to 3.97 per cent during the week ended September 24, 2005 from 3.75 per cent registered during the previous week. The inflation rate was at 7.33 per cent in the corresponding week last year.

The WPI in the week under review has remained unchanged at the previous week’s level of 196.5 (Base: 1993-94=100). The index of primary articles’ group has declined considerably by 0.8 per cent to 193.3 from the previous week’s level of 194.9, due to a considerable decline in the price indices of food articles as well as non-food articles by 0.8 per cent each. The lower prices of food articles have been evident due to the lower prices of mutton, fruits and vegetables and fish-inland. Similarly, the lower prices of non-food articles have been contributed by the lower prices of sunflower, groundnut seeds, raw jute and safflower. The index of ‘fuel, power, light and lubricants’ group has risen by 0.2 per cent to 314.6 from the previous week’s level of 313.9 due to higher prices of furnace oil. The heavy-weighted manufactured products’ group constituting 63.7 per cent of total weight, has also risen by 0.2 per cent to 171.2 from 170.8 of the previous week’s level, primarily due to increase in the prices of food products, ‘leather and leather products’ and ‘rubber and plastic products’.

The latest final index of WPI for the week ended July 30, 2005 has been revised upwards; as a result both, the absolute index and the implied inflation rate moved up to 195.1 and 4.16 per cent instead of the provisional levels of 194.5 and 3.84 per cent, respectively.

The high base effect has been at the forefront in bringing down the headline inflation rates in the past couple of months. However, the rate of inflation has now gradually started inching up due to the reducing impact of high base effect. The hike in the prices of petroleum products by the government, which has been effective from September 6th, and its consequent spiraling effects on the related sectors like transport, has also been partly responsible in stimulating inflationary pressures on the economy.

The Rs.77,000 crore Tata Group (TG) is set to return to the credit card business in a major way. The group is planning to launch its credit card, tentatively called ‘Tatacard’ in partnership with State Bank of India (SBI) and GE Caps. TG would be paid a fee for lending the Tata brand name to the card, marketed both by SBI-GE. At a later stage, the group may even consider buying the entire card base.

Three of the Indian banks – Oriental Bank of Commerce (OBC), Indian Overseas Bank (IOB) and Bank of India (BoI) – have figured among the top 25 global banks in terms of return on capital employed (RoCE) as on July 31, 2005, according to the latest Banker magazine. OBC, placed ninth on the list of top banks recorded a 57.55 per cent return on capital, IOB and BoI registered returns of 53.04 per cent and 49.55 per cent respectively. According to the report, gross non-performing assets (NPAs) in India have shrunk in absolute terms in the last two years, falling 5.6 per cent as a result of increased efforts at cleaning up of bad assets.

The boards of both Federal Bank and Lord Krishna Bank (LKB) have in-principle agreed to merge. The deal size is estimated at around Rs.300 – 350 crore and Federal Bank is likely to offer stocks to fund the takeover. With this acquisition, Federal Bank, with about 400 branches concentrated in Kerela, would expand its reach across the country since 55 of LKB’s 112 branches are in the western and northern region. This would be the second major deal in the private banking sector in the current financial year. Centurion Bank took over Bank of Punjab in an Rs.360 crore deal earlier this year.

In a significant development for Gujarat ’s co-operative banking sector, two co-operative banks have been merged. Ahmedabad-based Standard Co-operative bank that has just two branches, merged with The Kalupur Commercial Co-operative Bank (KCCB). Post merger, the total branch network of KCCB will rise to 30 branches. The move is seen as a precursor to the restructuring of the co-operative banking sector in the state of Gujarat .

The Centre’s tax collections has gone up by 19.13 per cent to Rs. 1,43,361 crore during the first half of the current financial year, compared with Rs. 1,20,342 crore during April-September 2004. The excise collections rose to 6.42 per cent to Rs. 47,860 crore during April-September 2005, compared with Rs. 44,973 crore in corresponding period last year. Meanwhile, service tax collections grew by nearly 66 per cent to Rs. 8,158 crore during April-September, against Rs. 4,919 crore during corresponding period last year.

The revenue department has clarified that service tax on subscription fees collected by multi-system operators (MSOs) and cable TV would be applicable only from June 2005 and not with retrospective effect from July 2001. This follows the contention that the amount collected from MSOs and cable TV operators by the broadcasters as subscription fees for allowing access to paid channels is also leviable to service tax from July 2001.

The Centre’s direct tax collections have moved up by 24.4 per cent during the first half of current fiscal year. The corporate tax collections have risen by 28.6 per cent to Rs. 33,700 crore during April-September 2005, against Rs. 26,200 crore during the first half of 2004-05. Personal income tax collection have registered a growth of 18.4 per cent to Rs. 22,500 crore during the first half of 2005-06, compared with Rs. 19,000 crore in the corresponding period last year. According to budget estimate the corporation tax collections and personal income tax collections were expected to rise by 33.2 per cent and 30 per cent, respectively, during the year.

On October 06, the Cabinet cleared an additional instalment of dearness allowance for the central government employees and dearness relief for pensioners at a rate of 4 per cent, over and above the existing rate of 17 per cent. The increase effective from July 1, will increase the cash component of DA relief to 21 per cent of the basic pay. The additional financial burden because of the increase would be Rs. 2,137.92 crore, out of which Rs. 1,521.92 crore per annum would be for serving employees and the remaining Rs. 616 crore for serving pensioners.

An internal panel of the empowered committee of state finance ministers on the VAT has made a proposal to increase service tax to 15 per cent from April 2006 from the present level of 10 per cent so as to find ways to compensate states for revenue they will lose due to the proposed phase-out of the central sales tax. The panel is of the opinion that the telecom and financial services may be taxed by the centre, while tax on other services can be administrated by states. The mop-up from service tax and centre sale tax has been estimated at Rs. 30,500 crore during 2004-05. The panel has now estimated revenue from the two levies at Rs. 35,000 crore for 2005-06 and Rs. 40,500 crore for 2006-07. Further, the panel has also recommended that a negative list of services should be prepared in which minor unorganised services may be kept out of ambit of the taxes.

The empowered committee of state finance ministries on VAT has agreed to cut central excise tax to 2 per cent from April 01,2006, as the first step towards abolition of central sales tax.

BJP-ruled Jharkhand will join the VAT regime from January 01,2006. Uttaranchal has already introduced VAT from October 01, taking the total number of states and Union territories implementing VAT to 28.

The IPO of Shree Renuka Sugars Ltd,which opened on October 7, received huge number of bids in the QIB category, which got oversubscribed by over 10 times on the same day itself.

The public issue of Paradyne Infotech consisted of an offer for sale of 33 lakh shares of Rs 10 each for a cash premium of Rs 32 per shares.

The public issue of Gujarat Industries Power Company limited is to open on October 13 and close on October 19.

After the exceptionally strong gains witnessed last week when the Indian stock markets logged weekly gains of about 5 per cent, amongst the best since the inception of this bull run, this week turned out to be diagonally opposite. However, over the week BSE sensex lost at about 2 per cent and NSE nifty 1 per cent. The spillover effect of weakness in global markets spread even to the domestic bourses. Factors that led to global stock market weakness were the worries about inflation, rising interest rates and slowing corporate profits in the US . Comments from Fed officials sparked apprehensions about the Fed would continue its rate-hiking campaign, which could adversely affect FII flows towards emerging markets. Also, worries about slowing corporate profits and profit erosion due to high energy prices weighed heavy on investor sentiments. A retreat in crude oil prices to below US$ 62 per barrel proved to be of no relief.

On October 7, the BSE sensex witnessed the third largest single day fall in the current financial of 196 points as the investors went into profit booking mode. The NSE nifty, too, witnessed the fourth-largest fall of 65 points.

In the first week of October, FIIs have been net sellers of equities to the extent of Rs 248 crore with sales of Rs 7768 crore and purchase of Rs 7520 crore. However, mutual funds have net buyers of equities to the extent of Rs 130 crore with purchases of Rs 1903 crore and sales of Rs 1773 crore.

Sebi has barred the directors of Eltrol Ltd from trading in their shares and also top trading clients of BSE from trading in it. Sebi has found that in the recent past, there was an unprecedented increase in price and trading interest in the share of Eltrol (which has recently changed its name to “Shree Mahaganga Sugar Mills Ltd.”), on BSE. During the period from March 1, 2005 to September 23, 2005, the price of the share of Eltrol (face value Re.1/-), duly adjusted for corporate actions, on BSE, opened at Rs.0.47 touched a high of Rs. 3.52 on September 1, 2005, a low of Rs. 0.43 on March 2, 2005 and closed at Rs.1.85 on September 29, 2005. Thus, during the 128 trading days from March 1, 2005 to September 1, 2005, the price of the share on BSE has shown a rise of 649%. Sebi found that there is no identifiable promoter of Eltrol. The directors of the company who claim to be professional directors do not appear to have any knowledge about the industry in which the company is purportedly operating. The directors of the company are engaged in courier business which has no apparent relation with engineering or sugar business that Eltrol is purportedly engaged in.

The past financial performance of the company has been dismal and the company has accumulated losses. The company has not declared any dividend for the past many years. The company has discontinued production activities and is purportedly exploring entering into new business areas. The company has made preferential allotment to two NBFCs namely Oudh Finance & Investment Private Limited and Basmati Securities Pvt. Ltd. at a premium of Rs.6.50 per share (face value of Re.1/-). The source of funds of these NBFCs is not known and probably these NBFCs have taken Fixed Deposits from the public, the repayment of which could be imperilled by the unwise if not blatantly manipulative action of the promoters / management of these NBFCs. In any case, the rationale for the two NBFCs to invest in Eltrol shares at such a huge premium needs further probe. That apart, Eltrol has apparently diverted the money received through preferential allotment to stock brokers for indulging in stock market operations and has tried to hide this fact by claiming that the funds have been invested in the assets of the company. The issue of working capital funds belonging to corporates being diverted for stock market operations which activity is not in consonance with the regular business activities of corporates has been a major concern for SEBI in the recent past. The activities of Eltrol as detailed above confirm the concerns of SEBI in this regard.

The market remained cautious due to the negative clues from the US markets an nervousness ahead of the quarterly earnings seasons. As a result, investors have been taking positions in F&O segment to hedge their exposures.

In the auction held on October 6 of 11.83 per cent 2014 and 7.40 per cent 2035 for notified amounts of Rs 6,000 crore and Rs 3,000 crore, respectively, the RBI has rejected all the bids tendered for 11.83 per cent 2014 and the issue has not devolved either on RBI or primary dealers. The cut-off price for the 30-year paper has been set at Rs 97 (yield at 7.65 per cent)

The liquidity situation improved despite outflows due to auctions. The average deployment under RBI’s reverse repo increased to around Rs 26,000 crore from Rs 20,000 crore. However, as the inflation rate increased from 3.75 per cent to 3.97 per cent, as a result, the weighted average YTM on 8.07 per cent 2017 has increased from 7.20 per cent on September 30 to 7.27 per cent on October 7. Further, the market remained concerned about a possible hike in interest rate in the impending credit policy.

The rupee-dollar exchange rate depreciated from Rs 43.99 on September 29 to Rs 44.32 on October 7 due to strong dollar overseas, non-deliverable forwards arbitrage and negative FII flows.

Given the weakness in the spot rupee, the six-month forward premia has edged marginally higher to 0.79 per cent on October 7 from 0.76 per cent on September 30.

Kewal Ram, member of FMC, has said that to make the commodity markets more attractive to investors, introduction of options and participation of foreign institutions must be encouraged. He added that FMC was in consultation with the RBI for enabling entry of FIIs.

In the first fortnight of September, the cumulative turonover of exchanges has surpassed a whooping Rs 2.5 lakh crore. of this, Rs 2 lakh crore is contributed by NCDEX, followed by MCX at Rs 48,414 crore. the turnover of commoditiy exchanges in 2004-05 was at Rs 5.75 lakh crore.

In the first six month so current financial year, the cumulative turnover of commodity futures across all exchanges has crossed Rs 9.5 lakh crore, though this is nearly half of the derivatives turnover in equities clocked Rs 18.27 lakh crore over the same period.

The biggest jump in commodity futures has been witnessed in guar seed. Of the Rs 2 lakh crore turnover on NCDEX during the first half of September, guar seed alone generated Rs 1.77 lakh turnover.

Nymex has signed MoU with MCX to explore areas of co-operation and businessopportunity.

Crisil has assigned a rating of ‘AAA (SO)’ to ICICI Bank's assignment of receivables programme- Acquirer's share worth Rs. 98.6 crore and deferred purchase consideration worth Rs. 32.6 million. This credit opinion is based on the credit quality of the pool cash flows, ICICI Bank's origination and servicing capabilities, the available enhancements and the soundness of the legal structure.

The agency has also reaffirmed Essel Mining and Industries Limited’s credit rating for Rs. 250 million bond programme at ‘AA/Stable’. The rating reaffirmation reflects EMIL’s increased scale of operation with the successful commissioning of Apahatu and Kasia (North Block) mines.

Crisil has upgraded the ratings assigned to Kirloskar Brothers Limited’s (KBL) fixed deposit programme from ‘FAA-‘ to ‘FAA’ and its Rs. 200 million commercial paper programme from ‘P1’ to ‘P1+’. The ratings upgrade reflects KBL's established position in the growing turnkey projects business and its leadership in the domestic pumps industry. The rating takes comfort from KBL's improving revenue profile, with an increasing share of exports in its total sales.

Icra has reaffirmed the ‘LAA’ and the ‘MAA’ ratings assigned to Rs. 1.25 billion non convertible debenture programme and the fixed deposit programme of BHW Birla Home Finance Limited (BBHFL) respectively. The ratings primarily reflect the strengths derived from its status as a wholly owned subsidiary of BHW Holding AG1 The rating also factors in comfortable capital adequacy of the company at 31.40 per cent as on March 31, 2005 giving it cushion to grow and to absorb credit losses.

Icra has assigned a credit risk rating of ‘mfA1+’ to Tata Liquid Fund (TLF). a rating of ‘mfAAA’ to Tata Floating Rate Short Term Fund (TFRSTF) and the agency has also retained the rating of ‘mfAAA’ to Tata Income Fund (TIF).

In an another exercise, the agency has assigned an ‘LAAA’ rating to Rs. 1.4 billion subordinate bonds of State Bank of Indore (SBIn). The rating factors in SBIn’s strong franchise value in its geographical areas of operations enabling a growing retail deposit base and sustained market position demonstrated in the growing credit portfolio.

Icra has assigned a credit risk rating of ‘mfA1+’ to Reliance Liquidity Fund (RLF) and Reliance Liquid Fund Treasury Plan (RLF TP). The rated fund carries the lowest credit risk, similar to that associated with short term debt obligations rated in the highest credit quality category. The ratings should, however, not be construed as an indication of the prospective performance of the Mutual Fund scheme or of volatility in its returns.

Care has retained the grading of ‘CCt2+’ assigned to McNally Bharat Engineering Company Ltd. (MBEL) for its construction activities. This grading is applicable for execution of contracts with aggregate value up to Rs.300 crore (increased from Rs.225 crore), subject to a sublimit of Rs.150 crore on a single contract, upto the financial year 2006-07 in respect of MBEL’s existing areas of operations. The grading draws comfort from the long & satisfactory track record of the company, proven project execution capabilities with strong technical tie-ups, project manning by qualified and experienced personnel, healthy order book position & impressive client portfolio.

Care has assigned a ‘AAA’ rating to the Rs.235 crore bond issue of State Bank of Travancore. Meanwhile, the agency has also assigned a rating of ‘A-‘ to the proposed secured non-convertible debentures (NCDs) of Rs.70 crore of JSW Power Ltd. (JPL).

Fitch Ratings has assigned an expected ratings of ‘F1+( ind )(SO)’ to Senior Series B Pass Through Certificates (PTCs), issued by a special purpose vehicle (SPV) called Corporate Loan Securitisation Trust August 2004. The Senior Series B PTCs are backed by the three year loan, aggregating to INR100 million, extended by Kotak Mahindra Bank

According to a report by Standard & Poor’s (S&P) and its subsidiary Crisil, most of the Indian companies are borrowing increasingly to finance expansions, despite robust cash flow generation from positive economic factors. The report, titled “Indian Top 50 Corporates’ released recently profiled 50 prominent companies selected on the basis of attracting investor attention for being active issuers in the international or domestic capital markets. Of the 50 companies studied, 24 companies increased their debt by more than 10 per cent to finance expansions during the past 2 years. Only 16 companies took advantage of strong cash flows to lower their debt burden by more than 10 per cent. Although the overall financial profiles of the top 50 companies are currently strong to adequate, those choosing to rely substantially on debt to finance their growth could face significant challenges that could weaken their credit profiles. These challenges include product price volatility, unexpected regulatory actions, slower than projected demand and difficulty in managing rapidly expanding processes, the release said.

Engineering and construction major, Larson & Toubro, has decided to invest Rs 500 crore for its sixth growth centre to manufacture marine structures.

Electrosteel Castings limited is planning to invest Rs 25 crore for backward integration of its ductile iron pipe plant at Kolkata.

Simplex Concrete Piles limited has secured Rs 260 crore project from the National Highway Authority of India for executing the Lucknow-Muzaffarpur national highway.

Welspun-Gujrat Stahl Rohren, manufacturer of metal pipes, has got order worth Rs 500 crore for supply of coated line pipes to the south Sumatra-West Java gas pipeline in Indonesia .

Hindustan Copper limited has raised provisional selling prices of its products by approximately Rs 5000 per tonne across all the segments.

Tata Power has planned to set up a 3000 mega-watt power project in Jharkhand with an investment of around Rs 12,000 crore.

Adhunik Metaliks has decided to invest Rs 450 crore to manufacture high value added auto grade steel at its manufacturing plant at Rourkela .

Mahindra & Mahindra has planned to set up a special economic zone at Jaipur with an investment of Rs 1,100 crore.

Bajaj Auto has recorded sales of 1,80,926 motorcycles for September 2005, an increase of 43 per cent over the motors sold in the corresponding month previous year.

Hero Honda has sold 2,66,071 bikes in September 2005 as against 2,17,507 bikes in September 2004.

Cement production of Gujrat Ambuja has dropped to 9.6 lakh tonne in September 2005 against 10.6 lakh tonne in September 2004 similarly ACC’s production has slumped to 12.5 lakh tonne as against 13 lakh tonnes in September 2004.

GAIL is planning to invest up to $ 300-$ 500 million over the next three to five years in gas exploration factories at Australia .

Zenith Infotech has posted a net profit of Rs 2.2 crore for the second quarter ended September 2005 with an increase of 588 per cent over the same quarter previous year.

The government is planning to amend the Industrial Disputes Act, 1947 to increase the compensation for laid-off workers. The plan includes the provision to increase the compensation package for laid-off workers to 45 days of salary for every year served against the existing provision of 15 days salary for every year served. Simultaneously, it also intends to keep the units employing up to 300 workers out of the purview of the Act in order to provide flexibility to these small and medium enterprises. At present, all the units employing more than 100 workers come under the purview of the Act and require prior permission of the government to lay off workers. The government has already consulted central trade unions regarding this. However, they have opposed the reduction in the number of units covered under the Act.

The National Housing Bank (NHB) has raised the risk weightage requirement for housing finance companies (HFCs) to 75 per cent from the earlier 50 per cent. The move brings risk weightage for HFCs in line with those for banks. This is a signal for capital cushioning, as most of the HFCs are well-capitalised and may not need to raise additional capital. The move will affect only those HFCs, which have a capital adequacy around the prescribed level of 12 per cent. With the new provision in place, HFCs will have to provide Rs. 9 on every Rs 100 loan extended by them, against Rs. 6 per Rs 100 earlier. Higher risk weightage may, however, mean that HFCs maintain a healthy lean to value.

During 2004-05 India , for the first time, is expected to attract $5 billion foreign direct investment (FDI) through the equity component alone. This implies that overall FDI inflows may easily cross the estimated $7 billion during the entire fiscal year. According to the preliminary estimates for 2004-05, total FDI inflows were pegged at $3.75 billion. FDI inflows include equity investments and reinvested earnings. The equity component of FDI inflows for 2004-05 has not yet been compiled, since the final FDI data including reinvested earnings are still being compiled by the RBI. Traditionally, the equity component of FDI inflows in India has been around 50-55 per cent of the total inflows.

Mahindra and Mahindra has announced plans to set up a special economic zone at Jaipur, that is projected to attract investments of Rs 1100 crore and is also expected to create direct employment for 100000 people and indirect employment for 120000-150000 people. The SEZ will be spread over 3000 acres and its first phase of 129 acres will be completed in six months.

Lower edible oil imports helped reduce the import of over 300 sensitive items during April-July 2005 by 5.4 per cent to Rs 4864 crore, compared with Rs 5143 crore in the corresponding period previous year. The import of sensitive items constituted 2.6 per cent of the gross commodity imports of Rs 183537 during April-July 2005. This is; however, marginally lower than last year when sensitive item imports accounted for 3.7 per cent of the total commodity imports.

Maharashtra has doubled its export of grape wine in the last four years. It has posted 25 per cent increase in exports of grape wine from last year, earning foreign currency amounting to Rs 3.9 crore. Currently total production of grape wine in India is 62.14 lakh litres. Of which, Maharashtra accounts for as much as 54.64 lakh litres or 88 per cent, with 32 per cent coming from Nashik district alone.

Microsoft Corporation plans to double the headcount to around 1000 at its Indian centres in Hyderabad and Bangalore by March 2006.

Flextronics, Singapore-registered but San Jose-based global electronic manufacturing services ( EMS ) provider, has signed an MoU with the government of Tamil Nadu to build an industrial park in Chennai at an investment of Rs.430 crore spread over five years. This will be the sixth industrial park of the company globally. The industrial park would be a Special Economic Zone and would offer Flextronics’ vertically integrated services like printed circuit board assembly, plastics injection molding, mechanicals and enclosure integration, distribution, logistics and repair services. In addition, the Chennai operation would also manufacture telecom and other products for Flextronics’ local and global original- equipment manufacturer (OEM) customers like Nortel and Microsoft. Currently, the company has industrial parks in China , Brazil , Hungary , Mexico and Poland .

*These statistics and the accompanying review are a product arising from the work undertaken under the joint ICICI research centre.org-EPWRF Data Base Project.