Current Economic Statistics and Review For the Week Ended September 15

Revision of National Accounts Statistics

Part I

Salient Features of Improvements in Product and Expenditure Accounts

I

Introduction

The Central Statistical Organisation’s revision of the National Accounts Statistics (NAS) series by shifting the base year forward to 1999-2000 from the earlier 1993-94 base, is indeed a welcome step. Such a revision of the base year for the NAS series within a six-year interval deserves to be commended as it contrasts with all other index number series for wholesale and consumer prices,¹agricultural and industrial output and export-import trade, which have remained unchanged for more than a decade or even two. At the time of the 1993-94 revision itself, the CSO had agreed that it was possible from then on to bring forward the base year for NAS purposes every five to six years with a view to capturing the rapidly changing structural features of the economy, because of the availability of nation-wide quenquennium survey results of the National Sample Survey Organisation (NSSO) on employment and unemployment (EUS) and household consumption expenditures which, along with other surveys on demography, land and livestock, manufacturing, services sectors, and household debt and investment, have provided a rich source material, though secondary in character, for the estimation of different components of national accounts.

While the CSO-NSSO’s efforts in the above respects are thus commendable, the absence of uniformity in setting some common base-year periods for the index number series covering different economic statistics certainly speaks poorly of coordination at the government level despite the growing need for more accurate and timely statistics for planning and policy formulation purposes. This lapse no doubt appears minor when compared with persistent delays in implementing the recommendations of the National Statistical Commission (NSC 2001; Chairman: Dr. C, Rangarajan) which have advanced suggestions for improvement in every component of the Indian statistical system.

Basic Weaknesses in Primary Data Remain to be Addressed

The entire set of national income and related aggregates and accounts are derived statistics based as they are on the basic data available from multitudes of primary sources. While the CSO’s picturesque presentation of varied accounts under the NAS appears very sophisticated, guided as it is by the framework set out in the UN System of National Accounts (UN SNA), there is wide concern that the quality of official statistics generated for different sectors of the economy constituting the building blocks for the Indian NAS, leaves much to be desired as it has deteriorated over a fairly long period of years. This is as much true of the organised segment of the manufacturing sector, corporate sector and non-banking financial sector as it is true of the unorganised segments in manufacturing as well as the vastly growing services sector.² In this respect, the CSO’s claim in the latest brochure on the revised NAS (CSO February 2006) that it has undertaken an exercise variously described as “a complete review” or “a comprehensive review of both the data bases and the methodology employed in the estimation of various macro-economic aggregates,” appears untenable. What the CSO has apparently attempted is to undertake a series of improvements by and large within the existing basic data availability from primary sources, particularly in respect of agricultural and industrial sectors.

What is missing in the so-called comprehensive revision exercise is any reference to the serious decline in the quality and reliability of statistics generated in respect of these important sectors as brought out by the National Statistical Commission. The Commission had clearly opined that their recommendations with regard to improving the national statistical system would have an important bearing on the issue of national income estimation, that “the recommendations in respect of agriculture, industry, trade and services sector would also contribute towards improving the quality, reliability and timelines of direct estimates (of national income)” (p.358 in Vol. II) and that these recommendations “in respect of official statistics relating to different sectors of the economy be implemented speedily so as to improve the quality of data going into the compilation of National Accounts Statistics from primary source agencies.” (p.392). Therefore, at this stage of statistical development, the derived macro-economic aggregates dependent on sectoral data should have the nature and extent of improvements achieved based on NSC recommendations as the starting point. On the other hand, there is sufficient evidence to the effect that the recommendations of the Rangarajan Commission have hardly been implemented in any of the ministries/ departments of the government of India producing primary real sector data (Shetty 2006). When such is the position, the CSO cannot claim having undertaken a complete review of the data base, though technically it cannot be blamed for the weaknesses of sectoral data; the National Accounts Statistics (NAS) constructed by it can only be as good as the data provided by the source agencies.

In agriculture, for instance, though statistics of crop production – both area and yield – had been based on scientifically designed methodologies, “the quality of land use and crop output data has suffered seriously for a variety of reasons” (NSC Report, Vol.I, p.10). It is estimated that area enumeration in respect of about 40 per cent of the land under major agricultural crops is unscientific. Yield measurements in crops, based on crop cutting experiments, are in bad shape “on account of the poor performance of field operations” (Rangarajan 2002; see also DoS 1999). As for industrial statistics, “the data generated by the ASI system based upon this deficient ASI frame do not therefore depict the true situation of organised industrial sector” (Rangarajan 2001). Also, the functioning of the source agencies providing the primary data of industrial production to the CSO is afflicted with a number of serious deficiencies (ibid; see also Shetty 2006). The private corporate sector data used for estimating particularly saving and capital formation are known to be faulty for want of a sound census frame and due to the absence of current data. This is equally true of the data for non-banking financial companies (NBFCs) and the unorganised financial enterprises. When such are the obvious blemishes in the data base for different sectors and when all of these are yet to be addressed, the CSO cannot adopt an ostrich-like approach; it is better that it presents a more sober and restrained claim on its revision of data base for NAS purposes and clearly indicate the sectors for which the NSC recommendations have been implemented and the sectors for which the suggested improvements are yet to take place.

III

Concerted Attempts at Improvement within the Existing Data Base Sources

The above is not intended to belittle the importance of extensive exercises undertaken by the CSO in increasing the coverage of items, changing the procedures and methodology of NAS compilation, implementing the 1993 SNA recommendations, making studied adjustments to the normally survey-based estimates of workforce and average value added per worker in respect of the unorganised segments of manufacturing (non-SSI) and services sectors which have been otherwise most intractable, organising type and other studies from states and independent agencies for updating various rates and ratios used, adopting detailed economic and purpose classifications of government finance accounts, and in adopting consultative processes in effecting changes in methodology and use of alternative data sources. No doubt, these changes have been of a significant nature, and except for two changes, namely, the introduction of a new category of ‘valuables’ included in the estimation of gross capital formation (GCF) and aligning the industry-wise estimation of GCF by the estimation by asset or institution (more on it later), all changes deserve to be welcomed.

Discrepancies between ‘Accounts’ continue to be a worry

But, the above changes, while they are wide-ranging in nature and quite meticulously done, cannot on the face of it contribute to any significant improvement in the NAS system unless and until the NSC recommendations are put in place, that is, as stated above, “to improve the quality of primary data collected by the reporting source agencies” (Rangarajan 2002). As indicated in the next section, changes in the levels of GDP due to the revision in the national accounts series have been minimal and there have not been any noticeable alternations in the overall growth of real GDP either.

But, a more potent measure of judging if the data base revisions and whatever procedural changes effected by the CSO in the new 1999-2000 series, have in fact contributed to an improvement in the quality of NAS, lies in the extent to which the series of ‘statistical discrepancies’ or ‘errors and omissions’, which are generally noticed as between various accounts when an attempt is made at their integration under the ‘consolidated accounts of the nation’, have been pruned. When the 1993-94 base revision took place, the then revised series had tended to narrow the sizes of discrepancies in some accounts, while no such improvement had occurred in some other accounts (EPWRF 2004). Thus, discrepancies between GDP estimates and estimates of key expenditures on GDP (Account 1 under UN-SNA) and those between national disposable income and its appropriation (Account 3) had reduced as between the 1993-94 and 1980-81 series. On the other hand, the ‘errors and omissions’ under capital finance account (Account 5), juxtaposing sources of finance for capital accumulation and estimation of capital accumulation itself, had remained stubbornly high. There is also another set of discrepancies largely specific to the Indian NAS which relate to the differences between the estimation of capital formation by type of assets and that by industry of use; these discrepancies too had widened after the 1993-94 revision.

The CSO has just released the details of some components under the system of ‘consolidated accounts of the nation’ as per the 1999-2000 series compared with the 1993-94 series. In the existing 1993-94 series, the aforesaid discrepancies in almost all accounts had begun to increase in recent years and more significantly, tended to widely fluctuate from year-to-year (CSO 2005) casting misgivings on the overall quality of estimates probably because of the differing and deteriorating quality of data sources. In the latest revision with 1999-2000 as the base, there is no evidence of any systematic reduction in discrepancies between accounts except for Account 1 (GDP and Expenditure) (Table 1). The information available in respect of “errors and omissions” in the capital finance account (Account 5) concerning capital accumulation and its sources, presents an interesting story. No doubt, these “errors and omissions” in the new series have come down from a range of Rs 9,531 crore to Rs 91,174 crore for the period 1999-2000 to 2003-04 as per the 1993-94 series to a range of (-) Rs 30,731 crore to Rs 26,502 crore for the same period. But, apart from behaving in an unstable manner, these

Table 1: Comparisons of ' Discrepancies' and ' Errors and Omissions' in SNA Accounts in New and Old Series
(Rupees, crore)
	Account 1		Account 3		Account 5
	(GDP and Expenditure)		(National Disposable		(Capital Finance)
			Income and Its Appropriation)		New	New	Old
					(1999-00)	(1999-00)	(1993-94)
	New	Old	New	Old	Series	Series	Series
	(1999-00)	(1993-94)	(1999-00)	(1993-94)	(without	(with
	Series	Series	Series	Series	Valuables)	Valuables)
1	2	3	4	5	6	7	8
1999-00	-30,076	-2,192	-5,467	-12,915	-2,925	12,594	32,407
2000-01	6,837	18,243	38,838	22,207	-2,564	12,160	25,471
2001-02	-542	19,239	48,962	28,481	-30,731	-16,544	9,531
2002-03	27,357	54,365	35,491	11,663	1,494	15,451	52,330
2003-04	44,147	86,029	23,239	449	26,502	50,986	91,174
2004-05	53,017	-	45,171	-	50,310	90,456	-
Source: CSO (February 2006).

estimates of discrepancies under the new series have a major flaw in that they have been partly the result of including ‘valuables’ as part of gross capital formation (GCF) without incorporating them also as a counterpart in domestic saving to finance such investment. As explained in a subsequent section, if the equivalent of ‘valuables’ is added to the estimation of domestic savings, the consequential ‘errors and omissions’ almost double. In respect of Account 3 concerning national disposable income and its appropriation, “statistical discrepancies” have substantially increased between the old and the new series; of course, in this case, “valuables” have been included neither under personal consumption nor under domestic saving. What is more, the new series has sought to duck the discrepancies between GCF estimates obtained from commodity flow approach and those obtained by industry of use. By assuming that gross fixed capital formation (GFCF) estimates from the commodity flow approach for the entire economy are firmer estimates, the CSO has adjusted the industry-wise GFCF estimates compiled by the expenditure method in respect of private corporate and household sectors proportionately with the estimates compiled by institutions through the commodity flow method. Thus, the discrepancies have been obliterated by a definitional fiat. Therefore, the improvement in the data base and the methodology of estimation is not reflected in any noticeable narrowing of different types of discrepancies in national accounts.

Limited Change in GDP Estimates

But Significant Change in Sectoral GDP Shares

As the CSO itself has emphasized, at the aggregate level, the changes in the levels of GDP, following the introduction of the new series, appears minimal ranging from 0 per cent to 1.7 per cent (Table 2). More significantly, there are hardly any changes in the overall growth rates of real GDP as between the new and old series (Table 3). Except for one year 2002-03, the growth rates appear identical for four years between 2000-2001 and 2003-04. There appears a major change in 2004-05 which is because of the data base differences as between the earlier advance estimates for the year based on indicators and the subsequent quick estimates based on more detailed data at the sectoral level.

Table 2: Gross Domestic Product At Current Prices) (Rupees, crore)
Year	New Series (Base Year 1999-2000)	Old Series (Base Year 1993-94)	Percentage Difference
1999-2000	17,92,292	17,61,838	1.7
2000-01	19,30,184	19,02,999	1.4
2001-02	20,97,446	20,81,474	0.8
2002-03	22,55,574	22,54,888	0.0
2003-04	25,43,396	25,19,785	0.9
2004-05	28,43,897	28,30,465	0.5
Source: CSO (January 2006)

Table 3: Gross Domestic Product (At Constant Prices) (Rs. Crore)
Year	New Series (Base Year 1999-2000)	Old Series (Base Year 1993-94)	Growth Rates
Year	New Series (Base Year 1999-2000)	Old Series (Base Year 1993-94)	New Series	Old Series
1999-2000	17,92,292	11,48,367
2000-01	18,70,387	11,98,592	4.4	4.4
2001-02	19,78,055	12,67,945	5.8	5.8
2002-03	20,52,586	13,18,362	3.8	4.0
2003-04	22,26,041	14,30,548	8.5	8.5
2004-05	23,93,671	15,29,408	7.5	6.9
Source: Same as in Table 2

But, there are some noticeable differences at the sectoral level, in which there is also a distinct trend noticed. That is, as shown in Table 4, estimates for GDP originating in agriculture and allied activities have been consistently lower in the new series as compared with the old and this negative difference has rapidly grown during 1999-2000 to 2004-05 [ranging from (-) 1.7 per cent to (-)7.0 per cent], while those for the industrial sector have shown negligible difference. However, the revision has produced uniformly positive impact in all components of the services sectors. Consequently, the relative share of the agricultural and allied activities in aggregate GDP has dipped much more sharply by about 1 to 1.5 percentage points in the new series as compared with that in the old series and that of industry has remained at the old level. Thus, the losses suffered by agriculture in its share of GDP for the above years have been by and large gained by the services sectors (Graph A).

While all service sector areas have gained in the latest revision of GDP, sizeably large increases are noticed in a few service sector areas; they are: hotels and restaurants, the railways, storage, communication, and ‘real estate, ownership of dwellings, business and legal services’ – all of which have contributed to an argumentation of the services sector share in GDP. It is said that in almost all of them, the adoption of the latest data have contributed to the upward revision. For ‘hotels and restaurants’, value added per worker (VAPW) from the Enterprise Survey conducted during the 57^th round (2001-02) of NSSO and workforce estimates from the 1999-2000 EUS (55^th round) along with the Population Census 2001 have been used; these replaced the EUS 50^th round (1993-94) data employed along with Population Census 1991 for the old series. ‘Communication services’ has experienced considerably improved coverage under private communication

including separate estimates for cellular mobile, courier services and public call offices (PCO). Apart from increases in GVA estimates from real estate and ownership of dwellings due to the adoption of latest data, a new item, ‘renting of machinery and equipment without operator’ has been covered for the first time in the new series, using the VAPW and work force in the activity from the results of the NSSO 57^th and 55^th rounds, respectively.

Table 4: Gross Domestic Product At Factor Cost By Industry at Current Prices
Difference Between New (1999-00) and Old (1993-94) Series : Percentage Change
Industry	2004-05	2003-04	2002-03	2001-02	2000-01	1999-00
	(QE)	(PE)
Agriculture, Forestry and Fishing	-7.0	-7.1	-7.7	-4.5	-2.4	-1.7
Agriculture	na	-7.5	-8.3	-4.6	-2.1	-1.7
Industry	1.0	0.9	-0.3	-0.5	0.3	0.0
Mining and Quarrying	-6.0	4.3	1.1	1.0	0.8	0.7
Manufacturing	-0.5	-0.6	-1.6	-1.5	-0.4	-1.0
Registered	na	1.9	1.3	1.3	1.5	1.3
Unregistred	na	-5.6	-7.3	-7.1	-3.9	-5.0
Electricity,Gas and Water Supply	4.6	4.2	8.0	6.6	7.4	5.8
Construction	6.8	2.3	-0.6	-0.8	-0.9	-0.1
Services	3.3	4.5	3.7	4.0	4.0	4.5
Trade, Hotels and Restaurants	na	5.9	4.2	3.6	3.3	3.3
Transport, Storage and	na	3.6	3.0	3.6	3.9	6.0
Communication
Financing, Ins.,Real Estate	4.6	8.6	6.7	8.1	6.3	5.5
and Business
Community, Social and	1.2	-0.3	0.6	1.0	2.8	4.2
Personal Services
Total Gross Domestic Product	0.5	0.9	0.0	0.8	1.4	1.7
at Factor Cost
Note: QE: Quick Estimates, PE: Provisional Estimates, na : not available

It appears from the above results for various segments of the services sectors, that the CSO/NSSO have achieved considerable advance in updating the data base for the services sectors. In the absence of direct estimates, the use of a variety of economic censuses, enterprise and other quenquennium or periodic surveys, combined with indicators approaches, has enabled the CSO to adopt probably the second best method for estimating GDP from the services sectors. There may be further scope for improving the survey results so as to minimise sampling and non-sampling errors. There are also certain flaws in the sample survey procedures, as explained in a subsequent section. The surveys themselves are done once in five years by the NSSO and they also exclude the trading activity which is the largest segment amongst the services sectors. The quenquennium benchmark estimates are projected through extrapolation with the help of indicators for specific service sectors. Consequently, successive survey results tend to depart from the earlier survey results. Despite all these, it could be said that attempts to improve the data base for the services sectors are in the right direction.

Contrariwise, it is the gap in the quality of real sector data that stands out. For instance, a closer examination of the changes effected in the estimation procedure suggests that three crucial factors have contributed to the losses in the relative share of agriculture in total GDP. First, in the revised series, the price data furnished by states for non-procured quantities of paddy and wheat have been used as distinguished from the minimum support prices (msp) which were used earlier whenever the former were lower than the latter. Secondly, in the case of fruits and vegetables, a sub-committee has recommended that the CSO use the National Horticultural Board (NHB) data and not the data collected under the centrally-sponsored plan scheme, ‘Crop Estimation Survey on Fruits, Vegetables and Minor Crops’, because the plan scheme had not yet been evaluated in terms of the quality of data generated by it. Both of these have meant some reductions in agricultural output and GDP originating in it. These approaches, particularly the one on farm prices, are contrary to what has been recommended by the NSC. The NSC report states thus: “Sometimes, it is observed that these prices reported by the States are under-stated, as devolution of Central funds, to some extent, depends on the estimated per capita State income. It is necessary that such price data is provided by the DESMOA*, which would then be free from bias or alternatively the devolution of funds may be de-linked from the per-capita income of the States” (p.385). These brief observations are in addition to the general point that the primary source data for agriculture are yet to be improved. A third factor that has been responsible for the reduction in agricultural GDP has emanated from the input cost in the form of ‘market charges’ which have doubled form 1.29 per cent output of agricultural crops to 2.358 per cent based on a fresh market study undertaken by the Ministry of Agriculture, which appears to be an improvement. While on input costs, it may be noted that with the upward revision of the yield rate for fodder crops, their value of output has substantially gone up but it has not affected the estimate of agriculture GDP as the entire output is treated as input, namely, feed of livestock, in the agriculture sector.

As for industry, the primary data sources are truly in a shambles as is evident from the fact that the CSO itself has not found it worthwhile to use the ASI data for national accounts purposes beyond 1999-2000 (CSO February 2006, p.16). In the absence of ASI data, the index of industrial production (IIP) is used for extrapolation of the benchmark data of ASI for more number of years than in the past. But, studies have also shown how there are serious gaps in the coverage of industrial units for the IIP.

It is because of these drawbacks in the real sector data base that a lurking misgiving gets entertained which is that the higher and growing relative share of the services sectors in GDP in recent years could also be attributable to weak data base in respect of the real sectors. While it is difficult to foresee how the output of agricultural and industrial sectors will fare when improved data are put in place for them, there is enough corroborative evidence in the NSC report as well as in independent research studies to show that, at any rate, the output of the organised manufacturing which forms the basis for the CSO’s estimation of GDP for the sector is underestimated in official statistics.

Differing NSSO survey results: a source of worry

Before concluding this section, it must be pointed out that a preponderant part of the upward or downward revisions in the sectoral estimates of GDP as well as PFCE are hardly based on improved coverage of production or consumption items; they are rather based on fresh NSSO survey results which have generally tended to be different from the earlier survey results or the inter-survey growth rates used earlier have been disproved by the fresh survey results. These bring home the basic fact that the NSSO survey results or the methodology of using them for estimational purposes, have not stabilised as yet. It cannot, for if NSC report is to be believed, the existing approach adopted for data collection through follow-up Enterprise Surveys on different segments of the services sector has a basic flaw in that it seeks to collect data for all types of enterprises irrespective of their size. It is said that such integrated surveys do not ensure adequate representation to big-size units, which tends to distort the estimated results. The NSC has, therefore, recommended a survey of non-manufacturing industries for bigger units, say with at least 10 workers (other than those in the public sector) and a separate sample survey for the residual category of smaller units similar so the existing follow-up Enterprise Surveys. To be able to do this on a regular basis, it is necessary to have a sample frame and for this the NSC has recommended the building up, though in phases, of a nation-wide Business Register for the defined large units (pp, 194-195 and 635-638 Vol. II of NSC).

Reductions in PFCE Share in the New Series

Amongst the expenditure aggregates of GDP, some downward revision is seen in the estimates of private financial consumption expenditure (PFCE) and also a significant change in the household consumption pattern³ within a short period of five years, 1999-2000 to 2004-05, as per the revised NAS. The basic data on production and prices utilized in the PFCE estimation are generally the same as those utilized for the GDP estimates. However, reflecting the relative shift in the production pattern in favour of products partaking the character of saving and capital formation in the new series, PFCE estimation has not only been lower as compared with old series, but also the divergence as between the two has grown (Table 5). This is also reflected in slower growth of PFCE and per capita PFCE at constant prices in the new series as compared with earlier series (see the same Table 5).

What is more significant is the relatively sharper fall in the share of ‘food’ in the total consumption basket of the households, and within “food”, consistent fall not only in ‘cereals and bread’ and pulses but also in some of the finer items of consumption, namely, fruits and vegetables, milk and milk products, and meat, eggs and fish (Table 6). Even the clothing and footwear share has not gone up; instead what have gone up are the proportions of the consumption of ‘services’ supplies in conformity with the rapid expansion of services sectors in aggregate GDP. Gross rent and water charges, medical care and health services, and transport and communication; the consumption shares of miscellaneous services too have gone up.

Table 5: PFCE and Per Capita PFCE at Current Prices
	PFCE (Rupees, crore)			Per capita PFCE (Rupees)
Year	1993-94	New	Extent of downward	1993-94		New	Extent of downward
	Series	Series	revision	Series		Series	Revision
			(in per cent)				(in per cent)
1999-00	12,71,556	12,66,294	(-0.4)	12,703		12,650	(-0.4)
2000-01	13,60,018	13,50,520	(-0.7)	13,347		13,253	(-0.7)
2001-02	14,88,781	14,70,421	(-1.2)	14,357		14,166	(-1.3)
2002-03	15,85,132	15,40,181	(-2.8)	15,025		14,599	(-2.8)
2003-04	17,65,849	17,22,288	(-2.5)	16,457		16,051	(-2.5)
2004-05	Na	18,90,619	-	na		17,345	-
Growth Rates in PFCE and Per capita Expenditure at Constant Prices
	PFCE			Per Capita PFCE
	1993-94 Prices	New Series (1999-2000 Prices)		1993-94 Prices	New Series (1999-2000 Prices)
2000-01	2.8	2.3		0.9	0.5
2001-02	5.8	5.9		3.9	4.0
2002-03	2.8	1.6		1.1	-0.1
2003-04	8.2	7.9		6.4	6.1
2004-05	-	6.3		-	4.6
Source: Same as in Table 1

Table 6: Composition of Private Final Consumption Expenditure By Object
(at current prices)
Percentage Distribution
			2004-05		2003-04	2002-03		2001-02		2000-01		1999-00
1		Food, Beverages and Tobacco	40.6		42.3	42.9		46.4		46.8		51.7
		Food	35.4		37.1	37.5		41.2		41.2		45.6
		of which:
		Cereals and Bread	6.9		8.4	8.4		11.1		10.5		13.4
		Pulses	1.1		1.2	1.1		1.6		1.2		1.5
		Fruits and Vegetables	8.6		9.0	8.6		8.8		9.4		9.6
		Milk and Milk Products	6.7		6.9	7.5		7.5		7.7		8.2
		Meat, Egg and Fish	3.9		4.0	4.3		4.3		4.2		4.0
2		Clothing and Footwear	5.2		5.1	5.2		5.2		5.9		5.2
		Clothing	4.6		4.6	4.7		4.6		5.3		4.6
3		Gross Rent, Fuel and Power	12.2		12.6	13.1		12.7		12.7		11.5
		Gross Rent and Water Charges	8.1		8.2	8.5		8.3		8.2		7.8
4		Furniture, Furnishing, Appliances & Services	3.4		3.3	3.4		3.3		3.4		3.2
5		Medical Care and Health Services	6.2		5.9	5.7		5.2		4.8		4.3
6		Transport and Communication	18.2		16.8	15.9		14.4		14.3		13.0
7		Recreation, Education and Cultural Services	4.0		3.8	3.7		3.7		3.6		3.4
8		Misc. Goods and Services	10.2		10.2	10.1		9.1		8.5		7.7
Private Final Consumption Expenditure in			100.0		100.0	100.0		100.0		100.0		100.0
Domestic Market
(at constant prices)
				Percentage Distribution
1	Food,Beverages and Tobacco			42.5			44.2		44.6		47.9		47.7	51.7
	Food			36.9			38.5		39.0		42.5		42.0	45.6
	of which:
	Cereals and Bread			8.7			10.1		10.0		12.6		11.2	13.4
	Pulses			1.3			1.4		1.1		1.4		1.2	1.5
	Fruits and Vegetables			7.7			8.0		7.9		8.2		9.3	9.6
	Milk and Milk Products			6.4			6.6		7.1		7.1		7.2	8.2
	Meat,Egg and Fish			4.1			4.1		4.4		4.3		4.1	4.0
2	Clothing and Footwear			5.3			5.2		5.6		5.5		6.0	5.2
	Clothing			4.7			4.6		5.0		4.8		5.2	4.6
3	Gross Rent,Fuel and Power			10.5			10.8		11.4		11.2		11.5	11.5
	Gross Rent and Water Charges			7.1			7.3		7.7		7.6		7.9	7.8
4	Furniture,Furnishing, Appliances & Services			3.5			3.4		3.4		3.3		3.4	3.2
5	Medical Care and Health Services			6.3			6.0		5.7		5.1		4.7	4.3
6	Transport and Communication			17.5			16.6		15.8		14.4		14.3	13.0
7	Recreation,Education and Cultural Services			4.3			4.0		3.8		3.7		3.7	3.4
8	Misc. Goods and Services			10.1			9.9		9.6		8.9		8.6	7.7
Private Final Consumption Expenditure in				100.0			100.0		100.0		100.0		100.0	100.0
Domestic Market
Source: Same as in Table 1

Some of the estimational changes have also contributed to the changes in the consumption pattern – all of which seem to arise out of the process of updating the data base. For most food items, increases in marketed surplus ratios have resulted in higher quantity of market supplies and their valuation at retail prices which are higher than ex-farm prices, have all pushed up the value of total PFCE for the group “cereals and bread” in the revised series as compared with the old series. Decline in the ‘food’ category as a whole has occurred due to over 40 per cent fall in the PFCE estimates for ‘salt and spices’, which have been the result of the use of the 55^th round (1999-2000) of NSSO in the revised series as compared with inter-survey growth between 43^rd (1987-88) and 50^th round (1993-94) used for the older series. The downward revision was very large for spices (Rs. 13,525 crore) and meagre for salt (Rs. 1,161 crore) for the base year 1999-2000; together, the estimates for that year have been revised downwards from Rs 31,240 crore from the old series to Rs 17,715 crore in the new series. Some increase has taken place in PFCE of the group “meat, egg and fish” due to increase in trade and transport margins which is based on input-output transaction tables of 1998-99. With the change of the data base for gross rent from the ownership of dwellings as referred to earlier and with PFCE estimated as ratio of output to GDP, there has been a sizeable upward revision in gross rent.

With the use of some meticulous studies, including those by the Ministry of Health and the World Health Organisation, downward revision to the extent of 35 per cent has been effected in the PFCE for “health care and health services” by using the 52^nd round of NSSO instead of the inter-survey growth rate between the NSSO 43^rd and 50^th rounds applied in the old series. A conscious coverage difference has been in shifting the ‘valuables’ purchased by households from PFCE to capital formation. This has reduced PFCE for personal goods n.e.c. by over 30 per cent.

1 The Labour Bureau (Government of India) has just revised, after 25 years, the base year for the Consumer Price index for Industrial Workers from 1980 to 2001. It is also reported that efforts are being made to update the other price indices – WPI (1993-94=100), CPI-UME (1984-85=100), and CPI-AL (1986-87=100) – with new base levels.

2 Apart from the series of research papers pointing to this deterioration as quoted in Shetty (2006), the Report of the National Statistical Commission cited above has been an eye-opener in this respect.

3 Private final consumption expenditure is equivalent to the expenditure on current or consumption account of resident and non-resident households in the domestic market and non-profit bodies serving households.

References

CSO (January 2006): A Press Note Quick Estimates of National Income, Consumption Expenditure,

Saving And Capital Formation, 2004-05, January 31

-(February 2006): New Series of National Accounts Statistics (Base Year 1999-2000), February

-(2005): National Accounts Statistics 2005, May.

DoS (GOI) (1999): ‘Comments on Press Reports Relating to Advance Estimates of National Income’, February 12.

EPW (2006): ‘Higher Investment by Statistical Revision’ (editorial), Economic and Political Weekly, February 11.

EPWRF (2004): National Accounts Statistics of India 1950-51 to 2002-03: Linked Series with

1993-94 as the Base Year, Fifth Edition, December 20

NSC (2001): Report of the National Statistical Commission (Chairman Dr. C. Rangarajan), Volumes I and II, August

Rangarajan, C (2002): ‘Reform of the Indian Statistical System’, Inaugural Address, January 14, see Data, Models and Policies, Proceedings of the 38^th Annual Conference of the Indian Econometric Society

- (2001): ‘National Statistical Commission: An Overview of the Recommendations’, Economic and Political Weekly, October 20, 2001

Shetty S L (2006): A paper read at the seminar on Macroeconomic Policy, Rural Institutions and Agricultural Development in India (A National Conference in Honour of Prof. A. Vaidyanathan) held at the Institute for Social and Economic Change (ISEC), Bangalore, during April 9-10.

(Tabulations for this note, prepared by R. Krishnaswamy, are gratefully acknowledged; so also the efforts of K. Srinivasan in inputting the note)

* Directorate of Economics and Statistics, Ministry of Agriculture (DESMOA)

Australia’s monopoly wheat exporter AWB ltd and Geneva based Agrico Trade have qualified the technical parameters specified in the tender floated by State trading Corporation (STC) to import 3 million tonnes of wheat on May 18, 2006. AWB Ltd. is expected to supply 1.2 million tonnes of wheat, while Singapore based Agrico Trading would provide 5 lakh tonnes. STC had received 8 bids totaling 2.68 million tonnes, out of which 3 bid have been rejected due to absence of bid amounts and another 3 for major technical deviations. As only 1.7 million tonnes of the total 3 million tonnes would be met through the 2 accepted bids, the central government might float a fresh tender to cover the remaining requirement.

A forecast from Cotton Advisory Board (CAB) has pegged cotton output for 2005-06 (October - September) season at 244 lakh bales (of 170 kgs), higher by 1.5 lakh bales than previous estimate of 242.50 lakh bales on December 7, 2005. The highest output is expected from the central region (143 lakh bales), followed by north region (46 lakh bales) and southern region (42 lakh bales). The mills consumption of cotton ad cotton exports are likely to be 182 lakh bales and 33 lakh bales respectively during the same period, higher than the previous estimates of 180 lakh bales and 25 lakh bales respectively.

The government of Karnataka has increased the seed subsidy given to small and marginal farmers to 75 per cent during kharif season 2006 as against 50 per cent provided a year ago. Under the scheme the government would be distributing 3.59 lakh quintal of seeds for 13 crops, including paddy, jowar, maize, groundnut, cotton, soyabean etc.

The central government has plans to set up 25 integrated textile parks across the country during the period of forthcoming 18 months to improve the competitiveness of the domestic textile industry. Other steps to boost the local textile industry include rationalisation of the existing excise duty structure, removing infrastructural bottlenecks and creation of a congenial business environment by reducing the cost of production.

A seven-point strategy to usher second green revolution has been outlined by the central government. These consist of revamping extension services, introducing new plant technologies, conserving soil health, water conservation, scientific animal husbandry techniques and new investment through public private partnership.

Associated Chambers of Commerce and Industry (Assocham) has urged the finance ministry to replace the current SSI policy by an SME policy and allow 100 per cent foreign direct investment in the small and medium enterprises (SMEs) sector. It has also stressed on a concrete flexible labour policy with zero import duty on capital goods for infrastructural projects as a key for achieving 12 per cent manufacturing growth.

Excise duty on the Rs 45,000-crore domestic automobile components industry is planned to be levied on the maximum retail price (MRP). Currently, manufacturing of auto components attracts a 16 per cent excise duty on the factory-gate price. The Central Board of Excise & Customs (CBEC) had proposed a 35 per cent abatement (an offsetting reduction) along with the shift, sans any change in the tax rate. The new levy is expected to compress the margins in the auto components trade and might also result in price cuts in certain product segments. The new levy will give some semblance of a level-playing field to smaller auto parts manufacturing units, because the big players will now have to curb their promotional expenses to avoid a higher levy.

Chemicals and fertilisers ministry has declared that the maximum allowable post-manufacturing expenses (MAPE) of drug companies would be kept at 150 per cent of the production cost. Currently, the MAPE, which includes manufacturers’ and trade margins, is 100 per cent in case of the drugs under price control. In the control-free segment, there is no such overall ceiling, but in case of branded drugs, there is a government-brokered understanding between the industry and the trade that the wholesale and retail margins would not exceed 20 per cent and 10 per cent respectively. The ministry said in the case of generic drugs, the wholesale and retail margins should not exceed 15 per cent and 35 per cent respectively. At present, there are no caps on trade margins which in case of some generic medicines are as high as 1,000-2,000 per cent.

The government is scaling up its target for nuclear power generation from 20,000 MW to 40,000 MW by 2020 and considering amendments to the Atomic Energy Act to enable private participation in the sector. India is the only country which could offer small 300-500 MW reactors at commercially viable prices and countries like Malaysia, Indonesia and Vietnam have already expressed an interest in buying this technology from India. The capacity-addition programme has been based on a three-pronged strategy of developing PHWRs, fast breeder reactors (FBRs) and thorium reactors; while PHWR technology in the country is now commercially viable, FBR technology is still being fine-tuned. The country’s first FBR, the 500-Mw reactor at Kalpakkam is expected to be commissioned by the end of the year.

The Rural Electrification Corporation plans to sanction Rs 16,000 crore to power utilities in 2006-07, of which it plans to disburse around Rs 3,000 crore each for generation and distribution projects and Rs 1,000 crore for transmission projects and Rs 4,000 crore for rural electrification projects. REC believes that for its pump energisation programme ground water should be exploited in Bihar, Uttar Pradesh and West Bengal and not in Maharashtra and Gujarat.

The National Electricity Plan, an integral part of the 11^th Five-year Plan (2007-12), may target a generation capacity addition of 67,000 MW. Also, the government plans to add generation capacity of around 60,000 MW in the 12^th Five-year Plan (2012-2017) and will make this part of the plan. Of the 67,000 MW planned capacity by 2012, 20,000 MW will come from hydro-generation, 40,000 MW from coal-based power generation, 3,000 MW from nuclear power generation and 4,000 MW from non-conventional energy sources. Around 50 per cent of the generation has been planned in the central sector, 30 per cent from the state sector and the rest from the private sector. The resources for this capacity addition are being tied up with the ministries of coal, power, non-conventional energy sources and finance and the plan will immensely help the equipment manufacturers associated with the power sector.

National Thermal Power Corporation (NTPC), the country’s largest power producer, plans to set up a series of merchant power plants for direct sale of electricity to bulk consumers. Currently, NTPC’S entire power generation is sold to states at a break-even cost under long-term power purchase agreements with state electricity boards. The proposed plants will give NTPC an opportunity to sell electricity on better commercial terms to bulk buyers, either under long-term bilateral deals or under forward trading or in the spot market. At present, NTPC sells power at an average cost of Rs 1.57 a unit, which is expected to be much higher when sold to the proposed merchant power plants, given that power at peak hours currently fetches around Rs 6-7 a unit in the spot market. The NTPC has identified four hydel power projects (totalling 1,551 MW) to be set up as merchant power plants in Uttaranchal including the 600 MW Loharinag, 520 MW Tapovan, 260MW Rupsibagar and the 171 MW Lata Tapovan hydroelectric projects. The 500MW Korba extension project may also be used for merchant sale to bulk consumers directly.

The government is ready for 100 per cent bidding by private companies under NELP-VI and there is to be minimum interference from the government in the bidding process and all deals and regulations are to be transparent and non-discriminatory enabling greater participation from private companies to explore oil and gas in India.

The standing committee on petroleum and natural gas has recommended scrapping off the present system of setting rates as it is artificially inflating the prices, when the government is currently contemplating hiking petroleum products prices. Currently the prices at which an oil marketing company purchases the product from a refinery are being calculated by adding ocean freight, insurance, customs duty, ocean loss and port charges to the FOB price in the international market; this system artificially inflates prices of petroleum products refined domestically. Though the basic price at the refinery gates, calculated on the import parity basis, is uniform at all refineries throughout the country, the retail selling prices of the products are being calculated by adding excise duty, freight up to depots, marketing cost/margin, state-specific irrecoverable levies and dealers’ commission. The committee asked the government to explore the option of pegging the product’s price to its FOB price prevailing in global markets.

The coal ministry is in the process of finalising a new captive coal mining policy for the small scale industry (SSI) units. According to the proposed policy, the ministry will allocate captive coal blocks through competitive bidding to the SSI units. The idea is that a group of SSI units will form a consortium and apply for coal blocks for joint operations and captive mining of coal in the area of approved end users. Further, the SSI units with small requirements could apply for small and isolated reserves for using coal mined from such reserve in their plants, on a sub-lease basis, which will be awarded by Coal India Limited (CIL). As per the existing legal framework, companies in the private sector engaged in iron and steel production, power generation and cement production can mine coal for captive use in the respective end-use projects. The SSI units engaged in any of these businesses can apply for the unallocated coal blocks identified for mining under the new policy.

Cement companies have continued to enjoy last year's boom trend in April 2006 with the consumption having grown 10.18 per cent to 12.99 million tonnes (mt) as against last April’s 11.79 mt. The production too has witnessed a sharp growth, registering 12.18 per cent jump to 13.17 mt, during the month under review, as against 11.74 mt during April 2005. The first month has seen a capacity addition of 3.65 mt, taking the total installed capacity to 163.45 mt; Dalmia Cements, ACC and Jaypee Group have added 2.27 mt, 0.88 mt and 0.50 mt, respectively.

The Railway Board is reformulating a Cabinet note for a special purpose vehicle (SPV) for the dedicated freight corridor. The options being explored by the board include financing the SPV by offering some stretches on the build, operate and transfer (BOT) basis. A paper detailing the different financing options for the SPV will be prepared by the Railway Board and presented to the Planning Commission. The freight corridor project of the Indian Railway’s is estimated to cost Rs 22,000 crore. The corridor is not only expected to reduce transit time but also cost of operation. The department of economic affairs (DEA) has suggested that the structure of the SPV should not be such that it becomes an extension of the Railways and added that the SPV should be rated to raise resources from the market or multilateral agencies on non-recourse basis. It has also proposed that options for public-private participation in execution of the project could be explored.

The annual point-to-point inflation rate based on wholesale price index (WPI) has gone up to 4.32 per cent for the week ended May 13, 2006 from 3.96 per cent during the previous week. The inflation rate was at 5.60 per cent in the corresponding week last year.

The WPI in the week under review has increased by 0.4 per cent to 200.5 from 199.7 in the previous week (Base: 1993-94=100). The index of primary articles’ group (weight 22.02 per cent) has risen considerably by 0.8 per cent to 197.3 from the previous week’s level of 195.8, mainly due to an increase in the price index of ‘food articles’ by 1.2 per cent. The index of ‘food articles’ has gone up to 201 from 198.6 in the previous week, mainly due to the higher prices of moong, fruits and vegetables, gram, urad, ragi, masur, wheat, milk, mutton barley and arhar. The index of ‘fuel, power, light and lubricants’ group (weight 14.23 per cent) has gone up marginally to 319.8 from the previous weeks’ level of 319.7, mainly due to the higher prices of lubricants. Similarly, the index of ‘manufactured products’ group constituting the maximum of 63.7 per cent of total weight, has also gone up by 0.4 per cent to 175 from 174.3 in the previous week, mainly due to an increase in the prices of textiles, ‘chemical and chemical products’, ‘non-metallic mineral products’, base metals and ‘ machinery and machine tools’.

The latest final index of WPI for the week ended March 18, 2006 has been revised downwards; as a result both, the absolute index and the implied inflation rate stood at 196.7 and 3.69 per cent as against their provisional levels of 197.4 and 4.06 per cent, respectively.

In a bid to provide transparency to transactions between non-banking financial companies (NBFCs) and end users, the Reserve Bank of India (RBI) has laid down draft guidelines on Fair Practices Code for NBFCs. As per the draft guidelines, NBFCs have been asked to provide a meaningful comparison to the terms and conditions of other NBFCs in their loan application forms. The NBFCs should convey in writing to the borrower, the amount of loan sanctioned along with the annualised rate of interest and method of application thereof. NBFCs also need to give notice to the borrower in case of any change in the terms and conditions. In addition, NBFCs should release all securities on repayment of dues or on realization of the outstanding amount of loan, subject to any legitimate right or in lieu of any other claim NBFCs may have against the borrower.

The State Bank of Travancore has registered a net profit of Rs 259 crore in 2005-06, the bank has decalred a 100 per cent dividend, up from 75 per cent paid during the last two years.

Leading foreign player, Standard Chartered Bank has posted a healthy 51 per cent increase in net profit for its India operations for the financial year 2005-06. The bank registered a profit after tax of Rs 906 crore as against Rs 601 crore in the previous year.

During the week, the high volatility in the stock market has forced the Power Finance Corporation to postponed its filing of the draft red herring prospectus for its proposed IPO of Rs 1,500 crore with the Sebi on May 22 and the new date is yet to be finalised. The company’s price band for the issue will range between Rs 60 and Rs 70.

The IPO of Deccan Aviation Ltd has managed to get full subscription on the last day as per the scheduled, however, the issuer had to extend the issue by 3 days to May 26 and the price band was also revised from Rs 150-175 to Rs 146-175, after receiving permission from Sebi given the volatility in the stock market.

Bluplast Industries Limited will be tapping the market on June 5 with its public issue offer of around Rs 35.20 crore with a offer price of Rs 32 per equity shares; the issue closes on June 9.

During the week, the market settled down after a catastrophic opening session where the market circuit filters led to suspension of the trading for one hour on May 22, after the sensex fell by 10 per cent; thought the index later erased some of its losses it closed 4 per cent lower. The weak trend in global markets, heavy FII selling spree, imposition of margin calls and unwinding of positions by traders before futures expiry of May 2006 resulted into extreme volatility which pulled the market down. The sensex dipped by 1.18 per cent or 129.26 points to settle at 10809.35 and nifty fell by 2.13 per cent or 69.20 points to close the week at 3177.7 levels. Meanwhile, both BSE Small-Cap and BSE Mid-Cap indices have registered a higher decline as compared with the sensex at 3.60 per cent 2.36 per cent, respectively. Amongst the sectoral indices, the capital goods index has registered the highest fall of 3.23 per cent to close at 7535.89, followed by the oil and gas index at 3.03 per cent.

The FIIs continued with their selling spree, as they remained net sellers in the equity market to the tune of Rs 7102 crore with purchases worth Rs 12088 crore and sales of Rs 19190 crore. However, domestic institutions, especially mutual funds has provided support to the bourses as they remained net buyers to the extent of Rs 2730 crore with purchases of Rs 4952 crore and sales of Rs 2222 crore, during the week.

The FIIs pressed heavy sales during the first four days of the week. The cumulative outflow of FIIs for May 2006, till 26 May, aggregated Rs 7,011.30 crore. The selling was primarily done so as to take the money out of emerging markets on inflation concerns and on prospects of further rise in US interest rates. The possibility of higher rates on US treasuries has drawn investor interest away from riskier assets in emerging markets. In contrast, mutual funds made heavy purchases. The cumulative inflow of mutual funds for May 2006, till 26 May, totaled Rs 6,937 crore.

In a post-decisional order in the IPO demat scam Sebi has, on May 26, allowed current demat account holders to continue with Karvy Depository Participant but has restrained it from acting as a DP till a final order is passed. The regulator has also restrained its broking arm from undertaking any proprietary trades in securities including off-market trades, pending enquiry. Meanwhile, the regulator has also withdrawn its interim directions against two broking entities – Jhaveri Securities Private Ltd and Magnum Equity Service Ltd.-, which were issued in its April 27, 2006 order.

The NSE’s F & O segment has witnessed a decline in its total turnover on a weekly basis to Rs 171273 crore for the week ending May 26 from Rs 202347 crore during week ending May 19. The stock futures continued to contribute the bulk of the trading with Rs 82407 crore, followed by index future at Rs 75146 crore.

During the week, the RBI has mopped up Rs 517.25 crore and Rs 2650 crore through 91-day and 364-day treasury bill, respectively. The cut-off yields for the 91-day and 364-day treasury bills were 5.6951 per cent and 3.4346 per cent, respectively.

Meanwhile, the RBI has also conducted a sale of a new 15-years government dated security for a notified amount of Rs 5,000 crore and the cut-off yield for the paper was 7.94 per cent.

During the week, the trading in gilt-edged securities remained irregular as volatile international crude oil prices coupled with apprehensions over the upcoming scheduled auctions worth Rs 10,000 crore between June 1 and June 8 further impaired the market sentiments. Moreover, speculations over the hike in the domestic oil prices and a higher-than-expected rise in inflation rate to 4.32 per cent also dampened the market sentiments. The weighted average YTM of 7.59 per cent 2016 paper was 7.6065 per cent on May 26 as compared to 7.6093 on May 19.

Meanwhile, the call rates traded flat throughout the week to close at 5.50-5.60 per cent. Meanwhile, the borrowing requirements ahead of the gilt auction worth Rs 5,000 crore has remained low on account of the surfeit money market liquidity, which was quite evident from the RBI’s LAF auctions. The amount placed under the reverse repo averaged to Rs 63,368 crore as against Rs 58,683 crore in the previous week; while no bids were received at the repo auctions.

Indian Railway Finance Corporation has raised Rs 10 billion through two different bonds having a maturity period of 10 and 15 years, respectively.

During the week, the rupee depreciated against the dollar as it fell by almost 25 paise to close the week at Rs 45.88 per cent after witnessing a week high of Rs 45.93. Rupee weakened after the domestic stock market fell by 10 per cent, thus forcing the authorities to suspend trading for one hour. Though the index recovered later it closed four per cent lower; thereby renewing the fears that falling stock market may lead to slow FIIs inflows thus weakening the rupee further. Moreover, heavy dollar demands by the oil companies on expectations of a further rise in the international crude oil prices also resulted in the weakening of the domestic currency. India’s higher trade deficit at $4.21 billion and the rising global oil prices also led to worries of a widening trade deficit, and the rupee weakened. Meanwhile, in the forward premia market, the six-month annualised forward premia closed at 0.70 per cent on May 26 as against 1.04 per cent on May 19.

In response to the extreme on-going volatility in the equity market, MCX has tightened the margin requirements across various commodities as a proactive measure, since most of the traders dealing in commodities are also common to equity market. The exchange has imposed additional and special margins on aluminium, brent crude oil, crude oil, copper, gold, gold mini, gold HNI, silver, silver HNI, silver mini and zinc contracts. In addition to these, MCX has also imposed special margins on cumin seed and mentha oil contracts.

The five years of liberalisation has been a highly paying proposition for the new insurance companies. In general, a new insurance company globally takes 5 to 7 years breakeven, but there has been increasing instances where Indian private sector insurance companies are making net profit quite early. In 2005-06, two more insurers – SBI Life Insurance and HDFC Chubb General Insurance – have entered into the list of insurance companies, which are booking net profit. The SBI Life Insurance, a joint venture between State Bank of India and French based Cardiff, with a new business income of Rs 828 crore has controlled its expense through bancassurance model and recorded a net profit of Rs 2.02 crore during 2005-06. With a premium of Rs 206 crore, HDFC Chubb reported a profit after tax of Rs 4.41 crore as against a loss of Rs 7.98 crore in the previous year. Royal Sundaram Alliance in its sixth year of operations, with a premium income of Rs 461 crore has recorded a profit before tax of Rs 10 crore. Bajaj-Allianz General Insurance has recorded a net profit of Rs 51.6 crore in 2005-06 compared to the previous year profit of Rs 47 crore. Similarly, ICICI Lombard General Insurance has seen its net profit growing from Rs 48 crore to Rs 50 crore in 2005-06.

Care has assigned ‘AAA’ rating to the proposed market borrowing programme aggregating to Rs 4670 crore for the financial year 2006-07 of Indian Railway Finance Corporation Ltd. (IRFCL). The assigned rating factors in the 100 per cent government of India ownership of IRFCL, its strategic role in providing financial assistance to meet planned outlay of the Indian Railways, strong integration with the parent, consistent profitable operations, demonstrated government support evident form lease agreements enabling transfer of interest and exchange risks to Ministry of Finance.

Care has retained the ‘AAA (SO)’ rating assigned to the long-term bond issue of Rs 94 crore (series L) and Rs 118 crore (Series M) of ITI Limited. (ITI). However, keeping in view the weak financials of ITI, the ratings are primarily based on the credit enhancement in the form of an unconditional and irrevocable government of India guarantee towards payment of interest and repayment of principal of bond issue.

In an another exercise, Care has retained the rating of Maharashtra State Road Development Corporation Limited (MSRDCL) bond issue Series II, Series VIII-X and Series XVI–XXII aggregating to Rs 1821 crore at ‘BBB (SO)’ and the agency has also assigned an in – principal ‘BBB (SO)’ rating to the MSRDCL’s proposed tax-free bond issue of Rs 320 crore. The above ratings are primarily based on the credit enhancement in the form of an unconditional and irrevocable guarantee of debt servicing from the government of Maharashtra and a structured payment mechanism to facilitate timely debt servicing.

Care has revised the rating assigned to the fixed deposit programme of Thirunindra Narayana Finance and Investment Limited (TNFIL) from ‘BBB (FD)’ to ‘BB +(FD)’ for a reduced limit of Rs 6 crore. The rating factors in the continuously falling disbursements and assets level in the past few years due to increasingly competitive business environment, high level of capitalisation and improving level of asset quality aided by a satisfactory recovery performance.

Icra has re-affirmed the ‘A1+’ rating assigned earlier to the commercial paper programme of Indoco Remedies Limited (IRL) for an enhanced amount of Rs. 250 million (enhanced from Rs. 150 million). The rating takes into account IRL’s well-established brands in the domestic market, besides its healthy financial profile, characterised by strong cash accruals and low gearing.

Icra has assigned and ‘A1+’ rating to the enhanced Rs.2.5 billion short-term debt programme (enhancement from Rs. 1.5 billion) of Sundaram Finance Limited (SF). The assigned rating is based on SF’s strong franchise in the commercial vehicle and car financing segments, its conservative credit underwriting policies and strong collection and monitoring mechanisms, which have ensured good asset quality and low charge offs across all retail businesses.

Icra has retained the ‘A1+’ rating assigned to the commercial paper programme of Everest Industries Limited (EIL) for an amount of Rs. 250 million. The rating takes into account the established position of EIL in the domestic fibre cement industry backed by its strong brand and distribution capabilities, the geographical spread of its plants enabling better reach, and its favourable financial risk profile reflected in its low debt levels and strong coverage indicators.

Aditya Birla group company Hindalco has signed a Memorandum of Understanding (MoU) with the Madhya Pradesh government to set up a Rs 7,700 crore greenfield aluminium smelter plant in the state’s Siddhi district. The greenfield project includes setting up of a 32,500-tonnes per annum aluminium smelter plant, a 750-megawatt captive power plant and a jointly-owned captive coal mines. The company will source the alumina required for the smelter from Utkal Alumina, the company’s greenfiled project in Orissa, a joint venture with Alcan, Canada.

Lupin Limited has signed a MoU to acquire 51 per cent equity in Belgium-based Artifex Finance CVA along with its subsidiaries.

Tata Motors has entered into a contract to supply bus chassis to Brazilian bus manufacturer Marcopolo for its South America operations. Tata Motors initially for one year will supply about 2,000 bus chassis generating sales of about Rs 100 crore for the company.

Reliance Capital Partners has acquired a 14 per cent share in Maxwell Industries, the maker of VIP and Lovable brands of innerwear, for Rs 45 crore.

Larsen & Turbro (L&T) Limited has secured three orders worth Rs 347 crore from the Kerala Water Authority for the construction of treated water transmission main and associated works. The 22-months project is expected to be completed by February 2008. The packages are a part of the water supply improvement schemes aided by Japan Bank for International Cooperation. The project objectives are to augment water supply systems of the urban regions, namely Thiruvananthapuram and Kozhikode in the state.

L&T has secured the development rights for a 60-megawatt Singoli Bhatwari hydroelectric power project from the Uttaranchal government for Rs 500 crore. The project will be executed by the company on build, own, operate and transfer basis.

Sterlite Industries, Vedanta Group Company, has decided to set up a manufacturing plant in the Integrated Industrial Estate at Haridwar, with an investment of Rs 1,000 crore.

L&T has posted 40 per cent growth in net profit at Rs 466.8 crore for the quarter ended March 2006, over the corresponding period previous year. For the fiscal year ended March 2006, engineering and construction segment has recorded 51 per cent growth in order booking at Rs 19,609 crore. International orders at Rs 3,786 crore constituted 19 per cent of the total value of orders. For 2005-06, L&T has posted a net profit of Rs 1,012 crore, a growth of almost 3 per cent compared with the previous year.

Bharat Forge has reported net sales of Rs 438.41 crore, a growth of 21 per cent for the quarter ended March 2006 and a 9.6 per cent growth in net profit at Rs 53 crore over the same period previous year. The company has reported 24.2 per cent growth in exports at Rs 191.8 crore. For 2005-06, the company has registered a growth of 29 per cent in its net sales to Rs 1577 crore and net profit has stood at Rs 206.96 crore, an increase of 28 per cent over 2004-05. Exports revenue for 2005-06 has reached at Rs 655 crore on account of strong demand from the US market.

Pidilite Industries net sales have been higher by 21 per cent to Rs 206 crore for the quarter ended March 2006. However, its net profit has stood at Rs 13.9 crore which is 21 per cent lower compared to Rs 17.8 crore for the corresponding quarter a year ago. During 2005-06, the company has reported 18 per cent rise in net sales to Rs 907 crore and net profit has stood at Rs 90.7 crore an increase of 18 per cent as against Rs 76.6 crore in 2004-05.

Ship building company ABG Shipyard has reported a whooping 153 per cent rise in its net profit at Rs 30.9 crore in the fourth quarter ended March 2006. The company’s total income from the operations has surged by 44 per cent stood at Rs 541 crore for the 2005-06.The company’s net profit for 2005-06 has galloped by 87 per cent to Rs 83.7 crore. The shipyard is having a capacity of 1,20,000 dead weight tonne and it’s planning to add two to three ships more to this capacity. The company has recently acquired a Canadian shipbuilding equipment facility for $ 5.6 million.

ITC Limited has reported a jump of 21 per cent in its gross sales turnover at Rs 16,510 crore for 2005-06 and net profit has gone up by 24 per cent to Rs 2,280 crore over 2004-05.

State owned Indian Oil Corporation Limited (IOC) has reported a 20 per cent rise in total income to Rs 1,76,339 crore during 2005-06 and net profit has risen marginally by 0.49 er cent to Rs 4,915 crore over 2004-05.

Steel Authority of India Ltd (SAIL) has reported 58.8 per cent drop in net profit to Rs 1,103 crore in the fourth quarter ended March 2006 compared with Rs 2,678 crore in the corresponding period last fiscal. The steel behemoth has seen a marginal increase in sales turnover by 1.5 per cent to Rs 32,800 crore in 2005-06. SAIL has reported a 41 per cent fall in net profit to Rs 4,103 crore for the fiscal year ended March 2006 as compared to the previous year on the back of rising coal prices and a fall in prices of finished steel.

Hindustan Petroleum Corporation Limited has registered a phenomenal 302 per cent rise in net profit to Rs 2,013 crore for the quarter ended March 2006. For the financial year 2005-06, the company’s net profit has slumped 68.2 per cent to Rs 405.6 crore over the previous year.

Mumbai-based coastal shipping company Shreyas Shipping & Logistics has posted a 43 per cent decline in net profit at Rs 7.2 crore for the quarter ended March 2006. The company’s total income from the operations has hardly grown up to Rs 31.7 crore from Rs 31.6 crore for the corresponding quarter previous year.

The government has decided to amend the rules for special economic zones, empowering the board of approval to relax the area norms for old cases where an in-principal approval had been given but the final notification was held up on account of area constraints.

After difference over special economic zones, Commerce and Finance ministries have made clear about their disagreement over the inclusion of Africa in product focus scheme. The intensity of this discord is so much that the prime minister has been asked to intervene. The finance ministry is unwilling to include Africa under the scheme, which was announced in the foreign trade policy, on the ground of revenue outgo of Rs 500 crore.

Singapore has asked India to remove 752 trade items ranging from condensed milk to shrimps and a whole range of fabric and yarns from its “negative list” of imports and bring it under the tariff liberalisation scheme, under the Comprehensive Economic Cooperation Agreement.

Analysis of trade data reveals that India has been at the loosing end in both the Thai and Sri Lanka FTAs (free trade agreements). Overall, after signing the FTA the balance of trade has tilted in favour of Thailand with India’s exports remaining at 0.65 per cent and imports growing at 33.8 per cent in 2005. Nine of the top ten items imported from Thailand in terms of value have shown a double-digit growth. At the same time, many of India’s previously high value exports to Thailand like marine products, chemicals and iron and steel have shown a decline after FTA. Trade data with Sri Lanka also reveals similar phenomenon; while Indian exports doubled to Rs 6082 crore between 2002 to 2005, Indian imports of Sri Lankan goods quintupled to Rs 1636 crore in the same period.

According to a survey conducted by the Internet and Mobile Association of India (IAMAI), the number of Indians seeking jobs online are on rise; it stood at 6.5 million in 2005-06 registering 71 per cent growth over the previous year and is expected to cross 9.2 million in 2006-07. For job-seekers, internet has opened up plethora of job opportunities by eliminating locational disadvantages and saving cost and time to a considerable extent. Similarly, for recruiters the online recruitment facility has been providing easy access to the best talent at a competitive cost. The IAMAI has also estimated that the market size of the country’s online recruitment industry would touch Rs 241 crore in 2006-07 as against Rs 145 crore posted in 2004-05. The industry is likely to maintain a year-on-year growth of over 60 per cent. The region-wise study has shown that Maharashtra has topped the list of online job seekers with 26 per cent share, followed by Delhi (17 per cent), Tamil Nadu (13 per cent), Karnataka (8 per cent) and West Bengal (6 per cent). The inter-city comparison has exhibited that Mumbai and Delhi has topped with 17 per cent share each, followed by Chennai (7 per cent), while Kolkata and Bangalore with 5 per cent each. The survey also stated that junior (15 per cent), mid level (25 per cent) and senior executives (12 per cent) accounted for over 50 per cent of the online job seekers.

Mahanagar Telephone Nigam Ltd (MTNL) has reduced its landline calls between Delhi and Mumbai by 80 per cent. Effective June 1, 2006, a call between Delhi and Mumbai on the MTNL network will be treated as local and will be charged at Rs 1.20 per three minute against Rs 5.70 per three-minute charges now. MTNL is the largest landline player in Delhi and Mumbai with a total of 3.8 million subscribers.

*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.