Introduction

The concept of Corporate Social Responsibility (CSR) has been an integral part of corporate growth strategy for quite some time at the international level; in the recent period, it has also entered the Indian corporate sector. There is no commonly accepted definition of CSR as it varies widely from country to country. For instance, in Ghana , the concept is about capacity building for sustainable livelihoods; it respects cultural differences and finds business opportunities in building the skills of employees, the community and the government. In Philippines , it is about business giving back to society. In the USA , traditionally the concept has been defined more in terms of philanthropy; companies make unhindered profits constrained only by having to fulfil their duty to pay taxes; they then donate a certain share of the profits to charity. However, in modern times, the whole perspective of the corporate world towards CSR has undergone considerable changes in the USA ; it is viewed as responsibilities of the corporate personal to wards social transformation. In Brazil , it is about commitment to strive for the best economic development for the community, to respect workers and build their capacities, to protect the environment and to help create frameworks where ethical business can prosper. According to European Commission (2001), CSR is essentially a concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment. This responsibility is expressed towards employees and more generally towards all the stakeholders affected by business and which in turn can influence its success. Most definitions describe it as a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis. Being socially responsible means not only fulfilling legal expectations, but also going beyond compliance and investing “more” into human capital, the environment and the relations with stakeholders. The World Business Council for Sustainable Development defines CSR as the ‘ethical behaviour of a company towards society’. The philosophy behind it is basically to give back to the society, what it (business) has taken from it, in the course of its quest for creation of wealth. It could take the form of community relationship, volunteer assistance program, healthcare initiatives, special education or training program and scholarships, preservation of cultural heritage and beautification of cities.

Possible Reasons for Following CSR

In spite of the dominant role of profit in the running of business, now a days businessmen are more conscious about their social responsibilities on account of the following factors:

Changed public expectations from business: One of the most potent arguments for social responsibility is that public expectation from business has changed. It is reasoned that the business institution exists only because it satisfies valuable needs of society. Society gives business its charter to exist, and that charter can be amended or revoked at any time if that business fails to live up to society’s expectations. Therefore, if business wishes to remain viable in the long run, it must respond to society’s needs and people expect the corporates to behave ethically and contribute to economic development, while improving the quality of life of the workforce, their families and society in general.

Better environment for business: The second argument favoring social responsibility is that it creates a better environment for business, since a better society may produce environmental conditions more favorable for business operations. The firm, which is the most responsive to improve people’s quality of life, will as a result have a better community to conduct its business. Recruitment of labour will be easier and the labour will be of a better quality.

Public image: Another argument is that social responsibility improves the public image of the business. Each individual firm seeks an enhanced public image so that it may gain more customers, better employees, and other benefits.

Avoidance of government regulation: A related argument is that business should engage in socially responsible behavior to avoid regulation by government. Regulation is costly to business and restricts its flexibility of decision-making, which is desirable from the businessman’s point of view.

Balance of responsibility with power: Another reason underlying the notion of social responsibility relates to the balancing of power and responsibility. Because business enjoys considerable social power, it has a corresponding responsibility in relation to society. Responsibility is a necessary reciprocal of power, and any imbalance can affect the welfare of society. Responsibility, thus, arises from power, and if business insists on avoiding its social responsibilities, then some of its power may be gradually taken away by government, which will then shape business behaviour through legislation and regulations.

How Does It Benefit the Organisation?

CSR is increasingly becoming a part of corporate governance and its activities have their own advantage. One of the biggest advantages of such activities is the development of internal branding among employees. Besides, with hectic work schedules, these activities help in de-stressing many employees and help in developing more evolved and conscientious human beings. In several organisations these activities have major employee involvement. The benefits are in terms of building a positive image and encouraging social involvement of employees, which in turn develops a sense of loyalty and trust among the employees in the organisational ethics, enhances reputation of the company, increases market share, etc. More importantly its serves as a soothing diversion from the mundane workplace routine and gives one a felling of satisfaction and a meaning to their lives. CSR has become one of the pivots on which corporations look to build their reputation.

Evolution of CSR: Global Scenario

The phrase Corporate Social Responsibility was coined in 1953 with the publication of Bowen's 'Social Responsibility of Businessmen', which posed the question: 'what responsibilities to society can business people be reasonably expected to assume? The late 1950s saw the beginning of the rise of consumer power as a force to influence corporate behaviour, joined in the early 1970s by environmental concerns and the ideas of growth. Since the 1980s, dramatic political and economic changes around the world have brought social responsibility issues to the fore again, associated with the rise of libertarian values in western politics and the collapse of communism and other collectivist ideologies. The political changes in the 1980s, especially in the US and the UK , led to a radical re-think of the respective roles of the state and business in western society. The dominant idea in political thought at the time was to shrink the role of the state and to place greater responsibility on the individual and business. Reducing the role of government was achieved by privatising state-owned companies, reducing tax burdens, de-regulating a range of business activities (e.g. telecommunications), cutting government spending and reducing subsidies. In return for these liberal environments, businesses were asked to donate more for charity. Politicians in the US and UK made special calls for businesses to increase there contribution to charity, giving tax incentives for those who did.

Evolution of CSR in Japan

During Japan ’s rapid growth era (in 1960’s), as companies single-mindedly pursued profit, industrial pollution and other social problems emerged mainly in heavy and chemical industries. These included air and water pollution from factory waste water and sulfurous acid gas causing the poisoning and other diseases. A strong anti-business sentiment emerged that regarded companies as inherently evil. In 1967 the Basic Law for Environmental Pollution Control was enacted. After the first oil shock of 1973, price hikes in the oil industry prompted opportunistic price hikes and market cornering elsewhere, causing inflation in daily necessities, while the problem of defective products also added to the anti-business sentiment. Responding to corporate criticism at its peak in 1973, Keidanren (Japan Federation of Economic Organizations) proposed ideals for corporate behaviour. At the company level, new departments were set up to deal with pollution, and foundations were hastily formed to return some of the profits back to society. A new era of CSR began in 2000. Socially responsible investment (SRI)* had reached Japan in the summer of 1999 with the emergence of Japan ’s first eco funds, and Japanese companies were bombarded with intrusive surveys by western research agencies for SRI screening purposes. While eco funds initially focused on the environmental stance of companies, the scope of SRI gradually expanded to corporate governance and social contribution. Since the surveys influenced corporate valuations in capital markets, Japanese companies grudgingly complied. Meanwhile, a series of corporate scandals erupted including Snow Brand and Nippon Meat Packers, causing the scope of social responsibility to expand to corporate ethics, compliance, accountability, and disclosure. Ricoh became the first of several companies to set up a CSR department in 2003, and Japanese companies began to implement new CSR initiatives from the perspective of risk management and sustainability.

Evolution of CSR in Latin America and the Caribbean

In Latin America and the Caribbean , the concept is still strongly associated with philanthropy, which is usually the initial stage of all social responsible practices. There is a long tradition of corporate philanthropy in Latin America and the Caribbean , where the private sector had an overly paternalistic view of its role in society. With the exceptions of Chile and Brazil , there are no tax incentives to corporate donations. Therefore, philanthropy and the more evolved participatory concepts of corporate citizenship seem to drive companies to take up CSR in the region. Philanthropy is not related to the core business of profit making. While company donations play a role in Latin American societies, an evolution toward increased private sector participation is needed. Foundations and nongovernmental organizations (NGOs) are encouraging corporations to participate more actively and to move beyond philanthropy toward corporate citizenship tailored to specific local characteristics. This is especially the case in conflict sensitive societies, such as Colombia, as unexpected problems are likely to arise when companies fund development projects without due consideration of needs, means and goals. More generally, to avoid unforeseen mishaps and to enhance its effectiveness companies should develop strategies that contribute to the economic and social development of the community in partnership with local, regional and national actors.

Indian Scenario

The concept of CSR is not new to the Indian companies. However, what is new is the way it has caught on with Indian corporates and the direct involvement of employees in implementation of these projects. Dedicated departments in most organisations are looking into much more than just funding or getting involved in one-time projects.

Earlier, Indian corporations were predominantly family owned, so it was more of a desire by the families. Institutes like the Tata Memorial Hospital , BITS, Pilani and Dhirubhai centre are a few of the examples of such work undertaken by the corporates. However, in the present scenario we see all major companies following the practice. The CSR effect has been creating a positive ripple in both society and the corporate world. A large number of public and private sector organisations have their own foundations, which work in close association with NGO’s and the government. Together they tackle a lot of local and public issues. These organisations focus on education, primary healthcare, AIDS awareness, and infrastructure. Good beginnings are made my number of companies like Wipro, Tata, Infosys, Reliance and National Thermal Power Corporation (NTPC). Among these, Tatas and Infosys have done great work on corporate philanthropy. The PSU’s are also self-driven on CSR. ONGC and IOC have seriously begun to engage with NGOs on various causes.

CSR Activities by FICCI and CII

A significant component of the corporates CSR is rendered through industry associations. The Confederation of Indian Industry’s (CII) Social Development Council (SDC) and the Federation of Indian Chambers of Commerce and Industry’s (FICCI) Socio-Economic Development Foundation (SEDF) were both established in 1995 with the aim of getting firms to focus on CSR. CII set up its SDC to ensure that the benefits of economic reforms and industrial growth are available to people living in poverty and facilitate the image of industry as a concerned group for all round community development, and build strong partnership across sectors for better governance and empowerment. FICCI set up their SEDF for several reasons, first, companies want advice on how to engage with society and bring about improvement in the environment in which they function. Second, in times of calamity and disaster, industry wants to be part of the rehabilitation effort. Third, donor agencies are in search of a credible organisation through whom they want to engage with society. FICCI’s CSR activities cover health, education, gender issue, child labour, substance abuse prevention, rebuilding and rehabilitation and training programmes for regional chambers of commerce and corporate houses. CII’s SDC focus on community development, disaster management, education and literacy, population and health with special focus on HIV/AIDS, the physically challenged, vocational training, women’s empowerment and substantial livelihood programmes. CII is also handling a handicrafts development project in the North-East India and non-conventional projects in Rajasthan and Jharkhand.

CSR Activities by Indian Companies

The concept is taking new dimensions with more and more companies encouraging and also involving their employees in the numerous social activities and ventures being undertaken in collaboration with NGO groups and voluntary organization. Several companies and their CSR activities are discussed below.

The Tata group’s diverse approach towards CSR is designed to meet the needs of environment as well as of the community. They believe in making an individual self reliant rather than offering mere monetary assistance. CSR has been part of the Tata Group ever since the days of Jamshetji Tata. Ages ago when the idea of social responsibility by the corporates was either the government or charitable organisations responsibility, the Tatas aggressively worked for the upliftment of the community. Tata initiated various labour welfare laws, like the establishment of Welfare Department in 1917 and enforced by law in 1948 or Maternity Benefit was introduced in 1928 and enforced by law in 1946. Over the years, the Tata philosophy to 'give back what you get has been followed by all their enterprises across India . The kinds of social activities introduced by Tata Group have been relief measures, rural development, health care, education and art and culture, etc. In addition, there are special programmes for the welfare of women, rehabilitation projects, etc. Every year, the Tata Group's contribution to society has been phenomenal. In the fiscal year 2004 Tata Steel alone spent Rs 45 crore on social services. Different Tata companies have been actively involved in several kind/type of social work. Like Tata Consultancy Services runs an adult literacy program, Titan has employed disabled people in blue collar workforce at Hosur, Telco is fighting against Leprosy at Jamshedpur , Tata Chemicals runs a rural development program at Okhamandal and Babrala and Tata Relief Committee works to provide relief at disaster affected areas.

Hindustan Lever Limited generates around half its business (sales/profit) from rural markets. Their brands are sold in around 100,000 villages with populations of 2,000 or more. Until recently the company was very pleased with this level of distribution but regional competition forced them to look further afield. The challenge now was how to reach the other 500,000 smaller villages in the more remote parts of India where there is no retail distribution network but thousands potential consumers. The solution the company came up with was to recruit women from these small villages to act as freelance direct sales operators. HLL’s Project Shakti is one of its initiatives to usher prosperity and uplift the standard of living in the rural areas. The objectives of Project Shakti are to create income-generating capabilities for underprivileged rural women by providing a tiny enterprise opportunity, and to improve rural living standards through health and hygiene awareness. HLL has trained underprivileged rural women as ‘Shakti Entrepreneurs’, who sell the company’s products in the villages of states like Andhra Pradesh, Madhya Pradesh, Karnataka, Orissa, West Bengal, and Gujarat. Currently, around 13,000 ‘Shakti Entrepreneurs’ operate across 12 states of the country covering more than 60,000 villages and selling to 70 million consumers. This has been achieved in cooperation with over 300 organisations including NGOs, banks and both state and local government departments who recognise the potential for economic growth by encouraging women to become entrepreneurs. Another HLL initiative, Shakti Vani is a communication program that spreads awareness of best practices in health and hygiene. Local women are appointed as Vanis, and trained on matters relating to health & hygiene. They use specially designed communication material, such as pictorial literature, school contact programs, etc. The Vani project is currently operational in the states of Madhya Pradesh, Chattisgarh, and Karnataka.

Infosys Foundation of Infosys Technologies Limited is a public charitable trust founded in 1996. The main activities of the Infosys Foundation are conducting rehabilitation camps at tribal areas, drought hit areas, construction of hospitals, upgrading the hospitals with significant equipment like ultrasound scanners, ambulance, significant drugs in certain cases, etc. It also works for the cause of social rehabilitation and rural upliftment, construction of orphanages construction of common halls at orphanages, old age homes, etc. Rehabilitation of devadasis in Karnataka, rehabilitation of mentally retarded through other local organisations, rehabilitation of children on platforms, streets and slums, assisting the promotion of social awareness among the tribals or other backward communities where evil practices are followed. The foundation has done exceptional philanthropic work by providing shelter and assistance to destitute children and building libraries and science centres in several government schools run in remote areas. They also providing financial assistance to artisans and their families in their endeavour to sustain and revive the disappearing art forms and the ethnic culture of rural India .

SAIL undertake a range of activities under the banner of CSR. These are primarily divided into plant specific and other activities. Working in the township around the plant Self-help group for women, old age homes, homes for handicapped, running such institutions from a decade. Sail has around 150 schools where more than 1.5 lakh children are studying. The company also run 19 hospitals with total bed strength of more than 3900. SAIL has initiated SAIL AIDS control programmes in association with the National AIDS control organisation. The company’s major initiatives include school AIDS education programme, safe blood and blood products, family health awareness campaign and voluntary counselling and testing centres (VCTC).

Bicon Limited has established its Bicon Foundation in 2004. The foundation has identified a strong need to provide low cost health insurance and health education to all levels of our social structure aimed at providing quality healthcare and improving the health standards of rural India. Arogya Raksha Yojana is the first step taken by the foundation. ARY is a comprehensive health insurance scheme that offers people of rural Indian affordable access to high quality healthcare provided by a network of hospitals and clinics.

Violation of CSR Principle: A Case Study of Coca Cola Company

A severe protest by the people against a multinational soft drink company, Coca Cola, at its plant in a small village Plachimada, Kerala, led the government to shutdown the plant in August 2005. The plant at Plachimada was alleged to have exploited the ground water resources leading to drying up of wells and other natural water resources in the area. The entire region, which was a thriving agricultural land, had to rely on water supplied by tankers. Coca Cola was drawing 1.5 million liters/day from the common groundwater resource. However, due to inherent water scarcity the company was able to extract only 800,000 liters from the bore wells. The company drew water from the nearby villages to compensate for the lack of availability causing parched lands of more than 2000 people residing within 1.2 miles of the factory. Adding to the water exploitation, Coca Cola was accused of supplying poisonous waste as fertiliser to the local farmers. Tests done by independent agencies showed that the sludge contained high levels of Lead and Cadmium. The sludge, which was disposed off in open ground, ran along with rain water to the natural water resources. The contamination caused by the sludge allegedly caused allergic symptoms and perpetual headache to the local population. Tests also show that the water available in the wells was contaminated and unsuitable for consumption. This led the government of Kerala to order shutdown of operations of the plant so as to safeguard the interests of the local community.

The Kerala incident was not the isolated one; the company had to face 14 similar accusations from various parts of the country. For instance in Varanasi, the local community protested against Coca Cola for exploiting water resources and spilling waste into the sacred Ganges. Added to these were the findings from the Centre for Science and Environment that twelve large soft-drink brands manufactured by Coca-Cola and its rival Pepsi, sold in and around Delhi, contained a cocktail of pesticide residues, including chemicals which could cause cancer, damage the nervous and reproductive systems and reduce bone mineral density.

The case clearly shows that emerging markets can respond and protest against irresponsible behaviours of MNCs. The bad publicity and loss of brand value has repercussions not only in the local markets but also in the global market scenario. The adverse publicity caused by the protests and media coverage brings out high degree of negative public response for the product safety of the company. Thus, it is in the best interest of the corporations to take care of the welfare of the local community. Recently, the government of Kerala has banned the consumption of soft drinks manufactured by Coca Cola and Pepsi Company.

Conclusion

CSR is increasingly getting recognition, much visible in the overall contribution in terms of time and money by companies and their employees on a range of social issues. Instead of concentrating only on mere production and profitability, companies now carry out non-financial functions such as human rights, business ethics, environmental policies, corporate contributions, community development, corporate governance, and workplace issues. Companies are also more transparent in disclosing and communicating their policies and practices as these impact employees, communities, and the environment.

In India , the meaning of CSR in the mind set of people is nothing more but charity. CSR should not be mistaken for charity; it is the responsibility of the corporate sector towards the society it operates in. This responsibility is wide-ranging towards its customers, employees, shareholders and the community as a whole. Apart from creating wealth, making profits and being drivers of economic growth, companies are expected to exercise a sense of responsibility towards the society that they operate in.

The governments of the western world have a strong social security network such that corporates can concentrate on making profits and paying taxes regularly but, in this regard, India still considerably lags behind. We are far away from reaching that phase of economic development where government is solely responsible for the basic needs of the public. We don't have social security worth the name for, adequate health and education services. Therefore, the corporates have the bigger role to play in mitigating the social deprivations of the people at large and in improving the environment.

Reference:

Commission of the European Communities (2001): Green Paper on ‘Promoting a European Framework for Corporate Social Responsibility’: July 18.

Kawamura Masahiko (2004): ‘The Evolution of Corporate Social Responsibility in Japan (Part 1) – Parallels with the History of Corporate Reform’

World Business Council for Sustainable Development on CSR (2000): ‘Making Good Business Sense’; January

World Business Council for Sustainable Development (2002): ‘Meeting Changing Expectations’.

Various media sources

* Socially responsible investing (SRI) is an investment process that considers the social and environmental consequences of investments, both positive and negative, within the context of rigorous financial analysis. It is a process of identifying and investing in companies that meet certain standards of CSR and is increasingly practiced internationally.

* This note is prepared by Vidya Kanitkar

The latest wheat import tender for 4-lakh tonnes has attracted eight bidders with the US-based Cargill Inc offering to supply the maximum of 3.4 lakh tonnes at $ 233-245 per tonne. The other bidders include Toepfer International of Germany (2.6 lakh tonnes at $ 220-240 a tonne), Australia's AWB Lakh tonnes (2.2 lakh tonnes at $ 216-230), the Switzerland-based Agrico Trade & Finance SA (two lakh tonnes at $ 210-212) and Glencore International (1.75 lakh tonnes at $ 222-228). Those offering smaller quantities have been Singapore 's Agrocorp International (90,000 tonnes at $ 212.95), France 's Soufflet (70,000 tonnes at $ 223.9) and Concordia Agritrading , Singapore (43,000 tonnes at $217).

The first consignment of 45,000 tonnes wheat being imported by the private trade is expected to arrive in the country till August 05, 2006 or early next week. The Canadian origin wheat has been contracted by a Pune-based firm on behalf of a few millers in the country, which has been bought at $195 (Rs 9,100) per tonne cost and freight (c&f).

The Cabinet Committee on Economic Affairs (CCEA) has fixed the Statutory Minimum Price (SMP) of sugarcane for 2006-07 sugar season at Rs 80.25 a quintal for a base recovery rate of 9 per cent subject to a premium of Rs 0.90 for every 0.1 percentage point increase in the recovery above that level.

The central government has released 1 lakh tonnes of maize over and above the 4.5 lakh tonnes already approved by the centre for distribution to the poultry sector through the tender route. The maize would be routed through the animal husbandry departments in the respective states at a provisional price of Rs 550 per quintal, though the state-wise cut off rates obtained in the tender enquiries would be the final applicable price for the 1-lakh tonnes. Of newly released quantity, 50 thousand tonnes would provided to the poultry farmers in Andhra Pradesh and 25 thousand tonnes each would be allocated to Maharashtra and Tamil Nadu.

Oilmeal exports from the country have declined by 21 per cent to 1,79,950 tonnes in July 2006 compared with 2,27,025 tonnes reported during the corresponding month last year. However, on the cumulative basis, they have posted an increase of 12 per cent to 1,055,150 tonnes during the first four months of the current fiscal year 2006-07 on account of the spurt in exports of soybean meal, which has jumped to 6,85,425 tonnes in the same period compared with 5,06,650 tonnes a year ago. China has emerged as a major importer during the period.

Agricultural & Processed Food Products Export Development Authority (APEDA) has scaled down the export growth target for agricultural products to 15 per cent for the year 2006-07 from 21 per cent last year. The cut in expected growth rate has been primarily due to ban on exports of pulses, which contributed Rs 800-1,000 crore last year.

APEDA, with the help of the commerce ministry, has plans to set up five market-cum-auction centres across the country to give a fillip to floriculture industry, which has been facing recession since last 5 years with more than 40 per cent floriculture farms in shut-down mode. The centres would be open in Mumbai, Bangalore , Noida and Kolkata. The ministry has provided a one-time grant of Rs 25 crore for setting up the facilities. APEDA is considering setting up a fund, which would primarily help buying new planting material available overseas to help the floriculture industry.

Monsanto's monopoly over Bt cotton technology in the country has come to an end, with two new players — the Hyderabad-based JK Agri-Genetics Ltd and Nath Seeds Ltd of Aurangabad, launching hybrids based on alternate technologies (`constructs') for incorporating genes from the soil bacterium, Bacillus thuringiensis or Bt. JK Agri has got clearance for four hybrids, namely, `JK Varun Bt' in the central zone, `JK Durga Bt' and `JKCH-99 Bt' in the south and `JKCH-1947 Bt' in the north, whereas Nath’s three approved hybrids include `NCEH-6 Bt' for the north zone, `NCEH-2R Bt' for central and `NCEH-3R Bt' for the south.

As per the estimates of London-based International Grains Council (IGC), world wheat output for 2006-07 is expected to be lower by 21 million tonnes at 596 million tonnes over the previous year. Wheat crop prospects in major origins have deteriorated and hot, dry weather conditions during July are likely to further reduce global output. Supplies for the year 2006-07 are going to tighten in the view of closing stocks reaching 118 million tonnes, lower by an estimated 15 million tonnes.

Steps have been taken up to establish the National Centre for Sustainable Aquaculture (NCSA) in Kakinada in September 2006 and the union government has sanctioned Rs 6 crore for the same purpose. The institute would help aqua farmers in combating diseases and obtaining better crop.

Industry

India

's manufacturing sector needs a massive investment of $135 billion over the next five years if it is to support economic growth of more than 8 per cent as per the ministry of commerce and industry. A government-appointed panel has projected that India requires $1.5 trillion, including $72 billion in Foreign Direct Investment (FDI), of investment in all sectors over a similar period. Apart from allowing FDI up to 100 per cent in most industries, the government has initiated a slew of measures to boost manufacturing, such as improving infrastructure and developing growth centres. India has set a target of 12 per cent growth in manufacturing (from 8.4 per cent in 2005-06) as it seeks to boost GDP growth to 10 per cent in the coming years.

The blended yarn spinning protested the steep increase in prices of polyester staple fibre (PSF) and demanded duty-free imports to help spinners cope with the cost escalation, especially given that blended yarn prices have shown no commensurate increase. If the problems arising out of price hikes are not addressed, the downstream industries would suffer heavy losses and some facing machinery constraints may simply shut down. According to Indian Spinners' Association (ISA), the domestic PSF industry currently enjoys adequate protection in the form of 10 per cent customs duty and 4 per cent countervailing duty on PSF imports and in order to support downstream processors, the ISA has demanded the customs duty on PSF import be abolished.

The government plans to take advantage of the developments in the field of technical textiles and focus on the export potential of the field, arising out of a large textile manufacturing base and technical manpower in the country. An expert committee on technical textiles has drawn up a roadmap on various issues to suggest measures for implementation in a time bound manner. India has the potential to emerge as a leading technical textile manufacturer and exporter with greater investments, focused research and development efforts, and creation of state-of-the-art common testing facilities. The global market for technical textile products, which include medical non-wovens and textile items used for industrial applications, stood at $107 billion in 2005 and is expected to grow to $127 billion by 2010 at a compounded annual growth rate (CAGR) of 3.3 per cent. The domestic market for technical textiles in 2005 has been estimated at $6.7 billion and is expected to grow to $12.4 billion by 2010 at a CAGR of 11.25 per cent.

The double-digit growth run seen in the domestic tractor industry in 2005-06 has continued into the current year; tractor sales have jumped by 25 per cent in the first quarter of 2006-07 to around 83,670 units over and above the all time high of about a 15 per cent growth last year. The fundamental reasons for the continued growth remain the same, namely higher return from crops and reduction in interest rates on tractor loans. In addition, the availability of easy financing for tractors has also increased, especially in the southern states as per the Tractor Manufacturers Association (TMA). While tractor sales in Andhra Pradesh have almost doubled to 8,300 units during the quarter under review, sales in Tamil Nadu and Karnataka have also seen brisk growth in sales. The other states to register high double-digit growth during the quarter have been Gujarat, Haryana and Maharashtra, while growth has been lower in states such as Punjab , where farm mechanisation level is already very high. Madhya Pradesh, however, has seen a dip in sales primarily due to poor availability of financing. Meanwhile, with strong growth in demand impulses, domestic tractor makers have been ramping up capacities to meet demand; domestic tractor manufacturers are set to invest Rs 1,067 crore over the next few years to enhance capacity.

The government is working on a proposal to set up five new institutes for pharmaceutical education and research in Hyderabad , Ahmedabad, Kolkata, Hazipur (Bihar) and Guwahati, on the lines of the National Institute of Pharmaceutical Education & Research (NIPER), Chandigarh . The new institutes would take up new drug research, including animal toxicology studies, separately and in partnership with major pharma companies, besides creating a vast pool of skilled scientists. The ministry of chemicals and fertilisers has estimated that setting up of these institutes would require Plan funding to the tune of Rs 750 crore (Rs 150 crore per institute) during the eleventh plan period. Besides, each unit would require Non-Plan outlays of Rs 10 crore per annum to meet operational expenses till they can become self-sustaining.

According to the Automotive Tyres Manufacturers Association (ATMA), production of tyres in the domestic market has jumped 15 per cent in April at 58,78,614 units against 50,90,272 units in the same month last year, boosted by higher offtake of car and motorcycle tyres. In the same month, exports of tyres has seen a 4 per cent jump at 4,67,205 units against 4,49,412 units in April 2005.

Infrastructure

According to a survey by FICCI based on responses from the industry, allied industry organisations, associations, government and public sector undertakings, major core sectors like coal, electric power, oil and gas, crude oil, steel and aluminium will record higher year-on-year growth this year implying better prospects for growth of industry players in the engineering, non-engineering and the services sectors. As per the survey, the coal sector is projected to grow at 6.5-7 per cent in 2006-07 compared to a growth of 6.4 per cent a year ago; electric power at 5.5-6 per cent against 5.1 per cent in the last fiscal year; oil and gas at 0.8-1.4 per cent against a negative growth of 1.4 per cent; crude oil at 0.5-1.2 per cent against a negative growth of 5.2 per cent; steel at 7-8 per cent against 6.5 per cent; and aluminium at 8-9 per cent against 7.8 per cent.

The sugar industry is likely to settle at a price of about Rs 21 for a litre of ethanol as per a proposal for considering basic purchase price of ethanol submitted by Indian Sugar Mills Association (ISMA) to the ministry of petroleum. The industry has presented three options for revising the current price of Rs 18.75 per litre fixed in May 2005. The first option is based on change in prices of sugarcane; the price of sugarcane has increased by about 10 per cent since last May and there should be a corresponding increase of 10 per cent in the current price of ethanol which works out to be Rs 20.66 per litre. The second option is based on the revision of petrol prices since last May; the ex-storage price of petrol has increased from Rs 15.80 per litre last May and it has increased to Rs 22.98 by June 2006 due to which the sugar industry is seeking a shareable increase of Rs 2.25 per litre on ethanol price based on the Rs 7.18 increase in petrol price indicating a price of Rs 21 per litre. The third option is based on the minimum and maximum production cost of ethanol; the minimum cost is Rs 23.81 per litre and the maximum is Rs 28.49 resulting in a median price of Rs 26.25 a litre. The export realisation of ethanol is about Rs 21.75 per litre. The industry is likely to consider option one or two. The ethanol blending programme at the rate of 5 per cent is due to start from October this year in all the states barring the North-East. At five per cent blending, the country would require about 600 million litres of ethanol.

Domestic manufacturers of chemicals are apprehensive about the diversion of alcohol meant for the chemical industry for consumption towards blending once ethanol blending is made mandatory from October 2006 since the country has been facing a shortage of alcohol with around 30-35 per cent of the total annual domestic requirement being met through imports. In fact, about half of the country’s manufacturers of alcohol-based chemicals have already shut down operations in the last six months owing to the shortage of alcohol. According to the Indian Chemical Manufacturers’ Association (ICMA), limited land availability, water shortages and issues like food security make the ethanol blending programme an unviable option in the country. In India , the chemical industry and portable liquors are the major consumers of alcohol, estimated to consume 95 crore litres and 60 crore litres of alcohol in 2006-07, respectively. Of this consumption requirement, 120 crore litres will be produced domestically and the rest will be imported. The sources said blending would require an additional 60 crore litres of alcohol. Also, scarcity of alcohol will artificially jack up the prices.

Mining of Uranium

The government is planning to outsource the strategic area of uranium exploration work and mining activities to private players with a view to step up uranium exploration in the country and find larger, high-grade deposits. So far, prospecting of uranium and other minerals required for the nuclear power programme has been carried out by the Atomic Minerals Division (AMD), a unit of the Department of Atomic Energy, while uranium is mined and processed by Uranium Corporation of India Ltd (UCIL). Initially private sector participation would be limited to areas such as data collection, utilisation of modern techniques and processing of uranium and later its role could be expanded to full-fledged exploration and mining and even nuclear generation. The proposal comes in the wake of plans to step up nuclear generating capacity to around 24,000 MW by 2020 from the existing installed capacity of 3,360 MW. India is estimated to have around 80,000 tonnes of uranium reserves and an estimated 1,00,000 tonnes of uranium would be required to sustain the nuclear energy programme in the near future. Identification of a number of new uranium mining sites in states such as Meghalaya and Andhra Pradesh, including the Chitrial site in Nalgonda district where radioactivity is spread over an area of 50 sq kms, has sparked off efforts to search for more such sites. Though the fructification of the Indo-US deal could make way for uranium imports, stepping up of domestic uranium exploration is likely to be a hedge in case of disruption in possible foreign supplies if and when foreign supplies commence.

Indian shipping companies have posted lower net profits in the first quarter of 2006-07, as compared to the corresponding quarter of the last fiscal year due to factors like relatively softer global freight rates (for example crude carriers have earned an average Time Charter Yield (TCY) of $26,582 per day, as against $26,922 per day in the first quarter of last year while dry bulk carriers have registered an average TCY of $15,487 per day as against $22,590 per day in the year-on quarter reflecting a dip of about 31 per cent), spiralling bunker prices (there had been a 31-per-cent increase in cost of bunkers from the first quarter of last fiscal year to the first quarter of the current fiscal year) and higher interest and depreciation costs. Essar Shipping has recorded the biggest dip of 67 per cent with its net profit falling to Rs 36.9 crore as against Rs 110.3 crore in the corresponding quarter of 2005-06, followed by Mercator which recorded a fall of 56 per cent to Rs 18.30 crore from Rs 41.90 crore. Similarly, GE Shipping's net has fallen by 22 per cent, Varun Shipping's by 12 per cent and SCI's by 34 per cent. However, it is expected that with the changing trade routes, involving long haul transportation of oil between the US and West African coasts and Venezuelan oil increasingly flowing to China, freight rates may harden in the coming months, especially in the tanker segment. Even in the dry bulk segment, there are positive indications of the market firming up in the coming months on the back of a surge in US steel and cement imports due to re-building activity after the devastating hurricanes and the increasing grade trade, especially Brazilian soyabean exports.

Inflation

The annual point-to-point inflation rate based on wholesale price index (WPI) has moved up to 4.67 per cent for the week ended July 22, 2006 from 4.52 per cent during the previous week. The inflation rate was at 4.33 per cent in the corresponding week last year.

The WPI in the week under review has risen by 0.2 per cent to 204.1 from 203.7 in the previous week (Base: 1993-94=100). The index of ‘primary articles’ group (weight 22.02 per cent) has risen by 0.3 per cent to 203.4 from its previous week’s level of 202.7, mainly due to an increase of 0.6 per cent in the price index of ‘food articles’. The index of ‘food articles’ has gone up to 204.8 from 203.6 in the previous week, mainly due to the higher prices of poultry chicken, fruits and vegetables, masur, urad, gram and eggs. The index of ‘fuel, power, light and lubricants’ group (weight 14.23 per cent) has risen by 0.3 per cent to 327.4 from its previous weeks’ level of 326.3, mainly due to the higher prices of naphtha, furnace oil and bitumen. The index of ‘manufactured products’ group constituting the maximum of 63.7 per cent of total weight, has also risen marginally by 0.1 to 176.8 from the previous weeks’ level of 176.7, mainly due to the higher prices of food products, textiles, base metals, ‘machinery and machine tools’ and ‘transport equipment and parts’.

The latest final index of WPI for the week ended May 27, 2006 has been revised upwards; as a result both, the absolute index and the implied inflation rate stood at 201.9 and 4.99 per cent as against their provisional levels of 201.3 and 4.68 per cent, respectively.

During the first quarter of the fiscal year 2006-07, the tax collection by the government had increased over 40 per cent to Rs 44,463 crore against Rs 31,668 during the corresponding period of the previous year. However, the collection during the period under consideration, had been achieved 13.6 per cent of the targeted revenue of Rs 3,27,205 crore for the entire fiscal.

Fiscal deficit during the first quarter of the financial year 2006-07 stood at Rs 77,740 crossing 52 per cent of the budget estimates for the entire fiscal. Upside in fiscal deficit has been attributed to the increased expenditure (Rs 1,31,470 crore) in the first quarter due to generous transfer to states and higher expenditure on roads, ports and other infrastructure. Plan expenditure stood at Rs 38,524 crore, constituting 22.3 per cent of the projected amount of Rs 1,72,728 crore for the entire fiscal. To meet the Fiscal Responsibility and Budgetary Management (FRBM) target of reducing the fiscal deficit to 3.8 per cent of the GDP at the end of this fiscal year, the finance ministry has ordered a mandatory 5 per cent cut in all non-plan expenditure and cutting down of other expenses including a total ban on purchase of new vehicles. The measures also include restrictions on foreign travel by officials and more purchases through e-procurement.

The Goa Government has introduced an amendment Bill on July 25, 2006 in the State Assembly to amend the definition of luxury under its Goa Tax on Luxuries Act, so as to exclude entertainment, such as boat cruise, river cruise, water sports and casinos from the definition of luxury provided in a hotel under the Act. These are now being brought under the Goa Entertainment Tax Act. The proposed amendment of the Act seeks to levy tax at the rate of 10 per cent on the turnover of receipts of the proprietor, for accommodation provided for commercial purposes.

Banking

Punjab National Bank has posted a 2.6 rise in its net profit at Rs 368 crore for the quarter ended June 30, 2006 as compared to Rs 358 crore for the same quarter in 2005-06.

The National Bank for Agriculture and Rural Development (NABARD) and National Dairy Development (NDB) have joined hands to set up a Rs 2,000 crore comprehensive animal husbandry project in the country. The project would envisage a ten-year milk plan, which would be almost similar to operation flood.

Labour

The cabinet, on July 20, 2006, has approved setting up of the ‘Sixth Pay Commission’ for the central government employees. The Commission would also look into the quantum and need to sanction interim relief, if any, to the employees. The centre is expected to keep aside an additional Rs 20,000 crore annually, as pay and allowances for its 5.5 million employees (Minister of parliamentary Affairs). In 2005-06, the centre would pay Rs 50,000 crore to its employees, which works out to 1.56 per cent of GDP for 2005-06 at current prices. Following the Sixth Pay Commission, the total pay and allowances could increase by another 0.5 per cent of the GDP. According to the ministry of Information and Broadcasting, the state governments have also been consulted on the issue, as the state government employees are expected to demand similar hikes in their salaries. While the states like Karnataka , Assam , Tripura, Orissa, Manipur and Nagaland have demanded that the centre should share the burden of the increase in salaries of the state government employees, others like Madhya Pradesh and Gujarat have opposed it.

Financial Markets

Between the two offers of Tech Mahindra Ltd and GMR Infrastructure Ltd, the former was oversubscribed across all the categories while the latter was oversubscribed only for institutional investors.

During the week under review, the market displayed strong performance with BSE sensex registering a rise of 186 points to close at 10867 points and NSE nifty recording a gain of 46 points to close at 3177, though these indices rose for the first three days of the week but following the profit booking they fell marginally. Interestingly, on Thursday, August 3, the BSE sensex touched an intra-day high of 11,000 mark, but closed for the day below the mark. The stock indices tracked the global markets particularly the Asian markets that showed strong performance and also responded to strong corporate results. Moreover, Fitch upgraded India ’s foreign currency ratings from ‘speculative grade’ to ‘investment grade’.

Among the sectoral indices of BSE, the highest gain was registered by capital goods index which increased by 3.6 per cent followed by IT with 3.1 per cent and a negative growth was registered by FMCG and oil and gas indices. The BSE small-cap and mid-cap registered 3 per cent and 1.9 per cent gains respectively, as against 1.7 per cent recorded by the BSE sensex.

FIIs were net buyers to the extent of Rs 785 crore with purchases of Rs 5,884 crore and sales of Rs 5,099 crore, even mutual funds remained net buyers during the week.

As per the monthly data released by AMFI, the asset under management (AUM) has increased substantially to Rs 2,87,159 crore in July 2006 from Rs 1,64,546 crore in July 2005. Among the different available schemes liquid/ money market scheme has been the most favoured and accounts for about 43 per cent of the AUM.

Derivatives

The nifty futures traded during the week at discount to spot nifty; August nifty ruled at 3167 and September at 3145 while spot nifty at 3176. this discount suggests that consensus opinion is neutral and bearish. Open interest in all the series increased but not by significant amounts.

Government Securities Market

On August 8, the government is to re-issue 9.39 per cent 2011 and 7.59 per cent 2016 for notified amounts of Rs 6,000 crore and Rs 3,000 crore, respectively. The RBI has allowed both these securities to trade in ‘When Issued’ (WI) market until August 7; WI market stands for when, as and if issued, allows for the securities to trade before they are auctioned. On the first day of its trading, volumes were quiet thin and most of the participation came only from primary dealers; the turnover ranged between Rs 30 crore and Rs 40 crore.

The cut-off yield on 91-day TBs remained steady at 6.44 per cent while that on 364-day TB fell to 6.99 per cent from 7.02 per cent in the previous week.

Call rates ruled around the reverse repo rates due to increased supplies on account of increased government spending towards salary payments and also the demand for funds from banks remained subdued. The gilt-edged market remained cautious ahead of the auction as well as the uncertainty surrounding the US Fed rate. The weighted average YTM 7.59 per cent 2016 increased from 8.2 per cent on July 28 to 8.3 per cent.

Finance minister has said that the government was not in favour of increasing employees provident funds rate and also those on small savings instruments.

Bond Market

The fixed deposits schemes of commercial banks with maturity above 5 years are to be eligible to deduct the amount from their taxable income.

Foreign Exchange Market

The rupee-dollar exchange rate remained range bound during the week by marginally appreciating from Rs 46.56 on July 28 to Rs 46.54 on August 4, though dipped to Rs 46.72 on August 3 due to huge demand for dollars but it bounced back due to hike in benchmark rates by ECB and Bank of England and also upgrade of India’s foreign currency ratings by Fitch.

The annualized six-month forward premia fell from 1.10 per cent on July 28 to 1.04 per cent on August 4. The tenor wise data put out by CCIL shows that share of forward trades between 30-90 days maturity declined to 30 per cent from 40 per cent in the previous week, while that of 180-360 days maturity increased from 11 per cent to 35 per cent.

MCX and Euronext.life, the derivatves business of Euronext comprising the Amsterdam , Brussels , LIFFE, Lisbon and Paris derivatives markets, announced that they have signed a licensing agreement for MCX to use Euronext.life futures prices. This allows MCX to list domestic mini-futures contracts for both robusta coffee and white sugar based upon Euronext.life futures prices.

Corporate Sector

Mahindra & Mahindra has signed a long-term agreement with Bavarian Auto Trading Company, an Egyptian automobile manufacturer and trader, for setting up a completely knocked down (CKD) assembly unit in Egypt . The entire investment will be made by the Egyptian company.

FMCG major, Hindustan Lever Limited’s (HLL), has reported an 8.7 per cent increase in its net sales at Rs 3,083 crore for the second quarter (Q2) ended June 2006 as against Rs 2,836 crore in the same period previous year. The company’s net profit has shot up by 35 per cent to Rs 380.6 crore for Q2 2006 as compared with Rs 281.7 crore in Q2 2005. The FMCG business of the company has grown by 12 per cent to Rs 2,730 crore in Q2 2006 against Rs 2,434.9 crore in Q2 2005. The health and personal care business has witnessed a strong performance with 13.9 per cent sales growth, touching Rs 2,286.7 crore, as against Rs 2,007.1 crore. The innovations during the quarter have been the launch of Clinic All Clear Ice and Cool Variant and re-launch of Surf Excel, Pepsodent and Vim Liquid, said Manwani. For the half year (H1) ended June 2006, its net profit has grown by 54.8 per cent at Rs 823.5 crore, as against Rs 531.9 crore registered in the corresponding period a year ago.

Ashok Leyland has reported a 7.8 per cent increase in net profit at Rs 69 crore for the quarter ended June 2006 as against Rs 64 crore for the same period previous year. The total sales turnover of the second largest vehicle maker has surged 33 per cent to Rs 1,641 crore for April-June 2006 compared with Rs 1,231 crore for the corresponding quarter a year ago.

Tata Power Company has registered a rise of 25 per cent in net sales to Rs 1376.6 crore for the first quarter ended 2006 compared to Rs 1098.8 crore over the same period a year ago and its net profit has grown by mere 3 per cent at Rs 121.9 crore against Rs 118.4 crore despite the company paid higher interest charges of Rs 14.1 crore. The sales volume showed an increase of 5.25 per cent to 3,807 million units. The company has begun work on the 250 MW coal-based plant at Trombay, which will serve to meet Mumbai's projected power needs. The company had bagged order for a 50 MW Wind Farm at Khandke, Ahmednagar. It is also in the process of acquiring land for the two 1000 MW coastal power plants in Maharashtra Work on another 120 MW unit (unit 6) at Jamshedpur has begun, which is a captive plant for Tata Steel and is based on waste gases from the steel making process.

Maruti Udyog Limited has reported a 10.1 per cent growth in sales to 44,653 units in July 2006. While, this was higher than the car market growth of 8 per cent in the previous year.

Tata Motor has sold 45,056 vehicles including exports in July 06, a growth of 44.5 per cent over 31,173 vehicles in July 05. The company has sold 18,238 passenger vehicles in domestic market, a healthy growth of 40.4 per cent. Its sales of commercial vehicles in domestic market have been 21,534 (a rise of 54.3 per cent) while light commercial vehicles sales have stood at 9,395 units (a substantial increase of 58 per cent).

Hyundai Motor India has posted a strong growth of 50.5 per cent in vehicles volume at 24, 615 units sold in July 06. Of this 16,209 have been sold domestically and 8,406 units have exported.

General Motors India has registered a 37 per cent growth in July sales to 2,450 units. It consists of 1,302 units of Chevrolet Tavera, 309 units of Chevrolet Optra and 839 units of Chevrolet Aveo.

The number of telegrams booked during 2004-05 stood at 151 lakh, which has declined by 28 per cent against the previous fiscal. The declining trend started since 1991-92, when the numbers of telegrams booked were 651 lakh. Since then, the number has fallen every subsequent year. The telegram services are provided by BSNL. The usage of telegram service has been affected due to the rapid growth of mobile phones, e-mails and SMS.

In a setback to basic telephone services provider Bharti Telenet, telecom tribunal TDSAT has rejected its petition and directed that long distance (STD) call traffic of Bharti would be carried by state-run BSNL from the point of origin. Bharti had contended that it was entitled to carry long distance call traffic on its own up to the point where its network was available – a move which would have resulted in huge savings to the company on payment of interconnection charges to BSNL.

A software engineer based in Lucknow has duped at least 20 customers transacting on the world’s largest online marketplace ebay.com. Though the amount involved was only Rs 14 lakh, the engineer succeeded in breaking the security checkpoints and duping several banks. ebay is the world’s largest online marketplace. About 12,793 Indians use ebay as their primary or secondary source of income. ebay claims to have registered about 1.3 million sellers and 203 million potential buyers worldwide on its site.

*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.