Current Economic Statistics and Review For the Week 
Ended August 19, 2006 (33^rd Weekly Report of 2006)

Theme of the week:

And Now Is The FII’s Role in The Derivatives Market
Tending to Induce Volatility in Equity Prices?*

Highlights of  Current Economic Scene

AGRICULTURE  

According to the estimates of Rubber Board, the total production is likely to post an increase of 4.5 per cent to touch 425,500 tonnes during August – December 2006 compared to 407,140 tonnes a year ago, which would be slightly higher than 50 per cent of the total targeted production of 831,000 tonne in 2006-07. On the contrary rubber growers are expecting rubber production to fall by 2-3 per cent during the same period on account of deficient rainfall during months of June and July 2006.

The Minerals and Metals Trading Corporation (MMTC) has floated a tender for importing 1.05-1.20 lakh tonnes of wheat. MMTC had earlier purchased 50,000 tonne of wheat from its Singapore-based subsidiary MMTC Transnational Pvt. Ltd. As per the tender, 50 thousand tonnes need to be delivered at Vishakhapatnam , 25-30 thousand tonnes at Kolkata and the remaining 30-40 thousand could be delivered either at Tuticorin/New Mangalore or Tuticorin ports. The shipments have been scheduled for September and October 2006. 

The State Trading Corporation (STC) has finalised to award the wheat import contract for about 3.3 lakh tonnes out of the 4 lakh tonnes tender floated on July 27, 2006 to the lowest bidder, Agrico Trade and Finance , Switzerland at $210-212 per tonne, inclusive of cost and freight (C&F).  It is likely to buy nearly 70 thousand tonnes wheat from Australia ’s monopoly wheat exporter AWB Ltd, leaving the second lowest bidder ( Singapore ’s Agrocorp International), which could not qualify for the tender on technical ground. The centre is expected to import at least 1 million tonne more wheat, as there would be a shortage of over 5 million tonnes in 2006-07 due to low output and carryover stock.

A 50 thousand tonnes wheat import tender floated by PEC Pvt. Ltd. has received 7-8 bids with $220 per tonne on cost and freight basis being the cheapest among all. The company is seeking wheat of European Union or Black Sea origin.

The central government has approved setting up of a National Fisheries Development Board (NFDB), involving an investment of Rs 2,100 crore that would be spread over 6 years. About Rs 620 crore of the total investment would be allocated for aquaculture development and Rs 600 crore towards infrastructure development. The project is expected to increase fish production, besides facilitating direct employment in the sector.

The excess rainfall and the subsequent release of water from various dams has adversely affected more than 2.5 lakh hectares of agricultural land damaging kharif crops like oilseeds, sugarcane, soyabean, banana and cotton to some extent, in Maharashtra. The cotton crop in Gujarat is likely to fall by at least 10 per cent due to floods in southern region of the state.

The ministry of finance has proposed revival of subsidy schemes for food, fertiliser and fuel. Introduction of smart cards for every citizen by March 2009, allowing states to announce a cash transfer scheme for food and kerosene supplies to poor families, utilisation of natural gas as a feedstock for the fertiliser industry against costlier fuels like naphtha, provision of fertiliser subsidy only to small and marginal farmers by way of setting two separate prices for paddy and wheat for each season and complete elimination of LPG subsides have been the important features of the ministry’s draft cabinet note national policy on subsidies.

Industry

Overall

To enable the country achieve 12 per cent growth in the manufacturing sector, Assocham has demanded infrastructure status for gas pipelines as well as a 100 per cent tax holiday for infrastructure building industries for 15 years from day of commencement of their operations. It has also urged for a 100 per cent tax holiday for various types of activities involved in the complete supply chain of food processing and agro-based industries; a tax holiday for 15 years will make the food-processing sector substantially raise its contribution to the GDP growth.

Industrial growth has continued to slide for the second consecutive month, dipping to 9.6 per cent in June 2006 from 12.2 per cent in the corresponding month in the previous fiscal year due to a slowdown in the manufacturing and the electricity sectors. According to data released by the CSO, the manufacturing sector has grown at a slower 10.5 per cent as compared to 13.2 per cent in June 2005. The growth in the electricity sector has also slipped from a strong 9.6 per cent in June 2005 to 4.5 per cent in June 2006. The mining sector has remained stagnant at 4.8 per cent during the month as compared to the corresponding month in the previous year. As per the use-based classification, the capital goods sector has risen  strongly by 23.7 per cent during June 2006 as against 13.5 per cent in the same month a year ago while intermediate goods have recorded a growth of 9.9 per cent, up from the 4.2 per cent growth in the comparable month of the previous year. However, there has been a steep deceleration in the overall growth of consumer goods to 5.9 per cent compared to 23.7 per cent a year ago.

During April-June 2006 the growth in industrial production on a cumulative basis has stood at 10.1 per cent, marginally lower than the 10.4 per cent achieved in the corresponding period in the previous fiscal year. In this period, the manufacturing sector growth has stood at the same level of 11.2  per cent as in the first quarter of the previous fiscal year, electricity growth has been lower at 5.1 per cent compared to 7.7 per cent and mining production has gone up by a mere 3.5 per cent as against 4.3 per cent.

Automobiles

Passenger car sales has remained strong for the fourth consecutive month in the current financial year with sales increasing by 28.4 per cent in July 2006 over the same month last year, backed by cut in excise duty on compact cars and high discounts being offered by manufacturers. During April-July 2006 passenger car sales have risen by 24.8 per cent to 324,671 units as compared with 260,025 units in the same period a year ago as per data released by the Society of Indian Automobile Manufacturers (SIAM). However, it has been pointed out that with several carmakers increasing prices in August citing rise in raw material costs the momentum might sag in the coming months.  The sales of two wheelers has also maintained high growth in the same period; the overall two-wheeler market has grown by 17.78 per cent during April-July 2006 over the same period last year; while motorcycles sales have grown by 20.6 per cent scooters sales have gone up by about 6.9 per cent and mopeds by 1.2 per cent. Meanwhile, with infrastructure development activities in full swing, the overall commercial vehicles segment has spiralled by 40.8 per cent. The growth of medium and heavy commercial vehicles has been about 43 per cent while that of light commercial vehicles has been 37.6 per cent. Overall automobile exports have registered a 33 per cent growth during April-July 2006 over the same period last year.

Air Conditioners

According to the latest annual report of Blue Star Ltd, the air conditioning market in India is Rs 5,600 crore with the amount being split equally between the centralised variety and the window/split air-conditioners. Another smaller but fast growing climate control segment in India is that of commercial refrigeration that is estimated at Rs 1,200 crore. With a growth in the production and export of vegetables and fruits the company also anticipates a dramatic increase in the cold chain business, namely, pre-coolers, bulk cold storages, transport refrigeration and perishable cargo complexes.

Alcohol and Molasses

With sugar production recovering this season (October-September) and slated to go up further in 2006-07, mills are facing a new problem of disposing surplus molasses and alcohol. During 2005-06, total sugar output is estimated at 19 million tonnes (mt); the corresponding production of molasses at this level (100 tonnes of cane crushed yields an average 10 tonnes of sugar and 4.5 tonnes of molasses) works out to 8.55 mt and (one tonne of molasses gives 225 litres of alcohol) around 1,925 million litres of alcohol. As against this, total domestic consumption is estimated at 1,625 million litres, of which 925 million litres would go for potable purposes and 700 million litres to the chemical industry (including 50 million litres by units making ayurvedic and other products). Thus, even without accounting for imports or alcohol from grains and other substrates, there would be a surplus of 300 million litres. In the coming season the situation might be worse with sugar output scheduled to cross 23 mt, which would end up generating some 2,330 million litres of alcohol and domestic demand at the most pegged at 1,700 million litres, it would leave a surplus of 630 million litres. In Tamil Nadu mills are expected to close this season with molasses stocks of 4 lakh tonnes (lt). With production to touch 11 lt against consumption of 8 lt, the closing stocks in 2006-07 at 7 lt, would be twice the storage capacity of 3.5 lt in the state. This has resulted in ex-factory rates of molasses in the state to slump to Rs 500 per tonne against Rs 2,500-3,000 per tonne in UP, where there are more distilleries. Bajaj Hindusthan Ltd (BHL), the country's top sugar producer, has exported a 5 million litres shipment to Korea and Japan , worth around Rs 14 crore at $ 600 per tonne free-on-board. This is a reversal from 2003-04 and 2004-05, when sugar production ruled at 13.55 mt and 12.69 mt and alcohol availability from local molasses hovered around 1,300 million litres resulting in imports of around 400 million litres in each of these seasons.

Infrastructure

Overall

The growth in the cumulative index of the six infrastructure industries has slowed down to 6.2 per cent in June 2006 compared with 8.3 per cent in the corresponding period in the last fiscal year mainly due to a major deceleration in growth of power generation as well as steel and cement production. The growth in the six core sectors would have been lower but for the rebound in crude oil production and petroleum refining which have grown by 1.2 per cent and 10.4 per cent respectively from a growth of 0.3 per cent and 1.1 per cent in June 2005 as per the provisional data that has been released. Coal production has also grown strongly by 11.9 per cent in June this year, as against 3.4 per cent registered in 2005. However, growth in electricity generation has declined drastically to 4.5 per cent from 9.4 percent in June 2005. Growth in steel production has been lower at 5.6 per cent in June 2006 compared with 12.6 per cent in the corresponding month of last fiscal year. Cement production has recorded a slower growth rate of 11.2 per cent in June 2006 against 16.6 per cent in June 2005.

During April-June 2006-07, the six infrastructure sectors have logged a growth rate of 6.3 per cent compared with 7.5 per cent during the corresponding period of 2005-06. Crude oil production during April-June in the current year has risen by 0.2 per cent against a decline of 1.2 per cent in the same period a year ago. Refining throughput has been higher by 11.8 per cent compared with a negative 4.9 per cent during April-June 2005. Coal production has grown by the same rate of 7.6 per cent in April-June 2006-07 while growth momentum in power generation has reduced to 5.2 per cent from 7.5 per cent a year ago. Cement production has risen by 9.7 per cent compared with 13.9 per cent while steel production has grown by 6.8 per cent against 13.5 per cent in April-June 2005.

Infrastructure Investment

The total investment requirement in the infrastructure sector of the country would be $331 billion over the next five years, according to estimates in a study conducted by the Confederation of Indian Industry (CII). Hence, the annual investment in the sector would need to increase every year from $47 billion in 2006-07 to $84 billion by 2010-2011. The chamber has also stressed the need for evolving a mutual roadmap among the central government, state governments and the private sector for drawing an overall investment plan in infrastructure so that an understanding of the investment's break-up and the time-frame would enable the constituents, especially the private sector, to accept a target for bringing in its share of the total investment. It has also commended the approach paper to the 11th Five Year Plan to have correctly recognised that the investment in infrastructure needs to be increased from a current level of 4.6 per cent of GDP to between 7-8 per cent during the Plan period.

Power

The government run NTPC Ltd has projected that funds would not be a constraint to add 21,941 MW in 11^th Plan and 24,208 MW in 12^th Plan. With the proposed additions, the company will have a total installed capacity of 66,000 MW by 2017. As against NTPC’s 10^th Plan capacity addition target of 9160 MW, actual achievement is likely to be 7610 MW. For 11^th Plan, NTPC had earlier envisaged capacity addition of 17,052 MW, which was later revised to 17,042 MW. NTPC’s total investment is expected to a whopping Rs 2,45,897 crore in capacity addition and also in coal mining/gas souring, joint ventures, renovation and modernisation and other related activities. The company may opt for domestic borrowings of over Rs 45,000 crore in 11^th Plan and around Rs 23,000 crore in 12^th Plan.

The Central Electricity Regulatory Commission (CERC) has restrained power trading companies from buying electricity from other traders and directed that they can buy electricity only from generating or distribution companies. Acting on a petition by Mr Gajendra Haldea (Advisor to the Planning Commission Deputy Chairman), the central power regulator has restrained PTC India Ltd from buying power from Gridco of Orissa. CERC has also terminated all other contracts of PTC with other electricity traders stating that these contracts were in contravention of its Inter-State Trading Regulations.

Ethanol

The gasohol programme in Tamil Nadu and in the other southern states may come to a halt after August when the current contract period for ethanol supply comes to an end since the oil companies and sugar mills have not been able to agree on ethanol pricing. Since the beginning the programme had taken off on a shaky note; in Andhra Pradesh the oil companies have not been able to tie-up sufficient ethanol, in Kerala no ethanol has been available, in Karnataka the oil companies expect some restrictions in supply, and in Tamil Nadu the state government has permitted only restricted quantity of ethanol for the programme to be implemented in nine districts. None of the state government in the region have been willing to permit mills to spare any ethanol supplies.

Coal

The coal ministry has taken a slew of measures in the nature of increasing capacity of coal washeries, improving coal transport system and ensuring transfer of excess coal with a utility to area of requirement in order to overcome infrastructure constraints in the supply of coal to power, steel and cement sectors. The state-run Coal India will develop new coal washeries at Dhori and Parej in Jharkhand, which will be commissioned by 2009 and 2010 respectively. Moreover, a coal washery at Kathara in Jharkhand will be taken up for renovation of primary crusher and railway tracks by June 2007. Coal India has also proposed to undertake extension of loading bunkers at Sawant washery (Jharkhand) and renovation of railway tracks which are expected to complete by March 2008. In a bid to improve recovery of fine coal, Coal India plans to install a column floatation circuit, with an investment of Rs 12.38 crore and to be completed by January 2009. To avoid coal supply shortages, the coal ministry will chalk out ways to transfer excess coal to the northern region where coal requirement is more.

Inflation

The annual point-to-point inflation rate based on wholesale price index (WPI) has marginally gone down to 4.61 per cent for the week ended July 29, 2006 from 4.67 per cent during the previous week. The inflation rate was at 4.16 per cent in the corresponding week last year.

The WPI in the week under review has remained unchanged at the previous weeks’ level of 204.1 (Base: 1993-94=100). The index of ‘primary articles’ group (weight 22.02 per cent) has declined by 0.1 per cent to 203.1 from its previous week’s level of 203.4, mainly due to the decline of 0.2 per cent and 0.1 per cent in the price index of ‘food articles’ and ‘non-food articles’, respectively. The index of ‘food articles’ has gone down to 204.4 from 204.8 in the previous week, mainly due to the lower prices of milk and urad. Similarly, the index of ‘non-food articles’ has declined to 184.0 from 184.1, mainly due to the decline in the prices of raw rubber, sunflower, niger seed and cotton seed.  The index of ‘fuel, power, light and lubricants’ group (weight 14.23 per cent) has risen a tad by 0.1 per cent to 327.6 from its previous weeks’ level of 327.4, mainly due to the higher prices of aviation turbine fuel. 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 176.9 from the previous weeks’ level of 176.8, mainly due to the higher prices of food products, textiles, base metals,’ chemical and chemical products’ and ‘machinery and machine tools’.   

The latest final index of WPI for the week ended June 3, 2006 has been revised upwards; as a result both, the absolute index and the implied inflation rate stood at 202.2 and 4.88 per cent as against their provisional levels of 201.9 and 4.72 per cent, respectively.

Public Finance

The collection of indirect tax of the government including custom and excise duties has seen an impressive increase of 18. 6 per cent during April-July 2006as compared to the previous year.  The rise has been mainly endorsed to the substantial increase in custom collection during the period under consideration, which has move up by 35.2 per cent to Rs 19752 crore while the excise collection has seen a smaller rise of 7.8 per cent to Rs 32754 crore,

The service tax collection has also seen a huge rise 63.4 per cent during the first quarter of this fiscal (April-June 2006) to Rs 7173 crore. Collection during June 2006 has gained by 67.5 per cent amounting to Rs 3010 crore as compared to the collection during the corresponding month a year ago.

The direct tax collections during the first four months of the financial year 2006-07 have also surged by 61.12 per cent to Rs 36,061 crore over a year ago. The rise is mainly driven by the massive growth of 85.5 per cent in corporate tax collections, which stood at Rs 19,553 crore Income tax collections have gained by 39.8 per cent over a year to Rs 16,528 crore. The fringe benefit tax and BCTT, introduced last year, yielded Rs 915 crore and Rs 158 crore respectively.

 The government has exempted the 4 per cent additional custom duty on a number of products and manufacturing commodities including edible oils and noodles imported from Nepal . The government had levied a four per cent countervailing duty on several imported items in the budget for this financial year. However, the goods must be manufactured in Nepal either wholly from Nepalese materials or Indian materials or Nepalese and Indian materials. Further, the importer must also produce a certificate of origin certified by an Nepalese government agency that the goods have been manufactured in Nepal ,

Stay orders by courts and income tax tribunal, and failure to trace the assessee has contributed to income tax outstanding arrears touching Rs 1,16,766 crore on March 31, 2006. The income tax outstanding, which stood at Rs 72,217 crore in 2002-03 rose to Rs 87,885 crore in 2003-04, Rs 98,612 crore during 2004-05 and Rs 1,16,766 crore in 2005-06.

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.

Financial Markets

Capital Markets

Primary Market

Crisil has launched IPO grading services by grading the two forthcoming IPOs, namely, Ashtavinayak Cine Vision and Minar International ltd; they have been assigned grading of 2 out of 5. Crisil said that its IPO grading is designed to provide investors an independent, reliable and consistent assessment of the fundamentals of the new public issues.    

Secondary Market

US Federal Reserve’s action of keeping the interest rates unchanged at 5.25 per cent and firm Asian markets propped up the domestic market. During the week, BSE sensex crossed the 11,000 mark by gaining 326 points to close at 11,192.46 and the Nifty moved up by 97.6 points to settle at 3274.35. FIIs and domestic mutual funds have also turned net buyers of Rs. 1067.60 crore and Rs. 224.89 crore, respectively.

Market breadth was extremely positive with 28 out of the 30 sensex stocks ending in the positive territory. All the sectoral indices of BSE ended the week in the positive territory with  BSE Consumer Durable (up by 8.75 per cent) was the biggest gainer, followed by BSE Bankex (up by 5.8 per cent), BSE Capital Goods (up by 4.67 per cent) BSE Oil & Gas (up by 4.11 per cent) and BSE Metal (up by 4.08 per cent).

The major international indexes ended the week with losses. The Dow Jones industrials ended the week down 152.32 points, or 1.36 per cent, ending at 11,088.03 points, the S&P 500 index lost at 12.62 points, or 0.99 per cent, to close at 1,266.74 points and the Nasdaq lost 27.34 points, or 1.31 per cent, to end at 2,057.71 points. Investor sentiments were weak due to fear of an economic slowdown in US.

Derivatives 

The cash nifty was held at 3274, while the August future was settled at 3262, September was settled at 3242 and October at 3223, thus all futures contracts traded at a discount to the nifty. Open interest increased in the near-term contract, contracted marginally in the mid-term contract and climbed in the long-term contract, which however, was off a relatively low base.

The interesting thing is that there is a fairly large differential in favour of the spot. This is normally indicative of a market where operators are still displaying abundant caution. The differential is also quite marked in the August-September series.

Government Securities Market

Primary Market

Under the weekly T-Bill auctions, the RBI mopped up Rs.2700 crore and Rs.1500 crore through 91-day T-Bill and 182 day T-Bill. From this, the RBI raised Rs.1500 crore and Rs.1000 crore under the Market Stabilisation Scheme (MSS) through 91-day T-Bill and 182 day T-Bill respectively. The cut-off yields for the 91-day and 182-day T-Bill were 6.3563 per cent and 6.6940 per cent respectively.

RBI conducted the sale (re-issue) of “9.39 per cent Government Stock 2011” and “7.59 per cent Government Stock 2016” for notified amount Rs.6,000 crore and Rs.3,000 crore respectively. The cut-off yield for the“9.39 per cent Government Stock 2011” and “7.59 per cent Government Stock 2016” were 7.94 per cent and 8.27 per cent respectively.

The Government of India has announced the sale (re-issue) “8.07 per cent Government Stock 2017” and “8.33 per cent Government Stock 2036” for the notified amount Rs.5,000 crore and Rs.3,000 crore respectively on August 18, 2006.

RBI fixed the rate of interest on the Floating Rate Bonds, 2011 (FRB 2011) applicable for the year (August 8, 2006 to August 7, 2007) at 7.13 per cent per annum.

RBI fixed the rate of interest on the FRB, 2015 (II) applicable for the year (August 10, 2006 to August 9, 2007) at 7.50 per cent per annum.

Secondary Market

Call rates during the period ranged between 6.05 per cent and 6.09 per cent, while repo rates ranged between 5.00 per cent and 6.10 per cent and the CBLO rates ranged between 5.85 per cent and 6.00 per cent. The daily average outstanding amounts in the LAF (reverse repo) operations conducted during the period were Rs. 40,591 crore vis-à-vis Rs.14,157.48 crore and Rs. 13,346 crore for CBLO and Call market respectively. The weighted average YTM of. 7.59 per cent 2016 bond was 8.12 per cent on August 11, 2006 as compared to 8.28 per cent on August 04, 2006. The 1-11 year YTM spreads decreased by 12 bps to 120 bps.

With the finance minister indicating that the public sector banks to not to increase interest rates for productive sectors, there has emerged difference between them and RBI, but they  sought to play down their differences indicating that the directive was to ensure that productive sectors are not starved of liquidity at a time when economy is on high growth path.

RBI has notified that the scheduled commercial banks (SCBs) undertaking PD business departmentally will be allowed to maintain a single SGL account. The banks would, however, need to keep separate books of accounts internally for monitoring on an ongoing basis, maintenance of the minimum stipulated balance of Rs.100 crore of Government Securities and for recording the transactions undertaken by the PD business.

RBI has notified that with effect from the fortnight beginning June 24, 2006 penal interest will be charged in cases of default in maintenance of CRR by the SCBs. In cases of default in maintenance of CRR requirement on a daily basis, penal interest will be recovered for that day at the rate of 3 per cent per annum above the bank rate on the amount by which the amount actually maintained falls short of the prescribed minimum on that day and if the shortfall continues on the next succeeding day/s, penal interest will be recovered at a rate of 5 per cent per annum above the bank rate. In cases of default in maintenance of CRR on average basis during a fortnight, penal interest will be recovered as envisaged in sub-section (3) of Section 42 of Reserve Bank of India Act, 1934.

The Reserve Bank’s Central Board approved the transfer of surplus profit to the Government of India amounting to Rs. 8404 crore for the year ended June 30, 2006.

The US Federal Open Market Committee has kept the benchmark US interest rate unchanged at 5.25 per cent. In its statement, it mentioned that the economic growth has moderated from its quite strong pace earlier in 2006, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices. It identified inflation as a major risk. “The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information,” it said.

Foreign Exchange Market

Rupee tested higher levels throughout the week before closing almost flat at 46.53/$. The broad-based weakness of the dollar bolstered the rupee like most other currencies across regions. Soft dollar outlook was reinforced by the US Fed’s decision to keep interest rates steady early last week.

The six-month forward premia closed at 1.20 per cent (annualized) on August 11, 2006 vis-à-vis 1.04 per cent on August 04, 2006.

Commodities Futures derivatives

The ministry of consumer affairs, food and public distribution has rejected a proposal to curb futures trade in some of the essential commodities. Following the recent surge in prices of essential commodities like wheat and sugar, the government was considering imposing restrictions on some of the essential commodities.

Corporate Sector

Infrastructure development company Hindustan Construction Company Limited has secured Rs 246.4 crore contract from National Thermal Power Corporation for construction works at Loharinag Pala Hydro Electric Power project in Uttaranchal.

Bharat Heavy Electricals Limited (BHEL) has secured two contracts for supply of bubbling fluidised bed boilers (BFBC) and circulating fluidised bed boiler (CFBC) for captive power plant application from Jayaprakash Associates Limited and Gujarat Ambuja Cements Limited, respectively. BHEL has got Rs 53 crore order from Jayaprakash Associates is for the supply of pressure parts for two BFBC boilers with capacities of 150 TPH (tonnes per hour) and 125 TPH. The 150 TPH BFBC is to be set up at Chunar and the other at Dalla both in Uttar Pradesh.

Monnet Ispat and Energy Limited has entered into a technical collaboration with Italian firm Scandiuzzi SRL to set up a steel engineering and fabrication factory in Haldia with an investment of Rs 400 crore and a production capacity of 1.20 lakh tonne.

Ashok Leyland has reported a 29.5 per cent growth in domestic sales to 4,970 vehicles in July 06 compared with 3,837 vehicles during July 05. While the total vehicle sales including exports have posted a 22 per cent increase to 5,231 vehicles compared to 4,283 vehicles.

Mahindra and Mahindra has received the government’s approval for its special economic zone (SEZ) for the biotechnology sector to be set up in Mumbai. The SEZ would involve investment of around Rs 150 crore and is expected to generate employment for more than 2,000 people. The proposed SEZ will be spread over 72 acres of land of the company and would be developed by Mahindra Gesco Developers Limited, a subsidiary of the company.

External Sector

Floods at Surat have hit nearly half a billion worth of India ’s diamond export as this city cuts and polishes nearly 90 per cent of total exports. The flood water has almost completely destroyed nearly half the plants and pieces of machinery used for cutting and polishing diamonds.

The government is considering introducing a security clause for companies bringing FDI through automatic route. This move is considered as an interim measure until a view is finalised on having an overarching legislation granting powers to the government to restrict investments in sensitive sectors.

Telecom

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.

Information Technology

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.

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