Current Economic Statistics and Review For the Week Ended September 15

Characteristics of Households and Incidence of Indebtedness
Distribution on the basis of Assets Holding Class (AHC)

Introduction

In section 1, a brief review of the household characteristics, holdings of assets and aggregate cash loans outstanding as on 30-06-2002 at an aggregate level has been presented. This section (Section 2) deals mainly with the phenomenon of indebtedness of households in rural and urban India against the backdrop of assets holdings by different size classes.

The 59^th Round Survey of NSSO (January-December 2003) has made a major departure in distributing households amongst asset classes. Earlier, the class intervals for the asset classes were kept at a uniform size or spread. The 59^th survey, on the other hand, has decided on the ten household asset classes by examining the distribution of sample households over the assets-holding classes for all-India. In this process, each household has been assigned to its appropriate assets-holding depending upon the class in which the total value of assets of the household falls. Therefore, the class intervals are not uniform. The range of assets holding classes is vastly divergent: Rs.15000 or less; Rs.1,50,000- 2,00,000; Rs.4,50,000 – 8,00,000 and so on; the top class interval is Rs.8,00,000 and above.

Characteristics of Households According to Assets Holding Classes (AHC)

Distribution of All Households According to AHC: All-India

As on 30-06-2002, out of the total estimated households of 203.4 million for all-India , about 20.5 million or 10.1 per cent of total households each had got assets worth Rs 15,000 or less, which is the lowest size class in this survey. As against this, at the other end of the strata, households holding assets worth Rs. 8 lakh and above – the highest size class – constitute 17.7 million or 8.7 per cent of the total (Tables 3 and 3A). A scanning of the chart 1 reveals that there is some concentration in the assets holding classes between Rs 30000 - Rs.60,000 and Rs. 1 lakhs – Rs.1.5 lakhs.; about 37.9 per cent of the households fall within these three asset classes.

An estimated 147.9 million households or 72.7 per cent live in rural India . Out of this, 11.3 million or 7.6 per cent possess assets worth Rs. 15,000 or less. At the higher end of the spectrum, i.e., asset holdings at Rs. 8 lakh or above, there are 9.8 million households which constitute 6.7 per cent of the total households in rural areas (Tables 1 and 1A). As in the case of all-India a high proportion – as much as 41.7 per cent- is concentrated within the three size groups identified above (Table 1A).

An estimated 55.5 million households (or 27.3 per cent) lives in urban India . Among them, 9.2 million or 16.7 per cent households fall under the lowest strata of the assets holding class, i.e., Rs. 15,000 or less and 7.8 million or 14.0 per cent of the total urban households are worth Rs. 8 lakh or above (Tables 2 and 2A). Unlike in rural India , the urban picture is more unequal; the top two groups account for over 25 per cent of the total urban households and the lowest asset group 16.7 per cent (Table 2A).

Comparative analysis of regions

Unlike the all-India picture, in the northern region the number of household owning assets less than Rs. 15,000 has been less at about 1.85 million or 7.7 per cent of total households of 24.00 million households as against number of households owning assets worth equal or more than Rs. 8 lakh at 4.43 million or 23.7 per cent. Within this region, there are serious inter-state disparities. Haryana with a number of households owning assets Rs 8 lakhs or more at 1.03 million or 23.6 per cent and Punjab with that value of 1.17 million or 29.5 per cent and Jammu and Kashmir with household of 1.36 million or 29.54 per cent. The respective low strata number of households i.e. owning assets worth Rs. 15,000 or less are 0.40 million (9.1 per cent), 0.31 million (6.7 per cent) and .04 million (2.6 per cent) (Table 3 and 3a). This means in this region comparatively lesser number of households are poorest of the poor as far as household asset holdings. However, Delhi (24.4 per cent), Chandigarh (23.4 per cent) had got more people in the lowest strata of assets holding and these states have also a high percentage share of 18 per cent each holding assets worth Rs. 8 lakh or more. In Rajasthan, the households owning assets worth Rs. 15,000 or less forms only 3.3 per cent as against 11.3 per cent in upper strata households.

In the rural areas of states falling under Northern Region the picture is not different. Households owning assets worth Rs. 15,000 or less a mere 3.6 per cent of the total households and at the other end households owning assets of Rs.. 8 lakh or more at 17.7 per cent of the total households (Table 2 and 2a). Remaining households are more or less evenly distributed among different assets holding classes.

Typically, the urban areas had more households in the lower end of the spectrum at 15.8 per cent holding assets worth Rs.15,000 or more as against 19.97 per cent households holding assets Rs. 8 lakhs or more (Statement 1). In the urban areas of Haryana (9.9 per cent), Punjab (14.6 per cent), Jammu and Kashmir (8.4 per cent), Delhi (26.7 Per cent) and Rajasthan (8.9 per cent) households falling under the lowest strata of assets holding of Rs. 15,000 or less (Table 2 and 2A).

The disparity in the distribution is wide with about 0.51 million or about 8 per cent of the household falls in the lower strata and 0.20 million households or a mere 3 per cent of the total households of 6.63 million holding asset worth Rs. 8 lakh or above. There is wide disparity among the different states falling under this region.

The households in the smaller states are better of than that in Assam , Arunachal Pradesh and Sikkim . (Table 3 and 3A and Statement 2).This is true in the case of rural areas to some extent, but the urban areas of Manipur Meghalaya, Mizoram and Nagaland depicts a converse picture (Table 2 and 2A).

Statement 2: Percentage Distribution of Households as Per Assets Holding Class
	Assets Holding Class ( Rs. 000)
	Rural		Urban		Rural+Urban
	0-15	=>800	0-15	=>800	0-15	=>800
North-Eastern Region	6.5	1.9	15.2	9.6	7.7	3.0
Arunachal Pradesh	17.6	0.0	28.7	1.3	19.1	0.2
Assam	5.8	1.0	16.7	7.1	7.0	1.7
Manipur	1.8	2.6	3.8	13.4	2.4	5.6
Meghalaya	4.4	4.4	16.8	20.6	6.4	6.7
Mizoram	6.1	1.4	6.2	11.8	6.1	5.3
Nagaland	4.6	40.7	29.6	19.6	13.7	33.1
Tripura	11.9	0.7	12.5	6.7	12.0	1.5
for notes and source see Table 1

Unequal distribution of household assets in eastern region is still wider with the lower strata forming about 10.4 per cent of total households of 41.89 million and the upper strata forming a percentage of only 3.5 per cent of the total households. Bihar , although a poor and the most populous state in this region the disparity is narrow between the two extreme strata of assets holding classes (Statement 3).

Statement 3: Percentage Distribution of Households as Per Assets Holding Class
	Assets Holding Class ( Rs. 000)
	Rural		Urban		Rural+Urban
	0-15	=>800	0-15	=>800	0-15	=>800
Eastern Region	8.7	2.4	18.4	8.8	10.5	3.6
Bihar	5.5	3.8	14.0	7.9	6.5	4.3
Jharkhand	5.1	1.5	22.0	6.2	8.5	2.4
Orissa	14.7	0.6	17.2	5.9	15.1	1.4
Sikkim	10.6	3.8	38.6	17.4	14.5	5.7
West Bengal	9.4	2.2	19.4	10.5	11.9	4.3
A & N Island	26.8	5.5	19.2	8.8	24.2	6.7
for notes and source see Table 1

But in states like Orissa, West Bengal Sikkim the inequality in the distribution of wealth is much wider. (Table 3 and 3A). Also, there is not much difference in the distribution of wealth among different class of households in the rural and urban areas of these states.

This region registers the most equitable distribution of assets among different households The households are more or less evenly distributed among different classes Madhya Pradesh with about 0.62 million (5 per cent) households possess assets worth Rs. 15,000 or less and about 1.04 million (8.4 per cent) households had assets worth Rs. 8 lakh or above (Table 3 and 3a) and (Statement 4).

Statement 4: Percentage Distribution of Households as Per Assets Holding Class
	Assets Holding Class ( Rs. 000)
	Rural		Urban		Rural+Urban
	0-15	=>800	0-15	=>800	0-15	=>800
Central Region	3.6	7.7	10.5	13.3	5.1	8.9
Chattisgarh	6.7	3.5	14.2	9.8	7.9	4.5
Madhya Pradesh	3.4	5.5	10.0	17.4	5.0	8.4
Uttranchal	7.6	10.9	15.6	13.5	9.2	11.5
Uttar Pradesh	3.0	9.2	10.1	11.6	4.6	9.7
for notes and source see Table 1

Uttar Pradesh with about 1.30 million (4.6 per cent) households fall in the lower strata of Rs. 15,000 or less and 2.76 million (9.7 per cent) owning assets worth Rs. 8 lakh or above.

While Gujarat boast about a better distribution of wealth, with only 0.90 million (9.2 per cent) households in the lower strata as against 1.27 million ( 13 per cent) households in the higher strata, Maharashtra, the most industrialized state in the country, the distribution of assets are most skewed. With 2.86 million (13.8 per cent ) households owning a mere Rs. 15,000 or less and on the other end 1.89 million (9.1 per cent) households possessing Rs.8 lakhs or more. A better picture will emerge if one take the number of households owning Rs. 1 lakhs or less, it works about 9.25 million households (about 45 per cent) owns assets worth Rs. 1 lakhs or less and another 9.61 million households ( about 46 per cent) owns assets worth Rs. 1 to 8 lakhs and a mere 1.89 million (6.0 per cent) gobbled up the remaining asset worth Rs. 8 lakh or more (Statement 5).

Out of 53.24 million households in this region, 7.5 million or about 14.2 per cent find place in the lower strata and 4.13 million or 7.8 per cent in the topmost strata. Within this region, there is wide inequality in the distribution of households among different asset holding classes. In Andhra Pradesh, 3.89 million or almost one-fifth of the total households own assets worth Rs.15,000 or less as against 0.86 million or a tiny 4.4 per cent households owning assets worth more than Rs.8 lakh. In Karnataka, the distribution of asset among different asset holding classes is more even. .Out of 10.47 million households, 1.00 million households (9.6 per cent) fall in the category of Rs 15,000 or less and 0.81 million (7.8 per cent) households in the highest strata of Rs. 8 lakh. Tamil Nadu is another state facing a wide discrimination in asset distribution among different assets holding classes; while 2.35 million or about 14.2 per cent of total households own assets worth Rs. 15,000 or less, a few 1.06 million (4.4 per cent) enjoy assets worth Rs. 8 lakh or more. A more glaring picture emerges if one regroup asset classes and focus on the households owning assets of Rs. 1 lakh or below as depicted in the Statement 6.

In other words, Tamil Nadu for example, if one take into account the households which possess assets worth at least Rs. I lakh or less , then 9.28 million or a massive 56 per cent of the households are in this level, which shows the highly unequal nature of distribution of assets in the state. By contrast,in Kerala the distribution has been more or less even as can be seen in the data in Statement 6. In this state, out of 6.74 million household, 1.39 million households or 20.6 per cent hold assets worth Rs.1 lakh or less and in the next strata, 2.92 million or 43.3 per cent i.e. about nearly half of the households has got assets worth between Rs. 1 lakh and Rs. 4.5 lakh. Still next higher strata i.e. households owning assets worth Rs. 4.5 lakh to Rs.8 lakh forms 1.06 million or about 16 per cent. The richest - households owning Rs.8 lakhs or more - forms 1.4 million or 6.4 per cent of the total households.

Distribution of Household Among Rural Households By AHC

59^th Round NSSO survey on all-India debt and investments, estimated that there are about 147.85 million households in the rural areas. Out of this 147.85 million households 11.26 million or 7.6 per cent households owns about assets worth Rs. 15,000 or less and about 9.87 million (6.7 per cent) possess assets worth Rs. 8 lakhs or more. Rural households, which owns assets worth Rs. 1 lakh or less at 67.00 million forms about 45 per cent of total rural households and at the higher end i.e household owning about Rs 8 lakhs or above forms about only 6.7 per cent or 9.87 million households of the total households depicting the wide disparity of assets holding among all-India rural households (Table 2).

Region-wise Analysis

Northern Region

Rural household holding assets worth Rs. 15,000 or less is a meagre 0.57 million as against 2.80 million rural households which holds assets worth Rs. 8 lakh or more. This reveals that the states in northern region Viz., Haryana , Punjab , Rajasthan etc. have got a better distribution of rural assets than the all-India.

Bihar, Orissa, West Bengal are the big states in this region . In this region, rural households owning assets worth Rs. 15,000 or less at 2.97 million households is almost 4 times that of households owning Rs. 8 lakh or more at 0.81 million households indicative of wide spread inequality in these states as far as rural assets distribution is concerned.

Madhya Pradesh and Uttar Pradesh are the two big states included in this region. A scanning of the Table 3 reveals that these states’ rural households enjoys a bit better equitable distribution of assets as per 59^th survey (Table 1).

Rural areas in the states of Gujarat and Maharashtra follows a more or less similar pattern of total western region as explained above.

While rural areas of states likes Andhra Pradesh, Karnataka and Tamil Nadu follows same pattern of asset distribution as in the case of all area taken together as explained above, rural Kerala came out better in the distribution of asset among different classes of asset holdings. In Kerala, while 0.15 million households owns wealth worth Rs.15,000 or less; 0.89 million owns assets worth Rs. 8 lakhs or above.

Distribution of Households Among Urban Households by AHC

59^th Round NSSO survey on all-India debt and investments, estimated that there are about 55.50 million households in the urban areas. Out of this, about 9.25 million(16.6 per cent) households are worth Rs. 15,000 or less as against 7.78 million (14.0 per cent) who holds assets worth Rs. 8 lakh or more. More or less a better distribution of assets as compared to that of rural areas can be seen among different regions/States of urban areas (Table 3).

Incidence of Indebtedness

Incidence of Indebtedness (IOI) is the ratio of the number of households reporting cash loans outstanding to total number of households, in percentage terms. IOI as per NSSO 59^th survey for all-India works out to 24.1 per cent for all households. IOI of households owning assets worth Rs. 15,000 or less is a meagre 13.1 per cent. At the other extreme end, IOI of households with assets worth Rs. 8 lakh or more has stood at almost double that of the lowest strata at 27.8 per cent, indicating that the high strata households enjoy better credit facilities .

Region-wise Analysis of IOI

All households of Haryana (4.2 per cent), Punjab (21.3 per cent), and Rajasthan (29.7 per cent) enjoy a relatively high level of debt. However, the number of households reporting cash loans in percentage terms among different asset-holding classes are skewed. Households which fall under the asset-holding class of Rs. 15,000 or less reported IOI at a tiny 3.9 per cent in Haryana , 8.4 per cent in Punjab and comparatively better at 16.2 per cent in Rajasthan . At the other end of the spectrum, i.e., households with assets worth Rs. 8 lakh or more in these states enjoy undoubtedly significantly higher levels of debt. This is revealed by the fact that households falling in this class level in Haryana , Punjab and Rajasthan have IOIs of 23.8 per cent, 25.7 per cent and 23.7 per cent , respectively. However, one interesting point is that among these states IOIs tend to increase in the initial asset classes up to the middle level of Rs. 1 to 1.50 lakh and then tend to recede.

This region includes all the small states viz., Manipur, Mizoram, Meghalaya, Nagaland , Sikkim and Assam ; generally have very low IOIs ranging from 5 to 10 per cent among different assets holding classes. Here, the households in the lower strata got as much IOIs as the richer strata (Table 6). Amogst the North-Eastern Region states, however, Tripura enjoys a better level of indebtedness.

Interestingly, Bihar state which is undoubtedly a poor state, enjoys a more equitable distribution of IOI with the household at the lower strata, i.e., with asset holding of Rs. 15,000 has an IOI of 23.2 per cent as against households having Rs. 8 lakh and above with an IOI of 15.5 per cent . All households in Bihar has an IOI of 20.5 per cent . Hence, though Bihar as a whole got a lower IOI i.e. low number of indebted households , the number of household reporting cash loans are more or less equitably distributed along different asset holding classes and it can also be seen that along the household asset holding classes there is a gradual decline of IOI as one moves up along lower strata of AHC to higher strata of AHC. But, in this respect, the states of Orissa and West Bengal witness exactly opposite phenomenon of a progressive rise in IOIs with the increases in asset sizes (Table 6).

State of Madhya Pradesh had a highly unequal distribution of IOI ranging from 10.0 in case of AHC of Rs. 15,000 or less to31.2 per cent in case of AHC of Rs. 8 lakh and above. In Uttar Pradesh, this range is less skewed at 13.3 per cent to 20.4 per cent.

Both Gujarat and Maharashtra have vast inequalities in the IOI distribution among different asset holding classes ( Table 6). The proportion of households reporting cash loans have been wide ranging: from- 11.3 per cent to 40.3 per cent in Gujarat and from 4.9 per cent to 33.6 per cent in Maharashtra .

In Kerala, while the asset distribution is equitable it has been found contrariwise that the IOI distribution ranges from 16.6 per cent to 39.5 per cent as between the lowest and highest asset classes. In Karnataka, the range is still widere with 8.5 per cent and 32.5 per cent among lower and upper strata of households. In Tamil Nadu and Andhra Pradesh, the same kind of skewed distribution of IOI, i.e., numbers of households reporting cash loans among different assets holding classes can be seen.

More or less the same kinds of distribution of households reporting cash loans amongst different classes of asset holding classes are witnessed among different states and regions in both rural and urban areas (Tables 4 to 6).

The central government has announced a bonus of Rs 100 per quintal over the minimum support price (MSP) of Rs 750 per quintal for the 2006-07 wheat procurement season. It is the highest ever price offered by the government. The MSP has been fixed at Rs 750 per quintal, which was higher by Rs 100 per quintal over Rs 650 per quintal price set for 2005-06.

The Department of Company Affairs has asked the private companies like Reliance, Cargill, Adani, and ITC to declare the quantity of wheat stocked by them if their total purchases are over 50,000 tonnes. The move would be undertaken to minimise market distortions in wheat.

The central government has extended state trading corporation’s (STC) deadline for taking delivery of duty-free wheat imports to April 30, 2007 as wheat imports of Russian origin had failed quality tests at the Chennai port in September following which the state-run trading house had sought permission to seek deliveries beyond the stipulated deadline. The deadline was earlier valid till February 28, 2007. Of the total contracted imports of 5.5 million tonnes in 2006, around 5.4 million tonnes has arrived in the country.

Amid the situation of falling sugar prices when the country is set to witness a record sugar production of 240-260 lakh tonnes, the central government has plans to announce a Rs 750-crore bail-out package for the sugar industry before the end of March 2007. While about Rs 350 crore are likely to be provided for creating a buffer stock of 1.15 million tonnes of sugar, another Rs 400 crore as export subsidy when there are few takers overseas.

According to the ministry of water resources, cost overruns due to delayed irrigation projects have cost the central and states government over Rs 1 lakh crore. A total of 205 irrigation projects, whose original estimated cost was Rs 20,000 crore, would now cost Rs 1,16,242 crore. The delays range from one to six years. The projects include 62 large and 49 medium scale projects. Among the delayed projects, 68 have been given central grants under the Accelerated Irrigation Benefit Programme (AIBP).

India

has emerged as the largest exporter of black pepper to the US in January 2007 overtaking Vietnam after a gap of five years on account of provision of export subsidy. Of the total US imports of 4,226 tonnes in January 2007, India has contributed 1,870 tonnes, followed by 1,225 tonnes by Brazil, 465 tonnes by Indonesia, 375 tonnes by Vietnam and 115 tonnes by Malaysia.

According to the Rubber Board’s provisional estimates, imports of natural rubber as on March 10, 2007 have stood at 72,904 tonnes, overtaking the previous record of 72,835 tonnes imports in 2004-05. The rubber-based industry estimates the imports to cross 80,000 tonnes by the end of the financial year 2006-07. The steep rise in imports has led to an increase in the natural rubber inventory and the Rubber Board has projected the stock at the end of 2006-07 to be around 160,000 tonnes, posting a rise of 67,000 tonnes over the last year. A large carry-over stock, coupled with rising imports, has resulted in a bearish trend in the domestic rubber market.

The science-based products and services company DuPont has plans to set up a plant biotech research centre in Hyderabad . First such centre outside the US would help scientists develop hybrids of rice, pearl millet, maize, mustard and sunflower for cultivation in India . At present biotech tools would be deployed to develop non-transgenic hybrids.

Industry

According to latest data released by the central statistical organization (CSO), the index of industrial production (IIP) has grown by 10.9 per cent in January 2007, up from an 8.5 per cent growth in the same period a year earlier. India ’s manufacturing output has increased by 11.6 per cent in January 2007 as compared to 9.4 per cent in the same month a year earlier. Mining and electricity have grown by 6 per cent and 8.5 per cent, respectively. For the period April-January 2006-07, the IIP has grown at 11 per cent against 8 per cent in the same period last year. While the mining and quarrying sector has grown by 4.5 per cent during April-January 2006-07 against last year's 0.6 per cent, manufacturing has increased by 11.9 per cent during April-January 2006-07 against the 9 per cent growth a year ago. In the same 10-month period, electricity generation has risen by 7.6 per cent as compared to last year's 5 per cent during the same period.

The pharmaceuticals industry is at present free to increase the prices of non-scheduled medicines (drugs whose prices are not fixed by the government) by up to 20 per cent in a year. The national pharmaceutical pricing authority (NPPA) has revised the guidelines for non-scheduled drugs and has brought down the limit for annual price hikes from 20 per cent to 10 per cent, leaving the remaining criteria unchanged. The new rule will apply to formulation packs with an annual turnover of over Rs 1 crore and for those that occupy more than 20 per cent of the market share or are among the top three selling formulations in their segment. As per the authority, price monitoring is to continue on the basis of ORG IMS data and non-compliance will call for action against the company. Further, the NPPA has upwardly revised the rates of 118 drugs by 12.46 per cent during 2006-07 and has brought down the rates of 298 medicines by an average 31.46 per cent. To check arbitrary increase in the prices of medicines, the chemicals ministry has also asked the regulator to keep track of all medicines whose prices rise by 10 per cent in a year. The drugs price control order (DPCO), 1995, administered by the NPPA, calls for such a price intervention on non-scheduled drugs in the eventuality of an abnormal price hike.

An investigation carried out by the Indian edition of the leading medical bulletin, the Monthly Index of Medical Specialties (MIMS), has found that several drug companies, including leading pharmaceutical manufacturers like Dr Reddys’, Novartis and Torrent, have utilised a recent government directive to revise the maximum retail prices (MRP) of their popular brands beyond the desired level. This, in turn, resulted in an upward movement in the prices of the ‘drugs and medicines’ segment in the weekly wholesale price index (WPI) by 5.8 per cent during the week ending February 24, 2007. The government had, in an attempt to unify the MRP of medicines across the country, asked for a change in the way prices are printed on medicine packs; the MRP was to be “inclusive of all taxes” instead of being “MRP + local taxes extra” from October 2, 2006. MIMS investigation has shown that the companies added much more than the tax component to their revised MRP, thereby causing the price hike.

Domestic drug market

According to ORG-IMS, foreign multinational drug makers, barring GlaxoSmithKline (GSK) Pharmaceuticals, continue to have a miniscule presence in the domestic pharmaceuticals market even after the product patent regime has come into being. The Indian prescription drug market in 2006 has stood at Rs 27,333 crore, up by 18 per cent as compared to Rs 23,243 crore in 2005. Bulk of the business has been from the sale of drugs that do not enjoy patent protection, a reason for the dominance of domestic companies. The ORG-IMS figures indicate that domestic players have grown by 19 per cent both in value as well as in volume and have been worth Rs 21,797 crore in 2006. This is a record 80 per cent share of the domestic prescription sales in 2006. Meanwhile, foreign multinational companies have managed only Rs 5,535 crore, registering a 11 per cent value growth and 8 per cent volume growth as compared to 2005. GSK Pharma is the only foreign multinational among the top 10 players in domestic drug business. With only 30-40 per cent Indians having access to modern medicines, domestic pharmaceutical companies with a deep trenched distribution network are likely to continue to growth robustly. The Indian pharmaceutical market is expected to continue its growth at 12-14 per cent over three to five years.

Infrastructure

The index of six infrastructure industries in January 2007 has registered a year-on-year growth of 8.74 per cent as against 8.2 per cent in the same month last year. This growth has been due to increased output of crude petroleum, petroleum refinery products, coal and electricity. In the April to January period of 2006-07, infrastructure output has increased by 8.4 per cent against 5.8 per cent in the corresponding period of the previous year. However, the cement and finished steel sectors have slowed down during January 2007 compared to the growth figures of the same month of the previous year. Production of cement, a sector that has been facing supply side constraints, has registered a year-on-year growth of 6.8 per cent at 14.5 million tonnes in January 2007, much lower compared to last year's healthy 15.4 per cent growth in the same month. Growth in cement production in the April-January period of the current financial year has also slowed down to 9.5 per cent at 131.878 million tonnes, against a growth of 11.4 per cent in the corresponding period of the previous year. The output of finished steel has slowed down too in January 2007. It has registered a year on year growth of 10.4 per cent at 4.434 million tonnes, compared to 14.3 per cent growth in the corresponding month of 2006. Petroleum production in the country has increased by 4.7 per cent at 2.901 million tonnes during January this year, against a negative growth of 4.9 per cent in the month last year. Refineries’ output has also increased by 9 per cent at 11.839 million tonnes in January this year, as against 5.5 per cent in the corresponding month last year. Coal production during January 2007 stands at 42.15 million tonnes, a growth of 10 per cent as compared to an 8.2 per cent growth in January 2006. Power production in January 2007 has stood at 58,320.6 MW, which is a growth of 8.5 per cent as against 6.4 per cent in the corresponding month of the previous year.

Petroleum

The Organisation of the Petroleum Exporting Countries (OPEC) oil cartel has decided to keep output unchanged despite rising demand by the world’s biggest oil consuming countries. The OPEC, which currently pumps about 30 million barrels a day of oil, more than a third of the world’s total consumption, has acknowledged that it may have to pump more oil by the end of the year. In the report, OPEC has slightly raised its expectation of world oil demand growth and said that the demand for its own oil would average 30.4 million barrels per day, up from previous estimates of 30.25 million barrels per day. Oil prices are currently trading at $61.34, up from the $49 they fell to in January 2007, but substantially below last summer’s records of nearly $80 a barrel.

In a related development, Ecuador may be able to rejoin OPEC sooner than expected and will have to pay the $4.2 million they owe OPEC in unpaid dues. Angola , OPEC’s newest member, will have to adhere to OPEC’s quota system as early as next year, by which time its production is expected to touch 2 million barrels a day, according to OPEC. Detailed discussions on the exact level of the quota are likely to begin when Angola , which currently produces about 1.5 million barrels per day, nears the 2 million barrels per day threshold and if low oil prices make Angola ’s active participation more critical.

Aviation

The government may allow foreign airlines to acquire up to 26 per cent stake in domestic passenger airlines. The foreign direct investment limit in domestic carriers might also be hiked to 74 per cent from the current 49 per cent. Under the new plans, a foreign airline can engage with an Indian carrier as an investor. It will, however, have no control over the running and the management of the domestic carrier. On the other hand, the present restriction on the number of foreign members on an airline board to one third may be relaxed. The government had banned foreign carriers from investing in Indian airlines a decade ago fearing they would seriously threaten state-owned carriers. Further, it was also seen as a security threat. The government had opened up the airline industry for foreign investment in 2001, but no Indian carrier has so far attracted foreign investment. Indian carriers require over $20 billion to stay afloat and have so far raised about $3 billion through a number of routes, including the capital market.

Railways

The railways have decided to offer over 500 acres of prime land to private developers at over 13 locations across the country. The cities that have been earmarked for the purpose include Delhi , Mumbai, Kolkata, and Bangalore , apart from Lucknow , Vishakapatnam, Gwalior and Gaya . The newly set up Rail Land Development Authority (RLDA), which has been formed to commercially exploit the large tracts of land available with the Indian Railways, will offer the land through a public-private partnership (PPP) model. Under the PPP model, the railways will form joint ventures in which the land will represent the railways’ portion of the equity. The plots will be developed for commercial use in the form of shopping malls, office space, plazas and multiplexes. A consultant is being appointed to work out the details of the project. The sites have been short listed from an earlier list of 61 locations. Most of these sites constitute vacant, unused land; Indian Railways have around 43,000 hectares of unused land.

Shipping

The shipping corporation of India (SCI) will invest around $3 billion over the next four years to acquire 16 vessels. SCI is already spending $1 billion to buy 12 vessels, which will be delivered between 2008 and 2010. Resources for the acquisition will be raised through a blend of debt and equity. The company is looking at a debt-equity ratio of 80:20 or 75:25, according to SCI CMD, Mr. S Hajara. SCI has taken a loan of $103 million from State Bank of India to buy one of the two very large crude carriers from South Korean Hyundai Heavy Industries at a cost of $65.2 million per vessel. SCI operates a fleet of 84 vessels totaling 4.93 million dead-weight tonnage (DWT). It also manages 53 vessels totaling 63,000 DWT on behalf of various government departments and other organisations. It provides liner and passenger services, bulk carrier and tanker services.

The shipping corporation of India , the Jawaharlal Nehru port, the Mumbai port, Mazgaon docks ltd. and some oil PSUs are going to collaborate to form a mega-dredging company to undertake dredging works. The venture will not only take up dredging operations at ports but also intends to venture into building dredgers at a later stage. This will make India one of the few countries capable of making dredgers; Dutch and Belgian companies, currently dominate the dredging industry.

Inflation

The annual point-to-point inflation rate based on wholesale price index (WPI) rose by 6.46 percent for the week ended March 03,2007 as compared to 6.10 per cent in the last week or at a lower rate of 3.86 per cent during the corresponding week last year.

During the week under review, the WPI rose by 0.2 per cent to 209.2 from 208.8 for the previous level (Base: 1993-94=100). The index of ‘primary articles’ group, (weight 22.02 per cent), rose by 0.1 percent to 214.2 from its previous week’s level of 213.9 mainly due to increase in prices of fruits and vegetables, fish, maize, groundnut, gingelly seed,sunflower and cotton seed. Higher Prices of naptha, bitumen aviation fuel and furnace oil pushed up the price index of ‘fuel, power, light and lubricants’ group (weight 14.23 per cent) which rose by 0.2 per cent. The price index of ‘manufactured products’ group moved up by 0.2 per cent to 182.9 from 182.5 due to wide spred increase in various commodities.

The latest final index of WPI for the week ended January 06,2007 has been revised upwards; as a result both, the absolute index and the implied inflation rate stood at 208.7 and 6.37 per cent as against their provisional levels of 208.2 and 6.12 per cent, respectively.

Banking

UTI Bank is planning to raise $754 million from the overseas market in 2007-08, to finance its branch expansions abroad.

UTI Bank has tied up with Maruti Udyog for providing four-wheeler finance to the company’s customers.

Financial Markets

Two IPOs debuted this week. Raj Television Network debuted at Rs 275 on BSE on 16 March 2007 compared to the IPO price of Rs 257. It settled at Rs 225.95 on the day of its debut.

The second IPO was Page Industries, which debuted at Rs 341.90 on the BSE on 16 March 2007 compared with the IPO price of Rs 360. It settled at Rs 282.10 on the day of its debut.

Vimal Oil and Foods Ltd has tapped the market between March 14-23 through issue of shares at a fixed price of Rs 30 to mobilise Rs 29 crore.

The week was extremely volatile and the BSE sensex traded below the psychologically-important 13,000 mark for most days in the week ended 16 March 2007. The market declined despite the BSE sensex gaining in three out of the five trading sessions for the week ended 16 March 2007. A global market meltdown, due to a deepening US mortgage lending crisis, coupled with higher inflation data pushed the market lower. The sensex shed 454.59 points for the week ended 16 March 2007, to settle at 12,430.40, compared with the previous week’s closing of 12,884.99 on 9 February 2007. The S&P CNX Nifty lost 109.45 points, to settle at 3,608.55, compared with the previous week’s closing of 3,718. The BSE Mid-Cap Index rose 7.13 points for the week ended 16 March 2007, to settle at 5,235.57. The BSE Small-Cap Index rose 23.59 points, to 6,274.64.

Around 60 per cent equity oriented schemes have underperformed the benchmark index on account of the technical correction after the Sensex reached its peak of 14,724 on February 8, 2007. The sensex plunged 12.06 per cent between February 8 and March 9, while 146 equity schemes (out of 243 studied) declined over 12.06 per cent each. The performance of 40 odd schemes has been even worse as these funds have underperformed the S&P CNX Nifty, BSE-500 and BSE Midcap indices, declining over 15 per cent each. However, only 11 odd schemes have outperformed all segments of markets, posting decline of around 5-8 per cent. Interestingly, not a single scheme has posted positive returns after the sensex peak.

Derivatives

The derivatives market showed all the symptoms of a massive downtrend coupled with a narrowing of trading focus. The futures of all tradeable indices were at big discounts to the spot levels. Put-call ratios dropped as puts came into-the-money and were cashed. The ten most active calls and puts were all based on the nifty and even highly liquid stock futures saw a diminution of volumes and open interest.

RBI conducted the auction of 6.65 per cent 2009 for a notified amount of Rs.2000 crore under MSS. The cut-off yield of the security was 7.9622 per cent.

RBI conducted the auction of State Development Loans (SDLs), 2017 for ten states for an aggregate amount of Rs. 2283.71 crore through a yield-based auction using multiple price auction method. The cut-off yield of security was 8.25 per cent for Rajasthan, 8.32 per cent for Tamil Nadu and Punjab, 8.35 per cent for Himachal Pradesh, 8.38 per cent for Uttaranchal, 8.39 per cent for Meghalaya, Mizoram and Nagaland, 8.40 per cent for Madhya Pradesh and 8.45 per cent for Jammu and Kashmir .

RBI has announced sale (re-issue) of 6.65 per cent 2009 for Rs. 2000 crore under the Market Stabilisation Scheme (MSS) on March 22, 2007.

During the week, the weighted average call rates during the period ranged between 5.27 per cent and 9.42 per cent, while weighted average repo rates ranged between 4.05 per cent and 8.10 per cent and the weighted average CBLO rates ranged between 3.75 per cent and 7.95 per cent. The average volumes of Call, Repo and CBLO segments were Rs. 13424.58 crore, Rs. 11585.33 crore and Rs. 19751.83 crore respectively. The daily average outstanding amounts in the LAF (reverse repo) operations conducted during the period were Rs.2434.00 crore. The amounts raised under LAF (repo) auction were Rs.20.00 and Rs.19705.00 crore on March 15 and March 16, 2007 respectively.

The weighted average YTM of G.S 2017 8.07 per cent bond was 7.9825 per cent on March 16, 2007 as compared to 7.9874 per cent on March 09, 2007. The 1-10 year YTM spreads decreased by 21 bps to 17bps.

Bond Market

City Union Bank has tapped the market through the issue of non-convertible debenture to moblise Rs 10 crore by offering 10 per cent for 121 months.

Foreign Exchange Market

In the first week, rupee’s movement tracked the volatile domestic stock market movement. Rupee began the week on a weak note, falling to its lowest levels of 2007 after a fall in the domestic stock market gave rise to capital outflow fears. Rupee strengthened later on the back of stronger Asian markets. However, market participants were wary of possible central bank intervention and remained on the sidelines. Rupee ended the week at a 2-week high level of 44.21 against USD – a gain of 9 paise during the week.

The six-month forward premia closed at 3.58 per cent (annualized) on March 16, 2007 vis-à-vis 3.15 per cent on March 09, 2007.

Commodities Futures derivatives

Agriculture Minister Sharad Pawar remained non-committal on the ban over maize futures, telling the Lok Sabha that the government would “look at all aspects of the matter”. The issue was raised during the question hour by Congress MP from Andhra Pradesh K S Rao, who wanted to know whether the government was contemplating banning maize futures in line with wheat and rice. Pawar in his reply said the government had been getting “contradictory signals” on the matter. “The bird feed manufacturers and starch manufacturers are demanding that maize futures be banned, but farmers growing the crop are opposed to it,” he told the Lok Sabha. “The government is studying the issue,” he added. Previously, Pawar had categorically ruled out any such move. “Maize is not for human consumption. Let farmers also get a better price,” Pawar had said. The National Egg Coordination Committee (NECC), the all-India poultry farmers’ body, had earlier expressed disappointment over the Centre’s inaction on the demand from the NECC for removing maize from the list of items permitted under forward trading. In a statement released to the press, NECC National Chairperson Anuradha Desai said Finance Minister P Chidambaram, while presenting the Budget for 2007-08, had announced a ban on forward trading in wheat and rice. “All the reasons and issues considered by the Union government for banning forward trading in wheat and rice equally applied to maize also, as the forward trading of maize had led to unprecedented rise in the price, affecting poor poultry farmers across the country,” she had said in the statement. Maize can now be imported duty-free. This follows pressure from the livestock industry, which lobbied with the government to ban the export of maize and remove duties on imports. Imports were governed by a tariff rate quota (TRQ) regime, under which up to 5 lakh tonne could be imported at 15 per cent basic customs duty, with quantities above this charged at 50 per cent duty. This was removed recently. Export of maize was canalised through four agencies last week. All this has proved unprofitable for maize farmers, but has helped the poultry and egg industry hold the price line. It is the political pressure that the two sections represent that has made Pawar non-committal on the issue of a ban on futures trading.

With approximately 1,000 tonne cumin seeds rejected by the National Commodity & Derivatives Exchange (NCDEX) on quality grounds, a majority of traders dealing in cumin seeds from Unjha have decided to approach the Forward Markets Commission (FMC) and urge it to intervene in the matter. Pravin Patel, Director of Unjha Agriculture Market Produce Committee (APMC) and Gujarat State Agriculture Marketing Board, said, “We fail to understand why the NCDEX has been continuously rejecting cumin seeds traded from Unjha on product specification grounds. Till date, no such issues have ever occurred to us. We fear the officials of NCDEX are supporting some speculators interested in down-rating prices of cumin seeds as there is already deficit in the crop with farmers in Gujarat shifting to cotton and untimely showers affecting the crop in Rajasthan.” He said the jeera sent for delivery to NCDEX warehouse was a year old as the fresh crop was yet to arrive. “We have decided to approach the FMC and request them to intervene into the matter, as we estimate rejection of more than 1,000 million tonne cumin seeds, the market value of which is around Rs 12.50 crore,” added Patel. Cumin seed is grown in several districts in Gujarat and Rajasthan. The prominent ones are Banaskantha and Mehsana in Gujarat and Barmer, Jalore, Jodhpur and Nagaur in Rajasthan. The country produces around 1.2 lakh-1.3 lakh tonne Jeera every year. Last year, Gujarat produced 60,000 tonne and Rajasthan produced 45,000 tonne. With at least 30,000 tonne carry-forward inventory and farmers in Gujarat shifting to cotton crop, cultivation scenario of cumin seeds in Gujarat has drastically changed this year. Besides, unexpected showers in Rajasthan damaged 20 per cent crop in the state. This year Gujarat is likely to produce 30,000 tonne cumin seeds while Rajasthan’s production stand at 36,000 tonne. Speaking on the issue, an NCDEX official said: “Before launching any commodity trade contract, the exchange would give a set of quality parameters and specifications including parameters of seed counts a gram, permissible moisture content and permissible foreign matters. In case of jeera, the ideal seed count is maximum of 300 seeds a gram, the moisture content is 10 per cent, the permissible foreign matters is 1 per cent and edible seeds other than jeera is 2 per cent. If the product received at our warehouse does not adhere to the quality specifications stipulated in the trade contract, we simply reject it.” He said the product to be traded is sent to the exchange warehouse, where it is tested by neutral assayers. If assayers find the product not in parity with the stipulated quality specifications, it is rejected, he added. “In the cumin seeds received from Unjha since last 4-5 days, complaints of edible seeds other than jeera — damaged, discoloured, weevilled, shriveled seeds and immature seeds — were found more than the allowed percentage and so we rejected the lot,” claimed the official. Cumin seeds are largely traded in bags of 60 kg, mainly across the marketing yards of Unjha in North Gujarat in Mehsana District. Prices of cumin seeds are usually quoted on quintal basis.The consumption of cumin seed in the world (excluding India ) is between 25,000 tonne and 30,000 tonne. India exports cumin seed mainly to Bangladesh , Brazil , Japan , Malaysia , Nepal , Singapore , the UAE, the UK and the US .

The government is considering a proposal to provide an insurance cover for the girl child that can enable her to receive a lump sum at the age of 18 years with suitable medical and educational components.

Around 24 public sector banks and quite a few financial institutions (FIs) and mutual funds (MFs) are in race for the government’s residual 10.27 per cent stake, worth over Rs 2,300 crore, in India ’s largest carmaker, Maruti Udyog. The Cabinet had cleared the disinvestment in December 2006 on condition that the stake is offloaded only in favour of banks, FIs or MFs.

Following its winning bid to pick up 43.3 per cent stake in Punjab Tractors Ltd (PTL) and its subsidiaries Mahindra & Mahindra (M&M) made a mandatory open offer of Rs 490 crore to acquire an additional 20 per cent stake in the same. The total deal is likely to cost M&M close to Rs 1,391 crore. Once the open offer is completed, M&M would have 63.3 per cent share in PTL with complete management control of the company.

In the largest foreign acquisition by an Indian company in the electrical industry, Delhi-based Havell’s India has acquired SLI Sylvania of the Netherlands for $300 million in cash. The deal takes Havell’s-Sylvania’s combined revenue of around $1 billion, making it the world’s fourth largest lighting business after Philips, Osram and GE.

Telecom

To retain the lead position in the mobile industry, Bharti Airtel will be investing a massive $8 billion by 2010.

The government is likely to impose penalties of a total of more than Rs 400 crore on telecom majors including Reliance Communications, Tata Teleservices and Bharti Airtel for delay in commissioning of services after obtaining licences. Reliance Communication tops the list with proposed Liquidated Damages of Rs 147 crore, followed by Tata Teleservices with Rs 126 crore.

British giant Vodafone and Indian conglomerate Essar group reached an agreement for jointly running India's fourth largest mobile firm - Hutch-Essar, which would be rechristened as Vodafone Essar The two companies have agreed on partnership terms for Hutchison Essar, in which Vodafone is acquiring 67 per cent stake from Hong Kong's Hutchison Telecom International Ltd while Essar would continue to retain its 33 per cent stake. Vodafone will have operational control of Vodafone Essar and Essar will have rights consistent with its shareholding, including proportionate Board representation. Ravi Ruia will be appointed as Chairman of Vodafone Essar and Arun Sarin will be Vice Chairman.

On its first anniversary of manufacturing in India , Nokia has announced that it had shipped 25 million handsets from its Chennai plant as of December 2006.

Telecom associations COAI and Auspi has announced the establishment of an office of ombudsman for the sector.

*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.