Current Economic Statistics and Review For the Week 
Ended April 07, 2007 (14^th Weekly Report of 2007)

Theme of the week:

All-India Debt and Investment Survey (AIDIS)
State and Region-wise Analysis
Part A*

Household Indebtedness in India

Section 2C

Debt-Asset Ratio*

1

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 was presented. Sections 2a and 2b dealt mainly with the phenomenon of indebtedness of households in rural and urban India against the backdrop of assets holdings by different size classes and a brief review of the aggregate value of cash loan and total value of assets were discussed. This section (Section 2c) deals mainly with the burden of debt as measured by debt-asset ratio on 30-06-2002.

2

Debt-Asset Ratio

In spite of the fact, whether or not an asset is mortgaged or hypothecated to a person or agency, at any given point of time, the outstanding debt of a household is potentially a charge upon the households assets. Hence, the question naturally arises – how was the debt outstanding related to assets on any given date or what is the burden of the household debt? Debt-asset ratio is the best measure to know the burden of debt at any given point of time.

“Debt-asset ratio (DAR) is defined as the average amount of debt outstanding on a given date for a group of households expressed in percentage of the average value of assets owned by them on the given date”. 

Debt-Asset Ratio – All-India

            It may be seen from Statement 1 that as on 30-6-2002, the debt-asset ratio at the all-India level is found to be 2.83 per cent. It is slightly more in rural areas at 2.84 per cent as compared to 2.82 per cent of urban areas.

Debt-Asset Ratio – Rural Households

Burden of debt for rural households at 2.84 is a tad more that of 2.83 per cent for all-India households. Among rural households the burden of debt seems to be more on ‘non-cultivators’ at 4.64 per cent as compared to ‘cultivators’ whose average assets value is more than that of ‘non-cultivators’ and hence less burden of debt as measured by debt-asset ratio at 2.49 per cent (Statement 2).

Debt-Asset Ratio – Urban Households

The differences in the ratios of urban households between the two occupational categories i.e. ‘self-employed’ and ‘others’ are comparatively narrower. While the debt-asset ratio of ‘self-employed’ works out to be 2.19 per cent that of ‘others’ is 3.42 per cent thereby confirming the asset holding of self-employed are more than that of ‘others’ also they enjoys better debt facilities without undergoing its burden as their counter part ‘others’ (Statement 3).  

3

Region-wise Review

Rural+Urban Households

Households in northern region, which has got the maximum assets also owes more than all-India debt, bears less burden of debt at 1.80 per cent, the lowest -except that of the households of north-eastern region - among all the regions and also lower than that of 2.83 per cent of all-India level (Statement 4). Another two regions, which enjoys low debt-asset ratio, were eastern and central regions (see Statement 4). This may be due to owning low debt as compared to better asset owning in this region. The households in western region and southern region, due to owing more cash loans as on 30-6-2002 have to bear higher burden of debt. Their debt-asset ratio works out to 3.69 per cent in western region and 4.65 per cent in southern region. 

Rural Households

            Statement 5 gives the debt asset ratio in the rural areas of different regions. It can be seen that except southern region and western region all other regions have got a debt asset ratio less than that for all-India. Southern Region had to bear maximum burden of debt as the rural households in this region borrow more.

Among the rural households, the cultivator households are more prosperous than non-cultivator households and they hold a major part of the household assets especially landed property, hence in all these regions, cultivators bear less burden of debt as compared to non-cultivator (Table 3).

Urban Households

            Statement 6 throws some lights on the burden debt on different urban households depending upon their occupation. It can be seen that, the self-employed households as compared to all others are better of in this regard in all urban regions (see Table 2 and Statement 6).

4

Debt-Asset Ratio by Assets Holding Classes

Rural+Urban Households

The debt-asset ratio, as seen in Statement 7, decreased almost monotonically with the ascendancy of the assets. The ratio for the asset holding class ‘less than Rs. 15,000’ works out to be 22.84 per cent, which reduces to 2.83 per cent for the asset holding class ‘Rs.8,00,000 and above’ (Statement 7).

Statement 8 and 9 depicts debt-asset ratio of different asset holding classes in rural and urban areas and it can be seen from there that there is not much change in burden of debt when one traverse from lower asset holding class to higher asset holding classes with lower class having more burden of debt in both rural and urban areas alike.

5

Debt-Asset Ratio – Asset Holding Class – Region-wise

Tables 4 to 6 gives throws some light on the phenomena of burden of debt on different asset classes among different asset holding class households in different region/states.

            Statement 10 depicts the debt asset ratio of lowest and highest asset classes.

            It can be seen that the trend is one of diminishing burden with the ascendancy of asset in both rural and urban areas of all the regions. However it can be seen that especially in the southern region the burden of debt is very high among the entire region in the lowest asset classes. In this region Andhra Pradesh had a burden of debt of 50.2 per cent in the lowest decennial class asset holding, preceded by Kerala at 60.7 per cent. However, households in Karnataka had to bear the brunt of debt at a lower level of 13.6 per cent only among this class. Tamil Nadu also experienced the burden of debt of 25.2 per cent, more than that of all-India. Rajasthan ( 46.0 per cent) in northern region, Uttar Pradesh ( 23.3 per cent) in central region and Gujarat (26.4 per cent), all have more than all-India level of debt asset ratio. However, Bihar in eastern region has only 22.1 per cent of the burden of debt slightly lesser than that of all-India (Table 6).

6

Summing up

      (i)      Burden of debt as measured by asset-debt ratio for all-India households is 2.83 per cent with rural (2.84 per cent) and urban areas (2.82 per cent)

    (ii)      In rural areas, cultivator households are better off as far as the burden of debt is concerned as compared to non-cultivator households. 

   (iii)      Similarly, in urban areas, self-employed households bear less burden of debt.

  (iv)      Among regions, southern region suffers from the worst case of burden of debt. With Andhra Pradesh and Tamil Nadu being the front-runners in this respect.

    (v)      Obviously, the low asset holding classes bears heavy brunt of the debt burden as measured by debt-asset ratio in all region/states/among different occupational categories.

* This note is prepared by R.Krishnaswamy

      TABLES  

Highlights of  Current Economic Scene

AGRICULTURE  

According to III advance estimates (AE) released by ministry of agriculture, India is likely to produce 73.7 million tonnes of wheat in the 2006-07 rabi season against the previous estimate (II AE) of 72.5 million tonnes due to favourable weather and higher acreage of the crop. The projected output of 73.7 million tonnes will be 6.2 per cent higher over final estimates of 69.35 million tonnes of 2005-06. The production of rice is likely to touch 91.05 million tonnes, marginally higher than previous estimate of 90.13 million tonnes. The total foodgrain output is expected to rise by 1.5 per cent to 211.78 million tonnes as against 208.6 million tonnes of previous year.

As per the Solvent Extractors’ Association of India (SEA), the export of oilmeals for the year 2006-07 has been recorded at 51.70 lakh tonnes, valued at Rs 4,300 crore ($1 billion) posting an increase of 17 per cent compared to 44.23 lakh tonne (Rs 3,562 crore) last year. This the highest export ever made by the country both in terms of quantity and value. The rapeseed meal export has improved sharply due to the provision of the commodity from (Nafed) during off-season, which had not only boosted the crushing and oil availability but also increased rapeseed extraction and led to a boost in the exports of rapeseed meal. Vietnam has emerged as the major importer, which has imported 12.5 lakh tonnes of oilmeals followed by South Korea importing 11.56 lakh tonnes.

According to the estimates of International Cotton Advisory Committee, world cotton production is likely to touch 25.2 million tonnes in 2007-08, almost unchanged from 2006-07. Cotton production in India is expected to increase to a record 4.7 million tonnes. Production in the US is expected to be lower by 10 per cent to 4.3 million tonnes while that in China (Mainland) is expected to decline slightly to 6.5 million tonnes. World cotton consumption is projected to increase by 2 per cent to 26.7 million tonnes in 2007-08, driven by Chinese mill use. International cotton trade is expected to recover from 8.5 million tonnes in 2006-07 to 9.2 million tonnes in 2007-08, on account of an expected rebound in Chinese imports. However, world cotton ending stocks are forecast down by 5 per cent to 11.3 million tonnes in 2006-07 and by 10 per cent to 10.1 million tonne in 2007-08.

In order to rescue the sugar industry, the government of Maharashtra has waived purchase tax for October-September 2006-07 season. At present, sugar mills are required to pay 3 per cent of sugarcane prices as purchase tax. The waiver of purchase tax is expected to result in substantial savings for the sugar industry, compensating for some the losses faced by it this season. 

The Rubber Board has fallen short of its X five-year (2003-07) plan target of replacing aged rubber trees with new ones by 23 per cent. The board could only cover 26,649 hectare against the target of 34,850 hectare due to the reluctance of growers to cut aged trees due to high price of rubber. In the situation of high prices, growers would prefer some income from aged trees than replacing and waiting for 6-7 years for new plant to reach yielding stage.

According to the crop prospects and food situation report published by the United Nations Food and Agriculture Organisation (FAO), the global wheat production is expected to rise sharply by about 4.8 per cent in 2007 to stand at 626 million tonne, with most countries, except China , showing noticeable recovery after the last year’s weather-driven poor harvests. Most of the major wheat-exporting countries are anticipating better harvests, indicating possibilities of higher export supplies and consequential softening of international prices.  The total world cereal production is likely to go up by around 10 million tonnes to touch a record level of 2,082 million tonnes, driven by 5.6 per cent increase in the production of maize. The rice production is expected to rise only marginally by about 3 million tonne to 423 million tonne in 2007. 

According to the provisional data available with the National Federation of Cooperative Sugar Factories (NFCSF), sugar production in the October-March 2006-07 has jumped by about 25 per cent to a record 21.2 million tonnes against the 19.2 million tonnes of the previous year. Private sugar mills have contributed around 11 million tonnes. Maharashtra has recorded a highest production of 7.32 million tonnes, followed by Uttar Pradesh at 6.46 million tonnes and Karnataka at 1.9 million tonnes. 

The central government’s wheat procurement operations have commenced in Punjab and Haryana. However, according to traders, the government would not be able to purchase the expected wheat quantity in both these states, given the low arrivals and high open market prices. The private players are offering much more for wheat than government’s procuring price of Rs 850 per quintal.  In 2006-07, the food corporation of India (FCI) was able to procure only 9.2 million tonnes of wheat, against 14.8 million tonnes in 2005-06. The FCI is targeting to procure15 million tonnes of wheat this year. Companies like ITC and Cargill have drawn up plans to buy large quantities of wheat this season, though the Australian Wheat Board has decided to stay out of Punjab and Haryana.  The competition from the private sector in the mandis has intensified because these companies are entering into contracts with farmers and have also prepared to pick up the wheat from farmers’ doorsteps, saving them transport and storage costs. 

Industry

Pharma exports to Africa and Commonwealth of Independent States (CIS) have been growing at an impressive pace in the first half of the fiscal year 2006-07. According to the provisional figures for the first half of the current fiscal year, between April 6 and October 6, exports of drugs, pharmaceuticals and fine chemicals to Africa and CIS have grown by 22.83 per cent and 7.06 per cent, respectively, compared to the corresponding period last year. While exports to Africa have stood at $402.48 million as the fourth largest export market for India after Europe, Asia and North America , the CIS has occupied fifth position with $215.51 million. Nigeria , South Africa and Kenya are the top markets for India in Africa . The total exports in the first half of the 2006-07 have stood at $2,869 million as per the provisional figures available with pharmaceutical export promotion council (Pharmexcil).

Infrastructure

Railway

Indian Railways has witnessed a 9.12 per cent growth in freight loading during April 2005-February 2006 to 655.35 million tonnes (mt) from 600.58 mt. It has also registered a 14.89 per cent increase in freight earnings touching Rs 37,589.03 crore from Rs 32,716.59 crore during the period. Passenger earnings have risen by 13.61 per cent to Rs 15,371.93 crore from Rs 13,530.19 crore. The integral coach factory and rail coach factory has produced 1,110 and 1,164 coaches, respectively, during the period, exceeding the target by 26 and 4 coaches each. The rail wheel factory has produced 1,22,339 wheels and 52,537 axles during the same period compared to the target of 1,18,126 wheels and 52,528 axles.

Shipping

The union shipping ministry is considering an action plan for the next five years to increase the draught in the major ports in the country up to 18 m to handle larger vessels. In this context, the ministry has prepared an action plan to increase the draught in major ports such as Kolkata from the present 7 to 9 m, Haldia Dock Complex from 8.5 to 9 m, Visakhapatnam from 17 to 18 m, Ennore from 13.5 to 16.5 m, Chennai from 17 to 17.5 m, Tuticorin from 10.7 to 14.7 m, Kochi from 12.5 to 14.5 m, New Mangalore from 14 to 17 m, Goa from 13.3 to 14.3 m, Mumbai from 9.1 to 14 m, JNPT from 12.5 to 14 m and Kandla from 11.7 to 14.5 m. The ministry is also planning to set up a deep-sea port off the coast of West Bengal . The new port will be like that of Shanghai Port far away from the coast with a draught of 20 m to cater to vessels with a capacity of more than 1.5 lakh TEUS.

In 2006-07, the 12 major ports have handled a total of 463.84 million tonnes (mt) of traffic, up by an estimated 9.51 per cent over 423.56 mt handled in 2005-06, according to tentative figures released by the Indian Ports Association. However, there has been a marginal shortfall of 0.4 per cent from the target of 465.7 mt. Visakhapatnam port is the largest cargo-handling port with a total traffic throughput of 56.38 mt, followed by Kolkata port (including Haldia) 55.05 mt and Chennai 53.4 mt. In terms of growth, Mumbai port has topped the list with an 18.5 per cent growth at 52.36 mt (44.19 mt in 2005-06), followed by Jawaharlal Nehru port 18.45 per cent at 44.81 mt (37.83 mt), Ennore 16.86 per cent at 10.71 mt (9.17 mt) and Paradip 16.33 per cent at 38.51 mt (33.10 mt). Kolkata Dock System (excluding Haldia) has also posted 16.56 per cent growth at 12.59 mt (10.80 mt). But traffic throughput at Haldia remained virtually stagnant at 42.45 mt (42.33 mt), or a mere 0.28 per cent rise. Together with Haldia, Kolkata port has, thus, posted a meager growth of 3.59 per cent. Other ports that posted double digit growth during the year are Kandla, 15.41 per cent at 52.98 mt (45.90 mt), followed by Chennai 13.05 per cent at 53.41 mt (47.24 mt) and Kochi 10.28 per cent 15.31 mt (13.88 mt). New Mangalore port has reported a negative growth of 6.99 per cent at 32.04 mt (34.45 mt). Visakhapatnam port, the largest cargo-handling port, has registered the lowest growth of 1.05 per cent, followed by Tuticorin at 5.03 per cent to 18 mt (17.13 mt) and Mormugao by 8.06 per cent to 34.24 mt (31.68 mt).

Cement

The government has made cement imports duty-free and is also contemplating a removal of the dual excise duty structure on cement announced in the recent budget. The government has abolished, with immediate effect, the countervailing duty of 16 per cent and additional customs duty of 4 per cent on Portland cement, widely used in construction. This follows a full customs duty exemption on Portland cement in January 2007. The domestic cement companies have been asked by the government to suggest proposals to reduce prices. Cement prices have risen from an average of Rs 165 (per 50 kg bag) in January 2006 to Rs 209 in February 2007 and subsequently to Rs 220.The government has also clarified that the countervailing duty exemption on cement import would be Rs 350 per tonne in the case of cement of declared retail sale price not exceeding Rs 190 per 50 kg bag. For higher priced cement, the excise duty would be Rs 600 per tonne. Since the budget, differences have arisen between government and domestic manufacturers.

Inflation

The annual point-to-point inflation rate based on wholesale price index (WPI) stood at 6.39 percent for the week ended March 24,2007 or at a lower rate of 4.06 per cent during the corresponding week last year.

During the week under review, the WPI rose by 0.2 per cent to 209.8 from 209.4 for the previous level  (Base: 1993-94=100). The index of ‘primary articles’ group, (weight 22.02 per cent), rose by  0.5 percent to 215.3 from its previous week’s level of 214.2 mainly due to rise in prices of urad, gram, masur and condiments and spices. The index of ‘fuel, power, light and lubricants’ group (weight 14.23 per cent) remained stagnant. The price index of ‘manufactured products’ group moved up by 0.1 per cent to 183.4 from 183.2 due to increase in the prices of food products by 0.3 per cent.

 The latest final index of WPI for the week ended January 27,2007 has been revised upwards; as a result both, the absolute index and the implied inflation rate stood at 209.0 and 6.69 per cent as against their provisional levels of 208.8 and 6.58 per cent, respectively.

Banking

In an effort to check the misuse of export credit by small exporters who benefit from the interest rate arbitrage between low-interest currencies and the Indian rupee, the RBI has asked banks to ensure that the Foreign Exchange Management Act (FEMA) regulations are not violated during such transactions. An RBI directive has asked banks to be careful in giving guarantees against export advances and has told them to verify the exporter’s record to assess his ability to execute such orders. Many exporters with low export turnover were receiving large amounts as export advances in currencies with lower interest rates against domestic bank guarantees. The exporters were depositing such advances with banks in Indian rupee to take advantage of the interest rate arbitrage. Further, the guarantees were being issued even before the advances were received, with a condition that they would be operational only after getting the funds. The guarantees are issued at par value, against the discounted values of the export advances.

After many years of being in the red, term lending institution IFCI is on the verge of announcing a major turn-around with a profit of around Rs 1,000 crore for financial year 2006-07.

HDFC, the second largest mortgage lender after ICICI Bank, have raised its lending rates by 75 basis points, but effected a smaller hike for existing borrowers by raising its prime lending rate (PLR) by only 50 basis points. HDFC Bank and UTI Bank has also raised their PLRs by 100 basis points to 15 per cent.

LIC Housing Finance has announced an increase in its lending rates both for floating rate loans and fixed rate loans with effect from April 5, 2007. The floating rate loans will now be 11.25 per cent onwards, and the rates for fixed loans will start at 11.75 per cent.

Public Finance

The central government has achieved about 99 per cent of its set target with the revenue deficit standing at Rs 82,411 crore till February this year. According to official statistics, the revenue deficit for 2006-07 is estimated at Rs 83,436 crore. The government, in the previous fiscal, achieved 107 per cent of the set target. Fiscal deficit during the April-February 2006-07 has stood at Rs 1.21 lakh crore, 80 per cent of the target for 2006-07. The fiscal deficit has been primarily financed by external borrowings and domestic markets. Market borrowings by the government have touched Rs 1,24,682 crore at the end of February 2007. The domestic borrowings for the entire current fiscal have been pegged at Rs 1.44 lakh crore. The government has raised Rs 1.15 lakh crore or 80 per cent of the estimates, till the end of February. The Public Provident Fund has raked in Rs 9,456 crore and 76% has been financed from external borrowings. The figure at the end of February for the previous fiscal was 64%. 

Financial Markets

Capital Markets

Secondary Market

The market staged a recovery from Monday’s steep fall that was caused by RBI’s surprise hike in short term interest rate and cash reserve ratio announced after the markets had closed on Friday 30 March 2007. Firm global markets and cooling off oil prices aided the recovery from lower level in the short trading week.

But the market ended the week in the red. The 30-share BSE Sensex lost 216.02 points or 1.6 per cent to 12856.08 in the week ended Thursday 4 April 2007. The S&P CNX Nifty shed 69.55 points or 1.8 per cent to 3752 in the week.

BSE Mid-Cap index lost 64.17 points or 1.1 per cent to 5319.95 whereas BSE Small-Cap index lost 14.14 points or 0.2 per cent to 6456.37 in the week.

The market regulator Securities & Exchange Board of India proposed applying circuit filter on the day of relisting in a scrip. Sebi has proposed that 20 per cent price band would be levied on commencement/re-commencement of trading in a scrip which would include all the cases of commencement/ re-commencement of trading due to de-merger, amalgamation, capital reduction, scheme of arrangements, revocation of suspension, etc. as decided by the exchanges from time to time

On Wednesday, Sebi banned 28 stock broking firms and eight individuals from trading in shares for five years for their role in the Ketan Parekh securities scam. These entities have also been debarred from accessing capital market and associating with any intermediary in capital market for five years.

China 's central bank has ordered commercial banks to set aside money as reserves for the sixth time in 10 months, in an aim to further control liquidity and curb lending. The bank raised the reserve ratio by another 0.5 percentage point to 10.5 percent, effective from April 16, the People's Bank of China said on Thursday. On the same day, Bank of England held British interest rates steady at 5.25 percent.

Derivatives                                  

The April Nifty future was settled at 3722.55 while the May Nifty future was settled at 3721. Open interest increased across both series.  The marked discount between spot and April future suggests that there is still a lot of pessimism in the market.

Of the other indices, the Bank Nifty is fairly liquid and the April future is running at 5121.65, which is at a small discount to the spot value of 5129. The CNX IT is less liquid and the April future was settled at 5080 while the spot closed at 5088

Government Securities Market

Primary Market

Under the weekly T-Bill auctions, the RBI mopped up Rs.3200 crores (MSS worth Rs.1500 crore) and Rs.1500 crore (MSS worth Rs.1000 crore) through 91-day T-Bill and 182-day T-Bill. The cut-off yields for the 91-day and 182-day T-Bill were 7.9353 per cent and 7.9869 per cent respectively.

RBI conducted the auction of 7.55 per cent 2010 for a notified amount of Rs.6000 crore under MSS. The cut-off yield of the security was 8.2431 per cent.

The Government of India has announced the sale (re-issue) of 7.38 per cent 2015 and 8.33 per cent 2036 for a notified amount of Rs.6000 crores and Rs.4000 crores respectively through a price based auction using multiple price method on April 12, 2007.

Secondary Market

During the week, the weighted average call rates during the period ranged between 7.12 per cent and 12.83 per cent, while weighted average repo rates ranged between 6.93 per cent and 10.02 per cent and the weighted average CBLO rates ranged between 6.72 per cent and 8.82 per cent. The average volumes of Call, Repo and CBLO segments were Rs.20838.56 crores, Rs.7311.27 crores and Rs.21645.85 crores respectively. The daily average outstanding amounts in the LAF (reverse repo) and LAF (repo) operations conducted during the period were Rs.1055.33 crores and Rs.11550.00 crore respectively. The weighted average YTM of G.S 2017 8.07 per cent bond was 8.1604 per cent on April 06, 2007 as compared to 7.9602 per cent on March 30, 2007. The 1-10 year YTM spreads increased by 7 bps to 26bps.

RBI has permitted trading in power bonds, maturing on Oct. 1, 2011 and April 1, 2012, which were issued by various states to central public sector undertakings.

In his address on "Role of Monetary Policy in Attaining Growth with Stability: The Indian Experience", Dr. Y. V. Reddy indicated the central bank's policy preference for indirect instruments like a mix of market based instruments and changes in reserve requirements to give effect to its monetary policy. He also mentioned that the tolerance level to inflation in India has been low, relative to many developing countries, especially on account of democratic pressures.

Bond Market

Bank of Maharashtra is tapping the market to mobilise Rs 150 crore through issue of upper tier II bonds by offering 10.25 per cent for 15 years and a step-up of 50 basis points if call is not exercised at the end of 10 years.

In accordance with the Union Budget Speech for the year 2007-08, regarding the creation of mortgage guarantee companies, RBI has released the Draft Guidelines on Operations of Mortgage Guarantee Companies. The guidelines cover the definition of a mortgage guarantee company, the essential features of a mortgage guarantee, the capital requirements, the prudential and accounting norms, norms regarding creation and maintenance of reserves, terms of counter-guarantee, and the due diligence to be exercised by a mortgage guarantee company.

Foreign Exchange Market

The rupee-dollar exchange rate touched a high of Rs 42.90 on April 4 but dipped to Rs 43.15 on April 5. The six-month forward premia closed at 5.41 per cent (annualized) on April 05, 2007 vis-à-vis 4.40 per cent on March 30, 2007.

Commodities Futures derivatives

National commodity exchanges have registered 99 per cent jump in their turnover at Rs 40.72 lakh crore for the financial year ended March 31compared with Rs 21.34 lakh crore during the same period of the previous year. MCX has maintained its leadership over other national commodity exchanges by posting 138 per cent rise in turnover at Rs 22.93 lakh crore (Rs 9.61 lakh crore).

MCX daily average turnover in FY07 was Rs 9,463 lakh crore. NCDEX reported 7 per cent growth at Rs 11.67 lakh crore (Rs 10.91 lakh crore), while that of NMCE was Rs 1.17 lakh crore. Regional commodity exchanges have logged in Rs 1.2 lakh crore in FY07. The three national exchanges alone have contributed about 97 per cent to the total turnover.

The first coffee robusta contract launched in MCX expired on March 30 with a delivery of 120 tonnes. Futures trading in coffee was launched on January 29, 2007. "The delivery intention period was for a month to overcome logistic problems pertaining to bulk handling and storage. There is a provision that once a seller's stock is validated by the exchange, actual delivery can take place on any of the tender days as per the seller's choice. All open positions at the end of contract expiry result in compulsory delivery," said an MCX official. Maximum allowable position limits for members and clients in the commodity is 2,250 tonnes and 750 tonnes, respectively. However, in the delivery period, the maximum allowable position limits are reduced to 450 tonnes and 150 tonnes for members and clients, respectively. Robusta contracts are traded on MCX platform up to 11.55 p.m. to coincide with international market timings as coffee is a global commodity with global reference pricing. After a series of discussions with domestic planters, traders, processors and exporters, MCX had decided to launch the Euronext.liffe based Coffee Robusta contract as Indian exporters were selling their coffee using the Euronext.liffe based contract price as the benchmark. The final settlement price of MCX is linked to the Euronext.liffe, giving the traders the advantage of global benchmark price. MCX Robusta coffee has four delivery centres, three in Karnataka — Kushalnagar, Chikmangalur and Hassan — and one in Kerala — Kalpeta, where National Bulk Handling Corporation (NBHC) maintain warehouse for coffee industry participants trading on MCX. The contract has attracted good interest from the domestic coffee industry. "All the three verticals — metals, energy and agriculture sector — have registered a good growth in turnover. More importantly, our business has managed to register growth despite volatility due to a mismatch in supply-demand. End users have started using our platform to hedge their risk," said Mr Joseph Massey, Deputy Managing Director, MCX. Without putting any target for the coming fiscal year, Mr Massey said, "We want to grow organically by introducing more new products and align with the physical market.

External Sector

The current account deficit of the county has stood at $ 3 billion for the third quarter ended December 31, 2006, according to statistics put out by the Reserve Bank of India compared with $ 4.7 billion in the corresponding period in the previous fiscal. For the nine-month period covering (April-December 2006), the current account deficit has stood at about $12 billion, at the same level as in the previous corresponding period. Exports have seen a growth of 14 per cent in this quarter compared with 21 per cent in the corresponding quarter of the previous fiscal, while imports have grown by 25 per cent in this quarter as against 17 per cent in the corresponding earlier period. A doubling of receipts due to services rendered by software companies, tourism earnings and remittances from Indians working abroad helped India reduce its current account deficit for the third quarter of this fiscal year.

The foreign exchange reserves of India have surged by $1.789 billion to touch $197.746 billion in the week ended March 23, 2007. The reserves have increased by over $3.3 billion in two consecutive weeks. During the week ended March 16, the reserves had touched $1.547 billion to $ 195.957 billion. According to the RBI's Weekly Statistical Supplement, foreign currency assets increased by $1.789 billion to $190.392 billion.

The country's external debt stock has shot up by $6.19 billion in the quarter ended December 2006 to $142.66 billion on the back of a sharp increase in commercial borrowings by corporate sector and also due to rise in non-resident India (NRI) deposits. While long-term debt outstanding for the quarter ended December 2006 increased by $6.80 billion to $132.64 billion, short-term debt declined by $610 million to $10.02 billion at end-December 2006.

Corporate Sector

Fiat and Tata Motors, in an industrial joint venture for cars and engines have opened their Ranjangaon plant near Pune. The plant has capacity to produce one lakh cars and two lakh engines every year for the Indian and foreign markets. Fiat’s Grande Punto and sedan Linea which were expected to be launched in India by mid-2008 would roll out from this plant. Fiat and Tata Motors will invest 50 percent each in the Rs 4000 crore facility.

Bharati Enterprises and the world’s largest retailer Wal-Mart stores will sign a legal agreement for their joint retail venture in April’2007. Bharati Enterprises has announced an investment of $2.5 billion to be made before 2015 into the front end of its retail venture, covering floor space of 10 million sq ft.  The joint retail venture would initially focus on the northern part of the country and the retail outlets are more likely to be known by Bharati name.

Deutche Bank has valued Reliance Industries’ KG D6 block at Rs 59,800 crore, which is the second largest deep-water find in the world. This is the first independent valuation of the block. KG Basin is expected to go into production in 2008.

Mahindra Renault launched the 1.4-litre petrol Logan at Rs 4.28 lakh, making it the cheapest mid size sedan in the market after the Tata Motors IndigoV series.

Tata group company Indian hotels will acquire US based Hotel Capton Place for around Rs 264 crore ($60 million).

Japan ’s third largest automaker, Nissan Motor Co, plans to produce a car priced at below $3000 (Rs 1.33 lakh) in India . The vehicle would formidably compete with the Tata Motors Rs 1-lakh-car, which is under development.

Reliance Retail is planning to open 400 small format consumer durables stores under the ‘Reliance Digital’ brand in the rural and semi-urban markets. This will be the second major durable retailing initiative in the domestic market after competitor Tata Group’s Infiniti retail owned Croma. Infiniti Retail also hopes to enter the semi-urban and rural markets in the next two years.

The $1.5 billion, Dubai-based Landmark Group will invest $500 million over the next three years to expand its retail operations and foray into budget hotels in India .

Textile and apparel major Raymonds, has recently concluded talks with Mukesh Ambani-promoted Reliance Retail for marketing Raymond fabrics through Reliance Retail's first mall, which is being, launched in Ahmedabad in May 2007. The new retailing initiative by Raymond will coincide with its aggressive retail expansion plans. After having set-up 350 exclusive showrooms, the company is planning to have a network of 950 stores in India by 2010.

Quintiles Transnational Corp, one of the largest clinical trials organisations in the world, is scouting for drug development partnerships with Indian companies through its 100 per cent subsidiary NovaQuest.

Ranbaxy Laboratories is looking at 14.9 percent stake in Andhra based Jupiter Biosciences. If the deal goes through, Ranbaxy would use its distribution network in Europe and the US to distribute Jupiter's peptide components, organic intermediates, and active pharma ingredients in those markets.

Reliance Industries Ltd (RIL), is expected to decide on Krishna Godavari  (K-G) basin gas price for marketing in consultation with the government by June-July’2007. The price of the 40 mmscd (million standard cubic metres) of gas from the K-G basin, which will be produced by mid-2008, is expected to be significantly cheaper than naphtha prices.

Information Technology

Wipro Technologies, the global IT services arm of Wipro is planning to invest around Rs 375 – 400 crores over a period of 3 years – 5 years in Pune. The announcement was made at the inauguration of phase II of the company’s development centre at Hinjewadi in Pune. With the opening of the new centre, the Wipro division will have an employment strength of 6,300.

Satyam Computer Services has launched a 4,500 sq ft development centre in South America .

In a bid to develop an online professional platform for medical doctors across the world, Apollo Hospital Group has joined IBM for a 50:50 partnership. The proposed online platform will be known as ‘ Health-care Super Highway ’ and will be implemented in phases. The aim of the project is to provide access platform to 500,000 odd physicians across countries enabling them to interact for profession related information including consultation and second opinion. If the project gets finalised, it will open new vistas for Indian doctors. Microsoft has also evinced interest in partnering the project.

The Rs 9,000-crore Indian entity of global electronics major Siemens AG, has decided to make Kolkata one of its principal IT hubs. It is going to increase the number of IT employees in the city by a few thousand in the next three to four years. (fe,8/04/07)

Telecom

The much-awaited 3G policy is expected to be announced in April’2007, with the defence ministry agreeing to vacate 40Mhz spectrum by July’2007. 3G technology would allow mobile service providers to offer their subscribers high speed data download and interactive services like video gaming and stock trading.

*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.

LIST OF WEEKLY THEMES

We will be grateful if you could kindly send us your feed back at epwrf@vsnl.com