Current Economic Statistics and Review For the Week 
Ended April 28, 2007 (17^th Weekly Report of 2007)

Theme of the week:

Recent Trends in State Finances: A Snapshot*

By now almost all states have presented their budgets for 2007-08. State government budgets play a very significant role in the national economy as state governments are empowered to operate in most important areas like agriculture, health, education and other social services. This note makes an attempt to get a holistic impression on state finances for fiscal years 2006-07 and 2007-08, emphasising on major states in the country. The overall picture of state finances for fiscal year 2007-08 reveals that the state governments will continue to pursue the process of fiscal correction primarily through raising revenue from various sources along with containing revenue expenditures. In addition, states have announced sizeable increases in capital outlays for the year.

Revised estimates for fiscal year 2006-07 of most state governments reveal improved revenue inflows as well as sound expenditure patterns for most states. Many state governments have pursued the process of fiscal consolidation by means of Fiscal Responsibility Legislations (FRLs). Larger devolutions and transfers to states from the central government have helped them augment their revenues. Moreover all states, with the exception of Uttar Pradesh, have implemented VAT (value added tax), which is expected to improve tax incomes of states. Various state governments have emphasised on more efficient improving the tax administration and many states have proposed to introduce ‘Outcome Budget’, which in turn would incentivise better fiscal performance by state governments. On the developmental front, states have proposed to spend on social sector activities such as health, education, etc.

Rising Revenue Receipts

The budget estimates of state governments for fiscal year 2007-08, exhibit robust growth in revenue receipts, mainly on account of buoyant tax collections, which are expected to witness double-digit growth in several states during fiscal year 2007-08. Meanwhile, growth in non-tax revenue and capital receipts as budgeted shows mixed trends.

Budgetary statistics of major states have been presented in Annexures 1 & 2 of this note. Among various state governments presented in Annexure 1, the government of Andhra Pradesh has estimated the largest year-on-year growth of 31.6 per cent in total receipts during fiscal year 2007-08, however for 2006-07 the budget estimates for the same have been downwardly revised by 3 per cent over in the revised estimates. As against this, Karnataka government has budgeted a fall of 3.7 per cent in total receipts during the 2007-08, while revised estimates stand 12 per cent higher than the budgeted figures for fiscal year 2006-07. All other states expect healthy rises in total receipts during 2007-08

Expenditure Patterns

It is evident from the table below that endeavours of state governments to achieve FRBM targets so far seem to be on track. Specific to budgeted outlays (Annexure 2), there is a noticeable change in the expenditure pattern of most state governments. Efforts to curtail non-plan revenue expenditure and at the same time increase capital outlays are evident in the budgets of major states. Also, larger sums have been earmarked for social sector spending by many state governments.

Again, it is the Andhra Pradesh government that has budgeted the largest increase in total expenditure to the extent of 31.6 per cent during 2007-08 over revised estimates of the previous year whereas Maharashtra is expected to see a comparatively smaller increase of only 4.7 per cent. As mentioned earlier, all state governments have made attempts to curb rises in their revenue expenditures in their budgets for 2007-08 while announcing larger capital outlays. However Karnataka, Kerala and Maharashtra have proposed a decline in the budgeted estimates for capital expenditures.

Improving Deficits Scenario

According to FRBM targets, consolidated revenue deficit and gross fiscal deficit (GFD) for all states had been budgeted at 0.1 per cent and 2.7 per cent, respectively, of GDP during 2006-07, a reduction of 0.4 percentage points and 0.5 percentage points, respectively, over the previous year. The current fiscal situation makes these targets seem attainable.

Fiscal deficits of major states like Maharashtra, Gujarat, Bihar , Kerala are budgeted to decline in 2007-08 over revised estimates for 2006-07. For 2007-08, government of Haryana expects a fiscal surplus of Rs 1,640 crore, substantially higher than revised estimates for 2006-07.  Most states have presented revenue surplus budgets for 2007-08 with few exceptions like Andhra Pradesh, Goa , Karnataka and Kerala. Revenue surplus of Bihar has been budgeted very high at Rs 3,483 crore for 2007-08 as compared to revenue deficit of Rs 752 crore during 2006-07 (RE). Haryana government has also budgeted a substantially higher revenue surplus for fiscal year 2007-08 as compared to a deficit during the previous year.

Budget estimates for 2007-08 of state governments depict  an environment conducive for states to achieve FRBM targets within the specified period. The pattern of fiscal correction in most states towards the attainment of FRBM targets appears to be of a healthy nature. however, it is crucial for the states to be wary of any adverse effects on the developmental process in their respective jurisdictions. Social and developmental expenditures being state responsibilities as per the Indian constitution, state governments should be cautious about not compromising the egalitarian principle of equity while targeting to achieve mere quantitative targets as prescribed by the FRBM Act.

(*This note has been prepared by Snehal Nagori.)

References:

Ø      Budget documents of various state governments (2006-07 and 2007-08)

Ø      Reserve Bank of India (2007), ‘Macroeconomics and Monetary Developments in 2006-07,’ April

Highlights of  Current Economic Scene

AGRICULTURE  

According to the India Meteorological Department’s (IMD) long range forecast for the 2007 south-west monsoon season (June to September), the rainfall for the country as a whole is likely to be 95 per cent of the long period average with a model error of ± 5 per cent. The first long range forecast, based upon the newly-adopted statistical forecast system issued in April 2007, has been formed using the 8-parameter models and the forecast update, which would be issued in June 2007, would be based on the 10 parameter models.

With its wheat procurement certain to fall short of the target of 15 million tonnes, the central government is considering various plans to import up to 3 million tonnes of wheat in the current financial year 2007-08. A draft note on wheat imports has been prepared by the empowered committee on wheat and submitted for discussion at a meeting of the empowered group of ministers (e-GoM).  The e-GoM has suggested that the government could import 2 million tonnes of wheat and if required, it could import an additional 1 million tonne by the end of 2007-08. The government has set a ceiling of 5 million tonnes on imports this year. The e-GoM has also suggested that the government allocate Rs 40 crore for call options of wheat in the international market, so that its agencies can procure the commodity at competitive prices. The Food Corporation of India (FCI), by April 23, 2007, has purchased 5.9 million tonnes of wheat out of the total arrivals of 7.5 million tonnes in marketing season 2007-08, down by 18 per cent from 7.2 million tonnes procured a year ago. Lower procurement has resulted as the wheat growers are holding back their stocks in anticipation of a rise in prices in the coming months.

The commission for agricultural costs and prices (CACP) has recommended a record Rs 65 per quintal increase in the minimum support price (MSP) for the forthcoming 2007-08 paddy crop. The CACP has proposed an MSP of Rs 675 per quintal for Grade `A' paddy and Rs 645 per quintal for common varieties to be procured during the kharif marketing season, beginning October 2007-08 from the corresponding MSPs were Rs 610 and Rs 580 per quintal, respectively during the 2006-07 season (October-September). However, in addition, the it had announced an incentive bonus of Rs 40, taking the effective procurement price of the 2006-07 crop to Rs 650 and Rs 620 per quintal for Grade `A' and common paddy, respectively. Apart CACP has recommended huge increases in MSP of kharif pulses. For the ensuing 2007-08 crop, the CACP has suggested an MSP of Rs 1,550 per quintal for tur (arhar) and Rs 1,700 per quintal for mung (green gram), against the corresponding Rs 1,410 and Rs 1,520 per quintal levels in 2006-07. The MSP increases recommended for oilseeds are more moderate, that is, Rs 1,020-1,050 per quintal for yellow soyabean and Rs 1,520-1,550 per quintal for groundnut-in-shell.

The government has refused to extend 15 per cent subsidy to private traders for importing pulses, as given to state-owned agencies, citing it has no mechanism to check over billing. The representatives of Mumbai-based association of pulses demanded that the subsidy be extended to them as well because private traders had been more successful in importing the commodities than the state agencies. Import by private traders has stood at around 17 lakh tonnes till end of 2006, while state-owned companies have contracted 1.03 lakh tonne till March 8, 2007.

The central government has prepared a financial package of Rs 60 crore for a time frame of 5- years for the revival of closed tea estates in the country and most of them are expected to start operating within few months. The package includes waiver of all dues to the Tea Board, waiver of all penalties due to default of provident fund of workers, financial restructuring of bank loans, conversion of debts into medium term loans, write-off of penalties and interest rate subsidy for a five-year period for fresh loans. The Commerce Ministry has also announced that 14,928 tea growers would receive financial assistance of Rs 74.64 lakh from the Price Stabilisation Fund (PSF) Trust for 2007-08 on the basis of the Price Spectrum Band 2006. This decision follows the declaration of the tea crop for 2006 as a `normal year', as per the calculations of the Price Spectrum Band on the basis of the seven year's moving average of international price for the commodity, the annual average domestic price of the beverage being Rs 63.62 per kg.

The Indian Agricultural Research Institute (IARI) has launched an improved version of the Pusa Basmati-1 variety, which has been the mainstay of Indian basmati exports for nearly 15 years. The new variety, with relatively higher yield potential and disease-resistance, is expected to boost basmati availability for exports.  The new variety, named Improved Pusa Basmati-1, was formally approved for commercial cultivation at the 42nd Annual Rice Group meeting held early this month in Hyderabad . India exports around 1.2 million tonnes of basmati rice every year, and Pusa Basmati-1 accounts for 60 per cent of it. In the three-year national level field trials, which are mandatory before a new variety is approved for release, the new variety has shown about 12 per cent yield superiority over Pusa Basmati-1, and more than 33 per cent superiority over Taraori basmati, which is another good basmati variety enjoying a significant share of the exports. 

In response to the Centre’s action plan, the government of Maharashtra has planned to increase pulses acreage by 2 lakh hectares in (June-May) 2007-08, that is, considering kharif and rabi seasons together.  The state would concentrate more on tur (pigeon pea), followed by urad (black matpe), moong, and chana (chick pea). Currently, among kharif crops, the state has 1.08 million hectares under tur, besides 6 lakh hectares under moong, and 4.9 lakh hectares under urad. In the rabi season, the main crop chana, occupies 1.28 million hectares. 

The export subsidy on sugar announced by the union government in March 2007 would not apply to mills exporting sugar under the advance licence ( AL ) scheme. Further, the subsidy for exports under the open general licence (OGL) would apply only to the exports done on or after April 19, 2007, and up to April 18, 2008, said a government notification. 

With effect from April 25, sugar mills in Maharashtra would no longer offer sugar to exporters at the last-declared floor of Rs 1,190 per quintal f.o.r (free-on-rail). The government of Maharashtra has dispensed with the system of fixing export floor prices on a weekly basis. Factories can now fix their own rates, so long as they are broadly compatible with prevailing London white sugar rates. Fixing minimum export prices was proving counterproductive because mills, in their desperation to offload stocks, were doing little to improve realisations and mostly quoting at the floor and the floor price itself was getting successively revised downwards due to pressure from buyers, further reinforcing the bearish market trend.

As per provisional estimates of Coir Board, exports of coir products have touched an all-time high of 165,097 tonnes valued at Rs 595.2 crore for 2006-07. The exports have risen 21.4 per cent in quantity over 136,027 tonnes exported in 2005-06 and have increased by 17.1 per cent in value terms compared with Rs 508.5 crore clocked in 2005-06. The Coir Board had projected an export target of Rs 572 crore for financial year 2006-07.  Of the 11 coir-products, coir mats have registered the highest exports of 72,147 tonnes worth Rs 454.7 crore, recording an overall growth of 13 per cent in quantity terms and 16 per cent in value terms over the figures in financial year 2005-06.

Industry

The confederation of Indian industry (CII), in its quarterly report on the “state of the economy”, has said that while the manufacturing sector, especially, consumer durables and automobile industry has been showing early signs of a slowdown, the profitability of services sector has moderated. The report has said that the automobile industry sales grew at 0.8 per cent in the month of March 2007 as compared to 20.4 per cent in March 2006. Similarly, the growth figures for production of consumer durables has been 1.6 per cent in February 2007 compared to 20.3 per cent during the same period last year. These are sectors are the most sensitive to interest rate adjustments. 

However, the analysis states that in March, 2007, net sales and profit after tax (PAT) of 3834 firms surveyed, grew by 21 per cent and 74 per cent respectively compared to 18 per cent and 1 per cent recorded a year earlier. The growth in sales has been attributed to domestic consumption having gone up on the back of a buoyant economy. 

Infrastructure

Shipping

Bulk cargo freight cost has increased significantly due to shortage of panamax (ships classified of the maximum dimensions that will fit through the locks of the Panama Canal ) and handymax (35,000-60,000 dead weight tonnes) vessels in the market. The vessel shortage has been mainly attributed to congestion at the Australian coal port Newcastle . The freight for bulk cargo has increased to around $21 a tonne from $14 prevailing six months ago. Iron ore, which has been affected by the Rs 300-per tonne export levy in the budget, has been further burdened with the increase in freight cost. More than 70 ships have been waiting at Newcastle , the world's biggest coal export terminal, which handles over 85 million tonnes of coal a year, with the waiting time for ships being around 30 days. The delay due to infrastructure constraints and maintenance work has affected export of coal even as demand has soared in the markets, especially India and China . Australia is the world's largest producer of thermal coal and the delays are costing the industry more than A$1 million a day in fees paid to compensate shipping firms.

Power

Reliance energy customers in Mumbai will have to pay 4 per cent to 69 per cent more for electricity, according to the company's new tariffs, which have been approved by the Maharashtra electricity regulatory commission (MREC). The impact on customers will depend on their consumption and category. There would be no increase in tariff for consumers below the poverty line. For residential consumers whose power consumption is below 100 units per month, there would be a four per cent increase in their monthly bills. Those with consumption levels of 300 to 500 units would face a seven per cent increase. For consumers using more than 500 units a month, the increase would be 19 per cent. For commercial consumers, the increase would be between 14 per cent and 34 per cent. For the low-tension industrial consumers, the hike in bills would be between 17 per cent and 34 per cent. The high-tension industrial consumers such as hotels and cinemas halls would pay 69 per cent more for electricity. MERC has also chosen to target advertisement hoardings and malls for their conspicuous consumption. The fixed charge for advertisement and hoarding consumers has been increased to Rs 400 per month, energy charge has been increased to Rs 13.55 per unit from the existing energy charge of Rs 11 per unit. In addition, there would be a reliability charge of Rs 1.09 per unit. The Commission has introduced a new tariff category for all multiplexes and shopping malls having a sanctioned load of more than 20 kW with tariff of fixed charge of Rs 300 per kVA per month, energy charge of Rs 7.40 per kWh and reliability charge of Rs. 1.09 per kWh, totaling to Rs 8.49 per unit.

The central government has targeted an additional power generation capacity of 10,000 MW from renewable sources, mostly wind energy, in the 11th Five-Year Plan with around 1,800-2,000 MW to be added in the first year.

Inflation

The annual point-to-point inflation rate based on wholesale price index (WPI) stood at 6.09 percent for the week ended April 14,2007 or at a lower rate of 3.70 per cent during the corresponding week last year.

During the week under review, the WPI rose by 0.05 per cent to 210.9 from 210.8 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 219.1 from its previous week’s level of 218.9 mainly due to rise in prices ofbajra, arhar and moong. The index of ‘fuel, power, light and lubricants’ group (weight 14.23 per cent) declined from 320.5 to 320.4.. The price index of ‘manufactured products’ group increased by 0.1 pr cent to 183.6 from 183.5 for the previous week due to rise in foo products like groundnut oil, cotton seed oil etc.

The latest final index of WPI for the week ended February 17,2007 has been remained unchanged at 208.6.

Banking

Banking industry will continue to be a public utility service for another 6 months, which among other things mean that employees cannot go on strike without giving notice six months in advance. According to a notification issued by the ministry of labour and employment, the step has been taken in public interest. The notice is required so that conciliatory proceedings could be started. During the conciliatory proceedings and 7 days after their completion, the employees cannot go on strike. The decision came on the heels of bank union’s plan to strike work in the last week of March demanding among things, a second option for pension. After the conciliatory process, the strike was however called off.

The Reserve Bank of India has asked banks to either cancel or open lockers in case they remained unoperated for more than three years for medium risk category or one year for higher risk category. In a notification issued to all the scheduled commercial banks, the RBI has asked them to immediately contact the locker-hirer in such cases and advise him to either operate the locker or surrender it. Also, the banks have been asked to carry out the exercise even if the locker hirer was paying the rent regularly. Further, banks will have to ask the locker hirer to give in writing, the reasons why he/she did not operate the locker. In case the locker-hirer has some genuine reasons as in the case of NRIs or persons who are out of town due to a transferable job etc, banks may allow the locker hirer to continue with the locker. However, if the locker-hirer does not respond nor operate the locker within the stipulated period of time, banks have been asked to open the lockers after giving due notice to him. In this context, banks should incorporate a clause in the locker agreement that in case the locker remains unoperated for more than one year, the bank would have the right to cancel the allotment of the locker and open the locker, even if the rent is paid regularly.

Yes Bank’s profit after tax (PAT) has increased by 71 per cent at Rs 94 crore in 2006-07 as against Rs 55 crore in the previous financial year.

The upward trend in home loan rates looks set to continue with banks understood to be considering higher charges for those seeking loans for a second home loan or above the Rs 15 – Rs 20 lakh limit. This could further accelerate the slowdown in the home loan segment, which began in the end of 2006. India ’s largest private sector lender, ICICI Bank, is considering charging more for loans for second homes. The bank is already discouraging second home buyers with credit norms being tighter for this category.

Barclays Plc, Britain ’s third-largest bank, had agreed to buy ABN Amro Holding NV for 67 billion euros ($91 billion) in the world’s biggest ever financial services takeover. Barclays offered 3.225 new shares for each share of ABN Amro, amounting to 36.25 euros a share. The bid is 33 per cent above ABN Amro’ s price on March 16, the last trading day before talks were announced.

The country’s second largest bank ICICI Bank is planning to tap the markets with a Rs 20,000 crore (about $5 billion) follow-on public offer (FPO) by June to meet the growing demands of Indian corporates and to meet regulatory guidelines. The funds would be raised from both the Indian and US markets by issuing fresh shares. The FPO will be the second issue by the bank after ICICI Bank was created through a reverse merger between ICICI Bank and ICICI Ltd. This would be the largest public issue ever made in domestic corporate history surpassing Cairn India ’s $2 billion issue last year. As on March 31, 2006, the total foreign share holding in the bank was 73.87 per cent (with the maximum permissible limit at 74 per cent). The issue would help the bank to increase its capital adequacy ratio (CAR) substantially to more than 20 per cent from the present level of 0.98 per cent from 0.71 per cent.

Financial Markets

Capital Markets

Secondary Market

Local bourses ended the week flat after suffering high volatility throughout the week. A lot of significant events kept pulling the key indices either ways.

For the week ended 27 April 2007, the BSE Sensex was up 11.59 points, at 13,908.58, while the NSE Nifty was down marginally by 0.05 points, to 4,083.50.

The week started mildly bullish with the Sensex rising 30.92 points, to 13,928.33 on Monday. The market chose to remain cautious on the first day of the week, ahead of the Reserve Bank of India (RBI)’s monetary policy.

On Tuesday, the 30-share BSE Sensex jumped 208.39 points to finish at 14,136.72, after the Reserve Bank of India (RBI)’s decided to keep all policy rates - the CRR, repo, reverse repo and bank rates -- unchanged. Speculative buying, as well as short-covering in the derivatives aided the surge, especially in banking shares.

On Wednesday, the benchmark Sensex gained 81.05 points to 14,217.77, as it abandoned a weak intraday trend, towards the later part of the day, led by index heavyweight, Reliance Industries. Short-covering ahead of expiry of the April contracts also happened in the later half of the day.

On Thursday, the Sensex rose marginally by 11.11 points to 14,228.88, after highly a volatile session, due to the scheduled expiry of the April 2007 derivative contracts.

But the Sensex was not able to sustain the higher levels, for the last day of the week, and hence plunged 320.30 points, to 13,908.58, as index pivotals were being offloaded, tracking weak global markets and profit-booking.

Derivatives          

The Nifty May 2007 futures settled at 4,066.55, a discount of 16.95 points over the spot closing of 4,083.50.                       

Government Securities Market

Primary Market

Under the weekly T-Bill auctions, the RBI mopped up Rs.2100.00 crores (MSS worth Rs.1500.00 crores) and Rs.2300.00 crores (MSS worth Rs.1000.00 crores) through 91-day T-Bill and 364-day T-Bill. The cut-off yields for the 91-day and 364-day T-Bill were 7.3521% and 7.7450% respectively.

RBI conducted the auction of "8.07% Government Stock 2017" for a notified amount of Rs.6000 crores. The cut-off yield of the security was 8.1577%.

RBI has revised the ceiling for the outstanding under the Market Stabilisation Scheme (MSS) to Rs.1,10,000 crore with a threshold of Rs.95,000 crore.

Secondary Market

During the week, the weighted average call rates during the period ranged between 7.66% and 12.59%, while weighted average repo rates ranged between 5.61% and 7.72% and the weighted average CBLO rates ranged between 3.10% and 7.60%. The average volumes of Call, Repo, and CBLO segments were Rs.14465.32 crores, Rs. 6164.56 crores, and Rs.19105.61 crores respectively. The daily average outstanding amounts in the LAF (reverse repo) and LAF (repo) operations conducted during the period were Rs.845.80 crores and Rs.9520.00 crores respectively. The weighted average YTM of G.S 2017 8.07% bond was 8.0328% on April 27, 2007 as compared to 8.0475% on April 20, 2007. The 1-10 year YTM spreads decreased by 3 bps to 29bps.

Foreign Exchange Market

The rupee-dollar exchange rate appreciated from Rs 41.67 on April 23 to Rs 40.97 on April 25 and again rose to 40.78 on April 26 but dipped to Rs 41.07 on April 27.

The six-month forward premia closed at 6.80% (annualized) on April 27, 2007 vis-à-vis 6.49% on April 20, 2007.

Commodities Futures derivatives

Commodity market regulator Forward Market Commission (FMC) has strongly advocated the participation of banks, mutual funds and FIIs in forward trading in commodities. Since it is very important for the growth of commodity market in India .As a first step ,FMC Chairman S Sundareshan Said FIIs should be allowed to participate only in bullion, metal and crude commodities while banks should be permitted in agriculture commodities.

The Forward Markets Commission (FMC) has decided to appoint auditors living in the vicinity of commodity exchanges to save the costs of transporting them to audit the books of accounts of the commodity bourses and their members. The FMC is trying to tighten the norms for defaulters by auditing their accounts

The suddenly stronger rupee has sandbagged Indian punters playing on foreign commodity exchanges. Traders betting on LME or the price arbitrage between MCX and Nymex now lose cash if they bring back their dollar profits into India .

IBMA Spot Exchange, jointly promoted by Financial Technologies Group and the Bombay Bullion Association (BBA) Limited, will be formally launched in the next month.

The new spot exchange has been named as Indian Bullion Market Associates Limited. For the first time, spot trading in gold will be commenced on the electronic platform in the country.

Among the major promoters of the spot exchange, Financial Technologies ( India ) Limited (FTIL), promoter of Multi Commodity Exchange of India Ltd (MCX) would hold 51% stake in the spot exchange while BBA members would hold 17%, trade sources said.

Bombay Bullion Association Ltd (BBA) as an association would hold 2% stake while 20% stake would be offered to various banks, financial institutions, and mutual funds.

All India bullion dealers would hold 10%, sources said.

Corporate Sector

Reliance is roping in local kirana owners by using their property on lease and signing a no-competition pact with them. If a kirana shop commands a market rent of Rs15,000-20,000 a month, Reliance Retail pays up to Rs 80,000-Rs 1,00,000. Using this strategy, the company, which is rolling out fruits, vegetables and grocery outlets called Reliance Fresh, aims to reach out to big neighborhood markets.

The country’s largest car manufacturer Maruti Udyog will introduce its new Sedan SX4 a replacement for the Baleno in May 2007. Powered by the 1.6-litre M-series petrol engine, the SX4 will be available in two variants and is likely to be priced at around Rs 7 lakh.

Droege & Comp Management Consultant Pvt. Ltd, a German-based management-consulting firm is entering in India , with the opening of its office in Mumbai. The primary focus of the firm will be to provide expertise to German companies in India and also to Indian companies looking at investing in Germany .

Vedanta Resources Plc the largest producer of copper and zinc in India has clinched Mitsui’s coveted 51 percent stake in iron ore exporter Sesa Goa for $981 million, besting rivals LN Mittal and Kumar Mangalam Birla in a bidding war that started in January 2007. Vedanta will pay Rs 2,036 a share; it will also make a mandatory open offer for 20 percent more at the same price, taking the total cost of a 71percent stake to $1.37 billion. The acquisition marks Vedanta’s entry into the iron ore market, stoked by rising steel demand in China and India .

Mukesh Ambani-led Reliance Retail has launched Reliance Digital, its first store for consumer durables and IT (CDIT) products, at Shipra Mall in Ghaziabad in the national capital region of Delhi . The company would be investing Rs 3-10 crore per store, depending upon the real estate availability.

After picking up Sesa Goa from Mitsui Vedanta group would invest $13-14 billion in greenfield and brownfield expansions across group companies over the next three to five years. Vedanta aims at a capacity of 1 million tonnes each in copper, aluminium and zinc. The group is also entering the power sector and eyeing an entry into coal. It is setting up a large-scale 2400 MW independent power plant project in Orissa that marks its entry into the commercial power sector.

Reliance Industries Ltd is entering the $27 billion venture financing space in India through Reliance Life Sciences (RLS). RLS, which recently invested $40-50 million in a $650 million biotech venture fund floated by US investment management fund MPM capital, will invest in start up biotech companies in India that have drugs in the discovery or development phase.

Like revolutions in IT and biotechnology, the year 2007-08 will witness a revolution in food technology (FT). According to minister of state for food processing industries, the government is open to offer optimum support required by companies to set up a food processing unit in the country and has declared Rs 1,500 crore grant to develop mega food parks across the country. It will extend a grant of Rs 50 crore to create infrastructure and supply lines respectively for 30 food parks across the country.

Hindalco Industries is all set to compete with the UK-based metals giant Vedanta Resources Plc to acquire an 88 percent stake in Bosnia 's Aluminij Mostar. The Bosnian company has been offered for sale at 76.8 million euro (Rs 427.65 crore).

Stuttgart-based Robert Bosch GmbH made an open offer of Rs 4,000 a share in cash to buy 6.4 million shares from the shareholders of Bangalore-based Motor Industries Company Ltd (Mico). Currently, Bosch holds 60.55 percent stake in Mico and if the offer is fully subscribed, its stake would go up to 80.55 percent.

Information Technology

In order to make India its strategic destination for future growth, the $14.7 billion Nasdaq listed computer Sciences Corp(CSC) has acquired Covansys Corp for a consideration of $1.3 billion(Rs 5320 crore). Covansys, another Nasdaq listed company with an annual revenue of over $455 million, incidentally has a major presence in India with over 70 percent of its 9000 employees located in Chennai, Bangalore, Mumbai and Vadodara. Founded in 1985,Covansys was one of the first US based IT series company to establish operations in India and in Chennai.

Telecom

In a move that could lead to tug-of-war between private mobile operators and the government, the department of telecommunications (DoT) has proposed new licencees – to be called niche operators – to provide telephony and broadband services in rural areas. The area of operation would be limited to a few villages. They will be allotted funds from the universal service obligation fund (USOF) and will also contribute 5 per cent of their AGR to the fund.

Telecom companies like Bharti, Reliance, Tata Teleservices, Hutch and Bharat Sanchar Nigam Ltd would be receiving notices from the department of telecommunications (DoT) levying penalty of Rs 1,000 per unverified subscribers. The government had made it mandatory for all service providers to finish the verification of their existing subscriber base by March 31, 2007 and after that a penalty of Rs 1,000 per unverified subscriber would be levied and the connection would be disconnected.

Foreign Investment Promotion Board (FIPB) has given conditional clearance to Vodafone’s acquisition of 52 percent in Hutch Essar Ltd (HEL), the country’s fourth largest mobile operator.

*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

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