Current Economic Statistics and Review For the Week 
Ended May 12, 2007 (19^th Weekly Report of 2007)

Theme of the week:

Recent Trends in Investment as Revealed by CAPEX Data Series of CMIE *

I

Introduction

            One of the important indicators of current and prospective economic development is the extent of investment programmes initiated by various entrepreneurial classes combined with the extent of projects actually under implementation. Such an information set, extremely difficult to collate on a nation-wide scale, is nowhere available except in the quarterly survey of capital expenditures regularly conducted by the Centre for Monitoring the Indian Economy (CMIE). It is said that the CMIE collects information on individual projects from diverse sources. CMIE concedes that the information gathered even unreliable sources my be weak or “ sometimes even unreliable or misleading”. But, all sources put together collectively may provide a broad indication of the direction in which the investment intentions of the entrepreneurs and the project planners in various sectors of the economy. Table 1 to 13 present the details of these projects proposed under implementation, industry wise and state-wise over all picture of Investment Proposals and Under Implementation.

            There has occurred a very rapid rise in project proposals during 2006-07. Earlier, in four years from April 2002 to April 2006, the number of investment proposals increased by 3,862 from 6,542 to 10,409 and the levels of investment associated with them rose by near 80 per cent during from Rs. 16,09,623 crore to Rs. 28,76,027 crore during the same period. But, during the past year March 2006 to March 2007, the number of projects has shot up by 2,680 and the associated investments have jumped by 55 per cent from Rs. 28,70,838 crore to Rs. 44,36,727 crore (Table 1).

            What is more significant is the jump in the number and amounts of projects under implementation, in the latest year. The number of projects has gone up from 3,034 to 4,103, that is, by 1,069 and the investment amount by 64 per cent from Rs. 9,18,409 crore to Rs. 15,10,077  crore. On the other hand, during the previous four-year period, the number of projects under implementation had limped up by 841 from 2,172 to 3,013 and the investment amounts of projects under implementation had gone up by 37 per cent from Rs. 6,67,356 crore to Rs. 9,16,787 crore (Table 1).

            Overall, there is at the all-India and all-Industry level, an improvement in the project proposals submitted by the entrepreneurs and the actual number and amount of investments under implementation.

II

Investment Proposals Industry-wise

            Until the year 2005, the two individual categories, which were dominating the investment scene, were “electricity” and “ services”; between April 2003 and April 2005, over 60 per cent of the total investment proposals were in these two industrial categories. It is interesting that in the latest period, the ‘ manufacturing’ sector has overtaken either of the two industries mentioned above (Table 2 and 3). The share of ‘manufacturing ‘ hs gone up from 24.7 per cent in April 2005 to 30.1 per cent in April 2006 and remained at 28.6 per cent in March 2007. While the share of “electricity” has remained at around 31.7 per cent in March 2007 or 29.1 per cent in March 2006, that of “services” has steadily declined from 33 per cent in April 2003 to 26.7 per cent in March 2006 and further steeply to 21.8 per cent.

            However, the only segment amongst the ‘manufacturing’ industries to show a decent rise in share has been “ ferrous metals”; its share has go one up from 2.4 per cent in April 2003 to 12.8 per cent in March 2007 (Table 3). ‘ Chemicals’ industry has been another area where the share of investment proposals has remained around 9 to 10 per cent throughout the period. Within the services sector, it is the ‘transport services’ that has attracted a substantial rise in investment share, but of late its share has been declining.

Overall, the investment proposals under ‘ services’ have been generally widespread with communication and storage and distribution services joining the transport sector. But, it is not so with regard to the ‘manufacturing’ sector where investment proposals are actually concentrated in a few industries.

III

Investment Under Implementation by Industry

            Interestingly, the actual investment share has followed the same pattern as the share in project proposals (Table 6).

            At the same time, in all industries, the rate of implementation has been declining in areas where the shares in project proposals have been high and rising or both. This is partly due to operational reasons, for the newly projects take a while to implement (Table 7).

IV

State-wise Distribution of Project - Proposals and Implementation

            During the period under review, the states which have enjoyed around 8 to 9 per cent or above share in the aggregate investment proposals and implementation are just six: Gujarat, Maharashtra , Orissa, Tamil Nadu, Karnatka and Andhra Pradesh. Another set of three states, namely, West Bengal , Uttar Pradesh and Madhya Pradesh have shares in the range of 3 to 4 per centage points (Table 8 to 12).

            Amongst the states, the most dominant case, which has tended to push up the entire investment picture in the country, is that of Orissa; this state has attracted the maximum investment proposals in the areas of ferrous metals and associated mining activities (CISCO is an example). Maharashtra and Gujarat have retained their 9 to 10 per cent share each. Andhra Pradesh has retained about 8 to 9 per cent share. Amongst those, a state to suffer a fall in share in Tamil Nadu; its share in total investment has fallen from 9.2 per cent in April 2003 to 5 per cent in March 2007 (Table 9); the corresponding share in implementation has also come down from 7.5 per cent to 4.8 per cent (Table 12).

V

Corroborative Data from Official Source

            There is one set of data from the government sources, which concern investment proposals and their implementation in the industrial sector. These relate to industrial entrepreneur memoranda (IEMs) submitted to the Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry. These pertain to industries in the licensed as well as delicensed sectors which are required to file their investment intentions in the form of IEMS; these have been collated and disseminated cumulatively from August 1991, that is from the post-liberalisation period.

            As shown in Table 14, for about past 16 years, 73,676 IEMs have been filed with DIPP and their proposed investment has cumulatively worked out to Rs.26,70,643 crore. What is significant is that the growth in both the number of investment proposals and the associated amount of investment have considerably accelerated during the past three years 2005 to 2007. The annual rates of increases in cumulative investment have jumed from 13.7 per cent at the end of March 2004 to 22.3 per cent at the end of March 2005 and further to 24.0 per cent and to 33.8 per cent at the end of March 2006 and February 2007, respectively.

These investment proposals belong to only the “ manufacturing” areas and industrial fuels. As at the end of February 2007, eight industries, namely, metallurgical industries, electrical equipments, chemicals (except fertilizers), fuels, textiles, sugar, cement and paper, together have accounted for 77.7 per cent of the the total investment proposals (Table 15). These are the industries which have begun to participate in the industrial revival underway.

VI

State-Wise Implementation Report

The DIPPs SIA Statistics, a monthly publication, also provides data, based on Part B of the IEM form filed by entrepreneurs, cumulative information on IEMs implemented. Such data on total implementation as well as state-wise upto the end of February 2007 are presented in Table 16.

            Data in Table 16 do indicate that the pace of implementation has accelerated since March 2005; it was in the range of 2.3 to 2.5 per cent as annual increases in cumulative amounts of implementation but the same have accelerated to a range of 7.2 per cent to 11.1 per cent in each of the successive three years.

            However, the state-wise information suggests that the implementation processes are concentrated in a few states, namely, Gujarat, Maharashtra, West Bengal , Uttar Pradesh, Haryana and Andhra Pradesh. This six states accounted for 75 per cent of the total investment of Rs. 2,45,213 crores and 4,046 IEMs out of 6,492 IEMs.i.e. about 62 per cent of the total IEMs.  

      TABLES  

Highlights of  Current Economic Scene

AGRICULTURE  

India has delayed its tender to import 1 million tonnes of the wheat amid speculation that the government may be waiting to gauge the size of its purchases from domestic farmers. The last date for submitting the offers has been extended till May 21, 2007, which was originally scheduled to close on May 10, 2007. State Trading Corporation of India (STC) is importing wheat for a second year to augment government wheat inventories as domestic demand outpaces production.

Wheat procurement by the central and state agencies has reached 9.06 million tonnes between April 15-May 9, 2007 compared with 9.15 million tonnes a year earlier. According to the US Department of Agriculture, wheat are likely to touch 10 million tonnes in the marketing season 2007, less than the government’s target of 15 million tonnes, boosting prospects of importing wheat to replenish stockpiles. The government had procured 9.2 million tonnes wheat in marketing season 2006 from local farmers.

According to the records available with the central government, ITC, Cargill and AWB have together purchased over five lakh tonnes of wheat on their account so far in the rabi marketing season (April-June) 2007-08. ITC, Secunderabad has declared purchases of 2,61,007 tonnes, while Cargill India , Gurgaon and AWB India have purchased 1,70,881 tonnes and 69,013 tonnes, respectively.

Total chana output in the country is expected to be around 51.8 lakh tonnes, lower by 9.2 per cent compared to the earlier trade estimate of 57.1 lakh tonnes due to a major decline in output witnessed by the two major chana producing states, Madhya Pradesh and Maharashtra . Lower than normal rainfall and its uneven distribution have hampered the standing crop in these two states. While, the chana output is estimated to fall by 14 per cent to 16 lakh tonnes in Madhya Pradesh as against last year, in Maharashtra , the crop is estimated to be down to 8.3 lakh tonnes from 10 lakh tonnes a year ago.

As per the Indian meteorological department (IMD), the southwest monsoon is expected reach the country almost a week earlier than normal schedule of May 18. According to IMD, monsoon is likely to be 95 per cent of the long-term average in June September 2007 with a 5 per cent margin of error.

The central government has approved a package of Rs 22,000 crore to revive non-operational public sector fertiliser plants in the nations. Seven sick units of Fertiliser Corporation of India and Hindustan Fertiliser Corporation would be restarted considering the increasing demand for fertilisers in the country. The demand for fertilisers is expected to cross 300 lakh tonnes in the near future (five years), while the production is estimated to be touch to 200 lakh tonnes. The revival plans of the fertiliser units hinges on the availability of the cheaper natural gas.

The Indian Farmers Fertiliser Cooperative (Iffco), K.K. Birla and Murugappa groups are among the worst hit by the almost Rs 12,000 crore worth of pending fertiliser subsidy reimbursement claims on the central government. The outstanding subsidy reimbursement, owed by the central government to these fertiliser companies, as on March 31, 2007, has been a whopping Rs 11,641.5 crore, arising from the difference between their concession rates (roughly corresponding to the actual production or import costs) and the controlled prices at which they sell nutrients to farmers.

The central government has decided that the 2 percent interest subvention scheme for short-term crop loans will continue in 2007-08. According to an earlier announcement, the government will provide an interest subvention of 2 per cent per annum to public sector banks in respect of short-term production credit of up to Rs 3 lakh provided to farmers. This amount of subvention will be calculated on the amount of the crop loans disbursed from the date of disbursement or drawal up to the date of payment or up to the date beyond which the outstanding loan becomes overdue that is on March 31, 2008 for kharif and June 30, 2008 for rabi crops, respectively, which ever is earlier. This subvention will be available to public sector banks on the condition that they make available short-term credit at ground level at 7 per cent per annum.

As per International Pepper Community (IPC) report, exports of pepper from the country revealed a substantial increase in calendar year 2006 to 24,673 tonnes valued at Rs 242.8 crore against 15,800 tonnes in 2005, registering an increase of 56 per cent in volume and 84 per cent in value. Total shipments during the January-February 2007 have risen by almost 80 per cent to 5,426 tonnes valued at Rs 61.5 crore with 143 per cent increase in export value compared with the corresponding period of last year. Short supply from other origins coupled with competitive prices has led to the increase in the Indian shipments last year.

The government is considering a proposal recommended by Swaminathan committee report to offer farmers at least 50 per cent more than their weighted average cost of production as minimum support price (MSP) for agricultural products. At present, the government has been offering MSPs for 26 agricultural products that are fixed annually on the basis of factors like crop size, demand and inflation. Apart from this, it is also contemplating over setting up a market risk fund to cover perishable agricultural products that have not been covered under the MSP at present. Another proposal to offer farmers market price as the minimum support price for agricultural produce has also being studied.

The ministry of agriculture is planning to create a buffer stock of 2 million tonnes sugar to rescue the sugar industry. The sugar industry has been facing a difficult situation due to an estimated record production of 26.5 million tonne and consequent fall in prices. The ministry has already taken various steps like rendering export subsidy to traders in this regard.

The state government of Andhra Pradesh has approved two irrigation projects worth Rs 28,000 crore, namely, Pranahita-Chevella and Dummugudem tail pond schemes. While the Pranahita-Chevella project is expected to irrigate 12 lakh acres, with the creation of 160 thousand million cubic metres (TMC) feet of water potential at a cost of Rs 18, 000 crore, the Dummugudem project would create 165 TMC feet of water and cost about Rs 14,450 crore. 

Industry

The index of industrial production has increased by 12.9 per cent in March 2007 as against 8.9 per cent registered last year. This has helped the 2006-07 fiscal attain an annual industrial growth of 11.3 per cent. Annual industrial growth in 2005-06 was estimated at 8.2 per cent. The last time industrial growth crossed the double-digit mark was in 1995-96 at 13 per cent. Industrial growth in March 2007 has been fuelled by double-digit growth from the manufacturing sector — basic goods production has grown by 11.4 per cent, capital goods by 13.2 per cent and consumer goods by 14.2 per cent. Power production has also accelerated by 7.9 per cent in March this year, up from 3.4 per cent in March 2006, while mining output has increased by 5.1 per cent against 1 per cent in the same month last year. The consumer durables sector, however, has grown by a meager 2.7 per cent in March this year. This is a sharp drop from 21 per cent growth achieved in the same month of 2006. For the whole year, this sector’s output has grown by 9 per cent. In terms of industries, 14 of the 17 industry groups have shown positive growth during March 2007, the highest being the wood and wood products, furniture and fixtures group with 113.9 per cent, followed by 47.5 per cent in metal products and parts and 23.7 per cent in food products. 

FICCI survey

According to a FICCI survey for the fourth quarter of 2006-07, conducted in April when RBI raised key rates and the rupee appreciated against the dollar, business confidence has taken a beating compared with that in the third quarter of 2006-07. However, at the enterprise level, a larger percentage of firms expect to invest more and generate more employment in the next six months, while fewer firms anticipate higher profits and sales. Seventy two per cent of the participating firms are reported to have operated at over 75 per cent of their installed capacities in the last quarter of the previous fiscal. Capacity utilisation in sectors such as basic metals and alloys, cement, chemicals and machinery, among others, remain high. Sixty eight per cent respondents expect higher to much higher sales as against 78 per cent in the third quarter of 2006-07. Fifty per cent expect higher to much higher profits as against 52 per cent in the third quarter. Fifty two per cent expect higher to much higher exports as against 46 per cent in the third quarter. Thirty seven per cent expect higher to much higher employment against 32 per cent in the third quarter.

Another important divergence that the survey has highlighted relates to the development of a `dualistic interest rate structure' in the economy. While a high 42 per cent of the companies are complaining of rising cost of credit as an impediment for their businesses, it must be noted that a significantly large proportion (80 per cent) of these companies belong to the small and medium sector. Large Indian corporates have beaten the high cost of credit by tapping resources from outside at cheaper rates. Large companies also enjoy obtaining funds from domestic sources at rates lower than prime lending rates, a benefit that SMEs cannot avail themselves of. The survey drew responses from 418 companies from cement, pharmaceuticals, textiles, food and beverages, financial services, paper, metal, chemicals, FMCG, IT, infrastructure, auto, real estate, steel and petrochemicals sectors among others.

Infrastructure

Overall

The six core infrastructure industries index, which has a combined weight of 26.7 per cent in the index of industrial production (IIP), has grown by 10 per cent in March 2007, as against 7.1 per cent in March last year. Growth in cement production has shown a sharp decline 17 per cent in March 2006 to 5.5 per cent in March this year. For the 12-month period (April-March 2006-07), production growth has slowed down to 9.1 per cent, as against 12.4 per cent in 2005-06. The March slowdown has been probably due to a decline in construction activity in the real estate sector. Electricity generation has increased by 8 per cent in March 2007 as against 3.4 per cent in the same month of the previous year. The sectors, which have registered double-digit growth rates in March 2007, are petroleum refinery products, coal and finished steel with 13.4 per cent, 10.7 per cent and 15 per cent respectively. Overall, in the financial year 2006-07, the index for six infrastructure industries has grown by 8.6 per cent against 4.9 per cent registered in 2005-06.

Railway

The railways has announced that it would drop the 10 per cent surcharge on mini-rake and two-point rake services till further notice. Mini rakes are less than full-train load services and two-point rakes allow companies to load or unload a train at two points. According to railway officials, this move has been taken with an eye to attract more cement traffic, which had seen a drop in April. Meanwhile, the cement industry has also demanded lower tariff levels for moving fly-ash in trains. This is because fly-ash is a light commodity and about 45 tonnes of fly-ash can be moved in a wagon (vis-à-vis a carrying capacity of over 58 tonnes as considered by Railways).

Cement

In response to the finance minister's ad valorem duty proposal, cement manufacturers in the north Indian markets have decided to scale down the maximum retail price (MRP) printed on cement bags with effect from 13^th May. This would result in a lowering of MRP on bags by about Rs 4 in the Rajasthan market and around Rs 2-3 per bag in other northern markets including Delhi , Uttar Pradesh, and Uttaranchal. On 10^th May, the finance minister, Mr. P Chidambaram, had announced an ad valorem duty of 12 per cent for cement selling above Rs 190 for a 50-kg bag, instead of the increased specific duty of Rs 600 per tonne proposed in the budget 2007-08. Cement selling at a price below Rs 190 was to, however, continue with a lower specific excise duty of Rs 350 per tonne announced as part of the budget proposals. Mr. Chidambaram had said that he expected the move to result in an effective duty reduction of up to Rs 7 per bag.

Bandra-Worli sea link

According to the Maharashtra public works minister, Mr. Anil Deshmukh, the 6 km long Bandra-Worli sea link would be completed by April 2008. Work on the sea link will continue even in monsoon season, said. The project has been delayed by about five years due to the opposition by local fisherman and cost overruns. The Bandra-Worli sea link is an 8 lane, twin carriageway having a cable-stayed bridge design. It will enable speedy travel between Bandra and Worli. Traffic studies have estimated that due to the sea link, the savings in fuel and vehicle operation cost would be Rs 100 crore per annum. Motorist using this bridge will save about 30 minutes of travel time and delays of 23 signals, which motorists currently face. The link will be able to accommodate about 1.20 lakh motorists per day. Currently, Mahim causeway is the only link connecting the western suburbs with the island city of Mumbai . This north-south traffic corridor is very congested and during the peak hours results in a bottleneck at Mahim Causeway. Mr. Deshmukh has said that about 55 per cent of the total work on the sea link is over and would continue on crucial cable stayed section of the link in spite of the monsoon season. The cable-stayed section of the bridge would be as high as a 53-storied building. At the current rate, the sea link will cost about Rs 1,306 crore. Out of the eight lanes on the link, two lanes would be dedicated for buses. The motorist using the bridge will have to pay a toll: Rs 30 for cars, Rs 45 for light commercial vehicles and Rs 60 for trucks and buses.

Inflation

The annual point-to-point inflation rate based on wholesale price index (WPI) stood at 5.66 percent for the week ended April 28,2007 as compared to 5.77 per cent for the previous week or at a lower rate of 3.90 per cent during the corresponding week last year.

During the week under review, the WPI remained unchanged at 210.9  (Base: 1993-94=100). The index of ‘primary articles’ group, (weight 22.02 per cent), declined by 0.2 percent to 218.8 from its previous week’s level of 219.2 mainly due to decline in the prices of food articles. The index of ‘fuel, power, light and lubricants’ group (weight 14.23 per cent) remained unchanged at 320.5. The price index of ‘manufactured products’ group gone up marginally by 0.1 pr cent to 183.7 from 183.5 for the previous week due to rise in food products like bread and bun, cattle feed etc.

The latest final index of WPI for the week ended March 3,2007 has been revised upward from 209.3 to 209.2. Annual WPI inflation gone up to 6.51 per cent as compared to 6.46 per cent (provisional).

Banking

State-owned Union Bank of India has taken the lead in reducing both fixed and floating rates by 50 basis points for housing loans below Rs 20 lakh. The cut in interest rates will be applicable for fresh loans, effective May 7,2007.

Acting on the complaints received by the RBI and the offices of banking Ombudsmen, the central bank has asked banks to fix an appropriate ceiling on the interest charged on loans, particularly those of small value, keeping in mind the total cost incurred by the bank in extending such a loan. The RBI has, in a notification to all commercial banks (excluding RRBs), reasoned that the total cost to the borrower, including interest and all other charges levied on a loan, should be justifiable having regard to the total cost incurred by the bank in extending the loan.

Standard Chartered bank has introduced an e-channel for its corporate and institutional clients. According to the bank officials, this novel ‘Straight2Bank’ approach is unique whereby it requires only a single sign-in access for providing multiple services.

HSBC has launched global personal banking service for the growing number of mass affluent around the world. 'HSBC Premier' offer customers the ability to move around the world without changing the way they bank.

Kotak Mahindra Asset Managemnt Company (KMAMC), the asset management arm of Kotak Mahindra Bank, plans to raise between $50-100 million through Sharia funds in the Middle East . The company is looking at tying up with some local players there and the fund will be launched sometime in June 2007.

Financial Markets

Capital Markets

Primary Market

Asahi Songwon Colors Limited has tapped the market between May 09 and 15 by issuing equity shares aggregating Rs.3350 lakh, share of Rs 10 each in a price band of Rs 90-108 per share

Secondary Market

The market was under pressure throughout the week, weighed by lot of domestic and global events. High degree of volatility was seen throughout the week. The BSE Sensex lost 1.06% to 13,796.16 while the S&P CNX Nifty was down 0.98% to 4,076.6 The week started on a weak note, with the Sensex declining 55.02 points to 13,879.25, on Monday due renewed selling, led by IT pivotals. The weak trend continued at day later, as the BSE Sensex lost a further 113.79 points to 13,765.46, due to lack of buying support, as investors watched from the sidelines ahead of major local and global events scheduled later in the week. Subdued Asian and European stocks also were of not much help. The 30-shares BSE Sensex settled 16.05 points higher on Wednesday at 13,781.51, as buying resumed for index pivotals. Strong global markets also helped the sentiment. The barometer index lost 10.28 points, to 13,771.23, on Thursday as a late sell-off pulled the market in the red at closing bell. Sensex gained 24.93 points on Friday to settle at 13,796.16, amidst intense volatility. Global markets, Uttar Pradesh election results, inflation and industrial production figures, made it swing sharply.

Derivatives                                  

The Nifty May 2007 futures settled at 4,084.50, a premium of 7.95 points as compared to the spot closing of 4,076.65.

Government Securities Market

Primary Market

Under the weekly T-Bill auctions, the RBI mopped up Rs.2000 crores (MSS worth Rs.1500 crores) and Rs.2000 crores (MSS worth Rs.1000 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 7.6018% and 7.7683% respectively. RBI conducted the auction of "7.55% Government Stock 2010" for a notified amount of Rs.2000 crores under MSS. The cut-off yield of the security was 8.0288%.

RBI conducted the auction of "7.49% Government Stock 2017" and "8.33% Government Stock 2036" for a notified amount of Rs.6000 crores and Rs.4000 crores respectively. The cut-off yields for the "7.49% Government Stock 2017" and "8.33% Government Stock 2036" were 8.3118% and 8.6399% respectively.  RBI conducted the auction of State Development Loan (SDL), 2017 for the state of Kerala for an aggregate amount of Rs.350 crores through a yield based auction using multiple price auction method. The cut-off yield for the security 8.34%. RBI has announced the sale (re-issue) of "7.55% Government Stock 2010" for Rs.6000 crores under the Market Stabilisation Scheme (MSS) on May 16, 2007.

Secondary Market

During the week, the weighted average call rates during the period ranged between 2.79% and 7.41%, while weighted average repo rates ranged between 0.10% and 5.86% and the weighted average CBLO rates ranged between 0.84% and 5.72%. The average volumes of Call, Repo and CBLO segments were Rs.11476.81 crores, Rs.9434.91 crores and Rs.19021.87 crores respectively. The daily average outstanding amount in the LAF (reverse repo) operations conducted during the period was Rs.2999 crores. RBI conducted LAF (repo) operations for Rs.30 crores and Rs.150 crores on May 08, 2007 and May 09, 2007 respectively. The weighted average YTM of G.S 2017 8.07% bond was 8.1048% on May 11, 2007 as compared to 8.1499% on May 04, 2007. The 1-10 year YTM spreads decreased by 24 bps to 13 bps.

Bond Market

LIC Housing Finance has tapped the market to mobilise Rs 200 crore offering 10.25 per cent for 10 years.

NABARD has tapped the market to mobilise Rs.1200 crore offering 10 per cent for 5 years.

Foreign Exchange Market

The rupee-dollar exchange rate depreciated from Rs 40.57 on May 07 to Rs 40.91 on May 09 and again falls to 41.34 on May 11.

The six-month forward premia closed at 4.42% (annualized) on May 11, 2007 vis-à-vis 5.61% on 04 May 2007.

Commodities Futures derivatives

National Multi-Commodity Exchange on May 10, 2007 launched new series in soya oil, guar seed and chana desi futures contracts.

Multi commodity  Exchange’s  experiment on tinkering with transaction fee on futures trading turnover has backfired .Driven largely by a 15-25 per cent hike in transaction fees on different slabs of trading turnover in April, gross turnover of the exchange dropped nearly 17 per cent to Rs. 203,840.55 crore in the month on the single side transaction basis , compared to march when it reported a turnover of Rs.246,040.71 crore. FMC had directed all exchanges to charge transaction fees on the basis of volume of turnover of the broker.

Insurance

In a tough battle to expand market shares the private sector life insurance industry consisting 14 life insurance companies at 26 percent have lost 3 percent of market share to the state owned Life Insurance Corporation (LIC) in the domestic life insurance industry in 2006-07. According to the figures released by Insurance Regulatory & Development Authority the total premium these 14 companies have shot up by 90 percent to Rs 19,471.83 crore in 2006-07 from Rs 10, 252 crore.

Bajaj Allianz Life Insurance, with an Rs 63 crore of profit in 2006-07, has emerged as the most profitable private life insurance company in the industry. The life insurance joint venture between Germany ’s largest company Allianz and auto major Bajaj Auto has mobilised a new business premium of Rs 4270 crore during the year. The company has also 20 lakh policies which is the largest that any private sector life insurance company has sold in the country.

Corporate Sector

Tata Realty and Infrastructure Ltd (TRIL), the infrastructure and real estate development subsidiary of the Tata group, has signed an MOU with Dubai-based Jafza International, the global operations arm of Economic Zones World, to establish a joint venture company to develop and operate business and logistics parks in India .

India ’s largest carmaker Maruti Udyog has launched SX4a 1.6-litre, petrol engine-powered sedan at Rs 6.18 lakh, nearly Rs 60,000 (9 percent) cheaper than segment leader Honda City.

Swiss cement maker Holcim has raised its holding in ACC Ltd to about 41 percent by buying another 3 percent at an estimated Rs 530 crore.

India ’s largest carmaker Maruti Udyog Ltd has seen a 10 percent dip in customers availing auto loan to buy vehicles due to rising interest rates.

Tata Tea Ltd, the world’s second largest tea company has forayed into China by floating a joint venture with Zhejiang Tea Import and Export (ZTIE), which accounts for nearly 25 percent of export volume in China . Tata Tea has signed an agreement with ZTIE at the Government House, Anji County which involves setting up a joint venture company at Economic Development Zone of Anji County, Zhejiang, PRC for the manufacture and marketing of green tea polyphenols, other green tea extracts, cold and hot water soluble instant tea, liquid tea concentrates and other value added tea beverage products.

Union de Credit pour le Batiment SA (UCB), a wholly owned subsidiary of BNP Paribas SA of France has picked up 49.9 percent stake in Sundaram Home Finance Ltd (SHFL) for Rs 196.98 crore.

In order to have a younger crew on board, Indian Airlines has come up with an attractive retirement scheme for crew above 40 years of age. Referred to as the voluntary rehabilitation/rejuvenation scheme, it will help Indian Airlines delineate a youthful image in the extremely competitive aviation market. Cabin crew over 41 will have the option of retiring with a compensation package ranging between Rs 25 lakh and Rs13 lakh, depending on their age. This will be in addition to the existing post-retirement benefits. Furthermore, cabin crew below 50 can opt for ground duties at the discretion of the company. They will receive the benefit of an additional monthly compensatory allowance ranging from Rs 15,000 to Rs 50,000. ).

Observing that the main objective of bringing about competition and boosting growth of the Internet has been only partially achieved, the Telecom Regulatory Authority of India (Trai) has recommended a comprehensive regulatory framework for Internet service providers (ISPs). This includes bringing the ISPs under a licence fee regime and lowering foreign direct investment in them from the current 100 percent to 74 percent. Instead of free entry an entry fee of up to Rs 20 lakh, along with a uniform licence fee of 6 percent of the adjusted gross revenue and also a minimum licence fee of Rs 50,000, Rs 10,000 and Rs 5,000 for the national, state and district level service providers is recommended. ISPs seeking licences at the national level will have to pay Rs 20 lakh as entry fee, while it will be Rs 10 lakh for state-level ISPs.

After software services companies, it is the small product companies from the silicon valley of India that are slowly moving into US markets. Bangalore based Enterprise software Products Company, i-Vista Digital Solutions Ltd, has successfully implemented iMorfus, its flagship intranet product suite, at the US centre of the Nasdaq-listed Ness Technologies. Initially it had installed the suite at its India centre in August 2006.

Cairn India Ltd, a unit of Cairn Energy Plc, has made two discoveries in its largest oil field and secured government permission to extend exploration work in that area, raising the chances of boosting output. The drilling extension for its fields in the western state of Rajasthan is for six months. The company plans to spend $1.5 billion in developing the same area, which may have 1 billion barrels of oil and may boost India ’s output by about 20 percent once production starts in 2009.

Telecom

The department of telecommunications (DoT) has constituted two committees to oversee implementation of foreign direct investment (FDI) in the telecom sector by the companies, especially with regard to the guidelines concerning security aspects. Recently, the government notified the revised guidelines for telecom companies willing to hike FDI from 49 percent to 74 percent.

UK ’s Vodafone announced that it had closed the acquisition of India ’s fourth largest mobile operator Hutch Essar Ltd from the Hong Kong-based Hutchison Telecommunications International Ltd (HTIL), finally paying a discounted price of $10.9 billion in cash. The price is $180 million lower than the original $11.08 billion, and reflects retention and closing adjustments as agreed between Vodafone and HTIL.

Mobile operators Bharti Airtel and Hutch Essar would be fined up to Rs 50 crore each for launching Airtel 2-in-1 service and TalkOn service, respectively, during 2005 in the Delhi metro area without obtaining prior approval of the department of telecommunications (DoT).

*These statistics and the accompanying review are a product arising from the work undertaken under the joint ICICI research centre.org-EPWRF Data Base Project.

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