Current Economic Statistics and Review For the Week 
Ended June 30, 2007 (26^th Weekly Report of 2007)

Theme of the week:

All-India Debt and Investment Survey (AIDIS)
State and Region-wise Analysis
Section 9 

Estimated Amounts of Cash Loans Outstanding By Schemes of Lending as on 30-06-2002*

I

Introduction

This note – ninth in a series of notes on all-India debt and investment survey, conducted by the National Sample Survey Organisation in 2003 (January-December) along with some other surveys, viz., situation assessment survey of farmers (SAS), land and livestock holding survey (LHS), etc., in their 59^th round (January-December 2003)- deals with distribution of outstanding cash loans as on 30-06-2002 by institutional agencies among different asset holding classes of households in rural and urban areas, under different schemes announced by the government from time to time for all states and regions.

2

 Distribution of Aggregate Amount of Debt

All-India

According to the NSSO 59^th Round (January-December 2003), there are 203.4 million households in India, having an aggregate amount of debt Rs. 1,76,795 crore as on June 30,2002. Thus, each household had borrowed an average amount of Rs. 8,694 (Statement 1).

It is expected that  institutional agencies will play an important role in meeting the credit needs of households in easy terms of contract and thus reduce the burden of heavy interest that the household would otherwise be compelled to bear. Unfortunately, their dominance appears to be the least among those who, probably, need their service the most.

Statement 2 & 3 depicts the distribution of cash loans among different asset holding classes by institutional and non-institutional agencies for both rural and urban as well as rural households seperately. It can be seen that out of  total cash loans of Rs . 176,795 crore granted by all credit agencies, institutional agencies share stands at Rs. 112,684 crore or 63.7 per cent; is much more than that disbursed by non-institutional agencies at Rs. 64,119 crore or 36.3 per cent.  But, institutional agencies have extended advance of 68 per cent or  Rs 76,511 crore  to the richest two asset holding classes, while the poorest got Rs.522 crore or 0.5 per cent. Though, non-institutional agencies also mainly cater to the needs of richer classes more their performance towards poorer class is better than that of institutional agencies. 

Institutional agencies especially co-operative societies and commercial banks normally advance cash loans to different household usually under different schemes.

The NSSO 59^th round give detailed information regarding distribution of cash loans outstanding against institutional agencies under Differential Rate of Interest (DRI) Scheme, Prime Minister’s Rozgar Yojana (PMRY), Swarnajayanti Gramin Swarojgar Yojana (SGSY), Swarna Jayantai Sahari Rozgar Yojana (SJSRY), advances to minority communities, and rahabilitation of scavengers. The remaining amount of cash loans are advanced against total state schemes and other schemes for rural and urban areas.

Statement 4  give the working of these different schemes.

At the outset, it can be averred that not only the percentage share of household cash dues arising out of loans advanced by institutional agencies under a number of individual schemes of lending do not show any appreciable value but also the number of  households they served under the different schemes were meagre. In 2002, in rural as well as in urban India, it is seen that certain specific programmes/ schemes such as ‘Prime Minister’s Rozgar Yojana’ (PMRY), ‘Swarnajayanti Gramin Swarozgar Yojana’ (SGSY), ‘Swarna Jayanti Sahari Rozgar Yojana’ (SJSRY), ‘advances to minority communities’ and various ‘self-employment’ schemes had not become significant means of disbursal of loans to households as per AIDIS 59^th Round (January-December 2003).  The individual percentage shares of these schemes were very negligible at the national level both in number of households served as well as the amount advanced. Among the various ‘self employment’ schemes, the one that is most prominent is Differential Rate of Interest Schemes. Majority of loans disbursed by institutional agencies, in 2002, were given under ‘ other schemes’ – the share being 84 per cent and 90 per cent of the total for the rural and urban areas, respectively (Statement 4). Still, it would be interesting to know the objective of these different schemes and their working. Hence, these schemes are discussed in the following paragraphs.

3. Differential Rate of Interest ( DRI) Scheme

The Differential Rate of Interest Scheme operative since 1972, is intended for the benefit of the weaker sections of the community. It envisages lending by banks at a concessional rate of 4 per cent per annum to selected low-income group who deserve financial assistance.

The main criteria for selection are the weak economic status of the borrowers, who do not have any tangible security to offer nor can produce a security or guarantee of a well-to-do party, and the productive character of the activity to be financed. The income ceiling for eligibility under the scheme is an annual income upto Rs. 3,000 in urban areas and upto Rs. 2,000 in rural areas.

            The important categories of borrowers are landless persons and persons with small holdings.

            The ceilings on loans for working capital and term-loan to a single borrower are Rs. 2,500 and Rs. 5,000, respectively. Since February 1980, banks can grant advances upto Rs. 6,500 by way of a composite loans in the case of small-scale industries, village artisans etc., without making any distinction between working capital and term loan. In 2007-08 budget speech finance minister has raised this limit of Rs. 6,500 to Rs. 15,000.

            The interest to be charged by banks is fixed at a uniform rate of 4 per cent which remain unaltered. The loans and advances granted by banks under the scheme are covered under Small Loans Guarantee Scheme of the Deposit Insurance and Credit Guarantee Corporation.

            From 1978 the lending under the scheme should be a minimum of 1 per cent of banks aggregate advances at the end of the previous year. Banks were asked to route two-thirds of these loans through their rural and semi-urban branches so that the weaker sections in rural areas derives maximum benefit under the scheme. Moreover, to enable persons belonging to the Scheduled Castes and Scheduled Tribes to obtain a good share of the benefits under the scheme, at least 40 per cent (as against 33.3 per cent earlier) of the credit granted under the scheme is to be given to the eligible borrowers under these categories.

            Out of the total cash loan of Rs. 1,76,795 crore outstanding among both urban and rural households as on 30-6-2002 , institutional agencies share at Rs. 1,12,684 crores forms about 63.7 per cent. Similarly, out of the total number of households reported cash loans from institutional agencies at 25.0 million forms about 12.3 per cent of the total estimated number of households of 203.3 million.

            Out of these 25 million households, hardly 1.1 million households or 0.5 per cent of the total estimated households of 203.3 million households were advanced loans under DRI scheme (Statement 5). Though the scheme envisages the upliftment of the weaker sections of the households the fact is only 11,300 households who have assets holding of less than Rs. 15,000 were able to get the help under this scheme. This works out to be 1 per cent of the total number of households of 10,52,300 households served under this scheme. However, almost all other households who got some kind of assets holding are better treated under this scheme. A peek in the distribution of actual amount reveals that the lowest asset group i.e. the poorest households were given a paltry sum of Rs. 23 crore or 0.5 per cent out of Rs. 5,077 crore purveyed under this scheme. On the other hand, a sum of Rs. 4,223 crore or 83.2 per cent of the total of Rs. 5,077 crore had been shared by the asset holding class who got asset worth more than Rs. 3 lakhs. Even with in this Rs. 2,858 or 56.3 per cent were enjoyed by the richest household i.e. more than Rs. 8 lakh asset holding class.

            Tables 3 and 4 depict state and regionwise data on number of households reporting cash loans and actual amount enjoyed by households under different schemes.

It can be seen that households of two regions (western region – 27.2 per cent or Rs. 1,379 crore and southern region – 38.6 per cent or Rs. 1,959 crore ) benefited more under the DRI scheme, though the number of households in this region were 4.5 lakh or 42.6 per cent of the total DRI benefited households.

It can also be seen from these tables that though number of households availed cash loans under the DRI scheme was more wide spread, large number of households of  Karnataka ( 14.8 per cent i.e. 1.6 lakh households out of 10.5 lakh for all-India), Uttar Pradesh (13.7 per cent or 1.4 lakh households ) and       Maharashtra ( 12.7 per cent or 1.3 lakh ) have enjoyed much of the benefit under the scheme.

Irrespective of the fact that a small number of households in Andhra Pradesh (i.e 41,300 or a tiny 3.9 per cent of the total DRI assisted households) were benefited under the DRI scheme , the actual cash loans outstanding against this households are the maximum at Rs. 940 crore or 18.5 per cent among all the states in India. The households of Gujarat also show the same phenomenon. In Gujarat , the number of households are 52,200 or 5.0 per cent and cash loan outstanding among them were Rs. 752 crore or 14.8 per cent. In both these states the urban households are responsible for this  phenomenon.  

4. Prime Minister’s Rozgar Yojana ( PMRY)

Prime Minister’s Rozgar Yojana (PMRY) was launched on October 2,1993. This scheme initially launched as an employment-creating scheme for the Urban educated youth, it was extended to all over the country from April 1, 1994.

Objective of the scheme is to provide self-employment opportunities to educated unemployed youth in the age group of 18 to 25 years. To be eligible for assistance under the scheme, the family income of the beneficiaries shall not exceed Rs. 40,000 per annum and income of parents of beneficiary should not exceed Rs. 40,000 per annum. The banks have been allowed to make parents/ head of family of unmarried girl as co-borrower, with effect from November 21, 2002. The borrower should be the resident of the area for more than 3 years. Minimum educational qualification fixed was VIIIth standard pass. The margin money was fixed at 5 per cent. The Government would provide 15 per cent of the project cost as subsidy. There is some relaxation of these prameters in some north eastern states. All viable economic activities including agricultural and allied activities excluding direct agricultural operations like raising of crops, purchase of manure etc. are now being covered under this scheme.

Project cost of Rs. 1 lakh in business sector and upto Rs. 2 lakh in other sectors will be eligible for finance by banks. In case of partnership firms projects upto Rs. 10 lakh can be undertaken and loan amount will be upto the extent of individual admissibility. A reservation of 22.5 per cent and 27 per cent for scheduled castes and scheduled tribes, respectively, have been provided. Preference is to be given to women and weaker sections. No third party guarantee or collateral is necessary for project upto Rs. 1 lakh. Advances under this scheme are treated as priority sector lending.

Under this scheme, there were only 4,70,300 or a meager 0.2 per cent number of households borrowed a sum of Rs. 1,480 crore or a 1.3 per cent of total institutional finance as on 30-6-2002. Even though hardly 2,50,000 households or 5.4 per cent in the poorest asset holding class i.e. asset holding of less than Rs. 60,000 were served a miniscule sum of Rs. 73 crore or 4.9 per cent of the total of Rs. 1,480 crore; the poorer rural households getting still smaller share of the total disbursed amount. The distribution among all other asset holding classes except two richest classes was more or less equitable in respect of number of beneficiary households at about 10 per cent each.. The amount distributed, however, favored more the higher asset holding classes in spite of the fact that the number of households served in these two classes are minimal.        

 Tables 3 and 4 depict state and region-wise data on number of households reporting cash loans and actual amount enjoyed by households under different schemes.

It can be seen, that households of central region enjoyed maximum benefit under this scheme. A 32.8 per cent or 1,54,100 central region households had got an outstanding cash loan of Rs. 451 or 30.5 per cent of the total under this scheme. Except north and north-eastern region states, all other region’s households are  benefited equitably under this scheme.

5. Swarnajayanti Gram Swarozgar Yojana (SGSY)

The Ministry of Rural Development , Government of India launched a restructured Poverty Alleviation Programme, known as Swarnajayanti Gram Swarozgar Yojana (SGSY) with effect from April 1, 1999. This scheme subsume the erstwhile Integrated Rural Development Programme and Its allied programmes viz., Training of Rural Youth for Self Employment ( TRYSEM), Development of Women and Children in Rural Areas (DWCRA) , Supply of Improved Tool kits to Rural Artisans (SITRA), Ganga Kalyani Yojana (GKY) and Million Wells Scheme (MWS). SGSY focuses on group approach and major share of assistance is for 4-5 identified activities in a block and  50 per cent of the groups  formed in a block should be women groups. It lays stress on training, credit, infrastructure and marketing needs of the beneficiaries and is being implemented by commercial banks, cooperative banks and Regional Rural banks. Aim of the scheme is establishing a large number of micro enterprises in rural areas of the country with an aim to bring the assisted family above the poverty line by providing them with income generating assets through a mix of bank credit and government subsidy.

Under this scheme, 8007 households or 0.4 per cent of total households were extended help to the tune of Rs. 1,576 crore or 1.3 per cent of total institutional finance as on 30.6.2002. This scheme mainly helped the households who got more than Rs. 30,000 leaving out the households with asset less than Rs. 30,000. The number of households (under Rs. 30,000 asset holding class), who  are benefited under this scheme were 84,800 or 10.6 per cent of 5,00,700 household benefited under the scheme, with a cash loan of Rs.96 crore or 6.1 per cent of the total amount of Rs. 1,576 crore purveyed under this scheme ( Tables 1 and 2).

Table 3 and 4 present the number of rozgari households and amount enjoyed by them in different regions and states. Here also, households in central region states had been benefited more. More than 50 per cent of the total amount extended under this scheme is enjoyed by about 40 per cent of the total central region households. 

6. Swarna Jayanti Shahari Rozgar Yojana (SJSRY)

The Swarna Jayanti Shahari Rozgar Yojana (SJSRY) which subsumed the earlier  three urban poverty eradication programmes viz., Nehru Rozgar Yojana (NRY), Urban Basic Services for the Poor (UBSP) and Prime Minister’s Integrated Urban Poverty Alleviation Programme (PMIUPEP), came into operation from December 1997. Main objective of the scheme is to provide employment to the urban unemployed or underemployed poor living below poverty line and educated upto IX standard through encouraging the setting up of self-employment ventures or provision of wage employment. Beneficiaries are identified by the Urban Local Bodies (ULB) on the basis of house-to-house survey.

 Among other components, the scheme has two main sub-schemes where bank credit is involved namely

1. Urban Self Employment Scheme (USEP) : This scheme is funded on a 75:25 basis between central and state governments. Under USEP, unemployed and underemployed urban youth whose annual family income is below the poverty line and who are educated upto ninth standard and who have been included in the ULB list are to be assisted with bank loans. Project costing upto Rs. 50,000 are to be financed by banks. Subsidy would be provided by government at 15 per cent of the project cost subject to a maximum of Rs. 75,000.  Borrowers contribution is 5 per cent of the project cost. Interest will be charged as per RBI directives from time to time.

II. Development of Women and Children in Urban Area (DWCUA): This scheme gives special impetus to empower and uplift the poor women and launches a special programme, namely, Development of Women and Children in Urban Areas (DWCUA) under which groups of urban poor women setting up self-employment ventures are eligible for subsidy. DWCUA group should consist of at lest 10 urban poor women. The group is entitled to a subsidy of Rs. 1,25,000 or 50 per cent of the project cost whichever is less.

The beneficiaries under this scheme numbering 1,64,400 households are only 0.1 per cent of the total estimated households as on 30-6-2002. Total cash loan outstanding under this scheme at Rs. 350 crore forms about 0.3 per cent of the total institutional lending of Rs. 1,12,684 crores. Under this scheme also the poor households i.e. household holding assets worth Rs. 15,000 or less were virtually left out of the scheme (Tables 1 and 2).

Still, there was an equitable distribution among various asset holding beneficiary households under the scheme. However, 14,000 households forming only 8.4 per cent of total beneficiary households under the scheme were enjoying Rs. 138 crore or 33.8 per cent of the total cash loan outstanding of Rs. 350 crore under this scheme as on 30.6.2002 as per NSSO 59^th round belonging to higher two asset holding classes (Tables 1 and 2).

Tables 3 and 4 present the number of beneficiary households under this scheme along with other schemes and amount enjoyed by them in different regions and states. Here also households in central region especially Uttar Pradesh has been benefited more. More than 50 per cent of the total amount extended by this scheme had been enjoyed by about 41 per cent of the total central region households. 

7. Assistance to Minority Communities

Under the present arrangements, banks have to ensure that credit is made available to the members of minority communities like Sikhs, Muslims, Christians, Zoroastrians and Budhists in an adequate measure. However, no sub-target has been earmarked to the priority sector lending for the minority communities. As on 30.6.2002, 2,10,500 households belonging to minority communities or 0.1 per cent of the total estimated households were indebted to the institutional agencies to the tune of Rs.318 crore or 0.3 per cent of total institutional finance.

8. Scheme of Liberation and Rehabilitation of Scavengers (SLRS)

The National Commission for Safai Karmacharis Act, 1993, was enacted and the Commission had been constituted on 18.4.1994. The commission looks into specific problems of safai karamcharis and recommends specific programmes for elimination of inequalities in status, facilities and opportunities for them. The commission submitted its first report on November 16, 1995.

A National Scheme for Liberation and Rehabilitation of Scavengers was launched in March 1992 to eliminate the inhuman practice of carrying night soil and filth on head by the end of Eighth Five Year Plan.

As on 30.6.2002, 30,900 scavenger households has been benefited under this scheme with an amount of Rs. 79 crore or 0.1 per cent of the total institutional finance.

* This note is prepared by R.Krishnaswamy

Highlights of  Current Economic Scene

AGRICULTURE  

With a view to bail out the sugar industry from its present crisis, the central government has announced some non-cash incentives to encourage exports. According to this, the mills exporting sugar would be exempted from supplying the same amount to government at a highly subsidised rate for distribution to the poor under the public distribution system (PDS). The sugar released for export would be treated as that released for free sales in the domestic market and would be adjusted in the free sale stocks of the sugar factories after 12 months. These incentives are, however, not applicable to exports under preferential quota allotted by importing countries. These incentives were to be given only on export of sugar made during the period January 3, 2007 to July 2, 2007 under Advance Authorisation Scheme and for exports under the Open General Licence Scheme for the period January 23, 2007 to July 22, 2007. The government has decided to extend the period of these incentives by six months. Accordingly, the period of incentive stands extended from July 3, 2007 to January 2, 2008 for exports under Advance Authorisation Scheme and from July 23, 2007 to January 22, 2008 for exports under Open General License Scheme or till further orders whichever is earlier.

Private companies have declared wheat purchases totalling to 1.4 million tonnes in the current calendar year till June 15, 2007. Under the Wheat (Stock Declaration by Companies or Firms or Individuals) Order issued on March 1, private players buying over 50,000 tonnes of the foodgrain during the current financial year need to declare details of purchases and stocks held by them to the government.  These companies have to submit weekly declarations to the government till June and monthly statements from July to December. The government order was passed to monitor stocks held by private companies and check hoarding.

Raising concern over the rising international prices, private pulses traders have once again requested the central government to provide them subsidy on pulses imports as accorded to state agencies. The state agencies currently enjoy a 15 per cent subsidy on imports of pulses. The state agencies have been set a target to import 15 lakh tonnes of pulses in the current fiscal year 2007-08. The government had earlier this year rejected the demand of a subsidy for private traders to import pulses. The government’s announcement to import a large bulk of pulses has led to a rise in global prices and hence private importers are finding it difficult to book the orders at such a high prices.

The central government is considering building a wheat buffer of at least 6.5 million tonnes by April 1, 2008 to contain the hike in wheat prices this year as well as the next year. According to buffer norms, the government should have at least 4 million tonnes of wheat in reserve on April 1 to meet requirements of public distribution system. The government needs around 16 million tonnes of wheat until March 2008 that comprises 12 million tonnes for state-run welfare schemes and a carry-over of 4 million tonnes. To build the extra reserve, the government is keen on importing around 5 million tonnes of wheat by March 2008. The government already has about 15.8 tonnes of wheat in its inventories for the year, taking into account last year’s carry-over of 4.7 million tonnes and 11.1 million tonnes procured so far.  

According to the US import estimates, Indian pepper exports to the US have risen by a whopping 400 per cent to 4,950 tonnes during January-March compared with 1,481 tonnes in the year-ago period. Competitive pricing has helped the country to raise its pepper exports to overtake Vietnam and Brazil , the two major exporters to the US . Export performance of both Vietnam and Brazil has been poor, with the former shipping 1,631 tonnes in 2007 (January-March) against 2,961 tonnes in the same period last year. Brazil ’s pepper exports have also declined by 745 tonnes to 5,014 tonnes during the same period. 

Chilli exports from the country, which accounted for 22 per cent of the total spices exports in the last fiscal year 2006-07, are likely to drop by a significant 64 per cent to 1.35 lakh tonnes in 2007-08 due to a fall in production. As per the Spices Board, about 1.35 lakh tonnes of chillies valued at Rs 675 crore have been targeted for exports in 2007-08 against an estimated 3.73 lakh tonnes worth Rs 807 crore last fiscal. In terms of value, the exports are expected to fall by Rs 132 crore, although they are likely to get a better price owing to global shortfall in production.

The Tamil Nadu Agricultural University has released 10 new crops released for 2007. which is among the by here. The new crop releases include medium fine white rice variety with 9,625 kg per hectare yield and blackgram VBN (BG) 5, groundnut - VRI (Gn) 6, Bhendi hybrid A (COGhH1) and a jackfruit variety PLR (J) 2 among others. The university has also released 3 new farm equipments, viz., (power tiller operated slasher-cum-insitu shredder), sugarcane detrasher and a sub-soil attachment for stump removal.

The central government is planning to raise production and productivity of major food crops by 2011 and reduce their imports. The plan aims at boosting wheat output to 80 million tonnes per year, from around 73 million tonnes, rice production to 101 million tonnes from around 90 million tonnes, oilseed production to 35 million tonnes and pulses output to 18 million tonnes.

Farmers in Maharashtra , who had shifted from onion farming to sugarcane for better returns and due to a glut in onion prices, are likely to take up the cultivation onions again. Sugarcane farmers are facing a problem of plenty as the supply is out-pacing the demand, causing a fall in sugar prices.

With a view to bail out the sugar industry from its present crisis, the central government has announced some non-cash incentives to encourage exports. According to this, the mills exporting sugar would be exempted from supplying the same amount to government at a highly subsidised rate for distribution to the poor under the public distribution system (PDS). The sugar released for export would be treated as that released for free sales in the domestic market and would be adjusted in the free sale stocks of the sugar factories after 12 months. These incentives are, however, not applicable to exports under preferential quota allotted by importing countries. These incentives were to be given only on export of sugar made during the period January 3, 2007 to July 2, 2007 under Advance Authorisation Scheme and for exports under the Open General Licence Scheme for the period January 23, 2007 to July 22, 2007. The government has decided to extend the period of these incentives by six months. Accordingly, the period of incentive stands extended from July 3, 2007 to January 2, 2008 for exports under Advance Authorisation Scheme and from July 23, 2007 to January 22, 2008 for exports under Open General License Scheme or till further orders whichever is earlier.

Private companies have declared wheat purchases totalling to 1.4 million tonnes in the current calendar year till June 15, 2007. Under the Wheat (Stock Declaration by Companies or Firms or Individuals) Order issued on March 1, private players buying over 50,000 tonnes of the foodgrain during the current financial year need to declare details of purchases and stocks held by them to the government.  These companies have to submit weekly declarations to the government till June and monthly statements from July to December. The government order was passed to monitor stocks held by private companies and check hoarding.

Raising concern over the rising international prices, private pulses traders have once again requested the central government to provide them subsidy on pulses imports as accorded to state agencies. The state agencies currently enjoy a 15 per cent subsidy on imports of pulses. The state agencies have been set a target to import 15 lakh tonnes of pulses in the current fiscal year 2007-08. The government had earlier this year rejected the demand of a subsidy for private traders to import pulses. The government’s announcement to import a large bulk of pulses has led to a rise in global prices and hence private importers are finding it difficult to book the orders at such a high prices.

The central government is considering building a wheat buffer of at least 6.5 million tonnes by April 1, 2008 to contain the hike in wheat prices this year as well as the next year. According to buffer norms, the government should have at least 4 million tonnes of wheat in reserve on April 1 to meet requirements of public distribution system. The government needs around 16 million tonnes of wheat until March 2008 that comprises 12 million tonnes for state-run welfare schemes and a carry-over of 4 million tonnes. To build the extra reserve, the government is keen on importing around 5 million tonnes of wheat by March 2008. The government already has about 15.8 tonnes of wheat in its inventories for the year, taking into account last year’s carry-over of 4.7 million tonnes and 11.1 million tonnes procured so far.  

According to the US import estimates, Indian pepper exports to the US have risen by a whopping 400 per cent to 4,950 tonnes during January-March compared with 1,481 tonnes in the year-ago period. Competitive pricing has helped the country to raise its pepper exports to overtake Vietnam and Brazil , the two major exporters to the US . Export performance of both Vietnam and Brazil has been poor, with the former shipping 1,631 tonnes in 2007 (January-March) against 2,961 tonnes in the same period last year. Brazil ’s pepper exports have also declined by 745 tonnes to 5,014 tonnes during the same period.  

Chilli exports from the country, which accounted for 22 per cent of the total spices exports in the last fiscal year 2006-07, are likely to drop by a significant 64 per cent to 1.35 lakh tonnes in 2007-08 due to a fall in production. As per the Spices Board, about 1.35 lakh tonnes of chillies valued at Rs 675 crore have been targeted for exports in 2007-08 against an estimated 3.73 lakh tonnes worth Rs 807 crore last fiscal. In terms of value, the exports are expected to fall by Rs 132 crore, although they are likely to get a better price owing to global shortfall in production.

The Tamil Nadu Agricultural University has released 10 new crops released for 2007. which is among the by here. The new crop releases include medium fine white rice variety with 9,625 kg per hectare yield and blackgram VBN (BG) 5, groundnut - VRI (Gn) 6, Bhendi hybrid A (COGhH1) and a jackfruit variety PLR (J) 2 among others. The university has also released 3 new farm equipments, viz., (power tiller operated slasher-cum-insitu shredder), sugarcane detrasher and a sub-soil attachment for stump removal.

The central government is planning to raise production and productivity of major food crops by 2011 and reduce their imports. The plan aims at boosting wheat output to 80 million tonnes per year, from around 73 million tonnes, rice production to 101 million tonnes from around 90 million tonnes, oilseed production to 35 million tonnes and pulses output to 18 million tonnes.

Farmers in Maharashtra , who had shifted from onion farming to sugarcane for better returns and due to a glut in onion prices, are likely to take up the cultivation onions again. Sugarcane farmers are facing a problem of plenty as the supply is out-pacing the demand, causing a fall in sugar prices.

INFLATION

Annual rate of inflation, based on WPI on point-to-point basis stood at 4.03 per cent for the week ended 16^th June 2007 as compared to 4.28 per cent last week or 5.50 per cent last year.

Over the week WPI declined by 0.1 per cent to 211.7 from 211.8 for the previous week. Primary articles prices fell marginally to 219.8 from 220.1 due to lower price in maize, urad, jowar and fruits and vegetables. However, prices of bajra and masur rose by 3 per cent and 2 per cent respectively. Prices of Fuel, Power, Light and Lubricants remained unchanged.The price index of Manufactured products declined by 0.1 per cent to 184.3 from 184.4.

WPI index for all commodities were revised upwards for the week ended 21-04-2007 to 211.5 from 210.9. Inflation rate correspondingly changed to 6.07 from 5.77 per cent. 

BANKING

In a move to reduce non-performing assets of all co-operatives, private and public sector banks, the RBI has decided to insure all default loans. The central bank will soon start taking insurance for default loans and these operations will be carried out by its subsidiary, the Deposit Insurance and Credit Guarantee Corporation (DICGC).

PUBLIC FINANCES

During the first two months of the current fiscal year, fiscal deficit of the country has stood at 1.4 per cent of the GDP at Rs 62,135 crore. The fiscal deficit for the entire fiscal has been projected at Rs 1,50,948 crore, which is 3.3% of the GDP. Revenue deficit for the same period stood at 1.2 per cent of the GDP at Rs 59,335 crore which is 83 per cent of the full year target. Given the high advance tax collection, deficit figures are likely to improve for the first quarter of the current financial year. Tax revenue during the period has stood at Rs 21,725 crore, while non-tax revenue at Rs 4,174 crore. Plan and non-plan expenditure during April-May 2007 has been amounted to Rs 23,135 crore and Rs 67,615 crore respectively.

FINANCIAL MARKETS

Capital Markets

Primary Market

Housing Development and Infrastructure Limited has tapped the market between June 28 and 03 July by issuing 2,97,00,000 equity Shares (Excluding Green Shoe Option of 44,55,000 Equity Shares) with face value Rs.10 per share, in a price band of Rs 430-500

Bharat Earth Movers Limited has tapped the market between June 27 and 03 July by issuing 49,00,000 equity Shares with face value Rs.10 per share, in a price band of Rs 1020-1090.

Suryachakra Power Corporation Limited has tapped the market between June 25 to June 29 by issuing 49,00,000 equity Shares with face value Rs.10 per share, in a price band of Rs 17-20.

Secondary Market

The market edged higher, last week, with most of the gains coming in a single trading session on Friday, 29 June 2007. For a better part of the week, the market was range bound and caution prevailed ahead of Thursday (28 June 2007)’s expiry of June 2007 derivatives contracts. The action was mainly in the small-cap and mid-cap segment, with the BSE Mid-Cap index hitting all time high. BSE Capital Goods index, BSE’s banking sector index Bankex and BSE Consumer Durables Index also scaled all time peaks.

The 30-share BSE Sensex rose 183.15 points or 1.2per cent to 14,650.51, in the week ended Friday, 29 June 2007. It is Sensex’s second best close. Sensex had struck record closing high of 14,652.09 on 8 February 2007.

The S&P CNX Nifty advanced 66.25 points or 1.55per cent to settle at record closing high of 4,318.30 in the week ended Friday, 29 June 2007.

The BSE Mid-Cap Index rose 153.33 points or 2.4per cent to a lifetime closing high of 6,527.03 in the week. The BSE Small-Cap index gained 217.28 points or 2.89per cent to 7,730.40 in the week.

Derivatives    

The July 2007 futures settled at 4290.50, a discount of 27.80 points compared to spot closing of 4,318.30.                          

Government Securities Market

Primary Market

The Government of India has announced the sale of a new 10 year Government Stock for a notified amount of Rs.6,000 crore and the re-issue of "8.33 percent Government Stock 2036" for a notified amount of Rs.4,000 crore on July 6, 2007. RBI conducted the additional auction of 91-day Treasury Bills for Rs.5000 crores on June 25, 2007. The cut-off yield was set at 7.1443per cent.

Secondary Market

During the week, the weighted average call rates during the period ranged between 2.25 per cent and 8.68 per cent, while weighted average repo rates ranged between 0.83 per cent and 7.79 per cent and the weighted average CBLO rates ranged between 0.62 per cent and 7.72 per cent. The average volumes of Call, Repo, and CBLO segments were Rs.11853 crores, Rs.9444 crores and Rs.22839 crores respectively. The daily average outstanding amount in the LAF (reverse repo) operation conducted during the period was Rs. 1403 crore. The 1-10 year YTM spreads decreased by 16 bps to 48 bps.

Bond Market

State Bank of Patiala has tapped the market to mobilise Rs 200 crore by issuing bonds by offering coupon rate of 10.24 per cent & 10.74 per cent if Call is not exercised for 15 years.

Food Corp of India has tapped the market to mobilise Rs 190 crore by issuing special bonds by offering coupon rate of 8.03 per cent for 15 years

Food Corp of India has tapped the market to mobilise Rs 240 crore by issuing special bonds by offering coupon rate of 8.15 per cent for 15 years

Foreign Exchange Market

The rupee closed at Rs.40.75/USD on June 29, 2007 as compared with Rs. 40.71/USD as on June 22,2007. The Rupee moved between Rs. 40.75 and Rs.41.01, with a standard deviation of 11 paise during the week. Similarly during the fortnight (June 18, 2007 - June 29, 2007), the Rupee moved between Rs.40.7 and Rs.41.01, with a standard deviation of 10 paise. The Rupee moved between Rs.40.47 and Rs.41.01 during the last 1 month (June 04, 2007 -June 29, 2007), with a standard deviation of 15 paise.

The six-month forward premia closed at 2.62 per cent (annualized) on June 29, 2007 vis-à-vis 4.23 per cent on June 22, 2007.

Commodities Futures derivatives

With the monsoon advancing into Delhi and its adjoining areas , a day ahead of the normal schedule of June 29, kharif sowing operations are expected to get an impetus in the country’s key north-western agricultural belt.Crop sowing in the southern peninsula, which has already been covered by the monsoon, is already apace. Last year, the monsoon had set in over Delhi on July 9, almost 10 days behind schedule.According to the India Meteorological Department, the south-west monsoon has already covered the bulk of the country barring some parts of Haryana and Rajasthan. The northern limit of the monsoon today passed through Barmer, Jodhpur, Ajmer, Jaipur, Narnaul, Rohtak, Ludhiana and Amritsar.The monsoon prediction model used by the National Centre for Medium Range Weather Forecasting (NCMRWF) suggests that the conditions are currently favourable for the monsoon to move ahead to the remaining parts of eastern Rajasthan, Haryana, and most part of western Rajasthan in the next 4 to 5 days. The normal date for the south-west monsoon to cover the entire country is July 15.

Weather expert Akhilesh Gupta of the science and technology ministry told media that the present rainy spell in the north-western India was the result of an interaction between low-pressure area hovering over the Bay of Bengal and the western disturbance lying over Jammu and Kashmir and adjoining areas. While the Bay of Bengal system was loading the easterly winds with moisture, the western disturbance was providing the needed lift to the confluence of these systems to cause rains. The pace of further movement of the monsoon towards western Rajasthan would depend on the course taken by the low-pressure area over the Bay of Bengal which has already been transformed into a deep depression in the next two days. Subsequently, the rainfall belt is likely to shift to Madhya Pradesh, Maharashtra, Goa and Gujarat from June 30 onwards.

Gupta said there were indications of the formation of another low pressure area over the Bay of Bengal around July 5. Though it is too early to talk more about this, but if it developed on the expected lines, it might bring more rainfall in several areas. According to Mr. Gupta the monsoon current is on now and will remain intact and strong for some more days.

With the southwest monsoon turning out to be a normal one so far, sowing for the current kharif season is gradually picking up. According to the Agriculture Ministry's latest Crop Weather Watch report, released on 22nd June, a total area of 23.14 lakh hectares (lh) have been till now planted under rice, which is marginally lower than the 23.39 lh during the same period last year. There is a similar lag in the case of coarse cereals (8.306 lh versus 13.577 lh), with these being 4.781 lh and 5.593 lh for maize, 0.686 lh and 4.357 lh for bajra and 1.78 lh and 2.51 lh for jowar. Even for oilseeds, the cumulative acreage of 4.52 lh is below last year's corresponding level of 7.83 lh, while amounting to 2.53 lh and 3.97 lh for groundnut, 0.24 lh and 1.01 lh for soyabean, 0.81 lh and 1.58 lh for sunflower, 0.77 lh and 1.07 lh for sesamum and 0.17 lh and 0.18 lh for castor.On the other hand, farmers have planted 15.29 lh under cotton so far, which is higher than last year's progressive area of 14.707 lh. Of the 15.29 lh, as much as 8.68 lh has been sown under Bt cotton, according to the report. Area under sugarcane and jute are, however, lower at 44.02 lh and 45.44 lh and 7.864 lh and 8.176 lh, respectively.

The sowing lag will reduce, with the resurgence of monsoon activity over the last one week. During the week ended June 20, the country as a whole recorded an area weighted average rainfall of 51 mm, or a third more than the `normal' (long period average) of 38.3 mm for this week.As a result, the cumulative rainfall for the season (June 1-20), at 87.8 mm, was only slightly below the normal 89.3 mm for this period. The monsoon has generally been good, barring in a few regions such as Gujarat, East Rajasthan , East Madhya Pradesh and Chattisgarh.

The turnover on commodities exchanges has surprised even the experts as it crossed Rs 20,000 crore mark in just three years. In Punjab and Chandigarh the daily turnover on commodities exchange is about Rs 210 crore a major landmark and indicator of bright future for these exchanges. In comparison the stock exchange turnover crossed Rs 60,000 crore in 100 years. Experts opine going by the brisk activity on commodities exchange, it appears certain this would cross Rs 60,000 mark in next three years and match the present turnover of stock exchanges. However in five years, the turnover on commodities exchanges would cross Rs 1,00,000 crore mark.

CORPORATE SECTOR

Chennai-based Easun Reyrolle (ERL) has acquired the relay and recorder unit of Canada-based Nxtphase T&D Corporation, which is a fast growing, and state-of-the-art technology firm providing protection, power system recording and wide-area monitoring solutions to power utilities in the Americas and other global markets. ERL is floating a new subsidiary ERLPHASE Power Technologies in Canada to take care of the acquisition process. The company is expected to gain large number of customers across North America and Europe , excellent technology and wide range of products through this deal.

The shoe major Bata India is looking to get franchisees to run its new stores. It is planning to set up 200 such retail stores over the next two years, in a bid to expand without increasing headcount. It will also refurbish 500 old stores and close down 70 unviable ones out of the 1,100 it owns. The company has also decided to merge its subsidiary, Bata Properties Ltd.

Tata Steel is setting up Rs 2,500-crore titanium di-oxide project to produce 1,00,000 tonne of titanium di-oxide from the ilminite sands available in Tirunelveli and Tuticorin districts in Tamilnadu. India imports 60,000 to 70,000 tonne of this material every year. This project will employ 1,000 people directly and 3,000 indirectly whereas 10,000 persons will be employed in the agro-related activities.

The RPG Group is planning to invest Rs 3,500 crore in its retail business spread over the next two to three years. Spencer's Retail, part of the Rs 11,300 crore RPG Group, will contribute Rs 1,000 crore to open 40 stores across the country, while RPG Retail will invest another Rs 1,300 crore in expanding the number of Spencer's outlets within hypermarkets, supermarkets, under the brands Fresh, Express and Dailies. Also, Rs 400 crore will be invested in each of the RPG Group's other retail ventures, which include Music World, Books and Beyond and Health and Glow. The group is also likely to raise resources from the primary market with an IPO over the next 12 months to fund its retail ambitions.

After acquiring the Navratna status, which gives it greater operational freedom, the state-run defence major Bharat Electronics Ltd (BEL) is planning to acquire small and medium-sized niche technology companies in Europe or the US . The company would be also looking at Israeli firms for joint development, joint cooperation and co-development of products leading to a joint venture.

Kishor Biyani promoted Future Group is planning to hive off its retail chain brands- Big Bazaar, Food Bazaar and Central Mall into separate entities and also to have them listed in the long run.

EXTERNAL SECTOR

India ’s external debt at end of March 2007 has increased by US $ 28.6 billion over same period of the previous year to reach at US $ 155 billion. Among the various components of external debt, external commercial borrowings have stood at US $ 42.8 billion (28.6 per cent of total debt) recording a significant increase of 59.2 per cent. They have been followed by trade credit (rose by 44.6 per cent to US $ 18.935 billion and accounted for 12.2 per cent of the total debt) and NRI deposits (increased of 12.8 per cent to US $ 39.624 billion and accounted for 25.6 per cent). Other components of the debt which are multilateral and bilateral debt witnessed moderate increase of 9.5 per cent and 2.4 per cent during 2006-07 to US $ 35.641 billion & US $ 16.104 billion accounting for 23 per cent and 10.4 per cent respectively, of the total external debt. The shares of long-term debt and short-term debt to total debt at the end of March 2007 have stood at 92.3 per cent and 7.7 per cent respectively. Short-term trade credit has witnessed a sharp increase of US $ 3.3 billion to US $ 11.971 underpinned by growth in imports during the year. As a percentage of GDP, external debt to GDP ratio increased to 16.4 per cent from 15.8 per cent. The debt service ratio has decreased to 4.8 per cent during 2006-07 from 9.9 per cent during 2005-06.

INFORMATION TECHNOLOGY

TCS has been ranked 23^rd in Business Week’s annual listing of the world’s leading IT companies. TCS was also the only Indian company ranked among the top ten most profitable companies with a return on equity of 46 per cent in the magazine’s 2007 Information Technology 100 listing. Of all the Indian tech-services outfits, it has the largest network of delivery centres outside of India . In Latin America alone, TCS employs more than 5,000 people, most of them locals.

Microsoft has announced plans to set up an information technology (IT) park in Maharashtra .

*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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