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Transcript of InTouch_July 2011
Volume 25 – No.4 – July 2011
In this issue
4 President’s message
4 Chamber’s activities
Seminar on Securing US
Green Card
Video Discussion-
Between You and Me
4 General Committee
4 Expert Committees
4 SPOT LIGHT
12th FIVE YEAR PLAN Draft
4 Policy Watch
4 Trade Fairs & Exhibitions
4 Additions to Library
4 Economic Review
4 Others
MOU between MCCI
and CCIFI
1
PRESIDENT’S MESSAGE
Dear Members
Interest rates have gone up, again!
RBIs latest hike of 50 Basis Points (BPS)
on July 26th was the eleventh such
hike since March 2010. Though a hike
was not unexpected, the 50 bps dose
was more than market expectations,
especially considering the fact that the
last increase was only in May 2011.
With this increase, the repo rate, the rate
at which RBI lends to banks has now
reached 8%, while the reverse repo rate,
the rate at which the RBI borrows from
banks now stands at 7%. With 300
basis points of tightening over the past
sixteen months, India is easily the most
aggressive inflation fighter in the world,
surpassing even Brazil.
Clearly the concerns around spiralling
inflation have been uppermost on the
minds of the policy makers. In the words
of the RBI Governor, the rates had to be
increased to “maintain the credibility of
the commitment of Monetary Policy” to
controlling inflation.
In simple terms, RBI’s way to tame
inflation is to reduce the amount of
money that enters the economic system.
How does that work? A high interest
rate influences spending patterns
and shif ts consumers and businesses
from borrowing to saving mode. This
influences money supply. The high
reverse repo rate would tempt banks to
park funds with RBI instead of lending
as the former is risk free and yields a
fairly good return. Both ways the money
supply would be cur tailed, making funds
costlier for borrowers, thus resulting in
less borrowing and spending.
There can be no two opinions on the
need for controlling inflation, which
stood at 9.4% as of June 2011. India
suf fers from the worst inflation of
any major Asian economy, prompting
the Reserve Bank of India to raise
rates more than its regional peers.
High inflation eats away the fruits
of economic growth and poses a
significant risk to future growth. Not
surprisingly, growth projections have
been revised downwards and double
digit growth will perhaps have to wait
for a couple of years.
Inevitably, there is also the debate
between inflation targeting and growth.
RBI in its review had said since domestic
inflation remains very high, some shor t
term deceleration in growth may be
inevitable to bring inflation under control.
Already, the ef fects of the interest hike
have become visible in rate sensitive
sectors like auto, reality, housing and
consumer goods, which may have
cascading ef fect on the economy
as a whole.
But monetary policy only goes so
far. Inflation in India has been fuelled
by several structural bottlenecks in
agriculture and infrastructure as well
as heavy Government borrowings and
subsidies. High oil prices, loose fiscal
policy and supply constraints have
muted the impact of the Reserve Bank’s
aggressive anti-inflation stance. Even
the RBI Governor made it clear that in
the absence of reforms and fiscal steps
to ease the supply-side constraints on
food and commodities, the central bank
had no choice but to keep monetary
policy tight.
Therefore RBI’s move in controlling the
demand side without matching policy
actions from the government to address
the supply side concerns may not
yield expected results. Higher interest
rates are pushing up costs of products
and services, while inflation remains
stubbornly strong despite RBI‘s frequent
interventions in the last one year. This
is bound to af fect the competitiveness
of our industries as well. We should not
end up with the remedies worse than
the disease itself.
What we require now is a balanced
approach to contain inflation, without
dampening the growth momentum.
Best wishes
T T Srinivasaraghavan
President
2
CHAMBER’S ACTIVITIES
1st July 2011
Seminar on “Securing U. S. Green Card”The MCCI in association with Fox
Mandal Lit tle organised a Seminar on
Securing US Green Card on 1st July at
Hotel Savera.
The objective was to brief the
par ticipants on how to secure a US
Green card via the EB-5 programme
created by the US Congress to
encourage foreign investment in the
United States, to create jobs and provide
expeditious Residency and Citizenship to
Qualified foreign investors.
The Green Card Fund is a United States
Citizenship and Immigration Service
(USCIS) approved EB-5 Regional Centre
specialising in providing quality EB-5
investment projects. Green Card Fund is
a subsidiary of the Bedford companies,
founded in 1991.
Mr Gregory Wing, co-founder of t he
Green Card Fund and President &
CEO of Bedford International made a
presentation on the following:
l How to apply for an EB-5 visa
through a USCIS approved
Regional Centre
l How to identify and Select safe,
qualified EB-5 investment projects
l How to secure Permanent US
Residency through an Investment in
an EB-5 project
He explained the following steps for a
EB-5 programme:
l select an EB-5 programme
that is safe
l provide information for
your visa application
l Fund the project ; and
l Get your money back in 4-5 years
What is needed by an EB-5 applicant
is – the ability to invest $ 500,000 for
up to 5 years and $ 55,000 towards
administration fee.
Currently 10,000 US visas are available
for EB-5 prospective investors.
The advantages of EB-5 were:
l expedited residency
l permanent residency for investor,
spouse and children (unmarried
under 21 yrs of age)
l live anywhere in the US
l become a US citizen in 5 years
EB-5 target industries are – Education,
Healthcare and Energy.
There was a lively interaction during
which Mr Satish Kholay, Managing
Director, Green Card Fund who was
also present clarified the queries of the
par ticipants.
27th July 2011
Video Discussion
on “Between You and Me”. The monthly video discussion jointly
being organized by the Chamber along
with MMA was held on the topic
“Between you and me”. The trainer
was Ms Shripriya Srinivasan, Corporate
Trainer.
The video showed realistic role plays
to help employees embrace team work
and solve their own conflicts without
management intervention.
It is important to recognise that there are
two sides to every story. Of ten we leave
the responsibility of solving the conflict
with someone else.
It is important to listen and take
responsibility for the conflict.
The video brought out that –
l Be open and honest
l Ask questions
l Ask for feedback
l Listen without arguing or judging and
reach a consensus
l Be committed
l Enjoy the work in the work place
l Focus on job related actions
l Take action and do the follow up
Every person in the organisation down
to the last is also very important. The
end result is customer satisfaction and
all organizations aim for that.
The program was attended by
around 35 par ticipants from various
organisations and the feed back
was excellent.
For more details, please contact Fox Mandal Lit tle in Chennai – Tel: 24361029
Email: Chennai@foxmandal lit tle or Ms Madhri Guruswamy Mobile: 95000 57312
Email: [email protected]
3
GENERAL COMMITTEE
9th July 2011 Brief excerpts of the discussions are given below:
Study on Port Sector:
The Chamber has engaged Madras
Consultancy Group for a study on the port
sector. Once the study is completed, the
Chamber will hold a Seminar and present
the findings to all the stakeholders. It is
hoped that the study would be completed
by the middle of August.
While on this it was informed that the
members of CTCC met the Hon.Speaker of
Government of Tamil Nadu and impressed
upon him the importance of the timely
completion of the EMRIP project . He
promised his personal attention and
thereupon assured to hold a meeting with
all the agencies involved and Chennai Port
Trust to expedite the project. This meeting
has since been held.
Programme on XBRL:
This being of contemporary interest, it
was felt this certainly warrants one more
programme. Members were informed
that there were two circulars from MCA
in this regard. These have been put on
their website and any one could give their
comments.
The Chamber will organize another
programme on this shortly with the
presence of Secretary, MCA.
Co-options to the Committee:
It is usual for the Chamber to co-opt
some leading corporate representatives to
the Committee in order to gain from their
knowledge, expertise and suggestions
for the benefit of the Committee’s
deliberations.
The Committee felt that the same persons
co-opted last year be co-opted this year
as well, considering their involvement and
the contributions to the activities of the
Chamber.
Invitees to the Committee:
It has been the convention of the
Chamber to invite all the Past Presidents
who are active in business to join
the General Committee as invitees.
Accordingly communications would be
sent to them in this regard.
MCCI - Skill Development Initiative - Progress:
As announced at the AGM, the
preliminary steps for starting the Skill
Development Course are almost complete.
The soft launch of the training activities will
be started in August at a rented place in
Chembarambakkam in association with
organizations like NTTF.
As already indicated, efforts are underway
for setting up the skill development centre
at MCCI’s own land at Koppur village,
Tiruvallur District.
Applicability of Service Tax for Chambers of Commerce:
Representatives of local Chambers of
Commerce including their tax professionals
met on 5th July. This meeting was
initiated by MCCI. It was noted that none
of the Chambers in the city are collecting
service tax.
An opinion was obtained that Chambers
and Associations have taken a stand
that the principle of mutuality applies and
based on this, service tax should not
apply.
Chamber Day - 29th September 2011- Action plan:
The Chamber has extended an invitation
to Dr.J.Jayalalithaa, Hon’ble Chief Minister
of Tamilnadu to be the chief guist and her
confirmation is awaited.
The Coffee Table Book and the Directory
of Members 2011 will be released on this
occasion. The Skill Development project
would also be unveiled on this occasion.
New Membership:
The following companies were admitted
as members:
EDAC Engineering Ltd.
Nokia India Pvt Ltd.
Spearheaders Management Consultants
Pvt Ltd.
Treeline Business Solutions Pvt Ltd.
Assocham Managing Committee - Nominations from the Promoter Chambers:
The Chamber has five seats on the
Managing Committee and the following
names have been forwarded to them:
Mr T T Srinivasaraghavan
Mr T Shivaraman
Mr Srinivasan K Swamy
Mr N Srinivasan (F&R Retd)
Mr S Gopal
Sustainable Chennai Initiative:
An informal group consisting of
representatives of Anna University (Water
Dept), British Dy High Commission and the
MCCI have been meeting on 3rd Fridays
of the month with regard to taking this
initiative further.
A number of activities like training and
engaging students to conduct eco
assessments in college campuses,
documenting green initiatives in industries
etc were being planned as a part of this
Initiative.
The plans to organize a seminar on 3rd
October on the occasion of World Habitat
Day were also deliberated in detail.
4
EXPERT COMMITTEES
6th July 2011
COMPANY LAW/COPORATE MATTERS:Terms of Reference of the Committee:The Committee perused the terms
of reference and felt that Foreign
Contribution Regulation Act 2010 which
was notified by the Government of India
would be relevant to include in the terms
of reference. Organisations seeking
foreign contribution for cultural, social,
economic, educational purposes, may
obtain registration or prior permission
to receive foreign contribution from the
Ministry of Home Af fairs by making
application in the prescribed format and
furnishing details of the activities and
audited accounts.
Work Plan for the year 2011-12: Members were apprised that the
Committee has been organising about 5
to 6 programmes each year. Members
were of the opinion that Companies Bill
is likely to be tabled at the for thcoming
monsoon session in the Parliament. If
it is passed, the Chamber could plan a
discussion meeting on this.
It was also noted that a number of
legislations were being amended from
time to time. In view of this, not much
of changes will be expected in the
new Companies Bill. New Schedule VI
and XBRL is one of the core topics for
discussion today and the Ministry of
Corporate Af fairs expects to implement
new changes in an urgent manner
without proper discussions.
It was informed that the Chamber had
organised a seminar on Schedule VI
and XBRL recently and a number of
issues had emerged at the Seminar and
the Chamber had sent a representation
to the Government. Members were of
the view that the Chamber could plan
a Training Programme on XBRL which
would help the corporates to know
the technical details, filling data and
many more connected issues. They
also suggested to invite an approved
sof tware developer to demonstrate the
XBRL tool.
In the recent past, MCA has issued a
number of circulars on various subjects
which seem to be important. The
Chamber would organise a meeting
to gain knowledge of various circulars
issued by MCA.
The draf t code for Independent Directors
has been announced and af ter
analysing the draf t code, a suitable
programme would be planned by the
Chamber on this topic.
Interaction meetings with ROC and
RD, Chennai, also will be scheduled at
appropriate time.
Companies (Dematerialization of Certificates) Rules 2011:Members were informed that MCA
has issued a draf t on Companies
(Dematerialization of Cer tificates) Rules
2011 for comments from the public.
l The Draf t Rules are proposed to be
made ef fective from
1st October 2011
l The Draf t Rules will be applicable
to all public companies and their
subsidiaries which have
raised money by issue by shares,
debentures by accepting public
deposits, stocks, bond or any other
financial instruments from public
other than from directors
of company.
l The Draf t Rules provide that such
companies shall issue and keep
share cer tificates, debenture
cer tificates and cer tificates
issued for receipt of deposits,
stock, bond or any other financial
instruments only in dematerialised
form as prescribed in the
Depositories Act 1996.
l The Companies falling in the above
categories are required to conver t
their existing cer tificates in the
dematerialised form by
30th September 2011.
Members felt that this is impossible and
impracticable to implement.
Members were requested to send
their suggestions to the Chamber to
enable the Chamber to forward it to the
Government.
Invitees to the committee:The Committee desired that Mr.B.Ravi,
Mr.L.Venkatesan, Mr.S.A.Muraliprasad
and Ms. B. Chandra be requested
to join the Committee as Invitees
since their knowledge and exper tise
would be of immense value to the
deliberations of the Committee.
“In a free enterprise, the community is not just another stakeholder in business but is in fact the very purpose of its existence” - JRD
13th July 2011
LOGISTICS:Mr.J.Krishnan, Chairman of the
committee, apprised the members that
the Chamber has been instrumental
in setting up the Chennai Por t and
the Chamber’s history describes the
historical links of the Chamber with
the Por t. Coming to the operations
and administration of Chennai Por t in
the present day context, he said there
were a number of issues unsettled and
day-by-day its number was growing. He
informed that to highlight these issues
and the expectations of the industry, the
Committee had decided to commission
a study on por t sector development in
Tamilnadu. Madras Consulting Group
has been appointed for this purpose
and the work was in progress and
requested Mr.Shanker, President, MCG,
to inform the present position of the
study to the members.
Mr.Shanker made a brief presentation to
the Committee on the progress
of the study.
He and his team also met the of ficials
of the Por t Trust, Corporate Houses,
Expor ters & importers, Por t Users,
Associations etc. He said it would be
possible to present the final draf t only
af ter a number of representatives
connected with the industry and the
Government sector are met. Members
felt that the points covered in the
study were well taken and need to be
fine tuned. During the presentation,
members suggested a number of
issues/solutions which need to be
incorporated in the study.
The final draf t expected to be ready
by the first week of August would be
discussed by the Logistics Committee
and then placed before the General
Committee for their concurrence.
Once the final repor t is ready, the
Chamber would be planning a
suitable conference and the study will
be released at the conference. The
conference would be organised before
15th September.
Course on Logistics:Members were informed that a course
on Logistics has been finalized. The
Committee also suggested conducting
capsule courses like product liability
insurance, marine insurance, shipping
related courses etc. for the benefit of
professionals working in corporate.
18th July 2011
HRD/CSR:
Work Plan for the year 2011-12: The Chairman of the Committee, Mr S
Ganguly, informed the members that
the Chamber every month organizes
Food For Thought (FFT) programmes
which were well received by the
corporates. He mentioned that one
such programme was on CSR. He felt
that the Chamber could plan similar
programmes on topics relevant to
the Committee and requested the
members to suggest such topics. He
said, the Chamber has developed
a good website and requested the
members to visit the site periodically
and place their queries, suggestions,
comments, etc. as also share their views,
if any, relating to this Committee,
so that the Chamber could take
appropriate action.
The Committee suggested to have a
seminar/meeting with the PF of ficials,
ESI of ficials, labour depar tment of ficials
and related authorities to understand
the present legislative changes,
policy changes and administrative
requirements. Presently there were a
number of changes in PF legislation and
the committee will work on a possible
programme in due course.
It was brought to the notice of Members
that the Ministry of Corporate Af fairs,
Government of India, New Delhi has
issued National Voluntary Guidelines
on Social, Environmental & Economic
Responsibilities of Business. Members
were informed that MCA had released
the Voluntary Guidelines on CSR in 2009
as the first step towards mainstreaming
the concept of Business Responsibilities.
This has now been revised with a more
comprehensive set of guidelines that
encompass social, environmental and
economic responsibilities of business.
The Chamber would provide a link in
the MCCI website to download the
guidelines issued by MCA. The Exper t
Committees on Company Law and
HRD would study the guidelines before
providing suggestions. Members were
requested to go through the website
and have a look at the guidelines and
send their comments to the Chamber
either through website or by e-mail.
The Chairman suggested that this topic
could also be considered as one of the
topics for future FFT programmes.
5
EXPERT COMMITTEES
CSR activities in association with Government of Tamilnadu: Mr M Ramakrishnan, Co-Chairman gave
highlights of his earlier CSR project done
in Coimbatore where large groups like
PRICOL, LMW, ELGI, Bannari Amman
Group and Sankara Eye Foundation
and other trading agencies joined
hands and made a successful project
called “Sirutholi”. These initiatives were
done with the suppor t of Government
agencies like PWD, Revenue, Forestry
and the Corporation. He suggested
that the Chamber can embark on similar
projects in Chennai, taking the suppor t
of our member industries.
Job Fair – 27th & 28th August: The MCCI in association with Jaya
TV is planning to organize a Job Fair
on the 27th & 28th August. The basic
objective of this Fair is that MCCI would
act as a bridge between the Corporate
and the Student community and the
idea would be to bring a number of
students to take par t in the Fair, since
many students are unable to take
up jobs due to many factors and this
fair might of fer a good oppor tunity to
them. Graduates of various disciplines
including engineering, ar ts and science,
diploma holders, etc. are eligible to
par ticipate in the Fair.
Members were also informed that
the Chamber is also setting up a skill
development centre and sof t skills
training would be commenced from
August. For the selected students from
the Fair, training in communications,
front of fice management etc., would be
planned by the Chamber under the Skill
Development Programme. The Secretary
General requested the Committee to
suppor t the Fair.
EXPERT COMMITTEES
6
25th August
Preview on UNEP’s Responsible Production
Framework:
Sheraton Park Hotel – 3 to 6.30 p.m.
Mr Jayakumar, Speaker, Tamilnadu Assembly will address.
(By invitation – please contact Mrs J Edwards,
MCCI for invitations)
............................................................................................................................
10th & 11th September
Job Fair – MCCI & Jaya TV –
Atrium, Spencer’s Plaza
............................................................................................................................
4th September
Felicitation to Mr Harsh C. Mariwala, President, FICCI – 4 p.m. Taj Coromandel Hotel
.............................................................................................................................
5th September
Interaction meeting with the representatives
of Greater Geneva Berne Area (GGBa), Western Switzerland - 4.45 p.m. MCCI Conference Room
............................................................................................................................
9th September
MCCI & TCS – Seminar on IT for SMEs –
Hotel Raintree, Anna Salai – 6 p.m . followed by Dinner
............................................................................................................................
10th September
Seminar on Cost Audit & Rules under the
Companies Act 1956 – 10 a.m. Hotel Deccan Plaza
............................................................................................................................
12th September
Talk by Rober t F Bruner,Dean, Darden School of Business, University of Virginia –
on Global Trends and the Changing Economic Outlook.
(Time and venue to be finalized)
............................................................................................................................
15th September
Presentation on “Indo-German Trade in
the Machinery Sector – Challenges &
Opportunities” –
by Mr Ulrich Ackermann, Managing Director of Foreign
Trade Division, German Engineering Federation (VDMA)
10.30 a.m. t0 11.30 a.m. MCCI Conference Room
Forthcoming Programmes
SPOTLIGHT
Process of formulating the
12th Plan:
The Planning Commission
has commenced a very wide
consultative process on the
challenges for the 12th Plan. Over
900 CSOs across the country
have par ticipated, as well as
many Industry Associations and
‘think tanks’. A series of regional
consultations with States have been
planned and the dialogue with other
stakeholders continues.
Eleventh Plan Experience:
The GDP growth is likely to average
8.2% over 11th Plan - shor t of the
9% target but remarkable, given the
global crisis and drought. In the 10th
Plan, GDP growth averaged 7.7 %.
The Commission has seen progress
on inclusiveness: Agricultural growth,
Pover ty Reduction, Education,
Health, Uplif tment of SCs/STs,
Minorities etc. However, progress on
inclusiveness is less than expected.
Inflation has accelerated in the last
two years. The current international
environment is very uncer tain as
there is global pressure on food,
oil and other commodity prices.
Financial conditions and exchange
rates are likely to be volatile due to
sovereign debt related problems
in Europe/US, and readjustment
of extraordinary monetary/fiscal
easing.
Key messages from
consultations:
Strong demand from all sectors
of society is the need of the
hour to improve Implementation,
Accountability and Service Delivery.
Citizens Groups broadly suppor t
the stated objectives of existing
Government programmes. However,
the design and institutional
arrangements are weak. Greater
devolution and empowerment is
needed.
Government programmes need
a new architecture: greater
localisation, break-down of silos,
feedback from citizens and
mechanisms for learning and
sharing of best practices. A major
contribution to economic growth
now comes from the private
sector. A policy environment that
suppor ts this dynamism is therefore
important. There is a need to create
environment for nur turing enterprise,
improving markets, suppor ting
innovation, providing access to
finance and inculcating respect for
common pool resources.
Twelfth Plan Objectives:
The basic objective is to have
faster, more inclusive, and
sustainable growth. The 12th plan
aims to achieve a growth rate
of 9.0 to 9.5 percent. Energy,
Water and Environment present
major sectoral challenges. It is a
challenge to address them without
sacrificing growth. We need to find
resources to create a world class
infrastructure.
For growth to be more
inclusive we need:
l Better per formance in agriculture
l Faster creation of jobs, especially
in manufacturing
l Stronger ef for ts at health,
education and skill development
l Greater ef fectiveness of
programmes directly aimed
at the poor
l Special programmes for socially
vulnerable groups
l Special plans for disadvantaged/
backward regions
The 12th Five year Plan – Draft
7
8
SPOTLIGHT
Agriculture and Rural
Development:
We need to target at least 4%
growth for agriculture. Cereals are
on target for 1.5 to 2% growth. We
need to concentrate more on other
foods and on animal husbandry
and fisheries, where feasible.
Land and water are the critical
constraints. Technology must focus
on land productivity and water
use ef ficiency. Farmers need
better functioning markets for both
outputs and inputs. Also, better rural
infrastructure, including storage and
food processing. States must act to
modify APMC Act/Rules (exclude
hor ticulture), modernize land records
and enable properly recorded land
lease markets. RKVY has helped
convergence and innovation and
gives State governments flexibility.
This must be expanded in the
Twelf th Plan. MGNREGS need
to be redesigned to increase
contribution to land productivity
and rain-fed agriculture. Similarly,
FRA has potential to improve forest
economies and tribal societies. But
convergence with NRLM is required
for enduring rural livelihoods.
Water:
Revisit India’s water balance
estimates basin-wise. Must map
all aquifers over next five years to
facilitate aquifer management plans.
AIBP is not achieving its objectives.
It must be restructured to incentivise
irrigation reform and ef ficiency of
resource use. Setting up of Water
Regulatory Authority must be a
precondition. There is a strong
case for higher priority to watershed
management. Separation of
electricity feeders for agriculture can
improve quality of power availability.
Propor tion of water recycled by
urban India and industry to be
raised to protect water levels and
improve sur face and groundwater
quality.
Rational water use may need for:
l New Groundwater Law reflecting
Public Trust Doctrine
l New Water Framework Law
(as in the EU)
For this there is a need to evolve
political consensus and the
constitution of a National Water
Commission to monitor compliance
with conditionalities imposed in the
investment clearance of important
projects.
Industry:
Manufacturing per formance is
weak. There is a need to grow at
11-12% per year to create 2 million
additional jobs per year. Indian
industry must develop greater
domestic value addition and more
technological depth to cater to
growing domestic demands and
improve trade balance. FDI and
trade policies should be tuned
up to attract quality investment in
critical areas. Improve business
regulatory framework: ‘cost of doing
business’, transparency, incentives
for R&D, innovation etc. Land and
infrastructure constraints are a major
problem. States should develop
‘special industrial zones’ with good
connectivity and infrastructure.
‘Clusters’ need to be suppor ted to
enhance productivity of MSMEs and
there should be better consultation
and co-ordination in industrial policy
making.
Some sectors should be given
special attention because they
contribute to most of our objectives
eg:
l Create large employment
in the following:
4textiles and garments,
4leather and footwear;
4gems and jewelry;
4food processing industries
l Deepen technological
capabilities: Machine tools; IT
hardware and electronics
l Provide strategic security:
telecom equipment;
aerospace; shipping;
defence equipment
l Capital equipment for
infrastructure growth:
Heavy electrical equipment;
Heavy transpor t and
ear th-moving equipment
l Sectors with global
SPOTLIGHT
9
competitive advantage:
automotive; pharmaceuticals
and medical equipment
l MSMEs: innovation, employment
and enterprise generation
Sectoral plans are being prepared
for each of the above with
involvement of Industry Associations
and the concerned Ministries.
Education and Skill
Development:
The Government must aim at
universalisation of secondary
education by 2017 and at raising
the Gross Enrolment Ratio (GER)
in Higher Education to 20 percent
by 2017 and 25 percent by 2022.
It must also focus on quality of
education (11th Plan emphasis was
on quantity). Must invest in faculty
development and teachers’ training.
Must aim at significant reduction in
social, gender and regional gaps in
education. Targets to be set for this
purpose. Major curriculum reforms
in vocational/skill development to
ensure employability in response
to changing market needs are
required. Development and
operationalisation of PPP models
in School and Higher Education
in accordance with the needs of
a fast growing economy should
be under taken. Research and
innovation in higher education must
be encouraged with cross-linkages
between institutions and industry.
Health:
Better health is not only about
curative care, but about better
prevention and therefore clean
drinking water, sanitation and
better nutrition, childcare, etc. and
convergence of schemes across
Ministries is needed. Expenditure
on health by Centre and States
to increase from 1.3% of GDP
to at least 2.0%, and perhaps
2.5% of GDP by end of 12th Plan.
There is a desperate shor tage
of medical personnel. For this,
targeted approach to increase
seats in medical colleges, nursing
colleges and other licensed health
professionals should be taken.
Improve quality of NRHM services
vs. quantity of NRHM infrastructure.
Structured involvement of PRIs/CSOs
can help. Role of PPP in secondary
and ter tiary healthcare must
be expanded. Health insurance
cover should be expanded to all
disadvantaged groups. Focus on
women and children; ICDS needs to
be revamped.
Energy:
Commercial energy demand will
increase at 7% p.a. if GDP grows at
9%. This will require a major supply
side response and also demand
management. Energy pricing is a
major issue. Petroleum and Coal
prices are significantly below world
prices and world prices are unlikely
to sof ten.
1. Power Sector Issues:
Government aims to set a target
of 100,000 MW capacity in 12th
Plan (against likely achievement of
50,000 MW in Eleventh Plan). Coal
availability will be a major constraint.
Long term health of power sector
seriously undermined (losses Rs.
70,000 crore per year). AT&C losses
are coming down, but too slowly.
State governments must push
distribution reforms. Hydro-power
development seriously hindered by
forest and environment clearance
procedures. Electricity tarif fs not
being revised to reflect rising
costs. Regulators are being held
back from allowing justified tarif f
increases. Open access is not being
operationalised.
2. Coal Production:
On optimistic assumption about
Coal India production, India needs
to import 250 million tonnes in 2017-
18. We must plan for corresponding
expansion of rail and por t capacity.
Coal India must become a coal
supplier and not just a mining
company. It should plan to import
coal to meet coal demands. This
requires blending of imported
and domestic coal as supplied by
Coal India. Environment and forest
clearances of coal mining projects,
including few private sector captive
projects will be critical.
3. Petroleum and Natural Gas:
There is a need for fur ther
SPOTLIGHT
10
expansion of new NELP blocks.
Stable and clearer production
sharing contracts will incentivise
exploration and encourage
investment. Pipeline network for
transpor tation of natural gas and
LNG is limited and this needs quick
expansion.
4. Other Energy Sources:
Nuclear power programme must
continue with necessary safety
review. Solar Mission is seriously
under funded. Need longer term
energy solution for cooking in rural
areas. Expand LPG network (with
cash subsidy for the deserving, not
subsidised prices). Also use of grid
solar and bio-mass energy. Wind
power development, including of f
shore wind power, needs to be
encouraged.
5. Demand Side
Management:
Expansion in supply will need to
be suppor ted by demand side
management.
l Rational energy pricing will help
l Energy standards for high energy
consuming industry, electrical
appliances, energy ef ficient buildings
or enhanced use of electric/ hybrid
vehicles.
Transpor t Infrastructure:
It is proposed that the Railways’
Western and Eastern Dedicated
Freight Corridors (DFC) will be
completed by the end of the Twelf th
Plan. There is a proposal for a High
Speed Rail link between Delhi-
Mumbai and Delhi-Kolkata in the
Twelf th Five Year Plan. More PPP
in railways and State highways
to complement Government
investment would help. Capital
intensive transpor t projects should
rely on private investment to
release resources for other priorities.
Complete the linkages between the
por ts and the existing road and rail
network. Need to deepen existing
por ts. Increase bulk/container
capacity. Ensure suf ficient provision
for maintenance of the already-built
roads. Invest in unified tolling and
better safety on highways. Improve
bus services/public transpor t in
smaller cities, towns and districts.
Metros in urban areas through PPPs
wherever feasible.
Managing Urbanisation:
India’s urban population is expected
to increase from 400 million 2011 to
about 600 million or more by 2030.
The critical challenges therefore
are basic urban services especially
for the poor: water, sewerage,
sanitation, solid waste management,
af fordable housing and public
transpor t. The investment required
in urban infrastructure is estimated
at `60 lakh crores over the next
20 years. We need to develop
and propagate innovative ways
of municipal financing, through
Public-Private Par tnerships (PPPs).
Land management strategies
are key factors for good urban
development as well as financing
urban infrastructure development.
Training and capacity building for
urban planning and urban services
management for corporators and
municipal of ficials is required.
Reform of JNNRUM for the next
phase and convergence with RAY
for an integrated approach.
Source: Planning Commission, Govt. of India
Mr K V Shetty
MCCI deeply mourns the sudden
demise of Mr K V Shetty,
Director, IP Rings Ltd.
on 18th August 2011.
He was the President of the
Chamber during the
year 2002-2003 and led the
Chamber so ably.
The Chamber, on behalf of
all its members, conveys its
hear tfelt condolences to the
bereaved family
and to all at IP Rings Ltd.
May his soul rest in peace.
INCLUSIVE GROWTHBy M.A. Oommen, Emeritus Professor
Institute of Social Sciences, Thiruvananthapuram
SPOTLIGHT
INCLUSIVE GROWTH
Institute of Social Sciences, Thiruvananthapuram
Montek Singh Ahluwalia’s paper on
“Prospects and Policy Challenges
in the Twelf th Plan” (EPW, 21
May 2011) is very interesting and
cer tainly illuminating. I think that
among the various issues the
paper has raised for “spurring a
broader discussion”, the concept
of “inclusive growth” is an ideal
candidate for debate because of
the “policy challenges” it raises. The
term not only appears prominently
in recent years in the documents
of the Planning Commission, and
in budget speeches and Economic
Surveys, but it is constantly used in
the speeches of the leading public
persons of the country. Even so, the
concept of inclusive growth is lef t
delightfully vague. In terms of policy
content, it is cer tainly not a focal
variable. Clarity about the concept
and its contents leaves many things
to be desired. This paper, by one
of the leading architects of India’s
recent five-year plans, is important
for the light it throws on the concept
and some of the policy implications
that follow. In this brief note, I try
to make some observations that I
hope will help to stimulate fur ther
discussions on the subject.
Coequal Objectives?
Presenting growth and inclusiveness
as coequal objectives, the author
notes: “The Eleventh Plan aimed at
delivering faster and more inclusive
growth and it is logical to assess
per formance against this dual
objective” (p 88) and even goes
on to say, “it is dif ficult to assess
inclusiveness than per formance on
growth” (p 89). The three reasons
which the author mentions may be
summarised thus: (a) inclusiveness
is a multidimensional concept,
(b) the data on inclusiveness are
available only af ter a lag, and
(c) the impact of inclusiveness is
not immediately visible. These
arguments do not seem to be
tenable. For one thing, concepts like
growth and development are also
multidimensional. Moreover, several
components of growth (which in the
aggregate appear as the sum-total
of value added) have long-term
implications and some of the related
data are available af ter a lag.
The critical issue is the treatment
of growth and inclusiveness as
two separate boxes and then
considering such an approach
“logical”. The fundamental question
then is why underscore inclusive
growth as a development goal and
proceed to ar ticulate the “vision
and strategy” of inclusive growth in
the very first chapter of the Eleventh
Plan and earlier in the Approach
to the Eleventh Five-Year Plan:
“Towards faster and more inclusive
growth”. Of course, one can quarrel
with the content of the vision and
strategy, but it is incorrect to treat
the two as disparate entities as
policy variables. Ahluwalia speaks
of the “systemic reforms” since 1991
based on a wider play of market
forces, gradual liberalisation of the
financial sector and the opening up
of the economy to world trade and
capital flows. But the moot question
is whether “the cumulative ef fect of
the systemic reforms” has promoted
inclusive growth. A more per tinent
question is what “systemic reforms”
the policymakers have initiated
to strategise a well-designed
vision of inclusive growth. Treating
inclusiveness and growth separately
and then enumerating the variables
to be included (27 is an impressive
number) to monitor progress is pretty
easy, but misses out the needed
vision, strategy and surely “systemic
reforms”.
11
SPOTLIGHT
12
Exclusionary Process
According to the author,
“Inclusiveness must obviously
include progress in delivery
of essential services” such as
education, health, clean drinking
water and sanitation. These
services, especially education
and health, are basic to capability
building and freedom of any
democratic society. The growing
commericalisation of education
and health cer tainly has excluded
many poor and dispossessed them
from the mainstream of growth.
There is no dear th of evidence. Joe
et al (2008) utilising the National
Health Survey data under take a
state-level analysis of inequities
in child health employing widely
accepted concentration measures,
and find that the poorer sections
of population are buf feted with
ill-health and malnutrition of their
children, thus jeopardising the future
of the already vulnerable sections of
society. Using data from a nationally
representative high sample of 41,554
households conducted in 2005,
Sonalde Desai and Amaresh Dubey
(2011), examine the relationship
between social background and
dif ferent dimensions of well-being
and find the continued persistence
of alarming caste disparities in
education, income and social
networks.
The author of the paper on the
policy challenges in the Twelf th Plan
who tries to give the latest figures
and evaluation repor ts about the
unfolding pathology of inadequate
access to proper education, health
and so on seems to walk past the
excluded like the high priest before
the wounded man in the Biblical
parable of the Good Samaritan.
“Accelerating agricultural growth”
is indeed important for inclusion,
but the problem is whether it can
really be inclusive in the absence
of redistributive land reforms. Some
benefits may trickle down to the
wage earners but surely not into the
hands of the landless who remain
excluded (unless they succeed in
selling their labour). Growth is not an
end in itself, but important only as
one of the means towards human
well-being and freedom.
By its own logic, market mediated
growth prices out or excludes those
without exchange entitlements,
the latter including not only assets,
but also income, employment,
social security entitlements, initial
endowments, credit wor thiness and
so on. Apar t from market exclusion,
there are several institutional failures
and market failures. There are
also several social exclusions like
caste, gender discrimination and
so on. While some of these can
be addressed through af firmative
action, economic exclusion can
be taken care of ef fectively only
through relevant policy choices on
redistributive strategy and then with
sustained action. Charity can help
one to par ticipate in the market.
But cer tainly that is not what one
bargains for in an inclusive growth
regime.
Strategy, Not Mitigating Factor
Inclusiveness is not a mitigating
act, but a strategy of par ticipation
in the social production (growth)
process and settlement of claims
on the product on a fair basis. For
the Asian Development Bank which
has been advocating inclusive
growth in the region, “growth is
inclusive when it allows all members
of a society to par ticipate in and
contribute to the growth process on
an equal basis regardless of their
individual circumstances” (Ali and
Zhuang 2007: 10). This definition is
positive but does not indicate the
structure and pattern of growth and
rules out a distribution strategy. A
growth process that works towards
ef fective equality of oppor tunity
must define the boundaries of
the market, the composition of
the commodity flow, the structure
of initial endowments, the social
arrangements for enhancing the
capabilities of individuals and the
freedoms needed to achieve the
capabilities and so on.1
Equality is a universally acclaimed
value and is generally af firmed
as a basic human right. Amartya
Sen famously asked the question
“equality of what”? The answer
to this question is important for
identifying the policy variables that
have to be chosen for action.2
Ahluwalia’s paper rightly asser ts
that inclusiveness must address
the concerns about inequality
and identifies some variables for
focal action. Basically one has to
review the rationale and interrogate
the ethics of the existing social
arrangements that exclude some
and enrich others in order to
propose a meaningful strategy
of inclusive growth. Even without
any such plea for radical structural
transformation one can be more
positive than the following remarks
of the author on inequality.
It is sometimes argued that
inequality should not matter as long
as the poor are getting better of f
and it is probably true that a rapid
rate of improvement in incomes
for the poor may make them
willing to accept some increase in
inequality. However, large increases
in inequality accompanying only
modest improvements in the levels
of living of the poor, are unlikely
to be acceptable (p 89, emphasis
added).
This type of approach obviously is
not inclusive, but willy-nilly keeps
the poor excluded in perpetuity. It
is a matter for debate whether you
can build the road map to inclusive
growth on such postulates. I have
no hesitation in saying that the
wedge between “Shining India” and
“suf fering India” will keep growing
unless strong “systemic reforms” are
initiated for promoting a sustainable
inclusive growth path similar to
what has been done since 1991 to
ensure the unfettered freedom of
capital. The indif ferent way in which
inclusive growth is handled in India
is probably because “they could get
away with it” as when Sen (1973,
1998) points out how the Athenian
intellectuals of direct democracy
fame lef t out the slaves and women
from the orbit of their discourse and
discussion.
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SPOTLIGHT
identifying the policy variables that
have to be chosen for action.2
Ahluwalia’s paper rightly asser ts
that inclusiveness must address
the concerns about inequality
and identifies some variables for
focal action. Basically one has to
review the rationale and interrogate
the ethics of the existing social
arrangements that exclude some
and enrich others in order to
propose a meaningful strategy
of inclusive growth. Even without
any such plea for radical structural
transformation one can be more
positive than the following remarks
of the author on inequality.
It is sometimes argued that
inequality should not matter as long
as the poor are getting better of f
and it is probably true that a rapid
rate of improvement in incomes
for the poor may make them
13
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We are pleased to inform you that Mr D K Pradhan has joined the Chamber as Chief Operating Officer for our Skill Development project with effect from 1st August 2011. Mr Pradhan is a highly qualified professional with over 40 years of general and tool room management experience. His last assignment was with T S Srinivasan Centre for Polytechnic and Vocational Training, Chennai. He was
also instrumental in setting up Indo-German Tool Room, Aurangabad - this is a Rs 700 million project, operating as an autonomous body under the Ministry of MSME.Mr Pradhan would coordinate the vocational training initiatives of the Chamber.He can be reached at :Mobile: 9383305745Email: [email protected]
Appointment of Mr D K Pradhan, Chief Operating Officer, MCCI Skill Development Centre
SPOTLIGHT
The Planning Commission has
listed 10 areas given below on
cross cutting themes, each of
which is relevant for dif ferent
sectors. These ten areas
include:
1. Citizens’ expectations - What
are the citizens’ expectations
in individual sectors? How can
we set targets to reflect these
expectations?
2. Governance and Institutions -
How does government or public
institutions af fect us in dif ferent
sectors? How can we make
them work better?
3. Markets - Are markets
per forming their role in these
sectors satisfactorily? How
can we improve the functioning
of markets?
4. Global Developments - How
will global developments af fect
us in individual sectors?
How can we use global
developments to our
advantage?
5. Demography and Skills - How
does the age / sex /
geographical / skill distribution
of our population af fect
our per formance or potential?
How can we cope with
demographic changes
already underway?
6. Science and Technology - What
kinds of science and technology
are available and appropriate?
How can we get more
useful S&T?
7. Information - Do we all have
appropriate information
to take informed decisions?
How can we improve the
availability and usefulness of
information?
8. Land Climate and
Environment - How does
land use and environmental
considerations af fect us?
How do we build strategies
to take them into account?
9. Innovation and Enterprise -
Are we creating enough
innovations and
enterprise for inclusive and
sustainable growth? If not, how
can we do so?
10. Financing the Plan - What are the
financial requirements, both
public and private of achieving
our targets? Can we meet them?
Governance
The first draf t to the XI Plan,
prepared and issued by the
Planning Commission in 2006, had
this to state on Governance:
“All our ef for ts to achieve rapid and
inclusive development will come to
naught, if we cannot ensure good
governance both in the manner
public programmes are implemented
and, equally important, in the way
the government interacts with the
ordinary citizen. Corruption is now
seen to be endemic in all spheres
and this problem needs to be
addressed urgently.” Crucially the
quality of governance (or the lack of
it) is seen as India Achilles heel in
her march to prosperity.
In shor t, given the quality of
governance it is inappropriate in
the current Indian context to raise
outlays significantly and hope
for the best. Af ter all, anything
multiplied by zero is zero. Since there
is a complete disconnect between
service providers and consumers,
poor governance has become the
norm in India. For long, we have
assumed that poor governance can
be tackled through “Better design
of projects and implementation
AN APPROACH TO THE XII FIVE YEAR PLANAN APPROACH TO THE XII FIVE YEAR PLANBy M R Venkatesh
Chairman, Exper t Committee on Economic Af fairs, MCCI
14
SPOTLIGHT
15
mechanisms and the Right to
Information Act.” But these are
passive attempts when the rot is
deep and massive.
The malaise of poor governance
needs radical and innovative
solutions, especially in three crucial
sectors – Primary education, health
and public transpor t. It is the failure
of India in delivering in these crucial
sectors that has been attracting
comments from critiques, both
in India and abroad. Naturally
we need to tackle this upfront
before we proceed any fur ther.
Various government agencies
have repeatedly brought about the
charge that these sectors were
under-funded as a percentage
to our GDP. This is only par tially
true. Even a substantial increase in
the spending of any one of these
sectors may not help to see any
significant increase in outcome /
outputs. The reason for the same is
too obvious – the service providers
are completely disconnected from
the needs of the service seekers.
And this disconnect lies at the
root of all malice af fecting our
governance.
Making Growth inclusive:
While we appreciate the ef for ts
of the Government in tackling the
scourge of pover ty, the fact is India
continues to be a laggard in Human
Development Index. According to the
recent global Human Development
Repor t (2010) India’s HDI rank is
119. Countries with lesser natural
endowments, human capital and
those repeatedly ravaged by
several natural calamities are placed
far higher than India in the Global
Human Development Index (HDI). For
long , we in India had discussions
on the economic model and
revelled in mere sloganeering. The
time to act is now. Consequently,
MCCI suggests that as an
overarching objective of the XII plan,
the Planning Commission must have
an ambitious target of ensuring
that India significantly improves
her rankings in the global HDI.
Unless we benchmark ourselves
to the global HDI and measure our
per formance, we would be stuck
in the quagmire of pover ty, illiteracy
and disease.
Notwithstanding the above, one
area that is engaging our attention
is the disparity in various social
indices even within our country. For
instance, on social indices, cer tain
States seem to do far better than
the other. This gap needs to be
bridged for thwith. It is suggested
that the best social index for every
State to be drawn up and the
worst per forming State to be given
special attention by the Planning
Commission in the next five years,
so that the laggard State catches
up with the best per forming State
within 2017. This obviously calls
for micro-management and in our
opinion make growth more inclusive.
Fur ther, the scourge of pover ty and
depravation can be conquered only
when we achieve an ambitious
farm growth of 10 or 12 per cent.
In fact, the farm sector should
be one of the growth drivers of
Indian economy. Experiences in
several pockets of the country
demonstrate that farm sector can
indeed grow in excess of 12 per
cent p.a. consistently for well over an
extended period of time. Gujarat is
a case in point.
It is believed that even to this day,
over fif ty percent of our population
is dependent on the farm sector.
However, the overall growth rate
recoded by the farm sector for the
past decade or so has not been
impressive. Naturally, the majority of
our population seems to have been
lef t out on the India growth story.
That can be remedied if and only if
we plan and achieve a double-digit
growth.
Extract from Times of India under “Madras
Diaries” “It was in 1836 that the Madras Chamber of Commerce mooted the idea of setting up a harbour to enable the embarkation and disembarkation of goods and passenger ships. In 1861, an iron screw-pile pier was erected along the coast, and the harbour was thrown open to traffic almost immediately.”
Read more ….... Times of India Chennai Presentation .. Saturday, 20th August 2011
POLICY WATCH
16
Sector-specific industry policies soonFirst in line will be the launch of energy sector policy:
Tamilnadu is all set to become a new
growth model in India with the launch
of sector-specific industry policies
within the next two to three months
said Principal Industries Secretary, Mr N
Sundradevan recently.
Tamilnadu has immense potential and
it was currently considering a number
of new initiatives such as the sector
specific industry policy to improve the
investment climate and attract more
foreign direct investment.
He fur ther said the draf ts were ready
and the first in line would be the launch
of energy sector policy. This would be
followed by the release of industrial
policy that would include automobile,
manufacturing and infrastructure
sectors. Pharmaceutical policy would
take longer.
Five States to get priority in Centre’s infra spending:New infrastructure projects in Gujarat,
Andhra Pradesh, West Bengal, Tamil
Nadu and Orissa are set to get a
major push in the five years star ting
2012 as various government agencies
will be prioritizing building of roads,
rail networks, airpor ts and sea por ts
in these States that are setting up
mega petroleum and petrochemical
investment regions. Five massive
regions meant to attract investments
in the petrochemical and allied
sectors are now at various stages of
implementation at Dahej in Gujarat,
Visakhapatnam-Kakinada in Andhra
Pradesh, Haldia in West Bengal,
Paradeep in Orissa and Cuddalore and
Nagapattinam in Tamil Nadu. These
investment zones, each of which is
not less than 250 square kilometers,
are expected to attract a collective
investment of Rs 8,63,664 crore and
create more than 40 lakh jobs during
the 12th Five-Year Plan.
Commerce Ministry to revisit SEZ Rules book:The Commerce Ministry is mulling over
a “relook” at the area ceiling for multi-
purpose Special Economic Zones (SEZs),
presently at 5,000 hectares, since land
is emerging as ‘a binding constraint’
for huge industrial projects in the wake
of widespread protests by farmers for
land acquisition across the country.
The Commerce Secretary, Dr Rahul
Khullar, said the time has come where
issues per taining to land, labour and
infrastructure in the context of the SEZ
need to be looked at again as the rules
were framed seven years ago.
Government lifts restrictions on cotton export:The Government has lif ted expor t
restrictions on cotton and allowed it to
be shipped under open general licence
(OGL) for the rest of the cotton season
responding to a fall in prices of the
commodity and its adequate availability
in the country. In the remaining two
months of the cotton season — that
runs from October to September —
expor ters will only have to register with
the Directorate General of Foreign Trade
(DGFT) to send shipments. They will be
free to expor t any quantity they want.
The government had placed a cap on
cotton expor ts at 55 lakh bales (170
kg each) in October last year to check
spiraling prices and ensure availability
of the raw material for the domestic
textiles industry.
Indo-Japan pact comes into effect:The CEPA between India and Japan,
that seeks to augment bilateral trade
of $25 billion by 2014, has come into
ef fect. The CEPA will see about 94%
reductions in goods ranging from cars to
shrimps and easier movement of nurses
and chefs. On a trade value basis
while Japan has agreed to 97% tarif f
reduction in trade in goods, India has
consented for 90% duty abolition.
NREGA back on table for removing flaws:New Rural Development Minister Jairam
Ramesh is working to overhaul the
United Progressive Alliance’s six-year old
flagship rural jobs programme to rid it
of all ‘man-made’ flaws and make the
job entitlement more demand driven.
The Mahatma Gandhi National Rural
Employment Guarantee Act (MGNREGA),
which costs the government Rs. 40,000
crore a year – the largest spend on any
social welfare scheme – played a key
role in catapulting the UPA government
back to power in the general elections
of 2009. The scheme, however, has
floundered on the ground because of
red tape and corruption. Star ting with
a complete administrative revamp, the
17
POLICY WATCH
government plans to link MGNREGA to a
cluster of mini watersheds, or aquifers,
in a cluster of panchayats, or village
councils. The government also aims to
make the scheme truly demand driven
by moving to a system of receipts, which
will clearly mention the date work was
demanded.
SEBI changes code to ease takeovers by India Inc: SEBI has proposed new takeover rules
that will ease acquisitions by Indian
companies and scrap the non-compete
fee. But it will dilute the spirit of a
committee that mandated total buyout
of minority holders by acquirers as in
the developed markets. The minimum
holding requirement to trigger an of fer
to minority holders has been raised to
25% of the company from 15%. Once
that level is reached, the acquirer must
of fer to buy 26%, up from 20% now.
New norms make it mandatory for the
board of the target company to suggest
its opinion to shareholders, and the rise
in minimum limit may benefit private
equity investors who can own more of a
listed company without having to invest
a substantial sum.
Food Bill likely to be tabled in Parliament in December: Thomas:The proposed National Food Security
Bill for providing subsidized food grains
to the poor is likely to be introduced
in Parliament by December 2011.
The Empowered Group of Ministers
(EGoM) has approved the draf t Bill,
which is now before the Law Ministry.
“Once that is done, it has to go to
the Cabinet. We will also discuss with
the chief ministers, because they are
the implementing agency... then it
has to go to Parliament,” Thomas,
said.”What I propose is to introduce the
Bill by this December so that it can be
implemented from next year,” he said.
Textile Ministry provides Rs 1,972 cr as subsidy under tech upgrade fund:The Textile Ministry has made provisions
for Rs 1,972 crore towards subsidy
amount under the Restructured
Technology Up-gradation Fund Scheme
(TUFS) up to March 31, 2012.The
Union Minister of State for Textiles, Ms
Panabaka Lakshmi, said there will be
an overall subsidy cap of Rs 1,972 crore,
which can be leveraged to make a total
investment of Rs 46,900 crore in the
dif ferent sectors.
Starting business in India to take less than a day:India will soon join an elite group of
countries where star ting a business will
take less than a day. The Ministry of
Corporate Af fairs (MCA) has simplified
the procedures for incorporation to
enable promoters to get their companies
incorporated within 24 hours. The new
procedure to issue online cer tificate
of incorporation will be implemented
from August 11. Earlier, of ficials at the
Registrar of Companies used to go
through the available list of names
and approve all documents manually.
Incorporation took anywhere between
four days to two weeks, depending
upon individual issues. Under the new
procedure, the promoters need to
get the application and other relevant
documents cer tified by a practising
professional and the applications will be
processed electronically.
New Land Acquisition Bill to be introduced soon:To take on the discontentment
against land acquisition process,
Rural Development Minister Jairam
Ramesh has cleared a draf t Bill for
public comments. The Land Acquisition
and Rehabilitation Bill which is on
the Ministry’s website proposes a
compensation of more than six times
the circle rate of land, acquired for
industrial and real estate projects. This is
in line with the recommendations of the
National Advisory Council but given the
time constraint is unlikely to be cleared
by Parliament in the next monsoon
session.
Manufacturing policy clears Labour Ministry hurdle:The proposed manufacturing policy of
the government has crossed a major
hurdle with the issues concerning the
Labour Ministry getting sor ted out.
Labour and Employment Secretary P C
Chaturvedi said that the Ministry had
detailed discussions on the matter with
the Department of Industrial Policy and
Promotion (DIPP) and all the issues
had been resolved. Under the agreed
plan, existing labour laws would be
applicable in the manufacturing zones
18
POLICY WATCH
and there would be administrative
arrangements for quick relief to workers
in case a unit is closed.
MNCs with liaison offices may be taxed:Multinationals which have liaison of fices
in India may have to star t paying taxes
soon. The government feels that many
of these companies generate income
in the country but have not opened
branches, to avoid paying taxes. The
Income Tax depar tment has already
sought details of operations of many
MNCs with liaison of fices in India. Lloyds
of UK, Bender of Germany, BBLO of
Spain, Doosan of South Korea, Magna
of Canada and CKD of Japan are some
of the leading MNCs which operate
liaison of fices in the country. Foreign
entities are allowed to open liaison
of fices in India af ter approval from the
Reserve Bank of India. They are not
subjected to any tax on the condition
that no business activity is carried out.
On the other hand, profits from branches
of foreign companies are taxed at the
rate of 42%.
Steel Ministry to announce new policy by year end:The Government will announce a new
steel policy by this year end. The policy
will address issues related to raw
material security, land acquisitions, steel
demand and infrastructure and will
replace the extant national steel policy
that was announced in 2005.
DEPB sops for textiles restored:The government has restored the Duty
Entitlement Pass Book (DEPB) benefits
for cotton and cotton yarn following a
sharp fall in domestic and international
prices of the commodities. Commerce
and Industry Minister Anand Sharma
who has recently been given additional
charge of the Textiles Ministry said, “The
government has restored the DEPB
benefits for cotton yarn from April 1, 2011
and on Cotton from October 1, 2010.”
India, Lithuania ink double taxation avoidance pact:
India has signed a double taxation
avoidance pact with Lithuania. This
agreement provides for ef fective
exchange of information between
tax authorities of the two countries,
including exchange of banking
information. Lithuania is the first Baltic
country with which India has signed a
double tax avoidance pact.
Builders will be Forced to Cut Prices by 20%:Proper ty prices are expected to
come down by around 20% as realty
developers may not be able to hold
on to the current prices following
the Reserve Bank of India’s liquidity
tightening move to increase repo and
reverse repo rates by 50 basis points
(bps) each. According to exper ts, the
current rate hike may achieve what
the earlier 10 rate hikes could not. Most
realty developers may be now forced
to cut proper ty prices and move the
inventory out to infuse liquidity into their
business, said market exper ts. The
move has come in as a shock and will
hit both developers and home buyers
given the higher cost of funding, said
most realty developers.
Duty drawback on cotton yarn export to return:The Finance Ministr y has decided to
reinstate the duty drawback facility
for cot ton yarn expor ts keeping in
view the current situation of huge
inventories with spinning mills and the
contraction in demand for the item in
the world markets. The government
had withdrawn the duty drawback
on expor ts of cot ton yarn through
a notification on April 29, 2010 for
discouraging overseas shipments in
the backdrop of high domestic prices.
It also put a ceiling on cot ton yarn
expor ts in January this year, which
remained in force till March. According
to a finance ministr y of ficial, “The
duty drawback facility for cot ton yarn
expor ts would be reinstated shor tly”.
“The finance ministr y has given a
confirmation to the textile ministr y that
the duty drawback facility would be
reinstated shor tly. This would come as
a relief to the expor ters,” said a textile
ministr y of ficial.
POLICY WATCH
19
TRADE FAIRS & EXHIBITIONS
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management, wastewater treatment
and pollution control to be held
from 20th to 22nd October 2011 at
Bombay Exhibition Centre, Mumbai.
For more details log on to
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call Conventions and Fairs (I) Pvt .Ltd.
Mobile 09892256022
Nilekani’s 3 steps for direct food subsidy transfer:As the government works out the
modalities for implementing direct
transfer of subsidies on cooking gas,
fer tilizers and kerosene, a task force
headed by Nandan Nilekani has
proposed a three-stage model for
direct transfer of food subsidy. The
rollout of direct transfer of food subsidy
will be contingent on a modern and
computerized public distribution system
(PDS), for which Nilekani has suggested
a centralized network. ‘Aadhaar’
numbers, currently being rolled out
across the country, will form an integral
par t of the transfer, just as in the case
of fuel and fer tilizers. The draf t repor t
on direct transfer of fuel and fer tilizer
subsidy was submit ted earlier this
month, following which the government
asked Nilekani to also prepare a
blueprint for the direct transfer of food
subsidy.
Dairy majors want milk items kept out of trade pact with New Zealand:The domestic dairy industry has
opposed inclusion of milk products
within the ambit of the proposed
India-New Zealand Free Trade
Agreement (FTA). “We want Chapter
4 (of the Customs Tarif f dealing with
dairy produce) to be kept out of the
FTA. Any plan to grant New Zealand
preferential access to the Indian dairy
market in exchange for a more liberal
visa and employment regime for our
professionals is totally unacceptable,”
said Mr. R.S. Sodhi, Managing Director,
Gujarat Cooperative Milk Marketing
Federation (Amul).
Telecom may move to unified licence regime:The government could move to a
‘unified licence’ regime under a planned
radical overhaul of telecom rules,
potentially dismantling walls between
dif ferent types of communication
services but at the same time risks
triggering fresh turmoil in the scandal-
ravaged sector. A senior depar tment of
telecom of ficial said the new telecom
policy being readied by the government
may allow operators to of fer all “forms
of communication services under a
single permit”. Telecom firms now need
separate licences for each type of
service.
New accounting regime for taxation from Finance Ministry soon:A key hurdle to implementing
International Financial Reporting
Standards (IFRS) in India is set to be
removed. The Finance Ministry, which
flatly refused to endorse IFRS for taxation
purposes, has now star ted work on
developing a new set of indigenous
accounting standards, which would
be capable of accurately estimating
the tax liability of India Inc. The new
India-specific standard will be marked
by its flexibility to suit dif ferent types
of businesses. It will also reconcile the
Direct Taxes Code — which would replace
the Income Tax Act once Parliament
approves it — with the IFRS. The finance
ministry move would mean that IFRS and
the new standards for taxation would
co-exist and companies could achieve
compliance with both with relative ease.
Environment regulator to be set up soon:Recognizing the need for a change in
the way environmental clearances are
granted, Prime Minister Manmohan
Singh has said the country would
soon have a National Environment
Appraisal and Monitoring Authority.
“We hope to establish an independent
regulator — the National Environment
Appraisal and Monitoring Authority
— soon. This authority could lead to
a complete change in the process of
granting environmental clearances,”
Singh said at the valedictory session
of the international seminar on ‘Global
environment and disaster management:
Law and society’.
ADDITIONS TO LIBRARY
Directories:
Assocham – “The Luxury”
Competition Law in India – An overview
Future Jobs – The Employment Challenges
A Step towards measuring social responsibility and sustainability
Qualified Institutional Placement – The flavour of Indian corporate world
Others:
Chambers Asia Pacific – Asia Pacific’s Leading Lawyers for Business -2011 A client’s guide - Chambers and Par tners
National Voluntary Guidelines on Social, Environmental & Economic Responsibilities of Business
- Ministry of Corporate Af fairs, Govt. of India
Cooperation Agreement
The Madras Chamber of Commerce & Industry has signed a Cooperation Agreement with The Chamber of Commerce and Industry France-India, France.
Under this agreement, both the Chambers will work together to:
l provide a framework within which the CCIFI and MCCI will work collaboratively together
l establish a basis to fur ther develop the relationship and achieve greater collaboration
l define common objectives for joint par ticipation and engagement
l share relevant information, market and economic study to the extent possible
l share agenda/logos to promote events on the par ties website
l provide each other with visual material to realize the above missions and
l assist each other in networking with other relevant organizations
A warm welcome to our following new members
EDAC Engineering Ltd.
Nokia India Pvt Ltd.
Spearheaders Management
Consultants Pvt Ltd.
Treeline Business Solutions Pvt Ltd.
Directories:
Assocham – “The Luxury”
Competition Law in India – An overview
Future Jobs – The Employment Challenges
A Step towards measuring social responsibility and sustainability
Qualified Institutional Placement – The flavour of Indian corporate world
Others:
Chambers Asia Pacific – Asia Pacific’s Leading A client’s guide - Chambers and Par tners
National Voluntary Guidelines on Social, Environmental & Economic Responsibilities of Business
-Ministry of Corporate Af fairs, Govt. of India
The Madras Chamber of Commerce & Industry has signed a Cooperation Agreement with The Chamber of Commerce and Industry France-India, France.
Under this agreement, both the Chambers will work together to:
21
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ECONOMIC REVIEWECONOMIC REVIEW
ECONOMY
India’s core industries output growth up 5.2 percent in June
Fiscal deficit surges four-fold in April-June, 2011
Food inflation moderation trend continued for yet another week
India- UK Reaf firms their Commitment to Strengthen their Economic and Financial Relations
POLICY
First Quar ter Review of Monetary Policy 2011-12: RBI
REPORTS
Rising prices hur t Asia’s growth - ADB
2010 Global FDI Inflows up 5%; India slips to 14th spot: UNCTAD
ECONOMIC REVIEW
ECONOMY
India’s core industries output
growth up 5.2 percent in June
The Index of Eight core industries
having a combined weight of 37.90
per cent in the Index of Industrial
Production (IIP) with base 2004-05
registered a growth of 5.2 per cent
in June 2011 as compared to 4.4 per
cent in the same period last year.
However, the growth of eight key
infrastructure industries is less than
the 5.3 per cent growth achieved
in May. Also, for the first quar ter of
current financial year, the Index of
eight core industries grew by only
5.0 per cent as compared to 6.8
per cent during the corresponding
period of previous fiscal year.
Despite the unfavorable environment
of growth, such as high inflation rate
and increasing interest rates, the
production of eight core industries
has more or less been able to
maintain its pace of growth. Also,
the high global commodity prices
have acted as a barrier to the
industry‟s faster expansion.
The government has added two
more sectors - natural gas and
fer tilisers to the existing six industry
segments. With the inclusion
of these two sectors, the core
industries now cover the sectors
such as crude oil, petroleum refinery
products, natural gas, fer tilisers,
coal, electricity, cement and steel.
Also, its weightage now account for
37.9 percent in the overall index of
industrial production, as compared
to 26.7 percent earlier.
According to provisional data
released by the Ministry of
Commerce & Industry on July 29,
production of steel, electricity, crude
oil and petroleum refinery products,
saw positive growth in the month
of June, 2011. On the other hand, the
remaining sectors such as natural
gas, coal, fer tilizers and cement saw
a negative growth.
Steel production registered a growth
of 12.5% in June 2011 compared to
4.3% in June 2010. In addition to
Steel, the remaining three sectors
also repor ted better growth during
the month. Electricity generation
registered a growth of 8.2% in June
2011 compared to a growth of 3.8%
in June 2010. The growth in Crude
oil production expanded by 7.7% in
June 2011 compared 6.8% percent
expansion in the corresponding
period of 2010. Also, the Petroleum
refinery production showed an
23
ECONOMIC REVIEWECONOMIC REVIEW
improved output growth of 4.7% as
against the growth of 2.9%
in June 2010.
Among the sectors, which
experienced contraction in growth,
Natural Gas production registered
the worst growth of (-) 11.7% in
June 2011 compared to 25.4%
expansion in June 2010. Coal
production growth also slowed
down to (-) 3.3% during the month
under review, compared to growth
of 0.8% in June last year. Similarly,
Fer tilizer production contracted by
(-) 2.4% in June 2011 compared to
(-) 6.7% in year ago period. Cement
production maintained its continuous
contraction in growth during the
current fiscal, this time by (-) 0.8% as
compared to 3.7% in June 2010.
During the first three months of
current financial year (April-June
2011-12), Steel production grew by
7.8% compared to an increase of
8.6% during the same period of
2010-11. Similarly, during the period
Electricity generation, Crude Oil
production, and the Petroleum
refinery production grew by 8.3%
(5.7% in 2010-11), 9.5% (5.9%), and
5.3% (5.3%) respectively. On the
other hand, Natural Gas production
registered a growth of (-) 10.2%
during April-June 2011-12 compared
to 37.0% during the same period
of 2010-11. Similarly, the respective
rates of growth for the remaining
sectors were 0.2% (- 0.6% in 2010-
11) for Coal production, 1.1% (-2.6%)
for Fer tilizer production, and (-) 0.9%
(7.0%) for Cement Production.
Fiscal deficit surges four-fold in
April-June, 2011
The central government’s fiscal
deficit surged by over four-fold
in the first three months of the
current fiscal 2011-12 to Rs 1.62 lakh
crore on account of lower non-tax
receipts. The deficit was Rs 40,196
crore in April-June, 2010. The fiscal
deficit, or the gap between overall
expenditure and receipts in the first
quar ter of this year is almost 40% of
the Budget estimate of Rs 4.12 lakh
crore for 2011-12.
The sharp rise in Centre’s fiscal
deficit is on account of 89% decline
in non-tax receipts which went
down to Rs 12,221 crore in the first
quar ter of this fiscal compared to
Rs 1.15 lakh crore in the year-ago
period. Besides, there was a 6.3%
decline in tax revenues at Rs 78,699
crore during the period under
review. The figure was Rs 83,994
crore in the year-ago period.
As per the latest data of the
Controller General of Accounts (CGA),
the total receipts were Rs 98,564
crore in April-June 2011, down by
51% year-on-year. The figure was Rs
2.02 lakh crore in the three month
period in 2010.
Also the non-tax receipts have
been lower as the government’s
disinvestment programme for this
year is yet to take of f fully. The higher
non-tax revenue in first quar ter
of last fiscal was on account of
auction of 3G spectrum. Meanwhile,
the revenue deficit, the dif ference
between revenue earned and
expenses, in April-June this year
stood at Rs 1.34 lakh crore, which
is almost 13 times higher than the
figure of Rs 10,577 crore in the first
three months of 2010-11. The latest
number is 48.3% of the Budget
estimate of Rs 3.07 lakh crore.
Though, the government has set a
fiscal deficit target of 4.6% of the
GDP for the current fiscal. Exper ts
had said that lower revenue
collection on account of removing
duties on petroleum products, could
pose a challenge and take the
deficit to over 5%. In 2010-11, the
fiscal deficit was 4.7%.
Food inflation moderation
trend continued for yet
another week
India’s food inflation rate based
on the Wholesale Price Index (WPI)
eased to 7.33 per cent (%) for
the week ended July 16, 2011 as
compared to 18.56 per cent during the
corresponding period of the previous
year. Food inflation for the previous
reported week was recorded at 7.56
per cent on a year-on-year basis. The
decline was mainly on account of fall
in the prices of coarse cereals, fibres
and minerals.
24
ECONOMIC REVIEWECONOMIC REVIEW
Among the major groups, the index
for „Primary Ar ticles‟ rose by 0.2
percent as compared to the previous
week levels. Annual rate of inflation
for this group was 10.49 per cent,
down from last week’s level of
11.13 per cent. It was 19.23 per cent
for the corresponding week of the
preceding year.
The index for ‘Food Articles’ sub-
group moved up by 0.8 per cent,
due to higher prices of fish-inland,
fruits & vegetables and fish-marine
(2% each). However, the prices of
jowar (4%), ragi and poultry chicken
(2% each) declined.
The index for „Non-Food Articles‟
sub-group also declined by 0.3 per
cent owing to higher prices of flowers
(16%), groundnut seed (10%), gaur
seed (3%). However, the prices of
raw cotton (6%), raw silk (3%), copra
and raw rubber (2% each) declined.
On the other hand, index for another
major category „fuel, power, light &
lubricants‟ remained unchanged at
its previous week’s level. The annual
rate of inflation under this category
for the week ended July, 16 stood
at 12.12 percent as compared to
previous week level of 11.89 per cent.
India- UK Reaf firms their
Commitment to Strengthen
their Economic and Financial
Relations
The Union Finance Minister Shri
Pranab Mukherjee said that the
Indo-UK Economic and Financial
Dialogue which was established in
2005 has contributed successfully
in strengthening the bilateral
relationship. He said that the
significance of this dialogue is in
laying the agenda and guidance for
future engagement.
While speaking at the Four th
Ministerial Level Indo-UK Economic
and Financial Dialogue at London,
Shri Mukherjee said that both the
countries have identified a number
of issues for joint collaboration. He
said that he is sure that both the
countries will make fur ther progress
in the coming months in deepening
countries economic relations based
on mutual appreciation of their
respective concerns and aspirations.
“This exchange of views will
go a long way in improving our
understanding of each other‟s
position on issues of mutual
concern, he said.” Shri Mukherjee
said that India and UK share a
strategic par tnership and enjoy
traditionally warm and close bilateral
relations in diverse areas.
“Our two countries enjoy strong
historical and cultural relations built
on shared values and traditions.
Since the visit of His Excellency, UK
Prime Minister David Cameron to
India in July 2010, we have seen our
bilateral relations being elevated to
an „Enhanced Par tnership for the
Future‟- he added.”
POLICY
First Quar ter Review of
Monetary Policy 2011-12: RBI
The Reserve Bank of India (RBI) has
released its first quar ter review of
monetary policy for 2011-12 on 26th
July 2011. In its monetary policy
release, the RBI signalled that
battling inflation took precedence
over growth imperatives. The RBI
remains confident that moderation
of domestic growth is not yet broad-
based, but the risks to growth from
uncer tainties abroad have increased
instead of dissipating. Also the
Inflation expectations are becoming
entrenched due to persistently high
food prices, while rising wages are
another worry.
“There are signs that growth is
beginning to moderate, par ticularly
in interest sensitive sectors. But
there is no signs of a broad-based
slowdown”, said RBI Governor D
Subbarao, adding that a moderation
in demand is necessary to bring
down inflation and that the US debt
standoff will add risks to the global
capital flows. In this backdrop, the
RBI continued the tightening cycle
and took a more decisive step
with a 50 basis point hike, beating
market expectations. Moreover, the
central bank gave enough hints that
the latest hike may not be the last.
On the basis of the policy stance
RBI has raised the Repo Rate by
25
ECONOMIC REVIEWECONOMIC REVIEW
50 basis points (bps) from 7.5 per
cent to 8.0 per cent. This has raised
operational policy rates by 475
basis points in a span of 15 months
since mid-March 2010, one of the
sharpest monetary tightening seen
across the world. Infact, RBI has
hiked the rates at all its previous 10
policy meetings.
The Central Bank, however, kept the
Cash Reserve Ratio (CRR) and Bank
Rate unchanged at 6.0 per cent.
The Marginal Standing Facility (MSF)
rate, determined with a spread of
100 basis points above the repo
rate, gets calibrated at 9.0 per cent.
Similarly, the Reverse Repo Rate, or
shor t-term borrowing rate, hiked to
7.0 per cent from 6.5 per cent.
RBI‟s May 3 Policy Statement
projection of baseline real GDP
growth for 2011-12, based on the
assumption of a normal monsoon
and crude oil prices averaging USD
110 a barrel, lef t unchanged at
around 8.0 per cent.
The RBI’s both the documents,
“Macroeconomic and Monetary
Developments First Quar ter Review
2011-12” and “First Quar ter Review
of Monetary Policy 2011-12 by
the Governor D. Subbarao” were
critical on the fiscal intervention
of the government as well as its
policy. Among other things it said
“While the anti-inflationary bias of
monetary policy (of RBI) anchors
inflation expectations, the present
trends necessitate structural reforms
to enhance supply response (from
the government).”
Fur ther, the RBI pointed out that
with overshooting of the fiscal deficit
target a possibility, its expansionary
impact on demand could par tly
of fset the moderation in demand
resulting from anti-inflationary
monetary actions and weaken
monetary policy ef fectiveness.
Responding to persistent
high inflation and increasing
generalisation of price pressures,
the Reserve Bank has significantly
raised its emphasis on containing
inflation. The RBI noted that two
things, the minimum suppor t price
for agricultural commodities and the
increase in wages of rural labour
would add fur ther pressure to
prices. The Central Bank feels that
controlling inflation is imperative
both for sustaining growth over the
medium-term and for increasing the
potential growth rate.
The challenge for the government
and the Reserve Bank, said Dr.
Subbarao, was to ensure that
demand was constrained in the
shor t-term to bring inflation down,
“but to encourage supply response
so as to expand the potential output
of the economy in the medium-
term”. “The economy’s ability to
grow rapidly for any length of
time without provoking inflation
is dependent on implementing
policies, with corresponding resource
allocations, which will allow supply
of various products and services
to keep pace with demand – he
added.”
REPORTS
Rising prices hur t Asia’s
growth - ADB
World Surging inflation, a weak
post-tsunami economic recovery
in Japan and debt woes in the
U.S. and Europe threaten East
Asia’s economic outlook, the Asian
Development Bank (ADB) said on
July 28, 2011. ADB maintained its
growth forecasts for 14 emerging
and newly industrializing East Asian
economies in 2011 and 2012. But
it said the region faces risks that
also include more volatile financial
markets and destabilizing inflows of
shor t term capital, also known as
“hot money.”
The ADB’s growth forecasts were
unchanged from a repor t in April,
with East Asia forecast to expand
nearly 8 percent this year and next.
It forecasts China’s gross domestic
product growth at 9.6 percent this
year and 9.2 percent next year. But
it indicated that economic growth
forecasts for China, Malaysia,
Thailand and Vietnam would likely
to be cut. That would also result
in a downgrade for the region,
26
ECONOMIC REVIEWECONOMIC REVIEW
which includes 10 Southeast Asian
countries as well as the economies
of China, Taiwan, Hong Kong and
South Korea.
In the first half of 2011, economic
growth across East Asia eased from
a blistering pace as inflation surged
across much of the region, driven by
higher commodity prices and strong
economic recovery. Annual growth
in the region’s ten largest economies
moderated to 8.1%, in the first
quar ter of 2011, down from 8.4% in
the previous three months. “Rapidly
rising inflation risks a wage-price
spiral that could derail the region’s
recent strong growth,” the repor t
said, noting that inflation in many
economies has risen above 10-year
averages.
Consumer prices in the region have
been rising due to higher food and
fuel costs. The repor t also detailed
other sources of rising prices.
In many East Asian economies
proper ty prices are climbing quickly.
The devastating tsunami and
nuclear disaster in Japan in March
has also spurred a debate over the
use of nuclear power, which could
drive up energy prices by boosting
demand for other energy sources
such as oil and gas.
The threat of inflation has been a
major worry in Asia this year. The
ADB warned in April that surging
food prices of 10 percent on
average in many Asian economies
could drive 64 million more people
into pover ty. The bank warned that
if price growth does not slow, it
could make things more dif ficult for
the region’s economies. “Elevated
food and commodity prices and
robust domestic demand could
push inflation higher yet,” the bank
said. Rising prices have seen many
economies in the region raise
interest rates in a bid to curb price
growth. Tighter monetary policies
have resulted in a slowdown in
growth.
However, the bank said the
economies will continue to take
measures to tackle inflation.
“Authorities are expected to keep
tightening monetary policy and
rolling back fiscal stimulus to counter
rising inflation and economic
overheating,” the bank said.
The ADB’s economists also fretted
about the dismal prospects for
the U.S. and Europe, which are
plagued by high unemployment
and debt problems. Both are major
customers for East Asia’s expor ts.
“If the recovery in Japan, U.S. and
eurozone falters, sluggish external
demand could once again disrupt
the region’s expor ts,” the repor t
said.
The repor t also warned that the
region could be hur t if the U.S.
government’s top-notch credit rating
is downgraded amid fears that U.S.
lawmakers may fail to come up
with a way to prevent a debt default
in the world’s biggest economy.
That could depress the dollar
against other currencies, hur ting
Asian governments that hold large
amounts of U.S. government debt in
their foreign reserves.
The bank said this “two-paced”
global economy had resulted in
investors flocking to the region’s
economies looking for better
returns, putting fur ther pressure
on inflation. “Continued shor t-
term capital inflows add to already
ample liquidity and exacerbate price
pressures,” it said.
2010 Global FDI Inflows up
5%; India slips to 14th spot:
UNCTAD
Global FDI inflows grew 5 percent to
USD 1.24 trillion in 2010, according to
the United Nations Conference on
Trade and Development (UNCTAD)
„World Investment Repor t 2011‟.
This was never theless 15% below
pre-crisis average levels, and 37%
below the 2007 peak of USD 1.9
trillion.
Also, the UNCTAD predicts in
this repor t that the recover y of
FDI f lows will continue in 2011
and will reach a total of some
USD 1.4 to USD 1.6 trillion,
thus returning to the pre-crisis
average. Thereaf ter, f lows are
forecast to rise to USD 1.7 trillion
in 2012 and USD 1.9 trillion in
27
28
ECONOMIC REVIEWECONOMIC REVIEW
2013, barring any unexpected
global economic shocks.
The US topped the tables for
FDI inflows in 2010 at USD 228.2
billion, followed by China (USD
105.7 billion) and Hong Kong
(USD 68.9 billion). Regionwise, EU
and other developed European
countries at tracted the highest FDI
inflows (USD 313.1 billion), followed
by Nor th America and other
developed countries (USD 288.8
billion).
On the other hand, the US topped
the tables for FDI out flows in 2010
at USD 329 billion, followed by
Germany (USD 105 billion) and
France (USD 85 billion). Regionwise,
EU and other developed European
countries contributed the highest
FDI out flows (USD 475.8 billion),
followed by Nor th America and
other developed countries (USD
288.8 billion).
In terms of sectoral pat terns, FDI in
services continued its downward
path in 2010. FDI flows to the
financial industry experienced one
of the sharpest declines. The share
of foreign investment channelled
to manufacturing increased,
meanwhile, and accounted for
almost half of all FDI projects.
In 2010, the rise of emerging
economies as new powerhouses
of FDI became more apparent.
Developing countries and transition
economies absorbed more than
half of global FDI inflows for
the first time. Half of the top 20
host economies for FDI in 2010
were developing and transition
economies. Their outward FDI also
rose sharply in 2010, climbing by
21 per cent. These economies now
account for 29 per cent of global
FDI out flows. Six developing and
transition economies were among
the top 20 investors.
The record level of cash holdings,
low rates of debt financing and
rising stock market valuations of
transnational corporations (TNCs)
should encourage them to expand
overseas, the repor t says. On the
recipients´ side, ongoing corporate
and industrial restructuring,
privatizations resulting from fiscal
rebalancing ef for ts and unwinding
of state suppor t programmes, and
the growth of emerging economies
should create new investment
oppor tunities.
However, the repor t warned
that “the post-crisis business
environment is still beset by
uncer tainties. Risk factors such
as the unpredictability of global
economic governance, a possible
widespread sovereign debt crisis,
and fiscal and financial sector
imbalances in some developed
countries, as well as rising inflation
and signs of overheating in major
emerging market economies, may
yet derail the FDI recovery.”
Despite the emergence of cer tain
developing countries, FDI flows
continued to decline in some of
the poorest regions of the world.
Flows to the Africa and South
Asia, as well as to least developed
countries, landlocked developing
countries and Small Island
developing States fell in 2010. “FDI
to South Asia declined to USD 32
billion, reflecting a 31 per cent slide
in inflows to India and a 14 per
cent drop in flows to Pakistan. By
contrast, inflows to Bangladesh, a
rising low-cost production location,
increased by nearly 30 per cent to
USD 913 million,” the repor t said.
Meanwhile, at a time when
developing and emerging countries
are set ting new records in foreign
direct investment (FDI) inflows,
India‟s position among the top 20
recipients fell to 14th position, from
8th in 2009. India at tracted FDI
wor th USD 25 billion in 2010, much
lower than the inflows of USD 36
billion seen in 2009. In contrast, the
other emerging economies such as
China stood at 2nd position with
inflows totalling USD 106 billion in
2010. Similarly, Brazil stood at 5th
position with inflows at USD 48
billion during the year, the repor t
said.
Source: Assocham
Seminar on Securing US Green Card
- Gregory Wing addressing
- A view of the meeting. Satish Kholay at the mike.
Video Discussion on “Between You and Me”
Shripriya Srinivasan interacting with the par ticipants.