New Delhi, July 16
India’s economy is likely to grow by 9 per cent during 2007-08, assuming monsoon rains are normal, Prime Minister’s Economic Advisory Council said here today.

The council, headed by former RBI Governor C. Rangarajan, also expected the inflation rate to moderate to around 4 per cent but said the hardening of the rupee against the dollar may slow export growth to around 18 per cent.

“The council assesses that the economy will grow by 9 per cent during 2007-08, assuming reasonably benign monsoon and other external conditions,” Dr Rangarajan told newspersons releasing the “Economic Outlook” for 2007-08.

As compared to last year, the council said it expected slightly lower sectoral growth rates - farm sector incomes to grow by 2.5 per cent (as against 2.7 per cent last fiscal), industrial output to expand by 10.6 per cent and service sector to grow by 10.4 per cent.

“The primary downside risk to our expectations of economic performance in 2007-08 derives from uncertainties on account of the south-west monsoon, both in regard to its quantum and spatial and temporal distribution,” the council said.

Noting that there is increasing evidence that a greater part of economic growth is now investment driven, the Council said “in the medium to long term, the Council said the principal constraints in sustaining of high rates of economic growth in India derive from two basic sources, namely, the farm and power sectors, where special circumstances obtain.”

The Indian economy, Asia’s third-largest, has grown at an average 8.6 per cent in the past four years, touching 9.4 per cent in 2006-07. RBI expects the growth to expand by about 8.5 per cent in 2007-08.

The panel has projected foreign direct investment (FDI) of $15 billion in 2007-08 from $8.4 billion last fiscal. Net portfolio inflows are estimated at $12.5 billion.

The council has suggested a three-pronged strategy to deal with the problem of capital Inflows and rupee appreciation. These include absorbing capital inflows into reserves, discourage inflows by putting some restrictions and liberalising capital outflows.

“One is to let the rupee appreciate. The second channel is to absorb the capital flows into reserves and to sterilise the excess over what may be regarded as appropriate. The third channel is to further liberalise and remove impediments, administrative and procedural, in the way of capital inflows, and discourage inflows by putting restrictions on some capital inflows.”

“Instead of arguing for any one of the instruments to be used, we urge there must be a judicious mix of all of the three instruments,” the panel said asserting that any restriction on equity investment, be it direct or portfolio investment, will be most unwise.

“On the debt side there are some areas that can do with some scrutiny,” it added.

On inflation, the council said that the current situation is a big improvement on the scenario prevailing in the period December to March 2006-07, and it is our assessment that with appropriate monetary management headline inflation will continue to drop.

“After factoring in future correction in petroleum product prices, it should be possible to maintain the headline rate close to 4 per cent,” it said.

The panel has projected slow down in exports growth to 18 per cent in dollar terms in the wake of strengthening of the Indian currency against the Greenback. The council expected exports to touch $147 billion, less than the government’s target of $160 billion.

Imports are projected to cross $223 billion, an increase of little over 23 per cent over the previous year.

“The higher and more persistent the increase in world crude oil prices, the greater will be the domestic burden and this could, in some measure, operate to depress the economic factors encouraging investment and growth,” C Rangarajan, chairman of prime minister’s economic advisory council said here today.

He said rising crude oil prices and supply disruptions do pose a potential downside risk.

Expressing concern over the ballooning fertiliser subsidy, he said the government is considering how to provide subsidy directly to the farmers. It hopes that the setting up of gas-based fertiliser units would reduce the subsidy burden significantly.

About the power sector, Rangarajan panel said: “It is the single most important infrastructure constraint and there is an urgent need to radically enlarge the scope of power generation over the XIIth Plan period.”

Mumbai, July 16
Reliance Communications' (RCom) Flag Telecom on Monday announced the acquisition of US-based Yipes for about $300 million in an all-cash deal, chairman Anil Ambani said.

San Francisco-based Yipes Enterprise Services, Inc, is one of the leading providers of end-to-end Gigabit Ethernet solutions, with 22,000 route km of fibre across 14 metros in the US that covers 40 per cent of the total datacom market. Some of its leading global customers include Verizon and NTT.

"This is the largest acquisition that Reliance Communications has ever made.

The acquisition of Yipes drives forward our strategy to offer the most sophisticated, cutting edge data communication products and services, specialising in application and content distribution, spanning developed and emerging markets," Ambani told a press conference here.

"This acquisition is going to accelerate Reliance Communications' penetration into the lucrative $100 billion global enterprise market," he said.

Ambani also said RCom would be investing over Rs 1 billion towards rolling out the services by Yipes in Asia, Africa, West Asia and Europe by mid-2008.

"By synergising Flag and Yipes, Reliance is poised to become the global leader in ethernet, a $25 billion market worldwide by 2010," Ambani added.

He further added that Flag Telecom would be investing over $1.5 million in the next couple of years to expand to Vietnam, Cambodia and the Philippines.

"This acquisition of Yipes by India's powerhouse, Reliance Communication, sets the stage for a major transformation within global telecommunications," said John Scanlon, CEO of Yipes.

"With Reliance Communications we aim to replicate our success in the US across the rest of the world," Scanlon added. — IANS

New Delhi, July 16
The Centre today directed all regional rural banks (RRBs) to lend cash to farmers to enable them to repay loans availed from private moneylenders at astronomically high rates.

The government also disclosed its plans to nurse 29 ailing RRBs to health by March 31, 2010, but wanted the state governments to join the effort as it would involve a cost of nearly Rs 1,850 crore.

Finance Minister P. Chidambaram, who chaired a meeting of the chairmen of RRBs here, told newspersons after the meeting that the banks have been asked to aggressively pursue the debt-swap scheme by which they take over farmers’ loan from private moneylenders.

“We have urged them (RRBs) to extend credit to farmers so that they can pay back high-cost credit taken from private moneylenders,” Chidambaram said.

Noting that several RRBs are already implementing the debt-swap scheme in a small way, the Finance Minister said we wanted them to be more aggressive on this front.

“The RRBs must target certain number of farmers who are indebted to moneylenders… I am told that Syndicate Bank sponsored Pragati Grameen Bank has made 42 villages in Karnataka free of moneylenders,” he said.

As far nursing of the 29 ailing RRBs, the Centre expected the states to infuse Rs 277.5 crore, while Centre would pump in Rs 925 crore and sponsoring public sector banks would contribute Rs 647.5 crore.

“Right now in all RRBs, the respective states have got a stake of 15 per cent, 35 per cent is held by the sponsoring banks and the remaining 50 per cent is with the Centre. In our exercise to bring the ailing RRBs in to positive, we do not want dilution of states stake,” Chidambaram said.

The exercise would be undertaken immediately if state governments agree to put in their 15 per cent share for reviving these banks, he said adding if the states do not come forward with their contribution, recapitalisation of these RRBs would take some time.

To a query whether recapitalisation would be done through cash or bonds, he said banks invariably infuse cash. But the centre has both the options of recapitalising RRBs, cash or bonds.

In all, there are 96 RRBs with a total of 14,595 branches.

Mumbai, July 16
IT payers, chartered accountants and even officials at the Central Board of Direct Taxes (CBDT), which looks after tax collection are a harried lot, as confusion reigns over the series of new income-tax return (ITR forms) introduced by the finance ministry from this year.

In all, there are eight different forms for various categories of income-tax assessees to file returns in. But most persons are confused about the forms they need to use and the kind of information they need to fill in.

"Every single financial transaction, including tax-exempted dividend and interest income needs to be mentioned in the return," says Sarang Desai, chartered accountant. He notes that only assessees who have incomes from salaries and interest may rest easy by filing their returns in the ITR-1 form.

As income from different sources emerge, the returns form to be filed gets progressively bulkier. ITR-7 and 8 which pertain to companies and businesses would need the entire finance and accounting team to pitch in, says the CA.

"A number of CAs in Mumbai are rushing through with the forms hoping that the IT department gives some concessions later in the year," says another CA who does not want to be named.

What makes things worse for assessees is the total ban on enclosing annexures with their returns. Assessees awaiting refunds would have to enter details of their transactions and hope for the best since no supporting documentation can be enclosed with their returns.

Meanwhile, reports from the interiors of the country indicate that IT officials are asking assessees to enclose annexures like accrued interest statements from banks despite there being no provision for such enclosures in the new ITRs.

Though Finance Minister P. Chidambaram announced the formation of a special cadre of tax-preparers who would assist assessees in filing their income-tax returns, the proposal has not really taken off.

Tax preparers who have been let loose after nine days' training simply fill up the forms like clerks. "They have little knowledge of tax laws and one would need the services of a chartered accountant," says Girish Mehta, a textile business owner in Mumbai.

All ITR forms carry several pages of instructions that need to be studied and understood in detail.

"Assessees who miss out on giving information to the income tax department may be penalized at a later date for no fault of their own," warns Desai.

With assessees being required to make detailed disclosures, the need for experienced CAs is becoming more pronounced. Assessees who have approached the tax returns preparers have had to rush back to their CAs since the TRPs messed up their returns.

Meanwhile, CAs are raking in a moolah. Most of them have virtually doubled their rates for filing income-tax returns. From about Rs 700 per return during the 'saral' days, the rates have doubled this year.

Mumbai, July 16
India’s central bank bought $4.43 billion in intervention in May, the month the rupee rose to a nine-year high against the dollar, the Reserve Bank of India’s (RBI) monthly bulletin showed on Monday.

May’s intervention took the RBI’s dollar purchases to $28.4 billion since the start of November 2006. The partially convertible rupee rose to a nine-year high of 40.28 per dollar on May 28. Suspected central bank intervention knocked it from that high and then kept it weaker than 40.50 through June.

Record highs in the stock market have attracted foreign investors and pushed the rupee back to its May highs. On Monday, the rupee hit a high of 40.30, while India’s main share index ended at a record close.

The rupee has appreciated more than 9.5 per cent in 2007, making it Asia’s best performing currency against the dollar. Foreigners bought $2.1 billion of equities in the first nine trading days of July, taking total purchases for 2007 to $7.8 billion-just below the $7.9 billion they bought over all of 2006.

India’s foreign exchange reserves were $214.84 billion on July 6, up $37.6 billion so far in 2007. Traders said a large part of that increase was due to the RBI’s dollar purchases.

Meanwhile, economists and industry players feel that the Reserve Bank is likely to keep key interest rates unchanged in its quarterly review of credit policy on July 31, but may increase the requirement for banks to keep cash with it to absorb excess liquidity in the system.

Although economists and banking experts agreed that some action from the RBI to curb liquidity was due, they differed on the methodology it should adopt. Some experts said a CRR hike will be too much for the banking sector to take.

Crisil Principal Economist D.K. Joshi said instead of a CRR hike, the RBI might use another tool - Monetary Stabilisation Scheme (MSS) - more aggressively for liquidity management.

RBI Governor YV Reddy had recently said that taking into account high expansion of money supply worldwide, and given the monetary overhang of 2006-07, it was important to contain monetary expansion at around 17 per cent this fiscal, in consonance with the outlook on growth and inflation.

High funds inflow, which is leading to excess liquidity, might see some moderation due to tightening of norms for external commercial borrowings by the government recently and pick up in credit offtake by August.

MSS auction is a better option to manage liquidity since an increase in CRR could push up interest rates. This could lead to higher inflow of foreign funds, as they would find Indian market more attractive. This would lead to further appreciation of rupee, PNB executive director K. Raghuraman said. — Reuters, PTI

New Delhi, July 16
The board of Bharat Sanchar Nigam Ltd (BSNL) today said that they have made certain recommendations on the controversial tender to procure 45.5 million GSM lines which would be forwarded to the telecom minister Azhimuthu Raja tomorrow. After a marathon four hour long board meeting to end the impasse over the vexed GSM lines tender issue Chairman and Managing Director Anil Kumar Sinha said its suggestions will be sent to the Communications and IT minister.

Sinha, however, did not disclose the details of the much-hyped meeting.

The board was expected to decide on the three-member panel report on the review of the tender, keeping in mind the Minister's queries and suggestion to put 3G services out of the tender for the time being and focus on 2G or normal voice services.

The deal which was caught in the eye of a storm triggering dissent among employees who had struck work has gone to Ericsson after Motorola and its Chinese combine ZTE were disqualified.

''We may even begin a fresh process,'' a BSNL source said on the likelihood of a re-bid after the Minister called for a relook at the Ericsson tender.

On Wednesday, thousands of employees struck work demanding immediate fulfilment of the BSNL's GSM service expansion tender.

The tender was the outcome of a more than year-long process under which four foreign firms, including Nokia, Ericsson, Siemens and ZTE, were to collaborate with BSNL in expanding its technology and machinery for setting up six crore additional GSM connections.

The tender was first put up in October 2005, with decision taken regarding tender conditions and appointment of an empowered committee. — UNI

Mumbai, July 16
Tata Consultancy Services (TCS) Ltd has posted a 36.3 per cent increase in consolidated net profit at Rs 1,202.93 crore for the first quarter ending June 30 and the total income for the quarter stood at Rs 5,203 crore, up by 25.2 per cent. The board of directors has declared an interim dividend of 300 per cent, that is, Rs 3 per equity share of Re 1 each.