Exports fall by 2 per cent: Jalan
MUMBAI, April 20 — The Reserve Bank of India today expressed serious concern over the fall in exports in 1998-99 and its impact on the balance of payments and said that measures to provide maximum support to export efforts should be the priority during the current fiscal.

Exports fall by 2 per cent: Jalan

MUMBAI, April 20 (PTI) — The Reserve Bank of India (RBI) today expressed serious concern over the fall in exports in 1998-99 and its impact on the balance of payments and said that measures to provide maximum support to export efforts should be the priority during the current fiscal.

During 1998-99 (upto February), exports have declined by about 2 per cent in US dollar terms, RBI Governor Dr Bimal Jalan told a meeting with Chief Executives of commercial banks convened to unveil the monetary and credit policy for 1999-2000.

Mr Jalan said exporters have the choice of reducing their interest costs to (or below) international levels either through availing of pre-shipment rupee credit at 10 per cent and selling expected export earnings in the forward market or by availing of foreign currency loans.

While 10 per cent in nominal rupee terms would appear higher than the prevailing international interest rates, the foreign currency forward premium in forex market in India is also higher at around 7 per cent for six months.

An exporter can avail of the rupee credit and sell expected earnings in the forward market, effectively reducing interest cost to only around 3 per cent.

Mr Jalan said in response to suggestions from exporters, the facility to issue cheques against their “exchange earners’ foreign currency” balance is being granted from May 1,1999.

The RBI said foreign institutional investors (FIIs) would now have the facility of taking forward cover to the extent of 15 per cent of their outstanding investments as on March 31, 1999, against the previously announced cut-off date of June 11, 1998.

FIIs can also take forward cover to the entire amount of additional investment made after March 31, 1999, the RBI stated in its monetary and credit policy for 1999-2000.

RBI Governor Dr Bimal Jalan said as a measure of further liberalisation, until further notice, any FII which has exhausted the 15 per cent limit can apply to the RBI for additional forward cover for a further 15 per cent of their outstanding investments at the end of March 1999.

India’s outlook stable: S & P

MUMBAI, April 20 (UNI) — Global ratings agency Standard and Poor’s today affirmed its ratings on India and said the country’s outlook was stable despite weak coalition governments.

S and P affirmed its double-’B’ foreign currency and triple-’B’ local currency long-term issuer credit ratings on of India. At the same time, single-’B’ foreign currency and; A-3’ local currency short-term issuer credit ratings were also affirmed. The outlook is stable.

The affirmation reflects the fact that the country’s reliance on weak coalition governments is factored in at current ratings levels. Frequent changes of government are the inevitable consequence of the fragmentation of voting patterns in recent years, the long-term decline of the once-dominant Congress party, and the heightened assertiveness of regional political groupings.

The fall of the Vajpayee government last week is consistent with the ratings’ assumptions and does not, in itself, materially affect India’s creditworthiness.  

India’s ratings are supported by ongoing regulatory and structural reforms in other sectors, as well as prudent international liquidity management. To some extent, economic policy is shielded from the vagaries of coalition politics by the long-term economic and financial imperatives of market-based liberalisation. Official foreign exchange reserves cover about 165 per cent of total government, public sector and private sector external principal-repayment obligations due within the next 12 months. At $ 32.6 billion on April 7, they mitigate the risk of a sudden loss of external confidence even as exports decelerate and the trade gap widens.

Greater fiscal rigour, large-scale privatisation, and a renewed commitment to trade liberalisation will support an improvement in India’s ratings going forward. This, along with more welcoming policies for export-oriented foreign direct investment, could stimulate growth prospects and enhance debt sustainability. However, the required import-tariff reform would necessitate an even deeper fiscal adjustment — as yet not forthcoming from policymakers — through downsizing the administration, reducing subsidies, and improving cost recovery in public services, Standard and Poor’s said.

ADB: reform banking sector

WASHINGTON, April 20 (PTI) — India needs to accelerate structural reforms of its financial and capital markets, concentrate on infrastructure and public finance consolidation and strengthen support for human resource development to ensure sustainability of its reforms process, the annual Asian Development Outlook has said.

There is still substantial scope for further improvement in, and reform of, the banking system, prudential norms are not stringent enough and need to be tightened. The banking sector continues to be characterised by inefficiencies and high intermediation costs, which limit the scope for lowering interest rates, the report released here by the Asian Development Bank (ADB) yesterday said.

In its cautionary note for India, ADB said: “although to date India has been relatively unaffected by the Asian economic crisis, uncertainties about the external environment and rising concern about slowdown of economic growth will continue to dominate economic policy in the short term”.

“Infrastructure bottlenecks continue to impose constraints on economic development and has to be alleviated to enhance India’s future growth prospects. Equally important, India must not neglect its human resources,” it said.

The ADB said its figures and expectations of gross domestic product growth in India are 5.8 per cent in 1998, compared to 7.8 in 1996 and 5 in 1997, 5.9 in 1999 and 6 in 2000.

India gets poor marks from IMF

WASHINGTON, April 20 (PTI) — The IMF today said India missed an opportunity to grow 1.5 to 2.5 per cent faster by slowing down its reform process and singled out stalling of the structural reforms process and deterioration of the government’s finances as a main factor for the economic downslide.

“India’s growth has slowed to 5.5 per cent due to the lack of the much-needed reforms and the poor state of government finances, rather than the regional economic crisis,” the IMF said in its semi annual World Economic Outlook (WEO) while criticising India for not carrying out the “needed” economic reforms since 1996.

Pointing that output growth in India has slowed from 7 to 8 per cent in 1994-96 to 5.5 per cent in 1997-98, the IMF said this reflected mainly domestic factors like stalling of the structural reforms process and the deterioration of government finances.

“Inadequacies in the government’s revenue system, as well as the rapid growth in current outlays, including for the public sector wage bill and subsidies, will need to be addressed to bring down a fiscal deficit, expected to exceed 9 per cent of the GDP in 1998-99,” it said.

Hind Lever net profit up 24.2 pc

MUMBAI, April 20 (PTI) — Hindustan Lever Ltd (HLL) has registered 24.2 per cent rise in net profit at Rs 212.83 crore on a higher turnover of Rs 2,632 crore in the first quarter of 1999.

Turnover was up by 4.6 per cent from Rs 2,516 crore during the first quarter last year, while the net profit grew by 24.2 per cent from Rs 171.35 crore. In turn, the earnings per share (annualised) increased to Rs 38.77 against Rs 31.22 during the first quarter of the last year.

“Volume growth and market development continue to be the company’s focus,” HLL Chairman K. B. Dadiseth said in a release after the Board meeting here today.

The domestic businesses of soaps and detergents, personal products, culinary products, coffee, ice creams, branded staples and oils and fats which account for 67 per cent of total sales of HLL have shown good sales growth, he said.

However, exports were depressed (down by 8.3 per cent) due to prevailing sluggish conditions in international trade and difficulties in Russia, Dadiseth said.

Cracks appear in Pak ties with IMF, World Bank

CRACKS have appeared in Pakistan’s relations with the IMF and the World Bank, and a high-level official team is likely to leave for Washington soon on a troubleshooting exercise.

After the economic and financial turbulence of 1998, Pakistan was able to strike a bailout agreement with the IMF. The agreement, on the back of some political understanding with the group of seven developed countries, allowed Pakistan to seek large debt rescheduling from the Paris Club in support of the financing arrangements agreed with the IMF.

In addition, the World Bank and the Asian Development Bank (ADB) extended new balance of payments support to cover the $ 5.5 billion financing gap.

These agreements enabled the government to start the year 1999 on an optimistic note. However, gradually cracks have appeared in relations with the Fund and the Bank. These differences have cropped up due to slippages in policy implementation on certain crucial issues.

Both parties, the government and the multilaterals, are apparently trying to keep mum on these irritants. During the last two weeks all-out efforts were made in the power corridors to work out an agreeable solution.

Failure in reaching an understanding has made necessary the high-level visit of the economic managers and representatives of the donors to Washington. These problems have also played a key role in the postponement of the Pakistan Development Forum (PDF) meeting in Paris.

To start with, the government implemented most of the front-loaded conditionalities, except WAPDA related issues. The defence budget was slashed by Rs 7 billion, the uniform rate of sales tax was increased from 12.5 to 15 per cent, import tariffs were brought down to 35 per cent from 45, and progress was made towards a more market-based exchange rate mechanism. However, there were major lapses in the privatisation schedule and restructuring of the Central Board of Revenue (CBR) into Pakistan Revenue Service (PRS).

The government backed out of its commitment to increase electricity tariffs by 11 per cent before the end of March. Instead, a new supply side approach was adopted by lowering the higher electricity tariff slabs. Likewise, another agreed commitment to start the process of partial withdrawal of 30 per cent electricity subsidy was also deferred. — ANI

3.4 pc growth

Asian Development Bank has called for long-term reforms of Pakistan’s economy, saying growth has been impeded by poor governance, sectarian violence, weak policy implementation and a lack of private dynamism.

The bank, a major lender to Pakistan, has also said in its 1999 Asian development outlook report released on Monday that industrial recession and low levels of private investment would limit growth to 3.4 per cent in the fiscal year ending in June.

The economy grew by 5.4 per cent in the 1997-98 year.

The bank prescribed long-term reforms to boost economic growth, also partially stalled by economic sanctions slapped on Islamabad after the country conducted nuclear tests last May in response to similar tests by India. — Reuters

Insurance premium to be monitored
Tribune News Service

NEW DELHI, April 20 — Private life insurance companies would be allowed to to float pension fund schemes, once private players are allowed entry into the life insurance business, the Chairman of Insurance Regulatory Authority (IRA), Mr N. Rangachary said here today.

Inaugurating a workshop on “Developing an appropriate pension model in India”, organised by the FICCI here, Mr Rangachary said that after opening up of the insurance sector, new players will be allowed to issue pension policies (annuities) provided they subject themselves to certain standards.

There will be certain restrictions regarding the pricing of the products. Mr Rangachary said that the private company will have to submit its business plans and the rationale for the premium charged. The companies would be allowed to charge very high premium as compared to the benefit, while at the same time under-cutting of prices would not be allowed.

Giving an overview of a possible pension fund scheme in India, the IRA Chairman said that the scheme envisages a direct tie-up between provident fund authorities and insurance companies.

The tie-up also pre-supposes that while the Provident Fund Authority would would be engaged in collection phase form contributors, the insurance companies with their varied expertise will get associated with management of provident funds.

In order to make it attractive , the scheme should also extend sickness benefit to the policy holders so that a contributor to the provident fund would automatically become eligible for pension as well as sickness.

Mr Rangachary said that there is a need for a higher sensitisation programme to orient the people on various insurance products and their benefits.

Dabur divests stake in confectionery jv

NEW DELHI, April 20 (PTI) — Dabur India Ltd (DIL) has concluded a deal to sell off its entire 49 per cent stake in the confectionery joint venture (jv) General De Confiterria (GCI) to Spanish partner Agrolimen for Rs 35 crore, as part of its restructuring exercise.

Dabur’s holding will be formally transferred to the Spanish company after it obtains a FIPB approval, a senior company official said today.

“We have exited the confectionery business by selling off our 49 per cent stake in GCI to Agrolimen for Rs 35 crore,” Director of Dabur India P.D. Narang told PTI.

This deal comes on top of Dabur’s reducing its stake by 20 per cent in another joint venture — Excelsia Foods — earlier this month to become a minority partner.

The company divested its stake to Swiss major Nestle SA for $ 2.5 million, becoming a 40 per cent stake holder in the biscuits and extruded foods venture.

Dabur’s ouster from GCI comes after the Rs 800-crore group employed management consultants McKinsey & Co for mapping out a comprehensive restructuring plan for its varied businesses.

Internet Business ’99 opens on June 22
Tribune News Service

NEW DELHI, April 20 — Nine Indian companies will participate in the two-day “Internet Business 99”, being organised by Communic Asia in Singapore from the June 22 to 25, 1999.

Besides, 13 group pavilion from Australia, Canada, Finland, Germany, Ireland, Korea, New Zealand, Singapore, Spain, Taiwan, Thailand, the UK and the USA will participate in the show that will focus on Internet protocol telephony.

The Indian companies participating in the event include Aces India, Communication Today, Eltel System, GNB Technologies-India, HCL Comnet, National Panasonic India, Sumitomo Electric Industries, Telemobile India and Telstra India.

The summit has been designed to help expansion of business via the Internet. It will provide an overview of technologies such as application of servers, XML and other emerging hot tools, IP Telephony, smart cards and V-commerce.

Malaysian team calls on Badal
Tribune News Service

CHANDIGARH, April 20 — The Malaysian Government will take up in the next two to three months various rail and road projects in Punjab. A Malaysian delegation met Punjab Chief Minister Parkash Singh Badal here today.

Mr Badal said his government will set up a high-powered committee of the Infrastructure Development Board to facilitate Malaysian participation in different projects in the State.

HMT
CHANDIGARH, April 20 (TNS) — Machine Tools Division of HMT Limited, Pinjore has registered a sales turnover of Rs 48.51 crore in 1998-99. It manufactured 90 state-of-the-art Computerised Numerically Controlled (CNC) Machines, the highest ever in any financial year. The unit launched new cost effective CNC Milling Machine Model VCM-400 and Horizontal Machining Centre HMC-400/HMC-500s specially catering to the needs of small scale industries and industrial and advance training institutes.

Sales tax
LUDHIANA, April 20 (FOC) — The United Cycle and Parts manufacturers Association has said that no mention has been made regarding keeping in abeyance the implementation of recent increase in the sales tax rate on bicycle and its parts announced in the Punjab Budget for 1999-2000. It is unfortunate and discriminatory in nature, it said.

BSE chief
MUMBAI, April 20 (PTI) — The Mumbai High Court today admitted a petition challenging the order of SEBI asking the President of the Bombay Stock Exchange, Mr J.C. Parekh, to quit office in the wake of rigging of share prices besides appellate authority’s ruling upholding such a directive. Admitting the petition on merits, Justice N.J. Pandya and Justice S.S. Parkar expedited its hearing but granted no interim relief to Parekh thereby debarring him from attending any meeting of the BSE Governing Board.