InTouch_July 2011

Volume 25 – No.4 – July 2011

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PRESIDENT’S MESSAGE

Dear Members

influences money supply. The high

muted the impact of the Reserve Bank’s

reverse repo rate would tempt banks to

aggressive anti-inflation stance. Even

park funds with RBI instead of lending

the RBI Governor made it clear that in

as the former is risk free and yields a

the absence of reforms and fiscal steps

fairly good return. Both ways the money

to ease the supply-side constraints on

supply would be curtailed, making funds

food and commodities, the central bank

costlier for borrowers, thus resulting in

had no choice but to keep monetary

less borrowing and spending.

policy tight.

There can be no two opinions on the

Therefore RBI’s move in controlling the

need for controlling inflation, which

demand side without matching policy

stood at 9.4% as of June 2011. India

actions from the government to address

Interest rates have gone up, again!

suffers from the worst inflation of

the supply side concerns may not

RBIs latest hike of 50 Basis Points (BPS)

any major Asian economy, prompting

yield expected results. Higher interest

on July 26th was the eleventh such

the Reserve Bank of India to raise

rates are pushing up costs of products

hike since March 2010. Though a hike

rates more than its regional peers.

and services, while inflation remains

was not unexpected, the 50 bps dose

High inflation eats away the fruits

stubbornly strong despite RBI‘s frequent

was more than market expectations,

of economic growth and poses a

interventions in the last one year. This

especially considering the fact that the

significant risk to future growth. Not

is bound to affect the competitiveness

last increase was only in May 2011.

surprisingly, growth projections have

of our industries as well. We should not

been revised downwards and double

end up with the remedies worse than

digit growth will perhaps have to wait

the disease itself.

With this increase, the repo rate, the rate at which RBI lends to banks has now reached 8%, while the reverse repo rate,

for a couple of years.

What we require now is a balanced approach to contain inflation, without

the rate at which the RBI borrows from banks now stands at 7%. With 300

Inevitably, there is also the debate

basis points of tightening over the past

between inflation targeting and growth.

sixteen months, India is easily the most

RBI in its review had said since domestic

aggressive inflation fighter in the world,

inflation remains very high, some short

surpassing even Brazil.

term deceleration in growth may be

Clearly the concerns around spiralling

inevitable to bring inflation under control.

inflation have been uppermost on the

Already, the effects of the interest hike

minds of the policy makers. In the words

have become visible in rate sensitive

of the RBI Governor, the rates had to be

sectors like auto, reality, housing and

increased to “maintain the credibility of

consumer goods, which may have

the commitment of Monetary Policy” to

cascading effect on the economy

controlling inflation.

as a whole.

In simple terms, RBI’s way to tame

But monetary policy only goes so

inflation is to reduce the amount of

far. Inflation in India has been fuelled

money that enters the economic system.

by several structural bottlenecks in

How does that work? A high interest

agriculture and infrastructure as well

rate influences spending patterns

as heavy Government borrowings and

and shifts consumers and businesses

subsidies. High oil prices, loose fiscal

from borrowing to saving mode. This

policy and supply constraints have

dampening the growth momentum.

Best wishes

T T Srinivasaraghavan President

1

CHAMBER’S ACTIVITIES

1st July 2011

He explained the following steps for a

27th July 2011

Seminar on “Securing U. S. Green Card”

EB-5 programme:

Video Discussion

l select an EB-5 programme

l provide information for

on “Between You and Me”.

your visa application

The monthly video discussion jointly

Hotel Savera.

l Fund the project ; and

being organized by the Chamber along

The objective was to brief the

l Get your money back in 4-5 years

The MCCI in association with Fox Mandal Little organised a Seminar on Securing US Green Card on 1st July at

that is safe

with MMA was held on the topic “Between you and me”. The trainer

participants on how to secure a US

What is needed by an EB-5 applicant

was Ms Shripriya Srinivasan, Corporate

Green card via the EB-5 programme

is – the ability to invest $ 500,000 for

Trainer.

created by the US Congress to

up to 5 years and $ 55,000 towards

encourage foreign investment in the

administration fee.

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,

to help employees embrace team work

Currently 10,000 US visas are available

and solve their own conflicts without

for EB-5 prospective investors.

management intervention.

The advantages of EB-5 were:

It is important to recognise that there are

l expedited residency

two sides to every story. Often we leave the responsibility of solving the conflict

l permanent residency for investor,

with someone else.

spouse and children (unmarried under 21 yrs of age)

It is important to listen and take responsibility for the conflict.

founded in 1991.

l live anywhere in the US

Mr Gregory Wing, co-founder of t he

l become a US citizen in 5 years

Green Card Fund and President &

EB-5 target industries are – Education,

CEO of Bedford International made a

Healthcare and Energy.

presentation on the following:

The video showed realistic role plays

The video brought out that – l Be open and honest

There was a lively interaction during

l A sk questions l A sk for feedback

l How to apply for an EB-5 visa

which Mr Satish Kholay, Managing

l Listen without arguing or judging and

through a USCIS approved

Director, Green Card Fund who was

reach a consensus

Regional Centre

also present clarified the queries of the

l How to identify and Select safe,

participants.

qualified EB-5 investment projects l How to secure Permanent US

Residency through an Investment in an EB-5 project

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

For more details, please contact Fox Mandal Little in Chennai – Tel: 24361029

all organizations aim for that.

Email: Chennai@foxmandal little or Ms Madhri Guruswamy Mobile: 95000 57312

The program was attended by

Email: madhri.guruswamy@foxmandal.com

around 35 participants from various organisations and the feed back was excellent.

2

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

the contributions to the activities of the

The Coffee Table Book and the Directory

Chamber.

of Members 2011 will be released on this

Invitees to the Committee:

occasion. The Skill Development project

It has been the convention of the

would also be unveiled on this occasion.

Chamber to invite all the Past Presidents

New Membership:

who are active in business to join

The following companies were admitted

the General Committee as invitees.

as members:

Accordingly communications would be

EDAC Engineering Ltd.

sent to them in this regard.

Nokia India Pvt Ltd.

MCCI - Skill Development Initiative - Progress:

Spearheaders Management Consultants

As announced at the AGM, the

Assocham Managing Committee - Nominations from the Promoter Chambers:

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

Pvt Ltd. Treeline Business Solutions Pvt Ltd.

organizations like NTTF.

The Chamber has five seats on the

Trust to expedite the project. This meeting

As already indicated, efforts are underway

names have been forwarded to them:

has since been held.

for setting up the skill development centre

all the agencies involved and Chennai Port

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.

Managing Committee and the following

at MCCI’s own land at Koppur village,

Mr T T Srinivasaraghavan

Tiruvallur District.

Mr T Shivaraman

Applicability of Service Tax for Chambers of Commerce:

Mr N Srinivasan (F&R Retd)

Representatives of local Chambers of

Sustainable Chennai Initiative:

Mr Srinivasan K Swamy

Commerce including their tax professionals met on 5th July. This meeting was initiated by MCCI. It was noted that none

Mr S Gopal

An informal group consisting of representatives of Anna University (Water

The Chamber will organize another

of the Chambers in the city are collecting

programme on this shortly with the

service tax.

Dept), British Dy High Commission and the

An opinion was obtained that Chambers

of the month with regard to taking this

Co-options to the Committee:

and Associations have taken a stand

initiative further.

It is usual for the Chamber to co-opt

apply.

some leading corporate representatives to

Chamber Day - 29 September 2011Action plan:

presence of Secretary, MCA.

the Committee in order to gain from their knowledge, expertise and suggestions for the benefit of the Committee’s deliberations.

MCCI have been meeting on 3rd Fridays

that the principle of mutuality applies and based on this, service tax should not

th

The Chamber has extended an invitation

The Committee felt that the same persons

to Dr.J.Jayalalithaa, Hon’ble Chief Minister

co-opted last year be co-opted this year

of Tamilnadu to be the chief guist and her

as well, considering their involvement and

confirmation is awaited.

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.

3

EXPERT COMMITTEES

6th July 2011

and XBRL recently and a number of

debentures by accepting public

COMPANY LAW/ COPORATE MATTERS: Terms of Reference of the Committee:

issues had emerged at the Seminar and

deposits, stocks, bond or any other

the Chamber had sent a representation

financial instruments from public

to the Government. Members were of

other than from directors

the view that the Chamber could plan

of company.

The Committee perused the terms

the technical details, filling data and

of reference and felt that Foreign

many more connected issues. They

Contribution Regulation Act 2010 which

also suggested to invite an approved

was notified by the Government of India

software developer to demonstrate the

would be relevant to include in the terms

XBRL tool.

a Training Programme on XBRL which would help the corporates to know

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 Affairs by making application in the prescribed format and

which seem to be important. The Chamber would organise a meeting to gain knowledge of various circulars issued by MCA.

Work Plan for the year 2011-12:

analysing the draft code, a suitable

Members were apprised that the

Interaction meetings with ROC and

Committee has been organising about 5

RD, Chennai, also will be scheduled at

to 6 programmes each year. Members

appropriate time.

were of the opinion that Companies Bill

Companies (Dematerialization of Certificates) Rules 2011:

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

programme would be planned by the Chamber on this topic.

stock, bond or any other financial instruments only in dematerialised

l

The Companies falling in the above

categories are required to convert their existing certificates 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

has issued a draft on Companies

since their knowledge and expertise

(Dematerialization of Certificates) Rules

would be of immense value to the

2011 for comments from the public.

deliberations of the Committee.

l The Draft Rules are proposed to be

discussion today and the Ministry of

made effective from

Corporate Affairs expects to implement

1st October 2011 l

The Draft Rules will be applicable

without proper discussions.

to all public companies and their

It was informed that the Chamber had

subsidiaries which have

organised a seminar on Schedule VI

raised money by issue by shares,

4

issued for receipt of deposits,

Members were informed that MCA

and XBRL is one of the core topics for

new changes in an urgent manner

certificates and certificates

Depositories Act 1996.

has been announced and after

discussion meeting on this.

share certificates, debenture

number of circulars on various subjects

audited accounts.

it is passed, the Chamber could plan a

companies shall issue and keep

form as prescribed in the

The draft code for Independent Directors

monsoon session in the Parliament. If

The Draft Rules provide that such

In the recent past, MCA has issued a

furnishing details of the activities and

is likely to be tabled at the forthcoming

l

“In a free enterprise, the community is not just another stakeholder in business but is in fact the very purpose of its existence� - JRD

EXPERT COMMITTEES

13th July 2011

LOGISTICS:

discussed by the Logistics Committee

so that the Chamber could take

and then placed before the General

appropriate action.

Committee for their concurrence.

The Committee suggested to have a

Mr.J.Krishnan, Chairman of the

Once the final report is ready, the

committee, apprised the members that

Chamber would be planning a

the Chamber has been instrumental

suitable conference and the study will

in setting up the Chennai Port and

be released at the conference. The

and related authorities to understand

the Chamber’s history describes the

conference would be organised before

the present legislative changes,

historical links of the Chamber with

15th September.

policy changes and administrative

the Port. Coming to the operations

seminar/meeting with the PF officials, ESI officials, labour department officials

requirements. Presently there were a

and administration of Chennai Port in

Course on Logistics:

the present day context, he said there

Members were informed that a course

the committee will work on a possible

were a number of issues unsettled and

on Logistics has been finalized. The

programme in due course.

day-by-day its number was growing. He

Committee also suggested conducting

informed that to highlight these issues

It was brought to the notice of Members

capsule courses like product liability

and the expectations of the industry, the

that the Ministry of Corporate Affairs,

insurance, marine insurance, shipping

Committee had decided to commission

related courses etc. for the benefit of

a study on port sector development in

professionals working in corporate.

number of changes in PF legislation and

Government of India, New Delhi has issued National Voluntary Guidelines

Tamilnadu. Madras Consulting Group

on Social, Environmental & Economic

has been appointed for this purpose

Responsibilities of Business. Members

and the work was in progress and

18th July 2011

were informed that MCA had released

requested Mr.Shanker, President, MCG,

HRD/CSR:

the Voluntary Guidelines on CSR in 2009

Work Plan for the year 2011-12:

the concept of Business Responsibilities.

The Chairman of the Committee, Mr S

encompass social, environmental and

Ganguly, informed the members that

economic responsibilities of business.

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 officials of the Port Trust, Corporate Houses,

the Chamber every month organizes

Exporters & importers, Port Users,

Food For Thought (FFT) programmes

Associations etc. He said it would be

which were well received by the

possible to present the final draft only

corporates. He mentioned that one

after a number of representatives

such programme was on CSR. He felt

connected with the industry and the

that the Chamber could plan similar

Government sector are met. Members

programmes on topics relevant to

felt that the points covered in the

the Committee and requested the

study were well taken and need to be

members to suggest such topics. He

fine tuned. During the presentation, members suggested a number of issues/solutions which need to be incorporated in the study.

said, the Chamber has developed a good website and requested the members to visit the site periodically and place their queries, suggestions,

The final draft expected to be ready

comments, etc. as also share their views,

by the first week of August would be

if any, relating to this Committee,

as the first step towards mainstreaming This has now been revised with a more comprehensive set of guidelines that

The Chamber would provide a link in the MCCI website to download the guidelines issued by MCA. The Expert 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 support of Government agencies like PWD, Revenue, Forestry and the Corporation. He suggested

that the Chamber can embark on similar

fair might offer a good opportunity to

projects in Chennai, taking the support

them. Graduates of various disciplines

of our member industries.

including engineering, arts and science,

Job Fair – 27th & 28th August:

diploma holders, etc. are eligible to participate in the Fair.

Members were also informed that

The MCCI in association with Jaya

the Chamber is also setting up a skill

TV is planning to organize a Job Fair

development centre and soft skills

on the 27th & 28th August. The basic

training would be commenced from

objective of this Fair is that MCCI would

August. For the selected students from

act as a bridge between the Corporate

the Fair, training in communications,

and the Student community and the

front office management etc., would be

idea would be to bring a number of

planned by the Chamber under the Skill

students to take part in the Fair, since

Development Programme. The Secretary

many students are unable to take

General requested the Committee to

up jobs due to many factors and this

support the Fair.

Forthcoming Programmes 25th August

9th September

Preview on UNEP’s Responsible Production Framework:

MCCI & TCS – Seminar on IT for SMEs –

Sheraton Park Hotel – 3 to 6.30 p.m.

Mr Jayakumar, Speaker, Tamilnadu Assembly will address.

............................................................................................................................

10th September

MCCI for invitations)

Seminar on Cost Audit & Rules under the Companies Act 1956 – 10 a.m. Hotel Deccan Plaza

............................................................................................................................

............................................................................................................................

10th & 11th September

12th September

Job Fair – MCCI & Jaya TV –

Talk by Robert F Bruner,

Atrium, Spencer’s Plaza

Dean, Darden School of Business, University of Virginia –

............................................................................................................................

on Global Trends and the Changing Economic Outlook.

4th September

(Time and venue to be finalized)

Felicitation to Mr Harsh C. Mariwala,

............................................................................................................................

(By invitation – please contact Mrs J Edwards,

President, FICCI – 4 p.m. Taj Coromandel Hotel .............................................................................................................................

5th September

6

Hotel Raintree, Anna Salai – 6 p.m . followed by Dinner

15th September

Presentation on “Indo-German Trade in the Machinery Sector – Challenges & Opportunities” –

Interaction meeting with the representatives of Greater Geneva Berne Area (GGBa),

by Mr Ulrich Ackermann, Managing Director of Foreign

Western Switzerland - 4.45 p.m. MCCI Conference Room

Trade Division, German Engineering Federation (VDMA)

............................................................................................................................

10.30 a.m. t0 11.30 a.m. MCCI Conference Room

SPOTLIGHT

The 12th Five year Plan – Draft

Process of formulating the 12th Plan: The Planning Commission has commenced a very wide

sovereign debt related problems

common pool resources.

in Europe/US, and readjustment

Twelfth Plan Objectives:

of extraordinary monetary/fiscal easing.

The basic objective is to have faster, more inclusive, and

challenges for the 12th Plan. Over

Key messages from consultations:

900 CSOs across the country

Strong demand from all sectors

of 9.0 to 9.5 percent. Energy,

have participated, as well as

of society is the need of the

Water and Environment present

many Industry Associations and

hour to improve Implementation,

major sectoral challenges. It is a

‘think tanks’. A series of regional

Accountability and Service Delivery.

challenge to address them without

consultations with States have been

Citizens Groups broadly support

sacrificing growth. We need to find

planned and the dialogue with other

the stated objectives of existing

resources to create a world class

stakeholders continues.

Government programmes. However,

infrastructure.

Eleventh Plan Experience:

the design and institutional

For growth to be more inclusive we need:

consultative process on the

The GDP growth is likely to average 8.2% over 11th Plan - short of the 9% target but remarkable, given the

arrangements are weak. Greater devolution and empowerment is needed.

global crisis and drought. In the 10th

Government programmes need

Plan, GDP growth averaged 7.7 %.

a new architecture: greater

The Commission has seen progress

localisation, break-down of silos,

on inclusiveness: Agricultural growth,

feedback from citizens and

Poverty Reduction, Education,

mechanisms for learning and

Health, Upliftment of SCs/STs,

sharing of best practices. A major

Minorities etc. However, progress on

contribution to economic growth

inclusiveness is less than expected.

now comes from the private

Inflation has accelerated in the last

sector. A policy environment that

two years. The current international

supports this dynamism is therefore

environment is very uncertain as

important. There is a need to create

there is global pressure on food,

environment for nurturing enterprise,

oil and other commodity prices.

improving markets, supporting

Financial conditions and exchange

innovation, providing access to

rates are likely to be volatile due to

finance and inculcating respect for

sustainable growth. The 12th plan aims to achieve a growth rate

l

Better per formance in agriculture

l

Faster creation of jobs, especially in manufacturing

l

Stronger efforts at health, education and skill development

l

Greater effectiveness of programmes directly aimed at the poor

l

Special programmes for socially vulnerable groups

l

Special plans for disadvantaged/ backward regions

7

SPOTLIGHT

Agriculture and Rural Development: We need to target at least 4% growth for agriculture. Cereals are

irrigation reform and efficiency of

critical areas. Improve business

resource use. Setting up of Water

regulatory framework: ‘cost of doing

Regulatory Authority must be a

business’, transparency, incentives

precondition.

for R&D, innovation etc. Land and

There is a strong

case for higher priority to watershed

infrastructure constraints are a major

management. Separation of

problem. States should develop

electricity feeders for agriculture can

‘special industrial zones’ with good

improve quality of power availability.

connectivity and infrastructure.

Proportion of water recycled by

‘Clusters’ need to be supported to

urban India and industry to be

enhance productivity of MSMEs and

raised to protect water levels and

there should be better consultation

improve sur face and groundwater

and co-ordination in industrial policy

quality.

making.

outputs and inputs. Also, better rural

Rational water use may need for:

Some sectors should be given

infrastructure, including storage and

l

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 efficiency. Farmers need better functioning markets for both

food processing. States must act to modify APMC Act/Rules (exclude horticulture), modernize land records and enable properly recorded land

New Groundwater Law reflecting Public Trust Doctrine

special attention because they contribute to most of our objectives eg:

l

New Water Framework Law (as in the EU)

l

Create large employment in the following:

lease markets. RKVY has helped

For this there is a need to evolve

convergence and innovation and

political consensus and the

gives State governments flexibility.

constitution of a National Water

4leather and footwear;

This must be expanded in the

Commission to monitor compliance

4gems and jewelry;

Twelfth Plan. MGNREGS need

with conditionalities imposed in the

to be redesigned to increase

investment clearance of important

contribution to land productivity

projects.

and rain-fed agriculture. Similarly,

Industry:

FRA has potential to improve forest economies and tribal societies. But convergence with NRLM is required for enduring rural livelihoods.

4textiles and garments,

4food processing industries l

Deepen technological capabilities: Machine tools; IT hardware and electronics

Manufacturing per formance is weak. There is a need to grow at

l

Provide strategic security: telecom equipment;

11-12% per year to create 2 million

aerospace; shipping;

additional jobs per year. Indian

Water:

industry must develop greater

Revisit India’s water balance

domestic value addition and more

estimates basin-wise. Must map

technological depth to cater to

infrastructure growth:

all aquifers over next five years to

growing domestic demands and

Heavy electrical equipment;

facilitate aquifer management plans.

improve trade balance. FDI and

Heavy transport and

AIBP is not achieving its objectives.

trade policies should be tuned

earth-moving equipment

It must be restructured to incentivise

up to attract quality investment in

8

defence equipment l

l

Capital equipment for

Sectors with global

SPOTLIGHT

Health:

1. Power Sector Issues:

Better health is not only about

Government aims to set a target

curative care, but about better

of 100,000 MW capacity in 12th

MSMEs: innovation, employment

prevention and therefore clean

Plan (against likely achievement of

and enterprise generation

drinking water, sanitation and

50,000 MW in Eleventh Plan). Coal

Sectoral plans are being prepared

better nutrition, childcare, etc. and

availability will be a major constraint.

for each of the above with

convergence of schemes across

Long term health of power sector

involvement of Industry Associations

Ministries is needed. Expenditure

seriously undermined (losses Rs.

and the concerned Ministries.

on health by Centre and States

70,000 crore per year). AT&C losses

to increase from 1.3% of GDP

are coming down, but too slowly.

to at least 2.0%, and perhaps

State governments must push

competitive advantage: automotive; pharmaceuticals and medical equipment l

Education and Skill Development:

2.5% of GDP by end of 12th Plan.

distribution reforms. Hydro-power

The Government must aim at

There is a desperate shortage

development seriously hindered by

universalisation of secondary

of medical personnel. For this,

forest and environment clearance

education by 2017 and at raising

targeted approach to increase

procedures. Electricity tariffs not

the Gross Enrolment Ratio (GER)

seats in medical colleges, nursing

being revised to reflect rising

in Higher Education to 20 percent

colleges and other licensed health

costs. Regulators are being held

by 2017 and 25 percent by 2022.

professionals should be taken.

back from allowing justified tariff

It must also focus on quality of

Improve quality of NRHM services

increases. Open access is not being

education (11th Plan emphasis was

vs. quantity of NRHM infrastructure.

operationalised.

on quantity). Must invest in faculty

Structured involvement of PRIs/CSOs

development and teachers’ training.

can help. Role of PPP in secondary

2. Coal Production:

Must aim at significant reduction in

and tertiary healthcare must

social, gender and regional gaps in

be expanded. Health insurance

education. Targets to be set for this

cover should be expanded to all

purpose. Major curriculum reforms

disadvantaged groups. Focus on

in vocational/skill development to

women and children; ICDS needs to

ensure employability in response

be revamped.

to changing market needs are required. Development and

Energy:

On optimistic assumption about Coal India production, India needs to import 250 million tonnes in 201718. We must plan for corresponding expansion of rail and port capacity.

Coal India must become a coal supplier and not just a mining company. It should plan to import

operationalisation of PPP models

Commercial energy demand will

coal to meet coal demands. This

in School and Higher Education

increase at 7% p.a. if GDP grows at

requires blending of imported

in accordance with the needs of

9%. This will require a major supply

and domestic coal as supplied by

a fast growing economy should

side response and also demand

Coal India. Environment and forest

be undertaken. Research and

management. Energy pricing is a

clearances of coal mining projects,

innovation in higher education must

major issue. Petroleum and Coal

including few private sector captive

be encouraged with cross-linkages

prices are significantly below world

projects will be critical.

between institutions and industry.

prices and world prices are unlikely

3. Petroleum and Natural Gas:

to soften.

There is a need for further

9

SPOTLIGHT

expansion of new NELP blocks.

Plan. There is a proposal for a High

are key factors for good urban

Stable and clearer production

Speed Rail link between Delhi-

development as well as financing

sharing contracts will incentivise

Mumbai and Delhi-Kolkata in the

urban infrastructure development.

exploration and encourage

Twelfth Five Year Plan. More PPP

Training and capacity building for

investment. Pipeline network for

in railways and State highways

urban planning and urban services

transportation of natural gas and

to complement Government

management for corporators and

LNG is limited and this needs quick

investment would help. Capital

municipal officials is required.

expansion.

intensive transport projects should

Reform of JNNRUM for the next

4. Other Energy Sources:

rely on private investment to

phase and convergence with RAY

release resources for other priorities.

for an integrated approach.

Complete the linkages between the

Source: Planning Commission, Govt. of India

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 off shore wind power, needs to be encouraged.

5. Demand Side Management: Expansion in supply will need to be supported by demand side management. l

Rational energy pricing will help

l

Energy standards for high energy

consuming industry, electrical appliances, energy efficient buildings

ports and the existing road and rail network. Need to deepen existing ports. Increase bulk/container capacity. Ensure sufficient provision for maintenance of the already-built roads. Invest in unified tolling and better safety on highways. Improve bus services/public transport 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, affordable housing and public

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.

transport. The investment required

The Chamber, on behalf of

in urban infrastructure is estimated

all its members, conveys its

at `60 lakh crores over the next

heartfelt condolences to the

20 years. We need to develop

bereaved family

It is proposed that the Railways’

and propagate innovative ways

and to all at IP Rings Ltd.

Western and Eastern Dedicated

of municipal financing, through

Freight Corridors (DFC) will be

Public-Private Partnerships (PPPs).

completed by the end of the Twelfth

Land management strategies

or enhanced use of electric/ hybrid vehicles.

Transport Infrastructure:

10

May his soul rest in peace.

SPOTLIGHT

INCLUSIVE GROWTH

By M.A. Oommen, Emeritus Professor Institute of Social Sciences, Thiruvananthapuram

Montek Singh Ahluwalia’s paper on

Coequal Objectives?

then is why underscore inclusive

“Prospects and Policy Challenges

Presenting growth and inclusiveness

growth as a development goal and

in the Twelfth Plan” (EPW, 21

as coequal objectives, the author

proceed to articulate the “vision

May 2011) is very interesting and

notes: “The Eleventh Plan aimed at

and strategy” of inclusive growth in

certainly illuminating. I think that

delivering faster and more inclusive

the very first chapter of the Eleventh

among the various issues the

growth and it is logical to assess

Plan and earlier in the Approach

paper has raised for “spurring a

per formance against this dual

to the Eleventh Five-Year Plan:

broader discussion”, the concept

objective” (p 88) and even goes

“Towards faster and more inclusive

of “inclusive growth” is an ideal

on to say, “it is difficult to assess

growth”. Of course, one can quarrel

candidate for debate because of

inclusiveness than per formance on

with the content of the vision and

the “policy challenges” it raises. The

growth” (p 89). The three reasons

strategy, but it is incorrect to treat

term not only appears prominently

which the author mentions may be

the two as disparate entities as

in recent years in the documents

summarised thus: (a) inclusiveness

policy variables. Ahluwalia speaks

of the Planning Commission, and

is a multidimensional concept,

of the “systemic reforms” since 1991

in budget speeches and Economic

(b) the data on inclusiveness are

based on a wider play of market

Surveys, but it is constantly used in

available only after a lag, and

forces, gradual liberalisation of the

the speeches of the leading public

(c) the impact of inclusiveness is

financial sector and the opening up

persons of the country. Even so, the

not immediately visible. These

of the economy to world trade and

concept of inclusive growth is left

arguments do not seem to be

capital flows. But the moot question

delightfully vague. In terms of policy

tenable. For one thing, concepts like

is whether “the cumulative effect of

content, it is certainly not a focal

growth and development are also

the systemic reforms” has promoted

variable. Clarity about the concept

multidimensional. Moreover, several

inclusive growth. A more pertinent

and its contents leaves many things

components of growth (which in the

question is what “systemic reforms”

to be desired. This paper, by one

aggregate appear as the sum-total

the policymakers have initiated

of the leading architects of India’s

of value added) have long-term

to strategise a well-designed

recent five-year plans, is important

implications and some of the related

vision of inclusive growth. Treating

for the light it throws on the concept

data are available after a lag.

inclusiveness and growth separately

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 further discussions on the subject.

The critical issue is the treatment of growth and inclusiveness as two separate boxes and then considering such an approach “logical”. The fundamental question

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

Exclusionary Process

who tries to give the latest figures

sustained action. Charity can help

According to the author,

and evaluation reports about the

one to participate in the market.

“Inclusiveness must obviously

unfolding pathology of inadequate

But certainly that is not what one

include progress in delivery

access to proper education, health

bargains for in an inclusive growth

of essential services” such as

and so on seems to walk past the

regime.

education, health, clean drinking

excluded like the high priest before the wounded man in the Biblical

Strategy, Not Mitigating Factor

water and sanitation. These services, especially education

parable of the Good Samaritan.

and health, are basic to capability

“Accelerating agricultural growth”

building and freedom of any

is indeed important for inclusion,

democratic society. The growing

but the problem is whether it can

commericalisation of education

really be inclusive in the absence

and health certainly has excluded

of redistributive land reforms. Some

many poor and dispossessed them

benefits may trickle down to the

from the mainstream of growth.

wage earners but surely not into the

There is no dearth of evidence. Joe

hands of the landless who remain

et al (2008) utilising the National

excluded (unless they succeed in

Health Survey data undertake a

selling their labour). Growth is not an

state-level analysis of inequities

end in itself, but important only as

in child health employing widely

one of the means towards human

accepted concentration measures,

well-being and freedom.

and find that the poorer sections

By its own logic, market mediated

structure and pattern of growth and

of population are buffeted with

growth prices out or excludes those

rules out a distribution strategy. A

ill-health and malnutrition of their

without exchange entitlements,

growth process that works towards

children, thus jeopardising the future

the latter including not only assets,

effective equality of opportunity

of the already vulnerable sections of

but also income, employment,

must define the boundaries of

society. Using data from a nationally

social security entitlements, initial

the market, the composition of

representative high sample of 41,554

endowments, credit worthiness and

the commodity flow, the structure

households conducted in 2005,

so on. Apart from market exclusion,

of initial endowments, the social

Sonalde Desai and Amaresh Dubey

there are several institutional failures

arrangements for enhancing the

(2011), examine the relationship

and market failures. There are

capabilities of individuals and the

between social background and

also several social exclusions like

freedoms needed to achieve the

different dimensions of well-being

caste, gender discrimination and

capabilities and so on.1

and find the continued persistence

so on. While some of these can

of alarming caste disparities in

be addressed through affirmative

education, income and social

action, economic exclusion can

networks.

be taken care of effectively only

The author of the paper on the

through relevant policy choices on

policy challenges in the Twelfth Plan

redistributive strategy and then with

12

Inclusiveness is not a mitigating act, but a strategy of participation 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 participate 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

Equality is a universally acclaimed value and is generally affirmed as a basic human right. Amartya Sen famously asked the question “equality of what”? The answer to this question is important for

SPOTLIGHT

identifying the policy variables that

of living of the poor, are unlikely

have to be chosen for action.

to be acceptable (p 89, emphasis

2

Ahluwalia’s paper rightly asserts 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.

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

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no hesitation in saying that the

1/4 page Vertical

wedge between “Shining India” and “suffering India” will keep growing

Full page

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

It is sometimes argued that

capital. The indifferent way in which

inequality should not matter as long

inclusive growth is handled in India

as the poor are getting better off

is probably because “they could get

and it is probably true that a rapid

away with it” as when Sen (1973,

rate of improvement in incomes

1998) points out how the Athenian

for the poor may make them

intellectuals of direct democracy

willing to accept some increase in

fame left out the slaves and women

inequality. However, large increases

from the orbit of their discourse and

in inequality accompanying only

discussion.

modest improvements in the levels

Appointment of Mr D K Pradhan, Chief Operating Officer, MCCI Skill Development Centre 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.

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13

SPOTLIGHT

AN APPROACH TO THE XII FIVE YEAR PLAN

By M R Venkatesh Chairman, Expert Committee on Economic Affairs, MCCI

our per formance or potential?

The Planning Commission has How can we cope with listed 10 areas given below on demographic changes cross cutting themes, each of already underway? which is relevant for different sectors. These ten areas 6. Science and Technology - What include: kinds of science and technology 1. Citizens’ expectations - What

are available and appropriate?

are the citizens’ expectations

How can we get more

in individual sectors? How can

useful S&T?

we set targets to reflect these

7. Information - Do we all have

Governance The first draft to the XI Plan, prepared and issued by the Planning Commission in 2006, had this to state on Governance: “All our efforts to achieve rapid and inclusive development will come to naught, if we cannot ensure good governance both in the manner public programmes are implemented

expectations?

appropriate information

and, equally important, in the way

2. Governance and Institutions -

to take informed decisions?

the government interacts with the

How does government or public

How can we improve the

ordinary citizen. Corruption is now

institutions affect us in different

availability and usefulness of

seen to be endemic in all spheres

sectors? How can we make

information?

and this problem needs to be

them work better?

8. Land Climate and

addressed urgently.” Crucially the

Environment - How does

quality of governance (or the lack of

per forming their role in these

land use and environmental

it) is seen as India Achilles heel in

sectors satisfactorily? How

considerations affect us?

her march to prosperity.

can we improve the functioning

How do we build strategies

In short, given the quality of

of markets?

to take them into account?

governance it is inappropriate in

3. Markets - Are markets

4. Global Developments - How

9. Innovation and Enterprise -

the current Indian context to raise

will global developments affect

Are we creating enough

outlays significantly and hope

us in individual sectors?

innovations and

for the best. After all, anything

How can we use global

enterprise for inclusive and

multiplied by zero is zero. Since there

developments to our

sustainable growth? If not, how

is a complete disconnect between

advantage?

can we do so?

service providers and consumers,

5. Demography and Skills - How

10. Financing the Plan - What are the

does the age / sex /

financial requirements, both

geographical / skill distribution

public and private of achieving

of our population affect

our targets? Can we meet them?

14

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

SPOTLIGHT

mechanisms and the Right to

Report (2010) India’s HDI rank is

Information Act.” But these are

119. Countries with lesser natural

passive attempts when the rot is

endowments, human capital and

deep and massive.

those repeatedly ravaged by

The malaise of poor governance needs radical and innovative solutions, especially in three crucial sectors – Primary education, health and public transport. 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 further.

Various government agencies have repeatedly brought about the charge that these sectors were under-funded as a percentage to our GDP. This is only partially true. Even a substantial increase in the spending of any one of these

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 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 poverty, illiteracy and disease.

significant increase in outcome /

area that is engaging our attention

outputs. The reason for the same is

is the disparity in various social

too obvious – the service providers

indices even within our country. For

are completely disconnected from

instance, on social indices, certain

the needs of the service seekers.

States seem to do far better than

And this disconnect lies at the

the other. This gap needs to be

root of all malice affecting our

bridged forthwith. It is suggested

governance.

that the best social index for every

Making Growth inclusive:

State to be drawn up and the

scourge of poverty, the fact is India continues to be a laggard in Human Development Index. According to the recent global Human Development

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 fifty 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

Notwithstanding the above, one

of the Government in tackling the

Further, the scourge of poverty and

an ambitious target of ensuring

sectors may not help to see any

While we appreciate the efforts

opinion make growth more inclusive.

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

left 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

15

POLICY WATCH

sectors are now at various stages of

exporters will only have to register with

implementation at Dahej in Gujarat,

the Directorate General of Foreign Trade

Visakhapatnam-Kakinada in Andhra

(DGFT) to send shipments. They will be

First in line will be the launch of energy sector policy:

Pradesh, Haldia in West Bengal,

free to export any quantity they want.

Paradeep in Orissa and Cuddalore and

The government had placed a cap on

Nagapattinam in Tamil Nadu. These

cotton exports at 55 lakh bales (170

investment zones, each of which is

kg each) in October last year to check

Tamilnadu is all set to become a new

not less than 250 square kilometers,

spiraling prices and ensure availability

growth model in India with the launch

are expected to attract a collective

of the raw material for the domestic

of sector-specific industry policies

investment of Rs 8,63,664 crore and

textiles industry.

within the next two to three months

create more than 40 lakh jobs during

said Principal Industries Secretary, Mr N

the 12th Five-Year Plan.

Sector-specific industry policies soon

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.

Commerce Ministry to revisit SEZ Rules book:

Indo-Japan pact comes into effect: The CEPA between India and Japan, that seeks to augment bilateral trade

The Commerce Ministry is mulling over

of $25 billion by 2014, has come into

a “relook” at the area ceiling for multi-

effect. The CEPA will see about 94%

purpose Special Economic Zones (SEZs),

reductions in goods ranging from cars to

presently at 5,000 hectares, since land

shrimps and easier movement of nurses

He further said the drafts were ready

is emerging as ‘a binding constraint’

and chefs. On a trade value basis

and the first in line would be the launch

for huge industrial projects in the wake

while Japan has agreed to 97% tariff

of energy sector policy. This would be

of widespread protests by farmers for

reduction in trade in goods, India has

followed by the release of industrial

land acquisition across the country.

consented for 90% duty abolition.

policy that would include automobile,

The Commerce Secretary, Dr Rahul

manufacturing and infrastructure

Khullar, said the time has come where

sectors. Pharmaceutical policy would

issues pertaining to land, labour and

take longer.

infrastructure in the context of the SEZ

NREGA back on table for removing flaws:

need to be looked at again as the rules

New Rural Development Minister Jairam

were framed seven years ago.

Ramesh is working to overhaul the

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 starting 2012 as various government agencies will be prioritizing building of roads, rail networks, airports and sea ports 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

16

United Progressive Alliance’s six-year old

Government lifts restrictions on cotton export:

flagship rural jobs programme to rid it

The Government has lifted export

Employment Guarantee Act (MGNREGA),

restrictions on cotton and allowed it to

which costs the government Rs. 40,000

be shipped under open general licence

crore a year – the largest spend on any

(OGL) for the rest of the cotton season

social welfare scheme – played a key

responding to a fall in prices of the

role in catapulting the UPA government

commodity and its adequate availability

back to power in the general elections

in the country. In the remaining two

of 2009. The scheme, however, has

months of the cotton season — that

floundered on the ground because of

runs from October to September —

red tape and corruption. Starting with

of all ‘man-made’ flaws and make the job entitlement more demand driven.

The Mahatma Gandhi National Rural

a complete administrative revamp, the

POLICY WATCH

government plans to link MGNREGA to a

“Once that is done, it has to go to

four days to two weeks, depending

cluster of mini watersheds, or aquifers,

the Cabinet. We will also discuss with

upon individual issues. Under the new

in a cluster of panchayats, or village

the chief ministers, because they are

procedure, the promoters need to

councils. The government also aims to

the implementing agency... then it

get the application and other relevant

make the scheme truly demand driven

has to go to Parliament,” Thomas,

documents certified by a practising

by moving to a system of receipts, which

said.”What I propose is to introduce the

professional and the applications will be

will clearly mention the date work was

Bill by this December so that it can be

processed electronically.

demanded.

implemented from next year,” he said.

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 offer to minority holders has been raised to 25% of the company from 15%. Once that level is reached, the acquirer must offer 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.

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 different sectors.

Starting business in India to take less than a day: India will soon join an elite group of countries where starting a business will

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 draft Bill, which is now before the Law Ministry.

take less than a day. The Ministry of Corporate Affairs (MCA) has simplified the procedures for incorporation to enable promoters to get their companies incorporated within 24 hours. The new procedure to issue online certificate of incorporation will be implemented from August 11. Earlier, officials at the Registrar of Companies used to go through the available list of names and approve all documents manually.

Incorporation took anywhere between

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 draft 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 sorted 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

17

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 offices in India may have to start 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 department has already sought details of operations of many MNCs with liaison offices in India. Lloyds

tightening move to increase repo and

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

of Canada and CKD of Japan are some of the leading MNCs which operate liaison offices in the country. Foreign

(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 inventor y 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.

benefits for cotton yarn from April 1, 2011 and on Cotton from October 1, 2010.”

of UK, Bender of Germany, BBLO of Spain, Doosan of South Korea, Magna

reverse repo rates by 50 basis points

India, Lithuania ink double taxation avoidance pact:

entities are allowed to open liaison

Duty drawback on cotton yarn export to return: The Finance Ministr y has decided to reinstate the duty drawback facility for cotton yarn expor ts keeping in

offices in India after approval from the

India has signed a double taxation

view the current situation of huge

Reserve Bank of India. They are not

avoidance pact with Lithuania. This

inventories with spinning mills and the

subjected to any tax on the condition

agreement provides for ef fective

contraction in demand for the item in

that no business activity is carried out.

exchange of information between

the world markets. The government

On the other hand, profits from branches

tax authorities of the two countries,

had withdrawn the duty drawback

of foreign companies are taxed at the

including exchange of banking

on expor ts of cotton yarn through

rate of 42%.

information. Lithuania is the first Baltic

a notification on April 29, 2010 for

countr y with which India has signed a

discouraging overseas shipments in

double tax avoidance pact.

the backdrop of high domestic prices.

Steel Ministry to announce new policy by year end:

It also put a ceiling on cotton yarn expor ts in Januar y this year, which

steel policy by this year end. The policy

Builders will be Forced to Cut Prices by 20%:

will address issues related to raw

Proper ty prices are expected to

material security, land acquisitions, steel

come down by around 20% as realty

demand and infrastructure and will

developers may not be able to hold

replace the extant national steel policy

on to the current prices following

that was announced in 2005.

the Reser ve Bank of India’s liquidity

The Government will announce a new

remained in force till March. According to a finance ministr y of ficial, “The duty drawback facility for cotton 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.

18

POLICY WATCH

Nilekani’s 3 steps for direct food subsidy transfer:

market in exchange for a more liberal

by its flexibility to suit different types

visa and employment regime for our

of businesses. It will also reconcile the

professionals is totally unacceptable,”

Direct Taxes Code — which would replace

said Mr. R.S. Sodhi, Managing Director,

the Income Tax Act once Parliament

Gujarat Cooperative Milk Marketing

approves it — with the IFRS. The finance

Federation (Amul).

ministry move would mean that IFRS and

As the government works out the

the new standards for taxation would

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 countr y, 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 submitted earlier this month, following which the government asked Nilekani to also prepare a

co-exist and companies could achieve

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 different types of communication services but at the same time risks triggering fresh turmoil in the scandalravaged sector. A senior department of telecom official said the new telecom policy being readied by the government may allow operators to offer all “forms of communication services under a single permit”. Telecom firms now need separate licences for each type of service.

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,”

blueprint for the direct transfer of food

Singh said at the valedictory session

subsidy.

of the international seminar on ‘Global

Dairy majors want milk items kept out of trade pact with New Zealand: The domestic dair y industr y 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 dair y produce) to be kept out of the FTA. Any plan to grant New Zealand preferential access to the Indian dair y

New accounting regime for taxation from Finance Ministry soon:

environment and disaster management: Law and society’.

TRADE FAIRS & EXHIBITIONS Times Resource India Expo 2011

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 started work on

This is an event on solid waste management, wastewater treatment and pollution control to be held from 20th to 22nd October 2011 at Bombay Exhibition Centre, Mumbai.

developing a new set of indigenous

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accounting standards, which would

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19

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 Partners National Voluntary Guidelines on Social, Environmental & Economic Responsibilities of Business -Ministry -Ministry of Corporate Affairs, 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 further develop the relationship and achieve greater collaboration

l

define common objectives for joint participation and engagement

l

share relevant information, market and economic study to the extent possible

l

share agenda/logos to promote events on the parties 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.

21

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ECONOMIC REVIEW

ECONOMIC 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 Reaffirms their Commitment to Strengthen their Economic and Financial Relations

POLICY First Quarter Review of Monetary Policy 2011-12: RBI

REPORTS Rising prices hurt Asia’s growth - ADB 2010 Global FDI Inflows up 5%; India slips to 14th spot: UNCTAD

ECONOMY India’s core industries output growth up 5.2 percent in June

and increasing interest rates, the

Commerce & Industry on July 29,

production of eight core industries

production of steel, electricity, crude

has more or less been able to

oil and petroleum refinery products,

maintain its pace of growth. Also,

saw positive growth in the month

The Index of Eight core industries

the high global commodity prices

of June, 2011. On the other hand, the

having a combined weight of 37.90

have acted as a barrier to the

remaining sectors such as natural

per cent in the Index of Industrial

industry‟s faster expansion.

gas, coal, fertilizers and cement saw

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 quarter 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

The government has added two more sectors - natural gas and fertilisers 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, fertilisers, 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.

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 reported 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

According to provisional data

refinery production showed an

released by the Ministry of

23

ECONOMIC REVIEW

improved output growth of 4.7% as

11) for Coal production, 1.1% (-2.6%)

disinvestment programme for this

against the growth of 2.9%

for Fertilizer production, and (-) 0.9%

year is yet to take off fully. The higher

in June 2010.

(7.0%) for Cement Production.

non-tax revenue in first quarter

Among the sectors, which

Fiscal deficit surges four-fold in April-June, 2011

of last fiscal was on account of

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, Fertilizer production contracted by (-) 2.4% in June 2011 compared to (-) 6.7% in year ago period. Cement production maintained its continuous

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

compared to 3.7% in June 2010.

quarter of this year is almost 40% of the Budget estimate of Rs 4.12 lakh crore for 2011-12.

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

deficit is on account of 89% decline down to Rs 12,221 crore in the first quarter 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

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

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. Experts 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

crore in the year-ago period.

on the Wholesale Price Index (WPI)

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.

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

rates of growth for the remaining

Also the non-tax receipts have

sectors were 0.2% (- 0.6% in 2010-

been lower as the government’s

24

expenses, in April-June this year

review. The figure was Rs 83,994

refinery production grew by 8.3% (5.7% in 2010-11), 9.5% (5.9%), and

between revenue earned and

had said that lower revenue The sharp rise in Centre’s fiscal in non-tax receipts which went

During the first three months of

the revenue deficit, the difference

expenditure and receipts in the first

contraction in growth during the current fiscal, this time by (-) 0.8% as

auction of 3G spectrum. Meanwhile,

in the prices of coarse cereals, fibres and minerals.

ECONOMIC REVIEW

POLICY

Among the major groups, the index

Indo-UK Economic and Financial

for „Primary Articles‟ rose by 0.2

Dialogue which was established in

percent as compared to the previous

2005 has contributed successfully

week levels. Annual rate of inflation

in strengthening the bilateral

for this group was 10.49 per cent,

relationship. He said that the

The Reserve Bank of India (RBI) has

down from last week’s level of

significance of this dialogue is in

released its first quarter review of

11.13 per cent. It was 19.23 per cent

laying the agenda and guidance for

monetary policy for 2011-12 on 26th

for the corresponding week of the

future engagement.

July 2011. In its monetary policy

preceding year.

While speaking at the Fourth

The index for ‘Food Articles’ sub-

Ministerial Level Indo-UK Economic

group moved up by 0.8 per cent,

and Financial Dialogue at London,

due to higher prices of fish-inland,

Shri Mukherjee said that both the

fruits & vegetables and fish-marine

countries have identified a number

(2% each). However, the prices of

of issues for joint collaboration. He

jowar (4%), ragi and poultry chicken

said that he is sure that both the

(2% each) declined.

countries will make further progress

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

in the coming months in deepening countries economic relations based on mutual appreciation of their respective concerns and aspirations.

seed (3%). However, the prices of

“This exchange of views will

raw cotton (6%), raw silk (3%), copra

go a long way in improving our

and raw rubber (2% each) declined.

understanding of each other‟s

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

position on issues of mutual concern, he said.” Shri Mukherjee said that India and UK share a strategic partnership and enjoy traditionally warm and close bilateral relations in diverse areas.

First Quarter Review of Monetary Policy 2011-12: RBI

release, the RBI signalled that battling inflation took precedence over growth imperatives. The RBI remains confident that moderation of domestic growth is not yet broadbased, but the risks to growth from uncertainties 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, particularly 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

at 12.12 percent as compared to

“Our two countries enjoy strong

RBI continued the tightening cycle

previous week level of 11.89 per cent.

historical and cultural relations built

and took a more decisive step

India- UK Reaffirms their Commitment to Strengthen their Economic and Financial Relations

on shared values and traditions.

with a 50 basis point hike, beating

Since the visit of His Excellency, UK

market expectations. Moreover, the

Prime Minister David Cameron to

central bank gave enough hints that

India in July 2010, we have seen our

the latest hike may not be the last.

The Union Finance Minister Shri Pranab Mukherjee said that the

bilateral relations being elevated to an „Enhanced Partnership for the Future‟- he added.”

On the basis of the policy stance RBI has raised the Repo Rate by

25

ECONOMIC REVIEW

50 basis points (bps) from 7.5 per

trends necessitate structural reforms

is dependent on implementing

cent to 8.0 per cent. This has raised

to enhance supply response (from

policies, with corresponding resource

operational policy rates by 475

the government).”

allocations, which will allow supply

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

Further, the RBI pointed out that with overshooting of the fiscal deficit target a possibility, its expansionary

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 short-term borrowing rate, hiked to 7.0 per cent from 6.5 per cent.

offset the moderation in demand resulting from anti-inflationary monetary actions and weaken monetary policy effectiveness.

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 support price for agricultural commodities and the

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, left unchanged at around 8.0 per cent.

The RBI’s both the documents, “Macroeconomic and Monetary Developments First Quarter Review 2011-12” and “First Quarter 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

26

to keep pace with demand – he added.”

impact on demand could partly

Rate unchanged at 6.0 per cent.

The Marginal Standing Facility (MSF)

of various products and services

increase in wages of rural labour would add further 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 short-term to bring inflation down, “but to encourage supply response so as to expand the potential output of the economy in the mediumterm”. “The economy’s ability to grow rapidly for any length of time without provoking inflation

REPORTS Rising prices hurt 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 short term capital, also known as “hot money.”

The ADB’s growth forecasts were unchanged from a report 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,

ECONOMIC REVIEW

which includes 10 Southeast Asian

could drive 64 million more people

with a way to prevent a debt default

countries as well as the economies

into poverty. The bank warned that

in the world’s biggest economy.

of China, Taiwan, Hong Kong and

if price growth does not slow, it

That could depress the dollar

South Korea.

could make things more difficult for

against other currencies, hurting

the region’s economies. “Elevated

Asian governments that hold large

food and commodity prices and

amounts of U.S. government debt in

robust domestic demand could

their foreign reserves.

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 quarter of 2011, down from 8.4% in the previous three months. “Rapidly

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.

The bank said this “two-paced” global economy had resulted in investors flocking to the region’s economies looking for better returns, putting further pressure on inflation. “Continued shortterm capital inflows add to already

rising inflation risks a wage-price

However, the bank said the

ample liquidity and exacerbate price

spiral that could derail the region’s

economies will continue to take

pressures,” it said.

recent strong growth,” the report

measures to tackle inflation.

said, noting that inflation in many

“Authorities are expected to keep

economies has risen above 10-year

tightening monetary policy and

averages.

rolling back fiscal stimulus to counter

2010 Global FDI Inflows up 5%; India slips to 14th spot: UNCTAD

Consumer prices in the region have been rising due to higher food and

rising inflation and economic overheating,” the bank said.

Global FDI inflows grew 5 percent to USD 1.24 trillion in 2010, according to the United Nations Conference on

fuel costs. The report also detailed

The ADB’s economists also fretted

other sources of rising prices.

about the dismal prospects for

In many East Asian economies

the U.S. and Europe, which are

property prices are climbing quickly.

plagued by high unemployment

The devastating tsunami and

and debt problems. Both are major

nuclear disaster in Japan in March

customers for East Asia’s exports.

has also spurred a debate over the

“If the recovery in Japan, U.S. and

use of nuclear power, which could

eurozone falters, sluggish external

drive up energy prices by boosting

demand could once again disrupt

demand for other energy sources

the region’s exports,” the report

such as oil and gas.

said.

The threat of inflation has been a

The report also warned that the

major worry in Asia this year. The

region could be hurt if the U.S.

ADB warned in April that surging

government’s top-notch credit rating

food prices of 10 percent on

is downgraded amid fears that U.S.

average in many Asian economies

lawmakers may fail to come up

Trade and Development (UNCTAD) „World Investment Report 2011‟.

This was nevertheless 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 flows 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, flows are forecast to rise to USD 1.7 trillion in 2012 and USD 1.9 trillion in

27

ECONOMIC REVIEW

2013, barring any unexpected

economies absorbed more than

global economic shocks.

half of global FDI inflows for

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 attracted 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 outflows 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 outflows (USD 475.8 billion), followed by Nor th America and other developed countries (USD 288.8 billion).

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 outflows. Six developing and transition economies were among the top 20 investors.

financial industr y 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

28

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

low rates of debt financing and

cent drop in flows to Pakistan. By

rising stock market valuations of

contrast, inflows to Bangladesh, a

transnational corporations (TNCs)

rising low-cost production location,

should encourage them to expand

increased by nearly 30 per cent to

overseas, the repor t says. On the

USD 913 million,” the repor t said.

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 oppor tunities.

ser vices continued its downward path in 2010. FDI flows to the

Despite the emergence of cer tain

The record level of cash holdings,

should create new investment In terms of sectoral patterns, FDI in

yet derail the FDI recover y.”

Meanwhile, at a time when developing and emerging countries are setting 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 attracted FDI wor th USD 25 billion in 2010, much

However, the repor t warned

lower than the inflows of USD 36

that “the post-crisis business

billion seen in 2009. In contrast, the

environment is still beset by

other emerging economies such as

uncer tainties. Risk factors such

China stood at 2nd position with

as the unpredictability of global

inflows totalling USD 106 billion in

economic governance, a possible

2010. Similarly, Brazil stood at 5th

widespread sovereign debt crisis,

position with inflows at USD 48

and fiscal and financial sector

billion during the year, the repor t

imbalances in some developed

said.

countries, as well as rising inflation and signs of overheating in major emerging market economies, may

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 participants.