Page 1

Volume 25 – No.7 – October 2011

In this issue 4 President’s message 4 Chamber’s activities • Meeting with Belgian

Ambassador • MCCI & MMA Video Discussion

on “ It’s not my problem”

4 General Committee 4 Article on MCCI featured in Business India

4 SPOT LIGHT Public Private Partnership (PPP)

4 Economic Review


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CHAMBER’S ACTIVITIES 18th October 2011

European market. In Tamil Nadu,

visas were issued within 24 hours and

Meeting with Ambassador for Belgium:

particularly Chennai has a number of

said they had issued 35000 visas till

automobile and auto components

September 2011 and expected to issue

manufacturing

companies and

another 10000 visas before December

The Chamber had organised an

most of the leading companies are

2011. The Ambassador invited SMEs

interaction meeting with the visiting

members of the Chamber. He further

to set up their units in Belgium and

Delegation from Belgium on 18th

highlighted to them that the Madras

business licenses would be issued

October 2011 in the Conference

Chamber was instrumental in setting

within 3 to 4 working days and

room of the Chamber.

up the Chennai Port and we continue

there was no minimum investment

to be actively involved in trying to sort

stipulated. The Ambassador

the current issues concerning the port

informed that a delegation headed

and represent the interests of traders

by Kris Peeters, Minister –President of

and exporters . In fact we had taken up

the Flanders regions along with a 35

a detailed study on Port infrastructure

member team would be visiting India

which was completed and findings

and they are planning to visit Chennai

to be presented for more discussion.

between 12 and 18th November

Antwerp

The President then requested the

2011. The areas of business interest

President,

The Ambassador appreciated the

MCCI and Mr.T.Shivaraman, Vice-

Madras Chamber’s role towards the

President, MCCI along with the other

development of Tamil Nadu economy

members of MCCI were present.

as well as national economy. He said,

Mr.T.T.Srinivasaraghavan,

Belgium which had a highly diversified

H.E.Mr.Pierre

Vaesen,

Ambassador

for Belgium, H.E.Mr.Karl Van Den Bossche, the new Consul General for

Belgium,

Mr.Jayant

Nadigar,

Trade Commissioner, Bangalore Mrs. Fruithof, Future Trade Commissioner for Chennai and Mr.Raj Khalid, India Representative

of

Port

participated in

the

Mr.T.T.Srinivasaraghavan,

welcomed

the

meeting. Ambassador to address.

President

Ambassador

and

his team. He gave an overview of

for the delegation from Flanders are

economy was keen to strengthen bilateral

trade

ties

with

India.

activities. Currently there were 150 Belgian The President highlighted that the companies that had investments in Madras Chamber was one of the India and about half the number of the

Chamber’s

various

oldest chambers in the Country and had recently completed 175 years of service to the trade and industry on 29th September 2011. The history of the Chamber began with European connections and after independence Indians took over the position and got involved in the MCCI’s activities. He explained that the membership base is strong and nearly about 70% of the members are in the manufacturing and

the

rest

of

them

include

professional firms, service and other industries. Most of our manufacturing companies have business with the

2

Indian companies in Belgium and their

proportion was increasing. Flanders

utilising Port Antwerp, Chemicals, pharmaceuticals,

biotechnology,

logistics, automotives and renewable energy. The

Ambassador

also

informed that India and Belgium already have a double taxation treaty in place, the proposed Free Trade agreement between India and the EU could significantly improve trade and the FTA should be ready by the year end. Mr.Raj Khalid requested the members

have a trade office in Bangalore. to consider setting up warehouses Around 20 out of 250 Belgium firms

in the Port of Antwerp which he told

have invested in Chennai and a trade

is very cost effective. From there,

office

and

the products could be traded locally

Wallonia regions would soon be in

representing

Brussles

and could be sent to other European

Chennai. The main purpose of the

countries as well.

office is to attract investments into Belgium. The Ambassador told that they are ready to lend a helping hand to Indian firms interested in setting up their units in Belgium particularly in areas like logistics, car assembly, bio-

The Ambassador and his team of officials then interacted with the members and the meeting was concluded with vote of thanks. The President presented MCCI Coffee

technology and infrastructure sector. Table Book – Championing Enterprise The Consul General mentioned that to the Ambassador.


CHAMBER’S ACTIVITIES 20th October 2011:

A

MCCI & MMA – Video discussion “That’s not my problem” :

highlighted the need for employees

my problem’ could lead to unforeseen

to put out small office fires before

consequences. The key issues were:

The

that followed the importance of taking

monthly

video

discussion

lively

animated

video

that consequences. Thinking that ‘it is not

they blaze out of control was shown. Through the video, and the discussions

- H ow to see needs and take

responsibility

meeting was organised on 20th

responsibility

acknowledging

- H ow to face up the problems

October in the Conference room of

problems, and taking action before

the Chamber. The title for the video

a crisis is reached is stressed upon.

- H ow to accept and manage

discussion was -“That’s not my

The video demonstrated, what can

problem”. Ms.Sandhya Sankar, a well

happen when we are not personally

known corporate trainer coordinated

motivated to fix a problem before

the discussion.

it gets out of hand with escalating

participated.

The 4th meeting of the General

fitter, electrician, computer skills, soft

and

Committee met on 15th October in

skills and week end courses for the

of the Committee offered his help to

the Conference room of MCCI. The

engineering students have already

negotiate in this regard.

President and 14 members of the

been initiated and the modules and

General Committee attended the

syllabus have also been worked out.

meeting and the following matters

Work tables, drilling machines and

were discussed.

other required infrastructure facilities

by

responsibility

About

25

members

representing

both organisations (MCCI & MMA)

15th October 2011:

GENERAL COMMITTEE

The members of the Committee appreciated

the

President

and

the Chamber Secretariat for their wonderful work done in connection with the 175th year celebrations held on 29th September 2011 at Park Sheraton Hotel. The President thanked the members for their valuable support and for their presence in the function

were developed at the premises and the course would be commenced by this month end. It was informed that after local bodies’ elections, Mr.Pradhan

and

Ms.K.Saraswathi

would meet the local village officials, Panchayat

officials

and

other

Mr.S.G.Prabhakaran,

Member

MCCI Port Study and the present problems in Chennai Port were discussed at the meeting. Mr.Krishnan, Chairman of the Logistics Committee apprised the members that the exim trade was greatly affected by imposing congestion surcharge. Operations of the Chennai Port and related issues would be discussed & highlighted at the proposed Port Seminar.

connected people in this regard. The President reported various meetings organised by the Chamber during the month.

function and also for contributing

The members felt that the Chamber

towards advertorial support in the

could try and purchase the other

The 6 new companies joined as

Hindu.

vacant land which is available behind

members were approved and the

MCCI land at Koppur Village which

names of the new members would be

might be useful for expansion of Skill

published elsewhere in the bulletin.

With regard to the progress of skill development centre the members were updated. The Committee was informed that basic courses like

Development Centre at a later stage. It was agreed to explore the possibility

3


Special article on MCCI featured in Business India - 13th November issue

4


5


COMMERCIAL HOLIDAYS 2012 1st January

Sunday

New Year’s Day

15th January

Sunday

Pongal

16th January

Monday

Thiruvalluvar Day

26th January

Thursday

Republic Day

6th April

Friday

Good Friday

13th April

Friday

Tamil New Year’s Day

1st May

Tuesday

May Day

15th August

Wednesday

Independence Day

20th August

Monday

Ramzan

19th September

Wednesday

Vinayaka Chathurthi

2nd October

Tuesday

Gandhi Jayanthi

23rd October

Tuesday

Ayudha Pooja

13th November

Tuesday

Deepavali

25th December

Tuesday

Christmas

Charter Party Holidays 2012 15th January

Sunday

Pongal

26th January

Thursday

Republic Day

1st May

Tuesday

May Day

15th August

Wednesday

Independence Day

2nd October

Tuesday

Gandhi Jayanthi

13th November

Tuesday

Deepavali

and any other day which the Chennai Port Trust declares as a closed holiday during the year. Note: These Charter Party Holidays will also be applicable to Ennore Port.

7


SPOTLIGHT

PUBLIC PRIVATE PARTNERSHIPS – THE NEXT WAVE By Arslan Aziz, Lead Consultant – Public Policy, Athena Infonomics India Pvt. Ltd.

Public

Private

Partnerships

have

public funds for addressing chronic

private sector, outcome specifications

increasingly emerged as a viable mode

infrastructure investment deficit. The

among others. A quick comparison

of developing public infrastructure

first PPPs followed as a consequence

across international definitions of PPPs

Figure 1: Infrastructure Spending Targets in 11th and 12th Five year plans

11th plan

coincides

Sector-wise breakup Gas

20.6 7.7 6.7 Total

Central

6.2

State

Private

Telecommunications Airport Port

with

international

best

definitions

and practices.

potential returns or benefits

Railways

for all the stakeholders in a PPP project is presented in Figure 2. To enable the next wave

Sector-wise breakup Gas

42.7 12

Telecommunications

9.7

Central

21

State

Private

Water Sanitation &Irrigation

through

Public Private Partnerships, success factors that need

Roads Railways

The 12th five year plan envisages a

the National Highway Development

threefold jump in the size of private

Program – Phase I in 1999, which has

investments in infrastructure sectors,

since then grown in scope and size to

from about Rs 6 lakh Crore in the

cover most sectors across transport,

11th five year plan to over Rs 20 lakh

logistics and utilities.

in experimenting with PPPs in social

investments

to be enhanced.

Airport Port

of economic liberalization through

there has been increasing interest

of

this article outlines six key Power

through private sector resources.

Crore in the 12th plan. In addition,

Public Sector Capacity The role of the public sector

in any public private partnership is critical in enabling the project from achieving its objectives. Apart from being a partner, the public sector entity also has the responsibility to govern and monitor the entire process.

Given

the

very

long

The recent draft for consultation of a

gestation periods of infrastructure

National Public Private Partnerships

projects, this requires a sustained level

Policy

defining

of political commitment irrespective

features of PPPs including investments

of the particular government in

by private sector, optimal risk sharing

power. Similarly important is a strong

evolved

between the public and private sector,

commitment from the bureaucracy

in India to overcome the lack of

performance linked payments to the

that implements such projects on

sectors

such

as

healthcare

and

education. PPPs

8

the

incurred, risks borne and

Roads

Water Sanitation &Irrigation

that

An analysis of the costs

Power

12th plan

Total

reveals

Indian approach broadly

have

historically

highlights

certain


SPOTLIGHT Figure 2: PPP Stakeholder analysis Public Sector

hand, the supply of both debt and equity are near

Lenders

Cost Incurred

Return/Benefit

 Project Identification  Monitoring

 Fulfilment of mandate to provide public infrastructure

Risk Borne

Cost Incurred  Cost of capital  Opportunity Cost

current financial system. The inherent asset-liability

Risk

mismatch issue for long-

 Financial viablity risk  Currency Risk?  Asset - liability tenure mismatch

Con trac t

Tax

 Return on investment

VGF Debt Protection

 Political Risk?  Regulatory Risk?  Residual Asset value risk

their upper limits in the

Return/Benefit

term infrastructure loans, lack of a deep and liquid bond market, the inability

Repayments

Debt

Public /User

of infrastructure projects

Private developer

Cost Incurred

Cost Incurred

Return/Benefit

 Tax  User changes  Displacement

 Usage of quality infrastructure  Time and cost savings  Employment opportunities  Improved living standard

Risk Borne  Environmental/ social impact  Exclusion



Access

 

User charges

    

Return/Benefit

Opportunity cost of investment Debt repayments Technical & human resourses

Risk Borne

from receiving investment

 Return on investment  Increased technical competence  Enhanced brand equity

grade rating that limits the pool of funds that can invest in them, are some

Financial risk Developmental risk Operational risk Technology risk Non-profitionam force majeure risk

of the issues that need to be urgently resolved if adequate debt financing

the government’s behalf to ensure

transaction advisors are engaged

transparency and objectivity of the

by the government agency to assist

is to become available.

process.

in this process. There is a need for

Risk Sharing

Adequate and coordinated planning across different central and state governments

and

the

associated

ministries is essential for smooth

an objective and efficient process of leveraging the expertise of such consultants and translate it into effective structuring of contracts.

Exhaustive

identification

of

risks,

allocation to party best suited to manage or mitigate that risk, as well as accurate pricing of risks is essential

functioning of a process. A national

Private Sector Capacity

PPP policy can outline a mature

Harnessing private sector efficiency

risks during the land acquisition and

and technical competence is one of

getting

the key factors of a mature rationale

different regulatory authorities are

for

best managed by the sponsoring

rationale for PPPs, as well as clearly outline the roles and responsibilities of different agencies to improve coordination across agencies.

implementing

to any successful project. Early stage

infrastructure

requisite

clearances

from

Private

government authority. Private sector

Public Private Partnerships involve a

Partnerships. A broad and deep shelf

developers as well as financiers can

range of stakeholders and affected

of commercially viable projects need

split the risks in the subsequent stages

parties

diverge.

to be identified and information be

of the project depending on the

Managing multiple stakeholders and

made publicly available. Adequate

pricing of the risks.

aligning their incentives towards a

checks and balances must be put in

Social Inclusion

common goal requires a pragmatic

place to ensure the private sectors

approach

deliver on the promised outcomes

whose

interests

that

projects

appreciates

the

through

Public

nuances of the complexities involved.

with the desired quality of service.

A thorough technical understanding

Availability of Adequate Financing

of

the

feasibility,

viability,

social

and environmental impact is an essential starting point for the public sector.

Consultants,

independent

engineers, financial consultants and

Increasing participation of private sector

in

providing

what

were

traditionally considered public services requires a careful management of the social inclusion issue. Existing

While on the one hand a quantum

experience

leap

are

projects have suffered long delays

envisaged in infrastructure in the

due to rights of affected communities

12th Five Year Plan, on the other

not being managed appropriately.

in

total

investments

suggests

that

many

9


SPOTLIGHT

Disputes regarding user charges and

Internalizing the negative externalities

compensation given to land owners

of large infrastructure projects is

have stalled or delayed many projects.

a

If social sectors such as healthcare and education are brought into the ambit of Public Private Partnerships, it must be ensured that addressing problem of lack of quality does not result in the creation of a problem of exclusion.

Sustainability

daunting

yet

necessary

task.

Depleting water resources, pollution, deforestation and adverse impact on biodiversity are costs that need to be factored into the total project cost. While this would decrease an individual project’s commercial viability, in the long-run and at a macro-level, such an approach

Increasing population and depleting

would contribute to more sustainable

natural resources in the country

development.

Conclusion Public

Private

Partnerships

have

the potential to be a significant contributor to delivering inclusive development to the nation. However, the process needs to be diligently planned and executed to ensure the potential is realized. Focus on the six success factors described in this article can help different stakeholders to identify capacities that need to be built.

make sustainability an urgent priority.

PPP MODEL IN CLUSTER DEVELOPMENT (Source: ASSOCHAM Publication on Cluster Development)

The Scope of PPP Model

PPM Model is one of the best global

partnership

practices and well acceptable model

and one or more private players on

worldwide. It is one of the most

particular project and specially focusing

successful model not only inn India

on financing, designing, implementing

even well acceptable in world also. It

and operating facilities and services

has been implementing by and large

which are traditionally provided by

all sectors more particularly telecom,

government / public enterprises.

construction, Infrastructure, road ways,

These collaborative ventures are built

agriculture, education etc., Wherever

around the expertise and capacity of

this model has been implemented,

the project partners and are based

most of the places showed fabulous

on a contractual agreement, which

result, better productivity & profitability,

ensures

enhanced

efficiency,

agreed allocation of resources, risks and

managerial expertise and many more

returns. This approach of developing

benefits. PPP model is not only assisting

and

and assuring a high degree of comfort

infrastructure by the private sector

level to funding institution for infusing

under terms and conditions agreeable

the adequate fund in cluster zone but

to both the government and the private

also creating a new avenue to allure PE/

sector is called PPP or P3 model.

VC investor and FDI etc.

of these major challenges could be

About PPP Model :

Role and Responsibilities of Public / Private Sector :

covered

(Public

There is no standard or formal concept

PPP Model, it doesn’t mean that there

Private Partnership) Model in Cluster

of PPP model. However, it broadly

is reduced and less responsibility and

development.

refers to as a contractual long term

accountability has with government.

There are more than 6500 clusters running pan India but only around 450 clusters are recognized and getting government support. There are 490,000 firms operating, employing 75,00,000 employment with annual output of Rs.157,000 crores. However even getting recognition by government and having such a enormous contribution to the economy, they aren’t properly privileged to explore their full potential for grown up themselves. They have still major challenges remain with them like limited size and scale, obsolete technology, non-availability of finance, traditional marketing systems, inability to meet environmental compliances, Poor infrastructure etc. ASSOCHAM

10

by

believes adopting

certain PPP

parts

operational

between

appropriate

operating

public

Government

and

mutually

utilities

and


SPOTLIGHT

SME Entrepreneurs

Government

Private Agencies

Enterprises

(Comprehensive role-play of PPP Model and shows ability to bring key stakeholders together strongly Positions into clusters to make a purposeful intervention in the SME segment)

Government actively remains involved

adequate and timely delivery of services

enterprises and private agencies under

throughout the project life cycle.

to customers and cost effectiveness in

single

Government is very much accountable

the market.

through integration and cross transfer

to meet its committed services towards

The major objective of such model

of private and public sectors skills,

its SME stakeholders or beneficiaries.

is to bring more value addition and

expertise knowledge, best experiences

The responsibilities also remain with

effectiveness by synergizing the best

etc., contributed and shared with SME

Government to govern and regulate

part of two or more partners – Public

entrepreneurs.

the price stability, robust competition,

umbrella

more

particularly

11


PPP Model in Cluster Development : There are three major components of

What Governments should do in a PPP project

PPP model during implementation in

• Maintain Transparency should

cluster development. These are:

• Government / Public Enterprises

• Protect officers who take the

• Private Agencies

• SME Stakeholders

• Align the economic interest

Under PPP model, Government is defined

paramount. initiative on PPP ; of all SME Stakeholders;

as facilitator / enabler and committed

• Define PPP project on

to provide stable governance, citizen

support with economic imbalanced,

• Induct the Private sector as partners;

social

• Establish frameworks that

unrest

and

politics

free

environment to private agencies and other engaged entrepreneurs. Whereas Private players are defined as financer, builder and operator of services or

a holistic basis;

permit failures; and

• Encourage plurality of approaches.

innovative methodology, appropriate set up skill, managerial effectiveness,

• Offer a project without

global best practices etc among clusters.

SME stakeholders who are defined as

• Make commitments that cannot

targeted beneficiaries of this model.

There are major 5 important steps

• Change goalposts after award of

towards

concession and revisit

project design;

among effective operational efficiencies,

implementation

of

methodology:

PPP

detailed project development; be kept;

• Not recognize that each project is a Project Execution

business and not a mere asset;

• Regret that the business is profitable Project Financing

Need Assessment of Project

12

private initiatives; and

• Not fully exploit the capacity of the

Capacity Building

within the framework agreement;

• Superimpose public process on

Project Development

BSD & Associates Chartered Accountant firm

….and what governments should not do

facilities and committed to bring

A warm welcome to our following new members:

business to grown in the state

Express Infrastructure Pvt.Ltd. Leasing, Construction and Malls

Raj Petro Specialities Pvt.Ltd. Manufacturer and exporter for petroleum speciality products

Satva Logistics Pvt. Ltd. Logistics Services

Walker Chandiok & Co. Chartered Accountant Firm

Winsar Infosoft Pvt Ltd. Software development


17


ECONOMIC REVIEW

Contents 1. Macroeconomy

1.1 Industrial Production in September 2011

1.2 Wholesale Prices of Primary Articles and Energy

1.3 Indirect Tax Revenue in October Drops by 2.5 percent

1.4 Trade Deficit Widens in October

2. Corporate Sector

2.1 Automobile Industry in Red

2.2 High input costs affects aviation sector

3. Global Developments

4.1 Emerging Economies are Seen as Saviors of Europe

4.2 Inflation in China Cools in October

4. Data Appendix

1. Macroeconomy 1.1 Growth in Industrial Production Further Slips

mining output and poor performance

As per the new series with base year

in

Electricity

2004-05, the IIP registered 1.9 per cent

generation grew at a healthy 9 percent.

growth in September as against 6.1 per

manufacturing

sector.

cent recorded during the same month

India’s industrial output further slowed down in September to 1.9 percent on

With this, the slump in industrial

of the previous year. Consequently, the

year on year basis. The growth rate for

production has continued for three

first half (April-September) of 2011-12

August too was revised downwards

consecutive months and this will make it

fiscal witnessed the cumulative growth

from 4.1 per cent to 3.6 percent,

further difficult to achieve the targeted 8

of IIP at 5.0 per cent as against 8.2 per

according to official figures released by

per cent economic growth in the current

cent during the corresponding period of

Central Statistical Organization (CSO)

fiscal. In July, the industrial output

the previous year.

on 11th November, 2011. Growth rate

growth slumped to 3.8 per cent. This

of industrial production has declined

was followed by 3.6 percent in August

Sector wise, the Mining output further

mainly because of negative growth in

and now 1.9 percent in September.

slumped by 5.6 per cent in September, registering -1.0 per cent cumulative

14


ECONOMIC REVIEW growth in the first six months of 2011-

posted the poorest growth during the

intermediate goods mere increased by

12. Manufacturing production also

month under review. Production of

1.4 percent. Production of Basic goods,

grew at a sluggish rate of 2.1 per cent in

capital goods declined by 6.8 percent

which comprises of nearly half the

September. Manufacturing sector which,

production growth as compared to 7.2

total weightage of IIP Index, showed

constitutes over three-fourths of the IIP

per cent during the same month last year.

somewhat decent growth rate of 4.5

index, registered cumulative a growth of

Capital goods production in the first six

percent compared to 3.5 per cent

5.4 per cent in April-September period.

months of the current fiscal increased by

during the last year.

On the other hand, Electricity output

mere 4.6 percent as compared to 16.4

continued to register a decent growth

percent during corresponding period in

To add to the above, production of

of 9.0 per cent during the month under

the previous year.

Consumer non-durable goods declined

review. The electricity sector registered a

by 1.3 per cent compared to 5.8 per

cumulative growth of 9.4 per cent so far

Output

in the current fiscal.

industries

of

intermediate

increased

by

goods

mere

cent in September last year. Growth in

1.5

the production of consumer durable

percent as compared to 4.6 per cent in

goods too has slowed down drastically.

As regards the use-based classification

September 2010. The first half of 2011-

Please refer Tables 1 and 2 for details.

of industries, capital goods industries

12 fiscal has seen the production of

Table 1

Index of Industrial Production (Sectoral, base 2004-05)

March

Mining

September Apr-Sep

2010- 2011- 4.3 7.2

Manufacturing

2011 2012 -5.6 -1

2010- 2011- 6.9 8.8

2011 2012 2.1 5.4

Electricity 2010- 2011- 4.3 7.2

2011 2012 -5.6 -1

General 2010- 2011- 6.9 8.8

2011 2012 2.1 5.4

Table 2

Index of Industrial Production (Use based, base 2004-05)

Month Basic Goods

Capital Goods

Intermediate Goods

Consumer Goods

2010- 2011- 2010- 2011- 2010- 2011- 2010- 2011 2012 2011 2012 2011- 2012 2011-

2011 2012

Consumer Durables

Consumer Non- durables

2010- 2011 2010- 2011 2011- 2012 2011 2012

September

3.5

4.5

7.2

-6.8

4.6

1.5

9.7

3.5

14.2

8.7

5.8

-1.3

Apr- Sep

4.7

6.9

16.4

4.6

8.4

1.4

9.1

4.5

15.9

5.2

3.8

3.8

15


ECONOMIC REVIEW Table 3

Wholesale Price Index and Rates of Inflation (Base Year 2004-05) Commodities /Major Groups/ Groups/ Sub- Groups Primary Articles

Weight

WPI

Latest Week over week

Year on year

52 week Average

Oct 29, 2010

2011- 2012

2010- 2011

2011- 2012

2010- 2011

2010- 2011

20112012

20.12

204.7

0.44

-0.15

10.26

8.65

16.71

11.43

13.86

Food Articles 14.34 Non- Food 4.26 Articles Fuel & Power 14.91

201.7 177.5

0.11 0.18

-0.25 0.17

9.73 10.76

12.62 -7.41

12.68 24.29

11.81 6.41

10.57 21.39

169.8

0.00

0.00

5.85

7.54

10.67

14.50

12.52

1.2 Wholesale Prices of Primary Articles and Energy

Build-up in overall inflation during the

provide a relief to consumers from the

week, financial year so far, and year on

hike in petrol prices that month. The cut

year growth rate is given in Table 3.

meant an annual loss of. 49,000 crore

indicated a state of no respite from

1.3 Indirect Tax Revenue in October Drops by 2.5 percent

hyper inflationary pressures to both

Indirect tax collections in October

percent increase to 2.01 lakh crore from

households

While

dropped by 2.5% to 30,278 crore. This

1.70 lakh crore during the corresponding

the price index of primary articles

was mainly attributed to the slowing

period in the last financial year. The

declined insignificantly by 0.1 percent

economy and cut in customs and

increase during the first seven months

over that week, the price index of

excise duties on petroleum products a

of the current fiscal was on account of

fuel & power remained unchanged.

few months ago. Indirect tax revenue

higher collections from customs, central

comprises

from

excise and service tax which rose by

Prices of food articles declined slightly

customs, excise and service taxes.

16.6 percent, 10.6 percent and 33.6

during the week mainly due to the

During October 2011, realisations from

percent respectively. This development

lesser rise in the prices of fish-inland,

customs dropped by 11.6 percent. The

confirms the fears of slow down and the

bajra, fruits and vegetables, moong and

central excise collections during the

need for the government to prune its

spices. At the same time, prices of gram,

same month dropped 5.3 percent. On

non-development expenditure.

egg, marine fish, ragi and chicken

the other hand, service tax collections

along with others have moved up.

during the month rose by 18.4 percent.

The wholesale price index (WPI) for the week ended on 29th October 2011

16

Build up form end March

and

Corporates.

revenues

raised

to the central exchequer. However, if we consider the 2011-12 fiscal so far, the indirect tax collection showed 17.8

In June, the government had slashed

1.4 Trade Deficit Widens in October

customs and central excise duties to

India’s exports growth slumped in


ECONOMIC REVIEW October, as demand slackened from the

Further, the current account deficit is

the

developed markets. Exports grew 12.4

likely to be about 3 percent of GDP. The

Manufacturers. However, truck and

percent to $19.9 billion in October from

debt crisis in the

bus sales held up, rising 19% to 61,800

a year ago, much slower than 36.5%

European Union has started resulting

vehicles, helped by robust demand for

in September and 52 percent in

in lower demand from the zone. Export

vehicles from Tata Motors and Ashok

the

The

of electronic goods, which go mostly to

Leyland.

slowdown was across the board.

the region, dropped 18 percent drop in

April-September

period.

October.

over the same period of the previous fiscal.

Indian

Automobile

for the current financial year to between

2. Corporate Sector

2 and 4% from an initial forecast of 16-

representing 46% growth, while imports stood at $273.5 billion, increasing 31%

of

SIAM has cut its sales growth forecast

Exports in the first seven months of the fiscal came in at $179.8 billion,

Society

18%. “Demand for petrol cars has been

2.1 Automobile Industry in Red

hit hard. Though customers are keen to purchase diesel cars, production is

Passenger car sales in India fell 23.8

a major constraint,” Mathur said. The

While exports in the remaining months

percent in October on year over year

automobile market relies heavily on

of the fiscal are expected to be relatively

basis.

monthly

demand from the middle class whose

low, compared with the high growth

percentage decline since December

ranks have been growing. The Reserve

phase in the first half of the fiscal, high

2000. Rising interest rates and fuel costs,

Bank of India increased interest rates

global oil prices and fertilizer imports

coupled with the fallout of the strike

by 25 basis points last month, making

will check a sharp slowdown in imports,

at Maruti-Suzuki, India’s largest car

it more expensive to take loans to buy

putting pressure on the country’s

manufacturer, drove down sales for a

cars.

current account deficit and balance of

fourth consecutive month. The two-

payments.

wheeler

major

“Traditionally sales get a boost in the

As a direct result, trade deficit for

barometer of consumer sentiment, also

festival season, but this year the general

October 2011 remained high as exports

stalled, posting a marginal monthly

weak

stood at $19.6 billion, while imports

increase of just 2 percent in October.

spoilsport with the market. We don’t

This

is

thebiggest

segment,

another

increased 36.7 percent to $39.5 billion.

customer

sentiment

played

expect any major upswing in the near

The country’s trade deficit climbed

“The auto industry is facing the double

future as uncertain macro economic

to $93.7 billion in the April-October

whammy of high interest rates and

environment will continue to affect the

period, against $72 billion in the year-

rising fuel prices. For any recovery to

industry,” said Hyundai Motor India

ago period. At this rate, India’s annual

happen, interest rates have to come

source. The strike at Maruti during the

trade deficit is expected to reach $150

down and fuel prices need to cool,” said

festival season also proved to be an

billion.

Vishnu

impediment. The company’s profits

Mathur,

director-general

of

17


ECONOMIC REVIEW dipped by up to 60% for the quarter

airlines and Spice Jet has all posted

ended September. Thecompany posted

heavy losses in the July-September 2011

a 55% drop in production to 50,487 cars

quarter. Leaving apart the infamous

last month, pulling down the growth

mismanagement

rate for the industry.

government bailouts of the public sector

and

repeated

3. Global Developments 4.1 Emerging Economies are Seen as Saviors of Europe

airliner ‘Air India’s’ case, the financial

2.2 High Input Costs Affects Aviation Sector

difficulties faced by the Kingfisher airlines

Christine Lagarde, the head of the

and the poor results posted by the Jet

International Monetary Fund, told a

Increasing fuel prices, unfavourable

airlines and Spice Jet presently needs

financial forum in Beijing that European

currency movements, rising interest

policy attention. The industry, mainly

plans to bolster a rescue package

rates, geopolitical uncertainty at the

owing to slower demand growth, low

for Greece were a “step in the right

macro level have affected the civil

degree of pricing power coupled with

direction”,but that the outlook for the

aviation industry in India. Apart from

diversion of resources have registered

world economy remained dangerous

the ailing public sector Air India, the

financial losses.

and uncertain. Advanced economies

Kingfisher Airlines followed by Jet

have a “special responsibility” to restore

4. Data Appendix Latest Financial Information Item

Oct. 28, 2011

Nov. 4, 2011 #

Percentage Change

Deposits of Scheduled Commercial

350870

341527

-2.7

1390514

1378936

-0.8

36153

52063

44.0

3745

870

-76.8

Banks with RBI (Rs.Crore) Foreign Currency Assets of RBI (Rs.Crore) Advances of RBI to the Central Government (Rs.Crore) Advances of RBI to the Scheduled Commercial Banks (Rs.Crore)

BSE Sensitive Index and NSE Nifty Index of Ordinary Share Prices

18

Index

Oct. 28, 2011

Nov. 4, 2011 #

Percentage Change

BSE SENSEX (1978-79=100)

17593.7

17192.8

-2.3

S & P CNX NIFTY (3.11.1995=1000)

5292.3

5168.9

-2.3


confidence and lift growth, while China

in the past week, is in the form of

vehicle, preferring to contribute via the

should boost consumption and allow

the European Union boosting the

IMF.

its currency to rise.

European

Financial

Stability

Fund

present €440 billion.

4.2 Inflation in China Cools in October

advanced economies and particularly so

Also, the policymakers are hopeful that

China’s annual inflation rate fell sharply

in the European Union and the United

big emerging economies, led by China,

in October to 5.5 percent in a further

States,” Lagarde said. “Our sense is that

will invest some of their vast foreign

pullback from July’s three-year peak,

if we do not act boldly and if we do not

exchange reserves to help end the debt

giving Beijing more room to fine-tune

act together, the economy around the

crisis.

policy to help an economy feeling

(EFSF) to around 1 trillion euros from its “There are clearly clouds on the horizon. Clouds on the horizon particularly in the

world runs the risk of downward spiral

the chill of a global slowdown.

of uncertainty, financial instability and

But there is scepticism in emerging

Other data, including figures showing

potential collapse of global demand...

economies, where public opinion is

industrial output in October grew

we could run the risk of what some

firmly against bailing out countries that

at its weakest annual pace in a year,

commentators are already calling the

still enjoy far higher average incomes.

provided the latest evidence of a

lost decade.”

Also, emerging economies including

modest slowdown in the world’s

China opine that European plans are

second-biggest economy.

The “lost decade” reference carries echoes

of

Japan’s

experience

“not complete and not firm”.

of

Industrial output rose in October by

persistent deflation, mounting debts

The lack of political will in Europe and

13.2 percent from a year earlier, slightly

and economic impotence through

a lack of coordination between EU

below expectations for a 13.4% rise and

the 1990s and beyond after its real

members is also seen as other hurdles.

the weakest pace since October 2010,

estate bubble burst — an outcome

suggesting factories were bearing the

many analysts fear could be repeated

Before arriving in Beijing, Lagarde had

brunt of the economic slowdown.

given the debt and property origins of

spent two days in Moscow, trying to

Europe’s problems.

convince Russia to chip in some of its

Inflation fell from 6.1 percent in

petro dollars to boost bailout funds for

September and marked the third

The solution for the ongoing public

the euro zone. But the so-called BRIC

straight decline since a peak of 6.5% in

debt crisis in Europe, which has seen

nations, comprising Brazil, Russia, India

July, bolstering expectations that price

the prime ministers of Greece and Italy

and China, have so far been reluctant

pressures were on a solid downtrend.

forced to announce plan to resign

to invest directly in Europe’s rescue

19


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