Economic Development

  • Farmers from 20 states want their pie in Union Budget

    Ahead of the Union Budget, farmers across the country have asked the government to consider agriculture as a separate entity and allocate a separate budget for it, besides interlink of all the rivers. Farmers from more than 20 states of the country had assembled under one banner and put forth their demands to MPs, Prime Minister, Finance Minister, Commerce and Industry Minister and the Planning Commission. Senior officials of the Consortium of Indian Farmers' Association (CIFA) said the farming community in the country wants a permanent solution to their problems rather than a short-term one through bonus on crops. "Finance Minister P Chidambaram, Agriculture Minister Sharad Pawar and Commerce and Industry Minister Kamal Nath have agreed to a long-term policy,' they told The Indian Express. CIFA secretary general Prabhakar K Reddy said they had urged the ministers to fix rates of crops based on cost of cultivation. He said they have also asked that rivers across the country should be interlinked so that input costs could be cut down. Farmer leaders from 24 states of the country had also met UPA chairperson Sonia Gandhi, BJP president Rajnath Singh and Telgu Desham party chief Chandrababu Naidu. "A meeting of all MPs across the country has been scheduled for March 15 at Andhra Bhawan in Delhi for an open debate,' said farmers. Reddy said, "The government should have a national policy on agriculture and the report of National Farmers' Commission Chairman MS Swaminathan should be put implemented.' Punjab president of the CIFA Satnam Singh Baheru said if the MPs failed to pay heed to their plight, they would blacklist them and never vote for them.

  • GMAS warns of agitation if SEZs not scrapped

    Goa's Movement Against SEZs Convenor Matanhy Saldanha Tuesday warned GMAS would be forced to launch second stage of its agitation if the State government failed to get all SEZs, including the three notified ones, cancelled immediately. In a statement issued today, Saldanha said the Board of Approval at the Centre had contradicted the statement of Commerce Ministry that SEZs would not be imposed on the State and more so when the Government does not want it. BoA recently issued show-cause notices to 12 SEZs asking why the approval granted to them should not be withdrawn stating that the move was in line with the principle of natural justice. At the same time the Board deferred the decision on de-notifying the three notified zones giving its promoters a new lease of life. The above moves of BoA have not gone well with GMAS whose Convenor charged the former of contradicting the public statement of Union Commerce Minister Kamal Nath who had said SEZs would not be imposed on the people of Goa if they don't want them. In the statement, Saldanha said the decision of BoA on 12 SEZs and the move seeking consultation with the State Government on three notified ones smacked of double standards. "If BoA takes any decision contrary to the will of the people, GMAS will be forced to construe that the former (Board) and the Union Commerce Ministry are involved in underhand dealings in connivance with the State Government to approve SEZs,' Saldanha declared. He, however, said GMAS was pleased with Cipla's plan to shift from Keri to some other place in the country. We request the promoters of other two notified SEZs to voluntarily leave Goa as the zones are shunned by Goans, he remarked. Meanwhile, the convenor said a meeting has been fixed on February 27, at 11.30 am to take up the subject.

  • Focus on agriculture

    The article on "Focus on agriculture' (Business Line, February 18) highlighted the need for giving importance to the agricultural sector in the context of its importance to the economy. The article focused on price levels of agricultural commodities in the background of the Government's concern for checking inflation. In this context, it is worth looking at the growth strategy adopted by Israel, a small country made up of predominantly desert and semi-arid land. Since its independence in 1948, it has been able to increase its agricultural production 16-fold, thanks to the synergies and co-operation between agricultural scientists, extension workers, farmers and service industries. Israeli farmers conserve water by constructing terraces in the hilly regions, which naturally holds water. Besides, drip irrigation techniques are used to reduce water consumption for agriculture. Also, use of optimal water, sunlight and air pressure increases productivity. Genetic technology and tissue culture have been employed to reduce the cropping time. Besides, techniques such as use of soil preparation machinery have increased soil fertility. Result: Higher production at low cost. This has enabled the country to export more than 70 per cent of its farm produce. What India requires is a marriage of superior cost-effective techniques and farming, akin to the Israeli model, to increase production at lesser cost. This will increase the profit margin of farmers and could be a solution to their economics-related problems. P. E. Muthu Mumbai

  • Govt does not want any SEZs, reiterates CM

    Chief Minister Digambar Kamat has reiterated that the State government does not want any SEZs in Goa including the three already notified ones. The SEZ Board of Approval at the Centre gave a fresh lease of life to the developers by deciding to seek reply from them as to why their projects shouldn't be scrapped in the light of the concerns raised by the Goa government and citizens' groups. Goa's Movement Against SEZs delegation led by convenor Matanhy Saldanha met the chief minister at his Altinho residence to clarify the government stand in the matter. "He (Kamat) has assured us that the government will not allow any SEZs in Goa,' Saldanha told Herald. It may be recalled that despite a strong pro-SEZ lobby in the cabinet, the chief minister on December 31 had taken a decision to scrap all SEZ projects in Goa and subsequently the decision was conveyed to the Centre. Since then however, the Centre has deferred taking any decision on SEZs in Goa until two days ago when BoA decided to consult the Goa government on the issue. The former Cortalim MLA was critical of the BoA, saying it has contradicted the statement of Commerce Ministry that SEZs would not be imposed on the State and more so when the Government does not want it. Yesterday, GMAS had warned that it would be forced to launch second stage of its agitation if the State Government failed to get all SEZs, including the three notified ones, cancelled immediately. "If BoA takes any decision contrary to the will of the people, GMAS will be forced to construe that the former (Board) and the Union Commerce Ministry are involved in underhand dealings in connivance with the State Government to approve SEZs,' Saldanha declared. CONFUSION: There appears to be some confusion over the number of SEZs quoted by BoA. Union ministry of Commerce had approved seven SEZs for Goa till December 2007 of which three were notified. But BoA now says that show cause notices would be sent to 12 SEZs. Officials here too wonder whether the figure quoted by BoA is correct and if so which are the ones as no communication had been received by the state government pertaining to more than seven. The 8 additional proposals which were forwarded to the Centre anyway are scrapped.

  • TN chalks out new MSME policy

    Envisages generation of one million direct and indirect opportunities The plethora of subsidies and incentives announced in the new exclusive policy for the micro, small and medium enterprises (MSMEs) sector by the Tamil Nadu government will create a large employment potential. New opportunities will be thrown open for artisans, ITI and diploma holders in the state to come and set up their own units, according to small industry associations. Tamil Nadu has unveiled a separate policy for the MSME sector with a vision to enhance the competitiveness of the sector and aim for a sustained annual growth rate of over 10 per cent for MSMEs. The new MSME policy, apart from encouraging agro-based industries, envisages generation of one million direct and indirect employment opportunities during the 11th Five Year Plan. The new MSME policy pampers tiny manufacturing units with capital subsidy on plant and machinery, low-tension power tariff subsidy, subsidy on assessed VAT and stamp duty exemption. Over and above this, the additional subsidies for units set up by women entrepreneurs, physically disabled persons and trans-gender entrepreneurs will be highly rewarding and encouraging, says S Srinivasan, president, Ambattur Industrial Estate Manufacturers' Association. New entrepreneurs and the small scale sector could reap the benefits of the current policy and become a regular feeder sector for the vibrant medium and large-scale sector, especially active in the automobile and engineering sectors in the state, he adds. K Gopalakrishnan, honourary general secretary of Tamil Nadu Small and Tiny Industries Association, says the policy will give fillip to the MSME eco-system in the state. The subsidy schemes will help small industry upgrade technology and machinery, thereby enhancing their competitiveness. The purpose of announcing a separate policy for the MSME sector is to make it co-exist with large industries as well as accelerate industrial growth and generate large-scale job opportunities, especially in the rural and backward areas, says P Selvam, secretary, small industry, government of Tamil Nadu. "With this new policy, we expect MSME sector contribution to the total exports from Tamil Nadu to go up substantially from the present 35 per cent,' he adds. Growing industrial demand has driven expansion by several units in the industrial estates, which are considered the growth engines of small and medium enterprises in and around Chennai. However, the units point out that land is not readily available for these units and expansion to other areas will prove to be unviable. The MSME policy prescribes, among other incentives and subsidies, reservation of 20 per cent of the land in all SIPCOT (Tamil Nadu Small Industries Development Corporation) industrial estates for MSMEs and upto 30 per cent for micro industries within SIDCO estates. This initiative is expected to help the small industry in a big way. Small industry bodies have for long pointed out that skyrocketing land prices caused by rampant SEZ promotion is affecting small industry growth. The policy also talks of enacting an Industrial Single Window Clearance Act for single window committees at the state and district levels and authority for setting time periods for approvals. The state government also plans to develop 22 new industrial estates in several parts of the state. Presently, there are about 78 industrial estates in Tamil Nadu. Locations for the new industrial estates have been identified and the government has also acquired lands for the these new estates. Lauding the state government for announcing a policy for revival of sick MSMEs, Srinivasan urges the government to undertake a detailed study on the causes of sickness. He points out that a primary cause for sickness is non-payment of supplier bills by medium and large industries; besides, lack of financial support, non-availability of technology, product process obsolescence, interrupted power supply and labour issues. The MSME sector in Tamil Nadu accounts for over 95 per cent of all industrial units, about 40 per cent of the output in the manufacturing sector and 35 per cent of exports. There were about 5,30,000 registered micro and small scale units as on March, 2007, providing employment to over 37 lakh people with a total investment of around Rs 16,817 crore. There is also a substantial unregistered sector of over 600,000 units which serves as a nursery for entrepreneurial talent, according to the MSME policy statement.

  • Plots for 51 Haryana units

    A high-level allotment committee of the Haryana Government on Wednesday cleared allotment of industrial plots to 51 units in various industrial estates developed by The Haryana State Industrial and Infrastructure Development Corporation. The committee is headed by P.K. Chaudhery, Principal Secretary and Financial Commissioner for Industries and Commerce. Mr. Chaudhery said that these projects when implemented would catalyse an investment of Rs.2,300 crore besides providing direct employment to more than 5,000 people. These plots have been allotted in Growth Centre Bawal Phase II and industrial estates at Barhi and Saha in Sonepat district and Ambala respectively. HSIIDC Managing Director Rajeev Arora disclosed that the allotments had been made in diverse fields .

  • Economic Survey on SEZs

    Acquisition of land for developing special economic zones (SEZs) is a major cause for concern, says the Economic Survey for 2007-08, which was released yesterday by Finance Minister P Chidambaram. The Finance Ministry presents the Economic Survey in Parliament every year, just before the Union Budget. It is the ministry's view on the economic development of the country in the year gone by, and the prospects for the year ahead. The survey has also expressed "apprehension' about the possible "misuse of the (SEZ) scheme and relocation of existing industries into SEZs'. It says the Board of Approval (BoA) headed by Commerce Secretary G K Pillai, which approves SEZ proposals, would not give a go-ahead to SEZs that "have carried out or propose to carry out compulsory acquisition of land

  • Forex inflows still a 'challenge': Survey

    Govt's annual report doubts ability to eliminate revenue deficit. Calling double-digit growth a tough task, the government today cited foreign capital inflow and inflation as the macroeconomic challenge to high sustained growth in its Economic Survey for 2007-08. "If you wish me to sum up in one phrase the outlook for 2008-09, I would say optimism but with caution is the watchword,' Finance Minister P Chidambaram told reporters after presenting the Survey in Parliament. The annual report card on the economy also said the target of bringing the revenue deficit down to zero by 2008-09 would "remain a challenge,' pointing to a step-up in expenditure as the Congress-led United Progressive Alliance prepares for general elections next year. Though bullish on growth, the Survey has sounded an unmistakable note of caution on the capital inflows that the country has seen in the last several months. As these inflows are substantially higher than what the country needs to cover its trade deficit, these funds threaten to raise prices, leading to a tighter monetary policy. This, in turn, is threatening to capital investments in the country. As the sub-prime crisis unfolds in the US and Europe, global investors are likely to be more risk-averse and are, therefore, likely to cut investments in emerging markets like India, the Survey says. However, this could be balanced out by the increased liquidity created by Western Central Banks to deal with the crisis. "On balance, the decline in capital inflows as a proportion of GDP in 2008 is likely to be modest,' the Survey notes. There could be a softening in global commodity prices because of the moderate slowdown in the world economy led by the sub-prime crisis in the US, the Survey says. However, the slowdown could hurt Indian exports, resulting in a modest increase in the country's deficit in trade of goods and services, unless the US slowdown turns into a severe recession, it adds. The Survey also lists radical policy reform options. These include allowing regulated private entry into coal mining, phasing out controls on sugar, fertiliser and drug industries, opening up all retail trade to foreign investment, raising foreign ownership of insurance companies from 26 per cent to 49 per cent (51 per cent for companies operating in the rural sector) and allowing foreign companies to set up fully-owned rural banks. Some of these options like opening retail and insurance sectors have been debated internally by the government in the past. However, opposition from its Communist allies has made it put these proposals on the backburner. The Survey does not mention how actively these options are being considered by the government. However, a finance ministry official told Business Standard that these are the policy reforms that need to be undertaken if the country wants to move to the high growth trajectory. "Hopefully, the inputs will be picked and debated for implementation. These are suggestions and not recommendations,' the official said. In addition, the Survey calls for amending the Factories Act that would allow companies to meet seasonal ups and downs in demand and new bankruptcy laws to facilitate the exit of old management as expeditiously as possible. It also lists an ambitious disinvestment programme of listing all closely-held public sector companies and auctioning all loss-making units that cannot be revived. For the first three years of its rule (2004-07), the government kept its word to the Left parties and did no disinvestment at all. It was only earlier this year that it decided to list all its power utilities.

  • Assessing the Budget

    Any Budget can be evaluated on a number of criteria. Here, briefly, is a check-list of benchmarks by which today's pronouncements can be scored. First, from the perspective of the finance ministry's own domain, we need to look at what it does on the fiscal front. Mr Chidambaram has shown complete commitment to the mandate of the Fiscal Responsibility and Budget Management (FRBM) Act, to cap the fiscal deficit while eliminating the revenue deficit. The latter is the greater challenge and his convergence towards the zero-deficit target will be a significant yardstick. Beyond the aggregate numbers, he has also indicated his commitment to taking the country to a full-fledged Goods and Services Tax (GST), which will involve a series of rate rationalisations and re-balancing as far as indirect taxes are concerned. These should be watched out for. Second, broadening the scope of evaluation to macro-economic performance, the Budget must be seen in terms of what it does to sustain rapid economic growth, especially in the context of the global as well as Indian slowdown that has set in. To deal with the cyclical effects, he needs to pump money into programmes that will quickly spend it, thus achieving pump-priming. Critical to longer-term growth is the stepping up of investment in infrastructure, not just in terms of financial commitments but also in creating effective vehicles for implementation in the public and private sectors. Even with all the good intentions of the government in play, the infrastructure gap is not narrowing. Third, the ruling coalition's emphasis on inclusive growth is beyond being a political slogan; inclusiveness is a critical component of a sustainable growth path. This needs to be tackled at several levels. Transfer payments to provide households a secure and minimum level of subsistence need to be combined with longer-term programmes that build capabilities and earning capacity. The Economic Survey has shown that, despite doubling social sector spending over the past four years, the country's position vis-

  • Sustaining 9 p.c. growth will be tough: Survey

    Favours partial sale of profit-making non-navaratna PSUs, and tackling of inflationary impulses Holding out a warning that the current slowdown in the U.S. would have an effect on the Indian economy, the Economic Survey 2007-08 maintained that sustaining a high GDP growth of nine per cent while reining in inflation would be a tough challenge. Tabled in Parliament by Finance Minister P. Chidambaram on Thursday, the Government's pre-Budget annual economic progress report said that in the current uncertain scenario, an increase in the overall growth to double digits would entail additional reforms and came out with a policy prescription. Among the various measures suggested to sustain the high growth momentum, the Survey favoured partial sale of the identified profit-making non-navaratna public sector undertakings (PSUs), phasing out control on sugar, fertilizer and drugs, sale of old oilfields to the private sector, a higher share for foreign equity in retail trade and further opening up of the banking and insurance sectors to foreign direct investment (FDI). With the economy projected to grow at 8.7 per cent during the current fiscal, the Survey pointed out that the lower growth represented a deceleration from the unexpectedly high growth of 9.4 and 9.6 per cent in the preceding two years. "Maintaining growth rate at nine per cent will be a challenge and raising it to two digits will be an even greater one,' the Survey said. Linking the huge accumulation of foreign capital inflows as the reason for the pressure building up on prices, the Survey said that inflationary impulses from global commodity prices must be tackled through use of fiscal and trade policy instruments. Inflation this fiscal is projected to return to the earlier level of 4.4 per cent, down from 5.4 per cent in 2006-07. Deceleration in growth this fiscal appears to have spread across all sectors except electricity, community service and services such as trade, hotels, transport and communications. More significantly, the slowdown in the farm sector growth is attributed to the sluggish trend witnessed in rabi crops. Also, other sectors like manufacturing and construction which grew at 12 per cent in 2006-07 dropped by 2.5 percentage points in the current year. "The slower growth of consumer durables was the most important factor in the slowdown of manufacturing,' the Survey said. As for the external sector, the U.S. economy is expected to slow down in 2008 as a fall-out of the sub-prime mortgage crisis. In fact, most projections of global economies anticipate a moderate and not severe slowdown. "This will impact all countries including India, depending on the importance of the slowdown in different countries and importance of the country in our exports,' the Survey concluded, while pointing out that a further fall in exports to the U.S. might be unavoidable but would be relatively modest. On the flip side, the Survey viewed that one of the implications of the U.S. sub-prime crises would be increased capital inflows into India and other emerging markets. "Thus the situation of excess inflows is likely to remain, though the pressure on reserve accumulation and exchange rate appreciation is likely to ease. Any reduction in excess capital flows from the high levels in 2007 may affect the equity markets in the short-term, but will make the task of monetary management easier,' it said.

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