Experts doubt sustainability of industrial recovery
New Delhi: Economists recognize recovery in industry but are divided over its sustainability and strength. The index of industrial production (IIP) registered 5.8 per cent in the last fiscal as compared to 2.73 per cent in 2001-02. Despite a drought year, manufacturing has significantly improved its growth since July 2002, but the growth has been very thinly spread, said Dharmakirti Joshi, senior economist, Crisil Centre for Economic Research. “The number of sectors contributing to manufacturing growth has been reducing.” Manufacturing grew by 6 per cent in 2002-03 as compared to 2.78 per cent in the previous fiscal. Analysing the data since April 1995 and comparing the recoveries seen over the years, Joshi said it would be reasonable to conclude that each phase of industrial recovery has been more fragile than the previous one and in no way compares with the growth buoyancy witnessed in the first upturn, that is, 13 per cent in April 1995-August 1997. “The high industrial growth during this period was led by private investment boon due to removal of entry barriers accompanies by financial sector liberalisation. This growth could not be sustained as it was based on overoptimistic demand expectations that did not materialise. Each recovery after that has not been led by any major structural reform but by either agricultural cycles or as in the case of recent recovery by policy-induced boost to construction like in highways and housing,” said Joshi.
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Changes in DEPB scheme likely to make it WTO-compatible
New Delhi: The government plans to introduce some new provisions in the post-export duty entitlement passbook (DEPB) scheme so as to make it “compatible” with the World Trade Organisation (WTO) rules and thus avoid countervailing action by industrialised countries. Under the proposed provisions, those exporters availing of the benefit of the scheme will have to maintain specific registers containing details of the items imported by them. They will also have to be ready for physical verification of their records by concerned authorities, say commerce ministry officials. The ministry officials point out that the European Union, the United States and South Africa continue to perceive the DEPB scheme as subsidy-oriented and want it to be scrapped on grounds that it is violative of the provisions of the WTO agreement on subsidies and countervailing measures. Indian Council for Research on International Economic Relations’ (Icrier) Anwarul Hoda opines that “some corrections are required to make the DEPB scheme compatible with the WTO rules so as to avoid the risk of countervailing action by developed countries”.
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CACP may not increase MSP for kharif crop
New Delhi: The commission of agricultural costs and price (CACP) has refused to recommend any hike in minimum support prices (MSPs) for foodgrain for the ensuing kharif season. It has also decided to announce the prices early, even before the beginning of the sowing season. The agriculture ministry, which is going to announce MSPs shortly, is waiting for a Cabinet approval to do so. “Recommendations have already been made and the prices are likely to be announced before the end of this month or early next month,” said an ministry official. The ministry has taken a conscious decision to announce prices early, with a view to help farmers make their choices before going ahead with sowing, says the official. Traditionally MSPs are announced only after the sowing season. However, as per an official communication from the ministry, MSPs for kharif crops from this year on will be announced by May 31. For rabi crops and sugarcane the date has been finalised for September 30, and September 28 will the date for jute.
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External debt increased to $105 bn by Dec 2002
New Delhi: India’s external debt inched up to $105 billion at the end of December 2002 from $98.8 billion as on March 31, 2002. The ninth status report on India’s external debt released by the finance ministry states that the incidence of external debt burden measured by debt-GDP ratio almost halved over the last decade from 38.7 per cent to 20.6 per cent. According to the report, debt service as a proportion of gross current receipts reduced to less than half from 30.2 per cent in March 1992 to 13.7 per cent at the end of December 2002. The stock of short-term debt has declined steadily. This has resulted in a significant shrinkage in short-term to total external debt ratio from the peak of 10.2 per cent at the end of March 1991 to 3.2 per cent at the end of December, 2002. As a result of this increase in foreign exchange reserves at $77.6 billion as on May 2, 2003, short-term debt as a proportion of foreign exchange assets declined to 5 per cent during the corresponding period. External debt stock on total government debt has dropped from $46.5 billion at the end of March 1998 to $ 45.8 billion by December end 2002. Contingent liability of government has also reduced from $7.3 billion at March end 1998 to $6.4 billion at the end of December 2002.
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