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E X E C U T I V E S
U M M A R Y
It's getting better all the time
Clinton's last hurrah may mean little to the Indian economy in the short run, but who needs Uncle Sam anyways?
Policy-making took a back-seat in the fortnight that was as India got down to the serious business of playing host to the first US President to visit the country in 22 years. The only tangible outcome of the visit was an ambitious vision statement titled "India-US Relations: A Vision For The 21st Century." The 2 sides also spent considerable time talking about trade, but little trade is likely to result from that.
Closer home, the Government of India continued its let's - ready - for -
disinvestment drive by getting the joint secretaries of departments which control public sector enterprises that have been identified for privatisation to report directly to the Department of Disinvestment. And the Reserve Bank of India issued fresh guidelines for the entry of banks into the insurance sector. Only banks that have a net worth of Rs 500 crore, a 3-year profitability record, and a capital adequacy ratio of 10 per cent or more are eligible to form joint ventures (maximum permissible stake of the banks: 50 per cent) with insurance companies.
The government's focus on reducing subsidies continued: it increased the price of LPG by Rs 30 a cylinder, kerosene by Rs 2.50 a litre, and ATF by Rs 2 a litre. Elsewhere in the government's policy-making machinery, the trickle of reforms continued. The Department of Telecommunications (dot) decided to let the private companies that set up Internet gateways to sell bandwidth to ISPS. Thus, bandwidth exchanges now have the government's sanction. India's decision-makers may not look it, but they're certainly on the wired side of the tired-wired equation.
-Biju Mathew
C
O R P O R A T E S U M M A R Y
The art of the deal
e-India inc. continued to resonate with deals. but then, so did ex-India inc.. bully for both!
It was a fortnight that highlighted the art of deal-making. The Kumar Mangalam Birla-led Hindalco acquired Alcan's 54.6 per cent stake in Indal for Rs 738 crore. And the Chennai-based private internet service provider Dishnet dsl netted a cool $70 million by offering an undisclosed stake in its equity to several foreign companies including Covad Communications, Century Tel Inc., hsbc Private Equity Fund, and Citicorp International Finance Corporation.
The fortnight saw foreign firms in the direct investment mode too. French tyre major Michelin unveiled plans to invest Rs 500 crore in a million-radials-a-year plant in Maharashtra. And Italian scooter giant Piaggio got a go-ahead from the GOI to set up a 100 per cent subsidiary. The most unlikely shark was IOC, which, apart from taking a 60 per cent stake in Lubrizol India, may take a 26 per cent stake in Essar Oil's 10.50 million tonne refinery at Jamnagar. Visiting Deal-meister (Don) Trump would have been pleased.
-Dilip Maitra
S
T O C K M A R K E T S U M M A R Y
April may be good
The recovery is on and great fourth-quarter results could cause the sensex to zoom again.
A new fiscal year, global markets on the upswing, and a cooling down of the indices on the bourses, all point to a renewal of the rally in April. This, after a decline of nearly 16 per cent in the Bombay Stock Exchange (BSE) Sensitivity Index (a.k.a. the Sensex), from its peak of 6150 on February 14, 2000. Says Ramesh Damani, 45, BSE broker: "This time the rally will be broad-based and led by the information technology stocks."
Not surprising. For, in the US markets, Microsoft was once again driving the NASDAQ up though the broad-based Dow Jones index, with more old economy stocks, has also been moving up. However, thanks to the fall, infotech, media and entertainment stocks, which have plunged by between 40 and 50 per cent, offer good buying opportunities for investors.
There's more reason to cheer: fourth-quarter results are expected to come in around the second week of April, and, in the expectation of good results, some operators are likely to build up positions in various stocks. The result could well be another bull run. Net-net: the Sensex could zoom.
-Roshni jayakar
G
O V E R N A N C E
Teaching Thrift
The government's solution to rising expenditure? another commission.
If you want to procrastinate over taking a decision, set up a commission. If you want to procrastinate even more, announce that you'll set up one but do so only a year later. A year ago, Budget 99 had announced that the government would set up an expenditure reforms commission. Nothing happened till a full year went by, and, finally, Budget 2000 announced its formation.
The news that the commission, to be headed by former finance secretary K.P. Geethakrishan, is a reality did not really create much of a ripple. The setting up of commissions rarely does. And carps, most of them concerning the fact that the commission is headed by a former bureaucrat, abound. To be sure, no one doubts Geethakrishnan's credentials. Still, the question is whether the ex-IAS officer can withstand pressures from the various lobbies at work in the government.
Of course, the commission, which also comprises former financial advisor to the defence minister, V.S. Jafa, economist Kirit Parekh, and expenditure secretary C.M. Vasudeva, will benefit from its clear mandate to go ahead and get tough with government spending. And the government too is dead set about changing its spending habits. But the desire to do everything in-house, with no expert assistance, is a little alarming. Says Indira Rajaraman, 52, Professor, NIPF&P: "In the case of fiscal management, India and other developing countries like Brazil and Mexico have many things in common. Therefore, it would be of help if India can source international expertise, too, to solve our fiscal crisis." Sometimes, to save money, you may have to spend some.
-Sahad
P.V.
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