Having sent US President Bill Clinton safely back home, the Vajpayee Administration got into overdrive last fortnight. Udyog Bhawan was the centre of the policy universe, with Commerce Minister Murasoli Maran announcing a new World Trade Organisation (WTO)-compatible export-import policy. In one fell swoop, he freed 714 items from import restrictions, reintroduced duty-free replenishment licences, abolished import licences beginning April 1, 2001, earmarked a Rs 250-crore fund to help states boost exports, and converted the export processing zones into a la- China special economic zones.

The Reserve Bank of India sent interest rates spiralling down with a 1 percentage point reduction in cash reserve ratio and repo rates. Before the markets could celebrate the cuts, however, the income tax department created shockwaves by slapping income tax claims on 5 Mauritius-based Foreign Institutional Investors (FIIs). However, the Union Finance Ministry soon clarified that there will be no double taxation. Clearly, even in politics, the bottomline comes first.

-Arundhati Bakshi

C O R P O R A T E   S U M M A R Y 
Back to re-restructuring
Com.dots continued to slice, dice, and strike alliances while alarms of a shakeout rang out in the telecom industry.

In what smacked of pre-Net era, the fortnight that was found corporate India busy re-aligning its strategy and structure. Sterlite Industries formally announced its demerger, separating its non-ferrous metals and telecom cables businesses. Larsen & Toubro and Gujarat Ambuja Cement entered into a unique agreement for sharing information related to transportation of cement in various parts of the country. Reliance Industries announced that it planned to buyback 3 per cent of its outstanding equity for Rs 1,100 crore. And global energy company, the US-based Enron Corporation, decided to pitch for a 49 per cent stake in Ispat Energy, which is setting up a 354-mw power project at Dolvi (Maharashtra).

The M&A wave swept through PSUs too. The Power Finance Corporation is to be merged with the Rural Electrification Corporation to create a company with a Rs 4,500-crore net worth. While Indian Oil Corporation is set to be merged with Madras Refineries, Cochin Refineries may be merged with Bharat Petroleum.

In telecom, close on the heels of Usha Martin opting out of its paging licences in Ernakulam and Indore, industry-leader Hutchison Max decided to close shop in 7 cities.

-Dilip Maitra

S T O C K M A R K E T   S U M M A R Y 
ICE May Not Melt Yet
Its recent rough ride notwithstanding, the Sensex is set to remain uppish-unless the NASDAQ nosedives.

The Black Tuesday was a grim reminder of the tenuous valuations of Infotech, Communications and Entertainment (ICE) stocks. But it also seems to be a pointer to the market's inherent belief in them. After plunging by 361 points to touch a low of 4,691 on April 4, Black Tuesday, the 30-share Bombay Stock Exchange Sensitivity Index, a.k.a. Sensex, made a recovery over the next 2 days, gaining a whopping 752 points to soar to 5,443.

What triggered the market paranoia was, first, the American technology index, NASDAQ's 500-point sheer drop following the US Supreme Court's ruling in the Microsoft case. Then, the income tax department in India slapped notices on 5 foreign institutional investors (FIIs) asking them to pay income tax, although they were covered under the double taxation treaty with Mauritius. With the Finance Minister axing the move, the Sensex heaved a sigh of relief.

Says Deepak Mohoni, 43, Investment Consultant: ''The rally raises the question whether the bear market signal-the 8-week long intermediate downtrend that started at 6,151 on February 14, 2000-was a false one.'' It may have been. For, the ice stocks-after falling between 50 per cent and 66 per cent-have since rallied. And the FIIs have been net buyers with their net investments touching Rs 805 crore. And the old economy stocks, which saw some consolidation, seem set for longer-term revival. With the market expecting an intermediate uptrend, another Black Tuesday seems distant in Sensex's calendar.

-Roshni jayakar

E C O N O M Y  O U T L O O K
Clawing Its Way Back Up
The recessionary years are over, and the Indian economy is set to cruise on the road to growth, says a new study on economic outlook.

Goodbye, recession, hello, growth. A 150-equation, open-economy macro-econometric model predicts that India's aggregate Gross Domestic Product (GDP) will grow at an average of 6.38 per cent over the next 4 years. The study, which was conducted by the Institute of Economic Growth, says that the growth will be led by a revival in the industrial sector, projected to clip ahead at more than 8 per cent over the next 4 years. Although agriculture shows a modest average growth rate of 2.66 per cent over the next 5 years, the services sector is projected to grow steadily at an average rate of 6.85 per cent over the same period.

Despite the robust growth, the rate of inflation is expected to be below 5.80 per cent during the next fiscal. A modest deceleration in investment is projected, and as a percentage of GDP it could touch a low of 20.53. This is part of a perceptible, 4-year-old downtrend in the investment-GDP ratio. Cautions Pronab Sen, 47, Advisor, Perspective Planning Division, Planning Commission: ''Although a high growth rate can be temporarily maintained on the basis of utilisation of excess capacity, some time in the future you will not have enough capacity to sustain the growth rate.''

There is consensus that the economic engine will hum, but not without some rattling and clonking. For instance, public debt is set to go up from 56.66 per cent of GDP to 76.43 per cent by 2004. Even the prime lending rate is expected to fall marginally. And the exchange rate will continue to deteriorate. A little rain...

-Sadanand Tutakne

S T A T E  D E F I C I T S 
Do They Mean It?
India's deficit-ridden states are trying to shore up their bottomlines by getting their books in order.

Broke. But not broken. If their Budget 2000 proposals are anything to go by, then India's profligate states are making a serious attempt at fiscal consolidation. BT's analysis of 7 State Budgets reveals a common bid to rein in expenditure, and spur revenue. Agrees Tapas Sen, 45, Associate Professor, National Institute of Public Finance and Policy: ''There is definitely some fiscal consolidation taking place.''

Maharashtra, for instance, has increased the sales tax on some items, and hiked the tax on cable TV operators, bowling alleys, and professionals. But none of the other 6 states have slapped major fresh taxes. Instead, the focus is on better tax collection. Explains Saumitra Chaudhuri, 47, Senior Economist at ICRA: ''The scope to impose new taxes is limited.''

States awash in red, like Uttar Pradesh, have proposed reforms in tax structures, subsidies, and non-productive expenditure. Punjab plans to mop up Rs 100 crore by rationalising levies and imposing fresh taxes. And Tamil Nadu has decided to cap guarantees to loans taken by its departments.

Ever since the double whammy of the 5th Pay Commission largesse and a shortfall in their share of Central taxes hit state governments in 1997-98, there's been a growing pressure on them to balance their budgets. If this year's exercise proves cosmetic, then the regional governments will continue to be in a state of deficit.

-Seetha

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