Except for the central bank, other policy-makers seemed to have gone into an early summer recess last fortnight, even as a good part of India battled devastating drought. The Minister for Chemicals and Fertilisers, Suresh Prabhu, announced the setting up of a Rs 150-crore fund to promote R&D in the pharma sector. The Sathyam Committee Report on the draft textile policy recommended 100 per cent foreign investment in garments, de-reservation of the garment industry, and removal of the 50 per cent export obligation on foreign joint ventures, among others. And the setting up of a yet another 'new' divestment commission was announced.

Although the Reserve Bank of India's (RBI) credit policy was the highlight of the fortnight, it did not spring any surprises on corporate India. The RBI had earlier announced a one percentage point cut in the bank's Cash Reserve Ratio (CRR), triggering rate cuts across the industry. Among the salient features of the policy were the RBI's decision to allow financial institutions to set up banks, and banks to invest up to 50 per cent in insurance joint ventures. Besides, the minimum daily CRR was slashed from 85 to 65 per cent. The stock markets, however, were indifferent to the credit policy. As far as New Delhi is concerned, the only hot thing in the weeks to come could well be its scorching summer.

-Sadanand M. Tutakne

C O R P O R A T E   S U M M A R Y 
Driven by the Deal Zeal
Barely a month into the new fiscal, corporates discover their flavour of the fortnight: deals and more deals.

Whew! Reliance Industries announced a mega $500-million plan of buying half of Consolidated Electric Power Asia (CEPA), which is setting up a 3,960-mw thermal power project at Hirma, Orissa. StanChart's CEO, Rana Talwar, snapped up rival ANZ Grindlays' Middle-East and Asian operations for $1.30 billion. The Nandas of the Escorts Group lowered their stake in the motorcycle JV with Yamaha Motors. The Tata Group-even as it denied rumours that it was eyeing British car company, Rover-reached an agreement with its JV partner, Dresdner RCM Global Investor Holdings, UK, to buy out its 20 per cent stake in Tata Asset Management Company, which manages total assets of Rs 825 crore. Arvind Mills was slapped with a $75-million default case by its foreign lenders, and the B.K.Birla Group decided to sell its loss-making tyre business-Birla Tyre-to some foreign buyers. It's India Inc. unplugged.

-Dilip Maitra

M A R K E T   S U M M A R Y 
A Mind of Its Own
Don't expect the Sensex to show any more sense than it has so far. But do expect quality stocks to rally round.

A no-surprises credit policy missed Dalal Street by a mile, but information technology, communications, and entertainment (ice) stocks, and the indices, yo-yoed for other reasons. The Bombay Stock Exchange Sensitivity Index-Sensex-touched a low of 4,285 points on April 25, 2000, almost a third off February 14, 2000's peak of 6,150 points. Reason: the crash on the NASDAQ, the supposed withdrawal of what can be called Mauritius tax benefits, and the collapse of international hedge funds. To prevent short-selling by momentum players who ape the NASDAQ, the Securities and Exchange Board of India (SEBI) slapped a 5 per cent additional margin.

As the markets tumbled, the operators were selling even blue chip New Economy stocks to pay off their losses. Says Deepak Mohoni, 44, Investment Consultant: ''A few of the Old Economy stocks could actually move up if they manage to hold out during the next few weeks.'' Mutual funds and Foreign Institutional Investors continued to be buyers. Says Bharat Shah, 38, Chief Investment Officer, Birla Mutual Fund: ''Strong infotech stocks will continue to perform, irrespective of the market-direction.'' The collapse, then, can be seen as an investment opportunity. However, some of the ice stocks have crashed by over 70 per cent, and-some say-they may never see their old highs again. When the bears come stalking, there will be a rush for quality stocks.

-Roshni jayakar

G L O B A L I S A T I O N
This Elephant Won't Dance
After a decade of reforms, India is still a laggard among the world economies, a new world report on competitiveness reveals.

It wasn't just the Asian flu which missed India. The Asian miracle did too. If the Lausanne, Switzerland-based International Institute of Management Development's (IMD) World Competitiveness Yearbook index is anything to go by, then the Indian economy's competitiveness is at a five-year low. This, when everyone thought the second generation of reforms was all set to turn the country into an economic powerhouse. IMD-which surveyed 47 countries on their ''ability to provide an environment that sustains the competitiveness of enterprises''-puts India at an abysmal No. 43. In 1999, the country was at No. 39. What explains the huge drop in ranking? ''India scored poorly in two major categories: domestic economy and management,'' says N. K. Nair, 53, Director, National Productivity Council. China has slipped two places, too, but it is way ahead at No. 31. The US and Singapore take the top two positions, respectively, while Russia winds up the list at No. 47.

Of the 249 parameters on which all the countries were graded, India ranks the lowest in 15 of them, including on counts of infrastructure, literacy, retail sales per capita, human development, and productivity in services per person. Proponents of the its-our-size-that-makes-it-so theory may argue that within India there are pockets which are probably as competitive as the best. And thanks to the very size of the Indian market, these pockets may be as large, if not larger than some countries in Europe. That could be the case, but skewed competitiveness is probably as bad as uncompetitiveness. Clearly, infotech does not a country make.

-Sadanand Tutakne

C R EA D I T  P O L I C Y 
Cautious on Credit
With inflation creeping up, the Guv is loath to unplug money supply.

On the simmer. That's how the Reserve Bank of India (RBI) Governor, Bimal Jalan, wants the Indian economy to stay. Accordingly, the credit policy announced on April 27, 2000, did not seek to make any sweeping changes, but rather focused on streamlining certain structural issues. For one, financial institutions have been allowed to set up banks, and banks have been permitted to own half of insurance joint ventures. Besides, project loans will now have floating rates of interest pegged to the prime lending rate. As for trade, export credit refinancing facility has been liberalised, although it is only a marginal concession. Ending the primary dealers' free lunch, the central bank has replaced the fixed rate of refinance with a Liquidity Adjustment Facility (LAF), which will require banks and primary dealers to bid for their refinance requirements at market rates. And funding will be made available only to meet systemic mismatches, and not for regular funding purposes.

Banks have also been asked to tighten their Non-Performing Asset norms, even as the minimum daily requirement of cash- reserve ratio was reduced from 85 to 65 per cent. Despite its 6.5 to 7 per cent GDP growth projection, the bank seems fearful of inflation ballooning. In a bid to eliminate the volatility in the Wholesale Price Index, the RBI has proposed a new measure of inflation, core inflation. However, only robust economic growth, and stable stockmarkets, will make the Guv's handiwork creditworthy.

-R. Sridharan

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