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E C O N O M Y S U M M A R Y Sinha's waltz to wailers Badgered into submission, Union Finance Minister Yashwant Sinha sugarcoats Budget 2000-at the Exchequer's cost. The only thing that Yashwant Sinha wasn't accused of last fortnight was match-fixing. That apart, he got blamed for pretty much everything else, such as choking Indian exports, cutting off Dalal Street's bull run, even, the drought. His response was to fill Budget 2000's rough edges. The details! The proposal to phase out income-tax exemption to exporters has been put off until 2009. Stock-options to employees will not be taxed at the time of issue, but at the time of sale. Similarly, venture capital funds will not be taxed, but investors in them will. While Sinha did yield to the demand for a hike in the import duties on agri-products like tea, coffee, and poultry, he refused to oblige on the issue of food and fertiliser subsidy. But his volte face will cost the Exchequer Rs 1,000 crore and widen the yawning gap between the GOI's income and expenditure. Populism made its presence felt in the Electricity Bill, 2000, too. The Bill, which will replace all the existing electricity laws, has been watered down to give state governments the option of retaining their inefficient electricity boards. The initial suggestion was to restructure the electricity boards into three corporations. Finally, worried about the wild valuations of dot.com stocks, the market watchdog, the Securities & Exchange Board of India, said that it planned to probe their valuations. Another fortnight when the administration stumbled along its job of governance. -Biju Mathews C
O R P O R A T E S U M M A R Y Out. That's how corporate India wanted to be last fortnight. In a mega move, scions of the extended Birla clan-Basant Kumar, Chandra Kant, and Sudarshan Kumar Birla-were reported to be planning to offload their combined cement business, which has a capacity of 11.08 million tonnes per annum, to a willing buyer. The UK's Blue Circle, France's Lafarge, and Mexico's Chemox could be some potential suitors. Ending a protracted feud with Nestlé, Dabur India decided to exit from their joint venture, Excelsia Foods, by selling its 40 per cent stake to Nestlé. Tata Iron & Steel Company wanted to get out of the bearings business. On the 'In' front, the race for the takeover of Scooters India got hotter with the entry of Suzuki Motors of Japan, on the heels of Piaggio of Italy. Hutchison Telecom announced its offer to buy Usha Martin's cellular operations in Calcutta for $145 million. Rounding off a hectic fortnight, consumer electronics major BPL decided to transfer its home appliances business to a joint venture with Sanyo. Who said summer was a silly season? -Dilip Maitra S
T O C K M A R K E T S U M M A R Y Like a dutiful CFO, Union Finance Minister Yashwant Sinha agreed to accommodate changes in his annual report, the Budget:2000. And, like a gratified boss, the market perked up the next day, on May 5, 2000, taking the Bombay Stock Exchange Sensitivity Index, a.k.a. the Sensex, up by 5.04 per cent, to 4,553.92 points. As the market saw it, the revoking of tax on venture capital funds and the 10-year tax holiday for R&D in pharma would bring in fresh investment. The euphoria was as short-lived as the market's whims. Still in the grip of a ''fear-pyschosis,'' investors see every rise in the Sensex as an opportunity to book profits. After all, who knows if the New Economy stocks will rise again. As the Sensex dipped to a low of 4,107.14 on May 12, the intra-day volatility rose dramatically. Says Ramesh Damani, 45, BSE broker: ''The bulls won't return without second-generation reforms.'' In 1992, when the market was in crisis, and the index was at 4,500, it took a decisive Budget to finally pull up the Sensex. Eight years on, the market is much below that level. The foreign institutional investors were net buyers in April, 2000, pumping in Rs 3,430 crore. With the market keeping a ritualistic vigil for the monsoon, the Sensex could remain range-bound in the short run. Will it rain? -Roshni Jayakar G
O V E R N M E N T F I N A N C E In early May, 2000, North Block mandarins were euphoric. As people in charge of balancing the government's income and expenditure, they were ecstatic about the 17 per cent jump in actual revenue-collection in 1999-2000 over the previous year. Compared to the revised estimate of Rs 57,300 crore, income-tax collections touched Rs 57,581 crore. And Excise and Customs collections too had exceeded the target by Rs 658 crore and Rs 515 crore, at Rs 61,389 crore and Rs 48,315 crore, respectively. The celebrations may be premature. Argues Saumitra Chaudhury, 47, Chief Economist at ICRA: ''The ministry has not spelt out how much of the excess revenue it will refund to tax-payers.'' Worse, a BT analysis of the Budget Estimates for the five years of 1996-2001 shows that the government's expenses are fast out-stripping its income. By March, 2001, revenue receipts will rise only Rs 73,328 crore to Rs 2,03,673 crore. But just the non-plan expenditure alone will jump by Rs 1,00,415 crore to Rs 2,50,387 crore. Planned expenditure is set to go up Rs 33,415 crore to Rs 88,100 crore. The growing income gap will more than triple the government's market borrowings at Rs 76,383 crore. The government's committed expenditure-interest payments, defence, pensions, and grants to states-too has ballooned. By next year, the pension bill more would have more than tripled from Rs 4,509 crore to Rs 15,843 crore. Interest payments will vault from Rs 60,000 crore to Rs 1,01,266 crore, and the defence spend from Rs 18,854 crore to Rs 40,661 crore. The higher share of the states in Central taxes will further hit the government. The only way out for the government is to rein in its galloping expenses. -Ashish Gupta G
L O B A L I S A T I O N Breaking a three-year jinx, India's exports growth edged past the double digit-mark in 1999-2000. At $37.5 billion, earnings were nearly $4 billion more than in 1998-99. More importantly, the growth rate was 11.6 per cent compared to the previous year's 3.74 per cent. Items contributing to the jump were gems & jewellery, engineering, electronics & software, and carpets. The highest growth came from gems & jewellery, whose exports jumped by a quarter over 1998-99. But a big reason behind it was the millennium-led market-boom. Reasons H.A.C. Prasad, 43, Economic Advisor, Ministry of Commerce: ''Lower import duties on gold and the easing of the gold-dollar account helped push exports.'' The reading between the lines? They may not next year. But some economists believe other big-ticket items like garments and engineering goods could make up for the shortfall in gems & jewellery. Says B. Bhattacharya, 55, Dean, Indian Institute Of Foreign Trade: ''The world economy is on a roll, and the South-East Asian recovery is almost three-quarters done.'' Indeed, these were the factors that helped engineering exports ratchet a 21.6 per cent growth. In contrast textiles and garments grew by a mere 8 per cent. The reason? Exporters exhausted their quota. But textiles and garments still earn the most, and raked in Rs 7,294.5 crore in 1999-2000. The good news: exports could keep their head over the double digit-mark. -Naagesh Ayyagary |
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