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TRENDS: LEADER Superman V: Murasoli Maran He's pro-liberalisation, but in a wholly Indian way. He's always ready for a good fight, as long as he thinks the cause is right. Meet India's own Incredible Hulk: Murasoli Maran.
Murasoli Maran is the GOI's own Bruce Banner. Present him with tricky tangles like the dereservation of sectors hitherto reserved for small scale industries, the removal of quantitative restrictions on imports, and the seemingly ad-hoc functioning of the Foreign Investment Promotion Board, and the man tackles them with an almost scientific precision. But present Maran with a cause, and the Hulk in him surfaces. L'affaire Suzuki (circa 1997) was a sort of coming-out event. Then the industry minister in the United Front government, Maran became famous for his reaction to what he perceived as Suzuki's arm-twisting techniques. ''They are welcome to go; there are several other companies waiting to step in.''
That bull-headedness was very much in evidence at this year's economic editors' conference where he refused to reduce his export target for 2001-02. Buoyed by the 20 per cent growth in exports India achieved (in dollar terms) in 2000-01, he maintained that Indian exports would achieve the 12 per cent growth he had mandated. Then came the World Trade Organisation ministerial meet at Doha where Maran made his famous last stand against a new round of talks. ''There were two superstars at Doha,'' he gloated to reporters on his return. ''China for its accession and India for its position''. But the positive sentiment-much of it generated by the minister himself-over Doha is fast waning: pharmaceutical companies are realising that the so-called gains related to Trade Related Intellectual Property Rights (trips), are chimerical in nature. For instance, to supply patent-protected medicines to a country ravaged by an epidemic, Indian generic-drug manufacturers will have to actually set up a manufacturing base within that country. Worse, they can make and sell the drug only so long as the epidemic lasts. Maran's most recent exploit has been to hold a clearance issued to Amway-the company was seeking an extension of two years for a clearance to test market its products-on the grounds that his mandate was to make India a manufacturing base, not a trading outpost for a MNC. Ironically, this is the same man who allowed the FIPB to clear a proposal from the Financial Times for a joint venture with Business Standard-a proposal that was eventually blocked-and championed the cause of the Tata-sia alliance, another non-starter. So, will the real Maran please stand up and declare whether he is reformist or protectionist? Actually, says a deep-throat in Delhi's political circles, Maran is both. He is business-friendly-and you can't ask for more in an industry minister-but is just a bit biased towards Indian businesses-something that fits in perfectly with the idealogy of the leading constituent of the ruling national Democratic Alliance. Comments a Delhi-based trade specialist on the tumultuous welcome Maran received on his return from Doha, ''Most industry associations wanted him to adopt an inward-looking policy; to scream and shout and provide some respite for domestic industry.'' That he did, and more: by managing to get the WTO to agree to some concessions on agriculture as a trade-off for accepting environmental issues as an integral part of the next round of negotiations, Maran has managed to assuage the farmer's lobby. Reformist or protectionist, Maran is the consummate politico. -Ashish Gupta G-BIZ
The opposition is still miffed over the re-induction of George Fernandes into the Union Cabinet, a few paragraphs that were deleted from NCERT's history books, and the controversial Prevention of Terrorism Ordinance (POTO). It has every right to be that-miffed, that is. Only, with Parliament House resounding with polemics, there's little chance that all of the 30 bills on the agenda this winter session will go through. It isn't just political manoeuvring that is holding things up: the nuances of several bills are still being discussed (and discussed) by parliamentary committees. These include the Electricity Regulatory Commission (Amendment) Bill, 2001, the Competition Bill, 2001, The Fiscal Responsibility and Management Bill, 2001, The Industrial (Amendment) Bill, and the Protection of Plant Varieties and Farmers' Rights Bill, 2001. And then there are those bills, like the one on fiscal responsibility, where the opposition and the government have an actual difference of opinion. It is the Ministry of Finance that has the largest number of bills stuck in committees. Apart from the last mentioned, the list includes the Banking Companies (Acquisition & Transfer of Undertaking) Bill, which deals with bringing down the government's stake in nationalised banks to 33 per cent, the Sick Industrial Companies (Special Provisions) Repeal Bill, 2001, which will change the rules regarding the closure of companies, and the Insurance (Amendment) Bill, which will facilitate the entry of cooperatives into the sector. The government hopes to get some key bills through this session, but at the time of writing this item, only one bill, The Companies (Third Amendment) Bill, 2001seems set to become an Act. The rest, we guess, will just have to wait. -Ashish Gupta POLICY When finance minister Yashwant Sinha tabled the Fiscal Responsibility and Budget Management Bill in the winter session of Parliament last year, there were sceptics galore who doubted whether anything would come of it. Sinha had then bravely declared that regardless of the fate of the legislation, he was committed to sticking to the milestones set by it. Famous last words, as they say. The Bill, incidentally, aims to bring down the fiscal deficit to 2 per cent of the gross domestic product (GDP)- from the current 5.1 per cent-by March 2006, and completely wipe out the revenue deficit. One year on, all fiscal indicators tell a tale of continued profligacy (See Whither Consolidation?). The fiscal deficit in April-October 2001, is 24 per cent higher than last year. And it's already 54 per cent of the budget estimate of Rs 1,16,314 crore. Last year, it was only 45 per cent of the budget estimate. Sinha's dexterity at passing the buck may not be of much use this time. Sure, the economic slowdown has provided an excuse for sluggish revenue collections. Revenue receipts in April-October 2001, at Rs 99,046 crore, are up a measly 1.6 per cent over last year. That's natural, considering tax collections have dipped 9.9 per cent. But what excuse can Sinha offer for other slippages on the fiscal front? Non-plan expenditure continues to be far higher than plan expenditure. But hidden in these figures is the scary picture relating to revenue expenditure (current expenditure on maintenance, salaries, subsidies and interest payments). At Rs 1,45,319 crore, revenue expenditure (which accounts for 84 per cent of total expenditure) is 12 per cent higher than last year. The revenue deficit has soared 48 per cent, which means our borrowings are being used to finance current expenditure. With 51 per cent of revenue receipts going straight into interest payments, where's the money for productive investment? And without that, how will the economy recover? Any answers, Mr Finance Minister? EQUITIES
It can't be? Could it? It isn't? It does look like it... With every passing week, the hope that global equity markets are on a rebound grows just that bit stronger. Since September 21, the indices of major global stockmarkets have moved in tandem. The Dow Jones Industrial is up 19.61 per cent, the NASDAQ Composite, 35.6 per cent, the FTSE 100, 17 per cent, and our own Sensex, 26 per cent. The rally in the American indices did falter in the last week of November as investor-expectations of a recovery in 2002, fell prey to those predictable clouds of doubt and the ripple created by Enron's Chapter 11 filing. If things go bad, 2001 will be the only year since 1974 that the Dow Industrial and the NASDAQ Composite will end up losing in the course of a calendar year. Some analysts point out that this need not happen if the Dow Industrial gains 9. 5 per cent and the NASDAQ Composite, 28 per cent by December 31. JFK (Just For Kicks) the Sensex will have to gain 16 per cent to achieve the same objective. Will these gains happen? That depends on whether or not investors buy the story that a recovery is imminent in the US. And it also depends on whether the Federal Reserve will cut its interest rates-for the 11th time this year-at its December 11 meeting. As for D-street, it is just a question of bringing forward those usual January highs some. -Roshni Jayakar PRIMER
Manufacturers can set off sales tax on inputs and pay a tax on the quantum of value added by them. What is the exact rate at which a manufacturer will pay this tax? There is a floor rate of 10 per cent (termed the Revenue Neutral Rate or RNR). There are, however, exceptions. These include essential commodities, capital goods, basic inputs and declared goods, on which the rate will be 4 per cent, agricultural products and sea-food on which it will be zero, gold, on which it will be 1 per cent, and cigarettes, liquor, petrol and diesel on which it will be 20 per cent.
Why, then, are the states hesitant to adopt VAT? The states expect their revenues to suffer because of vat. That is why, the concept of sat (Special Additional Tax), applicable at the first point of sale (and non-vattable) has been proposed. And why is industry unhappy? Industry feels that the continuation of a central sales tax after the adoption of vat is an anomaly. Companies will end up paying CST on inter-state trade as vat is only applicable for intra-state trade. To solve this, the Confederation of Indian Industry has suggested the replacement of CST with a vattable inter-state tax equivalent to the vat rate. -Swati Prasad
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Among the
entire pantheon of Marvel superheroes, the Incredible Hulk, the other
persona of wimpish physicist Dr Robert Bruce Banner is the most
unpredictable. Avid comic-philes know his heart is in the right place,
only it isn't evident from his actions all the time.
What is VAT all about?