CPI's Bardhan: Leading the anti-Korean propaganda

It's now the turn of the Koreans to be at the receiving end of communist vitriol. On June 8, the Tamil Nadu unit of the Communist Party of India (CPI) announced a campaign to drive Korean companies out of the state. The provocation: South Korean giant LG's decision to sever links with its Indian partner, Indian Household and Healthcare Ltd (IHHL), following the scrapping of Press Note 18. According to the Reds, this is yet another case of the concession being misused by MNCs to boot out Indian collaborators. Well, well! Since when has the party of the proletariat revolutionary become the voice of Indian industry?

Interestingly, the same day, CPI's feisty general secretary, A.B. Bardhan, launched a broadside against the Naveen Patnaik government in Orissa over its proposal to lease iron ore mines to South Korean steel giant Posco. "Posco will plunder the mineral wealth of the country," he thunders. Er... The South Koreans are planning to set up a 10-million-tonne mega-steel plant in the state, Sir. They need the ore for this. "Rubbish," retorts the grand revolutionary, "it's only three million tonnes. The rest is only a promise. Let them buy their ore from the Orissa Mining Corporation. But no, the government would rather let them loot the country."

Bardhan, however, clarifies that his party's ire is aimed specifically at the two "erring" South Korean entities and not at every company hailing from that country. But what does he have to say about LG's reported plans of investing in the Left Front-ruled West Bengal? "That's for the West Bengal government to decide. What can I say?" he responds.

Ah! At least the party's precepts are flexible enough to accommodate its politics.

-Arnab Mitra

Fixing The Fiscal Deficit
Last year's fiscal deficit was lower than projected. Will it stay that way?

FM Chidambaram: A balancing act

It was a pleasant surprise to everyone, including the government, when a justifiably proud Finance Minister P. Chidambaram announced earlier this month a final fiscal deficit figure of 4.1 per cent for 2004-05, a good 0.4 percentage point lower than the Fiscal Responsibility and Budget Management (FRBM) Act's 4.5 per cent figure. The question is, what has brought about the unexpected drop in deficit? Is it, like one Delhi-based economist says, "just a fluke", or will Chidambaram press the "pause button" like he mentioned in his budget speech?

On the revenue side, a buoyant industrial scenario has swelled government coffers by way of both non-tax (essentially dividend receipts from public enterprises) and tax revenues. While the former is up 7 per cent, the latter has managed a 1.4 per cent increase over initial estimates, despite lower taxes and duties. "But expenditure contraction looks like the more likely reason for lower deficit," says Indranil Pan, Chief Economist at the Mumbai-based Kotak Mahindra Bank. He's right. Both Plan and non-Plan expenditure fell short by 3.8 per cent and 0.6 per cent respectively in 2004-05.

Can the fm maintain this tempo of higher revenues and lower spending this year too? Looks unlikely. "The UPA Common Minimum Programme's (CMP) expenditure crunch will start to kick in this year onwards," says Rajiv Kumar, Chief Economist at CII. The Prime Minister has already announced the mammoth Bharat Nirman scheme that will guzzle Rs 1,74,000 crore in the next five years. Many economists concur that agriculture, education and rural infrastructure may not have the capacity to take in this huge investment, and that there would be immense leakages here, making it both fiscally imprudent and socially wasteful.

It remains to be seen how the fm balances this huge expenditure mobilisation with his promise to lower central government borrowings in the current financial year. Fortunately for the fm, revenue collections look promising. If the GDP grows by the expected 7 per cent, then the government's revenues could surge by 17 per cent. Value-added tax and fringe-benefit tax seem like big revenue earners, although disinvestment is unlikely to fetch the Rs 7,000 crore Chidambaram hopes to raise this year. "You cannot expect me to go back to 4.3 per cent (fiscal deficit as a percentage of GDP) when I actually achieved 4.1 per cent," he told journalists last fortnight. Nobody expects him to. But, then, unexpected things do happen.

-Shailesh Dobhal

HURRAH
Back In The AIDS Business

Late last month, Ranbaxy became the first company in India to receive the US food and drug Administration's (FDA) tentative approval for its anti-retroviral (ARV) drug, Lamivudine (150 mg tablets), for AIDS under the US President's Emergency Plan for AIDS Relief (PEPFAR) programme. It's a quick change in fortunes for Ranbaxy's AIDS drug. Last November, the company had voluntarily withdrawn its ARVs from the World Health Organization's prequalification list after it found that the CRO (clinical research organisation) that had tested the drugs had not followed international standards. The USFDA approval, then, is a shot in the arm for Ranbaxy's low-cost ARVs business. "This is a major step in making our life-saving ARV medicines available to more and more HIV/AIDS patients in the developing world," Brian W. Tempest, Ranbaxy's CEO and Managing Director, said in a statement. Ranbaxy has already filed 11 ARVs with the WHO for approval, which is expected soon.

-E. Kumar Sharma

Biscuit Brouhaha
Biscuit makers protest the crunch of high taxes.

FBMI's Aggarwal: The cookie crumbles

It's the proverbial crunch in the munch. The issue? States are levying a 12.5 per cent value-added tax (VAT) on biscuits while the Centre takes its cut by way of an 8 per cent excise duty. The fear? These will take the country's favourite munchy out of reach of the common man and drive several small biscuit makers out of business.

The Federation of Biscuit Manufacturers of India (FBMI), which has taken up the issue with the government, does have a point. Why has the finance ministry lumped biscuits with luxury and "non-essential" goods like white goods and personal care products like toothpastes in the 12.5 per cent VAT category? "After all, namkeen, dry fruits and juices all fall under the lower 4 per cent category, so why shouldn't we?" the association asks.

B.P. Aggarwal, Chairman of Priyagold Biscuits and President of FBMI, says the VAT impacts not just small biscuit manufacturers, but even big players. "It raises biscuit prices and forces the lower income groups, who consume a lot of biscuits, to buy other foodstuff." Aggarwal adds that biscuit manufacturers, who had toyed with the idea of an industrywide strike to press their point, have decided to put their threat on hold for the time being. They are hoping that their repeated representations to the government will do the trick. And it's not just VAT that they're up against. The FBMI is also targeting the 8 per cent excise duty. "Is it fair that namkeen and juice manufacturers don't pay excise but we do?" Aggarwal asks.

-Kushan Mitra

Trying Harder
Can Fiat break its Indian jinx?

Fiat's Castagno: Hoping for a magical revival

Fiat India seems to be following sir Robert Bruce's dictum 'Try, try and try again'. It is now trying to crack open the Indian market with its latest launch, the Rs 5.58-lakh (ex-Mumbai) Fiat Adventure Sport. Paolo Castagno, the company's Managing Director, says it is important to communicate the car's many attributes to the customer. "We're offering a high-end (actually C segment) car and that's exactly what the positioning will be. This needs to be done since it is not a mass product," he says, adding that this time, the company will ensure that after-sales services are readily and easily available "because it is not enough if you just have a good product."

Ironically, despite an over 50-year presence in the Indian market, Fiat remains a bit player here. Its brand has been substantially eroded and it sells barely 200 Palios and Siennas a month. How does Castagno plan to revive the magic of the Fiat brand? "Customers here need a good mix of product and price. It is important for us to take one step at a time," he emphasises. Castagno's target for his new baby: though he was unwilling to share numbers on this, it is learnt that he is hoping to sell at least 200 cars a month.

It's been a rough ride so far. In 2004, Fiat India wrote off accumulated losses of Rs 1,300 crore and today, appears more focussed on the country. "We have taken a long-term view and our seriousness can be gauged from the fact that we have invested Rs 2,000 crore since 1997," Castagno says. How confident is he of pulling it off? "The challenges are different now and we will do our best to succeed here," he says, pointing out that though Brazil was a tougher market (than India), Fiat today has a 30 per cent share in it.

-Krishna Gopalan