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FEB. 25, 2007
 Cover Story
 BT Special
 Back of the Book

Trading with ASEAN
In the recent Indo-ASEAN summit, ASEAN was, for the first time, on the defensive. India has agreed to bring down its negative list of imports to 490 items in the free trade agreement with the 10 ASEAN nations. But India’s step towards free trade was not matched by the ASEAN nations, as more than 1,000 items still figure in the negative list of the ASEAN. In 2005-06, India’s total trade with ASEAN was at $22 billion (Rs 99,000 crore), against just $7 billion (Rs 31,500 crore) in 2000-01.

Exchange Deal
Indian markets are on a roll. Global stock exchanges and financial institutions’ interest in the Indian stock exchanges goes to show the long-term growth potential of India Inc. The year has started on a positive note. The NYSE and three global financial institutions have each picked up a 5 per cent stake in the NSE. The deal will open exciting vistas in global co-operation for the NSE, and at the same time could improve the fortune of smaller exchanges in the country.
More Net Specials
Business Today,  February 11, 2007
WTO Talks: All Sound and Little Heat
Sticking to his guns: Yes, that’s precisely what Kamal Nath has done till now
Last fortnight, there was optimism in the air about the revival of the Doha round of global free trade negotiations. This was evident in spite of the fact that there were no new offers from any of the parties to the proposed agreement-the United States, the European Union and the developing nations.

However, the 150 member states of the World Trade Organisation took heart from noises about "flexibilities" in the positions of these players and supported a full-scale resumption of talks. The Doha round of trade negotiations were in a limbo over the past six months since the Geneva talks in July last year. At the heart of the logjam are the massive subsidies that the rich countries provide to their domestic farm sector.


According to estimates, the United States, Japan and the European Union pump in nearly $300 billion (Rs 13.5 lakh crore) a year to prop up their domestic agricultural sectors. This massive subsidy skews global trade in agricultural commodities and prices farmers in poor countries like India out of the market. Developing countries such as Brazil and India want deep cuts in these trade-distorting subsidies in return for granting greater market access to industrial goods and services from the developed world. The Doha round has been bogged down by the inability of the developed nations to sell any agreement which calls for cuts in farm subsidies to their powerful domestic farm lobbies.

The current round of negotiations began in Doha in 2001 and was dubbed the Development Round, since the intent of the Doha Development Agenda was to improve the fairness of trade rules for developing countries.

So what is the current optimism all about? It is about hints that the trade representatives of the developed world will adopt "flexibilities in their positions. Is there a firm offer on the table? No.

According to Biswajit Dhar, Professor and Head of the Delhi-based Centre for WTO Studies, this could well be a complex posturing by developed nations to tie down the developing world to some binding commitments. "The us and the EU have not sorted out their internal problems. There is nothing substantial in the revamped us Farm Bill which indicates any forward movement," says Dhar.

So, is there nothing to this optimism? Well, not exactly. The talk of revival at least signifies the importance of the multilateral trade negotiation forums for all concerned parties.

"There is better appreciation of multilateralism," says T.K. Bhaumik, Chief Economist, Reliance Industries. He, however, believes there is scope for the US to adopt a more pragmatic stance; this can lead to a breakthrough on the broad contours of an agreement.

Dhar says an agreement is possible if all negotiating parties concede their low appetite for liberalisation in agriculture and lower their ambitions. "Then some kind of a deal is possible on goods and services, and that, too, will not be insignificant," he says.

What does all this mean for India? Merely that it should stick to its guns like it did earlier. As Commerce and Industry Minister, Kamal Nath, puts it: "We will do two-thirds of what the developed countries will do."

Can the FM Wield the Knife?

The economy is on a roll, and finance minister P. Chidambaram has little reason to raise taxes in his forthcoming Budget. That, however, should not be the reason for him to look the other way at the taxes foregone in the form of sops. Here's why: corporate taxes account for a third of the taxes mopped up across the country. While the statutory rate is a significant 33 per cent, corporates, on average, pay a mere 17 per cent.

Even worse, the oil sector (populated mostly by public sector units) contributes a significant 10.5 per cent of the total corporate tax collections and pays out at rates close to the statutory rate. Says R.S. Sharma, Chairman, ONGC: "We are the highest corporate tax payers in the country and pay out at a rate marginally lower than the statutory rate."

For the FM to use the knife will not be easy. A good part of the sops (amounting to a third of the total revenues, according to Finance Ministry estimates) have been garnered through political patronage and not economic merit.

However, with the FM having set the tone for higher corporate tax collections and lower excise mop up (see table) last year, it is unlikely that he will not pursue all the options before him. Aiding him in this endeavour is a tool he did not possess last year: e-filing of tax returns by corporates, which provides him proof to pull the plug if he so desires. Can he follow through on his promise of doing away with exemptions? Wait till the end of the month to find out.


HT Media has just launched its daily business paper Mint, making it the fifth player in the segment after The Economic Times (ET), Business Standard (BS), Hindu BusinessLine (HBL) and Financial Express (FE). It will be the sixth financial daily in Mumbai if we include DNA-Money, a 12-pager that was launched on a standalone basis last year. The print media market is already overcrowded; so, why do you need another business newspaper? And, is there space for another product like Mint?

Says a media planner and buyer at a leading media buying agency in Mumbai: "There is a huge gap between the #1 and #2 players; so there is space for a good second business newspaper." Ashish Bhasin, Director, IMAG, Lintas India, says: "In the current scenario, there are already newspapers that deliver good quality and good content that satisfy consumer needs in this space. Only time will tell how new products perform."

In terms of circulation, however, the leader is ET, which has an all-India circulation of 618,197. In second and third positions are HBL 117,047 and BS 96,150, respectively. Can Mint, which claims to have a circulation of 80,000, overtake these two and take over the #2 slot? Watch this space.