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Indian
Economy
Present
Scenario
According to the Economic Survey for 2001-02, the
Indian Economy is expected to grow by 5.4
percent in 2001-02 as compared to 4 percent in 2000-01.
The
overall growth of 5.4 per cent in 2001-02 is
supported by a growth rate of 5.7 per cent in agriculture
and allied sectors, 3.3 per cent in industry and 6.5
per cent in services. The acceleration of overall growth
is basically due to a significant improvement in value
added in agriculture and allied sectors from a negative
growth rate of (-)0.2 per cent in 2000-01 to 5.7 percent
in 2001-02. There has been significant deceleration
in the growth rate of industry. However, the performance
of the services sector has improved moderately.
The
food grain production in 2001-02 was 209.2 million
tonnes as compared to 195.9 tonnes in 2000-01.
The
industrial growth was 2.3 percent in 2001-02
as against 5.0 percent during 2000-2001.
Foreign
Exchange reserves accumulated to a record figure
of US$ 49.48 billion at the end of January 2002.
The
Budget 2002-03 envisages a fiscal deficit of
5.7 percent of GDP which is a cause of alarm and such
the Government is targeting of controlling non-productive
expenditure, rationalization of subsidies and taking
steps for enhancement of revenues, including by widening
of tax base.
The 52
week average inflation rate in terms of WPI declined
from 7 percent at the beginning of 2001-02 to 4.7 percent
for the week ended January 19, 2002. The point to point
inflation rate reached a low of 1.3 per cent by the
end of January 2002 which was the lowest in over two
decades.
Major
Reforms in 200-02
Infrastructure
- The
five year tax holiday and 30 per cent deduction of
profits for the next 5 years for telecommunications
extended to internet service providers and broadband
networks.
- National
Highway Development Project launched.
- Accelerated
Power Development Programme started for incentivising
power sector reforms in States.
- Electricity
Bill 2001 and communication convergence Bill 2001
introduced in Parliament.
Foreign
Investment
- Foreign
Direct Investment (FDI) up to 100 % permitted in e-commerce,
subject to specific conditions.
- The
dividend balancing condition for FDI in 22 consumer
goods industries removed.
- Existing
upper limit of Rs.15000 million for FDI in projects
involving electricity generation, transmission and
distribution (other than atomic reactor plants) dispensed
with.
- FDI
under the automatic route permitted up to 100 % for
all manufacturing activities in Special Economic Zones
(SEZ) except certain activities.
- FDI
up to 26 % in insurance sector allowed under automatic
route.
Trade
Policy - External Sector
- Quantitative
Restrictions (QRs) on BOP grounds removed by dismantling
restrictions on the remaining 715 items.
- Interest
Rates on export credit rationalised by indicating
interest rates on export credits as PLR linked ceiling
rates.
- Duty
Drawback rates for more than 300 export products and
value caps abolished under DEPB on about 400 export
items from October 2001.
Infrastructure
- Domestic
long distance service opened up without any restriction
on the number of operators.
- Revenue
sharing regime, in place of existing fixed licence
fee, introduced for both basic and cellular service
operators.
- Corporatization
of Department of Telecom Services and Department of
Telecom Operations by creating Bharat Sanchar Nigam
Ltd., w.e.f. October 1, 2000.
- Thrust
to accelerated implementation of Prime Minister’s
National Highways Development Project from petrol
and diesel cess and additional fund raising for National
Highway Authority of India.
- Extension
of tax holiday benefit to solid waste management and
water treatment for developing urban infrastructure.
Foreign
Investment
- Foreign
Direct Investment (FDI) upto 100% permitted for B
to B E-commerce, Courier services, oil refining, hotel
and Tourism Sector, drugs and pharmaceuticals, mass
rapid transport systems including associated commercial
development of real estate.
- The
dividend balancing condition for FDI in 22 consumer
goods industries removed.
- Foreign
investors permitted to set up 100% operating subsidiaries
without the condition of disinvesting a minimum of
25% equity to Indian entities.
- FDI
upto 49% in private banking sector allowed under automatic
route.
- Offshore
venture capital funds/companies allowed to invest
in domestic venture capital undertakings.
Financial
Sector
- Aggregate
limit for FII portfolio investment enhanced to 49
per cent and subsequently upto sectoral ceiling.
- Corporation
of stock exchanges proposed involving segregation
of ownership, management and trading membership from
each other.
- Floating
Rate Government Bonds introduced
- Badla
banned and rolling settlement introduced
- Clearing
Corporation of India Ltd (CCIL) set up the Negotiated
Dealing System (NDS) is being introduced.
Industry
- The
Bill to establish National Company Law Tribunals to
address issues of sickness and bankruptcy has been
introduced in Pashiament, along with that for abolition
of Sick Industrial Companies Act (SICA) and the dissolution
of the Board for Industrial and Financial Restructuring
(BIFR). As the bill get enacted the process of industrial
restructuring should become easier and faster.
- Government
initiated the process for amending labour laws to
provide for greater flexibility in employing labour,
and for out sourcing of services so that labour use
becomes more flexible and efficient.
- Reduction
of interest rates has resulted in significant debt
overhang for industries.
- Step
towards simplification and rationalisation in areas
of taxation - Corporate tax, excise and customs.
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