GDP growth spurts to 6 per cent Q2, manufacturing slips
New Delhi: The Central Statistical Organisation (CSO) figures released on Friday show that India's gross domestic product (GDP) has risen by 6 per cent during the second quarter (July-September) of the current financial year to Rs 265,392 crore at constant (1993-94) prices, from Rs 250,434 crore in for the same period in 1999-2000. GDP at factor cost at current prices is estimated at Rs 425,184 crore, up 11 per cent from Rs 383,143 crore in the second quarter of 1999-2000.

According to the CSO, spurt was led by construction, which saw rise of 8.7 per cent, followed by financial services, insurance, and real estate and business services, which grew at 8.5 per cent. The key indicators of the construction sector, namely, cement and steel registered growth rates of 2.6 per cent and 12.6 per cent, respectively, against the growth rates of 15.7 per cent and 12.6 per cent respectively in the same period last year.

Among other key sectors, mining and quarrying registered growth at 8.4 per cent, trade, hotels, transport and communication at 7.8 per cent, community, social and personal services at 7.1 per cent and the manufacturing at 5.9 per cent. Agriculture, forestry and fishing grew just 1 per cent, while the electricity, gas and water supply sector posted 3.9 per cent growth.

The growth rate in other key sectors are: minus 12.8 per cent for production of commercial vehicles, minus 3 per cent for cargo handled at major ports, 37.2 per cent for post and telecommunications, 16 per cent for aggregate bank deposits, 23.8 per cent for bank credits and 13.5 per cent for revenue expenditure.

29 December 2000

RBI outlines policy for universal banking
New Delhi: The Reserve Bank of India (RBI) has cautioned banks and other financial institutions against any dilution in their compliance of stipulated prudential and supervisory norms. In its report to the parliamentary standing committee on finance, the central bank has called for strengthening of the regulatory framework and has spelt out the broad contours of its proposed policy for universal banking.

The central bank has also suggested that the Narasimhan Committee report's recommendations on universal banking be operationalised. However, it has warned against the dilution of supervisory norms on account of the special characteristics of the banks. The RBI has suggested that a consolidated approach towards supervision and regulation should be put in place, especially in the case of conglomerates, in which a bank is partner.

In its submission, the RBI has also said that the domestic financial institutions (DFIs) would continue to play a crucial role in the financial system till such time that the debt market improves both in terms of liquidity and depth. The central bank has said that any DFI wanting to transform itself into a bank should therefore have the option of conversion, subject to the prudential norms specified by the bank.

28 December 2000

Government targets $10 billion in FDI to prop up growth rate
New Delhi: The government is planning on increasing the foreign direct investment inflows (FDI) to $10 billion annually from the current level of over $3 billion to meet infrastructural and industrial investment needs. An official release has said that FDI as a supplement to domestic savings, will help propel GDP growth to high levels.

As part of a continuing strategy to liberalise the FDI regime, the inflows would be now be allowed to enter under the automatic route in almost all sectors, except those in a small negative list. The automatic route implies that FDI can come in automatically and the investor is required only to give intimation later to the Reserve Bank of India about proposed activities.

The FDI policy would focus towards resolving post-approval difficulties faced by foreign investors so as to speed up implementation. In this direction, the Foreign Investment Implementation Authority would be mandated to look into the implementation problems with the investors and the concerned central and state agencies.

Besides allowing FDI in most sectors on the automatic route, the other major FDI policy initiative would include 100 per cent FDI through automatic route in all manufacturing activities in special economic zones with a few exceptions. The government would also clear 100 per cent FDI for B2B e-commerce and oil refining.

Sebi to tighten disclosure norms for mutual funds
Mumbai: Securities and Exchange Board of India (Sebi) is set to tightening disclosure norms for mutual funds with a view to introducing greater transparency in the segment. The regulator is considering a move, which would require mutual funds to disclose the identity of major holders or investors (in terms of value) in any given scheme.

The Sebi argument is that if a major portion of the corpus were in the hands of a few entities, the small investors would stand to lose, if any of these holders pulled out. The higher the concentration of the portfolio in the hands of few, the greater the potential of loss to smaller unit holders if at any point these investors decide to exit, a Sebi official is quoted to have said.

It has been argued that if an investor, holding a substantial portion of the units, exits from a scheme, the scheme's net asset value would be adversely affected, ultimately hitting the smaller investors, whose investments would get eroded.

More stringent disclosure of investor profiles would help small investors decide whether to stay invested in a scheme where a large portion of the corpus is in the hands of a few investors.

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