2 February 2001

IBRD report shows recovery in capital inflows
Mumbai: The World Bank in its advance release of the report on Global Development Finance 2001 has forecast a recovery in capital flows to developing countries based on preliminary data for 2000. The bank has said that continuing strength in portfolio equity flows and a surge in bond market financing will boost private investment flows in 2000, despite temporary slowdown in foreign direct investment (FDI).

Capital flows to developing countries had declined in 1999, on diverging trends in debt and non-debt flows. The report said, overall, private capital flows were depressed and not commensurate with surge in economic activity in developing countries. At $126 billion, long-term private flows in 1999 were well below pre-1997 levels. Besides, private flows were narrowly concentrated in a few emerging market economies, with five countries receiving more than half (56 per cent) of private flows.

This marked a change from the 1994-97 period, when concentration levels trended down on improved prospects for developing countries and increased access to global capital markets by wider range of countries. FDI is the single largest source of foreign capital inflows. Its level and share in developing countries increased each year in the 1990s, as developing countries benefited from a shift to global production processes and structures by multinational corporations.

Two percent surcharge on income tax and corporate tax
New Delhi: The union cabinet has decided to introduce an ordinance imposing two percent surcharge on personal income tax and corporate tax in a bid to mop up additional funds to finance the relief and reconstruction expenses in quake-hit Gujarat. The new ordinance will come into force from the assessment year 2001-02 and is expected to net an additional Rs.1300 crore.

The surcharge will be applicable for all taxable income above Rs.60,000 per year. The effective rate of income tax for 60,000 to Rs.1.5 lakh will work out to 22.4 % and for income above Rs.1.5 lakh, the effective rate of tax will be 35.1 per cent. The effective rate for corporate tax will be 39.55 per cent.

The new surcharges have effectively brought the income tax and corporate tax rates closer to those prevailing in 1996-97. The effective rates at the highest slabs were 43 percent for corporate tax and 40 percent for income tax in 1996-97.

Export growth touches 20.42%
New Delhi: India's export growth during this fiscal has touched the 20.42 per cent mark, though growth for the month of December has actually come down to 17.33 per cent. The growth continues to be higher than the export growth target set for the fiscal at 18 per cent.

Monthly trade data released by the ministry of commerce shows that the growth rate of exports in December was lower than the growth rate of 20.31 per cent in November. The total value of exports from April to December is calculated at $32.26 billion, while for the month of December, exports are estimated at $3.59 billion. The growth in exports has helped to squeeze the trade deficit to $5.88 billion, which is lower than last years' level of $8.22 billion.

There is however, a steep fall in the non-oil imports, which are 8.31 per cent lower than the corresponding period of last year. In absolute terms, it is $25.7 billion against $28.03 billion in the same period of last fiscal.

31 January 2001

GDP for 1998-99 revised down to 6.6%
New Delhi: Provisional data released by the government's Central Statistical Organisation has revised down estimated gross domestic product growth for 1998-99 (April-March) to 6.6 per cent from 6.8 per cent but maintained its estimate for 1999-2000 at 6.4 per cent. The CSO has now estimated 1999-2000 GDP at constant (1993-94) prices at Rs 11,51,991 crore ($247.7 billion) against Rs 10,83,047 crore ($233.1 billion) a year earlier.

Per capita income for 1999-2000 was estimated at Rs 10,204 at 1993-94 prices and at Rs 16,047 at the current prices. Per capita income was put at Rs 14,712 at current prices in 1998-99. Gross domestic savings at current prices totalled Rs 4,35,572 crore in 1999-2000, against Rs 3,86,732 crore a year earlier.

SBI and HDFC to have major stake in CIBIL
Mumbai: The State Bank of India (SBI) has signed an agreement to pick up a 40 per cent stake in Credit Information Bureau India, the country's first credit data dissemination body along with Housing Development Finance Corporation (HDFC) which is also take 40 per cent of the equity. Among others Dun & Bradstreet Information Services (India) and Trans Union International Inc, an US credit services firm taking 10 per cent equity each.

CIBIL will collect credit-related data, both consumer and commercial, and sell the reports to banks, financial institutions and businesses, which agree to contribute their data to CIBIL data pool regularly. Data sharing will be within a closed group of data providers. It is expected that all credit grantors will eventually be part of this closed group. CIBIL is expected to start full-scale commercial operations in the second half of this year after the legal requirements are met.

30 January 2001

RBI report says competition has spurred bank efficiency
Mumbai: Reserve Bank of India (RBI) report on Currency and Finance 1999-2000, has noted that competition has helped to improve the overall efficiency in the banking system. The report which is making a positive case for greater competition has stated that ever since private banks came into operations and foreign banks were permitted to open more branches, there has been an overall improvement in efficiency, reflected in the decline in intermediation costs as percentage of total assets.
There has also been a gradual improvement in the capital level of the banking sector and on the asset quality. The wage bill as a percentage of total assets too has declined from 2.05 per cent in 1995-96 to 1.66 per cent in 1999-2000. Most of the efficiency has been achieved due to the financial sector reforms, the report points out. Though initially the prudential accounting norms did affect the bank profitability, most public sector banks have managed to improve efficiency by conforming to international best practices in various areas.

29 January 2001

IPPs seek exemption from dividend tax and MAT
New Delhi: Ogden Energy, National Grid, PowerGen and ABB, some of the leading global power generating companies, in a collective representation made to the government, have demanded exemption of power sector from dividend distribution tax (DDT) and Minimum Alternate Tax. The current rate of DDT at 22 per cent and MAT have struck a severe blow to the chances of the nascent independent power projects (IPPs) attracting substantial foreign investment, the pre-budget memorandum has stated.

The memorandum pointed out that IPPs were still evolving in India and only about eight IPPs had gone into commercial operations, while another eight IPPs were on the verge of financial closure. The representation points out that considering a minimum construction period of three years, the power projects would distribute dividend only in 2004-05. Until then, DDT revenues from power sector will be non-existent and even thereafter, quite insignificant to make any material difference to the total revenue collections.

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