India Budget 2009, Highlights

* Govt plans to bring back economy to high growth of 9%
* GDP growth dipped to 6.7% in FY'09
* FM to make pre-budget talks with state FMs annual affair
* Fiscal deficit up from 2.7% to 6.8% of GDP
* Return to fiscal prudence at the earliest
* 'Aam admi' is focus of all programmes and schemes
* IT exemption limit raised; Rs 15,000 (rpt) 15,000 for Sr.Citizens
* Limit raised by Rs 10,000 for tax payers, including women
* 10% surcharge on personal income tax scrapped
* Fringe Benefit Tax abolished
* No change in corporate tax
* Defence gets Rs 1,41,703 cr, up 34%
* Total fiscal stimulus in 2008-09 amounts to Rs 1,86,000 cr
* IIFCL to evolve mechanism for increased funding of infra
* IIFCL to re-finance commercial bank loans up to 60 per cent in critical
projects through PPP to tune of Rs 1,00,000 cr
* Allocations for highways being stepped up by 23 per cent
* Funds for housing, amenities for urban poor up Rs 3,973 cr
* Funds for JN Urban Renewal Mission up 87% to Rs 12,887 cr
* Assistance for storm-water drainage project up by Rs 300 cr
* Farm credit target up at Rs 3,25,000 cr from Rs 2,87,000 cr
* Interest rates incentive to farmers to repay loans on time
* Additional Rs 1,000 crore for accelerated irrigation scheme
* Export Credit Guarantee scheme extended till March 2010
* 2% interest subvention (IS) scheme extended till March 2010
* IS scheme to cover 7 job-oriented sectors, including textile, handicrafts and handlooms.
* Commodity Transaction Tax abolished
* New pension system trust exempted from STT; DDT
* Minimum Alternate Tax hiked to 15% from 10%
* Tax holiday on petro sector extended to natural gas
* 100% tax deduction on political donation
* Stimulus for print media for another six months
* Fertiliser subsidy to be nutrient-based, not price
* Expert Grp to form viable pricing for imported petro goods
* Banks and insurance firms to remain in public sector
* Rs 100 cr one-time grant to expand banks in unbanked areas
* Govt committed to provide Rs 100 a day as wages under NREGA
* Allocation of Rs 39,100 cr to be made for NREGA
* NREGA coverage increased to 4.74 crore households in FY'09
* Work National Food Security scheme has begun
* Allocation for Bharat Nirman being raised by 45 per cent
* Rs 2,000 cr rural housing fund under National Housing Bank
* Mission for female literacy with focus on minorities, SC/ST
* 50% of all rural women to be brought into SHG programmes
* Full interest subsidy for students in select institutions
* Five lakh students to benefit
* Modernisation of national exployment exchanges
* Action for social security to unorganised sector workers
* New pension benefits for 12 lakh jawans and JCOs from July
* One lakh dwelling units for paramilitary forces personnel
* Unique Identification Card to citizens in 12-18 months
* Provision of Rs 120 crore for UIC project
* Rs 2,113 crore allocated for IITs and new IITs
* Rs 3472 cr for Commonwealth Games from Rs 2112 cr

India's Industrial Output Dips For the First Time In 15 Years

Indian industry saw its output shrink for the first time in 15 years with a 0.4 per cent year-on-year decline in October, as the impact of the global economic downturn deepened in the country.
From a dazzling 12.2 per cent growth in October last year, industry recorded a negative growth of 0.4 per cent in October this year, partly due to a dip of over 12 per cent in India's exports.

The fall was bigger than expected and lets hope that the December 7 stimulus package would arrest any further decline though looks unlikely. Industrial output had last fallen in April 1993.

Manufacturing, comprising around 80 per cent of the Index of Industrial Production, (IIP) clocked a negative 1.2 per cent growth in the month from a whopping 13.8 per cent a year ago.
In fact, output in two of the four sectors that make up the index -- intermediate goods and consumer goods -- contracted to 3.7 per cent and 2.3 per cent, respectively, from a growth of 13.9 per cent and 13.7 per cent, respectively. Within consumer durable goods, both segments -- consumer durables and consumer non-durables -- shrank by three per cent and two per cent, respectively.

Of the total 17 industries, captured in the IIP figure, as many as 10 recorded a negative growth and could have a similar bearing on economic growth, given the fact that industry accounts for 29.4 per cent of GDP. Besides manufacturing, mining growth fell by 2.8 per cent, from 5.1 per cent in October, 2007. Electricity, however, proved to be a consolation with growth rate rising to 4.4 per cent from 4.2 per cent.

Of the industry segments, leather and fur products shrunk the maximum by 18.1 per cent, followed by food and wood, furniture and fixtures by 14.4 per cent and cotton textiles by 9.6 per cent. Seven industry which registered a growth, included beverages, tobacco, paper and paper products, printing and publishing, rubber and plastics and basic metals.

For the first seven months of this fiscal, industrial growth rate more than halved to 4.1 per cent from 9.9 per cent in the corresponding period a year ago.

The slowdown follows the impact of global financial crisis which has pushed economies of developed countries like the US, the UK, Euro zones nations and Japan into recession.

In fact, Asian Development Bank has already scaled down India's growth projection to 7 per cent for 2008 from the earlier estimate of 7.4 per cent. For 2009, the economy is likely to grow at 6.5 per cent, ADB said.

Ranbaxy expresses disappointment over US FDA action

In response to the US Food and Drug Administration (US FDA)'s warning letters and import alert for drugs issued to Ranbaxy Laboratories Ltd regarding drug products produced in two Ranbaxy plants at Dewas and Paonta Sahib in India, the company said that it is very disappointed by the action taken by the US FDA.


In a press release, it said, "Ranbaxy is very disappointed in the action FDA has taken. The company has responded to each concern FDA has raised during the past two years and had thought that progress was being made. We are, however, pleased that FDA's testing and review led the agency to conclude that there is no reason to question the safety or effectiveness of Ranbaxy's drugs. The company has just received the warning letters that FDA has issued and has not had the opportunity to review those concerns that FDA has determined are unresolved. Once it has had an opportunity to review the issues, the company looks forward to continuing to cooperate with FDA to resolve the remaining issues."


According to the FDA announcement, the warning letters and import alert do not apply to Ranbaxy's other facilities including its three manufacturing facilities in the US, Ohm's Laboratories facilities in New Brunswick, North Brunswick, New Jersey, and Gloversville, New York, from which Ranbaxy delivers some 59 drug products to the US healthcare system, including: Simvastatin, Acyclovir, Minocycline, Clindamycin, Lorazepam, Loratadine-D, Cetirizine, Acetaminophen Extended release tablets, Lisinopril and Zolpidem.

Pharmabiz

Indian economy slowing down

For last years or three years from 2005-07, the Indian economy touched new highs. The gross domestic product (GDP) grew at an average rate of 9% during the period, with India becoming the second fastest-growing major economy of the world. This was the result of unprecedented growth in investments triggered by low interest rates, as well as high growth in demand. These low interest rates were, in turn, possible on account of a low inflation rate. However, the entire cycle seems to have turned.

India's growth engine is now showing signs of deceleration. The trouble started with the rise in inflation. The Indian economy, which was getting used to 5% inflation, is now having to deal with prices rising at the rate of more than 12%. The fact that the Reserve Bank of India (RBI) has started increasing the repo rate and cash reserve ratio (CRR) clearly indicates that the central bank can sacrifice a few basis points in GDP growth to contain inflation.

As a result of high inflation and a spate of interest rates hikes, there has been a slowdown in investment plans announced by industries. Analysis of data released by CMIE clearly indicates that the rate of implementation of corporate capital expenditure (capex) plan has slowed down. On an average, the rate of implementation for India Inc had come down to 44.8% as of end June '08, from 52.7% as of December '06. Simply put, Corporate India is implementing lesser investment plans these days.

The bigger worry is that as much as Rs 43,000 crore worth of investment plans (across industries) were shelved during the quarter ended June '08. The situation is unprecedented as this is the first time that the current bull run is witnessing such a colossal abandonment of investment plans. In fact, even capacity additions have been low, which is evident from the slowdown in completed projects. However, despite all this, what is astonishing is the pace at which India Inc is announcing its investment plans. This can be attributed to the fact that often, the stock market reacts positively to mega expansions plans by companies. But whether these plans materialise is another story. Nonetheless, even amidst concerns of an economic slowdown, corporates continue to announce new projects.

Broadly, the industry is divided into five categories - manufacturing, electricity, services, mining and construction. Of these, only manufacturing has not seen a slowdown in implementation of investment plans. Mining projects have seen one of the worst slowdown in implementation, with the rate crashing to 37% in June '08 from around 50% in December '06.

As for specific industries, ferrous metals, construction, electricity generation, transport services and petroleum products have been the highest gainers of investments that have been announced. However, in terms of implementation of these plans, some of them seem to have lost ground. Ferrous metals and organic chemicals have seen the highest rate of implementation vis-à-vis plans that were announced earlier. At a 52% rate of implementation, the organic chemicals sector was among the top few gainers. In case of ferrous metals, particularly steel, India has enough iron ore - a major raw material for steel. Steel prices - which are expected to remain bullish in the international market in the near term - are apparently providing a strong impetus for capacity expansion in the industry. As demand continues to outpace supply, the rate of implementation of steel projects remains high.

However, the list of losers is longer. Despite big announcements, many projects in the infrastructure sector, including petroleum, transport services (highways, rail projects, airports and ports) and electricity generation seem to have hit hurdles. For instance, the power sector saw a 720-basis point decline in project implementation: only 40% of the projects were under implementation at the end of June '08, against 47% in December '06. Similarly, transport services, which include roads and flyovers, have also fared poorly in terms of implementation of investment plans. The implementation rate in the sector has fallen to just 44.9% as on June '08 from 62.4% as of December '06.

However, a slowdown in infrastructure should not be surprising. Even when investments in other sectors were rising at a breathtaking pace till the end of FY08, infrastructure investment was rising at a much slower pace. For instance, private corporate investments rose to 16.1% of the GDP in FY08 from 5.4% of the GDP FY02. But infrastructure investments accounted for only 5.3% of the GDP in FY08. This shows that even when interest rates were low, enough money was not being invested in basic infrastructure like roads, ports and airports. Whatever little funds were flowing into the sector have further slowed down. Sectors like transport and power form the backbone of the economy and a slowdown in investments in these sectors will have a deeper impact on the entire economy.

Grey market Blues- Rpower

The debut of Reliance Power (RPL) shares on the Mumbai Stock Exchange (BSE) and the National Stock Exchange (NSE) was one of the most spectacular fiascos in recent times in the Indian primary market. It was hyped up so much that when the stock crashed below its offer price, even grey market investors felt the tremors.

Scores of investors are believed to have refused to pay up after buying RPL shares shelling out double the Rs 450 offer price as premium. Usually, operators do not lose money because shares invariably list at a premium to the last traded price in the grey market. Sometimes, if there is a marginal loss, the difference is settled through cash and the show carries on to the next IPO. However, the RPL stock is believed to have spawned a Rs 2,000-2,500 crore payment crisis in the unofficial bucket (dabba) shops most of which are in Gujarat centres such as Ahmedabad and Rajkot. That is because, it debuted at a 21 per cent premium to its offer price of Rs 450 but soon sank below it. It now trades at a discount of Rs 175 to the issue price.

With the other two big IPOs —Wockhardt and Emaar MGF —bowing out due to poor investor response, the below-the-ground operators are stuck for a while.

That brings us to the point, how to regulate this when-issued market. It’s difficult, but then, sources say that it is tough for that market to function without the connivance of the issuers and their investment bankers. Regulating them better could be the answer.