Shri Kamal Nath, Union Minister of Commerce & Industry, has stated that India’s GDP would be in the range of 7 to 8% in 2008-09 and added that GDP growth in real terms in the first half of the fiscal year has been at 7.8%, which is fairly robust. Speaking at the Breakfast Session of Boston Consulting Group (BCG) on “Defying the downturn: How Rapidly Developing Economies are Dealing with the Global Slowdown” at World Economic Forum in Davos today, the Minister said that India’s path to recovery will be faster than for the rest of the world. “For example, after industrial downturn in October 2008, the November 2008 figure was positive at 2.4%. The financial situation has eased somewhat and liquidity is accessible in the domestic markets. I would like to point out here that India is still a low-cost high quality competitive manufacturing environment, and with falling shipping rates, it may be more cost effective to set up production facilities in India”, he added. “FDI inflow has maintained its pace – with inflow of $ 19.7 billion during the period April – November 2008.

Even during the financial crisis was playing out, an inflow of more than USD 1 billion took place in November 2008”, Shri Kamal Nath said. During the interaction, Shri Kamal Nath pointed out that India has seen rapid economic growth averaging 8.8% for the past five years; savings and investments as a proportion of GDP have gone up to 36 and 38% respectively; share of services in the economy has increased to around 60%; trade as a percentage of GDP is in excess of 40%, reflecting India’s increased integration with the world and added that India that has gradually integrated with the global economy has not escaped unscathed from the global economic turmoil. “We have a dynamic young population with a large and growing middle class consumers of 300-400 million. Agricultural growth has been robust, maintaining the incomes of 65% of the workforce that is dependent on the sector for livelihood”, the Minister said.

Addressing the gathering, Shri Kamal Nath underlined the measures taken by the Indian government to mitigate the effects of global economic crisis: “Interest rates have been reduced and cash reserve ratios have been lowered. The repo rate was reduced from 9% to 6.5%, while CRR came down from 9% to 5.5%. Term repo facility for an amount of $12 billion was instituted to ease liquidity stress faced by mutual funds and non banking financial companies. Provisioning requirements for reduced agricultural and SME loans. Excise rates have been slashed across the board. External borrowing limits have been raised and FII limits for corporate bonds have doubled. Tax-free infrastructure bonds have been announced to increase funds available for the sector. Fiscal measures worth $ 5 billion have been announced”.

India’s Cumulative value of exports for the period April- November, 2008 was US $ 119301 million (Rs.523879 crore) as against US $ 99912 million (Rs.404417 crore) registering a growth of 19.4 per cent in Dollar terms and 29.5 per cent in Rupee terms over the same period last year. Exports during November, 2008 were valued at US $ 11505 million which was 9.9 per cent lower than the level of US $ 12768 million during November, 2007. In rupee terms, exports touched Rs.56374 crore, which was 12.0 per cent higher than the value of exports during November, 2007.

India’s Imports during November, 2008 were valued at US $ 21571 million representing an increase of 6.1 per cent over the level of imports valued at US $ 20329 million in November, 2007. In Rupee terms, imports increased by 31.8 per cent. Cumulative value of imports for the period April- November, 2008 was US $ 203642 million (Rs.897246 crore) as against US $ 153109 million (Rs.620050 crore) registering a growth of 33.0 per cent in Dollar terms and 44.7 per cent in Rupee terms over the same period last year.

Oil imports during November, 2008 were valued at US $ 7254 million which was 11.9 per cent higher than oil imports valued at US $ 6483 million in the corresponding period last year. Oil imports during April- November, 2008 were valued at US $ 74114 million which was 55.7 per cent higher than the oil imports of US $ 47597 million in the corresponding period last year.

Non-oil imports during November, 2008 were estimated at US $ 14318 million which was 3.4 per cent higher than non-oil imports of US$ 13846 million in November, 2007. Non-oil imports during April- November, 2008 were valued at US $ 129528 million which was 22.8 per cent higher than the level of such imports valued at US$ 105511 million in April- November, 2007.

The commerce ministry amended rules governing the Special Economic Zones (SEZs). About 16 amendments to the rules were incorporated in the SEZ rule book, catering to various demands of exporters and developers operating in the tax-free industrial enclaves for exports. These include allowing reimbursement of duty through the Duty Drawback Scheme to suppliers outside SEZs even if payment is made in rupees. Duty Drawback enables exporters to claim back taxes paid while importing, or any other local taxes paid.

Tax benefits enjoyed by developers and contractors are now being extended to sub-contractors, who are engaged in developing an SEZ. In addition, the new rules allowed SEZ developers to provide housing to staff and workers within the tax-free enclaves. Gems and jewellery, one of the most affected segments due to the economic slowdown, has been given some relief. These units will be allowed to bring back consignments, which have been found to be defective by the overseas buyer, or refused payment.

The government has approved an Integrated Energy Policy that envisions a road-map for sustainable growth with energy security over a reasonable period of time.
The policy seeks to make energy markets more competitive, have market-determined energy pricing and resource allocation, transparent and targeted subsidy disbursal and improved efficiency. The policy, prepared by the Planning Commission, aims at optimal exploitation of domestic energy resources and exploring and acquiring energy assets abroad to attain energy security for the country.

Home Minister P Chidambaram, who briefed reporters on the approval of the integrated energy policy, said that the government will set up a monitoring committee under the chairmanship of the Cabinet Secretary to review the progress of implementation of the policy. The Cabinet Committee on Economic Affairs (CCEA) gave its approval to Suzlon Energy's proposal to undertake Right Issue of equity to its existing shareholders. The approval, which is subject to the conditions recommended by the Foreign Investment Promotion

In what will lend additional risk cover for micro, small and medium exporters (MSMEs), the CCEA gave its approval for allocation of Rs 350 crore to Export Credit Guarantee Corporation of India (ECGC). The fund which will come from the National Export Insurance Account (NEIA) will provide higher risk cover to MSME exporters, which will go up from the existing 85% to 95%. For banks financing such MSME exporters, the riskk cover is being enhanced from the present 75% to 85%.

The CCEA also extended a scheme that allows public sector enterprises (PSEs) to invest their surplus funds in select mutual funds. The government had in August 2007 withdrew prohibition on investing surplus funds of navratna and miniratna PSEs in public sector mutual funds, a decision which it was to review a year later. With Friday's decision, the scheme has been extended from August 2008 till further orders.

Source: The Economic Times