IFC sees 6% growth for India in 2001

World Bank's private lending arm International Finance Corporation (IFC) has projected a 6 percent growth for India this year despite the economic slowdown even as it warned that political and financial scams were damaging investors' confidence. Annual growth is expected to remain at around 6 percent in India, said, adding uncertain fiscal and regulatory conditions, inadequate infrastructure and slow pace of reforms impede growth.

To sustain high growth in India, IFC in its annual report released recently said there was need to pursue business oriented policies and ambitious privatisation programmes more vigorously. India is among one of large beneficiaries of loans from IFC, which funds investments in private companies.

Of the 45 committed transactions totalling $ 784 million this fiscal, IFC inked 18 transactions in India amounting to $ 224 million. Cumulative gross commitment in India was a student loan programme through NIIT.

Through a novel student loan programme in India, IFC helped fill an urgent need since private lenders avoided higher education loans, viewing them as a state responsibility or a loss making proposition.

IFC provided a partial guarantee for Rs. 1.5 billion on a 10 year bond issue from Ballarpur Industries (BILT), the largest producer of writing and printing paper in India. Through the issue, BILT was able to raise local currency funds to partly finance its Rs. 900 crore modernisation and expansion plan.

RBI reduces interest rates on export credit

In a move to boost exports, the Reserve Bank of India recently announced a reduction of interest rates for export credit by one percentage point across the board with effect from September 26.

The reduction in the rates would be applicable for both preshipment and post shipment credits, the RBI said.

The RBI said the maximum rate the bank should charge to exporters would be 2.5 percent below its prime lending rate (PLR) for preshipment credit upto 180 days and post shipment credit upto 90 days.

Earlier the ceiling rate was 1.5 percentage point below the PLR. The concession would apply to all export credit upto March 31, 2002, the apex bank added.

In addition to the above facility for rupee credit, exporters would continue to have the facility for foreign currency loan in the currency of their choice at internationally competitive rates.

ADB warns Bangladesh of economy hit

Several key industries in Bangladesh will suffer "Service" effects as a result of the terror attacks in the United States, the Manila-based Asian Development Bank (ADB) warned in a report received in Dhaka recently.

If the effects of the September 11 attacks are prolonged, "there will be severe effects on the backward linkage industries, banks and insurance companies, and transportation services," the ADB said.

"Social consequences of the setback in the garment industry would also be severe as it provides employment to 1.5 million workers, mostly women," it said.

Bangladeshi business have already warned of economic fallout from the attacks and the ensuing US-led war on terrorism, including a decline in exports for ready-made garments, which earns the impoverished country four billion dollars annually.

The quarterly economic report on Bangladesh also said the attacks would have "a negative impact" on the flow of remittances from Bangladeshi expatriates, which account for four percent of gross domestic product (GDP).

Nearly 80 percent of the remittances come from the Middle East and 12 percent from the United States.

Bangladesh weighs export of natural gas to India

Bangladesh will allow exports of natural gas to neighboring India "if it makes economic sense", a minister of the country's new government said recently.

"Gas can be exported to India. But we must determine the extent of national benefit before making a final decision, "Commerce Minister Amir Khasru Mahmud told a lunch meeting of the Foreign Investors' Chamber of Commerce and Industry.

FICCI president Wali Bhuiyan told the minister that "allowing gas export to India would attract new foreign direct investment".

The country's main opposition has threatened street protests against the export of natural gas.

Local and international business groups want Bangladesh to change a long-standing policy and allow international oil companies to export gas and earn foreign currency for economic development.

Bangladesh fears that exports could lead to faster depletion of its reserves and leave it with insufficient gas for its domestic needs, including cooking, generating electricity and making fertilizer.

India to privatise hotels

India's cabinet recently set the ball rolling on the privatisation of eight hotels of the India Tourism Development Corp (ITDC) and five hotels of Air India subsidiary, Hotel Corp. of India.

The cabinet also said any company bidding for the 33 percent stake sale in oil marketing firm IBP Ltd, would have to invest up to 20 billion rupees (416 million dollars) over the next 10 years to develop the petroleum sector.

Two prime ITDC properties in the Indian capital new Delhi and southern city of Bangalore would be handed over to a private bidder only under a 30 year lease, Shourie specified.

Five hotels of the Hotel Corp of India will be privatised and the funds generated will be used for buying much needed planes for cash strapped Air India the country's international carrier.

Sri Lanka records poor economic growth

Sri Lanka's economy grew by a dismal 0.4 percent in the second quarter of this year, down sharply from a 7.3 percent growth in the corresponding period last year, the central bank said recently.

The latest figures released by the bank showed growth in the first half was 0.86 perecent, far less than the 6.92 percent growth recorded in the same period on 2000.

Previously, the International Monetary Fund (IMF) had expected Sri Lanka's first half economic growth this year at about 1.0 percent, but the figures released by the bank disappointed government planners.

The agriculture and fishing sectors contracted 1.2 percent in the second quarter of this year while construction expanded by 5.6 percent, the bank said in a statement.

The poor economic performance came on top of modest growth of 1.3 percent in the first quarter compared with 6.6 percent in the same period last year.

The central bank had expected economic growth this year at about 4.5 percent.