Indian economy on track

Indian Finance Minister Yashwant Sinha recently put on a brave face in the face of attack on parliament and said the economy showed signs of recovery.

"I am hoping to end the year with the last mishap," Sinha told reporters, referring to the attack on parliament which left 13 people dead.

"No economy can flourish when there are uncertainties whether they are global or national.

"Desite this the economy will continue to grow. There are some signs of recovery in the economy. Even at a slow rate India’s economy will be the fastest growing economy in the world," Sinha said.

India’s economic growth slipped to 5.2 percent in the fiscal year ended March 2001, after recording 6.1 percent in the previous year. The government has targetted an annual growth rate of seven percent until 2010. Sinha said in the current financial year industrial production had declined sharply to two percent.

"But agricultural sector is expected to do better than the previous years and the growth rate could be in the region of about 6.5 percent to 7.0 percent," he said.

The finance minister said his government’s increased investment in sectors such as housing, rural development, telecommunications and power would lead to an increase in demand in the economy and "greater economic activity".

However he said the government’s main worry was the revenue deficit. "Due to the result of industrial slowdown we have noticed a shortfall in the corporate tax and customs duty. The increase in personal income tax is modest... the bothersome thing is the higher revenue deficit.

"I will not rule out some slippage in the fiscal deficit", Sinha said. The government had targetted a fiscal deficit of 4.7 percent of gross domestic product in the budget to March 2002.

FICCI for retaining 35% peak duty tariff

Federation of Indian Chambers of Commerce & Industry FICCI’s per-budget memorandum has taken a hard line on import duty reduction. The chamber has asked the government not to have any general reduction in peak duty tariff of 35 percent for three years and added that the government should move towards a graded (three tier based) import duty structure.

Furthermore, the chamber feels that if duty reduction does indeed happen the phasing of peak duty reduction to 20 percent in the next three year should be done in such a manner that the priority is on raw materials and not on finished goods. The chamber wants duties on raw materials to be 10-15 percent lower than duties on finished goods.

In what would be music to the ears of electronic hardware industry, FICCI is saying that if import of final products is allowed at zero duty then components of such products should also be allowed to be imported at zero duty. The desirable duty structure for the basic raw materials should be the lowest at 10-15 percent, for the intermediate goods it should 20 percent and 35 percent for the finished goods. The chamber feels that there should be a reasonable duty difference between raw materials components and finished goods.

Bangladesh imposes import tariffs

Bangladesh imposed import duties recently on more than 30 items to boost foreign exchange reserves and protect local industries, officials said.

The National Board of Revenue officials said the duties of between 10 and 25 percent would be imposed on a number of "non-essential" items that are being increasingly imported. The items include powdered milk, plastic made furniture, fresh dates, cooking appliances, fresh mangoes, apples, chocolate, shampoo, perfume, imitation jewelry and shoes.

Bangladesh court rules against export of gas

A court has barred the government from exporting natural gas through a pipeline to neighboring India for three months, a court official said recently.

The High court imposed the restriction on a joint petition filled by an economist, a university teacher and a journalist.

The ban will be effective for three months during which the court will hear the petition.

Even though Bangladesh has signed an agreement with international oil companies to prospect and produce gas, "there is no provision to export the natural gas through a pipeline," the petition said.

It said exports of gas will be harmful to the country.

"Only 14 percent of our population has access to electricity and 80 percent of power production depends on natural gas. This is one reason why we can’t afford to export gas," said the petition.

Sri Lanka's economy more trouble

Sri Lanka’s exports have fallen sharply for the sixth consecutive month while the budget deficit has widened signalling a worse than expected performance, officials said recently.

Export earnings fell nearly 20 percent in October after recording falls of 14.5 percent in September and 20 percent both in July and August, Central Bank officials said.

Imports too fell dramatically by 30 percent in September due to a 40 percent surcharge on customs duties as well as the depreciation of the rupee against major currencies, officials said.

Government revenue improved by 13 percent in the first nine months of the year, but the gains were eroded by higher spending which widened the deficit by 22 percent, officials said.

Compounding problems for the Sri Lankan economy is the near three percent drop in remittances of Sri Lankans employed abroad. The expatriate funds provide a key source of foreign exchange for the government.

Official figures showed that the GDP growth in the second quarter of this year was a dismal 0.4 percent compared to 7.3 percent in the corresponding period last year.

The Central Bank has forecast a GDP growth rate of 2 to 2.5 percent this year, down from earlier projections of 4.5 percent.

New Prime Minister Ranil Wickremesinghe has said it would be an achievement to maintain a zero growth rate given the dismal performance of the economy.