Tuesday, February 17, 2009
Across-the-board selling saw Sensex slip by 2.85%, as Indian market fell in line with weak international markets. The market showed no sign of recovery after resuming in negative territory at 9213, asthe sentiment turned extremely bearish. Following the sharp fall in heavyweights, a correction in reality, consumer durable, banking, metal and tech stocks dragged the index below 9000 mark in afternoon to touch the day's low of 8994, down 311 points. Sensex closed 270 points down at 9035 while Nifty shed 78 points to close at 2771.
All the sectoral indices were hammered. BSE Realty led the slump and closed 4.95% down followed by BSE CD (down 4.56%), BSE Bankex (down 4.14%) and BSE Metal (down 3.85%).
The market breadth was extremely weak. Of the 2,504 stocks traded on the BSE 1,722 stocks declined, whereas 682 stocks advanced. Hundred stocks ended unchanged. Of the 30 Sensex stock only one advanced while 29 declined. Among major losers Tata Steel slumped by 6.74% at Rs171.65, ICICI Bank shed 5.69% at Rs385.90, DLF declined by 5.19% at Rs147.85, Mahindra & Mahindra lost 5.01% at Rs298.70, Hindalco Industries shed 4.74% at Rs42.20, Reliance Communications fell 4.53% at Rs163.40, HDFC slipped by 4.37% at Rs1432.45, Reliance Industries plunged 3.90% at Rs1267.60 and HDFC Bank tumbled by 3.77% at Rs880.25. The other blue chips also fell around 1-3% each. ITC was the only gainer adding 0.08% at Rs180.55.
Satyam Computer Services was the most actively traded counter with volume of over 2.20 crore shares on the BSE followed by Unitech (1.11 crore shares), Suzlon Energy (96.98 lakh shares), Hexaware Technologies (83.80 lakh shares) and Cals Refineries (77.65 lakh shares).
Indian market extended its losses to close with huge deep cut mainly due to the disappointment from the interim budget. Stocks tumbled since initial bell along with other Asian markets on intensive selling across the board. Market plummet as on 16th Feb 2009, acting Finance Minister Pranab Mukherjee had not announced any new scheme or tax initiative in the interim budget. Negative European markets along with lower US index futures also fueled the negative sentiments.
The domestic market today opened sharply lower tracking weak cues from Asian markets on dismal Japanese growth data. US markets remained closed on Monday for President''s Day holiday. Further, benchmark indices continued to lose ground without any sign of recovery on heavy sell off. The traders were also disappointed as the much-awaited interim budget failed to provide any sops to the required sectors. Finally, market ended the day in red zone to continue its yesterday’s downfall. BSE Sensex ended below 9,050 mark and NSE Nifty closed below 2,800 level. From the sectoral front, traders off-loaded position across the sectors. Among those, Consumer Durable, Reality, Bank, Metal, IT, Teck, Oil & Gas and Power stocks contributed to most of the selling pressure. Midcap and Smallcap stocks also got hammered during the trading session.
Among the Sensex pack 29 stocks ended in red territory and 1 in green. The market breadth indicating the overall health of the market remained in favour of decliners as 1722 stocks closed in red while 682 stocks closed in green and 100 stocks remained unchanged in BSE.
The BSE Sensex closed lower by 270.45 points at 9,035 and NSE Nifty ended down by 78 points at 2,770.50. Broader market indices were in red as BSE Mid Caps and Small Caps ended with losses of 67.63 points and 78.15 points at 2,853.12 and 3,245.99 respectively. The BSE Sensex touched intraday high of 9,213.40 and intraday low of 8,994.34.
Losers from the BSE Sensex pack are Tata Steel (6.74%), ICICI Bank (5.69%), DLF Ltd (5.19%), M&M Ltd (5.01%), Hindalco (4.74%), RCom (4.53%), HDFC (4.37%), Reliance (3.90%), Tata Power (3.87%) and HDFC Bank (3.77%).
Only gainer from the BSE Sensex pack is ITC Ltd (0.08%).
On the global markets front, the Asian markets, which opened before Indian market, ended lower as worse than expected slump in Japan''s fourth quarter GDP numbers raised concerns about deteriorating global economy. The world''s second-biggest economy shrank 3.3% from the previous quarter, or at an annual rate of 12.7%. The Shanghai Composite index also gave up its winning rally due to lack of new stimulus measures from Beijing. Shanghai Composite, Hang Seng, Nikkei 225, Straits Times and Seoul Composite index ended down by 69.95, 510.48, 104.66, 42.78 and 48.28 points at 2,319.44, 12,945.4, 7,645.41, 1,637.92 and 1,127.19 respectively.
European markets which opened after the Indian market are also trading in red as investors remained nervous on the health of the global economy and disappointing corporate results. In London FTSE 100 is trading lower by 55.24 points at 4,079.51 and in Frankfurt the DAX index is trading down by 77.23 points at 4,289.41.
The BSE Reality index ended lower by (4.85%) or 73.70 points to close at 1,445.67 after the interim budget failed to provide any relief to the sector reeling under a severe credit crunch. Orbit Co (8.77%), Penland Ltd (7.82%), Ansal Infra (6.70%), Unitech Ltd (6.14%), Housing Dev (5.72%) and DLF Ltd (5.19%) ended in negative territory.
The BSE Consumer Durables index faced heavy selling pressure and closed with decrease of (4.80%) or 80.21 points at 1,590.95. Scrips that lost are Videocon Ind (6.08%), Titna Ind (5.55%), Gitanjali GE (4.75%), Rajesh Export (53.60%) and Blue Star L (2.33%).
The BSE Bank index ended down by (4.41%) or 211.41 points at 4,583.37 on weak sentiment for financial sector globally. Main losers are Bank of India (7.39%), Oriental Bank (6.67%), ICICI Bank (5.69%), PNB (5.43%), Bank of Baroda (4.90%) and Federal Bank (4.73%).
The BSE Metal stocks ended down by (3.98%) or 200.3 points at 4,830.72 as import duty remained unchanged in the interim budget. Main losers are Tata Steel (6.74%), Hindalco (4.74%), Welspan Guajrat (4.37%), Steel Authority(4.27%), Sesa Goa Ltd (4.02%) and Jindal Steel (3.92%).
The BSE IT index also ended lower by (3.24%) or 68.58 points at 2,047.62 on feeble outlook for US, which is main market for them. Losers are Financ Tech (5.19%), Rolta Ind (5.05%), Aptech Ltd (3.83%), Moser Bayer (3.79%) and Infosys Tech (3.59%).
The BSE Oil & Gas index dropped by (2.98%) or 186.71 points to close at 6,077.96. Aban Offshore (4.15%), Reliance (3.90%), Gail India (3.62%), Reliance Natural Resources (3.13%) and Cairn Ind (2.56%) ended in red.
Unitech plunged by 6.14% on the back of the report that the promoters have pledged 49.48% of their total 64.4% in the company in order to secure additional security for the loans availed by the company.
DLF ended down by 5.19% due to problem relating to acute liquidity crunch and poor buyer sentiments.
M&M Ltd tumbled 5.01%. The merger of Punjab Tractors Ltd (PTL) with M&M Ltd became effective from 16th Feb 2009. The company has fixed March 4 as the ''record date'' for ascertaining the shareholders of the PTL, who would be entitled to receive equity shares of the company as per the scheme of amalgamation.
Power Grid lost 4.37%. The company’s board has approved investments of Rs.51.81 billion to strengthen its transmission network in the southern, northern and western grid. The investment will be made over the three years period.
Oil and Natural Gas Corporation declined 1.48%, on falling global crude oil prices.
Oracle Financial Services Software ended higher by 3.85%. The company today announced Oracle Flexcube Direct banking 5.0, an internet and mobile banking application that addresses the direct banking needs of financial institutions ranging from traditional brick and mortar and click and mortar institutions to direct business entities of the banks.
A broad-based sell-off spilled over to the second session in a row after interim budget turned out to be a non-event. Weakness in global markets also dampened sentiments. The BSE 30-share Sensex fell 270.45 points, or 2.91%. In the last two trading session, the barometer index has lost 6.2%.
The only solace for the investors was that barometer index BSE Sensex held the psychological 9,000 level. The index had fallen below the crucial 9,000 level in late trade today, 17 February 2009, but soon recovered.
Selling was broad-based with realty, metals and bank stocks among major losers. Gains in select FMCG shares supported the indices at lower levels.
Selling by foreign funds led the decline. As per the provisional data released by the stock exchanges after trading hours, foreign funds today, 17 February 2009, dumped shares worth a net Rs 462.21 crore. Domestic funds bought stocks worth a net Rs 278.42 crore.
Not a single new scheme or tax initiative was announced in the interim budget unveiled by the acting Finance Minister Pranab Mukherjee during trading hours on Monday, 16 February 2009, disappointing the stock market. The market was expecting government to offer tax sops and sector-specific stimulus package for the economy in the interim budget.
Meanwhile, a concern among the marketmen is that the deteriorating government finances may force rating agencies to downgrade India's sovereign rating. If India's sovereign rating is downgraded, it will significantly raise the cost of borrowing of Indian firms in global markets - something the government had banked on to ease the domestic credit crunch. The financial meltdown had already reduced these inflows; a rating downgrade will put an end to them altogether.
India's rising fiscal deficit is seen at 6% of GDP at end 2008-09, much higher than the initial target of 2.5%. For the year 2009-10, it is expected to be 5.5% of GDP.
European shares hit a two-week trough on Tuesday, led lower by banking and energy stocks, as investors remained jittery over the health of the global economy and disappointing corporate results. Key indices in France, Germany and UK were down by 1.40% to 1.81%.
Asian markets, which opened before Indian market, fell as dismal Japanese growth data and fresh concerns about the financial sector fanned worries about the deteriorating global economy. Key indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan closed down between 2.17% to 4.11%. A latest survey showed Japanese manufacturers' confidence remains mired near record lows.
Data showed on Monday that Japan's economy shrank by 3.3% in the fourth quarter, its worst since the 1974 oil crisis. Meanwhile, Japanese Finance Minister Shoichi Nakagawa said on Tuesday he would resign after being forced to deny he was drunk at a G7 news conference, dealing a fresh blow to unpopular Prime Minister Taro Aso in an election year.
Trading in US index futures indicated the Dow could fall 116 points at the opening bell on Tuesday, 17 February 2009. US markets were closed on Monday, 16 February 2009 for President's Day holiday.
Countless economic stimulus packages and open promises to take more action by policymakers around the world have so far all been met with disappointment by investors, with not even the $787 billion pledged by Washington making a dent in negative sentiment.
The BSE 30-share Sensex fell 270.45 points, or 2.91%, to 9,035, its lowest closing since late January 2009. The Sensex opened 92.05 points lower at 9,213.40, which was also the day's high. The indices slowly succumbed to selling pressure to slip at the day's low of 8,994.34, losing 311.11 points at the fag end of the trading session.
The S&P CNX Nifty dropped 78 points, or 2.74%, to 2770.50. Nifty February 2009 futures were at 2749.95, a discount of 20.55 points as compared to the spot closing.
The market breadth, indicating the overall health of the market, was weak on BSE with 1722 shares declining as compared with 682 that rose. A total of 100 shares remained unchanged.
BSE clocked a turnover of Rs 2384 crore, lower than Rs 2,908.21 on Monday, 16 February 2009. Turnover in NSE's futures & options (F&O) segment fell to Rs 38956.24 crore from Rs 44914.39 crore on Monday, 16 February 2009.
The barometer index BSE Sensex is down 612.31 points or 6.34% in calendar 2009 from its close of 9,647.31 on 31 December 2008.
The BSE Realty index fell 4.85%. The BSE Consumer Durables index (down 4.80%), the BSE Bankex (down 4.41%), the BSE Metal index (down 3.98%), the BSE IT index (down 3.24%), and BSE Oil & Gas index (down 2.98%). All these indices underperfomed the Sensex.
The BSE Power index (down 2.55%), the BSE PSU index (down 2.47%), the BSE Capital Goods index (down 1.88%), the BSE Auto index (down 1.68%), the BSE BSE Healthcare index (down 0.87%), and the FMCG index (down 0.74%), outperformed the Sensex.
India's largest cigarette maker by sales ITC was the only stock in the Sensex that bucked weak market trend. The stock, which was almost ended unchanged at Rs 180.55, supported the Sensex at lower level as ITC has 7.15% or third-highest weightage in the Sensex.
India's largest drug maker by sales Ranbaxy Laboratories declined after a firm start. The stock fell 0.20% to Rs 204.65, off day's high of 209.90. Recently some reports suggested the company got US drug regulator's nod to sell acute migraine drug sumatriptan in the US. Sumatriptan is a generic of GlaxoSmithKline's Imitrex, which has sales of nearly at $1.1 billion in the US.
India's largest private sector firm by market capitalisation and oil refiner Reliance Industries fell 3.90%. The stock has 15.59% weightage on the Sensex. The stock fell on profit booking as the government did not re-introduce an anticipated seven-year income-tax holiday for natural gas producers in the interim budget.
Petroleum Minister, Murli Deora, hinted some days back that the government may consider granting seven-year tax holiday for natural gas producers in an attempt to make the next round of Nelp (New Exploration and Licensing Policy) bidding attractive. The finance ministry had withdrawn the tax holiday last year.
India's largest state-run oil explorer by market capitalisation ONGC fell 1.48% on lower crude prices. US crude futures were down 2.2% to $36.69 a barrel, having lost 12% so far in February 2009. A fall in crude oil prices would hit profits of the company on account of lower realizations from crude sales.
Banking shares tumbled sharply after bond yields rose to their highest in more than two months on Tuesday afternoon on concerns over the government's additional borrowing and lack of clarity on the central bank's open market operations.
India's largest private sector bank by net profit ICICI Bank which has 6.84% weightage on the Sensex, slipped 5.69%. HDFC Bank, Axis Bank, Oriental Bank of Commerce, Punjab National Bank, Kotak Mahindra Bank, Bank of India and State Bank of India fell by 1.59% to 7.39%.
At 15:13 IST, the 8.24% bond maturing in 2018 was at 6.55%, its highest since 11 December 2008 and above its previous close of 6.42%.
The biggest quarterly gains posted by government bonds in at least a decade helped most of the domestic banks to boost investment returns and post an increase in third-quarter profit.
Metal shares declined sharply as there was no changes in import duty in the interim budget. A section of the market was expecting increase in import duties on metals to protect the domestic industry from cheap imports.
World's sixth largest steel maker Tata Steel slumped 6.74%. An official from Standard & Poor's was recently quoted by media as saying that Tata Steel's liquidity is weak on a consolidated basis. The report also said the firm could face significant refinancing risk considering the near term pressure on Tata Steel UK's financial agreements which involves about more than 3 billion pounds of debt.
India's largest aluminimum maker by sales Hindalco Industries fell 4.74%. Hindalco proposes to use its share premium reserves to write off expenses incurred by the company on its international acquisition and domestic expansion. The company's board has approved a proposal to this effect. The company has a share premium reserve of around Rs 8,500 crore.
Bhushan Steel, Steel Authority of India, Sesa Goa, Jindal Steel & Power, and Sterlite Industries were down by 3.37% to 4.39%
Realty shares fell sharply in absence of any tax sops for the housing sector in interim budget. India's largest real estate firm by market capitalisation DLF slumped 5.19%. Omaxe, Puravankara Projects, Ansal Properties & Infrastructure, HDIL, Indiabulls Real Estate, Sobha Developers and Peninsula Land fell by 2.12% to 7.82%
Delhi-based realtor Unitech slipped 6.14% after the company said its founders had pledged shares equivalent to 49.48% of the company's equity.
The BSE Realty index had fallen 4.58% yesterday, 16 February 2009, due to disappointment from the budget. Prior to that, the realty index had risen 14.7% in past six sessions till Friday, 13 February 2009.
Software shares extended recent losses as US market reels under slowdown. HCL Technologies, TCS, Infosys Technologies and Wipro were down by 1.27% to 3.59%. Indian software firms earn more than half of their income from the US market.
But Hexaware Technologies jumped 7.36% to Rs 31.35 after the company reporting a net profit of Rs 36.76 crore in the year ended December 2008 as against a net loss of Rs 10.76 crore in the year ended December 2007. Net sales rose 6.3% to Rs 498.17 crore in the year ended December 2008 over the year ended December 2007. The company announced the results after market hours on Monday, 16 February 2009.
Telecom stocks slipped after Morgan Stanley, in its latest report, downgraded India's telecom sector citing increased competition in the country. Bharti Airtel (down 0.75%), Idea Cellular (down 3.06%), and Reliance Communication (down 4.53%), slipped.
The investment bank said in a report that it expects the tariff wars of the telecom firms to lead to lower than expected Average Revenues per Minute (ARPM). Morgan has downgraded its rating on Reliance Communications and Idea Cellular to 'underweight' and cut their estimated price target to Rs 132 and Rs 37, respectively. The investment bank has maintained an 'overweight' for Bharti Airtel, with a price target of Rs 758.
Shares of jewellery exporters slumped as the government did not announce any sops in the interim budget to revive demand. Su-Raj Diamonds (down 2.80%), Rajesh Exports (down 3.60%), Gitanjali Gems (down 4.75%), and Classic Diamonds (down 7%), fell. Market had expected the government to ease service tax refunds and exempt jewellery exporters from fringe benefit tax for a certain stipulated period.
Shares of stock brokerage firms tumbled on concerns weak securities market conditions may keep investors away in the near term. India Infoline (down 1.61%), Geojit Financial Services (down 4.04%), Reliance Capital (down 4.30%), Motilal Oswal (down 4.66%), Indiabulls Securities (down 6.82%), fell.
Shipping shares tumbled as the government did not announce any sops in the interim budget for the sector. Varun Shipping Company, Shipping Corporation of India, Essar Shipping, GE Shipping Company, SEAMEC, Bharati Shipyard, Mercator Lines, ABG Shipyard, and Shreyas Shipping & Logistics fell between 1.43% to 4.09%. Indian shipping firms had sought exemption from service tax on input services in the federal interim budget 2009.
Hotel shares mostly declined as the demand for inclusion of hotels in the infrastructure sector category remained unfulfilled in the in interim budget. Indian Hotels Company (down 2.64%), Hotel Leela Ventures (down 1.35). However, EIH rose 0.43% to Rs 105.85, after hitting a day's low of Rs 100.55. An infrastructure status could have enabled hotels for easier and cheaper access to bank loans. Non-priority lending by banks and institutions at higher interest rates leads to higher project cost and room rates.
Multiplex operator Cinemax India slumped 5.29% to Rs 35.80 after the company said its promoters have pledged more than 1.14 crore shares or 41% stake in the company.
Textiles firm Bombay Dyeing & Manufacturing Company lost nearly 3.83% to Rs 145.55 after the company said its promoters have pledged more than 49.72 lakh shares or 12.88% stake in the company.
Shares of Temptation Foods (down 10%) and Kohinoor Foods (20%) extended losses to hit the lower circuit for the second straight day after the market regulator Securities and Exchange Board of India pulled up Temptation Foods for falsifying shareholding information. According to the SEBI order, Temptation Foods misled investors by providing false declaration to the stock exchanges that it holds over 31.80 lakh shares representing 11.98% stake in Kohinoor Foods.
Reliance Industries reported a highest turnover of Rs 179.68 crore on the BSE. Educomp Solutions (Rs 178.55 crore), United Spirits (Rs 126.50 crore), ICICI Bank (Rs 124.34 crore), and Satyam Computer Service (Rs 109.95 crore), were other turnover toppers on the BSE.
Satyam Computer Service registered a highest volume of 2.21 crore shares on the BSE. Unitech (1.11 crore shares), Suzlon Energy (97 lakh shares), Hexaware (83.82 lakh shares), and Cals Refineries (78.01 lakh shares), were other volume toppers on the BSE.
Deal Date Scrip Code Company Client Name Deal Type * Quantity Price **
17/2/2009 500077 CABLE CORP I KASHUKHA TRADING AND SERVICES PVT LTD B 180000 14.00
17/2/2009 500077 CABLE CORP I GRANT TRADING AND SERVICES PVT LTD S 180000 14.00
17/2/2009 526367 GANESH HOU C INDEA ABSOLUTE RETURN FUND S 325000 34.02
17/2/2009 531784 KADAMB CONST ALLIANCE INTERMEDIATERIES AND NETWORK PVT LTD S 30000 32.45
17/2/2009 511728 KZLEASING DIVYA STOCK BROKING LTD B 50000 41.91
17/2/2009 511728 KZLEASING JYOTIKABEN MAHESHBHAI HADVANI B 31053 41.66
17/2/2009 511728 KZLEASING JYOTIKABEN MAHESHBHAI HADVANI S 22000 41.88
17/2/2009 532494 MICRO TECHN PR VYAPAAR PRIVATE LIMITED B 70437 62.86
17/2/2009 532494 MICRO TECHN MORGAN STANLEY MAURITIUS COMPANY LIMITED S 55000 62.05
17/2/2009 500322 PANYAM CEMEN DEUTSCHE SECURITIES MAURITIUS LIMITED B 100000 140.06
17/2/2009 500322 PANYAM CEMEN PRASAD ART PICTURES PNT LTD S 82850 140.01
17/2/2009 590077 RANKLIN SOLU JYOTHI G B 28000 24.48
17/2/2009 519097 RITES INTERN MACKERTICH CONSULTANCY SERVICES PVT LTD B 97028 4.45
17/2/2009 519097 RITES INTERN VINCENT COMMERCIAL CO LTD S 96400 4.45
17/2/2009 531898 SANGUINE MD BHAMINI KAMAL PAREKH B 74900 4.26
17/2/2009 519285 TARAI FOOD L MACKERTICH CONSULTANCY SERVICES PVT LTD B 178800 2.67
17/2/2009 519285 TARAI FOOD L SUDHA COMMERCIAL CO LTD S 176600 2.67
17/2/2009 531917 TWINSTA SO E VIPUL VIRENDRAKUMAR PATEL S 103747 3.15
17/2/2009 531249 WELL PACK PA VISHESH.SHAHRA B 50900 64.95
Date,Symbol,Security Name,Client Name,Buy/Sell,Quantity Traded,Trade Price / Wght. Avg. Price,Remarks
17-FEB-2009,BAJAUTOFIN,Bajaj Auto Finance Ltd,BAJAJ FINSERV LIMITED,BUY,537000,61.99,-
17-FEB-2009,EDUCOMP,Educomp Solutions Limited,C D INTEGRATED SERVICES LTD,BUY,192317,1969.43,-
17-FEB-2009,EDUCOMP,Educomp Solutions Limited,CITIGROUP GLOBAL MARKETS MAURITIUS PVT LTD,BUY,135500,1964.60,-
17-FEB-2009,HEXAWARE,Hexaware Technologies Lim,OM INVESTMENTS,BUY,752554,32.35,-
17-FEB-2009,IVRCLINFRA,IVRCL Infra & Proj Ltd,FIDELITY INVT INTERNATIONAL A/C FID FUND (MAURITIUS) LTD,BUY,953000,112.01,-
17-FEB-2009,MICROTECH,Micro Technologies (India,PR VYAPAAR PRIVATE LIMITED,BUY,79563,62.64,-
17-FEB-2009,ONMOBILE,OnMobile Global Limited,DEUTSCHE SECURITIES MAURITIUS LIMITED,BUY,1749189,229.50,-
17-FEB-2009,EDUCOMP,Educomp Solutions Limited,C D INTEGRATED SERVICES LTD,SELL,192317,1970.43,-
17-FEB-2009,GANESHHOUC,Ganesh Housing Corp Ltd,INDEA ABSOLUTE RETURN FUND,SELL,325000,34.29,-
17-FEB-2009,HEXAWARE,Hexaware Technologies Lim,OM INVESTMENTS,SELL,752554,32.39,-
17-FEB-2009,ONMOBILE,OnMobile Global Limited,DEUTSCHE BANK AG,SELL,1749189,229.50,-
Today domestic markets are likely to open negative on the back of yesterday’s poor interim budget effect. Further the other Asian markets have also opened with blood bath. The sentiments are likely to be bearish today as the investors would carry the resentment of yesterday’s poor interim budget. There is also no specific news to support the market sentiments. The worst macro economic data was the fiscal deficit that is hovering around 6% of the GDP, which the government may fill the gap through Market Stabilization Scheme and not through borrowing. There might be low volumes of trade during the day’s session and most likely it would follow the cues of the other markets’ movements.
On Monday, the markets opened with heavy losses as the investors were pessimistic about the interim budget and other Asian markets had opened with blood bath. The budget for FY09-10 could not bring cheers for the corporate as unlike anticipations there were no tax sops and stimulus package to revive the economy. Traders were expecting tax holidays for gas producers but nothing as such happened. Further fiscal deficit as a percentage to GDP was witnessed at 6% against 2.5% expected, which may horrify the foreign investors. The expected fiscal deficit to GDP for 2009-10 is also expected to hover around 5.5%, which is not a good figure. Sectors like Metal, Realty, Bankex, CG and Oil & Gas fell drastically by 4.75%, 4.58%, 4.58%, 4.55% and 4.23% respectively. Mid caps and Small caps fell 2.93% and 2.10% respectively. During the session we expect the markets to be trading negative.
The BSE Sensex closed low by 329.29 points at 9,305.45 and NSE Nifty ended with a loss of 99.85 points at 2,848.50. The BSE Mid Caps and Small Caps ended with losses of 88.20 points and 71.44 points at 2,924.75 and 3,324.14 respectively. The BSE Sensex touched intraday high of 9,637.04 and intraday low of 9,279.10.
On Monday, the US stock markets remained closed on the observance of Presidents Day.
Today major stock markets in Asia are trading in deep red. Shanghai composite is lower by 12.42 points to 2,376.97, Japan''s Nikkei is low by 100.72 points at 7,649.45. Hang Seng lost 425.87 points at 13,030.10, South Korea''s Seoul Composite is low by 31.52 points at 1,143.95 and Singapore''s Strait Times is lower by 21.06 points to 1,656.64.
The FIIs on Monday stood as net buyers in equity and debt. Gross equity purchased stood at Rs 1,319.20 Crore and gross debt purchased stood at Rs 93.40 Crore, while the gross equity sold stood at Rs 1,299.20 Crore and gross debt sold stood at Rs 0.00 Crore. Therefore, the net investment of equity and debt reported were Rs 20 Crore and Rs 93.40 Crore respectively.
On Monday, the Indian rupee closed at 48.82/83, 0.33% weaker than its previous close of 48.66/67. The rupee fell sharply as the domestic stock markets plummet on the opening of the interim budget session.
On BSE, total number of shares traded were 27.88 Crore and total turnover stood at Rs 2,908.21 Crore. On NSE, total number of shares traded were 61.75 Crore and total turnover was Rs 8,019.41 Crore.
Top traded volumes on NSE Nifty – Unitech with 90142597 shares, DLF with 24981766 shares, Suzlon Energy with 14925131 shares, Reliance Comm with total volume traded 10501311 shares followed by SAIL with 10090041 shares.
On NSE Future and Options, total number of contracts traded in index futures was 923550 with a total turnover of Rs 12,272.99 Crore. Along with this total number of contracts traded in stock futures were 1058098 with a total turnover of Rs 10,104.05 Crore. Total numbers of contracts for index options were 1473163 with a total turnover of Rs. 21,461.58 Crore and total numbers of contracts for stock options were 1473163 and notional turnover was Rs 21,461.58 Crore.
Today, Nifty would have a support at 2,772 and resistance at 2,818 and BSE Sensex has support at 9,118 and resistance at 9,242.
Key benchmark indices are seen extending Monday's, 16 February 2009 losses mirroring weak Asian indices. The SGX Nifty futures for February 2009 series dropped 29 points in Singapore.
Disappointment from the government's interim budget 2009-2010 presented in the parliament on Monday, 16 February 2009, which failed to shower any sops and weak global cues triggered a sell-off on Monday, 16 February 2009. The BSE 30-share Sensex lost 329.29 points, or 3.42%, to 9,305.45 and the S&P CNX Nifty dropped 99.85 points, or 3.39%, to 2,848.50.
According to provisional data on NSE, FIIs were net sellers worth Rs 45.33 crore while mutual funds bought shares worth Rs 189.52 crore on Monday, 16 February 2009.
The budget turned out be a non event as there were no sector-specific tax sops for the industry hit by the global economic slowdown in the interim budget for 2009-2010 unveiled by acting Finance Minister Pranab Mukherjee on Monday, 16 February 2009. No changes were made in direct or indirect taxes. The stock market was expecting government to offer tax sops and sector-specific stimulus package for the economy in the interim budget.
Asian stocks fell, led by finance and commodity companies, amid concern insurers may have to boost capital reserves and as metals prices and shipping rates declined. China's Shanghai Composite slipped 2.01% or 48.03 points at 2,341.34, Hong Kong's Hang Seng was down 3.27% or 439.74 points at 13,016.14, Japan's Nikkei fell 1.45% or 112.68 points at 7,637.49, Singapore's Straits Times declined 1% or 16.81 points at 1,663.89, South Korea's Seoul Composite plunged 3.19% or 37.44 points at 1,138.03, Taiwan's Taiwan Weighted fell 1.97% or 90.48 points at 4,500.78
US markets remained shut on Monday, 16 February 2009 for President's Day holiday.
The market is likely to remain under pressure after a sharp fall in ongoing Asian indices in the ongoing trades. However, US indices was closed on account of Washington,s Birthday. Among the domestic indices, the Nifty could test higher levels of 2900 and may dip to 2800 - 2750 levels on the downside. The Sensex has a likely support at 9150 and may face resistance at 9450.
Stocks with +ve bias : United Phos ( SL 95 ) BOI near 235-236 ( SL 231)
Stocks with-ve bias : Chambal & Rpower
Stocks for Investment : Ril, BOB, BEL, Bhel, Crompton, Ultratech
- The fiscal deficit is expected to touch 6% of GDP in FY09, the highest in seven years and drop 50bps to 5.5% in FY10. (BS)
- Centre’s tax revenues falls short of budgeted targets by almost Rs600bn. (BL)
- The Government would borrow an additional Rs450bn from RBI to meet the shortfall in financing during current fiscal. (ET)
- The Government ruled out imposing limit on stocks of sugar a trader can keep. (ET)
- The Government has increased budget outlay for power sector in 2009-10 by over 43% to ~Rs521.3bn. (FE)
- The Government has allocated over Rs990bn to infrastructure development schemes for 2009-10. (FE)
- National Highways Authority of India (NHAI) is budgeted to mobilise Rs50bn through loans and bonds in 2009-10. (BL)
- Domestic traffic in January 2009 declined 14.6% as compared to the same period in the previous year. (BL)
- India Infrastructure Finance Company Ltd (IIFCL) plans to raise Rs27bn and to lend it to banks at 7.85%. It would refinance 60% of commercial bank loans for public-private partnership (PPP) projects in critical sectors over the next 18 months. (ET)
Victory is a matter of staying power
Acting Finance Minister seemed to be singing ‘Jai Ho,’ the triumphant song that plays towards the end of Slumdog Millionaire’s closing Bollywood dance sequence. Laced with lyrics on the achievements by the Cong-led government, the budget speech had its mention and allocation for the social sector, farmers and defence. Sound beats came in the form of desk thumping by the coalition members even as the market gave a thumbs down to the budget falling over 3%.
The market is expected to open on a weak note. The Nifty is likely to find some support near the 2780 levels. Global cues on Monday worsened the situation and the broader indices came tumbling down. Thank God the US markets were closed for President’s Day. Stocks in Europe, Asia and Latin America fell. Japan’s Nikkei is down 1.5% as it grapples with its worst economic crisis since the end of World War II. Britain was warned it faces the worst recession in almost three decades, the Group of Seven offered no solution to revive global growth and commodity prices sank.
It’s raining data on pledged shares. Dhoots, promoters of Videocon group have pledged 36.14% in Videocon Industries. United Breweries’ promoters have pledged 7.5% stake. Kingfisher Airlines’ promoters have pledged a 43.8% stake.
McDowell Holdings’ five promoters have pledged 13.2% stake. Unitech promoters have pledged 49.48% of their 64.4% holding in the company. Parsvnath, Omaxe, Sobha Developers and Ansal Properties and Infrastructure, have informed the NSE that promoters have pledged 13-64% of shares in their companies. RCOM has pledged 13.19% of the company’s shares amounting to one-fifth of the promoters holding.
Gas prices, which had crashed to low of $1.616 per gallon on Dec. 30, have grown over 20%. Crude oil prices climbed towards $38 a barrel on Monday after the International Energy Agency (IEA) said there could be an oil market supply crunch from next year.
Among other corporate news M&M says it has completed the amalgamation of Punjab Tractors with itself.
Infosys has ruled out any job cuts, but sees tough times ahead.
Hindalco to use its Rs86bn share premium account to write off costs incurred on buying Novelis and to use the fund for its expansion purpose.
LIC Housing Finance will launch its financial services subsidiary, LIC Housing Finance Financial Services, but has deferred its venture capital fund.
The Government has transferred the investigation of the Satyam scam to CBI.
The Government has earmarked a major chunk of the US$4bn World Bank aid to recapitalize 11 public sector banks, including Dena Bank, OBC, Andhra Bank, UBI and Bank of Maharashtra
Reliance Infrastructure’s promoter AAA Project Ventures has pledged 16.35% stake in the company.
It was the second straight trading session where Indian market ended with losses. Weak global cues dragged the markets at open. Key indices further lost ground as disappointment from the interim budget triggered a sell-off on the Indian bourses.
The realty, banking and the auto stocks erased gains as the interim budget failed to provide any relief as expected.
Finally, the Sensex plunged 329 points to close at 9,305 and the Nifty fell 99 points to close at 2,848.
Among the 30-components of Sensex, 29 stocks ended in the red and only 1 stock i.e. ITC held up in the positive terrain. The major laggards in the Sensex were JP Associates, Reliance Infra, ICICI Bank, RCom, Tata Steel and Reliance Industries.
Shares of Hindalco slipped by 3% to Rs44. The company announced that the board of directors considered and approved to undertake a financial restructuring exercise. The scrip touched an intra-day high of Rs46 and a low of Rs44 and recorded volumes of over 10,00,000 shares on BSE.
Shares of Aventis Pharma slipped by 5% to Rs851 after reports stated that UB Group may offload stake in Aventis Pharma. The scrip touched an intra-day high of Rs910 and a low of Rs851.
Shares of MRO Tek surged by over 4.5% to Rs23.4 after the board of directors of the company announced that it would consider buyback of shares on Feb 25. The scrip touched an intra-day high of Rs24.5 and a low of Rs22.1 and recorded volumes of over 32,000 shares on BSE.
Shares of HBL Power rallied by over 4% to Rs116 after the company announced that it has set up venture in Saudi Arabia to manufacture industrial batteries. The company would own 40% stake in Saudi Arabia venture. The scrip touched an intra-day high of Rs128 and a low of Rs112 and recorded volumes of over 13,000 shares on BSE.
Corporation Bank announced that it opened its Local Representative Office in Hong Kong, on February 16, 2009. This is the second international office of the Bank, including the first Local Representative Office at Dubai opened in last calendar year.
Shares of Corporation Bank slipped by a percent to Rs171 after hitting an intra-day high of Rs175 and a low of Rs171 and recorded volumes of over 13,000 shares on BSE.
The outlook remain bleak for the moment, with the interim budget out of the way no markets lack triggers and also with the US markets to remain closed overnight, markets might remain choppy,
In Monday’s trading session the Nifty was seen taking support at 2,840 levels. If these levels are breached, we would see fresh round of selling. However, a bounce back cannot be ruled out. Staying stock specific would be wise.
Why did B. Ramalinga Raju do it? No, we are not talking about why and how he fooled all of us for seven years by presenting blatantly false financials of his company, Satyam Computer Services. We are more concerned about the timing of his sensational confession. What really makes a fraudster listen to his conscience? Or did he do it under duress because of pressure from his family members, friends and professional colleagues? Did he just wake up on 7 January and decide that he wanted to become the honest gentleman that he was way back in the 1980s? Or is there a more sinister reason to explain the revelations?
There are several conspiracy theories to explain the origins of the letter that Raju wrote to the Satyam board, admitting his guilt. But we will try and separate the grain from the chaff. He did it for the 'larger good' of everyone he knew, including himself. In retrospect, it may turn out to be a master stroke. Thanks to his 7 January letter, Raju has possibly saved Satyam, the group firms managed by his sons, friends and colleagues, and the politicians who helped him in the past. In an ironical twist to the tale, he may have saved himself from a long term behind the bars.
The fact is that Satyam as a company was about to collapse under its own financial weight. With a 3% margin, as Raju claimed, almost non-existent cash balances, with no hope of a new pipeline after Raju had pledged most of his personal shares with institutions, which sold them off, huge liabilities and receivables, and highly inflated revenues and profits, the company didn't have the money even to pay salaries in January 2009. Kiran Karnik, one of the six government-appointed directors on Satyam's board, has publicly said that the company needs nearly Rs 2,000 crore cash over the next three months.
In fact, this is the reason why the failed merger with group firms, Maytas Infrastructure and Maytas Properties, for Rs 8,000 crore was critical for Raju's survival. In one stroke, it would have cleaned up Satyam's balance sheet. The deal, which was opposed by institutional shareholders as the two Maytas firms were controlled by Raju's sons and, therefore, smacked of conflict of interest, would have infused new assets and also ensured new revenue and profit streams. For example, Maytas Properties possesses a land bank of 6,800 acres, with the ability to construct 245 million sq ft of built-up space.
|The Satyam Saga|
|1991||IPO over-subscribed by 17 times; company gets its first Fortune 500 customer in John Deere & amp; Co.|
|1993||Awarded ISO 9001 certification. Signs joint venture with GE, another Fortune 500 company.|
|1999||Satyam Infoway (Sify) becomes the first Indian Internet firm listed on the Nasdaq.|
|2000||Company merged with Satyam Enterprise Solutions (SES) in a way that benefits Srini Raju of SES.|
|2001||Satyam Computer Services listed on the NYSE (SAY).|
|1999-2001||Its stock was one of the 10 that Ketan Parekh was rigging.|
|2002||The Dept of Co Affairs seeks clarification on alleged violation of the Companies Act.|
|2004||Acquires Citisoft and Knowledge Dynamics. Features in the Forbes Top Asian Companies.|
|2005||UK-based IT firm Upaid files case against Satyam for alleged fraud and forgery.|
|2006||Company says 'Revenue exceeds US$1 b'. Gets award from Institute of Internal Auditors, US.|
|2008||Announces acquisition of Maytas Prop and Maytas Infra. Deal shelved after outcry.|
|2009||Raju confesses to Rs 7,000-crore fraud; arrested. Satyam board reconstituted.|
At the Satyam's board meeting on 16 December 2008 to discuss the merger, Ram Mynampati, a former director, disclosed that there was little future in infotech as accelerated growth was difficult in the current scenario, prices and margins were under pressure, and there was discomfort about anti-outsourcing voices emanating from the US, especially from the new President Barack Obama. Therefore, entry in construction and infrastructure seemed like an ideal de-risking strategy. If things had gone according to plan, Raju could have easily jumped off the Satyam tiger without being 'eaten up'.
When this strategy didn't work, Raju had no option. The only way to save Satyam was to come out in the open, confess to his crimes and hope that the government would act swiftly to save the future of Satyam's 53,000 employees as well as restrict the possible negative impact on the Indian IT story. This is exactly what happened. The future of Satyam, its employees and Indian IT seem much safer today. When we spoke to a few employees, they sounded a bit reticent, but confident. All of them said they were "optimistic that things would be back to normal soon".
Raju's sons were obviously angry. The father had practically destroyed their future. By not being able to go through with the merger, he had made sure that the Satyam scandal would become public knowledge. It could force several state governments, including that of Andhra Pradesh, to cancel the high-profile infrastructure contracts bagged by Maytas Infrastructure and Maytas Properties. At present, the two entities are working on projects worth Rs 30,000 crore, including the prestigious Hyderabad metro rail. Satyam's truth had the potential to severely tarnish the sons' image. And it did. However, the sons' anger could have weighed heavily on a desperate Raju, forcing him to reveal everything.
|How Raju did it|
|The Rs 7,000-crore Satyam scam was the outcome of a series of accounting misdemeanours by B. Ramalinga Raju and his accomplices. Here's how he doctored Satyam's books and hoodwinked investors for seven years:|
|Inflated Profits: Over the last several years. For September quarter, revenues and operating margin overstated at Rs 2,700 cr and Rs 649 cr (24% of revenue) against actual of Rs 2,112 cr and Rs 61 cr (3% of revenue).|
|Overstated Cash & amp; Bank Balances: Of Satyam's reported cash and bank balances of Rs 5,361 cr on 30 Sept 2008, Rs 5,040 cr was non-existent. Even accrued interest of Rs 376 cr shown in books was non-existent.|
|Hid Liabilities: Debt on account of funds arranged by Raju by pledging shares was understated by Rs 1,230 cr. This was one of the triggers for Raju's confession after lenders sold these shares on margin triggers.|
|Inflated Receivables: Debtors' position was overstated by Rs 490 cr. Together, with this overstated debtors' position and understated liabilities, a staggering hole of Rs 7,136 cr arose in the balance sheet.|
There's another angle to the family drama. Maybe there was a feeling that if Raju went down taking all the blame, there wouldn't be too much of an impact on the sons' businesses. It is probable that the nonexistent cash balances that Raju is talking about were monies that were siphoned out of Satyam to finance his sons' projects. It is possible that a part of the cash balances has gone into the personal accounts of family members. Or it could have been partially used to bribe officials in lieu of government projects awarded to the Maytas companies.
Now, consider what was going on in the minds of Raju's close colleagues before the founder's letter. They were scared. If Satyam went down, so would they. For no one would believe that Raju carried out this fraud for so long without the senior managers being aware of it. In return for their undying loyalty, they demanded Raju's head. He had to tell the truth and take the blame himself. This too seems to be panning out the right way as until now only the former CFO, Srinivas Vadlamani, has been arrested by government sleuths, who seem more worried about finding the extent of the damage.
As Raju got sucked into a financial tornado that he had created in the first place, he had to take care of the politicians, who had helped him throughout his entrepreneurial career. Yet again, it seemed like a perfect solution for Raju to confess after wiping out the tell-tale marks that could have pointed at a nexus between Satyam and the state's political leaders.
As of now, the media is speculating that former Andhra Pradesh chief minister N. Chandrababu Naidu of the Telugu Desam Party helped Raju wriggle out of income-tax cases earlier this decade. It is also being rumoured that the current Chief Minister, Y.S.R. Reddy of the Congress, helped Raju's sons bag the prestigious infrastructure projects in the state. Interestingly, both Reddy and Naidu are accusing each other of helping the Raju family.
|Red Flags That Were Ignored|
|There were enough indications that something was wrong at Satyam, but nobody noticed these till it was too late.|
|Mismatch in balance sheet entries: Starting 2002-3, the company's reported cash and bank balance, including term deposits, continued to swell without matching the growth in cash flow. In fact, Satyam's free cash flow continued to wobble and was negative in two years.|
|Auditor fees shoots up: Auditor fees increased three times in the past couple of years though other IT companies continued to pay the same amount.|
|Non-payment of advance tax: Satyam did not pay advance tax in 2008-9. Payment of advance tax is an indicator of profitability and non-payment could imply that trouble has been brewing for some time.|
|Vanishing brass: In August 2008, many top officials left the company. This should have been a reason for further investigation.|
|Not using cash to acquire: It was puzzling that the company was proposing to invest $1.6 billion in real estate at a time when HCL was trying to expand its presence in the SAP market, essentially Satyam's turf.|
|Cash idling in current account: In Oct 2008, analyst Kawaljeet Saluja of Kotak Securities almost blew the lid off the scam when he questioned the rationale for keeping $550 million idle in a current account.|
More political skeletons are likely to tumble out of Raju's cupboards, but they are likely to be mere limbs because the crucial evidence may have been carefully hidden, or simply made to vanish. Just like the thousands of crores of rupees in Satyam's bank accounts over the past seven years.
That leaves us with Raju. He had to chalk out his own survival too. After such a massive scam, possibly the biggest in the history of corporate India, he could languish in jail for the rest of his life. However, by admitting to cooking up the accounts, he may successfully divert attention from a far more serious crime siphoning off money from a public company. Some lawyers feel that his confession may get him some form of immunity. And he may be let off with minor penalties. Section 24(B) of the Sebi Act states that if a person has made "full and true disclosure of the alleged violation", he can be granted immunity from prosecution for some of the offences.
We hope this doesn't happen in this case. Raju's conviction has to act as a deterrent to other optimistic and over-confident owners, who may think that they too can get away with such frauds. Or else, India Inc. will witness the birth of more Rajus who, as detailed out in a recent study by Wharton School, would believe that their firms were experiencing "only a bad quarter or patch of bad luck" and that it was "in the interest of everyone involved... to cover up the problem". But when things don't improve, the promoter is forced to continue his "fraudulent behaviour and he has to do more" in the subsequent quarters.
Therefore, it is imperative for the government to financially reboot India Inc.
via Money Today
Real estate developer Unitech declared on Monday that the promoters have pledged 49.48% of their total 64.4% in the company. Promoter
holding in the company also fell by at least 3% since the beginning of this year to 64.4%.
Other realty players, including Parsvnath, Omaxe, Sobha Developers and Ansal Properties and Infrastructure (API) too have informed NSE that promoters have pledged shares ranging from 13-64% of their company.
The latest data available on stock exchange confirms market speculation that promoters of realty firms have pledged a large percentage of their stake to financial institutions.
Unitech informed the stock exchange that “a very significant portion of the shares have been pledged as additional security for the loans availed by the company.”
Promoters usually pledge shares as collateral for the secured loans from financial institutions as well as for their personal purposes. Unitech did not declare the name of the financial institutions with which the shares were pledged.
But one Unitech executive suggested that a large portion of shares have been pledged with IDFC, HDFC and JM Financial, although it couldn’t be verified independently.
According to the data made available by Unitech on NSE on Monday, the stake of promoter Ramesh Chandra and family has possibly re-duced by 3% since the beginning of this year. The combined share-holding of Chandra’s three investment firms — Prakausali Invest-ments, Mayfair Investments and Mayfair Capital — are 3% lower compared to the shareholding as on December 31, 2008.
According to market traders, the decline in shareholding could be at-tributed to financial institutions selling pledged shares following a steep decline in share prices.
Delhi-based Parsvnath Developers too has declared that promoters have pledged 63.88% of total shares of the company. The promoters own 80.33% stake in Parsvnath, as of December-end. Delhi-based Omaxe said promoters have pledged 13.19% out of their total 69.63% stake in the company. Ansal Properties and Infrastructure promoters have pledged 29.11% out of 64.14%, mainly to IL&FS and HDFC. The promoters of Bangalore-based Sobha Developers, who own 50.06% in the company, have pledged 28.39% in the company.
Mr. Speaker, Sir,
I rise to present the Interim Budget for 2009-10.
2. Five years ago the people of India had voted for change. In the words of our Prime Minister, Dr. Manmohan Singh, people had sought “a change in the manner in which this country is run, a change in the national priorities and a change in the processes and focus of the Government”. The Common Minimum Programme of the United Progressive Alliance, built around ‘Aam Aadmi’, was a response to this call for change. As indicated by Shri P. Chidambaram in July 2004, this programme spelt out seven clear economic objectives:
(i) maintaining a growth rate of 7-8 per cent per year for a sustained period;
(ii) providing universal access to quality basic education and health;
(iii) generating gainful employment and promoting investment;
(iv) assuring hundred days of employment to the breadwinner in each family at the minimum wage;
(v) focusing on agriculture, rural development and infrastructure;
(vi) accelerating fiscal consolidation and reform; and
(vii) ensuring higher and more efficient fiscal devolution.
3. As I present the sixth budget of the Government of the United Progressive Alliance which completes its tenure in a couple of months, I can say with confidence that every effort has been made by the government to deliver on the commitments made.
4. For the first four years of the UPA government, our policies ensured a dream run for the economy with Gross Domestic Product (GDP) recording increase of 7.5 per cent, 9.5 per cent, 9.7 per cent and 9 per cent from fiscal year 2004-05 to 2007-08. For the first time, the Indian economy showed sustained growth of over 9 per cent for three consecutive years. With per capita income growing at 7.4 per cent per annum, this represented the fastest ever improvement in living standards over a four year period.
5. During this period, the fiscal deficit came down from 4.5 per cent in 2003-04 to 2.7 per cent in 2007-08 and the revenue deficit declined from 3.6 per cent to 1.1 per cent.
6. Investment and savings showed significant improvement. The domestic investment rate as a proportion of GDP increased from 27.6 per cent in 2003-04 to over 39 per cent in 2007-08. The gross domestic savings rate shot up from 29.8 per cent to 37.7 per cent during this period. The gross capital formation in agriculture as a proportion of agriculture GDP improved from 11.1 per cent in 2003-04 to 14.2 per cent in 2007-08.
7. The buoyant growth of Government revenues facilitated fiscal consolidation as mandated in the FRBM Act. The tax to GDP ratio increased from 9.2 per cent in 2003-04 to 12.5 per cent in 2007-08 bringing us within striking distance of the target for fiscal correction. This also enhanced our capacity to raise resources internally to finance our growth at the rate of 9 per cent per annum during the Eleventh Five Year Plan.
8. All this would not have been possible without the guidance of UPA Chairperson, Smt. Sonia Gandhi, the inspiring leadership of Prime Minister, Dr. Manmohan Singh and the hard work put in by my predecessor, Shri P. Chidambaram.
Mr. Speaker, Sir,
9. The growth drivers for this period were agriculture, services, manufacturing along with trade and construction. Hon’ble Members will agree with me that the real heroes of India’s success story were our farmers. Through their hard work, they ensured “food security” for the country. With record procurement of 22.7 million tonnes of wheat and 28.5 million tonnes of rice for our Public Distribution System in 2008, our granaries are full. During this four year period, the annual growth rate of agriculture rose to 3.7 per cent. The production of foodgrains increased by about 10 million tonnes each year to reach an all time high of over 230 million tonnes in 2007-08. Despite a high base, the outlook for 2008-09 is encouraging with the country receiving normal rainfall during the agricultural season. Manufacturing, registered as well as unregistered, recorded a growth of 9.5 per cent per annum in the period 2004-05 to 2007-08. Similarly, communication and construction sectors grew at the rate of 26 per cent and 13.5 per cent per annum, respectively.
10. Though our growth is based largely on domestic efforts, foreign trade and capital inflows played a catalytic role. India’s exports grew at an annual average growth rate of 26.4 per cent in US dollar terms during this period. Foreign trade increased from 23.7 per cent of GDP in 2003-04 to 35.5 per cent in 2007-08. The conscious policy to gradually integrate the Indian economy with the world, opened new opportunities for Indian corporates to build world scale plants and aim at global competitiveness.
11. In order to maintain a high GDP growth rate on a sustained basis with price stability, the Indian economy had to face two inter-related macro-economic challenges. These relate to capital inflows and global inflation. Profitable investment opportunities generated by high GDP growth attract foreign capital. In 2007-08, capital inflows spurted to an unprecedented 9 per cent of GDP, far in excess of current account financing requirements leading to large accumulation of reserves and build up of pressure on prices.
12. During 2008-09, international prices of many essential commodities particularly fuel oils, food and edible oils and metals rose to alarming levels. To cite just one example, the price of crude oil which was US $ 28 per barrel in 2003-04 shot up to US $ 147 per barrel in 2008. The sharp rise in global inflation, even with a moderated pass-through, put pressure on domestic prices. The WPI headline inflation shot up to nearly 13 per cent in the first week of August 2008. To ease supply side constraints, Government took a series of fiscal and administrative measures, in concert with monetary policy measures by the Reserve Bank of India. RBI raised the interest rates to mop up excess liquidity. This, in turn, had implications for the growth rate from the demand as well as supply side. These, along with easing of global price pressures, led to a decline in domestic prices with inflation rate falling to 4.4 per cent on January 31, 2009. We have weathered the crisis, but there is no room for complacency.
Outlook for the year 2008-09
Mr. Speaker, Sir, I now turn to the outlook for the current year and the events that have impacted its prospects.
13. The global financial crisis which began in 2007 took a turn for the worse in September 2008 with the collapse of several international financial institutions, including investment banks, mortgage lenders and insurance companies. There has been a severe choking of credit since then and a global crash in stock markets. The slowdown intensified with the US, Europe and Japan sliding into recession. Current indications of the global situation are not encouraging. Forecasts indicate that the World economy in 2009 may fare worse than in 2008.
14. A crisis of such magnitude in developed countries is bound to have an impact around the world. Most emerging market economies have slowed down significantly. India too has been affected. For the first nine months of the current year, the growth rate of exports has come down to 17.1 per cent. According to the latest figures available, the industrial production has fallen by 2 per cent year-on-year basis in December 2008. In these difficult times, when most economies are struggling to stay afloat, a healthy 7.1 per cent rate of GDP growth still makes India the second fastest growing economy in the world.
15. To counter the negative fallout of the global slowdown on the Indian economy, our Government took prompt action by providing substantial fiscal stimulus. The two packages announced on December 7, 2008 and January 2, 2009, provide tax relief to boost demand and aim at increasing expenditure on public projects to create employment and public assets. In this context, the Government renewed its efforts to increase infrastructure investments. In the period from August 2008 to January 2009 alone, the Government accorded approval for 37 infrastructure projects worth Rs.70 thousand crore.
16. In addition to expanding public sector investment in infrastructure, our Government has also taken steps to encourage private investment in infrastructure through Public Private Partnership (PPP). I am happy to say that the Government of India has been successful in attracting private investment in infrastructure sectors such as telecommunications, power generation, airports, ports, roads and railways. Under the PPP mode, 54 Central Sector infrastructure projects with a total project cost of Rs.67 thousand seven hundred crore have been given in-principle or final approval by the PPP Appraisal Committee and 23 projects amounting to Rs.27 thousand nine hundred crore have been approved for viability gap funding in 2008-09.
17. To ensure that such projects do not face financing difficulties arising from the current downturn, we have taken a new initiative for providing refinance to the banks for long term credit extended to these projects. Accordingly, the Government has decided that India Infrastructure Finance Company Ltd. (IIFCL) will refinance 60 per cent of commercial bank loans for PPP projects in critical sectors over the next eighteen months or so.
For this purpose, IIFCL has been authorized to raise Rs.10 thousand crore in the market by the end of March 2009. An additional Rs.30 thousand crore can be raised if required. With this, IIFCL and banks will be able to support projects involving a total investment of Rs.100 thousand crore in infrastructure. Combined with the steps we are taking to increase public investment in infrastructure, this will provide a big boost to such investment.
18. The RBI took a number of monetary easing and liquidity enhancing measures including reduction in cash reserve ratio, statutory liquidity ratio and key policy rates. The objective was to facilitate flow of funds from the financial system to meet the needs of productive sectors. Our Government has also announced specific measures to address the impact of global slowdown on India’s exports. These include extension of export credit for labour intensive exports, improving the pre and post shipment credit availability, additional allocations for refund of Terminal Excise Duty/CST and export incentive schemes, and removal of export duty and export ban on certain items. A Committee of Secretaries has been set up to address, on continuing basis, procedural problems being faced by exporters.
Mr. Speaker, Sir,
19. The favorable economic environment created by the reforms of 1990’s gradually inspired the confidence of foreign investors in our economy, leading to rise in capital inflows. India has evolved a liberal and transparent policy for Foreign Direct Investment (FDI). Except for a small negative list, FDI is allowed mostly on the automatic route. During 2007-08, we received a record US $ 32.4 billion of FDI. In spite of global financial crisis, inward FDI flows during April-November 2008 were US$ 23.3 billion, representing a growth of 45 per cent over the same period in 2007. Latest figures show a slow down. To provide an impetus to foreign investment in India, guidelines are being further simplified and made homogenous and consistent across various sectors.
20. Extraordinary economic circumstances merit extraordinary measures. Now is the time for such measures. Our Government decided to relax the FRBM targets, in order to provide much needed demand boost to counter the situation created by the global financial meltdown. Indeed, depending on the response of the domestic economy and the revival of the global economy, there may be a need to consider additional fiscal measures when the regular budget is presented by the new Government after the elections. However, the medium term objective must be to revert to the path of fiscal consolidation at the earliest. The Thirteenth Finance Commission has been asked to lay down the roadmap in this regard. The new Government will have to address it in the light of future developments in the domestic and international economic environment.
21. The recent developments have also brought out the need for accelerating the pace of policy reforms, including in the financial sector, to make the economy more competitive. The economic regulatory and oversight systems have to be made more efficient and effective to bring the economy back to the 9 per cent growth path at the earliest.
22. We also have to take note of Prof. Amartya Sen’s observation and I quote “along with old slogan of ‘growth with equity’, we also need a new commitment towards ‘down turn with security’, given the fact that occasional downturns are common, possibly inescapable, in market economies” unquote. Employment generation schemes have to be expanded and social security nets have to be strengthened to protect the vulnerable sections of our society.
Mr. Speaker, Sir,
23. Let me now briefly review the progress in some important areas.
Initiatives and Achievements
24. UPA Chairperson, Smt. Sonia Gandhi had said “To be equitable, economic growth has to be sustainable. To be sustainable, economic growth has in turn to be all inclusive. All inclusive is no longer the greatest good of the greatest number. It is actually Sarvoday or the rise of all”. In pursuance of that vision, the UPA Government in the National Common Minimum Programme had declared its intention to make growth more inclusive. The Eleventh Five Year Plan provides a comprehensive framework and strategy for making growth both faster and more inclusive. Impressive growth rates and buoyant revenues gave us the head room to fund ambitious programmes to achieve these objectives.
25. Never losing sight of our commitment to the welfare of Aam Aadmi and recognizing that 60 per cent of our population lives in villages, focused attention has been given by our Government to the agriculture sector:
(i) In the period between 2003-04 and 2008-09, our Government increased the plan allocation for agriculture by 300 per cent.
(ii) The Rashtriya Krishi Vikas Yojana was launched in 2007-08 with an outlay of Rs.25 thousand crore, to increase growth rate of agriculture and allied sector to four per cent per annum during the Eleventh Plan period. The scheme has encouraged State Governments to take initiatives to develop the agricultural sector.
(iii) On June 18, 2004 our Government had announced a package for doubling the flow of credit to agriculture. The credit disbursements have already gone up from Rs.87 thousand crore in 2003-04 to about Rs.2.5 lakh crore in 2007-08 marking a three fold increase. To strengthen the short-term co-operative credit structure, the Government is implementing a revival package in 25 States involving a financial assistance of around Rs.13 thousand five hundred crore. Government will continue to provide interest subvention in 2009-10 to ensure that farmers get short term crop loans upto Rs.3 lakhs at 7 per cent per annum.
(iv) The Agricultural Debt Waiver and Debt Relief Scheme for farmers, announced in the last budget speech, was implemented by June 30, 2008 as scheduled. The Scheme has been able to restore institutional credit to indebted farmers. As per early reports, the total debt waiver and debt relief so far, amounts to Rs.65 thousand three hundred crore covering 3.6 crore farmers.
(v) Our Government is committed to ensuring “food security” in the country and meeting the food requirement of the poor under the Targeted Public Distribution System (TPDS). In spite of higher procurement costs and higher international prices during the last five years, the central issue prices under the TPDS have been maintained at the level of July 2000 in case of Below Poverty Line (BPL) and Antyodaya Anna Yojana (AAY) categories and at July 2002 levels for Above Poverty Line (APL) category.
(vi) Our Government has ensured remunerative prices for the farmers for their crops. Since 2003-04, Minimum Support Price (MSP) for the common variety of paddy was increased from Rs.550 to Rs.900 per quintal for the crop year 2008-09. In case of wheat the increase was from Rs.630 in 2003-04 to Rs.1,080 per quintal for the year 2009.
26. Our Government has accorded highest priority to rural development. A number of programmes have been designed to help improve the living conditions of rural population.
(i) The Rural Infrastructure Development Fund (RIDF) is the main instrument to channelize bank funds for financing rural infrastructure. It is popular among State Governments. The corpus of RIDF was increased from Rs.5,500 crore in 2003-04 to Rs.14 thousand crore for the year 2008-09 ensuring greater availability of funds for its activities. A separate window for rural roads was created under RIDF with a corpus of Rs.4 thousand crore for each of the last three years.
(ii) Given the importance accorded to housing for the weaker sections in rural areas, 60 lakh houses were to be constructed under the Indira Awaas Yojana by 2008-09. In the period between 2005-06 and December 2008, 60.12 lakh houses have already been constructed.
(iii) Panchayat Empowerment and Accountability Scheme (PEAIS) is an existing scheme under the central sector plan which has been recognized as a powerful instrument to incentivise States to empower the Panchayats and put in place accountability systems to make their functioning transparent and efficient. Acknowledging the need to build in incentives for encouraging States to devolve funds, functions and functionaries and set up an institutional framework for such devolution, the Government proposes to substantially expand the scheme by making suitable allocations.
(iv) The Department of Posts has launched “Project Arrow” to revitalize its core operations and to provide new technology enabled service to the common man. So far this has been successfully implemented in 500 post offices in the country. This Project will receive full government support as it will enhance the services offered to masses and would also lay the foundation for a vibrant delivery mechanism for many social sector schemes such as pension and National Rural Employment Guarantee Scheme (NREGS).
Mr. Speaker, Sir,
27. It has been said that literacy levels are a measure of a nation’s degree of commitment to social justice. A literate environment is essential for ensuring universal elementary education, reducing child mortality, curbing population growth, ensuring gender equality and acquiring essential livelihood skills:
(i) The year 2008-09 was a momentous year for secondary education when several major initiatives, including a new Centrally Sponsored Scheme to universalise education at secondary stage was launched.
(ii) Higher education is of vital importance for the country in consolidating its comparative advantage in skill and knowledge intensive services and in building a knowledge based society. Our Government has taken a decisive initiative in this direction. The outlay on Higher Education has been increased 900 per cent in the Eleventh Five Year Plan. An Ordinance has been promulgated for establishing 15 Central Universities. Six new Indian Institutes of Technology (IIT) have started functioning in Bihar, Andhra Pradesh, Rajasthan, Orissa, Punjab and Gujarat during 2008-09. Two more IITs in Madhya Pradesh and Himachal Pradesh are expected to commence their academic sessions in 2009-10. With the commencement of academic sessions in the Indian Institutes of Science Education and Research (IISERs) at Bhopal and Thiruvananthapuram, all 5 IISERs announced earlier are now functional. Two new schools of Planning and Architecture at Vijayawada and Bhopal have already started functioning. Teaching is expected to commence in four of the six new Indian Institutes of Management, proposed for the Eleventh Plan period, from the academic year 2009-10. These are in Haryana, Rajasthan, Jharkhand and Tamil Nadu.
(iii) The UPA Government has revised the Educational Loan Scheme, as a result of which the number of loan accounts has increased by more than four times during the period March 31, 2004 to September 30, 2008 from 3.19 lakhs to 14.09 lakhs. The loan outstanding during this period has increased from Rs.4 thousand five hundred crore as on March 31, 2004 to Rs.24 thousand two hundred and sixty crore as on September 30, 2008.
(iv) Following our announcement in 2004-05, nearly 500 ITIs have been upgraded into centres of excellence. As an integral part of the coordinated action plan for skill development, the Government created the National Skill Development Corporation in July 2008 with an initial corpus of Rs.1 thousand crore to stimulate and coordinate private sector participation in skill development.
Mr. Speaker, Sir,
28. I now turn to the social sector.
29. The UPA Government has launched many new schemes to provide steady monetary assistance to weak and downtrodden people of our society. Emphasis has also been given to the empowerment of women which has been an abiding objective of the UPA Government. I give some details of the important schemes:
(i) To further strengthen social and economic inclusion of minority communities, the new Ministry of Minority Affairs has been set up. Our Government has announced the Prime Minister's 15-point programme for the welfare of the minorities. Adequate allocations are being made to support this initiative.
(ii) The Scheduled Tribes and other Traditional Forest Dwellers (Recognition of Forest Rights) Act 2006, which was notified for operation with effect from December 31, 2007, has been widely welcomed by Scheduled Tribes and other traditional forest dwellers who now have legal rights on forest land which they have been cultivating or using over generations for eking out their livelihood.
(iii) The National Safai Karamchari Finance and Development Corporation (NSKFDC) has been mandated to provide loans at concessional rates for economic development of persons engaged in unclean occupations. The authorized capital of this organization is being raised from Rs.200 crore to Rs.300 crore to enable it to effectively carry out its mandate. The scope of the pre-matric scholarship for children of those engaged in unclean occupations has been expanded and the rates of scholarships have been doubled in 2008-09. The annual ad hoc grant has also been substantially increased by almost 50 per cent as compared to the earlier rates.
(iv) Efforts of our Government and the financing institutions have led to a rapid growth of credit linked Women Self Help Groups which are now over 29 lakh in number. In this context, the Rashtriya Mahila Kosh will be strengthened by enhancing its authorized capital.
(v) In December 2008, ‘Priyadarshini Project’, which is a rural women’s empowerment and livelihood programme, was launched in U.P. with the assistance of IFAD. The project will be implemented as a pilot in the district of Madhubani and Sitamarhi in Bihar and Shravasti, Bahraich, Rai Bareli and Sultanpur in U.P.
(vi) A revised and modified scheme named ‘Indira Gandhi National Old Age Pension Scheme’ was launched on November 19, 2007. This scheme covers all persons aged 65 years and above belonging to BPL households. So far 146 lakh persons have benefited from this scheme during the current financial year.
(vii) Two new schemes, Indira Gandhi National Widow Pension Scheme and Indira Gandhi National Disability Pension Scheme, are being launched in the current year. The Indira Gandhi National Widow Pension Scheme will provide pension of Rs.200 to widows between the age groups of 40-64 years. The Indira Gandhi National Disability Pension Scheme aims to provide pension to severely disabled persons.
(viii) In order to empower young widows in the age group 18-40 and equip them to stand on their own feet, I propose to give them priority in admissions to ITIs, Women ITIs and National/Regional ITIs for Women. Government will bear the cost of their training and provide stipend of Rs.500 per month.
(ix) The Government launched Rashtriya Swasthya Bima Yojana for BPL families in the unorganized sector on October 1, 2007. Up to January 15, 2009, 22 States and Union Territories have initiated the process to implement the scheme. The Government of India also launched the Aam Aadmi Bima Yojana (AABY) on October 2, 2007. The AABY is a Scheme for death and disability cover of rural landless in the country in conjunction with the State Governments. Upto December 31, 2008, the Scheme has covered 60.32 lakh lives.
Mr. Speaker, Sir,
Public Sector Enterprises
30. We have created a strong public sector which has evolved in response to the nation’s needs and provided stability to our development efforts. When the UPA Government took charge, the turnover of Central Public Sector Enterprises (CPSEs) in 2003-04 was Rs.5 lakh 87 thousand crore which has grown by 84 per cent to Rs.10 lakh 81 thousand crore in 2007-08. During the same period, profits of CPSEs have increased by 72 per cent from Rs.53 thousand crore to Rs.91 thousand crore and their contribution to the Central Exchequer by way of dividend, interest and taxes and duties has recorded an increase of 86 per cent. The number of loss making enterprises has come down from 73 in 2003-04 to 55 in 2007-08 and the number of profit making enterprises has gone up from 143 to 158 during the same period.
31. In order to maintain ethics and probity in the functioning of CPSEs, the Government approved the implementation of Guidelines on Corporate Governance in CPSEs in June, 2007.
32. In November 2007, Government constituted the National Investment Fund into which the proceeds from disinvestment of Government equity in Central Public Sector Enterprises (CPSEs) are deposited. Three-quarters of annual income of the Fund will be used to finance select social sector schemes which promote education, health and employment. The residual 25 per cent annual income of the Fund will be used to meet the capital investment requirements of profitable and revivable CPSEs. As on December 31, 2008, the corpus of the Fund was about Rs.1815 crore.
Financial Sector Reforms
33. Over past years, technological, institutional and legal reforms in the financial sector have resulted in Public Sector Banks achieving significant improvement in their financial health. The asset quality has improved and NPAs have declined considerably from 7.8 per cent on March 31, 2004 to 2.3 per cent on March 31, 2008.
34. In the case of Regional Rural Banks (RRBs), a process of amalgamation and recapitalization of those with negative networth has been initiated. Over the last four years, 196 RRBs have been merged into 85 RRBs. The Central Government has contributed Rs.652 crore for the capitalization of RRBs upto December 31, 2008.
35. The UPA Government has undertaken a number of reforms in the last four years to deepen and widen the Securities markets and strengthen the regulatory mechanisms for these markets. The initiatives include reforms in the corporate bond market, participation of foreign institutional investors, foreign investment in stock exchanges, setting up of a dedicated training and research institute in the securities market, making PAN the sole identification number, streamlining the process and grading of initial public offering etc. Systems and practices have been put in place to promote a safe, transparent and efficient market and to protect market integrity.
36. The Government undertook a comprehensive revision of the Companies Act, 1956 to make it a compact law that, while responding to the changes in the business environment, would enable adoption of internationally accepted best practices. The Companies Bill, 2008 based on this exercise, has been introduced in Parliament.
Mr. Speaker, Sir,
37. In the days of financial stress, tax rates must fall and our ability to pay taxes must rise. Therefore, our Government undertook comprehensive reforms of the tax system, both the direct and the indirect tax system, with a view to improving its efficiency and equity. Distortions within the tax structure have been reduced by expanding the tax base and moderating the tax rates. The personal income-tax rates have been rationalized by increasing the threshold limit and adjusting the tax slabs to provide relief to taxpayers. Similarly, Customs Duty rates have been steadily reduced to eliminate the bias against the export sector and promote competition and efficiency in the manufacturing sector. The rates of Union Excise Duties and Service Tax have also been rationalized to enable eventual shift to the Goods and Services Tax on April 1, 2010. The Government also facilitated the introduction of the State level VAT in April 2005.
38. These structural changes were also supported by undertaking modernisation of the business processes of the tax administration through extensive use of information technology, viz., e-filing of returns, e-payment of taxes, issue of refunds through ECS and refund bankers, computer assisted selection of returns for scrutiny, establishing taxpayer information system and a computerised tax payment reporting system. These measures have enabled the tax administration to enhance its functional efficiency and provide better taxpayer service leading to increased compliance levels. To prevent movement of contraband goods across the country’s sea borders, the Government has sanctioned acquisition of 109 marine vessels for the Customs Department.
39. The Government set up the second Administrative Reforms Commission in August 2005 with a mandate to suggest measures to achieve a proactive, responsive, accountable, sustainable and efficient administration for the country at all levels of the government. The Commission has brought out number of reports with practical recommendations, providing a starting point for improving efficiency in the delivery of public services. The enactment of the Right to Information Act in 2005 at the Centre and in many States has bridged a critical gap in the public decision-making process, ushering in greater accountability of the public servants.
40. The Sixth Central Pay Commission submitted its recommendations in March, 2008. Government considered and improved upon the recommendations of the Sixth Central Pay Commission. This has benefited over 45 lakh Central Government employees including Defence Forces and Para Military forces and over 38 lakh pensioners. It is my hope that this will not only improve the quality of administration but will also help the economy by supporting demand.
Revised Estimates 2008-09
41. Mr. Speaker, Sir, I shall now briefly go over the Revised Estimates for 2008-09.
42. The Budget Estimate for 2008-09 had placed the total expenditure at Rs.7,50,884 crore. This has now been revised to Rs.900,953 crore, showing an increase of Rs.1,50,069 crore.
43. Plan Expenditure for 2008-09 was placed at Rs.2,43,386 crore in the Budget Estimate. It has now gone up to Rs.2,82,957 crore in the Revised Estimate. The additional plan spending of Rs.39,571 crore is on account of an increase in Central Plan by Rs.24,174 crore and an increase of Rs.15,397 crore in the Central Assistance to State and UT Plans. The Central Plan expenditure has increased for Rural Development, Atomic Energy, Telecommunications, Textiles, Urban Development, Youth Affairs and Sports and Railways. The increase in Central Assistance for State and UT Plans is on account of additional Central Assistance for Externally Aided Projects, Accelerated Irrigation Benefit Programme, Roads and Bridges, National Social Assistance Programme, Jawaharlal Nehru National Urban Renewal Mission and Tsunami Rehabilitation.
44. On the Non-Plan side, the additionality of Rs.1,10,498 crore in the Revised Estimates is accounted for by an increase in the expenditure of Rs.44,863 crore on fertilizer subsidy, Rs.10,960 crore on food subsidy, Rs.15,000 crore on Agricultural Debt Waiver and Debt Relief Scheme, Rs.7,605 crore on Pensions, and Rs.5,149 crore on Police. An additional amount of Rs.9,000 crore has also been provided for Defence expenditure.
45. Non-Tax Revenues constitute an important component of our receipts. As against the Budget Estimates of Rs.95,785 crore for 2008-09, the Revised Estimates for the Non-Tax Revenues are Rs.96,203 crore.
46. In keeping with the recent trend, the actual tax collections during
2007-08 exceeded the Revised Estimates for 2007-08, both for Direct and Indirect Taxes. However, for 2008-09, the RE of tax collection is projected at Rs.6,27,949 crore as against the BE of Rs.6,87,715 crore. This shortfall is primarily on account of the Government's pro-active fiscal measures initiated to counter the impact of global slowdown on the Indian economy. A substantial relief of about Rs.40,000 crore has been extended through tax cuts, including a fairly steep across the board reduction in Central Excise rates in December, 2008. Despite this, it is expected that the tax collection in 2008-09 would exceed last year’s collection.
47. Taking into account the variations in receipts and expenditure, the current year is expected to end with a Revenue Deficit of Rs.2,41,273 crore as against the budgeted figure of Rs.55,184 crore. Accordingly, the revised Revenue Deficit stands at 4.4 per cent of GDP instead of 1.0 per cent in the Budget Estimates. Similarly, the fiscal deficit for 2008-09 has gone up from Rs.1,33,287 crore in the BE to Rs.3,26,515 crore in the RE. The revised fiscal deficit is estimated at 6 per cent of the GDP as against the budgeted figure of 2.5 per cent.
48. Constitutional propriety requires that new Government formulates the tax and expenditure policies for 2009-10. These policies, in the medium term perspective, would have to:
(a) pursue macro economic policies to sustain a growth rate of at least 9 per cent per annum over an extended period of time;
(b) strengthen the mechanisms for inclusive growth for creating about 12 million new work opportunities per annum;
(c) reduce the proportion of people living below poverty line to less than half from current levels by 2014;
(d) ensure that Indian agriculture continues to grow at annual rate of at least 4 per cent;
(e) bridge the infrastructure gap by increasing the investment in infrastructure to more than 9 per cent of GDP by 2014;
(f) support Indian industry to meet the challenge of global competition and sustain the growth momentum in exports;
(g) strengthen and improve the economic regulatory framework in the country;
(h) expand the range and reach of social safety nets by providing direct assistance to vulnerable sections and insulate them from dislocative effects of slowdown in economy;
(i) strengthen the delivery mechanism for primary health care facilities with a view to improve qualitatively the preventive and curative health care in the country;
(j) create a competitive, progressive and well regulated education system of global standards that meets the aspiration of all segments of the society; and
(k) move towards providing energy security to all by pursuing an Integrated Energy Policy.
49. The term of the UPA Government comes to an end in a few months. Therefore, I am presenting an Interim Budget for the purpose of Vote on Account to enable the Government to meet expenditure during the first four months of the next financial year.
Mr. Speaker, Sir,
50. Let me now turn to the Estimates for the Interim Budget 2009-10.
Budget Estimates 2009-10
51. I am proposing the total expenditure for fiscal 2009-10 at Rs.9,53,231 crore. This includes a provision of Rs.2,85,149 crore under plan and Rs.6,68,082 crore under non plan.
52. The plan allocation under various heads provided at this stage is limited to the provision at the BE stage last year, plus additional amounts on account of the two stimulus packages, which has been reflected in the Revised Estimates for 2008-09. It also reflects a modest increase in Central Assistance to the States to enable the States to complement their budgetary resources. The total Gross Budgetary Support (GBS) for the Plan at Rs.2,85,149 crore, is 17.16 per cent higher in nominal terms than the GBS Plan for BE 2008-09.
53. The budgetary support to the Plan for 2009-10, in comparison to BE 2008-09 has been increased for Department of Rural Development, Department of Road Transport and Highways, Railways, Ministry of Power, Department of Industrial Policy and Promotion and Department of Information Technology with a view to maintain the fiscal tempo to address the economic slowdown and meet the requirements of rural and infrastructure development. In addition, enhanced Plan allocations have been provided for Ministry of Youth Affairs and Sports and Ministry of Culture to ensure availability of adequate resources for the preparation towards hosting of the Commonwealth Games next year. I have ensured adequate allocations to our flagship programmes which directly impact Aam Aadmi:
(i) National Rural Employment Guarantee Scheme was launched in February 2006 and has now been extended to all the districts of the country. During the year 2008-09, employment of 138.76 crore person days, covering 3.51 crore households, has already been generated. The implementation of this programme has resulted in increased wage employment, enhanced wage earnings, improved equity with significant benefits flowing to SC/ST and women. This has also led to increased demand for and consumption of wage goods. I propose an allocation of Rs.30,100 crore for this Scheme for the year 2009-10.
(ii) Sarva Shiksha Abhiyan has made significant contribution in providing access to and infrastructure for elementary education. About 98 per cent of our habitations have been covered by primary schools and the focus now is to improve the quality of elementary education. Between 2003-04 and 2008-09, the allocation for this programme has been increased by 571 per cent. For the year 2009-10, I propose an allocation of Rs.13,100 crore for this programme.
(iii) The national programme of Mid-day Meals in schools is the world’s largest school feeding programme and has contributed to enhancement of school participation, reduction in class room hunger, and fostering of social and gender parity. I propose an allocation of Rs.8,000 crore to this Scheme for the year 2009-10.
(iv) In our Government’s efforts to universalize the Integrated Child Development Scheme (ICDS) in the country, it was expanded twice in the last five years to cover the hitherto uncovered habitations across the country. In our commitment to reduce the malnutrition levels in the country, the UPA Government has recently adopted the New WHO Child Growth Standards for monitoring growth of children under ICDS. I propose an allocation of Rs.6,705 crore for this Scheme for the year 2009-10.
(v) Jawaharlal Nehru National Urban Renewal Mission was launched to give focused attention to integrated development for urban infrastructure and services in mission mode, in identified cities. A major achievement of the UPA Government is development and extension of Mass Rapid Transport System (MRTS) in major cities like Bengaluru, Chennai, Delhi, Hyderabad, Kolkata and Mumbai. Under Jawaharlal National Urban Renewal Mission, 386 projects amounting to Rs.39,000 crore have been sanctioned as of December 31, 2008. For the year 2009-10, I propose an allocation of Rs.11,842 crore for this programme.
(vi)Rajiv Gandhi Rural Drinking Water Mission is envisaged to supply safe drinking water to uncovered habitations and slipped back habitations. I propose an allocation of Rs.7,400 crore for this programme for the year 2009-10.
(vii) Total Rural Sanitation Programme is a continuous process. I propose an allocation of Rs.1,200 crore for this programme for the year 2009-10.
(viii) National Rural Health Mission aims to bring about uniformity in quality of preventive and curative healthcare in rural areas across the country. I propose an allocation of Rs.12,070 crore for this programme during the year 2009-10.
(ix) Bharat Nirman is a time bound plan for building rural infrastructure. It has six components namely, rural roads, telephony, irrigation, drinking water supply, housing and electrification. There has been all round progress in the implementation of this programme. During 2005-2009, the allocation to this programme has been increased by 261 per cent. For the year 2009-10, I propose an allocation of Rs.40,900 crore for this programme.
54. The UPA Government has been working on improving arrangements to ensure that development deliverables reach the intended beneficiaries. In order to do so efficiently, effectively and economically, a comprehensive system of Unique Identity for the resident population of the country has been worked out. The Unique Identification Authority of India is being established under the aegis of Planning Commission for which a notification has been issued in January 2009. A provision of Rs.100 crore has been made in the Annual Plan 2009-10 for this.
55. To ensure continuity in financing of rural infrastructure projects, I propose RIDF-XV with a corpus of Rs.14,000 crore and continuation of the separate window for rural roads with a corpus of Rs.4,000 crore.
56. To counter the negative impact on exports due to the global financial crisis, I propose to extend the interest subvention of 2 per cent on pre and post shipment credit for certain employment oriented sectors i.e. Textiles (including handloom & handicrafts), Carpets, Leather, Gem and Jewellery, Marine products and SMEs beyond March 31, 2009 till September 30, 2009. This is expected to involve an additional financial outgo of Rs.500 crore during Financial Year 2009-10.
57. Government would recapitalize the public sector banks over next two years to enable them to maintain Capital to Risk Weighted Assets Ratio (CRAR) of 12 per cent and to ensure that credit growth continues to sustain economic growth.
58. While the proposed provisions are appropriate for a Vote-on-Account, I would like to point out that Plan expenditure for 2009-10 may have to be increased substantially at the time of the presentation of the regular Budget, if we are to give the economy the stimulus it needs to cope with the global recession that is likely to continue through the year. In the current environment, there is a clear need for contra-cyclical policy and it calls for a substantial increase in expenditure in infrastructure development where we have a large gap and in rural development where the programs such as Bharat Nirman and NREGS are playing a vital social role. Since the scope for revenue mobilization is bound to be limited in a period of economic slowdown, any increase in plan expenditure will increase the fiscal deficit. Indeed, we may have to consider additional plan expenditure of anything from 0.5 per cent to 1.0 per cent of the GDP and gear up our systems accordingly.
Mr. Speaker, Sir,
59. We are going through tough times. The Mumbai terror attacks have given an entirely new dimension to cross-border terrorism. A threshold has been crossed. Our security environment has deteriorated considerably. In this context, I propose to increase the allocation for Defence, which is a part of non plan expenditure to Rs.1,41,703 crore. This will include Rs.54,824 crore for capital expenditure. Needless to say, any additional requirement for the security of the nation will be provided for.
60. I am also making a provision of Rs.95,579 crore for major subsidies including food, fertilizer and petroleum.
61. For the fiscal 2009-10, Gross Tax Revenue receipts at the existing rates of taxation are estimated at Rs.6,71,293 crore and Centre’s net tax revenue at Rs.5,00,096 crore. With revenue expenditure estimated at Rs.8,48,085 crore, the revenue deficit amounts to 4.0 per cent of GDP. Fiscal Deficit is estimated at Rs.3,32,835 crore which is 5.5 per cent of GDP. This would be lower than in 2008-09, but higher than would be appropriate under normal circumstances. However, conditions in the year ahead are not likely to be normal and, therefore, the high fiscal deficit is inevitable. We will return to FRBM targets once the economy is restored to its recent trend growth path.
62. Honourable members are aware that the ceiling of fiscal deficit that the States can incur in 2008-09, in terms of the Debt Consolidation and Relief Facility set up under the Twelfth Finance Commission award has been increased by 0.5 per cent of the GSDP to 3.5 per cent. This may have to be reviewed in view of the response of the economy in the coming months.
63. India has arrived on the international economic scene. In the last five years, the Indian economy has grown at an impressive 8.6 per cent which is much faster than ever before. This growth has been more inclusive providing people expanded opportunities for livelihood. The creative energies of our farmers, entrepreneurs, businessmen, scientists, engineers and workers have been unleashed.
64. Increased global competitiveness of Indian enterprise, its resilience to global shocks, and a positive economic outlook has contributed to a marked change in the way the Indian economy is being viewed, within and outside the country.
65. The successful launch of Chandrayaan and the historic feat of placing the Indian tri-colour on Moon’s surface has made us members of a very select club of countries who have well developed space programmes.
66. India has made determined progress in finding its rightful place in the Comity of Nations with a credible voice that matters in the deliberations of the global political and economic order. We have succeeded in dismantling the nuclear apartheid that India was subjected to for more than three decades. This has opened up new opportunities for civil nuclear cooperation and cleared the pathways for rapid industrialization of our country.
67. For all this and more, I would like to express my deep gratitude to UPA partners and supporters who walked the extra mile with us in this journey.
68.Mr. Speaker, Sir, our people will soon be called upon to exercise their democratic right to choose the next Government. The Indian people have repeatedly shown that they can be relied upon to make sound decisions to secure the nation’s future. They have seen how the ‘Aam Aadmi’ has become the focus of the development process. They have also seen how our Government has successfully steered the country through difficult times. They have experienced the joy of being citizens of a proud nation moving ahead with confidence. I have no doubt that when the time comes, our people will recognize the hand that made it all possible. The hand that alone can help our nation on the road to peace and prosperity.
69. Sir, with these words, I commend the Interim Budget to the House.