Indian Economy - News & Updates - Archive

[nitesh]

Bangalore : Infosys Technologies has set up Infosys Science Foundation, a not-for-profit trust to promote research in sciences and honour
outstanding contributions and achievements by Indians.

The foundation will be funded by a corpus of Rs 21.5 crore and give out annual awards under different categories. The prize money under each will be Rs 50 lakh, one of the highest in the country for research.

Speaking at a media conference here on Tuesday, N R Narayana Murthy, chief mentor of Infosys, said: "India needs bright minds across all areas of academics, government, business and society to strive for global excellence. We need to encourage research in the country to address our developmental problems. This award will honour outstanding researchers who will make a difference to our future.''

The jury panel for each area will consist of eminent international personalities and will be selected by the trustees of the foundation.

Infosys had earlier instituted a global award for computing excellence with a cash prize of $ 150,000. The annual award, instituted through the Association for Computing Machinery (ACM), comes out of a corpus of $4 million given by Infosys.

Awards in five categories:

l Physical sciences (physics and chemistry)

l Mathematical sciences (mathematics and statistics)

l Engineering sciences (all branches of engineering)

l Life sciences (biology and medicine)

l Social sciences and economics (economics, history, sociology, political science and other social sciences)


Infy to promote science research-Bangalore-Cities-The Times of India

 

[johnpeter]

According to article which posted on 15th Feb 2009 at "The Economic Times"

The Indian economy will turn in the second-fastest growth rate in the world after China's 8% for 2008-09, according to the advance estimates of national income released by the Central Statistical Organisa-tion (CSO).

The Cabinet Committee on Economic Affairs (CCEA) on 11th Feb.2009 adopted new guidelines for computation of foreign equity holding in Indian companies. This opens up the scope for additional foreign equity inflow into Indian companies, and, in the process, dilutes the foreign investment ceiling that had earlier been imposed on sensitive sectors such as telecom, media, aviation, banking, defence and insurance.

 

[Omar1984]

India hit as foreign remittances dry up

Wed, Feb 18 12:33 PM

Bangkok, Feb 18 (DPA) India would be among the hardest-hit nations as the remittances sent home by its people working in the Middle East begins to dry up following the economic downturn.

There are an estimated five million Indian migrant workers in six Gulf nations, transferring more than one-fifth of India's total overseas remittances.

While the Ministry of Overseas Indian Affairs insisted the situation is not alarming, there are reports of job losses and wage cuts in the United Arab Emirates and Bahrain during the slump in oil prices and in the construction, real estate and tourism sectors because of the financial crisis.

'Remittances are a catalyst in India's growth as they make up 3 percent of the country's GDP,' a ministry official said. 'A drop in the figures could act as a drag on the economy.'

The Indian consulate in Dubai has said construction firms there had bulk-booked planes next month to fly 20,000 to 30,000 workers home on long leave or to re-deploy them on projects in Gulf nations like Qatar.

An estimated $260 billion of real estate projects are reported to have been delayed or shelved in the Emirates alone. Dubai's construction boom has crashed, sending thousands of workers back home and causing thousands of them to leave cars at the airport that they have stopped payments on.

Over the past three to four years, one of Asia's fastest growing industries has been exporting workers, especially to the oil-driven, construction-crazed economies of the Middle East.

Remittances have become a major contributor to foreign exchange earnings and gross domestic products (GDPs), peaking at an estimated $116 billion in 2008.

This year, the money flows were expected to slow as construction projects are shelved and other jobs dry up in Gulf nations, such Abu Dhabi, Bahrain, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates, which have employed up to 13 million foreign workers, 11 million of whom hailed from Asia.

The remittances have saved millions of families from impoverishment and boosted the region's economies.

Last year, remittances to Asia amounted to $8.9 billion for Bangladesh, $27 billion for China, $30 billion for India, $6.5 billion for Indonesia, $2.2 billion for Nepal, $1.8 billion for Malaysia, $7 billion for Pakistan, $16.4 billion for the Philippines, $2.7 billion for Sri Lanka, $5.5 billion for Vietnam and $1.8 billion for Thailand, according to International Labour Organisation estimates.

The inflows accounted for 9.5 percent of Bangladesh's GDP, 2.4 percent of India's, 15.5 percent of Nepal's and 11.6 percent in the Philippines, the UN agency said.

But recession and plummeting oil prices were expected to take a deep bite out of the remittance flow in 2009.

The World Bank estimated remittances from South Asians in the Gulf could decline by nine percent in dollar terms in 2009, compared with a 38 percent increase in the previous year.

Pakistan - with 24 percent of its remittances coming from the US and 56 percent coming from the Gulf - was expecting to be hit in the second half of 2009.

In Nepal, where remittances sustained the economy during the recent years of civil war and political turbulence, fears abound that mass layoffs abroad this year would mean more than economic instability at home.

'If hundreds of thousands of people employed in foreign countries are sent home, it could lead to social problems,' Nepalese economist Shankar Sharma said.

In the Philippines, where remittances have been the lifeblood of the economy for decades, the government is looking for new, riskier markets for its chief export: English-speaking labour and managers.

The government is reviewing deployment bans to risky destinations such as Iraq, Lebanon and Nigeria to find alternative jobs for retrenched Filipino workers.

Remittances from Indonesian workers, who are more dependent on the export-driven economies of Malaysia and Singapore, were expected to slump to around $3 billion this year, said Fauzi Ichsan, an economist with Standard Chartered Bank.

The Indonesian government expected that at least 100,000 Indonesian workers in Malaysia would have to return home this year.

In more affluent Asian countries, there is mounting political pressure to send Asian migrant workers home.

Japan, with its exports falling, has been laying off Brazilian workers of Japanese ancestry. Since September, planes to Brazil have been fully booked with returning labourers.

South Korea has promised subsidies to companies that hire only South Korean labourers over foreigners.

Such trends bode ill not just for remittances but also for the employment conditions of the legions of Asian workers desperately seeking jobs in a shrinking market.

'The danger is that migrant workers who invested their meagre assets at home to find work abroad will be laid off first and will seek to stay at whatever cost to try to recoup their investments,' said Manolo Abella, chief technical adviser for the International Labour Organisation on labour migration. 'Many will become illegal and be vulnerable to abuse.'


India hit as foreign remittances dry up - Yahoo! India News

 

[Nihat]

Slowdown not affecting India, pay to rise 8.2 pc: Survey


New Delhi: After all the news of corporate frauds, economic slowdown and recession, finally there is some good news for Indian employees.

Salaries would continue to rise and lay-offs are not on employer's mind says the latest survey by Hewitt, an HR consultancy firm.

Salaries are projected to rise at an average of 8.2 per cent in 2009, down though from 13.3 per cent at which they grew in 2008 according to the Hewitt survey.

India could be the safest bet for employment as only 16 per cent Indian companies are considering lay-offs as an option against 55 per cent companies in the United States of America and 30.6 per cent Chinese companies.

In more good news, 60 per cent companies are still considering hiring new employees and nine out of 10 companies are still giving promotions to deserving candidates.

So how are these companies going to cope with the current economic slowdown?

"I think organisations are going to be far more strategic in the way they provide salary increases across levels of management and definitely more stringent in the way they evaluate performance to increase salaries," says Sandeep Chaudhary, Business Leader at Hewitt.

Junior managerial employees can expect a maximum salary growth with a projected increase of 8.8 per cent against 14.3 per cent which they achieved in 2008.

Top management can expect a relatively slower growth at 7.4 per cent against 12.4 per cent growth registered in 2008.

Sector wise, pharma is expected to see maximum salary growth with an average projected increase of 13 per cent followed by telecom services at a distant second with 11.3 per cent and FMCG coming third with 11 per cent.

Slowdown not affecting India, pay to rise 8.2 pc: Survey

 

[Nihat]

Rush to India, PwC tells global companies

TORONTO: Engineering and construction companies should rush to India as it offers huge opportunities for their future growth, says a new report
by professional services firm PricewaterhouseCoopers (PwC).

The report released here on Wednesday said India offered unlimited opportunities as it needed investment of $500 billion for infrastructure development in the next three years alone.

"Foreign companies who do not acknowledge the opportunity now may miss out on a critical opportunity to establish a long-term presence in one of the world's largest growth markets," said the report, adding that India will still post a growth of 7-7.5 percent this year despite the global meltdown.

Liberalisation of regulations and "a deliberate strategy on the part of the Indian government to develop infrastructure and promote foreign direct investment (FDI) spells opportunity for foreign engineering and construction companies", it added.

According to PwC, India will become the world's third largest economy by 2050.

Being its second largest economic activity after agriculture, construction in India is set to boom as the country plans to spend $167 billion on electricity, $92 billion on roads, and $65 billion on railway in the next three years.

"The developing services and manufacturing sectors, increasing consumer demand and government commitments to rejuvenate agriculture and rural areas have spurred increases in rail, road and port traffic, necessitating further infrastructure improvements," the report said.

Public private partnerships (PPPs) are also booming as investments worth $150 billion are in the pipeline, it said.

Simplified FDI approval process by India saw a surge in international interest in PPPs in 2008, the report said.

"Already a number of firms from Canada, Europe, Australia, China, Malaysia and Korea have made their presence felt in India. Toyo Engineering, Jacobs H&G, Uhde, Tecnimont, and Aker Kvaerner are already leading players in the region.

"An example of a Canadian company making the move into India is SNC-Lavalin, which has acquired Pipecon Consultants Pvt. Ltd, based in Mumbai, and Span Consultants Pvt. Ltd, an engineering firm headquartered in New Delhi with local offices in Bangalore, Mumbai and Kolkata," the report said.

Michael Clifford, PwC Canada's engineering and construction expert, said: "The opportunities to develop a significant business in India are extremely promising for construction companies with roads, ports and airports, railways and power standing out as particular bright spots."

Rush to India, PwC tells global companies-India Business-Business-The Times of India

 

[macintosh]

India likely to grow 7% next fiscal: Montek
Press Trust of India
Saturday, February 21, 2009 (Mumbai)


The Indian economy is expected to grow at least 7 per cent in the next financial year on the back of stimulus measures taken by the Government, Planning Commission Deputy Chairman Montek Singh Ahluwalia said on Saturday.
"The world economy expects a recovery in the second half of the next fiscal... In the coming year, India's growth will be at least seven per cent," Ahluwalia told reporters here on the sidelines of a seminar.
"Compared to other countries, we are doing reasonably well... we are growing below our potential... many sectors are feeling the pain. Right now, the foremost challenge is to restore the growth momentum of the economy," he said.
In the second-half of the current fiscal, the economy would have grown at around 6.5 per cent and the growth is likely to be better next year, he added.
"Compared to other countries, we are doing reasonably well (though) we are growing below our potential...many sectors are feeling the pain. Right now, the foremost challenge is to restore the growth momentum of the economy," Ahluwalia said.
The fiscal and monetary measures have enough flexibility to respond to the prevailing economic situation, he said.
On Reserve Bank Governor D Subbarao's observation that there is a room for policy rate cuts, Ahluwalia said that there is enough flexibility on the monetary side (to reduce policy rates).
The Deputy Chairman of the Planning Commission said that with some sectors affected by the economic slowdown, NPA levels of banks may witness a rise, though these would not be significant.
Banks have been unusually slow to respond to various signals from the Government and RBI to extend credit to needy segments, he said.
"Banks are sufficiently liquid...banks should extend credit to needy segments like SME," Ahluwalia said.
On credit off-take, he said that banks' credit growth has been improving since January and is further expected to improve in the next one-two months.
Globally, central banks have been infusing liquidity into the system to face the challenge of the economic slowdown, Ahluwalia said.
On another stimulus package to industry, Ahluwalia said this package, expected to be announced with the full budget, should be around 1 per cent of GDP or Rs 60,000 crore.
"The already-announced two stimulus packages are expected to show results in the coming two-three months. The benefits will come with a lag effect. Both SMEs and large-scale companies will benefit (from the packages)," he said.
Queried about the high fiscal deficit, Ahluwalia said this is only a feature of the current fiscal and that in the long-term, the outlook on economic growth remains positive.

 

[macintosh]

India invited for G20 meet on financial crisis
Press Trust of India
Saturday, February 21, 2009 (London)


Prime Minister Manmohan Singh is among the top world leaders who have been invited for the second G20 Summit to be held here in April, which will discuss ways and means to reinvigorate growth in the wake of the global economic crisis.
British Prime Minister Gordon Brown, whose country will host the global economic summit, has sent formal invitations to the world leaders.
"The global economic challenges we face need to be met with decisive action if we are to secure jobs, restore confidence and reinvigorate growth," Brown said yesterday.
Besides leaders from G20 nations, Chair of the New Partnership for Africa's Development (NEPAD), the Chair of the Association of South East Asian Nations (ASEAN) and the President of the EU Commission have also been invited for the summit to be held here on April 2.
The Chairman of the African Union Commission will also attend. This is the second meeting of the grouping after the one in Washington on November 15 hosted by the then US President George W Bush.
"To be effective in addressing this global crisis we have to bring in partners from across the world. For that reason I have issued invitations to the leaders of G20 countries and the Chairs of NEPAD, ASEAN and the African Union will ensure their interests are not forgotten and their voices are heard," Brown said.
"Having this mix of countries and international organisations present not only reflects the new reality of the global economy but will also make any action we take more effective," the British Prime Minister said.
Reflecting the participation at the Washington Summit, Brown has invited the Heads of State from India, United States, Argentina, Australia, Brazil, Canada, China, Czech Republic (EU Presidency), France, Germany, Indonesia, Italy, Japan, Mexico, The Netherlands, Republic of Korea, Russia,Saudi Arabia, South Africa, Spain and Turkey.
In addition, the Prime Minister is also inviting the heads of a number of global institutions to contribute to specific parts of the agenda.

 

[Neo]

Half a million jobs lost in India ​

Sunday, February 22, 2009

NEW DELHI: Half a million jobs were lost in India from September to December last year in the sectors of textiles, automobiles and information technology, the private Indo-Asian News Service reported on Friday quoting government official sources, according to Xinhua on Saturday.

A study by the Labor Ministry said total employment in the sectors of mines, metals, gems, jewelry, textiles, automobiles, transport and IT-outsourcing fell from 16.2 million in September to 15.7 million in December, due to the economic meltdown, said the report.

Labor Minister Oscar Fernandes said earlier that the average earnings of Indians also declined by 3.45 per cent during the same period of time. Indian left-wing parties and labor unions put the number of jobs lost since September last year at 2 million.

India’s External Affairs Minister Pranab Mukherjee, who also holds the portfolio of finance minister, said on Friday Indians have to share the pain of economic crisis, while promising to protect Indian jobs even through lowering salaries.

“Jobs must be protected even if it means some reduction in compensation,” said the minister.

Indian Prime Minister Manmohan Singh, who holds the portfolio of finance minister, is recovering after a heart surgery.

 

[macintosh]

What slowdown? Telecom adds 15 million telecom users in Jan
21 Feb 2009, 0052 hrs IST, ET Bureau

NEW DELHI: Indian telecom companies added a record 15 million customers in January, indicating that the world’s fastest growing telecom market remains untouched by the economic slowdown.

This is a global record for any telecom market. The number of phone connections in the country — mobile and landline — has crossed 400 million as of January-end, telecom regulator Trai said on Friday. Mobile phone users now account for close to 91% of the country’s telephone base with 362.3 million connections, the regulator said. The robust growth has also helped push the country’s teledensity to 34.5%. This means, there are 35 phone connections for every 100 people in India.

The industry maintained the growth momentum with operators expanding networks to smaller towns and villages. Besides, cheap call rates, which are among the lowest in the world, have also helped the record growth.

January growth was led by Reliance Communications that added close to 5 million new subscribers, GSM and CDMA combined, taking its subscriber base to 66.2 million. RCom had launched GSM services in January with an aggressive pricing strategy that enabled the company to garner a third of the total customers added by the industry in the month.

The wireline segment continued its declining trend, with the subscriber base going down to 37.75 million in January, registering a drop of 0.15 million from 37.90 million subscribers in December 2008. BSNL’s wireline subscriber base dipped by 0.2 million to reach 29.29 million in January 2009 compared to 29.50 million in December 2008.

MTNL too registered a drop of over 10,000 customers in the wireline space to take its total subscriber base to 3.5 million. However, private telecom operators providing landline services like Bharti Airtel, Reliance Communications and Tata Teleservices recorded positive growth.

The broadband sector also recorded positive growth. The country added 0.20 million new users in January, taking the total customers using high-speed internet services to 5.65 million. However, this is well below the target of 9 million users by 2007, laid out in the broadband policy.

 

[LCA]

The broadband sector also recorded positive growth. The country added 0.20 million new users in January, taking the total customers using high-speed internet services to 5.65 million. However, this is well below the target of 9 million users by 2007, laid out in the broadband policy.

I think Broadband situation will improve after 3G tech. come into play.

 

[LCA]

FY09 FDI to exceed last year's $25 bn

FY09 FDI to exceed last year's $25 bn
Press Trust of India / New Delhi February 23, 2009, 16:21 IST

The government today said despite the financial meltdown hitting the global economy, India will receive more foreign direct investment during the current fiscal, surpassing $25 billion that came in during 2007-08.

"Our FDI will be more than $25 billion. It is a very good sign... We are still doing very well," Joint Secretary in the Ministry of Commerce and Industry N N Prasad told reporters here.

India has already received FDI totalling $25 billion, he said, adding the fiscal will end with higher inflows than what was received during 2007-08.

Answering questions on job losses in the aftermath of slowdown, Prasad said the government while replying to a question in Parliament stated that 5 lakh people have lost jobs in various sectors.

According to the report prepared by the Labour Ministry 5 lakh people lost their jobs on account of slowdown during the four-month period ending December.

On the affected sectors, Prasad said, those badly hit by the slowdown include automobiles, IT, textiles and exports.

Among the large companies, he added, Tata Motors has already taken steps to rationalise operations to combat slowdown.

 

[tyagi]

I think Broadband situation will improve after 3G tech. come into play.

dude what does 3g has to do with broadband .

 

[LCA]

dude what does 3g has to do with broadband .

This article can help you...........

BSNL launches 3G pan India- Politics/Nation-News-The Economic Times

BSNL launches 3G pan India
22 Feb 2009, 1639 hrs IST, ET Bureau

Print EMail Discuss Share Save Comment Text:
CHENNAI: By the 27th of this month, mobile telephony will enter its third generation (3G) in 12 cities in India, courtesy the state owned telecom
service provider BSNL.

Union minister for communication and IT A Raja launched BSNL's 3G services pan India, from Chennai, on Sunday, by making the first video call to TN chief minister M Karunanidhi.

The PSU was awarded one block of 2*5 MHz 3G spectrum in all telecom circles in the country, six months before, without participating in the auction, at a price equal to the winning bids in the respective circles, in the auctions to be held before March 31st.

"Considering the need for faster penetration of 3G, and the need for telecom access to rual areas, the Government policy will allow telecom infrastructure sharing between commercial telcos as well as infrastructure providers," Mr.Raja said. DoT also plans enable mobile number portability (MNP) in major cities by August, and in other towns by end of this year. Bids have been invited of providing MNP switches.

On the occasion, BSNL also launched its India Golden 50 tariff scheme, where, by increasing the pulse duration for all calls to 120 s, the tariffs have been have been reduced by 50-80%. Presently, a pulse is calculated at 90 s for national calls to other networks and 60 s within network.

"Besides upgrading mobile data speeds to 2 mbps from the present 144 kbps, we will also offer video screening of calls, video on demand, mobile surveillance, Live TV, movie downloads etc on our 3G platform," BSNL CMD Kuldeep Goyal said. For this, the company will scale up tie-ups with its existing content providers. However, the telco will not be providing its previously launched IPTV service, which has garnered 5000 subscribers, on 3G.

"We plan to operate 5 million lines spanning all district headquarters and important towns by end of this year at an investment of Rs.2700 crore," Mr Goyal said. "We expect 5% of our 2G subscribers to migrate to 3G." The company expects a revenue addition of Rs 500-1000 crore by this customer addition, and a 20% revenue augmentation by infrastructure sharing.

BSNL has tied up with Nokia, Sony and Samsung for handset bundling, the cheapest of which is priced at Rs.7000. Voice tariff schemes begin from a fixed monthly charge of Rs.350 for prepaid, and Rs 500 for postpaid. Data subscriptions are available starting Rs 250. The company has tied up with Micromax and Huawei for offering laptop data cards at prices ranging form Rs 3800 to 6000. "Trials are on to launch mobile banking on our 2G and 3G platforms," Mr Goyal said.

 

[Rajkumar]

'Resilient' Indian economy will bounce back by October: Chidambaram-India-The Times of India


NEW DELHI: Complimenting the resilience displayed by Indian industry in dealing with the slowdown, home minister P Chidamabaram on Tuesday said
the country's economy is likely to find an upturn by October this year.

"By the beginning of the third quarter of 2009-10, by October, we will find an upturn in the economy," Chidamabaram, who was Finance Minister till November last year, said while presenting the National Tourism Awards here.

"The present downturn is temporary. Our growth rate is expected to be well over seven per cent," he said noting that despite a downturn in global scenario, India has managed to achieve seven per cent growth. He attributed this to domestic consumption and demand.

Commending the performance of Indian businesses and industry during the global downturn, the Minister said India stood out as a "shining example" of a resilient economy when the world was engulfed by economic gloom.

"We owe this resilience of Indian business and economy to its ability to quickly adjust to changing times. But in no other country, I have seen businessmen adjusting so rapidly (to the situation). That is why we were able to hold our head high," he said.

During difficult times, Chidambaram advised that one should take "hard decisions" like cutting prices as a "natural response" to the downturn.

 

[Neo]

Indian budget 2009-2010 ​

ARTICLE (February 23 2009): The Indian budget announced by stand-in Finance Minister Pranab Mukherjee who is also External Affairs Minister, for the fiscal year 2009-10 would have many a developed country drooling over its state of the economy and growth forecasts for the forthcoming fiscal year.

Past Pakistani economic managers, if they are in the mood for introspection and an unbiased analysis of their own performance would, no doubt, feel not only envious of India's achievements; but also ashamed of how our rival left us far behind in the economic arena even at a time when the world was prospering and Pakistan registering high growth rates.

It is India's achievements in the field of economics that is considered by many an analyst as the main source of India's rising international clout - clout evident given the frequent mention of the potential of India's large middle class as a market for western products in the international media.

So what exactly are these statistics? First, GDP growth rate of 7.5 percent, 9.5 percent, 9.7 percent, and 9 percent from fiscal years 2004-05 to 2007-08. Comparable growth rates in Pakistan as per the Economic Survey were: 9 percent, 5.8 percent, 6.8 percent and provisional estimate of 5.8 percent in 2007-08. In other words Musharraf's economic managers mantra that during their tenure the country experienced high growth rates must be seen in the context of India's economic performance during the comparable period.

Musharraf's dwindling acolytes may well quote Bush from three years ago as the reason for Pakistan's poor performance even at a time when the floodgates of concessional aid were open to us post 9/11: "Pakistan and India are different countries with different needs and different histories." And this remark, though it angered the Pakistani public and media at the time, remains valid.

While both Pakistan and India have high corruption levels, though we have been able to beat India in terms of scoring higher on the Corruption Index compiled by international institutions yet the major difference is three fold: (i) India has remained a democracy since its independence excepting a brief period of emergency during which time the government remained under civilian control.

In contrast, the role of the Pakistan army has remained pervasive not only in Pakistani politics but also in our economy even during times of civilian rule. (ii) Indian judiciary has remained independent of the executive and has, as a consequence, strengthened its institutions. This has also spread the perception amongst businessmen, local and foreign, that justice is accessible - a fact that accounts for large foreign investment inflow into India.

Pakistan's military and civilian rulers, in contrast, continue to show a partiality for a judiciary subordinate to their dictates. And (iii) the Indian government's five year economic plans encapsulated a vision for the future from which politicians did not deviate. In Pakistan, in contrast, five-year plans were rarely followed which may well account for the appalling literacy rates, low outlay on education and health - trends that continue to this day.

Thus, during the last four years of Musharraf the Pakistan government failed to take advantage of a favourable international investment climate as well as to channel massive aid injections to this country to the deficient physical (read energy) and social infrastructure (education and health) sectors in marked contrast to India. The reason may be found in the fact that Musharraf did not want to rock the boat as far as the economy was concerned and more specifically in terms of (i) not changing expenditure priorities from the past which did not take account of the changing ground realities, for example the brewing energy crisis; and (ii) backing off from taxing those who were supporting his government.

In terms of fiscal policy the two countries took different decisions that accounts for Pakistan's current economic impasse. Tax to Gross Domestic Product (GDP) ratio for India was 9.2 percent in 2003-04 while in Pakistan it was comparable at around 9 percent in 2004-05. By 2007-08 India had upped the tax to GDP ratio to 12.5 percent which, according to the Finance Minister in his budget speech, brought India "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 percent per annum during the eleventh five-year plan."

In contrast Pakistan's tax-GDP ratio was 9.6 percent in 2007-08. Shaukat Tarin, Advisor to PM on Finance has underlined the need for enhancing tax to GDP ratio to 18 to 20 percent to achieve 7 to 8 percent growth in the economy - considered to be a wish at this point as it does not reflect any policy announcement in this regard.

The current tax-GDP ratio is simply too low to finance Pakistan's desired spending levels as well as control the persistent budget deficit. Tarin has stated the government will request the International Monetary Fund (IMF) to increase its support for Pakistan by over 4 billion dollars, reflecting paucity of domestic tax and non-tax revenue collections for the current year, while no effort has yet been made to bring the sacred cows into the tax net.

Focus, as per the government's Letter of Intent (LoI), submitted to the IMF Board for formal approval of the 7.6 billion dollar standby arrangement, is on (i) eliminating subsidies (oil subsidies have already been eliminated and food subsidies have been dramatically reduced). This reduction, one would assume, would be much greater than the other condition in the LoI namely to place a comprehensive and well targeted social safety net, (ii) integration of income and sales tax administration with obvious implications for (iii) audit reintroduction and (iv) full VAT with minimal exceptions.

India in contrast used high growth of the 2000's to its long term economic stabilisation: Finance Minister Mukherjee in his budget speech added that "during this period the fiscal deficit came down from 4.5 percent in 2003-04 to 2.7 percent in 2007-08 and the revenue deficit declined from 3.6 percent to 1.1 percent." But with international oil and food prices rising in 2007-08 coupled with an impending election the government of Pakistan's subsidy erased all previous gains largely attributed to the heavy inflow of foreign assistance. True, but India, like the rest of the world, was also subject to the same prices.

Mukherjee in his budget speech stated that "the sharp rise in global inflation, even with a moderated passthrough, put pressure on domestic prices. The WPI headline inflation shot up to nearly 13 percent 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 interest rates to mop up excess liquidity. This in turn had implications for the growth rate from the demand as well as the supply side. These, along with easing global price pressures, led to a decline in domestic prices with inflation rate falling to 4.4 percent on January 31 2009. We have weathered the crisis" but he added: "there is no room for complacency."

One must contrast this state of affairs with what happened in Pakistan. The State Bank of Pakistan, in spite of measures to combat inflation, failed to come up with a monetary policy formula that controlled the inflation rate and it requested IMF monitoring to force the Ministry of Finance to desist from borrowing irresponsibly from the SBP. In other words Pakistan remains far from the position where anyone can declare that have 'weathered the storm.'

(This is Part 1 of a two-part series contrasting India's economic performance and budgetary policies as contained in the budget speech of Mukherjee with Pakistan's experience.)