New Delhi: Pitches for raising duties as part of sops rollback.

The Prime Minister’s Economic Advisory Council, or PMEAC, today pegged growth in the next financial year (2010-11) at 8.2 per cent as the agriculture sector is expected to turn around next year. It also predicted that the country would return to 9 per cent growth in 2011-12.

Along with these, the panel pitched for raising duties in the coming Union Budget, as part of the rollback of stimulus measures. For the current financial year (2009-10), it stuck to the Central Statistical Organisation’s advanced growth estimate of 7.2 per cent though added an upward bias to it. “The council expects a bounce-back in agricultural gross domestic product in the next year and maintenance of the desired trend growth of 4 per cent in 2011-12,” PMEAC Chairman C Rangarajan said after releasing a review of the economy.

The PM’s panel also expected the industrial and services sectors to continue to expand strongly through the next two years. “On this basis, we are making an initial estimate that the economy would grow by 8.2 percent in 2010-11 and by 9 per cent in 2011-12,” said Rangarajan.

Fiscal correction
On the issue of exit from the government’s stimulus measures, panel member M Govind Rao said that taking the excise duty to 10-12 per cent level was something that could be done though taking it back to the original level would be difficult.

At present, there are three categories of NBFCs — asset finance companies, loan finance companies and investment companies. All these have to maintain a minimum capital adequacy ratio of 12 per cent. RBI said all criteria of NBFCs would apply to IFCs. In addition, the central bank said that a minimum of 75 per cent of these institutions’ assets should be deployed in infrastructure and their net owned funds should be Rs 300 crore or above. Moreover, they should carry ‘A’ or equivalent rating from Crisil, Fitch, Care, Icra or their equivalent rating agencies. The minimum Tier-1 capital has been fixed at 10 per cent.

“Infrastructure needs long-term funds, so it was important to form a separate category. Now, we can approach RBI and create an environment to relax borrowing norms. We can ask it to raise the external commercial borrowing limit or seek use of refinance from IIFCL,” said Srei Infrastructure Managing Director Hemant Kanoria. “Since the classification for the purpose of income recognition, asset classification and provisioning norms is based on asset specification, the extant prudential norms will continue as hitherto,” RBI said.

The regulator mandated that a bank’s exposure to IFCs should not exceed 15 per cent of its capital funds, with a provision of increasing it to 20 per cent if it is on account of funds on-lent by IFCs to the infrastructure sector. The central bank said IFCs would not be allowed to accept deposits from public. An IFC may exceed the concentration of credit norms by 10 per cent of its owned fund in lending to any single borrower and by 15 per cent of its owned fund in case of a single group of borrowers.

India’s exports during December, 2009 were valued at US $14606 million (Rs. 68107 crore) which was 9.3 per cent higher in dollar terms (4.8 per cent in Rupee terms) than the level of US $ 13368 million (Rs. 65015 crore) during December, 2008. Cumulative value of exports for the period April- December, 2009 was US $ 117587 million (Rs 563304 crore) as against US $ 147569 million (Rs. 652919 crore) registering a negative growth of 20.3 per cent in Dollar terms and 13.7 per cent in Rupee terms over the same period last year.


India’s imports during December, 2009 were valued at US $ 24753 million (Rs.115420 crore) representing a growth of 27 per cent in dollar terms (22 per cent in Rupee terms) over the level of imports valued at US $ 19456 million ( Rs. 94625 crore) in December, 2008. Cumulative value of imports for the period April- December 2009 was US $ 193829 million (Rs. 927969 crore) as against US $ 253809 million (Rs. 1126199 crore) registering a negative growth of 23.6 per cent in Dollar terms and 17.6 per cent in Rupee terms over the same period last year.

Oil imports during December, 2009 were valued at US $ 6536 million which was 42.8 per cent higher than oil imports valued at US $ 4578 million in the corresponding period last year. Oil imports during April- December, 2009 were valued at US$ 56918 million which was 29.8 per cent lower than the oil imports of US $ 81101 million in the corresponding period last year.

Non-oil imports during December, 2009 were estimated at US $ 18217 million which was 22.4 per cent higher than non-oil imports of US $ 14879 million in December, 2008. Non-oil imports during April- December, 2009 were valued at US$136911 million which was 20.7 per cent lower than the level of such imports valued at US$ 172708 million in April- December, 2008.

The trade deficit for April- December, 2009 was estimated at US $ 76242 million which was lower than the deficit of US $ 106240 million during April-December, 2008.

IT contract worth $1.5 billion awarded to Indian vendors TCS, Infosys and Wipro early this year was one such mega deal.


There are several such projects lined up in the country’s power sector as well, said Everest Group country head Gaurav Gupta. “Governments in the US and other western markets tend to account for a big chunk of mega deals, but Indian companies are not strong contenders,” he said, adding that large deals for Indian companies are typically in the range of $50-100 million, though some Indian IT services vendors currently have some mega outsourcing contracts in the pipeline.

Meanwhile, the US has seen its share of total contracts awarded steadily decline over the past five years. Europe is seen as the big gainer as the UK, France, Netherlands and Switzerland have brought the overall European tally to reasonable levels. Experts say the resurgence of mega deals may throw open more job opportunities in the sector. “Deal pipeline has picked up and 2010 is certainly a strong year compared with 2009,” said Sid Pai, managing director, global sourcing advisory firm TPI.

The latest TPI Index shows that almost $25 billion worth outsourcing contracts were awarded in the fourth quarter of 2009, up 47% over the third quarter. Each of these three large industry verticals, including financial services, manufacturing and telecom, saw sequential growth of 33%, 76% and 24%, respectively, in the second half of the previous year. In 2009, almost 70% of all broader market contracts were valued at under $100 million in total contract value worldwide.

“We see both large and small deals coming back to the table. Although the traditional verticals like telecom, financial services and manufacturing have gained volume, it has been observed that new verticals like retail, media and entertainment, healthcare are also driving growth,” said Suresh Sundaram, HCL Technologies global head for marketing and strategy. He added that sectors like public services and energies and utilities and geographies such as Continental Europe, Asia and Latin Amercia should be the ones to watch for in the long term.

Clearly, the trend of mega deals has picked up globally. Some big IT outsourcing contracts signed globally early this year include $1.2-billion deal between Deutsche Post DHL and T-Systems, Ian, Evan & Alexander Corp selected for Federal Aviation Administration contract worth $2 billion and the deal between IBM Corp for Essex County Council worth $4 billion signed in December last year.

“While mid- and large-sized deals will continue to be the key drivers, in terms of mega deals, there is pent-up demand since late 2009. Also, suppliers and contracts are being consolidated that explain the resurgence of big deals this year,” said outsourcing advisory firm EquaTerra global sourcing consultant Uday Parmar. He said manufacturing sector which saw decline in annual contract value in 2009 may witness more such deals as the world gets out of recession.