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P-watch

A bird's eye view of what's hot and what's not on the government's policy radar.

Print Edition: July 29, 2007

Government bets on investments

At work: More jobs in the pipeline?

The government has raised the investment estimates for the ambitious Delhi-Mumbai Industrial Corridor (DMIC) from $50 billion (Rs 2,05,000 crore) to $90 billion (Rs 3,69,000 crore). The corridor will run parallel to the Indian Railways' Dedicated Freight Corridor (DFC). And, given Commerce Minister Kamal Nath's insistence that the corridor passes through his home state of Madhya Pradesh, the proposed 4,000 sq. km project will now, in all likelihood, cover Delhi, Haryana, Uttar Pradesh, Rajasthan, Gujarat, Maharashtra and Madhya Pradesh.

It is understood that the promoters, in consultation with the government, have decided to set up investment and industrial regions-one in each state-in the first phase, which ends in 2012. The five investment regions short listed thus far are Dadri-Noida-Ghaziabad in Uttar Pradesh, Manesar-Bawal in Haryana, Khushkhera-Bhiwandi-Neemrana in Rajasthan, Ahmedabad-Dholera in Gujarat and Igatpuri-Nasik-Sinnar in Maharashtra. Japanese companies are expected to invest over $10 billion (Rs 41,000 crore) in the proposed corridor during the first phase, work on which will commence next year. Sources, however, point out that the absence of an effective land acquisition policy may once again play a damp squib.

-Amit Mukherjee


RBI spares $5 bn for growth

On cue from the recommendations of the Deepak Parekh Committee, the Reserve Bank of India (RBI) has decided to loan $5 billion (Rs 20,500 crore) out of its burgeoning forex kitty to the government. Infrastructure projects of Indian companies will be bankrolled by the India Infrastructure Finance Corporation (IIFC), once the latter gets the money. The process of funds transfer will involve a special purpose vehicle (SPV) that will borrow from the RBI and finance the external borrowing needs. It appears to be a win-win both for government and business. While the infrastructure sector, which is in urgent need of $320 billion (Rs 13,12,000 crore), will have access to ready cash, the government hopes to net a return of more than 3.5 per cent on the borrowing. Money, well directed.

-Rishi Joshi


Exporters' relief on way

 Help is finally on the way. the government is reportedly all set to give its nod to a relief package to lend succour to exporters who have been hit by a 12 per cent rise in the rupee since March (it touched a 9-year high towards the end of the first week of July).

While the ministries of commerce and finance are yet to iron out all the issues, the proposed package is likely to raise the Duty Entitlement Passbook (DEPB) and drawback rates by up to 5 per cent in a bid to nullify domestic levies.

The government may also reduce interest rates on pre-shipment credits as well as allow exporters to enjoy interest on foreign currency accounts. It plans to do this after effecting the 10 per cent reduction in insurance premiums for exporters. A final decision on the matter is expected to be taken sometime in the second week of July. In the long run, though, incentives cannot be a substitute for deregulation of the currency markets.

-Aman Malik

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