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No
slip-up likely in capital expenditure for 2001-02: RBI
Our
Banking Bureau
Mumbai, Nov 20: Despite the overall gloomy projections
on the investment climate, the aggregate capital investment
for 2001-2002 has been pegged at Rs 54,343 crore — nearly
the same as that in 2000-01 — by the Reserve Bank of India
(RBI) in its monthly bulletin for November.
| S&P reaffirms
India rating with warning |
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Our Banking Bureau
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Mumbai, Nov 20: Despite the prevailing
slump on the economic front, international rating agency
Standard & Poor’s (S&P) has reaffirmed India’s
country rating, but it has warned that it could be lowered
if the current negative fiscal and debt trends continued.
The rating agency while reaffirming its ‘BB’ foreign currency,
‘BBB-’ and a-3’ ratings for local currency long- and short-term
sovereign credits, stated that “the ratings could be lowered
if current negative fiscal and debt trends continue or
if government fails to stimulate economic growth through
deeper structural reforms.”
In a statement issued from Singapore, S&P said, “Many
encouraging announcements in the current year’s budget
designed to improve growth prospects remain unimplemented
including steps to loosen unworkable labour laws and to
introduce liberalisation into agricultural sector.”
S&P said that the rating reflects the continued deterioration
of the government’s financial profile with a persistently
high fiscal deficit resulting in rising burden of public
debt. “Failure to undertake structural reforms in a timely
manner has eroded the margin of error for policy makers
to avoid macroeconomic instability”, it said.
It pointed out that the government’s already low level
of fiscal flexibility (interest payments are projected
to consume about half of the central government revenue
this year) might worsen if the current deceleration in
GDP growth persists.
IndusInd Bank’s senior vice-president, head-treasury,
opined that the a further downgrade in the country rating
was expected. “The short-term economic situation looks
comfortable, but the long-term looks shaky. However, as
an immediate reaction to the news, the rupee may weaken
to around 48.05 per dollar on Wednesday, but from there
on the central bank, which is believed to have been mopping
dollars off the market for the past couple of weeks will
definitely provide support and prevent any sharp fall”.
Senior banking sources pointed out that the S&P statement
on a further downgrade “is nothing new”. They said that
the country’s economy was a resilient one and drew attention
to the fact that the rating agency’s last downgrade did
not result in any pressure on local interest rates or
on the rupee front. “On both fronts, the story has been
stable. Interest rates have softened, and the rupee fell,
but only in reaction to the September 11 attacks in the
US,” a dealer said.
Total foreign exchange reserves of the country rose by
$690 million to $46.258 billion during the week ended
November 9, according to the Reserve Bank of India (RBI)’s
latest Weekly Statistical Supplement. Good inflows of
dollars were mopped up by the central bank and this seems
to be the reason for the healthy rise in forex reserves.
Foreign currency assets were also up by $688 million to
$43.309 billion. Gold reserves was steady at $2.937 billion.
SDRs rose by $2 million to $12 million. Total bank credit
was up by Rs 1,809 crore to Rs 5,45,934 crore for the
fortnight ended November 2. Food credit was up by Rs 1,795
crore to Rs 52,075 crore while non-food credit was up
by Rs 14 crore at Rs 4,93,859 crore. |
The central bank said in its
report: “The aggregate capital expenditure in 2001-2002 would
be Rs 54,343 crore, which will be nearly of the same quantum
of investment as in the preceding fiscal.”
The report, though, cautions that “the realisation of the
projected investment in 2001-02 will, inter alia, be contingent
on strict adherence to the implementation of power projects
as scheduled, their share in aggregate investment being substantial.”
Against this backdrop, the capital expenditure in 2001-02
on projects to be sanctioned during 2001-02 could be placed
at Rs 18,500 crore.
The RBI says that the initiatives of the government to boost
investments include allowing private power companies to sell
power directly to bulk consumers as proposed in ‘Electricity
Bill 2001.’ Also, issuance of licences to Fourth Cell Operators,’
and the conscious efforts to encourage investment in roads,
ports and storage facilities are likely to jack up capital
investments to Rs 54,343 crore this fiscal.
The total envisaged project expenditure in 2001-02 for which
sanctions were accorded in 2000-01 amounted to Rs 35,843 crore.
Total expenditure, including assistance under the bill-rediscounting
scheme, during 2000-01 worked out to Rs 55,032 crore. Of this
Rs 31,668 crore is expected to have been incurred during 2000-01
in respect of projects sanctioned up to 1999-2000 and Rs 18,264
crore of sanctioned assistance during 2000-01. The remaining
being through the bill-discounting window.
In fact, capital expenditure during 2000-01 rose by 2.5 per
cent compared with Rs 53,709 crore estimated for 1999-2000.
RBI’s note of caution on the scheduled implementation of power
projects is a sequel to the financial institutions’ cancellation
of assistance to 12 major power projects sanctioned in 1994-95
and later years, as these projects were not likely to be taken
up in the near future.
Companies implementing five other power projects approached
the FIs again , with substantial revisions in the phasing
of capital expenditure. These two developments resulted in
considerable changes in phasing pattern of capital expenditure
and data for the study, RBI said.
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