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INDIA-E  June 2002

INDIA-E June 2002

Subject:

India Network Economic News - June 21, 2002

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Fri, 21 Jun 2002 10:29:11 -0400

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India Network Economic News - June 21, 2002 Volume 14 Issue 113
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Today's News Items
------------------
#1. Economy to grow over 6% this fiscal: RBI
#2. Rupee ends near two-month high at 48.9/$
#3. Downtrend halted, Sensex gains 22 points
#4. The General And Economy In A Labyrinth
#5. Exchange rates
------------------------------------

#1. Economy to grow over 6% this fiscal: RBI
PTI [ FRIDAY, JUNE 21, 2002  5:35:27 PM ]

NEW DELHI: Asserting that the prospects of Indian economy was bright, the
Reserve Bank on Friday said GDP will grow by 6-6.5 per cent during this
fiscal and interest rates will continue to remain soft.

"The RBI's estimate is 6 to 6.5 per cent growth for the current financial
year," RBI governor Bimal Jalan told reporters after a meeting with
Finance Minister Yashwant Sinha here.

He said the liquidity condition was comfortable and was "puffed up" and
the interest rates would remain soft.

On the inflation front, the governor said there was nothing to suggest
that there was an inflationary pressure.

Jalan said the prospects of the economy was bright with no balance of
payment problem coupled with high foreign exchange reserves.
This was coupled with high growth in IT and other sectors, he said.

#2. Rupee ends near two-month high at 48.9/$
REUTERS [ FRIDAY, JUNE 21, 2002  5:55:08 PM ]

MUMBAI: The rupee ended marginally firmer, near its two-month high, with
sentiment upbeat on the dollar's continued woes overseas, dealers said.
The rupee ended at 48.9050/9150 per dollar, against the previous close of
48.9125/9200, gaining 0.2 per cent on the week. Traders said dollar
purchases by state-run banks, believed to be acting on behalf of the
central bank, capped the rupee's gains at 48.90 in early deals.

"Their purchases ensured that, despite strong inflows, the rupee was
unlikely to cross 48.90," said a dealer at a state-run bank.

State-run banks' purchases reinforced the view that the central bank
wished to halt the rupee's sharp gains in order to maintain the export
competitiveness of Indian goods and services, traders said.

They said most Indian importers were on the sidelines, but sporadic demand
from corporates covering their foreign currency loans did emerge.

In the past week, the rupee has been on a rising streak, tracking regional
currencies and with war risks in the region receding.

Exporters have stepped up dollar supplies on expectations that the rupee
is likely to gain further, with the dollar continuing to fall against most
major currencies.

On Friday, the dollar fell to a two-year low against the euro, to 17-month
lows against the sterling and seven-month lows against the yen on concerns
over the widening US current account gap and by weak US stocks.

Regional currencies also held on to gains on Friday as pressure on the
dollar mounted after gloomy US trade data.

The dollar has been under selling pressure since early April as doubts
over the strength of the US recovery and a series of corporate accounting
scandals have dimmed the appeal of US assets.

Forwards eased on comfortable liquidity conditions, with six-month
forwards closing at 5.38 per cent annualised, down from the previous close
of 5.44 per cent.

#3. Downtrend halted, Sensex gains 22 points

MUMBAI JUNE 20. Discounting couple of negative factors, equities generally
moved upwards aiding the Sensex to break the two-session losing streak and
stage a smart recovery to end higher by about 22 points on the Bombay
Stock Exchange today on fairly good purchases by domestic institutions.

The market ignored an overnight sharp fall in Wall Street and continuous
net sales by foreign institutional investors that had been causing concern
among investors.

The Nasdaq Composite Index dipped by about 46 points and the Dow Jones
Industrial Average by 145 points yesterday.

The BSE benchmark 30-share index, which opened lower at 3223.47, later
fluctuated irregularly between 3276.06 and 3223.47 before ending at
3264.02 against 3242.26, netting a gain of 21.76 points.

The broad-based BSE-100 index moved up by 7.42 points to 1661.43 from
1654.01.

While punters and retail investors remained somewhat cautious in view of
consistent selling by FIIs in the first three sessions, local
institutions, mainly Life Insurance Corporation were believed to be net
buyers in select IT counters such as Infosys Technologies, Satyam Computer
and HCL Techno.

In the specified group, 101 including 14 index-based counters registered
moderate gains while 61 others finished with losses.  PTI

#4. The General And Economy In A Labyrinth

Sanjaya Baru


 Today we have reached a stage where our economy has crumbled, said
General Pervez Musharraf in an address to his countrymen hours after he
had seized power in a bloodless coup detat in 1999. Revival of economy is
critical. Our economy is in deep trouble and revolutionary steps are
needed to put it back on track.
Three years later, the Economic Survey 2001-02, presented last week by
Pakistans technocrat finance minister Shaukat Aziz, shows that General
Musharrafs regime has failed to deliver on the economic front. Pakistans
economy grew at the rate of 6.8 per cent in the 1960s, at close to 5 per
cent in the 1970s and at 6.5 per cent in the 1980s. In the first half of
the 1990s, even with the misgovernance of the civilian governments which
General Musharraf lambasts, the economy grew at 4.9 per cent.

What has General Musharraf delivered since 1999? An annual average growth
rate of approximately 3.3 per cent, perhaps the lowest for any three
consecutive years in Pakistans recent history. At least the military
dictators of the 1960s, 1970s and 1980s delivered higher economic growth
to Pakistan, if not good governance. At least the democratically elected
leaders offered a representative government, if not high economic growth.
General Musharraf cannot claim credit for either. Thereby hangs his
future!

Mr Aziz is a highly regarded technocrat with impeccable credentials from
the world of finance. Thanks to his personal credibility and the positive
view that Washington DC and other G-7 governments have taken of General
Musharraf after 9/11, Pakistan has been saved from default and bankruptcy
by a generous induction of foreign assistance and capital. This has
afforded General Musharraf the one silver lining to the large cloud of a
dismal economic situation, namely, foreign exchange reserves of $5.566
billion.

In part, this reserve build-up has been enabled by the re-routing of
foreign exchange remittances from Pakistanis abroad, largely in the
Persian Gulf, through official channels rather than the hawala route. This
is a byproduct of 9/11 and the campaign against the financing of terrorism
which has pushed remittances out of the hawala route on to the legit
route. Interestingly, this has actually contributed to a 7 per cent
appreciation of the Pakistan rupee last year, despite a fall in exports by
1.8 per cent.

Mr Aziz has held widespread drought, that has restricted agricultural
sector growth to a lowly 1.4 per cent against a target of 2 per cent,
responsible for the below target 3.6 per cent GDP growth. However,
industrial growth was also below target in 2001-02, at 4.4 per cent
instead of the hoped for 6.2 per cent. More to the point, even the target
rate of overall GDP growth was itself a mere 4 per cent.

The Pakistani economy has been in dire straits for over half a decade now.
It is not surprising that General Musharraf linked his coup to the
performance of the economy and promised better times. Recall the Generals
statements at his first few press conferences in 1999 and 2000 and they
were all about the economy, good governance, reform and such like. Perhaps
General Musharraf assumed all too easily that if military governments of
the past had delivered a higher rate of economic growth than intervening
civilian regimes, so could he. That was a naive assumption  what he had
forgotten to factor in was the fact that never in the past was Pakistan as
much in the grip of jehadism as it is today.

The rate of economic growth is just a number, but it captures a countrys
overall performance and potential. Pakistan had demonstrated its capacity
to be a top of the line performer in the developing world in the 1960s,
but over the years there has been a slide down. Today, its economy is
caught in the pincers of the debilitating impact of jehadism unleashed by
the most retrograde political forces in this region, on the one hand, and
the pressures of implementing a structural adjustment programme under the
aegis of the International Monetary Fund and the World Bank.

Reviewing Pakistans previous experience with Fund-Bank programmes,
Pakistani economist S Akbar Zaidi (Issues in Pakistans Economy, Oxford
University Press, 1999) observed caustically: The last two major
agreements with the IMF were both made by unelected, so-called caretaker
governments, and the elected governments that followed were simply told to
follow the programmes through. With the democratic process repeatedly
sabotaged by the powers in the background, no elected government has been
given the permission or the room to produce any independent programme. It
is clear that the political process in Pakistan has been gagged and bound
by the requirements and orders of the IMF, the World Bank, and the
domestic elite.

The economic slide has had its impact on human development. Pakistan is
slipping behind the rest of South Asia on human development indicators and
even its per capita income is now below that of the more populous India.

If there is a difference in the situation today, it is only on account of
9/11 and Pakistans diabolic role in the campaign against jehadi terrorism.
Holding out the prospect of helping the West in this campaign, Pakistan is
securing IMF-Bank approval of some transgressions in fiscal policy even as
it assures the lenders of compliance on other counts.

One of these transgressions has to do with defence spending. In the name
of fighting jehadism, Pakistan is re-arming itself. This can neither pull
Pakistan out of the morass of low economic growth nor address the
challenge of internal social strife and jehadism. It can only embolden the
Pakistani military to pursue its adventurist policies in the region. If
donor countries and multilateral institutions are serious about bringing
Pakistan back into the mainstream of development and democracy, they must
take a less accommodating view of Pakistans military spending and pressure
the Musharraf regime into re-focusing on development.

In doing this, General Musharraf will discover sooner or later that
improved relations with India can in fact help Pakistan recover the lost
economic shine and register high economic growth. Pakistans creditors can
play a more constructive role in this regard by urging Pakistan to devote
more resources to development and less to defence.

#5. Exchange rates

=========================================================
      Currencies                    Direct rates
                              TT Buying      TT Selling
=========================================================
Indicative rates in rupees a unit at 4 p.m. on June 20
U.S. Dollar                   48.73          49.03
Sterling                      72.69          73.20
Euro                          46.66          47.00
Singapore Dollar              27.33          27.51
Japan yen (per 100)           39.37          39.62
Swiss Franc                   31.74          31.96
Australian Dollar             27.73          27.93
New Zealand dollar            23.82          24.01
Hong Kong dollar               6.25           6.29
Malaysian Ringitt             12.82          12.90
Canadian dollar               31.67          31.89
Swedish Kroner                 5.15           5.19
Kuwaiti Dinar                160.60         161.66
UAE dirham                    13.26          13.35
Bahrain Dinar                129.18         130.09
Qatary Riyal                  13.37          13.48
Saudi Riyal                   12.99          13.08
Omani Riyal                  126.23         127.68
=========================================================
Source: Indian Bank


------------------------------------------
End of India Network Economic News Digest
==========================================

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