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INDIA-E  June 2002

INDIA-E June 2002

Subject:

India Network Economic News - June 19, 2002

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Wed, 19 Jun 2002 09:54:27 -0400

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India Network Economic News - June 19, 2002 Volume 14 Issue 111
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Today's News Items
------------------
#1. Sensex down by 39 points
#2. Rupee ends at two-month high
#3. Businesses want US-India free trade accord
#4. Steep rise in FDI inflows
#5. Exchange rates
------------------------------------

#1. Sensex down by 39 points

Mumbai: Stocks suffered a sharp setback pushing the Sensex down by about
39 points at close on the Bombay Stock Exchange on Tuesday in the wake of
increased selling from domestic funds as well as foreign institutional
investors.

Reflecting the reaction in shares, the Sensex opened firm at 3337.32 and
spurted to the intra-day high at 3361.23, later turned weak due to selling
pressure and finished the session at 3284.54 as against Mondays close of
3323.50, a net loss of 38.96 points or 1.17 per cent.

#2.  Rupee ends at two-month high
REUTERS [ WEDNESDAY, JUNE 19, 2002  5:31:11 PM ]

MUMBAI: The rupee ended at a near two-month high on Wednesday as banks
went short on the dollar amid a growing belief that the local unit will
gain further, tracking other regional currencies and on receding war
fears. The rupee ended at 48.9100/9175 per dollar, up from the previous
close of 48.9550/9650. The rupee last closed at Wednesday's level on April
22.

Traders said that the undervalued local currency extended the gains of the
past two sessions on steady dollar supplies from exporters and little
resistance from state-run banks, which usually act on behalf of the
central bank.

The rupee has been showing an upward bias against the dollar in recent
sessions, tracking other currencies.

Most Asian currencies were higher in Wednesday trade on the back of gains
against the dollar by major currencies. The dollar hit fresh 17-month lows
against the euro and a session low against the yen.

But traders will be wary of sharp gains by the rupee as the central bank
is likely to intervene, keen to maintain the export competitiveness of
Indian products and services.

On Tuesday, India announced it was aiming for a 12 per cent export growth
in the current year to March 2003 after a flat performance last year.

Forwards fell across the board on easy liquidity conditions in the money
market and receiving by players. The six-month forwards ended at 5.53 per
cent annualised, down from the previous close of 5.63 per cent.

#3. Businesses want US-India free trade accord
Agencies/Washington

The US-India Business Council has called for a US-India free trade
agreement as part of its comprehensive four-part strategy to create closer
and mutually beneficial bilateral trade ties. The plan, approved at a meet
here on Monday, envisages bilateral dialogue, cooperation at the WTO and
economic links in Asia.

The council, a group wedded to promoting US economic interests in India,
developed a series of recommendations, incorporating ideas of members,
governments and Indian business partners, seeking to make economic and
trade ties a "fundamental pillar of Indo-American partnership in the new
century."

It wanted the two countries to develop a common vision for the future
course of trade liberalisation through the WTO, particularly in
knowledge-related services, IT and electronic commerce.

The council favoured early resumption of a regular and permanent
high-level economic policy dialogue between India and the US.

Business leaders who attended the 27th annual meeting of the council
sought US support for India's participation in Asian regional economic
organisations, including the ASEAN and the Asia-Pacific Economic
Cooperation (APEC) forum.

This would facilitate cooperation on a broader scale at the WTO and ensure
India's full integration into Pacific regional trade and investment, they
said. Despite substantial accomplishments in the past two years, the
US-India economic partnership remained "fragile and limited."

Many factors that had limited ties in the past have faded but tariffs and
other trade barriers, together with lingering disputes that have plagued
the relationship for many years continue to pose hindrances, business
leaders said.

Indian Ambassador to the US Lalit Mansingh drew the attention of American
investors to the enormous potential for expanding technical ties with
India.

Over the past decade, India-US goods and services trade had tripled,
rising from under $7 billion in 1990 to close to $20 billion in the year
2000.

Investment has also grown, though at a more hesitant pace, with American
companies committing around $1.2 billion to Indian factories, power
plants, telecommunications networks and financial services.

US Ambassador to India Robert Blackwill, in a teleconference speech
broadcast from India, said India-US dealings had undergone a sea change in
the last decade and were now on "a spectacular ascent." Today the US is
the biggest investor in India and economic and defence ties are ever
expanding.

Chairman-elect Rajat Gupta, managing director of McKinsey, said the
council would focus on expanding American business to new opportunities in
biotechnology and to facilitate Indian industries to compete globally in
this area.

#4. Steep rise in FDI inflows

By Sushma Ramachandran



NEW DELHI JUNE 18. Even though war clouds have been swirling on the
domestic horizons since last December, foreign investors remained
unperturbed as is clear from the enormous rise in foreign direct
investment flows during 2001-02. These have recorded a huge increase to
cross $4 billion in 2001-02. This is 66 per cent higher than FDI inflows
of $2.64 billion in the previous year.

The increased level of FDI inflows clearly indicates first, that reports
of the country's defence forces gearing up at the borders which have been
circulating since December last year have not had much of an impact on
foreign corporates. In contrast to the recent panicky advisories issued by
foreign embassies to their staff and countrymen to leave India, foreign
companies based here have largely been functioning on a business-as-usual
basis. Similarly, it is clear, foreign investment flows have not been
hampered by any fears of an Indo-Pak war.

Second, the steep rise in FDI during the year shows that the sustained
process of economic reforms especially in areas such as disinvestment have
convinced prospective investors that these will continue despite any
political turmoil. In the case of privatisation, even though foreign
investors have not been involved in any of the strategic sales till now,
the process is becoming smoother and less controversial.

Third, the global slowdown has had its impact on other parameters of
economic growth such as exports during 2001-02 but FDI inflows have
continued unabated. In fact, it can be argued that the country would have
attracted much higher levels of FDI in case the terrorist attacks on the
U.S. on September 11 had not taken place.

It must also be pointed out that apart from the September 11 attack, India
had its own terrorist strikes at the J & K Assembly and at Parliament in
October and December. It was in the face of this rise in terrorism that
foreign investors have continued to repose faith in the growth and
resilience of the Indian economy by increasing investments in this
country.

The Commerce and Industry Ministry has also concluded that judging by
international definitions of foreign direct investment, the actual FDI
inflows should be estimated at $8 billion. According to a statement issued
by the Ministry, the FDI data for 2001-02 is based purely on foreign
equity investments including preference shares other than foreign
portfolio investment. It excludes investment by offshore venture capital
funds, domestic venture capital funds set up by foreign venture capital
investors which strictly speaking should form part of the FDI inflows.
Apart from this, it excludes reinvested earnings and other direct capital
flows which are treated as FDI according to International Monetary Fund
standards.

It says the IMF definition of FDI treats both reinvested and other direct
capital flows such as debt securities trade credits and grants as part of
FDI. This definition is accepted by most countries and also by UNCTAD for
reporting FDI data.

The Ministry says that FDI inflows into the country, if recalculated on
the basis of these international reporting practices will work out to be
much higher than what is now being reported.

According to a recent study conducted by the International Finance
Corporation (IFC), adoption of international standards for computation of
FDI would raise India's net annual FDI inflows from the present level of
$2 to 3 billion to about $8 billion. This works out to about 1.7 per cent
of the country's GDP.

In order to align the FDI reporting system with the international
computation standards and updating the FDI inflows into the country
accordingly, the Government has set up a joint committee comprising
representatives from the Reserve Bank of India and the Department of
Industrial Policy and Promotion. The committee is expected to complete its
work shortly, the Ministry says.

#5. Exchange rates




=========================================================
      Currencies                    Direct rates
                              TT Buying      TT Selling
=========================================================
Indicative rates in rupees a unit at 4 p.m. on June 18
U.S. Dollar                48.77          49.08
Sterling                   72.27          72.78
Euro                       46.21          46.53
Singapore Dollar           27.19          27.37
Japan yen (per 100)        39.13          39.38
Swiss Franc                31.29          31.51
Australian Dollar          27.34          27.53
New Zealand dollar         23.72          23.89
Hong Kong dollar            6.25           6.29
Malaysian Ringitt          12.83          12.92
Canadian dollar            31.58          31.80
Swedish Kroner              5.09           5.13
Kuwaiti Dinar             160.43         161.50
UAE dirham                 13.27          13.37
Bahrain Dinar             129.29         130.22
Qatary Riyal               13.39          13.49
Saudi Riyal                13.00          13.09
Omani Riyal               126.35         127.81
=========================================================
Source: Indian Bank

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

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