Saturday, February 27, 2010

3 SMARTS OF BUDGET 2010-11

PETROL: Walk Out
Yesterday the Parliament of India have created a history by making a walkout even before the budget was yet to be finished. The opposition parties made the walkout once it was declared in the budget that petrol prices to go up. To levy excise duty of Re1 per liter on petrol and diesel have made the whole of India to think about the probable price they will have to pay for every commodity.
Earlier before the budget day words were being heard where their were mixed views and testimonies where deregulation of oil prices were on the agenda. If price of oil was deregulated then it would ease pressure on government finances and improve earnings of state-run oil marketing companies. But at the same time their were fear that the price of deregulated oil will increase the inflation to a higher risky zone. Other fear factor reasons followed the deregulated price regime of oil.
Now it stands that oil marketing companies are facing losses and are being subsidies by government and more statistical figures and we find some endless debates, Summing up . all that can be concluded that government is not going to pay subsidies at the cost of its fiscal balance. We need exploration policies which will help to meet the demand at home of oil products. At the same time the government needs to make an end of this debate whether to go for deregulated oil prices or not.

We should not forget that when Indian economy is expected to have a growth of 8% to 10% of GDP oil consumption will pick up and resulting more import. This will exert more pressure on the coming days on fiscal balance of India. If some policy changes is not being made in oil exploration and allocation of funds for exploration projects, Indian economy is bound to face hard times and price hikes will only lead India economy to a dead lock. At present government is running fiscal deficit. At international level crude prices are hovering around $75-$80.If demand of crude picks up internationally then imagine when crude will come up to $147 level of July 2008 where Indian oil prices will be hitting.
We all need to look into the long term affects and movement of prices of oil. Their is no use of making a walk out from parliament during budget session. Even by doing protest there is no use. Since which ever government comes cannot control oil price, where a country imports 70% of the crude from international market. This is not a commodity of Indian economy. If any price disruption happens it affects every economy across the globe.
ECBS TO BE AVAILABLE FOR FOOD PROCESSING SECTOR
By making external commercial borrowing facility available to the food processing industry, the governments have opened up new dimensions for the industry. As Indian economy is making a baby steps toward inclusive growth wide prospects have opened up for the industry to reach out to every corner of the Indian economy:

• India's food processing industry is expected to benefit and grow to around $260-billion from the present $200-billion in the next 6-years.

• Under the 11th Five-Year Plan, 30 mega food parks are being planned in different parts of the country. In the first phase, 10 such parks are expected to come up in the next two years.

• For this the food processing industry is required huge flow of credit. Banks may not find the process of funding to be more feasible as in the major cases we find banks are reluctant to provide loans on new projects.

• To increase the flow of goods to each part of India working capital requirements will be more. At the same time technological up gradation needs more funds. By enabling ECB these technical and infrastructure requirements for the industry can be met very easily and without much time consumption. Many venture capitalist and private equity investors will come forward and will find growth in this sector.

• Food processing is the process of adding value to the agricultural or horticultural produce by using various techniques like grading, sorting, packaging, etc. which enhances the shelf life of food products.

• If we look at the investments flow in this sector we find that the amount of FDI inflow into the sector which stood at Rs. 333.06 crores (US$ 74.01 million approximately) in 2005-06 and 2006-07 (till September 2006).

• So apart from FDI inflow if ECB is also made available to the sector the industry might be in a position to replace the few other sectors which are now appearing to be probable threats.

• Food processing industry will become a prominent sector in the coming days.

• The sector is also one of the largest tax payers to the government.

• As per industry forecast the sector has the potential to employ around 6.8 million people by 2018
As a whole we are thankful to the Indian finance department for acknowledging the potential growth hidden within Food processing industry. This sector will propel in this new decade. The growth from this sector will give huge growth to the Indian investors as well as the venture capitalist and private equity investors. The small projects will now get the attention of venture capitalist. The ailing companies in this sector will get a new sun shine. Indian Food processing industry will be the next portfolio for the financial investors of the world.

REPAYMENT FOR FARM LOANS EXTENDED BY 6 MTHS TO JUNE 30, 2011
AGRI CREDIT FLOW TARGET RAISED TO Rs.375,000 CR FROM Rs.325,000 CR LAST.
The Indian agriculture has been called as a vote bank for the parties. For UPA this word was used like any thing during the last tenure. But what now they will say when UPA government have made a improved credit flow for the agri sector. The agri sectors have reeling under hard times. First of all low monsoon and later on delayed monsoon resulting loss of many crop plantation timings.

UPA governments have been very close to the AM ADMI via the route of agriculture. It have done the waiver of Rs.60,000.cr for the farmers giving them a big relief. The government was not only focused towards higher allocation of funds for the agri sector but also looked into the repayment mechanism. It has kept a close tab on the problems that arises from poor monsoon and other natural calamities. By extending the farm loan period by 6 months to June 2011 it have created a big a relief to the farmers and also gave them opportunity to capitalize and make the food inflation to cool down slowly without making any other regulatory body to make any decision.
We have seen in the past that RBI is active in taming inflation. But by enhancing this measures the government gave RBI also a space of making a cool out lay of controlling food inflation. The Indian economy might not see some aggressive measures to be taken up by RBI in the coming days as it was feared by us. Government has given time and strategy to cool of the food inflation through this package of budget 2010-11.
We all should not forget we are coming out of easy economy to a competitive economy. The present government or any government across the world cannot let loose economic policies. War basis activity is for abnormal situations and not for normal situation.

I have been hearing that this budget will spook inflation. I will come up with this debate very soon in my next article.

1 comments:

pink

I love readding, and thanks for your artical. ........................................

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