Economy and Business  

Finance ministry survey
bullish on growth

What is India News Service, 08 July 2004, 1700 hrs

Finance minister P Chidambaram released his Economic Survey on Wednesday, setting his sights on 8 per cent growth, and indicating that reforms would continue.  

The survey indicated that he could cut deficit, boost manufacturing, end reservation for the small scale sector, and liberalised foreign direct investment policies. While these signals cheered the stock market, which promptly climbed up, business leaders responded by saying  removal of tax exemptions should be backed by a reduction in corporate tax rates. Only then, they said, could the country achieve 10 per cent industrial growth.

The survey favoured revamping of tax exemptions, but is silent on reduction of corporate tax. Industry bodies had unitedly lobbied for a reduction of corporate tax to 30 per cent from the existing 35 per cent. The survey says Indian firms are increasingly getting integrated into the global production chain. Captains of industry say that labour law rigidities, distortions in indirect tax structure, the high customs tariff, and reservations for the small scale sector need to be sorted out.

Shares ended on a high note on Wednesday with investors being optimistic ahead of the budget. Maruti Udyog Ltd decided to set up a new diesel engine plant at Gurgaon. It is upbeat about the luxury car segment, which includes the Baleno and the Esteem. It has relaunched the Esteem by giving it a new look, and a cheaper price tag.

Metal stocks and select auto and cement makers led to the rise in shares. The sensex closed up 0.56 per cent at 4,955.97 points, making gains since Monday touch 2.4 per cent. Gainers overrode losers 904 to 706. But the index is still down about 15 per cent in 2004, making it Asia's worst performer.

Top company sources say that Maruti Udyog Ltd would set up a new diesel engine plant at Gurgaon with an investment of Rs 350 crore in 2006. The diesel technology will be sourced from Fiat GM Power Train (FGP), a global consortium. A team from FGP, a joint venture between Fiat, GM and Opel, is already in Gurgaon to discuss the finer points of the plant. Company sources say that the plant will produce one lakh diesel engines per year.

Overall:

Chidambaram presented survey: The finance minister set his sights on 8 per cent overall growth, and indicated more reforms.

Business leaders wanted tax cut: They said reduction of corporate tax would help growth.

Maruti talked to potential partners: It will set up a modern diesel engine factory in Guragaon.