Monday, Feb 17, 2003
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By P.K. Bhardwaj
They feel that its implementation would streamline the tax system and enhance the competitiveness of the Indian industry. The implementation process should be initiated, even if it was limited to the States that had proper legislation and infrastructure in place. According to a recent study undertaken by CII, 15 States and five Union Territories were expected to be in a position to implement VAT on April 1, 2003. On the implication of the "expected war" between the U.S. and Iraq, 67 per cent of them stated that there would be a moderate negative impact on the growth prospects of the Indian economy. Twenty three per cent respondents said that there would be a significant negative impact and the remaining was of the opinion that there would be no impact. Commenting on the impact of the war on inflation levels in the country, 79 per cent felt that the inflation increase, as a result of the war, would be moderate. Thirteen per cent felt that the impact would be significant and only eight per cent felt that there would be no impact. The CEOs also pointed out that the extent of the impact on growth and inflation would largely depend on the duration and intensity of the war. Recently, the Government announced that it was planning to increase the cover provided by the strategic oil reserves from the existing 15 days to 45 days. This decision has been based keeping in mind the erratic price of crude oil in the global markets over the last few months. The majority of the executives were of the opinion that the cost involved in maintaining the additional reserves, as a mechanism to manage oil reserves fluctuations, would be more than offset by the benefits that would accrue. The current year witnessed a decline in the interest rates in the Indian economy. The reasons for this are many, such as the low inflation rates and the move to integrate the Indian interest rate levels to the global rates. However, to determine whether the trend would continue it would be important to ascertain which factor played a greater role in enabling the reduction in interest rates — slowdown of economic activity and the consequent building up of inventories or the innovations in the use of working capital by the industry. Fifty four per cent of them were of the opinion that greater efficiency in the management of working capital, on the part of the Indian industry, had been a significant factor contributing to the decline in interest rates. This also reflects that the industry expects this trend to continue even with a pick up of economic activity. On the GDP growth in the current fiscal, 90 per cent felt that they expected growth to be in the region of 5-6 per cent and rest felt that it would be below five per cent. The expectations of growth in the next fiscal generated more diverse opinions. For 2003-04, 51 per cent respondents were of the opinion that it would be above 6 per cent, while 41 per cent said it would be between 5-6 per cent and the remaining stated that the economy would exhibit growth rates of below five per cent. In view of a surge in export growth in the first nine months of the current fiscal, with exports registering a growth of 23.38 per cent in April-December 02-03. 87 per cent CEOs stated that this positive trend would continue in the next fiscal. While in the previous Budget, the fiscal deficit had been forecast to be 5.3 per cent of the nation's Gross Domestic Product, a majority of the CEOs (53 per cent) felt that the Government would overshoot the budgeted fiscal deficit and the actual fiscal deficit would fall in the region of 5.3-6 per cent, while 31 per cent felt that it would exceed six per cent and only 13 per cent said it would be at 5.3 per cent.
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