Prepared by Daniel Kanda and Patricia Reynolds. This paper has drawn upon information from a range of sources, including the Ministry of Finance Economic Survey, various issues; Reserve Bank of India, Annual Report, various issues; Rajiv Gandhi Institute for Contemporary Studies, Agenda for Change, March 1998; World Bank, India: Policies to Reduce Poverty and Accelerate Sustainable Development, Report No. 19471 -IN, January 2000; and A.V. Desai, “The Economics and Politics of Transition to an Open Market Economy,” OECD Technical Paper No. 155, October 1999.
Securities held in dematerialized (demat) form are those that are traded electronically, and do not require exchange of paper scrips during settlement.
For a discussion of trade policy developments, see Chapter VII.
Companies implementing infrastructure projects via subsidiary joint ventures are permitted to tap ECB up to $200 million (the previous limit was $50 million), and ECB exposure limits on infrastructure projects have been increased to 50 percent from 35 percent (the limit can also exceed 50 percent in special cases). Export units are now allowed ECB exposure up to 60 percent of project cost. ECB clearance procedures were simplified, and 100 percent prepayment of borrowing through export earnings is now allowed.
For example, foreign ownership of equity is limited to 49 percent in telecommunications, 74 percent in bulk Pharmaceuticals, mining of diamonds and precious stones, and advertising, and 51 percent in hotels and tourism related industry. Also, foreign investment in small-scale industries is limited to 24 percent of capital.
Mega power projects are defined as thermal plants that will generate at least 1,000 mw annually, or hydro plants that will generate at least 500 mw annually.
In particular, switching capacity increased by 23 percent in 1998/99 alone. However, telephone density in India is 1.7 percent, compared to 11.4 percent in Thailand, 7.3 percent in China, and 2.9 percent in Indonesia (World Bank, India: Policies to Reduce Poverty).
Average turnaround time fell from 6.6 days in 1997/98 to 5.9 days in 1998/99, compared to about 8 hours turnaround in competitor ports.
See Chapter II; World Bank, India: Policies to Reduce Poverty; and Krishna, P. and D. Mitra, “Trade Liberalization, Market Discipline and Productivity Growth: New Evidence from India,” Journal of Development Economics, Vol. 56 (1998), pp. 447-62.
See, for example, World Bank. India: Macroeconomic Update 1998, and N. Bajpai and J.D. Sachs, Strengthening India’s Strategy for Economic Growth, Development Discussion Paper No. 641, Harvard Institute for International Development, 1998.
See, for example, N. Bajpai, T. Jian, and J.D. Sachs, Economic Reforms in China and India: Selected Issues in Industrial Policy, Development Discussion Paper No 580, Harvard Institute for International Development, 1999; World Bank, India: Policies to Reduce Poverty; and Kongsamut, P. and A. Vamvakidis, “Economic Growth”, in The Philippines: Toward Sustainable and Rapid Growth, IMF Occasional Paper 187 (Washington: International Monetary Fund, 2000).
See, for example, Chapter IV of the accompanying Selected Issues volume.
N. Bajpai, and J.D. Sachs, The Progress of Policy Reform and Variations in Performance at the Sub-National Level in India, Development Discussion Paper No. 730, Harvard Institute for International Development, 1999.
In particular, see V. Kelkar, “India’s Emerging Economic Challenges,” Economic and Political Weekly, August 1999.
While figures from the 1998/99 large-coverage National Sample Survey are not yet available, the unofficial small-sample surveys—which are conducted annually—indicate that the poverty rate did not decline appreciably between 1988/89 and 1998/99. See also S. Tendulkar, “Indian Economic Policy Reforms and Poverty: An Assessment,” in I.J. Ahluwalia and I.M.D. Little, eds., India’s Economic Reforms and Development: Essays for Manmohan Singh (Delhi: Oxford University Press, 1998).
Operations of the FCI and PDS are discussed in greater detail in Chapter IV of the Selected Issues (IMF Staff Country Report No. 96/132, January 1997).
An important example of the adverse effects of these regulatory problems is the recent decision by the U.S. company Cogentrix to pull out of a power project in Karnataka, after 10 years and $27 million in expenditures, due to clearance delays. Approval of power purchase agreements at the state level can require clearances by as many as 27 interministerial committees (Economist Intelligence Unit, India Country Report, First Quarter 2000).
Small scale industries are defined as firms with investment in plant and machinery not exceeding Rs 10 million. Production of over 800 manufactured items is reserved for SSIs, and they account for roughly 40 percent of manufacturing production in India. See Hussain Committee, Report of the Expert Committee on Small Enterprises, New Delhi, 1997.
See World Bank, India: Policies to Reduce Poverty.
See, in particular, Rajiv Gandhi Institute, Agenda for Change.
As of end-November 1999, less than one percent of companies referred to the BIFR had been revived.
See World Bank, India: Policies to Reduce Poverty.
World Bank, India: Policies to Reduce Poverty. The operations and profitability of PSUs are discussed in greater detail in Chapter V o IMF, India Selected Issues, (IMF Staff Country Report No. 96/132, January 1997.
PSUs in strategic sectors—defense, railways, and atomic energy—would not be divested.
See Chapter III of the accompanying Selected Issues volume.