ECONOMIC NEWS UPDATES

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in this regard and a task force con-
sisting of the Finance Ministers of
India and Singapore can be formed
to work out the modalities. Shri Sinha
also said that such an exercise should
be carried out by the private sector
with both the Governments playing
the role of facilitators.

While appreciating the ongoing eco-
nomic reform process in India, Mr.
Tong suggested that the pace of re-
forms should be increased so that
India is not submerged by the strong
Western economies. The Prime Min-
ister has also felt that Asian coun-
tries should not be overwhelmed by
the West and use technology and
competition effectively to enhance its
trade and commerce in the world
market. He has also observed that
India is a big country with lot of po-
tential to become a major economic
power

Shri Sinha in turn reiterated his
Government’s commitment to go
ahead with the economic liberaliza-
tion programme. Though, Informa-
tion Technology, Bio-technology and
Pharmaceuticals are emerging areas
of India’s strength, traditional sectors
like Textiles, Steel and Cement also
continue to be important for the
economy, he assured. Shri Sinha also
called for more foreign direct invest-
ment in view of the investor friendly
climate created by the Indian Gov-
ernment.

Indian Cabinet clears
Rs. Six billion Cotton
Technology Mission

Indian Cabinet has cleared the Rs.
Six billion (US $1 = Rs. 43) Cotton
Technology Mission (CTM) for en-
hancing the overall performance of
domestic cotton sector. The mission,
first announced by Finance Minister
Yashwant Sinha in his budget speech
in 1998-99, is aimed at improving
the income of cotton growers, en-
hancing per hectare yield, reducing
cultivation cost and upgrading and
modernizing ginning and pressing
factories, according to the official
sources.

The mission to be implemented over

4 INDIA NEWS © January/February 2000

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a period of five years through 2003-
04 will have four mini-missions to be
undertaken by Indian Council of Ag-
riculture Research (ICAR), Ministries
of Agriculture and Textiles. While
ICAR and the Agriculture Ministry will
administer the first two missions re-
spectively, the remaining ones would
be implemented by Textiles Ministry.

Indian Government hints
at a new auto policy

The Indian Government has hinted
at formulating a new auto policy to
provide the right framework for the
domestic industry to grow and oper-
ate in the increasingly competitive
global market.

“A policy that will provide the Rs 360
billion automotive industry the right
framework of growth to operate in
the increasingly competitive market
is the need of the hour,” according to
the Minister of Heavy Industries and
Public Enterprises Manohar Joshi.

With Quantitative Restrictions (QRs)
are being removed in 15 months time,
Joshi said the growth engine of the
economy should take on the daunt-
ing challenge of technology driven
market equation. The need of the
hour is to keep pace with technologi-
cal advancement to capture the
minds of consumers, he said. The
automotive industry needs to make
more investments in research and de-
velopment to ensure they conform
to safety and pollution standards, he
said.

Underlining the importance of foreign
direct investment (FCI) in the auto-
motive sector, Joshi said nearly Rs
45 billion FDI has been committed
to the sector, which accounted for
about four per cent of the Gross Do-
mestic Product (GDP) in 1998-99 as
compared to 2.7 per cent of GDP in
1992-93.

FEMA & Insurance Bill

Both the Houses of Parliament passed
the Foreign Exchange Management
(FEMA) on 2nd and 8th December
respectively. The FEMA introduced
in the House on November 29 pro-
posed to replace the FERA and en-

visages stringent penalties for viola-
tion of foreign exchange norms.
FEMA is also aimed at consolidating
and amending the law relating to for-
eign exchange with the objective of
facilitating external trade and pay-
ment and for promoting orderly de-
velopment and maintenance of for-
eign exchange market in the coun-
try.

The Parliament passed the Insurance
Regulatory and Development Author-
ity (IRDA) Bill by both the Houses of
Parliament on 2.12.99 and 7.12.99
respectively, opening the insurance
sector to private and foreign compa-
nies after the government incorpo-
rated all the amendments proposed
by the Congress party; i) insurance
firms should invest 50 per cent of
their funds for infrastructure and so-
cial sector development, ii) grant of
licence to health insurance on a pri-
ority basis, iii) continuation of social
welfare schemes like crop insurance
and iv) insurance for the unorganised
sectors and heavy penalties for er-
rant companies. With the passage of
the measure, the insurance sector will
now be open to private Indian com-
panies who can tie up with foreign
partners with an equity cap of 26 per
cent.

Special Groups to push
reforms

In a move to give boost to second
generation reforms, Prime Minister Atal
Bihari_/ainayee set up eight special
groups consisting of top industrial-
ists who would submit the reports
within four months on major eco-
nomic issues to enable the govern-
ment to formulate policies in these
area. Leading industrialists N.R.
Narayanamurthy and Kumarmanga-
lam Birla constitute the special group
on good governance; Mukesh Ambani
and A.C. Muthiah on education and
health; N. Srinivasan and Rahul Bajaj
for WTO strategies and G.P. Goenka
and Rajiv Chandrasekharan head the
group on disinvestment. The fifth
group on unshackling Indian indus-
try from regulations will comprise
industrialists Ratan Tata and Nusli
Wadia and the sixth on globalisation
pitfalls would comprise Rahul Bajaj
and Sanjeev Goenka.