Reforms may deliver 9% growth rate for India by 2011: CRISIL

CRISIL has said that it expects India to regain and sustain its pre-crisis GDP growth rate of about 9% starting in 2011, provided it hastens policy reforms in areas such as taxation, education, and foreign investment regulations

Ratings agency CRISIL Ltd has said that having emerged from the global economic crisis relatively unscathed than most other nations, India is on course to return to a pre-crisis growth rate of about 9% from 2011, if key reforms continue.

"Though not insulated from the global crisis, India proved to be less vulnerable than many first anticipated. In contrast with advanced economies, its financial sector also stayed fairly healthy. This made the country's stimulus program more effective than elsewhere and accelerated its recovery," said Dharmakirti Joshi, principal economist of CRISIL Ltd, a unit of Standard & Poor's (S&P).

"As a result, we expect India to regain and sustain its pre-crisis GDP growth rate of about 9% starting in 2011, provided it hastens policy reforms in areas such as taxation, education, and foreign investment regulations,” said Mr Joshi in a guest opinion article titled "Why India Will Continue To Gain Stature In The Global Economy" and published by S&P.

The article says that India's large, young, and growing population, the rising income of the middle class, and the country's high savings rate continue to support strong domestic demand, tempering the impact of weak export markets and other external stimuli.

CRISIL said that it believes that the country therefore has a greater opportunity than advanced economies to address its constraints and create a prosperous 'new normal' for its economy.

"Clearly, the fallout from the global crisis for advanced economies is lower growth and reduced financial leverage, each reinforcing the other. But for India, the economic environment and growth possibilities haven't changed fundamentally. The challenge before India is not merely achieving a 9% growth rate but also sustaining it," added Mr Joshi.

According to the article, realising India's potential will mean accelerating reforms to improve the investment climate, productivity, and domestic demand to offset the impact of weak performances among advanced economies.

Areas that need immediate policy action include addressing the country's high debt and deficits, improvement in infrastructure, opening the door to more foreign investment, streamlining the tax system via early implementation of a goods and services tax that would replace the existing system of indirect taxation, amending labour laws, and reforming the financial sector, the article said.
 

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CIL cuts production target as late clearances delay projects

As many as 17 projects, both big and small, involving production of 101MT, were delayed due to the long wait in getting clearances from the environment and forest ministry

State-owned Coal India Ltd (CIL) has revised its production target to 486 million tonnes (MT) from 520MT by 2012, as the delay in getting environment and forest clearances for some of its projects have affected production, company chairman Partha S Bhattacharyya told PTI.

"In the mid-term appraisal, the company's production target has been revised to 486MT from 520MT by 2012," he said.

As many as 17 projects, both big and small, involving production of 101MT, were delayed due to the long wait in getting clearances from the environment and forest ministry, Mr Bhattacharyya told reporters in Kolkata after a press conference to announce the Asian Mining Congress, which will be held here from 22nd January.

Mr Bhattacharyya said if CIL received environment and forest clearance for those projects now, the company would still be able to produce 47MT of coal in the remaining two years.

He said normally, it should take 300 days for a project to get clearance, but it has taken about five years to get these clearances.

There should be an integrated approach to give clearances and a proper policy should be formulated for this purpose, he added.
 

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RCF’s African projects stalled

RCF’s plan to set up facilities in Africa has been delayed, as its partners do not believe that there is any commercial value in fertilisers

India’s largest fertiliser maker by capacity and revenue, Rashtriya Chemicals and Fertilizers (RCF) Ltd’s plans to set up facilities in the African continent have been stalled. RCF’s mining partner in South Africa doesn’t find commercial value in investing in the continent, due to drop in prices of diammonium phosphate (DAP), company officials said.

One of its major partners, Foskor, has had reservations in setting up these facilities owing to the drop in DAP prices, a senior official from RCF said.

RCF had planned to build a greenfield DAP and urea facilities in South Africa and Mozambique last year. Both plants were estimated to have cost Rs14,000 crore-Rs15,000 crore. Under the memorandum of understanding (MoU) between RCF, Foskor and South Africa's Industrial Development Corp (IDC), the companies were to produce about 1.1 million tonnes to 1.2 million tonnes per year of urea and about 600,000-700,000 tonnes per year of phosphate fertilisers at their Mozambique plant.

“The international fertiliser market is not conducive for heavy investments,” the RCF official said.

The fact that Foskor would have provided the raw materials like mineral and rock phosphate for its facilities would have made it much easier for the fertiliser company to produce DAP and urea. Also, a key advantage would have been its ability to source natural gas at a much lower cost.

"We are looking at Africa closely as there are abundant sources of minerals which need to be exploited. However, we will not be pushing this forward without Foskor by our side," the official said.

Another official tells us that the deal is also being delayed by both governments who have not agreed as to who would get majority of the produce. There is also an argument as to the distribution of natural gas in South Africa, which is a major feedstock for producing urea.

According to him, the issues related to each company’s stake in the project and the quantity of the produce to be shipped to India has lead to the current situation.
 
RCF had agreed to set up facilities there due to the availability of feedstock resources and strong demand in the country. According to the original plan, the company was to send the produce to India through ships from Port Mabuto, at Mozambique. RCF would have to import almost 90% of the finished products for its Indian market requirements as well as exports.
 

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