India faces competition from Southeast Asia<\/p>\n
NEW DELHI (Reuters): India is facing growing competition from
\nSoutheast Asia where currencies have slumped, business leaders
\nsaid yesterday.<\/p>\n
They said the falls in the currencies of Southeast Asian
\ncountries, which are major producers of polymers, synthetic
\nfibers, rice and other plantation crops, had thrown up a
\nchallenge for Indian exporters.<\/p>\n
\"Currencies in Thailand, Indonesia, Malaysia have fallen and
\nthe question is can we withstand competition from these nations
\nwhich sell nearly the same products in the global markets as us?\"
\nasked D.H. Pai Panandikar, corporate adviser to India's RPG
\nGroup.<\/p>\n
India's businessmen are closely watching the currency markets.<\/p>\n
\"We have to keep a watch on the rupee and also the global
\nstock markets as the economy recovers patchily,\" V. Raghuraman,
\nsecretary general of the Associated Chambers of Commerce and
\nIndustry (Assocham) told Reuters.<\/p>\n
A dip in business confidence, sluggishness in investment
\nactivities, political uncertainty, and lack of demand had slowed
\ndown the economy in the first half of fiscal 1997\/98 (April-
\nMarch), industry leaders said.<\/p>\n
But they said latest economic data showed clear signs of
\nrevival and were optimistic the economy would gather momentum by
\nthe last quarter of 1997\/98.<\/p>\n
Industrial output grew by 9.2 percent in the year to July.<\/p>\n
Exports in September rose by 11.63 percent to US$2.89 billion
\nfrom $2.59 billion in the same month in 1996.<\/p>\n
\"A bold initiative from the government to boost investment and
\nhasten big projects is needed now,\" A.S. Kasliwal, president of
\nthe Federation of Indian Chambers of Commerce (FICCI), said.<\/p>\n
There was concern that India, whose foreign exchange reserves
\nand current account deficit are at healthy levels and inflation
\nis under control, might still catch the Asian flu.<\/p>\n
\"The rupee is overvalued and this is a distress point for
\nexporters,\" Raghuraman said.<\/p>\n
The rupee hit a 21-month low of 36.75 against the dollar last
\nweek. The currency ended Thursday weaker at 36.75\/76 to the
\ndollar as the Reserve Bank of India (RBI) warned the markets not
\nto overreact and pay heed to economic fundamentals.<\/p>\n
\"The RBI must not intervene and allow the rupee to depreciate
\na little,\" Panandikar said. The RBI sold about $400 million on
\nWednesday after the rupee hit a 21-month low.<\/p>\n
While the foreign exchange market was suffering nervous tics,
\nthe turmoil in Asian stock markets has shaken India's ambitious
\nplans for tapping global markets for Euroissues of global
\ndepositary receipts (GDRs) of state-run firms.<\/p>\n
India, responding to market conditions, two weeks ago deferred
\na $800 million GDR issue by the state-run gas monopoly, Gas
\nAuthority of India Ltd (GAIL) after it failed to muster a floor
\nprice of 125 rupees ($3.4) per share.<\/p>\n
Last Friday the government also announced a 40 percent
\nreduction in the size of a proposed GDR issue by state-controlled
\nMahanagar Telephone Nigam Ltd.<\/p>\n
\"The government's revenue, disinvestment and fiscal targets
\nwill go awry if market conditions remain depressed,\" said an
\neconomist with a foreign brokerage.<\/p>\n
The government has ambitiously raised its target for partial
\ndisinvestment of shares in state-owned firms in fiscal 1997\/98 to
\n70 billion rupees from an earlier projected 48 billion.<\/p>\n
A shortfall in the disinvestment target would hamper revenue
\nestimates and hit the government's fiscal deficit goal in the
\ncurrent fiscal year.<\/p>\n
India hopes to reduce its fiscal deficit as a proportion of
\nits gross domestic product (GDP) in fiscal 1997\/98 to 4.5 percent
\nagainst 5.0 percent last year.<\/p>",
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