24.07.2007

• In today’s Discover It blog, I have noted for you something about PL 480 programme. Take a look at it here.
• Export rules for FDI in SSIs
• At present, FDI in sectors reserved for SSIs (Small Scale Industries) is permitted only if the company concerned agrees to export 50% of its production.
• Foreign investors have been demanding that export obligation on investment in these areas should be scrapped.
• Around 144 items have been reserved for SSIs. Indian exporters are not able to compete in the global market as SSI reservation hinders economies of scale.
• Deepening of the bond market
• In accordance with the Deepak Parekh committee’s recommendations the government and the RBI seem to have come to an understanding in allowing banks to invest more in unrated debt paper.
• At present banks are not allowed to invest more than 10% of their total investment in unrated bonds.
• Government is also planning to change the methodology of rating infrastructure projects and SPVs so as to facilitate investments in the sector.
• Security restrictions on FDI
• Only yesterday we noted that we are trying to emulate the US by enacting a law which is similar to the Exon-Florio Act.
• Today’s editorial in ET argued about why we should not have such an act. Take a look:
• As it is we are not having good FDI figures to speak of. The $16 bn FDI that we have seen in the just concluded financial year pale in comparison with the $60 bn that China attracts. When the infrastructure sector needs about $450 bn in investments spread over the next five years, anything that can negatively impact investment flow into India needs to be resisted.
• We should always try to emulate the ‘best’ practices; but not the worst practices from the developed world. The Exon-Florio Act is an example of a worst measure. In any case a sparing use of such an equivalent Act in India cannot be guaranteed.
• Ownership makes no difference to creation of jobs and prosperity and these are what matter in any progressive society and economy. So imposing legislative restrictions on ownership should be desisted.
• Well, what’s your take on this subject? Let me hear your views through the comments feature or the shout-box on the blog.
• Sub-prime mortgage woes in US
• We covered it for quite some in our blog. It refers to giving loans to borrowers with poor credit histories or high levels of debt.
• Investment bankers that are likely to take biggest hit because of their underwriting of such sub-prime mortgages include:
• Merrill Lynch
• Lehman Brothers