India celebrated 1997 as its Golden Jubilee Year of Independence. This also represents the 50th year of democracy for the people, close to one billion.
Despite the fragility of the thirteen party United Front coalition, the Government showed a strong commitment to continue the country’s economical reforms.
The coalition Government could not survive its full term as its largest supporter, the Congress Party, withdrew their support, thereby making the people of India face untimely elections due in February 1998.
The study conducted by some of the agencies indicates that again this year no single party will get a majority to be able to form the Government. Thus coalition seems to be inevitable.
It is expected that the new Government will not be a 12-13 party led coalition but a coalition led by either the Bhartiya Janata Party (BJP) or the Congress.
The brighter side of this election is that whether a single party or a coalition forms the Government, everybody is in favour of liberalization and economic reforms.
The Indian paper industry continued to suffer due to depressed market conditions.
Production levels were below 1996 levels. Total production of paper, paperboard and newsprint for 1997-98 is expected to be around 2.5 million tons as compared to 2.7 million tons in 1996-97. The prices were downward and input costs were higher, thereby squeezing margins. Even most of the good mills reported substantially poor operating profits.
The newsprint industry was no exception and its capacity utilisation was quite low since large scale imports were coming into the country. In industry circles there was a feeling that there was a serious dumping situation which demanded anti-dumping protection. This petition has been going on for the last six months.
With the possibility of the imposition of an anti-dumping duty, Indian newspaper publishers have stocked enough newsprint to cater for their requirements up to March 1998.
The newsprint industry is badly in need of a price rise to become a remunerative industry. This means the present price level of Rs 19 000/ ton should rise beyond Rs 26 000/ton.
With regard to new capacity, Rama Newsprint, Sinar Mas & Bhadrachalam Papers, amongst the new entrants, commenced production. No grass root projects were announced.
As reported last year, the new pulp and paper mills that will be planned will be of larger capacity, say 100 000 t/aand above. This reflects a significant change in the establishment of new projects.
On the whole the industry has witnessed a "never seen before" situation. Many units were closed down. Some ran with partial capacity, while those running had to face severe competition.
The financial institutions are reluctant to finance new projects because of uncertain and subdued market conditions.
In such a situation the productivity and efforts required to achieve quality of international standards were the watchwords for survival.
Scarcity of raw material continued to be the paramount problem. This is associated with an unbearable cost burden. Afforestation programmes which are vital are still very meagre and industry is required to look for wood pulp from overseas suppliers. Strategic alliances with overseas pulp suppliers is a possible option industry is looking into.
Environmental legislation is becoming stricter and few of the mills have faced a situation of suspension of operations. The industry will be compelled to take effective steps to improve its quality of effluent.
Mills up to 50 t/p based on agricultural residues and without any chemical recovery are facing closure or having to change over to waste paper as raw material.
Total reliance on grid supply is not advisable and the paper industry is taking steps to improve co-generation.
An international exhibition held at the Pragati Ground, New Delhi, attracted a number of foreign suppliers in the fields of pulp, paper, utilities and instrumentation.
This gave an excellent opportunity for suppliers and users to meet to discuss problems of mutual interest. It was clearly seen that the Indian pulp and paper industry is now looking for the latest technology applications to improve quality and reduce costs.
No doubt environmental considerations were uppermost in everybody’s minds.
The Gross Domestic Product (GDP) is expected to grow by 5.5 percent in 1997-98. The Government had initially projected a growth of 7 percent for 1997-98 as against record growth of 7.5 percent in 1996-97. The GDP is expected to sustain a 6-7 percent per year growth in coming years.
The inflation rate has been maintained somewhere around 5-6 percent.
The Centre for Monitoring Indian Economy (CMIE), in its report, has predicted that foreign capital inflows into India will total around US$ 8.2 billion in 1997-98, against US$ 9.5 billion in the previous year. However, the foreign direct investment (FDI) inflows into India would total US$ 3.5 billion in the current year as against US$ 2.7 billion for the previous year.
The report also predicts that the widening trade deficit and negative net FII inflows will weaken the rupee against the dollar.
The foreign currency reserves are US$ 27.50 billion, as against previous years when they were US$ 24.23 billion.
Though the untimely rains have adversely affected some of the food crops, the overall food grain production in 1997-98, at 199 million tons, will be a shade above the 198 million tons produced in 1996-97.
The overall agricultural production is expected to increase by 5 percent.
This year witnessed some of Asia’s strongest economies collapse. However India, due to its strong industrial base, remained unaffected by the meltdown.
Infrastructure spending in the power and telecom sector, as well as road construction, being initiated at the state level could provide the boost for accelerated economic growth which has been lagging for two years. Growth in infrastructure would have a positive impact on the heavy core industries like steel and cement, as well as credit offtake from the banking sector. Besides it would provide large scale employment opportunities.
An Apex financial institution, Infrastructure Development Finance Corporation (IDFC), was formed to facilitate infrastructure financing. This institution is expected to be fully functional from this year.
The National Highway Authority (NHAI) expects to spend Rs 14-20 billion improving the roads.
A large port project is also expected to begin in the state of Orissa in 1998.
The capital expenditure on oil refineries is expected to be doubled in 1998-99 compared to 1997-98.
Political stability and continued reforms in terms of liberalization and globalization are critical for sustaining economic growth. Assuming a stable government is formed with no reversal in economic policies, knowledgeable circles expect industrial growth to accelerate to 8 percent in the financial year 1999-2000.
Falling interest rates, moderate inflation and declining fiscal deficits should ensure that the fundamental economy continues to be strong.
