DEVELOPMENT DIGEST

VOL.3 1-31 MAY 2000 NO.2

INFORMATION TECHNOLOGY

India joined the select league of nations having a legal framework for electronic commerce and governance with Parliament passing the novel Information Technology Bill.

India will be the only country in the whole of South Asia and the second after Singapore in Asia to frame legislation for e-commerce and internet.

The Bill besides providing legality to electronic commerce also seeks to curb cyber crimes. It empowers police officers of the rank of Dy.S.P. to raid public places and arrest a suspect of cyber crimes without a warrant.

Information Technology Minister Pramod Mahajan said "the bill is not the last word and is open for amendments and will enable India to become an information technology superpower in less than 10 years".

The bill was approved by the Upper House after a two-hour debate, while the Lok Sabha passed it on 17 May.

India and China are among the top ten countries registering the maximum number of dotcom companies this year with Network Solutions, the global leader in domain registrations.

According to Network Solutions' latest dotcom index for the year up to February end

released on 2 May, India is in the tenth place, while China is placed seventh.

India was in the eleventh place in 1998 and fell to twelfth position in 1999, but is back among the top ten nations registering the maximum dotcoms, according to the statistics.

The top 10 countries other than the US with maximum number of dotcom registrations this year are the UK, Korea, Canada, France, Germany Japan, China, Spain, Italy and India.

From India, Mumbai found place among the top 10 cities for dotcom registration, but in the 10^th place. The other cities in the top 10 league are Seoul, London, Toronto, Istanbul, Paris, Singapore, Beijing, Madrid, and Vancouver.

Indian electronics and computer software exports have registered a 29 per cent increase to $4.28 billion in 1999 as against $3.32 billion in the previous year, despite a sharp 75 per cent decline in computer hardware exports.

The computer software and services sector achieved an all time high sectoral growth of 66 per cent in dollar terms to $ 3.01 billion in 1999 against $1.81 billion in 1998, according to statistical yearbook on infotech exports released by Electronics and Computer Software Export Promotion Council (ESC) on 15May.

The report said that Singapore, Hong Kong and other South Asian countries emerged as the largest market for Indian electronic goods

(Ministry of Information and Broadcasting)

during the year.

The US and Canada emerged as major software and service export destinations accounting for 61.4 per cent of exports, while Europe contributed 25.4 per cent and Japan, Korea and other Far East countries accounted for 4.47 per cent.

During the year, 19 new countries including Malta, Zambia, Seychelles, Albania and Lebanon were targeted taking the total number of counties for exports of software to 85 countries from 66 in the previous year.

On the performance of the telecom service and project exports, the report said that the sector had registered a marginal growth of 7.6 per cent to Rs. 2800 crores in 1999 as compared to Rs.2600 crores in 1998. Videsh Sanchar Nigam Limited (VSNL) and Telecommunications Consultants of India (TCIL) emerged as leading telecom services and project exporters.

In a major development, India has signed a memorandum of understanding with the world's premier research body, Massachusetts Institute of Technology (MIT) to set up centres of excellence for research and development.

Included in the purview of this MoU is the world famous Media Lab of the MIT and advanced research in other areas of information technology.

The MoU was signed by Minister for Information Technology, Pramod Mahajan and Chancellor of MIT Professor Lawrence Backow at Massachusetts, US.

MIT and the Indian government have agreed to work on advanced research in education, human resources development (HRD) and applications in critical areas of information technology.

As per the MoU, two centres of excellence - one at MIT and the other in India - would be

established soon.

The IT Ministry had set up a non-resident Indian advisory committee in January this year to provide critical technical inputs to keep India abreast of global developments and this collaboration with MIT was being seen as the next major policy initiative.

This agreement is in line with the government's avowed vision of making India an IT superpower by the year 2008 taking the $60 billion IT export target.

India's victory in the neem patent war, in the form of the decision of the European Patent Office (EPO) to revoke the patent granted by it for a fungicide derived from the seeds of the neem tree, has been acclaimed by scientists, entrepreneurs and environmentalists alike.

The Union Science and Technology Minister, Dr. Murali Manohar Joshi, disclosed it at a gathering of eminent scientists and entrepreneurs to mark the second national technology day.

Referring to reports from Munich where the landmark decision was taken by a four- member committee of the EPO, he said it was highly appropriate that the panel has held that the patent amounted to bio-piracy and has endorsed that the process for which the patent had been obtained was actually in use in India for time immemorial.

INDIA ELECTED TO FIVE ECOSOC BODIES

India has been elected on several subsidiary bodies of the UN Economic and Social Council (ECOSOC).

In elections held on 4 May India was elected to the Commission of Human Rights, the Commission on Sustainable Development, the Commission on Crime Prevention and Criminal Justice, executive board of the World food Programme and United Nations

Statistical Commission.

The Cabinet Committee of Economic Affairs (CCEA) on 13 May approved a clutch of proposals including buyback of shares by the Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) as well as creation of a Rs. 125 crore Credit Guarantee Fund for Small Industries (CGFSI). It also cleared the revised cost estimates of the Kaiga Atomic Power Plant (KAPP) in Karnataka and the Rajasthan Atomic Power Plant (RAPP).

The buyback of shares will yield an estimated Rs. 792.2 crores to the Government.

The PFC will buyback 21.3 lakh shares with a face value of Rs. 1000 at Rs. 2710 per share while the REC will buyback 17 lakh shares at the rate of Rs1150 per share. These also have a face value of Rs.1000.

The Government also approved setting up of a Rs. 125 crore-credit guarantee fund for small industries to tackle the problem of collateral and provide necessary comfort level to banks lending money to small-scale units. The scheme will be operational from 2000-01 and will be implemented by a trust to be set up by the Small Industries Development Bank of India (SIDBI).

The scheme would guarantee loan upto Rs.10 lakhs extended by commercial banks and well-performing regional rural banks to SSI units without collaterals including third party guarantee. The EGFSI would guarantee 75 per cent of the principal amount of the credit extended by the lender.

A Rs.100-crore mega medical research institute-cum-hospital on the lines of the

premier AIIMS in Delhi and JIPMER in Pondicherry will come up near Madurai.

The Centre had given the nod for the medical research centre with a 500-bed facility and would fund the project as well.

The Centre had also cleared the Rs.100-crore research centre for Indian Medicine near suburban Tambaram. The Union Health Ministry had allocated funds and the construction work for the project would start this year.

India has exported handicraft products worth Rs. 5924 crore during the year 1999-2000 as against Rs. 5058 crore during the year 1998-99, registering an increase of 17 per cent.

The major increase in handicraft exports registered during the year 1999-2000 was in the embroidered and crocheted goods section, registering an increase of 31 per cent. This has been followed by woodwares, to Rs 348 crore from Rs 286 crore, an increase of 22 per cent. Shawls as artware registered an increase of 18 per cent from Rs 18 crore to Rs 22 crore during the year 1999-2000.

To further boost the export of handicrafts, several steps have been taken by EPCH and the Ministry of Textiles in the recent past. The first stage of setting up of a centre has already been completed. It is equipped with the latest designing facilities and assisted by professionals, including foreign designers.

The Council has also taken steps to set up a permanent India trade mart for round the clock international marketing. The initial process of pre-feasibility study identification of land and views of exporters for setting up such a project has already been completed.

In an attempt to bring down emission levels in

major cities, the government has decided to introduce Bharat Stage-II norms, the Indian equivalent of Euro-II, in eight more cities across the country.

The cities identified for introduction of stricter emission norms include Ahmedabad, Bangalore, Calcutta, Chennai, Hyderabad, Lucknow, Mumbai, and Poona.

These norms were brought into operation in the national capital region (NCR) from 1April following the Supreme Court directive.

Though no formal notification in this regard has been issued yet, the leading automobile manufacturers have been told that the new norms will be applicable latest by 1 December 2000.

It has also been decided to bring LCVs and buses within the purview of the Bharat Stage-II emission norms in all the nine cities.

The Government has also initiated discussions with the auto industry on the possible introduction of Euro-III norms in the near future. It is confident that rapid introduction of stricter environment norms will enable the industry to reach global standards in the next 5 to 6 years. Auto units had last month proposed an aggressive schedule for implementation of future emission norms in the country.

The decision to impose stricter norms follows public interest litigation (PIL) filed in various high courts by environmentalists regarding the decaying quality of air. The Ministry of Surface Transport, the nodal agency to deal with emission norms, held detailed discussions with the Ministry of Petroleum, Ministry of Environment and the auto manufacturers earlier this month to evolve a consensus on the issue.

The Petroleum Ministry has agreed to provide fuel with 0.05 per cent sulphur content to all the nine cities. The automobile industry had contended that this was a prerequisite for meeting the Bharat Stage-II norms.

The industry representative assured the government that the six-month period between notification and implementation of stricter emission norms will allow it to make necessary technological adjustments.

This year's ESCAP's (Economic and Social Survey of Asia and Pacific) survey is upbeat on India, saying that the economy can be expected to grow at 7 per cent this year. But it warns this needs the support of better supply side incentives, better infrastructure and greater private sector participation.

Released on 21 May the survey puts India's rate of saving for 1999 at 24.8 per cent, only second in the South Asian region (after Bhutan's 49 per cent) and comparable to the high growth standards traditionally set by the fast growing East Asian economies.

Industry and services led India's 5.9 per cent growth last year, says the survey. It would have been higher and nearer the 6.8 per cent of 1998, had adverse climatic conditions not intervened to slow down agriculture.

The survey urges the installation of prudential banking and financial sector norms and a step-up in the transparency of data. An extensive concluding section goes into transparency standards, including the 'Special Data Dissemination Standard, (SDDS) and also its 'generalized' version -- both evolved by the IMF in 1996. But SDDS and other standards would also need current banking sector reforms to be accelerated along with the identification and weeding out of bad debts.

Secondly, the economy needed social safety nets and early warning systems. These would need micro-level reforms.

But along with safety nets the survey also stresses the need for flexibility in the micro-economy. It recommends "well-conceived" programmes of PSU privatisation, discarding

SSI entry barriers in sectors and a speedier exit strategy for bankrupt firms.

The survey compliments India on its "simplification and rationalisation of both direct and indirect taxes on industrial products and a reduction in prime lending rates by the commercial banks and financial institutions were other stimulating factors".

The Bombay Stock Exchange (BSE) said it has developed its own master earth station (HUB) and managed leased data network (MLDN) to expand its online trading system. Both projects have been completed using services of leading telecom vendors including Mahanagar Telephone Nigam (MTNL), Hughes Escorts Communications and Nortel Networks & Ramco Systems.

The move would enable the exchange to serve the investor community better in the form of speedy execution of orders and dissemination of information, highly secured set up, availability of multiple services, centralized network monitoring and control, according to BSE press release.

The project will facilitate saving on transaction time on the exchange as speedy communication facilities will be available now. The entire project, which cost Rs 25 crore, has been commissioned in eight weeks, according to the BSE.

The Insurance Regulatory and Development Authority (IRDA) has formulated a code of conduct for insurance brokers and prescribed strict penalties, including cancellation of licences, for default and manipulation.

q The code of conduct formulated by IRDA covers the entire gamut of activities, including relationship with clients, sales

practices, duty to disclose information to

clients, claims, advertising, sub-brokers

and remuneration, among others.

This is the first time IRDA has made a draft report on insurance brokers.

According to the report,

q An insurance broker would be granted a licence, valid for a period of three years.

q He/she would face penalty of cancellation of licence if indulged in deliberate manipulation of policy conditions affecting the insurance market and the policy holders interest.

q A broker would also face cancellation if the financial position of the broker deteriorated to such an extent that his continuance as an insurance broker was not in the interest of policyholders. In case, an insurance broker is found guilty of fraud, or convicted of a criminal offence, the IRDA would cancel his licence.

IRDA has confronted various issues related to working of insurance brokers in its draft report. For instance, the report covers validity of licence, cancellation of licence, code of conduct, advertising, etc.

According to code of conduct in draft report,

q Insurance brokers must conduct their dealings with clients with integrity at all times, act with care and avoids conflicts of interest.

q All insurance brokers would have to become members of the Insurance Brokers Association of India.

q They should ensure transparency and also explain the consequences of nondisclosures and inaccuracies to the prospective clients.

On the advertising front, the report pointed out that insurance brokers would also be directed that statements made in advertising were not misleading or extravagant.