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EICC-GOPIO Conference

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Next phase of action and reform at state level. India not one opportunity, 29 opportunity sets ... During 90s, J&K as an economy was devastated ... – PowerPoint PPT presentation

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Title: EICC-GOPIO Conference


1
EICC-GOPIO Conference
  • Jammu Kashmir
  • Reform and Reconstruction
  • November 9, 2006
  • Brussels

2
India story
  • It is the CHINDIA decade
  • India is the flavour right now
  • Macroeconomics is looking good
  • GDP growth will exceed 8
  • Invisible exports up 106
  • Manufacturing up 22
  • FII flows graduating into FDI

3
29 state economies
  • India is not a single economy
  • It is a group of 29 economies
  • Differential levels of development
  • Different enabling environments
  • Diverse resource endowments
  • Next phase of action and reform at state level
  • India not one opportunity, 29 opportunity sets

4
JK is special
  • JK is a Special Category State
  • This status gives it
  • Limited applicability of national economic
    legislations
  • Some rigidities in land laws
  • Flexibility in regulatory framework
  • Greater quantum of federal assistance on more
    liberal terms

5
Infrastructural gap analysis
  • Aggregate infrastructure
  • Economic infrastructure
  • Social infrastructure
  • Administrative infrastructure

6
Dreadful decade
  • During 90s, JK as an economy was devastated
  • Biggest damage was decimation of institutional
    capacity, especially, economic administrative
    capacity
  • Results
  • government finances in a mess
  • Expenditure allocations non-developmental
  • Infrastructure not maintained and destroyed
  • Slump in growth

7
Aggregate Infrastructure index
8
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9
Eco Infrastructure Disaggregated
10
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11
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12
Cost of catching up
  • JK is 50 basis points below what it would have
    been
  • Each basis point costs Rs 1000 crore
  • Financial implications of being where JK would
    have been Rs 50,000 crore

13
Strategy Peace via economic reconstruction
  • The three R mission
  • Revive political initiatives
  • Reform the government
  • Reconstruct the economy

14
Major constraints
  • Infrastructure
  • Power
  • Connectivity
  • Communication
  • Institutional capacity
  • Governance
  • Policy regime

15
Requirements
  • Overall enabling environment
  • Well laid out fiscal policy that ensures
    government has investable surplus
  • Well defined and effective industrial policy
    which overcomes structural negatives
  • Autonomous investment in Infrastructure
    especially power

16
JK Changing Conditions
  • Socio-Political situation
  • Domestic changes
  • Democratically elected sub-national government
  • Local body election after 32 years
  • Same party in power at the Centre and the State
    after 24 years
  • First time a coalition government in the state

17
Peace process
  • International peace process
  • Srinagar-Muzaffarabad road opened after 52 years
  • Visa requirement within the greater JK abolished
  • Freer movement of people across the LOC
  • Trade relations on the anvil

18
Reforming Government
  • Creating institutional capacity for
  • Instituting a proper policy framework
  • Bringing efficiency in expenditure
  • Improving delivery of services
  • Bring a balance in state finances
  • Reduce pre-emption of resources
  • Align revenues and expenditures

19
Institutional Capacity Building
  • Economic Reconstruction Agency set up
  • Financial Restructuring Authority in the works
  • Privatisation of major corporations, starting
    with Power Development State Corporation

20
Public Expenditure Policy
  • Basic maintenance activity financed through by
    government
  • Series of well-designed interventions, in the
    nature of sectoral specific packages, with
    alternative private funding
  • JK Development Fund
  • Multilateral Institutional Funding

21
Industrial Incentives
  • No income tax till 2013
  • Capital Investment Subsidy of 30
  • Exemption on toll tax till 2015
  • GST exemption till 2015
  • CST exemption to SSI units till 2015.
  • Interest Subsidy of 3 to new industrial units
  • 15 price preference to SSI units on landed cost.
  • Air freight subsidy of 50 at 15 till 2015  

22
Industrial policy
  • Industrial Committee with the Chief Minister as
    the Chairman for providing response to emerging
    situations.
  • Permanent Grievance Redressal Committee
    established.
  • No consignment claiming benefit under the
    Industrial Policy 2004 will be detained at the
    entry point of the state for more than 24 hours.

23
Economic Reconstruction Plan
  • Objectives of intervention
  • Expanding economic infrastructure
  • Expanding the provision of basis services
  • employment and income generation.
  • Phase I
  • Revive the rural economy of JK by
  • Restoring critical rural infrastructure
  • Phase II
  • Create urban infrastructure
  • fiscal consolidation of govt
  • Build utilities through PPP

24
Peace through Economic Reconstruction
  • Prime Ministers Reconstruction Plan
  • Timeframe 2005-06 to 2008-09
  • Size Rs 240 bn
  • Focus areas Power, Roads, Hospitals and Tourist
    Infrastructure
  • Asian Development Banks Multi-sectoral
    Investment Plan
  • Timeframe 2005-06 to 2009-10
  • Size Rs 20 bn
  • Focus areas Rural connectivity, Urban
    Infrastructure
  • Japanese Bank of Industrial Cooperation
  • Timeframe 2007-08 to 2010-11
  • Size Rs 35 bn
  • Focus areas Water supply and Urban sanitation

25
Staggering Numbers
  • Prime Ministers Reconstruction Plan Rs 240
    bn
  • Asian Development Banks Multi-sectoral
    Investment Rs 20 bn
  • Japanese Bank of Industrial Cooperation Rs 37
    bn
  • In addition to this,
  • Normal spending plans Rs 45 bn p.a
  • Three year autonomous expenditure of Rs 340
    bn
  • All this money will be managed by and will pass
    through the banking channels of the Jammu and
    Kashmir Bank
  • And this is not all..

26
Trickle down impact
  • Crowding in of investment
  • - public investment in infrastructure will
    induces private investment with backward and
    forward linkages
  • - Growth of SMEs
  • - Growth of ancillaries associated with
    projects picks up
  • - Pick up in induced demand of the private
    sector

27
Private Investment Picking Up
  • Quantity
  • Investment in the SME sector till July 2006 Rs
    70 bn
  • Proposals in the pipeline Rs 120 bn
  • The flow of funds is in the range of Rs 500 bn
  • Quality
  • Top notch Indian corporates
  • Bharti
  • Reliance (ADA) Infocom
  • Mahindra and Mahindra
  • Lupin Laboratories
  • Essar telecom

28
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29
In real terms
  • New Roads 1100 kms
  • Macdemisation 2300 kms
  • Primary Health Centres 66
  • Sub-districts Hospitals 7
  • District Hospitals 2

30
This means, everyday..
  • 5 kms of new roads will be laid out
  • 10 kms of roads will be macdemised
  • Every week one PHC will be opened/upgraded
  • Every two months one SDH

31
Economics of Peace
  • A. Pure growth effect
  • Increased level of economic activity due to
    improved socio-political situation
  • For example
  • Tourist inflow in 2006 has already crossed 1989
    levels
  • Income multiplier of tourism sector is 1.66
  • Private sector investments in tourist
    infrastructure
  • Credit to tourism industry has picked up

32
Reconstruction Impact
  • B. Normalcy plus economic reconstruction
  • - Economic growth accelerates due to
    reconstruction of economy through
  • autonomous investments in physical
    infrastructure
  • Induced investment in production activity
  • Example
  • Acceleration of Economic growth
  • State SDP growth 13.5 per cent
  • Commercial Agricultural growth 9.7 per cent
  • SMEs projected at 16.3 per cent

33
Economic Growth Trends
34
State Income Composition
35
Credit gap
  • JK accounts for 0.70 per cent of national GDP
  • Yet, it absorbs only 0.30 per cent of total
    national credit
  • Productive sectors of the economy account for
    less than 5 per cent of the credit disbursed in
    JK
  • Comparable national average is 30 per cent
  • JK accounts for 1 per cent of Indias
    population
  • Yet it accounts for only less than 0.2 per cent
    of personal credit disbursed in India
  •  

36
Results of Fiscal Reforms
  • Three consecutive zero-deficit budgets
  • Revenue surplus up from Rs 128 crore in 02/03 to
    Rs 2800 crore in 05-06
  • Fiscal deficit down from 7.5 in 2002/03 to 5 of
    SDP in 04-05

37
Revenue Performance
38
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39
Fiscal balance
40
Power Options
  • Increase physical availability by
  • Developing 7000 MW over the next 3 years
  • Changing the power mix of JK by accessing
    thermal capacity especially in winter
  • Increasing the share of JK in some central power
    projects on JK rivers are commissioned

41
On the anvil
  • Opening up of Power sector
  • PPP in Health sector
  • Privatisation of Tourist sector
  • Development of Financial services sector
  • Incentivisation of crafts and SME sector

42
Power Development
  • JKs water resources offer immense potential for
    commercial hydro power generation.
  • The potential is as high as 14,000 MW of hydro
    power investment of 1,50,000 crore
  • Only about 10 of this has been exploited so far

43
Power sector
  • Taking PDC public to create Indias largest power
    utility company
  • Reforms in transmission and distribution sectors
  • Unbundling transmission and distribution
    entities.  
  • Establish a transmission utility company

44
The Financial Universe
?New York
? Tokyo
Regional Gap
? Sydney
45
A Proposition JK IFC
  • JK International Financial Centre A hub for
    institutional financial services
  • A financial cluster in the vale of Kashmir
  • Window to access regional wealth
  • World-class regulations
  • International legal system including a commercial
    court
  • State-of-the-art communication infrastructure
  • 100 foreign ownership

46
Sectors of Focus
  • Banking Services Capital Markets
  • Asset Management Fund Registration
  • Islamic Finance
  • Reinsurance Captives
  • Business Processing Operations
  • Ancillary Service Providers
  • Non-Regulated Others

47
Value Proposition
  • JKIFC has its own legal, regulatory judicial
    environment based on best-practices from
    International jurisdictions
  • Laws are distinctly different from National laws
  • Will provide the platform to list trade in
    financial instruments like Bonds, Equities, Funds
    etc. without restriction of ownership

48
To sum up
  • JK government is enroute to
  • Financial stability
  • Infrastructure Development
  • Creation of an enabling environment for private
    business
  • JK economy is poised for
  • Growth
  • Absorption of private investment
  • Specialisation in financial services under the
    stewardship of JK Bank

49
Jammu and Kashmir Bank
  • An introduction

50
Profile
  • Incorporated in 1938 as a limited liability
    company
  • Governed by the Companies Act and Banking
    Regulation Act of India
  • Regulated by the Reserve Bank of India and SEBI
  • Listed on National stock exchange (NSE) and
    Bombay stock exchange (BSE)
  • Rated P1 by Standard and Poor-CRISIL
    highest degree of safety
  • Four decades of uninterrupted profitability and
    dividends

51
Shareholding Pattern
FOREIGN INST. INVESTORS
As on October 27, 2006
52
One of a Kind
  • Private sector bank despite governments majority
    holding
  • Sole banker and lender of last resort to the
    Government of J K
  • Only private sector bank designated as RBIs
    agent for banking business
  • Carries out banking business of the central
    government
  • Collects taxes for Central Board of Direct Taxes
    in J K

53
Infrastructure
  • Fastest growing bank with 516 branches
  • 98 per cent business computerized
  • Anywhere, Tele-banking and SWIFT
  • Internet, SMS and Mobile Banking
  • Globally connected ATM network
  • Mobile ATM Service
  • Global Access Debit Credit Cards
  • Live on RTGS System of RBI

54
Financial Services Portfolio
  • Insurance joint venture with MetLife
    International .
  • Distributor of
  • Life Insurance products of MetLife (India) Pvt.
    Ltd. and
  • Non-Life Insurance products of Bajaj Allianze
    General Insurance Co. Ltd.
  • Providing Depository Services
  • Offering Stock Broking Services.
  • Collection Agent for utility services provided
    by State and private sector.

55
Productivity per Employee
56
Capital Adequacy Most
Comfortable
As on 31st March 2005
57
Asset Quality (net NPA) Among the Best
58
Operating Costs The Lowest
59
Super specialist banking
  • Knowledge banking foray to create a niche in
  • Leather Branch in Chennai
  • Spices Branch in Cochin
  • Castor Branch in Mumbai
  • Could pave way for Commodity Bank

60
Addressing financial depth
  • JK bank is a Corporate with a Community
  • It has a geographical region to itself which
    lacks financial depth
  • bank will bring about a financial deepening of
    the regional economy by monetising trade and
    replacing channels of informal finance
  • By creating a new financial architecture in the
    state
  • Consolidation of existing financial institutions
    by engineering a series of MAs

61
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