Manufacturing Sector in India

Contribution of Manufacturing Sector in India

Though India banks heavily on its services sector for growth, the manufacturing sector too plays a significant role in the Indian economy, contributing nearly 16 per cent to the GDP (in 2006-07).

Encouraged by an increasing presence of multinationals, scaling up of operations by domestic companies and an ever expanding domestic market, the Indian manufacturing sector has been averaging a 9 per cent growth in the last four years (2004-08), with a record 12.3 per cent in 2006-07.

India is fast emerging as a global manufacturing hub. Be it automobiles or computer hardware, consumer durables or engineering products, all are being manufactured by multinationals in India.

Moreover, according to a report by the Federation of Indian Chambers of Commerce and Industry (FICCI) and Yes Bank, India is poised to become the global manufacturing hub for luxury brands over the next five years with manufacturing of luxury items becoming a US$ 500 million industry during this period.

India has all the requisite skills in product, process and capital engineering, thanks to its long manufacturing history and higher education system. India's cheap, skilled manpower is attracting a number of companies, spanning diverse industries, making India a global manufacturing powerhouse.

According to a survey of the manufacturing industry, carried out by FICCI among 25 core sectors, 21 capital goods, 15 intermediate goods, 26 consumers durables, and 13 consumer non-durable sectors, the country's manufacturing sector is expected to grow by 9.5 per cent in 2008-09, up from 8.8 per cent last fiscal.

• LG is looking at making India its global manufacturing hub for its mobile handsets. The company will soon be exporting mobile phones to Europe and the Commonwealth of Independent States (CIS) from India.
• Luxury brands like Louis Vuitton and Frette are looking at India as a manufacturing base for their products.
• Skoda Auto, a part of the international Volkswagen Group based in the Czech Republic, plans to make India its regional manufacturing hub. It will start producing cars in India by 2010 with a manufacturing target of 50,000 units. Besides the domestic market, these will also be exported to neighbouring countries like Nepal, Sri Lanka, Burma and Bangladesh.
• Aircraft manufacturer Airbus is considering India as one of the key centers for design and development of its long haul A 350 plane.
• Cummins is making India its manufacturing hub for newly developed line of generator sets.
• Samsung plans to invest US $ 100 million over a period of four years in its manufacturing plant near Chennai and make it its global hub.
• Ford is making India its manufacturing hub for engine manufacturing.
• Hyundai has made India the manufacturing and export hub for its small Cars. The i10 is being manufactured only in India and exported to the world. India is Hyundai's largest base outside Korea.
• Suzuki too is making India its manufacturing hub for small cars. The A-Star is being manufactured solely in India and exported to Europe.
• Nokia is investing an additional US $ 75 million in its Sriperumbudur plant taking the total investment to US$ 285 million. Nearly 50 per cent of its production at Sriperumbudur is exported to countries across the Middle East and Africa, Asia, Australia and New Zealand.

India Advantage

India's vast domestic market and availability of low-cost workers with advanced technical skills has been instrumental in attracting an ever expanding number of multinationals who are setting up their manufacturing base in the country.

The sheer size of the Indian market has obvious appeal. The rapid growth of the Indian economy is likely to make India the fifth largest consumer market in the world by 2025 from twelfth in 2005, according to a study by McKinsey Global Institute.

Aggregate Indian consumer spending is likewise estimated to more than quadruple to approximately US $ 1.5 trillion by 2025, on the back of a ten-fold increase in middle class population and a three-fold jump in household income.

Along with this, India offers abundant engineering and technical manpower, producing annually about 400,000 graduate engineers.

Moreover, according to a study by ASSOCHAM, India will emerge as the fourth strongest economy among the G-20 countries after China, Russia and South Korea from the global crisis, given its robust forex reserves, high GDP growth rate and various fiscal and monetary measures taken to tackle the downturn.

Petroleum and Natural Gas in India

• First successful oil well was dug in India in 1889 at Digboi, Assam.
• At present a number of regions having oil reserves have been identified and oil is being extracted in these regions.
• For exploration purpose, Oil and Natural Gas Commission (ONGC) was established in 1956 at Dehradun, Uttarakhand.
• The total oil reserves in India have been estimated to be about 13 crore tonnes. Domestic production of oil in India is much less to meet the domestic demand.
India currently produces just over 32 million tonnes of crude oil against its annual demand of 105 million tonnes meeting only 30.5 percent of demand from domestic resources.

Oil Refineries in India

• At present there are 19 refineries operating in the country (17 in Public Sector and 2 in Private Sector). Mangalore Refinery and Petro chemicals Limited (MRPL), which was a joint sector company, became a PSU subsequent on acquisition of its majority shares by ONGC.
• Out of 17 Public Sector Refineries 7 are owned by IOC Ltd., two each by Chennai Petroleum Corporation Ltd. (a subsidiary of IOCL), Hindustan Petroleum Corporation Ltd. and ONGC, one each by BPCL, Kochi Refineries Ltd. (a subsidiary of BPCL), Numaligarh Refinery Ltd. (a subsidiary of BPCL) and Bongaigaon Refineries and Petrochemicals (a subsidiary of IOCL). The private Sector Refineries belong to Reliance Industries Ltd. and Essar Industries.

Marketing and Distribution of Petroleum Products

1. Indian Oil Corporation IOC : Established in 1964 by amalgamating Indian Refineries Ltd. and Indian Oil Company Ltd.
2. Bharat Petroleum Corporation Ltd BPCL : By acquisition of Burmah Shell in 1976.
3. Hindustan Petroleum Corporation Ltd (HPCL): Established in 1974 by acquiring the assets of US Company ESSO Eastern. In 1976, Government acquired Caltex Oil Refining Ltd. and merged it with HPCL.
4. Gas Authority of India Ltd GAIL : Established in 1984, for handling post-exploration activities relating to natural gas. The company was assigned the priority task of setting up the cross country HBJ (Hazira, Bijapur and Jagdishpur) pipeline. Presently GAIL is the largest company in India for marketing of natural gas.

Oil India Ltd

Oil India Limited (OIL), under the administrative set-up of the Ministry of Petroleum and Natural Gas, is a National Oil Company engaged in the exploration, production and transportation of crude oil and natural gas in the country. OIL was incorporated in 1959 as a company with two-third share of Burmah OIL Company and one-third share of Government of India. In 1961, OIL became a joint venture company with equal share of Government of India and Burmah OIL Company. On October 14, 1981, OIL became a Government of India Enterprise, a wholly-owned Public Sector Undertaking.

New Industrial Policy of India

• After independence, the first Industrial Policy was declared on April 6, 1948 by the Union Industry Minister Mr. Shyama Prasad Mukherjee. This policy established a base for Mixed and Controlled Economy in India and clearly divided the industrial sectors in to private and public sectors.
  Later on, 1948 Industrial Policy was replaced by a new Industrial Policy Resolution declared on April 30, 1956 with the basic objective of establishing ‘Socialistic Pattern of Society’ in the country.

• Industrial Policy Resolution of 1956 categorized industries which would be the exclusive responsibility of the state or would progressively come under state control. Earmarking the pre – eminent position of the public sector, it envisaged private sector coexisting with the state and thus attempted to give flexibility to the policy framework.
• Though the Government had declared a number of new industrial policies after 1956, but every new policy accepted the 1956 Industrial Policy Resolution as its base. In June 1991, Narsimha Rao Government took over charge and a wave of reforms and liberalization was observed in the economy. In this new atmosphere of economic reforms, the Government declared broad changes in Industrial Policy on July 24, 1991.
• The Industrial Policy initiatives undertaken by the Government since July 1991 have been designed to build on the past industrial achievements and to accelerate the process of making Indian industry internationally competitive. It recognizes the strength and maturity of the industry and attempts to provide the competitive stimulus for higher growth.
• A significant number of industries had earlier been reserved for public sector. Recently, a decision has been taken to open defence industry sector to private sector with foreign direct investment permissible up to 26 percent.
• Now, the areas reserved for the public sector are Atomic energy, the substances specified in the schedule to the notification of the Government of India in the Department of Atomic Energy dated the 15 March, 1995 and railway transport.

List of Industries Requiring Compulsory Licence :

• With the introduction of New Industrial Policy in 1991, a substantial program of deregulation has been undertaken. Industrial licensing has been abolished for all items except for a short list of five industries related to security, strategic or environmental concerns. These are :

• Distillation and brewing of alcoholic drinks.
• Cigar Cigarettes and other substitutes of prepared tobacco.
• Electronic, Aerospace and all types of defence equipment.
• Industrial Explosive, including match boxes.
• Hazardous chemicals.

Distinction between Cottage, Small and Village Industries

• In a broad sense, cottage, small and village industries are treated similar but they fundamentally differ from each other.
• Cottage industry is run by family members on full or part time basis. It possesses negligible capital investment. There is hand made production and no wage earning person is employed in cottage industry.
• Small industrial units employ wage earning labor and production is done by the use of modern techniques. Capital investment is also there. A few cottage industries which are export – oriented have been included in the category of small sector so that facilities provided to small units may also be given to export – oriented cottage industries.
• The industries established in rural areas having population below 10,000 and having less than 15,000 as fixed capital investment per worker will be termed as village industries. KVIC and state village Industries Board provide economic and technical assistance in establishing and operating these industrial units.

India’s Share in Global Trade Up
India has been able to grab a significant portion of the world trade pie with its booming economy and a billion – plus markets, says a report by the World Trade Organization (WTO).
According to the World Trade Statistics report, India’s share in the global trade, including trade in merchandise and services sector has increased from 1.1 percent in 2004 to 1.5 percent in 2006.

WORLD BANK

The World Bank Group constitutes the following Institutions :

• International Bank for Reconstruction and Development (IBRD)
• International Development Association (IDA)
• International Finance Commission (IFC)
• Multilateral Investment Guarantee Agency (MIGA)
• International Centre for Settlement of Investment Disputes (ICSID)
• The IDA and the IBRD constitute the World Bank. Robert Zoellick is its present head.

1. International Bank for Re – Construction and Development (IBRD)

• IBRD was established in December 1945 with the IMF on the basis of the recommendations of the Bretton Woods Conference. That is why IMF and IBRD are called Bretton Wood Twins. Its head – quarter is at Washington D.C.
• At present, 186 nations are members of the IBRD.
• Objective is of assisting of member nations in the economic re – construction and development of their territories.
• The bank makes its loans on terms that are reasonable but at the same time sufficient to earn a profit in the form of interest and commission fees. The loans are long – term, generally repaid in the currencies loaned over 20 Years, with a five – year grace period.
• May also guarantee loans by private investors.
• The loans may be made to member countries, to their political sub – divisions or to private business enterprises in their territories. If the borrower is not a government guarantee of the member – government concerned is required.

Difference between IBRD and IMF

• The banks lends while funds sells i.e., it makes available the necessary currency of a particular country in case of a shortage.
• The bank assists by advancing long – term credits for development and re – construction, whereas IMF facilitates the balanced growth of international trade by short – term credit.

2. International Development Association (IDA) India

• IDA is an associate institution of IBRD and is known as the Soft Loan Window of World Bank.
• It was established on September 24, 1960.
• It provides loans to its member countries and no interest is charged on these long – term loans (but there is a 0.75 per cent annual service charge on disbursed credits). Most IDA commitments are made to countries with annual per capita incomes less than $785. Credits are extended for terms of 40 Years for least developed countries and 35 Years for other countries.
• As an affiliate of IBRD, its directors, officers and staff are those of the IBRD.

3. International Finance Corporation (IFC)

• Established in 1955, the IFC became a UN specialized agency in 1957.
• It provides loans to private industries of developing nations without any government guarantee and also promotes the additional capital investment in these countries.

International Monetary Fund (IMF)

• Established on December 27, 1945 in Washington D.C. on the recommendations of Bretton Woods Conference. But it started its operations on March 1, 1947.
• At present 185 nations are members of the IMF. Dominique Strauss Kahn is the present MD of IMF.

Objectives of IMF

• To promote international monetary co – operation.
• To ensure balanced international trade.
• To ensure exchange rate stability.
• To eliminate or to minimize exchange restrictions by promoting the system of multilateral payments.
• To grant economic assistance to member countries for eliminating the adverse imbalances in balance of payments.
• Main function is to stabilize exchange.
• Offers facilities to the member nations for the expansion of international trade, the control of international exchange and to avoid competitive exchange depreciation.
• The capital resources of the IMF comprise Special Drawing Rights (SDRs) and currencies that members pay under quotas calculated for them when they join the IMF.
• Every IMF member is required to subscribe to the IMF an amount equal to its quota. The quota of a member is largely determined by its economic conditions relative to other members. An amount, not exceeding 25 per cent of the quota, is to be paid in reserve assets, the balance in member’s own currency.
• The quota determines both the amount of foreign exchange a member may borrow from the Fund and its voting power on IMF policy matters. The members with the largest quotas are USA, Japan and Germany in first, second and third spots. India is placed at the thirteenth spot (1961 per cent share in total quota).
• The IMF makes its resources available to its members to meet their short – term or medium – term payment difficulties, subject to established limits and conditions with respect to the amount of its drawing rights.
• Member – countries are given borrowing or drawing rights with the fund which they can use, together with their own nationally held international reserves, to finance the balance of payments deficits.

Multilateral Economic Relations

Multilateral Economic Relations

Agendas of the multilateral fora, during the period, were generally under the shadow of international financial turmoil, high food prices and volatile energy prices. India continued its active engagement with ASEM (Asia-Europe Meeting), BIMSTEC (Bay of Bengal Initiative for Multi-sectoral Technical and Economic Cooperation), BRIC (Brazil, Russia, India and China-May 2008), G-8-05, G-20, IBSA (India, Brazil and South Africa), IOR-ARC (Indian Ocean Rim Association for Regional Cooperation), ACD (Asia Cooperation Dialogue) etc, where it presented its perspective on financial crisis and other critical issues such as food, security, energy security, climate changes and sustainable development. The first IOR-ARC Film Festival was held in New Delhi in February-March 2008 as part of Indian initiatives announced at the 7^th IORARC Council of Ministers (COM) meeting held in Tehran in March 2007.
Secretary (ER) led the Indian delegation to the preparatory meeting of BRIC Deputy Foreign Ministers meeting in Russia in May 2008.
India hosted the 2^nd BIMSTEC (13/11/2008), and the 3^rd IBSA Summit in New Delhi during the period. Prime Minister Dr. Manmohan Singh led the Indian delegations to the ASEM Summit in Beijing, the G-20 Summit in Washington (15/11/2008) and informal interaction of Heads of State/Govt. of BRIC countries. Conclusion of the negotiations on the agreement on "trade in Goods" under the Comprehensive Economic Cooperation Agreement (CECA) between India and ASEAN was considered yet another milestone in India's "Look East" policy.

Indian Technical and Economic Cooperation (ITEC) Programme & Development Partnership (DP)

The Indian Technical and Economic Cooperation (ITEC) programme is the flagship programme of India's technical and economic cooperation efforts. In keeping with India's growing economic strength and international role, efforts were made to enhance and expand India's technical cooperation and development assistance to partner countries with emphasis on capacity building, transfer of technology and sharing of experiences. This involved 158 developing countries including 139 countries under ITEC in Asia, Africa, Central Asia, East Europe, Latin America and 19 countries under SCAAP (Special Commonwealth African Assistance Programme) in Africa. Around 5000 professionals, in Government and other sectors from 158 developing countries attended more than 200 courses conducted by institutions in India, both Government and in the private sector, under the civilian and defence training programmes. Special courses were organized for Africa, IOR-ARC, CIS, Afghanistan, Lao PDR, Yemen in various fields like management, WTO issues, labour, audit etc. Indian experts were deputed to advise and assist in diverse areas such as information technology, auditing, legal expertise, pharmacology, statistics and demography, public administration, textile and agriculture. Many projects were undertaken during the year in the field of information technology, small and medium enterprises, civil construction and vocational training in different parts of the world. Humanitarian assistance was also extended to countries affected by earthquake, cyclones, floods, etc.

Investment and Technology Promotion (ITP)

Economic Diplomacy continued to occupy an important place in India's foreign policy, acquiring a sharper focus in an increasingly interdependent and interconnected world. The Ministry, through the ITP Division, was actively engaged in the promotion and facilitation of foreign investment and trade. It participated in policy meetings of Foreign Investment Promotion Board and Department of Industrial Policy and Promotion, as well as other policy meetings concerning reforms and liberalization of the economy and simplification of investment procedures. ITP Division supplemented the overall efforts of the Government to boost FDI inflow into India, by reaching out to the investor community and organizing and funding promotional events in partnership with the private sector, apex business chambers and our Missions abroad.
Development aid, including grants and Lines of Credit (LOC), to developing countries in Latin America, Africa and Asia formed an important component of our Economic Diplomacy. While helping Indian companies get project contracts and orders for supply of goods in these developing countries, the LOCs have helped in infrastructure development in these regions thereby creating considerable goodwill for the country. During 2008-09. 17 LOCs worth US$ 744 million to 16 developing countries were approved.
Given the importance of energy security for India's development, a separate Energy Security Division has been established in March 2009 to coordinate with Energy Ministries and Indian Missions abroad. The Division worked closely with the Ministry of Petroleum and Natural Gas in organizing the India-CIS Roundtable on Hydrocarbons in November 2008 and Petrotech 2009, hosted/co-hosted seminars on India's energy options, commissioned studies on energy surplus countries and regions, was actively involved in energy security related seminars/conferences organised by other Ministries and Chamber of Commerce and Industry and extended assistance to Indian companies dealing with overseas energy collaborations and opportunities. It also took the initiative to set up a Working Group on energy with senior representatives of oil infrastructure PSUs.

Policy Planning and Research

The PP&R Division maintained close interaction with institutions and individuals specializing in policy research and analysis and extended financial assistance to various academic institutions/think-tanks located in different parts of the country for holding conferences. seminars, preparation of research papers, exchange of scholars on issues related to India's external relations and security with a view to derive invaluable inputs for the planning, formulation and implementation of our foreign policy.
Policy Planning and Research Division continued issuing Monthly Summary for the Cabinet. The Division also continued to edit and publish the Annual Report of the Ministry. The Report serves as a compendium of India's interaction with the rest of the world in the political, economic, and cultural fields, including the views of the Government on various facets of international relations.

Consular, Passport and Visa Services

During the year 3 new Passport Offices were opened at Amritsar, Dehradun and Coimbatore. All 37 Passport Offices have been computerized and issue machine printed and machine readable passports.
A total of 53.15 lakh passports were issued in 2008-09, an increase of approximately 6.5% % over the corresponding figure in 2007-08. The total revenue generated from all Passport Offices also increased to Rs.606 crore, an increase of approximately 5.5% over 2007-08.
The Ministry has been taking a number of measures to make the processing and issue of passports simpler and quicker for the comfort and convenience of the public. District Passport Cells (DPCs) have been opened at the district level to increase the efficiency of the receiving and verification process. Online submission of passport applications has been introduced in all Passport Offices. Also facilitation Counters and Help Desks have also been set up to assist applicants and also to attend to grievances/complaints expeditiously.
The Passport Seva Project launched by the Government of India is expected to result in the issue of new passports within three days after police verification and of all other passport services in one day. The Pilot Project is expected to begin at Chandigarh and Bengaluru by July-August 2009. It will be implemented fully to cover the entire country in 2010.
The Ministry has successfully implemented the project for centralized printing of Machine Readable Passports (MRPs) at CPV Division, New Delhi in respect of 140 Indian Missions/Posts abroad.
All diplomatic and official passports are now being issued as e-passports as part of the pilot project. Based on the experience gained from the pilot project, it is proposed to start issuance of e-passports in the ordinary, category by end 2009. During 2008, visa-waiver agreements were signed with Egypt, EI Salvador, Honduras, Nicaragua, South Africa and Turkey.
Extradition treaties were signed with Brazil, Australia, Iran and Egypt. The apostille attestation on documents was also started at branch secretariat offices of the Ministry at Chennai, Hyderabad, Kolkata and Guwahati with effect from 15 June 2008. During the year, 1,70,000 personal and educational documents and 1,71,000 commercial documents were attested by the Ministry. In addition to this, 80,000 documents were apostilled for use abroad in the member countries.

Administration

There are currently 171 resident Indian Missions and Posts abroad. During the year, a resident Indian Mission was opened in Iceland, while three new Missions are to be opened in the near future in Niger, Mali, and Guatemala. In order to address the Ministry's acute constraints of personnel in the face of India's growing diplomatic responsibilities, a 10-year plan has been developed to induct 514 additional positions in the Ministry in a phased manner.

Implementation of Official Language Policy and Propagation of Hindi Abroad

World Hindi Day was celebrated on 10 January 2008. Hindi Essay Competition was organized for foreign students studying Hindi at Kendriya Hindi Sansthan, Delhi University and Jawaharlal Nehru University.

External Publicity

The main activities of the Division were focused on dissemination of information on India's relations with its immediate neighbours as also with major countries of the world. The Division launched the first phase of the Media Monitoring Project for all users at Headquarters. This is aimed at streamlining the monitoring of media sources for the Ministry. The Project monitors Print, Web and Internet based media in a systematic manner and provides 5 daily products to users on a real time basis.
The Division used the opportunities provided by visits of the President of Iran, Mr. Ahamadnejad; President of Syria, Dr. Bashar Al-Assad; President of Egypt, Mr. Hosny Mubarak; Prime Minister of Nepal, Mr. Pushpa Karnal Dahal "Prachanda"; Prime Minister of Bhutan, Mr. Lyonchen Jigmi Y. Thinley and the President of the Russian Federation, Mr. Anatoly Medvedev to articulate India's position on important bilateral, regional and international issues. The Division also arranged joint press interaction with the visiting dignitaries during these visits. Special briefings by the official spokesperson and other senior officials of the Ministry were also held regularly on important international issues of concern to India.
Media delegations on President's visit to Brazil, Medico, Chile, Vietnam and Indonesia; Prime Minister's visits to Bhutan, Japan (G-8 summit), Sri Lanka (15^th SAARC summit), USA and France (UNGA and Civil Nuclear Cooperation Agreement), China, Oman and Qatar (bilateral); Vice President's visits to Kazakhstan and Turkmenistan; and the External Affairs, Minister's visits to Saudi Arabia, Pakistan, Russia, Australia, Egypt and USA were facilitated by XP Division.

Public Diplomacy

PD Division, in order to fulfill its mandate of outreach activities inside and outside India, and audio-visual and print publicity to effectively project India's Foreign Policy to the wider public, works in collaboration with researchers, think tanks, civil society, media and industry, within India and abroad.
Last year, the Division organized a number of seminars and conferences to effectively project India's foreign policy, and to support Track Two interaction with other countries. A large number of Indian and foreign academics, researchers, senior officials, representatives of industry and the media were involved in the events organized by the Division. Among the major activities of the Division were conferences on our relations with Nepal. Afghanistan, Kazakhstan, Pakistan and Ethiopia. The Division also organized conferences on varied themes such as the fallout of the cold war, development of North-East, terrorism and climate change. With a view to familiarize policy and opinion makers from other countries with modern India and our concerns and interests, the Division hosted visits of delegations from the UK, Mauritius, South Africa. Tajikistan and Taiwan, as well as a delegation of PIO journalists from 16 countries.
The Division commissioned documentaries projecting our interests as also Indian culture and heritage. Some of the documentaries commissioned by the Division were screened at international festivals and awarded special prizes/special mention. The Division's flagship magazine 'India Perspectives' covering a variety of subjects completed twenty years; an anniversary issue and two Special Issues on Indian Publishing and Indian Cinema were brought out.

Foreign Service Institute

The Government of India established the Foreign Service Institute (FSI) in 1986, primarily to cater to the professional training needs of the Indian Foreign Service of the Ministry of External Affairs. The new building of the Foreign Service Institute was formally inaugurated on 14 November 2007 by Hon'ble Minister of External Affairs, Shri Pranab Mukherjee.
FSI has diversified its activities to include courses of interest to staff and officers at all levels of the Ministry of External Affairs, other Civil Services and Foreign Diplomats and Correspondents. FSI organizes and conducts training programmes for MEA Staff, IFS Probationers, Directors and for Joint Secretaries (since 2009), as well as courses for other Civil Services, Foreign Diplomats and Diplomatic Correspondents, The first Mandatory mid-career training programme for Joint Secretary-level IFS officers of the 1979-80 Batches was organised by FSI from 13 April to 1 May, 2009 in collaboration with the Indian School of Business, Hyderabad.
The Training Programmes for the IFS probationers of 2007 and 2008 batches was conducted by FSI between 22007-2009, which included an attachment with IIM, Bangaluru, district training and other field visits. On successful completion of their Training Programme, the Bimal Sanyal Award Ceremony was organized for the probationers of the 2007 batch. IFS probationers of the 2008 batch completed their Mission Orientation Programme in 2009, with 10 probationers visiting Sri Lanka, led by Dean (FSI), and 10 IFS probationers visiting Bhutan.
The Professional Course for Foreign Diplomats (PCFD), which is FSI's main programme for foreign diplomats, was launched in 1992. Around three PCFDs are conducted every year (duration - 4 - 6 weeks). The 47^th PCFD was held in February-March 2009 and more than 1500 foreign diplomats from over 100 countries have been trained at FSI. An MoU providing institutional framework of cooperation between FSI and its counterpart institute in Ukraine was signed. Delegations from Bangladesh, Romania and China visited FSI. The Second Meeting of Deans of Diplomatic Institutes of IBSA (India-Brazil-South Africa) countries was held at FSI in September, 2008. A Seminar on the subject of "India-Brazil-South Africa Cooperation: Challenges and Opportunities" was also held on this occasion.
In response to specific requests from friendly countries, the FSI has also conducted special courses for diplomats from Afghanistan , Canada, Iraq, Laos, Maldives (a Special Course for Diplomats, from Maldives commenced on 14th July, 2009 and will conclude on 12th August, 2009), Norway, Palestine, Sudan and Vietnam. Training programmes for the ASEAN countries have become an annual feature since 2006. In addition to active contacts with specialized institutions and academic bodies in India, FSI has established institutional linkages with 34 counterpart institutions in other countries. Over the last year FSI organized several special lectures by eminent Indian and foreign experts and dignitaries. The Foreign Defence officers attending the 48th Course at National Defence College visited FSI and a lecture was arranged for them.
The Abid Hussain Committee, composed of distinguished diplomats and chaired by Shri Abid Hussain, finalized a report in 2009 making useful recommendations on the further upgradation of the Foreign Service Institute.
The Foreign Service Institute has career foreign service officers at its core, headed by the Dean, who is of the rank of Secretary in the Ministry of External Affairs. FSI has an extensive guest faculty drawn from specialists in the academic and research community, think tanks, other ministries-departments of the Government of India, the media, public life, industry and trade, and retired civil servants.

Indian Council of Cultural Relations

The primary objective of the Indian Council of Cultural Relations [ICCR] is to establish, revive and strengthen cultural relations and mutual understanding between India and other countries. The Council's flagship project, the Rabindranath Tagore Centre (RTC) was inaugurated on 1 June 2008 by Shri Pranab Mukherjee, former Minister for External Affairs.
The Council organized large-scale cultural events with foreign and Indian troupes, on the sidelines of major Summits, such as the India-Africa Summit, IBSA Summit. Arab League Meeting etc. It also coordinated the South Asia Cultural Festival and held cultural programmes for VVIP visitors. A number of festivals were held, such as Sufi Music Festival in Srinagar, Malhaar Festival and Festival of Indian Classical Dance by foreign artists residing in India. An important highlight of 2008 was the "Year of Russia in India" which included a series of high-profile cultural performances. In addition, 50 cultural troupes from different countries were hosted by the Council, with performances held in Delhi and other cities. The Council also provided financial support to NGOs and cultural institutions to jointly organize cultural activities. The Council hosted 19 eminent visitors from different countries under the Distinguished Visitors Programme.
The twenty-one Indian Cultural Centres abroad continued to vigorously promote India's 'Soft Power'. The expanded Cultural Wing of the Indian Embassy in Beijing became functional in the year and preparations were made to open new Cultural Centres in Bangkok, Kuala Lumpur, Tokyo and Dhaka.
The Council organized a series of cultural festivals abroad in Syria, Egypt, Netherlands, Argentina and Hungary, which included diverse and varied cultural programmes. The 'Year of India in Russia' was inaugurated by President, ICCR on 31 March 2009 in Moscow. The Council sponsored 93 cultural delegations which visited 73 countries and also sponsored a number of outstanding artistes abroad and provided travel grants. The Council continued to manage 21 long-term and 12 short term Chairs in Indian Studies in various foreign Universities.
An important focus area of ICCR has been facilitating admission of foreign students in Indian Universities. In 2008-09, ICCR administered scholarships for approximately, 3200 foreign students under various schemes. This included 1778 new scholarships, including 500 scholarships for Afghan students.
The Council opened two new Regional Offices at Cuttack and Shillong during the year to enhance its reach to North-east and eastern India. The Council also organized major exhibitions showcasing Indian and foreign art and sculpture; disseminated 6 journals in 5 different languages and also assisted various organizations/institutes in organizing 24 International Conferences in India.
President of India presented the Jawaharlal Nehru Award for International Understanding for 1995 to President of the Arab Republic of Egypt, H.E. Mr. Mohamed Hosny Mubarak on 18^th November 2008. The Maulana Abul Kalam Memorial Lecture 2009 was delivered by Mr. Martin Luther King III on the subject "A New Nonviolent Revolution".

Indian Council of World Affairs

Indian Council of World Affairs (ICWA) continued in 2008 to develop as a think-tank and an important platform for discussions of foreign affairs in India ICWA signed 6 MoUs for bilateral cooperation, viz, with Centre for Strategic Studies (CSS) of Ministry of Foreign Affairs of Afghanistan, New Zealand Institute of International Affairs (NIIA) Wellington, Australian Institute of International Affairs (AIIA) Melbourne, The Emirates Centre for Strategic Studies and Research (ECSSR) Abu Dhabi, Asia Centre of Bengaluru & Centre for Research in Rural and Industrial Development (CRRID) Chandigarh. Council sponsored a Joint Study between. India-Central Asia Foundation (ICAF), ICWA and Department of International Relations, Al-Farabi Kazakh National University, Almaty, Kazakhstan on "Contemporary Process of Political Modernizing; Experience of Central Asian States and India". The Council organized 7 lectures, 4 seminars/conferences, 6 bilateral dialogues & 14 background briefings, book release/panel discussions.

Achievements of the Ministry of Overseas Indian Affairs

Overseas Indian Citizenship Scheme

The Government launched Overseas Citizenship of India Scheme (OCI Scheme) w.e.f. Dec. 2, 2005 to facilitate life long visa-free travel to India and certain economic education and cultural benefits to Persons of Indian Origin (PIOs). Around 4.56 lakh OCI documents until 31st July have been issued by the Government.

Overseas Workers Resource Centre (OWRC)

In order to educate the intending emigrants about the risks involved in irregular migration and the precautions to be taken while seeking overseas employment and to provide need based information to overseas emigrants an Overseas Workers Resource centre (OWRC) has been established. The Centre operates a toll free 24x7 helpline for the purpose.

Council for Promotion of Overseas Employment (CPOE)

A council for Promotion of Overseas Employment (CPOE) has been established which will serve as a strategic think-tank to conduct market research, identify employment opportunities in the international labour market, disseminate market information to stakeholders, do skill profiling to identify skill gaps and plan appropriate interventions for addressing such gaps, devise strategies to respond to the market dynamics and enable intending emigrants to reap the demographic dividends of globalisation.

Overseas Indian Facilitation Centre (OIFC)

An Overseas Indian Facilitation Centre - a Not for Profit Trust - serves as a single window to promote overseas Indian Investment in India to provide a variety of business advisory services to overseas Indians and Knowledge Networking.

Establishing a PIO University

With a view to providing benefits to the children of Overseas Indians by offering courses of international standards the Government has decided to establish PIO/NRI University at Bengaluru by the Manipal Academy of Higher Education Trust, Manipal. The University will have 50% seats earmarked for PIOs/NRIs and the remaining 50% for resident Indian students.

Setting Up of Overseas Indian Centres

The Government has approved setting up of three Overseas Indian Centres at Dubai, Kuala-Lumpur and Washington to provide medical, legal and financial counseling to the Overseas India workers. Counsellor (Community Affairs) has already been approved at Abu Dhabi and Washington.

India Development Foundation of Overseas Indians

India Development Foundation of Overseas Indians, is a not-for-profit trust registered to provide a credible window for Overseas Indian Philanthropy in India's Social development. The objective of the foundation is to facilitate philanthropic activities by Overseas Indians, including through innovative projects and instruments such as micro credit for rural entrepreneurs, self-help groups for economic empowerment of women, best practice interventions in primary education and technology interventions in rural delivery.

Global-Indian Network of Knowledge

Global Indian Network of Knowledge (Global INK), an electronic platform will connect people of Indian origin from a variety of disciplines including scientists working abroad, recognized as leaders in their respective fields, not just in their country of residence but globally as well, with knowledge users at the national and sub-national levels in India. The network will serve as a strategic 'virtual think-tank'. The outcome targeted will be the germination of ideas on development, identification of the key elements in addressing the challenges to development and articulating and mapping out solutions through innovation and technological interventions.

INDIA-MALAYSIA FTA EFFECTIVE FROM JULY 1, 2011

The free trade agreement between India and Malaysia will come into force from July 1, 2011, giving Indian professionals like accountants, engineers and doctors access to the key South-East Asian nation. In addition, exports of items of considerable interest to India, like basmati rice, mangoes, eggs, trucks, motorcycles and cotton garments, will attract lower or no duty in Malaysia with the implementation of the Comprehensive Economic Cooperation Agreement (CECA), according to a statement of the Commerce Ministry issued in New Delhi on June 30, 2011. It said sensitive sectors like agriculture, fisheries, textiles, chemicals and automobiles have been given protection from imports without duty or with significant cuts. The CCEA will facilitate temporary movement of business people, including contractual service suppliers and independent professionals in accounting, architecture, engineering services, medical and dental, nursing and pharmacy, computer services and management consulting. The agreement will also help boost cross-border investment between the two countries, which achieved bilateral trade of USD 10 billion in the 2010-11 fiscal. With the help of the opening of trade in goods and services, bilateral trade between India and Malaysia is expected to reach USD 15 billion by 2015, it said. "The CECA creates an attractive operating environment for the business communities of both countries," the statement said.
An agreement for freeing trade in goods has already been implemented with the 10-nation Association of Southeast Asian Nations (ASEAN). The pact with Malaysia will lead to tariff liberalisation beyond the India-ASEAN FTA commitments, which were implemented by both countries on 1st January 2010. India has
also freed trade with South Korea, while a similar agreement with Japan will come into effect from August.
ASEAN Free Trade Area (AFTA) is a trade bloc agreement by the Association of Southeast Asian Nations supporting local manufacturing in all ASEAN countries. The AFTA agreement was signed on 28 January 1992 in Singapore.

When the AFTA agreement was originally signed, ASEAN had six members, namely, Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand. Vietnam joined in 1995, Laos and Myanmar in 1997 and
Cambodia in 1999. AFTA now comprises ten countries of ASEAN. All the four latecomers were required to sign the AFTA agreement in order to join ASEAN, but were given longer time frames in which to meet
AFTA's tariff reduction obligations.

The primary goals of AFTA seek to:

 Increase ASEAN's competitive edge as a production base in the world market through the elimination, within ASEAN, of tariffs and non-tariff barriers; and
 Attract more foreign direct investment to ASEAN. The primary mechanism for achieving the goals given
above is the Common Effective Preferential Tariff (CEPT) scheme, which established a schedule for phased initiated in 1992 with the self-described goal to increase the "region's competitive advantage as a
production base geared for the world market".
Countries that agree to eliminate tariffs among themselves:
 Brunei
 Indonesia
 Malaysia
 Philippines
 Singapore
 Thailand
 Myanmar
 Cambodia
 Laos
 Vietnam
Regular Observers
 Papua New Guinea
 Timor-Leste
The most recent ASEANmeeting was observed also by :
 China
 Japan
 South Korea
 India
 Australia
 New Zealand

ASEAN Plus Three
ASEAN Plus Three (APT) is a forum that functions as a coordinator of cooperation between theAssociation of Southeast Asian Nations and the three East Asian nations of China, Japan, and South Korea. The first leaders' meeting was held in 1997 and the group's significance and importance was strengthened by the Asian Financial Crisis. The grouping was institutionalised by 1999.
ASEAN Plus Three, in establishing the Chiang Mai Initiative, has been credited as forming the basis for financial stability in Asia, the lack of such stability being a contributing factor to the Asian Financial Crisis. The
Asian Currency Unit (ACU) is a proposed weighted index of currencies for ASEAN+3.
The ACU was inspired by the now defunct European Currency Unit, replaced by the Euro. The Asian Currency Unit's purpose is to help stabilize the region's financial markets. The ACU
as it is proposed is a currency basket and not a real currency, i.e., a weighted index of East Asian currencies
that will function as a benchmark for regional currency movements. The Asian Development Bank is currently reviewing different options concerning the technical aspects related to the ACU calculation, including the nature of the basket, the choice of fixed weights vs. fixed units, the selection of currencies to be included in the basket, the choice of weights, the criteria for their periodical revision, and other aspects as well. The Asian Development Bank was to announce the details of the ACU in March 2006 or later. However external pressures delayed this announcement although the concept was still being studied in detail. A panel discussion in February 2007 cited technical and political obstacles as having prevented the project from advancing. The unit, limited to ASEAN+3, was said to be still moving forward by mid- July 2007.

India Proposed/Suspended Current Bilateral/ Multilateral FTA's
 SAFTA (Bangladesh, Bhutan, the Maldives, Nepal, Pakistan, Sri Lanka and Afghanistan)
 ASEAN (ASEAN-India Free Trade Area)
 European Union (final stage)
 Sri Lanka
 Singapore
 Thailand (separate from FTA agreement with ASEAN)
 Malaysia (separate from FTA agreement with ASEAN)
 Japan
 European Free Trade Association (EFTA) (negotiation ongoing)
 Canada (negotiation ongoing)
 South Korea (India- Korea CEPA)
 Iran has bilateral agreements with the following countries and blocs:
 Venezuela
 Japan has bilateral agreements with the following countries and blocs:
 ASEAN (signed in Hanoi as of 1 April 2008)
 Chile (signed in 2006)
 Brunei (signed in 2007)
 Indonesia
 Malaysia (Japan- Malaysia Economic Partnership Agreement signed in 2005)
 Mexico (took effect in 2005)
 Philippines (signed in 2006)
 Thailand (Japan- Thailand Economic Partnership Agreement signed in 2007)
 Singapore (signed in 2002)
 Vietnam (signed in 2008)
 Switzerland (signed in 2009)
 Kazakhstan (Entry into force: 11 November 1995)
 Moldova (Entry into force: 21 November 1996)
 Russian Federation (Entry into force: 24 April 1993)
 Ukraine (Entry into force: 19 January 1998)
 Uzbekistan (Entry into force: 20 March 1998)
 Lebanon has bilateral agreements with the following countries and blocs:
 Gulf Cooperation Council (GCC)

Bilateral free trade agreements:
This is list of free trade agreements between two sides, where each side could be a country (or othercustoms territory), a trade bloc or an informal group of countries. Every customs union, trade common market, economic union, customs and monetary union andeconomic and monetary union has also a free trade area.
 ASEAN - Australia - New Zealand Free Trade Area (AANZFTA) is a free trade area between ASEAN and ANZCERTA, in effect as of 1 January 2010
 ASEAN-China Free Trade Area (ACFTA), in effect as of 1 January 2010
 ASEAN-India Free Trade Area (AIFTA), in effect as of 1 January 2010
 ASEAN-Japan Comprehensive Economic Partnership (AJCEP), in effect as of 1 December 2008
 ASEAN-Korea Free Trade Area (AKFTA), in effect as of 1 January 2010

BANKING IN INDIA

Overview

• Organized banking in India originated in the late 18^th century
• The State Bank of India, headquartered in Mumbai, is the largest bank in India
  
• Currently, India has 88 Scheduled Banks – 27 public sector banks, 31 private banks and 38 foreign banks
• The public sector banks hold over 75% of banking assets in the country, followed by private banks (18.2%) and foreign banks (6.5%)
• Central banking in India is the responsibility of the Reserve Bank of India
• Banking in India is the responsibility of the Department of Financial Services, Ministry of Finance
  
• Currently there are 170 scheduled commercial banks, which includes 91 regional rural banks, 19 nationalised banks, 8 banks in the SBI group and the IDBI
  
• There are 4 non-scheduled commercial banks in the country
  

History of banking in India

• The oldest banks in India were the General Bank of India and the Bank of Hindustan, both founded in 1786. However both banks are now defunct
• The oldest existing bank in India is the State Bank of India. The origins of the SBI go back to the Bank of Calcutta (founded 1806, renamed Bank of Bengal in 1809)
• The Bank of Madras was established in 1843 and the Bank of Bombay in 1868
• The Bank of Bengal, Bank of Bombay and Bank of Madras merged to form the Imperial Bank of India in 1921. The Imperial Bank of India was renamed the State Bank of India in 1955. Although a normal commercial bank, the Imperial Bank of India also functioned as a central governmental until 1935
  
• The Reserve Bank of India was established in 1935
  
• The oldest joint stock bank is the Allahabad Bank, established in 1865.
  
• The first entirely Indian joint stock bank was the Oudh Commercial Bank (Faizabad, 1881). However, it failed in 1958. The next oldest is the Punjab National Bank (Lahore, 1895)
  
• The Dakshina Kannada and Udipi districts of Karnataka (called South Canara), is known as the Cradle of Indian Banking
  

Nationalisation of banks

• The Government of India nationalised 14 of the largest banks in 1969
  
• This achieved by an ordinance to the effect in July 1969. This was formalized by the Banking Companies (Acquisition and Transfer of Undertaking) Bill 1969
• The banks that were nationalized in 1969 were: Allahabad Bank, Bank of Baroda, Bank of India, Bank of Maharastra, Canara Bank, Central Bank of India, Dena Bank, Indian Bank, Indian Overseas Bank, Punjab National Bank, Syndicate Bank, UCO Bank, Union Bank of India and United Bank of India
• In 1980, six more banks were nationalized. The banks that were nationalized in 1980 were: Andhra Bank, Corporation Bank, Oriental Bank of Commerce, Punjab and Sind Bank, New Bank of India and Vijaya Bank
• In 1993, the New Bank of India was merged with Punjab National Bank. There are 19 nationalized banks in operation today
  
• Following this, the GoI controlled about 91% of the banking business in India

RESERVE BANK OF INDIA

Overview

• The Reserve Bank of India is the central bank of India
  
• It was established in 1935 and nationalised in 1949. Its headquarters was initially Calcutta, but moved to Bombay in 1937. It is currently headquartered in Mumbai.
  
• The first Governor of the RBI was Sir Osborne Smith. The current Governor of the RBI is Dr. Duvvuri Subbarao
  
• The RBI functions under the provisions of the Reserve Bank of India Act 1934
  

Objectives

• Maintain price stability
• Ensure adequate flow of credit
  
• Protect depositor’s interests
• Provide cost-effective banking services to the public
• Facilitate external trade and payment
• Promote development of foreign exchange market in India
  
• Provide supplies of currency notes and coins in the country
  

Functions

• Formulates, implements and monitors monetary policies
• Regulates operations of banking and financial services sector in the country
• Manages the Foreign Exchange Management Act 1999
  
• Issues, exchanges and destroys currency notes and coins
• Perform promotional functions to support national objectives
• Acts as banker to banks by maintaining accounts of all scheduled banks
• Acts as banker to the Central and state governments

List of RBI Governors

S. No.	Governor	Tenure	Notes
1	Sir Osborne Smith	1935-1937	First Governor of the RBI Did not sign any bank notes
2	Sir James Taylor	1937-1943	Governor during WWII Started the practice of signing bank notes
3	Sir C D Deshmukh	1943-1949	First Indian Governor of RBI Oversaw Independence & Partition Represented India at the Bretton Woods Conference 1944 Served as Minister of Finance 1950-1956
4	Sir Benegal Rama Rao	1949-1957	Longest serving Governor Was Indian Ambassador to USA prior to RBI Witnessed commencement of Five Year Plans, and transformation of Imperial Bank of India to SBI
5	K G Ambegaonkar	Jan 1957 – Feb 1957	Did not sign any bank notes
6	H V R Iyengar	1957-1962	Witnessed introduction of decimal coinage Variable cash reserve ration (CRR) introduced
7	P C Bhattacharya	1962-1967
8	L K Jha	1967-1970	Witnessed nationalization of banks (1969) Appointed as Ambassador to US in 1970
9	B N Adarkar	May 1970 – June 1970	Served as India’s Executive Director at the IMF
10	S Jagannathan	1970-1975	Witnessed oil shock, expansion of banking services, shift to floating rates Relinquished office to serve as Executive Director at IMF
11	N C Sen Gupta	May 1975 – Aug 1975
12	K R Puri	1975-1977
13	M Narasimhan	May 1977 – Nov 1977	Only Governor to be appointed from the Reserve Bank cadre Chairperson of Committee on Financial System (1991) and Committee on Banking Sector Reforms (1998) Served as Executive Director for India at the World Bank and the IMF
14	Dr. I G Patel	1977-1982	Served as Secretary at the United Nations Development Programme (UNDP) Witnessed demonetisation of high denomination bank notes and “gold auctions” Witnessed nationalization of six banks (1980) Secured IMF’s Extended Fund Facility (1981). This was the largest arrangement of the IMF at the time
15	Dr. Manmohan Singh	1982-1985	Witnessed comprehensive legal reforms in banking sector
16	A Ghosh	Jan 1985 – Feb 1985
17	R N Malhotra	1985-1990	Served as Executive Director of IMF prior to RBI Made efforts to develop money markets
18	S Venkitaraman	1990-1992	Managed balance of payments crisis Adopted IMF’s stabilisation programme Supervised devaluation of the Rupee Witnessed launch of economic reforms
19	Dr. C Rangarajan	1992-1997	Ushered in unprecedented central bank activism Introduced comprehensive measures to strengthen and improve efficiency of banking sector Establishment of unified exchange rate Cap on automatic finance by the Bank to the Government
20	Dr. Bimal Jalan	1997-2003	Represented India on the Executive Boards of the IMF and World Bank prior to RBI
21	Dr Y V Reddy	2003-2008	Executive Director to IMF prior to RBI
22	Dr. D Subbarao	2008-Present	Prior to RBI, he has been Secretary to the PM’s Economic Advisory Council (2005-2007) Lead economist in the World Bank (1999-2004) Finance Secretary to the Government of Andhra Pradesh (1993-1998) Joint Secretary, Dept. of Economic Affairs (1988-1993)

STATE BANK OF INDIA

• The State Bank of India is derived from the Imperial Bank of India (1921), which was nationalised in 1955
  
• The State Bank of India is the oldest bank in India. It traces its ancestry to the Bank of Calcutta, founded in 1806.
• It is headquartered in Mumbai
• The State Bank of India is also the largest bank in India. It has a market share of about 20% in deposits and advances
  
• The State Bank Group consists of the SBI and its subsidiary banks viz. State Bank of Indore, State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala, State Bank of Travancore
  
• The SBI is one of the Big Four Banks in India, along with ICICI Bank, Axis Bank and HDFC Bank
  
• The SBI was ranked as the 29^th most reputable company in the world by Forbes in 2009
  

CATEGORIES OF BANKS IN INDIA

Structure of banking in India. Number of banks given in brackets

• Commercial Banks
  
  • Commercial banks are those that cater to the regular banking and financial needs of the public
    
  • Commercial banks include public sector banks and private sector banks. Public sector banks include the State Bank Group and other nationalised banks, while private sector banks include Indian banks and foreign banks
    
• Cooperative Banks
  
  • Cooperative banking is retail and commercial banking organised on a cooperative basis. Cooperative banks include credit unions, savings and loans associations and building societies and cooperatives
  • Cooperative banks operate on the principles of cooperation – mutual help, democratic decision making and open membership
  • They are governed by controls of the RBI as well as state governments. Cooperative banks in general operate under the Cooperative Credit Societies Act 1904, but large Urban Cooperative Banks operate under the Banking Regulation Act 1949
    
  • Cooperative banks in India are the primary financiers of agricultural activities, small scale industries and self-employed workers
    
  • Cooperative banks in India were first established in the late 19^th century, following the success of such banks in Britain and Germany
    
  • The Anyonya Cooperative Bank Ltd. (ABCL) was the first cooperative bank in India. It was established Vithal Laxman (aka Bhausaheb Kavthekar) in 1889 under the name Anyonya Sahayakari Mandali Cooperative Bank Ltd. The bank closed functioning in March 2008 following an order by the RBI. Re-opening is under consideration
    
• Regional Rural Banks
  
  • Regional Rural Banks (RRBs) were first established in 1975
    
  • Initially five RRBs were established at Moradabad (UP), Gorapkhpur (UP), Bhiwani (Haryana), Jaipur (Rajasthan), Malda (WB). Currently there are 91 RRBs
    
  • RRBs exist in all states except Goa and Sikkim
    
  • The share of RRBs in agricultural credit is around 5%
    
• Scheduled Banks
  
  • Scheduled Banks are those banks that have been included in Second Schedule of the RBI Act 1934
    
  • Scheduled Banks must fulfil two conditions
    
    • The paid up capital and collected funds of the bank must not be less than Rs 5 lakhs
    • Any activity of the bank should not adversely affect the interest of deposition
  • Scheduled Banks enjoy the following benefits
    • They are eligible for obtaining loans on Bank Rate from the RBI
    • They acquire membership of the clearing house
  • Scheduled Banks include commercial banks, cooperative banks and regional rural banks
  • There are around 302 Scheduled Banks in operation
• Non-Scheduled Banks
  
  • Non-Scheduled Banks are those that are not included in the list of Scheduled Banks
  • They have to follow the Cash Reserve Ratio (CRR) condition. However, they are not compelled to deposit these funds with the RBI
  • They can avail loans from the RBI only under emergencies, and not for daily activities
    
  • There are only 4 Non-Scheduled Banks in operation

GOVERNMENT ENTITIES IN BANKING

1. Small Industries Development Bank of India (SIDBI)
   
   1. Established in 1990, headquarters Lucknow
   2. The main objective of the SIDBI is to aid the growth and development of micro, small and medium scale industries in India
   3. It provides direct credit to micro, small and medium enterprises, supports microfinance institutions and refinancing to state level finance bodies
2. Industrial Development Bank of India (IDBI)
   
   1. Established in 1964, headquarters Mumbai
   2. The IDBI is the tenth largest development bank in the world. It is one of India’s largest public sector bank
   3. Its main objective is to provide credit and other banking facilities to industries in India
   4. However, in 2004 the IDBI was re-designated as a commercial bank, following the Industrial Development Bank (Transfer of Undertaking and Repeal) Act 2003, and renamed IDBI Ltd
   5. Following this, the commercial banking division, IDBI Bank was merged into IDBI
3. Industrial Finance Corporation of India (IFCI)
   
   1. The IFCI is the first development finance institution in the country to cater to the needs of Indian industry
   2. Established 1948, headquarters New Delhi
   3. The IFCI was established to provide long term low interest credit to corporate borrowers
   4. In 1993, the IFCI was re-registered as a commercial company under the Indian Companies Act 1956, and renamed IFCI Ltd
4. National Bank for Agricultural and Rural Development (NABARD)
   
   1. Partly owned by the RBI
      
   2. Established 1982, headquarters Mumbai
   3. NABARD serves as the apex development bank in India for economic activities in rural areas
      
   4. The main objective of NABARD is to facilitate credit flow for agriculture and small scale industries
      
   5. NABARD provides refinance to State Cooperative Agriculture and Rural Development Banks (SCARDBs), State Cooperative Banks (SCBs), Regional Rural Banks (RRBs), Commercial Banks and other financial institutions approved by the RBI
      
   6. NABARD coordinates the rural financing activities of all institutions engaged in developmental work
      
   7. NABARD has 28 regional offices (state capitals), one Sub Office (in Port Blair) and one Special Cell (in Srinagar)
      
   8. NABARD is famous for its Self Help Group (SHG) Bank Linkage Programme, which serves as an important tool for microfinance
      
5. National Housing Bank (NHB)
   
   1. Wholly owned subsidiary of the RBI
   2. Established in 1987, headquarters New Delhi
   3. Established mainly to provide long term finance to individual households
6. Export-Import Bank of India (EXIM Bank)
   
   1. Established 1981, headquarters Mumbai
   2. The main objective of the EXIM Bank is to provide financial assistance to exporters and importers with a view to promoting the country’s international trade
   3. It acts as the apex financial institution for financing foreign trade in India
7. Bharatiya Reserve Bank Note Mudran Private Ltd (BRBNMPL)
   
   1. Wholly owned subsidiary of the RBI
   2. Established in 1995, headquarters Bangalore
   3. Main function is to augment the product of bank notes to meet demand
   4. The company manages two presses: Mysore and Salboni (West Bengal)
8. Deposit Insurance and Credit Guarantee Corporation (DICGC)
   
   1. Wholly owned subsidiary of the RBI
   2. Established in 1962, headquarters Mumbai
   3. India was one of the first countries to provide deposit insurance
   4. Main objective is to provide insurance to depositors against collapse and bankruptcy of banks
   5. Provides deposit insurance coverage up to Rs 100,000

INSURANCE IN INDIA

Overview

• The first insurance company in India was the Oriental Life Insurance Company, founded in Calcutta 1818. However, it is now defunct
• The first Indian insurance company was the Bombay Mutual Life Assurance Society, founded 1870
• The oldest existing insurance company is the National Insurance Company, founded 1906
  
• Insurance was nationalised in 1956 and then opened up to private sector in 1999.
• Currently the government allows 26% FDI in the insurance sector
• The largest life insurance company in India is the Life Insurance Corporation
• Insurance falls under the purview of the Department of Financial Services, Ministry of Finance
  

Nationalisation of insurance

• Life insurance in India was nationalised by the Life Insurance Corporation Act 1956
• All 245 life-insurance companies in India at the time were merged to form the Life Insurance Corporation (LIC).
• The General Insurance Business Act 1972 nationalised general insurance companies
• The existing 100 general insurance companies were amalgamated into the General Insurance Corporation of India (GIC).

GOVERNMENT BODIES IN INSURANCE

All government bodies in insurance function under the Ministry of Finance unless otherwise noted
Life Insurance Corporation (LIC)

• Established 1956, headquarters Mumbai
• The LIC is the largest life insurance company in India and also the nation’s largest investor
  
• It funds close to 25% of the government’s expenses
• The LIC owns the following subsidiaries
  • Life Insurance Corporation of India International: provides USD denominated policies to NRIs
  • LIC Nepal
  • LIC Lanka
  • LIC Housing Finance

General Insurance Corporation (GIC)

• Established 1972, headquarters Mumbai
• The GIC is a holding company for four subsidiary companies
  
  • Oriental Insurance Company Ltd (New Delhi)
  • New India Assurance Company Ltd (Mumbai)
  • National Insurance Corporation Ltd (Kolkata)
  • United India Insurance Company Ltd (Chennai)
• The GIC is the sole re-insurance company in India
  
• The GIC covers insurance for the entire spectrum of the economy from shoes to aircraft, from agricultural wells to oil wells, from chemical manufactures to satellite launches etc

Insurance Regulatory and Development Authority (IRDA)

• Established 2000, headquarters Hyderabad
• The IRDA was set up to protect the interests of policy holders, and to regulate the growth of the insurance industry
• Some of the functions of the Authority include
  • Regulate investment of funds by insurance companies
  • Regulate maintenance of margin of solvency
  • Adjudicate disputes between insurers and intermediaries

Agriculture Insurance Company (AIC)

• Established 2003, headquarters New Delhi
• The AIC is promoted by the GIC and NABARD
• The AIC is under administrative control of Ministry of Finance, but under operative control of Ministry of Agriculture
• The AIC offers area based and weather crop insurance schemes to farmers
  
• It is one of the largest agriculture insurance companies in the world

POLICIES AND PROGRAMMES

Social Security Scheme

• A Social Security Fund (SSF) was set up in 1988-89 for providing social security through group insurance schemes to the weaker sections of society
• The SSF is administered by the LIC
  
• The SSF provides up to Rs 5000 on death from natural causes and Rs 25,000 upon death/disability due to accident

Janashree Bima Yojana (JBY)

• The Janashree Bima Yojana was launched in 2000
• The JBY is a group insurance scheme. The minimum membership of the group should be 25 persons
• The JBY is administered by the LIC
  
• The JBY provides for insurance protection to rural and urban poor. The scheme covers BPL people and above poverty line people who belong to certain identified occupational groups
• The scheme provides for cover of Rs 20,000 on natural death. The scheme also provides pension of Rs 200

Aam Aadmi Bima Yojana (AABY)

• Launched in 2007
• Provides insurance to the head of the family of rural landless households
  
• Covers natural death and accidental death/disability
• The scheme also provides additional benefit of scholarships for max two children between 9^th and 12^th standards
• Administered by the LIC
  

Universal Health Insurance Scheme (UHIS)

• The UHIS is meant to improve access of health care to poor families
• Scheme provides for reimbursement of medical expenses, death and compensation due to loss of earning capacity
• The UHIS targets only BPL families
  

National Agriculture Insurance Scheme (NAIS)

• Launched in 1999
• Protects farmers against losses due to natural calamities such as flood, drought, pestilence etc
  
• Scheme is implemented by the Agriculture Insurance Company (AIC)
  
• The Scheme is available to all farmers irrespective of the size of their land holdings
  
• The Scheme covers all food crops and oil seeds. It also covers some commercial and horticultural crops
• The scheme has until now covered more than 1.3 million farmers and 211 million hectares of land

Pilot Weather Based Crop Insurance Scheme (WBCIS)

• Launched in 2007, on a pilot basis
• The WBCIS aims to cover farmers against anticipated crop failure due to adverse weather conditions
  
• The scheme is based on the fact that weather parameters can affect crop yield even when the farmer has taken all care to ensure a good harvest
  
• The payouts are based on historical data that determine weather thresholds/triggers beyond which crop losses are expected
  
• The WBCIS is implemented by the AIC
  
• The scheme is currently being implemented on 30 major crops including horticultural crops
  
• Currently the scheme covers more than 110,000 farmers and 1.4 million hectares of land

South Indian States way ahead in achieving MDGs

South India is way ahead in achieving the millennium development goal (MDG) targets for maternal mortality ratio, infant mortality rate and the total fertility rate.

The latest figures of the Sample Registration System (SRS), released by the office of the Registrar General of India suggest that the undivided Bihar, Madhya Pradesh, Uttar Pradesh, and Assam still lagged behind in improving their respective MMR, IMR and TFR figures despite being high focus States where the bulk of Centre's attention and funds are directed.

As in every other sector, Kerala tops the list of performance by having achieved the MDG well ahead of the schedule. The MMR in Kerala is 81 as against the stipulated 109, the IMR is 12 as against the required 28 and the TFR at 1.7 as set by the United Nations. The under five mortality rate is already14, though India had to achieve a figure of 42 by 2015.

Closely following Kerala is Tamil Nadu that has managed to bring down its MMR to 97, IMR to 28, TFR to 1.7 and U5MR to 33.

Andhra Pradesh is closing in with its MMR at 134, IMR at 49, TFR at 1.9 and U5MR at 52. Karnataka's MMRis at 178 and IMR at49 and it has achieved a TFR at 2 and U5MR is 50. Maharashtra and West Bengal have also shown remarkable improvements.

The worst performers have been the undivided States of U.P, Madhya Pradesh and Bihar — clubbed as the empowered action group (EAG) and Assam. The MMR is highest among these States at 308. The maximum IMR (67) and U5MR (89) has been reported from Madhya Pradesh while Bihar has the highest TFR of 3.9, followed closely by Uttar Pradesh, Chhattisgarh, and Jharkhand — all with a TFR of over 3.

Impressive drop in maternal, infant mortality rates

India has impressively brought down its maternal and infant mortality rates, indicating that it was close to achieving the millennium development goals (MDGs) set by the United Nations though the total fertility rate (TFR) has remained stationary after showing a decline during the past few years.

The maternal mortality ratio (MMR) – number of women dying due to maternal causes per 1, 00, 000 live births – has come down to 212 (2007-09) from 254 in 2004-06. The MDG target for India is to bring down maternal deaths to 109 by 2015. Similarly, the infant mortality rate (IMR) – the number of infant deaths per 1,000 live births – has registered a 3 point decline at 50 from 53 in 2008, thought every 6th death in the country pertains to an infant. Sadly enough, the mortality rate of girls is higher than boys indicating a “worrisome trend” for the government.

The under 5 mortality rate (U5MR), denoting the number of children (0-4 years) who die before reaching an age of five years, has declined by 5 points over 2008 to touch 64 in 2009 as against 69 in 2008. However, the average number of children born to a woman during her entire reproductive period or the total fertility rate (TFR) remained stationary at 2.6 during 2008 to 2009.

Releasing a latest statistics of the Sample Registration System (SRS), the Registrar General of India (RGI) and Census Commissioner C. Chandramouli said the progress of India on this front is vital for overall reduction in the world as every fifth woman dying due to reproductive causes is an Indian. The 17 per cent decline in the MMR has been most significant in Empowered Action group of States and Assam from 375 to 308, indicating a fall of 18 per cent. Among the Southern States, the decline has been from 149 to 127 (15 per cent) and in the other States from 174 to 149 (14 per cent). “It is worth noting that the number of States that have achieved the MDG target in 2007-09 has gone up to 3 as compared to 1 in 2004-06. Kerala, with a figure at 81, was the sole State earlier which has now been joined by Tamil Nadu at 97 and Maharashtra at 104. Andhra Pradesh, West Bengal, Gujarat and Haryana are in closer proximity to achieving the target,'' Mr Chandramouli said.

The maximum infant mortality rate has been reported from Madhya Pradesh (67) against the national average of 50, while Kerala, again, is among the earliest to achieve the MDG target of 28, well ahead of the set date. Kerala's IMR is 12 with Tamil Nadu just at 28. While Delhi is at 33, Maharashtra at 31 and West Bengal at 33 are within the reaching distance.

The TFR for the country remained constant at 2.6 during 2008-09 with Bihar reporting the highest TFR at 3.9 while Kerala and Tamil Nadu continuedits outstanding performance with the lowest rate at 1.7. The TFR level of 2.1 has been attained by nine States and Union Territories with Andhra Pradesh at 1.9, Karnataka (2.0), Kerala (1.7), Maharashtra (1.9), Punjab (1.9), Tamil Nadu (1.7) and West Bengal (1.9). At present, on average, a rural woman, (having a TFR of 2.9) at the national level, would have about one child more than an urban one(having a TFR of 2.0).

A uniform decline of about 5 points is seen in male and female under 5 maternal rate with the maximum reported from Madhya Pradesh (89) and the minimum in Kerala (14). As of now Kerala, Tamil Nadu (33), Maharashtra (36), Delhi (37) and West Bengal (40) have achieved the MDG target of 42 by 2015.

Foreign Tourist Arrivals and Foreign Exchange Earnings During June 2011

Foreign Tourist Arrivals (FTAs) during the Month of June 2011 was 3.96 lakh as compared to FTAs of 3.70 lakh during the month of June 2010 and 3.52 lakh in June 2009. There has been a growth of 7.2 % in June 2011 over June 2010 as compared to a growth of 4.9 % registered in June 2010 over June 2009. The 7.2% growth rate in FTAs in June, 2011 was higher than 7 % growth rate observed in May, 2011. FTAs during the period January-June 2011 were 29.19 lakh with a growth of 10.9 %, as compared to the FTAs of 26.32 lakh with a growth of 8.9 % during January-June 2010 over the corresponding period of 2009

Foreign Exchange Earnings (FEE) during the month of June 2011 were Rs. 5440 crore as compared to Rs. 4751 crore in June 2010 and Rs. 3801 crore in June 2009. The growth rate in FEE in Rupee terms in June 2011 over June 2010 was 14.5 % as compared to 25 % in June 2010 over June 2009. FEE from tourism in rupee terms during January-June 2011 were Rs. 35163 crore with a growth of 12.1 %, as compared to the FEE of Rs. 31373 crore with a growth of 27.1 % during January-June 2010 over the corresponding period of 2009. FEE in US$ terms during the month of June 2011 were US$ 1213 million as compared to FEE of US$ 1020 million during the month of June 2010 and US$ 796 million in June 2009. The growth rate in FEE in US$ terms in June 2011 over June 2010 was 18.9 % as compared to the growth of 28.1 % in June 2010 over June 2009. FEE from tourism in terms of US$ during January-June 2011 were US$ 7811 million with a growth of 14.2 %, as compared to US$ 6842 million with a growth of 36.6 % during January-June 2010 over the corresponding period of 2009.