The Supreme Court of India on 12 April 2012 upheld the constitutional validity of the Right to Education Act, 2009, which mandates 25 per cent free seats to the poor in government and private unaided schools uniformly across the country. The apex court clarified that its judgment will come into force from 12 April 2012. However, the act will apply uniformly to government and unaided private schools except unaided private minority schools.
A three-judge bench of Chief Justice S H Kapadia and justices K S Radhakrishnan and Swantanter Kumar gave the ruling.
The bench had reserved its verdict on 3August 2012 on a batch of petitions by private unaided institutions which had contended that the section 12 (1)(c) of RTE Act violates the rights of private educational institutions under Article 19(1) (g) which provided autonomy to private managements to run their institutions without governmental interference.
Right to Education Act (RTE) was passed by the Indian parliament on 4 August 2009.The act came into force on 1 April 2010. It has the provision of free and compulsory education for children between 6 and 14 in India under Article 21A of the Indian Constitution. India became one of 135 countries to make education a fundamental right of every child.
Section 12(1)(c) of the RTE act says that every recognized school imparting elementary education is obliged to admit underprivileged children even if it is not aiaded by the government to meet its expenses.
Saturday, April 14, 2012
Friday, April 13, 2012
India, one of the top clean-energy economies
India continued its ascent as a top destination for private clean energy investment, according to a research report released by The Pew Charitable Trusts, a non-profit organisation.
The country’s ‘National Solar Mission,’ with a goal to have 20 GW of solar power installed by 2020, helped drive the seven-fold jump in solar energy investments to $4.2 billion, the report said. India received $4.6 billion and an additional 2.8 GW of capacity was installed over the course of the year. India now has 22.4 gigawatts of installed clean energy generating capacity.
According to the report, India’s clean energy sector continued to flourish in 2011, with private investment increasing 54 per cent to $10.2 billion, placing the country at sixth position among the G-20 nations. This was the second highest growth rate among the G-20 nations.
“Clean energy investment, excluding research and development, has grown by 600 per cent since 2004 on the basis of effective national policies that create market certainty,” said Ms Phyllis Cuttino, Director of Pew’s Clean Energy Program.
“On a number of measures, India has been one of the top performing clean energy economies in the 21{+s}{+t} century, registering the fifth highest five-year rate of investment growth and eighth highest in installed renewable energy capacity,” the report said.
Globally, investment grew to a record $263 billion in 2011, a 6.5 per cent increase over the previous year. The US reclaimed the top spot among all G-20 nations and attracted $48 billion.
However, with $45.5 billion in private investments, China continued to be a hub of clean energy activity — leading the world in wind energy investment and deployment as well as wind and solar manufacturing.
Germany received $30.6 billion, ranking third among G-20 nations. The combination of falling prices and growing investments accelerated installation of clean energy generating capacity by a record 83.5 GW in 2011 bringing the total to 565 GW globally. This represents almost 50 per cent more than installed nuclear power capacity.
Bloomberg New Energy Finance is Pew’s research partner.
Wednesday, April 4, 2012
Economy - Terms and definitions
Adam Smith (1723 – 1790) Regarded as the father of modern Economics. Author of Wealth of Nations.
Aggregate monetary resources Broad money without time deposits of post office savings organisation (M3).
Automatic stabilisers Under certain spending and tax rules, expenditures that automatically increase or taxes that automatically decrease when economic conditions worsen, therefore, stabilizing the economy automatically.
Autonomous change A change in the values of variables in a macroeconomic model caused by a factor exogenous to the model.
Autonomous expenditure multiplier The ratio of increase (or decrease) in aggregate output or income to an increase (or decrease) in autonomous spending.
Balance of payments A set of accounts that summarise a country’s transactions with the rest of the world.
Balanced budget A budget in which taxes are equal to government spending.
Balanced budget multiplier The change in equilibrium output that results from a unit increase or decrease in both taxes and government spending.
Bank rate The rate of interest payable by commercial banks to RBI if they borrow money from the latter in case of a shortage of reserves.
Barter exchange Exchange of commodities without the mediation of money.
Base year The year whose prices are used to calculate the real GDP.
Bonds A paper bearing the promise of a stream of future monetary returns over a specified period of time. Issued by firms or governments for borrowing money from the public.
Broad money Narrow money + time deposits held by commercial banks and post office savings organisation.
Capital Factor of production which has itself been produced and which is not generally entirely consumed in the production process.
Capital gain/loss Increase or decrease in the value of wealth of a bondholder due to an appreciation or reduction in the price of her bonds in the bond market.
Capital goods Goods which are bought not for meeting immediate need of the consumer but for producing other goods.
Capitalist country or economy A country in which most of the production is carried out by capitalist firms.
Capitalist firms These are firms with the following features (a) private ownership of means of production (b) production for the market (c) sale and purchase of labour at a price which is called the wage rate (d) continuous accumulation of capital.
Cash Reserve Ratio (CRR) The fraction of their deposits which the commercial banks are required to keep with RBI.
Circular flow of income The concept that the aggregate value of goods and services produced in an economy is going around in a circular way. Either as factor payments, or as expenditures on goods and services, or as the value of aggregate
production.
Consumer durables Consumption goods which do not get exhausted immediately but last over a period of time are consumer durables.
Consumer Price Index (CPI) Percentage change in the weighted average price level. We take the prices of a given basket of consumption goods.
Consumption goods Goods which are consumed by the ultimate consumers or meet the immediate need of the consumer are called consumption goods. It may include services as well.
Corporate tax Taxes imposed on the income made by the corporations (or private sector firms).
Currency deposit ratio The ratio of money held by the public in currency to that held as deposits in commercial banks.
Deficit financing through central bank borrowing Financing of budget deficit by the government through borrowing money from the central bank. Leads to increase in money supply in an economy and may result in inflation.
Depreciation A decrease in the price of the domestic currency in terms of the foreign currency under floating exchange rates. It corresponds to an increase in the exchange rate.
Depreciation Wear and tear or depletion which capital stock undergoes over a period of time.
Devaluation The decrease in the price of domestic currency under pegged exchange rates through official action.
Double coincidence of wants A situation where two economic agents have complementary demand for each others’ surplus production.
Economic agents or units Economic units or economic agents are those individuals or institutions which take economic decisions.
Effective demand principle If the supply of final goods is assumed to be infinitely elastic at constant price over a short period of time, aggregate output is determined solely by the value of aggregate demand. This is called effective demand principle.
Entrepreneurship The task of organising, coordinating and risk-taking during production.
Ex ante consumption The value of planned consumption.
Ex ante investment The value of planned investment.
Ex ante The planned value of a variable as opposed to its actual value.
Ex post The actual or realised value of a variable as opposed to its planned value.
Expenditure method of calculating national income Method of calculating the national income by measuring the aggregate value of final expenditure for the goods and services produced in an economy over a period of time.
Exports Sale of goods and services by the domestic country to the rest of the world.
External sector It refers to the economic transaction of the domestic country with the rest of the world.
Externalities Those benefits or harms accruing to another person, firm or any other entity which occur because some person, firm or any other entity may be involved in an economic activity. If someone is causing benefits or good externality to another, the latter does not pay the former. If someone is inflicting harm or bad externality to another, the former does not compensate the latter.
Fiat money Money with no intrinsic value.
Final goods Those goods which do not undergo any further transformation in the production process.
Firms Economic units which carry out production of goods and services and employ factors of production.
Fiscal policy The policy of the government regarding the level of government spending and transfers and the tax structure.
Fixed exchange rate An exchange rate between the currencies of two or more countries that is fixed at some level and adjusted only infrequently.
Flexible/floating exchange rate An exchange rate determined by the forces of demand and supply in the foreign exchange market without central bank intervention.
Flows Variables which are defined over a period of time.
Foreign exchange Foreign currency, all currencies other than the domestic currency of a given country.
Foreign exchange reserves Foreign assets held by the central bank of the country.
Four factors of production Land, Labour, Capital and Entrepreneurship. Together these help in the production of goods and services.
GDP Deflator Ratio of nominal to real GDP.
Government expenditure multiplier The numerical coefficient showing the size of the increase in output resulting from each unit increase in government spending.
Government The state, which maintains law and order in the country, imposes taxes and fines, makes laws and promotes the economic wellbeing of the citizens.
Great Depression The time period of 1930s (started with the stock market crash in New York in 1929) which saw the output in the developed countries fall and unemployment rise by huge amounts.
Gross Domestic Product (GDP) Aggregate value of goods and services produced within the domestic territory of a country. It includes the replacement investment of the depreciation of capital stock.
Gross fiscal deficit The excess of total government expenditure over revenue receipts and capital receipts that do not create debt.
Gross investment Addition to capital stock which also includes replacement for the wear and tear which the capital stock undergoes.
Gross National Product (GNP) GDP + Net Factor Income from Abroad. In other words GNP includes the aggregate income made by all citizens of the country, whereas GDP includes incomes by foreigners within the domestic economy and excludes incomes earned by the citizens in a foreign economy.
Gross primary deficit The fiscal deficit minus interest payments.
High powered money Money injected by the monetary authority in the economy. Consists mainly of currency.
Households The families or individuals who supply factors of production to the firms and which buy the goods and services from the firms.
Imports Purchase of goods and services by the domestic country to the rest of the world.
Income method of calculating national income Method of calculating national income by measuring the aggregate value of final factor payments made (= income) in an economy over a period of time.
Interest Payment for services which are provided by capital.
Intermediate goods Goods which are used up during the process of production of other goods.
Inventories The unsold goods, unused raw materials or semi-finished goods which a firm carries from a year to the next.
John Maynard Keynes (1883 – 1946) Arguably the founder of Macroeconomics as a separate discipline.
Labour Human physical effort used in production.
Land Natural resources used in production – either fixed or consumed.
Legal tender Money issued by the monetary authority or the government which cannot be refused by anyone.
Lender of last resort The function of the monetary authority of a country in which it provides guarantee of solvency to commercial banks in a situation of liquidity crisis or bank runs.
Liquidity trap A situation of very low rate of interest in the economy where every economic agent expects the interest rate to rise in future and consequently bond prices to fall, causing capital loss. Everybody holds her wealth in money and
speculative demand for money is infinite.
Macroeconomic model Presenting the simplified version of the functioning of a macroeconomy through either analytical reasoning or mathematical, graphical representation.
Managed floating A system in which the central bank allows the exchange rate to be determined by market forces but intervene at times to influence the rate.
Marginal propensity to consume The ratio of additional consumption to additional income.
Medium of exchange The principal function of money for facilitating commodity exchanges.
Money multiplier The ratio of total money supply to the stock of high powered money in an economy.
Narrow money Currency notes, coins and demand deposits held by the public in commercial banks.
National disposable income Net National Product at market prices + Other Current Transfers from the rest of the World.
Net Domestic Product (NDP) Aggregate value of goods and services produced within the domestic territory of a country which does not include the depreciation of capital stock.
Net interest payments made by households Interest payment made by the households to the firms – interest payments received by the households.
Net investment Addition to capital stock; unlike gross investment, it does not include the replacement for the depletion of capital stock.
Net National Product (NNP) (at market price) GNP – depreciation.
NNP (at factor cost) or National Income (NI) NNP at market price – (Indirect taxes – Subsidies).
Nominal exchange rate The number of units of domestic currency one must give up to get an unit of foreign currency; the price of foreign currency in terms of domestic currency.
Nominal (GDP) GDP evaluated at current market prices.
Non-tax payments Payments made by households to the firms or the government as non-tax obligations such as fines.
Open market operation Purchase or sales of government securities by the central bank from the general public in the bond market in a bid to increase or decrease the money supply in the economy.
Paradox of thrift As people become more thrifty they end up saving less or same as before in aggregate.
Parametric shift Shift of a graph due to a change in the value of a parameter.
Personal Disposable Income (PDI) PI – Personal tax payments – Non-tax payments.
Personal Income (PI) NI – Undistributed profits – Net interest payments made by households – Corporate tax + Transfer payments to the households from the government and firms.
Personal tax payments Taxes which are imposed on individuals, such as income tax.
Planned change in inventories Change in the stock of inventories which has occurred in a planned way.
Present value (of a bond) That amount of money which, if kept today in an interest earning project, would generate the same income as the sum promised by a bond over its lifetime.
Private income Factor income from net domestic product accruing to the private sector + National debt interest + Net factor income from abroad + Current transfers from government + Other net transfers from the rest of the world.
Product method of calculating national income Method of calculating the national income by measuring the aggregate value of production taking place in an economy over a period of time.
Profit Payment for the services which are provided by entrepreneurship.
Public good Goods or services that are collectively consumed; it is not possible to exclude anyone from enjoying their benefits and one person’s consumption does not reduce that available to others.
Purchasing power parity A theory of international exchange which holds that the price of similar goods in different countries is the same.
Real exchange rate The relative price of foreign goods in terms of domestic goods.
Real GDP GDP evaluated at a set of constant prices.
Rent Payment for services which are provided by land (natural resources).
Reserve deposit ratio The fraction of their total deposits which commercial banks keep as reserves.
Revaluation A decrease in the exchange rate in a pegged exchange rate system which makes the foreign currency cheaper in terms of the domestic currency.
Revenue deficit The excess of revenue expenditure over revenue receipts.
Ricardian equivalence The theory that consumers are forward looking and anticipate that government borrowing today will mean a tax increase in the future to repay the debt, and will adjust consumption accordingly so that it will have the
same effect on the economy as a tax increase today.
Speculative demand Demand for money as a store of wealth.
Statutory Liquidity Ratio (SLR) The fraction of their total demand and time deposits which the commercial banks are required by RBI to invest in specified liquid assets.
Sterilisation Intervention by the monetary authority of a country in the money market to keep the money supply stable against exogenous or sometimes external shocks such as an increase in foreign exchange inflow.
Stocks Those variables which are defined at a point of time.
Store of value Wealth can be stored in the form of money for future use. This function of money is referred to as store of value.
Transaction demand Demand for money for carrying out transactions.
Transfer payments to households from the government and firms Transfer payments are payments which are made without any counterpart of services received by the payer. For examples, gifts, scholarships, pensions.
Undistributed profits That part of profits earned by the private and government owned firms which are not distributed among the factors of production.
Unemployment rate This may be defined as the number of people who were unable to find a job (though they were looking for jobs), as a ratio of total number of people who were looking for jobs.
Unit of account The role of money as a yardstick for measuring and comparing values of different commodities.
Unplanned change in inventories Change in the stock of inventories which has occurred in an unexpected way.
Value added Net contribution made by a firm in the process of production. It is defined as, Value of production – Value of intermediate goods used.
Wage Payment for the services which are rendered by labour.
Wholesale Price Index (WPI) Percentage change in the weighted average price level. We take the prices of a given basket of goods which is traded in bulk.
Aggregate monetary resources Broad money without time deposits of post office savings organisation (M3).
Automatic stabilisers Under certain spending and tax rules, expenditures that automatically increase or taxes that automatically decrease when economic conditions worsen, therefore, stabilizing the economy automatically.
Autonomous change A change in the values of variables in a macroeconomic model caused by a factor exogenous to the model.
Autonomous expenditure multiplier The ratio of increase (or decrease) in aggregate output or income to an increase (or decrease) in autonomous spending.
Balance of payments A set of accounts that summarise a country’s transactions with the rest of the world.
Balanced budget A budget in which taxes are equal to government spending.
Balanced budget multiplier The change in equilibrium output that results from a unit increase or decrease in both taxes and government spending.
Bank rate The rate of interest payable by commercial banks to RBI if they borrow money from the latter in case of a shortage of reserves.
Barter exchange Exchange of commodities without the mediation of money.
Base year The year whose prices are used to calculate the real GDP.
Bonds A paper bearing the promise of a stream of future monetary returns over a specified period of time. Issued by firms or governments for borrowing money from the public.
Broad money Narrow money + time deposits held by commercial banks and post office savings organisation.
Capital Factor of production which has itself been produced and which is not generally entirely consumed in the production process.
Capital gain/loss Increase or decrease in the value of wealth of a bondholder due to an appreciation or reduction in the price of her bonds in the bond market.
Capital goods Goods which are bought not for meeting immediate need of the consumer but for producing other goods.
Capitalist country or economy A country in which most of the production is carried out by capitalist firms.
Capitalist firms These are firms with the following features (a) private ownership of means of production (b) production for the market (c) sale and purchase of labour at a price which is called the wage rate (d) continuous accumulation of capital.
Cash Reserve Ratio (CRR) The fraction of their deposits which the commercial banks are required to keep with RBI.
Circular flow of income The concept that the aggregate value of goods and services produced in an economy is going around in a circular way. Either as factor payments, or as expenditures on goods and services, or as the value of aggregate
production.
Consumer durables Consumption goods which do not get exhausted immediately but last over a period of time are consumer durables.
Consumer Price Index (CPI) Percentage change in the weighted average price level. We take the prices of a given basket of consumption goods.
Consumption goods Goods which are consumed by the ultimate consumers or meet the immediate need of the consumer are called consumption goods. It may include services as well.
Corporate tax Taxes imposed on the income made by the corporations (or private sector firms).
Currency deposit ratio The ratio of money held by the public in currency to that held as deposits in commercial banks.
Deficit financing through central bank borrowing Financing of budget deficit by the government through borrowing money from the central bank. Leads to increase in money supply in an economy and may result in inflation.
Depreciation A decrease in the price of the domestic currency in terms of the foreign currency under floating exchange rates. It corresponds to an increase in the exchange rate.
Depreciation Wear and tear or depletion which capital stock undergoes over a period of time.
Devaluation The decrease in the price of domestic currency under pegged exchange rates through official action.
Double coincidence of wants A situation where two economic agents have complementary demand for each others’ surplus production.
Economic agents or units Economic units or economic agents are those individuals or institutions which take economic decisions.
Effective demand principle If the supply of final goods is assumed to be infinitely elastic at constant price over a short period of time, aggregate output is determined solely by the value of aggregate demand. This is called effective demand principle.
Entrepreneurship The task of organising, coordinating and risk-taking during production.
Ex ante consumption The value of planned consumption.
Ex ante investment The value of planned investment.
Ex ante The planned value of a variable as opposed to its actual value.
Ex post The actual or realised value of a variable as opposed to its planned value.
Expenditure method of calculating national income Method of calculating the national income by measuring the aggregate value of final expenditure for the goods and services produced in an economy over a period of time.
Exports Sale of goods and services by the domestic country to the rest of the world.
External sector It refers to the economic transaction of the domestic country with the rest of the world.
Externalities Those benefits or harms accruing to another person, firm or any other entity which occur because some person, firm or any other entity may be involved in an economic activity. If someone is causing benefits or good externality to another, the latter does not pay the former. If someone is inflicting harm or bad externality to another, the former does not compensate the latter.
Fiat money Money with no intrinsic value.
Final goods Those goods which do not undergo any further transformation in the production process.
Firms Economic units which carry out production of goods and services and employ factors of production.
Fiscal policy The policy of the government regarding the level of government spending and transfers and the tax structure.
Fixed exchange rate An exchange rate between the currencies of two or more countries that is fixed at some level and adjusted only infrequently.
Flexible/floating exchange rate An exchange rate determined by the forces of demand and supply in the foreign exchange market without central bank intervention.
Flows Variables which are defined over a period of time.
Foreign exchange Foreign currency, all currencies other than the domestic currency of a given country.
Foreign exchange reserves Foreign assets held by the central bank of the country.
Four factors of production Land, Labour, Capital and Entrepreneurship. Together these help in the production of goods and services.
GDP Deflator Ratio of nominal to real GDP.
Government expenditure multiplier The numerical coefficient showing the size of the increase in output resulting from each unit increase in government spending.
Government The state, which maintains law and order in the country, imposes taxes and fines, makes laws and promotes the economic wellbeing of the citizens.
Great Depression The time period of 1930s (started with the stock market crash in New York in 1929) which saw the output in the developed countries fall and unemployment rise by huge amounts.
Gross Domestic Product (GDP) Aggregate value of goods and services produced within the domestic territory of a country. It includes the replacement investment of the depreciation of capital stock.
Gross fiscal deficit The excess of total government expenditure over revenue receipts and capital receipts that do not create debt.
Gross investment Addition to capital stock which also includes replacement for the wear and tear which the capital stock undergoes.
Gross National Product (GNP) GDP + Net Factor Income from Abroad. In other words GNP includes the aggregate income made by all citizens of the country, whereas GDP includes incomes by foreigners within the domestic economy and excludes incomes earned by the citizens in a foreign economy.
Gross primary deficit The fiscal deficit minus interest payments.
High powered money Money injected by the monetary authority in the economy. Consists mainly of currency.
Households The families or individuals who supply factors of production to the firms and which buy the goods and services from the firms.
Imports Purchase of goods and services by the domestic country to the rest of the world.
Income method of calculating national income Method of calculating national income by measuring the aggregate value of final factor payments made (= income) in an economy over a period of time.
Interest Payment for services which are provided by capital.
Intermediate goods Goods which are used up during the process of production of other goods.
Inventories The unsold goods, unused raw materials or semi-finished goods which a firm carries from a year to the next.
John Maynard Keynes (1883 – 1946) Arguably the founder of Macroeconomics as a separate discipline.
Labour Human physical effort used in production.
Land Natural resources used in production – either fixed or consumed.
Legal tender Money issued by the monetary authority or the government which cannot be refused by anyone.
Lender of last resort The function of the monetary authority of a country in which it provides guarantee of solvency to commercial banks in a situation of liquidity crisis or bank runs.
Liquidity trap A situation of very low rate of interest in the economy where every economic agent expects the interest rate to rise in future and consequently bond prices to fall, causing capital loss. Everybody holds her wealth in money and
speculative demand for money is infinite.
Macroeconomic model Presenting the simplified version of the functioning of a macroeconomy through either analytical reasoning or mathematical, graphical representation.
Managed floating A system in which the central bank allows the exchange rate to be determined by market forces but intervene at times to influence the rate.
Marginal propensity to consume The ratio of additional consumption to additional income.
Medium of exchange The principal function of money for facilitating commodity exchanges.
Money multiplier The ratio of total money supply to the stock of high powered money in an economy.
Narrow money Currency notes, coins and demand deposits held by the public in commercial banks.
National disposable income Net National Product at market prices + Other Current Transfers from the rest of the World.
Net Domestic Product (NDP) Aggregate value of goods and services produced within the domestic territory of a country which does not include the depreciation of capital stock.
Net interest payments made by households Interest payment made by the households to the firms – interest payments received by the households.
Net investment Addition to capital stock; unlike gross investment, it does not include the replacement for the depletion of capital stock.
Net National Product (NNP) (at market price) GNP – depreciation.
NNP (at factor cost) or National Income (NI) NNP at market price – (Indirect taxes – Subsidies).
Nominal exchange rate The number of units of domestic currency one must give up to get an unit of foreign currency; the price of foreign currency in terms of domestic currency.
Nominal (GDP) GDP evaluated at current market prices.
Non-tax payments Payments made by households to the firms or the government as non-tax obligations such as fines.
Open market operation Purchase or sales of government securities by the central bank from the general public in the bond market in a bid to increase or decrease the money supply in the economy.
Paradox of thrift As people become more thrifty they end up saving less or same as before in aggregate.
Parametric shift Shift of a graph due to a change in the value of a parameter.
Personal Disposable Income (PDI) PI – Personal tax payments – Non-tax payments.
Personal Income (PI) NI – Undistributed profits – Net interest payments made by households – Corporate tax + Transfer payments to the households from the government and firms.
Personal tax payments Taxes which are imposed on individuals, such as income tax.
Planned change in inventories Change in the stock of inventories which has occurred in a planned way.
Present value (of a bond) That amount of money which, if kept today in an interest earning project, would generate the same income as the sum promised by a bond over its lifetime.
Private income Factor income from net domestic product accruing to the private sector + National debt interest + Net factor income from abroad + Current transfers from government + Other net transfers from the rest of the world.
Product method of calculating national income Method of calculating the national income by measuring the aggregate value of production taking place in an economy over a period of time.
Profit Payment for the services which are provided by entrepreneurship.
Public good Goods or services that are collectively consumed; it is not possible to exclude anyone from enjoying their benefits and one person’s consumption does not reduce that available to others.
Purchasing power parity A theory of international exchange which holds that the price of similar goods in different countries is the same.
Real exchange rate The relative price of foreign goods in terms of domestic goods.
Real GDP GDP evaluated at a set of constant prices.
Rent Payment for services which are provided by land (natural resources).
Reserve deposit ratio The fraction of their total deposits which commercial banks keep as reserves.
Revaluation A decrease in the exchange rate in a pegged exchange rate system which makes the foreign currency cheaper in terms of the domestic currency.
Revenue deficit The excess of revenue expenditure over revenue receipts.
Ricardian equivalence The theory that consumers are forward looking and anticipate that government borrowing today will mean a tax increase in the future to repay the debt, and will adjust consumption accordingly so that it will have the
same effect on the economy as a tax increase today.
Speculative demand Demand for money as a store of wealth.
Statutory Liquidity Ratio (SLR) The fraction of their total demand and time deposits which the commercial banks are required by RBI to invest in specified liquid assets.
Sterilisation Intervention by the monetary authority of a country in the money market to keep the money supply stable against exogenous or sometimes external shocks such as an increase in foreign exchange inflow.
Stocks Those variables which are defined at a point of time.
Store of value Wealth can be stored in the form of money for future use. This function of money is referred to as store of value.
Transaction demand Demand for money for carrying out transactions.
Transfer payments to households from the government and firms Transfer payments are payments which are made without any counterpart of services received by the payer. For examples, gifts, scholarships, pensions.
Undistributed profits That part of profits earned by the private and government owned firms which are not distributed among the factors of production.
Unemployment rate This may be defined as the number of people who were unable to find a job (though they were looking for jobs), as a ratio of total number of people who were looking for jobs.
Unit of account The role of money as a yardstick for measuring and comparing values of different commodities.
Unplanned change in inventories Change in the stock of inventories which has occurred in an unexpected way.
Value added Net contribution made by a firm in the process of production. It is defined as, Value of production – Value of intermediate goods used.
Wage Payment for the services which are rendered by labour.
Wholesale Price Index (WPI) Percentage change in the weighted average price level. We take the prices of a given basket of goods which is traded in bulk.
Tuesday, April 3, 2012
Nirmal Bharat: Total sanitation for all
"Sanitation is more important than Independence."
- Mahatma Gandhi
Importance of sanitation and WHO
Emphasising the relative importance, father of the nation Mahatma Gandhi had once said, "Sanitation is more important than Independence." India has done a commendable job in improving the sanitation facilities and providing clean drinking water to all.
India has acknowledged the fact that sanitation is a cornerstone in the well-being of a person as unsanitary surroundings form the base for spread of numerous diseases. The World Health Organisation (WHO) observes that polluted water is the root cause of 80 per cent diseases, a result of inadequate sanitation and sewage disposal methods. A huge number of people even today relieve themselves in the open contaminating water bodies and other natural resources. This shows that people need to be educated on the importance of sanitation and its use in rural and urban areas alike. Inadequate sanitation facilities and lack of awareness often result in a number of health problems such as intestinal worms, most commonly the human roundworm and the human hookworms. Occurrence of these diseases is generally very high in low-income semi-urban and rural areas. Therefore, sanitation is the basic infrastructure component that could contain excreta-related diseases.
The Central and State governments have now increased activities and funding to achieve the sanitation MDG (Millennium Development Goal) target. Water supply and sanitation is a State responsibility under the Constitution of India and following the 73rd and 74th Constitutional amendments, the States give the responsibility and powers to the Panchayati Raj Institutions (PRIs) and Urban Local Bodies (ULBs) to implement them.
Towards Nirmal Bharat: Vision and Strategy
The Ministry of Drinking Water and Sanitation has formulated the Rural Sanitation and Hygiene Strategy for the period of 2012 to 2022. The main purpose of this strategy is to provide a framework to realize the vision of Nirmal Bharat, an environment that is clean and healthy.
A Nirmal Bharat is a dream of clean and healthy nation that thrives and contributes to the welfare of our people. This vision seeks to visualize a nation in which the traditional habit of open defecation is entirely eliminated, the worth of every human being is respected, and quality of life is improved. To achieve this in rural areas, the department has following strategies and goals to meet in coming years.
- Completely eliminating the traditional habit of open defecation and making this a relic of the past.
- Operationalizing systems for the safe management of solid and liquid waste at scale.
- Promoting the adoption of improved hygiene behaviours.
- Addressing inequalities in access with special attention to vulnerable groups such as women, children, aged and disabled.
- Ensuring that providers have the capacity and resources to deliver services at scale.
- Stimulating and enabling cooperation across public sector agencies concerned with rural development, health, environment and vulnerable sections.
- Working with business, academic and voluntary partners to achieve the goals of the strategy.
Goals
- Creation of Totally Sanitized Environments - By 2017: The end of open defecation and achievement of a clean environment where human faecal waste is safely contained and disposed.
- Adoption of Improved Hygiene Practices - By 2020: All people in the rural areas, especially children and caregivers, adopt safe hygiene practices during all times.
- Solid and Liquid Waste Management - By 2022: Effective management of solid and liquid waste such that the village environment is kept clean at all times.
Report
Rural Sanitation and Hygiene Strategy (2012-2022)Total Sanitation Campaign (TSC)
The Central Rural Sanitation Programme of the Indian government began in 1986. It has now evolved into the Total Sanitation Campaign (TSC) which operates in various districts of States and Union Territories. TSC successfully encourages households to finance their own toilets while giving financial incentives to the underprivileged. A nationwide network of Rural Sanitary Marts and Production Centres has been established with government funds though they are run primarily by local governance, NGOs and community based organisations. These Marts and Production Centres provide the materials required for construction of sanitary latrines and other facilities. The outlets also serve as counseling centres for those interested in building a toilet on their own. This has boosted the supply chain, promoting sanitation and hygiene, catering to an estimated 138 million rural households in the country. Lessons from three decades of a government-driven programme suggest that visionary policies and a strong institutional setting helped in reaching more households without toilets. Although progress has happened, models in West Bengal, Maharashtra and other places show how informed strategies, strong peoples participation and strong monitoring yield results. Thus, the government has also put in efforts to focus on improvement of sanitation facilities in various schools, Anganwadi centres and communities.
TSC is a success story and achieved thousands of ODF (Open Defecation Free) villages in the last few years. For the urban areas, the National Urban Sanitation Policy was launched in 2008 to accelerate sanitation provision in cities.
Nirmal Gram Puraskar
To give fillip to the objectives of TSC, the government initiated the Nirmal Gram Puraskar . A cash award, the Puraskar recognises fully covered PRIs and those individuals and institutions that work towards ensuring full sanitation coverage in their area of operation. The project implemented in rural areas taking district as the unit. The main objectives of Nirmal Gram Puraskar are:
- To bring sanitation to the forefront of social and political discourse for development in rural India.
- To develop open defecation free and clean villages that will act as models for others to emulate.
- To give incentives to PRIs to sustain the initiatives taken by them to eliminate the practice of open defecation from their respective geographical area by way of full sanitation coverage.
- To increase social mobilization in TSC implementation, by recognizing the catalytic role played by organizations in attaining universal sanitation coverage.
United Nation Millennium Development Goal
The 2.6 billion people, 40 per cent of the world's population, still do not have access to toilets or latrine that is why sanitation is one of the key subjects in the United Nations Millennium Development Goal targets. The UN-backed Sanitation for all: the drive to 2015 aims to mobilize political will and collect resources to expand sanitation facilities across the globe.World Toilet Day
In 2001, the World Toilet Organization (WTO) declared 19th November as a World Toilet Day (WTD). The WTO created the WTD to raise global awareness of the struggle 2.6 billion face every day without access to proper and clean sanitation.
The WTD also highlights the health, emotional and psychological consequences the poor endures as a result of inadequate sanitation. The WTD's popularity is gaining momentum, and in 2010 there were 51 events on sanitation facilities spanning 19 countries.
Monday, April 2, 2012
Stuart Milne is new CEO of HSBC India
Mr Stuart Milne has been appointed Chief Executive Officer of HSBC India, effective April 1, 2012.
Mr Milne succeeds Mr Stuart A. Davis who, after three years in the role, will be moving to a new post within the organisation.
Mr Milne joined HSBC in 1981 in the UK. Most recently, Mr Milne has been Country Manager of Japan since 2007, where he served as President and Chief Executive Officer of Hongkong and Shanghai Banking Corporation Ltd, Chairman of HSBC Securities (Japan) Ltd and Chairman of HSBC Global Asset Management (Japan) K.K.
Mr Milne is British and graduated with Honours in Modern Arabic Studies from the University of Durham, England.
PSEs - Performance Overview
Public sector enterprises have been set up to serve the broad macro-economic objectives of higher economic growth, self-sufficiency in production of goods and services, long term equilibrium in balance of payments and low and stable prices. While there were only five Central Public Sector Enterprises (CPSEs) with a total investment of Rs. 29.00 crore at the time of the First Five Year Plan, there were as many 248 CPSEs (excluding 7 Insurance Companies) with a total investment of Rs. 6,66,848 crore as on 31st March, 2011.
A large number of CPSEs have been set up as Greenfield projects consequent to the initiatives taken during the Five Year Plans. CPSEs such as National Textile Corporation, Coal India Ltd.(and its subsidiaries) have, however, been taken over from the private sector consequent to their ‘nationalization’. Industrial companies such as Indian Petrochemicals Corporation Ltd., Modern Food Industries Ltd., Hindustan Zinc Ltd., Bharat Aluminium Company and Maruti Udyog Ltd., on the other hand, which were CPSEs earlier, ceased to be CPSEs after their ‘privatization’.
Along with other public sector majors such as State Bank of India in the banking sector, Life Insurance Corporation in the insurance sector and Indian Railways in transportation, the CPSEs are leading companies of India with significant market-shares in sectors such as petroleum, (e.g. Coal India Ltd. and NMDC), power generation (e.g. NTPC and NHPC), power transmission (e.g. Power Grid Corporation of India Ltd.), heavy engineering (e.g. BHEL), aviation industry (eg. Hindustan Aeronautics Ltd. and Air India Ltd.) storage and public distribution system (eg. Food Corporation of India and Central Warehousing Corporation), shipping and trading (eg. Shipping Corporation of India Ltd. and State Trading Corporation Ltd.) and telecommunication (eg. BSNL and MTNL).
With economic liberalization, post-1991, sectors that were exclusive preserve of the public sector enterprises were opened to the private sector. The CPSEs, therefore, are faced with competition from both domestic private sector companies (some of which have grown very fast) and the large multi-national corporation (MNCs). The turnover of CPSEs like Cotton Corporation of India, ITI Ltd., Mazgaon Dock LTd., MSTC Ltd., STC Ltd., ONGC Videsh Ltd. and Bharat Sanchar Nigam Ltd. declined significantly during 2010-11. CPSEs like Air India Ltd., Bharat Sanchar Nigam Ltd., Mahanagar Telephone Nigam Ltd., Hindustan Photofilms & Manufacturing Co. Ltd., and Indian Drugs & Pharmaceuticals Ltd. suffered losses during 2010-11.
Indian Economy (2010-11) and CPSEs
The CPSEs play a critical role in the Indian economy. They influence the growth in the economy and are affected by the overall growth in the economy. As against the nominal GDP growth of 18.80 per cent (at current market price) in 2010-11, the gross value addition by all the CPSEs (exclusive of under-recoveries) grew by 10.03 per cent during the year (if however, ‘the under recoveries’ are added, then the gross value addition by all CPSEs during the year increased by 13.40 per cent). The turnover of petroleum (Refinery & Marketing), services (Trading & Marketing), electricity (Generation), heavy engineering, minerals & metals and coal & lignite showed a significant increase during the year. Profits/losses of the different CPSEs did not necessarily correspond to increase or decrease in turnover, a several factors came into play like higher input costs, lower prices, increase in salary and wages, heavy interest burden and exchange rate fluctuations.
The turnover of all 220 operating CPSEs stood at Rs. 14,73,319 crore as compared to Rs. 12,44,805 crore in the previous year. During the year 2010-11, the CPSEs earned foreign exchange equal to Rs. 97,004 crore as compared to Rs. 84,224 crore in 2009-10. The foreign exchange outgo on imports and royalty, know-how, consultancy, interest and other expenditure, on the other hand, increased from Rs. 4,24,207 crore in 2009-10 to Rs. 5,22,577 crore in 2010-11 showing an increase of 23.19%.
The total employee strength in CPSEs was 14.44 lakh (excluding casual labours) in 2010-11 as compared to 14.90 lakh in 2009-10. The total strength of the employees in CPSEs has gone down by 45,981 persons due to superannuation, voluntary retirement etc. The salary and wages in all the CPSEs went up from Rs. 87,792 crore in 2009-10 to Rs. 96.210 crore in 2010-11, showing a growth of 9.58%.
Turnover in CPSEs
Gross sales/turnover of CPSEs has been robust during 2010-11. The turnover of CPSEs (at the aggregate level) increased by 18.36 per cent in 2010-11 over 2009-10 against decline of 2.10 per cent in 2009-10 over 2008-09.
The agriculture sector recorded the highest growth in turnover (23.03%) during 2010-11. This was followed by ‘manufacturing’ with a (20.64%) growth against a negative growth (-7.76%) in 2009-10. The ‘mining’ sector had 15.66 per cent growth in turnover during the year as against a negative growth of 0.68% during 2009-10. The turnover in ‘electricity’ and ‘service’ sector showed marginal improvement over the previous year with a growth of 17.96% and 12.85% respectively during 2010-11.
There was, moreover, much variation from industry to industry. There was significant decline in turnover of CPSEs belonging to industries like medium & light engineering, transportation equipment and telecommunications services.
Aggregate Profit and Loss of CPSEs
The profit of profit making CPSEs stood at Rs. 1,13,770 crore in 2010-11 compared to Rs. 1,08,434 crore in 2009-10. The loss of loss making CPSEs, on the other hand, was Rs. 21,693 crore in 2010-11 compared to Rs. 16,231 crore in 2009-10. At the aggregate level, the net profit of all CPSEs (aggregate net profit- aggregate net loss) stood at Rs. 92,077 crore in 2010-11 compared to Rs. 92,203 crore during 2009-10.
Cognate group-wise, the best results were achieved by the ‘mining’ sector with 22.32 per cent growth in profit over the previous year. This was followed by 12.97 per cent growth in profits achieved by electricity sector. The ‘services’ sector suffered a loss of Rs. 7,639 crore during 2010-11, which was higher than the loss of Rs. 3,279 crore in 2009-10. This was mainly due to the loss suffered by Air India Ltd. in both these years. In the other industry groups, CPSEs belonging to transport services, telecommunication services and consumer goods were equally under stress, and their losses increased during 2010-11. Under the manufacturing sector, steel petroleum and textile showed a decline in profits. CPSEs belonging to medium and light engineering industries, suffered losses during the year in comparison to profit in the previous year. CPSEs in the chemicals & pharmaceuticals sectors, on the other hand, reduced their losses during 2010-11.
Top Ten Profit Making CPSEs
Oil & Natural Gas Corporation Ltd., NTPC Ltd., and Indian Oil Corporation Ltd have ranked first, second and third CPSEs respectively amongst the top ten profit making CPSEs. They are followed by NMDC Ltd., Bharat Heavy Electricals Ltd., Steel Authority of India Ltd., Coal India Ltd., GAIL(India) Ltd., Oil India Ltd. and Power Grid Corporation of India Ltd. All the top ten profit making companies are, more or less same in 2010-11 as in 2009-10 (with ranking slightly changed) except for Power Grid Corporation that has replaced the Power Finance Corporation.
Top Ten Loss Making CPSEs
Amongst the loss making companies, Air India Ltd., Bharat Sanchar Nigam Ltd. and Mahanagar Telephone Nigam Ltd. were the top three loss making enterprises during 2010-11. They are followed by Hindustan Photo Films Manufacturing Co. Ltd., Indian Drugs & Pharmaceuticals Ltd., Hindustan Cables Ltd., Fertilizer Corporation of India Ltd., Air India Charters Ltd., Hindustan Fertilizer Corporation Ltd. and ITI Ltd. The top ten loss making Companies covered nearly 92.55% of the total loss made by all the (62) CPSEs during the year. The top three CPSEs namely Air India Ltd., BSNL and MTNL alone have incurred a loss equal to 74% of the total loss of all CPSEs in 2010-11. Intense price war and cut-throat competition from new entrants, increase in salary & wages and increase in operating cost as well as increase in interest cost contributed to greater losses during the year. While the loss of Air India and MTNL have gone up by 24% and 54% respectively, the loss of BSNL increased by 145% in 2010-11 over 2009-10.
Contribution to GDP
Gross Value Addition by CPSEs
The share of ‘gross value addition’ in CPSEs (net value addition + depreciation) in Gross Domestic Product (at current market price) stood at 5.96 per cent in 2010-11 against a share of 6.44 per cent in 2009-10. If, however, the under-recoveries of oil marketing companies (amounting to Rs. 37,190 crore in 2010-11 and Rs. 29,951 crore in 2009-10) are included, then the share of all CPSEs in GDP goes up to 6.45 per cent in 2010-11 and 6.75 per cent in 2009-10.
Components of Net Value Addition
In terms of ‘net value addition’ (excluding depreciation) generated by CPSEs in 2010-11, the share of profit (PBTEP) was the highest at 31.75 per cent followed by indirect tax and duties (30.84%), salary & wages (23.20%) and interest payment (9.41%). A comparison between the respective shares of each of these items during 2009-10 and 2010-11 shows a very little change during these two years.
Contribution to the Central Exchequer
CPSEs contribute to the Central Exchequer by way of dividend payment, interest on government loans and payment of taxes and duties. There was, however, a significant increase in the total contribution of CPSEs to the central Exchequer during the year, which increased from Rs. 1,39,918 crore in 2009-10 to Rs. 1,56,124 crore in 2010-11. This was, furthermore, primarily due to increase in contribution towards ‘customs duty’ and ‘excise duty’ which increased from Rs. 6,896 crore and Rs. 52,627 crore in 2009-10 to Rs. 14,151 crore and Rs. 62,713 crore respectively in 2010-11. There was a significant increase in contribution from corporate taxes as well, which went up from Rs. 38,134 crore in 2009-10 to Rs. 43,369 crore in 2010-11. There was, however, a decline in ‘other duties & taxes’ and sales tax and dividend tax’ during the year as compared to the previous year.
Saturday, March 31, 2012
State of India's Economy
The Indian economy slowed down in 2011-12, compared not just to the previous two years but 2003 to 2011 (except 2008-09). However, India remains among the front-runners.
With agriculture and services continuing to perform well, India’s slowdown can be attributed almost entirely to the weakening industrial growth. The manufacturing sector grew by 2.7 per cent and 0.4 per cent in the second and third quarters of 2011-12, respectively. Inflation as measured by the wholesale price index (WPI), was high during most of the fiscal year, though by the year’s end there was a clear slowdown. Food inflation, in particular, came down to around zero, with most of the remaining WPI inflation being driven by non-food manufacturing products.
Monetary policy was tightened by the Reserve Bank of India (RBI) during the year to control inflation and curb inflationary expectations.
The global economic environment turned sharply adverse in September 2011, owing to the turmoil in the euro-zone and questions about the outlook on the US economy provoked by rating agencies.
The macroeconomic situation in February 2011—at the time of presentation of Economic Survey 2010-11—looked positive, even though there was some concern about industrial slowdown. Economic Survey 2010-11 had anticipated that the Indian economy would register growth of around 9 per cent (+ or - 0.25 per cent) in 2011-12, almost reverting to the pre-crisis levels achieved during the three-year period, from 2005-06 to 2007-08. However, during the course of the year it became increasingly clear that economy would fall short of that growth rate by a significant margin.
At sectoral level, growth is estimated to be 2.5 per cent for 2011-12 for agriculture and allied sectors, a little lower than expected. Growth in the services sector is likely to be 9.4 per cent in 2011-12, as against 9.3 per cent in 2010-11. Thus, it was primarily the dip in growth in industry to 3.9 per cent in 2011-12 that led to the slowdown in real gross domestic product (GDP) growth .
Domestic factors, namely the tightening of monetary policy, in particular raising the repo rate in order to control inflation and anchor inflationary expectations, resulted in some slowing down of investment and growth, particularly in the industrial sector. Since monetary policy operates largely through demand compression in the short run, the expectation is that this policy will in fact bolster long-run growth. The 2008-09 down-turn came to India when the country’s fiscal balances were robust. Hence, there was ample scope for fiscal and monetary stimulus. As in most parts of the world, this second slowdown came so quickly on the heels of the previous one that the latitude in terms of fiscal and monetary policy was much more limited.
The growth rate of investment in the economy registered a significant decline during 2011-12. The year also witnessed a sharp increase in interest rates that resulted in higher costs of borrowings; and other rising costs affecting profitability and, thereby, internal accruals that could be used to finance investment. In 2010-11, the growth in gross capital formation, particularly fixed capital formation, was substantially lower than had been achieved in 2005-06 to 2007-08. The investment rate continued to be lower than the peak level achieved in 2007-08.
Despite difficult conditions in the global economy, exports continued to be robust in 2011-12 and registered a growth rate of 14.3 per cent in real terms over and above 22.7 per cent growth achieved in the previous year (2010-11), as per Advance Estimates. Imports are likely to end the year with a real growth rate of 17.5 per cent.
There was a reduction in investment rates, both in the public and private sectors, particularly the corporate sector, in 2010-11. Reduction in corporate investment could be attributed to global factors, with the global economy exhibiting signs of slowing down in the second half of 2010, as well as to domestic factors, namely increased cost of borrowing following the raising of interest rates in order to control inflation. Fixed investment as a ratio of GDP peaked in 2007-08 and has continued to register a decline since then, falling from 31.6 per cent in 2009-10 to 30.4 per cent in 2010-11.
At 2.8 per cent of GDP, the savings-investment gap during 2010-11 remained at the same level as in 2009-10. This reflected the need to finance the investment requirement from foreign savings (current account deficit). The gap, in excess of 2 per cent of GDP, has been at relatively elevated levels (since 2008-09). The savings-investment gap narrowed both in the public as well as private sectors in 2010-11 vis-Ã -vis 2009-10. For the public sector, it narrowed from -9.0 per cent of GDP to -7.1 per cent.
The increase in the revenue levels, thanks partly to substantial increase in non-tax revenue receipts in the year 2010-11, and the process of fiscal consolidation were among the factors responsible for narrowing of the public sector’s savings-investment gap.
In the medium to long term, growth of an emerging economy depends, to a large extent, not only on overall level of investment but also on its sectoral composition, reflecting the transformation taking place. However, annual growth rates of investment, both at aggregate and sectoral levels may vary, depending on expectations of profitability, sales, etc.
Historic Background
The rate of growth of Indian economy, between 1950-51 and 1990-91, was 4.1 per cent. In contrast, between 1991-92 and 2011-12 the economy registered a growth of 6.9 per cent. While in the four decades from 1951-52 to 1991-92, the growth rate in terms of GDP at factor cost (at 2004-05 prices) was more than 6 per cent only in 10 years, between 1992-93 and 2011-12 (including the AE for 2011-12) (a time-span covering 20 years, inclusive of both observations) the growth rate has been over 6 per cent in as many as 14 years. The growth rate has accelerated significantly since 2003-04. Between 2003-04 and 2011-12, the economy registered a growth of 8.2 per cent per annum. In fact, during this period, the growth rate has never fallen below 6.7 per cent and has been over 8 per cent in six of these nine years. All the three major sectors of the economy, namely agriculture, industry, and services witnessed higher-than-trend growth rates at 3.9 per cent, 8.0 per cent, and 9.6 per cent, respectively. Clearly the services sector has emerged as the key driver of growth in the Indian economy.
This accelerated growth could partly be attributed to an increase in savings and investment rates, which averaged 33.1 per cent and 34.3 per cent, respectively, during the period between 2003-04 and 2010-11. The average savings and investment rates in the 1990s were 23.0 per cent and 24.3 per cent, respectively. Sustaining and accelerating this growth further could be crucial for attaining higher per capita income and other objectives that aim at enhancing human welfare as reflected by the inclusive development agenda
The contributions of the agriculture and allied sector, industry sector, and services sector also underwent significant changes overtime. The long-term growth rate of the agriculture sector (over the last 60 years) has been 2.7 per cent. It was 2.3 per cent between 1950-51 and 1980-81 and 3.1 per cent during 1980-81 to 2011-12. Growth in the industry sector increased from 5.2 per cent in the earlier period to 6.4 per cent between 1980-81 and 2011-12. Similarly, growth in the services sector was 4.4 per cent and 7.8 per cent, respectively, during these two sub-periods.
The structure of the economy has also undergone significant changes over time. Between 1950-51 and 1980-81, the industrial sector registered a higher growth rate than the services sector. The converse has been the case since then. This resulted in the share of the industry sector in GDP increasing by around 9 percentage points from 16.6 per cent to 25.9 per cent during the period from 1950-51 to 1980-81. The share of the services sector increased from 30.3 per cent in 1950-51 to 38 per cent in 1980-81. It started growing rapidly thereafter and this phenomenon became more pronounced in the 1990s. Consequently, since 1980-81, the share of the industry sector has remained in the range of 26 to 28 per cent of GDP, while the entire decline in share of agriculture has been balanced by an increase in share of the services sector. Thus, the resilience of the economy to shocks owe to the services sector which has the largest share and most consistent growth performance.
Agriculture and Food
Agriculture, including allied activities, accounted for 13.9 per cent of GDP at 2004-05 prices in 2011-12, as compared to 14.5 per cent in 2010-11. In terms of composition, out of a total share of 14.5 per cent in GDP in 2010-11, agriculture alone accounted for 12.3 per cent, followed by forestry and logging at 1.4 per cent, and fishing at 0.7 per cent. Notwithstanding the declining trend in agriculture’s share in GDP, the importance of the sector to the economy is best understood with reference to its share in employment and in terms of its criticality for macro-economic stability. While the former was well known, the latter became manifest with rising growth in incomes since the mid-2000s.
Hence, growth in agriculture and allied sectors remains an important objective and a ‘necessary condition’ for inclusive growth. The average annual growth in agriculture and allied sectors realized during the Eleventh Plan Period was 3.3 per cent, against the targeted growth rate of 4 per cent. The sector recorded slightly lower average growth than targeted in the Eleventh Plan period due to severe drought experienced in most parts of the country during 2009-10 and drought/deficient rainfall in some States, namely Bihar, Jharkhand, eastern UP, and West Bengal in 2010-11. However, timely and corrective measures taken by the government helped boost agricultural production and growth in the sector reached 7.0 per cent in 2010-11, the highest growth rate achieved during the last six years. In 2011-12 agriculture and allied sectors are estimated to achieve a growth rate of 2.5 per cent. However, it is a matter of concern that agricultural growth is still, to a certain extent, characterized by fluctuations due to the vagaries of nature, though there has not been actual decline in terms of output since 2002-03.
In 2010-11 a significantly high level of 244.78 million tonnes of foodgrains production was achieved. As per the second AE, production of foodgrains during 2011-12 has been estimated at 250.42 million tones, owing to increase in the production of rice in some of the major rice-producing states of the country, namely Assam, Bihar, West Bengal, Jharkhand, and Uttar Pradesh.
The stock position of foodgrains in the central pool, as on February 1, 2012 was 55.2 million tonnes, comprising 31.8 million tonnes of rice and 23.4 million tonnes of wheat, which is adequate for meeting the requirements under the targeted public distribution system (TPDS) and welfare schemes 2011-12. The higher levels of agricultural output and ample food stocks augur well for bringing down headline inflation.
Industry and Infrastructure
Industrial growth, measured in terms of the index of industrial production (IIP), shows fluctuating trends. Growth had reached 15.5 per cent in 2007-08 and then started decelerating. Initial deceleration in industrial growth was largely on account of the global economic meltdown. There was, however, a recovery from 2.5 per cent in 2008-09 to 5.3 per cent in 2009-10 and 8.2 per cent in 2010-11. Fragile economic recovery in the US and Europe and moderately subdued expectations at home affected the growth of the industrial sector in the current year.
Cumulative growth in April-January 2011-12, in eight core sectors has been 4.1 per cent, as compared to 5.7 per cent during the corresponding period of the previous year. While four sectors, namely coal, fertilizers, cement, and electricity, showed positive growth during January 2012, other four sectors—crude oil, natural gas, refinery products and steel—registered negative growth.
Electricity generation by power utilities during 2011-12 was targeted to grow by 5.4 per cent to reach 855 billion units. Growth in power generation during April-January 2011-12 was 8.6 per cent, as compared to 5.2 per cent during April-January 2010-11. Production of crude oil is estimated at 38.19 million metric tonnes (MMT), which is about 1.33 per cent higher than the 37.70 MMT produced during 2010-11. Domestic crude oil production during April-December 2011-12 was 28.70 MMT, showing a growth of 1.9 per cent over the same period of the previous year.
The telecom sector continued to grow, with the total number of telephones increasing from 206.8 million on March 31, 2007 to 926.95 million on December 31, 2011. Tele-density has increased from 18.2 per cent in March 2007 to 76.8 per cent in December 2011.
Services Sector
The share of services in India’s GDP at factor cost (at current prices) increased from 55.1 per cent in 2010-11 and 56.3 per cent in 2011-12, as per Advance Estimates. Trade, hotels, and restaurants as a group, with 16.9 per cent share, is the largest contributor to GDP among the various services sub-sectors, followed by financing, insurance, real estate, and business services with 16.4 per cent share.
While agriculture continues to be the primary employment-providing sector, the services sector is the principal source of employment in urban areas. As per the National Sample Survey Organization’s (NSSO) report on the ‘Employment and Unemployment Situation in India, 2009-10’, for every 1,000 people employed, 679 and 75 people are employed in agriculture sector in rural and urban areas, respectively, (measured in terms of usually working persons in the principal status and subsidiary status). On the other hand, the services sector accounted for 147 and 582 of every 1,000 persons employed in rural and urban areas, respectively.
Prices
Headline WPI inflation remained persistently high and relatively sticky at around 9 per cent during 2011. The major contributory factors to headline inflation during the current financial year include (a) higher primary articles prices driven by vegetables, eggs, meat, and fish due to changing dietary pattern of consumers; (b) increasing global commodity prices especially metal and chemical prices which ultimately led to higher domestic manufactured prices; and (c) persistently high international (Brent) crude petroleum prices in the last two years averaging around $ 111 per barrel (/bbl) in 2011 (January-December) as compared to $ 80/bbl in 2010 (January-December).
Compared to a relatively stable inflationary period in the earlier part of the last decade, average headline WPI inflation started to rise in 2008-09 and persisted. The pressure was mainly from primary and fuel products with average inflation in these commodities remaining continuously in double digits for a major period since 2008-09. In comparison, inflation in manufactured products remained relatively stable, dropping sharply in 2009-10 because of the global economic crisis and its impact in India, before it started to pick up and exceed its long-run average of around 5 per cent in early 2011-12. Among individual product groups, inflation in food products, beverages, textiles, chemicals, and basic metals remained elevated mainly on account of high global commodity prices.
Reining in inflation and containing inflationary expectations were the dominating objectives of monetary policy during 2011-12. The RBI hiked the repo rate 13 times between March 2010 and January 2012, cumulatively by 375 basis points (bps). With supply-side factors feeding into food inflation and an uncertain economic scenario in advanced countries necessitating repeated liquidity injections by these countries to counter recessionary trends, the task of monetary policy calibration was particularly challenging. Sustained rate increases have, to an extent, impacted growth negatively. However, the period from December 2011 to January 2012 marked a reversal of the cycle with the RBI in its Third Quarter Review of Monetary Policy keeping the repo and reverse repo rates unchanged at 8.5 per cent and 7.5 per cent, respectively. The cash reserve ratio (CRR), however, has been reduced from 6.0 to 5.5 per cent in order to ease the liquidity situation and aid revival of growth.
Financial Markets
The weak global economic prospects and continuing uncertainties in the international financial markets had their impact on emerging market economies like India. Sovereign risk concerns, particularly in the euro area, affected financial markets for the greater part of the year, with the impact of Greece’s sovereign debt problem spreading to India and other economies by way of higher-than-normal levels of volatility.
Subdued foreign institutional investor (FII) inflows into the country led to a decline in Indian markets and contributed to the sharp depreciation of the rupee in the forex market, though much of the depreciation was due to ‘flight to safety’ by foreign investors, given the meltdown in Europe and inflation in emerging market economies. Moderation in the growth rate of the economy also affected market sentiments.
International Trade
The resilience of India’s trade can be seen from the fact that the growth of exports and imports, which was (-)3.5 per cent and (-)5 per cent, respectively, in 2009-10 as a result of the 2008 global economic crisis, rebounded to 40.5 per cent and 28.2 per cent in 2010-11. India not only reached pre-crisis levels in exports but also surpassed pre-crisis trends in export growth rate, unlike many other developing and even developed countries. India’s share in global exports and imports also increased from 0.7 per cent and 0.8 per cent, respectively, in 2000, to 1.5 per cent and 2.2 per cent in 2010.
The highlight of BoP developments during 2011-12 was merchandise exports of US$ 150.9 billion in the first half of the year, which represented an increase of over 40 per cent over the corresponding period in 2010-11. Imports of US$ 236.7 billion during April-September 2011 recorded an increase of 34.3 per cent over April-September 2010. The trade deficit was higher at US$ 85.8 billion (9.4 per cent of GDP) during the first half of 2011-12, vis-Ã -vis US$ 68.9 billion (8.9 per cent of GDP) in the first half of 2010-11. This was mainly on account of increase in international prices of imported commodities, namely oil and gold and silver during the first half of 2011-12.
Net capital flows at US$ 41.1 billion in the first half of 2011-12 remained higher as compared to US$ 38.9 billion in the first half of 2010-11. Under net capital flows, foreign direct investment (FDI) has shown considerable increase at US$12.3 billion during the first half of 2011-12, vis-Ã -vis US$ 7.0 billion in the corresponding period of 2010-11. Similarly, ECBs increased to US$ 10.6 billion during the first half of 2011-12, as against US$ 5.7 billion in the first half of 2010-11. Portfolio investment, mainly comprising FII investments and American depository receipts (ADRs)/global depository receipts (GDRs), however, witnessed large decrease in inflows to US$ 1.3 billion in the first half of 2011-12 vis-Ã -vis US$ 23.8 billion in the first half of 2010-11
In fiscal 2010-11, foreign exchange reserves increased by US$ 25.7 billion, from US$ 279.1 billion at end March 2010 to US$ 304.8 billion at end March 2011. Of the total increase in reserves, US$12.6 billion was on account of valuation gains arising out of depreciation of the US dollar against major currencies and the balance US$ 13.1 billion was on BoP basis. In 2011-12, the reserves increased by US$ 6.7 billion from US$ 304.8 billion at end March 2011, to US$ 311.5 billion at end September 2011. Out of this total increase, US$5.7 billion was on BoP basis and the balance US$1.0 billion on account of valuation effect.
External Debt
India’s external debt stock stood at US$ 326.6 billion at end-September 2011, recording an increase of US$ 20.2 billion (6.6 per cent) over end March 2011 estimates of US$ 306.4 billion. This increase was primarily on account of higher commercial borrowings and short-term debt, which together contributed over 80 per cent of the total increase in the country’s external debt.
The maturity profile of India’s external debt indicates the dominance of long-term borrowings. The long-term external debt at US$ 255.1 billion at end September 2011 accounted for 78.1 per cent of the total external debt, while the remaining 21.9 per cent was short-term debt. Government (sovereign) external debt stood at US$ 79.3 billion, while non-government debt amounted to US$ 247.3 billion at end September 2011. India’s external debt has remained within manageable limits as indicated by the external debt to GDP ratio of 17.8 per cent and debt service ratio of 4.2 per cent in 2010-11. This has been possible due to an external debt management policy of the government that emphasizes monitoring of long- and short-term debt, raising sovereign loans on concessional terms with long maturities, regulating ECBs through end-use and all-in-cost restrictions, and rationalizing interest rates on NRI deposits.
Future Prospects
The financial crisis in Europe, along with certain exogenous shocks like the Japanese nuclear disaster, resulted in a sharp global economic slowdown during 2011-12. There is no doubt, however, that a part of India’s slowdown is rooted in domestic causes. The persistent inflation that remained over 9 per cent for much of the year and needed to be tamed played a role. There were also the pressures of democratic politics, which slowed reforms.
The main reason for the recovery to be initially slow is the slight decline in investment rate. In the third quarter of 2011-12, gross fixed capital formation as a ratio of GDP was 30 per cent, down from 32.3 per cent one year ago. But as fiscal consolidation gets back on track, savings and capital formation should begin to rise. Moreover, with the easing of inflationary pressures in the months to come, there could be a reduction in policy rates by the RBI, which would encourage investment activity that could have a positive impact on growth. These factors, along with the fact that India’s investment rate at 35.1 per cent, is still an impressive figure, should result in growth consolidating in 2012-13 and picking up rapidly thereafter. Preliminary calculations suggest that the growth rate of GDP in 2013-14 will be 8.6 per cent. Long-term forecasts, of course, always come with a larger margin of error. These projections are based on assumptions regarding factors like normal monsoons, reasonably stable international prices, particularly oil prices, and global growth somewhere between where it now stands and 0.5 per cent higher.
Agricultural growth in the Eleventh Five Year Plan has been less than the target of 4 per cent despite a clear improvement compared to the previous plan periods. Though agriculture has now shrunk as a proportion of GDP to 13.9 per cent, as is only to be expected of a growing economy, it is vital sector and provider of livelihood for more than 50 per cent of the population. How this sector performs also has large implications for overall prices and, hence, it is a sector deserving of special attention. The area under foodgrains production has declined over the last three decades. That in itself is not worrying, but what is of concern is the low productivity of Indian agriculture. In yield parameters, India is lagging behind global levels in most crops. Concerted and focused efforts are required for addressing the challenge of stagnating productivity levels in agriculture. A holistic approach, simultaneously working on agricultural research and development, dissemination of technology, and provision of agricultural inputs such as quality seed, fertilizers, pesticides, and irrigation, would be important. Above all, the need is to raise investment in agriculture.
It is also important to understand that productivity itself will get a fillip if the supply chain from farm to consumer can be improved. This will lead to farmers getting a higher price for their products and be an incentive for them to invest and produce more. The crux of an improved supply chain is not for government to try to provide this directly by the public service delivery authorities but to take policy steps that facilitate private players to provide this vital service.
In 2010-11 and 2011-12, there was a slight moderation in services growth, mainly due to the steep fall in growth of public administration and defence services, creating some fiscal space for the government. Growth in trade, hotels, and restaurants is more robust at 11.2 per cent. If interest rates remain elevated, there would be some concern about growth in real estate, ownership of dwellings, and business services which has started decelerating. The outlook for some of the services in the economy is also linked to the global prospects. While software services exports have continued to be steady, the unfolding events in the euro area could lead to some sluggishness in this sector. The growth in fair-weather business services which has already shown signs of deceleration may not get better. Among the other two major services, transportation has already been affected with the Baltic dry index at an all-time low, though this may be of a passing nature. While travel and tourism could also be affected, it could also lead to a shift in tourist inflow pattern with increased inflow of holiday backpackers searching for cheaper destinations like India. The rise in tourists from South Asia, East Asia, and South East Asia could further help this sector.
The recent regulatory prescriptions for European banks have brought in fears of de-leveraging. Indian banks are not expected to have any direct impact on account of their negligible exposure to the troubled zone. However, there could be indirect impact on account of funding pressures. The scope for counter-cyclical financial policy could be explored in financial regulations in order to minimize the negative impact of accumulated financial risks. This will go a long way in providing needed stability to the financial system.
Going forward, fiscal consolidation would need to be anchored in a framework that addresses some of the risks like rise in crude prices. Besides, micro-foundational reforms are needed for achieving desired macro-economic outcomes.
This feature is based on Economic Survey 2012
With agriculture and services continuing to perform well, India’s slowdown can be attributed almost entirely to the weakening industrial growth. The manufacturing sector grew by 2.7 per cent and 0.4 per cent in the second and third quarters of 2011-12, respectively. Inflation as measured by the wholesale price index (WPI), was high during most of the fiscal year, though by the year’s end there was a clear slowdown. Food inflation, in particular, came down to around zero, with most of the remaining WPI inflation being driven by non-food manufacturing products.
Monetary policy was tightened by the Reserve Bank of India (RBI) during the year to control inflation and curb inflationary expectations.
The global economic environment turned sharply adverse in September 2011, owing to the turmoil in the euro-zone and questions about the outlook on the US economy provoked by rating agencies.
The macroeconomic situation in February 2011—at the time of presentation of Economic Survey 2010-11—looked positive, even though there was some concern about industrial slowdown. Economic Survey 2010-11 had anticipated that the Indian economy would register growth of around 9 per cent (+ or - 0.25 per cent) in 2011-12, almost reverting to the pre-crisis levels achieved during the three-year period, from 2005-06 to 2007-08. However, during the course of the year it became increasingly clear that economy would fall short of that growth rate by a significant margin.
At sectoral level, growth is estimated to be 2.5 per cent for 2011-12 for agriculture and allied sectors, a little lower than expected. Growth in the services sector is likely to be 9.4 per cent in 2011-12, as against 9.3 per cent in 2010-11. Thus, it was primarily the dip in growth in industry to 3.9 per cent in 2011-12 that led to the slowdown in real gross domestic product (GDP) growth .
Domestic factors, namely the tightening of monetary policy, in particular raising the repo rate in order to control inflation and anchor inflationary expectations, resulted in some slowing down of investment and growth, particularly in the industrial sector. Since monetary policy operates largely through demand compression in the short run, the expectation is that this policy will in fact bolster long-run growth. The 2008-09 down-turn came to India when the country’s fiscal balances were robust. Hence, there was ample scope for fiscal and monetary stimulus. As in most parts of the world, this second slowdown came so quickly on the heels of the previous one that the latitude in terms of fiscal and monetary policy was much more limited.
The growth rate of investment in the economy registered a significant decline during 2011-12. The year also witnessed a sharp increase in interest rates that resulted in higher costs of borrowings; and other rising costs affecting profitability and, thereby, internal accruals that could be used to finance investment. In 2010-11, the growth in gross capital formation, particularly fixed capital formation, was substantially lower than had been achieved in 2005-06 to 2007-08. The investment rate continued to be lower than the peak level achieved in 2007-08.
Despite difficult conditions in the global economy, exports continued to be robust in 2011-12 and registered a growth rate of 14.3 per cent in real terms over and above 22.7 per cent growth achieved in the previous year (2010-11), as per Advance Estimates. Imports are likely to end the year with a real growth rate of 17.5 per cent.
There was a reduction in investment rates, both in the public and private sectors, particularly the corporate sector, in 2010-11. Reduction in corporate investment could be attributed to global factors, with the global economy exhibiting signs of slowing down in the second half of 2010, as well as to domestic factors, namely increased cost of borrowing following the raising of interest rates in order to control inflation. Fixed investment as a ratio of GDP peaked in 2007-08 and has continued to register a decline since then, falling from 31.6 per cent in 2009-10 to 30.4 per cent in 2010-11.
At 2.8 per cent of GDP, the savings-investment gap during 2010-11 remained at the same level as in 2009-10. This reflected the need to finance the investment requirement from foreign savings (current account deficit). The gap, in excess of 2 per cent of GDP, has been at relatively elevated levels (since 2008-09). The savings-investment gap narrowed both in the public as well as private sectors in 2010-11 vis-Ã -vis 2009-10. For the public sector, it narrowed from -9.0 per cent of GDP to -7.1 per cent.
The increase in the revenue levels, thanks partly to substantial increase in non-tax revenue receipts in the year 2010-11, and the process of fiscal consolidation were among the factors responsible for narrowing of the public sector’s savings-investment gap.
In the medium to long term, growth of an emerging economy depends, to a large extent, not only on overall level of investment but also on its sectoral composition, reflecting the transformation taking place. However, annual growth rates of investment, both at aggregate and sectoral levels may vary, depending on expectations of profitability, sales, etc.
Historic Background
The rate of growth of Indian economy, between 1950-51 and 1990-91, was 4.1 per cent. In contrast, between 1991-92 and 2011-12 the economy registered a growth of 6.9 per cent. While in the four decades from 1951-52 to 1991-92, the growth rate in terms of GDP at factor cost (at 2004-05 prices) was more than 6 per cent only in 10 years, between 1992-93 and 2011-12 (including the AE for 2011-12) (a time-span covering 20 years, inclusive of both observations) the growth rate has been over 6 per cent in as many as 14 years. The growth rate has accelerated significantly since 2003-04. Between 2003-04 and 2011-12, the economy registered a growth of 8.2 per cent per annum. In fact, during this period, the growth rate has never fallen below 6.7 per cent and has been over 8 per cent in six of these nine years. All the three major sectors of the economy, namely agriculture, industry, and services witnessed higher-than-trend growth rates at 3.9 per cent, 8.0 per cent, and 9.6 per cent, respectively. Clearly the services sector has emerged as the key driver of growth in the Indian economy.
This accelerated growth could partly be attributed to an increase in savings and investment rates, which averaged 33.1 per cent and 34.3 per cent, respectively, during the period between 2003-04 and 2010-11. The average savings and investment rates in the 1990s were 23.0 per cent and 24.3 per cent, respectively. Sustaining and accelerating this growth further could be crucial for attaining higher per capita income and other objectives that aim at enhancing human welfare as reflected by the inclusive development agenda
The contributions of the agriculture and allied sector, industry sector, and services sector also underwent significant changes overtime. The long-term growth rate of the agriculture sector (over the last 60 years) has been 2.7 per cent. It was 2.3 per cent between 1950-51 and 1980-81 and 3.1 per cent during 1980-81 to 2011-12. Growth in the industry sector increased from 5.2 per cent in the earlier period to 6.4 per cent between 1980-81 and 2011-12. Similarly, growth in the services sector was 4.4 per cent and 7.8 per cent, respectively, during these two sub-periods.
The structure of the economy has also undergone significant changes over time. Between 1950-51 and 1980-81, the industrial sector registered a higher growth rate than the services sector. The converse has been the case since then. This resulted in the share of the industry sector in GDP increasing by around 9 percentage points from 16.6 per cent to 25.9 per cent during the period from 1950-51 to 1980-81. The share of the services sector increased from 30.3 per cent in 1950-51 to 38 per cent in 1980-81. It started growing rapidly thereafter and this phenomenon became more pronounced in the 1990s. Consequently, since 1980-81, the share of the industry sector has remained in the range of 26 to 28 per cent of GDP, while the entire decline in share of agriculture has been balanced by an increase in share of the services sector. Thus, the resilience of the economy to shocks owe to the services sector which has the largest share and most consistent growth performance.
Agriculture and Food
Agriculture, including allied activities, accounted for 13.9 per cent of GDP at 2004-05 prices in 2011-12, as compared to 14.5 per cent in 2010-11. In terms of composition, out of a total share of 14.5 per cent in GDP in 2010-11, agriculture alone accounted for 12.3 per cent, followed by forestry and logging at 1.4 per cent, and fishing at 0.7 per cent. Notwithstanding the declining trend in agriculture’s share in GDP, the importance of the sector to the economy is best understood with reference to its share in employment and in terms of its criticality for macro-economic stability. While the former was well known, the latter became manifest with rising growth in incomes since the mid-2000s.
Hence, growth in agriculture and allied sectors remains an important objective and a ‘necessary condition’ for inclusive growth. The average annual growth in agriculture and allied sectors realized during the Eleventh Plan Period was 3.3 per cent, against the targeted growth rate of 4 per cent. The sector recorded slightly lower average growth than targeted in the Eleventh Plan period due to severe drought experienced in most parts of the country during 2009-10 and drought/deficient rainfall in some States, namely Bihar, Jharkhand, eastern UP, and West Bengal in 2010-11. However, timely and corrective measures taken by the government helped boost agricultural production and growth in the sector reached 7.0 per cent in 2010-11, the highest growth rate achieved during the last six years. In 2011-12 agriculture and allied sectors are estimated to achieve a growth rate of 2.5 per cent. However, it is a matter of concern that agricultural growth is still, to a certain extent, characterized by fluctuations due to the vagaries of nature, though there has not been actual decline in terms of output since 2002-03.
In 2010-11 a significantly high level of 244.78 million tonnes of foodgrains production was achieved. As per the second AE, production of foodgrains during 2011-12 has been estimated at 250.42 million tones, owing to increase in the production of rice in some of the major rice-producing states of the country, namely Assam, Bihar, West Bengal, Jharkhand, and Uttar Pradesh.
The stock position of foodgrains in the central pool, as on February 1, 2012 was 55.2 million tonnes, comprising 31.8 million tonnes of rice and 23.4 million tonnes of wheat, which is adequate for meeting the requirements under the targeted public distribution system (TPDS) and welfare schemes 2011-12. The higher levels of agricultural output and ample food stocks augur well for bringing down headline inflation.
Industry and Infrastructure
Industrial growth, measured in terms of the index of industrial production (IIP), shows fluctuating trends. Growth had reached 15.5 per cent in 2007-08 and then started decelerating. Initial deceleration in industrial growth was largely on account of the global economic meltdown. There was, however, a recovery from 2.5 per cent in 2008-09 to 5.3 per cent in 2009-10 and 8.2 per cent in 2010-11. Fragile economic recovery in the US and Europe and moderately subdued expectations at home affected the growth of the industrial sector in the current year.
Cumulative growth in April-January 2011-12, in eight core sectors has been 4.1 per cent, as compared to 5.7 per cent during the corresponding period of the previous year. While four sectors, namely coal, fertilizers, cement, and electricity, showed positive growth during January 2012, other four sectors—crude oil, natural gas, refinery products and steel—registered negative growth.
Electricity generation by power utilities during 2011-12 was targeted to grow by 5.4 per cent to reach 855 billion units. Growth in power generation during April-January 2011-12 was 8.6 per cent, as compared to 5.2 per cent during April-January 2010-11. Production of crude oil is estimated at 38.19 million metric tonnes (MMT), which is about 1.33 per cent higher than the 37.70 MMT produced during 2010-11. Domestic crude oil production during April-December 2011-12 was 28.70 MMT, showing a growth of 1.9 per cent over the same period of the previous year.
The telecom sector continued to grow, with the total number of telephones increasing from 206.8 million on March 31, 2007 to 926.95 million on December 31, 2011. Tele-density has increased from 18.2 per cent in March 2007 to 76.8 per cent in December 2011.
Services Sector
The share of services in India’s GDP at factor cost (at current prices) increased from 55.1 per cent in 2010-11 and 56.3 per cent in 2011-12, as per Advance Estimates. Trade, hotels, and restaurants as a group, with 16.9 per cent share, is the largest contributor to GDP among the various services sub-sectors, followed by financing, insurance, real estate, and business services with 16.4 per cent share.
While agriculture continues to be the primary employment-providing sector, the services sector is the principal source of employment in urban areas. As per the National Sample Survey Organization’s (NSSO) report on the ‘Employment and Unemployment Situation in India, 2009-10’, for every 1,000 people employed, 679 and 75 people are employed in agriculture sector in rural and urban areas, respectively, (measured in terms of usually working persons in the principal status and subsidiary status). On the other hand, the services sector accounted for 147 and 582 of every 1,000 persons employed in rural and urban areas, respectively.
Prices
Headline WPI inflation remained persistently high and relatively sticky at around 9 per cent during 2011. The major contributory factors to headline inflation during the current financial year include (a) higher primary articles prices driven by vegetables, eggs, meat, and fish due to changing dietary pattern of consumers; (b) increasing global commodity prices especially metal and chemical prices which ultimately led to higher domestic manufactured prices; and (c) persistently high international (Brent) crude petroleum prices in the last two years averaging around $ 111 per barrel (/bbl) in 2011 (January-December) as compared to $ 80/bbl in 2010 (January-December).
Compared to a relatively stable inflationary period in the earlier part of the last decade, average headline WPI inflation started to rise in 2008-09 and persisted. The pressure was mainly from primary and fuel products with average inflation in these commodities remaining continuously in double digits for a major period since 2008-09. In comparison, inflation in manufactured products remained relatively stable, dropping sharply in 2009-10 because of the global economic crisis and its impact in India, before it started to pick up and exceed its long-run average of around 5 per cent in early 2011-12. Among individual product groups, inflation in food products, beverages, textiles, chemicals, and basic metals remained elevated mainly on account of high global commodity prices.
Reining in inflation and containing inflationary expectations were the dominating objectives of monetary policy during 2011-12. The RBI hiked the repo rate 13 times between March 2010 and January 2012, cumulatively by 375 basis points (bps). With supply-side factors feeding into food inflation and an uncertain economic scenario in advanced countries necessitating repeated liquidity injections by these countries to counter recessionary trends, the task of monetary policy calibration was particularly challenging. Sustained rate increases have, to an extent, impacted growth negatively. However, the period from December 2011 to January 2012 marked a reversal of the cycle with the RBI in its Third Quarter Review of Monetary Policy keeping the repo and reverse repo rates unchanged at 8.5 per cent and 7.5 per cent, respectively. The cash reserve ratio (CRR), however, has been reduced from 6.0 to 5.5 per cent in order to ease the liquidity situation and aid revival of growth.
Financial Markets
The weak global economic prospects and continuing uncertainties in the international financial markets had their impact on emerging market economies like India. Sovereign risk concerns, particularly in the euro area, affected financial markets for the greater part of the year, with the impact of Greece’s sovereign debt problem spreading to India and other economies by way of higher-than-normal levels of volatility.
Subdued foreign institutional investor (FII) inflows into the country led to a decline in Indian markets and contributed to the sharp depreciation of the rupee in the forex market, though much of the depreciation was due to ‘flight to safety’ by foreign investors, given the meltdown in Europe and inflation in emerging market economies. Moderation in the growth rate of the economy also affected market sentiments.
International Trade
The resilience of India’s trade can be seen from the fact that the growth of exports and imports, which was (-)3.5 per cent and (-)5 per cent, respectively, in 2009-10 as a result of the 2008 global economic crisis, rebounded to 40.5 per cent and 28.2 per cent in 2010-11. India not only reached pre-crisis levels in exports but also surpassed pre-crisis trends in export growth rate, unlike many other developing and even developed countries. India’s share in global exports and imports also increased from 0.7 per cent and 0.8 per cent, respectively, in 2000, to 1.5 per cent and 2.2 per cent in 2010.
The highlight of BoP developments during 2011-12 was merchandise exports of US$ 150.9 billion in the first half of the year, which represented an increase of over 40 per cent over the corresponding period in 2010-11. Imports of US$ 236.7 billion during April-September 2011 recorded an increase of 34.3 per cent over April-September 2010. The trade deficit was higher at US$ 85.8 billion (9.4 per cent of GDP) during the first half of 2011-12, vis-Ã -vis US$ 68.9 billion (8.9 per cent of GDP) in the first half of 2010-11. This was mainly on account of increase in international prices of imported commodities, namely oil and gold and silver during the first half of 2011-12.
Net capital flows at US$ 41.1 billion in the first half of 2011-12 remained higher as compared to US$ 38.9 billion in the first half of 2010-11. Under net capital flows, foreign direct investment (FDI) has shown considerable increase at US$12.3 billion during the first half of 2011-12, vis-Ã -vis US$ 7.0 billion in the corresponding period of 2010-11. Similarly, ECBs increased to US$ 10.6 billion during the first half of 2011-12, as against US$ 5.7 billion in the first half of 2010-11. Portfolio investment, mainly comprising FII investments and American depository receipts (ADRs)/global depository receipts (GDRs), however, witnessed large decrease in inflows to US$ 1.3 billion in the first half of 2011-12 vis-Ã -vis US$ 23.8 billion in the first half of 2010-11
In fiscal 2010-11, foreign exchange reserves increased by US$ 25.7 billion, from US$ 279.1 billion at end March 2010 to US$ 304.8 billion at end March 2011. Of the total increase in reserves, US$12.6 billion was on account of valuation gains arising out of depreciation of the US dollar against major currencies and the balance US$ 13.1 billion was on BoP basis. In 2011-12, the reserves increased by US$ 6.7 billion from US$ 304.8 billion at end March 2011, to US$ 311.5 billion at end September 2011. Out of this total increase, US$5.7 billion was on BoP basis and the balance US$1.0 billion on account of valuation effect.
External Debt
India’s external debt stock stood at US$ 326.6 billion at end-September 2011, recording an increase of US$ 20.2 billion (6.6 per cent) over end March 2011 estimates of US$ 306.4 billion. This increase was primarily on account of higher commercial borrowings and short-term debt, which together contributed over 80 per cent of the total increase in the country’s external debt.
The maturity profile of India’s external debt indicates the dominance of long-term borrowings. The long-term external debt at US$ 255.1 billion at end September 2011 accounted for 78.1 per cent of the total external debt, while the remaining 21.9 per cent was short-term debt. Government (sovereign) external debt stood at US$ 79.3 billion, while non-government debt amounted to US$ 247.3 billion at end September 2011. India’s external debt has remained within manageable limits as indicated by the external debt to GDP ratio of 17.8 per cent and debt service ratio of 4.2 per cent in 2010-11. This has been possible due to an external debt management policy of the government that emphasizes monitoring of long- and short-term debt, raising sovereign loans on concessional terms with long maturities, regulating ECBs through end-use and all-in-cost restrictions, and rationalizing interest rates on NRI deposits.
Future Prospects
The financial crisis in Europe, along with certain exogenous shocks like the Japanese nuclear disaster, resulted in a sharp global economic slowdown during 2011-12. There is no doubt, however, that a part of India’s slowdown is rooted in domestic causes. The persistent inflation that remained over 9 per cent for much of the year and needed to be tamed played a role. There were also the pressures of democratic politics, which slowed reforms.
The main reason for the recovery to be initially slow is the slight decline in investment rate. In the third quarter of 2011-12, gross fixed capital formation as a ratio of GDP was 30 per cent, down from 32.3 per cent one year ago. But as fiscal consolidation gets back on track, savings and capital formation should begin to rise. Moreover, with the easing of inflationary pressures in the months to come, there could be a reduction in policy rates by the RBI, which would encourage investment activity that could have a positive impact on growth. These factors, along with the fact that India’s investment rate at 35.1 per cent, is still an impressive figure, should result in growth consolidating in 2012-13 and picking up rapidly thereafter. Preliminary calculations suggest that the growth rate of GDP in 2013-14 will be 8.6 per cent. Long-term forecasts, of course, always come with a larger margin of error. These projections are based on assumptions regarding factors like normal monsoons, reasonably stable international prices, particularly oil prices, and global growth somewhere between where it now stands and 0.5 per cent higher.
Agricultural growth in the Eleventh Five Year Plan has been less than the target of 4 per cent despite a clear improvement compared to the previous plan periods. Though agriculture has now shrunk as a proportion of GDP to 13.9 per cent, as is only to be expected of a growing economy, it is vital sector and provider of livelihood for more than 50 per cent of the population. How this sector performs also has large implications for overall prices and, hence, it is a sector deserving of special attention. The area under foodgrains production has declined over the last three decades. That in itself is not worrying, but what is of concern is the low productivity of Indian agriculture. In yield parameters, India is lagging behind global levels in most crops. Concerted and focused efforts are required for addressing the challenge of stagnating productivity levels in agriculture. A holistic approach, simultaneously working on agricultural research and development, dissemination of technology, and provision of agricultural inputs such as quality seed, fertilizers, pesticides, and irrigation, would be important. Above all, the need is to raise investment in agriculture.
It is also important to understand that productivity itself will get a fillip if the supply chain from farm to consumer can be improved. This will lead to farmers getting a higher price for their products and be an incentive for them to invest and produce more. The crux of an improved supply chain is not for government to try to provide this directly by the public service delivery authorities but to take policy steps that facilitate private players to provide this vital service.
In 2010-11 and 2011-12, there was a slight moderation in services growth, mainly due to the steep fall in growth of public administration and defence services, creating some fiscal space for the government. Growth in trade, hotels, and restaurants is more robust at 11.2 per cent. If interest rates remain elevated, there would be some concern about growth in real estate, ownership of dwellings, and business services which has started decelerating. The outlook for some of the services in the economy is also linked to the global prospects. While software services exports have continued to be steady, the unfolding events in the euro area could lead to some sluggishness in this sector. The growth in fair-weather business services which has already shown signs of deceleration may not get better. Among the other two major services, transportation has already been affected with the Baltic dry index at an all-time low, though this may be of a passing nature. While travel and tourism could also be affected, it could also lead to a shift in tourist inflow pattern with increased inflow of holiday backpackers searching for cheaper destinations like India. The rise in tourists from South Asia, East Asia, and South East Asia could further help this sector.
The recent regulatory prescriptions for European banks have brought in fears of de-leveraging. Indian banks are not expected to have any direct impact on account of their negligible exposure to the troubled zone. However, there could be indirect impact on account of funding pressures. The scope for counter-cyclical financial policy could be explored in financial regulations in order to minimize the negative impact of accumulated financial risks. This will go a long way in providing needed stability to the financial system.
Going forward, fiscal consolidation would need to be anchored in a framework that addresses some of the risks like rise in crude prices. Besides, micro-foundational reforms are needed for achieving desired macro-economic outcomes.
This feature is based on Economic Survey 2012
Friday, March 30, 2012
Welfare Schemes for Women
A number of welfare schemes for women have been undertaken by the Government of India. The details of such schemes under implementation by Ministry of Women and Child Development are as under:
RAJIV GANDHI NATIONAL CRECHE SCHEME FOR THE CHILDREN OF WORKING MOTHERS (RGNCS) provides day care facilities to the children in the age group 0-6 years from families with monthly income of less than 12000/-. In addition to being a safe space for the children, the crèches provide services such as supplementary nutrition, pre-school education and emergency health care, etc.
CENTRAL SOCIAL WELFARE BOARD : The main women welfare Related schemes and programmes being implemented by CSWB are as under:-
Family Counselling Centres: It was introduced in 1983. The centres provide counselling, referral and rehabilitative services to women and children who are victims of atrocities, family maladjustment and social ostracism. They also provide crisis intervention and trauma counselling in case of natural disasters.
Awareness Generation Programme: This scheme aims at creating awareness amongst women and the community at large on rights, status and problems of women in particular and other social concerns.
Condensed courses of education for women: This scheme caters to the needs of girls/women who could not join mainstream education system or who were drop outs from formal schools. The scheme aims to provide educational opportunities to girls/women above the age of 15 years along with additional inputs of skill development/vocational training. The contents of the course are need based and modified according to local requirement.
NATIONAL MISSION FOR EMPOWERMENT OF WOMEN (NMEW) is an initiative of the Government of India for empowering women holistically. It is a Centrally Sponsored Scheme sanctioned in April 2011 and acts as an umbrella Mission with a mandate to strengthen inter-sectoral convergence and facilitate the process of coordination of all the women’s welfare and socio-economic development programmes across Ministries and Departments. NMEW is being implemented in all the 35 States and Union Territories.
WORKING WOMEN’S HOSTEL (WWH) Scheme envisages provision of safe and affordable hostel accommodation to working women, single working women, women working at places away from their home-towns and for women being trained for employment. The scheme has been revised recently.
SUPPORT TO TRAINING AND EMPLOYMENT PROGRAMME (STEP) for Women was launched as a Central Sector Scheme during 1986-87. It aims at making a significant impact on women by upgrading skills for self and wage employment. The target group includes the marginalized assetless rural Women and urban poor. This also includes wage labourers, unpaid daily workers, female headed households, migrant labourers, tribal and other dispossessed groups, with special focus on SC/ST households, women headed households and families below the poverty line.
RASHTRIYA MAHILA KOSH (RMK) with a corpus of Rs.100 crore extends micro-finance services to bring about the socio-economic upliftment of poor women. Credit is provided to the poor women beneficiaries through Intermediary Microfinancing Organisations (IMOs) working at grass root level such as NGOs, Women Federations, Co-operatives, not for profit companies registered under Section 25 of the Companies Act and other Voluntary/Civil society organisations etc. by following a client friendly, simple, without collateral, for livelihood and income generation activities, housing and micro-enterprises.
WOMEN’S EMPOWERMENT AND LIVELIHOOD PROGRAMME IN MID-GANGETIC PLAIN (WELP) also called Priyadarshini is being implemented with assistance of International Fund for Agricultural Development in 13 Blocks spread over 5 Districts in Uttar Pradesh i.e. Bahraich, CSM Nagar, Raebareli, Shravasti and Sultanpur and 2 Districts Madhubani and Sitamarhi in Bihar. It aims at holistic empowerment of vulnerable groups of women and adolescent girls in the project area through formation of Women’s Self Help Groups (SHGs) and promotion of improved livelihood opportunities. Over 1,00,000 households are to be covered under the project and 7,200 SHGs will be formed during the project period ending 2016-17. The beneficiaries are expected to be empowered to address their political, legal and health issues through rigorous capacity building. National Bank for Agriculture and Rural Development is the lead programme agency for implementation of the programme which became effective in December 2009.
INDIRA GANDHI MATRITVA SAHYOG YOJANA (IGMSY) is a Conditional Cash Transfer scheme for pregnant and lactating (P&L) women introduced in the October 2010 to contribute to better enabling environment by providing cash incentives for improved health and nutrition to pregnant and nursing mothers. It envisages providing cash to P&L women during pregnancy and lactation in response to individual fulfilling specific conditions. It addresses short term income support objectives with long term objective of behaviour and attitudinal change. The scheme attempts to partly compensate for wage loss to P&L women both prior to and after delivery of the child. The scheme is being implemented initially on pilot basis in 52 selected districts using the platform of ICDS. 12.5 lakh P&L women are expected to be covered every year under IGMSY. The beneficiaries are paid 4000/ in three instalments per P&L women between the second trimester till the child attains the age of 6 months on fulfilling specific conditions related to maternal and child health .
SWADHAR GREH SCHEME: The Ministry of Women and Child Development had been administering Swadhar scheme since 2001 for Women in difficult circumstances. Under the Scheme, temporary accommodation, maintenance and rehabilitative services are provided to women and girls rendered homeless due to family discord, crime, violence, mental stress, social ostracism. Another scheme with similar objectives/target groups namely Short Stay Home (SSH) was being implemented by Central Social Welfare Board. Being similar in objectives and target groups, both the schemes have been merged to Swadhar Greh scheme with revised financial parameters.
UJJAWALA is a comprehensive scheme for prevention of trafficking and rescue, rehabilitation and reintegration of victims of trafficking for commercial sexual exploitation. Funds are released to NGOs as the scheme is being implemented mainly through NGOs.
Award of projects under NHDP / VGF Schemes under PPP Mode
In the year 2011-12, National Highways Authority of India (NHAI) has awarded 49 projects of 6491 Kms. In addition, Ministry of Road Transport & Highways (M/o RT&H) has awarded 9 projects of 908 Kms. through state agencies. Thus 58 projects of 7400 Kms. have already been awarded. This is about 40% more than the best ever that was in the last year.
In addition, 3 projects in NHAI of 318 Kms. and 5 projects in the Ministry of 664 Kms. i.e. 982 Kms. in all, bids have been received, which are under evaluation and decision is to be taken soon.
In addition, 3 projects in NHAI of 318 Kms. and 5 projects in the Ministry of 664 Kms. i.e. 982 Kms. in all, bids have been received, which are under evaluation and decision is to be taken soon.
Per Capita Power Consumption
The per capita consumption of electricity in the country during the year 2009-10 was 778.63 kWh per annum as against the global average of 2730 kWh for the year 2009.
As per the National Electricity Policy 2005, per capita availability of electricity is to be increased to over 1000 units by 2012. However, it is estimated that per capita consumption in the country would reach 1257 units by the end of the 12th Plan (2016-17).
As per the report of Working Group on Power for the 12th Plan, capacity addition requirement during 12th Plan is 75,785 MW on all India basis, based on the Mid-Term Appraisal capacity addition target of 62,374 MW during 11th Plan. The capacity of 75,785 MW comprises 9,204 MW hydro, 63,781 MW thermal and 2,800 MW nuclear capacity. In addition, a grid interactive renewable capacity addition of about 18,500 MW during 12th Plan has been considered for the generation planning studies.
Several steps have been taken to improve the power situation including per capita power availability in the country. These include delicensing of thermal generation, introduction of Ultra-Mega Power Projects (UMPP), investor friendly New Hydro Policy 2008, initiatives for augmentation of domestic manufacturing capacity of power plant equipment, adoption of super-critical technologies, liberalization of mega power policy, enhancing availability of skilled and trained manpower and acceleration in generation capacity addition.
As per the National Electricity Policy 2005, per capita availability of electricity is to be increased to over 1000 units by 2012. However, it is estimated that per capita consumption in the country would reach 1257 units by the end of the 12th Plan (2016-17).
As per the report of Working Group on Power for the 12th Plan, capacity addition requirement during 12th Plan is 75,785 MW on all India basis, based on the Mid-Term Appraisal capacity addition target of 62,374 MW during 11th Plan. The capacity of 75,785 MW comprises 9,204 MW hydro, 63,781 MW thermal and 2,800 MW nuclear capacity. In addition, a grid interactive renewable capacity addition of about 18,500 MW during 12th Plan has been considered for the generation planning studies.
Several steps have been taken to improve the power situation including per capita power availability in the country. These include delicensing of thermal generation, introduction of Ultra-Mega Power Projects (UMPP), investor friendly New Hydro Policy 2008, initiatives for augmentation of domestic manufacturing capacity of power plant equipment, adoption of super-critical technologies, liberalization of mega power policy, enhancing availability of skilled and trained manpower and acceleration in generation capacity addition.
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