Gujarat Emerges One Of The Leaders For Investments Among Forward Looking States

Gujarat has emerged a leader among five top States i.e.  Maharashtra, Orissa, Andhra Pradesh and Karnataka in becoming preferred investment destinations and in attracting 52.42 % of total investment of Rs. 1,04,93,602 crore for 20 States  as on 31st March, 2010, according to a study undertaken by ASSOCHAM.

While releasing the study, Chamber Secretary General, Mr. D S Rawat said that  Gujarat attracted investment proposals of Rs.1201785 crore, Maharashtra was close to Rs.1036115 crore, Orissa Rs. 985929 crore, Andhra Pradesh Rs. 809600 crore, Karnataka Rs. 733457 crore and  the remaining 15 states received Rs. 6167548 crore worth proposals only.

The study observed that Tamil Nadu was at sixth position by attracting investment worth Rs. 658116 crore and West Bengal at seventh position with Rs. 579029 crore investment proposals.

The remaining 15  States were Tamil Nadu (Rs. 658116 crore), West Bengal (Rs. 579029 crore), Jharkhand (Rs. 529401 crore), Chhattisgarh (Rs. 412497 crore), Uttar Pradesh (Rs. 410161 crore), Madhya Pradesh (Rs. 371087 crore), Haryana (Rs. 316823 crore), Rajasthan (Rs. 246841 crore), Kerala (Rs. 211956 crore), Punjab (Rs. 172226 crore), Bihar (Rs. 112588 crore), Uttarakhand (Rs. 94038 crore), Jammu & Kashmir (Rs. 80108 crore), Himachal Pradesh (Rs. 78231 crore) and Assam (Rs. 52952 crore).

The highest amount of investment has gone into electricity (40.3%), services (22.6 %), manufacturing (22.1 %), real estate (9.9 %), mining (2.4 %) and irrigation (2.3 %).

Mr. Rawat also said that Investment in primary sector, represented by irrigation, has highest share in Andhra Pradesh. Next to A.P. are Bihar, Karnataka, Gujarat andMaharashtra. As against these states, Chhattisgarh, J&K, Haryana, Tamil Nadu and Orissa, in that order, gave least priority to investing in irrigation development.

Mining has got highest shares in live investments in states of Orissa, Assam, Rajasthan and Andhra Pradesh. As opposed to this trend, mining sector got the least share in total investments in Kerala, Uttarakhand, J&K, Haryana and Himachal Pradesh.

Manufacturing is expected to achieve higher growth relatively to other sectors in states of Jharkhand, Karnataka, West Bengal, Assam and Orissa. Conversely, manufacturing got lower shares in J&K, Haryana, U.P., Kerala and Uttarakhand.

As regards share of electricity, sector has got the highest share of investments in states of Uttarakhand, Chhattisgarh, Himachal Pradesh, Madhya Pradesh, and Bihar. The bottom five states to focus on electricity are Karnataka, Kerala, Haryana, Assam and A.P, added Mr. Rawat.

Kerala, J&K, Punjab, Assam and Maharashtra emphasize more on development of services sector. The states of Himachal Pradesh, Rajasthan, Karnataka, Haryana and Gujarat have lesser focus on services sector.

Gujarat, of total proposals worth Rs. 1201785 crore, attracted 39.1% in electricity, 25.9 % in manufacturing, 18.7 % in services, 11.5 % in real estate, 3.4 % in irrigation and 1.2 % in mining.

Maharashtra, of total proposals worth Rs. 1036115 crore, attracted 30.8 % in electricity, 13.2 % in manufacturing, 33.1 % in services, 19 % in real estate, 3 % in irrigation and 0.9 % in mining.

Orissa, of total proposals worth Rs. 985929 crore, attracted 42.3 % in electricity, 34.0 % in manufacturing, 7.3 % in services, 0.3 % in real estate, 0.5 % in irrigation and 15.5 % in mining.

Andhra Pradesh, of total proposals worth Rs. 809600 crore, attracted 26.9 % in electricity, 23.8 % in manufacturing, 19.8 % in services, 11.8 % in real estate, 14.1 % in irrigation and 3.5 % in mining.

Karnataka, of total proposals worth Rs. 733457 crore, attracted 22.3 % in electricity, 42.5 % in manufacturing, 16.2 % in services, 13.2 % in real estate, 4.1 % in irrigation and 1.7 % in mining.

For real estate sector, Haryana was a major destination as it attracted 57.8% of total investment proposals. For electricity sector, Uttarakhand received 80.6 % of total investment of Rs. 94038 crore, followed by Chhattisgarh, 68.2 % (Rs.412497 crore), Himachal Pradesh 63.6 % (Rs. 78231 crore), Madhya Pradesh 58.4 % (Rs. 371087 crore) and Bihar 56.7 % (Rs. 112588 crore).

West Bengal emerged second to Jharkhand as far as manufacturing was concerned. Jharkhand attracted 62.2 % (Rs.529401 crore). Karnataka, 42.5 % (Rs. 733457 crore) followed by West Bengal 40.9 % (Rs. 579029 crore), Assam, 34.1 % (Rs. 52952 crore) and Orissa, 34.0 % (Rs. 985929 crore).

The incorporation of two new chapters on ‘Trends and Composition of India’s External Debt’ and ‘Global and Euro Zone Debt Crisis: Perspective and Lessons’ and issues relating to State Governments’ back to back external debt and debt service projections for externally-aided projects make the Status report more analytical and topical in nature.

The salient features of the Report are summarized as under:

Though the India’s external debt has increased in absolute terms during 2009-10, key debt sustainability indicators suggest that India’s external debt remains at a comfortable level. This was made possible because of the external debt management policy of the Government of India, which focuses on monitoring long and short-term debt, raising sovereign loans on concessional terms with longer maturities, regulating external commercial borrowings (ECB) through end-use and all-in-cost restrictions, and rationalizing interest rates on Non-Resident Indian (NRI) deposits. While the liberalization of ECB policy provided cushion against the decline in capital flows during 2008-09, the cautious approach also helped prevent the build-up of unsustainable debt burden in the pre-crisis era, which could have strained the corporate balance sheets during the crisis. The ECB policy therefore has been an effective intervention tool for managing surge and reversal of capital flows.

India’s external debt position during the years 2006-07 to 2009-10 is given below in the Table.

India’s external debt of US$ 261.5 billion at end March 2010 reflects an increase of US$ 37 billion (16.5 per cent) over the US$ 224.5 billion at end March 2009. The rise is largely attributed to long-term components viz. external commercial borrowings, NRI deposits and Special Drawing Rights (SDR) allocation by the International Monetary Fund. The valuation effect arising from depreciation of the US dollar against major international currencies contributed 17.8 per cent (US$ 6.6 billion) to the total increase in India’s external debt in US dollar terms.

The maturity structure of India’s external debt is favorable with long-term debt at US$ 208.9 billion at end-March 2010, accounting for 79.9 per cent of the total external debt. The share of short-term debt in total external debt has increased to 20.1 per cent at end-March 2010 from 19.3 per cent at end-March 2009. The rise in short-term debt ratio in recent years is primarily due to a change in the definition of short term debt from 2005 onwards, with increased coverage.

Government (Sovereign) external debt of US$ 67.1 billion accounted for 25.7 per cent of total external debt at end March 2010 as against US$ 55.9 billion at end March 2009. Similarly, Government guaranteed external debt increased marginally to US$ 7.7 billion at end-March 2010, vis-a-vis US$ 6.8 billion at end-March 2009.

India’s external debt service payments continue to remain within manageable limits. It was in the range of 4.4 per cent to 4.8 per cent during 2006-07 to 2008-09, before increasing to 5.5 per cent in 2009-10 due to higher repayments under external commercial borrowings.

A comparative picture of India’s external debt vis-a-vis top twenty developing debtor countries for the year 2008, as brought out by the World Bank’s ‘Global Development Finance, 2010’ shows that India was the fifth most indebted country. All the key debt indicators, especially debt to GNI ratio (19.0 per cent), debt service ratio (8.7 per cent), short-term to total external debt (19.6 per cent) and the cover to external debt provided by foreign exchange reserves (111.6 per cent) were, however, in comfortable zone.

Analysis of India’s external debt scenario over the period 1990-2010 reveals an improvement in India’s external debt situation. Over the last two decades, external debt has increased in absolute terms, but the rise has not translated into higher debt burden. This is manifested in the decline in the debt-GDP ratio from 28.7 per cent in 1990-91 to 18.9 per cent in 2009-10 and the debt service ratio from 35.3 per cent in 1990-91 to 5.5 per cent in 2009-10.

Over the period 1990-2010, the composition of external debt has also undergone change with the share of both multilateral and bilateral components exhibiting a declining trend in the long term external debt. The share of the Government (the main borrower from bilateral and multilateral sources) in the total external debt also declined from 59.9 per cent in 1990 to 25.7 per cent in end-March 2010. The share of private players increased correspondingly from around 40 per cent in the first half of the nineties to over 70 per cent in the recent years.

The sovereign debt crisis in the Euro zone highlighted the fact that public debt numbers, seen in isolation, could be misleading. The composition, maturity profile, refinancing requirement,investor base and distribution between domestic and international investors play the critical role in determining the vulnerable level of sovereign debt. In this context, it is important to note that the nature of sovereign debt in India is fundamentally different from many countries facing sovereign debt risk.

The composition of the Central Government public debt reveals that the bulk of the sovereign debt is from domestic sources (about 89 per cent), and external debt accounts for about 11per cent, most of which is from multilateral/ bilateral sources. Besides, banks (including co-operative banks) and insurance companies account for a sizeable share of the total domestic debt.  Given the Statutory Liquidity Ratio (SLR) requirement for banks and the fact that a significant share of the banking and insurance sector remains in the public sector, the refinancing risk that has been at the root of the Euro zone crisis, is at best minimal.

The complete Annual Status Report is available at the website of the Ministry of Finance -www.finmin.nic.in.

For More Reading. .

INDIA’S EXTERNAL DEBT INCREASES BY 12 PERCENT

ComScore, Inc. (NASDAQ: SCOR) released its June 2010 ranking of the top Business/Finance sites in India based on data from its comScore Media Metrix service. The study found that 19.7 million Internet users in India visited Business/Finance sites, representing a 45-percent increase from the previous year, as a growing number of Indians turned to the Web for business and finance-related content including online banking, trading and the latest news on financial markets. Males accounted for 72 percent of visitors to the Business/Finance category, driving 78 percent of total page views and 78 percent of total minutes spent at the category, with the highest skews among males age 25-34.

“With India emerging as a vibrant global financial center, online finance is beginning to attract significantly more attention and drive more transactions than ever before in this market,” said Will Hodgman, comScore executive vice president for the Asia-Pacific region. “With half of India’s online population visiting a business or finance-related site during the month, there is an opportunity to reach and engage financial consumers in a way that was not possible before. Financial companies must focus now on devising effective digital strategies to help attract and retain these important customers or risk losing them to their competitors.”

ICICI Ranks as Most Visited Bank in India

In June 2010, 19.7 million people age 15 and older visited a Business/Finance site from a home or work location in India, an increase of 45 percent from the previous year. Nearly all of the top 10 most visited Business/Finance sites witnessed double-digit traffic growth in the past year as more Indians turned to the Web for financial information. ICICI Bank led as the top Business/Finance site in India with 4.7 million visitors, an increase of 40 percent from the previous year. HDFC Group followed as the second most visited site with 3.5 million visitors (up 58 percent) with the State Bank of India grabbing the #3 spot with nearly 3 million visitors (up 84 percent).

*Excludes visitation from public computers such as Internet cafes or access from mobile phones or PDAs.

Further analysis of the most-visited online banks revealed that the top three received a significant portion of site traffic from markets outside of India. ICICI Bank saw 12.3 percent of its traffic originate from other markets, with the U.S. accounting for 5.4 percent of overall visitation to the site, the U.K. at 2.5 percent and Canada with 1.0 percent, leading as the three largest markets for visitation outside of India. HDFC Group received nearly 6 percent of its traffic from other markets (top three: U.S. 1.5 percent, U.K. 0.7 percent and Singapore 0.3 percent). While State Bank of India received 6 percent of its traffic from other markets (top three: U.S. 2.3 percent, U.K. 0.5 percent and Singapore 0.3 percent).

*Excludes visitation from public computers such as Internet cafes or access from mobile phones or PDAs.

“Several banks occupied top spots in the category, pointing to the popularity and growing interest in online banking in India,” continued Mr. Hodgman. “With the top banks attracting a significant number of visitors from countries outside of India, these visitors, most likely non-resident Indians, represent an important segment for banks to address when developing and executing their digital strategies.”

Visitors Show Strong Engagement at MoneyControl.com and Bombay Stock Exchange

On average, Internet users in India spent 53 minutes on Business/Finance sites in June 2010, consuming 92 pages of content and frequenting the category 6 times during the month. Of the top 10 most visited Business/Finance sites, visitors to MoneyControl.com displayed the strongest engagement, averaging more than one hour on the site during the month, visiting the site 5 times and consuming 57 pages of content. Visitors to Bombay Stock Exchange also exhibited strong engagement, averaging 42 minutes on the site during the month and consuming 97 pages of content. Among the major banks, ICICI Bank led with the largest amount of time spent per visitor at 26 minutes.

*Excludes visitation from public computers such as Internet cafes or access from mobile phones or PDAs.

FOR MORE READING. .

• CORE BANKING SERVICES AT POST OFFICES
• REFORMS, RECESSION, AND RESERVE BANK OF INDIA
• MOBILE BANKING FACILITY IN INDIA
• GOVERNMENT OF INDIA APPROVES INFUSION OF CAPITAL WORTH RS.6211 CRORE IN FIVE PUBLIC SECTOR BANKS
• ENHANCE RELEVANCY OF FINANCIAL SERVICES TO RURAL INDIA
• MICROFINANCE IN INDIA
• ENTRY OF NEW BANKS IN THE PRIVATE SECTOR – DISCUSSION PAPER
• ENTRY OF NEW BANKS IN THE PRIVATE SECTOR – DISCUSSION PAPER

]]> http://indiacurrentaffairs.org/in-india-traffic-to-business-and-finance-web-sites-surged-45-percent-in-past-year/feed/ 0 http://indiacurrentaffairs.org/indian-economy-is-going-through-the-phase-of-recovery-finance-minister-shri-pranab-mukherjee/ http://indiacurrentaffairs.org/indian-economy-is-going-through-the-phase-of-recovery-finance-minister-shri-pranab-mukherjee/#comments Wed, 08 Sep 2010 07:09:28 +0000 India Current Affairs http://indiacurrentaffairs.org/?p=11364 Current Affairs Banking: The major barriers for poor to access appropriate financial services are lack of education, low and irregular income, mandatory requirements of documentation and product design factor. Promoting technological and institutional innovation as a means to expand financial system access and usage, including addressing infrastructure weaknesses could provide an answer to the above barriers. Today there is no dearth of technology and its transformational role cannot be over-emphasised. Scalable financial inclusion cannot happen without stable and reliable information and Communication Technology and appropriate outreach of our banks.

Indian economy at present is going through a phase of recovery with high GDP growth. Our commercial banks and PSBs in particular have performed quite well in terms of high credit growth, deposit mobilization and profitability apart from meeting their socio economic commitments. But I must emphasize that financial services is vital for economic resilience and Indian Banks must grow in size to be able to offer services on par with global players and must have appropriate systems in place to manage growth. As the global banking landscape has been changing fast, I look forward to the time, not very far away from now, when Indian Banks would reign among the top global brands. This growth aspiration must drive our bank’s future plans and actions with financial stability, resilience, vision and social commitments.

Source: Excerpts of Finance Minister Shri Pranab Mukherjee’s address, delivered on the occasion of 105th Foundation Day Celebrations of Bank of India,

FOR MORE READING. .

• CORE BANKING SERVICES AT POST OFFICES
• REFORMS, RECESSION, AND RESERVE BANK OF INDIA
• MOBILE BANKING FACILITY IN INDIA
• GOVERNMENT OF INDIA APPROVES INFUSION OF CAPITAL WORTH RS.6211 CRORE IN FIVE PUBLIC SECTOR BANKS
• ENHANCE RELEVANCY OF FINANCIAL SERVICES TO RURAL INDIA
• MICROFINANCE IN INDIA
• ENTRY OF NEW BANKS IN THE PRIVATE SECTOR – DISCUSSION PAPER
• ENTRY OF NEW BANKS IN THE PRIVATE SECTOR – DISCUSSION PAPER

]]> http://indiacurrentaffairs.org/indian-economy-is-going-through-the-phase-of-recovery-finance-minister-shri-pranab-mukherjee/feed/ 0 http://indiacurrentaffairs.org/exports-likely-to-suffer-by-10-in-2010-2011/ http://indiacurrentaffairs.org/exports-likely-to-suffer-by-10-in-2010-2011/#comments Tue, 07 Sep 2010 06:22:15 +0000 India Current Affairs http://indiacurrentaffairs.org/?p=11273 The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has predicted a shortfall of close to 10 per cent in exports target for current fiscal due to slowdown in exports growth rate, which fell from 36.2 per cent in April to 35.1 per cent in May, 30.4 in June and that of 13.2 per cent in July this year and the trend is unlikely to witness a u-turn.

The chamber is of the view that India’s exports would thus be around $US 180 billion as against the target level of $US 200 billion by the end 2010-2011, since slump in export growth rate has started becoming extremely pronounced and is likely to continue for remaining period of on-going fiscal.

This is because developing countries have already gone in for fiscal consolidation as their economies commenced partial roll back of stimulus packages, impact of which will fall on India’s export proceeds in current fiscal, said Secretary General, ASSOCHAM, Mr. D.S. Rawat.

As a result of fiscal consolidation, India’s exports which grew at the rate of 32.6 per cent in April 2010, it fell to 35.1 per cent in the following month before coming down to a level of 30.4 per cent in June, which slipped at abysmally lower level of 13.2 per cent in July this year and reversal trend will continue with some improvements here and there in remaining months of current fiscal, amounting severe sinkage of export proceeds arriving at $US 180 billion by March 31st, 2011, said Mr. Rawat.

The ASSOCHAM, however, stated that USA will remain a leading market for Indian traditional goods and services even in current fiscal, the country which suffered the maximum onslaught of global financial turmoil between September 2007 until 2009. This is because US economy has gradually started coming out of recessionary moods in which it will have lot of space for Indian products especially in the traditional segments which includes gems & jewellery, textiles, components, tea, spices and brassware and other handicrafts.

The ASSOCHAM is of the view that Indian exports will suffer a good deal of beatings in European Union (EU) in which countries like Spain, Italy, Portugal, Germany are already in for major fiscal consolidation. This has put a serious question for demand of Indian products in these countries.

Estimates reveal that close to $US 20 billion of export proceeds are absorbed in aforesaid countries, including other European nations in which slump in demand and consumption are being closely followed.

Mr. Rawat said that major hope for Indian exports, retaining their edge will stay in Latin American countries and African continent, since India has described them as focused region for domestic exports. In totality, it is estimated that exports will stay stagnant in current fiscal and severely dent the external engagements of the country thereby compromising India to remain content with the loss of foreign exchange inflows.

The chamber has suggested that India needs to map out its technological gaps and invest heavily on R&D so that it makes products and sells goods & services of supreme quality so that Indian products can create space for themselves. Investment in R&D in India is just negligible, as a result it still imports equipments and processes for setting up power plants, oil & gas facilities, telecommunication infrastructure, engineering plants and so on and so forth.

FOR MORE READING. .

• THE US LAW COULD ADD SIGNIFICANT COSTS FOR INDIAN EXPORTERS
• TEXTILES PRODUCTION AND EXPORT IN INDIA
• EXPORT OF MARINE PRODUCTS FROM INDIA
• WHAT IS THE SHARE OF MICRO AND SMALL ENTERPRISES IN THE EXPORTS OF INDIA
• COMPETITION HARDER FOR INDIAN TEXTILES IN US MARKET THAN EU
• ECONOMIC OUTLOOK – 2010-11 HIGHLIGHTS
• EXPORT OF HANDLOOM, HANDICRAFTS, AND COTTON
• PRODUCTION AND EXPORT OF COFFEE
• DECLINE IN APPAREL EXPORTS FROM INDIA
• NATIONAL POLICY FOR PETROCHEMICAL EXPORTS
• INDIA’S TRADE WITH FRANCE
• IMPACT OF EUROPEAN CRISIS ON TEXTILE EXPORTS
• SERVICES EXPORTS FROM INDIA
• INDIA MARCHES ON THE GROWTH PATH – Ashok Handoo
• FOREIGN TRADE POLICY

]]> http://indiacurrentaffairs.org/exports-likely-to-suffer-by-10-in-2010-2011/feed/ 1 http://indiacurrentaffairs.org/india-marches-on-the-growth-path-ashok-handoo/ http://indiacurrentaffairs.org/india-marches-on-the-growth-path-ashok-handoo/#comments Thu, 02 Sep 2010 11:14:42 +0000 India Current Affairs http://indiacurrentaffairs.org/?p=11102 After 8.6 percent quarterly growth rate, it is now 8.8 percent. India’s economy has grown by 8.8 per cent in the first quarter of the current financial year ending June against 8.6 percent in the last quarter ending March. This is the strongest performance since 2007. The economy grew by just 6 percent in the first quarter of the last financial year.

This impressive performance has been achieved due to high growth in the manufacturing and services sector. Data released by the Central Statistical Organization on Tuesday revealed an increase of 12.4 per cent growth in manufacturing sector.

This was only 3.8 in the first quarter last year. The growth has been 7.5 per cent in construction and 8.9 per cent in mining. Farm output, forestry and fishing grew by a modest 2.8 percent in this quarter, but still higher than 1.9 percent in the first quarter of the last fiscal.

A good monsoon this year is expected to increase agriculture production in the coming months and give a further boost to the growth process.

Judging by this performance analysts believe that India could well end up with a growth rate anywhere between 8.5 to 9 percent in the current financial year- a figure India had been achieving, year after year, until the global economic crisis hit the economies across the world. So far the government has predicted the economy to expand 8.5 percent in the current fiscal, compared to an annual growth of 7.4 percent in 2009-10.

As the Finance Minister Mr. Pranab Mukherjee put it “The numbers are quite encouraging…..I do hope it will be possible to maintain this level of growth.”

The performance in the first quarter will encourage the Reserve Bank of India to pursue its tight money policy to curb inflation which has been a major concern for the government. Though the RBI raised the key interest rates four times in the current financial year so far, it has been treading the path carefully lest heavy doses hamper the growth process. Some economists believe that RBI may now give a pause to further increasing the key rates. One, however, has to wait till September 16, when the RBI will come out with its review of the economy report, to find what approach the bank adopts on the key rates issue.

The headline inflation has eased from double-digit levels to 9.97 percent, lowest since February, and is likely to soften further in the wake of good harvests.High inflation has hurt the poor most, because they spend a greater part of their income on food. Though food inflation too is coming down but it still   remains high at 16.6 percent. The silver lining is that as new crops arrive in the market, it is expected to come down. This should give a relief to the people, particularly those in the poor category. The Government is confident to bring down the inflation rate to around 6 percent by the end of this calendar year. Though agriculture constitutes only about 18 percent of India’s GDP, it caters to half of its 1.2 billion population. As such its importance can hardly be overemphasized.

Keeping in view the Indian situation, the importance of Micro, Small and Medium Enterprises in the growth process is all too important. As President Pratiba Devi Singh Patil pointed out while presenting National awards to excellent performers in this sector, it accounts for about 45 percent of manufacturing output, 95 percent of the number of industrial units and 40 percent of exports. Besides, the sector provides employment to almost 60 million people, mostly in the rural areas of the country, making it the largest source of employment after the agriculture sector. The sector also represents the philosophy of Swedeshi movement in the country since village and Khadi industries form a bulk of this sector. Development of this sector thus holds key to inclusive growth and plays a critical role in India’s future. The sector therefore is an engine of growth.

Quite understandably, the President called for adequate attention to this sector by introducing better technology, improving credit facilities and upgrading the marketing structure so vital to give a push to this sector.  The sector faces challenges at all levels. It cannot afford expensive technologies due to smaller turnover at individual level. The banks consider it a vulnerable sector and thus shy away from lending adequate finances to it. But sufficient and timely financial support is absolutely essential for its survival, failing which smaller units face the threat of extinction. On the marketing front too, more needs to be done to give it a better exposure by holding domestic and international trade fairs.

One area of concern is the low growth in domestic demand in the quarter under reference. The figures indicate that consumption at the grass root level has not picked up yet, though car sales climbed 38 percent in July. But that jump reflects expenditure pattern of middle and high income groups.

As during the last two difficult years, the economy will have to depend on domestic demand for growth.  Exports in this quarter also rose only by 13 percent, slowest in six months, indicating slow economic recovery in the traditional European markets. So was the case with merchandise exports which increased 13.2 percent in July. Though exports too form only 20 percent of India’s GDP, Unlike China where the figure is about 38 percent, but about 40 per cent of industrial production is influenced by external factors, like commodity prices. That underlines the importance of raising exports in the days ahead.

The Planning Commission Deputy Chairman Montek singh Ahluwalia says the growth is on the expected lines. The overall GDP growth in this fiscal would be slightly better than 8.5 percent.” The industry bodies are confident that the momentum would be enough to touch the 9 percent figure for 2010-11. Whether that happens or not remains to be seen.

The Prime Minister Dr. Manmohan Singh has always been stressing that the country needs double-digit growth to lift hundreds of millions of Indians out of poverty. India, world’s second-fastest growing major economy, needs to do more to post even better figures in the remaining three quarters of the current financial year. That requires a consistent effort and a closely monitored economic and monetary policy.  (PIB Features)

]]> http://indiacurrentaffairs.org/india-marches-on-the-growth-path-ashok-handoo/feed/ 0 http://indiacurrentaffairs.org/india%e2%80%99s-impressive-economic-growth-calls-for-adequate-and-sustainable-infrastructure-development/ http://indiacurrentaffairs.org/india%e2%80%99s-impressive-economic-growth-calls-for-adequate-and-sustainable-infrastructure-development/#comments Thu, 02 Sep 2010 09:46:34 +0000 India Current Affairs http://indiacurrentaffairs.org/?p=11086 NCAER released “Infrastructure Development in India: An Assessment of Status and Strategies”

The report provides comprehensive review of the progress of infrastructure development in the country for seven major sectors including power, transportation and irrigation. It highlights the new strategy outlined in the Eleventh Five Year Plan for the sharp increase in the planned investment levels for infrastructure and the expanding role for the private sector. The strategy remains one of demand-led development implying the critical need for achieving planned targets. As the economy has accelerated growth, the utilisation rates of infrastructure have gone up sharply whereas the building of infrastructure is lagging behind. There is a need to improve implementation performance. The report suggests:

 Full exploitation of the current potential of the infrastructure sectors; slack capacity in one sector also implies less than full utilisation of capacity elsewhere.

 ‘Institutional’ measures to make the various legal, financial and fiscal arrangements effective; independence of regulators, efficient pricing of service, reducing the time needed for achieving implementation of plan targets .

 Sizing up infrastructure in terms of improvement in service quality, etc.

 Designing good contracts and contracting procedures to speed up the project implementation

 Providing focus on building good quality assets in this phase of heightened infrastructure building

 Need for stable policies both at the sectoral level and at the macroeconomic level

February 16, 2010, New Delhi: “Infrastructure Development in India: An Assessment of Status and Strategies” a report prepared by NCAER and commissioned by Holcim, was released today by Honorable Shri.Kamal Nath, Minister for Road Transport and Highways. The main focus of the present study is to provide an overall analysis of the developments in the infrastructure sector taking into account their inter-linkages with the other sectors of the economy. It also includes an overview of development efforts covering the perspectives of the seven sub-sectors of infrastructure—power, telecommunication, roads, railways, airports, ports and irrigation.

According to Mr. Suman Bery, Director General, NCAER, “The Eleventh Five year plan (2007 to 2011) projected investments in infrastructure development to the tune of $500 billion over a five year period. The current economic slowdown has cast some doubts on the scale of investments that may be possible in a short period of time, but there is a wide recognition that infrastructure development would be essential for sustaining high rate of economic growth over a longer term which in turn is necessary to achieve developmental goals. This study points to areas which require attention to improve performance in infrastructure development It is hoped that this report will act as a useful source of reference to policy makers, academics, corporate sector and the public-at large on Infrastructure development in India “ Mr. Kamal Nath, Minister for Road Transport and Highways, while releasing the report added, “As we continue to grow and develop, the challenge of sustaining the growth is always there. With the disposable income growing, the society today is moving towards higher aspiration and thus creating a huge demand for quality of work delivered. Hence, it is imperative to implement our infrastructure development programmes in a more systematic way. India possesses great intellectual capabilities and we need to mobilize that for accelerated infrastructure development.” Briefing the session, Mr. Paul Hugentobler, Member of the Executive Committee, Holcim said, “The private industry plays a vital role in achieving the ambitious targets for infrastructure development. This requires the development of qualified people and high investment into new capacities. Holcim, through its two affiliates ACC and Ambuja Cement, will continue investing in India to reassure its role as a trusted partner in the construction industry” While complimenting the NCAER- Holcim initiative, Shri B.K Chaturvedi, Member, Planning Commission said “The major challenges in our infrastructure development are coal supply, environmental issues and finance. There is a need to address these and develop a good quality infrastructure that meets global standards”. The inaugural session was followed by working and concluding sessions. These sessions were chaired by Dr. Rakesh Mohan, Ex. Deputy Governor of Reserve Bank of India, and Dr. Bimal Jalan, former Rajya Sabha member and Governor Reserve Bank of India, in which experts from all infrastructure sectors assessed strategies and mechanisms to accelerate the infrastructure development.

The experience of infrastructure development both within the country and outside has now led to a change  in strategies that take note of the need of accelerating infrastructure development and the synergetic role that can be played by the public and private sectors together. The report is a comprehensive documentation that provides an assessment the prospects for sustained infrastructure development which is essential for accelerated economic growth by examining the development of the sub-sectors both in terms of quantum and quality, and highlighting the strengths and weaknesses of alternative strategies.

NCAER:

The National Council of Applied Economic Research (NCAER) was founded in 1956 as an independent, board-run body to give support to both the government and the private sector in empirical economic research. NCAER’s research programme is organized into four broad areas: Growth, Trade, and Economic Management; Investment Climate, Physical and Economic Infrastructure; Agriculture, Rural Development, and Resource Management; and Household Behavior, Poverty, Human Development, Informality, and Gender. A broad theme that permeates the Council’s current research activities is the progress of India’s economic reform programme and its impact on agriculture, industry and human development. An emerging focus is rigorous evaluation of major government public expenditure schemes in the social sector, at both state and Union levels, and the impact of globalization on gender and the informal sector.

]]> http://indiacurrentaffairs.org/india%e2%80%99s-impressive-economic-growth-calls-for-adequate-and-sustainable-infrastructure-development/feed/ 0 http://indiacurrentaffairs.org/protocol-for-avoidance-of-double-taxation-between-india-and-switzerland/ http://indiacurrentaffairs.org/protocol-for-avoidance-of-double-taxation-between-india-and-switzerland/#comments Wed, 01 Sep 2010 09:42:56 +0000 India Current Affairs http://indiacurrentaffairs.org/?p=11057 India and the Swiss Federal Council have signed a Protocol which will amend the existing Double Taxation Avoidance Agreement between the two countries (DTAA). The amended DTAA shall come into operation after it enters into force on completion of internal process by Switzerland side.

Salient features of this Protocol are:

Article on Exchange of Information has been amended to bring it in line with international standards

· Under the current DTAA between India and Switzerland, India has not been able to obtain banking information from Switzerland. The protocol now seeks to amend the Article concerning Exchange of Information to enable exchange of such information.

· Information which is foreseeable relevant for carrying out the provisions of this agreement or to the administration or enforcement of the domestic laws concerning taxes can be exchanged under the DTAA, whereas earlier information which was relevant only for carrying out the provisions of DTAA could be exchanged.

· Information exchanged is to be used for tax purpose only. However, the new Article also provides for use of information by such other purposes which are allowed under the laws of both States and the competent authority of the supplying State authorizes such use.

· There is a specific provision to ensure that information will be exchanged even if there is no domestic interest.

· There is a specific provision for providing banking and ownership information.

· The new provision will be applicable only for prospective information and not for past information.

At present the income from international shipping are not covered under the DTAA. This is now sought to be included in the DTAA by providing for residence based taxation for shipping income from international traffic.

Our earlier treaties used to cover tax sparing provisions where if the income is exempt in one country, the other country used to provide corresponding relief even if such taxes are not paid due to exemption. However, India no longer supports this method and is moving away from profit based exemption. Tax sparing (to the extent of 10% of interest income) is currently there in the existing DTAA. Therefore, it is sought to be deleted in the Article concerning elimination of double taxation.

Article on Non-discrimination is sought to be amended to provide that difference in tax rate of resident taxpayer and Permanent Establishment of non-resident tax payer should not be more than 10%.

Recognised pension fund or scheme is included in the definition of resident to enable them to get benefit of the DTAA.

A provision for Limitation of Benefit is sought to be introduced to prevent misuse of treaty benefits on dividend, interest, royalty, fee for technical services and other income.”

Source: Text of the Statement made by FM in Reply to  Lok Sabha and Rajya Sabha Regarding Protocol for Avoidance of Double Taxation between India and Switzerland

In this backdrop, the key objective for the Foreign Trade Policy was to arrest the declining exports and reverse the trend.

For Foreign Trade Policy Full Copy pdf Click here : foriegntradepolicy_english

According to the WGC’s Gold Demand Trends report for Q2 2010, published today, demand for gold for the rest of 2010 will be underpinned by the following market forces:

• India and China will continue to provide the main thrust of overall growth in demand, particularly for gold jewellery, for the remainder of 2010.

• Retail investment will continue to be a substantial source of gold demand in Europe.

• Over the longer-term, demand for gold in China is expected to grow considerably. A report recently published by The People’s Bank of China and five other organisations to foster the development of the domestic gold market will add impetus to the growth in gold ownership among Chinese consumers.

• Electronics demand is likely to return to higher historic levels after the sector exhibited further signs of recovery, especially in the US and Japan.

Marcus Grubb, Managing Director, Investment at the WGC commented:  “Economic uncertainties and the ongoing search for less volatile and more diversified assets such as gold will underpin investment demand for gold in the immediate future. Further, in light of lingering concerns over public debt levels and the euro, European retail investor demand has increased significantly.

“Over the past quarter, demand for gold jewellery in key Asian markets has been challenged by rising local prices. Nevertheless, we are seeing a deceleration in the pace of decline in demand, providing a strong outlook for ongoing recovery in this crucial market segment.”  GLOBAL DEMAND STATISTICS FOR Q2 2010

• Total gold demand1 in Q2 2010 rose by 36% to 1,050 tonnes, largely reflecting strong gold investment demand compared to the second quarter of 2009. In US$ value terms, demand increased 77% to $40.4 billion.

1 Total gold demand refers to total identifiable gold demand in the Q2 GDT 2010 report.  2 Investment demand relates to identifiable investment demand in the Q2 GDT 2010 report.

• Investment demand2 was the strongest performing segment during the second quarter, posting a rise of 118% to 534.4 tonnes compared with 245.4 tonnes in Q2 2009.

• The largest contribution to this rise came from the ETF segment of investment demand, which grew by 414% to 291.3 tonnes, the second highest quarter on record.

• Physical gold bar demand, which largely covers the non-western markets, rose 29% from Q2 2009 to 96.3 tonnes.

• Global jewellery demand remained robust in Q2 2010. In the face of surging price levels, consumption totalled 408.7 tonnes during the second quarter of 2010, just 5% below year-earlier levels.

• Gold jewellery demand in India, the largest jewellery market, was little changed from year earlier levels, down just 2% at 123.0 tonnes. In local currency terms, this translates to a 20% increase in the value of demand to Rp216 billion.

• China saw demand for gold jewellery increase by 5% to 75.4 tonnes3 . While growth in demand in tonnage terms was hindered by extreme weather conditions, the growth in the local currency value measure of demand was 35% to RMB 19.8 billion.

3 This figure does not include demand in Hong Kong and Taiwan.

• With the return of demand for consumer electronics, industrial demand grew by 14% to 107.2 tonnes, compared to Q2 2009.

Marcus Grubb added:  “While many investors turned to gold as a ‘flight to quality’ in response to the uncertain financial environment, this interest has proved resilient even though a sense of optimism has started to return to some sectors of the investment community. In addition to the ETF market and physical bar and coin market, the demand for gold through internet based investment platforms is likely to provide further sources of investment demand.”

The full 2010 Q2 Gold Demand Trends report, which includes comprehensive data for the second quarter of 2010, can be viewed at: www.mediacentre.gold.org .

WHY ARE GOLD PRICES RISING –Prof.K.Nageshwar.

]]> http://indiacurrentaffairs.org/investment-demand-will-continue-to-support-robust-gold-market-during-2010/feed/ 0 http://indiacurrentaffairs.org/child-maltreatment/ http://indiacurrentaffairs.org/child-maltreatment/#comments Fri, 27 Aug 2010 08:25:37 +0000 India Current Affairs http://indiacurrentaffairs.org/?p=10672 KEY FACTS

• Approximately 20% of women and 5–10% of men report being sexually abused as children, while 25–50% of all children report being physically abused.
• Consequences of child maltreatment include impaired lifelong physical and mental health, and the social and occupational outcomes can ultimately slow a country’s economic and social development.
• Preventing child maltreatment before it starts is possible and requires a multisectoral approach.
• Effective prevention programmes support parents and teach positive parenting skills.
• Ongoing care of children and families can reduce the risk of maltreatment reoccurring and can minimize its consequences.

Child maltreatment is the abuse and neglect that occurs to children under 18 years of age. It includes all types of physical and/or emotional ill-treatment, sexual abuse, neglect, negligence and commercial or other exploitation, which results in actual or potential harm to the child’s health, survival, development or dignity in the context of a relationship of responsibility, trust or power. Exposure to intimate partner violence is also sometimes included as a form of child maltreatment.

Scope of the problem

Child maltreatment is a global problem with serious life-long consequences. There are no reliable global estimates for the prevalence of child maltreatment. Data for many countries, especially low- and middle-income countries, are lacking.

Child maltreatment is complex and difficult to study. Current estimates vary widely depending on the country and the method of research used. Estimates depend on:

the definitions of child maltreatment used;

the type of child maltreatment studied;

the coverage and quality of official statistics;

the coverage and quality of surveys that request self-reports from victims, parents or caregivers.

Nonetheless, international studies reveal that approximately 20% of women and 5–10% of men report being sexually abused as children, while 25–50% of all children report being physically abused. Additionally, many children are subject to emotional abuse (sometimes referred to as psychological abuse) and to neglect.

Every year, there are an estimated 31 000 homicide deaths in children under 15. This number underestimates the true extent of the problem, as a significant proportion of deaths due to child maltreatment are incorrectly attributed to falls, burns, drowning and other causes.

In armed conflict and refugee settings, girls are particularly vulnerable to sexual violence, exploitation and abuse by combatants, security forces, members of their communities, aid workers and others.

Consequences of maltreatment

Child maltreatment causes suffering to children and families and can have long-term consequences. Maltreatment causes stress that is associated with disruption in early brain development. Extreme stress can impair the development of the nervous and immune systems. Consequently, as adults, maltreated children are at increased risk for behavioural, physical and mental health problems such as:

perpetrating or being a victim of violence

depression

smoking

obesity

high-risk sexual behaviours

unintended pregnancy

alcohol and drug misuse.

Via these behavioural and mental health consequences, maltreatment can contribute to heart disease, cancer, suicide and sexually transmitted infections.

Beyond the health and social consequences of child maltreatment, there is an economic impact, including costs of hospitalization, mental health treatment, child welfare, and longer-term health costs.

Risk factors

A number of risk factors for child maltreatment have been identified. These risk factors are not present in all social and cultural contexts, but provide an overview when attempting to understand the causes of child maltreatment.

Child

• It is important to emphasize that children are the victims and are never to blame for maltreatment. A number of characteristics of an individual child may increase the likelihood of being maltreated:
• being either under four years old or an adolescent
• being unwanted, or failing to fulfil the expectations of parents
• having special needs, crying persistently or having abnormal physical features.
• A number of characteristics of a parent or caregiver may increase the risk of child maltreatment. These include:
• difficulty bonding with a newborn
• not nurturing the child
• having been maltreated themselves as a child
• lacking awareness of child development or having unrealistic expectations
• misusing alcohol or drugs, including during pregnancy
• being involved in criminal activity
• experiencing financial difficulties.

Parent or caregiver

Relationship

A number of characteristics of relationships within families or among intimate partners, friends and peers may increase the risk of child maltreatment. These include:

• physical, developmental or mental health problems of a family member
• family breakdown or violence between other family members
• being isolated in the community or lacking a support network
• a breakdown of support in child rearing from the extended family.

Community and societal factors

A number of characteristics of communities and societies may increase the risk of child maltreatment. These include:

• gender and social inequality;
• lack of adequate housing or services to support families and institutions;
• high levels of unemployment or poverty;
• the easy availability of alcohol and drugs;
• inadequate policies and programmes to prevent child maltreatment, child pornography, child prostitution and child labour;
• social and cultural norms that promote or glorify violence towards others, support the use of corporal punishment, demand rigid gender roles, or diminish the status of the child in parent–child relationships;
• social, economic, health and education policies that lead to poor living standards, or to socioeconomic inequality or instability.

Prevention

Preventing child maltreatment requires a multisectoral approach. Effective programmes are those that support parents and teach positive parenting skills. These include:

• visits by nurses to parents and children in their homes to provide support, education, and information;
• parent education, usually delivered in groups, to improve child-rearing skills, increase knowledge of child development, and encourage positive child management strategies; and
• multi-component interventions, which typically include support and education of parents, pre-school education, and child care.

Other prevention programmes have shown some promise.

• Programmes to prevent abusive head trauma (also referred to as shaken baby syndrome, shaken infant syndrome and inflicted traumatic brain injury). These are usually hospital-based programmes targeting new parents prior to discharge from the hospital, informing of the dangers of shaken baby syndrome and advising on how to deal with babies that cry inconsolably.
• Programmes to prevent child sexual abuse. These are usually delivered in schools and teach children about:
  • body ownership
  • the difference between good and bad touch
  • how to recognize abusive situations
  • how to say “no”
  • how to disclose abuse to a trusted adult.

Such programmes are effective at strengthening protective factors against child sexual abuse (e.g. knowledge of sexual abuse and protective behaviours), but evidence about whether such programmes reduce other kinds of abuse is lacking.

The earlier such interventions occur in children’s lives, the greater the benefits to the child (e.g. cognitive development, behavioural and social competence, educational attainment) and to society (e.g. reduced delinquency and crime).

In addition, early case recognition coupled with ongoing care of child victims and families can help reduce reoccurrence of maltreatment and lessen its consequences.

To maximize the effects of prevention and care, WHO recommends that interventions are delivered as part of a four-step public health approach:

1. defining the problem;
2. identifying causes and risk factors;
3. designing and testing interventions aimed at minimizing the risk factors;
4. disseminating information about the effectiveness of interventions and increasing the scale of proven effective interventions.

WHO response

WHO, in collaboration with a number of partners:

• provides technical and normative guidance for evidence-based child maltreatment prevention;
• advocates for increased international support for and investment in evidence-based child maltreatment prevention;
• provides technical support for evidence-based child maltreatment prevention programmes in several low- and middle-income countries.

]]> http://indiacurrentaffairs.org/child-maltreatment/feed/ 1 http://indiacurrentaffairs.org/proposed-road-map-for-new-vehicles/ http://indiacurrentaffairs.org/proposed-road-map-for-new-vehicles/#comments Fri, 27 Aug 2010 06:18:08 +0000 India Current Affairs http://indiacurrentaffairs.org/?p=10712 CurrentAffairs Transport:  New vehicles (other than 2- and 3-wheelers) in the 13 cities , NCR (including Delhi), Kolkata, Mumbai, Chennai, Hyderabad & Secunderabad, Ahmedabad,  Surat,  Pune,   Bangalore,  Kanpur,  Solapur,  Lucknow and Agra are meeting B.S. III norms by 1 April 2005 and B.S. IV emission norms by 1 April 2010.

For entire country, the roadmap proposed for New Vehicles (passenger cars)implementation of Bharat Stage-II emission norms by 2005 and Bharat stage-III norms by 2010, except 2 and 3 wheelers.

For two and three-wheelers, the Committee recommends Bharat Stage II norms are complied with by 1 April 2005 and Bharat Stage III norms with effect from 1^st April2010 in the entire country.

The road map proposed for In-Use vehicles in a prescribed time framework is :

-    New PUC checking system for all categories of vehicles.

-    Inspection & Maintenance (I&M) System for all categories of vehicles.

-    Performance checking system of catalytic converters and conversion kits installed in vehicles.

-    Augmentation of city public transport system.

-    Emission norms for In-Use Buses, Taxis & Three Wheelers.

Road map for Vehicular Standards in India is as following:

For More Reading. .

EMISSION NORMS FOR PETROL & DIESEL VEHICLES IN INDIA

Introduction of the Value Added Tax (VAT) at the Central and the State level has been considered to be a major step – an important breakthrough – in the sphere of indirect tax reforms in India. If the VAT is a major improvement over the pre-existing Central excise duty at the national level and the sales tax system at the State level, then the Goods and Services Tax (GST) will indeed be a further significant improvement – the next logical step – towards a comprehensive indirect tax reforms in the country.

For FULL TEXT OF THE First Discussion Paper On Goods and Services Tax In India: gst

The report, published in a special chapter of Key Indicators for Asia and the Pacific 2010, the flagship annual statistical publication of the ADB, found that Asia’s consumers spent an estimated $4.3 trillion (in 2005 purchasing power parity dollars), or about one-third of OECD consumption expenditure, in 2008 and by 2030 will likely spend $32 trillion, comprising about 43% of the worldwide consumption.

The special chapter, titled “The Rise of Asia’s Middle Class”, examines the rapid growth of Asia’s middle class, how the poor advance to the middle class, factors that characterize the middle class, and pathways through which they become effective contributors to growth and poverty reduction in the region.

“Developing Asia’s middle class is rapidly increasing its size and purchasing power, and will be an increasingly important force in global economic rebalancing,” said ADB Chief Economist Jong-Wha Lee. “Even though the Asian middle class has significantly lower income and spending relative to the Western middle class, its growth in expenditures has been remarkable and its absolute levels are commanding.”

Strong economic growth in Asia over the past two decades has been accompanied by significant reductions in poverty as previously poor households have moved into the middle class. Defining the middle class in Asia as those consuming between $2 and $20 per day, the report found that in 2008, Asia’s middle class had risen to 56% of the population—or nearly 1.9 billion people—up from 21% in 1990. The middle class of the People’s Republic of China (PRC) is currently larger than all others in absolute size, having added 800 million people to its ranks between 1990–2008. In the same period, spending in Asia increased almost three fold, compared to marginal increases in all other regions, including developed countries. As a result, consumption expenditures by developing Asia are now second only to developed countries.

The report stresses that a great number of Asia’s new middle class individuals still get by on incomes just above poverty levels, leaving them vulnerable to a relapse into poverty. At the same time, the emergence of so much new spending power carries with it a host of new environmental and health concerns that until recently were more typical of wealthier parts of Asia and the world.

“Clearly, policies are needed that both bolster the new status of the middle class and deal with its adverse consequences; policies that encourage the creation of and access to more well-paid jobs and more advanced education and health care to help prevent slippage back into poverty, and that mitigate additional environmental constraints and health concerns,” said Dr. Lee.

Yet, in balance, expectations are that Asia’s middle class, through its sheer size and dynamism, will present a huge opportunity for the region and for the world. The report projects that by 2030 much of developing Asia will have attained middle class and upper class majorities, with the PRC and India expected to provide the largest number of new middle class. With the appropriate middle-class friendly policies, the report says, Asia will be able to move away from export-led to domestic-led consumption growth and reduce its exposure to negative external shocks, such as the 2008 global financial crisis, which began in the US. In turn, it will also help correct the global imbalances that contributed to the financial crisis

full text of Asian Development Bank (ADB) report on The Rise of Asia’s Middle Class

]]> http://indiacurrentaffairs.org/asias-expanding-middle-class-presents-huge-opportunity-for-region/feed/ 0 http://indiacurrentaffairs.org/entry-of-new-banks-in-the-private-sector-%e2%80%93-discussion-paper/ http://indiacurrentaffairs.org/entry-of-new-banks-in-the-private-sector-%e2%80%93-discussion-paper/#comments Fri, 20 Aug 2010 09:33:49 +0000 India Current Affairs http://indiacurrentaffairs.org/?p=10041 The Union Finance Minister, in his budget speech for the year 2010-11 had announced that ‘The Indian banking system has emerged unscathed from the crisis. We need to ensure that the banking system grows in size and sophistication to meet the needs of a modern economy. Besides, there is a need to extend the geographic coverage of banks and improve access to banking services. In this context, the RBI is considering giving some additional banking licences to private sector players. Non Banking Financial Companies could also be considered, if they meet the RBI’s eligibility criteria.’ For full text (pdf) RBI Discussion paper

Shri Mukherjee mentioned that the investment in infrastructure in the first 3 years of the Eleventh Plan Period has well exceeded the target of 9,81,119 crore. The actual investment was 10,65,828 crore, which is 7.1 per cent of the GDP and 109 per cent of the targeted expenditure. Investments in sectors such as electricity, telecommunications, irrigation and oil and gas pipelines have exceeded the target during this period.

Mentioning the measures initiated by UPA Government to enable greater flow of funds into infrastructure, he highlighted the initiatives taken by him as the Finance Minister , such as the “takeout financing” scheme of the India Infrastructure Finance Company Ltd (IIFCL); separate classification of infrastructure non-banking finance companies (NBFCs); and, long-term infrastructure bonds with tax exemption upto 20,000 for individual investors. As a result of these measures, the total bank lending to infrastructure has gone up from 8.68 per cent of total bank credit as at end-March 2008 to 10.8 per cent by end-March, 2010. The bond issuances by infrastructure companies have grown by 6.9 times between 2007-08 and 2009-10. IIFCL has taken up for active consideration, a large number of projects, under the “take-out financing scheme” which has the potential to release significant balance sheet space of commercial banks, stated the Finance Minister.

He noted that the fundamental constraint in infrastructure financing relates to the limits on banks’ lending to infrastructure sector in view of their asset liability mismatch (ALM) and concentration risk concerns. Increasingly, therefore, we would need to rely upon intermediating greater amounts of insurance and pension funds into infrastructure, subject, of course, to the overriding concern of safeguarding the interests of the policyholders and pensioners, he stated. Shri Mukherjee emphasized the need to strengthen the corporate bond market and develop credit enhancement mechanisms to enable infrastructure projects, typically non-recourse Special Purpose Vehicles (SPVs), to access long tenor funds available with insurance and pension funds. He also highlighted the need for suitable regulatory changes for channelizing greater amounts of foreign capital, especially debt capital, into Indian infrastructure to bridge the large financing gap in infrastructure sector in India.

The Members congratulated the Finance Minister for the various initiatives taken by the Government for infrastructure development in the country and gave various suggestions on meeting the urgent and strategic challenges in infrastructure financing. These include, policy on infrastructure financing, regulation of PPP projects by Parliament Act, creation of food chains from producers to consumers, developing credit rating agencies, increasing limit of investment in infrastructure bonds for the purpose of income tax exemption, monitoring of funds being spent for infrastructure development and development of infrastructure in rural areas among others.

Minister of State for Finance Shri Namo Narain Meena and Shri S.S. Palanimanickam were present in the meeting which was attended by S/Shri Mukesh B. Gadhvi, Neeraj Shekhar, Partap singh Bajwa, Prabhatsinh Chauhan, S.P.Y. Reddy Singh, Vijay Inder Singla, W. Bhausaheb Rajaram, M.S. Reddy and Smt. Rajkumari Ratna all Members of Lok Sabha and Dr. E.M. Sudarsana Natchiappan, Mukut Mithi, Rajeev Chandrasekhar, Rajeev Shukla, Prof. S.P. Singh Baghel, Shantaram Naik and Dr. Ashok Sekhar Ganguly all Members from Rajya Sabha. Finance Secretary, Revenue Secretary, Expenditure Secretary, Secretary, Disinvestment and Secretary, Financial Services alongwith other senior officers of the ministry also attended the meeting.

According to survey results, employment declined by 4.91 lakh during the quarter October-December, 2008; increased by 2.76 lakh during January-March, 2009; declined by 1.31 lakh during April-June, 2009; increased by 4.97 lakh during the quarter July-September, 2009; increased by 6.38 lakh in the quarter October – December 2009 and increased by 0.61 lakh during the quarter January-March 2010. Thus overall estimated employment in the selected sectors has experienced a net addition of 8.51 lakh during the period October, 2008 to March, 2010.

A statement giving sector-wise changes in employment based on six quarterly surveys is as under:

The Minister of Labour and Employment Shri Mallikarjun Kharge gave this information in reply to a question in the Rajya Sabha

The amount of total assets seized by the Income Tax Department during Search and Seizure operations conducted in the last three financial year is as under:

There are several underlying causes of generation and circulation of unaccounted money, including various socio-economic factors.  However, generation and circulation of unaccounted money is found to be prevalent in Real Estate, Manufacturing Sector, Mining, Education, Healthcare and various other sectors.

There is no official estimate of the extent of unaccounted income/ wealth in the country as on date.  At the instance of the Government, the National Institute of Public Finance and Policy (NIPFP) had in 1985 conducted a study” Aspects of black money in India” in which the amount of black of black money in the country in the year 1983-84 was estimated between Rs. 31,584 Crore and Rs. 36,786 Crore.  The authors of the study had, however, admitted that their estimate was based on numerous assumptions and approximations, each of which could be challenged.  Subsequently no fresh study has been conducted by the Government on the amount of black money.

At present, there is no proposal to make any fresh assessment of the extent of unaccounted income/ wealth in the country.

This information was given by the Minister of State for Finance Sh. S.S. Palanimanickam in a written reply to an UnstarredQuestion raised in Rajya  Sabha

]]> http://indiacurrentaffairs.org/black-money-unearthed-2009-10/feed/ 0 http://indiacurrentaffairs.org/the-myth-of-the-%e2%80%9csub-prime-crisis%e2%80%9d-prabhat-patnaik/ http://indiacurrentaffairs.org/the-myth-of-the-%e2%80%9csub-prime-crisis%e2%80%9d-prabhat-patnaik/#comments Sun, 15 Aug 2010 06:38:56 +0000 India Current Affairs http://indiacurrentaffairs.org/?p=9894 Capitalism, like the proverbial horse, kicks even when in decline. Even as the current crisis hit it, it gave an ideological kick by attributing the crisis to “sub-prime” lending; and so well-directed was its kick that the whole world ended up calling it the “sub-prime crisis”.

The idea, bought even in progressive circles, was that in the euphoria of the boom that had preceded the crisis, financial institutions in the U.S. had given loans even to sections of the population who were not really “credit-worthy”, i.e. who were poor and had few assets of their own. They would normally not get loans from banks; they were not “prime borrowers”. They got loans only because the boom had lowered guards everywhere and banks had started underestimating risks. But if you give loans to people who are not “creditworthy”, who are not “true blue”, then you inevitably come to grief, which is what ultimately happened, precipitating the crisis.

Remarkably, the idea appealed not only to the Right but even to sections of the Left. Sections of the Left liked it because they read into this explanation a basic contradiction of the system: to keep the boom going the capitalist system needs to give more and more loans, and therefore to bring an ever larger number of people into the ambit of borrowing, so that the level of aggregate demand is kept suitably up. This necessarily means that “sub-prime” borrowers have to be brought in more and more for the sustenance of the boom, which therefore must eventually lead to a collapse. The Right saw in it an opportunity to argue that the crisis arose because capitalism had become “too soft”: people who should not be touched by financial institutions with a barge-pole had actually been given huge loans. The problem therefore lay not with the system as such, since it normally would never do such silly things, but with an aberration it had suddenly got afflicted with. Some even saw in this aberration a muddle-headed humaneness which the system had suddenly developed. And they used the crisis as an illustration of the fact that all such humaneness is fundamentally misplaced, that there is, as they had always maintained, no scope for sentiment in the harsh world of economics.

APOLOGISTS OF NEO-LIBERALISM

In India, apologists of neo-liberalism worked overtime to use the fact of the crisis itself to discredit policies of “social banking”, such as priority sector lending and differential interest rates, that the country had embarked on after bank nationalization. All such policies, they argued, saddle banks with the responsibility of lending to “sub-prime” borrowers, and hence put on their shoulders an unbearable burden of “non-performing assets”. This ultimately makes them unviable and in need of substantial doses of government assistance to survive, as had happened in the US and elsewhere. The moral of the story therefore was that in countries like India the markets should be left to work in their own pitiless manner without having to accommodate sentimental hogwash like “social banking” and “financial inclusion”. Hence by a curious irony, a crisis precipitated in the advanced capitalist world by the free functioning of the markets was used in the Indian context to argue for an unleashing of the free functioning of the markets.

The basic argument about “sub-prime” lending causing the crisis however was a flawed one. The banks had given loans to the so-called “sub-prime borrowers” against the security of the houses they had bought with these loans. If the values of the houses collapsed then banks’ asset values collapsed relative to their liabilities, precipitating a financial crisis. The cause of the crisis therefore lay not in the identity of the borrowers, the fact of their being “sub-prime”, but in the collapse of the asset values, which in turn was because asset markets in a capitalist economy are dominated by speculators whose behaviour produces asset-price bubbles that are prone to collapse. Indeed when the banks were giving loans against houses to the so-called “sub-prime borrowers”, they too were essentially speculating in the asset markets, using the “sub-prime borrowers” only as instruments, or as mere intermediaries in the process.

SIFTING ATTENTION

To attribute the crisis to sub-prime lending therefore amounted to shifting attention from the immanent nature of the system, the fact that it is characterized by asset markets, which are intrinsically prone to being dominated by speculators whose behaviour produces asset-price bubbles that necessarily must collapse, to a mere aberration, a misjudgement on the part of the financial institutions that made them lend to the “wrong people”. It was a deft ideological manoeuvre. The identity of the people who borrowed, whether they were in rags or drove limousines, was actually irrelevant to the cause of the crisis, but it was presented as the cause. The blame for the crisis was put falsely on “sub-prime lending”; and a fabrication, a complete myth, called the “sub-prime crisis” was sold to the world, quite successfully.

Let us for a moment imagine that no loans were made to the so-called “sub-prime” borrowers, and that all loans were made only to “prime borrowers” against the security of the houses that were purchased through such loans. True, “prime borrowers” might not have been interested in taking more loans than they already had, in order to purchase houses, and that “sub-prime” borrowers had to be brought in. But, let us, just for a moment, assume that all the loans that the banks had actually made were made to “prime borrowers” rather than “sub-prime borrowers”. With the collapse in house prices, which had to happen sooner or later, the “prime borrowers” would have found their balance sheets going into the red, and so would the banks who gave them the loans. The borrowers would have been hard put to keep to their payments commitments, and the same denouement that unfolded with “sub-prime borrowers” would have unfolded with “prime borrowers”. The fact that the latter owned other assets would not have made any difference; they would not have easily or voluntarily liquidated those assets to pay the banks for the housing loans (and, besides, those other asset prices too would have collapsed if the “prime borrowers” had tried to liquidate them). And if such forced liquidation was insisted upon for paying off housing debt, then there would have been prolonged court battles to prevent it; the crisis certainly would not have been averted. Hence the real reason for the crisis lies in the collapse of the house price-bubble (which was bound to happen no matter what the identity of the borrowers), and not the identity of the borrowers themselves.

Of course it may be argued that with consumer credit the matter is entirely different, since such credit has been given to large sections of the population without any security. In other words, it may be argued that consumer credit to “sub-prime borrowers” is necessarily crisis-causing, in a sense that consumer credit to “prime borrowers” is not, since it is given without any collateral. But the consumer credit bubble has not yet busted; so it is idle to speculate on this matter. The fact remains that with regard to the bubble that has actually busted, namely the housing bubble, the identity of the borrowers, whether they are prime borrowers or sub-prime borrowers makes little difference.

SUSTAINING SPECULATION

To say this is not necessarily to deny that the sustenance of boom under capitalism may require bringing more and more people under the ambit of borrowing, including the so-called “sub-prime” borrowers who normally do not have access to credit. But this is not the cause of the crisis; the bringing in of “sub-prime” borrowers, the widening of the circle of borrowers, is merely the mechanism through which speculation may get sustained. It may determine the size of the “bubble”, but the real cause of the crisis lies in these “bubbles” themselves, i.e. in the fundamental fact that in a modern capitalist economy, where fiscal deficits are sought to be restricted, booms are necessarily “bubbles-led” or at least “bubbles-sustained”; and the inevitable collapse of these “bubbles” necessarily produces crises.

Or putting it differently, if “sub-prime” lending had not happened, then the crisis would have occurred even earlier than it did, i.e. the bubble would have collapsed even earlier. This would of course have limited the size of the collapse relative to the top of the boom, since the bubble would have burst before it became too big; but by the same token it would also have limited the size of the boom itself that preceded the collapse, so that the unemployment rate, experienced with the crisis, would not have differed much between the two situations.

A modern capitalist economy is characterized by highly-developed and highly-complex asset markets, where it is not only the physical assets themselves, but, above all, financial assets, which represent claims on physical assets, that are bought and sold. Since the carrying costs of these financial assets are extremely low (rats do not eat them up as they eat up foodgrains for instance, and they do not need godowns for storage and for protection from the elements), they are particularly prone to speculation. Their markets tend to be dominated by speculators who buy assets not “for keeps” but for selling at the opportune moment to realize capital gains. The prices of these financial assets therefore are determined largely by the behaviour of speculators. When there is a rise in their prices for whatever reason, speculators often rush in expecting a further rise and this pushes up prices even further. This process may go on for sometime, creating a “bubble”. But when, for whatever reason, the price rise comes to a halt, speculators start running away from this asset like rats deserting a sinking ship and the “bubble” collapses.

INHERENT IN THE SYSTEM

The real point however is this: the amount of the physical asset that is produced depends upon the price of the claims upon it, i.e. of the financial assets that represent claims upon this physical asset. If the price of these claims is high, then more of such physical assets are produced, and if the price is low then less. But while the price of these claims is determined by the behaviour of the speculators, the output and employment in the real economy is determined by the amount of physical assets that are produced.Hence in a modern capitalist economy, it is the caprices of a bunch of speculators that determines the real living conditions of millions of people, their employment and incomes. When speculators are bidding up the prices of assets (or claims upon assets) employment and output start rising and we have a boom. When speculators leave assets like rats leaving a sinking ship and wish only to hold money (and in extreme cases, when confidence in banks gets impaired, only currency), we have a crisis.

John Maynard Keynes, acutely aware of the irrationality of this system that made the lives of millions of people dependent upon the caprices of a bunch of speculators, and yet extremely keen to prevent its transcendence by socialism, sought to alter this state of affairs by advocating “socialization of investment”. This would mean that how much of physical assets were produced depended not upon the whims of speculators but upon the decisions of the State, which made these decisions with the objective of keeping the economy close to full employment.

The Keynesian remedy was tried out for nearly two decades after the second world war; and the unemployment rate in the advanced capitalist countries was indeed kept at levels that were extremely low by the historical standards of capitalism. But with the ascendancy of international finance capital, and the consequent transformation in the nature of the nation-State, whose interventions now are meant exclusively for promoting the interests of finance capital, Keynesian “demand management” recedes to the background; and we are back to a regime of booms and busts associated with the formation and collapse of “bubbles”. The current crisis is not caused by any aberration on the part of financial institutions; it is immanent to a regime of finance capital.

CII’s preliminary  estimates suggest that the additional cost ofcompliance with this new American law for Indian companies could be anywhere between US$ 300 to US$ 500 million. This would significantly impact the competitiveness of Indian exports”. Sectors like chemicals, textiles, and engineering products are expected to be the ones most impacted by this new regulation.

The proposed Foreign Manufacturers Legal Accountability Act of 2010 (“FMLAA”) seeks to protect U.S. consumers by requiring foreign manufacturers and producers to take direct responsibility on any liability arising out of such manufacturers’ or producers’ products.

Expressing disappointment at yet another protectionist measure emanating from the US, Mr.Chandrajit Banerjee, Director General, CII said, “CII’s preliminary  estimates suggest that the additional cost of compliance with this new American law for Indian companies could be anywhere between US$ 300 to US$ 500 million. This would significantly impact the competitiveness of Indian exports”. Sectors like chemicals, textiles, and engineering products are expected to be the ones most impacted by this new regulation.

The Act requires all foreign manufacturers exporting covered products’ (which includes drugs, devices, cosmetics, biological products, consumer products, chemical substances, new chemical substances and pesticides) to establish a registered agent in the U.S. who would be in a position to take legal responsibility for the liabilities arising out of these products, thus also bringing Indian exporters into the ambit of US jurisdiction.

The FMLAA would prove to be very expensive for Indian exporters, especially for small and medium scale manufacturers and producers. For one, the cost of hiring registered agents on a permanent basis will prove prohibitive.  Such a provision would be unjustified more so, because many Indian exporters do not export to the US all year round; some not even every year. This proposed law is also of grave concern because it applies not just to finished products, but also to intermediates. As per the Act, Indian exporters would be potentially liable for faulty products in which Indian made parts, components or intermediates were used.

In addition to adding very high transaction costs for exporters to the US market, the Act also violates the underlying principles of free trade.