Draft Twelfth Five Year Plan Documents 2012-17

Faster, More Inclusive and Sustainable Growth Volume 1

Faster, More Inclusive and Sustainable Growth Volume 1 Download

Economic Sectors Volume 2

Economic Sectors Volume 2 Download

Social Sectors Volume 3

Social Sectors Volume 3 Download 


NOTE: This is only a draft document which is still being edited. Readers are requested to point out the errors they notice.

Factors responsible for the Gold price increase

Gold prices have reached a record level. The factors responsible for increase in gold price are

• Purchase of Gold by Central banks: The Reserve bank of India recently purchased 200 tonnes of Gold, which led to the price increase in the international and indian gold markets. Other central banks of Asia and Latin America are also buying gold.
• Demand for Gold in developing countries like China and India: The rapid GDP growth rate, emergence of middle class in the rapidly developing countries is leading to the demand for Gold in international market. The cultural affinity towards gold also plays a major role in demand from India.
• Slowdown in World Economy: As most western economies including USA, UK and EU are facing economic slowdown, more number of investors are looking for safer alternatives like gold.
• Gold is inflation proof, which makes it as a prime investment option.

References:

http://en.wikipedia.org/wiki/Gold_as_an_investment#Factors_influencing_the_gold_price

 

What is a hawala transaction ?

Hawala means transfer in arabic language. Hawala is an informal alternative foreign remittances transfer system based on the trust of a huge network of money brokers.

It is not a legal method of money transfer, because it evades foreign exchange rate regulations, tax, currency control, immigration, and other concerns. The hawala brokers charge less commission than the banks, which makes it attractive to the common people.

Hawala is also used to circulate black money and to terrorism funds, drug trafficking and other illegal activities. The Governmentt of India made, FEMA (Foreign Exchange Management Act) 2000 and PMLA ( Prevention of Money Laundering) Act 2002 to curb these activities.

Hawala brokers transfer money without moving it physically.

Steps involved in Money Transfer in a Hawala Transaction:

1. A customer approaches a hawala broker in one city and gives a sum of money that is to be transferred to a recipient in a foreign country.
2. The hawala broker calls another hawala broker in the recipient's city, and gives instructions about the funds.
3. The recipient collects the money from the hawala broker in his city. 
4. Settlements of debts between hawala brokers can take a variety of forms, such as goods, services, properties, transfers of employees, etc. and need not take the form of direct cash transactions.

Index of Eight Core Industries - India

Index of Eight Core Industries (Base: 2004-05=100). 

The Eight core industries have a combined weight of 37.90 per cent in the Index of Industrial Production (IIP) in may 2012.

During April-May 2012-13, the cumulative growth rate of the Core industries was 3.4 % as against their growth at 5.0% during the corresponding period in 2011-12.

The eight core industries are

1. Coal
2. Crude Oil
3. Natural Gas
4. Refinery products
5. Fertilisers
6. Steel
7. Cement
8. Electricity

Electricity has a maximum weight of 10.32%.

Fiscal Responsibility and Budget Management FRBM Act 2003

The Fiscal Responsibility and Budget Management FRBM Act 2003 aims to achieve financial discipline, reduce fiscal deficit, improve macro economic management.

The main purpose of FRBM Act 2003 was to eliminate revenue deficit(RD) and bring down the fiscal deficit (FD) to a manageable 3% of GDP by march 2008.

The FRBM Act 2003 provides for making rules to specify the annual targets for reduction of fiscal deficit and revenue deficit, contingent liabilities and total liabilities.

The main objectives of the act were

1. to introduce transparent fiscal management system
2. to introduce a more equitable and manageable distribution of the country's debts over the years
3. to aim for fiscal stability for India in the long run

Along with the budget and demands for grants, the government of India should submit the following documents to the parliament.

1. Medium-term Fiscal Policy Statement – It should present a three-year rolling target for the fiscal indicators.
2. Fiscal Policy Strategy Statement – This should enumerate strategies and policies for the upcoming Financial Year including strategic fiscal priorities, taxation policies, key fiscal measures
3. Macro-economic Framework Statement – This report should contain forecasts enumerating the growth prospects of the country - GDP growth etc.

The Act provided that the Central Government shall not borrow from the Reserve Bank of India(RBI) except under exceptional circumstances where there is temporary shortage of cash in particular financial year.

Aadhaar’s Progress: Plumbing for Better Public Service Delivery

The Unique Identification Authority of India (UIDAI), attached to the Planning Commission, is engaged in providing residents of India a Unique Identification number (called Aadhaar) linked to the resident’s demographic and biometric information. The project aims to create a platform that serves as an ‘identification infrastructure’ for delivery of public and private services to the residents of India. The Aadhaar project is set to become the largest biometric capture and identification project in the world.

Aadhaar has huge potential for improving operations and delivery of services. Its potential applications in various significant public service delivery and social sector programs are as follows:

PDS: India’s PDS with a network of 4.78 lakh fair price shops (FPS) is perhaps the largest retail system of its type in the world. The PDS is operated under the joint responsibility of the central and the state Governments. By using Aadhaar it is possible to have the subsidy go directly to the target households who can then purchase their food from any PDS store or maybe even non-PDS shops. The PDS system stands to benefit from Aadhaar in several ways:

1. Better Identification and Beneficiary Mobility – Integration with the UID programme will lead to better identification of individuals and families making possible better targeting and increased transparency. Further, an individual who migrates to some other part of the country can easily continue to avail of his designated benefits.
2. Offtake Authentication – The UID database will maintain details of the beneficiary that can be updated from multiple sources. The PDS system can use this database for authentication of beneficiaries.
3. Duplicate and Ghost Detection – The UIDAI will provide a detection infrastructure to the PDS programme to weed out duplicate and ghost cards.
4. Support for PDS reform – The UID will become an important identifier in banking services. This can support PDS reform by, for example, providing the banking account number for a family to effect direct cash transfer.

Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS): Incorporation of the UID into the MGNREGS programme will assist in addressing some of the major challenges that impede progress:

1. Payment of Wages - The UID can replace the need to provide supporting documentation for the standard Know Your Customer (KYC) fields, making opening a bank account significantly simpler.
2. Ghost Beneficiaries – Once each citizen in a job card needs to provide his UID before claiming employment, the potential for ghost or fictitious beneficiaries is eliminated.
3. Beneficiary Management – The UID system will provide a platform for managing citizens who relocate or migrate from one place to another and want to seamlessly enjoy benefits of the programme.
4. Social Audit - The village-level social audit committee can be selected after authentication with the UID database. The social audit reports filed by the village-level committees can be authenticated by the biometrics of the committee members and social audit coordinator.

Public health: Health, and health-related development schemes, could benefit from the UID. Public health in India is seeing a revolution in terms of

(1) greater commitment towards government financing of public and primary health care,

(2) pressure to meet the millennium development goals (MDGs), and

(3) consequent creation of large supply platforms at national level such as the National Rural Health Mission (NRHM) and Rashtriya Swasthya Bima Yojana (RSBY).

What would be the public health associated pay-off from the application of the UID? Routine health information systems that capture and track the morbidity and mortality due to various disease conditions are critical to improving public health outcomes including life expectancy. Currently infrequent national or state surveys are the major mode of capturing data on infectious disease conditions. However, chronic or lifestyle diseases are not captured in any meaningful way even through surveys.

An integrated routine health system that can capture and track population-level disease conditions by linking citizen IDs with hospital or other medical facility records generated through facility visits can

(1) inform the public health system of the prevalence of various routine disease conditions and

(2) help prepare the health system to respond to unforeseen epidemics. A partial example of (1) can be seen under the Rajeev Arogyasri insurance scheme in Andhra Pradesh.

Education: Currently the primary education system in our country faces a serious problem of inflated enrolment at school level. This results in significant leakages and serious implementation problems. Leakages occur in various areas, including mid-day meals, books, scholarships, provision of uniforms and bicycles. If UIDs are given to children, it will do away with the problems of multiple enrolments and ghosts. Provision of UIDs will ensure that there are no problems due to migration of students anywhere within the country as one would have no difficulty in establishing one’s identity at the new location. It will effectively address the issue of education of children of migrant labourers as their children can be admitted at new places, without cumbersome verification.

Source: Economic survey

Food and Inclusion

A central focus of India’s economic policy is to achieve inclusive growth. However, while India’s success in growth over the last two decades has been universally praised, much remains to be done on the inclusion front. Accordingly, the government is committed to making this a central tenet of policy. In doing so, it is worthwhile to be self-critical and analyse why India has not done better on this dimension despite so much energy and rhetoric directed to it. Some recent papers that analysed this, by focusing on the distribution of food, shed useful light.

It is a maintainable ethical principle that in any nation that is in principle able to provide food to all, basic food should not be treated as an option or a luxury, but as a right. The Indian government’s new food security bill is rooted in this fundamental ethical precept and is, as such, highly desirable. An implication of this bill is that all the poor and vulnerable must be empowered by the state to be able to get their basic food requirements.

Before commenting on this it is worth clarifying that when economists measure poverty there can be two very different motivating factors. One is to see how the level of poverty is changing over time and the other is to identify the poor in order to direct benefits. When tracking the level of poverty over time we have to hold the poverty line constant (subject to corrections for the changing value of the rupee). This is for the same reason that we use the same standard over time to see if there is global warming occurring. To change the standard would make inter-temporal comparison quite meaningless.

However, to decide on whom to direct subsidies, we have reason to use different standards for measuring poverty. We could think of measures which change as society becomes better off and is able to service the poor better. One criterion in this spirit is the quintile income measure, which assesses society in terms of how its poorest 20 per cent population or the bottom quintile fares. We of course know that they do not fare well. But what is more dismaying is that they do not even adequately get the benefits they are supposed to get. A study by Dutta and Ramaswami showed using 1993-4 NSS data that the bottom quintile of rural population in Maharashtra and Andhra Pradesh got 10 per cent and 20 per cent, respectively, of the foodgrain that they were supposed to get. In general, several studies confirm that our track record of delivering to the vulnerable remains highly flawed. One of the most comprehensive recent studies of this, by Swedberg , suggests that a key secret lies in giving the benefit to the poor directly. Swedberg estimates that to transfer Rs 1 to a poor household by the current method of giving cheap food first to PDS stores and then having them transfer it to the poor, the Government of India incurs a budgetary expenditure of Rs 9. At this rate a large food programme would be fiscally unviable.

Fortunately, with Aadhaar coming up, it is possible to make a cash transfer to the poor directly, which, especially if given to the female head of the household, can empower the poor and the women and sharply cut down leakages and the costs of the programme. This in turn means that we can greatly increase the coverage of the population that gets the subsidy. Success stories with cash transfer programmes from Mexico’s Oportunidades and Brazil’s Bolsa Familia bolster this argument. Of course, we have to be aware that in many regions of India private markets hardly exist and so we will in these regions have to, for now, rely on actual food being delivered through the PDS system. On the other hand, it is important to recognize that one reason private markets do not exist in these areas is because the people do not have enough buying power. Once we make cash transfers to them, private markets will develop even in these areas. This is what is meant by the enabling role of government. It should create a setting where it is in the interest of private agents to deliver on what needs to be delivered.

Source: Economic Survey

National Food Security Bill - 2011

The National Food Security Bill was introduced in the Lok Sabha on 22 December 2011. As per the provisions of the Bill, 

• it is proposed to provide 7 kg. of foodgrains per person per month belonging to priority households at prices not exceeding Rs 3 per kg of rice, Rs 2 per kg of wheat, and Rs 1 per kg of coarse grains and 
• to general households not less than 3 kg of foodgrains per person per month at prices not exceeding 50 per cent of the MSP for wheat and coarse grains and derived MSP for rice. 

It will benefit up to 75 per cent of rural population (with at least 46 per cent belonging to priority households) and up to 50 per cent of urban population (with at least 28 per cent belonging to priority households), besides providing nutritional support to women and children and meals to special groups such as destitute and homeless, emergency and disaster affected, and persons living in starvation. 

Pregnant and lactating women will also be entitled to maternity benefit of Rs 1,000/per month for six months. In case of non-supply of foodgrains or meals, entitled persons will be provided food security allowance by the concerned state/UT governments. 

Provisions for reforms in the TPDS such as doorstep delivery of foodgrains , application of information and communication technology (ICT) including end to end computerization, leveraging ‘aadhaar’ for unique identification of beneficiaries have also been made in the Bill. Provisions have also been made for transparency and accountability including disclosure of records relating to the PDS, social audits, and setting up of vigilance committees besides an elaborate grievance redressal mechanism.

Source: Economic survey

Impacts of Climate Change on Indian Agriculture

Indian agriculture, with two-third rainfed area remains vulnerable to various vagaries of monsoon, besides facing occurrence of drought and flood in many parts of the country. Natural calamities such as drought and flood occur frequently in many parts of the country. Climate change will aggravate these risks and may considerably affect food security through direct and indirect effects on crops, soils, livestock, fisheries, and pests. Building climate resilience, therefore, is critical. Potential adaptation strategies to deal with the adverse impacts of climate change are  

• developing cultivars tolerant to heat, moisture, and salinity stresses; 
•  modifying crop management practices; 
•  improving water management;  
• adopting new farm practices such as resource-conserving technologies;  
• crop diversification; 
• improving pest management; 
• making available timely weather-based advisories; 
• crop insurance; and 
• harnessing the indigenous technical knowledge of farmers.

The Indian Council of Agricultural Research has initiated a scheme on National Initiative on Climate Resilient Agriculture with an outlay of Rs 350 crore for 2010-12. This initiative has been planned as a multi-disciplinary, multi-institutional effort covering crops, livestock, and fisheries and focusing mainly on adaptation and mitigation of climate change in agriculture. It also has a component for demonstration of climate-coping technologies on farmers’ fields in 100 most vulnerable districts. State-of-the-art infrastructure is being set up at key research institutes to undertake frontier research on climate change adaptation and mitigation.

Source: Economic Survey

Indian Agriculture - Options for addressing supply-side constraints

1. Given the compositional shift in foodbasket of a common household and its impact on consumption demand, improved supply response is critical for ensuring price stability in food items.
2. Extension programmes and guidance to farmers regarding fertilizer and insecticide usage and alternate cropping pattern based on soil analysis could be undertaken and intensified.
3. As a strategy, regular imports of agricultural commodities in relatively smaller quantities with an upper ceiling on total quantity could be considered. The upper ceiling can be decided annually, relatively well in advance, after assessing the likely domestic situation in terms of production and consumption requirements.
4. Setting up special markets for specific crops in states/regions/areas producing those crops would facilitate supply of superior commodities to the consumers.
5. Mandi governance is an area of concern. A greater number of traders must be allowed as agents in the mandis. Anyone who gets better prices and terms outside the Agricultural Produce Marketing Committee (APMC) or at its farm gate should be allowed to do so. For promoting inter-state trade, a commodity for which market fee has been paid once must not be subjected to subsequent market fee in other markets including that for transaction in other states. Only user charges linked to services provided may be levied for subsequent transactions.
6. Perishables could be taken out of the ambit of the APMC Act. The recent episodes of inflation in vegetables and fruits have exposed flaws in our supply chains. The government-regulated mandis sometimes prevent retailers from integrating their enterprises with those of farmers. In view of this, perishables may have to be exempted from this regulation.
7. Considering significant investment gaps in post-harvest infrastrure of agricultural produce, organised trade in agriculture should be encouraged and the FDI in multi-brand retail once implemented could be effectively leveraged towards this end.
8. Government should step up creation of modern storage faclities for food grains.

Source : Economic survey

India’s stand on key negotiating issues in WTO : A summary

Agriculture

• Substantial and effective reductions in overall trade-distorting domestic support (OTDS) of the US and EU;
• Self-designation of an appropriate number of special products (SPs);
• An operational and effective Special Safeguard Mechanism (SSM);
• Simplification and capping of developed country tariffs.

Non-Agricultural Market Access (NAMA)

• Adequate and appropriate flexibilities for protecting economically vulnerable industries;
• Participation in sectoral initiatives only on a non-mandatory and good faith basis without prejudgment of the final outcome, with substantial special and differential treatment provisions for developing countries;
• Serious consideration of non-tariff barrier (NTB) textual proposals with wide support such as the horizontal mechanism.

Services

• Need for qualitative improvement in the revised offers especially on Modes 1(cross-border supply) and 4 (movement of natural persons);
• Appropriate disciplining of domestic regulations by developed countries.

Rules

• Tightening of disciplines on anti-dumping (deletion of zeroing clause and reiteration of the lesser duty rule)
• Effective special and differential treatment for developing countries on fisheries subsidies.

Trade-related Aspects of Intellectual Property Rights (TRIPS)

• Establishing a clear linkage between the TRIPS Agreement and the Convention on Bio-diversity (CBD) by incorporating specific disclosure norms for patent applications;
• Enhanced protection for geographical indications (GIs) other than wines and spirits.

Source : Economic Survey 2011-12

The Recommendations of the High Level Expert Committee on Efficient Management of Public Expenditure

The Planning Commission constituted the High Level Expert Committee (HLEC) on Efficient Management of Public expenditure under the Chairmanship of Dr C.Rangarajan. 

The terms of reference were: 

• to clearly define the scope of public-sector Plan aligning it to changes in design and delivery systems;
• to suggest an action plan for abolition of the Plan and non-Plan distinction; 
• to suggest a comprehensive framework for resource transfer to states; 
• to examine the accountability concerns arising out of direct transfer of funds;
• and to examine revenue and capital expenditure classification on end-use basis.

The HLEC submitted its report in September 2011 and the main recommendations of the Committee are as follows:

1. A fundamental shift in the approach of public expenditure management by removing the Plan-Non Plan distinction and with budgeting linked to outputs and outcomes.
2. Introduction of a new multi-dimensional budget and accounting classification with uniform codes for central programmes, sub programmes and schemes being implemented in the States. The Central Plan Scheme Monitoring System (CPSMS) to be extended and a portal to be set up for the citizens to provide information on flow of resources and their utilization.
3. The switchover to complete treasury mode from 12th Five Year Plan for all new schemes. A suitable accounting methodology to distinguish between final expenditure and transfer to be worked out by the CGA (Controller General of Accounts) and CAG (Comptroller and Auditor General).
4. The annual budgetary component of the Plan of the Centre and States to have one-to-one relation with the Government Budget of the Centre or of a State respectively. All States/UTs to include information about investment outlays of SPSEs (State Public Sector Enterprises) in their budgets as a separate annexure. The resources of the rural and urban local bodies to be included as part of the State/UT Plans.
5. Regular updates on Project-wise, Ministry-wise and Sector-wise information on Public Private Partnerships (PPPs) to be provided in Central and State Budgets as both annuity payments and VGF (Viability Gap Funding) pertaining to PPP projects are provided from the budgetary support.
6. Continuation of the Revenue-Capital classification and introduction of an “adjusted revenue deficit” by adjusting the revenue deficit to the extent of grants for creating assets for better understanding and for compliance in terms of FRBMA. Capital expenditure should relate to the creation of assets and be determined by the ownership criterion.

Source : Economic Survey 2011-2012

Economic survey 2011-2012 - pdf all in one zip file

http://indiabudget.nic.in/es2011-12/echapter.zip

Recent steps taken by the Indian Government to check the generation and spread of black money

Recent steps taken by the Indian Government to check the generation and spread of black money.

1. Constitution of a Committee under the Chairmanship of Chairman, Central Board of Direct Taxes (CBDT) to examine ways to strengthen laws to curb the generation of black money in the country, its illegal transfer abroad and its recovery.
2. Commissioning fresh study through top national level institutions for estimation of unaccounted income/wealth both inside and outside the country.
3. Creation of new Directorate of Income Tax (Criminal Investigation).
4. The government will introduce a Bill in the monsoon session of Parliament that will enable confiscation of illegal money.

Credit Rating and Types of Credit Rating

A credit rating evaluates the credit worthiness of an issuer of specific types of debt, specifically, debt issued by a business enterprise such as a corporation or a government.

types of credit rating

Corporate credit rating: The credit rating of a corporation is a financial indicator to potential investors of debt securities such as bonds. Credit rating is usually of a financial instrument such as a bond, rather than the whole corporation. These are assigned by credit rating agencies and have letter designations such as A, B, C.

Sovereign credit rating: A sovereign credit rating is the credit rating of a sovereign entity, i.e., a national government. The sovereign credit rating indicates the risk level of the investing environment of a country and is used by investors looking to invest abroad. It takes political risk into account.

Types of Civil Society Organisations

Types of Civil Society Organisations

1. Civil rights advocacy organizations: to promote human rights of specific social groups e.g. women, migrants, disabled, HIV, sex workers, Dalit   people, tribal people, and the likes.
2. Civil liberties advocacy organizations: to promote individual civil liberties and human rights of all citizens, rather than focusing on particular social group.
3. Community based organizations, citizen’s groups, farmers’ cooperatives: to increase citizen’s participation on public policy issues so as to improve the quality of life in a particular community.
4. Business and industry chambers of commerce: to promotion policies and practices on business.
5. Labour unions: to promote the rights of employees and workers.
6. International peace and human rights organizations: to promote peace and human rights.
7. Media, communication organization: to produce, disseminate, or provide production facilities in one or more media forms; it includes television, printing and radio.
8. National resources conservation and protection organizations: to promote conservation of natural resources, including land, water, energy, wildlife and plant resources, for public use.
9. Private and public foundations: to promote development through grant-making and partnership.
10. Also the Civil society includes - Political Parties; Religious Organizations; and Housing cooperatives, slum dwellers, resident welfare associations.

Five fold stategy of Indian Government to tackle Black Money

The Indian Government has adopted five-fold strategy to tackle the menace of illicit funds.

1. Joining global crusade against ‘black money’;
2. Creating an appropriate legislative framework;
3. Setting up institutions for dealing with Illicit Funds;
4. Developing systems for implementation; and
5. Imparting skills to the manpower for effective action.

Eight Millennium Development Goals

Following are the eight Millennium Development Goals adopted by 189 member states of United Nation in September, 2000 at UN Millennium Summit, New York, USA.

Goal 1:	Eradicate extreme povertyand hunger
Goal 2:	Achieve Universal Primary Education
Goal 3:	Promote gender equality and empower women
Goal 4:	Reduce child mortality
Goal 5:	Improve maternal health
Goal 6:	Combat HIV/AID, malaria and other diseases
Goal 7:	Ensure environmental sustainability
Goal 8:	Develop a global partnership for development

Skyscraper Index

Skyscraper Index shows the correlation between the business cycle and investment in skyscrapers. It shows that investment in skyscrapers peaks when cyclical growth is exhausted and the economy is ready for recession.

Unlike other similar indexes this index predicts that construction of skyscrapers as an indicator of economic crisis not boom.

WTO Ministerial Conferences

Venue	Year
Singapore	December 1996
Geneva	May 1998
Seattle	Nov-Dec1999
Doha	November 2001
Cancún	September 2003
Hong Kong	December 2005
Geneva	Nov-Dec 2009
Geneva	December 2011