SUMMERY OF ECONOMIC SURVEY 2012-2013

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SUMMARY OF ECONOMIC SURVEY 2012-13
 More than 6 Per Cent Growth Forecast for Next Fiscal Considerable Enhancement for Social Sector Spending India on Verge of Creating Quality Jobs to Seize ‘Demographic Dividend’
Indian economy is likely to grow between 6.1% to 6.7% in 2013-14 as the downturn is more or less over and the economy is looking up. Following the slowdown induced by the global financial crisis in 2008-09, the Indian economy responded strongly to fiscal and monetary stimulus and achieved a growth rate of 8.6 per cent and 9.3 per cent respectively in 2009-10 and 2010-11, but due to a combination of both external and domestic factors, the economy decelerated growing at 6.2% and an estimated 5% in 2011-12 and 2012-13 respectively. The Economic Survey 2012-13, presented by the Finance Minister Shri P. Chidambaram in the Lok Sabha predicts that the global economy is also likely to recover in 2013 and various government measures will help in improving the Indian economy’s outlook for 2013-14. While India’s recent slowdown is partly rooted in
external causes, domestic causes are also important. The slowdown in the rate of growth of services in 2011-12 at 8.2%, and particularly in 2012-13 to 6.6 percent from the double-digit growth of the previous six years, contributed significantly to slowdown in the overall growth of the economy, while some slowdown could also be attributed to the lower growth in agriculture and industrial activities. But despite the slowdown, the services sector has shown more resilience to worsening external conditions than agriculture and industry. For improved agricultural growth, the survey underlines the need for stable and consistent policies where markets play an appropriate role, private investment in infrastructure is stepped up, food price, food stock management and food distribution improves, and a predictable trade policy is adopted for agriculture. FDI in retail allowed by the government can pave the way for investment in new technology and marketing of agricultural produce in India. Fast agricultural growth remains vital for jobs, incomes and food security.
The survey points out that the priority for the Government will be to fight high inflation by reducing the fiscal impetus to demand as well as by focusing on incentivizing food production through measures other than price supports. But unlike the previous year, when food inflation was mainly driven by higher protein food prices, this year the pressure has been coming mainly from cereals. On the Balance of Payments and External Position, the survey highlights that with net exports declining, India’s balance of payments has come under pressure. Moreover, in the current fiscal, foreign exchange reserves have fluctuated between US$ 286 billion and US$ 295.6 billion, while the rupee remained volatile in the range of Rs 53.02 to Rs 54.78 per US dollar during October
2012 to January 2013.
The survey had a special chapter focusing on jobs. The future holds promise for India provided we can seize the “demographic dividend” as nearly half the additions to the Indian labour force over the period 2011-30 will be in the age group 30-49. India is creating jobs in industry but mainly in low productivity construction and not enough formal jobs in manufacturing, which typically are higher productivity. The high productivity service sector is also not creating
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enough jobs. As the number of people looking for jobs rises, both because of the population dividend and because share of agriculture shrinks, these vulnerabilities will become important. Because good jobs are both the pathway to growth as well as the best form of inclusion, India has to think of ways of enabling their creation.
The survey calls for a widening of the tax base, and prioritization of expenditure as key ingredients of a credible medium term fiscal consolidation plan. This along with demand compression and augmented agricultural production should lead to lower inflation, giving the RBI the requisite flexibility to reduce policy rates. Lower interest rates could provide an additional fillip to investment activity for the industry and services sectors, especially if some of the regulatory, bureaucratic, and financial impediments to investment are eased. On financial sector reform, it takes note of the high level of gross NPAs (non-performing assets) of the banking sector which increased from 2.36 percent of the total credit advanced in March 2011 to 3.57 percent of total credit advanced in September 2012. The survey suggests that revival of growth will help contain NPAs, but more attention will have to be paid to whether projects are adequately capitalized up front given the risks. Expenditure on social services also increased considerably in the 12th Plan, with the education sector accounting for the largest share, followed by health. In the 11th Plan period nearly 7 lakh crore rupees has been spent on the 15 major flagship programmes. A number of legislative steps have also been taken to secure the rights of people, like the RTI, MGNREGA, the Forest Rights Act, AND THE Right to Education. However, the survey notes that there are pressing governance issues like programme leakages and funds not reaching the targeted beneficiaries that need to be addressed. Direct Benefit Transfer (DBT) with the help of the Unique Identification Number (Aadhaar) can help plug some of these leakages. With the 12th Plan’s focus on
‘environmental sustainability’, India is on the right track. However, the challenge for India is to make the key drivers and enablers of growth-be it infrastructure, the transportation sector, housing, or sustainable agriculture-grow sustainably.
Dr. Raghuram G. Rajan, Chief Economic Adviser, Ministry of Finance writes in an introduction to the Survey that these are difficult times, but India has navigated such times before, and with good policies it will come through stronger. Slowdown is a wake-up call for increasing the pace of actions and reforms. The way out lies in shifting national spending from consumption to investment, removing the bottlenecks to investment, growth, and job creation, in part through structural reforms, combating inflation both through monetary and supply side measures, reducing the costs for borrowers of raising finances and increasing the opportunities for savers to get strong real investment returns.
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 Seizing the Demographic Dividend - Grabbing Opportunities for the Indian
Work Force
The future holds good promise for India provided we can seize the “demographic dividend”, as nearly half the additions to the Indian labour force over the period 2011-30 will be in the age group of 30-49 years. Also, productive jobs are vital for growth and a good job is also the best form of inclusion. Since more than half our population depends on agriculture but the experience of other countries suggests that the number of people dependent on agriculture will have to shrink if per capita incomes in agriculture are to go up substantially. This was mentioned in the Economic Survey for the year 2012-13 which was tabled the Union Finance Minister Shri P. Chidambaram in the Lok Sabha today.
While industry is creating jobs, too many such jobs are low-productivity non-contractual jobs in the unorganized sector, offering low incomes, little protection, and no benefits. Service jobs are relatively high productivity, but employment growth in services has been slow in recent years. India’s challenge is to create the conditions for faster growth of productive jobs outside of agriculture, especially in organized manufacturing and in services, even while improving productivity in agriculture. The benefit of rising to the challenge is decades of strong inclusive growth.
The Survey shows that since 1991, the beginning of economic reforms in India we are growing at a similar rate more or less as Indonesia but China and Korea grew faster in terms of per capita income as well as our share in world trade.
The Survey has expressed concern over the inability of service sector for not creating jobs. It says, in addition to labor regulations the lack of properly educated and skilled work force is also a factor. As suitable higher education is important for high-end services such as information technology, software development and finance. The Mid-level services such as retail trade, hotels, and restaurant services also require adequate skilling of the labour force. In this connection, schemes such as the formal apprenticeship programme of the government which places employers at the heart of education, can play a powerful role in imparting job-relevant skills and also re-training and upgrading the labour force. In its current form the Act and Rules governing the apprenticeship are outdated and rigid from both the perspective of employers and employees. Here changes are needed. Also, the challenge is to address both quality and quantity issues in skill development and train so as to correct the mismatch between employers who do not get people with requisite skills and millions of job seekers who do not get employment . To this end the National Skill Development Mission aims to impart employment-oriented vocational training to 8 crore people over the next five years by working with State governments/State Skill Missions and incorporating the private sector through PPPs and for profit vocational training and NGOs. Basic education is also an important input for enhancing human capital.
We stand at a cross roads where we need to develop a clear strategies for continued growth. It also suggests that for creating better employment facilities in industrial sector. We need to formulate a common policy on business development and regulation; help business facilitation; simplify registrations for starting up; ease burden of compliance as the firm grows; allow for easy exits;
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transform employment exchanges to enable effective job matching; improve value/benefits from statutory pre-emptions and reduce attractiveness of staying small.
In a nut-shell India has to focus on an agenda to create productive jobs outside of agriculture which will help up reap the demographic dividend and also improve livelihood in agriculture. We need to examine carefully whether regulations contain business excessively and, if so, strip away the excess regulation while ensuring adequate protection and minimum safety nets for workers. Building infrastructure and expanding access to finance will also help. While the government is clearly in this process, some further steps need greater debate and action.
 Industrial Relations Climate Generally Remained Peaceful and Cordial; Number of Strikes and Mandays Lost Show Declining Trend
The Economic Survey for the year 2012-13 tabled in the Lok Sabha today by the Union Finance Finance Minister Shri P. Chidambaram shows that due to constant endeavour of the industrial relations by machineries of both the Central and the States the industrial relations climate has generally remained peaceful and cordial. While the number of incidences of strikes and lock-outs reported during 2007 were 389, this figure was 189 in 2011 (provisional) and stood at 194 (provisional) up to October 2012. The number of strikes has exhibited a declining trend over the period. Similarly, the figures for man-days lost were 27.17 million in 2007 and 2.03 million (provisional) for 2012.
As regards spatial/industry-wise dispersions of incidents of strikes and lock-outs there exists wide- spread variations amongst different states/UTs. Wage and allowances, bonus, personnel, indiscipline and violence and financial stringency have been stated to be the major reasons for these strikes and lock-outs.
 Upward Trend in Employment Maintained; Overall Employment Increased by
6.94 Lakh in June 2012 Over June 2011
Upward trend in employment since July 2009 continues despite the economic slowdown as per the Fifteenth Quarterly Employment Survey by the Labour Bureau. This has been reflected in the Economic Survey for the year 2012-13 tabled in the Lok Sabha today by the Union Finance Finance Minister Shri P. Chidambaram.
Overall employment in June 2012 over June 2011 has increased by 6.94 lakh, with the highest increase recorded in IT/BPO(4.44 lakh) sector followed by 1.70 lakh in Textiles including Apparels,
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0.45 lakh in Transport, 0.26 lakh in Metals, 0.19 lakh in Gems and Jewellery and 0.11 lakh in
Automobiles sectors during the period.
On the other hand, employment in handloom/powerloom and leather sectors has marginally declined during this period.
In export oriented units, employment at the overall level has increased by 5.81 lakh whereas in the non-exporting units, it has increased by 1.10 lakh during the period June 2012 over June 2011.
During the quarter from March to June 2012, employment increased in respect of only Textiles including Apparels followed by IT/BPO and Gems & Jewellery. There was no growth in employment in the Leather, Transport and Handloom/Powerloom sectors, while sectors like Metals and Automobiles registered negative growth. Overall employment has increased by 0.73 during this quarter.
The results of the 15th quarterly survey reveal that there has been a sustained and consecutive increase in employment in both the public and private sectors covered at overall level during the last eleven quarters with a total addition of 30.73 lakh employment during this recovery period.
 India Has Highest Increase in Share of Services in GDP at 8.1%
A comparison of the services performance of the top 15 countries for the 11 year period from 2001 to 2011 shows that the increase in share of services in GDP is the highest for India with 8.1 percentage points. These 15 top countries include major developed countries alongwith Brazil, Russia, India and China. While China’s highest services compound annual growth rate (CAGR) stood at 11.1%, India’s very high CAGR of 9.2% was second highest and also accompanied by highest change in its share. This is a reflection of the fact that India’s growth has been powered mainly by the services sector.
India’s services sector has emerged as a prominent sector in terms of its contribution to national and state incomes, trade flows, FDI inflows and employment. For more than a decade the sector has been pulling up the growth of Indian economy with great stability. The share of services in India’s GDP at factor cost (at current prices) increased from 33.3% (1950-1951) to 56.5% in 2012-13, as per advance estimates. Including construction, this would increase to 64.8%. With 18%, trade, hotels and restaurants are the largest contributors to GDP among the various sub sectors. This is followed by financing, insurance, real estate and business services with 16.6% share. Community, social, and personal services with 14% share stand in the third place. This is followed by construction at fourth place with 8.2% share.
In 2011-12, although the growth of “trade” sub-sector decelerated to 6.5%, its share improved to
16.6%. The share of the sub-sector “transport by other means” was 5.4%, while its growth was
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8.6%. Banking and insurance was the most dynamic sector in 2011-12 with growth of 13.2%. “Other services” had a share of 7.9% in 2010-11 and 2011-12. It grew at 6.5% in 2011-12.
 Chandigarh Tops with Highest Share of Services in GSDP with 85%
With 85% of share of services in the GSDP, Chandigarh leads other states followed by Delhi at
81.8%. Other states such as Kerala, Mizoram, West Bengal, Tamil Nadu, Maharashtra, Nagaland and Karnataka have higher than all India share. Other than Arunachal Pradesh (33.8%), Chattisgarh (36.7%) and Sikkim(37%), all other states registered more than 40% share of services sector in the GSDP.
 Robust Inflow of FDI in the Services Sector
India’s Share of Services Exports Increasing Faster than Share of Merchandise
Exports
The FDI inflows in the services sector grew robustly at 57.62% compared to the growth of overall
FDI inflows at 33.6%, in 2011-12. However, in April-November, 2012-13, overall FDI inflows fell by
43.3% to US $ 15.85 billion from US $ 27.93 billion in the corresponding period in the previous year. FDI inflows in the top five services also fell by 9.7% to US $ 8.19 billion.
The Government has taken many policy initiatives to liberalize FDI policy for services sector. This includes increasing FDI limit from 49 to 74% in teleports and DTH and cable networks, permitting FDI upto 74% in mobile TV, upto 49% in scheduled and non-scheduled air transport services and upto 50% in multi-brand retail trading. The Government has also amended the existing policy on FDI in single brand product retail trading.
The share of services export of India in the world exports of services has been increasing faster than the share of merchandise exports in world exports. It grew from 0.6% in 1990 to 1% in 2000 and 3.3% in 2011. The overall openness of the economy reflected by total trade including services as a percentage of GDP shows higher degree of openness at 55% in 201-12 as compared to 38.1% in
2004-05. The openness indicator based only on merchandise trade is 43.2% in 2011-12, as
compared to 28.3% in 2004-05.
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 Tourism, Railways and Telecom Continue to Lead Other Sectors
Foreign Tourist Arrivals (Ftas) Grow by 9.2% In 2011
Telecom, Tourism and Railways have shown better performance compared to other services like aviation, shipping, ports and storage. The telecom connections (wire and wireless) increased from
4297.25 lakh in 2008-09 to 9513.4 lakh in 2011-12. The data till 31st December, 2012 shows that
8955.1 lakh connections have been provided. In the tourism sector the number of foreign tourists visiting India increased from 5.28 million in 2008-09 to 6.31 million in 2011-12. The number of arrivals as on 31st December, 2012 was 6.65 million. The foreign exchange earnings from foreign tourist arrival grew from US $ 11832 million to US $ 16564 million in 2011-12. The earnings till
31st December, 2012 were US $ 17737 million. The Railways sector also performed well by registering 969.78 million ton of freight traffic carried by Railways in 2011-12 as compared to
833.31 million ton of freight transported in 2008-09. The net ton kilometres of Railways increased from 538226 million in 2008-09 to 639768 million in 2011-12.
As per the 12th Five Year Plan approach paper, India’s travel and tourism sector is estimated to create 78 jobs per million rupees of investment compared to 45 jobs per million rupees in the manufacturing sector. The foreign tourist arrivals in the country grew by 9.2% in 2011. This however was moderated to 5.4% in 2012 as a result of the global slowdown and Euro-zone crises. Domestic tourism continues to be an important contributor to the sector with 14.34% CAGR of domestic tourist visits from 1991-2011. The hotels and restaurants sector with 1.5% share in India’s GDP for 2011-12 is an important sub component.
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 3 Per Cent Growth in Traffic Handled by Ports During 2011-12
Non Major Ports Grow by 11.5 Per Cent
The total traffic handled by all ports in the country grew by 3% in 2011-12 over the previous year. This stood at 911.7 million tons. 11.5% growth achieved by non-major ports contributed to the overall traffic growth, although there was a decline in traffic handled at major ports. The traffic handled by all ports grew by 1.8% in the first half of 2012-13 (April – September) over the corresponding period of the previous year. The share of the non-major ports in this growth was
10.3%.
The three port related performance indicators i.e. average turnaround time (in days), average pre- berthing detention time (in days) and average output per ship – berth – day (in tons) have shown improvement in 2011-12 and April-September, 2012 over corresponding previous period. The average output per ship-berth-day improved to 13,374 tons for all major ports during April- September, 2012-13 compared to 12,825 tons in corresponding period of 2011-12. The average turnaround time at major Indian ports improved to 4.15 days in 2012-13 (April-September) as against 5.29 (2010-11) and 5.05 (2011-12).
The average pre berthing detention time (PBDT) for all major ports declined from 2.32 days in
2010-11 to 2.04 in 2011-12. According to the Economic Survey, this could be a result of the lower volumes handled by ports due to the global turn down.
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 Legal Services Show a Steady Annual Growth of 8.2% Free Legal Services Benefit More than 7.82 Lakh Persons
Legal services in the country have been growing at a steady annual rate of 8.2% from 2005-06 to
2011-12. The Indian legal profession consists of nearly 1.2 million registered advocates, about 950
Law schools and approximately 4 to 5 lakh law students. Every year approximately 60,000 to
70,000 law graduates join the legal profession. India is ranked 45,with a score of 4.5 in terms of judicial independence by the Global Competitiveness Report 2012-13. This is an improvement from
2011-12 when it was ranked 51. As regards efficiency in the legal framework in settling disputes, India has improved its position from 64 rank in 2011-12 to 59 in 2012-13 with a score of 3.8.
India is regarded as one of the best Legal Process Outsourcing (LPO) destinations on account of the low cost of legal professionals (which is 50-80% more cost competitive than USA and UK), geographical advantage (Indian Time Zone allows it to offer legal services round the clock), language proficiency, and the legal system which is inspired by those of USA and UK. This is also because the LPO industry in the country can make use of advanced means of communication technology, and legal support in the form of research document reviews, drafting of documents, making applications for patents and various paralegal and administrative services.
Through the free legal services available in country, more than 7.82 lakh persons have benefited during 1st April, 2012 to 31st October, 2012. Of this, more than 23,000 belong to the Scheduled Caste and about 20,000 persons are Scheduled Tribes. More than 37,000 women and 5,900 children have also benefited through these free services. In addition, more than 54,000 Lok Adalats have settled 17.3 lakh cases during the same period. Under the National Legal Services Authority (NLSA), through the Paralegal Volunteers Project 73,555 PLVs have been trained in the country and have started functioning. These volunteers impart legal awareness to various target groups, thus bridging the gap between common people and legal service institutions.
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 Energy Production and Consumption: A Snap Shot
During the 11th Five Year Plan, nearly 55,000 MW of new generation capacity was created. Yet there continues to be an overall energy deficit of 8.7% and peak shortage of 9%. The potential for energy generation depends on the country’s natural resource endowment and the technology to harness it. As on March, 2011 India’s estimated coal reserves were about 286 billion ton, 81 billion ton of lignite, 757 MT of crude oil and 1241 billion cubic meter (BCM) of natural gas. The estimated hydro potential (about 25 MW) is about 145 GW. The total potential for renewable power generation from various sources other than large hydro projects stood at 89,760 MW. The 12th Plan has projected total domestic energy production of 669.6 million tons of oil equivalent (MTOE) in 2016-17 and 844 MTOE in 2021-22. This will meet around 71% and 69% of expected energy consumption with the balance to be met from imports which are projected to be 267.8 MTOE in
2016-17 and 375.6 MTOE in 2021-22. Import dependence in case of crude oil is projected to be
78% while that in coal will be 22.4% by 2016-17. The report says that coal and lignite will continue to dominate the energy scenario in the country. By 2021-22, their share will be about 66.8% in the total commercial energy produced and about 56.9% in total commercial energy supply.
The trend in production of the primary sources of conventional energy such as coal, lignite, crude petroleum, natural gas and electricity shows that in the last four decades i.e. from 1970-71 to 2010-
11, the Compound Annual Growth Rate (CAGR) of production of coal, lignite, crude petroleum, natural gas and electricity (hydro and nuclear) generation was 5% , 6.1%, 4.3%, 9.1% and 4% respectively. In terms of energy equivalent of all primary energy sources in 2010-11, the share of coal and lignite, electricity (hydro and nuclear) and natural gas was 52%, 28% and 11% respectively.
Trends in consumption of energy from conventional sources indicate that from 1970-71 to 2010-
11, consumption of coal, lignite, crude oil in terms of refinery throughput, and electricity (thermal, hydro and nuclear) grew at a CAGR of 5.3%, 6.05%, 11.25% and 6.63% respectively. Growth of total energy consumption from all conventional sources in terms of peta joules was 6.04% during 1970-
71 to 2010-11. The per capita energy consumption grew at an average annual rate of 5.3% during this period. The consumption pattern of energy by primary sources expressed in terms of peta joules indicates that electricity generation accounted for about 51% of the total consumption of all primary sources of energy during 2010-11, followed by coal and lignite which stood at 25% and crude petroleum which was pegged at 20%.
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 More than 3.7 Lakh Villages Provided Electricity Through Rajiv Gandhi
Grameen Vidyutikaran Yojana
More than 3.79 lakh villages across the country have been provided electricity through the Rajiv
Gandhi Grameen Vidyutikaran Yojana (RGGVY). The rural electrification scheme launched in April,
2005 has provided electricity to 1,06,116 unelectrified villages and intensive electrification in
2,73,328 partially electrified villages. It has also provided free electricity connections to 202.6 lakh below poverty line (PBL) households as on 30th November, 2012. In addition, capital subsidy of Rs.
26,664 crore has been utilized under the scheme so far.
The rural electrification scheme was launched with the objective of providing all rural households access to electricity through creation of appropriate rural electricity infrastructure. Under this scheme, the Government of India provides 90% capital subsidy for the project.
 Spurt in Refining Capacity and Pipeline Network
The total refining capacity in the country increased from 187.4 MMT (as on 1.4.2011) to 215.1 MMT (as on 1.1.2013) and is projected to reach 218.4 MMT by the end of 2012-13 and 239.6 MMT in
2013-14 with capacity augmentation of existing refineries and commissioning of the Paradip Refinery. Refinery production (crude throughput) during 2011-12 was 211.14 MMT (including the Kamnagar Refinery under special economic Zone (SEZ) by Reliance Industry Ltd) showing an increase of 2.6 % compared to a production of 206.15 MMT in 2010-11. The refinery production (crude throughput) during April-November 2012-13 is 141.45 MMT. The Economic Survey notes that the country is not only self-sufficient but also substantially exports petroleum products. During
2011-12, India exported 60.84 MMT of petroleum products worth Rs. 2,66,486 crore.
There has been substantial increase in the pipeline network in the country. At present there are 32 product pipelines spread over a length of 11,274 km with capacity of 70.688 MMT. In addition to this, there are 16 crude pipelines over 8,558 km with capacity of 106.45 MMT, LPG pipelines of
2,313 km with 3.94 MMT capacity and gas pipelines of 13,428 km with 355 MMSCMD capacity. The Economic Survey mentions that the pipeline infrastructure is being strengthened with 14,889 km of new pipeline network with an additional capacity to transport 264 MMSCMD of gas by 2015-16. In addition to this, around 4,300 km of pipeline network has been authorized by the Petroleum and Natural Gas Regulatory Board (PNGRB) which will transport 184 MMSCMD of gas.
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 Railway Freight Grows by 5.1 PER CENT
Freight loading by Indian Railways during the fiscal 2011-12 registered an increase of 5.1%. The Railways carried a total freight of 969.1 MMT as against 921.7 MMT in 2010-11. The total freight target for 2012-13 has been fixed at 1025 MMT (BE). During April-November, 2012, Indian Railways carried 647.1 MMT of revenue earning freight traffic. This is 4.7% higher than the traffic carried (618.05 MMT) during corresponding period of the previous year.
Various schemes have been initiated by Indian Railways towards passenger comfort and safety. Some of them are as follows –
- Under the Adarsh scheme launched in 2009, Adarsh stations are provided with basic amenities such as drinking water, toilets, catering services, waiting rooms and dormitories specially for women passengers.
- Of the 976 stations identified, 616 have been developed so far. Computerized unreserved ticketing system is made available at 5560 locations with 10,172 counters by end of November, 2012.
- About 250 automatic ticket vending machines were commissioned during 2012-13 making the total number of such machines 808.
- The Rake Management System (RMS) has been implemented at 246 locations. It covers all major yards/lobbies and control offices at various divisions and zones.
- High speed passenger trains, popularly referred to as “bullet trains” travelling at speeds above 350 kmph, will soon be a part of the Indian Railways. Seven corridors have been identified for conducting the pre feasibility study.
- Till December, 2012 Linke Holfmann Busch (LHB) coaches have been inducted in 14 Rajdhani, 12
Shatabdi and 11 AC Duronto services. LHB coaches have higher carrying capacity, better riding comfort, higher speed potential, longer life, provision of control discharge toilet system, lower maintenance requirement and enhanced safety features.
- Eight trains have been installed with 436 eco friendly bio toilets. A complete switch over to bio toilets in the new coaches has been planned by 2016-17.
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 Government to Expedite Projects Under NHDP
The Government of India has taken several initiatives to expedite highway projects under the National Highway Development Project (NHDP). These are –
- NHAI Board has approved formation of a High Level Expert Settlement Advisory
Committee for one time settlement of old cases pending in court.
- A new model of Engineering Procurement and Construction (EPC) contracts is being brought in. Highways which are not viable to be constructed under the BOT(toll) mode will be taken up under the new EPC mode. Under this modified turnkey EPC note, the Government will provide 100% funding.
- The Government has also decided to introduce passive Radio Frequency Identification (RFID) for electronic toll collection at the toll boards. This will remove bottlenecks at the toll booths and ensure seamless movement of traffic.
- NHAI has taken up award of select highway projects to the private sector under an Operate, Maintain, and Transfer (OMT) concession. Till recently the tasks of toll collection and highway maintenance were entrusted to tolling agents and sub contractors respectively.
- Under directive from NHAI most states have constituted high level committees under their Chief Secretaries for monitoring pre construction activities of NHAI projects. The NHAI regional officer is the Member Secretary.
- Substantial financial powers have been delegated to the regional officers of NHAI for facilitating speedy processing and approvals for acquisition of land.
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 JNNURM: Fueling Urban Renewal
The Jahwaharlal Nehru National Urban Renewal Mission (JNNURM) was launched in 2005 to support and facilitate 65 mission cities to take up projects of urban renewal. The Government has extended the seven year tenure of the mission by two years upto 31st March, 2014. All the 65 cities under the Urban Infrastructure and Governance (UIG) component of the Mission have prepared comprehensive City Development Plans which include investment plans with a focus on providing city wide urban services such as water supply, sanitation, drainage, urban transport etc. As on December, 2012 more than 91% of the seven year Additional Central Assistance (ACA) allocation of Rs. 31,500 crore has been committed. A total of 551 projects at an approved cost of Rs. 61,772.9 crore for the 65 mission cities spread over 31 states/UTs has been sanctioned. Moreover a sum of Rs. 20,145.2 crore has been released as ACA till 31st December, 2012.
The mission has also undertaken an exercise for assessing finances and credit worthiness of the Urban Local Bodies (ULBs) of the mission cities that have been charged with implementation of the urban renewal projects. This is intended to trigger the process of leveraging debt for JNNURM projects and provide a platform for the ULBs and financial institutions to engage in issues related to project financing. As of now, 65 ULBs of the mission cities have been assigned final ratings. Moreover, as a follow up surveillance rating has been initiated to affirm the rating and assess improvements undertaken. So far 62 ULBs have undergone surveillance rating.
Bus Rapid Transit Systems (BRTS), providing speedy and better transport to passengers, have been approved for Ahmedabad, Bhopal, Indore, Jaipur, Rajkot, Surat, Vijaywada, Vishakapatnam, Kolkata and Pune-Pimpri-Chinchwad. These projects will cover total length of 467.4 kms at an estimated cost of Rs. 5211.6 crore with admissible central finance assistance of Rs. 2373.4 crore. The scheme also provides for purchase of 15260 buses at a total cost of Rs. 4727 crores. Till Novemebr, 2012 more than 12,620 model Intelligent Transport System (ITS) enabled low-floor and semi-low floor buses have been delivered to the states/Union Territories.
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 More than 900 Infra Projects Under PPP Mode
More than 900 projects with total project cost (TPC) of Rs. 5,43,045 crore in the infrastructure sector have been initiated till December, 2012, as compared to over 600 projects with TPC of Rs.
3,33,083 crore as on 31st March, 2010. These projects are in various stages of implementation. This seems to be a strong indication of the primacy given to the PPP mode as an effective tool for bringing private sector efficiencies in creation of social and economic infrastructure and delivery of public services. According to the World Bank report on “Private Participation in Infrastructure” (PPI), India has been the top recipient of private investment since 2006 and has implemented 43 new PPP projects which have attached a total investment of US $ 20.7 billion in 2011. According to the report, India alone accounted for almost half of the investment in new PPI projects implemented in developing countries during the first semester of 2011. The report also mentions that India continues to be the largest market for private participation in infrastructure in the developing world. In the South Asian region, India attracted 98% of regional investment and implemented 43 of the new 44 PPP projects taken up in the region.
This seems to strongly reflect the favour PPPs have found in India. The PPP Appraisal Committee
(PPP AC) constituted in January, 2006 has approved 307 central projects with TPC of Rs.
2,97,856.58 crores. These include 242 proposals of national highways, 29 in ports, 27 in housing, 5 in sports stadia, 2 in airports, one each in tourism and railways. The Government also supports PPPs through its Viability Gap Funding (VGF) scheme under which 145 projects have been granted approval with TPC of Rs. 80,203.28 crore and VGF support of Rs. 156,72.68 crores. Of this amount VGF of Rs. 902.96 crore has been disbursed. Furthermore, 51 projects have been approved with India Infrastructure Project Development Fund (IIPDF) assistance of Rs. 64.51 crore of which Rs. 25 crore has been disbursed.
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 India Calls for Additional Finance and Technology for Achieving Sustainable
Development Goals
Though multilateral efforts on sustainable development and climate change have led to several positive outcomes, there are still areas of concern where further work is needed to safeguard the interests of developing countries. More importantly, equity, fair burden sharing, and equitable access to global atmospheric resources have to be protected and addressed more adequately. With the 12th Plan’s focus on ‘environmental sustainability’, India is on the right track. However, the challenge for India is to make the key drivers and enablers of growth-be it infrastructure, the transportation sector, housing, or sustainable agriculture-grow sustainably. This leads us to the most vital issue of raising additional resources for meeting the need of economic growth with greater environmental sustainability. India could do much more if new and additional finance and technology were made available through the multilateral processes. There is a case for greater cooperation, action, and innovation, provision of finance and technology for developing countries and institutions and mechanism for capacity building.
Sustainable development and climate change was introduced as a chapter in the Economic Survey last year for the first time. These topics remained headline news with extreme weather events both at home and abroad. Efforts to arrive at a consensus on what to do at home and abroad gathered momentum, even as they sailed through some rough waters and fickle seas in many respects.
Along with the national efforts in different sectors, India also recognizes that rural areas are equally prone to stress and pressures from natural resource exploitation. In this context, schemes for rural development and livelihood programmes are very relevant. A vast majority of the works under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) are linked to land, soil, and water. There are also programmes for non-timber forest produce-based livelihood, promotion of organic and low-chemical agriculture, and increased soil health and fertility to sustain agriculture-based livelihoods. These schemes help mobilize and develop capacities of community institutions to utilize natural resources in a sustainable manner and their potential can be further developed.
The year 2012 may arguably be considered a high water mark in the field of environment and sustainable development initiative. The global community met at the UN Conference on sustainable development that took place in Rio in June 2012, also marking the 20th Anniversary of the landmark first Earth Summit held in 1992. The Conference reviewed the progress made, identified implementation gaps, and assessed new and emerging challenges, which resulted in a political outcome called the “Future We Want”.
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 Agriculture Does Well in Output Growth
Food grains production in India has shown remarkable improvement in recent years. The production of food grains in 2011-12 was at a record high of 259.32 million tones. Nevertheless the XIth Five Year Plan (2007-12) witnessed an average annual growth of 3.6% in GDP from agriculture and allied sector against a target of 4 per cent realized agriculture growth has been higher than the average annual growth achieved during the IXth and Xth Plans despite drought and deficient monsoon conditions.
The Survey finds that despite an all time high total food grain production during 2011-12, the production of 2012-13 kharif crops is likely to be adversely affected by deficiencies in south west monsoon and the resultant acreage losses. Output is expected to decline in all major crops. However, yield levels significantly improved for cotton, pulses and coarse cereals during 2000-
2012.
The Survey noted that as a result of central sector schemes for development and strengthening of infrastructure facilities for seeds, there is an increased availability of certified quality seeds from
140.5 lakh quintals in 2005-06 to 328.6 lakh quintals in 2012-13. In hilly /remote areas of North Eastern States, a Transport Subsidy on Movement of Seeds Schemes is in operation whereby grants- in-aid of Rs, 12.6 crores was to be reimbursed. The Government has notified the new investment policy of 2012 in the urea sector which will lead to increase in indigenous capacity and reduction in imports. India has made considerable progress in developing irrigation infrastructure. However, irrigation efficiency is low for both surface and ground water.
The live stock sector achieved an average growth rate of 4.8 per cent during XIth Plan. In 2011-12 the production of milk was estimated at 127.9 million tonnes, eggs at 66.45 billion, wool at 44.73 million Kg and meat at 5.51 million tonnes. A new scheme called National Dairy Plan Phase-I has been launched in March, 2012 with the objectives of improving productivity of milch animals. Poultry Venture Capital Fund Scheme is being implemented in capital subsidy mode since 1st April,
2011. Production of fish, both marine and inland has gone up from 5.6 million tonnes in 2000-01, to
8.7 million tonnes in 2011-12.
The Government continues to provide large and growing amount of subsidy on food grains for distribution under the TPDS, other nutrition based welfare schemes and open market operations. India has improved its position in agriculture and food exports to 10th globally. Exports of agriculture and allied products during 2011-12 accounted for 9.08 % of India’s total exports against
6.9% during 2010-11. The Standing Committee on Food, Consumer Affairs and Public distribution has submitted its report on the National Food Security Bill to the Speaker Lok Sabha on 17th January, 2013 which is being processed in consultation with concerned Ministries and States/ UTs.
Of the various challenges that the agriculture faces, the Survey finds that the country faces the stiff challenge of feeding its growing population. According to the Survey, the country will have to invest
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heavily in farm research, rural infrastructure, provide better access to high value markets better credit facility and input use. Wide Yield gaps among various crops exists across the country which needs to be bridged by adopting technological and policy interventions. There are also challenges to maximize agriculture income while adopting more sustainable agriculture strategy. The current crop insurance system also needs to be further refined. A thrust on Horticulture products and protein-rich items is required for enhancing per capita availability of food items as well as ensuring nutritional security.
 Focus On Curbing Imports Of Gold And Making Oil Prices More Market
Determined To Contain CAD
 Survey Lays Emphasis on FDI and FII Inflows
Capital Inflows Sufficient to Finance Current Account Deficit
The Economic Survey 2012-13 presented by the Union Finance Minister, Shri P. Chidambaram in the Lok Sabha today has stated that as the room to increase exports in short run is limited, the main focus has to be on curbing imports, mainly by making oil prices more market determine and curbing imports of gold to contain current account deficit. At the same time, the Survey says, further measures to ease the inflow of remittances and steps to diversify software exports could help reduce financing needs. Greater emphasis on FDI including opening of sectors further can help increase quantum of safe-financing. Foreign Institutional Investors (FIIs) flows need to be targeted towards long-term rupee instruments so as to minimize the reversal of capital during risk-off phases. Finally, the Survey observes, external commercial borrowing needs to be monitored carefully so that entities without access to foreign exchange revenues do not leave significant exposures unhedged.
The Survey observes that widening trade deficit and Current Account Deficit (CAD) crossing 4% of GDP in 2011-12 and the first half of 2012-13 have been matters of concern. The Survey further says that in recent years, net invisible balance reduced the need for financing while capital inflows were sufficient to finance the CAD. The Survey notes that in the current fiscal the growth in invisible is insufficient to narrow the growing trade deficit besides the CAD financed by volatile capitals flows has led to financial fragility and is reflected in rupee exchange rate volatility.
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 Gross Tax Revenue in April-December 2012 Grows by 15% Over
Corresponding of Previous Fiscal
The Economic Survey 2012-13 presented by the Union Finance Minister, Shri P. Chidambaram in the Lok Sabha today states that the Gross Tax Revenue in April-December, 2012 has grown year-on- year by 15% to reach Rs. 6,83,345 crore. This was higher than that of 12.2% in April-December
2011. It however, falls significantly short of the growth envisaged by the budget estimates of 2012-
13 (Rs. 10,77,612 crore).
The Survey points out that growth in April-December, 2012 comprises of 17.4% in union excise duties, 6% in customs, 22.5% in personal income tax, 33% in service tax and 10.6% in corporate income tax. In terms of the implied year-on-year growth envisaged by BE 2012-13 over provisional actuals of 2011-12, there is a slippage in the first nine months of current fiscal in corporate income tax by 4.9 percentage points, customs by 18.9 percentage points and central excise by 16 percentage points. There is overperformance in service tax collections by 5.9 percentage points and personal income tax by 7.6 percentage points with an overall slippage of 6 percentage points.
The Survey notes that slippage in tax revenue collection could be lowered with some additional efforts in the last quarter based on the observed collection in the last quarter of previous year.
 Foreign Exchange Reserves Remain Steady
The Economic Survey 2012-13 presented by the Union Finance Minister, Shri P. Chidambaram in the Lok Sabha today has stated that the Foreign Exchange Reserves in the current fiscal, on month- on-month basis remained in the range of US $ 286.0 billion (at end-May 2012) to US $ 295.6 billion (at end-December 2012).
By end of December 2012, reserves stood at US $ 295.6 billion, indicating a marginal increase of US
$ 1.2 billion from US $ 294.4 billion in March, 2012. At this level, reserves provided about seven months of import cover, the Survey observes.
India’s foreign exchange reserves comprise foreign currency assets (FCA), gold , special drawing rights (SDRs) and reserve tranche position (RTP) in the International Monetary Fund (IMF). The level of foreign exchange reserves is largely the outcome of the Reserve Bank of India (RBI) intervention in the foreign exchange market to smoothen exchange rate volatility and valuation changes due to movement of the US dollar against other major currencies of the world.
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 Reprioritisation of Expenditure from Non-Plan to Plan Critical to Meet 12th
Plan Outlay
The Economic Survey 2012-13 presented by the Union Finance Minister, Shri P. Chidambaram in the Lok Sabha today observed that repriorisation of expenditure from non-Plan to Plan would be critical in meeting the proposed 12th Plan outlay. The total non-Plan expenditure as per Budget Estimates for 2012-13 is placed at Rs. 9,69,900 crore while the Plan expenditure has been pegged at Rs. 5,21,025 crore.
The non-Plan expenditure during April-December 2012 has been Rs. 6,95,233 crore as against
6,19,457 crore in April-December 2011 registering an increase of 12.2% the Plan expenditure on the other hand during April-December 2012 increased by 6.9% to Rs. 2,95,890 crore from Rs.
2,76,904 crore in April-December 2011.
The Plan outlay comprises Gross Budgetary Support (GBS) for Plan (Central Plan plus central assistance to States/Union Territories and internal & extra budgetary resources of central public enterprises).
 Controlling Expenditure on Subsidies Crucial; Need to Raise Diesel and LPG Prices in Line with Global Markets
The Economic Survey 2012-13 presented by the Union Finance Minister, Shri P. Chidambaram in the Lok Sabha today called for checking expenditure on subsidies. The Survey says, “Controlling the expenditure on subsidies will be crucial. The domestic prices of petroleum products, particularly diesel and liquefied petroleum gas (LPG) need to be raised in line with the prices prevailing in the international markets”.
The Survey states that a beginning has already been made with the decision in September, 2012 to raise the prices of diesel and again in January, 2013 to allow oil marketing companies to increase prices in small increments at regular intervals. The number of subsidised gas cylinders has also been capped at nine.
The Economic Survey further emphasizes that efforts will have to be made to contain subsidies through better targeting and for reducing leakages involved in their delivery. One such initiative is Direct Benefit Transfer (DBT) Scheme.
The high level of crude oil prices also has a significant bearing on the level of fertilizers subsidies as it is not only a key input as feedstock but also because of inadequate pass through in urea prices. The Government has been calibrating pricing policies to address the issue of burgeoning fertilizer subsidies. One of the important decisions taken was to fix per tonne subsidy on key non- nitrogenous fertilizers, thereby limiting the increasing the subsidy outgo to the extent of increase in consumption.
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The Survey underlines the need for according priority to food subsidy in view of the under consumption of basic food by the poor and the extent of malnutrition in the country. Government has sought to correct this through National Food Security Act, though concerns have been expressed that this will lead to a higher subsidy outgo. “However, it is a part of the challenge of prioritization to provide for this basic need even as other items of expenditure are minimised”, the Survey advocates.
 Fiscal Outcome Indicates Significant Improvement in 2012-13
Continuing Fiscal Consolidation Critical for Higher Growth and Price Stabliity: Economic Survey
The Economic Survey 2012-13 presented by the Union Finance Minister, Shri P. Chidambaram in the Lok Sabha today emphasizes that the fiscal outcome of Central Government in 2012-13 so far indicates a significant improvement over 2011-12. The fiscal position of the States has continued to progress with fiscal deficit budgeted at 2.1% of gross domestic product (GDP), the Survey added.
The fiscal outcome of 2011-12 was affected by macro economic developments of slow down in growth, higher global crude oil prices and sluggish financial market conditions for effecting the budgeted disinvestments programme. The Survey stresses that these developments continued through the first half of the current year. The Government then pressed harder for reforms and an initial step was to set up the Kelkar Committee. Following its recommendations, the Government unveiled a revised fiscal consolidation roadmap.
The Economic Survey has called for staying on the path of indicated fiscal consolidation. This, it says, is critical to sustaining the desirable macro-economic outcomes not only in terms of higher growth in real GDP and lower inflation, but also in easing the financing of the widening current account deficit (CAD), for which India’s sovereign credit rating is important. The Survey also emphasizes widening tax base and privatization of expenditure as key factors in effecting the desired reduction in the Central Government fiscal deficit over the medium term and in reducing the key risks in fiscal marksmanship (different between actual outcomes and budgetary estimates as a proportion of GDP). The Survey underlines that addressing the key fiscal risk of petroleum subsidies is critical in better fiscal marksmanship. “ With recent reforms in diesel prices and efforts at expenditure reprioritization, the medium term fiscal consolidation plan is credible and could yet again yield macro economic dividends in terms of higher growth and price stability,” the Survey notes.
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 Government to Raise Rs 40,000 Crore Through Disinvestment
The Central Public Sector Enterprises (CPSEs) are an important constituent industry. There were altogether 260 CPSEs under the Administrative control of various Ministries/Departments as on March 31, 2012. Of these, 225 were in operation and 35 under construction. The share of industrial CPSEs in the total investment in CPSEs in terms of gross block, stood at 77.46 per cent during the year. The CPSEs in the mining sector registered the highest increase in net profit (29.45 per cent) in
2011-12. CPSEs in manufacturing sector recorded a decline of 22.65 per cent in net profit in 2011-
12 despite 27.73 per cent increase in their turnover. The electricity sector recorded growth of 16 per cent turnover and 13.42 per cent in profit.
The Government has set a target for raising Rs 40,000 crore by way of disinvestment in various CPSEs during 2011-12 and raised Rs 13,854 crore, which included disinvestment by way of ‘offer for sale’ (OFS) in Oil and Natural Gas Commission (ONGC) amounting to Rs 12,749.50 crore. The disinvestment target in Budget 2012-13 has been set at Rs 30,000 crore.
 Government’s Key Initiatives to Boost Manufacturing
The Government has taken several initiatives to uplift overall business sentiment, boost investment, strengthen industry and in particular the manufacturing sector in the country. The Twelfth Five Year Plan document lays down broad strategies for spurring industrial growth. It recommends sector specific measures covering micro, small, medium and large industries in the formal as well as informal sector. Some of major initiatives that can change the manufacturing landscape of the country are the National Manufacturing Policy (NMP), implementation of the Delhi Mumbai Industrial Corridor (DMIC) Project and reforms to promote foreign direct investment (FDI)and an-e-Biz project.
The National Manufacturing Policy was approved by the Government in October, 2011. The major objectives of the policy are enhancing the share of manufacturing in gross domestic product (GDP) to 25 per cent and creating an additional 100 million jobs over a decade or so. The NMP provides for promotion of clusters and aggregation, especially through the creation of National Investment and Manufacturing Zones (NIMZs). Out of twelve NIMZs so far announced, eight are along the DMIC. Besides, four other NIMZs have been given in-principle approval (i) Nagpur in Maharashtra, (ii) Tumkur in Karnataka, (iii) Chittoor district in Andhra Pradesh and (iv) Medak district in Andhra Pradesh.
Industrial development initiatives under DMIC project presently cover eight industrial cities that are proposed to be developed along the railway corridor. The Master Planning for the investment regions and industrial areas taken up initially are to be developed as new cities in Gujarat, Madhya
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Pradesh, Haryana, Rajasthan and Maharashtra have been completed and master planning in Uattar
Pradesh has started.
In the policy reform process, the FDI policy is being progressively liberalized on an ongoing basis in order to allow FDI in more industries under the automatic route. Some recent changes in FDI policy, besides consolidation of the policy into a single document include FDI in multi-brand retail trading up to 51 per cent, subject to specified conditions; increasing FDI limit to 100per cent in single- brand retail trading; FDI up to 49 per cent in civil aviation and power exchanges; FDI up to 49 per cent in broadcasting sector under the automatic route and FDI above 49 per cent and up to 74 per cent under the govt route both for teleports and mobile TV.
The govt has announced the setting up of ‘Invest India’ a joint-venture company between the Department of Industrial Policy and Promotion and FICCI, as a not-for-profit, single window facilitator for prospective overseas investors and to act as a structured mechanism to attract investment. The objectives of setting up of the e-Biz portal are to provide a number of services to business users, covering the entire life cycle of their operation. The project aims at enhancing India’s business competitiveness through a service oriented, event-driven G2B interaction.
 Industrial Growth Expected to Improve
The index of industrial production (IIP) with 2004-05 as base is the leading indicator for industrial performance in the country. In compilation on a monthly basis, the current IIP series-based on 399 products/product groups is aggregated into three broad groups of mining, manufacturing and electricity. The mining sector production has contracted in the last six quarters. The contraction in the current years was largely because of decline in natural gas and crude petroleum output. There was, however, a sharp pick-up in growth in October 2012 with manufacturing growth improving to
9.8 per cent, the highest recorded since June, 2011.
In terms of the use-based classification of industries, the capital goods sector sustained negative growth in the last six quarters. Growth in the consumer durable sector continued to fluctuate, turning negative in Q4 of 2011-12, 0.7 per cent in Q2 and 3.2 per cent in Q3 of 2012-13. The growth of consumer durables at 16.9 per cent was the highest in the last 20 months.
The moderation in industrial growth, particularly in the manufacturing sector, is largely attributed to sluggish growth of investment, squeezed margins of the corporate sector, deceleration in the rate of growth of credit flows and the fragile global economic recovery.
The Gross Capital Formation (GCF) in the industrial sector comprising mining, manufacturing, electricity and construction recorded an average growth of 13.02 per cent during 2004-05 to 2011-
12. Growth turned negative during 2008-09 and again in 2011-12.
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The decline in overall share of GCF in industry in the total GCF for the economy and overall negative annual growth during 2008-09 and 2011-12 was largely due to a negative growth in GCF in the registered and unregistered manufacturing sector.
The sluggish industrial performance also affected corporate performance. The rate of growth of sales of the corporate sector particularly in respect of listed manufacturing companies for the private sector declined from an average of 28.8 per cent in Q1 of 2010-11 to 11.4 per cent in Q2 of
2012-13. Together with a deceleration in the rate of growth of sales, the ratio of net profit to sales
also moderated.
As industrial production remained sluggish in 2011-12 and the moderation continued during the current financial year. Infrastructure and energy constraints, decline in demand for India’s exports and fragile recovery in investment are the risk factors. The latest seasonally adjusted annualized growth of industrial output indicate that the growth of the sector could remain moderately positive at around 3 per cent for the current year.
Apart from weak investment climate, industrial sector performance remained subdued due to infrastructure bottlenecks. Industrial growth rate moderated due to sharp decline in output of natural gas, subdued performance of the coal sector and its resultant impact on thermal power generation, and slow pace of project implementation in rail, road and port sectors.
 Government Initiatives Generate Optimism
The policy initiatives taken by the government in the recent months have made the business sentiment buoyant and have generated some optimism. The latest seasonally adjusted annualized growth of industrial output indicate that the growth of the sector could remain positive at around 3 per cent for the current year. Industrial production was moderate in 2011-12 and continued during the current financial year. Industrial growth still remains vulnerable to several domestic factors and external shocks. Infrastructure and energy constraints, decline in demand for India’s exports, and fragile recovery in investment are the risk factors.
In the short run, revival of investment in industry and key infrastructure sectors is the key challenge. Industrial sector has been hit hard by the deceleration in investment for the second successive year. As per the latest first revised estimates of GDP gross capital formation in the manufacturing sector in 2011-12 had declined by 18.8 per cent as compared to 2010-11. Lower foreign direct investment inflows in key industry and infrastructure sectors during April-October
2012 was $ 6.19 billion as against the inflow of $ 18.66 billion during the same period of the previous year. This has further constrained investment in these sectors.
Investment intentions indicated in the industrial entrepreneur memorandum (IEMs) filed, which are lead indicators of likely investment flows to industry, also declined in 2011 and 2012.
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Notwithstanding a marginal pickup in the gross bank credit deployment into industrial sector in recent months, year on year increase in gross bank credit deployment by end of December 2012 has been 13.8 per cent as compared to 19.8 per cent a year ago.
 Visible Moderation in WPI Inflation while Food Inflation Remains High
The headline WPI inflation has remained muted in the current financial year and declined to a three year low of 6.62 per cent in January 2013 backed by moderation in the non food manufacturing sector. Headline WPI inflation decelerated to 7.55 per cent in the first nine months of 2012-13. It had averaged 9.56 per cent in 2010-11 and 8.94 per cent in 2011-2012.
WPI inflation has been declining across commodity groups. Against 72 commodities, accounting for a weight of 13.8 per cent reporting inflation of 20 per cent or above in Q2 of 2011-12, the number declined to 29 commodities with a weight of 5.5 per cent in Q2 of 2012-13.
Relative importance of different commodity groups contributing to this persistent inflation, however, changed over time. The persistently elevated prices for animal products (eggs, meat and fish), the rise in the prices of cereals and vegetables, along with the increase in international prices of fertilizers (non-urea) and the increase in administered prices of diesel have contributed to inflation in differing degrees over time. Unlike last year when the food price inflation was mainly driven by higher protein food items, this year the pressure has been mounting in cereals. On the other hand milk and other protein items have shown decline.
Food inflation comprising primary food articles and manufactures food products at 9.05 per cent in Q3 of 2012-13 was significantly higher than the 5.30 per cent in Q4 of 2011-12. Non-food non- manufacturing inflation did moderate over the current year, but remains high, in the double digits, largely because of higher inflation for oilseeds and the commodities in the group ‘fuel and power’.
Core inflation which corresponds to inflation for non-food manufactured products, and is a central focus for the Reserve Bank of India (RBI), however, continued to show moderation from its peak in Q3 of 2011-12. It has declined from 8.35 per cent in November 2011 to 4.24 per cent in December,
2012. Deceleration in inflation was witnessed across all major segments of manufacturing.
However, inflation in machinery and transport equipment has generally remained low Apart from monetary measures taken by the RBI, softening of international and domestic prices of metals, chemicals and textile products also contributed to the moderation in core inflation.
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 Measures Taken by Government to Protect Consumers from Price Rise
The Government has undertaken various measures to insulate the vulnerable sections of society from price rise.
· The central issue prices(CIP) for rice (at Rs. 5.65 per kg for below poverty line(BPL) and Rs. 3 per kg for Antodaya Anna Yojana (AAY) families) and wheat (at Rs. 4.15 per kg for BPL and Rs. 2 per kg for AAA families) have been maintained since 2002.
· Under the targeted PDS(TPDS), allocation of foodgrains is being made to 6.52 crore AAY
and BPL families at 35kg per family per month at a highly CIP.
· The government has allocated rice and wheat under the Open Market Sales
Scheme(OMSS).
· The scheme for imports of pulses which envisaged imports for distribution of BPL households through the PDS with a subsidy of Rs. 10 per kg operated from November 2008 to June 2012. The government has decided to implement a varied form with a subsidy element of Rs. 20 per kg per month for BPL cardholders for the residual part of the current year.
· The Scheme for Distribution of Subsidized Imported Edible Oils has been implemented since 2008-09 through state/union territory(UT) governments for distribution of 1 litre per ration card per month with a central subsidy of Rs. 15 per kg. The scheme has been extended up to 30 September 2013.
Fiscal measures
· Import duties for wheat, onions, pulses and crude palmolein were reduced to zero and 7.5 per cent for refined vegetable and hydrogenated oils respectively.
· Duty-free import of white/raw sugar was extended up to 30 June 2012. Presently the import duty has been fixed at 10 per cent.
Administrative Measures
· Ban on exports of onions was imposed for short periods of time whenever required. Exports of onions were calibrated through the mechanism of minimum export prices(MEP).
· Future trading in rice, urad, tur, guar, gum and guar seed was suspended.
· Exports of edible oils (except coconut oil and forest-based oil) and edible oils in blended consumer packs up to 5kg with a capacity of 20,000 tons per annum and pulses (except Kabuli chana and organic pulses and lentils up to a maximum of 10,000 tones per annum) were banned.
· Stock limits were imposed from time to time in the case of select essential commodities such as pulses, edible oil, and edible oilseeds and in respect of paddy and rice up to 30
November 2013.
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Budgetary and other measures
· The government launched a National Mission for Protein Supplements in 2001-12 with an allocation of Rs. 300 crore. To broaden the scope of production of fish to coastal aquaculture, apart from fresh water aquaculture, the outlay in 2012-13 was stepped up to Rs. 500 crore. Recently the government permitted FDI in multibrand retail trading. This will help consumers and farmers as it will improve the selling and purchasing facilities.
Monetary measures
· The RBI had also taken suitable steps to contain inflation with 13 consecutive increases by
375 basis points(bps) in policy rates from March 2010 to October 2011.
 Headline WPI Inflation May Decline Between 6.2 to 6.6. Per Cent in March
2013
With moderation in non food manufacturing sector and global commodity prices, the headline WPI inflation may decline between 6.2 to 6.6. per cent in March 2013. Inflation has remained muted in the current financial year and declined to a three year low of 6.62 per cent in January 2013 . Unlike last year when the food price inflation was mainly driven by higher protein food items, this year the pressure has been mounting in cereals. On the other hand milk and other protein items have shown a decline. The recent increase in onion prices in January 2012 and revision in diesel prices may put some pressure on headline inflation. However, inflation is expected to continue the moderating trend.
Inflation has eased in almost all major advanced and emerging market economies in the current year. The positive effect of continuous policy easing by the major advanced and developing countries could pose a higher risk to inflation expectations. However, in the short run, given weak growth sentiments, the impact of policy easing may not lead to a surge in inflation and inflation expectations may remain anchored around current target inflation rates.
As per the World Bank’s global economic prospects, January 2013, except for metals, most global commodity prices are expected to decline further in 2013 and 2014. The impact of benign inflationary expectations internationally will have a moderating impact on domestic prices. The RBI’s monetary policy stance has continued to focus on the twin objectives of containing inflation and facilitating growth. Increasing risks to growth from external as well as domestic sources and tight monetary policy in face of persistent inflationary pressures have contributed to a sharper slowdown of the Economy than anticipated. There has been some moderation in inflation in Q3 of
2012-13 and with the expected fiscal consolidation the current macroeconomic situation creates
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room for a more accommodative monetary policy.
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 Government Takes Several Initiatives to Achieve Greater Financial Inclusion
Government has taken number of steps to expand the reach of organized financial services to the door steps of the common man. Particular attention has been paid to the rural areas where a large segment of the society was not having access to organized banking. Some of the steps taken for financial inclusion are as below:-
 Micro-Finance: Self Help Group-Bank Linkage Programme
The Self-Help Group (SHG)-Bank Linkage Programme has emerged as the major micro- finance programme in the country. It is being implemented by commercial banks, regional ruralbanks(RRBs), and cooperative banks. Under the SHG-Bank Linkage Programme, as on 31
March 2012, 79.60 lakh SHG-held savings bank accounts with total savings of Rs. 6,551 crore were in operation. By November 2012 another 2.14 lakh SHGs had come under the ambit of the programme, taking the cumulative number of savings-linked groups to 81.74 Lakh.
 Extension of Swabhimaan Scheme
Under the Swabhimaan financial inclusion campaign, over 74,000 habitations with population in excess of 2,000 had been provided banking facilities by March 2012, using various models and technologies including branchless banking through business correspondents (BCs). Swabhimaan has been extended to habitations with population more than 1,000 in the North-Eastern and hilly states and population more than1,600 in the plains areas as per census
2001. 10,450 have been provided banking facilities by end of December, 2012. This will extend the reach of banks to all habitations above a threshold population.
 Setting up of Ultra Small Branches
Considering the need for close supervision and monitoring of the business correspondent agents(BCAs) by respective banks and in order to ensure that a range of banking services are available to the residents of such villages, ultra small branches (USBs) are being set up in all villages covered through BCAs under financial inclusion. These USBs will comprise a small area of 100-200 sq. feet where the officer designated by the bank will be available with a laptop on pre-determined days. A total of over 40,000 USBs have so far been set up in the country.
 Roll out of Direct Benefit Transfer
The Government of India has decided to introduce a Direct Benefit Transfer (DBT) scheme with effect from 1 January, 2013. To begin with, benefits under 26 schemes will directly be transferred into the bank accounts of beneficiaries in 43 identified districts across respective states and union territories (UT).
Approach: 10 min from Kodambakkam R.S, Maambalam R.S, and Panagal Park B.S.
 Agriculture Credit
As against the target of Rs. 4,75,000 crore fixed for 2011-12, Rs. 5,11,029.09 crore was disbursed to the agricultural sector, thereby exceeding the target by 8 per cent.
 Kisan Credit Card Scheme
The Kisan Credit Card(KCC) has been an important initiative for universal access of farmers to institutional credit. The number of operative KCCs issued by the cooperative banks and RRBs as on 31 August, 2012 was 406 Lakhs against which outstanding loan amount was Rs.1,12,334 crores.
 RS. 12,517 Crore Capital to be Infused in PSB’st to Augment their Tier-1
Capital
Government has proposed to infuse an amount of Rs. 12,517 crore in Public
Sector Banks(PSB’s) to augment their Tier-1 capital in FY-2012-13. A sum of Rs. 12,000 crore was infused during 2011-12 to enable them to maintain a minimum Tier-1 CRAR of 8 per cent.
Performance of Indian banks during the year 2011-12 was conditioned to a large extent by fragile recovery of global financial markets as well as a challenging operational environment on the domestic front. The operating performance of the Scheduled Commercial Banks(SCBs) can be summed up as follows:-
· Public Sector Banks(PSB’s) had a dominant share and accounted for 72 percent of the total income of the SCBs and 72.8 per cent of aggregate assets.
· In 2011-12, there was a sharp increase in the expenditure on provisioning and contingencies. As percentage of PSB assets, the provisioning expenditure increased from
1.04 per cent in 2010-11 to 1.11 per cent in 2011-12.
· PSBs were able to increase their interest spread from 2.55 per cent in 2010-11 to 2.59 per cent in 2011-12.
· Net profit as percentage of assets remained sticky at 0.98 per cent in 2010-11 and 2011-
12.
· The Capital to Risk-Weighted Assets Ratio (CRAR) remained well above the RBI’s stipulated 9 per cent for the system as a whole as well as for all bank groups during 2011-
12, indicating that Indian banks remained well-capitalized.
· Overall NPAs of the Banking sector increased from 2.36 per cent of total credit advanced in March, 2011 to 3.57 per cent of total credit advanced in September 2012.
Approach: 10 min from Kodambakkam R.S, Maambalam R.S, and Panagal Park B.S.
 Economic Survey Acknowledges Benefits of Market Diversification
The Economic Survey presented by the Finance Minister, Shri P. Chidambaram in the Parliament today expressed satisfaction over the strategy of market diversification There has been significant market diversification in India’s trade. Region wise, India’s exports to Europe and America have declined to 18.7 per cent and 19.5 percent respectively in 2012-13 from 25.9 per cent and 24.7 per cent in 2000-01. On the other hand Export to Asia and Africa rose to 50.4 per cent and 9.6 per cent respectively from 37.4 per cent and 5.3 per cent respectively during the same period. There was a noticeable rise in the share of West Asia –GCC (Gulf Cooperation Council) countries from 14.9 percent in 2011-12 to 17.7 percent in 2012-13 (April- November) said the Survey. However, the Survey noted that “in terms of product diversification a lot more is needs to be done.”
The Survey also noted the impact of exchange rate changes on export growth. It said that while Export growth in dollar terms was negative at - 4.9 in 2012-13 (April-January), it was positive in rupee terms at 9.1 per cent. Though, here too, there was a deceleration from the 28.3 per cent in
2011-12 (full year).
The trade deficit of USD 167.2 billion for 2012-13 (April-January) was 7.9 per cent higher than the USD 154.9 billion during the same period in 2011-12. The survey attributes this to moderate export growth and high import growth, particularly in petroleum, oil and lubricants (POL) products. Demand contraction due to global economic conditions impacted India and export suffered.
After touching the high point of 56.5 per cent growth in July 2011, India’s export growth started decorating with a sudden fall to single digits in November 2011 and then to negative territory in March 2012. Monthly export growth rates in 2012-13 (April- December) were negative except in April 2012. The survey notes the marginal revival to positive territory i.e. growth of export at 0.8 per cent in January 2013. The Survey said that the India’s exports to EU and China have been more negative during the recent slowdown then in 2009-10, while the performance to USA has been better for most of the sectors except gems and jewellery.
Approach: 10 min from Kodambakkam R.S, Maambalam R.S, and Panagal Park B.S.
 India’s Social Safety Nets Successfully Weather Global Economic and Financial
Crisis; Social Sector Spending on Continuous Increase; Direct Benefit Transfer
Scheme Successfully Implemented in States of Jharkhand, Tripura and
Maharashtra
India with its focus on inclusive development and timely interventions has been able to ward off the ills of global economic and financial crisis better than many other countries. The global recession and the slow down have squeezed the fiscal space for most countries. However, India’s social sector spending has seen a continuous increase. According to Survey, the country contines to work on XIIth Plan initiative for “Faster, More Inclusive and More Sustainable Growth” and strives for targeted policy for the poor with minimal leakages. To achieve greater inclusive development, the share of Central Govt. expenditure (Plan and Non-Plan) on Social Service and Rural Development increased from 14.8% in 2007-08 to 17.4% in 2012-13(BE) 2007-08 to 25.1% in 2012-13.
Survey says that under Phase 2 of Unique Identification Authority of India (UIAI), 40 crores residence are to be enrolled before end 2014. As of December 2012, 25 crores Aadhaars had been generated and approximately 20.00 crore aadhaars letters has been dispatched. Pilots on Direct benefit transfers (DBT) have also been successfully conducted in the States of Jharkhand, Tripura and Maharashra to transfer monetary benefits related to social welfare schemes. Survey says that about 10.5 crore children benefitted under the mid-day meals programme during 2011-12.
According to Survey, through Bharat Nirman Programme, the country strives to achieve a higher degree of rural- urban integration and an even pattern of growth and opportunities for the poor and disadvantaged. During 2012-13 as against of physical target of 30.10 lakhs houses, 25.35 lakhs houses were sanctioned and 13.88 lakhs had been constructed as on 31st December, 2012. The Unit assistance provided under the Indira Awas Yojana (IAY) is being revised w.e.f 1st April, 2013 from Rs.45,000 to Rs.70,000/ in plain areas and from Rs.48,500/ to Rs.75,000/ in hilly/ difficult areas/integrated action plan districts. 82 left wing extremisms affected districts have been made eligible for this higher rate of unit assistance. Under the Pradhan Mantri Gram Sarak Yojna (PMGSY), a sum of Rs.l02658 to have been released to the States and about Rs. 96939 crore spent by December, 2012. A total of 3,63,652 Km. road length connecting nearly 90,000 habitations has been completed. About 74% of rural habitations are fully covered under the provision of the safe drinking water.
Quoting the latest Human Development Report 2011, the Survey finds that the Human Development Index for India ws 0.547 in 2011 within overall global ranking of 134. ( Out of 187 countries) compared to 119 (out of 169 countries) in HDR 2010. Survey points out that the India is ranked 129 in terms of the gender inequality index(GII) which highlights the loss in achievement due to gender disparities in the areas of reproductive health, empowerment and labour force participation. The Survey mentions that the infant mortality rate (IMR) which was 58 per thousand in the year 2005 has fallen to 44 in the year 2011. The Survey highlights that not only the inequality in India is lower than many other developing countries
Approach: 10 min from Kodambakkam R.S, Maambalam R.S, and Panagal Park B.S.
The Survey finds that the last decade 2000-2010 witnessed an employment growth of 1.6% per annum. Quoting NSSO Survey 2009-10 the survey says that the modest employment growth in second half of the decade was on account of a lower Labour Force Participation Rate (LFPR). The growth of those in labour force declined possibly on account of greater number of persons opting for education /skill development. The unemployment rate infact decline between 2004-05 and
2009-10 both in rural and urban areas implying that relatively large proportions of persons who will willing to work, were actually employed.
The Survey finds out that while some states have performed well in terms of growth indicators, they have performed poorly in terms of poverty, rural-urban disparity, unemployment, education, health and financial inclusion. According to Survey, Bihar has the highest decadal (2001-11) growth rate of population(25%) while Kerala has the lowest rate (4.9%). In 2011, Kerala has the highest sex ratio ( 1084), while Haryana is at the bottom (877). In terms of growth Bihar is the best performer (16.7%), Rajasthan is the worst (5.4%). Highest Poverty Head Count Ratio (HCR) exists in Bihar (53.5) while lowest is in Himachal Pradesh (9.5%). The unemployment rate is the lowest in Gujarat (18) and highest in Kerala and Bihar(73) in Urban areas and the lowest in Rajasthan (4) and again highest in Kerala (75) in rural areas. Kerala is the best performer in terms of life expectancy at birth whereas Assam is the worst performer in both males and females. Based on above findings, the Surveys calls for a rethink on the criteria used for devolution of funds to states.
The Government is following a focused approach through various flagship schemes in the areas of poverty alleviations and employment generation. The Survey points out that under MNREGA, out of total outlay of Rs.33,000 crores approved for 2012-13, Rs.25,894 crores has been released. About
4.39 crores household have been provided employment of 156 crores person days. Approximately,
168.46 lakhs Swarozjaris have been assisted with Bank credit and subsidy under Aajeevika ( SGSY/NRLM). Out of Annual Budgetary Provision of Rs.838 crores for the Swaran Jayanti, Shahri Rozgar Yojana (SJSRY) for the year 2012-13, Rs.516.77 crores have been released and a more than
4.07 lakh people have benefited from this scheme. A total of 290 lakh lives under the Janshree Bima
Yojana (JBY) and 179 lakhs lives under Aam Aadmi Bima Yojana have been covered till December,
2012. Under Rashtriya Swasth Bima Yojana (RSBY) more than 3.34 crores Smart Cards have been issued in 27 States/UTs till 31st December 2012.
Approach: 10 min from Kodambakkam R.S, Maambalam R.S, and Panagal Park B.S.
 Plan Outlay for Health up by 13.9 Per Cent; Allocation on Gender Budgeting
Gone up to 5.96 of Total Budget
Government continues to strive for the improvement in the standard living and health status of the population. The Survey noted that the Government increased its plan outlay for health by 13.9% to Rs.30,4777 crores in 2012-13. Under the NHRM over 1.4 lakhs Health Human Resources have been added (upto September, 2012) and under infrastructure strengthening 10,473 sub centres, 714 primary Health Centres and 245 community Health centres have been newly constructed. A sum of Rs.520 crore have been released to open 132 ANM schools and 137 general nursing and mid wifery schools in districts where there are no such schools. Opening of six Nursing colleges at the sites of AIIMS like institution at a total cost of Rs 120 crore is also under consideration.
Survey noted that due to Janini Suraksha Yojana, the number of institutional delivery have increased from 1.08 crores during 2005-06 to 1.75 crores during 2011-12. In 2012-13, Indira Gandhi Matritva Sahyog Yogna (IGMSY), a budgetary outlay of Rs.520 crores is target to cover 12.5 lakhs pregnant and lactating women. The Surveys notes that allocation of gender budgeting as a percentage of total budget have gone up from 2.8 % in 2005-06 to 5.96 in 2012-13. . A proposal for strengthening and restructuring of the ICDS scheme within an overall budget allocation of Rs.1,23,580 crores during the XIIth Plan has been approved. Under Sabla Programme against an allocation of Rs.750 crores for 2012-13, Rs.496 crores has been released. In 2012-13 under Indira Gandhi Matritva Sahyog Yogna (IGMSY), a budgetary outlay of Rs.520 crores is outlayed to cover
12.5 lakhs pregnant and lactating women . The Survey points out that Janini Suraksha Yojana (JSY), Janini Shishu Suraksha Yojana (JSSK) and Indira Gandhi Matritva Sahyog Yojana (IGMSY) have many overlapping features and the same beneficiaries. This calls for a careful exercise in identifying overlapping schemes and weeding out or converging them.