tag:blogger.com,1999:blog-26720509061829201862023-11-15T21:49:51.313+05:30SPIPAThis is blog which provide Civil service exam awareness as well as study material and gives answer to those candidates who are unable to go for coaching class. this is a basic platform to help student to equip them with proper information......
जब तक न सफल हो, नींद चैन को त्यागो तुम,
संघर्श का मैदान छोड़ कर मत भागो तुम.
कुछ किये बिना ही जय जय कार नहीं होती,
कोशिश करने वालों की कभी हार नहीं होतीMANISHhttp://www.blogger.com/profile/00428491443420277409noreply@blogger.comBlogger102125tag:blogger.com,1999:blog-2672050906182920186.post-13388346729203573952009-08-29T13:27:00.001+05:302009-08-29T13:31:21.802+05:30Mahatma Gandhi and Freedom MovementIn January 1915, Mohandas Karamchand Gandhi returned to his homeland after two decades of residence abroad. These years had been spent for the most part in South Africa, where he went as a lawyer, and in time became a leader of the Indian community in that territory. As the historian Chandran Devanesan has remarked, South Africa was “the making of the Mahatma”. It was in South Africa that Mahatma Gandhi first forged the distinctive techniques of non-violent protest known as satyagraha, first promoted harmony between religions, and first alerted upper-caste Indians to their discriminatory treatment of low castes and women. The India that Mahatma Gandhi came back to in 1915 was rather different from the one that he had left in 1893. Although still a colony of the British, it was far more active in a political sense. The Indian National Congress now had branches in most major cities and towns. Through the Swadeshi movement of 1905-07 it had greatly broadened its appeal among the middle classes. That movement had thrown up some towering leaders – among them Bal Gangadhar Tilak of Maharashtra, Bipin Chandra Pal of Bengal, and Lala Lajpat Rai of Punjab. The three were known as “Lal, Bal and Pal”, the alliteration conveying the all-India character of their struggle, since their native provinces were very distant from one another. Where these leaders advocated militant opposition to colonial rule, there was a group of “Moderates” who preferred a more gradual and persuasive approach. Among these Moderates was Gandhiji’s acknowledged political mentor, Gopal Krishna Gokhale, as well as Mohammad Ali Jinnah, who, like Gandhiji, was a lawyer of Gujarati extraction trained in London. On Gokhale’s advice, Gandhiji spent a year travelling around British India, getting to know the land and its peoples. His first major public appearance was at the opening of the Banaras Hindu University (BHU) in February 1916. Among the invitees to this event were the princes and philanthropists whose donations had contributed to the founding of the BHU. Also present were important leaders of the Congress, such as Annie Besant. Compared to these dignitaries, Gandhiji was relatively unknown. He had been invited on account of his work in South Africa, rather than his status within India.<br /><br /><br />When his turn came to speak, Gandhiji charged the Indian elite with a lack of concern for the labouring poor. The opening of the BHU, he said, was “certainly a most gorgeous show”. But he worried about the contrast between the “richly bedecked noblemen” present and “millions of the poor” Indians who were absent. Gandhiji told the privileged invitees that “there is no salvation for India unless you strip yourself of this jewellery and hold it in trust for your countrymen in India”. “There can be no spirit of selfgovernment about us,” he went on, “if we take away or allow others to take away from the peasants almost the whole of the results of their labour. Our salvation can only come through the farmer. Neither the lawyers, nor the doctors, nor the rich landlords are going to secure it.”<br /><br /><br />The opening of the BHU was an occasion for celebration, marking as it did the opening of a nationalist university, sustained by Indian money and Indian initiative. But rather than adopt a tone of self-congratulation, Gandhiji chose instead to remind those present of the peasants and workers who constituted a majority of the Indian population, yet were unrepresented in the audience.<br /><br /><br />Gandhiji’s speech at Banaras in February 1916 was, at one level, merely a statement of fact – namely, that Indian nationalism was an elite phenomenon, a creation of lawyers and doctors and landlords. But, at another level, it was also a statement of intent – the first public announcement of Gandhiji’s own desire to make Indian nationalism more properly representative of the Indian people as a whole. In the last month of that year, Gandhiji was presented with an opportunity to put his precepts into practice. At the annual Congress, held in Lucknow in December 1916, he was approached by a peasant from Champaran in Bihar, who told him about the harsh treatment of peasants by British indigo planters. <br /><br /><strong>The Making and Unmaking of Non-cooperation </strong><br /><br /><br />Mahatma Gandhi was to spend much of 1917 in Champaran, seeking to obtain for the peasants security of tenure as well as the freedom to cultivate the crops of their choice. The following year, 1918, Gandhiji was involved in two campaigns in his home state of Gujarat. First, he intervened in a labour dispute in Ahmedabad, demanding better working conditions for the textile mill workers. Then he joined peasants in Kheda in asking the state for the remission of taxes following the failure of their harvest.<br /><br /><br />These initiatives in Champaran, Ahmedabad and Kheda marked Gandhiji out as a nationalist with a deep sympathy for the poor. At the same time, these were all localised struggles. Then, in 1919, the colonial rulers delivered into Gandhiji’s lap an issue from which he could construct a much wider movement. During the Great War of 1914-18, the British had instituted censorship of the press and permitted detention without trial. Now, on the recommendation of a committee chaired by Sir Sidney Rowlatt, these tough measures were continued. In response, Gandhiji called for a countrywide campaign against the “Rowlatt Act”. In towns across North and West India, life came to a standstill, as shops shut down and schools closed in response to the bandh call. The protests were particularly intense in the Punjab, where many men had served on the British side in the War – expecting to be rewarded for their service. Instead they were given the Rowlatt Act. Gandhiji was detained while proceeding to the Punjab, even as prominent local Congressmen were arrested. The situation in the province grew progressively more tense, reaching a bloody climax in Amritsar in April 1919, when a British Brigadier ordered his troops to open fire on a nationalist meeting. More than four hundred people were killed in what is known as the Jallianwala Bagh massacre. It was the Rowlatt satyagraha that made Gandhiji a truly national leader. Emboldened by its success, Gandhiji called for a campaign of “non-cooperation” with British rule. Indians who wished colonialism to end were asked to stop attending schools, colleges and law courts, and not pay taxes. In sum, they were asked to adhere to a “renunciation of (all) voluntary association with the (British) Government”. If noncooperation was effectively carried out, said Gandhiji, India would win swaraj within a year. To further broaden the struggle he had joined hands with the Khilafat Movement that sought to restore the Caliphate, a symbol of Pan-Islamism which had recently been abolished by the Turkish ruler Kemal Attaturk.<br />Knitting a popular movement<br /><br /><br />Gandhiji hoped that by coupling non-cooperation with Khilafat, India’s two major religious communities, Hindus and Muslims, could collectively bring an end to colonial rule. These movements certainly unleashed a surge of popular action that was altogether unprecedented in colonial India. Students stopped going to schools and colleges run by the government. Lawyers refused to attend court. The working class went on strike in many towns and cities: according to official figures, there were 396 strikes in 1921, involving 600,000 workers and a loss of seven million workdays. The countryside was seething with discontent too. Hill tribes in northern Andhra violated the forest laws. Farmers in Awadh did not pay taxes. Peasants in Kumaun refused to carry loads for colonial officials. These protest movements were sometimes carried out in defiance of the local nationalist leadership. Peasants, workers, and others interpreted and acted upon the call to “non-cooperate” with colonial rule in ways that best suited their interests, rather than conform to the dictates laid down from above. “Non-cooperation,” wrote Mahatma Gandhi’s American biographer Louis Fischer, “became the name of an epoch in the life of India and of Gandhiji. Non-cooperation was negative enough to be peaceful but positive enough to be effective. It entailed denial, renunciation, and self-discipline. It was training for self-rule.” As a consequence of the Non-Cooperation Movement the British Raj was shaken to its foundations for the first time since the Revolt of 1857. Then, in February 1922, a group of peasants attacked and torched a police station in the hamlet of Chauri Chaura, in the United Provinces (now, Uttar Pradesh and Uttaranchal). Several constables perished in the conflagration. This act of violence prompted Gandhiji to call off the movement altogether. “No provocation,” he insisted, “can possibly justify (the) brutal murder of men who had been rendered defenceless and who had virtually thrown themselves on the mercy of the mob.”<br /><br /><br />During the Non-Cooperation Movement thousands of Indians were put in jail. Gandhiji himself was arrested in March 1922, and charged with sedition. The judge who presided over his trial, Justice C.N. Broomfield, made a remarkable speech while pronouncing his sentence. “It would be impossible to ignore the fact,” remarked the judge, “that you are in a different category from any person I have ever tried or am likely to try. It would be impossible to ignore the fact that, in the eyes of millions of your countrymen, you are a great patriot and a leader. Even those who differ from you in politics look upon you as a man of high ideals and of even saintly life.” Since Gandhiji had violated the law it was obligatory for the Bench to sentence him to six years’ imprisonment, but, said Judge Broomfield, “If the course of events in India should make it possible for the Government to reduce the period and release you, no one will be better pleased than I”. <br /><br /><strong>A people’s leader </strong><br /><br /><br />By 1922, Gandhiji had transformed Indian nationalism, thereby redeeming the promise he made in his BHU speech of February 1916. It was no longer a movement of professionals and intellectuals; now, hundreds of thousands of peasants, workers and artisans also participated in it. Many of them venerated Gandhiji, referring to him as their “Mahatma”. They appreciated the fact that he dressed like them, lived like them, and spoke their language. Unlike other leaders he did not stand apart from the common folk, but empathised and even identified with them.<br /><br /><br />This identification was strikingly reflected in his dress: while other nationalist leaders dressed formally, wearing a Western suit or an Indian bandgala, Gandhiji went among the people in a simple dhoti or loincloth. Meanwhile, he spent part of each day working on the charkha (spinning wheel), and encouraged other nationalists to do likewise. The act of spinning allowed Gandhiji to break the boundaries that prevailed within the traditional caste system, between mental labour and manual labour. In a fascinating study, the historian Shahid Amin has traced the image of Mahatma Gandhi among the peasants of eastern Uttar Pradesh, as conveyed by reports and rumours in the local press. When he travelled through the region in February 1921, Gandhiji was received by adoring crowds everywhere. <br /><br /><br />Wherever Gandhiji went, rumours spread of his miraculous powers. In some places it was said that he had been sent by the King to redress the grievances of the farmers, and that he had the power to overrule all local officials. In other places it was claimed that Gandhiji’s power was superior to that of the English monarch, and that with his arrival the colonial rulers would flee the district. There were also stories reporting dire consequences for those who opposed him; rumours spread of how villagers who criticised Gandhiji found their houses mysteriously falling apart or their crops failing. Known variously as “Gandhi baba”, “Gandhi Maharaj”, or simply as “Mahatma”, Gandhiji appeared to the Indian peasant as a saviour, who would rescue them from high taxes and oppressive officials and restore dignity and autonomy to their lives. Gandhiji’s appeal among the poor, and peasants in particular, was enhanced by his ascetic lifestyle, and by his shrewd use of symbols such as the dhoti and the charkha. Mahatma Gandhi was by caste a merchant, and by profession a lawyer; but his simple lifestyle and love of working with his hands allowed him to empathise more fully with the labouring poor and for them, in turn, to empathise with him. Where most other politicians talked down to them, Gandhiji appeared not just to look like them, but to understand them and relate to their lives.<br /><br /><br />While Mahatma Gandhi’s mass appeal was undoubtedly genuine – and in the context of Indian politics, without precedent – it must also be stressed that his success in broadening the basis of nationalism was based on careful organisation. New branches of the Congress were set up in various parts of India. A series of “Praja Mandals” were established to promote the nationalist creed in the princely states. Gandhiji encouraged the communication of the nationalist message in the mother tongue, rather than in the language of the rulers, English. Thus the provincial committees of the Congress were based on linguistic regions, rather than on the artificial boundaries of British India. In these different ways nationalism was taken to the farthest corners of the country and embraced by social groups previously untouched by it. By now, among the supporters of the Congress were some very prosperous businessmen and industrialists. Indian entrepreneurs were quick to recognise that, in a free India, the favours enjoyed by their British competitors would come to an end. Some of these entrepreneurs, such as G.D. Birla, supported the national movement openly; others did so tacitly. Thus, among Gandhiji’s admirers were both poor peasants and rich industrialists, although the reasons why peasants followed Gandhiji were somewhat different from, and perhaps opposed to, the reasons of the industrialists.<br />While Mahatma Gandhi’s own role was vital, the growth of what we might call “Gandhian nationalism” also depended to a very substantial extent on his followers. Between 1917 and 1922, a group of highly talented Indians attached themselves to Gandhiji. They included Mahadev Desai, Vallabh Bhai Patel, J.B. Kripalani, Subhas Chandra Bose, Abul Kalam Azad, Jawaharlal Nehru, Sarojini Naidu, Govind Ballabh Pant and C. Rajagopalachari. Notably, these close associates of Gandhiji came from different regions as well as different religious traditions. In turn, they inspired countless other Indians to join the Congress and work for it.<br /><br /><br />Mahatma Gandhi was released from prison in February 1924, and now chose to devote his attention to the promotion of home-spun cloth (khadi), and the abolition of untouchability. For, Gandhiji was as much a social reformer as he was a politician. He believed that in order to be worthy of freedom, Indians had to get rid of social evils such as child marriage and untouchability. Indians of one faith had also to cultivate a genuine tolerance for Indians of another – hence his emphasis on Hindu-Muslim harmony. Meanwhile, on the economic front Indians had to learn to become self-reliant – hence his stress on the significance of wearing khadi rather than mill-made cloth imported from overseas. <br /><br /><strong>The Salt Satyagraha </strong><br /><br /><br />For several years after the Non-cooperation Movement ended, Mahatma Gandhi focused on his social reform work. In 1928, however, he began to think of re-entering politics. That year there was an all-India campaign in opposition to the all-White Simon Commission, sent from England to enquire into conditions in the colony. Gandhiji did not himself participate in this movement, although he gave it his blessings, as he also did to a peasant satyagraha in Bardoli in the same year. In the end of December 1929, the Congress held its annual session in the city of Lahore. The meeting was significant for two things: the election of Jawaharlal Nehru as President, signifying the passing of the baton of leadership to the younger generation; and the proclamation of commitment to “Purna Swaraj”, or complete independence. Now the pace of politics picked up once more. On 26 January 1930, “Independence Day” was observed, with the national flag being hoisted in different venues, and patriotic songs being sung. Gandhiji himself issued precise instructions as to how the day should be observed. “It would be good,” he said, “if the declaration [of Independence] is made by whole villages, whole cities even ... It would be well if all the meetings were held at the identical minute in all the places.”<br /><br />Gandhiji suggested that the time of the meeting be advertised in the traditional way, by the beating of drums. The celebrations would begin with the hoisting of the national flag. The rest of the day would be spent “in doing some constructive work, whether it is spinning, or service of ‘untouchables’, or reunion of Hindus and Mussalmans, or prohibition work, or even all these ? together, which is not impossible”. Participants would take a pledge affirming that it was “the inalienable right of the Indian people, as of any other people, to have freedom and to enjoy the fruits of their toil”, and that “if any government deprives a people of these rights and oppresses them, the people have a further right to alter it or abolish it”. <br /><br /><strong>Dandi </strong><br /><br />Soon after the observance of this “Independence Day”, Mahatma Gandhi announced that he would lead a march to break one of the most widely disliked laws in British India, which gave the state a monopoly in the manufacture and sale of salt. His picking on the salt monopoly was another illustration of Gandhiji’s tactical wisdom. For in every Indian household, salt was indispensable; yet people were forbidden from making salt even for domestic use, compelling them to buy it from shops at a high price. The state monopoly over salt was deeply unpopular; by making it his target, Gandhiji hoped to mobilise a wider discontent against British rule.<br /><br /><br />Where most Indians understood the significance of Gandhiji’s challenge, the British Raj apparently did not. Although Gandhiji had given advance notice of his “Salt March” to the Viceroy Lord Irwin, Irwin failed to grasp the significance of the action. On 12 March 1930, Gandhiji began walking from his ashram at Sabarmati towards the ocean. He reached his destination three weeks later, making a fistful of salt as he did and thereby making himself a criminal in the eyes of the law. Meanwhile, parallel salt marches were being conducted in other parts of the country.<br /><br /><br />As with Non-cooperation, apart from the officially sanctioned nationalist campaign, there were numerous other streams of protest. Across large parts of India, peasants breached the hated colonial forest laws that kept them and their cattle out of the woods in which they had once roamed freely. In some towns, factory workers went on strike while lawyers boycotted British courts and students refused to attend government-run educational institutions. As in 1920-22, now too Gandhiji’s call had encouraged Indians of all classes to make manifest their own discontent with colonial rule. The rulers responded by detaining the dissenters. In the wake of the Salt March, nearly 60,000 Indians were arrested, among them, of course, Gandhiji himself.<br /><br /><br />The progress of Gandhiji’s march to the seashore can be traced from the secret reports filed by the police officials deputed to monitor his movements. These reproduce the speeches he gave at the villages en route, in which he called upon local officials to renounce government employment and join the freedom struggle. In one village, Wasna, Gandhiji told the upper castes that “if you are out for Swaraj you must serve untouchables. You won’t get Swaraj merely by the repeal of the salt taxes or other taxes. For Swaraj you must make amends for the wrongs which you did to the untouchables. For Swaraj, Hindus, Muslims, Parsis and Sikhs will have to unite. These are the steps towards Swaraj.” The police spies reported that Gandhiji’s meetings were very well attended, by villagers of all castes, and by women as well as men. They observed that thousands of volunteers were flocking to the nationalist cause. Among them were many officials, who had resigned from their posts with the colonial government. Writing to the government, the District Superintendent of Police remarked, “Mr Gandhi appeared calm and collected. He is gathering more strength as he proceeds.” The progress of the Salt March can also be traced from another source: the American newsmagazine, Time. This, to begin with, scorned at Gandhiji’s looks, writing with disdain of his “spindly frame” and his “spidery loins”. Thus in its first report on the march, Time was deeply sceptical of the Salt March reaching its destination. It claimed that Gandhiji “sank to the ground” at the end of the second day’s walking; the magazine did not believe that “the emaciated saint would be physically able to go much further”. But within a week it had changed its mind. The massive popular following that the march had garnered, wrote Time, had made the British rulers “desperately anxious”. Gandhiji himself they now saluted as a “Saint” and “Statesman”, who was using “Christian acts as a weapon against men with Christian beliefs”. <br /><br /><strong>Dialogues</strong><br /><br />The Salt March was notable for at least three reasons. First, it was this event that first brought Mahatma Gandhi to world attention. The march was widely covered by the European and American press. Second, it was the first nationalist activity in which women participated in large numbers. The socialist activist Kamaladevi Chattopadhyay had persuaded Gandhiji not to restrict the protests to men alone. Kamaladevi was herself one of numerous women who courted arrest by breaking the salt or liquor laws. Third, and perhaps most significant, it was the Salt March which forced upon the British the realisation that their Raj would not last forever, and that they would have to devolve some power to the Indians.<br /><br /><br />To that end, the British government convened a series of “Round Table Conferences” in London. The first meeting was held in November 1930, but without the pre-eminent political leader in India, thus rendering it an exercise in futility. Gandhiji was released from jail in January 1931 and the following month had several long meetings with the Viceroy. These culminated in what was called the “Gandhi-Irwin Pact’, by the terms of which civil disobedience would be called off, all prisoners released, and salt manufacture allowed along the coast. The pact was criticised by radical nationalists, for Gandhiji was unable to obtain from the Viceroy a commitment to political independence for Indians; he could obtain merely an assurance of talks towards that possible end. A second Round Table Conference was held in London in the latter part of 1931. Here, Gandhiji represented the Congress. However, his claims that his party represented all of India came under challenge from three parties: from the Muslim League, which claimed to stand for the interests of the Muslim minority; from the Princes, who claimed that the Congress had no stake in their territories; and from the brilliant lawyer and thinker B.R. Ambedkar, who argued that Gandhiji and the Congress did not really represent the lowest castes.<br /><br /><br />The Conference in London was inconclusive, so Gandhiji returned to India and resumed civil disobedience. The new Viceroy, Lord Willingdon, was deeply unsympathetic to the Indian leader. In a private letter to his sister, Willingdon wrote: “It’s a beautiful world if it wasn’t for Gandhi ... At the bottom of every move he makes which he always says is inspired by God, one discovers the political manouevre. I see the American Press is saying what a wonderful man he is ... But the fact is that we live in the midst of very unpractical, mystical, and superstitious folk who look upon Gandhi as something holy, ...”<br /><br /><br />In 1935, however, a new Government of India Act promised some form of representative government. Two years later, in an election held on the basis of a restricted franchise, the Congress won a comprehensive victory. Now eight out of 11 provinces had a Congress “Prime Minister”, working under the supervision of a British Governor.<br /><br /><br />In September 1939, two years after the Congress ministries assumed office, the Second World War broke out. Mahatma Gandhi and Jawaharlal Nehru had both been strongly critical of Hitler and the Nazis. Accordingly, they promised Congress support to the war effort if the British, in return, promised to grant India independence once hostilities ended. The offer was refused. In protest, the Congress ministries resigned in October 1939. Through 1940 and 1941, the Congress organised a series of individual satyagrahas to pressure the rulers to promise freedom once the war had ended.<br /><br /><br />Meanwhile, in March 1940, the Muslim League passed a resolution committing itself to the creation of a separate nation called “Pakistan”. The political landscape was now complicated: it was no longer Indians versus the British; rather, it had become a three-way struggle between the Congress, the Muslim League, and the British. At this time Britain had an all-party government, whose Labour members were sympathetic to Indian aspirations, but whose Conservative Prime Minister, Winston Churchill, was a diehard imperialist who insisted that he had not been appointed the King’s First Minister in order to preside over the liquidation of the British Empire. In the spring of 1942, Churchill was persuaded to send one of his ministers, Sir Stafford Cripps, to India to try and forge a compromise with Gandhiji and the Congress. Talks broke down, however, after the Congress insisted that if it was to help the British defend India from the Axis powers, then the Viceroy had first to appoint an Indian as the Defence Member of his Executive Council. <br /><br /><strong>Quit India</strong><br /><br />After the failure of the Cripps Mission, Mahatma Gandhi decided to launch his third major movement against British rule. This was the “Quit India” campaign, which began in August 1942. Although Gandhiji was jailed at once, younger activists organised strikes and acts of sabotage all over the country. Particularly active in the underground resistance were socialist members of the Congress, such as Jayaprakash Narayan. In several districts, such as Satara in the west and Medinipur in the east, “independent” governments were proclaimed. The British responded with much force, yet it took more than a year to suppress the rebellion.<br /><br />“Quit India” was genuinely a mass movement, bringing into its ambit hundreds of thousands of ordinary Indians. It especially energised the young who, in very large numbers, left their colleges to go to jail. However, while the Congress leaders languished in jail, Jinnah and his colleagues in the Muslim League worked patiently at expanding their influence. It was in these years that the League began to make a mark in the Punjab and Sind, provinces where it had previously had scarcely any presence. In June 1944, with the end of the war in sight, Gandhiji was released from prison. Later that year he held a series of meetings with Jinnah, seeking to bridge the gap between the Congress and the League. In 1945, a Labour government came to power in Britain and committed itself to granting independence to India. Meanwhile, back in India, the Viceroy, Lord Wavell, brought the Congress and the League together for a series of talks. Early in 1946 fresh elections were held to the provincial legislatures. The Congress swept the “General” category, but in the seats specifically reserved for Muslims the League won an overwhelming majority. The political polarisation was complete. A Cabinet Mission sent in the summer of 1946 failed to get the Congress and the League to agree on a federal system that would keep India together while allowing the provinces a degree of autonomy. After the talks broke down, Jinnah called for a “Direct Action Day” to press the League’s demand for Pakistan. On the designated day, 16 August 1946, bloody riots broke out in Calcutta. The violence spread to rural Bengal, then to Bihar, and then across the country to the United Provinces and the Punjab. In some places, Muslims were the main sufferers, in other places, Hindus. In February 1947, Wavell was replaced as Viceroy by Lord Mountbatten. Mountbatten called onelast round of talks, but when these too proved inconclusive he announced that British India would be freed, but also divided. The formal transfer of power was fixed for 15 August. When that day came, it was celebrated with gusto in different parts of India. In Delhi, there was “prolonged applause” when the President of the Constituent Assembly began the meeting by invoking the Father of the Nation – Mohandas Karamchand Gandhi. Outside the Assembly, the crowds shouted “Mahatma Gandhi ki jai”. <br /><br /><strong>The Last Heroic Days </strong><br /><br />As it happened, Mahatma Gandhi was not present at the festivities in the capital on 15 August 1947. He was in Calcutta, but he did not attend any function or hoist a flag there either. Gandhiji marked the day with a 24-hour fast. The freedom he had struggled so long for had come at an unacceptable price, with a nation divided and Hindus and Muslims at each other’s throats. Through September and October, writes his biographer D.G. Tendulkar, Gandhiji “went round hospitals and refugee camps giving consolation to distressed people”. He “appealed to the Sikhs, the Hindus and the Muslims to forget the past and not to dwell on their sufferings but to extend the right hand of fellowship to each other, and to determine to live in peace ...”<br /><br />At the initiative of Gandhiji and Nehru, the Congress now passed a resolution on “the rights of minorities”. The party had never accepted the “two-nation theory”: forced against its will to accept Partition, it still believed that “India is a land of many religions and many races, and must remain so”. Whatever be the situation in Pakistan, India would be “a democratic secular State where all citizens enjoy full rights and are equally entitled to the protection of the State, irrespective of the religion to which they belong”. The Congress wished to “assure the minorities in India that it will continue to protect, to the best of its ability, their citizen rights against aggression”.<br /><br />Many scholars have written of the months after Independence as being Gandhiji’s “finest hour”. After working to bring peace to Bengal, Gandhiji now shifted to Delhi, from where he hoped to move on to the riottorn districts of Punjab. While in the capital, his meetings were disrupted by refugees who objected to readings from the Koran, or shouted slogans asking why he did not speak of the sufferings of those Hindus and Sikhs still living in Pakistan. In fact, as D.G. Tendulkar writes, Gandhiji “was equally concerned with the sufferings of the minority community in Pakistan. He would have liked to be able to go to their succour. But with what face could he now go there, when he could not guarantee full redress to the Muslims in Delhi?” There was an attempt on Gandhiji’s life on 20 January 1948, but he carried on undaunted. On 26 January, he spoke at his prayer meeting of how that day had been celebrated in the past as Independence Day. Now freedom had come, but its first few months had been deeply disillusioning. However, he trusted that “the worst is over”, that Indians would henceforth work collectively for the “equality of all classes and creeds, never the domination and superiority of the major community over a minor, however insignificant it may be in numbers or influence”. He also permitted himself the hope “that though geographically and politically India is divided into two, at heart we shall ever be friends and brothers helping and respecting one another and be one for the outside world”. Gandhiji had fought a lifelong battle for a free and united India; and yet, when the country was divided, he urged that the two parts respect and befriend one another.<br /><br />Other Indians were less forgiving. At his daily prayer meeting on the evening of 30 January, Gandhiji was shot dead by a young man. The assassin, who surrendered afterwards, was a Brahmin from Pune named Nathuram Godse, the editor of an extremist Hindu newspaper who had denounced Gandhiji as “an appeaser of Muslims”. Gandhiji’s death led to an extraordinary outpouring of grief, with rich tributes being paid to him from across the political spectrum in India, and moving appreciations coming from such international figures as George Orwell and Albert Einstein. Time magazine, which had once mocked Gandhiji’s physical size and seemingly non-rational ideas, now compared his martyrdom to that of Abraham Lincoln: it was a bigoted American who had killed Lincoln for believing that human beings were equal regardless of their race or skin colour; and it was a bigoted Hindu who had killed Gandhiji for believing that friendship was possible, indeed necessary, between Indians of different faiths. In this respect, as Time wrote, “The world knew that it had, in a sense too deep, too simple for the world to understand, connived at his (Gandhiji’s) death as it had connived at Lincoln’s.” <br /><br /><br /><strong>Knowing Gandhi</strong><br /><br />There are many different kinds of sources from which we can reconstruct the political career of Gandhiji and the history of the nationalist movement. <br /><strong><br />Public voice and private scripts </strong><br /><br /><br />One important source is the writings and speeches of Mahatma Gandhi and his contemporaries, including both his associates and his political adversaries. Within these writings we need to distinguish between those that were meant for the public and those that were not. Speeches, for instance, allow us to hear the public voice of an individual, while private letters give us a glimpse of his or her private thoughts. In letters we see people expressing their anger and pain, their dismay and anxiety, their hopes and frustrations in ways in which they may not express themselves in public statements. But we must remember that this private-public distinction often breaks down. Many letters are written to individuals, and are therefore personal, but they are also meant for the public. The language of the letters is often shaped by the awareness that they may one day be published. Conversely, the fear that a letter may get into print often prevents people from expressing their opinion freely in personal letters. Mahatma Gandhi regularly published in his journal, Harijan, letters that others wrote to him. Nehru edited a collection of letters written to him during the national movement and published A Bunch of Old Letters. <br /><br /><strong>Framing a picture </strong><br /><br />Autobiographies similarly give us an account of the past that is often rich in human detail. But here again we have to be careful of the way we read and interpret autobiographies. We need to remember that they are retrospective accounts written very often from memory. They tell us what the author could recollect, what he or she saw as important, or was keen on recounting, or how a person wanted his or her life to be viewed by others. Writing an autobiography is a way of framing a picture of yourself. So in reading these accounts we have to try and see what the author does not tell us; we need to understand the reasons for that silence – those wilful or unwitting acts of forgetting. <br /><br /><strong>Through police eyes </strong><br /><br />Another vital source is government records, for the colonial rulers kept close tabs on those they regarded as critical of the government. The letters and reports written by policemen and other officials were secret at the time; but now can be accessed in archives. Let us look at one such source: the fortnightly reports that were prepared by the Home Department from the early twentieth century. These reports were based on police information from the localities, but often expressed what the higher officials saw, or wanted to believe. While noticing the possibility of sedition and rebellion, they liked to assure themselves that these fears were unwarranted. If you see the Fortnightly Reports for the period of the Salt March you will notice that the Home Department was unwilling to accept that Mahatma Gandhi’s actions had evoked any enthusiastic response from the masses. The march was seen as a drama, an antic, a desperate effort to mobilise people who were unwilling to rise against the British and were busy with their daily schedules, happy under the Raj. <br /><br /><strong>From newspapers </strong><br /><br />One more important source is contemporary newspapers, published in English as well as in the different Indian languages, which tracked Mahatma Gandhi’s movements and reported on his activities, and also represented what ordinary Indians thought of him. Newspaper accounts, however, should not be seen as unprejudiced. They were published by people who had their own political opinions and world views. These ideas shaped what was published and the way events were reported. The accounts that were published in a London newspaper would be different from the report in an Indian nationalist paper.<br /><br />We need to look at these reports but should be careful while interpreting them. Every statement made in these cannot be accepted literally as representing what was happening on the ground. They often reflect the fears and anxieties of officials who were unable to control a movement and were anxious about its spread. They did not know whether to arrest Mahatma Gandhi or what an arrest would mean. The more the colonial state kept a watch on the public and its activities, the more it worried about the basis of its rule. <br /><br /><strong>Timeline</strong><br /><br /><br />1915 - Mahatma Gandhi returns from South Africa<br />1917 - Champaran movement<br />1918 - Peasant movements in Kheda (Gujarat), and workers’ movement in Ahmedabad<br />1919 - Rowlatt Satyagraha (March-April)<br />1919 - Jallianwala Bagh massacre (April)<br />1921 - Non-cooperation and Khilafat Movements<br />1928 - Peasant movement in Bardoli<br />1929 - “Purna Swaraj” accepted as Congress goal at the Lahore Congress (December)<br />1930 - Civil Disobedience Movement begins; Dandi March (March-April)<br />1931 - Gandhi-Irwin Pact (March); Second Round Table Conference (December)<br />1935 - Government of India Act promises some form of representative government<br />1939 - Congress ministries resign<br />1942 - Quit India Movement begins (August)<br />1946 - Mahatma Gandhi visits Noakhali and other riot-torn areas to stop communal violenceMANISHhttp://www.blogger.com/profile/00428491443420277409noreply@blogger.com0tag:blogger.com,1999:blog-2672050906182920186.post-18171599471239097562009-08-29T13:26:00.000+05:302009-08-29T13:27:06.408+05:30GS 2 Markers-Ancient India1. AIHOLE near Badami with rock cut and structural temples of Western Chalukya period, is favous for the temples of Vishnu, Ladkhan and Durga. It furnish examples of a well developed Deccan style of architecture. The other three styles of ancient India being Nagar Dravidian and Vesara. It is also famous for its inscription or Prasasti composed by Ravikirti, the court poet of Pulkesin II. This prasasti mentions the defeat of Harsha by the Chalukya king, Pulkesin II, a r rare event of a Northern emperor or ruler being defeated by a ruler south of Narmada. <br />2. ACHICHHATRA identified with modern Ramnagar in Bareily district of U.P. was the capital of North Panchala in the first half of first millennium B.C. Exacavation grove that it had moats and ramparts around it, it has revealed terracottas of the Kushan period, and also remarkable siries of coins of second century A.D. Its importance lies in the fact that it was on the important ancient Indian northern trade route linking Taxila and Inidraprastha with Kanyakubaj and Sravasti, Rajgriha and Pataliputra indicating that trae could be one of the reasons for its prominence. <br />3. AJANTA near Aurangabad (Maharashtra), is famous for wonderful Buddist caves, and also paintings probably executed only b the Buddhist monks. Paintings of exceptional skill belong to the period between 2nd century B.C. and 7th Century A.D. One of the cave well depicts the reception of a Persian mission in the Chalukya court of Pulkasin II indicating cultural and commercial contacts with the Persian empire. <br />4. ANUPA in Narmada valley mentioned in the Nasik inscription (dated 115 A.D.) of Gautami Balasri, mother of the Satvahana ruler Sri Satakarni (Circa 72-95 A.D.) was conqured bythe latter from the sakas, and was a bone of contention for long between the Sakas and the Satvahanas. The sakas were responsible for driving the Satavahanas. Into the south -eastern and western direction. In other words, Anupa signifies the earlier homeland of the Satvahanas. <br />5. APARNTAKA (Aparanta), identified withk Konkan, i.e. North western region of the Deccan, was a bone of contention between the sakas and the Satavahanas and is mentioned in Nasik Inscription (dated circle 155 A.D.) of Gautami Balasri. Gautamiputa stakarni conquered it from theSakas. According to the Mahavamsa, the third Buddhist council deputed Great elder Dharamarakshita to do missionary work in Aparantaka region. Literacy evience locates the Abhiras in this region, who probably were responsible for identifying Lord Krishna as the diety of cowherd and milk-maids. <br />In matters relating to trade and commerce it was famous for the production of cotton textiles in ancient times and ated, as the hinterland for the ancient ports of Bharukachechha and Sopara. <br />6. ARIKAMEDU near Pondicherry, known to the periplus as podoka, wa port of call in Sangam Times (200 B.C.) on the route of Malaya and china. Recent excavation during which a veryrich treasure of Roman beads, glass and coins, and of Roman and south Indian Pottery were found have proved that it was once a prosperous settlement of Western trading people, including the Romans. <br />The favourable balance of Payments position ejoyed by India in its trade with Rome is amply revealed by the rich haul of Roman gold coins. <br />7. AYODHYA also known as A-yu-te or Abhur of Saketa on the river Sarya (Modern Ghaghra) in Faizabad district of U.P. was the earliest capital of the Kosala Janapade and was the seat of the epic hero, Rama. It is also known for its short Sanskrit inscription of king Dhandeva of Kosal (belonging probably to the first century B.C.) which refers to the conducting of two Asvamedha sacrifices by king Pushyamitra. From the economic view-point it was located on the important trade of Tamralipti-Rajagriha-Sravasti which passed via Ayodhya. <br />8. AMRAVATI near modern Vijayawada (Andhra Pradesh), is famous for its stupa and as an art center flourishing under the Satavahanas and the pallavas. Second century works of art khow mastery of stone sculpture. Amravati bas-reliefs have the representation of ancient Indian vehicles - the boat or the ship or the cart, and of a foreign mission (like the Ajanta cave paintings) of marchants being received by a king. In ancient times is was an important center of trade, and ships from here sailed to Burma and Indonesia. <br />It is maintained by some scholars that a human figure, for the first time, that a marble stone relief was executed. <br />9. ASIKA (Probably on the left bankof the river Krishna), is mentioned in the Nasik inscription (dated circe 115 A.D.) of Gautami Balasri, it was conquered by the Satavahana rular Gautamiputra Satakarini (………) The latter fact reveals that Gautamiputra Satakarni gained a stronger hold of southern India which proved beneficial because of the continuing Saka pressure even after his victory against the Sakas. King Kharavela of Kalinga also made a claim of its conquest. <br />10. AVANTI (western Malva) one of the 16 Janapadas of 6th century B.C. with its capital at Ujjain; struggle dhard against Magadhan imperialism but in vain. According to Buddhist traditions, Asoka, the Mauryan ruler, served as the Viceroy of Avanti, while he was a prince. <br />Since Malwa region is important politically, and economically it became a bone of contention between the Sakas. And the Satavahanas, Rashtrakutas and Pratiharas in ancient India. It is through this region that the importanttrade routes from eastern and western Indian passed Via Ujjain to the important Western ports Bharukachchha (Broach) and Soparaka (Sopara). <br />11. ANGA one of the 16th Janapadas of 16th century B.C. Lay to the east of Magadha with Champa, near Bhagalpur, as its capital. Some of the Anga monarchas, like Brahmadatta, appear to have defeated their Magadha contemporaries. Subsequently, however, Magadha emerged supreme leading to the establishment of the first empire of ancient India. In other words, the conquest of Anga by Magadha was one of the stepping stones for the Magadhan Empire. <br />12. BARHUT in central Indian is famous for Buddhist Stupa and stone railings which replaced the wooden ones in the Sunga period. Barhut sculptures depict the visit of king Ajatasatru to the Buddha. Barhut along with Sanchi and Bodh-Gaya represent the first organized art activity of the Indian people as a whole. Furthermore, all these clearly indicate the transition of sculpture from wood to stone. <br />13. BARYGAZA OR BHARUKACHCHA (Broach) was the oldest and largest northern most entrepot on the mouth of the Narmada river in modern Maharashtra. It handled the bulk of the trade with western Asia (Jataka stories and the Periplus mention it). It was also one of the district head quarters of the Saka rulers. According to Jain traditions, it was the capital of the Saka empire. It was international trade that mode Barygaza important in ancient India. <br />14. BARBARICUM was an important port in the Indus delta, receiving Chinese furs and silks through Bacteria for export to the West. It added to the growing prosperity of India in the first century A.D. <br />15. BADAMI (MODERN NAME FOR VATAPI) in Bijapur district was founded by pulkesin I as an early capital of the Western Chalukyas. It as a hill-fort and an exquisite cave temple of lord Vishnu excavated during the rule of Manglesh, the Chalukya ruler. Huen-tsang visited it. <br />16. BODH-GAYA situated six miles south of Gaya in Bihar on the western bank of the Nilajan river, was the place where the Buddha attained enlightenement. It was part of the Magadha janapada. <br />17. BANAVASI (north kanara in Karnataka) also known as Vaijayanti, was the capital of the Kadambas who were defeated by the Chalukya king Kirtivarman during the last quarter of the 6th century A.D. According to the Ceylonese chronicles Ashoka sent a mission to Deccan with the Monk Rkshita who went as far as Banavasi. <br />18. BRAHMAGIRI in Chitaldurg district of Karnataka, is remarkable for its continuity of cultural heritage extending from Neolithic (stone-age culture) to megalithic (early historic culture-3rd century B.C. to Ist century B.C. with possible links with Mediter anean and Caucasian Megaliths) revealing ancestory worship and animism pointing to the practice of cist and pit burials. It is the site of one of the two minor rock edicts of Askoka. These edicts suggest the provability of Ashoka entering the Sangha as a full monk after two and a half years of his conversion to Buddhism. <br />19. BURZAHOM in Kashmir Valley near Srinagar, is associated with megalithic settlements (dating 2400 B.C.) where the people lived on a plateau in pits using tools and weapons of stone (axe) and bones. (The only other site which has yielded considerable bone implements is Chirand, 40 km. West of Patna on the northern bank of the Ganges and using coarse grey pottery. The information that we gather from the two places, recently discovered, throws light on the proto-histroy of India). <br />20. BAMIYAN an important Buddhist and Gandhara Art center in Afghanistan in the early Christian centuries, has tall rock-cut Buddha statues. The ancient trade route linking north western India with China passed through it. It was the capital of the Hunas in the 5th and the 6th centuries A.D. <br />21. BELUR with a group of Hoysala monuments including the famous Chennakesava temple (built around 1117 A.D.) represents an art which applies to stone the technique of the ivory worker or the goldsmith. <br />22. CHIDAMBARAM a town in south Arcot district in Tamilnadu is famous for its great Hindu Siva Temple dedicated to Nataraja, i.e. Siva in his aspects of cosmic dance. The Nataraja sculptures are esteemed as tehgreatest specimens of sculpture in the world. Also, Chidambaram bears evidence to the birth as well as the development of Shaivism to begin with insouthern Indian and its consequential spread to the whole of India. <br />23. CHEDI OR CHETI one of the 16 Janapadas of 6th century B.C. roughly corresponds to modern Bundelkhand and adjacent tracts. It lay near the Kanuna, its metropolis was suktimati to Sottihivatinagar. <br />24. CAAMPA the capital city of the Anga Janapada on the border of Bengal was of great commercial importance in ancient times; for it was a river port from which ships would sail down the Ganges and the coast the south India, returning with jewels and spices which were much in demand in the North. By Mauryan times, with the eastward expansion of Aryan culture, Tamralipti replaced in in importance. An interesting feature of this is the fact that a Hindu Kingdom with the same name came into existence in the mainland of South east Asia. Indeed it is difficult to say how exactly this name came to be transplanted in South-east Asia. <br />25. DASAPURA modern Mandasor in western Malwa, was disputed between the Sakas and the Satavahanas. Its famous Siva temple of the guild of Silk weavers, was built during the reign of kumar Gupta I (414 A.D.-455 A.D.) the institution that is responsible for building the Siva temple indicates the climax of Indian trading and commercial activities in ancient Indian. It also reveals that manufacture of silk was no longer the secret monopoly of China and it had taken roots in India by the 5th century A.D. <br />26. DEVAKA modern Dokak in Nowgong district in Assam, a frontier country which paid tribute to Samudragupta claiming the payment of tribute by Kamarupa goes along with Devaka. However, it is to be borne in mind that Harisena's Prasasti is of doubtful historical validity. The one significant thing that is known is the fact that no ruler of the northern India could ever conquer the Assam region but instead Burma conquered it and it was wrenched from Burma by the British in 1829 by the Treaty of Yandavoo. <br />27. DEOGARH in Jhansi district of U.P. is famous for its Dasvatara Vishnu temple belonging to the Gupta period. The temple may be considered as most respresentative and well known example of the early sikhara style of temple architecture in example of the early sikhara style of temple architecture on the panels of its walls. Deogarh is one the temples with which began the temple architecture of India. In particular, the Shikhara is the unique feature of the northerntemples compared to those of southern Indian. <br />28. DWARAKA Legends associate this place toYadavas after the battle of Kurukshetra. According to mythology Dwaraka was destroyed by the huge tidal wave as per the forewarning of Lord Krishna. In very recent times Dr. S.R.Rao with the cooperation of the Department of Ocenography, did carry out under-sea explorations. Some artifacts including stone anchors have been found dating back to the Harappan period. The exploration is still continuing. <br />29. ELLORA With three distinct groups of rock-cut architecture associated with Buddhism, Jainism and Brahmanical Hinduism, is famous for its temple of Kailash (Siva) "an entire temple complex completely hewn-out of the live rock in imitation of a distinctive structural form". The temple ws built by the Rashtrakuta king Krishna I (758-773 A.D.) and is one of the most magnificent examples of Dravida architecture with its four principal characteristic components, viz. Vimana, Mandapa, nandi mandapa and gopuram. The Ellora sculptures are famous for their liveliness. <br />30. ERAN Besnagar district (Madhya Pradesh) is famous on account of Eran Inscriptions dated 510 A.D. This inscription mentions the practice of Sati, first of its kind. It is also famous for its colossal board, the zoomorphic incarnation of Lord Vishnu. <br />31. ELEPHANTA beautiful little island off Bombay, with latest cavetemples in Ellora style was famous for their sculpture, especially the great Trimutti figure of Siva, emblem of the Maharashtar Govt. representing the highest plastic expression of the Hindu concept of divinity. <br />32. GANDHARA with Taxila and peshwar as two capitals, in earlier and later ancient periods was one of the 16 Janapadas (6th century B.C.) onthenorth-western frontier of India. Under the Kushans it become a popular center of Mahayana Buddhism and Gandhara art- Indian images both secular and religious (the Buddha and Lord Krishna) but in long floating garments, as is the tradition of early Greek sculpture. It was a meeting ground for several civilizations and mercantile communities belonging to different countries. <br />33. GORATHAGIRA A hill fortress on the modern Barabar hills in the Gaya district of Bihar, was attacked by King Kharavela of Kalinga in the 8th year of his reign. This fact is known from the Hathigumpha Inscription of king Kharavela. <br />34. GANGAIKOND-CHOLA-PURAM was capital city of the greatest Chola ruler Rajendra Chola I (1012-1044 A.D.) who built it after the successful Chola military camaign upto the bank of the river Ganges in 1021-22. Currently the city lies inruins and its enormous tankshas dried up. <br />35. GIRNAR hill near Janagarh in Gujarat, where a Mauryan governor is said to have built an artificial lake, known as Sudarsana lake which Rudradaman, the Saka ruler renovated. Rudradaman's Sanskrit Inscription was located here and it is the first Sanskrit inscription It had been a sacred place to the Jainas since remote times because Jain shrines are also located here. <br />36. HASTINAPURA aim district Meerut in U.P. (known as Asandivant) was the capital of the ancient tribe of the Kurus. Later the floods destroyed it. Recent excavations prove that the people of this region used iron by about 700 B.C. that is the Aryans had learnt the art of making iron which revolutionized the whole socio-economic pattern of Aryan communities. It was this fact that lay at the base of the Economic Revolution that India passed through between 1000 B.C. to 600 A.D. with far too many consequences like the emergence of an empire, various kinds of guilds, brisk trade both with in and with out the country and links with buth South-east Asia and the Roman empire. <br />37. HATHIGUPHA on Udaigir hill, three miles from Bhuvaneshwar in the puri district of Orissa, is famous for an inscription in post-ashokan character, engraved inside the elephant cave. It depicts the meteoric and dazzling carer of Jaina king Kharavela, the 3rd ruler of the Cate dynasty. It also refers to the building of an equeduct in Kalinga by one of the Nanda rulers of Pataliputra. The importance of this inscription lies in the fact that it is the first important sign-post in fixing the chronology of ancient India. <br />38. HAILBID is famous for Hoysalesvara temple (Hoysala period) designed and built by Kedoroja, the master-building of Narasimha I. The infinite wealth of sculpture over the exterior of this temple makes it one of the most remarkable monuments of the world. Known as Dwaramudra it was the capital of the Hoysalas. <br />39. INDRAPRASTHA identified by Jain scholars with the site around the enclosure of the Purana Oila (Delhi) one of the sites of painted Grey Ware (10th century B.C.) finda, was the legendry capital of the Pandava brothers of the epic Mahabharata, which they lost to the Kauravas having been defeated in the gambling match. After the second battle of Tarain (1192) Moh. Gauri appointed Outbuddin Aibak as his deputy at Indraprastha which became a base for Aibak's successful operations against north Indian states. <br />40. KURA one of the 16 Janapadas of 6th century B.C., was in the neighbourhood of Delhi. Among its towns may be mentioned Indraprastha and Hastinapur. This place clearly brings home the truth to us that Mahabharata was not purely fictional story but some amount of historical evidence is embedded in the story. As a matter of fact, Vasudeve Krishna is now known as a historical personality as borne out by the writings of patanjali and other sources of evidence. <br />41. KAJANGALA in Raj mahal district in Eastern Bihar, where king Harsha (606-647 A.D.) held his court while campaigning in eastern India.The Chiense pilgrim Huen-Tsang first saw Harsha here. <br />42. KAPISA It is the region near Kabul, probably Kipin as referred to by Chineses writers. The presiding diety of the city according to Chiense writers was zeus. The Greek god. The gold and silver coins issued by the Greek kings have been discovered from this region in big numbers. The Greeks were the first to issue gold coins in India. These coins testify to the growing trade links between India and Central Asia and China and also with the Roman world. Far more important is the fact that these coins testify to the gowing worship of Vasudeva-krishna or the Bhagavata cult which later repened as Vaishnavism. <br />43. KIPIN is identified with Kapisa or Kafirstan in Kashmir. It indicated the wide region know in earlier times as the Mahajanapada of Kamboja. It was ruled by the Sakas, the Kushans and the Hunas in succession. The name Kamboja reappears as the name of kamboja, an important of the mainland of South-East Asia. <br />44. KAMPILYA was the capital of southern Panchalas, one of the tribal communities of the Aryans. This fact proves that the Aryans, to begin with in India, lived as various tribes. The tribes were in constant war with eachother culminating in the emergence of the Magadha Empire. <br />45. KUSAMDHVALA (Patliputara) Gargi-Samhita alludes that in the 2nd century B.C. the Yavanas (Indo-Bacterians) having reduced Saketa, Panchala, and Mathura reached kusumdhvana. Demetrios, was, most probably, the Yavana leader. He was defeated or he retired withouth fighting. <br />46. KASI one of the 16 Janapadas of the 6th century B.C. with its capital of the same name. It was also called Varanasi (69). It greatly prospered under the rule of Brahmadatta. <br />47. KOSAL one of the 16 janapadas of the 6th century B.C. had three different capitals (Saketa, Ayodhya and Sravasti) in three different periods. It region roughly corresponded to modern oudh. <br />48. KUSINAGAR (Kusinara ?) moder Kasia, in Gorakhpur district in UP was a small town where the Buddha attained Mahaparinirvana. It was one of the two capitals of the Mall Janapada in pre-Buddhists times. It was visited by Ashoka and the Chinese pilgrim Fa-hien. <br />49. KANYAKUBJA (Kanauj) on the bank of river Gangas in UP rose to prominence during the time of Mukhar is, Harsha and Gujara-Pratiharas. Under the pratiharas, Kanauj successfully resisted the Arabs. In the 9th century A.D. It was disputed among the Palas of Bengal, Prathiharas, and the Rashtrakutas. It was situated on a very important trade-route linking north-Western regions of India with Prayaga, Kasi, Vaishali, Pataliputra, Rajagriha, Tamralipti. <br />50. KAUSAMBI identified with the villagesof Kosam near Allahabad was one of the earliest cities, so prominent that Anand, the Buddhist monk, though it important enough for a Buddha to die in. Recent excavation it here unearthed historically and culturally important terracotta figures. It was built in the shape of a trapezium and was the capital of the vastse Janapada. One of the Ashokan Pillars was located here. It was also an inscription of the Kushan monarch. <br />60. KARNA-SUVARNA : refers to the region of Bengal and some parts of Bihar and Orrisa, fuled by sasanka in the early 7th century A.D. Harsha conquered the region from him after 619 A.D. <br />61. KANHERI In Thana district near Bombay, has rock cut Chaitya shrines with elaborately decorated railings belonging to the third century A.D. One inscription of the last great ruler of the Satavahana dynasty. Yajnasri Satakarni is found here. Kanheri Buddhist Tank inscription makes mention of Matiemonial relationship between the Sakas and the Satavahanas. It was the chief center of Buddhism in Rashtrakuta times. Faint traces of the art of paintings may be traced in the caves of Kanheri. <br />62. KANCHI modern canjeevaram, south-west to Madras is reckoned among the seven sacred cities of the Hindus. It was an important center of Jaina culture in the first half of the first millennium A.D. It was one of the south Indian kingdoms conquered by Samudragupta. It was visited by Huen-Tsang. It rose to prominence in 7th century A.D. Under the Pallava king. It possesses the famous Kailashnath temple (built by Pallava King Narsimhavarman - II) and Vaikuntha perumalla (constructed sometime after the kailashnath). The Kailashnath temple is a landmark in the development of dravida temple style with its characteristic components-vimana, mandapa gopuram and an array of vimanas along the walls of the court, i.e. peristyle cells. <br />63. KAVERIPATTANAM known as Puhar, was the Chola capital and chief port in Sangam period (200 B.C.- 300 A.D.) with a large colongy of foreigners. It was an important trade center. Ships sailing from here to South-East Asia. A long poem on this Chola capital is the part of the famous Sangam work pattupattu (Ten Idylls). <br />64. KURUKSHETRA near Thaneswar, to the north of Delhi in Haryana, was the site of the great battle of Mahbharata. This battle fought between the Kauravas and the Pandavas, formed the basis of the story of the greatness of India epics the Mahabharata. It is in this great war that Krishna prached his gospel of the Gita, to the Pandava hero Arjuna who saw his own elders and kishmen arranged himself for the fith and then early decided to renounce and retire. Krishna gave him the message of disinterested perfomance of duty i.e. renunciation in action but no renunciation of action. That a great war ws fought between the cousin brothers - Kauravas and Pandavas is quite possible. <br />65. MANYAKHET (modern Malkhed in Hyderabad region) was the capital of Rashtrakuta Amoghavarsha I in the 9th century A.D. <br />66. MAHABALIPURAM is today a tiny coastal village 65 kms. south of Madras. This port-city was founded by Pallava king Narasimhavarman in the 7th century A.D. Pallava kings created an architecture of their own which was to be the basis of all the styles of the south. In fact Mahabilipuram, the Pallava art with its monolithic temples (rathas) and rocks sculptured in the shapes of animals with a wonderfully broad and powerful naturalism, with whole cliffs worked in stone frescoes, immenspictures unparalleled at the time in all Indian in their order movement and lyrical value. The Descent of the Ganges, the unique masterpiece of Pallava art was surely one of the most remarkable compositions of all time (in which is portrayed the Ganges coming down to earth, with gods, animals men and all creation in adoration). The shore temple built by Rajasimha represents one of the earliest examples of structural temples. the Pallvava monuments at Mahabalipuram symbolize not only the transition from rock-architecture to structural stone temples but also significantly the completion of the "Aryanisation" of South India during the Pallava period. <br />67. MADHYAMIKA is identified with Nagari near Chitor in Rajasthan. Patanjali alludes toYavana (Indo-Bacterian) invasion of Madhyamika. <br />68. MUSHIKAS on the lower Indus with its capital at Alord. Was the greatest principality at the time of Alexander's invasion. Its king mousikanas submitted to Alexander after brave resistance. <br />69. MATIPUR modern Mandawar in district Bijnor of UP was a center of Hinayana Buddhist studies in the 6th and 7th centuries A.D. Huen-Tsang stayed here for some time. <br />70. MADURAI popularly known as the city of festivals, was the seat of the 3rd Sangam and was till the 14th century the capital of the Pandyan kingdom which had sea-borne brade with Rome and Greece. It is famous for the Minakshi temple. <br />80. MACCHA or Matsaya, was one of the 16 janapads. The Matsyas ruled to the west of the Jamuna and south of the Kurus. Their capital was at Viratnagar (modern Bairrat near Jaipur). <br />81. MALLA was one of the 16 Janapadas of the16th century B.C. The territory of the Mallas was on the mountain slopes probably to the north of the vijjain confederation. They had to branches with their capitals at Kusinagar and Pawa. But in pre-Buddhist time the Mallas were a monarchy. <br />82. MUZIRIS modern canganors in Kerala at the mouth of the river Periyar, an important port in Sangam period (20 B.C. - 300 A.D.) abounded in ships with cargoes from Arabia and Roman world. Later literature speaks of Roman settlements and a temple was built here ni honour of Augustus. <br />83. NAGARJUNAKONDA is Krishna Velley, harboured a Neolithic community with stone-axe-culture and primitive mode of agriculture. With a few classical accidental looking sculptures in proves trade and culture contacts with the Roman world. Survival of a Buddhist stupa proves it to be a Buddhist center in early Christian centuries. The beginning of Hindu temple architecture in south India are best traced in the remains of the early brick temples of the Ikshavakus excavated here anticipating the Nagara, Dravida and Vasars styles. <br />84. NASIK (also known as Naiskya and Govardhan) is famous for exquisite rock-cut Buddhist temple (of the period 2nd BC - 1st A.D.) with an engraved iscription of Gautami Balsari recording the achievement of the Satavahanas ruler Gautamiputra Satakarni). A large board of silver coins bearing the name, the titles of Nahapana were discovered at Jogalthambi very close to the Nasik suggesting the defeat of the Saka ruler bythe Satavahana knig. It is also famous for the Chaitya and Vihar as pan-du-lonea. <br />85. PITHUNDA on the Godavari, was the capital of the Avapeople or the Avamukta which was conquered as Samudragupta. <br />86. PADMAVATI was Nag capital is Gwalior region. Its king Ganapati Naga was defeated by Samudragupta. <br />87. PRATISHTHANA (Paithan) at the mouth of the river godavri in the Aurangabad district of Maharashtra, was the capital of Satavahana kings. It was an important commercial mart linked with Sravasti. <br />88. PURUSHPURA (modern Peshawar) was the capital of Kanishka's vast empire and the center of Gandhara art. It became the chief center of Buiddhist activity and studies with building of number of huge Chaityas and viharas and with one stupa. The Chiense pilgrims refer to a many storied relic-tower in which some relics of Buddha were enshrined. It is here that the icons of Buddha and other Hindu gods were first finely carved. In provided the meeting place of the marchants of India, China, central Asia, Persia, and the Roman world. <br />89. PATTADAKAL near Aihole Badami is famous for magnificentrock-cult and sculptures temples in Chalukya and Pallava style. The number of such temples is ten - four in the northern style and six in southern. Most famous of these temples is lokesvara temple (now called Virupaksha). <br />90. PANCHALA was one of the 16 janapadas of the 6th century B.C. Its area correspondent to modern Bundelkhand and the portion of the Central Doab. It had two divisions northern and southern, the Ganges forming the boundary line. Their capitals were Ahicchatra and Kampilya respectively. One of the early Panchalas kings, Durmukha, is credited with conquests in all directions. <br />91. PUSHKALAVATI i.e. the "city of lotuses' in Afganisthan to the north of the river Kabul (modern Charasadda) in the district of Peshawar was conquered by Alexandar. It was the old capital of western Gandhara. A gold coin (belonging to the 2nd century B.C.) with the city goddess (Lakshmi) holding a lotus in her right hand and an appropriate Kharoshthi legend "Pakhalavati devata" had been discovered here pointing to the popularity of Indian goddess. It remained under the rule of the Indo-Greeks, the sakas and the Kushana. It was an important link in India's trade relations with central Asia and China. <br />92. RAJAGRIHA moder Rajgir, near Patna in Bihar was and ancient capital of Magadha under Bimbisara and Ajatsatru. It was here that first Buddhist council was held after the death of Buddha. The cyclopean walls of the this old commercial town are among themost remarkable finds in India. <br />93. SAKALA modern Sialkot, capital of Menander, was the refuge of Buddhist monks. It was here, according to Buddhist tradition, that Pushyamitra Sungha declared to give an award of 199 dinars for the head of a Buddhist monk. <br />94. SANCHI :near Bhopal famous for a Buddhist stupa and for one of Ashoka's Minor Pillar Edicts. Sanchi sculptures along with Bharhut Godh-Gaya represent the first organized art activity of the Indian People. There are reliefs of the Jatkas on the stone walls around the stupa. Sanchi revealed historically important inscription of the Satavahanas and the Gupta kings. Kakanodbota probably was the ancient name for Sanchi, which was inhabited by the tribal people Kakar, and was conquered by the Samudragupta. <br />95. SRAVASTI moder Saket-Mahet on the borders of the Gonda and the Bahraich districts of U.P. On the river Rapti - It was a famous center of trade in ancient times, from where three important trade routes emanated linking it with Rajagriha, Pratishthana, and Taxila. It was one of the early capitals of the Janapad of Kosal. Later, it served as the provincial headquarters of the Gupta kings. Fa-hien visited it. <br />96. SAKETA region around Ayodhya, was invaded by Yavanas (Indo-Bacterin) is attested to by Patanjali. <br />97. SARNATH near Varanasi, is the place where the Buddha delivered his frist sermon in the Deer park, this event being known as the "Turning of the Wheel of Law". It is the site of the famous Ashokan Pillar of Polished sand-stone whose lion capital was adopted by the people of Free India as the state emblem. It was also the famous seat of Gupta sculpture. Gupta plastic art reached its perfection e.g. the seated Buddha in preaching posture. <br />98. SRAVANA-BELGOLA in Hasan district of Karnataka, is famous for the monolithic statue of Gometeswara- 85fit. High, erected in 980 A.D. by Chemundya Rai, the chief minister of the Ganga king Rachmal. <br />99. SOPARA port town known to the Periplus and ptolmey, carried most of the ancient Indian trade with foreign countries; gradually it began to lose its importance to Berygaza and Barharium- Ist century A.D. onwards. It ahs survived as a village 40 miles north of Bombay. <br />100. TOSALI (Dhauli) near Bhuaneshwar in Puri district of Orissa, was the seat of one of the Mauryan viceroyalties as well as one of the fourteen major rock edicts of Ashoka. The Tosali rock edict refers only to the conquered province. <br />101. TRIPURI now village near Jabalpur, was the capital of the Kalachuri dynasty. The Kalachuri kings became independent in 10th century A.D. In 1939, Tripuri had the distinction of being the venue of the 54th session of Indian National congress. <br />102. TAMRALIPTI Tamluk in the Midnapur district of Western Bengal was one of the most important port-towns of ancient India. Outlet to south-east Asia when there was trade boom. <br />103. TANJORE is famous for Rajarajeswava or Brihadeswara temple of lord Shiva which is the largest and tallest of all India temples with its vimana towering to a height of nearly 200 feet over the Garbhagriha with Pyramidal body in thirteen tiers. It was the seat of Chola government in the 9th century A.D. and later of an independent kingdom after the fall of ther Vijayanagar Empire. Weight of the cap 80 tonnes. Conceived on a gigantic scale. Stone relief as minute as that of jewelers. <br />104. THANESWAR near Kurukshetra, to the north of Delhi in the province of Haryana, was the capital of the Pushyabhuti dynsty. The kingdom of thanesar emerged into a powerful state under Harsha's (606-647 A.D.) father, Prabhakarvardhan who was in constant warfare against the Huns on the frontier and with the rulers of Malwa. Harsha shifted his capital from Thaneswar to Kannauj. According to Heun-Tsang the people of this city were specially inclined to trade. Thus thanesar was a principal center of trade. It was attacked by Mahmud of Ghazni in 1014 A.D. it is here that ahmad Shah Abdali first defeated the Maratha army in 1759 boding to the Maratha collapse at Panipat in 1761. <br />105. UJJAIN in Madhya pradesh was the capital of Avanti (6th century B.C.) and Chandragupta II, and was one of the provincial capitals of the Mauryas. It was the modal point of two ancient trade routes, one from Kausambui and the other from Mathura, its chief exports being agate, jasper and carnelian. It has an observatory built by Maharaja Savai Jai Sing II (1686-1743). <br />106. URAIYUR also known as Aragaru,on the river Kavari, was for some time the Sangam chola capital, was famous for its pearls and muslin, the latter being as think as the slough of the snake. <br />107. UTTARMERUR is a village of Tamil Nadu where nearly two hundred inscriptions belonging to Pallava and Chola periods indicating the nature and working of the village administration have been found. According to Uttarmerur inscriptions Pallava and Chola villages enjoyed maximum of autonomy inadministrative matters with popular village assemblies like the Ur, Sabha, Mahasabha or Nagaram looking after the village affains without any interference from royal officers. The village of Uttarmerur was divided in thirty wards. <br />108. VATSGULMA modern Basim in the Ahoka district in the South of Ajanta, was the capital of a Junior branch of the Vakatakas who are mentioned in the Ajanta cave inscriptiona No. XVI. <br />109. VIDISA modern Besnagar, near Bhilsa, in East Malwa, was a part of Sunga empire with Agnimitra, the sone of Pushyamitra Sunga as viceroy. The Vidisa guild of ivory worker was famous for these workers carved the stone sculpture on the gateways and railings surrounding the Sanchi Stupa. It indicates commercial prosperity. It was also famous for the Garuda Pillar Inscription which testified its erection by a Greak ambassabor named Heliodorus in honour of Vasudeva Krishna, the god of the Bhagavatas. <br />110. VAISHALI indentified with modern Basali in Muzaffarpur district of Bihar, was apulent and prosperous town in the Buddhist period. The second Buddhist Councial was held here. It served as the capital of lichchavis. Later, Ajatsatru annexed it to this kingdom. Ambapali, the famous charming courtesan, lived here and hosted to the Buddha at one time and later she became a convert to Buddhism. <br />111. VENGI (in Andhra Pradesh) one of the south Indian kingdoms probably joined the Sangha conquered by Samudragupta. It was the capital of the eastern Chalukyas, and was disputed between the Chalukyas and the Pallavas.MANISHhttp://www.blogger.com/profile/00428491443420277409noreply@blogger.com0tag:blogger.com,1999:blog-2672050906182920186.post-38073319164774802272009-08-25T20:15:00.003+05:302009-08-29T11:18:10.984+05:30INDIA’S ECONOMIC REFORMS: AN APPRAISAL<strong>Montek S. Ahluwalia</strong><br /><br />India’s economic reforms began in 1991 when a newly elected Congress government, facing an exceptionally severe balance of payments crisis, embarked on a programme of short term stabilisation combined with a longer term programme of comprehensive structural reforms. Rethinking on economic policy had begun earlier in the mid-eighties by when the limitations of a development strategy based on import substitution, public sector dominance and pervasive government control over the private sector had become evident, but the policy response at the time was limited to liberalising particular aspects of the control system without changing the system itself in any fundamental way. The reforms initiated in 1991 were different precisely because they recognised the need for a system change, involving liberalisation of government controls, a larger role for the private sector and greater integration with the world economy.<br /><br /><br />The broad outline of the reforms was not very different from the reforms undertaken by many developing countries in the 1980s. Where India’s reforms differed was the much more gradualist pace at which they were implemented. The compulsions of democratic politics in a pluralist society made it necessary to evolve a sufficient consensus across disparate (and often very vocal) interests before policy changes could be implemented and this meant that the pace of reforms was often frustratingly slow. Daniel Yergin (1997) captures the mood of frustration when he wonders whether the Hindu rate of growth has been replaced by the Hindu rate of change! Yet even a gradualist process can achieve significant results over time and India’s reforms have been underway now for seven years. . That a consensus of sorts has evolved is perhaps reflected in the fact that the reforms initiated by the Congress Government in 1991 were continued by the United Front coalition which came to power in 1996 and have also been broadly endorsed by the BJP led government which took office in 1998. This is not to say that economic policy issues are no longer controversial and there is complete consensus on all points. Differences do exist, especially in emphases and nuance but these are often as much evident within parties as across the political spectrum.<br /><br />3. This paper attempts to evaluate what has been achieved by gradualism in this seven year period which has seen three different governments in office - the Congress government which initiated the reforms in 1991, the United Front coalition which continued the process in 1996 and 1997 and finally the BJP led coalition which took office in March 1998 and has also declared its intention of strengthening the reforms. The paper distinguishes between achievements in terms of the end results in terms of the actual performance of the economy in this period and achievements achievements in terms of policy reforms actually implemented. implemented. The distinction is important because dramatic policy changes in many countries have may not always lead to actual comparable improvements in actual performance, as has happened in many countries. Part 1 presents a summary assessment of of the paper documents achievements in terms of the performance of the economy in the post-reform period. Parts 2 and 3 attempt to evaluate the extent to which the reforms were successful in bringing about policy changes. Part 2 focusses on the achievement in reducing the fiscal deficit, which was a key macro-economic policy objective and Part 3 reviews achievements in bringing about various types of structural reforms. the cumulative change brought about over seven years in each important policy area and identifies the unfinished task in each case. Part 3 4 presents a summary assessment assessment of achievements thus far and of the challenges that lie ahead.<br /><br /><strong>1. Economic Performance under the Reforms </strong><br /><br /><br />To evaluate the impact of the reforms on the performance of the economy it is useful to distinguish between two periods. The first period is the three years 1991-92 to 1993-94 which were years of crisis management, when the primary objective of policy was to stabilise the economy. The next four years 1994-95 to 1997-98 constitute the post-stabilisation period, when the focus of policy was on the longer term objective of putting the economy on a higher growth path. Since objectives in the two periods were different, performance in each period must be evaluated in terms of objectives of the period. The major parameters of macro-economic performance the two periods are summarised in Table 1.<br /><br /><strong>a] Crisis Management : 1991-92 to 1993-94</strong><br /><br />India’s performance in stabilising the economy was commendable by any standards. The extent of the achievement can be appreciated only if we recall the severity of the crisis. The surge in oil prices triggered by the Gulf War in 1990 imposed a severe strain on a balance of payments already made fragile by several years of large fiscal deficits and increasing external debt. Coming at a time of internal political instability, the balance of payments problem quickly ballooned into a crisis of confidence which intensified in 1991 even though oil prices quickly returned to normal levels. There was a flight of capital in the form of withdrawal of non-resident deposits from the banking system and an unwillingness of international banks to extend new loans. Foreign exchange reserves dropped to $1.2 billion in June 1991, barely sufficient for two weeks of imports and a default on external payments appeared imminent. The shortage of foreign exchange forced tightening of import restrictions which in turn led to a fall in industrial output. In November 1991, the gGovernment entered into a stand-by arrangement under which the IMF would provide $ __2.3 billion over a two year period and there was a definite expectation on both sides that the stand-by arrangement may need to be followed by recourse to the ESAF facility because adjustment was expected to take longer than two years.<br /><br /><br />Performance in the next two years, measured in terms of the usual parameters of growth and stability clearly exceeded expectations (Table 1). The current account deficit, which had expanded to 3.2% of GDP in 1990-91, was brought down to a comfortable level of 0.4% in 1993-94. Foreign exchange reserves were rebuilt to a respectable level of 8.6 months of imports by the end of 1993-94. Inflation, which had reached 13.7% in 1991-92, declined to 8.4% in 1993-94. Contrary to the original expectations, there was no need to negotiate further access to IMF resources at the end of the stand-by arrangement in November 1993. Most important of all, and in sharp contrast to stabilisation programmes in many other countries, there was minimal disruption of growth. The rate of growth of GDP had collapsed to 0.8% in 1991-92 but it rebounded to a near normal 5.3% in 1992-93, and then accelerated to 6.2% in 1993-94. <br /><br /><br />A common concern about macro-economic stabilisation programmes is that they may hurt the poorer sections of the population because of temporary reductions in employment resulting from demand restraining policies, or even permanent loss of employment in certain areas because of structural change. This aspect of performance in the stabilisation period has been examined in detail by Tendulkar (1997). Tendulkar’s estimates (Table 2) indicate that the incidence of both rural and urban poverty declined more or less steadily through the 1980s but this trend was briefly reversed in the early years of the reforms. Restricting the analysis to estimates of poverty based on consumption data for a full twelve month period, we can compare 1990-91 (July-June) with 1992 (January-December) and this comparison shows an increase in poverty in both urban and rural areas in the first two years of the reforms. However, this deterioration in the poverty indicators was reversed in 1993-94 (July-June). In the case of urban poverty the reversal was complete and the incidence of poverty in 1993-94 was actually lower than in 1990-91 but in the case of rural poverty it was marginally higher. <br /><br /><br />Tendulkar addresses the issue of whether the increase in poverty was in any sense caused by the reforms and also the related issue of whether it could have been avoided by following a different set of policies. He explains the increase in poverty in 1992, especially in rural areas, in terms of the decline in foodgrain production in 1991-92 which lowered rural incomes generally and the associated increase in food prices which lowered the real consumption levels of the poor in both urban and rural areas. According to Tendulkar, the increase in food prices was primarily the result of the fall in foodgrain production which had nothing to do with the reforms though it was perhaps exacerbated by the effect of the devaluation of the rupee in 1991, which increased the import parity price, and therefore also the domestic market price, of foodgrains. <br /><br /><br />It is difficult to determine whether the increase in poverty could have been avoided by a different mix of policy. One can postulate a counterfactual situation where this is attempted by expanding the scale of income generating poverty alleviation programmes, which would have raised incomes of the poor, or by expanding the supply of subsidised foodgrains through the Public Distribution System to moderate the rise in foodgrain prices for these years. However, both options would have required additional budgetary expenditures which would have been difficult to finance given the severe fiscal constraints affecting the economy at the time. Expanding supplies through the PDS would also have required additional imports of foodgrains to supplement domestic availability and this would have required additional foreign exchange, which was in short supply. All these considerations suggest that the measured increase in poverty in the first two years of the reforms was largely due to exogenous factors and was probably unavoidable given the severe constraints on policy at the time. In any case it is important to note that the deterioration was short-lived and was almost completely reversed by 1993-94.<br /><br /> <strong>b] Post-Stabilisation Period 1994-95 to 1997-98</strong><br /><br /><br />The aim of policy in the post-stabilisation period was to achieve a sustainable acceleration in growth and here too the results were impressive. GDP grew at an average rate of 7.5% in the three years 1994-95 to 1996-97, before slowing down to 5.1% in 1997-98. The slow-down in 1997-98 is a matter for concern - and we will return to this issue later in this paper - but it is important to note that despite the slowdown the average growth rate in the four years 1994-95 to 1997-98 was 6.9%, significantly higher than the growth rate of 5.6% achieved in the 1980s. Four years is not a long enough period to claim that the economy has been firmly put on a sustainable 7% growth path, but there is little doubt that growth in the post-reform period was faster than in the pre-reform years. It was also faster than targeted. The growth rate achieved in the Eighth Plan period 1992-93 to 1996-97 was 6.8%, exceeding the Plan target of 6.5%.<br /><br /><br />India’s growth in the post-reform period also compares favourably with the performance of other developing countries. As shown in Table 3, India’s post-reforms growth rate was higher than the growth of all developing countries taken together. Comparing India with the twelve largest developing countries, we find that China, Indonesia, Malaysia, Thailand and Chile grew faster than India in the post-reform period while India grew faster than the other seven.<br /><br /><br />An encouraging aspect of India’s experience is the behaviour of investment in the post-reforms period. Latin American countries undertaking economic reforms in the 1980s experienced a sharp decline in public investment without a compensating acceleration in private investment with the result that the rate of investment in many of these countries declined significantly and stayed depressed for a long period. In India too, fiscal discipline did lead to a decline in public sector investment as a percentage of GDP in the post-reform period, but this was offset by an increase in private investment in both the corporate and the household sectors (Table 4). Total investment as a per cent of GDP therefore did not decline compared to the pre-reform period and by 1995-96 it had actually increased to levels higher than before the reforms. However, it is important to note that the rate of investment in the later years increased only modestly and the average rate of investment in the post-reforms period is only marginally higher than in the pre-reform years. The fact that GDP growth accelerated significantly after the reforms even though the investment rate was only marginally higher suggests that productivity growth was higher - precisely the outcome one would expect from efficiency oriented structural reforms.<br /><br /><br />Inadequate public investment in the post-reform period had an adverse impact on the economy in one respect. It led to serious under-investment in critical infrastructure sectors such as electric power generation, roads, railways and ports. The addition to power ggeneration capacity in the public sector during the Eighth Plan was only a little over half the target and there were similar shortfalls in capacity creation in roads and ports. These shortfalls would not have mattered if capacity in the private sector had expanded, but this did not happen either. The end result was that total investment in infrastructure development was less than it should have been, leading to large infrastructure gaps These inadequacies did not come in the way of achieving higher economic growth in the post reform years because there was some slack in the system, but there can be no doubt that rapid growth will be difficult to sustain in future unless investment in infrastructure can be greatly expanded.<br /><br /><br />The high growth of the post-reform period was also accompanied by an improvement in the external payments position. The current account deficit has varied between 1% and 1.8% of GDP and foreign exchange reserves have been comfortable throughout. Exports grew strongly for three years after 1992-93, averaging 20% dollar growth per year between 1993-94 and 1995-96, but then slowed down sharply in 1996-97 and yet again in 1997-98 (Table 1). This deceleration in exports is in part a reflection of slower growth in world trade in 1996 and 1997 measured in US dollars but even so, it is a matter of deep concern for the future. India’s external debt indicators improved continuously in the post reforms period. The debt service ratio had reached a worrying level of 35.3% in 1990-91 but it declined to 18.3% in 1997-98 (Table 1). Other indicators such as the debt to GDP ratio, and the debt to exports ratio, also show substantial improvement.<br /><br /><br />Unfortunately, it is not possible to provide reliable answers No definitive answer can be given to the all important question of what happened to poverty in the post-stabilisation period since no poverty . The latest available estimate of poverty is for 1993is available after 1993-94. and the next available estimate will be for 1996-97. We know from past experience that there was no significant trend in poverty from the mid-fifties to the late seventies when per capita income grew at very low rates but this changed after the late 1970s as growth rates accelerated, leading to a steady though not dramatic decline in poverty. Projecting on thise basis, of this relationship the acceleration in growth after 1993-94 must have led to a resumption in the declining trend of poverty in the post stabilisation period but in the absence of survey data this is at best a plausible projection. Data on social indicators such as life expectancy and infant mortality, also provide some indication of the living standards of the poor and the information available is summarised in Table 1. T. As shown in Table 1hese indicators show continuing improvement in the post reform years which is consistent with the hypothesis of a continuing decline in poverty after 1993-94. However, these positive indicators notwithstanding, it remains trueThe weight of evidence therefore suggests that after a brief deterioration in poverty in the initial years which was quickly reversed, there was probably a resumption of the trend of steady improvement observed in the previous decade. that progress in reducing poverty in India is much less impressive than witnessed in East and South East Asia in the seventies and eighties. Replication of such success would provide a much more powerful constituency in favour of reforms then has been the case thus far. This calls for more rapid rates of growth than have been witnessed in India thus far, sustained over a longer period and also a stronger effort at improving social development through purposive government action. <br /><br /><br />focus The slowdown in GDP growth witnessed in 1997-98 is a worrying feature of the post-stabilisation period. As noted above, GDP the average rate of growth in the post-reforms period remains at a respectable level even after we include the slowdown. including the slower growth in 1997-98, but this raises the question it is certainly relevant to ask whether 1997-98 was a purely temporary downturn or whether it reflects the restraining impact of specific constraints which, if not tackled urgently, could force a return to a lower growth path. This issue is examined in Part 4. <br /><br /><strong>2. POLICY CHANGES UNDER THE Macro Economic Balance and the Fiscal Deficit REFORMS</strong><br /><br /><br />18. The gradualist pace of India’s reform has at times made the reforms appear halting and even confused at a given point in time, but even a gradualist process can bring about a significant cumulative change over seven years. The focus of this section is to assess the cumulative change actually brought about in some of the important areas of policy reform.<br /><br /><strong>a] Reducing the Fiscal Deficit </strong><br /><br /><br /><br />High fiscal deficits in the 1980s were one of the root causes of the crisis of 1991 and reducing the fiscal deficit was therefore a critical macro-economic objective a key objective not only of India’s reforms. This was particularly important in the initial years, when the country was subject to the discipline of an IMF programme in which fiscal deficit reduction was a key component. Ialso over the medium term as an instrument for t was also important in the medium term as a means of reducing real rates of interest in the economy and creating conditions in which private investment would expand rapidly. <br /><br /><br />There was encouraging progress at the start of the reforms, when the fiscal deficit was reduced from 8.3% of GDP in 1990-91 to 5.9% in 1991-92, but performance thereafter was disappointing. As shown in Table 1, the deficit declined only marginally in 1992-93 and then increased to 7.4% in 1993-94. It declined again thereafter, but remained well above the Finance Ministry’s medium term target. In 1993 the Ministry had projected a fiscal deficit target of 3% by 1996-97. At one stage, it was envisaged that the fiscal deficit would be reduced The actual fiscal deficit in 1996-97 was 5.3 per cent of GDP, more than 2 percentage points higher than the target, and it deteriorated further to 6.1% in 1997-98. These figures refer only to the Central Government fiscal deficit. If the deficit of the State Governments is added the combined fiscal deficit of the Centre and States was around 7.5% in 1997-98 which is much higher than in most other developing countries. <br /><br /><br />The inability to reduce the fiscal deficit in line with expectations is one of the most disappointing aspects of India’s reforms. Some indication of what went wrong can be gleaned from the trends in revenues and expenditures summarised in Table 5. The sharp reduction in the fiscal deficit in 1991-92 was achieved through a combination of a significant decline in expenditure as a percentage of GDP and a marginal increase in revenues. Total expenditure continued to decline as a percentage of GDP in subsequent years but total revenues also declined. It The lack of buoyancy in revenues was the principal reason why the fiscal deficit could not be reduced. The scope for reducing the deficit in future depends upon the scope for reducing expenditures or increasing revenues as a percentage of GDP.<br /><br /><strong>a. The scope for reducing expenditure</strong><br /><br />It is tempting to conclude that further reduction in expenditure as a percentage of GDP should be attempted to reduce fiscal deficits in future. However, the scope for reducing expenditure should not be overstated. As shown in Table 5, all items of expenditure except interest payments already show a steady decline steadily as a percentage of GDP in the post-reforms period. On the face of it therefore the fiscal problems of the economy are not due to unbridled growth of public expenditure. In fact many would argue that India needs much larger volumes of public expenditure in health, education and other social sectors to close the gaps which exist at present between India and other Asian countries. It is now widely recognised that closing these gaps is essential not only as part of the strategy for poverty reduction, but also as an essential precondition for transiting to an employment generating high growth path. Apart from expenditure in the social sectors, there is also a need for larger expenditure in certain types of economic infrastructure, especially in rural areas, which may not be commercially viable and can only be financed through the Budget. <br /><br /><br />In order to expand expenditure in these areas it is necessary to reduce expenditure in other areas so that total expenditures as a percentage of GDP are kept under control. This calls for a thorough review of government expenditures and staffing patterns to bring about operational economies, discontinue less important programmes and reduce inefficiently targeted subsidies. There is also a very strong case for reducing the size of the what is clearly a bloated bureaucracy. Expenditure reduction is therefore critical for fiscal management but more to provide room for other expenditures to expand, than to bring about a reduction in total expenditure as a percentage of GDP. These limitations on our ability to reduce total expenditure as a percentage of GDP underscore the role of revenue buoyancy as the principal means of reducing fiscal deficits in future.<br /><br /><strong>b. The need for buoyant tax revenues </strong><br /><br />A reduction in the As shown in Table 5, tax revenues flowing into the Central Budget actually declined as a percentage of GDP in the first three years of the reforms. The declining trend was reversed after 1993-94 but even so, tax revenues in 1997-98 as a percentage of GDP were about 0.5 percentage points below the pre-reform level whereas they should have been 1.5 percentage points higher. This decline in the tax ratio points to serious weaknesses in the tax system despite extensive reform of both direct and indirect taxes undertaken as part of the reform programme. India’s tax reforms were based on the Reports of Tax Reforms Committee (Chelliah Committee) appointed in 1991 and aimed at simplifying the tax structure, moving to moderate rates of tax in line with trends in other countries, and relying upon base broadening and improved tax administration to yield strong revenue growth. It is important to consider why revenue buoyancy has been inadequate despite these reforms. <br /><br /><br />In the area of direct taxes the reforms have succeeded in establishing a regime of moderate tax rates which compare reasonably well with other countries. 23. The maximum rate of personal income tax has come down from 56% at the start of the reform to 30% in 1997-98. The rate of corporation tax on Indian companies, which varied from 51.75% to 57.5% in 1991-92, depending upon the nature of the company, has been unified and reduced to 35%. Despite these reductions in rates, revenues from personal and corporate taxes have remained buoyant as indicated by the continuing increase in these revenues as a per cent of GDP (Table 6). The share of direct taxes in GDP is still too low, but it has increased steadily over time from 2% in 1990-91 to 3.5% in 1997-98. On the whole, this appears to be an area where the strategy of reform seems to be working fairly well and needs to be continued, with special emphasis on broadening the tax base and improving compliance by reducing under-reporting of taxable income.<br /><br /><br />24. Customs revenues declined steadily as a percentage of GDP in the initial years and then stabilised at a lower level. In view of the explicit intention The maximum rate which was as high as 250% before the reforms, has been reduced to 40% in 1997-98, and duty rates below the maximum have also been reduced and rationalised. of reducing levels of protection in the economy, the loss of revenue from customs duties is not unexpected and should be viewed as an acceptable cost of tariff reforms. As argued later in this paper, customs duty rates have to fall further in future, which implies that this cannot be a source of increasing the tax ratio in the years ahead. At best we can hope to avoid a further decline in the ratio of custom duties to GDP despite a continuing decline in duty rates because the removal of quantitative restrictions on consumer goods, which is a part of the reform agenda, will add to the buoyancy of customs revenues as these imports are likely to be at the upper end of the duty rate structure.<br /><br /><br />25. There has been less change in the tax structure in the case of excise duties thoughExcise duties are a major source of indirect tax revenue in India and performance in this area has been unexpectedly weak. Excise duties as a percentage of GDP declined from 4.4% of GDP in 1990-91 to 3.4% in 1997-98. Had the tax ratio increased over this period, as it should have in view of the fact that the industrial sector, which is the base of excise duties has grown faster than GDP, the fiscal deficit would have been significantly lower. The reasons for the poor performance of excise duties need to be carefully studied so that corrective action can be taken. <br /><br /><br />Ideally, the domestic indirect tax system should have been converted into a full fledged VAT which integrates the tax system from manufacturing down to retail sales, creating a self re-inforcing chain of tax compliance. Experience in other countries shows that a shift to VAT would help improve revenue generation but this is not possible in India under the present constitutional division of powers, whereby excise duties at the production stage are levied by the Central Government while sales taxes at the wholesale or retail level are levied by the States. In the absence of VAT, India had introduced a modified VAT (called Modvat) under which credit was given for excise taxes paid on inputs against excise taxes due on outputs. thus avoid cascading of excise duties. This system was extended and rationalised during the reforms in various ways. The number of duty rates has been reduced and some exemptions removed. The tax credit facility (Modvat facility) was earlier not available for all products and is now almost has now been made almost universal in coverage. Earlier, credit was given only for duties paid on inputs but since 1995 it has been extended to duties paid on capital goods. The number of duty rates has been reduced and some exemptions removed. These efforts at rationalising the excise duty structure were expected to lead to a rising share in the ratio of excise revenue to GDP but in fact excise revenues have declined steadily. <br /><br /><br />It is possible that expansion of the Modvat facility to all goods, including capital goods, as part of the tax reforms was not accompanied by a sufficient increase in excise duty rates on final products to maintain revenue buoyancy. In a system with full tax credit being given for all inputs and for capital goods, excise revenue mobilisation (net of Modvat credit) depends upon the revenue realisation from excise duties on final consumption. Unfortunately, India’s excise duty structure contains too many consumer products which are either exempted from excise altogether or attract relatively low rates of duty. Tax reformers usually recommend a tax structure characterised by a single duty rate, with additional duties to be levied on luxury items, as most likely to improve tax compliance and to increase revenues Even if a single rate proves difficult to implement immediately, it is desirable to move to a rate structure with at most three rates as soon as possible. However, this implies an increase in excise duty rates for a large number of currently low taxed consumer items. It is necessary to create public awareness that across the board increases of this sort, implemented as part of a strategy of rationalisation in which other tax rate are reduced, does not increase the burden of taxation on the average commoner.<br /><br /><strong>3. Structural Reforms</strong><br /><br /><br />India’s efforts at structural reforms covered the familiar gamut of decontrol of private investment, opening up the economy to foreign trade and foreign investment, financial sector reforms, etc. This familiar package of market oriented reforms was supplemented by efforts to strengthen various anti-poverty programmes reflecting a widely shared perception that liberalisation by itself would not provide an adequate flow of benefits to the poorest sections of the population at least in the short run. In this section we evaluate the extent of change actually implemented in the critical areas of structural reform, indicating the degree of consensus on each of these issues across the political spectrum. Multifaceted reforms also raise issues of sequencing because the effectiveness of reforms in one area depends upon the implementation of reforms in other areas. We touch upon these issues where they are especially important, or have been the focus of public debate.<br /><br /><strong>a] Removing Controls on Private Investment</strong><br /><br /><br />India’s industrial environment before the reforms was characterised by pervasive government controls on private investment which prevented entrepreneurs from responding quickly and flexibly to market signals. Reducing these controls was essential to create a more competitive industrial environment and this part of the reform agenda - broadly described as domestic liberalisation - . This aspect of the reforms enjoys the widest possible political support across parties. Major progress has been made in this area as far as Central Government controls are concerned. <br /><br /><br />Industrial licensing was a major instrument of control under which Central Government permission was needed for both investment in new units (beyond a relatively low threshold) and also for substantial expansion of capacity in existing units. Licensing was undoubtedly responsible for many of the inefficiencies plaguing Indian industry. In a series of steps, licensing was abolished for all except 6 industries viz. alcoholic beverages, cigars and cigarettes, electronics, aerospace and defence products, hazardous chemicals and pharmaceuticals. Another major achievement was the abolition of the special permission needed under the MRTP Act for any investment by the so-called "large houses". This was an additional instrument of control over large private companies or companies belonging to large groups, in addition to industrial licensing. Its stated objective was to prevent "concentration of economic power" but in practice it only served as another barrier to entry, reducing potential competition in the system. Abolition of these controls has given Indian industry much greater freedom and flexibility to expand existing capacity, or to set up new units in a location of their choice, thus increasing the pressure of competition as well as the ability to face competition. <br /><br /><br />Major progress has also been made in opening up areas earlier reserved for the public sector. At the start of the reforms 18 important industries, including iron and steel, heavy plant and machinery, telecommunications and telecom equipment, mineral oils, mining of various ores, air transport services, and electricity generation and distribution, were reserved for the public sector. This list has been reduced to 6, covering industries as arms and ammunition, atomic energy, mineral oils, atomic minerals and railway transport. Because of this liberalisation, private investment including foreign investment has flowed into areas such as steel, telephone services, telecommunications equipment, electricity generation, petroleum etelecommunications equipment, electricity generation, petroleum exploration development and refining, coal mining and air transport, none of which would have been possible earlier because of public sector reservation.<br /><br /><br />An important area where decontrol domestic liberalisation has made very little progress is relates to the the policy of reserving certain items for production in the small scale sector defined in terms of a maximum permissible value of investment in plant and equipment. The policy "protects" small scale units by barring the entry of larger units into reserved areas also prevents existing small scale units from expanding beyond the maximum permissible value of investment. India is unique in adopting reservation as an instrument for promoting small scale producers and Thethe policy obviously entails efficiency losses and imposes costs on consumers. Several committees have recommended various degrees of dilution of the reservation policy. Most recently, an Expert Committee on Small Enterprises set up in 1995, has recommended that reservation should be completely abolished and efforts to support small scale producers should focus instead on positive incentives and support measures. None of the governments in the post-reforms period has been inclined to accept a drastic re-orientation of policy along these lines. The United Front Government in 1997 mitigated the rigours of reservation by raising the investment limit for small scale industries from Rs.60 lakhs to Rs.3 crores. It also removed 15 items from the reserved list. The successor BJP led government has announced the de-reservationed of farm implements in 1998.<br /><br /><br />Many of the items on the reserved list are such as would in any case be produced in the small scale sector so that reservation does not impose significant cost on the economy. However, a reconsideration of the reservation policy is urgently needed in areas such as garments, toys, shoes and leather products. These are areas with a large export potential but reservation prevents the development of domestic units of the size and technology level which can deliver the volumes and quality needed in world markets. Some flexibility was introduced in 1997 ______ by allowing larger units to be set up in these sectors provided they accept an obligation to export 50% of production. It remains to be seen whether this modification will provide sufficient incentive to encourage producers to set up larger capacities to tap export markets. <br /><br /><br />While Central Government controls on investment have been greatly liberalised except in the matter of small scale reservation, little has been done about controls at the State level. Investors typically complain of having to obtain a very large number of separate state government approvals relating to acquisition of land, electricity and water connections, conformity with regulations regarding facilities to be provided for labour, various safety and pollution related clearances etc. These controls generate harassment, delays and petty corruption and are viewed as major impediments by both domestic and foreign investors. Reforms to eliminate unnecessary controls at the State level are urgently needed to complement decontrol at the Central level. Some State Governments are trying to streamline the system, and these efforts are being spurred by the growing competition among States to attract both domestic and foreign investment. However the situation varies from State to State and much more needs to be done in this area.<br /><br /><strong>b] Opening the Economy to Foreign Trade </strong><br /><br />Opening the economy to trade and foreign investment was an important objective of the reforms aimed at reaping the potential benefits from greater integration with the world economy. Unlike the effort to reduce controls on domestic industry, which enjoyed wide support, for which there is widespread support, there was less consensus on external liberalisation. Spokesmen for Indian industry initially voiced strong support for both domestic liberalisation and external liberalisation, especially liberalisation of access to imports of components and capital goods. As tariff levels came down and the pressure of competition from imports increased, concern began to be expressed about the need to provide an adequate transition period for domestic industry to adjust to external liberalisation, in particular the need to create a "level playing field" by first removing domestic policy constraints afflicting domestic firms, which made it difficult for these firms to become competitive. This was sometimes expressed as an issue of sequencing, in which it was argued that domestic liberalisation must precede external liberalisation. While the debate on these issues continues, a . Despite these doubts a substantial consensus of sorts has evolved in favour of a gradualist process of external liberalisation. Significant progress has been made towards this objective over the past seven years. by removing quantitative restrictions and lowering tariff barriers, though the process is not yet complete. . <br /><br /><br /><strong>i] Dismantling Quantitative Restrictions</strong><br /><br /><br />India’s trade policy regime before the reforms was heavily dependent upon the use of quantitative restrictions(QRs) in the form of import licenses, more than almost any other developing country. Imports of finished consumer goods were simply not allowed and even inputs into production such as raw materials, components and capital goods were subject to restrictions through import licensing. The system began to be administered more liberally in the 1980s, with import licenses being much more freely given, but it remained restrictive and also highly discretionary. The first phase of dismantling QRs occurred in the first two years of the reforms when import licensing was virtually abolished for imports of industrial raw materials, intermediates, components and capital goods. By 1993, these categories could be imported freely, subject only to the prevailing tariff levels. However, agricultural products and industrial consumer goods remained subject to import controls. Import restrictions on agriculture were probably redundant as India’s agricultural product prices were typically lower than import prices and agriculture actually suffered from negative protection via export controls. Restrictions on imports of consumer goods on the other hand provided substantial and open ended protection for all industrial consumer goods , which account for about 25 per cent of the manufacturing sector in terms of value added.<br /><br /><br />Continuing with near infinite protection for consumer goods while liberalising other imports has been widely criticised as illogical because it only distorts resource allocation in favour of highly protected consumer goods industries and away from basic and capital goods industries which are otherwise thought to be "strategically" important. This was recognised at a policy level and the need to extend import liberalisation to consumer goods as part of the reforms was explicitly stated in the Eighth Plan as early as 1992, but implementation of this element of trade policy has been very slow because of perceived political sensitivity. Predictably once the balance of payments improved, the QR regime was challenged by India’s major trading partners as inconsistent with the WTO. This led to protracted negotiations which culminated in the United Front announcing, in 1998, a plan to phase out QRs on all imports within a period of six years. This was accepted by all the major trading partners except the US. The phase out will occur in three stages with most QRs being phased out in the first 3 years while QRs on agricultural products will be phased out only at the end of the period. The commitment to phase out QRs has been endorsed by the BJP Government which took the first step in thuethe process by removing QRs on 350 items in April 1998. This still leaves about 2200 items subject to QRs to be removed over the next six years. In August 1998, the government unilaterally removed QRs on 2000 of these items for imports from the SAARC region countries in order to give a boost to trade liberalisation in the region.<br /><br /><strong>ii] Reducing Tariffs</strong><br /><br /><br />India’s trade policy before import duties before the reforms was characterised by import tariffs which were among the highest in the world. Rates with duty rates above 200% were being fairly common. Significant progress has been made in reducing tariff rates since then. The maximum tariff rate was brought down in a series of steps to 45% in 1997-98 (Table 7). Tariff rates below the maximum have also been lowered over the years, bringing the import weighted average tariff rate for all products down from 87% in 1990-91 to 30% in 1998-99. <br /><br /><br />Customs duties were steadily reduced in the first five years. Duties continued to be lowered on a number of items in 1996 and 1997 but this was offset to some extent by the imposition of a 2% surcharge on most imports in 1996, as a revenue raising measure, followed by another 3% surcharge in 1997 to finance the burden of the large civil service pay rise announced in that year. The Budget for 1998-99, presented by the new BJP Government, introduced some changes in customs duties an entirely new special customs duty. Several industry associations had complained of the lack of a level playing field on the grounds had complained that domestic producers were subject to certain local taxes, which were not balanced by equivalent taxes on imports in the same way as excise duties on domestic production are balanced by an equivalent "countervailing duty" duties levied on imports. It was argued that these local taxes had the effect of reducing the protective element in the existing duty structure, and in certain cases where customs duties were low, the erosion was said to result in a complete elimination of protection. Responding to these demands, a special additional duty on imports to balance the incidence of local taxes was levied initially at 8% but quickly reduced to 4%. This duty was widely criticised as signalling a retreat into protectionism, a charge vociferously denied by the government which pointed to the fact that the 1998-99 Budget also reduced customs duties on a number of products, and in this respect continued the trend of tariff reduction of earlier yearswhich indicates.also The deadline for zero duty treatment of a number of electronic products, agreed to under the Information Technology Agreement-1, was also advanced by two years, which indicates signalling an acceleration of the process of opening up in this area.<br /><br /><br />Despite the new duties introduced in the past two years, the average rate of duty is much lower than in 1990-91 (Table 7). However, average tariff levels in India are much higher than in other developing countries, where tariff rates typically range between 5 and 15%. Since consumer goods continue to be protected by QRs, the tariff levels understate the degree of protection for these items. The process of reducing tariff levels clearly needs to continue to complete the reform process in this area. <br /><br /><br />Tariff reform in future must also focus on the problem of tariff inversions, whereby duties on final products are lower than duties on inputs thus giving rise to very low or even negative protection in some cases. The duty on various types of steel for example is 30 to 35% whereas the duty on capital goods ranges from 20 to 25% and is even zero in some cases. Such tariff inversions did not matter the earlier system because of quantitative restrictions on imports of the final product but they obviously become very important once QRs are phased out. The problem has arisen in part because tariffs on many intermediate inputs were relatively high to begin with and the gradualist pace of reduction has left many of these tariffs at too high a level, while other tariffs have been reduced more rapidly. <br /><br /><br />There is also a case for a pre-announced time table for future tariff reductions. The Congress Government had indicated that tariffs would be brought down to levels "comparable with other developing countries" but had not specified either the final structure of tariffs or the time frame for reaching it. The United Front government stated that it would move to Asian levels of tariffs by the year 2000 but the exact tariff structure was left undefined except in the case of hydrocarbons where a terminal year structure for 2002 has been indicated and for information technology related products where India has accepted the ITA-1 commitments. The BJP led government has stated that it favours "calibrated globalisation" which implies that the process of reducing tariffs will continue, but again no specific time frame has been spelt out. A clearer indication of target levels of tariffs over the next three to five years would help investors making decisions on new investments. <br /><br /><br />To summarise, India’s tariff reduction programme, though still incomplete, has certainly created a more open economy, with significant beneficial effects as Indian firms are being pushed to restructure their operations to become more competitive. The fact that protectionist noises from some segments of industry, have increased in recent years indicates that this process is beginning to bite. Banks and financial institutions are also increasingly assessing the viability of new projects on the basis that the economy will continue to open up and tariffs will be reduced further. The pace of the transition has been slow, consistent with the gradualist strategy, and it is necessary to continue lowering tariffs, focussing especially on tariff inversion problems. Fortunately the present levels of duty are now in the range where the remaining adjustment can be completed in two or three years.<br /><br /><strong>iii] Exchange Rate Flexibility</strong><br /><br />The removal of QRs and reduction in tariff levels described above would not have been possible but for parallel changes in exchange rate policy. The rupee was devalued in July 1991 by 24% as part of the initial stabilisation programme, and a dual exchange rate was introduced in March 1992. The dual exchange rate was unified shortly thereafter in March 1993 and the unified rate was allowed to float. The cumulative effect of these changes was that between June 1991 and March 1993 the exchange rate depreciated from $1=Rs.20 to $1=Rs.31, a depreciation of 35% in the dollar value of the rupee and a real depreciation (adjusting for price changes) of around 27% vis-à-vis India’s major trading partners. This adjustment in the exchange rate clearly helped Indian industry to meet the import competition resulting from trade liberalisation.<br /><br />The flexible exchange rate regime has worked reasonably well with the exchange rate responding to market conditions while the Reserve Bank of India (RBI) intervenes periodically through foreign exchange sales and purchases or through monetary fine tuning to "maintain orderly market conditions". Exchange rate management has avoided the danger of excessive rigidity and also the opposite dangers of overshooting with associated loss of confidence. Although there is no declared real effective exchange rate target the system has worked in a manner to preserve the advantageous real exchange rate achieved in the early years of the reforms. As shown in Figure 1, the real exchange rate depreciated sharply at the start of the reforms, and appreciated thereafter in 1994-95 and 1995-96, but this appreciation in the real exchange rate was corrected in subsequent years, bringing the real effective rate close to the level reached in 1993-94. <br /><br />As part of the process of transiting to an open economy India declared full current account convertibility in 1994 and accepted the corresponding obligations of Article VIII of the IMF. Following this decision a number of steps have been taken to liberalise exchange restrictions on current account transactions. The United Front government in 1997 announced that the Foreign Exchange Regulation Act of 1973 would be repealed and replaced by a more modern Foreign Exchange Management Act (FEMA) but the Government fell before this could be done. It is a measure of the continuity in policy that FEMA was subsequently introduced in 1998 by the successor BJP led coalition. <br /><br />c<strong>] Policy towards Foreign Investment</strong><br /><br />The reforms involved a radical re-orientation of foreign investment policy with foreign investment being actively sought not only as a preferred means of financing balance of payments deficits compared with external borrowing, but also because it provides access to closely held technology and to global marketing linkages. Both foreign direct investment (FDI) and portfolio flows have been encouraged in the post-reform period with good positive results in both cases. <br /><br />The process of approving foreign direct investment (FDI) was expedited by providing a window of automatic approval of FDI upto 51% foreign equity in a defined list of 48 industries and upto 74% for 9 high priority industries. Foreign investment proposals which are not eligible for the automatic route can obtain approval from an inter-Ministerial body called the Foreign Investment Promotion Board (FIPB). Approvals from FIPB are generally seen to have been speedily and liberally given. Despite widespread concerns about the BJP’s attitude to foreign investment, the new government has continued this system and has announced its intention to expedite clearances and also set up mechanisms to help translate approvals into actual investment decisions. <br /><br />The results achieved by the new policy are summarised in Table 8. Total approvals for FDI have increased from $325 million in 1991-92 to $16 billion in 1997-098. Actual inflows are running atof course much lower, level reflecting the lag in converting approvals between approvals andto inflows, but even these have increased from a negligible level of $133 million in 1991-92 to over $3 billion in 1997-98. This may not appear impressive compared to the volumes attracted by many other countries, but it represents a dramatic increase from the earlier levels prevailing earlier and it is growing. The change in the foreign investment environment in India is reflected in the fact that a large number of Indian companies have sought foreign joint venture partners while major foreign investors have focussed on India for the first time. The latter category includes several of the Fortune 500 companies such as General Motors, Ford, Merck, Sony, Honda Motor, Coca Cola, Hewlett Packard, Texas Instruments, LG International, Fanuc, Samsung, Du Pont, AT & T, BT, Enron, Shell and a host of others. The amounts invested in most cases are as yet small, but the entry of such investors holds out the potential for substantially larger inflows in the years ahead.<br /><br />The economy has also been was also opened to portfolio investment in two ways. In 1993 Foreign Institutional Investors (FIIs) meeting certain minimum standards were allowed to invest in Indian equity and later also in debt instruments through secondary market purchases in the stock market. At present 528 FIIs are registered with the Securities and Exchange Board of India (SEBI) and around 150 are active investors. A second window for portfolio investment was provided by allowing Indian companies to issue fresh equity abroad through the mechanism of Global Depository Receipts (GDRs). This enabled Indian companies to raise resources from passive investors in world markets instead of seeking active investors as is the case with joint venture partners. Portfolio investment has expanded rapidly in the post-reform period. From a level of $ 4 million in 1991 the inflow on account of FII flows and GDRs taken together quickly increased to $3.6 billion in 1993-94 and fluctuated thereafter. It declined to $1.5 billion in 1997-98 reflecting the effect of the Asian crisis on capital flows to emerging markets. Despite the often expressed concern about the volatility and unreliability of portfolio capital flows, India’s experience in this area has been fairly encouraging. Inflows of portfolio capital have fluctuated but they did not turn negative even in 1997-98 during the East Asian crisis. The cumulative inflow of portfolio capital since the reforms began exceeds $15 billion, a significant amount in absolute terms even if it is associated with some potential for volatility.<br /><br />While liberalising inflows of FDI and portfolio capital, other elements of the capital account remained subject to controls though the controls were more flexibly administered. Corporations and individuals need government permission to borrow abroad and such permission is granted within a framework which places a cap on total external borrowing and also ensures a minimum maturity period for each borrowing. This policy has helped to control India’s exposure to external debt and in particular to avoid a build up of short term debt which is viewed with particular disfavour in financial circles in the aftermath of the Asian crisis. Foreign investors are allowed to repatriate dividends and capital freely but Indian residents are restricted from taking capital out of the country, a restriction which makes it easier to avoid panic over-reaction in foreign exchange markets.<br /><br />In 1996, the government appointed a Committee on Capital Account Convertibility to advise on the transition to full capital account convertibility. The Committee recommended moving to capital account convertibility over time in a phased manner, but emphasised that certain pre-conditions must be established first. These include a moderation in the rate of inflation, a reduction in the fiscal deficit to 3%, and also considerable strengthening of the domestic banking system to deal with stresses created by an open capital account. These conditions implicitly rule out any quick move to capital account convertibility. The recent East Asian experience certainly suggests that there is merit in a cautious approach in this area.<br /><br /><strong>d] Reducing Price Controls</strong><br /><br /><br />Reduction, if not elimination, of price controls is a familiar component of market oriented reforms everywhere and this was the case in India also. Price control was abolished at an early stage of the reforms in some key industries, viz., iron and steel, coal, phosphatic and potassic fertilisers, newsprint, naphtha, lubricating oils and molasses . Price control on pharmaceuticals was not abolished but its coverage was reduced in 1995 from 143 basic drugs to 76. However, price control remains in place in three major areas, i.e., hydrocarbons, electricity and nitrogenous fertilisers, introducing significant distortions in the system. Interestingly though price decontrol is clearly a part of domestic liberalisation which enjoys wide support in principle, there is great reluctance across all parties to implement it in practice.<br /><br /><strong>i] Decontrol of Hydrocarbon Prices</strong><br /><br />The petroleum sector in India was fully state owned at the start of the reforms with the State also controlling imports of crude oil and production. Prices were determined by a complex Administered Price Mechanism (APM) under which domestic producers of crude and natural gas were paid controlled prices which were much lower than world market prices. Refineries also received controlled prices for their products based on the cost of crude oil supplied to them (either underpriced domestic crude or market priced imported crude) plus a refining margin for each refinery based on plant specific refining costs. Prices charged to consumers were also controlled and were expected to cover the cost of domestically produced and imported supplies. However, there was substantial cross subsidisation across products, with kerosene and diesel being underpriced, while gasoline and aviation fuel were over priced. The inefficiencies in this system were extensive. Under-pricing of crude oil discouraged exploration. Cost based product prices paid to refineries gave them little incentive to reduce costs. Severe underpricing of kerosene led to pervasive black marketing and adulteration of diesel with kerosene. Since consumer prices were not adjusted sufficiently frequently to reflect changes in the cost of imports, the system often generated deficits in the oil sector accounts. The controlled price regime was particularly unsuitable for attracting private investment in either production or refining since private investors expected an assured structure of market related prices.<br /><br />In a major decontrol initiative the United Front government in 1997 announced a phased de-regulation of petroleum prices to be completed by 2002. The first step in 1997 was to fix the domestic consumer prices of diesel, fuel oil and LSHS on the basis of import parity, with monthly adjustments to reflect changes in import prices. Domestic crude oil and natural gas prices, as well as petroleum product prices paid to refineries, will be progressively adjusted within an APM framework to reach import parity prices by the year 2002 at which point they will be de-regulated. Import parity pricing for crude and products is feasible only if the customs duty structure is rationalised to avoid anomalies in the present structure where the customs duty on crude oil is higher than on many products. The government has announced a duty rationalisation and the year structure of customs duties in this sector to be achieved by 2002 has been published, though the annual phasing to reach that level has not been announced. Kerosene, which meets the fuel and lighting needs of the poor, will continue to be subsidised, but this subsidy will be made explicit and met from the Budget. Similarly naphtha, which at present is supplied at a subsidised price to the fertiliser industry will be provided only at the normal decontrolled price, requiring either an increase in fertiliser prices or an increase in the fertiliser subsidy from the Budget. The transfer of these subsidies to the Budget will impose a severe fiscal burden but a successful transition to market prices in this important sector will be a major achievement with significant efficiency gains.<br /><br /><strong>ii] Control over Electricity Prices</strong><br /><br /><br />Pricing of electricity is subject to regulatory control in most countries but the way it has operated in India is seriously flawed. Electricity prices charged to consumers are fixed by State Governments and have been set very low for certain categories of consumers such as households and agricultural users and this is one of the major reasons for the poor financial condition of the State Electricity Boards (SEBs). The SEBs are expected to earn a rate of return of 3% on capital employed but they actually earn a negative rate of -13.7 per cent with total losses amounting to Rs.10,000 crores or about 0.8 per cent of GDP. This is one of the main reasons why public investment in this sector has fallen below target. It is also the reason why it is difficult to encourage private investment in electricity generation since private investors are deterred by high risks of non-payment by financially weak SEBs which are the sole buyers. <br /><br />A shift to a rational system of setting electricity tariffs is essential if investment in power, whether public or private, is to take place. The primary responsibility for such reforms rests with the State Governments but the Central Government has an important catalytic role to play. In 1995 the Congress Government announced a National Minimum Action Plan for Power envisaging depoliticisation of electricity tariffs by entrusting tariff fixation to an independent State Regulatory Commission with terms of reference which would ensure that tariffs must cover costs and earn a 3% return. The Plan also sought to limit the extent of price distortion through cross subsidy by stipulating that the maximum underpricing allowed to any category of consumer should not exceed 50% of the cost of production nor should any consumer be charged more than 50% above the cost of production. The successor United Front Government introduced legislation to set up a Central Electricity Regulatory Commission but was not able to get it passed by Parliament. The BJP government in 1998 was able to get Parliamentary approval for a modified Central Electricity Regulatory Commission Act which sets up a Central statutory commission to regulate all inter-state sales and transmission of electricity and set tariffs in such cases. The Act also provides for separate State Regulatory Commissions to be set up by individual states which will regulate the electricity sector within a State and fix all tariffs. Though the establishment of State level Commissions is not mandatory it is heartening to note that as many as ten States are expected to enact the necessary legislation setting up State level commissions. Another important step forward was the passage of the Electricity Transmission Act which opened the transmission sector to private investment.<br /><br />The process of reform in the power sector has made good progress in some States. Orissa was the first to restructure its power sector by setting up a State level regulatory commission for fixing tariffs and………………….. unbundling the monolithic SEB into separate generation, transmission and distribution corporations. It is currently engaged in privatising distribution. A few others, Andhra Pradesh, Haryana and Rajasthan are considering similar reforms. It is difficult to say as yet how fast these changes will be implemented in other States, but there is no doubt that the process has begun.<br /><br /> <strong>iii] Price Controls on Nitrogenous Fertiliser</strong><br /><br />Nitrogenous fertiliser is another important industry where prices continue to be fully controlled. Fertiliser factories are paid a cost based plant specific producer price, and the government fixes a low consumer price for farmers. The difference between producer and consumer prices is met by a budgetary subsidy which amounts to about 0.7% of GDP. The inefficiencies of the system have been noted by many critics. The cost based producer price system provides insufficient incentive for cost reduction and under pricing of nitrogenous fertilisers for farmers is leading to wasteful use of fertilisers and a distortion in the N:P:K ratio compared to the agronomically recommended norm. The resources absorbed by the subsidy have also increased consistently over time and it has been argued that the same resources would be far more beneficial to agriculture with superior distributional effect if directed to increase public investment in irrigation and other agriculture related infrastructure. While these concerns are well recognised, it has not been possible to change the system of pricing nitrogenous fertilisers. <br /><br /><strong>e] Labour Market Controls</strong><br /><br />An important area untouched by reforms thus far is the labour market. India’s labour laws, which apply to all industrial units employing more than 100 persons, make it difficult for firms to either shed excess labour or to close down unviable units. Indian firms complain that labour market rigidities make it difficult to achieve the levels of efficiency and competitiveness needed to survive in the more competitive and more open economic environment. They also discourage entrepreneurs from investing in relatively labour intensive areas, which not only reduces employment below its full potential but also introduces an additional bias against exports since India’s exports are typically at the labour intensive end of the spectrum. <br /><br />Labour rigidities also make it difficult for Indian companies to undertake much needed restructuring. Indian companies in the past were encouraged to enter into diverse lines of production outside their areas of "core competence", often setting up plants of sub-optimal scale because the industrial environment provided assured protection from international competition with very limited domestic competition. In the new more competitive environments these companies need to consolidate their position in core areas, where they must modernise and expand, while selling off other units to other entrepreneurs in a better position to manage and modernise them. Such restructuring should normally take place through mergers and acquisitions, but it is more difficult in India because potential new owners are unwilling to take over existing units if they are burdened with surplus labour. They would rather set up a new unit, even though restructuring may be much cheaper if labour laws were less rigid.<br /><br />It is sometimes argued that labour problems in India are exaggerated by inefficient managements as an excuse for management failures. Certainly, many well run firms have been able to shed excess labour through generous voluntary retirement schemes. The costs incurred are significantly higher than the statutory minimum compensation payable under the law, but this only reflects the fact that the statutory compensation requirements are very low. Restructuring through mergers and acquisitions has also become more common, especially after 1996. The attitude of labour unions has also changed considerably because of competition in product markets. Labour intransigence beyond a point in a competitive market situation only weakens the unit relative to its competitors and therefore militates against the interest of the labour employed in the unit. However, these factors do not negate the case for more rational labour laws. On the contrary, as protection levels are lowered further in future, Indian industry will need all the possible efficiency gains it can achieve to be internationally competitive and greater flexibility in the labour market will be an important pre-requisite to achieve this goal. This is an area in which there is very little consensus anywhere in the political spectrum at present, but such a consensus will have to be developed.<br /><br /><strong>f] Public Sector Reforms</strong><br /><br /><br />Despite suffering from all the familiar problems experienced by other developing countries with a large public sector, the approach to public sector reforms in India’s approach to public sector reforms has been much more cautious than elsewhere that of other developing countries. Radical solutions such as outright privatisation of commercially viable units and closure of unviable units, which have been attempted in many countries elsewhere, were eschewed to begin with, in favour of a much more cautious approach. In the 1980s public sector reform focussed on increasing the functional autonomy of public sector organisations to improve their efficiency. In the 1990s this was combined with "disinvestment" involving sale of a portion of the government equity in public sector enterprises while retaining majority control with the government attempting to improve the performance of public sector enterprises (PSEs) as much as possible without rejecting public ownership as an inherently inefficient arrangement. Nevertheless p. <br /><br />Unlike privatisation a la Margaret Thatcher, which was driven by the conviction that government control makes public sector units inherently less efficient and privatisation therefore improves economic efficiency and is good for the consumers, 59. Since the late 1980s efforts to reform the public sector have focussed on granting PSEs greater functional autonomy from the government to enable them to function as commercial enterprises. The need for more autonomy is indisputable. Public sector enterprises in India operated under a suffocatingly large number of guidelines laid down by government over the years many of which has lost their relevance but were never withdrawn. Many critical decisions taken by PSEs, including investment decisions, needed separate approval by the government. Complete independence from government in a situation where the government owns the company, appoints the Chief Executive and is responsible to Parliament for the actions of PSE managements is impossible. However, steps have been taken to give PSEs greater operational freedom. Almost 700 guidelines accumulated over the past several years were withdrawn. Nine of the best performing public sector units have been given special status, with greater delegation of financial power to make investments, enter into strategic alliances, raise capital from the capital markets, etc. without seeking government approval. The Boards of these PSEs are proposed to be broad based by appointing non-government directors with the objective of making these PSEs truly Board managed companies in due course. <br /><br />The second leg of the strategy for public sector reform was partial privatisation under which a portion of government equity (initially limited to 49%) would be sold to private investors. This was the policy of disinvestment in India was initially motivated largely by the need to raise resources for the Budget. Equity sales took place intermittently through the post reform years, and by 1997-98 the government had sold varying proportions of equity, ranging from 5% to 49%, in 50 public enterprises, generating a total revenues of of over Rs.8400 crores in the processfor the Budget. Partial privatisation of this type can be legitimately criticised on the grounds that it is unlikely to yield the efficiency gains associated with full privatisation including transfer of management. However, it needs to be recognised that even the induction of minority private shareholders makes some difference. It rules out budgetary subsidies to the enterprise, which is an important improvement in incentive system. Public sector managers in partially privatised PSEs become much more conscious of market indicators of performance such as earnings per share, dividends and share prices, and this creates greater commercial orientation. Many public sector units also acquired private investors, including international portfolio investors by making fresh issues of equity in international markets for the purpose of raising funds for their expansion programmes. The presence of international stakeholders has helped create a climate in which PSE managers are able to extract greater de facto autonomy from the government.<br /><br />Over time, the insistence on maintaining government control in public sector enterprises was steadily diluted and a broader consensus evolved towards eliminating government control in some areas. The United Front Government. I in 1996, established a Disinvestment Commission was appointed charged and specifically requested the Commission to identify units in "non-strategic and non-core" areas where the government stake can be reduced to a minority or even zero. The Commission has examined 50 public sector enterprises and recommended disinvestment of a majority stake, with transfer of management control, in several cases. Implementation of these recommendations has been slow, but effective privatisation in a few PSEs, with a majority stake and effective management control being offered to private sector investors now appears very likely in 1998-99. This clearly heralds a very different approach to public sector reform and this approach has been further reinforced by the BJP government’s announcement that the government stake in public sector enterprises will be reduced to 26% "in the generality of cases". <br /><br />62. It is difficult to evaluate whether these efforts to improve the performance of the public sector have made a difference in practice. Available data on the financial performance of the public sector enterprises in the post-reform period are summarised in Table 9. They clearly show that the profitability of all public sector enterprises as a whole has improved significantly in the post-reform period. Gross profit (before deduction of interest) as a per of cent of capital employed was 10.9% in 1990-91 and increased to 16.1% in 1995-96. Since the economic environment became much more competitive over this period, it is reasonable to assume that increased profitability reflects improvements in operational efficiency.<br /><br />The area of public sector reforms where very little has been done relates to the treatment of chronically loss making public sector enterprises making losses. While some of these units can be turned around, many have been making losses for a very long period of time and are unlikely candidates for revival. The government ruled out sSummary closure of these units and was ruled out in the early years of the reforms and the government decided instead that the scope for reviving each unit would be carefully examined and only those units where revival was found to be economically feasible would be revived while others would be closed down. The feasibility of revival was to be determined by the Board for Industrial and Financial Reconstruction (BIFR) and government would take a decision based on the Board’s recommendations. Several public sector units have been identified as fit for closure through this process, and the government has even decided on closure in many cases, but no unit has been actually closed because the decision has been challenged in the courts by labour unions. The BJP Government in its first Budget announced a generous retrenchment package to be offered in cases of closure in order to overcome labour opposition. <br /><br /> Has this combination of partial privatisation, combined with some effort to increase public sector autonomy, led to improved performance of the public sector? Available, data on the financial performance of the public sector enterprises in the post-reform period (Table 9) show that the profitability of public sector enterprises as a whole has improved significantly in the post-reform period. Gross profit (before deduction of interest) as a per of cent of capital employed was 10.9% in 1990-91 and increased to 16.1% in 1995-96. Since the economic environment became much more competitive over this period, it is reasonable to assume that increased profitability reflects improvements in operational efficiency. <br /><br />As in so many other areas of structural reform, it seems reasonable to conclude that a process of public sector reform has clearly begun and the scope of what is feasible is now seen to be much wider than was the case initially. Bolder efforts at privatisation of the public sectors are called for, not only to mobilise larger volumes of resources which would help reduce the fiscal deficit but also to generate greater efficiency in the public sector.<br /><br /> <strong>g] Private Investment in Infrastructure</strong><br /><br />It was recognised early in the reforms that a faster growing economy would need major investments in infrastructure and these investments could not be financed solely in the public sector. Private investment to supplement the public sector efforts was seen as the solution and new policies were announced to encourage private investment (including foreign investment) in power generation, telecommunications services, ports and roads. There has been some success in this area but the results thus far have fallen considerably short of expectations. In retrospect it is clear that the difficulties in attracting private investment into regulated sectors such as infrastructure were underestimated. Infrastructure sectors have many special characteristics. Tariffs are controlled and public interest issues are invariably involved. Private investors have to deal with a number of government agencies and are also subject to their regulatory control to a much greater extent than elsewhere. In these circumstances, special efforts are needed to create a policy environment in which good quality private investors will be encouraged to invest.<br /><br />The experience of private investors in power and telecommunications provides many examples of problems which could have been avoided if the policy framework had been designed to deal with these difficulties.<br /><br />The early power projects were criticised on the grounds that the cost of private power was too high. This criticism gained credibility because tariffs were fixed on the basis of a cost plus formula which inevitably attracts the charge of cost padding. It could have been avoided if tariffs had been determined on the basis of competitive bidding, as was done later.<br /><br />Private sector power producers wanted fuel supply contracts which protected them from risks of fuel supply interruption by providing for sufficient compensation in the event of non-performance by either the public sector coal supplier or by the railways which have to transport coal to the power plant. Such contracts had never been signed for coal supplies to public sector projects and there was reluctance on the part of public sector suppliers to accept new obligations for private sector projects. The power policy had not anticipated the need to mitigate fuel supply risk.<br /><br />Private sector telecommunications projects could not achieve financial closure because lenders insisted that in the event of debt service default by the original licensee, the telecom license should be assignable at the option of the lenders to a new operator. The terms of the license under Indian law did not provide for easy assignability and new provisions had to be devised to meet these requirements. This was an important source of delay in implementation.<br /><br />Private sector telecom operators claimed that the interconnection charges levied by the public sector network were too high making it impossible to the new operators to compete with the existing public sector operator. In this connection they complained that the regulatory framework was inadequate because the Government was both the regulator and the owner of the public sector network. Private operators demanded the establishment of an independent regulatory authority to adjudicate on disputes with the public sector network. This demand was conceded and the Telecommunication Regulatory Authority of India was established in 1996 . This has helped increase confidence levels but the scope of its authority is narrower then the private operators would like.<br /><br />Cellular licenses were awarded through competitive bidding on the basis of the license fee bid. Subsequently market demand proved to be less then anticipated making these projects unviable at the agreed license fees. The licensees have appealed to the government for an adjustment of the license fees and an extension of the period of the license. The government is considering whether such adjustments can be made at this stage consistent with the public interest and how to ensure transparency if this is to be done. In retrospect, a revenue sharing arrangement would have provided a better method of protecting against the downside of market risk.<br /><br />68. TThese problems illustrate the fact that a great deal of preparatory work is necessary if private investment is to play a significant role in infrastructure development. In particular, it is necessary to have much greater clarity about the regulatory framework within which the private sector will operate. The aim should be to create as close to a competitive situation as possible, with an unbundling of risks so that private operators can take on only those risks which it is reasonable to expect them to take. Since the complexity of these problems was not fully realised when the policies were initially introduced, there was a great deal of "learning by doing".<br /><br />Fortunately, some learning has taken place and many the process of private sector infrastructure projects have taken off successfully. The first two private sector power projects are now in commercial production and several others are at various stages of implementation construction. Private telecommunication services (both cellular and basic) have commenced in various parts of the country. A major expansion of the Jawaharlal Nehru Port at Mumbai involving doubling of the container handling capacity is being implemented on a BOT basis by a private consortium. Several minor ports are being built entirely in the private sector. Roads are the most difficult area for private investment, but a few small private sector toll road projects are being implemented, while other larger projects are being planned for the future. The extent of progress in this area can be seen from the figures for total loan approvals for private infrastructure projects by the All India Financial Institutions which have increased from Rs.5880 crores in 1995-96 to Rs.22,255 crores in 1997-98. The disbursement figures also show an increase from Rs.2332 crores to Rs.6505 crores in the same period.<br /><br /><strong>h] Reforming the Financial System</strong><br /><br /><br /> Reforms in the financial system are critical for the success of sStructural reforms if only because the latter aim at reallocating real resources in the economy and this process needs to be supported lubricated by an efficient financial system. I The efficiency of the financial system is especially important in the context of the increasing integration of domestic and financial markets as is evident in the recent East Asian experience, where weaknesses in the financial systems are now seen to be an important cause of the currency crisis that engulfed the region. India’s reform programme therefore included a concerted effort to reform banking and capital market institutions. There has been steady forward movement in these areas. These reforms were to be extended to the insurance sector, but this has not yet taken place.<br /><br /><strong>i] Banking Sector Reforms</strong><br /><br /><br />71 Banking sector reforms were first initiated in 1992, based on the recommendations of the Committee on the Financial System (Narasimham Committee), and the first stage focussed on interest rate liberalisation, improvement in prudential norms and standards, strengthening supervision, and increasing competition in the banking sector. In 1997, the United Front government appointed a second Committee on Banking Sector Reforms also under the chairmanship of M. Narasimham to review what had been accomplished and to chart the agenda for a second stage of banking sector reforms. The second Narasimham Committee submitted its report in 1998 and its recommendations are expected to guide banking reforms in the years ahead.though much more remains to be done.<br /><br />72 The pace of banking sector reforms exemplifies gradualist change. The achievements thus far are substantial though a great deal remains to be done.<br /><br /><br />In 1991, iInterest rates were have been almost completely de-controlled since 1991 when both. T the interest rate on government debt as well as the deposit and lending rates of the commercial banks were strictly controlled. was artificially fixed at a low level, supported by mandatory requirements for banks and insurance companies to invest high proportions of their assets in government securities. The banking system was also subject to strict interest rate regulation. The Reserve Bank of India (RBI) prescribed the structure of deposit rates for term deposits of different maturities, and also the structure of lending rates with different rates for different categories of borrowers. There has been a major liberalisation in this area. Mandatory requirements for investment by banks in low interest government securities have been sharply lowered and interest rates on government securities are now determined by the market on the basis of periodic auctions conducted by the RBI. Deposit rates have been completely deregulated and lending rates have also been largely deregulated, except for two a concessional rates for loans below Rs.25,000 and loans between Rs.25,000 and Rs.200,000.<br /><br /><br />3India made a relatively early beginning, compared with other developing countries, in upgrading Pprudential norms and standards relating to capital adequacy, income recognition, asset classification and provisioning have been upgraded and brought into closer alignment with, in line with the Basle Committee recommendations, and enforced full compliance over a 3 year period. These standards have been fully applicable since 31st March, 1996. The second Narasimham Committee has recommended further tightening of these norms to ensure full alignment, and this will be done in phases. <br /><br /><br />External supervision of the banks has been strengthened to monitor and evaluate bank performance on the basis of the new prudential standards. This has made the financial condition of the banks more transparent focussing attention on the size of the non-performing assets (NPAs) of the banking system. Performance in this area has been encouraging. The net NPAs of public sector banks as a proportion of their commercial advances declined from 16.3% to 9.2%. <br /><br /><br />4 The degree of Ccompetition in the banking system has been increased significantly as new private sector banks have been given licenses and foreign banks have been allowed to expand much more liberally than in the past. The share of business of private sector banks and foreign banks has increased from around 10.6% in 1991-92 to 17.6% in 1996-97. Public sector banks still dominate the system, but greater competition among public sector banks is beginning to make an impact on their behaviour. <br /><br />These reforms are already changing the way banks function. Higher prudential standards are forcing the banks actively to seek quality borrowers in order to improve their asset quality. Interest rate liberalisation gives the banks flexibility to offer borrowers more attractive interest rates. Quality borrowers on their part are also able to demand better terms because of competition among banks and because the opening up of both domestic and foreign capital markets, enables them to look for cheaper sources of funds outside the banking system. All of this adds to competitive pressure favouring better In short, better regulation and competition is working to the advantage of better quality borrowers which should improve the allocative efficiency of the system.<br /><br /><br />5 However, the reforms still have a long way to go. As pointed out above the existing prudential norms need to be further tightened and fully aligned with international practice. More importantly, reforms in banking are about changing the way banking institutions function. A liberalised and more open economy, with freer flow of capital, will place particularly heavy demands on the system. Bank margins will be threatened as better quality clients gain access to other sources of funds especially in international markets. Banks will have to develop much stronger credit appraisal skills than were necessary in the past to reflect the more competitive environment facing borrowers and the consequent higher risk of failure. A liberalised economy also involves exposure to greater volatility in both exchange rates and interest rates and credit appraisal techniques must take account of the impact of uncertainties on these counts on the quality of the loan portfolio. Static measures of asset quality need to be supplemented by methods of assessing asset quality in the face of uncertainty. Handling these challenges calls for basic restructuring of management systems in banks and massive upgradation of staff skills. <br /><br /><br />The next stage of banking sector reforms also requires parallel improvement in the legal system relating to debt recovery. Efficient banking requires a credible threat of legal action to force recovery from defaulting borrowers. Without such a threat, the incentive system encourages borrowers to default. India’s legal system in these areas needs massive improvement. The government has recognised the need for this change and a full scale review of banking laws is being undertaken to identify the nature of legislation needed. Early action in this area should have high priority.<br /><br /><br />A key issue in banking reforms in the future relates to government control over public sector banks. Public sector ownership imposes several constraints including limitations in methods of recruitment and promotion and restrictions on the salaries they can pay. Public sector banks are also burdened by standards of public accountability which may be inconsistent with the degree of flexibility needed for commercial decision making. Many credit decisions taken in good faith can end up as non-performing assets for a number of reasons but public sector managers are peculiarly vulnerable to accusations that such decisions were mala fide ab initio and these accusations can often trigger lengthy investigations by investigative agencies and also become issues of public concern. This can lead to an overly cautious approach on the part of bank managers impairing the speed and quality of decision making. The Committee on Banking Sector Reforms has recommended that the government’s equity holding should be reduced to 33% which would free the banks of constraints arising from government ownership.. No decision on this issue has been announced thus far. The weight of international experience is certainly in favour of moving away from government ownership, though a consensus on this issue is yet to develop in India.<br /><br /><strong>ii] Capital Market Reforms</strong><br /><br /><br />8Parallel with reforms in banking iMajor changes have taken place in the capital market in the past seven years. In 1991 India’s capital market did not have a statutory regulatory framework. The Securities and Exchange Board of India (SEBI), was given statutory powers in 1992 and has since laid down a structure of regulations governing various participants in the capital markets, including rules for insider trading, take-overs, management of mutual funds, etc. These rules are now in operation and will need to be refined on the basis of experience. The stock exchanges, which were earlier dominated by brokers and lacked effective supervision, are now much better governed. The focus of the new regulations is to ensure investor protection through transparency and full disclosure.<br /><br /><br />9Important changes have taken place The technology of trading has been modernised. The National Stock Exchange introduced on-line electronic trading in 1994 and the system today allows brokers located in 140 cities and towns all over the country to trade in a single unified market through terminals linked by VSAT to the NSE computers. It provides automatic matching of buy and sell orders with price time priority, ensures transparency for investors and assurance of the best price. Competitive pressure has led the Bombay Stock Exchange also to introduce an on-line trading system in 1995, with linkages to brokers all over the country.<br /><br /><br />Prior to 1996, India’s capital market was burdened by the fact The settlement system has also seen major improvement. Earlier, that completion of a trade involved physical transfer of share certificates from the seller to buyer followed by submission of the certificates to company registrars to effect changes in the register of stock holders. The process was vitiated by long delays, frequent loss of certificates, return of certificates because signatures of the seller on the certificates did not match with signatures on record with registrars, and also the danger of forged certificates. In 1996, a National Depository commenced operations offering investors the facility of holding securities in dematerialised form and settling trades through book entries in the depository, eliminating delays and uncertainties in transfer of ownership. The volume of business done by the Depository has expanded rapidly. In June 1997 only 48 companies with a market capitalisation of Rs.94,000 crores had signed up enabling their securities to be dematerialised. By June 1998 this had increased to 198 companies with a market capitalisation of Rs.2,88,000 crores. The value of securities actually dematerialised increased from Rs.2518 crores to Rs.35,000 crores in this twelve month period.<br /><br /><br />These changes are slowly putting in place a set of capital market institutions which can generate confidence among investors and encourage financial intermediation in this area. As with all institutional development, much depends upon how the system actually functions under the new rules and regulations but a good start has been made. The presence of FIIs, which have invested a total of around US $9 billion in the stock markets, is an important force which will push capital market to come closer to international standards.<br /><br /><br /><strong>iii] Insurance Sector Reforms</strong><br /><br /><br />82 The missing element in India’s financial sector reform thus far relates to insurance which remains industry by law a a public sector monopoly, a situation which exists in only three other countries, Cuba, North Korea and Myanmar. The industry suffers from a very high mandatory requirement for investment of the life fund in government securities which lowers the implicit return on insurance products. The lack of effective competition also leads to a lack of variety in pension products available for savers. 3Reform of the Opening the insurance sector by opening it up to new private sector participants, with suitable regulation is clearly overdue. It will help consumers by providing a vigorous and create a more competitive insurance industry, offering attractive insurance and pension products, which become especially important as per capita incomes rise, life expectancy increases and traditional family support systems, which are a substitute for insurance and pensions, are eroded. A vigorous insurance industry would also increase the volume of long term contractual savings in the economy and channelise these savings towards infrastructure sectors which have the greatest need for long term funds. <br /><br /><br />The pace of insurance reform in India reflects both the time taken to build a consensus on difficult issues and also the fact that a consensus does evolve. The Congress government had recognised the importance of reform in this area and appointed the Malhotra Committee to look into these issues. The Committee submitted its report in January 1994 and recommended opening up the insurance sector to private competition permitting foreign investment with a minority stake. No decision could be taken on this recommendation within the remaining term of the government because of opposition from the Unions. The United Front government in 1997 moved a step forward and announced its intention of creating a statutory regulatory authority for insurance and also allowing a limited opening of the the sector should be opened up pension and health insurance segment to private sector participants to begin with. The legislation could not be passed because the BJP at that time opposed foreign investment in insurance. Insurance sector reforms are an unsaturated part of financial sector reforms which should be high on the agenda for the future In 1998 the BJP Government announced that it will open up all sectors of insurance for Indian companies, but the extent of foreign investment to be allowed in these companies is yet to be decided. The Finance Ministry has proposed that foreign investors (insurance companies) may be allowed upto 26% of equity, with additional scope for investment by NRIs taking the combined total of foreign equity to 40%. A final decision on this proposal has yet to be taken. The area of consensus on insurance has clearly widened considerably over the years but it has taken a long time. It is worth noting that even if the Finance Ministry’s proposal is approved, legislation will have to be introduced in Parliament to give effect to the decision and the earliest this process could be completed will be sometime in 1999. This will be more then five years after the Malhotra Committee submitted its report !<br /><br /><strong>i] Policies for Poverty Alleviation</strong><br /><br />The impact of the reforms on the poor has been a constant focus of the policy debate in India. Supporters claim that the reforms will help the poor by encouraging rapid and efficient growth, which in India’s circumstances means labour using employment generating growth, and this is the only sustainable way of reducing poverty to any significant effect. Critics claim that this process will take time especially if reforms are implemented at a gradualist pace and large sections of the population may therefore not benefit in the early stages. Some sections may even be hurt as certain kinds of products and processes are displaced by structural changes brought about by the reforms. India’s reform programme sought to deal with these problems by combining structural reforms with strong poverty alleviation programmes to ensure an adequate flow of benefits to the poor even in the short term.<br /><br /><br />From the outset, the reforms emphasised a continuing commitment to the traditional programmes for poverty alleviation which existed even before the reforms. These included direct support of consumption of the poor by subsidised sale of foodgrains through the Public Distribution System, employment programmes providing wage employment in public works type projects especially in rural areas and a variety of self-employment programmes involving provision of a combination of capital subsidy, credits and technical assistance to set up micro-enterprises in both rural and urban areas. Fiscal constraints in the first two years of the reforms prevented any large increases in these programmes but there was a substantial expansion from 1993-94 onwards. <br /><br /><br />The effectiveness of these programmes in achieving their stated objective varies considerably. Parikh (1997) has shown that the public distribution system is a very inefficient instrument for helping the poor since the entitlement of subsidised supply is available equally to all households and in practice the poor have less access to the system. The spread of the PDS varies considerably across the country and most of the offtake is accounted for by a few States where the PDS is well organised and these are not the States where poverty is most concentrated. In 1997 the United Front government tried to introduce better targeting in the system by distinguishing household below the poverty line which would obtain their entitlement at a lower price, but it is too early to judge how effectively this is being implemented. The other poverty alleviation programmes are better targeted, especially those providing wage employment, and it is generally agreed that they have helped to provide income support to lower income groups. The experience with self-employment programme is much more varied. While reasonably well targeted it is not clear that they provide a sufficiently stable additional flow of income to the beneficiaries.<br /><br /><br />As the reforms progressed the approach to poverty alleviation was broadened to include efforts to improve the supply of social services especially health education and family welfare. This focus was spurred by the recognition that India lags far behind most other developing countries in this respect including most countries in sub-Saharan Africa which are otherwise regarded as least developed. As pointed out by Dreze and Sen (1995) India’s social development indicators at the start of the reforms were lower then in the East Asian countries three decades ago which suggest that unless significant improvement take place in these indicators, it may not be possible to achieve growth rate of 7 to 8 % as envisaged by the reforms. Larger investment in the social sectors is regarded as necessary not only because social development is an end in itself, but also as a precondition for accelerating growth. <br /><br /><br />Trends in the Central government social services expenditures as a percentage of GDP in the post-reform years are summarised in Table 10. These show a marginal decline in the first two years of the reforms, when the fiscal situation was under severe pressure, followed by a steady increase after 1993-94. However, the real problem in this area relates to expenditure in the States which account for the bulk of social services expenditure. As shown by Guhan (1995) social service expenditures at the State level as a percentage of GDP declined steadily in the post reform years up to 1994-95 and this decline swamps the increase in Central government expenditure so that the trend in consolidated expenditures shows a steady decline. <br /><br /><br />The poor state of social indicators in India is obviously not a consequence of the reforms but a reflection of prolonged neglect of this crucial area in the pre-reform years. However the trend of the past few years is clearly alarming and has to be reversed. Remedial action lies primarily in the domain of the States and this underscores the importance of fiscal reform and restructuring at the States level. In practice this means that States must take hard decisions to electricity tariffs to reduce the large losses of the State Electricity Boards, increase water charges to reduce the very large operating deficits of the irrigation system and also reduce losses of the State Road Transport Corporations. These corrections would ease demands on State Government budgets from these sectors enabling the States to expand social sector expenditures. A major effort in this area, combined with continuing reforms is probably much more important for poverty reduction than marginal expansions in the traditional poverty alleviation schemes even though these are often seen to respond more directly to the demand for tackling poverty. In fact, the present levels of leakages from these programmes are so high that major improvement is needed in administrative arrangements, including involvement of NGOs, to improve the effectiveness of these programmes before attempting any significant expansion on their scale.<br /><br /> <strong>34. Conclusions</strong><br /><br />4 India’s achievements in the past seven years as far as economic performance is concerned are clearly impressive. The recovery from the 1991 crisis was exceptionally swift and the post stabilisation period saw a significant acceleration in growth compared with the growth rate before the reforms. The rate of growth in the four years 1994-95 to 1997-98 averages 6.9 %. This amounts to growth in per capita GDP of over 5 percent per year. Poverty may have increased in the first two years after the crisis, but this was not because of the reforms and in any case, the deterioration was reversed by 1993-94. It is likely that Thereas economic growth accelerated in subsequent years, the incidence of poverty also resumed its earlier declining trend. <br /><br /><br />The good performance thus far does not mean however that high growth rates will be easy to maintain, let alone accelerate, in future. The slowdown in 1997-98 and the continuing crisis in East and South East Asia raise legitimate concerns about the pace at which India can grow in the near future. The Asian crisis has proved to be deeper and is likely to be more prolonged than was initially expected and its depressive effect on world growth and on India is likely to continue in 1998-99. The imposition of sanctions by some countries following the nuclear tests by India and Pakistan in May 1998 has added new uncertainties, the scope and duration of which is not yet clear. However, even if we assume that the sanctions are temporary or their effect is marginal, it is clear that the international environment facing in India in the next two years will be less supportive than in the recent past. World trade is likely to grow more slowly, competition from South East Asia will intensify, and the environment for capital flows to emerging market is likely to be more restrained. All this suggests that India will have to make additional efforts to ensure that the post reforms growth rate is maintained. <br /><br /><br />The reforms underway are clearly wide ranging and have yielded good results thus far, but they need to be further strengthened. A credible signal that reforms will continue and a clearer statement on the time path of reforms will increase confidence among investors both domestic and foreign. The fact that three different governments have endorsed the broad direction of reforms indicates that while there may be differences in emphasis and even more so in presentation, there is also a substantial consensus on many of these issues. This should help to insulate economic policy from perceptions of political uncertainty which are perhaps unavoidable in an era of coalition politics.<br /><br /><br />Where reforms have already begun they should be swiftly completed preferably with a clearly announced time frame. Examples of such continuing reforms are the reduction in protection levels, continuing reforms in banking, decontrol of petroleum prices, reform of the power sector etc. An important positive factor for the future is that the productivity gains from many of these ongoing reforms have yet to be realised. For example, the new investments made responding to the <br /><br /><br />more open environment gained momentum only in 1995-96, when corporate investment and foreign investment picked up (Tables 4 and 8) and the benefits from these investment will materialise only in the years ahead. Similarly, reforms in the public sector and in the financial system are as yet at an early stage, and the improved allocational efficiency from these reforms are only just beginning to be realised and should provide significant efficiency gains for the economy in the future.<br /><br /><br />There are also many areas where reforms have not yet gained momentum and these will now have to be addressed with urgency. An obvious area for priority attention is the continuing high level of the fiscal deficit of the Centre and States combined. Unless this deficit is reduced significantly, the economy will not be able to transit to a regime of low real interest rates which, with efficient financial intermediation, can give a boost to private investment. This calls for a two pronged approach. It will be necessary to restructure of Government expenditure by restraining inessential expenditure while increasing government expenditure in important areas. It also calls for further tax reform, especially in excise duties, and a strengthening of the tax administration to increase buoyancy in tax revenues. These efforts can be supplemented by much bolder efforts at privatisation of the public sector generating larger revenues from privatisation. There is much greater acceptability of privatisation today than was the case even two years ago and this new consensus should be used to strengthen policies in these areas.<br /><br /><br />Infrastructure bottlenecks are likely to be a binding constraint on even achieving 7% growth over the next few years. India’s infrastructure system is clearly overstrained and has suffered from under investment in the post reforms period. Massive investments will be needed in both the public and the private sector to overcome this bottleneck. The two are not alternatives because the need is so great that even the most optimistic projection for private investment will leave a large proportion of the need to be met by the public sector. Public investment in infrastructure depends crucially upon the ability to raise resources in the public sector and this in turn depends upon the ability to levy user charges. Reform of power sector tariffs, introduction of road user charges (either direct in the form of tolls or indirect in the form of a cess on petrol and diesel earmarked for road development) and rationalisation of railway fares are all extremely important in this context. <br /><br /><br />These efforts at expanding public investment in infrastructure must be supplemented by a vigorous effort to attract private investment by creating an environment which is attractive to private investors. This includes simplification and transparency of various clearance procedures, a policy framework which allows the various risks involved in infrastructure projects to be unbundled so that private investors are expected to take only lthose risks which it is reasonable for them to bear, and a credible and independent regulatory framework which assures private investors of fair treatment. Fortunately a number of private sector infrastructure projects in power, telecommunications and ports have taken off and the process could gain momentum.<br /><br /><br />The pace of private investment in infrastructure will of course depend upon the availability of finance for such projects especially debt finance. There are limits to the amount of foreign currency exposure which infrastructure projects can take since the tariff in most cases is fixed in local currency and this limits the extent of foreign exchange risk which the project can take. Infrastructure development in the private sector will therefore depend crucially upon the availability of long term debt finance for such projects at reasonable interest rates. This will depend partly upon macro-economic developments, especially the ability to reduce the fiscal deficit, and partly on the pace of financial sector reform especially insurance. Early implementation of reforms in insurance will clearly help to stimulate private financing of infrastructure.<br /><br /><br />Finally, India cannot afford to ignore the poor state of social indicators relating to health and education which has resulted from prolonged neglect of the important area over the decades. Other countries, starting from a similar situation have been able to improve the level of social development over time through determined public action. Some States in India have also done so; Kerala is the best known example but more recently Tamil Nadu has made excellent progress in literacy and fertility and Himachal Pradesh has also shown significant improvement in literacy and primary schooling. This is clearly an area where the public sector must play a dominant role. Indeed, the role of the State needs to be redefined to withdraw from direct involvement in areas which can be easily privatised and to expand in areas such as the social sectors where the State is the natural, and in most cases, the only agent.<br /><br /><br />To summarise, the process begun in 1991 has proceeded steadily if not as rapidly as its should have but the changes already made and those currently underway are impressive. At the same time there are formidable challenges ahead many of which will involve forays into more difficult areas than has been necessary hitherto. It is essential to make steady progress in addressing these new challenges if India is to achieve the objective of 7 to 8% growth.<br /><br />* The author is currently serving as Member of the Planning Commission, Government of India. The views expressed in this paper do not necessarily reflect the views of the Commission. Thanks are due to Isher Ahluwalia, Surjit Bhalla, Nirvikar Singh and T.N. Srinivasan for helpful comments on an earlier draft.MANISHhttp://www.blogger.com/profile/00428491443420277409noreply@blogger.com0tag:blogger.com,1999:blog-2672050906182920186.post-47414892646489997532009-08-25T20:12:00.001+05:302009-08-25T20:13:33.497+05:30Stabilising India’s PopualtionDr. Prema Ramachandran <br />Adviser, Health, Planning Commision <br /><br />Perspective<br /><br />India, the second most populous country in the world, has no more than 2.5% of global land but is the home of 1/6th of the world's population. The prevailing high maternal, infant, childhood morbidity and mortality, low life expectancy and high fertility and associated high morbidity had been a source of concern for public health professionals right from the pre-independance period. The Bhore Committee Report (1946) which laid the foundation for health service planning in India, gave high priority to provision of maternal and child health services and improving their nutritional and health status. It is noteworthy that this report which emphasized the importance of providing integrated preventive, promotive and curative primary health care services preceded the Alma Ata declaration by over three decades. Under the Constitution of India elimination of poverty, ignorance and ill health are three important goals. Successive Five Year Plans have been providing the policy frame work and funding for planned development of nationwide health care infrastructure, manpower, drugs, devices and other essential items for improving health status of mothers and their children<br /><br />In 1951, the infant republic took stock of the existing situation in the country and initiated the first Five Year Development Plan. Living in a resource poor country with high population density, the Planners recognised in the census figures of 1951, the potential threat posed by population explosion and the need to take steps to avert it. It was recognised that population stabilisation is an essential prerequisite for sustainability of development process so that the benefits of economic development result in enhancement of the well being of the people and improvement in quality of life. India became the first country in the world to formulate a National Family Planning Programme in 1952, with the objective of “reducing birth rate to the extent necessary to stabilise the population at a level consistent with requirement of national economy”. Thus, the key elements of health care to women and children and provision of contraceptive services have been the focus of India’s health services right from the time of India’s independence. Successive FiveYear Plans have been providing the policy framework and funding for planned development of nationwide health care infrastructure and manpower. The Centrally Sponsored and 100% centrally funded Family Welfare Programme provides additional infrastructure, manpower and consumables needed for improving health status of women and children and to meet all the felt needs for fertility regulation. <br /><br />Achievements of the Family Welfare Programme<br /><br />Basic premises of the Family Welfare Programme are:<br /><br />Acceptance of FW services is voluntary <br />FW programme will provide : <br />Integrated Maternal and Child Health (MCH) & FP services <br />Ensure easy and convenient access to FW services free of cost <br />Effective IEC to improve awareness <br />Major Achievements of FW Programme are:<br /><br />Reduction in Crude Birth Rate (CBR) from 40.8 (1951 Census) to 27.2 in 1997 (SRS 97) <br />Reduction in Infant Mortality Rate (IMR) from 146 in 1951 to 71 in 1997 (SRS 97), <br />Increase in Couple Protection Rate (CPR) from 10.4% (1970-71) to 45.4% on 31.3.1998 (Dept of Family Welfare) <br />The National Family Health survey (1992-93) indicated that<br /><br />There is universal awareness about contraception <br />40.6% of currently married women use contraceptives <br />Wanted fertility is lower than the actual fertility <br />There is a large unmet need for contraception: - <br />11.0% for birth spacing methods and <br />8.5% for terminal methods <br />Lessons learnt during implementation of FW programme:<br /><br />Governmental network provides most of the MCH and contraceptive care <br />Adequate financial inputs and health infrastructure are essential prerequisites for the success of the programme <br />Providing efficient and effective integrated MCH and contraceptive care helps in building up rapport with the families <br />IEC activities are powerful tools for achieving the small family norm; <br />The population is conservative but responsible, responsive and mature; their response is slow but rational and sustained <br />Population Growth <br /><br />Over the last four decades there has been rapid fall in Crude Death Rate (CDR) from 25.1 in 1951 to 9.8 in 1991 and less steep decline in the Crude Birth Rate (CBR) from 40.8 in 1951 to 29.5 in 1991. As a result, the annual exponential population growth rate has been over 2% in the last three decades. During the Eighth Plan period the decline in CBR has been steeper than that in the (CDR) and consequently, the annual population growth rate has been around 1.9% during 1991-95.<br /><br />The rate of decline in population growth is likely to be further accelerated during the Ninth Plan period. Though the decline in CBR and CDR has occurred in all States, the rate of decline in CBR was slower in some States like U.P. and Bihar. <br /><br />There are substantial differences in CBR and IMR between States (Figure 3 and 4) and even within the same State there are substantial differences between districts .<br /><br />Population Projections and their implications to FW programme <br /><br />The population of the country was 846.3 million in 1991 as recorded in the census. <br /><br />As per projections made in the Report of the Technical Group on Population Projections the estimated population in the census years 2001 and 2011 will be 1012.4 million and 1179 million respectively. There are major differences between states with regard to their current population size as well as their potential to contribute towards the increase in the population of the country during 1996-2016 (Figure-5,6)<br /><br /> <br /> <br /><br />The five states of Bihar, Uttar Pradesh, Madhya Pradesh, Rajasthan and Orissa, which constitute 44% of the total population of India in 1996, will constitute 48% of the total population of India in 2016 (Figure-6). These states will contribute 55% of the total increase in population of the country during the period 1996-2016 (Figure-7). The progresss in these states would determine the year and size of the population at which the country achieves population stabilisation. In all the states performance in the social and economic sector has been poor. The poor performance is the outcome of poverty, illiteracy and poor development which co-exist and reinforce each other. Urgent energetic steps are required to be initiated to assess and fully meet the unmet needs for maternal and child health (MCH) care and contraception through improvement in availability and access to family welfare services in the states of UP, MP, Rajasthan and Bihar in order to achieve a faster decline in their mortality and fertility rates. The performance of these states would determine the year and size of the population at which the country achieves population stabilisation. <br /><br /><br /><br /><em>Population Projection– implications to the FW Programme</em><br /><br />There will be massive increase of population in the 15-59 age group (from 500 million to 800 million) in just twenty years (Figure). The RCH care has to provide the needed services for this rapidly growing clientele. Along with the demographic transition, there is concurrent ongoing socioeconomic, educational, information technology transition. The population in this age group will therefore have greater awareness and expectation regarding both the access to a wide spectrum of health care related services and the quality of these services. The Family Welfare Programme has to provide the wider spectrum of health care needs of this population – including maternal and child health care, contraceptive care, management of gynaecological problems, STD/RTI/HIV management and control; quality of services need also be improved. Increasing number of the population beyond 60 years would necessitate provisions for management of some of the major health problems in this age group including management of cancers. <br /><br />The number of births will not alter substantially over the next two decades; this respite from increasing numbers should be utilised to provide improved access to high quality of services so that there is reduction in the current high IMR and MMR. This in turn might lead to a fall in the current high desired level of fertility. If the birth rate continues to decline at the present rate, replacement level of fertility will not be achieved till 2026. In view of the serious implications of this, efforts should be made to meet all the felt needs for contraception and achieve a more rapid decline in birth rates<br /><br />Policy and strategy for achievement of rapid population stabilisation<br /><br />The current high population growth rate is due to: <br /><br />the large size of the population in the reproductive age-group (estimated contribution 60%); <br />higher fertility due to unmet need for contraception (estimated contribution 20%); and <br />high wanted fertility due to prevailing high IMR (estimated contribution about 20%). <br />Unmet needs for health and contraceptive care exist in all regions and all segments of the population irrespective of religion, caste, education and income status. <br /><br />The objective of the Population policy is to achieve rapid reduction in the population growth rate by :<br /><br />meeting all the felt-needs for contraception; and <br />reducing the infant and maternal morbidity and mortality so that there is a reduction in the desired level of fertility so that the country achieves replacement level of fertility by 2010. <br />The country’s medium and long term efforts will be focussed on bringing about an accelerated convergence of ongoing demographic, socio-economic, educational and information technology transitions, enable the increasingly literate and aware families to achieve their reproductive goals, and the country to achieve rapid population stabilisation, sustainable development and improvement in quality of life.<br /><br /><em>The strategies for achieving these objectives will be:</em><br /><br />To assess the needs for reproductive and child health at PHC level and undertake area- specific micro planning; and <br />To provide need-based, demand-driven high quality, integrated reproductive and child health care. <br /><br /><em>The Family Welfare Programme will be directed towards:</em><br /><br />Bridging the gaps in essential infrastructure and manpower through a flexible approach and improving operational efficiency through investment in social, behavioural and operational research <br />Providing additional assistance to poorly performing districts identified on the basis of the 1991 census to fill existing gaps in infrastructure and manpower. <br />Ensuring uninterrupted supply of essential drugs, vaccines and contraceptives, adequate in quantity and appropriate in quality. <br />Promoting male participation in the Planned Parenthood movement and increasing the level of acceptance of vasectomy. <br />Efforts will be intensified to enhance the quality and coverage of family welfare services through: <br /><br />Increasing participation of general medical practitioners working in voluntary, private, joint sectors and the active cooperation of practitioners of ISM&H; <br />Involvement of the Panchayati Raj Institutions for ensuring inter-sectoral coordination and community participation in planning, monitoring and management; <br />Involvement of the industries, organised and unorganised sectors, agriculture workers and labour representatives. <br /><br />Efforts are being made to provide adequate inputs to improve availability and access to services to improve performance so that the disparities between states will be narrowed. It is noteworthy that there are districts in these states where CBR and IMR are well below the national levels; steps may have to be initiated to study and replicate these success stories within each of these states so that the existing disparities between states are minimised.MANISHhttp://www.blogger.com/profile/00428491443420277409noreply@blogger.com0tag:blogger.com,1999:blog-2672050906182920186.post-13958333457562166192009-08-24T21:45:00.000+05:302009-08-24T21:46:27.871+05:30NATIONAL AGRICULTURE POLICYThe first ever National Agriculture Policy was announced on 28th July, 2000. The National Policy on Agriculture seeks to actualise the vast untapped growth potential of Indian agriculture, strengthen rural infrastructure to support faster agricultural development, promote value addition, accelerate the growth of agro business, create employment in rural areas, secure a fair standard of living for the farmers and agricultural workers and their families, discourage migration to urban areas and face the challenges arising out of economic liberalization and globalisation. Over the next two decades, it aims to attain:<br /><br /><br /> A growth rate in excess of 4 per cent per annum in the agriculture sector; <br /> <br /> <br /> Growth that is based on efficient use of resources and conserves our soil, water and bio-diversity; <br /> <br /> <br /> Growth with equity, i.e., growth which is widespread across regions and farmers; <br /> <br /> <br /> Growth that is demand driven and caters to domestic markets and maximises benefits from exports of agricultural products in the face of the challenges arising from economic liberalization and globalisation; <br /> <br /> <br /> Growth that is sustainable technologically, environmentally and economically. <br /><br /> <br /><br /> The policy seeks to promote technically sound, economically viable, environmentally non-degrading, and socially acceptable use of country’s natural resources - land, water and genetic endowment to promote sustainable development of agriculture.<br /><br /> The use of bio-technologies will be promoted for evolving plants which consume less water, are drought resistant, pest resistant, contain more nutrition, give higher yields and are environmentally safe. Conservation of bio-resources through their ex situ preservation in Gene Banks, as also in situ conservation in their natural habitats through bio-diversity parks, etc., will receive a high priority to prevent depletion of bio-diversity.<br /><br /> Balanced and conjunctive use of bio-mass, organic and inorganic fertilizers and controlled use of agro chemicals through integrated nutrients and pest management (INM & IPM) will be promoted.<br /><br /> A regionally differentiated strategy will be pursued, taking into account the agronomic, climatic and environmental conditions to realize the full growth potential of every region. Special attention will be given to development of new crop varieties, particularly of food crops, with higher nutritional value.<br /><br /> A major thrust will be given to development of rainfed and irrigated horticulture, floriculture, roots and tubers, plantation crops, aromatic and medicinal plants, bee-keeping and sericulture for augmenting food supply, promoting exports and generating employment in the rural areas.<br /><br /> Development of animal husbandry, poultry, dairying and aqua-culture will receive a high priority in the efforts for diversifying agriculture, increasing animal protein availability in the food basket and for generating exportable surpluses.<br /><br /> An integrated approach to marine and inland fisheries, designed to promote sustainable aquaculture practices, will be adopted.<br /><br /> The regionalization of agricultural research based on identified agro-climatic zones will be accorded high priority. Application of frontier sciences like bio-technology, remote sensing technologies, pre and post-harvest technologies, energy saving technologies, technology for environmental protection through national research system as well as proprietary research will be encouraged.<br /><br /> The research and extension linkages will be strengthened to improve quality and effectiveness of research and extension system.<br /><br /> Adequate and timely supply of quality inputs such as seeds, fertilizers, plant protection chemicals, bio-pesticides, agricultural machinery and credit at reasonable rates to farmers will be the endeavour of the Government.<br /><br /> The Government will endeavour to create a favourable economic environment for increasing capital formation and farmer’s own investments by removing distortions in the incentive regime for agriculture, improving the terms of trade with manufacturing sectors and bringing about external and domestic market reforms.<br /><br /> Rural electrification will be given a high priority as a prime mover for agricultural development. The quality and availability of electricity supply will be improved and the demand of the agriculture sector will be met adequately in a reliable and cost effective manner.<br /><br /> Bridging the gap between irrigation potential created and utilized, completion of all on-going projects, restoration and modernization of irrigation infrastructure including drainage, evolving and implementing an integrated plan of augmentation and management of national water resources will receive special attention for augmenting the availability and use of irrigation water.<br /><br /> Emphasis will be laid on development of marketing infrastructure and techniques of preservation, storage and transportation with a view to reducing post-harvest losses and ensuring a better return to the grower.<br /><br /> Setting up of agro-processing units in the producing areas to reduce wastage, especially of horticultural produce, increased value addition and creation of off-farm employment in rural areas will be encouraged.<br /><br /> Institutional reforms will be pursued so as to channelise their energies for achieving greater productivity and production.<br /><br /> The Government will provide active support for the promotion of cooperative form of enterprise and ensure greater autonomy and operational freedom to them to improve their functioning.<br /><br /> Endeavour will be made to provide a package insurance policy for the farmers, right from sowing of the crops to post-harvest operations, including market fluctuations in the prices of agricultural produce.<br /><br /> The price structure and trade mechanism will be continuously reviewed to ensure a favourable economic environment for the agriculture sector and to bring about an equitable balance between the rural and the urban incomes.<br /><br /> Quality consciousness amongst farmers and agro processors will be created. Grading and standardization of agricultural products will be promoted for export enhancement. Application of science and technology in agriculture will be promoted through a regular system of interface between Science and Technology institutions and the users/potential users to make the sector globally competitive.<br /><br /> The database for the agriculture sector will be strengthened to ensure greater reliability of estimates and forecasting which will help in the process of planning and policy making.<br /><br />Follow up Action <br /><br /> Various Central Sector and Centrally Sponsored Schemes are being implemented by the Government of India and the State Governments for development of agriculture and allied activities as per guidelines of the Agriculture Policy. Following major initiatives have been taken to accelerate the pace of developmental activity and implement the objectives of the Agriculture Policy: <br /><br /> Macro Management Scheme has been launched after integrating 27 ongoing Centrally Sponsored Schemes to enable a shift from programmatic approach to a macro mangement mode of assistance to the states in the form of work plans based on crop/area specific, regionally different strategies, to provide flexibility to State Governments and to ensure timely and effective application of limited financial resources.<br /><br /> Common guidelines have been issued for National Watershed Development Project for Rainfed Areas to harmonize the implementing norms with other watershed development programmes. A Watershed Development Fund with a corpus of Rs.200 crores each from NABARD and the Department of Agriculture & Cooperation, has been created. <br /><br /> A Technology Mission for the Integrated Development of Horticulture in the North-Eastern Region has been launched.<br /><br /> Seed Legislation is under revision to provide fillip to varietal research and plant breeding. Enactment of legislation on the “Protection of Plant Varieties and Farmers Rights”.This is likely to stimulate investment and initiative both in public and private sector for development of new plant varieties and a vibrant seed industry. A National Seed Policy is under formulation. A Scheme for Seed Crop Insurance has been launched to cover the risks involved in seed production. A Seed Bank has been established to meet contingent requirements of seed in the wake of natural calamities.<br /><br /> Increasing availability, flexibility and security in the flow of credit to the farmers. All eligible farmers are proposed to be covered under the Kisan Credit Cards scheme within the next 3 years. A personal insurance package is proposed to be extended to Card Holders covering them against risk to life and injury. <br /><br /> A scheme has been introduced for provision of capital subsidy for construction/modernization and expansion of cold storages and storages for horticultural produce.<br /><br /> Rural Infrastructure Development Fund corpus has been increased in 2001-02 from Rs. 45,00,00,00 thousands to Rs.5,00,00,000 thousands and the interest rate charged by NABARD reduced.<br /><br /> Market Information Network has been launched with the objective to provide farmers latest information on price movements ofagricultural commodities and other essential data.<br /><br /> Cooperative Sector Reforms: a new Bill has been formulated and introduced in Parliament for replacing the existing Multi-State Cooperative Societies Act, 1984.<br /><br /> Formulation of new subsidy linked scheme for establishment of rural godowns.<br /><br /> Promotion of Food Processing Industries and value addition in agriculture through the excise exemptions and other interventions.<br /><br /> Standing Committee of Union Ministers and Chief Ministers constituted to consider issues concerning agricultural strategies, food management and promotion of agriculture exports. The Committee has approved the outline of the proposed Grain Bank Scheme which will be extended to BPL families in identified areas and developed on the contours of the recently launched Sampoorna Grameen Rozgar Yojana.MANISHhttp://www.blogger.com/profile/00428491443420277409noreply@blogger.com0tag:blogger.com,1999:blog-2672050906182920186.post-8344101684924013732009-08-24T15:43:00.000+05:302009-08-24T15:44:35.608+05:30The Kargil I RememberThe Tenth Anniversary of the victory in “Kargil War” somehow got soggy in controversy. Instead of commemorating a crisp, well-fought and spectacular victory achieved at great human costs against the Pakistani intruders on the snowy heights of Ladakh, India’s northern-most territory, the ruling coalition in India headed by the Indian National Congress quite unwisely happened to politicize it. Reckoning it as a war that was fought and won by the Bharatiya Janata Party (BJP), now occupying the Opposition benches in the Parliament, it attempted to downplay the Anniversary. That the (surreptitious) diabolical Pakistani incursions through the icecaps of the Himalayan heights posed a great threat to the nation and its integrity happened to be coolly overlooked. But for the hype created by the Defence Forces, the media and sundry patriotic pockets in the country the ruling party at the Centre, in a display of un-camouflaged ingratitude to the guardians of our frontiers, had almost succeeded in giving the Anniversary a miss. It was virtually at the last moment that the Prime Minister seems to have decided to go and lay a wreath at the Martyr’s Memorial at the India Gate on 26th July, the date on which ten years ago Indian defence forces wrested back the last of the territories occupied by the Pakistani invaders. <br /><br />Those who have not been to Ladakh may not be able to fully appreciate the significance of the Indian victory. A plateau with an average elevation of around 10,000 ft (about 3000 meters) with most of the surrounding mountains above the snowline, Ladakh is an arid mountainous region of the Indian state of Jammu & Kashmir (J&K) spanning the Himalayan and Karakoram ranges and the Upper Indus valley. In those rarefied heights where normal activities for a plainsman are a torture, waging a war would seem to be an impossible proposition. Known for its rugged beauty and quaint culture, it has now become a tourism hotspot.<br /><br /><br /><br />I happened to visit Ladakh more than 40 years ago when it was still a restricted area. Outsiders were not allowed to enter without a permit. I, too, had to obtain one even though I was in the service of the Government of India. So, one beautiful September morning I left Srinagar, the capital of J&K, wangling a ride with an Army Signals major in his jeep proceeding to Leh as a part of an Army convoy, the then district headquarters of Ladakh. With a brief halt in the green and captivating Baltal valley, which now seems has been sacrificed at the altar of religious tourism, we labored up the highway to the famed Zoji- la, the Pass on to which Gen Thimayya of the Indian Army, in a brilliant tactical move, had hauled Light Stuart Tanks to surprise the Pakistani intruders in 1948.<br /><br />Once we crossed the 11575 ft high Zoji-la, the landscape underwent a dramatic change. Gone were the green Kashmir conifers covering the sides of the mountains and green grass over the meadows. It was now a series of rugged, bare seemingly inhospitable mountains with an occasional trickle of a stream in the plunging depths of the valleys, and the highway, arcing along the contours of the rocky mountainside, climbed up or went down in loops to cross over to interminable series of naked mountains. We travelled sometimes metres away from the Cease Fire Line, which post-1971 became the Line of Control (LOC), that was violated through 1998-99 precipitating the Kargil War. <br /><br />Stopping for coffee at Drass, reputed to be the second coldest inhabited place in the world and overlooked by Pakistanis occupying the heights on its north, we headed down the same highway that Pakistan attempted to cut off in 1998 to disrupt the logistics of Ladakh.<br /><br />On our way up we stayed only for a while in Kargil. The local Brigadier was hosting a delegation of members of parliament to a lunch on the banks of the Suru River that flows through the town. We, too, were made to join in. It was a lovely setting by the side of the narrow stream in the generous shade of low hanging trees, a rare luxury in the midst of the surrounding dryness, coupled with the lavish Indian Army fare laid out.<br /><br />However, the severity of the conditions in which the Army had to function became apparent a few miles away as we came upon a bridge guarded by three soldiers, two on one side and one on the other. With no habitation for miles around, they were by themselves for weeks without a change of scene. With several such crucial points to guard lonesomeness of the soldiers could only be imagined.<br /><br />On our way back from Leh, as we rolled down from the heights of Fatu-la, at around 13700 the highest pass on this highway, we skirted what looked like a tallish hillock only to discern in the half light a huge a settlement down below. It was the Indian Army brigade at Kargil sprawled a few hundred feet below on a huge flat ground so unlikely in the hilly surroundings. Looking at it from that elevation one could imagine what medieval army encampments would have seemed like at dusk. Several thin wisps of smoke rising up in the air, scattered blinking lights and stray men moving around, almost ant-like, consummated the scene.<br /><br />Back then Kargil was a small village, dusty, dirty and so dry that the cracked lips made smiling a painful exercise. With around a dozen shops, it was mostly dependent on the Army for supplies and provisions. It has now grown out of all proportions, more so because of the “War-tourism”. The “Kargil War”, somewhat like the Kuwaiti War, was a highly televised war bringing it to the bedrooms across India, raising among the people a curiosity about those rugged heights where the soldiers bravely fought, gave their lives and yet won the “War” for them. No wonder, the benefits of tourism, now a thriving industry, have trickled down giving the place, I am told, a prosperous appearance. One improbable blessing of the “War”!<br /><br />It was during the day that I happened to realize that what had looked like a tallish hillock the previous evening was a tall, well-shaped mountain dominating the town. Known by its elevation as “13620” it had a forbidding presence and, worse, its heights were occupied by the Pakistanis who could watch every move of the supremely vulnerable brigade down below. Dislodged from it during the 1965 War, it was handed back to them as a sequel to the Tashkent Agreement. The Major, who had won it for the country, it seems, wept like a child when he heard of the hand-over. He had lost many of his brave men who, fearlessly facing enemy bullets, struggled up the feature and clawing their way up inch by inch. A strategic gain, achieved with super-human effort and endurance and at the cost of fresh young blood, was given up on the negotiating table! That dark sinister-looking mountain, as I saw it sitting out on the grounds in front of the Signals Mess, has remained so deeply imprinted on my psyche that the intervening forty-odd years have not been able to wash it away.<br /><br />The 1998 “War” along the heights from Drass to Kargil would have been, if anything, fiercer. Having seen Kargil with the malefic “13620” towering over it, I wonder how a government can play politics with the sacrifices of the cream of the country’s youth. Surely, people wouldn’t allow it, as the courage, fortitude and the spirit of sacrifice displayed at Drass or Tiger Hill or Tololing are now the very stuff of the nation’s military folklore. Deeply embedded in the nation’s consciousness, efforts to dislodge them would be a futile exercise.MANISHhttp://www.blogger.com/profile/00428491443420277409noreply@blogger.com0tag:blogger.com,1999:blog-2672050906182920186.post-2470639815346440362009-08-24T15:37:00.001+05:302009-08-24T15:40:07.395+05:30National Governance and Internal SecurityThere is a crucial link between National Governance and Internal Security. If Internal Security is not maintained Governance cannot be delivered and there would be grave threats to the very unity and integrity of the country. Likewise, Internal Security cannot be safeguarded if Governance is delivered by an inefficient and corrupt administration.<br /><br /><br />It is perhaps not necessary to define Governance. However, in the simplest terms, governance relates to the effective management of national affairs at all levels of functioning; guaranteeing the country’s unity and integrity and securing the safety and overall welfare of its people. For the attainment of these objectives it would be essential that political, economic, executive and judicial authority is exercised in a manner which ensures that the people are enabled to enjoy their rights, discharge their obligations and resolve their disputes within the parameters of the Constitution and the Rule of Law.<br /><br /><br />Our exhaustive Constitution provides the basis of the relationship between the Union and the States and delineates the Legislative, Judicial and Executive framework within which the Union and the States shall discharge their respective responsibilities for delivering governance. The Preamble to our Constitution provides the key to its philosophy: it enshrines the sovereignty of the people and envisions a socialist, secular, democratic republic based on justice, liberty, equality and fraternity.<br /><br /><br />The principles of governance of our country are excellently enunciated in the chapter on Directive Principles of State Policy in the Constitution of India. It has been laid down (Article 37) that the provisions contained in this chapter shall be “fundamental in the governance of the country” and that it shall be the “duty of the State to apply these principles in making laws”.<br /><br /><br />The founding fathers of the Constitution of India were acutely aware that political democracy would have no significance unless it was accompanied by social and economic democracy. It was their belief that, within the democratic framework, clean and efficient governance would transform the social, economic and political life of our people and build a strong, prosperous and vibrant nation. The Directive Principles, described as the `core’ or the `conscience’ of our Constitution, provide the goals and guidelines which, if vigorously pursued and implemented timely, would have led to removing the inequalities and disabilities suffered by large segments of our society and thus paved the way for the achievement of social and economic justice.<br /><br /><br />We have still to traverse a very long distance to achieve our nation-building goals. About a quarter of our population still lives below the poverty line. The persistence of large-scale poverty and illiteracy, the lack of employment, shelter, clean drinking water, basic sanitation and health care, food and nutrition, and the yawning gaps in the achievement of various other vital developmental targets manifest the serious failures of national governance. The default in achieving social and economic justice has perhaps been the most signal failure.<br /><br /><br />The failures of governance have led to the recognition that governance shall become honest and effective, and inequalities shall start reducing, when the people are empowered and the communities are enabled to manage their own affairs. In this context, the 73rd and the 74th Amendments to the Constitution provide the constitutional mandate for the provision of self-governance through the establishment of duly empowered rural and urban local self-governing institutions. It is a matter for deep regret that the States have still to evince the required political will to effectively pursue the path of democratic decentralisation.<br /><br /><br />Thus, today, in large parts of the country, the people’s sovereignty still means no more than the right to exercise their vote whenever elections are held. It is, however, a matter of enormous satisfaction that, despite failures on various fronts and despite the serious shortcomings of the electoral processes, the spirit of democracy stands deeply rooted in our country.<br /><br /><br />Among the many reasons for the continuing failures of governance, a significant factor has been the instability of the political regimes in the States from around the late 1960s and at the Centre in the past decade and a half. From 1989 onwards, there were six governments at the Centre in less than a decade. It has also been seen that frequent elections have not invariably engendered conclusive outcomes. In recent years no single party or pre-poll alliance of parties has succeeded in securing a clear majority. Unstable coalition governments in the States, perennially occupied in combating threats to their survival, have failed to deliver effective governance.<br /><br /><br />Over the years, the politicisation of caste and communal identities has led to divisiveness and disruption of the national ethos. The failure of the electoral system to prevent anti-social, communal, undesirable and even criminal elements from contesting and winning elections has contributed to the progressive decline of the polity and the consequent failure of the State Assemblies and the Parliament to effectively discharge their vital constitutional roles.<br /><br /><br />Consequent to the 1993 serial bomb blasts in Mumbai, on the direction of the Prime Minister, a Committee was established to enquire into certain aspects of the bombings. In September 1993 this Committee, generally referred to as the Vohra Committee, had reported the existence of a deep nexus between political personalities, public servants and criminal syndicates. As per the Director CBI’s report to this Committee “all over India crime syndicates have become a law unto themselves. Even in the smaller towns and rural areas, muscle men have become the order of the day. Hired assassins have become part of these organizations. The nexus between the communal gangs, police, bureaucracy and politicians has come out clearly in various parts of the country.” Quoting the Director Intelligence Bureau, the Committee reported that the Mafia network is “virtually running a parallel government, pushing the State apparatus into irrelevance” and that in certain States “these gangs enjoy the patronage of local politicians, cutting across party lines, and the protection of functionaries… Some political leaders become the leaders of these gangs/armed senas and, over the years, get themselves elected to local bodies, State Assemblies and national Parliament.” By all accounts, over the past decade and a half, this criminal nexus has enlarged and extended its reach.<br /><br /><br />Governance has been adversely affected also because political leaders remain incessantly preoccupied with the narrow, sectarian and partisan interests of their parties and the pursuit of day-to-day political gains and have no time or patience to attend to the crying needs of the common man. The failure of the political executive to devote sustained attention to its constitutional responsibilities has led to the governmental functioning in the States being marred by gross delays, inefficiency, insensitivity, unaccountability and pervasive corruption.<br /><br />Today, thanks to the information technology revolution and the fast spreading reach of the media, the awareness and expectations of the average citizen have been significantly enhanced. This has, correspondingly, generated much deeper dissatisfaction with the failures of governance. Unless urgent and ruthless steps are taken to check maladministration and corruption, the anger and disgust of the common people, particularly the disadvantaged and oppressed elements, could lead to their alienation. And past experience has shown that alienated elements can be easily lured to adopting the gun culture and joining unlawful networks whose activities cause serious public disorder.<br /><br />In the past decade and more, despite the constraints of governance under coalition governments, the rate of the country’s economic growth has been consistently higher than at any time in the past. It is heartening to observe that the new economic strength is being utilised to significantly enhance the investments in human development and poverty eradication programmes and for the execution of varied schemes for improving the quality of life of the common man.<br /><br />In the obtaining environment of steady economic growth and dynamism, the interest of foreign governments, companies, investors and entrepreneurs has been growing steadily. Quite understandably, foreign investors would keep a close watch on the situation in our country, to be assured of the security of their assets and holdings. In this context, national governance has the super-added responsibility of ensuring that internal security is effectively maintained to promote our growing international trade and business interests which are vital for the steady growth of our economy.<br /><br />Let us now take a quick look at the constitutional position in regard to national security management in our country.<br /><br /><br />The safeguarding of national security encompasses eternal vigilance to meet every threat to the Indian State from every possible source within the country and from anywhere across its land or sea borders or from across the air space.<br /><br /><br />Broadly speaking, national security would comprise external security i.e. safeguarding the realm against any external threat, and internal security i.e. maintenance of security within the entire country. National security management would also encompass employment, food, water and shelter security; fiscal and economic security; energy, science, technology and environment security; cyber security, etc. However, for the purpose of this Lecture, I shall speak only about issues relating to internal security management. <br /><br /><br />For appreciating the implications of internal security, it may be useful to keep in mind the physical parameters of our concerns which, while being generally well known, are invariably forgotten.<br /><br /><br />India is the seventh largest country in the world with an area of about 33 lakh square kilometres. It has land boundaries of 15,200 kilometres, over 600 island territories, a coastline of over 7500 kilometres and an EEZ of 25 lakh square kilometres. We have land frontiers and maritime boundaries with half a dozen neighbouring countries. Except for some of our hinterland States, e.g. Haryana and Madhya Pradesh, all other States and some of the Union Territories have one or more land or sea borders which require to be guarded. Our borders with Pakistan and China are militarised; those with Pakistan have generated a variety of threats ever since Independence.<br /><br /><br />While discussing India’s security concerns, it would also be useful to remember that our country represents an immense cultural and geographical diversity and socio-religious traditions that go back to 5000 years of recorded history. The well over a billion people of India comprise multi-racial, multi-religious, multi-lingual and multi-cultural societies. We have 22 major languages and over 1500 dialects. Every major religion in the world is practiced in India. The roots of India’s secular and pluralistic traditions are imbedded deep in our ancient history.<br /><br /><br /><br />India’s internal security problems, arising from varied sources, are influenced by a host of factors among which are its past history, geography, colonial legacy, a burgeoning population, sharp social and economic disparities and complex socio-cultural and ethno-religious traditions which interplay freely in our secular democracy. As events in the past decades have shown, regional and global developments have also been impacting significantly on our security concerns.<br /><br /><br />Under our Constitution, “Public Order” and “Police” are included in the State List (List II, Seventh Schedule). Consequently, for maintaining internal security, the States have exclusive powers [Article 246(3)] to make laws and take all necessary executive action in respect of both the aforesaid subjects. Thus, in the normal circumstances, the States are responsible for maintaining internal security within their jurisdictions.<br /><br /><br />As regards the Centre’s responsibility, the Constitution prescribes [Article 355] that it shall be the duty of the Union to protect the States against external aggression and internal disturbances and to ensure that the governance of every State is carried on in accordance with the Constitutional powers, failing which Presidential Rule may be imposed [Article 356] in the defaulting State, till constitutional functioning can be restored. The Constitution also provides [Article 352] for the enforcement of Emergency if a situation exists or there is an imminent danger of the security of India being threatened by war or an armed rebellion.<br /><br /><br />Looking back, from 1947 onwards, the country has faced varied internal security problems. Some of the more serious threats have emanated from Pakistan’s unceasing efforts to seize Jammu & Kashmir and its sustained strategy to create chaos and disorder to de-stabilise and “break up” India.<br /><br /><br />India has been facing increasing internal security threats in the past years and, as today, the public order in about 40 per cent of the districts is seriously affected by insurgencies, terrorist activities or political extremism. From about the early 1980s Pakistan’s ISI succeeded in launching terrorist activities in Punjab, which suffered enormous human and economic loses for over a decade till the situation was normalised. Benefiting from the experience gained from its foray into Punjab, Pakistan launched a proxy-war in Jammu & Kashmir in end-1989. Over the past nearly two decades now, the continuing wave of terrorism has resulted in the loss of thousands of innocent lives, ruined the economy and, worst of all, shattered the historical secular fabric of Kashmir. In the North East region, several States have continued to face varying insurgencies, many of which have been accentuated by the ISI’s cross-border networks. Illegal immigration from Bangladesh has led to a demographic upheaval and generated serious communal, political, social and economic tensions and conflicts in several areas of the North East region.<br /><br /><br />Instigated by the ISI, and spurred by domestic factors, there has been a steady increase in the growth of pan-Islamic militant outfits which have been preaching fundamentalism and spreading subversion and violence. Over the years, the reach of these networks has spread to areas in Central and South India.<br /><br /><br />Left-Wing extremist groups, specially the People’s War Group and the Maoist Communist Centre, have been continuing to enlarge their violent activities which have progressively spread to cover vast tribal areas in several States.<br /><br /><br />Several organised criminal and mafia groups have linked up with ISI-supported networks and progressively extended their criminal, subversive and communal activities. The narcotics and drug mafia outfits, also involved in the smuggling of weapons, RDX and other materials for causing death and destruction, have been carrying out large scale havala and money laundering operations. The enormous funds generated by the unlawful activities of these groups have been utilised for spreading Islamic fundamentalism, creating violence and executing terrorist activities. Serious threats to internal security have emerged from the ISI linking up with organised crime and mafia outfits and exploiting this nexus to organise major violent incidents in various cities of India, virtually at will.<br /><br /><br />For the past nearly three decades now, ever since Pakistan’s initial venture to foment militancy in Punjab, the Centre has been kept incessantly engaged in dealing with serious internal security problems in the North East region, Punjab, Jammu & Kashmir, in the various States affected by the activities of the Naxalite groups and in all the areas affected by violence caused by Islamic fundamentalist groups. The restoration of normalcy in any disturbed area has inescapably involved the application of coercive power which, in other words, means the deployment of the required strength of Central Police Forces and, as required, contingents of the Indian Army. <br /><br /><br />From the experience gained in combating militancies, insurgencies and terrorist activities in the past years, it has become abundantly clear that the responsibility of the disturbed States does not end merely with the deployment of State or Central Police Forces, or even of the Army, to restore the disturbed area to normalcy. The Armed Forces of the Union are deployed in aid of the civil authority and, constitutionally, the concerned State remains entirely responsible till normalcy is fully restored.<br /><br /><br />It is necessary to recognise that the deployment of Central Police Forces, or of the Army, for carrying out anti-insurgency/terrorist operations may not yield the expected outcome unless the entire State administrative machinery, led by the Chief Minister, devotes continuous organised attention to sensitively dealing with the root causes that contributed to the break down of public order. Time bound initiatives would need to be implemented to identify and resolve the social and economic problems or the political demands and aspirations of the agitating groups. Simultaneously, the entire State administration apparatus would require to devote close and continuous attention to providing effective governance, systematic attention being paid to resolve the day-to-day difficulties faced by the common man, particularly those which may have emerged on account of the ongoing disturbed situation. Instead of slackening its functioning on account of the prevailing disturbed environment, the administrative apparatus shall need to work overtime to ensure that all socio-economic development and poverty alleviation programmes are implemented with high efficiency and honesty and within an urgent time frame.<br /><br /><br />To deal in a timely manner with internal security problems, the State Governments need to exercise constant vigilance, particularly in regard to the resolution of complex pending issues, and launch prompt initiatives to open meaningful dialogues with the leaders of the aggrieved groups or communities. Past experience has shown that very high human and economic costs have to be paid if there is a failure to timely deal with issues which can lead to conflicts and violence. The situation is further complicated when a violent agitation, arising from a sensitive demand, is dealt with merely as a law and order problem and the disturbance sought to be quelled with the application of force. In many such cases the agitating elements are supported and incited by adversary external agencies and, when this happens, we see the beginning of much larger problems.<br /><br /><br />The deep despair and consequent alienation of the disadvantaged communities is heightened by the social, economic and political exploitation to which they are subjected. Feudal systems continue to exist in several parts of the country where the much needed land, agrarian and other reforms have still to be carried through. It is indeed most unfortunate that despite the economic disparities and severe disadvantages from which they suffer, the neglected and oppressed segments of society are further subjected to continuing harassments which arise from the various political parties exploiting religious, ethnic and caste factors merely to secure electoral gains.<br /><br /><br />Besides the gross failures of governance to pursue the avowed welfare-state goals and deliver social and economic justice to the masses, there has also been failure to timely and sensitively respond to the felt needs and aspirations of ethnic and tribal communities, most of who live in remote, difficult and harsh areas. The demands of such neglected communities have been ignored for prolonged periods and if and when any ameliorative action has been taken it has happened essentially to secure an envisaged electoral gain for the party in power. Such failures of governance have promoted greater distrust and alienation among the neglected communities, which no longer have any faith or trust in their State Governments.<br /><br /><br />The poor and neglected people have many other reasons to be angry and frustrated. For example, the large outlays provided to the States for poverty alleviation schemes are not timely or fully utilised. In many cases, the funds are diverted to other purposes or even embezzled. Such gross failures result in despair, cynicism and deep seated alienation among the poorest segments of society.<br /><br /><br />Failures of this kind arise from continuing mal-administration, unaccountability and corruption. Despite endless public criticism in the past several decades, effective steps have still to be taken to deal with corruption at the highest levels and to enforce efficiency, honesty and accountability in the functioning of governmental and public institutions. The Lok Pal Bill has been awaiting enactment for the past nearly four decades now and the functioning of the Lok Ayukts, established in many States, has still to see even the known crooks being brought to book. Needless to stress, if good governance is to be delivered perhaps the most crucial challenge shall be to restore ethical and moral values to public life in our country.<br /><br />Corruption erodes and weakens the very foundations of the administrative and legal framework and disrupts the Rule of Law. Thus, internal security cannot be safeguarded unless the governmental apparatus is rid of corruption.<br /><br />Corruption has the subversive affect of destroying discipline. And indiscipline leads to the unaccountability which has permeated the administrative apparatus and also led to the growth of the threatening politico-bureaucratic-criminal nexus about which a reference was made earlier.<br /><br />Efforts to reduce corruption do not invariably yield the expected outcome as most of the tainted elements enjoy the patronage and protection of their political masters who have placed them in key positions and continue to use them for the execution of their unlawful behests. As I had stated earlier, from the perspective of effective internal security management it is a matter for deep concern that even persons of highly questionable integrity, who may have close linkages with criminal and anti-national elements, could continue to hold responsible positions in the administrative system. The potential of such elements subverting national interests from within the system poses a most serious threat to the security of the State.<br /><br />The continuing determined efforts of adversary external agencies to destabilise India by spreading religious fundamentalism, inciting tensions that lead to conflicts, and perpetrating violence and subversion, have generated challenges which impinge on issues of external security management. In this context it needs to be recognised that issues relating to the management of internal and external security have become inextricably interwoven and, as such, the Centre would need to evolve a holistic approach to internal security management, in close coordination with the States. I would reiterate that in the security scenario which has evolved over the past three decades and more, it would be impractical, in fact extremely hazardous, to deal sectorally with the management of internal and external security issues.<br /><br />Internal security cannot be maintained satisfactorily in the country unless the States effectively discharge their constitutional duty of maintaining peace and public order in their realms. The States cannot pass on this crucial responsibility to the Centre, as has been the continuing trend in the past years. A signal failure of the States has been the continued neglect and the political exploitation of their Police organisations. This has most adversely affected the discipline, morale, efficiency, honesty and trustworthiness of the constabulary. It is essential that every State undertakes a time bound programme to enlarge, train and equip its Police to effectively manage the existing and emerging challenges as well as to provide very strong support for the implementation of the Centre’s initiatives to maintain public order in the entire country.<br /><br />It may be noted that a stable security environment cannot be engendered merely by promulgating new laws. In the ultimate analysis every citizen must discharge his duty to uphold and protect the sovereignty, unity and integrity of the country. It is indeed unfortunate that while the vast majority of our educated people are concerned only about their Fundamental Rights there are not very many who are even aware of their Fundamental Duties, laid down in Article 51A of the Constitution. Even if action were to be taken to enforce the Fundamental Duties of our citizens, it would be unsound to assume that the citizenry of India shall be overnight imbued with patriotic feelings to protect national interests if the environment in which they live and work continues to be vitiated by discrimination, corruption and injustice. The requisite environment can be engendered only if the States perpetually demonstrate and ensure that the laws of the land apply equally to the rich and influential and the highest placed public servants. Side by side, it must be particularly ensured that no injustice is done to the poor and the disadvantaged segments of society as this would result only in promoting distrust and despair among the masses and further eroding their loyalties.<br /><br />In the aforesaid context, it has also to be noted that lawlessness cannot be controlled and internal security maintained unless the entire framework of the criminal justice system functions with speed, fairness and transparent honesty. In 2005, of the over 23 million cases awaiting disposal in the country, over 7 million IPC crime cases were pending trial. The ever increasing number of criminal cases awaiting investigation and trial and the correspondingly declining conviction rates have generated the growing public perception that crime is a “low-risk, high-profit business”.<br /><br />Besides the enormous logistical inadequacies in the justice delivery system, the integrity of the magistracy and the subordinate judiciary is seriously tainted. In the recent past, serious allegations of questionable integrity have been raised even against those who man the superior echelons in our judicial structure. Needless to say, the most urgent measures need to be taken to clean up the justice administration apparatus and enlarge and strengthen it to deliver speedy and effective justice. Another cause for serious concern is that while we continue to have hundreds of altogether obsolete and irrelevant laws, most of which were enacted during the colonial period, we do not have an adequately stringent law, applicable all over the country, that can effectively meet the requirements of dealing with terrorist offences, cyber crimes and the fast growing areas of organised criminality which pose a grave threat to national security. We also do not have a Federal Crime Agency which can deal with the serious offences committed by criminal networks whose activities may spread across the States, across the entire country and across various foreign lands. We also need a comprehensive law for dealing with serious economic offences which, if not timely checked, have the potential of disrupting the national economy. Today, terrorist and criminal networks operate in a borderless world and, needless to say, the grave challenges posed by their activities cannot be tackled if the various concerned law enforcing agencies continue to operate within their respective limited jurisdictions. What is urgently required is an appropriate legal framework and an extremely well considered strategy which is executed in the most effective co-ordination between the Centre and the States, to deal with each and every aspect of internal security management.<br /><br />Another matter for serious concern relates to the failure, over the past six decades, to develop a pool of functionaries who have been especially trained to manage the security apparatus at the Centre. Only the Intelligence Bureau has a sub-cadre of deputationist Indian Police Officers who, after acquiring the required experience, comprise the core of the Bureau and can spend their entire careers in this agency. R&AW, the agency for external intelligence, has been facing serious personnel problems and recently there have been a number of incidents of grave professional failures. As per the continuing practice, the officers assigned to posts in the Home Ministry, drawn from various services and cadres, are not required to possess any past experience in the field of security management. The situation in the States is much worse. <br /><br />It is a matter for deep concern that despite the serious challenges to national security faced by the country it has still not been recognised that security management cannot any longer be entrusted to persons who have no training or experience in this field. It is also no longer viable to entrust the work of Intelligence agencies only to officers of one particular service. It is necessary that very high priority is accorded for raising a pool of adequately trained and trusted officers who can be assigned to posts in the Intelligence Agencies and the Departments and Ministries which are responsible for managing internal and external security.<br /><br />In the aforesaid context, particularly keeping in view that even key posts in the Home and Defence Ministries and their related agencies are, on many occasions, assigned to functionaries who have no prior experience of working in the security administration arena, I had proposed (in the Task Force Report on Internal Security, September 2000) that Government may consider the establishment of a dedicated Security Administration Cadre, which is comprised of officers selected from among volunteers from the Civil and Police Services, Defence Services, Defence Science Research Organisation, Science and Technology, Information and Communication Technology, Broadcasting and Media and other relevant areas. It was envisaged that such a pool of officers, in various age groups, would be properly trained and assigned to posts in the security management machinery. After critically assessing their performance, the selected officers could be allowed, as is done in the Intelligence Bureau, to enjoy open-ended tenures so that, over time, they acquire the much needed professional expertise which is sorely lacking in the existing set-up. It was projected that, once such a dedicated cadre gets adequately established, Government would be able to select the most suitable officers, from within this pool of officers, to man posts at given levels in the Union Home Ministry, the Intelligence Agencies, National Security Council Secretariat, Ministry of Defence and other security management related areas. Side by side, the States could be provided required support, particularly well designed training facilities, to raise similar cadres. <br /><br />The Government had approved the aforesaid approach in early 2001. Nearly seven years have since elapsed. It is apparent that Government do not intend to terminate the continuing practice of even the top most posts in the security apparatus being filled by persons who have no past experience in security management.<br /><br />I would conclude by saying that considering the extremely worrying scale and pattern of the internal security failures in the recent past, the Centre shall need to significantly enlarge the capacity of its Intelligence agencies, and to also ensure that the States take similar action, so that a constant vigil can be effectively kept across the length and breadth of the country. The Centre would also need to most vigorously pursue the States to ensure that the functioning of their Police forces is completely depoliticised and their autonomous working entrusted to the best available officers, known for their integrity and professionalism. The speediest possible measures must also be taken to revive the criminal justice system and restore its credibility. It is equally important that the State Chief Ministers urgently bring themselves around to fully understanding the altogether grave consequences if they fail to maintain peace and order within their jurisdictions or dither in providing total support and co-ordination to the Centre’s initiatives to make the management of internal security more effective.<br /><br />And finally, I would reiterate that effective enforcement of the Rule of Law is crucial to the maintenance of national security and delivery of good governance. Any threat to the constitutional values shall pose a threat to the very foundations of our polity and society and, consequently, to the very unity and integrity of our country.<br /><br />This is an edited transcript of the R.D. Katari Memorial Lecture delivered at the DRDO Auditorium, New Delhi. Mr. N.N. Vohra is Special Representative of the Government of India for the Jammu & Kashmir Dialogue.MANISHhttp://www.blogger.com/profile/00428491443420277409noreply@blogger.com0tag:blogger.com,1999:blog-2672050906182920186.post-3710740380555360912009-08-22T10:53:00.000+05:302009-08-22T10:54:03.368+05:30BUDGET GLOSSARYThe government's annual budget exercise is no different from the way we all manage our household budgets. The only difference: the former's intimidating jargon. Team ET simplifies the important budget items for its readers in a five-part series. We have, however, departed from the usual way glossaries are presented, in alphabetical order, to a flow-type format wherein terms are explained as the reader would encounter them in the budget. Read on <br /><br /><br />ON the budget day, the finance minister tables 10-12 documents. Of these, the main and most important document is the Annual Financial Statement. <br /><br />ANNUAL FINANCIAL STATEMENT: <br />Article 112 of the constitution requires the government to present to the Parliament a statement of estimated receipts and expenditure in respect of every financial year, April 1 to March 31. This statement is the annual financial statement. <br />The annual financial statement is usually a white 10-page document. It is divided into three parts, Consolidated Fund, Contingency Fund and Public Account. For each of these funds the government has to present a statement of receipts and expenditure. <br /><br />CONSOLIDATED FUND: <br />This is the most important of all the government funds. All revenues raised by the government, money borrowed and receipts from loans given by the government flow into the consolidated fund of India. All government expenditure is made from this fund, except for exceptional items met from the Contingency Fund or the Public Account. Importantly, no money can be withdrawn from this fund without Parliament's approval. <br /><br />CONTINGENCY FUND: <br />As the name suggests, any urgent or unforeseen expenditure is met from this fund. The Rs 500-crore fund is at the disposal of the President. Any expenditure incurred from this fund requires a subsequent approval from Parliament and the amount withdrawn is returned to the fund from the consolidated fund. <br /><br />PUBLIC ACCOUNT: <br />This fund is to account for flows for those transactions where the government is merely acting as a banker. For instance, provident funds, small savings and so on. These funds do not belong to the government. They have to be paid back at some time to their rightful owners. Because of this nature of the fund, expenditure from it are not required to be approved by Parliament. <br /><br />For each of these funds the government has to present a statement of receipts and expenditure. It is important to note that all money flowing into these funds is called receipts, the funds received, and not revenue. Revenue in budget context has a specific meaning. The Constitution requires that the budget has to distinguish between receipts and expenditure on revenue account from other expenditure. So all receipts in, say consolidated fund, are split into Revenue Budget (revenue account) and Capital Budget (capital account), which includes nonrevenue receipts and expenditure. For understanding these budgets - Revenue and Capital - it is important to understand revenue receipts, revenue expenditure, capital receipts and capital expenditure. <br /><br />REVENUE RECEIPT/EXPENDITURE: <br />All receipts and expenditure that in general do not entail sale or creation of assets are included under the revenue account. On the receipts side, taxes would be the most important revenue receipt. On the expenditure side, anything that does not result in creation of assets is treated as revenue expenditure. Salaries, subsidies and interest payments are good examples of revenue expenditure. <br /><br />CAPITAL RECEIPT/EXPENDITURE: <br />All receipts and expenditure that liquidate or create an asset would in general be under capital account. For instance, if the government sells shares (disinvests) in public sector companies, like it did in the case of Maruti, it is in effect selling an asset. The receipts from the sale would go under capital account. On the other hand, if the government gives someone a loan from which it expects to receive interest, that expenditure would go under the capital account. In respect of all the funds the government has to prepare a Revenue Budget (detailing revenue receipts and revenue expenditure) and a capital budget (capital receipts and capital expenditure). Contingency Fund is clearly not that important. Public Account is important in that it gives a view of select savings and how they are being used, but not that relevant from a budget perspective. The consolidated fund is the key to the budget. We will take that up in the next part. <br /><br />CORPORATION TAX: <br />Tax on profits of companies. <br /><br />TAXES ON INCOME OTHER THAN CORPORATION TAX: <br />Income tax paid by non-corporate assesses, individuals, for instance. <br /><br />FRINGE BENEFIT TAX (FBT): <br />The taxation of perquisites — or fringe benefits — provided by an employer to his employees, in addition to the cash salary or wages paid, is fringe benefit tax. It was introduced in the 2005-06 budget. The government felt that many companies were disguising perquisites such as club facilities as ordinary business expenses, which escaped taxation altogether. Employers have to now pay a tax (FBT) on a percentage of the expense incurred on such perquisites. <br /><br />SECURITIES TRANSACTION TAX (STT): <br />Sale of any asset (shares, property etc) results in loss or profit. Depending on the time the asset is held, such profits and losses are categorised as long term or short term capital gain/loss. In the 2004-05 budget, the government abolished long-term capital gains tax on shares (tax on profits made on sale of shares held for more than a year) and replaced it STT. It is a kind of turnover tax where the investor has to pay a small tax on the total consideration paid/received in a share transaction. <br /><br />BANKING CASH TRANSACTION TAX (BCTT): <br />Introduced in the 2005-06 budget, BCTT is a small tax on cash withdrawal from bank exceeding a particular amount in a single day. The basic idea is to curb the black economy and generate a record of big cash transactions. <br /><br />CUSTOMS: <br />Taxes imposed on imports. While revenue is an important consideration, customs duties may also be levied to protect the domestic industry or sector (agriculture, for one), in retaliation against measures by other countries etc. <br /><br />UNION EXCISE DUTY: <br />Duties imposed on goods manufactured in the country. <br /><br />SERVICE TAX: <br />It is a tax on services rendered. Telephone bill, for instance, attracts a service tax. <br />While on taxes, let us take a look at an important classification: direct tax and indirect tax, which finds wide mention in the budget. <br /><br />DIRECT TAX: <br />Traditionally, these are taxes where the burden of tax falls on the person on whom it is levied. These are largely taxes on income or wealth. Income tax (on corporates and individuals), FBT, STT and BCTT are direct taxes. <br /><br />INDIRECT TAX: <br />In the case of indirect taxes the incidence of tax is usually not on the person who pays the tax. These are largely taxes on expenditure and include Customs, excise and service tax. <br /><br />Indirect taxes are considered regressive, the burden on the rich and the poor is alike. That is why governments strive to raise a higher proportion of taxes through direct taxes. Moving on, we come to the next important receipt item in the revenue account, non-tax revenue. <br /><br />NON-TAX REVENUE: <br />The most important receipts under this head are interest payments (received on loans given by the government to states, railways and others) and dividends and profits received from public sector companies. <br /><br />Various services provided by the government — general services such as police and defence, social and community services such as medical services, and economic services such as power and railways — also yield revenue for the government. Though Railways are a separate department, all its receipts and expenditure are routed through the consolidated fund. <br /><br />GRANTS-IN-AID AND CONTRIBUTIONS: <br />The third receipt item in the revenue account is relatively small grants-in-aid and contributions. These are in the nature of pure transfers to the government without any repayment obligation. <br /><br />We now look at the disbursements section of the Revenue Account of the consolidated fund. It lists all the revenue expenditures of the government. These include expense incurred on organs of state such as Parliament, judiciary and elections. A substantial amount goes into administering fiscal services such as tax collection. The biggest item is interest payment on loans taken by the government. Defence and other services such as police also get a sizeable share. Having looked at receipts and expenditure on revenue account we come to an important item, the difference between the two, the revenue deficit. <br /><br />REVENUE DEFICIT: <br />The excess of disbursements over receipts on revenue account is called revenue deficit. This is an important control indicator. All expenditure on revenue account should ideally be met from receipts on revenue account; the revenue deficit should be zero. When revenue disbursement exceeds receipts, the government would have to borrow. Such borrowing is considered regressive as it is for consumption and not for creating assets. It results in a greater proportion of revenue receipts going towards interest payment and eventually, a debt trap. The FRBM Act, which we will take up later, requires the government to reduce fiscal deficit to zero by 2008-09.<br /><br />RECEIPTS in the capital account of the consolidated fund are grouped under three broad heads — public debt, recoveries of loans and advances, and miscellaneous receipts. <br /><br />PUBLIC DEBT: <br />In normal accounting, debt is a stock, to be measured at a point of time, while borrowing and repayment during a year are flows, to be measured over a period of time. In Budget parlance, however, you'll find public debt receipts and public debt disbursals. These are respectively borrowings and repayments during the year. The difference between the two is the net accretion to the public debt. <br /><br />Public debt can be split into two heads, internal debt (money borrowed within the country) and external debt (funds borrowed from non-Indian sources). <br /><br />The internal debt comprises of treasury Bills, market stabilisation scheme, ways and means advance, and securities against small savings. <br /><br />TREASURY BILL (T-BILLS): <br />These are bonds (debt securities) with maturity of less than a year. These are issued to meet short-term mismatches in receipts and expenditure. Bonds of longer maturity are called dated securities. <br /><br />MARKET STABILISATION SCHEME (MSS): <br />The scheme was launched in April 2004 to strengthen Reserve Bank of India's (RBI) ability to conduct exchange rate and monetary management. The RBI mops up excess liquidity, created, for instance when the central bank buys up huge quantities of dollar inflows to prevent undesirably fast appreciation of the rupee, by selling its stock of government securities to banks. When the RBI began to run short of of government securities that had been issued to meet the government's borrowing requirement, the MSS was launched. These securities are issued not to meet the government's expenditure but to provide the RBI with a stock of securities with which to intervene in the market for managing liquidity. <br /><br />WAYS AND MEANS ADVANCE (WMA): <br />One of the many roles of the RBI is to serve as banker for both the Central and State governments. In this capacity, the RBI provides temporary support to tide over mismatches in their receipts and payments in the form of ways and means advances. <br /><br />SECURITIES AGAINST SMALL SAVINGS: <br />The government meets a small part of its loan requirement by appropriating small savings collection by issuing securities to the fund. <br /><br />MISCELLANEOUS RECEIPTS: <br />These are primarily receipts from disinvesment in public sector undertakings. <br />The capital account receipts of the consolidated fund — public debt, recoveries of loans and advances, and miscellaneous receipts — and revenue receipts make up the total receipts of the consolidated fund. <br /><br />We now take up the disbursements on capital account from the consolidated fund. The first part deals with capital expenditure incurred on the various services — general services, social services and, economic services. Some of the biggest expenditure items under these heads are defence services, investment in agricultural financial institutions and capital to railways. The second part takes up the public debt (repayments of loans) and various loans made by the government. <br /><br />The consolidated fund has certain disbursements "charged" to the fund. These are obligations that have to be met in any case and, therefore, do not have to be voted by the Lok Sabha. These include interest payments and certain expenditure such as emoluments of the President, salary and allowances of speaker, deputy chairman of the Rajya Sabha, and allowances and pensions of Supreme Court judges. Parliament and so on. This concludes the discussion on consolidated fund. We now move on to the other budget documents, which give a more detailed presentation of the consolidated fund. <br /><br />BUDGET AT A GLANCE: <br />This is obviously a snap shot of the budget, for an easy understanding. Nonetheless, it introduces some new concepts. While receipts are broken down into revenue and capital, unlike the consolidated fund, it shows the centre's net tax revenues. This is because a decent part of the gross tax revenue, as decided by the relevant Finance Commission, flows to the state governments. <br /><br />Budget at a glance also segments expenditure into plan and non-plan expenditure, instead of splitting into revenue and capital. Each of these is then split into revenue account and capital account. Before discussing plan and non-plan expenditure it is important to discuss the concept of the central plan. <br /><br />CENTRAL PLAN: <br />Central or annual plans are essentially the five year plans broken down into five annual instalments. Through these annual plans the government achieves the objectives of the Five-Year Plans. The funding of the central plan is split almost evenly between government support (from the budget) and internal and extra budgetary resources of public enterprises. The government's support to the central plan is called the budget support. <br /><br />PLAN EXPENDITURE: <br />This is essentially the Budget support to the central plan and the central assistance to state and Union territory plans. Like all Budget heads, this is also split into revenue and capital components. <br /><br />NON-PLAN EXPENDITURE: <br />This is largely the revenue expenditure of the government. The biggest item of expenditure are interest payments, subsidies, salaries, defence and pension. The capital component of the non-plan expenditure is relatively small with the largest allocation going to defence. <br /><br />It is important to note that the entire defence expenditure is non-plan expenditure. We will now take up the various deficits and the components of plan and non-plan expenditure. In the Budget at a Glance, the plan and the non-plan expenditure make up the total government expenditure. This brings us to the concept of deficit. <br /><br />FISCAL DEFICIT: <br />When the government's non-borrowed receipts (revenue receipts plus loan repayments received by the government plus miscellaneous capital receipts, primarily disinvestment proceeds) fall short of its entire expenditure, it has to borrow money from the public to meet the shortfall. The excess of total expenditure over total nonborrowed receipts is called the fiscal deficit. <br /><br />PRIMARY DEFICIT: <br />The revenue expenditure includes interest payments on government's earlier borrowings. The primary deficit is the fiscal deficit less interest payments. A shrinking primary deficit would indicate progress towards fiscal health. <br /><br />We had already discussed revenue deficit earlier. The Budget document also mentions the deficit as a percentage of the GDP. This is to facilitate comparison and also get a proper perspective. In ab- SALAM solute terms, the fiscal deficit may be <br />large, but if it is small compared to the size of the economy then it is not such a bad thing. Prudent fiscal management requires that government does not borrow to consume, in the normal course. That brings us to the FRBM Act. <br /><br />FRBM ACT: <br />Enacted in 2003, the Fiscal Responsibility and Budget Management Act requires the elimination of revenue deficit by 2008-09. This means that from 2008-09, the government will have to meet all its revenue expenditure from its revenue receipts. Any borrowing would then only be to meet capital expenditure — repayment of loans, lending and fresh investment. The Act also mandates a 3% limit on the fiscal deficit after 2008-09. This is a reasonable limit that allows significant-cant leverage to the government to build capacities in the economy without compromising fiscal stability. <br />It is important to note that since the entire Budget is at current market prices the deficits are also calculated with reference to GDP at current market prices. <br /><br />RESOURCES TRANSFERRED TO THE STATES <br />We now look at the resources transferred to the states. As mentioned earlier, a part of the central government's gross tax collections goes to state governments. In the Budget 2007-08 the states were to receive nearly 27% of the gross tax collections. <br /><br />The Centre also transfers substantial funds to states by way of support to their plans. These are largely in the nature of grants. Centre also gives large grants to states for managing centrally sponsored schemes. Interestingly, the government counts small savings transfers to state governments, which are in the nature of borrowings, as resources transferred to states. Before March 31, 1999, the Centre used to borrow net accretions to small savings (public provident fund, national saving scheme, etc) and lend them to the states. From April 1, 1999, states started receiving 75% of net small savings collections directly; the balance was invested in special Central Government securities during 1999-2000 to 2001-2002. The sums received in the National Small Savings Fund on redemption of special securities are being reinvested in special central government securities. From April 2002, the entire net collections under small saving schemes in each State & UT (with legislature) are advanced to the concerned State/UT government as investment in its special securities. <br /><br />It seems many states are actually not keen on small savings funds as the cost of these borrowings works out higher than what they can get from the market. We now find the Centre is being forced to mop-up some small savings mobilisation (Rs 5750 crore Budgeted in 2007-08) through special securities as state governments are not taking the entire mobilisation. <br /><br />This completes the discussion on Budget at a Glance. The expenditure and receipts Budget take up the respective heads in greater detail. We will now take up terms that require some discussion for a clearer understanding of the Budget. <br /><br />VALUE-ADDED TAX (VAT) AND GST: <br />VAT helps avoid cascading of taxes (tax being levied upon a price that includes one or more elements of tax) as a product passes through different stages of production/value addition. The tax is based on the difference between the value of the output and the value of the inputs used to produce it. The aim is to tax a firm only for the value added by it to the inputs it is using for manufacturing its output and not the entire input cost. VAT brings in transparency to commodity taxation: right now, only the final tax paid by the consumer is apparent to her, while with value added tax generalised to a goods and services tax (GST) that subsumes both central and state level taxation, the entire element of tax borne by a good (or a service) would be represented by the GST paid on it. A GST of 20% might seem high, but it would be about half the actual incidence of tax in most goods at present.<br /><br />BHARAT NIRMAN: <br />Bharat Nirman is the current UPA government’s ambitious programme for building infrastructure, especially in rural India. It has six components - irrigation, roads, water supply, housing, rural electrification and rural telecom connectivity. In each of these areas, the government has set targets that are to be achieved by the year 2009, within four years of its launch.<br /><br />CESS: <br />This is an additional levy on the basic tax liability. Governments resort to cesses for meeting specific expenditure. For instance, both corporate and individual income is at present subject to an education cess of 2%. In the last Budget the government had imposed an another 1% cess ‘Secondary and higher education cess on income tax’ to finance secondary and higher education. <br /><br />COUNTERVAILING DUTIES (CVD) : <br />Countervailing duty is a tax imposed on imports, over and above the basic import duty. CVD is at par with the excise duty paid by the domestic manufacturers of similar goods. This ensures a level playing field between imported goods and locally produced ones. An exemption from CVD places domestic industry at disadvantage and over long run discourages investments in affected sectors. <br /><br />EXPORT DUTY: <br />This is a tax levied on exports. In most instances the object is not revenue but to discourage exports of certain items. In the last Budget, for instance, the government imposed an export duty of Rs 300 per metric tonne on export of iron ores and concentrates and Rs 2,000 per metric tonne on export of chrome ores and concentrates. <br /><br />FINANCE BILL: <br />The proposals of government for levy of new taxes, modification of the existing tax structure or continuance of the existing tax structure beyond the period approved by Parliament are submitted to Parliament through this bill. It is the key document as far as taxes are concerned. <br /><br />FINANCIAL INCLUSION: <br />Financial inclusion is universalising access to basic financial services (to have a bank account, timely and adequate credit) at an affordable cost. Exclusion from financial services imposes costs on those excluded; these are typically the disadvantaged and low income group. Exclusion forces them into informal arrangements such as borrowing from local money lenders, etc at high rates. Financial inclusion remain a serious issue in India. The government has proposed a no-frills account to provide cheap banking. <br /><br />MINIMUM ALTERNATE TAX (MAT): <br />This tax on corporate profits was introduced in 1996-97 and has been modified since. If the tax payable by a company is less than 10% of its book profits, after availing of all eligible deductions, then 10% of book profits is the minimum tax payable. Book profits are profits calculated as per the Companies Act, while profits as per the Income Tax Act could be significantly lower, thanks to various exemptions and depreciation. <br /><br />PASS-THROUGH STATUS: <br />A pass through status helps avoid double taxation. Mutual funds, for instance, enjoy pass through status. The income earned by the funds is tax-free. Since mutual funds’ income is distributed to unit holders, who are in turn taxed on their income from such investments, any taxation of mutual funds would amount to double taxation. Essentially, it means that the income is merely passing through the MFs and, therefore, should not be taxed. The government allows VC funds in some sectors pass-through status to encourage investments in start-ups. <br /><br />SUBVENTION: <br />The term subvention finds a mention in almost every Budget. It refers to a grant of money in aid or support, mostly by the government. In the Indian context, for instance, the government sometimes asks institutions to provide loans to farmers at below market rates. The loss is usually made good through subventions. <br /><br />SURCHARGE: <br />As the name suggests, this is an additional charge or tax. A surcharge of 10% on a tax rate of 30% effectively raises the combined tax burden to 33%. In the case of individuals earning a taxable salary of more than Rs 10 lakh a surcharge of 10% is levied on income in excess of Rs 10 lakh. Corporate income is levied a flat surcharge of 10% in the case of domestic companies and 2.5% for foreign companies. Companies with revenue less than Rs 1 crore do not have to payMANISHhttp://www.blogger.com/profile/00428491443420277409noreply@blogger.com0tag:blogger.com,1999:blog-2672050906182920186.post-40219822612311336242009-08-22T10:49:00.001+05:302009-08-22T10:51:37.859+05:30Infrastructure Development Through Public Private PartnershipsIn order to achieve the targeted growth rate of 9 per cent for the 11th Five Year Plan, country requires enormous investment in physical infrastructure. At 2006-07 prices, infrastructure investment requirement has been estimated at over 20,60,000 crores (about US $ 515.5 billion). This amount cannot be met by public sector alone. Moreover, investment in the social sectors is the priority charge on the Government’s own resources as they are not amenable to private investment in a big way.<br /><br /><br />Therefore, it is necessary to explore avenues for increasing investment in infrastructure through a combination of public investment, Public Private Partnerships (PPPs) and also, exclusive private investments wherever feasible. PPPs offer a number of advantages in terms of leveraging public capital to attract private capital and undertake a larger number of infrastructure projects, introducing private sector expertise and cost reducing technologies and bringing efficiency in operations and maintenance.<br /><br /><strong>Constraints</strong><br /><br />While encouraging PPPs main constraints identified are policy and regulatory gaps; inadequate availability of long term finance; inadequate capacity in public institutions and public officials to manage PPP processes; inadequate capacity in the private sector – both in the form of developer/investor and technical manpower; inadequate shelf of bankable infrastructure projects & inadequate advocacy to create greater acceptance of PPPs by the public.<br /><br /><strong>Initiatives to promote PPPs</strong><br /><br />The Government has taken several initiatives to create an enabling framework for PPPs by addressing issues relating to policy and regulatory environment. Progressively more sectors have been opened to private and foreign investment, levy of user charges is being promoted, regulatory institutions are being set up and strengthened and fiscal incentives are given to infrastructure projects. Approval mechanism for PPPs in the central sector has been streamlined through setting up of Public Private Partnership Appraisal Committee (PPPAC) in the Ministry of Finance headed by Finance Secretary. An Online database on PPP projects in the country is being developed to provide comprehensive information on the status of infrastructure sector PPPs.<br /><br /><strong>Funding of PPP Projects</strong><br /><br />The Government has taken various steps to address the financing needs of these projects. India Infrastructure Finance Company Limited has been set up to provide long tenor debt to infrastructure projects and a scheme for Financial support to PPPs in infrastructure has been launched to provide Viability Gap Funding to PPP projects. Multilateral agencies such as Asian Development Bank have been permitted to raise Rupee bonds and carry out currency swaps to provide long term debt to PPP projects. Setting up of dedicated infrastructure funds are also being encouraged to increase the flow of equity investments.<br /><br /><br />The ‘India Infrastructure Finance Initiative’ facilitated by the Ministry of Finance, is one such collaborative effort to deploy approximately US$ 5 billion in capital for infrastructure projects in India. The Fund is structured as a Venture Capital Fund, with about US$ 2 billion in equity capital and US$ 3 billion in long term debt financing with maturities exceeding ten years. Initial steps have been taken to use Foreign Exchange Reserves for building Infrastructure. The Reserve Bank of India has given ‘in principle” approval to invest upto US $ 5 billion in the securities of the SPV and these would be fully guaranteed by the Government.<br /><br /><br /><strong>PPP Projects in India</strong><br /><br /><br />Analysis based on study of 221 PPP projects in the country reveal that development and use of PPPs for delivering infrastructure services has now at least 10 years of precedence in India, with the majority of projects coming in line in the last five years. Participation as well as innovation with different structures have met with varying degrees of success.<br /><br /><br />Some sectors like telecommunications, power, ports and roads, have done very good progress compared to limited success in other sectors. Some states have undertaken far more PPPs than others, and a much heavier use of PPPs in some sectors than others. As per the survey of the 221 PPP projects in the main sectors of focus, undertaken at the instance of Department of Economic Affairs for preparation of the Online Database on PPPs, - where a contract has been awarded and projects are underway - the total project cost is estimated to be about Rs. 1,29,575 Crore.<br /><br /><br />The road projects account for 78 percent of the total number of projects (36 percent by total value) because of the small average size of projects. Ports, with a much larger average size of project, account for 17 percent of the total number of projects (47 percent by total value). It is noteworthy that if ports and central road projects are excluded from the total, there is a relatively small value of deal flow, in basic infrastructure PPPs to-date, suggesting a significant potential upside for PPP projects across sectors where states and municipalities have primary responsibility.<br /><br /><br />The potential use of PPPs in e-governance, health and education sectors remains largely untapped across India as a whole, though of late there have been some activities shaping in these sectors. Almost all contracts have been of the BOT/BOOT type or close variants. Since its constitution in January 2006, PPPAC has granted approval to 65 projects, with an estimated cost of Rs. 53,284.95 crore. These includes Highways (Fifty-six projects), Ports (six projects), Airports (two projects) and Tourism Infrastructure (one project).<br /><br /><strong>Outlook</strong><br /><br />The Central Government is working with the State Governments and all other stakeholders to expand the horizon of PPPs in infrastructure development in the country. It has created a favourable atmosphere, provided fiscal incentives and facilitated funding of PPP projects. The Government now allows FDI in most infrastructure sectors to the extent of 100 percent. The time is ripe for the foreign strategic investors for taking greater interest in PPP Projects for infrastructure development. <br />Posted by Career Quest Education, IndiaMANISHhttp://www.blogger.com/profile/00428491443420277409noreply@blogger.com1tag:blogger.com,1999:blog-2672050906182920186.post-71354630401373169532009-08-22T10:47:00.000+05:302009-08-22T10:49:31.985+05:30PANCHAYATI RAJ- POWER TO THE GRASS-ROOTSVillage communities in the Indian sub-continent have been self-governing over the centuries. The earlier councils or assemblies called Sabhas had a position of considerable authority and slowly they assumed the form of the Panchayats. These Panchayats became the pivot of administration and the principal forum for the dispensation of justice and resolution of local disputes. The British Colonial Administration referred to these village communities as “little republics”. The Indian constitution adopted w.e.f. 26th January 1950 included Article 40 that read : “The state shall take steps to organize village Panchayats and endow them with such power and authority as may be necessary to enable them to function as units of self-government”. <br /><br /><br />In 1957, a historic breakthrough in establishing Panchayati Raj came about through the report of the Team for the Study of Community Development Projects and National Extension Service headed by Shri Balwantrai Mehta which recommended that “public participation in community works should be organized through statutory representative bodies”. The Team was of the view that without an agency at the village level that could represent the entire community, assume responsibility and provide the necessary leadership for implementing development progammes, real progress in rural development could not come about. Further discourse on this matter saw the term “Panchayati Raj” gaining currency as a process of governance organically linking the will of the people from the Gram Sabha to the Lok Sabha. Prime Minister Nehru inaugurated Panchayati Raj in Rajasthan on 2nd October, 1959 at Nagaur. <br /><br /><br />From 1959 to the eighties, Panchayati Raj made sporadic progress in different parts of the country. While it took root in States such as Gujarat, Maharashtra, Karnataka and West Bengal, in many States elections to the Panchayats were not held regularly and long periods went by when there was no effective representation of people at the grassroots nor was the participation of representative institutions at the grassroots in development programmes and local governance visible. Prime Minister Rajiv Gandhi was driven by a vision to provide the people with a “representative administration”. <br /><br /><br />He also observed that there were weaknesses in the structure of Indian democracy since although the superstructure was strong, the foundation was weak. Putting together both Houses of Parliament and the State Legislatures, there were only 5-6 thousand persons representing nearly 80 crore Indians. Panchayati Raj finally got the constitutional mandate through the Constitution (73rd Amendment) Bill, which was passed by both Houses of Parliament in December 1992. The Constitution (73rd Amendment) Act, 1992 came into force on 24th April, 1993. The 73rd Amendment provides for the constitution of the Panchayats at the village, block and district levels. Elections at five years intervals are also mandated. Reservation of at least one third of seats for women is provided for. Disadvantaged sections of society such as SCs, STs and OBCs (in some states) get representation in proportion of their population. <br /><br /><br />The establishment of State Election Commissions and State Finance Commissions is mandatory. Provision has also been made through Article 243ZD introduced through the 74th Amendment to the Constitution for constitution of District Planning Committees. The 73rd Amendment is applicable in 24 States and five Union Territories.<br /><br /><br />Today, when most States and Union Territories have had three rounds of elections, there are more than 28 lakh elected representations at the 3 levels of Panchayats. Of these over 10 lakh are women, 5.2 lakh belong to the Scheduled Castes and 3.3 lakh to the Scheduled Tribes. The last fifteen years have seen a silent revolution in the rural areas as political representation available to women and marginalized groups has empowered them and improved their social and economic situation very significantly. <br /><br /><br />One of the first actions of the Government, when it took office in May 2004, was to set up a separate Ministry of Panchayati Raj to provide focused and dedicated attention to operationalizing the constitutional mandate on Panchayati Raj. It was decided to evolve a national consensus regarding the roadmap for Panchayati Raj through consultations between the Centre and the States. <br /><br /><br />The Ministry of Panchayati Raj organized Seven Round Tables which the State Ministers of Panchayati Raj joined. Within a period of 150 days, from 23rd July 2004 to 19th December, 2004, 18 dimensions of Panchayati Raj ranging from the effective devolution of the 3Fs – functions, finances and functionaries – to district planning, training, capacity building and IT enabled e-governance were discussed. At the conclusion of all the Round Tables the totality of nearly 150 action points were unanimously adopted by all Panchayati Raj Ministers. The priority areas identified for concerted action were Activity Mapping, Panchayat Sector Windows in State budgets based on the Activity Maps and the assignment of functionaries in conformity with the pattern of devolution of functions and finances<br /><br />Local self-government is a State subject. The 73rd Constitutional Amendment makes it mandatory for all States to hold regular elections to the three tiers of the Panchayati Raj system. Panchayat Raj has thus brought in a third stratum of government to supplement the Union Government at the Centre and the State Government to reinforce the federal characteristics of our Constitution. At an operational level the largest inflow of resources to State Governments is through Centrally Sponsored Schemes that cover sectors like primary education, public health, drinking water, sanitation, etc. identified in the 11th Schedule for devolution to the Panchayats. <br /><br /><strong>Key Objectives</strong><br /><br /><br />One of the key objectives of Panchayati Raj is to ensure that the process of planning for development in the country follows a bottom-up approach and commences at the grassroots level. The core approach is that the village Panchayat plans prepared with people’s participation are joined by plans prepared by the Intermediate and District Panchayats and these are then consolidated by the District Planning Committees with the Municipal plans into the draft district development plan. <br /><br />Till now, 18 States in the country have constituted District Planning Committees while the process is underway in the remaining ones where Part IX of the Constitution is applicable. In order to guide the process of grassroots planning an Expert Group was constituted under the Chairmanship of Shri V. Ramachandran and the recommendations of the Group have been accepted by the Ministry of Panchayati Raj and Planning Commission for guiding the process of district planning. Decentralization and planning from the below have also been recognized in the 11th Plan document endorsed by the National Development Council. This document also recognizes the centrality of the role to be played by the Panchayats in the planning and development process.<br /><br /><strong>Backward Regions Grant Fund (BRGF) Programme </strong><br /><br /><br />The BRGF is designed to redress regional imbalances in development. The fund provides financial resources in supplementing and converging existing development inflows into the identified 250 districts with a view to bridging critical gaps in local infrastructure and other development requirements that are not being adequately met through existing inflows. It is expected that the fund will help strengthen panchayat and municipal level governance with appropriate capacity building, facilitation of participatory planning, decision making, implementation and monitoring to reflect the local felt needs. <br /><br />Through the Fund, professional support can be provided to local bodies and it is hoped that this will help improve the performance and delivery of critical functions assigned to Panchayats. The substantially untied grant is distributed among the districts with each district receiving a fixed minimum amount of Rs.10 crore per annum. 250 crore is reserved for capacity building while 50% of the balance under this Scheme is released on the basis of population and 50% on the basis of physical area of the district. <br /><br />It may be mentioned also that Rashtriya Sam Vikas Yojana (RSVY) has been subsumed in the BRGF and balance allocations to districts that have not completed implementation of their plans approved under the RSVY are funded from BRGF. In 2007-08 an amount of Rs.3599 crore was released to the districts under RSVY and BRGF. This year the allocation for the programme is Rs.4670 crore.<br /><br /><strong>Empowerment of Women</strong><br /><br /><br />Indeed, the proportion of women getting elected tends to be significantly higher than the reserved quota, with women from the scheduled castes and scheduled tribes often securing election to a higher proportion of seats and chairpersonships than women from the socially and economically better off classes. The political and social empowerment of women on this scale is without parallel in the world and without precedent in the history. There are more elected women in India than in the rest of the world put together. Combined with the economic empowerment fostered by the enormously successful women’s self-help group movement, what we are witnessing in the Indian countryside is a gender revolution of a magnitude never before seen. <br /><br />The Ministry of Panchayati Raj has launched the Panchayat Mahila Shakti Abhiyan (PMSA) in collaboration with the National Commission for Women’s “Chalo Gaon ki ore Programme” that aims at consolidating the collective strength of elected women representatives. Each time a PMSA is convened, elected women representatives in a State get together in a conference where experiences sharing and discussion of common problems is facilitated. <br /><br />In November 2006, the Ministry of Panchayati Raj published the first comprehensive baseline report on the state of Panchayat across the rural India. In March 2008, the States of Tamil Nadu, Kerala, West Bengal, Rajasthan, Karnataka, Madhya Pradesh, Himachal Pradesh, Andhra Pradesh, Orissa, Sikkim, Manipur, Goa and Haryana were awarded in recognition of their efforts in empowering the Panchayats.<br /><br /><strong>Rural Business Hubs</strong><br /><br />The idea of setting up rural businesses through facilitation by Panchayats originated from the Prime Minister’s address to the Conference of Chief Ministers on 29th June, 2004, where he stressed the importance of decentralized economic development in rural areas. In November 2004, the Ministry of Panchayati Raj and the Confederation of Indian Industry jointly organized a national presentation on Rural Business Hubs. This was followed up with identification of champion products in block Panchayats, developing linkages with industry and promoting training of artisans and marketing of agri and handicrafts items.<br /><br /><br />Removing poverty and ensuring that the “Aam Admi” gets the services from the State that he/she is entitled to is the avowed goal of the Government. Satisfactory development of outcomes cannot be ensured without the participation of grassroots institutions of local governance. While much progress has been made over the last 15 years, much more still remains to be done before we can have a true participatory democracy functioning from the grassroots level upwards where every Indian has a voice and every Indian gets his entitlements.MANISHhttp://www.blogger.com/profile/00428491443420277409noreply@blogger.com0tag:blogger.com,1999:blog-2672050906182920186.post-3223925944337185082009-08-22T10:43:00.002+05:302009-08-22T10:47:10.420+05:30UNIVERSALIZING SECONDARY EDUCATIONSecondary Education occupies a crucial stage in the educational hierarchy as it prepares the students for higher education and also to face the challenges of life at large. Besides moulding the personality traits, this stage of education also enhances individual level of productivity.<br /><br />The remarkable growth of enrolment in elementary education and improvement in retention rate over the past few years, particularly among more disadvantageous sections of society, have dramatically shifted the focus to the Secondary Education sector in the country.<br /><br /><strong>Increased Demand For Secondary And Higher Education</strong><br /><br /><br />While pressure on Secondary Education is already being felt due to the success of Sarva Shiksha Abhiyan (Universalisation of Elementary Education ), India’s impressive and sustained economic growth has worked as an impetus for increased demand for Secondary and Higher Secondary Education.<br />Added to this is the increased awareness about the role of Secondary Education, in particular for the girl child, in reinforcing positive social outcomes. There is a growing realization of the desirability to universalize access to secondary education leading to greater opportunity for participation to all. In other words, the challenge today is how to drastically improve the reach and quality of Secondary Education.<br />Keeping in view the rapid growth of Indian economy, the demographic advantage that India enjoys, the centrality of education in social and economic development, and the role of education in poverty reduction, an all out emphasis on education is visible in the 11th Five Year Plan (2007-08 to 2011-12) which has an allocation of Rs. 2,89,000 crore for Education constituting 19.4% of the total plan size. This is a steep increase from the share of 7.7% in the 10th Plan. With a view to achieve the goal of universalisation of access to secondary education while improving quality in a phased and sustained manner, the allocation for the Secondary Education sector for the 11th five year plan has been pegged at Rs. 53,550 crore, which reflects a quantum jump from the 10th Five year plan allocation of Rs. 4, 325 crore. This twelve fold increase brings within its fold a series of new schemes besides revising existing schemes making their design, intervention and coverage wider and more focused. <br /><br />The importance accorded to secondary education can be gauged from the fact that it occupies a share of 19.9% of the total Central Plan allocation to the education sector in the 11th Plan as compared to only 9.9% in the 10th Plan.<br /><br /><strong>The Most Active, Dynamic And Happening Sector</strong><br /><br /><br />In all, there are eight important schemes being rolled out in the Secondary Education sector alone, during the 11th Plan, making it one of the most active, dynamic and happening sectors. The new schemes that have already been rolled out, or in the pipeline are:<br />(1) Rashtriya Madhyamik Shiksha Abhiyan,<br />(2) Model Schools, <br />(3) National Means-cum-Merit Scholarship, <br />(4) Incentive to Girls for Secondary Education,<br />(5) Girls’ Hostel<br />(6) ICT in Schools,<br />(7) Inclusive Education for the Disabled Children and<br />(8) Vocationalization of Secondary Education. <br /><br />These schemes, individually as well as collectively, address issues connected with access, equity and quality in the entire gamut of Secondary Education sector.<br /><br /><strong>Rashtriya Madhyamik Shiksha Abhiyan</strong><br /><br /><br />Rashtriya Madhyamik Shiksha Abhiyan (RMSA) or SUCCESS (Scheme of Universalization of Access to and Improvement of Quality at Secondary Stage) , as the scheme is alternatively called, will be a centrally sponsored scheme for universalizing access to secondary level through substantial enhancement of access so that by the end of 12th Five Year Plan, there would generally be a high school within 5 kms of any habitation. The main objectives include improvement of the gross enrolment ratio for classes IX-X to 75% by 2012 from 52.26% in 2005-06 and to provide facilities for estimated additional enrolment of 63 lakh by 2011-12 through strengthening of 44,000 existing Government high schools and opening of nearly 12, 000 new high schools, through upgradation of higher primary schools, appointment of 2.50 lakh additional teachers and construction of 1.33 lakh additional classrooms.<br /><br />The scheme envisages development of State-specific norms. The general strategies are to provide required infrastructure and teaching-learning resources, including laboratories, libraries , computer rooms, toilets and qualified teachers. The scheme also envisages in-service training of teachers, capacity building of Headmasters and broad-based curricular, examination and educational governance reforms. National Curriculum Framework 2005 is already a right step in the direction of desirable curricular reforms.<br /><br />As a basic requirement in planning the entire activity, complete mapping of secondary schools for developing a comprehensive Secondary Education Information and Management System (SEMIS) is being undertaken by the States.<br /><br />Rs. 20,120 crore has been allocated for this scheme during the 11th Five year Plan, with a budget provision of Rs. 2185 crore during 2008-09. The ultimate aim is to universalize secondary education by achieving full enrolment by the end of the XIIth Plan, i.e., 2017, and to attain full retention by 2020.<br /><br /><strong>6000 Model Schools at Block Level</strong><br /><br />Pursuant to the announcement of the Prime Minister, during his address to the nation on the Independence Day last year, the scheme of model school supports 6,000 new high quality schools – one in every block of the country. These schools will play a pace-setting role for other schools in the Block. The schools would have quality infrastructure, innovative curriculum, pedagogy and assessment system, effective and innovative use of educational technologies including ICT and a superior system of school management and governance. 3500 of these schools will be set up in the Government sector whereas 2500 will be set up under public-private partnership.<br /><br />An amount of Rs. 12,750 crore has been earmarked for the scheme in the 11th five year plan and the budget allocation for 2008-09 is Rs. 650 crore. It is expected that these schools, spread over the entire country, will act as live demonstration of what a good school should be, and will act as nuclei for a positive qualitative shift in the schools of the neighbouring area, and will thus lead to a quality revolution in the secondary education sector. <br /><br /><strong>National Means-cum-Merit Scholarship Scheme</strong><br /><br />While access to secondary education needs to be substantially improved, the issue of equity is equally important to achieve our ultimate aim of inclusiveness in the society. To bring meritorious students belonging to dis-advantageous and socially and economically backward section of the society to the secondary schools, the Central Government has launched a scheme to award one lakh new scholarships every year to students of class IX. Each selected student will be given Rs. 500 per month for study in classes IX upto XII. This is intended to arrest the drop-out at class VIII and to encourage the students to continue upto the end of the higher secondary stage.<br /><br />Selection test for the first batch of students is being conducted by most State Governments on 16th or 17th August, 2008. It is hoped that the drop-outing of many bright students at the end of upper primary level would be checked because of this scheme, which will motivate them to continue to excel. <br /><br /><strong>Incentive Scheme for SC/ST Girls</strong><br /><br /><br />Gender disparity in secondary education is a cause of concern. In 2005-06, the enrolment ratio for girls in the secondary stage was 46.23% as against the figure of 57.72% for boys. Similarly, the drop-out rate for girls from class I to X was 73.7% as against 68% for boys. The disparity in case of SC/ST girls is even more alarming with the enrolment for ST girls at a lowly 32.6% and drop-out rate at a high of 79.8%.<br /><br />In this background, the Central Government has launched a centrally sponsored scheme to encourage higher participation of girls. Under the scheme, a sum of Rs. 3000 will be deposited in the names of all SC/ST girls and also all girls who have studied in Kasturba Gandhi Balika Vidyalayas, who pass class VIII and enrol for class IX in Government and Government-aided schools. The amount with interest will be payable to the girls after they reach the age of 18 provided they complete at least class X successfully. <br /><br /><strong>Girls’ Hostel Scheme </strong><br /><br />Another scheme specially aimed at enhancement of participation of girl students, is to provide hostel facility so that they don’t discontinue secondary education due to distance from home to school. The scheme will assist the State Governments for construction of one 100-seater hostel in each of about 3500 identified educationally backward blocks in the country. The target group would be the girls studying in classes IX to XII, with special focus on SC, ST, OBC, minority and families below poverty line. The Central Government will also assist the States in meeting a major part of the recurring cost for running the hostels during the 11th Plan. An allocation of Rs. 2000 crore has been made in the 11th Plan for this purpose. <br />Information & Communication Technology (ICT) in Schools<br /><br />The Centrally Sponsored Scheme “Information and Communication Technology (ICT) in School” was launched in December 2004, for imparting ICT literacy to high school students and also to use ICT in an effective way to enhance the quality of teaching. The Scheme is a major catalyst to bridge the digital divide amongst students of various socio economic and other geographical barriers. The Scheme provides support to States/UTs to establish ICT infrastructure on a sustainable basis and to provide internet connectivity. <br /><br />The Scheme currently covers both Government and Government aided secondary and higher secondary schools. <br />Support is provided for procurement of computers and peripherals, educational software, training of teachers and internet connectivity. <br />A computer lab having at least 10 working stations is envisaged in each school. For Smart Schools the lab may have at least 40 work stations.<br /><br />The project cost is shared in the ratio of : 75:25 between Centre and General Category States and 90:10 between Centre and Special Category States. During 2007-08, assistance was provided for 22,833 schools. <br /><br />Allocation for the scheme for the 11th Five Year Plan is Rs. 6000 crore. It is proposed to ICT-enable all the government and government aided schools in the country by the end of the 11th Plan, so as to bring about a major qualitative improvement in teaching-learning process in these schools.<br /><br /><strong>Inclusive Education for Disabled Children</strong><br /><br /><br />The Centrally Sponsored Scheme of Integrated Education for Disabled Children was launched in 1974 with a view to provide educational opportunities to children with mild to moderate disability in common schools and facilitate their retention in the school system.<br />Under the scheme, disabled children receive allowances for books & stationery, uniform, equipment (assistive aids), transport, readers, escorts, and boarding and lodging. The scheme also provides for appointment of special teachers, attendants for severely orthopaedically handicapped children, removal of architectural barriers and production of relevant instructional material. 2.84 lakh disabled children were covered under this scheme in 28 States/UTs during the Xth Plan. Over 200 NGOs were engaged in implementing the scheme. At the end of the 2007-08, 3.6 lakh disabled children were covered in 31 States/UTs with an expenditure of Rs.76.11 crore in 2007-08.<br /><br />Steps have been initiated for launching a new scheme of “Inclusive Education of the Disabled at Secondary Stage” so as to shift the focus from integration to inclusion, and a no rejection policy in the schools.<br /><br /><strong>Vocationalisation of Secondary Education</strong><br /><br /><br />The existing Centrally Sponsored scheme of Vocationalisation of Secondary Education was launched in 1988 and has already covered 10,000 schools with 25,000 vocational sections through establishment of capacity for an annual intake of 10 lakh students. Presently 150 vocational courses are being offered. The scheme of Vocationalisation of Secondary Education is under revamp to make it more need-based and to reduce the demand and supply gap in the economy. <br /><br />Besides introducing new skill-based courses at the higher secondary level with appropriate curriculum, 10,000 new vocational schools are proposed to be opened so as to enroll about 25 lakh students in these courses. Linkage with industry, scope for horizontal and vertical mobility, training of vocational teachers, modularity of courses with multiple entry and exit facilities, career guidance and counseling, apprenticeship etc., will be insisted upon so as to ensure that the courses practically benefit the students in choosing the career and in specialization in higher education. <br /><br /><strong>Other Schemes</strong><br /><br />The Central Government also runs Kendriya Vidyalayas and Navodaya Vidyalayas through autonomous organizations to provide quality education. These are pace setting schools for the entire country. There are 981 Kendriya Vidyalayas as of now. 50 of these were opened in educationally backward special focus districts during the last two years. <br /><br />Navodaya Vidyalayas are residential schools meant to provide quality education to talented rural children. There are 554 Jawahar Navodaya Vidyalayas in as many districts and these help fulfilling the aspiration of a large number of bright rural children and their parents. All expenses on boarding and lodging of students of JNVs as well as expenses on their uniform, stationery etc. are borne through support from the Central Government. It has been decided to open 20 new Vidyalayas in districts having large concentration of SC and ST population so as to give a boost to education of meritorious SC/ST children. <br /><br /><em>National Institute of Open Schooling (NIOS), </em>another autonomous organization under the Ministry of HRD provides opportunity to those outside the formal school system to learn through distance education mode. The Central Government also encourages State Governments to open their own State Open Schools. Besides conventional curriculum for various stages of school education till higher secondary level, the National Open School also offers a variety of vocational courses of practical utility. With the advent of knowledge economy and its attendant requirement of skill and attitude, the importance of secondary education can not be over stressed. The Central Government, in partnership with State Governments has chalked out a blue print to enhance access to quality secondary education while ensuring equity.MANISHhttp://www.blogger.com/profile/00428491443420277409noreply@blogger.com0tag:blogger.com,1999:blog-2672050906182920186.post-29158241619552990002009-08-22T10:38:00.005+05:302009-08-22T10:42:21.121+05:30EDUCATION AND 11TH PLANLiteracy in India has made remarkable strides since Independence. This has been further confirmed by the results of the Census 2001. The literacy rate has increased from 18.33% in 1951 to 64.84% in 2001. This is despite the fact that during the major part of the last five decades there has been exponential growth of the population at nearly 2% per annum. <br /><br />According to the Census 2001 the literacy rate in the country has increased to 64.84%, which reflects an overall increase of 12.63%, the fastest decadal growth ever. This is the highest rate since independence.The male literacy rate has increased to 75.26%, which shows an increase of 11.13%. On the other hand, the female literacy of 53.67% has increased at a much faster rate of 14.38%.The male-female literacy gap has reduced from 24.84% in 1991 to 21.59% in 2001. Mizoram has the smallest gap (3.97%) followed by Kerala (6.52%) and Meghalaya (5.82%). All States and Union Territories without exception have shown increase in literacy rates during 1991-2001.<br /><br />In all the States and Union Territories the male literacy rate except Bihar (59.68%) is now over 60%. For the first time since independence there has been a decline in the absolute number of illiterates during the decade. In the previous decades, there has been a continuous increase in the number of illiterates, despite the increase in the literacy rates, but now for the first time the total number of illiterates has come down by 24.77 million. The number of literate persons has increased to 560.68 million in 2001 thus adding an additional 201.40 million literates in the country.<br /><br /><br /><strong>Illiteracy Size </strong><br /><br />In terms of the size of illiteracy, eight States, viz. Uttar Pradesh, Bihar, Madhya Pradesh, Rajasthan, Andhra Pradesh, West Bengal, Karnataka and Maharastra had more than 15 million illiterates each and accounted for 69.7 per cent of the illiterate population of the country.The first four of these states - Uttar Pradesh, Bihar, Madhya Pradesh and Rajasthan are in Hindi belt and have 42.76% illiterates. Number of non-literates in these States - Uttar Pradesh (58.85 million), Bihar (35.08 million), Rajasthan (18.15 million) and Madhya Pradesh (17.97 million). In Bihar the number of illiterates increased from 31.98 million in 1991 to 35.08 million in 2001. Jharkhand and Chhattisgarh have 10.21 million and 6.10 million illiterates in 2001. It means that 48.12% of the non-literates reside in these six Hindi-speaking States. Other States having more than 10 million illiterates are: Orissa (11.61 million), Gujarat (13.31 million) and Tamil Nadu (14.65 million).<br /><br /><strong>Female Literacy</strong><br /><br /><br />The Census 2001 final report indicates that India has made significant progress in the field of literacy during the decade and since the 1991 census. The literacy rate as per 2001 census is 64.84% as against 52.21% in 1991, whereas the female literacy had increased by 14.4 percentage points i.e. from 39.3% in 1991 to 53.7% in 2001. Out of 864.79 million people in 7+ age group, 560.68 million are now literate out of which 224.15 million are women. Three-fourths of the male population and more than half of the female population are literate.<br /><br /><strong>National Literacy Mission (NLM)</strong><br /><br />National Literacy Mission was launched on May 5, 1988 as a Technology Mission to impart functional literacy to non-literates in the country in the age group of 15-35 years in a time bound manner. This age group has been the focus of attention because they are in the productive and reproductive period of life. The National Education Policy - 1986, as modified in 1992, also has recognised National Literacy Mission as one of the three instruments to eradicate illiteracy from the country, the other two being Universalisation of Elementary Education and Non-formal Education.<br /><br />The Mission objective was to impart functional literacy to 80 million illiterate persons in 15-35 age group - 30 million by 1990 and additional 50 million by 1995. However, now the goal of the Mission is to attain a sustainable threshold literacy rate of 75 per cent by 2007.<br />The Mission also takes into its fold children in the age group of 9-14, in areas not covered by Non-formal Education programmes to reach the benefits of literacy to out–of-school children as well. The major thrust of these programmes is on the promotion of literacy among women, scheduled castes and tribes and backward classes.<br />National Literacy Mission eventually aims at ensuring that the Total Literacy Campaigns (TLC) and their sequel, the Post-Literacy Programme (PLP), successfully move on to Continuing Education (CE), which provides a life-long learning and is responsible for the creation of a learning society.<br /><br /><strong>Functional Literacy</strong><br /><br />The adult literacy programme, defines literacy as the achievement of reading, writing and numeracy skills of a predetermined level. However, the goal goes beyond the simple achievement of self-reliance in the 3 R’s, to ‘Functional Literacy’, which is the ability to apply what one has learnt, to daily life. Functional Literacy one is capable of achieving self reliance in literacy and numeracy; becoming aware of the causes of their deprivation and moving towards amelioration of their condition through organisation, and participation in the process of development; acquiring skills to improve the economic status and general well-being; and imbibing the values of national integration, conservation of the environment, women's equality, observance of small family norms, etc. <br /><br />The acquisition of ‘Functional Literacy’ results in empowerment, a definite improvement in the quality of life and helps ensure that the majority of India can be participants in, and recipients of, the benefits of the information era.<br /><br />National Literacy Mission has succeeded in making 124.64 million persons literate. Of these 60% are female. It is also a great achievement that out of the total number of persons made literate 23% learners belong to SCs and 12% belong to STs. Under the Literacy programme 597 Districts have been covered whereas 95 Districts have been brought under Total Literacy Programme. Taking a step further 174 Districts are now under Post-Literacy Programme and 328 Districts are under Continuing Education Programme.<br /><br /><strong>Total Literacy Campaigns</strong><br /><br /><br />Total Literacy Campaign (TLC) has been the principal strategy of the National Literacy Mission (NLM) for eradication of illiteracy.The TLC has certain positive characteristics like being area-specific, time-bound, participative, delivery through voluntarism, cost effective and outcome oriented. Though the campaign emphasizes the achievement of predetermined levels of literacy and numeracy, there are other activities linked up with TLCs, such as campaigns for universal enrolment and retention in schools, immunization, conservation of environment, the small family norm, women’s empowerment, etc.<br /><br />The TLC has an assumed duration of 12 to 18 months of which half is devoted to preparation and half to actual teaching/learning activity. In exceptionally difficult areas, the duration is suitably extended. Two activities, namely, environment building as well as monitoring and internal evaluation are continued throughout the campaign.<br /><br />The initial activity of environment building is closely followed by a door-to-door survey to identify potential learners and volunteer instructors. Suitable primers (in 3 parts) are developed through the State Resource Centres for adult education in accordance with the new pedagogic technique of “Improved Pace and Content of Learning.”<br /><br />The three-legged management structure of TLC consists of popular committees from district to village levels, the ZSS supported by the subject-specific sub-committees, and the officials of the district and block level administration.<br /><br />Literacy campaigns are implemented by the Zilla Saksharata Samitis, usually headed by district collectors. Both the central and state governments participate in funding in the ratio of 2:1 for normal districts while the ratio of center and State share for districts under tribal sub-plan areas is 4:1. Presently, per learner cost for a TLC is between Rs.90 to 180.<br /><br /><strong>Post-Literacy Programme</strong><br /><br />On the conclusion of Total Literacy Campaign (TLC), Post-Literacy Programme is implemented by the Zilla Saksharata Samiti for the period of one year.<br /><br />One of the major objective of a PLP is to enable the neo-literates to learn the application of literacy skills as a problem solving tool, so that learning becomes relevant to living and working. In the limited time available during TLC, it is not possible to dwell adequately on the functionality and awareness components of the programme. Therefore, in PLP phase, these objectives take centre stage.<br /><br />One of the first tasks in a PL programme is what is known as ‘mopping up’ operation. Those learners, who dropped out or could not achieve the NLM levels of literacy in the TLC phase, are enabled to achieve them through remediation or mopping up operation.<br /><br />To ensure that there is no time lag between the conclusion of the basic literacy phase and the start of post literacy programme, which could result in a regression of neo-literates, NLM has laid a great deal of emphasis on the planning and launching of PLP well in time.<br /><br />Post literacy specifically aims at remediation, retention and consolidation of literacy skills in the first phase through guided learning. In the second phase, learners are provided with a variety of supplementary reading material and library services to help them continue learning through self-directed processes.<br /><br /><strong>Scheme of Support to NGOs</strong><br /><br /><br />The scheme of support or Assistance to Voluntary Agencies in the field of adult education was designated and started in the First Five Year Plan and was continued with the expanded scope in the subsequent plans. The National Policy on Education (NPE), 1986 has stipulated that non-governmental and voluntary organizations, including social activist groups, would be encouraged and financial assistance provided to them subject to proper management. The Programme of Action (POA) to operationalise NPE, 1986, inter-alia, envisaged relationship of genuine partnership between the Government and Non-Governmental Organisations (NGOs) and stipulated that Government would take positive steps to promote their wider involvement by providing facilities to them to participate for the selection of NGOs and grant of financial assistance to them.<br /><br />In view of the widening horizon of association of NGOs with Adult Literacy Programmes over the period of time, the Scheme is now named ‘Scheme of Support to Non-Governmental Organisations/Institutions, State Resource Centres for Adult Education and Skill Development.The objective of the scheme is to secure extensive involvement of NGOs in National Literacy Mission. The approach and process of providing financial assistance to NGOs is based on the objectives and characteristics of NLM strategy.<br /><br /><strong>State Resource Centres</strong><br /><br /><br />In order to provide academic resource support to literacy and adult education programmes, State Resource Centres (SRCs) have been established throughout the country. Since the inception of the National Literacy Mission (NLM) in 1988, the number of SRCs has risen to 26. Most of the SRCs are run by Voluntary Agencies, while a few are functioning under the aegis of the Universities.<br /><br />For administrative purposes, SRCs have been classified into two categories, namely, A & B. ‘A’ category SRCs get grants-in-aid with a ceiling of Rs.60 lakh per annum, ‘B’ category SRCs with a ceiling of Rs.40 lakh per annum. SRCs are graded on the basis of workload and number of years of functioning. In bigger States, such as UP, Bihar, Madhya Pradesh and Maharashtra, more than one SRC has been set up to facilitate literacy and adult education activities.<br /><br />With the gradual expansion of Total Literacy, Post Literacy and Continuing Education Programmes, new resource centres will be opened keeping in view the need to provide adequate and good quality technical resource support to the field programmes. New resource centres will be opened under the aegis of NGOs. All the SRCs are directly registered bodies under the Societies Registration Act with their own Memorandum of Association and Rules and Regulations.<br /><br /><strong>Jan Shikshan Sansthans</strong><br /><br /><br />The scheme of Jan Shikshan Santhan (JSS) or Institute of People’s Education (IPE), previously known as Shramik Vidyapeeth was initially launched as a polyvalent or multi-faceted adult education programme aimed at improving the vocational skill and quality of life of workers and their family members. The programme was evolved to respond to the educational and vocational training needs of numerous groups of adult and young people living in urban and industrial areas and for persons who have been migrating from rural to urban settings. Now, with the emergence of millions of neo-literates, thanks to the total literacy campaigns launched across the length and breadth of the country and the transformation that has taken place in the economic and social set up over the years, the role and scope of these polyvalent educational institutes have widened manifold.<br /><br />In the changed scenario, the focus of JSS is now shifting from industrial workers in urban areas to the numerous neo-literates and unskilled and unemployed youth throughout the country. Now, these Sansthans are to act as district level resource support agencies especially with the organization of vocational training and skill development programmes for the neo-literates and other target groups of the continuing education scheme. Hitherto, the JSS scheme was restricted to urban/semi-urban industrial areas. Now their area of operation has been extended to rural areas also. At least 25% of the beneficiaries of JSS should be neo-literates.<br />During the 10th Five-Year Plan (2002-07), 90 more Jan Shikshan Sansthans were sanctioned with the result that the total number has increased to 198. During 2007-08, 23 more JSSs were sanctioned, thus taking their total number to 221.<br /><br />The performance of Jan Shikshan Sansthans is evaluated every three years by reputed evaluating agencies empanelled with National Literacy Mission. So far, 116 Jan Shikshan Sansthans have been evaluated.<br /><br /><strong>Directorate of Adult Education</strong><br /><br />The Directorate of Adult Education, a subordinate office of the Department of Elementary Education & Literacy, Union Ministry of Human Resource Development has been functioning as the National Resource Centre for Adult Education and Literacy Programmes in the country. It is the `functional arm' of the National Literacy Mission, which is responsible for monitoring, and evaluation of various schemes launched under the aegis of the Mission. The Directorate is also entrusted with the task of developing model teaching learning materials for the learners and neo-literates and harnessing all kinds of media facilities for furtherance of the objectives of the National Literacy Mission. It provides professional, academic and technical guidance for the effective functioning of the Jan Shikshan Sansthans (Previously known as Shramik Vidyapeeths). Selected Jan Shikshan Sansthans were also provided financial assistance for implementation of Population and Development Education activities.<br /><br />With all these intense efforts at the Government level and the great strides already taken the target for 11the Five Year Plan is to achieve 80% literacy rate, reduction in gender gap in literacy to 10% and also a reduction in regional and social disparities.MANISHhttp://www.blogger.com/profile/00428491443420277409noreply@blogger.com0tag:blogger.com,1999:blog-2672050906182920186.post-83449248120112657962009-08-22T10:38:00.002+05:302009-08-22T10:39:15.354+05:30Topic Govt. Schemes, Health, Science and Technology, Social IssuesMANISHhttp://www.blogger.com/profile/00428491443420277409noreply@blogger.com0tag:blogger.com,1999:blog-2672050906182920186.post-91187600292527160972009-08-22T10:38:00.001+05:302009-08-22T10:39:13.726+05:30Topic Govt. Schemes, Health, Science and Technology, Social IssuesMANISHhttp://www.blogger.com/profile/00428491443420277409noreply@blogger.com0tag:blogger.com,1999:blog-2672050906182920186.post-53288986798505399482009-08-22T10:38:00.000+05:302009-08-22T10:39:12.744+05:30Topic Govt. Schemes, Health, Science and Technology, Social IssuesMANISHhttp://www.blogger.com/profile/00428491443420277409noreply@blogger.com0tag:blogger.com,1999:blog-2672050906182920186.post-41550027794943915312009-08-22T10:32:00.000+05:302009-08-22T10:38:04.684+05:30NAXAL PROBLEM NEEDS HOLISTIC APPROACHIf the Prime Minister Dr. Manmohan Singh has been saying it repeatedly that Naxalism is the biggest challenge to our internal security he clearly wants to underline the dangers it has been posing to India, as also the need to deal with the challenge in a most effective way.<br /><br /><br />Naxalism, which started from Naxalbari area in West Bengal in 1967, ostensibly to champion the cause of small farmers and tribals through violence, was wiped out in 1970. It soon became out of fashion in its homeland West Bengal. But the underground operations of the outfit continued. The problem became more serious after the merger of the Peoples War Group (PWG) and the Maoist Communist Centre (MCC) in September, 2004 which led to the formation of the CPI (Maoist). Naxalism today holds sway in vast swathes of 10 states in the country, involving about 180 districts.<br /><br />Recently the Home Minister said in the Parliament that Naxal challenge had been underestimated over the years as a result of which left wing extremism had increased its area of influence. The Home Minster said that they now pose a very grave challenge to the state. Just days before his statement 36 policemen, including an SP, had been ambushed by the Maoists in Chhatisgarh.<br />It was in this backdrop Mr. Chidambaram urged the Members of Parliament to join hands in facing the challenge. “All sections of the house must recognize that if we must remain a democratic, republic ruled by law, we must collectively rise and face the challenge of left wing extremism” Shri Chidambaram said.<br /><br /><br />In its status report presented to the Parliament on March 13, 2006, the then Home Minister Mr. Shivraj Patil said that the Naxalite movement continues to persist in terms of spatial spread and intensity of violence. He pointed out that it remains an “area of serious concern”. Naxal violence has claimed about 6000 lives during the last 20 years. The question that arises is why have the Naxals been able to extend their area of influence over the years to become a serious threat to the country’s internal security?<br /><br /><br />It is encouraging to know that the government is not treating it as a mere law and order problem. The 2006 status report itself made it clear that the Government would address the problem in a holistic manner. That includes ‘political security, development and public perception management fronts’ as well. Surely, the Naxal problem is deeply rooted in the social and economic disparities in remote and tribal areas.<br /><br />Since the fruits of development have not percolated to these areas, the Naxal outfits are able to exploit the sentiments of the local people. But the outfits themselves have been preventing and in fact destroying, developmental initiatives taken by the government. They destroy roads, railway infrastructure and administrative institutions that are needed for speeding up developmental activities. Not only this, they indulge in train hold-ups, jail breaks and attacks on politicians.<br /><br /><br />That is proof enough to indicate that they do not have real interest in the development of these areas and their loyalties lie elsewhere. Perhaps, they want to usurp political power which, they think, flows through the barrel of the gun.<br /><br />At the same time, a lot many measures need to be taken to make the fight against Naxalism effective. On top of this is improving governance in the affected areas by moving corrupt officials who exploit the local people. It must also be ensured that large scale projects in these areas do not lead to displacement of people, who in any case, live a life of penury.<br /><br />Since law and order is a state subject, the role of State Governments in dealing with the problem can hardly be overemphasized. They too have their share of responsibility to fulfil. A good deal of coordination between the Centre and the States is, therefore, called for. This is particularly true in view of the fact that the Outfits have established inter-state networks. The state police need to be modernized to be able to tackle the Naxal attacks. The Greyhounds experiment in Andhra Pradesh is a case in sight. Actionable intelligence collection and sharing mechanisms need to be strengthened. Funds provided to the States under the Police Modernization Scheme need to be better utilized.<br /><br />The states also need to go fast with raising India Reserve Battalions, particularly in Naxal affected areas, which besides addressing security concerns, provide jobs to the unemployed youth.<br /><br />A specially trained police force also needs to be put in place to fight the Maoists who basically are adopting guerrilla warfare techniques. There is also a difference in their targets. While other terrorist groups attack the strong foundations of the country such as democracy, secularism and the financial institutions, Maoists make India’s weak points like poverty and economic disparity as their targets. All this needs to be factored in the strategy to deal with the Maoist problem.<br /><br />Keeping in view the fact that the Naxal groups have been raising mainly land and livelihood issues, it is important that land reforms are taken up on a priority basis. States have also to focus on physical infrastructure like roads, buildings, bridges, railway lines, communications and power etc. There is no room to brook any delay on this account.<br /><br />Unfortunately, the several rounds of talks held with the Naxals hitherto and the announcements of amnesties and attractive rehabilitation schemes have not worked so far. Some states like Andhra Pradesh have a good rehabilitation policy and it has achieved some success, but a lot more remains to be done.<br /><br />The Government indeed is committed to address the Naxal problem in right earnest. It is focusing on improving intelligence set up at the state level, providing help to the states to modernize and train their police forces and accelerate development in the affected areas. What is needed is better coordination both on security and developmental fronts to meet the challenge posed by the NaxalsMANISHhttp://www.blogger.com/profile/00428491443420277409noreply@blogger.com0tag:blogger.com,1999:blog-2672050906182920186.post-46436414117312315312009-08-22T10:31:00.000+05:302009-08-22T10:32:22.548+05:30Modernising the Indian ArmyFOR over a decade the Indian Army’s efforts to modernise have been thwarted due to political neglect and lack of adequate budgetary support. The defence budget for Financial Year 2008-09 increased 10 per cent in nominal terms, barely adequate to keep up with inflation and the fall in the value of the rupee against the US dollar, but decreased to less than 2.0 per cent of India’s projected GDP. A sum of US $12 billion was provided for capital acquisitions (US $9 billion for the army), but of this US $0.6 billion (Rs 3,000 crore) is expected to be surrendered as unspent.<br /><br />Nothing exemplified the army’s lack of preparedness for war more than the fact that 155 mm ammunition for the Bofors howitzer had to be imported from South Africa during the Kargil conflict in 1999. Had the conflict not been confined to the 150 km frontage of the Kargil sector, T-72 and 130mm medium gun ammunition too may have run short and it would have been politically embarrassing for the government as well as the army.<br /><br />Not only that, in the plains the army would have had to fight with obsolete Vijayant tanks and several other vintage equipment that were unsuitable for combat. Even though A.K. Antony, the Defence Minister, has said, ‘We need to cut down on the unnecessary procedures, bottlenecks and red tape in our procurement mechanism,’1 the Ministry of Defence has been unable to give modernisation of the armed forces the priority that it deserves.<br /><br />The Army Chief’s modernisation vision is to ‘adapt to high-end technology, improve night-fighting capability… (and) information technology, information warfare and network centric warfare.’ The indigenously designed Arjun main battle tank (MBT) has been in the pipeline for over two decades. Though the tank has many good features, it has consistently failed to meet the army’s GSQR for an MBT and orders have been placed for only 124 tanks to be manufactured. The lack of progress on the Arjun MBT has significantly slowed down the pace of armour modernisation. In the year 2000 India signed a deal with Russia to acquire 310 T-90S tanks. Subsequently, India began to assemble these tanks at Avadi. It has recently been reported that in addition to these, India has decided to acquire another 347 T-90S tanks and assemble them within the country.<br /><br />The first Indian assembled T-90S (Bhishma) rolled off the production line on 8 January 2004. Meanwhile, a large number of T-72M1 (Ajeya) tanks are still awaiting modernisation. The lack of a suitable fire control system and night fighting capability are major handicaps.<br /><br /> <br /><br />In a future conventional war that will be fought under the nuclear shadow, manoeuvre will be extremely limited. This restriction will lead to much greater emphasis being placed on firepower to achieve the laid down military aim. Hence, it is imperative that artillery modernisation is undertaken with alacrity so as to generate firepower asymmetries on the future battlefield. The last major acquisition of towed gun-howitzers was that of about 400 pieces of 39-calibre 155mm FH-77B howitzers from Bofors of Sweden in the mid-1980s. This gun had proved its mettle in the Kargil conflict. Just when a contract for 120 tracked and 180 wheeled self-propelled (SP) 155mm guns was about to be concluded after years of protracted trials, South African arms manufacturer Denel, a leading contender for the contract, was alleged to have been involved in a corruption scam in an earlier deal for anti-material rifles (AMRs).<br /><br />Since January 2008, the Ministry of Defence (MoD) has issued three global tenders for 155mm guns and howitzers for the mountains, the plains and self-propelled guns for the deserts. Summer and winter trials were expected to be held in 2009-10, but so far the bids received are still being evaluated. The artillery modernisation programme is bound to see further delays.<br /><br /> <br /><br />The probability of the next conventional war breaking out in the mountains is far higher than that of a war in the plains. With this in view, the artillery recently conceptualised a requirement for a lightweight towed howitzer of 155mm calibre for employment in the mountains. Neither the present Bofors howitzer nor its 52-calibre replacement will be capable of effective operations in the mountains. A lightweight 45-calibre 155mm howitzer weighing less than 5,000 kg, with a light but adequately powered prime mover, is ideal for the mountains. In January 2008, the MoD floated a Request for Proposal (RfP) for 140 pieces of ultra-light 39 calibre 155mm towed howitzers for use by the Indian Army’s mountain formations. Presumably, these will also be employed by its rapid reaction divisions – as and when they are raised – as the howitzers will be easy to transport by air.<br /><br />India has floated a global tender for the purchase of 400 52-calibre 155mm towed artillery guns for the army, to be followed by indigenous manufacture of another 1,100 howitzers. An RfP has also been issued for 180 wheeled self-propelled guns for around Rs 4,700 crore for employment by mechanised forces in the plains and semi-desert sectors. Approximately 180 pieces of 130mm M46 Russian medium guns have been successfully ‘up-gunned’ to 155mm calibre with ordnance supplied by Soltam of Israel. The new barrel length of 45 calibres has enhanced the range of the gun to about 40 km with extended range ammunition.<br /><br /> <br /><br />A contract for the acquisition of two regiments of the 12-tube, 300mm Smerch multi-barrel rocket launcher (MBRL) system with 90 km range was signed with Russia’s Rosoboron-export in early 2006. This will be a major boost for the long-range firepower capabilities of the army. Extended range (ER) rockets are being introduced for the 122 mm Grad MBRL that has been in service for over three decades. The ER rockets will enhance the weapon system’s range from 22 to about 40 km. A Rs 5,000 crore (US $1billion) contract has also been signed for the serial production of the Pinaka MBRL weapon system, another DRDO project plagued by time delays and completed with help from Larsen and Toubro and the Tatas.<br /><br />Since the Bofors 155mm Howitzer was introduced into service, the indigenously designed and manufactured 105 mm Indian Field Gun (IFG) and its (not so) light version, the Light Field Gun (LFG), have joined the 75/24 Indian Mountain Gun, the 100mm Russian field gun and the 122mm Russian howitzer on the obsolescence list.<br /><br />Counter-bombardment (US term counter-fire) capability is also being upgraded, but at a slow pace. At least about 40 to 50 weapon locating radars (WLRs) are required for effective counter-bombardment, especially in the plains, and only a dozen have been procured so far. In addition to the 12 AN-TPQ 37 Firefinder WLRs acquired from Raytheon, USA, under a 2002 contract worth US $200 million, Bharat Electronics Limited is reported to be assembling 28 WLRs. These radars will be based on both indigenous and imported components and have been approved for introduction into service after extensive tests. The radar is expected to match the capabilities of the Firefinder system and will have a detection range of about 40 kilometre.<br /><br /> <br /><br />The BrahMos supersonic cruise missile (Mach 2.8 to 3.0), with a precision strike capability, very high kill energy and range of 290 km, was inducted into the army in July 2007. It is a versatile missile that can be launched from TATRA mobile launchers and silos on land, aircraft and ships and, perhaps in future, also from submarines. 50 BrahMos missiles are expected to be produced every year. Efforts are underway to further increase its strike range. BrahMos Aerospace has orders worth Rs 3,500 crore (US $0.65 billion) from the army and the navy, which has opted for the anti-ship as well as the land attack cruise missile (LACM) versions. These terrain hugging missiles are virtually immune to counter measures due to their high speed and very low radar cross section and are far superior to subsonic cruise missiles like Pakistan’s Babur.<br /><br /> <br /><br />Despite its large-scale employment on border management and extensive commitments in IS and CI operations, infantry modernisation had been languishing for several decades when the Ministry of Defence (MoD) finally cleared a visionary plan to modernise the army’s infantry battalions by according ‘in principle’ approval in the form of Modification 4B to the war establishment (WE) of a standard infantry battalion in 1998. However, no funds were specially sanctioned for this purpose till the NDA government approved the expenditure of Rs 3,500 crore (US $0.6 billion) in September 2003. The army has initiated a project for a Future Infantry Soldier as a System (F-INSAS). ‘F-INSAS basically aims at "converting an infantryman into a fully-networked all-terrain, all-weather, weapons platform with enhanced lethality, survivability, sustainability, mobility and situational awareness" for the digitised battlefield of the future.’2<br /><br />While 250 Kornet-E anti-tank guided missiles (ATGMs) with thermal imaging sights have substantially increased the anti-tank capability of infantry battalions, most efforts to modernise the equipment held by infantry and Rashtriya Rifles (RR) units are aimed at enhancing their capability for surveillance and target acquisition at night and boosting their firepower for precise retaliation against infiltrating columns and terrorists holed up in built-up areas. 200 hand-held BFSRs with practical ranges up to seven to eight km where clear line of sight is available, 2,000 hand-held thermal imaging devices (HHTIs) with ranges up to 2,000 metres for observation at night and stand-alone infrared, seismic and acoustic sensors with varying capabilities have enabled infantrymen to dominate the Line of Control so completely that infiltration has come down to almost a trickle.<br /><br /> <br /><br />The newly acquired weapons, which complement these surveillance and observation devices, include: 1,500x 84 mm rocket launchers, including some disposable ones; 1,000 AMRs (anti-material rifles); 8,000 UBGLs (under-barrel grenade launchers); 4,000 new generation carbines; 300 bullet proof vehicles; and, several hundred accurate sniper rifles. However, the numbers acquired and the ammunition stocks are still inadequate and need to be made up more rapidly.<br /><br />While the INSAS 5.56 mm assault rifles have now been in service for almost 10 years and proved to be effective, the light machine gun (LNG) version is still facing teething problems and the carbine version for close quarter battle has not found favour with the army. New 5.56 mm assault rifles of bull-pup design with an integrated laser range finder and grenade launcher are under development. Efforts are also being made to provide infantry platoons and sections with integrated GPS-based navigation system, secure lightweight walkie-talkie radio sets and better protective gear with a helmet that incorporates a built-in head-up display.<br /><br />The mechanised infantry is now equipped with the BMP-2 ICV Sarath of which over 1,000 have been built since 1987. A new variant is the 81 mm Carrier Mortar Tracked Vehicle (CMTV) that is based on the chassis of the Sarath ICV and has been indigenously developed to enhance the integral firepower available to mechanised infantry battalions. Other variants include a command post, an ambulance, armoured dozer and engineer and reconnaissance vehicles. Mechanised reconnaissance and support battalions need better surveillance radars, fire-and-forget ATGMs and effective night fighting capability.<br /><br /> <br /><br />A new DRDO project that is reported to be ongoing aims to equip future soldiers with lightweight force multipliers. Soldiers of the future will have miniaturised communication and GPS systems, small power packs, weapon platforms and smart vests with fibre-optic sensors. For over 350 infantry battalions, plus about 150 Rashtriya Rifles, Assam Rifles and Territorial Army battalions, these major changes will be extremely costly to implement and will spill over at least 10 to 12 years – that is, if the funds can be found. Without modernising this cutting edge of its sword, the army will soon begin to resemble the armies of India’s lesser neighbours.<br /><br />Another DRDO project that is way behind schedule is the Nag anti-tank missile system. The antiquated Jonga-mounted SS-11 B1 anti-tank guided missile (ATGM) system has been replaced in missile battalions by MILAN shoulder-fired ATGMs. However, a vehicle-mounted missile system like the Nag is definitely necessary for reconnaissance and attrition tasks and for anti-tank screens. The experimental Plan AREN tactical communications system for strike formations needs early replacement. The ability to carry broadband data needs to be enhanced in particular. Even the more recent static communications network called ASCON lacks ISDN capability for the real-time transmission of maps and streaming video.<br /><br /> <br /><br />The Defence Minister, A.K. Antony, recently admitted that there are gaps in India’s air defence coverage.3 While the allusion was primarily to the lack of sufficient radar coverage to detect aerial threats to India’s air space, the air defence (AD) of field formations continues to be given a much lower priority than it deserves. With the DRDO’s indigenous Akash medium-range and Trishul short-range surface-to-air (SAM) missile projects not making major headway, it is time to start looking at substitutes from abroad. The air defence of mechanised forces is another area that is crying for attention. The SAM-6 and SAM-7 Kvadrat-Strela medium range missile system, the backbone of AD for strike formations since the early 1970s, is now ageing and needs urgent replacement.<br /><br />The Tungushka and the OSA-AK (SA-8) missile systems are on the obsolescence list and the 23mm, multi-barrelled Schilka tracked air defence gun system is already obsolete. In fact, the assets of the Army Air Defence corps are grossly inadequate to provide high quality low-level air defence to the field formations. Hence, forward combat echelons will lack effective protection against enemy aircraft during a future war. The young Army Air Defence corps requires substantial capital infusion to really come into its own.<br /><br />For the future, the Defence Research and Development Organisation (DRDO) is planning to develop an integrated air defence system with exo-atmosphere (above 40 km altitude) and endo-atmosphere (below 30 km) capabilities by 2009-10. The system may also have built-in features to double up as a tactical missile, apart from functioning as an extended air defence system to engage target aircraft beyond 100 km. This was stated by V.K. Saraswat, Chief Controller, DRDO R&D (Missiles and Strategic Systems), after the successful test launch of a high-altitude interceptor missile from the Wheeler Island in December 2007. This programme will also lead to the development of an indigenous ballistic missile defence (BMD) capability.<br /><br /> <br /><br />An automated command and control and decision support system for use by the General Staff is still far from becoming a reality, as also supporting systems like the battlefield surveillance system and air space management system. The urgent requirement of real-time satellite reconnaissance systems has still not been operationalised despite the nuclear overhang under which the armed forces now operate. Even though the cameras on India’s remote sensing and cartographic satellites now have sharply enhanced resolutions, less than one metre, military-grade photographs of still better resolution are needed to be purchased from the open market. These sources may dry up quickly during war.<br /><br />A ‘system of systems’ approach must be followed so that scarce RSTA and communications resources can be synergistically configured and optimally exploited, based on the concept of ‘network-centric warfare’ in which surveillance sensors, targeting systems and ‘shooters’ are fused together in a seamless ‘system of systems’ that reduces response time between the acquisition of a target and its destruction to 15-20 minutes.<br /><br />Though some modern frequency hopping radio sets with integral encryption devices have been introduced into service in recent years, networked communications, which form the backbone of an effective C4I2SR system, need substantial upgradation. The tactical-level Tac C3I system for field formations is in urgent need of an upgrade. The Plan AREN system has been in service for almost three decades and is based on outdated and bulky technologies. The ASCON communication system for voice and data links between static HQ and those in peacetime locations, still has some years of service left as it is of modular design and can be upgraded to a limited extent. However, its capability to provide data links is rather limited as data requirements have grown by leaps and bounds over the last decade or so. A tri-service Defence Communication Network (DCN) is in an advanced stage of planning.<br /><br /> <br /><br />While some Stentor long-range BFSRs have been in service for over a decade, medium-range radars are still to be acquired. Israeli Searcher-I and Heron unmanned aerial vehicles (UAVs) have been introduced into service but these are few in number and it will be a long time before they really make a difference by providing a real-time surveillance capability so that ground forces can initiate action even as a fresh input is received. Only a small number of Searcher-II UAVs, with an upper ceiling that makes them suitable for the mountains, have been acquired.<br /><br />PGMs are increasingly gaining currency as weapons of choice in conflict on land, however, the Indian artillery does not have PGMs in quantities large enough to matter. Only limited quantities of the Russian Krasnopol PGM have been imported for the Bofors 155mm howitzer. Among others, the Bofors Bonus PGM is a suitable candidate, subject to successful trials in the deserts and mountains.<br /><br /> <br /><br />Despite a Long-term Integrated Perspective Plan (LTIPP) and five-year Defence Plans, approval has to be sought on file for each new weapon system or piece of equipment on a ‘case-by-case’ basis. It is by now well-known how each such case chronicles the saga of an uphill struggle to get approval first from the MoD, then MoD (Finance), the Ministry of Finance (MoF) and, finally, the Cabinet Committee on Security. All this is only possible after the DRDO has first certified that the weapon system or equipment in question cannot be developed and manufactured indigenously and such a certificate is hard to come by. Gradually these archaic procurement and acquisition procedures are being reviewed and improved. The Defence Procurement Procedure (DPP) 2008 was promulgated recently.<br /><br />The approach to army modernisation must be more focused; the priorities need to be clearly established and then adhered to. The government must give a firm commitment in terms of funds and the MoD should streamline its procedures and processes for speedy procurement of high priority weapons and equipment. It is time to institute a rolling, non-lapsable defence modernisation fund of Rs 25,000 crore (US $5 billion) as a viable method of ensuring that defence procurement is not subjected to the vagaries of annual budgets. The present situation is disturbing and, if allowed to go on indefinitely, will seriously compromise the army’s preparedness to fight the next border war that inimical neighbours like Pakistan can be expected to thrust on India. The MoD ‘has assured the army of full support for its around 600 modernisation schemes, worth about Rs 70,000 crore in the 11th Plan (2007-2012) period,’4 but it remains to be seen whether this will actually materialise.MANISHhttp://www.blogger.com/profile/00428491443420277409noreply@blogger.com0tag:blogger.com,1999:blog-2672050906182920186.post-79916822454537730692009-08-22T10:30:00.000+05:302009-08-22T10:31:23.987+05:30India and crisis managementTHE reaction of states and regimes to crises is a staple of the study of modern international relations, and an important part of the study of business strategy and public policy. International crises, in particular, have a certain romance about them – the looming possibility of escalation (especially in a nuclear environment), the sometimes reckless use of brinkmanship, the role of covert communications and back channels, and the watchful eye of the international community and the possibility of third party intervention all provide great drama to the study of relations between states.<br /><br />Modern India, like many other states, regularly contends with crises. Some have been domestic – the Bhopal disaster, the economic crisis of 1990, and most recently the tsunami of 2004-2005. India has also faced both bilateral and multilateral international crises, including the crisis of 1971, at least six different military crises with Pakistan since 1984 (with a progressively more threatening nuclear component), the intervention of a peace keeping force in Sri Lanka in 1987, the evacuation of Indian citizens abroad in 1990 and 2006, and multiple terrorist incidents. These all give some evidence for identifying India’s crisis management ‘style’.<br /><br />This essay will focus on several key components of crisis and crisis management – surprise and the role of intelligence agencies both before and during the crisis; cooperation and coordination among government agencies in crisis; the use of signalling and communications in crisis; the role of leadership in managing and defusing crises; and how the Indian system has adapted and learned from each crisis. This essay will also focus primarily on crises with Pakistan, because crisis management is more difficult in the face of an adversary, and because the number of crises with Pakistan since 1984 provides a more consistent source of examples to demonstrate institutional learning and change.<br /><br />The romance of crisis management as a focus for the study of international relations dates back to the crises of October 1962. For India, of course, military and political leadership struggled with the implications of a looming military defeat on the Sino-Indian border. In the United States, the Himalayan War was subsumed in what for the US was a much greater crisis in the Caribbean – the famous Cuban Missile Crisis. This two-week event is now immortalized in film (Thirteen Days in October) and books (Essence of Decision), and remains a case study for the understanding of international relations. What most Americans and Indians do not know is that at the same time President Kennedy created the famous ‘EXCOM’ (executive committee) of the highest ranking officials for discussion of Cuba, he simultaneously created a second committee of key officials at a slightly lower tier in the bureaucracy to consider options in the Sino-Indian conflict.<br /><br /> <br /><br />In the United States, crisis management became almost a cult phenomenon – studied intensely by businesses, policy-makers, and academics. The reason for this is simple. Crises provide a unique opportunity for officials to make decisions that matter. Those decisions are made under pressure – correct decisions must be made in a timely manner. The correctness of the decision is measurable, since the crisis either resolves satisfactorily (including, in some cases, a ‘win’) or it does not. Crises provide a benchmark for measuring executive performance at the highest level, under the greatest pressure, and often in circumstances of intense competition.<br /><br />It would be a mistake to assume that the American fascination – some might say obsession – with crisis management is found in equal measure elsewhere in the world. Different states and regimes manage crises in different ways – each has its own particular style, resulting from its own history, traditions, and institutions. What is so interesting about the Indian case is how crisis management has evolved, since 1962, in such different ways from the US.<br /><br /> <br /><br />In India, especially in government, the style of decision-making is quite different from the United States. India has large, highly trained bureaucracies, but decision-making remains tightly centralized, hierarchical, and stovepiped. The Prime Minister and a handful of close advisors already make most of the major decisions in government – often in consultation, but the nature of Indian decision-making already vests enormous authority and routine responsibility in the hands of the very top leaders. This process of centralization, present since independence, has only accelerated since the 1970s. The small strategic enclave that dominated nuclear decision-making from 1947-1998 symbolizes this tightly-knit, highly centralized decision-making style. A crisis, which is a rare opportunity to act decisively for American executives, is very much ‘business as usual’ in the Indian system – with perhaps a slightly elevated sense of haste.<br /><br />India’s inter-agency process is also unique. The Lok Sabha plays remarkably little role in national security or foreign affairs. The extraordinary influence of certain key institutions – the Ministry of External Affairs, Indian Administrative Service, and Defence Research and Development Organization (DRDO), to name a few – is not necessarily matched by an ability to coordinate across agencies or work cooperatively. Competition between ministries – the Ministry of Finance, DRDO, and the Ministry of Defence on matters of defence procurement – and between elements of the bureaucracy (Indian Foreign Service and Indian Administrative Service, for example) inhibits normal decision-making, and does not appear to decrease substantially in crisis.<br /><br />Finally, India’s unique civil-military relationship creates an ambiguous impact on policy – in most periods, military influence is limited and tightly channelled into specific areas of professional expertise (tactics, operations, force structure, and certain elements of procurement). At times, however, particular Indian military leaders have been extremely influential or outspoken, creating points of dissonance in what otherwise appears to be a gradual evolution towards modest but greater military involvement in foreign policy matters.<br /><br /> <br /><br />Surprise is endemic to crisis, as friction is to warfare. What creates a crisis is at least in part a sense of psychological shock – the abrupt emergence of the unexpected. It is easy to blame intelligence agencies and professionals for failure to anticipate the unexpected, but this often unrealistic. Uncertainty is a fundamental factor in intelligence collection and interpretation. What is equally interesting is how intelligence adapts to crisis, how it is used, and how accurately it assesses second-order effects of the activities of the state.<br /><br />Both Indian and Pakistani scholars and analysts routinely reassure Americans that the regional nuclear balance is stable, because both sides understand one another so well. The experience of the region since the mid-1980s, however, suggests that surprise and crisis have been endemic, at least in part because of intelligence failures based on significant misperception or over-confidence. From Surprise to Reckoning: The Kargil Review Committee Report devotes three chapters and several different sections on findings and recommendations to the inadequacy of India’s intelligence gathering efforts. The report makes a series of recommendations about both organizational changes and the need to provide greater redundancy in collection and assessment. Not all the recommendations have been acted upon – this is also the case with the American 9/11 Commission Report.<br /><br /> <br /><br />The inability to predict certain second-order effects in earlier crises is quite evident. In the Brasstacks crisis of 1986, for instance, there appears to have been no awareness in India that the nature of the later stages of the operation might create a crisis. A routine military exercise practising the dispersal and concealment of key strike elements in the Indian Air Force generated great alarm among both Pakistani and US analysts in 1984. Routine Indian Army exercises in both 1990 and 2008 were interpreted by Pakistan (rightly or wrongly) as aggressive or threatening in the midst of evolving crises. It remains unclear how much of India’s failed effort at coercion in 2001-2002 was the result of flawed intelligence assessments, and how much was simply the result of frustration and a lack of credible military options.<br /><br />India’s intelligence agencies, particularly the Research and Analysis Wing (R&AW), have a historically close relationship with the office of the prime minister. As a result, during crises their output has been, increasingly, utilized for signalling purposes (see below). The Kargil Review Committee recognized the most spectacular coup of the 1999 conflict – the interception and subsequent publication of General Musharraf’s high-level telephone conversations. Indian intelligence has also been used for diplomatic purposes in 1971, to publicize Pakistan’s actions in what is now Bangladesh, and also in both the 2001-2002 and 2008 Mumbai attacks to indicate links to Pakistani intelligence agencies and support.<br /><br /> <br /><br />As mentioned above, Americans revel in crisis management at least in part because it allows executives to step out of their institutional role and consider and inform broader policy-making. Because of crises and more extended conflict experiences (especially Vietnam, and now Iraq), the United States is institutionalizing both jointness (coordination between military services) and inter-agency cooperation (between various government agencies). In the US system, influence depends not only on personalities, but also on resources, which makes the Department of Defense an extraordinarily powerful player in foreign policy.<br /><br />The Indian system is evolving much more slowly towards joint and inter-agency cooperation and coordination. Barriers to information sharing are sometimes formidable, and do not appear to lift significantly in crisis. The IPKF mission (Operation Pawan) was hampered by inter-service issues – the Indian Navy now admits in its Indian Military Maritime Strategy that ‘…it often deposited the troops ashore in an unfit condition to fight.’ Sharing of intelligence between R&AW and the army in the Sri Lankan intervention has been criticized by some analysts. The MEA was at least partially excluded from the planning of Brasstacks, and was either unwilling or unable to provide insight into possible Pakistani reactions. The misreading at almost all levels of Pakistan’s response to India’s 1998 nuclear tests contributed to two successive crises – the first in the period just before Pakistan’s test, when Pakistani security responded to an anticipated (but non-existent) Indian pre-emptive strike, and later in Kargil.<br /><br />The tensions in cooperation are only exacerbated by Indian civil-military relations. The role of the military, and particularly the army, is tightly regulated by Indian political leadership. At the same time, the army is by far the largest service, and the one with the greatest capacity in a wide range of contingencies. As a result, the establishment of joint and inter-agency coordinating bodies – the Integrated Defence Staff, or a National Security Council – has been complicated and, to date, incomplete. The response to the Mumbai attack suggests a range of obstacles to effective coordination.<br /><br />Jointness and inter-agency cooperation thrive, however, in crisis circumstances in India that are non-competitive – the response to the tsunami in 2004-2005, in which joint planning played a critical part is an interesting example. The enormous difficulty the US had in managing the Hurricane Katrina disaster suggests a counterpoint – the US may be much less focused or adequate in organizing for natural disasters than in thinking about international crises. This may be a function of familiarity (the Indian Ocean is the scene of catastrophic natural disasters on a more regular basis than the continental US), of institutional competence and capability, or perhaps of institutional focus and organizational style.<br /><br /> <br /><br />A crucial element of crisis management is the use of communications and signalling. These tools allow governments to frame the nature of the problem for their own populations, to influence the international community, and most crucially to manage escalation and tension with the adversary, leading to a resolution of the crisis short of major war. These efforts can include not only official remarks and formalized bilateral communications channels, but also informal channels, ‘Track Two’ approaches (often through former officials), third-party diplomatic intervention, and the use of leaks to local and international media.<br /><br />US analysts were particularly struck by the reluctance of both India and Pakistan to use a ‘hot line’ established between the two military headquarters during crises in the late Cold War period. The US had come to rely on these official channels for defusing potential crises, and for simply keeping the Soviets informed of potential surprises, during the Cold War. As the Indo-Pakistan relationship became more hostile and crisis-prone, primarily because of Pakistani support for a range of militants attempting to destabilize India, India’s use of signalling and communications evolved.<br /><br /> <br /><br />A major argument for more control in the process emerged during the Kargil conflict, when multiple Indian sources of varying levels of official influence made remarks about nuclear preparedness and strategy. These communications included belligerent statements from the RSS – which Pakistanis might have interpreted as much more ‘official’, given the BJP-led coalition government, than they actually were. Lack of control over nuclear signalling is an easy route to inadvertent escalation, and it is clear that during Operation Parakram the Indian government exercised more stringent control over the process. Track Two diplomatic efforts, at the time, apparently played some role in crisis management – although they were ultimately unsuccessful in creating a solution to the Kashmir issue.<br /><br />An area where India has been particularly effective in influencing both domestic and international audiences has been the use of the well-placed intelligence release. The release of transcripts of telephone calls between Pakistani leaders during the Kargil crisis clearly delegitimized Pakistan’s spurious official story. Similarly, the leaking of some data about the terrorist attackers on 13 December 2001 made a profound impression on the US and the international community, and essentially confirmed the Pakistani origin of the attackers, if not the attack itself. Most recently, the release of a significant file on the Mumbai attack, and the continuing flow of information from the one captured terrorist, leave no doubt about the Pakistani origins of the attackers.<br /><br /> <br /><br />Given India’s centralized decision-making process, it is not surprising that executive leadership is crucial in crisis management. Various leaders have demonstrated somewhat different approaches – Indira Gandhi, for example, was opportunistic and Machiavellian in her exploitation of the 1971 crisis. Rajiv Gandhi also exhibited an opportunistic side in 1986 – perhaps from inexperience, perhaps from the unique influence of a pair of senior military and defence advisors, or perhaps out of a genuine desire to influence Pakistan before its nuclear capacity was actualized. Atal Bihari Vajpayee demonstrated both idealism after the nuclear tests and a frustrated (and entirely understandable) outrage during Kargil and Parakram. In each of the latter cases, however, belligerent rhetoric did not blossom into unconstrained military action. In response to individual terrorist acts, Vajpayee chose not to overreact to the Indian Airlines 814 hijacking incident in 1999, and Manmohan Singh showed enormous restraint over Mumbai.<br /><br />Each of the crises with Pakistan has been a test of Indian policy, and of the utility of military force in managing its relationship with Pakistan. Because these crises have been nearly constant, averaging at least two per decade since the 1980s, they also constitute a referendum on the policies of particular governments and of the Indian leadership consensus on the Indo-Pakistani relationship. During and after each crisis, the existing Indian leadership must grapple with how tough a stance they wish to take, the role of military force, and how they wish to conduct diplomacy with Pakistan during and after the crisis. Each crisis provides plenty of ammunition for partisan critics and for those who believe India should take a far more antagonistic stance towards their western neighbour.<br /><br /> <br /><br />It is interesting, therefore, that the overall trend in Indian policy, reinforced through multiple crises with leaders from several different political parties and alliances, has been pragmatic and restrained. Some, especially in the United States, argue that this is attributable to the presence of nuclear weapons on both sides. Nuclear weapons undoubtedly play some role in Indian restraint, but do not explain some remarkable choices. PM Vajpayee, for example, had every reason not to conduct any kind of negotiations with General Musharraf once he took power, given Musharraf’s role in the Kargil conflict. He could easily have opted for something like a containment policy – an option that was frequently mentioned among Indian analysts and critics – given the woeful state of Pakistan’s economy, diplomatic relations (especially with the United States), and the ongoing militancy in Jammu and Kashmir. Rajiv Gandhi opted for ‘cricket diplomacy’ rather than Operation Trident. Manmohan Singh chose not to pressure Pakistan’s new and fragile democracy too fiercely, despite the viciousness of the Mumbai attacks. Each crisis, therefore, has contributed to the strengthening of an Indian tradition of watchful engagement with Pakistan, however unpleasant that may occasionally seem.<br /><br /> <br /><br />Responses to domestic crises, however, have led to considerable adaptation by leadership. The Bhopal disaster reversed Indo-US economic relations. The economic crisis of 1990-1991 led to a reassessment of India’s economic policy. Internal conflicts in Punjab and elsewhere, even when receiving foreign support, created opportunities to make significant changes in security policy and in the management of local politics. Internal crises, therefore, appear to provide opportunities for major policy innovation and response, in contrast to external crises which appear to reinforce a relatively consistent policy approach.<br /><br />This makes, again, an interesting contrast with the American experience. Americans tend to focus on international crises, which then profoundly impact not only domestic elections but also overall policy. The Cuban missile crisis basically validated President Kennedy, and contributed to the landslide victory of President Johnson in 1964. The combination of the Iranian revolution (with associated hostage crisis) and the Soviet invasion of Afghanistan doomed President Carter. Operation ‘Desert Fox’ nearly reached the level of comic relief in 1998, with both Iraq and the opposition Republican Party suggesting that President Clinton was attempting to distract the country from his domestic problems. The aftermath of that crisis included an under-resourced commitment by the Clinton administration to overthrow the regime of Saddam Hussein – a commitment which was pursued by his successor after 9/11, with profound effects on US international and domestic policy.<br /><br />In one area, the response of both India and the US is similar. In both states, international crises tend to lead to temporary increases in military spending. India’s defence expenditures increased dramatically after both Kargil and Parakram – as did the US after the disasters of 1979. Again, India makes pragmatic choices after crises with Pakistan, including the reconsideration of the issue of limited war after Kargil, and the continued implementation of a new and more flexible ‘Cold Start’ army doctrine after Parakram.<br /><br /> <br /><br />Indian crisis management style, therefore, is not terribly dissimilar from general Indian governance – tightly centralized, risk-averse, and hierarchical in nature. India does learn from crises, but changes tend to be evolutionary rather than innovative. Continual crises with Pakistan are gradually changing the civil-military relationship, permitting greater military input into policy planning and crisis management, while still maintaining strict civilian control. Individual leaders are the most important factor in Indian crisis management efforts, but the overall Indian experience in crisis is one of gradual evolution and continuity. International crises do not generally result in dramatic policy shifts. Those tend to result from domestic crises, and are then reflected in electoral shifts.MANISHhttp://www.blogger.com/profile/00428491443420277409noreply@blogger.com0tag:blogger.com,1999:blog-2672050906182920186.post-13156825792901991422009-08-22T10:28:00.000+05:302009-08-22T10:29:09.034+05:30Strategic partnershipsBORROWED from the discipline of organizational theory and business management, the term strategic partnership has come to define a number of diplomatic relationships the world over. Formal alliances are now thought to be passé. Scholars argue that the proliferation of strategic partnerships ‘reflects an international system in transition.’ They are better suited to increase bilateral, trilateral, or even multilateral cooperative efforts between nations to achieve common goals. They are thus, ‘goal-driven’ rather than ‘threat-driven’.1<br /><br />Unlike formal alliances, strategic partnerships are not hierarchical or vertical structures marked by different levels of bindingness. They are not intended to develop into a confederation of states, where the lead actor, such as Russia in the Warsaw Pact, seeks to enjoy a position of influence that supersedes the authority of other member states. Instead, strategic partnerships represent a system of diplomatic engagement that is really a halfway house between maintaining friendly relations between select states and organizing those relationships under a framework that contributes to furthering mutually beneficial ties. These ties or contracts might not always be cost free, but are created keeping the partners’ national and sovereign strategic objectives in mind.<br /><br />The few scholars who have written about the distinctive qualities of a strategic partnership are of the view that this is a relatively new phenomenon. However, in India’s case, while the rhetoric of ‘strategic partnership’ might have been evoked only at the turn of the 21st century, its conceptual underpinning – engagement minus the drawbacks of alliance commitments in terms of curtailing the freedom of action and thought – is hardly new.<br /><br />Until the end of the Cold War, India remained, by necessity, cautious about entering partnerships with other states. The distinct feature of a strategic ‘partnership’ is that it is a joint venture between equals. It is not necessary that equality means maintaining a fifty-fifty balance of political influence, but that the partnering states understand this dynamic. For the first two decades of the Cold War, neither the USSR nor the United States were either willing, or in a position to appreciate that other, smaller states were equal in status. Hence, rather astutely, Nehru remained cautious when dealing with both the blocks.<br /><br /> <br /><br />In the post Cold War period, while India, like many nation states around her, explored options in a de-camped international system, it was not until the turn of the century that India had decided to actively pursue the strategy of engaging everyone. Global engagement was the new mantra. India no longer needed to be too concerned about being treated unequally. Unlike Pakistan or Japan, India had spent over forty years developing her economy and military without having to depend on a third actor for the sake of survival. Barring Nehru’s appeal for arms from the US and later the UK towards the end of the 1962 debacle with China, Indian foreign policy had remained as independent as a post-colonial nation like India could afford it to be.<br /><br />With a view to further expanding the conceptual as well as empirical understanding of strategic partnerships, this article puts forward two arguments. First, in response to scholars who claim that strategic partnerships are a fairly new phenomenon, the article argues that this ‘new’ phenomenon has to be understood in context. For nations that entered into formal alliances or mutual security pacts during the Cold War, such as the US with Japan or the USSR with the United Arab Republic (UAR), the non-binding aspect of a strategic partnership might be seen as something new and attractive. However, for nations like India, which remained cautious of formal alliances and their supposed benefits, strategic partnerships are nothing new.<br /><br />To illustrate this point, the article will briefly discuss the 1971 Soviet-Indian Treaty of Friendship, arguably India’s first meaningful strategic partnership, which many have wrongly dubbed as an alliance. The so-called new rules of the game inherent in a strategic partnership are those that India embraced even before the Cold War ended. Embedded in this are lessons which have wider implications for contemporary Indian foreign policy.<br /><br />Second, the article goes on to look at the several types of strategic partnerships India’s global engagement strategy has led her to forge. In particular, it will look at the partnership with the US. It will focus on President Obama’s attempt to construct a ‘Regional Strategy for South Asia’ in 2009. This brief case study focuses on India’s strategic behaviour having entered into a strategic partnership with the US. It demonstrates that a strategic partnership is not a strategic alliance masquerading behind diplomatic rhetoric. The differences are not merely semantic, but indeed very real.<br /><br /> <br /><br />In writing about strategic partnerships, scholars have propounded a misleading idea that strategic partnerships are a phenomenon intrinsic to the post-Cold War period, and more specifically the 21st century. In their analysis, the division into ideological camps disallowed any form of engagement to be non-hierarchical. However, rather than a new phenomenon, the nature of the partnership between nations is more often than not mandated by historical experiences and the tensions inherent in domestic political cultures. This is important because at some level, every nation remains hostage to its particular national and strategic narrative, which informs its current and future strategic behaviour.<br /><br />For instance, in the case of Germany and Japan, entering into less binding strategic partnerships is domestically feasible, and strategically preferable. The populations of both nations have experienced extreme militarism, have had little choice but to enter into a binding alliance with the US, and now seem to view strategic partnerships as an enviable system of diplomatic engagement. Their national narrative supports entering into such partnerships, which while far less hierarchical, provides ample opportunity to engage likeminded nations.<br /><br /> <br /><br />In India’s case, the national narrative is outlined by an intellectual resistance to any form of dominance. An extreme sense of independence, not even shared by other post-colonial states like Pakistan and Egypt (which ironically stood at the forefront of the non-alignment movement) has for long determined Indian strategic behaviour. The 1971 treaty with the USSR is a prime example of a strategic partnership forged during the Cold War and in its history are lessons that need to be kept in mind in the present time. The chief lesson is that on the one hand, nations that have participated in hierarchical diplomatic arrangements in the past, either by choice (Australia and New Zealand in 1952) or forcibly (Japan and Germany post 1945), will have greater domestic and elite support to enter into strategic partnerships in the present or the near future. On the other hand, nations like India that have resisted formal alliances in the past and instead, have for long embraced the conceptual underpinnings of a strategic partnership risk finding it harder to ‘sell’ these partnerships as they evolve.<br /><br />On 9 August 1971, India and the USSR signed a Treaty of Peace, Friendship and Cooperation. Article IX of the Treaty came to be read as the most controversial, as it essentially implied that at a time of conflict, Soviet assistance to India was not guaranteed, but highly probable. The treaty was designed to deter hostile intentions of any other actor, within or outside of the South Asian region.<br /><br />The treaty was signed at a time when India’s foreign policy elite argued that India required a diplomatic shield in the event of Indian military activism in East Pakistan, now Bangladesh. In a meeting on 29 April 1971, Indira Gandhi was told that any military adventurism by India could potentially invite the wrath of the People’s Liberation Army (PLA). In addition, Henry Kissinger had sent mixed signals to Indian leaders regarding US’ response in case of Chinese aggression.<br /><br />While it served as a diplomatic shield, the treaty in no way hindered India’s sovereign right to make decisions. It was non-binding, non-hierarchical, and unlike the Soviet treaty with the UAR, it did not mandate either actor to militarily intervene in case of a conflict with a third party. In fact, on India’s insistence, Article IV of the treaty made clear that this formal relationship would not impinge upon Indian non-alignment.<br /><br /> <br /><br />The generally accepted British and American interpretations of the USSR’s motives for going ahead with the treaty in 1971 indicate that the Soviet leadership had actually believed that it could restrain India. British diplomats argued that the ‘Russians had been extremely worried about the "smell of war" in the air and had been anxious to take some practical measure to defuse the situation.’ For them, ‘the treaty had greatly reduced the chances of conflict in the coming months.’<br /><br />Unwilling and unable to convince the Indians otherwise, by the beginning of November, Chairman Alexei Kosygin seemed to have understood that India would not be swayed by external advice. New Delhi would make its own foreign policy related decisions, based on its own calculations. Eventually, this is exactly what India did. Having negotiated a diplomatic shield, India found it relatively easy to intervene in East Pakistan.<br /><br /> <br /><br />Notwithstanding that the treaty was mostly accepted by India’s political elite because it was signed in the backdrop of war with Pakistan, two conditions supported its general acceptance. First, Indira Gandhi understood that foreign policy can be made hostage to domestic politics. She waited till the 1971 election, when she received a landslide majority, before going ahead with a treaty that had first been discussed in 1969. Foreign policy might be argued to be a product of elite politics, but elite politics is highly disaggregated. Indira Gandhi appreciated this, and it allowed for a treaty to be signed minus the political bickering evidenced in the passage of the recently concluded ‘N’ deal with the US.<br /><br />Further, the treaty was sold to both India’s domestic audience as well as to foreign diplomats as a reaction to a potential US-Pakistan-China alignment, which did not impinge on Indian non-alignment. In fact, T.N. Kaul, the Foreign Secretary, and Swaran Singh, the Foreign Minister, made it their mission to convince the world that Indian foreign policy remained as independent as before. There also seemed to have been a coordinated effort between Moscow and New Delhi not to cross each others path in their respective strategic communications. Nothing was taken for granted.<br /><br />In 1971, foreign policy decisions were contested but yet more or less monopolised by a single party. Currently, relatively smaller regional actors play a far more integral role in the policy debate, even if this might be more because of reasons extraneous to the issue at hand. It is imperative that India’s current leaders appreciate this dynamic better. The political fiasco over the debates on the ‘N’ deal might serve as a reminder that foreign policy is no longer the mandate of a single political organization. The so-called ‘other’ parties are becoming increasingly important, and will continue to be so. For ideological, political, and sometimes simply selfish reasons, foreign policy issues will increasingly become hostage to domestic arm wrestling matches. This is an inherent disadvantage, but a reality that needs to be better understood.<br /><br />Keeping in mind the above-mentioned conditions, in the past decade, since entering into strategic partnerships in the post-Cold War period, India has done well to retain the ability to say ‘no’. The following part of this article reflects on how India has managed its diplomatic affairs once in a strategic partnership. It seeks to counter the premise that a partnership is more or less the same as an alliance.<br /><br /> <br /><br />In the past nine years, India has entered into strategic partnerships with, amongst others, the European Union, US, UK, France, Iran, Germany, Japan, Australia, Singapore, and Nigeria. Most of these partnerships began with the issuance of a joint statement, leading to the signing of bilateral agreements and memorandums of understanding (MoU). In each of these cases, the idea was to multiply bilateral agreements with potential partners ranging from increasing cultural ties to signing MoUs on defence cooperation efforts and intensifying trade agreements. Of these partnerships, the most politically explosive is that between India and the US.<br /><br /> <br /><br />In March 2000, during President Clinton’s visit to India, the leaders of both countries pledged to ‘deepen the India-American relationship in tangible ways.’ A year later, President Bush decided to take this relationship to a whole different level. His National Security Strategy report of September 2002 made his intentions clear. It simply stated: ‘US interests require a strong relationship with India.’ The American President had taken a personal interest in India, and by 2004, its new Prime Minister, Manmohan Singh. The US and India initiated a series of dialogues under the rubric of the ‘Next Steps in Strategic Partnership’. The purpose was to expand the strategic partnership to include cooperation in what came to be called the ‘trinity areas’, therefore easing restrictions on the export to India of dual-use high technology goods (including those with military applications), civilian nuclear and civilian space cooperation.<br /><br />By 2005, the strategic partnership had taken on a significant defence dynamic. India and the US signed a ten year defence pact, and a year later they entered into a maritime security cooperation agreement. Currently, Indian and US military exercises include air exercises, the annual Malabar naval exercises (which in 2008, unlike in previous years were conducted bilaterally); and special forces ‘Vajra Prahar’ joint exercises, with a high number of US servicemen having attended the Indian Counter-Insurgency Jungle Warfare School. For the first time in India’s defence procurement history, US systems and platforms have been entered into Indian tenders. Most notable are the fighters in the bid for 126 medium multi-role combat aircraft. India has also purchased a decommissioned US amphibious dock, now the second largest in the Indian Navy, as well as maritime surveillance aircraft, military transport aircraft, aircraft self-protection systems, and counter-battery radars.<br /><br />However, it is outside of the defence arena that the benefits of the strategic partnership are fully realized. Without going into the now much publicised details, suffice it to state that the civil nuclear cooperation agreement with the US, finally passed by the Indian government and the US Congress in the last quarter of 2008, has gone a long way to cement ties between what are often referred to as the world’s two largest democracies. The nuclear deal and increased defence cooperation has led some to argue that the partnership is really an alliance, which has curtailed India’s independent foreign policy. The last part of this article alludes briefly to a recent case study: India’s response to a US designed ‘Regional Strategy for South Asia’. The intent is to make the point that much like in 1971, India’s negotiations with another actor, and the cementing of ties has done little to influence India’s ability to make independent decisions. India retains the ability to say ‘no’ without incurring a notable cost to the partnership.<br /><br /> <br /><br />On 22 January 2009, only two days after being sworn in, Obama officially named Richard Holbrooke – who negotiated the Dayton accords in 1995 – ‘Special Representative to Afghanistan and Pakistan’. He was apparently supposed to have been named the ‘Special Representative to Afghanistan, Pakistan, and India’ but the Indian government lobbied hard to make sure that India was kept outside of Holbrooke’s brief. His ensuing trip in February to India, along with Pakistan and Afghanistan, was subsequently dubbed as a ‘listening trip’.<br /><br />Holbrooke’s lighter credentials notwithstanding, there is clear evidence that the Obama administration is keen that India and Pakistan engage in some discussion on Kashmir. During his election campaign, Obama argued that India and Pakistan should ‘try to resolve the Kashmir crisis so that [Pakistan] can stay focused not on India, but on the situation with those militants [camped on the border with Afghanistan].’<br /><br /> <br /><br />The logic, at least for this US administration, is fairly simple. If India began a series of discussions on Kashmir, similar perhaps to the series of dialogues led by Z.A. Bhutto and Swaran Singh in 1962-1963, then Pakistan would feel more confident about relocating a bulk of its troop formations from the border with India to that with Afghanistan. This is undoubtedly one of Pakistan’s demands. Those close to Obama have touted this line since 2005. Kashmir lies at the centre of their regional strategy designed to take-on the Taliban in the Federally Administered Tribal Areas of Pakistan, who continue to severely compromise US, UK, Dutch, and Canadian efforts to ‘stabilise’ southern and eastern Afghanistan.<br /><br />The merits and demerits of this policy aside, India’s response to the Obama approach provides key indicators on how India manages strategic partnerships. Contrary to the view that the nuclear deal has made India diplomatically vulnerable, the Indian government made it abundantly clear that it will not dance to the Obama tune. This is especially important when President Obama was expected by almost all analysts, some within his own coterie, to renegotiate the ‘N’ deal and even nudge India to sign the controversial Comprehensive Test Ban Treaty (CTBT). If India was in a muted alliance with the US, would not she be expected to have behaved differently? For the sake of argument, if the Indian government’s opposition to the suggestion that Kashmir should be discussed was nothing but a public relations campaign, would this not backfire when such negotiations did take place? Something as explosive as the ‘K’ word is not a secret that can be concealed from public scrutiny.<br /><br />Here again, it is important to keep in mind that the Indian government’s position has been in keeping with the national narrative. In 1962-1963, when President Kennedy tried to use Kashmir as leverage against providing arms to deter the Chinese, the strategy simply did not work. Kennedy eventually wrote to Harold Macmillan, his co-conspirator that ‘Nehru is unlikely to settle Kashmir with too obvious a gun at his back.’ If Nehru, under the threat of a Chinese offensive in the spring of 1963 was unwilling to allow Kashmir to be used as bait for arms, then common sense suggests that India today will not discuss Kashmir, and this with not too obvious a gun at its back.<br /><br />As stated earlier, strategic partnerships have to be approached in context. India’s national context or narrative makes a fairly clear case: this is a nation that has, is, and perhaps will continue to negotiate partnerships cautiously, tilting the cost-benefit equilibrium to its advantage. Those who have dealt with India – diplomats and international negotiators – understand this dynamic all too well. Negotiating non-binding contracts comes fairly naturally to India’s foreign policy elite. However, as a word of caution, this natural advantage will hold well only as long as India has something to offer the world. Luckily for India, her strategic position, market size, democratic credentials, non-militarised political society, and comparatively healthy civil-military relations will make her the preferred choice for at least some time to come.MANISHhttp://www.blogger.com/profile/00428491443420277409noreply@blogger.com0tag:blogger.com,1999:blog-2672050906182920186.post-216116536862328812009-08-07T12:16:00.000+05:302009-08-07T12:18:15.046+05:30G20: The 'trillion' dollar magic trickTo great fanfare, the G20 announced a US $1.1 trillion global package, which will actually deliver less than half that amount in new or guaranteed resources. Meanwhile issues of fundamental economic reform were left off the agenda.<br /><br /> • Write the author<br /> • Trade<br /> • Send to a friend<br /> • Printer friendly version<br />19 April 2009 - The G20 meeting on 2 April, billed as the London Summit 2009 because of its inclusion of non-G20 players, captured positive media attention despite failing to set out a vision for transformative economic change, and pumping more money into the IMF and World Bank without a clear plan for reforming them.<br /><br /><span style="font-weight:bold;">Where did the 'trillion' go?</span><br /><br />The IMF received most of the boost, with a possible $500 billion in new resources and $250 billion in issuances of Special Drawing Rights (SDRs). Of the $500 billion, only half has been signed and sealed, the vast majority of which had been previously announced: $100 billion from Japan in January and the same amount from the EU in March. Most of the new $50bn comes from China - a small drop in its vast ocean of reserves, indicating that it continues to be reluctant to back the International Financial Institutions (IFIs) financially without real governance reform. The second tranche of $250 billion only exists as a G20 promise to find the extra cash, and to make "substantial progress" in doing so by April's spring meetings.<br /><br />The other massive increase in IMF resources was through an allocation of Special Drawing Rights (SDRs), the IMF's own internally created reserve asset. An SDR allocation effectively means printing new money, $100 billion of which will go to "emerging market and developing countries". Unlike other forms of finance, SDRs come without conditions attached, but a country must still pay interest when it uses them. As SDRs are allocated according to voting shares at the IMF, the majority will go to rich countries.<br /><br />On new money for the multilateral deveopment banks (MDBs), the language is particularly hazy. The G20 agrees only to "support" additional annual lending by the MDBs of $100 billion per year. Some of this, such as a boost to IFC trade financing, is money already promised. Some is supposed to come from existing MDB resources. Some will come from a 200 per cent boost to the Asian Development Bank's capital, and consideration of similar moves for the Inter-American Development Bank and the African Development Bank.<br /><br />World Bank attempts to garner additional contributions for their 'vulnerability' funds were snubbed, with the G20 making clear that these would only be delivered bilaterally from willing donors. So far, the UK is the only country to make concrete commitments - diverting £200 million of its existing aid budget for this purpose. The G20 also asked the Bank to increase lending limits for "large countries" and to lend at market rates to low income countries, but only those with "sustainable debt positions and sound policies."<br /><br /><span style="font-weight:bold;">Money for the poorest?</span><br /><br /><br />Big increases in IMF resources have not been matched with clear commitments to end the controversial austerity policies that have so far accompanied IMF bailout packages.<br /><br /><br /> • IMF: The rich world's viceroy<br /> • Market fundamentalism<br />Of the putative $1.1 trillion, $50 billion, or less than 5 per cent, is likely to be for the 49 poorest countries in the world. The communique does not give clear details of how this figure is arrived at. Brussels based NGO, Eurodad estimates that, in addition to $6 billion (over three years) from IMF gold sales that will be added to the IMF's concessional lending pot, $19 billion in new money will come from the SDR allocation. The communique also calls for a doubling of the IMF's concessional lending capacity, currently at about $20 billion. That means that most of the total is IMF loans, which are only available if poor countries' economies go into meltdown.<br /><br />The detail on the promised "global effort to ensure the availability of at least $250 billion of trade finance over the next two years" is entirely absent from the communique. However, the IFC - the private sector lending arm of the World Bank - is already angling for a slice of this cash for its new global trade lliquidity programme. Most of the rest is likely to funds provided by export credit agencies, which have been heavily criticised for a host of issues, including focussing their support on the arms industry. The communique's commitment to meet existing aid pledges obviously meant more to some G20 countries than others. Italy, the current host of the G8, plans to cut its aid by 55 per cent this year.<br /><br /><span style="font-weight:bold;">Elephants in the room: governance and conditionality</span><br /><br />The G20 communique says nothing new on IFI governance reform, and big increases in IMF resources have not been matched with clear commitments to end the controversial austerity policies that have so far accompanied IMF bailout packages.<br /><br />Changes to voting shares to give developing economies "greater voice and representation" are promised in general but the annex appears to backtrack on IMF reform. The existing plan for Bank governance reforms by the 2010 Spring Meetings for the World Bank is reconfirmed, but on the Fund, the annex indicates that the slightly accelerated quota review may not address the democratic deficit or governance imbalance but will be undertaken "to ensure the IMF's finances are on a sustainable footing".<br /><br />Critics remain concerned that lessons from the Asian financial crisis a decade ago have not been learned, where IMF conditions were blamed for worsening recessions. Duncan Green of Oxfam said: "We have deep concerns about how central the IMF has become in this crisis. The fund has been given a blank cheque but its reform remains no more than a promise."<br /><br />Financial reform: does it have teeth?<br /><br />Campaigning NGOs and continental European governments had pushed the issue of tax havens to the fore in the run up to the summit. The UK, itself a sponsor of many of the world's most famous tax havens including the Cayman Islands and Jersey, had picked up the rhetoric.<br /><br />The G20 decided to endorse the OECD approach of exchanging information about companies and individuals suspected of evading taxes on request, rather than the more stringent automatic exchange of information called for by the Tax Justice Network and others. There was no mention of measures that could help developing countries crack down on corporate tax abuse: country-by-country financial reporting or requiring transparency of all information on beneficial ownership in all jurisdictions.<br /><br />The fanfare surrounding a supposed 'blacklist' of non-cooperative countries published on the day of the summit by the OECD went silent when it emerged that only four countries were on the list - Uruguay, the Philippines, the Malaysian Federal Territory of Labuan, and Costa Rica - none of them well known tax havens. Further confusion followed when even these four were removed, leaving no countries in the OECD's worst category. The strong rhetoric - declaring that "the era of banking secrecy is over" and promising to "stand ready to deploy sanctions" - has yet to be turned into effective action.<br /><br />As promised by the G20 finance ministers in March the Financial Stability Forum will be expanded to include all G20 countries, and renamed the Financial Stability Board (FSB). It will continue to have a purely advisory role to; "promote co-ordination"; "assess vulnerabilities affecting the financial system" and "set guidelines". With no specific powers or sanctions available to it, and a lack of a clear governance structure, it remains to be seen whether the new board will be an improvement on the old forum.<br /><br />On banking regulation, a topic that has dominated headlines in the run up to the summit, surprisingly little concrete was agreed, though international bodies are tasked with looking further into a host of issues. International minimum capital requirements will remain unchanged "until recovery is assured" and the often criticised Basel II capital framework supported. The existing 'toxic assets' in banks remain a huge problem, but one that has been left to national regulators to fix.<br /><br />The fund has been given a blank cheque but its reform remains no more than a promise.<br /><br /><br /> • IMF: The rich world's viceroy<br /> • Market fundamentalism<br />In his post-summit press conference, British Prime Minister Gordon Brown repeated his assertion that the 'shadow banking system' would be brought into "the global regulatory net", but the language of the communique is far more cautious - "systematically important financial institutions, markets, and instruments" should be subject to an "appropriate degree of regulation and oversight."<br /><br />The FSB and IMF are tasked with deciding what "systematically important" means. Many hedge funds and private equity firms may continue to escape the regulatory net, especially those formally headquartered in off-shore financial centres. Hedge fund and credit rating agency "registration" is promised, and credit derivatives markets will be "standardised," but it is left to the industry itself to decide how to do this.<br /><br /><span style="font-weight:bold;">Missing the green picture<br /></span><br />Green groups slammed the G20 for failing to grasp the opportunity to signal a clear commitment to building a low-carbon economy. The communique promises to "make best possible use" of stimulus packages "towards the goal of building a resilient, sustainable, and green recovery" and to "identify and work together on further measures to build sustainable economies." But there were no hard commitments about what portion of stimulus packages would be directed towards green projects, technologies, or jobs.<br /><br />The aim of the upcoming UN climate talks in Copenhagen is set as reaching agreement, with no reference made to the scale of the changes G20 countries, particularly the richest ones, will have to make to combat climate change. Friends of the Earth said the G20 had "short changed people and the planet". Greenpeace said climate change had been tagged on to the communique as an "afterthought".<br /><br /><span style="font-weight:bold;">Liberalisation still the norm?</span><br /><br />The communique is understandably short on the usual congratulatory opening paragraphs, though it reiterates support for "an open world economy based on market principles" but now balanced by "effective regulation, and strong global institutions."<br /><br />On trade the expected promise to "not repeat the historic mistakes of protectionism" is made, but the commitment to "reach an ambitious and balanced conclusion to" the Doha trade round looks suspiciously similar to the commitments made by the G20 in Washington last November, since when little progress has been made. Interestingly the G20 estimate for how much the Doha trade round could boost the global economy stands at a modest $150 billion. Civil society organisations around the globe have questioned whether reviving a trade round that developing countries have rejected many times is a good idea.<br /><br /><span style="font-weight:bold;">Protest grows<br /></span><br />Marches and protests took place around the world in the run up to the G20 summit, including in India, Philippines, Indonesia, Spain, Germany, France, Austria and Italy. In London, thousands marched under the banner of 'Jobs, Justice, Climate,' as part of the 160-plus Put People First alliance of development, environment, faith groups and trade unions.<br /><br />In addition to mobilisation of citizens, civil society groups have also put out collective statements which look very different from the limited set of issues in the G20 communique. At January's World Social Forum, civil society and social movements from around the world produced a statement signed up to by more than 600 organisations worldwide, entitled "Let's put finance in its place!" It includes demands barely considered by the G20, yet at the heart of the debate about how best to control global finance, including managing capital flows, and calling for "citizen control of banks and financial institutions." It also issued a challenge to the leaders gathered in London, saying: "the G20 is not the legitimate forum to resolve this systemic crisis."<br /><br />On the eve of the G20, at the World in Crisis NGO summit in Prague, a declaration was issued calling for putting economies "at the service of social, environmental and other vital interests of women, men, girls and boys, in particular to start greening our economies and to increase local economic resilience." A raft of proposals were included on a host of critical topics including: market regulation; breaking the dominance of finance over the economy; keeping the climate negotiations on track; rethinking development finance; fairly sharing resource consumption across the globe; ensuring tax justice; and making IFIs more transparent, representative and accountable.<br /><br />Meanwhile, the London Summit was slammed for systematically excluding civil society voices. In contrast to most international gatherings there was no process for civil society organisations to accredit and attend. Of the few civil society representatives who were allowed in as media representatives, some had accreditation withdrawn at the last minute. One of these denied entrance, Benedict Southwark of UK campaigning group the World Development Movement said that this: "starts to reek of the deliberate exclusion of critical voices."<br /><br /><span style="font-weight:bold;">Spotlight turns to UN</span><br /><br />A week before the G20 met in London, the UN General Assembly president's commission on financial reforms released its draft report. The Joseph Stiglitz-led commission was much stronger in the latest report than in its first set of recommendations, and appears ahead of the G20 curve. The G20 has yet to pay adequate attention to this high powered group of thinkers.<br /><br />In contrast to most international gatherings there was no process for civil society organisations to accredit and attend. Of the few civil society representatives who were allowed in as media representatives, some had accreditation withdrawn at the last minute.<br /><br /><br /> • IMF: The rich world's viceroy<br /> • Market fundamentalism<br />The recommendations said: "short term measures to stabilize the current situation must ensure the protection of the world's poor, while long term measures to make another recurrence less likely must ensure sustainable financing to strengthen the policy response of developing countries."<br /><br />The commission was not unwilling to lay blame: "Loose monetary policy, inadequate regulation and lax supervision interacted to create financial instability," and there was "inadequate appreciation of the limits of markets." The report split its recommendations up into things to be done immediately and those that should be on the agenda for systemic reform.<br /><br />Among immediate goals, it called for global fiscal stimulus, a new credit facility with better governance arrangements than exist at institutions such as the IMF, an end to pro-cyclical conditionality and rolling back the limits on developing country policy space created by trade agreements. For the financial sector the commission noted "While greater transparency is important, much more is needed than improving the clarity of financial instruments," and recommended the use of rules and incentives to limit excess leverage, prevent tax evasion, and address the regulatory race to the bottom.<br /><br />While the short-term recommendations were sometimes eye-catching, the systemic demands surprised many observers. The call for "a new global reserve system", echoed the demand to end the US dollar's privileged position as international reserve currency made by China's central bank governor Zhou Xiaochuan. The commission also supported the idea for a UN-based Global Economic Council at the head of state level - essentially bringing a G20 type structure under the auspices of the UN system.<br /><br />On long-term changes to financial regulation, the commission listed seven areas for reform and warned against "merely cosmetic changes". Notably it said: "The fact that correlated behaviour of a large number of institutions, each of which is not systemically significant, can give rise to systemic vulnerability makes oversight of all institutions necessary." This throws cold water the G20's plans for regulating only 'systemically-important' financial institutions.<br /><br />The UN commission, despite being organised more quickly than the G20 meeting, was much more open to civil society input. More than 100 organisations made submissions to the stakeholder consultation procedure, and the final report on civil society opinion was detailed, comprehensive, and well received by the commission. The civil society submissions were all put online, more than can be said of the official G20 working group reports (see Update 64), which are yet to be published. In late March, members of the commission also held interactive dialogues with representatives at the UN General Assembly and civil society organisations.<br /><br />The global focus will now move to a UN conference from 1-3 June in New York, billed as the follow-up to the UN Financing for Development conference in Doha. The conference is being held at the initiative of the General Assembly president, rather than from the UN Secretariat because of opposition from some major countries. It is unclear how much participation there will be by heads of state, especially as the G20 announced that it will hold another leader's level summit sometime before the end of this year. ⊕<br /><br />Bretton Woods Project<br />19 Apr 2009<br /><br />This article is republished from the Bretton Woods Project. The The Bretton Woods Project works as a networker, information-provider, media informant and watchdog to scrutinise and influence the World Bank and International Monetary Fund. Through briefings, reports and the bimonthly digest Bretton Woods Update, it monitors projects, policy reforms and the overall management of the Bretton Woods institutions with special emphasis on environmental and social concerns.MANISHhttp://www.blogger.com/profile/00428491443420277409noreply@blogger.com0tag:blogger.com,1999:blog-2672050906182920186.post-3077833098764396612009-08-07T12:14:00.000+05:302009-08-07T12:15:03.183+05:30Kargil: Whose War was That?by C. Uday Bhaskar<br /><br />July 26 marks 10 years after India won the limited but high-stakes Kargil War initiated by Pakistan. On this day in 1999, the Indian soldiers gave the country a significant victory - albeit at a heavy cost in life, limb and blood. More than 500 military personnel gave their lives and a grateful nation celebrated a Kargil Diwas (Day).<br /><br />But regrettably a decade later, it is evident that the nation has learnt little by way of imbibing the right lessons. And this is not for lack of clear and objective recommendations based on a careful review of what caused Kargil and what went wrong as far as national security was concerned.<br /><br />The Kargil Review Committee headed by veteran security analyst K. Subrahmanyam produced its report in record time and this was submitted to the Atal Bihari Vajpayee-led NDA government.<br /><br />To its limited credit, the NDA constituted four separate task forces to make tangible recommendations to improve and restructure the following areas: management of the country's borders; internal security; intelligence gathering capabilities; and defence management.<br /><br />These reports were then submitted to the NDA government and reviewed by a Group of Ministers. The earnest hope and crying national need was for these recommendations to have been discussed in some detail in parliament so as to obtain consensual political support and then be implemented progressively. The objective ought to have been to prevent another Kargil and create necessary national security capacity from the apex downwards.<br /><br />Alas, little of the implementation took place during the NDA rule and even less so in the UPA's first tenure.<br /><br />Consequently the nation had to face the ignominy of its parliament being attacked by terrorists in December 2001 and seven years later, undergo the trauma of the November 2008 Mumbai attacks - a veritable maritime Kargil.<br /><br />In the interim, national security has become a political football and it was deplorable that in the run up to the 10th anniversary of the Kargil Diwas, some political representatives actually described this war as belonging to the NDA/BJP. The martyrs and their families and those wounded in the icy heights of the Kargil-Drass region have been predictably forgotten and ignored.<br /><br />The lack of adequate capacity for national security - despite the rhetoric that is periodically heard - is best reflected in the kind of time and attention paid to this highest and most sacred national calling in the Indian parliament.<br /><br />In 10 years, there has been no sustained or meaningful debate on the Kargil war and its lessons in any session of parliament. And to add insult to injury, in the same period, the Ministry of Defence has returned almost Rs.50,000 crore (over $10 billion) as money unspent from the amount allocated for acquisition and modernization of the Indian military inventory. Thus the reality is that in the post-Kargil decade, India's trans-border military capacity has shrunk - but no one in the political spectrum is particularly concerned.<br /><br />In this period, the nature of the security challenges facing India has become more complex and tangled and today the external and internal security strands have coalesced into one opaque domain. The country is at war. On paper - in the budget documents - the country allocates over Rs.141,000 crore (nearly $30 billion) towards defence. Yet what is meaningfully spent is lesser and this when the military, para-military and police forces have equipment and related inventory that is veering towards block obsolescence.<br /><br />Parliamentarians and senior political leaders must take the responsibility for this sorry state of affairs and embark on appropriate redress with purpose. Specific suggestions include convening a full 10-day session of both the houses that will discuss the Kargil recommendations and the GoM reports to evolve an all-party consensus for immediate action.<br /><br />The Indian military is a credible and highly professional institution and when the chips are down - as they were in Kargil in 1999 - it was the young officers and their committed troops who plucked the chestnuts out of the fire. Ineptitude at the higher levels of national security management is a recurring leit motif from the 1962 war with China through Kargil to the 2008 Mumbai carnage.<br /><br />Many inadequacies exist in the Indian national security apparatus despite the lessons of Kargil and this is a poor reflection on the Indian entity - both state and empowered civil society.<br /><br />Parliament ought to demand that the government set up a Blue Ribbon commission that will draw the most eminent and capable national security professionals who have no political axe to grind to carry out an urgent review and outline time-bound remedial measures. And to be meaningful and not anodyne, they would have to be radical and far-reaching and not timid and tentative.<br /><br />Finally, as regards the martyrs - those who died in Kargil for flag and country - and the many more who made the supreme sacrifice before 1999 and after - right into July this year - they warrant a national tribute.<br /><br />This is not the time to open the arid debate about why the world's largest democracy does not have a national memorial for its 'fauj' but to make a modest suggestion.<br /><br />Many Western nations who lost their young men in World War I (which incidentally includes India) mark Nov 11 as Poppy Day. A tradition has evolved wherein the common citizen lays a poppy flower on the tomb of the martyrs or pays tribute in a designated public space.<br /><br />The average Indian need not wait for the state and its political representatives to decide whose war Kargil was. It was fought for India. Period.<br /><br />Thus there may be a case to choose an Indian flower - why not the humble 'gainda' (marigold) - and offer it to the unknown and forgotten Indian martyr who willingly shed blood. Local communities can decide how best to remember the martyrs and their families in their midst and let them know that at least once a year.<br /><br />'Your sacrifice is not forgotten'. The moment has come for 'Gainda' Day to lead the plethora of other dedicated 'days' that dot the Indian calendar.<br /><br />(Uday Bhaskar is a well-known strategic analyst. He can be reached at cudayb@gmail.com)MANISHhttp://www.blogger.com/profile/00428491443420277409noreply@blogger.com0tag:blogger.com,1999:blog-2672050906182920186.post-21658691026819327482009-08-07T12:13:00.001+05:302009-08-07T12:13:51.439+05:30Pakistan's Army: Living in a State of Strategic Denialby C. Uday Bhaskar<br /><br />A two-day international conference on genocide that concluded in Dhaka July 31 exhorted the UN to recognize the mass killings and rape that the Pakistan Army had unleashed in the torturous and tumultuous events that preceded the birth of Bangladesh in December 1971.<br /><br />Legal experts from Germany, Vietnam, Hong Kong, Britain and Canada joined their Bangladeshi counterparts in issuing a declaration that noted: "The conference calls upon the media and the civil society at home and abroad to focus on the (1971) genocide in Bangladesh, and launch a campaign so that this is recognized in the UN as Genocide."<br /><br />Furthermore, the conference urged the Bangladesh government to begin the process of trying the perpetrators as war criminals and to seek international support in this regard.<br /><br />But the sad truth is that as in the past 37 years, this earnest plea is unlikely to elicit any meaningful response from the powers that be at the global table.<br /><br />The US, with Richard Nixon in the White House and his ace assistant Henry Kissinger actually calling the shots in 1971, was culpable by turning a blind eye to the genocide and mass rape that enveloped then East Pakistan. To their credit, the US mission in Dhaka tried to report the carnage to the DC Beltway and the US media, including some mainstream papers reported the events as accurately as possible. But in vain. And in keeping with the dictum that major powers shape the historical narrative in a selective manner by engaging in astute exclusion, this enormity has since been successfully relegated to the distant back-burner of the global record.<br /><br />Four decades later, except for the victims and their traumatized families, recall of the genocide in Bangladesh outside of that country is hazy. The Pakistan Army, which was the principal institution engaged in attacking and butchering its own citizens - albeit of Bengali ethnicity, has since sought to play down the scale of the bloodshed and rape.<br /><br />The official Pakistani version refers to 26,000 killed over a year but this is at considerable variance with other estimates which range from 300,000 to a staggering three million killed and between 200,000 to 400,000 women raped.<br /><br />Two other estimates are illustrative of the disparity that exists about these gory figures. "Statistics of Democide: Genocide and Mass Murder Since 1900" by R.J. Rummel places the deaths at 1.5 million and other literature on the subject avers that East Pakistan of 1971 ranks as having the highest concentration or density of genocide by way of the numbers killed, the time involved and the geographical area in question. Yet another book, "Against Our Will: Men, Women and Rape" by Susan Brownmiller estimates that the total number of women raped by Pakistan Army personnel along with their local support base - the 'razakars' - varies from 200,000 to 400,000. The majority of them were Muslim girls and women ranging from age eight to 70 plus.<br /><br />These are appalling statistics by any yardstick and in a normative context, even one death or rape of a civilian non-combatant by any uniformed person is cause for the gravest concern. Paradoxically, where death becomes macro, cerebral distortions occur easily. In keeping with the Einstein formulation that in a stellar domain mass can deform space, it may be averred that where a whole state machinery is committed to mass killing, normal morality and ethics are warped and elite responsibility evaded. Most objective genocide studies point to this pattern.<br /><br />However, the purpose of this comment is not to cast aspersions on the veracity of one study or the other - more qualified voices will have to address that - but to relate the events of 1971 with the current turmoil in Pakistan.<br /><br />Currently, the Pakistan Army - which in the Zia years became the defender of the Islamic faith - is caught in deep strategic denial about its murky and blood-splattered past. The empirical reality is that this institution since the first war for Kashmir in October 1947 to Kargil of May 1999 has been tasked in covert operations that have used terror stoked by religious radicalism and sectarian xenophobia against the 'adversary' - whether the much reviled Hindu Indian or the fellow Pakistani, be it the Bengali Pakistani of 1971 or the Baluchi of current times.<br /><br />Like Oscar Wilde's "Picture of Dorian Grey", the institutional face of the Pakistan Army is best exemplified by the chutzpah of General Pervez Musharraf is a visage of supreme confidence - now further bolstered by the nuclear firewall. But the ugly reality is of a once proud army - its track record in World War II as part of the erstwhile British Indian Army is lustrous - that has lost its moral compass. The result has been the ignominy of killing fellow citizens on an unprecedented scale and where arch enemy India has been engaged - not being able to acknowledge the deaths of its regular troops in battle or even claim their bodies. A la Lady Macbeth, this is a stain that cannot be wiped away.<br /><br />The inflexible mindset of the Pakistan Army has to be radically altered and there is no historical precedent that this will occur by consensus and deep introspection. The military acquires its legitimacy to use proportionate force for a larger national objective from adherence to the rule of law and a distilled code of professional conduct. But when the deviant becomes the norm, the correlation between principle and power is subverted.<br /><br />The Pakistan Army is caught in an inflexible mode of strategic denial about its past, which is why it appears both unable and unwilling to deal with its present internal security challenges. This is the 'truth' that President Asif Ali Zardari has been trying to reveal - but with limited success. The reverberations of the Dhaka genocide conference must be picked up by Pakistan's accomplished intellectuals - both in the media and academia - and a false narrative corrected. The army must finally confront its mea culpa moment through the bloody cross of East Pakistan.<br /><br />(C. Uday Bhaskar is a well-known strategic analyst. He can be reached at cudayb@gmail.com)MANISHhttp://www.blogger.com/profile/00428491443420277409noreply@blogger.com0tag:blogger.com,1999:blog-2672050906182920186.post-74089928784014223282009-08-04T12:49:00.000+05:302009-08-04T12:50:25.511+05:30Anand Model Should be Replicated for Inclusive GrowthTraditional growth models are the legacy of the industrialization era that started a couple of centuries ago. The approach meant leveraging lowest cost resources with an aim of maximizing benefits to the owners of the enterprise. It is apparent now that pursuing a growth model that brings prosperity to a few while leaving the majority out of the ambit of its benefits is only furthering the gap between the haves and have not. There is a need to change that for inclusive growth, and the 'Anand experience' provides an excellent model.<br /><br />Verghese Kurien, the father of the 'white revolution' in India, innovated the concept of social business in this country through the 'Anand Model', a vertically integrated three-tier self-generative system for cooperative dairy development. He successfully established a commodity like milk as an instrument for socio-economic development. The impact that Anand Model was able to make is very similar to the economic theory canvassed by economist Jeffrey Sachs three decades later.<br /><br />Sachs, professor of Sustainable Development at Columbia's School of International and Public Affairs, authored a seminal work "The End of Poverty" in 2005 in which he claimed the right policies and key interventions can eradicate extreme poverty (living on less than $1 per day) in 20 years. He suggests that an improved input significantly increases the income of subsistence farmers, thereby reducing poverty. He does not believe that increased aid is the only solution; he supports establishing credit and micro loan programmes that are lacking in impoverished areas.<br /><br />Across the globe there is a realization that consistent economic growth has done precious little to reduce the actual extent of deprivation in the world. World Development Report 2008 mentions 850 million people as undernourished and chronically food insecure; leading to death of 2.8 million children and three million women annually in the developing world. The recent financial meltdown too has added about 200 million to the list of poor globally.<br /><br />These facts highlight the need for a greater inclusiveness in the determination of growth processes to combat the increasing global poverty levels. No wonder that global leaders are refocusing their efforts to create a participatory base, encompassing every section of the society in the growth process. Inclusive growth implies an equitable distribution of resources and its accruing benefits for every section of the society.<br /><br />Muhammad Yunus, the Nobel laureate from Bangladesh, purported the need for business models that recognize the multidimensional nature of human beings; 'Social Business' as he terms it provides everyone with a fair chance to unleash their energy and creativity. Designed to operate as a normal business enterprise with the exception of the principal of profit maximization, which is replaced with the principal of social benefit, he set about to make a change. He believes once a social objective driven project overcomes the gravitation of financial dependency, it is ready for space flight.<br /><br />The success of an inclusive growth model in a developing economy will depend much on growth in the rural areas, especially in the agriculture sector. If you look at the agricultural sector in India, the conventional output in relation to the human resources deployed is actually reducing dramatically. In large parts the ailment to this section of our society can be addressed by enabling micro enterprises and businesses that create value added products and services. It is important to provision necessary inputs to the marginalized populace in the rural areas such as access to banking, micro credit and suitable technologies.<br /><br />The Indian government had consistently provided policy support to agriculture and its sub-sectors, including recently while formulating the eleventh plan. Poor execution of public delivery models have seriously impaired the impact that these policies could have made. The Indian farmer seeks empowerment, access to right inputs and not merely largesse. If inclusive growth in India is to succeed there is a dire need to revisit the operating models at the lowest levels.<br /><br />The classical intervention for inclusive growth has come through NGOs or through the corporate world itself. While the NGOs have been stymied by unavailability of adequate infrastructure the corporate intervention through Corporate Social Responsibility (CSR) is usually limited to its area of operation or in conflict with the overall goal of the business to maximize profit.<br /><br />There is a case to consider the Anand Model as an operating national model due to its proven record. The approach provides for action at the grassroot levels as well as coalesces the inputs into capacities to provide global scale finished products, effectively providing an opportunity to create economic value at all the three levels of value chain.<br /><br />However the Anand Model too has its limitations, those that have impaired its ability to emerge as an instrument of change across the nation. These are largely structural as well as political. The cooperative framework imposes limitations as it necessitates these entities to be administered by bureaucracy and state controlled archaic act and rules that impairs functional autonomy. Given its potential impact the guiding structure for the cooperatives shall need to be reviewed and structured to allow them to play the role of catalysts of inclusive growth.<br /><br />Technology is driving mass awareness and exposing systemic inefficacy and socio-economic inequalities, in turn influencing public opinion. India today has a wonderful opportunity to lead the world in inclusive growth. Better infrastructure in conjunction with an inclusive growth enabled by all-pervasive technology has the potential to transform the lives of a billion people. But we need to act decisively and now. Napoleon Bonaparte had said, at a critical juncture: "Take time to deliberate but when the time for action arrives stop thinking and go for it; otherwise defeat is inevitable."<br /><br />(The author is former executive director, National Dairy Development Board and past president Indian Dairy Association, who works for rural empowerment. He can be reached at banerjeeanimesh@rediffmail.com)MANISHhttp://www.blogger.com/profile/00428491443420277409noreply@blogger.com0tag:blogger.com,1999:blog-2672050906182920186.post-60245103854050267312009-08-04T12:41:00.002+05:302009-08-04T12:48:31.066+05:30Pranab Mukherjee’s Union Budget speech 2009-2010Madam Speaker,<br /><br />I rise to present the Budget for 2009-10.<br /><br />2. Just 140 days back, I had the privilege to present the Interim Budget for 2009-10. It is a rare honor that I have been called upon to present the regular budget after the new Government assumed office.<br /><br />3. The Congress-led UPA Government has come back to power with a renewed mandate. As Prime Minister, Dr. Manmohan Singh, said recently “It is a mandate for continuity, stability and prosperity. It is a mandate for inclusive growth and equitable development.” It is a mandate that we accept with humility and a firm resolve to do all that we can for the welfare of this nation.<br /><br />4. I am deeply conscious of the faith reposed by the people in our government and the responsibilities that come with it. I am sensitive to the great challenge of rising expectations of a young India . It reflects a population that is restless, yet engaged and is ready to seize the opportunities that it is presented with. There are new and powerful reasons for us to create, facilitate and sustain those opportunities.<br /><br />5. In the Interim Budget for 2009-10, I had stated that the new Government would need to anchor its policies for 2009-10, in a medium term perspective that would have to:<br /><br />(a) sustain a growth rate of at least 9 per cent per annum over an extended period of time;<br /><br />(b) strengthen the mechanisms for inclusive growth for creating about 12 million new work opportunities per year;<br /><br />(c) reduce the proportion of people living below poverty line to less than half from current levels by 2014;<br /><br />(d) ensure that Indian agriculture continues to grow at an annual rate of 4 per cent;<br /><br />(e) increase the investment in infrastructure to more than 9 per cent of GDP by 2014;<br /><br />(f) support Indian industry to meet the challenge of global competition and sustain the growth momentum in exports;<br /><br />(g) strengthen and improve the economic regulatory framework in the country;<br /><br />(h) expand the range and reach of social safety nets by providing direct assistance to vulnerable sections;<br /><br />(i) strengthen the delivery mechanism for primary health care facilities with a view to improve the preventive and curative health care in the country;<br /><br />(j) create a competitive, progressive and well regulated education system of global standards that meets the aspiration of all segments of the society; and<br /><br />(k) move towards providing energy security by pursuing an Integrated Energy Policy.<br /><br />6. The Government recognizes the challenges that this task entails, particularly at a time when the world is still struggling with an unprecedented financial crisis and an economic slowdown that has also affected India . While we are determined to convert our words into deeds, Members would appreciate that a single Budget Speech cannot solve all our problems, nor is the Union Budget the only instrument to do so. Yet, it is an important means to share the vision of the Government, particularly as we begin a new term. I propose to do just that for the next hour or so, as I dwell on the challenges and outline the approach of the government in the short term and medium term perspectives.<br /><br />7. The first challenge is to lead the economy back to the high GDP growth rate of 9 per cent per annum at the earliest. Growth of income is important in itself, but it is as important for the resources that it brings in. These resources provide us with the means to bridge the critical gaps that remain in our development efforts, particularly with regard to the welfare of the vulnerable segments of our population.<br /><br />8. The second challenge is to deepen and broaden the agenda for inclusive development; and to ensure that no individual, community or region is denied the opportunity to participate in and benefit from the development process.<br /><br />9. The third challenge is to re-energize government and improve delivery mechanisms. Our institutions must provide high quality public services, security and the rule of law to all citizens with transparency and accountability.<br /><br /><br /><br /><span style="font-weight:bold;">Overview of the Economy</span><br /><br /><br />10. Madam Speaker, at the time of the presentation of the Interim Budget, I had given a detailed analysis of the economic situation. Without repeating myself, I would like to highlight that the development course charted by the UPA Government in the last five years has been possible due to a step up in the growth rate of the economy and improved revenue buoyancy. The principal growth driver in this period has been private investment, which has been predominantly funded by domestic resources. During the year 2008-09, there has been a dip in the growth rate of GDP from an average of over 9 per cent in the previous three fiscal years to 6.7 per cent. It has affected the pace of job creation in certain sectors of the economy and the investment sentiments of the business community. It has also resulted in considerably lower revenue growth for the government. Another feature of the year 2008-09 was a sharp rise in the wholesale price index to nearly 13% in August 2008 and an equally sharp fall close to 0% in March 2009. While a detailed analysis of the developments has been presented in the Economic Survey-2008-09, tabled in both houses of Parliament last Thursday, I draw your attention to a few aspects.<br /><br />11. The structure of India ’s economy has changed rapidly in the last ten years. External trade and external capital flows are an important part of the economy and so is the contribution of the services sector to the GDP at well over 50 per cent. The share of merchandise trade (exports plus imports) as a proportion of GDP has more than doubled over the past decade to 38.9 per cent in 2008-09. Similarly, trade in goods and services taken together has also doubled to 47 per cent during this period. Gross capital flows rose to a peak of over 9 per cent of GDP in 2007-08 before falling in the wake of the global financial crisis. The significant increase in the inflow of foreign capital is important, not so much for bridging the domestic savings-investment gap, but for facilitating the intermediation of financial resources to meet the growing needs of the economy.<br /><br />12. This growing integration of the Indian economy with the rest of the world has brought new opportunities and also new challenges. It has made the task of sustaining high growth more complex. Over the past month, we have critically evaluated Government’s efforts at both short term economic recovery as well as medium term economic growth. The economic recovery and growth is a cooperative effort of the Central and State Governments. That is why, for the first time, I held a meeting with Finance Ministers of States as part of the preparations for this Budget. I intend to make this an annual feature.<br /><br /><br /><span style="font-weight:bold;">TOWARDS ECONOMIC REVIVAL<br /><br /><br />Short-term measures</span><br /><br /><br />13. To counter the negative fallout of the global slowdown on the Indian economy, the Government responded by providing three focused fiscal stimulus packages in the form of tax relief to boost demand and increased expenditure on public projects to create employment and public assets. The RBI took a number of monetary easing and liquidity enhancing measures to facilitate flow of funds from the financial system to meet the needs of productive sectors.<br /><br />14. This fiscal accommodation led to an increase in fiscal deficit from 2.7 per cent in 2007-08 to 6.2 per cent of GDP in 2008-09. The difference between the actuals of 2007-08 and 2008-09 constituted the total fiscal stimulus. This fiscal stimulus at 3.5% of GDP at current market prices for 2008-09 amounts to Rs.1,86,000 crore.<br /><br />15. These measures were effective in arresting the fall in growth rate of GDP in 2008-09 and we achieved a growth of 6.7 per cent. There are signs of revival in the domestic industry and the foreign investors have also returned to the Indian market in the last couple of months. It is possible that the two worst quarters since the global financial meltdown in September 2008 are behind us. While the global financial conditions have shown improvement over the recent months, uncertainties relating to the revival of the global economy remain. We cannot, therefore, afford to drop our guard. We have to continue our efforts to provide further stimulus to the economy.<br /><br />16. Madam Speaker, what I unfold now are only the ‘First steps’. It will be my endeavour to make the process of budget formulation more participatory and a continuous exercise.<br /><br /><br /><span style="font-weight:bold;">Infrastructure Development</span><br /><br /><br />17. To stimulate public investment in infrastructure, we had set up the India Infrastructure Finance Company Limited (IIFCL) as a special purpose vehicle for providing long term financial assistance to infrastructure projects. We will ensure that IIFCL is given greater flexibility to aggressively fulfil its mandate.<br /><br />18. ‘Takeout financing’ is an accepted international practice of releasing long term funds for financing infrastructure projects. It can be used to effectively address the asset liability mismatch of commercial banks arising out of financing infrastructure projects and also to free up capital for financing new projects. IIFCL would, in consultation with banks, evolve a ‘takeout financing’ scheme which could facilitate incremental lending to the infrastructure sector.<br /><br />19. Government has had some success in attracting private investment in a wide range of infrastructure sectors such as telecommunications, power generation, airports, ports, roads and even in railways through public private partnerships ( PPP ). To ensure that infrastructure projects do not face financing difficulties arising from the current downturn, as I indicated in my Interim Budget Speech, the Government has decided that IIFCL will refinance 60 per cent of commercial bank loans for PPP projects in critical sectors over the next fifteen to eighteen months. The IIFCL and Banks are now in a position to support projects involving a total investment of Rs.100 thousand crore in infrastructure. Combined with the steps we are taking to increase public investment in infrastructure, this will provide a big boost to such investment.<br /><br />20. The investment in infrastructure for the growth of economy is critical. I have urged my colleagues in the Central and State Governments to remove policy, regulatory and institutional bottlenecks for speedy implementation of infrastructure projects. I, on my part, will ensure that sufficient funds are made available for this sector.<br /><br /><span style="font-weight:bold;">Highway and Railways</span><br /><br /><br />21. The allocation during the current year to National Highways Authority of India (NHAI) for the National Highways Development Programme (NHDP) is being stepped up by 23 per cent over the 2008-09 (BE). I have also increased the allocation for the Railways from Rs.10,800 crore made in the Interim Budget for 2009-10 to Rs.15,800 crore.<br /><br /><span style="font-weight:bold;">Urban Infrastructure</span><br /><br /><br />22. The Jawaharlal Nehru National Urban Renewal Mission (JNNURM) has been an important instrument for refocusing the attention of the State governments on the importance of urban infrastructure. In recognition of the role of JNNURM, the allocation for this scheme is being stepped up by 87 per cent to Rs.12,887 crore in the current budget. To improve the lot of the urban poor, I propose to enhance the allocation for housing and provision of basic amenities to urban poor to Rs.3,973 crore in the current year’s budget. This includes the provision for Rajiv Awas Yojana (RAY), a new scheme announced in the address of the President of India. This scheme, the parameters of which are being worked out, is intended to make the country slum free in the five year period.<br /><br /><span style="font-weight:bold;">Brihan Mumbai Storm Water Drainage Project (BRIMSTOWA)<br /></span><br /><br /><br />23. To address the problem of flooding in Mumbai, Brihan Mumbai Storm Water Drainage Project (BRIMSTOWA) was initiated in 2007. The entire estimated cost of the project at Rs.1,200 crore is being funded through Central assistance. A sum of Rs.500 crore has been released for this project upto<br />2008-09. I have enhanced the provision for this project from Rs.200 crore in Interim BE to Rs.500 crore to expedite the completion of the project.<br /><br /><span style="font-weight:bold;">Power</span><br /><br /><br />24. <span style="font-style:italic;">The Accelerated Power Development and Reform Programme (APDRP)</span> is an important scheme for reducing the gap between power demand and supply. I propose to increase the allocation for this scheme to Rs.2,080 crore, a steep increase of 160 per cent above the allocation in the BE of 2008-09.<br /><br /><span style="font-weight:bold;">Gas</span><br /><br /><br />25. With the recent find of natural gas in the KG Basin on the Eastern offshore of the country, the indigenous production of Natural Gas is set to double with natural gas emerging as an important source of energy. LNG infrastructure in the country is also being expanded. Government proposes to develop a blueprint for long distance gas highways leading to a National Gas Grid. This would facilitate transportation of gas across the length and breadth of the country.<br /><br /><span style="font-weight:bold;">Assam Gas Cracker Project<br /></span><br /><br />26. The Assam Gas Cracker Project sanctioned in April 2006 is being executed at a cost of Rs.5,461 crore. The capital subsidy of Rs.2,138 crore for the project is to be provided by the Central Government. The outlay for this project is being stepped up suitably.<br /><br /><span style="font-weight:bold;">Agricultural Development<br /></span><br /><br />I now turn to Agricultural development.<br /><br />27. Agriculture has been the mainstay of our economy with 60 per cent of our population deriving their sustenance from it. In the recent past, the sector has recorded a growth of about 4 per cent per annum with substantial increase in plan allocations and capital formation in the sector. Agriculture credit flow was Rs.2,87,000 crore in 2008-09. The target for agriculture credit flow for the year 2009-10 is being set at Rs.3,25,000 crore. To achieve this, I propose to continue the interest subvention scheme for short term crop loans to farmers for loans upto Rs.3 lakh per farmer at the interest rate of 7 per cent per annum. I am also happy to announce that, for this year, the Government shall pay an additional subvention of 1 per cent as an incentive to those farmers who repay their short term crop loans on schedule. Thus, the interest rate for these farmers will come down to 6 per cent per annum. For this, I am making an additional Budget provision of Rs.411 crore over Interim BE.<br /><br /><br /><span style="font-weight:bold;">Debt Relief for farmers<br /></span><br /><br />28. The one-time bank loan waiver of nearly Rs.71,000 crore to cover an estimated 40 million farmers was one of the major highlights of the last Budget. Under the Agricultural Debt Waiver and Debt Relief Scheme (2008), farmers having more than two hectares of land were given time upto 30th June, 2009 to pay 75% of their overdues. Due to the late arrival of monsoon, I propose to extend this period by six months upto 31st December, 2009 .<br /><br />29. It is learnt that in some regions of Maharashtra , a large number of farmers had taken loans from private money lenders and the loan waiver scheme did not cover them. The matter requires special attention. To examine the matter in greater detail and suggest the future course of action, I propose to set up a Taskforce.<br /><br /><br /><span style="font-weight:bold;">Accelerated Irrigation Benefit Programme<br /></span><br />30. I propose to provide an additional Rs.1,000 crore over Interim BE for the Accelerated Irrigation Benefit Programme (AIBP), marking an increase of 75 per cent over the allocation in 2008-09(BE). The allocation for the<span style="font-style:italic;"> Rashtriya Krishi Vikas Yojna (RKVY) </span>is also being stepped up by 30 per cent over Budget Estimates of 2008-09.<br /><br /><br /><span style="font-weight:bold;">Restoring Export Growth</span><br /><br /><br />31. Our exporters by virtue of their close links to the external sector have borne the brunt of the global economic crisis. It is, therefore, appropriate that we continue to provide all possible assistance to our exporters to help them overcome the short term disadvantages. More specifically:<br /><br />(a) An adjustment assistance scheme to provide enhanced Export Credit and Guarantee Corporation (ECGC) cover at 95 per cent to badly hit sectors had been initiated in December 2008 to mitigate the difficulties faced by the exporters. In view of the continuing contraction in exports, I propose to extend the benefits of this scheme up to March 2010.<br /><br />(b) The Market Development Assistance Scheme provides support to exporters in developing new markets. With many traditional markets still under financial stress, greater effort is required to identify and develop new markets. I propose to enhance the allocation for this scheme by 148% over BE 2008-09 to Rs.124 crore.<br /><br />(c) With a view to insulating the employment - oriented export sectors from the global meltdown, Government had provided an interest subvention of 2 per cent on pre-shipment credit for seven such sectors. These sectors are textiles including handlooms, handicrafts, carpets, leather, gems and jewellery, marine products and small and medium exporters. I propose to extend the interest subvention beyond the current deadline of September 30, 2009 to March 31, 2010 .<br /><br />(d) Micro, Small and Medium Enterprises (MSMEs) have been affected by the slowdown in exports and the indirect effect of the global crisis on domestic demand. To support this sector, I propose to facilitate the flow of credit at reasonable rates, by providing a special fund out of Rural Infrastructure Development Fund (RIDF) to Small Industries Development Bank (SIDBI). This fund of Rs.4,000 crore will incentivize Banks and State Finance Corporations (SFCs) to lend to Micro and Small Enterprises (MSEs) by refinancing 50 per cent of incremental lending to MSEs during the current financial year.<br /><br />(e) In February, 2009 the Print Media was given a stimulus package comprising waiver of 15% agency commission on DAVP advertisements and a 10% increase in the DAVP rates to be paid as a ‘special relief’ subject to documentary proof of loss of revenue in non-governmental advertisements. Since Print Media is still passing through difficult times, I have decided to extend the stimulus package for another six months from 30th June, 2009 to 31st December, 2009 .<br /><br /><span style="font-weight:bold;">Medium-term sustainability<br /></span><br /><br />32. The short term fiscal stimulus has to be balanced against long term prudence and fiscal sustainability objectives. To quote Kautilya, “In the interest of the prosperity of the country, a King shall be diligent in foreseeing the possibility of calamities, try to avert them before they arise, overcome those which happen, remove all obstructions to economic activity and prevent loss of revenue to the state”. I intend to take Kautilya’s advice and return to the FRBM target for fiscal deficit at the earliest and as soon as the negative effects of the global crisis on the Indian economy have been overcome. On the medium term fiscal perspective, I await the recommendations of the 13th Finance Commission.<br /><br />33. To bring the fiscal deficit under control, we have to initiate institutional reform measures during the current year itself. This is essential for maintaining a stable balance of payments, moderate interest rates and steady flow of external capital for corporate investment. These measures have to encompass all aspects of the budget such as subsidies, taxes, expenditure and disinvestment.<br /><br /><span style="font-weight:bold;">Fertilizer subsidy</span><br /><br />34. In the context of the nation’s food security, the declining response of agricultural productivity to increased fertilizer usage in the country is a matter of concern. To ensure balanced application of fertilizers, the Government intends to move towards a nutrient based subsidy regime instead of the current product pricing regime. It will lead to availability of innovative fertilizer products in the market at reasonable prices. This unshackling of the fertilizer manufacturing sector is expected to attract fresh investments in this sector. In due course it is also intended to move to a system of direct transfer of subsidy to the farmers.<br /><br /><span style="font-weight:bold;">Petroleum and Diesel pricing policy<br /></span><br /><br />35. Madam Speaker, Honorable Members are aware that global prices of oil and petroleum products had shot up to unprecedented levels in 2008-09. Most oil importing countries, including our neighbors, adjusted their domestic prices to reflect these global changes. Though prices have declined since then, they are already about double of the lows reached in the wake of the global financial crisis. It is important to recognize that, with almost three-quarters of our oil consumption met through imports, domestic prices of petrol and diesel have to be broadly in sync with global prices of these items. Government will set up an expert group to advise on a viable and sustainable system of pricing petroleum products. Details will be announced by my colleague, the Minister of Petroleum and Natural Gas.<br /><br /><span style="font-weight:bold;">Taxation</span><br /><br /><br />36. It is time that we complete the process that was started in 1991 for building a trust based, simple, neutral, tax system with almost no exemptions and low rates designed to promote voluntary compliance. The Income Tax Return Forms should be simple and user-friendly. I have asked the Department to work on SARAL-II forms for early introduction. We need a tax system which generates revenues on a sustained basis without use of coercive tax collection methods at the end of each year to meet targets. It is my intention to make a modest start in this direction in the current year and ensure that the process is completed in the next four years. At the end of this process, I hope the Finance Minister can credibly say that our tax collectors are like honey bees collecting nectar from the flowers without disturbing them, but spreading their pollen so that all flowers can thrive and bear fruit.<br /><br /><br /><br /><span style="font-weight:bold;">People’s ownership of PSUs</span><br /><br /><br />37. The Public Sector Undertakings are the wealth of the nation, and part of this wealth should rest in the hands of the people. While retaining at least 51 per cent Government equity in our enterprises, I propose to encourage people’s participation in our disinvestment programme. Here, I must state clearly that public sector enterprises such as banks and insurance companies will remain in the public sector and will be given all support, including capital infusion, to grow and remain competitive.<br /><br /><br /><span style="font-weight:bold;">Financial sector</span><br /><br /><br />38. The financial sector is the life blood of any economy. Our Government’s approach to the banking and financial sector has been to ensure robust oversight and regulation while expanding financial access and deepening markets. The merit of this balanced approach has been borne out in the recent experience, as the turbulence in the world financial markets has left the Indian banking and financial sector relatively unaffected. Never before has Indira Gandhi’s bold decision to nationalize our banking system exactly 40 years ago - on 14th of July, 1969 - appeared as wise and visionary as it has over the past few months. Her approach continues to be our inspiration even as we introduce competition and new technology in this sector.<br /><br />39. The average public float in Indian listed companies is less than 15 per cent. Deep non-manipulable markets require larger and diversified public shareholdings. This requirement should be uniformly applied to the private sector as well as listed public sector companies. I propose to raise, in a phased manner, the threshold for non-promoter public shareholding for all listed companies.<br /><br />40. For a country like ours, with significant sections of unbanked population and regions, financial inclusion is vital for sustaining long term equitable development. As part of the financial inclusion drive, scheduled commercial banks have been opening ‘no frills’ accounts either with ‘nil’ or very low minimum balances. So far, these banks have opened 3.3 crore such accounts. The RBI has announced a further relaxation in its Branch Authorization Policy. Scheduled Commercial Banks are now allowed to set up off-site ATMs without prior approval, subject to reporting.<br /><br />41. Despite the expansion of banking network in the country, there are still some areas that remain under-banked or unbanked. A sub-committee of State Level Bankers Committee ( SLB C) will identify such areas and formulate an action plan for providing banking facilities to all these areas in the next 3 years. I propose to set aside Rs.100 crore during the current year as one-time grant-in-aid to ensure provision of at least one centre/Point of Sales (POS) for banking services in each of the unbanked blocks in the country.<br /><br />42. The Government has established Competition Commission of India, an autonomous regulatory body to promote and sustain competition in markets, protect interests of consumers and to prevent practices having adverse effect on competition. An Appellate body headed by a retired judge of the Supreme Court has also been constituted.<br /><br />43. The benefits of competition should now come to more sectors and their users and consumers. Now is the time for us to work on these aspects to eliminate supply bottlenecks, enhance productivity, reduce costs and improve quality of goods and services supplied to consumers.<br /><br /><br /><span style="font-weight:bold;">Investment environment</span><br /><br />44. Private sector investment has been affected by the global macro economic conditions. Our Government is committed to creating a facilitating environment in which a competitive private sector can thrive and play its rightful role in nation’s economic development. India ’s high growth of 8.5% per annum from 2004 to 2008 was fuelled in very large part by private investment. I look forward to working closely with industry and our vibrant entrepreneurial community to address their outstanding concerns.<br /><br /><br /><span style="font-weight:bold;">TOWARDS INCLUSIVE DEVELOPMENT</span><br /><br /><br />45. Madam Speaker, the UPA government has gone for a paradigm shift for making the development process more inclusive. It involves creating entitlements backed by legal guarantee to provide basic amenities and opportunities for livelihood to vulnerable sections. ‘Aam Admi’ is now the focus of all our programmes and schemes.<br /><br />National Rural Employment Guarantee Scheme (NREGS)<br /><br />46. (i) It is widely acknowledged that the National Rural Employment Guarantee Act, (NREGA) first implemented in February 2006, has been a magnificent success. During 2008-09, NREGA provided employment opportunities for more than 4.47 crore households as against 3.39 crore households covered in 2007-08. We are committed to providing a real wage of Rs.100 a day as an entitlement under the NREGA. To increase the productivity of assets and resources under NREGA, convergence with other schemes relating to agriculture, forests, water resources, land resources and rural roads is being initiated. In the first stage, a total of 115 pilot districts have been selected for such convergence. Details of these measures and convergence guidelines will be announced by my colleague, the Minister of Rural Development. I propose an allocation of Rs.39,100 crore for the year 2009-10 for NREGA which marks an increase of 144% over 2008-09 Budget Estimates.<br /><br /><span style="font-weight:bold;">National Food Security Act (NFSA)</span><br /><br />(ii) I am happy to announce that the work on National Food Security Act has begun in right earnest. This will ensure that every family living below the poverty line in rural or urban areas will be entitled by law to 25 kilos of rice or wheat per month at Rs.3 a kilo. The Government proposes to put the draft Food Security Bill on the website of the Department of Food and Public Distribution for public debate and consultations very soon.<br /><br /><br /><span style="font-weight:bold;">Bharat Nirman</span><br /><br /><br />(iii) Bharat Nirman with its six schemes is an important initiative for bridging the gap between the rural and urban areas and improving the quality of life of people, particularly the poor, in the rural areas. I propose to step up the allocations for Bharat Nirman by 45 per cent in 2009-10 over the BE of 2008-09. The Pradhan Mantri Gram Sadak Yojana (PMGSY) is one of the most successful programmes under Bharat Nirman. I propose to step up the allocation for this programme by 59% over BE 2008-09 to Rs.12,000 crore. I also propose to allocate Rs.7,000 crore to Rajiv Gandhi Grameen Viduytikaran Yojana (RGGVY) which represents a 27 per cent increase over 2008-09 (BE).<br /><br />(iv) The allocation for the Indira Awaas Yojana ( IAY) is proposed to be increased by 63 per cent to Rs.8,800 crore in Budget Estimates 2009-10. To broaden the pace of rural housing, I propose to allocate, from the shortfall in the priority sector lending of commercial banks, a sum of Rs.2,000 crore for Rural Housing Fund in the National Housing Bank (NHB). This will boost the resource base of NHB for their refinance operations in rural housing sector.<br /><br /><br /><span style="font-weight:bold;">Pradhan Mantri Adarsh Gram Yojana (PMAGY)</span><br /><br /><br />(v) There are about 44,000 villages in which the population of Scheduled castes is above 50 per cent. A new scheme called Pradhan Mantri Adarsh Gram Yojana (PMAGY) is being launched this year on a pilot basis, for the integrated development of 1000 such villages. I propose an allocation of Rs.100 crore for this scheme. Each village would be able to avail gap funding of Rs.10 lakh over and above the allocations under Rural Development and Poverty Alleviation Schemes. On successful implementation of the pilot phase, the Yojana would be extended in coming years.<br /><br /><br /><span style="font-weight:bold;">Empowerment of Weaker Sections</span><br /><br /><br />47. The Swarna Jayanti Gram Swarozgar Yojna (SGSY) is being restructured as the National Rural Livelihood Mission to make it universal in application, focused in approach and time bound for poverty eradication by 2014-15. Stress will be laid on the formation of women Self Help Groups (SHGs). Apart from providing capital subsidy at an enhanced rate, it is also proposed to provide interest subsidy to poor households for loans upto Rs. one lakh from banks.<br /><br />48. The Women’s Self Help Group movement is bringing about a profound transformation in rural areas. There are today over 22 lakh such groups linked with banks. Our objective is to enroll at least 50% of all rural women in India as members of SHGs over the next five years and link these SHGs to banks.<br /><br />49. The Rashtriya Mahila Kosh has been working towards the facilitation of credit support or micro finance to poor women and has developed a number of innovative schemes for their benefit. In recognition of its role as an instrument of socio-economic change and development, the corpus of the Kosh, which at present is Rs.100 crore, would be raised to Rs.500 crore, over the next few years.<br /><br /><span style="font-weight:bold;">Female literacy</span><br /><br />50. The low level of female literacy continues to be a matter of grave concern. It has, therefore, been decided to launch a National Mission for Female Literacy, with focus on minorities, SC, ST and other marginalized groups. The aim will be to reduce by half, the current level of female illiteracy, in three years.<br /><br /><span style="font-weight:bold;">Integrated Child Development Services</span><br /><br />51. Government is committed to universalization of the Integrated Child Development Services (ICDS) Scheme in the country. By March 2012, all services under ICDS would be extended, with quality, to every child under the age of six.<br /><br /><br /><span style="font-weight:bold;">Student Loans to Weaker Sections</span><br /><br /><br />52. To enable students from economically weaker sections to access higher education, it is proposed to introduce a scheme to provide them full interest subsidy during the period of moratorium. It will cover loans taken by such students from scheduled banks to pursue any of the approved courses of study, in technical and professional streams, from recognized institutions in India . It is estimated that over 5 lakh students would avail of this benefit.<br /><br /><br /><span style="font-weight:bold;">Welfare of Minorities</span><br /><br /><br />53. The Plan outlay of Ministry of Minority Affairs has been enhanced from Rs.1,000 crore in BE 2008-09 to Rs.1,740 crore in 2009-10, registering an increase of 74%. This includes Rs.990 crore for Multi-Sectoral Development Programme for Minorities in selected minority concentration districts, Grants-in-aid to Maulana Azad Education Foundation which is almost doubled, and provisions for National Minorities Development and Finance Corporation and Pre-Matric and Post-Matric Scholarships for Minorities. Allocations have also been made for the new schemes of National Fellowship for Students from the Minority Community and Grants-in-aid to Central Wakf Council for computerization of records of State Wakf Boards.<br /><br />54. Aligarh Muslim University has decided to establish its campuses at Murshidabad in West Bengal and Malappuram in Kerala. I propose to make an allocation of Rs.25 crore each for these two campuses.<br /><br /><br /><span style="font-weight:bold;">Welfare of workers in the unorganized sector<br /></span><br /><br /><br />55. The unorganized or informal sector of our economy accounts for 92% of the employment and absorbs bulk of the annual increase in our labor force. The Unorganized Workers Social Security Bill, 2007 has now been passed by both Houses of Parliament. I have already initiated action to ensure that social security schemes for occupations like weavers, fishermen and women, toddy tappers, leather and handicraft workers, plantation labor, construction labor, mine workers, bidi workers, and rikshaw pullers are implemented at the earliest. Necessary financial allocations will be made for these schemes.<br /><br /><br /><span style="font-weight:bold;">Employment Exchanges</span><br /><br /><br />56. I propose to launch a new project for modernization of the Employment Exchanges in public private partnership so that a job seeker can register on-line from anywhere and approach any employment exchange. Under the project, a national web portal with common software will be developed. This will contain all the data regarding availability of skilled persons on the one hand and requirements of skilled persons by the industry on the other. It will help youth get placed and enable industry to procure required skills on real time basis.<br /><br /><br /><span style="font-weight:bold;">Handlooms</span><br /><br /><br />57. In the last Budget two mega handloom clusters at Varanasi and Sibsagar and two mega powerloom clusters at Erode and Bhiwandi were approved. They are under successful implementation. I propose to add one handloom mega cluster each in West Bengal and Tamil Nadu and one powerloom mega cluster in Rajasthan. These will help preserve the magnificent textile traditions in West Bengal and Tamil Nadu and generate thousands of jobs in Rajasthan. In addition, I propose to add new mega clusters for Carpets in Srinagar (J&K) and Mirzapur (UP).<br /><br /><br /><br /><span style="font-weight:bold;">Health</span><br /><br /><br />58. The National Rural Health Mission is an essential instrument for achieving our goal of Health for all. I propose an increase of Rs.2,057 crore over and above Rs.12,070 crore provided in the Interim Budget.<br /><br />59. Rashtriya Swasthya Bima Yojana (RSBY) was operationalised last year. The initial response has been very good. More than 46 lakh BPL families in eighteen States and UTs have been issued biometric smart cards. This scheme empowers poor families by giving them freedom of choice for using health care services from an extensive list of hospitals including private hospitals. Government proposes to bring all BPL families under this scheme. An amount of Rs.350 crore, marking 40% increase over the previous allocation, is being provided in 2009-10 Budget Estimates.<br /><br /><br /><span style="font-weight:bold;">Environment and Climate Change<br /><br /></span><br />60. The National Action Plan on Climate Change unveiled last year, outlines our strategy to adapt to Climate Change and enhance the ecological sustainability of our development path. Following this, eight national missions representing a multi-pronged, long term and integrated approach are being launched. I propose to provide necessary funds for these missions.<br /><br />61. Our government has already set up a ‘National Ganga River Basin Authority’ (NGRBA). I propose increasing the budgetary outlay for the National River and Lake Conservation Plans to Rs.562 crore in 2009-10 from Rs.335 crore in 2008-09.<br /><br />62. I propose to make a special one-time grant of Rs.100 crore to the Indian Council of Forestry Research and Education, Dehradun in recognition of its excellence in the field of research, education and extension. I also propose an allocation of Rs.15 crore each for the Botanical Survey of India and Zoological Survey of India. An additional amount of Rs.15 crore is being allocated to Geological Survey of India.<br /><br /><br /><span style="font-weight:bold;">TOWARDS BUILDING ACCOUNTABLE INSTITUTIONS</span><br /><br /><br /><span style="font-style:italic;">Improving delivery of public services</span><br /><br /><br />63. As substantial resources, both public and private, are mobilized to fuel the growth of the economy and make it more inclusive in character, efficiency of delivery must become the focus of government programmes. The enactment of the Right to Information Act at the Centre and in many states has been an important and successful step in this direction, ushering in greater transparency and accountability in the public decision-making process.<br /><br />64. The setting up of the Unique Identification Authority of India (UIDAI) is a major step in improving governance with regard to delivery of public services. This project is very close to my heart. I am happy to note that this project also marks the beginning of an era where the top private sector talent in India steps forward to take the responsibility for implementing projects of vital national importance. The UIDAI will set up an online data base with identity and biometric details of Indian residents and provide enrolment and verification services across the country. The first set of unique identity numbers will be rolled out in 12 to 18 months. I have proposed a provision of Rs.120 crore for this project.<br /><br /><br /><span style="font-style:italic;">National Security<br /><br /></span><br />65. For modernization of Police force in the States, an additional amount of Rs.430 crore is being proposed, over and above the provisions in the Interim Budget. The Government has also sanctioned special risk/hardship allowances to the personnel of Para Military Forces at par with Defence forces. Provisions for payment of these allowances are also being proposed in the Budget.<br /><br />66. For strengthening Border Management, an additional amount of Rs.2,284 crore, over and above the provision in the Interim Budget, is being provided for construction of fences, roads, flood-lights on the international borders.<br /><br />67. Significant augmentation in the strength of para-military forces is being done. This calls for more investment in creating the necessary infrastructure, particularly in the area of housing. The Government, therefore, proposes to launch a massive programme of housing to create 1 lakh dwelling units for Central Para-Military Forces personnel. This will not only contribute to the morale of the forces, but will also enable leveraging of government’s annual budgetary resources and create an innovative financing model.<br /><br /><br /><span style="font-style:italic;">One Rank One Pension for Ex-Servicemen (OROP)<br /><br /></span><br />68. Our country owes a deep debt of gratitude to our valiant ex-Servicemen. The Committee headed by the Cabinet Secretary on OROP has submitted its report and the recommendations of the Committee have been accepted. On the basis of these recommendations, the Government has decided to substantially improve the pension of pre 1.1.2006 defence pensioners below officer rank (PBOR) and bring pre 10.10.1997 pensioners on par with post 10.10.1997 pensioners. Both these decisions will be implemented from 1st July 2009 resulting in enhanced pension for more than 12 lakh jawans and JCOs. These measures will cost the exchequer more than Rs.2,100 crore annually. Certain pension benefits being extended to war wounded and other disabled pensioners are also being liberalized.<br /><br /><br /><span style="font-style:italic;">Education</span><br /><br /><br />69. The demographic advantage India has in terms of a large percentage of young population needs to be converted into a dynamic economic advantage by providing them the right education and skills. The provision for the scheme, ‘ Mission in Education through ICT,’ has been substantially increased to Rs.900 crore. Similarly, the provision for setting up and up-gradation of Polytechnics under the Skill Development Mission has been increased to Rs.495 crore. The government shall take forward its intent of having one Central University in each uncovered State and for this purpose I am allocating Rs.827 crore. I am also allocating Rs.2,113 crore for IITs and NITs, which includes a provision of Rs.450 crore for new IITs and NITs. The overall Plan budget for higher education is proposed to be increased by Rs.2,000 crore over Interim BE.<br /><br />70. Union Territory of Chandigarh is the capital of Punjab and Haryana. The facilities at Punjab University , Chandigarh , need to be improved. I, therefore, propose to make an allocation of Rs.50 crore for this university. To enable the Union Territory Administration to provide better infrastructure to the people, I propose to suitably enhance the Plan allocation for Chandigarh during the current financial year.<br /><br />Commonwealth Games 2010<br /><br />71. The Commonwealth Games present the country with an opportunity to showcase our potential as an emerging Asian Power. I propose to substantially enhance the allocations for the Commonwealth Games from Rs.2,112 crore in the Interim Budget to Rs.3,472 crore in the Budget for 2009-10.<br /><br />72. Madam Speaker, the Government is committed to ensure that Sri Lankan Tamils enjoy their rights and legitimate aspirations within the territorial sovereignty and framework of Sri Lanka ’s Constitution. The Ministry of External Affairs is working closely with the Sri Lankan Government in this regard. I propose to allocate Rs.500 crore for the rehabilitation of the internally displaced persons and reconstruction of the northern and eastern areas of Sri Lanka .<br /><br />73. As Honorable Members are aware, Cyclone Aila struck the coast of West Bengal in the last week of May 2009. Extensive damage was caused to roads, houses and infrastructure. While immediate interim relief has been provided from the Calamity Relief Fund (CRF), it is proposed to draw up a programme for rebuilding the damaged infrastructure. For this purpose, I propose to allocate Rs.1,000 crore.<br /><br /><br /><span style="font-weight:bold;">BUDGET ESTIMATES 2009-10</span><br /><br /><br />Madam Speaker, now I turn to the Budget Estimates for 2009-10.<br /><br />74. The Budget Estimates 2009-10 provide for a total expenditure of Rs.10,20,838 crore consisting of Rs.6,95,689 crore towards Non Plan and Rs.3,25,149 crore towards Plan expenditure. The increase in Non Plan expenditure over BE 2008-09 is 37% whereas the increase in Plan expenditure is 34%. The total increase in expenditure in 2009-10 over BE 2008-09 is 36%.<br /><br />75. The increase in Non Plan expenditure is mainly on account of the implementation of the Sixth Central Pay Commission recommendations, increased food subsidy and higher interest payment arising out of the larger fiscal deficit in 2008-09. Interest payments are estimated at Rs.2,25,511 crore constituting about 36% of Non Plan revenue expenditure in BE 2009-10. The total provision for subsidies are up from Rs.71,431 crore in BE 2008-09 to Rs.1,11,276 crore in BE 2009-10. The outlay on Defence has gone up from Rs.1,05,600 crore in BE 2008-09 to Rs.1,41,703 crore in BE 2009-10.<br /><br />76. Honorable Members may recall that while presenting the Interim Budget 2009-10, I had stated that the Plan expenditure for 2009-10 may have to be increased further as a part of counter-cyclical measures to minimize the impact of global recession and economic slowdown. Against the backdrop of limited fiscal space because of reduction in CENVAT and Service Tax rates, Government have taken a conscious and bold decision to enhance the Gross Budgetary Support (GBS) for the Annual Plan 2009-10 by Rs.40,000 crore over Interim Budget 2009-10. Bulk of this enhanced GBS is directed towards public investment in infrastructure with special emphasis on rural infrastructure, raising growth potential and leading to income generation. Besides, the State Governments will be permitted to borrow additional 0.5% of their GSDP by relaxing the fiscal deficit target under FRBM from 3.5% to 4% of their GSDP. This will enable the State Governments to raise additional open market loans of about Rs.21,000 crore in the current year. In other words, the total additionality in Plan expenditure by Centre and the States put together would be Rs.61,000 crore over Interim Budget. I do believe that this fiscal expansion will go a long way in reversing the impact of economic slowdown and accelerate our growth revival in the medium term.<br /><br />77. Madam Speaker, given the possibility of the economic downturn persisting in the current year, the gross tax receipts are budgeted at Rs.6,41,079 crore in BE 2009-10, compared to Rs.6,87,715 crore in BE 2008-09. The non tax revenue receipts are, however, likely to be better and are estimated at Rs.1,40,279 crore in BE 2009-10 compared to Rs.95,785 crore in BE 2008-09. The revenue deficit as a percentage of GDP is projected at 4.8% compared to 1% in BE 2008-09 and 4.6% as per provisional accounts of 2008-09. The fiscal deficit as a percentage of GDP is projected at 6.8% compared to 2.5% in BE 2008-09 and 6.2% as per provisional accounts 2008-09. This level of deficit is a matter of concern and Government will address this issue in right earnest to come back to the path of fiscal consolidation at the earliest.<br /><br />78. Madam Speaker, before I turn to my tax proposals, I cannot resist the temptation of re-visiting Kautilya. He said and I quote, “Just as one plucks fruits from a garden as they ripen, so shall a King have revenue collected as it becomes due. Just as one does not collect unripe fruits, he shall avoid taking wealth that is not due because that will make the people angry and spoil the very sources of revenue.”<br /><br /><br /><span style="font-weight:bold;">PART - B</span><br /><br /><br /><span style="font-style:italic;">TAX PROPOSALS</span><br /><br /><br />79. Madam Speaker, I shall now present my tax proposals.<br /><br />80. As the House is aware, the thrust of reforms over the last few years, including the previous term of this Government, has been to improve the efficiency and equity of our tax system. This is sought to be achieved by eliminating distortions in the tax structure, introducing moderate levels of taxation and expanding the base. These policy changes have been accompanied by requisite re-engineering of key business processes coupled with automation, both for direct and indirect taxes. On the direct tax side, a recent initiative for further improving efficiency is the setting up of a Centralized Processing Centre (CPC) at Bengaluru where all electronically filed returns, and paper returns filed in entire Karnataka, will be processed.<br /><br />81. These tax reform initiatives have produced impressive results. The Centre’s Tax- GDP ratio has increased to 11.5 per cent in 2008-09 from a low of 9.2 per cent in 2003-04. The healthy growth in tax revenues over the last five years is essentially attributable to growth in direct taxes. Further, the share of direct taxes in the Centre’s tax revenues has increased to 56 per cent in 2008-09 from 41 per cent in 2003-04, reflecting a sharp improvement in the equity of our tax system. The Government is committed to furthering this process of tax reform.<br /><br />82. In the course of preparation of this budget, I have had the opportunity to interact with large number of stakeholders and receive valuable inputs. Most suggestions were for structural changes in the tax system. Tax reform, like all reforms, is a process and not an event. Therefore, I propose to pursue structural changes in direct taxes by releasing the new Direct Taxes Code within the next 45 days and in indirect taxes by accelerating the process for the smooth introduction of the Goods and Services Tax (GST) with effect from 1st April, 2010 .<br /><br />83. The Direct Taxes Code, along with a Discussion Paper, will be released to the public for debate. Based on the inputs received, the Government will finalize the Direct Taxes Code Bill for introduction in this House sometime during the Winter Session.<br /><br />84. To further enhance efficiency in tax administration, I intend to merge the two Authorities for Advance Rulings on Direct and Indirect Taxes by amending the relevant Acts. This will enable the Authority for Advance Rulings set up under Section 245-O of the Income Tax Act, 1961 to also function as the Authority for Advance Rulings for Indirect Taxes.<br /><br />85. I have been informed that the Empowered Committee of State Finance Ministers has made considerable progress in preparing the roadmap and the design of the GST. Officials from the Central Government have also been associated in this exercise. I am glad to inform the House that, through their collaborative efforts, they have reached an agreement on the basic structure in keeping with the principles of fiscal federalism enshrined in the Constitution. I compliment the Empowered Committee of State Finance Ministers for their untiring efforts. The broad contour of the GST Model is that it will be a dual GST comprising of a Central GST and a State GST. The Centre and the States will each legislate, levy and administer the Central GST and State GST, respectively. I will reinforce the Central Government’s catalytic role to facilitate the introduction of GST by 1st April, 2010 after due consultations with all stakeholders.<br /><br /><br /><span style="font-weight:bold;">DIRECT TAXES</span><br /><br /><br />86. I shall now deal with direct taxes.<br /><br />87. Madam Speaker, there have been demands by the corporate sector for reduction in tax rates. However, tax rates are determined by the size of the tax base; if the tax base is higher, the tax rates can be lower. The Income Tax Act is riddled with a plethora of tax exemptions which substantially erode the tax base. The extent of this erosion is presented to this House in the form of a Revenue Foregone Statement. The growth in the direct tax revenue foregone is relatively higher than the growth in the direct tax revenues. Accordingly, I do not propose to make any change in the Corporate Tax rates.<br /><br />88. With a view to providing interim relief to small and marginal taxpayers and senior citizens, I propose to increase the personal income tax exemption limit by Rs.15,000 from Rs.2.25 lakh to Rs.2.40 lakh for senior citizens. Similarly I also propose to raise the exemption limit by Rs.10,000 from Rs.1.80 lakh to Rs.1.90 lakh for women tax payers and by Rs.10,000 from Rs.1.50 lakh to Rs.1.60 lakh for all other categories of individual taxpayers. Further, I also propose to increase the deduction under section 80-DD in respect of maintenance, including medical treatment, of a dependent who is a person with severe disability to Rs.1 lakh from the present limit of Rs.75,000.<br /><br />89. In the past, surcharges on direct taxes have generally been levied to meet the revenue needs arising from natural calamities. The Government has set up the National Calamity Contingency Fund to build up resources to meet emergency situations. As a corollary, surcharge on direct taxes should be removed. However, this has to be balanced with the revenue needs of the Government. Therefore, in the first instance, I propose to phase out the surcharge on various direct taxes by eliminating the surcharge of 10 per cent on personal income tax.<br /><br />90. Deduction in respect of export profits is available under sections 10A and 10B of the Income-tax Act. The deduction under these sections would not be available beyond the financial year 2009-2010. In order to tide over the slowdown in exports, I propose to extend the sun-set clauses for these tax holidays by one more year i.e. for the financial year 2010-11.<br /><br />91. The Finance Act, 2005 introduced the Fringe Benefit Tax on the value of certain fringe benefits provided by employers to their employees. This tax has been perceived as imposing considerable compliance burden. Empathizing with these sentiments, I propose to abolish the Fringe Benefit Tax.<br /><br />92. The competitive ability of an economy rests on its progress in the area of Research and Development (R&D). In order to incentivize the corporate sector to undertake R&D work, I propose to extend the scope of the current provision of weighted deduction of 150% on expenditure incurred on in-house R&D to all manufacturing businesses except for a small negative list.<br /><br />93. Under the present scheme of the Income Tax Act, tax exemptions are largely profit-linked. Such incentives are inherently inefficient and liable to misuse. Therefore, it is proposed to incentivize businesses by providing investment-linked tax exemptions. To begin with, I propose to extend investment- linked tax incentives to the businesses of setting up and operating ‘cold chain’, warehousing facilities for storing agricultural produce and the business of laying and operating cross country natural gas or crude or petroleum oil pipeline network for distribution on common carrier principle. Under this method, all capital expenditure, other than expenditure on land, goodwill and financial instruments will be fully allowable as deduction.<br /><br />94. Minimum Alternate Tax (MAT) was introduced to address inequity in taxation of corporate taxpayers. In the quest for greater equity, I propose to increase the rate of MAT to 15 per cent of book profits from the present rate of 10 per cent. However, to grant relief to corporate taxpayers, I also propose to extend the period allowed to carry forward the tax credit under MAT from seven years to ten years.<br /><br />95. The New Pension System (NPS) is an important milestone in the development of a sustainable, efficient, voluntary and defined contribution pension system in India . While the NPS will continue to be subjected to the Exempt-Exempt-Taxed (EET) method of tax treatment of savings, it is proposed to provide necessary fiscal support to the NPS for the establishment of this much needed social security system. Accordingly, I propose to exempt the income of the NPS Trust from income tax and any dividend paid to this Trust from Dividend Distribution Tax. Similarly, all purchase and sale of equity shares and derivatives by the NPS Trust will also be exempt from the Securities Transaction Tax. I also propose to enable self employed persons to participate in the NPS and avail of the tax benefits available thereto.<br /><br />96. In order to further improve the investment climate in the country, we need to facilitate the resolution of tax disputes faced by foreign companies within a reasonable time frame. This is particularly relevant for such companies in the Information Technology (IT) sector. I, therefore, propose to create an alternative dispute resolution mechanism within the Income Tax Department for the resolution of transfer pricing disputes. To reduce the impact of judgemental errors in determining transfer price in international transactions, it is proposed to empower the Central Board of Direct Taxes (CBDT) to formulate ‘safe harbor’ rules.<br /><br />97. The Finance Act, 2008 introduced the Commodity Transaction Tax (CTT) to be levied on taxable commodities transactions entered in a recognized association. The Prime Minister’s Economic Advisory Council has recommended abolition of the CTT. I, therefore, propose to abolish the Commodity Transaction Tax.<br /><br />98. The House will agree that it is desirable to bring about transparency in the funding of political parties in the country. With a view to reforming the system of funding of political parties, I propose to provide that donations to electoral trusts shall be allowed as a 100 per cent deduction in the computation of the income of the donor. For this purpose, Electoral Trusts will be such trusts as are set up as pass-through vehicles for routing the donations to political parties and are approved by CBDT.<br /><br />99. Section 80E of the Income-tax Act provides for a deduction in respect of interest on loans taken for pursuing higher education in specified fields of study. I propose to extend the scope of this provision to cover all fields of study, including vocational studies, pursued after completion of schooling.<br /><br />100. Anonymous donations to charitable institutions are presently liable to tax so as to prevent unaccounted money being routed to such entities in the garb of anonymous donations. However, some organizations are facing genuine problems in complying with the procedural requirements. In order to mitigate the practical difficulties being faced by such charitable organizations, I propose to grant relief to such organizations by not taxing anonymous donations received to the extent of 5 per cent of their total income or a sum of Rs.1 lakh, whichever is higher.<br /><br />101. To facilitate the business operations of all small taxpayers and reduce their compliance burden, I propose to expand the scope of presumptive taxation to all small businesses with a turnover upto Rs.40 lakh. All such taxpayers will have the option to declare their income from business at the rate of 8 per cent of their turnover and simultaneously enjoy exemption from the compliance burden of maintaining books of accounts. As a procedural simplification, I also propose to allow them to pay their entire tax liability from business at the time of filing their return by exempting them from paying advance tax. This new scheme will come into effect from the financial year 2010-11.<br /><br />102. Madam Speaker, in the context of the geo-political environment, it is necessary for us to create our own facilities for energy security. Accordingly, I propose to extend the tax holiday under section 80-IB(9) of the Income Tax Act, which was hitherto available in respect of profits arising from the commercial production or refining of mineral oil, also to natural gas. This tax benefit will be available to undertakings in respect of profits derived from the commercial production of mineral oil and natural gas from oil and gas blocks which are awarded under the New Exploration Licensing Policy-VIII round of bidding. Further, I also propose to retrospectively amend the provisions of the said section to provide that “undertaking” for the purposes of section 80-IB(9) will mean all blocks awarded in any single contract.<br /><br />103. Under the present provisions of section 2 (15) of the Income Tax Act, “charitable purpose” includes relief of the poor, education, medical relief, and the “advancement of any other object of general public utility”. However, the “advancement of any other object of general public utility” cannot involve the carrying on of any activity in the nature of trade, commerce or business. I propose to provide the same tax treatment to trusts engaged in preserving and improving our environment (including watersheds, forests and wildlife) and preserving our monuments or places or objects of artistic or historic interest, as is available to trusts engaged in providing relief of the poor, education and medical relief.<br /><br /><br /><span style="font-weight:bold;">INDIRECT TAXES</span><br /><br /><br />104. Madam Speaker, I turn to my main proposals on indirect taxes.<br /><br />105. I will first take up customs duties.<br /><br />106. Although our domestic industry has weathered the impact of the global financial crisis and the resultant slowdown with resilience, it is yet to fully find its feet. Manufacturing growth, which had turned negative in October 2008 on a year-on-year basis and remained in that zone till March this year, appears to be barely turning the corner. However, the global scenario remains worrisome and it is my view that the paramount need is to provide industry with a stable framework. My proposals on indirect taxes seek to achieve this by maintaining the overall rate structure for customs and central excise duties as well as service tax. I must hasten to add that I have not hesitated to act where distortions provide a compelling reason or where relief would provide a healing touch.<br /><br />107. Full exemption from basic customs duty was provided to Set Top Boxes in 2006 to enable their free import for the smooth introduction of the Conditional Access System (CAS). Now that production capacity has come up in the country, I propose to impose a nominal basic customs duty of 5 per cent on such Set Top Boxes to encourage domestic value addition.<br /><br />108. The electronic hardware industry has a strong potential for creating employment especially in the SME sector. I intend to reduce the basic customs duty on LCD panels from 10 per cent to 5 per cent to support indigenous production of LCD televisions.<br /><br />109. Full exemption from CVD of 4 per cent was available to accessories, parts and components imported for the manufacture of mobile phones till the 30th of June, 2009 . I propose to reintroduce this exemption for another year.<br /><br />110. For reasons that are apparent, industry sectors having an export-orientation have been adversely impacted by the demand compression in global markets. Presently, exporters of leather products, textile garments, footwear as well as sports goods are permitted to import raw materials, consumables etc. upto 3 per cent of the fob value of their exports free of duty. I propose to add a few more items to these lists. Full exemption from basic customs duty is being provided to rough corals for encouraging value-addition and export.<br /><br />111. It is imperative that the contribution of new and renewable energy sources of power is enhanced if we have to successfully combat the phenomena of global warming and climate change. I am reducing the basic customs duty on permanent magnets - a critical component for Wind Operated Electricity Generators - from 7.5 per cent to 5 per cent.<br /><br />112. On influenza vaccine and nine specified life saving drugs used for the treatment of breast cancer, hepatitis-B, rheumatic arthritis etc. and on bulk drugs used for the manufacture of such drugs, I propose to reduce the customs duty from 10 per cent to 5 per cent. They will also be totally exempt from excise duty and countervailing duty.<br /><br />113. Customs duty will also be reduced from 7.5 per cent to 5 per cent on two specified life saving devices used in treatment of heart conditions. These devices will be fully exempt from excise duty and CVD also.<br /><br />114. Gold bars currently attract customs duty at the specific rate of Rs.100 per ten grams while other forms of gold (excluding jewellery) are chargeable to a duty of Rs.250 per ten grams. These rates were fixed in 2004 and have not been reviewed even as the price of gold has increased manifold. I propose to partially restore the incidence by increasing these rates to Rs.200 per ten grams and Rs.500 per ten grams respectively. Along the same lines, the customs duty on silver (excluding jewellery) will be increased from Rs.500 per kg to Rs.1,000 per kg. These revised rates would also apply to gold and silver, including ornaments that are not studded, when imported by a bona fide passenger as baggage.<br /><br />115. I will now come to central excise duties.<br /><br />116. Hon’ble Members are aware that the Government announced a series of fiscal stimulus packages, one of the key elements of which was the sharp reduction in the ad valorem rates of Central Excise duty for non-petroleum products by 4 percentage points across the board on 7th of December 2008 and by another 2 percentage points in the mean CENVAT rate on the 24th of February, 2009.<br /><br />117. One of the consequences of these cuts was that pure cotton textiles came to be fully exempted from excise duty. We have received representations that full exemption prevents manufacturers from availing of export rebate of the duty paid from CENVAT credit. I propose to rectify this situation by restoring the erstwhile optional rate of 4 per cent for cotton textiles beyond the fiber stage.<br /><br />118. Ever since the revamp of the excise duty structure on textiles by my distinguished predecessor in the 2004 budget, a differential in rates has been maintained between the cotton sector and the manmade sector. In keeping with the integrity of the earlier structure, I propose to restore the rate of 8 per cent Central Excise duty on manmade fiber and yarn on a mandatory basis and on stages beyond fiber and yarn at that rate on optional basis. These changes, together with duty changes on intermediates, would imply that the duty on all types of manmade fiber and yarn and their intermediates would be the same, easing the problem of credit accumulation.<br /><br />119. Wool waste and cotton waste are chargeable to basic customs duty of 15 per cent. These are used in the manufacture of cheaper varieties of textile articles such as blankets and rugs. As a measure of relief to this sector, I propose to reduce the basic customs duty on these items to 10 per cent.<br /><br />120. With the Government’s proclaimed objective of introducing a Goods and Services Tax (GST) both at the national and State level, some more steps in that direction are necessary. One measure that would facilitate the process is the further convergence of central excise duty rates to a mean rate - currently 8 per cent. I have reviewed the list of items currently attracting the rate of 4 per cent, the only rate below the mean rate. There is a case for enhancing the rate on many items appearing in this list to 8 per cent, which I propose to do, with the following major exceptions:<br /><br />• food items; and<br /><br />• drugs, pharmaceuticals and medical equipment.<br /><br />Some of the other items on which I propose to retain the rate of 4 per cent are:<br /><br />• paper, paperboard & their articles;<br /><br />• items of mass consumption such as pressure cookers, cheaper electric bulbs, low-priced footwear, water filters/purifiers, CFL etc.;<br /><br />• power driven pumps for handling water; and<br /><br />• paraxylene.<br /><br />The details are available in the relevant notifications.<br /><br />121. Bio-diesel, obtained from vegetable oils and used for blending with petro-diesel, is currently exempt from excise duty. I now propose to fully exempt petro-diesel blended with bio-diesel from excise duty.<br /><br />122. In order to encourage the use of this environment friendly fuel and augment its availability in the country, I also propose to reduce basic customs duty on bio-diesel from 7.5 per cent to 2.5 per cent - at par with petro-diesel. With these proposals I hope to see a smile on the faces of the green brigade!<br /><br />123. My other proposals on central excise duties seek to address distortions that the manufacturing industry has been complaining about.<br /><br />124. The IT industry has pointed out that it is facing difficulties in the assessment of software which involves transfer of the right to use after the levy of service tax on IT software service. To resolve the matter, I propose to exempt the value attributable to the transfer of the right to use packaged software from excise duty and CVD.<br /><br />125. The construction industry has represented that they are facing difficulties on account of withdrawal of exemption on goods manufactured at site. I propose to restore full exemption to such goods, including pre-fabricated concrete slabs or blocks, when used for further construction at site.<br /><br />126. A specific component was added to the ad valorem duty of 24 per cent applicable to large cars and utility vehicles in June last year. In the case of vehicles of engine capacity below 2000 cc, this component was Rs.15,000/- per unit while for vehicles of higher engine capacity it was Rs.20,000/- per unit. These rates are now being unified at the lower level of Rs.15,000/- per unit.<br /><br />127. Petrol driven trucks provide a useful means of transport within cities and across short distances. These are chargeable to excise duty of 20 per cent. I propose to reduce excise duty on these trucks to 8 per cent to equate the duty with similar vehicles run on diesel.<br /><br />128. Madam Speaker, I fear that my proposals relating to gold and silver on the customs side would somewhat dent my popularity with women. I propose to salvage this by fully exempting branded jewellery from excise duty.<br /><br />129. I now turn to my proposals on service tax.<br /><br />130. It is an international practice to zero-rate exports. To achieve this objective, a scheme was announced in 2007, granting refund of service tax paid on certain taxable services used after the clearance of export goods from the factory. For some time now, the exporting community has been expressing dissatisfaction over the difficulties faced in obtaining such refunds. Several procedural simplifications attempted in the past have also not yielded satisfactory results. The solution seems to lie in placing greater trust on the claims filed by the exporters. Keeping this in view, I propose to make the following changes in the scheme:<br /><br />• Services received by exporters from goods transport agents and commission agents, where the liability to pay service tax is ab initio on the exporter, would be exempted from service tax. Thus, there would be no need for the exporter to first pay the tax and later claim refund.<br /><br />• For other services received by exporters, the exemption would be operated through the existing refund mechanism based on self-certification of the documents where such refund is below 0.25 per cent of fob value, and certification of documents by a Chartered Accountant for value of refund exceeding the above limit.<br /><br />131. The Export Promotion Councils and the Federation of Indian Export Organizations (FIEO) provide a valuable service in augmenting our export effort. I propose to exempt them from the levy of service tax on the membership and other fees collected by them till 31st March, 2010 .<br /><br />132. In the goods transport sector, service tax is currently levied on transport of goods by road, by air, through pipelines and in containers. However, goods carried by Indian railways or those carried as coastal cargo or through inland waterways are not charged to service tax. In order to provide a level playing field in the goods transport sector, I propose to extend the levy of service tax to these modes of goods transport. The new levy is not likely to impact the prices of essential commodities or goods for mass consumption, as suitable exemptions would be provided.<br /><br />133. As the Hon’ble Members are aware, services provided by chartered accountants, cost accountants, and company secretaries as well as by engineering and management consultants are presently charged to service tax. Although there is a school of thought that legal consultants do not provide any service to their client, I hold my distinguished predecessor in high esteem and disagree! As such, I propose to extend service tax on advice, consultancy or technical assistance provided in the field of law. This tax would not be applicable in case the service provider or the service receiver is an individual.<br /><br />134. Vehicles having ‘Stage Carriage Permits’ and run by State undertakings are exempted from service tax. However, transportation of passengers undertaken by private enterprises in vehicles having ‘Contract Carriage Permits’ is, subjected to service tax. In order to bring parity in tax treatment, I propose to exempt such transportation also from the levy of service tax.<br /><br />135. In July, 2008 goods transport agents (GTA) went on strike with several demands. One of the demands that was accepted by the government was to exempt certain services, such as packing, cargo handling and warehousing, provided to GTAs en route, from service tax. For this purpose an exemption notification was issued. It was also demanded by goods transport agents that the proceedings already initiated against such service providers should be dropped. The Government has accepted this genuine demand. Therefore, I propose to make certain legislative changes required to fulfill this promise.<br /><br />136. Copies of notifications giving effect to the changes in customs, central excise and service tax will be laid on the Table of the House in due course.<br /><br />137. My tax proposals on direct taxes are revenue neutral. On indirect taxes, they are estimated to yield a net gain of Rs.2,000 crore for a full year.<br /><br /><br /><span style="font-weight:bold;">CONCLUSION<br /></span><br /><br />138. As we begin this five year journey, the road ahead will not be easy. We will have to manage uncertainties and there will be as many problems as there would be solutions. Mahatma Gandhi said and I quote, “Democracy is the art and science of mobilizing the entire physical, economic and spiritual resources of various sections of the people in the service of the common good of all.” This is precisely what we will have to do. With strong hearts, enlightened minds and willing hands, we will have to overcome all odds and remove all obstacles to create a brave new India of our dreams.<br /><br />139. Madam Speaker, with these words I commend the budget to the House. <br /><br />July 6, 2009MANISHhttp://www.blogger.com/profile/00428491443420277409noreply@blogger.com0tag:blogger.com,1999:blog-2672050906182920186.post-43806623072539867782009-08-04T12:40:00.000+05:302009-08-04T12:41:08.292+05:30Iran’s DemocracyWe don’t have to look far to find who’s behind the stolen election in Iran. One man alone has the authority to pull it off. State thugs gun down an innocent young woman in plain daylight on the streets of Tehran? It’s his doing. The killing is blamed on the protesters themselves? Him again. The family is denied permission to hold a funeral in the mosque? Him. The body is nabbed and spirited out of sight. Him. Black mourning cloth out front of the family’s home is ripped down? Him. The family is ousted from their home and every trace of them is eliminated? That bears his signature as well – the way he micromanages every tiny detail. What we’ve seen writ large all across Iran – college computers smashed by government thugs, a whole people muffled and denied expression, each telling detail of the whole big canvas – is a picture of the heart of the spiritual leader of Iran.<br /><br />It reminds me of an ancient Islamic tale. The great Ayatollahs in a city of old found out that at exactly 12 noon on a given day God would make his appearance in a certain square of the marketplace. On that day they had all the vendors driven from that square, had it swept clean and covered in priceless rugs, and then crowded in all around the edge of the square, every one of them in their turbans and official garb, and waited. The moment the clock struck 12 noon, some common person stumbled in from the street. The moment his dusty boots soiled the expensive carpet, the grand Ayatollah stood up and lashed out in anger, “How dare you desecrate the spot where God himself is to appear!”<br /><br />The simple man looked up at the Ayatollah in surprise. “I am greater than God,” he replied.<br /><br />“NOBODY is greater than God!” thundered the furious Ayatollah. "Who do you think you are?" he demanded.<br /><br />“I am nobody,” the man replied. He turned and retreated back from whence he came. In an instant he was lost in the crowd on the street.<br /><br />The Iranian Islamic Revolution is based on a truth – the authority of God can reside in one person – but represents a flawed understanding of that truth; because it is not for man to choose who that person is. This can only be done by God.<br /><br />We have all, by the mere fact of being here, been chosen by God in a sense. But there may be, at any given moment in the whole world, only one person who speaks and acts with the true authority of God. The hitch is that nobody can really know who that person is – for this instant it’s one individual; the next it’s another. The democratic component of Iran’s system is not just a cosmetic covering. It’s the essence of the Islamic Revolution.<br /><br />The only sin committed by the protesters in Iran who have been beaten, shot at, and now effectively driven from the streets – is that they have a higher and truer concept of God than the Ayatollah, a concept that includes freedom, justice, fairness, and truth.<br /><br />It’s a failure of Iran’s system of government that a lying, cheating, and small-minded leader presumes to speak for a God that is truthful, broadminded, and honest. The true word of God is left no outlet except through the people’s voice. The protests we see aren’t against God and they aren’t against Islam. They aren’t against Iran and they aren’t against the government. They’re against a small-hearted impostor who has too puny an idea of religion and God and has attempted by brute force to impose this on an ancient, pious, and great people.<br /><br />If the other Ayatollahs let him get away with this, the Iranian Islamic Revolution will have failed.MANISHhttp://www.blogger.com/profile/00428491443420277409noreply@blogger.com0