Mohammed Hamid Ansari Reelected Vice President of India: Becomes Second Person To Get Two Terms in Country’s Second Highest Office

United Progressive Alliance’s (UPA) candidate Mohammed Hamid Ansari was reelected vice president of India on August 7, defeating NDA’s candidate Jaswant Singh by a large margin of 252 votes. As expected, the election of Ansari for a second term as the vice president was noncontroversial and smooth. The surprise, if any, was not in the outcome, but in the political churning that overflowed from the presidential election. After the Bharatiya Janata Party (BJP) made an overambitious attempt to disrupt Pranab Mukherjee’s bid for the presidency, this was an occasion to recover lost ground. The party sought to first retain its old allies such as the Shiv Sena and the Janata Dal (United), and then win over non-Congress allies such as the All India Anna Dravida Munnetra Kazhagam, instead of looking to poach disgruntled elements within the UPA. The less ambitious strategy was not intended to win the election for its candidate, Jaswant Singh, but to keep the National Democratic Alliance (NDA) united and in fighting mode for the 2014 Lok Sabha polls.

Seventy-five-year old former IFS officer, Ansari becomes the second person after Dr Sarvapalli Radhakrishnan, India’s first vice president (and second president), to get two terms in the second highest office.

Ansari got 490 votes, against Singh’s 238, of the 736 votes polled. Eight votes were declared invalid. Altogether 787 members of two Houses of Parliament were eligible to vote.

Ansari, a Padma Shri recipient, was a surprise choice for vice president in 2007, proposed by the Left, then giving outside support to the UPA government. Congress president Sonia Gandhi had named Ansari as the second choice of her party for the presidential election after Pranab Mukherjee. The Left had no problem supporting him again.

Among those who did not vote were ailing Union minister Vilasrao Deshmukh, admitted to a Chennai hospital, and BJP’s Shatrughan Sinha, recovering from surgery, in addition to 21 BJD members, 11 from TDP and six from the Congress and supporting parties.

Others who did not vote included two nominated MPs, two each from the BJP, AGP, RSP and TRS and Y.S. Jagan Mohan Reddy, one of two YSR Congress members.

Ansari will once again be the chairman of the Rajya Sabha (upper house of the Parliament) by virtue of his election as vice president.

Career Profile

Born in Kolkata (Calcutta) on April 1, 1937, while his family hailed from Ghazipur, Uttar Pradesh, Ansari completed his schooling from St. Edwards High School in Shimla, attended the St. Xavier's College, University of Calcutta, and pursued MA in Political Science at the Aligarh Muslim University (AMU), where he also got his doctorate degree and worked as lecturer.

Ansari – the grand-nephew of former Congress President Mukhtar Ahmad Ansari, a leader of the Indian independence movement – is also a reputed West Asia scholar. He has authored a book-- Travelling Through Conflict. He has written books on Palestine, Iraq and Iran. Some of his views have run contrary to India's official position. He had questioned India's vote at the International Atomic Energy Agency (IAEA) on Iran's nuclear program where the country voted against Iran.

Ansari also upheld a decision as NCM Chairperson when in 2007 he agreed with the position taken by St. Stephens College, Delhi, to earmark seats for Dalit Christians.

Ansari was chairman of a working group on "Confidence building measures across segments of society in the State," established by the Second round Table Conference of the Prime Minister on Jammu and Kashmir in 2006. The report of the working group was adopted by the Third round Table in April 2007.

In the past, a suave and sober Ansari has served in many positions, including as Permanent Representative of India to the United Nations, Indian High Commissioner to Australia and Ambassador to the United Arab Emirates, Afghanistan, Iran and Saudi Arabia. He joined the Indian Foreign Service in 1961.

Ansari became vice chancellor of the AMU in May, 2000 and held the post until March, 2002. He is also known for his role in ensuring compensation to the victims of the Gujarat riots and pushing for a complete re-look into the relief and rehabilitation for riot victims since 1984. He is also known for his strong views on burning issues.

"The language used by the Pope sounds like that of his 12th-century counterpart who ordered the crusades... It surprises me because the Vatican has a very comprehensive relationship with the Muslim world," Ansari had said in 2006 as Chairman, Minorities Commission of India, in reaction to Pope Benedict XVI's comments on Islam.

As chairman of the Rajya Sabha, Ansari faced criticism when the Opposition parties expressed unhappiness at the manner in which he “abruptly” adjourned the House on the night of December 29, 2011 (Winter Session) during the debate on the Lokpal Bill.

Advantage UPA

The result of the election was a foregone conclusion as the numbers were stacked in favor of the ruling alliance. It managed to get the backing of its estranged ally Trinamool Congress and the parties extending it outside support. These include arch rivals, the Bahujan Samaj Party and the Samajwadi Party. The Left parties also supported Ansari.

Undoubtedly, the importance of the reelection of Ansari as the country's vice president lies not just in the United Progressive Alliance managing to get its candidate through with a convincing margin, after sending its presidential nominee Pranab Mukherjee to Rashtrapati Bhavan (President’s House).

Both these victories have undoubtedly come as a morale-booster for an otherwise beleaguered ruling combine, battered over the last two years by scams and crises. There was a time two months ago when the ability of the UPA to get its candidates elected as President and vice president was under serious doubt.

Nor does Ansari's import lie merely in him being able to successfully transit from being viewed as a nominee of the Left parties -- which had supported him for vice presidentship in 2007 and they had their way because of the clout they carried in UPA I -- to being adopted as the candidate of the Congress, and the UPA.

3 Years of UPA2 Government: Crucial Political, Economic Policies Remain in State of Drift

The Congress-led UPA2 (United Progressive Alliance) Government completed three inglorious years in office in May 2012. Given the fact that it has all but abandoned the governance of the country, constantly harangued by allies and put on the mat by the Opposition, Prime Minister Manmohan Singh’s regime must consider it a miracle that it is still in power. The past three years of the government have been marked by a complete paralysis in decision-making and an erosion of stature of the prime minister. Crucial political and economic policies have remained in a state of drift because there is no leadership at the top. As Prime Minister, Singh should have been directing the battle to revive the government, but he is found nowhere in the front. That is because he now leads the government only in name, and his Ministers and allies know it well.

The prime minister is in charge of neither the political agenda of the country nor its economic agenda. In other words, he is a lame-duck prime minister biding his time before he is ousted by the electorate or replaced by his party’s high command led by Congress president Sonia Gandhi. Meanwhile, everyone in the UPA Government and outside is having fun at his cost. But the headless government’s continuance is not a matter of amusement for the country, which is paying a heavy price for Singh’s pusillanimity and inaction.

Political Front

On the political front, allies are regularly issuing threats and arm-twisting the government because the Congress as a party and Singh as the prime minister have failed to reach out to their partners or allay their apprehensions on several contentious issues. The growing lack of trust between the Congress and its partners in the UPA Government — not to mention the widening divide between the government and the Opposition — has led to key decisions being either kept on hold or rolled back. Many of these decisions which have become victims of the government’s incompetence relate to the economic well-being of the people and their security. 

No amount of chest-thumping by the UPA and its acolytes over its imagined achievements is going to change the reality that the Congress-led government has failed in every way that a government possibly can. Most importantly, the government has lost the people’s trust, which is clearly evident in the results of the recently held election to five States. UPA2 is on life-support — alive but not living.

Unattended Issues

However, as Congressmen across the board will tell you, there is no real sustained debate — or at any rate, any formal putting of heads together in party fora — on how to achieve all this. The big issues, freedom of expression versus community sentiments, market versus control, etc are never thrashed out to evolve a party view.

A senior party functionary pointed out that even the A.K. Antony Report, which analyzed the Congress' performance in recent Assembly elections to five States, including U.P., will be seen only by the Core Group (whose members include Singh, Sonia Gandhi, Pranab Mukherjee, P. Chidambaram, and A.K. Antony, and Sonia Gandhi's Political Secretary, Ahmed Patel) that meets once a week.

As for the Congress Working Committee (CWC), a more representative body, it seldom meets. It is little wonder then that the Congress is now a party where senior functionaries and ministers themselves scramble for information, where intrigue replaced any world view as ideology a long time ago, and ginger groups are a thing of the hoary past.

Optimism and Reality 

It was an acknowledgment that Dr. Singh had played a stellar role in the party's spectacular victory, drawing in support not just from middle class metropolitan living rooms but rural India as well: across Uttar Pradesh, I recall voters — cutting across caste and religious lines — saying they hoped the UPA, under Singh, would return to power and steer the country through the global economic meltdown.

But three years later, as the UPA readies itself to celebrate its eighth anniversary in power, the government and its Prime Minister have lost their sheen, swamped by a slew of financial scandals, the ham-handed response to the Anna Hazare campaign and rising prices. Congressmen, not Opposition leaders, are beginning to ask whether the Sonia Gandhi-Manmohan Singh partnership has run out of steam, and whether this unique power-sharing arrangement has led to ambivalence on policy issues, crippling effective decision-making. Finally, they are even asking whether the government needs a new face to lead it to the general elections scheduled just two years away, in 2014.

Pranab Factor 

That face could have been Rahul Gandhi, the Congress yuvraj, but his own lack of enthusiasm for taking on the job at this stage, compounded by the party's disastrous showing in the recent Assembly elections in Uttar Pradesh has ensured that he will not be taking over the reins, anytime soon. It could have been Sonia Gandhi, but she made it clear in 2004, when the position was hers, that she was not going to take it. It could also have been the party's troubleshooter, its one man brains trust, Finance Minister Pranab Mukherjee. But most senior functionaries and ministers rule out that possibility even though a majority agrees that of those available and no Gandhi willing, he would be the popular choice in the party for Prime Minister.

Of course, the finance minister's name is currently in circulation for another job — that of the next President, and he is certainly emerging as the Opposition's popular choice for a consensus First Citizen.

NCERT Textbook Issue 

Neither is there any system in the party that can respond to the challenges of the times. The recent NCERT textbook controversy, a cabinet minister stresses, should have evoked a considered response from the party: “Textbooks,” he said, “play a key role in a democracy. The response to the objections to the Ambedkar cartoon should not have been left to the HRD ministry.” If there is no serious internal debate, the minister said, people in the party are unlikely to own decisions: the problem with allowing Foreign Direct Investment in retail, he said, is not the opposition of allies or other parties: “We ourselves haven't made up our minds, so we talk of evolving a consensus.”

Eliminating Terrorism

The Congress-led government should not demonstrate softness in approach toward terror attacks. Unfortunately, that is what the UPA has been showing all these years. Its leaders speak in different voices on the growing terrorism menace.

How long will the current state of affairs continue? After every major terrorist incident, the instinctive response of the government is to constitute a committee or form a new investigative body on top of the existing, inefficient anti-terror set-up. In the aftermath of the 2008 Mumbai terror attacks, the government realized the need for a central investigating agency to combat terrorism. As a result, with the unanimous support of all political parties the National Investigation Agency (NIA) was created. However, this agency has proved ineffective in preventing terror attacks and tracking down terrorists in the country. The 2011 serial blasts in Mumbai followed by the Delhi High Court blasts and the German Bakery bombing in Pune the previous year could neither be prevented and nor were they properly investigated. The NIA was also accused of allegedly offering bribes to name RSS members in the Ajmer blasts case.

The UPA Government wants to create another anti-terror organization called the National Counter-Terrorism Centre. It is time the government realized that bad policing cannot be supplemented with more policing. The need of the hour is to improve coordination between investigative agencies and state governments, create a more comprehensive database of suspected terrorists and streamline the anti-terror operations, rather than encroach upon the powers of the States.

The current state of affairs makes it amply clear that these extremists have no concern for development and they intend to usurp power by first dominating the countryside and then moving toward the cities. And, hence, the soft approach being taken by the government makes India an even easier target. We cannot afford being the soft state that we are. Merely pumping funds into development is not the solution to the Maoist menace. Similarly, removing or diluting the Armed Forces Special Powers Act (AFSPA) in Jammu and Kashmir would severely hamper the capabilities and morale of the Army.

The country is in dire need of a more nuanced approach to dealing with issues of national security. Mere half-baked policies will not succeed. Our security will continue to be compromised so long as this UPA Government tries to politicize and pressure the stakeholders in the crucial decision-making process.

White Paper on Black Money: Opposition Terms Document Disappointing, Non-Paper

Finance Minister Pranab Mukherjee presented the White Paper on Black Money in the Parliament on May 21. The 108-page Paper trashed the huge figure of illegal wealth stashed away by Indians in Swiss banks and said much of the money may have already come back into India through illicit means. It did not disclose any names of Swiss account holders or provided any fresh estimate of black money in India.

Indian Black Money Issue

The Bharatiya Janata Party (BJP) has termed the government's White Paper on black money as "disappointing" and a "non-paper." The Opposition party said that it is "like a bikini" as it hides the essentials and reveals only the less significant details.

The issue of Indian black money stashed abroad has been raked by the Bharatiya Janata Party (BJP) time and again both inside and outside Parliament. Party veteran L K Advani had taken out a month long Jan Chetna yatra across the country to highlight the issue.

The White Paper has not revealed the quantum of Indian black money kept in tax havens abroad. Neither has the government shared details of steps it has taken to repatriate this wealth.

The bank deposits of Indians in Swiss banks have decreased from Rs 23,373 crore in 2006 to Rs 9,295 crore in 2010. The government has not disclosed where this money has gone. Has it come back to India? Or has it been transferred to some other tax haven? Or has it been invested somewhere?

The Opposition has been demanding that the government make all efforts to bring back this money as has been done by countries like the United States, Germany and Ireland, among others.

The White Paper is also silent on the black money made by illegal sale of arms and armaments, evasions on stamp duty especially in land transactions, and use of such funds in politics. This document has several shortcomings. It does not explicitly explain what has been done to deal with black money in arms and armaments.

The generation of black money through stamp duty evasion especially in land transactions has not been revealed. The black money made by corrupt politicians has also not been revealed.

Tax Immunity Scheme

On the possibility of any tax immunity scheme, especially gold deposit scheme, to deal with black money, the White Paper said, "The issue of complete tax immunity needs to be examined in the light of other policy objectives." The document seeks to dispel the impression that government was not doing enough to deal with black money and talks about various policy options and strategies it has been pursuing to address the issue of corruption in public life.

Referring to the issue of institutions like Lokpal and Lokayuktas, the Paper said, "(they) need to be put in place at the earliest, in the Centre and the states respectively, to expedite investigations into cases of corruption and bring the guilty to justice."

The government has not been able to push through the Lokpal Bill in Rajya Sabha (upper house of the Parliament), despite pressure from the civil society. The Bill was approved by the Lok Sabha.

Introduction of Goods and Services Tax

The introduction of Goods and Services Tax, the White Paper added, would be a major step in integrating the efforts of different agencies dealing with black money.

Referring to the misuse of corporate structure, the Paper stated, "The Vodafone tax case provides an instance of the misuse of corporate structure for avoiding the payment of taxes."

In this case, it said, the Hutchison Group had made investments in India from 1992 to 2006 through a number of subsidiaries having 'separate corporate personality' but which were essentially post box companies based in the Cayman Islands, British Virgin Islands, and Mauritius.

The Hutchison Group sold its entire business operation in India in February 2007 to the Vodafone Group for a total consideration of $11.2 billion and the same was effected through transfer of a solitary share of a Cayman Islands company.

Global Financial Integrity (GFI) has estimated that from 1948 to 2008 a total of $ 213.2 billion has been shifted out of India through illicit outflows and the adjusted gross transfer of illicit assets by residents of India amounts to $ 462 billion as of end-December 2008.

The White Paper’s view is that this money has at least partly already returned to India. This may have been happened through Foreign Direct Investment route and stock markets.

Four-Pronged Strategy

The Paper suggested four-pronged strategy to curb generation of black money. These include more incentives for voluntary compliance of tax laws, reforms in vulnerable sectors of economy and creation credible deterrence. It mentioned that reform of financial and real estate sectors would help in reducing generation of black money in long term as freeing of gold imports had helped in checking smuggling.

On the need to curb this menace in vulnerable sectors like real estate, the provision of deducting tax at source on payments made on real estate transactions and mandating it as a pre-condition for registering of the transacted property could be considered.

Large number of transactions in bullion and jewelry are unaccounted and there is also urgent need to improve the reporting and monitoring systems in this sector. On the informal sector and cash economy, the Paper states that there is a need to amend laws to check keeping very large amounts of cash. Another important measure could be the promotion of banking channels, including use of credit and debit cards through tax incentives, since they leave adequate audit trails and hence disincentivize black money generation. Levying tax at source at a low level on cash purchases may also be considered as a possible policy option.

The White Paper states that there does not seem to be much progress on repatriation of black money abroad. It says that the government has been working on bilateral treaties. However, these treaties do not have provisions for repatriation of undisclosed assets. Without international consensus on this issue it is difficult to implement domestic law on repatriation of assets located abroad.

Assessment

Undoubtedly, we now know that based on some recent international data, India is 15th in the world in terms of outgo of unaccounted or “black” money, namely money that has evaded the tax net and has been parked overseas.

The White Paper does not say anything that is not public knowledge but shifts the focus from foreign banks to domestic culprits and sources. Since the finance minister had refused to disclose the names of those holding illegal assets abroad in the Supreme Court as well as Parliament, it was futile to expect their mention in the White Paper. The government report talks of the possibility of one-time amnesty scheme for tax evaders to encourage disclosures and recover tax.

The Paper gives an idea of the generation of black money in the system, and calls for reforms in the financial sector, including taxation and in investment instruments such as participatory notes, as well as in real estate.

Some Facts

* To curb black money, a four-pronged strategy — reducing disincentives against voluntary compliance, reforms in vulnerable sectors of the economy, creating effective credible deterrence and supportive measures — is being worked out.

* The White Paper states that encouraging the use of credit and debit cards — as they leave adequate audit trails — could also help in preventing black money generation.

* It also proposes improved reporting and monitoring systems to track bullion and jewelry transactions and wants close tabs on real estate deals

Poverty Lines and BPL Population: State of HDI in India

The Planning Commission has recently released the latest poverty estimates for the country showing a decline in the incidence of poverty by 7.3 per cent over the past five years and stating that anyone with a daily consumption expenditure of Rs. 28.35 and Rs. 22.42 in urban and rural areas respectively is above the poverty line.
The new poverty estimates for 2011-12 will only add to the furore triggered by the Commission's affidavit in the Supreme Court in October in which the Below Poverty Line (BPL) cap was pegged at an expenditure of Rs. 32 and Rs. 26 by an individual in the urban and rural areas respectively at the going rate of inflation in 2010-11.
Eventually, Union Minister of Rural Development Jairam Ramesh and Planning Commission Montek Singh Ahluwalia jointly set aside the cap suggested by the Tendulkar Committee and set up a new committee to work out a new methodology for identifying the BPL households.
The present system had to be continued until a new one was worked out and that would be done only after the Socio-economic and Caste Census was completed.
Impact of Government Spending
Similarly, Planning Commission members Abhijit Sen and Mihir Shah separately underlined the need to adopt the same methodology to understand the impact of government spending on the people and across the States over a period of time.
The figure of expenditure in the Supreme Court affidavit had been arrived at by adjusting the figures for 2004-05 with the prevailing inflation rate in 2011-12 and not based on the survey conducted across the country. The survey for 2011-12 is likely to be completed by July and the report would be released in December.
Tendulkar Methodology
Government programs had been delinked from the poverty line estimated on the basis of the Tendulkar methodology which was only being used to understand the impact of government programs over a period of time.
The impact of the new list will be felt on the Rural Development Ministry schemes, particularly those availing various kinds of pension under the National Social Assistance Program.
As per the Household Consumer Expenditure Survey for 2009-10, 29.9 per cent of the population alone were under the BPL from 37.2 per cent in 2004-05.
Rural Poverty
Rural poverty has declined by eight percentage points, from 41.8 per cent to 33.8 per cent, and urban poverty by 4.8 per cent, from 25.7 per cent to 20.9 per cent.
At the national level, anyone earning Rs. 672.8 monthly that is earning Rs. 22.42 per day in the rural area and Rs. 859.6 monthly or Rs. 28.35 per day in the urban area is above the poverty line. Population as on March 1, 2010 has been used for estimating the number of persons below the poverty line.
The total number of people below the poverty line in the country is 35.46 crore as against 40.72 crore in 2004-05. In rural areas, the number has come down from 32.58 crore five years ago to 27.82 crore and the urban BPL number stands at 7.64 crore as against 8.14 crore five years ago.
One of the most astonishing revelations is that poverty has actually gone up in the north-eastern States of Assam, Meghalaya, Manipur, Mizoram and Nagaland.
Even big States such as Bihar, Chhattisgarh and Uttar Pradesh registered only a marginal decline in poverty ratio, particularly in the rural areas, whereas States such as Himachal Pradesh, Madhya Pradesh, Maharashtra, Odisha, Sikkim, Tamil Nadu, Karnataka and Uttarakhand saw about 10 per cent decline in poverty over the past years.
States with high incidence of poverty are Bihar at (53.5 per cent), Chhattisgarh (48.7 per cent), Manipur (47.1 per cent), Jharkhand (39.1), Assam (37.9 per cent) and Uttar Pradesh (37.7 per cent).
However, it is in poverty-ridden Odisha that monthly per head expenditure of just Rs. 567.1 and Rs. 736 in rural and urban areas respectively puts one above the poverty line, while in Nagaland, where the incidence of poverty has gone up, the per capita consumption expenditure of Rs. 1016.8 and Rs. 1147.6 in rural and urban areas puts one above the poverty level.
Among social groups in the rural areas, Scheduled Tribes (47.4 per cent) suffer the highest level of poverty, followed by Scheduled Castes (42.3 per cent), Other Backward Castes (31.9 per cent) as against. 33.8 per cent for all classes.
In rural Bihar and Chhattisgarh, nearly two-third of the SCs and the STs are poor where as in States like Manipur, Orissa and Uttar Pradesh it is more than 50 per cent.
In urban areas, 34.1 per cent of SCs, 30.4 of STs and 24.3 per cent OBCs fall under this category against 20.9 per cent for all classes.
Poverty Estimates
In September 2011, the Planning Commission has told the Supreme Court that the BPL population in the country is 40.74 crore and the poverty line for the urban and rural areas could be provisionally placed at Rs. 965 per capita per month (approximately Rs. 32 per day) and Rs. 781 per capita per month (around Rs. 26 per day), respectively.
The Planning Commission in an affidavit said that the BPL population at present touched by the public distribution services (PDS) was 35.98 crore.
The poverty estimates for year 2009-10 were being worked out and the provisional estimates suggest that the total BPL population as per 2009-10 estimation may be lower than that which would have emerged (on the basis) of Tendulkar ratio on 2004-05 projection.
The Planning Commission filed the affidavit in pursuance of the May 14 order of the apex court bench of Justice Dalveer Bhandari and Justice Deepak Verma, which said that according to the expert group headed by Suresh Tendulkar at the price level of 2011, it was impossible for an individual in urban and rural area to consume 2,100 calories in Rs. 20 and Rs. 15, respectively.
The bench's order asked the Planning Commission to 'revise norms of per capita amount looking at the price index of May 2011 or any subsequent dates'.
The affidavit stated that on applying price increase using the consumer price index for industrial workers in urban areas and the consumer price index for agricultural laborers for rural areas, 'the poverty line at June 2011 price level can be placed provisionally at Rs. 965 per capita per month in urban areas and Rs. 781 per capita per month in rural areas'.
The affidavit further stated: "At June 2011 price level, for a family of five, this provisional poverty line would amount to Rs. 4,824 per month in urban areas and Rs. 3,905 per month in rural areas."
The affidavit said that the final poverty line following the Tendulkar Committee ratio would only be available after completion of the 2011-12 National Sample Survey (NSS) and this would vary from state to state because of price differential.
Moderate Malnourishment
It is no secret that India is doing quite poorly on a number of development counts. According to the Human Development Report, India languishes at around 130th rank among of 177 countries. The International Food Policy Research Institute’s Global Hunger Index ranks India 94th among 118 countries surveyed. The World Food Program (WFP) estimates half of our children suffer from severe or moderate malnourishment.
Sixty-seven out of 1,000 children born in India die before the age of five. Despite a national policy for compulsory primary education, only 50 per cent of children have access to proper education.The World Bank’s own estimate of poverty in 2007 has been radically revised by new cost of living data which draws the new poverty line at $1.25 at 2005 purchasing power parity. On this basis a shocking 41.6 per cent of India’s population — or 456 million people — live below the poverty line, notes Raghav Gaiha, professor of Public Policy, University of Delhi. This is about one-third of the world’s poor population. Even this World Bank data is an underestimate because it does not adequately cover the rural areas where the vast majority of the poor live.
The Planning Commission has accepted the Tendulkar Committee report, which says that 37 per cent of people in India live below the poverty line. This arbitrary method based on an income of `32 per day for urban area and `26 for the rural, has been widely disputed. India wants to be globally respected as a world power but refuses to apply global standards of calculating poverty, which should at least be in line with the World Bank criterion of $1.25 per day.
There is an urgent need to agree on some objective criteria by which to ascertain the number of those in the BPL category. The multidimensional poverty indicators developed by the Oxford Poverty and Human Development Initiative and applied by the Human Development Index (HDI) 2010, are perhaps the most reliable measures developed so far. They include: years of schooling, child enrolment, mortality (any age), nutrition, electricity, sanitation, drinking water, flooring, cooking fuel, and asset ownership. Each of these indicators is given due weight. The new Inequality Index as deployed in the HDI further elaborates the nature of disparities and shocking poorness of the poor in relation to the richness of the rich.According to this calculation the proportion of BPL families in India is 55.4 per cent of the population. Bihar fares poorest, with 61.4 per cent of the people below the poverty line, while Kerala has the lowest fraction of BPL people — 40.9 per cent.
NREGS and Several Other Job-Creation Projects
The Planning Commission’s figures on reduction of poverty to 29.8 per cent in 2009-10 from 37.2 per cent in 2004-05 is welcome as it was expected, considering that it comes on the back of the government’s flagship National Rural Employment Guarantee Scheme (NREGS) and several other job-creation projects like the Pradhan Mantri Gram Sadak Yojna. Welcome as it is that 47 million people have been lifted from poverty, the sorry fact remains that 365 million people — one-third of our population — remain below the poverty line in a country that is growing fast.
These figures only reflect advances made in implementing the government’s “inclusive growth” policy. It clarified that in no way is it going to be a yardstick to cut down employment generation by the government. The Opposition’s fears might not be entirely unfounded: Finance Minister Pranab Mukherjee’s recent Union Budget lowered spending on NREGS from `40,000 crores (in the previous budget) to `33,000 crores as last year only `31,000 crores was spent out of the budgeted amount.Schemes like NREGS continue to be indispensable for creating employment and putting purchasing power in the hands of the rural poor across the country.

Union Budget 2012-13: Neither Reformist Nor Populist

Finance Minister Pranab Mukherjee presented the Union Budget for 2012-13 in the Lok Sabha (lower house of the Parliament) on March 16. The Budget proposed a total plan outlay for agriculture has been increased by 18 per cent from Rs 17,123 crore in 2011-12 to Rs 20,208 crore in 2012-13. This will support the new initiatives announced in the budget besides backing the existing programs which have resulted into record food grain production this year. There is a total non-plan outlay of Rs 4,011 crore in the budget estimates for 2012-13.
The finance minister also announced an increase in the allocation for Rashtriya Krishi Vikas Yojana (RKVY) from Rs. 7860 crore in 2011-12 to Rs. 9217 crore in 2012-13. Expressing satisfaction at the success of bringing Green Revolution to Eastern India by way of increasing the production and productivity of paddy, the Finance Minister proposed to increase the allocation for this scheme from Rs. 400 crore in 2011-12 to Rs. 1000 crore in 2012-13.
Defense
The Union Budget has announced a justifiable 17.6 per cent hike in its defense spending to allocate an additional Rs 28,992 crore for 2012-13, over the ongoing year’s Rs 1,64,415 crore defense budget. India will spend Rs 1,93,407 crore, nearly $38.6 billion, on defense which is about 11 per cent of the entire country’s budgetary outlay for the next financial year staring April 1.
Around Rs 79,579 crore, it was Rs 69, 199 crore in 2011-12, have been earmarked for capital expenses like for new acquisitions of weapons, warplanes, warships, equipment, naval dockyards and special classified projects. In 2011-12, India had affected a hike of 11.59 per cent in its defense spending.
The finance minister said this allocation was based on the present needs projected by the Defense Ministry and further needs for security would also be met. India’ budgetary hike comes just weeks after China announced a $106 billion military budget, taking its military spending into the triple digit figures for the first time.
In other words, India would be spending some 40 per cent of what China spends on its Defense. The core US defense budget, not including its war funding, has been projected $525 billion for the same period. Pakistan has a defense outlay of $5.75 billion for 2011-12, a raise of 12 per cent.
The present hike, when seen from the revised budget allocation for this year, works out to be a 13.15 per cent. Interestingly, the share of India’s defense spending out of its Gross Domestic Product (GDP) has gone up slightly. It now stands at 1.90 per cent of the GDP, up from 1.84 per cent for the ongoing fiscal.
Agriculture
The finance minister Pranab gas announced a Rs 1,00,000 crore increase in the agriculture credit target, boosting it to Rs 5,75,000 for the next fiscal, and raised the outlay for farm sector by more than Rs 3,000 crore - proposals that farmers’ representatives called “encouraging” and economists “lacking in new initiatives”.
Emphasising that agriculture was a priority for the government, Mukherjee increased the total plan outlay for the sector by 18 per cent, up from Rs 17, 123 crore in 2011-12 to Rs 20,208 crore in 2012-13.
As per leading agriculture scientist MS Swaminathan, the increase in the target for agricultural credit to Rs 5,75,000 crore is the only new initiative in Budget. The finance minister has essentially tried to consolidate the gains made as a result of the initiatives he had launched during the previous two budgets.
Education
With a range of flagship projects moving in parallel in the school education sector, Pranab Mukherjee has announced nearly a 22 per cent hike for the Sarva Shiksha Abhiyan and a 29 per cent increase for the Rashtriya Madhyamik Shiksha Abhiyan (RMSA).
The finance minister has earmarked a total of `61,427 crores for the education sector in budget 2012-13, a hike of about 18 per cent in the budgetary allocation over last year, with `15,458 crores earmarked for higher education and `45,969 for school education.
Health
The Union Budget has proposed to increase the outlay of the government’s flagship scheme — National Rural Health Mission (NRHM) and projected to launch the National Urban Health Mission (NUHM) to target the urban poor. It proposes to increase the allocation to NRHM from `18,115 crores in 2011-12 to `20,822 crore in 2012-13.
The finance minister also proposed to extend concessional basic customs duty of five per cent with full exemption from excise duty/CVD to six life-saving drugs/vaccines. The drugs and the vaccines exempted from excise duty are: Raltegravir Potassium for treatment of HIV-I infection, rotavirus vaccine, Pneumococcal Polysaccharide vaccine for the treatment of patients with thallassemia, malignancy, Posaconazole Oral Suspension for the treatment of life threatening invasive fungal infections, Temsirolimus Concentrate for Infusion for Injection for treatment of advanced renal cell carcinoma and Natalizumab the treatment of relapsing forms of Multiple Sclerosis.
For 2012-2013 an allocation of `30, 477 crores has been made as against the budget estimate of `24315 crores in 2011-2012. This amounts to a jump of over 25 per cent. In a major thrust towards ensuring adequate nutrition women and children, the government has proposed to reduce basic customs duty on soya protein concentrate and isolated soya protein to 10 per cent from the present 30 per cent and 15 per cent respectively.
Subsidy
The government has made it clear in the Budget presented that it is not possible to grant more subsidies and keep consumers cushioned from price rises.
The finance minister has set a target to restrict subsidies under 2 per cent of GDP in 2012-13 and bring it down further to 1.75 per cent of GDP over the next three years. This may be achieved through direct transfer of fuel and fertilizer subsidies to the beneficiaries and an increase in retail prices of petroleum products. This means the subsidy bill would be capped at `2.04 lakh crores, considering India’s GDP of `102 lakh crores. The government has absorbed the duty reduction in petroleum products with annual revenue loss of `49,000 crores. For 2011-12, the total subsidy bill has been pegged at `2.16 lakh crores. The Budget estimate for subsidies stands at `1.9 lakh crores for 2012-13.
External Commercial Borrowings
Finance Minister Pranab Mukherjee permitted the sectors to take External Commercial Borrowings (ECB) route to help themselves.
The Budget proposed to allow external commercial borrowings to part finance rupee debt of existing power projects. Reliance Power, Tata Power, Torrent Power, Adani Power, GVK Power are the major companies which would get benefit from this move.
As regards airlines, Kingfisher, Jet Airways and SpiceJet got a major relief after the Government allowed the airline companies to raise capital through external borrowings worth $1 billion for a year.
Kingfisher Airlines, which has a debt of around Rs 600 crore, reported a net loss of Rs 469 crore for the July-September quarter of the current fiscal, while Jet Airways posted a net loss of Rs 101.22 crore (Rs 1.01 billion) for the third quarter of 2011-12, will benefit the most from the move.
As regards the real estate and road sector, the Budget has taken into account the crying need to focus on affordable housing sector by allowing ECB for low cost housing, road as well as construction. Experts say as withholding tax on ECBs for affordable housing has been reduced from 20 per cent to 5 per cent for 3 years this will help ease the liquidity in the sector.
Tax Relief
In a relief to individual taxpayers and salaried class, the finance minister raised the exemption limit on personal income-tax by `20,000 to `2,00,000 in the Union Budget. The exemption limit will be the same for men and women, unlike in the past. The threshold limit for senior citizens remains unchanged, at `2,50,000. The change will mean savings of `2,000 in tax for male taxpayers and savings of `1,000 for women.
The finance minister also tinkered with tax slabs; the top 30 per cent income-tax rate will be applicable from incomes of `10 lakhs and above, against `8 lakhs now. This will give a straight and flat tax relief to the extent of `20,000 for anyone who has income over `10 lakhs. Incomes between `2,00,001 and `5,00,000 will be taxed at 10 per cent; and those between `5,00,000 and `10,00,000 at 20 per cent.According to the finance minister, increasing the exemption limit is a move toward implementing the Direct Taxes Code (DTC). The standing committee of Parliament that scrutinised the DTC Bill had suggested raising the tax exemption limit to `3 lakhs. Tax rates for senior citizens (60 and above) and “very senior” citizens (80 and above) remain unchanged. The qualifying age for senior citizens has been set at 60 now.
Revenue Collection
The finance minister has been timid in revenue collection resources, which will raise just `41,440 crores net. It is clear that he has tried to act cautiously, and not been as proactive as expected, possibly due to global economic weaknesses, as well as domestic constraints. The revenue collection is nowhere close to what was needed, given the huge fiscal deficit the government must grapple with. He widened the service tax net, but said himself that the funds he will get is far less than what this sector, accounting for almost 59 per cent of GDP, could be tapped for.
Fiscal Deficit
There is skepticism about the finance minister’s claim of reducing the fiscal deficit to 5.1 per cent of the GDP in the coming year. This year the budgetary target of 4.6 per cent of the GDP has been overshot by one percentage point due to economic slowdown, higher oil prices and a hefty subsidy bill. There is no guarantee that things would change this year. There is another negative signal for foreign investors. The government has indicated that the British firm Vodafone’s case may be reopened as the definitions of “property” and “transfer” have been changed retrospectively. The Supreme Court had ruled in favor of Vodafone in a tax dispute over a cross-border deal. Such actions hit investor confidence.
Highlights
* Tax burden for individuals to come down: Income tax exemption limit raised from Rs. 1,80,000 to Rs. 2,00,000; 10 per cent tax for 2-5 lakh income; 20 per cent for 5-10 lakh and 30 per cent beyond Rs. 10 lakh; Savings bank account interest up to Rs. 10,000 exempted from tax.
* Many services and goods to cost more: No change in corporate tax rate, but standard rate of excise duty, as also service tax rates, raised from 10 per cent to 12 per cent; No change in peak customs duty of 10 per cent on non-agri goods.
* Large cars, imported bicycles, cigarettes, bidis and some imported jewellery to cost more; branded silver jewellery may get cheaper.
* Boost for capital markets: Securities Transaction Tax on cash delivery reduced by 25 per cent to 0.1 per cent; A new Rajiv Gandhi Equity Saving Scheme to allow income tax deduction to retail investors in stocks.
* Economy expected to gain ground: GDP growth rate pegged at 7.6 per cent in 2012-13; Subsidy Expenditure to be checked and higher tax revenues targeted; Rs. 30,000 crore to be raised from disinvestment.
* Capital boost to financial and infrastructure sectors: Rs. 15,888 crore to be provided for capitalisation of public sector banks and financial institutions; Infrastructure investment of Rs. 50 lakh crore in 12th period, with half from private sector; Tax free bonds of Rs. 60,000 crore to be allowed for financial infrastructure projects.
* Fight against black money: White paper on black money in current session of Parliament; Introduction of compulsory reporting requirement for assets held abroad; tax collection at source on high-value cash purchase of bullion, jewellery, immovable property and trading in coal, lignite and iron ore.
* Greater scrutiny of closely-held companies for funds; Taxation of unexplained money, credits, investments, expenses at highest rate of 30 per cent irrespective of income slab.
* Tax reforms: Direct Taxes Code (DTC) at earliest; GST network to be operational by August 2012; Central Excise and Service Tax being harmonized. A General Anti-Avoidance Rule (GAAR) to be introduced to counter aggressive tax avoidance.
* Attracting foreign funds: Efforts on to allow FDI in multi-brand retail and permitting foreign airlines invest in domestic players; External borrowings to the extent of USD one billion for aviation companies; Qualified Foreign Investors to get access to corporate bond market.
* Tax relief for stressed sectors: Sectors like agriculture, infrastructure, mining, railways, roads, civil aviation, manufacturing, health and nutrition, and environment to get duty relief; Turnover limit for compulsory tax audit for SMEs raised from Rs 60 lakh to Rs 1 crore.
* Farming for growth: Target for agricultural credit raised to Rs 5,75,000 crore; Interest subvention for short-term crop loans to farmers at 7 per cent interest continues; additional 3 per cent for prompt paying farmers.
Financial Highlights of Budget 2012-12:
* Direct proposals to give in net revenue loss of Rs. 4,500 crore and net gain of Rs. 45,940 crore from indirect taxes, resulting into a net gain of Rs. 41,440 crore.
* Fiscal deficit targeted at 5.1 per cent of GDP in 2012-13, down from 5.9 per cent in 2011-12; Central Government debt at 45.5 per cent of GDP.
* Total expenditure budgeted at Rs. 14,90,925 crore; plan expenditure at Rs. 5,21,025 crore, 18 per cent higher than 2011-12 budget; non-plan expenditure at Rs. 9,69,900 crore.
* Gross Tax Receipts estimated at Rs. 10,77,612 crore, 15.6 per cent higher than original budget estimates and 19.5 per cent over the revised estimates for 2011-12.
* Net tax to the Centre in 2012-13 estimated at Rs. 7,71,071 crore; Non-Tax Revenue Receipts estimated at Rs. 1,64,614 crore and Non-debt Capital Receipts at Rs. 41,650 crore.
* Total expenditure for 2012-13 budgeted at Rs. 14,90,925 crore, including Rs. 5,21,025 crore of Plan Expenditure and Rs. 9,69,900 crore as Non-Plan Expenditure. * Defence services get Rs. 1,93,407 crore; any further requirement to be met.

Economic Survey 2011-12: Inflation Pegged at 6.5 Per Cent, Maintained GDP Growth at 6.9 Per Cent

Finance Minister Pranab Mukherjee presented the Economy Survey 2011-12– a report card of the Indian economic scenario for current fiscal– in the Lok Sabha (lower house of the Parliament) on March 15.
Inflation Rate
The Survey pegged inflation at 6.5-7 percent by end of March and projected a further moderation in the next fiscal. Inflation in the current fiscal has largely been driven by high food prices. It had slipped to a low of 6.6 percent in January, but rebounded to almost 7 percent in February. The survey, however, said that fiscal consolidation was the only way to keep inflation down.
The survey said that monetary measures by the Reserve Bank of India (RBI) and its impact on curbing inflation needed to be studied further to improve efficiency of such actions in the future. Incidentally, the RBI in its mid-quarter review of the monetary policy left key rates unchanged, citing upside risks to inflation.
Growth Rate
The Economic Survey has maintained Gross Domestic Product (GDP) growth at 6.9 per cent. The growth in the financial year 2012-13 growth is expected to come in at 7.6 per cent and the financial year 2013-14 growth is pegged at 8.6 per cent.
Indian along with Indonesia showed strong growth despite a global economic slowdown in the final quarter of 2011, according to the International Monetary Fund (IMF).
IMF in its latest provisional report has said the GDP growth of G20 – a grouping of leading economies of the world – slowed to 0.7 per cent in the October-December quarter, compared with 0.9 per cent in the third quarter.
In the United States, GDP growth increased to 0.7 per cent in the fourth quarter, compared with 0.5 per cent in third quarter.
The IMF stated that in India and Indonesia growth increased strongly, but slowed in China to 2 per cent, compared with 2. 3 per cent in the third quarter.
In Japan, economic growth decreased to (-)0.2 per cent, following the strong rebound (+1. 7 per cent) in third quarter.
The Survey states that GDP fell by (-)0.3 per cent in both the European Union and the euro area in the fourth quarter of 2011, the first fall since the second quarter of 2009.
Fiscal Deficit
The Survey states that the fiscal outcome in 2011-12 is likely to be affected by the macroeconomic setting which indicates sharp slowdown in industry and rising costs affecting profits. In the first nine months of the current fiscal, gross tax revenue has grown by 12.2 per cent as against the budget estimate target of 17.3 per cent, it said.
On the other hand, as against a target of 4.9 per cent for the whole year, growth in total expenditure in the first nine months of 2011-12 was 13.9 per cent, which comprised 15.4 per cent growth in non-Plan expenditure and 10.8 per cent growth in Plan expenditure, the survey added.
Per Capita Income
According to the Survey, the per capita income of India stood at $ 1,527 in 2011. The Survey says that this is perhaps the most visible challenge. Nevertheless, India has a diverse set of factors, domestic as well as external that could drive growth well into the future.
The Survey further says that between 1980 and 2010, India achieved a growth of 6.2 per cent, while the world as a whole registered a growth rate of 3.3 per cent. As a result, India’s share in global GDP more than doubled from 2.5 per cent in 1980 to 5.5 per cent in 2010.
Consequently, India’s rank in per capita GDP showed an improvement from 117 in 1990 to 101 in 2000 and further to 94 in 2009. China, however, improved its rank from 127 to 74 during the same period.
Highlights
* India's economic growth estimated at 6.9 per cent in the current fiscal; growth momentum to pick up in next two fiscals to 7.6 per cent 2012-13 and 8.6 per cent in 2013-14.
* RBI expected to lower policy interest rates, as inflationary pressures expected to ease in coming months; A low interest rate regime to encourage investment activity and push forward economic growth.
* Steps required for deepening of domestic financial markets, especially corporate bond market and attracting longer-term inflows from abroad; Efforts at attracting dedicated infrastructure funds have begun.
* The growth rate of investment in the economy is estimated to have declined significantly; borrowing costs up due to a sharp increase in interest rates.
* High borrowing costs and increase in other costs affecting profitability and internal accruals.
* Slowdown in Indian economy largely due to global factors, as also because of domestic factors like tightening of monetary policy, high inflation and slower investment and industrial activities.
* Inflation high, but showing clear signs of slowdown by the year-end; Whole-sale food inflation down to 1.6 per cent in January 2012 from 20.2 per cent in February 2010.
* India remains one of the fastest growing economies of the world; Country's sovereign credit rating rose by a substantial 2.98 per cent 2007-12
* Farm sector growth pegged at 2.5 percent for 2011-12.
* Services sector to grow at 9.4 percent.
* Services sector share in GDP to go up to 59 percent in the fiscal ending March 31.
* Industrial growth pegged at 4-5 percent, expected to improve as economic recovery resumes.
* Inflation on Wholesale Price Index (WPI) was high but showed clear slow down by the year-end. This is likely to spur investment activities leading to positive impact on growth.
* WPI food inflation dropped from 20.2 percent in February 2010 to 1.6 percent in January 2012.
* Calibrated steps initiated to rein-in inflation on top priority.
* India remains among the fastest growing economies of the world.
* Fiscal consolidation on track - savings and capital formation expected to rise.
* Exports grew by 40.5 percent in the first half of this fiscal and imports grew by 30.4 percent.
* Foreign trade performance to remain a key driver of growth.
* Forex reserves enhanced - covering nearly the entire external debt stock.
* Central spending on social services goes up to 18.5 percent this fiscal from 13.4 percent in 2006-07.

Money-Laundering (Amendment) Bill, 2011

Money laundering refers to the process of concealing the source of illegally obtained money. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount of money laundered, either worldwide or within their national economy. In 1996, the International Monetary Fund (IMF) estimated that two to five percent of the worldwide global economy involved laundered money. However, the Financial Action Task Force on Money Laundering (FATF), an intergovernmental body set up to combat money laundering, admitted that "overall it is absolutely impossible to produce a reliable estimate of the amount of money laundered and therefore the FATF does not publish any figures in this regard." Academic commentators have likewise been unable to estimate the volume of money with any degree of assurance.
Regardless of the difficulty in measurement, the amount of money laundered each year is in the billions (US dollars) and poses a significant policy concern for governments. As a result, governments and international bodies have undertaken efforts to deter, prevent and apprehend money launderers.
PMLA (Amendment) Bill, 2011
Keeping these points in view and to bring prevention of money laundering legislation on par with global norms, Finance Minister Pranab Mukherjee has introduced PMLA (Amendment) Bill, 2011in the Lok Sabha. The Bill seeks to allow confiscation of proceeds of crime even during the trial.
The Bill also provides that in any proceedings relating to proceeds of crime "...it shall be presumed that such proceeds of crime is involved in money-laundering".
The proposed Bill has provision for attachment and confiscation of the proceeds of crime even before conviction, "so long as it is proved that offence of money-laundering has taken place and property in question is involved in money-laundering. The amendment was necessiated in view of India being an important member of the FATF and also chairing its Asia Pacific group. Therefore, it was important to make the existing PMLA in tune with the practice being followed across the world.
Provisions of Indian Law
The Bill proposes to introduce the concept of corresponding law to link the provisions of Indian law with the laws of foreign countries and provide for transfer of the proceeds of the foreign predicate offence in any manner in India.
The Prevention of Money-laundering Act, 2002 was enacted to prevent money laundering and to provide for confiscation of property derived from, or involved in, money laundering. The Act was amended in the year 2005 and 2009 to remove the difficulties arisen in implementation of the Act.
Moreover, the amendment bill seeks to use proceeds of crime as criminal activities and remove existing limit of five lakh rupees of fine under the Act.
About FATF
The FATF, formed by the G7 countries in 1989, is an intergovernmental body whose purpose is to develop and promote an international response to combat money laundering. The FATF Secretariat is housed at the headquarters of the Organization of Economic Cooperation Countries (OECD) in Paris. In October 2001, FATF expanded its mission to include combating the financing of terrorism. FATF is a policy-making body, which brings together legal, financial and law enforcement experts to achieve national legislation and regulatory AML and CFT reforms. Currently, its membership consists of 34 nations and territories and two regional organizations.
In addition, FATF works in collaboration with a number of international bodies and organizations. These entities have observer status with FATF, which does not entitle them to vote, but permits full participation in plenary sessions and working groups.
FATF has developed 40 Recommendations on money laundering and 9 Special Recommendations regarding terrorist financing. FATF assesses each member country against these recommendations in published reports. Countries seen as not being sufficiently compliant with such recommendations are subjected to financial sanctions.

India’s Economic Growth Rate

India's economic growth has slumped to 7.3 percent in the first half of the current fiscal, substantially below the budgetary estimate. The Gross Domestic Product (GDP) growth declined to 7.7 percent in the first quarter and it slumped further to 6.9 percent in July-September period. The economic growth was likely to be better in the second half of the current financial year. It is hoped that the country will be recovering some of the loss in our growth momentum and may end the year over 7.5 percent." The finance minister said the government was not in a position to boost growth through stimulus as it did during the global financial crisis in 2008-09.
Inflation Rate
Inflation has remained stubbornly high, near double digit, for the last two years despite an aggressive monetary tightening by the Reserve Bank of India (RBI) and claims of a series of fiscal measures by the government. Headline inflation based on the wholesale price index was recorded at 9.73 percent in October. However, food inflation has moderated in the recent week. It was recorded at 8 percent for the week ended Nov 19, according to the latest official figures.
Food inflation dropped to a four-month low of 8 per cent as on November 19, reflecting fall in prices of essential items like onions, potatoes and wheat giving relief to common man, while rates for rice and vegetables increased at a moderate pace.
Decline in food inflation may also give respite to the government which is facing heat from the Opposition on various issues, including the price rise. This is lowest since July 16 when it was 7.16 per cent.
The RBI raised the repo rate by 25 basis points to 8.50 per cent and the reverse repo moved up by a similar percentage to 7.50 per cent in its last policy review in October. Repo is the short-term rate at which the RBI lends to banks, while reverse repo is the rate at which it gets funds from banks.
The central bank has hiked policy rates five times this fiscal. In the last one-and-a-half months alone, it has raised the key rate (repo) by 50 basis points.
Foreign Trade
India's exports grew by just 10.8 per cent to $19.8 billion in October, the lowest in the past two years, mainly due to the declining demand in the US and Europe. The growth rate has been the lowest since October, 2009, when it contracted by 6.6 per cent.
According to the Commerce Ministry data, imports grew at a faster rate of 21.7 per cent to $39.5 billion leaving a trade deficit of $19.6 billion, the highest ever in any month in the last four years, which is also due to expensive crude oils and vegetable oils.
From a peak of 82 per cent in July, export growth has slipped to 44.25 per cent in August, 36.36 per cent in September and 10.8 per cent in October.
In October, oil imports grew by 20.73 per cent to $10 billion, whereas the non-oil imports rose by 22 per cent to $29.4 billion over the year-ago period.
But, for the cumulative April-October period, exports aggregated to $179.7 billion showing a handsome growth of 45.9 per cent, thanks to sterling trend witnessed in the previous months of the current fiscal.

Indian Parliament Accepts Anna Hazare's Demands

After being reviled for its self-serving ways and incorrigible politicking, the political class delivered when it mattered. Displaying an unerring big-day temperament, political parties surpassed themselves as Parliament gave Anna Hazare a massive victory.
Sensing the public mood, political egos were largely in check. MPs drove home the humbling knowledge that politicians were lagging their constituents. The leaders had become the led.
Agreed Points
After over eight hours of debate around the structure of the Lokpal Bill, the Government and the Opposition in both the Lok Sabha (lower house of the Parliament) and Rajya Sabha (upper house of the Parliament) came together to agree “in-principle” to the three major demands the activist had raised in his letter to Prime Minister Manmohan Singh on 26 August as a condition to end his protest.
In doing so, the Parliament, which sat for the longest hours this monsoon session today, paved the way for the Gandhian to end his fast. Anna responded late night after government’s emissary and minister Vilasrao Deshmukh announced the day’s developments amid cheering and roaring crowds at the Ramlila Grounds. “We have won the battle but the war remains. This is your victory. I will end the fast tomorrow in the presence of all of you,” Anna said to his supporters.
Earlier, the two Houses agreed that the anti-graft law, to be effective, must cover corruption by lower bureaucracy through appropriate mechanisms; must have an inbuilt grievance redress system which Anna calls the citizens’ charter and should provide for enabling laws to establish Lokayuktas in states on the lines of the Lokpal at the Centre.
The debate ended amidst members thumping their desks to applaud the agreement which Finance Minister Pranab Mukherjee summed up as “the sense of two Houses” which would now be conveyed to the Parliamentary Standing Committee on Law and Justice for its consideration.
Hazare Breaks 12-Day-Long Protest Fast
A day after his 12-day-long fast for a strong Lokpal culminated into a victory for both the civil society as well as Parliament, anti-corruption crusader Hazare on Sunday ended his hunger strike. Anna broke his fast by drinking coconut water with honey, given to him by two girls - five-year-old Simran and Ikra.
Addressing the crowd at Ramlila Maidan after ending his fast, the social activist described it as a victory of every Indian. He also described it as a victory of the media for waking up the people of this country.
Vowing his fight will continue, the Gandhian said the anti-corruption movement was a lesson for the world to learn as to how to wage a nonviolent battle. Anna said the movement instilled trust in us that we can remove corruption from this country.
Asking people to be alert and keep a watch on the Lokpal process, Anna said the movement would have to restart if Parliament fails to pass a strong Lokpal Bill. Anna said it is the power of the people that made Parliament take a decision on Lokpal.
Leaders’ Reactions
Some leaders did hit back at civil society, warning that calling politicians names could draw retaliatory action. Others blamed the media's 24x7 focus for nurturing the agitation. But most were quick to accept that the people's anger was real and needed to be seen as genuine disgust with corruption.
Congress and BJP leaders, who usually do not pass up a chance to have a go at each other, seriously addressed the question of accountability in public life. Finance Minister Pranab Mukherjee set the tone by saying MPs should carefully consider the implication of their views but not fail to seize the moment at hand.
In the Rajya Sabha, BJP leader Arun Jaitley said Anna's campaign had outlined relevant demands and reminded the House that democracy could not be so lethargic as to not pass the Lokpal bill 42 years after it was first proposed. CPM's Sitaram Yechury pointed to the need to match intent with practicability. In the Lok Sabha, Congress's Sandeep Dikshit spoke of the urgent need to end Anna's fast.
Some MPs were candid enough to agree that the phenomenon was not limited to Mumbai and Delhi. "We are all getting phone calls from our constituents asking why are we not talking about this," said BJP's Varun Gandhi, MP for Philibhit, in an extempore speech.
Even Janata Dal (United) leader Sharad Yadav's caustic reference to Team Anna member Kiran Bedi's antics and a side-splitting description of how relentless media pressure of the "dabba" (TV) was depriving leaders of their sleep, carried more than a degree of self-deprecation. Politicians, he suggested, had asked for it.
For a discussion that revolved around deeply contentious matters impacting India's federal structure -- usually much less can ignite state sensibilities -- there were not too many interruptions or cat calls in Parliament. Even regular disrupters like Congress's Lal Singh seemed taken in by the gravity of the occasion.
Most speakers had worked hard on their speeches. MPs did not slip into unnecessary hyperbole and stuck to the substance of what was at hand. For a class that has been under fire and subject to most dismissive treatment, they did not fling the muck back.
There was the cut and thrust of politics as Opposition leaders reminded Congress of how a string of scams had created the space for Anna's movement and given it unprecedented legitimacy. There were retaliatory barbs about how the National Democratic Allaince record was not squeaky clean either.
All quarters in Parliament seemed to realize the challenge they face is much larger than one of factional identities. It was not the time to settle internecine scores. The relevance of Parliament itself was questioned. On 27 August, the Lok Sabha and Rajya Sabha posted a thumping riposte.

FDI Limit in Banking Sector To Be Capped at 49 Percent

Indian companies may have reasons to rejoice, as the Reserve Bank of India (RBI) is likely to allow some of them an entry into the banking space. The entry will, of course, be subject to stiff riders. Real estate companies, however, may not be as lucky as they are among four sectors that will find the banking doors locked.
According to a government official, the RBI is expected to come out with draft guidelines on allowing new private banks, as the Finance Ministry and the central bank have resolved their differences on most of the contentious issues.
Capping New Banks
The official said Foreign Direct Investment (FDI) in new banks may be capped at 49 per cent for now, as the RBI was not in favor of higher FDI. In a discussion paper released in August 2010, the central bank had suggested capping FDI in new banks at 49 per cent in the first 10 years, which could be subsequently raised to 74 per cent. The ministry was open to a higher cap.
The number of new licenses to be issued has not been decided yet and the call will be taken by the RBI.
The guidelines were more or less final, but the regulator would want to give a one-month window to all stakeholders to give their suggestions on the draft, said the official.
On the reasons for keeping real estate companies out, the official said the government did not have a good experience when the sector was allowed in the Special Economic Zone space.
Foreign Investment Limit
The central bank had sent the draft guidelines to the Finance Ministry in January 2011 to seek its approval. The process got delayed as differences cropped up over the grant of licenses to industrial houses, the minimum foreign investment limit and caps on promoter shareholding.
It is learnt that initially the RBI was not in favor of giving licenses to big corporate entities, while the finance ministry was opposed to restricting the FDI limit to 49 per cent. At present, banks are allowed to have an aggregate 74 per cent foreign investment (FDI plus foreign portfolio investments), with a cap of five per cent for a single investor.
The norms will also minimize the downside risks of industrial houses promoting banks and ensure promoters of these new banks meet the "fit and proper" criteria. This would make it difficult for any entity to get a license if any case involving it was pending before any regulator.
The minimum capital requirement for new banks may be kept at Rs 1,000 crore, five times the requirement when new bank licenses were given in 2001. The RBI had stipulated this be increased to Rs 300 crore over three years from the commencement of business. The minimum promoters' contribution may be retained after dilution of stake over a period of five years.
Retention of Current Approach
In its discussion paper, the RBI had suggested retention of the current approach of requiring promoters to bring in a minimum of 40 per cent of capital with a lock-in clause for five years. The threshold for other significant shareholders was proposed to be restricted to a maximum of 10 per cent, with a requirement to seek acknowledgement from the RBI on reaching the five per cent threshold and above. "Promoters, too, would have to dilute to the extent required in a time-bound manner, say, five years after the lock-in period," the discussion paper said.
The grant of new licenses will be linked to financial inclusion as the finance ministry is looking at a nationwide roll-out of Unique Identification (UID) numbers with the help of banks.
Industrial houses such as Larsen & Toubro, Reliance Anil Dhirubhai Ambani Group, Aditya Birla Group and the Shriram group have expressed interest in setting up banks. Currently, the space is dominated by the State Bank of India and private lenders such as ICICI Bank and HDFC Bank.
In the 2010-11 Budget, Finance Minister Pranab Mukherjee had first announced that new banking licenses would be issued to private sector players and non-banking finance companies to extend the geographic coverage of banks and improve access to banking services.

Hike in Petrol Prices

A whispering campaign was on for the last several months that immediately after the declaration of election results for five state assemblies that went to elections, the prices of petrol and diesel would be hiked. After the declaration of the results, the process of formation of governments in these states is still on. Now that the government has hiked the petrol price by rupees give a liter, the whispers have come true.
Unexpected Steep Rise
Both Finance Minister Pranab Mukherjee and Petroleum Minister Murli Deora had hinted about price hike on several occasions, but no one expected a steep rise of Rs. 5 per liter in price of petrol. It may be recalled that the prices of petrol has been hiked eight times during the past nine months, the present hike being the highest ever. It has been noticed often that whenever there is a hike in the prices of petrol and diesel, the price of food articles also go up. Freight and fares also go up.
The issue was discussed threat bare at the meeting of the Group of Ministers (GoM) headed by Pranab Mukherji. The GoM also discussed ways and means to keep price rise of essential commodities in check, but to ignore the hike in prices of crude oil at the international level, was well nigh impossible for the government. The finance minister maintains that going by the current scenario, the government was left with no option because, despite having raised the price of petrol by Rs.5 per liter, the oil companies still continue to suffer a loss of Rs. 5.5 a liter on petrol.
Prices of Crude Oil
Despite that the prices of crude oil had reached the highest level in the international marked in the last two-and-half years, the oil companies had refrained from raising the price of petrol since January, though the companies continued to exert pressure on the government to hike the price. The government continued to delay the announcement because while it did its best to save the people from the price rise is essential commodities and to bring inflation under control, it also had the elections in five states before it.
The oil crisis started in the international market in wake of the Iraq war. It had its impact on the entire world. The situation became all the more serious after the relations between the United State and Libya sourced. Further, the imposition of sanctions on Iran by the United Nations also aggravated the situation. It is not mean to discuss here as to which country imports oil from where or does not import at all. The truth, however, cannot be ignored that the rise in crude oil prices does have an impact on the oil industry in all countries.
The government had decontrolled the petrol prices in June 2010 and since then the prices of the commodity have been hiked for the eighth time. It was the compulsion of the government as well. The opposition Bharatiya Janata Party (BJP) has termed the hike in petrol prices as anti-people saying that the government was awaiting the results of the elections held in five states. The accusation by the BJP loses its strength because both the finance minister and the petroleum minister had already hinted a couple of months ago that the raising the petrol prices was the compulsion of the government.
Despite the price rise of Rs. 5 a liter in petrol, the oil companies continue to suffer a loss, which makes it clear that another hike in petrol price may be announced soon. The BJP has linked the current hike with politics but, should there be a further rise in the petrol price in the future, with which the BJP would link that? It would be futile to believe that the opposition is not aware or ignorant of the rise in crude oil prices in the international market. A government when takes such a hard decision, discusses the issue threadbare but under unavoidable circumstances the price rise becomes its compulsion.
Burden of Price Rise on People
One can not deny that with the rise in petrol prices, the burden of the price rise on people would further, increase and that it would also have its impact on inflation. Even the prices of the LPG and kerosene and diesel may be affected. Yet the situation that the government faces is unavoidable. No government wants to see its people falling in the grip of miseries. The government has taken the decision after the GoM report. It can be safely claimed that the decision of the government hints at some kind of a concrete strategy as Finance Minister Pranab Mukherjee has admitted that the government was left with no other option.
It is always easy to criticize the government. Protests, demonstrations and sit-ins are held against decisions of the government. Yet, no opposition has ever come out with an alternative solution to any problem. Nor does it ever suggest how a particular issue can be solved.
The government decided to hike the price of petrol in view of the situation that it confronted but now it would have to think how it should provide relief to people. The meeting of the GoM is scheduled during the current month itself to take a decision on the prices of LPG, diesel and kerosene. The government needs to be abundantly cautious while making a decision on it. At the same time, it needs to think on the subsidies too, so that some kind of relief is given to the people and opposition may not find an opportunity to criticize and take on the government.