Jorge Mario Bergoglio: Challenges Before 266th Pope of Roman Catholic Church

The world had had a few seconds to prepare itself. The French Cardinal Jean-Louis Tauran who made the announcement Habemus Papem — in medieval Latin revealed two things. The first was the name Cardinal Jorge Mario Bergoglio. The second was the name he had chosen — Francis.

Francis, the first pope from Latin America and the first from the Jesuit order, bowed to the crowds in St Peter's Square and asked for their blessing in a hint of the humble style he cultivated while trying to modernize Argentina’s conservative church and move past a messy legacy of alleged complicity during the rule of the military junta of 1976-83.

About New Pope

Bergoglio was born in Buenos Aires, Argentina's capital city, December 17, 1936. He studied and received a master's degree in chemistry at the University of Buenos Aires, but later decided to become a Jesuit priest and studied at the Jesuit seminary of Villa Devoto. He also studied liberal arts in Santiago, Chile, and in 1960 earned a degree in philosophy from the Catholic University of Buenos Aires. Between 1964 and 1965 he was a teacher of literature and psychology at Inmaculada high school in the province of Santa Fe, and in 1966 he taught the same courses at the prestigious Colegio del Salvador in Buenos Aires.

In 1967, he returned to his theological studies and was ordained a priest Dec. 13, 1969. After his perpetual profession as a Jesuit in 1973, he became master of novices at the Seminary of Villa Barilari in San Miguel. Later that same year, he was elected superior of the Jesuit province of Argentina.

In 1980, he returned to San Miguel as a teacher at the Jesuit school, a job rarely taken by a former provincial superior. In May 1992 he was appointed auxiliary bishop of Buenos Aires. He was one of three auxiliaries and he kept a low profile, spending most of his time caring for the Catholic university, counseling priests and preaching and hearing confessions. In June 1997, he was named coadjutor archbishop. He was installed as the new archbishop of Buenos Aires in February 1998. Since 1998, he has been archbishop of Buenos Aires, where his style is low-key and close to the people.

Francis, the son of middle-class Italian immigrants, came close to becoming pope during the last conclave in 2005. He reportedly gained the second-highest vote total in several rounds of voting before he bowed out of the running before selection of Vatican insider Joseph Ratzinger, who became Pope Benedict XVI.

With the name Bergoglio, we knew some decisive changes had been set in train. The Archbishop of Buenos Aires is the first non-European pope for 1,000 years. He is the first pope from the New World, most specifically from Latin America where the majority of the planet’s 1.2 billion Catholics live. He is the first pope ever from the Jesuits, the order renowned for having produced some of the most intellectually profound, and often free-thinking, church minds over the centuries.

With the name Francis came a signal of another new departure. No pope had ever before taken the name of the great saint of the poor, Francis of Assisi. And Bergoglio was known for his commitment to social justice and his championing of the poor of his native Argentina in the teeth of a global economic crisis whose cost fell chiefly upon the shoulders of the most vulnerable.

Seventy-six-year-old Bergoglio, it was known, was a humble man who had moved out of his archiepiscopal palace and into a simple apartment. He gave up his chauffeur-driven car and takes the bus to work. He cooks his own meals.

Unlike many of the other papal contenders, Bergoglio never held a top post inside the Vatican administration, or curia. This outsider status could pose obstacles in attempts to reform the Vatican, which has been hit with embarrassing disclosures from leaked documents alleging financial cover-ups and internal feuds.
But the conclave appeared more swayed by Bergoglio's reputation for compassion on issues such as poverty and the effects of globalization, and his fealty to traditional church teachings such as opposition to birth control.
His overriding image, though, is built around his leaning toward austerity. The motto chosen for his archdiocese is "Miserando Atque Eligendo,'' or "Lowly but Chosen.''
Even after he became Argentina's top church official in 2001, he never lived in the ornate church mansion where Pope John Paul II stayed when visiting the country, preferring a simple bed in a downtown building, warmed by a small stove on frigid weekends when the building turned off the heat. For years, he took public transportation around the city, and cooked his own meals. Yet Bergoglio has been tough on hard-line conservative views among his own clerics, including those who refused to baptize the children of unmarried women.

Charges Against New Pope             

Bergoglio, whose official name is Pope Francis, without a Roman numeral, also was accused of turning his back on a family that lost five relatives to state terror, including a young woman who was five months' pregnant before she was kidnapped and killed in 1977. The De la Cuadra family appealed to the leader of the Jesuits in Rome, who urged Bergoglio to help them; Bergoglio then assigned a monsignor to the case. Months passed before the monsignor came back with a written note from a colonel: The woman had given birth in captivity to a girl who was given to a family "too important'' for the adoption to be reversed.

Despite this written evidence in a case he was personally involved with, Bergoglio testified in 2010 that he didn't know about any stolen babies until well after the dictatorship was over.

Preferences and Actions

His preference to remain in the wings, however, has been challenged by rights activists seeking answers about church actions during the dictatorship after the 1976 coup, often known as Argentina's "Dirty War.'' Many Argentines remain angry over the church's acknowledged failure to openly confront a regime that was kidnapping and killing thousands of people as it sought to eliminate "subversive elements'' in society. It is one reason why more than two-thirds of Argentines describe themselves as Catholic, but less than 10 percent regularly attend Mass.

Under Bergoglio's leadership, Argentina's bishops issued a collective apology in October 2012 for the church's failures to protect its flock. But the statement blamed the era's violence in roughly equal measure on both the junta and its enemies.

Challenges before Pope

Pope Francis will have a tough job ahead of him. The Catholic Church has been seen as an organisation facing the pressure of modernisation. It has been scarred by child sex abuse scandals and in recent years, also by infighting, even corruption in the Vatican bureaucracy. The new pontiff is not a Vatican insider. This could well be to his advantage as he uses his dedication, energy and skills to clean up what his predecessor, Pope Benedict XVI, called the “filth” in the church. Pope Francis must build on his known love for the poor and his association with the area that has the largest number of Catholics in the world to leave a lasting legacy.

The former Bishop of Buenos Aires is the first non-European Pope in the modern era; he is the first Pope to hail from Latin America, the first Jesuit to hold the revered post; and he is also the first to take on the name ‘Francis’ after St Francis of Assisi. That is not all. During the course of his first public appearance itself, Pope Francis I broke with tradition — not once but twice — as he refused to stand upon a pedestal that would elevate him above the other Cardinals who stood by him. Instead, he chose to “stay down here”, and surprised many again when he asked the people to pray for him first, before he blessed the crowd. On both the occasions that the newly named Pope steered away from convention, he appeared to strengthen his image as a humble pastor, not given to the pomp of the Vatican, but instead, committed to serving his people — much like his namesake St Francis of Assisi who chose to live in poverty and who remains one of the most beloved figures in Catholic history even though he was never ordained into Catholic priesthood.

One of the most important challenges before Pope Francis will be to bring the faithful back to the fold. Particularly in the Western world, which has traditionally been the heart of Christendom, the Catholic Church has lost much of its following as an increasing number of people have been moving away from institutionalized religion. Much of this problem is of the Church's own making. For example, in recent years, the Roman Catholic Church has been associated with sex abuse scandals across the world and rampant corruption within the Vatican. In fact, Pope Francis's predecessor, Pope Benedict XVI, had come under much criticism for his alleged efforts to overlook sexual assaults that priests had committed on children. Yet, it remains unclear if Pope Francis will take up the kind of zero tolerance policy against such crimes as many would want him to.

Demand of the Situation

The list of trials facing Catholicism is as long as it is daunting: plummeting church attendance and a massive shortage of new priests in the secular West; a widening theological chasm between the developed and developing world over what is socially acceptable; inter-religious animosity and distrust; the seemingly ever-recurring sex abuse scandals and a Vatican bureaucracy that all but the most naïve of commentators will admit is riven with corruption, incompetence and political infighting.

Similarly, it is also to be seen if Pope Francis will respond to the reformist within him — a hallmark of Jesuit priests — and introduce changes in the Catholic Church's policies toward key social issues such as contraception, abortion and gay rights. For example, Pope Francis had earlier said that contraceptives could be used to prevent the spread of AIDS, but has stayed away from endorsing the use of contraceptives in general, in keeping with official Church policy.

While many will look for signs of change from the new Pope, and there are already some departures from tradition, a look at his record shows that Cardinal Bergoglio, who belongs to the Jesuit order, is theologically conservative and supportive of the Vatican’s positions on major issues. He is against abortion, gay marriage and the ordination of women. However, the energy with which he has devoted himself to his flock as Archbishop of Buenos Aires has often been praised.

How Pope Francis will prioritize these problems remains to be seen but he will need to tackle them nonetheless. Pope Francis is both a continuation of the past and something very different. Theologically he is an orthodox conservative like his predecessor. No-one will be expecting him to take the Catholic Church into a brave new world where homosexuality is suddenly accepted and women are ordained.

Change of Reigns in China: Xi Jinping Takes Over as Country’s President, Military Commission Chief; Li Keqiang Becomes Nation’s Premier

Xi Jinping emerged as China's most powerful leader in decades after he was named President and head of the powerful Military Commission on March 14. He was also named chief of the ruling Communist Party, smoothly completing a 10-yearly transition of power in the world's second-largest economy. Officially, Xi is being elected for a five-year term, but barring extraordinary events the 59-year-old president will hold the position for a decade.

In addition to being the general secretary of the Communist Party of China (CPC), which effectively rules the country, Xi has been appointed as the chairman of the powerful Military Commission, when he was elected as the new leader of the party in November 2012.

According to an official announcement here, Xi was elected as president by 3,000-strong National People’s Congress, which also endorsed his appointment as the chairman of the Military Commission.

The Military Commission supervises 2.3 million-strong and the world’s largest standing army called People’s Liberation Army (PLA), incorporating Army, Navy and Air Force.

Xi’s election a formality as the NPC, dominated by the CPC functionaries completed the once-in-a-decade power transfer from the administration headed by Hu, 70, who along with team of leaders including premier Wen Jiabao formally retires.

With today’s election Xi has emerged as the most powerful leader in China as heads the country, CPC and the Military.

The NPC also elected Li Yuanchao, a reformist and Politburo member of the CPC, as vice president. Yi who was reportedly picked by Xi ignoring pressures within the factions to energize the economic reform process to revitalize slowing economy.

Widely regarded as smooth transfer of power, Xi along with seven member standing committee of the CPC which virtually rules the country completed over 100 days in the leadership running various public campaigns against corruption, austerity both in the government and military and revamping the administration by cutting down size of cabinet.

Election of New Prime Minister

China’s annual Parliament confirmed Li Keqiang as the country’s new prime minister to replace Wen Jiabao on March 15, who retires after a decade in the post. Approximately 3,000 delegates to the National People’s Congress, the ruling Communist Party’s nominal state Parliament, endorsed Li’s recommendation by the party.

Li was nominated to the Congress by state president. He won 99.7 per cent of the 2,949 votes counted, with just three votes against him and six abstentions

Profile of New President

Xi is the son of one of China's most esteemed generals and known as a "princeling", the name given to relations of China's first generation of Communist leaders, who grew up immersed in the ruling party's upper echelons. But he has threatened to target not only lowly "flies" but also top-ranking "tigers" in corruption crackdowns, warning that graft could "kill the party".

Born in Beijing in 1953, Xi Jinping is the son of revolutionary veteran Xi Zhongxun, one of the Communist Party's founding fathers.

Xi Zhongxun was purged from the post of vice-premier in 1962 prior to the Cultural Revolution and eventually imprisoned.

The younger Xi was then sent aged 15 to work in the remote village of Liangjiahe for seven years, like most other "intellectual youth" of the time.

A local village official who knew Xi at that time described him as "very sincere and honest", adding that he was just like one of them "so everybody liked him very much".

Xi has acknowledged that this time spent working alongside villagers was a key experience for him.

He went on to study chemical engineering at Tsinghua University in Beijing, which has produced many of China's current top leaders, including Hu Jintao.

Accepted into the party in 1974, Xi served as a local party secretary in Hebei province and then went on to ever more senior roles in Fujian and then Zhejiang provinces.

He was named party chief of Shanghai in 2007 when its former chief, Chen Liangyu, was sacked over corruption charges. Shortly after, he was promoted to the party's Standing Committee and became vice-president in 2008.

Challenges Ahead

In November 2012, in his first speech to the Communist Party’s elite Politburo,.Xi denounced the prevalence of corruption and said officials needed to guard against its spread or it would “doom the party and the state.”

In following month of the same,. Xi made his first trip outside of Beijing with a visit to special economic zone of Shenzhen in south China that has stood as a symbol of the nation’s embrace of a state-led form of capitalism. Xi’s trip was seen as a strong signal of support for greater market-oriented economic policies.

The new Chinese president is well-traveled and intimately familiar with the West. His daughter attends Harvard, and he is said to enjoy Hollywood films about the Second World War.

Hu, a onetime hydroelectric power technician, worked his way up through jobs in China’s hardscrabble interior. The new Chinese president is the son of a Communist Party aristocrat, Xi Zhongxun, who was present at the birth of China’s turn to capitalism and helped develop the special economic zone of Shenzhen.

Assessment

The Presidency coupled with the post of the chairman of the Military Commission which supervises 2.3 million-strong world's largest standing military, People's Liberation Army (PLA), gives him a head start to begin his 10-year stint in power.Hu got the post of head of the military from Jiang Zemin two years after he took over as the president.

While retiring, Hu ensured that the head of the country and the party has single power structure to ensure stability. Seen as having a zero-tolerance attitude towards corrupt officials, Xi has twice been drafted in to trouble-shoot major problems.

In Fujian, he helped to clear up a corruption scandal in the late 1990s which involved the jailed smuggling kingpin Lai Changxing.

Xi takes charge at a time when the public is looking for leadership that can address sputtering economic growth and mounting anger over widespread graft, high-handed officialdom and increasing unfairness. A growth-at-all-costs model that defined the outgoing administration's era has befouled the country's air, waterways and soil, adding another serious threat to social stability.

Union Budget 2013-14: Focuses on Economic Growth, Middle Class To Pay More

Finance minister P. Chidambaram presented the Union Budget for 2013-14 in the Parliament on February 28. It was Chidambaram's eighth annual budget, the second highest by anyone in India after a record ten by former Prime Minister Morarji Desai. Overall, it was 82nd Union Budget in the Indian history, including interim and special-situation budgetary proposals, since the first one of independent India was presented by then finance minister R.K. Shanmukham Chetty on November 26, 1947.

Individually, Chidambaram presented the Union Budget for the eighth time, the second-highest by any finance minister. The maximum number of 10 budgets have been presented by Morarji Desai, while Pranab Mukherjee (currently President of the country), Yashwant Sinha, Y.B. Chavan and C.D. Deshmukh have presented seven budgets each in the past.

Plan Outlay

The finance minister has proposed a 29.4 percent hike in the plan expenditure for the union budget 2013-14. The plan expenditure for the next fiscal will be about Rs.5.53 lakh crore, the finance minister said.

The budget expenditure is Rs.16,65,297 crore and the plan expenditure is Rs.5,55,322 crore," Chidambaram said, adding that the plan expenditure in 12th Five-Year Plan was revised to Rs.14,30,825 crore or 96 percent of budgeted expenditure.

Growth Rate

India’s economic growth, as per official estimates, decelerated to 5 percent and 6.2 percent in the past two years, from 8.6 percent and 9.1 percent in the two years preceding them. Chidambaram said the Indian economy was today constrained by three factors: high fiscal deficit, slow growth and high inflation.

The finance minister said a whopping Rs.16.65 lakh crore (Rs.16.65 trillion or nearly $300 billion) would be spent under plan expenditure during 2013-14, which will be 30 percent higher than the outlay for this fiscal.

Fiscal Deficit

While doing a shade better than the targeted fiscal deficit of 5.3 percent of Gross Domestic Product (GDP) at 5.2 percent for the current fiscal, the finance minister has stuck to his target of 4.8 percent of GDP for 2013-14, even while stepping up defense allocation by 14 percent over the revised estimates in the current fiscal.

Similar hikes have been proposed in various sectors. although it is clear that he managed to create a cushion through compression in spending during the current financial year. Expenditure under several key heads, including roads and rural housing actually fell in the current fiscal compared to the previous year.

Tax Rates

The 2013-14 Budget proposed a tax cut of Rs.2,000 for people earning an annual income of between Rs.200,000 and Rs.500,000 and said anything beyond that was not possible given the current circumstances. The finance minister said any hike in the exemption limit for direct tax that is paid by individuals would take millions out of the tax net and was neither a desirable proposition, nor feasible. Accordingly, he proposed a Rs.2,000 tax credit for those in the first slab. This measure will benefit 1.8 crore (18 million) tax payers," he said, adding that this would entail an outgo of Rs.3,600 crore ($650 million) to the exchequer.

The finance minister sought to kick-start the engines of growth by providing incentives for productive investment, stepping up expenditure in social sectors to invigorate the economy in the longer term and giving a token tax break at the lowest slab rate to offset the inflationary burden on the middle class.

The Budget proposed to levy a surcharge of 10 percent on individuals whose annual taxable incomes exceed Rs.1 crore. The surcharge will be levied for the 2013-14 financial year. The finance minister said there are only 42,800 individuals in the country who will be liable to pay the surcharge.

To provide for the various increased allocations, the finance minister moved to tap the well-heeled by way of a one-year surcharge of 10 percent on the ‘super rich’ section of tax payers – all 42,800 of them, that is — along with duties on imported or domestic luxury vehicles such as SUVs, mobile phones (priced over Rs. 2,000), and what has been the tax horse of most Finance Ministers —cigarettes. With other minor tinkering of duties, including Tax Deducted at Source (TDS) on sale of property worth Rs. 50 lakh, the net additional tax revenue in the kitty works out to Rs. 18,000 crore.

However, given the challenges that he faced by way of low growth, high inflation, the widening fiscal and current account deficits coupled with lower than targeted revenue collection during 2012-13, Chidambaram may have disappointed taxpayers looking for some major breaks. But he did provide a tax break of Rs. 2,000 to individual tax payers with taxable income of up to Rs. 5 lakh. This itself is estimated to benefit 1.8 crore tax payers and work out to a revenue sacrifice of Rs. 3,600 crore. Likewise, first-time buyers of affordable homes will get an additional deduction of interest of Rs. 1 lakh for home loans up to Rs. 25 lakh, which will be over and above the current Rs. 1.5 lakh deduction allowed for self-occupied dwellings.

Defense Allocation

The government has marginally increased its defense spending by 5.31 percent than 2012-13. The defense budget for 2013-14 starting April 1 will be Rs 2,03,672 crore, an increase of Rs 1,93,407 crore more from the 2012-13 budget.

The revised budget after the mid-fiscal cut was Rs 1,78,504 crore in December 2012. The hike is 14.10 percent, much lower than last year’s 17.6 percent hike. Also the share of defense spending in the GDP will be reduced from 1.9 percent for the year ending March 31 to 1.79 percent of the GDP. The share of defense spending in the overall expenditure will be 10 percent of government expenses, a decrease of 11 percent this year.

Finance Minister P. Chidambaram said that India plans to spend up to 2.03 trillion rupees ($37.7 billion) on defense next year, up from a revised 1.78 trillion rupees this year.

The finance minister said 867.41 billion rupees will be spent to buy defense equipment in the next fiscal year, up from this year's about 695.79 billion rupees. The government had originally planned to spend 795.78 billion rupees on purchasing defense equipment this year.

Despite the cut in this year's defense budget, India will become the world's fourth-largest defense spender by 2020, behind the United States, China and Russia, and surpassing France, Japan and the United Kingdom. It is predicted that India's defense spending will reach $65.4 billion in 2020.

Boost to Agriculture

Finance Minister P Chidambaram hiked the agriculture budget by 22 percent, increased farm credit limit to small and marginal farmers from Rs 5,75,000 crore to Rs 7,00,000 crore in 2013-14 and announced setting up “nutri-farms” pilot project.

The sector got a major boost, in line with the UPA’s ambitious food security Bill (which got an allocation of Rs 10,000 crore) and the next general election, as sufficient sops have been announced for farmers in the Budget.

Also for the first time perhaps, the government set aside separate funds - Rs 500 crore - to start a program on crop diversification.

Education Sector

The Union Budget set aside a budget of Rs 79,451 crore for the entire education sector, including literacy and higher and technical education. This represents a meagre Rs 5,395 crore increase over the budget estimate of Rs 74,056 crore for the Ministry of HRD in the last financial year. The hike constitutes 7.2 percent over 2012-13, whereas last year the increase for the education sector budget was a handsome 18.6 percent. Expenditure on education as a proportion of the GDP has increased from 2.59 percent in 2007-08 to 3.31 percent in 2012-13.

The Plan Budget is Rs 65,869 crore which is Rs 4,442 crore more than Rs 61,427 crore in last fiscal. It will certainly ask for more money with the Right to Education Act (RTE) in mind.

The budget for school education is Rs 49,659 crore which is only 8 percent more than last year. The allocation for the Sarva Shiksha Abhiyan (SSA) is up from Rs 25,500 crore last fiscal to Rs 27, 258 this year an increase of Rs 1,758 crore which is very low considering SSA is the main vehicle to implement the RTE Act. Midday Meal Scheme has been allocated Rs 13,125 crore as against Rs 11,937 crore last year, an increase of Rs 1,260 crore.

Skill Development of Youth

The 2013-14 Budget has allocated Rs.1,000 crore to develop job-oriented skills among youth. Assuming that 10 lakh (one million) youth can be motivated in one year, skill trained youth will give enormous boost in employment and productivity," Chidambaram said, while presenting the federal 2013-14 budget to the Lok Sabha, the lower house of parliament.

The finance minister allocated Rs.1,000 crore (Rs.10 billion) for the "ambition", saying that it would be a "trigger for skill development in the country".

Infrastructure

Infrastructure got a major thrust in the 2013-14 budget with Finance Minister P. Chidambaram announcing a slew of measures to boost sector's growth, like raising Rs 50,000 crore through taxfree bonds and setting up of major ports.

In some other decisions which would boost the infrastructure development in the country, the government also said that it would set up a road regulatory authority in the financial year 2013-14 to address financial stress, construction risk and contract management in the road sector and start work on two more industrial corridors between Bangalore and Chennai and Bangalore and Mumbai.

"The power transmission system from Srinagar to Leh will be constructed at the cost of Rs 1,840 crore, Rs 226 crore provided in current budget," Chidambaram said in his budgetary proposals for next fiscal.

In a move that is also strategic for the region, the proposed 220 kV line from Srinagar to Leh, to be implemented by Power Grid Corp, will pass through Kargil, Drass, Khalsi and is aimed at enhancing the reliability of power supply.

Highlights

* Fiscal deficit for 2013-14 pegged at 4.8 percent of GDP and 5.2 percent in 2012-13

* Plan expenditure pegged at Rs. 5,55,322 crore and Non-Plan at Rs. 11,09,975 crore

* New taxes to collect Rs. 18,000 crore for government

* Voluntary Compliance Encouragement Scheme launched for Recovering service tax dues

* Rs 14,000 crore earmarked for capital infusion in public Sector banks in 2013-14

* Refinance capacity of SIDBI raised to Rs. 10,000 crore

* TUF Scheme for textile sector to continue in 12th Plan With an investment of Rs. 1.51 lakh crore

* No change in income tax slabs

* Relief of Rs. 2,000 for tax payers in tax bracket of Rs2-5 lakh

* Ten percent surcharge on persons with taxable income of over Rs. 1 crore

* Tobacco products, SUVs and mobile phones to cost more

* Income limit under Rajiv Gandhi Equity Savings Scheme Raised to 12 lakh from Rs. 10 lakh

* First home loan of up to Rs. 25 lakh to get extra Interest deduction of up to Rs. 1 lakh

* Duty free limit of gold import increased to Rs. 50,000 For male passengers and Rs. 1 lakh for female passengers

* India’s first women’s bank to be set up by October

* Concessional six percent interest on loans to weavers

* Commodity transaction tax of 0.01 percent proposed on non-agri futures traded on commodity bourses

* Securities transaction tax brought down to 0.01 percent

* No change in basic customs duty; normal excise and Service tax rates unchanged at 12 percent

* Handmade carpets and textile floor coverings of coir or jute exempted from excise duty

* Excise duty on SUVs increased to 30 percent from 27 percent

* Chidambaram says India to become $5 trillion economy, And among top five in the world by 2025

* Rashtriya Swasthya Bima Yojana benefit extended to Rickshaw pullers, auto and taxi drivers, among others

* ‘Nirbhaya Fund’ of Rs. 1,000 crore to empower women and Provide safety in the wake of Delhi gang rape incident

*Rs 9,000 crore earmarked as first installment of balance of CST compensation to states

* Defense allocation at Rs. 203,672 crore, education Rs. 65,867 crore and rural development ministry Rs. 80,194 crore

* Rs 10,000 crore earmarked for national food security toward incremental cost

* Farm credit target set at Rs. 7 lakh crore as against Rs. 5.75 lakh crore in 2012-13

* Direct benefit transfer scheme to be rolled out in the entire country during tenure of UPA government

Assessment

At first glance, the budget may appear harmless to the middle-class. In fact, it might even appear friendly what with all those improvements in housing loan deductions and stock market investments. But make no mistake, this budget will bite the average citizen in more ways than one.

Just take the seemingly innocuous proposal to impose service tax on all air-conditioned restaurants. With most decent restaurants — we are not talking of the up-market ones here — climate-controlled, eating out will become at least another 12 percent more expensive. Remember that restaurants are in the process of revising their price-lists even now with rising prices of food commodities.

Cellular phones are now a necessity and smart phones are increasingly becoming so as they help you do your daily business on the go. As much as 97 percent of all telephone connections in the country are cellular. Yet, smart phones (or phones that cost more than Rs.2,000) will now become pricier with the sharp rise in excise duty to 6 percent from 1 percent. In addition to driving business to the grey market, this proposal will also undo the efforts to push people into using their mobiles extensively for transactions.

It can be said that it must not be forgotten that the finance minister appears to have placed enormous trust in the growth figures going northward in the coming months, and with that he hopes the revenues will follow. After all, by not changing the income tax slabs or too significantly altering the indirect tax proposals which previously existed, Chidambaram hopes to mop just under Rs18,000 crore from his new tax proposals.

However, since that is far less than what the Government needs to meet its expenditure, the Minister is banking heavily on upward economic growth to trigger revenue generation. But growth has dipped from a high of nine percent only a few years ago to around five percent now. While the Minister hopes for a turnaround to six percent and above, there remains a big ‘if'.

Economic Survey 2012-13: Reflects India's Grim Reality, Cautions Against Growing Taxes

Finance Minister P. Chidambaram presented the pre-Budget Economic Survey for 2012-13 to Parliament on February 27. The Survey reflects the grim reality that India is facing a severe slowdown and must act fast to spur investment, restart stalled projects, cut interest rates and contain its fiscal deficit.

Growth Rate

The Survey made it clear that this fiscal’s five per cent growth, the slowest in the past decade, could no longer be blamed on external factors alone, and the government will have to act on the domestic front to come out of the slump.

The Economic Survey, while projecting an optimistic growth rate of 6.1-6.7 percent for 2013-14, stated that to contain the fiscal deficit the government should widen the tax base and cap subsidies, particularly through better targeting and plugging leakages. It also claimed the downturn was more or less over, and that the economy was looking up. Claiming that the downturn was “more or less over” and that the economy was looking up, the Survey projected a cautiously optimistic growth rate of 6.1-6.7 percent while conceding that the Gross Domestic Product (GDP) growth for the current fiscal was likely to slip to the decade’s low of five per cent — compared to the estimates by the Central Statistical Organisation (CSO) of 6.2 percent for 2011-12 and 9.3 percent the year before.

Fiscal Deficit

The Survey had pegged the fiscal deficit at 5.1 percent for the GDP for 2012-13, which the finance minister later revised to 5.3 in view of the rising expenditure and subdued revenue collection. For the new fiscal, the finance minister has committed to bring it down to 4.8 per- cent.

The 2012-13 Survey notes that the government needs to contain the fiscal deficit especially by shrinking wasteful and discretionary subsidies. The Survey said: "Controlling the expenditure on subsidies will be crucial. The domestic prices of petroleum products, particularly diesel and LPG need to be raised in line with their prices prevailing in the international market.

In addition, delays in getting permissions for projects need to be curbed so that investment can pick up. Implementation of GST, if approved, would create an integrated market and bring more producers in the tax net. Also, the direct benefit transfer scheme recently rolled out on the AADHAAR platform will target subsidies better.

Agriculture Reforms

Economic Survey states that with agriculture growth rate falling short of the four per cent target in the past five years, the country’s annual economic report card (the first since the beginning of the 12th Five-Year Plan period), calls for increase in yields and reforms like a suitable sustainable strategy to maximize agricultural income and make it a viable option.

The farm sector achieved 3.6 percent growth during the 11th Five year Plan (2007-12) – higher than growth of 2.5 and 2.4 percent during ninth and 10th Five-Year Plans but lower than expectations of 4 percent growth target.

Therefore, in the face of stiff challenge of feeding its growing population, the Survey has sought urgent reforms to boost crop yield and private investment in infrastructure to motivate farmers.

Economic Survey for 2012-13 has emphasized putting in place a strategy for farm development in the eastern and northeastern regions amid saturation in crop yields in Green Revolution belt, especially in the States of Punjab and Haryana.

Tax Rate

In what may bring cheer to the well-heeled in the wake of a raging pre-Budget debate over squeezing more out of the super-rich class, the Survey suggested the government’s efforts to raise additional revenue should be through widening of the tax base and not by increasing the rates. The Survey stated: “It is much better to achieve a higher tax-GDP ratio by broadening the base which is taxed rather than increasing marginal tax rates significantly — higher and higher tax rates impinge more and more on incentives to undertake taxable activity, while encouraging tax evasion.”

Several experts, including PMEAC Chairman C. Rangarajan, have pitched for higher rates of taxes on super-rich. The Survey, prepared by a group of economist led by Chief Economic Advisor Raghuram Rajan, said it is better to achieve fiscal consolidation partly through a higher tax-GDP ratio than merely through reduction in expenditure as it would only hurt development spending.

The Tax-GDP ratio touched a peak of 11.9 percent in 2007-08, but declined to 9.6 percent in 2009-10. It was 9.9 percent in 2011-12. “Raising the tax-GDP ratio to above the 11 percent level is critical for sustaining the process of fiscal consolidation in the long run,” it said.

Gross tax revenue in April-December 2012 has grown by 15 percent to over Rs. 6.81 lakh crore. However, the growth in tax collection was “significantly” short of the growth envisaged in Budget. The tax collection until December 2012, was 63.2 percent of Budget estimates, lower than the last five-year average of 69 percent.

Rate of Inflation

Predicting that headline inflation may fall to 6.2–6.6 percent by next month, the Survey stated that elevated food inflation would continue to remain an area of concern as it inched towards double digits in December 2012. While 2012, the inflation was driven by protein items, this year it has been due to increase in prices of cereals such as wheat, rice and maize.

Inflation which is one of the major areas of concern for the United Progressive Alliance (UPA) Government, has remained in the range of above seven per cent since December 2009, while to add to its woes food inflation, too, has remained on the higher side during the same period, and according to the Economic Survey for 2012-13, easy money policy of major developed and developing nations may further aggravate inflationary expectations in India.

The survey further added that inflation has remained muted in the current financial year and declined to a three year low of 6.62 percent in January 2013. The average wholesale prices-based inflation in 2012 (April-December) moderated to 7.55 percent from 8.94 percent in the corresponding period of 2011-12.

Industrial Production

With the spurt in factory output last October turning out to be an aberration in the wake of sharp downturns in the months after, the latest Economic Survey has sought to describe the industrial production scenario as a ‘mixed picture’ of sluggishness bottoming out as well as continuing for a little longer period.

What came as a surprise to the government while India Inc. maintained a ‘we said so’ stance to clamor for easing of interest rates, was that industrial growth, as measured by the Index of Industrial Production (IIP), witnessed a smart recovery with a robust 8.3 per cent expansion in October, 2012.

Despite the downward bias, the Survey has highlighted at least two factors which point to some optimism on the industrial front.

First is the data on frequency distribution of products/product groups within the IIP basket which indicates that the number of products with negative growth has declined from 182 in the fourth quarter of 2011-12 to 160 in October-November 2012.

The second positive factor is the Reserve Bank of India’s ‘Business expectation index’, which showed moderately positive growth during the third quarter of the current fiscal after posting persistent negative growth for the previous six quarters. Since the RBI business index tracks IIP growth fairly closely, the change in trend suggests a possible bottoming out of IIP growth moderation.

Foreign Direct Investment

According to the Economic Survey, Foreign Direct Investment (FDI) in India slumped by 43.3 percent at $15.85 billion in April-November period of the current financial year as compared to $27.93 billion in the corresponding period previous year. The overseas investment flows in top five services declined by 9.7 percent at $8.19 billion during the period under review.

The Survey stated that overall FDI inflows increased by 33.6 percent in 2011-12. Overseas investment inflows in services surged by 57.62 percent in the financial year ended March 31, 2012.

The document presented a day ahead of the Union Budget 2013-14 pointed out that the government has taken many policy initiatives to liberalize FDI policy for services sector. This includes increasing FDI limit from 49 percent to 74 percent in teleports and DTH and cable networks, permitting FDI up to 74 percent in mobile TV, up to 49 percent in scheduled and non-scheduled air transport services and up to 50 percent in multi-brand retail trading.

The Survey stated that the government has also amended the existing policy on FDI in single brand product retail trading.

Health Sector

The country’s spending on health remains abysmally low with the Survey revealing that the spending on health, as compared to the spending on the rest of social services, has actually been declining in the country. Raising alarm over the decline, the survey has called for increased focus on health and education if India's demographic dividend is to be used to its advantage. Between 2011 and 2016, as many as 63.5 million workers, mainly aged between 20 and 35 years, will join India's pool. For this segment to be productively engaged, spending on health and education must remain consistent, the survey says.

But the ground situation paints to a sorry picture. The combined central and state expenditure on social services as a proportion of total expenditure increased from 22.4 per cent in 2007-08 to 25.1 per cent in 2012-13 and the spending on education among all the social services also increased over this period from 43.9 to 46.6 per cent.

However, the combined general spending (federal and states) on health has fallen over the past five years from 21.5 per cent to 19.2 per cent.

Petroleum Subsidies

The 2012-13 Survey has called for addressing the key issues of petroleum subsidies, clarity on gas pricing policy, petroleum price distortion and concerns over various disputes pertaining to the New Exploration Licensing Policy (NELP). It stated that addressing the key fiscal risk of petroleum subsidies is critical in better fiscal marksmanship.

It stated further that the overall subsidy bill of the government, it said, was likely to overshoot the target of Rs.1.79 lakh crore this financial year due to higher crude oil prices. The government had put the petroleum products subsidy at Rs.43,580 crore, food subsidy at Rs.75,000 crore and fertilizer subsidy at Rs.60,974 crore, taking the total subsidy bill to Rs.1,79,554 crore for 2012-13.

Employment Rate

The 2012-13 Economic Survey stated that the employment rate between June 2011 and June 2012 went up by approximately 7 lakh led mainly by the IT and BPO sector which accounted for almost half of the increase. It stated that upward trend in employment since July 2009 continues despite the economic slowdown.

A sector wise analysis shows that the textiles sector including apparels saw 1.70 lakh job additions, followed by transport sector (0.45 lakh), metals (0.26 lakh), gems and jewelry (0.19 lakh) and automobiles (0.11 lakh) in June 2012 over June 2011.

The survey said that employment in handloom/power loom and leather sectors has marginally declined during this period.

It said that there has been a sustained and consecutive increase in employment in both the public and private sectors covered at overall level during the last eleven quarters with a total addition of 30.73 lakh employment during this recovery period.

According to the Survey, India is on the brink of a demographic revolution with the proportion of working-age population between 15 and 59 years likely to increase from approximately 58 per cent in 2001 to more than 64 per cent by 2021. Moreover around 63.5 million new entrants to the working age group between 2011 and 2016, the bulk of whom will be in the relatively younger age group of 20-35 years.

The Survey added that the annual growth rate of employment in the private sector in 2011 was 5.6 per cent whereas that in the public sector was negative.

Railway Budget 2013-14: Passengers Fare Untouched, Hike in Freight Tariff

Railway Minister Pawan Kumar Bansal presented the Railway Budget for 2013-14 in the Parliament on February 26. The Budget spared passengers a fare hike, but raised various charges on tickets as well as freight tariff to net in additional Rs 4,683 crore a year.

Plan Outlay

The railway minister announced the highest-ever plan outlay of Rs 63,363 crore for the public sector behemoth. Of this, Rs 14,260 crore would be raised from internal resources with Rs 26,000 crore budgetary support. Other sources of financing include Rs.14,260 crore from railway's internal resources and Rs.2,000 crore from railway's share in road safety fund. There is also a plan to raise Rs.15,103 crore from the market and mobilize Rs.6,000 crore through Public-Private-Partnership (PPP) route to fund its expansion plans in 2013-14.

While tatkal charges for sleeper class have been raised by Rs 15 to Rs 25 and for AC chair car from Rs 25 to Rs 50, tatkal charges in AC-3 tier have been increased by Rs 50 and AC-2 tier and executive class by Rs 100. The reservation fee for AC First and Executive classes has been raised to Rs 60 from Rs 35 and that of First Class and AC-2 doubled to Rs 50. Reservation fee for AC chair car, AC-3 economy and AC-3 tier has been increased to Rs 40 from Rs 25 and supplementary charges for superfast trains raised between Rs 5 and Rs 25.

Growth Rate

It is creditable that an operating ratio of 88.8 per cent is being achieved during the current year 2012-13, even after fully repaying the loan of Rs 3,000 crore along with interest that was taken from the Ministry of Finance, and after setting aside Rs. 9500 crore for Depreciation Reserve Fund (DRF). Against this, the budget estimate for 2013-14 projects an Operating Ratio (OR) of 87.8 per cent with a DRF appropriation of only Rs.7500 crore. This once again highlights the need for a more reliable index of financial performance rather than the present OR, which can be tweaked to suit by appropriately adjusting the DRF allocation. It is hoped that the proposed revamping of the accounting system will look into this aspect.

The Gross Budgetary Support (GBS) component out of this was projected as Rs. 2.5 lakh crore. It is rather distressing to note that the 12th Five-Year Plan approved by the Planning Commission has scaled down the Railway plan to Rs. 5.19 lakh crore with a GBS component of Rs. 1.94 lakh crore.

In other words, the government is not in a position to provide for a much higher rate of growth of the railway sector than it has historically done. The long-term implication of this modest growth rate on the economy as a whole needs to be looked into.

Highlights

* No increase in passenger fares

* Rs.6,600 crore increase in earnings from fare adjustment in January

* Rs.63,000 crore investment in 2013-14

* 1,047 million tons freight loading estimated during 2013-14

* Passenger earnings of Rs 42,000 crore estimated in 2013-14

* Indian Railways Institute of Financial Management to be set up at Secunderabad

* Chair at Delhi to promote research in reducing carbon footprint

* 22 new lines to be taken up in 2013-14

* Superfast and Tatkal charges to rise

* 67 new Express trains to be introduced

* 27 new passenger trains; run of 58 trains to be extended

* New debt service fund to be set up

* Six more Rail Neer bottling plants to be set up

* Losses mounted from Rs.22,500 crore in 2011-12 to Rs.24,600 crore in 2012-13

* Planning Commission pegged 12th Five-Year Plan at Rs.125.19 lakh crore

* Fall in accidents - per million accidents down from .41 to .13

* Aim to eliminate 31,846 level crossings

* Will close fiscal 2012-13 with fund balance against previous deficit; need to build fund balance to Rs.30,000 crore by end of 12th Five-Year Plan

* Operating ratio of 88.8 percent achieved

* Dividend reduced from 5 to 4 percent

* Electrification of 1,200 km to be completed this year

* 72 additional suburban services in Mumbai and 18 in Kolkata

* Complementary passes of freedom fighters to be renewed every three years instead of annually

* New wheel factory to be set up at Rae Bareli

* Greenfield EMU manufacturing facility at Bhilwara

* Railway energy management company to be set up to harness solar and wind energy

* 1,000 crossings to be energized by solar power

* 1.51 lakh vacancies to be filled up

* Locomotive cabs to be air-conditioned

* Azadi Express to be introduced to travel to places associated with freedom struggle

* India in 1 billion ton freight club

* By end of 2013-14, 1,500 km of contracts to be awarded for two dedicated rail corridors

* Rs.1 lakh crore target set for public-private-partnership route

* Free Wi-Fi to be provided on some trains

* Rs.100 crore for improving stations in New Delhi

* 179 escalators and 400 lifts at A 1 and other select stations

* E-ticketing through mobile phones

* SMS alerts for passengers on reservation status

* Next generation e-ticketing system by end of 2013

Assessment

The 2013-14 Budget has skirted the prickly issue of structural reforms. There is no mention in the budget of even the proposal in the last budget to expand the Board to include two members to look after PPP /Marketing and safety/research. The proposal has perhaps been shelved.

Overall, the budget conveys an impression of an exercise to keep the system going very much as it has done in the past, at a modest growth rate. Whether such a rate of growth of this key infrastructure sector will be sufficient to sustain the projected growth rates of the economy as a whole remains to be seen.

Nevertheless, it is a matter of pride that the Indian Railways has joined the select club of world railways moving more than a billion tons of freight annually, and is entering into yet another exclusive group of railways moving more than 10,000 tons per train. Some concomitant steps that should improve maintainability, reduce maintenance costs and improve staff productivity such as widespread introduction of track friendly/self-steering bogies and doing away with the anachronistic institution of goods guards, have not been explicitly mentioned in the budget. Hopefully, these and other steps will be implemented.