Download Highlights of Union Budget 2012-13

General Awareness Updates – April 2012
Persons in News
Akhilesh Yadav, son of SP chief Mulayam Singh Yadav, was sworn in as the Chief Minister
of Uttar Pradesh, the youngest-ever to hold the office. Akhilesh Yadav, 38, will be the 33th
Chief Minister of the most populous state.
Sixty-three year old Congress leader Okram Ibobi Singh was sworn in as the 23rd Chief
Minister of Manipur for a third consecutive term. The Congress had won 42 of the 60 seats
in the state assembly securing two thirds majority in the assembly elections.
Congress MP Vijay Bahuguna was sworn in as the Chief Minister of Uttarakhand after the
Congress overruled a revolt by another MP Harish Rawat, who is said to have offered to
resign from the Union government. The Congress won 32 seats in the 70-member
Assembly, one more than BJP’s 31.
85-year-old year old SAD leader Parkash Singh Badal was sworn in as the Chief Minister
of Punjab for a record fifth time along with 17 other Cabinet rank ministers, including his son
Sukhbir, for a second successive term of the SAD-BJP alliance government. The SAD has
created a record in the state since 1966 when Punjab was reorganized by becoming the first
party ever to retain power in alliance with the BJP with an improved tally of 68 seats against
67 which the two parties secured in 2007.
Twenty-eight people, including 22 children, returning from a skiing holiday died in a bus
accident in Sierre in the Swiss canton of Valais, while they were travelling from Val
d’Anniviers and were returning to Belgium. The bus was travelling towards Sion, and hit a
wall in the motorway tunnel running from east to west and exiting at Sierre.
Abd-Rabbu Mansour Hadi (right) became Yemen’s new president, formally removing
autocrat Ali Abdullah Saleh from power, as a car bombing in the south of the country
underscored the violence that will be the new leader’s greatest
challenge.
The car loaded with explosives killed at least 26 people and
injured dozens when it was driven towards a presidential palace in
the southern Yemeni city of Hadramout, far from the capital Sanaa where Mr Hadi was
sworn in.
A former army general, Mr Hadi stood as the sole candidate to replace Mr Saleh in a power
transfer deal brokered by Gulf neighbours and backed by Western powers. Mr Saleh’s
departure makes him the fourth Arab leader to be removed from power in more than a year
of mass uprisings that have redrawn the political map of the Middle East.
Yemen’s richer neighbours, led by Saudi Arabia, crafted the power transfer, also backed by
the U.S. and a UN Security Council resolution, to ease out Mr Saleh, who had ruled Yemen
for 33 years.
One of the poorest countries in the Middle East, Yemen had already been fractured before
the revolt against Saleh’s rule, with separatists in the south, Shi’ite rebels in the north and
an active wing of Al-Qaeda. There are fears that chaos inYemen could empower the
country’s branch of Al-Qaeda near major oil shipping routes.
Mr Hadi now is tasked with overseeing a proposed two-year political transition that
envisions parliamentary elections, a new constitution and restructuring of the military in
which Mr Saleh’s son and nephew still hold power. He made a point to single out Al-Qaeda
as a top priority for his new administration: “Continuing the war against Al-Qaeda is a
national and religious duty”.
Some 42 per cent of Yemen’s population of 23 million live on less than U.S.$2 per day in a
land where tribal loyalties remain central to society.
Gurbanguly
Berdymukhamedov was
re-elected
for
a
second
term
as
president
of Turkmenistan. There were seven other candidates, all from his own (and the only) party. He
picked up only 97% of the vote.
Joachim Guack is the new President of Germany. He succeeds Christian Wulff who
resigned due to corruption allegations.
Pakistan appointed Lieutenant-General Zaheer ul Islam as the new head of the Directorate
of Inter-Services Intelligence (ISI), its military spy agency. The ISI wields enormous power
in Pakistani politics and has been accused of colluding with militants. General Islam’s most
recent post was as commander of a Karachi-based army corps.
F. Sherwood Rowland,(right) the Nobel prize-winning chemist who sounded the alarm on
the thinning of the Earth’s ozone layer and crusaded against the use of man-made
chemicals that were harming Earth’s atmospheric blanket, has died. He was 84.
Mr Rowland was among three scientists awarded the
1995 Nobel Prize for chemistry for explaining how the
ozone is formed and decomposed through chemical
processes in the atmosphere.
The prize was awarded more than two decades after
Rowland and his post-doctoral student Mario Molina
calculated that if human use of chlorofluorocarbon, a
byproduct of aerosol sprays, deodorants and other
household products was to continue at an unaltered
rate, the ozone layer would be depleted after several decades. Their work at University of
California (UC) Irvine built upon findings by atmospheric scientist Paul Crutzen.
Their prediction caught enormous attention and was strongly challenged partly because
CFC’s non-toxic properties were thought to be environmentally safe. Their work gained
widespread recognition more than a decade later with the discovery of the ozone hole over
Earth’s Polar regions and leaders of nations worldwide began to act to ban or curb usage of
the chemicals.
Geir Haarde, a former prime minister of Iceland, went on trial facing charges of gross
negligence during his time in office. Mr Haarde is accused of failing to take appropriate
measures to avoid Iceland’s spectacular financial crash in 2008.
General Awareness Updates – April 2012
Places in News
At least 22 people were killed during fresh protests in several cities across Afghanistan over
the burning of copies of the Koran, Islam’s holy book, at Bagram, NATO’s main base
in Afghanistan.
The American Embassy said its staff were in lockdown and all travel had been suspended as
thousands of people expressed fury over the burning, a public relations disaster for U.S.-led
NATO forces fighting Taliban militants ahead of the withdrawal of foreign combat troops by the
end of 2014.
The U.S. government
and
the U.S. commander
of
NATO-led
forces
in Afghanistan apologised after Afghan labourers found charred copies of the Koran while
collecting rubbish at the sprawling Bagram Airbase about an hour’s drive north of Kabul.
A fire at a jail in Honduras killed over 350 people. Many victims were burned or suffocated
to death in their cells in Comayagua, north of the capital Tegucigalpa. At least 300 are
confirmed dead, but a further 56 inmates, out of the 853 in the prison, are missing and
presumed dead. An inquiry is under way whether the blaze was caused by rioting or an
electrical fault.
At least 200 people are reported to have been killed following huge explosions at an arms
dump in Congo’s capitalBrazzaville. The force of the blasts was felt several miles away in
the city of Kinshasa, across the border in the Democratic Republic of Congo. Hundreds more
people are reported to have been injured in the explosions. The explosions had been caused
by a fire in the arms.
An American soldier went on an unprovoked shooting rampage in two villages close to his
base in southern Afghanistan and killed 16 people, including nine children. The incident
sparked a number of revenge attacks around the country, which was just starting to recover
from a spate of violence in reaction to copies of the Koran being burned in an incinerator at
an American compound.
General Awareness Updates – April 2012
Awards & Honours
84rd Academy Awards (Oscars)
v
v
v
v
v
v
Actor in a Leading Role: Jean Dujardin, The Artist
v
v
v
v
Best Foreign Language Film: A Separation (Iran)
Actor in a Supporting Role: Christopher Plummer, Beginners
Actress in a Leading Role: Meryl Streep, The Iron Lady
Actress in a Supporting Role: Octavia Spencer, The Help
Animated Feature Film: Rango by Gore Verbinski
Best Director: Michael Hazanavicius, The Artist
Best Music: The Artist by Ludovic Bource
Best Picture: The Artist¸ produced by Thomas Langmann
Best Original Screenplay: Midnight in Paris by Woody Allen
62nd Berlin Film Festival
Golden Bear for Best Film: Cesare
v
deve morire (Caesar
Must
Die), Paolo
and Vittorio Taviani, Italy
Silver
v
Bear
Jury
Grand
Prix: Csak
a
szél (Just
The
Wind), Bence
Fliegauf, Hungary, Germany and France
Silver
v
Bear
for
Special
Mention: L’Enfant
d’en
haut (Sister),
Ursula
Meier, Switzerland and France
v
Silver Bear for Best Director: Christian Petzold for Barbara, Germany
v
Silver Bear for Best Actress: Rachel Mwanza in Rebelle (War Witch), Kim
Nguyen, Canada
v
Silver Bear for Best Actor: Mikkel Følsgaard in En Kongelig Affære (A Royal Affair)
General Awareness Updates – April 2012
Economy & Business
Iran has stopped selling crude to British and French companies in a retaliatory measure
against fresh EU sanctions on the Islamic state’s lifeblood, oil.
The European Union in January decided to stop importing crude from Iran from July 1 this
year over its disputed nuclear programme, which the West says is aimed at building
bombs. Iran denies this.
The European Commission said that the group would not be short of oil if Iran stopped
crude exports, as they have enough in stock to meet their needs for around 120 days.
Among European nations, debt-ridden Greece is most exposed to Iranian oil disruption.
EU’s new sanctions includes a range of extra restrictions on Iran that went well beyond UN
sanctions agreed in February this year and included a ban on dealing with Iranian banks and
insurance companies and steps to prevent investment in Tehran’s lucrative oil and gas
sector, including refining. The mounting sanctions are aimed at putting financial pressure on
the world’s fifth largest crude oil exporter, which has little refining capacity and has to
import about 40 per cent of its gasoline needs for its domestic consumption, into giving up
its nuclear programme.
Johnson & Johnson promoted Alex Gorsky from Vice-Chairman to Chief Executive Officer
(CEO). He will replace William Weldon, who has held the job since 2002, in April. Mr Gorsky,
a former army captain and marathon runner, is expected to instil discipline at J&J, which
has seen its brand image tarnished by a number of product recalls.
Driven by strong performance of the manufacturing sector, India’s industrial output rose to
7-month high of 6.8 per cent in January, suggesting that economic recovery may be round
the corner. On the back of 8.5 per cent growth in manufacturing during the month,
the Index of Industrial Production (IIP) grew at a faster pace than 2.5 per cent recorded
in December.
On the other hand, output of the mining and capital goods sectors contracted by 1.5 per
cent and 2.7 per cent respectively during the month. However, the Planning Commission
cautioned that one will have to wait for February data before concluding that downturn is
over.
Although the growth in industrial output during January 2012 at 6.8 per cent, it is less than
7.5 per cent recorded in the same month last year. On sequential basis, this is the highest
growth since June 2011 when it was 9.5 per cent. During the April-January 2011-12 period,
the IIP growth stood at 4 per cent, as against 8.3 per cent in same period in 2010-11.
The recovery may restrain the Reserve Bank of India, which cut CRR to inject `48,000 crore
liquidity into the system in the second fortnight of February, from reducing interest rates in
the mid-quarterly credit policy on March 15. The annual monetary policy for 2012-13 will be
announced on 17th April.
Output of the consumer goods sector grew 20.2 per cent in January, compared to 8.3 per
cent in the same month last year. The production of the non-durable consumer goods
segment has shown signs of improvement and grew by 42.1 per cent in the month under
review.
Power generation, however, witnessed slow growth of 3.2 per cent in January, compared to
10.5 per cent in the year ago period. During the month, 13 of the 22 industry groups
witnessed growth. Output of basic goods went up by meagre 1.6 per cent, as against 7.7
per cent in the year ago period. However, intermediate goods witnessed a contraction of 3.2
per cent, as against 7.4 per cent growth in January last year.
Recently, the Central Statistical Organisation (CSO) had estimated that the economy would grow
at a slower pace of 6.9 per cent this fiscal, as against 8.4 percent in 2010-11.
The Union Government has slashed interest rate on deposits in Employees Provident
Fund (EPF) from 9.5 per cent to 8.25 per cent for 2011-12, affecting over 4.7 crore
subscribers. This cut was proposed by the Finance Ministry and a notification was issued by
the Labour Ministry. The Employees’ Provident Fund Organisation (EPFO) had provided 9.5
per cent interest rate to its subscribers for 2010-11 after it found `1,731 crore surplus in its
books of account. The Labour Ministry had recommended 8.6 per cent rate of interest for
this fiscal on provident fund deposits to EPFO subscribers.
China posted a trade deficit of U.S.$31.48 billion in February, the country’s biggest in
almost a decade. The massive trade deficit was due partly to seasonal distortions but also to
faltering demand for the country’s exports. Factories were closed during the Chinese newyear celebrations, which may be one factor behind the slacker exports.
The weak export performance, even as imports grew at twice the rate of exports, comes on
top of a raft of disappointing economic data that economists said will add to the likelihood of
additional easing by the central bank and other policy makers. The deficit of U.S.$31.48
billion in February comes on the back of a U.S.$27.28 billion surplus in January, according
to data released by China’s General Administration of Customs.
The U.S., Japan and the European Union have filed a case against China at the World Trade
Organization (WTO), challenging its restrictions on rare earth exports.
Beijing has set quotas for exports of rare earths, which are critical to the manufacture of
high-tech products from hybrid cars to flat-screen TVs.
It is the first WTO case to be filed jointly by the U.S., EU and Japan. They argue that by
limiting exports, China, which produces more than 95% of the world’s rare earth metals,
has pushed up prices.
The co-ordinated complaints are the first step in a process that could ultimately lead to
sanctions against China. Beijing has denied the allegations in the WTO case, saying that it
enforced the quotas to ensure there was no environmental damage caused due to excessive
mining.
The filing focuses on 17 rare earth minerals which are essential for making products such as
smart phones and camera lenses, as well as many renewable energy devices.
The rare earth complaints follow a WTO ruling earlier this year in favour of the EU. It
found China had illegally restricted exports of other materials, such as bauxite, zinc and
magnesium.
Brazil’s economy, the second largest in the Western Hemisphere, grew by just 2.7% last
year, a huge drop from the 7.5% growth rate in 2010. Brazil’s economy is forecast to grow
by around 3% this calendar year.
China has lowered its target for GDP growth rate to 7.5% for this year, the first time in
eight years that the official target has been under 8%. Economists fear that Beijing’s growth
slowdown might adversely impact the region and commodity-rich countries (like Australia),
that feed the Middle Kingdom’s massive hunger for raw materials.
India’s patent office ordered Bayer, a German drugmaker, to license a cheaper version of
Nexavar,
an
anti-cancer
drug
to
an
Indian
generics
maker, Natco. Compulsory
licensing is permitted under WTO rules but rarely used. Natco will sell its version at a 97%
discount to Bayer’s (`8,800 as against `2.24 lakh for 120 capsules) and hand over 6% of the
revenues as royalties. Bayer is planning to appeal. The decision will heighten pharma
companies’ concerns about investing in India, which is involved in other patent rows.
Britain is experiencing its highest unemployment rate since 1995. The latest snapshot of
the labour market by the Office for National Statistics showed the unemployment rate stuck
at a 17-year high of 8.4% in the three months to December and the number of women
claiming unemployment benefits at the highest level since 1995.
The number of people out of work was up by 48,000 on the previous three months to 2.67
million, almost a third of whom have been unable to find work for more than a year. Twothirds of the increase in unemployment was accounted for by women, who continue to be
hit hardest by the deterioration in the labour market. The number of women claiming
unemployment benefits has hit 531,700 – driven partly by government reforms that have
forced single mothers to return to the labour market. A record number of people were
working part-time as they were unable to find full-time work.
Moody’s cut the credit ratings of Portugal, Spain, and Italy while it also put Great Britain,
France, and Austria, on negative outlook, a warning that their AAA (triple-A) ratings could
be downgraded. Moody’s said that although Great Britain was not in the euro zone, the
massive debt crisis in the common currency union was putting extreme negative pressure
on its economy, and London may thus find it a great challenge to reduce the country’s very
high public debt.
Kellogg has agreed to buy Pringles from Procter & Gamble for U.S.$2.7 billion. Kellogg,
best known for its breakfast cereals, says this deal will make it the second biggest player in
the global snacks business. Pringles are sold in more than 140 countries and generate
annual sales of about U.S.$1.5 billion.
General Awareness Updates – April 2012
Miscellaneous-1
In a military campaign codenamed Operation Linda Nchi, Ethiopian and Somali troops
have taken control of Baidoa, the strategic stronghold of Islamist militants in southwestern Somalia. After the southern port of Kismayo, the town was the most important AlShabab base. Al-Shabab is a local ally of international terror group, Al-Qaeda.
The military operation comes even as the UN Security Council (UNSC) voted to increase the
African Union force in Somaliafrom 12,000 to 17,731. These developments come ahead of a
major conference to be hosted by the UK aimed at ending two decades of conflict in the
troubled country.
The UNSC unanimously agreed to bolster the number of African Union forces in Somalia by
more than 5,500 to 17,731 - this would include the Kenyan troops that entered the country
last October in pursuit of Al-Shabab militants. The resolution passed by the 15-nation
council also gave the African force a stronger mandate to attack Al-Shabab militants and
substantially increase international funding for the military operation.
In the ten-year-old International Criminal Court’s first verdict, Thomas Lubanga Dyilo,
a Congolese warlord, was convicted of the abduction and use of children as soldiers—a war
crime—in the Democratic Republic of Congo during 2002 and 2003.
Israel and Palestinian factions in the Gaza Strip agreed to a truce brokered by Egypt,
after a four-day burst of fighting killed at least 25 Gazans and injured dozens of Israelis. It
was the worst violence in two years, sparked by an Israeli air strike against a Palestinian
guerrilla leader. Israel said its new Iron Dome missile-defence shield performed well against
a barrage of 200 Palestinian rockets.
General Awareness Updates – April 2012
Miscellaneous-2
Highlights of Rail Budget 2012-13
r Passenger fares increased marginally. The increase will be by 2 paise per km for
suburban and ordinary second class; 3 paise per km for mail/express second class; 5
paise per km for sleeper class; 10 paise per km for AC Chair Car, AC 3 tier and First
Class; 15 paise per km for AC 2 tier and 30 paise per km for AC I.
r Minimum fare and platform tickets to cost `5.
r 50% concession in fare in AC-2, AC-3, Chair Car & Sleeper classes to patients suffering
from ‘Aplastic Anaemia’ and ‘Sickle Cell Anaemia’.
r Extending the facility of travel by Rajdhani and Shatabdi trains to Arjuna Awardees.
r Travel distance under ‘Izzat Scheme’ to increase from 100 kms to 150 kms.
r SMS on passenger mobile phone in case of e-ticket to be accepted as proof of valid
reservation.
r Introduction of satellite based real time train information system (SIMRAN) to provide
train running information to passengers through SMS, internet, etc.
r On board passenger displays indicating next halt station and expected arrival time to be
introduced.
r Installation of 321 escalators at important stations of which 50 will be commissioned in
2012-13.
r Introduction of regional cuisine at affordable rates; launching of Book-a-meal scheme to
provide multiple choice of meals through SMS or email.
r Introduction of coin/currency operated ticket vending machines.
r Upgradation of 929 stations as Adarsh Stations including 84 stations proposed in 201213; 490 stations have been completed so far.
r Specially designed coaches for differently-abled persons to be provided in each
Mail/Express trains.
r Introduction of Rail Bandhu on-board magazines on Rajdhanis, Shatabdis and Duronto
trains.
r Setting up of AC Executive lounges at important stations
r 75 new Express trains to be introduced.
r 21 new passenger services, 9 DEMU services and 8 MEMU services to be introduced.
r Run of 39 trains to be extended.
r Frequency of 23 trains to be increased.
r 75 additional services to run in Mumbai suburban; 44 new suburban services to be
introduced in Kolkata area, 50 new services to be introduced in Kolkata Metro; 18
additional services in Chennai area.
r 725 km new lines, 700 km doubling, 800 km gauge conversion and 1,100 km
electrification targeted in 2012-13.
r Highest ever plan outlay of 60,100 cr
r `6,872 cr provided for new lines, `3,393 cr for doubling, `1,950 cr for gauge
conversation, `828 cr for electrification
r Rae Bareli coach factory manufactured 10 coaches in 2011-12; phase-II of the factory
would be commissioned in 2012-13.
r A wagon factory to be set up at Sitapali (Ganjam District of Odisha)
r A rail coach factory with the support of Government of Kerala to be set up at Palakkad;
two additional new manufacturing units for coaches to be established in the Kutch area
in Gujarat and at Kolar in Karnataka with active participation of the State Governments.
r Indian Railway Station Development Corporation to be set up to redevelop stations
through PPP mode.
r Creating
Missions
as
recommended
by
Pitroda
Committee
to
implement
the
modernization programme.
r Setting up of a factory at Shyamnagar in West Bengal to manufacture next generation
technology propulsion system for use in high power electric locomotives.
r Setting up of Railway Tariff Regulatory Authority to be considered.
r New Board Members for Safety/Research and PPP/Marketing to be inducted.
r Rail-Road Grade Separation Corporation to be set up to eliminate level crossings.
r Logistics Corporation to be set up for development & management of existing railway
goods sheds and multi-modal logistics parks.
r National High Speed Rail Authority to be set-up.
r Pre-feasibility studies on six high speed corridors already completed; study on DelhiJaipur-Ajmer-Jodhpur to be taken up in 2012-13.
r Introduction of a ‘Green Train’ to run through the pristine forests of North Bengal.
r Setting up of 200 remote railway stations as ‘green energy stations’ powered entirely by
solar energy.
r Providing solar lighting system at 1,000 manned level crossing gates.
r 2,500 coaches to be equipped with bio toilets.
r Setting up of 72 MW capacity windmill plants in Andhra Pradesh, Karnataka, Kerala,
Tamil Nadu and West Bengal.
r Installation of Integrated Security System at all 202 identified stations to be completed in
2012-13.
r Escorting of trains by RPF/GRP extended to 3,500 trains.
r Integration of RPF helpline with the All India Passenger Helpline.
r Setting up of a Railway Safety Authority as a statutory regulatory body as recommended
by Kakodkar Committee
r Three ‘Safety Villages’ to be set up at Bengaluru, Kharagpur and Lucknow for skill
development for disaster management.
r Over one lakh persons to be recruited in 2012-13 – backlog of SC/ST/OBC and other
categories to be wiped off.
r Introduction of a wellness programme for railway staff at their work places.
r Ensuring proper rest for skilled and technical staff including the running crew.
r Institution of ‘Rail Khel Ratna’ Award for 10 rail sports-persons every year.
r New coaching terminal at Naihati, the birth place of Rishi Bankim Chandra Chattopadhyay
commemorating him on 175th Birth Anniversary.
r Project to connect Agartala with Akhaura in Bangladesh to be taken up in 2012-13.
r Freight loading of 1,025 MT targeted; 55 MT more than 2011-12
r Passenger growth targeted at 5.4 %.
RAIL BUDGET 2012-13: AT A GLANCE
Highest ever plan outlay of `60,000 crore
75 new express trains, 21 new passenger services, 9 demu and 8 memu services
137 services new sub-urban services to come up in Mumbai, Chennai & Kolkata
725 km new lines to be introduced
A green train and 200 green energy stations proposed
Special coaches for differently-abled persons
Emphasis on infrastructure development – 5 focus areas identified
19000 km rail tracks to be modernised
Mission-mode approach for rail modernisation
Minor increase in passenger fares
A slew of passenger amenities being introduced
Key Features of
Economic Survey 2011-12
Managing growth
and
price stability are the major challenges of macroeconomic
policymaking. In 2011-12, India found itself in the heart of these conflicting demands. The
Indian economy is estimated to grow by 6.9 per cent in 2011-12, after having grown at the
rate of 8.4 per cent in each of the two preceding years. This indicates a slowdown compared
not just to the previous two years but 2003 to 2011 (except 2008-9).
At the same time, sight must not be lost of the fact that, by any cross-country
comparison, India remains
among
the
front-runners.
With
agriculture
and
services
continuing to perform well, India’s slowdown can be attributed almost entirely to weakening
industrial growth. The manufacturing sector grew by 2.7 per cent and 0.4 per cent in the
second and third quarters of 2011-12. Inflation as measured by the wholesale price index
(WPI) was high during most of the current fiscal year, though by the year’s end there was a
clear slowdown. Food inflation, in particular, has come down to around zero, with most of
the remaining WPI inflation being driven by non-food manufacturing products. Monetary
policy was tightened by the Reserve Bank of India (RBI) during the year to control inflation
and curb inflationary expectations. The slowing inflation reflects the lagged impact of
actions taken by the RBI and the government.
Reflecting the weak manufacturing activity and rising costs, revenues of the centre have
remained less than anticipated; and, with higher than-budgeted expenditure outgo, a
slippage is expected on the fiscal side. The global economic environment, which has been
tenuous at best throughout the year, turned sharply adverse in September 2011 owing to
the turmoil in the eurozone, and questions about the outlook on the U.S. economy provoked
by rating agencies. However, for the Indian economy, the outlook for growth and price
stability at this juncture looks more promising. There are signs from some high frequency
indicators that the weakness in economic activity has bottomed out and a gradual upswing
is imminent.
The macroeconomic situation in February 2011 — at the time of presentation of Economic
Survey 2010-11 — looked positive, even though there was some concern about industrial
slowdown. Economic Survey 2010-11 had anticipated that the Indian economy would
register growth of around 9 per cent (+ or - 0.25 per cent) in 2011-12, almost reverting to
the pre-crisis levels achieved during the three-year period 2005-6 to 2007-8. The optimism
was driven in part by the fact that the economy had achieved a growth rate of 8.4 per cent
during the years 2009-10 and 2010-11 and the savings and investment rates had begun
rising once again. However, during the course of the year it became increasingly clear that
economy would fall short of that growth rate by a significant margin for various reasons.
This was indeed pointed out in the Mid-Year Analysis for the year 2011-12 that had stated
that the Indian economy was expected to register a growth rate of 7.5 per cent during the
year. As it happens, the economy is expected to register a growth rate of 6.9 per cent in
2011-12, as per the Advance Estimates (AE) released by the Central Statistics Office (CSO)
in February 2012. At sectoral level, growth is estimated to be 2.5 per cent for 2011-12 for
agriculture and allied sectors, a little lower than expected.
However, this has to be seen in light of the high growth of 7 per cent achieved in 2010-11.
Growth in the services sector is likely to be 9.4 per cent in 2011-12 as against 9.3 per cent
in 2010-11. Thus, it is primarily the dip in growth in industry to 3.9 per cent in 2011-12 that
has led to the slowdown in real gross domestic product (GDP) growth.
WHAT IS THE ECONOMIC SURVEY?
The Economic Survey is a yearly report card of the economy put out by the Chief Economic
Advisor. It is a comprehensive document that analyses important economic, financial and
social developments over the year. Over the years, it has expanded to accommodate more
sectors and include more of analytical content. From 362 pages in 2004-05, the survey has
grown to a 459 page document in 2010-11 that included separate chapters on prices,
financial intermediation, and service, reflecting their importance in the economic debate.
With the exception of the year 2008-9 when the growth rate was 6.7 per cent, the growth in
real GDP in 2011-12 has been the lowest in nine years. This speaks well of the last nine
years but must also be treated as a wake-up call. Like in 2008-9, a part of the reason for
the slowdown lies in global factors, particularly the crisis in the eurozone area and nearrecessionary conditions prevailing in Europe; sluggish growth in many other industrialized
countries, like the USA; stagnation in Japan; and hardening international prices of crude oil,
which always has a large effect on India.
Domestic factors, namely the tightening of monetary policy, in particular raising the repo
rate in order to control inflation and anchor inflationary expectations, resulted in some
slowing down of investment and growth, particularly in the industrial sector. Since monetary
policy operates largely through demand compression in the short run, the expectation is
that
this
policy
will
infact
bolster
long-run
growth.
The
2008-9
downturn
came
to India when the country’s fiscal balances were robust. Hence, there was ample scope for
fiscal and monetary stimulus.
As in most parts of the world, this second slowdown is coming so quickly on the heels of the
previous one that the latitude that we have in terms of fiscal and monetary policy is much
more limited. Evidently, there is need to be innovative in terms of policy.
Earlier Economic Surveys had highlighted the growing divergence between the two
measures of GDP, namely GDP at factor cost at constant prices (production or value-added
method) and GDP at constant market prices (demand-side GDP), arising from the global
financial crisis and the policy responses which included fiscal stimuli. As per the latest
revisions to GDP announced by the CSO in the QE of national income released on 31
January 2012, demand-side GDP is estimated to have grown by only 3.9 per cent in 2008-9
and the recovery in 2009-10 and 2010-11 was sharper at 8.2 per cent and 9.6 per cent
respectively. The revisions indicate that the global crisis in 2008-9 was mainly reflected in
negative growth in gross capital formation, with the slowdown in private final consumption
expenditure being modest. More importantly, post-crisis growth in gross fixed capital
formation has been lukewarm. As per the AE the growth of GDP at market prices is
expected to be 7.5 per cent in 2011-12. The growth in real terms of consumption
expenditure, gross fixed capital formation, exports and imports respectively works out to
6.0 per cent, 5.6 per cent, 14.3 per cent, and 17.5 per cent for the year 2011-12. The
growth in these indicators in 2010-11 was 8.1 per cent, 7.5 per cent, 22.7 per cent, and
15.6 per cent respectively. The rate of growth of private final consumption expenditure in
real terms has been fairly consistent and did not decline significantly even when the growth
rate was relatively lower, partly due to the inherent nature of private consumption that does
not fluctuate as much as other demand-side components and partly on account of
inflationary tendencies, which tend to reduce savings (on account of reduction in real
interest rates) rather than affecting the consumption level in the economy.
The growth rate of investment in the economy is estimated to have registered a significant
decline during the current year. The year has been witnessing a sharp increase in interest
rates that resulted in higher costs of borrowings; and other rising costs affecting profitability
and, thereby, internal accruals that could be used to finance investment. It may also be
observed from that the economy registered high growth in gross capital formation during
2005-6 to 2007-8. As a result, there was rapid increase in investment rate in the economy
from 32.8 per cent in 2004-5 to 38.1 per cent in 2007-8. The level of investment declined in
absolute terms in 2008-9 following the slowdown in the global economy. Though it did
recover quickly in 2009-10 and 2010-11, the growth in gross capital formation, particularly
fixed capital formation, has been substantially lower than had been achieved in 2005-6 to
2007-8. The investment rate continues to be lower than the peak level achieved in 2007-8.
Despite difficult conditions in the global economy, exports continued to be robust in the
current year and registered a growth rate of 14.3 per cent in real terms over and above
22.7 per cent growth achieved in the previous year (2010-11), as per Advance Estimates.
Imports are likely to end the year with a real growth rate of 17.5 per cent as against 15.6
per cent in 2010-11. It may further be noted that international trade (exports and imports)
as per national accounts is now around 53 per cent of GDP, up from a level of 37 per cent in
2004-5.
As stated earlier, the growth rate of private final consumption expenditure has been fairly
consistent even when the economy’s growth rate has fluctuated somewhat. However, this
consistency masks large variations between the various commodity groups. As against an
overall growth of private final consumption expenditure that was in the range of 7.1-9.2 per
cent during the period 2005-6 to 2010-11, the rates of growth of the consumption groups
food, beverages, and tobacco and gross rent, fuel, and power have generally been lower.
On the other hand, the growth rates of items like furniture and furnishing, transport and
communications, and miscellaneous goods and services have generally been higher. As a
result, the composition of private final consumption expenditure in terms of shares
underwent changes.
SAVINGS AND INVESTMENT
As per the QE released by the CSO, gross domestic savings as a ratio of GDP at current
market prices (savings rate) declined from 33.8 per cent in 2009-10 to 32.3 per cent in
2010-11. This decline is accounted for by a reduction in private savings, primarily household
savings in financial assets, and somewhat by a reduction in corporate savings. Public
savings on the other hand registered an increase, thanks to fiscal consolidation. The
reduction in the financial savings rate of households could be partly attributable to
inflationary tendencies in the economy during the period that resulted in higher growth of
private final consumption expenditure than of personal disposable income and partly to a
reduction in real interest rate.
In the medium to long term, growth of an emerging economy depends, to a large extent,
not only on overall level of investment but also on its sectoral composition reflecting the
transformation taking place. However, annual growth rates of investment both at aggregate
and sectoral levels may vary, depending on expectations of profitability, sales, etc. There
are large scale variations in the growth rates of sectors over time. Most of the sectors in
2010-11
registered
positive
growth
in
real
terms
in
investment
levels
except
communications and railways. The marginal negative growth in communications in 2009-10
and 2010-11 is not surprising after the very high growth in this sector in the previous two
years. The growth in real investment in railways turned negative after showing a positive
trend for several years. This partly reflects the inability to raise tariffs in order to meet
increasing expenditures
WHAT IS THE SIGNIFICANCE OF THE SURVEY?
In terms of information, the Survey has little usefulness as most of the data presented is
already out in the public domain. Its real significance is that it lays down the economic
reforms agenda for the country and contains suggestions to the policymakers on the issues
that dominate economic discourse. Tabled usually a day before the Union budget for the
next fiscal is presented, it is expected that some of the suggestions in the Survey will find
their way into the budget.
Typically, the Economic Survey details developments in the current year; however, it is
worth commenting on the growth of the Indian economy from the perspective of long-term
trends, particularly in the context of the post 1991 period and reflect upon where we are at
the current conjuncture. The rate of growth between 1950-1 and 1990-1 was 4.1 per cent.
In contrast, between 1991-2 and 2011-12 the economy registered a growth of 6.9 per cent.
While in the four decades from 1951-2 to 1991-2, the growth rate in terms of GDP at factor
cost (at 2004-5 prices) was more than 6 per cent only in 10 years, between 1992-3 and
2011-12 (including the AE for 2011-12) (a time span covering 20 years, inclusive of both
observations) the growth rate has been over 6 per cent in as many as 14 years. The growth
rate has accelerated significantly since 2003-4. Between 2003-4 and 2011-12, the economy
registered a growth of 8.2 per cent per annum. In fact, during this period, the growth rate
has never fallen below 6.7 per cent and has been over 8 per cent in six of these nine years.
All the three major sectors of the economy, namely agriculture, industry, and services
witnessed higher-than-trend growth rates at 3.9 per cent, 8.0 per cent, and 9.6 per cent
respectively. Clearly the services sector has emerged as the key driver of growth in the
Indian economy. The growth of this sector has shown the least inter-temporal variations.
With the declining share of the agriculture sector and reasonably consistent growth in the
services sector, the variations in growth rate of GDP are lately being associated with the
variations in the industry sector.
This accelerated growth could partly be attributed to an increase in savings and investment
rates, which averaged 33.1 per cent and 34.3 per cent respectively during the period
between 2003-4 and 2010-11. The average savings and investment rates in the 1990s were
23.0 per cent and 24.3 per cent respectively. Sustaining and accelerating this growth
further could be crucial for attaining higher per capita income and other objectives that aim
at enhancing human welfare as reflected by the inclusive development agenda. It may be
mentioned that higher growth rate resulted in fairly rapid increase in per capita income. It
took nearly 40 years for the real per capita income to double from the level achieved in
1950-1. However, it increased 2.5 times in the next 20 years in the post-reforms period.
Agriculture sector, industry sector, and services sector also underwent significant changes
overtime. The long term growth rate of the agriculture sector (over the last 60 years) has
been 2.7 per cent. It was 2.3 per cent between 1950-1 and 1980-1 and 3.1 per cent during
1980-1 to 2011-12. Growth in the industry sector increased from 5.2 per cent in the earlier
period to 6.4 per cent between 1980-1 and 2011-12. Similarly growth in the services sector
was 4.4 per cent and 7.8 per cent respectively during these two sub-periods.
The structure of the economy has also undergone significant changes over time. Between
1950-1 and 1980-1, the industrial sector registered a higher growth rate than the services
sector. The converse has been the case since then. This resulted in the share of the industry
sector in GDP increasing by around 9 percentage points from 16.6 per cent to 25.9 per cent
during the period from 1950-1 to 1980-1. The share of the services sector increased from
30.3 per cent in 1950-1 to 38 per cent in 1980-1. It started growing rapidly thereafter and
this phenomenon became more pronounced in the 1990s. Consequently, since 1980-1, the
share of the industry sector has remained in the range of 26 to 28 per cent of GDP, while
the entire decline in share of agriculture has been balanced by an increase in share of the
services sector. Thus, the resilience of the economy to shocks owe to the services sector
which has the largest share and most consistent growth performance.
INTERNATIONAL TRADE
The resilience of India’s trade can be seen from the fact that the growth of exports and
imports, which was (-)3.5 per cent and (-)5 per cent respectively in 2009-10 as a result
of the 2008 global economic crisis, rebounded to 40.5 per cent and 28.2 per cent in 201011. India not only reached pre-crisis levels in exports but also surpassed precrisis trends in
export growth rate, unlike many other developing and even developed countries.
India’s share in global exports and imports also increased from 0.7 per cent and 0.8 per
cent respectively in 2000 to 1.5 per cent and 2.2 per cent in 2010 (1.4 and 2.1 per cent as
per the World Trade Organisation (WTO).
During the first half of 2011-12, India’s exports witnessed a high growth of 40.6 per cent.
However, since October 2011 there has been a deceleration as a result of the crisis
originating in the periphery and spreading to the core economies in the euro area. In
November 2011, export growth was at (-) 0.5 per cent and in December 2011 and January
2012, it was positive but low at 6.7 per cent and 10.1 per cent respectively. Cumulative
exports were at U.S. $ 242.8 billion, registering a growth of 23.5 per cent during 2011-12
(April-January). During April-December 2011, the export sectors that have done well are
petroleum and oil products, gems and jewellery, engineering goods, cotton fabrics, made
ups, electronics, readymade garments, and drugs.
Imports in 2011-12 (April-January) at U.S.$391.5 billion registered a growth of 29.4 per
cent. During this period, POL imports at U.S. $ 118 billion grew by 38.8 per cent. Non-POL
imports at US $ 273.5 billion grew by 25.7 per cent. Gold and silver imports of U.S.$ 50
billion grew by 46.2 per cent. Non-POL and non-bullion imports, which basically reflect the
imports of capital goods needed for industrial activity and imports needed for exports,
valued at U.S. $ 223 billion grew by 21.7 per cent.
Trade deficit (on customs basis) increased by 8.2 per cent to U.S. $ 118.6 billion in 2010-11
from US$109.6 billion in 2009-10. However, trade deficit for 2011-12 (April-January) at
U.S.$ 148.7 billion was 40.4 per cent higher than the U.S.$ 105.9 billion in 2010-11 (AprilJanuary).
PROSPECTS, SHORT TERM AND MEDIUM TERM
The financial crisis in Europe, along with certain exogenous shocks like the Japanese nuclear
disaster, has resulted in a sharp global economic slowdown during 2011-12. When this
happens so quickly after a recession—the last one being in 2008-9—it is not easy to deal
with. Most of the standard and well-known policies are already used to near capacity and a
second dose can backfire. The entire world, especially Europe, is treading with caution and
working on devising novel cures for the problems on hand. Thanks to India’s rapid growth
over the last two decades and growing integration with the world, it can no longer be
impervious to global developments. Not surprisingly, the Indian economy has also been
adversely affected and its GDP growth is likely to decline to 6.9 per cent during the current
year, somewhat mirroring what happened in 2008-9, when growth was 6.7 per cent; and
the pressure is on for the nation to improvise policies to revive growth.
There is no doubt that a part of India’s slowdown is rooted in domestic causes. The
persistent inflation that remained over 9 per cent for much of the year and needed to be
tamed played a role. There were also the pressures of democratic politics, which slowed
reforms. Keeping these factors in view, it seems reasonable to endorse the CSO’s AE of 6.9
per cent growth for this year. Calculations based on tracking several statistical indicators
and projections of incremental capital-output ratios lead to a forecast of the growth rate of
real GDP for 2012-13 to be 7.6 (+/-0.25) per cent.
The main reason for the recovery to be initially slow is the slight decline in investment rate.
In the third quarter of 2011-12, gross fixed capital formation as a ratio of GDP was 30 per
cent, down from 32.3 per cent one year ago. But as fiscal consolidation gets back on track,
savings and capital formation should begin to rise. Moreover, with the easing of inflationary
pressures in the months to come, there could be a reduction in policy rates by the RBI,
which would encourage investment activity that could have a positive impact on growth.
These factors, along with the fact that India’s investment rate at 35.1 per cent, is still an
impressive figure, should result in growth consolidating in 2012-13 and picking up rapidly
thereafter. Preliminary calculations suggest that the growth rate of GDP in 2013-14 will be
8.6 per cent. Long-term forecasts of course always come with a larger margin of error.
These projections are based on assumptions regarding factors like normal monsoons,
reasonably stable international prices, particularly oil prices, and global growth somewhere
between where it now stands and 0.5 per cent higher. A deviation from these situations
would have an impact on the growth trajectory of India.
However, thanks to 15 years of robust growth and nearly a decade of over 30 per cent
investment rate, the economy now has enough resilience for an optimistic view
that India can be the leading engine of global growth.
Union Budget 2012:
No more reforms under UPA2?
It is said that in advanced economies the Budget tends to be a non-event – largely just a
statement of revenue and expenditure. By that measure, India can now been called an
advanced economy – Union Budget 2012 was pretty much a non-event!
Sadly, it also marked the singular absence of any serious reform measures – tough steps
needed to put the economy on a high growth path. The sharp slippage in fiscal targets is
also a cause for serious concern, indicating as it does, that the economy is no longer in the
high growth trajectory. GDP growth of 7 per cent, and not 9 per cent, would perhaps be the
norm in the proximate future.
Significant tax reforms like the introduction of a Goods and Services Tax (GST) and a Direct
Taxes Code (DTC) that were in the pipeline have remained there. What is worse is, the
government is now not even venturing to set a timeframe for these important measures.
The compulsions of coalition politics are all too well understood, but the total unwillingness
of the current government to take a tough stand on any significant reform measures is very
disappointing. Perhaps the current impasse is a good time to remember the debt of
gratitude that the economy of this country owes to the late Prime Minister P. V. Narsimha
Rao. Looking back, the most significant economic reforms took place when he was at the
helm. He was the political enabler who actually made things happen.
The Big Picture
The most serious concerns facing the economy pertain to the slowing rate of growth of the
economy even as it faces galloping inflation. Last year, the Finance Minister had worked on
the premise that real GDP growth of the Indian economy would be approximately 9 per
cent. With the economy slowing down drastically, the real GDP growth for 2011-12 is now
being estimated at 6.9 per cent. Growth is estimated to be 2.5 per cent in agriculture, 3.9
per cent in industry, and 9.4 per cent in services.This is the slowest growth the economy
has shown in the last nine years with the exception of 2008-09 when it grew at 6.7 per
cent. Worrisome indeed.
On the other hand, inflation ruled at 9.1 per cent on an average through the period April
2011 to February 2012. This is only marginally lower than the 9.6 per cent in the
corresponding period of the previous year – a rate that was widely regarded as being
unacceptably high.
Fiscal deficit, the excess of government expenditure over its receipts, came in at 5.9 per
cent of GDP for 2011-12, against an estimated 4.6 per cent in the last budget and an actual
of 4.9 per cent in 2010-11. In Rupee terms this comes to a staggering `522,000 crore – an
amount that the government made good by borrowing from the market.
Herein lies the problem
A slowing economy could mean that the government’s revenue estimates would face
pressure as tax collections would not grow as much as anticipated. This could lead to a
further deterioration in the fiscal deficit situation. The government would then need to
borrow even more, leading to higher interest rates and higher inflation. In turn this would
crowd investment out of the private sector leading to a further slowing down of the
economy – a vicious cycle if ever there was one.
Tax and spend
To be fair to the FM, he does seem to have made a commendable effort to try to control the
fiscal deficit by trying to raise resources to match the ever-growing government
expenditure. The most significant increase in tax rates this year has come in the sphere of
Service Tax and Excise Duty – both of which have gone up from 10 per cent to 12 per cent.
The larger impact is expected to come from the significant widening of the Service Tax net –
all services except 17 specified services would now come under the tax net. These changes
in Service Tax rules are expected to fetch additional tax revenue of`18,660 crore. Gross Tax
Receipts are estimated at 10.6 per cent of GDP, as against 10.4 per cent last year.
This increase in indirect tax rates, while needed from the fiscal consolidation perspective,
comes with two serious problems. Firstly, it is widely expected to be inflationary in impact –
the result of a whole host of new services now becoming more expensive by 12 per cent.
Secondly, any increase in indirect tax rates is regressive in nature. It taxes the rich and
poor alike – regardless of their ability to suffer the tax. This is certainly not a pro-aam
aadmi move!
Direct Taxes
This is one area of the budget that is normally a headline-grabber. On this occasion, the FM
chose to work on behind-the-scenes rule changes that will make tax evasion by stashing
funds abroad a lot more difficult. A number of modifications to the rules have been made
and hopefully, they will have the desired effect without leading to harassment of the
taxpayer.
In an area that affects the common man more, the minimum Income Tax exemption limit
was moved up from `1.8 lakh to `2.0 lakh – a small change that barely covers inflation. The
limit for the 20% slab was moved up from `8 lakh to `10 lakh. Both moves were probably
designed to align the slabs closer to those proposed in the DTC and, in that sense, are steps
in the direction of the future.
Another concession to the taxpayer has come in the form of allowing a deduction of `10,000
per annum for income from interest on savings bank account.
There is no change in the rate of Corporate Taxation. However, corporate entities should
certainly welcome the move toward removing the cascading effect of Dividend Distribution
Tax. The details are as yet unclear but, if effective, this move will certainly be a step in the
right direction.
Retrospective Amendments to the Income Tax Act
The Budget amends certain sections of the Income Tax Act to ensure that cross-border
transactions such as the `55,000 crore Vodafone-Hutch deal, where the underlying assets
are in India, are taxable. This law in this case is being amended with retrospective effect
from 1962!
This is a move that is indeed regrettable. To change the rules of the game, and thereby fix
its result, long after the match is over is just not cricket. Corporates take serious
investment decisions based on the existing laws of the land. Such post-facto rule changes
will not only vitiate the investment climate, but also, more seriously, project a very poor
image of the rule of law in India. This is the way one would expect a banana republic to
operate, certainly not an aspiring superpower.
One hopes, perhaps in vain, that even now better sense will prevail and that the
government will not use this retrospective change of the law to go after Vodafone. After all,
that would also make a mockery of the recent ruling of Supreme Court of India in favour of
Vodafone in this very matter.
Disinvestment
This continues to be an area of poor performance for the government, year after year. In
2011-12, the government raised`14,000 crore from disinvestment against a targeted
amount of `40,000 crore. Even this amount would have been almost wiped out but for the
fact that LIC, an entity controlled by the government, bought 90 per cent of the shares
auctioned by ONGC as part of the disinvestment plan.
This year, the disinvestment proceeds have been pegged at `30,000 crore. What the
government accomplishes remains to be seen.
The bigger questions, of course, remain. Are these disinvestments merely meant to be a
fund raising activity for the government? Would it not be a better idea to allow some of
these companies to be truly privatised at fair market value? That would not only free up far
greater resources, but would also lead to more efficient, market driven running of these
companies. As has often been said, business is not the government’s business.
Expenditure
All the effort made toward raising revenue finally goes into funding the huge expenditure of
the
government.
The
total
expenditure
budgeted
for
the
financial
year
2012-13
is `14,92,000 crore! Of this only about `370,000 crore will go toward capital expenditure and
grants that lead to the creation of capital assets. The remaining `11,22,000 crore will go
toward meeting revenue expenditure. Interest payments alone will account for `320,000
crore. Since the government will be borrowing a sum of `514,000 crore to bridge the fiscal
deficit, it means that 62 per cent of all government borrowing will serve only to pay interest
on past loans. Hardly a comforting thought!
Defence expenditure, the perennial holy cow, accounts for another about `1,93,000 crore.
Of this, about `80,000 crore will go toward capital expenditure and the remaining toward
revenue expenditure, a large part of which falls under salaries head.
Subsidies
Very early in his budget speech, the Finance Minister raised the issue of expenditure control
and the need for looking into the growth of revenue expenditure, particularly subsidies. This
focus on subsidies is not something new. Controlling them will be very tough. The
government has never really been able to display the political will need to cut the subsidy
bill – and the populist leanings of all its coalition partners has certainly not helped.
The budget expenditure on all subsidies amounts to about `190,000 crore. The major
subsidies are on account of food, fertilisers and petroleum products. Dangerously, the
allocations on these accounts appear to be under-budgeted – especially on account of the
fuel subsidy. The fuel subsidy bill in FY 2012-13 is estimated at `43,600 crore as against an
actual of `68,500 crore in FY 2011-12. Similarly, fertiliser subsidies have been budgeted
at `61,000 crore as against an actual of `67,200 crore last year.
It is estimated that unless diesel prices are hiked by about 20 per cent it unlikely that the
fuel subsidy can be contained at the level indicated in the budget. The need to display the
political ability to pull this off is likely to put the government to serious test. With crude oil
prices showing an upward trend, the pressure on this front is only likely to be even more
severe.
Subsidies are one single factor that could derail the budgetary assumptions completely. If
that happens, the economy could face strong headwinds on account of high inflation and
slower GDP growth.
The reliance on Aadhar
The government seems to placing a great deal of faith in the ability of Nandan Nilekani’s
baby to deliver subsidies in a targeted manner and to cut down the infamous leakages of
the Public Distribution System. The plan seems to be to deliver the food and fertilisers
directly to the poor using the data that have been gathered by the UID scheme.
While the UID scheme has undoubted merit and should certainly help reduce pilferage in the
long run, it remains doubtful as to whether any dramatic improvement will be possible in
the immediate future. While the government’s plans are clearly in the right direction, the
reliance on these to control the subsidy bill for the coming year may be too much of an ask.
In conclusion
This is not a budget that will be remembered by history as a path-breaking effort. It will be
remembered as a workman-like attempt to present more realistic numbers than had been
projected in other budgets of the recent past.
The unfortunate fact of life is that this government has neither the political mandate nor the
parliamentary numbers to take any sweeping decisions. The Railways fare rollback is an
uncomfortable reminder to the team in power about just how far their writ runs under the
current circumstances.
In a democracy, we get the government we deserve. The same dictum seems to apply to
the economy.
The unfortunate fact of life is that this government has neither the political mandate nor the
parliamentary numbers to take any sweeping decisions. The Railways fare rollback is an
uncomfortable reminder to the team in power about just how far their writ runs under the
current circumstances.
Highlights of Union Budget 2012-13
APPROACH TO THE BUDGET
v
For Indian economy, recovery was interrupted this year due to intensification of debt
crises in Euro zone, political turmoil in Middle East, rise in crude oil price and earthquake
in Japan.
v
GDP is estimated to grow by 6.9 per cent in 2011-12, after having grown at 8.4 per cent
in preceding two years.
v
India however
remains
front
runner
in
economic
growth
in
any
cross-country
comparison.
v
Monetary and fiscal policy response for better part of past 2 years aimed at taming
domestic inflationary pressure.
v
Growth moderated and fiscal balance deteriorated due to tight monetary policy and
expanded outlays.
v
Indicators suggest that economy is turning around as core sectors and manufacturing
show signs of recovery.
v
At this juncture, it is necessary to take hard decision to improve macroeconomic
environment and strengthen domestic growth drivers.
v
Twelfth Five Year Plan to be launched with the aim of “faster, sustainable and more
inclusive growth”. Five objectives identified to be addressed effectively in ensuing fiscal
year.
v
If India can build on its economic strength, it can be a source of stability for world
economy and a safe destination for restless global capital.
OVERVIEW OF THE ECONOMY
v
GDP growth estimated at 6.9 per cent in real terms in 2011-12. Slowdown in comparison
to preceding two years is primarily due to deceleration in industrial growth.
v
Headline inflation expected to moderate further in next few months and remain stable
thereafter.
v
Steps taken to bridge gaps in distribution, storage and marketing systems have helped in
more effective management of inflation.
v
Developments in India’s external trade in the first half of current year have been
encouraging. Diversification in export and import market achieved.
v
Current account deficit at 3.6 per cent of GDP for 2011-12 and reduced net capital inflow
in the 2nd and 3rd quarters put pressure on exchange rate.
v
India’s GDP growth in 2012-13 expected to be 7.6 per cent +/- 0.25 per cent.
v
Deterioration in fiscal balance in 2011-12 due to slippages in direct tax revenue and
increased subsidies.
SUBSIDIES
v
Some subsidies, while being inevitable, may become undesirable if they compromise the
macroeconomic fundamentals of economy.
v
Subsidies related to administering the Food Security Act will be fully provided for.
v
Endeavour to keep central subsidies under 2 per cent of GDP in 2012-13. Over next 3
year, to be further brought down to 1.75 per cent of GDP.
v
Based on recommendation of task force headed by Shri Nandan Nilekani, a mobile-based
Fertilizer Management System has been designed to provide endto-end information on
movement of fertilisers and subsidies. Nation-wide roll out during 2012.
v
All three public sector Oil Marketing Companies have launched LPG transparency portals
to improve customer service and reduce leakage.
v
Endeavour to scale up and roll out Aadhaar enabled payments for various government
schemes in atleast 50 districts within next 6 months.
TAX REFORMS
v
DTC Bill to be enacted at the earliest after expeditious examination of the report of the
Parliamentary Standing Committee.
v
Drafting of model legislation for the Centre and State GST in concert with States is under
progress.
v
GST network to be set up as a National Information Utility and to become operational by
August 2012.
DISINVESTMENT POLICY
v
Government has further evolved its approach to divestment of Central Public Sector
Enterprises by allowing them a level playing field vis-à-vis the private sector in respect
of practices like buy backs and listing at stock exchanges.
v
For 2012-13, `30,000 crore to be raised through disinvestment. At least 51 per cent
ownership and management control to remain with Government.
STRENGTHENING INVESTMENT ENVIRONMENT
Foreign Direct Investment
v
Efforts to arrive at a broadbased consensus in consultation with the State Governments
in respect of decision to allow FDI in multi-brand retail upto 51 per cent.
Financial Sector
v
Rajiv Gandhi Equity Saving Scheme to allow for income tax deduction of 50 per cent to
new retail investors, who invest upto `50,000 directly in equities and whose annual
income is below `10 lakh to be introduced. The scheme will have a lock-in period of 3
years.
Capitalisation of Banks and Financial Holding Company
v
To protect the financial health of Public Sector Banks and Financial Institutions, `15,888
crore proposed to be provided for capitalisation. Possibility of creating a financial holding
company to raise resources to meet the capital requirments of PSU Banks under
examination.
Financial Inclusion
v
Out of 73,000 identified habitations that were to be covered under “Swabhimaan”
campaign by March, 2012, about 70,000 habitations have been covered. Rest likely to be
covered by March 31, 2012.
v
As a next step, Ultra Small Branches are being set up at these habitations.
v
In 2012-13, “Swabhimaan” campaign to be extended to more habitations.
Regional Rural Banks
v
Out of 82 RRBs in India, 81 have successfully migrated to Core Banking Solutions and
have also joined the National Electronic Fund Transfer system.
v
Proposal to extend the scheme of capitalisation of weak RRBs by another 2 years to
enable States to contribute their share.
INFRASTRUCTURE AND INDUSTRIAL DEVELOPMENT
v
During Twelfth Plan period, investment in infrastructure to go up to `50 lakh crore with
half of this, expected from private sector.
v
More sectors added as eligible sectors for Viability Gap Funding under the scheme
“Support to PPP in infrastructure”.
v
Government has approved guidelines for establishing joint venture companies by defence
PSUs in PPP mode.
v
First Infrastructure Debt Fund with an initial size of `8,000 crore launched earlier this
month.
v
Tax free bonds of `60,000 crore to be allowed for financing infrastructure projects in
2012-13.
National Manufacturing Policy
v
National Manufacturing Policy announced with the objective of raising, within a decade,
the share of manufacturing in GDP to 25 per cent and creating of 10 crore jobs.
Transport: Roads and Civil Aviation
v
Target of covering a length of 8,800 kilometre under NHDP next year.
v
Allocation of the Road Transport and Highways Ministry enhanced by 14 per cent
to `25,360 crore.
v
ECB to be permitted for working capital requirement of airline industry for a period of
one year, subject to a total ceiling of US $ 1 billion.
v
Proposal to allow foreign airlines to participate upto 49 per cent in the equity of an air
transport undertaking under active consideration of the government.
Delhi Mumbai Industrial Corridor
v
In September 2011 central assistance of `18,500 crore spread over 5 years approved. US
$ 4.5 billion as Japanese participation in the project.
Fertilisers
v
Government has taken steps to finalise pricing and investment policies for urea to
reduce India’s import dependence in urea.
Textiles
v
Government has announced a financial package of `3,884 crore for waiver of loans of
handloom weavers and their cooperative societies.
v
Two more mega handloom clusters, one to cover Prakasam and Guntur districts in
Andhra Pradesh and another for Godda and neighbouring districts in Jharkhand to be set
up.
v
Three Weaver’s Service Centres one each in Mizoram, Nagaland and Jharkhand to be set
up for providing technical support to poor handloom weavers.
v
`500 crore pilot scheme announced for promotion and application of Geo-textiles in the
North Eastern Region.
v
A powerloom mega cluster to be set up in Ichalkaranji in Maharashtra with a budget
allocation of `70 crore.
Micro, Small and Medium Enterprises
v
`5,000 crore India Opportunities Venture Fund to be set up with SIDBI.
v
To enable greater access to finance by Small and Medium Enterprises (SME), two SME
exchanges launched in Mumbai recently.
v
Policy requiring Ministries and CPSEs to make a minimum of 20 per cent of their annual
purchases from MSEs approved. Of this, 4 per cent earmarked for procurement from
MSEs owned by SC/ST entrepreneurs.
AGRICULTURE
v
Plan Outlay for Department of Agriculture and Co-operation increased by 18 per cent.
v
Outlay for Rashtriya Krishi Vikas Yojana (RKVY) increased to `9,217 crore in 2012-13.
v
Initiative of Bringing Green Revolution to Eastern India (BGREI) has resulted in increased
production and productivity of paddy. Allocation for the scheme increased to `1,000 crore
in 2012-13 from `400 crore in 2011-12.
v
`300 crore to Vidarbha Intensified Irrigation Development Programme under RKVY.
v
Remaining activities to be merged into following missions in Twelfth Plan:
r
National Food Security Mission
r
National Mission on Sustainable
r
National Mission on Oilseeds and Oil Palm
r
National Mission on Agricultural Extension and Technology
r
National Horticultural Mission
Agriculture including Micro Irrigation
National Mission for Protein Supplement
v
`2,242 crore project launched with World Bank assistance to improve productivity in the
dairy sector. `500 crore provided to broaden scope of production of fish to coastal
aquaculture.
Agriculture Credit
v
Target for agricultural credit raised by `1,00,000 crore to `5,75,000 crore in 2012-13.
v
Interest subvention scheme for providing short term crop loans to farmers at 7 per cent
interest per annum to be continued in 2012-13. Additional subvention of 3 per cent
available for prompt paying farmers.
v
Short term RRB credit refinance fund being set up to enhance the capacity of RRBs to
disburse short term crop loans to small and marginal farmers.
v
Kisan Credit Card (KCC) Scheme to be modified to make KCC a smart card which could
be used at ATMs.
Irrigation
v
Structural changes in Accelerated Irrigation Benefit Programme (AIBP) being made to
maximise flow of benefit from investments in irrigation projects.
v
Allocation for AIBP in 2012-13 stepped up by 13 per cent to `14,242 crore.
v
Irrigation and Water Resource Finance Company being operationalised to mobilise large
resources to fund irrigation projects.
v
A flood management project approved by Ganga Flood Control Commission at a cost
of `439 crore for Kandi sub-division of Murshidabad District.
INCLUSION
Scheduled Castes and Tribal Sub Plans
v
Allocation for Scheduled Castes Sub Plan at `37,113 crore in BE 2012-13 represents an
increase of 18 per cent over BE 2011-12.
v
Allocation for Tribal Sub Plan at `21,710 crore in BE 2012-13 represents an increase of
17.6 per cent.
Multi-sectoral Nutrition Augmentation Programme
v
A multi-sectoral programme to address maternal and child malnutrition in selected 200
high burden districts is being rolled out during 2012-13.
v
Allocation of `15,850 crore made for Integrated Child Development Service (ICDS)
scheme, representing an increase of 58 per cent over BE 2011-12.
v
`11,937 crore allocated for National Programme of Mid Day Meals in schools.
v
An allocation of `750 crore proposed for Rajiv Gandhi Scheme for Empowerment of
Adolescent Girls, SABLA.
Rural Development and Panchayati Raj
v
Budgetary allocation for rural drinking water and sanitation increased from `11,000 crore
to `14,000 crore representing an increase of over 27 per cent.
v
Allocation for PMGSY increased by 20 per cent to `24,000 crore to improve connectivity.
v
Major initiative proposed to strengthen Panchayats through Rajiv Gandhi Panchayat
Sashaktikaran Abhiyan.
v
Backward Regions Grant Fund scheme to continue in twelfth plan with enhanced
allocation of `12,040 crore in 2012-13, representing an increase of 22 per cent over the
BE 2011-12.
Rural Infrastructure Development Fund (RIDF)
v
Allocation under RIDF enhanced to `20,000 crore. `5,000 crore earmarked exclusively for
creating warehousing facilities.
EDUCATION
v
For 2012-13, `25,555 crore provided for RTE-SSA representing an increase of 21.7 per
cent over 2011-12.
v
6,000 schools proposed to be set up at block level as model schools in Twelfth Plan.
v
`3,124 crore provided for Rashtriya Madhyamik Shiksha Abhiyan (RMSA) representing an
increase of 29 per cent over BE 2011-12.
v
To ensure better flow of credit to students, a Credit Guarantee Fund proposed to be set
up.
HEALTH
v
No new case of polio reported in last one year.
v
Existing vaccine units to be modernised and new integrated vaccine unit to be set up in
Chennai.
v
Scope of ‘Accredited Social Health Activist’ – ‘ASHA’ is being enlarged. This will also
enhance their remuneration.
v
Allocation for NRHM proposed to be increased from `18,115 crore in 2011-12 to `20,822
crore in 2012-13.
v
National Urban Health Mission is being launched.
v
Pradhan Mantri Swasthya Suraksha Yojana being expanded to cover upgradation of 7
more Government medical colleges.
EMPLOYMENT & SKILL DEVELOPMENT
v
MGNREGS has had a positive impact on livelihood security.
v
Need to bring about greater synergy between MGNREGA and agriculture and allied rural
livelihoods.
v
Allocation of `3915 crore made for National Rural Livelihood Mission representing an
increase of 34 per cent.
v
To ease access to bank credit, corpus for ‘Women’s SHG’s Development Fund’ enlarged.
v
Proposal to establish Bharat Livelihoods Foundation of India through Aajeevika scheme.
v
Allocation for Prime Minister’s Employment Generation Programme increased by 23 per
cent to `1,276 crore in 2012-13.
Skill Development
v
Projects approved by National Skill Development Corporation expected to train 6.2 crore
persons at the end of 10 years.
v
`1,000 crore allocated for National Skill Development Fund in 2012-13.
v
To improve the flow of institutional credit for skill development, a separate Credit
Guarantee Fund to be set up.
v
“Himayat” scheme introduced in J&K to provide skill training to 1 lakh youth in next 5
years. Entire cost to be borne by Centre.
SOCIAL SECURITY AND THE NEEDS OF WEAKER SECTIONS
v
Allocation under NSAP raised by 37 per cent to `8,447 crore in 2012-13.
v
In the ongoing Indira Gandhi National Widow Pension Scheme and Indira Gandhi National
Disability Pension Scheme for BPL beneficiaries, pension amount to be raised from `200
to `300 per month.
v
Lump sum grant on the death of primary breadwinner of a BPL family, in the age group
18-64 years, doubled to `20,000.
Security
v
A provision of `1,93,407 crore made for Defence services including `79,579 crore for
capital expenditure. Any further requirement to be met.
v
`1,185 crore proposed to be allocated for construction of nearly 4,000 residential
quarters for Central Armed Police Forces.
v
`3,280 crore proposed to be allocated for construction of office building of Central Armed
Police Forces.
v
Scheme to create National Population Register likely to be completed within next 2 years.
BUDGET ESTIMATES 2012-13
v
Gross Tax Receipts estimated at `10,77,612 crore.
v
Net Tax to Centre estimated at `7,71,071 crore.
v
Non-tax Revenue Receipts estimated at `1,64,614 crore.
v
Non-debt Capital Receipts estimated at `41,650 crore.
v
Temporary arrangement to use disinvestment proceeds for capital expenditure in social
sector schemes extended for one more year.
v
Total expenditure for 2012-13 budgeted at `14,90,925 crore.
v
Plan expenditure for 2012-13 at `5,21,025 crore is 18 per cent higher than BE 2011-12.
This is higher than 15 per cent projected in Approach to the Twelfth Plan.
v
99 per cent of the total plan outlay met in the Eleventh Plan.
v
Non-plan expenditure estimated at `9,69,900 crore.
v
`3,65,216 crore estimated to be transferred to States including direct transfers to States
and district level implementing agencies.
v
Entire amount of subsidy is given in cash and not as bonds in lieu of subsidies.
v
Fiscal deficit at 5.9 per cent of GDP in RE 2011-12.
v
Fiscal deficit at 5.1 per cent of GDP in BE 2012-13.
v
Net market borrowing required to finance the deficit to be `4.79 lakh crore in 2012-13.
v
Central Government debt at 45.5 per cent of GDP in 2012-13 as compared to Thirteenth
Finance Commission target of 50.5 per cent.
v
Effective Revenue Deficit to be 1.8 per cent of GDP in 2012-13.
PART B — TAX PROPOSALS
DIRECT TAXES
v
Tax proposals for 2012-13 mark progress in the direction of movement towards DTC and
GST.
v
DTC rates proposed to be introduced for personal income tax.
v
Exemption limit for the general category of individual taxpayers proposed to be enhanced
from `1,80,000 to `2,00,000 giving tax relief of `2,000.
v
Upper limit of 20 per cent tax slab proposed to be raised from `8 lakh to `10 lakh.
v
Proposal to allow individual tax payers, a deduction of upto `10,000 for interest from
savings bank accounts.
v
Proposal to allow deduction of upto `5,000 for preventive health check up.
v
Senior citizens not having income from business proposed to be exempted from payment
of advance tax.
v
To provide low cost funds to stressed infrastructure sectors, rate of withholding tax on
interest payment on ECBs proposed to be reduced from 20 per cent to 5 per cent for 3
years for certain sectors.
v
Proposal to continue to allow repatriation of dividends from foreign subsidiaries of Indian
companies at a lower tax rate of 15 per cent upto 31.3.2013.
v
Proposal to extend the sunset date for setting up power sector undertakings by one year
for claiming 100 per cent deduction of profits for 10 years.
v
Proposal to provide weighted deduction at 150 per cent of expenditure incurred on skill
development in manufacturing sector.
v
Reduction in securities transaction tax by 20 per cent on cash delivery transactions.
v
Proposal to extend the levy of Alternate Minimum Tax to all persons, other than
companies, claiming profit linked deductions.
v
Proposal to introduce General Anti Avoidance Rule to counter aggressive tax avoidance
scheme.
v
Measures proposed to deter the generation and use of unaccounted money.
v
A net revenue loss of `4,500 crore estimated as a result of Direct Tax proposals.
INDIRECT TAXES
Service Tax
v
To maintain a healthy fiscal situation proposal to raise service tax rate from 10 per cent
to 12 per cent, with corresponding changes in rates for individual services.
v
Proposals from service tax expected to yield additional revenue of `18,660 crore.
Other proposals for Indirect Taxes
v
Given the imperative for fiscal correction, standard rate of excise duty to be raised from
10 per cent to 12 per cent, merit rate from 5 per cent to 6 per cent and the lower merit
rate from 1 per cent to 2 per cent with few exemptions.
v
Excise duty on large cars also proposed to be enhanced.
Health and Nutrition
v
Proposal to extend concessional basic customs duty of 5 per cent with full exemption
from excise duty/CVD to 6 specified life saving drugs/vaccines.
v
Basic customs duty and excise duty reduced on Soya products to address protein
deficiency among women and children.
v
Basic customs duty and excise duty reduced on Iodine.
v
Basic customs duty reduced on Probiotics.
Additional resource mobilisation
v
Proposals to increase excise duty on ‘demerit’ goods such as certain cigarettes, handrolled bid is, pan masala, gutkha, chewing tobacco, unmanufactured tobacco and zarda
scented tobacco.
v
Cess on crude petroleum oil produced in India revised to `4,500 per metric tonne.
v
Basic customs duty proposed to be enhanced for certain categories of completely built
units of large cars/MUVs/SUVs.
Rationalization measures
v
Excise duty rationalised for packaged cement, whether manufactured by minicement
plants or others.
v
Levy of excise duty of 1 per cent on branded precious metal jewellery to be extended to
include unbranded jewellery. Operations simplified and measures taken to minimise
impact on small artisans and goldsmiths.
v
Branded Silver jewellery exempted from excise duty.
v
Chassis for building of commercial vehicle bodies to be charged excise duty at an ad
valorem rate instead of mixed rate.
v
Import of foreign-going vessels to be exempted from CVD of 5 per cent retrospectively.
v
Duty-free allowances increased for eligible passengers and for children of upto 10 years.
v
Proposals relating to Customs and Central excise to result in net revenue gain of `27,280
crore.
v
Indirect taxes estimated to result in net revenue gain of `45,940 crore.
v
Net gain of `41,440 crore in the Budget due to various taxation proposals.
WHO takes India off the endemic polio list
India was taken off a list of polio endemic countries by the World Health Organisation
(WHO), marking a massive victory for health workers battling the crippling disease. The
announcement leaves just three countries with endemic polio – Pakistan,Afghanistan,
and Nigeria.
India, which last reported a fresh polio case more than 12 months ago, now will ihave to
remain polio free for the next two years to be judged to have eradicated the disease, the
WHO said.
“The government of India has coordinated a massive effort to rid
our country of the terrible scourge of polio that has scarred the lives
of
thousands
of
children
in India,” India’s
Prime
Minister
Dr
Manmohan Singh told the Polio Summit in New Delhi. But “the real
credit” for India’s success in tackling polio goes to the volunteers
who repeatedly vaccinated children, he said. They visited slums and
railway stations, construction sites and bus stops, using all means
of transport to reach even the most far-flung corners of one of the
world’s most crowded and impoverished countries.
Polio – which afflicts mainly the under-fives causing death, paralysis
and crippled limbs – travels easily across borders and is transmitted via the faecal matter of
victims.
India has been a frequent exporter to other developing countries, but has also been reinfected from abroad. The ancient disease was wiped out from the 1970s in developed
countries through successful vaccination campaigns.
In 2009, India accounted for half of all cases in the world, but infections plummeted to 42 in
2010 and none in the last 12 months. The Indian government has spent U.S.$2 billion over
the last 10-15 years on polio eradication efforts.
WB ups aid to India
The World Bank has announced U.S.$4.3 billion financial aid to India through a new
innovative and flexible financing arrangement to help the country fight poverty. This
arrangement, while facilitating a U.S.$4.3 billion increase in support to India, is designed to
maintain International Bank for Reconstruction and Development’s (IBRD) – which is its
lending arm – net exposure within the limit of U.S.$17.5 billion
established by it.
The World Bank said the new arrangement will allow for special
bonds to be issued by the World Bank and purchased by India, to
offset additional planned lending. This will enable India to continue
accessing long-term, low-interest IBRD finance for development
projects aimed at improving the lives of its people, one-third of
whom are yet to make their way out of poverty.
“Without taking this action, it would have been difficult for the Bank
to assist India meaningfully as it tackles the remaining large
challenges of lifting some 300 million out of poverty,” the World Bank said. “This new
arrangement will work towards supporting India’s development needs, showing the Bank
can be innovative, flexible and responsive to the differentiated needs of our client
countries.”
The World Bank said like other emerging economies, India is faced with the challenge of
removing bottlenecks in infrastructure and human skill development that can constrain its
ability to sustain non-inflationary, rapid and inclusive growth.
Currently, the World Bank has nearly 80 active projects in India, with several large projects
in the critical area of infrastructure. There are “growing demands for the World Bank’s lowcost financing and the institution has been exploring innovations to meet these calls for its
services,” the World Bank said. “The new move is in line with previous commitments by the
World Bank that the Bank strives to leverage its financial and knowledge resources to
help India as it steps up its response to its development challenges,” it said.
Funding for active World Bank Group projects includes U.S.$9.2 billion in interest-free
credits from the Banks fund for the poorest, the International Development Association
(IDA); U.S.$4.6 billion from IBRD; and a committed portfolio of U.S.$3.57 billion from the
Banks private sector arm, the International Finance Corporation (IFC).
The World Bank Group in its last fiscal year (ending June 2011) made U.S.$6.32 billion
available to India, including U.S.$2.07 billion from IDA, U.S.$3.47 billion from IBRD, and
U.S.$775 million from IFC.
Greece secures second bailout, averts default on debt payment
Finance ministers from the euro-zone member nations have agreed to a second bail-out
for Greece worth some euro 130 billion (U.S.$170 billion). The money will be paid in
tranches.
The deal comes after Greece approved a final set of austerity measures sought by the
European Union (EU) and the International Monetary Fund (IMF) as a condition for a
euro130-billion (U.S.$170 billion) rescue package which it desperately needs to avert a
chaotic default on its debt, a considerable portion of which is due on March 20.
The approval was largely a formality after Athens unveiled details of the extra budget and
public sector wage cuts worth euro 325 million to euro zone partners. The Greece cabinet
had also agreed to a debt swap for private creditors. The swap is intended to accompany
the rescue deal and will mean that creditors take a 70 per cent cut in the real value of their
holdings.
The Greek Prime Minister Lucas Papademos regretted that extra pension cuts could not be
avoided, but said the impact was limited because it would only affect the part of the pension
above a monthly threshold of euro 1,300.
A recent survey showed 72.7 percent of Greeks want the country to stay in the euro, but
only about half believe it will manage to do so.
Huge debt
At stake is a target of lowering the debt from the equivalent of 160 per cent of annual Greek
economic output now to a more manageable 120 per cent by 2020.
At the moment, EU and IMF officials believe that target, which assumes that Greece will run
a budget surplus next year, excluding the massive cost of its debts, will be missed. Under
the main scenario of an analysis by the European Commission, the European Central Bank
and the International Monetary Fund, Greek debt will fall to only 129 per cent of GDP in
2020.
The euro zone is therefore looking at modifying the deal negotiated over many months with
private creditors under which they would accept a cut of around 70 per cent in the real
value of their Greek bondholdings. These might include changes to interest accrued on
privately held bonds, but the EU and its national institutions might also play their part.
Interest rates on EU loans to Greece could be cut, and those national central banks in the
euro zone which hold Greek bonds might accept similar terms to the private creditors on
some of their holdings.
India’s GDP growth slips to two-year low to 6.1% in Q3
India’s economic growth rate slipped to 6.1 per cent in the third
quarter this fiscal, lowest in more than two years due to poor
performance of the manufacturing, mining and farm sectors.
The Gross domestic product (GDP) growth the in third quarter
(October-December) last fiscal was 8.3 per cent, as per the latest
data released by the Central government.
GDP in April-December period also moderated to 6.9 per cent from
8.1 per cent in the first nine months of 2010-11.
During
the
quarter
ending
December
31,
growth
in
the
manufacturing sector dipped to a meagre 0.4 per cent from 7.8 per cent in the
corresponding period of 2010-11.
Farm output also exhibited a similar trend and expanded by just 2.7 per cent during the
quarter, compared to 11 per cent in the corresponding period last fiscal.
Mining and quarrying production contracted by 3.1 per cent during the quarter under
review, as against a growth of 6.1 per cent in Q3 of last fiscal. Growth in the construction
sector also slowed to 7.2 per cent during the quarter from 8.7 per cent in the same period a
year ago.
Furthermore, the trade, hotels, transport and communications segments grew by just 9.2
per cent in the quarter under review, as against 9.8 per cent expansion in the year-ago
period. However, electricity, gas and water supply grew by robust 9 per cent in the OctoberDecember period, compared to 3.8 per cent growth in the corresponding period last fiscal.
The growth of the services sector, including insurance and real estate, slowed to 9.9 per
cent in the third quarter ended December, compared to 11.2 per cent expansion in Q3 of
2010-11.
The Central Statistical Organisation has pegged the GDP growth for 2011-12 at 6.9 per
cent, while the Prime Minister’s Economic Advisory Council (PMEAC) expects that it would be
7.1 per cent. The Indian economy expanded by 8.4 per cent in 2010-11.
Manufacturing growth in the 9-month period ending December, slowed to 3.4 per cent as
compared to 7.6 per cent during the same period a year ago. During April-December,
output of mining and quarrying sector declined by 1.4 per cent as against a positive growth
of 6.7 per cent in same period last fiscal.
Furthermore, the agriculture, forestry and fishing sector grew by just 3.2 per cent in the
nine month period, as against 6.8 per cent expansion a year ago. Growth of the
construction sector stood at 4.2 per cent during the 9-month period, compared to 7.7 per
cent in the same period last fiscal.
Unemployment reaches all-time high in euro zone
Euro zone joblessness rose to a new euro-era high while inflation was largely steady at the
start of 2012, leaving the European Central Bank to juggle the demands of a slowing
economy and only mild pressure on prices.
A cold snap in Europe and rising oil prices were probably behind the slight rise in February
consumer prices that took inflation for the euro zone to 2.7 percent, compared to 2.6 per
cent in January, figures from the EU’s statistics office Eurostat showed.
The euro zone’s economic slump has helped bring the prices of goods, fuel and food down
from last year’s peak of 3 per cent, but oil prices hit record highs in euro terms in March
and undermined inflation’s downward trend.
That suggests the ECB is likely to put off any quick decision to take interest rates to below 1
per cent for the first time and economists see the bank in “wait-and-see” mode.
The bank wants to keep inflation below, but close to 2 per cent over the medium term.
Stripping out volatile energy and food prices, inflation in January was 1.9 per cent on an
annual basis, Eurostat said.
Falling prices may help European households, but the euro zone is heading into its second
recession in three years and unemployment is one of the biggest challenges for EU leaders.
The number of people out of work in the euro zone rose to 10.7 per cent in January, up
from an upwardly revised 10.6 per cent in December. That was far higher than the 8 per
cent rate when euro coins and notes began circulating in 2000, and the latest figure masks
the north-south split in the euro zone’s fortunes.
Unemployment in Spain rose to 23.3 per cent in January, the highest level in the 17-nation
currency area, but was just 4 per cent in Austria.