17 October 2017

How companies are spending on CSR projects The top 100 NSE companies are moving beyond compliance to focus on creating long-term impact for beneficiaries of their CSR projects

In the three years since Corporate Social Responsibility (CSR) rules were implemented, not much has changed in patterns of spending by the top 100 National Stock Exchange (NSE) listed companies by market capitalization. While education and healthcare continue to attract most of the monies, Maharashtra still sees the maximum inflow of CSR spends. The top 10 companies still account for almost half of the total CSR spend.
CSR Rules, which came into effect on 1 April 2014, state that companies with a net worth of Rs500 crore or revenue of Rs1,000 crore or net profit of Rs5 crore should spend 2% of their average profit in the last three years on social development-related activities such as sanitation, education, healthcare and poverty alleviation, among others, which are listed in Schedule VII of the Rules.
In fiscal year 2017 (FY17), an actual spend of Rs6,810 crore was recorded for the 92 companies whose annual reports were studied to collect the data by Goodera (previously NextGen), a CSR and sustainability management platform. The cut-off date for collecting the data was 18 September. The remaining eight had either not released their annual reports or follow a different fiscal year.
At Rs3,307 crore, the share of the top 10 companies was once again nearly 50% of the total amount spent by the firms surveyed. “The overall CSR spend growth has reduced to 10% this fiscal from 23% in the previous. This is primarily due to two reasons: the overall rate of growth of companies’ profits has slowed down in this fiscal year and second, 16% of companies have reduced their overall spend, though their profits have grown, causing an overall slowdown of CSR spend in the ecosystem,” says Abhishek Humbad, founder and co-chief executive officer (CEO) of Goodera.
Public sector focus
Of the 92 firms surveyed, 15 were public sector units (PSUs) and their spend was Rs1,996 crore out of Rs6,810 crore, or 30% of the total spend.
“In FY17, spend by PSUs has decreased by 9%, though the prescribed spend grew by 1%. This is mainly due to certain PSUs being non-compliant since the law came into existence. Some of the common explanations cited for non-compliance are multi-year projects, delay in identification of projects and other related delays,” says Humbad.
One of the ways to improve the current situation is to invest in fewer but strategic projects instead of taking up more projects. “On an average, while private companies take up 14 projects, the corresponding number for PSUs is 26, which leads to thinning of resources and lack of adequate focus on projects under PSUs,” he adds.
As in the previous two years, in FY17, nearly half of the top 10 spenders exceeded their prescribed limit.
Perhaps one approach could be like that of NTPC Ltd, which ranks at No. 6 in the spend tally. The company reported that almost half of its CSR budget was allocated to hunger, healthcare and poverty alleviation projects. NTPC also takes up most of the CSR activities primarily in the neighbourhood villages of its units too. “Despite the slowdown in the growth rate of the economy, India is still one of the fastest-growing economies in the world. This growth has been accompanied by certain aberrations like social and economic inequity, lagging human development indicators, environmental degradation, etc. Therefore NTPC’s endeavours for sustainable socio-economic development,” says G. Sridhar, additional general manager (CSR) at NTPC.
Looking at new areas
As in the previous two years, in FY17, nearly half of the top 10 spenders exceeded their prescribed limit. Tata Steel Ltd, ranked at No. 9, led the tally with a spending of almost 67% above its prescribed limit. “We do not look at 2% as a cut-off limit. The onus is on us to do more nuanced and high-impact activities to bring in social change. This is built into the DNA of our company,” says Biren Ramesh Bhuta, chief CSR officer at Tata Steel. He believes that more and more companies in India are now incorporating sustainability practices and carrying out effective CSR practices because that is the need of the day. “There are two compelling reasons: If you as a business want to survive for 100 years, you have to do right by the society you work in and if you want to grow, you cannot do so by leaving a large section of the society so behind,” he adds.
ITC Ltd, ranked as the seventh largest spender with spends in six of the 11 activities of Schedule VII, including the oft neglected national heritage, says it focuses on activities that meet the developmental needs of its stakeholder communities. “ITC’s CSR interventions are focused on two stakeholder communities: rural communities with whom ITC’s agri-businesses have forged enduring partnerships through crop development and procurement activities; and communities residing in close proximity to our production units,” says Ashesh Ambasta, executive vice-president and head (social investments) at ITC.
HDFC Bank Ltd has been looking to scale up its CSR strategy. Ranked four on the spend tally, for the first time in three years of reporting the bank has a 100% actual spend (Rs305.42 crore) versus the prescribed spend. “We have consciously tried to ensure that we have a broad spread. We operate in about 18 states and while we have been increasing our footprint, there is a certain method in how we pick the specific areas that we work in,” says Paresh Sukthankar, deputy managing director at HDFC Bank.
“In the first year, we covered about 60-65 villages. Many of these villages had been allocated to us to open accounts under the Jan Dhan Yojana, and we thought that while we address their basic financial inclusion and banking needs, why not also do an overall needs assessment and deal with their other developmental issues too? By March 2017, we had covered 560 villages under this Holistic Rural Development Programme (HRDP) and many more villages under smaller projects. Today we are working in over 750 villages under HRDP,” he says.
The bank spent about 41.6% of its CSR spend under rural development category according to its annual report. “The higher level of spends has come from scaling up of some of the initiatives in the areas that we have been previously working in. We have always worked in education, skilling, sanitation and financial inclusion, and our initiative and outlays in these areas have grown. We have also got our toes wet in a few newer areas although the absolute outlays in some of these will be smaller,” adds Sukthankar.
Meanwhile, Ambasta says ITC, out of its total spend of Rs275.96 crore, spent Rs2.18 crore on conservation of heritage, art and culture through the ITC Sangeet Research Academy. “Exceptionally gifted students, carefully handpicked across India, receive full scholarships to reside and pursue their music education at the academy campus,” he explains.
Infosys, which ranks fifth in the top 10 spenders list, is also the only company to show CSR spend under the Armed Forces veterans category of Schedule VII.
Another company among the top 10 spenders in this category is Infosys Ltd, which spent about Rs3 crore on projects including the Anupu festival, Kelkar museum, etc., according to its annual report.
Infosys, which ranks fifth in the top 10 spenders list, is also the only company to show CSR spend under the Armed Forces veterans category of Schedule VII. The Infosys Foundation gives aid to disabled veterans and to around 194 families of Central Armed Police Forces martyrs. “This will be a multi-year activity for the foundation,” says Sudha Murty, chairperson of Infosys Foundation, who is also pleased to note that spending for CSR has gone up overall, with the company spending a little above its prescribed limit this year.
“From the perspective of Infosys Foundation we were glad to see the approved increase in spend, due to which we were able to commit and utilize funding for deserving multi-year projects and extend our reach to more states,” adds Murty.
The top spender, Reliance Industries Ltd, has held on to the position for the third year in a row and as in the previous years, has spent above its prescribed spend. “Reliance Foundation (which implements CSR projects for the company) is focused on addressing the nation’s development challenges in areas of rural transformation, education, health, sports for development and more,” says Jagannatha Kumar, CEO of Reliance Foundation. The company, which has spent 77.7% of its CSR funding on projects related to education, sanitation, skill development, etc., has also reported a Rs26.8 crore spending on the development of sports. Nita M. Ambani, founder and chairperson of Reliance Foundation who is also a member of the International Olympic Committee, is seen as the reason behind the push to include sports in the foundation’s work. “RIL believes in the power of sports to create positive social impact and is committed to creating a large-scale ecosystem for sports and to train the youth of India to take it up as a vocation,” adds Kumar.
Factoring in lessons
Among the Schedule VII activities that received the lowest funding were Prime Minister’s relief fund and technology incubators. “We will have to take it that it is a reflection of the need in the society. The priorities of the community needs is reflected in the CSR expenditures,” explains Santhosh Jayaram, partner and head (sustainability and CSR advisory) at KPMG.
The general consensus among industry experts is that in the third year, companies are moving beyond compliance to focus on creating a long-term impact for the beneficiaries. “The MCA (ministry of corporate affairs) guidelines mandate companies to report on their CSR spend. However, we are seeing that many companies are proactively conducting extensive monitoring and evaluation, and impact assessment for their projects and reporting these through CSR specific detailed reports,” says Humbad of Goodera.
So some things have changed from FY15 and FY16. “The first two years there was struggle to get clarity on how existing work should be aligned to CSR and how initiatives have to be taken that are in conformity to the CSR schedule. In the third year, we found an improvement in quality of proposals that are being developed and an increased interest to develop flagship programmes that will give the companies greater visibility,” says Niraj Seth, executive director (advisory services) at EY India.
This is reflected not just in how the private sector is engaging with CSR but PSUs too. “During the last three years, many structural as well as procedural interventions have been taken to strengthen the CSR process of the corporation. IndianOil has framed a CSR Policy and Guidelines to streamline the execution, monitoring, evaluation and impact assessment of activities. Now, most of our CSR activities are being executed in project mode. Also, CSR officials have been posted in 31 key establishments and unit-level CSR panels have been constituted to conceive, implement and monitor CSR projects,” says Kali Krishna, chief general manager (corporate communications) at Indian Oil Corp. Ltd.
Jayaram of KPMG adds that now the thought process is going beyond spend allocation. “We see more detailed discussion around impact and very structured process for monitoring and evaluation.”
Besides wanting to include impact assessment and in some cases doing so, experts and companies shared some more learnings from doing CSR for three years. “This is our third year of CSR learning: While working in a specific geography, even though we may have started with one project or one specific activity, when we identified other areas of intervention that could make things better for the community, we saw value in a more holistic approach,” says Sukthankar of HDFC Bank.
Among the Schedule VII activities that received the lowest funding were Prime Minister’s relief fund and technology incubators.
Kumar of Reliance Foundation says the company is now looking at an outcome-oriented approach towards programme implementation and has accordingly been using various tools and methods to assess its programmes from time to time.
For Infosys Foundation, the focus was on processes and governance. “These have been tightened. Third-party impact assessment has been introduced and is periodically reviewed for improvement. Reach has been expanded to other states where Infosys Foundation does not have a presence,” says Murty.
This year, more than before, Ambasta of ITC believes organizations have figured out the nuances of the CSR Rules. “After a slow start, companies have set their CSR policy, focus areas and implementation mechanism in place. Most companies over the last three years are bound to have increased their CSR spends till they at least touch the 2% target. This has and will positively impact as well as address the developmental challenges that our country faces, including reduction in inequality.”

uttarakhand pcs current affairs from 1-10th september 2017 by samveg ias

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current affairs of uttarakhand from 10th september to 30th september 2017 by samveg ias

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current affairs of uttarakhand from 1october to 18 october 2017 by samveg ias

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new batch for ias/ukpcs

new batch for ias/ukpcs
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job creation:challenges and how to solve it in india.

job creation:challenges and how to solve it .
Growth generates employment and employment generates further growth. In general, employment corresponds to the qualitative aspect of growth. If a country is on the growth trajectory, it will generate more employment opportunities and while the growth declines, people start losing jobs.
Jobless growth is an economic phenomenon in which a macro economy experiences growth while maintaining or decreasing its level of employment.
The aim should be at growth that is driven both by improvements in productivity and modernizations of its labour force — especially since better jobs are crucial to improving the lives of millions.
What are the main factors of India’s jobless growth?
The transition peasants into factory workers requires basic training, which is not keeping in pace with job needs. Moreover the main contributor in India’s GDP is service sector which is not labour intensive and thus adds to jobless growth.
The other factor is related to small and medium enterprises (SMEs). Their labour intensity is four times higher than that of large firms. SMEs, which employ 40 per cent of the workforce of the country and which represent about 45 per cent of India’s manufacturing output and 40 per cent of India’s total exports, are in a better position to create jobs. But it is not able to do so because of poor infrastructure, lack of skilled labour and also they don’t have easy access to loans.
What can policy-makers do to revive job growth?
An industrial and trade policy is needed.
The Department of Industrial Policy and Promotion (DIPP) is preparing an industrial policy. National Manufacturing Policy came in 2011, was not implemented fully.
While the DIPP is preparing the industrial policy document, it is essential that trade policy is consistent with such an industrial policy. Otherwise the two may work at cross purposes and undermine each other’s objectives.

Excessive imports have been decimating Indian manufacturing.
An inverted duty structure has the following features: higher duty on intermediate goods compared to final finished goods, with the latter often enjoying concessional customs duty.
As a result, domestic manufacturers face high tariffs leading to higher raw material cost at home, emanating from the unfavourable inverted duty structure.
This has prevented many manufacturing sectors from growing since economic reforms began. This must be corrected.
The automobiles sector in India faced no inverted duty structure, and has thrived. India has become in the last decade one of the largest producers of vehicles of several kinds in the world now. Electronics faced an inverted duty structure, but due to changes made, electronics manufacturing has shown slow growth.
Special packages are needed for labour-intensive industries to create jobs.
There are a number of labour intensive manufacturing sectors in India such as food processing, leather and footwear, wood manufacturers and furniture, textiles and apparel and garments.
The apparel and garments sector received a package from the Government of India roughly a year back. The other labour intensive sectors have been ignored.
The nature of the package will need to be individually designed for each sector defined as quickly as possible.

Cluster development
There should be cluster development to support job creation in micro, small and medium enterprises (MSMEs).
Most of the unorganised sector employment is in MSMEs, which tend to be concentrated in specific geographic locations.
There are 1,350 modern industry clusters in India and an additional 4,000 traditional product manufacturing clusters, like handloom, handicraft and other traditional single product group clusters.
There is a cluster development programme of the Ministry of MSMEs, which need to be funded adequately and better designed to create more opportunities.

Align urban development with manufacturing clusters to create jobs.

The Ministry of Urban Development has a programme called AMRUT (Atal Mission for Rejuvenation and Urban Transformation) aimed at improving infrastructure for small towns. Infrastructure investment by the government creates many jobs.
The same intervention should be made in towns which have clusters of unorganised sector economic activities.
Hence an engagement between the Urban Development and MSME Ministries is necessary to attract more investment to industrial clusters and increase non-agricultural jobs.

More focus on women participation
Girls are losing out in jobs, or those with increasing education can’t find them, despite having gotten higher levels of education.
Secondary enrolment in the country rose from 58% to 85% in a matter of five years (2010-2015), with gender parity.
Skilling close to clusters is likely to create more no of jobs.
The problem with skilling programmes has been low placement after skilling is complete.
The availability of jobs close to where the skilling is conducted will also enhance the demand for skilling.

Public investments in health, education, police and judiciary
This can create many government jobs.
Public investment in the health sector has remained even in the last three years at 1.15% of GDP, despite the creation of the national health policy at the beginning of 2017.
The policy indicates that expenditure on health will rise to 2.5% of GDP by 2025.
Given the state of health and nutrition of the population, it is critical that public expenditure on health is increased immediately.
In the absence of greater public expenditure, the private sector in health keeps expanding, which raises the household costs on health without necessarily improving health outcomes, because the private sector does not spend on preventive and public health measures.
Preventive and public health have been in all countries the responsibility of government. More government expenditure in health means more jobs in government and better health outcomes.

Next important area should be Revitalising schools.
Government schools should maintain education quality on par with private schools.
Many new government jobs can be provided if more young people could be trained specially to become teachers for science and mathematics at the secondary and higher secondary levels in government schools.

The same applies to the police and the judiciary.
All the vacancies in Police and judiciary should be filled immediately. More police and a larger judiciary can both reduce crime as well as speed up the process of justice for the ordinary citizen.
Government schemes rarely create many jobs. International evidence is that when consumer demand grows consistently, whether from domestic or international markets, that is when jobs grow. That requires an industrial policy. Ease of doing business improvement and infrastructure investment increases should improve the economic environment. But most importantly India needs a robust industrial policy.

bureau of Indian standards (BIS) Act 2016 brought into force with effect from 12th October, 2017

bureau of Indian standards (BIS) Act 2016 brought into force with effect from 12th October, 2017

A new Bureau of Indian standards (BIS) Act 2016 which was notified on 22nd March, 2016, has been brought into force with effect from 12th October, 2017. The Act establishes the Bureau of Indian Standards (BIS) as the National Standards Body of India. The Act has enabling provisions for the Government to bring under compulsory certification regime any goods or article of any scheduled industry, process, system or service which it considers necessary in the public interest or for the protection of human, animal or plant health, safety of the environment, or prevention of unfair trade practices, or national security. Enabling provisions have also been made for making hallmarking of the precious metal articles mandatory. The new Act also allows multiple type of simplified conformity assessment schemes including self-declaration of conformity against a standard which will give simplified options to manufacturers to adhere to the standards and get certificate of conformity. The Act enables the Central Government to appoint any authority/agency, in addition to the BIS, to verify the conformity of products and services to a standard and issue certificate of conformity. Further, there is provision for repair or recall, including product liability of the products bearing Standard Mark but not conforming to the relevant Indian Standard. The Hon’ble Minister for Consumer Affairs, Food and Public Distribution said that the new Act will further help in ease of doing business in the country, give fillip to Make In India campaign and ensure availability of quality products and services to the consumers.

Audrey Azoulay nominated by UNESCO Executive Board for the post of Director-General:current affairs for upsc pre

Audrey Azoulay nominated by UNESCO Executive Board for the post of Director-General

The 58 members of UNESCO’s Executive Board on 13 October nominated Audrey Azoulay of France for the position of Director-General of the Organization, replacing outgoing Director-General Irina Bokova.
The nomination will be submitted to the vote of the General Conference that brings together all 195 Member States of the Organization every two years on 10 November.

India and the EU have been strategic partners since 2004. The 14th annual Summit between India and the European Union (EU) was held in New Delhi. The two sides reviewed a full spectrum of their ties at the 14th summit with a focus on ramping up two-way trade and investment.
The leaders reviewed the wide-ranging cooperation under the India-EU Strategic Partnership. Recognising that India and the EU are natural partners, the leaders reaffirmed their commitment to further deepen and strengthen the India-EU Strategic Partnership based on shared principles and values of democracy, freedom, rule of law and respect for human rights and territorial integrity of States.

The U.S. has announced its withdrawal from the United Nations Educational, Scientific and Cultural Organization (UNESCO), accusing it of “continuing anti-Israel bias.” Besides the US, Israel has also decided to pull out of UNESCO.
As required by law, the U.S. has stopped funding UNESCO. The U.S. withdrawal will take effect on December 31, 2018. Until then, it will remain a full member.
UNESCO is a United Nations organization that helps preserve historical and cultural sites worldwide.
It is a special multi-country agency, formed in 1945 and based in France, that promotes sex education and literacy as well as improving gender equality in countries around the world.
It is also known for its work to preserve cultural and heritage sites such as ancient villages, ruins and temples, and historic sites such as the Great Mosque of Samarra in Iraq, which at one point came under threat of being destroyed by the Islamic State.


deep sea fishing and marine conservation
Deep sea fishing has been an integral part of the country’s Blue Revolution vision to exploit fishing resources to the maximum within the 200 nautical mile exclusive economic zone (EEZ). One day workshop was organized on Deep sea fishing with an aim to promote deep sea fishing as an alternative to trawling in the Palk Bay.
What is the issue with Bottom trawling?
Bottom trawling, an ecologically destructive practice, involves trawlers dragging weighted nets along the sea-floor, causing great depletion of aquatic resources. Bottom trawling captures juvenile fish, thus exhausting the ocean’s resources and affecting marine conservation efforts. This practice was started by Tamil Nadu fishermen in Palk Bay and actively pursued at the peak of the civil war in Sri Lanka.
The Palk Bay fishing conflict has figured prominently in high-level meetings between India and Sri Lanka. The Joint Working Group on Fisheries was formed by the two countries in November, 2016 to discuss the prolonged issue. But Sri Lankan fishermen wanted an immediate end to incursions by Indian trawlers, which resulted into amendment to the Fisheries and Aquatic Resources Act by Sri Lankan parliament. Also its navy has been vigilantly patrolling the International Maritime Boundary Line, ‘capturing’ Indian trawl boats and fishers.deep sea fishing and marine conservation

Sampoorna Bima Gram Yojana
About the Sampoorna Bima Gram (SBG) Yojana:
Under the Sampoorna Bima Gram (SBG) Yojana, at least one village (having a minimum of 100 households) will be identified in each of the revenue districts of the country, wherein endeavour will be made to cover all households of that identified village with a minimum of one RPLI (Rural Postal Life Insurance) policy each. Coverage of all households in the identified Sampoorna Bima Gram village is the primary objective of this scheme.
Rural Postal Life Insurance (RPLI), introduced on March 24, 1995 on the recommendations of the Malhotra Committee, provides insurance cover to people residing in rural areas, especially weaker sections and women living in rural areas
National e-Governance Services Ltd (NeSL) has become India’s first information utility (IU) for bankruptcy cases under the Insolvency and Bankruptcy Code 2016. NeSL is owned by State Bank of India and Life Insurance Corporation Ltd., among others. Recently, the Insolvency and Bankruptcy Board of India (IBBI) eased ownership norms for setting up such utilities.
What is an information utility?
Information utility is an information network which would store financial data like borrowings, default and security interests among others of firms. The utility would specialise in procuring, maintaining and providing/supplying financial information to businesses, financial institutions, adjudicating authority, insolvency professionals and other relevant stake holders.
Why is it important? How useful is it?
The objective behind information utilities is to provide high-quality, authenticated information about debts and defaults. Information utilities are expected to play a key role as they allow storage of financial information of registered users and expeditiously process and verify information received.
Moreover, the database and records maintained by them would help lenders in taking informed decisions about credit transactions. It would also make debtors cautious as credit information is available with the utility. More importantly, information available with the utility can be used as evidence in bankruptcy cases before the National Company Law Tribunal

change in uppcs 2018 exam: new pattern

change in uppcs 2018 exam: new pattern
more friendly to upsc aspirants.now ukpsc candidate can also easily appear in uppcs.
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Avoid the adventurous path

Any aggressive attempt to widen the fiscal deficit will land India’s economy in problems

The sharp deceleration in the growth of the economy as revealed by the first quarter estimate of GDP released a month ago has been widely commented upon. The policy prescriptions needed to reverse the trend depend on our understanding of the factors responsible for the slowdown. Among other things, one factor that stands out is the steady and sharp decline in the investment rate. The Gross Fixed Capital Formation (GFCF) rate has touched the level of 27.5% in the first quarter of 2017-18. A year ago, it was 29.2%, and a decade ago, it was 10 percentage points higher. In recent years, public investment has shown a small rise. The decline in the investment rate has been largely due to a decline in the private investment rate, both corporate and household.

Fiscal and revenue deficits

Given this situation, policy initiatives must be directed towards raising private investment. However, some have argued for a strong fiscal stimulus through an increase in public investment by relaxing the fiscal deficit. It is also suggested that what is relevant is revenue deficit and that there is no rationale for having a fiscal deficit target. There are two problems with this argument. First, the focus on fiscal deficit is mainly to ensure that the private sector has sufficient borrowing space. This is clearly set out in the Report of the Twelfth Finance Commission (TFC) chaired by the first author and which was reiterated by the recent Report of the Fiscal Responsibility and Budget Management (FRBM) Review Committee chaired by N.K. Singh, former Revenue and Expenditure Secretary and former Member of Parliament. The argument in the TFC was that when the transferable saving of the household sector relative to GDP is 10% and an acceptable level of current account deficit 1.5%, containing the aggregate deficit of the Centre and States at 6% and providing 1.5% to the public sector enterprises would leave 4% borrowing space to the private sector.

Similarly, the target of debt-GDP ratio at 60% in 2023 from the present level of 70% (with the Centre and States required to contain their ratios at 40% and 20%, respectively) is supposed to be achieved by limiting the fiscal deficit at 3% of GDP in the first three years and 2.5% in the next two by both the Centre and States.

Second, over 60% of the estimated fiscal deficit at the Centre in 2017-18 (1.9% out of 3.2%) is revenue deficit. At the State level, when the impact of loan waivers, additional interest payments on account of Ujwal DISCOM Assurance Yojana (UDAY) and possible impact of pay revision is considered, the revenue deficit may increase by 1% of GDP. Thus, the problem of proliferation in revenue deficit continues. The golden rule which the U.K. wanted to follow set no limit on fiscal deficit. But borrowing was limited to only financing capital expenditures. The implication is revenue deficit will be nil. We are far from this.

History of fiscal laxity

Indian economic history is replete with instances of adverse effects of fiscal expansion on inflation as well as the balance of payments. The huge fiscal expansion in the late 1980s, with the fiscal deficit at more than 10% of GDP leading to the macroeconomic and balance of payments crisis requiring the adoption of structural adjustment programme in 1991, has been very well documented. The recent episode of fiscal expansion after 2008-09 and 2009-10 is fresh in memory. After substantial improvement in the fiscal situation during the period 2004-05 to 2007-08, the implementation of the Pay Commission recommendation, expansion of rural employment guarantee for the whole country and the introduction of the loan waiver led to derailing the process of adjustment in 2008-09, and the fiscal deficit of the Centre increased from 2.5% in 2007-08 to 6.1% in 2008-09. It further ballooned to 6.6% in 2009-10 and the consolidated deficit was 9.4%. This was one of the important reasons for the inflation rate increasing to 10.2% in March 2010, and the average increase in wholesale price index in 2010-11 was 11.1%.

Declining financial savings

The Annual Report of the Reserve Bank of India (RBI) gives the latest estimate of the financial saving of the household sector for 2016-17 at just about 8.1% of GDP. And if the foreign savings of 2% is added, the transferable savings is just a little over 10%. The aggregate fiscal deficit at the Central and State levels budgeted for 2017-18 is about 6% of GDP, but this is likely to go up after the impact of loan waivers and increase in house rent allowance at the Centre and possible revision of pay scales in the States are taken account of. The annual report also estimates the impact of loan waivers alone at 0.5% of GDP. Taking 6.5% of GDP as the aggregate fiscal deficit and leaving aside 2% for public enterprises, the private corporate sector is left with a borrowing space of just about 1.5% of GDP. At a time when the need is to stimulate private investment, to restrict the space available for it may be counterproductive. In such an environment, there is hardly any scope for reducing the interest rates by the RBI, and even if it did, financial institutions would be unwilling to lend at lower rates. The liquidity crunch may eventually result in monetising the deficits, if not directly but indirectly.

Shortfalls in Centre and States

As it is, adhering to the fiscal deficit targets set out in the Budgets is going to be challenging. There will be a sharp reduction in the dividends from banking and financial institutions. The RBI has announced that against the expected ₹58,000 crore, the actual dividend will be ₹36,905 crore, and given the difficulties in the public sector banks, there will be shortfalls in the dividends from them as well. There will be a shortfall in disinvestment and tax revenue collection, if current trends persist.

The problem of adhering to the fiscal deficit target is not confined to the Centre alone. At the State level, the combined fiscal deficit for 26 States is budgeted at 2.2% of GDP excluding the deficit arising from taking over the power distribution companies (discoms) loans. However, as mentioned earlier, the expenditure on account of loan waivers is estimated at about 0.5% of GDP. Furthermore, following pay revision at the Centre, some of the States may revise their pay scales which could add to the fiscal pressure. There could be a slippage of about 1% GDP in fiscal deficits.

Road map ahead

The solution to the current slowdown in growth lies in reviving private investment, recapitalising banks to enable them to lend more, and speedy completion of stalled projects. Fiscal policy can at best play a role in creating the appropriate climate. Fiscal prudence is one of the elements in sustaining growth over an extended period. The fiscal deficit rules that we have evolved are consistent with the level of savings and the demands of the various sectors on those savings. Our adherence to the fiscal rules has been weak. They have been more honoured in breach than in observance. We are passing through a difficult situation. Even to maintain government expenditures at the budgeted levels, there will be a slippage in the fiscal deficit budgeted because of the likely fall in revenues. The slippage in fiscal deficit by a few decimal points may not matter but any aggressive attempt to widen the fiscal deficit will land us in problems. Our history is witness to it. We should avoid being adventurous.

C. Rangarajan is Former Chairman of the Economic Advisory Council to the Prime Minister and Former Governor, Reserve Bank of India. M. Govinda Rao was Member, Fourteenth Finance Commission and is Emeritus Professor, NIPFP

good initiative for aasan barrage

good initiative for aasan barrage
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efficiency in financial matter is necessary for timely implementation

efficiency in financial matter is necessary for timely implementation
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Nobel-winning team spots merging neutron stars

Nobel-winning team spots merging neutron stars
For the first time, a cosmic event has been observed with gravitational waves and also light waves.
The LIGO-VIRGO collaboration, three members of which won this year’s physics Nobel Prize, strikes again, this time, to detect the merger of two neutron stars — extremely dense, massive but tiny, objects. What is more striking is that gamma rays bursting from the event were observed by nearly 70 ground and space-based observatories.
This is the very first time that a cosmic event has been observed with gravitational waves as well as the light emanating from it. Earlier observations made by LIGO have been of black hole mergers, and as no light can escape from a black hole, there was no such light counterpart to the measurements.
According to a press release circulated by the collaboration, “On August 17, LIGO’s real-time data analysis software caught a strong signal of gravitational waves from space in one of the two LIGO detectors. At nearly the same time, the Gamma-ray Burst Monitor on NASA’s Fermi space telescope had detected a burst of gamma rays.”
“The fact that these two signals [the gravitational waves and the gamma ray bursts, which are essentially light waves] arrived at nearly the same time tell us that the speed of gravitational waves is extremely close to the speed of light. This was predicted by Einstein, but it is the first time we are making a direct measurement,” says P. Ajith, of International Centre for Theoretical Sciences, Bengaluru. Dr. Ajith is one of the leading contributors to the theoretical studies on gravitational waves. In all, the LIGO-VIRGO collaboration includes about 1,500 scientists and of this about 40 are Indians.
The neutron stars of the signal detected on August 17 were located about 130 million light years away. As these neutron stars spiraled together, they emitted gravitational waves that were detectable for about 100 seconds. When they collided, a flash of light in the form of gamma rays was emitted. This “gamma ray burst” was seen on Earth about two seconds after the gravitational waves were observed. As a result, the gravitational wave detectors caught the signal which is the longest “chirp” heard so far — it lasted 100 seconds.
Neutron stars are the smallest, densest stars known to exist. These could be about 20 kilometres in diameter and have masses much greater than the Sun. A teaspoonful of neutron star material could hold a mass of a billion tonnes. They are formed when massive stars explode in supernovae.
“From informing detailed models of the inner workings of neutron stars and the emissions they produce, to more fundamental physics such as general relativity, this event is just so rich. It is a gift that will keep on giving,” David Shoemaker, spokesperson of the LIGO collaboration, is quoted as saying in the press release.

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