9 July 2014

Performance of Special Purpose Vehicles for Implementation of 39 Projects


The overall performance and achievement of the Special Purpose Vehicles (SPVs) for implementation of 39 projects sanctioned during the Tenth and Eleventh Five Year Plan Periods are quite satisfactory.  Out of 39 projects sanctioned in the 10th and 11th Five Year Plan periods under Industrial Infrastructure Upgradation Scheme (IIUS), 21 projects have been completed and the remaining are at various stages of implementation.  Sanction has been withdrawn in respect of two projects as these projects could not start implementation activities in more than two years despite efforts made by this department.
Most of the projects have been delayed on account of land related issues and environment clearance. Some projects have also been delayed on account of shortfall in contributions from Industrial stakeholders and State Governments.
The latest independent evaluation of the Scheme was carried out in December 2011 by National Productivity Council (NPC). The findings of the Evaluation Study of NPC indicate that the Scheme has provided a robust platform for development of common facilities like R&D labs, Skill Upgradation Centre, Common Tool Rooms, Prototyping Centres, Effluent Treatment Plants and basic infrastructure (road, water, supply, power, etc.) which are essential for the clusters. Majority of these clusters belong to Small and Medium Enterprises who have taken up green initiatives and components to curb pollution. 
The project-wise complete list of projects sanctioned and fund generated of 37 projects is at Appendix-I.
The IIUS has been revised as ‘Modified Industrial Infrastructure Upgradation Scheme (MIIUS)’ for taking up new projects in the 12th Five Year Plan Period and under this scheme only State Implementing Agency (SIA) such as State Industrial Development Corporation, is authorised to implement the project.  Due to modification in the scheme, projects in the 12th Plan Period cannot be undertaken by SPV or Special Purpose Entity (SPE), however new projects have been undertaken through SIA.  

Economic Survey pegs GDP growth at 5.4-5.9%

The Economic Survey 2013-14, which was tabled on Wednesday in the Lok Sabha, has pegged GDP growth for the year 2014-15 in the range of 5.4-5.9 per cent.
"There are downside risks to the economy arising from a poor monsoon, the external environment and the poor investment climate. GDP growth slowed to below 5 per cent for two consecutive years, i.e. 2012-13 and 2013-14. The combination of domestic structural constraints, inflationary pressures, particularly food inflation and uncertainty in the global economy, has affected growth and posed challenges for macroeconomic stability," said the Survey.
Agriculture and allied sector grew at 4.7 per cent, while industry grew at 0.4 per cent in 2013-14.
"The key reasons for poor performance have been contraction in mining activities and deceleration in manufacturing output. Manufacturing and mining sector GDP declined by 0.7 per cent and 1.4 per cent respectively in 2013-14. The underlying cause of the poor performance of these two sectors has been considerable deceleration in investment, particularly by the private corporate sectorduring 2011-12 and 2012-13," it said.
Consumer price inflation declined from 10.21 per cent during FY 2013-14 to about 9.49 per cent in 2013-14. However, food inflation remained stubbornly high during FY 2013-14. Contribution of the commodity sub-groups, ‘fruits and vegetables’, as well as ‘egg, meat and fish’ to the food inflation has been very high.
India’s balance-of-payments position improved in 2013-14 with current account deficit (CAD) at 32.4 billion (1.7 per cent of GDP) as against $88.2 billion (4.7 per cent of GDP) in 2012-13.
"India's exports at $312.6 billion grew by a positive 4.1 per cent compared to the previous year’s negative growth of 1.8 percent. Import growth decelerated from 0.3 per cent in 2012-13 to a negative 8.3 per cent in 2013-14, owing to fall in non-oil imports by 12.8 per cent primarily due to restrictions on gold imports," said the document.
But public finances faced serious challenges, with a shortfall in tax revenues and disinvestment receipts and higher than budgeted subsidies, interest and pension payments, fiscal consolidation was mainly achieved through a reduction in grants for creation of capital assets and capital expenditure.
"An important factor in the increase in the Centre’s fiscal deficit after 2008-09 has been the sharp increase in subsidies from 1.42 per cent of GDP in 2007-08 to 2.56 per cent of GDP in 2012-13. For 2013-14 the subsidy bill is 2.26 per cent of GDP," it said.
The Survey identifies the need to address long run problems to improve the investment climate. It emphasises the need for creating a framework for low and stable inflation, setting public finances on a sustainable path by tax and expenditure reform, and creating the legal and institutionalframework for a well-functioning market economy.
"The Survey calls for putting public finances on the sustainable path through fiscal correction, a new Fiscal Responsibility and Budget Management (FRBM) Act with teeth, better accounting practices, greater transparency and improved budgetary management. It argues that improvements on both tax and expenditure are needed to obtain high quality fiscal adjustment," said a press release.
This year's Economic Survey also discusses the need for revamping some of the social sector schemes such as MNREGA, NRHM, SSA, etc.
"It is felt that the outlays for the different schemes have not often translated fully into outcomes owing to the poor delivery mechanism. Leveraging modern technology for efficient delivery of programmes, removing the multiple layers of governance, simplifying procedures, and greater participatory role by the beneficiaries can help in creating a better delivery mechanism," it said.

'CAD likely to fall to 2.1% in FY15; to be fully financed'


India's current account deficit (CAD) is likely to fall to 2.1 per cent of the GDP in 2014-15 and will be fully financed in the current year, the government said today.
CAD, which is excess of foreign exchange over inflows, declined sharply from a record high of $88.2 billion (4.7 per cent of gross domestic product) in 2012-13 to $32.4 billion (1.7 per cent of GDP) in 2013-14.
"With close monitoring and policies calibrated to emerging contexts upfront, it is likely that the CAD may be limited to around $45 billion (2.1 per cent of GDP) in 2014-15, which is likely to be fully financed by stable sources of capital flows," said the Economic Survey for 2013-14 tabled by Finance Minister Arun Jaitley in Lok Sabha today.
"After staying at perilously unsustainable levels of well over 4 per cent of GDP in 2011-12 and 2012-13, the improvement in BoP (Balance of Payments) position is a welcome relief, and there is need to sustain the position going forward."
Improvement in BoP in latter half of 2013-14 was indeed swift and owed to exceptional measures like restrictions on non-essential imports, limited period incentives for certain varieties of capital flows and impact of overall economic slowdown on imports, it said.
Hiking customs duty in gold and silver to a peak to 10 per cent, improving capital outflows through quasi-sovereign bonds and liberalisation of external commercial borrowings also helped control rising CAD.
The survey said a longer-term outlook has already been outlined in terms of the fiscal consolidation roadmap leading to a fiscal deficit of 3 per cent of GDP in 2016-17.
"Despite the global and domestic challenges, the economy achieved its targeted fiscal consolidation 2013-14. Nevertheless, this was achieved by cutting expenditure which is unsustainable for an economy."
India's fiscal deficit remained at 4.5 per cent of the GDP in 2013-14.
However, sustaining the robust outcome in the medium term is a challenge as some of the restrictions need to be gradually withdrawn.
It said there is need to adjust to not merely the asset purchase taper by the US Fed but also to the eventual exit from the accommodate monetary policy stance by advanced economies.
A high CAD puts pressure on the rupee, which in turn makes imports expensive and fuels inflation.

Revive investment to boost growth, jobs: Economic Survey


The pre-Budget Economic Survey today called for investments, especially in infrastructure, to revive growth and jobs while carrying out tax and subsidy reforms for fiscal consolidation, projecting an upto 5.9 per cent GDP growth this year.
The Survey, tabled by Finance Minister Arun Jaitley in Parliament ahead of his maiden Budget tomorrow, also suggested touch measures to shore up public finances and reduce inflation.
Among the measures suggested are massive investment in infrastructure, market-linked reforms, boost to manufacturing, tax reforms and structural changes in various sectors to bring the economy back on track.
The fiscal situation of the central government is worse than it appears, given the acceleration of inflation from 2006 to 2014, the Survey said.
Moderation in inflation would help ease the monetary policy stance and revive the confidence of investors. With the global economy expected to recover moderately, particularly on account of performance in some advanced economies, the economy can look forward to better growth prospect in 2014 and beyond, it said.
The Survey acknowledged that inflation has eased but is still above comfort level.
After tabling the Survey, Jaitley told reporters that fiscal deficit for the current year will be 4.5 per cent which needs to go down further in the next two years.
In 2014-15, the Survey claims that the economy is poised to overcome the sub-5 per cent growth of GDP witnessed in the last two years which affected in particular the industrial sector.
It, however, sounded a cautious note saying agriculture production may be impacted this year if a likely El Nino torpedoes monsoon rainfall, putting pressure on food prices.
The Survey says investment can be revived by improving long term growth prospect. For this, reforms are needed on three fronts: creating a framework for sustained and low inflation, setting public finances on a sustainable path by tax and expenditure reforms and creating the legal regulatory framework for a well functioning market economy.
First, the government must ensure a low and stable inflation rate through fiscal correction, establishing a monetary policy framework, and creating a competitive national market for food.
Initiation of reforms on these fronts will reduce inflation uncertainty and restore a stable business environment. Further lower inflationary expectations would increase domestic household financial saving and make resources available for investment.
The government must put public finances on a sustainable path through tax and expenditure reforms. Tax reforms require a Goods and Services Tax (GST), Direct Taxes Code (DTC) and more
predictable tax administration.
Expenditure reforms must focus on public goods, new designs for subsidy programmes and mechanism for accountability.
"India requires the legal and regulatory frameworks for a market economy. This requires repealing the old legacy laws and creating state capacity to market reforms," it said.
The Survey said the defining challenge in India today is that of generating employment and growth. Jobs are created by firms when firms invest and grow. Hence it is important to create environment conducive for firms to invest.
The recent business cycle downturn has seen a sharp decline in investment. Reviving investment is therefore on top of the government's priorities.
As part of fiscal consolidation, raising the tax GDP ratio above the current prevailing levels is critical for sustaining the process of consolidation in the long run as compression of expenditure beyond a certain amount can be counter productive.
Calling for a new Fiscal Responsibility and Budget Management (FRBM) Act, it said, "Fresh thinking is required on a responsible fiscal policy framework... The modified act needs to take into account business cycles and to have penalties that are strong enough so that it cannot be ignored."

India has second fastest growing services sector: Survey


India has the second fastest growing services sector in the world with a compound annual growth rate at 9 per cent, just below China's 10.9 per cent, during 2001 to 2012, the Economic Survey said today.
Among the world's top 15 countries in terms of GDP, India ranked 10th in terms of overall GDP and 12th in terms of services GDP in 2012, it said.
"India has the second fastest growing services sector with CAGR at 9 per cent, just below China’s 10.9 per cent, during the last 11-year period from 2001 to 2012," the survey said.
It said that services share in world GDP was 65.9 per cent but its share in employment was only 44 per cent in 2012.
In India, the services sector had a high share in income at 56.9 per cent in 2012 with a lower share of 28.1 per cent in employment, it added.
In 2013-14 the growth rate of the services sector at 6.8 per cent is marginally lower than in 2012-13. This is due to deceleration in the growth rate of the combined category of trade, hotels, restaurants, transport, storage and communications.
The survey, which was tabled in Parliament today, said that services in India are emerging as a prominent sector in terms of contribution to national and states' incomes, trade flows, FDI inflows and employment.
Further, it said that the immediate challenge in this sector is revival of growth.
India’s services sector which was growing at a steady rate of over 10 per cent since 2005-06 has shown subdued performance in the last three years.
Revival, it said, could be achieved through reforms and speeding up of the policy decision making, a targeted approach with focus on big ticket services.
"Some services like software and telecom were big ticket items that gave India a brand image in services. While further focus on these services is needed to retain and further our lead, the time has come to focus on some other high potential big ticket items that have high manufacturing-sector and employment linkages," it added.
Going forward, it said, 2014-15 seems to augur well for the services sector with expansion in business activity in India.
"There are also signs of revival in growth of the aviation sector with the announcement of new players like Air Asia and Tata-SIA Airline after a turbulent period of withdrawals and losses by some airlines," it added.
Indications of revival in the world GDP and trade growth in general

and of developed countries in particular, could help in revival of the tourism and shipping sectors.
"With a stable government in place and growing optimism which could translate into investment and growth, some quick reforms and removal of some barriers and obsolete regulations in the services sector could help. The downside risk however is the fragile global situation," it said

8 July 2014

Rail Budget 2014

Rail Budget Seeks Course Correction, Avoids Populism No Increase in Rail Fare
Stress on Resource Mobilization Through PSU Surplus, FDI and PPP
Bullet Train on Ahmedabad-Mumbai Corridor Proposed, Speed of Trains to be Increased in Nine Sectors
More Thrust on Passenger Amenities, Cleanliness & Efficient Station Management
Multi Pronged Approach for Improving Safety & Security, 4000 Women RPF Constables to be Recruited
Revamping Railway Reservation System into Next Generation e-Ticketing, WI-FI Services in Major Stations & in Select Trains, Mobile based Wakeup Calls for Passengers
58 New Trains Introduced; 11 Existing Trains Extended
Railway University and Innovation Incubation Centre to be Set UP
Top Priority to Transparency, e-procurement to be made
Compulsory in Higher Purchase, Online Registration for Wagons in Next Two Months
Highest Ever Plan Outlay of Rs. 65,445 Crore with Higher Allocation for Safety Measures
Increased passenger amenities, more safety measures, timely completion of projects and increased financial discipline are the main highlights of the Railway Budget 2014-15 presented by the Minister of Railways Shri D. V. Sadananda Gowda in Parliament today.
The Budget seeks course correction in the light of mismanagement, apathy, populism in starting projects and severe fund crunch that have inflicted the railways over the years, the Minister averred. For this, structural reforms will be introduced and resources will be mobilized through PSU surplus, FDI and PPP.
The Budget proposes multi-pronged approach to make Railway journey safe and secure and comfortable for passengers. More thrust has been placed on passenger amenities, cleanliness and efficient station management. Now all major stations will have foot-over bridges, escalators, lifts etc.
On safety and security, the Budget has proposed introduction of advance technology for rail-flaw detection to check causes of accidents, a significant amount has been kept for road-over and road-under bridges and a pilot project will be launched on automatic door closing in mainline and sub-urban coaches. In order to make women safer while travelling, the Railway will recruit 4000 women constables. Coaches for ladies will be escorted.
IT initiatives get a big boost in the Budget. Revamping Railway Reservation System into Next Generation e-Ticketing will be taken up with provision of platform tickets and unreserved tickets also over internet. The Railway has proposed real-time tracking of trains and rolling stocks, mobile based Wakeup Call System for passengers, mobile based destination arrival alert and Wi-fi Services in A-1 and A category stations and in select trains. Indian Railways has also planned paperless offices

Delhi and the diaspora

As India celebrates the return of the Kerala nurses trapped in Iraq’s civil war and New Delhi intensifies the effort to bring many others home, Prime Minister Narendra Modi must create a strong institutional framework to cope effectively with the recurrent crises involving Indian citizens abroad.

Over the last decade alone, Delhi had to launch two major military operations to rescue Indian citizens from war zones abroad. In Libya (2011), Indian armed forces evacuated nearly 18,000 people. In Lebanon (2006), the Indian navy helped get nearly 2,200 Indians, Sri Lankans and Nepalese out of the war zone. There have been other cases that have drawn much public attention in recent years — the violence against Indian students in Australia, the arrest of Indian traders in southern China and students caught in fake universities in the United States, to name a few.
Dealing with the diaspora — people of Indian origin, citizens living abroad, and stateless people who originally migrated from the subcontinent — has been a major preoccupation for independent India. The expansive globalisation of the subcontinent under the Raj in the 19th century saw significant movement of Indian labour and capital beyond the subcontinent. In the decades after Independence, the lack of opportunities at home drove many Indians abroad, especially to English-speaking lands and to the Gulf, after the oil boom there from the mid-1970s. The economic reforms at the end of the 20th century did not reduce the outward flows, but have added new streams to the Indian diaspora.
If citizens’ expectations from Delhi were low in the past, Delhi is now under great pressure domestically to respond purposefully to the challenges of securing the Indian abroad. Recall the importance S.M. Krishna, external affairs minister (from 2009 to 2012) in the UPA government, attached to the issue of the Indian students in Australia, and note current External Affairs Minister Sushma Swaraj’s vigour in leading the diplomatic effort on Iraq. And don’t forget the pressure from the Kerala and Punjab governments on Delhi in the last few days. If politicians understand the new pressures from below, the media accentuates them by 24×7 coverage of any Indians in trouble beyond borders.
More Indian passport holders are living today in foreign lands for work, education and business. According to one count, in 2012, there were nearly 11 million Indian citizens abroad. There are others travelling for pleasure. The number of Indians leaving national shores, on short or long trips, has gone up from a little over four million in 2000 to nearly 15 million in 2012. There are nearly 2,00,000 students abroad today. With more than 50 per cent of the Indian economyDelhi.
The BJP has always taken an extra interest in the diaspora. The prime minister, who successfully mobilised support from overseas Indians during
the general election, is well placed to take a major initiative on getting Delhi to more effectively discharge India’s responsibilities to citizens abroad.

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