Major FDI Policy Changes

Government has put in place an investor-friendly policy on FDI, under which FDI, up to 100% is permitted, under the automatic route, in most sectors/activities. FDI policy is reviewed on an ongoing basis, with a view to making it more investor friendly.  FDI helps in the economic growth of the country by supplementing the domestic capital, bringing technology transfers, global best practices leading to increased manufacturing and productive capacity. Overall growth in different sectors of economy results in job creation.  Following are the major FDI policy changes made during the year: Defence: The Government vide Press Note 7  /2014 dated 26th August, 2014 has allowed FDI upto 49% on approval route in Defence sector with certain conditions e.g., the applicant company seeking FIPB approval be an Indian company owned and controlled by resident Indian citizens. Above 49% the proposal will be routed to Cabinet Committee on Security on a case to case basis, wherever it is likely to result in access to modern and state-of-art technology in the country. FPI investment has been allowed to be made in the Defence sector upto 24% on automatic route.  A number of conditions have been relaxed /removed making the sector more investor friendly. The proposal is expected to result in technology transfer which would help in increasing the production base and providing an impetus to manufacturing sector and job creation in India. The measure is expected to not only reduce the heavy burden of imports and conserve foreign exchange reserves but also make domestic manufacturing an integral part of GDP growth of the country. Railways: The Govt. (vide PN 8/2014 dated 26th August, 2014)  has allowed 100% private and FDI investment under automatic route in Rail infrastructure (other than construction, operation and maintenance of (i) Suburban corridor projects through PPP, (ii) High speed train projects, (iii) Dedicated freight lines, (iv) Rolling stock including train sets, and locomotives/coaches manufacturing and maintenance facilities, (v) Railway Electrification, (vi) Signaling systems, (vii) Freight terminals, (viii) Passenger terminals, (ix) Infrastructure in industrial park pertaining to railway line/sidings including electrified railway lines and connectivities to main railway line and (x) Mass Rapid Transport Systems ) subject to meeting sectoral laws and with the condition that FDI beyond 49% in sensitive areas from security point of view will be approved by the Cabinet Committee on Security on a case to case basis. The proposal for amendments will facilitate private investment including FDI inflows into infrastructure projects including elevated rail corridor project in Mumbai, High Speed Train project, port connectivity projects, dedicated freight corridors, logistic parks, station development, locomotive manufacturing units and power plants, through public-private partnerships which would not only bring in the much needed capital but also technology and global best practices. Construction Development: The Government has issued the Press Note No. 10 on 3rd December, 2014 amending the FDI policy regarding Construction Development Sector.   Amended policy includes easing of area restriction norms, reduction of minimum capitalization and easy exit from project.   Further, in order to give boost to low cost affordable housing, it has been provided that conditions of area restriction and minimum capitalization will not apply to cases committing 30% of the project cost towards affordable housing. FDI INFLOWS Total FDI into India, since April, 2000, including equity inflows, reinvested earnings and other capital, is US $ 345.29 billion (April, 2000-September, 2014). During the calendar year 2014 (i.e. during January- September, 2014), FDI equity inflows of US $ 22.43 billion have been received. This represents increase of 24% over the FDI equity inflows of US $ 18.07 Billion received during the corresponding period (January- September 2013) of the previous calendar year (2013). During the financial year 2014-15 (i.e. April- September, 2014), FDI equity inflows of US $ 14.69 billion have been received. This represents an increase of 17% over the FDI equity inflows of US$ 12.59 billion received during the corresponding period (April 2013- September, 2013) of the previous financial year (2013-14).

Year End Review-

Government constitutes National Institution for Transforming India (NITI) Aayog

Press Note The Government has replaced Planning Commission with a new institution named NITI Aayog (National Institution for Transforming India). The institution will serve as ‘Think Tank’ of the Government-a directional and policy dynamo. NITI Aayog will provide Governments at the central and state levels with relevant strategic and technical advice across the spectrum of key elements of policy, this includes matters of national and international import on the economic front, dissemination of best practices from within the country as well as from other nations, the infusion of new policy ideas and specific issue-based support. The following is the full text of the Cabinet  Resolution:- RESOLUTION Mahatma Gandhi had said:  “Constant development is the law of life, and a man who always tries to maintain his dogmas in order to appear consistent drives himself into a false position”. Reflecting this spirit and the changed dynamics of the new India, the institutions of governance and policy have to adapt to new challenges and must be built on the founding principles of the Constitution of India, the wealth of knowledge from our civilizational history and the present day socio-cultural context.           The Planning Commission was set up on the 15th of March, 1950 through a Cabinet Resolution.  Nearly 65 years later, the country has metamorphosed from an under-developed economy to an emergent global nation with one of the world’s largest economies. From being preoccupied with survival, our aspirations have soared and today we seek elimination, rather than alleviation, of poverty.  The people of India have great expectations for progress and improvement in governance, through their participation.  They require institutional reforms in governance and dynamic policy shifts that can seed and nurture large-scale change. Indeed, the ‘destiny’ of our country, from the time we achieved Independence, is now on a higher trajectory. The past few decades have also witnessed a strengthening of Indian nationhood.  India is a diverse country with distinct languages, faiths and cultural ecosystems.  This diversity has enriched the totality of the Indian experience.  Politically too, India has embraced a greater measure of pluralism which has reshaped the federal consensus.  The States of the Union do not want to be mere appendages of the Centre.  They seek a decisive say in determining the architecture of economic growth and development.  The one-size-fits-all approach, often inherent in central planning, has the potential of creating needless tensions and undermining the harmony needed for national effort.  Dr. Ambedkar had said with foresight that it is “unreasonable to centralise powers where central control and uniformity is not clearly essential or is impracticable”.  At the heart of the dynamics of transforming India lies a technology revolution and increased access to and sharing of information.  In the course of this transformation, while some changes are anticipated and planned, many are a consequence of market forces and larger global shifts.   The evolution and maturing of our institutions and polity also entail a diminished role for centralised planning, which itself needs to be redefined. The forces transforming India are many and include: a.       The industry and service sectors have developed and are operating on a global scale now.  To build on this foundation, new India needs an administration paradigm in which the government is an “enabler” rather than a “provider of first and last resort”.  The role of the government as a “player” in the industrial and service sectors has to be reduced.  Instead, government has to focus on enabling legislation, policy making and regulation. b.      India’s traditional strength in agriculture has increased manifold on account of the efforts of our farmers and improvements in technology.  We need to continue to improve, and move from pure food security to a focus on a mix of agricultural production as well as the actual returns that farmers get from their produce. c.       Today, we reside in a ‘global village’, connected by modern transport, communications and media, and networked international markets and institutions.  As India ‘contributes’ to global endeavours, it is also influenced by happenings far removed from our borders.  Global economics and geo-politics are getting increasingly integrated, and the private sector is growing in importance as a constituent within that.  India needs to be an active player in the debates and deliberations on the global commons, especially in relatively uncharted areas. d.      India’s middle class is unique in terms of its size and purchasing power.  This formidable  group is increasing with the entry of the neo-middle class.  It has been an important driver of growth and  has enormous potential on account of its high education levels, mobility and willingness to push for change in the country.  Our continuing challenge is to ensure that this economically vibrant group remains engaged and its potential is fully realised. e.       India’s pool of entrepreneurial, scientific and intellectual human capital is a source of strength waiting to be unleashed to help us attain unprecedented heights of success.  In fact, the ‘social capital’ that is present in our people has been a major contributor to the development of the country thus far and, therefore, it needs to be leveraged through appropriate policy initiatives. f.       The Non-Resident Indian community, which is spread across more than 200 countries, is larger in number than the population of many countries of the world. This is a significant geo-economic and geo-political strength.  Future national policies must incorporate this strength in order to broaden their participation in the new India beyond just their financial support.  Technology and management expertise are self-evident areas where this community can contribute significantly. g.      Urbanisation is an irreversible trend.  Rather than viewing it as an evil, we have to make it an integral part  of our policy for development.  Urbanisation has to be viewed as an opportunity to use modern technology to create a wholesome and secure habitat while reaping the economic benefits that it offers. h.      Transparency is now a sine qua non for good governance.  We are in a digital age where the tools and modes of communication, like social media, are powerful instruments to share and explain the thoughts and actions of the government.  This trend will only increase with time.  Government and governance have to be conducted in an environment of total transparency – using technology to reduce opacity and thereby, the potential for misadventures in governing. Technology and information access have accentuated the unity in diversity that defines us.  They have helped integrate different capabilities of our regions, states and eco-systems towards an interlinked national economy.  Indeed, Indian nationhood has been greatly strengthened on their account.  To reap the benefits of the creative energy that emerges from the Indian kaleidoscope, our development model has to become more consensual and co-operative.  It must embrace the specific demands of states, regions and localities.  A shared vision of national development has to be worked out based on human dignity, national self-respect and an inclusive and sustainable development path.  The challenges we face as a country have also become more complex: India’s demographic dividend has to be leveraged fruitfully over the next few decades.  The potential of our youth, men and women, has to be realized through education, skill development, elimination of gender bias, and employment.  We have to strive to provide our youth productive opportunities to work on the frontiers of science, technology and knowledge economy. Poverty elimination remains one of the most important metrics by which alone we should measure our success as a nation.  Every Indian must be given an opportunity to live a life of dignity and self respect.  The words of Tiruvalluvar, the sage-poet, when he wrote that “nothing is more dreadfully painful than poverty”, and “gripping poverty robs a man of the lofty nobility of his descent”, are as true today as they were when written more than two thousand  years ago. Economic development is incomplete if it does not provide every individual the right to enjoy the fruits of development. Pt. Deen Dayal Upadhyaya had enunciated this in his concept of Antyodaya, or uplift of the downtrodden, where the goal is to ensure that the poorest of the poor get the benefits of development.  Inequalities based on gender biases as well as economic disparities  have to be redressed.  We need to create an environment and support system that encourages women to play their rightful role in nation-building.  Equality of opportunity goes hand in hand with an inclusiveness agenda.  Rather than pushing everyone on to a pre-determined path, we have to give every element of society – especially weaker segments like the Scheduled Castes and Scheduled Tribes - the ability to influence the choices the country and government make in setting the national agenda.  In fact, inclusion has to be predicated on a belief in the ability of each member of society to contribute.  As Sankar Dev wrote centuries ago in the Kirtan Ghosh: “To see every being as equivalent to one’s own soul is the supreme means (of attaining deliverance)”. Villages (Gram) continue to be the bedrock of our ethos, culture and sustenance.  They need to be fully integrated institutionally into the development process so that we draw on their vitality and energy. India has more than 50 million small businesses, which are a major source of employment creation.  These businesses are particularly important in creating opportunities for the backward and disadvantaged sections of the society.  Policy making must focus on providing necessary support to this sector in terms of skill and knowledge upgrades and access to financial capital and relevant technology. Responsible development implies environmentally sound development.  India is one of the mega-diverse countries.  Our environmental and ecological assets are eternal, and must be preserved and safeguarded.  The country’s legacy of respect for environment is reflected in our reverence for trees and animals.  Our legacy to future generations must be sustainable progress.  Each element of our environment (paryavaran) and resources, namely water, land  and forest (Jal, Jameen evam Jungle) must be protected; and this must be done in a manner that takes into account their inter-linkages with climate (jal vayu) and people (jan).  Our development agenda has to ensure that development does not sully the quality of life of the present and future generations. The role of the government in achieving ‘national objectives’ may change with time, but will always remain significant.  Government will continue to set policies that anticipate and reflect the country’s requirements and execute them in a just manner for the benefit of the citizens.  The continuing integration with the world – politically and economically - has to be incorporated into policy making as well as functioning of the government. In essence, effective governance in India will rest on the following pillars: a.       Pro-people agenda that fulfils the aspirations of the society as well as individual, b.      Pro-active in anticipating and responding to their needs, c.       Participative, by involvement of citizens, d.      Empowering   women in all aspects e.       Inclusion of all groups, with special attention to the economically weak (garib), the SC, ST and OBC communities,  the rural sector and farmers (gaon and kisan), youth and all categories of minorities. f.       Equality of opportunity to our country’s youth, g.      Transparency through the use of technology to make government visible and responsive. Governance, across the public and private domains, is the concern of society as a whole.  Everyone has a stake in ensuring good governance and effective delivery of services. Creating Jan Chetna, therefore, becomes crucial for people’s initiative.    In the past, governance may have been rather narrowly construed as public governance.  In today’s changed dynamics – with ‘public’ services often being delivered by ‘private’ entities, and the greater scope for ‘participative citizenry’,  governance encompasses and involves everyone. The institutional framework of government has developed and matured over the years.   This has allowed the development of domain expertise which allows us the chance to increase the specificity of functions given to institutions.  Specific to the planning process, there is a need to separate as well as energize the distinct ‘process’ of governance from the ‘strategy’ of governance. In the context of governance structures, the changed requirements of our country, point to the need for setting up an institution that serves as a Think Tank of the government – a directional and policy dynamo.  The proposed institution has to provide governments at the central and state levels with relevant strategic and technical advice across the spectrum of key elements of policy.  This includes matters of national and international import on the economic front, dissemination of best practices from within the country as well as from other nations, the infusion of new policy ideas and specific issue-based support.  The institution has to be able to respond to the changing and more integrated world that India is part of. An important evolutionary change from the past will be replacing a centre-to-state one-way flow of policy by a genuine and continuing partnership with the states.   The institution must have the necessary resources, knowledge, skills and, ability to act with speed to provide the strategic policy vision for the government as well as deal with contingent issues. Perhaps most importantly, the institution must adhere to the  tenet that while incorporating positive influences from the world, no single model can be transplanted  from outside into the Indian scenario. We need to find our own strategy for growth.  The new institution has to zero in on what will work in and for India.   It will be a Bharatiya approach to development. The institution to give life to these aspirations is the NITI Aayog (National Institution for Transforming India).  This is being proposed after extensive consultation across the spectrum of stakeholders including inter alia state governments, domain experts and relevant institutions.  The NITI Aayog will work towards the following objectives: To evolve a shared vision of national development priorities, sectors and strategies with the active involvement of States in the light of national objectives.    The vision of the NITI Aayog will then provide a framework ‘national agenda’ for the Prime Minister and the Chief Ministers to provide impetus to. To foster cooperative federalism through structured support initiatives and mechanisms with the States on a continuous basis, recognizing that strong States make a strong nation. To develop mechanisms to formulate credible plans at the village level and aggregate these progressively at higher levels of government. To ensure, on areas that are specifically referred to it, that the interests of national security are incorporated in economic strategy and policy. To pay special attention to the sections of our society that may be at risk of not benefitting adequately from economic progress.  To design strategic and long term policy and programme frameworks and initiatives, and monitor their progress and their efficacy.  The lessons learnt through monitoring and feedback will be used for making innovative improvements, including necessary mid-course corrections. To provide advice and encourage partnerships between key stakeholders and national and international like-minded Think Tanks, as well as educational and policy research institutions. To create a knowledge, innovation and entrepreneurial support system through a collaborative community of national and international experts, practitioners and other partners. To offer a platform for resolution of inter-sectoral and inter-departmental issues in order to accelerate the implementation of the development agenda. To maintain a state-of-the-art Resource Centre, be a repository of research on good governance and best practices in sustainable and equitable development as well as help their dissemination to stake-holders. To actively monitor and evaluate the implementation of programmes and initiatives, including the identification of the needed resources so as to strengthen the probability of success and scope of delivery. To focus on technology upgradation and capacity building for implementation of programmes and initiatives. To undertake other activities as may be necessary in order to further the execution of the national development agenda, and the objectives mentioned above. The NITI Aayog will comprise the following: Prime Minister of India as the Chairperson Governing Council comprising the Chief Ministers of all the States and Lt. Governors of Union Territories Regional Councils will be formed to address specific issues and contingencies impacting more than one state or a region.  These will be formed for a specified tenure.  The Regional Councils will be convened by the Prime Minister and will comprise of the Chief Ministers of States and Lt. Governors of Union Territories in the region.  These will be chaired by the  Chairperson of the NITI Aayog or his nominee. Experts, specialists and practitioners with relevant domain knowledge as special invitees nominated by the Prime Minister The full-time organizational framework will comprise of, in addition to the Prime Minister as the Chairperson:                                                               i.      Vice-Chairperson: To be appointed by the Prime Minister                                                             ii.      Members: Full-time                                                             iii.      Part-time members: Maximum of 2 from leading universities research organizations and other relevant institutions in an ex-officio capacity.  Part time members will be on a rotational basis.                                                           iv.      Ex Officio members: Maximum of 4 members of the Union Council of Ministers to be nominated by the Prime Minister.                                                              v.      Chief Executive Officer : To be appointed by the Prime Minister for a fixed tenure, in the rank of Secretary to the Government of India.                                                           vi.      Secretariat as deemed necessary. Swami Vivekananda said “Take up one idea. Make that one idea your life – think it, dream of it, live on that idea. Let the brain, muscles, nerves, every part of your body, be full of that idea and just leave every other idea alone. This is the way to success.” Through its commitment to a cooperative federalism, promotion of citizen engagement, egalitarian access to opportunity, participative and adaptive governance and increasing use of technology, the NITI Aayog will seek to provide a critical directional and strategic input into the development process.  This, along with being the incubator of ideas for development, will be the core mission of NITI Aayog.

Government establishes NITI Aayog (National Institution for Transforming India) to replace Planning Commission

NITI Aayog will seek to provide a critical directional and strategic input into the development process In accordance with a key announcement made by Prime Minister Narendra Modi on Independence Day, the Union Government today established NITI Aayog (National Institution for Transforming India), as replacement for the Planning Commission. This comes after extensive consultation across the spectrum of stakeholders, including state governments, domain experts and relevant institutions. NITI Aayog will seek to provide a critical directional and strategic input into the development process. The centre-to-state one-way flow of policy, that was the hallmark of the Planning Commission era, is now sought to be replaced by a genuine and continuing partnership of states. NITI Aayog will emerge as a "think-tank" that will provide Governments at the central and state levels with relevant strategic and technical advice across the spectrum of key elements of policy. The NITI Aayog will also seek to put an end to slow and tardy implementation of policy, by fostering better Inter-Ministry coordination and better Centre-State coordination. It will help evolve a shared vision of national development priorities, and foster cooperative federalism, recognizing that strong states make a strong nation. The NITI Aayog will develop mechanisms to formulate credible plans to the village level and aggregate these progressively at higher levels of government. It will ensure special attention to the sections of society that may be at risk of not benefitting adequately from economic progress. The NITI Aayog will create a knowledge, innovation and entrepreneurial support system through a collaborative community of national and international experts, practitioners and partners. It will offer a platform for resolution of inter-sectoral and inter-departmental issues in order to accelerate the implementation of the development agenda. In addition, the NITI Aayog will monitor and evaluate the implementation of programmes, and focus on technology upgradation and capacity building. Through the above, the NITI Aayog will aim to accomplish the following objectives and opportunities: ·         An administration paradigm in which the Government is an "enabler" rather than a "provider of first and last resort." ·         Progress from "food security" to focus on a mix of agricultural production, as well as actual returns that farmers get from their produce. ·         Ensure that India is an active player in the debates and deliberations on the global commons. ·         Ensure that the economically vibrant middle-class remains engaged, and its potential is fully realized. ·         Leverage India`s pool of entrepreneurial, scientific and intellectual human capital. ·         Incorporate the significant geo-economic and geo-political strength of the Non-Resident Indian Community. ·         Use urbanization as an opportunity to create a wholesome and secure habitat through the use of modern technology. ·         Use technology to reduce opacity and potential for misadventures in governance. The NITI Aayog aims to enable India to better face complex challenges, through the following: ·         Leveraging of India`s demographic dividend, and realization of the potential of youth, men and women, through education, skill development, elimination of gender bias, and employment ·         Elimination of poverty, and the chance for every Indian to live a life of dignity and self-respect ·         Reddressal of inequalities based on gender bias, caste and economic disparities ·         Integrate villages institutionally into the development process ·         Policy support to more than 50 million small businesses, which are a major source of employment creation ·         Safeguarding of our environmental and ecological assets

composition of NITI ayog

The NITI Aayog, set up by a resolution of the Union Cabinet, will have a multi-tiered structure, with the PM as the chairperson, a governing council comprising the chief ministers of all states and lieutenant governors of union territories, regional councils to be set up on region and state specific issues, and experts and specialists as the PM’s special invitees. “The regional councils will be convened by the Prime Minister and will comprise the chief ministers of all the states and lieutenant governors of union territories in the region. These will be chaired by the chairperson of the NITI Aayog or his nominee,” said an official statement. 

In addition, the full-time organisation framework of the NITI Aayog will comprise the PM as its chairperson, who will appoint a CEO and vice-chairperson. It will also have some full-time members and two part-time members, while four union ministers will serve as ex-officio members. While the two part-time members will - be from leading universities and research organisations, the number of full-time members has not been specified as yet. 

Sources said the names of the members are likely to be announced over the next few days - While the Planning Commission was primarily responsible for deciding on plan spending of the Centre and allocation to state governments, the NITI Aayog will provide a “national agenda framework for the Prime Minister and the chief ministers” after evolving “a shared vision of national development priorities, sectors and strategies with the active involvement of states”. Invoking the words of national and spiritual leaders including Mahatma Gandhi, Swami Vivekananda and B R Ambedkar, the government said the new agency will also “foster cooperative federalism through structured support initiatives and mechanisms with states” as well as develop mechanisms to formulate credible plans at the village level. 

“Nearly 65 years later, the country has transformed from an under-developed economy to an emergent global nation with one of the world’s largest economies… People require institutional reforms in governance and dynamic policy shifts that can seed and nurture largescale change,” said the statement. Besides, the NITI Aayog will interact with and encourage partnerships between key stakeholders and national and international like-minded think tanks, maintain a state-of-the-art resource centre on good governance and best practices in sustainable and equitable development and actively monitor and evaluate the implementation of programmes and initiatives. It will also “ensure, on areas that are specifically referred to it, that the interests of national security are incorporated in economic strategy and policy,” said the official statement, adding that it will pay special attention to the sections of society that may be at risk of not benefiting adequately from economic progress. Further, it will design strategic and long-term policy and programme frameworks and initiatives, and monitor their progress and their efficacy.

The Centre we need

New year resolutions, for the most part, are platitudes. This is because, to paraphrase Sherlock Holmes, it is the obvious that eludes us the most. The government is generating a lot of activity, but in a form more likely to cause greater economic uncertainty rather than restore clarity. And this is most true of the finance ministry, the economic face of the government. We all hope the new year will bring new resolve and clarity. But the signals are a bit confusing. So here are reminders in terms of the five key transitions needed in the new year.

First, the government was elected to restore institutional credibility, not erode it further. Frankly, the defence of the ordinance route for important legislation like coal and land acquisition is dubious on two grounds. The Opposition may have stalled Parliament. But the prime minister could have seized the political initiative with simple gestures like, “I will answer all questions in both Houses of Parliament for at least one hour a week.”  A prime minister’s question hour would have restored the dignity of Parliament. It would not have given the impression that he is running away. And if, after that, the Opposition were still obtuse, at least legitimacy would be on the government’s side. There has not been a single major gesture by the government to restore institutional credibility. The prime minister rightly said that countries with ideologies falter, those with values endure. He should have added: Those with strong institutions thrive.

Second, the government needs to make a transition from “we are a too-clever-by-half lawyers’ government” to a people’s government. This hubris did the last government in. The land acquisition act needed modification, particularly on procedures. But the nature of the proposed modifications is a recipe for future problems. First, the social impact assessment (SIA) needed rationalisation. But this could have been done by promulgating rules. It did not need an ordinance. Second, the exemption granted to PPP projects will make the act liable to misuse. The courts will step in and we will be back to square one. A typical government manoeuvre: Preserve the form of the SIA but hollow it out. And third, the ordinance does not clean up anomalies in the act. (An odd one is that if the property of a minority education institution is acquired, the market value should be such that it would not abrogate the right of the institution to function, but the same protection does not apply to majority-run educational institutions. So, as a Jain, my private institution has more protection than as a Hindu.) The intent seems to have been more to create a splash. As my colleague, Partha Mukhopadhyay, colourfully puts it, this government seems to believe not in MGNREGA, but LEGA (legal employment generation acts).transition is thinking about ends and means differently in public finance. Financial prudence and macroeconomic stability is a good thing. But making India competitive will require at least four wheels: infrastructure and energy, human capital, low morbidity and good regulation. Right now, we have about half a wheel. There is some activity in infrastructure and energy, though without credible financing plans. The ministry of human resource development is a black hole, more intent on destroying than creating. Health has always been low priority and we have not even begun to reckon with its costs to the economy. There are some interesting moves on regulation. But building a credible state that can generate compliance will require massive investment — from information systems to the judiciary, from regulatory capacity to technical knowledge. The state will need to spend on all the areas it needs to get into. We have not seen a budget in years that has a credible financial plan to get all the four wheels going. Quite the contrary, the administrative form that budgetary compression takes usually means even less rationality in expenditure. In the short run, it will also be impossible to raise growth without public investment. Let the budget serve the needs of the economy, not the economy the needs of the budget. We need to make the transition from crony capitalism to well-regulated capitalism. The inherited mess has left its imprint on every single institution, including the banking sector. Under pressure, some prosecutions are proceeding. But the government knows that chasing black money with special investigation teams is another one of those delusional too-clever-by-half solutions. It needs to create an institutional architecture that can create sensible accountability. Getting the infrastructure sector out of the mess it is in will require cutting new deals, renegotiating contracts and so forth. If the government does not have anti-corruption political capital, it will not be able to cut those deals credibly. But there is no evidence that the government has done anything to restore trust in its institutions on this score. This government was not elected to paper over the problem of plutocracy. It was elected to confront it. Finally, a modern state has to be a welfare state.

 There can be a debate about which forms of welfare enhance participation in an economy and which lock citizens into low-capability traps. Welfare is a floor, not a ceiling. There can also be a debate about the instruments of delivery. Unfortunately, what we are seeing by way of reform is not a transition from dole to participation; it is simply cutting for the sake of cutting. Rather than ad hoc cuts here and there, the government will need to spell out its roadmap for a welfare state that is credible and effective. This is particularly so in a context where rural wages are likely to stagnate over the next year or so. A good welfare state is both politically and economically prudent. A government that lets itself be ideologically confused about this will be in -trouble soon. The last year saw one of the most astounding political feats in modern Indian history: The political victory of Narendra Modi. But the political audacity has not yet been matched by economic imagination, institutional regeneration or ideological assurance. The government still has lots of political capital. It has also been lucky with energy and food prices. So the immediate sense of crisis has dissipated. But, as the year came to a close, so did the sense of euphoria. Old pathologies are beginning to reassert themselves faster than new innovations. Contrary to the defensiveness of the government, people want it to be a success. The criticism is to goad it into action. The new year resolution has to be “back to basics, not building castles in the sand”. The tides of politics wash those away rather swiftly. -

What is the difference between GSLV and PSLV?

Both PSLV (Polar Satellite Launch Vehicle) and GSLV (Geosynchronous Satellite Launch Vehicle) are the satellite-launch vehicles (rockets) developed by ISRO. PSLV is designed mainly to deliver the “earth-observation” or “remote-sensing” satellites with lift-off mass of up to about 1750 Kg to Sun-Synchronous circular polar orbits of 600-900 Km altitude.

The remote sensing satellites orbit the earth from pole-to-pole (at about 98 deg orbital-plane inclination). An orbit is called sun-synchronous when the angle between the line joining the centre of the Earth and the satellite and the Sun is constant throughout the orbit.

Due to their sun-synchronism nature, these orbits are also referred to as “Low Earth Orbit (LEO)” which enables the on-board camera to take images of the earth under the same sun-illumination conditions during each of the repeated visits, the satellite makes over the same area on ground thus making the satellite useful for earth resources monitoring.

Apart from launching the remote sensing satellites to Sun-synchronous polar orbits, the PSLV is also used to launch the satellites of lower lift-off mass of up to about 1400 Kg to the elliptical Geosynchronous Transfer Orbit (GTO).

PSLV is a four-staged launch vehicle with first and third stage using solid rocket motors and second and fourth stages using liquid rocket engines. It also uses strap-on motors to augment the thrust provided by the first stage, and depending on the number of these strap-on boosters, the PSLV is classified into its various versions like core-alone version (PSLV-CA), PSLV-G or PSLV-XL variants.

The GSLV is designed mainly to deliver the communication-satellites to the highly elliptical (typically 250 x 36000 Km) Geosynchronous Transfer Orbit (GTO). The satellite in GTO is further raised to its final destination, viz., Geo-synchronous Earth orbit (GEO) of about 36000 Km altitude (and zero deg inclination on equatorial plane) by firing its in-built on-board engines.

Due to their geo-synchronous nature, the satellites in these orbits appear to remain permanently fixed in the same position in the sky, as viewed from a particular location on Earth, thus avoiding the need of a tracking ground antenna and hence are useful for the communication applications.

Two versions of the GSLV are being developed by ISRO. The first version, GSLV Mk-II, has the capability to launch satellites of lift-off mass of up to 2,500 kg to the GTO and satellites of up to 5,000 kg lift-off mass to the LEO. GSLV MK-II is a three-staged vehicle with first stage using solid rocket motor, second stage using Liquid fuel and the third stage, called Cryogenic Upper Stage, using cryogenic engine.

NITI Aayog to replace Planning Commission

NITI (National Institution for Transforming India) Aayog will have a governing council comprising all Chief Ministers and Lt. Governors.

The 65-year-old Planning Commission was on Thursday replaced by a new body, NITI Aayog or National Institution for Transforming India, which will serve as a policy think-tank for the central as well as State governments and have Prime Minister as its Chairperson.

The NITI Aayog will have a governing council comprising of all State Chief Ministers and Lt. Governors and will work towards fostering a ‘co-operative federalism’ for providing a “national agenda” to the Centre and States.

The body will have a CEO and a Vice-Chairperson, to be appointed by the Prime Minister, in addition to some full-time members and two part-time members, while four Union Ministers would serve as ex-officio members.

The Planning Commission, known as a socialist era institution, instead had a Deputy Chairperson.

Besides, there would be specific regional councils, while experts and specialists from various fields would be there as “special invitees nominated by the Prime Minister“.

“NITI Aayog will serve as a ‘Think Tank’ of the government as “a directional and policy dynamo” and would provide the governments at the Centre and in states with strategic and technical advice on key policy matters including economic issues of national and international importance,” an official statement said.

NITI Aayog follows Prime Minister Narendra Modi’s announcement in his Independence Day speech in August 2014 that there is a need for replacing the Planning Commission by a new body keeping in view the changed economic scenario.

The government has set up the new body through a Cabinet Resolution, wherein it has invoked words of leaders like Mahatma Gandhi, B.R. Ambedkar, Swami Vivekananda and Deen Dayal Upadhyaya.

While the two part-time members would be from leading universities and research organisations, the number of full time members has not been specified as yet.

As per the Resolution, the NITI Aayog will provide a ’national agenda’ for the Prime Minister and Chief Ministers to foster cooperative federalism while recognising that “strong states make a strong nation“.

It will also interact with other national and international Think Tanks, as also with educational and policy research institutions.