bhayankari

ഞാനൊരു ഭയങ്കരി തന്നെ ;
മൂക്കത്ത് ശുണ്ടി
വായില്‍ വികട ദേവത
നോട്ടത്തില്‍ അരിശം
ചേഷ്ടയില്‍ ഭ്രാന്തം

താതന്റെ കോപത്തില്‍ വിവാഹം
അമ്മയുടെ കണ്ണീരില്‍ ജീവിതം
കാന്തന്റെ ജാള്യതയില്‍ അപമാനം
ഞാനും വളയുന്നു കമാനം


ഇന്നലെ കോപത്തില്‍ സ്വന്തം താലി ഞാന്‍ ദൂരെ പൊട്ടിച്ചെറിഞ്ഞു;
എനിക്കെന്റെ കോപത്തിനെ തീറ്റണമായിരുന്നു
അടക്കിയ വേദനാ പര്‍വത്തിനെ ആശ്വസിപ്പിക്കണമായിരുന്നു
എന്നെ നീ വെറുക്കുക
വെറുതെ വെറുക്കുക
ഞാനതില്‍ സന്തോഷിക്കുന്നു
എന്തെന്നാല്‍ .....

ഞാനൊരു ഭയങ്കരി !

ECONOMIC DEVELOPMENT AND ENVIRONMENT

Economic development without environmental considerations can cause serious environmental damage, in turn impairing the quality of life of present and future generations. Such environmental degradation imposes a cost on the society and needs to be explicitly factored into economic planning, with necessary remedial measures incorporated. The challenge of sustainable development thus requires integration of the country's quest for economic development with its environmental concerns.  Environment management in India has, over the years, recognized these sustainable development concerns. The National Environment Policy 2006 has attempted to mainstream environmental concerns in all our developmental activities. It underlines that "while conservation of environmental resources is necessary to secure livelihoods and well being of all, the most secure basis for conservation is to ensure that people dependent on particular resources obtain better livelihoods from the fact of conservation, than from degradation of the resource".  A few recent initiatives The Ministry of Environment and Forests has notified the Wetlands (Conservation and Management) Rules 2010 in order to ensure that there is no further degradation of wetlands. The rules specify activities that are harmful to wetlands, such as industrialization, construction, dumping of untreated waste and reclamation and prohibit these activities in the wetlands. Other activities, such as harvesting and dredging may be carried out in the wetlands but only with prior permission from the concerned authorities.  The National Green Tribunal (NGT) Act, 2010 came into force on October 18, 2010. As per the provisions of the NGT Act 2010, the National Environment Appellate Authority (NEAA), established under the NEAA Act, 1997, stands dissolved and the cases pending before NEAA stand transferred to the NGT. The Act provides for the establishment of a NGT for the effective and expeditious disposal of cases relating to environmental protection and conservation of forests and other natural resources, including enforcement of any legal right relating to environment and giving relief and compensation for damages to persons and property and for matters connected therewith or incidental thereto.  Coastal ecosystems are a critical reservoir of our biodiversity and provide protection from natural disasters such as floods and tsunamis and are a source of livelihood to hundreds of millions of families. Hence, as a major national initiative in this direction, the Coastal Regulation Zone Notification has been published in the gazette of India on January 6, 2011.  The Government of India and World Bank have signed a loan agreement for the implementation of an Integrated Coastal Zone Management Project, which will be implemented at a total cost of Rs 1156 crore. The World Bank will contribute an amount of Rs 897 crore (77.7 per cent), the Government of India Rs 177 Crore (15.4 per cent), and the States Rs 80 Crore (6.9 per cent). This project is for a period of five years and it is estimated that it will benefit 3.56 crore people directly 6.30 crore indirectly.  Climate Change Climate Change, as a global environmental problem has been receiving intense political attention at domestic and international levels. 'Climate change' means a change of climate which is attributed directly or indirectly to human activity, that alters the composition of the global atmosphere and is in addition to natural climate variability observed over comparable time periods. Increasing levels of fossil fuel burning and land use changes have emitted, and are continuing to emit, greenhouse gases (mainly carbon dioxide, methane, and nitrous oxide) into the earth's atmosphere. This increasing level of emissions of greenhouse gases has caused a rise in the amount of heat from the sun trapped in the earth's atmosphere, heat that would normally be radiated back into space. This has led to the greenhouse effect, resulting in climate change.  Besides, Global Greenhouse Gas (GHG) emissions have risen sharply since 1945. As per a working paper published by the World Resources Institute, total GHGs were estimated at 44,153 MtCo2 equivalents (million metric tons) in 2005. This is the most recent year for which comprehensive emissions data are available for every major gas and sector. Total global emissions grew by 12.7 per cent between 2000 and 2005, an annual average of 2.4 per cent. CO2 is the predominant gas accounting for 77 per cent of world GHG emissions in 2005, followed by methane (15 per cent) and nitrous oxide (7 per cent). North America accounted for 18 per cent of world GHG emissions, China for 16 per cent, and the EU for 12 per cent in 2005. India's share stood at 4 per cent in 2005. The issue of climate change is now placed firmly on national and international agendas, subject to scrutiny by public and media, and is even shaping the strategies of a number of businesses. Internationally, the United Nations Framework Convention on Climate Change (the Convention) was set up in 1992 and entered into force in 1994. This was a crucial step in putting in place the institutions and processes for the world's Governments to take coordinated and effective action.  The Convention laid the groundwork for concerted international action, which in 1997 led to the adoption of the Kyoto Protocol containing a legally binding quantitative time-bound target for developed countries. The Kyoto Protocol set a target for developed countries (individually or jointly) to reduce overall emissions by at least 5 per cent below 1990 levels in the first commitment period, 2008 to 2012. Recognizing that relying on domestic measures alone to meet the target could be onerous, the Kyoto Protocol offers considerable flexibility through three mechanisms: Clean Development Mechanism (CDM), Joint Implementation (JI), and Emissions Trading (ET). Through the CDM, industrial countries can finance mitigation projects in developing countries contributing to their sustainable development.  Credits received from such projects can be used to meet commitments under the Kyoto Protocol. Through JI, industrialized countries acquire emissions credit by financially supporting projects in other industrialized countries. Currently, international actions for addressing climate change are being pursued under the Bali Action Plan and the mandate of the Kyoto Protocol. The 15th CoP held at Copenhagen in December 2009 made some advance in the form of the 'Copenhagen Accord', which reflects the political understanding reached by a select group of countries. However, this was only 'noted' and not adopted by the Parties to the Convention. The recent negotiations held at Cancun during November 29 -  December 11, 2010, have resulted in a set of decisions that cover various areas of action, for example mitigation, adaptation, technology and finance as outlined in the Bali Action Plan, while agreeing to work towards an ambitious target of emissions reduction under the Kyoto Protocol.  India's Greenhouse Emissions Although India ranks in the top five in terms of GHG emissions, the per capita emissions are much lower compared to those of the developed countries, even if the historical emissions are excluded. Its high level of emissions is due to large populace, geographical size and large economy. The most recent data available for India are the assessment carried out by the Indian Network for Climate Change Assessment (INCCA) in May 2010. The key results of the assessment are that the total net GHG emissions from India in 2007 were 1727.71 million tons of CO2 equivalent (eq.), of which carbon dioxide emissions were 1221.76 million tons; methane 20.56 million tons; and nitrous oxide 0.24 million tons. In 1994, the total net GHG emissions for India were 1228.54 million tons of CO2 eq. This represents a compounded annual growth rate of 2.9 per cent during the period 1994 to 2007. GHG emissions from the energy, industry, agriculture, and waste sectors in 2007 constituted 58 per cent, 22 per cent, 17 per cent, and 3 per cent of the net CO2 eq. emissions respectively. India's per capita CO2 eq. emissions including land use, land use change, and forestry (LULUCF) were 1.5 tons per capita in 2007. Impacts of Climate Change in India Climate change has enormous implications for the natural resources and livelihoods of the people. It will have wide-ranging effects on the environmental and socio-economic and related sectors. Various studies indicate that the key sectors in India such as the agriculture, water, natural ecosystem, biodiversity, and health are vulnerable to climate change. This is happening precisely at a time when it is confronted with huge development imperatives. The Indian Network for Climate Change Assessment (INCCA) released a report in November 2010 on assessment of the impact of climate change on key sectors and regions of India in the 2030s. The assessment covers four key sectors of the Indian economy, namely agriculture, water, natural ecosystems and biodiversity, and health in four climate sensitive regions, namely the Himalayan region, the Western Ghats, the Coastal Area, and the North-east region. The report warns of impacts such as sea-level rise, increase in cyclonic intensity, reduced crop yield in rain-fed crops, stress on livestock, reduction in milk productivity, increased flooding, and spread of malaria. This calls for urgency of action in reducing vulnerability to adverse impacts of climate change and enhancing adaptive capacity through sector-specific interventions and efforts. India's Strategies India's total CO2 emissions are about 4 per cent of total global CO2 emissions and the energy intensity of India's output has been falling with improvements in energy efficiency, autonomous technological changes, and economical use of energy. India's climate modeling studies show that even with 8-9 per cent gross domestic product (GDP) growth every year for the next decade or two, its per capita emissions will be around 3-3.5 tonnes of CO2eq. by 2030, as compared to the present 1-1.2 tonnes. These are well below developed country averages by any estimation.  India's determination in addressing climate change is evident from the fact that an indicative target of increasing energy efficiency by 20 per cent by 2016-17 is already included in the Eleventh Five Year Plan. This has now been supplemented with the domestic mitigation goal of reducing emissions intensity of the GDP by 20-25 per cent of the 2005 level by 2020 through proactive policies. The resources for the measures required to achieve this objective will need to be mobilized from various sources, including the national planning process. Studies in respect of a low carbon strategy for development aimed at ensuring inclusive growth are being conducted with the aim of including this as one of the key pillars in the Twelfth Five Year Plan. Second, India is taking conscious steps to diversify the energy fuel mix such as setting up of 20,000 MW of solar power-generating capacity by 2022, doubling the present share of 3 per cent of nuclear power in the energy mix over the next decade, putting in place a major market-based programme to stimulate energy efficiency, imposing clean energy cess on coal for funding research and development (R&D) of clean energy technologies, even though coal will continue to play a key role in our future energy strategy, and aggressively expanding the use of natural gas in power production.  Third, India has been pursuing aggressive strategies for forestry and coastal management to increase the quality and quantity of forest cover and has launched a major new programme on coastal zone management to address the adaptation challenges facing over 300 million people in our country who live in vulnerable areas near our coast. As part of its international obligations under the United Nations Framework Convention on Climate Change (UNFCCC) India periodically prepares the National Communication (NATCOM) that gives an inventory of the GHG emissions in India, assesses the vulnerability and impacts, and makes appropriate recommendations regarding social, economic and technological measures for addressing climate change.  India's strategy for enhancing its adaptive capacity to climate variability is reflected in many of its social and economic development programmes. For developing countries like India, adaptation ultimately boils down to assisting the vulnerable population during exigencies and empowering them to build their lives and cope with uncertainties in the long run. Several of India's social-sector schemes, with their emphases on livelihood security and welfare of the weaker sections, aim to do just that. India implements a series of Central sector and centrally sponsored schemes under different Ministries/Departments aimed at achieving social and economic development. Many of these schemes contain elements (objectives and targets) that are decidedly geared to adaptation. In other words, there is substantial adaptation orientation in many of the sectoral schemes currently under operation. An exercise has been carried out to measure the expenditure on adaptation-related programmes with critical adaptation components: (a) crop improvement and research, (b) poverty alleviation and livelihood preservation, (c) drought proofing and flood control, (d) risk financing, (e)forest conservation, (f) health, and (g) rural education and infrastructure. It has been found that India's expenditure on these adaptation-oriented schemes has increased from 1.45 per cent of GDP in the year 2000-01 to 2.84 per cent during 2009-10. This is a fairly impressive level of spending and is an obvious reflection of the multiplicity of economic and social welfare programmes under implementation in India. India has announced a National Action Plan on Climate Change (NAPCC) in June, 2008 which incorporates its vision of sustainable development and the steps it must take to realize it. Climate Change Financing Climate change is a complex policy issue with major implications in terms of finances for addressing mitigation of GHG emissions, on the one hand, and coping with the adverse impacts of climate change on the community and population, ecosystem, economy and livelihood, on the other. All actions to address climate change ultimately involve costs. Funding is vital in order for countries like India to design and implement adaptation and mitigation plans and projects.  Lack of funding is a large impediment to implementing adaptation plans. Article 4 of the Convention states that developed countries shall provide financial resources to assist developing country Parties in addressing climate change. The funds that are currently available under the Convention and the Kyoto Protocol are small compared to the magnitude of the need assessed by many studies. The UNFCCC has estimated a requirement of US$ 200-210 billion in additional investment in 2030 to return GHG emissions to current level. Further, additional investment needed worldwide for adaptation is estimated to be US$ 60-182 billion in 2030 by UNFCCC, inclusive of an expenditure of US$ 28-67 billion in developing countries. As various estimates point to the enormity of funds to address climate change, developing countries including India have been arguing that a global mechanism for generating and accounting for additional resources, mainly from public sources, is essential for meeting the long-term finance requirements for adaptation and mitigation. There should be a multilateral financial mechanism under the Convention that should be set up with resources provided by developed countries on the basis of assessed contributions. One of the important outcomes of the Cancun Agreements from the finance point of view is the decisions on 'fast start finance, long-term finance, and Green Climate Fund'. At Cancun, it was decided to set up a 'Green Climate Fund', to be designated as an operating entity of the Financial Mechanism of the Convention under Article 11. The Green Climate Fund is accountable to and functions under the guidance of the CoP. The Fund will support environment-related projects, programmes, policies, and other activities in developing countries.  While the outcomes in Cancun on Climate Fund, Technology Mechanism, and Adaptation Framework and Forestry (REDD+) are welcome, further work is needed on strengthening of weak mitigation pledges by developed countries, preventing unilateral trade actions in the name of climate change, and continuing a dialogue on intellectual property rights as part of technology development and transfer efforts. Moreover, a successful global effort for addressing climate change must be built on sound principles of equity and common but differentiated responsibilities. Equity in terms of equitable access to global atmospheric resources should define the pathway to attainment of a long-term goal in line with the broad findings of science.  Besides, the increasing importance of climate-related issues should not shake the foundations of our inclusive growth strategy. Careful planning and customized policies are needed to ensure that the green growth strategies do not result in a slow growth strategy. Eight National Missions Jawaharlal Nehru National Solar Mission (JNNSM): The government has launched the JNNSM in January 2010 with a target of 20,000 MW grid solar power (based on solar thermal power- generating systems and solar photovoltaic [SPV] technologies), 2000 MW of off-grid capacity by 2022. The Mission will be implemented in three phases. The first phase will last three years (up to March 2013), the second till March 2017, and the third till March 2022. The Government has also approved the implementation of the first phase of the Mission (up to March 2013) and the target to set up 1100 MW grid-connected solar plants including 100 MW of rooftop and small solar plants and 200 MW capacity-equivalent off-grid solar applications and a 7 million sq.m solar thermal collector area in the first phase of the Mission, till 2012-13. Energy Conservation and Efficiency: The objective of the National Mission for Enhanced Energy Efficiency (NMEEE) is to achieve growth with ecological sustainability by devising cost-effective strategies for end- use demand-side management. The Ministry of Power and Bureau of Energy Efficiency have been entrusted with the task of preparing the implementation plan for the NMEEE and up-scaling the efforts to create and sustain market for energy efficiency to unlock investment of around Rs 74,000 crore. The Mission is likely to achieve about 23 million tons oil-equivalent of fuel savings—in coal, gas, and petroleum product—by 2014-15, along with an expected avoided capacity addition of over 19,000 MW. The carbon dioxide emission reduction is estimated to be 98.55 million tons annually. National Mission on Strategic Knowledge for Climate Change (NMSKCC): The NMSKCC has been launched with the broad objectives of mapping of the knowledge and data resources relevant to climate change and positioning of a data-sharing policy framework for building strategic knowledge among the various arms of the Government, identification of knowledge gaps, networking of knowledge institutions after investing critical mass of physical, intellectual, and policy infrastructure resources, creation of new dedicated centres within the existing institutional framework, building of international cooperation on science and technology for climate change agenda through strategic alliances and assistance for the formulation of policies for a sustained developmental agenda. National Mission for Sustaining Himalayan Ecosystem (NMSHE): The broad objectives of the NMSHE include: understanding the complex processes affecting the Himalayan ecosystem and evolving suitable management and policy measures for sustaining and safeguarding it, creating and building capacities in different domains, networking of knowledge institutions engaged in research and development of a coherent data base on the Himalayan ecosystem, detecting and decoupling natural and anthropogenic-induced signals of global environmental changes in mountain ecosystems, studying traditional knowledge systems for community participation in adaptation, mitigation, and coping mechanisms inclusive of farming and traditional health care systems, and developing regional cooperation with neighbouring countries, to generate a strong data base through monitoring and analysis so as to eventually create a knowledge base for policy interventions. National Water Mission: The objectives of the National Water Mission are 'conservation of water, minimizing wastage and ensuring its more equitable distribution both across and within States through integrated water resources management'. The goals of the Mission are a comprehensive water data base in the public domain, assessment of the impact of climate change on water resources, promotion of citizen and State actions for water conservation, augmentation and preservation, focused attention to overexploited areas, increasing water use efficiency by 20 per cent, and promotion of basin-level integrated water resources management. Green India Mission: The Mission aims at responding to climate change through a combination of adaptation and mitigation measures. These measures include enhancing carbon sinks in sustainably managed forests and other ecosystems, adaption of vulnerable species/ecosystems to the changing climate, and adaptation of forest-dependent communities. The objectives of the Mission are increased forest/tree cover on 5 million ha of forest/non-forest lands and improved quality of forest cover on another 5 million ha (a total of 10 million ha), improved ecosystem services including biodiversity, hydrological services, carbon sequestration as a result of treatment of 10 million ha), increased forest-based livelihood income for about 3 million households living in and around the forest, and enhanced annual CO2 sequestration by 55 million tonnes in the year 2020. National Mission on Sustainable Habitat (NMSH): The NMSH seeks to promote sustainability of habitats through improvements in energy efficiency in building and urban planning, improved management of solid and liquid waste including recycling and power generation, modal shift towards public transport, and conservation. It also seeks to improve ability of habitats to adapt to climate change by improving resilience of infrastructure, community- based disaster management, and measures for improving advance warning systems for extreme weather events. National Mission for Sustainable Agriculture: The National Mission for Sustainable Agriculture (NMSA) seeks to address issues regarding 'sustainable agriculture' in the context of risks associated with climate change by devising appropriate adaptation and mitigation strategies for ensuring food security, enhancing livelihood opportunities, and contributing to economic stability at national level. Under this Mission, the adaptation and mitigation measures would be mainstreamed in research and development activities, absorption of improved technology and best practices, creation of physical and financial infrastructure and institutional framework, facilitating access to information and promoting capacity building. While promotion of dry-land agriculture would receive prime importance by way of developing suitable drought- and pest-resistant crop varieties and ensuring adequacy of institutional support, the Mission would also expand its coverage to rain-fed areas for integrating farming systems with livestock and fisheries so that agriculture continues to grow in a sustainable manner.

UNION BUDGET 2012

On March 16, 2012, battling a tough economic situation and severe political compulsions, Finance Minister Pranab Mukherjee did a balancing act to present a pragmatic and realistic Union Budget for 2012-13. 

For Indian economy, recovery was interrupted in 2011-12 due to intensification of debt crises in Euro zone, political turmoil in Middle East, rise in crude oil price and earthquake in Japan.

While tax payers got some relief in the form of increase in exemption and changes in income tax brackets, the Budget, as expected, was tax heavy for consumption as both excise and service tax went up from 10 per cent to 12 per cent. 

For individuals, there is relief on personal income tax with the increase in exemption limit from Rs. 1.8 lakh to Rs. 2 lakh. The upper end of the 20 per cent tax slab has been raised from Rs 8 lakh to 10 lakh as Direct Tax Code (DTC) slabs have been fast-tracked. An individual with an income of Rs 10 lakh or more will pay Rs. 22,000 less in taxes.

While the direct tax proposals in the Budget will result in a revenue loss of Rs. 4,500 crore, indirect tax proposals would result in a revenue gain of Rs. 45,940 crore. Tax proposals lead to a net gain of Rs 41,440 crore. Service tax proposals alone are expected to yield additional revenue of Rs 18,660 crore. 

The fiscal deficit for this year is at 5.9 per cent, much higher than the Budget estimates of 4.6 per cent. In 2013-14, it is proposed to bring it down to 5.1 per cent.

Outlays for welfare schemes have seen modest hikes as the focus is on controlling expenditure. Allocation for road transport has been enhanced by 14 per cent. Target for agricultural credit has been raised to Rs 5.75 lakh crore. Rural drinking water and sanitation has got 27 per cent rise in allocation to Rs 14,000 crore. RTE has got Rs 25,555 crore allocation, showing an increase of 21 per cent.

The government has set a target to raise Rs 30,000 crore from stake sales in public sector undertakings in 2012-13, even as it missed the target for the current fiscal by a wide margin.

Finance Minister announced a justifiable 17.6 per cent hike in its defence spending to allocate an additional Rs. 28,992 crore for 2012-13, over the ongoing year's Rs. 1,64,415 crore defence budget. New Delhi will spend Rs. 1,93,407 crore, nearly $38.6 billion, on defence which is about 11 per cent of the entire country's budgetary outlay for the financial year 2012-13.

In an effort to encourage investment in the infrastructure sector, the Union Budget has allowed financial institutions to raise about Rs 60,000 crore through tax-free bonds in 2012-13.

Finance Minister Pranab Mukherjee announced a Rs. 1,00,000 crore increase in the agriculture credit target, boosting it to Rs. 5,75,000 for the next fiscal, and raised the outlay for farm sector by more than Rs 3,000 crore—proposals that farmers' representatives called "encouraging" and economists "lacking in new initiatives". The total plan outlay for the sector has been increased by 18 per cent, up from Rs 17, 123 crore in 2011-12 to Rs 20,208 crore in 2012-13.

With India set to become the youngest nation in the world by 2020, the government continued to raise education budget to reap the benefit of demographic dividend and increased allocations to the sector by 18.6 per cent in 2011-2012.

The proposed overall social sector spending is up by Rs. 30,931 crore over the Budget of 2011-2012. This represents 16.5 per cent hike, with the proposed funding going up to Rs. 218,041 crore in 2012 Budget, as against Rs. 187,110 crore in 2011-2012.

Every social sector ministry got enhanced allocations with the education sector getting the maximum raise of Rs. 9,665 crore. As against Rs. 51,772 crore in 2011, Budget 2012 proposes Rs. 61,427 crore allocation for education.

Bulk of the 2012 education Budget has gone for school literacy—Rs. 45,659 crore (a hike of 18 per cent over 2011) as against Rs. 15,458 crore for university and higher education.

India's cash-strapped airline industry got some relief, with Finance Minister Pranab Mukherjee proposing permission of external commercial borrowings worth $1 billion (around Rs 5,000 crore) for working capital requirement for a year and recommended allocating Rs 4,000 crore to the ailing national carrier Air India for 2012-13.

Highlights
— Twelfth Five Year Plan to be launched with the aim of "faster, sustainable and more inclusive growth". Five objectives identified to be addressed effectively in 2012-13.
— GDP growth estimated at 6.9 per cent in real terms in 2011-12. Slowdown in comparison to preceding two years is primarily due to deceleration in industrial growth.
— Current account deficit at 3.6 per cent of GDP for 2011-12 and reduced net capital inflow in the 2nd and 3rd quarters put pressure on exchange rate.
— India's GDP growth in 2012-13 expected to be 7.6 per cent +/- 0.25 per cent.
— Deterioration in fiscal balance in 2011-12 due to slippages in direct tax revenue and increased subsidies.
— Introduction of amendments to the FRBM Act as part of Finance Bill, 2012. Concept of "Effective Revenue Deficit" and "Medium Term Expenditure Framework" statement are two important features of amendment to FRBM Act in the direction of expenditure reforms.
— Endeavour to keep central subsidies under 2 per cent of GDP in 2012-13. Over next 3 year, to be further brought down to 1.75 per cent of GDP.
— Based on recommendation of task force headed by Shri Nandan Nilekani, a mobile-based Fertilizer Management System has been designed to provide end-to-end information on movement of fertilisers and subsidies. Nation-wide roll out during 2012-13.
— GST network to be set up as a National Information Utility and to become operational by August 2012.
— For 2012-13, Rs.30,000 crore to be raised through disinvestment. At least 51 per cent ownership and management control to remain with government.
— Provision regarding implementation of Advance Pricing Agreement to be introduced in Finance Bill, 2012.
— Rajiv Gandhi Equity Saving Scheme, to allow for income tax deduction of 50 per cent to new retail investors, who invest up to Rs.50,000 directly in equities and whose annual income is below Rs.10 lakh, to be introduced. The scheme will have a lock-in period of 3 years.
— A central "Know Your Customer" depository to be developed in 2012-13 to avoid multiplicity of registration and data upkeep.
— Out of 73,000 identified habitations that were to be covered under "Swabhimaan" campaign by March, 2012, about 70,000 habitations have been covered. Rest likely to be covered by March 31, 2012. As a next step, Ultra Small Branches are being set up at these habitations.
— Out of 82 RRBs in India, 81 have successfully migrated to Core Banking Solutions and have also joined the National Electronic Fund Transfer system.
— Tax free bonds of Rs.60,000 crore to be allowed for financing infrastructure projects in 2012-13.
— National Manufacturing Policy announced with the objective of raising, within a decade, the share of manufacturing in GDP to 25 per cent and creating of 10 crore jobs.
— External Commercial Borrowings (ECB) to be allowed to part finance Rupee debt of existing power projects.
— Target of covering a length of 8,800 kilometre under NHDP next year.
— Allocation of the Road Transport and Highways Ministry enhanced by 14 per cent to Rs. 25,360 crore.
— ECB proposed to be allowed for capital expenditure on the maintenance and operations of toll systems for roads and highways, if they are part of original project.
— ECB to be permitted for working capital requirement of airline industry for a period of one year, subject to a total ceiling of US $ 1 billion.
— Two more mega handloom clusters, one to cover Prakasam and Guntur districts in Andhra Pradesh and another for Godda and neighbouring districts in Jharkhand to be set up.
— Three Weaver's Service Centres, one each in Mizoram, Nagaland and Jharkhand, to be set up for providing technical support to poor handloom weavers.
— Rs.500 crore pilot scheme announced for promotion and application of Geo-textiles in the North Eastern Region.
— A powerloom mega cluster to be set up in Ichalkaranji in Maharashtra with a budget allocation of Rs. 70 crore.
— Rs. 5,000 crore India Opportunities Venture Fund to be set up with SIDBI.
— Plan Outlay for Department of Agriculture and Co-operation increased by 18 per cent.
— Outlay for Rashtriya Krishi Vikas Yojana (RKVY) increased to Rs. 9,217 crore in 2012-13.
— Initiative of Bringing Green Revolution to Eastern India (BGREI) has resulted in increased production and productivity of paddy. Allocation for the scheme increased to Rs. 1,000 crore in 2012-13, from Rs. 400 crore in 2011-12.
— Rs. 300 crore to Vidarbha Intensified Irrigation Development Programme under RKVY.
— Rs. 2,242 crore project launched with World Bank assistance to improve productivity in the dairy sector. Rs. 500 crore provided to broaden scope of production of fish to coastal aquaculture.
— Target for agricultural credit raised by Rs. 1,00,000 crore to Rs. 5,75,000 crore in 2012-13.
— Interest subvention scheme for providing short term crop loans to farmers at 7 per cent interest per annum to be continued in 2012-13. Additional subvention of 3 per cent available for prompt paying farmers.
— Kisan Credit Card (KCC) Scheme to be modified to make KCC a smart card which could be used at ATMs.
— A sum of Rs. 200 crore set aside for incentivising research with rewards.
— Structural changes in Accelerated Irrigation Benefit Programme (AIBP) being made to maximise flow of benefit from investments in irrigation projects. Allocation for AIBP in 2012-13 stepped up by 13 per cent to Rs.14,242 crore.
— A new centrally sponsored scheme titled "National Mission on Food Processing" to be started in 2012-13 in co-operation with State governments.
— Allocation for Scheduled Castes Sub Plan at Rs. 37,113 crore in BE 2012-13 represents an increase of 18 per cent over BE 2011-12.
— Allocation for Tribal Sub Plan at Rs. 21,710 crore in BE 2012-13 represents an increase of 17.6 per cent.
— Allocation of Rs. 15,850 crore made for Integrated Child Development Service (ICDS) scheme, representing an increase of 58 per cent over BE 2011-12.
— Rs. 11,937 crore allocated for National Programme of Mid Day Meals in schools.
— An allocation of Rs. 750 crore proposed for Rajiv Gandhi Scheme for Empowerment of Adolescent Girls, SABLA.
— Budgetary allocation for rural drinking water and sanitation increased from Rs. 11,000 crore to Rs. 14,000 crore representing an increase of over 27 per cent.
— Allocation for PMGSY increased by 20 per cent to Rs. 24,000 crore to improve connectivity.
— Major initiative proposed to strengthen Panchayats through Rajiv Gandhi Panchayat Sashaktikaran Abhiyan.
— Backward Regions Grant Fund scheme to continue in twelfth plan with enhanced allocation of Rs. 12,040 crore in 2012-13, representing an increase of 22 per cent over the BE 2011-12.
— Allocation under RIDF enhanced to Rs. 20,000 crore. Rs. 5,000 crore earmarked exclusively for creating warehousing facilities.
— 6,000 schools proposed to be set up at block level as model schools in Twelfth Plan.
— Rs. 3,124 crore provided for Rashtriya Madhyamik Shiksha Abhiyan (RMSA) representing an increase of 29 per cent over BE 2011-12.
— Scope of 'Accredited Social Health Activist' – 'ASHA' is being enlarged. This will also enhance their remuneration.
— Allocation for NRHM proposed to be increased from Rs. 18,115 crore in 2011-12 to Rs. 20,822 crore in 2012-13.
— National Urban Health Mission is being launched.
— Pradhan Mantri Swasthya Suraksha Yojana being expanded to cover upgradation of 7 more government medical colleges.
— Proposal to establish Bharat Livelihoods Foundation of India through Aajeevikascheme.
— Allocation for Prime Minister's Employment Generation Programme increased by 23 per cent to Rs. 1,276 crore in 2012-13.
— Projects approved by National Skill Development Corporation expected to train 6.2 crore persons at the end of 10 years.
— Rs. 1,000 crore allocated for National Skill Development Fund in 2012-13.
— "Himayat" scheme introduced in J&K to provide skill training to 1 lakh youth in next 5 years. Entire cost to be borne by Centre.
— In the ongoing Indira Gandhi National Widow Pension Scheme and Indira Gandhi National Disability Pension Scheme for BPL beneficiaries, pension amount to be raised from Rs. 200 to Rs. 300 per month.
— To enhance access under SWAVALAMBAN scheme, LIC appointed as an Aggregator and all Public Sector Banks appointed as Points of Presence (PoP) and Aggregators.
— A provision of Rs. 1,93,407 crore made for Defence services, including Rs. 79,579 crore for capital expenditure.

BUDGET ESTIMATES 2012-13
— Gross Tax Receipts estimated at Rs. 10,77,612 crore.
— Net Tax to Centre estimated at Rs. 7,71,071 crore.
— Non-tax Revenue Receipts estimated at Rs. 1,64,614 crore.
— Non-debt Capital Receipts estimated at Rs. 41,650 crore.
— Total expenditure for 2012-13 budgeted at Rs. 14,90,925 crore.
— Plan expenditure for 2012-13 at Rs. 5,21,025 crore is 18 per cent higher than BE 2011-12. This is higher than 15 per cent projected in Approach to the Twelfth Plan.
— 99 per cent of the total plan outlay met in the Eleventh Plan.
— Non-plan expenditure estimated at Rs. 9,69,900 crore.
— Rs. 3,65,216 crore estimated to be transferred to States including direct transfers to States and district level implementing agencies.
— Entire amount of subsidy is given in cash and not as bonds in lieu of subsidies.
— Fiscal deficit at 5.9 per cent of GDP in RE 2011-12.
— Fiscal deficit at 5.1 per cent of GDP in BE 2012-13.
— Net market borrowing required to finance the deficit to be Rs.4.79 lakh crore in 2012-13.
— Central Government debt at 45.5 per cent of GDP in 2012-13, as compared to Thirteenth Finance Commission target of 50.5 per cent.
— Effective Revenue Deficit to be 1.8 per cent of GDP in 2012-13.

DIRECT TAXES
— Exemption limit for the general category of individual taxpayers proposed to be enhanced from Rs.1,80,000 to Rs.2,00,000 giving tax relief of Rs.2,000.
— Upper limit of 20 per cent tax slab proposed to be raised from Rs.8 lakh to Rs.10 lakh.
— Proposal to allow individual tax payers, a deduction of upto Rs. 10,000 for interest from savings bank accounts.
— Proposal to allow deduction of up to Rs. 5,000 for preventive health check up.
— Senior citizens not having income from business proposed to be exempted from payment of advance tax.
— Restriction on Venture Capital Funds to invest only in 9 specified sectors proposed to be removed.
— Proposal to continue to allow repatriation of dividends from foreign subsidiaries of Indian companies at a lower tax rate of 15 per cent up to March 31, 2013.
— Investment link deduction of capital expenditure for certain businesses proposed to be provided at the enhanced rate of 150 per cent.
— Turnover limit for compulsory tax audit of account and presumptive taxation of SMEs to be raised from Rs.60 lakhs to Rs.1 crore.
— Exemption from Capital Gains tax on sale of residential property, if sale consideration is used for subscription in equity of a manufacturing SME for purchase of new plant and machinery.
— Proposal to provide weighted deduction at 150 per cent of expenditure incurred on skill development in manufacturing sector.
— Reduction in securities transaction tax by 20 per cent on cash delivery transactions.
— A net revenue loss of Rs.4,500 crore estimated as a result of Direct Tax proposals.

INDIRECT TAXES
— Proposal to tax all services except those in the negative list comprising of 17 heads.
— Exemption from service tax is proposed for some sectors.
— Proposals from service tax expected to yield additional revenue of Rs. 18,660 crore.
— Given the imperative for fiscal correction, standard rate of excise duty to be raised from 10 per cent to 12 per cent, merit rate from 5 per cent to 6 per cent and the lower merit rate from 1 per cent to 2 per cent with few exemptions.
— Excise duty on large cars also proposed to be enhanced.
— Full exemption from basic customs duty for import of equipment for expansion or setting up of fertilizer projects upto March 31, 2015.
— Relief proposed to be extended to sectors such as steel, textiles, branded ready-made garments, low-cost medical devices, labour-intensive sectors producing items of mass consumption and matches produced by semi-mechanised units.
— Cess on crude petroleum oil produced in India revised to Rs.4,500 per metric tonne.
— Levy of excise duty of 1 per cent on branded precious metal jewellery to be extended to include unbranded jewellery. Operations simplified and measures taken to minimize impact on small artisans and goldsmiths.
— Branded Silver jewellery exempted from excise duty.
— Proposals relating to Customs and Central excise to result in net revenue gain of Rs. 27,280 crore.
— Indirect taxes estimated to result in net revenue gain of Rs. 45,940 crore.
— Net gain of Rs. 41,440 crore in the Budget due to various taxation proposals.

STATE OF INDIA'S ECONOMY

The Indian economy slowed down in 2011-12, compared not just to the previous two years but 2003 to 2011 (except 2008-09). However, India remains among the front-runners. 

With agriculture and services continuing to perform well, India's slowdown can be attributed almost entirely to the weakening industrial growth. The manufacturing sector grew by 2.7 per cent and 0.4 per cent in the second and third quarters of 2011-12, respectively. Inflation as measured by the wholesale price index (WPI), was high during most of the fiscal year, though by the year's end there was a clear slowdown. Food inflation, in particular, came down to around zero, with most of the remaining WPI inflation being driven by non-food manufacturing products. 

Monetary policy was tightened by the Reserve Bank of India (RBI) during the year to control inflation and curb inflationary expectations. 

The global economic environment turned sharply adverse in September 2011, owing to the turmoil in the euro-zone and questions about the outlook on the US economy provoked by rating agencies. 

The macroeconomic situation in February 2011—at the time of presentation of Economic Survey 2010-11—looked positive, even though there was some concern about industrial slowdown. Economic Survey 2010-11 had anticipated that the Indian economy would register growth of around 9 per cent (+ or - 0.25 per cent) in 2011-12, almost reverting to the pre-crisis levels achieved during the three-year period, from 2005-06 to 2007-08. However, during the course of the year it became increasingly clear that economy would fall short of that growth rate by a significant margin. 

At sectoral level, growth is estimated to be 2.5 per cent for 2011-12 for agriculture and allied sectors, a little lower than expected. Growth in the services sector is likely to be 9.4 per cent in 2011-12, as against 9.3 per cent in 2010-11. Thus, it was primarily the dip in growth in industry to 3.9 per cent in 2011-12 that led to the slowdown in real gross domestic product (GDP) growth .

Domestic factors, namely the tightening of monetary policy, in particular raising the repo rate in order to control inflation and anchor inflationary expectations, resulted in some slowing down of investment and growth, particularly in the industrial sector. Since monetary policy operates largely through demand compression in the short run, the expectation is that this policy will in fact bolster long-run growth. The 2008-09 down-turn came to India when the country's fiscal balances were robust. Hence, there was ample scope for fiscal and monetary stimulus. As in most parts of the world, this second slowdown came so quickly on the heels of the previous one that the latitude in terms of fiscal and monetary policy was much more limited. 

The growth rate of investment in the economy registered a significant decline during 2011-12. The year also witnessed a sharp increase in interest rates that resulted in higher costs of borrowings; and other rising costs affecting profitability and, thereby, internal accruals that could be used to finance investment. In 2010-11, the growth in gross capital formation, particularly fixed capital formation, was substantially lower than had been achieved in 2005-06 to 2007-08. The investment rate continued to be lower than the peak level achieved in 2007-08.

Despite difficult conditions in the global economy, exports continued to be robust in 2011-12 and registered a growth rate of 14.3 per cent in real terms over and above 22.7 per cent growth achieved in the previous year (2010-11), as per Advance Estimates. Imports are likely to end the year with a real growth rate of 17.5 per cent.

There was a reduction in investment rates, both in the public and private sectors, particularly the corporate sector, in 2010-11. Reduction in corporate investment could be attributed to global factors, with the global economy exhibiting signs of slowing down in the second half of 2010, as well as to domestic factors, namely increased cost of borrowing following the raising of interest rates in order to control inflation. Fixed investment as a ratio of GDP peaked in 2007-08 and has continued to register a decline since then, falling from 31.6 per cent in 2009-10 to 30.4 per cent in 2010-11.

At 2.8 per cent of GDP, the savings-investment gap during 2010-11 remained at the same level as in 2009-10. This reflected the need to finance the investment requirement from foreign savings (current account deficit). The gap, in excess of 2 per cent of GDP, has been at relatively elevated levels (since 2008-09). The savings-investment gap narrowed both in the public as well as private sectors in 2010-11 vis-à-vis 2009-10. For the public sector, it narrowed from -9.0 per cent of GDP to -7.1 per cent. 

The increase in the revenue levels, thanks partly to substantial increase in non-tax revenue receipts in the year 2010-11, and the process of fiscal consolidation were among the factors responsible for narrowing of the public sector's savings-investment gap.

In the medium to long term, growth of an emerging economy depends, to a large extent, not only on overall level of investment but also on its sectoral composition, reflecting the transformation taking place. However, annual growth rates of investment, both at aggregate and sectoral levels may vary, depending on expectations of profitability, sales, etc. 

Historic Background
The rate of growth of Indian economy, between 1950-51 and 1990-91, was 4.1 per cent. In contrast, between 1991-92 and 2011-12 the economy registered a growth of 6.9 per cent. While in the four decades from 1951-52 to 1991-92, the growth rate in terms of GDP at factor cost (at 2004-05 prices) was more than 6 per cent only in 10 years, between 1992-93 and 2011-12 (including the AE for 2011-12) (a time-span covering 20 years, inclusive of both observations) the growth rate has been over 6 per cent in as many as 14 years. The growth rate has accelerated significantly since 2003-04. Between 2003-04 and 2011-12, the economy registered a growth of 8.2 per cent per annum. In fact, during this period, the growth rate has never fallen below 6.7 per cent and has been over 8 per cent in six of these nine years. All the three major sectors of the economy, namely agriculture, industry, and services witnessed higher-than-trend growth rates at 3.9 per cent, 8.0 per cent, and 9.6 per cent, respectively. Clearly the services sector has emerged as the key driver of growth in the Indian economy. 

This accelerated growth could partly be attributed to an increase in savings and investment rates, which averaged 33.1 per cent and 34.3 per cent, respectively, during the period between 2003-04 and 2010-11. The average savings and investment rates in the 1990s were 23.0 per cent and 24.3 per cent, respectively. Sustaining and accelerating this growth further could be crucial for attaining higher per capita income and other objectives that aim at enhancing human welfare as reflected by the inclusive development agenda

The contributions of the agriculture and allied sector, industry sector, and services sector also underwent significant changes overtime. The long-term growth rate of the agriculture sector (over the last 60 years) has been 2.7 per cent. It was 2.3 per cent between 1950-51 and 1980-81 and 3.1 per cent during 1980-81 to 2011-12. Growth in the industry sector increased from 5.2 per cent in the earlier period to 6.4 per cent between 1980-81 and 2011-12. Similarly, growth in the services sector was 4.4 per cent and 7.8 per cent, respectively, during these two sub-periods.

The structure of the economy has also undergone significant changes over time. Between 1950-51 and 1980-81, the industrial sector registered a higher growth rate than the services sector. The converse has been the case since then. This resulted in the share of the industry sector in GDP increasing by around 9 percentage points from 16.6 per cent to 25.9 per cent during the period from 1950-51 to 1980-81. The share of the services sector increased from 30.3 per cent in 1950-51 to 38 per cent in 1980-81. It started growing rapidly thereafter and this phenomenon became more pronounced in the 1990s. Consequently, since 1980-81, the share of the industry sector has remained in the range of 26 to 28 per cent of GDP, while the entire decline in share of agriculture has been balanced by an increase in share of the services sector. Thus, the resilience of the economy to shocks owe to the services sector which has the largest share and most consistent growth performance. 

Agriculture and Food
Agriculture, including allied activities, accounted for 13.9 per cent of GDP at 2004-05 prices in 2011-12, as compared to 14.5 per cent in 2010-11. In terms of composition, out of a total share of 14.5 per cent in GDP in 2010-11, agriculture alone accounted for 12.3 per cent, followed by forestry and logging at 1.4 per cent, and fishing at 0.7 per cent. Notwithstanding the declining trend in agriculture's share in GDP, the importance of the sector to the economy is best understood with reference to its share in employment and in terms of its criticality for macro-economic stability. While the former was well known, the latter became manifest with rising growth in incomes since the mid-2000s.

Hence, growth in agriculture and allied sectors remains an important objective and a 'necessary condition' for inclusive growth. The average annual growth in agriculture and allied sectors realized during the Eleventh Plan Period was 3.3 per cent, against the targeted growth rate of 4 per cent. The sector recorded slightly lower average growth than targeted in the Eleventh Plan period due to severe drought experienced in most parts of the country during 2009-10 and drought/deficient rainfall in some States, namely Bihar, Jharkhand, eastern UP, and West Bengal in 2010-11. However, timely and corrective measures taken by the government helped boost agricultural production and growth in the sector reached 7.0 per cent in 2010-11, the highest growth rate achieved during the last six years. In 2011-12 agriculture and allied sectors are estimated to achieve a growth rate of 2.5 per cent. However, it is a matter of concern that agricultural growth is still, to a certain extent, characterized by fluctuations due to the vagaries of nature, though there has not been actual decline in terms of output since 2002-03.

In 2010-11 a significantly high level of 244.78 million tonnes of foodgrains production was achieved. As per the second AE, production of foodgrains during 2011-12 has been estimated at 250.42 million tones, owing to increase in the production of rice in some of the major rice-producing states of the country, namely Assam, Bihar, West Bengal, Jharkhand, and Uttar Pradesh.

The stock position of foodgrains in the central pool, as on February 1, 2012 was 55.2 million tonnes, comprising 31.8 million tonnes of rice and 23.4 million tonnes of wheat, which is adequate for meeting the requirements under the targeted public distribution system (TPDS) and welfare schemes 2011-12. The higher levels of agricultural output and ample food stocks augur well for bringing down headline inflation.

Industry and Infrastructure
Industrial growth, measured in terms of the index of industrial production (IIP), shows fluctuating trends. Growth had reached 15.5 per cent in 2007-08 and then started decelerating. Initial deceleration in industrial growth was largely on account of the global economic meltdown. There was, however, a recovery from 2.5 per cent in 2008-09 to 5.3 per cent in 2009-10 and 8.2 per cent in 2010-11. Fragile economic recovery in the US and Europe and moderately subdued expectations at home affected the growth of the industrial sector in the current year. 

Cumulative growth in April-January 2011-12, in eight core sectors has been 4.1 per cent, as compared to 5.7 per cent during the corresponding period of the previous year. While four sectors, namely coal, fertilizers, cement, and electricity, showed positive growth during January 2012, other four sectors—crude oil, natural gas, refinery products and steel—registered negative growth. 

Electricity generation by power utilities during 2011-12 was targeted to grow by 5.4 per cent to reach 855 billion units. Growth in power generation during April-January 2011-12 was 8.6 per cent, as compared to 5.2 per cent during April-January 2010-11. Production of crude oil is estimated at 38.19 million metric tonnes (MMT), which is about 1.33 per cent higher than the 37.70 MMT produced during 2010-11. Domestic crude oil production during April-December 2011-12 was 28.70 MMT, showing a growth of 1.9 per cent over the same period of the previous year. 

The telecom sector continued to grow, with the total number of telephones increasing from 206.8 million on March 31, 2007 to 926.95 million on December 31, 2011. Tele-density has increased from 18.2 per cent in March 2007 to 76.8 per cent in December 2011. 

Services Sector
The share of services in India's GDP at factor cost (at current prices) increased from 55.1 per cent in 2010-11 and 56.3 per cent in 2011-12, as per Advance Estimates. Trade, hotels, and restaurants as a group, with 16.9 per cent share, is the largest contributor to GDP among the various services sub-sectors, followed by financing, insurance, real estate, and business services with 16.4 per cent share. 

While agriculture continues to be the primary employment-providing sector, the services sector is the principal source of employment in urban areas. As per the National Sample Survey Organization's (NSSO) report on the 'Employment and Unemployment Situation in India, 2009-10', for every 1,000 people employed, 679 and 75 people are employed in agriculture sector in rural and urban areas, respectively, (measured in terms of usually working persons in the principal status and subsidiary status). On the other hand, the services sector accounted for 147 and 582 of every 1,000 persons employed in rural and urban areas, respectively.

Prices
Headline WPI inflation remained persistently high and relatively sticky at around 9 per cent during 2011. The major contributory factors to headline inflation during the current financial year include (a) higher primary articles prices driven by vegetables, eggs, meat, and fish due to changing dietary pattern of consumers; (b) increasing global commodity prices especially metal and chemical prices which ultimately led to higher domestic manufactured prices; and (c) persistently high international (Brent) crude petroleum prices in the last two years averaging around $ 111 per barrel (/bbl) in 2011 (January-December) as compared to $ 80/bbl in 2010 (January-December).

Compared to a relatively stable inflationary period in the earlier part of the last decade, average headline WPI inflation started to rise in 2008-09 and persisted. The pressure was mainly from primary and fuel products with average inflation in these commodities remaining continuously in double digits for a major period since 2008-09. In comparison, inflation in manufactured products remained relatively stable, dropping sharply in 2009-10 because of the global economic crisis and its impact in India, before it started to pick up and exceed its long-run average of around 5 per cent in early 2011-12. Among individual product groups, inflation in food products, beverages, textiles, chemicals, and basic metals remained elevated mainly on account of high global commodity prices.

Reining in inflation and containing inflationary expectations were the dominating objectives of monetary policy during 2011-12. The RBI hiked the repo rate 13 times between March 2010 and January 2012, cumulatively by 375 basis points (bps). With supply-side factors feeding into food inflation and an uncertain economic scenario in advanced countries necessitating repeated liquidity injections by these countries to counter recessionary trends, the task of monetary policy calibration was particularly challenging. Sustained rate increases have, to an extent, impacted growth negatively. However, the period from December 2011 to January 2012 marked a reversal of the cycle with the RBI in its Third Quarter Review of Monetary Policy keeping the repo and reverse repo rates unchanged at 8.5 per cent and 7.5 per cent, respectively. The cash reserve ratio (CRR), however, has been reduced from 6.0 to 5.5 per cent in order to ease the liquidity situation and aid revival of growth.

Financial Markets
The weak global economic prospects and continuing uncertainties in the international financial markets had their impact on emerging market economies like India. Sovereign risk concerns, particularly in the euro area, affected financial markets for the greater part of the year, with the impact of Greece's sovereign debt problem spreading to India and other economies by way of higher-than-normal levels of volatility. 

Subdued foreign institutional investor (FII) inflows into the country led to a decline in Indian markets and contributed to the sharp depreciation of the rupee in the forex market, though much of the depreciation was due to 'flight to safety' by foreign investors, given the meltdown in Europe and inflation in emerging market economies. Moderation in the growth rate of the economy also affected market sentiments. 

International Trade
The resilience of India's trade can be seen from the fact that the growth of exports and imports, which was (-)3.5 per cent and (-)5 per cent, respectively, in 2009-10 as a result of the 2008 global economic crisis, rebounded to 40.5 per cent and 28.2 per cent in 2010-11. India not only reached pre-crisis levels in exports but also surpassed pre-crisis trends in export growth rate, unlike many other developing and even developed countries. India's share in global exports and imports also increased from 0.7 per cent and 0.8 per cent, respectively, in 2000, to 1.5 per cent and 2.2 per cent in 2010.

The highlight of BoP developments during 2011-12 was merchandise exports of US$ 150.9 billion in the first half of the year, which represented an increase of over 40 per cent over the corresponding period in 2010-11. Imports of US$ 236.7 billion during April-September 2011 recorded an increase of 34.3 per cent over April-September 2010. The trade deficit was higher at US$ 85.8 billion (9.4 per cent of GDP) during the first half of 2011-12, vis-à-vis US$ 68.9 billion (8.9 per cent of GDP) in the first half of 2010-11. This was mainly on account of increase in international prices of imported commodities, namely oil and gold and silver during the first half of 2011-12.

Net capital flows at US$ 41.1 billion in the first half of 2011-12 remained higher as compared to US$ 38.9 billion in the first half of 2010-11. Under net capital flows, foreign direct investment (FDI) has shown considerable increase at US$12.3 billion during the first half of 2011-12, vis-à-vis US$ 7.0 billion in the corresponding period of 2010-11. Similarly, ECBs increased to US$ 10.6 billion during the first half of 2011-12, as against US$ 5.7 billion in the first half of 2010-11. Portfolio investment, mainly comprising FII investments and American  depository  receipts (ADRs)/global depository receipts (GDRs), however, witnessed large decrease in inflows to US$ 1.3 billion in the first half of 2011-12 vis-à-vis US$ 23.8 billion in the first half of 2010-11

In fiscal 2010-11, foreign exchange reserves increased by US$ 25.7 billion, from US$ 279.1 billion at end March 2010 to US$ 304.8 billion at end March 2011. Of the total increase in reserves, US$12.6 billion was on account of valuation gains arising out of depreciation of the US dollar against major currencies and the balance US$ 13.1 billion was on BoP basis. In 2011-12, the reserves increased by US$ 6.7 billion from US$ 304.8 billion at end March 2011, to US$ 311.5 billion at end September 2011. Out of this total increase, US$5.7 billion was on BoP basis and the balance US$1.0 billion on account of valuation effect.

External Debt
India's external debt stock stood at US$ 326.6 billion at end-September 2011, recording an increase of US$ 20.2 billion (6.6 per cent) over end March 2011 estimates of US$ 306.4 billion. This increase was primarily on account of higher commercial borrowings and short-term debt, which together contributed over 80 per cent of the total increase in the country's external debt.

The maturity profile of India's external debt indicates the dominance of long-term borrowings. The long-term external debt at US$ 255.1 billion at end September 2011 accounted for 78.1 per cent of the total external debt, while the remaining 21.9 per cent was short-term debt. Government (sovereign) external debt stood at US$ 79.3 billion, while non-government debt amounted to US$ 247.3 billion at end September 2011. India's external debt has remained within manageable limits as indicated by the external debt to GDP ratio of 17.8 per cent and debt service ratio of 4.2 per cent in 2010-11. This has been possible due to an external debt management policy of the government that emphasizes monitoring of long- and short-term debt, raising sovereign loans on concessional terms with long maturities, regulating ECBs through end-use and all-in-cost restrictions, and rationalizing interest rates on NRI deposits.

Future Prospects
The financial crisis in Europe, along with certain exogenous shocks like the Japanese nuclear disaster, resulted in a sharp global economic slowdown during 2011-12. There is no doubt, however, that a part of India's slowdown is rooted in domestic causes. The persistent inflation that remained over 9 per cent for much of the year and needed to be tamed played a role. There were also the pressures of democratic politics, which slowed reforms. 

The main reason for the recovery to be initially slow is the slight decline in investment rate. In the third quarter of 2011-12, gross fixed capital formation as a ratio of GDP was 30 per cent, down from 32.3 per cent one year ago. But as fiscal consolidation gets back on track, savings and capital formation should begin to rise. Moreover, with the easing of inflationary pressures in the months to come, there could be a reduction in policy rates by the RBI, which would encourage investment activity that could have a positive impact on growth. These factors, along with the fact that India's investment rate at 35.1 per cent, is still an impressive figure, should result in growth consolidating in 2012-13 and picking up rapidly thereafter. Preliminary calculations suggest that the growth rate of GDP in 2013-14 will be 8.6 per cent. Long-term forecasts, of course, always come with a larger margin of error. These projections are based on assumptions regarding factors like normal monsoons, reasonably stable international prices, particularly oil prices, and global growth somewhere between where it now stands and 0.5 per cent higher. 

Agricultural growth in the Eleventh Five Year Plan has been less than the target of 4 per cent despite a clear improvement compared to the previous plan periods. Though agriculture has now shrunk as a proportion of GDP to 13.9 per cent, as is only to be expected of a growing economy, it is vital sector and provider of livelihood for more than 50 per cent of the population. How this sector performs also has large implications for overall prices and, hence, it is a sector deserving of special attention. The area under foodgrains production has declined over the last three decades. That in itself is not worrying, but what is of concern is the low productivity of Indian agriculture. In yield parameters, India is lagging behind global levels in most crops. Concerted and focused efforts are required for addressing the challenge of stagnating productivity levels in agriculture. A holistic approach, simultaneously working on agricultural research and development, dissemination of technology, and provision of agricultural inputs such as quality seed, fertilizers, pesticides, and irrigation, would be important. Above all, the need is to raise investment in agriculture. 

It is also important to understand that productivity itself will get a fillip if the supply chain from farm to consumer can be improved. This will lead to farmers getting a higher price for their products and be an incentive for them to invest and produce more. The crux of an improved supply chain is not for government to try to provide this directly by the public service delivery authorities but to take policy steps that facilitate private players to provide this vital service. 

In 2010-11 and 2011-12, there was a slight moderation in services growth, mainly due to the steep fall in growth of public administration and defence services, creating some fiscal space for the government. Growth in trade, hotels, and restaurants is more robust at 11.2 per cent. If interest rates remain elevated, there would be some concern about growth in real estate, ownership of dwellings, and business services which has started decelerating. The outlook for some of the services in the economy is also linked to the global prospects. While software services exports have continued to be steady, the unfolding events in the euro area could lead to some sluggishness in this sector. The growth in fair-weather business services which has already shown signs of deceleration may not get better. Among the other two major services, transportation has already been affected with the Baltic dry index at an all-time low, though this may be of a passing nature. While travel and tourism could also be affected, it could also lead to a shift in tourist inflow pattern with increased inflow of holiday backpackers searching for cheaper destinations like India. The rise in tourists from South Asia, East Asia, and South East Asia could further help this sector.

The recent regulatory prescriptions for European banks have brought in fears of de-leveraging. Indian banks are not expected to have any direct impact on account of their negligible exposure to the troubled zone. However, there could be indirect impact on account of funding pressures. The scope for counter-cyclical financial policy could be explored in financial regulations in order to minimize the negative impact of accumulated financial risks. This will go a long way in providing needed stability to the financial system.

Going forward, fiscal consolidation would need to be anchored in a framework that addresses some of the risks like rise in crude prices. Besides, micro-foundational reforms are needed for achieving desired macro-economic outcomes. 

This feature is based on Economic Survey 2012