NATIONAL POPULATION POLICY 2000- GOALS AND OBJECTIVES

COURTESY: WEBSITE OF NATIONAL COMMISSION ON POPULATION

The immediate objective of the NPP 2000 is to address the unmet needs for contraception, health care infrastructure, and health personnel, and to provide integrated service delivery forbasic reproductive and child health care. The medium-term objective is to bring the TFR to replacement levels by 2010, through vigorous implementation of inter-sectoral operational strategies. The long-term objective is to achieve a stable population by 2045, at a level consistent with the requirements of sustainable economic growth, social development, and environmental protection.

	In pursuance of these objectives, the following National Socio-Demographic Goals to be achieved in each case by 2010 are formulated:
	Address the unmet needs for basic reproductive and child health services, supplies and infrastructure. Make school education up to age 14 free and compulsory, and reduce drop outs at primary and secondary school levels to below 20 percent for both boys and girls. Reduce infant mortality rate to below 30 per 1000 live births. Reduce maternal mortality ratio to below 100 per 100,000 live births. Achieve universal immunization of children against all vaccine preventable diseases. Promote delayed marriage for girls, not earlier than age 18 and preferably after 20 years of age. Achieve 80 percent institutional deliveries and 100 percent deliveries by trained persons. Achieve universal access to information/counseling, and services for fertility regulation and contraception with a wide basket of choices. Achieve 100 per cent registration of births, deaths, marriage and pregnancy. Contain the spread of Acquired Immunodeficiency Syndrome (AIDS), and promote greater integration between the management of reproductive tract infections (RTI) and sexually transmitted infections (STI) and the National AIDS Control Organisation. Prevent and control communicable diseases. Integrate Indian Systems of Medicine (ISM) in the provision of reproductive and child health services, and in reaching out to households. Promote vigorously the small family norm to achieve replacement levels of TFR. Bring about convergence in implementation of related social sector programs so that family welfare becomes a people centred programme.

DISINVESTMENT

DISINVESTMENT

"To privatize is to drive a two-horse cart. The cart is the enterprise in question. One horse is called Political Goals and is flighty and fickle, the other is called Economics, and is slow and steady."

The role of the State vs. Market has been one of the major issues in development economics and policy. In a mixed economy such as India, historically the public sector had been assigned an important role. However, in the year 1991 the national economic policy underwent a radical transformation. The new policy of liberalization, privatization and globalization de-emphasized the role of the public sector in the nation’s economy. The faculty at IIT-Bombay has been studying various aspects of the New Economic Policy such as financial sector reforms, fiscal implications of reforms, and of globalization.

To date several arguments have been proffered by the apologists of market-oriented economic structures:

§                the government must not enter into those areas where the private sector can perform better

§                market-driven economies are more efficient than the state-planned economies

§                the role of the state should be as a regulator and not as the producer

§                Government resources locked in commercial activities should be released for their deployment in social activities.

It is also contended that the functioning of many public sector units (PSUs) has been characterized by low productivity, unsatisfactory quality of goods, excessive manpower utilization, inadequate human resource development and low rate of return on capital. For instance, between 1980 and 2002, the average rate of return on capital employed by PSUs was about 3.4% as against the average cost of borrowing, which was 8.66%. Disinvestment (or divestment) of the PSUs has therefore been offered as one of the solutions in this context.

Disinvestment involves the sale of equity and bond capital invested by the government in PSUs. It also implies the sale of government’s loan capital in PSUs through securitization. However, it is the government and not the PSUs who receive money from disinvestment.

The fixation of share/bond price is an important aspect of disinvestment. Now, the Disinvestment Commission determines the share/bond price. Disinvested shares are listed, quoted and traded on the stock market. Indian and foreign financial institutions, banks, mutual funds, companies as well as individuals can buy disinvested shares / bonds.......

Disinvestment is generally expected to achieve a greater inflow of private capital and the use of private management practices in PSUs, as well as enable more effective monitoring of management discipline by the private shareholders. Such changes would lead to an increase in the operational efficiency and the market value of the PSUs. This in turn would enable the much needed revenue generation by the government and help reduce deficit financing.

However, to date the market experience has been otherwise. The large national budgetary deficit on revenue account has been increasing. The government has not used the disinvestment proceeds to finance expenditure on capital account; i.e. the disinvestment policy has resulted in capital consumption rather than generation. Administrative costs of the disinvestment process have also been unduly high.

The actual receipts through disinvestment have often fallen far short of their target (see figure). During the period 1991-92 to 2002-2003, the government had targeted the mobilization of about Rs. 78,300 crores through disinvestment, but it could actually mobilize only Rs. 30,917 crores.

Problems associated with Disinvestment

A number of problems and issues have bedevilled the disinvestment process. The number of bidders for equity has been small not only in the case of financially weak PSUs, but also in that of better-performing PSUs. Besides, the government has often compelled financial institutions, UTI and other mutual funds to purchase the equity which was being unloaded through disinvestment. These organizations have not been very enthusiastic in listing and trading of shares purchased by them as it would reduce their control over PSUs. Instances of insider trading of shares by them have also come to light. All this has led to low valuation or under pricing of equity.

Further, in many cases, disinvestment has not really changed the ownership of PSUs, as the government has retained a majority stake in them. There has been some apprehension that disinvestment of PSUs might result in the crowding out of private corporates (through lowered subscription to their shares) from the primary capital market......

An important fact that needs to be remembered in the context of divestment is that the equity in PSUs essentially belongs to the people. Thus, several independent commentators have maintained that in the absence of wider national consensus, a mere government decision to disinvest is not enough to carry out the sale of people’s assets. Inadequate information about PSUs has impeded free, competitive and efficient bidding of shares, and a free trading of those shares. Also, since the PSUs do not benefit monetarily from disinvestment, they have been reluctant to prepare and distribute prospectuses. This has in turn prevented the disinvestment process from being completely open and transparent.

It is not clear if the rationale for divestment process is well-founded. The assumption of higher efficiency, better / ethical management practices and better monitoring by the private shareholders in the case of the private sector all of which supposedly underlie the disinvestment rationale is not always borne out by business trends and facts.

Total disinvestment of PSUs would naturally concentrate economic and political power in the hands of the private corporate sector. The US economist Kenneth Galbraith had visualized a role of countervailing power for the PSUs. While the creation of PSUs originally had economic, social welfare and political objectives, their current restructuring through disinvestment is being undertaken primarily out of need of government finances and economic efficiency.

Lastly, to the extent that the sale of government equity in PSUs is to the Indian private sector, there is no decline in national wealth. But the sale of such equity to foreign companies has far more serious implications relating to national wealth, control and power, particularly if the equity is sold below the correct price!

If the disinvestment policy is to be in wider public interests, it is necessary to examine systematically, issues such as - the correct Valuation of shares, the crowding out possibility, the appropriate use of disinvestment proceeds and the institutional and other prerequisites.

FINANCIAL INCLUSION

The term " FINANCIAL INCLUSION " was added in the budget 2008-09 on the recommendation of the central committee on financial inclusion.It refers to better access of the larger sections of the population to the vast organized and structured financial market of the country and ensuring availability of timely and adequate credit.In other words, it is extension of banking to the less privileged sections of the society.

Though regional rural banks and cooperative banks are larger in number in the rural areas, their contribution in total banking services is meager, 9% and 3% of the total as compared to the huge 78% of the commercial banks.Financial inclusion seeks to make corrections in such anomalies.

The financial inclusion policy of the government includes two fold policy- first to encourage the RRBs and cooperative banks to enroll more rural and semi urban households as their customers and to appoint retired bank officials and other ex servicemen to act as credit counselors or business facilitators.

This is a wonderful step in many ways.Firstly it will save the rural people from the clutches of the unscrupulous money lenders and intermediaries and help them to take benefits of the financial progress of the country.Secondly, this will boost up the overall financial health of the country as most of the population the country stll live in villages.

Suggested strategies:

• Setting up a financial inclusion task force.
• Setting up a Financial Inclusion fund like that of UK.
• Better monitoring system to keep a vigil on the banking activities in the rural areas.
• Creation of better business opportunities in the rural areas to help the rural people to utilize the credit available in better ways.
• India must learn from the mistake of the US financial system that financial inclusion policy if not guided by a pragmatic approach may cause irreversible damage to the economic structure of the nation.
  

E-BOOK ON INDIAN ECONOMY

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CREDIT AVAILABILITY FOR AGRICULTURE IN INDIA

Availability of credit has been the main hindrance in development of agriculture in India.The banking system is still hesitant on various grounds to purvey credit to the small and marginal farmers.Less availability of credits makes it difficult to adopt modern techniques which in turn renders agriculture unremunerative and land unprofitable.Despite government policy of financial inclusion,most of the farmers in India are still deprived of adequate and timely availability of credit.

Though there has been instruction to the domestic banks to reserve 40% of the Net Bank Credit for the priority sector lending and 18% out of that amount for agriculture by RBI,banks over the years have failed in achieving the target. The Rural Infrastructure Development Fund was set up in 1996 to solve the credit availability crisis.The Commercial Banks make contributions to the fund for failing to achieve their target for Priority Sector Lending.The Kisan Credit Card scheme launched in 1998-99 however was a laudable effort by the government to make credit available at farmers' doorstep.The scheme facilitated short term loan availability for seasonal agricultural operations and other agricultural inputs.In addition to that Personal Accident Insurance of Rs 50,000/ against annual premium of just Rs 15/ is being offered along with the cards.So far the performance of Cooperative banks has been commendable in issuing credit cards whereas commercial banks lag behind their targets.The performance of the Regional Rural Banks has been below par.Updation of land records and sensitisation of bank staff through training programmes are needed to add to the spread of the scheme.

However there were crying needs for loans for investment and working capital requirements for the farmers.To take care of the need Swarojgar Credit Card Scheme was launched in 2003.It must be noted that Non-Institutional credits which accounted for more than 90% after the independence have decreased considerably in the past 50 years and presently accounts for little more than 30% of the total agricultural credits.Moreover,till the liberalisation of economy started, cooperative banks were leading in credit delivery.But past one and a half decades has seen drastic change of the scenario with the commercial banks now leading in credit delivery by handsome margin.Another aspect of credit delivery in India is the dominance of short term credit over long term ones.Present short term credits account for more than 65% of the total credits.The accessibility to institutional credits is much higher in Southern India than rest parts of India and Tamil Nadu leads the way.

CONVERTIBILITY OF INDIAN RUPEE

Convertibility refers to the freedom to convert one currency to any other internationally accepted currencies.It is of two types-Current account Convertibility and Capital Account Convertibility.Capital Account Convertibility refers to the freedom in converting financial assets of one country to the financial assests of another and vice versa in the market determined rates.In other words it refers to the flexibility in converting currencies of one country to another one for acquisition of capital assets abroad and vice versa.On the other hand current account convertibility refers to the flexibility in exchanging currencies of one nation to another for other purposes like trade,interest payment,amortization,family expenses etc.

After the economic liberalization process started in India in 1991, a Liberalised Exchange Rate Mechanism was introduced in 1992.This allowed partial convertibility of Indian rupee, thus introducing dual exchange rate.After that full convertibility on trade account started from 1993.It was followed by Full convertibility on current account from 1994.However after the Mexico crisis in early 1990s or the mammoth East Asia Crisis where there was sudden flow of capital internationally debilitating the economies of the involved nations,India was reluctant to adopt capital account convertibility.

However the Tarapore committee,appointed in 1997,recommended phased implementation of capital account convertibility with certain prerequisites like fiscal deficit to be 3.5% of GDP,CRR to be brought down to 3%, gross NPA of public sector banks to be 5% of the total assets,inflation rate to be around 3.5%.The committee was reappointed almost a decade later and submitted almost the same recommendations with some modifications.

It must be remembered that the movement towards fuller CAC should be aprocess and not an event.Macroeconomic stability is a must before achieving full CAC.Any adhoc arrangement from the fixed regime maintained for a long period of time might disturb the foreign exchange market and disrupt the economic progress.

NATIONAL AGRICULTURAL INSURANCE SCHEME

Salient features

Introduced in:1999-2000 replacing the Comprehensive Crop Insurance Scheme which was in operation since 1985

Implementing Authority:General Insurance Corporation on behalf of Ministry of Agriculture

Beneficiaries:All farmers including sharecroppers and tenants

Covered crops:All

Objective: To insure every farmers against loss of food crops,To help stabilize farm incomes, particularly in disaster years,To encourage the farmers to adopt progressive farming practices, high value in-puts and higher technology in agriculture.

Special feature:50% subsidy on premium for small and marginal farmers.This subsidy is shared equally by Central and state/UT governments.The scheme has an area based approach. For loanee farmers it is compulsory while for non-loanee farmers it will be optional

Premium rates:2.5-3.5% during kharif and 1.5-2% during ravi seasons

MEGA FOOD PARK SCHEME

The Mega Food Park Scheme, initiated by the Centre, aims to encourage public-private partnership in creating rural infrastructure in food processing sector. The scheme, approved by the Cabinet Committee on Economic Affairs in September 2008, envisages setting up 10 mega foods parks in India i.e. Chittoor (Andhra Pradesh), Dharmapuri (Tamil Nadu), Mandya (Karnataka), Pune-Satara region (Maharashtra), Jangipur (West Bengal), Guwahati (northeast), Rae Bareilly (Uttar Pradesh), Ranchi (Jharkhand), Hardwar (Uttarakhand) and Ludhiana-Jalandhar region (Punjab).The scheme is under the Ministry of Food Processing Industries.The government will divide the stipulated Rs 500 Cr among the ten food parks.

For instance, Unity Infraprojects Ltd, Mumbai, is developing the mega food park near Jalandhar at a cost of around Rs 360 crore. The facility will be established on around 100 acres and will consist of 30-35 food processing units.Western Agri Food Park established in Satara is Western India's first food park and based on 75 acres of land.

Such food parks will help in

• Reducing post harvest losses
• Maintainance of the supply chain in sustainable manner
• Value Addition
• Additional income generation for the farmers
• shifting the farmers to more market driven and profitable farming activities.
  

PRIORITIES OF INDIAN ECONOMY AMIDST GLOBAL CRISIS

Crisis is a window of opportunities.India proved that with sheer brilliance after the Gulf Crisis in 1990 and started economic reforms which for the next decade or so put Indian economy into a commanding position.The present global financial crisis is of no difference.It has provided us two alternatives-to shine or to perish.It is how well we handle the crisi, will set the fortune of our economy for the coming years or so and will provide the world an answer to the doubt whether or not India truly has the potentials to become a global superpower in future.

The present task ahead of India is to undertake economic reforms considering twin objectives of our economy from the present shock and avoiding further financial turmoil.The means to do so may be summed up as below

• Moving to an Inflation targeted monetary policy so that external influences on inflation can be minimized
  
• Ensuring timely and adequate availability of credit for the priority sectors so as to ensure square growth of the economy.
  
• Moving to a full capital account convertibility to bring back the sense of competition in the financial sector
• Establishing a strong regulatory architecture so as to protect the irregularities in the financial market.
• Restructuring the banking industry to make it competitive in the global scenario

We must understand inaction is no solution to the problem.We must not be jubilant as the impacts of the recession to our economy have not been as hard as to the developed nations' economies.Rather we must seek opportunities in danger and work harder for financial sector reforms and come up with flying colors while the developing nations continue do some firefighting to save themselves from th wrath of global recession.

GLOBALIZATION ON HIGHER EDUCATION IN INDIA

The ramifications of globalization in India have been uneven.Education, as a service industry, is a part of the globalization process under the umbrella of General Agreement on Trade in Services(GATS).Thus it is of now wonder that like in any other sector, globalization has bred inequality and dependence in the education system of the nation, especially higher education.Thus while a section of the population has benefited from globalization in their academic pursuits, the under privileged section has struggled to receive proper higher education due to excessive corporatization of education ,increasing fees and unavailability of opportunities in the lower strata of the society.

That globalization has opened newer vistas of higher education, can not be denied.It has given the Indians opportunities to get higher education in foreign countries, though unfortunately till now India has not been an attractive hub of education for the foreign students despite having much potentials to be so.Today India on an average spends $ 5 billion annually to send students abroad to get higher education.Sadly enough, most of them hardly come back to their motherland and instead opt for serving in an alien nation.

Globalization has created a market based educational system in India.Thus there has been incredible growth of the number of technical colleges and universities providing technical education especially in fields like IT,Computer Science,electronics, architecture.As the job market in these sectors are flourishing, students after getting mere Bachelors degree hardly opt for higher education.Thus India over the years has produced some brilliant technicians but hardly any excellent educationist or a genius teacher.Moreover, as the cost of receving such technical education is sky high, poor students have been out of the competition to receive higher education.Moreover, the declining value of the civil society is an evidence in itself that higher education has imparted technical skills but failed to impregnate values among the students.

Moreover, lack of higher educational opportunities in the rural areas confirms that the interest of the corporate world is limited only in the shining cities, not in the rural India where ironically more than 70 % of the population lives.As a result rural-urban divide has been more prominent, there has been migration of students from rural to urban areas in search of educational opportunities, creting more socio-economic imbalnce.

In the end , it must be said that while globalization has been of tremendous benifit for the upper strata of the society in their academic pursuits, the benefits have not percolated down the social strata to educate each layer of the society.While corporatization of education should not be discouraged, the government should have more control in the sphere of education, so that the people irrespective of their social class, can reap the benefits of higher education and can be a part of making India a better nation to live in.

JOBLESS GROWTH IN INDIA- SOLUTIONS ARE PLENTY

By Anubhav Srivastava

Though India has maintained a GDP growth of more than 8 per cent for past few years, a vast section of its populace, particularly in the rural areas, still remains jobless. There is thus an urgent need to evolve a model of development that ensures employment growth along with GDP growth. If we look at the Indian scenario, we find that nearly 60 per cent of the workforce is engaged in agriculture and about 12 per cent in manufacturing. Hence government must find ways and means to stimulate growth in these two sectors in order to meet the growing demand of jobs.

To promote agriculture, the government should put irrigation and watershed development high in the list of priorities. Irrigation is vital to the growth of agriculture. It has a cascading effect on all the other activities related to agriculture. Developed irrigation facilities makes farmers less dependent on monsoon and at the same time helps them in increasing the per hectare agricultural production. Efficient irrigation facilities encourage the farmers to opt for high yielding varieties (HVY) and also increases fertilizer consumption. Dams built on rivers help in bringing more and more wasteland under agriculture. This increase in agricultural land, apart from increasing production of food crops, simultaneously increases the production of fodder. This in turn encourages people in the villages to purchase more livestock. Similarly government must encourage setting up of secondary and tertiary sector industries related to agriculture in the rural areas itself so that migration of people to bigger cities in search of jobs can be checked.

On the manufacturing front, the government must promote small-scale industries (SSI). This can be done by imparting vocational training to the people in the rural Areas and providing them micro-credits. To make these small industries competitive vis-à-vis the bigger companies, people in the villages should be promoted to form cooperative bodies. Previously, the government had dereserved some of the small scale sector products and the small industries manufacturing those products failed to compete with the bigger, highly mechanised industries. Many of the people, who had been involved in manufacturing those products and hence had skill-set pertaining to only that particular economic activity, for example cloth weaving, were forced to work as manual labourers. The skills they had acquired were hence rendered useless. Government can even think of once again reserving the manufacturing of certain products to the small scale sector in order to boost employment.

Apart from the above two measures, expansion of social service network can also be taken up by the government in its efforts to boost job creation. There are several areas where there is tremendous scope for expansion and improvement like education and public sector. There is an ever increasing need of primary and secondary schools and also hospitals and dispensaries. Besides a boost to the rural sector infrastructure too helps in generating more jobs. For example, if roads are constructed in any area, it not only increases the value of the nearby land but also promotes economic activities like Dhabas (eating joints) and vehicle repair shops along it.

Emergence of a ''green economy'' is now clearly visible and efforts to tackle climate change could result in millions of ''green jobs'' in India and other countries, says a UN sponsored report.India could generate 900,000 jobs by 2025 in biomass gasification of which 300,000 would be in the manufacturing of stoves and 600,000 in the fuel supply chain and other areas.

GOODS AND SERVICES TAX-CONSTRAINTS AND SOLUTIONS

Goods & Services tax is proposed to phase out Central Sales Tax by April 2010 and Indian states and political parties have reached fair amount of consensus on the issues related to the new tax regime.However careful analysis reveals that the route to the new tax regime may not be an easy one.
Firstly, all the states understand that they will gain from the new tax structures and there remains not much ideological problems with its implementation.But the problem is, none of the states will continue to be that much enthusiastic if they suffer revenue losses while phasing out the CST.The empowered committee of the state finance ministers has suggested that the states should be compensated for five years for the revenue losses incurred.However,they are apprehensive about the possibility of full scale compensation because of their claimed bitter experience in this regard earlier.Therefore it is essential to prepare a comprehensive policy for the compensation of the states for the revenue losses, taking into account past experiences.
Moreover, the states are also apprehensive about encroachment upon their fiscal autonomy, i.e, their power to levy taxes.However, the apprehension can be assuaged with the fact that the states will now have the power to levy service taxes hitherto a monopoly of the Central Government.
Under-preparedness of the administrative machinery and the juvenile IT structure might pose a threat to the successful implementation of the new tax structure.The state tax collecting officials who have so far collected only tax on goods will now be given the responsibility to collect taxes on services as well and for that they need thorough training which may take some time.This problem can be sorted out if the Center continues to collect taxes on behalf of the states and give the revenue to the states for the initial 2-3 years till the time the state officials are thoroughly trained.The Tax information exchange system has to scaled up with better IT facilities and educated IT professionals thoroughly educated on the tax structure of the country. The format of the challans for tax payment need to be redesigned and the government may need to allot new unique number under the GST system for better administration of the tax.
Problems are plenty and time is limited.The time frame given for the implementation of the GST is nearing the deadline.It is therefore suggested to delay the process a bit so that both the center and the states have enough time to get accustomed to the new tax structures.A little delay is always better than a premature roll out.

DECOUPLING THEORY-REALITY CHECK

Decoupling theory, as the name suggests, decouples emerging world markets from US markets. The followers of this theory believe that “because of the strong GDP growth of many developing countries, especially of China and India, their markets will chug along even at the time of USAfter the first symptoms of recession of US stock and other financial markets, many investing firms and funds changed their focus to emerging markets of Europe and Asia. Decoupling theory is postulated in this context for assisting the firms to reap from these emerging markets, but the validity of this theory is arguable.The theory was pretty right till the end of last year, but things have changed considerably in this year. recession.”

Now with the US slowdown spreading across the globe coupled with a declining dollar, advocates of the decoupling theory are debunking their claims.Most Asian markets are now on big recession after the crash of Dow John’s. Indian, Chinese and Hong Kong markets fell considerably in the recent past.In the globalized world no country can remain isolated and hence developments taking place in one part of the world have their repercussions on the other part of the world and capital markets are no exception. The Indian capital market is also showing bearish trends with banking stocks moving down in recent times.

After the first symptoms of recession of US stock and other financial markets, many investing firms and funds changed their focus to emerging markets of Europe and Asia. Decoupling theory is postulated in this context for assisting the firms to reap from these emerging markets, but the validity of this theory is arguable.
The major drawback of Decoupling theory is that it does not consider the multiple economic relationships and globalization trends. Although the trades among Asian countries grown tremendously, the major trading partner for all major Asian countries is still United States and any recession in its economy will lead to recession in all these countries, although the effect may vary.The coupling thus still exists and the same can be said about the near future as well.
Courtesy:1>Dr Salma Rizvi,MBA,PhD,Lecturer(Finance)Amity Business School
2>Amarendra Chowdhury,MBA,Phd,Consultant,Citi-India

CREDIT RATING

Credit rating refers to the Credit worthiness of an Individual, Corporation or even of a Country.It is calculated on the basis of credit history,present assets and liabilities.A poor credit rating indicates higher chances of defaulting.
The individual credit rating is important for the banks to estimate the repayment capacity of its borrowers and the individual credit score takes into account the total amount of credit,credit spending pattern,amount of credit used,savings pattern,debt,interest rates etc.Accordingly a three digit credit score is prepared by rating agencies like Fair Isaac Corporation.
Corporate Credit rating is important for potential investors in bonds and debt securities.It is also known as bond rating.Agencies like Moody's,Standard's & Poor's, Fitch Ratings are involved in assigning such credit ratings.Corporate credit ratings are indicated by AAA,AA,A,BBB,BB,B and so on.Any rating below BBB indicates poor credit health of the corporation.
Sovereign credit rating takes into account the investment environment of a country and it includes the political environment as well.Investment friendly government policies ensure better credit rating of the country.Presently countries like Luxemburg's,Norway,Switzerland have very high credit rating.
Apart from the already mentioned credit rating agencies Equifax,CallCredit, Experian,TransUnion are some of the credit rating giants.In India Credit Information Bureau of India Ltd is an individual credit rating agency.CRISIL,ICRA,Credit Registration Office etc engage in corporate credit ratings.
India's credit rating is presently facing growing pressure because of the widening fiscal deficit and the country's increasing dependence on foreign capital inflow.The newly elected government, which won a second five-year term last in May, is planning to borrow a record Rs.363,000 crore ($76 billion) this fiscal. This move is expected to widen the budget deficit to 5.5 percent of the gross domestic products.However due to India's positive credit history the pressure may just last for a temporary period.

EFFECTS OF LIBERALIZATION ON PRODUCTION AND EMPLOYMENT

Liberalization of Indian economy has yielded many positive results.But considering the overall socio economic impact of liberalization in Indian context the scenario is still not something to cheer about.
It was widely believed that a liberal economy will eventually lead to better production and more employment generation, the two most important features of any successful economy.Although India has not fared badly in the first category,employment generation fore the targeted section is still not satisfactory.
Considering production of goods, today Indian markets are full of white goods, i.e, goods required and used by the upper strata of the society and produced by multinational companies,refrigerators,washing machines, inverters, air conditioning machines are to name a few.This has resulted in the growth of consumer culture with international companies dominating the market because of their high brand value,large expenditure on product development and marketing strategies.The domestic companies in the face of tough competition are losing the battle and are on the verge of extinction.Thus, though India boasts of having high mobile density,producing the cheapest car in the world, farmers still commit suicide in the countryside, more than 20% of the population still live below the poverty level.It would be, therefore, not wrong to say that the benefits of liberalization have not percolated down the social strata to enrich the poorer section of the country.
Considering employment generation, liberalization has created more white collared jobs ignoring the needs of the poor, rural people.More and more call centers are being opened,state of the art,sophisticated IT offices are being built.But beneficiaries?The privileged,educated sections of the society.But the miserable plight of the unskilled workers,poor farmers, daily wage earners is still the same.It seems the growth rate of Indian economy has not done justice to the weaker section of the society.
Therefore care has to be taken to ensure a balanced development so that domestic companies can also flourish along with their multinational counterparts,economic development results in social growth and the young Indians are free from the menace of unemployment.
NOTE:THIS ARTICLE CAN BE USED FOR ANSWERING QUESTIONS LIKE "GLOBALISATION ON POVERTY ALLEVIATION IN INDIA".

Impact of globalization on state system and its institutions- 2007- 15 marks

Globalization removes boundaries among the states for enonomic and socio-cultural unification of the world.In the wake of golbalization a new concept of global governance is replacing the age old closed and confined single state governance.
The state system has gone through significant changes in the globalized economy.States are opening their economies.To get benefits of barrierless trade cooperative governments, trade groups, economic blocs are being developed. Bilateral and multilateral agreements ,free trade agreements are taking place among several nations.
Today the state system is broadly being dictated by the norms of organizations like WTO and IMF.Even states have to limit their sovereign decisions due to pressure from such international forums.The states are giving up administered price mechanism to make way for market determined prices.
Even the state institutions have to change their structure and organization to get themselves acquinted with the process.Insurance,banks,education,finance,agriculture, PSUs, FDI policy all are being modified to accustomed to the changing world to become more competitive and more qualitative.
Thus in today's world the state system and its institutions are largely being dictated by market forces and shedding off the age old sovereign prejudices to get the most of the new trends.
For referrence you can visit http://www.allacademic.com//meta/p_mla_apa_research_citation/0/7/2/2/5/pages72251/p72251-1.php
http://unpan1.un.org/intradoc/groups/public/documents/nispacee/unpan005068.pdf

SHORT NOTES- ECONOMY

1>Merit goods: The concept of a merit goods was introduced by Richard Musgrave (1957, 1959) and it denotes a commodity which is judged that an individual or society should have on the basis of some concept of need, rather than ability and willingness to pay. Examples include the provision of food stamps to support nutrition, the delivery of health services to improve quality of life and reduce morbidity, subsidized housing and arguably education.A merit good can be defined as a good which would be under-consumed (and under-produced) in the free market economy
2>Cheap Money: The money which is available at lower interest rates, softer terms and easy conditions.Cheap money causes inflation in an economy.
3>Countervailing Duty: It is the duty against dumping and aimed at increasing the prices of the products being dumped so as to protect the interest of the domestic industries and farmers.
4>Hot Money:The money which is highly volatile and flees from one country to another swiftly to take advantage of better short term interest rates.
5>Trickle Down Theory: The basis of the theory emphasizes on heavy industries and it is assumed that the benefits of such industries will trickle downwards and will eventually benefit the consumer goods industries
6>Engel's law: This suggests that the lower income group spends larger part of their income on food and other similar items and with increase in income proportion of expenditure over such items decreases.
7>Stagflation: It is a state of the economy where economic activity continues to slow down but wages and prices continue to rise.The term is a blend of stagflation and inflation.
8>Ad Valorem Tax: A tax that is specified as a percentage of value. Sales, income, and property taxes are three of the more popular ad valorem taxes devised by government. The total ad valorem tax paid increases with the value of what's being taxed.
9>Administered price:It is the price fixed by the government to keep control over rise or fall of prices of particular commodities sos that the vulnerable groups do not suffer.
10>Cash Reserve Ratio:Every scheduled bank has to keep a percentage of total assets and deposits as deposits with the RBI.Presently it is 5% in India.

DUMPING AND INDIA (30 MARKS, 250 WORDS)

Dumping is the process of selling goods to foreign market at very low prices.When production exceeds the demand and there is a chance of falling prices even lower than the stipulated levels, the country opts for selling the product to other countries at thrown away price.This saves losses of the producers but causes losses in the country where the products are being exported.
To restrict such dumping, countries tend to put quantitative restrictions upon dumping.But due to WTO norms such restrictions are prohibited.Thereby countries look for new devices to restrict dumping.
India has adopted various preventive measures allowed under WTO rules to restrict dumping.Giving subsidy to the farmers to reduce their production cost and improve quality of goods, imposing countervailing duties and additional charges are some of the measures taken by India in this regard.The Ministry of Commerce has established "Directorate of Anti Dumping" to tackle issues of dumping.
Main threats of dumping in India is in the spheres of agricultural produces and manufactures that are allotted to the small scale industries.However, measures taken against dumping renders the domestic economy more competitive due to technological upgradation,better value addition and cheaper products.

ECONOMY TITBITS( INDIA YEAR BOOK INCLUDED)

• Gilt-edged market-Deals with govt and semi govt securities
• Working group on WPI led by Arjun Sengupta-proposed base year 2000-01
• Reflation-Price rise during the process of recovery
• Pound Sterling has the highest value in comparison to Indian Rupee
• IDA is the soft loan window of World Bank
• India's rank in FOREX reserve-5th
• National Housing Bank established in 1988 is a wholly owned subsidiary of RBI
• MID DAX-index of Frankfurt stock exchange
• SENSEX takes into account the weighted average of 30 shares and its base year is 1978-79
• India was one of the first in Asia to recognise the effectiveness of the Export Processing
  Zone (EPZ) model in promoting exports, with Asia’s first EPZ set up in Kandla in
  1965
• MMTC Limited is India’s largest trading company with an annual business turnover
  in the region of US $ 7 billion. It is the largest exporter of Minerals and Ores from
  India
• The Central Statistical Organisation (CSO) undertook a countrywide Economic
  Census, for the first time in 1977
• The Department of Economic Affairs (DEA) is the nodal department for procuring
  and coordinating external assistance from multilateral/ bilateral agencies.
• The first bank of limited liability managed by Indians was Oudh Commercial Bank
  founded in 1881
• India's current quota in the IMF is SDR (Special Drawing Rights) 4,158.20
  million in the total quota of SDR 213 billion, giving it a share holding of 1.95 per cent.
• India is a founder member of the International Monetary Fund. Finance
  Minister is the ex-officio Governor on the Board of Governors of the IMF and Governor,
  RBI is India's Alternate Governor. India is represented at the IMF by an Executive
  Director who also represents three other countries, viz. Bangladesh, Sri Lanka and
  Bhutan.
• Electronics equipments including Software attracts highest FDI in India
• The three largest states constituting 54% of the corporate sector are Maharashtra,
  Delhi and West Bengal
• WINGS OF World Bank

IDA-Soft Loan
MIGA-Insurance
ICSID-Investment disputes
IFC-Lending to private sector

• Members of IMF can be the members of World Bank
• Omkar Goswami Committee-Industrial sickness
• M3 is known as Broad Money
• First National Human Development Report-2002
• The economy of India is the twelfth largest in the world by market exchange rates and the fourth largest in the world by GDP
• India currently accounts for 1.5% of World trade as of 2007 according to the WTO.
• India has the world's second largest road network.^[147] Container traffic is growing at 15% a year.^[148] Some 60% of India’s container traffic is handled by the Jawaharlal Nehru Port Trust in Mumbai
• Call Money Market deals with one day loan
• Dr VKRV Rao first calculated India's national income on a scientific basis in 1931-32
• First plan was based on Harold Domar Project
• Eradication of poverty was the main target of the 5th Plan
• India has the second largest share holding population after USA
• Bank of Baroda is the Indian bank with highest number of foreign branches
• First stock exchange in Bombay in 1875
• NK Singh committee-FDI
• Central Cooperative Bank operates in the district level
• PC Moholanobish was the chairman of the National Income Committee in 1949
• SIDBI is a wholly owned subsidiary of IDBI
• Directorate of Enforcement is responsible for FEMA
• NAFTA is the largest trading block in the world
• UTI II is NAV based and floated by LIC,BOB,SBI and PNB
• Treasury bills are sold through auction
• Devaluation is done on fixed exchange rates
• Crawling peg refers to the existence of both fixed and flexible rates.It is also known as Dirty Float or Managed Floating Exchange Rate
• Commercial banks are set up by the act of Parliament whereas cooperative banks by the act of state
• Regional rural banks were set up in 1975.First RRB in Maldah,West Bengal
• Bank of International Setlement- BIS( Basle,Switzerland)
• Bank rate, CRR and Open Market Operations are the quantitative measures
• RRB s are not present in Sikkim and Goa
• United Nations has maximum debt on USA
• OECD countries have highest trade with India
• Rangarajan Committe-BOP problems