By KR Sudhaman - IAS EXAM PORTAL (Formerly UPSC ......— By KR Sudhaman Father the Nation Mahatma Gandhi was right in saying India lived in its six lakh villages and cottage industries

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SECOND ROUND OF FDI REFORMS

The changes in the FDI policy are aimed atliberalising and simplifying the norms with a viewto promoting ease of doing business, encouraginggreater capital flows and making India andattractive destination for foreign investment.

— By Rajesh Pal

The government wants to turn over every ‘stonein-order to attract foreign investors.

Series of Reforms

The sectors which have been tweaked’ histime’ includes defence, civil aviation, private securityagencies, single brand retail, pharmaceuticals,broadcasting carriage services and animalhusbandry.

Launched the second wave of. FDI reforms,the government has allowed 100 per cent inflowsin civil aviation and food processing sectors whileeasing norms in defence and pharmaceuticals.While in the single brand retail, it has somewhatti6htened the norms by putting a, fix ‘period forgiving exemptions from the mandatory localsourcing conditions.

The major reform measures were decided at ahigh-level meeting chaired by Prime MinisterNarendra Modi. The’ Prime Minister’s Office (PMO)has said that the decisions will make “India the.most open economy in the world for FDI”, butcritics said it was a “panic” reaction to Rajan’s

decision 01) Saturday to exit RBI and return to-academia after September, 4. Commerce MinisterNirmala Sitharaman has said the decisions wouldhelp in attracting more investments creating jobsand making India the global manufacturing hub.

“Now most of the sectors would be underautomatic approval route, except ‘a small negativelist. With these changes India is now the most openeconomy in the world for FDI,” the PMO statement,-has said. The first batch of FDI reforms wereannounced by the government in November 2015,after the announcement of Bihar assembly elections.

Important Developments

The most important announcement made wasrelated to civil aviation in which 100 percent FDIhas now been allowed in airlines, except by foreigncarriers. Norms for overseas Investment have alsobeen relaxed in brownfield airports. Under thepresent policy, foreign investment up to 49 percentis allowed under atutomatic route in domesticairlines. It has now been decided to raise tis limit to100 percent, with FDI up to 49 percent underautomatic route and beyond that throughGovernment approval.

In the defence sector, the policy has beentweaked to allow 100 per cent FDI by doing awaywith the condition of access to “state of the art”technology. It has now been modified to “modernor for other reasons”, a move that will widen thescope of investment by foreign players.

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The news norms have alos been madeapplicable to manufacturing of small arms andammunitions covered under Arms Act 1959. Underthe current policy, FDI up to 49 per cent wasallowed under automatic route and beyond thatunder the approval route. For the pharmaceuticalssector, the government’ relaxed the norms andpermitted FDI up to 74 per cent throuqh automaticroute in brownfield projects and approval routebeyond that limit to promote the development ofthis sector.

The move assumes significance as FDI in theexisting pharma companies has been a conteniousissue as concerns have been raised over some M&Asof Indian pharma companies by foreign gaints. Incase of private security agencies, FDI up to 49percent is now permitted under automatic routeand up to 74 percent through approval route. Thecurrent policy permits 49 percent FDI undergovernment approval route in privaate securityagencies.

The government has decided to do away withthe requirement of separate security clearance orRBI approval for setting up of branch or liaisonoffices by foreign companies dealing in defence,telecom, private security or information andbroadcasting i’f the requisite approval of FIPB orthe ministry or regulator concerned is in place.

The government has also decided’ to do awaywith the ‘controlled conditions’ for FDI in theseactivities relating to animal husbandry. As per theexisting policy, FDI in animal husbandry (includingbreeding of dogs), pisciculture, aquaculture andapiculture is allowed 100 per cent under automaticroute under route and beyond that throughcontrolled conditions.

Measures undertaken by the government haveresulted in increased FDI inflows from USD 36.04billion in 2013-12 to US 55.46 billion in 2015-16,the highest ever FDI inflow for a particular financialyear, the statement said. The changes in the FDI

policy are aimed at liberalising and simplifying thenorms with a view to promoting ease of doingbusiness, encouraging greater capital flows andmaking India an attractive destination for foreigninvestment.

(PTI Economic Service)

MICRO, SMALL ANDMEDIUM ENTERPRISES IN INDIA

The start-up and Stand up India, Skill Indiaand Digital India will all help in the growth ofMSMEs in the country.

— By KR Sudhaman

Father the Nation Mahatma Gandhi was rightin saying India lived in its six lakh villages andcottage industries alone could create much neededjobs and livelihood to the majority of the 1.25 billionpeople. In India 60 percent of the population in stilldependent on agriculture but they accounted forjust 15 percent of Gross Domestic Product. So vastnumber of peoples are disguisedly unemployed inthe farm sector and the number is increasing withland holdings getting fragmented generation aftergeneration.

Easy Way for Rural Development

So what is the way out to ensure ruralprosperity and the answer is simple to developclusters of small industries dotting all over thecountry. Very little is known about tile greatcontribution the small and· medium: enterpriseshave made to the. development of an economy. InIndia to it has contributed greatly particularlyconsidering the fact that there is a large Population.

It is established all over the World that Micro,Small and Medium enterprises are one of the-majordrivers of job creation and achieve disperseddevelopment preventing large scale migration tourban areas. Also the advantage is that every Rs1.5 lakh capital spent on MSMEs results in one jobwhereas it required Rs 6 lakh capital for a job in



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large industries.

This universal statistics indicate largeindustries are capital guzzler and small industriesset up’ in rural areas around, the farm land canprovide seasonal jobs as well tackling the, problemof underemployment in farming, which by natureis seasonal.

MSMEs however’ cannot grow in vacuumand. in a restrictive environment. There were, fearsthat liberalization of economy in 1991 that freedthecountry from shackles of controls that come tobe known as licence-permit raj, has in fact helpedthe growth of small enterprises side by side largecompanies.

They complimented each other. Today MSMEsaccounted for 40 percnt of manufacturing in thecountry and 45 per cent of exports, Doing so wellin exports is not a small achievement as it hasprogressed’ in an environment of stiff globalcompetition.

Today there are five crore micro, small andmedium enterprises providing employment to 11crore people. Textiles which is second largestemployer in the country is mostly in small sectorEighty five per cent of the textiles industry are inthe small arid medium sector.

The 15 percent large textiles industry acts aspivot for the small textiles industries to develop. Thede-reservation policy adopted for small scaleindustries and ultimate phase-out of reservationpolicy has only help small enterprises.

This has been corroborated by the statistics andthis has proved doom sayers wrong and smallindustries have not only survived’ but has’ grownmanifold. Also every car produced in a largecompany results three, jobs’ in MSMEs and servicessector likewise one truck, produced results in sevenjobs. These indicate the power of MSMEs in jobcreation and economic development.

National Statistics Commission Chairman

Pronab Sen, who, has done pioneering work in thegrowth of small industries in the country said thatduring the corporate led growth process of 2003-09, when India clocked over 9 percent growthannually, the increased revenues of the governmentpermitted expansion of’ both public infrastructure‘investments as well as SME investments. Howeverwhen the global’ crisis occurred in September 2008,the corporate sector cut-back sharply on itsinvestment activities. However the small andmedium scale enterprises sector actually expandedits investment as a share of GDP quite significantly.

Crucial role by Small and MediumEntrepreneurs

Thus the resilience of the Indian economy inthe first· two years after the crisis owned almost asmuch to the small and medium entrepreneurs inthe country as it did to ;the government’s fiscalexpansion. In fact India achieved over six per centGDP growth despite marked slowdown incorporate investments indicated that SME came’ tothe rescue of the economy to keep the growthmomentum. Of course if India had to get back tohigh 9 per cent growth corporate, flush withmoney, will have to investing and. that is nothappening because of excess capacity. But it is thesmall and medium enterprises that is ensuring thatIndia grew at a healthy 7-7.5 per cent in a gloomyworld economy in which advanced economies andChina that adopted corporate led growth haveslowed down drastically.

India is still one island of prosperity’ even inthis difficult situation is partlys because of SMEsdoing well. In fact one of the problems of USeconomy at the present juncture is because SMEsgave way to large companies, which are indoldrums. The resilience that SMEs particularlyduring economic slowdown or crisis is unavailablein US due to discouragement of growth of SMEsthere.



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Underlying Obstacles

It is not that SMEs have no problem in thecountry. There are many. Access to formal financeis a major problem. Banking sector thoughconsiders SMEs as priority lending, bank loans arenot all that easily available to SME sector.

The largely depend on family resources,informal channels like chit funds and moneylenders, where cost of funds are much higher.Despite that they are able to complete partlybecause of the fact the capital requirement is muchless compared to large companies, according to Sen.There is yet another source of funding available nowthat is to tap the capital market through SMEexchanges of BSE and NSE. Here cost of fundswould be cheaper but his is not getting popularrapidly as still most of the MSMEs are family ownedand they fear going public. This is one area thatneeded to be encouraged, according to KK Jalan,Secretary, MSME ministry.

There is yet another major problem that is lackof skilled and trained manpower. According to Sen,MSME owners spend most of the time skilling rawhands and once they acquire the skills, they moveon to greener pasture in large companies andmultinational and as result most of the MSMEs aregood training ground.

But this handicaps MSMEs as theirentrepreneurs get very little time to attend to otherissues like marketing, technology and so on. Tohandle this issue, the MSME ministry is workingskill mapping of the country. Former MSMESecretary, Anup Pujari, who began this work saidthis will go a long way in ensuring appropriate skillsare available by providing skill training in areaspecific manner. At the moment there are it is allover the country but they provide training skillswhich are required local small scale industriesresulting in SMEs constantly providing on the jobtraining.

If an ITI in Odisha provides training to

plumbers and if there are no demand for plumbersin Odisha, they will have to shift out in search ofjobs, they will have to shift out in search of jobs. Toprevent this kind of training, the skill mapping willensure appropriate skilling is provided to therespective towns so that SMEs do not face thisproblem.

Rating of SMES with investment over Rs onecrore will be an useful exercise to ensure thatlending from formal banking sector happens.Rating agency Onicra head Varun Mirchandani toldCorporate Tycoon that 75000 SMEs, which havebeen rated found that it was now easier for themget loans from banks.

There is no longer trust deficit and this hasworked wonders among SMEs in the North East.But the number rated SMEs formed a smallpercentage of the overall SMEs in the country.Asked why the rating has not picked up in Indiaand what the government proposed to do, SecretaryJalan said he did not subscribe to the view that ratingof SMEs are not picking up. He said not all MSMEsrequire ratings. More than 3.5 crore MSMEs in thecountry are micro industries, which do not requireratings.

Also the SMEs in the services sector do notrequires do not require ratings. It is onlymanufacturing MSMEs above Rs one croreinvestment and that too those seeking loans frombanks need rating and they formed only 5-6 percentof total MSMEs in the country and they areincreasingly getting rated in the country.

The successive governments have done a lotof for the development of MSMEs in the countrybut a lot more needed to be done and one greatservice that government, particularly stategovernment could do is to dismantle inspect jar,which still remains though licence-permit raj hasvirtually vanished. Also there is need for acomprehensive MSME policy.

Now various ministers have sector specific



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policy, for example textiles ministry has policy forMSMEs in that sector. The recent decision to allow100 percent FDI in food retail and food processingindustries will help MSMEs growth anddevelopment of food processing parks in the countryparticularly in rural and semi urban areas. MSMEminister Kalraj Mishra said that he hadrepresentations from 130 SME associations for acomprehensive policy and he had constituted oneman committee headed by former cabinet secretaryPrabhat Kumar to come out with one.

This is expected shortly. The government’sMUDRA bank to provide loans to micro industriesrun by scheduled casts and tribes too seemed to beworking. As Prime Minister Narendra Modi saidthe government has already lend over Rs 1.5 lakhcrore under the MUDRA to SC/ST entrepreneurs.The start-up and Stand up India, Make in India,Skill India and Digital India will all help in thegrowth of MSMEs in the country. It has alreadydone will despite several hiccups and it can onlygrow further, which is evident from the fact over3000 industrial clusters have mushroomed bythemselves like Tirrupur for hosiery, Ludhiana forwoolens and cycle parts, Moradabad for Brassware,leather clusters, in Chennai, Agra and Kanpur,gems and Jewellery in Surat, precious stones inJaipur, Fireworks industries in Sivakasi and manymore. These have come up on their own withoutgovernment help and many more are expected.Now IT enabled services are doing well in the SMEsector.

The explains the bright future for SMEs butthere are problems which needed to be handledparticularly the attempts of large industries tryinggobble up smaller ones. This will not be good forthe economy as he has been witnessed in the UnitedStates.

(PIT Feature)

LESS-CASH DRIVE: RBI RELEASEFRAMEWORK ON PAYMENTS SYSTEMS

Reserve Bank has brought in a framework formoving towards a society less dependent on cash-transactions and also making mobile banking‘services a preferred choice of a wider mass withits Vision Statement termed as ‘Payment and-Settlement Systems in India’.

New Vision

The Vision-2018 reiterates commitment of RBIto encourage greater use of electronic payments byall sections of society so as to ‘achieve a “less-cash”society RBI has said, “The policy efforts will alsofocus on ensuring that access to mobile bankingservices is seamlessly provided-to the large numberof users of non-Smartphone handsets in multiplelanguages,” it said. The broad contours of Vision-2018 revolve around the 5 Cs: Coverage,Convenience, Confidence, Convergence and Cost.Coverage is enabling wider access to a variety ofelectronic payments services, convenience is to offerease of use of products and processes whileconfidence hinges on promoting integrity ofsystems, security of operations and customerprotection’. Convergence envisages ensuringinteroperability across service providers while costis to make making services price effective for usersas well as service providers.

“Building a robust payments infrastructure inthe country to increase the accessibility. availability,interoperability and security of the paymentsystems will continue to remain a key objective”,states the document. RBI said the proposed newpolicies to be framed under the Vision with focuson electronic payments will influence trends inpayment systems in the country.

“The high mobile density in the country isbeing increasingly leveraged to offer paymentservices by a wide range of payment serviceproviders so, as to enable an on the-go, faster



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payment experience to the customers”, it said. Inits framework, service providers will be,encouraged to use technology to provide innovativeeasy to use mobile based payment solutions in aninteroperable environment without Compromisingon security.

Addressing the Core Issues

The banking sector regulator will also reviewthe existing prepaid payment instruments (PPls),mobile :banking guidelines and White Label ATM(WLA) guidelines. “To promote mobile phones asaccess channel to payment and banking servicesthe guidelines (mobile banking) will be reviewed toaddress issues related to customer registration formobile banking safety and security of transactions,risk: mitigation and customer grievance redressalmeasures”, it said.

RBI also aims to facilitate faster paymentservices in view of increasing adoption of electronicpayments particularly those driving e-commerceand m-commerce there is a growing demand forfaster payment services which, in turn, facilitate easein doing financial transactions.” Towards this endthe measures that ‘will be initiated includingNational Electronic ‘Funds Transfer (NEFT) withthe growing adoption of NEFT by individualsbusinesses and government agencies/departments.

If has necessitate a review of the system toenable faster payment processing throughintroduction of more frequent settlement cycles,RBI said. Also RBI will explore the feasibility ofadopting ISO messaging format for NEFT.

The move towards a less-cash society alsomeans promoting interoperability as customersshould be able to use and re-use a, set of payment:instruments seamless across different segment tomeet· a variety of payment requirements, it adds.

The requirement of users for seamless paymentexperience are met only when the payment systems

are inter-operable and, are able to communicatewithin their own segments on the basis of commonstandards adopted, by all providers of theseservices, as per the document paper.

Vision-2018 envisages promotinginteroperability in areas which have a’ highpotential for driving electronic payments; including-for small value transactions, such as UnifiedPayment Interface (UP!), toll collection andpayments for mass transit systems. RBI saidcollection of.toll, largely ‘done in the form of cashpayments, is another segment where efforts tomigrate to ‘electronic payments have beensporadic’ and isolated.

“Such disparate developments have led to thepropagation of different systems across differentparts of the country, not only causing confusionand inconvenience to’ the customers; but alsopushing them further into cash payments. “Hence,electronification of the toll collection systems on apan-India basis in an interoperable environmentwill be encouraged”, reads the Vision-2018.

RBI expects the Vision to result in acontinueddecrease in the share of paper-basedclearing instruments; growth in individual segmentsof retail electronic payment system—NEFT, IMPS,card transactions, mobile banking as well as increasein registered customer base for mobile banking;significant growth in acceptance infrastructure; andaccelerated use of Aadhaar in payment systems.


GOVERNMENT SETS UP MULTI-AGENCYPROBE TEAM ON MONEY STASHED ABROAD

RBI Governor Raghuram Rajan said that themulti-agency probe will look into the legitimacy ofsuch holdings of Indians named in the leakedPanama List.

— By Joyeeta Dey

With 500 Indians being named in leaked‘Panama’ Papers’ for alleged offshore holdings, the



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Modi government has formed a multi-agency groupto monitor exposes in this regard and vowed to takeaction against all “unlawful” accounts held abroad.Finance Minister. Aru’n Jaitley said that PrimeMinister Narendra Modi discussed the issue withhim and or’ his advise the group has been set upcomprising agencies like CBDT, RBI and FLU(Financial Intelligence Unit).

Thorough Monitoring

The Special Investigation Team (SID on blackmoney also said it will investigate thoroughly the“reported secret list exposed by the InternationalConsortium of investigative Journalists (lCIJ). “Themulti-agency group will comprise variousgovernment agencies - the CBDT, FLU, FT& TR(Foreign Tax and Tax Research) and RBI. - Theywill continuously monitor these (accounts) andwhichever accounts are found-to be unlawful, strictaction as per existing laws’ will be taken,” Jaitleysaid.

His comments came after reports based onleaked documents of a Panama-based law firmMossack Fonseca said over 500 Indians heldaccounts in offshore tax havens. The report claimedthat the list included foundations and trusts ‘andpassport details of 234 Indians.

This included a well-known actor and hisdaughter-in-law, a leading real estate tycoon anda number of other industrialists and their familymembers, most of whom have .denied anywrongdoing. The report said Onkar Kanwar,Chairman of Apollo Group, and his family membersfloated an offshore entity in British Virgin Islandsin 2010 and two trusts in 2014.

Reaching to it, an authorised spokespersonsaid, “India lawfully permits foreign investmentsin accordance with certain regulations. Anyinvestment abroad, that the Kanwar family mayhave, is in due compliance with the Indian laws,where applicable, including making disclosureswherever required.

“Much of the family members mentioned areNRls. They are covered by other nation’spermissible laws for their foreign investments aridare not covered by Indian laws and restrictions’ onresidents in matters such as Income Tax and RBI.”Jaitley said the multi-agency group, set up to probeoffshore accounts disclosed in Panama Papers, isanalysing each and every account and those havingillegal holdings will not “get sleep at Right”.

“Now these Panama names have come intothe limelight. In last three days we have formed agroup. We are analysing each and every accountto find which is legal and which is illegal,” he said.-In a stern warning, Jaitley said, “Those who arehaving legal accounts, they need not worry andthose having illegal accounts won’t get sleep atnight.” “Those people who have kept it illegally,we will try to detect it fully. And I think that sooneverything will be made clear,” Jaitley said.

Opting for a Serious-probe

RBI Governor Raghuram Rjan said that themulti-agency probe will look into the legitimacy ofsuch holdings of Indians named in the leakedPanama list. It is important to note that there arelegitimate reasons to have accounts outside and theLRS scheme allows you to take money outside,Rajan had said.

Under the Liberalised Remittance Scheme(LRS), all resident individuals, including minors, areallowed to freely’ remit up to USD 2,50,000 perfinancial year for any permissible current or capitalaccount transaction or a combination of both..Jaitley said after the revelations, more names maycome out in the next ‘few days. “I welcome thisinvestigation. I think it is a healthy step that thesekind of exposes are being made. I have beenrepeatedly saying that the world is now going toincreasingly become more transparent, countriesare cooperating with each other and ‘slowly all thisinformation is going -to come out as a result ofvarious global initiatives which have been



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launched,” he said.

He said that Prime Minister has spoken to himin, this regard and after his advice, the governmenthas constituted a multi-agency group to monitorthe information and’ to collect further informationin this regard. The list has been released byInternational Consortium of InvestigativeJournalists (ICIJ), which added a disclaimer thatthere are also “Legitimate uses ‘for offshorecompanies”. Jaitley said the report published by TheIndian Express gave details of accounts and assetsheld by some Indian entities in Panama. This is’ thefourth collective bunch of such information andinvestigation that have been made, he said.

He added: “The first related to Liechtensteinaccounts against all persons involved in thatprosecutions have already been launched.Assessment orders have been passed. Then detailscame in 2011 with regard .to HSBC accountholders. 569 out of those account holders have beentraced. 390 were illegal and already 154' set ofprosecutions have been filed.”

The minister further said that detailedassessment orders have led to the discovery of illegalassets worth around Rs 6,500 crore. “Theprosecutions are taking their normal course andassessment proceedings and their consequentialactions are on,” he said. In 2013 the InternationalConsortium of investigative Journalists hadpublished a list of 700 per-sons which was analysed,he said, adding, “434 Indian entities have beentraced. 184 out of them admitted their relationshipwith the accounts and the process of passingassessment and prosecuting them is now on.Already 52 prosecutions have been filed’ by IncomeTax authorities”.

Jaitley said that in view of the commitment ofthe Central Government to bring out undisclosedmoney both from abroad and from within thecountry, “the information brought out by anyinvestigative journalism is welcome”.

Although in the previous report of ICIJ,information relating to the financial transactionsand bank accounts was not available, Jaitley said,the government detected credit in the undisclosedforeign accounts of such Indian persons in excessof Hs 2,000 crores, The multi-agency group, Jaitleysaid, “will monitor the flow of information in eachone of these cases. The government will take allnecessary actions as required to get maximumInformation from all sources including from foreigngovernments to help in the investigation process”.

India, he added, is also concerned that thereare nation in the world which are being used astax havens because of which all other countries ofthe world suffer loss of tax. The recent initiative ofBase Erosion and Profit Shifting (BEPS), Jaitley said,will help India and other countries in checking thispractice of tax-avoidance ‘through such tax havens.“India is also fully committed-to the BEPSinitiative.”

With regard to information received from theFrench government in 2011, a Finance-Ministrystatement said it revealed details of bank accountsof 628 Indian persons in HSBC, Switzerland and. alot of progress has been made with regard toinvestigation by the Department and 569 personshave been traced.

Out of 628, 214 we’re found not actionable onaccount of no balance or being non-residents orbeing non-traceable. Of the remaining casesassessments have been completed in 390 cases inwhich undisclosed income of Rs 5,01'8 crore andtax demand of Rs 4,584crore has been raised,’ thestatement said. Also, a concealment penalty of Rs1,213 crore has been levied in’157 cases.

It further said that 154 prosecution complaintshave been filed in HSBC cases, Based on theprosecution complaints of predicate offences, EDhas also initiated investigation in 23 cases of HSBCand 20 cases of ICIJ expose of 2013.




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LOAN DEFAULTS: ADOPT ETHICALAPPROACH, JAITLEY ASKS INDUSTRY

The global initiativs to deal with the menaceof unaccounted wealth abroad will be in place by2017, and then it would become extremely diffifultfor individuals to hide assets.

— By Dipankar Kumar

In the light of rising cases of wilful default, onloans, including the one by liquor baron VijayMallya; ‘finance Minister Arun Jaitley emphasisedthat industry is fighting a battle of credibility and itshould adopt positive and’ ethical approachtowards N.PAs or bad debts.

Chronic Problem of Bad Loans

“Indian industry is also fighting a major battlefor its own credibility. Some recent events haven’tadded to their credibility,” he said, without namingMallya who has defaulted on Rs 9,000 crore loanand has gone to the UK to avoid action byinvestigative agencies and lenders. “In this entiredebate which. is going on non-performing assets,ram quite conscious of the fact that an adversebusiness environment can-lead to non-performingassets.

“When the cycle reverses, the NPAs can alsobe reversed but the approach of the leaders of theindustry will certainly have to be always positiveand ethical because it is that approach which isgoing to add to their credibility,” he said. There areabout 7,686 wilful defaulters who owe Rs 66,190crore to public sector banks. Of these, suits havebeen filed in 6,816 cases and FIR has been lodged1.669 cases.

Banks have initiated action under theSecuritization and Reconstruction’ of FinancialAssets and Enforcement of Security Interest Act(Sarfaesi) Act in 584 such cases, .Jaitley also saidthe government has been trying to address theproblem of NPAs in sectors like steel,’ textile,highways and infrastructure, which are on account

of economic lowdown. “In the last one year pro-active steps have been taken as “far as steel industryis concerned, the revival of highway industry isconcerned, the sugar industry is concerned, the stepwhich has been taken in power sector, each of-theseare going to lead to better consequence as far asthese sectors are concernred in coming one year,”he said.

The Finance Minister also said there are stillsome sectors which have been adversely impacedby business environment around the world, moreparticularly in this country. “The government andindustry will have to put their heads together, workin tandem to address each of the sectoral concerns.Obviously, those sectoral concern have fallout onthe overall economy,” Jaitley said.

The gross Non Performing Assets (NPAs) ofpublic sector banks (PSBs) increased from 5.43 percent as on March 2015. Groas NPAs of PSBsincreased from Rs 2,61,731 lakh crore in December.Talking about the stalled project, he said, the PrimeMinister’s Office is directly looking at them. A largenumber of them have got started in several sector,he said. On black money, the Finance Minister saidthose who did not take advantage of thecompliance window last year to declare illegalassets abroad will find “such adventurism extremelycostly”.

Need for Fruitful Global Initiatives

The minister said global initiatives to deal withthe menace of unaccounted wealth abroad will bein place by 2017, and then it would becomeextremely difficult for individuals to hide’ assets.’“With G20 initiatives FATCA and bilateraltransactions in place with effect from 2017, theworld is going to be a far more’ transparentinstitution ‘and therefore, this kind of anadventurism will prove to be extremely costly forthose who have indulged in it,” he said.

Jaitley said those who did not take advantage



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of the blackmoney compliance window last yearto declare undisclosed overseas assets will realisetheir mistake. “I had come in for adverse commentincluding some of my friends here when in 2015Budget we had announced a strong penal lawagainst illegal assets abroad. At that stage I hadsaid that those who committed mistakes in the pastare getting last opportunity with a compliancewindow in place.

“The compliance window operated (and),many availed but probably some didn’t. Todaywhen I see contrarian reports appearing (in media),which are not only impacting India …… which areimpacting the rest of the world, I think it is a sternreminder to all of us,” he said, Last year, duril1gthe 90-day compliance window ended September30, the government had received disclosures ofundeclared overseas wealth totalling Rs 4,147crore. Those wanting to come clean were requiredto pay 30 per cent tax and 30 percent penalty.

Beside, the government in this Budget cameout with a compliance window to encouragedomestic black money holders to, declare assets inthe four-month compliance window, which willopen in June. They will have to pay a total of 45per cent tax and penalty. Jaitley further said theessence of the industry will have to beentrepreneurship and also credibility. “If Indiaaspires to be the fastest growing global leader, asfar as the economy is concerned, we in governmenthave a primary responsibility in terms of policy andguiding public opinion,” he said adding theindustry also has to work towards achieving theglobal.


VALUE CHAIN EMPOWERING FARMERS

We need to empower our farmers to organisethemselves without waiting for others to help them

— By Dr Som Dutt

There has been significant progress in

agricultural production in India during the last sixdecades. The food grain production has increasedfrom 50 million tonnes in 1950 to 262 million tonnesin 2011-12.

The Green Revolutlon was initiated in thesixties, accelerated the growth of crop production,ensuring food security. - Thus, .phenomenal successhas transformed the country from a food-deficit toa food surplus nation. In the absence of a fair andefficient marketing system, neither the farmers geta fair deal nor the country can boost ‘agriculturalproduction to feed the burgeoning population. Sinceit is necessary to’ Keep all food fresh for a long timeor up to the end users, there is a need to have valuechain among farmers. Therefore, efforts’ have beenmade to develop an efficient value chain.

Realising the potential of value chain inmarketing, the Government of India assuredminimum support price for major foodgrains andestablished procurement centres for a fewimportant crops, where farmers Gould not sell theirsurplus produce in the local markets. This practiceis being continued even today for paddy and wheatin Punjab and Haryana.

Market is a place where the individuals havefreedom and right to sell and buy. A fair-marketensures efficient and reasonable price where a largenumber of buyers and sellers are active and theprocess is fair and transparent. Market should befriendly-to both buyers’ and sellers.

Need to Market Agriculture

The National Commission on Agriculture,defined agricultural marketing as a process startingfrom the decision to produce saleable farmcommodity until reaching the consumers. This canbe termed as backward-and forward integration ora Complete value chain, which bongs allstakeholders on a common platform to add valueto their produce, reducing the cost transaction.Marketing plays a critical role in determining the



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profitability of any production unit and moresignificant role in agriculture because of widelydecentralized production by millions of farmers,and fragile and bulk nature of the produce, whichare seasonal in production while the demand isspread all round the year.

Most of the farmers grow such crops whichcan be conveniently grown, depending on the-season and available inputs without understandingthe demand for the produce. As the marketingefficiency has been poor due to inadequateinfrastructure, weak information system, outdatedpolicies, unscrupulous traders and unfair practices,helpless farmers are exploited to such an extent,that cultivation of many crops is becoming anuneconomic activlty according to a report in theICAR publications.

Since small farmers have very little surplus tosell, their produce does not fetch better price in thelocal market. Such farmers are neither benefittedby improved production technologies nor byincreasing price of their produce. The small farmersin the arid regions of Western Rajasthan growpearlmillet or other hardy pulse crop due’ to non-’availability of marketing facility instead ofcultivating high- value crops like cumin, fennel,coriander, Psyllium (isabqol), clusterbean, sennaetc. which fetch very high price, leading to veryhigh income.

If there is a reliable service to provide finance,improved seeds, storage facilities for holding thestock whenever necessary and a fair market, theywould have opted for high-value crops and ‘becomeprosperous, owing to non-availability of backwardand, forward linkages, these distressed farmers areleft with ‘no enthusiasm, missing the goldenopportunity to cultivate many, elite crops. Withthese small farmers, medium and large farmers alsocompelled to send their surplus produce to themarket yard (rnandi), where they, face manyproblems, resulting’ in poor price realization.

Since our crop production is dependent onnature, there are severe variations in yield, qualityand time of supply of produce, while’ consumersexpect quality produce all round the year. In caseof fruits and vegetables, consumers prefer to havedifferent varieties and hence do not wish to buythe same vegetables and fruits every day. Thus, thereis a heavy fall in the price and inferior quality‘produce find no buyers. Many customers who eatber and oranges, discontinue buying them whengrapes arrive. The cut flower like marigold, hasdemand during certain festivals. If there is a delayin harvesting even by a day, there will not be anytakers in the market.

Many farmers do not have the capacity to holdtheir produce and wait for better price, unless theyget some advance cash against their stock, to settlepending debts and even to arrange grading andtransportation. Facilities for availing loan for cropproduction can empower them to enhance cropyield and quality.

The traders play a dubious role in exploitingfarmers in many ways. They serve as money lenderswith a claim on the produce at a lower price. Thereare many traders who go to farmers to pressurizethem to sell immediately after harvesting, cheatingthem in price as well as weight.

Sometimes, large farmers are cheated in themarket yards by recording lower weight, levyingvarious service charges and offering lower chargesby forming a cartel among traders. In fact, it isextremely difficult for farmers to bring back theproduce once it is taken to the marketed for selling,contrary to the philosophy of fair marketing.

Presently, small farmers have very, few optionsto sell their produce at a competitive price. Apartfrom selling to local traders, other options are tosell in local weekly markets (haats), to cooperativemarketing societies or ‘through e-chaupals. Of late,there are new options opening up, to supply toretailers or to other private entrepreneurs under the



12



contract farming agreement. However; there is along way to go before-small farmers-across thecountry become part of the value chain to get a fairdeal.

Realising the problems faced by farmers inmarket yards, the Government of India has nowintroduced model laws on agricultural marketing.Now, provision has been made to operate privatemarket yards and direct purchase centres, such ase-chaupals, ryat bazaars and public privatepartnership in market yard management. MarketStandard-Bureau has also been established to setstandards forvarious produce and Issue qualitycertificate for ‘graded produce. Several MarketingBoards and Federations have been established toprovide marketing support to growers.

Most of them are managed by theGovernment, with varying degree of success buttheir sustainability without the involvement of theGovernment, is doubtful. Provision forestablishment of Terminal Markets has also beenmade under the National Horticulture Mission, topromote marketing of fruits and vegetables bycooperatives and private agencies.

Under this programme, hub and spokes typenetwork has been proposed, with collection andgrading facilities created at village or block level.These graded produce can be sent to differentmarkets and processing units depending on thedemand and utility. Provision has also been madeto establish cold storages and godowns for storingthe products till processing and ‘marketing.Establishment of producers companies has beenrecently Introduced to-organize the producers andto ensure value-addition to the produce through’processing and, marketing. These companies areestablished by producers’, groups cooperatives, -processors and other stakeholders as members, forfacilitating various services to farmers with a majorfocus on value addition and marketing.

This company is expected to professionally

manage the business of procurement, processingand marketing of produce. These organizationshave the strength to negotiate with processors andretailers for better price, while assuring superiorquality produce and time bound delivery. Regularmarket survey ‘on, daily and weekly basis ondemand and survey of various agriculturalcommodities with their price ranges andtransmission rough radio, TV, internet andnewspapers, can give a clear idea about thedemanded supply situations during differentoccasions.

This data will be helpful to farmers andagricultural extension agencies to organizestaggered sowing of crops which can be harvestedwhen the demand is high. Relay of market-priceson daily basis, can empower farmers to bargain forhigher price. Grading of, the produce, based onstandard colour, size, shape and quality will helpin sending specific consignments to particularmarkets, to fetch better price.

Proper method of harvesting of fruits andvegetables without any scratches and damages,proper cleaning before grading, packing in differentquantities and in good packages, can fetch betterprice. Farmers should be oriented about consumers;preferences and good management practices.Suitable measures should be adopted to bringtransparency and fair trading in mandis/marketyards, to ensure provision for direct sale of produceby producers to retailers and processing agencies.

Offering suitable bet-price to farmers by tradersbased on sample of the’ produce, with a conditionto deliver the agreed quantity within a stipulatedperiod, the system adopted by private e-chaupals,should be encouraged.

Better Training for Farmers

This would empower farmer to sell theirproduce whenever they are offered better price.Value chain is a platform where all the stakeholders



13



associated with a particular crop or commodityshare a common platform and interact among eachother with a goal of optimizing the production andvalue-addition.

These are the intermediaries between farmersand consumers. They include scientists, extensionexperts, development agencies and farmers’organizations, input producers and distributors;financial institutions and insurance agencies,traders, warehouse owners, transporters processingestablishments and marketing organizations. Localfarmers cooperatives. dedicated civil societyorganizations or producer companies can take thelead in coordinating the value chain platform. Foreffective functioning and inclusion of small farmers,producers groups of 20 - 50 farmers, preferablybelonging to a homogeneous land holding andsocio-economic category, may be formed for sharinginputs technology, infrastructural, services andexperiences.

A field technician or a trained field, guide canbe-appointed for providing hands-on technicalguidance to individual farmers, under thesupervision of an expert, while organisation inputdistribution, credit facilitation, development ofwater resources, promotion of agro-engineeringservices post-harvest management of the producesuch as collection cleaning, grading packing andtransportation of the produce to variousdestinations.

With such an organizational set up either inthe form of informal or registered groups orcooperatives even small farmers can sell all thesurplus produce without any exploitation bymoneylenders and middlemen.

With timely availability of inputs and technicalguidance, these farmers can take up production ofeven high-value crops-and increase their income,The facilitating agency can also encourage newentrepreneurs to take up contract farming forgrowing high-value crops, wherein small farmers

can even think of pooling-their fragmented landswithout losing their land rights and increase thescale of production.

The facilitators can promote different marketoutlets, apart from sending their produce to exportand elite markets and processing agencies. Directsupply to retailers and consumer groups can furtherreduce the involvement of middlemen. This wouldalso provide an opportunity for farmers to knowtheir consumers’ better and improve theirproduction to suit the market needs. With suchefficient value chain development, farmers will beable to get remunerative price for” their produce,which in turn, can’ boost agricultural productionin the country.

The time is now ripe and fortunately, theGovernment policies are supporting such initiatives.Hence, we need to empower our farmers toorganize, themselves without waiting for others tohelp them.

(PTI Feature)

CENTRAL WATER ANDPOWER RESEARCH STATION, PUNE

Today the institute is totally devoted to serviceof the nation through research which also happensto be the mutto of the institution

— By G V Joshi

The Pune based Central Water and PowerResearch Station (CWPRS), as it is known today,has completed its one hundred years of fruitfulexistence on June 14, 2016. It was established in1916 on this day by the then Government byBombay Presidency as a “Speical Irrigation Cell”with a directive to develop irrigation practice to metIndian farmers’ requirements. Recognizing its rolein the systematic study of various phases of waterflow in canals, including floods, the institution wastaken over by the Government of India (GoI) in 1936and became a part of iminstries connected withwater resources and irrigation from time to time.



14



With the dawn of independence in 1947, andlaunching of planned development of the nationswater resources, CWPRS became the principalcentral agency to cater to the Research andDevelopment needs of projects in the fields of waterresources, energy development, and coastalengineering. Based on its experties, CWPRS adviseson various problems pertaining to projects not onlyin India, but also in neighbouring countries.

Recently engineers and scientists working atthe CWPRS have provided,’ structural and design’related recommendations to ensure safety andsecurity of the Salma Dam in Herat province ofAfghanistan, also known as the Afghan-IndiaFriendship Dam, which was inaugurated on June4, 20.16 by India’s Prime Minister Narendra Mbdiand Afghanistan’s’ President Ashraf Ghani.

Elaborate Government Arrangement

Today, CWPRS under the Union Ministry ofWater Resources is one of the foremost organisationin the field of water as well as irigation in India. Itprovides specialized services through physical andmathematical model studies and fieldsinvestigations in the following major areas: RiverEngineering, River and Reservoir system modeling,Reservior and Appurtenant Structures. Coastal andOffshore Engineering Foundation and StructuresEngineering and the like, It was in the year 1945that the Gol set up a Commission under the nameof Central Waterway, Irrigation and NavigationCommission, generally known as CWINC, whichwas to act as a Central planning and coordinatingorganisation with the authority to undertakeconstruction work in India, In November 1944, asister Organisation namely Central TechnicalPower Board (CTPB) , had also been set up by theGol, with the’ general responsibility ‘of initiatingcoordination and processing the schemes of powergeneration and its utilisation throughout thecountry.

However, the work between these two

organizations was found to be overlapping. The Goltherefore, reviewed the position in 1948, regardingthese two organisations along with two such otherbodies dealing with electricity and waterwaysdevelopment viz.

The Electrical Commissioner with the Gol andthe Consulting Engineer for Waterways andIrrigation, Gol then decided to amalgamate thesefour organisations into two, namely, the CentralWater-Power, Irrigation and NavigationCommission of which CWPRS was a part. At itsinception, the institution was located at Hadapsar,on the banks of Mutha Right Bank Canal thatoriginated from the then Lake Fife, named afterCaptain Fife, the engineer who recommendedduilding the Khadakwasla dam, which formed thereservoir on the river Mutha.

The institute took up the first problem aboutflow of water in canals in 1919, when it wasrecognised that the canals in Bombay Presidencythat carried varying amounts of water over the yearneeded special-purpose outlet devices, differentfrom those used In north India where the canalsremained at full supply levels throughout the year.

Studies conducted at the institute after theend of World War I in 1919, for silt removal fromthe canals in Sindh province, (now in Pakistan),and protection of bridges in India proved theimportance of a hydrodynamic research station inunderstanding the shifting nature of-alluvial riversin Indo-Gangetic plains of India and developing theprotection and training measures for them.

By 1935, the research activities far outgrew thefacilities available at the Hadapsar site. Substantialresearch works/modeling studies were relocated atKhadakwasla, about 15 km to the southwest of thePoona city where water was available, in adequatequantity, throughout the year for the hydraulicmodel studies. In the process the Special IrrigationDivision was named as the HydrodynamicResearch Station in 1928.



15



The Government of India established theCentral Board of Irrigation in 1928 as acoordinating body on technical and researchmatters. A few water research, laboratories wereset up in some provinces, but it was felt necessaryto have a central institution for the whole of Indiato provide-advice not only to the irrigationdepartments but also to the Railway, Board, PortAuthorities and other public agencies that mayneed it. Hence the institute was renamed as theCentral Irrigation and Hydrodynamic ResearchStation in 1937.

River valley development became thecatchword for all-round development of India after1947, with emphasis on establishment of new portsimprovement of existing ones arid coastalprotection.

To reflect-the renewed mandate and activities,the institution was renamed in 1947 as the CentralWaterways, Irrigation and Navigation ResearchStation. New laboratories such as River & CanalHydraulics, Mathematics, Statistics, Soils & SoilMechanics, and Concrete & Materials ofConstruction, Physics and Chemistry were added.

In 1949, to include the enhanced sphere ofactivities of the research station, the Governmentchanged its name to the Central Water Power,irrigation and Navigation Research Station; andfinally in 1951 to the Central Water and PowerResearch Station.

CWPRS has grown during the past tendecades to an institution of international standing;and is one of the few institutions of its kind in theworld, dealing with the entire life cycle of water,from its occurrence in rainfall to joining the oceanand dealing with various uses .of water on one handand water-related disasters on the other. Watermanagement scenario of today is centered onsustainable development and environmental issuesand this paradigm shift is reflected in the present-day activities of CWPRS. Today the institute is

totally devoted to service of the nation throughresearch, which also happens to be the motto ofthe institution.

(PTI Feature)

GOVERNMENT EYES CREATING A MASSIVEONE CRORE JOBS IN SHIPPING, PORTS

UNDER SAGARMALA

Thrust is being laid on developing waterwaysin the country and ball has been set rolling to tapthe potential of 116 rivers across the nation aswaterways

— By Namita Tewari

A massive one crore job creation is what thegovernment eyes under its ambitious Sagarmalaproject in the next four to five years.

The Ambitious Sagarmala Project

Sagarmala aims to promote port-leddevelopment in the country by harnessing India’s7,500-km long coastline, 14,500-km of potentiallynavigable waterways and strategic location on keyInternational maritime trade routes.

“One crore jobs will be created underSagarmala project only in the shipping and portssector,” Road- Transport, Highways and ShippingMinister Gadkari has said after chairing the secondNational Sagarmala Apex Committee meeting. Thejobs will include 40 lakh direct and 60 lakh indirectemployment.

Also upbeat that the Maritime India Summitin Mumbai from April 14 to 16 would give a boostto Sagarmala, the Minister has said that the globalmeet alone would see investments to the tune ofRs. two lakh crore in the sector. The Summit is beingorganised to harness India’s immense opportunitiesin the maritime sector. In line with Prime Minister’,‘Narendra Modi’s announcements that port sectorcan propel our economic growth, we are makingall efforts to exploit its immense potential, Gadkarihas said.



16



Thrust is being laid on developing waterwaysin the country and ball has been set rolling to tapthe potential of 116 rivers across the nation aswaterways, he has said. The government’s toppriority is to develop waterways and ports toreduce the high logistics cost as it costs Rs 1.5 a kmto carry the cargo from road, one rupee from railwhile through waterways it reduces to only 25 paisea km, he said.

Government has identified over 150 projectsunder its ambitious ‘Sagarmala’ initiative, theMinister informed. Apart from converting 111rivers into waterways the agenda includesdeveloping smart cities at major ports, the Ministersaid adding that the 1,620- km stretch on Haldia-Varanasi on Ganga was being developed andtenders were out for projects worth Rs 4,000 crore.

Also, on the priority is development of coastalareas in 13 states which will benefit lakhs offishermen, he said informing the governmentplanned low cost housing and other initiatives for.them. Development of shipping sector along withhighways will contribute at least 2 per cent to India’sGDP, he has said. On ports front, the 12 major portsin the country saw capacity addition of a record 94million tonne (MJ) last fiscal ended March 31,earning Rs 4,268 crore profit on the back-of variousgovernment initiatives.

Comprehensive Planning

Projects worth Rs 72,818 crore have beenawarded-for ports modernization as well as newport/terminal development, he has said, addingthat contracts worth Rs 60.,000 crore would beawarded by May 26. “Financial Year 2015-16 hasbeen historic for the Ports sector in the country,with 94 MT capacity added through 34 capitalinvestment projects which is the highest in majorports history,” Gadkari has said.

The Minister has also stressed that India plansto ramp up the capacity of its ports to 3,000 milliontonnes per annum (MTPA) by 20.25 as against

1,500. MTPA at present. He said ports capacity hasbeen increased by 4.3 per cent. Kandla became thefirst major port to reach 100. MT traffic in a yearhelped by 20 per cent improvement in portefficiency while JNPT became the first major portto reach Rs 1,000 ‘crore net profit helped by 12 percent of efficiency improvement, the Minister hassaid after the second meeting of the NationalSagarmala Apex Committee (NSAC).

Paradip Port achieved highest coal loadingvolumes of 24 MT with 30 per cent efficiencyimprovement, he has said adding the port efficiencyimprovement has added 50. MTPA of cargohandling capacity leading to high returns for portswith comparatively low investments.

Stating that the ports have continued theirrecovery, Gadkari has informed that, operatingprofit margins for major ports improved from 27per cent FY 2013-14 to 39 per cent in FY 2015-16.“The major ports have increased their operatingprofits from Rs 3,593 crore in 2014-15 to Rs 4,268crore in 2015-16, registering increase of about Rs670. crore,” he has said. The minister said efficiencyimprovement has lowered logistics cost for the trade,creating an estimated benefit of about Rs 500 croreper year.

Also, the turnaround time has reduced by over40 per. cent in Paradip, Tuticorin and Vizag, hehas said. While emphasizing on the need forpushing port and port led development, Gadkarihas said that the forthcoming Maritime IndiaSummit would be a game changer. He said therewere plans to set up several industrial zones atports like Kandla and Haldia to, spur economicgrowth. The minister has said that as part ofmodernization and up gradation of ports varioussteps are-being taken including implementation of104 initiatives to reduce time and cost of operationsin ports as per best global practices.

Thirty of the 104 initiatives have beenimplemented and the remaining will be



17



implemented over various phases ‘by 2019. Indiahas 12 major ports Kandla, Mumbai, JNPT,Marmugao, New Mangalore, Cochin, Chennai,Ennore , V O Chidambarnar, Visakhapatnam,Paradip and Kolkata (Includinq Haldia) whichhandle approximately 61 per cent of the country’stotal cargo traffic.


TWO YEARS OF MODI GOVERNMENT ANDINDIAN ECONOMY

During the last two years, government has putin place structural changes, setting the stage of theeconomy to return to high growth path in the nextcouple of years

— By KR Sudhaman

A lot of positive developments have takenplace to the Indian Economy during two years ofPrime Minister Narendra Modi Government. Manyof these developments have gone unnoticed becauseof the tepid global growth particularly in some ofthe advanced economies in Europe and emergingChina.

The Economic Overhauling

The Indian Economy might not be growing toIs full potential as yet but none can deny the factthat a derailed economy during the last few yearsof UPA government has been put back on rails. ‘Theeconomic slowdown has bottomed out and theeconomy is on revival mode and surging towardshigh 8-10 per cent-annual growth in the comingyears.

After slowing down to Jess than five per cent‘during the last years of UPA regime, India’s GDPgrew by 7.6 per cent in 2015-16and 7.2 per cent in2014-15, making the country fastest growingeconomy in the world after racing China sloweddown to less than 7 per cent annual growth in 2015.Annual inflation, as measured by the wholesaleprice’ index (WPI), fell to -0.9% ‘in January 2016.High growth and falling inflation is unprecedented

in recent Indian economic history. The fiscal deficithas been contained below 4 per cent of GDP andCurrent Account Deficit is less than 1.5 per cent ofGDP.

Foreign Exchange Reserves is beyond $350billion and growing. India received highest ForeignDirect Investment at over $50 billion in 2015-16,which has happened for the first time in puttingthe Indian Economy on a sweet spot when most of‘the other’ major economies are not doing all thatwell. Systemic reforms have happened in the lastcouple of years, whose impact might not be feltimmediately but over a period of time it wouldcertainly cut down wasteful expenditure andsubsidies would become more targeted and socialschemes more effective.

Of course, one cannot say for sure Indianeconomy is out of the woods as yet in view of theexternal factors arising out of difficult, globaleconomic situation and some domestic, bottlenecksimpeding rapid growth.

Agriculture, badly hit by poor monsoonduring’ the last two years coupled withinfrastructure constraints are-some of the factorsthat needed to be addressed and the Union Budgetthis year has rightly caught the bull by the horn sothat consumption demanded picked upparticularly in rural areas and more jobs are oreatedby pushing investments.

The economic survey shows that fixed capitalformation has, fallen to 29.4% of GDP in 2015-16from 30.8% in 2014-15. Agriculture has grown bymerely 1.1 % this year after -0.2% growth last yearwith food grains production stagnating at around250 million tonnes for the past two years. Exportsand imports have fallen by,l7.6 and 15:5%,respectively, during this year.

The Railways reported a mere 1 % growth infreight volume in 2015-16 over last, year. Growthin bank credit has ranged between 9 to 11 % in thelast two years in contrast to an average annual



18



growth of over 20% in the last decade. Banks areunwilling to lend owing to a pile up of bad debts,with stressed advances accounting ‘for over Rs. 8.5crore i.e. almost 7% of GDP.

Conscious of these problematic’ areas of theeconomy, the Budget has made an honest attemptto deal with many of the pressing issues. To beginwith it has taken number of steps to boost saggingfarm sector to deal with rural stress.

It has taken several steps to ensureinfrastructure investments get a fillip particularlyinvestments in ‘railways, highways, ports, airports,metro rail projects in various cities, development ofsmart cities, rural housing and power generationparticularly renewable energy. Massiveinvestments in infrastructure is the key to kick-startthe economy and this was happening when globalcommodity prices are low. This world help theeconomy reduce costs on projects because of fallingprices of steel, cement, oil and other commodities.

India is endowed with 300 days of bright’sunshine in most ‘parts of the’ country and rightlySolar power generation has been given specialthrust by the government. After it came to’ powerin 2014, the NDA government has stepped .upsolar power’ generation target five-fold to one lakhmw by 2022, Pesently’ solar power ‘generation isaround 5000 mw and necessary ground work hasbeen prepared to ensure at least 10,000. MW powergenerating ‘capacity is added in the next one yearwhich is likely to go up to 15,000 to 20,000 Mwannually in a couple of years. Some States likeMaharashtra, Tamil Nadu, Andhra Pradesh,Telangana, Karnataka, Rajasthan and Gujarat haveleapfrogged in this area.

One of the major successes of NDAgovernment is in the area of financial inclusion. Thiswould help in making India’s growth story moreinclusive with’ nearly one third of 1.2 billionpopulation still living below the poverty line. Thesuccess’ of Jan Dhan Yojana to ensure that every

BPL, family has at least on bank account has helpedin bringing about systemic changes to ensure thatmoney provided under various social schemes istransferred to the beneficiary directly. This directbenefit transfer is work in, progress and openingup of 10 million bank accounts, within as pan offew months is a great achievement. What has notbeen achieved since bank nationalization in 1969has been achieved in a short period.

Predominant outlay and Initiatives

Given the widespread agrarian distress, thegovernment, has increased the outlays significantlythis-year to reverse the damage. While the outlayfor agriculture and irrigation has increased from0.19% of GDP in, 2015-16 to 0.32% in 2016-17. Thefour big bang reforms that Modi government cantake credit is the launch of Make in India, Skill India,Digital India and Swatch Bharat initiatives thatwould help the economy become a globalmanufacturing hub and create the much neededjobs for the youth, which form 65 per cent of thepopulation.

The Make in India initiative will push thecountry’s manufacturing from the present 16 percent to 25 per cent of GDP in the next five to 10years. The second initiative: Digital India is aimedat utilizing India’s prowess in InformationTechnology and software to make India easy placeto do business and improve governance- and reducecorruption by digitising most of the governmentoperations. India’s services sector accounted fornearly 60 per cent of GDP and it is amount theleaders in IT and IT enabled services. The thirdinitiative: Skill India is equally important as withoutskilled manpower, the make in India initiative willremain a non-starter.

The Make in India initiative is aimed at takingadvantage of the country’s demographic dividendwhen most other economies including China isfacing ageing population. India needed to skill atleast 500 million people in the next 10 years to



19



become a global manufacturing hub.

Apart from make in India initiative, thegovernment has done quite a bit in improving easeof doing business in the last two years. The statesare also competing among themselves to improvethe ease of doing business by cutting down redtapism, bureaucratic and procedural hurdles. TheFDI regime too has been liberalized substantially inthe last couple of years. Some necessary legislationson Insurance-and pension reforms than opened upFDI further to up to 49 per cent have been passed.These legislations were pending for several years.

That apart FDI in defence has been liberalizedconsiderably attracting large commitments byforeign companies with Indian partners for hi tech,defence productions. FDI in defence production isnow allowed up to 49 percent through FIPB route.In ‘some hi-tech defence production it could up to100 per cent on case by case basis. More recentlythe budget opened up multi-brand retail on fooditems up to 100 per cent foreign direct investment.’Usually 70 per cent of multi-brand retail businessworld over is on food items.

As on April 1,2015, there were 18.19 croreregistered LPG consumers and 14,85 crore activeconsumers implying a gap of 3.34 crore consumerswhich were duplicate, fake or inactive accounts,Eliminating such 3.34 crore consumers helped saveRs 14,67.2 crore in 2014-15 fiscal. The saving in2015-16 was about Rs 7,000 crore, lower than theprevious fiscal mainly because global oil pricesslumped thereby cutting the subsidy required.

The government has also, promoted greenenergy in a big way. Total estimated investment inrenewable energy power projects during last threeyears is around Rs. 86,000 crore. As per inputsprovided by Central Electricity Authority (CEA),around 15,400 MU has been generated throughsolar energy during the last three years and it has,met the energy requirement to that extent in thecountry. Up to 100 per cent foreign direct

investment is allowed under automatic route for-power generation from renewable.

Modi launched a scheme “Prakash Path” -“way to light,” under which energy efficient LEDbulbs, will be distributed for domestic efficientlighting programme in Delhi; arid a NationalProgramme for LED-based Home and StreetLighting.

More recently India has moved a step closerto adopting a new bankruptcy law after the LokSabha passed the legislation. The law will ensuretime-bound settlement of insolvency, enable’ fasterturnaround of businesses and create a data base ofserial defaulters-all critical in resolving India’s baddebt problem which has crippled bank lending andit will also help creditors recover debt faster. Thistransformational legislation restores the balance ofpower between promoters and creditors. Therewere 12 laws, some of which were more than 100years old, to tackle insolvency, and now there willbe one law. Implementation of the law will lead tomore foreign investment interest in India.

Focusing on Industries

The government has done quite a lot to promoteMicro, Small and Medium Industries as well. It hasalready come out with Mudra Yojana to ensurefinancial’ assistance to SC/ST small entrepreneurin particular. Rs 1.8 crore loans to be provided tosmall and micro enterprises at a concessionalinterest rates. That apart government will sooncome out with a comprehensive MSME policy toboost the sector, which accounted for 40 percent ofmanufacturing and 45 per cent of merchandiseexports. It also has tremendous potential for jobcreation particularly in rural and semi urban areas.

The sector already employed 11 crore people.Textiles sector, another employment generatingsector has received fillip under NDA government.Funding is a major issue for MSMEs and thegovernment has made concerted effort to addressthis issue by promoting credit rating of



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manufacturing SMEs in the country, which hasconsiderably helped in availability of bank .Ioansto them. During the last two years government hasput in place structural changes, setting the stagefor the economy to return to high growth ‘path inthe next’ couple of years.

The government is on right traek to pushreforms, and these would start bearing fruits in thecoming years for the economy to reap benefit. OneMajor reform agenda that is yet to fructify is gamechanging Goods and Services Tax, which-is stuckin Rajya Sabha as the ruling NDA did not haverequisite numbers in the upper house.

Once that is passed in the coming months, theeconomy will see a sea change in pushing upgrowth. Apart from moving towards common-market in the entire country with near uniform rateof indirect taxation, GST rollout will push up GDPby 1.5-2 per cent.

It will-also save thousands of crore of moneylost because of commercial vehicle being held ‘upat toll gates. Also GST will widen the indirect, taxbase thereby helping revenue mop up by both statesand centres without high tax burden on indirecttax payers.

The recent monetary easing with inflation atmanageable levels too will help the economy byreducing interest rates. From here on the Modigovernment during the last years have ensured thatthe economy can only look up besides the growthbeing inclusive with the revival of investment in thecoming years.

(PTI Features)

INFLATION REMAINS IN NEGATIVE FOR17TH MONTH AT (-) 0.85 PERCENT

RBI has so far refrained from taking boldinitiatives to boost growth. The central banks hasbeen taking baby steps as far is interest rate cut isconcerned

— By Chandra Shekhar

It has been over one-and-half year that’ thewholesale price index has remained in the negativeindicating that all is not well with the economy.Low inflation is good, but persistent deflationarytrend can create macro-level problems.

Continuing the deflationary trend for 17thmonth, WPI inflation wais at (-)0.85 per cent inMarch but may inch-up gradually in the comingmonths on growing pressure on food-and vegetableprices. The Wholesale Price Index-based Inflationrate in March was marginally higher at (-)0.91 percent in February. In March last year, it was (-)2.33per cent. This is the 17th straight month sinceNovember 2014 when deflationary pressurepersisted.

Persistent Pressure

Food inflation stood at 3.73 per cent in Marchcompared, with 3.35 per cent in February, showedofficial data. Inflation rate for vegetables came inat (-)2.26 per cent in March, while for cereals andpulses it was at 2.47 per cent and 34.45 per centrespectively. The inflation print in the fuel and‘power segment was (-)8.30 per cent, and formanufactured products, it read (-)0.13 percent inMarch. Onion and fruits saw easing, of prices withthese sub indices hilling by 17.65 per cent and 2.13per cent, respectively.

The January WPI inflation has been revisedlower to (-)1.07 per cent from the provisionalestimate of (-)0.90 per cent. As regards pulses, itsprices have continued to remain high in March -34.45 per cent up from year-ago levels - markingthe 15th straight month of double-digit inflation inlentils, though several other essential kitchen stapleshave seen moderation rates. The price rise in pulsesbecome more evident taking into account the factthat WPI inflation remained in negative for 17thmonth in a row. However, the sub-index for pulsesshowed—an inflation rate of 34.45 per cent for thesame month.



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The inflation in pulses has been recordingdouble digit in increase since January 2015 when itwas 12.56 percent. Since then inflation touched ahigh of 58.09 per cent in November 2015. IndiaRatings said that although prices of oil andmanufactured items are expected to remain benignand keep the pressure on WPI inflation low the samecannot be said about food inflation over the nextfew months despite the prediction of an above thannormal monsoon.

“Prices of cereals have shown some escalationin March and with summer season setting in therewill be pressure on vegetable/fruit prices to rise.As a result, WPI inflation is expected to move intopositive territory next month but will remain in lowsingle digit in the foreseeable future,” said SunilKumar Sinha, Principal Economist, India Ratings.

Industry body Assocham said that althoughpredictions of weather department are in favour ofthe ongoing Rabi season, policymakers shouldcontain the upward price pressure if it surfaces inthe coming months. “Since the government hasshown its commitment to support industry andconsidering that recent RBI policy stance to kickstart investment and credit cycle can have positiveimpact on India’s economy in the coming months,WPI is likely to move upwards,” AssochamPresident Sunil Kanoria said.

Pulses have shown upward price pressurecontinuously for the past six months andpolicymakers should check and address this issuethrough supply side responses, Assocham said.ICRA Senior Economist Aditi Nayar said that pricesof pulses have hardened in the first half of April.Besides, prices of certain, vegetables have risen inthe last fortnight in line with seasonal trends duringthe summer months.

In order to deal with the rising prices of pulses,the government had in October announced host ofsteps including use of price stabilization fund andimports to cool prices and create a buffer stock. It

had-also launched a crackdown on hoarders to dealwith the price situation. Industry chamber CII saidgoing forward, the prospects of normal monsoonalong with subdued global commodity prices andfavorable government policies should restrainupside pressures on inflation.

“This should provide the space to the RBI toretain the dovish stance towards monetary policyand open up the door for further easing of policyrates during the current year,” it said in astatement. FICCI said the pressure which was seenarising from the food segment seems to bemoderating, with , prices of vegetables and fruitsreporting a decline, Further, recent meteorologicalprediction indicates expectation of normal rainfallthis year which ‘is a huge positive.

“Current inflation trajectory combined withpositive monsoon forecast provides enough roomfor further accommodation in the policy rates whichis critical for reviving the capex cycle in theeconomy,” it said.

RBI approach

The Reserve Bank mainly looks at retailinflation data while firming up its monetary policystance. Retail inflation in March fell, to a six monthlow of 4.83 per cent. RBI earlier cut the key policyrate by 0.25 percent and projected retail inflationto be around 5 per cent this fiscal.

It had said there were uncertainties overunseasonal rains, the likely spatial and temporal‘distribution of the monsoon, the low reservoir levelsby historical averages, and the strength of the recentupturn in commodity prices, especially, oil. TheMeteorological Department, later, forecast an abovenormal monsoon for this year. There areexpectations that the current year will havebountiful rains after a bap of two years of deficientmonsoon.

But for the subdued prices of crude oil in theinternational market there is no obvious reason for



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continued deflationary trend. The wisdom lies intaking advantage of the situation and do the utmostto push growth by generating demand forindustrial goods and taking extra initiative topromote growth of agriculture produce. RBI has sofar refrained from taking bold initiatives to boostgrowth. The central bank has been taking babysteps as far as interest rate cut is concerned. At atime, when the RBI could have been bolder itremained ultra conservative, unmindful of the factthat in several developed countries including theUS and Japan the interest rates are near zero.

The onus of taking action definitely rests onthe RBI as of now. If it does not take bold action, itmight become too late once the oil prices startinching up in the international market.


GOVERNMENT ROLLS BACK DECISION TOLOWER EPF RATE

The EPFO pays rate of return to subscriberson the basis of returns it generates from itsinvestments

— By Ammar Zaidi

There seems to be no ending of rollbacks as faras employee provident fund (EPF) is concerned.After nationwide protests, the Government bowedto wishes of employees and rolled back its decisionof lower interest rate on provident fund deposits to8.7 percent for 2015-16 and agreed to fix it at 8.8percent as decided by retirement fund body EPFO.

Rollback by the Government

The Finance Ministry apparently relented afterPrime Minister’s Office (PMO) intervened torollback the hugely unpopular decision, The rollback comes on the heels of government having’ towithdraw an order restricting withdrawals ofemployers share in the, employee provident fund(EPF) till an employee achieves 58 years of age. Lastmonth the government had to roll back a Budgetproposal to tax EPF withdrawals. The rollbacks on

both the decisions followed protests fromemployees and their unions. “I am happy that ourFinance Minister has agreed for 8.8 per cent interestto be given for EPF workers for 2015-16. We willissue a notification 8.8 per cent interest rateimmediately,” Labour-Minister BandaruDattatreya said announcing the decision. Theminister clarified that the EPFO’s apex decisionmaking body the Central Board of Trustees headedby him in its meeting held on February 16, 2016 atChennai recommended 8.8 per cent ‘interest to becredited to EPF workers for the 2015-16 whichwould leave a surplus of Rs 673.85 crore.

The minister said that the Finance Ministry_had sought clarification on interest to be creditedto inoperative accounts and it was clarified thatinterest of 8.8 per cent was (decided) after taking-into consideration the inoperative accounts also. Healso informed that EPFO updates about 15 croreaccounts annually and only 2.89 lakh accountshave to be updated as of March 18, 2016.

When asked about the tussle with FinanceMinistry, the minister said, Finance Ministry advisesall the ministries. When interest rates wer fallingthey wrote a letter to us and we fixed the interest-keeping that in view.

The roll back comes in the backdrop of anationwide protest by 10 central trade unionsopposing the Finance Ministry’s decision-to lowerEPF interest rate by 10 basis points. Earlier theFinance Ministry defended its decision, saying lastYear’s surplus would have to be used to pay eventhe lower 8.7 per cent rate on Employee ProvidentFund for 2015-16.A Finance Ministry source saidearnings of EPFO in 2015-16 is not even sufficientto pay 8.7 per cent interest rate. There was a surplusof Rs 1.604.05 crore for 2014-15. At the proposedrate of 8.8 Per cent this surplus would be reducedto just Rs 673.85 crore in 2015-16. Thus theproposed rate of 8.8 per cent seeks to draw onsurplus of last year. This would adversely hit



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maintenance of relatively stable returns to investorsfor the next year in a falling interest rate scenario.”the source added.

Rational behind the Rollback

Stating that earnings of EPFO in 2015-16 werenot even sufficient to pay 8.7 per cent interest, thesource said the ratified interest rate of 8.7 percentwould leave a surplus of around Rs 1,000 crore withEPFO for the year. “This is still lower than thesurplus of Rs 1,604.05 crore for 2014-15.” he said.Explaining the process, the source said interest rateon EPF accumulations is administered by the LabourMinistry on the recommendations of Central Boardof Trustees (CBT) of EPF. Ministry of Finance ratifiesthe rates on the basis of proposal from LabourMinistry, taking into account financial sustainabilityand ensuring stable returns to the investors,” thesource said. ‘’Action of Ministry of Finance is basedon pure arithmetic calculation and is in the interestof all the members of EPFO and sustainability.”

The Finance Ministry source said the interestincome earned on nine crore inoperative accounts,having a principal of more than Rs 35,000 crore, isnot distributed among them but rather distributedamong existing active account holders based on aCBT decision, “Moreover, this windfall for exitingoperative accounts will not be available from nextyear since CBT in its recent meeting has taken adecision to pay interest for the inoperative accountswhich it stopped since April 1,2011. From wherewould these account holders be compensated forpast years when the interest earning on theirinvestment has been used by existing active accountholders?” he asked.

Also, as on March 31, around three lakhaccounts are pending for updation, in the absenceof which, it is difficult to calculate the’ exactliabilities towards them. “The earnings of EPFo in2015-16 itself are a result of investment made overa number of, years. It clearly implies that outgoingemployees may also have benefited from the

investments made when they were not themembers. A decent reserve/surplus amount isnecessary ‘to ensure inter-generational equity,” thesource added.

Labour Minister Bandaru Dattatreya had onApril 16 told Lok Sabha that Finance Ministryapproved a 8.7 per cent interest rate for over fivecrore subscribers of ‘the Employees’ Provident FundOrganisation (EPFO). “The (EPFO’s apex decision-ranking body)’ CBT at its meeting held in Februaryhad proposed an interim rate of interest at 8.8 per,cent to be credited to the accounts of EPFsubscribers for 2015-16. The Finance Ministry has,however, ratified an interest rate of 8.7 per cent,”the minister had said.

This would have been the first time whenFinance Ministry has not given concurrence to theinterest rate on EPF as decided by the CBT, whichis headed by the labour minister. The EPFO hadprovided 8,75 per cent rate of interest in 2013-14and 2014-15, which was higher than 8.5 per centin 2012-1·3 and 8.25 per cent in 2011-12. Itsestimates, worked out in September, projected-thatthe body can easily, pay 8.95 per cent rate of interestas it would leave a surplus of Rs. 100 crore. TheEPFO pays rate of return to subscribers on the basisof returns it generates from its investments.


GOVERNMENT RELAXES FDI NORMS FORE-COMMERCE PLAYERS

The new guidelines are expected to facilitateentry of foreign players into the booming Indian e-commerce industry

— By Rajesh Rai

Taking a calibrated approach, the governmenthas relaxed norms for foreign players in the Indiane-commerce sector, but with certain riders.Although associations and industry has welcomedthe move, but few big online players are notreacting, According to experts, major players are



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not happy with the guidelines issued by theDepartment of Industrial Policy and Promotion(DIPP), under the Commerce and IndustryMinistry.

Good News for E-commerce

The government has allowed 100 per cent FDIthrough automatic route in the marketplace,format, of e-commerce retailing, a developmentthat will give a boost to foreign firms like Amazonand Ebay as well as domestic players. As per theguidelines issued by the DIPP on FDI ine-commerce, foreign direct investment (FDI) hasnot been permitted in inventory based model ofe-commerce.

It has said that, e-commerce marketplace mayprovide support services to sellers in respect ofwarehousing, logistics’, order fulfillment call centre,payment collection and other services. However,such entities will not exercise ownership over theinventory. “Such an ownership over the Inventory’will render the business into inventory’ ecommercemarketplaces will play in ‘the based model.” As perthe norms, an e-commerce film will not be permittedto sell more than 25 percent of total sales from onevendor or its group companies.

“E-commerce entities providing marketplacewill not directly or indirectly influence the sale priceof goods or services and shall maintain level playingfield,” the guidelines has said. This particular pointhas raised eyebrows of several firms as they areclaiming that it would impact the online comapniesto announce discounts for consumers. A DIPPofficial has said that market place firms, which asFDI , cannot- tweak the prices but the seller canannounce the discounts.

Snapdeal has said the norms will provideclarity to India’s fast growing e-commerce industry,“These guidelines recognize the transformative rolethat ecommerce marketplaces will play in theIndian market. It is a comprehensiveannouncement wich will pave the way for

accelerated growth of the sector in India,” it hadsaid. The ecommerce industry has grown rapidlyin India logging a growth rate of over 60 percent.Studies have pegged the size of the industry ataround USD 38 billion by 2016 billion mark in 2020.

Posit ive Guidelines

To bring clarity, DIPP has also come out withthe definition of e’commerce’, ‘inventory-basedmodel’ and ‘marketplace model’, Marketplacemodel of e-commerce means providing of an ITplatform by an e-commerce entity on a digital andelectronic network , to act as a facilitator betweenbuyer and seller, The inventory-based model of e-commerce means an e-commerce activity whereinventory of goods and services is owned byecommerce entity and is sold to consumers directly,according to the guidelines.

A marketplace entity will be permitted to enterinto transactions with sellers registered on itsplatform on business-to-business basis. As per theguidelines, e-commerce means buying and sellingof goods and services, including digital productsover digital and electronic network Digital andelectronic network Will include computers, TVchannel and other Internet application used inautomated manner such as web pages, extranetsand mobiles.

It also said that in marketplace model goods/services made available for sale electronically onwebsite should clearly, provide name, address andother contact details of the seller, “Post sales,delivery of goods to, the customers and customers.satisfaction will be responsibility of the seller,” ithas said adding in marketplace model, paymentsfor sale may be facilitated by the e-commerce entityin conformity with the RBI rules. In this model, anywarrantee/guarantee of goods and services soldwill be responsibility of the seller.

Further the guideline has said “subject to theconditions of FDI policy on services sector andapplicable laws/regulations and other



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conditionalites, sale of services through e-commercewill be under automatic route”, Currently, FDIupto 100 per cent under automatic route ispermitted in business-to-business e-commerce butno FDI is allowed in B2C. However, FDI in B2C e-commerce is permitted in certain circumstances likea manufacturer is permitted-to sell its productmanufactured in India through e-retailing.

A single brand retail trading entity operatingthrough brick and mortar stores is allowed toundertake retail trading through online platforms.The new guidelines are expected to facilitate, entryof foreign players into the booming, Indian e-commerce industry. Chinese retailer Alibaba, whichholds a significant stake in payment solutionsprovider Paytm, has already expressed interest toenter the Indian market. Also, the move would helpdomestice players tap investment easily.

‘25 Percent Cap is Reasonable’

Some e-commerce players, industry experts aswell as IT industry body Nasscom have siad thatrestricting sales of a vendor to only 25 percent ofthe sales in the marketplace may prove to berestrictive, more so if the vendor sells high valueitems.

When asked, DIPP Secretary RameshAbhishek has said, “25 percent is a fair numberbecaue we want it to be a marketplace model andnot inventory”. If a firm a providing a marketplacemodel platform, sourcing 25 percent from onevendor is reasonable and large number of sellerscan sell through that platform.


WTO CUTS GLOBAL TRADE GROWTHFORECAST TO 2.8 PERCENT FOR 2016

The report has said that China registered thehighest merchandise trade by value in 2015 withUSD, 2,275 billion worth of exports

— By Rajesh Rai

Rough Clouds are expected to continue hoverat the global trade. Being an integrated andimportant part of the: world ‘economy, India toowould get impacted due to this. The World TradeOrganisation (WTO) has again cut the global tradegrowth forecast to 2.8 per cent, from 3.9,per centearlier, on account of slowdown in emergingeconomies and financial volatility.

Global Trade Scenario

This is not a good news for India which isaiming to increase its share in the global trade to3.5 per cent from the current 2 per cent by 2020. Itis also ‘aiming to nearly double its goods andservices exports to USD 900 billion by 2019-2020.The global situation may further dent the growthof India’s exports, which’ are in negative zone sinceDecember-2014. “Growth in the volume of worldtrade is expected to remain sluggish in 2016 at 2.8per cent, unchanged from the 2.8 per cent increaseregistered in 2015 imports of developed countrieswould moderate this year while demand forimported goods in developing Asian economiesshould pick up, Global trade growth should rise to3.6 per cent in 2017,” the WTO has said.

The 2017 figures are still below the average of5 per cent since 1990. Risks to this forecast are“mostly on the downside, including a sharper thanexpected slowing of the Chinese economy,worsening ‘financial market, volatility, andexposure of countries with large foreign debts tosharp exchange rate movements,” it has said.“Trade is still registering positive growth, albeit ata disappointing rate,” WTO Director-GeneralRoberto Azevedo has said. This will be the fifthconsecutive year of trade growth below 3 per cent.

While the volume of global trade is growingits value has fallen because of shifting exchangerates and falls in commodity prices. This couldundermine fragile economic growth in vulnerabledeveloping countries. There remains as well thethreat of “creeping protectionism” as, many



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governments continue to apply trade restrictionsand the stock of these barriers continues to grow, ithas said.

“However, we should keep these figures inperspective. WTO members can take a numbersteps to use trade to lift global economic growth -from rolling back trade restrictive measures, toimplementing the, WTO Trade FacilitationAgreement. Azevedo has said. This pact willdramatically cut trade costs around the world,thereby potentially boosting trade by up to USD 1trillion a year. “More can also be done to addressremaining tariff and non-tariff barriers on exportsof agricultural and manufactured goods,” he hassaid.

India’s Rank

India’s rank remained unchanged at 19th in20.15 in the list of top 30 merchandise exporters ofthe world, according to the report. China continuesto hold the top position in the list. However, India’sranking among top importers slipped by one notchto 13th in 2015, from 12th in previous year. Inimports, the US topped the list.

India’s exports dipped by 17.2 per cent to USD267 billion last year while imports aggregated atUSD 392 billion. In 2014, the country’s outboundand inbound shipments aggregated at USD 317billion and USD 460 billion respectively. Slowdownin the global demand-hit India’s exports in 2015and this year too the shipments are in the negativezone.

Further, India’s rank remained unchanged at8th last year among the top 30 leading exporters ofcommercial services respectively. This list wastopped by the US in both exports ‘and imports. Inimports, India positioned 10th.

In 2015, India’s commercial services exportsaggregated at USD 158 billion while imports wereUSD 126 billion. Indian government hasannounced a host of incentives with an aim to

nearly double goods and services exports to USD900 billion by 2019-2020.

The report has said that China registered thehighest merchandise trade by value in 2015 withUSD 2,275 billion worth of exports. Total worldmerchandise exports were USD 16,482 billionwhereas imports were USD 16,766 billion.

“Exports of developed and developingcountries should grow at around the same rate in2016, 2.9 per cent in the former and 2.8 per cent inthe latter. Meanwhile, imports of developedeconomies are expected to outpace those ofdeveloping countries in 2016, with a 3.3 per centrise in the former compared to a 1.8 per centincrease in the latter,” it has said.

Falling for the 15th month in a row, exportsdipped 5.66 per cent in February to USD 20.73billion due to contraction in shipments of petroleumand engineering goods amid tepid global demand.


EMPOWERING PEOPLE WITHFINANCIAL INCLUSION

Social welfare schemes were earlier of a boonfor middleman who used to siphon-off bulk of thefunds by taking advantage of flaws/loopholes inthe system

— By Ms Prunima Sharma

Sogada a small village of Jashpur district inChhattisgarh, is beautifully nestled in the lap ofnature. The picturesque settlement is surroundedby green hills which make the village somewhatdifficult to access. Not surprisingly, thisinaccessibility has added to the difficulties beingfaced by the villagers in this region. Roshni Bai, aresident of-this village, says that, the .nearest bankto this village is 15 kilometer far, and for this veryreason the banking services were beyond the reachof villagers.



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Earnest Need for Financial Inclusion

Even after 69 years of independence peoplelike Roshni Bai could not be brought within thebanking system, Roshni Bai and their futuregenerations could have been living in the sameconditions but, for a new change occurred., SomeBank Mitras from a bank visited her village andexplained the meaning of savings and availingbanking services at their doorstep. It was a newdawn for the villagers. People from the bankexplained the benefits of opening a bank accountto them. They were also told that they didn’t needto visit bank now and for banking services. BankCorrespondents will provide most of the bankingservices to them at their doorstep. After knowingall this there was no-reason for them but to open abank account.

Roshni Bal now has a fair amount of savingsin her bank account and this has encouraged herand her husband to save more. The couple is nowplanning to enhance their monthly deposits andsave enough money to buy a scooter for thehousehold. This would enhance the mobility offamily members and help increase the income. Forthe first time Roshni Bai and crores of such peoplenow have bank in their lives, and it happened onlydue to Pradhan Mantri Jan-Dhan Yojna (PMJDY).

Under this Scheme a majority of people whoopened their bank accounts were earlier outside theperiphery of banking system. The number ofpeoplewho have been included in the bankingsystem in such a short time is a global record. Both‘public and private banks have been roped in forthis scheme.

The Pradhan Mantri Jan-Dhan Yojana’(PMJQY) was launched on August 28, 2014 by thePrime Minister of India Shri Narendra Modi in thenational capital with a vision to bring unbankedsection of the society into ‘mainstream banking. TheScheme was initiated to provide bank account andbanking services to each household in the country

so as to have comprehensive financial inclusion. Sofar as on 29 June 2016 more than 22.29 crore newbank accounts have been opened under the Yojanawith a total deposits of over Rs 39.251,57 crore inthese accounts, and overdraft facility has beenavailed in about 20 lakhs accounts, Out of all theaccounts opened under the scheme. 61 % are inrural areas and more than 52% are women accountholders.

As on 29 th June, 2016, 10.39 crore of theaccounts opened under PMJ DY are seeded withAadhar numbers. In addition to this 18.22 croreRupay Cards have been issued under PMJDY. Outof all the accounts opened under PMJDY, the zerobalance accounts are now left almost one fourthonly that is 25.29 percent which means people havestarted doing transactions in their accounts.

Guinness Book of World Records hasrecognized the Achievements made under PMJDYespecially the largest number of bank accountsopened under PMJDY in a shortest time.

The most striking feature of this Scheme is thatinstead of delivering banking services to villages thefocus is on households. Earlier cities were notincluded in the scheme assuming that banks werealready there. But 8.60 crore accounts opened incities under PMJDY showed that it was needed incities too. Through this Scheme banks also got anopportunity to tap the saving potential of thecommon man. Apart from this, provision has alsobeen made that accounts opened under this schemeare connected with mobile phones so that accountholder can directly get information abouttransactions in their accounts.

Areal Boon

Pradhan Mantri Jan-Dhan-Yojana (PMJDY)has proved to be a major job creator, Empoweringpeople by financial inclusion and creating self-employment by increasing the availability of creditis one-aspect of the scheme. This Scheme alsoenabled banks to create jobs for more than 1.26 lakh



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Banking Correspondents who are deliveringbanking services to households’ at their door step.Banking Correspondents in many ways acts asATM too for many people. They help people to openbank account, deliver their money and also inclaiming insurance. In a very short span of time.Bank Correspondents/Bank Mitras have becomevery popular in the rural areas.

The objective of PMJDY is to bring commonpeople within the sphere of social security. AfterIndependence, the concept of welfare State has beentalked about much but, how to take it to thecommon man has not been thought-out. As a result,lot of Government policies wer formulated but theirexecution was poor. Money that had to reach tothe masses from the Centre and State capitals usedto remain unutilized or got evaporated midwaysomewhere.

Ther previously existing seystem was the causeof corruption where there was no provision tocheck whether the actual benefit of the scheme hasreached to the intended beneficiary or not. A formerPrime Minister’s statment was much talked aboutwhen he said that only 16 paisa out of a rupeereaches to the actual beneficaries of theGovernment funds released by the Centre for theirwelfare Schemes.

The Constitution, specially, Article 41 ofDirective Principles of State Policy, asks the Stateto make effective provision for securing the right towork, to education and to public assistance in casesof unemployment, old age, sickness anddisablement, and in other cases within the limits ofits economic capacity and development,.” As theDirective Principles are not binding on theGovernment, there has never been much emphasison it in earlier regimes to ensure social security forcitizens.

So, the fundamnetal change in the methods ofcarrying-out the schemes was needed. Even aftersix decades of independence, the Goverment

schemes could not achieve the desired result in thearea of sical security. And millions of people havebeen left-out of the banking system. Therefore, therewas a need to innolve the people themselves, so thatthey can create theri own future. At the same time,the need to include private sector was also felt. TheGovernment is working on the very fundamentalchange and this transformation is indeed speedy.

Previously, poor people had to put in tiringefforts and many formalities had to be fulfilled justto open a bank account. now they have got enoughstrength from the system and merely with anidentify proof or sell certification, an account canbe opened an banking services can be availed.

With Jan Dhan, Aadhar and Mobile (JAM)technology, bank accounts are connected andmiddleman can no longer exploit the poor people.Social Welfare schemes were earlier more ofa boonfor middleman who used to siphon-off bulk of thefunds by taking advantage of flaws/loopholes inthe system. Ghost beneficiaries wer also one of thefacet through which middleman made profit. Nowwith Jan Dhan, Aadhar and Mobile (JAM) haveeliminated the middleman altogether. Now themoney is being transferred directly into the targetbeneficiary’s account. Such Schemes are definitelythe need of the hour and play and important rolein transforming the lives of people and the countryat large.

TELECOM SECTOR JOURNEY

Government has set target to achieve 100percent tele-density by 2019. In this, mobile servicesare expected to play crucial role in meeting thistarget

— By Prasoon Srivastava

The mobile-phones have been driving telecomgrowth story in the country. At the end of February2016, the mobile phone connections in the countryreached 102.71 crore from 90.45 crore at the end ofMarch 2014. India is only next to China in the world



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in terms of mobile subscriber base. There has beenattempt to revive landline phones with free tailingschemes from telecom operators state-run BSNL,MTNL and private firm Bharti Airtel through freecall schemes. However, landline connectionscontinue to decline. It has dropped to 2.52 crore atthe end of February from 2.85 crore in March 2014.

The mobile SIM has become a major tool toconnect people to internet. The internet connectionsin India has crossed 40 crore mark at present from25.1 crore in March 2014. Most of the people nowuse their phone to access service on internet. Asper Telecom Regulatory Authority of India, therewere over 14 crore broadband users in the countryat the end of February with 12.7 crore accessingthe high speed Internet service through their mobiledevices like’ smartphone and dongles.

Under National Telecom Policy 2012,government has set target to, provide affordable andreliable -2014 to February, 2016. It is spread ofbroadband-on-demand by the year 2015 telecomservices which will facilitate and to achieve 17.5crore broadband government play to savethousands of connections, by the year 2017 and 60crores of subsidy using Aadhaar number crore bythe’ year 2020 at minimum 2, megabit per-second(mbps) download Easing life of people by cuttingdown on speed and making available higherdistance and enabling them utilise their speeds ofat least 100 mbps on demand time more efficientlycan be seen as main The data consumed thoughinternet and reason behind growth of Indiantelecom broadband service in the country has sector.Besides this affordability arid increased fromaround 9.44 lakh reach of telecom networks areanother terabytes in 2014-15 to 13.831akh TB.

The industry earned revenue of Rs growth in-the sector 15,531 crore from data services in 2013-14. It increased to Rs 24,494 crore in services oninternet eased life of people 2014-15. As per sixmonth data available ‘ like booking’ of train tickets,

birth with telecom regulator Trai, the revenuecertificates, and filing police complaints online,online banking services, payment of bills for variousutilities. The last two years ‘has’ seen most of theservices coming onto mobile phones.

The e-commerce sector has further broughtpeople closer to the internet. Now merchants insmall town have customers across globe and theyare selling products online. People in small townsare able to order quality products especially ofbrands that are not available in their area.

Even small merchants, handicraft traders,local service providers use mobile applications likeWhatsapp, Hike, Facebook etc to discover marketfor’ themselves. The telecom sector has been pivotalrole’ in creation of industries around it like e-commerce, BPOs and increased businessopportunity across the country.

As per official statistics, the, telecom sector hascreated 2.54 lakh jobs from 2013-14 till April’ 30 of2016-17. Telecom Minister Ravi Shankar Prasad, isa written reply to the Lok Sabha said a total of89,634 jobs were created in 2013-14, 61,573 in 2014-15, 94,294 in 2015-16 and 8,682 in 2016-17 (till April30,2016). The numbers include’ both direct andindirect jobs.

Government Effort

Government schemes for the sector haveplayed role of demand enabler in the sector. TheDigital India programme designed by thegovernment is an example. This program links thetelecom sector with good and effective governancefor robust growth of the nation. Besides creatingavenues for demand of telecom services, the DigitalIndia program also looks at infrastructure andresource deficit in the sector.

The vision of government under Digital Indiaproject includes creation of ICT (Information and:Communication Technology) ‘infrastructure likehigh speed Internet at village Panchayat Raj level,



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on demand availability” of government services likehealth; education etc, and digital empowerment ofcitizens specially through digital literacy.

The programme is monitored by a committeeheaded by Prime Minister Narendra Modi and theCabinet Committee on Economic. ‘Affairs (CCEA)will accord approval for projects. A Digital IndiaAdvisory Group has been formed and being chairedby the Minister of Communications and IT. Thereis an Apex Committee which chaired by theCabinet Secretary’ and the Expenditure FinanceCommittee (EFC) or Committee on Non PlanExpenditure (CNE).’The Digital India programmeis a transformed version of National e-GovernancePlan.

The project aims to provide thrust to ninepillars identified as growth areas. These pillarsinclude-broadband highways everywhere mobileconnectivity. Public internet Access Programmee-Governance, e-Kranti (which aims to give electronicdelivery of services), information on for allelectronics manufacturing. IT for Jobs and earlyharvest programmers Government is working onprogramme to connect 2.5lakh village panchayatswith broadband. The project is likely to becompleted by September 2018.

The government has till date laid optical fibrein about 050.009 village panchayats and broadbandservices has been provided in 6.533 panchayats. Itexpects to connect 1 lakh village panchayats by endof current financial year. It is estimated that thereare 55.669 villages in the country that do not havemobile coverage.

Various Schemes are being implemented withfinancial support from Universal Service’Obligation Fund (USOF) for expansion of mobileservices in rural and remote areas Governmentimposes 5 per cent levy on every call made whichis used to create USO Fund. This fund is used forsupporting telecom services in rural and remoteareas.

Under a shared mobile infrastructure schemein villages or cluster of villages having population’of 2000 or more around 7.300 mobile. Towers havebeen installed. Further 2199 mobile towers are beingset up in Left Wing Extremism (LWE) affected Stateswith a total estimated cost of Rs 3.567.58 crore.

In September, 2014, the government approveda proposal to implement a Comprehensive TelecomDevelopment Plan for the North-Eastern Region(NER) with project outlay of Rs 5,336.18 crore.Under the project mobile coverage has to beprovided to 8.621 identified uncovered villages byinstallation of about 6.673 mobile towers andinstallation of 321 mobile tower sites along nationalhighways.

Government is also in process to strengthentelecom networks in Andaman and Nicobar islandand enhance telecom capacity by three fold inLakshadweep Island.

Issues

Government has set target to achieve 100 percent tele-density by 2019. In to this, mobile servicesare expected to play crucial role in meeting thistarget. Policy makers have challenge to strikebalance between factors driving telecompenetrations like affordability, infrastructure andgovernments revenue from this sector.

The critical raw material in rapidly pushingtelecom service is spectrum. These are airwavesfrequencies which are used to transmit mobilesignals. The value of spectrum depends on theavailability of equipment and consumer devicesthat can-encode and decode signals. The otherfactor which counts is the area or distance thattransmitted signals from a mobile tower can cover.In India, mobile services are provided in 800 Mhz(2G,4G), 900 Mhz (3G, 4G), 1800 Mhz (2G,4G),2100,Mhz (3G), 2300 Mhz (4G) and 2500 Mhz (4G).In July, government is planning to auctionspectrum in 700 Mhz band which is considered tobe most efficient for delivering mobile services. The



31



cost of delivering mobile services in this band isestimated to be around 70 per cent lower than 2100Mhz band, used for providing 3G services.

The cut throat Competition in the sector hasbeen pushing telecom operators to acquirespectrum as much they can for survival. Thespectrum is allocated to telecom operators forperiod of 20 years. Holding of large a spectrumchunk can enable an operator meet growingdemand in the market couple with good quality ofservice. However, industry players often send outsignal of being over taxed by government and sectorbeing treated as cash cow.

In this financial year, the government expectsa revenue of Rs 98,995 crore from the sector in2016-17 which includes Rs 64,580.92 crore fromspectrum auction proceeds. Inter ministerialTelecom Commission has favoured putting allavailable spectrum of for auction which at pricesuggested by be sectoral regulator TRAI is valuedaround Rs 5.361akh crore.

The auction is to be held in July and wouldinclude sale of most premium 700 Mhz band at aprice of Rs 11,485 crore per Mhz. As per the ruleapproved by the inter-ministerial panel a companyinterested in buying spectrum 700 Mhz band willneed to shell out a minimum of Rs 57,425crore fora block of 5Mhz on pan-India basis. This band alonehas the potential to fetch bids of over Rs 41akhcrore. The total potential revenue of Rs 5.36 lakhcrore from the spectrum sale is more than doubleof telecom services industry gross revenue of Rs 2.54lakh crore reported in 2014-15 financial year.

Leading operators have requested to defer saleof 700 MHz spectrum, saying that ecosystem, forproviding services in this band was not developedand sale would lead to underutilization of thespectrum for several years and block industry’sfund. As per global body industry body GSMA”the total recommended reserve price for the auctionis almost double the cost of all spectrum investment

to date in India and more than 20 times the annualfree cash flow-of the entire mobile industry. Thepanel has also suggested stringent paymentconditions compared to liberal method suggestedby Telecom Regulatory Authority of India.

The panel has favoured that companieswinning ‘spectrum in higher frequency bands, 1800Mhz, 2100 Mhz, 2300 Mhz and 2500 Mhz band,should make 50 per cent upfront payment and restin 10 years after a 2-year moratorium. For spectrumin 700 Mhz, 800’ Mhz and 900 Mhz band,companies will require to pay 25 per cent upfrontand rest in 10 years after a 2-year moratorium. It isin line with practice of earlier auctions but differsfrom Trai suggestion. If all spectrum in 700 Mhzband gets sold at even Trai recommended baseprice, then successful bidder will need to pay overRs 1,00,000 crore upfront after auction.

Transformation

The rising cost of spectrum is leading tocompanies opting for premium services like 4Gwhich at present rate is unaffordable for masses atlower rung. Need of hour is for government to thinkof a policy of scheme that can strike the balancebetween two main pillar of telecom services growthaffordability and Infrastructure expansionGovernment in last two years has put in placecrucial policies in place like spectrum sharing,trading, active infrastructure sharing, liberalizationof spectrum, harmonization, virtual networkoperators and is further working on uniform rulesacross country for roiling out telecom infrastructure.

Spectrum sharing has resulted in reduction incost of owing airwaves especially for, companieswho have low subscriber base and are unable togrow at rapid pace. Spectrum trading has givenway to struggling telecom operators to sell their rightto use airwaves to other telecom operators basedon their mutual commercial agreement. Earlier,telecom operators depended only on governmentfor procuring spectrum but spectrum trading rules



32



has given them liberty to buy spectrum from otheroperators based on their need.

After about 7-8 years, government in January2015 was able to bring all ministries on a table todiscuss and free excess spectrum they could forcommercial mobile services. The industry hastransformed from spectrum crisis situation till 2015to over supply of spectrum.

Earlier telecom operators were allowed to onlyshare mobile towers for installing antennas but thisyear government has allowed them to even shareantennas. This would help industry in significantlyreducing cost of infrastructure. Further, governmenthas approved virtual network operator’s licencethat will help telecom operators in selling theirservice through another company. Situation oftelecom operators is like a company which ismaking product is selling on its own. The provisionof VNO will introduce a distributor like layer forcompanies. This will facilitate companies is sellingtheir services in bulk to a VNO who will thenmarket and sell telecom services further.

A VNO will be able to offer services or varioustelecom operators under one umbrella to customers.This will also reduce cost of marketing spend thattelecom operators are required to promote theservices. The sector is moving in direction where itwill see huge business in communication frommachines than human beings. Government hasalready announced roadmap for the same on May12, 2015.


UNENDING NATRiP PROJECT DUE TOMISMANAGEMENT:

PARLIAMENTARY PANEL

Calling the creation of different for allocationand expenditure of funds under a single umbrellascheme ironical, the panel said it is against thegovernment vision of simplification of procedures

— By Munish Shekhavat

A Parliamentary committee has expressedconcern over the “unending continuation” ofDepartment of Heavy Industries’ (DHI) flagshipproject NATRiP, saying it indicates“mismanagement and lack of oversight”. TheDepartment Related Parliamentary StandingCommittee on industry, chaired by K C Tyagi,expressed concern over the fact that a project whichhas already seen three extensions, is looking for‘further extension.

“In the view of the committee, this unendingcontinuation of the flagship project of DHI, whichwas originally intended to be time-bound, is apointer to mismanagement along with lack ofoversight and accordingly recommends that a’performance audit of NATRi P with specific focus’on lapses in project management shall be,conducted,” the panel noted in the report whichwas tabled in the Parliament. Last year, thegovernment had extended the timeline forcompleting the National Automotive Testing andR&D Infra Project (NATRIP) by three years.

NATRIP which plans creation of facilities atseven locations such as Ahmednaqar, Silchar,Haebareli, Pune, Manesar, Chennai and Indore hadfaced hurdles at various, stages of implementationon account of delays in acquisition of land,clearances and shifting of utilities besides,contractual complications and foreign exchange‘variation. Further, the committee said it ‘wouldhave-found it more appropriate if the governmentwould have at least by now decided the manner inwhich funds to NATRiP are to be provided, eitheras loan or as grants.

Observations by the Committee

“Such uncertainties can affect the lucidity ofthe demand and the transparency with whichallocations are made, it said the committee alsonoted the explanation given by the DHI on how itis to utilise the plan loan of Rs 300 crore allocatedto the project during 2015-16 over a period of three



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By KR Sudhaman - IAS EXAM PORTAL (Formerly UPSC ......— By KR Sudhaman Father the Nation Mahatma Gandhi was right in saying India lived in its six lakh villages and cottage industries