Governtment of India Incs and LPG Mafia has to unveil strategy on black money tomorrow!The government will shortly set up a reforms commission to overhaul laws governing the financial sector. This will be in line with income tax laws that have been s

Governtment of India Incs and LPG Mafia has  to unveil strategy on black money tomorrow!The government will shortly set up a reforms commission to overhaul laws governing the financial sector. This will be in line with income tax laws that have been simplified sans the clutter done through direct tax code (DTC).Swiss Bank Accounts details have to be published soon and the ruling Brahaminical Zionist Hegemony is adopting every possible Option to preempt the IMPACT. The Black Money has to be made White Money! NRIs have to take over Governance and Legislation in the coming Phase of Globalisation. Dual Citizenship with Citizenship   Amendment Acts was the curtain raiser. Unique Identity Number Project has become the AADHAR of CORPORATE Empire of Future. Now the Exclusive Economy of Ethnic Cleansing has to be armed with Financial Sector Reforms to make INDIA really a FREE Market Dominated by the Brahaminical Communities having the Purchasing Power and supported by FREE Foreign Capital Inflow added with BLACK Money! Mines and Mineral Act, Environment Act, Forest Act, Sea Coast Security Act, Coastal Zone regulation Act and Fifth and Sixth Schedules of Constitution have been VIOLATED often to Kill the ABORIGINAL Humanscape to Have MONOPOLY on Natural resources. Now further REFORMS have to be PUSHED for! To make the ETNIC Cleansing Justified and Legitimate!

RBI chief discusses economy with finance minister!FM may not cut taxes; continue with stimulus: Experts

Troubled Galaxy Destroyed Dreams, Chapter 578

Palash Biswas

http://indianholocaustmyfatherslifeandtime.blogspot.com/

http://basantipurtimes.blogspot.com/

Governtment of India Incs and LPG Mafia has  to unveil strategy on black money tomorrow!The government will shortly set up a reforms commission to overhaul laws governing the financial sector. This will be in line with income tax laws that have been simplified sans the clutter done through direct tax code (DTC).Swiss Bank Accounts details have to be published soon and the ruling Brahaminical Zionist Hegemony is adopting every possible Option to preempt the IMPACT. The Black Money has to be made White Money! NRIs have to take over Governance and Legislation in the coming Phase of Globalisation. Dual Citizenship with Citizenship   Amendment Acts was the curtain raiser. Unique Identity Number Project has become the AADHAR of CORPORATE Empire of Future. Now the Exclusive Economy of Ethnic Cleansing has to be armed with Financial Sector Reforms to make INDIA really a FREE Market Dominated by the Brahaminical Communities having the Purchasing Power and supported by FREE Foreign Capital Inflow added with BLACK Money! Mines and Mineral Act, Environment Act, Forest Act, Sea Coast Security Act, Coastal Zone regulation Act and Fifth and Sixth Schedules of Constitution have been VIOLATED often to Kill the ABORIGINAL Humanscape to Have MONOPOLY on Natural resources. Now further REFORMS have to be PUSHED for! To make the ETNIC Cleansing Justified and Legitimate!

he Reserve Bank of India (RBI) chief Duvvuri Subbarao said on Friday he discussed the country's macroeconomic situation with Finance Minister Pranab Mukherjee, as they met for a customary meeting ahead of a policy review.

The RBI will review monetary policy on Tuesday.FM may not cut taxes; continue with stimulus: Experts

Finance Minister Pranab Mukherjee is not in a mood to cut taxes but may continue with stimulus in the budget for 2011-12, feel industry representatives who met him for Pre-Budget interactions.

"Finance Minister is not in a mood to cut taxes because it will affect fiscal deficit targets...It appears that FM has at least agreed to continue with stimulus packages," Videocon Chairman Venugopal Dhoot told reporters after a three hour long meeting.

Echoing similar views, Ficci President Rajan Bharti Mittal said, "we have asked to maintain excise duty at the current level... Let the interest rate not harden up because industry is in investment mode so that those investments does not become unviable."

He also suggested for corporate tax reduction from the existing level of 30 per cent to 25 per cent.

Industry chamber Ficci also made a recommendation for opening up defence and retail sectors for foreign players.

"We have suggested for opening up of sectors like defence and multi-brand outlets," Mittal added.

In order to help the industry from the aftermath of the crisis, the government and the RBI provided a stimulus to the economy to tide over the turbulence. The government reduced tax rates and raised public expenditure, while the RBI released more funds into the system.

In view of the economic recovery, Mukherjee had started the process of withdrawal of stimulus by raising tax rates in the 2010-11 Budget.

With the economy recording a growth rate of 8.9 per cent in the first half of the current fiscal, Mukherjee is expected to further withdraw the stimulus with a view to reduce the fiscal deficit, which is expected to be about 5.5 per cent of the GDP in 2010-11.

The wholesale price index , the most widely watched gauge of prices in India, rose 8.43 percent in December from a year earlier, compared with 7.48 percent in November, showing food inflation had fed into the broader economy.

While monetary measures are largely ineffective in tackling supply-led problems like food inflation, the RBI is widely expected to raise policy rates by 25 basis points in its review to rein in inflationary expectations and dampen overall demand.

In the case of financial sector, several laws have to be rewritten to simplify the rules and regulations governing equity and debt markets, commodities, banks and insurance.

"It has been decided to set-up a Financial Sector Legislative Reforms Commission (FSLRC) to rewrite and clean up the financial sector laws and bring them in line with the requirements of the sector," finance minister Pranab Mukherjee told bank chairmen and top bankers during pre-budget consultations on Tuesday.

Financial Stability and Development Council (FSDC) — an apex-body to market regulators – that has come into being under the finance minister to bring about stability in market and avoid over-lap in regulations, would also lay down the road map for these legislative reforms for the sector.

Pranab Mukherjee also told bankers that the FSDC will also focus on financial literacy and financial inclusion. Pranab Mukherjee also emphasised on reducing the transaction costs of banks that are high in India. The finance minister also called for suggestions on bridging the gap between banked and unbanked sectors apart from providing affordable credit and insurance.

On macro-economic pa­rameters, Pranab Muk­herjee said that recovery was broad-based with agriculture, industry and services contributing to consolidation of growth momentum.

The finance minister said that government was undertaking an audit to assess the health of the financial sector.

Under attack from the Supreme Court and the Opposition over stashing of large amount
of money in Swiss banks and other tax havens, the government will unveil its strategy to deal with the issue tomorrow.

Finance Minister Pranab Mukherjee will announce the measures the UPA government intends to take to bring back the unaccounted money into the country and tighten the regulatory and tax framework to prevent further illegal outflows.

"Finance Minister will hold a press conference on the issues related to black money tomorrow," Finance Ministry spokesman said.

The Supreme Court had pulled up the government for withholding information on black money stashed in foreign banks, saying it is not just limited to tax evasion but a "mind boggling crime" amounting to "theft" and "plunder" of national wealth having security ramifications.

Prime Minister Manmohan Singh had said there was "no instant solution" to bring back blackmoney stashed in foreign banks and that information with the government cannot be made public due to treaty obligations.

"There is no instant solution to bring back what is called blackmoney. We have got some information and that has been provided to us for use in the collection of due taxes," he had said.

The issue came for discussion at the last meeting of the Union Cabinet during which Prime Minister Manmohan Singh had said that it was not possible to make specific details such as about black money parked in Swiss banks.

Mukherjee had pointed out that the government had received information about the black money accounts in foreign banks as per international treaties and if this is revealed, no government would share such details in future.

It was emphasised at the Cabinet meeting that the information was shared purely for taxation purposes and the government intends to do the same without making public the names of account holders or other details.

The government had also appointed a Group of Minister (GoM), headed by Mukherjee, to suggest legislative and administrative steps to deal with the menace of black money.

The GoM at its first meeting last week asked the government to expedite the Lok Pal Bill. It also asked the Cabinet Secretary to form two committees to go into the specific issues concerning black money.

24 Jan, 2011, 03.10PM IST,REUTERS

India needs solution to $1.5 trillion puzzle

HONG KONG/LONDON: India needs a solution to a $1.5 trillion-plus puzzle. That's what it will need to invest in infrastructure over the next decade if it is to have any hope of achieving its aspiration of 10 percent GDP growth. The government and banks, India's traditional sources of infrastructure funding, won't be able to carry that load on their own. Financial liberalisation, something the country has hitherto shied away from, could help fill the gap.

Poor infrastructure is one of the main things holding India back. Poor logistics cause waste equivalent to 5 percent of GDP, according to McKinsey. Roads such as the "golden quadrilateral" -- joining the country's biggest four conurbations -- are being laid down, but not rapidly enough. No wonder the roads minister was shifted in a cabinet reshuffle earlier this month. An estimated one-third of all fresh produce spoils before it reaches the market, and most of the country's railways predate independence in 1947. There are chronic electricity shortages in most states. And then there are the heaving cities, suffering from poor sanitation and virtually bereft of mass public transport.

The government and its planners see the problem. The ongoing five-year plan called for $500 billion of infrastructure investment. The next, which runs until 2017, will argue for $1 trillion. With India's public debt at over 60 percent of GDP, and a current account deficit touching 4 percent, plans to put up half of that from public finances seem less than ideal.

Foreign direct investment can play only a small role. FDI was $24 billion in 2010, according to the International Monetary Fund, only a quarter the amount China attracted, and not all of India's inflows went to infrastructure. Foreign investors are still largely deterred from building projects because of uncertainty over policy logjams and ever-present corruption.

Don't bank on it

Meanwhile, India's banks are also financially constrained. Part of the problem is that the banking industry -- much of which is state-controlled -- needs more capital to keep up with India's rapid growth. To finance real GDP growth of 10 percent, given inflation of say 5 percent (which is less than India currently experiences), loans probably need to increase by something over 20 percent a year. Of course, the banks can go to the market and raise the necessary capital -- indeed, a rash of equity issues is expected this year. But if the state wishes to maintain its stakes in the banks, it will need to dig into its own, bare pockets. Even if it can find the cash this year, it may need to see itself diluted in the longer term -- and that will require changes to the law, a tricky proposition given that India's corrupt politicians see state banks as their playthings.

It would also be easier to finance lending growth if the banking industry was opened up to more new entrants. Foreign banks want a bigger slice of the cake, but they have to beg to get every single extra branch. India's non-banks are also lobbying to be allowed to get into the market. Liberalisation may happen -- the authorities are examining the issue -- but the existing players have a strong vested interest in preventing more competition.

Even if these issues are dealt with, banking is not the ideal solution for infrastructure financing. Loans need to be long-term, say 15-20 years. Yet banks' liabilities, such as deposits, are short term. If they engage in too much infrastructure lending, they will suffer from an increasingly unstable maturity mismatch.

Capital inadequacy

Capital markets, by contrast, are much better suited for infrastructure financing. Unfortunately, although India's stock markets are thriving, its debt markets are in their infancy.

There are a host of reasons for this. One is that there is no real interbank rate off which to price loans, since banks are reluctant to lend to each other for more than the briefest durations. Another is that witholding tax on coupons deters foreign buyers. Nor are there many domestic buyers of long-term debt, since insurance companies and pension funds, who would normally snap up long-dated securities that match their liabilities, are not well developed.

Meanwhile, regulators have frowned on innovations like securitisations and credit default swaps. That seemed sensible during the financial crisis -- regulators worry that financial instruments removed from the underlying risk event promote cavalier behaviour. Yet sensible securitisation and credit insurance would enable banks to lend more to infrastructure, without loading up their balance sheets with long-term loans.

That is changing, but at a glacial pace. Guidelines on CDS have been published, but holders will only be able to use them to hedge the underlying risk, and not to trade freely. What's more, a long-promised plan to allow foreigners to take bigger stakes in Indian insurance companies -- something which could help beef up that fledgling sector -- is still stuck on the drawing board.

Financial reform alone won't solve India's infrastructure problems. Arguments between government agencies and companies over who owns land, and confusion around environmental policies, must be swept away too -- and, of course, corruption must be rooted out. But unless reforms and innovations are put in place to ensure capital gets to projects that need it, India's rapidly growing economy will struggle to maintain its punch.

India may have to wait till 2012 for Swiss info on black money

India may have to wait till at least next year for information from Switzerland on possible black money trail to Swiss banks, as a treaty for the same might come into force only by the end of 2011.

The treaty needs to be ratified by various authorities in India as also in Switzerland, including the Parliament of the European nation, and it might come into force by the end of 2011 depending on these approvals, a spokesperson for the Switzerland's Federal Department of Finance said.

If all these ratifications are achieved by 2011-end, the provisions of the treaty, which includes information exchange about suspected tax evaders and other financial offenders, would come into effect in India from the fiscal year beginning on or after first day of April 2012, the official said.

This means that India would be able to seek information on tax evasion and other financial offenses on incomes for the fiscal year 2012-13 beginning April 1, 2012, onwards and not for the past periods, experts said here.

Still, it is unlikely that the names of Indians having money in Swiss banks would be made public, as being demanded by the opposition parties, because such a step would not only be in breach of the bilateral treaty, but could also hinder the process of investigations, they added.

In Switzerland, the provisions would come into effect for fiscal year beginning on or after January 1 of the year following the one when treaty comes into force, the Swiss Finance Department official said.

Indian government is facing intense pressure from the opposition parties, as also the Supreme Court, on issue of black money allegedly stashed away by some Indians in Swiss banks and other tax havens.

The issue of Indians having secret Swiss bank accounts has become a political hot potato, amid reports of Indians having billions of dollars in banks in Switzerland. But, there are no official figures as such and experts believe that it was not necessary that all the funds deposited by Indians in Swiss banks were black money.

Finance Minister Pranab Mukherjee and Swiss Federal Councillor Micheline Calmy-Rey signed a "protocol" on August 30, 2010 to amend the double taxation agreement (DTA) in the area of taxes on income.

The revised tax treaty was expected to facilitate the Indian government seeking details about illicit wealth allegedly stashed away by Indians in Swiss banks.

However, this Protocol has not entered into force yet and needs to be ratified by the authorities in two countries.

Asked about the status, the Swiss Federal Department of Finance official said that one of the parliament commissions in charge of the DTAs last week decided to approve the DTA with India and the parliamentarial approval process was expected to come to an end by September 2011.

Indian govt, firms spent over $1.5 mn on US lobbying in 2010

With the US holding key to a vast number of issues affecting India and its corporates, the Indian government and companies together spent over $ 1.5 million last year on lobbying in the American power corridors.

However, the cost incurred by Indian government and companies on lobbying with US lawmakers in 2010 marks a significant drop of about one-third vis-a-vis spending in the previous year, when this figure stood at about $ 2.2 million.

The issue of lobbying has created a big controversy in recent months in India after leakage of taped conversations between a corporate lobbyist and a number of people from politics, business, the media and other areas.

The controversy led to talk of the Indian government also considering framing regulations for lobbying activities. However, the government and private companies have been officially lobbying in the US for many years to put forward their cases with the American government and lawmakers.

Lobbying is legal in the US and all the lobbyists there are required to file a quarterly report with the Senate, detailing their clients, the departments with whom they were lobbying and the fees charged for the same.

According to the lobbying disclosure reports filed with the Senate for the quarter ended December 31, 2010, the Indian government and companies together paid about $ 4,00,000 to lobbyists for putting forward their cases before US lawmakers.

This has taken the total lobbying cost incurred by Indian companies and the government for the entire 2010 to $ 1.57 million, as against $ 2.2 million in 2009.

Experts said the drop in lobbying expenses partly reflects the state of economy and the resultant cost-cutting exercise undertaken by the government as well as companies.

The Indian government alone paid over $ 420,000 during 2010 to high-profile lobbyist Barbour Griffith & Rogers (BGR), while the private sector companies together paid more than $ 11,50,000 to their lobbyists.

The lobbying for the Indian government was done mostly with the US Senate on issues related to the bilateral relationship between the two countries, the disclosure said.

Till last year, the Indo-US nuclear deal used to be the main lobbying issue for the Indian government.

On the other hand, the private sector lobbied on issues related to their respective businesses.

The most prominent among the private sector entities, billionaire industrialist Mukesh Ambani-led Reliance Industries , paid a total of $ 7,60,000 to its US lobbyist, which also happens to be BGR.

RIL paid $ 190,000 each in the four quarters of 2010, while the amounts were the same in the previous year.

Goldman Sachs warns against investing in India, China

London . Goldman Sachs , the US investment banking giant, has issued a short-term alert over investing in India and China due to the impact of rising inflation, advising clients to rotate into Wall Street and other bourses as a safer bet over coming months, a media report said on Tuesday.

"We're not as tactically positive on the BRIC as we have been," said Tim Moe , the bank's chief Asia-Pacific strategist, referring to the quartet of Brazil , Russia , India, and China, the Daily Telegraph reported.

"To be frank, we may have held on too long to our overweight position in China last year. We have decided that discretion is the better part of valour and have tactically reduced our weight. Asia is not in the sweet part of the cycle. The longer-term picture of Asia outperforming the US is taking a breather," he said, speaking at a Goldman conference in London.

The cooling ardour for China is significant shift for the bank that coined the term BRIC and has been the cheerleader of the emerging market story over the past decade.

According to the report, India is an even bigger worry, with yawning twin deficits, and overheating visible on all fronts. The nation's central bank warned this week of "surging inflation".

"India's current account deficit is running at a record pace of 4.1 percent of GDP and it is 100 percent funded by short-term portfolio flows, which cannot be relied on indefinitely," said Moe, describing Mumbai's bourse as "crowded".

Goldman insists that the longer-term super-boom remains healthy in both the BRIC nations and a broader group of countries, or "N-11", led by South Korea, Indonesia, the Philippines, Turkey and Egypt.

Goldman expects China to rebound strongly in the second half of the year, distancing itself from the ultra-bearish views of those such as hedge fund star Jim Chanos betting that Beijing will prove unable to engineer a soft landing from its property bubble.

The surprise for 2011 will be a torrid recovery in the US, with growth of 3.4 percent to 3.8 percent, as the country confounds critics and averts a post-bubble "Lost Decade". Even Japan will outshine China, pulling out of its deflation trap, with earnings growth of 23 percent this year and 22 percent in 2012.

Kathy Matsui, Goldman's Tokyo strategist, said Japanese equities may be the best way to play the Pacific growth story since the average price-to-book ratio is 1.0, compared to 1.9 for China and the rest of emerging Asia.

How to make money in a downtrend

23 Jan 2011, 06:33

India's forex reserves rise $3.4 billion

PTI 22 Jan 2011, 15:35

India's foreign exchange (forex) reserves increased by $3.4 billion to $297.41 billion for the week ended Jan 14 on the back of rise in the value of foreign currency assets.

FM meets financial sector regulators to seek budget inputs

PTI 21 Jan 2011, 15:47

Finance Minister Pranab Mukherjee today discussed the economic situation with financial sector regulators, including Reserve Bank of India Governor and Sebi chief.

Subbarao says discussed economy with Pranab

REUTERS 21 Jan 2011, 14:18

RBI governor Duvvuri Subbarao said on Friday he discussed the country's macroeconomic situation with Finance Minister Pranab Mukherjee.

No change likely in FSDC role

Deepshikha Sikarwar 21 Jan 2011, 00:52

The government is unlikely to make changes in the mandate of the recently set up Financial Stability and Development Council, despite lingering concern among regulators that the inter-regulatory mechanism will encroach on their autonomy.

CAG pegs tax loss of Rs 53 cr on non-resident transactions

Avinash Celestine 21 Jan 2011, 00:46

The government has forgone almost Rs 53,400 crore in taxes that it could have mopped up from transactions involving foreign residents over five years, an analysis by the Comptroller and Auditor General has said.

India likely to attract $250 bn FDI in next five years: Sharma

PTI 20 Jan 2011, 16:03

The target of $250 billion looks ambitious in the wake of India receiving cumulative FDI of $124 billion into equity in the last 10 years.

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The last decade witnessed the maturity of India's financial markets. Since 1991, every governments of India took major steps in reforming the financial sector of the country. The important achievements in the following fields is discussed under serparate heads:

Financial markets
Regulators
The banking system
Non-banking finance companies
The capital market
Mutual funds
Overall approach to reforms
Deregulation of banking system
Capital market developments
Consolidation imperative
Now let us discuss each segment seperately.

Financial Markets

In the last decade, Private Sector Institutions played an important role. They grew rapidly in commercial banking and asset management business. With the openings in the insurance sector for these institutions, they started making debt in the market.

Competition among financial intermediaries gradually helped the interest rates to decline. Deregulation added to it. The real interest rate was maintained. The borrowers did not pay high price while depositors had incentives to save. It was something between the nominal rate of interest and the expected rate of inflation.

Regulators

The Finance Ministry continuously formulated major policies in the field of financial sector of the country. The Government accepted the important role of regulators. The Reserve Bank of India (RBI) has become more independant. Securities and Exchange Board of India (SEBI) and the Insurance Regulatory and Development Authority (IRDA) became important institutions. Opinions are also there that there should be a super-regulator for the financial services sector instead of multiplicity of regulators.

The banking system

Almost 80% of the business are still controlled by Public Sector Banks (PSBs). PSBs are still dominating the commercial banking system. Shares of the leading PSBs are already listed on the stock exchanges.

The RBI has given licences to new private sector banks as part of the liberalisation process. The RBI has also been granting licences to industrial houses. Many banks are successfully running in the retail and consumer segments but are yet to deliver services to industrial finance, retail trade, small business and agricultural finance.

The PSBs will play an important role in the industry due to its number of branches and foreign banks facing the constrait of limited number of branches. Hence, in order to achieve an efficient banking system, the onus is on the Government to encourage the PSBs to be run on professional lines.

Development finance institutions

FIs's access to SLR funds reduced. Now they have to approach the capital market for debt and equity funds.

Convertibility clause no longer obligatory for assistance to corporates sanctioned by term-lending institutions.

Capital adequacy norms extended to financial institutions.

DFIs such as IDBI and ICICI have entered other segments of financial services such as commercial banking, asset management and insurance through separate ventures. The move to universal banking has started.

Non-banking finance companies

In the case of new NBFCs seeking registration with the RBI, the requirement of minimum net owned funds, has been raised to Rs.2 crores.

Until recently, the money market in India was narrow and circumscribed by tight regulations over interest rates and participants. The secondary market was underdeveloped and lacked liquidity. Several measures have been initiated and include new money market instruments, strengthening of existing instruments and setting up of the Discount and Finance House of India (DFHI).

The RBI conducts its sales of dated securities and treasury bills through its open market operations (OMO) window. Primary dealers bid for these securities and also trade in them. The DFHI is the principal agency for developing a secondary market for money market instruments and Government of India treasury bills. The RBI has introduced a liquidity adjustment facility (LAF) in which liquidity is injected through reverse repo auctions and liquidity is sucked out through repo auctions.

On account of the substantial issue of government debt, the gilt- edged market occupies an important position in the financial set- up. The Securities Trading Corporation of India (STCI), which started operations in June 1994 has a mandate to develop the secondary market in government securities.

Long-term debt market: The development of a long-term debt market is crucial to the financing of infrastructure. After bringing some order to the equity market, the SEBI has now decided to concentrate on the development of the debt market. Stamp duty is being withdrawn at the time of dematerialisation of debt instruments in order to encourage paperless trading.

The capital market

The number of shareholders in India is estimated at 25 million. However, only an estimated two lakh persons actively trade in stocks. There has been a dramatic improvement in the country's stock market trading infrastructure during the last few years. Expectations are that India will be an attractive emerging market with tremendous potential. Unfortunately, during recent times the stock markets have been constrained by some unsavoury developments, which has led to retail investors deserting the stock markets.

Mutual funds

The mutual funds industry is now regulated under the SEBI (Mutual Funds) Regulations, 1996 and amendments thereto. With the issuance of SEBI guidelines, the industry had a framework for the establishment of many more players, both Indian and foreign players.

The Unit Trust of India remains easily the biggest mutual fund controlling a corpus of nearly Rs.70,000 crores, but its share is going down. The biggest shock to the mutual fund industry during recent times was the insecurity generated in the minds of investors regarding the US 64 scheme. With the growth in the securities markets and tax advantages granted for investment in mutual fund units, mutual funds started becoming popular.

The foreign owned AMCs are the ones which are now setting the pace for the industry. They are introducing new products, setting new standards of customer service, improving disclosure standards and experimenting with new types of distribution.

The insurance industry is the latest to be thrown open to competition from the private sector including foreign players. Foreign companies can only enter joint ventures with Indian companies, with participation restricted to 26 per cent of equity. It is too early to conclude whether the erstwhile public sector monopolies will successfully be able to face up to the competition posed by the new players, but it can be expected that the customer will gain from improved service.

The new players will need to bring in innovative products as well as fresh ideas on marketing and distribution, in order to improve the low per capita insurance coverage. Good regulation will, of course, be essential.

Overall approach to reforms

The last ten years have seen major improvements in the working of various financial market participants. The government and the regulatory authorities have followed a step-by-step approach, not a big bang one. The entry of foreign players has assisted in the introduction of international practices and systems. Technology developments have improved customer service. Some gaps however remain (for example: lack of an inter-bank interest rate benchmark, an active corporate debt market and a developed derivatives market). On the whole, the cumulative effect of the developments since 1991 has been quite encouraging. An indication of the strength of the reformed Indian financial system can be seen from the way India was not affected by the Southeast Asian crisis.

However, financial liberalisation alone will not ensure stable economic growth. Some tough decisions still need to be taken. Without fiscal control, financial stability cannot be ensured. The fate of the Fiscal Responsibility Bill remains unknown and high fiscal deficits continue. In the case of financial institutions, the political and legal structures hve to ensure that borrowers repay on time the loans they have taken. The phenomenon of rich industrialists and bankrupt companies continues. Further, frauds cannot be totally prevented, even with the best of regulation. However, punishment has to follow crime, which is often not the case in India.

Deregulation of banking system

Prudential norms were introduced for income recognition, asset classification, provisioning for delinquent loans and for capital adequacy. In order to reach the stipulated capital adequacy norms, substantial capital were provided by the Government to PSBs.

Government pre-emption of banks' resources through statutory liquidity ratio (SLR) and cash reserve ratio (CRR) brought down in steps. Interest rates on the deposits and lending sides almost entirely were deregulated.

New private sector banks allowed to promote and encourage competition. PSBs were encouraged to approach the public for raising resources. Recovery of debts due to banks and the Financial Institutions Act, 1993 was passed, and special recovery tribunals set up to facilitate quicker recovery of loan arrears.

Bank lending norms liberalised and a loan system to ensure better control over credit introduced. Banks asked to set up asset liability management (ALM) systems. RBI guidelines issued for risk management systems in banks encompassing credit, market and operational risks.

A credit information bureau being established to identify bad risks. Derivative products such as forward rate agreements (FRAs) and interest rate swaps (IRSs) introduced.

Capital market developments

The Capital Issues (Control) Act, 1947, repealed, office of the Controller of Capital Issues were abolished and the initial share pricing were decontrolled. SEBI, the capital market regulator was established in 1992.

Foreign institutional investors (FIIs) were allowed to invest in Indian capital markets after registration with the SEBI. Indian companies were permitted to access international capital markets through euro issues.

The National Stock Exchange (NSE), with nationwide stock trading and electronic display, clearing and settlement facilities was established. Several local stock exchanges changed over from floor based trading to screen based trading.

Private mutual funds permitted

The Depositories Act had given a legal framework for the establishment of depositories to record ownership deals in book entry form. Dematerialisation of stocks encouraged paperless trading. Companies were required to disclose all material facts and specific risk factors associated with their projects while making public issues.

To reduce the cost of issue, underwriting by the issuer were made optional, subject to conditions. The practice of making preferential allotment of shares at prices unrelated to the prevailing market prices stopped and fresh guidelines were issued by SEBI.

SEBI reconstituted governing boards of the stock exchanges, introduced capital adequacy norms for brokers, and made rules for making client or broker relationship more transparent which included separation of client and broker accounts.

Buy back of shares allowed

The SEBI started insisting on greater corporate disclosures. Steps were taken to improve corporate governance based on the report of a committee.

SEBI issued detailed employee stock option scheme and employee stock purchase scheme for listed companies.

Standard denomination for equity shares of Rs. 10 and Rs. 100 were abolished. Companies given the freedom to issue dematerialised shares in any denomination.

Derivatives trading starts with index options and futures. A system of rolling settlements introduced. SEBI empowered to register and regulate venture capital funds.

The SEBI (Credit Rating Agencies) Regulations, 1999 issued for regulating new credit rating agencies as well as introducing a code of conduct for all credit rating agencies operating in India.

Consolidation imperative

Another aspect of the financial sector reforms in India is the consolidation of existing institutions which is especially applicable to the commercial banks. In India the banks are in huge quantity. First, there is no need for 27 PSBs with branches all over India. A number of them can be merged. The merger of Punjab National Bank and New Bank of India was a difficult one, but the situation is different now. No one expected so many employees to take voluntary retirement from PSBs, which at one time were much sought after jobs. Private sector banks will be self consolidated while co-operative and rural banks will be encouraged for consolidation, and anyway play only a niche role.

In the case of insurance, the Life Insurance Corporation of India is a behemoth, while the four public sector general insurance companies will probably move towards consolidation with a bit of nudging. The UTI is yet again a big institution, even though facing difficult times, and most other public sector players are already exiting the mutual fund business. There are a number of small mutual fund players in the private sector, but the business being comparatively new for the private players, it will take some time.

We finally come to convergence in the financial sector, the new buzzword internationally. Hi-tech and the need to meet increasing consumer needs is encouraging convergence, even though it has not always been a success till date. In India organisations such as IDBI, ICICI, HDFC and SBI are already trying to offer various services to the customer under one umbrella. This phenomenon is expected to grow rapidly in the coming years. Where mergers may not be possible, alliances between organisations may be effective. Various forms of bancassurance are being introduced, with the RBI having already come out with detailed guidelines for entry of banks into insurance. The LIC has bought into Corporation Bank in order to spread its insurance distribution network. Both banks and insurance companies have started entering the asset management business, as there is a great deal of synergy among these businesses. The pensions market is expected to open up fresh opportunities for insurance companies and mutual funds.

It is not possible to play the role of the Oracle of Delphi when a vast nation like India is involved. However, a few trends are evident, and the coming decade should be as interesting as the last one.

RBI warns on sustained inflation risk

The Reserve Bank of India (RBI) said inflation may stay high for longer than anticipated earlier due to a rise in global commodities prices and domestic supply side pressures that have recently pushed up food prices.

"Upside risks to inflation have increased, suggesting the need for sustained anti-inflationary policy focus," the RBI said in a report a day before its quarterly monetary policy review, when it is widely expected to raise interest rates by at least 25 basis points.

"Since a lower inflation regime is essential for sustainable high growth, containing inflation becomes the dominant policy objective in the current environment," the report said.

After raising rates six times since March to tame inflation, the central bank paused in December but indicated further rate hikes were possible, with inflation remaining well above its comfort zone.

"As a result of newer factors and increased risks, the inflation trajectory is likely to show some persistence and moderate only gradually," Monday's report said.

A sharp rise in food prices, a key driver of inflation in India, has been putting upward pressure on broader prices.

The wholesale price index , the most widely watched gauge of prices in the country, rose 8.43 percent in December from a year earlier, compared with 7.48 percent in November and well above the RBI's March-end projection of 5.5 percent.

The RBI's perceived comfort zone for inflation is 5-6 percent in the short term and 3-4 percent in the medium term.

Govt to take final call on Posco project by Jan end

The Environment Ministry today said it will take a final call on the Posco "By the end of January 2011," Environment Minister Jairam Ramesh told reporters here when asked about the government's decision on the South Korean major's USD 12 billion steel mill project in the coastal state.

The Ministry has put Posco project, which seeks diversion of 1,253.225 hectares of forest land for establishment of integrated steel plant and captive port in Jagatsinghpur district, under scanner citing alleged green law violations.

The Ministry has set up three panels -- Forest Advisory Committee (FAC), Expert Appraisal Committee (EAC) of Coastal Regulation Zone and another EAC -- to look after the green law violation issue.

The three panels are learnt to have submitted their reports.

Last week, South Korea had urged India to fast-track the steel project.

Meticulous strategy needed for housing demand:FM

Sustained economic growth will result in acceleration of urbanisation and meticulous strategy is required to meet the domestic housing and quality urban services demand, Finance Minister Pranab Mukherjee said today.

"With sustained economic growth, the pace of urbanisation is set to accelerate and the urban population living in Indian towns and cities will double in the next 25 years," Mukherjee said at the 24th All India Builders' Convention here.

The growth is in conformity to the global trend where more than half of world's population is living in cities and towns, he said.

"In order to harness this opportunity, it is important that we plan carefully our strategy to meet the demand for housing and quality urban services in our habitations," he said.

According to Mukherjee, urbanisation in India has occurred slowly and unevenly but this is set to change rapidly.

Corrective steps to push up industrial production: FM
By PTI     Jan 12 2011     , New Delhi

Finance Minister Pranab Mukherjee today said deceleration in industrial growth to 2.7 per cent
in November and high inflation could have an adverse impact on the economy and promised to take corrective steps to push up factory output.

"If IIP goes down and inflation goes up, it will have an adverse impact, but I am not coming to any premature conclusion," Mukherjee told reporters here.

"We shall have to look into and take corrective measures so that IIP numbers revive in the remaining four months," he said.

Even though part of the deceleration in growth may be because of high base effect of 11.3 per cent in November last year, the Finance Minister refused to take it as a consolation.

"Last time, if you have noticed that in november last year it (IIP) was very high, so base effect is also there, but that is no consolation," he said.

Inflation is expected to be higher in December than 7.48 per cent in November, since food inflation has surged up to 18.32 per cent during the week ended December 25.

In the previous two weeks also, food inflation was in double digits while standing at 9.46 per cent for the week ended December 4.

Chidambaram speaks to Jaitley, Omar to defuse tension

In a bid to defuse tension, Home Minister P Chidambaram today spoke to BJP leader Arun Jaitley and Chief Minister Omar Abdullah after J-K authorities stopped BJP leaders at Jammu airport ahead of a planned hoisting of tricolour in Srinagar's Lal Chowk on Republic Day.

Chidambaram phoned Omar and took stock of the situation arising out of the arrival of Jaitley and party colleagues Sushma Swaraj and Ananth Kumar at the Jammu airport and the decision of local authorities not to allow them to enter the city, sources said.

The Chief Minister told the Home Minister that the two top BJP leaders would not be allowed to attend a public rally in Jammu as part of the BJP's controversial 'Ekta Yatra'.

National Games will be held as per scheduled: Kalmadi
ndian Olympic Association President Suresh Kalmadi, who was removed as CWG OC Chairman by the government, today said the 34th edition of the National Games will be held as per schedule from February 12 to 26.

The Games have been postponed sevral times before.

"National Games will be held as scheduled. Khelgaon has international standard stadium," Kalmadi told newsmen after inspecting the Mega Sports Complex at Khelgaon here.

A total of 33 events will be held in three cities? Ranchi, Jamshedpur and Dhanbad.

Deputy Chairman, Planning Commission, Government of India. Tel. No.: (Off.) 23096677, 2309 6666/ 96 Extn. 2132/34 Email: dch[at]nic[dot]in >> Profiles

No.	TOPICS	FILE FORMAT
1.	Planning then and now, Montek Singh Ahluwalia, Deputy Chairman, Planning Commission, New Delhi, 30 August, 2008	[MS Word ]- [PDF ]
2.	Speech of Shri Montek Singh Ahluwalia, Deputy Chairman, Planning Commission during 53rd National Development Council Meeting held at Vigyan Bhavan, New Delhi on 29th May, 2007	[ MS Word ] - [ PDF ]
3.	Agriculture Strategy for Eleventh Plan : Some Critical Issues released during 53rd National Development Council Meeting on 29th May, 2007	[ MS Word ] - [ PDF ]
4.	Sardar Patel Memorial Lecture by Montek Singh Ahluwalia, Deputy Chairman, Planning Commission on 'India 2020 : A New Tryst with Destiny' on 25th October, 2005	[ MS Word ] - [PDF ]
5.	54th Convocation Address by Montek Singh Ahluwalia, Deputy Chairman, Planning Commission to the Students of Maharaja Satyajirao University of Baroda on 8th October, 2005	[ MS Word ] - [ PDF ]
6.	David Finch Memorial Lecture by Montek Singh Ahluwalia, Deputy Chairman, Planning Commission on India�s Experience with Globalisation at Melbourne University, Australia on September 22, 2005	[ MS Word ] - [ PDF ]
7.	Welcome Address and Presentation at the 51st Meeting of the National Development Council at Vigyan Bhavan, New Delhi on 27 June, 2005	[ MS Word ] - [ PDF ]
8.	Address on the 11th International Conference organized by Nihon Keizai Shimbun, Inc. (Nikkei) - �The Future of Asia: Charting a Course for Asian Economic Integration� at Japan on 24 May, 2005	[ MS Word ] - [ PDF ]
9.	Jawahar Lal Nehru Memorial Trust Lecture - India in a Globalizing World at London on 20 April, 2005	[ MS Word ] - [ PDF ]
10.	Address at XXI All India Builders� Association of India Convention on 18-20 February, 2005 at New Delhi	[ MS Word ] - [ PDF ]
11.	Inaugural Speech at the International Conference on Soil, Water & Environmental Quality � Issues and Strategies on January 28, 2005 at NPL Auditorium, PUSA	[ MS Word ] - [ PDF ]
12.	Thirty First Foundation Day Lecture of Indian Institute of Management, Bangalore delivered on 28 October 2004 onPolicies for Development in a Globalising World	[ MS Word ] - [ PDF ]
13.	Economic Reforms in India since 1991: Has Gradualism Worked?	[ MS Word ] - [ PDF ]
14.	India's Economy � The Challenges Ahead	[ MS Word ] - [ PDF ]
15.	India's Economic Reforms	[ MS Word ] - [ PDF ]
16.	Structural Adjustment and Reform in Developing Countries - (Paper presented at the Conference sponsored by G-24 on the occasion of the Fiftieth Anniversary of the Bretton Woods Conference at Cartagena, Columbia, April 1994)	[ MS Word ] - [ PDF ]
17.	Inaugural Address at the 55th Annual Conference of the Indian Society of Agricultural Economics - New Economic Policy And Agriculture : Some Reflections (published in Ind. Jn. of Agri. Econ., Vol. 51, No. 3, July-Sept. 1996)	[ MS Word ] - [ PDF ]
18.	Economists' Diminished Role	[ MS Word ] - [ PDF ]
19.	The Exchange Rate System: Some Issues by C. Rangarajan and Montek S. Ahluwalia	[ MS Word ] - [ PDF ]
20.	The Limitations of Using Fiscal Incentives for Employment Promotion	[ MS Word ] - [ PDF ]
21.	India's Economic Reforms - An Appraisal	[ MS Word ] - [ PDF ]
22.	SDR Allocations and the Present Articles of Agreement	[ MS Word ] - [ PDF ]
23.	India�s Economic Performance, Policies and Prospects	[ MS Word ] - [ PDF ]
24.	State Level Performance Under Economic Reforms in India - (Paper presented at the Centre for Research on Economic Development and Policy Reform Conference on Indian Economic Prospects: Advancing Policy Reform May 2000; Stanford University)	[ MS Word ] - [ PDF ]
25.	Income Distribution and Development : Some Stylized Facts (reprinted from The American Economic Review � The American Economic Association)	[ MS Word ] - [ PDF ]
26.	Rural Poverty, Agricultural Production, and Prices: A Re-examination	[ MS Word ] - [ PDF ]
27.	Reducing Poverty and Hunger in India : The Role of Agriculture	[ MS Word ] - [ PDF ]
28.	Welfare Effects of Demand Management Policies: Impact Multipliers Under Alterernative Model Structuresby Montek S. Ahluwalia and Frank J. Lysy, The Johns Hopkins University	[ MS Word ] - [ PDF ]
29.	Policies for Poverty Alleviation - (Article published in Asian Development Review : Studies of Asian and Pacific Economic Issues; Vol. 8 No. 1; 1990)	[ MS Word ] - [ PDF ]
30.	The International Debt Problem - (Published under IIC Monograph Series No. 6 on 17 December 1983 by the India International Centre, Max Mueller Marg, New Delhi-110003)	[ MS Word ] - [ PDF ]
31.	Growth and Poverty in Developing Countries by Montek S. Ahluwalia, Nicholas G. Carter and Hollis B. Chenery, Development Policy Staff, The World Bank,Washington, DC 20433, USA. Received December 1978 (from Journal of Development Economics 6 (1979) 299-341 � North-Holland Publishing Company)	[ MS Word ] - [ PDF ]
32.	Balance-of-Payments Adjustment in India, 1970-71 to 1983-84 (World Document, Vol.14,No.8,pp.937-962,1986. Printed in Great Britain)	[ MS Word ] - [ PDF ]
33.	Reforming the Global Financial Architecture (published in Economic Paper 41 as a part of Commonwealth Economic Paper Series on behalf of the Economic Affairs Division of the Commonwealth Secretariat)	[ MS Word ] - [ PDF ]
34.	The Exchange Rate System : Some Issues by C. Rangarajan and Montek Singh Ahluwalia	[ MS Word ] - [ PDF ]
35.	Rural Poverty and Agricultural Performance in India (World Bank Reprint Series : Number Sixty; Reprinted from the Journal of Development Studies, 1977)	[ MS Word ] - [ PDF ]
36.	Taxes, Subsides, and Employment (Reprinted from The Quarterly Journal of Economics Vol. LXXXVII, August 1973; Copyright, 1973, by the President and Fellows of Harvard College)	[ MS Word ] - [ PDF ]
37.	First Raj Krishna Memorial Lecture, 1995 : Economic Reforms for the Nineties (Organised by Department of Economics, University of Rajasthan, Jaipur, Rajasthan, India)	[ MS Word ] - [ PDF ]
38.	Priorities for Economic Reforms - (Delivered on 19th November, 1999 at 13th Jawaharlal Nehru Memorial IFFCO Lecture)	[ MS Word ] - [ PDF ]
39.	Financing of Development in India	[ MS Word ] - [ PDF ]
40.	Financial Sector Reforms in India : An Assessment	[ MS Word ] - [ PDF ]
41.	Financing Private Infrastructure: Lessons from India	[ MS Word ] - [ PDF ]
42.	Inequality, Poverty and Development - (World Bank, Washington, DC 20433, U.S.A.; May 1976, Revised Version August 1976)	[ MS Word ] - [ PDF ]
43.	Lessons from India's Economic Reforms (Published in the book titled �Development Challenges in the 1990s� - Leading Policymakers Speak from Experience; a copublication of the World Bank and Oxford University Press, March 2005)	[ MS Word ] - [ PDF ]
44.	Understanding India�s Reform Trajectory: Past Trends and Future Challenges - (India Review, Vol.3, No.4, October 2004)	[ MS Word ] - [ PDF ]
45.	Report of the Task force on Employment Opportunities by Montek S. Ahluwalia - July 2001	[ Summary ] - [ Full Report ]

Deputy Chairman, Planning Commission, Government of India. Tel. No.: (Off.) 23096677, 2309 6666/ 96 Extn. 2132/34 Email: dch[at]nic[dot]in >> Profiles

No.	TOPICS	FILE FORMAT
1.	Planning then and now, Montek Singh Ahluwalia, Deputy Chairman, Planning Commission, New Delhi, 30 August, 2008	[MS Word ]- [PDF ]
2.	Speech of Shri Montek Singh Ahluwalia, Deputy Chairman, Planning Commission during 53rd National Development Council Meeting held at Vigyan Bhavan, New Delhi on 29th May, 2007	[ MS Word ] - [ PDF ]
3.	Agriculture Strategy for Eleventh Plan : Some Critical Issues released during 53rd National Development Council Meeting on 29th May, 2007	[ MS Word ] - [ PDF ]
4.	Sardar Patel Memorial Lecture by Montek Singh Ahluwalia, Deputy Chairman, Planning Commission on 'India 2020 : A New Tryst with Destiny' on 25th October, 2005	[ MS Word ] - [PDF ]
5.	54th Convocation Address by Montek Singh Ahluwalia, Deputy Chairman, Planning Commission to the Students of Maharaja Satyajirao University of Baroda on 8th October, 2005	[ MS Word ] - [ PDF ]
6.	David Finch Memorial Lecture by Montek Singh Ahluwalia, Deputy Chairman, Planning Commission on India�s Experience with Globalisation at Melbourne University, Australia on September 22, 2005	[ MS Word ] - [ PDF ]
7.	Welcome Address and Presentation at the 51st Meeting of the National Development Council at Vigyan Bhavan, New Delhi on 27 June, 2005	[ MS Word ] - [ PDF ]
8.	Address on the 11th International Conference organized by Nihon Keizai Shimbun, Inc. (Nikkei) - �The Future of Asia: Charting a Course for Asian Economic Integration� at Japan on 24 May, 2005	[ MS Word ] - [ PDF ]
9.	Jawahar Lal Nehru Memorial Trust Lecture - India in a Globalizing World at London on 20 April, 2005	[ MS Word ] - [ PDF ]
10.	Address at XXI All India Builders� Association of India Convention on 18-20 February, 2005 at New Delhi	[ MS Word ] - [ PDF ]
11.	Inaugural Speech at the International Conference on Soil, Water & Environmental Quality � Issues and Strategies on January 28, 2005 at NPL Auditorium, PUSA	[ MS Word ] - [ PDF ]
12.	Thirty First Foundation Day Lecture of Indian Institute of Management, Bangalore delivered on 28 October 2004 onPolicies for Development in a Globalising World	[ MS Word ] - [ PDF ]
13.	Economic Reforms in India since 1991: Has Gradualism Worked?	[ MS Word ] - [ PDF ]
14.	India's Economy � The Challenges Ahead	[ MS Word ] - [ PDF ]
15.	India's Economic Reforms	[ MS Word ] - [ PDF ]
16.	Structural Adjustment and Reform in Developing Countries - (Paper presented at the Conference sponsored by G-24 on the occasion of the Fiftieth Anniversary of the Bretton Woods Conference at Cartagena, Columbia, April 1994)	[ MS Word ] - [ PDF ]
17.	Inaugural Address at the 55th Annual Conference of the Indian Society of Agricultural Economics - New Economic Policy And Agriculture : Some Reflections (published in Ind. Jn. of Agri. Econ., Vol. 51, No. 3, July-Sept. 1996)	[ MS Word ] - [ PDF ]
18.	Economists' Diminished Role	[ MS Word ] - [ PDF ]
19.	The Exchange Rate System: Some Issues by C. Rangarajan and Montek S. Ahluwalia	[ MS Word ] - [ PDF ]
20.	The Limitations of Using Fiscal Incentives for Employment Promotion	[ MS Word ] - [ PDF ]
21.	India's Economic Reforms - An Appraisal	[ MS Word ] - [ PDF ]
22.	SDR Allocations and the Present Articles of Agreement	[ MS Word ] - [ PDF ]
23.	India�s Economic Performance, Policies and Prospects	[ MS Word ] - [ PDF ]
24.	State Level Performance Under Economic Reforms in India - (Paper presented at the Centre for Research on Economic Development and Policy Reform Conference on Indian Economic Prospects: Advancing Policy Reform May 2000; Stanford University)	[ MS Word ] - [ PDF ]
25.	Income Distribution and Development : Some Stylized Facts (reprinted from The American Economic Review � The American Economic Association)	[ MS Word ] - [ PDF ]
26.	Rural Poverty, Agricultural Production, and Prices: A Re-examination	[ MS Word ] - [ PDF ]
27.	Reducing Poverty and Hunger in India : The Role of Agriculture	[ MS Word ] - [ PDF ]
28.	Welfare Effects of Demand Management Policies: Impact Multipliers Under Alterernative Model Structuresby Montek S. Ahluwalia and Frank J. Lysy, The Johns Hopkins University	[ MS Word ] - [ PDF ]
29.	Policies for Poverty Alleviation - (Article published in Asian Development Review : Studies of Asian and Pacific Economic Issues; Vol. 8 No. 1; 1990)	[ MS Word ] - [ PDF ]
30.	The International Debt Problem - (Published under IIC Monograph Series No. 6 on 17 December 1983 by the India International Centre, Max Mueller Marg, New Delhi-110003)	[ MS Word ] - [ PDF ]
31.	Growth and Poverty in Developing Countries by Montek S. Ahluwalia, Nicholas G. Carter and Hollis B. Chenery, Development Policy Staff, The World Bank,Washington, DC 20433, USA. Received December 1978 (from Journal of Development Economics 6 (1979) 299-341 � North-Holland Publishing Company)	[ MS Word ] - [ PDF ]
32.	Balance-of-Payments Adjustment in India, 1970-71 to 1983-84 (World Document, Vol.14,No.8,pp.937-962,1986. Printed in Great Britain)	[ MS Word ] - [ PDF ]
33.	Reforming the Global Financial Architecture (published in Economic Paper 41 as a part of Commonwealth Economic Paper Series on behalf of the Economic Affairs Division of the Commonwealth Secretariat)	[ MS Word ] - [ PDF ]
34.	The Exchange Rate System : Some Issues by C. Rangarajan and Montek Singh Ahluwalia	[ MS Word ] - [ PDF ]
35.	Rural Poverty and Agricultural Performance in India (World Bank Reprint Series : Number Sixty; Reprinted from the Journal of Development Studies, 1977)	[ MS Word ] - [ PDF ]
36.	Taxes, Subsides, and Employment (Reprinted from The Quarterly Journal of Economics Vol. LXXXVII, August 1973; Copyright, 1973, by the President and Fellows of Harvard College)	[ MS Word ] - [ PDF ]
37.	First Raj Krishna Memorial Lecture, 1995 : Economic Reforms for the Nineties (Organised by Department of Economics, University of Rajasthan, Jaipur, Rajasthan, India)	[ MS Word ] - [ PDF ]
38.	Priorities for Economic Reforms - (Delivered on 19th November, 1999 at 13th Jawaharlal Nehru Memorial IFFCO Lecture)	[ MS Word ] - [ PDF ]
39.	Financing of Development in India	[ MS Word ] - [ PDF ]
40.	Financial Sector Reforms in India : An Assessment	[ MS Word ] - [ PDF ]
41.	Financing Private Infrastructure: Lessons from India	[ MS Word ] - [ PDF ]
42.	Inequality, Poverty and Development - (World Bank, Washington, DC 20433, U.S.A.; May 1976, Revised Version August 1976)	[ MS Word ] - [ PDF ]
43.	Lessons from India's Economic Reforms (Published in the book titled �Development Challenges in the 1990s� - Leading Policymakers Speak from Experience; a copublication of the World Bank and Oxford University Press, March 2005)	[ MS Word ] - [ PDF ]
44.	Understanding India�s Reform Trajectory: Past Trends and Future Challenges - (India Review, Vol.3, No.4, October 2004)	[ MS Word ] - [ PDF ]
45.	Report of the Task force on Employment Opportunities by Montek S. Ahluwalia - July 2001	[ Summary ] - [ Full Report ]

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Economic liberalisation in India

From Wikipedia, the free encyclopedia

Jump to: navigation, search

The economic liberalisation in India refers to ongoing economic reforms in India that started in 1991. After Independence in 1947, India adhered to socialist policies. In the 1980s, Prime Minister Rajiv Gandhi initiated some reforms. In 1991, after India sold 67 tons of gold to the International Monetary Fund (IMF), the government of P. V. Narasimha Rao and his finance minister Manmohan Singh started breakthrough reforms.^[1] The new neo-liberal policies included opening for international trade and investment, deregulation, initiation of privatization, tax reforms, and inflation-controlling measures. The overall direction of liberalisation has since remained the same, irrespective of the ruling party, although no party has yet tried to take on powerful lobbies such as the trade unions and farmers, or contentious issues such as reforming labour laws and reducing agricultural subsidies.^[2] The main objective of the government was to transform the economic system from socialism to capitalism so as to achieve high economic growth and industrialize the nation for the well-being of Indian citizens.^[3][4] Today India is mainly characterized as a market economy.^[5]

As of 2009, about 300 million people—equivalent to the entire population of the United States—have escaped extreme poverty.^[6] The fruits of liberalisation reached their peak in 2007, when India recorded its highest GDP growth rate of 9%.^[7] With this, India became the second fastest growing major economy in the world, next only to China.^[8] An Organisation for Economic Co-operation and Development (OECD) report states that the average growth rate 7.5% will double the average income in a decade, and more reforms would speed up the pace.^[9]

Indian government coalitions have been advised to continue liberalisation. India grows at slower pace than China, which has been liberalising its economy since 1978.^[10] McKinsey states that removing main obstacles "would free India's economy to grow as fast as China's, at 10 percent a year".^[11]

For 2010, India was ranked 124^th among 179^th countries in Index of Economic Freedom World Rankings, which is an improvement from the preceding year.

Contents [hide] 1 Pre-liberalisation policies 1.1 Impact 2 Narasimha Rao government (1991–1996) 2.1 Crisis 3 Later reforms 4 Impact of reforms 5 Ongoing economic challenges 5.1 Reforms at the state level 6 See also 7 References 8 External links

[edit] Pre-liberalisation policies

Part of a series on the History of Modern India
Pre-Independence
British Raj (1858–1947)
Indian independence movement (1857–1947)
Partition of India (1947)
Post-Independence
Political integration of India (1947–49)
Indo-Pakistani War of 1947
States Reorganisation Act (1956)
Non-Aligned Movement (1956– )
Sino-Indian War (1962)
Indo-Pakistani War of 1965
Green Revolution (1970s)
Indo-Pakistani War of 1971
Emergency (1975–77)
Siachen conflict (1984)
1990s in India
Economic liberalisation in India
Kargil War (1999)
2000s in India
See also
History of India
History of South Asia
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Further information: Economic history of India and License Raj

Indian economic policy after independence was influenced by the colonial experience (which was seen by Indian leaders as exploitative in nature) and by those leaders' exposure to Fabian socialism. Policy tended towards protectionism, with a strong emphasis on import substitution, industrialization, state intervention in labour and financial markets, a large public sector, business regulation, and central planning.^[12] Five-Year Plans of India resembled central planning in the Soviet Union. Steel, mining, machine tools, water, telecommunications, insurance, and electrical plants, among other industries, were effectively nationalized in the mid-1950s.^[13] Elaborate licences, regulations and the accompanying red tape, commonly referred to as Licence Raj, were required to set up business in India between 1947 and 1990.^[14]

Before the process of reform began in 1991, the government attempted to close the Indian economy to the outside world. The Indian currency, the rupee, was inconvertible and high tariffs and import licensing prevented foreign goods reaching the market. India also operated a system of central planning for the economy, in which firms required licenses to invest and develop. The labyrinthine bureaucracy often led to absurd restrictions—up to 80 agencies had to be satisfied before a firm could be granted a licence to produce and the state would decide what was produced, how much, at what price and what sources of capital were used. The government also prevented firms from laying off workers or closing factories. The central pillar of the policy was import substitution, the belief that India needed to rely on internal markets for development, not international trade—a belief generated by a mixture of socialism and the experience of colonial exploitation. Planning and the state, rather than markets, would determine how much investment was needed in which sectors.

– BBC^[15]

In the 80s, the government led by Rajiv Gandhi started light reforms. The government slightly reduced License Raj and also promoted the growth of the telecommunications and software industries.^{[citation needed]}

The Vishwanath Pratap Singh government (1989–1990) and Chandra Shekhar Singh government (1990–1991) did not add any significant reforms.

[edit] Impact

• The low annual growth rate of the economy of India before 1980, which stagnated around 3.5% from 1950s to 1980s, while per capita income averaged 1.3%.^[16] At the same time, Pakistan grew by 5%, Indonesia by 9%, Thailand by 9%, South Korea by 10% and in Taiwan by 12%.^[17]
• Only four or five licences would be given for steel, power and communications. License owners built up huge powerful empires.^[15]
• A huge public sector emerged. State-owned enterprises made large losses.^[15]
• Infrastructure investment was poor because of the public sector monopoly.^[15]
• License Raj established the "irresponsible, self-perpetuating bureaucracy that still exists throughout much of the country"^[18] and corruption flourished under this system.^[8]

[edit] Narasimha Rao government (1991–1996)

Present Prime Minister Manmohan Singh was then Finance Minister in Cabinet of Prime Minister P V Narasimha Rao

[edit] Crisis

Main article: 1991 India economic crisis

The assassination of prime minister Indira Gandhi in 1984, and later of her son Rajiv Gandhi in 1991, crushed international investor confidence on the economy that was eventually pushed to the brink by the early 1990s.

As of 1991, India still had a fixed exchange rate system, where the rupee was pegged to the value of a basket of currencies of major trading partners. India started having balance of payments problems since 1985, and by the end of 1990, it was in a serious economic crisis. The government was close to default,^[19] its central bank had refused new credit and foreign exchange reserves had reduced to the point that India could barely finance three weeks' worth of imports.

A Balance of Payments crisis in 1991 pushed the country to near bankruptcy. In return for an IMF bailout, gold was transferred to London as collateral, the Rupee devalued and economic reforms were forced upon India. That low point was the catalyst required to transform the economy through badly needed reforms to unshackle the economy. Controls started to be dismantled, tariffs, duties and taxes progressively lowered, state monopolies broken, the economy was opened to trade and investment, private sector enterprise and competition were encouraged and globalisation was slowly embraced. The reforms process continues today and is accepted by all political parties, but the speed is often held hostage by coalition politics and vested interests.

– India Report, Astaire Research^[8]

[edit] Later reforms

• Atal Bihari Vajpayee's administration surprised many by continuing reforms, when it was at the helm of affairs of India for five years.^[20]
• The Vajpayee administration continued with privatization, reduction of taxes, a sound fiscal policy aimed at reducing deficits and debts and increased initiatives for public works.
• The UF government attempted a progressive budget that encouraged reforms, but the 1997 Asian financial crisis and political instability created economic stagnation.

This list is incomplete; you can help by expanding it.

[edit] Impact of reforms

The HSBC Global Technology Center in Pune develops software for the entire HSBC group.^[21]

The impact of these reforms may be gauged from the fact that total foreign investment (including foreign direct investment, portfolio investment, and investment raised on international capital markets) in India grew from a minuscule US$132 million in 1991–92 to $5.3 billion in 1995–96.^[22]

Cities like Gurgaon, Bangalore, Hyderabad, Pune and Ahmedabad have risen in prominence and economic importance, became centres of rising industries and destination for foreign investment and firms.

Annual growth in GDP per capita has accelerated from just 1¼ per cent in the three decades after Independence to 7½ per cent currently, a rate of growth that will double average income in a decade. [...] In service sectors where government regulation has been eased significantly or is less burdensome—such as communications, insurance, asset management and information technology—output has grown rapidly, with exports of information technology enabled services particularly strong. In those infrastructure sectors which have been opened to competition, such as telecoms and civil aviation, the private sector has proven to be extremely effective and growth has been phenomenal.

– OECD^[9]

[edit] Ongoing economic challenges

Main article: Economy of India

• Problems in the agricultural sector.
• Highly restrictive and complex labour laws.^{[9][23][24][25][26][27][28][29][30]}
• Inadequate infrastructure, which is often government monopoly.
• Failing education.
• Inefficient public sector.
• Inflation in basic consumable goods.
• Corruption
• High fiscal deficit

This list is incomplete; you can help by expanding it.

OECD summarized the key reforms that are needed:

In labour markets, employment growth has been concentrated in firms that operate in sectors not covered by India's highly restrictive labour laws. In the formal sector, where these labour laws apply, employment has been falling and firms are becoming more capital intensive despite abundant low-cost labour. Labour market reform is essential to achieve a broader-based development and provide sufficient and higher productivity jobs for the growing labour force. In product markets, inefficient government procedures, particularly in some of the states, acts as a barrier to entrepreneurship and need to be improved. Public companies are generally less productive than private firms and the privatisation programme should be revitalised. A number of barriers to competition in financial markets and some of the infrastructure sectors, which are other constraints on growth, also need to be addressed. The indirect tax system needs to be simplified to create a true national market, while for direct taxes, the taxable base should be broadened and rates lowered. Public expenditure should be re-oriented towards infrastructure investment by reducing subsidies. Furthermore, social policies should be improved to better reach the poor and—given the importance of human capital—the education system also needs to be made more efficient.

– OECD^[9]

[edit] Reforms at the state level

See also: Economic disparities in India

The Economic Survey of India 2007 by OECD concluded:

At the state level, economic performance is much better in states with a relatively liberal regulatory environment than in the relatively more restrictive states".^[9]

The analysis of this report suggests that the differences in economic performance across states are associated with the extent to which states have introduced market-oriented reforms. Thus, further reforms on these lines, complemented with measures to improve infrastructure, education and basic services, would increase the potential for growth outside of agriculture and thus boost better-paid employment, which is a key to sharing the fruits of growth and lowering poverty.^[9]

[edit] See also

• Economy of India
• Globalisation in India
• License Raj
• Hindu rate of growth

[edit] References

1. ^ Timeline:India -BBC 1991
2. ^ "That old Gandhi magic". The Economist. 27 November 1997. http://economist.com/displaystory.cfm?story_id=S%26%29H%2C%2BPQ%27%25%0A. ^{[dead link]}
3. ^ "India's surprising economic miracle". The Economist. 30 September 2010. http://www.economist.com/node/17147648?story_id=17147648&fsrc=rss. Retrieved Sep 30th 2010. 
4. ^ Chakrabarti, Anjan; Cullenberg, Stephen (2003). Transition from socialism to capitalism in india. ISBN 9780415934855. http://books.google.com/?id=KgPfWfp7kEQC&pg=PA169&lpg=PA169&dq=transition+from+socialism+to+capitalism+in+india&q=transition%20from%20socialism%20to%20capitalism%20in%20india. 
5. ^ "India's great journey to market economy". Rediff.com. http://www.rediff.com/money/2005/jun/17guest.htm. Retrieved 2010-03-29. 
6. ^ Nick Gillespie (2008). "What Slumdog Millionaire can teach Americans about economic stimulus". Reason. http://www.reason.com/blog/show/131810.html. 
7. ^ https://www.cia.gov/library/publications/the-world-factbook/geos/in.html#Econ
8. ^ ^{a b c} "The India Report". Astaire Research. http://www.ukibc.com/ukindia2/files/India60.pdf. 
9. ^ ^{a b c d e f} "Economic survey of India 2007: Policy Brief". OECD. http://www.oecd.org/dataoecd/17/52/39452196.pdf. 
10. ^ "India's economy: What's holding India back?". The Economist. 6 March 2008. http://www.economist.com/opinion/displaystory.cfm?story_id=10808493. 
11. ^ "The McKinsey Quarterly: India—From emerging to surging". The McKinsey Quarterly. http://business.indian-network.de/artikel/The%20McKinsey%20Quarterly-%20India-From%20emerging%20to%20surging.pdf. 
12. ^ Kelegama, Saman and Parikh, Kirit (2000). Political Economy of Growth and Reforms in South Asia. Second Draft. http://www.eldis.org/static/DOC12473.htm. 
13. ^ Sam Staley (2006). "The Rise and Fall of Indian Socialism: Why India embraced economic reform". http://www.reason.com/news/show/36682.html. 
14. ^ Street Hawking Promise Jobs in Future, The Times of India, 2001-11-25
15. ^ ^{a b c d} "India: the economy". BBC. 12 February 1998. http://news.bbc.co.uk/2/hi/south_asia/55427.stm. 
16. ^ "Redefining The Hindu Rate Of Growth". The Financial Express. http://www.financialexpress.com/news/redefining-the-hindu-rate-of-growth/104268/. 
17. ^ "Industry passing through phase of transition". The Tribune India. http://www.tribuneindia.com/50yrs/kapur.htm. 
18. ^ Eugene M. Makar (2007). An American's Guide to Doing Business in India. 
19. ^ India's Pathway through Financial Crisis. Arunabha Ghosh. Global Economic Governance Programme. Retrieved on 2 March 2007.
20. ^ J. Bradford DeLong (2001). "India Since Independence: An Analytic Growth Narrative". http://www.j-bradford-delong.net/Econ_Articles/India/India_Rodrik_DeLong.PDF. 
21. ^ "HSBC GLT frontpage". http://www.hsbcglt.com/. Retrieved 2008-08-22. 
22. ^ Local industrialists against multinationals. Ajay Singh and Arjuna Ranawana. Asiaweek. Retrieved on 2 March 2007.
23. ^ "IMF calls for urgent reform in Indian labour laws". http://news.indiainfo.com/2006/04/20/2004imf-labour-laws.html. 
24. ^ Kaushik Basu, Gary S. Fields, and Shub Debgupta. "Retrenchment, Labor Laws and Government Policy: An Analysis with Special Reference to India". The World Bank. http://www.worldbank.org/html/prdph/downsize/docs/india.pdf. 
25. ^ R. C. Datta / Milly Sil (2007). "Contemporary Issues on Labour Law Reform in India". http://atlmri.googlepages.com/RCD_MILI.pdf. 
26. ^ Aditya Gupta (2006). "How wrong has the Indian Left been about economic reforms?". http://www.ccsindia.org/interns2006/How%20Wrong%20is%20left%20about%20ecoonimic%20reforms%20in%20India%20-%20Aditya.pdf. 
27. ^ Basu, Kaushik (27 June 2005). "Why India needs labour law reform". BBC. http://news.bbc.co.uk/2/hi/south_asia/4103554.stm. 
28. ^ "A special report on India: An elephant, not a tiger". The Economist. 11 December 2008. http://www.economist.com/specialreports/displayStory.cfm?story_id=12749735. 
29. ^ "India Country Overview 2008". The World Bank. 2008. http://www.worldbank.org.in/WBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/INDIAEXTN/0,,contentMDK:20195738~menuPK:295591~pagePK:141137~piPK:141127~theSitePK:295584,00.html. 
30. ^ Gurcharan Das (July/August 2006). "The India Model". The Foreign Affairs. http://www.foreignaffairs.org/20060701faessay85401-p0/gurcharan-das/the-india-model.html. 

[edit] External links

• For a short educational video of the "economic history of India".
• Nick Gillespie (2009). "What Slumdog Millionaire can teach Americans about economic stimulus". Reason. http://www.reason.com/blog/show/131810.html. 
• Gurcharan Das (2006). "The India Model". The Foreign Affairs. http://www.foreignaffairs.org/20060701faessay85401-p0/gurcharan-das/the-india-model.html. 
• Aditya Gupta (2006). "How wrong has the Indian Left been about economic reforms?". Centre for Civil Society. http://www.ccsindia.org/interns2006/How%20Wrong%20is%20left%20about%20ecoonimic%20reforms%20in%20India%20-%20Aditya.pdf. 
• "The India Report". Astaire Research. 2007. http://www.ukibc.com/ukindia2/files/India60.pdf. 

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Categories: Economy of India | Economic history of India | Privatisation in India | Economic liberalization | Independent India | Rao administration