Five Year Plans in India
Five Year Plan
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Duration
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Focus
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Highlights of the plan period
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I
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1951 – 1956
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Agriculture
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II
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1956 – 1961
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Industrialization
Socialism
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III
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1961 – 1966
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Defence
Price stabilization
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IV
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1969 – 1974
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Growth
Stability
Self-reliance
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V
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1974 – 1978
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Poverty alleviation
Self-reliance
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VI
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1980 – 1985
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Industrialization
Information Tech.
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VII
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1985 – 1989
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Increasing employment
Growth
Modernisation
| |
No FYP 1989-1992. Annual plans 1990-1992
Balance of payments crisis 1991
Launch of economic reforms under P.V. Narasimha Rao
| |||
VIII
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1992 – 1997
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Human development
Industrial modernisation
Population control
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IX
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1997 – 2002
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Employment
Food security
Continued liberalization
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X
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2002 – 2007
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Education
Health
Environment
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XI
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2007 – 2012
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Education
Health
Environment
Infrastructure
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Land Systems and Reforms in India
Land Systems
- Zamindari System
- Government collect land tax through the intermediary of a zamindar
- Land assigned to zamindar who bid the highest tax rate. Farmers lose ownership of land
- Farmers pay tax to zamindar in cash
- No remissions granted due to lost produce (due to weather etc)
- Zamindari system implemented primarily in North India, especially Bengal, U.P., and Central Provinces and Berar
- Attributed as a consequence of the Permanent Settlement under Lord Cornwallis
- Ryotwari System
- Government collects land tax directly from farmers (called “ryots”)
- Land belongs to farmer, farmer pays fixed amount to government
- Remissions granted lost produce (due to weather etc)
- Ryotwari system implemented in Madras, Bombay, Assam and Burma
- Attributed to Sir Thomas Munro, Governor of Madras
Land Reforms
- Land Reforms Act 1955
- All share croppers to have permanent use rights
- Such rights to be inheritable
- Croppers to pay legal share of crop to landlord
- Land reforms in Kerala
- Introduced Land Reforms Ordinance in 1957
- Set absolute ceiling on land ownership. Tenants and hut dwellers receive claim on excess land
- Fixity of tenure and protection from eviction
- Land reforms in West Bengal
- Initiated Operation Barga in 1978
- Registered sharecroppers (”bargadars”) and educated them about cultivation rights
- Bargadar rights made hereditary. Bargadars to receive fair share of crop (50-75%)
- Land Ceiling Act: redistribution of ceiling-surplus land
AGRICULTURE IN INDIA
Highlights
- India is ranked second worldwide in farm output
- Agriculture accounts for 16.6% of GDP
- Agriculture employs 60% of the workforce
- India has the world’s largest cattle population
- Largest producer of milk, cashews, coconut, tea, ginger, turmeric and black pepper
- Second largest producer of wheat, rice, sugar, groundnut and inland fish
- Third largest producer of tobacco
- India accounts for 10% of world fruit production
- Largest producer of banana and sapota
Green Revolution in India
- Use of high yield seeds along with increased used of fertilizers and irrigation leading to dramatic increase in production
- Implemented mainly in Punjab, Haryana, western UP 1965-1980
- Increased food grain production by 4 times, milk 6 times, eggs 27 times
- Requires large investment in equipment and enormous quantities of water
- Padma Vibhushan awarded to Dr. Norman Borlaug in 2006 for instituting the Green Revolution. He is considered the Father of the Green Revolution. He also won the Nobel Peace Prize in 1970
AGRICULTURAL CREDIT AND INSURANCE
Kisan Credit Card
- Launched in 1998 to provide short-term credit
- Simple, flexible procedures
- Helps buy seeds and fertilizers at farmer’s convenience
- Operated by major nationalized banks
- Includes personal accident insurance coverage
National Agricultural Insurance Scheme (NAIS) / Rashtriya Krishi Bima Yojana (RKBY)
- Launched in 2008
- Provides insurance coverage in the event of failure of crop due to natural causes, pests and diseases
- Covers food crops, oilseeds, sugarcane, cotton and potato
- Joint programme of Central and State governments
- 50% subsidy for small and medium farmers
- Implemented by Agriculture Insurance Company of India (combination of NABARD and other nationalized insurance companies)
Livestock Insurance Scheme
- Launched in 2005
- Provides protection to farmers and cattle rearers against loss due to animal death
- Covers crossbred and high yielding cattle and buffaloes
- Fully funded by the Central government
- 50% subsidy
- Implemented by livestock development boards of each state
Rainfall Insurance / Varsha Bima
- Launched in 2004
- Provides protection against anticipated shortfall in crop yield due to deficit rainfall
- Implemented by Agriculture Insurance Company of India Ltd. (AIC)
Weather Based Crop Insurance Scheme (WBCIS)
- Launched in 2003
- Provides protection against loss due to adverse weather conditions including rainfall, frost, temperature etc
- Jointly funded by Central and State governments
- Up to 50% subsidy
Rainfall Insurance Scheme for Coffee Growers (RISC)
- Launched in 2009
- Protects against loss due to deficit rainfall during blossom and backing periods and excess rains during monsoon period
- Covers Robusta/Arabica variety of coffee in Karnataka, Kerala, TN
- Funded by the Coffee Board (Central government)
- 50% subsidy
- Implemented by AIC
AGRICULTURAL SCHEMES AND PROGRAMMES
All programmes fall under the purview of the Ministry of Agriculture unless otherwise noted.
National Food Security Mission
- Launched in Aug 2007
- Objectives:
- To increase production of wheat, rice and pulses on a sustainable basis to ensure food security of the country
- Restore soil fertility
- Employment generation
- Enhance farm-level economy
- Seeks to disseminate improved technologies and farm practices
- Central Govt. provides 50% subsidy
- Three components: NFSM Rice, NFSM Wheat, NFSM Pulses
- Targeted increase in production: Rice 10 million tonnes, Wheat 8 m t, Pulses 2 m t
- Structure:
- Chairman: Minister of Agriculture
- Members: Secretaries of Dept of Agriculture and Cooperation, Finance, Adviser Planning Commission, Agriculture Commissioner
National Horticulture Mission
- Launched in 2005
- Objective: provide growth of horticulture and enhance horticulture production
- Promotes use of technology to farmers for high-tech horticulture cultivation
- Promotes diversification from traditional crops to plantations, orchards, vineyards etc
- Funded by Central (85%) and State (15%) governments
- Structure
- Chairman: Minister of Agriculture
- Members: Ministers of Commerce, Health, Finance, Food Processing, Industries, Panchayati Raj, Science & Technology, Rural Development
National Agriculture Development Program (NADP) / Rashtriya Krishi Vikas Yojana (RKVY)
- Launched in 2007
- Objectives:
- To incentivise states to increase their investment in agriculture
- To provide flexibility and autonomy to states in agricultural planning
- To maximise returns for farmers
- To reduce yield gaps in important crops
- Fully funded by the Central government, executed by the State governments
- Areas of focus
- Integrated development of food crops
- Agriculture mechanization
- Soil health and productivity
- Horticulture
- Animal husbandry
- Use of technology
Agricultural Debt Waiver and Debt Relief Scheme 2008
- Launched in 2008
- Covers direct loans by certain commercial banks, rural banks and cooperatives
- For small and marginal farmers the entire eligible amount shall be waived
- For other farmers there will be a one time settlement under which the farmer will be relieved of 25% of the loan amount
- Implemented by NABARD and RBI
Agri Clinics and Agri Business Centres Scheme
- Launched in 2002
- Agriclinics provide expert services and advice to farmers on cropping practices, technology dissemination, crop protection, market trends, clinical services for animal health etc.
- Agribusiness
Centres provide input supply, farm equipment on hire etc - Objectives
- To make available supplementary sources of input and services to farmers
- To provide gainful employment to agriculture graduates
- To create agriculture entrepreneurs
- Example projects:
- Soil and water testing
- Pest control services
- Micro irrigation systems
- Seed processing units
- Hatcheries, apiaries
- Setting up of IT kiosks in rural areas
- Financial support from NABARD
National Commission on Farmers
- Constituted in 2004
- Chairman Dr. M.S. Swaminathan (instrumental in Green Revolution in India)
- Submitted final report in 2006
- Suggests measure to enhance productivity, profitability and sustainability of farming in different regions of the country
- Suggests measures to attract and retain youth in the agriculture sector
- Suggests medium term strategy for food and nutrition security
- Resulted in the National Policy for Farmers – 2007
National Policy for Farmers – 2007
- Focus on economic well being of farmers rather than just production
- Efficiency of water use and maximizing yield per unit of water
- Drought code, flood code and good weather code
- Use of technology to increase productivity
- Agricultural credit and insurance
- Support services for women
- Setting up of farm schools
- Gyan Chaupals to harness the help of IT
- Community foodgrain banks
- National social security system for farmers
- Cabinet Committee on Food Security to be constituted
Note: All programmes implemented by the Ministry of Agriculture unless otherwise states
INDUSTRY IN INDIA
AUTOMOBILE INDUSTRY
Overview
- Indian automobile industry is the ninth largest in the world
- Annual production of over 2.3 million units
- India is the 4th largest exporter of automobiles in Asia, behind Japan, South Korea and Thailand
About Maruti India
- Established as Maruti Udyog Limited in Feb 1981
- Market leader, credited for bringing an automobile revolution in India
- First Managing Direct was R.C. Bhargava
- In May 2007, the GoI sold its share in the enterprise, and no longer has a stake in the company
- Two manufacturing facilities: Gurgaon and Manesar (near New Delhi)
About REVA India
- Largest produced electric car in the world
- Introduced in India in 2001
- Manufactured in Bangalore
- Travels 80 km on a 8 hour charge for a running cost of Rs 0.40 per km
Automobile companies and their bases
| Company | Headquarters | In India |
| Audi | Germany | Aurangabad |
| BMW | Germany | Madras |
| Chevrolet | USA | Pune |
| Fiat | Italy | Pune (joint with Tata Motors), Madras |
| Ford | USA | Madras |
| Honda | Japan | Noida |
| Hyundai | South Korea | Madras |
| Mercedes-Benz | Germany | Pune |
| Mitsubishi | Japan | Thiruvallur (TN) |
| Nissan | Japan | Madras |
| Renault | France | Nasik (with Mahindra), Madras (with Nissan) |
| Skoda (owned by VW) | Czech Republic | Aurangabad |
| Toyota | Japan | Bangalore |
| Volkswagen | Germany | Pune |
PHARMACEUTICALS INDUSTRY
Overview
- India is in position to meet 70% of drug demand internally
- Important drugs produced in India include penicillin, flumeguine, pefloxacin, ramipiril etc
- Public sector companies in the pharmaceutical sector include Indian Drugs and Pharmaceuticals, Hindustan Antibiotics Ltd.,
- Over 60% of bulk drugs exported
History of pharmaceutical sector
- First pharmaceutical company in India was the Bengal Chemical and Pharmaceutical Works established in Calcutta in 1930
- First public sector pharma company was Hindustan Antibiotics Ltd. founded in Pimpri (Maharashtra) in 1954. It was also the first company in India to launch a recombinant DNA product, Hemax, in 1993
- Patents Act 1970 made pharmaceutical sector unsuitable for foreign companies thereby encouraging Indian companies
- In Jan 1995, government amended the Patent Act to reinstate product patents for the first time since 1972
- This was in compliance of the WTO’s Trade Related Aspects of Intellectual Property Rights (TRIPS) agreement
Biotechnology
- India’s biotech industry accounted for 2% of the $41 bn global biotech market
- India has the third largest biotech industry in the Asia-Pacific region and eleventh largest in the world
- Biotech sector is made up primarily of small startup firm
- Government established Department of Biotechnology under the Ministry of Science and Education in 1986
- Ministry of Science and Technology also launched Biotechnology Parks Society of India to provide tax breaks and dedicated infrastructure
- Government allows 100% FDI in biotechnology
Important names in the pharmaceutical sector
Company
|
Key people
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Headquarters
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Notes
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Ranbaxy
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Atul Sobti
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Gurgaon
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Largest pharmaceutical company in India
|
Dr. Reddy’s
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Anji Reddy
GV Prasad
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Hyderabad
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Second largest in India
|
Nicholas Piramal
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Ajay Piramal
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Bombay
| |
Cipla
|
YK Hamied
|
Bombay
|
Oldest in India
World’s largest producer of anti-retroviral (AIDS) drugs
Pioneered AIDS treatment drug (now standard)
|
Biocon
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Kiran Mazumdar-Shaw
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Bangalore
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India’s leading biotechnology company
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Serum Institute of Inida
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Cyrus Poonawalla
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Pune
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Fifth largest vaccine maker in the World
World’s largest maker of measles and DTP vaccines
Serum vaccines immunize 50% of world’s children
Currently manufacturing vaccine for swine flu
|
OTHER INDUSTRIES
- Steel industry
- India is the 8th largest producer of steel in the world
- It is the 2nd largest producer of sponge iron
- However, India continues to be a heavy importer of steel from abroad
- Tata Steel in Jamshedpur was the first steel plant in India and Asia (1907)
- First government-established steel plant in India in Rourkela (1953) in collaboration with Germany
- India is the fifth largest producer of steel in the world (China is the first)
- Bhilai steel plant is the only producer of steel rails in India
- Fertilizer industry
- India is the 3rd largest producer of nitrogenous fertilizers in the world
- However, India still imports substantial amounts of fertilizers
- first fertilizer plant was a Single Super Phosphate plant at Ranipat (TN) in 1906
- Textile Industry
- It is the single largest industry in India
- Employs 17% of the workforce
- Accounts for 20% of India’s industrial output and 30% of exports
- Indian textile industry is the second largest in the world (behind China)
- India is one of the largest producers of cotton in world
INDUSTRIAL POLICIES AND PROGRAMMES IN INDIA
Overview
- Industrial policies and programmes in India fall under the purview of the Ministry of Heavy Industry and Public Enterprises, and the Ministry of Commerce and Industry
- The Ministry of Heavy Industry and Public Enterprise contains two departments:
- Department of Heavy Industries
- Department of Public Enterprises
- The Ministry of Commerce and Industry has two departments:
- Department of Commerce
- Department of Industrial Policy and Promotion
- Most industrial policies thus fall under the Department of Heavy Industries and the Department of Industrial Policy and Promotion
Compulsory licensing
- The government requires compulsory licenses for certain specified industries
- This licensing is mainly on account of environmental and strategic concerns
- Industries requiring compulsory licensing include
- Alcoholic drinks
- Cigars and cigarettes made from tobacco and tobacco substitutes
- Aerospace and defence equipment
- All items related to use of atomic energy
- Explosives
- Hazardous chemicals
- In addition to the above, certain items are reserved for manufacture by small scale industries only. Non-small scale industries are required to obtain licenses and undertake an export obligation of 50%
- Drugs and pharmaceuticals were taken off the compulsory list in 2005
INDUSTRIAL POLICIES
Automobile Policy
- Objectives of the policy include
- Emerge as a global source for automobile components
- Establish an international hub for manufacture of small passenger cars, and a key centre for tractors and two-wheelers
- Ensure a transition to open trade at minimal risk to the economy
- Assist development of vehicles using alternative energy sources
- Development of safety and environment standards at par with international standards
- The Policy assures automatic approval for FDI up to 100%
- Used vehicles imported into the country to meet environmental standards
- The Policy is implemented by the Department of Heavy Industry, Ministry of Industry and Public Enterprises
Industrial Policy
- Launched in 1991
- Implemented by Department of Industrial Policy and Promotion, Ministry of Commerce and Industry
- Objectives include
- Maintain sustained growth
- Enhance gainful employment
- Optimal utilization of human resources
- Attain international competitiveness
- The Policy enshrines the liberalisation of industrial licensing policy
- The Policy enshrines the establishment of Software Technology Parks (STP) and Electronic Hardware Technology Parks (EHTP)
FDI Policy
- India has one of the most liberal FDI policies among developing countries
- FDI up to 100% is allowed in the automatic route in all activities except the following, which require prior approval
- Prohibited sectors
- Industries that require a compulsory license
- Proposals in which the foreign collaborator has an existing collaboration in the same field
- Acquisition of shares in an Indian company in the financial services sector
- In the automatic route, no governmental approval is required
- FDI in activities not covered under the automatic route, approval from Government in required. Such approvals are granted by the Foreign Investment Promotion Board
- Sectors prohibited for FDI include
- Gambling and betting
- Lottery
- Atomic energy
- Retail trading
- Agriculture (except Horticulture, animal husbandry) and plantations (except tea plantations)
North East Industrial and Investment Promotion Policy (NEIIP)
- Launched in 2007
- Implemented by Department of Industrial Policy and Promotion, Ministry of Commerce and Industry
- Covers Arunachal Pradesh, Assam, Manipur, Mizoram, Nagaland, Meghalaya, Tripura and Sikkim
- Major initiatives include subsidy for infrastructure expansion (25%), exemption from income tax and excise duty (100%)
- Industries covered by the Policy include
- Services
- Bio technology
- Power generation
- The nodal agency for the Policy is the North East Industrial Development Finance Corporation (NEDFi)
INDUSTRIAL PROGRAMMES AND SCHEMES
Indian Leather Development Programme (ILDP)
- Launched in 2007
- Implemented by Department of Industrial Policy and Promotion, Ministry of Commerce and Industry
- Objectives of the programme include
- Augmentation of raw material base
- Enhancement of capacity
- Addressing environmental concerns
- Global marketing of Indian leather
- Activities covered under the scheme include
- Modernisation of machinery
- Hardware and IT solutions
- Worker safety
- Environmental and waste management
Industrial Infrastructure Upgradation Scheme
- Launched in 2001
- Implemented by Department of Industrial Policy and Promotion, Ministry of Commerce and Industry
- Central government to sponsor 75% of expenditure
- Activities covered under the scheme include
- Physical infrastructure (such as road, water etc)
- Effluent treatment, waste disposal
- IT infrastructure
- R&D infrastructure
- Quality and benchmarking infrastructure
- Marketing infrastructure
Industrial Park Scheme
- Launched in 2002
- Implemented by Department of Industrial Policy and Promotion, Ministry of Commerce and Industry
- Envisages the establishment of
- Industrial model towns for the development of industrial infrastructure
- Industrial parks with facilities for industrial purposes
- Growth Centres, to act as hubs for industrial activity in the under developed areas
SMALL SCALE INDUSTRIES IN INDIA
Overview
- The small scale industrial sector in India is divided into three categories: micro, small and medium. Together, they are known as Micro, Small and Medium Enterprises (MSME)
- Micro scale sector: industries in which in the investment in plant and machinery is under Rs. 25 lakh. For service enterprises, this limit is Rs. 10 lakh
- Small scale sector: industries in which the investment in plant and machinery is between Rs 25 lakh and Rs. 5 crore. For service enterprises, this limit is Rs 10 lakh – Rs 2 crore
- Medium scale sector: industries in which the investment in plant and machinery is between Rs. 5 crore and Rs 10 crore. For services enterprise, Rs. 2 crore – Rs. 5 crore
- The MSME sector in India employs
about 60 million people, it is the second largest sector in terms of
employment (after agriculture)
- MSME sector accounts for 45% of industrial output and 40% of exports
- The MSME sector in India falls under the purview of the Ministry of Micro, Small and Medium Enterprises. This Ministry was formed by the merger of the Ministry of Small Scale Industries and Ministry of Agro and Rural Industries in 2007
- Registration of an industrial unit as a micro, small or medium scale enterprise is voluntary. However, benefits such as power and tax subsidies can only be obtained if registered
- Registration is done by the Directorate or Commissioner of Industries for the respective states
GOVERNMENTAL ORGANISATIONS IN THE MSME SECTOR
- Micro, Small and Medium Enterprises Development Organisation (MSME-DO)
- Established in 1954, headquarters New Delhi
- Also known as the Office of the Development Commissioner MSME
- It is the apex body for assisting the government for formulating and implementing policies for the MSME sector
- The MSME-DO provides facilities for managerial consulting, technology upgradation, quality and infrastructure improvement, and human resources training and development
- Functions under the Ministry of MSME
- National Small Industries Corporation (NSIC)
- Established in 1955, headquarters New Delhi
- Helps in the fostering, aiding and promotion of growth of MSME
- Focuses on the commercial aspects of operation
- Provides services in the areas of material procurement, product marketing, technology acquisition, improved management practices etc
- Functions under the Ministry of MSME
- Khadi and Village Industries Commission (KVIC)
- Established in 1956, headquarters New Delhi
- Provides employment opportunities in rural areas by promotion and development of khadi and village industries
- Functions under the Ministry of MSME
- Coir Board
- Established in 1953, headquarters Cochin
- First coir industry in India was established by James Darragh in Alleppey in 1859
- Is responsible for formulation and implementation of schemes for the promotion and development of coir industry in India
- Primary coir exports include coir mats, coir textiles and coir pith
- The Coir Board functions under the Ministry of MSME
- Small Industries Development Bank of India (SIDBI)
- Established in 1990
- Objectives include the promotion, financing and development of small scale industries
- SIDBI was ranked among the top 30 development banks in the world by the The Banker, London
- SIDBI functions under the Ministry of Finance
EDUCATIONAL INSTITUTES FOR THE MSME SECTOR
The
Government has established three national level Entrepreneurship
Development Institutes. These institutes develop training modules,
undertake research and provide consultancy services for the MSME sector.
All these institutes function under the Ministry of MSME
Institute
|
Location
|
Established
|
National Institute for Micro, Small and Medium Enterprises (NIMSME)
|
Hyderabad
|
1960
|
National Institute of Entrepreneurship and Small Business Development (NIESBUD)
|
Noida
|
1983
|
Indian Institute of Entrepreneurship (IIE)
|
Guwahati
|
1993
|
PROGRAMMES FOR THE MSME SECTOR
Some of the important programmes are highlighted in this section. For a complete list of schemes and programmes see here and here
- Cluster Development Initiative (CDI)
- Clusters are defined as sectoral and geographical concentrations of enterprises that share common opportunities and threats
- Clusters facilitate the development of inter-firm cooperation to promote local production and collective learning
- Clusters account for over 60% of manufactured exports from India
- India has over 400 clusters of Small and Medium Enterprises (SME) and 2000 artisan clusters
- The CDI in India is supported by the Cluster Development Programmer of the United Nations Industrial Development Organisation (UNIDO)
- The CDI is a programme implemented by the Ministry of MSME
- National Manufacturing Competitiveness Programme (NMCP)
- Launched in 2005
- Aims to increase competitiveness in the face of liberalization and moderation of tariff rates
- Implemented by the National Manufacturing Competitiveness Council functioning under the Ministry of MSME
- Scheme of Fund for Regeneration of Traditional Industries (SFURTI)
- Launched in 2005
- Aims to achieve comprehensive development of clusters of khadi, village and coir industries
- Implemented by the KVIC and the Coir Board
- Rajiv Gandhi Udyami Mitra Yojana (RGUMY)
- Launched in 2008
- Aims to provide support and assistance to first-time entrepreneurs
- Helps in dealing with various procedural and legal formalities required for the establishment of the enterprise
- Implemented by the Ministry of MSME
PUBLIC FINANCE IN INDIA
Overview
- Public finance in India comes under the purview of the Ministry of Finance
- The Ministry of Finance has four departments
- Department of Economic Affairs
- Department of Expenditure
- Department of Revenue
- Department of Company Affairs
- The Ministry of Finance prepares the budget for the following governments
- Union Government
- Union Territories
- Various states, when under President’s rule
Repositories of public finance
- Consolidated Fund of India
- Consists of all revenue received, loans raised and money received in repayment of loans by the Union Government
- All expenditure incurred by Government is incurred from the Consolidate Fund
- No money can be withdrawn from this fund except under the authority of Parliament
- Public Account India
- Consists of all other receipts such as deposits , service funds and remittances
- Usually consists of funds that don’t belong to the government, and need to be paid back
- Disbursements from the Public Account do not need authorization of Parliament
- Contingency Fund of India
- Contains funds for meeting unforeseen needs including supplementary Demand for Grants
- The Contingency Fund is placed at the disposal of the President to enable Government to meet urgent unforeseen expenditure
- Funds released from the Contingency Fund are released pending authorization from Parliament
Sources of Revenue
- Main sources of revenue are customs duties, excise duties, service tax, corporate and income taxes
- Non-tax revenues consist of interest receipts (including interest paid by Railways), dividend and profits
- For states, revenue is mainly from taxes and duties levied by the state governments, share of taxes levied by Union, and grants received from the Union
- For local body finance, the primary sources are property taxes, octroi and terminal taxes
Sources of expenditure
- Non-plan expenditure
- Revenue expenditure: it consists of interest payments, defence revenue expenditure, subsidies, debt relief to farmers etc, and grants to states and Union Territories
- Capital expenditure: include defence capital expenditure, loans to public sector enterprises, loans to state governments and UTs, and loans to foreign governments
- Plan expenditure
- Includes agriculture, rural development, irrigation and flood control, energy, industry, minerals, transport, communications etc
Union Budget
- The Union Budget is a statement of financial position of the Union Government
- The objectives of the Budget include
- Coordination of resources
- Economic stability
- Management of public enterprises
- Definition of economic policy
- The first Budget was presented in 1860
- The Railway Budget was separated from the General Budget in 1921. However, the Railway Budget is a part of the General Budget, just prepared and presented separately
- The first Union Budget of independent India was presented by R K Shanmukham Chetty in Nov 1947
- The Budget is presented on the last working day of February, and must be passed by Parliament before it can come into effect on April 1 (the start of the financial year)
Kelkar Commission
- The 13th Finance Commission, with Vijay Kelkar as Chairman was constituted in Nov 2007
- The Finance Commission is ordained by Article 280 of the Constitution
- The main recommendations of the Kelkar Commission include
- Senior citizens and widows to have exception limit on income tax of Rs 150,000
- Three types of income tax slabs: up to Rs 1 lakh (no tax), Rs 1-4 lakh (20% tax), Above Rs 4 lakh (30% tax)
- Abolition of dividend tax and long term capital gain
- Income tax on agriculture to be withdrawn
- Higher duty of 150% for specific agro products and demerit goods
- Complete exemption of custom duty for life saving drugs, equipment, and defence related goods
Taxes
- Direct taxes are those taxes in which the burden of tax cannot be shifted from the person on whom it has been levied. Eg: income tax, property tax
- Indirect taxes are those taxes in which the burden of tax can be shifted. Eg: sales tax, excise duty, entertainment tax
- Indirect taxes are the larger source of revenue for the government
- The ratio of revenue from direct to indirect taxes is usually around 40:60
- The largest revenue of the government comes from excise duty
Value Added Tax
- By definition, VAT is a tax levied on the value added at each stage of production and distribution process. It is an ideal form of consumption taxation since the value added by a firm represents the difference between its receipts and cost of purchased inputs
- Value Added Tax (VAT) is a general tax on commodities to replace sales tax, surcharge and other entry level taxes levied by the states and Union Territories
- VAT is levied on sale of all taxable goods. VAT is not levied if sales of goods are not made in the course of furtherance of business
- VAT is collected in stages: tax paid on purchases (input tax) is rebated against tax payable on sales (output tax). The concept of second sale or resale tax is done away with
- VAT can be computed using one of three techniques
- Subtraction method: tax rate is applied to the difference between the value of the output and the cost of the input
- Addition method: the value added is computed by adding all payments that is payable to the factors of products (wages, interest payments etc)
- Tax credit method: this entails the set off of the tax paid on inputs from tax collected on sales
- India uses the tax credit method for VAT computation
- Advantages of VAT include
- Tax evasion becomes difficult. Businesses compelled to keep proper record of purchases and sales, and keep a trail of invoices
- Avoids problem of undervaluing
- Increase in revenue as tax net widens
- Uniformity in tax regime avoids confusion
- Permits easy and effective targeting of tax rates, as a result of which exports can be zero-rated
- Parity with tax structures in other countries
HOUSING IN INDIA
Overview
- Majority of Indian have per capita housing space less than 10 x 10 square feet. Average rural per capita space is 103 sq ft and urban per capita space is 117 sq ft
- Dharavi (in Mumbai) is the largest slum in India. It comprises around 600,000-1 million people in a 0.67 sq mile area. Dharavi is one of the most densely populated areas of the world
- Housing is a state subject. However, the Union Government is responsible for formulation of policies and programmes
- Central-level policies are implemented by the Ministry of Housing and Urban Poverty Alleviation
Urbanization in India
- Urban settlements in India are those settlements
- That have a minimum population of 5000 and
- Have 75% of the male population engaged in non-agricultural activities and
- Have a population density of at least 400 persons per sq km
- Further, all towns having a Municipal Corporation, Municipal Council or Cantonment Board are classified as urban
- As per Census 2001, India’s urban population was 286 million (28% of total population)
- The number of cities with population more than 1 million is 35
- With 49.76% of population living in urban areas, Goa is the most urbanized state in India. Himachal Pradesh is the least urbanized (9.30%)
POLICIES AND PROGRAMMES
All policies/programmes under the purview of the Ministry of Housing and Urban Poverty Alleviation unless otherwise noted
National Urban Housing and Habitat Policy 2007
- The main aim of the policy is Affordable Housing for All
- Objectives of the Policy include
- Urban planning including urban local bodies, rural-urban balance and Mass Rapid Transit Systems (MRTS)
- Affordable housing including development of housing infrastructure, technological modernization and subsidies for economically weaker sections
- Increased flow of funds from government and private financial sources
- Spatial incentives including relaxation of Floor Area Ratio and more efficient use of space by construction of high-rise buildings
- Special provisions for minorities and women
Jawaharlal Nehru National Urban Renewal Mission (JNNURM)
- Launched in 2005
- It is a massive city modernization programme
- Applies to 63 cities in India
- Provides City Development Plans (CDP) for addressing infrastructure gaps relating to water, sanitation, housing and roads
- Includes the following sub-missions
- Basic Services for the Urban Poor (BSUP): provides seven services to low income settlements i.e. security of tenure, affordable housing, water, sanitation, health, education, social security
- Integrated Housing and Slum Development Programme (IHSDP): provides the seven services to cities other Mission cities
Interest Subsidy Scheme for Housing the Urban Poor (ISSHUP)
- Launched in 2009
- Applies to Economically Weaker Sections (EWS) and Low Income Group (LIG)
- The scheme aims to encourage the poor to avail loan facilities through commercial banks/HUDCO for construction of housing
- Provides a 5% subsidy in interest payment
- Envisages construction of 310,000 dwelling units in the country
Swarna Jayanti Shahari Rozgar Yojana (SJSRY)
- Launched in 1991
- Aims to provide gainful employment to urban unemployed
- Promotes setting up self-employment ventures and wage employment prospects
- Sponsored jointly by Central and state governments (75:25 ratio)
Integrated Low Cost Sanitation Scheme (ILCS)
- Launched in 1980, revised in 2003
- ILCS scheme launched to eliminate dry latrines in India, which involve carrying of sewage on the heads of scavengers
- The Employment of Manual Scavengers and Construction of Dry Latrines (Prohibition) Act 1993 seeks to remove this unsanitary and restore human dignity of scavengers
- Aims include
- Construct/convert low-cost sanitation units through sanitary two-pit pour flush latrines
- Construct news latrines for EWS households having no latrines
- The scheme covers all towns, but only EWS households
- Funded by the Centre (75%), state (15%) and beneficiary (10%)
- The main target of the scheme is to convert 600,000 dry latrines by March 2010
GOVERNMENTAL BODIES AND OFFICES
All bodies/offices under the purview of the Ministry of Housing and Urban Poverty Alleviation unless otherwise noted
National Buildings Organization (NBO)
- Established in 1954
- Headquarters in New Delhi
- The NBO is primarily tasked with collection, collation, analysis and dissemination of statistics relating to housing and construction
- Data collected by the NBO includes construction activity, building permits/completion certificates, prices of building materials and wages etc
- The NBO also conducts training courses for personnel engaged in housing statistics at the state level
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Building Materials and Technology Promotion Council (BMTPC)
- Established in 1990
- Headquarters in New Delhi
- The Council provides proven innovative technologies for entrepreneurs interested in setting up manufacturing units in construction materials
- Objectives include
- develop and operationalise a comprehensive and integrated approach for technology development, transfer and investment promotion
- promote environment-friendly and energy-efficient materials and construction practices
Hindustan Prefab Limited (HPL)
- Established in 1953
- Public Sector Undertaking functioning under the Ministry of Housing and Urban Poverty Alleviation
- Located in New Delhi
- HPL provides civil engineering services such as conventional construction as well prefab materials
- HPL pioneered the production of pre-stressed concrete railway sleepers
- HPL is the first company in India to produce precast pre-stressed concrete railway bridge girders
Housing and Urban Development Corporation Limited (HUDCO)
- Established in 1970
- HUDCO is a Public Sector Enterprise under the Ministry of Housing and Urban Poverty Alleviation
- Headquartered in New Delhi
- HUDCO’s focus is on the social aspects of housing and infrastructure development, with preferential access to disadvantaged
- One in every 16 houses in the country has availed of HUDCO’s assistance
- Objectives of HUDCO include
- Provide long term finance for housing construction
- To finance or undertake the establishment of new or satellite towns
- To finance or undertake the establishment of industrial enterprises of building materials
BANKING IN INDIA
Overview
- Organized banking in India originated in the late 18th century
- The State Bank of India, headquartered in Mumbai, is the largest bank in India
- Currently, India has 88 Scheduled Banks – 27 public sector banks, 31 private banks and 38 foreign banks
- The public sector banks hold over 75% of banking assets in the country, followed by private banks (18.2%) and foreign banks (6.5%)
- Central banking in India is the responsibility of the Reserve Bank of India
- Banking in India is the responsibility of the Department of Financial Services, Ministry of Finance
- Currently there are 170 scheduled
commercial banks, which includes 91 regional rural banks, 19
nationalised banks, 8 banks in the SBI group and the IDBI
- There are 4 non-scheduled commercial banks in the country
History of banking in India
- The oldest banks in India were the General Bank of India and the Bank of Hindustan, both founded in 1786. However both banks are now defunct
- The oldest existing bank in India is the State Bank of India. The origins of the SBI go back to the Bank of Calcutta (founded 1806, renamed Bank of Bengal in 1809)
- The Bank of Madras was established in 1843 and the Bank of Bombay in 1868
- The Bank of Bengal, Bank
of Bombay and Bank of Madras merged to form the Imperial Bank of India
in 1921. The Imperial Bank of India was renamed the State Bank of India
in 1955. Although a normal commercial bank, the Imperial Bank of India also functioned as a central governmental until 1935
- The Reserve Bank of India was established in 1935
- The oldest joint stock bank is the Allahabad Bank, established in 1865.
- The first entirely Indian joint
stock bank was the Oudh Commercial Bank (Faizabad, 1881). However, it
failed in 1958. The next oldest is the Punjab National Bank (Lahore,
1895)
- The Dakshina Kannada and Udipi districts of Karnataka (called South Canara), is known as the Cradle of Indian Banking
Nationalisation of banks
- The Government of India nationalised 14 of the largest banks in 1969
- This achieved by an ordinance to the effect in July 1969. This was formalized by the Banking Companies (Acquisition and Transfer of Undertaking) Bill 1969
- The banks that were nationalized in 1969 were: Allahabad Bank, Bank of Baroda, Bank of India, Bank of Maharastra, Canara Bank, Central Bank of India, Dena Bank, Indian Bank, Indian Overseas Bank, Punjab National Bank, Syndicate Bank, UCO Bank, Union Bank of India and United Bank of India
- In 1980, six more banks were nationalized. The banks that were nationalized in 1980 were: Andhra Bank, Corporation Bank, Oriental Bank of Commerce, Punjab and Sind Bank, New Bank of India and Vijaya Bank
- In 1993, the New Bank of India was merged with Punjab National Bank. There are 19 nationalized banks in operation today
- Following this, the GoI controlled about 91% of the banking business in India
RESERVE BANK OF INDIA
Overview
- The Reserve Bank of India is the central bank of India
- It was established in 1935 and nationalised in 1949. Its headquarters was initially Calcutta, but moved to Bombay in 1937. It is currently headquartered in Mumbai.
- The first Governor of the RBI was Sir Osborne Smith. The current Governor of the RBI is Dr. Duvvuri Subbarao
- The RBI functions under the provisions of the Reserve Bank of India Act 1935
Objectives
- Maintain price stability
- Ensure adequate flow of credit
- Protect depositor’s interests
- Provide cost-effective banking services to the public
- Facilitate external trade and payment
- Promote development of foreign exchange market in India
- Provide supplies of currency notes and coins in the country
Functions
- Formulates, implements and monitors monetary policies
- Regulates operations of banking and financial services sector in the country
- Manages the Foreign Exchange Management Act 1999
- Issues, exchanges and destroys currency notes and coins
- Perform promotional functions to support national objectives
- Acts as banker to banks by maintaining accounts of all scheduled banks
- Acts as banker to the Central and state governments
List of RBI Governors
| S. No. | Governor | Tenure | Notes |
| 1 | Sir Osborne Smith | 1935-1937 | First Governor of the RBI
Did not sign any bank notes
|
| 2 | Sir James Taylor | 1937-1943 | Governor during WWII
Started the practice of signing bank notes
|
| 3 | Sir C D Deshmukh | 1943-1949 | First Indian Governor of RBI
Oversaw Independence & Partition
Represented India at the Bretton Woods Conference 1944
Served as Minister of Finance 1950-1956
|
| 4 | Sir Benegal Rama Rao | 1949-1957 | Longest serving Governor
Was Indian Ambassador to USA prior to RBI
Witnessed commencement of Five Year Plans, and transformation of Imperial Bank of India to SBI
|
| 5 | K G Ambegaonkar | Jan 1957 – Feb 1957 | Did not sign any bank notes |
| 6 | H V R Iyengar | 1957-1962 | Witnessed introduction of decimal coinage
Variable cash reserve ration (CRR) introduced
|
| 7 | P C Bhattacharya | 1962-1967 | |
| 8 | L K Jha | 1967-1970 | Witnessed nationalization of banks (1969)
Appointed as Ambassador to US in 1970
|
| 9 | B N Adarkar | May 1970 – June 1970 | Served as India’s Executive Director at the IMF |
| 10 | S Jagannathan | 1970-1975 | Witnessed oil shock, expansion of banking services, shift to floating rates
Relinquished office to serve as Executive Director at IMF
|
| 11 | N C Sen Gupta | May 1975 – Aug 1975 | |
| 12 | K R Puri | 1975-1977 | |
| 13 | M Narasimhan | May 1977 – Nov 1977 | Only Governor to be appointed from the Reserve Bank cadre
Chairperson of Committee on Financial System (1991) and Committee on Banking Sector Reforms (1998)
Served as Executive Director for India at the World Bank and the IMF
|
| 14 | Dr. I G Patel | 1977-1982 | Served as Secretary at the United Nations Development Programme (UNDP)
Witnessed demonetisation of high denomination bank notes and “gold auctions”
Witnessed nationalization of six banks (1980)
Secured IMF’s Extended Fund Facility (1981). This was the largest arrangement of the IMF at the time
|
| 15 | Dr. Manmohan Singh | 1982-1985 | Witnessed comprehensive legal reforms in banking sector |
| 16 | A Ghosh | Jan 1985 – Feb 1985 | |
| 17 | R N Malhotra | 1985-1990 | Served as Executive Director of IMF prior to RBI
Made efforts to develop money markets
|
| 18 | S Venkitaraman | 1990-1992 | Managed balance of payments crisis
Adopted IMF’s stabilisation programme
Supervised devaluation of the Rupee
Witnessed launch of economic reforms
|
| 19 | Dr. C Rangarajan | 1992-1997 | Ushered in unprecedented central bank activism
Introduced comprehensive measures to strengthen and improve efficiency of banking sector
Establishment of unified exchange rate
Cap on automatic finance by the Bank to the Government
|
| 20 | Dr. Bimal Jalan | 1997-2003 | Represented India on the Executive Boards of the IMF and World Bank prior to RBI |
| 21 | Dr Y V Reddy | 2003-2008 | Executive Director to IMF prior to RBI |
| 22 | Dr. D Subbarao | 2008-Present | Prior to RBI, he has been
|
STATE BANK OF INDIA
- The State Bank of India is derived from the Imperial Bank of India (1921), which was nationalised in 1955
- The State Bank of India is the oldest bank in India. It traces its ancestry to the Bank of Calcutta, founded in 1806.
- It is headquartered in Mumbai
- The State Bank of India is also the largest bank in India. It has a market share of about 20% in deposits and advances
- The State Bank Group consists of
the SBI and its subsidiary banks viz. State Bank of Indore, State Bank
of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Mysore,
State Bank of Patiala, State Bank of Travancore
- The SBI is one of the Big Four Banks in India, along with ICICI Bank, Axis Bank and HDFC Bank
- The SBI was ranked as the 29th most reputable company in the world by Forbes in 2009
CATEGORIES OF BANKS IN INDIA
Structure of banking in India. Number of banks given in brackets
Structure of banking in India. Number of banks given in brackets
- Commercial Banks
- Commercial banks are those that cater to the regular banking and financial needs of the public
- Commercial banks include public sector banks and private sector banks.Public
sector banks include the State Bank Group and other nationalised banks,
while private sector banks include Indian banks and foreign banks
- Commercial banks are those that cater to the regular banking and financial needs of the public
- Cooperative Banks
- Cooperative banking is retail and commercial banking organised on a cooperative basis. Cooperative banks include credit unions, savings and loans associations and building societies and cooperatives
- Cooperative banks operate on the principles of cooperation – mutual help, democratic decision making and open membership
- They are governed by controls of the RBI as well as state governments.Cooperative
banks in general operate under the Cooperative Credit Societies Act
1904, but large Urban Cooperative Banks operate under the Banking
Regulation Act 1949
- Cooperative banks in India are
the primary financiers of agricultural activities, small scale
industries and self-employed workers
- Cooperative banks in India were first established in the late 19th century, following the success of such banks in Britain and Germany
- The Anyonya Cooperative Bank Ltd. (ABCL) was the first cooperative bank in India. It
was established Vithal Laxman (aka Bhausaheb Kavthekar) in 1889 under
the name Anyonya Sahayakari Mandali Cooperative Bank Ltd. The bank
closed functioning in March 2008 following an order by the RBI.
Re-opening is under consideration
- Regional Rural Banks
- Regional Rural Banks (RRBs) were first established in 1975
- Initially five RRBs were
established at Moradabad (UP), Gorapkhpur (UP), Bhiwani (Haryana),
Jaipur (Rajasthan), Malda (WB). Currently there are 91 RRBs
- RRBs exist in all states except Goa and Sikkim
- The share of RRBs in agricultural credit is around 5%
- Regional Rural Banks (RRBs) were first established in 1975
- Scheduled Banks
- Scheduled Banks are those banks that have been included in Second Schedule of the RBI Act 1934
- Scheduled Banks must fulfil two conditions
- The paid up capital and collected funds of the bank must not be less than Rs 5 lakhs
- Any activity of the bank should not adversely affect the interest of deposition
- Scheduled Banks enjoy the following benefits
- They are eligible for obtaining loans on Bank Rate from the RBI
- They acquire membership of the clearing house
- Scheduled Banks include commercial banks, cooperative banks and regional rural banks
- There are around 302 Scheduled Banks in operation
- Scheduled Banks are those banks that have been included in Second Schedule of the RBI Act 1934
- Non-Scheduled Banks
- Non-Scheduled Banks are those that are not included in the list of Scheduled Banks
- They have to follow the Cash Reserve Ratio (CRR) condition. However, they are not compelled to deposit these funds with the RBI
- They can avail loans from the RBI only under emergencies, and not for daily activities
- There are only 4 Non-Scheduled Banks in operation
GOVERNMENT ENTITIES IN BANKING
- Small Industries Development Bank of India (SIDBI)
- Established in 1990, headquarters Lucknow
- The main objective of the SIDBI is to aid the growth and development of micro, small and medium scale industries in India
- It provides direct credit to micro, small and medium enterprises, supports microfinance institutions and refinancing to state level finance bodies
- Industrial Development Bank of India (IDBI)
- Established in 1964, headquarters Mumbai
- The IDBI is the tenth largest development bank in the world. It is one of India’s largest public sector bank
- Its main objective is to provide credit and other banking facilities to industries in India
- However, in 2004 the IDBI was re-designated as a commercial bank, following the Industrial Development Bank (Transfer of Undertaking and Repeal) Act 2003, and renamed IDBI Ltd
- Following this, the commercial banking division, IDBI Bank was merged into IDBI
- Industrial Finance Corporation of India (IFCI)
- The IFCI is the first development finance institution in the country to cater to the needs of Indian industry
- Established 1948, headquarters New Delhi
- The IFCI was established to provide long term low interest credit to corporate borrowers
- In 1993, the IFCI was re-registered as a commercial company under the Indian Companies Act 1956, and renamed IFCI Ltd
- National Bank for Agricultural and Rural Development (NABARD)
- Partly owned by the RBI
- Established 1982, headquarters Mumbai
- NABARD serves as the apex development bank in India for economic activities in rural areas
- The main objective of NABARD is to facilitate credit flow for agriculture and small scale industries
- NABARD provides refinance to
State Cooperative Agriculture and Rural Development Banks (SCARDBs),
State Cooperative Banks (SCBs), Regional Rural Banks (RRBs), Commercial
Banks and other financial institutions approved by the RBI
- NABARD coordinates the rural financing activities of all institutions engaged in developmental work
- NABARD has 28 regional offices (state capitals), one Sub Office (in Port Blair) and one Special Cell (in Srinagar)
- NABARD is famous for its Self Help Group (SHG) Bank Linkage Programme, which serves as an important tool for microfinance
- Partly owned by the RBI
- National Housing Bank (NHB)
- Wholly owned subsidiary of the RBI
- Established in 1987, headquarters New Delhi
- Established mainly to provide long term finance to individual households
- Export-Import Bank of India (EXIM Bank)
- Established 1981, headquarters Mumbai
- The main objective of the EXIM Bank is to provide financial assistance to exporters and importers with a view to promoting the country’s international trade
- It acts as the apex financial institution for financing foreign trade in India
- Bharatiya Reserve Bank Note Mudran Private Ltd (BRBNMPL)
- Wholly owned subsidiary of the RBI
- Established in 1995, headquarters Bangalore
- Main function is to augment the product of bank notes to meet demand
- The company manages two presses: Mysore and Salboni (West Bengal)
- Deposit Insurance and Credit Guarantee Corporation (DICGC)
- Wholly owned subsidiary of the RBI
- Established in 1962, headquarters Mumbai
- India was one of the first countries to provide deposit insurance
- Main objective is to provide insurance to depositors against collapse and bankruptcy of banks
- Provides deposit insurance coverage up to Rs 100,000
INSURANCE IN INDIA
Overview
- The first insurance company in India was the Oriental Life Insurance Company, founded in Calcutta 1818. However, it is now defunct
- The first Indian insurance company was the Bombay Mutual Life Assurance Society, founded 1870
- The oldest existing insurance company is the National Insurance Company, founded 1906
- Insurance was nationalised in 1956 and then opened up to private sector in 1999.
- Currently the government allows 26% FDI in the insurance sector
- The largest life insurance company in India is the Life Insurance Corporation
- Insurance falls under the purview of the Department of Financial Services, Ministry of Finance
Nationalisation of insurance
- Life insurance in India was nationalised by the Life Insurance Corporation Act 1956
- All 245 life-insurance companies in India at the time were merged to form the Life Insurance Corporation (LIC).
- The General Insurance Business Act 1972 nationalised general insurance companies
- The existing 100 general insurance companies were amalgamated into the General Insurance Corporation of India (GIC).
GOVERNMENT BODIES IN INSURANCE
All government bodies in insurance function under the Ministry of Finance unless otherwise noted
Life Insurance Corporation (LIC)
- Established 1956, headquarters Mumbai
- The LIC is the largest life insurance company in India and also the nation’s largest investor
- It funds close to 25% of the government’s expenses
- The LIC owns the following subsidiaries
- Life Insurance Corporation of India International: provides USD denominated policies to NRIs
- LIC Nepal
- LIC Lanka
- LIC Housing Finance
General Insurance Corporation (GIC)
- Established 1972, headquarters Mumbai
- The GIC is a holding company for four subsidiary companies
- Oriental Insurance Company Ltd (New Delhi)
- New India Assurance Company Ltd (Mumbai)
- National Insurance Corporation Ltd (Kolkata)
- United India Insurance Company Ltd (Chennai)
- The GIC is the sole re-insurance company in India
- The GIC covers insurance for the entire spectrum of the economy from shoes to aircraft, from agricultural wells to oil wells, from chemical manufactures to satellite launches etc
Insurance Regulatory and Development Authority (IRDA)
- Established 2000, headquarters Hyderabad
- The IRDA was set up to protect the interests of policy holders, and to regulate the growth of the insurance industry
- Some of the functions of the Authority include
- Regulate investment of funds by insurance companies
- Regulate maintenance of margin of solvency
- Adjudicate disputes between insurers and intermediaries
Agriculture Insurance Company (AIC)
- Established 2003, headquarters New Delhi
- The AIC is promoted by the GIC and NABARD
- The AIC is under administrative control of Ministry of Finance, but under operative control of Ministry of Agriculture
- The AIC offers area based and weather crop insurance schemes to farmers
- It is one of the largest agriculture insurance companies in the world
POLICIES AND PROGRAMMES
Social Security Scheme
- A Social Security Fund (SSF) was set up in 1988-89 for providing social security through group insurance schemes to the weaker sections of society
- The SSF is administered by the LIC
- The SSF provides up to Rs 5000 on death from natural causes and Rs 25,000 upon death/disability due to accident
Janashree Bima Yojana (JBY)
- The Janashree Bima Yojana was launched in 2000
- The JBY is a group insurance scheme. The minimum membership of the group should be 25 persons
- The JBY is administered by the LIC
- The JBY provides for insurance protection to rural and urban poor. The scheme covers BPL people and above poverty line people who belong to certain identified occupational groups
- The scheme provides for cover of Rs 20,000 on natural death. The scheme also provides pension of Rs 200
Aam Aadmi Bima Yojana (AABY)
- Launched in 2007
- Provides insurance to the head of the family of rural landless households
- Covers natural death and accidental death/disability
- The scheme also provides additional benefit of scholarships for max two children between 9th and 12th standards
- Administered by the LIC
Universal Health Insurance Scheme (UHIS)
- The UHIS is meant to improve access of health care to poor families
- Scheme provides for reimbursement of medical expenses, death and compensation due to loss of earning capacity
- The UHIS targets only BPL families
National Agriculture Insurance Scheme (NAIS)
- Launched in 1999
- Protects farmers against losses due to natural calamities such as flood, drought, pestilence etc
- Scheme is implemented by the Agriculture Insurance Company (AIC)
- The Scheme is available to all farmers irrespective of the size of their land holdings
- The Scheme covers all food crops and oil seeds. It also covers some commercial and horticultural crops
- The scheme has until now covered more than 1.3 million farmers and 211 million hectares of land
Pilot Weather Based Crop Insurance Scheme (WBCIS)
- Launched in 2007, on a pilot basis
- The WBCIS aims to cover farmers against anticipated crop failure due to adverse weather conditions
- The scheme is based on the fact
that weather parameters can affect crop yield even when the farmer has
taken all care to ensure a good harvest
- The payouts are based on historical data that determine weather thresholds/triggers beyond which crop losses are expected
- The WBCIS is implemented by the AIC
- The scheme is currently being implemented on 30 major crops including horticultural crops
- Currently the scheme covers more than 110,000 farmers and 1.4 million hectares of land
FINANCIAL MARKETS IN INDIA
Overview
- India’s financial market is one of the oldest in the world
- It is considered the fastest growing and strongest among emerging economies
- Financial markets in India are under the purview of the Capital Markets Division of the Department of Economic Affairs of the Ministry of Finance
- The markets in India are regulated by the Securities and Exchange Board of India (SEBI)
- The PAN is the sole identification number for all transactions in securities markets
- Although there are more than 25 stock exchanges in the country, the Bombay Stock Exchange and the National Stock Exchange account for a large majority of securities exchanges
GOVERNMENTAL REGULATORY BODIES
Securities and Exchange Board of India (SEBI)
- Established 1992, headquarters Mumbai
- Functions under the Department of Economic Affairs, Ministry of Finance
- SEBI is the regulator for financial markets in India
- SEBI has regional offices in New Delhi, Kolkata, Chennai and Ahmadabad
- The main responsibilities of SEBI include protection of interests of investor, and the development and regulation of securities markets
- SEBI has three main functions
- Legislative functions: it drafts regulations and policies for financial markets
- Executive functions: conducts investigations and enforces action
- Judicial functions: passes rulings and orders and arbitrates disputes
Forward Markets Commission (FMC)
- Established 1953, headquarters Mumbai
- Functions under the Ministry of Consumer Affairs, Food and Public Distribution
- The FMC is the chief regulator of forwards and futures markets in India
- The main functions of the FMC include
- Advice the Union Government on matters relating to forward markets
- To monitor and regulate forward markets
- Collect and publish information relating to forward markets
- The FMC currently allows futures trading in specific spices, edible oils, pulses, energy products and metals
- These forwards and futures exchanges in commodities are performed at specialised commodity exchanges in the country
IMPORTANT STOCK EXCHANGES IN INDIA
Bombay Stock Exchange (BSE)
- Established 1875, location Mumbai
- The BSE is the oldest stock exchange in Asia
- The BSE is the largest stock exchange in India (in terms of market capitalization)
- In terms of the number of listed companies, the BSE is the largest stock exchange in the world (with over 4500 listed companies)
- The key index of the BSE is the SENSEX (BSE Sensitive Index). It is a composite measure of the performance of 30 key listed companies
National Stock Exchange (NSE)
- Established 1992, location Mumbai
- The NSE is the second largest stock exchange in India (after BSE)
- In terms of number of trades in equity, it is the largest stock exchange in India and the third largest in the world
- The NSE is also the second fastest growing stock exchange in the world
- The NSE is owned by a set of financial institutions, banks and insurance companies. There are at least two foreign investors in NSE: NYSE Euronext and Goldman Sachs
- The NSE’s key index is the Nifty
FOREIGN TRADE IN INDIA
Overview
- In 1950, India’s share in total world trade was 1.78 %. By 2002 this had dropped to 0.8 %
- India has a total foreign trade of around USD 489 billion. Of this imports accounted for USD 303 billion and exports USD 185 billion
- Based on 2008-2009 data, India’s largest trading partner is the UAE (total trade USD 48 billion)
- India exports the maximum to UAE (USD 24 billion) and imports the most from the People’s Republic of China (USD 32 billion)
- Foreign trade in India falls under the purview of the Department of Commerce under the Ministry of Commerce and Industry
Top trading partners
| Rank | Country | Exports
(USD billion)
| Imports
(USD billion)
| Total trade
(USD billion)
|
| 1 | UAE | 24.4 | 23.8 | 48.2 |
| 2 | PRC | 9.3 | 32.4 | 41.8 |
| 3 | USA | 21.1 | 18.5 | 39.7 |
| 4 | Saudi Arabia | 5.1 | 19.9 | 25.0 |
| 5 | Germany | 6.3 | 12.0 | 18.3 |
Special Economic Zones (SEZ)
- India was one of the first countries in Asia to recognize the effectiveness of Export Processing Zones (EPZ)
- The first Export Processing Zone (EPZ) in Asia was established in Kandla (Gujarat) in 1965
- The Special Economic Zone (SEZ) Policy was announced in 2000
- The main objectives of SEZs are
- Generation of additional economic activity
- Promotion of goods and services
- Promotion of investment from domestic and foreign sources
- Creating of employment opportunities
- Development of infrastructure facilities
- SEZs function under the Department of Commerce (Ministry of Commerce and Industry)
| S. No. | SEZ | Location | Type |
| 1 | Kandla SEZ | Gujarat | Multi product |
| 2 | SEEPZ | Mumbai | Electronics, gems and jewellery |
| 3 | Noida SEZ | Uttar Pradesh | Multi product |
| 4 | MEPZ | Chennai | Multi product |
| 5 | Cochin SEZ | Kerala | Multi product |
| 6 | Falta SEZ | West Bengal | Multi product |
| 7 | Visakhapatnam SEZ | Andhra Pradesh | Multi product |
Trade Agreements
| Agreement | Contracting parties | Notes |
| Agreement of Cooperation with
Nepal to control unauthorised trade
| India, Nepal | Established in 2009
The agreement aims to restrict and prevent unlawful activities
relating to traffic in narcotics, foreign exchange etc
|
| Agreement on South Asia Free Trade Area (SAFTA) | India, Pakistan, Sri Lanka,
Nepal, Bhutan, Bangladesh,
Maldives
| Established in 2007
Afghanistan, which became SAARC member in 2007, is set to become latest SAFTA member
India, Pakistan, Sri Lanka are categorised Non-Least Developed Contracting States (NLDCS)
Bhutan, Bangladesh, Nepal, Maldives are Least Developed Contracting States (LDCS)
NDLCS to reduce tariffs for LDCS products to 0-5 % in 3 years from contract
|
| Asia Pacific Trade Agreement (APTA) | Bangladesh, China,
India, South Korea, Sri Lanka
| Established 2005 |
| Comprehensive Economic Cooperation Agreement
between the Republic of India and the Republic of
Singapore
| India, Singapore | |
| India Chile Preferential Trade Agreement (PTA) | India, Chile | Signed 2005
India offers tariff preference of 10-50 % on 178 tariff lines (including meat, fish, salt, iodine,
Copper, chemicals, leather, newsprint, paper, wool, wood etc)
Chile offers preference of 10-100 % on 296 tariff lines (includes agricultural products, chemicals,
pharmaceuticals, dyes and resins, plastic, rubber, leather, textiles, footwear, industrial products)
|
| India Afghanistan PTA | India, Afghanistan | Afghanistan grants preferential tariff to 8 products from India including black tea, ayurvedic and
Homeopathic medicine, other medicine, sugar, cement
India grants preferential tariff to 38 products from Afghanistan, mainly agricultural products like
dry fruits
|
| India Bhutan Trade Agreement | India, Bhutan | |
| India Korea CEPA | India, South Korea | |
| India MERCOSUR PTA | India, MERCOSUR | MERCOSUR is a trading bloc in Latin America that comprises Brazil, Argentina, Uruguay and Paraguay
MERCOSUR offers tariff concession on 452 products
India offers tariff concession on 450 products
The major products covered in Indian offer list are meat products, chemicals, dyes and pigments,
raw hides and skins, leather, wool, cotton, glass, iron and steel, machinery, optical and photographic
equipment
The major products in MERCOSUR offer list include food, organic chemicals, pharmaceuticals, essential oils,
plastics, rubber, tools and implements, machinery
|
| India Sri Lanka FTA | India, Sri Lanka |
POVERTY ALLEVIATION IN INDIA
Overview
- Poverty is widespread in India.
- India has about 33% of the world’s poor
- 42% of India’s population falls below the poverty line (BPL) of $1.25 per day, having reduced from 60% in 1980
- Over the past decades the Government has initiated multiple poverty alleviation programmes that have helped substantially reduce poverty, prevent famines and increase literacy in the country
National Rural Employment Guarantee Scheme (NREGS)
- Launched 2006
- The NREGA aims at two objectives: employment and rural development
- Provides a legal guarantee for employment of 100 days every year to adult members of rural households, who are willing to do unskilled manual labour for public works
- Provides statutory minimum wage of Rs 60 per day
- Applies to all rural households, whether or not they are BPL
- The NREGA stipulates that works must be targeted towards a specific set of rural development activates like water conservation, afforestation, flood control, etc
Integrated Rural Development Programme (IRDP)
- Launched in 1978
- Aims to provide self employment in various activities in primary, secondary and tertiary sectors of the economy. Supported activities include sericulture, animal husbandry, weaving, handicrafts, services, businesses etc
- Merged with the Swarna Jayanti Gram Swarozgar Yojana in 1999
Prime Minister’s Rozgar Yojana
- Introduced 1993
- Aims to provide self employment for educated unemployed youth by setting up microenterprises
- Under the scheme, every selected educated unemployed youth 18-35 years old and having family income below Rs 24,000 is given loan up to Rs 1 lakh for opening his own enterprises
Swarnajayanti Gram Swarjgar Yojana (SGSY)
- Launched 1991
- The SGSY is a self employment programme that focuses on poverty alleviation
- Promotes self help groups, development of micro enterprises by providing bank credit and government subsidy
- Includes 50% benefit to SC/ST, 40% for women and 3% for disabled
Sampoorna Grameen Rozgar Yojana (SGRY)
- Launched 2001
- Provides wage employment in rural areas, thereby ensuring food security, creation of durable community, social and economic infrastructure
- Implementation through Panchayati Raj system
Swarna Jayanti Shahri Rozgar Yojana (SJSRY)
- Launched 1997
- Aims to provide gainful employment to the urban unemployed poor through encouraging the setting up self employment ventures or provision of wage employment
- Contains two special schemes
- The Urban Self Employment Programme
- Urban Wage Employment Programme
- SJSRY is a merged programme consisting of erstwhile schemes like Urban Basic Services, Nehru Rozgar Yojana, and PM’s Integrated Urban Poverty Eradication Programme
- Provides reservations for women (30%), disabled (3%) and SC/ST on the strength of local population
Indira Awaas Yojana (IAY)
- Launched 1996
- The IAY is a scheme that provides for construction of houses and money to be given to poor
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