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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY

TAX REFORMS 2010-11

Direct Tax Code 2009 Review and Analysis By Siddharth Malik, IRS

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he Budget 2010-11 has deferred the implementation of Direct Tax Code from 2010 to 2011. The new Direct Tax Code that seeks to revamp and simplify the Direct Tax Law and its administration in the country through several radical changes. The code, which the government plans to enact and implement Financial Year 2011 onwards with suitable changes if required, envisages meaningful reduction in the tax rates while simultaneously being revenue neutral for the government. It aims to achieve this by increasing the tax base and rationalising the myriad tax incentives prevalent under the current law.

Direct Tax Code Implications CORPORATE TAXATION

PERSONAL TAXATION



Corporate Tax rate to be 25 pc against 30 pc

 Maintains tax exemption at Rs. 1.60 lakh income a year



Abolition of Securities Transaction Tax

 10 percent tax imposed on income of Rs. 1.6-10 lakh



Re-introduction of long-term capital  20 percent tax imposed on income gains tax over Rs. 10 lakh upto Rs. 25 lakh



No distinction between short and long term capital gain tax

 30 percent tax imposed on income beyond Rs. 25 lakh



Amalgamation and de-mergers to be tax neutral

 All perks and allowances will be added to income for taxation



Business losses can carried forward  Savings upto Rs. 3 lakh will be till fully adjusted exempted from income for



MAT will be on gross assets as against book profit



Area-based incentives will be replaced with incentives on investment

 Withdrawals from PF, PPF etc. will be taxed  Wealth tax limit raised to Rs. 50



Punishment for defaulters will be more severe

crore from Rs. 30 lakh  Financial securities like shares brought under wealth tax

taxation taxation

The overall changes proposed will be quite beneficial for a number of sectors and companies, albeit definitively withdrawing tax holidays being currently enjoyed by different sectors, something that has been contemplated and proposed often in the past and therefore should not come as a major negative surprise. The Code seeks to consolidate and amend the law relating to all direct taxes, that is, income-tax, dividend distribution tax, fringe benefit tax and wealth-tax so as to establish an economically efficient, effective and equitable direct tax system which will facilitate voluntary compliance and help increase the tax-GDP ratio. Another objective is to reduce the scope for disputes and minimize unnecessary litigations significantly and will also simplify regulations. It is designed to provide stability in the tax regime as it is based on well accepted principles of taxation and best international practices. It will eventually pave the way for a single unified taxpayer reporting system. It is expected to usher in a new tax regime of transparency and greater compliance. If passed, it will become the new Income Tax Act, replacing the existing four decade old IT Act of 1961. In the foreward to the Tax Code it is explained that APRIL 2010, XVIYear, Issue No.4 Current NEWS Covered up to MARCH 01, 2010

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Highlights Key proposals for investors: 1. Rates of tax to be uniform 2. Tax deduction limit on savings to be hiked to Rs 3 lakh (Rs 300,000) 3. Income tax slabs proposed to be changed; highest tax rate of 30 per cent for individuals to be applicable for income over Rs 25 lakh (Rs 2.5 million) 4. Security transaction tax to be abolished 5. Effective corporate tax rate at 25 per cent 6. To scrap long, short-term capital gains distinction 7. Business losses can be carried forward indefinitely 8. No tax deduction on interest payable on any govt. security 9. Base year for calculation of cap gains tax moved to April 2000 10. Wealth tax liability to be discharged by payment of pre-paid taxes 11. Income from certain transfers not be treated as capital gains Proposals for businesses: 1. Taxation of all non profit organisations rationalised 2. Profits of non-life insurance business to be disclosed annually 3. Government may enter overseas agreements for double taxation avoidance 4. No tax deduction on interest payable to banking cos, insurers the aim is to eliminate distortions in the tax structure, introduce moderate levels of taxation, expand the tax base, improve tax compliance, simplify the language and lower tax litigations. Initial analysis shows that most of these objectives are achievable by tweaking of some provisions. The new proposals are in the right direction. The Code is a completely new law and not an amendment of the existing Income Tax Act. This is a Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY commendable change as one has always experienced tinkering of existing laws. Reduction in effective tax rates for Individuals is a major gains for individuals Personal income tax, almost all salaried persons will agree, in our country is one of the highest in the world. More open and honest an employer is in terms of disclosing remunerations, worse it is for the employees because taxable income goes up. The present system thus rewards dishonesty and nondisclosure of income by way of lower tax. The Tax Code will try to address these issues by significantly lowering income tax and by disallowing all taxfree perks. It proposed exemption of income tax on specified savings up to Rs 3 lakh a year as against the present deduction limit of Rs 1 lakh for all types of savings under 80C of the IT Act. The catch, however, is that a few long term investments like public provident fund, employer’s provident fund, insurance premium in pension (annuity) schemes, Post Office National Savings Scheme etc will be eligible for tax exemption. But contributions to fixed deposits, interest and principal payment on housing loans, educational expenses of dependents, and a host of other forms of savings will not qualify as eligible for tax savings. The thrust, clearly, is to induce long term savings for future needs. The Tax code proposes a significant increase in the tax slabs for personal income tax which, if implemented, will result in a meaningful increase in disposable income, especially benefiting Fast Moving Consumer Goods and other domestic consumption stories. The proposed increase in tax slabs is quite substantial in view of the country’s per capita income distribution, and should reduce the impact of the proposed increase in capital gains tax rates. There is increased deduction for savings up to Rs 3 lakh (Rs 300,000). The code proposes to exempt the general tax payer from paying income tax if his income is Rs 1,60,000 in a year. He would pay just zero tax till an income of Rs 1,60,000 per year.

From income above Rs 1,60,000 till Rs 10 lakh (Rs 1 million), he will pay a tax of 10 per cent. For income above Rs 10,00,000, but less than Rs 25,00,000 (Rs 2.5 million), he will pay tax of Rs 84,000 plus 20 per cent of the amount over Rs 10,00,000. For income above Rs 25,00,000, he will pay Rs 3,84,000 plus 30 per cent of the amount by which the total income exceeds Rs 25,00,000. Currently, the general income tax payer does not pay tax till Rs 1,60,000 of income in a year. However, he pays 10 per cent tax on income between Rs 1,60,000 and Rs 3 lakh, 20 per cent between Rs 3 lakh and Rs 5 lakh (Rs 500,000) and 30 per cent beyond Rs 5 lakh. Thus, for an individual with taxable income of Rs 10 lakh a year tax payment will drop from Rs 1.68 lakh to Rs 51,000, a net annual saving of Rs 1.17 lakh. The exemption limit for women and senior citizens will continue to be Rs 1.90 lakh and Rs 2.40 lakh, respectively.

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Tax incentives on Savings: Not without pains The code also proposes to increase the tax deduction limit however, the tax incentives on Interest paid on home loans is proposed to be withdrawn. On a further negative note, the code also proposes to tax the savings in various instruments including PPF, Insurance, etc. at the time of withdrawal, i.e. investments in tax savings instruments will only lead to a postponement of tax liability rather than an outright exemption as applicable at present. Moreover, retirement benefits such as gratuity will be tax-free only if deposited in specified retirement benefit schemes. These investments, when accrued, were earlier exempted from tax. The Tax Code says that under the Exempt-Exempt Tax (EET) system all withdrawals will attract tax b e c a u s e the amount withdrawn will be treated as part of the income for that year. Though taxing financial gains available after retirement will pinch the retired people. However, as a relief to senior citizens, tax exemption limits for them should be raised to Rs 5 lakh per annum instead of Rs 2.40 lakh at present. The prospect of eventual taxation at the time of withdrawal could weigh on investment decisions and reduce attractiveness of tax-saving instruments. If the finance minister is for giving major relief to tax payers, he will also make sure that there aren’t many avenues to avoid taxes. So, as a rider, the Tax Code proposes to add all perquisites enjoyed by a tax payer to income for the purpose of tax calculations. In other words, allowances like leave travel, furnishings, entertainment expenses, conveyance, medical etc, will be added to income. At the same time, the code proposes to do away with the distinction between long and short-term capital gains and abolish the Securities Transaction Tax (STT), effectively taxing all capital gains at the applicable marginal tax rate for the tax-payers’ total income. At present, the long-term capital gains tax is Nil on equity transactions on which STT is paid and 20 per cent on all other assets, while the shortterm capital gains tax rate is 10 per cent on equity transactions on which STT is paid and 30 per cent on other assets. Change in tax slabs for personal income will boost consumption, owing to rising disposable income in the hand of consumers triggering increased consumption and spending in the economy. Specifically, this would boost the demand for consumer discretionary items. This would ultimately provide a fillip to industrial capex and, consequently, Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY the Capital Goods industry would also benefit, in the form of increased inflows in the long run. Wealth tax benefits The proposed Tax Code has sought to make major changes in wealth tax calculations and rates. The threshold limit for wealth tax will be raised to Rs 50 crore from the present Rs 30 lakh and the tax rate was reduced from 1 per cent to 0.25 per cent. But, in a smart move, to expand the scope of taxation the Tax Code included financial assets like shares, corporate bonds, fixed deposits, etc in wealth tax. The valuation of these assets will be done at cost or at market price, whichever is lower. In case of capital gains tax too, the Tax Code proposed some sweeping changes. It has done away with the present system of short-term and long-term capital gain tax, and replaced it with a uniform structure and gains will be taxed at the marginal tax rate as applicable to the tax payer. The implications of these changes are clear: The period of holding has no bearing on the tax payable and bigger investors will be taxed at higher rates than the smaller ones. Reduction in Corporate Tax; withdrawal of tax incentives on Exports; increased rate of MAT: A mixed bag for corporates Reduction in the Corporate Tax rate from 33 per cent (including surcharge) to 25 per cent will benefit companies across sectors but sectors, especially in FMCG and Banking where the effective tax rates are close to 33 per cent for most companies. Moreover, business losses will be allowed to be carried forward indefinitely, unlike 8 years at present. The reduction in tax rates is intended to be compensated by a withdrawal of various tax incentives available to sectors such as exports, infrastructure, area-based tax holidays, etc. The code does provide for some investmentbased incentives. In respect of revenue and capital expenditure on scientific research and development, deduction to the extent of 150 per cent of the expenditure will be allowed to all companies. Under the new provisions, tax liability will accrue in various specified infrastructure

sectors only after 100 per cent of the capital expenditure is recovered, allowing these companies to postpone the tax liability. As companies under our coverage come under the full tax bracket, the reduction in corporate tax rate will bring down the overall tax liability of these companies and will provide a push-up to the bottom line. MAT provisions The tax code proposes a radical change in the MAT provisions. Under the new system, MAT will be paid at a specified percentage of Gross assets of a company (broadly equates to capital employed- Basis for computing Minimum Alternate Tax (MAT) changed from “Book Profits” to “Gross Assets”; Gross Assets to include: Value of Gross Fixed Assets + Capital work-in-progress + Book Value of all other assets Accumulated Depreciation - Debit

International taxation: The code proposes to treat foreign companies as Indian residence if the place of control or management is situated either wholly or even partly in India at any time during the year. It is a very interesting proposal - for close to fifty years, we had a very clear rule which has been unammended to say that if there is a foreign company which is wholly managed and controlled from India, it will be treated as a resident Indian company. The significant being that if it is a resident Indian company we have global basis of taxation worldwide income will be taxed in India. Carrot and stick If the Tax Code is generous in giving relief to tax payers, be sure, it will also make life miserable for those who evade tax through fraudulent means. As the Tax Code prescribes stiff penalties and prosecution for

Balance in P&L A/c; MAT to be charged at 2 per cent of Gross Assets and will be the final tax and will not be available as tax credit in subsequent years). This shift in MAT from book profits to gross assets is aimed at encouraging optimal utilisation and increased efficiency of assets. The specified percentage is 0.25 per cent for banking companies and 2 per cent for all other companies. Although intended to widen the tax base by reducing tax evasion, the new MAT proposals will cause hardship to loss making companies as they will have to pay tax on assets.

non-compliance with the tax laws, it proposes that every tax offense under the Code will be punishable by both imprisonment and fine. Apart from defaulters, the Tax Code proposes to punish tax consultants who help in tax evasion. It gives sweeping powers and blanket protection to Income Tax officials for initiating court proceedings on matters relating to tax offences. Briefly, the salient features of the code are as under: (a) Single Code for direct taxes: All the direct taxes have been brought under a single code and compliance

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Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY procedures unified. This will eventually pave the way for a single unified taxpayer reporting system. (b) Use of simple language: With the expansion of the economy, the number of taxpayers can be expected to increase significantly. The bulk of these taxpayers will be small paying moderate amounts of tax. Therefore, it is necessary to keep the cost of compliance low by facilitating voluntary compliance by them. This is sought to be achieved, inter alia, by using simple language in drafting so as to convey, with clarity, the intent, scope and amplitude of the provision of law. Each sub-section is a short sentence intended to convey only one point. All directions and mandates, to the extent possible, have been conveyed in active voice. Similarly, the provisos and explanations have been eliminated since they are incomprehensible to non-experts. The various conditions embedded in a provision have also been nested. More importantly, keeping in view the fact that a tax law is essentially a commercial law, extensive use of formulae and tables has been made. (c) Reducing the scope for litigation: Wherever possible, an attempt has been made to avoid ambiguity in the provisions that invariably give rise to rival interpretations. The objective is that the tax administrator and the tax payer are ad idem on the provisions of the law and the assessment results in a finality to the tax liability of the tax payer. To further this objective, power has also been delegated to the Central Government/Board to avoid protracted litigation on procedural issues. (d) Flexibility: The structure of the statute has been developed in a manner which is capable of accommodating the changes in the structure of a growing economy without resorting to frequent amendments. Therefore, to the extent possible, the essential and general principles have been reflected in the statute and the matters of detail are contained in the rules/Schedules. (e) To ensure that the law can be reflected in a Form: For most taxpayers, particularly the small and

t was heartening to note that in the true spirit as stated in the Code the draft Code was circulated for discussion and consultations at the numerous forums. Now that the process of consultations is over, the Code will need a redrafting but as reported in the press there could be a relook at the proposals on taxation for employees, income from house property, proposals of the minimum alternate tax (MAT), capital gain, tax treaties, taxation for foreign

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marginal category, the tax law is what is reflected in the Form. Therefore, the A-10 structure of the tax law has been designed so that it is capable of being logically reproduced in a Form. (f) Consolidation of provisions: In order to enable a better understanding of tax legislation, provisions relating to definitions, incentives, procedure and rates of taxes have been consolidated. Further, the various provisions have also been rearranged to make it consistent with the general scheme of the Act. (g) Elimination of regulatory functions: Traditionally, the taxing statute has also been used as a regulatory tool. However, with regulatory authorities being established in various sectors of the economy, the regulatory function of the taxing statute has been withdrawn. This has significantly contributed to the simplification exercise. (h) Providing stability: At present, the rates of taxes are stipulated in the Finance Act of the relevant year. Therefore, there is a certain degree of uncertainty and instability in the prevailing rates of taxes. Under the code, all rates of taxes are proposed to be prescribed in the First to the Fourth Schedule to the code itself thereby obviating the need for an annual Finance Bill. The changes in the rates, if any, will be done through appropriate amendments to the Schedule brought before Parliament in the form of an Amendment Bill.

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companies, etc. The direct tax code is not yet law and the government is reviewing many aspects of it which is aimed at bringing a new law that will further the objective of reform, yet be acceptable to ‘aam aadmi’. The new code is expected to simplify the tax procedures and adopt international best practices. But it could be tough on investors because their overall tax burden is likely to increase. The government has taken

into account the serious problem of complexity of tax legislation in India. Tax administrators, chartered accountants and tax payers have raised concerns about the complex structures of the Income Tax Act. In particular the numerous amendments have rendered the Act incomprehensible to the average tax payer. The problem has been further compounded by the courts at different levels. It is expected that the new Direct Tax code will have better compliance and better collection of taxes as this is a brand new Code written from scratch. OUTCOME BUDGET

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s per the promise of annual Budget 2005-06, the Finance Minister has come out with an Outcome Budget. This will ensure good governance. In simple words, it will provide outcomes for the expenditure provided for in the Budget for a fiscal. Each department and ministry will continue with the present practice of tabling a Performance Budget giving the details of the performance in the year gone by. The first official Budget was presented on March 18, 2006. Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY

OVERALL ECONOMIC SCENARIO

Still miles to go before ..

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inally, the Economic Survey of India 2009-10, prepared by the Finance Ministry, has indicated that the economy is expected to grow at 7.2 per cent in 2009-10, with the industrial and the service sectors growing at 8.2 and 8.7 per cent respectively. This recovery is impressive for at least three reasons. Firstly, it has come about despite a decline of 0.2 per cent in agricultural output, which was the consequence of sub-normal monsoons. Secondly, it foreshadows renewed momentum in the manufacturing sector, which had seen continuous decline in the growth rate for almost eight quarters since 2007-08. Indeed, manufacturing growth has more than doubled from 3.2 per cent in 2008-09 to 8.9 per cent in 2009-10. Thirdly, there has been a recovery in the growth rate of gross fixed capital formation, which had declined significantly in 2008-09 as per the revised National Accounts Statistics (NAS). While the growth rates of private and Government final consumption expenditure have dipped in private consumption demand, there has been a pick-up in the growth of private investment demand. There has also been a turnaround in merchandise export growth in November 2009, which has been sustained in December 2009, after a decline nearly twelve continuous months.

Major concerns of 2009: A major concern during the year 2009-10, especially in the second half, was the emergence of high double-digit food inflation. On a year-on-year basis, wholesale price index (WPI) headline inflation in December 2009 was 7.3 per cent but for food items (primary and manufactured) with a combined weight of 25.4 per cent in the WPI basket, it was 19.8 per cent. Thus, unlike the first half of 2008-09 when global cost-push factors resulted in WPI inflation touching nearly 13 per cent in August 2008, with inflation in primary and manufactured products just below the overall average and that in the fuel and power group at over 17 per cent, the upsurge in prices in the second half of 2009-10 has been more concentrated and confined to food items only. As of the week ending January 30, 2010 the inflation in primary food articles stood at 17.9 per cent, and that in fuel, power light and lubricants at 10.4 per cent. A significant part of this inflation can be explained by supply-side bottlenecks in some of the essential commodities, precipitated by the delayed and sub-norAPRIL 2010, XVIYear, Issue No.4 Current NEWS Covered up to MARCH 01, 2010

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IMF Projections The International Monetary Fund’s (IMF) World Economic Outlook update of January 26, 2010 suggests that following a sharp decline of 3.2 per cent in 2009, output in the advanced economies has begun to expand since the second half of 2009 and is now expected to grow by 2.1 per cent in 2010. In the case of emerging and developing economies, the modest 2.1 per cent output growth in 2009 is expected to be followed by a rise of about 6 per cent in 2010. For the world as a whole an output decline of 0.8 per cent in 2009 is projected to turn into a growth of 3.9 per cent in 2010. mal southwest monsoons. Since December 2009, there have been signs of these high food prices, together with the gradual hardening of non-administered fuel product prices, getting transmitted to other non-food items, thus creating some concerns about higher than-anticipated generalized inflation over the next few months. Overall GDP Growth: While there are no major changes in the overall growth rate of GDP at constant 200405 prices, except for 2007-08 where it has been revised upward from 9.0 to 9.2 per cent, there are some changes in growth rates at sectoral level and in the level estimates of GDP. Thus, for instance, the contribution of the agriculture sector to the GDP at factor cost in 2004-05 has declined from 17.4 per cent in the old series to 15.9 per cent in the new series. Similarly, while the contribution of registered manufacturing has declined from 10.9 per cent in the old series to 9.9 per cent in the new series, that of unregistered manufacturing has increased from 4.9 to 5.4 per cent. There is also an increase in the contribution of real estate, ownership of dwellings and business services from 8.2 per cent to 8.9 per cent. Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY In the case of level estimates of GDP at current prices, the difference ranges from 3.1 per cent in 2004-05 to 6 per cent in 2008-09. While the GDP at factor costs at constant 2004-05 prices, is placed at Rs 44,53,064 crore, the GDP at market prices, at constant prices, is estimated at Rs 47, 67,142 crore. The corresponding figures at current prices are Rs 57,91,268 crore and Rs 61, 64,178 crore respectively. It is worthwhile to note here that the growth rates of GDP at market prices, at constant 2004-05 prices, in 2008-09 and 2009-10 at 5.1 per cent and 6.8 per cent have been considerably lower than the growth rates of GDP at factor cost. This is due to the significant decline in net indirect taxes (i.e. indirect taxes minus subsidies) in the said years on account of the fiscal stimulus implemented by the Government, which included tax relief to boost demand and increase in the expenditure on subsidies. Seven out of eight sectors/sub-sectors show a growth rate of 6.5 per cent or higher. The exception, as anticipated, is agriculture and allied sectors where the growth rate is estimated to be minus 0.2 per cent over 2008-09. Gross Domestic Product: GDP is a measure of total flow of goods and services produced by the economy over a specified time period. It is obtained by valuing output of goods and services at market prices and then the aggregate is formulated. The are three sectors: 1. Primary Sector- agriculture, fishery, forest, mining, quaring (total production is calculated) 2. Secondary Sector- industries, manufacturing, construction, electricity. 3. Services Sector - banking, insurance, transportation, communication. In this process the intermediate good are excluded. Intermediary goods are mainly a kind of raw materials or something which is used in the produced in the production of other goods e.g. steel sheets used in making of a car body. It is also called pro ducer goods. GDP is of 2 types: 1. Nominal GDP- it measures total economic activity in current price. 2. Real GDP- total economic activity in constant price (rise in Nominal GDP does not mean rise of Real GDP). Gross National Product: Gross National Product (purified form

of GDP) GNP = GDP + (x - m) x = profit earned by an Indian outside India . m = profit earned by a foreigner in India. In developed countries GNP >GDP. In developing countries GDP >GNP. Net National Product: NNP = GNP- Depreciation (due to maintenance and technological obsolescence). NNP is of two types: 1. Factor Cost.

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Highlights Economic Survey 2009-10 1. Economy posted a remarkable recovery expected to grow at 7.2 per cent in 2009-10 against 6.7 per cent in 2008-09. Survey hopes the Indian GDP can be expected to grow around 8.5+/- 0.25 per cent, with a full recovery, breaching the 9 per cent mark in 2011-12. 2. Manufacturing growth more than doubled to 8.9 per cent in 2009-10 from 3.2 per cent in 2008-09. 3. Survey recognizes food inflation as major concern. 4. Per capita income increased to 5.3 per cent in 200910 from 3.7 per cent in 2008-09. 5. Gross Fiscal deficit stands at 6.5 per cent of GDP. 6. Liquidity condition remained comfortable during 2009-10. 7. Bank credit grows by 13.9 per cent on year-onyear basis. Non-food bank credit recorded an increase of 8.7 per cent on financial year basis till January 15, 2010 as per the latest available data. 8. Agricultural credit disbursal exceeds target. At sectoral level, there has been a rebound in the growth rate of investment in the agricultural sector, which grew at 16.5 per cent and 26.0 per cent in 200708 and 2008-09 respectively against 1.4 per cent recorded in 2006-07. 9. Investment Deposit Ratio increases to 32.52 per cent. 10. Balance of Payment situation improves due to surge in capital flows and rise in foreign exchange reserves, which have been accompanied by rupee appreciation. 11. Net capital flows to India at US$ 29.6 billion in April-September 2009 remained higher as compared to US$ 12.0 billion in April-September 2008. 12. During fiscal 2009-10, foreign exchange reserves increased by US$ 31.5 billion from US$ 252.0 billion in end March 2009 to US$ 283.5 billion in end December 2009. 13. Recommendations of the Thirteen Finance Commission need to be taken on board in shaping the fiscal policy for 2010-11 and in the medium term. 14. Momentum in telecommunication sector continues with monthly additions exceeding 17.6 million connections. 15. Share of central government expenditure on social services including rural development, in total expenditure, plan and non-plan gone up to 19.46 per cent in 2009-10 which was only 10.46 per cent in 2003-04. 16. The consolidated balance sheets of SCBs expanded by 21.2 per cent as in end-March 2009 as compared to 25.0 per cent in the previous year. The capital to risk-weighted assets ratio (CRAR) of SCBs improved to 13.2 per cent as in end-March 2009 from 13.0 per cent as in end-March 2008, remaining significantly above the stipulated minimum of 9.0 per cent. 2. Market Price. In India GDP is calculated on the basis of Factor cost of NNP. Price of the product at the production basis is known as factor price. Tax added to that price is known as market price. Market price is always more than Factor price (factor price is also known as Factory price) NNPFC = Market price – Indirect tax + subsidy. Per capita growth While the growth in per capita in-

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY come, measured in terms of GDP at constant market prices, has declined from a high of 8.1 per cent in 2007-08 to 3.7 per cent in 2008-09 and then recovered to 5.3 per cent in 2009-10, per capita consumption growth as captured in the private final consumption expenditure (PFCE) shows a declining trend since 2007-08 with its growth rate in 2009-10 falling to one-third of that in 2007-08. Aggregate demand The change in the NAS series from the old base of 1999-2000 to the new base of 2004-05 has brought about significant revision in the expenditure estimates of the GDP for 2008-09. While growth of the PFCE in 2008-09 was revised upward from 2.9 per cent to 6.8 per cent, growth in Government final consumption expenditure was revised downwards from over 20 per cent in 2008-09 on the old base to 16.7 per cent on the new base. In 2009-10 a growth of 4.1 per cent is expected in private final expenditure and 8.2 per cent in Government final expenditure. There is therefore a significant decline in the growth of consumption expenditure in 2009-10. However, the overall share of consumption expenditure, both private as well as Government in GDP at market prices, at constant 2004-05 prices, has declined only marginally from 70.9 per cent in 2008-09 to 69.6 per cent in 2009-10. At the same time, the growth rate of gross fixed capital formation in 200809 has also undergone a revision due to the change in the NAS base year. It was revised downward from 8.2 per cent in the earlier base to 4 per cent in the revised base for 2008-09. It is, however, estimated to grow by 5.2 per cent in 2009-10. Moreover, gross capital formation adjusted shows a negative 4 per cent growth in 2008-09 in the new NAS base. This is because of a significant decline in inventories (change in stocks) from Rs 1,08,739 crore in the old base to Rs 59,812 crore in the new base. The share of gross fixed capital formation in GDP remains nearly the same at 32.5 per cent in 2009-10 and 32.9 per cent in 2008-09. Agriculture: Total foodgrains production in 200809 was estimated at 233.88 million tonnes as against 230.78 million tonnes in 2007-08 and 217.28 million tonnes APRIL 2010, XVIYear, Issue No.4 Current NEWS Covered up to MARCH 01, 2010

Thirteenth Finance Commission Inclusive and green growth promoting fiscal federalism As per Articles 270, 275 and 280 of the Indian Constitution, the FC-XIII submitted its report on December 30, 2009. The FC-XIII’s overall approach was to foster “inclusive and green growth promoting fiscal federalism”. Observing that as against the level of 75 per cent targeted by the Twelfth Finance Commission, the combined debt-GDP ratio was 82 per cent in the terminal year (2009-10), the FC-XIII focused on anchoring the fiscal consolidation process in a medium-term debt reduction framework. The FC-XIII proposes reducing the combined debt-GDP ratio to 68 per cent by 2014-15 with the Centre’s debtGDP ratio declining to 45 per cent. Major recommendations: 1. Fiscal consolidation through the elimination of revenue deficit as the long-term target for both the Centre and States. For this there should be a normative discipline for both Centre and States; with equal treatment which entailed no automatic priority for any level of Government and a focus on equalization (and not equity). 2. In order to make the GST practicable, FC XIII recommended the sanction of Rs 50,000 crore as compensation for revenue losses of States on account of the implementation of the GST. This amount would shrink to Rs 40, 000 crore were the implementation to take place on/after April 1, 2013 and further to Rs 30,000 crore were it to take place on/after April 1, 2014. 3. The share of States in net proceeds of shareable Central taxes shall be 32 per cent every year for the period of the award. 4. Revenue accruing to a State is to be protected to the levels that would have accrued to it had service tax been a part of the shareable Central taxes, if the 88th Amendment to Constitution is notified and followed up by a legislations enabling States to levy service tax. Centre is to review the levy of cesses and surcharges with a view to reducing their share in its gross tax revenue. The indicative ceiling on overall transfers to States on revenue account may be set at 39.5 per cent of gross revenue receipts of the Centre. 5. The Fiscal Responsibility and Budget Management (FRBM) Act needs to specify the nature of shocks that would require relaxation of the targets thereunder. States are expected to be able to get back to their fiscal correction path by 2011-12 and amend their FRBM Acts to the effect. 6. The National Calamity Contingency Fund (NCCF) should be merged with the National Disaster Response Fund (NDRF) and the Calamity Relief Fund (CRF) with the State Disaster Response Funds (SDRFs) of the respective States. Grants to states: A total non-Plan revenue grant of Rs 51,800 crore is recommended over the award period for eight States. A performance grant of Rs 1500 crore is recommended for three special category States that have graduated from a non-Plan revenue deficit situation. An amount of Rs 19,930 crore has been recommended as grant for maintenance of roads and bridges for four years (2011-12 to 2014-15). An amount of Rs 24,068 crore has been recommended as grant for elementary education. An amount of Rs 27,945 crore has been recommended for State-specific needs. Amounts of Rs 5,000 crore each as forest, renewable energy and water sector-management grants have been recommended. A total sum of Rs 3,18,581 crore has been recommended for the award period as grants-in-aid to States. 25

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY in 2006-07. In the agricultural season 2009-10, the impact of the delayed and sub-normal monsoon is reflected in the production and acreage data for kharif crops. As per the first advance estimates, covering only the kharif crop, production of foodgrains is estimated at 98.83 million tonnes in 200910, as against the fourth advance estimates of 117.70 million tonnes for the kharif crop in 2008-09 and a target of 125.15 million tonnes for 2009-10. Overall production of kharif cereals in 2009-10 has shown a decline of 18.51 million tonnes over 2008-09. The total designed storage capacity at full reservoir level (FRL) of 81 major reservoirs in the country monitored by the Central Water Commission is 151.77 billion cubic metres (BCM). At the end of monsoon 2009, total water availability in the reservoirs was 90.48 BCM, which is less than the water availability of 113.74 BCM at the end of monsoon 2008 and the average of 100.95 BCM for the last 10 years. Decline in production: Rice: In the case of rice the decline is about 15 per cent over the 2008-09 level and 17 per cent in comparison with the target for 2009-10. Coarse cereals: In the case of rice the decline is about 15 per cent over the 2008-09 level and 17 per cent in comparison with the target for 2009-10. The decline in kharif coarse cereals in 2009-10 in comparison with 2008-09 is nearly 20 per cent and the shortfall with respect to the target for kharif 2009-10 is nearly 10 million tonnes. Total production of kharif pulses is estimated at 4.42 million tonnes in 2009-10, which is 8 per cent lower than the production during 2008-09 and 32 per cent lower than the targeted production for 2009-10. Oilseeds: Similarly, total kharif production of the nine oilseeds in 2009-10 is about 15 per cent lower than the kharif production in 2008-09. Sugarcane: Sugarcane production in 2009-10 is estimated at 249.48 million tonnes, which is 9 per cent lower than the previous year and 27 per cent lower than the targeted production for 200910. Cotton: Cotton production in 2009-10 is estimated at 236.57 lakh bales (of 170 kg each), which is higher than the fourth advance estimates of 231.56 lakh APRIL 2010, XVIYear, Issue No.4 Current NEWS Covered up to MARCH 01, 2010

Gross domestic savings

(GDS) The rate of GDS on the new series increased from 32.2 per cent in 2004-05 to 36.4 per cent in 2007-08 before declining to 32.5 per cent in 2009-10, as against the old series where it rose from 31.7 per cent in 2004-05 to 37.7 per cent in 2007-08. From 2005-06 to 2007-08, the GDS rate was overestimated in the NAS old series by an average of 1.3 per cent. The fall in the rate of GDS has mainly been due to the fall in the rates of savings of the public sector (from 5.0 per cent in 2007-08 to 1.4 per cent in 2008-09) and private corporate sector (from 8.7 per cent in 2007-08 to 8.4 per cent in 2008-09). In respect of the household sector, the rate of saving has remained at the same level of 22.6 per cent in 2007-08 and 2008-09. Domestic Savings: The data is prepared by CSO. The domestic savings is the is the assess of current income over the current expenditure. There are three factors involved in estimating domestic savings: 1. Household savings; 2. Private corporate savings; and 3. Public savings. 1. Household savings: (i) Total financial savings i.e. currency, shares, preference shares insurance and claims. (ii) Savings in the forms of physical estate, machinery, car household appliances etc. 2. Private corporate savings: (i) Non-Government, non-financial companies. (ii) Private financial institutions. (iii) Corporate institutions. 3. Public savings: Government’s income and profit. Gross Domestic Savings = 1+2+3 In India most of the savings are done in the Household sector, whereas in western countries the Private corporate sector accounts for largest component of GDS. The household sectors mainly deposits in bank and contractual savings and investment in shares and debentures is relatively less.

Gross domestic capital formation

(GDCF) Gross Domestic Capital Formation refers to investment which domestic savings and other capital flows. Foreign capital inflows bridges the savings –investment gap. The rate of gross capital formation at current prices rose from 32.7 per cent in 2004-05 to 37.7 per cent in 2007-08 before declining to 34.9 per cent in 2008-09. At sectoral level, the rate of gross capital formation or simply the investment rate has increased in both the public and private sectors. In the former it rose continuously from 7.4 per cent in 2004-05 to 9.4 per cent in 2008-09, whereas in the latter, it increased from 23.8 per cent in 2004-05 to 27.6 per cent in 2007-08 before falling to 24.9 per cent in 2008-09. Between 2007-08 and 2008-09, the investment rate for the private corporate sector declined significantly from 16.1 per cent to 12.7 per cent, whereas that of the household sector increased from 11.5 to 12.2 per cent. The sectoral savings-investment gap, reflecting the gap between gross domestic savings and gross capital formation of a sector, declined significantly for the public sector as its savings increased until 2007-08. However, with a sudden drop in its savings rate by nearly 4 percentage points in 2008-09, this gap shot to a negative 8 per cent. In the case of the private corporate sector, the savingsinvestment gap has been consistently positive and has risen in 2008-09 to 6.2 per cent after falling to 3.8 per cent in 2007-08 from 6.1 per cent in 2004-05. 26

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY bales in 2008-09 by 2.2 per cent. However, it is lower than the target set for 2009-10 by 9 per cent. Industry: While the CSO’s advance estimates place industrial-sector growth at 8.2 per cent, as against 3.9 per cent in 200809, the IIP industrial growth is estimated at 7.7 per cent for the period April-November 2009-10, significantly up from 0.6 per cent during the second half of 2008-09. The manufacturing sector, in particular, has grown at the rate of 8.9 per cent in 2009-10. There was strong growth in automobiles, rubber and plastic products, wool and silk textiles, wood products, chemicals and miscellaneous manufacturing; modest growth in nonmetallic mineral products; no growth in paper, leather, food and jute textiles; and a slump in beverages and tobacco products in 2009-10. Growth in the production of capital goods, a proxy for investment, is improving, but different components of the “capital goods” group reflect a mixed picture during the current year. The strength of the recovery so far has been helped by the favourable base effect and mild inflation in manufacturing articles, especially of industrial inputs. The declining trend in the number of mandays lost because of strikes and lockouts witnessed in recent years has continued in 2009-10. Core industries and infrastructure services, led by the robust growth momentum of telecom services and spread across power, coal and other infrastructure like ports, civil aviation and roads, have also shown signs of recovery in 2009-10. Infrastructure: Power Sector: During April-December 2009, the peak deficit and total energy deficit came down considerably to 12.6 per cent and 9.8 per cent respectively from 13.8 per cent and 10.9 per cent during the corresponding period of the previous year. Due to the production in KG Basin the overall PLF also improved during April-December 2009. Crude Oil: During 2009-10, the projected production for crude oil is 36.7 mmt, which is about 11 per cent higher than the actual crude oil production of 33.5 mmt in 2008-09. Roadways: In 2009-10, as against the stipulated target of developing about

a 3,165 km of national highways under various phases of the National Highway Development Project (NHDP), the achievement up to end November 2009 has been about 1,490 km. Similarly, as against the 2009-10 target of about 9,800 km for awarding projects under various phases of the NHDP, projects totalling a length of about 1,285 km have been awarded up to end November 2009. Telecom sector: From only 54.6 million telephone subscribers in 2003, the number increased to 429.7 million at the end of March 2009 and further to 562 million as of October 31, 2009 showing an addition of 96 million subscribers during the period from March to December 2009. Service sector: As against a growth of 9.8 per cent in 2008-09 it grew at 8.7 per cent in 200910. While there has been a significant dip in the growth of community social and personal services in 2009-10, the other sub-sectors have either re-

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Sectoral Investment The sectoral investment rate is a useful indicator of the direction of new investments. While the overall growth of investment in India was in the range of 15 to 16 per cent per annum during the last few years, it plunged to - 2.4 per cent in 2008-09 as a result of the external shock-led slowdown. AGRICULTURE: At sectoral level, there has been a welcome rebound in the growth rate of investment in the agricultural sector, which grew at 16.5 per cent and 26.0 per cent in 2007-08 and 2008-09 respectively. This is in contrast to the growth rate of 1.4 per cent recorded in 2006-07. INDUSTRY: Growth of investment in the industrial sector has been more than the total investment growth up to 2007-08. However, in 2008-09, this was reversed, when investment in the industrial sector declined by - 17.6 per cent as compared to a decline of - 2.4 per cent in total investment. Within the industrial sector, the decline was more prominent in manufacturing and the construction sector. Investment in the unorganized manufacturing sector declined by a negative 42 per cent, indicative, perhaps, of the difficulty faced by the sector in accessing credit due to the tight market conditions in the post financialcrisis phase. SERVICE: Investment in the services sector registered a growth of 20.2 per cent in 2006-07, which suddenly declined to - 16.0 per cent in 2007-08 as a result of a decline in investment in the trade, hotels Sectoral share in gross domestic capital formation 2008-09. tained their growth momentum or improved upon it. A comparison between the old and the new series of NAS reveals considerable difference in the level estimates of the value added of service sub-sectors to GDP at current prices. Thus, for instance, there has been a decline, ranging from around 8 per cent in 2004-05 to 30 per cent in 2008-09, in the communication sub-sector. This has been partly offset by the increase in the level estimates of value added in real estate, ownership of dwellings, business and legal services, ranging from 11.6 per cent in 2004-05 to nearly 34.4 per cent in 200809. Foreign exchange reserve: During fiscal 2009-10, foreign exchange reserves increased by US$ 31.5 billion from US$ 252.0 billion in end March 2009 to US$ 283.5 billion in end December 2009. Out of the total accretion of US$ 31.5 billion, US$ 11.2 billion (35.6 per cent) was on BoP basis (i.e excluding valuation effect), because Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY

Inflation

TERMS

The implicit deflator for GDP at market prices defined as the ratio of GDP at current prices to GDP at constant prices is the most comprehensive measure of inflation on annual basis, Unlike the WPI, the GDP deflator also covers prices in the services sector which now accounts for well over 55 per cent of the GDP. Overall inflation, as measured by the aggregate deflator for GDPMP, increased from 4.7 per cent in 2005-06 to 5.6 per cent in 2006-07 and then declined to 5.3 per cent in 2007-08, before rising again to 7.2 per cent in 2008-09. It has been estimated at 3.6 per cent in 2009-10 as per the advance estimates. The year-on-year WPI inflation rate has been fairly volatile in 2009-10. It was 1.2 per cent in March 2009 and then declined continuously to become negative during June-August 2009, assisted in part by the large statistical base effect from the previous year. It turned positive in September 2009 and accelerated to 4.8 per cent in November 2009 and further to 7.3 per cent in December 2009. For the fiscal year so far (March over December 2009) WPI inflation is estimated at 8 per cent. Causes: The supply-side bottlenecks in some of the essential commodities, precipitated by the delayed and sub-normal south-west monsoons as well as drought-like conditions in some parts of the country. In the case of sugar, delay in the market release of imported raw sugar may have contributed to the overall uncertainty and thereby price rise. Private Final Consumption Expenditure: The PFCE measures the average change over time in the price paid for all consumer purchases. For this reason, the PFCE deflator measures changes in the cost of living, and because it measures the price paid for all consumer purchases, versus just a basket of goods, it is considered a more accurate measure of inflation than the CPI. PFCEbased inflation is at a lower level than CPI-IW inflation during all the four years (2005-06 to 2008-09). Impact of Inflation 1. Income Effect: Change in demand for a product caused by a change in the price on the spending power of consumers. When the price of commodity is declining the purchasing capacity of the real income or constant increases as result people buy more commodities. 2. Substitution Effect: Under this condition the price of commodity tends to increase and as a result of this the customer is compelled to shift for substitutes. SE is always negative because consumers always shift spending from the commodity whose price has risen. 3. Price Effect: Income Effect+ Substitution Effect. Due to increase is cost of product the real income of the costumer decreases. As a result of this the customer purchases that commodity whose price is less. Commodities are of three types: 1. Normal Commodities- High income high demand. 2. Inferior Goods – High income low demand or Low income high demand. 3. Complementary substitutes. If there would be rise in cost of petrol the demand for petrol cars would come down. Therefore, the effect is indirect. 4. Substitute Goods: When the prices of increases the demand for coffee increases or when the prices of coffee increases the demand for tea increases. Impact is indirect. 5. Giffen Goods (Robert Giffen): This is an exception to the law of demand and supply. A commodity for which the demand increases at higher prices and falls at lower prices. He found that as the prices of bread rose , the poor who always relies on it as their staple diet could simply no longer afford to buy other relatively more luxurious food items which they had to replace with increased cost/ purchases of bread. Similarly ,because bread constituted the bulk of their spending when its price falls they enjoyed such large increase in their real income that they could then afford to substitute bread in their by other platable food. Therefore, the demand for bread comes down. 6. Inflation curves: The curve showing different combination two goods such as apples and pears between which the consumer is indifferent and which may be regarded as giving him equal satisfaction at the given income. of higher inflows under FDI and port- 2009 as compared to US$ 64.4 billion is mainly attributed to the base effect folio investments, while accretion of in April-September 2008 mainly on and decline in oil prices. The net invisibles surplus (invisibles US$ 20.3 billion (64.4 per cent) was on account of decline in oil import. account of valuation gain due to weak- Merchandise exports on a BoP basis receipts minus invisibles payments) ness of the US dollar against major posted a decline of 27.0 per cent in H1 stood lower at US$ 39.6 billion during (April-September 2009) of 2009-10 as April-September of 2009 as compared currencies. against a growth of 48.1 per cent in to US$ 48.5 billion during April-SepBalance of payment: There has been improvement in the the corresponding period of the pre- tember 2008. The current account deficit increased to US $ 18.6 billion in balance of payments (BoP) situation vious year. during H1 of 2009-10 over H1 of 2008- Import payments declined by 20.6 per April-September 2009, despite a lower 09, reflected in higher net capital in- cent during April-September 2009 as trade deficit, as compared to US $ 15.8 flows and lower trade deficit. The against a sharp increase of 51.0 per cent billion in April-September 2008, trade deficit was lower at US$ 58.2 bil- in the corresponding period of the mainly due to the lower net invisibles lion during H1 (April-September) of previous year. The decline in imports surplus.

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY Fiscal scenario: The expansion took the form of tax relief to boost demand and increased expenditure on public projects to create employment and public assets. The net result was an increase in fiscal deficit from 2.6 per cent in 2007-08 to 5.9 per cent of the revised GDP (new series) in 2008-09 (provisional) and 6.5 per cent in the budget estimates for 2009-10 (as against 6.8 per cent of the GDP on the old series, reported earlier). Thus the fiscal stimulus amounted to 3.3 per cent of the GDP in 2008-09 and 3.9 per cent in 2009-10 from the level of the fiscal deficit in 2007-08. As part of the fiscal stimulus, the Government also enhanced the borrowing limits of the State Governments by relaxing the targets by 100 basis points. As a result, the gross fiscal deficit of the States combined rose from 1.4 per cent of the GDP in 200708 to 2.6 per cent in 2008-09 (revised estimates) and was estimated at 3.2 per cent of the GDP in 2009-10 (BE). As a proportion of the GDP, the Plan expenditure at 5.3 per cent of the GDP in 2009-10(BE) was the highest in recent years. Non-Plan expenditure grew by 19.4 per cent and 14.8 per cent respectively in 2008-09 and 2009-10 (BE). Social sector: The share of Central Government expenditure on social services including rural development in total expenditure (Plan and non-Plan) increased to 19.46 per cent in 2009-10 (BE) from about 10.46 per cent in 2003-04. Similarly, expenditure on social services by General Government (Centre and States combined) as a proportion of total expenditure increased from 19.9 per cent in 2004-05 to 23.8 per cent in 2009-10 (BE). Further, sector-specific increases including in education, health and rural development were reinforced in the Budget allocations for 2009-10. Under the NREGA, which is a major rural employment initiative, during the year 2009-10, 4.34 crore households have been provided employment so far. Out of the 182.88 crore person days created under the scheme during this period, 29 per cent and 22 per cent were in favour of Scheduled Caste and Scheduled Tribe population respectively and 50 per cent in favour of women. APRIL 2010, XVIYear, Issue No.4 Current NEWS Covered up to MARCH 01, 2010

PILLARS OF INDIAN ECONOMY

Money market and monetary policy CALL MONEY MARKET The money market remained by and large orderly during 2009-10, due to the prevailing surplus liquidity conditions. Call rate continued to hover around the reverse repo rate during Q1 of 2009-10 and averaged 3.2 per cent as compared to 4.2 per cent during the last quarter of 2008-09. During the second quarter of 200910, the call rate averaged 3.25 per cent. Even in the third quarter, the call rate continued to hover around the lower bound of the informal LAF corridor. The average call rate was placed at 3.20 per cent during this period. It is a market for overnight to short-term funds and for short-term money and financial assets that are close substitute for money. The organised market comprises the RBI and Banks; the Non-Banking Financial Institutions (NBFIs) like, LIC, GIC and its subsidiaries and UTI, which doesn’t participate directly but indirectly through the banks. Besides commercial Banks, the Cooperative Banks also participates. It

Different Rates (A) Bank Rate: The Bank rate is the rate at which the RBI should be prepared to buy or rediscount eligible bills of exchange or other commercial papers. But the Bill market in India is not well developed and the RBI makes advances to banks mainly in other forms against government securities and as refinance. It is a weapon of control of money supply–An increase in the Bank Rate by raising the cost of borrowed reserves, other things being the same, discourages bank borrowings from the Central Bank. The Bank Rate has been kept unchanged at 6.0 per cent. (B) Differential Interest Rates: The scheme was introduced in 1972. Under the scheme, the public sector banks give loans at a concessional interest rate of 4 per cent to the weaker sections of the community. (C) Prime Lending Rates: It a privilege rate at which the banks gives loan to the prime customers. The risk is relatively less. The rate is to be decided by the governing body and directors of the bank but the scheduled commercial banks follow the PLR rate of State Bank of India. This is an interesting question for many borrowers. The prime rate is a “reference or base rate” that banks use to set the price or interest rate on many of their commercial loans and some of their consumer loan products. State Bank of India, the country’s largest lender, cut the rate it charges its best clients to 13 per cent last week from 13.75 per cent, the highest in a decade. ICICI Bank Ltd, the country’s largest private lender, hasn’t reduced its 17.25 per cent charge. is called organized because RBI systematically coordinates it. There are three main components of Organised Money Market: (a) Inter-bank call Money Market: Funds borrowed by discount houses and banks; it can be withdrawn without notice, on a daily basis. It is mainly centred in Bombay, Calcutta, and Madras. It deals in one-day loans called call money, which may or may not be renewed the next day. The participants are mostly banks, therefore, called inter-bank call money market. Between the Banks SBI is a lender of intermediate resort (because of its most liquid position) and RBI as lender of last resort. The main function of the market is to redistribute the pool of day today surplus funds of banks among other banks in temporary deficit of cash. 29

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY  The money market is normally tighter during the busy season (October-April) and the slack season (May and September). (b) Treasury Bill Market: T-bills issuances during the year 2009-10 were dynamically managed, keeping in view the emerging requirements of the Government and the market conditions. The T-bills issued for enhanced amounts in 2008-09 which became due for repayment both in the first and second quarters of 2009-10 were fully rolled over. The primary market yields for TBs of different tenors (91 days, 182 days and 364 days ) remained by and large stable during 2009-10 as compared to the pattern observed in 200809.TBs are short term (91 days) liability of the Government. In theory, they are issued to meet temporary needs for funds of the Government, arising from temporary excess of expenditure over receipts. RBI on behalf of the Central Government sells all treasury bills. The Government has decided to ensure that all future issuance of securities by it would be in a paperless mode or in a dematerialised form. The cabinet has introduced a new bill which would enable stripping of government securities. Stripping is the process of separating the coupon from the principal and then trading them independently. The Treasury Bills are of two types: (1) Ad hoc: means for the particular end or case at hand. It is issued for providing investment outlets to state governments, semi government departments and foreign capital banks for their temporary surpluses. They are not sold to the general public and banks and not marketable. However, their holders, when in need of cash, can get them rediscounted with the RBI, i.e, sell them back to the RBI. (2) Regular or ordinary: It is directly sold to the public or banks, mainly banks. Bills are bought and sold on discounted basis; i.e, the amount of interest due on it is paid in the form of discount in the price charged for the Bill. This price is thus lower than its face value by the amount of interest due on the bill. The RBI introduced the sale of 91day treasury bills in January 1993. In addition, 364-day bills were also sold by auction, which was started on April

28, 1992 on a fortnightly basis. From 1997-98, the system of ad hoc treasury bills was discontinued. Brief Introduction: Treasury bill was first issued in India in 1917, and then it continued unabated till 1950. A treasury bill is a peculiar type of finance bill or promissory note put out by the Government of the country. A finance bill, which does not arise from any genuine transaction in good, is called Finance bill. Treasury bill is not self-liquidating. The system of adhoc Treasury bill was introduced in India in 1937. From 1997 26th March to effective from 1 April 1997 ad-hoc Treasury bill were discontinued and in place of these WMA was introduced. CASH MANAGEMENT BILL The introduction of a new short-term instrument, known as cash management bill (CMB), was announced in August 2009 to meet the temporary cash-flow mismatches of the Government. CMBs are non-standard, discounted instruments issued for maturities of less than 91 days. However, issuance of CMBs has not so far been resorted to during the year. GILT-EDGED MARKET The gilt-edged market (the best quality) is the market in government securities, i.e., securities of Government of India and State Governments or the securities guaranteed (as to both principal and interest) by the Government, i.e., issued by the local authorities (like city corporations, municipalities and port trusts, banks and State Electricity Boards. Two benefits: (a) Highly liquid; (b) the risk level is very less The Gilt-edged market can be divided into two parts: (1) Treasury Bill market; and (2) Government bond market. COMMERCIAL BILL MARKET During 2009-10, the commercial paper (CP) market also picked up with the easing of liquidity conditions and the size of fortnightly issuance increased significantly. The outstanding amount of CP issued by corporates has shown an increasing trend from Rs 44,171 crore in end-March 2009 to Rs1,03,915 crore as in end -November 2009, marginally coming down to a level of Rs 90,305 crore in end-December 2009 . The weighted average discount rate (WADR) of CP declined from 9.79 per cent as in end-March 2009 to 4.71 per

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Q

How Treasury bill affects the monetary policy? What is implication of Treasury bill? Ans: The selling of Treasury bill directly to banks affects the working of the banks. It affects in two ways: (a) It may create inflationary tendencies by pumping more and more money in the market. (b) But when the bill matures and it is being return back to RBI, the RBI pays cash at the time of the repurchase of the bill.

cent as in end-July 2009 and increased to 5.17 per cent in end-November 2009. Firms engaged in business issue the commercial Bills. Generally, they are of three-month maturity. They are like postdated cheques drawn by sellers of goods on the buyers of goods for value received. They have a fixed term to maturity called usance. The Commercial Bills are of various types: (a) Hundis: there is a difference between inland bills and foreign (trade) bills; the trade bills are called Documentary Bills as they carry with them papers pertaining to genuine trade transactions. Therefore, they are called genuine (trade) bills. Finance bills, on the other hand, are clean bills. They do not carry any documents of sale of goods with them. They are only ‘accommodation bills’ drawn and accepted as a device for short-term credit. (b) Demand or sight Bills or Time or usance Bill: Former is payable on demand and the latter on fixed time. (c) Drawer’s Bill and Drawee’s Bill: The same bill may be of either kind. It all depends on who presents the bill to a bank for discounting: drawer or drawee. If the former, then the Bill is a drawee’s bill, if the latter then the bill is a drawee’s bill. COMMERCIAL PAPER They are short term usance promissory Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY notes with fixed maturity issued mostly by the leading nationally reputed credit worthy and highly rated large corporations of India in 1989, by RBI and became effective from January 1990 Guidelines are basically issued by RBI. It is a new instrument in money market. Commercial papers are also known as Industrial Paper, if it is a liability of finance companies. It is known as finance paper. Commercial paper is issued in domestic as well as international market. In foreign it is known as Euro commercial paper. They are suppose to be the safest and secure and of highest quality investment available from the private sector. RBI’s guidelines for commercial papers: 1. The tangible net worth of issuing company will not between less than 4 crore. 2. The company can issue commercial papers to the extent of 75 per cent of the working capital limit. 3. The minimum denomination of the commercial is Rs. Five lakh and the minimum size of an issue to a single investor is to be Rs. Twenty five lakh. Certificate of Deposits With the persistence of surplus liquidity conditions, the fortnightly average issuance of certificates of deposit (CD) also remained high during much of 2009-10. The amount of outstanding CDs issued by SCBs increased from Rs 1,92,867 crore in end-March 2009 to Rs 2,43,584 crore as on December 4, 2009. The outstanding amount constituted 7.84 per cent (as on December 4, 2009) of aggregate deposits of CD-issuing banks with significant inter-bank variation. CDs are bank deposits accounts, which are transferable from one party to another. They are marketable or negotiable short-term instruments in bearer forms and are known as negotiable certificates of deposits. They are marketable receipts in bearer or registered form of funds, deposited in a bank for a specified period, at a specified rate of interest. CDs are the obligations of the banks just as finance papers are the obligations of finance companies. The maturity period of CDs verified between 2 weeks to 5 years; but the most common period is between 3 months to 1 year. In India CDs launched in June 1989 on the recommendation of Vaghul Working Group. The size of CDs market is much bigger than that of CP’s market. Discount

Finance House of India (1) It has commenced its operations in April 1988. (2) It is set up as a specialized money market institution. (3) It is a subsidiary of RBI; its basic objective is to stimulate activity in the money market by providing liquidity through the treasury bills and rediscounting the commercial bills. (4) The DFHI is created on the basis of the recommendations of Chore Committee and hence with the suggestion of Vaghul Committee it was created with a paid up capital of Rs. 200 crore. Securities Trading Corporation of India (1) It was set up in 1994 with the objective of promoting good secondary market in dated instruments; (2) Paid up capital Rs. 500 crore, RBI’s share is 51 and; other banks are LIC; (3) It mainly deals with long dated securities while DFHI deals with Treasury Bills; (4) DFHI is mainly a broker while STCI is a market maker. Open Market Operations (OMOs) During 2009-10 ( up to January 15, 2010), gross market borrowing raised

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repo operations The global financial situation continues to be uncertain and unsettled. Even as countries directly affected by the turmoil have taken aggressive action to manage the crisis, confidence and calm is yet to be fully restored in the financial markets. Due to financial integration, this uncertainty is transmitting also to countries outside the epicenter of the crisis. India too is experiencing the indirect impact of the global liquidity constraint as reflected by some signs of strain in our credit markets in recent weeks. In order to alleviate the pressures and, in particular, to maintain financial stability, the Reserve Bank has decided to reduce the repo rate under the Liquidity Adjustment Facility (LAF) by 100 basis points to 8.0 per cent with immediate effect. Repo contract is a contract whereby one contractual party transfers financial assets (e.g., securities) in favour of the other contractual party in exchange for a sum of money. > repo transactions – receipt of deposits and sale of securities with a commitment to repurchase these on a specific date. > reverse repo transactions – making deposits and buying securities with a commitment to resell them on a specific date. In other words, when RBI lends money to bankers against approved securities for meeting their day to day requirements or to fill short term gap. It takes approved securities as security and lends money. These types of operations are generally for overnight operations. The present rate of LAF has been kept unchanged at 8.0 per cent. The reverse repo rate under the LAF has been kept unchanged at 6.0 per cent. through dated securities by the Central Government (excluding issuances under the MSS) was Rs 3,93,000 crore (net Rs 3,51,911 crore) as against Rs1,80,000 crore (net Rs 1,35,972 crore) raised during the corresponding period of the previous year. This also included floating rate bonds amounting to Rs 2,000 crore with a tenor of 11 years issued on December 18, 2009. RBI sucks out liquidity from the market through open market operations (OMOs) by selling of Government securities– a strategic policy operation known as sterilisation of capital inflows. Government of India issues treasury bills or dated securities under the Market Stabilization Scheme (MSS) in addition to normal borrowings requirements to absorb excess liquidity. These instruments indistinguishable from the present treasury bills and dated securities issued by the Government are eligible for the purposes of SLR and repo operations. BANKING SECTOR Bank Credit: While the overall credit Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY demand of the manufacturing sector from the banking sector slowed down during the 2009-10, corporates could access non-bank domestic sources of funds and external financing (which had almost dried up earlier during the crisis period) at lower costs. Thus, while bank credit during 2009-10 continued to decelerate, there was a turnaround in financing from non-bank domestic sources. It is likely that revival of growth in bank credit would manifest in the near-term economic recovery process. As against an increase of 22.3 per cent in 2007-08, bank credit increased by 17.5 per cent in 2008-09. Non-food credit during the same periods was 23.0 per cent and 17.8 per cent respectively. During 2009-10, on financial-year basis, growth in bank credit extended by scheduled commercial banks (SCBs) stood at 8.4 per cent (end March 2009 to January 15, 2010), as compared to 11.9 per cent during the corresponding period in 2008-09. The benchmark prime lending rates (BPLRs) of PSBs moved from the 12.2513.50 per cent range in March 2008 to 11.50-14.00 per cent in March 2009 and 11.00-13.50 per cent in December 2009. The BPLRs of PSBs, private-sector banks and foreign banks decreased from their September 2008 levels in March 2009 and further declined in December 2009. However, the movement in the BPLRs does not fully and accurately reflect the changes in effective lending rates as nearly two-thirds of banks’ lending takes place at subBPLR rates; the share of sub-BPLR lending of all SCBs (excluding export credit and small loans) was nearly 67.0 per cent in March 2009, and increased further to 70.4 per cent in September 2009. PRIORITY SECTOR LENDING (PSL): Domestic SCBs, both in the public and private sectors are required to meet a target of 40 per cent of their adjusted net bank credit (ANBC) or credit equivalent amount of off-balance sheet exposures (OBEs), whichever is higher, for lending to the priority sectors. Within this, sub-targets of 18 per cent and 10 per cent of ANBC or credit equivalent amount of OBE, whichever is higher, have been stipulated for lending to agriculture and the weaker sections respectively. In respect of for-

eign banks having offices in India, the target for lending to the priority sector has been kept at 32 per cent of ANBC or credit equivalent amount of OBE, whichever is higher. Within the overall target of 32 per cent to be achieved by foreign banks, advances to the MSE and export sectors should not be less than 10 per cent and 12 per cent of the ANBC or credit equivalent amount of OBE, whichever is higher, respectively. (a) Before 1969, commercial banks had largely neglected agriculture because cooperative banks mainly undertook the agricultural lending. (b) This led to the failure of the agricultural planning. Therefore, the rationale of priority sector lending was one of the causes for nationalization of the top 14 banks in 1969. (c) In 1980, RBI issued following guidelines: (1) Priority sector advances should constitute 40 per cent of aggregate bank credit; (2) Out of priority sector advances, at least 40 per cent should be provided for agriculture; (3) Direct advances to weaker sectors in agriculture and allied ac-

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STATUTORY LIQUIDITY RATIO

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t works indirectly: – it affects the borrowings of the government from the RBI. Banks are subject to statutory liquidity requirements. Each bank is required statutorily to maintain a prescribed minimum proportion of its daily total demand and time liabilities in the form of designated liquid assets. The liquid assets comprises: 1. Excess Reserves 2. Government and approved securities 3. Current Account Balances with other banks SLR = ER + I + CB L Where, ER = Excess Reserves; I = Investment in unencumbered government and ‘other approved’ securities; CB = Current-account balances with other banks, and L = Total demand and time liabilities. The objectives of SLR are: 1. To restrict the expansion of bank credit. 2. To augment the investment of the banks in Government securities. 3. To ensure solvency of banks. A reduction of SLR rates looks eminent to support the credit growth in India. The SLR is commonly used to contain inflation and fuel growth, by increasing and decreasing it respectively. The maximum and minimum limits for the SLR are 40 per cent and 25 per cent respectively. Following the amendment of the Banking regulation Act (1949) in January 2007, the floor rate of 25 per cent for SLR was removed. The SLR was 24 per cent with effect from 8 November, 2008. Keeping in view the comfortable liquidity position, the SLR was restored to its earlier level of 25 per cent of NDTL with effect from November 7, 2009. tivities in rural areas should form at least 50 per cent of the of the total direct lending to agriculture; (4) Bank credit to rural artisans, village craftsmen and cottage industries should be at least 12.5 per cent of the total advances to small scale industries and (5) About 12 per cent of bank credit should go to exporters. Rural Infrastructure Development Fund (RIDF) The annual allocation of funds announced in the Union Budget has gradually increased from Rs 2,000 crore in 1995–96 (RIDF I) to Rs 14,000 crore in 2009-10 (RIDF XV). The aggregate allocations have reached Rs 1,00,000 crore. Further, a separate window has been created under the RIDF with a corpus of Rs 4,000 crore, with annual replenishment, for partly funding the rural roads and bridges components of the Bharat Nirman Programme from 2006–07 to 2008-09. This amount was raised to Rs 4,500 crore in 2009-10. RIDF was set up under NABARD in 1995-96. Its main function is to improve rural roads and bridges, to reCivil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY move inter-regional, rural-urban or inter-state disparities, to help the new agricultural policy to realise more than 4 per cent growth rate, to help in soil conservation, water and bio-diversity, etc. The RBI has advised SCBs to provide at least 10 per cent of their net bank credit or 25 per cent of their priority sector advances to weaker sections comprising small and marginal farmers, landless labourers, tenant farmers and share croppers, artisans, village and cottage industries where individual credit limits do not exceed Rs 50,000, beneficiaries of the Government sponsored schemes such as the Swar-najayanti Gram Swarojgar Yojana for rural poverty, Swarna Jayanti Shahari Rozgar Yojana for urban poverty, Scheme of Liberation and Rehabilitation of Scavengers (SLRS) and beneficiaries of the Differential Rate of Interest (DRI) scheme. Agricultural credit: As against the target of Rs 2,80,000 crore (provisional) for agricultural credit in 2008-09, the banking system disbursed credit of Rs 2,92,437 crore to the agricultural sector, thereby exceeding the target by around 4 per cent. Commercial banks and regional rural ranks (RRBs) together extended credit to 81.02 lakh new farmers during 2008-09. In addition to this, cooperative banks provided loans to 13.88 lakh new farmers during the period, thus taking the total number of farmers financed by the banking system to 94.90 lakh. KISAN CREDIT CARD SCHEME (KCC): The KCC scheme has become a widely accepted mechanism for delivery of credit to farmers. The banking system has issued 878.30 lakh KCCs as of November 30, 2009. The scheme now also covers borrowers of the long-term cooperative credit structure. The KCC has thus become a single window for a comprehensive credit product. The KCC was introduced in 1998-99 and designed to follow simplified procedures to enable farmers to avail themselves of crop loans as and when need be. Therefore, objectives are: (a) To facilitate the flow of timely and adequate short-term credit to the farmers; (b) The loans disbursed under KCC

scheme have also been brought under the Krishi Bima Yojana under the General Insurance Corporation (GIC). Self-Help Groups (SHGs) Under the SHG-Bank Linkage Programme, as on March 31, 2009, 61,21,147 SHGs held savings bank accounts with total savings of Rs 5,545.62 crore as against 50,09,794 SHGs with savings of Rs 3,785.39 crore as on March 31, 2008. Thus more than 8.06 crore poor households were associated with banking agencies under the SHGBank Linkage Programme. As on March 31, 2009, commercial

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CASH RESERVE RATIO

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Components

ection 42 of the RBI Act, which stipulates cash reserves of scheduled banks to be kept with RBI. The cash reserve ratio may now be varied between 3 per cent and 15 per cent. Section 18 of the Banking Regulation Act, 1949 was amended so as to require non-scheduled banks to maintain with them or in current account with RBI. 1. Money at call at short notice. It is money lent to other banks, stockbrokers and other financial institutions for a very short period varying from 1 to 14 days. 2. Investments can be in (a) Government securities (b) Approved securities (c) Other securities (a) Government securities called first class Bill or Gilt-edged Bill, Treasury Bill, treasury deposit certificates, postal obligations such as National Plan Certificates, National Saving Certificates. (b) Other Approved securities are those securities, which are approved under Banking Regulation: 1949 Act in government associated bodies, such as electricity boards, housing boards, etc. 3. Loans: It can be done in four ways: (a) Cash Credit: on the basis of the withdrawing power of the borrower i.e., which is determined by the assets. (b) Overdrafts: is an advance given by allowing a customer to withdraw his current account up to an agreed limit. (c) Demand Loan: It has no stated share brokers mostly take maturity such loans. (d) Term Loan: it is the loan granted for a specified period on an agreed up conditions. It is further of two types namely long term and short term, which is for more than a year and less than a year respectively. On October 6, 2008 the Reserve Bank of India announced a reduction of the cash reserve ratio (CRR) for scheduled banks by 50 basis points to 8.5 per cent of net demand and time liabilities (NDTL) with effect from the fortnight beginning October 11, 2008. Accordingly, on a review of the evolving liquidity situation in the context of global and domestic developments, RBI had reduced the Cash Reserve Ratio (CRR) by 150 basis points to 7.50 per cent of NDTL on October 11, 2008 and it injected Rs 60,000 crore in the market. In addition, in the Third Quarter Review (January 29, 2010) the RBI announced that the CRR was being raised from 5.0 per cent of NDTL to a level of 5.50 per cent effective the fortnight beginning February 13,2010 and to 5.75 per cent effective the fortnight beginning February 27,2010. banks had the maximum share of SHG savings with savings of 35,49,509 SHGs (58 per cent) amounting to Rs 2,772.99 crore (50 per cent); this was followed by RRBs with savings bank accounts of 16,28,588 SHGs (26.6 per cent) and savings amount of Rs1,989.75 crore (35.9 per cent) and cooperative banks with savings bank accounts of 9,43,050 SHGs (15.4per cent) and savings amount of Rs 782.88 crore (14.1 per cent). The RBI has been taking a pro-active role in promoting micro-finance. It set up four Groups in 2002 to look into Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY various aspects of micro-financing. Based on the recommendations made by these Groups, the RBI announced that banks should provide adequate incentives to their branches in making the procedures for financing the SHGs simple and easy. Based on the recommendations of the Vyas Committee, the RBI, in its annual policy statement for 2004-05, indicated that micro-finance institutions would not be permitted to accept public deposits, unless they comply with the extant regulatory framework. Micro Finance has been given more importance and the target for creditlinking to be enhanced from 2 lakh Self Help Groups (SHGs) to 2.5 lakh SHGs; Micro Finance Development Fund to be redesignated as the “Micro Finance Development and Equity Fund” with an increased corpus of Rs. 200 crore; RBI to open a window to enable qualified NGOs to use the External Commercial Borrowing (ECB) window. BASEL II All commercial banks in India excluding RRBs and local area banks have become Basel II compliant as of March 31, 2009. Non-performing assests (NPAs) The gross NPAs to gross advances ratio for SCBs remained constant at 2.3 per cent during 2008-09 as in 2007-08. However, though the gross NPA to gross advances ratio of PSBs declined from 2.2 per cent in March 2008 to 2.0 per cent as of March 2009, that of old private banks increased from 2.3 to 2.4 per cent and that of foreign banks from 1.8 to 4.0 per cent in March 2009 over the level of March 2008. The net NPA ratio (net NPAs as percentage of net advances) increased marginally from 1.0 to 1.1 in the case of SCBs in March 2009. Non-Performing Assets (NPAs) are loans that have gone bad, i.e. loans where borrower has defaulted on making payment of interest or principal and remains overdue for a period of more than 180 days. In order to move closer to international convention, NPA is proposed to be reduced from 180 days to 90 days with effect from March 31, 2004. Banking and science and technology: ICCOMS: During 2008-09, the transmission of clearing data—both for

cheque and electronic clearing services—and collation of inputs from currency chests as part of the Integrated Currency Chest Operations and Management System (ICCOMS) was done using secured websites. CPADS: The prevalent IT system to process the accounting requirements of the State and Central Governments was replaced by the Centralised Public Accounts Department System (CPADS), which is considered more robust and user friendly. NDSA: To facilitate a smoother and faster bidding in the Primary Dated Securities Auctions held by the Reserve Bank, a new version of the Negotiated Dealing System Auction module, developed and hosted by the Clearing Corporation of India, was developed in 2008-09, leading to its launch with effect from May 11, 2009. CBS: One of the major achievements during 2008-09 was the increase in the number of branches providing Core Banking Solutions (CBS). The total number of branches of PSBs that have implemented CBS increased from 35,464 as on March 31, 2008 to 44,304 as on March 31, 2009. The number of branches providing ‘core banking solutions’ (CBS) in recent years is in-

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CAPITAL ADEQUACY RATIO (CAR):

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ith important measures for improving capital adequacy such as (a) application of capital charge for market risk from March 2006, (b) a sharp increase in risk weighted assets on account of higher credit growth, and (c) increase in risk weights for personal loans, real estate and capital market exposure, the overall capital to risk weighted assets ratio (CRAR) for all SCBs was 12.3 per cent at end-March 2006. Rapid credit expansion by SCBs, necessitated introduction of stiffer prudential norms by the RBI for maintaining quality of credit. Riskweighted assets of SCBs at end-March 2007 increased to Rs. 24,12,236 crore from Rs. 17,97,207 crore at end-March 2006. Concomitantly, capital funds of SCBs kept pace with the riskweighted assets and increased to Rs. 2,96,191 crore at end-March 2007 from the level of Rs. 2,21,363 crore at end-March 2006. The capital to risk-weighted assets ratio (CRAR) during 2006-07 remained at 12.3 per cent, unchanged from the previous year. It was substantially higher than the RBI stipulated minimum CRAR of 9 per cent. The overall CRAR of all SCBs improved to 13.2 per cent by end-March 2009 from 13.0 per cent a year earlier, thus remaining significantly above the stipulated minimum of 9.0 per cent. While the CRAR of as many as 78 banks was above 10 per cent, that of only one bank was in the range of 9 to 10 per creasing rapidly. Under CBS, a number of services are being provided such as ‘anywhere banking’, ‘everywhere access’, and quick transfer of funds in an efficient manner and at reasonable cost. ATMs: During 2008-09, the total number of automated teller machines (ATMs) installed by banks grew by 25.4 per cent. Straight-through-processing (STP): The STP technology framework seeks to provide better efficiency by providing a seamless data flow both within the enterprise as well as across the market, without any manual intervention. The STP can even enable the stock market with T + 1 system. The clearing transactions, use of Magnetic Ink Character Recognition (MICR) technology for cheque clearing which currently accounts for 65 per cent of the value of cheques processed in the country, the computerization of Government accounts and Currency Chest transactions, operationalization of Delivery versus Payment (DvP) for Government security transactions. The coverage of Electronic Clearing Service (ECS) has been significantly expanded to encourage non-paper Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY based funds movement and develop the provision of a centralized facility for effecting payments. The scheme of Electronic Funds Transfer (EFT) operated by the RBI has been significantly augmented and is now available across 13 major cities. The Centralized Fund Management System (CFMS) which would enable banks to obtain consolidated accountwise and centre-wise position of their balances with all 17 offices of the Deposits Accounts Department of RBI. The critical elements in the developmental strategy are the opening of new clearing houses, interconnection of clearing houses through the INFINET (Indian Financial Network) operational-ized by the Institute of Development and Research in Banking Technology (IDRBT), Hyderabad; optimizing the deployment of resources by banks through Real Time Gross Settlement System (RTGS), Centralized Funds management System (CFM-S), Negotiated Dealing System (NDS) and the Structured Financing Messaging Solution (SFMS). SENSITIVE SECTORS SCBs' credit to sensitive sectors, which consist of capital market, real estate market and some selected commodities, was driven mainly by the demand of the real estate market. The lending by Scheduled Commercial Banks (SCBs) to sensitive sectors comprises capital market, real estate and commodities. Advances by SCBs to the (i) capital market, (ii) commodities and advances to (iii) real estate. NATIONALISATION OF BANKS The Government of India (GOI) promulgated an Ordinance called the Banking Companies (Acquisition and Transfer of Undertakings) Ordinance, 1969. Under this 14 major Indian banks which has deposits of not less than Rs. 50 crores were nationalised. They are: (1) The Central Bank of India, (2) The bank of India, (3) Punjab National Bank of India, (4) The Bank of Baroda, (5) Canara Bank Limited, (6) The United commercial Bank, (7) Dena Bank, (8) United Bank of India, (9) Syndicate Bank Limited, (10) The Union Bank of India, (11) Allahabad Bank, (12) The Indian bank Limited, (13) The Bank of Maharashtra Limited, (14) The Indian Overseas bank Limited. In April 1980 six more banks were

nationalized: (1) Andhra Bank, (2) The Corporation Bank, (3) The New Bank of India, (4) The Punjab and Sind Bank, (5) The Oriental bank of Commerce, and (6) Vijaya Bank. What is SCHEDULED COMMERCIAL BANKS (SCBs)? (a) It should be in the second schedule of the RBI Act, 1934 (b) The paid up capital should be minimum 5 lakhs (c) They will have facilities of Clearing House. (d) They must deposit CRR with the RBI (e) They are entitled to get loans at Bank Rate CLEARING HOUSE: It serves as a

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MONETARY AND CREDIT POLICY

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he broad objectives of monetary policy in India has been continued : (i) to maintain a reasonable degree of price stability and (ii) to help accelerate the rate of economic growth. Monetary policy has been formulated in the context of economic planning to accelerate the growth process in the country; but economic planning creates inflationary tendencies and then the monetary policy to play the role of a countervailing force. India has some inherent problems: (a) violent fluctuations in agricultural production caused by weather conditions; (b) population explosion; (c) external debt, growing fiscal deficit. In order to overcome these situations Chakravarty Committee suggested two remedies: (a) Government should aim at raising output levels and; (b) RBI should control the expansion in reserve money and money supply. The monetary policy of 2004-05 has tried to change the traditional policy by giving more incentives to market forces of demand and supply rather than price stabilization. The Reserve Bank of India (RBI) mainly emphasised on two aspects: (i) to ensure the provision of adequate liquidity to meet credit growth and support investment and export demand in the economy while keeping a very close watch on the movements in the price level and (ii) to pursue an interest rate environment that is conducive to maintaining the momentum of growth and macroeconomic and price stability. The RBI constituted an Internal Working Group on Instruments of Sterilization. Based on the recommendations of the Group, a scheme for launching market stabilization bonds was formulated. RBI sucks out liquidity from the market through open market operations (OMOs) by selling of Government securities– a strategic policy operation known as sterilisation of capital inflows. Government of India issues treasury bills or dated securities under the Market Stabilization Scheme (MSS) in addition to normal borrowings requirements to absorb excess liquidity. These instruments indistinguishable from the present treasury bills and dated securities issued by the Government are eligible for the purposes of SLR and repo operations. meeting place for the representatives of member banks, at appointed hours on each working day to settle payments of cheques and other transfer order on each other by their customers. The clearing houses are run by the RBI at places where it has its offices and by the SBI and its subsidiaries elsewhere. There are more than 730 clearing houses in the country, of which 14 managed by the RBI and rest by the SBI. Lead Bank Scheme: The Branch expansion programme of banks in the post-nationalisation phase was supposed to be interwoven with the Lead Bank Scheme, adopted in 1969. The scheme was recommended by Gadgil Group. Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY

PILLARS OF INDIAN ECONOMY

Capital and commodity markets in India

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inance Market can be defined as the market in which financial assets / instruments are created or transferred. Financial markets deal in financial assets and instruments of various kinds such as currency, deposits, cheques, bills, and bonds, etc. It has two parts: (1) Money Market: The financial institutions that deal in short-term Securities and loans, gold and foreign exchange. (2) Capital Market: It provides the resources needed by medium and large-scale industries for investment purposes. It deals in long-term sources of funds, i.e., funds with more than one-year period of maturity. When a corporation first makes stock available for public purchase, it works with an investment-banking firm to arrange an initial public offering (IPO). An investment-banking firm buys the first issue of stocks from the company at a negotiated price, and then makes them available for sale to their clients and other investors. Corporations that have IPOs are usually young companies in need of large amounts of capital. A corporation

can only have one IPO—the first time it makes stock available to the public. After its IPO, a company is said to be public. Public companies that need an infusion of capital may choose to issue more stock at a later time. This is called a subsequent, or follow-on, offering. Capital Market: The Stock Market has two markets: (1) Primary Markets; (2) Secondary Markets. Stock exchanges serve important roles in national economies. They encourage investment by providing places for buyers and sellers to trade securities, stocks, bonds, and other financial instruments. Companies issue stocks and bonds to obtain capital to expand their business. Corporations issue new securities in the primary market (as opposed to the secondary market, where securities are bought and sold), usually with the help of investment bankers. In the primary market, corporations receive the proceeds of stock sales. Thereafter, they are not involved in the trading of stocks. Owners of stocks trade them on a stock exchange in the secondary market. Primary market: The total number of initial public offerings (IPOs) declined to 20 in 2009 from 37 in 2008. Public Offerings are classified into Initial Public Offerings (IPO), where a company goes public for the first, Rights Issues, where a company sells additional to existing shareholders, and Seasoned Equity Offerings APRIL 2010, XVIYear, Issue No.4 Current NEWS Covered up to MARCH 01, 2010

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(SEOs), where a listed company sells shares to the public. Secondary market: It is that segment of the capital market where the outstanding securities are traded. Its main function is to provide liquidity to such securities. In the secondary market, investors, not companies, earn the profits or bear the losses resulting from their trades. Stock exchanges encourage investment by providing this secondary market. By allowing investors to sell securities, exchanges increase the safety of investing. There are two parts of secondary markets: (a) Organized Stock sector; and (b) Over-the counter market. The stock market in India is regulated by the Central Government, under SCRA (Securities Contracts Regulation Act, 1956). (1) Stock Exchanges: A Stock Exchange is an organization for orderly buying and selling of ‘listed (approved) existing securities. Approved securities depend on several considerations, such as the size of the issue, timely production of the annual accounts, etc,. An organized stock exchange is an auction type market. It operates in three ways: 1. Customer-Driven: Auction System. 2. Order-Driven: Customers buy and sell orders reach a central point where they are matched. 3. Quote-Driven: Dealers compete to give customers’ best price- Electronic Trading. BOLT- Bombay on- line Trading System–– Introduced in 19, 1995 January by BSE. BOLT is an attempt to strike a delicate balance between the computerized trading and retaining some of the unique practices at the BSE. It gives quote- driven automated trading facility. (1) Bombay Stock Exchange: (1) It is the apex Stock Exchange in India; established in 1857; at that time the membership fee was Rs.1 and now in 1997 it was Rs. 2 crore. (2) It mainly deals with listed share, and has business with 100 other cities. (3) The BSE takes 1978-79 as the base year (4) On 19th January 1995, BSE introduced BOLT-Bombay On Line Trading System (5) It provides a driven automated trading facility; Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY (6) The market capitalization as a percentage of GDP is one of the indicators to measure the growth of capital market in the economy. (7) The market capitalization in the BSE was 10,219 crore in Dec. 1984, increased to 3,23,363 crore in the end of March 1992 and 5,05,137 crore at the end of March 1997. (2) National Stock Exchange of India: (1) It was set up in Nov. 1992, and its effective operations started from June 30, 1994; (2) It is fully automated electronic screen-based trading system; (3) It is sponsored by IDBI and co-sponsored by LIC, GIC, SHCIL, SBI (4) It has two separate segments: (a) The wholesale debt market segment - which caters to banks, financial institutions and other institutional participants and which deals in PSU Bond units, treasury bills, government securities, etc. (b) Capital market segment deals in equities, convertible debentures. (5) The NSE introduced trading RAPO with effect from 23rd June 1995 (6) NSE is an order driven and not a quote driven market (7) It deals with two types of share: (a) Listed (b) Permitted (8) It has business in 200 cities with 1000 terminals. It was first started in 1870s in USA, National Association of Securities Dealers Automated Quotations System (NASDAQ). Thousands of companies do not list their stock on any exchange. These stocks make up the overthe-counter (OTC) market. The largest of these companies are traded on the Nasdaq stock market. Nasdaq stands for National Association of Securities Dealers Automated Quotation system. The member countries of the European Union (EU) have an equivalent market, called EASDAQ. Nasdaq is a shareholder in and provides operational advice to EASDAQ. Nasdaq and EASDAQ operate like exchanges, but instead of having central locations, their specialists are located at computer terminals all over the United States and Europe. Trades are carried out primarily online through computer networks. Companies that list their stock on Nasdaq and EASDAQ are generally smaller than those listed on centralized exchanges. OTCEI can be defined as an

exchange without a specific trading ring. Its market is spread across the country through various counters, so that nationally and internationally scattered buyers can perform their business more effectively. It deals in such securities as are not ‘listed’ on an organized stock exchange. These are securities of small companies and have only a limited market. Their prices are determined through direct negotiations between stockbrokers and not through open bidding.

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It is based on automated ringless, trading system and it is promoted by ICICI, IDBI, IFCI, LIC,GIC, CAN Bank, UTI HQ - Bombay and deals with three types of shares: (a) Listed; (b) Permitted; and (c) Mostly in Unlisted It follows T+3 settlement system - the fastest in the country. It provides a liquid cash market for the retail investors. Malegam and Dave Committees were appointed to see the functioning of the OTCE. The number of companies

NON-BANKING FINANCIAL INSTITUTIONS (NBFIS): While banks account for a major share of the Indian financial system, NBFIs also play an important role in providing a wide range of financial services. While banks have an edge in providing paymentand liquidity-related services, NBFIs tend to offer enhanced equity and riskbased products. The major intermediaries that are included in the NBFI group are development finance institutions (DFIs), insurance companies, non-banking financial companies (NBFCs), primary dealers (PDs) and capital market intermediaries such as mutual funds.The NBFIs provide medium- to longterm finance to different sectors of the economy. Financial Institutions (FIs): Based on the major activity undertaken by FIs, they could be classified into three broad categories, namely (i) term-lending institutions whose main activity is direct lending by way of term loans and investments (e.g. EXIM Bank); (ii) refinance institutions which mainly extend refinance to banks as well as NBFIs (e.g. NABARD, the Small Industries Development Bank of India [SIDBI] andNational Housing Bank [NHB]); (iii) investment institutions which deploy their assets largely in marketable securities (e.g. the Life Insurance Corporation of India [LIC]). The ‘umbrella limit’ for aggregate borrowings by financial institutions (FIs) (through five specified instruments, namely term deposits, term money borrowings, certificates of deposits [CDs], commercial papers [CPs] and inter-corporate deposits [ICDs]) which was stipulated not to exceed 100 per cent of their net owned funds (NOFs) at any time, as per their latest audited balance sheets, was also raised to 200 per cent of NOFs for one year with effect from December 8, 2008 for EXIM Bank and from January 15, 2009 for the NHB, subject to review and subject to the asset liability management (ALM) guidelines of the Reserve Bank. NON-BANKING FINANCIAL COMPANIES (NBFCS): The NBFCs as a whole account for 9.1 per cent of the assets of the total financial system. The total number of NBFCs registered with the Reserve Bank, consisting of deposit-taking NBFCs (NBFCs-D), residuary non-banking companies (RNBCs), mutual benefit companies (MBCs), miscellaneous non-banking companies (MNBCs) and Nidhi companies, declined from 12,809 in end-June 2008 to 12,740 in end-June 2009. The number of NBFCs-D also declined from 364 in end-June 2008 to 336 in end-June 2009, mainly due to the exit of many NBFCs from deposit-taking activity. The number of NBFCs with less than the minimum regulatory CRAR of 12 per cent declined to 9 in end-March 2009 from 47 in end- March 2008. In end-March 2009, 198 out of 207 NBFCs had CRAR of 12 per cent or more as against 280 out of 327 NBFCs in end-March 2008. The number of NBFCs with CRAR more than 30 also declined to 168 in end- March 2009 from 239 in end-March 2008. Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY listed on OTCEI was 101, by the end of the March 1997. Other National and Regional Stock Exchanges of India: (1) BSE; (2) NSE; (3) OTCEI; (4) Ahmedabad; (5) Bangalore; (6) Bhubaneshwar; (7) Calcutta; (8) Coimbatore; (9) Cochin; (10) Hyderabad; (11) Jaipur; (12) Ludhiana; (13) Madhya Pradesh; (14) Chennai; (15) Magadh; (16) Mangalore; (17) Mumbai; (18) Pune; (19) Saurashtra; (20) Vadodara; (21) Lucknow; (22) Kutch; (23) Delhi International Stock Exchanges: (1) Dolex, Sensex, Nifty-Fifty (MumbaiIndia), (2) Dow Jones (New York), (3) Nikkei (Tokyo), (4) Mid Dax (Frankfurt), (5) Hang Seng (Hong Kong), (6) Simex, Straits Times (Singapore), (7) CAC (Paris), (8) FTSE 100 (London). (9) SBS General (Switzerland), (10) Composite Index (South Korea), (11) CBSAll share (Netherlands), (12) IPC (Mexico), (13) Bovespa (Brazil), (14) BEL-20 (Belgium), (15) Xextra DAX (Frankfurt-Germany), (16) HEX General (Finland), (17) KFX (Denmark), (18) Toronto Composite (Canada), (19) ISEQ Overall (Ireland). Largest Stock Exchange is NASAQ. Amongst the National Stock Exchange (NSE) indices, both Nifty and Nifty Junior recorded positive annual equity returns (current year-end index divided by previous year-end index multiplied by 100) of 75.8 per cent and 128.6 per cent in 2009 as against negative annual equity returns of 51.8 per cent and 63.5 per cent respectively during the calendar year 2008.The Jakarta Composite index (Indonesia) registered a rise of 264.1 per cent to 2,510 at end-December 2009, while the BSE Sensex was up by 199.1 per cent to 17,465 in end-December 2009. Nikkei 225, Japan, however remained lower than its end-December 2003 level. Exchange traded interest rate futures (IRFs) contracts on a 10-year notional coupon bearing Government of India security started trading at the NSE on August 31, 2009. Market participants include banks and primary dealers, mutual funds, insurance companies, corporate houses, brokers, FIIs and retail participants. IRFs enable banks and primary dealers to mitigate risk and improve process efficiency, while mutual funds, insurance companies and

corporates can use them to manage risk pertaining to volatility in interest rates. The minimum contract size for an IRF is Rs 2 lakh. The trading volumes in IRFs have, however, remained low. LIC and Central Bank of India have recently come forward to support transactions in the IRF market by buying securities from various market participants who wish to liquidate the securities received as part of their IRF obligations. Foreign Institutional Investors (FIIs): The overall limit for investments by FIIs and subaccounts is US$ 5 billion for government securities and treasury bills and US$ 15 billion for corporate debt. Investments by FIIs/ sub-accounts in debt-oriented mutual fund units (including units of money market and liquid funds) are considered corporate debt. Development of electronic spot exchanges: The Government and FMC have allowed the national commodity exchanges to set up three spot exchanges in the country, namely the National Spot Exchange Ltd. (NSEL), NCDEX Spot Exchange Ltd. (NSPOT) and National Agriculture Produce Marketing Company of India Ltd. (NAPMC). These spot exchanges have created an avenue for direct market

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linkage among farmers, processors, exporters and end users with a view to reducing the cost of intermediation and enhancing price realization by farmers. They would also provide the most efficient spot price inputs to the futures exchanges. The spot exchanges would encompass the entire spectrum of commodities across the country and would bring home the advantages of an electronic spot trading platform to all market participants in the agricultural and non-agricultural segments. So far, Maharashtra, Karnataka, Gujarat, Rajasthan, Orissa and Madhya Pradesh have given licences to the spot exchanges to undertake electronic spot trading. CCIL and CBLO: In order to check the unfair transaction in the Inter-bank call money market, an innovation took place at the Clearing Corporation of India (CCIL) through launch of Collateralized Borrowing and Lending Obligation (CBLO). The CBLO is like a repo, i.e. it be interpreted as borrowing backed by securities as collateral. Issued at a discount to face value, CBLOs always redeem at par, similar to treasury bills or zero coupon bonds. The maturities range from 1 day to 1 year. Further, in order to measure

COMMODITY FUTURES MARKET The third component of organised trading of standardised products in the country is in the commodity futures markets. In recent years, these markets have drawn upon the success of nationwide electronic trading on the equity market, and three new exchanges have come about: National Commodity Derivatives Exchange (NCDEX), Multi Commodity Exchange (MCX) and National Multi Commodity Exchange (NMCE). The last component of the Indian securities market is the commodity futures markets. These markets have been experiencing strong growth, through the introduction of nationwide electronic trading and market access, as was done on the equity market during 1994-1996. The National Commodity Derivatives Exchange (NCDEX) has emerged as the largest commodity futures exchange. Commodities traded in the commodity futures market during 2009 included a variety of agricultural commodities, bullion, crude oil, energy and metal products. Several new commodities were introduced for futures trading in 2009, such as almond, imported thermal coal, carbon credits and platinum. The total value of trades in the commodity futures market rose from Rs 50.34 lakh crore in 2008 to Rs 70.90 lakh crore during 2009. The MCX, Mumbai, recorded the highest turnover in terms of value of trade during 2009, followed by the National Commodity & Derivatives Exchange Ltd.(NCDEX) and National Multi Commodity Exchange of India Ltd.(NMCE) respectively. Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY the liquidity in the market ‘turnover ratio’ (TR) has been introduced. TR is defined as the latest 12 months turnover (NSE + BSE) divided by market capitalization. The National Securities Clearing Corporation (NS-CC) does risk management at NSE. When a clearing member on NSE defaults on payment obligations, these are fulfilled by NSCC. It is supervised by SEBI. EVENING TRADING It has been introduced with the integration of major commodity markets across the world. Domestic bullion prices are closely related to the current trading prices on the New York Mercantile Exchange (NY-MEX-COMEX) in USA and the London Bullion Market Association. Similarly, domestic Palmolein prices are highly correlated to the prices on the Malaysia Derivatives Exchange Berhad (MDEX). Further, a Multi Commodity Exchange (MCX) has started an evening trading facility to carry out the trade till 11.30 PM. NCDEX, Mumbai has the equity participation of 19.95 per cent each from ICICI Bank, LIC, NABARD, NSE; 12.10 per cent from CRISIL, and 8.10 per cent from PNB. MCX has been promoted by Financial Technologies of India Limited (FTIL), which is a public limited software company. Agricultural commodities, however, accounted for 38 per cent of the total volume of trade. Agriculture commodity futures staged a remarkable recovery after steady decline over the last two years, recording a trading value of Rs 10.88 lakh crore in 2009, signifying growth of 48 per cent over the previous year. During the year, a new National Commodity Exchange called Indian Commodity Exchange (ICEX) became operational. Besides, a scheme of upgradation of Ahmedabad Commodity Exchange to National Commodity Exchange status has been approved. NCDEX spot Exchange Ltd The Government has allowed the National Commodity Exchanges to set up three spot exchanges in the country, namely the National Spot Exchange Ltd. (NSEL), NCDEX spot Exchange Ltd. (NSPOT) and National Agriculture Produce Marketing Company of India Ltd. (NAPMC). During 2009, there was significant expansion of spot exchanges’ trading facilities in India. Insurance SECTOR

Of the 21 insurance companies that have set up operations in the life segment post opening up of the sector, 19 are in joint venture with foreign partners. Since the opening up of the sector, the number of participants has gone up from six insurers (including LIC of India, four public-sector general insurers and the General Insurance Corporation as the national reinsurer) in the year 2000 to 44 insurers operating in the life, non-life and reinsurance segments (including specialized insurers, namely the Export Credit Guarantee Corporation [ECGC] and Agricultural Insurance Company [AIC]). Two of the general insurance companies, namely Star Health and Alliance Insurance Company and Apollo DKV function as standalone health insurance companies. Pension SECTOR NPS implementation in the Central Government has stabilized with more than 5.64 lakh employees already covered. The Pension Fund Regulatory &

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Development Authority (PFRDA), set up as a regulatory body for the pension sector, is engaged in consolidating the initiatives taken so far regarding the full NPS architecture and expanding the reach of the NPS distribution network. The full NPS architecture comprising a Central Record keeping Agency (CRA), pension fund managers (PFMs), trustee bank, custodian and NPS Trust has been put in place and is fully operational. The National Securities Depository Limited (NSDL) has been selected as the CRA. The PFRDA has also appointed six Pension Fund Managers (PFM) for the unorganized sector, namely UTI Retirement Solutions Limited, SBI Pension Funds Pvt. Ltd., ICICI Prudential Life Insurance Company Ltd., IDFC Asset Management Company Ltd., Reliance Capital Asset Management Ltd. and Kotak Mahindra Asset Management Company Ltd., as pension fund sponsors under the NPS.

Government measures to contain inflation, particularly food inflation (a) Monetary Measures: The RBI made a minor modification in the statutory liquidity ratio (SLR) and restored it to 25 per cent of net demand and time liabilities (NDTL) with effect from the fortnight beginning November 7, 2009. In the Third Quarter Review of the RBI’s monetary policy on January 29, 2010, the CRR of scheduled banks was raised by 75 basis points from 5.0 per cent to 5.75 per cent of their NDTL in two stages; the first stage of increase of 50 basis points will be effective the fortnight beginning February 13, 2010, followed by the next stage of increase of 25 basis points effective the fortnight beginning February 27, 2010 . (b) Fiscal Measures: (i) Reducing import duties to zero–for rice, wheat, pulses, edible oils (crude) and sugar; and for maize (under TRQ of 5 lakh tonnes per annum, beyond which 15per cent duty will apply); Removing levy obligation in respect of all imported raw sugar and white/ refined sugar. (c) Administrative Measures: (i) 2 million tonnes of wheat and1 million tonnes of rice have been allocated to States for distribution to retail consumers over and above normal public distribution system (PDS) allocation for the period October 2009 to March 2010. (ii) One million tonnes of wheat has been allocated for release by the FCI in the open market through OMSS for the period October 2009 to March 2010. (iii) The National Agricultural co-operative Marketing Federation (NAFED) has been allocated 37,400 metric tonnes of wheat and 15,500 metric tonnes of rice for distribution through its outlets at the same rate at which allocations are made to State governments under OMSS (D). (iv) Distribution of imported pulses through PDS at a subsidy of Rs.10 per kg to State Governments. (v) Permitted sugar factories to sell processed raw sugar in the domestic market and fulfill export obligation on tonne to tonne basis. (vi) Proportion of sugar production requisitioned as levy sugar has been increased from 10 to 20 per cent for 2009-10 sugar season to ensure adequate levy sugar supplies under PDS. (vii) Minimum Support Prices (MSPs) have been systematically increased, leading to increased acreage, production, productivity and central procurement. For the marketing season of 2008-09, the MSP of wheat was increased to Rs. 1,080. For different grades of paddy, for kharif marketing season 200910, the MSP has been increased to Rs.950-980 per quintal and a bonus of Rs 50 per quintal for all varieties.

Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY

PILLARS OF INDIAN ECONOMY

Public finance and fiscal consolidation There are three major concern for the government: the non-planned expenditure; interest payment and subsidies. In a two-way classification of expenditure as Plan and non-Plan, the front loading of Plan expenditure is evident from the levels of growth of 34.3 per cent and 18.0 per cent in 2008-09 and 2009-10 (BE) respectively. Plan expenditure at 5.3 per cent of the GDP in 2009-10(BE) was the highest in recent years. Non-Plan expenditure grew by 19.4 per cent and 14.8 per cent respectively in 2008-09 and 2009-10 (BE). In the four-way classification of expenditure, growth in 2008-09 and 2009-10 (BE) respectively was 32.2 per DISTINCTION BETWEEN PLAN AND NON-PLAN t is argued that the distinction between plan and non-plan expenditure is illogical and even dysfunctional. The distinction has led to ever increasing tendency to start new schemes/projects to the utter neglect of maintenance of existing capacity and service levels. The distinction also often leads to the misperception that non-plan expenditure is inherently wasteful and should be avoided. This dichotomy has resulted in fragmented view of resource allocation to various sectors. The problem is assuming greater significance with higher priority to social sectors where salary constitutes an important element of the programme. The embargo imposed on recruitment for non-plan posts have caused serious problems of service delivery in health and education sectors. A need has been felt to draw protocols that will specify the agency for specific function and provide arrangements for coordinated activity. DISTINCTION BETWEEN REVENUE AND CAPITAL EXPENDITURE he distinction between revenue and capital expenditure has acquired significance, and needs a relook, consequent to the emergent situation in the post-FRBM period. The FRBM Act stipulates that revenue deficit should be eliminated by the end of 2008-09. More than three-fourths of plan expenditure is now revenue expenditure. Strict adherence to the FRBM stipulation has

level of 61.6 per cent in 2004-05 to 56.3 per cent in 2008-09(RE), has risen marginally to 56.7 per cent in 2009-10(BE). Internal debt, mainly market borrowings, continued to be the main component of outstanding liabilities. Value added tax: VAT has been successfully introduced by all the States.

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The introduction of VAT by States resulted in good growth in State’s own tax revenue in the last few years. During 2008-09, growth in tax revenue in 33 VAT States/UTs was 14.4 percent in the revenue from VAT items. Under the specific scheme evolved for the purposes to facilitate introduction of VAT, the Central Government compensated the revenue losses at the rate of 100 percent of revenue loss during 2005-06, 75 percent during 2006-07 and 50 percent during 2007-08. An amount of Rs 2,558 crore has already been released to States till December 31, 2009 in the financial year 2009-10, so far. A total amount of Rs.17,364 crore has been released to the states so far under this scheme. Advantages of VAT: 1. VAT is multi stage tax levied on all stages of production distribution of a commodity. 2. Under VAT each input is taxed only is taxed only once. Since an input is taxed only ones VAT avoids cascading effect which is the chief advantage of the traditional system of excise and sales taxation. 3. Since the cumulative effect of input taxation is absent under VAT, the cost

cent and 11.2 per cent in non-Plan revenue expenditure; -3.3 per cent (after adjustment) and 55.3 per cent in non-Plan capital expenditure; 35.5 per cent and 18.4 per cent in Plan revenue expenditure; and 27.8 per cent and 16.1 per cent in Plan capital expenditure. Interest payments: As a proportion of revenue receipts declined from a level of 52.1 per cent in 1998-99 to a level of 31.6 per cent in 2007-08. They were at the 35 per cent level in 2008-09 (provisional) and were budgeted at 36.7 per cent in 2009-10 (BE). The rise in the levels of gross market borrowings in 2008-09 and 2009-10 (BE) has resulted in a reversal of the trend towards fall in average cost of borrowings. Subsidies: As a proportion of GDP, major budgetary subsidies rose from 1.6 per cent in 2003-04 to 2.2 per cent in 2008-09 (provisional) and were budgeted at 1.7 per cent in 2009-10 (BE). Besides, the above below-the-line issuance of oil and fertilizer bonds was of the order of 1.7 per cent of GDP in 2008-09. The Budget for 2009-10, recognizing the importance of institutional reforms, announced the intention to move towards a nutrient-based subsidy regime in respect of fertilizers and ultimately towards direct cash transfers and the setting up of an expert to advise on a viable and sustainable system of pricing for petroleum products. Work on operationalization of the former is being attempted by the Department of Fertilizers and the Report of the latter containing the recommendations on petroleum subsidies has been submitted on February 3, 2010. Government debt: As a result, with the revised GDP series (2004-05) released by the CSO, the ratio of outstanding liabilities to the GDP after falling from a 40 APRIL 2010, XVIYear, Issue No.4 Civil Services Current NEWS Covered up to MARCH 01, 2010

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY of production increased by the amount of tax itself, thus by preventing unnecessary cost elevation, VAT promotes competitiveness of domestic industries in the world market and thereby generates favorable. 4. Since the credit is being granted the new entrepreneurs and small industries will have advantage because their investment becomes less. 5. VAT in its ideal and comprehensive form also has the advantage of being natural as between different industries, techniques of production and business organization. GST: In the Budget for 2007-08, an announcement was made to the effect that GST would be introduced from April 1, 2010, and that the Empowered Committee of State Finance Ministers would work with the Central Government to prepare a road map for introduction of GST. First Discussion Paper on GST in India 1. The GST is to have two componentsCentral GST and State GST—with separate rates, reflecting revenue considerations and acceptability. This dual GST model would be implemented through multiple statutes (one for the CGST and an SGST statute for every State). 2. The Central GST and the State GST would apply to all transactions of goods and services (with some specified exceptions). 3. The Central GST and State GST are to be paid to the accounts of the Centre and the States separately. 4. Cross-utilization of input tax credit (ITC) between the Central GST and the State GST not to be allowed except in the case of inter-State supply of goods and services under the Inter-State Goods and Service Tax (IGST) model. 5. Uniform State GST threshold of gross annual turnover of Rs10 lakh both for goods and services for all the States and Union Territories to be be adopted with adequate compensation for States (particularly northeastern region States and special category States) where lower threshold had prevailed in the VAT regime. 6. Each taxpayer to be allotted a PANlinked taxpayer identification number with a total of 13/15 digits. GST Rate Structure A two-rate structure –a lower rate for necessary items and goods of basic

importance and a standard rate for goods in general—proposed with a special rate for precious metals and a list of exempted items. Exports would be zero-rated. The GST will be levied on imports with necessary Constitutional Amendments. of deficit budgeting with the cheap money policy. CAPITAL GAIN TAX It was imposed in 1947. But the tax was withdrawn in 1950. A tax on capital gain was re-introduced in 1956. Here capital gain was meant a financial gain resulting from the sale of a capital asset at a higher price than what it was paid for it. Under Section 45 of the Income Tax Act 1961, profits or gains arising from transfer of capital assets affected in the previous year, are chargeable under the head ‘Capital Gains’. ESTATE DUTY It was introduced in 1953. It is also known as death duty. The estate duty was levied on total property passing

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THE FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT RULES, 2004 Reduction of revenue deficit by an amount equivalent of 0.5 per cent or more of the GDP at the end of each financial year, beginning with 2004-05. Reduction of fiscal deficit by an amount equivalent of 0.3 per cent or more of the GDP at the end of each financial year, beginning with 2004-05. No assumption of additional liabilities (including external debt at current exchange rate) in excess of 9 per cent of GDP for the financial year 2004-05 and progressive reduction of this limit by at least one percentage point of GDP in each subsequent year. No guarantees in excess of 0.5 per cent of GDP in any financial year, beginning with 2004-05. Specifies four fiscal indicators to be projected in the medium term fiscal policy statement. These are revenue deficit as a percentage of GDP, fiscal deficit as a percentage of GDP, tax revenue as percentage of GDP and total outstanding liabilities as percentage of GDP. For greater transparency in the budgetary process, rules mandate the Central Government to disclose changes, if any, in accounting standards, policies and practices that have a bearing on the fiscal indicators. The Government is also mandated to submit statements of receivables and, guarantees and a statement of assets, at the time of presenting the annual financial statement, latest by Budget 2006-07. The rules prescribe the form for the quarterly review of the trends of receipts and expenditures. The rules mandate the Central Government to take appropriate corrective action in case of revenue and fiscal deficits exceeding 45 per cent of the budget estimates, or total non-debt receipts falling short of 4 per cent of the budget estimates at the end of first half of the financial year.

on the death of a person. The duty was imposed and collected by the Central Government but the proceeds were passed on to the States. The rate of taxation ranged from 4 per cent to 40 per cent of the value of the estate left behind. It was an extremely progressive tax. But the tax collection was very poor and the Government collected merely Rs 15 crore from this source. This prompted the Government to withdraw the tax with effect from April 1, 1985. WEALTH TAX It was introduced in May 1957 on the basis of the recommendation of Nicholas Kaldore. The Wealth tax has been levied on the excess of net wealth over exemption of individuals, joint Hindu families and companies. But in the computation of the tax: (1) balances of provident funds, (2) life insurance, and (3) certain properties such as agricultural land has been exempted. The Government has also exempted productive assets such as shares, bonds, Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY bank deposits , etc. This decision has been taken on the basis of the Chelliah Committee recommendations. Wealth below 2-5 lakh is exempted. Initially, the rate of taxation was 15 per cent and it was a progressive tax. In 1992-93 the ceiling was raised to 15 lakh and the rate of tax is 1 per cent. EXPENDITURE TAX It was introduced in 1957. It was one of the many ‘progressive’ taxes introduced by T T Krishnamachari. The main rationale was to encourage people to save and invest. It will control wasteful expenditure specially luxury expenditure. But the tax was abolished in 1962. It was reintroduced in 1964 but again abolished in 1966. As on November 1987, the Government again imposed an Expenditure Tax Act, 1987. The Expenditure Act provides for levy of a tax on the expenditure on Hotels accommodation charging more than Rs 400 per day per individual. The rate of expenditure tax was increased from 10 per cent to 20 per cent for the assessment year 198990. The expenditure tax has been phased out. GIFT TAX It was introduced in April 1958. It was imposed on donor. In 1990-91 budget imposed the gift tax on donee and not on the donor. As a complement to the state duty wealth tax and expenditure tax, it was yielding only 10 crore per year. That is why it was abolished in 1998-99. Now it will be clubbed with income in the hands of their beneficiaries. Reintroduced in the Budget 200405. According to the proposal gifts from unrelated persons, above the threshold limit of Rs 25,000 would now be taxed as income.

Trends of deficits Fiscal Deficit: It is the excess of total expenditure over the sum of revenue receipts and non-debt creating capital receipts. In other words it is equal to borrowing. B u d g e t a r y Central Government: Trends of various deficits Deficit: AlRevenue Fiscal Primary Revenue though, it is the Year deficit deficit deficit as smallest of the per cent three types defiof fiscal cit, but it is the dificit most dangerous. Though (As per cent of GDP) this deficit is officially just the FRBMA net R.B.I credit 2003-04 3.6 4.5 0.0 79.7 to the Central 2.4 3.9 0.0 62.3 Government, in 2004-05 actual practice it 2005-06 2.5 4.0 0.4 63.0 is like printing notes to finance 2006-07 1.9 3.3 -0.2 56.3 Government 1.1 2.6 -0.9 41.4 o v e r s - 2007-08 pending.Smallest 2008-09 (Prov.)* 4.4 5.9 2.5 74.8 of all deficits is 4.6 6.5 2.8 70.5 Revenue deficit 2009-10 (BE) (but it is most Source: Economic Survey 2009-10 potent one). Revenue Deficit: It is the excess of revenue expenditure over the revenue receipts. Primary Deficit: It is excess of fiscal deficit over the interest payments. It represents the interest liabilities of an economy.

CUSTOM TAX The levy and the rate of customs duty

in India are governed by the Customs Act 1962 and the Customs Tariff Act 1975. Some times the custom duty is also called Effective Rate of Protections (ERP). Custom duty performs following functions: 1. To provide protection to domestic industries against foreign competition. 2. They regulate foreign trade of a country especially imports. 3. It works a s an instrument to raise productivity. 4. To raise the sufficient revenues. The Union Government levies duties on both imports and exports. Import duties are generally levied on ad valorem basis, i.e, tax amount is scheduled according to the value of the item being taxed. It originated in England. As per Chelliah committee recommendation the custom duty should be reduced and categorized on the basis of merits of the commodities. The peak custom rate for non-agricultural products is proposed to be from 15 per cent to 12.5 per cent. Now only a short dis-

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INTEREST TAX It was introduced in 1974. Provided for the levy and a special tax on the gross amount of interest allowing on the banks on the loans and advances given by them in India. The tax was abolished in 1985 but later reintroduced it as an anti-inflationary measure. In 2000-2001, the interest tax of 2 per cent paid by bank and financial institution was abolished.

Current NEWS Covered up to MARCH 01, 2010

tance away from East Asian rates. ADDITIONAL TAX– Additional tax is that which is imposed on the basis of the continuity in relation to the original one. AUXILIARY TAX - It is imposed irrespective of the original consideration. COUNTERVAILING TAX – An additional import duty imposed on a commodity to offset a reduction of its price as a result of an export subsidy in the country of origin. MINIMUM ALTERNATE TAX (MAT) MAT was introduced as a measure to bring zero-tax paying companies within the tax bracket. MAT was imposed in 1996-97. Under MAT, if taxable income of a company, after availing of all eligible deductions, comes to less than 30 per cent of its book profit, its total income is deemed to be 30 per cent of the book-profit and taxed accordingly. In 1997-98 export profit was exempted from MAT. With effect from April 1, 2000 MAT has been imposed Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY at a flat rate of 7.5 per cent on book profit. The Budget 2006-07 has increased the rate to 10 per cent, which is still only one-third of the normal rate. Book Profit is basically computed under the Companies Act and it is net profit in the profit and loss account without allowing for any deductions or adjustments. The decision to impose MAT was opposed by the arguments like: (a) MAT would generate higher dividend payouts and reduced investment rates; (b) zero-tax paying companies would pay by way of excise and custom duties. But definitely, the MAT would reduce the tax evasion and would

tering a growth of 29.52 percent. Growth in Corporate Taxes was 33.49 percent (Rs.105,174 crore as against Rs.78,785 crore), while Personal Income Tax (including FBT, STT and BCTT) grew at 23.14 percent (Rs.61,433 crore as against Rs.49,890 crore). The momentum of growth in direct taxes could be maintained, despite present global financial crises / recession and its resultant impact on the Indian economy, mainly on account of a shift in the tax collection strategy of the Central Board of Direct Taxes (CBDT) towards improving the tax deduction at source (TDS) mechanism and encouraging better tax compliance, reflected in growth of 35.78 Service tax revenue percent in TDS and Year No. of Tax rate in Revenue Growth in 52.76 percent in services per cent (Rs crore) per cent self-assessment tax. 2003-04 60 8 7891 91.4 Growth in Corporate TDS was 48.2 2004-05 75 10 14200 80.0 percent at Rs36,004 2005-06 84 10 23055 62.4 crore as against 2006-07 99 12 37598 63.1 Rs.24,293 crore in the same period 2007-08 106 12 51301 36.4 last year. Despite 2008-09 110 10 * 60702 18.3 substantial tax re2009-10(P) 114 10 36785 -6.5 # lief allowed to individual taxpayers in Source: Economic Survey 2009-10. the Union Budget * Reduced to 10 per cent with effect from February 24, 2009. 2008, growth of PIT # Over corresponding period April-December, 2008. TDS was 26 percent (P) Revenue collection for 2009-10 (April-December 2009). at Rs.38,868 crore broaden the tax base and encourage as against Rs.30,845 crore in the same the social equity and justice. period last year. Two important tax are being discussed Growth in corporate TDS above 48 as an alternative to MAT to prevent the percent, growth in Fringe Benefit Tax corporates from showing high profits. (FBT) above 47 percent and growth in ALTERNATIVE dividend distribution tax above 48 perTAX ON GROSS ASSETS (ATGA) cent indicate continued strength of the Under this proposed scheme of taxa- Indian economy. Growth in Securities tion, the base would consist of gross Transaction Tax (STT), however, at assets without any deduction of debts, minus 1.60 percent was reflective of exemption for the financial sector. humungous erosion in values of stock TAX ON PROFIT BEFORE markets transactions. DEPRECIATION, INTEREST AND Despite lower advance tax payments TAX (PBDIT) by certain sectors such as real estate, It is also known a ‘optimum alterna- infrastructure, cement, automobile, tive MAT’. It is more simplified and power, textile and downstream oil under this scheme the companies will companies, advance taxes recorded have to optimise the utilization of their positive growth in mining, mineral, inputs so that PBDIT is adequate to metal, engineering, Indian banking, meet the claims of tax, interest and de- telecom, IT, pharma, and consumer preciation. goods sectors. IT was introduced in INCOME TAX 1860 in India by Sir James Wilson to Net direct tax collections during first meet the financial difficulties caused by seven months of the present fiscal (up the mutiny of 1857. But the tax was to October 2008) stood at Rs.166,905 abolished in 1865. The tax was reintrocrore, up from Rs.128,864 crore, regis- duced in 1869. In 1886 exempted agriAPRIL 2010, XVIYear, Issue No.4 Current NEWS Covered up to MARCH 01, 2010

43

cultural-income (due to land revenue). In 1918 it granted exemption to contribution provident fund. In 1922 a separate department created for IT (preciously it was combined with revenue). In 1924-25 a committee was set up under Charles Tod Hunter. In 1939 step system was replaced by slab system. Step Rate- All persons in a particular income bracket bear the same effective rate on every rupee of their income. This is proportional. Slab Rate- Tax on each slab of income is calculated separately. Then calculated technically. It is progressive in nature. REGRESSIVE TAXES: A tax which takes a decreasing proportion of income as income rises. In other words, the tax is regressive if the tax rate diminishes as the base increase. PROPORTIONAL TAXES: A tax which is levied at the same rate at all income levels. The tax liability increases in the same proportion as the increase in income. Hence it is intermediate between a progressive tax and a regressive tax. PROGRESSIVE TAXES: A tax which takes an increasing proportion of income as income rises. In other words, with increasing income, the tax liability not only increases in absolute terms, but also as a proportion to the income. In 1947 an IT commission was set up under Srinivas Vardhan. In 1961 IT Act was imposed, which gave following exemptions: (i) Agricultural Income (ii) Receipts by a member from Hindu undivided family. (iii) Shares of a profit from a firm. (iv) Tax credit certificate (like NSC, NSS, Insurance etc.) The basic exemption limit for personal income tax increased: in general to Rs.1 lakh; for women to Rs.1.35 lakh; and for senior citizens to Rs.1.85 lakh. The personal income tax rates modified: to 10 per cent for income between Rs.1 lakh to Rs.1.5 lakh; 20 per cent for income between Rs.1.5 lakh to Rs.2.5 lakh; 30 per cent for income above Rs.2.5 lakh. Surcharge at 2.5 per cent applicable in the case of individuals, HUFs, association of persons and body of individuals on taxable income above Rs.10 lakh. Standard deduction withdrawn. All prevailing sectoral caps/rebate under Section 88,88B and 88C removed. Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY Investment in financial instruments hitherto eligible for rebate under section 88 eligible for deduction from income under new section 80C with an overall cap of Rs.1 lakh. Sectoral caps on house loan repayment, tuition fees, contribution to provident fund payment, etc. removed. Deduction provided in respect of interest on certain securities etc. under Section SOL withdrawn. One-in-six criteria for filing income

was levied in 1999-2000 at the rate of 10 per cent. In 2000-01 it was increased to 15 per cent on income more than 1 lakh and 1,50,000. In 2001-02 it was withdrawn again in 2002 it was imposed 5 per cent. In 2003-04, the surcharge was abolished. EDUCATION CESS It was introduced in 2004. It is expected to yield Rs 4000-5000 crore and the cess will be ear-marked for education through Mid-Day Meal Scheme. It will

Sources of tax revenue 2004-05

2005-06

2006-07

2007-08

2008-09 (BE)

2008-09 (Prov.)

2009-10 @ (BE)

(Rs. crore) Tax revenue as a proportion of gross domestic product* (in per cent)

Direct Taxes (a)

4.1

4.3

5.1

6.0

6.9

6.1

6.0

Personal Income Tax

1.5

1.5

1.8

2.1

2.6

2.2

1.8

Corporate Tax

2.6

2.7

3.4

3.9

4.3

3.8

4.2

Indirect Taxes (b)

5.3

5.4

5.6

5.6

6.1

4.8

4.4 1.6

Customs

1.8

1.8

2.0

2.1

2.2

1.8

Excise

3.1

3.0

2.7

2.5

2.6

2.0

1.7

Service Tax

0.4

0.6

0.9

1.0

1.2

1.1

1.1

Gross Tax Revenue #

9.4

9.9

11.1

12.0

13.0

10.9

10.4

Source: Economic Survey 2009-10 @ Provisional and unaudited as reported by Controller General of Accounts, Department of Expenditure, Ministry of Finance. # includes taxes referred to in (a) & (b) and taxes of Union Territories and “other” taxes. * Refers to GDP at current market prices. Notes: 1. Direct taxes also include taxes pertaining to expenditure, interest, wealth, gift and estate duty. 2. The ratios to GDP at current market prices are based on the CSO’s National Accounts 2004-05 series.

tax returns modified. Cellular phones removed from the list and expenditure exceeding Rs.50,000 on electricity consumption in any previous year included. TAX DEDUCTION AT SOURCE (TDS) It is an advance tax (also called withholding tax). It is sec-208 of IT Act of 1961. Under this the person is required to pay in advance and it is adjusted against tax liabilities after the year assessment. As per sec-208, any transaction over Rs 5000 related to the following is subjected TDS: 1. Fees for professional or technical services. 2. Deduction of tax from the salary. SURCHARGE TAX Surcharge is tax on tax. It was introduce in 1951 and continued uninterrupted up to 1985. In 1987-88 it was increased to 8 per cent for the purpose of unemployment. In 1990 was increased to 12 per cent. In 1994-95 surcharge remained 12 per cent but the limit became 1 lakh. In 1995-96 it was abolished from assessment. Surcharge

be imposed on the income tax, corporation tax, excise tax and services tax. TRANSACTION TAX The transaction tax is intended to plug the loopholes for evasion of long-term capital gain tax and offset the loss arising out of the abolition of the long-term capital gain tax. It is levied on every transaction in securities listed in the exchange. It is levied as a percentage of the total value of the transaction–and can be levied on either the buyers or sellers or both for every trade. SHORT-TERM CAPITAL GAINS TAX New Transaction Tax is meant to be in partial replacement of the direct Tax (Long Term Capital Gain Tax). New taxes to continue: (1) Banking Cash Transaction Tax (BCTT) was introduced with the objective of preventing generation and laundering of black money and has performed effectively during the previous year. Banking Cash Transaction Tax (BCTT) at 0.1 per cent introduced on withdrawal of cash from bank on a single day of Rs.25,000 or more by in-

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dividuals or HUF and Rs.1 lakh by persons other than individuals and HUF. Banks to report all deposits which are exempt from tax deduction at source on interest. Cash withdrawals from savings account and purchase of demand draft for cash exempt from BCTT. BCTT is applicable for encashment of term deposits if cash received during a single day exceeds the limit. (2) Fringe Benefits Tax (FBT). A new fringe benefits tax introduced on the value of benefits provided by the employer for the collective enjoyment of the employees. The tax at 30 per cent on the value of such fringe benefits is payable by the employer. The tax would, inter alia, include benefits like entertainment, conveyance, tour and travel, use of hotel, boarding and lodging facilities, and gifts. VALUE ADDED TAX (VAT) It is regarded as the fastest growing tax in the world. The road map for the implementation by the states of a fullfledged VAT system requires that the Central Sales Tax (CST) phase-out begin by 2007-08. As a part of states’ compensation package for the phasing out CST, states are given the right to levyVAT on imports. Advantages of VAT: 1. VAT is multi stage tax levied on all stages of production distribution of a commodity. 2. Under VAT each input is taxed only is taxed only once. Since an input is taxed only ones VAT avoids cascading effect which is the chief advantage of the traditional system of excise and sales taxation. 3. Since the cumulative effect of input taxation is absent under VAT, the cost of production increased by the amount of tax itself, thus by preventing unnecessary cost elevation, VAT promotes competitiveness of domestic industries in the world market and thereby generates favorable. 4. Since the credit is being granted the new entrepreneurs and small industries will have advantage because their investment becomes less. 5. VAT in its ideal and comprehensive form also has the advantage of being natural as between different industries, techniques of production and business organization. VALUE ADDED TAX AT STATE Introduction of State level VAT is the Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY most significant tax reform measure at State level. The State level VAT being implemented presently has replaced the erstwhile sales tax system of the States. Under Entry 54 of List II (State List) in the Seventh Schedule to the Constitution of India, “tax on sale or purchase of goods within a State” is a State subject. The decision to implement State level VAT was taken in the meeting of the Empowered Committee (EC) of State Finance Ministers held on June 18, 2004, where a broad consensus was arrived at amongst the States to introduce VAT from April 1, 2005. Accordingly, VAT has been in-

an exempt category and a special rate of 1 per cent for a few selected items. The items of basic necessities and goods of local importance (up to 10 items) have been put in the 0 per cent or the exempted schedule. Gold, silver and precious stones have been put in the 1 per cent schedule. The 4 per cent rate applies to other essential items and industrial inputs. The 12.5 per cent rate is residual rate of VAT applicable to commodities not covered by other schedules. There is also a category with 20 per cent floor rate of tax, but the commodities listed in this schedule will not be VATable. This category covers

Key indica tor s indicator tors Data categories and components

Units

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

% of GDP

3.9

4.0

3.3

2.6

5.92

6.53

1.1

4.4

2

4.63

2

2.83 1170

Fiscal Indicators (Centre) Gross Fiscal Deficit1 Revenue Deficit Primary Deficit Population

1

1

% of GDP

2.4

2.5

1.9

% of GDP

0.0

0.4

-0.2

-0.9

2.5

Million

1089

1106

1122

1138

1154

1

fiscal indicators are as per revised GDP at current market prices based on National Accounts 2004-05 series. fiscal indicators for 2008-09 are based on the provisional actuals for 2008-09. fiscal deficit, revenue deficit and primary deficit were envisaged at 6.8, 4.8 and 3.0 per cent of GDP respectively at the time of presentation of the 2009-10 Budget.

2 3

troduced by all States/UTs by now. Uttar Pradesh is the latest State which has introduced VAT on January 1, 2008. Since sales tax/VAT is a State subject, the Central Government is playing the role of a facilitator for successful implementation of VAT. A compensation formula has also been finalized in consultation with the States, for providing compensation to them, during 2005-06, 2006-07 and 2007-08, for any loss on account of introduction of VAT and compensation is being released according to this formula. Technical and financial support has also been provided to the States for VAT computerization, publicity and awareness and other related aspects. The Empowered Committee, through its deliberations over the years, finalized a design of VAT to be adopted by the States, which seeks to retain certain essential features commonly across States while, at the same time, providing a measure of flexibility to the States to enable them to meet their local requirements. Salient features of the VAT design 1. The rates of VAT on various commodities shall be uniform for all the States/UTs. There are two basic rates of 4 per cent and 12.5 per cent, besides

items like motor spirit (petrol, diesel and aviation turbine fuel), liquor, etc. 2. There is provision for eliminating the multiplicity of taxes. In fact, several State taxes on purchase or sale of goods (excluding entry Tax in lieu of octroi) have been subsumed in VAT or made VATable. 3. Provision has been made for allowing “Input Tax Credit (ITC)”. However, since the VAT being implemented is intra-State VAT only and does not cover inter-State sale transactions, the ITC will not be available on inter-State purchases. Exports will be zero-rated, and at the same time, credit will be given for all taxes on inputs/ purchases, related to such exports. 4. There are provisions to make the system more business-friendly. These include provision for self-assessment by the dealers, provision of a threshold limit for registration of dealers in terms of annual turnover of Rs. 5 lakh, and provision for composition of tax liability up to annual turnover limit of Rs. 50 lakh. 5. States have been allowed to continue with the existing industrial incentives, without breaking the VAT chain. However, no fresh sales tax/VAT-based incentives are permitted. PRESUMPTIVE TAX

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It relates to the use of appropriate indicators of income, wealth, etc., instead of the actual records of these tax bases. In the case of income tax, a presumptive tax is imposed on the basis of an estimated taxable income. It is exogenously determined. The base for presumptive income tax is fixed and does not depend on the behaviour of individual entrepreneurs. In essence, a presumptive income tax works like a lump sum tax. SECURITIES TRANSACTION TAX (STT) It is a tax being levied on all transactions done on the stock exchange at rates prescribed by the Central Government from time to time. The Government of India notified the Security Transaction Tax rules in 2004, which came into effect from October 1 of the same year. CORPORATION TAX It was introduced in 1960-61 and it is levied on the income earned by the joint stock companies or corporate bodies. Before 1959-60, the super tax on companies was known as corporation tax. Until 1960-61, corporations were taxed in partial sense. A corporation was required to pay income tax on behalf of the its shareholders on dividends paid to them. In return, each shareholder got a credit. But after 196061, the corporations are treated as a separate entity and shareholders are no longer allowed any credit against their individual tax liabilities. The Chelliah Committee had recommended that the corporation tax rate should be brought down to 40 per cent.

EXCISE TAX It is tax on goods produced or manufactured within a country. It is levied on two basis: 1. Ad valorem: In this case the duty is imposed on the basis of value of the product. 2. Specific: This is calculated on the basis of quantity of the product. It is governed by Indian Fiscal commission laws of 1921-22. Central excises and Salt Act of 1944 also determines it. Excise duties on commodities other than alcoholic liquors and narcotics are levied by the Central Government. In 1986 modified value added system was adopted, it is based on VAT, it was adopted in Britain in 1973 as an alternative of Sales Tax. In VAT the calculation of tax is calculated at every Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY stage of production till the final production. Manufactured VAT (MANVAT) was done on the basis of recommendation of L.K.Jha committee. But soon it was changed in 1986, in the form of MODVAT mainly because of the following reasons: (i) Taxation inputs: such as raw materials, components and other intermediated has a number of limitations. It is very often distorts the production structure, results in cascading; of taxes and does not allow correct assessments of tax incidents; AND (ii) Classification problem will be eroded. MODIFIED VALUE ADDED TAX (MODVAT)  It was introduced in 1986. The

Ways and Means Advance (WMA) As per the agreement, the Central government would meet temporary mismatches between receipts and expenditure through WMA provided by RBI. RBI and the government would mutually determine the size and cost of WMA. The present system of Ways and Means Advances (WMA) extended by the Reserve Bank of India (RBI) to the State Governments is based on the principles contained in the recommendations of the Informal Advisory Committee (IAC) under the Chairmanship

Demand side growth of GDP, growth contribution and relative share at 2004-05 market prices (per cent) 2005-06

2006-07

GDP at Market Prices

2004-05

9.3

9.4

9.6

5.1

6.8

Consumption (Private)

9.0

8.2

9.8

6.8

4.1 8.2

Consumption (Govt)

2007-08 2008-09

2009-10

8.3

3.8

9.7

16.7

Gross Capital Formation

14.7

14.5

16.9

-4.0

na

Gross Fixed Capital Formation

15.3

14.3

15.2

4.0

5.2

Change in Stocks

24.8

35.0

15.1

-61.2

4.7

Exports

25.9

21.8

5.2

19.3

-15.8

Imports

32.5

22.0

10.0

23.0

-17.2

57.3

51.3

59.7

78.2

36.0

9.8

4.4

10.4

33.6

13.9

Gross Capital Formation

51.4

52.6

62.7

-29.6

na

Gross Fixed Capital Formation

47.3

46.1

50.1

25.8

25.5

-18.6

-8.0

-15.0

-36.2

20.4

Contribution to Growth Consumption (Private) Consumption (Govt)

Net Exports Relative Share Consumption (Private)

59.2

59.1

58.4

58.5

59.5

58.0

Consumption (Govt)

11.0

10.9

10.3

10.3

11.5

11.6

Gross Capital Formation

32.7

34.2

35.8

38.2

34.9

na

Gross Fixed Capital Formation

28.8

30.3

31.7

33.3

32.9

32.5

Source: Economic Survey Note: Does not add to 100 because only major items are included in the table. Figures for 2009-10 are based on advance estimates.

MODVAT scheme provides for instant and complete reimbursement of excise duties paid on competent and raw materials when used in the manufacture of final product. Articles which are not being used as inputs during manufacturing process are not eligible for credit under the new scheme. The credit under MODVAT is available to a manufacturer on the final product only if the final product is dutiable. Credit is allowed only after the evidence of payment of duty is received by the Excise department. APRIL 2010, XVIYear, Issue No.4 Current NEWS Covered up to MARCH 01, 2010

of B.P.R. Vithal. Fiscal Situation 2006-07 were revised in consultation with the Government. As per the revised arrangement, the WMA limits would be fixed on a quarterly basis instead of the existing halfyearly basis. Accordingly, the WMA limits for 2006-07 was placed at Rs.20,000 crore and Rs.10,000 crore for the first and second quarters, respectively, and Rs.6,000 crore each for the third and fourth quarters of the year. 46

The Reserve Bank would retain the flexibility to revise the limits inconsultation with the Government taking into consideration the transitionalissues and prevailing circumstances. Furthermore, the interest rates on WMA and overdraft have been linked to the repo rate as against the Bank Rate hitherto, following emergence of the repo rate as the shortterm reference rate. Accordingly, the interest rate on WMA will be at the repo rate and that on overdraft will be at repo rate plus two percentage points. Considering the impact of recession, the Reserve Bank of India has raised the limit on how much the government can borrow from the central bank as ways & means advance to Rs 20,000 crore up to December 2008, instead of Rs 6,000 crore. In other words, The ways & means advance is additional support to keep the government’s cash flows intact. The government borrows through this facility for 90 days at the repo rate, currently at 7.5 per cent. The advantage of the ways & means advances route is that it does not impact market liquidity conditions. The limit was raised to Rs 20,000 crore for the first half of the year, in 2006-07. For the second quarter, the limit until now was Rs 6,000 crore. REVENUE BUDGET It has two parts: (i) Revenue receipts and (ii) Revenue expenditure. Revenue Receipts. All those receipts of the government which are non-redeemable may be termed as Revenue Receipts. These receipts are divided under two heads: (a) Tax-Revenue and (b) Non-Tax Revenue. Tax revenue comprises of proceeds of taxes and duties levied by the “Union”. Non-Tax Revenue is basically classified into three heads: Interest receipts. These are the largest source of income. These receipts accrue to four sources: (a) Loans to state Governments and Union Territories; (b) Indian Railways; (c) Department of Telecommunications; (d) Cooperatives and Government Servants. Dividends and Profits. These accrue to four sources: (a) Profits from RBI and Nationalized Banks. (b) LIC, GIC, NBFIs. (c) IDBI; (d) Public Sector Units (PSU) Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY  Other Non-Tax revenue. This comes from five sources: (a) Fiscal Services: (i) Circulation of coins. (ii) Difference between the face value of coins and their manufacturing cost. (iii) Mints and penalties realized against economic offences. (b) Other General Services: (i) Examination fees of the UPSC. (ii) Sales of forms, passport and gazettes. (iii) Police supply to the states (CRPF, ITBP, CISF and BSF and sometimes RAF). (c) Social Services: (i) Advertisement of Door-darshan and AIR. (ii) Entry fees at the museum. (iii) Public Health Centres (PHC). (d) Economic Services: (i) Animal husbandry.

Postal deficits. Police and pension. General Services (like tax collection). Social Services (education, health and broadcasting). Grants to states and union territories. Grants to foreign countries. CAPITAL BUDGET Capital Budget comprises: (i) Capital Receipts; and (ii) Capital Expenditures; Capital Receipts. These include receipts accruing from: (a) Market Loans. (b) Special Deposits. These deposits are due to Provident Fund, Superannuation and surplus funds of LIC and GIC. (c) External Assistance. (d) Recovery of Loans and Advances. Under the Five Year Plans, the centre has been giving liberal loans to states and UT governments and other parties. (e) Small Savings. These accrue to Post Office Accounts, Recurring Deposit (RD), Per capita income and consumption at 2004-05 prices Time Deposit (TD), National Saving Income Consumption Certificate (NSC), Rs (%) Rs (%) National Saving Growth Growth Scheme (NSS), Indira Vikas Patra 2004-05 29,745 17,620 (IVP). (f) Provident Funds. (g) Other 2005-06 32,012 7.6 18,909 7.3 Receipts. 2006-07 34,533 7.9 20,168 6.7 2007-08

37,328

8.1

21,841

8.3

2008-09

38,695

3.7

23,012

5.4

2009-10

40,745

5.3

23,626

2.7

Source: Economic Survey Note : Income is taken as GDP at market prices, Consumption is PFCE.

Capital Expenditure. This also can be divided under two heads: (a) Planned Expenditure. (b) Non-Planned

(ii) Dairy and Fisheries. (iii) Forest and Tourism. (e) Grants-in-aid from foreign countries. Revenue Expenditure. This can be divided under two heads: (a) Planned Expenditure. (b) Non-Planned Expenditure Planned Expenditure comprises: Central plans. These include agriculture, rural development, irrigation, flood control, energy, industry, mineral, transport, communications, science and technology, environment and social services and others. Central Assistance for plans of states and Union Territories. Non-planned Expenditure comprises: Interest payments: Defence revenue expenditure. Subsidies.

Expenditure. Planned Expenditure comprises of: Central Plans. Central Assistance for plans of states and Union Territories. Non-planned Expenditure comprises: General Services: These include expenditure on defence and civil services. Social Community Services: These include expenditure on schools, technical institutions, scientific research organizations, and hospitals. Economic Services: These include agriculture, allied services, industry, minerals, petroleum, and chemical fertilizers. Loans and Advances: Loans and advances are given to the state governments, UTs, foreign governments (Nepal and Bhutan) and central government employees.

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BUDGETARY PROCESS The entire process proceeds in various steps: (a) Preparation starts in September by Finance Ministry. (b) Planning Commission scrutinizes the estimates. (c) Estimates of Revenue are prepared by the Department of Revenue, Ministry of Finance. (d) The expenditure budget gives the total plan provisions. (e) The details of plan outlay at both the centre and state level are contained in the document titled Annual Plan, prepared separately by the Planning Commission. (f) A detailed survey of the working of PSUs is given in a document titled Public Enterprise Survey, brought out by the Ministry of Industry. Constitutional Provisions. Article 112, 113, 265 and Rule 104. No tax should be levied or collected except by authority of Parliament and that the President shall, in respect of every financial year, cause to be laid before both Houses, the annual financial statement. Article 113. Demands for grants: (a) No demand for a grant shall be made except on the recommendation of the President; (b) Only the government can present a demand for grant and not the private members; (3) Demands for grants indicate separately the voted and charged items of expenditure. Cut Motion: It is a device to initiate discussion on demands for grants. These motions are meant to reduce amounts of demands for grants. It can be classified into 3 categories: (a) Disapproval of policy Cut. The amount of demand to be reduced to Re.1.; (b) Economy Cut. A specific amount of sum is reduced; (c) Token Cut. The amount of demand is reduced by Rs. 100 only. Principle of Guillotine: The demands are directly put to vote without any discussion or scrutiny. Appropriation Bill: As per Article 114, it is a bill incorporating all the demands for grants voted by the Lok Sabha, along with the expenditure charged on CFI. It is introduced in the Lok Sabha. It has to be passed before 31st March. It has two parts: (a) Charged items. Though normally, the government cannot spend any money without the vote of the ParliaCivil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY ment, certain items of expenditure have been allowed to be incurred without the Parliament’s vote. These items are undisputed ones and include President’s salary, Contingency funds and the others. They are kind of traditional items. (b) Voted items. These are subject to vote by the Parliament. Any expenditure that involves withdrawal from the Consolidated Fund of India needs an Appropriation Bill to be passed. Therefore, an appropriation bill is a part of every budget. Vote on Account: 4 Article 116 empowers the Lok Sabha to make any grant in advance for a part of any financial year pending the completion of the Budgetary Process. A vote on account would be necessary to cover government’s expenditure for the period between the budget being presented and its being passed. A vote on account only pertains to the expenditure side. It is very different from the annual budget. The annual budget not only mentions the expenditure but also spells out how money is to be raised. INTERIM BUDGET: An interim budget is a statement of accounts that does not incorporate changes in the taxation rates from the prevailing rates at the time of budget being presented. Usually a caretaker government presents such budgets. In 1991, the Chandra Shekhar government presented such a budget. The rationale behind such a budget is that the government cannot bring major changes without proper mandate which may or may not be acceptable to the new government. But there is no legal bar on a caretaker government presenting a fullfledged budget. In India, there is no strict distinction between a caretaker government and a normal government. The constitution does not mention the word caretaker. VOTE OF CREDIT It is meant to make grants for meeting unexpected demand upon the resources of the state. The service demanding grants is of indefinite character, hence, the detailed demand cannot be stated as is ordinarily given in an annual financial statement. APRIL 2010, XVIYear, Issue No.4 Current NEWS Covered up to MARCH 01, 2010

Exceptional Grant: The approval from the Parliament It is meant to make those grants, which has to be taken and withdrawal of an do not form a part of the current ser- equivalent amount from the CFI is subvice of any financial year. sequently done. Supplementary demands/grants: Public Account. As per Article 115, it is demanded if The Provident Fund, small saving the amount authorized by any law collections, etc., received by the govmade in accordance with the provi- ernment are kept under the Public Acsions of Article 114, to be expended for count. a particular service for the current fi- The money under Public Account nancial year, is found to be insufficient does not belong to government and has for the purpose of that year. The to be paid back sometime or the other supplementary demands for grants are to the persons and authorities who depresented to be passed by the House posited them. before the end of the financial year. Parliamentary authorization for payAdditional or Excess Grants: ments on the public account is not reAs per Article 115, the demands for ex- quired. cess grants are made after the expen- For operational purposes, it is diditure has actually been incurred and vided into two broad accounts: after the financial year to which it re- (a) Revenue Account. lates has ended. (i) 66 per cent of the total account. The excess shall be brought to the Ranks of 109 nations, by PPP-corrected GDP per notice of CAG and capita Rank 1975 1984 1994 2004 examined by Pub- 58 Paraguay Dominican Rep. Dominican Rep. China lic Accounts Com- 75 Grenadines Honduras Zimbabwe India mittee. 77 Ghana Sri Lanka China Georgia BUDGET EX- 80 Mauritania Solomon Islands India Papua New Guinea ECUTION Solomon India Georgia Bangladesh (a) The Revenue 89 Islands Department, of India Rwanda Senegal Solomon the Ministry of Fi- 90 Islands nance, executes 96 Bangladesh China Congo,Dem.Rep. Burkina Faso the Budget. 108 China Nigeria Rwanda Malawi (b) It has two divisions: (i) Central Board of Direct Taxes (CBDT); (ii) All the receipts of CFI (except bor(ii) Central Board of Excise and Cus- rowing) are kept in revenue account, toms (CBEC); i.e., tax and non-tax revenues. (c) Integrated Financial Administration (iii) The revenue received from the was introduced on Oct 1, 1976. various taxes is the effect of tax pro(d) An organization named Controller posals raised in the finance bill. General of Accounts (CGA) was set up (iv) Within the Revenue Account, the to administer matters pertaining to the non-tax receipts include profits and departmentalization of accounts of the dividends on investments, fees and inUnion Government. terest receipts. Consolidated Fund of India (v) The interest receipt is mainly (Article 266) charged on the non-plan loans adAll revenues received by the govern- vanced to the states and UTs. ment, loans raised by it and also its re- (vi) The dividends and profits include ceipts from recoveries of loans granted surplus/profits of RBI, share in profby it are accounted in the CFI. its from nationalized banks, NBFIs, No amount can be withdrawn from and PSUs. As a whole, non-tax revenue the CFI without the approval and au- receipts constitute 20 per cent of the tothorization of the Parliament. tal receipts in revenue account. Contingency Fund of (b) Capital Account. India (Article 267) (i) Around 34-36 per cent of the total It is an imprest (around Rs. 50 crore) account. placed at the disposal of the President (ii) This includes the amount being to incur the urgent unforeseen expen- raised from market loans, long and mediture. dium term loans, short-term borrow48

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY ings, external loans, recoveries of loans and advances given for the state plans, NSC, NSS, KVP, IVP, PPF. (iii) The main contribution to Capital Account receipts is due to the internal borrowings which constitute 43 per cent of the total capital receipts. TYPES OF BILLS Money Bill It is defined in Article 110. It includes: (a) The imposition, abolition, remission, alteration or regulation of any tax; and (b) The regulation of the borrowing of the money or the giving of any guarantee by the Government of India. (c) The custody of CFI/ Contingency Fund of India, the payment of money into or the withdrawal of money from any such fund. (d) The appropriation of the money out of CFI. (e) The declaring of any expenditure

charged on the CFI or the increasing amount of such expenditure. (f) The receipt of money on account of the CFI or the Public Account of India or the custody or issue of such money or the audit of the accounts of the Union or of a state. It shall not be introduced in the Rajya Sabha. Joint-Sitting is not applicable (Article 108). President’s prior assent is needed. Speaker’s certificate must. When it is passed by the Lok Sabha, it goes to Rajya Sabha, which then has three options - accept it, reject all or make recommendations within the stipulated period of 14 days from the date of receipt of such bill by it. It would have following impact: (a) If accepted, the bill shall be deemed to be passed. (b) If Lok Sabha accepts the recommen-

PILLARS OF INDIAN ECONOMY

Coping with external sector Balance of payment

D

eveloping countries are likely to grow by 2.1 per cent in 2009 and 6.0 per cent in 2010, led by India and China, which remained the most resilient to the crisis.As per the latest BoPdata for fiscal 2009-10, exports and imports showed substantial decline dur ing April-September (H1) of 2009-10 vis-à-vis the corresponding period in 2008-09. There has been improvement in the BoP scenario during H1 of 2009-10 over H1 of 2008-09, reflected in higher net capital inflows and lower trade deficit. However, the invisible surplus declined and current account deficit widened vis-a-vis the corresponding period last year. The private transfer receipts, which had marginally declined during the second half of 2008-09, increased by 4.3 per cent in the first half of 2009-10. A notable feature in the last quarter of 2008-09, however, was significant narrowing down of the trade deficit on account of a larger decline in imports relative to exports, which along with the sustained invisibles surplus led to a significant reduction in the current account deficit (CAD). However, for fiscal 2008-09, despite the higher invisibles surplus of US$ 89.9 billion (7.4 per cent of GDP), the CAD increased to US$ 28.7 billion (2.4 per cent of GDP), mainly on account of the widening trade deficit, as compared to US$ 15.7 billion (1.3 per cent of GDP) in 2007-08.The CAD, despite lower trade deficits, increased to US$ 18.6 billion in H1 (April-September) of 2009-10 from US$ 15.8 billion in April-September 2008 mainly due to a lower net invisibles surplus. There was massive decline in net capital flows from US$ 106.6 billion in 2007-08 (8.8 per cent of GDP) to US$ 7.2 billion (0.6 per cent of GDP) in 2008-09. The decline was mainly due to net outflows under portfolio investment including foreign institutional investments (FIIs), American depository receipts (ADRs)/ global depository receipts (GDRs) (US$ 14.0 billion), banking capital including NRI deposits (US$ 3.2 APRIL 2010, XVIYear, Issue No.4 Current NEWS Covered up to MARCH 01, 2010

49

dations of Rajya Sabha, the bill shall be deemed to be passed. (c) If Lok Sabha doesn’t accept the recommendations of the Rajya Sabha, the bill shall be deemed to be passed. (d) If it is passed by the Lok Sabha and is not returned by the Rajya Sabha within the given period, the bill shall be deemed to be passed. Finance Bill It is a bill related to revenue or revenue expenditure. Its two types are: (a) 1st Class Finance Bill. This bill not only contains any of the matters specified in Article 110 but also others, e.g. a bill which contains a taxation clause but doesn’t deal solely with taxation. [Article (1)] (b) 2nd Class Finance Bill. Any ordinary bill, which contains provisions involving expenditure from the CFI, is a financial bill of 2nd Class. There is no reference of Article 110. billion) and short-term trade credit (US$ 1.9 billion). However, notwithstanding these adverse developments, the resilience of FDI inflows (US$ 17.5 billion in 200809) reflected the growing perception of India as one of the favourite longterm investment destinations. Foreign Exchange Reserve India’s foreign exchange reserves comprise foreign currency assets (FCA), gold, special drawing rights (SDRs) and reserve tranche position (RTP) in the International Monetary Fund (IMF). Foreign currency assets are maintained in major currencies like the US dollar, euro, pound Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY sterling, Australian dollar and Japanese yen. Foreign exchange reserves are denominated and expressed in the US dollar only. A general allocation of SDRs for an amount equivalent to US$ 250 billion and a special SDR allocation pursuant of the fourth amendment of the IMF’s Articles of Agreement, amounting to US$ 33 billion, was made by the IMF to member countries on August 28, 2009 and September 9, 2009 respectively. India received SDR 3,082 million (equivalent to US$ 4,821 million) under general allocation and SDR 214.6 million (equivalent to US$ 340 million) under special allocation from the IMF. These SDR allocations have resulted in an increase of US$ 5.2 billion in India’s foreign exchange reserves. The third major development was the purc hase of gold from the IMF by the RBI. Country-wise details of foreign ex-

tember 18, 2009 announced its decision to sell 403.3 metric tonnes of gold as a central element of its New Income Model and in order to increase its resources for lending to low-income countries. The IMF also decided that the initial offer of the sale would be directly to official holders, including central banks. Consequent of this, the RBIconcluded the purchase of 200 metric tonnes of gold from the IMF, under the IMF’s limited gold sales programme, at the cost of US$ 6.7 billion, in November 2009, as part of its foreign exchange reserves management operation. With this purchase, gold holdings in the country’s foreign exchange reserves have increased from 357.7 tonnes to 557.7 tonnes, which is about 6 per cent of the reserves. Post– purchase, India has become the 10th largest official gold-holding country in the world.

Balance of Payments The Balance of Payment is divided into two main parts: (a) Current Account and (b) Capital Account. I. Current Account: It shows all flows that directly affect the national-income accounts. The current account consists of two major items, namely, (a) merchandise exports and imports or visibles; and invisibles exports and imports. It includes: (a) Exports and Imports of merchandise; (b) Exports and Imports of services, e.g., transportation, insurance, travel, etc.; (c) Inflows and outflows of investment income; (d) Grants, remittances, and other transfers. In terms of calculations, current account consists of 1. Merchandise: (i) Private and (ii) Government. 2. Non-monetary Gold Movement: 3. Invisibles: (i) Travel; (ii) Transportation; (iii) Insurance; (iv) Investment income; (v) Government, not included elsewhere; (vi) Miscellaneous; (vii) Transfer payments (a) Official; and (b) Private. II. Capital Account: It shows all flows that directly affect the national balance sheet. Capital account in India is classified into three main sectors: (a) Private Capital- it is further divided into: (i) long term private capital, which covers foreign investment (both direct or portfolio), long term loans, foreign currency deposits and an estimated portion of the unclassified receipts allocated to the capital account. (ii) Short term private capital, which comprises of loans of an original maturity of one year or less constituting the relevant dividing line. (b) Banking Capital- it covers movements in the external financial assets and liabilities of commercial and cooperative banks authorized to deal in foreign exchange. (c) Official Capital Transaction- it covers RBIs holding of financial currency assets and monetary gold. It includes: (i) Loans; (ii) Amortisation; and (iii) Miscellaneous.

change reserves reveal that India is the fourth largest foreign exchange reserves holder in the world, after China, Japan and Russia. Gold Purchase RBI purchase of gold from the IMF The Executive Board of the IMF, on Sep-

Foreign exchange: In fiscal 2008-09, the rupee depreciated against major international currencies, except the pound sterling, due to deceleration in capital flows and widened trade deficit. The annual average exchange rate of the rupee in 2008-09 was

APRIL 2010, XVIYear, Issue No.4

50

Current NEWS Covered up to MARCH 01, 2010

Rs 45.99 per US dollar, Rs 64.98 per euro and Rs 46.22 per 100 yen, indicating depreciation by 12.5 per cent, 12.2 per cent and 23.5 per cent respectively over the annual average exchange rate during 2007-08. However, annual average exchange rate of the rupee per pound sterling of 78.29 in 2008-09 indicated appreciation by 3.2 per cent over 2007-08. The nominal effective exchange rate (NEER) and real effective exchange rate (REER) indices are used as indicators of external competitiveness of the country over a period of time. NEER is the weighted average of bilateral nominal exchange rates of the home currency in terms of foreign currencies. REER is defined as a weighted average of nominal exchange rates adjusted for home and foreign country relative price differentials. REER captures movements in cross-currency exchange rates as well as inflation differentials between India and its major trading partners. The RBI has been constructing six currency (US dollar, euro for eurozone, pound sterling, Japanese yen, Chinese renminbi and Hong Kong dollar) and 36 currency indices of NEER and REER. What is Exchange Rate? It is of two types: (i) Fixed exchange rate.; and (ii) Flexible Exchange rate system. Fixed Exchange RateCountries following the FER (also known as stable exchange rate and pegged Exchange rate) system agrees to keep their currencies at fixed or at pegged and to exchange their value only fairly at frequent intervals, when the economic situation forces them to do so. Gold standards are the rate under this exchange rate system. Uses: 1. It is necessary for orderly development and growth of foreign trade. 2. It is necessary to attract foreign capital invested, as foreigners will not be interested to invest in a country with unstable currency. 3. Unstable ER may encourage the flight of capital. 4. A stable ERS eliminates speculation in the foreign exchange market. Flexible Exchange Rate SystemUnder the flexible exchange rate system , ERS are freely determined in an open market. Primarily by private dealing by authorized dealers and like Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY other common market prices vary from day to day. The flexible ERS depends upon the day to day import and export of a country. Merits: 1. Those countries with higher growth rate and efficiency will prevail over those not having such performances (greater the efficiency greater the dominance). 2. It gives new country to come forward and to reassert its position. The tendency of monopoly diminishes. 3. Instead of conflict competition prevails. Demerits: 1. Investors become speculative. 2. Inflationary tendencies rise off high sometimes. 3. Difficult for the poor countries to prevail under this system. In between Fixed and Flexible there are many Exchange Rate Systems. (i) Target Zone- The fluctuation is permitted 2 to 3 per cent of the fixed rate. In this system gold is backed by paper currency. This is also known as Wider Band System (WBS). (ii) Managed Floating- When the government intervenes in the exchange markets to affect its exchange rate. It is also called pegged exchange rate. In general, currency values are allowed to fluctuate with market demand and supply, but wide fluctuations are prevented by central bank interventions. It is also called “Dirty Floating”. (iii) Crawling Peg: The par value is automatically revised; the central bank intervenes whenever the exchange rate approaches the support point and revises the par value itself. (iv) Mixed Exchange System- This is also called Dual Exchange Rate (existing in India) i.e. current account is clean float and on capital account is dirty float. The current account is determined by market and the capital account is fixed by RBI. (v) Clean / Pure / Free float: The exchange rate is totally determined by the market demand supply and there is no intervention of government in any situation. There are two basis of exchange: 1. Single currency peg: Single Currency Peg: The currency pegged to a single major currency usually the Reserve Currency the Dollar. 2. Composite currency peg There are five basis of transactions: APRIL 2010, XVIYear, Issue No.4 Current NEWS Covered up to MARCH 01, 2010

Housing Price Index The share of the construction sector in the GDP at constant prices (2004-05) has increased from 7.7 per cent in 2004-05 to 8.0 per cent in 2008-09 (quick estimates). Similarly, the share of real estate, ownership of dwelling and business services (in the financial sector) in overall GDP has increased from 8.9 per cent in 2004-05 to 9.2 per cent in 2008-09 (quick estimates). Both these sectors have grown at an average of 9.7 per cent (construction) and 9.6 per cent (real estate, ownership of dwelling and business services) during 2004-05 to 2008-09. The National Housing Bank (NHB) RESIDEX in India was launched in 2007. Initially 2001 was taken as the base year for the NHB RESIDEX and price movements during the period 2001-05 were captured for five cities (Bangalore, Bhopal, Delhi, Kolkata and Mumbai). Subsequently, based on data from the housing finance companies (HFCs) and National Council of Applied Economic Research (NCAER) the NHB RESIDEX was updated for two years, 2006 and 2007. The NHB RESIDEX has now been expanded to fifteen cities, namely Bangalore, Bhopal, Delhi, Kolkata, Mumbai, Ahmedabad, Faridabad, Chennai, Kochi, Hyderabad, Jaipur, Patna, Lucknow, Pune and Surat and updated up to December 2008 with 2007 as the new base year. 1. Arbitrage: Arbitrage is the simultaneous buying and selling of foreign currency with the intention of making profits from the difference between the exchange rate prevailing at the same time in the different markets. 2. SWAP Operations: Commercial Banks who conduct forward exchange business may resort swap operations to adjust their fund position. The swap means sale of spot currency for the forward purchase of the same currency or purchase of a spot for the forward sale of the same currency. 3. SPOT Exchange: Immediate delivery takes place in this case although it takes in two days time. But the rate is same. Therefore it is also called Spot Rate. 4. Forward Exchange: Exchange is done on spot and delivery takes place later on like deferred. 5. Spot and Forward: Both the feature are prevalent in this system. 1. CIF : Cost Insurance and Freight : It is always greater than FOB. 2. FOB – Freight on Board. External debt: India’s external debt stock stood at US 51

$ 224.59 billion (Rs 1,142,618 crore) in end-March 2009, that is fractionally higher than its previous year’s level of US$ 224.41 billion (Rs 897,314 crore). During the first half of 2009-10, total external debt increased by US$ 18.2 billion (8.1 per cent) to US$ 242.8 billion (Rs 1,166,217 crore). Long-term debt posted an increase of US$ 19.2 billion (10.6 per cent) to stand at US$ 200.4 billion, while shortterm debt fell by US$ 985 million (-2.3 per cent) to stand at US$ 42.4 billion. The share of longterm debt was higher at 82.5 per cent in end-September 2009 as against 80.7 per cent in end-March 2009. Concomitantly, the share of short-term debt declined to 17.5 per cent in endSeptember 2009 from 19.3 per cent in end-March 2009. US dollar-denominated debt accounted for 51.4 per cent of total external debt in end-September 2009, followed by Indian rupee (16.6 per cent), Japanese yen (13.6 per cent), SDR (12.0 per cent), Euro (3.9 per cent) and pound sterling (2.1 per cent) denominated debt. The debt sustainability indicator, that is ratio of foreign exchange reserves to Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY total external debt showed an improvement from 112.1 per cent in endMarch 2009 to 115.4 per cent in endJune 2009 and further to 115.8 per cent in end-September 2009. The ratio of short-term external debt to foreign exchange reserves, which had increased from 14.8 per cent in end-March 2008 to 17.2 per cent in endMarch 2009, was also lower at 15.1 per cent in end- September 2009. Top Twenty debtors in the world: 1. Argentina; 2. Brazil; 3. Chile; 4. China; 5. Colombia; 6. Croatia; 7. India; 8. Indonesia; 9. Kazakhstan; 10. Malaysia; 11. Mexico; 12. Philippines; 13. Poland; 14. Romania; 15. Russian Federation; 16. South Africa; 17. Thailand; 18. Turkey; 19. Ukraine; 20. Venezuela. A cross-country comparison of external debt of 20 most indebted developing countries, based on the data given in World Bank’s publication titled Global Development Finance, 2009 showed that India was the fifth most indebted country in 2007 in terms of stock of external debt. The ratio of India’s external debt stock to gross national income (GNI) as of 2007 at 18.9 per cent was the sixth lowest with China having the lowest ratio at 11.6 per cent. The element of concessionality in India’s external debt portfolio was the second highest after that of Indonesia. In terms of the cover of external debt provided by foreign exchange reserves, India’s position was the fifth highest at 125.2 per cent after China, Malaysia, Thailand and the Russian Federation. A comparison of the share of short-term debt in total external debt across countries reveals that India’s position was the eighth lowest with Mexico having the lowest ratio. World Trade: The World Trade organization (WTO) in March 2009 forecast a 9 per cent decline in global trade for 2009, the largest in over 60 years. As per the World Bank, the dollar value of world trade plummeted 31 per cent between August 2008 and its low point in March 2009. Examination of the month-wise exports and imports for the world, India and some major trading partners of India from 2008 onwards indicates a recovery in trade with export growth becoming positive in November 2009 APRIL 2010, XVIYear, Issue No.4 Current NEWS Covered up to MARCH 01, 2010

over November 2008 in the EU(11.4 per special attention. Among the countries cent), Hong Kong (1.3per cent), India not in the top 15, Brazil is an interest(18.2 per cent), Japan (1.5 per cent) and ing case. India’s export-import ratio Singapore (13.3 per cent) and remain- which had stabilized at above 2 till ing marginally negative in the USA (- 2008-09 indicating a high trade surplus 2.5 per cent) and China (-1.2 per cent). for India has suddenly turned into a Pick up in import growth rates was led trade deficit at 0.64 in the first half of by China (26.7 per cent), followed by 2009-10. Hong Kong (6.5 per cent), the EU (5.2 The UAE has displaced the USA as the per cent) and Singapore (4.4 per cent). topmost destination of India’s exports Import growth also became less nega- in 2008-09 and 2009-10 (April-Septemtive in the case of the US (-3.8 per cent), ber) with an export share of 13.1 per India (-2.6 per cent) and Japan (- 9.9 cent and 14.4 per cent respectively. per cent). India’s exports to all the top three exIn 1990, the shares in world exports of port destinations—the UAE followed China and India were 1.8 per cent Foreign exchange reserves of some major countries and 0.5 per cent reForeign exchange spectively and in Sl. Country No. reserves during 2009 2008, their respec(US$ billion) tive shares stood at 8.9 percent and 1.1 1 China (December 2009) 2399.2 percent. 2 Japan (December 2009) 1049.4 Direction of 3 Russia (December 2009) 439.0 Trade: The major devel- 4 India (December 2009) 283.5 opment in the di5 Korea (December 2009) 270.0 rection of India’s 6 China P R Hong Kong 256.3 trade is that USA which was in the (November 2009) first position in 7 Brazil (December 2009) 238.5 2007-08 has 8 Germany (November 2009) 189.5 been relegated to Singapore (November 2009) 188.9 the third position 9 in 2008-09, with 10 Italy (November 2009) 140.1 UAE becoming 11 France (November 2009) 139.1 India’s largest trading partner, Source: Economic Survey 2009-10 followed by China. However, in the first half of 2009-10, by the USA and China—registered with oil prices moderating, China has negative growth of (-) 28.7, (-) 25.3 and gained a slight edge over the UAE to (-) 21.9 per cent respectively. Regionbecome India’s major trading partner. wise, over half of India’s exports (55 India’s top 15 trading partners: per cent) in the first half of 2009-10 1. UAE; 2. China; 3. USA; 4. Saudi were to Asia (including ASEAN), up Arabia; 5. Germany; 6. Singapore; 7. from around 40 per cent in 2001-02. Iran; 8. Hong Kong; 9. Korea RP; 10. During 2009-10 (April-September), exUK; 11. Australia; 12. Switzerland; 13. ports to Asia (including ASEAN) deJapan; 14. Malaysia; 15. Nigeria. clined by 27.6 per cent and to Europe India had bilateral trade surplus with by 30.9 per cent. India’s merchandise five countries, namely the UAE, USA, exports to South Asian countries Singapore, the UK and Hong Kong in declined by 30.4 per cent. 2008-09 and the first half of 2009-10. In 2009-10 (April-September), Asia and India’s trade deficit with the USA and ASEAN continued to be the major Singapore in 2007-08, turned into trade source of India’s imports accounting surplus thereafter. The export import for 61.3 per cent of the total. Countryratio fell in 2008-09 in the case of Hong wise, China remained the largest Kong, though it recovered in the first source with a share of 12 per cent in half of 2009-10. The fall in export-im- India’s total imports followed by the port ratio from 0.8 in 2004-05 to the USA (5.95 per cent), UAE (5.93 per present 0.3 in the case of China needs cent) and Saudi Arabia (5.5 per cent). 52

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY As a result of global recession, India’s import growth from 14 of the top 15 trading partners was negative, Indonesia being the exception. World trade in services: The US$ 3.78 trillion world export of commercial services was dominated by the developed countries in 2008, with the exception of India and China which were also among the top 10 exporters. Import growth in commercial services in the US was particularly low at 8 per cent, while its deceleration in EU by 9 percentage points was particularly sharp. While India ranks 27th in world merchandise exports in 2008 compared to China at 2ndposition , in commercial services exports it ranks 9th compared to China at 5th rank. The three broad categories of commercial services, namely transport, travel and other commercial services witnessed a decline in export growth in 2008 compared to a high growth in 2007. In commercial services imports, India moved from 15th position in 2004 to 13th position in 2005, and remained in 13th position in 2008, with a 2.4 per cent share. The United States, the European Union-15 and Japan are the major importers of services in the world. Among top exporters/importers of services (with EU-27 taken as a single unit) India ranked among the first five countries in the export of computer and information services, commercial services, communication services including telecommunications services and other business services and in the import of computer and information services, financial services and transport services. India’s services exports India, which is moving towards servicesdominated GDP growth with a 9 per cent CAGR for services which is higher than the 5.8 per cent for nonservices during 2000-01 to 2006-07, is also moving towards a services-dominated export growth with a CAGR of 28.7 per cent for services during 200001 to 2006-07 which is higher than the 19 per cent for merchandise exports during the corresponding period. India’s services imports Imports of commercial services have become important in recent years reaching US$ 52.0 billion in 2008-09 though growth had decelerated to 1.1 per cent due to global recession. APRIL 2010, XVIYear, Issue No.4 Current NEWS Covered up to MARCH 01, 2010

Special Economic Zones The Special Economic Zones (SEZs) Policy supported by the SEZ Act 2005 and SEZ Rules 2006 intends to make SEZs an engine for economic growth supported by quality infrastructure, complemented by an attractive fiscal package, both at the Central and State levels and with the single-window clearance mechanism. In a short span of about three years since the SEZs Act and Rules were notified in February 2006, formal approvals have been granted for setting up of 571 SEZs out of which 346 have been notified. A total of 105 SEZs are exporting at present. Out of these 65 are information technology(IT)/ information technology enabled services (ITES), 15 multi-product and 25 other sector-specific SEZs. The total number of units in these SEZs is 2761. The SEZs in China are estimated to account for around 12 per cent of that country’s economy. Shenzhen, is the largest SEZ in China and it accounts for one-seventh of Chinese exports. The main objective of SEZ is to provide an internationally competitive and hassle free environment for export production. The SEZs imply a qualitative transformation of the traditional export processing zones. The unit operating in these zones are to be deemed as outside the country’s custom territory and will have full flexibility of operation. They can import capital goods and raw materials duty free. The only pre-condition is this that the units in the zones would have to be a net foreign exchange earner. Agricultural Export Zones AEZ are set up to promote agricul- Five new AEZs tural export and to reorganize our Product Specified area export efforts. On the basis of spe- Vegetable and Fruits: Pune cific profit on specific geographi- Vegetables: Punjab cal areas. The incentives includes: Potatoes: Agra 1) Financial Assistance 2) Tax Con- Meat: Aligarh cessions 3) No export registration Mangoes: In and around Lucknow 4) Free government consultation 5) Transport assistance is proposed to be made available for export of fresh and processed foods, vegetables and dairy products. 6) The scheme is already under operations and three agricultural Economic Zones have come up. Eg. : Pineapple in Jalpaiguri, Darjeeling and West Bengal. Lichee in Udhamsingh Nagar, Nainital in Uttaranchal and Gherkins in Bangalore Karnataka. 53

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY

PILLARS OF INDIAN ECONOMY

Agriculture and allied services and food management

T

he agriculture sector (including allied activities) in India accounted for 15.7 per cent of the GDP (at constant 2004-05 prices), in 2008-09, compared to 18.9 per cent in 2004-05, and contributed approximately 10.2 per cent of total exports during 2008-09. Notwithstanding the fact that the share of this sector in the GDP has been declining over the years, its role remains critical as it provides employment to around 52 per cent of the workforce. The GCF in agriculture and allied sectors as a proportion of total GDP stood at 2.66 per cent in 2004-05 and improved to 3.34 per cent in 2008-09. Similarly, the GCF in agriculture & allied sectors relative to GDP in this Agriculture sector: Key indicators at constant prices (2004-05) in per cent Item 1

2

3

4

2007-08

2008-09

Growth in GDP in Agriculture & Allied Sectors

4.7

1.6

Agriculture

5.0

1.1

Forestry and Logging

2.2

2.9

Fishing

6.0

6.3

Share in GDP - Agriculture and Allied Sectors

16.4

15.7

Agriculture

13.9

13.2

Forestry and Logging

1.7

1.7

Fishing

0.8

0.8

Share of Agriculture & Allied Sectors in total GCF

7.01

9.05

Agriculture

6.43

8.39

Forestry and Logging

0.07

0.09

Fishing

0.51

0.58

Share of Agricultural Imports in Total Imports at Current Prices

2.95

2.74

12.05

10.23

Share of Agricultural Exports in Total Exports at Current Prices 5

Employment in the agriculture Sector as Share of Total Employment in 2004-05 as per CDS

52.1

Source : Economic Survey 2009-10 Notes : GCF—gross capital formation; CDS—current daily status. sector has also shown an improvement from 14.07 per cent in 2004-05 to 21.31 per cent in 2008-09. Production: Total foodgrains production in 2008-09 was estimated at 233.88 million tonnes as against 230.78 million tonnes in 2007-08. However, the production of major commercial crops (oilseeds, sugarcane, cotton, jute and mesta) declined in 2008-09 compared to 2007-08 levels. Fertilizers: Chemical fertilizers have played a significant role in the development of the agricultural sector. The per hectare consumption of fertilizers in nutrients terms increased from 105.5 kg in 2005-06 to 128.6 kg in 2008-09. Irrigation: The total irrigation potential in the country has increased from 81.1 million ha in 1991-92 to 102.77 million ha by March 2007. Government launched the Accelerated Irrigation Benefit Programme (AIBP) during 1996-97 for accelAPRIL 2010, XVIYear, Issue No.4 Current NEWS Covered up to MARCH 01, 2010

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erating implementation of ongoing irrigation/multi-purpose projects on which substantial progress has been made and which were beyond the resource capability of the State Governments or at advanced stages of construction and could yield irrigation benefits in the next four agricultural seasons. AIBP guidelines were further modified in December 2006 to provide enhanced assistance at 90 per cent of the project cost as grant to special category States, Drought Prone Area Programme (DPAP) States/tribal areas/flood-prone areas and KoraputBalangir-Kalahandi (KBK) districts of Orissa. Under the AIBP, Rs 34,783.7823 crore of Central Loan Assistance (CLA)/grant has been released up to March 31, 2009. An additional irrigation potential of 54.858 lakh ha has been created under the AIBP up to March 2009. As on March 31, 2009, 268 projects have been covered under the AIBP and 109 completed. Price Support Scheme (PSS): The Department of Agriculture & Cooperation is implementing the Price Support Scheme (PSS) for procurement of oilseeds and pulses through the National Agricultural Cooperative Marketing Federation of India Limited (NAFED), which is the Central nodal agency, at the MSP declared by the Government. NAFED is also the Central agency for procurement of cotton under the PSS in addition to the Cotton Corporation of India (CCI). NAFED undertakes procurement of oilseeds, pulses and cotton under the PSS as and when prices fall below the MSP. Procurement under the PSS is continued till prices stabilize at or above the MSP. During 2009-10 (up to January 4, 2010) NAFED has procured 64,802 metric tonnes of various oilseeds costing Rs 278.07 crore under the PSS. Market Intervention Scheme (MIS): The Department of Agriculture & Cooperation implements the MIS on the request of State/Union Territory (UT) Governments for procurement of agricultural and horticultural commodities that are generally perishable in nature and not covered under the PSS. The MIS is implemented in order to protect the growers of these commodities from having to make distress sales. In the event of a bumper crop and glut in the market, prices tend to fall below economic levels/cost of production. Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY Procurement under the MIS is made by NAFED as the Central agency and by State-designated agencies. During 2009-10, the rates of most of the horticultural crops ruled to the benefit of growers. Thus only a couple of proposals were received, one from the Government of Karnataka for procurement of arecanut and another from the Government of Mizoram for procurement of passion fruit. Agricultural production: Rubber: India is the fourth largest producer of natural rubber (NR) with an 8.9 per cent share in world production in 2008. Coffee: In India, coffee is cultivated in an area of around 3.94 lakh ha. The post-monsoon crop estimate for the 2009-10 season is estimated at 2.90 lakh tonnes comprising 0.95 lakh tonnes of Arabica and 1.95 lakh tonnes of Robusta. The current year’s production is about 10.6 per cent more than the previous year’s. Livestock and fisheries: The livestock and fisheries sector contributed over 4.07 per cent of the total GDP during 2008-09 and about 26.84 per cent value of output from total agriculture and allied activities. India ranks first in world milk production, its production having increased from 17 million tonnes in 1950-51 to 108.5 million tonnes by 2008-09. Poultry continues to play an important role in providing livelihood support and food security, especially to the rural population. India produces more than 55.6 billion eggs per year, with per capita availability of 47 eggs per annum. Feed and fodder: Adequate availability of feed and fodder for livestock is very vital for increasing milk production and sustaining the ongoing genetic improvement programme. It is estimated that there is green fodder shortage of about 34 per cent in the country. Agricultural insurance: The National Agricultural Insurance Scheme (NAIS) is being implemented since rabi 1999-2000, as part of the strategy for risk management in agriculture. The scheme is being implemented by 25 States and two Union Territories. During the period from rabi 1999-2000 to rabi 2008-09, 1,347 lakh farmers over an area of 2,109 lakh ha have been covered, insuring a sum of Rs 1,48,250 crore. APRIL 2010, XVIYear, Issue No.4 Current NEWS Covered up to MARCH 01, 2010

Agricultural schemes in operation: Macro Management of Agriculture Scheme (MMA): It was formulated in 2000-01, by bringing together under one umbrella 27 Centrally sponsored schemes relating to cooperatives, crop production programmes, watershed development programmes, horticulture, fertilizer, mechanization and seeds. The Scheme has been revised during 2008-09 to improve its efficacy in supplementing/complementing the efforts of the States towards enhancement of agricultural production and productivity. National Food Security Mission (NFSM): With a view to enhancing the production of rice, wheat and pulses by 10 million tonnes, 8 million tonnes and 2 million tonnes respectively by the end of the Eleventh Plan, the Centrally sponsored NFSM has been launched from the rabi 2007-08 season. The three major components of the Mission are NFSM-rice, NFSM-wheat and NFSM-pulses. The NFSM is presently being implemented in 312 identified districts of 17 States of the country. Rashtriya Krishi Vikas Yojana (RKVY): The RKVY, a flagship scheme of the Government in the agriculture and allied sectors was launched in August 2007 to reorient current agricultural development strategies to meet the needs of farmers and rejuvenate the agricultural sector so as to achieve 4 per cent annual growth during the Eleventh Five Year Plan. The scheme has an envisaged outlay of Rs 25,000 crore for the Plan period in the form of Additional Central Assistance (ACA). Up to 83 per cent and 85.95 per cent of the allocations for 2007-08 and 2008-09 respectively have been utilized by the end of November 2009. Integrated Scheme of Oilseeds, Pulses, Oil palm and Maize (ISOPOM): The Ministry of Agriculture has restructured oilseeds, pulses, oil palm and maize development programmes into one Centrally Sponsored Integrated Scheme of Oilseeds, Pulses, Oil Palm and Maize which is being implemented in 14 major States for oilseeds and pulses, 15 States for maize and 8 States for oil palm. About 75-80 per cent area of pulses is already in the NFSM-Pulses districts under 14 States. The Oil Palm Development Programme under ISOPOM is being implemented in the States of Andhra Pradesh, Karnataka, Tamil Nadu, Gujarat, Goa, Orissa, Kerala, Tripura, Assam and Mizoram. National Rainfed Area Authority (NRAA): The Government of India has also constituted the NRAA to give focused attention to the problem of rainfed areas of the country. Drought Management: During the year 2009-10, drought/scarcity/drought-like situation has been declared in 334 districts by 14 State Governments. The States have ready availability of funds under the Calamity Relief Fund (CRF) for taking immediate necessary measures in the wake of natural calamities including drought. For natural calamities of severe nature, the State Governments can seek additional assistance from the National Calamity Contingency Fund (NCCF), by submitting a detailed Memorandum with relevant details. Several steps were taken to mitigate the hardship being faced by the States due to the drought situation. National Horticulture Mission (NHM): For the holistic development of the horticulture sector, a Centrally sponsored scheme called the National Horticulture Mission (NHM) was launched in 2005-06. Under the Technology Mission for Integrated Development of Horticulture in the North Eastern Region during 2008-09, an additional area of 1,48,071 lakh ha has been brought under different horticultural crops.A proposal for implementation of a pilot project for Replanting and Rejuvenation of Coconut Gardens in Thiruvananthapuram, Kollam and Thrissur districts of Kerala and the Union Territory of Andaman & Nicobar Islands has been approved. Micro Irrigation: A Centrally sponsored scheme on micro irrigation (MI) was launched in January 2006 for promoting water-use efficiency by adopting drip and sprinkler irrigation. National Bamboo Mission (NBM): The NBM is a Centrally sponsored scheme with 100 per cent Central assistance. The scheme commenced in 2006-07 and aims at holistic development of the bamboo sector in India. The Mission intends to establish 195 bamboo bazaars and 10 retail outlets (showrooms) in different metropolitan cities by the end of 2010-11, to promote marketing of bamboo and its products.

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY The pilot Weather Based Crop Insurance Scheme (WBCIS) is being implemented in 13 States to provide insurance protection to farmers against adverse weather incidences which are deemed to adversely impact crop production. The Coconut Palm Insurance Scheme (CPIS) has been launched on pilot basis during 2009-10 in selected areas of Andhra Pradesh, Goa, Karnataka, Kerala, Maharashtra, Orissa and Tamil Nadu. The pilot scheme will continue during 2010-11. Decentralized Procurement Scheme (DCP): A number of states have opted for implementation of the (DCP) introduced in 1997, under which foodgrains are procured and distributed by the State Governments themselves. Under this scheme, the designated States procure, store and issue foodgrains under the TPDS and welfare schemes of the Government of India. Allocation under the Targeted PDS Allocations of foodgrains for BPL and AAY categories are made at the rate of 35 kg per family per month for all accepted 6.52 crore families in the country. The total BPL and AAY allocations made during 2009-10 were 276.77 lakh tonnes comprising 181.05 lakh tonnes of rice and 95.72 lakh tonnes of wheat. Allocations under the APL category are made depending upon the availability of stocks of foodgrains in the Central Pool and past offtake. Presently, these allocations range between 10 kg and 35 kg per family per month in different States/UTs. During 200910, 197.17 lakh tonnes of foodgrains has been allocated to States/UTs under the APL category as against 112 lakh tonnes during 2008-09. Open Market Sale Scheme In order to check inflationary trends in the foodeconomy, the Government took a decision in August 2008 to release wheat into the open market under the Open Market Sales Scheme (Domestic). These releases have been made through (a) allocation to State/ UT Governments for distribution to retail consumers; and (b) sale to bulk consumers by the FCI through open tenders. The release of wheat under the OMSS has helped stabilize wholesale prices of wheat. APRIL 2010, XVIYear, Issue No.4 Current NEWS Covered up to MARCH 01, 2010

PILLARS OF INDIAN ECONOMY

Industrial de velopment dev

T

he major industrial groups like automobiles, rubber and plastic prod ucts, wool and silk textiles, wood products, chemicals and miscella neous manufacturing staged a strong recovery during April-No vember 2009, while machinery and textile products reinforced their growth. Led by cement, non-metallic mineral products also staged a recovery, albeit a modest one. After posting a growth of around 14 per cent annually in the eight-year period ending 2008-09, beverages and tobacco products experienced a slump in the current year. Product groups like paper, leather, food and jute textiles did not evince any visible recovery. Cotton textiles and metal products have also been experiencing lacklustre growth since 2007-08. Overall, the picture is a mixed one in the analysis of major industrial groups. The Technology Upgradation Fund Scheme (TUFS) and Scheme for Integrated Textile Parks (SITP) are two flagship schemes of the Ministry of Textiles. TUFS, implemented with a view to facilitating modernization and upgradation of the textile industry by providing credit at reduced rates, has been fine-tuned to induce investments in targeted seg- Growth in the IIP and its major components ments. (per cent) Pharmaceuticals: Period Mining Manufacturing Electricity IIP The country now 2006-07 5.4 12.5 7.2 11.6 ranks third in 2.7 11.1 8.3 10.3 terms of volume of Q1 2007-08 Q2 2007-08 7.4 8.9 7.1 8.7 production (10 per 5.5 8.9 4.6 8.3 cent of global Q3 2007-08 5.2 7.3 5.5 7.0 share) and 14th by Q4 2007-08 value. The Indian Q1 2008-09 4.0 5.8 2.0 5.3 pharma industry’s Q2 2008-09 3.8 4.9 3.2 4.7 growth has been Q3 2008-09 2.0 0.5 2.9 0.8 fuelled by exports Q4 2008-09 0.9 0.3 3.0 0.5 which registered a Q1 2009-10 6.8 3.4 6.0 3.8 growth of 25 per Q2 2009-10 9.0 9.3 7.5 9.1 cent in 2008-09. Oct-Nov. 09 9.5 11.9 4.0 11.0 The top five destinations of Indian Source : Economic Survey 2009-10 pharmaceutical products are the USA, Germany, Russia, the UK and China. The domestic pharma sector has also expanded in recent years. There are five pharmaceutical Central publicsector/ joint-sector undertakings under the Department of Pharmaceuticals which manufacture critical bulk drugs/ formulations. These are Indian Drugs & Pharmaceuticals Limited, Hindustan Antibiotics Limited, Bengal Chemicals & Pharmaceuticals Limited, Rajasthan Drugs and Pharmaceuticals Ltd and Karnataka Antibiotics & Pharmaceuticals Ltd. In pursuit of excellence in pharmaceutical education and research, six new National Institutes of Pharmaceutical Education & Research (NIPERs) have been set up, in addition to the existing one at Mohali. Steel: India ranked as the fifth largest producer of crude steel in the world during January -November 2009 (World Steel Association). Domestic crude steel production grew at a compounded annual rate of 7.1 per cent during 2004-05 to 2008-09. Information Technology: During 2008, electronics hardware production in India constituted around 1.5 per cent of global electronics production. The production of electronics hardware in the country stood at Rs 94,690 crore in 200809, registering a growth of 12.1 per cent, compared to a growth of 27.8 per cent in 2007-08; the decline is attributable to the global economic slowdown. 56

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY Twenty States/Union Territories have completed the institutional framework for State-level strategic decision making including setting up of State e-Governance Mission Teams (SeMT) and deployed SeMT personnel. Under the initial phase of the National Knowledge Network (with scalable multi-gigabit capabilities to connect 1,000 nodes covering all universities, research institutions, libraries, laboratories, hospitals and agricultural institutions across the country), a core backbone consisting of 15 Points of Presence (PoPs) has been established with 2.5 Gbp capacity. Application-oriented projects for specific users/industries with technology demonstration and technology transfers are mostly carried out by R&D societies of the Department of Information Technology like the Centre for Development of Advanced Computing (CDAC) and Society for Applied Microwave Electronic Engineering and Research (SAMEER) with active collaboration from academics. C-DAC commissioned a high performance computing system called PARAM “Yuva”. The “PARAM Sheersh” Supercomputing Facility at the North Eastern Hill University (NEHU), Shillong conducts scientific and engineering research in strategic areas in the North-East region. The Indian Computer Emergency Response Team (CERT-In) has been designated as the nodal agency for coordinating matters related to cyber security and emergency response. CERT-In has published a crisis management plan for countering cyber attacks and cyber terrorism. Micro, small and medium enterprises (MSMEs): MSMEs contribute about 8 per cent of the GDP of the country, about 45 per cent of manufactured output and about 40 per cent of exports. This, coupled with a high labour to capital ratio, high growth and high dispersion makes them crucial for achieving the objective of inclusive growth. As per the Quick Results of the 4th All India Census of MSMEs (2006-07), there were 26 million MSMEs in the country, which provided employment to about 60 million persons. Of the total, 28 per cent were in the manufacturing sector and 72 per cent in the service sector. This is

the first Census after the enactment of the MSMED Act 2006 and includes, for the first time, medium enterprises. Skill development has been accorded high priority in line with the overall target set by the Prime Minister’s National Council on Skill Development. The agencies under the Ministry of MSME will conduct skill development programmes for about 3.62 lakh trainees during 2009-10. Under the Credit Linked Capital Subsidy Scheme (CLCSS), which aims at facilitating technology upgradation of the MSE sector, 1,403 MSEs have been assisted and subsidy amounting to Rs 81.53 crore has been sanctioned during April-November 2009. Central Public-sector Enterprises (CPSEs): There were altogether 246 CPSEs under the administrative control of various ministries/departments as on March 31, 2009. The cumulative investment (paid-up capital plus longterm loans) in all the CPSEs together stood at Rs 5,28,951 crore as in end-March 2009. The largest share in this investment belonged to the service sector (46.1 per cent) followed by electricity (26.2 per cent), manufacturing (18.1 per cent) and mining (8.8 per cent). A great deal of investment in CPSEs is being made through internal resources rather than through investment from outside. Of the total, 158 CPSEs made net profit and 54 net loss in 2008-09. The Government has been delegating enhanced financial and operational powers to the Navratna, Miniratna and other profit-making CPSEs. There are 18 Navratna enterprises. Six more CPSEs, namely the Airport Authority of India Limited, Ennore Port Ltd, Tehri Hydro Development Corporation, Security Printing and Minting Corporation Ltd, Satluj Jal Vidut Nigam Ltd and Indian Railway Catering and Tourism Corporation Ltd. were granted Miniratna status during the year, raising the total number of Miniratna CPSEs to 62. Industrial sickness: The Board for Reconstruction of Public Sector Enterprises (BRPSE), established to advise the Government, inter alia, on revival /restructuring of sick and loss-making

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CPSEs, made recommendations on 58 cases until December 31, 2009. The Government has approved proposals for the revival of 37 CPSEs and closure of two. The total assistance approved in this regard up to March 31, 2009 was Rs 15,275 crore, which comprised Rs 2,935 crore as cash assistance and Rs 12,340 crore as non-cash assistance. A National Green Tribunal has been proposed for expeditious disposal of cases relating to environmental protection and conservation of forests and other natural resources including enforcement of any legal right relating to environment and giving relief and compensation for damages. FDI FDI inflows to India, which remained robust in 2008-09 despite the slump in global financial flows, have also continued to flow smoothly during the current year so far. During April-November 2009-10, total FDI equity inflows stood at Rs 93,354 crore (US$ 19,379 million) as against Rs 85,700 crore (US$ 19,791 million) during the corresponding period in 2008-09, signifying a growth of 9 per cent in rupee terms and a decline of 2 per cent in US dollar terms; the divergent patterns in growth rates being attributable to ex-

change rate changes during the period. During 2008-09, total FDI equity inflows stood at Rs1,22,919 crore (US$ 27,309 million) as against Rs 98,664 crore (US$ 24,579 million) during 200708, signifying a growth of 25 per cent in rupee terms and 11 per cent in US dollar terms. The sectoral shares of FDI inflows have fluctuated significantly in recent years. Sectors like agricultural services, sea transport and electrical equipment have shown a quantum jump in FDI inflows during 2009-10. Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY

PILLARS OF INDIAN ECONOMY

Energy, Infrastructure and Communications Power generation: Electricity generation by power utilities during 2009-10 has been targeted to go up by 9.1 per cent to 789.5 billion KWh. The growth of power generation during April–December 2009 was about 6.0 per cent (Table 10.3) as compared to about 2.7 per cent during April-December 2008. Decline in hydroelectric power generation was mainly due to poor monsoons. Coalbased generation of power constituted around 80 per cent of thermal generation and around 66 per cent of the total generation of power. The power sector is a major consumer of coal using 74 per cent of the coal production. The Eleventh Five Year Plan envisaged a capacity addition of 78,700 MW, of which 19.9 per cent was hydel, 75.8 per cent thermal and the rest nuclear. The target for 2007-08, the first year of the Eleventh Plan, was initially fixed at 16,335 MW and subsequently reduced to 12,039 MW. Against this revised target, a capacity addition of 9,263 MW was achieved during the year. A capacity addition target of 11,061 MW comprising 9,304 MW thermal, 1,097 MW hydro and 660 MW nuclear was origiPower Generation by Utilities (Billion KWh) Category

2007-08

2008-09

April-December 2008-09

2009-10

Growth (per cent)

Power Generation*

704.5

723.8

540.0

572.5

6.0

i) Hydroelectric

123.4

113.0

92.4

85.4 (-)

7.4

ii) Thermal

559.0

590.0

430.7

468.5

8.8

iii) Nuclear

16.8

14.8

11.3

13.4

18.6

5.3

5.9

5.6

5.1

(-) 8.3

iv) Bhutan Import

Source : Economic Survey 2009-10 * Excludes generation from captive and non-conventional power plants and thermal power plants below 20 MW units and hydro power plants below 2 MW.

nally planned for 2008-09. On account of revision in the definition of commissioning of thermal projects, the capacity addition target for the year 2008-09 was revised as 7,530 MW, against which a capacity of 3,454 MW was added up to March 31, 2009. Ultra Mega Power Projects (UMPPs): Nine UMPPs of 4,000 MW each have originally been identified for development under the international competitive bidding route. Four UMPPs, namely Sasan in MP, Mundra in Gujarat, Krishnapatnam in Andhra Pradesh and Tilaiya in Jharkhand have already been awarded. One unit of 660 MW of the Sasan UMPP and two units of 800 MW each of the Mundra UMPP are expected to be commissioned in the Eleventh Five Year Plan. In respect of the UMPP at Sarguja district in Chhattisgarh, all the pre-Request for Qualification (RfQ) activities have been completed. For the UMPP in Sundergarh district, Orissa, most of the prerequisites for issuing the RfQ are already in place, except issuance of Section 4 Notification. With respect to the UMPP in Tamil Nadu, the site has been finalized at Cheyyur, along with the captive port which is under finalization. For the second UMPP in Andhra Pradesh, the site at Nayunipalli, Prakasam District has been finalized by CEA/ PFC in consultation with State Government. Mega Power Policy: Guidelines under the Mega Power Policy, introduced in 1995, were modified in 1998 and 2002 and further amended in April 2006 to encourage power development in Jammu & Kashmir and the northeastern region. In the wake of the important statutory and policy- level changes, some of APRIL 2010, XVIYear, Issue No.4 Current NEWS Covered up to MARCH 01, 2010

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the provisions of the present Mega Power Policy were revisited, bringing them in line with the National Electricity Policy 2005 and Tariff Policy 2006. Forty-six hydro projects with an aggregate capacity of 13,675 MW are under construction in the country. The two power exchanges, namely the Indian Energy Exchange Ltd. (IEX), New Delhi, and the Power Exchange India Ltd. (PXIL), Mumbai, have been in operation from June 27, 2008 and October 22, 2008 respectively. The focus of the Restructured Accelerated Power Development Reforms Programme (RAPDRP) is on actual, demonstrable performance in terms of reduction in aggregate technical and commercial (AT&C) losses. Under the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY), 69,963 villages have been electrified and connections have been released to 88.8 lakh BPL households up to January 15, 2010. Rajiv Gandhi Gramin LPG Vitrak Yojana (RGGLVY): The Ministry of Petroleum & Natural Gas has formulated a vision for the year 2015 ‘Customers Satisfaction & Beyond’ wherein it is targeted to cover 75 per cent of the population with LPG by that year. The LPG customer base is targeted to increase from 10.6 crore as on April 1, 2009 to 16.0 crore by the year 2015. COAL: More than 92 per cent of the coal production in India is of non-coking coal. Raw coal production during April-November 2009 was 325.87 million tonnes as against 289.69 million tonnes in the same period of the previous year, registering a growth of 12.5 per cent. RAILWAYS: Adarsh Stations: Indian Railways has decided that 17 more railway stations would be added to the existing list of 358 Adarsh Stations. Railways will develop Adarsh Stations with basic facilities such as drinking water, adequate toilets, catering services, waiting rooms and dormitories especially for lady passengers and better signage. The work has started at various stations. Real-time train running information to passengers is proposed to be provided through Online Coach Indication Display Boards and Train Arrival/Departure Display Boards. The trial of one Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY of the pilot projects, Satellite Imaging for Rail Navigation (SIMRAN) using real-time train tracking through GPS and mobile (GSM) technologies has been successfully carried out by the Research Design and Standards Organisation (RDSO), Lucknow, in coordination with IIT/Kanpur. National Highways Development Project (NHDP): About 27 per cent of the total length of national highways is single-lane/intermediate lane, about 54 per cent is two-lane standard and the balance 19 per cent is four-lane standard or more. In 2009-10, as against the stipulated target of developing about 3,165 km length of NHs under various phases of the NHDP, the achievement up to November 2009 has been about 1,490 km. Against the target of awarding projects for a total length of about 9,800 km under various phases of the NHDP during 200910, projects have been awarded for a total length of about 1,285 km up to November 2009. Prime Minister’s Grameen Sadak Yojana (PMGSY): The Eleventh Five Year Plan has projected an investment requirement of Rs 41,347 crore (at 200607 prices) for rural roads. During the first three years of the Eleventh Five Year Plan, the flow of expenditure under the PMGSY seems to be on course for meeting the Plan target. Greenfield Airports in the North-eastern region: The AAI plans to construct of greenfield airports in the north-eastern region with budgetary support. Construction work has already commenced at Pekyong Airport in Sikkim at a cost of Rs 309.46 crore and is likely to be completed by January 2012. Approval is being obtained for construction of greenfield airports at Cheitu (Nagaland) and Itanagar (Arunachal Pradesh). Development of 35 Non-metro Airports: The AAI has taken up the development of 35 non-metro airports at an estimated cost of Rs 4,662 crore. Of them, 9 have been completed and put in operation. The other projects are in progress and likely to be completed by 2010-11. The Committee of Infrastructure has identified 24 of the 35 non-metro airports for city-side development through PPP. It has been decided that in the first instance cityside development of 10 selected air-

ports, namely Ahmedabad, Kolkata, Jaipur, Lucknow, Amritsar, Indore, Vishakapatnam, Hyderabad, Guwahati and Bhubaneswar, should be undertaken. It has been proposed to carve out the surplus land available with the AAI on the city side of the selected airports and lease out the same through open tenders. Pawan Hans Helicopters Ltd. proposes to construct a heliport in New Delhi to provide connectivity to tourists and the business community, especially during the Commonwealth Games 2010, and for emergency/disaster management. Possession has been taken of the land allotted by the Delhi Development authority (DDA) at Rohini and M/s RITES Ltd has been engaged for preparation of a feasibility study. Ports: India has 12 major ports and 200 non-major ones. Of the non-major ports, about 66 are handling traffic. The total traffic carried by both the major and non-major ports during 2007-08 was estimated at around 723 million tonnes. The 12 major ports carry about three-fourths of the total traffic, with Visakhapatnam as the top traffic handler in each of the last seven years. Posts: Collection of Rural Price Index Data: The Ministry of Statistics and Programme Implementation (MoSPI) has entrusted the collection of statistics for ascertaining the Rural Price Index to 1,183 post offices across the country with effect from October 2009. The data so collected would be electronically transmitted to MoSPI.Indian Post has implemented certain recommendations of the R.S. Nataraja Murthy Committee on the service conditions of Gramin Dak Sewaks (GDS), which include enhancement of emoluments of all categories of GDS and enhancement of certain allowances. Urban infrastructure: As per the 2001 Census, about 27.8 per cent of the population lives in urban areas. Jawaharlal Nehru Urban Renewal Mission (JNNURM): The JNNURM was launched in December 2005. In order to provide reforms-linked Central assistance to State Governments for the development of urban infrastructure, a Mission Mode approach was adopted in 63 selected cities, which

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include cities with 4 million plus population (7), cities with 1 million plus but less than 4 million population (28 cities) and other selected cities like State capitals and cities of religious/historic and tourist importance (28). During 2009, two more cities, that is Tirupati and Porbandar were included as Mission Cities, taking the total number to 65. The Peer Experience and Reflective Learning (PEARL) programme was launched to foster knowledge sharing through networking among the Mission cities. The Urban Infrastructure Development Scheme for Small and Medium Towns (UIDSSMT) is a sub-component of the JNNURM for development of infrastructural facilities in all towns and cities (other than the Mission cities). The UIDSSMT subsumed the erstwhile Integrated Development of Small and Medium Towns (IDMT) and Accelerated Urban Water Supply Programme (AUWSP) schemes. For obtaining assistance under the UIDSSMT, States and urban local bodies (ULBs) need to sign a memorandum, committing to reforms. A new pilot scheme for infrastructure development (water supply, solid

waste management and sewerage) in "satellite towns" around seven megacities (which exclude those towns and cities that have taken up projects under the UIDSSMT) has been launched. The selection of the cities/ towns has been done in consultation with State Governments, subject to their commitment to implement reforms. These are Vikarabad (Andhra Pradesh), Vasai Virar (Maharashtra), Sri Perumbudur (Tamil Nadu), New Town (West Bengal), Hoskote (Karnataka), Sanand(Gujarat) Sonepat (Haryana) and Pilkhua (Uttar Pradesh). Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY

PILLARS OF INDIAN ECONOMY

Social sector Poverty and flagship programmes

ty and Inequality Pover erty

As per the United Nations Development Programme (UNDP) Human Development Report 2009 (HDR 2009), the Human Development Index (HDI) for India in 2007 was 0.612 on the basis of which India is ranked 134 out of 182 countries of the world placing it at the same rank as in 2006. According to the Report, life expectancy at birth in India was 63.4 years in 2007 as against 80.5 years in Norway, 81.4 years in Australia, 74.0 years in Srilanka and 72.9 years in China. Adult literacy rate (aged 15 and above) in 1999-2007 was 66.0 per cent in India as against near 100 per cent in many of the developed nations, 93.3 per cent in China and 92.0 per cent in Indonesia. Combined gross enrolment ratio in education in 2007 was 61 per cent in India as against 99.3 per cent in Canada, 98.6 per cent in Norway, 78.0 per cent in Thailand and 76.4 per cent in Egypt. In terms of the Gender Development Index (GDI), with an index value of 0.594, India ranks 114 out of 155 countries. Gini Index: The lower (higher) the number, the more equal (unequal) is the distribution. At 36.8, India’s Gini index was more favourable than that of comparable countries like Brazil(55), Turkey (43.2), Thailand(42.5), China(41.5), Indonesia(39.4), Vietnam(37.8) and even the USA (40.8), Singapore(42.5), Hong Kong(43.4) and Portugal(38.5), which are otherwise ranked very high in human development. At 8.6, the ratio of the richest 10 per cent of population to the poorest 10 per cent was also lower than in these countries. Gini coefficient: It is a measure of income distribution in an economy. It is a precise way of measuring the position of the Lorenz curve. The Gini coefficient is found out by measuring the ratio of the area between the Lorenz curve and the 45 degree line. For a society with perfect income equality, the Lorenz curve coincides with the 45 degree line and hence Gini Coefficient is 0. For a perfectly inequal society, the Gini Coefficient is 1. Lorenz Curve: Inter-State inequality in India as reflected in the Lorenz ratio ( which like Gini Index is used as a measure of relative inequality) has been estimated by the NSSO based on household consumer expenditure for 2004-05. For rural India, the Lorenz ratio for total consumption expenditure was 0.30 while for urban India, it was 0.37 indicating, as expected, higher relative inequality in urban areas. Lower inequality was seen in rural areas of Assam (0.197), Meghalaya(0.155) and Manipur(0.158) than in Kerala(0.341), Haryana(0.323), Tamil Nadu(0.315) and Maharashtra(0.310). Similiarly, lower inequality was seen in the urban areas of Arunachal Pradesh(0.243), Jammu & Kashmir(0.244), Meghalaya(0.258) and Manipur(0.175) than in Chattisgarh(0.439), Goa(0.405), Kerala(0.400), and Madhya Pradesh(0.397). Lorenz Curve- It is the measure for inequality and relative poverty shows the relationship between percentage of income receivers and percentage of income. The increase in number of firm would increase number of employment. It shows that the increase percentage of the total income does not mean an increase in percentage of receiver. Poverty Gap Index (PGI) – It is defined by the mean distance between BPL expressed as proportion of that line a (where the mean is formed over the entire population counting the non-poor as having zero PG). The PG thus measured the transfer that would bring the income of every poor person exactly up to the poverty line, thereby elimination the poverty. Trends of expenditure on reforms: Expenditure on social services as a proportion of total expenditure increased from 19.9 per cent in 2004-05 to 21.6 per cent in 2006-07 and further to 23.8 per cent in 2009-10 (BE). Expenditure on educaAPRIL 2010, XVIYear, Issue No.4 Current NEWS Covered up to MARCH 01, 2010

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tion as a proportion of total expenditure has increased from 9.7 per cent in 2004-05 to 10.6 per cent in 2009-10 (BE). The share of health in total expenditure has also increased from 4.3 per cent in 2004-05 to 4.8 per cent in 200910 (BE). Poverty: The Uniform Recall Period (URP) consumption distribution data of the NSS 61st Round yields a poverty ratio of 28.3 per cent in rural areas, 25.7 per cent in urban areas and 27.5 per cent for the country as a whole in 2004-05. The corresponding poverty ratios from the Mixed Recall Period (MRP) consumption distribution data are 21.8 per cent, 21.7 per cent and 21.8 per cent respectively. The committee constituted by the Ministry of Rural Development for sug-

gesting a methodology for estimation of BPL households in rural areas observed that the national poverty line at Rs 356 per capita per month in rural areas and Rs 539 per capita per month in urban areas at 2004-05 prices permitted both rural and urban people to consume about 1,820 k calories as against the desired norm of 2,400/ 2,100 k calories. Hence, a large number of the rural poor got left out of the BPL status benefits as in order to consume the desired norm of 2,400/2,100 k calories, the cut-off line for determining BPL status should have been around Rs 700 in rural areas and Rs 1,000 in urban. The committee, therefore recommended that the percentage of people entitled to BPL status should be revised upwards to at least 50 per cent though the calorie norm of 2,400 would require this to be 80 per cent. Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY Employment: As noted in Economic Surveys of previous years based on NSSO data, employment on a current daily status (CDS) basis during 19992000 to 2004-05 had accelerated significantly as compared to the growth witnessed during 1993-94 to 1999-2000. During 1999-2000 to 2004-05, about 47 million work opportunities were created compared to only 24 million in the period between 1993-94 and 1999-2000. Employment Growth accelerated from 1.25 per cent per annum to 2.62 per cent per annum. However, since the labour force grew at a faster rate of 2.84 per cent than the work force, unemployment rate also rose. The incidence of unemployment on CDS basis increased from 7.31 per cent in 1999-2000 to 8.28 per cent in 2004-05. Employment in establishments covered by the Employment Market Information System of the Ministry of Labour grew at 1.20 per cent per annum during 1983-94 but decelerated to -0.03 per cent per annum during 19942007. However, the latter decline was mainly due to a decrease in employment in public-sector establishments from 1.53 per cent in the earlier period to -0.57 per cent in the later period, whereas the private sector showed acceleration in the pace of growth in employment from 0.44 per cent to 1.30 per cent per annum. Rural Sanitation: Total Sanitation Campaign (TSC): The annual budgetary support for the TSC was increased from Rs 202 crore in 2003-04 to Rs 1,200 crore in 2009-10. With the scaling up of the TSC, combined with higher resource allocation, programme implementation has improved substantially. Since 1999, over 6.01 crore toilets have been provided to rural households under the TSC. A significant achievement has also been the construction of 9.37 lakh school toilets and 2.95 lakh Anganwadi toilets. The number of households being provided with toilets annually has increased from only 6.21 lakh in 2002-03 to 115 lakh in 200809. In 2009-10 (up to December 22, 2009), more than 62 lakh toilets were provided to rural households. The cumulative coverage till now is 61 per cent as against only 21.9 per cent rural households having access to latrines as per Census 2001 data. The TSC follows a community-led and APRIL 2010, XVIYear, Issue No.4 Current NEWS Covered up to MARCH 01, 2010

Tendulkar Committee on poverty lines 1. Poverty estimates to continue to be based on private household consumer expenditure of Indian households collected by the National Sample Survey Organization (NSSO). 2. Need to move away from anchoring the poverty lines to a calorie intake norm. 3. Since for canvassing household expenditure on a recall basis, the NSSO has decided to shift to an MRP-based estimates for all its consumption surveys in future, there is need to adopt the MRP-based estimates of consumption expendi-ture as the basis for future poverty lines as against the previous practice of using URP estimates. This change captures the household consumption expenditure of poor households on low- frequency items of purchase more satisfactorily. 4. MRP equivalent of the urban poverty line basket (PLB) corresponding to 25.7 per cent urban headcount ratio as the new reference PLB to be provided to rural as well as urban population in all the states after suitable adjustments. 5. The proposed reference PLB takes into account all items of consumption (except transport and conveyance) for construction of price indices. Separate allowance for private expenditure on transport and conveyance has been made in the recommended poverty lines. 6. The proposed price indices are based on the household-level unit values (approximated price data) obtained from the 61st round (July 2004 to June 2005) of the NSS on household consumer expenditure for food, fuel and light, clothing and footwear at the most detailed level of disaggregation and hence much closer to the actual prices paid by consumers in rural and urban areas. Price indices for health and education were also obtained from unit-level data from related National Sample Surveys. The proposed price indices (Fisher Ideal indices in technical terms) incorporate both the observed allIndia and state-level consumption patterns in the weighting structure of the price indices. For rent and conveyance, the actual expenditure share for these items was used to adjust the poverty line for each state. 7. The new poverty lines seek to enable the rural as well as urban population in all the States to afford the recommended all-India urban PLB after taking due account of within-State rural-urban and inter-State differentials (rural and urban) incorporating observed consumer behaviour both at the all-India and State levels.

8. The all-India rural headcount ratio and all-India combined headcount ratio using the recommended procedure is 41.8 per cent and 37.2 per cent in comparison with official estimates of 28.3 per cent and 27.5 per cent respectively. Poverty at all-India level in 1993-94 was 50.1 per cent in rural areas, 31.8 per cent in urban areas and 45.3 per cent in the country as a whole as compared to the 1993-94 official estimates of 37.2 per cent rural, 32.6 per cent urban and 36.0 per cent combined. Thus, even though the suggested new methodology gives a higher estimate of rural and combined ruralurban headcount ratio at the all-India level for 2004-05, the extent of poverty reduction in comparable percentage point decline between 1993-94 and 200405 is not very different from that inferred using the old methodology. 61

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Major Anti Poverty, employment generation and basic services programmes Pradhanmantri Gram Sadak Yojana (PMGSY): 1. The PMGSY was launched on December 25, 2000 as a 100 per cent Centrally Sponsored Scheme with the primary objective of providing all- weather connectivity to the eligible unconnected habitations in the rural areas. 2. The programme is funded mainly from the accruals of diesel cess in the Central Road Fund. In addition, support of the multilateral funding agencies and the domestic financial institutions is beingobtained to meet the financial requirements of the programme. Indira Awaas Yojana (IAY): 1. This scheme aims at providing dwelling units, free of cost, to the poor families of the Scheduled Castes,Scheduled Tribes, freed bonded labourers and also the non-SC/ST persons below the poverty line in rural areas. 2. The scheme is funded on a cost sharing basis of 75:25 between the Centre and the States. Swarnjayanti Gram Swarozgar Yojana (SGSY): 1. The Swarnjayanti Gram Swarozgar Yojana (SGSY) was launched in April 1999 after restructuring the Integrated Rural Development Programme (IRDP) and allied programmes. It is the only Self Employment Programme currently being implemented for the rural poor. 2. The objective of the SGSY is to bring the assisted swarozgaris above the poverty line by providing them income generating assets through bank credit and Government subsidy. The scheme is being implemented on a cost-sharing basis between the Centre and States of 75:25 for non-northeastern states and 90:10 for north-eastern states. 3. Up to December 2009, 36.78 lakh selfhelp groups (SHGs) had been formed and 132.81 lakh swarozgaris have been assisted with a total investment of Rs 30,896.08 crore. Sampoorna Grameen Rozgar Yojana (SGRY) 1. The Sampoorna Grameen Rozgar Yojana (SGRY) was launched on September 25, 2001. The objective of the programme is to provide additional wage employment in the rural areas as also food security, alongside creation of durable community, social and economic infrastructure in the rural areas. Swarna Jayanti Shahari Rozgar Yojana (SJSRY) 1. In December 1997, the Urban Self-Employment Programme (USEP) and the Urban Wage Employment Programme (UWEP), which are the two special components of the Swarna Jayanti Shahari Rozgar Yojana, were substituted for various programmes operated earlier for urban poverty alleviation. 2. Budget allocation for the SJSRY scheme for 2009-10 is Rs 515.00 crore of which Rs 363.12 crore had been utilized till December 31, 2009. During 2009-10, as reported by States/UTs, 28,613 urban poor have been assisted to set up individual enterprises, 13,453 urban poor women have been assisted in setting up group enterprises, 27,463 urban poor women have been assisted through a revolving fund for thrift and credit activities and 85,185 urban poor have been imparted skill training. National Rural Employment Guarantee Scheme (NREGS), 1. was launched in February 2006 in 200 most backward districts in the first phase and was expanded to 330 districts during 2007-08. The coverage was extended to all rural districts of the country in 2008-09. At present, 619 districts are covered under the NREGS. During the year 2008-09, more than 4.51 crore households were provided employment under the scheme. During the year 2009-10, 4.34 crore households have been provided employment under the scheme. Out of the 182.88 crore person days created under the scheme during this period, 29 per cent and 22 per cent were in favour of SC and ST population respectively and 50 per cent in favour of women. Bharat Nirman: It was launched in 2005-06 for building infrastructure and basic amenities in rural areas, has six components,namely rural housing, irrigation potential, drinking water, rural roads, electrification and rural telephony. It is an important initiative for reducing the gap between rural and urban areas and improving the quality of life of people in rural areas. The allocation in 2009-10 for Bharat Nirman was stepped up by 45 per cent over 2008-09(BE). Up to December 2009, a total length of about 2,50,554 km of roads has been completed under the PMGSY with a cumulative expenditure of Rs 59,800 crore. To enable rural schools to provide safe and clean drinking water for children, the Jalmaniprogramme was launched on November 14, 2008 and Rs 100 crore was provided to the States in 2008-09. peoplecentred approach. The components of the TSC include start-up activities, Individual household latrines, community sanitary complexes, school sanitation and hygiene education and Anganwadi toilets. To encourage Panchayati Raj institutions (PRIs) to

take up sanitation promotion, there is the Nirmal Gram Puraskar (NGP) incentive scheme under which an award is given to those PRIs that attain a 100 per cent open defecation-free environment. The NGP has been acclaimed internationally as a unique

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tool of social engineering and community mobilization. Skill Development In the Eleventh Five Year Plan, a comprehensive skill development programme with wide coverage throughout the country has been initiCivil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY

Major Public Health Programmes

National Vector Borne Disease Control Programme 1. The National Vector Borne Disease Control Programme (NVBDCP) is being implemented for prevention and control of vector borne diseases like malaria, filariasis, kalaazar, Japanese encephalitis (JE), dengue and chikungunya. 2. To achieve NHP-2002 goal for Elimination of Lymphatic Filariasis by 2015, the Government. of India initiated Annual Mass Drug Administration (MDA) with single dose of Diethylcarbamazine citrate tablets to all individuals living at risk of filariasis excluding pregnant women, children below 2 years of age and seriously ill persons. 3. Kala-azar is endemic in 4 States of the country, namely Bihar, West Bengal, Jharkhand and Uttar Pradesh. The National Health Policy (2002) envisages kala-azar elimination by 2010. Acute Encephalitis Syndrome (AES)/Japanese encephalitis (JE) has been reported frequently from 12 States/ UTs. Revised National Tuberculosis Control Programme (RNTCP): It is using Directly Observed Treatment Shortcourse (DOTS) is being implemented with the objective of curing at least 85 per cent of the new sputum positive patients initiated on treatment, and detecting at least 70 per cent of such cases. Padiatric Patient Wise Drug Boxes have been introduced in the programme from January 2007. National AIDS Control Programme The NACP-III is being implemented for the period 200712 with an investment of Rs 11,585 crore.. Major achievements during 2009-10 include scaling up of targeted interventions for high-risk groups to 1,281,counselling and HIV testing 91.9 lakh persons including 38.8 lakh pregnant women and providing anti-retroviral treatment to around 2.88 lakh patients as of November 2009. New strategies initiated during the year include setting up of the District AIDS Prevention and Control Unit (DAPCU), scheme of link workers in rural areas of category A and B districts, collaboration with the NRHM and other National Health Programmes, preferred private provider scheme for management of sexually transmitted infections among high risk groups and setting up of link anti-retroviral (link ART) centres to facilitate ARV drug dispensing. National AIDS Control Organisation has tried to increase access to services and communicate effectively for behavior change. Integrated Disease Surveillance Project (IDSP) 1. It was launched in November 2004. It is a decentralized, State-based surveillance Program in the country. 2. In Phase-I, 9 States, in Phase-II, 14 States and in PhaseIII, 12 States are included. Major components of IDSP are integration and decentralization of surveillance activities, strengthening of public health laboratories, human resource development and use of information technology for collection, collation, compilation, analysis and dissemination of data.

National Rural Health Mission (NRHM): The NRHM was launched in 2005 to provide accessible, affordable and accountable quality health services to rural areas with emphasis on poor persons and remote areas. It is being operationalized throughout the country, with special focus on 18 states, which include eight Empowered Action Group States (Bihar, Jharkhand, Madhya Pradesh, Chhattisgarh, Uttar Pradesh, Uttarakhand, Orissa and Rajasthan), the eight north-eastern States, Himachal Pradesh and Jammu & Kashmir. the Mission, in a sector-wide approach addressing sanitation and hygiene, nutrition and safe drinking water as basic determinants of good health seeks greater convergence among the related social-sector departments, i.e. AYUSH, Women and Child Development, Sanitation, Elementary Education, Panchayati Raj and Rural Development. The expected outcomes of the Mission include reduction of IMR to below 30 per1,000 live births, MMR to below 100 per1,00,000 live births and TFR to 2.1 by 2012. Janani Suraksha Yojana ( JSY): This 100 per cent centrally sponsored scheme was launched with a focus on demand promotion for institutional deliveries in States and regions where these are low. It targeted lowering of the MMR by ensuring that deliveries were conducted by skilled birth attendants. Pradhan Mantri Swasthya Suraksha Yojana (PMSSY): The PMSSY has two components in its first phase: (i) Setting up of six All-India Institute of Medical Science (AIIMS)-like institutions—Under the first phase of the PMSSY, the Government has decided to set up six AIIMSlike institutions, one each in the States of Bihar (Patna), Chhattisgarh (Raipur), Madhya Pradesh (Bhopal), Orissa (Bhuban-eshwar), Rajasthan (Jodhpur) and Uttranchal (Rishikesh). These States were identified on the basis of their socio-economic vulnerabilities. (ii) Upgradation of 13 existing Government medical colleges/ institutions in ten States. In most of the colleges, most of the work is expected to be completed this year, while in the rest, it would be completed in 2010-11. Universal Immunization Programme. 1. The coverage of the programme, first launched in the urban areas in 1985, was progressively extended to cover the entire country by 1990. 2. Between 1988 and 2006, there has been a decline of 83 per cent in diphtheria, 83 per cent in pertussis, 59 per cent in measles, 94 per cent in neonatal tetanus and 97 per cent in poliomyelitis. 3. Hepatitis-B vaccination programme which was started in 2002 in 33 districts and 15 cities as a pilot has been expanded to all districts of good performing States. Vaccination against Japanese encephalitis was started in 2006. Pulse Polio Immunization Programme 1. An outbreak of polio has been witnessed in 2006 with the spread of polio virus. 2. The initiatives include use of Monovalent Oral Polio Vaccine (mOPV1 & mOPV3) in the high risk districts and States to enhance immunity against P1 and P3 virus,vaccinating the children in transit and covering children of migratory population from Uttar Pradesh and Bihar. APRIL 2010, XVIYear, Issue No.4 Current NEWS Covered up to MARCH 01, 2010

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Two schemes are being implemented for the development of adolescent girls, namely the Kishori Shakti Yojana (KSY) and the Nutrition Programme for Adolescent Girls (NPAG). The KSY is an intervention for adolescent girls and aims at addressing the self-development and nutrition and health status needs, literacy and numerical skills and vocational skills of adolescent girls in the age group 11-18 years. The scheme is currently operational in 6,118 ICDS projects. The NPAG is being implemented in 51 identified districts across the country to provide 6 kg of free foodgrains per beneficiary per month to undernourished adolescent girls (1119 years) irrespective of financial status of their families. Both the schemes are currently being implemented through the ICDS infrastructure. They will now be subsumed within a new scheme for adolescent girls, namely the Rajiv Gandhi Scheme for Empowerment of Adolescent Girls also named SABLA. The new Scheme

aims at empowering adolescent girls along with an improvement in their nutritional and health status and upgrading of various skills like home, life and vocational skills (for girls aged 16 and above). Kishori Shakti Yojana (KSY) and Nutrition Programme for Adolescent Girls (NPAG) 1. KSY aims at addressing the needs of self- development, nutrition and health status, literacy and numerical skills, and vocational skills of adolescent girls in the age group of 11-18 years. 2. It provides free foodgrain @ 6 kg per beneficiary per month to undernourished adolescent girls (11-19 years) irrespective of financial status of the family to which they belong. 3. Both the schemes are being implemented through the infrastructure of Integrated Child Development Services Scheme (ICDS). 4. A Comprehensive Scheme for Prevention of Trafficking and Rescue, Rehabilitation and Re-integration of Victims of Trafficking and Commercial Sexual Exploitation-"Ujjawala"has been launched recently. The scheme has five componentsprevention, rescue,rehabilitation, re-integration and repatriation. National Commission for Protection of Child Rights (NCPCR) 1. The National Commission for Protection of Child Rights (NCPCR) was set up on March 5, 2007, for effective implementation of child rights in the country. 2. Initiated in 1975, ICDS is one of the largest child intervention programmes in the world with a holistic package of six basic services for children up to 6 years of age, and for pregnant and nursing mothers. 3. These services are health check up, immunization, referral services, supplementary feeding, preschool education, and health and nutrition education through one platform, i.e. Anganwadi Centre (AWC). Rajiv Gandhi National Creche

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ated by the Government. The Coordinated Action Plan for Skill Development has a target of 500 million skilled persons by the year 2022. In this regard, a three-tier institutional structure consisting of (i) the Prime Minister’s National Council on Skill Development, (ii) the National Skill Development Coordination Board (NSDCB) and (iii) the National Skill Development Corporation(NSDC), has already been set up to take forward the skill development mission. The NSDCB has addressed to five core areas of skill development, namely (i) curriculum revision on a continuous basis, (ii) vocational education, (iii) apprenticeship training, (iv) accreditation and certification system and (v) skillgap mapping. Unique Identification Authority of India (UIDAI): On June 25, 2009 the Cabinet approved the creation of the position of Chairperson, Unique Identification Authority of India (UIDAI). On July 30, 2009 the Prime Minister has also constituted a council under his chairmanship to advice the UIDAI and ensure coordination between the ministries, stakeholders and partners.

Women and Child Development

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Scheme 1. The scheme of Rajiv Gandhi National Creche Scheme for Children of Working Mothers provides its services to the children of age group 0-6 years which includes supplementary nutrition, emergency medicines and contingencies. 2. Up to March 31, 2009, 31,718 creches with approximately 7,92,950 beneficiaries had been sanctioned to the implementing agencies. Juvenile Justice (Care and Protection of Children) Act, 2000 1. It is the primary law relating to juveniles in conflict with law as well as children in need of care and protection. 2. This Act provides for proper care, protection and treatment for juveniles, by adopting a child friendly approach in the adjudication and disposition of matters in the best interest of children and for their ultimate rehabilitation through various institutions established under the Act. 3. The Juvenile Justice (Care and Protection of Children) Amendment Act, 2006 came into effect from August 23, 2006 and has made the law more child friendly. 4. Under the scheme "A Programme for Juvenile Justice," 50 per cent expenditure requirements of States/UTs are being provided for establishment and maintenance of various homes under the Juvenile Justice (Care and Protection of Children) Act, 2000. Shishu Greh Scheme 1. The Central Adoption Resource Agency (CARA), an autonomous organization of Ministry of Women and Child Development is functioning with the goal to promote domestic adoption and regulate inter-country adoption as provided under the Guidelines of Government of India. 2. CARA is also implementing the Shishu Greh Scheme for providing institutional care to children up to the age of 6 years and their rehabilitation through in country adoption. Dhanalaxmi scheme: A conditional cash transfer scheme, Dhanlakshmi, for the girl child was launched as a pilot project in March 2008. The scheme provides for cash transfers to the family of a girl child on fulfilling certain specific conditionalities relating to birth and registration, immunization and enrolment and retention in schools Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY

The 86th Constitutional Amendment Act 2002 led to insertion of Article 21A in Part III of the Constitution that made free and compulsory education for all children between 6 and 14 years of age, a fundamental right. The Right of Children to Free and Compulsory Education Act 2009 to provide for free and compulsory education for all children of the age 6 to 14 years, was published in the Gazette of India on August 27, 2009. Sarva Shiksha Abhiyan (SSA) 1. The Sarva Shiksha Abhiyan (SSA) is being implemented in partnership with States to address the needs of children in age group of 6-14 years. 2. The achievements of the SSA till September end 2009 are opening of 2,88,155 new schools, construction of 2,40,888 school buildings, construction of 10,26,831 additional classrooms, 1,84,652 drinking water facilities, construction of 2,86,862 toilets, supply of

free textbooks to 9.05 crore children, appointment of 10.11 lakh teachers and in-service training for 21.79 lakh teachers. Rashtriya Madhyamik Shiksha Abhiyan (RMSA): A new centrally sponsored scheme, the RMSA, to enhance access to secondary education and improve its quality was launched in March 2009. The objectives of the scheme are to achieve an enrolment ratio of 75 per cent for Classes IX-X within five years by providing a secondary school within reasonable distance of every habitation, to improve quality of education imparted at secondary level through making all secondary schools conform to prescribed norms, to remove gender, socio-economic and disability barriers, universal access to secondary level education by 2017, i.e. by the end of 12th Five Year Plan and universal retention by 2020. The Central Government shall bear 75 per cent and the State Governments 25 per cent of the project expenditure during the Eleventh Five Year Plan. The funding pattern will be 90:10 for the northeastern States. National Programme for Education of Girls at Elementary Education (NPEGEL) 1. The programme is aimed at enhancing girls’ education by providing additional support for development of a “model girl child friendly school” in every cluster with more intense community mobilization and supervision of girls enrolment in schools. 2. Under NPEGEL, 35,252 model schools have been opened in addition to supporting 25,537 Early Childhood Care and Education (ECCE) centres. Besides, 24,387 additional classrooms have been constructed, and 1.85 lakh teachers have been given training on gender sensitization. Kasturba Gandhi Balika Vidyalaya (KGBV) 1. The Kasturba Gandhi Balika Vidyalaya (KGBV) scheme was launched in July 2004 for setting up residential schools at upper primary level for girls belonging predominantly to the SC, ST, OBC and minority communities. There are 2573 KGBVs reported to have been sanctioned in the States and 1.96 lakh girls belonging to the SC,ST,OBC & minority communities enrolled in them.

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up to Class VIII. The scheme is being implemented in 11 blocks across seven States. An amount of Rs 5.95 crore was released during 2008-09, which is expected to benefit 79,555 girl children in identified blocks of Andhra Pradesh, Chattisgarh, Orissa, Jharkhand and Punjab. The Support to Training and Employment Programme for Women (STEP) seeks to provide updated skills and new knowledge to poor women in 10 traditional sectors for enhancing their productivity and income generation. During the year 2008-09, 31,865 women have benefited from the scheme. Up to December 31, 2009 11 new projects have been sanctioned and 12,866 beneficiaries covered under STEP in 200910. As of December 31, 2009, 318 Swadhar homes and 237 helplines are functioning across the country under the Swadhar Scheme which aims to provide the primary needs of shelter, food, clothing and care to margina-lized women/ girls who are without any social and economic support.

Education

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National programme of mid-day meals in schools Under this programme, the Government has revised the food norm for upper primary children by increasing the quantity of pulses from 25 to 30 g, vegetables from 65 to 75 g and decreasing the quantity of oil and fat from 10 to 7.5 g. Upward revision of the cooking cost (excluding labour and administrative charges) for primary to Rs 2.50 and for upper primary to Rs 3.75 has also been made. The cooking cost now includes the cost of pulses, vegetables, oil and fats, salt and condiments and fuel. A separate provision for payment of an honorarium to a cook-cumhelper @ Rs 1000 per month has been made. Transportation assistance for 11 Special Category States— Assam, Arunachal Pradesh, Himachal

Pradesh, Jammu & Kashmir, Manipur, Meghalaya, Nagaland, Sikkim, Uttarakhand and Tripura—has been revised to the rate prevalent under the Public Distribution System (PDS) in these States in place of the existing assistance at a flat rate of Rs 125 per quintal. The new rates are effective from December 1, 2009. Besides the cost of construction of kitchen-cum-store has been revised. The cooking cost, honorarium and cost of construction of kitchen-cum-store will be shared between the Centre and the north-eastern States on a 90:10 basis and other States / UTs on a 75:25 basis. New Central Universities: Civil Services

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ECONOMIC SURVEY 2009-10: CURRENT ECONOMY Establishment of New Central Universities : The Central Universities Ordinance 2009 was promulgated by the President on January 15, 2009 for the conversion of three State Universities in Madhya Pradesh, Chhattis-garh and Uttarakhand into Central Universities and establishment of a new Central University each in twelve States. The Ordinance was subsequently replaced by the Central Universities Act 2009. While the three States Universities stood converted immediately on promulgation of the Ordinance, 11 new Central Universities have also been set up in Bihar, Gujarat, Haryana, Himachal Pradesh, Jharkhand, Karnataka, Kerala, Orissa, Punjab, Rajasthan and Tamil Nadu, which did not have a Central University. National Institute of Technology (NITs): The Government of India decided to set up 10 new NITs during the Eleventh Five Year Plan in the States/ UTs which do not at present have NITs. Accordingly, the Government has approved setting up of 10 new NITs in Meghalaya, Manipur, Mizoram, Nagaland, Sikkim, Arunachal Pradesh, Goa (also catering to the needs of Daman & Diu, Dadra & Nagar Haveli and Lakshadweep), Puducherry (also catering to the needs of A&N Islands), Delhi (also catering to the needs of Chandigarh) and Uttarkhand.One Regional Centre of the Indira Gandhi National Tribal University (IGNTU) Amarkantak has been started in Manipur.

Recent measur es ffor or measures social pr otection protection Aam Admi Bima Yojana (AABY): Under this scheme launched on October 2, 2007, insurance will be provided against natural as well as accidental death and partial/permanent disability to the head of the family of rural landless households in the country. Up to September 30, 2009, the Scheme had covered 81.99 lakh lives. Rashtriya Swasthya Bima Yojana (RSBY): The RSBY was launched on October 1, 2007 for BPL families (a unit of not more than five) in the unorganized sector. The total sum insured is Rs 30,000 per family per annum. The premium is shared on a 75:25 basis by the Centre and the State Government. In case of north-eastern States and APRIL 2010, XVIYear, Issue No.4 Current NEWS Covered up to MARCH 01, 2010

Jammu & Kashmir, the premium is shared in a 90:10 ratio. The beneficiary is entitled to cashless transactions through a smart card. The RSBY became operational from April 1, 2008. Till January 12, 2010, 26 States/Union Territories have initiated the process of implementing the scheme. The Unorganized Workers’ Social Security Act 2008: The Act has the objective of providing social security to unorganized workers. The Unorgani-sed Workers’ Social Security Rules 2009 have also been framed. The Act has come into force w.e.f. May 16, 2009. It provides for constitution of a National Social Security Board and State Social Security Boards which will recommend social security schemes for these workers.

Bilateral social security agreements: Bilateral social security agreements have been signed with Belgium, France, Germany, Switzerland, Luxemburg and Netherlands to protect the interests of expatriate workers and companies on a reciprocal basis. Negotiations for similar agreements with other countries like Czech Republic, Norway, Hungary, Denmark, Canada and Republic of Korea have been completed. Negotiations are in progress with several other countries. These agreements help workers by providing exemption from social security contribution in case of posting, totalisation of contribution periods and exportability of pension in case of relocation to the home country or any third country.

Revised norms for

KASTURBA GANDHI BALIKA VIDYALAYA SCHEME (KGBV) The Government has given its approval for revision in the criteria under the Kasturba Gandhi Balika Vidyalaya (KGBV) Scheme as per the following: (a) For Rural areas – blocks where the female literacy rate is below 30 per cent would qualify as educationally backward blocks for the purpose of this scheme. (b) For Urban areas – Out of the 338 town/cities identified by the Ministry of Minority Affairs having concentration of minority population, 94 towns/cities having female literacy rate below the national average of 53.76 per cent (as per 2001 Census) would qualify for the purpose of the scheme. Impact: The revision would ensure access to education to the most deprived section if girls through provision of additional residential schools for girls at upper primary level in blocks having very low female literacy rate (below 30 per cent) and urban areas with female literacy below national average (53.67 per cent) as per 2001 Census. SMART CARD FOR EMPOWERMENT A Planning Commission Working Group, in the context of the Eleventh Five Year Plan, has examined the design and potential use of the Multi-Application Smart Cards (MASCs) System which facilitates simplification of procedures and enhances the efficiency of Government schemes. Usefulness of the MASCs for various Central Government schemes like, PDS, Indira Awas Yojana and National Rural Employment Guarantee Scheme (NREGS), has been recognized. These studies could form the basis for the introduction of a Smart Card system and a web-enabled information system, on an experimental basis. The smart cards system will be based on unique ID, sharing of ID, multi-application and access control.The entire system will consist of front, middle and back end. The electronic card will be the front end of the Integrated Smart Card System. The front end is the point of delivery of the system where the smart cards will be read and used. The middle office will be responsible for charging and updating the card periodically (month, quarter, annual) depending on the type of information and the requirement and transfer information from the front end to the back end and vice versa. The back end set-up will contain the computerised records, guidelines, accounts and management information systems. The complete system would require complete digitization of the records. 66

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E ECONOMIC COMMUNITY OF WEST AFRICAN STATES: Headquarters: Abuja, Nigeria: It is the biggest regional economic bloc in Africa. It covers an area of 5. 27 million square km, one-sixth of Africa's total territory and embraces a population of 225 million, one-third of the region's total. Largest cities: Lagos, Abidjan, Dakar Member states: 15 Official languages: French, English,

Portuguese The current President of the Commission is James Victor Gbeho of Ghana since 18 February 2010. The current chairmen is Goodluck Jonathan of Nigeria since 18 February 2010. Formation of ECOWAS - Enforced Treaty of Lagos. - May 28 1975 The main objective is to achieve “collective self-sufficiency” for the member states by means of economic and monetary union creating a single large trading bloc. Member states of ECOWAS are: (1) Benin, (2) Burkina Faso, (3) Cape Verde, (4) Côte d’Ivoire, (5) The Gambia, (6) Ghana, (7) Guinea, (8) Guinea Bissau, (9) Liberia, (10) Mali, (11) Niger, (13) Nigeria, (14) Senegal, (15) Sierra Leone, and (16) Togo. In 2002, Mauritania left the organization. Guinea was suspended after 2008 coup d'état and Niger was suspended after 2009 auto-coup. Therefore, currently, there are 13 members only. The West African Economic and Monetary Union (or UEMOA from its name in French, Union économique et monétaire ouest-africaine) is an organization of eight states of West Africa established to promote economic integration among countries that share APRIL 2010, XVIYear, Issue No.4 Current NEWS Covered up to MARCH 01, 2010

a common currency, the CFA franc. UEMOA was created by a Treaty signed at Dakar, Senegal, on January 10, 1994 by the Heads of State and Government of Benin, Burkina Faso, Côte d’Ivoire, Mali, Niger, Senegal, and Togo. On May 2, 1997, GuineaBissau became its eighth member state. The 36th summit was held at Abuja, Nigeria on 23rd June, 2009.The 37th summit was held at Abuja, Nigeria on 16th February 2010. The Summit has deliberated on the political situation in Niger and in Guinea and elected a new chairman for the sub-regional economic grouping formed to spearhead West Africa's economic integration. ECONOMIC COOPERATION ORGANIZATION (ECO): Established in 1985 by Iran, Pakistan and Turkey. In 1992, the ECO expanded to include seven new members, namely Afghanistan, Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan. The Headquarter is situated in Tehran. and Secretary General Khurshid Anwar. It is an intergovernmental international organization involving ten Asian nations. It provides a platform to discuss ways to improve development and promote trade, and investment opportunities. The common objective is to establish a single market for goods and services, much like the European Union. Last Meeting: Tehran conducted the 10th Summit of the Economic Cooperation Organization (ECO) on 11th March , 2009 and discussed plans for a gas pipeline linking the two countries with India.The 11th eco summit is likely to be held in Pakistan in 20102011. ECOSOC: The Council’s 54 member Governments are elected by the General Assembly for overlapping three-year terms. Seats on the Council are allotted based on geographical represen67

tation with fourteen allocated to African States, eleven to Asian States, six to Eastern European States, ten to Latin American and Caribbean States, and thirteen to Western European and other States. The Charter established the Economic and Social Council as the principal organ to coordinate the economic, social, and related work of the 14 UN specialized agencies, 10 functional commissions and five regional commissions. The Council serves as the central forum for discussing international economic and social issues, and for formulating policy recommendations addressed to Member States and the United Nations system.  It is responsible for promoting higher standards of living, full employment, and economic and social progress; identifying solutions to international economic, social and health problems; facilitating international cultural and educational cooperation; and encouraging universal respect for human rights and fundamental freedoms. It has the power to make or initiate studies and reports on these issues. It also has the power to assist in the preparations and organisation of major international conferences in the economic and social and related fields and to facilitate a coordinated followup to these conferences. With its broad mandate the Council’s purview extends to over 70 per cent of the human and financial resources of the entire UN system. During the 2008 High-level Segment, the Council organized its first biennial Development Cooperation Forum (DCF) and second Annual Ministerial Review (AMR). The AMR focused on the theme, “Implementing the internationally agreed goals and commitments in regard to sustainable development”, which resulted in the adoption of a Ministerial Declaration. The President of ECOSOC, Mr. Léo Mérorès, described the 2008 Substantive Session as "historic" as it implemented the new functions of the Council in their entirety. The president of ECOSOC 2010 is AmbassadorHamidonAli of Malaysia.ECOSOC held its 2009 substantive session in Geneva from 6-9 Civil Services

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July with a focus on current global and national trends and their impact on social development in regard of global public health. held its 2009 subsn in EURASIAN ECONOMIC COMMUNITY COMMUNITY:: Headquarters: Moscow  Secretary General: Tair Mansurov Formation: - Signed - 10 October 2000 - Effective - 31 May 2001  Member states: Belarus (2001), Kazakhstan (2001), Kyrgyzstan (2001), Russia (2001), Tajikistan (2001), Uzbekistan (temporarily suspended in 2008)  Observers: Armenia (2003), Moldova (2002), Ukraine (2002) Aim:  Full-scale customs union and common market. Harmonisation of customs tariffs. Development of common guidelines on border security. Establishment of the general rules of trade in goods and in services and of their access to the domestic markets.  The introduction of the standardised currency exchange regulation and of currency control. Development and the implementation of the joint programmes of social and economic development. Creation of equal conditions for production and entrepreneurial activity. The formation of the common market for transport services and united transport system. The formation of general energy market. Equal rights for citizens of participating states to obtain medical aid. Equal rights for citizens of participating states to enter into higher education.  The Customs Union officially launched on January 1, a common customs space is to be established between Russia and Belarus as of the middle of 2010 - a move that will be followed suit by Kazakhstan in summer of 2011. The three's common economic space will enable them to stick to a single customs tariff plus mutually beneficial tax and trade principles EUROPEAN FREE TRADE ASSOCIATION (EFTA): Established on May 3, 1960 APRIL 2010, XVIYear, Issue No.4 Current NEWS Covered up to MARCH 01, 2010

It is an alternative for European SOME MORE AGENCIES states that were not allowed or did not (1)The UN Fund for Population Acwish to join the European Commutivities (UNFPA):nity. This Fund aims are to build up capacIts aim to Provide liberalisation of ity to respond to needs in population and trade among the Member States. family planning; to promote awareness The EFTA Convention was signed of population problems in both develon January 4, 1960 in Stockholm by oped and developing countries and posseven states. sible strategies to deal with them; to asThe European Free Trade Association sist developing countries at their request (EFTA) was established on 3 May 1960 in dealing with population problem. as a trade bloc-alternative for Euro(2)UNEP (United Nation Environment pean states who were either unable Programme):to, or chose not to, join the then-EuroEstablished in 1972, it works to enpean Economic Community (EEC) courage sustainable development (now the European Union (EU)). through sound environmental practices. The EFTA Convention was signed on HQ: Nairobi 4 January 1960 in Stockholm by seven (3) UNHCR (United Nation High Comstates. Today only Iceland, Norway, missioner for Refugees):Switzerland, and Liechtenstein remain It was established by the UN General members of EFTA (of which only NorAssembly with effect from 1 Jan, 1951, way and Switzerland are founding originally for 3 years. Since 1954, its manmembers). The Stockholm Convendate has been renewed for successive fivetion was subsequently replaced by the year period. For its work on behalf of refuges around the world, UNHCR was Vaduz Convention. awarded the Nobel Peace Prize in 1955 The founding members of EFTA were and again in 1981. Austria, Denmark, Norway, Portugal, H.Q: Geneva Sweden, Switzerland and the United (4) High Commission for Human Kingdom. During the 1960s these Rights:countries were often referred to as the Established in 1993 it has 53 memOuter Seven, as opposed to the Inner bers. Six of the then-European Economic (5)UNIDO (United Nation Industrial Community. Development Organisation):Finland became an associate member It provides developing and undeveloped in 1961 (becoming a full member in countries with advice on all aspects of 1986), and Iceland joined in 1970. The industrial policy. It was converted into a United Kingdom and Denmark joined SPECIAL ISED AGENCY of UN in 1985. the European Communities in 1973 HQ’s: Vienna (together with Ireland), and hence (6) WTO (World Trade Organisation) ceased to be EFTA members. Portugal It is a permanent international trade also left EFTA for the European Combody, which replaced General Agreement munity in 1986. Liechtenstein joined on Tariffs and Trade in Jan 1995. GATT in 1991 (previously its interests in was negotiated in 1947 EFTA had been represented by SwitHQ’s: Geneva zerland). Finally, Austria, Sweden and (7) WIPO Finland joined the European Union in  World Intellectual Property 1995 and hence ceased to be EFTA Organisation: The Convention establishmembers. ing WIPO was signed at Stockholm in General Secretary: Kåre Bryn 1967 by 51 countries and came into force in April, 1970. In December, 1974 WIPO EUROPEAN become a specialised agency of the U.N. PATENT ORGANISATION: HQ’s: Geneva It is a public international organisa(8)International Fund for Agricultural tion set up by the European Patent Development (IFAD):Convention (EPC). The establishment of IFDA was one of Headquarters: Munich, Germany the major actions proposed by the 1974 President: – Alain Pompidou (1 July World Food Conference. 2004 - 30 June 2007), French The agreement for IFAD came into – Alison Brimelow (1 July 2007 - 30 force on 30 November, 1977 following June 2010), British attainment of initial pledges of $1,000 Official languages: English, French m. and the agency began its operations and German. the following months. EPO provides a single patent grant HQ’s: Rome Italy procedure, but not yet a single patent 68 Civil Services

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on the point of view of enforcement. EUROPEAN SPACE AGENCY: Established in 1975 Member states: 18  Director General: Jean-Jacques Dordain Headquartered: Paris Official Language: English, French and German It is an inter-governmental organization dedicated to the exploration of space. The highlights of the year 2010 will be:- The launch of Node-3 and Cupola, and of CryoSat, two ESA astronauts to the International Space Station,second Automated Transfer Vehicle and of the first Galileo system satellites, the first lift-off of Soyuz from Kourou and the maiden flight of Vega. A simulated 520-day 'trip to Mars' will be starting in May. EAST CARIBBEAN CURRENCY UNION The East Caribbean Currency Union (ECCU) is a monetary union composed of eight small-island economies, six of which are independent states (Antigua and Barbuda, Dominica, Grenada, Saint Kitts and Nevis, Saint Lucia and Saint Vincent and the Grenadines), while the remaining two are British overseas territories (Anguilla and Montserrat). All these economies, together with the British Virgin Islands, constitute the Organization of Eastern Caribbean States (OECS). In June 2006, the OECS joined the CARICOM Single Market (CSM). East Caribbean dollar The East Caribbean dollar (sign: $; code: XCD) is the currency of eight of the nine members of the Organisation of Eastern Caribbean States. It has existed since 1965 and is normally abbreviated with the dollar sign $ or, alternatively, EC$ to distinguish it from other dollar-denominated currencies. The EC$ is subdivided into 100 cents. It has been pegged to the United States dollar at US$1 = EC$2.7 since 1976. Six of the states using the EC$ are independent states: Antigua and Barbuda, Dominica, Grenada, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines. The other two are British overseas territories: Anguilla and Montserrat. F FOOD AND AGRICULTURE APRIL 2010, XVIYear, Issue No.4 Current NEWS Covered up to MARCH 01, 2010

ORGANIZATION (FAO): The Food and Agriculture Organization (FAO) of the United Nations was founded in 1945 and the headquarter is at Rome. FAO has 191 members states along with the European Union and the Faroe Islands, which are associate members

Directors general-Jacques Diouf (Senegal),January 1994 - current Deputy Directors general-James G. Butler (US), 2008 - current. anuary - c Serving both developed and developing countries, FAO acts as a neutral forum where all nations meet as equals to negotiate agreements and debate policy. FAO’s activities comprise four main areas: (i) Putting information within reach. (ii) Sharing policy expertise. (iii) Providing a meeting place for nations. (iv) Bringing knowledge to the field. FRANCOPHONIE:  Official language: French: The Francophonie could be compared to a French version of the Commonwealth of Nations. Established: 1970 Member states: 56: Mauritania's membership was suspended on August 26, 2008, pending democratic elections, after a military coup. Headquarters: Paris, France Secretariat (Secretaries-general): Abdou Diouf (Senegal) : 1 Jan 2003 present It is an international organisation of French-speaking countries. Summits of the Francophonie (often referred by the English media as the "Francophone Summit")are held every two years, at which time the leaders of the member states have an opportunity to meet and develop strategies and goals for the organization. Summits: 1. Palace of Versailles, Paris, France 69

LATIN AMERICAN RESERVE FUND (LARF) Latin American Reserve Fund (LARF) with headquarters in Bogoto (Colombia) is a regional financial institution having an independent juridical personality. It was established in March 1991 as the successor to the Andean Reserve Fund (ARF). Members of LARF are Bolivia, Colombia, Costa Rica, Ecuador, Peru and Venezuela. Its functions are to assist in correcting payments imbalances through loans with terms of up to four years and guarantees extended to members, to coordinate their monetary, exchange, and financial policies and to promote the liberalization of trade and payments in the Andean subregion. OBJECTIVES To provide support for member countries´ balance of payments by granting credits or guaranteeing third-party loans; To contribute to the harmonization of member countries exchange, monetary and financial policies; and To improve the conditions of international reserve investments made by member countries’. (17-19 February 1986); 2. Quebec City, Quebec (Canada) (2-4 September 1987) 3. Dakar, Senegal (24-26 May 1989); 4. Chaillot, Paris, France (19-21 November 1991); 5. Port Louis,Mauritius (1618 October 1993); 6. Cotonou, Benin (2-4 December 1995); 7. Hanoi, Vietnam (14-17 November 1997); 8. Moncton, New Brunswick (Canada) (35 September 1999); Beirut, Lebanon (18-20 October 2002); 9. Ouagadougou, Burkina Faso (26-27 November 2004) 10. Bucharest, Romania (28-29 September 2006); 11. Quebec City, Quebec (Canada) (17-19 October 2008) (part of the 400th anniversary celebration of the founding of Quebec). Next summit: Montreux, (22-24 October 2010) G GREENPEACE In 1971, motivated by their vision of a green and peaceful world, a small team of activists set sail from Vancouver, Canada, in an old fishing boat. These activists, the founders of Greenpeace, believed a few individuals could make a difference. Their mission was to “bear witness” to US underground nuclear testing at Civil Services

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Amchitka, a tiny island off the West Coast of Alaska, which is one of the world’s most earthquake-prone regions. Amchitka was the last refuge for 3000 endangered sea otters, and home to bald eagles, peregrine falcons and other wildlife. Even though their old boat, the Phyllis Cormack, was intercepted before it got to Amchitka, the journey sparked a flurry of public interest. The US still detonated the bomb, but the voice of reason had been heard. Nuclear testing on Amchitka ended

that same year, and the island was later declared a bird sanctuary. Today, Greenpeace is an international organisation that prioritises global environmental campaigns. Based in Amsterdam, the Netherlands, Greenpeace has 2.8 million supporters worldwide, and national as well as regional offices in 41 countries. Greenpeace exists because the earth and all life on it deserves a clean and safe environment – now and in the future. Since its earliest days, Greenpeace has been linked to the seas and its ships are incredibly valuable, not only in actions to save the whales and protect the marine environment, but for all campaign work. Actions often speak louder than words and non-violent direct action is at the heart of Greenpeace campaigns, which have also grown to include lobbying and research over the past years. GUAM OR GANIZA TION FOR ORGANIZA GANIZATION DEMOCRACY AND ECONOMIC DEVELOPMENT On October 10, 1997, the Presidents of Azerbaijan, Georgia, Moldova and Ukraine met in Strasbourg during summit of the Council of Europe and stated their mutual interest in developing bilateral and regional cooperation, European and regional security, political and economic contacts.  Secretary General-Valery

Chechelashvili The Headquarters of GUAM were opened on February 26, 2009 in Kiev, Ukraine. The group was created as a way of countering the influence of Russia in the area, and it has received backing and encouragement from the United States. In 1999, the organisation was renamed GUUAM due to the membership of Uzbekistan and renames as GUAM due to the withdrawl of Uzbekistan. In May 22 to May 23, 2006 Ukraine and Azerbaijan announced plans to further increase the GUUAM member relations by renaming the organization GUAM Organization for Democracy and Economic Development and establishing its headquarters in the Ukrainian capital. Azerbaijani president Ilham Aliyev will be elected as the first secretary general of the organization. On June 19, 2007, presidents of

areas. It aims to eliminate trade barriers within 10 years (12 years for vehicles), though there are important exceptions in the agricultural sector. Included in the trade provisions are statutes on property rights and services. G-4: G-4 was an alliance among India, Germany, Japan and Brazil for the purpose of supporting each other’s bid for permanent seats on the United Nations Security Council.  The G-4 nations are regularly elected to two-year terms on the Security Council by their respective groups. India has been elected to the council six times in total, its last term was 1991-92. The G4 nations are regularly elected to two-year terms on the Security Council by their respective groups: in the 24-year period from 1987 to 2010, Japan was elected for five terms, Brazil for four terms, Germany for three terms and India for one term.

Lithuania, Poland and Romania joined the leaders of GUAM member states at the GUAM summit in Baku, Azerbaijan. GR OUP OF N ATIONS: GROUP NA G-3: It is a free trade agreement between Colombia, Mexico, and Venezuela. It came into effect on January 1, 1995. G3 committed the countries to the phased implementation of a trilateral free trade area over 10 years. The Agreement provides for the removal of tariff and nontariff barriers (Tariff Elimination Program or TEP), uniform customs procedures, and cooperation accords in various non-trade

G-5: The Leaders of Brazil, China, India, Mexico and South Africa, gathered in Sapporo, Japan, on 8 July 2008, have resolved to issue this Political Declaration: Mankind is at a critical historical crossroad. The potential of globalization and innovation to raise living standards is unprecedented, but so are social and sustainable development challenges around the world. G-7: Seven industrialized nations of the world, formed in 1976. Group of seven leading industrial countries; Canada, France, Germany, Italy, Japan, UK, US.The G7 is the meet-

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ing of the finance ministers from a group of seven industrialized nations. It is not to be confused with the G8, which is the annual meeting of the heads of government of the aforementioned nations, plus Russia. The latest G7 summit was held on February 2010 in Canada. G8 G-7+1: The Groups brings together eight major industrial economies of the world to consultation and policy coordination at the highest level. Its members are: Canada, France, Germany, Italy, Japan, the UK, and the US. The Group was named G-8 in 1997, Denver Summit with the inclusion of Russia as a full-fledged member. G8: A Religious Call for Strong Action, A Spotlight on Africa Hokkaido Toyako, Japan, 2008 In 2008, Hokkaido Toyako, Japan, has hosted heads of state of some of the world’s most developed nations, the Group of 8, in their 34th annual summit. The G8 summit is one of the only global summits in which leaders of the nations debate freely amongst themselves. With much less administrative structure surrounding the G8 than other multi-lateral organizations or frameworks, it theoretically allows for freer dialogue and a more direct follow-up on the decisions made regarding key international issues. L’Aquila 2009 The 35th G8 summit, the meeting forum of the world’s economic powerhouses was held in the Italian city of L’Aquila from 8th July to 10th July 2009. The choice of the venue had its own significance. L’Aquila was chosen “as a mark of solidarity with the people of Abruzzo, so badly hit by the earthquake on 6th April 2009, and with everyone else in the world who is suffering as a result of a natural disaster.” 36th G8 summit is to be held in June 25–27, 2010, host country is Canada, host leader is Stephen Harper Huntsville, and location is Ontario. 37th G8 summit is to be held in 2011 in France in TBD. G-10:  The Group of Ten signed the Smithsonian Agreement in December 1971, replacing the world’s fixed exchange rate regime with a floating exchange rate regime. It comprises countries that contrib-

the activities of the G10: The Bank for International Settlements (BIS), European Commission, IMF, and OECD. Luxembourg is also an associate member. G-15:( GR OUP OF 15 N ATIONS) GROUP NA It was established in 1989 during the ninth NAM Summit in Belgrade as an Action Group. Group of 15 developing countries acting as the main political organ for the Non-Aligned Movement. The summit-level Group brings together developing nations from across

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ute to the General Agreements to Borrow (GAB). It aims at discussing problems relating to the functioning and structure of the International Monetary Fund. The Group provides “multilateral surveillance” over loan recipients includes Iceland, Israel, Japan, Korea, Liechenstein, Mauritius, Norway, Switzerland, Taiwan. The Group of Ten or G10 refers to the group of countries that have agreed to participate in the General Arrangements to Borrow (GAB). The GAB was established in 1962, when the governments of eight International Monetary Fund (IMF) members—Belgium, Canada, France, Italy, Japan, the Netherlands, the United Kingdom, and the United States—and the central banks of two others, Germany and Sweden, agreed to make resources available to the IMF for drawings by participants, and, under certain circumstances, for drawings by nonparticipants. The GAB was strengthened in 1964 by the association of Switzerland, then a nonmember of the Fund, but the name of the G10 remained the same (G7 + Belgium, Netherlands, Sweden, Switzerland). The following international organizations are official observers of

the world The G15 is comprised 18 countries: Algeria, Argentina, Brazil, Chile, Egypt, India, Indonesia, Jamaica, Kenya, Nigeria, Malaysia, Mexico, Peru, Senegal, Sri Lanka, Venezuela,Iran and Zimbabwe. The G15 focuses on cooperation among developing countries in the areas of investment, trade, and technology. The membership of the G15 has expanded to 18 countries, but the name has remained unchanged. G-15: The G15 is an informal group of nations composed by the 15 leading economies of the world in 2006: USA, China, India, Japan, Germany, UK, Brazil, France, Russia, Italy, Spain, South Korea, Mexico, Canada and Indonesia.  These countries together were expected to comprise 73,3 per cent of the world Gross Domestic Product (GDP) by Purchasing Power Parity (PPP) in 2008. The real figure were actually 70,2 per cent according to the CIA World Factbook.a and Indonesia. G-20: The Pittsburgh Summit Declaration 1. The summit was dedicated to meet the critical transition from crisis to recovery to turn the page on an era of irresponsibility and to adopt a set of policies, regulations and reforms to meet the needs of the 21st century global economy. 2. The summit reviewed the on-going economic depression after its London summit. 3. The summit designated the G-20 to be the premier forum for our international economic cooperation. G-20 established the Financial Stability Board (FSB) to include major emerging economies and welcome its efforts to coordinate and monitor progress in strengthening financial regulation. Background: The G-20 was formed in 1999. The inaugural meeting took place on December 15–16, 1999 in Berlin. The G-20 was formed as a new forum for cooperation and consultation on matters pertaining to the international financial system. The membership of the G-20 comprises the finance ministers and central bank governors of 19 countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South KoCivil Services

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rea, Turkey, United Kingdom, United States of America. The European Union, who is represented by the rotating Council presidency and the European Central Bank, is the 20th member of the G-20. Unlike international organisations such as the Organisation for Economic Co-operation and Development (OECD), IMF or World Bank, the G-20 (like the G-7) has no permanent staff of its own. The G-20 represents about 90 percent of the world's gross national product, 80 percent of the worlds' trade and twothirds of its population. G-24: The Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development (G-24) was established in 1971. Its main objective is to concert the position of developing countries on monetary and development finance issues. It consists of the following countries from each of the three regions: Member countries are as follows: Region I (Africa): Algeria, Côte d'Ivoire, Egypt, Ethiopia, Gabon, Ghana, Nigeria, South Africa and the Democratic Republic of Congo. Region II (Latin America and the Caribbean): Argentina, Brazil, Colombia, Guatemala, Mexico, Peru, Trinidad and Tobago and Venezuela. Region III (Asia and developing countries of Europe): India, Iran, Lebanon, Pakistan,

Philippines, Sri Lanka and Syrian Arab Republic. Chairman: H.E. Mr. Adib Mayaleh Central Bank - Syria Its main objective is to harmonise the positions of the developing countries on monetary and development

finance issues. China has been a “special invitee” since the Gabon meetings of 1981. G-33: Developed Countries The Group of 33 was an international grouping that existed briefly in 1999, comprising the thirty-three leading national economies of the world. It superseded the Group of 22 in early 1999, and was itself superseded by the present Group of 20 later that year. A number of G33 meetings on the international financial system were held at the behest of the finance ministers and central bank governors of the G7. The first meeting was held in Bonn, Germany in 1999. G-33: Developing Countries The G33 is the name for a group of developing countries that coordinate on trade and economic issues.  G-33 Countries: Antigua and Barbuda, Barbados, Belize, Benin, Botswana, China, Cote d’Ivoire, Congo, Cuba, Dominican Republic, Grenada, Guyana, Haiti, Honduras, India, Indonesia, Jamaica, Kenya, Korea, Madagascar, Mauritius, Mongolia, Mozambique, Nicaragua, Nigeria, Pakistan, Panama, The Philippines, Peru, Saint Kitts, Saint Lucia, Saint Vincent and the Grenadines, Senegal, Sri Lanka, Suriname, Tanzania, Trinidad and Tobago, Turkey, Uganda, Venezuela, Zambia, and Zimbabwe 51 per cent of world population. 63 per cent of all Farmers. 20 per cent of world agricultural production. 26 per cent of total agricultural exports. 17 per cent of world’s imports of agricultural products. G-33 stressed that more meaningful and operational Special and Differential Treatment for developing countries should be an integral part of all elements of the negotiations. G-77: The Group is the largest coalition in the Third World Nations. It has 133 nations across the world. The Group of 77 (G-77) was established on 15 June 1964 by seventyseven developing countries signatories of the “Joint Declaration of the Seventy-Seven Countries” issued at the end of the first session of the United Nations Conference on Trade and Development (UNCTAD) in Geneva. Beginning with the first “Ministerial Meeting of the Group of 77 in

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Algiers (Algeria) on 10 – 25 October 1967, which adopted the Charter of Algiers”, a permanent institutional structure gradually developed which led to the creation of Chapters of the Group of 77 with Liaison offices in Geneva (UNCTAD), Nairobi (UNEP), Paris (UNESCO), Rome (FAO/IFAD), Vienna (UNIDO), and the Group of 24 (G-24) in Washington, D.C. (IMF and World Bank). Although the members of the G-77 have increased to 130 countries, the original name was retained because of its historic significance. The Group aims to provide the developing world the means to articulate and promote its collective economic interests. G-90: Most of the G90 countries (African Union, LDCs and African Caribbean and Pacific, ACP) have defensive interests. Except at WTO ministerials (Doha and again in Cancun), these countries have functioned as separate groupings – the African Group, LDCs and ACP – in the WTO. The most vo-

cal amongst them has been Kenya in the African Group, Uganda or Tanzania on behalf of LDCs and sometimes the Caribbean countries – Guyana or Jamaica. Politically however, many in this group are vulnerable to US and EU pressures since most have some kind of preferential trading arrangement with the US (eg. the Africa Growth and Opportunity Act, AGOA) or EU (eg. Cotonou) and are dependent on these powers for aid and loans. However, they have strength in numbers, and this allowed them to beat down the US and EC in Cancun.  The least developed countries (LDCs) joined other countries from Africa, the Caribbean and the Pacific during the Cancun conference to form the G90. GIRMITIA COUNTRIES Those Countries where bonded Indian Civil Services

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labourers were introduced by the British to work in sugarcane fields: Surinam, Guyana, Trinidad, Mauritius and Fiji.

catchment area of the Baltic Sea to reduce land-based pollution. I

H HELCOM The Helsinki Commission - Baltic Marine Environment Protection Commission, also known as HELCOM, aims to call for international coordination to protect the marine environment of the Baltic Sea. The Convention on the Protection of the Marine Environment of the Baltic Sea Area was first signed in 1974 by the coastal states of the Baltic Sea. In 1992, a new Convention was signed by all the countries bordering the Baltic Sea and by the European Economic Community. HELCOM is the governing body of the Convention. The present contracting parties to HELCOM are Denmark, Estonia, European Community, Finland, Germany, Latvia, Lithuania, Poland, Russia and Sweden. This commission works for protecting the marine environment of the Baltic Sea from all sources of pollution through intergovernmental cooperation between Denmark, Estonia, the European Community, Finland, Germany, Latvia, Lithuania, Poland, Russia and Sweden. HELCOM is the governing body of the Convention on the Protection of the Marine Environment of the Baltic Sea Area - more usually known as the Helsinki Convention. HELCOM’s main goal is to protect the marine environment of the Baltic Sea from all sources of pollution, and to restore and safeguard its ecological balance. The 1974 Convention: It was for the first time that all the sources of pollution around an entire sea were made subject to a single convention, signed in 1974 by the then seven Baltic coastal states. The Convention entered into force on 3 May 1980. The 1992 Convention: In the light of political changes and developments in international environmental and maritime law, a new Convention was signed in 1992 by all the states bordering on the Baltic Sea, and the European Community. It came into force on 17 January 2000. The Convention covers the whole of the Baltic Sea area, including inland waters as well as the water of the sea itself and the sea-bed. Measures are also taken in the whole

IBERO-AMERICAN SUMMIT The Ibero-American Summit is a yearly meeting, organized by the Iberoamerican Community of Nations, of the heads of government and state of the Spanish-, Portuguesespeaking nations of Europe and the Americas. The first summit, held in 1991 in Guadalajara, Mexico, was attended by the governments of Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Cuba, the Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Portugal, Spain, Uruguay and Venezuela. Andorra joined in 2004. Equatorial Guinea and the Philippines entered in 2009 as "associate members". The 19th Ibero-American summit was held in Estoril, Portugal on November 30–December 1, 2009 . The 20th Ibero-American summit is going to be held in Mar de Plata, Argentina on November 11–November 12, 2010 . INDEPENDENT SOUTH ASIAN COMMISSION ON POVERTY ALLEVIATION (ISACPA): In November, 1992, the Independent South Asian Commission on Poverty Alleviation (ISACPA) constituted as an initiative of the Colombo SAARC Summit of 1991. SAARC Development Goals for the period 2007-2012 in the areas of poverty alleviation, education, health and environment brought out by ISACPA suggesting strategies to attain the goals would be a menu for launching and monitoring programmes to make South Asia free from the clutches of hunger and poverty. INDIAN OCEAN COMMISSION It was started in January 1984 under the General Victoria Agreement. Official Language: French It is an intergovernmental organization. Objectives: Diplomatic cooperation; Economic and commercial cooperation;

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Cooperation in the field of agriculture, maritime fishing, and the conservation of resources and ecosystems;  Cooperation in cultural, scientific, technical, educational and judicial fields. The Indian Ocean Commission (COI), known as the Commission de l'Océan Indien in French, is an intergovernmental organization that joins Comoros, Madagascar, Mauritius, France (for Réunion and Mayotte), and the Seychelles together to encourage cooperation. It was started in January 1984 under the General Victoria Agreement. INDIAN OCEAN RIM ASSOCIATION FOR REGIONAL COOPERATION (IOR-ARC): The Association brings together the Indian Ocean countries from the three continents of Asia, Africa and Australia to step up regional cooperation and inter-continental trade. It came into existence in 1997 in Port Louis. The rationale for its formation lay in the growing importance of economic issues and the trend towards regional economic cooperation and First established in Mauritius on March 1995. Founding member states (March, 1995): Australia; India; Kenya; Mauritius; Oman; Singapore; South Africa. In September 1996: Indonesia; Malaysia; Madagascar; Mozambique; Sri Lanka; Tanzania; and Yemen. March 1999: (Council of Ministers Meeting in Maputo, Mozambique): Bangladesh; Iran; Seychelles (withdrew as a member on 1 July 2003); Thailand; and United Arab Emirates. Dialogue Partners: China; Egypt; France; Japan; and United Kingdom. The Indian Ocean is the world’s third largest Ocean. It carries half of the world’s container ships, one third of the bulk cargo traffic, two-thirds of the world’s oil shipments. It is a lifeline of international trade and economy. The region is woven together by trade routes and commands control of the major sea-lanes. Objectives: 1. To promote sustainable growth and balanced development of the region and Member States Civil Services

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2. To focus on those areas of economic cooperation which provide maximum opportunities for development, shared interest and mutual benefits 3. To promote liberalisation, remove impediments and lower barriers towards a freer and enhanced flow of goods, services, investment, and technology within the Indian Ocean rim. INTERGOVERNMENTAL AUTHORITY ON DEVELOPMENT: Membership: 7 member states Headquarters: Djibouti  Executive Secretary: Mahboub Maalim of Kenya (since 14 June 2008). Formation: Recurring and severe droughts and other natural disasters between 1974 and 1984 caused widespread famine, ecological degradation and economic hardship in the Horn of Africa region. The six countries of the region took action through the United Nations to establish an intergovernmental body for development and drought control in their region. At a January 1986 assembly of heads of state and government, an agreement was signed which officially launched the Intergovernmental Authority on Drought and Development (IGADD). The third ministerial Troika meeting between the Intergovernmental Authority on Development (IGAD) and the European Union (EU) was held in Brussels on 31 March 2009 under the Co–Chairs of His Excellency Dr Tekeda Alemu, State Minister of Foreign Affairs of the Federal Democratic Republic of Ethiopia, Chairperson of the IGAD Council of Ministers, and Jan Kohout, Deputy Minister of Foreign Affairs of the Czech Republic representing the President of the Council of the EU. INTER-GOVERNMENTAL MARITIME CONSULTATIVE ORGANIZATION (IMO): In 1948 an international conference in Geneva adopted a convention formally establishing IMO (the original name was the Inter-Governmental Maritime Consultative Organization, or IMCO, but the name was changed in 1982 to IMO). The headquarter is at London.  SecretaryGeneral- Efthimios E. Mitropoulos(18 June 2003-Till date) The IMO Convention entered into force in 1958 and the new Organiza-

tion met for the first time the following year. The purposes of the Organization, as summarized by Article 1(a) of the Convention, are “to provide machinery for cooperation among Governments in the field of governmental regulation and practices relating to technical matters of all kinds affecting shipping engaged in international trade; to encourage and facilitate the general adoption of the highest practicable standards in matters concerning maritime safety, efficiency of navigation and prevention and control of marine pollution from ships” Resolutions Resolution MSC.255(84) (adopted on 16 May 2008) adopts the Code of the International Standards and Recommended Practices for a Safety Investigation into a Marine Casualty or Marine Incident ( Casualty Investigation Code). INTERGOVERNMENTAL PANEL ON CLIMATE CHANGE (IPCC): Recognizing the problem of potential global climate change, the World Meteorological Organization (WMO) and the United Nations Environment Programme (UNEP) established the Intergovernmental Panel on Climate Change (IPCC) in 1988. It is open to all members of the UN and WMO. The First IPCC Assessment Report was completed in 1990. The Report played an important role in establishing the Intergovernmental Negotiating Committee for a UN Framework Convention on Climate Change by the UN General Assembly.  The UN Framework Convention on Climate Change (UNFCCC) was adopted in 1992 and entered into force in 1994. It provides the overall policy framework for addressing the climate change issue. The IPCC has decided to continue to prepare comprehensive assessment reports and agreed to complete its Fourth Assessment Report in 2007. IPCC FOURTH ASSESSMENT REPORT 2007 The Nobel Peace Prize winning Inter-

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governmental Panel on Climate Change (IPCC) came out with the last of its four parts of the Fourth Assessment Report on 17th November 2007 in Valencia, Spain. A Synthesis report, based on the assessment carried out by the three working Groups of the IPCC, has provided an integrated view of climate change as the final part of the Panel's Fourth Assessment Report. INTERNATIONAL ATOMIC ENERGY AGENCY (IAEA): The International Atomic Energy Agency (IAEA) is the world’s center of cooperation in the nuclear field. It was set up as the world’s “Atoms for Peace” organization in 1957 within the United Nations family. The Agency works with its Member States and multiple partners worldwide to promote safe, secure and peaceful nuclear technologies. The IAEA Secretariat is headquartered at the Vienna International Centre in Vienna, Austria. Director General- Yukiya Amano Board of Governors The current Board members are: Afghanistan, Argentina, Australia, Azerbaijan, Brazil, Burkina Faso, Cameroon, Canada, China, Cuba, Denmark, Egypt, France, Germany, India, Japan, Kenya, South Korea, Malaysia, Mongolia, Netherlands, New Zealand, Pakistan, Peru, Romania, Russian Federation, South Africa, Spain, Switzerland, Turkey, Ukraine, United Kingdom, Uruguay, and Venezuela (IAEA Board of Governors 2009–2010). Operational liaison and regional offices are located in Geneva, Switzerland; New York, USA; Toronto, Canada; and Tokyo, Japan. The Agency is led by Director General Mohamed ElBara-dei and six Deputy Directors General who head the major departments. Three main pillars - or areas of work: (a) Safety and Security; (b) Science and Technology; and (c) Safeguards and Verification. The Preparatory Commission for the Comprehensive Nuclear-Test-Ban Treaty Organization (CTBTO Preparatory Commission) is an international organization established by the States Signatories to the Treaty on 19 November 1996. It carries out the necessary preparations for the effective Civil Services

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implementation of the Treaty, and prepares for the first session of the Conference of the States Parties to the Treaty. INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES (ICSID): The creation of the International Centre for Settlement of Investment Disputes (ICSID) in 1966 was in part intended to relieve the President and the staff of the burden of becoming involved in such disputes. ICSID is an autonomous international organization. However, it has close links with the World Bank. Pursuant to the Convention, ICSID provides facilities for the conciliation and arbitration of disputes between member countries and investors who qualify as nationals of other member countries. ICSID has to date entered in such arrangements with the Permanent Court of Arbitration at The Hague, the Regional Arbitration Centres of the Asian-African Legal Consultative Committee at Cairo and Kuala Lumpur, the Australian Centre for International Commercial Arbitration at Melbourne, the Australian Commercial Disputes Centre at Sydney, the Singapore International Arbitration Centre and the GCC Commercial Arbitration Centre at Bahrain. These arrangements have proved their usefulness in many ICSID cases and have helped to promote cooperation between ICSID and these institutions in several other respects. INTERNATIONAL CIVIL AVIATION ORGANISATION (ICAO):  (ICAO) was established in 1947 and the headquarter is at Montreal. Secretaries General- Raymond Benjamin (France) (2009-present) Council President- Roberto Kobeh Gonzalez (Mexico) (2006-Present) One of ICAO’s chief activities is standardization, the establishment of International Standards, Recommended Practices and Procedures covering the technical fields of aviation: licensing of personnel, rules of the air, aeronautical meteorology, aeronautical charts, units of measurement, operation of aircraft, nationality and registration marks, airworthiness, aeronautical telecommunications, air traffic services, search and rescue, aircraft acci-

dent investigation, aerodromes, aeronautical information services, aircraft noise and engine missions, security and the safe. ICAO is currently against the inclusion of aviation in the European Union Emissions Trading Scheme (EU ETS). However, the EU is pressing ahead with its plans to include aviation from 2011. INTERNATIONAL CRIMINAL POLICE ORGANISATION (INTERPOL): The Organisation facilitates the cooperation of criminal police forces of over 175 countries for preventing and suppressing crime. Its headquarters is in Lyons, France. It came into effect in 1956. Secretary general-Ronald Noble of United States since 2000  President- Khoo Boon Hui of Singapore since Oct 2008 It was given observer status in the UN General Assembly in 1996. Its objectives are: to ensure and promote the widest possible mutual assistance between all criminal police authorities; to establish and develop all institutions likely to contribute effectively to the prevention of ordinary law crime. INTERNATIONAL FINANCE CORPORATION (IFC): The International Finance Corporation (IFC) promotes sustainable private sector investment in developing countries as a way to reduce poverty and improve people’s lives. Established in 1956, IFC is the largest multilateral source of loan and equity financing for private sector

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projects in the developing world. IFC is a member of the World Bank Group and is headquartered in Washington, DC. It shares the primary objective of all World Bank Group institutions: to improve the quality of the lives of people in its developing member countries. It promotes sustainable private sector development primarily by: Fi-

nancing private sector projects located in the developing world. Helping private companies in the developing world mobilize financing in international financial markets. Providing advice and technical assistance to businesses and governments. Ownership and Management IFC has 178 member countries, which collectively determine its policies and approve investments. INTERNATIONAL FUND FOR AGRICULTURAL DEVELOPMENT (IFAD): International Fund for Agricultural Development (IFAD) was established in 1977 with its headquarter at Rome One of the major outcomes of the 1974 World Food Conference. President- Kanayo F. Nwanze from 2009. Major goal is to empower poor rural women and men in developing countries to achieve higher incomes and improved food security Membership in IFAD is open to any State that is a member of the United Nations or its specialized agencies or the International Atomic Energy Agency. The Governing Council is IFAD’s highest decision-making authority, with the 165 Member States each represented by a governor and alternate governor. The Council meets annually. The Executive Board, responsible for overseeing the general operations of IFAD and approving loans and grants, is composed of 18 members and 18 alternate members. The President, who serves for a fouryear term (renewable once), is IFAD’s chief executive officer and chair of the Executive Board. The strategic policy of IFAD is detailed in Strategic Framework for IFAD 2007-2010: Enabling the Rural Poor to Overcome Poverty. INTERNATIONAL THERMONUCLEAR ENERGY INITIATIVE Europe, the US, China, India, Japan, South Korea and Russia have signed an agreement to go for $12.8 billion, 10-year project to be built at Cadarache in Southern France. France, which operates 58 nuclear reactors, got the opportunity to host the project. French companies including Areva SA, are the world’s biggest maker of nuclear reactors. The idea was first proposed by Ronald Reagan and Mikhail Gorbachev in 1985. Civil Services

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torus operating at over 100 million degree C, and will produce 500 MW of fusion power.Work on the ITER design is being done at two Joint Work sites at Naka (near Tokyo, Japan) and in Garching (near Munich, Germany). The main ITER facility will be built in Cadarache, France, and all ITER partners will participate in its construction, research and development. The direct construction costs for ITER would be $ 2,755 Million. EU will contribute 45 per cent and other six partners will contribute 9 per cent each. The project is technically ready to start construction and the first plasma operation is expected in 2016. Pursuant to the nuclear understanding of July 18, 2005, the USA supported India’s membership of the International Thermonuclear Energy Initiative (in ITER). ITER has seven partners. (1) India was invited on December 6, 2005 to join the initiative as a full partner by the (2) USA, and its other ITER partners (3) the European Union, (4) Russia, (5) Japan, (6) South Korea, and (7) China at the ITER negotiations meeting in Jeju, South Korea. They are working under the auspices of the IAEA. India

will join the international team that will work on this project. IBSA The first meeting of the India-BrazilSouth Africa (IBSA) Trilateral Commission of the foreign ministers of India, Brazil and South Africa took Place in March 2004 in New Delhi. TheTrilateral Commission was the outcome of the IBSA Dialogue Forum which was formed during the visit of the India Foreign Minister to Brazil in June 2003. Brasilia Declaration : The Foreign Ministers of Brazil, Celso Amorim, of South Africa, Nkosazana Dlamini Zuma, and of India, Yashwant Sinha, met in Brasilia on June 6, 2003, following ongoing consultations and after the respective Heads of State and/or Government of their countries held conversations during the G-8 meeting, in Evian. The Prime Minister of India, Manmohan Singh, the President of Brazil, Luiz Inácio Lula da Silva, and the President of South Africa, Thabo Mbeki (thereafter referred as “the leaders”) met in Tshwane, South Africa, on 17 October 2007, for the 2nd Summit of the India-Brazil-South Africa (IBSA) Dialogue Forum. India, Brazil and South Africa committed themselves to jointly pursue reforms in the United Nations and a poor-friendly conclusion to the Doha Round of trade talks. The three countries are at the centre of G-20 which has emerged as a formidable alliance of developing countries and is engaged in tough bargains with the developed countries for achieving "balanced" outcome. IBSA welcomed the adoption of 45 recommendations of concrete actions regarding the “Development Agenda” by this year’s WIPO General Assembly, as well as the establishment of the WIPO Permanent Committee on Development and Intellectual Property. 5th IBSA Ministerial Summit IBSA ministerial commission meeting was held at Somerset West in Cape Town. The IBSA was formed by India, Brazil and South Africa in 2003. In terms of trade, combined value at the end of last year had reached over $10 billion. It simply means that the three countries could feasibly see their target of $15 billion in turnover from combined trade by 2010 being ex-

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According to ITER organisation, the first commercial power from fusion reactors should be available around 2045. A Japanese engineer-turned ambassador, Kaname Ikeda, has been appointed to head the project. Fusion power has been regarded as much safer and cleaner than the energy produced by the fission reactor. The fusion power has very low carbon emissions. Unlike existing fission reactors, which release energy by splitting atoms apart, ITER would generate energy by combining atoms. ITER is a multi-billion dollar international project that seeks to make use of fusion energy for electricity production a reality. It is totally meant for peaceful purposes. It is based around a hydrogen plasma

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ceeded. Trade between Brazil, India and South Africa also came into sharper focus, the three governments welcomed moves by their trade ministers towards harmonising progress made in preferential trade agreements between the South African Customs Union (SACU) and Mercosur, the Latin American trading bloc. IBSA is a unique initiative in SouthSouth economic cooperation. New Delhi Summit Declaration October 2008: The Prime Minister of India, H.E. Dr Manmohan Singh, the President of Brazil, H.E. Mr. Luiz Inácio Lula da Silva, and the President of South Africa, H.E. Mr. Kgalema Petrus Motlanthe (thereafter referred as “the leaders”) met in New Delhi, India, on 15 October 2008, for the 3rd Summit of the India-Brazil-South Africa (IBSA) Dialogue Forum. Third IBSA Summit: The IBSA has set target of US$ 15 billion by 2010 and this target seems to be within the reach. In the recently concluded Third Summit of the IBSA Dialogue Forum at New Delhi has kept a new target for trade. Now the target for trilateral trade has been set US$ 25 billion by 2015. The fourth summit is to be held in Brazil in early October, 2009”. They reiterated that South-South Cooperation cannot replace commitments by developed countries but is only a complement to North-South Cooperation. In this context, they welcomed the convening of the Highlevel Conference on South-South Cooperation to be held in 2009. INTERNATIONAL LABOUR ORGANIZATION (ILO): The International Labour Organization (ILO) is the UN specialized agency which seeks the promotion of social justice and internationally recognized human and labour rights. It was founded in 1919 and is the only surviving major creation of the Treaty of Versailles which brought the League of Nations into being and it became the first specialized agency of the UN in 1946. Membership- There are 182 members of the ILO Executive- Mr. Kari Tapiola the Governing Body is the executive of the International Labour Office. It meets three times a year, in March, June and November. It takes decisions Civil Services

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Cross Societies, including the Red Crescent (in Muslim countries) and the Red Lion and Sun (in Iran), operate on the national level through their volunteer members, although they also participate in international work. Today numbering 114, these societies all have Junior Red Cross Societies as well. The League of Red Cross Societies, a coordinating world federation of

on ILO policy, decides the agenda of the International Labour Conference, adopts the draft programme and budget of the organisation for submission to the conference, and elects the director-general. The ILO formulates international labour standards in the form of Conventions and Recommendations setting minimum standards of basic labour rights: freedom of association, the right to organize, collective bargaining, abolition of forced labour, equality of opportunity and treatment, and other standards regulating conditions across the entire spectrum of work related issues. INTERNATIONAL MONETARY FUND: Headquarters: Washington, D.C. Membership: 185 member states Establishment: December 1945 Managing Director- Dominique Strauss-Kahn of France from November 1, 2007 – present It is an international organization that oversees the global financial system by observing exchange rates and balance of payments Aim: To foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty. The Group of Twenty (G-20) industrialized and emerging market economies has reaffirmed the IMF’s central role in the international financial system, agreeing to triple the Fund’s lending capacity to $750 billion and enabling it to inject extra liquidity into the world economy, according to Managing Director Dominique Strauss-Kahn. INTERNATIONAL RED CROSS AND RED CRESCENT MOVEMENT: It was established by Geneva Convention of 1864. The name and emblem of the movement are derived from the reversal of the Swiss national flag, to honor the country in which Red Cross was found.  Presidents of the FederationTadateru Konoé of Japan(2009-present) The Red Cross, a strictly neutral and impartial worldwide organization dedicated to humanitarian interests in general and to alleviating human suffering in particular, is composed of three basic elements. The self-governing National Red

these societies, was established in 1919 as the result of proposals made by Henry P. Davison (1867-1922) of the American Red Cross. The League maintains contacts between the societies; acts as a clearinghouse for information; coordinates international disaster operations. The International Committee of the Red Cross [ICRC], an independent group of Swiss citizens chosen by cooptation (limited to twenty-five in number), acts during war or conflict whenever intervention by a neutral body is necessary, such action constituting its special field of activity. INTERNATIONAL ORGANIZATION FOR STANDARDIZATION (ISO): Founded on 23rd February, 1947. Headquarter- Geneva, Switzerland The ISO is actually not purely an NGO, since its membership is by nation, and each nation is represented by what the ISO Council determines to be the ‘most broadly representative’ standardization body of a nation. Its members are not, as is the case in the United Nations system, delegations of national governments. It is a network of the national standards institutes of 153 countries, on the basis of one member per country, with a Central Secretariat in Geneva, Switzerland, that coordinates the system. Nevertheless, ISO occupies a special position between the public and private sectors. This is because, on the one hand, many of its member institutes are part of the governmental structure of their countries, or are

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mandated by their government. On the other hand, other members have their roots uniquely in the private sector, having been set up by national partnerships of industry associations. Therefore, ISO is able to act as a bridging organization in which a consensus can be reached on solutions that meet both the requirements of business and the broader needs of society, such as the needs of stakeholder groups like consumers and users. ISO (International Organization for Standardization) is the world’s largest developer of standards. Although ISO’s principal activity is the development of technical standards, ISO standards also have important economic and social repercussions. ISO standards make a positive difference, not just to engineers and manufacturers for whom they solve basic problems in production and distribution, but to society as a whole. INTERNATIONAL OLYMPIC COMMITTEE (IOC): It is a non-governmental international organisation which came into existence in 1984. Its headquarters is in Lausanne, Switzerland. President- Count Jacques Rogge from 2001 - 2013 of Belgium. The IOC aims at ensuring the regular holding of the Olympic Games and fostering Olypism and Olympic movement. It is a permanent organisation that elects its own members. Olympic Movement seeks to contribute to building a peaceful and better world by educating youth through sport practised without discrimination of any kind. In 2010, the International Olympic Committee was nominated for the Public Eye Awards. INTERNATIONAL RESEARCH AND TRAINING INSTITUTE FOR THE ADVANCEMENT OF WOMEN (INSTRAW): International Research and Training Institute for the Advancement of Women (INSTRAW) is the only United Nations entity mandated at the international level to promote and undertake research and training programmes to contribute to the advancement of women and gender equality worldwide. Civil Services

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By stimulating and assisting the efforts of inter-governmental, governmental and non-governmental organizations, INSTRAW plays a critical role in advancing the global agenda of gender equality, development and peace. Started operations in 1979 - since 1983 its main offices are located in Santo Domingo, Dominican Republic. Head: Carmen Moreno. UN-INSTRAW is governed by an Executive Board composed of ten Member States. These Member States are elected by the Economic and Social Council (ECOSOC) of the United Nations for a three-year term. In 2007 the United Nations Economic and Social Council (ECOSOC) reaffirmed its commitment to eliminating gender inequalities by requesting the Institute to strengthen its research and training activities in accordance with its mandates and its Strategic Framework 2008-2011, which strengthens the Institute’s commitment to act as a catalyst for action on gender - promoting applied research, facilitating information-sharing, and supporting capacity-building. INTERNATIONAL TELECOMMUNICATIONS SATELLITE ORGANISATION (INTELSAT): It promotes and coordinates the operations of the telecommunication satellite system. Its headquartersAdministrative headquarters is in Washington DC and Corporate headquarters in Bermuda

It came into effect in 1973. The objective is to carry forward on a definitive basis the design , development, construction, operation and maintenance of the space segment of the commercial telecommunications satellite system. INTERNATIONAL TELECOMMUNICATIONS UNION (ITU): With headquarter at Geneva and 89 member-countries; it was established as the International Telegraph Union in Paris in 1865; The ITU is headed by a SecretaryGeneral, who is elected to a four-year term by the member states at the plenipotentiary conference. The present Secretary-General of ITU is Dr.Hamadoun Touré of Mali Became associated with the UN as its specialised agency in 1947. The purposes of ITU are: To maintain and extend international cooperation between all its Member States for the improvement and rational use of telecommunications of all kinds. To promote and enhance participation of entities and organizations in the activities of the Union, and to foster fruitful cooperation and partnership between them and Member States for the fulfilment of the overall objectives embodied in the purposes of the Union To promote and offer technical assistance to developing countries in the field of telecommunications, and also to promote the mobilization of the material, human and financial resources needed to improve access to telecommunications services in such countries To promote the development of technical facilities and their most efficient operation, with a view to improving the efficiency of telecommunication services, increasing their usefulness and making them, so far as possible, generally available to the public To promote the extension of the benefits of new telecommunication technologies to all the world’s inhabitants To promote the use of telecommunication services with the objective of facilitating peaceful relations To harmonize the actions of Member States and promote fruitful and constructive cooperation and partnership between Member States and Sec-

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tor Members in the attainment of those ends To promote, at the international level, the adoption of a broader approach to the issues of telecommunications in the global information economy and society, by cooperating with other world and regional intergovernmental organizations and those non-governmental organizations concerned with telecommunications. INTERNATIONAL TRADE CENTRE (ITC): The International Trade Centre (ITC) is the technical cooperation agency of the United Nations Conference on Trade and Development (UNCTAD) and the World Trade Organization (WTO) for operational, enterprise-oriented aspects of trade development. ITC supports developing and transition economies, and particularly their business sector, in their efforts to realize their full potential for developing exports and improving import operations. ITC works in six areas: Product and market development Development of trade support services Trade information Human resource development International purchasing and supply management Needs assessment, programme design for trade promotion ITC’s technical assistance concentrates on the three issues for which it believes the need for national capacity-building is most critical: helping businesses understand WTO rules; strengthening enterprise competitiveness; and developing new trade promotion strategies. INTERPOL Formation: 1923 Headquarters: Lyon, France Membership: 186 member states Official languages: Arabic, English, French and Spanish Secretary General: Ronald K. Noble  President: Khoo Boon Hui of Singapore, since Oct 2008 It was formed to assist international criminal police cooperation. Interpol is the world’s fourth largest international organization, after FIBA. It was given observer status in the UN General Assembly in 1996. Civil Services

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Its objectives are: to ensure and promote the widest possible mutual assistance between all criminal police authorities; to establish and develop all institutions likely to contribute effectively to the prevention of ordinary law crime. INDO-EU SUMMIT 10th EU-India summit,was held in NewDelhi on 6th November 2009. The FIRST SUMMIT between the EU and India was held in Lisbon, Portugal on 28th June 2000. The EU and India shall build a new strategic partnership founded on shared values and aspirations characterised by enhanced and multi-faceted co-operation. The SECOND SUMMIT between India and the EU was held in New Delhi, India on 23rd November, 2001. The THIRD SUMMIT-EU Business Summit, Plenary Session 3

other countries (USA, Canada, Russia, Japan and China), and now India. The SIXTH SUMMIT-EU Business Summit was on September 7, 2005, New Delhi. The SEVENTH SUMMIT-EU Summit held in Helsinki, Finland has strengthened India and EU relations. Since the first EU-India Summit held in 2000 in Lisbon, trade between both partners has increased from euro 25.6 billion to around euro 40 billion in 2005. The EIGHTH-SUMMIT-EU was held in New Delhi on 30th November 2007. A Memorandum of Understanding (MoU) on the Country Strategy Paper for India for 2007-2010 was signed between India and EU. The MoU, with a total budget of Euro 260 million will support India’s efforts to achieve the Millennium Development

Copenhagen, 9th October, 2002. The FOURTH SUMMIT between India and the EU was held in New Delhi, India on November 29, 2003. Successful conclusion of an Indo-EU Customs Cooperation Agreement, India's imminent participation in the development phase of Galileo Project and the launching of negotiations for an Indo-EU Maritime Agreement. The FIFTH SUMMIT between the EU and India was held in The Hague, The Netherlands, on 8 November 2004. It was a landmark Summit for it endorsed the EU’s proposal to upgrade its relationship with India to a ‘Strategic Partnership’. The EU, which had strategic partnerships with only five

Goals (MDG) and to implement the India – EU Joint Action Plan. EU-India Marseille Summit The NINTH EUROPEAN UNION India Summit was held in Marseille on 29 September 2008. The EU side was represented by President Nicolas Sarkozy, in his capacity as President of the European Council; by José Manuel Barroso, President of the European Commission; by Dr Javier Solana, High Representative for the EU's Common Foreign and Security Policy; by Bernard Kouchner, French Foreign Minister; by Mme Anne Marie Idrac, French Secretary of State for external trade and by Peter Mandelson,

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European Commissioner for Trade. The Republic of India was represented by Prime Minister Dr Manmohan Singh; Kamal Nath, Minister for Commerce and Industry; and M. K. Narayanan, National Security Adviser. Major Outcome: 1. The need for strategic partnership was reiterated. The India-EU Partnership has been firmly based on shared values of democracy and human rights, fundamental freedoms (including religious), pluralism, rule of law and multilateralism. 2. The Summit expressed their serious concern over the Iranian nuclear issue and called on Iran to take steps to reestablish confidence in the nature of its nuclear programme, as required by the IAEA Board of Governors. 3. India and EU stressed the need to strengthen efforts towards national reconciliation and reaffirmed the need for an inclusive dialogue, including with Daw Aung San Suu Kyi and the Myanmar ethnic groups, to progress towards democracy. 4. The EU and India agreed to work actively towards a swift finalisation of a Comprehensive Convention on International Terrorism at the UN. At the bilateral level, the two sides expressed commitment to continuing their cooperation on counter-terrorism and early formalisation of cooperation between Europol and Indian agencies. 5. On global issues, the summit discussed on global economic recession, growing regional disparities, food security, and climate change and energy. Bilateral Issues: 1. The joint cooperation in the framework of the International Thermonuclear Experimental Reactor (ITER) Agreement remains a priority that will be further enhanced through the conclusion of a bilateral agreement between Euratom and India in the field of fusion energy research, for which negotiations are being finalised. 2. New channels have been established, such as the annual security dialogue. New formats for dialogue have also been created through Indian membership of ASEM and EU observer status at SAARC. 3. In the last five years, trade has more than doubled, and bilateral investment has increased ten-fold. The parties launched negotiations for a bilateral Civil Services

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trade and investment agreement in 2007. 4. Co-operation on information and communications technologies continues to be strengthened, as indicated by the connection of the European high speed research network GEANT2 with its Indian counterpart ERNET, allowing European and Indian researchers to develop joint projects. J JUNIOR- 8 It is a joint initiative of UNICEF and the Morgan Stanley Foundation, which is supported by the G8 Presidency. The conference serves as an international forum for the exchange of ideas. Children and young people from the G8 countries and the developing countries are to be given direct access to the most powerful leaders in the world. It also gets young people interested in politics. K KOREAN SUMMIT In a historic future-setting accord, President Roh Moo-hyun of the Republic of Korea (RoK) and Chairman Kim Jong-il of the National Defence Commission of the Democratic People’s Republic of Korea (DPRK) “agreed to resolve the issue of unification on their own initiative” and in accordance with “the spirit of by-theKorean people themselves.” L LA TIN UNION LATIN Official languages: Spanish, French, Italian, Portuguese, and Romanian GeneralSecretary:Mr.Ambasciatore Bernardino Osio Established: 15 May 1954 Member states: The Latin Union is an international organization of nations that use a Romance language. Its aim is to protect, project, and promote the common heritage and unifying identities of the Latin, and Latin-influenced, world. It was created in 1954 in Madrid, Spain, and it has existed as a functional institution since 1983. Since that time its member states have risen from 12 to 37, and its membership now includes countries in Europe, Africa, the Americas and the Asia-PaAPRIL 2010, XVIYear, Issue No.4 Current NEWS Covered up to MARCH 01, 2010

cific region Headquarters: Paris, France Its aim is to protect, project, and promote the common heritage and unifying identities of the Latin, and Latininfluenced, world. M MEDICINE SANS FRONTIERE Médecins Sans Frontières was created in 1971 by a small group of French doctors. President- Dr. Christophe Fournier. It is a global charity organisation that works to promote the welfare of the war ridden people. It is a secular humanitarian-aid nongovernmental organization best known for its projects in war-torn regions and developing countries facing endemic disease. Recently, it pulled out its activities from Afghanistan because of violence. MEKONG-GANGA COOPERATION The grouping brings together six nations of the Rivers Ganga and Mekong region for economic cooperation. Its members are: Cambodia, India, Laos, Myanmar, Thailand and Vietnam. The group was formally launched in 2000. The MGC aims at developing closer relations and better understanding among the member countries to enhance friendship and solidarity. Second MGC Ministerial Meeting At the Second MGC Ministerial Meeting held in Hanoi on July 28, 2001, the member countries adopted the Hanoi Programme of Action affirming their commitment to cooperate in four areas of cooperation. The “Hanoi Programme of Action” has 6 years timeframe from 2001 to 2007 and the progress of its implementation shall be reviewed every two years. Third MGC Ministerial Meeting At the Third MGC Ministerial Meeting held in Phnom Penh on June 20 2003, the member countries adopted the Phnom Penh Road Map as a plan to accelerate the implementation of all MGC projects and activities. Fourth MGC Ministerial Meeting Fourth MGC Ministerial Meeting was held January 12, 2007 at Sebu. In this meeting Thailand has handed over the chairmanship of MGC to India. 80

The Fifth Ministerial Meeting of the Mekong-Ganga Cooperation was held in Manila, Philippines, on 1 August 2007. The Meeting agreed that the Sixth Meeting on MGC was convened in (Kolkata, India) in 2008 under the chairmanship of India. MERCOSUR Formation: 26 March 1991 (Treaty of Asunción) Administrative centre: Montevideo Largest city: São Paulo Member states: Argentina, Brazil, Paraguay, Uruguay and Venezuela Associate states: Bolivia, Chile, Colombia, Ecuador and Peru Observer states: Mexico Official languages: Portuguese, Spanish and Guaraní

Presidency: Carlos Chacho Álvarez Mercosur giving the capability to combine resources to balance the activities of other global economic powers, maybe especially the United States and the European Union. The organization could also potentially pre-empt the Free Trade Area of the Americas (FTAA). Last Summit: 19-20 January, 2007; Rio de Janeiro, East of Brazil. MADRID PROTOCOL TRADEMARK PROTECTION This system is important for trademark protection for the global going companies and Indian companies needs to have these protection in order to survive in the international market. The Madrid System is basically administered by the International Bureau of World Intellectual Property Civil Services

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Organisation (WIPO), Geneva. The Madrid Protocol permits the filing, registration and maintenance of trademark rights in more than one jurisdiction on a global basis. The Madrid System comprises two treaties: (1) The Madrid Agreement concerning the International Registration of Marks, which was concluded in 1891 and came into force in 1892, and (2) the Protocol relating to the Madrid Agreement, which came into operation on April 1, 1996. At present, 67 countries are the contracting parties to the Madrid Protocol including China, Japan and the UK. US became a party to it on November 2, 2003 and the European Community joined it on October 1, 2004. MARSHALL PLAN II A proposal to green reconstruct package to help developing countries like India and China- to recast pollutiongenerating and unsustainable development models and transform them to become clean and sustainable. MIGA Founded in 1988, as a member of the World Bank Group,it is headquartered in Washington, DC. MIGA's shareholders are its 175 member countries. MIGA’s mission is to promote foreign direct investment (FDI) into developing countries to help support economic growth, reduce poverty, and improve people’s lives. MIGA’s operational strategy plays to our foremost strength in the marketplace—attracting investors and private insurers into difficult operating environments. MIGA gives private investors the confidence and comfort they need to make sustainable investments in developing countries. MIGA specializes in facilitating investments in high-risk, low-income countries—such as in Africa and conflict-affected areas—which account for 42 percent of our portfolio. By partnering with the World Bank and others, MIGA is able to leverage finance for guarantee trust funds in these difficult or frontier markets. The agency also focuses on supporting complex infrastructure projects and promoting investments between developing countries. MIGA’s technical assistance services also play an integral role in catalyzing APRIL 2010, XVIYear, Issue No.4 Current NEWS Covered up to MARCH 01, 2010

foreign direct investment by helping developing countries define and implement strategies to promote investment. MIGA develops and deploys tools and technologies to support the spread of information on investment opportunities. Thousands of users take advantage of our suite of online investment information services, which complement country-based capacitybuilding work. The agency uses its legal services to further smooth possible impediments to investment. N NATO: Formation: 4 April 1949 Type: Military alliance Headquarters: Brussels, Belgium Membership: 28 member states Official languages: English, French Secretary General: Anders Fogh Rasmussen of Denmark (1 August 2009–present ) Deputy Secretary General- Claudio Bisogniero of Italy (2007–present). It is a military alliance.

Last Summit:2009 Strasbourg-Kehl summit from April 3 to April 4, 2009 hosted by Strasbourg, France and Kehl Germany marks the 60th anniversary of NATO. 2010/2011 Lisbon summit will be held at the End of 2010/ Beginning of 2011 Lisbon, Portugal . RIGA SUMMIT A number of decisions were taken during the RIGA Summit at Latvia: NATO endorsed the Comprehensive Political Guidance (CPG). CPG is a major policy document that sets out the priorities for all Alliance capability isshttp://en.wikipedia.org/wiki/ Category:NATO_summitsues, planning disciplines and intelligence for the next 10 to 15 years. 81

NALANDA MENTOR GROUP The fifth Nalanda Mentor Group (NMG) held in Bodh Gaya on 19 and 20 February, 2009. One can recollect that the first summit was held in July 2007 in Singapore; the second was held in December 2007 in Tokyo; the third summit was held in May 2008 in New York, and the fourth summit at August 2008 in New Delhi. The Mentor Group for the revival of Nalanda, has been headed by Nobel Laureate Amartya Sen and comprises the Foreign Minister of Singapore, George Yeo, Harvard historian Sugata Bose, academic and writer Lord Meghnad Desai and scholars and experts from Japan and China. The Mentor Group agreed that Nalanda University should be an international university enjoying academic autonomy. It would be a secular academic institution. The University, according to the blueprint finalized by the Mentor Group, will have schools in Buddhist studies, philosophy and comparative religions, historical studies, international relations and peace studies, business management and development studies, languages and literature, and ecology and environmental studies. NON-ALIGNED MOVEMENT It was founded in April 1955; as of 2007, it has 118 members. The purpose of the organization as stated in the Havana Declaration of 1979 is to ensure "the national independence, sovereignty, territorial integrity and security of non-aligned countries" in their "struggle against imperialism, colonialism, neo-colonialism, racism, and all forms of foreign aggression, occupation, domination, interference or hegemony as well as against great power and bloc politics. Secretary-General: Raul Castro. Member states and representatives Afghanistan, Algeria, Angola, Antigua and Barbuda, Bahamas, Bahrain, Bangladesh, Barbados, Belarus, Belize, Benin, Bhutan, Bolivia, Botswana, Burma (Myanmar), Brunei, Burkina Faso, Burundi, Cambodia, Cameroon, Cape Verde, Central African Republic, Chad, Chile, Colombia, Comoros, Congo, Côte d'Ivoire, Cuba Democratic Republic of the Congo, Djibouti, Dominica, Dominican Republic, Ecuador, Egypt, Equatorial Guinea, Eritrea, Ethiopia, Fiji, Gabon, Gambia, Ghana, Grenada, Guatemala, Civil Services

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Guinea, Guinea-Bissau, Guyana, Haiti, Honduras, Indonesia, India, Iran, Iraq, Jamaica, Jordan, Kenya, Kuwait, Laos, Lebanon, Lesotho, Liberia, Libya, Madagascar, Malawi, Malaysia, Maldives, Mali, Mauritania, Mauritius, Mongolia, Morocco, Mozambique, Namibia, Nepal, Nicaragua, Niger, Nigeria, North Korea, Oman, Pakistan, Palestine, Panama, Papua New Guinea, Peru, Philippines, Qatar, Rwanda, Saint Lucia, Saint Kitts and Nevis, Saint Vincent and the Grenadines, São Tomé and Príncipe, Saudi Arabia, Senegal, Seychelles, Sierra Leone, Singapore, Somalia, South Africa, Sri Lanka, Sudan, Suriname, Swaziland, Syria, Tanzania, Thailand, Timor-Leste, Togo, Trinidad and Tobago, Tunisia, Turkmenistan, Uganda, United Arab Emirates, Uzbekistan, Vanuatu, Venezuela, Vietnam, Yemen, Zambia, Zimbabwe. Observers: The following nations have observer status: Armenia, Azerbaijan, Bosnia and Herzegovina, Brazil, Costa Rica, Croatia, El Salvador, Kazakhstan, Kyrgyzstan, Mexico, Montenegro, Paraguay, People's Republic of China, Serbia, Ukraine and Uruguay. 15th Summit The 15th Summit of Non-Aligned Movement ended without any substantive note. During the Summit, the participants elected the Egyptian president, Mohamed Hosni Moubarak, as the chairman of the Non-Aligned Movement (NAM) for a three years term. Egyptian President Hosni Mubarak noted the Non-Aligned Movement is" alive and well". The movement now has 118 member states, with 15 observer states, representing two-thirds of the members of the United Nations and half of the world's population. It has struggled to find a role since the 1989 fall of the Berlin Wall and the Soviet Union's collapse. The 118 are composed of 53 states in Africa, 38 in Asia, 1 in Europe and 26 in Latin America and the Caribbean. A meeting between Indian Prime Minister Manmohan Singh and Pakistani premier Yusuf Raza Gilani on the sidelines could become a focus and set the stage for dialogue between the rivals. Sudanese President Omar Hassan alBashir is at the summit despite an International Criminal Court (ICC) indictment calling for his arrest on

charges he masterminded rights abuses in Darfur. In a draft statement, NAM voiced "deep concern" about the ICC's move to indict Bashir. The NAM countries have demonstrated again their determination to play a bigger role in the world arena. NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA): Formation: 1 January 1994 Type: Free trade area Headquarters: none Secretariats at Mexico City, Washington, D.C. and Ottawa

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General Secretary: Abdallah Salem el-Badri Libya 1 Jan 2007 - PRESENT It is the trade bloc in North America created by the North American Free Trade Agreement (NAFTA). Its objective is to eliminate most tariffs and other trade barriers on products and services passing between the US, Canada and Mexico. O OXFAM During the Second World War, a national Famine Relief Committee was set up in England in May 1942. They raised funds for war refugees and displaced people across Europe. The Oxford Committee for Famine Relief met for the first time in October 1942. In 1949 the Committee’s objectives were again broadened to ‘the relief of suffering in any part of the world.’ The Committee gradually became known by its abbreviated telegraph address, Oxfam. This name was formally adopted in 1965. The 1960s brought great changes. The organisation worked to present a different picture of poor people in the Third World: one in which they were portrayed as human beings with dignity, not as passive victims.  Oxfam’s overseas operations changed too. The major focus of work,

managed by a growing network of Oxfam Field Directors, became support for self-help schemes whereby communities improved their own water supplies, farming practices, and health provision. As Oxfam continued to expand its work through the 1970s, many new ideas and theories were put forward about development and poverty, including the decision to employ local people to run and work on projects. The same principles of community involvement and control are still behind Oxfam’s work today. Oxfam’s Public Affairs Unit (PAU) was set up to provide research into and analysis of the causes of poverty. By the mid-1980s the PAU was lobbying on a range of issues including pesticides, food aid, and Third World debt. With the escalating number of conflicts following the collapse of the Soviet Union and the Eastern bloc, Oxfam began emergency and rehabilitation work in this region during the 1990s. Oxfam’s largest ever response to a humanitarian disaster was in the Great Lakes region of Central Africa in the mid-1990s. The work on the ground was matched by international lobbying and campaigning aimed at the UN, the Organisation of African Unity, and powerful governments, in an effort to build a lasting peace. OFFICE OF THE UNITED NATIONS HIGH COMMISSIONER FOR HUMAN RIGHTS (OHCHR): Office of The United Nations High Commissioner for Human Rights (OHCHR) works to keep that vision to the forefront through constant encouragement of the international community and its member States to uphold universally agreed human rights standards. It is the role of OHCHR to alert Governments and the world community to the daily reality that these standards are too often ignored or unfulfilled, and to be a voice for the victims of human rights violations everywhere. The post of High Commissioner was created in 1993. The Office of the High Commissioner for Human Rights (OHCHR) is based at the Palais Wilson in Geneva, Switzerland, with an office at United Nations Headquarters in New York. OFFICIAL DEVELOPMENT Civil Services

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ASSISTANCE (ODA): The poor countries cannot afford to have loans on the commercial terms (like External Commercial Borrowings) Therefore, the Official Development Assistance (ODA) or Aid is must for them. ODA refers to grants and soft loans from official sources to promote social welfare and economic development. There are two channels of ODA : (a) between governments or government agencies (bilateral flows), and (b) through multi-lateral institutions like the World Bank and Regional Development Banks like the Asian Development Banks (multilateral flows). ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT (OECD): Originated in 1948.  Secretary General-José Ángel Gurría of Mexico(2006) It is an international organisation of those developed countries that accept the principles of representative democracy and a free market economy. The organization provides a setting where governments can compare policy experiences, seek answers to common problems, identify good practice and co-ordinate domestic and international policies. Headquarters: Château de la Muette in Paris. OR GANISA TION FOR THE ORGANISA GANISATION PROHIBITION OF CHEMICAL WEAPONS (OPCW): The Organisation for the Prohibition of Chemical Weapons (OPCW) is the international organisation that was established in 1997 by the countries that have joined the Chemical Weapons Convention (CWC) to make sure that the Convention works effectively and achieves its purpose. Under the terms of the Convention, the OPCW undertakes many activities all over the world, including: Working to convince those countries in the world that have not yet done so to join the Convention; checking and confirming the destruction of existing chemical weapons; Monitoring certain activities in the chemical industry to reduce the risk of commercial chemicals being misused for weapons purposes; Providing assistance and protection to member countries if they are attacked or threatened with attack by

chemical weapons, including by terrorists; and Promoting international cooperation for the peaceful uses of chemistry. The OPCW plays an important role in limiting the methods of war by getting rid of one of the most horrible weapons and working towards the complete elimination of an entire category of weapons of mass destruction. The OPCW is an independent international organisation, working in the interests of its Member States. The OPCW cooperates with the United Nations and, like the United Nations, the six official languages of the OPCW are Arabic, Chinese, English, French, Russian, and Spanish. ORGANISATION OF EASTERN CARIBBEAN STATES: The Organisation of Eastern Caribbean States (OECS), created in 1981. Membership- There are 7 member countries -Antigua and Barbuda Dominica, Grenada, Montserrat, Saint Kitts and Nevis, Saint Lucia and Saint Vincent and the Grenadines. Associate Members- Anguilla and British Virgin Islands Director General - Dr. Len Ishmael  It is an inter-governmental organisation dedicated to economic harmonisation and integration, protection of human and legal rights, and the encouragement of good governance between countries and dependencies in the Eastern Caribbean. The main organ of the OECS, the Secretariat, is based in the capital city of Castries, Saint Lucia. ORGANISATION OF PETROLEUM EXPORTING COUNTRIES (OPEC): It was established in 1960 and its headquarters is in Vienna. The Organization of the Petroleum Exporting Countries (OPEC) is a permanent intergovernmental organization, created at the Baghdad Conference on September 10–14, 1960, by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. The five Founding Members were later joined by nine other Members: Qatar (1961); Indonesia (1962) -suspended its membership from January 2009; Socialist Peoples Libyan Arab Jamahiriya (1962); United Arab Emirates (1967); Algeria (1969); Nigeria (1971); Ecuador (1973) -- suspended its membership from December 1992October 2007; Angola (2007); and

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Gabon (1975–1994).  OPEC had its headquarters in Geneva, Switzerland, in the first five years of its existence. This was moved to Vienna, Austria, on September 1, 1965.  It brings together most of the world’s oil exporting countries to coordinate their petroleum policies and provide them with technical and economic aid. OPEC possess over three-quarters of the total oil reserves. It is in the form of a cartel. Recently, the organisation has decided to increase the production of crude oil to lower the soaring oil prices in the global markets. OPEC was founded to unify and coordinate members’ petroleum policies. Member countries hold about twothirds of the world’s oil reserves. THIRD OPEC SUMMIT AT RIYADH This was the Third Summit of Heads of State and Government of OPEC Member Countries held at Riyadh, Kingdom of Saudi Arabia, 17–18 November 2007. The First and Second Summits were held in Algiers and Caracas in 1975 and 2000, respectively. It was during the First Summit in Algiers that the OPEC Fund for International Development was established to provide development assistance to developing countries. The Third OPEC Summit was concluded under the chairmanship of Custodian of the Two Holy Mosques King Abdullah bin Civil Services

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Abdulaziz. The Organization of the Petroleum Exporting Countries (OPEC) is a permanent, intergovernmental Organization, created at the Baghdad Conference on September 10–14, 1960, by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. The five Founding Members were later joined by nine other Members: Qatar (1961); Indonesia (1962); Socialist Peoples Libyan Arab Jamahiriya (1962); United Arab Emirates (1967); Algeria (1969); Nigeria (1971); Ecuador (1973–1992); Gabon (1975–1994) and Angola (2007). OPEC had its headquarters in Geneva, Switzerland, in the first five years of its existence. This was moved to Vienna, Austria, on September 1, 1965. ORGANISATION OF THE ISLAMIC CONFERENCE (OIC):  It was formally established in Jeddah, Saudi Arabia in 1971. Its headquarters in is Jeddah. It promotes cooperation on all issues among the Islamic countries. The organisation seeks to promote solidarity among member-states in the economic, social, cultural, scientific and other vital fields.Islamic Summit Conferences- The 11th OIC summit was held on March 13–14, 2008 in Dakar, Senegal.The 12thOIC Summit will be conducted in 2011 in Cairo, Egypt. The Organization of the Islamic Conference (OIC) is the second largest inter-governmental organization after the United Nations which has membership of 57 states spread over four continents. The present Charter of the Organization was adopted by the Eleventh Is-

To consolidate cooperation among member states in economic, social, cultural, scientific, and other fields of activity; To endeavor to eliminate racial segregation and discrimination and to oppose colonialism in all its forms; and, To support all Muslim people in their struggle to safeguard their dignity, independence and national rights, bridging gaps between different culture of the world etc. Prof.Dr. Ekmeleddin Ihsanoglu (Turkey): is the Secretary General.

The 11th OIC Summit Conference at Dakar in Senegal is the first to be held since the 3rd Extraordinary Session was held in Makkah Al Mukarramah in the Kingdom of Saudi Arabia from 5 to 6 Dhul Qa’ada. Professor Ekmeleddin Ihsanoglu of Turkey is the first by-vote-elected Secretary General of the Organization of the Islamic Conference (OIC). Ever since he took the office as the ninth Secretary General in January 2005, he has taken serious steps to make the 57 member states organization as an effective organization.

lamic Summit held in Dakar on 13-14 March 2008 which laid down the objectives and principles of the organization and fundamental purposes to strengthen the solidarity and cooperation among the Member States. Aims: To promote solidarity among all Islamic member states;

ORGANIZATION FOR SECURITY AND CO-OPERATION IN EUROPE: Member States: 56 Created during the cold war era as an East-West forum. It serves as a forum for political dialogue and its stated aim is to secure stability in the region, based on democratic practices and governance.

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ORGANIZATION OF AMERICAN STATES: Headquarters: Washington, D.C. Membership: 35 member states Official languages: English, French, Spanish, Portuguese  Secretary General: José Miguel Insulza (26 May 2005 - present) Formation: - Signed - Charter of the OAS 30 April 1948 - In effect - 1 December 1951 39th OAS At the 39th OAS general assembly in the Honduran city of San Pedro Sula, the 34 members had unanimously voted in favor of revoking Cuba's exclusion from the group. Founded in 1948 as a regional political organization, the OAS had the United States as its leader and a major financial supporter in the early days, and member states had to conform to U.S. values and standards of democracy. One can remember that the US had played an instrumental role in Cuba's suspension from the hemispheric body in 1962 as Fidel Castro's government veered into the Soviet bloc at a moment of intense global tension. Why Cuba retained membership of OAS? 1. But in recent years, with the Cold War fading and left-of-centre governments spreading in the Americas, Cuba's isolation has melted away. 2. In course of time, every country in the hemisphere except for the United States has re-established relations with Cuba and the US embargo of Cuba is deeply unpopular throughout the region. 3. Latin American countries also became increasingly wary of U.S. interference in their internal affairs as they improved relations with Cuba. With the resumption of diplomatic relations with El Salvador, Cuba has now restored formal ties with all Latin American countries. 4. The new regime in USA did not place any major hurdle in this path. The US has already lifted restrictions on money transfers and travels to the island by Americans with family members there and is resuming longstalled immigration and postal service talks. Washington and Havana have also agreed to resume regular talks on migration issues. ORGANIZATION OF ARAB PETROLEUM EXPORTING COUNTRIES (OAPEC): Civil Services

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 Established by an agreement amongst Arab countries which rely on the export of petroleum, the Organization of Arab Petroleum Exporting Countries (OAPEC) is a regional inter-governmental organization concerned with the development of the petroleum industry by fostering cooperation among its members. In 1968, Kuwait, Libya and Saudi Arabia signed in Beirut an agreement establishing OAPEC. The three founding members agreed that the Organization would be located in the State of Kuwait. By 1982 the membership of the Organization has risen to eleven Arab oil exporting countries: Algeria (1970), Bahrain (1970), Egypt (1973), Iraq (1972), Kuwait (1968), Libya (1968), Qatar (1970), Saudi Arabia (1968), Syria (1972), Tunisia (1982) and United Arab Emirates (1970). In 1986, Tunisia submitted a request for withdrawal. ORGANIZATION OF CENTRAL ASIAN COOPERATION (OCAC): It is an international organization, composed of Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan and Russia. The current member nations, minus Russia and Tajikistan, plus Turkmenistan, formed the OCAC in 1991 as Central Asian Commonwealth. Its objective is to enchance “the development of the economic integration in the region, the perfection of the forms and mechanisms of expansion of the political, social, scientifictechnical, cultural and educational relations. ORGANIZATION OF THE BLACK SEA ECONOMIC COOPERATION (OBSEC): On 25 June 1992, the Heads of State and Government of eleven countries signed in Istanbul the Summit Declaration and the Bosporus Statement giving birth to the Black Sea Economic Cooperation (BSEC). With the entry into force of its Charter on 1 May 1999, BSEC acquired international legal identity and was transformed into a full-fledged regional economic organization: Organization of the Black Sea Economic Cooperation. With the accession of Serbia and Montenegro in April 2004, the APRIL 2010, XVIYear, Issue No.4 Current NEWS Covered up to MARCH 01, 2010

Organization’s Member States increased to twelve. The BSEC Headquarters - the Permanent International Secretariat of the Organization of the Black Sea Economic Cooperation (BSEC PERMIS) was established in March 1994 in Istanbul. P PACIFIC ISLANDS FORUM Founded in 1971 as South Pacific Forum and in 2000 name was changed. Headquarters: Suva, Fiji Member states: Australia, the Cook Islands, the Federated States of Micronesia, Fiji, Kiribati, the Marshall Islands, Nauru, New Zealand, Niue, Palau, Papua New Guinea, Samoa, the Solomon Islands, Tonga, Tuvalu, and Vanuatu. Associate members territories: New Caledonia and French Polynesia.

Aims: to enhance cooperation between the independent countries of the Pacific Ocean. In August 2008, the Forum threatened to suspend Fiji if the latter did not commit to holding a general election by March 2009. Secretary General of the Pacific Islands Forum: Tuiloma Neroni Slade (Samoa). The Pacific Island Countries Trade Agreement (PICTA) aims to establish a free-trade area between fourteen of the Pacific Islands Forum countries. As of November 2006, it had been signed by twelve countries (not signed by Marshall Islands or Palau per PICTA status report): Cook Islands, Fiji, Kiribati, Micronesia, Nauru, Niue, Papua New Guinea, Samoa, Solomon 85

Islands, Tonga, Tuvalu, Vanuatu. The Melanesian Spearhead Group (MSG) Preferential Trade Agreement is a trade treaty governing the four melanesian states of Vanuatu, Papua New Guinea, the Solomon Islands and recently, Fiji. The MSG Trade Agreement signed in 1993 is a sub-regional trade treaty established to foster and accelerate economic development through trade relations. PARIS DONOR'S CONFERENCE In an effort to shore up the cashstrapped Palestinian Authority, a major international donor's conference was held in Paris, France in the middle of December, 2007. 68 states and organizations came together and pledged at least $ 7 billion to the Palestinians. The aid is earmarked for creating a viable Palestinian state living side-byside with Israel. The urgent need for aid had been clearly voiced by the President of the Palestinian Authority, Mahmoud Abbas. PAN-AFRICAN ENETWORK It is a brainchild of President A P J Abdul Kalam. The current total project cost is about US$ 105 million, which will be a total grant from the Government of India. The Ministry of External Affairs, New Delhi is responsible for the project, while the TCIL is the implementing agency. India, in a joint initiative with the African Union, has launched the Pan-African e-network project, which will support tele-education, telemedicine, e-commerce, e-governance, infotainment, resource-mapping and meteorological services and VVIP connectivity. Pan African e-Network Project of 53 nations of African Union will be connected by a satellite/fiber optical network.Ethiopia is the first beneficiary of the project in Africa. Mauritius is one of three or four countries short-listed for the setting up of the "Continental Hub Earth Station". The Pan-African e-Network Project was inaugurated on 26th Feb 2009 at New Delhi. Civil Services

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Uruguay and Venezuela (the members of the Contadora Group and the Contadora Support Group). Contadora Support Group: Meeting in Panama City, the Contadora Group and the Foreign Ministers of Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua adopted specific measures designed to fulfil commitments made earlier in the year in an effort to restore harmony and stability in Central america. It was the twelfth meeting of the Contadora Group and the fifth held jointly with the Central American Foreign Ministers.

R Regional Centres of SAARC There are five regional centres managed each by representatives of member states, SAARC Secretary General and Ministry of External Affairs of the host government. 1. SAARC Agricultural Information Center (SAIC) – Dhaka 2. SAARC Tuberculosis Centre (STC) – Kathmandu 3. SAARC Documentation Centre (SDC) – New Delhi 4. SAARC Meteorological Research Centre (SMRC) – Dhaka 5. SAARC Human Resources Development Centre (SHRDC) – Islamabad REGIONAL TRADE AGREEMENT (RTA) RTAs are effective means to liberalize trade among a group of countries and are used as an instrument to gain market access amongst the signatory countries. More than two-thirds of the world trade is amongst RTA bloc. Basically, RTA implies a higher degree of liberalization within the region as compared to the rest of the world. The surge in RTAs has continued unabated since the early 1990s. Some 421 RTAs have been notified to the GATT/ WTO up to December 2008. Of these, 324 RTAs were notified under Article XXIV of the GATT 1947 or GATT 1994; 29 under the Enabling Clause; and 68 under Article V of the GATS. At that same date, 230 agreements were in force. RIO GROUP It arose in 1986 as an alternative body to the Organization of American States The Rio Group is an international organization of Latin American states. The Rio Group does not have a secretariat or permanent body, and instead relies on yearly summits of heads of states. XXII summit 2009 was held at Managua Nicaragua; and the XXIII 2010 will held in Cancun Mexico. The Rio Group (Spanish: Grupo de Río, Portuguese: Grupo do Rio) is an international organization of Latin American and some Caribbean states. It was created on 18 December 1986 in the Brazilian city of Rio de Janeiro by means of the Declaration of Rio de Janeiro, signed by Argentina, Brazil, Colombia, Mexico, Panama, Peru,

S SAARC PREFERENTIAL TRADING ARRANGEMENT (SAPTA) In December 1991, the Sixth Summit held in Colombo approved the establishment of an Inter-Governmental Group (IGG) to formulate an agreement to establish a SAARC Preferential Arrangement (SAPTA) by 1997. Given the consensus within SAARC, the Agreement on SAPTA was signed on 11 April 1993 and entered into force on 7 December 1995 well in advance of the date stipulated by the Colombo Summit. The Agreement reflected the desire of the Member States to promote and sustain mutual trade and economic cooperation within the SAARC region through the exchange of concessions. So far, four rounds of trade negotiations were concluded under SAPTA covering over 5500 commodities. The basic principles underlying SAPTA are: Overall reciprocity and mutuality of advantages so as to benefit equitably all Contracting States, taking into account their respective level of economic and industrial development, the pattern of their external trade, and trade and tariff policies and systems; Negotiation of tariff reform step by step, improved and extended in successive stages through periodic reviews; Recognition of the special needs of the

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Least Developed Contracting States and agreement on concrete preferential measures in their favour; and Inclusion of all products, manufactures and commodities in their raw, semi-processed and processed forms. SAARC Secretariat The SAARC Secretariat was established in Kathmandu on 16 January 1987. Its role is to coordinate and monitor the implementation of SAARC activities, service the meetings of the Association and serve as the channel of communication between SAARC and other international organisations. The Secretariat has also been increasingly utilised as the venue for SAARC meetings. The Secretariat is headed by the Secretary General, who is appointed by the Council of Ministers from Member Countries in alphabetical order for a three-year term. Q.A.M.A. Rahim from Bangladesh is the current Secretary General. The previous Secretaries General was from Bangladesh, India, Maldives, Nepal, Pakistan and Sri Lanka. The next Secretary General is to be from Bhutan. The Secretary General is assisted by seven Directors on deputation from Member States. Regional Centres of SAARC There are five regional centres managed each by representatives of member states, SAARC Secretary General and Ministry of External Affairs of the host government. 1. SAARC Agricultural Information Center (SAIC) – Dhaka 2. SAARC Tuberculosis Centre (STC) – Kathmandu 3. SAARC Documentation Centre (SDC) – New Delhi 4. SAARC Meteorological Research Centre (SMRC) – Dhaka 5. SAARC Human Resources Development Centre (SHRDC) – Islamabad South Asian Development Fund (SADF), set up under the overall umbrella of South Asian Association for Regional Co-operation (SAARC), started functioning with its first meeting in June 1996. The members of the Fund are Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. 15th SAARC Summit at Colombo SAARC groups eight countries of South Asia, namely Afghanistan, Bangladesh, Bhutan, India, the Civil Services

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Maldives, Nepal, Pakistan and Sri Lanka with a population of about 1.5 billion. Representatives from the People’s Republic of China, the Islamic Republic of Iran, Japan, the Republic of Korea, Mauritius, the United States of America and the European Union also participated in the summit as observers. SAARC has also welcomed Australia and Myanmar to be associated as Observers to SAARC. The 15th SAARC summit was conducted with the theme called “SAARC: Partnership for our people.” Food security, terrorism, energy, environment and other issues were discussed at the meeting, aimed at promoting regional economic and political cooperation. The highlights of the 15th SAARC Summit was the signing of four significant regional agreements which included the proposed Agreement on Mutual Legal Assistance in Criminal Matters with the significant inclusion of a regional framework for cooperation in tackling terrorism, and the establishment of a SAARC Development Fund to provide financial assistance for economic, social and infrastructure development projects in the region. The SAARC was established when its charter was formally adopted on Dec. 8, 1985 by the heads of state or government of Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka. Afghanistan joined the SAARC at the 14th summit in New Delhi in April 2007. 16th SAARC summit to be held in Bhutan. Bhutan is hosting 16th SAARC Summit at its capital Thimpu from April 28-29, 2010. SHANGRI-LA DIALOGUE 2008 The annual Asian Security Summit, also known as the Shangri-La Dialogue, was conducted as defence ministers and senior officials from 27 countries heavily focused on international cooperation in disaster relief. The countries represented since 2001 are: Australia, Bangladesh, Brunei, Cambodia, Canada, China, France, Germany, India, Indonesia, Japan, Laos, Malaysia, Mongolia, Myanmar, New Zealand, Pakistan, Philippines, Republic of Korea, Russia, Singapore, Sri Lanka, Thailand, Timor Leste, UK, US, Vietnam. The IISS will convene the 5th Regional Security Summit: The

Manama Dialogue 12-14 December 2008. Organised annually, the IISS Manama Dialogue provides a forum for the national security establishments of the participating states to exchange views on regional security challenges. It is a unique forum in that it is made up of governmental delegations from over 20 countries, including not only the states of the region

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and the immediate neighbourhood, but also the outside powers with security interests in the Gulf. The Manama Dialogue provides opportunities for government leaders to deliver vitally important public statements about the evolving policy approaches to regional security. Crucially, it also facilitates private bilateral and multilateral meetings between participating states in order to advance immediate policy goals. The IISS Manama Dialogue is the primary security forum for the Gulf. Convened annually, it brings together all elements of the national security establishments from the countries in the region – Bahrain, Egypt, Iran, Iraq, Jordan, Kuwait, Oman, Qatar, Saudi Arabia, the UAE and Yemen – with the key external powers – Australia, China, France, Germany, India, Japan, Pakistan, Russia, Singapore, Turkey, the United Kingdom and the United States. The Manama Dialogue provides a forum where the most senior authorities responsible for defence, foreign policy and security issues from the

participating states can exchange views on the security challenges of the region. Since 2004 IISS has hosted four important summit. SHANGHAI COOPERATION ORGANISATION (SCO) Formation: 14 June 2001 Membership: 6 member states, 4 observer states Headquarters: Secretariat- Beijing, PRC RATS- Tashkent, Uzbekistan Working languages: Chinese, Russian Secretary General: Bolat Nurgaliyev  It comprises (1) China, (2) Kazakhstan, (3) Kyrgyzstan, (4) Russia, (5) Tajikistan and (6) Uzbekistan. Mongolia, Iran, Pakistan and India were granted SCO observer status. SCO basically aims to bolster regional cooperation and serve as a counterweight to the United States. It has been said that SCO mainly tries to curtail US access in this energy-rich regions. The SCO is different from the North Atlantic Treaty Organization (NATO), SCO has been not conferred as yet a mutual defence pact. It is only expected to hold joint military exercises. History  SCO was originally called the Shanghai Five. It was formed in 1996 largely to demilitarize the border between China and the former Soviet Union. In 2001, the organization added Uzbekistan and renamed itself the SCO. Mongolia was conferred observer status in 2004. In 2005, Iran, Pakistan, and India became observers. Yekaterinburg, Russia 2009 SCO 2009 was held in Yekaterinburg, Russia along with the BRIC Summit at near about the same time. Security issues and the global economic crisis topped the agenda this time. The focus was essentially on developing coordination measures to stabilize the economies of the individual members while at the same time maintaining growth in the region. China for its part pledged $ 10 billion in loans to the Civil Services

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SCO countries to help them come out of their economic doldrums. Apart from this there were agreements on anti- terrorism which has affected this volatile region as well as on information security cooperation. The SCO members came out jointly with a comprehensive document known as the Yekaterinburg Declaration. The 8th session of the Shanghai Cooperation Organization Prime Ministers took place in Beijing. The 10-member countries and observers of the Shanghai Cooperation Organisation, the Central Asian regional security grouping, emphasised to work together on combating terror and improving financial co-operation among Asian nations to combat the financial crisis. SOUTH AMERICAN COMMUNITY OF CN): (SACN): NATIONS (SA Administrative centre: Brasília Largest city: São Paulo Member states: Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Suriname, Uruguay and Venezuela  Official languages: Portuguese, Spanish, Dutch, English Presidency-Secretary: Amb. Jorge D’Escragnolle Taunay Filho, Brazil SOUTH ASIAN DEVELOPMENT FUND (SADF):  The South Asian Development Fund (SADF) - to mobilise the global surpluses for development of South Asia. The basic objective of SADF was to provide finances for industrial development, poverty alleviation, and protection of environment, balance of payments support, and promotion of economic projects in the region. SADF was established in 1996 with the merger of the SAARC Fund for Regional Projects (SFRP) and the SAARC Regional Fund (SRF). SADF has three Windows for (i) identification and development of projects; (ii) institutional and human resources development projects; and (iii) social and infrastructural development projects. Its current core capital base stands at US $ 5.8 million. The Association brings together seven countries of South Asia for regional cooperation. Its headquarters is in Kathmandu. It was established in 1985. SAARC has been created “to pro-

mote the welfare of the peoples of South Asia and improve their quality of life; to accelerate economic growth, social progress and cultural development in the region; to promote and strengthen collective self-reliance. SOUTH PACIFIC FORUM: It’s headquarters at Suva. The Pacific Islands Forum was formerly known as the South Pacific Forum until a name change in October 2000 to better reflect the geographic location of its members in the north and south Pacific. The South Pacific Forum began with a meeting in Wellington, New Zealand in 1971 when its seven founding members Australia, the Cook Islands, Fiji, Nauru, New Zealand, Tonga and Westen Samoa - met for the first time. Currently, there are 16 members: Australia, Cook Islands, Federated States of Micronesia, Fiji, Kiribati, Nauru, New Zealand, Niue, Palau, Papua New Guinea, Republic of Marshall Islands, Samoa, Solomon Islands, Tonga, Tuvalu, Vanuatu. The Treaty of Rarotonga, 1985: The South Pacific Nuclear Free Zone Treaty (SPNFZ), also known as the Treaty of Rarotonga is the manifestation of the South Pacific Forum's persistent stand against nuclear testing and the dumping of radioactive waste at sea within the region. The current Secretary General of the Forum Secretariat is Tuiloma Neroni Slade of Samoa. Mr Slade was elected to the position for three years on 20 August 2008. SOUTHEAST ASIA TREATY ORGANIZATION (SEATO): It was signed in 1954, with the founding members Australia, France, the United Kingdom, New Zealand, Pakistan, the Philippines, Thailand, and the United States. France ceased active participation in SEATO in 1967; Pakistan officially withdrew in 1972. By mutual consent, the alliance dis-

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banded on June 30, 1977. Currently, Australia, Bangladesh, France, New Zealand, Pakistan, Philippines, Thailand, United Kingdom United States. Dialogue Partners: South Korea and South Vietnam. SEATO was created as part of the Truman Doctrine of creating anti-communist bilateral and collective defense treaties. These treaties and agreements were intended to create alliances that would contain communist power. SOUTHERN AFRICAN DEVELOPMENT COMMUNITY (SADCC): Headquarters: New SADC headquarters building under construction in Gaborone, Botswana. Membership: SADC has 15 member states, namely: Angola, Botswana, Lesotho, Malawi, Mozambique, Swaziland, Tanzania, Zambia, Zimbabwe, Namibia - since 31 March 1990 (since independence), South Africa since 30 August 1994, Mauritius - since 28 August 1995, Democratic Republic of the Congo - since 8 September 1997, Seychelles had also previously been a member of SADC from 8 September 1997 until 1 July 2004 than joined again in 2008. Madagascar has been suspended.  Working languages: English, French and Portuguese Formation - As SADCC- April 1, 1980 - SADCC was transformed into SADC on 17 August 1992, with the adoption by the founding members of SADCC and newly independent Namibia of the Windhoek declaration and treaty establishing SADC. In 2008, the SADC agreed to establish a free trade zone with the East African Community (EAC) and the Common Market of Eastern and Southern Africa (COMESA) including all members of each of the organizations. Chairperson: Levy Mwanawasa (c2007); he died in Aug 08 and Kgalema Motlanthe (2008-present) Secretaries-General: Thomas Salomao (2005 - present). In pursuit of this agenda, SADC has adopted milestones to facilitate the attainment of the SADC Free Trade Area (FTA) by 2008, the Customs Union (CU) by 2010, the Common Market (CM) by 2015, Monetary Union (MU) by 2016 and the Single Currency by 2018. The SADC Free Civil Services

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and 1600 launch vehicles. The new agreement will reduce this number even further. According to the framework agreement “within seven years after this treaty comes into force, and in future, the limits for strategic delivery system should be within the range of 500 to 1000 units and for warheads linked to them within the range of 1500 to 1675 units”. In order to dispel concerns regarding implementation of the treaty, the White House in its statement said that there are “effective verification measures” included in it. START I and II START (for Strategic Arms Reduction Treaty) is a treaty between the United States of America and the Union of Soviet Socialist Republics (USSR) on the Reduction and Limitation of Strategic Offensive Arms. The treaty was signed on 31st July 1991. The treaty barred its signatories from deploying more than 6,000 nuclear warheads atop a total of 1,600 ICBMs, submarine-launched ballistic missiles, and bombers. The treaty was implemented in 2001 and in this process 80 per cent of all strategic nuclear weapons were scrapped. Proposed by United States’ President Ronald Reagan, it was renamed START I after negotiations began on the second START treaty, which became START II. The START-II Treaty was signed on January 3, 1993 by President George Bush and President Boris Yeltsin. START II, when implemented, will eliminate heavy intercontinental ballistic missiles (ICBMS) and all other multiple-warhead (MIRVed) ICBMS. It will also reduce the total number of strategic nuclear weapons deployed by both countries, by two-thirds below pre-START levels. T

Trade Area (FTA) was launched on August 17, 2008 at Sandton, South Africa during the 28th Summit of SADC Heads of State and Government. The 29th summit was held on 8th September 2009 Kinshasa. START It was an event that the whole world was waiting for. A meeting between the Presidents of the USA and Russia. It was not only the first time that US President Barak Obama and Russian President Dmitry Medvedev were meeting each other since they took up the Presidencies of their respective countries but also the first US- Russia Summit in 7 years. Arguably the highlight of the meeting was the signing of an agreement between the two countries to reduce the nuclear weapons stockpile of each by one- third of what is available at present. Thus, in numerical terms the nuclear warheads of USA and Russia will come down to 1500. This new agreement will replace the previous START 1 (Strategic Arms Reduction Treaty) which was a treaty signed between the USA and the erstwhile Soviet Union aimed at reduction and limitation of strategic offensive arms. According to that treaty either country was to maintain no more than 6000 nuclear warheads and 1600 Inter- Continental Ballistic Missiles (ICBM), submarine- launched ballistic missiles and bombers. Subsequent treaties ensured that each country would be allowed a maximum of 2200 warheads

TSHWANE IBSA DECLARATION

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The Prime Minister of India, Manmohan Singh, the President of Brazil, Luiz Inácio Lula da Silva, and the President of South Africa, Thabo Mbeki (thereafter referred as “the leaders”) met in Tshwane, South Africa, on 17 October 2007, for the 2nd Summit of the India-Brazil-South Africa (IBSA) Dialogue Forum. THE ADVISORY CENTRE ON WTO LAW (ACWL): It is an international organisation established in 2001 The Centre is based in Geneva, has 37 Members: 10 developed country Members, and 27 Members entitled to the services of the ACWL Aim: To provide legal advice on WTO law, support in WTO dispute settlement proceedings and training in WTO law to least developed countries, developing countries and customs territories, and countries with economies in transition. THE CARIFTA: In 1972, Commonwealth Caribbean leaders decided to transform the Caribbean Free Trade Association (CARIFTA) into a Common Market and establish the Caribbean Community, of which the Common Market would be an integral part. CARICOM was established by the Treaty of Chaguaramas which came into effect on August 1, 1973. The first four signatories were Barbados, Jamaica, Guyana and Trinidad and Tobago. THE SAARC FOOD SECURITY RESERVE BOARD (SFSRB):  Agreement on Establishing the SAARC Food Security Reserve was signed during the Third SAARC Summit (Kathmandu, 1987). The SAARC Food Security Reserve Board (SFSRB) comprising representatives from Member Countries meets once a year. THE WEST AFRICAN CUSTOMS AND ECONOMIC UNION (UDEAC): The West African Customs and Economic Union (UDEAC) was established in 1966, has led to the fixing of new rates of duty applicable to goods exchanged between Senegal and the Ivory Coast. Corresponding to the Conseil de l’Entente and the UDEAO in the west is the Central African Customs and Economic Union, which includes the five states of Cameroon, Chad, Gabon, Central African Republic, and the Congo (Brazzaville). Civil Services

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TRANSPORT CORRIDOR EUROPE-CAUCASUS-ASIA It is an international organisation of economic cooperation.  Permanent Secretariat based in Baku, Azerbaijan. Established in 1998, upon signing of Multilateral Agreement on International Transport. Its first elected Secretary General was a representative of Georgia , ambassador Zviad Kvatchantiradze. Currently Permanent Secretariat is lead by Rustan Jenalinov from Kazakhstan. TEAM - 9 The rationale behind the initiative is that India would share its development and technology experience with Burkino, Faso, Chad, Cote d’ I’vore, Equatorial guinea, Ghana, Guinea Bissaue, Mali, Congo and Senegal, with government facilitating interaction between the private and institutional sector. Under this programme, we are cooperating in information technology, education, health care, small and medium scale industry, infrastructure, energy, textiles, transport, tourism and most notably agriculture. Under the techno-economic approach to Africa-India movement (TEAM-9), India has extended a credit line of $500 million to eight West African nations. Indian investment in Cote d’Ivoire will rise to $1 billion over 2006-11, mainly in the mining and hydrocarbon sectors.

though they have much higher capabilities compared with many other countries. Union of South American Nations (Unasur): Members are: Bolivia, Colombia, Ecuador, Peru and associate members are Chile, Argentina, Brazil, Paraguay and Uruguay and observors are Mexico and Panama.The UNASUR Constitutive Treaty was signed on May 23, 2008, at the Third Summit of Heads of State, held in Brasília, Brazil, but not as of yet ratified by the required ninth nation. U.N. SUMMIT Place: New York (U.S) Duration: Sept 14-16, 2005 Participant: 170 countries Outstanding: The UN members agreed on a collective responsibility to protect civilian population against genocide, war crimes, ethnic cleasing and crimes against humanity. Nuclear Plants should be verified by the IAEA, India, Pakistan, and Israel are not agreeable.

U Umbrella Group The ten-nation Umbrella Group countries pledged to act on climate change. The Umbrella Group, which consists of Canada, Iceland, Japan, Kazakhstan, New Zealand, Norway, Russia, Ukraine, the United States and Australia. Umbrella Group believed that the increase in global average temperature above pre-industrialized levels ought not exceed two degrees Celsius and the group sought a global outcome that put the world on a path to a 50 percent reduction in CO2 emissions by 2050. But the Umbrella Group did not give the details of the reduction targets. One can recall that the Umbrella Group has long been criticized for its reluctance to reduce carbon emissions,

Uranium and Plutonium enrichment should be restrained even for peaceful purposes. Main objectors are Iran, Brazil, Algeria, Germany, India and Pakistan. On the Security Council Expansion two models are proposed, both with non-veto powers for new members. Model-A was for six new Permanent Members- two each from Asia and Africa, one each from Europe and the Americas-and three new non-permanent members. The G-4 (Japan, India, Brazil Germany) and S. Africa seem to favour this model while the ‘Coffee Club’ of 40 mid size countries including Italy, Pakistan, Mexico, Argentian, S Korea and Spain oppose this model. The U.S. and China too are not in

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favour of it. Model B was for 8 ‘Semi-permanent’ members with renewable term of four years and one new non-permanent member. The G-4 opposes it, while all the countries opposed to Model A are in favour of it. UN CAPIT AL DEVEL OPMENT CAPITAL DEVELOPMENT FUND (UNCDF): UN Capital Development Fund was established in 1966 and became fully operational in 1974. Headquartered in New York City, the UNCDF, is a semiautonomous unit of the United Nations Development Programme, provides grants and loans to the least-developed members of the UN for projects in areas such as agriculture and agro-industry. UNCDF currently invests in 38 LDCs with a total programme portfolio amounting to approximately US$200 million. UNCDF is a member of the UNDP Group and provides capacity building and investment support to the Least Developed Countries (LDCs) within the areas of Microfinance and Local Development.  Executive Secretary: David Morrison. UN MAIN BODY Security Council Until 1965, the Council has 11 members and now the Council has 15 members— five permanent members and 10 elected by the General Assembly for two-year terms. Every year five new countries are elected to these seats, which rotate on a geographical basis: five from Asia, Africa and the Middle-East; two from Western Countries; two from Latin America; and one from Eastern Europe. The Council is composed of five permanent members — China, France, Russian Federation, the United Kingdom and the United States — and ten non-permament members (with year of term's end): Austria (2010) Japan (2010) Turkey (2010); Bosnia and Herzegovina (2011); Lebanon (2011) Uganda (2010); Brazil (2011) Mexico (2010); Gabon (2011) Nigeria (2011). The General Assembly elected Bosnia and Herzegovina, Brazil, Gabon, Lebanon and Nigeria to serve as non-permanent members of the Security Council for two-year terms starting on 1 January 2010. The newly elected countries will replace Burkina Faso, Costa Rica, Croatia, Libyan Arab Jamahiriya Civil Services

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and Viet Nam. UN Security Council Chamber in New York, also known as the Norwegian Room. UNEP UNEP, established in 1972, is the voice for the environment within the United Nations system. UNEP acts as a catalyst, advocate, educator and facilitator to promote the wise use and sustainable development of the global environment. To accomplish this, UNEP works with a wide range of partners, including United Nations entities, international organizations, national governments, non-governmental organizations, the private sector and civil society. UNEP work encompasses: (a) Assessing global, regional and national environmental conditions and trends (b) Developing international and national environmental instruments (c) Strengthening institutions for the wise management of the environment (d) Facilitating the transfer of knowledge and technology for sustainable development (e) Encouraging new partnerships and mind-sets within civil society and the private sector. To ensure its global effectiveness UNEP supports six regional offices, plus a growing network of centres of excellence such as the Global Resource Information Database (GRID) centres and the UNEP World Conservation Monitoring Centre (UNEP-WCMC). UNEP also has major offices in Geneva and Paris, where its Division of Technology, Industry and Economics is situated. UNEP also hosts several environmental convention secretariats including the Ozone Secretariat and the Montreal Protocol’s Multilateral Fund, CITES (the Convention on International Trade in Endangered Species of Wild Fauna and Flora), the Convention on Biological Diversity, the Convention on Migratory Species, and a growing family of chemicals-related agreements, including the Basel Convention on the Transboundary Movement of Hazardous Wastes and the recently negotiated Stockholm Convention on Persistent Organic Pollutants (POPs). Achim Steiner is the UNEP Executive Director.

UN-HABITAT It was established in 1978 and has its headquarters at the UN office in Nairobi, Kenya. It is the United Nations agency for human settlements. It runs two major worldwide campaigns – the Global Campaign on Urban Governance, and the Global Campaign for Secure Tenure. Through these campaigns and by other means,

tional organizations, national and local governments, non-governmental organizations, academic and educational institutions and the communities at the large. As part of the United Nations Organization, UNICRI sets its activities in accordance with the priorities indicated by the United Nations Commission on Crime Prevention and Criminal Justice. The Institute maintains

the agency focuses on a range of issues and special projects which it helps implement.  TURKISH Prime Minister, Mr. Recep Tayyip Erdogan is winner of the inaugural Rafik Hariri-UN-HABITAT. Mrs. Anna Tibaijukais the is the Executive Director. UNICRI  United Nations Inter-regional Crime and Justice Research Institute (UNICRI) acts with its partners in the international community to: advance understanding of crime-related problems foster just and efficient criminal justice systems support the respect of international instruments and other standards facilitate international law enforcement cooperation and judicial assistance. UNICRI supports other interna-

close working relations with UN bodies and agencies, particularly with the United Nations Office on Drugs and Crime (UNODC). Secretary-General Ban Ki-moon has appointed Mr. Sandro Calvani from Italy as Director of the United Nations Interregional Crime and Justice Research Institute (UNICRI). UNIDO The United Nations Industrial Development Organization (UNIDO) helps developing countries and countries with economies in transition in their fight against marginalization in today’s globalized world. It mobilizes knowledge, skills, information and technology to promote productive employment, a competitive economy and a sound environment. Dr. Kandeh K. Yumkella is the Director-General of UNIDO. UNIDO was set up in 1966 and be-

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came a specialized agency of the United Nations in 1985. As part of the United Nations common system, UNIDO has responsibility for promoting industrialization throughout the developing world. As of 11 December 2008, 173 States are Members of UNIDO. Its headquarters are in Vienna, and it is represented in 35 developing countries. UNITAR United Nations Institute for Training and Research (UNIT-AR) was established in 1965. It is an autonomous body within the United Nations with the purpose of enhancing the effectiveness of the Organization through appropriate training and research. UNITAR is governed by a Board of Trustees and is headed by an Executive Director. UNITAR's headquarters are based in Geneva, Switzerland. It has two regional offices in New York, U.S.A and in Hiroshima, Japan. UNITED NATIONS Formation: 24 October 1945 Type: International organization Headquarters: International territory on Manhattan Island, New York City Membership: 192 member states Official languages: Arabic, Chinese, English, French, Russian, Spanish Secretary-General: Ban Ki-moon Aim: facilitate co-operation in international law, international security, economic development, social progress and human rights issues. Current UN peacekeeping operations: 16 Budget for 2008-2009: USD 4.171 billion (peacekeeping operations not included) Official languages: Arabic, Chinese, English, French, Russian, Spanish. Information about the UN in other languages UN Observances - The first day approved by the UN General Assembly was United Nations Day, 24 October (by resolution 168 (II) of 31 October 1947). UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT (UNCTAD) The United Nations Conference on Trade and Development (UNCTAD) was established in 1964. It was meant

for the integrated treatment of trade and development and related issues in the areas of investment, finance, technology, enterprise development and sustainable development. There are 193 members. Main Functions: It functions as a forum for intergovernmental deliberations, supported by discussions with experts and exchanges of experience, aimed at consensus building. It undertakes research, policy analysis and data collection for the debates of government representatives and experts. It provides technical assistance tailored to the specific requirements of developing countries, with special attention to the needs of the least developed countries and of economies in transition. When appropriate, UNCTAD cooperates with other organizations and donor countries in the delivery of technical assistance. The Secretary-General of UNCTAD is Dr. Supachai Panitchpakdi (Thailand), who took office on 1 September 2005. UNITED NATIONS DEVELOPMENT PROGRAMME (UNDP):  United Nations Development Programme (UNDP) is the UN’s global development network, an organization advocating for change and connecting countries to knowledge, experience and resources to help people build a better life. There are as many as 166 countries, working with UNDP for their own solutions to global and national development challenges. (1) UNDP helps developing countries attract and use aid effectively. It encourages the protection of human rights and the empowerment of women. (2) The annual Human Development Report, commissioned by UNDP, focuses the global debate on key development issues, providing new measurement tools, innovative analysis and often controversial policy proposals. Helen Clark became the Administrator of the United Nations Development Programme on 17 April 2009, and is the first woman to lead the organization. The present country programme document for India (2008-2012) was formu-

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lated in partnership with the Department of Economic Affairs of the Ministry of Finance, building on the United Nations Development Assistance Framework (UNDAF) 20082012. UNITED NATIONS ECONOMIC AND SOCIAL COMMISSION FOR ASIA AND THE PACIFIC (UNESCAP): The regional arm of the United Nations Secretariat for the Asian and Pacific region is the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP). It is located in Bangkok, Thailand. Noeleen Heyzer (Singapore) is the ninth Executive Secretary of the Economic and Social Commission for Asia and the Pacific (ESCAP). Appointed by the United Nations Secretary-General in August 2007. The functions of UNESCAP have been defined by the Secretary- General as follows: (a) Promoting economic and social development through regional and subregional cooperation and integration; (b) Serving as the main economic and social development forum within the United Nations system for the UNESCAP region; (c) Formulating and promoting development assistance activities and projects commensurate with the needs

and priorities of the region while acting as an executing agency for relevant operational projects; (d) Providing substantive and secretariat services and documentation for the Commission and its subsidiary bodies; (e) Carrying out studies, research and other activities within the terms of reference of the Commission; (f) Providing advisory services to governments at their request; (g) Developing and executing programmes of technical cooperation; Civil Services

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(h) Coordinating UNESCAP activities with those of the major departments/ offices of the United Nations at Headquarters and specialized agencies and intergovernmental organizations. Sustainable Agricultural Development in Asia was the focus of a twoday meeting organized by UNESCAP regional institution Centre for Alleviation of Poverty through Secondary Crops’ Development in Asia and the Pacific in Bogor, Indonesia. With a membership of 62 Governments, 58 of which are in the region, and a geographical scope that stretches from Turkey in the west to the Pacific island nation of Kiribati in the east, and from the Russian Federation in the north to New Zealand in the south, ESCAP is the most comprehensive of the United Nations five regional commissions. UNITED NATIONS ECONOMIC COMMISSION FOR EUROPE: Established in 1947 Member states: 56 Secretariat Headquarters: Geneva, Switzerland It is one of five regional commissions under the administrative direction of United Nations headquarters. Aim: to encourage economic cooperation among its member States. UNITED NATIONS EDUCATION, SCIENTIFIC AND CULTURAL ORGANISATION (UNESCO): United Nations Education, Scientific and Cultural Organisation (UNESCO) fosters values by multiplying and reinforcing educational, scientific and cultural relations, pursuing two closely linked objectives: development which, beyond the simple demands of material progress, must also respond to a full range of human aspirations without jeopardizing the heritage of future generations; and establishment of a Culture of Peace, based on education for responsible citizenship and full participation in democratic processes. The headquarter is at Paris and founded in 1946. Through its strategies and activities, UNESCO is actively pursuing the Millennium Development Goals, especially those aiming to: (a) halve the proportion of people living in extreme poverty in developing

countries by 2015; (b) achieve universal primary education in all countries by 2015; (c) eliminate gender disparity in primary and secondary education by 2005; and (d) to reverse current trends in the loss of environmental resources by 2015. UNITED NATIONS HIGH COMMISSIONER FOR REFUGEES (UNHCR):  High Commissioners: António Guterres, 2005 - present (Portugal). The Office of the United Nations High Commissioner for Refugees was established on December 14, 1950 by the United Nations General Assembly.

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The agency is mandated to lead and co-ordinate international action to protect refugees and resolve refugee problems worldwide. Its primary purpose is to safeguard the rights and well-being of refugees. It strives to ensure that everyone can exercise the right to seek asylum and find safe refuge in another State, with the option to return home voluntarily, integrate locally or to resettle in a third country.  High Commissioners: António Guterres, 2005 - present (term to expire in 2009) (Portugal). UNITED NATIONS

OFFICE ON DRUGS AND CRIME (UNDOC): The United Nations Office on Drugs and Crime (UNODC) is a global leader in the fight against illicit drugs and international crime. Established in 1997, UNODC has approximately 500 staff members worldwide. Its headquarters are in Vienna and it has 21 field offices as well as a liaison offices in New York. UNODC relies on voluntary contributions, mainly from governments, for 90 per cent of its budget. The three pillars of the UNODC work programme are: Research and analytical work to increase knowledge and understanding of drugs and crime issues and expand the evidence-base for policy and operational decisions; Normative work to assist States in the ratification and implementation of the international treaties, the development of domestic legislation on drugs, crime and terrorism, and the provision of secretariat and substantive services to the treaty-based and governing bodies; and Field-based technical cooperation projects to enhance the capacity of Member States to counteract illicit drugs, crime and terrorism. UNITED NATIONS POPULATION FUND (UNFPA): United Nations Population Fund (UNFPA) is an international development agency that promotes the right of every woman, man and child to enjoy a life of health and equal opportunity. UNFPA supports countries in using population data for policies and programmes to reduce poverty and to ensure that every pregnancy is wanted, every birth is safe, every young person is free of HIV/AIDS, and every girl and woman is treated with dignity and respect. UNFPA seeks to improve the lives and expand the choices of individuals and couples. Over time, the reproductive choices they make, multiplied across communities and countries, alter population structures and trends. UNFPA helps governments, at their request, to formulate policies and strategies to reduce poverty and support sustainable development. The Fund also assists countries to Civil Services

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collect and analyse population data that can help them understand population trends. And it encourages governments to take into account the needs of future generations, as well as those alive today. The close links between development and reproductive health and gender equality, the other main areas of UNFPA’s work, were affirmed at the 1994 International Conference on Population and Development (ICPD) in Cairo. UNFPA is guided in its work by the Programme of Action adopted there. At the conference, 179 countries agreed that meeting needs for education and health, including reproductive health, is a prerequisite for sustainable development over the longer term. They also agreed on a roadmap for progress with the following goals: Universal access to reproductive health services by 2015 Universal primary education and closing the gender gap in education by 2015 Reducing maternal mortality by 75 per cent by 2015 Reducing infant mortality Increasing life expectancy Reducing HIV infection rates  Reaching the goals of the Programme of Action is also essential for achieving theMillennium Development Goals. UNITED NATIONS PROGRAMME ON HIV/AIDS With its headquarters in Geneva, the UNAIDS Secretariat works on the ground in more than 80 countries.  The Joint United Nations Programme on HIV/AIDS (UNAIDS), is the main advocate for accelerated, comprehensive and coordinated global action on the epidemic. Five major components make up the role of UNAIDS: Leadership and advocacy for effective action on the epidemic Strategic information and technical support to guide efforts against AIDS worldwide Tracking, monitoring and evaluation of the epidemic and of responses to it Civil society engagement and the development of strategic partnerships Mobilization of resources to support an effective response. UNAIDS Executive Director is Michel SidibÊ.

UNITED NATIONS RESEARCH INSTITUTE FOR SOCIAL DEVELOPMENT (UNRISD): UNRISD was created in 1963 as part of the first United Nations Development Decade. Since then, the Institute has sought to promote a holistic and multidisciplinary approach to social development by focusing on decisionmaking processes, often conflicting social forces, and the question of who wins and who loses as economies grow or contract and societies change. UNRISD is an autonomous UN agency engaging in multidisciplinary research on the social dimensions of contemporary problems affecting development. Through its research, UNRISD stimulates dialogue and contributes to policy debates on key issues of social development within and outside the United Nations system. For more than 47 years, UNRISD has engaged exclusively in research on social development and remains the only United Nations organization that does so. UNRISD is an unusually open space for research and dialogue. UN Secretary-General, Ban Ki-moon, has appointed Dr. Sarah Cook as the new Director of UNRISD. Dr. Cook

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UNIVERSAL POSTAL UNION Formation: October 9, 1874 Headquarters: Berne, Switzerland Membership: United Nations Official languages: French (official + working language), English (working language) Secretary General: Edouard Dayan It coordinates postal policies between member nations. It has 191 members.The Council of Administration (CA) consists of 41 member countries and meets in principle each year at UPU Headquarters in Bern. The postal services is the largest physical distribution network in the world. It is the second oldest international organisation after the International Telecommunications Union. World Post Day is celebrated each year on 9 October, the anniversary of the establishment of the Universal Postal Union in 1874 in the Swiss Capital, Bern. It was declared World Post Day by the UPU Congress held in Tokyo, Japan in 1969. The Pan African Postal Union (PAPU) has successfully wrapped up its 30th anniversary celebrations, attracting a record number of postal-sector ministers and top policy-makers from international and regional organizations. has taken up her post on 1 November 2009, replacing Thandika Mkandawire who left UNRISD on 30 April 2009. UNOPS:  The United Nations Office for Project Services (UNOPS), a ten years young and self-financing entity of the United Nations system, has more than a decade of experience in providing operational management services worldwide to help the clients achieve result. With its headquarters in Copenhagen, Denmark, a network of five regional offices and a further 20 operations and project centres, UNOPS oversees activities in more than 60 countries. It was established on 1 January 1995. It is self-financed. Jan Mattsson has been Executive Director of UNOPS since June 2006, having enjoyed a distinguished career with the United Nations over the previous 23 years.Siddharth Chatterjee is the Director of the Europe and Middle East Regional Office (EMO). UNU: United Nations University (UNU) has four key roles:  An international community of scholars. A bridge between the United Nations and the international academic Civil Services

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community. A think-tank for the United Nations system. A builder of capacities, particularly in developing countries. Since the beginning of its academic activities in September 1975, the UN University has grown and matured into a decentralized, global network comprising UNU Centre in Tokyo, a worldwide network of institutes located in 13 UN Member Nation host countries (as of 2008), and liaison offices at United Nations Headquarters (New York) and UNESCO Headquarters (Paris). Prof. Dr. Konrad Osterwalder is the Rector; Prof. Govindan Parayil is the Vice-Rector. US-INDIA CEO FORUM The US-India CEO Forum Infrastructure Investment Conference, which took place at the fag end of October 2007, and which was attended by top officials and corporate honchos from both India and USA, provided a platform for the free flow of ideas on ways and means to strengthen economic ties between the two countries. UNFCCC: The United Nations Framework Convention on Climate Change The UNFCCC was opened for signature on May 9, 1992, after an Intergovernmental Negotiating Committee produced the text of the Framework Convention as a report following its meeting in New York from 30 April to 9 May 1992. It entered into force on March 21, 1994. As of December 2009, UNFCCC had 192 parties. The Parties to the UNFCCC typically convene annually in a Conference of the Parties (COP), and twice a year in meetings of the subsidiary bodies – the Subsidiary Body for Implementation (SBI) and the Subsidiary Body for Scientific and Technological Advice (SBSTA). The Secretariat The Conference of the Parties (COP),

Subsidiary Bodies and Bureau are serviced by the secretariat, also known as the Climate Change Secretariat, whose mandate is laid out in general terms in Article 8 of the Convention. The UNFCCC is also the name of the United Nations Secretariat charged with supporting the operation of the Convention, with offices in Haus Carstanjen, Bonn, Germany. Since 2006 the head of the secretariat has been Yvo de Boer. The Secretariat, augmented through the parallel efforts of the Intergovernmental Panel on Climate Change (IPCC), aims to gain consensus through meetings and the discussion of various strategies. The function was to mainly coordinate with the secretariats of other relevant international bodies, notably the Global Environment Facility (GEF) and its implementing agencies (UNDP, UNEP and the World Bank), the Intergovernmental Panel on Climate Change (IPCC), and other relevant conventions. One of its first tasks was to establish national greenhouse gas inventories of greenhouse gas (GHG) emissions and removals, which were used to create the 1990 benchmark levels for accession of Annex I countries to the Kyoto Protocol and for the commitment of those countries to GHG reductions. Updated inventories must be regularly submitted by Annex I countries. The parties to the convention have met annually from 1995 in Conferences of the Parties (COP) to assess progress in dealing with climate change. In 1997, the Kyoto Protocol was concluded and established legally binding obligations for developed countries to reduce their greenhouse gas emissions. 1995 - COP 1, The Berlin Mandate 1996 - COP 2, Geneva, Switzerland 1997 - COP 3, The Kyoto Protocol on Climate Change 1998 - COP 4, Buenos Aires 1999 - COP 5, Bonn, Germany 2000 - COP 6, The Hague, Netherlands 2001 - COP 6, Bonn, Germany

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2001 - COP 7, Marrakech, Morocco 2002 - COP 8, New Delhi, India 2003 - COP 9, Milan, Italy 2004 - COP 10, Buenos Aires, Argentina 2005 - COP 11/MOP 1, Montreal, Canada 2006 - COP 12/MOP 2, Nairobi, Kenya 2007 - COP 13/MOP 3, Bali, Indonesia 2008 - COP 14/MOP 4, PoznaĂą, Poland; 2009 - COP 15/MOP 5, Copenhagen, Denmark; 2010 - COP 16/MOP 6, Mexico; 2011 - COP 17/MOP 7, South Africa; 2012 - COP 18/MOP 8, At present, there are two countries bidding to host: Qatar and South Korea. BALI ROADMAP (1) A preamble notes the "urgency" of scientific evidence that warming of the climate system is unequivocal and that delay in reducing emissions increases the risk that the impacts of climate change will worsen. (2) The Roadmap sets the framework for negotiations for a long-term agreement on emissions cuts, includ-

ing the United States, the only industrial power to remain outside the UN's Kyoto Protocol. (3) The negotiations are to wrap up in Copenhagen at the end of 2009, to give parties time to ratify the treaty so that it takes effect at the end of 2012, following on from current commitments under Kyoto. Four meetings are scheduled in 2008: in March/April, June, August/September and finally in December, in Poznan, Poland. (4) The Roadmap does not specify any clear emissions goal, nor does it suggest which countries should make emissions cuts or how deep these cuts should be. But in a footnote in the preamble, it refers to scenarios by the UN's Nobel-winning scientists, the InCivil Services

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tergovernmental Panel on Climate Change (IPCC), which include a goal of halving global emissions by 2050, compared with the level for 2000. POZNAN SUMMIT 2008 The international political response to climate change began with the adoption of the UNFCCC in 1992. The UN Framework Convention on Climate Change (UNFCCC) sets out a framework for action aimed at stabilizing atmospheric concentrations of greenhouse gases to avoid “dangerous anthropogenic interference” with the climate system. The UNFCCC entered into force on 21 March 1994, and now has 192 parties. W WHO The World Health Organization (WHO) is the United Nations specialized agency for health. It was established on 7 April 1948 and the headquarter is at Geneva. At present, it has 193 members. WHO’s objective, as set out in its Constitution, is the attainment by all peoples of the highest possible level of health. Health is defined in WHO’s Constitution as a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity. WHO is governed by 193 Member States through the World Health Assembly. The Health Assembly is composed of representatives from WHO’s Member States. The main tasks of the World Health Assembly are to approve the WHO programme and the budget for the following biennium and to decide major policy questions. Dr Margaret Chan is the DirectorGeneral of WHO, appointed by the World Health Assembly on 9 November 2006. WIPO: The World Intellectual Property Organization (WIPO) is an international organization dedicated to promoting the use and protection of works of the human spirit. These works-intellectual propertyare expanding the bounds of science and technology and enriching the world of the arts. Through its work, WIPO plays an important role in enhancing the quality and enjoyment of life, as well as creating real wealth for

nations. With headquarters in Geneva, Switzerland, WIPO is one of the 16 specialized agencies of the United Nations system of organizations. The Organization counts 184 nations as member states. Francis Gurry was appointed Director General of the World Intellectual Property Organization (WIPO) and Secretary-General of the International Union for the Protection of New Varieties of Plants (UPOV) on October 1, 2008. WMO WMO has a membership of 189 Member States and Territories(on 4 December 2009). Established in 1950, WMO became the specialized agency of the United Nations in 1951 for meteorology (weather and climate), operational hydrology and related geophysical sciences. It originated from the International Meteorological Organization (IMO), which was founded in 1873 and the headquarter is at Geneva. WMO is playing a leading role in international efforts to monitor and protect the environment through its Programmes, such as the World Weather Watch Programme, World Climate Programme, the Atmospheric Research and Environment Programme, and the Hydrology and Water Resources Programme. The vision of the WMO for the Sixth Longterm Plan (2004-2011) is to provide world leadership in expertise and international cooperation in weather, climate, hydrology and water resources, and related environmental issues, and thereby to contribute to the

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safety and well being of people throughout the world and to the economic benefit of all nations.  Ali Mohammad Noorian was elected First Vice-President of the World Meteorological Organization by Fourteenth World Meteorological Congress in 2003. WORLD BANK GROUP Formation: 27 December 1945 Operational: 25 June 1946 Headquarters: Washington, D.C. The President of the World Bank, Robert B. Zoellick, chairs meetings of the Boards of Directors and is responsible for overall management of the Bank. By tradition, the Bank president is a U.S. national and is nominated by the United States, the Bank's largest shareholder. World Bank is part of the United Nations system, but its governance structure is different. The World Bank works to bridge this divide and turn rich country resources into poor country growth. The “World Bank” is the name that has come to be used for the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). Together these organizations provide low-interest loans, interestfree credit, and grants to developing countries. The World Bank’s headquarter is situated at Washington DC. Currently, it has 186 members. Total member countries in each institution 1. The International Bank for Reconstruction and Development (IBRD) has 186 members. Civil Services

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2. The International Development Association (IDA) has 169 members. 3. The International Finance Corporation (IFC) has 182 members. 4. The Multilateral Investment Guarantee Agency (MIGA) has 175 members. 5. The International Centre for Settlement of Investment Disputes (ICSID) has 144 members. IDA: The International Development Asso- ciation (IDA) is the part of the World Bank that helps the world’s poorest countries. Established in 1960, IDA aims to reduce poverty by providing interest-free credits and grants for programs that boost economic growth, reduce inequalities and improve people’s living conditions. IDA complements the World Bank’s other lending arm–the International Bank for Reconstruction and Development (IBRD)–which serves middle-income countries with capital investment and advisory services. IDA lends money (known as credits) on concessional terms. This means that IDA credits have no interest charge and repayments are stretched over 35 to 40 years, including a 10-year grace period. IDA also provides grants to countries at risk of debt distress. Since its inception, IDA credits and grants have totaled US$207 billion, averaging US$14 billion a year in recent years and directing the largest share, about 50 percent, to Africa.IDA's Articles of Agreement became effective in 1960. The first IDA loans, known as credits, were approved in 1961 to Chile, Honduras, India and Sudan. On January 5, 2009 - Independent film veteran Michael Lumpkin has been chosen by the Board of Directors of the International Documentary Association to lead the organization as its new Executive Director. IFC: Lars H. Thunell, a Swedish national, is Executive Vice President and CEO of IFC (International Finance Corporation), a member of the World Bank Group.The creation of IFC in 1956 represented the first step by the global community to foster private sector investment in developing nations. IFC fosters sustainable economic growth in developing countries by financing private sector investment, mobilizing capital in the international financial markets, and providing advisory services to businesses and gov-

ernments. IFC helps companies and financial institutions in emerging markets create jobs, generate tax revenues, improve corporate governance and environmental performance, and contribute to their local communities. The goal is to improve lives, especially for the people who most need the benefits of growth. MIGA: As a member of the World Bank Group, MIGA's mission is to promote foreign direct investment (FDI) into developing countries to help support economic growth, reduce poverty, and improve people's lives. Iraq became the 174th signatory country of the Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group.Mexico is the 175th member. Izumi Kobayashi is the MIGA’s Executive Vice President. Kevin Lu, Director and Chief Financial Officer of the Multilateral Investment Guarantee Agency (MIGA), has been named a "Young Global Leader" for 2010 by the World Economic Forum. ICSID: ICSID is an autonomous international institution established under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States with over one hundred and forty member States. The Convention sets forth ICSID's mandate, organization and core functions. The primary purpose of ICSID is to provide facilities for conciliation and arbitration of international investment disputes. There are currently 155 signatory States to the ICSID Convention. Of these, 144 States have also deposited their instruments of ratification, acceptance or approval of the Convention and have become ICSID Contracting States. Prof. Carlos Hinrichsen, Chile is the ICSID President and currently Convenor of the Senate.

Observer has been given to following members: Afghanistan, Algeria, Andorra, Azerbaijan, Bahamas, Belarus, Bhutan, Bosnia and Herzegovina, Cape Verde, Comoros, Equatorial Guinea, Ethiopia, Holy See (Vatican) Iran, Iraq, Kazakhstan, Lao People's Democratic Republic, Lebanese Republic, Liberia, Republic of Libya, Montenegro, Russian Federation, Samoa, Sao Tomé and Principe, Serbia,

WORLD TRADE ORGANIZATION Formation: 1 January 1995 Headquarters: Geneva, Switzerland The 153-member World Trade Organisation has been joined by Viet Nam ( 11 January 2007), Tonga ( 27 July 2007), Ukraine (16 May 2008) and Cape Verde (23 July 2008).

WORLDWIDE FUND FOR NATURE (WWF): Headquarters: Gland, Switzerland It was formed and registered as a charity in 11 September, 1961. It aims at preserving genetic species and ecosystem diversity and to ensure that renewable natural resources is sustainable.

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Seychelles, Sudan, Tajikistan, Uzbekistan, Vanuatu, and Yemen. Official languages: English, French, Spanish Director-General: Pascal Lamy It is an international organization designed to supervise and liberalize international trade. Ministerial summits: 1. Singapore 9–13 Dec. 1996 2. Geneva 18 & 20 May 1998 3. Seattle 30 Nov.–3 Dec. 1999 4. Doha 9–14 Nov. 2001 5. Cancún 10–14 Sept. 2003 6. The Sixth WTO Ministerial Conference was held in Hong Kong, China, 13–18 December 2005. In general, ministerial conferences are the WTO’s highest decision-making body, meeting at least once every two years and providing political direction for the organization. 7. The 7th summit was held at Geneva from 30November 2009 to 3 December 2009.

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It is the world’s largest and most experienced independent conservation organisation. With almost 5 million supporters distributed throughout 5 continents, WWF has offices in over 90 countries and can safely claim to have played a major role in the evolution of the international conservation movement. Since 1985, WWF has invested over US$1 billion in more than 12,000 projects. Yolanda Kakabadse is Chair of the Advisory Board of Fundacion Futuro Latinoamericano, a regional NGO dedicated to conflict management in Latin America.James P Leape is the international director.

The WEF Meet in Davos, Switzerland was held in the back drop of the current global economic crisis. The five primary objectives and the key developments in these directions that the participants at the five day meet worked on are. 1. Supporting governments and governance institutions, particularly the G20; 2. Ensuring that global challenges are examined in a holistic way; 3. Beginning a process to develop recommendations on how the structure and strategies of international cooperation can be updated. 4. Improving the ethical basis for business as a constructive social actor. 5. Restoring confidence in the future. Japanese PM Aso to offer Asian countries more than US$ 17 billion of aid over three years to fight the global financial crisis.

WORLD ECONOMIC FORUM (WEF) The World Economic Forum is an independent inter-national organization committed to improving the state of the world by engaging leaders in partnerships to shape global, regional and industry agendas. 1979: The WEF became the first nongovernmental institution to initiate a partnership with China's economic development commissions. 1988: Andreas Papandreou and Turgut Ozal, the Prime Ministers of Greece and Turkey respectively, launched a peace initiative. They set up a crisis 'hot-line' and vowed to avoid war. Incorporated as a foundation in 1971, and based in Geneva, Switzerland, the World Economic Forum is impartial and not-for-profit; it is tied to no political, partisan or national interests. The World Economic Forum is under the supervision of the Swiss Federal Government. The Forum’s competitiveness reports range from global coverage, such as The Global Competitiveness Report, to regional and topical coverage, such as the Africa Competitiveness Report, The Lisbon Review and the Global Information Technology Report.The World Economic Forum has announced the names of 197 outstanding leaders from 72 countries and an array of sectors who are to join the Forum’s Young Global Leaders in 2010. Executive Chairman: Klaus Schwab is the founder and Executive Chairman of the World Economic Forum. Davos Summit 2009

WORLD SOCIAL FORUM (WSF): It is an annual meeting held by members of the anti-globalization movement to coordinate world campaigns, share and refine organizing strategies, and inform each other about movements from around the world and their issues. It tends to meet in January when its “great capitalist rival”, the World Economic Forum is meeting in Davos, Switzerland. The WSF has prompted the organising of many regional social forums, including the European Social Forum, the Asian Social Forum, the Mediterranean Social Forum, and many local and national social forum. The first WSF was held from 25 January to 30 January 2001 in Porto Alegre, Brazil, organized by many groups involved in the alternative globalization movement. The WSF was sponsored, in part, by the Porto Alegre town government, led by Brazilian Worker’s Party. The second WSF was also held in Porto Alegre from 31 January to 5 February 2002.

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The third WSF was again held in Porto Alegre, in January 2003. Among the speakers was the famed American author Noam Chomsky.  The fourth WSF was held in Mumbai, India, from 16 January to 21 January 2004. The fifth WSF for 2005 was held in Porto Alegre, Brazil between 26 January and 31 January. The sixth WSF was “polycentric” held in January 2006 in Caracas (Venezu-

ela) and Bamako (Mali), and in March 2006, in Karachi, Pakistan. The seventh WSF took place in Nairobi, Kenya in January 2007. The eighth WSF in 2008 was not organized at a particular place, but globally, which means by thousands of autonomous local organizations, on or around January 26. They are also known as the Global Call for Action. The ninth WSF took place in the Brazilian city of Belém, located in the Amazon rainforest, between January 27 and February 1, 2009. During 2010 (it's tenth anniversary year), the World Social Forum will not have a single global centralised event. There was indeed an event in Porto Alegre in January. ANZUS The Australia, New Zealand, United States Security Treaty (ANZUS or ANZUS Treaty) is the military alliance which binds Australia and New Zealand and, separately, Australia and the United States to cooperate on defense matters in the Pacific Ocean area. On February 4, 2008, U.S. Trade Representative Susan Schwab announced that the United States will join negotiations with four Asia–Pacific countries: Brunei, Chile, New Zealand and Singapore to be known as the "P-4". Civil Services

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