Saturday, August 21, 2010

Analysing India’s monetary policy from a historical perspective

Michael Debabrata Patra of IMF and Muneesh Kapur have written this fascinating paper on the topic.  

A New Keynesian model estimated for India yields valuable insights. Aggregate demand reacts to interest rate changes with a lag of at least three quarters, with inflation taking seven quarters to respond. Inflation is inertial and persistent when it sets in, irrespective of the source. Exchange rate pass-through to domestic inflation is low. Inflation turns out to be the dominant focus of monetary policy, accompanied by a strong commitment to the stabilization of output. Recent policy actions have raised the effective policy rate, but the estimated neutral policy rate suggests some further tightening to normalize the policy stance.  
Apart from the finding mentioned in the abstract, the paper has a superb discussion on regime shift in India’s monetary policy. It divides India mon pol framework in 3 phases.
Phase 1 was upto 1970s when Keynesian thoughts ruled. In this RBI was into  credit rationing and exchange controls
The monetary policy framework in India has undergone fundamental modifications. Surprisingly for an economy that has been inward-looking and relatively closed for the greater part of its independent history, these shifts have mirrored and closely followed the train of global developments. Viewed in a historical perspective, three broad phases of transformation are discernible. First, the period up to the 1970s, with the Keynesian paradigm the ruling orthodoxy worldwide, was marked by subordination to fiscal policy – monetary policy did not matter. As in other developing economies emerging from a colonial past, the logical operational corollary of this regime in India was a structuralist tradition of credit rationing and exchange controls. The pursuit of low unemployment (read as faster growth in developing countries) allowed inflation to drift upwards until it became unconscionable. 
 In phase 2 as stagflation surfaced, Friedman took over. RBI along with other central banks adopted monetary targeting.
The recognition brought on by influential work in the 1960s that monetary policy has powerful effects on real variables in the short run, the shift to floating exchange rates in advanced economies (managed floats in the case of India and many developing economies) and loss of formal constraints on money creation, oil price hikes and stagflation on the back of productivity growth slowdown in the 1970s brought about the end of an era.  
Monetarists assembled international evidence on the association between long-run sustained inflation and excessive money growth. This was bolstered by econometric proof of the stability of the demand for money and the persuasive argument that a central bank could exercise sufficient control over money through its monopoly over currency and reserves. In India, systematic evidence was turned in on stability in money demand and the money multiplier, and a predictable chain of causation running from changes in money supply to prices and output. This ushered in the second phase of monetary policy setting.  
Beginning in the mid-1980s, monetary targeting with feedback became the raison d’être of the conduct of monetary policy in India. Again, viewed with the hindsight of history, it was part of a worldwide revolution. Although Germany (1975), Switzerland (1978) and the USA (the early 1980s) were amongst the first advanced economies to adopt monetary targets in the operating framework of monetary policy, many developing countries also adopted various formulations of the money rule. 
 In third phase as monetary aggregates became difficult to monitor, central banks started conducting mon pol using interest rates. Some moved to inflation targeting. RBI moved to multiple indicator approach.
Yet, winds of change were blowing across the world again. Recession in the early 1980s focused attention on the sacrifice of output/employment that demand managed inflation control entailed. Doubts about the credibility and time consistency of monetary policy surfaced. Moreover, money demand functions, especially in the major advanced economies, started to exhibit instability. Globalization, capital mobile on a massive scale, and the explosion of financial innovations rapidly threatened the edifice of monetary targeting regimes. Accordingly, in the 1980s, several countries either modified the operating framework of monetary policy to a monetary-cum-output targeting approach or abandoned monetary targeting altogether. From 1989, inflation targeting regimes enshrining variants of the interest rate regimen had been gaining currency and several emerging economies also moved to target inflation in an explicit, formal manner.
During this period, ground was being broken again in the academia. Ideas that prices are mark-ups over costs, that there is a natural rate of unemployment, that inflation is influenced by output relative to its potential, and that prices and wages are sticky were getting increasingly established. The door was opened to the analysis of interest rates in the context of practical policy making. Short-term interest rates based on an underlying continuity of influence over the long-term rate and interest rate rules moved into centre-stage of the debate. In 1994, another revolution occurred – the Federal Reserve shed monetary mystique and began to announce the federal funds target, followed by ‘forward guidance’ on its expected path.
India was not immune to these forces. Radical changes occurred in the institutional setting for monetary policy in the 1990s. Notable among them were the phased emergence out of fiscal dominance, a market-based exchange rate regime, the progressive rollback of exchange control, and financial sector reforms resulting in the deregulation of interest rates and the activation of various segments of the financial market continuum. In the late 1990s, the third regime change was set in motion – interest rates progressively became the main instrument of monetary policy, supported by indirect instruments such as open market operations and reserve requirements. The centerpiece in the operating framework of monetary policy became the Liquidity Adjustment Facility (LAF). Repo and reverse repo rates essentially began to provide a corridor for market interest rates to evolve.
 Now, New Keynesian models have been highly criticised in this crisis. (Again the problem is not with the model but their creators who project any model as knows it all). So the paper has a nice discussion of how different models etc fought for survival of the fittest.
Since the 1990s, there has been a marked introspection among central banks about the way in which they conduct monetary policy. Increasingly, they have been willing to abandon secrecy and be more explicit to the public about their actions and the considerations upon which they are based. In some cases, this has been reflected in commitment to straightforward objectives – inflation targeting, for example – but more generally, they have been more forthcoming in their reports and analyses about their goals and why they chose them, the logic guiding their policies and the manner in which they intend to achieve their stated objectives.
Practical application conditioned by (i) a core set of agreed macroeconomic principles about the impact of monetary policy and (ii) a clear political-economic demand for an increased emphasis on policy rules has emerged since the late 1980s and the early 1990s (Taylor, 1998). An illustration of (i) is that while there is no long-run trade-off between output and inflation, there is a short-run trade off that concerns monetary policy. A reflection of (ii) is the wider recognition that people’s expectations matter and the policy rule must be consistent, simple, and systematic and clearly communicated to be able to gauge these expectations.
What is the New Keynesian Model?
Alternatively termed as the New Neoclassical Synthesis or the New Keynesian model, it has emerged as one of the most influential and prolific areas of research in macroeconomics (Gali, 2008a). In one sentence, inflation and output respond to aggregate demand, aggregate demand to interest rates, and interest rates are set by monetary policy, in turn, in response to expected movements in inflation and output. Importantly, money has no explicit role – a model without ‘em’. Within the new Keynesian tradition, however, this paper is agnostic. The fact that money does not make an explicit appearance does not imply any belief that money does not matter. Far from it: money is central but unseen.
Questions on the model remaining, the paper is nevertheless very interesting as it talks about so many things about India’ s monetary policy.

Managing Inflation in India: shift from supply driven to demand driven inflation

Subir Gokarn has this nice write up on India’s inflation issues (somehow most of the recent posts have been on India inflation). He shows how inflation has moved from a supply-side constraints driven trend to demand-side pressure one .
And accordingly monetary policy has responded over the time period. He points to 4 issues that have “influenced the sequence and magnitude of the monetary actions”:

First, even while the Indian economy has recovered quite rapidly from the slowdown, there is persistent global uncertainty. EMEs have generally done quite well in coming out of the crisis, but a major part of the global economy – the US, the UK, the Euro zone – is not only showing only very modest signs of recovery, it is also manifesting new stresses, partly as a result of the huge build-up of sovereign debt, which governments used to support their various fiscal stimulus packages. Given these linkages, the risks from the global economy need to be taken into consideration while formulating domestic policy.
Second, the reality is that the policy instruments are far from being in a normal position. As the economy recovers, it is imperative that policy instruments be brought as quickly as possible back to a position consistent with the state of the economy. This is essential for the management of expectations as well as to re-create the capacity to respond, should another shock hit the economy. But, as important as it is to return to normal quickly, it is equally necessary to do so non-disruptively. The kind of rapid and massive reductions that were made to instruments during the crisis simply cannot be replicated in the reverse direction.
Third, notwithstanding the above two issues, the fact is that inflation has taken hold, with both supply and demand pressures contributing to it. Monetary policy must respond. The table indicates that it indeed has. Action on rates and liquidity, through the CRR, began in January and has continued at the measured pace indicated earlier over the past six months. One strong criticism of the Reserve Bank’s approach has been that has been “too little, too late”. I would submit that the test of this is yet to come. It is well-known that monetary policy acts with a lag. It could be anywhere between 6 and 12 months, even longer before demand side pressures abate in response to an action. Given this, actions taken during January-July 2010 should start to show their impact on inflation over the next 6 to 12 months.
Finally, as I have already mentioned, an important lesson from the crisis was the critical role of liquidity in the financial system in maintaining economic stability. The policy approach over the past few months has been very conscious of the need to balance the exit from an abnormally high liquidity situation, which the response to the crisis created with the current liquidity requirements of both the public and private sectors.
A nice short analysis on India’s inflation trends.
(courtesy: www.mostlyeconomics.wordpress.com)

Impossible Quadrangle of Indian public finances

I came across this very interesting lecture by late Raja Chelliah, one of the architects of Indian public finances. The lecture was given in 2005 but the overall context still remains.
He says despite numerous attempts and promises problems of fiscal deficit remain.
Government of India’s avowed objective is to restore overall fiscal balance by reducing the fiscal deficit of the government sector to a reasonably low percentage of GDP and eliminating the revenue deficit by the year 2008-2009. Also, the state governments are being urged to radically improve their finances such that they would, collectively and severally, soon reach a sustainable fiscal situation in which their debt will be stabilized at reasonable levels with the fiscal deficit being brought down as percentage of their respective GSDPs.
These are laudable objectives and undoubtedly several steps have been taken in recent years to moderate the financial crisis, such as the debt swap scheme for the benefit of the states, attempts to raise the tax/GDP ratio of the central government and reducing the interest on small savings loans given to the states. However, there is no sign of visible improvement in the overall fiscal situation or in the fiscal situation of most states.
He says main reason for this apathy is the impossible quadrangle in Indian public finances.  
Macroeconomists speak of the “Impossible Trinity” in the area of monetary-external sector policy. They argue convincingly that the policy of fixed exchange rate, full capital account convertibility and freedom to follow monetary and fiscal policies required by domestic circumstances cannot all be pursued simultaneously. They are incompatible and one of them will have to give way.
In India, under the auspices of the central government, four major policies affecting the government finances are being pursued which are incompatible. These are:
a) adoption of the “gap-filling approach”by the Finance Commissions,
b) the policy of the Planning Commission of extending loan “assistance” to the states according to a set of entitlement formulae with no reference to borrowing or repayment capacity or the existing level of public debt – the same criteria are used for the distribution of loans as for the distribution of grants,
c) the policy of pay revision of government servants through the appointment of pay commissions periodically and the adoption of the same recommended revisions by the central government and by all the state governments, regardless of the size of the government labour force in different states, the capacity to pay of the governments of the different states, their per capita incomes and the general level of salaries in those states, and
d) the pursuit of the objective of achieving fiscal health through getting the governments to maintain reasonably low levels of fiscal deficit, through responsible fiscal policies, that is, each government assuming responsibility for balancing its budget.
Together these four objectives keep the fiscal problem as it is
The last-mentioned is a basic objective of the central government’s macroeconomic policy. However, the other three policies generate trends that make it impossible to achieve, in the medium or long-term, a state of fiscal balance. This incompatibility may be christened “the Impossible Quadrangle”.
The incompatibility basically arises from the fact that the policies relating to central transfers and loans to the states generate wrong incentives and violate economic considerations while the policies relating to the recruitment of government servants and their pay revisions do not take into account incentives, economic considerations or capacity to bear higher tax burden.
The planning mode applied to public financial activities proceeds on the basis that finances can be managed without reference to incentives, financial capacity of sub-national governments or fiscal discipline (essentially meaning that the governmental authority undertaking an increase in public expenditure on its own volition must pay for it). Fiscal responsibility cannot be planned from above; rather such conditions and rules must be created that fiscal responsibility will have to be practised by the sub-national governments / states which have a good deal of autonomy.
The author then looks at the evolution of state and government finances (tables need to be updated now) with continued surges in revenue expenditure. He then looks at federal finance in India, and explains the role of finance and planning commissions in not helping solve the problem.
His suggestions:
It will not be easy to bring about changes in the existing policies. Short-term compulsions will encourage adoption of remedies (like the debt swap scheme and debt relief) that will give only short-term relief.
Certain basic policy decisions will have to be taken.
First, the states should be treated as autonomous units and they should be allowed to determine for themselves levels of revenues and expenditure. They will have the primary responsibility to maintain fiscal balance in their respective jurisdictions.
Second, the percentage share of central taxes going to the states must remain constant for at least 15 years.
Third, block grants should be aimed at making up deficiency in fiscal capacity. “Need” must be defined as deficiency in fiscal capacity. Cost disadvantages could also be compensated. The proportion of block grants to devolution should rise.
Fourth, the distinction between plan and non-plan expenditure should be done away with, at least as far as revenue expenditure is concerned. The Planning Commission should deal with only capital expenditure.
Fifth, while loans could be extended to states by the centre to a limited extent, states should be required to borrow from the market within the limits set by the centre  
The centre could subside a small part of the interest (to differing extent) in respect of states that have less than average taxable capacity. Concurrently, in the place of plan loans, some capital grant assistance should be given with higher per capita amounts for the states with lower capacity. Collections of small savings should go into a fund as of now, and the states should negotiate loans (within the cap) with the fund, the lending rate of interest being determined by the borrowing rate and the credit worthiness of the states concerned.
When this new approach is adopted, it may be necessary to write-off 50 per cent of the debt which the states are now holding in order to enable the states to cope with the new situation (only that part of the debt which consists of central loans and market borrowing). But this will be on the understanding that there will be no more debt relief. With this new approach, our federal fiscal policy would become more rational, equitable and efficient and fiscal balance will be gradually restored.
Amazing stuff. Didn’t know of this impossible quadrangle. What an insight. 

(courtesy: www.mostlyeconomics.wordpress.com )

Recommendations on “Efficient Utilization of Numbering Resources in India”

The Telecom Regulatory Authority of India (TRAI) yesterday released the recommendations on “Efficient Utilization of Numbering Resources in India”.

The existing National Numbering Plan 2003 (NNP 2003) that was designed for 750 million connections including 450 million mobile connections and was designed to last till 2030, has come under severe strain with the mobile numbers having crossed that mark in 2009 itself. With the number of subscribers likely to exceed 1 billion by 2014, the situation calls for an urgent review to facilitate continued availability of numbers with minimum disruption to any service. The recommendations propose a solution in this regard.

In the recommendations, TRAI has proposed that the existing 10-digit numbering scheme should be continued to avoid inconvenience to the customers that would accompany any move to shift to an 11 digit numbering scheme. Giving a two pronged strategy, TRAI has recommended that India should migrate to an integrated numbering scheme for fixed and mobile services by 31st December, 2011. In other words both fixed line and mobile phones will have a 10-digit number. This would make available enough numbers to cater to expansion of existing services and introduction of new services for the next 30-40 years. This integrated numbering will also facilitate extension of number portability to fixed lines.

Till the integrated scheme is implemented the dialling of intra-circle calls from fixed lines to mobile will be with ‘0’ prefixed. This would enable exploitation of spare capacity available in the sublevels of existing Short Distance Charging Area (SDCA) codes, to the extent of about one billion numbers without affecting any telephone number or STD code.

Telephone numbers are a precious resource and should be utilized efficiently. In order to prevent accumulation of unutilized numbers by the service providers, the Authority has proposed that the service providers should not have more than 3 million unutilized numbers, in a service area, at the time of requesting a new block of numbers.

For making allocation of numbers more efficient, TRAI has recommended automation of the allocation process. This would help service providers in getting allocations online.

Once the recommendations are accepted, TRAI proposes to go ahead with the work of preparation of detailed plan for migration to the integrated numbering scheme.

Number resources have always played a central role in telecommunications and have acquired an important economic dimension with the liberalization of the telecommunications sector. Correspondingly significance of numbering as a regulatory instrument has also increased considerably with adequate, fair and transparent access to numbers becoming an essential part of ensuring a competitive telecommunications market.

Technology for fixing oil wells

The position taken by ExxonMobil, Chevron, ConocoPhillips and Shell, which are clubbing together to put $1 billion into creating and equipping a new not-for-profit firm, the Marine Well Containment Company, is that the capability to do much better than at Macondo depends on having hardware designed for the job and available from day one. The companies outlined their plans at a public meeting held in New Orleans on August 4th by the Bureau of Ocean Energy Management.

As the first diagram shows, the main component would be a containment assembly that could fit on top of a damaged blowout preventer, such as the one from which the Macondo oil poured forth. In the absence of a preventer, the assembly could fit on top of various other bits of wellhead equipment, or even on a bare pipe if it was in good enough condition, thanks to a set of adaptors and vice-like grips designed to let it mate with all the different forms of piping known to be in use at deepwater wells in the gulf.
This assembly would have powerful rams that could seal off the flow once it was attached to the relevant bit of broken plumbing. But it would also have outlets that could divert that flow, if need be, into undersea piping. If a well was badly damaged, the pressure that would build up if it were capped might cause it to spring another leak somewhere else. There were worries for some time that something like this would happen at Macondo.
Despite the assembly’s versatility, there might be times when it would have nothing to latch on to—if, say, all the sea-floor kit had toppled over, or if oil was gushing out of a hole in the seabed some distance from the well proper. For cases like this the system will have a range of watertight structures called caissons, which are based on the suction-pile technology used to emplace deep-sea moorings and foundations.

A giant sucking sound
A suction pile is open at one end. That end is put into the sediment into which the pile is to be stuck. The air is then pumped out and water pressure pushes the pile into the ooze, as shown in the second diagram. To make an oil-collecting caisson, such a pile would be used as a collar around a funnel-topped tube that would sit over the leak. Various sizes of caisson will be built, including one 15 metres (50 feet) or so in diameter, large enough to fit over a whole blowout preventer.
Once the caisson was in position, the pile would be pumped out and driven into the ooze. The caisson would fill with oil from the leak. A containment assembly would then be attached to the top of the caisson to send the oil elsewhere. The caisson could not simply be capped, because the oil pressure would blow its suction pile out of the sea floor.
Whether or not a caisson was used, the oil from the containment assembly would then pass through a manifold—a sort of switching yard for pipes—to one or more floating risers leading to the surface and held vertical by buoys. Here, as the third diagram shows, it would be collected by “capture vessels” kitted out with special modules that would flare off dissolved gas and pump the liquid into adjacent tankers. The whole system could cope with a flow of 200,000 barrels a day—more than three times the 63,000 barrels a day the government estimates was the Macondo well’s peak flow rate. The capture vessels could take other jobs around the gulf, but on contracts that allowed them to break off immediately in case of emergency.
Throughout the system there would be ways of warming things up and injecting antifreeze to stave off the formation of icelike methane hydrates. If the capture vessels had to leave in the teeth of a hurricane, there would be a system for injecting dispersants into any oil that spilled out of the risers. That should lessen its impact.
If this equipment had all been available in April, its proponents say it might have capped Macondo in weeks. The companies also say the system should never be needed if wells are properly designed and operated, and that they hope their billion-dollar backstop will never have to be used. The various reports into the Deepwater Horizon disaster will doubtless say the same, while endorsing the newly planned capabilities, or some variant thereof, and making some further drilling conditional on having them in place.

India's share in world GDP

Data compiled by Angus Maddison, an economist who died earlier this year, suggest that China and India were the biggest economies in the world for almost all of the past 2000 years. Why they fell so far behind may be more of a mystery than why they are currently flourishing.

Thursday, August 19, 2010

Impossible Quadrangle of Indian public finances

By Amol Agrawal

I came across this very interesting lecture by late Raja Chelliah, one of the architects of Indian public finances. The lecture was given in 2005 but the overall context still remains.

He says despite numerous attempts and promises problems of fiscal deficit remain.

Government of India’s avowed objective is to restore overall fiscal balance by reducing the fiscal deficit of the government sector to a reasonably low percentage of GDP and eliminating the revenue deficit by the year 2008-2009. Also, the state governments are being urged to radically improve their finances such that they would, collectively and severally, soon reach a sustainable fiscal situation in which their debt will be stabilized at reasonable levels with the fiscal deficit being brought down as percentage of their respective GSDPs.

These are laudable objectives and undoubtedly several steps have been taken in recent years to moderate the financial crisis, such as the debt swap scheme for the benefit of the states, attempts to raise the tax/GDP ratio of the central government and reducing the interest on small savings loans given to the states. However, there is no sign of visible improvement in the overall fiscal situation or in the fiscal situation of most states.

He says main reason for this apathy is the impossible quadrangle in Indian public finances.

Macroeconomists speak of the “Impossible Trinity” in the area of monetary-external sector policy. They argue convincingly that the policy of fixed exchange rate, full capital account convertibility and freedom to follow monetary and fiscal policies required by domestic circumstances cannot all be pursued simultaneously. They are incompatible and one of them will have to give way.

In India, under the auspices of the central government, four major policies affecting the government finances are being pursued which are incompatible. These are:

a) adoption of the “gap-filling approach”by the Finance Commissions,

b) the policy of the Planning Commission of extending loan “assistance” to the states according to a set of entitlement formulae with no reference to borrowing or repayment capacity or the existing level of public debt – the same criteria are used for the distribution of loans as for the distribution of grants,

c) the policy of pay revision of government servants through the appointment of pay commissions periodically and the adoption of the same recommended revisions by the central government and by all the state governments, regardless of the size of the government labour force in different states, the capacity to pay of the governments of the different states, their per capita incomes and the general level of salaries in those states, and

d) the pursuit of the objective of achieving fiscal health through getting the governments to maintain reasonably low levels of fiscal deficit, through responsible fiscal policies, that is, each government assuming responsibility for balancing its budget.

Together these four objectives keep the fiscal problem as it is

The last-mentioned is a basic objective of the central government’s macroeconomic policy. However, the other three policies generate trends that make it impossible to achieve, in the medium or long-term, a state of fiscal balance. This incompatibility may be christened “the Impossible Quadrangle”.

The incompatibility basically arises from the fact that the policies relating to central transfers and loans to the states generate wrong incentives and violate economic considerations while the policies relating to the recruitment of government servants and their pay revisions do not take into account incentives, economic considerations or capacity to bear higher tax burden.

The planning mode applied to public financial activities proceeds on the basis that finances can be managed without reference to incentives, financial capacity of sub-national governments or fiscal discipline (essentially meaning that the governmental authority undertaking an increase in public expenditure on its own volition must pay for it). Fiscal responsibility cannot be planned from above; rather such conditions and rules must be created that fiscal responsibility will have to be practised by the sub-national governments / states which have a good deal of autonomy.

The author then looks at the evolution of state and government finances (tables need to be updated now) with continued surges in revenue expenditure. He then looks at federal finance in India, and explains the role of finance and planning commissions in not helping solve the problem.

His suggestions:

It will not be easy to bring about changes in the existing policies. Short-term compulsions will encourage adoption of remedies (like the debt swap scheme and debt relief) that will give only short-term relief.

Certain basic policy decisions will have to be taken.

First, the states should be treated as autonomous units and they should be allowed to determine for themselves levels of revenues and expenditure. They will have the primary responsibility to maintain fiscal balance in their respective jurisdictions.

Second, the percentage share of central taxes going to the states must remain constant for at least 15 years.

Third, block grants should be aimed at making up deficiency in fiscal capacity. “Need” must be defined as deficiency in fiscal capacity. Cost disadvantages could also be compensated. The proportion of block grants to devolution should rise.

Fourth, the distinction between plan and non-plan expenditure should be done away with, at least as far as revenue expenditure is concerned. The Planning Commission should deal with only capital expenditure.

Fifth, while loans could be extended to states by the centre to a limited extent, states should be required to borrow from the market within the limits set by the centre

The centre could subside a small part of the interest (to differing extent) in respect of states that have less than average taxable capacity. Concurrently, in the place of plan loans, some capital grant assistance should be given with higher per capita amounts for the states with lower capacity. Collections of small savings should go into a fund as of now, and the states should negotiate loans (within the cap) with the fund, the lending rate of interest being determined by the borrowing rate and the credit worthiness of the states concerned.

When this new approach is adopted, it may be necessary to write-off 50 per cent of the debt which the states are now holding in order to enable the states to cope with the new situation (only that part of the debt which consists of central loans and market borrowing). But this will be on the understanding that there will be no more debt relief. With this new approach, our federal fiscal policy would become more rational, equitable and efficient and fiscal balance will be gradually restored.

Amazing stuff. Didn’t know of this impossible quadrangle. What an insight.

Though am wondering have things changed with 13th Finance Commission. One of the suggestions of states managing their debts by market borrowing is being implemented. In recent meet of State secretaries, talks of presenting state government borrowing projections and auction calendar was also discussed. So some reforms have happened there.

Need to do more research. Need to read RBI’s report on State finances carefully. I think this report is not read as well as it should be

(courtesy : www.mostlyeconomics.wordpress.com)

Tuesday, August 17, 2010

Global Center for Nuclear Energy Partnership

India will establish a Global Centre for Nuclear Energy Partnership. The Centre will be owned and managed by the Government. It will be open to international participation through academic exchanges, training and research and development efforts. The Centre is aimed at strengthening India’s cooperation with the international community in the areas of advanced nuclear energy systems, nuclear security, radiological safety and radiation technology applications in areas such as health, food and industry. This initiative was announced by Prime Minister at the Nuclear Security Summit held in Washington on 13th April 2010.

A phased approach will be followed for setting up of the Centre and no expenditure has so far been incurred on the Centre.

Schemes for Unorganised Workers


The Government is implementing various  schemes providing for social security to the workers in the unorganized sector. A Statement indicating schemes under schedule-I of the Unorganised Workers’ Social Security Act, 2008 is as under:


(i)                  Indira Gandhi National Old Age Pension Scheme  providing for old age pension to BPL family at the age of 65 yrs.
a.       It includes five components of National Social Assistance Programme (NSAP)  viz. Indira Gandhi Old Age Pension Scheme, National Family Benefit Scheme, Indira Gandhi National Widow Pension Scheme,  Indira Gandhi Disability Pension Scheme, and Annapurna.

(ii)                National Family Benefit Scheme  assistance to destitute bread earners.    
(iii)              Janani Suraksha Yojana for safe motherhood.
(iv)               Handloom Weavers’ comprehensive Welfare Schemes providing for health insurance and life & disability cover to  handloom weavers.
(v)                 National Scheme for welfare of Fisherman and Training & Extension providing housing assistance, insurance and training.
(vi)               Janashree Bima Yojana providing for life and accidental cover to BPL and marginally above BPL persons.
(vii)             Aam Admi Bima Yojana providing for life and accidental cover to landless rural household
(viii)           Rashtriya Swasthya Bima Yojana providing for smart card based cashless health insurance cover to BPL families in unorganigsed sector.  The scheme became operational from 01.04.2008

problem of malnutrition

The problem of malnutrition is multi-dimensional and multi-sectoral in nature. The Government is implementing several schemes which have an impact on the nutritional status of the people. 
 
                  The Integrated Child Development Services (ICDS) Schemes is being implemented by Ministry of Women and Child Development through state Governments/UT Administrations.
                  The scheme provides a package of six services, namely supplementary nutrition, pre-school non-formal education, nutrition & health education, immunization, health check-up and referral services. Three of the six services namely immunization, health check-up and referral services are delivered through the public health system of Ministry of Health & Family Welfare.
            The Government has recently taken various steps which include univesalisation of the schemes with special focus on SC/ST and minority habitations, revision in cost norms as well as the Nutritional and Feeding norms of the Supplementary Nutrition component of ICDS.
Besides the ICDS, the Government is implementing a number of other schemes throughout the country, which directly or indirectly affect the nutritional status of women and children. Some of these are as follows. 
Reproductive & Child Health Programme under the National Rural Health Mission being implemented by the ministry of Health & Family Welfare has interventions which include Janani Surasksha Yojana (JSY) to promote institutional deliveries; Immunization; Integrated Management of Neonatal and Childhood Illness; Specific Programmes to prevent and combat micronutrient deficiencies of Vitamin A and Iron& Folic Acid through Vitamin A supplementation of children till the age of 5 years and Iron & Folic acid.
(i)             Iron and folic acid supplementation for infant, pre-school children adolescent girls, pregnant and lactating women; iodized salt is being provided for combating Iodine Deficiency Disorders.
(ii)            Mid-Day Meal programme of Department of School Education and Literacy.
(iii)           Nutrition Programme for Adolescent Girls and Kisori Shakti Yojna of Ministry of Women and Child Development.
(iv)          Availability of essential food items at subsidized cost through Targeted public Distribution System and Antodaya Anna Yojna by Department of Food and Consumer Affairs.
(v)           Provision of safe drinking water under the National Drinking Water Programme and sanitation under the Total Sanitation Campaign of Ministry of Rural Development etc.

Conservation of Lesser Cats in India

The Government of India has taken the following measures to conserve and protect wildlife, including all the lesser cats species, in the country:

i.              Threatened species of wildlife including all the lesser cats are included in the Schedules of the Wildlife (Protection) Act, 1972, thereby affording them the highest degree of protection.

ii.             A network of Protected Areas has been established to conserve wildlife and their habitats including rare animals.

iii.            Wildlife Crime Control Bureau has been set up to check illegal trade in wildlife and its products.

iv.            Financial and technical assistance is extended to the State/UT Governments under various Centrally Sponsored Schemes, namely, ‘Integrated Development of Wildlife Habitats', ‘Project Tiger’ and ‘Project Elephant’ for providing better protection and conservation of wildlife.

v.             The Wildlife (Protection) Act, 1972 has been amended from time to time and made more stringent against wildlife related offences.

Lesser cats are part of faunal life along with other species. A network of protected areas viz. National Parks, Wildlife Sanctuaries, Conservation and Community Reserves has been established in the country.   Lesser cats, along with other species are afforded protection in these Protected Areas. The state wise details of Protected Areas in India are at Annexure-I .

As per BirdLife International, there are 465 Important Bird Areas in India. State-wise details of Important Bird Areas are at Annexure-II.  The Important Bird Areas Programme of BirdLife International aims to identify, monitor and protect a global network of Important Bird Areas for the conservation of the world's birds and other biodiversity. Important Bird Areas are identified, monitored and protected by national and local organisations and individuals.

The Government of India consider all the ecological factors including the  biodiversity occurring in the area while examining the proposals for diversion of the forest land of the Protected Areas for the developmental projects.

Plants Nullifying Ill Effect of Toxic Gases

It is a fact that forests and jungles have the capacity to nullify the ill effects of the toxic gases. It is well recognized that plants play an important role in reducing air pollutants including toxic gases. Government is encouraging green belt in the industrial premises, urban conglomerates, road sides etc. While granting environmental clearance to industrial projects, the Ministry stipulates a condition to develop green belt for mitigating air pollution as per the guidelines issued by the Central Pollution Control Board (CPCB).

The Air Pollution Tolerance Index (APTI) determined on the basis of leaf extract PH, ascorbic acid, total chlorophyll and relative water content varies among different plant species. Some studies have indicated that Ficus, Albizia, Pithecelobium, Phyllanthus and Polyalthia are some of the trees having high APTI.

Launch of IPv6

The Government decided to facilitate the use of Internet Protocol Version 6 (IPv6) in the country in June 2009.
National IPv6 Deployment Roadmap was released in July 2010. Salient features of this roadmap include action plan for telecom service providers, formation of Task Force for implementation of IPv6, formation of Indian IPv6 Centre for Innovation and development of standards and specifications for IPv6 conformance and interoperability etc.
The steps taken by the Government for transition from Internet Protocol Version 4 (IPv4) to IPv6 by stakeholders include the following.
         i.            Telecom Engineering Centre (TEC) in Department of Telecom is coordinating with all stakeholders for transition from (IPv4) to IPv6.
       ii.            Central Government Ministries/Departments, State Governments and Telecom operators have been advised to procure IPv6 complaint equipments.
      iii.            Five workshops were held in New Delhi, Bangalore, Chennai, Mumbai and Kolkata during 2009-10 for creating awareness and working out methodology for transition from (IPv4) to IPv6.
     iv.            IPv6 training program was held in November 2009 in association with Asia Pacific Network Information Centre (APNIC), Australia.
       v.            Checklist for facilitating (IPv4) to IPv6 transition has been issued by TEC in December 2009.
     vi.            Interactions and meetings are held by TEC with nodal officers from various government organizations and service providers for transition to IPv6.
    vii.            It has been decided to form a Task Force on IPv6 implementation with three tier structure having oversight committee, steering committee and nine working groups.

Growth of Telecom Sector

The Union Government has taken various steps in line with strategy to spur Telecom Sector Growth.  These are:
  • Setting up of an independent regulatory body in 1997 – the Telecom Regulatory Authority of India (TRAI), to assure investors that the sector would be regulated in a balanced and fair manner. Further changes in the regulatory system took place with the TRAI Act of 2000 that aimed at restoring functional clarity and improving regulatory quality. TRAI has come out with various regulations and directions, which included Telecom Mobile Number Portability regulation 2009, Telecom Tariff order 2009 as well as orders regarding Quality of Service etc.
  • The Universal Service Obligation fund has been introduced in 2003 as a mechanism for transparent cross subsidization of universal access in telecom sector. The fund was to be collected through a 5 percent levy on the adjusted gross revenue of all telecom operators.
  • Opening up of its telecom sector to foreign investors up to 100 percent holding in manufacturing of telecom equipment, internet services, and infrastructure providers (e-mail and voice mail), 74 percent in radio-paging services, internet (international gateways) and 49 percent in national long distance, basic telephone, cellular mobile, and other value added service.
  • Decision of not capping on the number of access providers in any service area. 122 new UAS licenses were granted in 2008 to 17 companies in 22 service areas for benefit of consumers by increased competition.
  • Permission of dual technology spectrum under the same UAS/CMTS licence.
  • Decision to introduce Mobile Number Portability (MNP), that will alow susbscribers to retain their existing numbers while switching over from one service provider to another.
  • With a view to regulate unsolicited calls from telemarketers, a regulation has been implemented whereby “National DO not call Registry” has been put in place.
  • Conclusion of Auction of 3G/BWA Spectrum in 22 circles for Telecom Service Providers. Rollouts expected by the end of 2010.
  • Target has been set to achieve 40% rural teledensity by 2012.
  • Target has further been set to achieve 20 million Broadband connections by end of 2010.
  • Broadband connectivity to all Gram Panchayats by 2012.

Child Labour

As per 2001 census, the total number of children working in various occupations including hazardous occupations in the Country was 1.26 core. As a result of various welfare measures taken by the Union Government and the State Governments coupled with stricter enforcement of the provisions of the Child Labour (Prohibition & Regulation) Act, 1986 the number of working children has declined to 90.75 lakh as estimated by National Sample Survey Organisation (NSSO) in 2004-05.

The Government of India has adopted a multi-pronged strategy for eradication of child labour as follows:
            i. A legislative action plan in form of Child Labour (Prohibition & Regulation) Act, 1986.
            ii. Project-based action plan in areas of high concentration of Child Labour under National Child Labour Project Scheme.
            iii. Focus on general development programmes for the benefit of the families of Child Labour.

National Skill Development Mission

Government has launched a National Skill Development Mission consisting of following three institutions:
Prime Minister’s National Council on Skill Development-under the chairmanship of Hon’ble Prime Minister, for policy direction and review of spectrum of skill development efforts in country.
            National Skill Development Coordination Board-under the chairmanship of Dy. Chairman Planning Commission to enumerate strategies to implement the decisions of PM’s council.
          National Skill Development Corporation (NSDC), a non-profit company under the Companies Act, 1956. The corporation is being funded by trust “National Skill Development Fund” to which the Government has contributed a sum of Rs.995.10 crores. The corporation is expected to mobilize about Rs.15, 000 crores from other governments, public sector entities, private sector, bilateral and multilateral sources. The corporation is expected to meet the skill training requirements of the labour market including that of unorganized sector.                                                                                                                                   

National Policy on Skill Development (NPSD) approved by the Government has set a target for skilling 500 million persons by the year 2022. Concerned central Ministries will involve respective departments of state Governments and other stake holders to achieve the target. The details of target for different Ministries/Departments is at Annex-I. MoL&E would train 100 million and the same is planned to be achieved through the following schemes:
Name of the Scheme                      Target  

Craftsmen Training Scheme           29.4 mn
Skill Development Centres             57.2 mn
Apprenticeship Training Scheme   05.4 mn
Skill Development Initiatives
through MES                                   11.0 mn
DGE&T field institutes                     0.5 mn
Total                                              103.5 mn

NOTE: Distribution amongst ministries/Departments has been kept higher that 500 millions.

The objective of NSDC is to fulfill the growing need for skilled manpower in the country, mainly by fostering private sector initiatives in skill development.
The salient features of NSDC are:
1.      Upgrade skills of work force through significant industry involvement especially for underprivileged sections of society and backward regions of the country.
2.      Enhance, support and coordinate private sector initiatives for skill development through Public-Private Partnership (PPP) models.
3.      Prioritize initiatives that can have a multiplier or catalytic effect.

            NSDC has a target of skilling / upskilling 150 mn people by the year 2022    and  so far 3 proposals have been cleared to train 10,39,000 persons in next 10 years.
National Skill Development Fund NSDF (Trust) has allocated Rs.200 Crores to NSDC during FY 2009-10. NSDC has, so far released Rs 13.05 crores for
funding of following three  proposals. During financial year 2009-10, a sum of Rs 7.15 crore was released. Rs 3.69 crores was released to Gems & Jewellery Export Promotion Council / Indian Institute of Gems & Jewellery, Jaipur, Rajasthan and Rs. 3.46 crore was released  to BASIX Academy for Building Life Long Employability Limited  a company having  Pan-India presence.
  During the current financial year 2010-11, Rs.5.90 Crore has been released to Gram Tarang Employability Training Services Private Limited, Orissa.   NSDC does not release funds to State governments.
The objective of NSDC is to skill/ upskill 150 million people in India including persons from rural areas by the year 2022, mainly by fostering private sector initiatives in skill development programmes and providing viability gap funding. NSDC would cover skills from the organized as well as from the un-organized sector.
NSDC will play a significant enabling role in some of essential support services like curriculum, faculty and their training, standards and quality assurance, technology platforms, student placement mechanisms and setting up standards and accreditation systems in partnership with industry associations. All these with participation of industry would improve quality of human resources.