economic affairs 2011

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Economic Affairs | September 2011

• Twenty-Second World Mining Congress and Expo was held at Istanbul, Turkey between 11-16 September 2011. World Mining Congress & Expo is a unique opportunityfor companies and manufactures to display their latest achievements and equipment

technologies to a wide audience especially to those officials and specialists from all over the world.

• In a move to contain persisting inflationary pressure, the Reserve Bank of India (RBI)

hiked the short-term policy rate (repo rate) by 25 basis points from 8 per cent to 8.25 per cent on 16 September 2011. The reverse repo rate as a result got automaticallyadjusted to 7.25 per cent and the marginal standing facility (MSF) rate to 9.25 per cent.Repo rate is the rate at which banks borrow from the central bank and reverse repo is therate at which banks park their funds with the RBI. The central bank raised rates for the12th time since March 2010.

• The Union Government on 15 September 2011 approved the Approach Paper for the

12th Plan (2012-17) which seeks to attain second generation economic reforms,

improving governance and raise annual economic growth rate to 9 per cent duringimpending five-year period. The Paper would be placed before the National DevelopmentCouncil (NDC) for its final approval in October 2011. The theme of the Approach Paper to the 12th Five Year Plan is faster, sustainable and more inclusive growth. Health,education and skill development, environment and natural resources and infrastructuredevelopment was pointed to be focusing areas in the next Plan. The paper lay emphasison inclusive growth. For the first time in the history of the Five Year Plans theApproach Paper has a chapter on governance and corruption. The paper suggeststerms measures to be taken to set up new institutions like the Lokpal and Lokayukta.

• UNCTAD’s Trade and Development Report 2011 was launched in New Delhi on 6September 2011. The report mentioned that global economy would witness a slow down

to 3.1 per cent in 2011 from 4 per cent in 2010. The slow down would impact developingeconomies which would get affected by recession in the developed world.The South Asiaregion was likely to be among the best performers globally, with a growth of seven per cent in 2011. On the other hand, growth in the U.S. was to remain low because of lowdomestic demand, stagnating wages. The European debt crisis is expected to act as a dragon the global growth. UNCTAD projected an economic growth of 8.1 per cent for India,the fastest rate of expansion in the world after China.

• The five-day 71st International Congress of FIP (International PharmaceuticalFederation) was inaugurated by President Pratibha Patil on 4 September 2011 inHyderabad. The World Health Organisation and the International PharmaceuticalFederation (FIP) signed a joint-statement on the role of pharmacists in tuberculosis care

and control on the inaugural day of the conference.• During the conference, the Pharmacy Council of India (PCI) urged the Union

government not to permit the opening of new colleges in the country, except in thenortheast, Bihar, Jharkhand and Chhattisgarh. The PCI pointed out that the mushroomingof pharmacy colleges in India created an imbalance. The vast number of institutions inthe country posed a major challenge to the foremost challenge in pharmacy education.Currently India has 700 pharmacy degree colleges. Andhra Pradesh has 300 pharmaceutical colleges- the highest number in the country.



• NTPC and Ceylon Electricity Board have sealed a deal for jointly setting up a coal-fired power plant in Sri Lanka at an investment of up to 700 million dollars. NTPC chairmanArup Roy Choudhury and CEB chief Wimaladharma Abeywickreme signed the finalagreement in Colombo on 6 September 2011 for setting up the 500 mw power plant atSampur in Trincomalee.The project will be a major milestone in bilateral relations and

further cement the economic bonds between India and Sri lanka. It will also mark NTPC’s overseas debut.

August

• The Cabinet Committee on Economic Affairs on 30 August 2011 approveddisinvestment of 5 per cent of government’s stake in power equipment maker BHEL

which is likely to fetch Rs. 4320 crore. After this disinvestment Government of India

shareholding in the company would come down to 62.72%.• A parliamentary Standing Committee on Finance headed by Yashwant Sinha in its

recommendations on the Pension Fund Regulatory and Development Authority

(PFRDA) Bill, 2011, recommended that subscribers to the New Pension System (NPS)should get an assured return on their investments. The committee also suggestedimposing a 26 per cent cap on foreign direct investment (FDI) in pension programmes.The PFRDA Bill introduced in the Lok Sabha in March, 2011 includes no provisions pertaining to FDI. The committee suggested that the government should devise amechanism so that subscribers of the NPS get guaranteed returns on their pension, so thatthey are not at any disadvantage via-a-vis other pensioners.

• India Post on 2 September 2011 signed a Memorandum of Understanding (MoU)

with VFS Global to provide visa related services for different countries through postoffices. The MoU set out broad understanding and intention of both the parties to providevisa related services at places where they are not currently available. Post Office counterswill be used for fee collection, providing visa application forms, dissemination of visainformation, biometric enrollment and other visa application process related services.VFSGlobal is in the business of visa application services and is currently working with 35governments across the world.

• The report on Customer Service in Banks by a committee chaired by M.

Damodaran, former Chairman of the Securities and Exchange Board of India (SEBI)was released. The Reserve Bank of India panel recommended an increased depositinsurance cover of Rs.5 lakh to encourage individuals to keep all their deposits in banks.

The Damodaran panel mentioned that in case of sick banks, a possibility to enablecustomers immediately avail themselves of a part of their insured deposits before thefinal fate of sick banks is decided should be explored.

• The Cabinet Committee on Economic Affairs (CCEA) on 4 August 2011 approvedequity infusion of Rs.1200 crore into the national carrier Air India that is passingthrough critical financial crunch. Air India had so far received financial assistanceamounting to Rs 2000 crore in the last two financial years while its cumulative loss and



debt burden is around Rs 67000 crore. The airline has a debt of Rs.4695 crore on anequity base of Rs.2145 crore.

July

• The Union Cabinet of India on 28 July 2011 gave its approval for setting up a nationallevel security fund (NSSF) for unorganized sectors named as National Social Security

Fund. The fund is likely to benefit 43.3 crore workers in the unorganized sector. The National Social Security Board will administer the fund. The Union Finance minister Pranab Mukherjee announced the fund during the budget 2010-11. The Ministry of Labour & Employment will be the nodal Ministry for the operation of theFund.According to an estimate done by the National Sample Survey Organisation totalunemployment in both organised and unorganized sector is 45.9 crore workers. Out of them, 43.3 crore workers belong to unorganized sector. A large number of unorganizedworkers were having occupations like agarbatti-making, embroidery work, papad makingand bidi making.

• The RBI hiked short-term lending and borrowing rates sharply by 50 basis points

for the third time in three months to control high inflation, a move that would make all personal and corporate loans more expensive. The RBI has also revised its fiscal-endinflation projection to 7 per cent from 6 per cent earlier. With July 26 increase of 0.50 per cent, the short-term lending (repo) rate has been hiked to 8 per cent and the short-term borrowing (reverse repo) rate has also been increased by a similar margin to 7 per cent. It,however, has retained the cash reserve ratio (CRR) at 6 per cent. This is the 11th timesince March, 2010, that the RBI has raised the interest rate to check inflation, which iscurrently ruling at over 9 per cent.

• According to the fourth advance estimates released by the Agriculture Ministry, India

is set for a record food grains production in the 2010-11 crop year at 241.56 million

tonnes. Wheat and pulses output are estimated to touch an all time high of 85.93 milliontonnes and 18.09 million tonnes respectively. The record production was attributed togood monsoon, higher minimum support price to farmers and focussed policy approach, particularly to enhance production of pulses and oilseeds. Wheat output was estimated to be higher by 5.13 million tonnes in 2010-11. Pulses production enhanced by 3.43 milliontonnes with gram at 8.25 million tones, urad at 1.74 million tonnes and moong 1.82million tonnes recording significant increases. Rice output was estimated at 95.32 milliontonnes as against 89.09 million tonnes harvested in 2009-10. Oilseeds production wasestimated at 31.1 million tonnes against 24.8 million tonnes in the previous crop year with a record soyabean output of 12.66 million tonnes. Total foodgrains output for rabiand kharif in 2009-10 was 218.11 million tonnes. The highest production in recent yearswas 234.47 million tonnes in 2008-09.

• The Cabinet Committee on Economic Affairs (CCEA) on 22 July 2011 approved BP’s

purchase of 30% stake in 21 out of 23 oil blocks belonging to Reliance Industries inthe Krishna Godavari basin for $7.2 billion. The deal will give Reliance access to BP’s



expertise in deep-water drilling and accelerate development and production at its fields, particularly the under-performing eastern offshore KG-D6. BP on the other hand willgain entry into the oil market where energy demand is growing at 5-8 per cent.

• According to a latest World Trade organization (WTO) report India achieved tenth

rank in export of services worldwide and emerged as the 20th biggest merchandise

exporter in 2010. India stood 12th and 22nd position globally in services and goodsexports, respectively in 2009. India’s goods exports went up by 31 per cent in 2010,helping the country to expand its market share to 1.4 per cent from 1.2 per cent in 2009.Engineering and petroleum exports contribute about 40% of India’s total exports.Thereport ranked China first in terms of merchandise exports followed by the U.S. andGermany. In services export, the U.S. is on the top slot followed by Germany and theU.K.

• Eight Indian companies, including Indian Oil Corporation (IOC) and Mukesh Ambani-led Reliance Industries Limited (RIL) featured in the list of the world’s 500 largest

companies compiled and released by Fortune magazine on 11 July 2011. The other Indian companies on the list are: SBI (282), BPCL (307), HPCL (354), Tata Steel (410),

ONGC (413) and Tata Motors (442).Indian Oil is at the 98th spot, up from 125th placelast year. Mukesh Ambani-led Reliance Industries also improved its ranking from previous year’s 175 to 134th position. Indian Oil raked in annual revenues of USD68,837 million while that of Reliance Industries stood at USD 58,900 million. Out of theeight Indian companies in the list, five are state-run entities.

• The oil ministry blocked Cairn India’s plans to begin oil production from the Bhagyam

oilfield which is the second biggest find in the Rajasthan block. Cairn had planned to put the Bhagyam oilfield into production by October to take total output from theRajasthan block to 175,000 barrels per day. The ministry insisted that it will not approvefurther programme on Bhagyam unless Cairn calculates profits to be divided amongstakeholders and the government after adding royalty to the cost.

• The Union government on 7 July 2011 cleared guidelines of the FM Radio Phase III

expansion. The FM Radio Phase III expansion will allow private radio channels tobroadcast news of All India Radio and enable revenue generation of Rs 1733 crorefrom the auction of license for services in 227 cities in the country. A meeting of theCabinet chaired by Prime Minister Manmohan Singh also approved hiking of foreign

investment limit in private FM radio broadcasting company to 26% from the current

20%. The FM Phase-III policy will extend FM radio services to about 227 new cities, inaddition to the present 86 cities with a total of 839 new FM radio channels. The FM phase III policy will result in coverage of all cities with a population of one lakh andabove through private FM channels.

• India dropped by one position to become the fourth largest steel producer in the worldin 2010 with 68.3 million tonnes (MT) production, according to World Steel Association(WSA). The US became the third largest producer of the alloy with 80.5 MT output in2010. It was the fifth largest steel maker in 2009.However; there was no change in thefirst two slots. With 626.7 MT production, China remained on top while with 109.6 MToutput, Japan was the second highest producer in 2010. Russia became the fifth highestmaker of the alloy in the world. It produced 66.9 MT steel in 2010.



June

• According to data released for the first time by the Reserve Bank of India in June 2011,foreign direct investment (FDI) by Indian firms jumped more than two-folds in financial

year 2010-11 to $43.9 billion from about $18 billion in 2009-10. Indian overseasinvestment policies were liberalised over the years to promote exports and strengtheneconomic linkages with other countries. Outward FDI comprises investments in equity,loans and guarantees issued by Indian firms to their joint ventures or wholly ownedsubsidiaries (WoS). The biggest outward investment from India during May 2011 was byGammon India Ltd, which pumped over $ 1.83 billion into its Panama-based jointventure, Campo Puma Orient SA. The Panamanian JV is engaged in the fields of agriculture, forestry, hunting and fishing. In the same month Tata Steel invested $514.57million in its Singapore-based subsidiary Tata Steel Asia Holdings PTE.

• The Government of India and Asian Development Bank (ADB) signed a $132 million

loan agreement for strengthening Bihar’s power sector. The major portion of the

ADB loan ($130.3 million) planned to be used to finance infrastructure such astransmission lines.The remaining ($1.9 million) is planned be used for strengthening theinternal capacity of the Bihar State Electricity Board (BSEB).The project is expected to be completed by 31 December 2015. There is a provision for providing/transmittingadditional 472,579 megawatt-hours (MWh) to consumers annually by the end of 2015and reduce system losses by 3% by 2016 in seven districts of Bihar.

• The Reserve Bank of India (RBI) hiked the repo rate on 16 June 2011, by 25 basis points; to 7.5 per cent from 7.25 per cent with immediate effect. As a result, the reverserepo rate stood automatically adjusted to 6.5 per cent and the marginal standing facility(MSF) rate to 8.5 per cent with immediate effect. It implied an increase in the cost of borrowing, EMIs for home, auto and personal loans. Other key rates and ratios remained

unchanged. Economic growth outlook remained unchanged at about 8% in the 2011-12fiscal.According to the first mid-quarter review of RBI’s Monetary Policy, 2011-12, thisinitiative was taken to maintain an interest rate environment that moderates inflation andchecks inflationary expectations.

• Former finance secretary Ashok Chawla was selected by the Ministry of CorporateAffairs for the post of chairman of India’s anti-trust watchdog Competition

Commission (CCI). The ministry sent Chawla’s name for ACC (AppointmentsCommittee of Cabinet) approval. Chawla succeeded Dhanendra Kumar, who retired on 5June 2011.CCI was established in 2003 to replace the erstwhile Monopolies andRestrictive Trade Practices Commission and Dhanendra Kumar was appointed as its firstchairman in February, 2009. Unlike sector regulators, under India’s new competitionlaws, the CCI will have the authority to punish companies for exploiting consumers, prevent a company from taking over another by withholding permission.

• Committee on Small Savings headed by RBI Deputy Governor Shyamala Gopinath

on 7 June 2011 suggested raising interest rates on Post Office savings bank deposits to 4 per cent. The committee recommended linking returns on other small savings schemeswith interest rates on government securities. It went on to suggest that Kisan Vikas Patra(KVP) be withdrawn and the annual investme.nt limit for the popular Public ProvidentFund (PPF) be raised to Rs.1 lakh from Rs.70000 at present.The committee



recommended that interest rates for Post Office savings deposits be raised to 4 per centfrom 3.5 per cent at present, in line with the Reserve Bank’s decision to hike rates onsavings bank deposits.

• A committee on natural resources allocation on 6 June 2011 called for the creation

of a national coal market to ensure greater transparency in the allocation of the dry fuel

and reduce the demand-supply mismatch.The committee pointed out the drawbacks of theexisting allocation mechanism for the dry fuel. The committee headed by former Finance Secretary Ashok Chawla recommended establishing a national coal market bycreating a platform for commercial trading of coal by suppliers and buyers. Thecommittee suggested use of experience gained through the e-auction platform to create acommon one for all buyers and suppliers, including the captive allotees that are permittedto sell. The committee highlighted that introduction of both captive mining and e-auctions were right steps taken in the direction of moving toward market-basedallocation.

• State-run NMDC on 6 June 2011 agreed to team up with Australia’s Minemakers

Ltd to develop a phosphate mine in Wonarah in northern Australia. India’s largest

iron ore miner’s decision to sign a memorandum of understanding with Minemakers is part of its strategy to focus on food and energy security by acquiring phosphate and coalmines. NMDC had signed an MoU with Nagarjuna Fertilisers for mining rock phosphateand potash in early 2011.As part of the MoU, NMDC and Minemakers decided toundertake a joint feasibility study into development of the Wonarah deposit. After completing the feasibility study, NMDC proposed to acquire 50% equity in the projectand participate in the development of the project.

• The Reserve Bank of India (RBI) on 3 June 2011 permitted urban cooperative banks

(UCBs) to give loans to self help groups (SHGs). RBI’s initiative is expected to promotefinancial inclusion in the country.The measure was adopted with a view to further expanding the outreach of UCBs and opening an additional channel for promotingfinancial inclusion.

• The Gross Domestic Product (GDP) data was released on 31 May 2011 by the CentralStatistics Office (CSO), Ministry of Statistics and Programme Implementation.According to the data, the country’s GDP (gross domestic product) growth slipped to 7.8 per cent in the fourth quarter (January-March) of 2010-11. The slowdown was believed to be the result of inflationary pressures and the impact of a consequent on-going tightmoney policy and a poor showing by the manufacturing sector. Robust farm sector growth coupled with better showing by construction and financial services propped upthe overall GDP growth for the entire 2010-11 fiscal year to 8.5 per cent from 8 per centin the previous fiscal. The fourth quarter growth of 2010-11 was way lower than the 9.4 per cent expansion in the same three-month period of 2009-10.vThe Indian governmenton 28 May 2011 announced the setting up of a panel to examine tightening of laws to

curb the growth of black money as well as to suggest ways to declare illegallygenerated wealth as national asset. The committee to be headed by the chairman of the

Central Board of Direct Taxes (CBDT) will also include the director, EnforcementDirectorate(ED), Director-General, Directorate of Revenue Intelligence (DRI), Director-General (Currency), and other top tax and revenue department officials. Thecommissioner of income tax (Investigations) of the CBDT would be its member



secretary. The committee will examine ways to strengthen laws to curb the generation of black money in the country, its illegal transfer abroad and its recovery.

May• The Prime Minister, Dr Manmohan Singh dedicated the world-class, 6-MMTPA Bina

Refinery in Madhya Pradesh to the nation. The refinery was set up by Bharat OmanRefineries Ltd (BORL), which is promoted by Bharat Petroleum Corporation Ltd, withequity participation of 26 per cent by Oman Oil Company and about 1 per cent by theMadhya Pradesh Government. The refinery will produce Liquefied Petroleum Gas, EuroIII and Euro IV Petrol and Diesel, Aviation Turbine Fuel (ATF) and Light Aromatic Naptha with sulfur as by-product. Also the project involves a crude supply systemconsisting of a Single Point Mooring system (SPM), Crude Oil Storage Terminal (COT)

at Vadinar, District Jamnagar, Gujarat and 935 Km long cross country crude pipelinefrom Vadinar to Bina for supplying crude.• State-run power equipment maker Bharat Heavy Electricals Ltd (BHEL) announced the

successful manufacture and testing of India’s first turbo generator of 600 MW

rating. The new state-of-the-art generator turbo generator will be supplied and installedat the upcoming North Chennai Thermal Power Project of the Tamil Nadu ElectricityBoard (TNEB). The turbo generators will cater to the requirements of thermal power stations with supercritical turbines of 660 and 700 MW ratings. The facility for assemblyand testing of this series of generators has been designed and engineered in-house atBHEL’s Haridwar plant.

• The Cabinet Committee on Economic Affairs (CCEA) approved the Asian

Development Bank (ADB)-assisted North Eastern State Roads InvestmentProgramme (NESRIP). North Eastern State Roads Investment Programme is centrallysponsored scheme of the Ministry of Development of North Eastern Region(MDONER).The CCEA’s approval will enable construction / upgradation/ improvementof a total of 433-km-long roads in six North-Eastern States at an estimated cost of Rs1353.83 crore to be implemented over a period of five years (2011-2016).The State-wiseroad lengths are: Assam 74.70 km, Meghalaya 93.40 km and Sikkim 34.20 km inTranche-I and Assam 62.90 km, Manipur 93.20 km. Mizoram 55.00 km and Tripura20.30 km in Tranche-II.

• The Cabinet Committee on Infrastructure approved Neyveli Lignite Corporation’s

(NLC) Rs 5907.11-crore lignite-based thermal power project in Tamil Nadu . The

proposal for the project included installation of 1,000 MW lignite based thermal power project at Neyveli. The power generated from the new thermal power project (2x500MWunits) will cater to the demand of the southern States. The project involves setting up of two units of 500 MW each at Neyveli in Tamil Nadu. The foreign exchange componentof the power plant is R969.81 crore. NLC which is currently operating three thermal power stations at Neyveli and one at Barsingsar in Rajasthan with a total installedcapacity of 2,740 mega watts is also planning to set up a 2×500 MW project in Cuddaloredistrict of the state.



• The Reserve Bank of India tightened the norms for foreign exchange risk cover. TheRBI mentioned that only companies with a net worth of Rs 200 crore can use derivativesto hedge against risk of volatility in currency rates. The RBI had in February 2011 pegged the net worth limit at Rs 100 crore while allowing corporates to hedge againstexchange rate risks associated with trade transactions and external borrowings.

•

Public sector oil marketing companies sought Rs 30000 crore from the government ascompensation to level up the revenue loss they suffered in 2010-11 by selling fuel atgovernment-fixed cheaper rates. Indian Oil Corporation, Hindustan PetroleumCorporation and Bharat Petroleum Corporation together lost Rs 78,000 crore in 2010-11 by selling diesel, cooking gas and kerosene at subsidised rates, according to industryestimates. The government till date gave these firms only Rs 20,000 crore incompensation, while upstream oil companies have paid another Rs 25,000 crore. Therevenue loss, termed as under-recoveries by these companies is expected to be more inthe current fiscal 2011-12 because crude prices have jumped to over $120 a barrel in theinternational market from about $75 a year ago. India imports about 80% of its oilrequirement.

•

The Annual Monetary Policy for 2011-12 was presented by RBI Governor D.Subbaraoon 3 May 2011. The Monetary Policy 2011-12 aim at maintaining an interest rateenvironment that moderates inflation and anchors inflation expectations. Also the policytargets to foster an environment of price stability that is conducive to sustaining growth inthe medium-term, coupled with financial stability. The following are highlights of theAnnual Monetary Policy 2011-12:

o RBI increased the repo rate under the liquidity adjustment facility (LAF) by 50

basis points from 6.75 per cent to 7.25 per cent with immediate effect.o The reverse repo rate under the LAF, determined with a spread of 100 basis point

below the repo rate, automatically adjusts to 6.25 per cent with immediate effect.o The Marginal Standing Facility (MSF) rate, determined with a spread of 100 basis

points above the repo rate, stands calibrated at 8.25 per cent. This rate will comeinto effect on operationalisation of the MSF.o The Bank Rate has been retained at 6.0 per cent.

o The cash reserve ratio (CRR) of scheduled banks has been retained at 6.0 per cent

of their NDTL.o Reserve Bank of India (RBI) capped bank investments into liquid schemes to 10

per cent of the bank’s net worth as of 31 March of the previous fiscal.o Reserve Bank of India (RBI) in May 2011 decided to accept the broad framework

of regulations recommended by the Malegam Committee report on micro financeinstitutions (MFIs) The Reserve Bank declared that it would adhere tointernationally agreed phase-in period (beginning 1 January 2013) for

implementation of the Basel III framework. The Reserve Bank declared that it isstudying the Basel III reform measures for preparing appropriate guidelines for implementation.

• Industry body Federation of Indian Chambers of Commerce and Industry (FICCI)

proposed setting up of National Knowledge Functional Hub (NKFH). FCCI proposedthe setting up of this body to engage higher educational institutions with the industry inorder to produce quality engineering graduates and meet increasing requirement of



skilled hands in the market.NKFH aims at facilitating industry-academia connect in tier-II and tier-III institutions which are the source of bulk engineering graduates for thecapital goods industry.

April

• International Monetary Fund (IMF) has lowered India’s economic growth rate

forecast to 8.2 per cent for 2011 and warned that boom like conditions could lead toover-heating of the economy.” The challenge for many emerging and some developingeconomies (is) to ensure that present boom-like conditions do not develop intooverheating over the coming year,” the IMF said in its World Economic Outlook report.However, it retained its projection for global economic growth at 4.5 per cent in 2011 and2012, which is lower than 5 per cent growth it projected for 2010.

•

The Telecom Regulatory Authority of India (TRAI) on 13 April issued importantrecommendations related to manufacturing, infrastructure and green telecom to

promote structured growth of the sector. It has also asked for making green measuresas an integral part of the proposed National Telecom Policy 2011 and ensuring energycertification for all telecom products, equipment and services in the telecom network.

• A cluster of 30 units to manufacture hi-tech defense and space components, apartfrom a major facility for integration of missile subsystems, would be coming up at theAerospace and Precision Engineering SEZ at Adibatla, near Hyderabad.

• The entire 100 acres, earmarked for the SEZ and another 100 acres in the non-SEZ areafor developing ancillaries, have been allotted to the units by the co-developer — SAMUHA Engineering Industries Limited – formed by six aerospace and defense

companies. SAMUHA would develop infrastructure like power, water, sewerage,greenery, and other common facilities along with APIIC.• The BRICS nations inked a pact at Sanya (china), to use their own currencies instead of

the U.S. dollar in issuing credit or grants among each other.• Braving the slow economic growth and declining demand from the western markets,

India’s exports posted an impressive 37.1 per cent rise at $245.9 billion for the fiscal

ending 2010-11. During March shipments posted an impressive 43.9 per cent growth at$29.1 billion. Engineering goods constituted the largest component of the exportsentailing considerable domestic value addition and engineering exports crossed $60 billion, a growth of 84.76 per cent. Petroleum products exports were up 50.58 per cent at$42.45 billion.

•

India’s food production crossed 235 million tonnes during 2010-11 as per the latestestimates and this is the highest since Independence, S. Ayyappan, Director-General of the Indian Council of Agricultural Research, said on 23 April, on the sidelines of afunction held in Mandya to mark the inauguration of a Jaggery Park. In 2010-11, thecountry produced 30.2 million tonnes of oilseeds, and 17.2 million tonnes of pulses — which had never crossed the 15 million tonne-mark in the past — apart from 94.5 milliontonnes of rice and 84 million tonnes of wheat. Agriculture also recorded a 5.4 per centgrowth — a first again — compared to the four per cent growth achieved all these years.



• On April 27, 2011 Oil and Natural Gas Corporation (ONGC) announced two new oil

and gas discoveries in Gujarat. ONGC has declared that it has 50 per cent interest inthe block that it had won along with the Gujarat State Petroleum Corporation (40 per cent) and Sunterra (10 per cent) in the seventh round of bidding under the NewExploration Licensing Policy (NELP).

•

The pension regulator, PFRDA on April 2011 opposed any form of mandatoryinvestments into infrastructure under the National Pension Scheme (NPS). PFRDA has put forth its opposition stance comes in the wake of the government’s attempt to set up aninfrastructure fund with retirement savings. PFRDA reiterated that in pension productsthe complete market risk is being borne by accountholders, and in such a situationdirecting investment is not proper on the part of the regulator.

• The Reserve Bank of India (RBI) issued a notification on 22 April 2011 to put intoforce the norms on creation of the defence mechanism by banks. The apex bank askedall the banks to create special buffers to be used by banks for making specific provisionsfor bad loans during system-wide downturns. The RBI expressed that it wants banks tocreate the counter-cyclical provisioning buffer to be set up out of any surplus available

after complying with the stipulated 70% provision of coverage ratio (PCR) of the grossnon-performing assets as of September 2010.The new guideline is basically in the contextof Basel III requirements. The Basel III requires more aggressive capital provisioning, particularly when the going is good for banks. The RBI is always ahead of the curvewhen it comes to the implementation of prudential norms.

• President Pratibha Devisingh Patil on April 11 awarded Standing Conference of PublicEnterprises (SCOPE) Meritorious Awards for 2009-10 to IOC, BHEL and HPCL,among others, for specialising in various fields. The (SCOPE) Award for environmentalexcellence was received by SAIL Chairman C S Verma. A K Datt, CMD, BharatElectronics Ltd won the award in the category of corporate governance. Hindustan

Petroleum Corporation Ltd (HPCL) CMD S Roy Choudhary was rewarded for corporatesocial responsibility. Petroleum major Indian Oil Corporation (IOC) received gold trophyfor being the best among the human resource management category. The country’ssecond largest state-owned Punjab National Bank was merited for Best Managed Bank and Financial Institution, whereas in the sector of R&D and technology BHEL wasdeclared a winner. National Safai Karamcharis Finance Development Corporation(NSKDFC) MD Lalit Kohli was awarded for best managed Section 25 PSE. Felicitationtrophies were presented to the chief executives of IOC, NTPC, ONGC and SAIL.

March• The flagship Technology Upgradation Fund Scheme (TUFS) of the Union Textiles

Ministry is all set to be resumed after being suspended on June 29 last year for want of funds. The Cabinet Committee on Economic Affairs (CCEA) on 29 March approved theMinistry’s proposal for provision of Rs.1, 972 crore for new projects during theremaining months of the current Plan period. In addition, the panel cleared an additional



Rs.5,432 crore for the scheme to meet the liabilities towards the projects that have beenalready sanctioned. With this, the allocation for the scheme for the XI Plan has beenenhanced to Rs. 15,404 crore from Rs.8,000 crore, a rise of Rs.7,404 crore. Therestructured TUFS provides for higher capital subsidy along with interest reimbursementfor installation of first handlooms. Five per cent interest reimbursement and 10 per cent

capital subsidy would be provided on brand new shuttleless looms, while 5 per centinterest reimbursement would only be provided for second-hand looms and that too onlythose up to 10-year vintage.

• In a significant development, the Centre on 31 March announced allowing 100 per cent

Foreign Direct Investment (FDI) in the agriculture sector, including seeds, plantation,horticulture and cultivation of vegetables. According to a circular by the Department of Industrial Policy and Promotion released on “Consolidated FDI Policy — Circular 1 of 2011”, 100 per cent FDI has been now allowed in development and production of seedsand planting material, floriculture, horticulture, and cultivation of vegetables andmushrooms under controlled conditions. The policy will come into effect from April 1.Besides, animal husbandry (including of breeding of dogs), pisciculture, aquaculture

under controlled conditions and services related to agro and allied sectors have been brought under the 100 per cent FDI norm. Similarly, the tea sector has also been broughtunder the 100 per cent FDI norm.

• Andhra Pradesh tops the list of functional Special Economic Zones (SEZs) in thecountry. This was stated by Union minister of state for commerce and industryJyotiraditya Scindia in the Rajya Sabha. AP has 32 operational SEZs, followed by Tamil Nadu (22) and Karnataka (20) of the 130 SEZs in the country whose collective exportsstand at Rs 2.2 lakh crore. Scindia said the total physical exports from the SEZs in thefirst three quarters of the current financial year 2010-11 was to the tune of Rs 2,23,132crore.

• The Centre on 22 March introduced a Constitution Amendment Bill in the Lok Sabha tofacilitate implementation of the Goods and Services Tax (GST), a tax regime thatwould subsume levies such as excise, service tax and sales tax. The Bill, introduced byFinance Minister Pranab Mukherjee, seeks to amend the Constitution with a view toconferring simultaneous powers on the Centre and the States to levy taxes on goods andservices. It will also subsume State VAT/sales tax, entertainment tax (unless levied by thelocal bodies), luxury tax, taxes on lottery, betting and gambling as also tax onadvertisements, cesses and surcharges levied by States.

• However, crude petroleum, diesel, petrol, aviation turbine fuel, natural gas and alcoholfor human consumption have been kept out of the GST ambit. The Bill provides for creation of a GST Council to be headed by Union Finance Minister. The council will beempowered to recommend tax rates and exemption and threshold limits for goods andservices. Besides, the Bill proposes a GST Dispute Settlement Authority to deal withgrievances of the Centre and the States with regard to GST. The chairperson of theauthority will be a retired judge of the Supreme Court or the Chief Justice of a HighCourt, who would be appointed by the President on the recommendation of the Chief Justice of India.

• The home-grown Tata brand has been ranked as the first Indian brand to be in the top50 club of global brands as per the latest Brand Finance’s Global 500 2007 report. Thegroup has operations in more than 80 countries across six continents, and its companies



export products and services to 85 countries. The total revenue of Tata companies stoodat $67.4 billion in 2009-10, with 57 per cent of this coming from business outside India.

• The Central Government on 24 March constituted the Financial Sector Legislative

Reforms Commission (FSLRC) under the chairmanship of former Justice B. N.

Srikrishna to rewrite and harmonise financial sector legislations, rules and regulations.

Apart from Justice Srikrishna as the head, other members of the 11-member commissioninclude former PFRDA Chairman D. Swarup, former Axis Bank chief P. J. Nayak andPMEAC member M. Govinda Rao.

• The Central Government said it would create a Rs.2, 500-crore corpus for technology

modernisation of the micro, small and medium units by next year. At present, onlytextiles sector is availing these benefits under the Technology Upgradation Fund Scheme(TUFS) wherein the units get 5 per cent subsidy on loans, for upgrading technology, fromthe government. The MSMEs account for 45 per cent of the country’s manufacturingoutput and 40 per cent of exports. The sector employs 50 million people in 26 millionunits producing over 6,000 products.

• Nippon Life Insurance Company on 14 March signed a ‘definitive agreement’ to

acquire a 26 per cent stake in Reliance Life Insurance, one of India’s largest private lifeinsurers.• Maruti Suzuki India on 15 March rolled out ten millionth car. The historic ten-

millionth car, a metallic breeze blue coloured WagonR VXi (Chassis No 243899) rolledout from the company’s Gurgaon plant. With this landmark achievement, Maruti Suzukibecomes the only Indian car company that makes its entry into the select club of automobile manufacturers across the globe which has crossed this milestone.

• Goldman Sachs Asset Management on 16 March announced that it has agreed toacquire Benchmark Asset Management Company, an asset management company inIndia.

• SBI official say-State Bank of India is on a mission to expand rural banking and issetting up ‘mini kiosks’, which offer limited banking services in villages having a population of over 2,000 persons. These kiosks are being set up on the Private PublicPartnership (PPP) model with an aim of building a robust network through private partnership. In urban areas, SBI has launched ‘One Rupee Bank,’ scheme throughwhich customers can open an account, deposit money etc using the kiosk. The AndhraPradesh Government had allotted 1,381 villages to SBI, in which kiosks were to be set up by March 2012 as part of a major policy thrust towards financial inclusion by the Centre.The SBI has already covered 300 villages in 20 districts. In Guntur district, a rural kiosk was inaugurated at Didugu village in Tadepalli mandal. ‘One Rupee Bank,’ branch

concept and ‘Bank on Bike,’ schemes which have been launched in Medak district have become hugely popular.

• In its pursuit to contain price rise in the economy the Reserve Bank of India (RBI) on17 March hiked the short-term indicative rates by 25 basis points. Since last March, thisis the eighth time the RBI increased the rates and this move of the central bank wouldincrease the borrowing cost of customers. The central bank has increased the repo rate by25 basis points from 6.5 per cent to 6.75 per cent and the reverse repo rate by 25 basis points from 5.5 per cent to 5.75 per cent with immediate effect. Repo rate is the rate atwhich banks borrow money from the central bank and reverse repo is the rate at which banks park their funds with the central bank.



• The Centre on 17 March announced relaxation in norms for according the Maharatna

status to Central public sector enterprises, a step that help many CPSEs acquire this tag,which gives a company more financial autonomy. At present, four CPSEs (ONGC,

Indian Oil Corp, SAIL and NTPC) have been given the Maharatna status. As per thenew guidelines issued by the Department of Public Enterprises, a company qualifying for

the Maharatna status should have an average annual turnover of Rs.20,000 crore in thelast three years, as against Rs.25,000 crore prescribed earlier. Similarly, a CPSE with anaverage annual net worth of Rs.10,000 crore and net profit of Rs.2,500 crore for threeyears in a row will qualify for the status. Earlier, companies required average annual networth of Rs.15,000 crore and net profit of Rs.5,000 crore for three consecutive yearswere eligible for the tag.

• The Reserve Bank of India (RBI) on March 7 constituted a working group under theChairmanship of Usha Thorat, Director, Centre for Advanced Financial Research andLearning (CAFRAL), to examine a range of emerging issues pertaining to regulation of the NBFCs (non-banking financial companies) sector. While examining a range of emerging issues pertaining to the regulation of the sector, the working group will focus

on the definition and classification of NBFCs, addressing regulatory gaps and regulatoryarbitrage, maintaining standards of governance in the sector and appropriate approach to NBFC supervision.

• Finnish Firm Neste Oil on March 8 opened the world’s biggest renewable diesel plant

in Singapore , taking advantage of massive palm oil production in nearby Malaysia andIndonesia. Clean diesel produced from the euro 550 million ($769 million) plant usingfeedstock such as palm oil and animal fat will be marketed in Europe, Canada and theU.S., which already have legislation in place supporting biofuels. With an annualcapacity of 800,000 tonnes, the Singapore facility is the biggest renewable diesel plant inthe world. The plant produces Neste Oil’s patented NExBTL renewable diesel.

• The BML Munjal-led Hero Group on March 8 said it would < the b stake cent per 26entire acquire>of Japan’s Honda Motor Co in their joint-venture Hero Honda Motors Ltd(HHML) for over Rs.3,841 crore.

• Tata Consultancy Services (TCS), a separate business unit iON, an integratedinformation technology solution for SMBs. The iON solution, which carries TCS brandand provides on-demand business solutions using the cloud computing technology, willdeliver IT in the third generation service model to SMBs. Using the pay-per-use businessmodel, iON will help SMBs leverage world-class technology solutions as a key businessdifferentiator.

• The Essar Group will take over Zimbabwe’s state-owned Zisco Steel in a $750-million deal to revive production at the defunct firm that was once one of Africa’s largest producers.

• The Bombay Stock Exchange plans to launch its small and medium enterprises

exchange platform by the second-half of 2011 after getting approval from the capitalmarket regulator Securities and Exchange Board of India.

• Finance minister Pranab Mukherjee on 28 February presented to Parliament India’sbudget for the coming financial year beginning in April.Following are the highlights of the budget:TAXES

o Standard rate of excise duty held at 10 percent; no change in CENVAT rates



o Personal income tax exemption limit raised to Rs 180,000 from Rs 160,000 for

individual tax payerso For senior citizens, the qualifying age reduced to 60 years and exemption limit

raised to Rs 2.50 lakh.o Citizens over 80 years to have exemption limit of Rs 5 lakh.

o A new revised income tax return form ‘Sugam’ to be introduced for small tax papers.

o To raise minimum alternate tax to 18.5 percent from 18 percent

o Direct tax proposals to cause 115 billion rupees in revenue loss

o Service tax rate kept at 10 percent

o Customs and excise proposals to result in net revenue gain of 73 billion rupees

o Basic customs duty on agricultural machinery reduced to 4.5 per cent from 5 per

cent.

SUBSIDIES

o Subsidy bill in 2011-12 seen at 1.44 trillion rupeeso Food subsidy bill in 2011-12 seen at 605.7 billion rupees

o Revised food subsidy bill for 2010-11 at 606 billion rupees

FISCAL DEFICIT

o Fiscal deficit seen at 5.1 percent of GDP in 2010-11



SPENDING

o Total expenditure in 2011-12 seen at 12.58 trillion rupees

o Plan expenditure seen at 4.41 trillion rupees in 2011-12, up 18.3 percent

REVENUE

o Gross tax receipts seen at 9.32 trillion rupees in 2011-12

o Non-tax revenue seen at 1.25 trillion rupees in 2011-12

o Corporate tax receipts seen at 3.6 trillion rupees in 2011-12

o Tax-to-GDP ratio seen at 10.4 percent in 2011-12; seen at 10.8 percent in 2012-13

o Customs revenue seen at 1.52 trillion rupees in 2011-12

o Service tax receipts seen at 820 billion rupees in 2011-12o Revenue gain from indirect tax proposals seen at 113 billion rupees in 2011-12

o Service tax proposals to result in net revenue gain of 40 billion rupees in 2011-12

GROWTH, INFLATION EXPECTATIONS ( Inflation remains principal concern )

o Economy expected to grow at 9 percent in 2012, plus or minus 0.25 percent

o Inflation seen lower in the financial year 2011-12



DISINVESTMENT

o Disinvestment in 2011-12 seen at 400 billion rupees

o Government committed to retaining 51 percent stake in public sector enterprises.

POLICY REFORMS

o To create infrastructure debt funds

o FDI policy being liberalised.

o To boost infrastructure development with tax-free bonds of 300 billion rupees

o Food security bill to be introduced this year

o To permit SEBI registered mutual funds to access subscriptions from foreign

investmentso Raised foreign institutional investor limit in 5-year corporate bonds for

investment in infrastructure by $20 billiono Setting up independent debt management office; Public debt bill to be introduced

in parliament soono Bills on insurance, pension funds, banking to be introduced.

o Constitution Amendment Bill for introduction of GST regime in this session.

o New Companies Bill to be introduced in current session

SECTOR SPENDING

o To allocate more than 1.64 trillion rupees to defence sector in 2011-12 ( 11% hike

in defence allocation )o Corpus of rural infrastructure development fund raised to 180 billion rupees in

2011-12

o To provide 201.5 billion rupees capital infusion in state-run banks in 2011-12o To allocate 520.5 billion rupees for the education sector. Rs.21,000 crore for

Sarva Shiksha Abhiyan.o To raise health sector allocation to 267.6 billion rupees (20% hike in health

budget )o Rs.500 crore more for national skill development fund.

o Rs.54 crore each for AMU (Aligarh Muslim University) centres at Murshidabad

and Mallapuram.o Rs.58,000 crore for Bharat Nirman; increase of Rs.10,000 crore.

o Mahatma Gandhi National Rural Employment Guarantee Scheme wage rates

linked to consumer price index; will rise from existing Rs.100 per day.o Increased outlay on social sector schemes. ( Social sector allocation up by 17%)o Infrastructure critical for development; 23 percent higher allocation in 2011-12.

( Rs 2,14,000 cr allocated for infrastructure sector )

AGRICULTURE ( Farm loans at 4 per cent )

o Removal of supply bottlenecks in the food sector will be in focus in 2011-12



o Agriculture growth key to development: Green Revolution waiting to happen in

eastern region.o To raise target of credit flow to agriculture sector to 4.75 trillion rupees

o Gives 3 percent interest subsidy to farmers in 2011-12

o Cold storage chains to be given infrastructure status

o Capitalisation of National Bank for Agriculture and Rural Development(NABARD) of 30 billion rupees in a phased manner

o To provide 3 billion rupees for 60,000 hectares under palm oil plantation

o Actively considering new fertiliser policy for urea

o Food storage capacity to be augmented – 15 more mega food parks to be set up in

2011-12; of 30 sanctioned in previous fiscal, 15 set up.o Comprehensive policy on further developing PPP (public-private-partnership)

mode.

ON THE STATE OF THE ECONOMY

o “Fiscal consolidation has been impressive. This year has also seen significant progress in those critical institutional reforms that will pave the way for doubledigit growth in the near future.”

o Food inflation remains a concern

o Current account deficit situation poses some concern

o Economy back to pre-crisis trajectory.

o Development needs to be more inclusive growth.

Others

o Govt to move towards direct transfer of cash subsidy for kerosene, LPG and

fertilisers.o Financial Sector Legislative Reforms Commission, to be headed by former

Supreme Court judge B Srikrishna, to complete its work in 24 months; tooverhaul financial regulations.

o Five-fold strategy against black money; 13 new double taxation avoidance

agreements; foreign tax division of CTBT strengthened; strength of EnforcementDirectorate increased three-fold.

o Bill to be introduced to review Indian Stamp Act.

o New coins carrying new rupee symbol to be issued.

o Anganwadi workers salary raised from Rs.1,500 to Rs.3,000.

o Mortgage risk guarantee fund to be created for economically weaker sections.

o Housing loan limit for priority sector lending raised to Rs.25 lakhs.• The Centre has decided to set up a six-member committee headed by T.V. Mohandas

Pai of Infosys to study and recommend the criteria for selecting private partners for the

setting up of 20 new Indian Institutes of Information Technology.

• Tata Motors on 1 March showcased concept small car ‘Pixel’, based on the Rs.1 lakhcar Nano, for the European market at the ongoing 81st Geneva Motor Show.



• The Andhra Pradesh government made a giant leap in the industrial map of the country,when Chief Minister N. Kiran Kumar Reddy cleared industrial investment worth Rs.25,672 crore on a single day last week at the State Investment Promotion Board meetingin Hyderabad. He cleared 25 units with an employment potential of 41,406 that isexpected to bring revenue to the Government through the Value Added Tax (VAT) of Rs.

878.30 crore annually. These include Bharat Dynamics Limited and Bharat ElectronicsLimited units at Anantapur for manufacturing missiles, NTPC-BHEL power plantequipment project at Mannavaram near Srikalahasti in Chittoor district.

February

• Reliance Industries Ltd. On 21 February announced the sale of 30 per cent stake in its23 blocks, including the giant KG-D6 gas fields, to British Petroleum of U.K. for $7.20

billion. It can be termed as one of the biggest foreign direct investments (FDI) in theenergy sector; the deal was signed in London between RIL Chairman and ManagingDirector Mukesh Ambani and BP CEO Bob Dudley, BP. The payments and combinedinvestment could amount to $20 billion, one of the largest FDIs in the country.

• Steel Authority of India on 21 February said it planned to put up four 3-million tonne

manufacturing facilities — one each in Indonesia, Mongolia, South Africa and Oman

— at a cumulative investment of $12 billion. C. S. Verma is the SAIL chairman.• The Amara Raja Group of companies has announced the setting up of a ‘Digital

World City’ at an investment of Rs.250 crore in the next 12-18 months on a 500-acresite in Chittoor district, A.P allotted by the State Government. The Group ChairmanRamachandra N. Galla, said the Digital City was being planned as the most attractive

destination for companies in electronics and related sectors and would become thecountry’s largest integrated electronics manufacturing park.• Leading telecom service provider Bharti Airtel along with 16 other global telecoms on

23 February launched the Europe India Gateway (EIG) cable system that willenhance diversity and capacity between Europe and India. Bharti Airtel said the 15,000-km-long cable project has received investment of around $700 million and has a capacityto transmit 3.84 terabits per second.

• Panasonic India is setting up the country’s first Eco Idea factory at village Dadri-Toi

in Jhajjar district of Haryana. Panasonic India president Daizo Ito said Panasonicaimed to be the world’s No. 1 ‘green innovation’ company in the electronics industry by2018 when it completed its centenary.

•

According to the Financial Services Group City report-India is expected to be theworld’s largest economy by 2050, surpassing China and the U.S.• Optimistic of commissioning First Phase of its proposed 6 million tones per annum steel

project by March 2012 in Orissa, Jindal Steel and Power (JSPL) said it would set up the

biggest steel Plant in Orissa. JSPL Executive Vice-Chairman and Managing Director Naveen Jindal told that “The capacity of the proposed 6 million tones plant will beexpanded to 20 million tones in the next 10 years,”



• Union finance minister Pranab Mukherjee has released commemorative coins of the

denominations of Rs.150 and Rs.5, at a function, organised to mark the completion of the year-long celebrations of ‘150 years of Income Tax’ The reverse faces of the Rs. 150and Rs. 5 coins, minted to commemorate ‘Income Tax — 150 years of Building India,’ bear the portrait of ‘Chanakya and Lotus with Honeybee’ at the centre representing his

famous lines, “….. Ideally, governments should collect taxes like a honeybee, whichsucks just the right amount of honey from the flower so that both can survive…” The leftand right peripheries of the coins are flanked with the words: “Income Tax — 150 yearsof Building India” in both Hindi and English. The Rs. 150 coin is not only unique for itsdenomination but also for its size and metal composition. The 44-mm circular coin ismade of 50 per cent silver.

• Union finance minister Pranab Mukherjee tabled the economic survey 2010-11 in the parliament. The highlights are-

1. Robust growth and steady fiscal consolidations have been the hallmark of theIndian economy in the year 2010-11 so far.

2. The growth rate has been 8.6 percent in 2010-11 and is expected to be around 9

percent in the next fiscal year.3. The growth has been broad based with a rebound in the Agriculture sector whichis expected to grow around 5.4 per cent.

4. Manufacturing and Services sector have registered impressive gains. Savings andinvestment are looking up while exports are rising.

5. Food inflation, higher commodity prices and volatility in global commoditymarkets have been a cause of concern underscoring the need of fiscalconsolidation and stronger reserves.

6. In order to check food inflation, it has suggested, the Government should improvethe delivery mechanisms by strengthening the institutions and addressingcorruption.

7. The Survey has observed that a rise in savings and investments and pick up in private consumption has resulted in 9.7 per cent growth of GDP at market prices(constant) in 2010-11.

8. Savings rate has gone up to 33.7 percent while the investment rate is up to 36.5 percent of GDP in 2009-10.

9. The Survey points out that the agriculture sector growth in the first four years of the 11th Plan (2007-12) is estimated at 2.87 per cent.

10. The food grain production went up to 232.1 billion tones from 218.1 billion tonesin 2009-10.

11. With a relatively good monsoon the agriculture-sector is expected to grow at 5.4 per cent during 2010-11.

12. The rising food inflation and the critical role of agriculture underline the need for a larger investment in agriculture enrooted to the second green revolution.

13. The Survey reports that the industrial output growth rate was 8.6 per cent whilethe manufacturing sector registered a growth rate of 9.1 per cent in 2010-11.

14. During April-November 2010 telecom, crude oil production, civil aviation sectors performed well while the power generation, cement and fertilizer production,railway freight traffic and cargo handling at major ports have grown atcomparatively lower rates.



15. Six core industries registered a growth of 5.3 per cent (provisional) in April-December, 2010 as against 4.7 per cent during the same period in 2009-10.

16. Economic Survey 2010-11 has highlighted the increasing role of infrastructureservices which have been deepening rapidly with rising investments.

17. The telecommunications sector has done exceedingly well as the tele density has

increased from 20.74 per cent in 2004 to 143.95 per cent in 2010 in urban areas.18. While in the rural areas it has gone up from 1.57 per cent in 2004 to 30.18 per cent in 2010.

19. Lauding the role of services sector as the potential growth engine, the Survey hascalled for the policies to promote further opportunities in new areas in globaldemand such as accounting, legal, tourism, education, financial and other services beyond the IT and business process sectors.

20. The Survey points out that the exports in April-December 2010 went up by 29.5 per cent while the imports during the same period registered a growth rate of 19 per cent.

21. The trade gap narrowed down to US $ 82.01 ban in the same period. Balance of

payment situation has improved due to surge in capital flows and rise in foreignexchange reserves which have been accompanied by rupee appreciation.22. During current fiscal foreign exchange reserves increased by US $ 18.2bn from

US $ 279.4 ban in end April 2010 to US $ 297.3 ban in end December 2010.23. The expenditure on Social sector programs has been stepped up by 5 percent point

of GDP over the past five years.24. The Survey points out that Gross Fiscal Deficit are 4.8% of GDP in 2010-11 as

against 6.3 percent of GDP in the previous year.25. The Revenue deficit in the current financial year has been 3.5 percent of GDP as

against 5.1 percent in the previous year.26. A call for reforms in the university and higher education and correcting the

demand supply mismatch in the job market has been made in the report.27. The Economic Survey sums up by stating that the real GDP growth is expected to

reach the 9 per cent mark in 2011-12 and the next two decades may well see theeconomy growing faster than it has done any time in the past.

28.Finance Minister of Andhra Pradesh, Anam Rama Narayana Reddy submittedBudget 2011-12 in AP Assembly on 23 February. This is first Budget for AnamRamanarayana Reddy as a Finance Minister of the State. It is estimated that thisyear Budget will cross Rs. 1.2 lakh crores. Following are the highlights of AndhraPradesh Budget 2011-12:1. Annual Budget Plan for 2011-12: Rs 1,28,542 Crores2. Planned Expenditure: Rs. 47,558 Crores3. Non- Planned Expenditure: Rs. 80,984 Crores4. Estimation of Revenue Surplus: Rs. 3826 Crores5. Estimation of Fiscal Deficit: Rs. 17602 Crores6. GDP Forecast: 8.5 percent7. Growth of Industry: 9.61 percent8. Irrigation Projects / Sector: Rs. 15000 Crores 9. Jalayagnam: Rs. 15000 Crores10. Higher Education: Rs. 3337 Crores



• Japan’s gross domestic product fell an annualised 1.1 per cent in the fourth quarter in2010, marking the first decline in five quarters due to a drop in exports, diminishinggovernment stimulus programmes and weak consumer consumption, said the sources on14 February .According to the data, Japan has now lost its position as the world’s

second largest economy to China.

•

The World Bank has stated in its latest report that India can generate 68,000 MW of power, costing less than Rs.6 a unit from renewable energy sources, a step that canaddress the country’s energy security concerns.

• Union Petroleum and Natural Gas Minister Jaipal Reddy on 15 February, dedicated to thenation India’s largest naphtha cracker plant at Indian Oil Corporation’s (IOCs)

Panipat Complex, Haryana.The complex has been commissioned in 46 months, whichcompares with the global standard for similar capacity plants and is ahead of averagetime taken in setting up similar units in India. With the completion of this petrochemicalscomplex, IOC has crossed a major milestone in realising its aspiration to emerge as anintegrated and diversified company.

• Rajiv Gandhi International Airport (RGIA) ,Hyderabad has retained its number one

position and has been ranked amongst the top airports in its category in the world for thesecond year in a row in the latest ASQ (Airport Service Quality) rankings of the AirportsCouncil International (ACI).Besides RGIA, Delhi’s Indira Gandhi International

Airport (IGIA), has been ranked fourth. Both the airports are operated by the GMR group-led consortia. IGIA’s ranking was in the group of 25-40 mppa (million passengers per annum). This niche league features the world’s best airports like Incheon-Seoul;Changi-Singapore and Shanghai Pudong-China.The awards will be presented on April 7,2011 during ACI conference at the ACI Asia Pacific Regional Conference and Exhibitionto be held at New Delhi. As many as 153 airports across the globe, including six Indianairports participated in the ASQ survey in 2010.

• World’s largest truck maker Daimler AG, which is setting up a state-of-the-art

commercial vehicle facility at Oragadam near Chennai, will roll out the BharatBenz

brand of trucks in 2012.Daimler will launch a range of Bharat Benz trucks from 6 to 49tonnes, catering to different applications.

• India on 18 February adopted the New Consumer Price Index (CPI) that will reflectthe actual movement of prices at the micro-level. As per the new series, the CPI hasincreased to 106 in January from a base of 100 in 2010 (inflation of 6 per cent).TheCentral Statistics Office (CSO), Ministry of Statistics and Programme Implementation,has introduced the new series of consumer price indices for all-India, and States andunion territories separately for rural, urban and combined for the purpose of intratemporal price comparison with effect from January, 2011, with 2010 as the base year.

• G20 Finance Ministers meeting in Paris on 19 February reached a compromise deal tocorrect global economic imbalances and expressed concern over excessive commodity price volatility impacting the world food security.Pranab Mukherji attended the meetingfrom India.

• Japan’s gross domestic product fell an annualised 1.1 per cent in the fourth quarter in2010, marking the first decline in five quarters due to a drop in exports, diminishinggovernment stimulus programmes and weak consumer consumption, said the sources on14 February .According to the data, Japan has now lost its position as the world’s

second largest economy to China.



• The World Bank has stated in its latest report that India can generate 68,000 MW of power, costing less than Rs.6 a unit from renewable energy sources, a step that canaddress the country’s energy security concerns.

• Union Petroleum and Natural Gas Minister Jaipal Reddy on 15 February, dedicated to thenation India’s largest naphtha cracker plant at Indian Oil Corporation’s (IOCs)

Panipat Complex, Haryana.The complex has been commissioned in 46 months, whichcompares with the global standard for similar capacity plants and is ahead of averagetime taken in setting up similar units in India. With the completion of this petrochemicalscomplex, IOC has crossed a major milestone in realising its aspiration to emerge as anintegrated and diversified company.

• Rajiv Gandhi International Airport (RGIA) ,Hyderabad has retained its number one

position and has been ranked amongst the top airports in its category in the world for thesecond year in a row in the latest ASQ (Airport Service Quality) rankings of the AirportsCouncil International (ACI).Besides RGIA, Delhi’s Indira Gandhi International

Airport (IGIA), has been ranked fourth. Both the airports are operated by the GMR group-led consortia. IGIA’s ranking was in the group of 25-40 mppa (million passengers

per annum). This niche league features the world’s best airports like Incheon-Seoul;Changi-Singapore and Shanghai Pudong-China.The awards will be presented on April 7,2011 during ACI conference at the ACI Asia Pacific Regional Conference and Exhibitionto be held at New Delhi. As many as 153 airports across the globe, including six Indianairports participated in the ASQ survey in 2010.

• World’s largest truck maker Daimler AG, which is setting up a state-of-the-art

commercial vehicle facility at Oragadam near Chennai, will roll out the BharatBenz

brand of trucks in 2012.Daimler will launch a range of Bharat Benz trucks from 6 to 49tonnes, catering to different applications.

• India on 18 February adopted the New Consumer Price Index (CPI) that will reflectthe actual movement of prices at the micro-level. As per the new series, the CPI hasincreased to 106 in January from a base of 100 in 2010 (inflation of 6 per cent).TheCentral Statistics Office (CSO), Ministry of Statistics and Programme Implementation,has introduced the new series of consumer price indices for all-India, and States andunion territories separately for rural, urban and combined for the purpose of intratemporal price comparison with effect from January, 2011, with 2010 as the base year.

• G20 Finance Ministers meeting in Paris on 19 February reached a compromise deal tocorrect global economic imbalances and expressed concern over excessive commodity price volatility impacting the world food security.Pranab Mukherji attended the meetingfrom India.

• India on 2nd February inked a revised tax treaty with norway for exchange of information to check tax evasion and prevent the flow of black money between the twocountries. This new DTAA (Double Taxation Avoidance Agreement) will replace theexisting double taxation avoidance convention (DTAC) that was signed between the twocountries on decemeber 31, 1986.

• The National Association of software & service companies (NASSCOM) on 2ndFebruary said, the Indian IT-BPO sector was estimated to grow 19% in the currentfinancial year to reach $ 76 billion in revenues. Exports would continue to be the mainstay of the industry with estimated growth of 18.7% to $ 59 billion revenue, while thedomestic market is estimated to grow 16% to aggregate Rs 78,700 Cr in 2010-11. Direct



employment is expected to reach nearly 25.40 lakh, an addition of 2.40 lakh employeesin 2010-11.

• In a major breakthrough that put an end to more than a month of uncertainty. India and

Iran on 3rd February arrived at a settlement and agreed to use EURO to pay for

Iranian crude oil through a German bank named EIH Bank •

A ban on sale of Ayurvedic and other Herbal medicine will take effect across Europefrom may 1st, following a E.U. directive, introduced as a response to growing concernover adverse effects of such alternative medicines.

• India’s GDP (gross domestic product) growth stands revised upwards to 8 percent for 2009-10 from the 7.4 per cent expansion estimated earlier for the fiscal, mainly on thestrength of better showing by sectors such as manufacturing and services.

• The Per capita income at 2004-05 prices is estimated at Rs 33,731 for 2009-10, up from31,801 in 2008-09, showing an increase of 6.1% Per capita income at current prices rose14.5% to Rs 46,492 in 2009-10 compared to Rs 40,605 crore in the previous fiscal. National income or the size of the economy rose 16.1% at current prices to Rs 60,95,230crore compared to Rs 52,49,163 crore in 2008-09.

•

United India Insurance Company has won the “Skoch Financial Inclusion Award -2010″.Company Managing Director G.Srinivasan received the Award from K.C.Chakrabarthy,Deputy Governor Reserve Bank of India at Chennai

• Food inflation rose to 17.05 per cent for the week ended January 22, from 15.57 per centin the previous week, driven by higher prices of vegetable, fruits and eggs.

• India’s foreign exchange reserves fell marginally to $ 299.172 billion during the week ended from $ 299.395 billion in the previous week, said by Reserve bank of India.

•

January

• According to the ‘Quick estimates’ for 2009-10, released by the C.S.O. (CentralStatistical Organisation) on 31st January.

• Indian GDP growth for 2009-10 revised up to 8% from the 7.4% estimated earlier for the fiscal. It occurred mainly on the better showing by manufacturing and service

sectors.

• The country’s GDP at factor cost at constant (2004-05) prices in 2009-10 is estimatedat Rs 44.94 lakh crores as against Rs. 41.63 lakh crores in 2008-09.

• However, at current prices, it is estimated much higher at Rs 61.33 lakh crores as againstRs 52.82 lakh crores in 2008-09.

• The per capita income in real terms (at 2004 – 05 prices) is estimated at Rs 33,731 for 2009-10 as against Rs 31,801 in 2008-09.

• At current prices, it is estimated at Rs 46,492 for 2009-10 as against Rs 40,605 for 2008-09.

• ONGC said it had struck natural gas reserves in its maiden well drilled to tap shale gas inWest Bengal. This is the first time gas has been discovered in sedimentary shale gasrocks outside the U.S.and Canada.



• Y H Malegam committee constituted by Reserve Bank of India (RBI) in October 2010 torecommend the practices of Microfinance Institutions (MFIs) submitted its report and proposes the maximum interest rates as 24 percent.

• Industrial output in November 2010 was slower-than-expected, 2.7 percent from ayear earlier, sharply lower than the previous month’s revised annual growth of 11.3

percent, according to government data released.• World Bank President Robert B.Zoellick signed a $220-million agreement with the

Bihar government for “the Kosi Recovery Project to rebuild areas affected by the2008 floods”.

• The gems and jewelry exports posted 39% growth at around $23.5 billion in the firstthree quarters of this fiscal. These were $14.46 billion in the corresponding period in the previous year, according to data given by the Gem and Jewelry Export Promotion

Council (GJEPC)

economic affairs 2011

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