Indian Economy: News and Discussion (Apr 1 2011)

Vipul · Post by **Vipul** » 16 Mar 2012 02:01

Gujarat, Maharashtra account for 46% of exports in 2010-11.

Gujarat and Maharashtra account for 46 per cent of exports from India according to the data on state of origin of exports of goods in 2010-11, according to the Economic Survey 2011-12.

If Tamil Nadu, Karnataka, and Andhra Pradesh, with more than 5 per cent share, are added to the top two, the share of the top five States would be 65.7 per cent (in 2010-11), it is found.

In 2010-11, the growth of exports from States was robust, the Survey said, adding that “Only Goa had negative export growth due to fall in ore exports owing to a ban on exports of iron ore by the Karnataka Government.”

High export growth was registered by Odisha followed by West Bengal and Gujarat. In the first half of 2011-12, there was robust export growth in case of Karnataka, Uttar Pradesh, and Tamil Nadu, it said.

To encourage exports, outlay under the Assistance to States for Developing Export Infrastructure and Allied Activities (ASIDE) Scheme for the Eleventh Five-Year Plan was increased to Rs 3,793 crore.

“State-wise allocation under State component of ASIDE shows that the top six States in terms of allocation in 2011-12 are Maharashtra and Gujarat followed by Tamil Nadu, Karnataka, Uttar Pradesh and Andhra Pradesh,” it said.

abhishek_sharma · Post by **abhishek_sharma** » 16 Mar 2012 07:21

Back to 1991?

Yogi_G · Post by **Yogi_G** » 16 Mar 2012 13:04

Budget is a disaster for the common man who plans to save a lot. Thought 80c exemption would go atleast to 2 lakhs but not happening. Bad bad bad!

vina · Post by **vina** » 16 Mar 2012 13:04

Dang. What a namby pamby scratching at the margins budget. All the big things "DTC and GST" are in the "works", the entire subsidy as cash instead of kind is stuck because Aadhar is stuck. No reforms, no new stuff, no talk about fuel subsidy rationalization, just some increase in tax on imported cars and SUVs etc , deficit at 5.1% GDP..

All in all, Kangress blew it's chance to actually do something and set itself up for 2014. The Didi shenanigan after the rail budget seems to have made the govt lose it's nerve.

Now it is totally at the mercy of global commodity prices and how oil behaves. So, Pranab da better start praying that the USD strengthens , China cools off and the demand for commodities and rising oil prices is killed.

Austin · Post by **Austin** » 16 Mar 2012 13:14

Stress on infrastructure is good , Tax Free infra Bonds raised to 60 K , Some Rajiv Gandhi scheme will save 50K with 3 year lock in period. Tax Limit for 5 to 10 lacs is reduced to 20 % and 2 - 3 lac to 10 %

As far as Oil prices goes $120 is a new normal for Brent and needs to be accepted , save something silly like Israel not attacking Iran happens else we end up with $150 as new normal.

nawabs · Post by **nawabs** » 16 Mar 2012 18:33

Is Budget 2012 about to legalise petty bribe income?

http://www.firstpost.com/economy/is-bud ... 47263.html

Did Pranab Mukherjee introduce a black money/small bribes amnesty scheme by the backdoor without calling it one?

The underwhelming headline news is that the finance minister will introduce a white paper on the subject, but there is a small sting in his long perorations on black money.Giving a long list of things he intends to do to “deter the generation and use of unaccounted money”, he says in the end that he will tax “unexplained income” at 30 percent regardless of the tax slab one belongs do.

This does not mean it is an amnesty scheme, but when he says he will tax “unexplained money, credits, investments, expenditures, etc at the highest rates of 30 percent irrespective of the slab of income”, does this mean there will be no further penal action?

To be sure, we can call this an amnesty scheme only if the receiver of such unexplained credits is given immunity from prosecution. The budget documents don’t elaborate on this statement of the FM.

The explanatory memorandum to the budget says this provision is being made because even though section 68 of the Income Tax Act says that unexplained money can be taxed, the courts have said that the onus of proof need not be entirely with the assessee.

The finance minister clearly wants to change that.The finance minister also wants to ensure that unexplained money—even if it is received by people who are below the tax bracket—is taxed. Says the memorandum: “Under the existing provisions of the Income-Tax Act, certain unexplained amounts are deemed as income under section 68, section 69, section 69A, section 69B, section 69C and section 69D of the Act and are subject to tax as per the tax rate applicable to the assessee. In case of individuals, HUF, etc, no tax is levied up to the basic exemption limit. Therefore, in these cases, no tax can be levied on these deemed income if the amount of such deemed income is less than the amount of basic exemption limit and even if it is higher, it is levied at the lower slab rate.”

Now, of course they can be taxed at the top rate.But can this provision be termed a kind of perpetual amnesty scheme?

There are two reasons to raise this question. One, in the recent case of some Swiss account holders of HSBC Bank—obtained from a list handed over to India by the French authorities—the taxman has been busy recovering his dues rather than prosecuting the holders of Swiss accounts for their illegal accounts (read here). Is the new provision about to legalise this?

Moreover, official circles—including Kaushik Basu, Chief Economic Advisor—have been suggesting the legalisation of small bribes.

As Firstpost reported some time ago, Basu wrote a paper titled ‘Why, for a class of bribes, the act of giving a bribe should be treated as legal’.

We noted: Basu’s case is that by tilting the law in favour of the (involuntary) bribe giver, he (or she) will be more willing to report the bribe, thus making it difficult of the bribe-giver to wriggle out of the situation. He said: “Harassment bribery is widespread in India and it plays a large role in breeding inefficiency and has a corrosive effect on civil society. The central message of this paper is that we should declare the act of giving a bribe in all such cases as legitimate activity. In other words, the giver of a harassment bribe should have full immunity from any punitive action by the state.”

He argues that this “will cause a sharp decline in the incidence of bribery. The reasoning is that once the law is altered in this manner, after the act of bribery is committed, the interests of the bribe giver and the bribe taker will be at divergence. The bribe giver will be willing to cooperate in getting the bribe taker caught. Knowing that this will happen, the bribe taker will be deterred from taking a bribe”.

The provision to tax petty unexplained income for people below the top tax bracket will enable the government to tax petty bribes without really going after them.

Is this what the 2012-13 budget is trying to do without saying so?

JohnTitor · Post by **JohnTitor** » 16 Mar 2012 19:01

shyam wrote:
tejas wrote:Sorry but I for one am glad to see lakhs/crores bite the dust.
Just to quote a phrase from Rajiv Malhotra - it just shows who is digesting whom. The problem I see is that Indians stopped using notations after crore and started using thousand crore, lakh crore etc. It just confuses almost everyone. May be the next generation will get pissed of with representing budget, GDP etc in rupee, and rather prefer them to be stated in US$.

+++1 !

Each successive generation seems to be more western than the last. Funny how Indians ape the west when it comes to the vices, yet they don't ape the good things such as honesty, sincerity and cleanliness.

Jaspreet · Post by **Jaspreet** » 16 Mar 2012 19:49

Each successive generation seems to be more western than the last. Funny how Indians ape the west when it comes to the vices, yet they don't ape the good things such as honesty, sincerity and cleanliness.

Hey, that's my line. I coined "Indians copy the vices but not the virtues."

Varoon Shekhar · Post by **Varoon Shekhar** » 16 Mar 2012 20:16

Jaspreet wrote:
Each successive generation seems to be more western than the last. Funny how Indians ape the west when it comes to the vices, yet they don't ape the good things such as honesty, sincerity and cleanliness.
Hey, that's my line. I coined "Indians copy the vices but not the virtues."

It's probably stating the obvious, but many Indians are naturally honest and sincere- it springs from their character and heart.My grand uncle on my mother's side is sincere and honest, and sometimes quite forthright. It has nothing to do with 'aping' anyone.It's his own personality.

Other Indians are not, though again not all the time. I've noticed in sport, when interacting with some older generation i.e 45-65 Indians/ethnic Indians, there is a tendency to be dishonest and dishonourable, particularly when one is losing in a game. Whereas I haven't seen this to the same degree among Chinese or other ethnicities, the one exception being Poles/East Europeans.

Theo_Fidel · Post by **Theo_Fidel** » 16 Mar 2012 21:28

In personal equal interactions Indians are honest. Between family, at the store and even in government. The problems come when one has power over another. Indians have trouble handling power gracefully. Even in USA.

Singha · Post by **Singha** » 16 Mar 2012 21:33

is India the only country where there is a mass media and public frenzy over yearly tinkering in the budget? I dont recall reading or hearing anything about khan federal budgets or god forbid their railway budget.

to me it looks like at personal level these things make minor differences to the salaried tax paying class - a 1000 less, a 1000 more here and there in terms of taxes and savings. nobody is going to get rich or poor with these tinkerings imo.

g.sarkar · Post by **g.sarkar** » 16 Mar 2012 23:07

http://www.nytimes.com/2012/03/16/busin ... &ref=world
Bad Loans at State-Run Banks Add to India’s Woes
By VIKAS BAJAJ
Published: March 15, 2012
"MUMBAI, India — When people talk about Europe’s “government debt problem” they mean something easy to describe: countries that borrowed more money than they can easily pay back. In India, it’s a bit more complicated.
Here, where the government is grappling with national debt and a growing budget deficit, the state might play the part of the delinquent debtor, the imperiled lender or the foot-dragging regulator — or may play all three roles in a single set of tail-chasing transactions.
The private company Hindustan Construction, for instance, is trying to renegotiate its $1.3 billion debt, some of it owed to government banks, to avoid defaulting. The company says its financial problems are partly a result of the government’s slow payments for road and highway projects, as well as government delays in giving final go-ahead on other projects already tentatively approved.
Bad loans now pose “the most significant risk to the financial system” in India, according to a recent survey of 100 bankers by the Reserve Bank of India.
India, whose once red-hot economy has started to cool, is now trying to cope with debt and deficit problems that will put strains on the annual budget the nation’s finance minister, Pranab Mukherjee, plans to present to Parliament on Friday.
The Indian government’s debt stands at nearly 69 percent of its gross domestic product, according to Citigroup. That is little changed from 71 percent a year earlier. But its fiscal deficit has been rising, and many analysts expect it to be 5.8 percent of G.D.P. at the end of March, up from 4.8 percent a year earlier.
Meanwhile, as India’s slowing growth creates financial challenges for state-run and private companies alike, the risk has fallen disproportionately on government-owned banks, which account for about 75 percent of India’s banking system.
At the end of December, 3 percent of loans made by the 15 largest state-owned banks were nonperforming, compared with about 1.8 percent for six newer private banks, according to Avendus Securities in Mumbai. CARE Ratings, a credit rating firm, estimated that 17 public and private banks collectively had $25.7 billion in bad loans on their books at the end of 2011, a figure expected to grow in the coming months.
Analysts say most of the problems are concentrated in industries like aviation, infrastructure, real estate and telecommunications — businesses where the government is heavily involved as a player or lender, and which have also suffered from erratic or delayed government policies.
Among the companies now struggling even to pay their employees are two of India’s biggest airlines. One is the formerly admired state-run Air India. The other is privately held Kingfisher Airlines, which besides stumbling from its own management missteps, has been hurt by the government’s barring it from profitable international routes in order to protect Air India.
And in electric power, analysts describe a looming financial disaster in state-owned utilities. They have accumulated losses of $14 billion because the low government-mandated rates they charge customers do not cover the cost of generating power.
And no industry is helped by India’s slowing economy, which grew by 7.4 percent last year, down from 9.9 percent in 2010, according to the International Monetary Fund. The fund expects India’s growth to slow further this year, to 7 percent. While that is fast relative to developed countries, most economists consider it laggardly, contending that even in the current global economic climate India has the potential to grow by 9 percent a year......"
Gautam

Virupaksha · Post by **Virupaksha** » 16 Mar 2012 23:51

Singha wrote:is India the only country where there is a mass media and public frenzy over yearly tinkering in the budget? I dont recall reading or hearing anything about khan federal budgets or god forbid their railway budget.

to me it looks like at personal level these things make minor differences to the salaried tax paying class - a 1000 less, a 1000 more here and there in terms of taxes and savings. nobody is going to get rich or poor with these tinkerings imo.

Singha sir,

No media frenzy over budget in Khan land??

In the past few years, the US hasnt been able to pass a full scale budget at all.

They are surviving with 3-month to 6 month extension IIRC. Every time you hear govt shut down in US, it is exactly that - the budget hasnt been passed beyond that time frame. Remember last year they didnt do it beyond their extension and some of Air traffic controllers had to work "without pay".

http://www.infiniteunknown.net/2011/08/ ... -shutdown/
For ~20 days, they didnt even collect some taxes!
Last time for the first time in years, they passed a budget for exactly 9 months.
Their latest budget: http://www.usatoday.com/news/washington ... 51984440/1

Suraj · Post by **Suraj** » 17 Mar 2012 00:04

There's no need for US-India polemics. Singha's point is valid - the budget as a primary arbiter of annual economic activity doesn't really hold anymore. Yes, GoI is the single largest economic participant, but unlike the dream budgets of the early 1990s, it doesn't really drive policymaking any longer - much of the economic low hanging fruit that could be picked through budgetary changes from FinMin has been done. The more pertinent reforms like GST are hanging fire thanks to political paralysis and co-ordination issues with other ministries, as well as between centre and states. Further, it's better for reform measures to be announced over the course of the year, or whenever possible, as opposed to bundling and announcing at budget time.

JohnTitor · Post by **JohnTitor** » 17 Mar 2012 02:39

Varoon Shekhar wrote:It's probably stating the obvious, but many Indians are naturally honest and sincere- it springs from their character and heart.My grand uncle on my mother's side is sincere and honest, and sometimes quite forthright. It has nothing to do with 'aping' anyone.It's his own personality.

Don't really want to drag this on, but what I meant was honesty in their life as a whole, not just in their personal life. Ofcourse this is a blanket statement and there are many people who wont fall under this category. I know of several people who work and worked all their life in government and have (almost) nothing to show for it financially. Yet there is a huge section, the majority, who take bribes and so on. Of course, they have a reason for everything - doctors prescribe tests that patients don't need because he gets a cut.. but he "has" to do this because he was asked to fork out several lakhs for his MBBS. No offense to the doctors here, not everyone is like this - that is fact. Corruption has become a norm in India. My dad tells me when he was studying, people in government were $hit scared of being accused of taking a bribe or being corrupt - oh how I wish that is how it was today.

There is corruption in the west, we all know it, but it doesn't happen at every single level. The people in power might push bills through for corporations in exchange for campaign money or something, but you don't pay a bribe to buy land.

I look forward to the day, where a superpower Bharat has the guts to protect itself, its citizens and its interests at home and abroad while being corruption free and where the courts are fair and clean.

Anyway.. I digress.

abhishek_sharma · Post by **abhishek_sharma** » 17 Mar 2012 06:43

gakakkad · Post by **gakakkad** » 17 Mar 2012 10:44

doctors prescribe tests that patients don't need because he gets a cut.. but he "has" to do this because he was asked to fork out several lakhs for his MBBS.

No offence taken , but prescribing unnecessary tests is far more uncommon in India than in US.

gakakkad · Post by **gakakkad** » 17 Mar 2012 10:51

The biggest disaster about the budget is that it might actually reduce the saving rate . I don't understand their logic . MMS claims that lower fiscal deficit leads to lower inflation . increasing indirect tax over "luxury items" like computers , cell phones (a luxury that 90% indian households own) have been increased . Now even cement will become more expensive leading to rising cost of the houses . Even government has to buy cement for its construction activities . So basically prices have been increased to reduce inflation. Someone deserves ths ig nobel for CON-omics .

gakakkad · Post by **gakakkad** » 17 Mar 2012 10:56

Theo_Fidel wrote:In personal equal interactions Indians are honest. Between family, at the store and even in government. The problems come when one has power over another. Indians have trouble handling power gracefully. Even in USA.

OT but American like Rush Limbaugh seem to be handling power with a lot a grace of late , don't you think ?

PS- what was the eponymous law of sarcasm in an internet forum ?

Singha · Post by **Singha** » 17 Mar 2012 11:19

well we have to deal with Govt officials for any odd reason like banks, land, police, loans, permits....where all the misue of power that affects the common man lies.

americans may choose to tune out of limbaugh if they choose to. for day to day things like loans, police, buying homes or land, registrations, starting a small business they dont have to pay bribes and things happen with due process unless in the 0.000001% of cases where the direct interests of the political/elites are being trod on. chances are a desi living there for 20 yrs never had to bribe anyone or face any harassment.

a lot of things that happen by post there in routine semi-automated process needs forms in triplicate here and personal visits to plead with people. eg being the "police verification" for passports which is SICK JOKE. the passport office (outsourced to folks like TCS in some places) sends it efficiently to police HQ and there it lies. you need to visit the local police dhana and pay 200-500 else they will not even pull that email and take action. if you pay 500 no questions asked they will pass it.

a lot of things are OPAQUE and subject to theft. we pay 10% of basic and employer match to PF every month. yet we only get a yearly statement (just the total sum not breakups) and that too sent to employer. do you think americans will tolerate not being able to track their 401k accounts like this? there is no talk of even putting PF accounts online. numerous attempts to clean up that mess have failed.

gakakkad · Post by **gakakkad** » 17 Mar 2012 16:55

every culture in the world has an equal tendency to abuse power . Indians are no different . Indian's in India tend to abuse power , because they can get away doing so due to the archaic judiciary and cops . Indians holding position of power in the US are not any more corrupt than their white counterparts . Indians don't have any more trouble being graceful about power than anyone else.

Hari Seldon · Post by **Hari Seldon** » 17 Mar 2012 21:30

gakakkad wrote:every culture in the world has an equal tendency to abuse power . Indians are no different . Indian's in India tend to abuse power , because they can get away doing so due to the archaic judiciary and cops . Indians holding position of power in the US are not any more corrupt than their white counterparts . Indians don't have any more trouble being graceful about power than anyone else.

+1.

Can we get past the breast beating about how we SDREs are incapable of grace or whatever in the xyz domain as compared to the goras please? TIA.

JohnTitor · Post by **JohnTitor** » 17 Mar 2012 22:22

abhishek_sharma wrote:http://epaper.hindustantimes.com/PUBLIC ... 18_011.jpg

Correct me if I'm wrong but does this mean 11% of GDP is used on defense?! I thought it was around 1.9%

gakakkad · Post by **gakakkad** » 17 Mar 2012 22:34

Shonu wrote:
abhishek_sharma wrote:http://epaper.hindustantimes.com/PUBLIC ... 18_011.jpg
Correct me if I'm wrong but does this mean 11% of GDP is used on defense?! I thought it was around 1.9%

seems to be a printing error. Defence budget is $ 39b . that is less than 2 % . 11 % would be like US$230b . that will be the defence spending of the next 5 years or so.

abhishek_sharma · Post by **abhishek_sharma** » 17 Mar 2012 22:38

I think it is 11% of govt spending (not GDP).

Theo_Fidel · Post by **Theo_Fidel** » 18 Mar 2012 05:08

Massa landers are not graceful by nature. But definitely they have gotten some of the petty harrassment out of the way. They do this by making interactions less and less personal. Everyone gets a number and is turned into a faceless entity. This starts all the way rom childhood. A teacher exhibiting favoritism is removed from his/her post as happened at my kids school. Even a parent has limits on power over a child. We learn our inability to handle power from a young age. This one of the virtues we should copy.

Remember efficient economies run on trust. If we can't get our petty interactions to run cleanly and without turning it into a feudal/supplicant situation we will have clear limits on our growth.

shyamd · Post by **shyamd** » 18 Mar 2012 20:47

There is resolve to keep subsidies in check: officials

Sandeep Dikshit

This is not fiscal consolidation Budget message: government intends to govern Govt. to trim subsidies on food, fuel and fertiliser Govt eyes spectrum sale, PSU disinvestment to generate revenues.

Top Finance Ministry officials hoped that political will and regular administrative action would be instrumental in keeping a check on the expenditure on subsidies, which has led to the widest budget deficit among major emerging economies.

Drawing attention to Union Finance Minister Pranab Mukherjee proposing the containment of subsidies to less than two per cent of GDP in the next fiscal and paring it to 1.75 per cent over the next two years, Finance Secretary Sunil Mitra said, “therefore it is not business as usual…it shows the resolve especially when sharp corrections are not possible due to the situation in the country.''

Along with efforts such as regular tracking and monitoring on the expenditure side, officials reposed faith in the auditing by the Comptroller and Auditor General to keep subsidy outgo within manageable limits.

While the expenditure on the food subsidy account would be difficult to cut because of the extent of malnutrition in the country, Mr. Mitra along with other senior North Block officials at the customary post-budget briefing hoped that other subsidies like fertilizer and oil would be funded to the extent that they can be borne by the economy without any adverse implication.

Though their performance has been below par, officials complimented States on doing well with respect to Fiscal Responsibility and Budget Management (FRBM) targets. At the same time, they added the caveat that there have been huge transfers from the Centre to States, helped in part by a generous devolution package by the 13th Finance Commission.

The officials did not reveal much about the budgetary proposals for a White Paper on black money and a holding company for recapitalising banks, saying that the former was in the works and would be ready by this month-end while the latter was aimed as a long-term mechanism whose fine print was being worked out. The Centre's MoUs with banks would help make them more efficient — average productivity per employee had already increased and the quantum of non-performing assets was destined to come down — so that it would not be a case of throwing good money after bad.

Explaining the rationale for the Rajiv Gandhi Equity Savings Scheme — 50 per cent income tax deduction to new retail investors, who invest up to Rs. 50,000 directly in equities and whose annual income is below Rs. 10 lakh (with a lock-in period of three years) — the officials said the intention was to deepen the investor segment and ensure the bourses were not heavily dependent on international capital flows.

Sale of spectrum

Asked how North Block hoped to net Rs. 40,000 crore from the sale of spectrum, the officials said they were not relying on the auction of the 122 cancelled 2G licences alone. Some surplus spectrum that would accrue after Central government departments vacated it and that available over and above the 6.2 Mhz allocated to companies would also be auctioned. “We are very confident based on the timeline given by the Department of Telecommunications,'' they said.

chackojoseph · Post by **chackojoseph** » 19 Mar 2012 10:17

10% food price rise can push 30 million Indians in extreme poverty

Austin · Post by **Austin** » 19 Mar 2012 10:31

Shonu wrote:Correct me if I'm wrong but does this mean 11% of GDP is used on defense?! I thought it was around 1.9%

Budget expenditure on defence as percentage of total budget spending.

No one ever spends GDP , you can only spend what you have which is your budget revenue

vina · Post by **vina** » 19 Mar 2012 11:03

Wind Power, Ultra Expensive and Does Not Avert Climate Change

Notice what it says in the article, the cheapest backup/peaking power is the good old SDRE open cycle Gas Turbine Yin Jin.

So, rather than spending a couple of hundreds of billions and trying to fit wind into base load applications (ie , energy storage and backing etc), throw $10b into getting Thorium based power (ie the 3rd stage) into early commissioning (within 20 years) and shortening the 3 stage cycle by using imported enriched fuel or maybe even separated PU (all that lying in massive amounts from reactors in operation for 40/50 years in Japan, France, So Ko etc) for whom it is a "problem" ..So YumBeeYea giri says, make power from "Waste" and use that as the base load.. for which Nukes are perfectly suited.

Sri · Post by **Sri** » 19 Mar 2012 11:21

Pranab is taking fiscal deficit very very seriously. grape wine is that it is being told to Govt of India employees, that they can kiss good bye to their DA if things don't improve on either revenue end or expenditure end. Govt needs good financial before the food security bill kicks in.

Austin · Post by **Austin** » 19 Mar 2012 16:38

^^^ Even if they can get 5.1 % of the projected deficit figure it will be an achievement , which still is quite high.

The most worrying factor will be oil prices , it may stay $ 120 through out the year or may go higher.

How much is Oil purchase is pegged in dollar in this budget , IIRC it was pegged at $80 last year which was too low.

putnanja · Post by **putnanja** » 19 Mar 2012 23:16

A good article on the issue of Fuel Subsidies. Check out the accompanying graphs too.

The great fuel subsidy hoax

Suraj · Post by **Suraj** » 19 Mar 2012 23:38

I wouldn't be surprised if GoI faciliates Iran's purchase of Rupee denominated government debt in exchange for oil at preferential terms in Rupees.

putnanja · Post by **putnanja** » 20 Mar 2012 04:49

The great deficit fudge - How Pranab painted a rosier picture

...
Finance minister Pranab Mukherjee has quietly dumped his commitment to eliminate the Centre’s revenue deficit — at least the real McCoy, which has traditionally been defined as the excess of revenue spending over revenue earnings.

It’s a commitment that every elected government in office since 2003 has sworn to achieve under the Fiscal Responsibility and Budget Management (FRBM) Act.

Mukherjee has chosen instead to do two things: first, he has created a hugely watered-down proxy target called the “effective revenue deficit” and, second, stretched the time schedule for its elimination by six years to March 31, 2015.

The effective revenue deficit — a new measure that the government started reporting from last year’s budget — strips out a portion of revenue expenditure that has been re-classified as grants for the creation of capital assets.

...
...
The government had never classified revenue expenditure as a grant for creation of capital assets until last year.

...
In the budget estimates for 2010-11, the Centre had made a provision of Rs 31,317 crore which has since ballooned to Rs 1,64,672 crore in the budget estimates for 2012-13, a surge of over 425 per cent in just two years.

In the process, the “effective revenue deficit” has gone down to 1.8 per cent of the GDP, giving Mukherjee bragging rights to claim that he has put the country back on the road to fiscal consolidation.

But the truth is that the real revenue deficit still hovers at 3.4 per cent of the GDP — at the same level as the budget estimates for 2011-12.

...
...
Capital assets or revenue spending?

The sum being treated as grants for creation of capital assets in the budget estimate for 2012-13 is Rs 164,672 crore. Two ministries — finance (Rs 51,597.75 crore) and rural development (Rs 62,276.89 crore) — hog over 69 per cent of the revenue spending that is masquerading as capital grants.

And what are the capital assets being created out of this corpus?

There’s the Mahatma Gandhi National Rural Employment Guarantee Programme (Rs 31,659.59 crore), the Pradhan Mantri Gram Sadak Yojana (Rs 19,343.10 crore), the Indira Awaas Yojana (Rs 11,066.20 crore) — all under the ministry of rural development.

Then there’s the Accelerated Irrigation Benefits Programme (Rs 14,142 crore), the Backward Region Grants Fund (Rs 6,990 crore) and the state-specific needs (Rs 6,723.75 crore) — all operated by the finance ministry. Funds under these schemes were given to the Trinamul government when Mamata was clamouring for a special package for Bengal.

Another big beneficiary of these grants is the Sarva Shiksha Abhiyan (Rs 8,409.06 crore) under the ministry of human resource development.

Reclassifying expenditures

Mukherjee’s plan to re-categorise a portion of revenue expenditure as a grant for creation of capital assets is an ingenious way to get out of a sticky situation.

...
...

Ambar · Post by **Ambar** » 20 Mar 2012 05:13

vina wrote:Wind Power, Ultra Expensive and Does Not Avert Climate Change

Notice what it says in the article, the cheapest backup/peaking power is the good old SDRE open cycle Gas Turbine Yin Jin.

So, rather than spending a couple of hundreds of billions and trying to fit wind into base load applications (ie , energy storage and backing etc), throw $10b into getting Thorium based power (ie the 3rd stage) into early commissioning (within 20 years) and shortening the 3 stage cycle by using imported enriched fuel or maybe even separated PU (all that lying in massive amounts from reactors in operation for 40/50 years in Japan, France, So Ko etc) for whom it is a "problem" ..So YumBeeYea giri says, make power from "Waste" and use that as the base load.. for which Nukes are perfectly suited.

There is another problem with Windmills in India. Morons steal copper from the windmills rendering them worthless in no time. Look what happened in Hassan Dist and Chickamaglur.

Singha · Post by **Singha** » 20 Mar 2012 07:51

we cannot have unattended infra of any form in india. every windmill site will need a armed guard. metal manhole covers get stolen. thats when people started to use concrete.

Austin · Post by **Austin** » 20 Mar 2012 12:47

Hmm you cant have guard every where for every asset else you end up creating Central Infrastructure Security Force , you will have to engage the community or the local gram panchayat to make sure those assets are duly protected from theft etc

Reminds me of the ticket vending machine the railways in mumbai started , most of those vending machine used to get stolen overnight by drug addicts who stayed around railways , now they have bigger vending machine with all those jazzy displays of stations etc makes it humanly impossible to carry it around an steal it and those theft has reduced drastically.

The effective Revenue Deficit is a smart juggling ,they can label all expenditure as grants and expenditure for capital asset and voila in few years we run a budget surplus.

Yogi_G · Post by **Yogi_G** » 20 Mar 2012 13:40

Iran is desperate now and India will be cut off from dealing with it pretty soon by Unkil. Time to purchase oil in bulk now and shore up the strategic reserves by 2 to 3 times (where to store it is of course moot). We will not get a better opportunity to increase our strategic reserves at such prices that Iran has to offer.

ShauryaT · Post by **ShauryaT** » 20 Mar 2012 14:44

Revise your Shakespeare skills with this article.

Budget 2012: Re-reading the Hamlet