[ECONOMIC SERVEY 2012-13-] NOTES

Efforts will have to be made to contain subsidies through better targeting and for reducing leakages involved in their delivery. One such initiative is direct benefit transfer (DBT) scheme.

It said the government has been calibrating pricing policies to addressing the issue of burgeoning fertiliser subsidy and underlined the need for according priority to food subsidy in view of the under consumption of basic food by the poor and the extant of malnutrition. The government has sought to correct this through National Food Security Act though concerns have been expressed that this would lead to a higher subsidy outgo.
Falling savings without a commensurate fall in aggregate investment have led to a widening current account deficit. Wholesale price indexed inflation (WPI) has been coming down in recent month. However, food inflation, after a brief slowdown, continues to be higher than overall inflation. Given the higher weightage to food in consumer price indices, CPI inflation has remained close to double digits. Another consequence of slowdown has been lower than targeted tax and non-tax revenues. With the subsidies bill, particularly that of petroleum products, increasing, and the danger that fiscal targets would be breached substantially became very real in the current year, the Survey said. In the current macro-economic environment, to achieve this objective, there is need to address sector-specific issues over the medium to long-term horizon in India. A high level of investment in the infrastructure sector is essential for the overall revival of investment climate, it said. Pinning hopes on the newly set up Cabinet Committee on Investment (CCI), the Economic Survey on Wednesday said that specific issues facing the infrastructure sector need to be resolved to revive investment climate and propel sustainable growth. JOB OF CCI: The recently constituted CCI is expected to resolve issues involving inter-ministerial coordination for the critical infrastructure projects, it added. Progress of many road and coal projects have suffered due to problems like delays in obtaining environmental clearances, land acquisitions and rehabilitation, the Survey called for suitably addressing the issues in the fast-track mode for achieving the 12th Plan (2012-17) targets. India witnessed a peak power shortage of 9 per cent during the five years ending 2012 when over 50,000 MW new generation capacity was created. During the 11th Five Year Plan (200712), nearly 55,000 MW of new generation capacity was created. Yet, there continues to be a peak shortage of 9 per cent, One of the key challenges remains resolving the energy bottlenecks. Further, the countrys excessive reliance on imported crude oil make it imperative to have an optimal energy mix that will allow it to achieve its longrun goal of sustainable development.

The government, in close collaboration with the RBI and SEBI, has recently taken a number of initiatives to meet the growing capital needs of the Indian economy.

[ECONOMIC SERVEY 2012-13-] NOTES To enhance liquidity in the corporate bond markets, the Insurance Regulatory and Development Authority (IRDA) has permitted insurance companies to participate in the repo market. Moreover, mutual funds have been permitted to participate in CDS in corporate debt securities. Among other initiatives to promote the corporate debt market, banks were permitted to take limited membership in SEBI-approved stock exchanges for the purpose of undertaking proprietary transactions in the corporate bond markets. Removing restrictions on foreign investment (FDI) in legal and accountancy services can result in dynamic gains for the Indian economy. It has listed some important domestic regulations in India, which need to be examined for suitable policy reforms in the services sector. In accountancy services, the survey said FDI is not permitted in this sector and foreign service providers are not allowed to undertake statutory audit of companies as per the provisions of the laws in India. There are also domestic regulations like prohibition on the use of individual logos for partnership and single proprietorship accounting firms, it said. These regulations need to be relaxed and streamlined to facilitate tie-ups and penetrate foreign markets given the potential for exporting these services by the outsourcing mode, it said. Talking about legal services, it said FDI is not permitted in the sector and international law firms are not authorised to advertise and open offices in India. In education services, it said these come under the concurrent list with multiple controls and regulations by central and state governments and statutory bodies. Regulations of minimum of 25 acres of land to establish a medical college restricts the setting up of medical colleges in cities like Delhi, In trade and transport services, Survey said some constraints in these sectors include restrictions on inter-state movement of goods which could ease with the adoption of the model Agriculture Produce and Marketing Committee (APMC) Act by many states. It also called for revision of the Multimodal Transportation of Goods Act 1993 to ease the existing restrictions on transportation and documentation through different modes of transport.