ISSN-0971-8400

SPECIAL ISSUE

MARCH 2010 A DEVELOPMENT MONTHLY RS 20

 Budget at a Glance (In Crore of Rupees)

2008-2009 2009-2010 2009-2010 2010-2011

Actuals Budget Estimates Revised Estimates Budget Estimates
Revenue Receipts 540259 614497 577294 682212
Capital Receipts 343697 406341 444253 426537
Total Receipts 883956 1020838 1021547 1108749
Non-plan Expenditure 608721 695689 706371 735657
Plan Expenditure 275235 325149 315176 373092
Total Expenditure 883956 1020838 1021547 1108749
Revenue Deficit 253539 282735 329061 276512
Fiscal Deficit 336992 400996 414041 381408
Primary Deficit 144788 175485 194541 132744

Rupee Comes From Rupee Goes To

(Budget 2010-11) (Budget 2010-11)
Non-Plan Assistance
Non-debt Capital
Non Tax Revenue receipts to States and UT
11p. 3p. Govts
States Share of 4p. Plan Assistance to
Borrowings & Other Taxes and Duties States and UT
Service Tax & Other liabilities 16p. (14p.) 7p.
Taxes 29 p.
6p.
Other Non-Plan Central Plan
Union Excise Duties Expenditure 21p.
10p 13p.

Customs Subsidies
9p. 9p.
Income Tax Corporation Tax Defence Interest Payment
9p. 23p. 11p. 19p.

71
29

27p.

Note : 1. Total Receipts are inclusive of States' share of taxes
and duties which have been netted in the table.
Notes :1. This does not include Plan outlays met from
internal and extra budgetary resources of public
enterprises
2. Total expenditure is inclusive of the States share
of taxes and duties which have been netted
against receipts in the table
March 2010 Vol 54

Chief Editor : Neeta Prasad Joint Director (Prod) : J.K. Chandra

Senior Editor : Rakeshrenu Cover Design : Sadhna Saxena
Editor : Manogyan R. Pal E-mail (Editorial) : editoryojana@hotmail.com
: yojanace@gmail.com
(Circulation) : pdjucir_ jcm@yahoo.co.in
Website : www.yojana.gov.in

Let noble thoughts come to us from every side

Rig Veda

CONTENTS

Just a Good Balancing Act ................................................ 5 Budgeting for the Energy Sector............................... 41
Partha Mukhopadhyay Vijay Thakur
A Pragmatic Mix of Politics and Economics.............11 do you know? . ...................................................................... 44
Amitendu Palit
Gendering Health and Education ............................... 46
A Tight Rope Walk Towards Fiscal Promila Yadava
Consolidation......................................................................... 14
Pinaki Chakraborty, Lekha Chakraborty shodh yatra Innovating and Improvising
to Increase Agricultural Productivity.................. 50
Analysing Tax Proposals.................................................. 17
Vikas Vasal, Uday Ved, Pratik Jain North east diary . ............................................................. 53
Fulfilling Social Responsibility.................................. 20 The Crucial Role of Banks in India’s
G Srinivasan Economic Development...................................................... 54
Upbeat on Growth, Concern over Inflation.......... 25 Barna Maulick
R C Rajamani Community Radio for Rural Development............. 60
Arpita Sharma
Pushing Agricultural Growth ..................................... 30
Surinder Sud J&K Window . .......................................................................... 65
Budget and Rural Development................................... 33 Fiscal Federalism: Emerging Challenges
K R Sudhaman in India......................................................................................... 66
T Sadashivam
best practices Bitter Neem to
book review Mobilizing Resources
Sweet Success.......................................................................... 38
for Development................................................................... 71
Ratan Mani Lal

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Disclaimer :
l The views expressed in various articles are those of the authors’ and not necessarily of the government.
l The readers are requested to verify the claims made in the advertisements regarding career guidance books/institutions. Yojana does not own responsibility
regarding the contents of the advertisements.

YOJANA March 2010 1

 Union Budget 2010-2011
Fiscal Consolidation Back on Track : Exit from stimulus begins; lower net government borrowings to
ease pressure on interest rates
Road Map to Goods and Services Tax : Cenvat rate hiked to 10% & aligned with service tax rates, more
services under tax net
More Tax for Less, Less for More : Corporate surcharge cut to 7.5% from 10%, but MAT rate rises to
18% from 15%
Disinvestment Gets Bigger : Govt eyes Rs. 40,000 crore from divestment, another Rs. 35,000 crore from
spectrum sale

Fiscal Deficit at 5.5% of Allocation for Defence up Rs. 66,100 crore Provided for
GDP Works out to Rs. 3,81,408 crore to Rs. 1,47,344 crore Rural Development

for the aam aadmi

l Rs. 40,100 crore for Mahatma Gandhi National Rural Employment Guarantee Scheme
l Rs. 48,000 crore allocated for rural infrastructure programmes under Bharat Nirman
l Unit cost under Indira Awas Yojana up to Rs. 45,000 in the plains and to Rs. 48,500 in the hilly areas
l Allocation to Backward Region Grant Fund raised by 26% from Rs. 5,800 crore to Rs. 7,300 crore
l Additional Central assistance of Rs. 1,200 crore for drought mitigation in Bundelkhand region
l Allocation for urban development up by more than 75% from Rs. 3,060 crore to Rs. 5,400 crore
l Allocation for Housing and Urban Poverty Alleviation raised from Rs. 850 crore to Rs. 1,000 crore
l Scheme for 1% interest subvention on housing loan up to Rs. 10 lakh, where the cost of the house does
not exceed Rs. 20 lakh, extended up to March 31, 2011
l Plan allocation for school education raised by 16%
l Plan outlay for Women and Child Development stepped up by almost 50%
l National Social Security Fund for unorganized sector workers to be set up with an initial allocation of
Rs. 1,000 crore. This will support schemes for weavers, rickshaw pullers, bidi workers, etc.
l Rashtriya Swasthya Bima Yojana benefits extended to all MNREGS beneficiaries who have worked for
more than 15 day during preceding financial year
l Mahila Kisan Sashaktikaran Pariyajana to meet needs of women farmers to be launched with Rs. 100
crore
l Plan allocation for Minority Affairs up by 50% from Rs. 1,740 crore to Rs. 2,600 crore
l Rs. 16,500 crore provided to ensure that public sector banks attain a minimum 8% Tier-I capital by March
31, 2011
l Indian rupee to get a symbol

2 YOJANA March 2010

 About the Issue

T
o fulfill the aspirations of a one billion population in a less than 30 page
document is not the easiest of tasks. To top it, the Finance Minister faced
an economy that was just about gathering pace after a massive pull back
that threatened to undo nearly all the good work of one decade, a spurt in inflation
that had less to do with money supply, more to do with rigidities of food supply
bottlenecks, and the needs of a developing economy hungry for more investment,
for more infrastructure spend and some more funds for a massive phalanx of
absolutely poor people.
At the end of the day, Pranab Mukherjee has managed to do quite a bit of
everything. He has managed this jigsaw puzzle by relying on growth as the final
missing piece to put the entire picture together. He has set an ambitious target of
over 17% rise in tax revenues and an even better 32% rise in non-tax revenue. Both these are far ahead of what
the Finance Minister collected in 2009-10. Based on these robust assumptions he plans to spend 18% more
on investment or plan expenditure but limit the rise in non-productive expenditure to only just above 4%.
This mixture will be made possible as Budget 2010-11 advises by assuming a robust 8.5% growth rate
of the GDP in real terms, that is, net of inflation. The estimated inflation rate is 4% for the year. This is also
the course broadly advocated by the Prime Minister’s Economic Advisory Council. The Indian economy has
come a long way from the point where growth was just a hope. It is now the second fastest in the world and
on course to becoming the fastest. This has been made possible by a combination of government policies
since the early nineties that made a clean break from the past, an industrial sector that has learnt to make
use of entrepreneurship and a services sector that has seen the lead shift continuously from IT, to Bio tech
to Pharma and so on. The result, says the latest year book from Unido, India has the 9th most advanced
industrial structure in the world. The only laggard in the pie is the agricultural sector. In the year 2009-10, the
total production from the sector actually contracted. To correct this, the budget has financed a four pronged
agricultural development programme including a second Green Revolution.
Within plan expenditure, Pranab Mukherjee has substantially raised the allocation for social sector
spends including the government’s flagship Bharat Nirman programmes and of course the rural employment
scheme—MGNREGA.
Commentaries on the budget have noted this pattern and the prescription for the future fiscal road map made
out by the Finance Minister. They have agreed that the minister has reason to be optimistic. The worry lines
are the weak infrastructure developments. The government in this case, can only provide the funds, but a lot
more action is needed on the ground to make the mega power, roads and airports projects work. q

YOJANA March 2010 3

 How will the budget impact
Taxpayer
• Personal tax liability goes
down across the board. Those
with annual taxable income of
Rs. 5 lakh will save Rs. 20,600
a year
• Tax-exempt saving limit
goes up to Rs. 1.2 lakh from
Rs. 1 lakh through additional
Rs. 20,000 for infrastructure
bonds
• Professionals earning up to
Rs. 15 lakh won’t need to have
their accounts audited
Consumer
• Chips, fridges, cars… all to
become dearer if producers
pass on the 2% cenvat hike.
• Petrol and diesel prices rise;
petrol up Rs. 2.67 a litre,
diesel Rs. 2.58 a litre. Could
rise further
• Carmakers up prices. Buyers
need to stump up Rs. 3,000 –
Rs. 1 lakh more.
For YOU
COSTLIER
AC, Fridge and Washing
Machine to cost more
TV and Micro Processor
to become dearer
Jewellery, Diapers
and Napkins to cost
more
4 YOJANA March 2010
• Gold prices to go up by Rs. 100
for every 10 gm.
• Income-tax payers are more
than compensated, but not other
consumers
Investor
• Stepped-up disinvestment drive
will mean more listing of state-
owned firms, widening choice
for investors keen on buying
into these firms at attractive
price.
• India becomes a more appealing
investment story; valuations to
rise
• New investment avenue in the
form of tax-free infrastructure
bonds
Business
• Lower government borrowing
will ensure funds are available to
the private sector at reasonable
rates
Tobacco Hard, Flash
Drive will be costlier
Sunglasses, Cement, Steel
will be expensive
Cheaper
Mobile Accessories and
Medical Equipment to
cost less
• Bulk transport costs to rise as
rail freight is brought into the
service tax net
• Compliance for small business
with turnover under Rs. 60
lakh to be easier
Economy
• More money in taxpayers’
hands and higher allocation
for govt. programmes to
boost consumption and
growth
• M o r e p r i v a t e f u n d s f o r
infrastructure through
bonds eligible for tax
deductions
• New banking licences to
encourage competition and
help financial inclusion
• Fiscal prudence road map
to boost investor confidence
in economy and encourage
investment
CFL Lamps and Set Top
Boxes to be cheaper
Peppermints and
Correction Glass to be
cheaper
Water Filters and Latex
Rubber Thread to cost
less
CD & DVDs and Toys
& Books to cost less
Budget 2010-11
Just a Good Balancing Act
T
he budget can be
reviewed on many
parameters. This article asks
three questions. First, is this
budget different? Second,
will this budget drive growth without
exacerbating inflation? Finally, in his
speech, the Finance Minister made it
clear that the “Union Budget cannot
This budget has be a mere statement of Government
made a fair start accounts [and it] has to reflect the
Government's vision and signal the
to getting back on policies to come in future”. Going
the path of stable further, he outlined three challenges,
viz.: (a) “find the means to cross the
growth, while 'double digit growth barrier'”, (b)
balancing the risk “to harness economic growth … in
making development more inclusive”
of a continuing and (c) alleviate the “the bottleneck
global slowdown, of our public delivery mechanisms”.
How does this budget fare against
but without broader his own benchmarks to evaluate the
participation, rapid budget?
growth cannot be Is this budget different?
sustained Table 1 compares the budget
not with its immediate predecessor
The author is Senior Fellow, Centre for Policy Research, New Delhi.
YOJANA March 2010 5
Evaluation
Partha Mukhopadhyay
but with the budgets from the two
preceding years, i.e., the first year
of the slowdown, 2008-09 and the
year before that, a high growth year,
2007-08. As can be seen, while the
expenditure levels are lower than
that observed in 2008-09 (15.99%
versus 16.61%), they are still well
above the levels of 2007-08. While
subsidies appear to have been cut
from 2008-09, they remain higher
than in 2007-08, and this is without
the effect of oil subsidies, for which
there is only a small provision in
this budget. Similarly, while non-
plan capital expenditure appears
to have risen, it is actually lower
and plan revenue expenditure is
higher and can be expected to
remain so on account of the various
schemes such as MGNREGS. Thus,
it appears that the government is
still not confident of the end of
the slowdown and has budgeted
for significantly high levels of
government spending, as compared,
for example to 2007-08. Depending
on how the year evolves, this could
be quite prudent. For now, the
budget can be characterized as still
a ‘slowdown’ budget.
This ‘slowdown’ nature subtly
persists in the tax collection
side too. Gross tax receipts are
still below 2008-09 levels and
substantially below 2007-08 levels,
except for corporate tax. Compared
to personal income tax, customs
and excise, this level of corporate
tax may reflect a hopeful optimism
that lower indirect taxation and
demand from recently enriched
consumers (as a result of the tax
slab rationalization may see strong
growth in corporate profits.
Will this Budget Drive Growth
without Exacerbating Inflation?
The Finance Minister would
like the taxpayers to spend their
Rs. 26,000 crore bonanza. From
most accounts, while GDP growth
is recovering, private investment
is still sluggish – not quite sure
whether it should take the plunge or
wait out the possibility of a double
dip recession internationally,
mentioned in passing by the
Economic Survey. They need
confidence from consumers
that demand is back. However,
recent history is not encouraging.
Over 2008 and 2009, as the Pay
Commission arrears flowed into
consumer pockets, the growth
in consumer spending stayed
low, though there has been some
increase in the growth rate after the
release of the second installment.
The tax bonanza is smaller but
unexpected. So, are they likely to
co-operate with the Minister? Only
time will tell.
On growth, the budget hedges
its bets. It is trying to encourage
the Indian consumer to spend, with
the hope that the spending will
convince the entrepreneur to invest
and put India back on the high
growth path. But, it still retains a
substantial expenditure component
for the government, possibly as
insurance, as we have seen in the
previous section.
As regards, inflation, Table
1 showed that deficit is still
above recent levels, and tax
collection is expected to remain
low. While the pressure on overall
inflation from the deficit may
moderate, deficit levels remain

Table 1: Budget Components as a share of GDP

2010-11 2008-09 2007-08 Change Change
(Budget) (Actuals) (Actuals) from FY09 from FY08
Total Expenditure 15.99% 16.61% 15.24% -0.62% 0.75%
Non-Plan Revenue Expenditure 9.28% 10.50% 8.97% -1.22% 0.31%
Subsidies 1.68% 2.44% 1.51% -0.76% 0.16%
Other 7.60% 8.07% 7.46% -0.46% 0.15%
Non-Plan Capital Expenditure 1.33% 0.93% 1.85% 0.39% -0.52%
Plan Revenue Expenditure 4.54% 4.41% 3.74% 0.13% 0.80%
Plan Capital Expenditure 0.84% 0.76% 0.68% 0.08% 0.16%
Gross Tax Receipts 10.77% 11.4% 12.6% -0.61% -1.87%
Corporation tax 4.35% 4.01% 4.11% 0.34% 0.24%
Personal Income tax 1.74% 1.99% 2.19% -0.25% -0.45%
Customs 1.66% 1.88% 2.22% -0.22% -0.56%
Union Excise Duties 1.90% 2.04% 2.63% -0.14% -0.73%
Others 1.12% 1.45% 1.49% -0.33% -0.37%
Net Tax Receipts 7.70% 8.33% 9.36% -0.63% -1.66%
Non-Tax Revenues 2.14% 1.82% 2.18% 0.31% -0.04%
Non-Debt Revenues 0.65% 0.13% 0.94% 0.52% -0.28%
Drawdown 0.00% 0.99% -0.58% -0.99% 0.58%
Debt 5.50% 5.34% 3.28% 0.16% 2.22%
Deficit (including drawdown) 5.50% 6.33% 2.70%

6 YOJANA March 2010

high. However, for all the noise
about the fuel price rise, the
burden of indirect taxation too
has been kept low, with budgeted
customs and excise collections
below levels of the first year of
the slowdown. Thus the budget
is unlikely to fuel generalized
cost-push inflation. Its effect on
food inflation is, however, more
difficult to assess.
While the Economic Survey
points to the divergence between
Food and non-Food inflation, it is
not clear whether this is temporary
or structural. As can be seen in
Figure 1, after remaining range-
bound over 2001-2007, wholesale
food prices began rising in mid-
2007, along with a generalized rise
in prices. However, as the non-food
prices dipped with the onset of the
slowdown, food prices continued
their uptrend. The drought last year
Figure 1: Growth WPI and CPI 2001-2010
served to exacerbate this trend but
may not have been its cause. If so,
the possibility that the rise in food
prices is at least partly structural
cannot be ignored.
There is also considerable
divergence between CPI and WPI,
with CPI for food being consistently
above the WPI, indicating a growth
in margins. The general CPI also held
up strongly during the slowdown.
Does this imply that our markets are
becoming less competitive? Over
the last five years, the competition
regulation has been absent in India,
with MRTPC acting out an extended
death scene, and the Competition
Commission unable to leave its
incubator till February 2009. These
price trends indicate much work
for the newborn Competition
Commission.
The price data also indicate that
Lord Indra’s assistance, invoked
by the Minister, may not be able to
calm the clamor over food prices
since, given the data in Figure 1, it
is facile to attribute the rise to the
poor monsoon last year, though
it has exacerbated it. Indeed, as
more income rightfully accrues to
the poor, and demand increases,
food prices may continue to rise,
unless compensated by increases
in productivity and decline in the
cost and reduction in usage of other
inputs like fertilizer. Addressing
this requires reforming our food
and fertilizer subsidy, which now
stands at Rs. 105,558 crore in this
budget. Even a 15% saving in this
subsidy through various efficiency
measures or price increases (notice
from Figure 1 that urea prices have
remain unchanged since 2003),
would generate an amount larger
than any individual scheme, except
the Mahatma Gandhi NREGS.
It would be enough to more than

25.0%

22.5%

20.0%

17.5%

15.0%

12.5%

10.0%

7.5%

5.0%

2.5%

0.0%

-2.5%

-5.0%

-7.5%

WPI-Food Articles and Products WPI-Non Food CPI-Food Urea

Source: Office of the Economic Advisor for WPI and Labour Bureau for CPI (Industrial Workers) series

YOJANA March 2010 7

double the allocations for Sarva
Siksha Abhiyan and increase
the allocation for the Rashtriya
Madhyamik Siksha Abhiyan by
more than ten times.
The political challenge will be
to convince our vocal urban middle
class that as prices are readjusted to
reflect true costs, food prices may
well settle at a higher level. In this
transition, it is important to protect
the urban poor, a failing urban
PDS system and rising food prices
is an unhappy double whammy.
Unfortunately for them, they are not
a strong political constituency.
Can this Budget meet the Finance
Minister’s Three Challenges?
The three challenges are
summarized as (i) inclusive high
growth and (ii) better public
services.
In this context, while agriculture
is essential to support growth, it
cannot drive us to 9.5%, though it
may make the difference between
9.5% and 10% and help us cross
the 'double digit growth barrier'.
The share of agriculture today is
just over 13% of GDP and falling
rapidly. If it grows at 1%, it adds
0.13% to the growth rate, but
even if it grows at a miraculous
5%, it will add only an additional
0.52% to the overall GDP growth.
After the advent of NREGA, even
rural landless labourers are not as
dependent on farm production.
Rural non-farm activities are also
growing, and this, along with
initiatives like MGNREGS, is
raising rural wages and income.
As Figure 2 shows, the decline
in the share of agriculture is being
8 YOJANA March 2010
picked up by the increase in new
areas such as communication,
information technology, banking
and real estate. Even manufacturing
is showing an upward bias. While it
is important to provide food security
and develop certain infrastructure
in rural areas, specifically,
connectivity, and provide them
with electricity and water, true
transformation can come only from
improved education that can enable
the broad masses to participate in
this growth.
Yet, this budget, as with previous
budgets, focuses much more on
protection and infrastructure
and less on building abilities to
participate. Table 2 classifies
the Rs. 186,873 crore budgeted
for forty major schemes of the
government into three groups,
viz. protection schemes (Pr), e.g.,
MGNREGS, rural health mission,
mid-day meal, etc. physical
infrastructure (PI), e.g., rural road,
irrigation, etc.; and participation
enhancers (Pa), e.g., secondary
education, technical training,
etc. Depending on how one
classifies elementary education,
as participation or protection, the
share of participation-oriented
schemes stay steady at around 17%
or 10% respectively. Compared
to the last budget the physical
infrastructure has actually declined
from 36% to 33%.
Within participation-oriented
schemes, of the 17.1%, elementary
education accounts for 39%, higher
education, i.e., support to UGC,
the IITs, NITs and other higher
education institutions accounts for
34% and the remaining 27% or less
than 5% of the total expenditure
on these forty schemes is for
secondary education, technical
training, teachers education, etc.
The allocation for secondary
education, RMSA, is roughly
one tenth that of the SSA. Even
if skill development is to be a
purely private-led or PPP (public
private partnership) activity, as
envisaged under the National
Skill Development Corporation
(NSDC), it is necessary that the
trainees possess a certain level
of education for them to acquire
these skills. The underinvestment
in secondary education means
that each year cohorts of students
who cannot enroll in secondary
education are condemned to low-
skill jobs. This focus on the upper
and the lower ends of education,
to the detriment of the need for
developing a professional middle
is evident in the minimal allocation
for nursing, given the shortage
of nurses and paramedical staff.
What is even more disturbing
is the reduction in funds for
scholarships, e.g. in the merit
cum means scholarship scheme.
Though there are interest subsidy
schemes for educational loans, it
needs to be recognized that going
into debt to acquire an education
is still a choice that many of the
poor will not exercise, though
loans are indeed a viable option
for the middle and upper class and
should be used in conjunction with
higher fees at these educational
institutions.
It is a pity that inclusion has
remained limited to strengthening
“food security, and provid[ing]
health facilities at the level of
 Figure 2: The Old and the New Economy of India

20.0%
19.8%
19.0%
18.9%
18.0%
17.9%
17.0% 15.9%
17.0%
16.0% 16.3%
15.3% 16.0% 16.2%
15.0% 15.6%
15.3% 15.3% 14.5%
13.9%
14.0%
13.2%
13.0%

12.0%
2004-05 2005-06 2006-07 2007-08 2008-09

Agriculture Communication, IT, Financial Services and Real Estate Manufacturing

Source: CSO data on components of GDP (2004-05 base year)

Table 2: Major Schemes by Type

BE 2009-10 RE 2009-10 BE 2010-11
Plan Non-Plan Total Plan Non- Total Plan Non- Total Group
Plan Plan
1. MGNREGS 39100 39100 39100 39100 40100 40100 Pr
2. NRHM 12457 72 12529 12017.6 78.53 12096.13 13836 74.45 13910.45 Pr
3. IAY 7918 7918 7918 7918 8996 8996 Pr
4. ICDS 6026.3 6026.3 7344.8 7344.8 7806.71 7806.71 Pr
5. MDM (PSK) 5089.8 5089.8 5612.65 5612.65 5825 5825 Pr
6. Swaranjayanti Gram 2114 2114 2114 2114 2683 2683 Pr
Swarozgar Yojana
7. MDM 1924.3 1924.3 824.23 824.23 2545.12 2545.12 Pr
8. TSC 1080 1080 1080 1080 1422 1422 Pr
9. EPS 994 994 994 994 1300 1300 Pr
10. NACO 973 973 888.15 888.15 1266.25 1266.25 Pr
11. RGSEAG 99 99 4.5 4.5 900 900 Pr
12. AIIMS 177 500 677 320.51 566 886.51 400 400 800 Pr
13. PMSSY 1447.92 1447.92 683.58 683.58 750 750 Pr
14. Conditional Maternity 3.6 3.6 0.9 0.9 351 351 Pr
Benefit Scheme
15 Social Security for 308 308 230.9 230.9 314.89 314.89 Pr
unorganized sector
(RSBY)
16. National Mental Health 60 60 50 50 103 103 Pr
Programme
17. JNNURM 11618.62 11618.62 6332.99 6332.99 11619 11619 PI
18. Accelerated Irrigation 9700 9700 9700 9700 11500 11500 PI
Benefit Programme
19. PMGSY 10933 10933 10285 10285 10886 10886 PI
20. Central Road Fund 3054 10878.51 13932.51 10878.51 9389.76 20268.27 9953.15 9953.15 PI
Transfers (NHAI)
21. RGNDWM 7200 7200 7199 7199 8100 8100 PI

YOJANA March 2010 9

22. RGGVY 6300 6300 4496.6 4496.6 4852 4852 PI
23. Integrated Watershed 1776.9 1776.9 1643.52 1643.52 2212.2 2212.2 PI
Management
Programme
24. Land Records 359.8 359.8 179.99 179.99 180 180 PI
Modernisation
Programme
25. SSA (PSK) 7694.67 7694.67 8416.02 8416.02 8608 8608 Pa
26. SSA 4239.25 4239.25 3517.9 3517.9 4994.1 4994.1 Pa
27. UGC 3917.04 3449.61 7366.65 3244.02 3977.78 7221.8 3885 3450.86 7335.86 Pa
28. KVS 270 1812.83 2082.83 306 2085.44 2391.44 315 1652 1967 Pa
29. NVS 1170 341.29 1511.29 1170 376.2 1546.2 1246.5 370.4 1616.9 Pa
30. RMSA 1143.46 1143.46 477.25 477.25 1527.54 1527.54 Pa
31. NIT Support 776 523.9 1299.9 793 523.9 1316.9 810 507.51 1317.51 Pa
32. ITI Loan To IMCs 730 730 730 730 735 735 Pa
33. Educational Loan Interest 0.1 0.1 0.1 0.1 500 500 Pa
Subsidy
34. Assistance to States for 400 400 400 400 500 500 Pa
new Polytechnics
35. Strengthening of 450 450 291.8 291.8 450 450 Pa
Teachers Training
Institutions
36. IIT Support 685.5 919.57 1605.07 685.5 980.26 1665.76 774 825.66 1599.66 Pa
37. IISER support 215 215 215 215 300 300 Pa
38. IISc support 75 149 224 75 170.28 245.28 80 141.43 221.43 Pa
39. New Polytechnics 45 45 45 45 220 220 Pa
40. Merit Cum Means 750 750 253 253 81.45 81.45 Pa
Scholarship Scheme
TOTAL 152281.3 19640.71 171922 149525 19142.15 168667.2 171627.9 8722.31 180350.2

households”, and improvement
in “education opportunities” has
stopped at elementary education.
As for new approaches to public
services, as extolled in such detail
in the Economic Survey, the only
conditional cash transfer scheme,
i.e., Dhanlakshmi, for encouraging
girl children to complete schooling,
receives a token allocation of Rs.
10 crore, even as the food subsidy,
through an ever growing PDS,
exceeds Rs. 50,000 crore. It was
perhaps a time to experiment with
the vision that the Economic Survey
lays out for the Unique Identification
system. Andhra Pradesh reportedly
has biometric identification for a
number of beneficiaries. Cannot
a pilot be begun there or in the
Union Territories, or in Delhi, under
the Samajik Suvidha Samagam?
Could not some support have been
allotted for this purpose, as the
Finance Commission has done
for implementation of the UID
scheme?
More important than the schemes,
is the capacity of the state and
especially, local governments to
execute them. In some small towns
today, the number of elected officials
outnumber the number of employees.
The total number of employees in all
forms of government in India today
is also less than the USA, which
has one-fourth our population. Our
government is too small. Since 1991,
we have done a good job of getting
out of sectors government should not
be in, but a poor job of getting into
areas it should be in. If the double
digit barrier has to be crossed, while
the fiscal deficit certainly needs
attention the deficit in the capacity
of the state to perform has to be
redressed, and the state reclaimed
and rebuilt.
This budget has made a fair start
to getting back on the path of stable
growth, while balancing the risk
of a continuing global slowdown,
but without broader participation,
rapid growth cannot be sustained.
Skill premiums on wages are rising
and sectors that grow at a rapid
pace, like information technology
and even construction soon find
themselves running out of steam.
Without inclusion, growth cannot
be high and without high growth,
it is difficult to find the resources
to provide the people with the
wherewithal for them to participate
in the high growth areas of the
economy. This budget has not
made sufficient effort to initiate this
virtuous cycle. q
(Email : pmukhopadhyay@gmail.com)

10 YOJANA March 2010

Budget 2010-11
A Pragmatic Mix of Politics
and Economics
I
ndia’s annual budgets
are followed with as much
curiosity and trepidation
as those of multi-starrer
Bollywood movies. While
pining for potential blockbusters
makes sense given their high
entertainment quotient, the same
yearning is difficult to explain for
budgets that are hardly more than
annual financial statements of the
In the context of the exchequer.
firm optimism voiced The nervous anticipation would
by the ‘Economic have still made sense if India were
still an overtly closed and controlled
Survey’ and the economy. Fiddling around with
pronouncements customs and excise duty rates for
such economies creates major
in the budget, the differences in short-term prospects
lack of measures for industries, producers, exporters
and importers. But one would have
for kick-starting expected India to come a long way
investment-led from such inward-looking postures.
In a considerably globalised
growth was rather economy like that of today’s
India’s, a couple of percentage
conspicuous point variations in duty rates should
The author is Head (Development and Programmes) and Visiting Senior Research Fellow with the Institute of South Asian
Studies (ISAS) in the National University of Singapore.
YOJANA March 2010 11
opinion
Amitendu Palit
not have much for whetting the
appetites of economic actors and
stock markets. This is because tax
rates are hardly the instruments for
deciding competitiveness in a world
where flow of goods and services
take place in a far unhindered
fashion.
In spite of these justifications,
the hype around budgets continues
to persist in India. The reason
is probably in India’s not yet
becoming as closely aligned to
global production systems as one
would have expected it to. Despite
two decades of economic reforms,
India’s indirect tax structure
(particularly customs and excise)
continues to exert a decisive say
on both cost of production as well
as consumer disposable incomes.
While the mean rate of customs
duties has come down and the excise
structure has been considerably
simplified, multiple rates and slabs
continue to prevail. There is little
wonder then that budgets and the
changes in duty rates that they
propose will impact economic
prospects. While this explains the
eagerness of industries to know
what the Finance Minister will
announce on budget day, academic
and intellectual curiosity stems
from a different perspective. Since
1991, budgets have come to be
taken as statements indicating shifts
in existing policies or introduction
of new ones. Thus policy-watchers
have every reason to watch out for
the budgets.
India’s latest budget presented
on 26 February 2010 was the
second by the Congress-led United
Progressive Alliance (UPA)
government in its second term.
Coming within nine months of the
previous budget, the backdrop to
the current one was much different
from the earlier one. The previous
budget had to chart a course out of
the rut that had set in. Riding high
on the favourable electoral verdict
and keen on overcoming the growth
deceleration, the budget for 2009-
10 had maintained fiscal expansion.
Revenue and fiscal deficits of the
central government were budgeted
to increase to 4.8 per cent and 6.8
per cent of GDP respectively in
2009-10. These were far higher
than their budgeted levels of 1.0
per cent and 2.5 per cent of GDP
respectively in 2008-09. However,
soon after the presentation of
the budget the economy began
producing evidence of returning
to robust health by clocking a
rather unexpected growth of 7.9
per cent in the second quarter of
2009-10. This was a trigger that
led many to question whether India
should continue to follow the path
of fiscal accommodation. With
the deficits reviving memories of
fiscal management difficulties in
12 YOJANA March 2010
early 1990s, doubts were being
raised over continuation of fiscal
consolidation.
The latest budget was expected
to address these doubts. It was also
expected to address the common
man (or ‘aam aadmi)’s concern
over unabated rise in prices. The
annual inflation of around 9.0 per
cent draws strength from alarming
increase in food prices. Cereals,
vegetables, pulses, fruits and milk –
the entire gamut of the consumer’s
food basket – has been experiencing
double-digit inflation. Price rises are
among the biggest downside risks
to India’s growth outlook. Indeed,
along with the fiscal and price
issues, as India went into ‘budget’
mode there were apprehensions
over the latest growth number for
the third quarter of 2009-10 that
showed a much more moderate
6.0 per cent. While this was not
entirely unexpected given the
setback to growth expected from
the aberration in the monsoons
earlier during the year, the growth
backdrop was now down to below
7.0 per cent for the year. The CSO’s
advance forecast of 7.2 per cent
at least conveyed the impression
that 7.0 per cent plus growth for
2009-10 was what the budget could
factor in.
What transpired on 26 February
was a somewhat evasive response to
the challenges of fiscal consolidation,
price rise and accelerating growth.
On fiscal consolidation the budget
pronounced several commitments.
These include shaping fiscal policy
in line with the recommendations
of the 13th Finance Commission
with an eye on steady withdrawal
from fiscal expansion; careful
monitoring of domestic public debt
as a proportion of GDP; introducing
the new Direct Taxes Code from
next year; and implementing a
nutrient-based fertilizer subsidy
scheme from 1 April 2010 that
was promised in the earlier budget.
Assuming revenue receipts to grow
by 18.1 per cent (courtesy 14.8 per
cent increase in net tax revenue)
and revenue expenditure by 11.7
per cent, the revenue deficit is
expected to be limited at 4.0 per
cent of GDP in 2010-11 from 5.3
per cent recorded in the revised
estimates 2009-10. Similarly fiscal
deficit is budgeted to be brought
down to 5.5 per cent in 2010-11
from 6.7 per cent recorded in the
revised estimate for 2009-10.
The more than one percentage
point reductions proposed in
revenue and fiscal deficits are
clearly efforts to return to the path
of fiscal consolidation that begun
with the Fiscal Responsibility and
Budget Management (FRBM)
Act. The views of the 13th
Finance Commission suggesting
a steady withdrawal from fiscal
accommodation has also been
taken on board in this regard.
However, the deficits are not being
reduced by reforming existing
structural distortions in government
expenditure. Rather they are being
addressed by mobilizing larger
taxes through higher customs duties
on imported petroleum products
and excise duties on domestic petrol
and diesel. Recommendations of
the Kirit Parikh Committee for
withdrawing subsidies and freeing
prices of domestic petroleum
products have been kept aside for
the time being. At the same time,
reorientation of fertilizer subsidies
in an efficient manner is a positive
step and is expected to generate
some much needed savings.
On the prices front, the budget
admitted that double digit food
inflation was a serious concern. It
also announced that the Centre is
consulting the states for taking steps
to improve the situation with an eye
on better food management. The
specifics in this regard, however,
were not mentioned. But intentions
to bring down the disparities between
farm gate, wholesale and retail
prices by freeing food retailing
is obviously what the situation
demands. Hopefully such measures
to improve supply management will
reduce prices over the long term
and encourage the Reserve Bank of
India to move towards easier interest
rates. The decision to increase excise
duties on petrol and diesel by taking
advantage of the current moderation
in global crude prices will have an
inflationary impact, however small.
Understandably, a further reduction
in petroleum subsidies on top of such
increase in excise rates would have
not only fuelled inflation further but
invited the ire of the middle class
salaried income earners. The budget
chose to relieve some hardships
faced by this group by enlarging the
‘nil’ income tax bracket till up to Rs
1.6 lakh that will benefit almost 25
million income tax payers. This was,
in some ways, ‘sugar coating’ the
bitter pill of price rise for lower and
middle income earners. Indeed, the
budget had little choice in this regard
given the imperatives to increase
consumer disposable incomes
in spite of hardening prices. The
outcome of this measure, however, is
to look for greater revenues through
customs, excise and service taxes for
compensating the loss in revenue
from personal income tax.
The politically ‘correct’ stance
of the budget was reflected in higher
allocations for rural development
and social sectors. These were again
expected given the UPA’s emphasis
on ‘inclusive development’. Setting
up a regulatory authority for the
coal mining sector, simplifying
qualifying definitions for foreign
equity in Indian enterprises,
producing a shorter and smarter
tax return form, setting up an
independent evaluation office (IEO)
for measuring progress on projects,
initiatives for clearing backlog
in pending litigations, setting up
the National Clean Energy Fund
and reiterating the government’s
commitment to the food security bill
were some of the other positives.
The disappointments, other than
absence of clear action agendas
for fiscal consolidation and price
reduction, were in postponing
the GST and absence of adequate
measures for accelerating demand
and growth. One wonders whether
the budget provided enough
ammunition for supporting the
optimism voiced in the latest
Economic Survey released on 25
February 2010 of India not only
figuring in the ‘rarefied domain of
double-digit growth’ in the near
term but also donning ‘the mantle
of the fastest-growing economy in
the world in the next four years’.
In the context of the firm optimism
voiced by the ‘Economic Survey’
and the pronouncements in the
budget, the lack of measures for
kick-starting investment-led growth
was rather conspicuous. q
(Email : e-mail : isasap@nus.edu.sg)

IMPROVING INVESTMENT ENVIRONMENT

l A number of steps have been taken to simplify the Foreign Direct Investment (FDI) regime.

l FDI policy to be made user-friendly by consolidating all prior regulations and guidelines into one
comprehensive document.

l Financial Stability and Development Council to be set up with a view to strengthen and institutionalize
the mechanism for maintaining financial stability. It would monitor macro prudential supervision of the
economy, including the functioning of large financial conglomerates.

l Banking sector to be strengthened with Rs.16500 crore as Tier-I capital. It would ensure that the Public
Sector Banks are able to attain a minimum 8 per cent Tier-I Capital by March 2011. Capital would also
be infused into the Regional Rural Banks (RRBs).

l RBI is considering giving some additional banking licenses to private sector players. Non Banking
Financial Companies could also be considered, if they meet the RBI’s eligibility criteria.

YOJANA March 2010 13

Budget 2010-11
A Tight Rope Walk Towards Fiscal
Consolidation
T
he major challenges
highlighted in the budget
2010-11 by the Finance
Minister are the following:
(a) to quickly revert to
the high GDP growth path of 9
per cent and then find the means
to cross the ‘double digit growth
barrier’. (b) to harness economic
growth to consolidate the recent
gains in making development
more inclusive, (c) to address
the weaknesses in government
systems, structures and institutions
Budget at different levels of governance.
reiterates the Given these challenges,
commitment to the Budget 2010-11 can best
be described as the budget for
introduce the a transition to a higher growth
path, greater fiscal consolidation,
Goods and Services indirect tax reforms through GST
Tax (GST) in the and implementation of direct tax
code and higher social sector
country, a spending. The growth impetus
landmark reform in of the budget is evident in the
increased development spending
indirect taxes and capital expenditure. As evident
The authors are Professor, and Associate Professor respectively, in National Institute of Public Finance and Policy, New
Delhi
14 YOJANA March 2010
View Point
Pinaki Chakraborty
Lekha Chakraborty
from the budget estimates, the
total expenditure proposed is
Rs. 11,08,749 crore. Although
the increase in terms of growth is
only 8.6 per cent over the pervious
year, but if we look at the growth
of plan and non-plan expenditure,
the growth in plan expenditure is
15 per cent while the growth in
non-plan expenditure is only 6
per cent over the previous year.
Such low growth of non-plan
expenditure is the indication
of the fact that salary induced
increase in expenditure due to
the implementation of 6th Pay
Commission’s recommendations
has been absorbed. However,
it is important also to note that
a sizeable part of the non-plan
expenditure is operation and
maintenance expenditure which
are developmental in nature and if
the growth is contained by cutting
down the developmental non-plan
expenditure, it would have adverse
implications in terms of growth.
 The estimated fiscal deficit at
Rs. 381,408 crore works out to be
5.5 per cent of GDP, which is 1.3
percentage point lower than that
for the year 2009-10. This in other
words, implies that government is
in the path of fiscal contraction and
an implicit exit from fiscal stimulus
has already started. Although, the
budget talks about the danger of
pre-mature exit in the recovery
phase of the economy, but the
level of contraction one sees in the
budget numbers do not substantiate
that view. It is important to have
long run fiscal sustainability in
mind in fiscal policy formulation.
But if the most important thing at
the moment is pushing the growth
trajectory up, fiscal expansion will
have to continue. It is important
to remember that even in the so-
called phase of fiscal consolidation
prior to the crisis year of 2008-
09, consolidation was primarily
driven by high revenue growth
not by cutting down productive
expenditure both at the centre as
well as in the states. In other words,
the focus of the budget should have
been more on revenue mobilization.
The direct tax bonanza given for
personal income tax is one of the
major reasons for the estimated
loss of revenues to the tune of
Rs. 26,000 crore, while the indirect
tax proposal is supposed to make
up for this loss and contribute
additional revenues to the exchequer
to the tune of Rs. 20,500 crore.
When the peak rate of income tax
is one of the lowest in our country,
is it appropriate to give further
relief to the income tax payers,
given huge revenue need for the
provisioning of public services and
additional spending in deficient
YOJANA March 2010 15
infrastructure. It also needs to be
emphasized that indirect tax by
nature is regressive and higher rates
of taxation of intermediate inputs
can fuel up further the already very
high inflationary pressure in the
economy.
Budget reiterates the commitment
to introduce the Goods and Services
Tax (GST) in the country, a land
mark reform in indirect taxes.
Given the problems of tax reforms
in a federal set up, the need of
the hour is to evolve a design of
GST which is non-distortionary,
acceptable to the states and protects
fiscal autonomy. The confusions
that are prevailing at the moment
in terms of design, mechanisms of
administrations of GST and rates
of tax, a time bound plan of action
is required including an explicit
compensation package for revenue
loss to reassure the states that their
revenue needs will be protected
during the GST regime. Budget
2010-11 should have used this
opportunity to have expanded the
service tax base to gain experience
for a generalized goods and services
tax. But selective services taxation
continues.
One of the critical areas where
budget probably could have done
a lot more is in the agricultural
sector and for rural development.
Although, the budget has announced
four pronged strategy to augment
agricultural growth, the expenditure
allocation is too little, especially
when one looks at the allocation
for extension of green revolution
in the eastern region of the country
with Rs. 400 crore. High allocation
of Ministry of Rural Development
(MORD) is primarily due to more
than Rs. 40,000 crore allocation
for NREGA. If we look at the
NREGA allocation alone, it is not
a major increase over the pervious
year. However, given the fact that
it is a demand based schemes,
these allocations will actually
translate in expenditure if the
demand for work is met effectively.
Although, NREGA is one of the
most successful public employment
programmes in creating jobs for
rural poor, still there are pockets of
deprivation in the country, where
implementation of NREGA is not
as effective when compared with
best performing districts. There is a
need for micro intervention in these
areas from the MORD to increase
NREGA participation and better
absorption of funds allocated to this
important Ministry.
If we look at other sectoral
allocations in the budget, the 37
per cent of gross budgetary support
for the plan is for the social sector
again through various flagship
centrally sponsored schemes. Given
the gap in literacy and health
outcomes across states, active state
intervention in these kinds of merit
goods is a must and a welcome step
taken. Although, the actual resource
requirement is much higher than
what has been allocated given the
overall fiscal constraint, the real
challenge in the social sector is the
utilization of funds. Various studies
on the CSS have shown that fund
utilization ratio is very low in states
that have low absorption capacity.
So supporting strategy is needed
for better absorption of funds
allocated and proper monitoring
and evaluation system for improved
outcome. q
(Email : pinaki@nipfp.org.in)
 YE-3/10/8

16 YOJANA March 2010

BUDGET 2010-11
Analysing Tax Proposals
The overall compliance
reforms presented
in the Budget are a
clear indication of the
Government's efforts to
increase transparency,
simplify compliances
thereby increasing
the tax base which
is also one of the key
objectives of GST
The authors are Executive Director, KPMG, Head of Tax, KPMG; and Executive Director, Indirect Tax, KPMG
respectively.
YOJANA March 2010 17
T
he Finance Minister
has, with his Budget for
2010-11, put India back
on the growth trajectory.
Finely balancing growth
measures with fiscal consolidation,
creating an improved environment
for investment and spending while
keeping a check on curtailing
inflation, the budget proposals have
caused positive ripples through the
industry.
Commitment to shrink the
fiscal deficit to 4% levels over the
next 3-5 years, targeted double
digit GDP growth, drawing a
roadmap for capping debt and
disinvestment focus will go towards
upgrading India’s sovereign rating
– an indication of which was
immediately seen through the
positive reaction on the Indian
bourses.
Proposals made in the Union
Budget 2010 reflect the FM’s
commitment to immediately revert
View Point
Vikas Vasal
Uday Ved
Pratik Jain
to the 9% growth path and cross
the ‘double digit growth’ barrier
through various fiscal consolidation
measures and growth which is
inclusive, ie by bringing about
reforms for poverty alleviation,
focus on enhancement of education
and healthcare, checking inflation
and boosting the farm and
infrastructure sectors.
The Budget has proposed
many reforms pointing in the
positive direction, key being to
the financial institutions and the
banking sector. Issuance of new
banking licenses to NBFCs and
private players, recapitalization of
PSU banks and rural banks will
help broadening and strengthening
banking reach to the rural and semi-
urban cities. Reaffirmation of the
intent to simplify and introduce a
comprehensive FDI regulation and
setting up of an apex-level Financial
Stability and Development Council
and the Financial Sector Legislative
Reforms Commission will provide
the necessary background for
building a robust financial sector
which in turn would play a key role
in nudging up India’s GDP growth.
Partial roll back on the stimulus
package by reverting to the 10%
excise duty rate on non-petroleum
products, increase in customs
duty for crude oil, hike in fuel and
diesel are some of the expected
withdrawals from the fiscal stimuli
package announced last year to
safeguard India from the impact of
the global recession.
Increase in fuel and diesel prices
has caused further inflationary
fears, however it remains to be
seen whether the FM rolls back
owing to political pressures. While
he could have retracted on larger
fiscal packages, the FM has clearly
taken short measured steps in the
direction towards the plan for fiscal
consolidation. This is indicative of
his philosophy on reforms being a
“process” rather than a “one-time
event”.
Streamlining of tax processes,
s e t t i ng up of computerized
processing centers, providing a
single window system for redressal
of grievances, rationalization
of TDS provisions, clarity on
conversion to setting up of LLP’s,
widening the service tax net, etc are
other positives of the Budget which
will should help broaden the tax net
for the finance ministry’s kitty.
Also the firm announcement of
the dates for roll-out of DTC and
GST are welcome moves, as the
same reflects a firm commitment
on the part of the Government for
implementation of these critical
legislatures, something which both
the domestic and international
corporate community was looking
to see.
18 YOJANA March 2010
We hoped to hear more on
the allocations for urban infra
development which is burdened
with the burgeoning demographics of
these cities. As of now the focus stays
on rural infrastructure development
and social welfare schemes. The
need of the hour of an economy
with growth potential such as ours is
robust infrastructure for far reaching
benefits. Also, the Government’s
commitment to “Education and
Healthcare” as a priority sector does
not seem to match with the allocations
provided in the Budget.
Through broadening of tax
slabs for individuals and reducing
surcharge for corporates, the FM
has aimed to put more money
in their hands to raise levels of
investment and spending. While it
is true that a significant portion of
the increased disposable incomes
would be directed in saving options,
a portion will also find its way
to meet consumption demand,
eventually increasing the buzz in
the slowed retail environment,
which had slid considerably in the
wake of the global recession.
The FM successfully managed
to keep the Indian economy afloat
during the global meltdown. Having
delivered a balanced and reformist
budget, encouraging domestic
growth, it now needs to be seen
how some of these proposals are
carried through and delivered. This
is especially so in the wake of fears
of a second recession in the Euro
zone. Till then, going by market
reactions, I would think the markets
are fairly satisfied.
Taking Care of the Common
Man
The rising inflation over the
last year has adversely impacted
the average household budget.
Therefore, the common man
had a lot of expectation from the
Hon’ble Finance Minister. At the
same time, the fear of rising fiscal
deficit over shadowed expectations
of any large scale tax concessions.
Nevertheless, some balancing act
has been done in the current year’s
budget.
There has been a long pending
demand to increase the tax slab
rates for individuals and reduce
the overall effective tax rate. Even
though, the minimum threshold
limit below which income is not
liable to tax has been retained
at the same level of Rs.1.6 lakh
for individuals, Rs.1.9 lakh for
women and Rs.2.4 lakh for senior
citizens, however, there has been a
broadening of the slabs. In general,
individuals earning income of Rs.3
lakh or more per annum are likely to
benefit in terms of tax savings.
Even though the expectation
was to increase the overall threshold
limit for investment under section
80C from Rs.1 lakh to Rs.2 lakh,
the government has however
decided to provide additional
deduction for investments made
in the infrastructure bonds for upto
Rs.20,000. This is a welcome move
as besides helping individuals save
some tax, this would also provide a
large pool of funds for infrastructure
development requirements.
In respect of individuals / SMEs
carrying on business, increase in
the overall threshold limit from
Rs.40 lakh to Rs.60 lakh to avail
of the concessional benefits under
presumptive taxation would help
reduce their compliance and
administrative costs as they would
neither be required to maintain
detailed books of accounts; nor
would they be required to get a
mandatory tax audit done. Similarly,
encouraging small companies
whose total turnover / gross receipts
do not exceed Rs.60 lakh in any
of the three preceding three years
to convert into LLP is again a
welcome move and would help
SMEs avail of the tax benefits like
exemption from MAT and dividend
distribution tax etc.
From macro economic
perspective as well, certain laudable
steps have been undertaken
by the government, which are
worth noting. To encourage the
people from unorganized sector
to voluntarily save for their
retirement, the government has
proposed to contribute Rs.1,000
per year to each new NPS account
opened in the coming financial year.
This benefit would be available
for persons who join NPS with a
minimum contribution of Rs.1,000
and maximum contribution of
Rs.12,000 per annum for the next
three years.
Social Security is indeed a matter
of concern in our country. A good
start has been made in this direction
by setting up a National Social
Security Fund for unorganized
sector workers covering weavers,
rickshaw pullers, etc. with an
initial corpus of Rs.1,000 crores.
It is expected that the scope of this
scheme would be enhanced over the
years to cover all individuals in the
unorganized sector.
Of course the increase in excise
duty rates, especially the increase
in price of petrol would adversely
impact the common man, however,
government had its own limitations.
Therefore, the budget is a mixed
YOJANA March 2010 19
bag of goodies with its own benefits
and loaded costs!
S i m p l i f y i n g I n d i r e c t Ta x
Compliance
Given the delay in GST
implementation, this year the
Hon’ble Finance Minister chose to
make the most of the opportunity to
rationalize the tax regime and make
it more tax payer friendly.
It is a common belief that IT
reforms in indirect tax administration
would reduce compliance cost,
lead to greater transparency etc.
In this regard, the Government
had already rolled Project ACES
(Automation of Central Excise
and Service tax) throughout the
country. On similar lines, a Mission
Mode Project to the tune of Rs
1133 Crore for computerization of
Commercial Taxes in states has also
been approved. These initiatives will
not only achieve greater transparency
in tax administration but would also
ensure a higher rate of compliance.
Another step in this direction
is the simplification/ expedition
of the current dispute resolution
mechanism, in that, the scope of the
Settlement Commission in respect
of Central Excise and Customs
has been expanded. Certain new
categories of cases would now
be admissible in its jurisdiction.
This would certainly speed up the
dispute resolution process in indirect
taxation which otherwise increase
the financial burden and also involve
substantial time cost of assesses
thereby causing undue hardship.
Moreover, the Finance Minister
has granted an upfront exemption
from ADC (Additional Duty of
Customs) on goods imported in
pre-packaged form intended for
retail sale along with few other
specified products. This would give
a significant respite to importers who
were facing substantial difficulties
in claiming a refund of this duty.
Further, with a view to ease
the refund process of accumulated
credit to exporter of services, certain
amendments in the definition of
export of service and procedures have
also been carried out. For instance,
scope of input/ input services used
by exporters for providing output
services/ manufacture of goods has
been widened. Further, total credit
available with the exporter has been
made eligible for refund instead of
limiting it to credit availed during
the month/ quarter (subject to the
ratio of Export turnover to Total
turnover). Moreover, the ambiguity
surrounding the scope of the phrase
‘provided from India and used
outside India’, which is an essential
condition for qualification as
export, lead to numerous litigation.
Therefore, by deleting this condition,
the Finance Minster has simplified
the criteria for qualification of
services as export in terms of the
Export Rules.
As always, there exist a list of
unfulfilled expectations (such as
extension in date of payment of
service tax, making best judgment
assessment orders appealable before
tax authorities and not just High
Court), nonetheless the overall
compliance reforms presented in
the Budget are a clear indication of
the Government's efforts to increase
transparency, simplify compliances
thereby increasing the tax base which
is also one of the key objectives
of GST. q
(Email : Uday Ved - uved@kpmg.com
Vikas Vasal - vvasal@kpmg.com
Pratik Jain - pratikjain@kpmg.com)
rail budget 2010-11
Fulfilling Social Responsibility
T
he Rail Budget for
2010-11, proposed by the
Union Railway Minister
Ms Mamata Banerjee in
Parliament on February
24 has maintained the trend of
the past couple of years, of being
passenger-friendly with an accent
on inclusive growth. As was widely
expected, the Minister has not raised
The future of this passenger fares or freight rates. The
budget underlines a commitment for
important mode of the perceptively improving passenger
country’s transport amenities, cleanliness, quality of
catering, safety and punctuality.
depends on a really The measures in this direction cover
efficient management a reduction of Rs. 100 per wagon
in freight charges for food-grains
of resources backed for domestic use and kerosene,
by sound reform ensuring availability of clean
drinking water and Janta Aahar,
measures which can developing 10 more World Class
ensure sustainability Stations as also extending the list
of Adarsh Stations, standard ramps
of the system and , earmarked parking lots, specially
foster growth that is designed coaches in each mail and
express train, lifts and escalators
truly inclusive and trolleys with attendants in a
The author is a Senior Journalist, New Delhi.
20 YOJANA March 2010
overview
G Srinivasan
phased manner for the physically
handicapped passengers and
senior citizens, multifunctional
complexes in 49 stations, a doctor
in long distance trains, ambulance
service in 7 stations, security for
women passengers, 50 more mobile
ticketing vans (Mushkil Aasan),
computerized ticketing facilities in
5000 post offices, special trains to
carry perishable products like fruits,
vegetables, fish, introduction of
more Durontos-- non-stop speedy
trains connecting cities across the
country, and launch of special
tourist trains
An important initiative is the
priority proposed for network
expansion with a target of 1000
route kms being fixed for 2010-11 as
against 250 kms for 2009-10. This
also needs to be contrasted with the
glacial pace of route km expansion
which inched up from 53,596 km in
1950 to 64,015 km over a long span
of 58 years, an annual average of
just 180 kms. This would definitely
 Railway Highlights
l No increase in passenger fares and freight tariffs.
l E-ticket vans (Mushkil Aasan) to be extended to Government Medical College Hospitals, Courts,
Universities, IT hubs, IITs and IIMs
l SMS updates of reservation status and movement of wagons
l Ticket centres to be opened at district headquarters and village panchayats
l 100% concession for cancer patients alongwith an escort
l Six clean bottling plants to provide cheaper, clean drinking water to passengers
l 12 companies of women RPF personnel, ‘Mahila Vahini’, for the security of women passengers
l No examination fee for women, minority and economically backward class candidates for Railway
Recruitment Boards’ exams
l Question papers in local state languages besides Hindi, Urdu and English,
l 117 new train projects to be flagged off by the end of March 2010
l 52 long distance express trains and 28 passenger trains to be introduced
l Special trains to mark Rabindranath Tagore’s 150th birth anniversary, for ladies, for uniformed persons
and for tourists
l Double-decker coaches to be introduced in two trains each from Delhi and Kolkata
l 94 stations to be upgraded as Adarsh Stations, 10 more stations to be upgraded as World Class
Stations
l Automatic fire and smoke detection system to be introduced in 20 trains
l All the unmanned Level Crossings (LCs) to be manned within five years
l Laying of 15000 Km Optical Fibre Cables through PPP
l More money to improve passenger amenities – Rs.1,302 crore in comparision to Rs.923 crore in 2009-
10
l Railway revenue through branding/advertising to go up from Rs.150 crore to Rs.1,000
l Special Task Force to clear investment proposals within 100 days
l Concession in freight charges for food-grains and domestic use kerosene
l Kisan Vision Project for manufacturing refrigerated containers
l Allotment of iron ore rakes would be accessible through the web. RFID technology to be introduced
for tracking of wagons
l Multi-level parking complexes through PPP route
l 93 new multi-functional complexes to be developed
l National High Speed Rail Authority proposed to plan high speed rail corridor
l Houses for all rail employees in next 10 years
l 522 hospitals, 50 Kendriya Vidyalayas, 10 residential schools, model degree colleges, technical and
management institutes for railway employees

YOJANA March 2010 21

be a boon to industry which relies
on this arterial mode of transport
for carrying industrial goods. A
target has been set to add 25,000
km of new lines in next 10 years.
Surveys for updating 114 projects
for connecting backward areas are
to be updated and surveys for 55
new lines will be taken up during
the year.
The Minister announced a
greater role for the private sector
in the railways’ policy of public-
private partnerships (PPP). She
announced a Special Task Force to
recommend a business model to cut
down administrative and procedural
delays, both internal and external so
that clearance of projects in 100
days is feasible. Ms. Banerjee said
“the need of the hour is to develop
new business models and invite
domestic investments through
PPP”. She also identified a host of
areas for PPP projects such as world
class railway stations, port and
mine connectivity lines, auto hubs
for ancillary industries, container
terminal operations, manufacturing,
and doubling of lines among others.
According to Railway Board
Chairman Mr.S.S.Khurana, the
railways obtained PPP investments
of Rs 4462 crore in 2009-10. A
National High Speed Rail Authority
will be set up for planning, standard
setting and implementing these
projects, the budget noted. She
also identified new dedicated
corridors including a dedicated
high speed passenger corridor for
development in the coming years.
The dedicated passenger corridor
on the lines of the freight corridor
(Diamond Rail Corridor) will be
christened as Golden Rail Corridor.
Although both the western and
22 YOJANA March 2010
eastern dedicated freight corridors
have not taken off in the past
three years, “the loan with Japan
International Cooperation Agency
(JICA) for the western dedicated
corridor is likely to be signed next
month”, the Minister said. Beside
fast-tracking the dedicated freight
corridor project on the eastern and
western seaboard, the rail budget
also promises to start groundwork
on four more freight corridor
projects to criss-cross the country.
They include north-south (Delhi,
Haryana, UP, MP, Maharashtra,
Andhra Pradesh, and Tamil
Nadu), east-west (West Bengal,
Jharkhand, Orissa, Chhattisgarh,
and Maharashtra), east-south (West
Bengal, Orissa, Andhra Pradesh)
and south-south (Tamil Nadu,
Andhra Pradesh, Karnataka and
Goa) and preliminary engineering-
cum-survey work will be taken up
this year.
The Rail budget also proposed
laying of 15,000 kms optical fibre
cables (OFC) through PPP mode to
cover the entire rail network and the
OFC infrastructure will be utilized to
extend broadband services with the
last mile connectivity on PPP basis
to urban and rural areas. In a bid to
get over the shortage of passenger
coaches, the Railways propose
to set up new coach factories at
Rae Bareilly, Kancharapara and
Palakkad under the PPP route.
The work on the loco factories at
Madhepura and Marhora is also
making right headway and it is also
proposed to set up a new diesel
multiple units (DMU) factor in joint
venture or PPP mode at Sankrail.
The Rail budget proposes an
annual plan outlay of Rs 41,426
crore for the next fiscal .Out of
this allocation, Rs.4,411 crore
have been proposed to achieve the
target of 1,000 kms. for new lines
and Rs.1,302 crore for passenger
amenities. The outlay would be
financed through gross budgetary
support (GBS) of Rs 15,875 crore,
diesel cess of Rs 877 crore, internal
resources of Rs 14,523 crore and
extra budgetary resources (EBR) of
Rs 10,151 crore including market
borrowing through Indian Railway
Finance Corporation (IRFC) of Rs
9120 crore.
The freight loading volume-the
bread-winner of the railways, which
also cross-subsidizes the passenger
fare, including that for commuters
of suburban services, fixed for fiscal
2010-11 is 944 million tonnes (MT)
This is an increment of 54 MT over
the revised estimates for 2009-10.
The number of passengers is likely
to grow by 5.3 per cent and gross
traffic receipts is estimated at Rs
94,765 crore, which is Rs 6490
crore more than the current fiscal.
The dividend payable to general
revenues by the Railways for next
fiscal is kept at Rs 6608 crore.
Considering the fact that loading
target of 882 MT for the current
fiscal is likely to be surpassed by 8
MT, analysts argue that the target
of 944 MT for 2010-11 is below the
incremental growth of 57 MT likely
to be compassed in the current
fiscal. They say that the White
Paper on railways released recently
laid the accent that the Railways
freight growth should normally
have a more-than-unity elasticity
with gross domestic product (GDP)
as it should be 1.25 times. From this
angle, the target for next fiscal fails
to meet this desirable level.
Critics of the rail budget contain
that with the losses on operating
coaches going up to nearly Rs
14,000 crore, the impact of the
Sixth Pay Commission at Rs 55,000
crore and the need to garner internal
resources for a three-fold increase in
the Annual Plan outlay as envisaged
in the Vision 2020 document, the
anomalies and aberrations in the fare
structure would need to be genuinely
addressed. But the rail minister
did not make a start in this regard,
despite the ill-health of the system.
They say the fare-to-freight ratio in
India is 0.3, compared with 1.2 in
China and with inert passenger fares
for the past few years, the Railways
may be under financial stress in the
coming years. The budget puts all
its eggs in the fond belief basket that
industry will chip in with a greater
role for itself in various PPP projects
for commercially remunerative
activities. But the privatization
of the system whether in the core
area of manufacturing segment or
building coaches or wagons or rail
lines, or in the non-core areas of
using surplus land vested with the
system for commercial exploitation
for revenue augmentation has been
proceeding at a pathetically poor
pace. This needs to be contrasted
with the private malls and fancy
and departmental stores that are
springing up across the major cities
in shorter span, providing a variety
of choice and competitive price to
consumers.
For all the new initiatives and
projects the budget unveiled, the
Indian Railways finances today are
not in the pink or robust enough to
fritter away its sparse resources in
a spate of fresh projects or socially
desirable programmes. The system is
bereft of a surplus for the network’s
rehabilitation and expansion. The
operating ratio, better known as
operating margin in commercial
accounting, is likely to improve
marginally to 92.3 per cent in 2010-
11 from the current year’s 94.7 per
cent. This also is predicated on the
gross traffic receipts rising 7.3 per
cent with passenger earnings growing
8.6 per cent and circumscribing the
expenditure increase to 4.4 per cent.
All these calculations might go awry
given the imponderables of volatile
crude prices and the attendant spurt
in diesel cost or other obstacles
in the economy. Though the rail
budget turns out to be a blessing
for rail users, both passenger and
industry in the short-term, it has
not made even a start to address
some of the structural problems
plaguing the railways for far too
long. Unless some reform measures
are put in place to keep the system
viable, we may end up squandering
resources in sundry projects or
populist programmes. The future of
this important mode of the country’s
transport depends on a really efficient
management of resources backed by
sound reform measures which can
ensure sustainability of the system
and foster growth that is truly
inclusive. q
(Email : geeyes34@gmail.com)

RAILWAYS TO RUN A COMMONWEALTH EXHIBITION TRAIN

T
o strengthen the present sports infrastructure, the Railway Ministry proposes to set up five Sports
Academies at Delhi, Secunderabad, Chennai, Kolkata and Mumbai. It is also proposed to provide
astro-turfs for the development of hockey at more places. The Railway Budget also provides for
increased employment opportunities to sports persons. To mark the Commonwealth Games 2010 to be held
in New Delhi, the Railways proposes to run a Commonwealth Exhibition Train to spread the message.

KisaN-Vision Project

S
pecial trains will be run to carry perishable products like fruits and vegetables, fish etc from identified
production clusters to consumer centres, by way of maintaining quality and freshness of perishable
produce. Railways will encourage creation of facilities of setting up cold storage and temperature
controlled perishable cargo centres and its transportation through public private partnership mode. For this
purpose, Railways will associate professional agency to identify locations and designing proper services.

YOJANA March 2010 23

 YE-3/10/7

24 YOJANA March 2010

Economic Survey
Upbeat on Growth, Concern over Inflation
T
he annual Economic
Survey, the tabling of
which precedes the
annual Union Budget in
Parliament, throws hints
on the nature of budget proposals.
The latest Survey 2009-10 was no
exception.
Presented by the Finance Minister
Mr Pranab Mukherjee, the Survey
was euphoric over the prospects of
Indian economy reaching double
digit growth by 2014. It took note
The Survey of the fact that the impressive growth
maintained by India even after the
emphasises the global slowdown since September
need to bring in 2008 was due to the economy's strong
fundamentals as well as the stimulus
the much-awaited packages given to industry.
goods and services The optimism on the economic
tax (GST), to growth front, no doubt, flows
enable an increase from the revival in investment and
private consumption demand, the
of revenues impressive growth in exports in
for the states November and December 2009
and a remarkable turnaround in the
The author is Editorial Consultant, The Statesman, New Delhi and Former Deputy Editor, PTI.
YOJANA March 2010 25
Overview
R C Rajamani
core infrastructure sector. After a
setback, agriculture is gradually
getting back to the projected path.
The turnaround came in the
second quarter of 2009-10 when
the economy grew by 7.9 per cent,
year-on-year basis. The CSO
estimates forecast 7.2 per cent
growth in GDP with industrial
output growing at 8.2 per cent and
service sector at 8.7 per cent. The
recovery is particularly impressive
despite a decline of 0.2 per cent in
agriculture output primarily due to
sub-normal monsoon.
The Survey notes with
satisfaction that several factors
that have emerged from the
performance of the economy in
the last 12 months augur well for
the Indian economy. The gross
domestic savings as a percentage
of GDP stands at 32.5 per cent in
2008-09 while the gross domestic
capital formation stands at 34.9
per cent. These figures compare
favourably with some of the
fastest growing economies. It
also underlines the significance of
the presence of Indian corporations
in the global market place. The
Survey is hopeful that the economy
will go back to 9 per cent growth
rate in the medium term. This
follows the revival in investment
and private consumption demand
impressive growth in exports in
November and December and
remarkable turn around in Core
infrastructure sectors.
Bold Forecast
The Survey is emphatic that the
country has bounced back from
the meltdown and is on its way to
returning to the robust growth path
of around 9 per cent seen before
the global crisis slowed it down
in 2008. For 2010-11, the GDP is
expected to grow around 8.5 per
cent, with a full recovery breaching
the 9 per cent mark in 2011-12. It
is pertinent here to recall that from
2003-04 to 2007-08, the Indian
economy reported over 9 per cent
annual growth.
Making the bold forecast that
the country’s GDP could grow to
double digits, making India as the
fastest growing economy in the
world by 2014, the Survey also
throws some hints about further
stimulus for the exporters in the
light of what it sees as “fragile
prospects” of recovery in global
markets. Elaborating its optimism
on India’s growth, the Survey says:
"It is entirely possible for India to
move into the rarefied domain of
double-digit growth and even don
the mantle of the fastest-growing
26 YOJANA March 2010
economy in the world within the
next four years.”
"The Indian GDP can be expected
to grow around 8.5 percent (plus or
minus 0.25 percent), with a full
recovery, breaching the 9 percent
mark in 2011-12.” "In the medium
term, it is reasonable to expect that
the economy will go back to the
robust growth path of around 9
percent that it was before the global
crisis slowed it down in 2008."
The Survey lists several
reasons to suggest that the India's
economic fundamentals remained
strong, including high savings
and investment rate, the arrival
of home-grown companies in the
global space and the dream run
for the services sector. It, however,
hastens to note that spiralling prices
remain “the immediate concern”.
Despite some improvement in global
trade environment, the downside
risks makes it imperative for the
government to reform policies
concerning imports as well.
The downside risks for world
and the Indian trade lie in the
fact that though the fall has been
arrested, both output and trade
recoveries are still fragile. It is
because of the fact that the recovery
has been pumped up by the stimulus
given by different countries,
including India. Suggesting some
fundamental policy changes for
the merchandise sector,the survey
lists tariff reforms by lowering
the peak duties (custom) from the
present 10 per cent to 7.5 per cent,
reductions of tariffs on all capital
goods to a uniform 3 per cent and
further reduction in excise duties
to make exports and industry
competitive.
Future of Stimulus
The survey points out that the
current rebound in growth called for
the gradual withdrawal of the $37-
billion stimuli since December 2008
to help the country weather the ills
of global slowdown. "The largely
structural nature of fiscal deficits in
India, the levels of recovery in the
economy and the sustainability of
the recovery without fiscal stimulus
call for resumption of process of
fiscal consolidation in a gradual
manner."
At the same time, agriculture
continues to be the cause for concern
even as it remains the mainstay of
the Indian economy, with the bulk of
its workforce dependent on farming,
either directly or indirectly. "There
is need to undertake serious policy
initiatives to reach the government's
target of sustained 4 percent growth
in this sector."
The Survey also mentions that
core industries such as power, coal and
other infrastructure such as ports and
roads are also reviving. The available
evidence points to a steady revival in
the flow of investible resources. The
Survey has emphasised the need to
develop infrastructure to complement
and sustain the economic growth
momentum.
Food Inflation
The Survey also expresses
concern over rising prices, especially
in essential items that has pushed the
country's annual food inflation, based
on wholesale prices, to nearly 18
percent in recent weeks. "As of now
the outlook for inflation is conditioned
by supply-side pressures in the near
term," said the survey while also
making a veiled criticism in the
manner in which the government
has sought to tackle rising prices.
"Making available adequate and
timely quantities of these items and
at different locations to overcome
supply side mismatches is the real
challenge," the survey notes.
While there is unease over rising
inflation in the economy, the Survey
also cautions that sustaining current
levels of domestic petroleum prices
in the scenario of rising international
crude oil prices may not be viable
for long from the fiscal side. At the
same time, an increase in domestic
petroleum prices would have its
impact on inflation levels, the
Survey notes.
Finance Commission
While applauding that the 7.2 per
cent growth estimation for the year,
supported by a better than expected
performance in agriculture, it has
expressed concern over the fiscal
deficit and control over inflationary
pressures. It says this requires the
government to consider a number
of aspects such as:
l Recommendations of the XIII
Finance Commission with regard
to reduction in centrally sponsored
schemes, reduction in the target
of debt to GDP ratio, elimination
of revenue deficit, thereby
returning to fiscal prudence,
early implementation of the
Goods and Services Tax (GST)
and support to state governments
in this respect. The Survey says
YOJANA March 2010 27
that the recommendations of the
Thirteen Finance Commission
have to be taken on board in
shaping the fiscal policy for
2010-11 and in the medium term.
The Finance Commission has
recommended a calibrated exit
strategy from the expansionary
fiscal stance of 2008-09 and
2009-10. It has also suggested
that the revenue deficit of the
centre needs to be progressively
reduced and eliminated followed
by emergence of revenue surplus
by 2014-15.
l Reforms in tax administration,
which should lead to more
robust revenue collection;
l Overcoming structural delays in
implementation of infrastructure
projects;
l Reforms in and support to the
farm sector, by way of innovative
investment in irrigation and
water resources, enhanced rural
infrastructure and promotion of
research and development in
agri services;
l Increased focus on education
and research, by restructuring
the sector and tapping private
resources;
l Addressing climate change,
specifically relating to water
resources, health, coastal zone
infrastructure, forests, etc.
l Implementing schemes to bring
about more inclusive growth and
reduction of poverty, resulting
in a larger relative share in the
overall growth
Advocating independent
thinking on second generation
reforms, the Survey calls for greater
flexibility in the labour market,
aimed at “creating market conditions
that result in greater demand for
labour.” The Survey also calls
for a reduction of petroleum and
fertiliser subsidies and investment
in agricultural research and higher
education aimed at increasing
land and human productivity. The
Survey also recommends bringing
down peak Customs tariff from 10
per cent to 7.5 per cent.
The Economic Survey has asked
the government to move to a system
of direct transfer of subsidies for a
targeted population, as the impact
of product-based subsidies given
for fertiliser production and use,
food grain, diesel and kerosene is
questionable. It also presses for
decontrol of prices, saying it is a
mistake to couple a subsidy scheme
with price control.
States' Fiscal Deficit
The Survey indicates the
combined fiscal deficit of states
would touch 3.2 per cent of Gross
Domestic Product in 2009-10, the
year their borrowing limits were
enhanced to counter the impact of
the global economic crisis.
The combined fiscal deficit of
the states rose from 1.4 per cent of
GDP in 2007-08 and 2.6 per cent
in 2008-09. With the enhancement
of the borrowing limits of the state
by 100 basis points, the deficit is
expected to rise to 3.2 per cent of
GDP this year.
The limit had been raised to
enable each state to borrow up
to four per cent of its gross state
 Highlights of Economic Survey 2009-10
l Economy likely to grow by up to 8.75 per cent in 2010-11
l Full recovery; return to 9 per cent growth in 2011-12
l Broad recovery gives scope for gradual stimulus roll back
l High double-digit food inflation in 2009-10 major concern
l Signs of food inflation spreading to other sectors
l Farm & allied sector production falls 0.2 percent in 2009-10
l Serious policy initiatives needed for 4 percent agriculture growth
l Moots direct food subsidy via food coupons to households
l Favours making available food in open market
l Favours monthly ration coupons usable anywhere for poor
l Gross fiscal deficit pegged at 6.5 percent of GDP in 2009-10
l India 10th largest gold holding nation at 557.7 tonnes
l Exports in April-December 2009 down 20.3 percent
l Imports in April-December 2009 down 23.6 percent
l Trade gap narrowed to $ 76.24 billion in April-December.
l 32.5% savings & 34.9% investment (of GDP in 2008-09) put India in league of world’s fastest growing
nations.
l Initiates steps to boost private investment in agriculture
l Wants credit available at reasonable rates on time for private sector to invest in agriculture
l Slowdown in infrastructure that began in 2007, arrested
l Domestic oil production to rise 11 per cent in 2009-10
l Gas output up 52.8 per cent to 50.2 billion cubic meters with RIL starting production
l India world’s 2nd largest wireless network with 525.1 million mobile users
l Virtually every second Indian has access to phone
l Auction for 3G spectrum to provide existing and foreign players to bring in new technology and
innovations.

domestic product (GSDP). The
Union government had also revised
the fiscal deficit target for states for
2009-10 from 3 per cent to 4 per cent
of their respective GSDP. As a result,
during the current financial year, the
amount raised by state governments
aggregated to Rs 105,937.7 crore
till December 2009, as compared to
Rs 52,842.7 crore raised during the
corresponding period last year.
The Survey emphasises the need
to bring in the much-awaited goods
and services tax (GST), to enable
an increase of revenues for the
states. It also suggests movement
on fiscal consolidation, including
cuts in spending to bring these in
line with revenue. It recommends
a review of the Public Distribution
System (PDS), with the subsidy to
be given directly to the consumer,
who could then buy the intended
product directly from the normal
market.
“The introduction of VAT (Value
Added Tax) by states resulted in
good growth in states’ own tax
revenue in the last few years,”
the Survey notes. Till December
2009, an amount of Rs 2,558
crore had been released as central
compensation for revenue loss on
account of VAT. Similarly, about Rs
6,000 crore was released to the states
till December 2009 as part of the
compensation to phase out Central
Sales Tax. q
(Email : rajamanirc@gmail.com)

28 YOJANA March 2010

 YE-3/10/4

YOJANA March 2010 29

BUDGET 2010-11
ANALYSIS

Pushing Agricultural Growth

Surinder Sud

T
he agriculture security”, declared the Finance
sector seems poised for Minister, Mr Pranab Mukherjee, in
a major growth push his budget speech on February 26,
thanks to an increase of 2010 in the Lok Sabha. He proposed
nearly 21.6 per cent in the further infusion of technology in
Central Plan outlay for agriculture this sector to augment agricultural
and allied sectors proposed in the production.
Union Budget for 2010-11. This
The Central Plan outlay for
is the largest hike in budgetary
agriculture and allied sectors has
allocation for this sector in recent
been put at Rs 12,308 crores for
years. Besides, the budget also
2010-11, up by Rs 2,185 crores,
proposes a four-pronged strategy to
or 21.58 per cent, from the 2009-
spur agricultural growth and tackle
10 revised estimates (RE) of
supply side constraints that have
Rs 10,123 crores. The bulk of the
been responsible for high prices
additional allocation has gone to
of food products in recent months.
the Department of Agriculture and
The gains Several fiscal incentives have been
mooted in the budget to impart
Cooperation and the Department
already made sustainability to agriculture and
of Agricultural Research and
Education. The outlay for the
introduce reforms in the marketing
in the green of the food products to reduce the
Department of Agriculture and
Cooperation has been stepped up
revolution wide gap in the prices received by
from Rs 7,018 crores in 2009-
the producers (farmers) and those
areas have to be paid by consumers.
10 (RE) to Rs 8,280 crores for
2010-11. This marks an increase
sustained through “The agriculture sector occupies of Rs 1,262 crores. Similarly,
conservation centre-stage in our resolve to
promote inclusive growth, enhance
the Department of Agricultural
Research and Education has been
farming rural incomes and sustain food allocated Rs 2,300 crores for 2010-

The author is a veteran agriculture journalist serving as Consulting Editor of the Business Standard.

30 YOJANA March 2010

11, against Rs 1,760 crores for
2009-10 (RE), marking a hike of
Rs 540 crores. The Department of
Animal Husbandry and Fisheries
has also been provided Rs 1,300
crores as the Central plan outlay for
2010-11, up Rs 370 crores from Rs
930 crores in 2009-10 (RE).
The four-pronged strategy
for boosting farm production
includes:
a) I n c r e a s e i n a g r i c u l t u r a l
production;
b) Reduction in wastage of farm
produce;
c) Credit support to farmers; and
d) Thrust to food processing
sector.
The first component of this plan
aims at boosting farm productivity
and production by extending the
green revolution to the eastern
region of the country where the
agricultural production had not risen
by as much as in the north-western
and some southern states in the first
phase of the green revolution. This
objective is proposed to be achieved
with the active involvement of Gram
Sabhas and the farming families in
the states of Bihar, Chhattisgarh,
Jharkhand, eastern Uttar Pradesh,
West Bengal and Orissa. A sum of
Rs 400 crores has been earmarked
for this purpose. Besides, the budget
moots to take up 60,000 “pulses and
oilseed villages” in predominantly
rainfed areas for concentrated
intervention for boosting the output
of pulses and oilseeds with a view
to narrowing the wide gap in the
indigenous production and actual
requirement of these essential food
items. The high import dependence
for meeting this demand and the
YOJANA March 2010 31
limited availability, especially of
pulses, in the international market
has led to the unprecedented spurt in
the domestic prices of these items.
Programmes related to rain water
harvesting, watershed management
and soil health improvement would
be taken up under the pulses and
oilseeds villages initiative as part of
the Rashtriya Krishi Vikas Yojana.
An outlay of Rs 300 crores has been
fixed for 2010-11 for this scheme.
Indeed, the budget has not
disregarded the green revolution
areas which have, in recent years,
started showing signs of fatigue as
reflected in flagging soil fertility
and stagnation in crop productivity.
“The gains already made in the
green revolution areas have to be
sustained through conservation
farming, which involves concurrent
attention to soil health, water
conservation and preservation of
biodiversity”, asserted the Finance
Minister in his budget speech. “I
propose an allocation of Rs 200
crores for launching this climate
resilient agriculture initiative”, he
added.
To reduce wastages in storage as
well as in operations of the existing
food supply chains, the budget
proposed extension of guaranteed
period for hiring godowns from
the private parties for the Food
Corporation of India (FCI) from the
present 5 years to 7 years. Besides,
external commercial borrowing
has been allowed to raise resources
for setting up cold storages or cold
room facilities, including farm
level pre-cooling systems, for
preservation or storage of products
of agriculture and allied fields, such
as fish and meat. As part of the same
initiative, the budget has proposed
opening up of the retail chain
and import duty concessions, in
addition to ‘project import status’,
for setting up mechanised handling
systems for foodgrains and sugar in
mandis or warehouses. Service tax
exemption has been provided for
installation and commissioning of
such equipment.
The aim of marketing reforms
mooted in the budget is to facilitate
coming up of a strong supply chain
for perishable farm produce so
that it reaches the consumption
and processing centres promptly.
Creation of infrastructure and
induction of technology to convert
such produce into value-added
products will also be encouraged.
Alluding to a recent statement of
the Prime Minister, Dr Manmohan
Singh, in which he had stated:
“We need greater competition and
therefore need to take a firm view
on opening up of the retail trade”,
the Finance Minister said that this
will help bring down considerable
difference between the farm gate
prices, wholesale prices and retail
prices.
To ensure greater flow of
institutional credit to agriculture,
the budget raises the target for such
credit for 2010-11 to Rs 3,75,000
crores from Rs 3,25,000 crores in
2009-10. The Regional Rural Banks
(RRBs), which play a significant
role in meeting the credit needs of
rural people, have been provided
higher capital support to enable them
perform their job more effectively.
These banks were last capitalised
in 2006-07. As a measure of relief
for the farmers, the period for the
payment of the farm loans has
been extended by 6 months, from
December 31, 2009, to June 30,
2010, in view of the recent drought
in some parts of the country. Besides,
the subvention for timely repayment
of crop loans has been hiked from 1
per cent to 2 per cent for 2010-11.
Thus, the effective rate of interest
for the farmers repaying their loans
on time will work out to 5 per cent
per annum, instead of the usual 7
per cent.
The budget has recognised, albeit
tacitly, the role the food processing can
play in value-addition of farm products,
reduction in their wastages and
extension in their shelf life. By doing
so, it ensures year-round availability
of the seasonal produce and, thus, has
a sobering influence on market prices.
That is why the promotion of food
processing has been included in the
four-pronged agricultural strategy. The
budget has proposed setting up of five
more mega food parks, in addition to
the 10 such parks already being put up,
to facilitate availability of state-of-the-
art infrastructure for food processing
sector.
This apart, the budget has
proposed several duty concessions
as well. The concessional import
duty on specified machinery for use
in the plantation sector, introduced
in 2003 to last till July 2010, has
been extended till March 2011. This
is expected to provide sufficient
time for this sector to achieve the
desired objective of mechanisation
of key operations. The budget has
also mooted concessional customs
duty of 5 per cent on specified
agricultural machinery which is at
present not manufactured in India.
Full exemption from excise duty has
been granted to trailers and semi-
trailers used in agriculture. In the
field of service tax, full exemption
has been granted to testing and
certification of crop seeds as well
as to transportation of cereals and
pulses by road. The transportation
of these items by rail is already
exempted from service tax.
The Finance Minister referred
to the nutrient based subsidy policy
for fertilisers, which is scheduled
to come into force from April 1,
2010, and asserted that this would
promote balanced fertilisation
through new fortified products and
focus on extension services by the
fertiliser industry. This will, in turn,
enhance agricultural productivity
and, consequently, ensure better
returns to the farmers. “Over time,
the policy is expected to reduce
volatility in the demand for fertiliser
subsidy in addition to containing the
subsidy bill”, the finance minister
said. “The new system will move
towards direct transfer of subsidy to
the farmers”, he asserted and added
that the government would ensure
that the retail prices of the fertilisers
remained near the present level in
the transition year, 2010-11, for
the subsidy system to move from
product-based to nutrient-based.
Significantly, the budget has
not forgotten the women farmers
whose number is growing fast and
who need to be suitably empowered
to survive in such a harsh and
risk-prone occupation. A “Mahila
Kisan Sashaktikaran Pariyojana”
is proposed to be launched for this
purpose. The budget has set apart
Rs 100 crores for this initiative as a
sub-component of the National Rural
Livelihood Mission. q
(Email : surinder.sud@gmail.com)

STRENGTHENING TRANSPARENCY AND PUBLIC ACCOUNTABILITY

• Proposal to set up a Financial Sector Legislative Reforms Commission to rewrite and clean up the
financial sector laws to bring them in line with the requirements of the sector.
• Rs.1,900 crore allocated for the Unique Identification Authority of India.
• A Technology Advisory Group for Unique Projects (TAGUP) is proposed to be set up under the
Chairmanship of Shri Nandan Nilekani for creation of reliable and secure IT projects.
• Defence gets an allocation of Rs.1,47,344 crore. As a one time confidence building measure in Jammu
and Kashmir about 2000 youths will be recruited as constable in five Central Para-Military forces in
2010.
• Adequate funds will be made available to support the action plan to be prepared by the Planning
Commission for development of 33 left wing extremist affected districts.
• An Independent Evaluation Office is to be set up in Planning Commission to undertake impartial
and objective assessment of various public programmes and improve the effectiveness of public
interventions.
• A National Mission for Delivery of Justice and Legal Reforms to be set up.

32 YOJANA March 2010

BUDGET 2010-11
Budget and Rural Development
H
igh growth a n d
economic development
serve no purpose if they
do not percolate down
to over six lakh villages
in India where majority
of the over one billion population
live. This is perhaps a major theme
of this year’s budget which has
laid stress on Agriculture and Rural
Development.
Finance Minister Pranab
Mukherjee has made it amply clear
There is a that India cannot return to high
growth path of over nine per cent
clear direction in the next two years without the
in the budget to farm sector growing by 4 per cent
annually. That being the case he has
ensure that rural rightly taken a number of initiatives
in the budget to push farm sector
India also develops growth and rural development.
and has facilities “The Agriculture sector occupies
centre-stage in our resolve to
comparable promote inclusive growth, enhance
rural incomes and sustain food
to those of security. To spur the growth in this
urban India in sector, the Government intends
to follow a four-pronged strategy
times to come covering agriculture production;
reduction in wastage of produce;
The author is Economic Affairs Editor, TickerPlant News.
YOJANA March 2010 33
Overview
K R Sudhaman
credit support to formers; and
thrust to the food procession
sector,” Mukherjee said outlining
the strategy while presenting the
budget in Parliament on Feb 26.
Green Revolution which
changed for good rural Punjab,
Haryana, and Western Uttar Pradesh
in the sixties and subsequently parts
of Maharashtra and Southern India
has not taken roots in Eastern
India. Rightly the Finance Minister
provided Rs 400 crore to extend
green revolution in the eastern
region.
“The first element of the strategy
is to extend the green revolution to
the eastern region of the country
comprising Bihar, Chattisgarh,
Jharkhand, Eastern Uttar Pradesh
West Bengal and Orissa with
the active involvement of Gram
Sabhas and the farming families,
Mukherjee said.
The farm productivity in these
eastern states is half of that of the
states like Punjab and Haryana.
By merely replicating what has
happened in Punjab and Haryana
the productivity in the large eastern
states would double and thus helping
in increasing India’s farm output
substantially in a short period.
Though India has managed to
get on to the path of economic
recovery rapidly after the global
recession, inflation has become a
matter of concern particularly that
of food price after drought due to
poor monsoon in 2009. Food price
inflation is mainly due to supply
constraints and aggravated by low
availability of four crops of pulses,
sugar, rice and wheat.
Aware of this problem, the
budget proposed to spend Rs
300 crore to organise 60,000
pulses and oilseed villages in
rain-fed areas in 2010-11. This
would provide an integrated
intervention for water harvesting,
watershed management and soil
health improvement to enhance
the productivity of the dry land
farming of these crops. The
initiative will be an integral part
of the Rashtriya Krishi Vikas
Yojana. Simultaneously these
measures would uplift the rural
income and prosperity. He has
provided Rs 200 crore for climate
resilient agriculture to sustain
gains of green revolution to be
sustained through conservation
farming.
Mukerjee announced the
intention of the government to
open up retail sector that would
help in rural development. This
will reduce significantly wastage in
agriculture particularly that of fruits
and vegetables as opening of retail
sector will lead to expansion of
cold storage facility. It would bring
down the considerable difference in
farm gate prices, whole sale prices
and retail prices.
The Finance Minister has also
attempted to address the issue
of wastage in buffer stock due
to adequate storage facility,
34 YOJANA March 2010
availability of credit to farmers and
extension of debt waiver scheme to
farmers by six months till June 30
2010. The target for farm credit has
been raised to Rs 3.75 lakh crore for
2010-11 from Rs 3.25 lakh crore in
2009-10.
He raised interest subvention to
farmers on short-term loans from
one to two per cent. This will be
available for timely repayment of
loans by farmers. So the effective
interest for such loans would be five
per cent in 2010-11.
To encourage food processing
industry, the government announced
setting up of additional five mega
food parks apart from 10 already
announced. Besides External
Commercial Borrowing facility
would be available for setting
up cold storage facility in the
country.
T h e m a n t r a o f t h e U PA
Government is inclusive growth.
Key element in this regard is the
promise to come out shortly with
Food Security Bill. The budget has
enhanced allocation to social sector
to Rs 1.38 lakh crore, which is 37
per cent of the total plan outlay
of Rs 3.73 lakh crore in 2010-11.
The Food Security Act will ensure
adequate availability of food to the
underprivileged especially in the
rural India. Stepped up allocation
to social sectors means more jobs
and development in rural areas
benefiting poor in villages.
Also, another 25% of the plan
allocation is for rural infrastructure
in 2010-11, which is a significant
funding aimed at speeding up rural
development. This would generate
more jobs in the rural sector.
There are number of initiatives
announced in the budget for taking
banking to un-banked areas in
rural and remote areas. This is a
step to move towards financial
inclusion of the underprivileged.
“To reach the benefits of banking
services to the ‘aam aadmi’, the
Reserve Bank of India has set up
a High Level Committee on the
Leak Bank Scheme. After careful
assessment of the recommendations
of this committee, and in further
consultation with RBI, it has been
decided to provide appropriate
banking facilities to habitations
having population in excess of 2000
by March 2012. It is also proposed to
extend insurance and other services
to the targeted beneficiaries. These
services will be provided using the
business correspondence and other
models with appropriate technology
back up. By this arrangement
it is proposed to cover 60,000
habitations,” Mukherjee said.
Also efforts are being made to
use mobile phones to reach out to
un-banked areas including money
transfer. Mukherjee proposed to
augment by Rs 100 crore the
financial inclusion fund and
financial inclusion technology fund
in Nabard to reach banking services
to unbanked areas.
Apart from these initiatives,
funding for the existing rural
development schemes have been
stepped up in the 2010-11 budget.
“For UPA government development
of rural infrastructure remains a high
priority area. For the year 2010-11,
I propose to provide Rs 66,100
crore for rural development,” the
Finance Minister said.
Mahatma Gandhi National
Rural Employment Guarantee
Scheme has completed four years
of implementation during which is
has been extended to all districts
covering 4.5 crore households. The
allocation for NREGA has been
stepped up to Rs 40100 crore in
2010-11. The funding for Bharat
Nirman Programme for creation of
rural infrastructure has been pegged
at Rs 48,000 crore for 2010-11,
Mukerjee announced.
The allocation of Indira Awas
Yojana, a popular rural housing
scheme, has been increased to
Rs 10,000 crore. Mukerjee also
raised the unit cost of housing under
the scheme to Rs 45,000 in plains
and Rs 48,500 in hilly areas.
To reduce the infrastructure
gap in backward areas, Mukherjee
stepped up allocation by 26% to
backward regions grant fund to
Rs 7,300 crore in 2010-11 from
Rs 5,800 crore in 2009-10.
As part of banking sector reforms,
Mukherjee announced measures for
recapitalisation of Regional Rural
Banks, which play an important role
in providing credit to rural people.
Strengthening of capital base of
these banks will help in increased
lending in rural areas.
The programme for linking
self help groups, with the banking
system has emerged as the major
micro-finance initiative in the
country. It was redesigned as the
micro-finance development and
equity fund in 2005-06 with a
corpus of Rs 200 crore. The fund
has been doubled to Rs 400 crore
in 2010-11 budget.
A comprehensive khadi reforms
programme is to be undertaken with
150 million dollar assistance from
Asian Development Bank. This
programme will cover 300 selected
Khadi institutions, Mukherjee said
in the budget.
To encourage the people from
the unorganised sector to voluntarily
save for their retirement and to lower
the cost of operations of the new
pension scheme for such subscribers,
Government will contribute Rs
1000 to each such NPS account
opened this year. The scheme will
be available to those who join with
a minimum of Rs 1000 to NPS and
a maximum of Rs 12,000 per annum
during the financial year, Mukherjee
said asking state governments too
to contribute to the scheme. The
scheme will benefit to sizeable
unorganised labour in rural areas
as well.
On the face of it the budget
may appear to be focussed only on
pushing growth to at least 8.5% in
2010-11 and bringing down fiscal
deficit to 5.5% of GDP in 2010-11
from 6.9% in 2009-10. These are
broad macro-economic aspects
which are no doubt very important.
But the underlying fact is that the
budget has made an honest attempt
to make growth inclusive so that
rural India too can reap the fruits
of high growth. There is a clear
direction in the budget to ensure
that rural India also develops
and has facilities comparable to
those of urban India in times to
come. q
(Email : sudhaman23@hotmail.com

Infrastructure sector gets the lion’s share

T
o sustain economic growth, the budget has 46 per cent – Rs. 1.73 lakh crore – of the total plan outlay
ear-marked for the infrastructure sector.

The FM announced a 13 per cent hike in allocation to fund the national highways expansion plan.
The current year will have an allowance of 19,894 crore. Over Rs. 950 crore more than last year have been
increased in the budgetary support for the railways.

l For an impetus to the public transport system, FM granted project import status to ‘monorail projects for
urban transport’ at a concessional basic duty of five per cent.

l The allocation for the urban development ministry has been increased form Rs. 2,975 crore to
Rs. 5,306 crore. This includes increased budgetary allocation for metro systems in Bangalore, Kolkata
and Chennai.

l The FM proposed a deduction of an additional amount of Rs. 20,000 for investment in long-term
infrastructure bonds, as notified by the Centre. This would be over and above the existing limit of Rs. 1
lakh on tax saving by salaried employees.

l FM has extended the benefit of investment-linked deduction under the Tourism Act to new hotels of two-
star category and above anywhere in India. Also, Rs. 200 crore has been allocated as a Special Golden
Jubilee package to restore Goa’s beaches.

YOJANA March 2010 35

36 YOJANA March 2010
 YE-3/10/10

YOJANA March 2010 37

best practices
Bitter Neem to Sweet Success
A
n increase in
agricultural yield and
better crop protection
are possible at low
cost and effort by
using traditional knowledge
in combination with modern
technology This has been
proved by groups of farmers in
the rural areas of Lucknow in
Uttar Pradesh, who have used
home developed fertilizers with
added nutrients in combination
with scien t i f i c insect and
The integrated disease control methods to raise
approach of the the productivity of their crops
and usher in prosperity and well
project team have being in their region.
started showing results It all started more than three
and has given hope years ago when, under a project
to scores of small sponsored by the Department of
Biotechnology, Government of
and medium farmers India, the use of neem seeds and its
for a better and more by-products was taken up to reduce
prosperous future the use of chemical fertilizer,
The author is a Senior Journalist and a Writer.
38 YOJANA March 2010
Ratan Mani Lal
especially urea. The neem tree
has traditionally been used for
its medicinal and other qualities
and its bitter leaves and seeds
have long been used for keeping
insects away and for treating skin
ailments.
The project was designed and
implemented by Dr Rashmi Roy
Choudhury, a retired Professor of
Lucknow University and an expert
in plant diseases. “Agriculture
in India is facing a crisis, crop
yields have reached a plateau, if
not declined, poor agricultural
reforms and low profitability are
gradually weaning the farmers away
from farming, over-dependence on
chemical fertilizers and pesticides
has taken its toll and rural and urban
areas alike are paying the price
for it,” says Prof Roy Choudhury.
To her, the prospect of increased
production by the ordinary small
 The seeds in villages in this region, but the
of neem collection of neem seeds is not
are high in organized and most of this precious
pesticidal resource is not used for agricultural
value and the purpose.
oil extracted
Several women from villages
from these
were organized into self help
are used to
groups and trained in neem seed
make neem
collection, its depulping and drying
oil based
in especially designed equipment
pesticide.
for making useful fertilizer and
The seeds of
biopesticide. Soon, the farmers
Equipment used for cleaning, depulping low quality
started using neem-based urea
and drying neem seeds are crushed
coating called neem lepak to
to make
substantially reduce the dependence
farmer from his ordinary vegetable f e r t i l i z e r. T h i s n eem-based
on urea . The yield of wheat, paddy
or cereal crop was indeed possible fertilizer added to fields protects and potato crop which otherwise
if they were taught to use modern the crop from soil pests and disease needed heavy urea inputs, have also
scientific methods in combination and also enhances fertility The grown by about 20 % .
with their traditional agricultural neem cake available to farmers
after oil extraction is usually The farmers were then also
practices. The region chosen for the
beyond his reach because of its trained to make value-added
project was Bakshi ka Talab in rural
high price. compost from the ordinary
Lucknow, off the National Highway
Neem trees grow in abundance ghurai or waste heap, which
towards Sitapur and New Delhi.

Table 1 : Self Help Groups (Samoohs) trained in various activities.

No. Name of samooh/ village Members Activity
1. Priya Samooh 16 Organic & Integrated farming
Vill. Chak Prithvipur
2. Shiv Shakti Samooh 12 Organic & Integrated farming
Vill Digoi
3. Ma Bhavani Samooh 10 Organic & Integrated farming
Vill. Bhavanipur
4 Pashupatinath Samooh 13 Organic & Integrated farming
Vill. Shahpur Raja
5.. Kranti Samooh 10 Organic & Integrated farming
Vill. Dingurpur
6.. Ekta Samooh 13 Organic & Integrated farming
Vill. Kundapur
7.. Jagriti Samooh 11 Organic Input – Biofertiliser production
Vill. Dingurpur
8.. Bhavanipur Samooh 10 Organic Input- Biofertiliser production
Vill. Bhavanipur

YOJANA March 2010 39

 of value-added compost
and is shared by farmers
who pitch in with their
share of cowdung,
ghurai and ash. The
microbes are purchased
from the contribution
to self help groups,”
explained Dr Roy
Choudhury. "Use of this
compost has resulted in
increased yield, better
quality vegetables and
double profit,” said
Ram Darash, a farmer.
The farmers have been
trained in techniques and
Women bringing in cleaned
neem seeds for sale methods of integrated
nutrition and pest
almost completely freed them
management, where one or two
from the use of urea, DAP and
applications of chemical fertilizer
super-phosphates. Every farmer
or chemical pesticide are allowed
dumps his agricultural waste and
if the situation demands, such as
cowdung in a designated area
low soil fertility and heavy influx
near his home. This compost
of insects. But later application
or ghurai is spread in the field
of chemicals is discouraged, so
before cultivation. This compost,
that the cereals and vegetables
however, is low in nutrients,
which are harvested are free from
and has to be used along with
harmful chemicals and hence safe
cowdung and ash to make
for consumption.
layered heap with the addition
of Trichoderma, nitrogen fixing, Plant protection measures by
phosphate solubilizing and potash these farmers have also undergone
solubilising bacteria. The compost a change. The farmers use neem-
gets ready in a fortnight and is based pesticides for protection
loaded in nitrogen, phosphate from aphids and whiteflies, neem
and potash, essential nutrients for cake and Pseudomonas mix for root
plants. “Trichoderma enhances treatment, Trichoderma for wilt
yield and protects crops from protection, Beauveria bassiana,
various diseases. A 3 by 6 feet NPV (an insect destroying virus)
heap yields around 10 quintals and pheromone traps for protection
40 YOJANA March 2010
of cabbage, cauliflower, gourds,
gram beans, brinjal etc from various
borers and destructive insects. An
ingenuous insect trap has been
designed from waste mineral water
bottles, bird perches from sticks
to pick on destructive insects. All
these newly found techniques have
created a big demand for more
as larger areas are sought to be
covered.
“The time is ripe for some rural
entrepreneur to set up neem based
collection and processing units in
villages and to market the valuable
microbe mediated compost,” says
Dr Roy Choudhury.The lack of
availability of biofertilizer and
biopesticide is the major hindrance
in use of organic and self sustaining
inputs by farmers. They do not
have the wherewithal and training
to set up manufacturing units.
Thus, while the demand has been
created, encouragement needs to be
given to rural entrepreneurship in
villages to set up units using rural bio
resources to make biofertilizers and
biopesticides to meet the demand and
make farming a truly self sustaining
and profitable enterprise.
The integrated approach of
the project team towards solving
common difficulties faced by
farmers, combined with their positive
approach have started showing results
and has given hope to scores of small
and medium farmers for a better
and more prosperous future. q
(Email : ratanml@rediffmail.com)
BUDGET 2010-11
Budgeting for the Energy Sector
A
fter two years of
industrial recession, the
pickup in the overall
industrial growth is a
very good sign. Major
industrial sectors have already
evinced signs of recovery and rest
are likely to hit the road to recovery
in the coming months.
Energy, being an engine of
growth, is going to play an important
role in the robust industrial and
Energy, being economic development of the
country, especially when all
an engine of projections are indicating recovery
and speedy growth in the coming
growth, is going years. Even International Eenergy
to play an analysts have projected steep
increase in India’s per capita power
important role consumption and highest over
in the robust growth after China.
industrial Though the Government is
already giving special emphasis on
and economic the energy sector, the budget 2010-
11 has accorded highest priority
development of to capacity addition in power
the country sector. Government has proposed
The author is Special Representative, The Statesman.
YOJANA March 2010 41
Overview
Vijay Thakur
to increase the Central Plan Outlay
to energy sector from Rs 1,09,685
crores (revised estimate for 2009-
10) to Rs 1,46,579 crores for
the year 2010-11. Out of this,
the Ministry of Power has been
allocated Rs 60,751.42 crores ,
Rs 4,739 crores goes for Nuclear
Power Schemes, Rs 69,494.79
crores to the Petroleum and Natural
Gas Ministry, Rs 13,518 to the
Ministry of Coal and Rs 1,950
crores to the New and Renewable
Energy Ministry.
Power
The outlay for the Ministry of
Power has been increased from
Rs 56,955 crores to Rs 60,751
crores, giving maximum allocation
to two schemes- Accelerated Power
Development and Reform Program
(APDRP) and Rajeev Gandhi
Gramin Vidyutikaran Yojna. While
the allocation in APDRP has gone
up from Rs 2080 crores in 2009-
10 to Rs 3,700 crores—an increase
of 77 %, Rs 5,500 crore has been
allocated to RGGVY. Besides these
two schemes the Government has
stressed upon Energy Conservation
(Rs 143.94 crore) and Bureau
of Energy Efficiency (Rs 66.92
crores).
Other than this, government has
proposed to generate Rs 50,121
from Internal and Extra Budgetary
Resources (IEBR), for power
projects of various PSUs including
NTPC (Rs 22,350 crore), NHPC
(Rs 4,108 crores), Damodar Valley
Corporation (Rs 8,539 crore), and
Power GridCorporation (Rs 12,99
crore).
The Government has envisaged
several measures to increase power
generation capacity including
modification of its Mega Power
Policy that would help power
companies to induct super critical
technology in large power plants
at a very competitive power tariff.
With India still reeling under power
shortage, the peak power deficit is
still at 12.6 %. Other than capacity
addition targeted at 78,700 MW
during the 11th Five Year Plan,
the Government has to reduce its
transmission and distribution losses
and ensure better quality power to
rural areas—the APDRP project is
already in place to address these
issues.
For Nuclear Power schemes,
total outlay is of Rs 4,739 crore
with provisions for investment in
Bharat Nabhikiya Vidyut Nigam
Ltd (BHAVINI), Kudankulam
Nuclear Power Plant, and projects
of Bhabha Atomic Research Centre
(BARC) and R & D power projects
of Indira Gandhi Centre for Atomic
Research.
New and Renewable Energy
The Government is putting extra
effort in the under utilized New
42 YOJANA March 2010
and Renewable Energy sector and
intent s to establish India as a global
leader. It has aimed to generate
20,000 MW of solar power by
the year 2022 as envisaged in its
Jawaharlal Nehru National Solar
Mission. Budget 2010-11 has
proposed to increase allocation in
this sector by 61 percent from Rs
620 crore to Rs 1,000 crore. In
addition to this, another Rs 950
crore would be invested through
IEBR. The major poject would be
set up in Ladakh region where the
Government proposed to set up
solar, small hydro, and micro power
projects at a cost of Rs 500 crores.
For the year 2010-11, the
Government has set a target for
2,972 MW grid-interactive power
capacity, 142 MW off-grid capacity
building, electrifying 1,500 villages
using renewable energy resources,
deployment of 1 million square
meter solar water heating system.
Petroleum
The Petroleum Sector is one
such sector which is very difficult to
insulate from International market
mainly because more than 75 percent
of our crude oil requirements
are being met through imports
and it would continue to increase
provided Indian oil companies go
for massive domestic exploration
and production.
Till last year, the domestic
production had not shown any
significant increase and remained
at around 34 MMTPA (Million
Metric Tones per annum) for
crude oil and 32 BCM (Billion
Cubic Meter) for gas during the
past five years. But this fiscal
year, the production is expected
to increase by 11 percent —thanks
to Barmer and KG deepwater oil
discoveries.
Since this sector immediately
affects common man and the
country’s economy, stabilizing
its pricing is a big challenges for
the Government. For the past
couple of years, wild swings in the
International crude oil prices have
shaken the Indian petroleum sector.
From slightly more than $ 22 a
barrel in 2002, it crossed $ 142 a
barrel in 2008. Last year it slumped
steeply to around $ 35 and today it
is hovering at $ 80 a barrel.
In this budget, the Government
has increased custom duty on
petroleum products from 5 % to 7.5
% and Excise Duty by Rupeeone per
litre. The Union Petroleum Minister,
Mr Murli Deora, however termed it
nothing new as the Government
had reduced custom and excise
duties when crude oil prices in the
international market had crossed $
120 barrel in June 2008. Though
it increased the petrol and diesel
pieces by morethan Rs 2.5 per litre,
the additional revenue generation
of around Rs 18,000 crore would
help the exchequer in compensating
subsidies on kerosene, LPG, petrol
and diesel.
The cause of concern for the
oil sector is huge subsidies on
petroleum products. For the current
fiscal year, it is expected to touch
Rs 45,000 crore. While it is still less
than what we saw in 2008-09 when
it reached Rs 1,03,292 crore, the
fluctuation in crude oil prices would
continue to haunt oil companies.
For the year 2009-10, government
has announced a cash subsidy of
Rs 12,000 crore to oil marketing
companies, but still under recoveries
are adversely affecting the fiscal
health of upstream and downstream
companies. If this situation persists,
the oil companies might have to look
for Government support to invest
abroad for oil acreages to ensure
energy security for the country.
The total plan outlay of the
Petroleum Ministry is Rs 69,494
crores, a major part of which would
come from IEBR—nearly Rs 69,457
crores. From IEBR Rs 46,299 crore
is for exploration and production
of crude oil, and Rs 20,471 crore
for refining, transportation and
marketing of petroleum products.
Coal and Lignite.
Coal is the mainstay of India’s
energy sector and three fourth of
the country’s power generation
is dependent upon coal. The
Government has proposed to
introduce a competitive bidding
process for allocating coal blocks
for captive mining to ensure
greater transparency and increased
participation in production from
these blocks. In the budget 2010-
11, the Government has proposed
a Plan outlay of Rs 13,518 crores,
of which Rs 13,118 crore would
come from IEBR (Internal and
Extra Budgetary resources). It has
further proposed to set up a “Coal
Regulatory Authority” to create
a level playing field in the coal
sector. Once set up, the Regulatory
Authority would resolve long
pending issues including economic
pricing of coal, benchmarking of
standards of performance. q
(Email : vijaythakurx@gmail.com)

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YOJANA March 2010 43

do you know?
A KEY TO BUDGET DOCUMENTS
A
part from the Finance
Minister's speech, the
Budget also comprises
some other documents that are
placed before the Parliament.
Following is a key to some of
these documents, as also to some
important terms used therein.
What are the main Budget
Documents placed before the
Parliament?
The main budget documents
consist of the Annual Financial
Statement, Demand for Grants,
Appropriation Bill, Finance Bill,
Macro Economic Framework for
the relevant year, Fiscal Policy
Strategy Statement and Medium
Term Fiscal Policy Statement. The
first four documents are mandated
by the Constitution and the latter
three are placed under provisions
of the FRBM Act 2003. Besides
these, there are some explanatory
documents also like Expenditure
Budget, Receipts Budget, Budget
highlights etc
What is the Annual Financial
Statement ?
This shows the estimated
disbursement and receipts of the
government of India for the financial
year in question, in relation to the
estimates for the current year and
expenditure for the previous year.
The revenue and disbursements
are shown under three heads -
Consolidated Fund ( Includes all
revenue received by government,
44 YOJANA March 2010
loans raised and recoveries from
loans. All Government expenditure
is met from this fund), Contingency
Fund (A Rs 500 crore Emergency
Fund for unforeseen expenditure,
at the disposal of the President)
and Public Account (Money held
by government in Trust, example
Provident Fund.). Expenditure from
the former two requires authorization
from the Parliament. The Annual
Financial Statement also shows
separately, the Revenue Budget
(Statement of Revenue receipts
from taxes and other revenues,
and expenditure made from these)
and Capital Budget (Statement of
Capital receipt from liquidating
assets eg. selling shares in a public
sector company, raising loans from
the public, borrowings from RBI and
other parties through sale of treasury
bills, and Capital expenditure made
to create assets).
What are Demand for Grants ?
The expenditure estimates for
different ministries are placed for
voting before the Lok Sabha in the
form of Demand for Grants. There
are a total of 105 Demands for Grant
in the 2010-11 budget. Each demand
gives a total of voted expenditure
( expenditure that requires to
be voted by parliament) and
charged expenditure (expenditure
that is charged directly to the
Consolidated Fund and does not
require to be voted by Lok Sabha-
eg emoluments of the President )
The document also shows a break
up of expenditure under Plan Head
(Budget support to the Central
Plan. It also comprises the amount
the Centre sets aside for plans
of states and Union Territories.)
and Non Plan Heads,( All bills
the government has to pay, like
interest payments, subsidies,
salaries, defence and pension)
Under each head Revenue and
Capital expenditure are also
shown separately.
What are Appropriation Bills?
Parliament's approval for
withdrawal of money from the
Consolidated Fund to meet the
expenditure as voted under
Demands for Grants, as also
expenditure charged on the
Consolidated Fund, is sought
through the Appropriation Bill.
What is a Finance Bills ?
This Bill places details of the
government's proposals for new
taxation or change in existing tax
structure, before the Parliament
for its approval. It is accompanied
by a Memorandum explaining its
provisions.
What is the Macro Economic
Framework Statement ?
This statement contains an
assessment of the growth prospects
of the economy. These include
assessment of GDP growth rate,
fiscal balance of the government,
and external sector balance of the
economy.
 What is the Fiscal Policy
Strategy Statement ?
Th is s ta te me nt o ut l i nes
government priority in the fiscal area
relating to taxation, expenditure,
lending and investment, administered
pricing, borrowing and guarantees.
It explains how the policies are
in consonance with sound fiscal
management principles .
What is Medium Term Fiscal
Policy Statement ?
This statement lays out
three year rolling target for
four specific fiscal indicators in
relation to GDP at market prices.
These are revenue deficit, fiscal
deficit, Tax to GDP ratio and
total outstanding debt at the end
of the year.
The above three Statements
are placed before the Parliament
as per the provisions of Fiscal
Responsibility and Budget
Management Act 2003. (FRBM
2003)
What is the FRBM Act ?
As per the Fiscal Responsibility
and Budget Management
Act, revenue deficit was to be
eliminated by 2008-09 , which
means that revenue expenditure
of the government was to be met
entirely from its revenue receipts.
Borrowing was to be done to meet
capital expenditure — that is,
repayment of loans, lending and
fresh investment. The Act also
mandates a 3% limit on the fiscal
deficit after 2008-09
What is Expenditure Budget ?
This document gives the
details of revenue and capital
disbursement of various ministries
and departments, with estimates
for each under Plan and Non
Plan. It analyses various kinds
of expenditures. The second
volume of this document It also
gives statements of the Plan
grants and loans released by the
government to state/ district level
autonomous bodies under central
or centrally sponsored schemes;
gender budgeting and schemes
for development of SC-ST
What is Receipt Budget ?
This document contains an
analysis of the estimated receipts
of the government. It also provides
the arrear of tax and non tax revenue
as mandated under FRBM Act.
Trends of receipt and expenditure,
deficit indicators, National Small
Savings Fund statement, statement
of liabilities, guarantees given
by the government, statement
of assets and details of external
assistance are also included in this
document. q

Yojana
Forthcoming April 2010
&
Issues May 2010

April 2010
Climate Change
Climate Change has emerged as perhaps the most major concern for the modern world. The April 2010
issue of Yojana brings you an insight on the subject. Experts in the field tell us what to expect and how to
go about tackling the problems that are likely to emerge.
May 2010
Tourism
The May 2010 issue of Yojana will focus on Tourism in India. Our country is coming up as a major tourist
destination. Do we have the wherewithal to cater to the growing flood of domestic and foreign tourists ?
What are our strengths and our weaknesses in this regard ? Experts will discuss various issues related to
the sector.

YOJANA March 2010 45

women's rights
perspective

Gendering Health and Education

Promila Yadava

T
he past d e c a d e and that these differences should
has witnessed a rise be identified and addressed
in gender perspective in a manner that rectifies the
on social policies The imbalances between the sexes.
U N Wo r l d S u m m i t
The gender dimensions of
of 2005 reaffirmed
health and education and
gender equality as a Millenium
gender mainstreaming has been
Development Goal (MDG 3)
internationally recognized as
and underlined its importance
a key tool for empowering
as a means to achieve all the
women by incorporating gender
other MDGs. MDG 3 aims to
perspective and concerns at
promote gender equality and
all stages of developmental
The challenge now empower women, with the target
planning, policy programmes and
of eliminating gender disparity in
is to shift to right primary and secondary education
delivery mechanism. As defined
by the United Nations, Gender
not later than 2015. It also
based approach to acknowledges gender equity as
Mainstreaming is “the process
of assessing the implications for
gender and budget an important prerequisite for
women and men of any planned
development and clearly states that
by linking needs “there is no tool for development
action, including legislation,
policies or programmes in any
more effective than the education
assessments at the of girls/women.” Gender disparity
area and at all levels”. Gender
mainstreaming helps reduce
grassroots level to in education and health hinders
poverty, generate economic activity
women’s development which
national budgetary further leads to limited progress in
and improve the quality of health
and productivity of the family.
empowering them and achieving
processes, for gender equality. Millennium
Hence, gender mainstreaming is
not only an issue of social justice
achieving Development Goals (MDG) 3
but is necessary for ensuring
recognizes that men and women
gender parity have different needs and powers
equitable sustainable human

The author is Senior Research Officer in the Planning Commission and specializes in Adult Education & Literacy Programmes
& Gender Issues in Social Sector.

46 YOJANA March 2010

development by the most effective
and efficient means.
Health and Education linkages:
The strong link between Health
and Education needs no introduction.
By now there is enough empirical
evidence to reveal gender gaps in
both health and education sectors.
Gender disparity is a global issue
with far reaching consequences. It
is evident in rich as well as poor
countries, in countries that are
diverse as well as those that are
not. In all situations, whether it is
access to health services or access
to educational facilities, women and
girls are affected on account of social
norms and biological factors. They
face increased risks for adverse health
and poor educational standards.
When women are educated and
empowered, the benefits can be seen
immediately : families are healthier,
they are better fed, their income,
savings and reinvestment go up.
Demographic studies of infant and
child mortality and differentials have
shown that maternal education, or
literacy, is one of the most important
and powerful factors explaining
different mortality levels within and
between societies. This pattern
persists even when income and
economic status are controlled.
Studies from many developing
countries have shown that mother’s
literacy and schooling are closely
related to child health and survival.
In view of the above, it is
important for governments to
ensure that gender considerations
are adequately addressed in all its
efforts in health and education sector,
and that gender mainstreaming
is integrated into all endeavours
relating to health and education.
The situation as it exists
As per Global Gender Gap Index
of 2008, India’s ranking among 130
YOJANA March 2010 47
countries is 113. As per the report
for 2009, it ranks 114 among 134
nations. The report ranks countries
according to gender equality rather
than women’s empowerment and
underlines that rich countries
have more education and health
opportunities for all members of
society in comparison to others.
As per the report, except for the
sub index political empowerment
where India ranks 25th (2008) ,
leaving behind developed countries
like the US and Australia, our
ranking in other key indicators is
very low. So far as the economic
participation and opportunities
for women is concerned, India
finished at 125, and in the case of
educational attainments, it ranks
116. The ranking in health and
survival of women is as low as
128. India ranks lowest among
the four BRIC (Brazil, Russia,
India and China) countries and
is even behind such countries as
Bangladesh and the United Arab
Emirates. India figures among
20 countries in the world where
the gender gap is the widest, and
stands sixth in economic inequality
between men and women
The declining sex ratio in the
country, slow decline of infant
mortality and child mortality
rates, and a static immunization
coverage directly show that there
is a chain reaction of inadequate
access to food, inadequate access
to early childhood education,
malnutrition, poor health, non-
enrollment and high drop-outs.
These problems are graver in
states which are severely poor and
hopelessly behind targets. Health
and nutrition cannot be addressed
without attention to education and
vice versa. Illiteracy, poor health
status and poverty are viciously
interconnected, set barriers for
economy and social development.
Gender is a cross-cutting issue and
therefore the implementation of the
gender policies will require a solid
commitment and multi-connections
between health and education.
The basic parameters of both
health and education (declining sex
ratio, higher infant and maternal
mortality rate, low immunization
levels, high incidences of morbidity
and poor nutrition, poor literacy
levels, poor enrollment and
higher drop out rates etc.) reflect
the continuing dismal status of
women in the country. Under five
mortality is higher among girls,
the incidences of deaths due to
specific diseases like Malaria, TB,
HIV/AIDS is again higher among
girls/women. As far as education
sector is concerned, the school
enrollment ratio is a far better
measure of gender equality than
of women’s empowerment. The
GER of girls drops sharply from
93.07% at primary level to 56.22%
at middle school level and 47.35%
in rural areas (Selected Education
Statistic, 2002-03). The drop out
rates for all girls is 28.57%, 52.90%
and 64.09% at primary, elementary
and secondary levels respectively.
The gap between male (75.80%)
and female (54.10%) literacy rate
is 22%. The female literacy rate is
below 50% in 235 districts of the
country. Female ratio in secondary
education is 0.63 during 2000-
01 and the ratio reduces to 0.58
during 2002-03. Though there
has been improvement in the ratio
of primary, secondary and higher
education over the period 1990-
2000 to 2000-01, the overall ratio
for females at all levels still remains
slow. As per India Country Report
2005 on the current status of MDG
goals, under five mortality rate per
thousand live births was 57 and 64
for males and females. Nearly,
46% of the children under five
were severely malnourished. This
comes due to inequality in nutrition
and health care during childhood.
Over the life cycle, males and
females face different risks and
causes of morbidity and mortality.
Infant Mortality Rate (IMR) and
Child Mortality Rate (CMR) are
falling too slowly to meet the MDG
targets. Maternal mortality has not
fallen at all since the MDG baseline
year. The immunization coverage
a static and stands at 50%.
Against the above backdrop, the
issues that call for attention are:
Is there a mandate and statement
of political will for enhancing
gender equality at the national
level? Do Ministries / Departments
have specific policies for gender
mainstreaming ? Do policies in
each sector or policy area reflect
a gender perspective ? Have
indicators been developed to
measure progress towards fulfilling
each objective ?
Gender Mainstreaming Initiatives
– A stock taking:
The Ministry of Women and
Child Development (MWCD)
in 2004-05 adopted the mission
statement of ‘Budgeting for Gender
Equity’ and framed a strategic
framework of activities to implement
this mission which it disseminated
to all Ministries and Departments of
Government of India. The Ministry
suggested the clear understanding
and appreciation of gender,
gender equality and women’s
empowerment, generation of sex
disaggregated and other gender
relevant data, adequate allocations
in all areas, identifications of
states/districts with severe gender
disparities and gender budgeting
exercise.
48 YOJANA March 2010
The importance of gender
budgeting has been stressed upon
Plan after Plan The Finance
Minister’s speech makes symbolic
reference to women, but we
do not see these interventions/
declarations being fulfilled. Most
of the schemes-under social sector
are women centred and therefore
these schemes rely heavily on
women work force who are paid
well below minimum wages. These
schemes are SSA,ICDS,NRHM.
The budget must keep aside proper
allocations that provide universal
services to these schemes. For
gender budgeting to be effective,
the schemes must enhance focus on
women and ensure simultaneously
that budgetary allocations are fully
utilized. Planning Commission
has also time and again reiterated
upon quantifiable outcomes for
women being reflected in State
Plans and Annual Plans. The
performance, however, has been
very unsatisfactory. The Ministry
of Finance has also recognized
the potential of Gender Budgeting
and mandated all Ministries/
Departments to establish Gender
Budgeting cells by January, 2005.
However, in the absence of gender
disaggregated data, the exercises as
suggested by Ministry of Finance,
Planning Commission and MWCD
have not been undertaken on an
adequate scale. A recent analysis
has revealed that gender-specific
schemes form only 2.4% of the
Women and Child Development
Ministry ‘s (WCD) total budget.
Formal earmarking of funds for
women began with the Women’s
Component Plan in 1997-98.
However, gender sensitivity in
allocation of resources started with
the Seventh Plan. The Tenth Plan
(2002-07) clearly stated “…….the
tenth plan continues the process
of dissecting the Government
budget to establish its gender
– differential impact and to
translate gender commitments into
budgetary commitments”. For
the Eleventh Five Year Plan, for
the first time there was a sub-group
on gender budgeting, as part of the
working group on empowerment
of women.
Key Issues
Low Budgetary Allocations:
India is consistently the lowest in
terms of investment in women’s
health. The net allocations in
health as a proportion of GDP
has vacillated from 1.5% in 2002-
03 to 2.2% in 2009-10 budget,
making it amongst the lowest global
spenders on health. Similarly,
the expenditure on education as
percentage of total budget is 4.4%
in 2009-10. As per WHO study,
India ranks 171 out of 175 in
public health spending. The low
investment in health further results
in poor health status in terms of
increasing inaccessibility to health
services especially for those who
are poor.
The non-availability of gender
disaggregated data : This is
one of the major constraint in
the way of formulating polices
and programmes with a view to
mainstreaming. The existing data
by and large is ‘gender neutral’
even when there is a large women
beneficiary component.
Emphasizing local priorities :
Gender Issues differ from country
to country, region to region, from
state to state, from district to district
and village to village in terms of
needs/priorities. Therefore, in
view of this, it may be emphasized
that the local needs/aspirations
are adequately incorporated in all
the schemes benefiting mainly the
women.
Social barriers :There are a
number of gender-specific barriers
which prevent women and girls
from gaining access to their rightful
share in the flow of public goods
and services. Unless these barriers
are addressed in the planning
and development process, the
benefits of economic growth are
likely to completely by-pass a
significant section of the country’s
population.
Absence of Monitoring : It
has also been observed that there
is an absence of the usage of the
existing body of literature in terms
of research and evaluation reports
highlighting the gender issues.
Additionally, absence of regular
monitoring of health and education
programmes which highlights
the gender issues also hinders the
understanding of major issues
concerning women’s programmes.
Women’s Budget : Gender
Budgeting is mainly women’s
budget and is a process that entails
gender perspective at various stages
from enactment of legislation to
mainstreaming into development
process. Gender budgeting should
not only confine to the ‘soft’ areas,
it should also aim at mainstreaming
in the development process as a
whole.
Raising Sensitivity : There is
also a paramount need to facilitate
and raise sensitivity to gender issues
in designing literacy materials
and programmes and emphasize
the gender approach in targeting
in all the health and education
initiatives.
Multiple dimension of gender
imbalances/inequalities need to be
identified and understood in terms
YOJANA March 2010 49
of severe deprivations in both the
health and education sector.
Developing GDI: There is a need
to develop a Gender Development
Index (GDI) on similar lines as
that of Human Development
Index (HDI) so that differentials
in indicators can be established.
This exercise should be attempted
at national/state levels.GDI could
be used as a tool to re-allocate
resources for programmes and
schemes designed to correct gender
gaps at all levels of governance
through monitoring and tracking
of progress regularly.
Inter Sectoral Convergence:
There is a need for inter-sectoral
convergence for important gender
development indices/parameters. In
view of this, all the Ministries and
Departments to converge effectively
with a gender perspective, if HDI is
to improve.
Evaluation: The gender outcome
assessment and evaluation is of
utmost importance for ensuring
the success of gender budgeting.
The Finance Ministry has made
it mandatory that gender outcome
form part of the outcome budget
prepared by every Ministry/
Department as part of the budget
documents.
Thrust areas of the Eleventh
Plan:
The government has pledged
to increase public spending on
education to 6% of Gross Domestic
Product (GDP). This also reflects
the high priority being given to
reducing gender disparities. In
the health sector, the Eleventh
Plan emphasizes the need to
transform public health care into
an accountable, accessible and
affordable system of quality services
during the 11th Plan. The plan will
also provide an opportunity to
restructure policies to achieve good
health for people, especially the
poor and the underprivileged and
marginalized groups like adolescent
girls, women of all ages, older
persons and disabled. It will view
gender as the cross cutting theme
across all schemes. The reduction
of Infant and Maternal mortality
rates which are sensitive indicator
of human development is a priority
concern. The plan also takes into
account the social, developmental
and health consequences of HIV/
AIDS and other communicable
diseases and aims at tackling them
from a gender perspective.
The Government has renamed
the National Literacy Mission
Authority (NLMA) as National
Women Literacy Mission (NWLM)
with specific focus on achieving
80% literacy for women by the
end of the 11th Plan. The Mission
will be launched in 365 districts
where the literacy level is below
50%. Under the National Common
Minimum Programme, Government
will that ensure at least one-third of
all funds flowing into Panchayats
are earmarked for the development
of women and children.
In the end, it may be concluded
that gender deprivations are severe
and need to be overcome. For
women, education is a major catalyst
to balance the gendered patterns of
discriminations and deprivations.
This may eventually promote
women’s health and empowerment
and ultimately lead to gender
equality. The challenge now is
to shift to right based approach to
gender and budget by linking needs
assessments at the grassroots level
to national budgetary processes, for
achieving gender parity. q
(E-mail : p.yadava@nic.in)
shodh yatra
Innovating and Improvising to Increase
Agricultural Productivity
A
motorcycle
adapted to undertake
agricultural operations,
a bicycle mounted
sprayer and a seed cum
fertiliser dribbler, are
creations of an ordinary farmer
cum artisan, Mansukhbhai Jagani,
with an extraordinary imagination.
Mansukhbhai hails from Mota
Devaliya village in Amreli district,
Gujarat. Born in a middle-class
farmer’s family, he went to school
only up to the primary level and then
had to join his father in agricultural
This work due to financial problems. He
later ventured out and worked in
implement can a diamond-cutting-and-polishing
factory in Surat for some time. He
be a boon for also worked as a farm labourer in
various places. But not satisfied
a region, where with this work, he returned to his
village and got informal training
the manpower for about a year in iron welding and
is abundant and fabrication work. Then he started
a small repairing and fabrication
the process for workshop in his own village,
and for the last 25 years, he has
sowing is mainly been running this workshop. He
carried out provides services to the villagers
for repairing diesel engines, farm
manually. implements and also manufactures
and sells various farm implements
50 YOJANA March 2010
like harrow, plough, seed drill, and
grills for doors and windows.
A series of innovations
Motorcycle driven multi-purpose
farming device (Bullet Santi)
Dwindling population of farm
animals like bullocks in the drought
prone regions of Amreli in Gujarat,
and outward migration of people
from the area from the early 1990s
onwards, was forcing people to
look for mechanical alternatives
to bullock led ploughs. In 1994,
when Mohan Patel, a farmer,
came to Mansukhbhai asking for a
replacement for his two bullocks,
Mansukhbhai got an idea. Inspired
by a local mode of transport,
the three-wheel taxi chakdo, he
designed what he called the Bullet
Santi. This amazing contraption
was made from an Enfield Bullet,
a hardy motorcycle whose engine
was converted to a 5.5 HP diesel
engine and the rear wheel was
removed and replaced with an
attachment with two wheels. Once a
tool bar was fixed to the attachment
this unique machine could be
used to carry out various farming
operations like furrow opening,

Bullet Santi
sowing, inter-culturing and spraying
operations. The machine is also cost
effective and fuel efficient, it could
plough an acre of land in just half
an hour consuming only two litres
of fuel. Ten hectares of land could
be weeded in a day and cost of
weeding was a mere eight rupees
a hectare. This contraption can be
attached to any motorcycle having
with at least 325 cc (6.5 HP) .With
the help of National Innovation
Foundation (NIF), Mansukhbhai
got a patent in India and USA for
this device.
Given the success of the
technology, many other users
and innovators have copied this
design. Copying, improvement and
blending of local innovations with
one’s own ideas is quite common at
grassroots level. In fact, a process
like this has been at the heart of
culture of innovation at community
level. In May 2008, NIF and GIAN
organized a workshop in Rajkot
where many innovations similar
to or inspired by Jagani's design
were compared and discussed. The
concept of ‘technology commons’
was also debated, as per which
a community of improvisers can
collectively own the IPRs and none
of them can individually license it
to a third party.
A seed-cum fertiliser dibbler
Farmers adopt different methods
to ensure the proper sowing of
seeds. Rich farmers opt for tractor
or animal operated seed drill
YOJANA March 2010 51
for speedy operation while poor
farmers, who cannot afford them,
sow seeds manually, which can be
physically very tiring .
Jagani, while working in his
small field, thought of developing
an implement economical for the
farmer and capable of performing
sowing function at a faster rate.
He designed and fabricated a seed-
cum-fertilizer dibbler. Using this
device, sowing can be done more
efficiently, quickly and more over
this process is much cheaper than
the other options available. This
implement is helpful in both sowing
of seeds, gap filling and fertilization
of those crops like coconut and
banana, which require fertilizers
to be injected into the ground,
near their roots. Wastage of seeds
and fertilisers is prevented. Due to
uniform sowing the germination
percentage is also increased.
This implement can be a boon
for a region, where the manpower is
abundant and the process for sowing
is mainly carried out manually.
Bicycle sprayer
Aware of the problem faced in
the spraying of agrochemicals in the
field, Jagani developed a sprayer
which is efficient and affordable.
This portable spraying system
consists of an adjustable boom,
tank, chain and sprockets and cam
follower mechanism for converting
rotary motion to reciprocating
motion. The assembly can be
mounted on any bicycle available
in the market. A cylindrical
tank containing the solution is
firmly attached to the frame of
the bicycle. While the bicycle is
pulled forward, the cam follower
provides reciprocating motion to
pump, which compresses the fluid
in the tank. This comes out through
the spraying nozzle, connected to
boom, as mist.
This sprayer is energy-efficient
and easy to operate and maintain.
A labour saving device, it can be
used to spray one acre of land in
45 minutes thus covering more
area compared to manual spraying.
Easy to assemble and dissemble, it
serves the dual use of sprayer cum
bicycle.
Recognition for rural talent
Mansukhbhai Jagani bagged
a National Award in NIF’s First
National Competition for Grassroots
Innovations and Traditional
Knowledge in 2001 for his bullet
santi and a consolation award
in NIF’s Third competition in
2005 for his bicycle sprayer. This
innovation was also displayed at
the Indian Science Congress, 2000
at Pune as well as at the Swadeshi
Vigyan Mela at IIT, Delhi where
he got an excellent response. He
also got the opportunity to display
his innovation in South Africa in
an exhibition organized by the
Department of Small, Medium
& Micro Enterprises (SMME) of
the Northern Provinces jointly
with Commonwealth Science
Council (CSC), London, on June
2002 with the help of SRISTI and
NIF. Mansukhbhai’s motorbike-
polycultivator is considered a
typical example of a product with
global applications. With design
inputs from NID, Ahmedabad,
help in patent-application-filing
from a Boston based law firm
and business-plan development
by Sloan School of Management
of Massachusetts Institute of
Technology, the innovation has
literally gone places. NIF also
supported him from the Micro
Venture Innovation Fund for pilot
production and test marketing of the
Bicycle sprayer. q
(E-mail : campaign@nifindia.org,
www.nifindia.org)
 (Declared�by�the�GOI�under�Section�3�of�the�UGC Act,�1956)
website:�www.nuepa.org
ADMISSION�NOTICE�2010-11
(i)����M.�Phil.�Programme
(ii) Ph.�D.�Programme
(iii) Part-time�Ph.�D.�Programme
The National University of Educational Planning and Administration (NUEPA), a premier organization of its kind in
South Asia, is engaged in capacity building and research in educational policy, planning and administration. NUEPA,
which is fully maintained by the Ministry of Human Resource Development, Government of India, offers M.Phil., Full-
time Ph. D. and Part-time Ph. D.programmes in educational policy, planning and administration from a broader inter-
disciplinary social science perspective. The research programmes of NUEPA cover all levels and types of education
from both national and international development perspectives.
NUEPA invites applications from eligible candidates for admission to its M.Phil. and Ph.D. and Part-time Ph.D.
programmes for the year 2010-11. While selecting the candidates for admission, NUEPA will follow all mandatory
provisions in the reservation policy of the Government of India. Admissions to M.Phil., Ph.D. and Part-time Ph.D.
programmes will be made purely on the basis of merit following the prescribed criteria of the University.
Fellowships
Candidates admitted for M.Phil. and Full-Time Ph.D. will be provided fellowship by the University. The NET qualified
candidates, who have been awarded Junior Research Fellowships by the UGC and who fulfill the required
qualifications, are encouraged to apply.
Eligibility Criteria
Full-time Programmes
(a) A candidate seeking admission to the M.Phil. and Ph.D. programmes shall have a minimum of 55% marks (50%
marks for SC/ST candidates and Persons with Disabilities) or its equivalent grade in Master's Degree in
education, social sciences and allied disciplines from a recognized university. Candidates possessing Master's
degree in other areas may also be considered if he/she has proven record of work/publication in the area of
educational policy, planning and administration.
(b) A candidate seeking admission to Ph.D. programme shall have an M.Phil. degree in an area closely related to
educational planning and administration and/or exceptionally brilliant academic record coupled with
publications of high quality.
(c) M.Phil. graduates of NUEPA will be eligible for admission to the Ph.D. Programme after due scrutiny by a
Selection/Admission Committee, if they obtain a FGPA of 6 or above on the ten point scale. This will be
applicable for all admissions from 2008 onwards.
Part-time Programme
A candidate seeking admission to Part-time Ph.D. programme is required to meet the following criteria:
(i) Should possess the educational qualifications as mentioned in Para (a) above;
(ii) Currently, should be in full-time employment;
(iii) Should be a senior level educational functionary with a minimum of five years work experience in teaching,
educational planning and administration.
Mode of Selection
The University reserves the right to decide the number of seats to be filled in the year 2010-11; the criteria for screening
of applications; and the selection procedure of candidates for admission to its M.Phil. and Ph.D.programmes. The
mode of selection of candidates will be as under:
(i) Initial short-listing of applications will be carried out on the basis of relevance and quality of the brief write-up
(in the prescribed format) in the proposed area of research to be submitted along with the application form;
(ii) Short-listed candidates will be subjected to second level of screening through which the University will assess
their motivation and potential.
How to Apply
Candidates may apply in the prescribed form for admission to M.Phil. and Ph.D. programmes of the University along
with three copies of the brief write-up (in the prescribed format) on the proposed research topic of a contemporary
issue within the broad framework of educational policy, planning and administration. For further details, please refer to
the M.Phil.-Ph.D. Prospectus, 2010--11 of the University.
The application form can be obtained from NUEPA by remitting a sum of Rs. 200/- ( Rs.100/- for SC/ST
candidates) by demand draft in favour of Registrar, NUEPA, payable at New Delhi if required by Post or purchased in
person. The Prospectus can be downloaded from our website: www.nuepa.org and demand draft of Rs.200/-
(Rs.100/- for SC/ST candidates) should be attached with the application at the time of submission to NUEPA.
Last Date of Applications
Application should reach the Registrar, NUEPA, 17-B, Sri Aurobindo Marg, New Delhi-110016 on or before
20 April 2010. For further details, please visit our website www.nuepa.org
YE-3/10/5

REGISTRAR

52 YOJANA March 2010

North east diary
Upsurge in tourist inflow into Pobitra Sanctuary

N
otwitstading the economic gloom, tourist inflow into the Pobitra Wildlife Sancturary in Morigaon
district of Assam has seen a marked rise in recent times.
According to official sources, altogether 9, 107 tourists visited the sanctuary during the period
of April 2009 – January 10, 2010. Out of them, 9019 were domestic tourists and 88 foreign tourists.
Revenue collection by the Tourism Department also got a boost due to the upsurge in the tourist inflow.
The total revenue collected during that period (till January 10) was Rs. 10,17,550. The figures till 2004-05
hovered between Rs. 15,000 and 20,000.
The main reason for the increase in tourist arrivals in the sanctuary is that the spot is only 52 km from
Guwahati city which is well connected by railways and airport. The same, however, is not the case with the
Kaziranga National Park and other tourist destinations.
Pobitora, which was officially notified as a wildlife sanctuary in 1998, is a habitat of a number of wild
animals, including one-horned rhino, leopard, wild buffalo, etc. It is a favourite place for migratory birds
as well.
Pobitora Wildlife Sanctuary is spread over an area of 38.81 square kilometres. Though one can enjoy
Jeep safari or pay a visit to the authorities concerned should take some more steps to develop it into a world
class rourist spot, including facilities of fooding and lodging.
(Courtesy: Sentinel)

villagers turn barren land into lush field

R
ural entrepreneurs along the Burhidehing river near Dongarupathar village within Lahowal revenue
circle have transformed a vast stretch of the unutilized deforestated area of Telpani forest reserve,
some 38 kilometres from Dibrugarh into rich lush fields.
About 500 bighas of the forest land is now occupied with rich growth of crops. The flowering mustard
plants, clinging brinjals and papayas, matured cabbages, radish and sprawling peas in the field gives a fresh
look. The crops including chilly, pumpkin, beans and leafy vegetables are still standing in abundance in the
area.
Each of the 70 farmers has a holding of about 7 bighas of the forest land on an average and further
extension cannot be ruled out. The villagers along with their family members can be seen toiling through the
day in the fields. The nearby Burhidehing river, although eroding huge chunk of the fertile land, has found
great importance in the area as it is helping the farmers for watering their crops.
Chain of four wheeler carrier vehicles can be seen rushing every day to the area to pick up the fresh
vegetables. Loads of vegetables are brought to the district headquarter markets here and ready crops also
get transported to other nearby markets.
The involvement of ABITA gramin Krishi Unnayuan Prakalpa in this agricultural area is worth mentioning.
The Prakalpa initiated the farmers for multiple-cropping and diversification of market oriented crops. The
organization, which has been instrumental in providing improved variety of seeds and fertilizes at nominal
price, has also been training farmers on judicious use of fertilizers, soil and water management and proper
crop planning for maximization of yield.
(Courtesy: Assam Tribune)

YOJANA March 2010 53

Banking
The Crucial Role of Banks in India’s
Economic Development
B
anking in its crude
form is an age-old
phenomenon. It was in
existence even in ancient
times. Revilpout, a French
writer, mentions about bank and
bank notes in Babylon in 600 B.C.
In India, the references to money
lending business are found in the
Manu Smiriti also. Chaldean,
Egyptian and Phoenician history
Indian records the existence of rudimentary
banks are banking in early days. Banking in
India originated in the last decades
hopeful of of the 18th century. Etymologically,
becoming the word ‘bank’, is derived from the
Greek word ‘banque’ or the Italian
global brands word ‘banco’ both referring to a
bench at which money-lenders and
as they are the money-chargers used to display
major source of their coins and transact business in
the market place.
financial sector Banking in India originated in
revenue and the last decades of the 18th century.
profit growth The first banks were The General
Bank of India which started in
1786, and the Bank of Hindustan,
both of which are now defunct.
The author is Research Scholar, Patna University and Asian Development Research Institute, Patna
54 YOJANA March 2010
Growth Story
Barna Maulick
The oldest bank in existence in
India is the State Bank of India,
which originated in the Bank of
Calcutta in June 1806 which almost
immediately became the Bank of
Bengal. This was one of the three
presidency banks, the other two
being the Bank of Bombay and the
Bank of Madras, all three of which
were established under charters from
the British East India Company. For
many years the Presidency banks
acted as quasi-central banks, as
did their successors. The three
banks merged in 1921 to form the
Imperial Bank of India, which,
upon India's independence, became
the State Bank of India. After
India's independence in 1947, the
Reserve Bank was nationalized
and given broader powers. In 1969
the government nationalized the
14 largest commercial banks; the
government nationalized the six
next largest in 1980. India.
The Allahabad Bank, established
in 1865 and still functioning today,
is the oldest Joint Stock bank in
India. It was not the first though. scheduled banks are those which which was due to planned economic
That honor belongs to the Bank of have not been included in the 2nd growth, increase in money supply
Upper India, which was established Schedule of RBI Act, 1934. There and growth of banking habit, control
in 1863, and which survived until are only 3 non-scheduled banks in and guidance by the RBI. Above all
1913, when it failed, with some the country. was the nationalization of banks in
of its assets and liabilities being July 1969.
Progress of Banking in India-
transferred to the Alliance Bank The Indian Banking System has Branch Expansion
of Simla. gone through a series of crisis and
consequent bank failures and thus Branch expansion gained
Types of Banks- momentum after the nationalization
its growth was quite slow during
Under the Reserve Bank of India the first half of the 20rth century. of major commercial banks and
Act, 1934, banks were classified But after independence, Indian the introduction of the Lead Bank
as scheduled and non-scheduled Banking recorded a rapid progress Scheme.
banks. The banks which came
Table1: Branch Expansion of Public Sector & Other Commercial Banks
under the 2nd Schedule of RBI Act, As on June Total no. of Rural Rural branches Population per
1934were classified as scheduled 30 branches Branches as % of the bank office
banks. All commercial banks- total
Indian and foreign, regional rural 1969 8260 1860 22 63,800
banks & State co-operatives are 1991 60,650 32,750 54 14,150
2007 72,170 30,590 42 15,000
scheduled banks whereas non-
Source: Economic Survey, 2007-08, TableA-58

Scheduled Banking Structure in India

The chart above shows Scheduled Banking Structure in India.

YOJANA March 2010 55

 The above table shows that within
33 years, after bank nationalization,
there was over 800% increase in
number of branches but the major
progress is in rural branches i.e. 1860
to 30,600 banks. . This rate of branch
expansion has been unparalleled
anywhere else in the world.”
Source: RBI
Development-oriented Banking-
After independence, banking has
moved away from the traditional
pulls into new directions. The concept
of banking has widened from more
acceptance of deposits and lending
of funds to development-oriented
banking. Banks are increasingly
catering to the needs of industrial
and agricultural sectors. From short-
term financing, they have shifted
to medium and even long-term
lending. From well-established
large industrial and business houses,
banks are positively assisting small
and weak industrial units, small
farmers, artisans and other hitherto
neglected groups in the country.
The most significant aspect of
the new awareness and involvement
in the development effort is the
adoption of lead bank scheme
under which all the districts of the
country are allotted to some or the
other bank. The function of a lead
bank is:-
56 YOJANA March 2010
(a) Opening bank offices in all the
important localities.
(b) Providing maximum credit
facilities for development in
the district.
(c) Mobilizing the savings of the
people in the district.
The performance of the lead
bank is judged by the number
of projects helped by them for
improving productivity or creating
employment opportunities which
are expected to become catalyst of
development of the district.
Priority Sector Lending By Banks-
Before 1969, commercial banks
neglected priority sector lendings and
Source: NABARD
they were owned by and controlled
by big industrialists, but after
nationalization commercial banks
started financing of priority sectors
like agriculture, small industry &
business, retail trade, professional
& self-employed persons, education,
housing loans for weaker sections
and consumption loans.
The Union Finance Minister had
on June 18, 2004 announced certain
measures for doubling of flow of
credit to agricultural sector within
a period of three years. The actual
disbursement by banks exceeded
the targets in each of the three years.
For the years, 2007-08, a target of
Rs.2,25,000 crore disbursement by
banks was fixed, while adding 5
million farmers to their portfolio.
As against this, all banks (including
RRBs & Co-operative bank)
disbursed Rs.2,54,657 crore forming
113% of the target. During 2007-
08, 75.36 lakh new farmers were
financed by commercial banks &
RRBs. The amount disbursed by all
banks during 2008-09 is placed at
Rs.2,64,455 crore.
The figure below shows the flow
of institutional credit to agricultural
and allied activities:
Social Banking-
The Government of India used the
public sector banks to finance many
of its pet programmes of poverty
reduction and poverty eradication.
The programmes like Integrated
Rural Development Programme
(1990-91); Prime Minister’s Rojgar
Yojana for Educated Unemployed
Yo u t h ; S c h e m e f o r U r b a n
Micro Enterprise; bank credit
to minority communities; Prime
Minister’s Employment Generation
Programme etc. are financed by
the commercial banks. In fact, this
has been an essential feature of the
country’s development strategy and
a major cause for low profitability
of public sector banks, because
the loans very often do not reach
the actual needy people, and the
recovery mechanism is also very
weak.
Source: Reserve Bank of India
Figures above represent Small
scale industries in terms of revised
guidelines on lending to priority
sector, micro and small enterprises
defined on the basis of Micro,
Small and medium Enterprises
development Act,2006. The bar
graphs of three years show that
lendings from Public Sector banks
to Priority Sector, Micro and Small
Enterprises and Weaker sections are
showing an increasing trend.
YOJANA March 2010 57
This means that social banking
is gaining importance in the current
economy.
Diversification in Banking
Services:
According to the Banking
Regulation Act,1949, banks have
the right to diversify their functions
according to need. The diversification
is seen in the following areas:
l Merchant Banking and Under
Writing- Commercial banks
have now set up merchant banking
divisions and are underwriting
new issues, especially preferences
shares and debentures, they
have been instrumental in the
conclusion of deferred payment
agreements between Indian
industrial houses and foreign
firms. Previously, banks provided
merchant banking services to few
known companies but now they
are offering wider services to a
large clientele. There are eight
commercial banks at present
which have set up equipments
leasing and merchant banking
subsidiaries.
l Mutual Funds- At one time,
mutual funds were a monopoly
of Unit Trust of India but now
seven public sector banks have
set up mutual funds.
l Retail Banking- Retail
Banking refers to housing
loans, consumption loans
for the purchase of durables
like refrigerators, TVs, air
conditioners, auto loans, credit
cards, educational loans etc.
The loan –value can lie between
Rs.20, 000 to Rs.1 crore. These
loans are generally for duration
of 5 to 7 years or 15 years in case
of housing loans. Retail Banking
has been facilitated by the
growth in banking technology
and automation of banking
process.
l ATMs- “Automated Teller
Machine” have emerged as an
alternative banking channel
which facilitates low cost
banking transaction.
l Anywhere Banking- Under
this system, a customer having
an account with any selected
branch can operate it from
other designated branches
of the bank throughout the
country. The facility includes
cash withdrawal, cash-deposit,
transfer of funds, collection of
local cheques, intra-city and
inter-city transactions etc..
l Internet Banking In India-
This is still only in a rudimentary
stage in India. Every client is
supplied with a unique personal
identification number (PIN) for
transacting with the bank-on-
line.
l Venture Capital Funds-
Some banks have launched
venture capital funds (VCF) to
provide equity capital for pilot
plants attempting commercial
application of indigenous
technology and adaptation of
 previously imported technology
to domestic conditions. The
Government of India has
issued detailed guidelines and
procedures for establishment of
VCF, management structure, size
and investment of the fund etc.
l Factoring- Banks are permitted
to take up factoring by floating
subsidiaries. Factoring is a
device by which book debts are
quickly realized through outright
sale of accounts receivable to a
financial intermediary (or a
bank‘s subsidiary) called the
‘factor’. The RBI has already
accepted factoring in principle
and banks may float subsidiaries
to take up factoring. SBI and
Canara Banks are the only two
banks which have set up separate
subsidiaries exclusively for
undertaking factoring services.
20 banks have now been given
permission to introduce the stock
invest scheme, increasing the
total number of such banks to 51.A
number of banks have set up Asset
Management Companies(AMCs) to
manage their mutual funds.
Future Challenges to Banks in
India
The banking industry is slated
for growth in future with a more
qualitative rather than quantitative
approach. The total assets of all
scheduled commercial banks by
end-March 2010 is projected to
touch Rs 40, 90,000 crore. This
is going to comprise around 65%
of GDP at current market prices
as compared to 67% in 2002-03.
The bank's assets are estimated
to grow at an annual composite
rate of growth of 13.4% during
the rest of the decade as against
16.7% between 1994-95 and 2002-
03. Barring the asset side, on the
liability perspective, there will be
huge additions to the capital base
and reserves. People will rely
more on borrowed funds, pace of
deposit growth slowing down side
by side. However, advances and
investments would not see a healthy
growth rate.
Indian banks are hopeful of
becoming global brands as they
are the major source of financial
sector revenue and profit growth.
The financial services penetration in
India continues to be healthy, thus
the banking industry is also not far
behind. As a result of this, the profit
for the Indian banking industry will
surely surge ahead. The profit pool of
the Indian banking industry is likely
to augment from US$ 4.8 billion in
2005 to US$ 20 billion in 2010 and
further to US$ 40 billion by 2015. This
growth and expansion pace would be
driven by the chunk of middle class
population. The increase in the number
of private banks, the domestic credit
market of India is estimated to grow
from US$ 0.4 trillion in 2004 to US$
23 trillion by 2050. India may well be
the third largest banking hub of the
globe by 2040 . q
(Email : barnaganguli@yahoo.in)

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21 Selections in IAS-2008
including

Daljeet Singh Sukhchain Singh Gaurav Sharma Sachin Kapoor Ravneet Khurana Karthik Kashyap Tejaswi Naik Shilpa Prabhakar Sandeep Rathod
128th Rank(Prev.) 698th Rank(2008) 115th Rank(Prev.) 440th Rank(IAS-2007) 330th Rank(IAS-2007) AIR-140(IAS-2008) AIR-132(IAS-2008) AIR-46(IAS-2008) AIR-136(IAS-2008)
Under the Guidance of
YE-3/10/2

Mr. M. Puri(Faculty of Pub. Admn.)

YOJANA March 2010 59

Communication
innovation

Community Radio for Rural Development

Arpita Sharma

A
community radio and local institutions are the
station is one that principal sources of support for
is operated in the its operation.
c o m m u n i t y, f o r t h e
Characteristics of Community
community, is about
Radio
the community and by the
community. The community can Following are the characteristics
be territorial or geographical - of community radio:
a township, village, district or
Community Radio island. It can also be a group of
• It serves a recognizable
community.
can play a very people with common interests, • It encourages participatory
who are not necessarily living
important role in i n o n e d e f i n e d t e r r i t o r y.
democracy.

bringing about Consequently, community radio

• It offers the opportunity to any
member of the community to
can be managed or controlled
social change. by one group, by combined
initiate communication and
It covers all groups, or of people such as
participate in program making,
management and ownership of
developmental and women, children, farmers, fisher
folk, ethnic groups, or senior
the station.
rights based issues, citizens. What distinguishes • It uses technology appropriate
to the economic capability of
and can help community radio from other
media is the high level of the people,
sustain the diversity people’s participation, both • It is motivated by community
of the local cultures in management and program
production aspects. Furthermore,
well being, not commercial
considerations.
and languages individual community members
The author is a Ph. D. Student, Department of Agricultural Communication, G. B. Pant University of Agriculture &
Technology, Pantnagar.

60 YOJANA March 2010

• It promotes and improves
problem solving.
Why Community Radio?
Community radio gives
community members access to
means of communication and
therefore, access to information..
Important local issues are aired,
a free market place of ideas
and opinions is opened up and
people are given the opportunity
to express themselves socially,
p o l i t i c a l l y a n d c u l t u r a l l y.
Community radio helps to put
the community members in charge
of their own affairs. Unlike the
state / privately owned radio
channels, community radio is
community owned, functionally
autonomous, preserves local
identity and promotes two
way communication. Whereas
radio on an individual level can
provide one with entertainment,
information, awareness etc. ,
community radio does this for
the entire community and acts as
a catalyst for change. It serves
as a watchdog for power holders,
affording active relationships
between leaders and the citizens,
helps to develop common objectives
by providing debates on issues,
exposes options for community
action, preserves culture, helps
disseminate new ideas, reinforces
values, helps maintain social order,
offers chance for individuals and
groups to speak to each other, thus
developing awareness of a common
membership of community, and
finally, mobilizes both private and
collective resources for personal
or community needs. It is for these
reasons that community radio is
YOJANA March 2010 61
emerging as a powerful tool for
rural development.
The concept of Community
Radio has been perceived
differently by different nations.
As per UNESCO, community
radio aims to fulfill the following
functions:
Reflect and Promote Local
identity, Character, and Culture:
Community radio provides
programming that is particular
to its community’s identity and
character. There are some 6,700
languages in the world and 63
percent of these are in Africa and
Asia. National broadcasting and
media globalization, combined
with other factors such as urban
migration, threaten half of the
world’s languages with extinction
during the next generation. And
with them will go their cultures.
Community radio is a prime defence
against this
Create a Diversity of Voices
and Opinions : This emerges from
the fact that anybody from the
community can participate.
P ro v i d e a D i v e r s i t y o f
P ro g r a m m e s a n d C o n t e n t :
Community radio provides
a diversity of programmes in a
variety of formats and styles. For
example, roundtable discussions,
reportage, talks, interviews, call-in
programmes, live broadcasts of
meetings in the community, etc.
Audience preferences are taken into
account in deciding both content
and formats .
Encourage Open Dialogue
and Democratic Process: It is the
function of community radio to
provide an independent platform
for interactive discussion about
matters and decisions of importance
to its community..
Promote Development and
Social Change: Community radio
provides the perfect platform
for internal discussions and for
reaching a collective perception of
the situation. Specific problems can
be analyzed, remedies discussed,
and those most affected- or who can
help with the solution – mobilized
to collective action.
P ro m o t e C i v i l S o c i e t y :
Community radio focuses on
explaining the implications of
democracy and civil society, raising
awareness about people’s rights,
and also about their obligations.
Promote Good Governance:
Community radio helps people
to obtain their just rights by
giving them a platform to air their
grievances. And through playing
the community watchdog role,
it makes local authorities and
politicians more conscious of their
public responsibilities.
Encourage Participation,
Sharing of Information and
Innovation, by providing a platform
for debate, analysis, and the
exchange of ideas and opinions. In
addition, community radio allows
for the sharing of information and
innovation.
Give Voices to the Voiceless: in
many traditional societies, women
and youth and ethnic and linguistic
minorities are virtually ignored in
community affairs. Community
radio gives voice to such voiceless
people in the community.
Replacement for the Telephone:
In the poor rural areas, community
radio replaces telephones to an
important extent by broadcasting
messages.
Contribute to Diversity
in Broadcasting Ownership:
community, commercial, and
national or state broadcasting
all have roles in society, though
community broadcasting is the one
that has generally lagged behind
the others. Community radio helps
to redress this, and provides the
balance of broadcast information
sources needed by democratic
societies for their advancement.
Status of Community Radio in
India
According to R. Sreedher,
D i r e c t o r, C o m m o n w e a l t h
Educational Media Centre for Asia
(CEMCA), “Community Radio can
be compared to a four year old child
who is trying to understand the
system." Karthik Panchapakesan of
Radio Active agrees with this view
and says that Community Radio
in India is in a state of infancy, but
he adds that it is also delivering
and making inroads (in some cases
headways) in dissemination and
creating awareness of scientific
information and empowerment.
According to K. Thangaraj, Chief
Co-ordinator, Kongu Community
Radio, "A vast country like India
needs several thousand Community
radios [with the permitted antenna
height (30 m) and power (50
watts)]. Target has been fixed for
62 YOJANA March 2010
4,000 to 5,000 Community Radios are structural causes to poverty such
but till now we have realised only as inequality rather than simply a
45. Even these 45 stations are on lack of information. Vertical model
air only for a few hours. More uses mass media which is expensive
agencies and institutions must come and unsustainable. Participatory
forward to establish Community model is more process oriented and
Radio in the true spirit, and this seeks to empower people. The first
could really happen now that the is short term, and the other is long
government has come forward to term. One emphasizes approaching
permit limited advertising..." J. Paul the individual while the other
Bhaskar of Pasumai Community reaches for the community.
Radio, feels that in India, the
The concept of community radio
Community Radio is still the low-
is 50 years old and had started
powered, small reach radio. Rahul
in Bolivia among the tin mining
Joshi, Assistant Station Head,
communities when they needed
Vivek Community Radio feels that
a format to discuss the issues in
procedural and bureaucratic blocks
their day to day lives. Now the
in the decision making process
concept has spread worldwide,
have to be removed and greater
though development in different
awareness about Community Radio
regions remains uneven. In Latin
has to be created. Amolina Ray
America, there is much diversity
of radio JU (Jadavpur University
in the types of noncommercial
CR) feels that Community Radio
radio stations, which may focus
has great potential that is yet to be
on education, indigenous people,
tapped. It gives a platform to the
gender, rural or urban issues.
Community to voice their opinion
Community based radio stations
and can be developed as a medium
spread rapidly in South Africa
for community interaction on a one
after the fall of apartheid. More
to one basis.
than 100 community stations exist
World Experience today in Mali. With current trends
toward empowerment and civic
According to Alfonso Gumucio,
participation, the role of community
a communications consultant
radio is taking on increased
working with community radio
importance, both in the developing
networks globally, there are two
and developed worlds. One of the
main models of communications
strengths of community radio is
for development -vertical and
that the participants do not need to
participatory. Vertical model evolves
know how to read or write. Legal,
from marketing and advertising
regulatory and policy environments
practices of the industrialized
in some countries, however, make
world and emphasizes behavioral
community radio difficult for
changes. The participatory model
example in Bangladesh.
is horizontal and calls upon people
to create social change. The In Africa, radio is a cultural
participatory model suggests there medium. According to Soule
Issiaka of the Africa Bureau of
Radio Netherlands, this is because
radio here is a product of the local
culture. Although Africa has a high
percentage of illiteracy , it has an
oral tradition, which has helped this
medium to grow.
In East Timor training was
provided to rural reporters in the
early 2000s to support the national
radio system, and acquisition of
small scale equipment. Residents
needed an outlet to express
themselves. The World Bank
launched a project which sought
to promote community radio.
Potential radio stations were
identified by surveying demand.
Proposals were put together by
hopeful recipients. Technical
assistance was provided by a
central community radio network..
A bottom-up consultation process
with the communities proved
invaluable. Also important was
taking advantage of existing
networks and infrastructure. The
East Timorese are now using
radio to promote reconciliation,
solidarity, and local development
planning in the post-conflict
period.
Challenges
Community radio faces
challenges in effective and quality
programme production in terms
of content, production quality
and community involvement.
The staff lacks journalistic,
management or technical skills,
training modules do not address
specific needs of the medium,
getting people's participation is
very difficult, infrastructure like
electricity is very often a major
problem, in many countries there
is also a lack of a clear regulatory
framework for Community Radio
to operate.
Among the various challenges
faced by the community radio,
the participation from the people
is a major one. Concerted efforts
are required in this direction, like
involving opinion leaders, elder,
religious leaders, women, different
occupational groups like farmers,
artisans, fisherman, minority groups
etc in consultation processes ,
group discussions and programme
evaluation. This would give a reality
check on people's preferences and
priorities, and also encourage their
participation.
Community Radio can play a
very important role in bringing about
social change. It is truly a people's
radio that perceives listeners not only
as receivers and consumers, but also
as active participants and creative
producers of content. Community
Radio covers all developmental and
rights based issues, and can help
sustain the diversity of the local
cultures and languages. Community
radio has been used in many countries
in various fields of development like
health, nutrition, sanitation, women
empowerment and also agriculture.
This medium needs to be supported
through legislative, administrative,
and financial measures. q
(Email : sharmaarpita35@gmail.com)

Health Budget - Rs 2,700-cr boost for Health

E
ven as the government hiked the Ministry of Health and Family Welfare's allocation by Rs 2,700
crore for 2010-11, the UPA's flagship programme National Rural Health Mission (NRHM) saw an
increase of only 10 per cent over last year.
Saying there was a need to provide health facilities to both rural and unban households, Finance Minister
Pranab Mukherjee said the allocation for the Health Ministry was being increased from Rs 19,534 crore to
Rs 22,300 crore. He also announced that an annual health survey would be carried out to prepare district
health profiles. "The findings of the survey should be of immense benefit in major public health initiatives,
particularly the NRHM, which has successfully addressed the gaps in delivery of critical health services to
rural areas."
While the overall health sector got a boost, the capital expenditure for the year 2010-11 also saw a reduction
of over Rs 390 crore. The main focus is on 18 states with weak public health infrastructure. The Budget
simplifies the duty regime on medical equipments and appliances, proscribing a uniform, concessional basic
duty of 5 per cent, with full exemption from special additional duty, on all medical equipments.

YOJANA March 2010 63

 YE-3/10/1

64 YOJANA March 2010

J&K Window
farmers to develop mulberry nurseries

M
ulberry tea, which is being relished in some parts of the world, is set to reach our teapots soon.
Scientists at Jammu and Kashmir’s Sher-e-Kashmir University of Agriculture Science and
Technology (SKUAST) have extracted various tea varieties from mulberry leaves and say they
could be marketed in Kashmir and outside within next two years.
Trials for mulberry tea began in 2007 at the university and the results were very encouraging. Mulberry is
grown for silk production in Kashmir, its surplus leaves can now be used to extract tea. This can be marketed
once the department is ready with its findings next year. Trials on a few more varieties have to be conducted
over the next year. During the trials it was found that mulberry tea could be best developed from indigenous
varieties. Around 70 varieties of mulberry are grown in Kashmir.
A senior researcher associated with the mulberry tea trials said the tea was also found to have medicinal
values. It tastes much like Kashmir’s famous sweet tea Kehwa. “It also has medicinal values and could be
useful for patients suffering from Type II Diabetes and blood pressure,” the researcher added. Trials in this
respect are also underway. At present, mulberry is grown in vast swathes of fields in north and south Kashmir.
Mulberry nurseries, however, are yet to come up.
The department is trying to motivate farmers to develop mulberry nurseries. If the health drink is successful,
the nurseries will come up in large numbers across Kashmir. Jammu and Kashmir is the country’s fourth
largest silk producing state and the mulberry trees are also grown in forest areas here.
“I have so far been producing mulberry for silk. Now I am planning to extract tea from its leaves as
SKUAST had offered to teach me its technology,” said Mohammad Yasin, a farmer who owns a big mulberry
nursery in Kashmir.

An extraordinary repository of seeds in the Himalayas

Seeds prioritised for yield or resistance to temperature, pests

I
t is India’s doomsday vault. If the land lies cracked and barren waiting for the rain, if the sea swallows
coastal paddy fields, if plagues of pests wipe crops out of existence, India has an insurance policy- a set
of seeds carefully preserved in permafrost, ready to be restored, that can be cultivated and sown to feed
its people.
Nestled 17,500 m high on a cliff top in the Himalayas, Chang-La has the sub zero temperatures and low
humidity necessary to suspend seed life for future generations. It is a site carefully chosen. It is far from
rising seas and tectonic plate movement but around 75 km from the Leh airport, it is close enough to human
civilisation today to deposit the country’s agricultural heritage with ease.
Mr. W. Selvamurthy distinguished Scientist and Chief Controller (R&D) Ministry of Defence feels that
India is a herbal garden. It is now getting threatened or endangered or extinct and there is a dire necessity to
preserve this rich wealth of biodiversity, to give it to the next generation. Chang-La, opened last December,
now holds 5,000 seeds from the Ministry of Defence. Government departments, research organisations and
more are welcome to store useful and viable seeds for free. Their qualities will be digitally indexed and
available through open access software to further science globally.
Crop seeds, developed slowly and carefully over thousands of years, are not only the source of sustenance
for humankind but the best repository of genetic material scientists can use to help develop food resistant
to the vagaries of climate change.
Transgenic cropping to ensure that our grains, pulse and vegetables can reproduce at high altitudes,
in salty water, less water and high temperatures, is essential to provide future generations with the same
opportunities of today.
(Courtesy : Newspapers)

YOJANA March 2010 65

Budget 2010-11
view point

Fiscal Federalism: Emerging Challenges in

India
T Sadashivam

I
ndia is the largest and
probably the most diverse
democratic country in the
world, with a federal form
of government and more
importantly, clearly demarcated
financial powers between different
layers of the government.. Fiscal
federalism in India has evolved
The states need since the early days of planned
to initiate development in the 1950’s, but is
faced with major challenges today,
economic reforms necessitating modifications in the
in consonance with existing architecture.
economic reforms Fiscal Federalism is concerned
with understandings as to which
of the centre, which functions and instruments are
comprise fiscal best centralized and which
are best placed in the sphere
consolidation, of decentralized levels of
government. In other words, it
reduction of is the study of how competencies
fiscal deficits, and (expenditure side) and fiscal
instruments (revenue side)
development with a are allocated across different
human face layers of the administration.
An important part of its subject
matter is the system of transfer
payments or grants by which a
central government shares its
revenues with lower levels of
government
Thus according to the theory
of Fiscal Federalism, functions
which involve national interest,
economies of scale, lumpy
investments and substantial
spatial externalities should be
left to the national government.
Functions, the benefits of which
are largely confined to regional
jurisdictions and which are subject
to heterogeneous preferences
should be assigned to the state
governments. Sanitation, street
lightning, and fire safety are
services the benefits of which
are localized and performed
by local governments, [e.g.
Municipalities]. In short
expenditure and service
responsibilities should be

The author is a Doctoral Research Scholar and Guest Lecturer, Dept of Political Science, Faculty of Social Sciences, Jamia
Millia Islamia, New Delhi

66 YOJANA March 2010

assigned according to the benefit
area of each service( M.M.Sury,
2008)
Evolution of Fiscal Federalism
in India
Pre- Independence Period
The present fiscal structure
of India is the result of a gradual
evolution over the last 140 years.
The first step for devolving financial
provisions to the provinces was
taken by Lord Mayo in a resolution
which said: “I believe as I have
repeatedly said that we place
administration of portions, both
of our revenue and expenditure, in
the hands of local government. It
will enable the rulers of the country
gradually to institute, in various
parts of the empire, something in
the shape of local self government,
and will eventually tend to associate
more and more natives of this
country in the conduct of public
affairs.”
The Government of India Act of
1919 brought in decentralization in
matters of land revenue, irrigation
receipts, excise duty and judicial
stamp, and this was taken further
by the Government of India Act
1935, according to which revenue
of provinces came to comprise land
revenue, sales tax, excise duties
on alcoholic liquors and narcotics,
shares of central taxes, such grants
in aid ‘or’ specific purpose grants
as might be approved by the central
legislature. The government of
India appointed Sir Otto Niemeyer
to recommend transfer of revenue
to the provinces under various
sections of the 1935 Act. His
recommendations were embodied
in the Government of India
YOJANA March 2010 67
(Distribution of Revenue) order
1936. The Niemeyer Award was
followed till the implementation of
the recommendations of the First
Finance Commission in 1952.
Post- Independence Period
The Indian Constitution provides
for a division of legislative,
administrative and financial
powers between the union and state
governments as laid down in the
Union, State and Concurrent Lists.
The constitution also requires the
President to appoint a Finance
Commission every 5 years ‘or’
earlier to review the finances of the
Union and States and recommend
in respect of
• The distribution of the net
proceeds of taxes to be shared
between the centre and the
states and allocation between
the states.
• The principle which should
govern the grants-in-aid to the
states by the centre.
• The measures needed to
augment the consolidated fund
of a state to supplement the
resources of the panchayats
and the municipalities in
the state on the basis of the
recommendations made by the
State Finance Commission.
• Any other matter referred to the
commission by the President in
the interests of sound finance.
Emerging challenges in Fiscal
Federalism
Since in a federal polity, two
sets of governments operate
simultaneously and directly upon
the same people and have to
perform their distinct functions
in relation to them, it is most
desirable that the centre and each
of the state governments must
have under its own independent
control financial resources
sufficient to perform its exclusive
functions and they should also
be allowed to have their own
distinct policy. However, of all
federal problems, the financial
relations between the centre and
the units are most difficult.”
(Prasad, Anirudh. , “Centre- State
Relations in India,” ) Especially,
in recent times, where functions
and responsibilities of different
layers of government becomes
dynamic in character.
Impact of Globalization and
Economic Slowdown
The emergence of a new ‘border
less’ world economy coupled with
economic liberalization policies
are having curious repercussions
on centre- state relations in India.
A decline is visible in central
government economic activities,
and it becomes apparent that the
nation states are too small to tackle
large things in life and too large to
address small things. There is now a
need for applying market principles
for allocating resources to the state.
With the gradual emergence of
coalition polities at the centre, there
are increased demands for a more
decentralized federal system. It has
also promoted a change in federal
relations from, inter-governmental
cooperation to inter-jurisdictional
competition among the states,
for example, competition with
each other for foreign investment
inflows. The current global
financial and economic downturn,
will also put a strain on state
budgets, posing new challenges for increasingly dependent on central Commission, the proportion of union
fiscal federalism. assistance. One reason for this is loan in the total debt liabilities of state
the composition of central assistance governments has increased, because
Indebtedness of States and Basis
for plans given under the GADGIL the states have to pay the interest
of Distribution of Taxes
formula of 1969, which has given and principal in respect of loans
The constitution has given loan grant ratio of 70: 30. Even with contracted from the centre. Even
more powers regarding taxation the implementation of the states Debt the First Administrative Reforms
and borrowing to the Centre than Consolidation and Relief Facility as Commission study team on centre-
to states. States are becoming recommended by the 12th Finance state relations, commenting on the
Table 1: Percentage Shares of the States in the Net Proceeds of Income Tax Assigned to the States as Recommended
by the Tenth Finance Commission, Eleventh Finance Commission and Twelfth Finance Commission.
State Share ( Per-cent)
10th Finance 11th Finance 12th Finance
Commission Commission Commission
Andhra Pradesh 8. 465 7. 701 7. 356
Arunachal Pradesh 0. 170 0. 244 0. 288
Assam 2. 784 3. 285 3. 235
Bihar 12. 861 14. 597 11. 028
Goa 0. 180 0. 260 0. 259
Gujarat 4. 046 2. 821 3. 569
Haryana 1. 238 0. 944 1. 075
Himachal Pradesh 0. 704 0. 683 0. 522
Jammu and Kashmir 1. 097 1. 290 1. 297
Karnataka 5. 339 4. 930 4. 459
Kerala 3. 875 3. 057 2. 665
Madhya Pradesh 8. 290 8. 838 6. 711
Maharashtra 6. 126 4. 632 4. 997
Manipur 0. 282 0. 366 0. 362
Meghalaya 0.283 0. 342 0. 371
Mizoram 0. 149 0. 198 0. 239
Nagaland 0. 181 0. 220 0. 263
Orissa 4. 495 5. 056 5. 161
Punjab 1. 461 1. 147 1. 299
Rajasthan 5. 551 5. 473 5. 609
Sikkim 0. 126 0. 184 0. 227
Tamil nadu 6. 637 5. 385 5. 305
Tripura 0. 378 0. 487 0. 428
Uttar Pradesh 17. 811 19. 798 19. 264
West Bengal 7. 471 8. 116 7. 057
Chhattisgarh Not Existed Not Existed 2. 654
Jharkhand Not Existed Not Existed 3. 361
Uttranchal Not Existed Not Existed 0. 939
Total 100. 000 100. 000 100. 000
Sources – Report of the 10th Finance Commission, 1994, p.25. Report of the 11th Finance Commission, June 2000, p.59.
Report of the 12th Finance Commission, November, p.133.

68 YOJANA March 2010

ever increasing massive indebtedness
of the states, had observed that the
states find it increasingly difficult to
repay their debts, or even the interest
charges in some cases, and that
repayment of central loans constitute
an increasingly large part of the total
states borrowings from the centre.
( Prasad Anirudh,) The basis of
distribution of taxes among different
is also a source of conflict. The union
government has been asking the
successive finance commissions to
use 1971 census figures as a criterion
for revenue distribution based on
population. These formulas are meant
to protect the interests of those states
who have considerably reduced their
population growth rate. But the 1971
population data does not present the
current picture, thus some states
emphasise on per capita expenditures
on social and economic development
as an appropriate measure of the
fiscal needs of the states whereas,
there are some who believe that
relative per-capita income of the state
is the better indicator of the need of
the states. {See the below table for
better understanding}
Growth of Inter State
inequalities
Inter regional disparities among
the states in economic matters has
existed since a long time but it
has increased particularly in the
1990’s after market based reforms
were initiated. Balanced regional
development has been an important
objective in our planning and
various instruments including fiscal
incentives, industrial policies and
directly targeted programmes have
been deployed in the past to achieve
it. Despite this , there is, evidence of
increasing regional divides. Growth
YOJANA March 2010 69
performances across states have
been varied .The performance of
poor states with poorer infrastructure
has been lagging.(M M Sury)
Introduction of GST
The country will soon have a
dual Goods and Sales Tax structure
which centre and state governments
will legislate, levy and administer.
G.S.T is expected to replace excise
duty and service tax at central
and VAT at state level. Although
many countries have adopted this
tax system, we have to see its
implication on our financial system,
especially the fiscal relationship
between centre and states, as the
states will lose revenue earning
from VAT, when G.S.T. come
into force. The 13th Finance
Commission has also asked to take
into consideration the likely impact
of the implementation of the GST
Effects of Climate Change
Climate change is also likely
to impact the centre – state fiscal
relations. The rise of sea levels
will lead to submergence of many
areas, global warming and change in
monsoon patterns will hit agricultural
productivity, fisheries will be affected.
All this will result in loss of livelihood
for people. The impact of climate
change will fall differently on people
and the states with majority of poor
people will be the worst hit. So
the development activities of these
states have to be sustainable and
need to have consensus based on
ecology, environment, and climate
change. As it was also included in
the terms of reference of 13th Finance
Commission [2010 to 2014-15], the
National Action Plan on Climate
Change adopted by India in July
2008, in which 8 missions in key areas
of activity were identified, need to be
urgently implemented. They are solar
energy, enhanced energy efficiency,
sustainable habitat, conserving
water, sustaining the Himalayan
Eco-System, creating a “Green India”
sustainable agriculture and finally
establishing a strategic knowledge
platform for climate change. To
achieve this, nationally appropriate
mitigation actions, supported and
enabled by technology, financing
and capacity – building are required.
All this require more money so, the
states have to depend more upon
the centre for adaptation, mitigation
and technology led development,
which in coming years will further
transform fiscal federalism.
Conclusion
The relationship between the centre
and states need to undergo a change
in the present time in order to be
able to respond to the forces of
globalization, the dynamics of
coalition politics and the current
global financial and economic
slowdown. Despite an existence
of fiscal arrangements since
independence, fiscal imbalances
at central and state levels pose a
serious threat to macro-economic
stability in the country. Thus for
achieving and maintaining the
national G.D.P. growth of double
digit, we need to have more fiscal
decentralization The states need
to initiate economic reforms in
consonance with economic reforms
of the centre, which comprise fiscal
consolidation, reduction of fiscal
deficits, and development with a
human face. q
(Email : sadajmi@gmail.com)
 YE-3/10/6

70 YOJANA March 2010

book review
tITLE : NON-TAX SOURCES IN
INDIA: ISSUES IN PRICING
AND DELIVERY OF
SERVICES
Authors : Mahesh C Purohit and keep in mind the objective of equity,
Vishnu Kanta Purohit
Page : 221 pages
Price : Rs. 700/- & US$ 50.00
ISBN : 81-85930-15-5
Publisher : Gayatri Publications,
New Delhi, 2010
YOJANA March 2010 71
Mobilizing Resources
for Development
A
ugmenting
resources for the
states is an intricate
exercise that involves
balancing current
revenues, economic growth and
political considerations. Mobilizing
resources is not a pure economic
exercise; it has political dimensions
as well. The political economy of
mobilizing resources therefore has
to consider issues related to both,
the economic effects and the fall
out in terms of politics.
Mobilizing resources through
reforms in non-tax sources serves
the twin purpose of having a rational
non-tax structure and generating
greater means to achieve economic
growth. Irrational structure of non-
tax sources has adverse economic
effects that invalidate growth
objectives. From the economic
point of view, therefore, one has to
efficiency and neutrality; especially
the impact of these on the economic
growth of the economy. To fulfill
these objectives, one often has to
adopt an economically rational
structure of non-tax sources that
may not be palatable politically.
This book entitled ‘Non-tax
Sources in India: Issues in Pricing
and Delivery of Services’ written
by Mahesh C Purohit and Vishnu
Kanta Purohit is the outcome of a
research study of the Foundation
of Public Economics and Policy
Research, an autonomous, non-
profit organisation. The foundation
undertook this study with the
support of Socio Economic
Research Division of the Planning
Commission, Government of India.
The objective of the study is to
analyze the existing structure of
non-tax sources in the Indian states
and to recommended requisite
changes in its structure, so as
to enable the states to mobilize
resources for development.
The study analyzes the structure
of non-tax revenue sources which
includes ten services, namely (i)
public services, (ii) education,
sports, art & culture, (iii) medical,
public health and family welfare,
(iv) water supply and sanitation,
(v) forestry and wild life, (vi) major
and medium irrigation, (vii) minor
irrigation, (viii) industries, (ix)
mines and minerals, and (x) roads
and bridges. These ten services
account for about 2/3rd to 3/4th of
the administrative component of
non-tax revenue in different states.
The area of the study included a
few selected states like Rajasthan
(Northern Zone), Karnataka
(Southern Zone), Maharashtra
(Western Zone) and West Bengal
(Eastern Zone).
The book under review
consists of seven chapters which
attempt to provide wide scope
and significance of the states’
own non-tax resources, pricing
strategy, revenue realization,
rationalizing structure of non-tax
resources, procedural reforms
and issues in delivery of services
and policy imperatives. Also, the
book is an excellent informative
c o m p i l a t i o n o f Ta b l e s a n d
Annexures.
Chapter I of the book begins
with an introduction explaining the
objective and scope of the study and
focuses on taxonomy of non-tax
resources and highlights the non-
tax sources covered in the study.
The Chapter also gives theoretical
perspective on optimal recoveries
on public services, methodology
and data sources.
Chapter II analyses the fiscal
significance of the states’ own non-
tax resources. In continuation, the
chapter examines the role of various
social and economic services in the
budget. It describes the composition,
components and trends in states’
own non-tax revenue sources from
ten services. These trends indicate
that the non-tax sources are one of
the constituents of total revenue
receipts which do not play a very
72 YOJANA March 2010
significant role in financing state
expenditure. Also the growth of
receipts from own tax sources has
neither kept pace with receipts from
the other revenue sources nor has
it shown the requisite buoyancy
needed for an efficient fiscal system.
It also gives the global figures to
help of international comparison of
non-tax revenue sources.
Chapter III is a review of
literature covering pricing strategy
for public utility. The effort is
to analyze the intricacies of the
theoretical issues confined to
social and economic services.
This analysis is only confined to
the pricing strategy for publicly
provided private goods and public
utilities. The other forms of non-tax
receipts in the nature of interest,
dividends have not been taken into
account. The analysis also includes
a review of various theories of
utility pricing dealing with costs and
problems in price measurement as
well as issues involved in designing
the user charges. The chapter has
honestly mentioned that in a given
politico-economic situation, it is
very difficult to apply a purely
economic rational policy for user
charges.
Chapter IV describes about the
revenue realization from non-tax
revenue. The chapter has made
a good effort to answer how the
Government fixes user charges
for non-tax sources. The chapter
also highlights that the revenue
realization as percentage of revenue
expenditure in most services is
abysmally low as compared to the
norms, and points out the necessity
of a review of the user charges of
some of the services.
Chapter V is entitled
‘Rationalizing Structure of non-
tax Sources’ . Here the authors
point out that in order to review
the user charges, it is essential to
rationalize non-tax structure and
also mobilize further resources for
planned development, keeping
in view the objective of equity
and efficiency. It reveals that the
selected services mentioned in the
chapter face enormous pressure due
to the fact that the capability of the
public sector has not kept pace with
the services.
Chapter VI is on ‘Procedural
Reforms and Issues in Delivery of
Services’ . The authors have looked
at the procedural complexity in
delivery of services and have gone
ahead to suggest improvements in
and rationalization of procedures.
Chapter VII is the final chapter
of the book where the authors raise
issues and suggest policy measures
to improve the delivery mechanism
of the services.
The book is a welcome edition
and a good source of information
on different aspects of non-tax
sources in India. If a regular
updation of data is undertaken,
the book will be a rich source
of information for students and
academicians, NGOs, policy
makers, corporate and consultancy
organizations. q
Krishna Dev
(Email : kd.krishnadev@gmail.com)
YE-3/10/9
 Regd. No. RN 949/57
Licenced U (DN)-52/09-11 to post without
Published on 10 March 2010 pre-payment at RMS, Delhi (Delhi Post)
Posted on 12-13 March 2010 Postal Regd. No. DL(S)-05/3230/2009-11

YE-3/10/3