UNDP Financing International Cooperation

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UNITED NATIONS DEVELOPMENT PROGRAMME
INTERNATIONAL COOPERATION BEHIND NATIONAL BORDERS: COUNTRY CASE STUDY ON INDIA

By Tarun Das ICRIER
Prepared for the Book Project The New Public Finance: Responding to Global Challenges
Office of Development Studies United Nations Development Programme New York - 2005 Note: The views expressed in this paper do not necessarily reflect those of UNDP. The author is working as Economic Adviser, Ministry of Finance, Government of India and a Consultant to the Indian Council for Research on International Economic Relations. The paper expresses personal views of the author, which may not necessarily imply views of the organizations he is associated with. Author is grateful to Inge Kaul, Arvind Virmani and an anonymous referee for constructive comments on an earlier draft.
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ABSTRACT
The country case study on India provides a good example of employing public finance policies and instruments to promote international cooperation. Key thrusts of international participation are to improve India's economic conditions and international competitiveness and at the same time to contribute towards global prosperity, peace and development. The country has attached high importance to global issues such as combating international terrorism, tackling environmental challenges, communicable diseases, drug trafficking and money laundering and supports measures taken by multilateral organizations. It is actively responding to these problems and allocating adequate resources for development and strengthening of appropriate institutional and legal set up. The case depicts a country that has not only been adjusting its policies to globalization challenges but taking a proactive role in international forums to influence and shape globalization. Moreover, the study shows how it has balanced profound economic reforms (liberalization, privatization and a revamping of governments administration and role) with human development needs by providing safety nets to vulnerable groups and following a gradualist approach to reforms.
Country Case Study on India
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CONTENTS
INTRODUCTION ........................................................................................................................................4 I. INSTITUTIONAL ASPECTS ...............................................................................................................5 OVERVIEW OF INDIAS PUBLIC FINANCE .......................................................................................5
A. B. C. D.
INDIAS FISCAL FEDERALISM .....................................................................................................5 FISCAL REFORMS ...................................................................................................................... 6 REVENUES AND EXPENDITURE MANAGEMENT ............................................................................ 8 GOVERNMENT DEFICIT AND PUBLIC DEBT .................................................................................. 8
INSTITUTIONAL AND LEGAL DIMENSIONS ...................................................................................... 9

A. B. C. D.
TRANSPARENCY AND ACCOUNTABILITY IN BUDGET FORMULATION .............................................9 POLITICAL ECONOMY ASPECTS ................................................................................................ 10 INTERACTION WITH EXTERNAL ACTORS ................................................................................... 11 COUNTRY DELEGATIONS TO INTERNATIONAL BODIES ............................................................... 11
II.
INTERNATIONAL COOPERATION POLICIES .................................................................................. 11 KEY THRUSTS OF INTERNATIONAL COOPERATION POLICIES ....................................................... 12 INCOMING COOPERATION ............................................................................................................ 12
A. B. C. D. E. F. G. H. I.
INTERNATIONAL AGREEMENTS ................................................................................................ 12 POLICIES ON EXTERNAL ASSISTANCE ....................................................................................... 13 EXTERNAL SECTOR LIBERALIZATION ....................................................................................... 14 MILLENNIUM DEVELOPMENT GOALS (MDG) .......................................................................... 16 PUBLIC HEALTH ...................................................................................................................... 17 ENVIRONMENT, ENERGY AND R&D POLICIES ........................................................................... 17 TRANSPORT , COMMUNICATIONS AND TOURISM ........................................................................ 18 MONEY LAUNDERING AND DRUG TRAFFICKING ........................................................................ 18 IMPLEMENTATION OF WTO AGREEMENTS ............................................................................... 19
OUTGOING COOPERATION ........................................................................................................... 20

J. K.
TECHNICAL ASSISTANCE ......................................................................................................... 20 REGIONAL INTEGRATION ........................................................................................................ 20
III.
BUDGETARY ALLOCATIONS FOR INTERNATIONAL COOPERATION ............................................... 21

A. B. C. D. E. F. G. H.
MANDATORY CONTRIBUTIONS TO THE INTERNATIONAL AGENCIES ............................................ 21 EXPENDITURES FOR EXTERNAL AFFAIRS .................................................................................. 22 EXTERNAL DEBT SERVICES AND CONTINGENT LIABILITIES OF THE GOVERNMENT ....................... 22 TRADE AND EXPORT PROMOTION............................................................................................. 23 SOCIAL SERVICES EXPENDITURE RELATED TO THE MDGS ........................................................ 23 FINANCING ENERGY , ENVIRONMENT AND R&D ....................................................................... 23 TRANSPORT , COMMUNICATIONS AND TOURISM ........................................................................ 24 MONEY LAUNDERING AND DRUG TRAFFICKING ........................................................................ 24
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I. J. K.
INSTITUTIONAL SET UP FOR WTO ISSUES ................................................................................. 24 FOREIGN EXCHANGE RESERVE................................................................................................. 24 MIGRATION ............................................................................................................................ 25
CONCLUSION .......................................................................................................................................... 26 REFERENCES .......................................................................................................................................... 27 TABLES .................................................................................................................................................. 29 TABLE 1: INDIAS FISCAL AND FINANCIAL SECTOR REFORMS SINCE 1991........................................ 29 TABLE 2: REVENUE RECEIPTS OF THE CENTRAL GOVERNMENT , % OF GDP...................................... 30 TABLE 3: COMBINED EXPENDITURE OF CENTRE AND STATES, RUPEES BILLION ................................ 31 TABLE 4: COMBINED EXPENDITURE OF CENTER AND STATES, % OF TOTAL ...................................... 32 TABLE 5: TOTAL EXPENDITURE OF THE CENTRAL GOVERNMENT, RUPEES BILLION .......................... 33 TABLE 6: TOTAL EXPENDITURE OF THE CENTRAL GOVERNMENT, % OF GDP ................................... 34 TABLE 7: COMBINED FISCAL DEFICITS OF THE CENTRE AND STATES ............................................... 35 TABLE 8: OUTSTANDING PUBLIC DEBT BY THE CENTER AND STATES, % OF GDP ............................. 35 TABLE 9: MAJOR REFORMS IN INVESTMENT AND EXTERNAL SECTOR SINCE 1991 ............................ 36 TABLE 10: TRENDS IN HEALTH CARE IN INDIA, 1951-2000 ............................................................. 37 TABLE 11: BUDGETARY EXPENDITURE FOR INTERNATIONAL COOPERATION .................................... 38 TABLE 12: CONTRIBUTIONS TO INTERNATIONAL BODIES ................................................................ 40 TABLE 13: CONTRIBUTIONS BY THE INDIAN GOVERNMENT TO INTERNATIONAL BODIES ................... 41 TABLE 14: BUDGET ALLOCATIONS FOR EXTERNAL AFFAIRS ........................................................... 42 TABLE 15: BUDGETARY EXPENDITURE FOR TRADE AND EXPORT PROMOTION ................................... 43 TABLE 16: DUTY FORGONE UNDER SELECTED EXPORT PROMOTION SCHEMES ................................... 44 TABLE 17: BUDGETARY EXPENDITURE FOR SELECTED SOCIAL SERVICES ......................................... 45 TABLE 18: BUDGETARY EXPENDITURE FOR ENERGY, ENVIRONMENT PROTECTION AND R&D............ 46 TABLE 19: BUDGETARY EXPENDITURE ON TRANSPORT , TELECOM AND TOURISM .............................. 47 TABLE 20: BUDGETARY EXPENDITURE FOR DRUG-TRAFFICKING ...................................................... 48 TABLE 21: BUDGETARY EXPENDITURE FOR WTO INSTITUTIONS ..................................................... 48 TABLE 22: GLOBAL SUPPLY OF SCIENCE AND ENGINEERING STUDENTS GRADUATING IN 1999, 000S. 49 TABLE 23: WORKERS REMITTANCES RECEIVED BY DEVELOPING COUNTRIES, 2001 ......................... 49
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INTRODUCTION
International cooperation takes place both within national borders (e.g. in terms of national policy harmonization) and at the international level (e.g. through the creation and use of joint, pooled mechanisms such as the World Bank or the Global Environment Facility). This study addresses basically the former aspect that is, the national level public policy measures and related decision-making processes that facilitate international cooperation. More significantly, the study focuses on the financial implications of the national-level policies, which comprise not only funding and allocation of public and private resources for particular purposes but also non-financial tools such as regulation or norms and standards. This study provides a good example of employing public finance policies and instruments to promote international cooperation. India believes in the so-called LPG: liberalization, privatization and globalization. Given its democratic set up with a free press and independent judiciary, Indias movement towards globalization is based on general political consensus and has a bias for human development. India allows the free movement of goods and services and has adopted an open door policy for foreign investment and transfer of technology. It attaches high importance to global issues on terrorism, environmental challenges, communicable diseases, drug trafficking and money laundering and supports measures taken by multilateral organizations. It is trying to combat these problems and allocating adequate resources for development and strengthening of appropriate institutional and legal set up. India is not only adjusting its policies to globalization: it is also taking proactive parts in international fora to influence and shape globalization. For example, India took active part in the G-20 group of countries and International Monetary Fund (IMF) for shaping a new international financial architecture with a focus on special interests of developing countries. India welcomed the establishment and implementation of internationally accepted standards and codes to promote financial stability, but urged that there should be a clear prioritization among the proliferating population of standards and that the acceptance by developing countries should remain voluntary and should not form a part of IMF conditionalities. India took leading role in the group of developing countries in the inter-ministerial meetings of the World Trade Organization (WTO) and emphasized that implementation of the past negotiations on services trade and their impact on the production, trade and economic growth of the developing countries should be reviewed first before making another round of negotiations on trade and tariff (Das 2003b). The present report is organized in three main sections. Section I deals with institutional aspects and the fiscal structure and policies in India having a bearing on the financing of international cooperation. It examines the interplay between national interest groups and external actors. Section II deals with major international cooperation policies and Section III deals with financial allocations for development and strengthening of international economic, social and political cooperation. Conclusions, references and tables follow.
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I.
INSTITUTIONAL ASPECTS
OVERVIEW OF INDIAS PUBLIC FINANCE

This section deals with the main features of fiscal federalism and recent fiscal reforms in India. It discusses trends of major fiscal parameters, sources of deficit financing, public expenditure and debt management, and salient features of the Fiscal Responsibility and Budget Management Act 2003. a. Indias fiscal federalism India has a federal fiscal structure with three-tiers comprised of a central government, states and local bodies (consisting of municipalities and corporations in the urban areas and village Panchayats and district boards in rural and semi-urban areas). The Indian constitution specifies fiscal powers at each level and allows the devolution of funds from the Centre to the States and from States to the local bodies. The Finance Commission constituted every five years under the act of Parliament specifies the criteria for vertical transfer of major taxes and duties from the centre to the states and horizontal sharing of such funds among the States. The Planning Commission deals with the allocation of plan resources (for development purpose) among the states. The Finance Ministry deals with non-plan resources and grants, which are given to the states to meet their needs of current expenditure. The Finance Ministry also determines the share in fiscal incentives for reforms and provides natural calamity relief and loans. Central government can impose taxes on production, income, profits, wealth, external trade and financial transactions. States taxes include land revenue, sales tax, road tax, and royalties on minerals and state excise (on alcohol). Major taxes of local bodies (that is, municipalities and corporations) include property tax, scavenging tax, education cess, fire tax, entertainment tax and user charges for public goods and services. Taxation of services faces an assignment vacuum in the Constitution. The Central government filled this vacuum by enacting a Service Tax Act in 1994 under which it imposes service tax, presently at the rate of 8%, on selected services that have now grown to 58 in number. Under the Indian constitutional provisions, States cannot borrow directly from external sources and the Central government has to intermediate external borrowings and bear exchange rate risk for the states. Currently, external assistance is passed on to the states on the same terms and conditions as for normal central assistance for state plans i.e. in 90:10 mix of grant and loan to the hilly and backward states (the so-called special category states) and 30:70 mix of grant and loan to other states. Loans carry an interest rate of 11.5% with maturity of 20 years including moratorium of 5 years. The system involves certain amount of concession provided to the states. India is a founder member of major international organizations and the Central government makes mandatory contributions to these organizations. Contributions are made through the respective Departments and Ministries having the sectoral charge and dealing wit the concerned international organization. In general, the Finance Ministry
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deals with the international financial organizations, the External Affairs ministry with the United Nations and its agencies, and the Ministry of Commerce and Industry with trade related organizations. The Central government makes allocations for expenditure of Indian Missions abroad and provides external assistance to developing countries under the technical assistance program. Expenditures on foreign delegations are borne by the respective departments in the Centre, States and local bodies after the specific approvals of the Finance Ministry. The Central government provides various fiscal incentives for exports and investment including foreign investment. Central government provides assistance to the states to develop infrastructure for trade and export promotion, to deal with WTO issues and for environment protection and pollution control. In conformity with the federal structure, States provide various fiscal and other incentives for the development of industry and infrastructure, which are equally applicable to both domestic and foreign companies. b. Fiscal reforms India is a sovereign democratic republic and strongly believes in liberalization, privatization and globalization (LPG). India acknowledges the benefits of international financial, economic and diplomatic cooperation. Since 1991 India initiated reforms in industry, trade, public, fiscal and financial sectors to integrate fully with the global economy and to impart dynamism to the overall growth process. Reforms also emphasized development and strengthening of institutional, legal and regulatory set up. As the initial reforms take root and second-generation reforms unfold, India is emerging as one of the fastest growing and dynamic economies of Asia. Indias reforms program is characterized by the following unique features (Das 2003a): A gradual and step-by-step approach; not a Big Bang or Shock Therapy approach Focusing on general political consensus A strong emphasis on human face Pursuing policies with the least sacrifice made by people No write-off of external debt Given its democratic set up with a free press and an independent judiciary, Indias movement towards globalization is based on a general political consensus. All reforms including fiscal reforms have a bias for human development and are calibrated in such a way that there is least sacrifice made by the people. The government introduced various social safety nets for the vulnerable sections. The government set up National Renewal Fund to re-employ workers who might be adversely affected by industrial restructuring or free trade. The Fund was partly financed by disinvestment of government equities and partly by external assistance. The government expanded food and fertilizer subsidies with better targeting and strengthened poverty alleviation and employment generation programs. In the financial sector, government directed the nationalized banks to provide at least 40 per cent of their lending to the priority sectors (comprising agriculture, small scale
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industries, retail trade and transport operators) and to provide education and housing loans and export credits at concessional interest rates. Government attaches a high importance to global issues on terrorism, environmental challenges, communicable diseases, drug trafficking and money laundering and is allocating adequate resources for development and strengthening of institutional and legal set up to tackle these problems. On considering the level of per capita income, Indian contributions and budget allocations for international cooperation and global issues appear to be adequate, stable and sustainable over time. In the context of globalization, contrary to the advice given by multilateral organizations, government is not shifting the tax burden from the external to domestic sectors. Rather, it has rationalized and reduced taxes and duties for both external and domestic sectors. The tax / GDP ratio of the general government (i.e. combined Centre and State governments) declined from 16 % in the pre-reform year 1990-91 to 14% in 2003-04. This was partly due to trade reforms and partly to change in the composition of GDP in favor of services which now constitute more than 50% of GDP but mostly remain outside the tax net. The basic objective of fiscal reforms since 1991 (table 1) was to reduce fiscal deficits to sustainable levels by expenditure management and resources mobilization through tax rationalization and widening tax net. The government strengthened tax administration; it improved Centre-States fiscal relations and focused attention on contingent liabilities and reforms in provident, pension and insurance funds. The Fiscal Responsibility and Budget Management Act 2003 aims at reducing government borrowing and fiscal deficit and eliminating revenue deficit by 2008 by higher tax/GDP ratio, higher contribution from the state value added tax and reduction of subsidies and interest payments. As for budget allocations for domestic purposes, government has reduced its scope and is withdrawing from commercial sectors where private initiatives are more productive and more efficient. But the level of government expenditure remains large in the development of social and physical infrastructure. The government is also encouraging public-private partnerships and private participation including foreign investment in infrastructure and social sectors, and relying less on direct purchases of public goods and services. Government has restructured public pension, insurance and provident funds and allowed foreign participation in these sectors so that these resources could be utilized for infrastructure financing with long term maturity. Government has increased allocations for poverty alleviation and employment generation programs to fulfill the commitments under the UN Millennium Development Goals. Several measures were taken since 1991 to strengthen the banking system and to improve money and capital markets. Policy package included decontrol of lending and deposit rates, reduction of Cash Reserve Ratio and Statutory Liquidity Ratio to augment credits to private sector, reduction of lending rates to reduce production costs. Other measures included active open market operations, abolition of selective credit controls and tightening of prudential norms for capital adequacy and provisioning for non-performing assets as per international best practices set by the Bank for International Settlements and
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the Financial Stability. An array of capital market reforms was introduced for primary and secondary markets, equity, bond and debt markets, and foreign investment. c. Revenues and expenditure management The tax-GDP ratios of the Centre suffered a steady deterioration in 1990s (table 2) due to gradual reduction of tax rates and duties since 1991 and a structural shift in the GDP composition towards services. However, there was some increase in the ratios of non-tax revenues to GDP due to restructuring of public enterprises and rationalization of user charges for public utilities such as power, water and transport. Expenditure management involved strict monitoring of fiscal deficit and financial allocations under different headings (see tables 3 through 6). Government tried to contain expenditure through rationalization and targeting of subsidies, reduction of interest rates on public savings, optimal use of cash and downsizing civil staff at the rate of 2% per annum. d. Government deficit and public debt Fiscal deficit trends of the general government indicate that the deficit declined significantly by 1995, but increased to pre-reform levels by the end of 1990s (table 7). The share of domestic borrowing in financing public deficit increased in 1990s with a corresponding decline in that of external finance. In fact, there was net outgo in external finance in 2002-03 due to pre-payment of a part of external debt by the government. Among domestic sources, market borrowings emerged as the major source of financing. The combined public debt of the general government as percentage of GDP increased by 20% points in 1990-2003 (table 8) leading to burgeoning interest payments, which now constitute 50% of revenue expenditure despite declining interest rates over time. This essentially reflects the overhang of outstanding liabilities contracted at higher interest rates in the past. A high level of public debt puts pressure on interest rates, crowds out private investment and creates problems for debt servicing. In order to avoid the possibility of debt traps, government is concentrating on long term borrowings. Consequently, the average maturity of loans increased from 7.7 years in 1998 to 13.5 years during 2001-2003. Until 1990 India adopted a development strategy based on the predominant role of the public sector. Unlimited borrowings from the Reserve Bank of India (RBI) at subsidized rates enabled Government to finance large fiscal deficits. Government initiated reforms in 1992 with the auction of government securities at market-determined rates, followed by gradual withdrawal of RBI support and stoppage of automatic magnetization to finance government deficit. Government also strengthened institutional infrastructure, legal and regulatory set-up for the Government securities market. The active public debt management strategy comprised minimizing refinancing risk and crowding out" effect, and avoidance of issuing floating rate, short-term and foreign currency-denominated debt. Government adopted a cautious approach towards capital account convertibility. It initially liberalized non-debt creating financial flows followed
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by liberalization of long-term debt. There was a high share of concessional debt with long maturity, amounting to 80 % of sovereign external debt in 2003. These policies paid dividends and protected India from the contagion effect of the East Asian crisis in 1997-2000. There was significant improvement in external debt indicators with external debt/GDP ratio declining from 38.7% in March 1992 to 20% in March 2003 and debt service ratio declining from 35.3% in 1990 to 14.7% in 2003. As per classification in the Global Development Finance (World Bank 2002, p.130) India is now classified as a low income and low indebted country. India's outstanding external assistance declined from US$59.5 billion at end-March 1995 to US$42.7 billion at end-March 2003, while annual inflows of grants ranged in between US$300 million to US$416 million over the period. The share of bilateral assistance in external assistance declined from 47.3% in 1993 to 39.6% in 2003 with corresponding increasing in the share of multilateral assistance. Outstanding external debt on government account now stands at 9% of GDP. The careful management of external debt allowed India to retain policy-making sovereignty and not to be wholly influenced by the conditionalities imposed by the multilateral funding agencies. In fact, in recent years India prepaid a part of more expensive debt from the World Bank, the Asian Development Bank and some bilateral countries, while they insisted for substantial reduction of food and fertilizer subsidies and overall fiscal deficit, which were not politically feasible for a coalition government in the Centre. Effective public debt management also helped government to adopt a step-bystep approach to liberalization and to adopt effective safety nets for the weaker and vulnerable sections of the society by expanding and strengthening various anti-poverty and poverty alleviation programs.
INSTITUTIONAL AND LEGAL DIMENSIONS

This section addresses institutional and legal issues relating to international cooperation. It deals specifically with transparency, accountability and political economy of budget formulation, inter-agency coordination, NGOs participation, and composition and financing of India's delegations to international bodies. a. Transparency and accountability in budget formulation Under Article 112 of the Indian Constitution, an "Annual Financial Statement" on Government receipts and expenditure is laid before Parliament for each financial year. Expenditure estimates are required to be voted by the Parliament and are submitted in the form of detailed Demands for Grants for each Ministry. Government proposals on taxes and duties are submitted to Parliament through the Finance Bill.
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Although the budget formulation is based on strict secrecy until its presentation to the Parliament on the 28th February every year, the Finance Ministry holds pre-budget discussions with the Planning Commission, other Departments and various interest groups such as industry associations, chambers of commerce, trade unions, agriculturists, science, technology and education specialists, and non-governmental organizations. The Budget is transparent with fiscal background, objectives and policies indicated clearly in the Finance Minister's Speech supported by detailed expenditures for each Department and a pre-budget Economic Survey. Finance Ministry publishes annual Status Reports on External Debt, official external assistance, Public Finance Album and An Economic and Functional Classification of Budget as per IMF guidelines on Government Finance Statistics. India has subscribed to the IMF Special Data Dissemination Standards (SDDS) and fulfilled all requirements regarding time lag and frequency of publication and dissemination of economic data. b. Political economy aspects As India is a sovereign democratic republic with independent executive, legislative and judiciary systems and a free press, the existing political economy plays an important role for determining the scope and funds for international cooperation. If any international commitment has wider economic and social implications and concerns constitutional provisions, it requires the ratification by the Parliament. However, once approved by the Parliament, policies are irreversible. In fact, Indian foreign exchange crisis after the gulf war in 1990 induced the then government to undertake wide ranging reforms in external and domestic sectors to globalize the economy at a faster speed, which was not politically feasible under tranquil conditions. As mentioned earlier, there is general political consensus regarding the need for ongoing economic reforms accompanied by privatization and globalization. However, at the beginning of reforms, domestic industrialists wanted level playing field as regards transactions cost and domestic interest rates which were significantly higher than international rates. With gradual reduction of interest rates, substantial reduction of taxes and duties and strengthening of the rupee, there had been substantial reduction of transactions cost. Given the sovereign democratic set up in India, there are various checks and balances on the government. Budget allocations for international cooperation is made by he concerned government department dealing with the subject as per the Allocations of Business Rules approved by the President of India. However, it requires prior approval of the Ministry of Finance and the Parliament as a part of annual Budget. Ministries also consult each other on important issues having impact on either internal or external finance. Although the concerned Ministry puts up a proposal, it is initially approved by a Committee of concerned Secretaries. Then it is put up for approval by a Group of Ministers followed by the Cabinet. If the proposal involves any conflict with Constitutional provision or any existing Act, it needs to be approved by at least twothirds majority in the parliament.
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c. Interaction with external actors The Indian government in association with trade, business and industry associations has been sponsoring various activities to facilitate international cooperation. In particular, government and industry associations organize international workshops and trade fairs, and publication of various manuals and journals for dissemination of information. There are bilateral exchange programs on national experiences and development practices. Asian and Pacific Centre for Transfer of Technology (APCTT), with headquarter in India and in collaboration with other development agencies such as the United Nations Development Progrmame (UNDP) and ESCAP (United Nations Economic and Social Commission fro Asia and the Pacific), has distinguished itself in a number of activities such as information dissemination, technology fairs, skill training, and promotion of Environmentally Sound Technologies. In India, APCTT formed a consortium with the Small Industries Development Bank of India, National Small Industries Corporation and the Council of Scientific and Industrial Research to assist small sized industries for technology upgrades, strengthening linkages between R&D institutions and local innovative systems. d. Country delegations to international bodies India has a very restricted policy and limited budget for foreign travel. The annual IMF and World Bank meetings as well as Asian Development Bank (ADB) annual meetings are attended by delegations led by the Finance Minister and comprising officers from the Finance Ministry and the Reserve Bank of India. Inter-Ministerial meetings of the United Nations and its associated organizations are attended by delegations led by the External Affairs Minister and comprising officers from the External Affairs, Finance and Commerce. Inter-Ministerial meetings of the WTO and ESCAP are attended by delegations led by the Commerce Minister and comprising officers from the Finance Ministry and the Reserve Bank of India. Other international delegations are led by officers having the ranks of Joint Secretary and above depending on the issues and comprise members from the concerned Ministries. Each Ministry has separate budget for foreign travel, which is approved by the Parliament. Foreign travel of an officer having rank up to Director is approved by the secretary of a Department, that of Joint Secretary by the concerned Minister, and that of higher officers (including Ministers and parliamentarians) is approved by the Cabinet Committee chaired by the Prime Minister and these foreign travel proposals are initially examined by a Screening Committee Chaired by the Finance Secretary.
II.
INTERNATIONAL COOPERATION POLICIES
This section discusses the key thrusts of cooperation initiatives and international and bilateral agreements. It goes through the domestic policies on energy and environment as
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well as tariff, trade, investment and exchange rate policies, which have a bearing on international cooperation. It also deals with activities to fulfill Indias commitments to the United Nation Millennium development goals and with policies taken in response conditionalities set by multilateral and bilateral lenders and the advice given by the international credit rating organizations. It also examines initiatives aimed at fostering regional integration. The section specifically addresses fiscal incentives for cross-border activities, R&D activities for global concerns, measures to tackle money laundering, drug trafficking and communicable diseases, and programs for implementation of agreements under the WTO.
KEY THRUSTS OF INTERNATIONAL COOPERATION POLICIES

Indias international cooperation is based on principles of non-alignment with super powers and to attain peaceful and friendly relations with all countries. India has diplomatic and economic relations with almost all nations and is a Member of various multilateral bodies. Key thrusts of ongoing participation are to improve India's economic conditions and competitiveness along with contributing towards global prosperity, peace and development. As all policies are interlinked, it is difficult to judge which policies are driven by competitive motivations and which ones by cooperative spirits. Indias role in the international co-operation is directed towards achieving the following overarching objectives (GOI MOEA 2000, pp. ii): To win international support to Indias national interests, priorities and concerns in the context of wide ranging changes taking place in the world. To strengthen the global consensus in favor of democracy as the central basis of peace and development. To develop broad-based, mutually beneficial and synergistic structures of cooperation in trade, industry, investment and technology transfer with all countries. To work constructively bilaterally and in multilateral institutions such as the UN, NAM etc. to find answers to complex political, social and economic problems. These include concerns relating to peace, security, nuclear disarmament, information technology, establishment of an equitable international economic order, globalization, environment, public health, terrorism and drug trafficking. To strengthen economic and commercial links with the rest of the world.
. Indias consistent activism, bilaterally and in multilateral institutions, paid dividend in galvanizing international public opinion and support against the menace of terrorism and made positive contribution for the establishment of new international order.
INCOMING COOPERATION
a. International agreements India is a founder member of most of the multilateral organizations and is guided by their rules and regulations for international co-operation. To name a few, India is a founder
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Member of the United Nations and its various economic and cultural councils, the IMF the World Bank, the ADB, the International Labor Office (ILO), the United Nations Conference on Trade and Development (UNCTAD) and the WTO. India takes active participation in their deliberations. India has signed bilateral economic, trade, investment and cultural treaties and agreements with major countries. In 2000, India signed 14 such agreements. Recently India signed bilateral investment treaties with ASEAN, Thailand and Singapore. It has signed comprehensive Double Tax Avoidance Agreements with 66 countries, which provide for reduced rates of withholding tax, avoidance of double taxation of income and exchange of information for prevention of tax evasion. India has agreements for the taxation of air transport and shipping operations with Afghanistan, Ethiopia, Iran, Kuwait, Lebanon, Pakistan, P.D.R.Y. (Yemen), Saudi Arabia, U.A.E., Yemen Arab Republic, Czechoslovakia and Russian Federation. b. Policies on external assistance The Indian government does not access external capital markets and borrows only from multilateral and bilateral sources. External assistance comprises of both loans and grants to finance large commercial projects or social sector projects. Official development assistance (ODA) is the external assistance with a grant element of 25% or more. The International Development Agency (IDA) of the Word Bank is the major source of concessional borrowing, carrying a service charge of 0.75% per annum and maturity of 35 years (including a grace period of 10 years). The IBRD1 and ADB provide nonconcessional funds with usually variable interest rates with a spread of 60-75 basis points. Bilateral borrowings are mainly concessional in nature. While loans from Japan carry a fixed interest rate of 1.8% per annum and a tenor of 30 years, borrowings from Germany comprise a semi-concessional mix of loans with the concessional portion carrying a fixed rate of 0.75% and a tenor of 40 years. India utilized IBRD loans for power generation and distribution, construction of highways, urban development, economic restructuring and fiscal reforms. IDA credits are used to fund projects in physical and human capital, institutions building and environment protection. ADB loans are mainly used for transport and communications, energy, financial services and poverty reduction. Of the major bilateral countries, India took loans for infrastructure development and housing from Japan and Germany. It is argued that multilateral organizations impose various conditionalities regarding structural reforms and stabilization policies. As the sovereign Indian government does not act under duress, ongoing reforms bear willful agreements of both the parties. In fact, conditions agreed to external donors after the Gulf crisis in 1990 helped India to come out of a severe balance of payments crisis. Major conditionalities included devaluation of Indian rupee, full convertibility on current account, partial convertibility on capital account, reduction of fiscal deficit, reduction of customs duties, rationalization of user
1
International Bank for Reconstruction and Development (World Bank).
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charges for public goods, downsizing the government, privatization, decentralization, delicensing, deregulation and anti-corruption strategies. Advice given by various international credit rating organizations such as Standard and Poors (S&P), Moodys, Fritch and Japan Bond Research Organization were also very helpful for policy planning. In particular, their advice on reduction of interest rates, fiscal deficits and off-budget liabilities were very useful. However, their criticisms regarding slow progress of reforms in land and labor markets, privatization, subsidies and down sizing the government are based on purely economic reasoning and do not take into account the ground realities posed by democratic traditions and socio-political constrains. External assistance is often tied with the procurement of goods and services from the donor countries and the net interest rate works out to be higher than expected. Multilateral organizations do not impose such conditions for India although they insist on global tenders. While Germany allows fair competition, some bilateral countries do make such stipulations. However, Indian borrowings from such sources constitute a negligible portion of total external borrowings. Recently, on considering the high transaction costs of a large number of low value projects, tied assistance, and strict conditionalities, the government has taken a policy decision to prune the number of bilateral creditors from over 18 to only six, namely Japan, United Kingdom, Germany, the U.S., the EU and the Russian Federation. The government has also decided to pre-pay outstanding bilateral debt except to Japan, Germany, the U.S. and France. The decision was also partly influenced by the substantial build up of foreign exchange reserves and low interest rates in the domestic countries. Those bilateral countries, from which it has been decided not to receive development assistance on government account, have been advised to provide their development assistance to non-governmental organizations and universities. Accordingly, countries like Australia, Belgium, Canada, Denmark, France, Italy, Netherlands, Norway, Sweden, Switzerland and others are now providing assistance directly to the NGOs for primary education, urban water supply and sanitation, HIV/AIDS prevention and care, strengthening environment institutions and poverty alleviation program. Aid flows to India declined from 3% in 1960s to 0.7% of GNP in 1990s. Overseas Development Assistance to India was very useful for development of social sectors and infrastructure. However regional distribution of ODA was uneven and generally helped the richer states. India has high absorbing capacity as the needs of social sectors are large and government does not have sufficient resources. c. External sector liberalization
A priority area under reforms was external trade, investment and exchange rate policies (table 9). Exports and invisible earnings were encouraged to build up foreign exchange. Quantitative restrictions on foreign trade were virtually abolished and maximum customs duties were reduced from 400% in 1990 to 20% in 2004 to improve competitiveness of
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Indian industries. There was liberalization of gold and silver imports which considerably reduced smuggling. The Indian rupee is now fully convertible on current account and fully convertible on capital account for the non-residents. The IMF regards India as one of the countries having independent floating exchange rate system. These liberalizations led to a build up of foreign exchange reserves from US$1 billion in June 1991 to US$ 102 billion in January 2004. To moderate the monetary impact of reserve accumulation, government prepaid part of multilateral and bilateral external debt, liberalized external commercial borrowing and outward foreign investment. Monetary authority phased out Foreign Currency NonResident Deposits which benefited from exchange rate guarantee. India recognizes that Foreign Direct Investment (FDI) acts an engine of growth and embodies a package of vital sources of capital, technology, and managerial, marketing and technical skills. Since 1991 India adopted an open door policy for FDI. It undertook general policies and strengthened legal and regulatory systems leading to a stable macroeconomic framework, liberalization of industry, trade and capital markets and nondiscriminatory fiscal and monetary policies. Most of the sectors (except agriculture, retail trade, print media etc.) are now open for foreign investment subject to sectoral caps on equity. Foreign equity up to 100% is allowed in most infrastructure sectors. Indian firms are allowed to raise funds abroad through Global Depository Receipts, Foreign Currency Convertible Bonds and offshore fund. Foreign Institutional Investors (FIIs) and Non-Resident Indians (NRIs) are allowed to operate in Indias capital markets (subject to an individual holding of 10% and collective holding up to 40% of total paid up capital of a company) and to pick up disinvested shares of public enterprises. Indian courts allow adequate safeguards for the enforcement of property and contractual rights. India had signed many bilateral investment protection agreements containing rules on fair and equitable treatment, repatriation of equity and profits, and international arbitration of disputes. Impediments to FDI include some reservation for the small scale industries, sectoral ceilings on foreign ownership, approval procedures, restrictions on employment of foreign staff and inadequate legal system for dispute settlements. India permits the free repatriation of profits, dividends, interests, rents, royalties, consultancy fees and equity capital. Import controls are virtually abolished except for some consumer goods. Almost all items of capital goods and raw materials are on open general license. The Foreign Exchange Regulation Act (FERA) was replaced by the Foreign Exchange Management Act. The FERA companies (having foreign equity exceeding 40% of total equity) now operate like Indian Companies, can own real estate, and use their trademarks and brand names for domestic sales. India provides fiscal incentives for the development of industry, infrastructure and technology, which are equally applicable to both domestic and foreign companies. Tax
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holidays up to 15 years are allowed for establishing industries in backward regions and for infrastructure projects set up anywhere in India. Incentives are given for exporters, R&D activities and units located in Special Economic Zones (SEZs), Export Processing Zones (EPZs) and Science and Technology Parks. A number of incentives such as capital subsidy, tax breaks, exemption of state duties, and the provinces provide concessional land and power. Regulatory Authorities for telecom, ports and power determine tariffs and resolve disputes among various operators. India allows tax exemptions for exports, lower interest rates for export credits and duty drawbacks on inputs used for exports. Producers are allowed duty free imports of capital goods subject to export obligations. Exporters of food grains are given WTO compatible subsidies. Exporters are granted Special Import Licenses for restricted consumer goods. Export-Oriented Units (EOUs)/EPZ/SEZ units can sell up to 25% of general goods and 50% of agro-based products in the Domestic Tariff Area (DTA). Supplies from DTA to the EPZ/EOUs/SEZs are regarded as deemed exports and exempted from taxes and duties. d. Millennium Development Goals (MDG) India is committed to achieve the United Nations MDGs targets, particularly to halve the poverty ratio and to halve the proportion of people without sustainable access to safe drinking water, by 2015. The Approach Paper to the Tenth Five-Year Plan (2002-2007) stipulates that growth in per capita GDP should be accompanied by significant improvement in human development and basic services to the people such as basic health, education, drinking water and sanitation. The Plan indicates the following monitorable targets:

Reduction of poverty ratio from 26 percent by 5-percentage point by 2007 and by 15 percentage points by 2012. All children to go to schools by 2003 and all children to complete at least five years of schooling by 2007. Increase in the literacy rate to 75 per cent during the Tenth Five-Year Plan. Reduction in the infant mortality rate per 1000 births to 45 by 2007 and 28 by 2012. All villages to have sustained access to potable drinking water within the plan period.
Growth with social justice had been the primary objective of Indian planning since 1951, and several anti-poverty measures had been in operation for decades. These include welfare programs for the weaker sections, women, children, and a number of special employment programs for self- and wage employment. Government relied mainly on two approaches for poverty alleviation: the first based on the anticipation that economic growth will have a trickle down effect on the levels of living of all groups; and the second that direct anti-poverty programs are also required. Ongoing economic reforms since 1991 strengthened these programs to generate more employment, create productive assets, impart technical skills and raise the income levels of the poor. As a result of these policies, despite high population growth, the poverty ratio declined from 55 percent in
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1973 to 26 percent in 1999 for all India i.e. at a rate of 1.1 percentage point per annum. The decline was fairly uniform across rural and urban areas. e. Public health India has built a vast health infrastructure at primary, secondary and tertiary care in government, voluntary and private sectors resulting in a substantial improvement in health over the years (table 10). During the 1990s India entered an era of dual disease burden. While communicable diseases became more difficult to combat due to insecticide resistance, emergence of new diseases such as HIV/AIDS and demographic transition needed larger investments in health. AIDS is not only a fatal disease but also a major development issue due to its potential impact on productivity and growth. The Plan outlay for the Central Health Sector Schemes in 2003-04 was Rs.1550 crore, 55% of which was spent for the control of Malaria, Tuberculosis, Leprosy, AIDS, Blindness, etc. Phase-II (2003-04) of the program is in operation with World Bank assistance under Global Fund for AIDS, TB and Malaria (GFATM). f. Environment, energy and R&D policies
Environment: Environmental protection is essential to ensure sustainable development over time. Vast population and wide spread poverty in India lead to degradation of environment in many ways by putting pressure on scare resources like land, water and energy. Environmental management was enhanced in the Seventh Plan (1985-1990) by organizational and legislative changes. A new Ministry of Environment, Forests and wildlife was created in September 1985 and the Environment Protection Act (EPA) was enacted in November 1986 to give greater impetus to the environment protection. Other measures included announcement of National Forest Policy 1988, Amendment of Forest Conservation Act in 1988, Water Prevention and Control of Pollution Act in 1988 and the Draft Policy Statement on Abatement of Pollution 1991. During the Eighth Plan (1992-1997) and Ninth Plan (1997-2002) major progress was achieved in environment and ecological development. National standards for polluting effluents were formulated for major industries and rivers. In urban areas, strict norms were fixed for vehicles to control air pollution. Environment unfriendly industries were shifted from the urban areas. Under World Bank and UNDP assistance programs, grants were provided to install environment friendly plant and machinery. Indian planners reserved energy sector for public investment, as they required huge capital with high capital intensity, long gestation, high risk and low return. Since 1991 government liberalized energy sector and allowed private including foreign investment. Except for coal and electricity distribution, foreign equity is allowed up to 100% in all energy sectors. The Electricity Regulatory Authority determines electricity tariffs. Energy: Energy taxation is an important source of government revenues. Depending on political priorities and fiscal objectives, excise and customs duties vary for different petroleum products. There is cess on diesel and petrol for financing construction of roads,
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flyovers and bridges. There is an environmental cess on selected products including oil. Various fiscal incentives are given to power plants. Power is supplied free to agriculture in many states. Administered pricing mechanism for POL had been dismantled, but subsidies are provided for household use of kerosene and LPG under a plan to phase out these subsidies in the medium term. Research and Development: India has built a wide array of institutions to support the development and diffusion of industrial technologies over the years so that its dependence on foreign technology is the least. It has all basic, applied, hardware and software and R&D institutions, some of which have world-class standards. In the sphere of biotechnology, government spent around US$ 1 billion towards R&D in national laboratories in 1990s. But, these institutions failed to commercialize R&D activities as these had little linkages with the private sector. Since 1993 Government encouraged private sector funding of research institutions by providing tax relief on R&D expenditure. Many pharmaceutical companies introduced products of original research through technology transfer from Indian R&D institutions in the field of vaccines, diagnostics and reagents. India acquired advanced technologies from the U.S., UK, U.S.S.R., Germany, France and Japan, either by outright purchase, FDI, joint ventures or on the basis of royalty payments. For this Indian companies received support and assistance from international organizations like APCTT, UN, UNIDO, and IDRC, Canada. g. Transport, communications and tourism
Development of international airports, seaports, international posts and telecommunications play a major role in facilitating tourism and cross-border movement of goods and services. As public resources are limited, government has allowed private participation including foreign investment in these areas. Government is upgrading existing international airports to international standards with public-private partnership and has allowed private sector to build up new international airports at the emerging information technology centers at Bangalore and Hyderabad and the major tourist resort at Goa. Private investment in sea-ports has increased significantly in recent years with the strengthening of the Ports Regulatory Authorities. Foreign investment up to 100% is allowed in the development of sea-ports, airports and shipping, and up to 49% in civil aviation. In telecoms, foreign investment up to 49% is allowed in basic and mobile services and broadcasting, 74% for Independent Service Providers (ISPs) with gateways, radio-paging and end-to-end bandwidth, 100% for ISPs providing electronic mail and voice mail, courier services and information technology. h. Money laundering and drug trafficking There is specific budgetary allocation for the Department of Revenue, which is responsible to control financial abuse through illegal flows of precious metals and financial transactions. While the Central Economic Intelligence Bureau, set up in July
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1985, oversees the implementation of the Conservation of Foreign Exchange and Prevention of Smuggling Act 1974 (COPEPOSA) against smugglers and foreign exchange racketeers, the Directorate of Enforcement is concerned with the enforcement of the Foreign Exchange Management Act 1999 (FEMA) after the expiry of the Foreign Exchange Regulation Act (FERA) 1973. The Department of Revenue is also responsible for the administration of the Narcotic Drugs and Psychotropic Substances Act 1985 (NDPS Act 1985), which sets out the statutory framework for drug administration in India. Three authorities - the Central Bureau of Narcotics (CBN), Government Opium & Alkaloid Works (GOAW) and Narcotics Control Bureau (NCB) - have been established for the purposes of superintendence of cultivation of opium, manufacture of opiates and combating drug trafficking. i. Implementation of WTO agreements India strongly favors the multilateral approach to trade relations and grants most favored nation treatment to all its trading partners, including non-members of WTO. Within the WTO, India is committed to ensuring that sectors in which developing countries enjoy comparative advantages are adequately opened up, and the special and differential treatment provisions for developing countries under WTO agreements are translated into specific enforceable dispensations. The Ministry of Industry and Commerce in association with the Ministries of Finance and other concerned Ministries has taken various measures to implement India's commitments to the WTO. The WTO agreement on Trade Related Intellectual Property Rights (TRIPS) sets out minimum standards of protection in respect of copy rights, trade marks, trade secrets, Geographical Indications, Patents and Industrial Designs. To fulfill these commitments, Parliament amended the Copyright Act 1957 in 1994 and 1999, Trade and Merchandise Marks Act 1958 in 1999, and passed Patents Act 1999, Geographical Indication of Goods (Registration and Protection) Act 1999, Designs Act 2000 and Semiconductor Integrated Circuits Lay-Out-Design Act 2000. Under the Trade Related Investment Measures (TRIMS) Agreement, developing countries had a transition period of 5 years up to 31-12-1999. India notified two TRIMS relating to local content requirements in production of certain pharmaceutical products and dividend-balancing requirement in the case of foreign investment in 22 consumer items. These requirements had since been eliminated. India made considerable progress in rationalization and reduction of customs tariffs. Peak customs tariff has been reduced to 20% and would be reduced to average ASEAN level in the medium term. India has set up special units to deal with anti-dumping cases and imposition of anti-dumping duties. India completed the process of phased removal of Quantitative Restrictions (QRs) as per the agreed time schedule. Presently, out of 11,671 items, only 52 items are prohibited, 484 restricted 32 subject to software exports and rest 11,103 items are free.
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OUTGOING COOPERATION
j. Technical assistance India provides technical assistance under the Technical and Economic Cooperation (ITEC) Program and the Special Commonwealth African Assistance plan (SCAAP) to 141 developing countries in Asia, Africa, Latin America, Eastern Europe and the Pacific. India is also participating actively in the international initiative for economic development of HIPC (Heavily Indebted Poor Countries) and other developing countries. Under HIPC, India is providing credit lines to seven eligible HIPC countries viz. Mozambique, Tanzania, Zambia, Ghana, Guyana, Nicaragua and Uganda. The government has waived the outstanding dues from these countries. In addition, India provides credit lines to a number of developing countries (table 14). k. Regional integration India believes that regional cooperation is a first step towards multilateral cooperation. Regional economic cooperation facilitates the free flow of goods, services, capital and labor across countries and helps for efficient use of resources and improvement of growth of member countries. South Asian Association for Regional Cooperation (SAARC) was established in 1985 comprising India, Bangladesh, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka. SAARC countries signed South Asian Free Trade Agreement (SAFTA) and recently included investment as a part of its regional cooperation. India signed bilateral trade agreements with Nepal in 1996 and Sri Lanka in 1998. India allows automatic approval of outward investment by Indian companies up to $50 million. India allows imports of goods manufactured in Nepal free of customs duties and quantitative restrictions (except for alcohol, tobacco and cosmetics). This system of investment and tariff jumping facilitated some Indian companies to shift production bases to Nepal for serving Indian and other markets. Indian companies run 72 of 214 foreign ventures in Nepal accounting for 53 % of capital of all foreign ventures (Kumar 2001). Sri Lanka hosts about 90 Indian ventures in light engineering goods, automobiles and hotels which are basically domestic market seeking. The share of intra-SAARC exports in total SAARC exports increased from 3.2% in 1990 to 4.7% in 1999. The intra SSARC imports as a proportion of total SSARC imports increased from 1.91% in 1990 to 4.12% in 1999 (Das 2002). In the region there are some sub-regional economic zones (SREZs) focusing on the movement of capital, labor, technology and information rather than trade in goods and services. A SREZ called the Bangladesh, India, Sri Lanka, Thailand Economic Cooperation (BIST-EC) was formed on June 6, 1997. Subsequently, Bhutan, Nepal and Myanmar had joined the group. Trade between these countries currently totals $1.3 billion and is expected to improve due to economic boom in South and South East Asia.
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These countries signed a Free Trade Agreement on February 8, 2004 and agreed to remove all trade and tariff barriers by 2015. India is a founder member of the Economic and Social Council for Asia and Pacific (ESCAP). ESCAP promoted regional cooperation in industry, power, shipping, ports and technology transfer. Asian developmental institutions like the Asian Development Bank, Asian Clearing House, the Asian Reinsurance Corporation and the Asian and Pacific Centre for the Transfer of Technology were established at the initiative of ESCAP. Increasing levels of intraregional trade and investment are gradually shaping an interdependent regional economy in the ESCAP based on linkages of production, technology and division of labor. ESCAP members succeeded significantly in utilizing the technological revolution to enhance national comparative advantages. Firstly Japan and then the advanced countries of the region became critical growth centers supplying foreign investment and technology to other economies of the region. ESCAP and its regional institutions such as APCTT, the Regional Network for Agricultural Machinery, and the Regional Coordination Centre for Research and Development of Coarse Grains, Pulses, Roots and Tuber Crops undertook activities to promote exchange of national experiences, skill training, endogenous capability-building, research on industrial restructuring, dissemination of information on specific technology and Environmental Sound Technologies (ESTs) through seminars, workshops and technology fairs.
III.
BUDGETARY ALLOCATIONS FOR INTERNATIONAL COOPERATION
This section presents the budgetary allocations made by the Central government for activities facilitating international cooperation (as identified in section II). Subsequent sections indicate the broad groups of activities under each heading and government agency to which the expenditure for each type of activity is issued. Budget allocations under these headings in 2002-03 and 2003-04, summarized in table 11, are further subdivided into two groups: those spent within national boundaries and those spent abroad to meet international obligations or to improve external relations. It may be observed from table 11 that total expenditure for international cooperation as percentage of total central government expenditure declined from 8.74% in 2002-03 to 6.78% in 2003-04. Social services expenditures constitute major portion of government expenditure, while expenditure on institutional set up for WTO, drug trafficking and smuggling was the least. The higher ratio in 2002-03 was due to larger interest payments for external debt and higher expenditure on food for works program (under social services) to tackle severe droughts in 2002-03. a. Mandatory contributions to the international agencies Mandatory contributions of the Indian government to international organizations in 199091 to 2003-04 summarized in table 12 indicate that the ratio of total contributions to the
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central government expenditure declined from 1.8% in 1991-92 to 0.2% in 2003-04, that to total revenue and grants from 2.6% to 0.3%, that to total tax revenue from 3.9% to 0.5% and that to overall deficit from 6.3% to 0.8% over the same period. Contributions amounted to as high as 40.8% of net external assistance received by the Indian government in 1995-96, although the ratio declined to 28.1% in 2003-04. Table 13 classifies the contributions under standard industrial classifications in the national account framework on the basis of the classification of the subject dealt by the concerned department (having one-to-one correspondence with the concerned international organization). It is observed that services sectors, particularly international organizations dealing with finance, account for major share in total contributions. In some years, international organizations dealing with public administration, community and social services also received major share of Indian contributions, while agriculture and industry taken together had marginal shares in total contribution. b. Expenditures for external affairs Expenditures for external affairs can be grouped under four sub-headings: (a) cost of 161 embassies abroad, (b) costs for diplomatic relations, (c) expenditure for granting visas, and (d) grants and external assistance given by the Ministry of Finance and the Ministry of External affairs under the Technical and Economic Cooperation. These expenditures for the years 2002-03 and 2003-04 are summarized in table 14 indicate that their share in total central government expenditure ranged between 0.8 to 0.9 per cent. c. External debt services and contingent liabilities of the government Interest on external debt: Interest on external debt on government account amounted to Rs.4511 crore and Rs.3288 crore respectively in 2002-03 and 2003-04 which accounted for 1.13% and 0.69% of total central government expenditures in the respective years. Contingent liabilities: In addition to direct liabilities for external debt, the government of India has various contingent liabilities in terms of government guarantees for the loans taken by the public enterprises, exchange rate risk and guarantees given to the first track large power projects by the independent power producers. During 1990s, as percentage of GDP, there was a steady decline of the contingent liabilities of the central government (from 7.8% to 4.2%), but an increase in the liabilities of the states (5.7% to 7%) (Das, Bisen, Nair and Kumar 2001). Many states initiated measures to contain the growth of guarantees. These include selectivity in providing guarantees, disclosing comprehensive information in budgets, setting up guarantee redemption funds, fixing statutory limits on guarantees and charging guarantee commissions on outstanding amounts. In the external sector, the government provided guarantees to external loans taken by public sector enterprises, fast track private power projects and oil and gas exploration companies. There was a steady decline in Government guarantees from US$10.7 billion at end-March 1995 to US$6.4 billion at end-March 2003. Sectoral distribution of Government guarantees indicates a growing share of guarantees extended to power (from 21.7% in 1994 to 52.7% in 2000) and housing (3.0% to 10.7%), but declining shares of
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petroleum (31.6% to 18.2%), civil aviation (17.2% to 4.3%) and aluminium (8.2% to 0.3%). In addition to loan guarantees by the government, until 1993 RBI provided exchange rate guarantees for attracting deposits from the non-resident Indians (NRIs). Other instances of exchange guarantee were the Resurgent India Bonds (RIBs) launched by the State Bank of India (SBI) in August 1998 and the India Millennium Deposits (IMD) floated by the SBI in October-November 2000 for raising resources from the NRIs. Funds mobilized through RIBs were US$ 4.23 billion and those by IMDs were US$ 5.51 billion. As per the agreement, in the event of rupee depreciation, the loss up to 1% per annum would be borne by the SBI and the balance by the Government. In addition to the above, contingent external liabilities arise in normal operations by the commercial and development banks, corporate bodies and the Export Import (EXIM) Bank of India for providing performance and loan guarantees, bonds, letters of credit, forward exchange contracts, underwriting commitments, deferred payment guarantees, bill discounting and exchange risk for Foreign Institutional Investment and NRI deposits. d. Trade and export promotion Budgetary allocations for trade development and export promotions summarized in table 15 indicate that these expenditures amounted to 0.27% of the total central government expenditure in 2002-03 and 2003-04. In addition to explicit budget allocations, there are various implicit subsidies in terms of fiscal and other incentives for trade and export promotion (discussed previously). Revenue losses for most of these fiscal incentives are not estimated in the budget. Table 16 on duty foregone for selected export promotion schemes indicates that there was an increasing and substantial loss of customs duties in 2000-2003. Total duty foregone amounted to as high as 80% of net customs collections in 2002-03. e. Social services expenditure related to the MDGs Budgetary allocations on selected social sectors related to the commitment under the MDGs are summarized in table17. It is observed from the table that these social services expenditures as percentage to the total central government expenditure amounted to 5.4% in 2002-03 and 4% in 2003-04. The higher expenditure in 2002-03 was due to special employment generation and food-for-work programs introduced by the central government to tackle the severe drought in the year. f. Financing energy, environment and R&D Budgetary allocations for energy conservation, pollution control, environment protection, capacity building for environment management, climatic change project and selected scientific and industrial research and development activities for the years are presented in table 18. It is observed that these expenditures accounted for 0.5% of total central government expenditures in 2002-2004. India lags far behind in its R&D activities when compared to advanced countries. As per the information given in the World Development
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Indicators 2003 (World Bank 2003, pp.302-304), Indias R&D expenditure at 1.23 % of GDP is higher than Malaysias 0.4%, Thailands 0.1% and Chinas 1%, but is considerably lower than that in the U.S. (2.7%), Japan (3%), Germany (2.5%) and the Republic of Korea (2.7%). g. Transport, communications and tourism Budgetary allocations for selected activities in seaports, air transport, telecom and tourism to facilitate international cooperation provided in table 19 indicate that these expenditures accounted for only 0.2% of central government expenditure in 2002-2004. h. Money laundering and drug trafficking There is specific budgetary allocation for the Department of Revenue and the Ministry of Home Affairs, which are responsible to control drug trafficking and financial abuse through illegal flows of precious metals and financial transactions. Table 20 indicates that only a small proportion of central government budget is spent on these activities. i. Institutional set up for WTO issues The Ministry of Commerce and Industry is the nodal ministry to deal with WTO issues. Only a small proportion of central government budget is spent on the institutional and administrative matter (table 21). j. Foreign exchange reserve After the Gulf crisis in 1990, Indias foreign exchange reserves dwindled to US$1 billion, equivalent to only two weeks level of essential imports. External sector liberalization along with Indias cautious approach towards capital account convertibility helped to build up significant foreign exchange reserves over the years. Foreign exchange reserves increased by more than $30 billion in 2003 as a result of improvement in both current account balance and net capital inflows. The stock of foreign exchange (including gold and SDR) stood at $108 billion in March 2004 and is equivalent to 18 months of imports. The policy for reserve management is judiciously built upon a host of factors such as the size of the current account balance and short-term liabilities, variability in portfolio investment and other types of capital flows; unanticipated external shocks; and repatriable foreign currency deposits of Non-Resident Indians. Taking these factors into account, Indias foreign exchange reserves are consistent with the rate of growth, the share of the external sector in the economy and the size of risk-adjusted capital flows. The substantial growth in reserves in recent years has generated a welcomed debate regarding the costs and benefits of holding reserves. In such cost-benefit analysis, it is essential to analyze the objectives of holding reserves which include (a) maintaining confidence in money and exchange markets; (b) enhancing the capacity to intervene in forex markets; (c) limiting external vulnerability; and (d) adding to the comfort of the
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market participants. Sharp exchange rate movements can be highly unsettling and costly for the economy during periods of uncertainty. These economic costs are likely to be substantially higher than the net financial cost, if any, of holding reserves. In this context, it is important to note that in the last few years, reserves have been made without increasing the overall level of external debt. The increase in reserves largely reflects higher remittances, quicker repatriation of export proceeds and non-debt inflows. Even after taking into account foreign currency denominated NRI flows (where interest rates are linked to LIBOR), the financial cost of additional reserves in India is quite low, and is likely to be more than offset by the return on additional reserves. It may also be mentioned that most of the increase in reserves in recent years is through net purchases by RBI in the domestic forex market, for which an equivalent amount of domestic currency has been released to the concerned domestic entities, including public sector units, corporate bodies and individuals. The decision on the use of this counterpart domestic currency released by RBI (i.e., for investment, deposits or as liquid assets, etc.) is the responsibility of the entities. Needless to add that to the extent this counterpart local currency is used by recipient entities for further investment in the economy, the impact on industrial demand and growth would be favorable. k. Migration Indias stock of human capital in terms of qualified people is one of the highest in the world (table 22). Every year India adds about 2.3 million English-speaking graduates compared with 1.2 million graduates in the U.S. (Ahya and Agarwal 2004, p. 2). With limited opportunities in the domestic market, Indian educated labor continues to look for outsourcing opportunities and job offshore. In the past, India participated in the global labor arbitrage through migration. The acceleration in the outsourcing of services and manufacturing in recent years has created alternative ways to participate in the global labor market. India has achieved success in sectors with higher labor intensity but lower infrastructure and capital intensity, such as software and IT enabled services, pharmaceuticals, gems and jewelry and garments. Presently India has a share of 1.3% in global trade of commercial services (excluding remittances from Indians working abroad) compared to its share of only 0.8% in global trade of goods. There is heated debate on substantial brain drain from India. Currently there are about 20 million non-resident Indians (NRIs) of which 1.7 million are settled in the U.S. Other favored destinations are the UK, Africa, the Middle East and Malaysia. However, on considering substantial remittances, investment and deposits by the NRIs, free movement of technical people had been beneficial to India. In 2001, India received the highest amount of remittances from workers amongst developing countries (table 23). High remittances helped India to have surplus on current accounts since 2002-03. NRIs have a share of about 20% in stock of Foreign Direct Investment (FDI) in India. NRI deposits of foreign exchange with the domestic banks are major sources of foreign exchange reserves with the RBI and helped India to tackle the economic sanctions imposed by developed countries after the nuclear test of 1998.
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CONCLUSION
India acknowledges the benefits of international economic and diplomatic relations. Over the years, the country has liberalized trade and investment policies, and protected interests of the weaker sections through development of appropriate safety nets. Ongoing reforms have a human face with increased outlays on social sectors and poverty alleviation programs. Reforms in India not only generated high growth but also reduced poverty ratios. India is a founder member of the major international organizations and makes annual contributions to these organizations. On considering the level of per capita income, Indian contributions and budget allocations appear to be adequate and stable over time. Indian budget making is transparent and all expenditures are debated and approved by the Parliament. Economic policies and budget allocations are based on general political consensus. Given the fundamentals of the economy and better economic prospects in future, government resources and expenditures are sustainable. However, there are concerns regarding increasing government deficit and contingent liabilities. Government passed the Fiscal Responsibility and Budget Management Act 2003 which aims at eliminating the revenue deficit and reducing the fiscal deficit in the medium term. India's fiscal deficit and public debt cannot be sustained over a longer period unless resources are augmented and subsidies reduced significantly. The tight fiscal situation may put a constraint on contributions to international organizations. It is necessary to maintain a high degree of fiscal discipline and transparency, a well designed fiscal policy, short-run contingency measures and a multi-year macro-budgetary process for both Centre and States. There is also need for strengthening institutional framework for preparation, sequencing, the phase-in and implementation of needed structural reforms and phasing out of quasi-fiscal and contingent liabilities. As in other countries, India should estimate the tax expenditure to raise public awareness about the hidden tax subsidies. In this respect, it is necessary to move towards accrual accounting as recommended in the IMF Revised Government Finance Statistics 2000 along with the existing system of preparing budget on cash basis. India recognizes global concerns regarding international terrorism, money laundering, drug-trafficking and spread of HIV/AIDS and supports measures taken by multilateral organizations. The country is actively combating these problems through appropriate institutions and laws. Multilateral organizations could provide more technical assistance in these areas to member countries for strengthening their financial and legal systems.
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REFERENCES
Ahya, Chetan and Anil Agarwal. 2004. India: Appending Itself to Global Labour Supply Chain. Hong Kong: JM Morgan Stanley. Das, Tarun. 2002."Implications of Globalisation on Industrial Diversification Process and Improved Competitiveness of Manufacturing in ESCAP Countries." ST/ESCAP/2197. Bangkok: ESCAP. _________. 2003a. Economic Reforms in India- Rationale, Scope, Progress and Unfinished Agenda. Pune, India: Bank of Maharashtra. _________. 2003b. An Assessment of Trade in Services- a Case Study on India. Discussion Paper, Indian Council for Research on International Economic Relations (ICRIER), New Delhi. Das, Tarun, Anil Bisen, MR Nair and Raj Kumar. 2001. External Sector- Contingent Liabilities- a Case Study on India. London: Commonwealth Secretariat. Das, Tarun, Usha Thorat and Charan Singh. 2002. "Country Case Studies: India". Chapter 4, Part-II, In Guidelines for Public Debt Management- Accompanying Document and Selected Case Studies. Washington D.C: International Monetary Fund and the World Bank: 66-80. GOI (Government of India), CS (Cabinet Secretariat). 1990. Allocation of Business Rules 1961: Amended up to 1989. New Delhi. GOI (Government of India), MCI (Ministry of Commerce and Industry). 1992. Annual Report 2002-03. New Delhi. GOI (Government of India), MOEA (Ministry of External Affairs). 2000. Annual Report 1999-2000. New Delhi. GOI (Government of India), MOF (Ministry of Finance). 1992. Expenditure Budget 1992-93, Volume-1. New Delhi. _________. 1993. Expenditure Budget 1993-94, Volume-1. New Delhi. _________. 1997. Expenditure Budget 1997-98, Volume-1. New Delhi. _________. 2002. Expenditure Budget 2002-03, Volume-2. New Delhi. _________. 2003a. Expenditure Budget 2003-04, Volume-1. New Delhi. _________. 2003b. Expenditure Budget 2003-04, Volume-2. New Delhi. _________. 2003c. Economic Survey 2002-03. New Delhi. _________. 2003d. India's External Debt- A Status Report. New Delhi. _________. 2004a. Expenditure Budget 2004-05, Volume-1. New Delhi. _________. 2004b. Revenue Budget. New Delhi. _________. 2004c. Budget at a Glance. New Delhi. GOI (Government of India), MHFW (Ministry of Health and Family Welfare). 2002. National Health Policy 2002. New Delhi. Kopits, George. 2001. "Fiscal policy rules for India?" Economic and Political Weekly, Vol.XXXVI: 749-756. Kumar, Nagesh. 2001. Globalisation and Quality of Foreign Direct Investment. London and New York: Routledge. Reserve Bank of India. 2003. Annual Report 2002-03. Mumbai. Virmani, Arvind. 1999. "Agenda for reforms in the external sector." Chintan Policy Paper. New Delhi.
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Virmani, Arvind. 2001. "India's 1990-91 Crisis: Reforms, Myths and Paradoxes." New Delhi, Planning Commission, Government of India. World Bank. 2003. Global Development Finance- Financing the Poorest Countries: Analysis and Summary Tables. Washington DC. _________. 2003. World Development Indicators 2003.Washington DC.
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TABLES
TABLE 1: INDIAS FISCAL AND FINANCIAL SECTOR REFORMS SINCE 1991
Area Budget Policy Status in June 1991 Budgetary support to central public enterprises amounted to 1.5% of GDP besides various subsidies, concessional credits, price and purchase preferences. No hard budget constraints. No privatization policy. Year Fiscal Revenue Primary Deficit Deficit Deficit 1990-91 6.6 3.3 2.8 Combined fiscal deficit of the Centre and States in 199091: Central government 6.6 States /Union Territories 3.3 Centre & States /Union Territories 9.4 Fixed and low interest rates. Issuing and pricing of securities, shares and bonds determined by the Controller of Capital Issues (CCI) in the Finance Ministry. Maximum Rates Excise duties 110% Import duties 400% Income tax 54% Corporate tax: Domestic cos. 49% and 54% Foreign cos. 65% Dividend tax on both individuals and companies. Existence of gift tax. Limited cases of tax holidays. Highly controlled banking system with strict rules for new branches and entry of new banks. Bank deposit rates fixed according to account types and maturities. Minimum maturity of time deposit was 30 days. Bank lending rates are fixed according to loan size and end uses. Floor rate on large loans fixed by the Reserve Bank of India (RBI) at 21%. RBI Bank rate at 12%. Priority sectors lending amounted at least 40 % of bank credits at concessional rates. Government pre-empted large portion of bank reserves through Cash Reserve Ratio of 25% and Statutory Liquidity Ratio of 38.5%. Inadequate norms concerning capital adequacy, income recognition, and provisioning for non-performing assets FDI treatment Foreign portfolio investment in Indian companies not allowed. Foreigners not allowed buying government securities or shares in public sector enterprises. Status in February 2004 Budgetary support curtailed to 0.6% of GDP. Concessional credits / price preference eliminated. Hard budget constraint introduced. Disinvestment up to 49% of government equity allowed. Fiscal Revenue Primary Deficit Deficit Deficit 2003-04 4.8 3.6 0.3 Overall fiscal deficit of the Centre and States in 200304: Central government 4.8 States /Union Territories 4.5 Central & States /Union Territories 8.8 Government securities are sold at market prices. Office of Controller of Capital Issues is abolished. Independent regulatory authority - Securities and Exchange Board of India - is established for orderly growth of capital markets. Maximum Rates Excise duties 24% Import duties 20% Income tax 30% + surcharge of 10% Corporate tax: Domestic cos. 35% + surcharge of 2.5% Foreign cos. 40% + surcharge of 2.5% Dividend tax on distributed profits. Gift tax abolished. Tax holidays extended to all infrastructures. New private banks set up. Government equity in public banks reduced to 49%. Foreign equity in private banks allowed up to 40%. Bank deposit rates except for savings a/c liberalized. The min. maturity of term deposit reduced to 7 days. Lending rates liberalised. Prime Lending Rate ranges between 10.5% to 12% with spread on both directions. Bank rate reduced to 6%. Priority sectors redefined. No concessional rates except for small loans, housing, small scale industries, agriculture and education. Higher bank funds are available for private sector, the Cash Reserve Ratio is reduced to 4.5% and the Statutory Liquidity Ratio is reduced to 25%. Regulations, monitoring, norms on asset classification, provisioning, capital adequacy tightened as per international best practices. Foreign Institutional Investors (FIIs), Non-Resident Indians (NRIs) and Overseas Corporate Bodies (OCBs) allowed operating in Indias stock markets subject to individual and cumulative ceilings. NRIs/ FIIs allowed buying govt securities & debt issues. Indian firms allowed raising funds abroad through Global Depository Receipts, Foreign Currency Convertible Bonds and offshore fund. Year
Fiscal deficit
Govt. securities Capital markets
Tax structure
Banking system
Domestic companies
Indian firms not allowed raising funds from foreign stock exchanges.
Source: Updated on the basis of Das 2003a (pp. 14-19).
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TABLE 2: REVENUE RECEIPTS OF THE CENTRAL GOVERNMENT, % OF GDP

Year Major Taxes Tax revenue Non-tax revenue Total revenue receipts 12.2 11.8 11.7 12.1 11.8
Income Corporate Excise Customs tax tax duties duties 1990-91 0.9 0.9 4.3 3.6 10.1 2.1 1995-96 1.3 1.4 3.4 3.0 9.4 2.4 2000-01 1.5 1.7 3.3 2.3 9.0 2.7 2002-03 1.5 1.8 3.5 1.8 9.1 3.0 2003-04 1.6 1.9 3.5 1.8 9.3 2.6 Source: (1) GOI, MOF 2003b, p.25. (2) RBI 2003, p.57 and (3) GOI, MOF 2004b, p.38.
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TABLE 3: COMBINED EXPENDITURE OF CENTRE AND STATES, RUPEES BILLION

Items 1990-91 1995-96 2000-01 2001-02 A. Non-developmental expenditure (1-11) 692.0 1,531.4 2,957.2 3,421.0 1. Defense services 154.9 269.6 498.4 572.1 2. Interest payments 250.1 589.4 1,196.6 1,391.6 3. Fiscal services 34.5 99.2 90.1 99.5 4. Administrative services 93.8 184.4 349.0 405.8 5. Organs of states 10.9 26.5 42.6 51.0 6. Pensions and other retirement benefits 51.8 121.7 388.2 432.0 7. Relief for natural calamilities 8.7 17.8 37.0 54.1 8. Compensation to local bodies 8.5 13.6 47.1 50.9 9. Food subsidy 24.9 57.2 125.5 181.6 10. Social security 24.4 54.5 83.8 85.4 11. Others 29.6 97.6 98.9 97.2 B. Developmental expenditure (1-8) 740.0 1,265.2 2,361.0 2,788.0 1. Social and community services 309.7 586.6 1,140.1 1,348.7 2. General economic services 49.9 19.0 43.6 64.6 3. Agriculture and allied services 117.1 216.4 351.4 417.4 4. Industry and minerals 38.5 50.9 67.6 86.2 5. Fertilizer subsidies 44.0 62.4 94.9 74.3 6. Power and irrigation 101.1 209.3 338.0 401.1 7. Transport and communications 66.0 98.1 285.3 350.3 8. Public works 13.7 22.6 40.1 45.4 C. Total expenditure (A+B) 1,432.0 2,796.6 5,318.1 6,209.1 Memo items: D. Selected Expenditures for international cooperation (a) Contributions to international bodies 7.3 1.3 6.3 2.4 (b) External affairs (excluding a and c) 4.5 8.5 13.8 16.8 (c ) Tech & eco-coop with other countries 1.4 2.4 7.0 7.7 (d) Foreign trade and export promotion 28.1 4.3 8.3 9.2 (e) Posts and telecommunications 4.1 0.5 7.7 0.5 (f) Civil aviation 0.3 1.0 2.3 2.8 (g) Ports, light houses and shipping 1.9 3.4 8.6 8.6 (h) Interest on external public debt 18.3 49.0 50.5 52.7 Total expenditure for int. cooperation (a-h) 65.9 70.5 104.5 100.7 Source: Table 1.1, pp.1-2 in Government of India, Ministry of Finance. 2003. "Indian Public Finance Statistics 2002-2003", New Delhi.
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TABLE 4: COMBINED EXPENDITURE OF CENTER AND STATES, % OF TOTAL

Items A. Non-developmental expenditure (1-11) 1. Defense services 2. Interest payments 3. Fiscal services 4. Administrative services 5. Organs of states 6. Pensions and other retirement benefits 7. Relief for natural calamilities 8. Compensation to local bodies 9. Food subsidy 10. Social security 11. Others B. Developmental expenditure (1-8) 1. Social and community services 2. General economic services 3. Agriculture and allied services 4. Industry and minerals 5. Fertilizer subsidies 6. Power and irrigation 7. Transport and communications 8. Public works C. Total expenditure (A+B) Memo items: D. Selected Expenditures for international cooperation (a) Contributions to international bodies (b) External affairs (excluding a and c) (c ) Tech & eco-coop with other countries (d) Foreign trade and export promotion (e) Posts and telecommunications (f) Civil aviation (g) Ports, light houses and shipping (h) Interest on external public debt Total expenditure for int. cooperation (a-h) Source: Derived from Table 3. 1990-91 48.3 10.8 17.5 2.4 6.5 0.8 3.6 0.6 0.6 1.7 1.7 2.1 51.7 21.6 3.5 8.2 2.7 3.1 7.1 4.6 1.0 100.0 1995-96 54.8 9.6 21.1 3.5 6.6 0.9 4.4 0.6 0.5 2.0 2.0 3.5 45.2 21.0 0.7 7.7 1.8 2.2 7.5 3.5 0.8 100.0 2000-01 55.6 9.4 22.5 1.7 6.6 0.8 7.3 0.7 0.9 2.4 1.6 1.9 44.4 21.4 0.8 6.6 1.3 1.8 6.4 5.4 0.8 100.0 2001-02 55.1 9.2 22.4 1.6 6.5 0.8 7.0 0.9 0.8 2.9 1.4 1.6 44.9 21.7 1.0 6.7 1.4 1.2 6.5 5.6 0.7 100.0
0.5 0.3 0.1 2.0 0.3 0.0 0.1 1.3 4.6
0.0 0.3 0.1 0.2 0.0 0.0 0.1 1.8 2.5
0.1 0.3 0.1 0.2 0.1 0.0 0.2 1.0 2.0
0.0 0.3 0.1 0.1 0.0 0.0 0.1 0.8 1.6
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TABLE 5: TOTAL EXPENDITURE OF THE CENTRAL GOVERNMENT, RUPEES BILLION

Items 1990-91 1995-96 2000-01 2001-02 A. Non-developmental expenditure (1-11) 489.8 1,033.6 1,998.9 2,208.1 1. Defense services 154.9 269.6 498.4 572.1 2. Interest payments 215.0 500.5 993.1 1,072.6 3. Fiscal services 18.9 55.7 41.5 36.5 4. Administrative services 28.7 60.4 134.0 143.9 5. Organs of states 3.8 8.5 16.0 15.6 6. Pensions 21.4 42.9 142.2 153.0 7. Tech & eco-coop with other countries 1.4 2.4 7.0 7.7 8. Compensation to local bodies 0.6 0.0 0.0 0.0 9. Food subsidy 24.5 53.8 120.6 176.1 10. Social security 1.9 5.2 4.0 3.8 11. Others 18.8 34.7 42.1 26.9 B. Developmental expenditure (1-9) 345.7 498.2 918.8 1,055.4 1. Social and community services 64.3 118.4 251.4 272.4 2. General economic services 40.4 17.8 11.8 29.6 3. Agriculture and allied services 32.3 90.4 128.2 146.2 4. Industry and minerals 22.6 24.6 39.2 47.2 5. Fertilizer subsidies 44.0 62.4 94.9 74.3 6. Power and irrigation 31.2 26.9 40.0 64.5 7. Transport and communications 36.0 38.4 170.6 211.3 8. Public works 3.8 4.0 7.0 8.9 9. Grants to states 71.0 115.4 175.7 201.1 C. Statutory Grants to States and UTs 33.9 52.9 115.8 143.9 D. Total expenditure (A+B+C) 869.4 1,584.7 3,033.5 3,407.4 Memo items: E. Selected Expenditures for international cooperation (a) Contributions to international bodies 7.3 1.3 6.3 2.4 (b) External affairs 4.5 8.5 13.8 16.8 (c ) Tech & eco-coop with other countries 1.4 2.4 7.0 7.7 (d) Foreign trade and export promotion 28.1 4.3 8.3 9.2 (e) Posts and telecommunications 4.1 0.5 7.7 0.5 (f) Civil aviation 0.3 1.0 2.3 2.8 (g) Ports, light houses and shipping 1.9 3.4 8.6 8.6 (h) Interest on external public debt 18.3 49.0 50.5 52.7 Total expenditure for int. cooperation (a-h) 65.9 70.5 104.5 100.7 Source: Table 2.1, pp.12-14 in Government of India, Ministry of Finance. 2003. "Indian Public Finance Statistics 2002-2003", New Delhi.
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TABLE 6: TOTAL EXPENDITURE OF THE CENTRAL GOVERNMENT, % OF GDP

Items A. Non-developmental expenditure (1-11) 1. Defense services 2. Interest payments 3. Fiscal services 4. Administrative services 5. Organs of states 6. Pensions 7. Tech & eco-coop with other countries 8. Compensation to local bodies 9. Food subsidy 10. Social security 11. Others B. Developmental expenditure (1-9) 1. Social and community services 2. General economic services 3. Agriculture and allied services 4. Industry and minerals 5. Fertilizer subsidies 6. Power and irrigation 7. Transport and communications 8. Public works 9. Grants to states C. Statutory Grants to States and UTs D. Total expenditure (A+B+C) Memo items: E. Selected Expenditures for international cooperation (a) Contributions to international bodies (b) External affairs (c ) Tech & eco-coop with other countries (d) Foreign trade and export promotion (e) Posts and telecommunications (f) Civil aviation (g) Ports, light houses and shipping (h) Interest on external public debt Total expenditure for int. cooperation (a-h) Source: Derived from Table 5. 1990-91 56.3 17.8 24.7 2.2 3.3 0.4 2.5 0.2 0.1 2.8 0.2 2.2 39.8 7.4 4.7 3.7 2.6 5.1 3.6 4.1 0.4 8.2 3.9 100.0 1995-96 65.2 17.0 31.6 3.5 3.8 0.5 2.7 0.2 0.0 3.4 0.3 2.2 31.4 7.5 1.1 5.7 1.5 3.9 1.7 2.4 0.2 7.3 3.3 100.0 2000-01 65.9 16.4 32.7 1.4 4.4 0.5 4.7 0.2 0.0 4.0 0.1 1.4 30.3 8.3 0.4 4.2 1.3 3.1 1.3 5.6 0.2 5.8 3.8 100.0 2001-02 64.8 16.8 31.5 1.1 4.2 0.5 4.5 0.2 0.0 5.2 0.1 0.8 31.0 8.0 0.9 4.3 1.4 2.2 1.9 6.2 0.3 5.9 4.2 100.0
0.8 0.5 0.2 3.2 0.5 0.0 0.2 2.1 7.6
0.1 0.5 0.2 0.3 0.0 0.1 0.2 3.1 4.4
0.2 0.5 0.2 0.3 0.3 0.1 0.3 1.7 3.4
0.1 0.5 0.2 0.3 0.0 0.1 0.3 1.5 3.0
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TABLE 7: COMBINED FISCAL DEFICITS OF THE CENTRE AND STATES

Fiscal Deficit (% of GDP) 1990-91 1995-96 2001-02 2002-03 2003-04RE Centre 6.6 4.2 6.2 5.3 4.8 States 3.3 2.6 4.2 4.7 4.5 Combined 9.4 6.5 9.9 10.1 8.8 Financing of Central government deficit (in %) Domestic finance 92.9 99.5 96.0 109.3 97.7 External finance 7.1 0.5 4.0 -9.3 2.3 Total 100 100 100 100 100 Note: RE stands for Revised Estimate. Combined deficit does not add up to the fiscal deficits of the Centre and States as the transfer from the Centre to the States is netted out in the combined deficit. Source: RBI 2003 (p.64) and GOI, MOF 2004c (p.15).
TABLE 8: OUTSTANDING PUBLIC DEBT BY THE CENTER AND STATES, % OF GDP

End of Centre States year Domestic External Total Domestic Domestic 1990-91 49.8 11.7 61.4 19.4 56.2 1995-96 46.7 12.5 59.2 17.9 53.7 2000-01 52.4 11.3 61.6 23.7 63.2 2002-03 61.4 9.5 70.9 28.3 73.8 2003-04 65.7 9.0 74.7 30.2 78.4 Source: Das, Thorat and Singh 2002 (p.80) and RBI 2003 (p.67; 298). Combined External 11.7 12.5 11.3 9.5 9.0 Total 67.8 66.2 74.5 83.3 87.4
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TABLE 9: MAJOR REFORMS IN INVESTMENT AND EXTERNAL SECTOR SINCE 1991

Status in June 1991 1. Investment policy (a) Licensing required for most industries which accounted for 80% of manufacturing output. (b) Restrictions on expansion under Monopolies and Restricted Trade Policies Act. (c) Reservation of 836 items for small scale industries. (d) 18 core and infrastructure industries with high capital intensity, long gestation, low return and high risk, reserved for the public sector. (e) Restricted foreign investment policy. (a) Licensing abolished except for 6 items which account for only 7% of manufacturing output. (b) Monopolies and Restricted Trade Policies Act amended. (c) Only 456 items are reserved for the small scale industries. (d) Only three industries viz. rail transport, atomic energy, minerals required by atomic energy reserved for public sector. (e) All sectors open for foreign investment except some strategic sectors on ground of national security, public health and environment. (f) Competition Commission established. Status in February 2004
(f) No Competition Act. 2. External Sector reforms (a) Fixed exchange rate determined by the Reserve Bank of India. (b) Quantitative Restrictions on 91% of imports (c) Imports of 55 goods canalized (d) 439 items of exports are subject to export licenses. (e) Export taxes on agro items & minerals. (f) No current account convertibility. (g) No capital account convertibility. Source: Updated on the basis of Das 2003a (pp. 31-32).
(a) Exchange rate is market determined by supply and demand for foreign exchange. (b) Most Quantitative Restrictions are removed. (c) Most items decimalized. (d) Abolished except for some minerals and agricultural products. (e) Export taxes abolished. (f) Full convertibility on current account. (g) Major convertibility on capital account.
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TABLE 10: TRENDS IN HEALTH CARE IN INDIA, 1951-2000

Item Primary/secondary health centers (in 000) Dispensaries and Hospitals (in 000) Beds (Private and Public) (in 000) Doctors (Modern System) Nursing Personnel Malaria (Cases in million) Leprosy (Cases/ 10,000 population) Small Pox (in 000) Source: GOI, MHFW 2003. 1951 0.7 9 117 18 62 75 38.1 45 1981 57 24 569 144 269 2.7 57.3 Eradicated 2000 165 50 1,000 505 740 2.2 3.74 Eradicated
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TABLE 11: BUDGETARY EXPENDITURE FOR INTERNATIONAL COOPERATION

Activity Ministry/ Department Within national Boundary (Rupees crore) 2002-03 2003-04 0 0 889 0 1,097 21,442 908 1,157 753 19 133 26,398 927 0 1,274 18,834 1,024 1,331 926 23 143 24,482 For overseas Transactions (Rupees crore) 2002-03 2003-04 1,299 1,007 2,727 4,511 0 0 0 0 0 1 64 8,602 2,841 3,288 0 0 0 0 0 1 66 7,203 Total expenditure (Rupees crore) 2002-03 1,299 3,616 4,511 1,097 21,442 908 1,157 753 20 197 35,000 400,397 2003-04 1,007 3,768 3,288 1,274 18,834 1,024 1,331 926 24 209 31,685 474,255
1.
Contributions to international bodies 2. Expenditure for external affairs 3. Interest on external debt 4. Trade and Export Promotion 5. UN Millennium Development goals 6. Energy and environment 7. Research & Development 8. Transport , Telecom, tourism 9. Drug trafficking & smuggling 10. Institutional set up for WTO Total (1 to 10 above) Total expenditure of Central government
Various Min / Departments External Affairs/ Finance Finance Commerce/ Communications Various Min / Departments Environment/ Non-conventional Various Min / Departments Various Min / Departments Finance/ Home Affairs Commerce and Industry
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TABLE 11 (CONT.)
As % of Total Central Government Expenditure Activity Ministry/ Within national For overseas Total expenditure Department Boundary Transactions 2002-03 2003-04 2002-03 2003-04 2002-03 2003-04 1. Expenditure for External Affairs/ 0.22 0.20 0.68 0.60 0.90 0.79 external affairs Finance 2. Interest on external Finance 0 0 1.13 0.69 1.13 0.69 debt 3. Trade and Export Commerce/ 0.27 0.27 0 0 0.27 0.27 promotion Communications 4. UN Millennium Various Min / 5.36 3.97 0 0 5.36 3.97 Development goals Departments 5. Energy and Environment/ 0.23 0.22 0 0 0.23 0.22 environment Non-conventional 6. Research & Various Min / 0.29 0.28 0 0 0.29 0.28 Development Departments 7. Transport , Various Min / 0.19 0.20 0 0 0.19 0.20 Telecom, tourism Departments 8. Drug trafficking & Finance/ Home 0.00 0.00 0.00 0.00 0.00 0.01 smuggling Affairs 9. Institutional set up Commerce and 0.03 0.03 0.02 0.01 0.05 0.04 for WTO Industry 11. Total (1 to 10 above) 6.59 5.16 2.15 1.52 8.74 6.68 Notes: (1) Different categories of expenditures are explained in the subsequent sections. (2) Expenditures under broad categories are incurred by the concerned departments/ ministries with prior approval of the Ministry of Finance and approved by the Indian Parliament as a part of Union Budget. (3) This table summarizes information given in tables 4.2 to 4.9. Source: Expenditure Budget Part 2, a part of Budget Documents presented to the parliament by the Ministry of Finance, indicates detailed demands for grants for each Department and Ministry under different headings and activities. The above table is based on information given in GOI, MOF 2003b. For detailed sources, see sources of data under tables 4.1 to 4.9.
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TABLE 12: CONTRIBUTIONS TO INTERNATIONAL BODIES

Items (Rupees billion) 1. Total contributions to international bodies 2. Total expenditure and net lending 3. Total revenue and grants 4. Total tax revenue 5. Total external assistance (net) 6. Overall deficit (2-3) Contribution as % of: 2. Total expenditure and net 0.7 1.8 0.1 0.1 0.3 0.2 lending 3. Total revenue and grants 1.2 2.6 0.1 0.1 0.5 0.3 4. Total tax revenue 1.7 3.9 0.2 0.2 0.8 0.5 5. Total external assistance (net) 23.1 35.8 40.8 4.4 -9.6 28.1 6. Overall deficit (2-3) 2.0 6.3 0.3 0.2 1.0 0.8 Notes: (1) Contributions mean mandatory subscriptions of the Government of India as a Member to the international organizations. Large variations of contributions over the years are due to the fact in 1995-96 and 2001-02 Indian government was required to make fewer contributions to the IMF, ADB and IBRD. (2) Various terms used in the table have the same interpretations as in the IMF Government Finance Statistics. Total expenditure covers all non-repayable payments on both current and capital accounts of the Government. Net lending consists of Central government lending for public policy purposes minus repayment to the Central government. (3) Total revenue and grants cover all non-repayable government receipts (including grants received from other governments and international organizations). (4) Revenue consists of tax and non-tax revenues. Tax revenue is unrequited and compulsory payments to government on the basis of levies imposed on income, wealth, production, imports etc. Source: Estimated by the author on the basis of information given in the Annexure-3 on Trends of Expenditure and Annexure-4 on Contributions to International Bodies in following budget documents: (1) GOI, MOF 1992, pp.72-77, for the year 1990-91. (2) GOI, MOF 1993, pp.76-81, for the year 1991-92. (3) GOI, MOF 1997, pp.80-85, for the year 1995-96. (4) GOI, MOF 2003a, pp.70-76, for the year 2001-02. And (5) GOI, MOF 2004, pp.68-74, for the years 2002-03 and 2003-04 1990-91 7.3 983 607 430 32 376 1991-92 19.4 1059 751 501 54 308 1995-96 1.3 1683 1180 819 3 503 2001-02 2.4 3623 2214 1335 56 1410 2002-03 13.0 4004 2691 1594 -135 1313 2003-04 10.1 4743 3422 1875 36 1321
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TABLE 13: CONTRIBUTIONS BY THE INDIAN GOVERNMENT TO INTERNATIONAL BODIES (Classified by industrial classifications in national accounts framework)
Ministry/ Department Contributions in Rupees million 1. Agriculture and allied services 2. Industry Mining and quarrying Manufacturing Electricity, gas and water supply Construction 3. Services Trade, hotels ad restaurants Transport, storage and communications Finance and real estate Public Administration, Community and social services Grand Total In percentage 1. Agriculture and allied services 0.8 0.4 6.3 8.2 1.7 2.2 2. Industry 0.7 0.5 11.9 10.5 2.6 3.2 Mining and quarrying 0.0 0.0 0.0 0.1 0.0 0.0 Manufacturing 0.6 0.4 7.8 8.2 2.1 2.5 Electricity, gas and water supply 0.2 0.1 3.0 1.7 0.4 0.5 Construction 0.0 0.0 1.1 0.6 0.1 0.2 3. Services 98.5 99.1 81.7 81.3 95.8 94.6 Trade, hotels ad restaurants 0.2 0.2 2.0 2.1 0.4 0.5 Transport, storage and 1.1 0.3 8.8 4.4 1.4 1.5 communications Finance and real estate 94.7 97.2 34.9 49.1 88.6 85.6 Public Administration, Community 2.5 1.4 36.1 25.8 5.4 7.0 and social services Grand Total 100.0 100.0 100.0 100.0 100.0 100.0 Notes: (1) As per the Allocation of Business Rules approved by the President of India, each Ministry/ Department has a sectoral charge and deals with the concerned subject and the international organization. With prior approval of the Ministry of Finance, mandatory contributions are made by the respective Ministries/ Departments to which the particular recipient international organization belongs. For example, Ministry of Finance makes contributions to the international financial organizations such as IMF, ADB, International Bank for Reconstruction and Development and these contributions are shown under finance and real estate. (2) Ministry of Agriculture deals with FAO and contribution to FAO is shown under agriculture. (2) Ministry of External Affairs makes contributions to the United Nations and its agencies, Commonwealth Secretariat etc. and these contributions are shown under public administration, community, Source: Same as in table 8. 58 53 0 41 12 0 7,238 16 78 6,961 182 7,349 76 97 0 79 18 0 19,221 29 64 18,850 278 19,395 82 155 1 101 39 15 1,061 26 114 453 468 1,298 199 257 2 199 41 15 1,984 50 108 1,197 629 2,440 215 337 2 271 47 18 12,434 50 180 11,505 699 12,985 219 322 2 255 47 18 9,525 50 147 8,622 707 10,066 1990-91 1991-92 1995-96 2001-02 2002-03 2003-04
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TABLE 14: BUDGET ALLOCATIONS FOR EXTERNAL AFFAIRS

Activity Ministry/ Department Within country (Rupees crore) 2002-03 889 0 795 94 0 0 2003-04 927 0 824 103 0 0 For overseas (Rupees crore) 2002-03 2,727 849 107 0 1,183 588 2003-04 2,841 914 123 0 1,250 554 Total (Rupees crore) 2002-03 3,616 849 902 94 1,183 588 2003-04 3,768 914 947 103 1,250 554
1. External relations 1-A. Cost of embassies 1-B. Diplomatic relations 1-C. Visa expenditure 1-D Tech/Eco Cooperation 1-E Tech/Eco Cooperation
Finance/ External Affairs External Affairs External Affairs External Affairs External Affairs Finance
As % of total central government expenditure 1. External Finance/ 0.22 0.20 0.68 0.60 0.90 relations External Affairs 1-A. Cost of External Affairs 0.21 0.19 0.21 embassies 1-B. Diplomatic External Affairs 0.20 0.17 0.03 0.03 0.23 relations 1-C. Visa External Affairs 0.02 0.02 0.02 expenditure 1-D Tech/Eco External Affairs 0.30 0.26 0.30 Cooperation 1-E Tech/Eco Finance 0.15 0.12 0.15 Cooperation Source: GOI, MOF 203b, pp. 64-65 for Ministry of External Affairs, and p.67 for Ministry of Finance and Company affairs 0.79 0.19 0.20 0.02 0.26 0.12
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TABLE 15: BUDGETARY EXPENDITURE FOR TRADE AND EXPORT PROMOTION

Activity Ministry/ Department Within country (Rupees crore) 2002-03 1,097 81 630 2003-04 1,274 106 656 For overseas (Rupees crore) 2002-03 0 2003-04 0 Total (Rupees crore) 2002-03 1,097 81 630 2003-04 1,274 106 656
1. Trade and Export promotion 1-A Development of FTZ/ SEZs 1-B Assistance for export promotion & market development 1-C Assistance to states 1-D Assistance to other bodies 1-E Software Tech. Parks & Electronic Hardware Tech. Park 1-F Electronic and Computer Software & Export Market Dev
Various Min / Departments Commerce Commerce
Commerce Commerce Communications & IT Communications & IT
274 103 5
333 166 6
274 103 5
333 166 6
As % of total central government expenditure 1. Trade and Export Various Min / 0.27 0.27 0.00 0.00 0.27 promotion Departments 1-A Development of Commerce 0.02 0.02 0.02 FTZ/ SEZs 1-B Assistance for export Commerce 0.16 0.14 0.16 promotion & market development 1-C Assistance to states Commerce 0.07 0.07 0.07 1-D Assistance to other Commerce 0.03 0.04 0.03 bodies 1-E Software Tech. Communications & 0.001 0.001 0.001 Parks & Electronic IT Hardware Tech. Park 1-F Electronic and Communications & 0.001 0.001 0.001 Computer Software & IT Export Market Dev Notes: FTZ stands for Free Trade Zones and SEZ for Special Economic Zones. Source: GOI, MOF 2003b, pp.30-32 for Ministry of Commerce and Industry, pp.39-42 for Ministry of Communications and Information Technology. 0.27 0.02 0.14
0.07 0.04 0.001
0.001
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TABLE 16: DUTY FORGONE UNDER SELECTED EXPORT PROMOTION SCHEMES

Scheme Rupees billion 2000-01 46.8 2.0 12.2 35.4 15.1 7.3 9.1 41.9 0 46.3 0.3 216.5 475.4 2001-02 64.6 4.2 5.2 65.1 15.9 2.0 12.6 29.9 2.4 62.7 3.9 268.4 401.0 2002-03 78.4 5.0 4.3 105.4 31.3 1.0 10.8 36.0 1.4 81.7 4.6 360.0 449.1 % to customs collection 2000-01 9.9 0.4 2.6 7.4 3.2 1.5 1.9 8.8 0 9.7 0.1 45.5 100 2001-02 16.1 1.0 1.3 16.2 4.0 0.5 3.2 7.6 0.6 15.6 1.0 66.9 100 2002-03 19.6 1.3 1.1 29.3 7.8 0.3 2.7 9.0 0.4 20.4 1.2 80.2 100
1. Quantity Based Advance License 2. Value Added License 3. Export Promotion Zones 4. 100% Export Oriented Units 5. Export Promotion Capital Goods 6. Special Imprest License 7. Special Economic Zones 8. Duty drawback 9. Passbook scheme 10. Duty Entitlement Passbook scheme 11. Duty Free Replenishment Certificate 12. Total duty foregone 13. Net customs collection Source: GOI, MCI 2003.
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TABLE 17: BUDGETARY EXPENDITURE FOR SELECTED SOCIAL SERVICES

Activity Ministry/ Department Within country (Rupees crore) 2002-03 21,442 2,250 9,502 152 180 765 2,743 3,765 2,085 2003-04 18,834 2,750 4,488 152 191 839 3,165 4,649 2,600 For overseas (Rupees crore) 2002-03 0 2003-04 0 Total (Rupees crore) 2002-03 21,442 2,250 9,502 152 180 765 2,743 3,765 2,085 2003-04 18,834 2,750 4,488 152 191 839 3,165 4,649 2,600
1. Social services 1-A Water supply & sanitation 1-B Poverty alleviation programs 1-C PM's Employment Plan 1-D Rural Employment Gen Program 1-E Public health 1-F Family welfare services 1-G Elementary education 1-H Women & child development
Various Min / Departments Drinking Water Supply Rural development Agro and Rural Industries Agro and Rural Industries Health Family Welfare Elementary Education & Literacy Women & Child Development
As % of total central government expenditure 1. Social services 1-A Water supply & sanitation 1-B Poverty alleviation programs 1-C PM's Employment Plan Various Min / Departments Drinking Water Supply Rural development 5.36 0.56 2.37 3.97 0.58 0.95 0.00 0.00 5.36 0.56 2.37 3.97 0.58 0.95 0.03 0.04 0.18 0.67 0.98 0.55
Agro and Rural 0.04 0.03 0.04 Industries 1-D Rural Employment Agro and Rural 0.04 0.04 0.04 Gen Program Industries 1-E Public health Health 0.19 0.18 0.19 1-F Family welfare services Family Welfare 0.69 0.67 0.69 1-G Elementary education Elementary Education 0.94 0.98 0.94 & Literacy 1-H Women & child Women & Child 0.52 0.55 0.52 development Development Source: GOI, MOF 2003b, pp.11-12 for Ministry of Agro and Rural Industries, pp.88-99 for Ministry of Health and Family welfare, pp.113-114 for Department of Elementary Education and Literacy, pp.130-133 for Department of Women and Child Development, pp.165-167 for Department of Rural Development, and pp.170 for Department of Drinking Water Supply.
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TABLE 18: BUDGETARY EXPENDITURE FOR ENERGY, R&D

Activity Ministry/ Department
ENVIRONMENT PROTECTION AND
Within country (Rupees crore) 2002-03 908 474 391 24 19 1,157 172 985 2003-04 1,024 630 376 17 1 1,331 195 1,136
For overseas (Rupees crore) 2002-03 0 2003-04 0
Total (Rupees crore) 2002-03 908 474 391 24 19 2003-04 1,024 630 376 17 1 1,331 195 1,136
1. Energy and environment 1-A Non-conventional energy 1-B. Pollution control 1-C Env.Manage. Cap.building 1-D Climatic change project 2. Research & Development 2-A. Oceanographic research 2-B Scientific & indl research
Various Min / Departments Non-co conventional energy Environment and Forest Environment and Forest Environment and Forest Various Min / Departments Ocean development Scientific & Indl Research
1,157 172 985
As % of total central government expenditure 1. Energy and Various Min / 0.23 0.22 0.00 0.00 0.23 environment Departments 1-A Non-conventional Non-conventional 0.12 0.13 0.12 energy energy 1-B. Pollution control Environment and Forest 0.10 0.08 0.10 1-C Env.Manage. Environment and Forest 0.01 0.00 0.01 Cap.building 1-D Climatic change Environment and Forest 0.00 0.00 0.00 project 2. Research & Various Min / 0.29 0.28 0.00 0.00 0.29 Development Departments 2-A. Oceanographic Ocean development 0.04 0.04 0.04 research 2-B Scientific & indl Scientific & Indl 0.25 0.24 0.25 research Research Source: GOI, MOF 2003b, pp.58-63 for Ministry of Environment and Forests, pp.144-145 for Ministry of Non-Conventional Energy Sources, pp.146-149 for Department of Ocean Development, and pp.177-179 for Department of Scientific and Industrial Research. 0.22 0.13 0.08 0.00 0.00 0.28 0.04 0.24
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TABLE 19: BUDGETARY EXPENDITURE ON TRANSPORT, TELECOM AND TOURISM

Activity Ministry/ Department Within country (Rupees crore) 2002-03 753 35 2003-04 926 36 For overseas (Rupees crore) 2002-03 0 2003-04 0 Total (Rupees crore) 2002-03 753 35 2003-04 926 36
1. Transport, Telecom, tourism 1-A. Collection cost of domestic 1 international air travel tax 1-B. Subsidy for Haj charters 1-C. Sea ports & light houses 1-D Telecom Reg. Authority 1-E.Tourist infrastructure
Various Min/ Departments Revenue
Civil Aviation Shipping Telecommunicatio ns Tourism
170 249 10 289
200 314 10 366
170 249 10 289
200 314 10 366
As % of total central government expenditure 1. Transport, Telecom, Various Min / 0.19 0.20 0.00 0.00 0.19 0.20 tourism Departments 1-A. Collection cost of Finance 0.01 0.01 0.009 0.008 domestic 1 international air travel tax 1-B. Subsidy for Haj Civil Aviation 0.04 0.04 0.04 0.04 charters 1-C. Sea ports & light Shipping 0.06 0.07 0.06 0.07 houses 1-D Telecom Reg. Telecommunicatio 0.002 0.002 0.002 0.002 Authority ns 1-E.Tourist infrastructure Tourism 0.07 0.08 0.07 0.08 Source: GOI, MOF 2003b. p.82 for Department of revenue, Ministry of Finance, p.24 for Ministry of Civil Aviation, pp.37-38 for Department of Telecommunications, pp.184-186 for Ministry of Shipping, and pp.211 for Department of Tourism.
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TABLE 20: BUDGETARY EXPENDITURE FOR DRUG-TRAFFICKING

Activity Ministry/ Department Within country (Rupees crore) 2002-03 19 8 11 2003-04 23 9 14 For overseas (Rupees crore) 2002-03 1 1 0 2003-04 1 1 0 Total (Rupees crore) 2002-03 20 9 11 2003-04 24 10 14
1. Drug trafficking & smuggling 1-A. Drug trafficking/ smuggling 1-B Narcotics control
Finance and Home Revenue Home Affairs
As % of total central government expenditure 1. Drug trafficking & Finance and 0.00 0.00 0.00 0.00 0.005 smuggling Home 1-A. Drug trafficking/ Revenue 0.002 0.002 0.002 smuggling 1-B Narcotics control Home Affairs 0.003 0.003 0.003 Source: GOI, MOF 2003b, p.82 for Department of Revenue and p.105 for Ministry of Home Affairs. 0.005 0.002 0.003
TABLE 21: BUDGETARY EXPENDITURE FOR WTO INSTITUTIONS

Activity Ministry/ Department Within country (Rupees crore) 2002-03 133 30 3 100 2003-04 143 28 4 111 For overseas (Rupees crore) 2002-03 64 64 2003-04 66 66 Total (Rupees crore) 2002-03 197 94 3 100 2003-04 209 94 4 111
1. Institutional l set up for WTO 1-A. Administrative set up for WTO 1-B Tariff Commission 1-C Patents, trade marts, quality control, designs, IPR
Various Min / Departments Commerce Industrial Policy & Promotion Industrial Policy & Promotion
As % of total central government expenditure 1. Institutional set up for WTO 1-A. Administrative set up for WTO 1-B Tariff Commission Various Min / Departments Commerce Industrial Policy & Promotion Industrial Policy & Promotion 0.03 0.01 0.001 0.03 0.01 0.001 0.02 0.02 0.01 0.01 0.05 0.023 0.001 0.04 0.020 0.001 0.023
1-C Patents, trade marts, 0.02 0.02 0.025 quality control, designs, IPR Source: GOI, MOF 2003b, pp.30-32 for Department of Commerce and pp.33-35 for Tariff Commission.
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TABLE 22: GLOBAL SUPPLY OF SCIENCE AND ENGINEERING STUDENTS GRADUATING IN 1999, 000S
Country Natural Science* Engineering Total Global 918 868 1786 EU 182 135 317 USA 144 61 205 China 60 195 255 India 147 350 176 Japan 33 103 136 Indonesia 11 21 31 South Korea 30 45 75 Taiwan 13 17 30 Thailand 10 11 21 * Includes physics, chemistry, astronomy, biology, mathematics, agricultural and computer sciences. Source: Ahya and Agarwal 2004 (p. 3).
TABLE 23: WORKERS REMITTANCES RECEIVED BY DEVELOPING COUNTRIES, 2001

Country India Mexico Philippines Morocco Egypt, Arab Rep of Turkey Lebanon Source: World Bank 2003. US$ billion 10.0 9.9 6.4 3.3 2.9 2.8 2.3 Share in total (%) 13.8 13.7 8.9 4.6 4.0 3.9 3.2
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UNITED NATIONS DEVELOPMENT PROGRAMME

INTERNATIONAL COOPERATION BEHIND NATIONAL BORDERS: COUNTRY CASE STUDY ON INDIA

Country Case Study on India

INSTITUTIONAL AND LEGAL DIMENSIONS ...................................................................................... 9

OUTGOING COOPERATION ........................................................................................................... 20

TECHNICAL ASSISTANCE ......................................................................................................... 20 REGIONAL INTEGRATION ........................................................................................................ 20

BUDGETARY ALLOCATIONS FOR INTERNATIONAL COOPERATION ............................................... 21

Country Case Study on India

Country Case Study on India

Country Case Study on India

OVERVIEW OF INDIAS PUBLIC FINANCE

Country Case Study on India

Country Case Study on India

Country Case Study on India

INSTITUTIONAL AND LEGAL DIMENSIONS

Country Case Study on India

Country Case Study on India

INTERNATIONAL COOPERATION POLICIES

Country Case Study on India

KEY THRUSTS OF INTERNATIONAL COOPERATION POLICIES

Country Case Study on India

International Bank for Reconstruction and Development (World Bank).

Country Case Study on India

Country Case Study on India

Country Case Study on India

Country Case Study on India

Country Case Study on India

Country Case Study on India

Country Case Study on India

Country Case Study on India

BUDGETARY ALLOCATIONS FOR INTERNATIONAL COOPERATION

Country Case Study on India

Country Case Study on India

Country Case Study on India

Country Case Study on India

Country Case Study on India

Country Case Study on India

Country Case Study on India

Govt. securities Capital markets

Source: Updated on the basis of Das 2003a (pp. 14-19).

Country Case Study on India

TABLE 2: REVENUE RECEIPTS OF THE CENTRAL GOVERNMENT, % OF GDP

Country Case Study on India

TABLE 3: COMBINED EXPENDITURE OF CENTRE AND STATES, RUPEES BILLION

Country Case Study on India

TABLE 4: COMBINED EXPENDITURE OF CENTER AND STATES, % OF TOTAL

0.5 0.3 0.1 2.0 0.3 0.0 0.1 1.3 4.6

0.0 0.3 0.1 0.2 0.0 0.0 0.1 1.8 2.5

0.1 0.3 0.1 0.2 0.1 0.0 0.2 1.0 2.0

0.0 0.3 0.1 0.1 0.0 0.0 0.1 0.8 1.6

Country Case Study on India

TABLE 5: TOTAL EXPENDITURE OF THE CENTRAL GOVERNMENT, RUPEES BILLION

Country Case Study on India

TABLE 6: TOTAL EXPENDITURE OF THE CENTRAL GOVERNMENT, % OF GDP

0.8 0.5 0.2 3.2 0.5 0.0 0.2 2.1 7.6

0.1 0.5 0.2 0.3 0.0 0.1 0.2 3.1 4.4

0.2 0.5 0.2 0.3 0.3 0.1 0.3 1.7 3.4

0.1 0.5 0.2 0.3 0.0 0.1 0.3 1.5 3.0

Country Case Study on India

TABLE 7: COMBINED FISCAL DEFICITS OF THE CENTRE AND STATES

TABLE 8: OUTSTANDING PUBLIC DEBT BY THE CENTER AND STATES, % OF GDP

Country Case Study on India

TABLE 9: MAJOR REFORMS IN INVESTMENT AND EXTERNAL SECTOR SINCE 1991