Human development

This is a summary of Human development chapter of economic survey [ http://indiabudget.nic.in/es2012-13/echap-13.pdf]

• to reap demographic dividend population needs to be skilled, healthy and literate

• india ranks 134 on HDI
• due to low literacy and poor healthcare

• ranks 129 on gender inequality'
• worse than pakistan, bangladesh and srilanka

• dimensions of inclusive development
• poverty alleivation
• employment generation
• health
• education
• women empowerment
• social welfare
• financial inclusion
• social inclusion

• social sector spending
• mostly focussed on education[40% of social sector spending]
• 3.3% of GDP spent on education
• public health expenditure much lesser than private health expenditure
• 1.36% of GDP

• Poverty
• poverty line
• based on monthly per cap consumption expenditure
• MPCE arrived at through NSSO surveys every 5 years
• poverty declined from 37 to 30% between 2004-05 to 2009-10
• 1.5% decline per year
• improvements in IMR and income

• inequality
• gini coefficient
• measures deviation of distribution of income
• India-35.8  lower than SOuth africa, lanka etc
• rural consumption expenditure increased at faster rate than urban

• employment
• grew by 1.6% per annum in last decade
• slowed down in second half of decade
• lower labour force participation rate
• declined from 430 in 2004-05 to 400 per thousand
• greater number of people opting for education/skill development
• female employment
• fall in female employment in rural areas
• indicates  more rural women are continuing education
• unemployment
• declined in last 5 years
• unemployment rate decline greater than employment growth
• more people are opting for education

• poverty alleivation schemes
• MGNREGA
• 53% women participated against mandated 33%
• enhances bargaining power of agricultural labour
• reduced distress migration
• recent initiatives
• electronic fund management to reduce delays in wage disbursal
• additional employment beyond 100 days in drought affected areas
• integration with UID
• convergence with other schemes like total sanitation campaign
• NRLM
• also called ajeevika
• self employment program
• assist poor families through bank credit and subsidy for creating income generating assets
• features
• every woman member from poor household must be member of a SHG
• SHG members provided training
• provision of funds to SHG and also interest subsidy
• SJSRY
• For urban unemployed and Under employed
• encourage self employment

• social protection programmes
• AABY
• life and disability cover
• 18-59 years
• includes rural landless
• includes education scholarship for children
• RSBY
• 30000 per family per annum
• 75:25 share
• 90:10 special category states
• smart card based portability
• National social security fund
• support schemes for unorganised sector like beedi workers, weavers, toddy tappers etc

• Rural infrastructure development
• Bharat nirman
• water supply
• electrification
• irrigation
• roads
• housing
• telecommunication
• Indira awas yojana
• PM gram sadak yojana
• rural drinking water program
• aims to provide 40 ltr per cap per day  
• so far 84% rural houses covered
• sanitation
• only 32% household have toilets
• new strategy- community sanitation approach

• urban infrastructure program
• JNNURM
• includes provision of shelter and basic services to urban poor
• extended till 2014

• Skill development
• National skill development council approved 24 training projects
• Udaan- private sector led skills training program for JK youth

• Education
• 12th plan focus
• teacher training
• accountability enforcement
• capacity building in secondary schools
• Elementary and secondary education
• Right to education
• out of school population 134 lakh to 81 lakh between 2005-09
• inservice teacher traning
• imrpovement in school infrastructure
• Mid day meals
• covers 1-8 standard
• convergence with NRHM
• MIS used to monitor scheme
• RMSA
• aims at improving access and quality of secondary education
• includes infrastructure, teacher training
• Models schools scheme
• implemented in 6000 educationally backward blocks
• implemented by state government
• sakshar bharat
• adult education
• aimed at 80% literacy by end of 11th FYP
• higher education
• among largest in world with over 600 universities
• 11th plan initiatives
• improvement of access
• curriculum reforms
• use of IT for distance education

• Health
• NRHM
• launched in 2005
• increased community involvement
• decentralized public health system
• improved manpower, drugs, equipment
• JSY
• launched 2005 to reduce MMR
• promotes institutional deliveries
• Janani shishu suraksha yojana
• covers all pregnant women
• free delivery, drugs, diet, transport etc
• National vector borne disease contorl, programme
• to contorl malaria, dnegue, chikungunya, japanese encephalitis, Kala-azar, lymphatic filariasis
• kala-azar , filariasis to be eliminated by 2015
• PM swasthya suraksha yojana
• to correct regional imbalance in territary healthcare
• 6 AIIMS like institutes to come up in
• bhopal
• bhubaneswar
• jodhpur
• patna
• rishikesh
• AYUSH
• mainstream allopathic services

• women and child development
• ICDS
• IGMSY
• Rashtriya mahila kosh
• micro credit to poor women
• policies to address violence against women
• varma committee-examine punishments in cases of aggravted sexual assault
• usha mehra committee- identify lapses in policing in delhi
• crisis centres
• counselling centres
• financial assistance to victims

• challenges
• need to balance imperatives of growth and inclusion
• growth should lead to higher and better jobs
• need to move towards more production and growth oriented schemes
• convergence of schemes
• empower PRIs and promote decentralisation in plan programme implementation
• need to convert outlays into outcomes

Boxes

• Socio economic caste census
• puprose - to better identify BPL families
• based on NC saxena recommended criteria
• door to door enumeration
• conducted by states with support from union

• ASER education survey
• positive
• increased enrollment
• better pupil teacher ratio
• better provision of girl toilets
• more libraries
• negatives
• fall in basic reading and arithmetic levels
• children attendance  declined 

DCT- should it complement or substitute PDS?

India spends close to two percent of its GDP as subsidies for the poor. Subsidies are seen as a means to provide basic livelihood security to the poor. Subsidies in form of both cash and kind are provided under various schemes of government. A common criticism against these schemes is that it is riddled with inefficiencies and leakages. As a result a large chunk of subsidies are not reaching the intended beneficiaries. Government is considering the idea of direct cash transfer as a means to correct the inefficiencies in existing system.

                Direct cash transfer aims at delivering subsidies directly to beneficiary in form of cash. Two major pillars of this scheme are Unique identity under UID and financial inclusion. While UID helps authenticate identity of the beneficiary ,financial inclusion would ensure that regular subsidy payments are made into beneficiaries bank account,there by acting as a source of insurance. This idea is largely based on the succesfull cash transfer schemes in Latin America. There are several inherent advantages in cash transfer schemes vis-à-vis in-kind subsidies. It is more transparent and simple, provides wider choice to beneficiary and provides income security to the poor. In this context there have been demands to replace the leaky public distribution system(PDS) with direct cash transfer

                PDS has been the mainstay of governments efforts to ensure food security of those living below the poverty line. Today fair price shops are spread across the length and breadth of the country. Despite large leakages, many still consider it a necessity.  With such a vast reach, it would be better to improve efficiency of existing system rather than replacing it with a new system without adequate infrastructure. The best way forward is to make use of UID in authenticating beneficiaries availing PDS. This would help eliminate ghost beneficiaries thereby cutting down leakages. Automation of processes will aid in real time monitoring of sale of grains.

                The direct cash transfer scheme in current scenario is useful in consolidating existing cash transfer schemes like pension and scholarship. While expanding the scope of DCT, government should consider the ground level infrastructure like bank branches, authentication tools etc. Mere transplantation of cash transfer model that was successful in a predominantly urban Latin America to Indian society would have deleterious impact.  A lot of grass root level changes need to be brought in before widening the scope of cash transfers to include essential goods like food grains.

Cost of black economy

Institutional mechanism for Monitoring PPP projects

It will ensure good governance, accountability, efficiency and economy in spending

GREXIT: Will it Happen

• source- Economic times
  
  
  
  
• WILL GREECE LEAVE THE EURO ZONE
• Unlikely in the near future.The fallout of Greeces exit would be
  more painful than negotiating fresh conditions under which the austerity measures and repayment obligations could be eased.Any exit has to be voluntary as no country can be pushed out.
• WHAT HAS CHANGED POLITICALLY FOR GREECE
• New French President Francois Hollande has hinted at some relief
  for Greece as he stands for liberal government spending rather than austerity.Even Chancellor Angela Merkel,who has been the prime mover of the austerity drive,could agree to climb down as a possible Greek exit could hurt German companies and banks and her country would lose all economic benefits it gained from the single currency.
  Its banking system will collapse,with depositors pulling out funds and banks ownership of Greek bonds becoming worthless.Bank funding will dry up as ECB wont lend anymore.Creation of a new currency,or the return to its old drachma,will lead to depreciation of as high as 80%.That would bloat debt and make imports impossible,causing job losses & poverty.
  
• WHAT IF THE BANKING SYSTEM COLLAPSES
  
  The contagion will spread since faith in the euro would vanish.Peripheral countries such as Portugal and Spain,where the banking system is perceived to be weak,will also come under assault as people will pull out funds.Once the contagion spreads,the financial markets will seize up.
• .
  
• CAN GREECE GAIN FROM TRADE IF CURRENCY FALLS
  
  Once it pulls out of the euro zone,its trade with other countries will face tariffs.Movement of capital and labour will also be restricted,causing more pain.
• HOW MUCH IT NEEDS TO REPAY DEBT
  
  Greece will need around 20 -28 billion a year until 2016.Thereafter,the funding requirements could fall below 20 billion and converge towards 10 billion.Under this scenario,bailout III would require around 110 billion from 2015-2020,according to RBS.
• IS AN ORDERLY EXIT POSSIBLE
  
  No.Approximately 20% of the worlds reserves are in euros,and a larger notional amount of euro swaps are traded than dollar swaps.An exit would almost automatically be disorderly as different laws govern different contracts.

  
    
        
    

summary of Antrix- devas scam

Excerpts from ET article

• Antrix Corporation was set up as the marketing arm of Isro in 1992
• company hoped to promote commercial exploitation of space products,technical consultancy services and transfer of technologies developed by Isro
• A major objective is to facilitate development of space-related industrial capabilities in India
• Forge Advisors,a US-based strategic consultancy, established an Indian company called Devas Multimedia,with some former Isro scientists on board.
• Antrix inked a memorandum of understanding with Forge for exploring opportunities in digital multimedia services
• agreement provided leasing of 90% of the space segment capacity on two satellites for 12 years to Devas
• Antrixs board approved the draft agreement between the two sides,and the agreement was signed

Two Satellites

• Antrix committed to build and launch two satellites
• These two would have helped Devas deliver a range of services such as broadband to remote areas

heres how a scam was discovered

• there was no tendering for awarding the contract to Devas
• the Cabinet was not informed that the two satellites were being built by Isro for Devas
• satellites were leased to Devas at throwaway prices

counter arguments

• Antrix-Isro,regularly leases satellite capacity to private firms in the direct-to-home business without tendering
• Devas was bringing in new technology that had a high risk of failure
• estimated loss of 2 lakh crore was based on comparing what Devas paid to 3G auction prices
1. it was a nonsensical comparison because the 3G spectrum and its uses and market are completely different from those of the S-band spectrum and the related technology that Devas would have used

OUTCOME

• Image of Antrix,which was supposed to be the government space technology arm that would bring in private investment and cutting-edge technology and market Indian space capabilities abroad,remains very badly damaged

Predictions for indian economy in 2012

FAQ on factoring

Q:Sir, I recently read about The Regulation of Factor Bill (Assignment of Receivables), 2011. It would be helpful if you could explain what factoring is.
A: Sure. Factoring is one of the oldest methods of financing by way of selling the accounts receivable of a firm. There are certain financial institutions called factors which provide this type of financing. The invoice approved by the buyer is sent to the factor. The factor in turn makes the payment to the company (seller).


What does the factor gain?
The invoice payment is done on a discount which usually ranges from 0.35 to 4 per cent of the value of the invoice. Also the entire amount is not paid by the factor. Usually it makes a payment of 75 to 80% keeping the remaining amount as reserve. The reserve amount is paid back when the buyer actually pays the amount. Thus the factor earns commission for factoring.

Does this imply that through factoring, all the sales made by a company are like cash sales? What are the advantages of factoring to the company?
As the factor pays the amount of sales to the company, it is equivalent to having all cash sales. Also the risk of collection of receivable and bad debts may be transferred to the financial institution acting as the factor based on terms agreed upon. Other advantages of going for factoring is that it frees up large amounts of funds locked up as accounts receivables and this can be used to purchase more inventory and fund other short term projects that can accelerate growth. Factoring also relieves a company from the burden of maintaining receivable accounts, conducting credit assessments for customers and handling collection of receivables. The working capital management of the company becomes efficient and hence, reduces the cost which in turn improves the possibility of better profits.

This seems great. So the companies can transfer all its accounts receivables to the factor and be risk free right?
This is not the case always. Companies must take judicious decision when going for factoring mode of financing. If the debtor is credit worthy and has paid all the debts in time, the company will lose money in terms of factoring fees. There must be a trade-off between the present value of the earnings a firm gains from sales and the cost of utilising factoring as a means for financing. For example, businesses which result in slower repayment can be factored so that the company is not affected by cash deficit for other needs.
If factoring is utilised for sundry debtors alone, why financial institutions provide this type of financing?
Factoring can be used in place of bank loans for small and medium enterprises. Though factoring costs are higher than bank rates, small companies which cannot obtain bank loans easily can resort to this mode of financing. Also factoring financial institutions look for the credit worthiness of the buyers and not the companies resorting to factoring. This proves to be an advantage for SMEs. Factoring is utilised by firms which cannot borrow money from other sources.

So what is the “Regulation of Factor Bill” about?
The bill provides regulations for factoring business by RBI. All financial institutions providing factoring services should get approval from RBI before entering into this business. Also the mechanism of assignment of receivables to the factor and payment of consideration by the factor will be regulated. This will also enable the factors to obtain legal remedy and claim their rights on the invoices factored by them in a more efficient manner.


source:http://www.iims-niveshak.com/

RBI financial stability report

background on FDI retail

source:pib.nic.in

EXISTING POLICY

Ø  FDI in Multi Brand Retail Trading (MBRT) is prohibited.

Ø  Foreign direct investment (FDI),  up to 51%, in the Single Brand Retail Trading (SBRT) sector, is permitted, under the Government/FIPB route, subject to the following conditions:

(a)    Products to be sold should be of a ‘Single Brand’ only.

(b)    Products should be sold under the same brand internationally i.e. products should be sold under the same brand in one or more countries other than India.

(c)    Single Brand’ product-retailing would cover only products which are branded during manufacturing.

(d)    The foreign investor should be the owner of the brand

FDI in SBRT was first permitted vide Press Note 3 (2006), dated 10.2.2006.

RATIONALE FOR LIBERALIZATION

Leveraging foreign investment in supply chain infrastructure

Ø  Lack of investment in the logistics of retail chain creating inefficiencies in the food supply chain.

Ø  Though India is the second largest producer of fruits and vegetables (about 200 million MT), it has a very limited integrated cold-chain infrastructure, with only 5386 stand-alone cold storages, having a total capacity of 23.6 million MT, 80% of this  is used only for potatoes.

Ø  Lack of adequate storage facilities cause heavy losses to farmers in terms of wastage in quality and quantity of produce in general, and of fruits and vegetables in particular.  Post-harvest losses of farm produce, especially of fruits, vegetables and other perishables, have been estimated to be over Rs. 1 trillion per annum, 57 per cent of which is due to avoidable wastage and the rest due to avoidable costs of storage and commissions.

Ø  As per some industry estimates, 35-40% of fruits and vegetables and nearly 10% of food grains in India are wasted. Though FDI is permitted in cold-chain to the extent of 100%, through the automatic route.  In the absence of FDI in front-end retail, investment flows into this sector have been insignificant.

Ø  The consequences of inadequate infrastructure are:

• Indian farmer realizes only 1/3^rd of the total price paid by the final consumer as against 2/3^rd with higher degree of retail.  A World Bank Study of 2007 demonstrates that the average price a farmer receives for horticulture produce is barely 12 to 15% of what is paid at the retail outlet.
• An 11th Plan working group has estimated a total investment of Rs. 64,312 crores in agricultural infrastructure.  A storage capacity gap of 35 million tonnes has been assessed, requiring an estimated investment of Rs. 7,687 crores during the 11th Plan.

Bringing supply chain efficiencies

Ø  Foreign retail majors have gained decades of experience, technologies and management practices which will ensure supply chain efficiencies.

Medium-term impact on regulating food inflation

Ø  The opening up of Multi Brand Retail will also have a salutary impact on food inflation as it would contribute to savings to the food which perishes on account of inadequate infrastructure.

Securing remunerative prices for the farmers

Ø  In the present dispensation, there is a complex chain of procurement involving several middlemen.  FDI in retail will create the enabling environment and it is expected that progressive States will undertake gradual reform of APMC Act which will ensure direct procurement, at least of horticultural produce from farmers to enable them secure remunerative price.   

Employment opportunities

Ø  Huge investments in the retail sector will see gainful employment opportunities in agro-processing, sorting, marketing, logistic management and the front-end retail business.

Ø  Industry estimates suggest employment of one person per 350-400 sq.ft of retail space, about 1.5 million jobs will be created in the front-end alone in the next 5 years.  Assuming that 10% extra people are required for the back-end, the direct employment generated by the organized retail sector in India over the coming 5 years will be close to 1.7 million jobs.  Indirect employment generated on the supply chain to feed this retail business will add millions of jobs.       

MULTI-BRAND RETAIL FDI POLICY IN OTHER COUNTRIES

S.No.	Country	FDI Limits	Benefits	Remarks
1.	China	100%	·   First permitted in 1992 with foreign ownership restricted to 49%, progressively lifted and now no restrictions. ·   Over 600 hypermarkets opened between 1996 and 2001 ·   The number of small outlets (equivalent to ‘kiranas’) increased from 1.9 million to over 2.5 million ·   Employment in the retail and wholesale sectors increased from 28 million people to 54 million people from 1992 to 2001.	Impressive growth in retail and wholesale trade.
2.	Thailand	100%	·   Referred to a country where FDI had an adverse effect on the local retailers. ·   Has a limited capital requirement for retail and wholesale outlets.	Growth in agro processing industry.
3.	Russia	100%	·   Supermarket revolution took place in 2000s. ·   Heavy growth registered.
4.	Indonesia	100	·   Modern retail took off in 1990s. ·   No limit on number of outlets ·   Matahari is leading chain.
5.	Brazil, Argentina, Singapore & Chile allow 100% FDI in retail sector while Malaysia permits FDI to a certain limit.

Cabinet decision

To permit FDI in MBRT in all products, in a calibrated manner, subject to the following conditions:

ü  FDI in Multi Brand Retail Trade (MBRT) may be permitted up to 51%, with Government approval;

ü  Fresh agricultural produce, including fruits, vegetables, flowers, grains, pulses, fresh poultry, fishery and meat products, may be unbranded. 

ü  Minimum amount to be brought in, as FDI, by the foreign investor, would be US $ 100 million.

ü  At least 50% of total FDI brought in shall be invested in `backend infrastructure`, where ‘back-end infrastructure’ will include capital expenditure on all activities, excluding that on front-end units; for instance, back-end infrastructure will include investment made towards processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, ware-house, agriculture market produce infrastructure etc.  Expenditure on land cost and rentals, if any, will not be counted for purposes of backend infrastructure.

ü  At least 30% of the procurement of manufactured/ processed products shall be sourced from `small industries` which have a total investment in plant & machinery not exceeding US $ 1.00 million. This valuation refers to the value at the time of installation, without providing for depreciation. Further, if at any point in time, this valuation is exceeded, the industry shall not qualify as a `small industry` for this purpose.

ü  Self-certification by the company, to ensure compliance of the condition as above, which could be cross-checked as and when required. Accordingly, the investors to maintain accounts, duly certified by statutory auditors.

ü  Retail sales locations may be set up only in cities with a population of more than 10 lakh as per 2011 Census only 53 cities qualify for FDI in multi-brand retail out of nearly 8000 towns and cities and may also cover an area of 10 kms around the municipal/urban agglomeration limits of such cities; retail locations will be restricted to conforming areas as per the Master/Zonal Plans of the concerned cities and provision will be made for requisite facilities such as transport connectivity and parking.

ü  The FDI in multi-brand retail is being opened in 53 cities only with population of 1 million and for the rest of the country, current policy regime will apply.  In the current regime, 100% FDI is allowed upto wholesale cash and carry point from which franchise/small retailers are able to source quality products for sale to the public at large.

ü  Government will have the first right to procurement of agricultural products;

To permit 100% FDI in single brand retail trading, subject to the following conditions:

ü  FDI in single brand retail trading may be permitted up to 100% with Government approval;

ü  Products to be sold should be of a ‘Single Brand’ only.

ü  Products should be sold under the same brand internationally i.e. products should be sold under the same brand in one or more countries other than India.

ü  ‘Single Brand’ product-retailing would cover only products which are branded during manufacturing.

ü  The foreign investor should be the owner of the brand.

ü  In respect of proposals involving FDI beyond 51%, 30% sourcing would mandatorily have to be done from SMEs/ village and cottage industries artisans and craftsmen. `Small industries` would be defined as industries which have a total investment in plant & machinery not exceeding US $ 1.00 million. This valuation refers to the value at the time of installation, without providing for depreciation. Further, if at any point in time, this valuation is exceeded, the industry shall not qualify as a `small industry` for this purpose. The compliance of this condition will be ensured through self-certification by the company, which could be subsequently checked, by statutory auditors, from the duly certified accounts, which the investors will be required to maintain.

Condition of 30% sourcing from small scale sector

ü  30% sourcing is to be done from micro and small enterprises which can be done from anywhere in the world and is not India specific. However, in this case, it has been stipulated that 30% sourcing will be done from micro and small enterprises having plant and capital machinery worth US 1 million.

ü  This condition will ensure that our SME sector, including artisans, craftsman, handicraft and cottage industry benefits, especially in sectors like textiles, gems and jewellery, leather and jute.

This condition is applicable both for Multi-brand retail in all cases and for single brand retail in cases where foreign equity exceeds 51%.

apprehensions

Rationale for enhancing FDI ceiling to 100% in single brand retail trading.

In the last 5 years, under the current regime of 51% FDI in single brand retail, foreign direct investment of only US$ 44.45 million have been received, constituting barely 0.03% of total FDI inflows.  Globally, single brand retail follow a business model of 100% ownership and global majors have been reluctant to establish their presence in a restrictive policy environment.  The current cap of 51% confers a right to pass all ordinary resolutions, while enhancing cap to 100% will confer full ownership and control.