Oct-2011-National

NATIONAL AFFAIRS

Saving Bank Interest rate decontrol
Reserve Bank of India (RBI) has freed interest rates on savings deposits. As per a rough estimate, about Rs 13 lakh crore of funds are parked in savings bank. The interest on these accounts had been fixed at 4% even as inflation was two-and-a-half times that level. Now savings rate deregulation gives people an opportunity to shift to banks that come up with better deals.

Although savings deposits can be withdrawn without notice and interest rates are calculated on daily basis, a part of these deposits are perpetual, partly because amounts withdrawn are replenished by monthly earnings and partly because banks mandate a minimum balance ranging between Rs 5,000 to Rs 10,000 in savings accounts.

Banks that are short of retail deposits, like Yes Bank and IDBI Bank, are in a better position to offer higher rates as their overall cost will not rise to that extent. Larger banks, such as SBI and HDFC Bank, may resist initially, preventing their overall cost of funds from rising. But if their customers respond to higher rates offered by rivals, they may be forced to follow suit. Given that the deregulation has come at a time when the interest rate cycle is close to its peak and banks are paying 8.5% for overnight money, it is likely that return on savings deposit will rise. But if there is a slowdown in the economy and demand for credit slips, banks may even lower deposit rates from current levels.

An increase in Saving Bank account rates will put pressure on bank margins. Even if rates go up by only one percentage point, the cost of funds will go up by 0.25% for a bank that has 25% of its resources coming from savings deposits.

Study on rural school education
A new study on learning and teaching outcomes in government schools of rural India has thrown up significant challenges for the Right to Education Act. It has found that in language and Maths, children are at least two grades behind where they should be. Besides, though the RTE Act stresses teacher qualifications immensely, neither higher educational qualifications nor teacher training are associated with better student learning. It is the teachers’ ability to teach that matters.

Conducted by NGO Pratham, which comes out with the Annual Status of Education Report (ASER), the study tracked 30,000 children in Standard 2 and Standard 4 in 900 schools spread over Andhra Pradesh, Assam, Himachal Pradesh, Jharkhand, and Rajasthan.

These children were followed for 15 months (2009-2010) and it was found that the concept of age appropriate grade and teaching (which RTE Act emphasises) did not match ground realities. In language and Maths, there were substantial gaps between what textbooks expected of children and what they could do.

The study also assessed schools for child friendliness—a concept of the RTE Act. After 850 hours of classroom observation, it found most primary school classrooms were not child friendly at all. Students asked teachers questions in a quarter of all classrooms; students’ work was displayed in about a quarter; teachers smile or laugh with students in about one fifth of all classrooms and use local information to make content relevant in about one fifth classrooms.

On the language front, the study found that out of more than 11,500 Standard 2 children tested, less than 30 pc could read simple words. A year later, 40 pc could read words they should have been able to read in Class I.

Also, the children vary in ability, challenging the concept of age appropriate teaching, as mentioned in the Right To Education Act.

Right to property is a human right: SC
Widening the scope of human rights, the Supreme Court has ruled that people’s right to own property fell very much within the domain of human rights. Pointing out that human rights were “gaining a multi-faceted dimension,” a Bench comprising Justices Dalveer Bhandari and Deepak Verma observed that these rights had already covered the “individual rights such as right to health, right to livelihood, right to shelter and employment etc.”

“Right to property is also considered very much a part of the new dimension now,” the Bench held in a verdict that questioned the rationale behind the law on adverse possession under which any person in illegal occupation of a property for 12 years could claim legal ownership of it. Providing yet another new dimension to human rights, the SC opined that “even claim of adverse possession has to be read in that context.” This clearly implied that depriving an individual of his property amounted to violation of his human rights.

Government cannot change purpose of acquired land: SC
Land acquired by the government or its instrumentalities for a specific public purpose cannot be changed and transferred to private individuals or corporate bodies, the Supreme Court has held.

The apex court passed the judgement while dismissing the appeal of certain corporate houses challenging the Karnataka High Court’s decision to quash the acquisition proceedings of over 37 acres of land in south Bangalore.

The Karnataka State Tourism Development Corporation had acquired private land through the State government to build a golf resort. Instead of constructing the resort, it chose to transfer the land to a private real estate developer for a group housing project; and also other corporate houses.

Aggrieved by the decision, the private land owners approached the High Court, which quashed the acquisition proceedings and directed that the land be restored to the original owners. The owners were also asked to return the compensation received by them at the time of acquisition.

National Manufacturing Policy cleared
On October 25, 2011, the UPA government cleared its ambitious national manufacturing policy (NMP) that seeks to create a massive 100 million additional jobs in the manufacturing sector by 2025, as well as create large sized industrial zones with easier compliance and labour laws.

The new policy seeks to boost the stagnating manufacturing sector to contribute at least 25 per cent of the national GDP by 2025.

The share of manufacturing in India’s GDP has stagnated at 15 to 16 per cent since 1980 while the share in comparable economies in Asia, like China, South Korea, Indonesia and Malaysia, is much higher at 25 to 34 per cent. Also, the manufacturing sector has a multiplier effect in creation of two to three additional jobs in the allied sectors.

The policy also seeks to empower rural youth by imparting necessary skill sets to make them employable. Sustainable development and technological value addition in manufacturing have received special focus.

The policy will be a partnership between the Central and State governments. The former will create the policy framework, provide incentives for infrastructure development on a public private partnership basis through appropriate financing instruments, while State governments will identify the suitable land and be equity holders in the national investment and manufacturing zones (NIMZs).

A defining feature of the policy has been the endeavour to improve the business regulatory environment by providing single window clearances. In order to protect the interests of labour in the eventuality of a closure of a unit, a suitable mechanism has been devised using innovative job loss policy and sinking fund to insure workers against such loss.

Green manufacturing has received a special attention. Also, small and medium enterprises will be given access to the patent pool, up to a maximum of Rs 20 lakh, for acquiring patented technologies.

India Human Development Report, 2011
On October 21, 2011, the Planning Commission released the second India Human Development Report (HDR) 2011, which records controversial claims and a few surprises on income, education, health, literacy and sanitation. The last India-specific report had come out in 2000.

The report claims that poverty, unemployment and child labour are declining, inter-State disparities are getting narrower and that the improved Human Development Index has been driven by strides made in education. It does concede, however, that the absolute number of the poor (27 per cent according to the report) stood at 302 million, compared to 320 million in 1973. Sixty per cent of the poor are still concentrated in Bihar, it holds.

Prepared by the Institute of Applied Manpower Research of the Commission, the report claims that between 2000 and 2007, the Human Development Index rose by 21 per cent, higher than 17 per cent recorded by China during the same period and the 18 per cent estimated by the Global Human Development Report, 2010.

The top five slots, states the report, were occupied by Kerala, Delhi, Himachal Pradesh, Goa and Punjab (same as in the last India HDR 2000). Haryana slipped two places from 7 to 9 while Jammu and Kashmir and Uttarakhand improved a notch to finish 9th and 14th, respectively.

For the six lowest HDI states—Bihar, Andhra Pradesh, Chhattisgarh, Madhya Pradesh, Orissa and Assam—HDI improvement has been considerably above the national average.

Education (mainly primary level enrolment of 96 pc) is the big gain for India. There has been an improvement of 28.5 per cent in Education Index between 1999 and 2008. Health Index rose by just 13 pc over the period of study.

Gujarat fares poorly on hunger index, ranked 13th out of 17. The eight poor States (Bihar, UP, MP, Orissa, Rajasthan, Jharkhand, Uttrakhand, Chhattisgarh) which are home to 48 percent of all SCs, 52 pc of all STs and 44 pc of all Muslims, have posted HDI improvements across groups and States doing well are doing so across board.

Muslims posted the sharpest decline in total fertility rate among all social groups and the highest increase in contraception prevalence rate. Muslims fare better than SCs and STs on other human development indicators. A higher percentage of the minority group has access to toilets too.

National Policy on Electronics
On October 3, 2011, the Union government unveiled the draft National Policy on Electronics, 2011, which aims at $400 billion turnover in 2020 by the domestic industry and focuses on reducing imports.

The National Policy of Electronics-2011 envisions creating a globally competitive electronics systems design and manufacturing (ESDM) industry, including nano-electronics, to meet the country's needs and serve the international market. It is aimed at making India the hub of electronic manufacturing. The policy proposes setting up of over 200 electronic manufacturing clusters.

Draft Policy on Information and Communication Technology
The draft national policy on information and communications technology, 2011, was unveiled by Telecom & IT Minister Kapil Sibal on October 7, 2011. It aims at increasing the revenues of the information technology and IT enabled services (ITES) industry to US $300 billion by 2020.

With the exports contributing to the majority of the $80 billion earning presently of the IT and ITES industry the policy proposes to encourage growth of indigenous demands and market. The proposed policy also aims at formulating fiscal and other incentives to attract investment in this sector in tier II and III cities.

The Indian IT and ITES sector currently employs over 2.5 million skilled people and has been one of the major employment generators in the last two decades.

The focus of the IT policy is on deployment of ICT in all sectors of the economy and providing IT solutions to the world.

The policy will extend the National e-Governance Plan (NeGP) and mandate provision of all government services through electronic mode within a fixed time frame by enactment of the electronic delivery of services (EDS) Bill, to enhance transparency, accountability, efficiency, reliability and decentralization in government and, in particular, in delivery of public services.

Visit of President of Afghanistan
Disillusioned by Pakistan’s attitude and its hobnobbing with the Haqqani network, Afghanistan President Hamid Karzai focused on strengthening ties with India during his visit to New Delhi on October 4, 2011.

In what is bound to irk Pakistan, India and Afghanistan entered into a strategic partnership under which India will, among other things, assist the war-ravaged nation in training, equipping and capacity building programmes for Afghan National Security Forces.

The landmark agreement was signed by Prime Minister Manmohan Singh and Afghan President Hamid Karzai after their wide ranging discussions on the situation in the embattled nation and how India could strengthen its capacity building programmes in that country.

The two countries also concluded a MoU on cooperation in the field of development of hydrocarbons and another on cooperation in the field of mineral resource development.

Though he was quite careful not to mention Pakistan by name on the Indian soil while addressing the media with the Indian PM, Karzai did take Islamabad to task for continuing to foment trouble in his country. “Radicalism is being used as an instrument of State policy against citizens’’ of Afghanistan, he said.

In the past, India has trained a small number of officers from the Afghan National Army but avoided getting involved in security operations. The strategic partnership accord has stepped up its attempts to control the future dispensation in Kabul after the withdrawal of the US-led NATO forces by 2014.

Under the agreement, the two sides will engage in close political cooperation by establishing a mechanism for regular bilateral political and Foreign Office Consultations. Political consultations will be led by the Foreign Ministries of both countries and include summit level consultations convened at least once a year.

The two sides will also consult and cooperate at the United Nations and other international, regional and multilateral forums. India and Afghanistan also agreed to establish a Strategic Dialogue to provide a framework for cooperation in the area of national security. The dialogue will be led by National Security Advisers (NSAs) and involve regular consultations with the aim of intensifying mutual efforts towards strengthening regional peace and security.

The two countries have also committed themselves to strengthening trade, economic, scientific and technological cooperation, as well as cooperation between other bodies of business and industry representatives, with a view to expanding trade and economic relations.

Visit of President of Myanmar
Rolling out the red carpet for Myanmar President U Thein Sein, India, on October 14, 2011, exhorted him to strengthen democratic transition in his country in an “inclusive and broad-based” manner.

During talks with the visiting leader, Prime Minister Manmohan Singh announced the extension of a new concessional facility of $500 million line of credit (LoC) for specific projects in the South-east Asian country. This is in addition to $300 million line of credit already extended by India for the development of railways, transport, power transmission lines and oil refinery there.

The two countries signed a MoU for upgrading of the Yangon Children’s Hospital and the Sittwe General Hospital and a programme of cooperation in science and technology for 2012-2015. They also decided to intensify cooperation in diverse fields, including security, economic and energy.

Significantly, President Sein’s visit came close on the heels of his invitation to pro-democracy leader Aung San Suu Kyi for a political dialogue and the release of around 200 political detainees, the latest in the series of reformist moves undertaken by Yangon. Observers say the release of political prisoners and wooing of Suu Kyi reflects Myanmar’s desire to end its long international isolation and seek lifting of trade and financial sanctions.

Myanmar is crucial for India as it shares nearly 1,600-km border with the north-eastern States. It has helped India immensely in tackling north-eastern insurgent groups. It also shares more than 2000-km-long border with China. Traditionally considered any ally of Beijing, Myanmar recently suspended a $3.6 billion China-backed dam project in Yangon.

In a joint statement issued after talks between the two sides, India and Myanmar reaffirmed their unequivocal and uncompromising position against terrorism in all its forms and manifestations.

Visit of Prime Minister of Nepal
Nepal's Maoist Prime Minister Baburam Bhattarai arrived in New Delhi on October 20, 2011—a visit aimed at mending fences with India and removing any misunderstandings, particularly over Kathmandu’s increasing tilt towards China.

Bhattarai is seen as an acceptable leader for New Delhi and there is hope that he will act as a bridge to improve ties between the two neighbours.

With political uncertainty continuing in Nepal, India nudged Bhattarai to expedite the peace process and frame a new constitution in the Himalayan nation.

New Delhi seemed pleased over the fact that Bhattarai had come to India on his first bilateral visit abroad after taking charge as Nepal’s Prime Minister less than two months ago.

Nepal believes that India can use its leverage with all political parties and formations in Nepal to push forward the peace process. The integration and rehabilitation of the Maoist cadre continues to divide the Maoists and the Nepali Congress.

India extended a 250 million Line of Credit (LoC) to Nepal and signed a key bilateral investment promotion and protection agreement (BIPPA) after talks between Prime Minister Manmohan Singh and his Nepalese counterpart Baburam Bhattarai.

The two countries also signed an MoU regarding India’s assistance for goitre control programme in Nepal and pledged to work in close cooperation on various bilateral projects.

The $ 250 million LoC will be used to finance infrastructure projects such as highways, airports, bridges, irrigation, roads, railways and hydropower projects.

However, no pact with long-term implications like the extradition treaty was signed.

India and Switzerland Info Exchange Treaty
India and Switzerland will start exchanging information on tax related matters from 2012-13 after the new tax information exchange treaty is ratified by the Swiss Parliament, paving way for obtaining data on black money stashed there.

The move comes at a time when the issue of black money stashed in Swiss banks has become a major concern in India, with political parties and civil society taking up the matter. The protocol amending the Double Taxation Avoidance Agreement (DTAA) between India and Switzerland was concluded in New Delhi on August 30 2011. The revised treaty would allow India to access tax related information from the Swiss authorities with a prospective effect.

Visit of President of Vietnam
President of Vietnam, Mr Truong Tan Sang, visited New Delhi on October 11, 2011 to further strengthen the ties between the two countries. Un-fazed by Chinese threats, he said India and other foreign nations were welcome to explore hydrocarbons in areas within his country's jurisdiction, as he sought to deepen strategic and defence ties with New Delhi.

President Sang said the objectives of his trip are to continue to strengthen friendship between the two peoples, reinforce, deepen and add greater substance to bilateral strategic partnership.

Ignoring China’s protestations, India and Vietnam signed an agreement to promote oil exploration in the South China Sea apart from inking five other accords, including an extradition treaty. They also instituted a security dialogue to strengthen their strategic partnership.

The most significant among the accords signed by the two countries is the one between the ONGC Videsh Limited (OVL) and the PetroVietnam for developing long-term cooperation in the oil sector. The pact covers new investments and strengthening presence from drilling-to-dispensing in Vietnam, India and other countries.

India and Vietnam also instituted a mechanism of a biennial dialogue on security issues between the Home Ministry and its Vietnamese counterpart. The extradition treaty would provide a legal and institutional basis for the cooperation.

The two countries would celebrate the 40th anniversary of the establishment of full diplomatic relations between them in 2012. India will be organising the ‘Year of India in Vietnam’ in 2012.

The two countries have also decided to increase their bilateral trade from $2.7 billion to $7 billion by 2015 and agreed to boost the two-way investment. They also agreed to work towards an early finalisation of the India-ASEAN Free Trade Agreement in Services and Investment.

Draft National Telecom Policy
Telecommunications Minister Kapil Sibal unveiled the draft National Telecom Policy (NTP) 2011 on October 10, 2011. The policy not only seeks to give the consumer the right to free roaming within the country but also seeks to increase the country’s tele-density to 100 per cent by 2020 and bring about transparency in spectrum allocation.

The new policy also proposes to introduce a stronger customer grievance redressal mechanism and recognise telecom as an infrastructure sector, which will help ease credit flow to companies for funding roll-out plans or expansion activities.

According to the draft, there will be a one-nation, one-licence policy.

Cellular service providers would benefit from the policy as it proposes to allow companies to pool, share and later trade spectrum—a scarce resource.