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Wednesday, November 16, 2011

Government approves 26% FDI in pension sector but no guarantee of assured returns!India Inc on Monday made a strong pitch for bolder reforms, fresh policy initiatives and speedy clearances to boost the investment sentiment to place the country back on a

Government approves 26% FDI in pension sector but no guarantee of assured returns!India Inc on Monday made a strong pitch for bolder reforms, fresh policy initiatives and speedy clearances to boost the investment sentiment to place the country back on a high-growth trajectory.Economic Times reports!Finance Minister Pranab Mukherjee is OBLIGED and the Renewal Agenda for Reforms is all set to be implemented!Meanwhile,Investors upped the pressure on Europe on Wednesday, driving up interest rates countries pay to borrow money and dumping stocks amid continuing unease over debt crisis.

Indian food market to treble to $900-bn by 2020: Report

Govt agenda for winter session of parliament includes Lokpal Bill and Whistle Blower Protection Bill!

Big business paying Maoists is condemnable: Chidambaram


The cut in petrol prices by state-run oil companies will have negligible or marginal impact on the country's economy and will not help the near double-digit inflation to cool down, industry experts observe.


India Infoline News Service / 16:33 , Nov 16, 2011

These sectoral innovation councils will drive sectoral innovations

"Identify domain experts from industry, government research laboratories, academic institutions from all sectors and create Sectoral Innovation Councils." This was Advisor to the Prime Minister On Public Information Infrastructure and Innovations, Sam Pitroda's advice to the Confederation of Indian Industry (CII) on the occasion of "Decade of Innovation--India@year1" an event jointly organized by CII and the National Innovation Council (NInC).






India tests Agni-IV missile with high accuracy!

Indian Holocaust My Father`s Life and

Time - SEVEN HUNDRED SIXTY One

Palash Biswas

http://indianliberationnews.com/

http://indianholocaustmyfatherslifeandtime.blogspot.com/





http://basantipurtimes.blogspot.com/



Brand Noida vs Brand Gurgaon
F1 powers Noida as Gurgaon hit with perils of rapid, unplanned growth
Soaring real estate prices, poor infrastructure and a severe water shortage have erased some of Gurgaon's sheen.

*

http://economictimes.indiatimes.com/
India's cabinet has approved allowing foreign direct investment in the country's burgeoning pension sector as it looks to press ahead with stalled economic reforms.

The government on Wednesday asserted it is committed to second generation economic reforms but said in a multi-party democracy decision-making takes more time than desired.

"There is an area of unfinished agenda of reform process. However, reform is a continuous process. As part of this process, some of the important legislations, including Pension Fund Regulatory and Development Authority (PFRDA) Bill, are likely to be passed (by Parliament) soon," Finance Minister Pranab Mukherjee said.

Earlier in the day the Union Cabinet approved changes in the PFRDA Bill said it will allow 26 percent foreign investment in the pension sector but no sectoral caps will be mentioned in the legislation.
   
The Pension Fund Regulatory and Development Authority Bill seeks to open the pension sector to private sector and foreign investment. It will be taken up for consideration and passage in the Winter Session of Parliament.

Speaking at the FT-YES Bank Summit here through video-conferencing, he maintained that decision-making in a multi-party democracy takes more time than desired. "In a multi-party democracy system, sometime legislature process takes longer time than desired. But, I can assure that there will be steady forward," he said.

Mukherjee said the UPA government has already taken several steps to give fillip to the reform process.

"The second generation reforms.... include the recent deregulation of the savings interest rate, discussions on mode of presence of foreign banks and the process to give additional banking licences to private sector players."

His remarks come amidst charges of paralysis in policy decisions and the government inaction on important economic issues have been a matter of debate in the recent past, with many industry leaders, seeking urgent steps from policymakers to tackle the issue.

Besides, a group of prominent personalities, through open letters, has also sought urgent steps in this regard. Earlier this week, RIL Chairman Mukesh Ambani too had asked the government to move faster in its decision making.

Efforts are underway for smooth transition of Indian banking system to International Financial Reporting Standards (IFRS) along with implementation of Basel-III regulations, he said.

"As per Basel-III regulation, government is committed to enable public sector banks to maintain a minimum tier-I CRAR (Capital to Risk Weighted Asset Ratio) of 8 percent."

Emphasising on financial inclusion, the Finance Minister said the Government is working towards covering 73,000 villages with a population of 2,000 or more by FY12 under this initiative.

Global financial players have long been lobbying for access to the lucrative pension sector that is expected to expand rapidly as millions of young Indians join the work force in the world's second most populous nation.
The change is contained in a proposed pension bill to be considered by parliament during the winter session which begins next week and is seen by investors as a key economic reform.
The pensions bill would give global financial institutions access to around $US2 billion ($A1.97 billion) worth of pension fund assets in Asia's third-largest economy.
The foreign direct investment (FDI) cap will initially be set at 26 per cent.
"But the government would like to retain the flexibility of changing the cap of FDI as and when required," a government spokesman said on Wednesday.
Around 1.1 million workers have pension funds that are managed by players such as ICICI Prudential Insurance, Reliance Capital and Life Insurance Corp of India, most of which have foreign partners.
Foreign players which include global giants Aviva and Axa can already have 26 per cent holdings in Indian insurance companies and a number have expressed a keen desire to enter the pension market.
The pension announcement came as India's Finance Minister Pranab Mukherjee sought to reassure investors that while the country's financial reforms might be slow in coming, they would proceed at a "steady" clip.
Foreign and domestic investors have been frustrated by the slow pace of economic reform by the Congress party-led government, which critics say has been gripped by "policy paralysis" due to a string of corruption scandals.
The government's proposal coincided with an appeal by Sunil Bharti Mittal - head of India's top mobile phone company Bharti Airtel - to opposition parties not to stall "critical" economic reforms in the next session of parliament.
The opposition has been relentlessly attacking the government over near double-digit inflation and rampant corruption, holding up parliamentary proceedings and obstructing headway on reforms.
Mittal in an open letter urged opposition leaders to "ponder over the serious negative perception that is now being created for India" on the global stage.
"On a bad day one often wonders how it (India) functions at all, let alone how it evolved to be Asia's second-fastest growing economy," investment house CLSA Asia Pacific Markets remarked this week in a sharply worded critique of the government's handling of the country's economy.
 
পেনশনে বিদেশি
লগ্নিতে সায় কেন্দ্রের
র্থিক সংস্কারের প্রতিশ্রুতি কার্যকর করার পথে আরও এক ধাপ। অবশেষে পেনশন তহবিল পরিচালনাকারী সংস্থায় ২৬ শতাংশ পর্যন্ত বিদেশি বিনিয়োগের প্রস্তাব অনুমোদন করল কেন্দ্রীয় মন্ত্রিসভা। এর পর আগামী ২২ নভেম্বর থেকে শুরু সংসদের শীতকালীন অধিবেশনে এই পেনশন সংস্কার (পিএফআরডিএ) বিলটি পেশ করা হবে। সেখানে পাশ হয়ে তা আইনে পরিণত হলে দেশের বিভিন্ন পেনশন তহবিল পরিচালনাকারী সংস্থায় ২৬ শতাংশ পর্যন্ত মালিকানা হাতে নিতে পারবে বিদেশি সংস্থাগুলি।
বিমা শিল্পে বিদেশি লগ্নির দরজা খুলে দেওয়ার পর থেকেই পেনশন তহবিল-সহ সমগ্র আর্থিক ক্ষেত্রের সংস্কারে বিদেশি বিনিয়োগকে স্বাগত জানানোর কথা বারবারই বলে এসেছে কেন্দ্র। কিন্তু গত ছ'বছর ধরে (সংসদে প্রথম এই সংক্রান্ত বিল পেশ হয় ২০০৫ সালে) মূলত বামেদের বিরোধিতার জেরে সেই উদ্যোগ ফলপ্রসূ হয়নি। তাই এ বার মন্ত্রিসভায় এই প্রস্তাব পাশ হওয়া আর্থিক সংস্কারের অন্যতম বড় মাইলফলক বলে অনেকের ধারণা।
প্রত্যাশিত ভাবেই এ দিনও পেনশন ক্ষেত্র সংস্কারের এই উদ্যোগের বিরোধিতা করেছেন বামেরা। বিজেপি অবশ্য নীতিগত ভাবে সংস্কারের বিরোধী নয়। কিন্তু এ বিষয়ে যশবন্ত সিনহার নেতৃত্বাধীন সংসদীয় স্থায়ী কমিটির সুপারিশ না-মানায় কেন্দ্রের সমালোচনা করেছে তারা।
সম্প্রতি কেন্দ্রীয় অর্থমন্ত্রী প্রণব মুখোপাধ্যায় স্পষ্ট জানিয়েছিলেন যে, দেশের আর্থিক উন্নয়নের পথ প্রশস্ত করতে কেন্দ্রকে এমন কিছু পদক্ষেপ করতে হবে, যা কারও কারও পছন্দ না-ও হতে পারে। তিনি এ কথা বলার দিন দুয়েকের মধ্যেই বুধবার দেশের পেনশন ক্ষেত্রের দরজা বিদেশি পুঁজির জন্য খুলে দেওয়ার কথা ঘোষণা করল কেন্দ্রীয় মন্ত্রিসভা।
কোথায় বদল
• তহবিল বাড়বে।
• পেনশন প্রকল্পে লগ্নির আয়ও আকর্ষণীয় হবে।
• বিমা শিল্পের মতো এখানেও প্রতিযোগিতা বাড়বে।
• ব্যবসার বহর বাড়বে শেয়ার বাজার ও মিউচ্যুয়াল ফান্ডগুলির।
পেনশন তহবিল পরিচালনায় বিদেশি সংস্থা পা রাখলে কী সুবিধা হবে পেনশন প্রকল্প গ্রাহকদের?
বিশেষজ্ঞরা মনে করছেন, এর ফলে ভারতের 'লোভনীয়' বাজারে পা রাখবে বিশ্বের অগ্রণী পেনশন তহবিল পরিচালনাকারী সংস্থাগুলি। তাদের ঝুলিতে শুধু লগ্নির অর্থই থাকবে না। সঙ্গে থাকবে ওই ধরনের তহবিলপরিচালনার বিশেষ দক্ষতা এবং অভিজ্ঞতার বিপুল সম্ভার। আসবেন দক্ষ তহবিল পরিচালকরা। যার ফলে, এই ক্ষেত্রে মৌলিক পরিবর্তন হবে তিনটি। এক, দ্রুত অনেকটাই বড় হবে তহবিলের আকার। ফলে পেনশন প্রকল্পে লগ্নি করে আরও আকর্ষণীয় অঙ্ক আয় করতে পারবেন গ্রাহকেরা। এর পরে লগ্নি সংক্রান্ত চালু বাধ্যবাধকতা যদি সরকার শিথিল করে, তা হলে ওই বিনিয়োগ অনেকটা ছড়িয়ে দেওয়া সম্ভব হবে।
দুই, সংস্থাগুলির মধ্যে গ্রাহক ধরার প্রতিযোগিতা বাড়বে। তার সূত্র ধরে বাজারে আসবে নিত্যনতুন প্রকল্প। ঠিক যেমনটা হয়েছে ব্যাঙ্ক ও বিমা শিল্পে।
আর তিন, ব্যবসার বহর বাড়বে শেয়ার বাজার ও মিউচুয়াল ফান্ডগুলির। কারণ, এর পর সরকারি বিধিনিষেধ কাটলে আয় বাড়াতে এই দুই ক্ষেত্রে আরও বেশি করে লগ্নি করবে পেনশন তহবিল পরিচালনাকারী সংস্থাগুলি।
সংস্কারের পথে এ দিন যে সিদ্ধান্ত নেওয়া হল, তার সুফল ঘরে তুলতে হলে অবশ্য তহবিলের টাকা বিনিয়োগের বিষয়ে অনেক বিধিনিষেধ সরিয়ে নেওয়া জরুরি বলে মনে করছেন সংশ্লিষ্ট অনেকে। তাঁদের দাবি, এই সব বাধা না সরালে কঠিন হবে বিদেশি বিনিয়োগ টানা। সেই তিমিরে থাকবেন গ্রাহকরাও। এ প্রসঙ্গে একটি রাষ্ট্রায়ত্ত আর্থিক প্রতিষ্ঠানের কর্তা বলেন, "এখন প্রভিডেন্ট ফান্ডের মতো পেনশন তহবিলের টাকা বিনিয়োগেও সরকারি নির্দেশিকা মানতে হয়। যেমন, তহবিলের সিংহভাগই লগ্নি করতে হয় সরকারি ঋণপত্র বা উঁচু রেটিংযুক্ত বন্ডে। শেয়ার বাজারে খাটানো যায় সামান্য অংশই।" ফলে আয়ও তুলনায় কম হয়। সে কথা জানিয়ে তাঁর বক্তব্য, "এই নিয়ম বদলানো জরুরি।" যদিও এর ফলে ঝুঁকি বাড়বে বলে অনেকের আশঙ্কা।
তবে ভবিষ্যতে সরকার যে পেনশন ক্ষেত্রে আরও সংস্কারের পথ খোলা রাখছে, অন্তত একটি ইঙ্গিতে তা স্পষ্ট। তা হল, এখনকার মতো ২৬ শতাংশ পর্যন্ত বিদেশি লগ্নিতে সায় দিলেও, ভবিষ্যতে এই ঊর্ধ্বসীমা বাড়ানোর পথ খোলা রেখেছে কেন্দ্র। যে কারণে, এ বিষয়ে সংসদীয় স্থায়ী কমিটির সুপারিশ সত্ত্বেও বিলে ঊর্ধ্বসীমার কথা উল্লেখ করা হয়নি। যাতে আইন সংশোধনের পরিবর্তে স্রেফ বিশেষ সরকারি নির্দেশ (এগ্জিকিউটিভ অর্ডার) জারি করেই তা বাড়ানোর রাস্তা খোলা থাকে।
এই নিয়েই এ দিন কেন্দ্রের সমালোচনা করেছেন বিজেপি মুখপাত্র রাজীবপ্রতাপ রুডি। একই সঙ্গে তাঁর অভিযোগ, সরকারি প্রভিডেন্ট ফান্ডে যে হারে সুদ পাওয়া যায়, অন্তত সেই হারে গ্রাহকদের ন্যূনতম আয় সুনিশ্চিত করার সুপারিশ করেছিল কমিটি। কিন্তু বিলে তা অগ্রাহ্য করেছে কেন্দ্র। পেনশন প্রকল্প থেকে গ্রাহকদের বেরিয়ে আসার বিষয়টিকে কঠিন করা হয়েছে এই বিলে। অনেকে বলছেন, এ ক্ষেত্রেও কমিটির সুপারিশ মানেনি কেন্দ্র।
পেনশন ক্ষেত্র সংস্কারের এই উদ্যোগকে অবশ্য প্রত্যাশিত ভাবেই সব থেকে চাঁছাছোলা ভাষায় আক্রমণ করেছে বামেরা। সিপিএমের পলিটব্যুরো সদস্য বৃন্দা কারাট বলেন, "আমরা এর সম্পূর্ণ বিরোধিতা করব। এটা শ্রমিক শ্রেণির উপর আঘাত। তাঁদের সারা জীবনের সঞ্চয় দেশি-বিদেশি সাট্টাবাজদের হাতে তুলে দিচ্ছে সরকার।"


পেনশনে বিদেশি
লগ্নিতে সায় কেন্দ্রের
র্থিক সংস্কারের প্রতিশ্রুতি কার্যকর করার পথে আরও এক ধাপ। অবশেষে পেনশন তহবিল পরিচালনাকারী সংস্থায় ২৬ শতাংশ পর্যন্ত বিদেশি বিনিয়োগের প্রস্তাব অনুমোদন করল কেন্দ্রীয় মন্ত্রিসভা। এর পর আগামী ২২ নভেম্বর থেকে শুরু সংসদের শীতকালীন অধিবেশনে এই পেনশন সংস্কার (পিএফআরডিএ) বিলটি পেশ করা হবে। সেখানে পাশ হয়ে তা আইনে পরিণত হলে দেশের বিভিন্ন পেনশন তহবিল পরিচালনাকারী সংস্থায় ২৬ শতাংশ পর্যন্ত মালিকানা হাতে নিতে পারবে বিদেশি সংস্থাগুলি।
বিমা শিল্পে বিদেশি লগ্নির দরজা খুলে দেওয়ার পর থেকেই পেনশন তহবিল-সহ সমগ্র আর্থিক ক্ষেত্রের সংস্কারে বিদেশি বিনিয়োগকে স্বাগত জানানোর কথা বারবারই বলে এসেছে কেন্দ্র। কিন্তু গত ছ'বছর ধরে (সংসদে প্রথম এই সংক্রান্ত বিল পেশ হয় ২০০৫ সালে) মূলত বামেদের বিরোধিতার জেরে সেই উদ্যোগ ফলপ্রসূ হয়নি। তাই এ বার মন্ত্রিসভায় এই প্রস্তাব পাশ হওয়া আর্থিক সংস্কারের অন্যতম বড় মাইলফলক বলে অনেকের ধারণা।
প্রত্যাশিত ভাবেই এ দিনও পেনশন ক্ষেত্র সংস্কারের এই উদ্যোগের বিরোধিতা করেছেন বামেরা। বিজেপি অবশ্য নীতিগত ভাবে সংস্কারের বিরোধী নয়। কিন্তু এ বিষয়ে যশবন্ত সিনহার নেতৃত্বাধীন সংসদীয় স্থায়ী কমিটির সুপারিশ না-মানায় কেন্দ্রের সমালোচনা করেছে তারা।
সম্প্রতি কেন্দ্রীয় অর্থমন্ত্রী প্রণব মুখোপাধ্যায় স্পষ্ট জানিয়েছিলেন যে, দেশের আর্থিক উন্নয়নের পথ প্রশস্ত করতে কেন্দ্রকে এমন কিছু পদক্ষেপ করতে হবে, যা কারও কারও পছন্দ না-ও হতে পারে। তিনি এ কথা বলার দিন দুয়েকের মধ্যেই বুধবার দেশের পেনশন ক্ষেত্রের দরজা বিদেশি পুঁজির জন্য খুলে দেওয়ার কথা ঘোষণা করল কেন্দ্রীয় মন্ত্রিসভা।
কোথায় বদল
• তহবিল বাড়বে।
• পেনশন প্রকল্পে লগ্নির আয়ও আকর্ষণীয় হবে।
• বিমা শিল্পের মতো এখানেও প্রতিযোগিতা বাড়বে।
• ব্যবসার বহর বাড়বে শেয়ার বাজার ও মিউচ্যুয়াল ফান্ডগুলির।
পেনশন তহবিল পরিচালনায় বিদেশি সংস্থা পা রাখলে কী সুবিধা হবে পেনশন প্রকল্প গ্রাহকদের?
বিশেষজ্ঞরা মনে করছেন, এর ফলে ভারতের 'লোভনীয়' বাজারে পা রাখবে বিশ্বের অগ্রণী পেনশন তহবিল পরিচালনাকারী সংস্থাগুলি। তাদের ঝুলিতে শুধু লগ্নির অর্থই থাকবে না। সঙ্গে থাকবে ওই ধরনের তহবিলপরিচালনার বিশেষ দক্ষতা এবং অভিজ্ঞতার বিপুল সম্ভার। আসবেন দক্ষ তহবিল পরিচালকরা। যার ফলে, এই ক্ষেত্রে মৌলিক পরিবর্তন হবে তিনটি। এক, দ্রুত অনেকটাই বড় হবে তহবিলের আকার। ফলে পেনশন প্রকল্পে লগ্নি করে আরও আকর্ষণীয় অঙ্ক আয় করতে পারবেন গ্রাহকেরা। এর পরে লগ্নি সংক্রান্ত চালু বাধ্যবাধকতা যদি সরকার শিথিল করে, তা হলে ওই বিনিয়োগ অনেকটা ছড়িয়ে দেওয়া সম্ভব হবে।
দুই, সংস্থাগুলির মধ্যে গ্রাহক ধরার প্রতিযোগিতা বাড়বে। তার সূত্র ধরে বাজারে আসবে নিত্যনতুন প্রকল্প। ঠিক যেমনটা হয়েছে ব্যাঙ্ক ও বিমা শিল্পে।
আর তিন, ব্যবসার বহর বাড়বে শেয়ার বাজার ও মিউচুয়াল ফান্ডগুলির। কারণ, এর পর সরকারি বিধিনিষেধ কাটলে আয় বাড়াতে এই দুই ক্ষেত্রে আরও বেশি করে লগ্নি করবে পেনশন তহবিল পরিচালনাকারী সংস্থাগুলি।
সংস্কারের পথে এ দিন যে সিদ্ধান্ত নেওয়া হল, তার সুফল ঘরে তুলতে হলে অবশ্য তহবিলের টাকা বিনিয়োগের বিষয়ে অনেক বিধিনিষেধ সরিয়ে নেওয়া জরুরি বলে মনে করছেন সংশ্লিষ্ট অনেকে। তাঁদের দাবি, এই সব বাধা না সরালে কঠিন হবে বিদেশি বিনিয়োগ টানা। সেই তিমিরে থাকবেন গ্রাহকরাও। এ প্রসঙ্গে একটি রাষ্ট্রায়ত্ত আর্থিক প্রতিষ্ঠানের কর্তা বলেন, "এখন প্রভিডেন্ট ফান্ডের মতো পেনশন তহবিলের টাকা বিনিয়োগেও সরকারি নির্দেশিকা মানতে হয়। যেমন, তহবিলের সিংহভাগই লগ্নি করতে হয় সরকারি ঋণপত্র বা উঁচু রেটিংযুক্ত বন্ডে। শেয়ার বাজারে খাটানো যায় সামান্য অংশই।" ফলে আয়ও তুলনায় কম হয়। সে কথা জানিয়ে তাঁর বক্তব্য, "এই নিয়ম বদলানো জরুরি।" যদিও এর ফলে ঝুঁকি বাড়বে বলে অনেকের আশঙ্কা।
তবে ভবিষ্যতে সরকার যে পেনশন ক্ষেত্রে আরও সংস্কারের পথ খোলা রাখছে, অন্তত একটি ইঙ্গিতে তা স্পষ্ট। তা হল, এখনকার মতো ২৬ শতাংশ পর্যন্ত বিদেশি লগ্নিতে সায় দিলেও, ভবিষ্যতে এই ঊর্ধ্বসীমা বাড়ানোর পথ খোলা রেখেছে কেন্দ্র। যে কারণে, এ বিষয়ে সংসদীয় স্থায়ী কমিটির সুপারিশ সত্ত্বেও বিলে ঊর্ধ্বসীমার কথা উল্লেখ করা হয়নি। যাতে আইন সংশোধনের পরিবর্তে স্রেফ বিশেষ সরকারি নির্দেশ (এগ্জিকিউটিভ অর্ডার) জারি করেই তা বাড়ানোর রাস্তা খোলা থাকে।
এই নিয়েই এ দিন কেন্দ্রের সমালোচনা করেছেন বিজেপি মুখপাত্র রাজীবপ্রতাপ রুডি। একই সঙ্গে তাঁর অভিযোগ, সরকারি প্রভিডেন্ট ফান্ডে যে হারে সুদ পাওয়া যায়, অন্তত সেই হারে গ্রাহকদের ন্যূনতম আয় সুনিশ্চিত করার সুপারিশ করেছিল কমিটি। কিন্তু বিলে তা অগ্রাহ্য করেছে কেন্দ্র। পেনশন প্রকল্প থেকে গ্রাহকদের বেরিয়ে আসার বিষয়টিকে কঠিন করা হয়েছে এই বিলে। অনেকে বলছেন, এ ক্ষেত্রেও কমিটির সুপারিশ মানেনি কেন্দ্র।
পেনশন ক্ষেত্র সংস্কারের এই উদ্যোগকে অবশ্য প্রত্যাশিত ভাবেই সব থেকে চাঁছাছোলা ভাষায় আক্রমণ করেছে বামেরা। সিপিএমের পলিটব্যুরো সদস্য বৃন্দা কারাট বলেন, "আমরা এর সম্পূর্ণ বিরোধিতা করব। এটা শ্রমিক শ্রেণির উপর আঘাত। তাঁদের সারা জীবনের সঞ্চয় দেশি-বিদেশি সাট্টাবাজদের হাতে তুলে দিচ্ছে সরকার।"

16/11/2011

Morgan Stanley calls on India to accelerate policy reforms


Singapore, Nov 16 (PTI) The Indian government must accelerate implementation of major policy reforms to attract investments and keep up with projected economic growth, Morgan Stanley Asia''s managing director Chetan Ahya said on Wednesday.
India should undertake strengthening of its institutional capacity to allocate critical national resources such as land and minerals to public and private corporate sector in a transparent manner for rapid industrialisation, Ahya told reporters at the two-day Morgan Stanley Asia Pacific Summit, that started here today.
Ahya pointed out that India''s two-pronged strategy needed strengthening of institutional capacity to manage transparent awarding of major infrastructure projects under public-private route.
India should also build a comprehensive plan for energy security along with a systematic programme for energy pricing reforms, Ahya said while stressing on the need for initiating aggressive fiscal consolidation.
He said the country should allow foreign direct investment in multi-brand retail distribution, insurance and other areas to build a sustainable source of capital inflows.
Ahya called on India not to delay any further the 25-30 planned infrastructure projects as quick executions of these investment-oriented developments would bring in the much needed foreign investments and capitals.
He noted India''s good initiatives including the awarding of national highway contracts and reducing the environmental approval delays for coal mining.
However, Ahya cautioned that clear signs of Indian economic slowdown have emerged in the last three to four months, even though the economy had till March this year maintained relatively strong growth.
Morgan Stanley sees India''s gross domestic product growth at 7.3 per cent this fiscal and 7.4 per cent in the following year, but warns that the eurozone crisis can impact the country''s exports.


Government approves 26% FDI in pension sector but no guarantee of assured returns!

India tests Agni-IV missile with high accuracy!

India Inc on Monday made a strong pitch for bolder reforms, fresh policy initiatives and speedy clearances to boost the investment sentiment to place the country back on a high-growth trajectory.Economic Times reports!Finance Minister Pranab Mukherjee is OBLIGED and the Renewal Agenda for Reforms is all set to be implemented!Meanwhile,Investors upped the pressure on Europe on Wednesday, driving up interest rates countries pay to borrow money and dumping stocks amid continuing unease over debt crisis.

Approving changes in the PFRDA Bill, the Government today said it will allow 26 per cent foreign investment in the pension sector but no sectoral caps will be mentioned in the legislation.

Turning down the suggestion of Parliamentary Standing Committee, the Union Cabinet also decided that there would be no guarantee of assured returns on schemes by pension funds.

India Tuesday succeeded with a very high level of accuracy in its first test of a new-generation Agni-IV strategic nuclear-capable missile with a 3,500-km range from a defence base in Odisha, an official said.

The Pension Fund Regulatory and Development Authority Bill 2011, which seeks to open the pension sector to private sector and foreign investment, will be taken up for consideration and passage in the Winter Session of Parliament beginning November 22.

The provisions concerning the FDI cap will be incorporated in the regulations once the Bill becomes an Act.

"The government is of the view that FDI cap in the pension (sector) should be at 26 per cent, at par with the insurance sector. However, it would like to retain the flexibility of changing the cap of FDI as and when required and that is why it has not been kept as part of the bill", an official spokesperson said.

The proposed legislation, which was introduced in the Lok Sabha on March 24, was referred to the Standing Committee by senior BJP leader and former Finance Minister Yashwant Sinha for scrutiny.

The committee wanted the government to specify the FDI cap in the legislation itself, besides providing for minimum guaranteed return to pension subscribers.

The government has also turned down the suggestion of the Committee to provide greater flexibility to subscribers to withdraw funds from their accounts.

"The missile, which has the capability to hit targets over 3,000 km away, was tested from a facility off the state's coast in the presence of senior defence officials," defence ministry spokesperson Sitanshu Kar told IANS.

"The test was successful," he added.

The Agni-IV is a modified version of the Agni-II strategic missile and was originally called Agni-II Prime.

"The successful launch of new generation strategic missile Agni-IV that has a designed range of 3,500 km achieved all mission parameters, which included a range of 3,000 km," Defence Research Development Organisation (DRDO) spokesperson Ravi Kumar Gupta told IANS in New Delhi.


"Agni-II Prime has now been renamed Agni-IV," he added.


India's Agni-series missiles are one of the five projects of DRDO under the Integrated Guided Missile Development Programme (IGMDP) launched in 1983 and concluded in 2008 after all its design objectives were achieved.


However, India's IGMDP follow-on projects, such as Agni-IV and the Sagarika submarine-launched ballistic missile, are continuing.


During Tuesday's test, the Agni-IV missile was launched from a Road Mobile System at 9.00 a.m. from Wheelers' Island in the Bhadrak district of Odisha on India's east coast, about 200 km from Bhubaneswar.


The missile had a text-book trajectory and reached a height of about 900 km and reached the pre-designated target in the international waters of the Bay of Bengal, Integrated Test Range (ITR) director S.P. Dash later said in a statement.


All mission objectives were fully met. All the systems functioned perfectly till the end, encountering the re-entry temperatures of over 3,000 degrees Celsius, Dash said.


This missile is one of its kind in the world, giving a quantum leap in technology, he said.


"The missile system has opened a new era in the class of long-range missile having capability to carry strategic warheads for the forces and has provided a fantastic deterrence to the country," he claimed.


The missile is lighter in weight and has two stages of solid propulsion and a payload with re-entry heat shield. The composite rocket motor which has been used for the first time had performed excellently, the statement said.


The missile system is equipped with modern and compact avionics with redundancy to provide high level of reliability, it said.


The high performance onboard computer with distributed avionics architecture and high speed reliable communication bus and a full digital control system controlled and guided the missile to the target, the statement said.


All the radars and electro-optical systems along the coast tracked and monitored all the parameters of the vehicle. Two Indian naval ships located near the target witnessed the final tochdown.

Former Union minister and sitting MP, Suresh Prabhu, said urgent economic reforms need to be brought in before people decide to stop paying taxes as they are not getting enhanced services in return from the government.

He was speaking on Sunday at the release of the first anniversary issue of the quarterly journal, Change For Better,
published by the Maharashtra Knowledge Corporation Ltd (MKCL).
He said the burden of taxes on the common man was increasing, but there was no improvement in services provided by the government.
"People pay taxes for services. But people are not getting them. Some day they may just stop paying taxes. Mahatma Gandhi had once said that if people wished to drive out the British they should stop paying taxes. People may now do the same to drive out the government if economic reforms are not brought in," he said.
He said the banking system has not reached even half the population in India and emphasised on use of technology to take it to the last man to support the economy.
Prabhu felt transformation was needed in tax collection to reduce corruption. The cover story of the anniversary issue of Change For Better revolves around the concept of Arth Kranti, which is a proposal, a technical correction to transform the Indian socio-economic scenario. It was enunciated by an engineer from Aurangabad, Anil Bokil.
Magazine editor Bhanu Kale, MKCL director Vivek Sawant and Bokil were present.

PFRDA was established by Government of India on 23rd August, 2003.  The Government has, through an executive order dated 10th October 2003, mandated PFRDA to act as a regulator for the pension sector. The mandate of PFRDA is development and regulation of pension sector in India.

The New Pension System reflects Government's effort to find sustainable solutions to the problem of providing adequate retirement income.  As a first step towards instituting pensionary reforms, Government of India moved from a defined benefit pension to a defined contribution based pension system by making it mandatory  for its new  recruits (except armed forces) with effect from 1st January, 2004. Since 1stApril, 2008, the pension contributions of Central Government employees covered by the New Pension System (NPS) are being invested by professional Pension Fund Managers in line with investment guidelines of Government applicable to non-Government Provident Funds.

Twenty eight (28) State/UT Governments have also notified the New Pension System for their new employees. Of these,  24 states have already signed agreements with the intermediaries of the NPS architecture appointed by PFRDA for carrying forward the implementation of the New Pension System.   The other States are in the process of finalisation of documentation.

NPS has been made available to every citizen from 1st April, 2009 on a voluntary basis.  The NPS architecture is transparent and will be web-enabled.  It would allow a subscriber to monitor his/her investments and returns under NPS, the choice of Pension Fund Manager and the investment option would also rest with the subscriber. The design allows the subscriber to switch his/her investment options as well as pension funds. The facility for seamless portability and switch between PFMs is designed to enable subscribers to maintain a single pension account throughout their saving period.

PFRDA has set up a Trust under the Indian Trusts Act, 1882 to oversee the functions of the PFMs.  The NPS Trust is composed of members representing diverse fields and brings wide range of talent to the regulatory framework.

The New Pension System has been designed to enable the subscriber to make optimum decisions regarding his/her future and provide for his/her old-age through systemic savings from the day he/she starts his/her employment.  It seeks to inculcate the habit of saving for retirement amongst the citizens.

PFRDA also intends to intensify its effort towards financial education and awareness as a part of its strategy to protect the interest of the subscribers. PFRDA's efforts are an important milestone in the development of a sustainable and efficient voluntary defined contribution based pension system in India.

What's New
*

Reply to queries_RFP for selection of Production House (s) for TV Commercials_Radio Spots_Print Commercials NEW
RFP for selection of Production House (s) for TV Commercials_Radio Spots_Print Commercials NEW
Advertisement for selection of Production House (s) for TV Commercials_Radio Spots_Print Commercials NEW
Performance of POPs under NPSNEW
Subscribers Registered under the New Pension System (NPS) NEW
EOI for selection of Annuity Service Providers under the NPS NEW
Report of the Committee to Review Implementation of Informal Sector PensionNEW
Returns generated by Pension Fund Managers NEW
Circular regarding evidence of the Date of Birth
List of Aggregators under NPS-Lite
Submission of Declaration Form for the Swavalamban Benefit
National Pension System - Offer Document
Welcome Kit
Location for opening NPS Account NEW
Pre-bid Meeting as per RFP for the NPS Information Desk
RFP for Establishment of National Pension System Information Desk
Advertisement for Inviting RFP for Establishment of NPS Information Desk
Swavalamban declaration form for old subscribers
Notice regarding Swavalamban benefit for NPS Account Holders
ECS -Auto Debit Mandate Form
ECS Guidelines for Subscribers and Points of Presence
RFP for Registration of New PoPs on Ongoing Basis
Registration of New PoPs on Ongoing Basis
Swavalamban/NPS-Lite Flyer
Incentive Scheme for Aggregators
Revised Subscriber Registration Form under NPS Lite to be used for availing Swavalamban Benefit
Revised Subscriber Registration Form under NPS Lite
Standard Operating Procedure for Contribution processing under NPS Lite
Standard Operating Procedure for Subscriber Registration under NPS Lite
Operating Guidelines for Aggregators under NPS Lite
Payment of NPS contribution in a single installment
Operational Guidelines on Swavalamban Scheme issued by Deptt of Financial Services, Government of India
Revised Composite Application Form for Subscriber Registration for opening NPS account and allotment of Permanent Retirement Account Number (PRAN)
Press Release regarding Operational Guidelines for Swavalamban Scheme
Press Release regarding NPS Lite Scheme
Chairperson-PFRDA
NAVs of Pension Fund Managers under the New Pension System
Performance of Pension Fund Managers managing funds of Government Employees
New Pension System (NPS) extended to all Citizens from 1st May 2009
Detailed investment guidelines for all Citizens under the New Pension System

http://pfrda.org.in/indexmain.asp?linkid=180

India cabinet OKs 26 pct FDI in pension sector-source

Reuters - ‎8 hours ago‎
Foreign firms have been lobbying to get into India's growing and lucrative pension market. India's insurance sector also currently has a 26 percent FDI cap. (Writing by Abhijit Neogy; Editing by Ranjit Gangadharan)

India OKs foreign investment in pensions

Ninemsn - ‎2 hours ago‎
India's cabinet has approved allowing foreign direct investment in the country's burgeoning pension sector as it looks to press ahead with stalled economic reforms. Global financial players have long been lobbying for access to the lucrativepension ...

India Cabinet OKs Pension Bill

Wall Street Journal - ‎8 hours ago‎
But it was silent on the extent of foreign ownership to be allowed in Indian pension funds and in a central record-keeping agency. In August, the finance ministry proposed to cap foreign investment in the pension sector at 26%, a suggestion accepted by ...

India cabinet OKs FDI in pension sector

Khaleej Times - ‎2 hours ago‎
NEW DELHI — India's cabinet has approved allowing foreign direct investment in the country's burgeoning pension sector in a fillip to the government's economic reform process, a spokesman said Wednesday. Global financial players have long been lobbying ...

Cabinet OKs 26 pct FDI in pension sector: source

Reuters India - ‎3 hours ago‎
Currently, pension funds of over a million employees in India are managed by domestic players such as IDFC, State Bank of India, Kotak Mahindra Bank, Reliance Capital and insurance major, Life Insurance Corporation of India. ...

India cabinet OKs 26 pct FDI in pension sector-source

Reuters - ‎9 hours ago‎
NEW DELHI Nov 16 (Reuters) - India's cabinet has approved foreign direct investment of up to 26 percent in the pensionsector, a government source told Reuters on Wednesday. The limit will be part of the Pension Fund Regulatory and Development ...

Cabinet okays 26 pc FDI in pension funds

IBNLive.com - ‎8 hours ago‎
In India, no pension fund management company offers a guaranteed pension product. Subscribers to the Employees Provident Fund Organisation (EPFO) get 9.5 per cent interest on their contribution. The committee wanted the government to make concerted ...

Govt approves 26% FDI in pension

Hindustan Times - ‎6 hours ago‎
PTI The government on Wednesday approved amendments to the PFRDA Bill 2011 while agreeing to the proposed 26 % foreign investment in the pension sector but refrained from providing assured returns to subscribers in the proposed law. ...

Pension Bill in cabinet today; no FDI provision

Indian Express - ‎21 hours ago‎

The consensus between the UPA government and the opposition BJP over the Pension Fund Regulatory and Development Authority (PFRDA) Bill is likely to come under stress with the finance ministry rejecting the Yashwant Sinha-chaired parliamentary standing ...

Bill allows FDI in pension funds, fixes no specific cap

mydigitalfc.com - ‎47 minutes ago‎
By KR Sudhaman Nov 16 2011 , New Delhi In what could give a fillip to stalled reforms in the financial sector, the Union cabinet on Wednesday gave the green signal to the long-awaited PFRDA bill, paving the way for opening up pension funds to 26 per ...

Government approves 26% FDI in pension sector but no guarantee of assured returns

Economic Times - ‎3 hours ago‎
NEW DELHI: Approving changes in the PFRDA Bill, the Government today said it will allow 26 per cent foreign investment in the pension sector but no sectoral caps will be mentioned in the legislation. Turning down the suggestion of Parliamentary ...

FDI in multi-brand retail key reform for

Moneycontrol.com - ‎1 hour ago‎
Q: The cabinet has approved the PFRDA Bill and in doing that it has retained the flexibility to hike FDI in the pension sector beyond the 26% disregarding the advice of the standing committee on finance in the process. We do seem to be seeing a new ...

Govt oks changes in PFRDA Bill, allows 26% FDI in pension

Moneycontrol.com - ‎8 hours ago‎

Published on Wed, Nov 16, 2011 at 15:00 | Source : PTI The government today approved amendments to the PFRDA Bill 2011 while agreeing to the proposed 26% foreign investment in the pension sector but refrained from providing assured returns to ...

New pension bill allows 26 per cent FDI; curtains down on assured returns

domain-B - ‎3 hours ago‎
The government today approved amendments to the Pension Fund Regulatory and Development Authority (PFRDA) Bill 2011, agreeing to allow up to 26 per cent foreign investment in the pension sector and ending the era of assured returns to subscribers. ...

Govt to consider PFRDA bill amendments to today

domain-B - ‎10 hours ago‎
The union cabinet is expected to take up for consideration amendments to the Pension Fund Regulatory and Development Authority (PFRDA) Bill, now in parliament. The Yashwant Sinha-led standing committee on finance had favoured allowing a cap of 26 per ...

CABINET LD PENSION 2 LAST

IBNLive.com - ‎3 hours ago‎
In India, no pension fund management company offers a guaranteed pension product. Subscribers to the Employees Provident Fund Organisation (EPFO) get 9.5 per cent interest on their contribution. PTI SSR KKS CS.

Final cabinet note on retail FDI likely next week: Sources

Moneycontrol.com - ‎7 hours ago‎
The final cabinet note on retail foreign direct investment (FDI) is likely to be issued next week, reports CNBC-TV18's Rituaparna Bhuyan quoting sources. It is learnt that the inter-ministerial discussions on retail FDI is likely to end on Friday. ...

Pension Bill cleared, but without FDI clause

Hindu Business Line - ‎1 hour ago‎

The Government has agreed to the proposed 26 per cent foreign investment in the pension sector but refrained from providing assured returns to subscribers in the proposed law. The Government is likely to allow up to 26 per cent foreign direct ...

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      The bill doesn't mention the extent of foreign ownership to be allowed in Indian pension funds and in a central record-keeping agency. ...
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Full coverage

हिन्दी में

Indian Cabinet Approves Bill to Overhaul Pensions

Wall Street Journal - ‎12 hours ago‎
The bill doesn't mention the extent of foreign ownership to be allowed in Indian pension funds and in a central record-keeping agency. But in August, the finance ministry proposed to cap foreign investment in the pension sector at 26%, a suggestion ...

India cabinet OKs 26 pct FDI in growing pension sector

AFP - ‎12 hours ago‎
NEW DELHI — India's cabinet on Wednesday approved allowing foreign direct investment in the country's burgeoning pension sector as it looks to press ahead with stalled economic reforms. Global financial players have long been lobbying for access to the ...

India cabinet OKs 26 pct FDI in pension sector-source

Reuters - ‎22 hours ago‎
Foreign firms have been lobbying to get into India's growing and lucrative pension market. India's insurance sector also currently has a 26 percent FDI cap. (Writing by Abhijit Neogy; Editing by Ranjit Gangadharan)

India cabinet OKs FDI in pension sector

Khaleej Times - ‎16 hours ago‎
NEW DELHI — India's cabinet has approved allowing foreign direct investment in the country's burgeoning pension sector in a fillip to the government's economic reform process, a spokesman said Wednesday. Global financial players have long been lobbying ...

Cabinet OKs 26 pct FDI in pension sector: source

Reuters India - ‎17 hours ago‎
Currently, pension funds of over a million employees in India are managed by domestic players such as IDFC, State Bank of India, Kotak Mahindra Bank, Reliance Capital and insurance major, Life Insurance Corporation of India. ...

Cabinet approves 26% FDI in pension sector

Financial Express - ‎11 hours ago‎
New Delhi: In a move that would help bring much-needed marketing strength to India's burgeoning pension industry and diversify the product basket to enable its rapid growth, the government on Wednesday decided to allow foreign direct investment (FDI) ...

Cabinet allows 26% FDI in pension

Calcutta Telegraph - ‎9 hours ago‎
Even, NPS subscribers will have to compulsorily buy annuity or the pension income from one of the life insurance companies with the accumulated money under the government scheme. Only life insurers in India can sell annuities.

Law won't set target for pension returns

Business Standard - ‎12 hours ago‎
The Union cabinet on Wednesday gave its nod to amendments in the Pension Fund Regulatory and Development Authority (PFRDA) Bill, which seeks to allow foreign players entry in the pension sector. Foreign direct investment (FDI) in the pension sector is ...

India cabinet OKs 26 pct FDI in pension sector-source

Reuters - ‎Nov 16, 2011‎
NEW DELHI Nov 16 (Reuters) - India's cabinet has approved foreign direct investment of up to 26 percent in the pension sector, a government source told Reuters on Wednesday. The limit will be part of the Pension Fund Regulatory and Development ...

Cabinet clears 26% FDI in pension, but cap not part of bill; we'll see, says BJP

Indian Express - ‎11 hours ago‎
The union cabinet today approved 26 per cent foreign direct investment (FDI) in the pension sector, and cleared amendments to the Pension Fund Regulatory and Development Authority (PFRDA) Bill, 2011. As reported by The Indian Express on Wednesday, ...

Government gives nod for 26% FDI in pension funds

Hindustan Times - ‎12 hours ago‎
The government is finally going ahead with the 26% foreign direct investment in pension funds and setting up of a regulator for them. The decision — too hot to be handled in the past because of the fierce resistance from the Left — was taken by the ...

Nod for 26% FDI in pension funds

Livemint - ‎11 hours ago‎
In comparison, the National Pension System (NPS) has provided much higher return in its short span," said Gautam Bhardwaj, director of Invest India Economic Foundation, a consultancy specializing in pension reforms. "Guarantees will force pension fund ...

Pension to get 26% FDI, but bill has no cap

The Asian Age - ‎6 hours ago‎
The Union Cabinet on Wednesday approved the Pension Fund Regulatory and Development Authority (PFRDA) Bill 2011, but rejected certain key suggestions made by the parliamentary standing committee on finance. Under the approved draft, 26 per cent foreign ...

Govt opens up pension sector to 26 per cent FDI

Deccan Herald - ‎11 hours ago‎
The PFRDA Bill, if passed, will open the country's lucrative pension sector to foreign players. Now, pension funds of over 10 lakh employees in the country are managed by domestic players such as LIC, State Bank of India, Kotak Mahindra Bank and ...

Cabinet okays Pension Bill, defers decision on FDI cap

Economic Times - ‎11 hours ago‎
NEW DELHI: The cabinet on Wednesday cleared the pension bill but decided not to limit foreign direct investment in the sector, retaining the flexibility to prescribe or change limit through an executive decision. The government will place the Pension ...

With financial sector under stress, regulators don the PR mantle

Indian Express - ‎6 hours ago‎
... the Securities and Exchange Board of India (Sebi) has decided to support the mutual fund advertisement campaign run by the Association of Mutual Funds in India (AMFI) and is also likely to fund it. Another financial sector regulator — Pension Fund ...

Cabinet clears Pension Bill, approves 26% FDI

India Infoline.com - ‎2 hours ago‎
The Union Cabinet on Wednesday, 17 November 2011 cleared the long awaited Pension Bill while agreeing to the proposed 26% Foreign Direct Investment (FDI) in the pension sector. The government has however retained the flexibility of changing the FDI cap ...

Pension Bill in cabinet today; no FDI provision

Indian Express - ‎Nov 15, 2011‎
The consensus between the UPA government and the opposition BJP over the Pension Fund Regulatory and Development Authority (PFRDA) Bill is likely to come under stress with the finance ministry rejecting the Yashwant Sinha-chaired parliamentary standing ...

Bill allows FDI in pension funds, fixes no specific cap

mydigitalfc.com - ‎14 hours ago‎
By KR Sudhaman Nov 16 2011 , New Delhi In what could give a fillip to stalled reforms in the financial sector, the Union cabinet on Wednesday gave the green signal to the long-awaited PFRDA bill, paving the way for opening up pension funds to 26 per ...

Government approves 26% FDI in pension sector but no guarantee of assured returns

Economic Times - ‎17 hours ago‎
NEW DELHI: Approving changes in the PFRDA Bill, the Government today said it will allow 26 per cent foreign investment in the pension sector but no sectoral caps will be mentioned in the legislation. Turning down the suggestion of Parliamentary ...

FDI in multi-brand retail key reform for

Moneycontrol.com - ‎15 hours ago‎
Q: The cabinet has approved the PFRDA Bill and in doing that it has retained the flexibility to hike FDI in the pension sector beyond the 26% disregarding the advice of the standing committee on finance in the process. We do seem to be seeing a new ...

Government clears changes in PFRDA Bill, allows 26% FDI in pension

Economic Times - ‎19 hours ago‎
NEW DELHI: The government today approved amendments to the PFRDA Bill 2011 while agreeing to the proposed 26 per cent foreign investment in the pension sector but refrained from providing assured returns to subscribers in the proposed law. ...

Government to finalise amendments to PFRDA bill tomorrow

Economic Times - ‎Nov 15, 2011‎
In India, no pension fund management company offers a guaranteed pension product. Subscribers to the Employees Provident Fund Organisation (EPFO) get 9.5 per cent interest on their contribution. The committee wanted the government to make concerted ...

Government to push second generation economic reforms: Pranab Mukherjee

Economic Times - ‎14 hours ago‎
As part of this process, some of the important legislations, including Pension Fund Regulatory and Development Authority (PFRDA) Bill, are likely to be passed (by Parliament) soon," Finance Minister Pranab Mukherjee said. Earlier in the day the Union ...

Govt oks changes in PFRDA Bill, allows 26% FDI in pension

Moneycontrol.com - ‎22 hours ago‎
Published on Wed, Nov 16, 2011 at 15:00 | Source : PTI The government today approved amendments to the PFRDA Bill 2011 while agreeing to the proposed 26% foreign investment in the pension sector but refrained from providing assured returns to ...

Cabinet approves 26% FDI in pension

Bloomberg UTV - ‎5 hours ago‎
The Cabinet gave its seal of approval to amendments to the PFRDA Bill 2011, while agreeing to the proposed 26% foreign investment in the pension sector. The Parliamentary Standing Committee on Finance has already examined the bill and it is likely to ...

New pension bill allows 26 per cent FDI; curtains down on assured returns

domain-B - ‎18 hours ago‎
The government today approved amendments to the Pension Fund Regulatory and Development Authority (PFRDA) Bill 2011, agreeing to allow up to 26 per cent foreign investment in the pension sector and ending the era of assured returns to subscribers. ...

16 economic legislations in coming Parliament session

IBNLive.com - ‎17 hours ago‎
The long-pending Pension Fund Regulatory and Development Authority (PFRDA) Bill, which will pave way for 26 per cent foreign investment and encourage private sector participation in pension sector, is among 16 economic bills which will come up in the ...

Govt to consider PFRDA bill amendments to today

domain-B - ‎Nov 15, 2011‎
The union cabinet is expected to take up for consideration amendments to the Pension Fund Regulatory and Development Authority (PFRDA) Bill, now in parliament. The Yashwant Sinha-led standing committee on finance had favoured allowing a cap of 26 per ...

Final cabinet note on retail FDI likely next week: Sources

Moneycontrol.com - ‎21 hours ago‎
The final cabinet note on retail foreign direct investment (FDI) is likely to be issued next week, reports CNBC-TV18's Rituaparna Bhuyan quoting sources. It is learnt that the inter-ministerial discussions on retail FDI is likely to end on Friday. ...

পেনশনে বিদেশি
লগ্নিতে সায় কেন্দ্রের
র্থিক সংস্কারের প্রতিশ্রুতি কার্যকর করার পথে আরও এক ধাপ। অবশেষে পেনশন তহবিল পরিচালনাকারী সংস্থায় ২৬ শতাংশ পর্যন্ত বিদেশি বিনিয়োগের প্রস্তাব অনুমোদন করল কেন্দ্রীয় মন্ত্রিসভা। এর পর আগামী ২২ নভেম্বর থেকে শুরু সংসদের শীতকালীন অধিবেশনে এই পেনশন সংস্কার (পিএফআরডিএ) বিলটি পেশ করা হবে। সেখানে পাশ হয়ে তা আইনে পরিণত হলে দেশের বিভিন্ন পেনশন তহবিল পরিচালনাকারী সংস্থায় ২৬ শতাংশ পর্যন্ত মালিকানা হাতে নিতে পারবে বিদেশি সংস্থাগুলি।
বিমা শিল্পে বিদেশি লগ্নির দরজা খুলে দেওয়ার পর থেকেই পেনশন তহবিল-সহ সমগ্র আর্থিক ক্ষেত্রের সংস্কারে বিদেশি বিনিয়োগকে স্বাগত জানানোর কথা বারবারই বলে এসেছে কেন্দ্র। কিন্তু গত ছ'বছর ধরে (সংসদে প্রথম এই সংক্রান্ত বিল পেশ হয় ২০০৫ সালে) মূলত বামেদের বিরোধিতার জেরে সেই উদ্যোগ ফলপ্রসূ হয়নি। তাই এ বার মন্ত্রিসভায় এই প্রস্তাব পাশ হওয়া আর্থিক সংস্কারের অন্যতম বড় মাইলফলক বলে অনেকের ধারণা।
প্রত্যাশিত ভাবেই এ দিনও পেনশন ক্ষেত্র সংস্কারের এই উদ্যোগের বিরোধিতা করেছেন বামেরা। বিজেপি অবশ্য নীতিগত ভাবে সংস্কারের বিরোধী নয়। কিন্তু এ বিষয়ে যশবন্ত সিনহার নেতৃত্বাধীন সংসদীয় স্থায়ী কমিটির সুপারিশ না-মানায় কেন্দ্রের সমালোচনা করেছে তারা।
সম্প্রতি কেন্দ্রীয় অর্থমন্ত্রী প্রণব মুখোপাধ্যায় স্পষ্ট জানিয়েছিলেন যে, দেশের আর্থিক উন্নয়নের পথ প্রশস্ত করতে কেন্দ্রকে এমন কিছু পদক্ষেপ করতে হবে, যা কারও কারও পছন্দ না-ও হতে পারে। তিনি এ কথা বলার দিন দুয়েকের মধ্যেই বুধবার দেশের পেনশন ক্ষেত্রের দরজা বিদেশি পুঁজির জন্য খুলে দেওয়ার কথা ঘোষণা করল কেন্দ্রীয় মন্ত্রিসভা।
কোথায় বদল
• তহবিল বাড়বে।
• পেনশন প্রকল্পে লগ্নির আয়ও আকর্ষণীয় হবে।
• বিমা শিল্পের মতো এখানেও প্রতিযোগিতা বাড়বে।
• ব্যবসার বহর বাড়বে শেয়ার বাজার ও মিউচ্যুয়াল ফান্ডগুলির।
পেনশন তহবিল পরিচালনায় বিদেশি সংস্থা পা রাখলে কী সুবিধা হবে পেনশন প্রকল্প গ্রাহকদের?
বিশেষজ্ঞরা মনে করছেন, এর ফলে ভারতের 'লোভনীয়' বাজারে পা রাখবে বিশ্বের অগ্রণী পেনশন তহবিল পরিচালনাকারী সংস্থাগুলি। তাদের ঝুলিতে শুধু লগ্নির অর্থই থাকবে না। সঙ্গে থাকবে ওই ধরনের তহবিলপরিচালনার বিশেষ দক্ষতা এবং অভিজ্ঞতার বিপুল সম্ভার। আসবেন দক্ষ তহবিল পরিচালকরা। যার ফলে, এই ক্ষেত্রে মৌলিক পরিবর্তন হবে তিনটি। এক, দ্রুত অনেকটাই বড় হবে তহবিলের আকার। ফলে পেনশন প্রকল্পে লগ্নি করে আরও আকর্ষণীয় অঙ্ক আয় করতে পারবেন গ্রাহকেরা। এর পরে লগ্নি সংক্রান্ত চালু বাধ্যবাধকতা যদি সরকার শিথিল করে, তা হলে ওই বিনিয়োগ অনেকটা ছড়িয়ে দেওয়া সম্ভব হবে।
দুই, সংস্থাগুলির মধ্যে গ্রাহক ধরার প্রতিযোগিতা বাড়বে। তার সূত্র ধরে বাজারে আসবে নিত্যনতুন প্রকল্প। ঠিক যেমনটা হয়েছে ব্যাঙ্ক ও বিমা শিল্পে।
আর তিন, ব্যবসার বহর বাড়বে শেয়ার বাজার ও মিউচুয়াল ফান্ডগুলির। কারণ, এর পর সরকারি বিধিনিষেধ কাটলে আয় বাড়াতে এই দুই ক্ষেত্রে আরও বেশি করে লগ্নি করবে পেনশন তহবিল পরিচালনাকারী সংস্থাগুলি।
সংস্কারের পথে এ দিন যে সিদ্ধান্ত নেওয়া হল, তার সুফল ঘরে তুলতে হলে অবশ্য তহবিলের টাকা বিনিয়োগের বিষয়ে অনেক বিধিনিষেধ সরিয়ে নেওয়া জরুরি বলে মনে করছেন সংশ্লিষ্ট অনেকে। তাঁদের দাবি, এই সব বাধা না সরালে কঠিন হবে বিদেশি বিনিয়োগ টানা। সেই তিমিরে থাকবেন গ্রাহকরাও। এ প্রসঙ্গে একটি রাষ্ট্রায়ত্ত আর্থিক প্রতিষ্ঠানের কর্তা বলেন, "এখন প্রভিডেন্ট ফান্ডের মতো পেনশন তহবিলের টাকা বিনিয়োগেও সরকারি নির্দেশিকা মানতে হয়। যেমন, তহবিলের সিংহভাগই লগ্নি করতে হয় সরকারি ঋণপত্র বা উঁচু রেটিংযুক্ত বন্ডে। শেয়ার বাজারে খাটানো যায় সামান্য অংশই।" ফলে আয়ও তুলনায় কম হয়। সে কথা জানিয়ে তাঁর বক্তব্য, "এই নিয়ম বদলানো জরুরি।" যদিও এর ফলে ঝুঁকি বাড়বে বলে অনেকের আশঙ্কা।
তবে ভবিষ্যতে সরকার যে পেনশন ক্ষেত্রে আরও সংস্কারের পথ খোলা রাখছে, অন্তত একটি ইঙ্গিতে তা স্পষ্ট। তা হল, এখনকার মতো ২৬ শতাংশ পর্যন্ত বিদেশি লগ্নিতে সায় দিলেও, ভবিষ্যতে এই ঊর্ধ্বসীমা বাড়ানোর পথ খোলা রেখেছে কেন্দ্র। যে কারণে, এ বিষয়ে সংসদীয় স্থায়ী কমিটির সুপারিশ সত্ত্বেও বিলে ঊর্ধ্বসীমার কথা উল্লেখ করা হয়নি। যাতে আইন সংশোধনের পরিবর্তে স্রেফ বিশেষ সরকারি নির্দেশ (এগ্জিকিউটিভ অর্ডার) জারি করেই তা বাড়ানোর রাস্তা খোলা থাকে।
এই নিয়েই এ দিন কেন্দ্রের সমালোচনা করেছেন বিজেপি মুখপাত্র রাজীবপ্রতাপ রুডি। একই সঙ্গে তাঁর অভিযোগ, সরকারি প্রভিডেন্ট ফান্ডে যে হারে সুদ পাওয়া যায়, অন্তত সেই হারে গ্রাহকদের ন্যূনতম আয় সুনিশ্চিত করার সুপারিশ করেছিল কমিটি। কিন্তু বিলে তা অগ্রাহ্য করেছে কেন্দ্র। পেনশন প্রকল্প থেকে গ্রাহকদের বেরিয়ে আসার বিষয়টিকে কঠিন করা হয়েছে এই বিলে। অনেকে বলছেন, এ ক্ষেত্রেও কমিটির সুপারিশ মানেনি কেন্দ্র।
পেনশন ক্ষেত্র সংস্কারের এই উদ্যোগকে অবশ্য প্রত্যাশিত ভাবেই সব থেকে চাঁছাছোলা ভাষায় আক্রমণ করেছে বামেরা। সিপিএমের পলিটব্যুরো সদস্য বৃন্দা কারাট বলেন, "আমরা এর সম্পূর্ণ বিরোধিতা করব। এটা শ্রমিক শ্রেণির উপর আঘাত। তাঁদের সারা জীবনের সঞ্চয় দেশি-বিদেশি সাট্টাবাজদের হাতে তুলে দিচ্ছে সরকার।"

পেনশনে বিদেশি
লগ্নিতে সায় কেন্দ্রের
র্থিক সংস্কারের প্রতিশ্রুতি কার্যকর করার পথে আরও এক ধাপ। অবশেষে পেনশন তহবিল পরিচালনাকারী সংস্থায় ২৬ শতাংশ পর্যন্ত বিদেশি বিনিয়োগের প্রস্তাব অনুমোদন করল কেন্দ্রীয় মন্ত্রিসভা। এর পর আগামী ২২ নভেম্বর থেকে শুরু সংসদের শীতকালীন অধিবেশনে এই পেনশন সংস্কার (পিএফআরডিএ) বিলটি পেশ করা হবে। সেখানে পাশ হয়ে তা আইনে পরিণত হলে দেশের বিভিন্ন পেনশন তহবিল পরিচালনাকারী সংস্থায় ২৬ শতাংশ পর্যন্ত মালিকানা হাতে নিতে পারবে বিদেশি সংস্থাগুলি।
বিমা শিল্পে বিদেশি লগ্নির দরজা খুলে দেওয়ার পর থেকেই পেনশন তহবিল-সহ সমগ্র আর্থিক ক্ষেত্রের সংস্কারে বিদেশি বিনিয়োগকে স্বাগত জানানোর কথা বারবারই বলে এসেছে কেন্দ্র। কিন্তু গত ছ'বছর ধরে (সংসদে প্রথম এই সংক্রান্ত বিল পেশ হয় ২০০৫ সালে) মূলত বামেদের বিরোধিতার জেরে সেই উদ্যোগ ফলপ্রসূ হয়নি। তাই এ বার মন্ত্রিসভায় এই প্রস্তাব পাশ হওয়া আর্থিক সংস্কারের অন্যতম বড় মাইলফলক বলে অনেকের ধারণা।
প্রত্যাশিত ভাবেই এ দিনও পেনশন ক্ষেত্র সংস্কারের এই উদ্যোগের বিরোধিতা করেছেন বামেরা। বিজেপি অবশ্য নীতিগত ভাবে সংস্কারের বিরোধী নয়। কিন্তু এ বিষয়ে যশবন্ত সিনহার নেতৃত্বাধীন সংসদীয় স্থায়ী কমিটির সুপারিশ না-মানায় কেন্দ্রের সমালোচনা করেছে তারা।
সম্প্রতি কেন্দ্রীয় অর্থমন্ত্রী প্রণব মুখোপাধ্যায় স্পষ্ট জানিয়েছিলেন যে, দেশের আর্থিক উন্নয়নের পথ প্রশস্ত করতে কেন্দ্রকে এমন কিছু পদক্ষেপ করতে হবে, যা কারও কারও পছন্দ না-ও হতে পারে। তিনি এ কথা বলার দিন দুয়েকের মধ্যেই বুধবার দেশের পেনশন ক্ষেত্রের দরজা বিদেশি পুঁজির জন্য খুলে দেওয়ার কথা ঘোষণা করল কেন্দ্রীয় মন্ত্রিসভা।
কোথায় বদল
• তহবিল বাড়বে।
• পেনশন প্রকল্পে লগ্নির আয়ও আকর্ষণীয় হবে।
• বিমা শিল্পের মতো এখানেও প্রতিযোগিতা বাড়বে।
• ব্যবসার বহর বাড়বে শেয়ার বাজার ও মিউচ্যুয়াল ফান্ডগুলির।
পেনশন তহবিল পরিচালনায় বিদেশি সংস্থা পা রাখলে কী সুবিধা হবে পেনশন প্রকল্প গ্রাহকদের?
বিশেষজ্ঞরা মনে করছেন, এর ফলে ভারতের 'লোভনীয়' বাজারে পা রাখবে বিশ্বের অগ্রণী পেনশন তহবিল পরিচালনাকারী সংস্থাগুলি। তাদের ঝুলিতে শুধু লগ্নির অর্থই থাকবে না। সঙ্গে থাকবে ওই ধরনের তহবিলপরিচালনার বিশেষ দক্ষতা এবং অভিজ্ঞতার বিপুল সম্ভার। আসবেন দক্ষ তহবিল পরিচালকরা। যার ফলে, এই ক্ষেত্রে মৌলিক পরিবর্তন হবে তিনটি। এক, দ্রুত অনেকটাই বড় হবে তহবিলের আকার। ফলে পেনশন প্রকল্পে লগ্নি করে আরও আকর্ষণীয় অঙ্ক আয় করতে পারবেন গ্রাহকেরা। এর পরে লগ্নি সংক্রান্ত চালু বাধ্যবাধকতা যদি সরকার শিথিল করে, তা হলে ওই বিনিয়োগ অনেকটা ছড়িয়ে দেওয়া সম্ভব হবে।
দুই, সংস্থাগুলির মধ্যে গ্রাহক ধরার প্রতিযোগিতা বাড়বে। তার সূত্র ধরে বাজারে আসবে নিত্যনতুন প্রকল্প। ঠিক যেমনটা হয়েছে ব্যাঙ্ক ও বিমা শিল্পে।
আর তিন, ব্যবসার বহর বাড়বে শেয়ার বাজার ও মিউচুয়াল ফান্ডগুলির। কারণ, এর পর সরকারি বিধিনিষেধ কাটলে আয় বাড়াতে এই দুই ক্ষেত্রে আরও বেশি করে লগ্নি করবে পেনশন তহবিল পরিচালনাকারী সংস্থাগুলি।
সংস্কারের পথে এ দিন যে সিদ্ধান্ত নেওয়া হল, তার সুফল ঘরে তুলতে হলে অবশ্য তহবিলের টাকা বিনিয়োগের বিষয়ে অনেক বিধিনিষেধ সরিয়ে নেওয়া জরুরি বলে মনে করছেন সংশ্লিষ্ট অনেকে। তাঁদের দাবি, এই সব বাধা না সরালে কঠিন হবে বিদেশি বিনিয়োগ টানা। সেই তিমিরে থাকবেন গ্রাহকরাও। এ প্রসঙ্গে একটি রাষ্ট্রায়ত্ত আর্থিক প্রতিষ্ঠানের কর্তা বলেন, "এখন প্রভিডেন্ট ফান্ডের মতো পেনশন তহবিলের টাকা বিনিয়োগেও সরকারি নির্দেশিকা মানতে হয়। যেমন, তহবিলের সিংহভাগই লগ্নি করতে হয় সরকারি ঋণপত্র বা উঁচু রেটিংযুক্ত বন্ডে। শেয়ার বাজারে খাটানো যায় সামান্য অংশই।" ফলে আয়ও তুলনায় কম হয়। সে কথা জানিয়ে তাঁর বক্তব্য, "এই নিয়ম বদলানো জরুরি।" যদিও এর ফলে ঝুঁকি বাড়বে বলে অনেকের আশঙ্কা।
তবে ভবিষ্যতে সরকার যে পেনশন ক্ষেত্রে আরও সংস্কারের পথ খোলা রাখছে, অন্তত একটি ইঙ্গিতে তা স্পষ্ট। তা হল, এখনকার মতো ২৬ শতাংশ পর্যন্ত বিদেশি লগ্নিতে সায় দিলেও, ভবিষ্যতে এই ঊর্ধ্বসীমা বাড়ানোর পথ খোলা রেখেছে কেন্দ্র। যে কারণে, এ বিষয়ে সংসদীয় স্থায়ী কমিটির সুপারিশ সত্ত্বেও বিলে ঊর্ধ্বসীমার কথা উল্লেখ করা হয়নি। যাতে আইন সংশোধনের পরিবর্তে স্রেফ বিশেষ সরকারি নির্দেশ (এগ্জিকিউটিভ অর্ডার) জারি করেই তা বাড়ানোর রাস্তা খোলা থাকে।
এই নিয়েই এ দিন কেন্দ্রের সমালোচনা করেছেন বিজেপি মুখপাত্র রাজীবপ্রতাপ রুডি। একই সঙ্গে তাঁর অভিযোগ, সরকারি প্রভিডেন্ট ফান্ডে যে হারে সুদ পাওয়া যায়, অন্তত সেই হারে গ্রাহকদের ন্যূনতম আয় সুনিশ্চিত করার সুপারিশ করেছিল কমিটি। কিন্তু বিলে তা অগ্রাহ্য করেছে কেন্দ্র। পেনশন প্রকল্প থেকে গ্রাহকদের বেরিয়ে আসার বিষয়টিকে কঠিন করা হয়েছে এই বিলে। অনেকে বলছেন, এ ক্ষেত্রেও কমিটির সুপারিশ মানেনি কেন্দ্র।
পেনশন ক্ষেত্র সংস্কারের এই উদ্যোগকে অবশ্য প্রত্যাশিত ভাবেই সব থেকে চাঁছাছোলা ভাষায় আক্রমণ করেছে বামেরা। সিপিএমের পলিটব্যুরো সদস্য বৃন্দা কারাট বলেন, "আমরা এর সম্পূর্ণ বিরোধিতা করব। এটা শ্রমিক শ্রেণির উপর আঘাত। তাঁদের সারা জীবনের সঞ্চয় দেশি-বিদেশি সাট্টাবাজদের হাতে তুলে দিচ্ছে সরকার।"

New Pension Scheme (India)

From Wikipedia, the free encyclopedia
*

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Click [show] on right for more details.[show]

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PFRDA Logo with original colours


[edit]Regulator

Pension Fund Regulatory and Development Authority (PFRDA) is the prudential regulator for the NPS. PFRDA was established by the Government of India on 23 August 2003 to promote old age income security by establishing, developing and regulating pension funds. PFRDA has set up a Trust under the Indian Trusts Act, 1882 to oversee the functions of the PFMs. The NPS Trust is composed of members representing diverse fields and brings wide range of talent to the regulatory framework.

[edit]Coverage & Eligibility

NPS will be available to all citizens of India on voluntary basis and mandatory for employees of central government (except armed forces) appointed on or after 1 January 2004. All Indian citizens between the age of 18 and 55 can join the NPS.
Tier-I is mandatory for all Govt. servants joining Govt. service on or after 1.1.2004. In Tier I, Govt. servants will have to make a contribution of 10% of his Basic Pay, DP and DA which will be deducted from his salary bill every month. The Govt. will make an equal matching contribution. Since 1 April 2008, the pension contributions of Central Government employees covered by the NPS are being invested by professional Pension Fund Managers in line with investment guidelines of Government. However, there will be no contribution from the Government in respect of individuals who are not Government employees. The contributions and returns thereon would be deposited in a non-withdrawable pension account.
In addition to the above pension account, each individual can have a voluntary tier-II withdrawable account at his option. Government will make no contribution into this account. These assets would be managed in the same manner as the pension. The accumulations in this account can be withdrawn anytime without assigning any reason. It's estimated that 8 crore citizens of India are eligible to join the NPS.

[edit]Operational Structure

NPS is designed to leverage network of bank branches and post offices to collect contributions and ensure that there is seamless transfer of accumulations in case of change of employment and/or location of the subscriber. It offers a basket of investment choices and Fund managers. Dhirendra Swarup is one of the founders.
There will be one or more CRA, several PFMs to choose from which will offer different categories of schemes. The participating entities (PFMs, CRA etc.) would give out easily understood information about past performance & regular NAVs, so that the individual would able to make informed choices about which scheme to choose. PFMs would share this common CRA infrastructure. The PFMs would invest the savings people put into their PRAs, investing them in three asset classes, equity (E), government securities (G) and debt instruments that entail credit risk (C), including corporate bonds and fixed deposits.

[edit]Contribution Guidelines

The following contribution guidelines have been set by the PFRDA:
  • Minimum amount per contribution: Rs. 500 per month
  • Minimum number of contributions: 1 in a year
  • Minimum annual contribution: Rs 6,000 in each subscriber account.

If the subscriber is unable to contribute the minimum annual contribution, a default penalty of Rs.100 per year of default would be levied and the account would become dormant. In order to re-activate the account, subscriber will have to pay the minimum contributions, along with penalty due. A dormant account will be closed when the account value falls to zero.

[edit]Investment Options

Under the investment guidelines finalized for the NPS, pension fund managers will manage three separate schemes, each investing in a different asset class. The three asset classes are equity, government securities and credit risk-bearing fixed income instruments. The subscriber will have the option to actively decide as to how the NPS pension wealth is to be invested in three asset classes:
  1. E Class: Investment would primarily in Equity market instruments. It would invest in Index funds that replicate the portfolio of either BSE Sensitive index or NSE Nifty 50 index.
  2. G Class: Investment would be in Government securities like GOI bonds and State Govt. bonds
  3. C Class: Investment would be in fixed income securities other than Government Securities

* Liquid Funds of AMCs regulated by SEBI with filters suggested by the Expert Group

* Fixed Deposits of scheduled commercial banks with filters

* Debt securities with maturity of not less than three years tenure issued by bodies Corporate including scheduled commercial banks and public financial institutions

Credit Rated Public Financial Institutions/PSU Bonds

Credit Rated Municipal Bonds/Infrastructure Bonds

In case the subscriber does not exercise any choice as regards asset allocation, the contribution will be invested in accordance with the 'Auto choice' option. In this option the investment will be determined by a predefined portfolio. At the lowest age of entry (18 years) the auto choice will entail investment of 50 % of pension wealth in "E" Class, 30% in "C" Class and 20% in "G" Class. These ratios of investment will remain fixed for all contributions until the participant reaches the age of 36. From age 36 onwards, the weight in "E" and "C" asset class will decrease annually and the weight in "G" class will increase annually till it reaches 10% in " E", 10% in "C" and 80 % in " G" class at age 55.
! Till the of age 35 years
! At age 55 Years |- | E Class | 50% | 10% |- | C Class | 30% | 10% |- | G Class | 20% | 80%

[edit]Investment Charges

NPS levies extremely low Investment management charge of 0.00009% on net AUM (Asset Under Management). This is extremely low as compared to charges levied by mutual funds or other investment products. Initial charge of opening the account would be Rs. 470. From second year onwards the minimum charge would be Rs. 350 a year. As per the offer document of NPS, annual and transaction charges would be reduced once the number of accounts in CRA reaches 10 lakh.

[edit]Withdrawal Norms

If subscriber exits before 60 years of age, he/she has to invest 80% of accumulated saving to purchase a life annuity from IRDA regulate life insurer. The remaining 20% may be withdrawn as lump sum. On exit after age 60 years from the pension system, the subscriber would be required to invest at least 40% of pension wealth to purchase an annuity. In case of Government employees, the annuity should provide for pension for the lifetime of the employee and his dependent parents and his spouse at the time of retirement. If subscriber does not exit the system at or before 70 years, account would be closed with the benefits transferred to subscriber in lump sum. If a subscriber dies, the nominee has the option to receive the entire pension wealth as a lump sum.

[edit]Tax Treatment

The offer document of NPS does not specify the tax benefits in elaborate manner. It specifies "Tax benefits would be applicable as per Income Tax Act, 1961 as amended from time to time." As per current provisions, withdrawals under the NPS attract tax under the EET (exempt-exempt-taxable) system, which means that while contributions and returns to the NPS are exempt up to a limit, withdrawals would be taxed as normal income (EET).
To make the New Pension System more attractive Government has announced two major Income tax concessions for contributions made in New Pension Scheme in the budget 2011.
While the NPS subscribers are directly benefited from one of these Income tax concessions, the second one is beneficial to the employers who contribute for NPS each month equivalent to employees contribution in Tier I.
Income tax concession to Employees under NPS:
So far, the contribution made by a New Pension Scheme subscriber in Tier I scheme is deductible from the total income under Section 80CCD of the Income Tax Act. Like wise, the contribution made by the employer for the employee in Tier I of New pension scheme is also deductible under Section 80CCD. However, the aggregate deduction under Section 80C, 80CCC and 80CCD is fixed at Rs.1 lakh.
So, if the NPS subscriber is already having other eligible deductions such as LIC premium, PPF, bank or NSC deposits, ELSS etc., under Section 80C, 80CCC and Section 80CCD., deduction allowed under Section 80CCD in respect of contribution towards New Pension Scheme may not be of much useful as the overall limit of savings eligible for deduction is pegged at Rs. 1 lakh.
Further, contribution made by the employer in Tier I New pension scheme should also be included in the Total income of NPS subscriber as far as calculation of income tax is concerned, while full deduction of the same from income under Section 80CCD may not be possible as other savings made by the subscriber covers the overall limit of Rs.1 lakh under Section 80CCD. Hence, for a NPS subscriber contribution for NPS by the Government is taxable in most of the cases.
For example, if an employee receives a salary of Rs.40,000 (pay+da), 10% of the same (Rs.4000) is paid by him as contribution towards NPS. The Government will also be paying Rs.4000 in this case in NPS fund of the said employee. Until now, an amount of Rs.96,000 (Rs.48,000+Rs.48000) could be deductible from the total income as far as this employee is concerned under Section 80CCD.
However, if the said employee has been paying LIC premium of Rs.20,000 per year, he will be allowed to deduct only Rs.2000 in respect of the same under Section 80CC as total ceiling of Rs.1,00,000 under Section 80CCE will apply in this case. So, an eligible deduction of Rs.18,000 could not be availed under Section 80CCD. In other words, employer contribution to NPS to an extent of Rs.18,000, which is already included in the income is taxable in this case.
However, budget 2011 has proposed to amend section 80CCE so as to provide that the contribution made by the Central Government or any other employer to a pension scheme under section 80CCD shall be excluded from the limit of one lakh rupees provided under section 80CCE. It is exepected that this proposal which will be effective from the assessment year 2012-13 (financial year 2011-12) would totally exempt employer's contribution in NPS from levying income tax.
Income tax concession to Employers under NPS:
Currently, the contribution made by an employer towards a recognized provident fund, an approved superannuation fund or an approved gratuity fund is allowable as a deduction from business income under section 36, subject to certain limits. However, the contribution made by an employer to the NPS is not allowed as a deduction.
In the Budget for the financial year 2011-12, it is proposed to amend section 36 so as to provide that any sum paid by the assessee as an employer by way of contribution towards a pension scheme including New Pension Scheme (NPS) to the extent it does not exceed ten per cent of the salary of the employee, shall be allowed as deduction in computing the income under the head "Profits and gains of business or profession".
This amendment will be effective from 1st April, 2012 and will be applicable to the assessment year 2012-13 (for the income earned in the financial year 2011-12) and subsequent years.

[edit]Past Investment returns

The NPS architecture has been managing money since April 2008. Rs.2100 crore is invested as corpus of Central Government employees. In 2008-09, as per unaudited results of the Pension Funds, the average weighted return on the corpus have been over 14.5% with the individual returns of three Pension Funds varying from 12% to 16% on the NPS corpus during the year 2008-09, weighted average return being over 14.5 per cent. According to the latest data released by the government in Parliament on Aug 23, 2011, return on investment is as low as 1.8% in case of those private sector employees, who opted for investments in government securities, the safest of the categories. The performance of the three pension fund managers for the central government employees indicate that the returns on subscribers' contributions under NPS ranged between 8% and 16% during 2008-09 and 2010-11.[1]

[edit]References

  1. ^ http://articles.economictimes.indiatimes.com/2011-08-25/news/29927190_1_nps-subscribers-fund-managers-returns
  1. PFRDA
  2. CRA
  3. FAQ for Pensioners
  4. Overview from DNA India
  5. Overview from Jago Investor
  6. Blogpost on NPS Controversy
  7. New pension scheme blog post


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Categories:

A Consolidated Model of Pensions for India

Nandita Markandan

Executive Summary

"The whole is much more than just the sum of the parts"–Aristotle
An economy, apart from everything else, is a highly fluid transmission mechanism. Its beauty lies in how the smallest of changes have the most complex trickle-down effects. A paradigmatic example of how seemingly minor policy changes can jumpstart the economy can be illustrated by examining the effects of a reform in the pension system. The OASIS Report first brought out the possibility of pension reform in India.
A reform in the pension system tackles the primary problem of the financial sector in a dual manner. On the one hand introduction of private pension fund managers will ensure the large-scale mobilisation of savings. This would increase the rate of savings, which would lead to a higher rate of capital accumulation, crucial for a developing country like India. It has been proved statistically that private managers are in a position to earn greater returns from their sources. So in effect privatising the pension system would place a large pool of fund in the hands of efficient managers, specialising in this form of activity.

But that answers only half the question. At this point it may be prudent to ask, so where would these funds be diverted in the absence of adequate channels? This is where the overall commitment comes into the picture. Admittedly pension reform is only a small part of a larger programme of allowing private initiative in the economy. The channelisation may take place in a dual manner:
  1. The insurance sector also has a bearing on pension reform, as part of the pension assets may also be invested in private insurance companies. Hence a simultaneous reform in the insurance sector with greater freedom for private companies would be in order.
  2. It is important to note that even privatisation of state public sector units (PSUs) would have a bearing on providing investment channels, though in an indirect manner. This is where the financial aspect comes into the picture. When pension fund manages to invest in public issues of companies who have acquired a stake in state PSUs the whole idea of "distribution of the assets of the public sector" is achieved in a fair manner. Thus it performs the operation of killing two birds with one stone—providing investment outlets as well as redistribution.
  3. Instruments such as index funds are another option for investment channels. It has been proved that by investing in an index fund and diversifying internationally one can earn a rate of return over and above the rate of inflation–-which is significantly higher than investing in government bonds. Pension fund managers may even take this course of action if provided with the opportunity to do so.

Private investment in infrastructure has long been a ticklish issue in India. But with a move towards the private pension system this would no longer be so--the need of one is perfectly fulfilled by the opportunities offered by the other. Putting it differently, the pension fund managers would mainly deal in long-term funds, and infrastructure companies would normally provide a return only after a long period of time. The infrastructure companies could absorb these funds either directly or through an intermediary leading to a symbiotic relationship between the two.
It would also be worthwhile to mention that the biggest "positive externality" of pension reform will be felt in the area of fiscal deficit. As per the recent report of the government of India paying pensions is one of the largest components of government expenditures and this is likely to increase in the future with increasing longevity and life expectancy. In the long run this is an unsustainable situation. This has been one of the major reasons behind private pension systems in Chile and other Latin American countries. In India it is only a matter of time--and the clock is ticking away.
The tendency to issue government bonds for deficit financing, which finally manifests itself in inflation is a situation all too well known in India. It has been repeatedly emphasised that the government ought to keep this kind of activity under check. The nexus between the pension system and deficit financing is thus clear by the reality that a large part of pension assets administered by the government are invested in government bonds itself. It is impossible to eliminate this form of deficit financing through government bonds so long as there are agencies that are mandatorily bound to keep a part of their funds in this form. Hence the only method, to discipline this tendency is by privatising the pension system and prescribing just a minimal level of government bonds to be held in pension portfolios. The second-generation reforms in the pension system in Chile have also stressed on the fact that the prescribed minimum limits for government bonds in pension portfolios should be gradually reduced.
To save the best for the last, the consequences of pension reform that touches each person's life is its extremely human aspect. Private pension fund managers provide the individual what he never had before--the power of exercising his choice. An individual can choose between competing Pension fund managers, between the growth type or secure income type of schemes and may even plan to save more in the initial stages and retire early! He can decide for himself as to who would be the best agent to manage his money for him and act accordingly. Such options are not provided under a system administered by the government.
Thus the pension reform represents an ideology of freedom and trust, which if adopted has the potential to make a significant dent in many of the problems plaguing the Indian economy in the financial, fiscal and individual spheres.

-------------------------------------

"Old age is the most unexpected of all things that happen to man."--Leon Trotsky
In India Old Age seems to be most unanticipated and consequently groundwork for it is quite inadequate. The hangover of the "welfare state" ideology has resulted in government sponsorship of a large part of pensions, which are a major part of government expenditure. As of now, payment of pensions constitutes a large part of the government's expenditure. This is expected to increase more so in the future as the improvements in health have resulted in an increased life span of the elderly.

Need for reform in India

The deficiencies of the current pension system in India are as follows:


There is an urgent need to:
Pension savings accounts represent real and visible property rights—they are the primary sources of security for retirement. A clear definition of property rights is a reaffirmation of the rights of people to their accretions.
The reform in the Pension system and the adoption of a system based on funded defined-contribution Individual Retirement Accounts will have a multi-pronged advantageous effect on the Indian Economy.
This paper discusses the Pension system in India under the following heads:
  1. Current System in India.
  2. An illustrative model of a new Pension for India, learning from the international experiences in this field.
  1. Current Systems in India

Employees' Provident Fund (EPF)
The EPF programme, established in 1952, is a contributory provident fund providing benefits upon retirement, resignation or death, based on the accumulated contributions plus interest, from employers and employees. Subscribers to the EPF have the option to make partial withdrawals for specified purposes such as house construction, higher education for children, marriage, and medical expenses associated with illness. Establishments covered by the EPF can either have the EPFO manage the provident fund, or can undertake processes to qualify as an exempt establishment, whereby they manage the provident fund themselves. In general, exempted establishments are large companies. (Private Provident Funds)
Statistics about EPF:
Source: International Social Security Association; Twelfth Regional Conference for Asia and the Pacific; Bangkok, Thailand, 20-23 November 2000. "Challenges to Providing Social Security to the Informal Sector in India", Ajai Singh, Central Provident Fund Commissioner, Employees' Provident Fund Organisation, India; ISSA/ASIPAC/RC/THAILAND/2000/2-INDIA
In India the EPF, has been used more as medium of tax evasion by the salaried classes as the entire amount deposited in EPF is deductible for income-tax estimation purposes. This negates the purpose for which it was originally set up for i.e. as a fund that would cover expenditure during the lifetime after retirement.
Employees' Pension Scheme (EPS)
The EPS, established in 1995, provides for the payment of a member's pension upon the member's superannuation/retirement, disability, and widow/widower pension, and children's pension upon the member's death. The EPS program has replaced the erstwhile Family Pension Scheme (FPS). Employers that are not mandated to be covered may voluntarily apply for coverage. The new scheme, known, as the Employees' Pension Scheme (EPS), is essentially a defined-benefit program providing earnings related pension on superannuation, disability or death. Thus, EPF members are now eligible for two benefit streams on superannuation – a lump sum EPF accumulation upon retirement and a monthly pension from the EPS.
The amount of the pension benefit is based on the employee's average salary during the final year of employment and the total number of years of employment. Under the EPS, members must have completed a minimum of ten years of service and must be at least 58 years old. However, if an employee has completed twenty years of service, he/she may obtain an early pension from age 50. Under this provision, the amount of pension benefit is reduced by 3 per cent for every year falling short of 58. Exemption from the EPS is allowed, but in this event, the employer will have to cover the government's contribution.
However, participation to the EPS program was voluntary for the existing workers as on 1995 but mandatory for the new workers whose monthly pensionable earnings did not exceed Rs. 5000. Aggrieved workers alleged that the pension from the EPS was substantially inferior compared to the public pension schemes and that the return from the scheme was even lower than the provident fund arrangement. The debate surrounding the EPS continues unabated till today, with many trade unions filing litigations against the scheme.
This new system along with the recommendations of the Fifth Pay Commission Report has only added to the liabilities of the government.
Employees' Deposit Linked Insurance Scheme (EDLI)
The EDLI programme was established in 1976. This programme provides lump sum benefits upon the death of the member equal to the average balance in the member's EPF account for the 12 months preceding death, up to Rs. 25,000 plus 25 per cent of the amount in excess of Rs. 25,000 up to a maximum of Rs. 60,000. Contributions received are kept in the Public Account and earn an interest of 8.5 per cent. Health care and insurance are covered through Employees' State Insurance Corporation.
Source: International Social Security Association; Twelfth Regional Conference for Asia and the Pacific; Bangkok, Thailand, 20 - 23 November 2000.
"Challenges to providing social security to the informal sector in India", Ajai Singh, Central Provident Fund Commissioner, Employees' Provident Fund Organisation, India; ISSA/ASIPAC/RC/THAILAND/2000/2-INDIA
Other Schemes
The central government alone administers separate pension programs for civil employees, defence staff and workers in railways, post, and telecommunications departments. This is called the Civil Servants' Pension Scheme (CSPS). These benefit programs are typically run on a pay-as-you-go, defined-benefit basis. The schemes are non-contributory i.e. the workers do not contribute during their working lives. Instead, they forego the employer's contribution into their provident fund account. The entire pension expenditure is charged in the annual revenue expenditure account of the government.
Source: International Social Security Association; Twelfth Regional Conference for Asia and the Pacific; Bangkok, Thailand, 20 - 23 November 2000.
"Challenges to providing social security to the informal sector in India", Ajai Singh, Central Provident Fund Commissioner, Employees' Provident Fund Organisation, India; ISSA/ASIPAC/RC/THAILAND/2000/2-INDIA
In addition to the provident fund, workers in both public and private sectors receive a second tier of lump sum retirement benefit known as gratuity. It is paid to the workers who fulfil certain eligibility conditions like a minimum qualifying service period of five years. It is equivalent to 15 day's of final earnings for each years of service completed subject to a maximum of Rs. 350,000. The cost of gratuity is entirely borne by the employer.

The Public Provident Fund (PPF) scheme, introduced about three decades ago, is meant to provide unorganised sector workers with the facility to accumulate savings for old age income security. Under the scheme, amounts between Rs 100 to Rs 60,000 per annum can be deposited into the PPF account. These investments are eligible for tax rebate under Sec 88 of the Income Tax Act and interest at a guaranteed 11 per cent p.a. (till recently 12 per cent per annum) is fully tax exempt under Sec 10.
The scheme has poor coverage because of ineffective marketing and the service delivery is grossly inadequate. Being largely urban centric, the scheme is used more as a tax planning vehicle by high-income savers than an old age income security plan. The 11 per cent tax-free return that a PPF investor is guaranteed is equivalent to a 16.8 per cent pre-tax return for a marginal income tax payer.

In an effort to widen the reach of the social safety net for the aged poor, the central government, in 1995, introduced a more comprehensive old age poverty alleviation program called the National Old Age Pension (NOAP) under the aegis of the National Social Assistance Programme (NSAP). The scheme aims to provide monthly pension to thirty percent of the poorest elderly. This programme provides benefits for poor people above the age of 75 years. Under the programme a pension of Rs. 75/- per month is provided to eligible persons.
The formal old age income security system in India can thus be classified into three categories:

Conceptual Explanations
Under a defined-contribution plan, workers build up either explicit or implicit retirement accounts that fund retirement. The benefit is determined by (1) the level and timing of contributions, (2) the rate of return on the retirement accounts and (3) the form in which benefits are realised, including annuitization, programmed withdrawals and lump-sum distribution. The relationship between contributions and benefits is transparent, which may improve compliance incentives.

In a defined-benefit system, benefits are usually determined by multiplying a replacement rate by a pension base.

The replacement rate is typically an accrual factor times the years of service, and the pension base is a function of a worker's earnings history. Since this type of system often ignores the time path of contributions in calculating the replacement rate and the pension base, the tie between benefits and contributions can be quite loose.
In a pay-as-you-go system; pension payments are made using the taxes collected from the younger taxpaying generation. Their pension payments in turn are made from the taxes collected subsequently.

In a Funded System, pension payments are invested in a variety of financial assets. Funding provides an opportunity to capitalise from investment in financial markets, where the rate of return is likely to be higher than the implicit rate of return to contributions in a pay-as-you-go pension system. The benefits of funding can be enhanced by investment diversification. Funded systems can reduce-though arguably not eliminate-the vulnerability of a pension system to adverse demographic trends and political pressures.

In the Indian context, the financing issues arise primarily in four programs: the EPS, the CSPS, the GPF because of its integration into the government accounts, and the NOAPS. Each presents a potentially open-ended financial responsibility. A goal of reform should be to place explicit limits on these liabilities.

II Changes recommended
1. Structure of the new pension system
Research commissioned by Project OASIS shows that regular savings at the rate of between Rs.3 to Rs.5 per day through the entire working life easily suffice in escaping the poverty line in old age provided the pension assets are invested wisely.
The OASIS Report envisages a hierarchical structure for the pension system in India based on individual retirement accounts (IRA). Individual accounts imply full portability: i.e. the individual would hold on to a single account across job changes across geographical locations. The pension system would constitute:
  1. Points of preference (POPs): which would be post offices and local banks to deal directly with customers. A two-tier system with POPs with good information technology and telecommunications facilities is proposed, which would offer better services.
  2. Depository corporation: which would maintain the database of individual choices of schemes (viz. safe income, balanced income and growing income styles) and convey them to PFMs
  3. Pension fund Managers (PFMs): which would perform the task of fund management.
  4. Annuity Providers: The pension system design proposed here critically relies on annuity providers who convert the lump sum of assets (attained at retirement) into a regular monthly pension (or a variable annuity) until death. Annuities are a part of the life insurance industry. With the recent liberalisation of entry into life insurance, it is likely that we will see improvements to the extent where annuities are efficiently priced.

2. Private management of accretions through Pension Fund Managers
The model of private pensions should be implemented using private Pension Fund Managers (PFMs). The OASIS report recommends the establishment of 6 Pension Fund Managers (PFMs) so as to simplify choice for individuals. But this objection is misplaced, as, even if individuals themselves do not possess the knowledge of financial instruments, the market forces would enable them to decide to employ a PFM who would make these choices on their behalf. Hence, this number should be determined by the free interplay of market forces. The most efficient fund managers would survive while the rest would be weeded out and hence there should be no cap on their number. In Chile there is complete free entry for Pension fund providers, even if they are foreign companies, provided certain capital requirements are met.
At this point, 19 private companies have received licenses to be pension plan providers for Polish workers. Most of them are alliances of Western and Polish financial institutions such as Aetna, Citibank, Bank Paribas, Credit Lyonnais, Allianz etc. There is also a pension plan being provided by the Korean conglomerate Daewoo, and by the largest Polish cable TV station, Polsat.
3. Investment Options and Prudential regulations for PFMs
Each PFM should offer at least 3 different type of investment alternatives:
a) safe income b) balanced income and c) growing income styles.
Regulations need to be laid down to harness the rate of return of the asset class and prevent malpractice and defrauding. In addition assurances also need to be made for ensuring the safety of returns.
Source: OASIS Report
An increase in the rate of interest by 1 percentage point over a lifetime of accumulations increases the terminal wealth of a pension program by 20%. In India, the funds deposited into pension accounts are invested mostly in government securities and securities under the special deposit scheme. The returns on these are highly limited. Ajay Shah in his paper argues that more profitable outlets for investing pension funds can be found by portfolio diversification and minimisation of risk. It can be proved for the Indian case that the terminal accretions obtained by investing in equities could be greater than those obtained by investing in govt. bonds. Shortfall probability is the possibility of underperformance of an all--equity option as opposed to the all--bond option. This probability is fairly small for India.
Equity investment is risky but also yields greater return. Hence the strategy to reduce risk and earn maximum return would be to:
1) Phase out equity exposure after age 50,
2) International diversification would greatly reduce risk and volatility. Expected rate of return taken as an average varies only slightly across different countries.

Investment strategy of 100% investment in government bonds:
Source: OASIS Report
Investment strategy of 100% investment in a NSE-50 Index Fund:
Source: OASIS Report
The gain in the case of investment in 100% equity is 2 to 7 times more than in the case of government bonds.
The OASIS report recommends the following strategy to be adopted for three asset classes:
(a) For the first five years, all domestic equity investments should be implemented using index funds on the NSE-50 or the BSE-100 indices only. There should be no "active fund management" (where fund managers have discretionary control of which shares to buy). Pension funds should not engage in off-exchange transactions on domestic equities: this helps ensure a high degree of transparency in all transactions and a lower incidence of murky market practice. These rules would make it possible for pension assets to harness the "equity premium" (the higher return of equities) while suffering from none of the risks that flow from giving fund managers complete freedom in forming share portfolios.
(b) Investments in corporate bonds should be limited to investment grade corporate bonds in India, which are liquid. Liquidity helps ensure that the secondary market prices of bonds (which are used in valuation of pension assets) are reliable. The definition of a liquid bond should be as follows: the average impact cost (on the most liquid exchange in India) at transaction sizes of Rs.100, 000 should be below 0.3%. Pension funds should not engage in off-exchange transactions on corporate bonds: this helps ensure a high degree of transparency in all transactions and a lower incidence of murky market practice.
(c) International equity investment should only be implemented using index funds.
One of the most outstanding features of the OASIS report has been its belief in investing part of pension funds in international equity. It has been proved that even if passive fund management is adopted, returns can be maximised by investing in international index funds, which are more or less stable and hence involve a lower risk thus guaranteeing safer returns.
The OASIS Report has suggested certain stringent criteria for PFMs such as:
  1. In the safe income style PFMs would have to guarantee that they would not underperform the weighted average returns of all managers in that style by worse than 2% points in a year.
  2. Furthermore, the PFM also has to assure that it collects Rs. 10 billion worth of assets within 2 years or its fees would be dropped by 20% in the next year.
  3. These rules are unduly restrictive and arbitrary and signify a total lack of faith in private initiative. When the pension reform was first introduced in Chile similar guarantees were also required from AFPs, but now there are proposals to slowly phase out these guarantees. In Chile it is believed that such clauses led to a misallocation of funds: because of the guarantee system and the strict monitoring of their fees, the AFPs invested only in similar kinds of funds, consequently earning similar returns.

Even if this policy is initially adopted in India to prevent the negative political implications of having a brand new pension system with wide disparities in the results that it provides; slowly as the pension system matures, these clauses should be phased out. The long-term implications of such a policy are not advantageous as it would force PFMs to compete on the basis of non-price differentials such as quality of service etc. and would in general hamper the growth of a competitive market for pensions.
An alternate way to ensure safety and transparency without debarring free entry and exit or creating a prohibitive atmosphere is through clearer disclosure and prudential norms.
Different investment alternatives
Active Fund Management (AFM) adds value when fund managers are able to exploit market inefficiencies adequately and pay for the costs of transaction costs and management fees. Active management subtracts value in the absence of such abilities. In addition AFM also introduces risk in terms of performance of the manager subject to manpower turnover. Active management also introduces greater complexities since regulators have to deal with a variety of trading strategies used by managers.
In contrast passive fund management harnesses the equity premium reliably by investing in Index funds. These are not vulnerable to volatility and are easier to regulate. An index fund passively replicates the returns of the index. The most useful kind of index is where the weight attached to the capital stock is proportional to its market capitalisation. The simplest method of implementing an index fund is through "full replication" where the portfolio held by the index fund is same as the index. The most basic foundation of indexation is the stock market index.
A passively managed fund investing both in domestic and international indices shows greater gains than the actively managed domestic fund.
While international diversification sharply reduces risk, it also reduces rates of return accessible to unleveraged investments since equity premium internationally is lower than that of India. The lower volatility of the world stock market index as compared to the much less diversified NSE-50 index will ensure higher rates of return.
The OASIS report recommends passive fund management using index funds in its recommendations. This however seems to be just a half-hearted attempt to the whole privatisation approach. Undeniably, index funds have the following advantages:
1) If markets are fairly efficient then it is difficult for active fund managers to obtain excess returns after considering extra fees and costs. Active fund management is a method of trying to earn excess returns. In this process, active fund managers expend resources on fund management and incur trading costs. Index funds lower expenditure by avoiding information collection and processing. Broadly index funds also engage in smaller trading volumes, which help, enhance returns through lower costs of transacting.
2) There is great difficulty in monitoring the activities of an agent. If a layer of intermediaries in the form of a pension committee is introduced then incentive schemes need to be devised to make both the committee and the PFM to act in the best interests of workers, which is a highly difficult task in itself.
3) In the case of quasi-nationalisation of pension accounts, when the bulk of the investment is done in equities there may be a large political risk where the government can use this control for meeting its political ends.
However, this can be avoided if workers have their own IRAs and are given the choice of choosing a fund manager.
4) A naive comparison of returns across alternative funds is an inefficient way to measure, fund manager ability especially when there are significant differences in the levels of risk adopted by different funds. A casual comparison should give way to a more scientific process of evaluation. Hence for a deciding on a pension fund manager, more objective sets of guidelines are required. Active fund managers may be able to fulfil requirements of size, pedigree etc. at the time of selection but may fall short on grounds of performance, thus blaming the authority for a wrong selection of pension fund manager. Hence, in the case of pensions, poor asset return should be traced back to poor returns on the index--which would in turn infuse greater accountability.
However, the advantages of index funds do not necessarily mean that active fund management is in any way disadvantageous. Index funds themselves impose certain negative externalities:
1) Distorted cost of capital for index stocks
2) Inferior corporate governance
3) Diminished market efficiency
4) Enhanced concentration in the fund industry
In India, market inefficiencies may still arise on account of:
1) Poor information access: inferior disclosure laws
2) Inferior human capital
3) Higher transaction costs
But this does not mean that the individuals should not be given a choice to try their hand at active fund management. Even though the argument of increased transaction costs may hold, active fund management in itself has a high educative value and one should not discount the existence of certain enterprising individuals who would be able to use these inefficiencies and earn a higher rate of return on their deposits.
Moreover, individuals themselves should be given a choice of whether they would like to adopt passive or active fund management for their accretions along with the freedom to choose their fund managers. However there could be an argument that the "moral hazard" problem enters into the picture. That is, in case individuals are backed by too many government-guarantees then they would be prompted to take more risks than they would ordinarily have taken and hence would opt for the riskier strategy of Active fund Management. But this problem can easily be avoided. The individuals who are ready to take the chance with active fund management should be allowed to do so – at their own risk. Hence in the three-fold scheme recommended by the OASIS report an additional active fund management scheme should also be introduced and PFMs should be provided the option of carrying this style too.
To sum up, each of the investment strategies, be it active fund management, passive fund management or investment in indexed equities abroad, each has its pros and cons in terms of risks and return. Ultimately it is the individual who should be given the opportunities to translate his preferences to reality. On the other hand, as far as PFMs are concerned, efforts should be made to give up the closed approach and allow them freedom to function within a broad regulatory framework.
4. Role of the insurance sector
The reform in the pension sector is also closely connected with the insurance sector. The common ground between the two arises from the following considerations:
1. On retirement, pension assets may be invested with annuity providers, who form an important component of the insurance sector.
2. Moreover, both pension fund management and insurance deal with similar kinds of investments, i.e. long term. Hence a reform carried out in one of them will necessarily have a positive external effect on the other and as such both share a symbiotic relationship.

Private pension business is a part of insurance business in India. After nationalisation of the insurance sector in 1956, the Life Insurance Corporation (LIC) of India became the only player. The monopoly of the LIC seriously hampered the development and growth of the private annuity market. The Malhotra Committee (1994), the expert group that studied the insurance sector, suggested opening up of the insurance industry. Following the committee's recommendations, the government liberalised the insurance sector in the year 2000. As a result, private corporations including foreign entities are now being permitted to enter the private pension market.
The Chinese method of combining insurance sector liberalisation is a case in point. Pension reform and Insurance de-regulation both share a common aim. The insurance sector provides the necessary outlets for investment in annuities and the pension reform provides the momentum for insurance reform. Voluntary funds are usually managed by Life Insurance Cos. The Standard Life Assurance Co. of Britain will be participating in the reforms of the Chinese pension system. Officials at the Ministry of Labour and Social Security of China have signed an agreement with the British government, welcoming Standard Life Assurance Co. and other British insurance firms to take part in the reforms, said an official of the company's Shanghai branch. The Standard Life Assurance Co. will be sending its best experts to provide technical training and consulting services to China, said Robert Knight, who is in charge of the Asia-Pacific affairs of the company, during a visit to China recently.
Pension reform has thus to go hand in hand with insurance sector reform. The first foreign license was granted to American international Assurance. 12 other companies have been given license and approximately 100 more are waiting.
The IRDA has recently released investment norms for insurance firms intending to enter the private pension market. The Insurance Regulatory and Development Authority (Investment) Regulations, 2000 (IRDA 2000) suggest that for pension and general annuity business, every insurer shall invest and at all times keep invested assets of Pension Business, General Annuity Business and Group Business in the following manner:

Note: For the purposes of this sub-regulation:

  1. No unapproved investments shall be made.
  2. All investments shall be made in graded securities and the grading shall not be less than of 'very strong' rating by a reputed and independent rating agency (e.g. AA of Standard and Poor).
  3. Every insurer shall invest assets in securities which are actively traded in any Stock Exchange in India and which are attributable to segregated funds, in respect of linked business.

The IRDA regulations fall short on many counts:
PFMs should be granted adequate flexibility to make their portfolio choices. For example, in Chile, government regulation sets only maximum percentage limits both for specific types of instruments and for the overall mix of the portfolio; and the spirit of the reform is that those regulations should be reduced constantly with the passage of time and as the AFP companies gain experience. There is no obligation whatsoever to invest in government or any other type of bonds. Currently, AFPs are not being allowed to hold more than 45 per cent of assets in governmental instruments and 30 per cent in domestic equities. In 1995, the permitted share of foreign instruments was raised to 10 per cent. Rates of returns of AFPs have been very high, reaching an average of 13.6 per cent in the period of 1981-93.
In India too, the objective behind pension reform should be a strong ideological commitment to increase savings, reduce government burden and strengthen capital markets. Pension reform should not be visualised as merely another avenue for deficit financing through the sale of government bonds and treasury bills. The success of the new system can be guaranteed only if Pension Fund Managers are allowed to operate and compete in a free atmosphere. The structure of rules needs to be broad and accommodative and should be conducive to fostering healthy competition.
5. Role of government guarantees
To reassure the people to switch to the new system government guarantees play a vital role. These guarantees may take the following 3 forms depending upon the level of 'welfare' functions that the government takes upon itself to perform:
- In Chile the government provides welfare type pension funded from general revenues for workers with fewer than 20 years of contributions.
- When workers with at least 20 years of continuous service, do not have enough capital accumulated in their accounts to fund a pension that meets the legally defined minimum pension, the government may add the money necessary to provide that pension.
- Similarly if the funds in the retirement account of a worker are depleted before a worker dies then the government may give the worker the minimum pension.
The government guarantees constitute the main element of the transition cost into a new pension system.

6. Administrative authority
The Indian Pensions Authority (IPA) would oversee the entire working of the system and handle the administration. CII, in a recent press release suggested that the insurance regulator could also supervise the pensions sector.
7. Removal of subsidies
The present contribution of 1.16% of wages by the Government to the Employees' Pension Scheme should discontinue. Instead, this contribution should be channelled into the National Senior Citizen's Fund as initial corpus for the first 3 years of incorporation of this Fund. Thereafter, this contribution should be discontinued. In addition, 25% of the premature and lump sum withdrawal tax on provident funds under the new IRA system should be transferred to this Fund annually.
8. Involving the unorganised sector
The absence of a unique social security number in India along with the high costs associated with implementation make it impossible to have a mandatory pension scheme for all. Specifically with regards to the unorganised sector, the PPF Scheme has clearly failed in attaining its objective of inducing savings. Even the Life Insurance Corporation (LIC) has neglected annuities and pension schemes, which have considerable potential among the self-employed and only 100 million people are covered by provident fund or pensions. LIC has no low premium policies like term or whole life insurance. Instead, it concentrates on expensive endowment policies.
One of the biggest problems of most of the countries that have the experience of a private social security system is the inherent failure of involving the unorganised sector. In the case of workers in the organised sector, the employer contributes part of the contribution. However, this is only implicit and it is the worker who actually bears the entire burden of the contribution. In the light of this matter, it ought not to make a difference to the self-employed. There may be many reasons behind the lack of participation from the self-employed such as:
a. By participating in the private pension system, a self-employed worker would be revealing information that he may want to keep private for income-tax reasons.
b. Wealthy self-employed workers would have other means of providing for their own retirement including self-insurance and access to financial instruments that would provide a better combination of risk and return.
c. It could be more profitable for them to rely on government guarantees. This is another area where the 'moral hazard' problem could come into play and hence, schemes need to be devised to make it more profitable for the self-employed to enter the formal pension system.

9. Misplaced priority on tax incentives
In India only a minuscule proportion of the population pays income taxes and other form of direct taxes. Hence the inbuilt tax deduction incentives benefit only these sections while the poorer majority are denied these immunities.
A better idea would be to replace the tax exemption with a tax credit system effect that produces a uniform tax incentive effect for all workers – for example by providing a direct state contribution to workers' retirement and savings accounts. A similar scheme has been introduced in Czechoslovakia. However one problem with the scheme has been that it has failed to link tax credit to a minimum contribution or saving rate so it has encouraged small amounts of savings. This general approach – called the CET approach is more superior from a social view. It would eliminate the preferential treatment of the tax paying workers, and could contain the tax cost of these exemptions or could achieve greater redistribution in favour of low-income workers for a given tax cost and would also encourage them to save.
10. Early withdrawals
One of the main problems of the Pension Schemes in India is the problem of premature withdrawals, which more than often results in poverty during old age. As of now there is no incentive to compel people to keep their savings till the maturity period and the tax incentives provided are the same even if withdrawals are made. The OASIS report suggests the abolition of tax on earnings of over 12 per cent in Provident Fund and levy of tax, at least of a 10 per cent, on early withdrawal from Provident Funds.
In this aspect an important lesson may be learnt from Singapore. In Singapore the funds for different purposes are segregated as far as possible, and therefore, a cap on premature withdrawal is ensured. Employees have a property right to the funds accumulating in their accounts and are able to withdraw funds for the purchase of a home, to buy life insurance or home mortgage insurance, and may borrow money from their account to pay for the college education of a family member. The designation of separate funds has achieved phenomenal results for Singapore, e.g., the highest rate of home ownership in the world (85%).
11. Inflation indexing
The National Old Age Social Security programme provides a monthly pension of Rs. 75 to the poorest 30% of the elderly. However, this contribution is highly meagre in the light of the present times. The argument for price indexation is that the old people are less able to adapt to falling incomes than young people are. Canada, UK and US have pensions indexed to prices. If pensions were indexed to wages, then changes in pensions would be linked to changes in productivity. In India, it would be a better alternative to enable the old to maintain their current consumption bundle by indexing pensions to prices. Using price rather than wage indexation would also help dampen the contribution rate increase and the wage increases may be put to use for other purposes.

12. Financing the transition cost
The transition cost for a new pension system may be three-fold:
  1. Cost of paying the workers who chose to remain within the old system.
  2. Cost of reimbursing those who chose the new system.
  3. Cost of the 'safety net' provided by the government.

This cost can be best borne in India by privatising the State Owned Enterprises. In such a case, Pension Fund Managers may also participate actively in buying shares of the companies being privatised. This would give workers the possibility of benefiting handsomely from the enormous increase in productivity of the privatised companies by allowing them, through higher stock prices that increases the yield of their PSAs, to capture a large share of the wealth created by the privatisation process.
To conclude: Foster experimentation and learning
A reform in the pension system is a long drawn out process, which requires ideological commitment in the first place. Ironically, it is the largest communist country of today that stands as a shining illustration to such commitment. In China, after Document 26 laid down the general features of a 3-pillar system of pensions, local experiments have been allowed to proceed. China is not following a top down blue print approach. The Chinese way of issuing broad central directives, letting local experiments proceed, then changing the central directives in the light of experience and then experimenting anew and so on is a unique process without close parallel elsewhere.
E.g., Liaoning, is a province of 40 million people and centre of a rusty industrial belt. Nearly one fifth of the province's overall financial expenditures were used to cover insurance payments, which the governor described as "really a heavy burden". This province has been chosen to implement a pilot project based on the 3-pillar scheme.
Similarly, in India also, the key word for pension reform is flexibility. This implies that maximum room needs to be provided for local experiments. Rules need to be laid down clearly, but their number and level of stringency should not be overwhelming. In the long run, there needs to be a commitment to phase out most of the detailed rules, leaving only a broad framework to act upon.

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  14. Reddy, Y V "Pension System in India: A Central Banker' Perspective", Comments in the session on Governance and Regulatory issues in pension reform in South Asia, of the Pension systems Reforms Conference, at New Delhi on November 24, 2000http://www.securities.com/Public/Public98/RBI/Speech/speech001124-2.html
  15. Roderiguez, L Jacobo "Europe's Retirement Blues", Cato Institute, February 5 1998. http://www.cato.org/dailys/2-05-98.html
  16. Roderiguez, L Jacobo "Time to Reform Mexico's Private Pension Reform", the Wall Street Journal, July 16 1999 http://www.pensionreform.org/mexicosreform.htm
  17. Rodríguez, L Jacobo "Chile's Private Pension System at 18: Its Current State and Future Challenges", July 30, 1999. http://www.cato.org/pubs/ssps/ssp-17es.html
  18. Shah, Ajay "Issues in Pension System Reform in India", Indira Gandhi Institute for Development Research, Mumbai, India, August 3 2000
  19. Shah, Ajay and Fernandes, Kshama "The Relevance of Index Funds for Pension Investment in Equities", in New Ideas About Old Age Security: Toward Sustainable Pension Systems in the 21st Century (editors) Robert Holzmann and Joseph Stiglitz, World Bank, 2001http://www.igidr.ac.in/~ajayshah/PDFDOCS/ShahFernandes2001_indexfunds.pdf
  20. Singh, Ajai "Challenges to Providing Social Security for the Informal Sector in India", International Social Security Association, Twelfth Regional Conference for Asia and the Pacific, Bangkok, Thailand, November 20- 23 2000. ISSA/ASIPAC/RC/THAILAND/2000/2-INDIA.
  21. Tanner, Michael "Private Provision of Retirement Security and Health Care" http://www.cato.org/events/china/papers/tanner.html
  22. The Cato Handbook for Congress, 104th Congress, Cato Institute
  23. Thomas, Susan "Equity Investment in Pension Asset Management in India", IGIDR, October 19, 2000http://www.igidr.ac.in/~susant/PDFDOCS/Thomas1999_multidecade.pdf.
  24. Vittas, Dimitri "Public policy for the Private Sector", World Bank. http://www.worldbank.org/html/fpd/notes/72/72vittas.pdf
  25. Wang, Yan et al., "Implicit Pension Debt and Transitional Cost in China's Pension Reform--A Computable General Equilibrium Analysis", May 24 2000http://www1.worldbank.org/wbiep/decentralization/Courses/China%2006.12.00/wang.pdf
  26. Wilmore, Larry "Comments on the Project OASIS Report submitted by the expert committee for devising a pension system for India" United Nationshttp://www.pensions-research.org/commentaries/2000/2000/india.htm
  27. Zafar-ul-Hassan Almas, "Pension Reforms for Mobilising Savings", in the online edition of Dawn, September 18 2000
  28. Acts
  29. The Insurance Regulatory and Development Authority Act (Investment) (Amendment) Regulations, 2001.
  30. Insurance Regulatory and Development Authority (Investment) Regulations, 2000, Notification, New Delhi, August 14 2000.
  31. Insurance Regulatory and Development Authority Act 1932, Sections 27 and 28.
  32. Reports
  33. The Project OASIS (Old age social and income security) Report, January 112000.
  34. Averting the old age crisis: Policies to protect the old and promote growth, A World Bank policy report.
  35. Global Pension Reform is Inevitable, Cato Policy Report, May/June 2000, Volume XXII, Number 3. http://www.cato.org/pubs/policy_report/v22n3/pensionreform.html.
  36. Other articles
  37. "The Full Story, Project OASIS Report", Financial Express, January 26 2000 http://www.financialexpress.com/fe/daily/20000126/fed26039.html
  38. CII Press Release, "After Insurance: Need for focus on Pension Reforms to increase contractual savings to fuel economic growth", December 28 2000http://www.ciionline.org/news/pressrel/2000/Dec/28Dec.htm
  39. "People's Republic of China, Overview of Formal Old-Age Support", World Bank publicationhttp://wbln0018.worldbank.org/HDNet/HDDocs.nsf/2d5135ecbf351de6852566a90069b8b6/4304337865f1a7788525690c0054f031/$FILE/china.pdf
  40. "Pension Flaws Emerge," South China Morning Post, August 25 2000, Singapore
  41. Singapore: Foreign workers and pensions, Migration News, Volume 2 Number 8, August 1995
  42. "Estimating the impact of the 1999 Pension Reform in Poland", published by Centre for Social and Economic Research ul. Sienkiewicza 12, 00-944 Warsaw, Poland. Located at http://www.case.com.pl/pdf/CEU-CASE/CEU-CASE27.pdf
  43. "Choices in Financing Health Care and Old Age Security", proceedings of a conference sponsored by the Institute of policy studies, Singapore, published by the World Bank, November 8 1997

http://www.ccsindia.org/ccsindia/RP01_14.html
  1. Economic liberalisation in India - Wikipedia, the free encyclopedia

  2. en.wikipedia.org/wiki/Economic_liberalisation_in_India

  3. Jump to Impact of reforms‎: The impact of these reforms may be gauged from the fact that total foreign investment (including foreign direct investment, ...

  4. Pre-liberalisation policies - Narasimha Rao government (1991 ...

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  10. India's Economic Reforms. What Has Been Accomplished? What Remains to Be Done? Arvind Panagariya. ERD POLICY BRIEF SERIES. Economics and ...

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    1. Morgan Stanley calls on India to accelerate policy reforms

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    3. Singapore, Nov 16 (PTI) The Indian government must accelerate implementation of major policy reforms to attract investments and keep up with projected ...

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  18. Association for Democratic Reforms | Improving and Strengthening ...

  19. www.adrindia.org/

  20. Ahmedabad-based non-political group aiming at governmental and electoral reforms; facilitating Gujarat Election Watch 2002.

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  23. Lessons from India's Economic Reforms

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  27. The reforms of the 1990s were triggered by the fact that India experienced a severe balance of payments crisis in 1991. The new administration, headed by ...

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  30. harrisschool.uchicago.edu/.../ipp%20economic%20reform%20in%20...

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  32. India's recent progress toward economic growth stems from reforms ... the interplay between reform and politics have influenced India's historical economic ...

  33. [PDF]

  34. GST Reforms and Intergovernmental Considerations in India, Jan 30 ...

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  37. GST Reforms and Intergovernmental. Considerations in India. Satya Poddar. Ehtisham Ahmad. March 2009. Department of Economic Affairs. Ministry of Finance ...

  38. [PDF]

  39. Monetary and Financial Sector Reforms in India:

  40. www.arts.cornell.edu/econ/indiaconf/Y.V.%20Reddy%20Paper.pdf

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  42. Monetary and Financial Sector Reforms in India: A Practitioner's Perspective. •. Y.V. Reddy. Reserve Bank of India. The objectives of this paper are to review the ...

  43. FDRI v6

  44. www.fdri.org/

  45. FDRI believes that key reforms in the governance structure of India can afford all citizens the opportunity to reach their full potential and lead to a renaissance of ...

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  49. India Inc s stupendous growth can be attributed to 'India Economic Reform' earnest in July 1991. The balance of payments crisis opened the way for an ...

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With a view to bring into existence a centrally controlled administered mechanism involving Pensioners Associations in the country, the Pensioners' Portal would function as a single window mechanism


The  department  of Pension & Pensioners'  Welfare  is  the nodal department  for  formulation of policies  relating  to pension & other retirement benefits of Central Government Pensioners/Family Pensioners. It also serves as a forum for redress of Pensioners' Grievances

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http://pensionersportal.gov.in/

Indian food market to treble to $900-bn by 2020: Report

The domestic food market is likely to triple to $900 billion by 2020 from the current $300 billion, according to an industry report.

"Accounting for 16 percent of the world population and 12 percent of the world food production, India is one of the largest producers and consumers of food in the world. Indians spend around 35 percent of their total spend on food - $300 billion annually that will grow to about $900 billion by 2020," a Boston Consulting Group report 'India Food Processing: Mission 2020' said.

However, the report adds food processing levels are substantially lower than most emerging and developed economies with only six percent of the agricultural produce in the country being properly processed.

Of the total food consumed today ($300 billion), 20 percent is processed and it is expected to increase to 35 percent (of $900 billion) by 2020.

"Food processing system needs to be remodelled. We have to figure a way to invest more in people and capacity among other things," BCG India principal Nimisha Jain said.

"Food processing is important as it helps to extend shelf life and reduces wastage, thereby increasing food supply," Danone Director Eric Soubeiran said.

The domestic food processing industry is likely to invest Rs 14,000 crore in the next two years, according to Ficci.

Most of the investment is likely to come from the existing companies.

"It is difficult to estimate what will be the investment cost but company wise, Danone is setting up manufacturing unit, Britannia is going towards north-east, we at Nestle are doubling all our capacities. So there is tremendous interest in investing," Nestle chairman and MD and Ficci food processing committee chairman Antonio Helio Waszyk said.

The report also found that last year there was a shift from pulses to poultry, and this year it is towards fruits and vegetables. Fruits and vegetables today account for 25 percent of the food consumed and by 2020 it is likely to be 40 percent of the food consumed.

"You should provide us a long, solid runway so that we can take off," Bharti group chairman Sunil Bharti Mittal is understood to have said at an industry-government interactive session called by Finance Minister Pranab Mukherjee on Monday.

The UPA government's key crisis manager was meeting industry leaders to assure them that the government was committed to reforms, amid a general perception of a policy paralysis.

"There has been some cynicism expressed of late regarding lack of adequate movement on policies and institutional processes....I find this view to be based more on perception than facts," Mukherjee said.

On Monday, the Prime Minister's Economic Advisory Council lowered GDP growth forecast to 8.2 % from its earlier estimate of 9%, and called for urgent policy action.

In the two-and-a-half hour meeting, Mukherjee asserted that fundamentals of the economy remained strong and growth drivers were intact.

Over the last two weeks, the finance minister has also met the media to put across the government's view.

Mukherjee asked the industry leaders for five suggestions from each of their sectors.

Commerce Minister Anand Sharma said a task force was being set up by the department of industry policy and promotion to take up policy issues raised by India Inc.

The industrialists attending the meeting included Tata group chairman Ratan Tata, ADAG chairman Anil Ambani, Essar chairman Shashi Ruia, Mahindra & Mahindra managing director and vice-chairman Anand Mahindra, Infosys founder N R Narayana Murthy, ITC chairman Y C Deveshwar and RPG Group chairman emeritus R P Goenka.

Reliance Industries chief Mukesh Ambani and Aditya Birla group chairman K M Birla did not attend the meeting.

Mittal said industry had some concerns and discussions were centered around elements that could result in slow economic activity. "The government and industry are together working on forming a coalition to address it," he said.

ADAG chairman Anil Ambani said, "The interaction today (Monday) will certainly go a long way in building the momentum needed to catalyse economic growth. Mr Mukherjee and Mr Sharma were receptive to a large number of suggestions made by industry to accelerate growth in key infrastructure sectors."

M&M's Anand Mahindra said, "If there was a trust deficit, it has vanished and there's a sense of renewal and motivation. There was a time-bound assurance of action from the government and no doubt we'll have to work together."

Mahindra also raised the issue of high interest rates that had begun to pinch industry, particularly the rate sensitive sectors.
http://economictimes.indiatimes.com/news/economy/policy/Finance-Minister-asks-India-Inc-to-present-5-point-action-plan-for-each-sector/articleshow/9449242.cms

The cut in petrol prices by state-run oil companies will have negligible or marginal impact on the country's economy and will not help the near double-digit inflation to cool down, industry experts observe.


India's fuel retailers cut petrol prices by Rs.1.85 per litre Tuesday.


The move came after some United Progressive Alliance (UPA) allies, including Trinamool Congress, and opposition parties alike criticised the petrol price hike of Rs.1.80 per litre earlier this month.


However, Indian Oil Corp (IOC), the largest of the three state-run oil marketing companies, stated that a fall in global crude prices and the rupee remaining stable at 49.30 to a US dollar were the reasons for the cut in petrol prices in domestic market.


"Bringing down fuel prices is always a good decision. Now the thing is that we have to see how sustainable it is as the rupee is depreciating against the dollar. The government must take measures to ensure that rupee does not depreciate," Srei Infrastructure Finance managing director Hemant Kanoria told IANS here Wednesday.


Kanoria said Rs.42 to Rs.44 was the right level of exchange rate against dollar.


"The price cut will have some marginal effect on the economy. Continuous hike in petrol prices was badly affecting the auto market of the country. Car owners now will get some relief. So general people will be benefited by the decision," he said.


He also observed that the reduction in petrol prices will not have any cooling effect on overall inflation which has stood at over nine percent for 11 months in a row.


Emami Group of companies director Manish Goenka said the petrol price cut will only benefit the common people, not the industry. "Now use of petrol is very limited in the industry. So the slash in petrol prices will not have any impact on the industry. But the cut is good for consumer sentiment," he said.


D.P. Nag, secretary of industry body Bengal National Chamber Of Commerce and Industry (BNCCI), said fuel prices always affect the industry. "But I think there will be a very negligible effect on industry because petrol use is reduced now," he averred.


He, however, said reducing petrol prices was a good signal. "It is a good signal for any market economy where reduction in global crude oil prices should be followed by a corresponding reduction in prices of fuel in the domestic market."


Dipankar Dasgupta, former professor of economics at the Indian Statistical Institute (ISI), also felt that petrol price cut will not give people any relief from very high inflation.


"In the Wholesale Price Index (WPI), the weightage of fuel is only 24 percent. And in this 24 percent, share of petrol is only one percent. So we are talking about one percent of the 24 percent...."


"Thus petrol prices have a very insignificant impact on overall inflation," Dasgupta observed.

There should be 100 innovation councils at the sectoral level to ensure creativity and innovation at the bottom of the pyramid, National Innovative Council (NIC) chief Sam Pitroda said Wednesday.

"We decided to write to all state level ministers to start state innovation councils, write to all the ministers to set up sectoral councils. Given a choice I would like to set up 100 sectoral councils," he said while releasing the Confederation of Indian Industry (CII) Industrial Innovation Framework.
"Each of these sectoral councils would then have a domain expert who in turn will come out and give a roadmap for the next decade," said Pitroda, who is also adviser to the prime minister.
Describing innovation as "a game-changer", Prime Minister Manmohan Singh had Tuesday called for devising a model of innovation that benefits not only the rich but also the poor through poverty eradication, development of agriculture and green energy.
The National Innovation Council was set up by Manmohan Singh in 2010 under the chairmanship of Pitroda to discuss, analyse and help implement strategies for inclusive innovation in India and prepare a roadmap for 2010-2020, which has been designated as the decade of innovation.
According to Pitroda, innovation should be looked upon as a platform, so it's not about what happens in industry R&D labs and universities but also about innovation in governance, education, health and social sector.
"We really want to focus on innovation at the bottom of the pyramid for the poor. The tough problem that we were not able to solve in the past is how do you take this development down to the poor people, he said.
"It is not about merely focussing on prosperity at the top...we really need to put our nose down and look at 400-500 million below poverty line people to see what is innovation going to bring to them."
India Infoline News Service / 16:33 , Nov 16, 2011

These sectoral innovation councils will drive sectoral innovations

"Identify domain experts from industry, government research laboratories, academic institutions from all sectors and create Sectoral Innovation Councils." This was Advisor to the Prime Minister On Public Information Infrastructure and Innovations, Sam Pitroda's advice to the Confederation of Indian Industry (CII) on the occasion of "Decade of Innovation--India@year1" an event jointly organized by CII and the National Innovation Council (NInC).

These sectoral innovation councils will drive sectoral innovations, be it in industry, in academia, in R&D labs or in any part of the society, said Pitroda. He also emphasized the need for recruiting young professionals in every sectoral council for innovating, translating and implementing innovation initiatives.

The second agenda for CII, suggested by Pitroda, was to transform existing industry clusters into innovation clusters by mentoring, networking with knowledge and financial sectors, training in elements of innovation such as industrial design, intellectual property rights (IPR) and technology.

The third agenda for CII, he suggested, was to create "Innovation Czars" in industry. Each industry should create a position of Innovation Leader who would anchor industry's in-company innovation initiatives. He emphasized the need for scouting and promoting "local innovation heroes" so that people could relate to them as role models.

The fourth agenda for CII, Pitroda suggested, was to create training materials and modules on innovation. CII should work with Delhi University, MS University in Vadodara and others to create various modules of such training materials which would cater to various levels of human resource.

The fifth agenda, he said, was for CII to create more and more innovation and design schools in the country. "Although we have many design schools in India but the quality of such schools needs continuous upgradation," he said.

Mr Pitroda has requested CII's Innovation Council, chaired by Dr. Naushad Forbes, to make a detailed presentation to NInC in order to work together towards a common goal.




http://www.indiainfoline.com/Markets/News/Pitroda-moots-setting-up-of-Sectoral-Innovation-Councils/5290140933
Reserve Bank Governor D Subbarao today said emerging economies like India would be impacted by newer regulations being discussed globally.

"What concerns us is that these global standards are going to be applied uniformly but their implications for emerging market economies will be different, given the different stages of our financial sector development," Subbarao said here.

Speaking at a global seminar, organised by the Reserve Bank's research and learning body CAFRAL and the Bureau of International Settlements, Subbarao said the financial sector in the country is still under development.

Following the recession of 2008-09, a slew of norms have been either suggested or are in the process of being made to ensure financial stability like the Financial Stability Board and the Basel Committee on Banking Supervision (BCBS).

One of BCBS' suggestions--the Basel-III norms calling for additional capital adequacy of banks--is one of the most debated issues at present.

Subbarao cited studies done by multiple bodies which talk of affecting growth following implementation of Basel-III and said the country will also get affected by it even though a majority of banks have healthy capital buffers.

With high growth, credit demand is going to be healthy in the days ahead and banks will have to expand their balance sheets which will in turn require them to raise capital, Subbarao explained.

"The concern is that this will raise the cost of credit and hence militate against growth," he observed.

"The crisis brewed in the advanced economies and much of the post-crisis reforms are driven by the need to fix what went wrong there...the agenda under consideration has been dominated by advance economy concerns," he said.

Subbarao also stressed the need to focus on the real sector saying the financial sector cannot reach out to those at the bottom of the pyramid.


Big business paying Maoists is condemnable: Chidambaram

RAIPUR: Union home minister P Chidambaram, on a review trip to Chhattisgarh on Tuesday, said it was "condemnable" if big business houses were funding Maoists. Responding to a question during a press conference in the state capital, he added it was up to the state government to take action against them.

Chidambaram's comments are significant in the light of the ongoing police probe in the case of alleged payments by Essar Steel to Maoists, routed through a contractor in Dantewada. This is the first time corporate India is being investigated for pay offs to Maoists.
However, in an indication of the centre's qualified approach, Chidambaram said, "We must remember, forget business houses, even a small contractor is compelled to pay protection money to Maoists. You can sympathise or criticise him, but he is not giving (money) out of love but since he has no other option. But if big business houses give money (to Maoists), it is condemnable."
Earlier, the home minister pointed out that contractors were not taking up construction activity in the Maoist areas, which he said must be taken up by the newly formed state police housing corporation and a special wing of PWD. "The state must take the lead, there is no other way," he said.
Reiterating that Maoist violence remained India's gravest internal security threat, he said Chhattisgarh accounted for 26.3% of all naxal incidents and 36% of casualties. Naxal violence had been reported from 85 police station areas in 11 of 18 districts in 2011. However, there has been a 'sharp decline' in both the number of incidents and casualties in 2011, compared to last year, he said. "This could either be interpreted as Naxal activity has come down, or that the Naxals and security forces are not engaging for tactical reasons. But the naxal presence remains extensive and we should not take the eye off the a ball," he added.
Providing an update on troop deployment, Chidambaram said the centre had provided 135 companies of the paramilitary forces to Chhattisgarh, which had doubled its police force to 54,000 men and further planned to recruit 9,000 policemen in 2012.
Freudian Slip?
Calling the Maoists "the worst violators of human rights", the home minister rued that while one or two instances of excesses by security forces receive a great deal of attention, naxal killings of civilians labelled police informers were "not highlighted in the media and the courts."
"Civil society must understand that naxals do not respect human rights either," he said.

While the use of "either" might have been an inadvertent slip, it raised eyebrows in a state where the government is seen to be condoning human rights violations by the security forces. In March this year, security forces allegedly torched homes in three villages in Dantewada during an anti-Maoist operation. The Supreme Court has asked the CBI to investigate the allegations.
http://articles.timesofindia.indiatimes.com/2011-11-15/india/30400844_1_naxals-maoist-areas-maoist-violence

Moody's Says Indian Debt 'Constraint' to Investment-Grade Sovereign Rating

Q

By Kartik Goyal - Nov 16, 2011 5:41 PM GMT+0530 India's public debt at 70 percent of its gross domestic product is preventing Asia's third-biggest economy from securing an investment-grade rating, Moody's Investors Service said.
The nation's fiscal deficit and "the debt burden, which is high relative to similarly rated countries," are among the constraints, Atsi Sheth, a sovereign analyst at Moody's, said in a telephone interview from Mumbai today. "For the ratings to be improved, we will have to be comfortable that India's government debt is at a level that can be sustained over the medium term."
India's finance ministry pitched for a higher rating in a meeting with Moody's officials on Nov. 14, R. Gopalan, secretary, Department of Economic Affairs said yesterday. The government raised its planned borrowing for the six months through March 31 by 32 percent as revenue collections fall short of target. Finance Minister Pranab Mukherjee said Oct. 4 that it may be hard to meet his goal of cutting the budget deficit to a four- year low of 4.6 percent of GDP.
Moody's rates India's rupee sovereign debt a Ba1, the highest junk grade, a level shared by Indonesia and Morocco. India's foreign-currency debt is rated at Baa3, the lowest investment grade. Sheth, who declined to comment on the lobbying by the finance ministry, expects the budget gap to be as high as 5.5 percent in the year ending March 31.

Rising Bond Yields

The yield on the benchmark 10-year government bond has risen 97 basis points this year, the most in Asia, to 8.89 percent, as inflation remained untamed above 9 percent for a 11th consecutive month in October, while increased supply damped demand. The Reserve Bank of India has increased borrowing costs 13 times starting March, 2010, to slow the pace of price gains, and expects inflation will cool to 7 percent by the end of March.
"It might be optimistic to expect a rating upgrade at this juncture when there are significant risks" on account of the deficit, said Suvodeep Rakshit, an economist at Kotak Securities Ltd. in Mumbai. "The government's finances are under severe pressure this year due to slowing growth and higher rates."
Slowing economic growth may also exacerbate the deficit, Sheth said. The $1.7 trillion economy is likely to expand 7.6 percent in the fiscal year to March, 2012, slower than 8.5 percent in the previous year, according to the central bank.
"The deficit is going to be higher due to growth slowdown," Sheth said. "Growth and profitability have been lower than the government had assumed and that will be reflected in revenue growth."

Revenue Collection

India's receipts grew 38.7 percent in the six months to September from a year earlier, slower than 58.4 percent gain in the same period a year ago, according to government estimates.Fourteen of the 30 companies that comprise the benchmark Sensitive Index reported profits that fell short of analyst estimates in the quarter ended Sept. 30.
The government will also spend more on oil and food subsidies, she said. The state caps retail prices of fuels including diesel, cooking gas and kerosene to rein in inflation and shield about 828 million people the World Bank says live on less than $2 a day.
Standard & Poor's and Fitch Ratings have a BBB- rating on India's local-currency debt, the lowest level in the investment category.
"A high debt burden, we believe, limits the fiscal flexibility that the government has to respond to future shocks, as well as invest in India's social and physical infrastructure Needs," Sheth said.
To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net
To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net
http://www.bloomberg.com/news/2011-11-16/moody-s-says-indian-debt-constraint-to-investment-grade-sovereign-rating.html
KOLKATA (Commodity Online): Eurozone crisis, persistently high Crude Oil prices could have some adverse impact on the Indian economy leading to shortfall in private invesment in the country.

The financial crisis will have a direct bearing on future investment in India, according to Subir Gokarn, Deputy Governor, Reserve Bank of India.

These two external factors have already started taking a toll on Indian exports. However, the bank interest rate cycle appears to have peaked and further hikes may not be warranted, he said while addressing the managing committee meeting of Associated Chambers of Commerce and Industry of India (ASSOCHAM).

India's GDP growth in the second quarter may be lower than 7.7%, according to Pranab Mukherjee, India's Finance Minister. He said at a conference organised by ASSOCHAM titled Global economic turmoil, Indian economy and role of the banking sector,' that financial crisis will have adverse effect on the Indian economy but appealed to bankers and industry not to become despondent or frustrated and urged corporate sector to step up investments.

"The government is with you. Sometimes we have to move carefully, but we are cautious about the pitfalls," he said. He confessed, however, that it would be difficult to meet the fiscal deficit target of 4.6% in the fiscal. The finance minister made it clear, however, that the government would not hesitate to take tough decisions to correct fiscal parameters, if need be.

Gokarn of RBI said though the risk of endemic food inflation remains, there are signals that headline inflation may start coming down by January next year and level below 7 per cent in the first half of 2012-13.

The Reserve Bank of India (RBI) has raised interest rates 13 times since early 2010 but failed to rein in inflation, which remains above 9 per cent. Instead, asset quality at banks is eroding and economic growth in Asia's third largest economy is slowing.

Mukherjee said bank lending needs to grow at 20-21% to achieve a 9% GDP growth.He said that the government has infused Rs 1,000 crore in banks this fiscal so far and will inject another Rs 5,000 crore over the next five months. Banks would need fresh funds to support their lending growth as Basel III regime is imminent from January 2013, and this would increase the requirement of capital.

Turbulence in the country's biggest export markets – the United States and Europe – have prompted many industry leaders and government officials to predict an export slowdown and a worsening trade deficit in the second half of the fiscal year ending March 2012.

Subir Gokarn pointed out that "the stress points in global scenario are evolving rapidly," said Mr Gokarn. "External turbulence is also impacting currency exchange rates in emerging markets like India. The rupee is the fourth most depreciated currency in Asian region in the past two-and-a-half months. From growth perspective, the country is facing a slowdown."

Mr Gokarn said that the rupee has become a floating currency now within the boundaries of structural capital controls. "The RBI has stayed within bounds of stated policies on the rupee," he added.

The RBI predicts GDP growth of about 7.6 per cent in 2011-12. Increasing affluence and changing consumption patterns are driving up food inflation, said Mr Gokarn.

He said efforts should be made to remove infrastructural bottlenecks, speed up new development projects and bring fiscal deficit within manageable limits to contain rising inflation and maintain growth momentum.

ASSOCHAM president Dilip Modi said the industry is concerned over ways to drive up investments. He said the EU crisis is impacting domestic economy which has seen cost of credit rising steadily.

Inflation dynamics show that within manufacturing sector, the highest price rise is in primary and upstream products. "Intermediate goods producers are passing on higher costs to consumer goods industry. Since consumer industry faces price rise resistance from consumers, their profit margins are under pressure," said Mr Modi.
http://www.commodityonline.com/news/Eurozone-crisis-high-crude-oil-prices-impact-Indian-economy-43690-3-1.html
Govt agenda for winter session of parliament includes Lokpal Bill and Whistle Blower Protection Bill
The government on Wednesday unveiled its legislative agenda for the winter sessionof parliament that includes the Lokpal Bill and Whistle Blower Protection Bill.

Talking to mediapersons, Parliamentary AffairsMinister Pawan Kumar Bansal said the session, starting Nov 22, will have 21 sittings.

He also said the government is determined to introduce the Lokpal Bill, which aims to tacklecorruption in high places.

"Government is determined to pass the (Lokpal) Bill. Government stands committed to root out corruption. It may not be done through one law," Bansal added.

But he hoped the parliamentary standing committee examining the bill will be able to submit its report by Dec 1.

Anna Hazare has threatened to go on a hunger strike again if the government does not pass the bill in the winter session. Hazare's hunger strike for a strong Lokpal in April and August this year made the government agree to his demands.

The minister also gave a list of 31 bills that the government intends to pass during the winter session that ends Dec 21.

Bansal also met chief whips of all political parties to discuss the issues they wanted to take up during the session.

"Political parties want to discuss issues like price rise, black money, division of states, energy security, corruption, situation in Afghanistan, earthquake in Sikkim and also issues concerning the farmers," he added.

"Government is ready to discuss all issues," he said.
RBI Governor D Subbarao on Occupy Wall Street: Growth sans equity destabilising
Reserve Bank Governor D Subbarao today said that the key message from the " Occupy Wall Street" movement is that growth itself can be destabilising if not accompanied by equity.

"Growth itself can be destabilising if it has no equity dimension...the elite cannot go on to do obscenely well even as the rest keep moving backwards," Subbarao said speaking to an audience comprising of bankers from across the globe at a seminar here.

The 'occupy' protests, despite their "amorphous nature and refusal to formulate a set of demands" have been able to strike a chord and spread the world over just because of that, he observed.

Interestingly, Subbarao's remarks come on a day when New York police raided the Zuccotti park, the ground zero for the anti-Wall Street protests, ordering protesters to leave the area or court arrest.

The movement which began at Zuccotti park in New York's Manhattan area in mid-September caught the attention of the rest of the world, particularly in the West which is reeling under an extended period of financial turbulences.

India had become the 83rd country internationally and Mumbai the 1501st city the world over, to witness the wave when a small group of people held protests at the Dalal Street earlier this month. However, the protestors were not able to strike a chord.

16 NOV, 2011, 08.04AM IST,

ET Awards' Agenda For Renewal 2011: Six stalwarts of India Inc craft agenda


For a document that undisputedly chiselled the first contours of India's post-independence economy, the Bombay Plan of 1944-45 went surprisingly unacknowledged. Jawaharlal Nehru never officially accepted the Plan even though the first Five Year Plan was remarkably similar to it.

Sixty seven years later, six stalwarts of India Inc have crafted the Agenda For Renewal at the invitation of the The Economic Times. This may not be as seminal as the Bombay Plan, but it will be acknowledged - by the Finance Minister Pranab Mukherjee on November 26 at the The Economic Times Awards for Corporate Excellence, and by three of his cabinet colleagues.

In the coming days, ET will orchestrate a national campaign around the Agenda For Renewal. This, we hope, will help the nation regain the sense of purpose and intent that has grown dull recently. Presented below are edited excerpts of the deliberations between ET and the six CEOs that eventually formed the basis on which this agenda was crafted.

How the campaign for renewal will unfold...

Six business leaders, Deepak Parekh, chairman ofHDFC, KV Kamath, chairman, ICICI Bank and Infosys, Ashok Ganguly, former chairman of Hindustan Unilever, Sunil Bharti Mittal, chairman, Bharti Enterprises, Zia Mody, legal firm AZB Partners, NR Narayana Murthy, founder Infosys Technologies, crafted the Agenda For Renewal at ET's invitation.

This will be presented to Finance Minister Pranab Mukherjee on Saturday, November 26 at the The Economic Times Awards for Corporate Excellence. Mukherjee and three cabinet ministers, Jairam Ramesh, minister for rural development, Kapil Sibal, minister for communications, and Salman Khurshid, minister for law and justice, will discuss this agenda with 400 CEOs who will be present at the ET Awards.

In the coming days, leaders from political parties, businessmen, leading civil society voices and academicians will also discuss and debate the agenda in the pages of The Economic Times.

Follow the campaign around the Agenda For Renewal at www.afr.economictimes.com
http://economictimes.indiatimes.com/news/news-by-company/corporate-trends/et-awards-agenda-for-renewal-2011-six-stalwarts-of-india-inc-craft-agenda/articleshow/10741888.cms
The government, industry and civil society need to collaborate to improve the education system, invest in infrastructure and ensure an equitable distribution of opportunities.

It is just a coincidence that the India Economic Summit's theme — "Linking Leadership with Livelihood" — echoes the objective of the 12th five-year plan. The Summit, jointly organised by the World Economic Forum (WEF) and the Confederation of Indian Industry (CII), is being held at a time when the Planning Commission has released the draft 12th five-year plan and sought suggestions and objections.
The draft plan reiterates the government's commitment to inclusive growth. It makes it amply clear that inclusive growth should be reflected in better opportunities for both wage employment and livelihood and in improved provision of basic amenities such as water, electricity, roads, sanitation and housing. All sections of society — the government, farmers, businesses, labour and concerned citizens — will have to adopt newer, more effective ways of pursuing their activities, so that Indians can collectively achieve national goals, the draft plan document says.
On the other hand, the Forum notes that leaders from government, industry and civil society can collaborate to improve the education system, invest in much-needed infrastructure, increase agricultural productivity and ensure an equitable distribution of opportunities through better governance, improved delivery systems, greater transparency and stronger implementation. CII's former president, Hari Bhartia, believes that "India can leverage its large workforce in the global agenda only if the private sector emerges in the interlinked issues of education and skills development."
He adds, "One per cent expansion in GDP leads to an additional 0.8-1 million new jobs. Further, livelihood opportunities can be fostered by nurturing entrepreneurship and innovation."
The Summit's theme in the present global financial crisis is quite apt, especially when, after several years of sustained near-9 per cent growth, India's GDP growth for the coming fiscal year is forecast to fall below 8 per cent on account of rising inflation and ongoing depressed markets worldwide. Therefore, critical governance reforms and innovative public-private partnerships would have to be pushed forward to deliver rapid and inclusive growth and an enabling environment for upgrading infrastructure in India.
Sushant Palakurthi Rao, senior director and head of Asia at WEF, says, "In this context of global and national challenges, there could not be a more appropriate time to host this year's summit in the city of Mumbai, the commercial capital of India and capital of the state of Maharashtra. Under the theme Linking Leadership with Livelihood, the programme will generate high-level discussions between stakeholders aimed at achieving new insights under four thematic pillars: From Momentum to Models; Removing Barriers, Managing Risks; Ensuring Sustainable and Equitable Growth; and Building Central and State Competitiveness."
Maharashtra Chief Minister Prithviraj Chavan admits that inclusive and equitable growth is a challenge but that governments are trying their best to achieve it. "Governments are making all efforts for deeper financial inclusion. There is inflation pressure and all attempts are being made to see that food inflation does not go through the roof." Further, he believes that collaboration between governments, industry and civil society is required to give a boost to India's evolving development story.
Chanda Kochhar, managing director and chief executive officer of ICICI Bank, India, concludes: "We tend to think of rural development as something for the government. But the private sector has an equal role to play."
http://www.business-standard.com/india/news/governance-reformskey-to-inclusive-growth/455333/

ET Awards 2011: Ten reforms to turn the tide

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Text: ET Bureau

India, a nation meant to be on the move, has lingered far too long with problems. The time for solutions is now, and it is here in the form of an Agenda for Renewal, a set of measures crafted by the leading luminaries of India Inc.

Prepared after intense deliberations by a group comprising Deepak Parekh, NR Narayana Murthy, Sunil Mittal, Ashok Ganguly, Zia Mody, and KV Kamath, the agenda will be debated on November 26 by India's top industrialists with a galaxy of cabinet ministers led by Finance Minister Pranab Mukherjee at the ceremony honouring the winners of The Economic Times Awards for Corporate Excellence.

In the coming days, ET will orchestrate a national campaign around the Agenda For Renewal. This, we hope, will help the nation regain the sense of purpose and intent that has grown dull recently.

Take a look at the top ten reforms by six CEOs that eventually formed the basis on which this agenda was crafted.

http://economictimes.indiatimes.com/quickiearticleshow/10753139.cms
16 NOV, 2011, 06.07AM IST, PREETI KULKARNI,ET BUREAU

You will now have more options in pension Ulips

You can soon expect calls from life insurance agents hard-selling unit-linked pension plans (ULPPs) once again. ULPPs have been out of circulation for a while, after the Insurance Regulatory and Development Authority (Irda) imposed a guaranteed-returns clause on them last September.


The authority has now relaxed its norms on guarantees. The new norms, to be effective from December 31, could trigger a partial revival of the pension Ulips category.


New Pitch


For one, insurers do not need to guarantee a return linked to the reverse repo rate of the Reserve Bank of India (RBI ) anymore. The assured-return requirement had been a bone of contention as many insurers felt the target couldn't be met.


Simultaneously, agents felt these pension Ulips were not lucrative as commissions were capped post September 1, 2010. This meant there were hardly any pension Ulips being launched.


Only LIC designed a regular pension Ulip. Companies like SBI Life and ICICI Prudential came out with single premium pension Ulips. In contrast, in the pre-September 2010 era, insurers banked heavily on pension plans to drive their business and these products accounted for nearly 30% of their premium collections.


What's more, the new form of the product being launched after September 1, 2010, was not considered beneficial to policyholders either, as the need for guaranteed returns meant funds had to be directed to safe, fixed income instruments, curtailing their return-earning ability.

*


Now, in its refurbished avatar, a pension Ulip will come with a guarantee, albeit with a difference. According to the new guidelines, insurers have the choice of offering any one of two types of guarantees - minimum return (a non-zero, positive return) disclosed upfront at the time of issuing the policy; and a specific maturity benefit.


Another key departure from the current practice is putting the onus of providing annuities on the insurer selling the pension plan.

http://economictimes.indiatimes.com/personal-finance/savings-centre/analysis/you-will-now-have-more-options-in-pension-ulips/articleshow/10749533.cms

16 NOV, 2011, 07.54AM IST, RAJAT PANDIT,TNN

With China in mind, India tests new Agni missile

NEW DELHI: India on Tuesday successfully tested a new-generation Agni missile with a strike range of 3,500 km and souped-up "kill efficiency", prompting excited defence scientists to proclaim it would add "fantastic deterrence" to the country's nuclear weapons programme.

The test of the "most advanced" surface-to-surface missile called Agni-IV also launched the countdown for India to test its most ambitious strategic missile Agni-V, which will have near ICBM (intercontinental ballistic missile) capabilities with an over 5,000-km range, in December-January.

"This test has paved the way for the success of Agni-V mission, which will be launched shortly," said DRDO's chief controller (missiles and strategic systems) Avinash Chander.

Incidentally, the project director for Agni-IV is none other than Tessy Thomas, the 48-year-old DRDO scientist who has made a mark for herself in the avowedly male bastion of strategic missiles, as reported by TOI earlier.

The Agni-IV, which failed in its earlier avtaar as "Agni-II-Prime" in December 2010, incorporates many new technologies in navigation, propulsion, avionics and other areas to represent "a quantum leap" in missile technology for India.

Having inducted the Pakistan-specific Agni-I (700-km) and Agni-II (over 2,000-km) missiles, the armed forces are now in the process of operationalising the 3,500-km Agni-III after completion of its developmental and pre-induction trials last year.

Pakistan, of course, remains slightly ahead of India in its missile arsenal, given the covert help it has got from North Korea and China for its Ghauri and Shaheen family of missiles.

The two-stage Agni-IV and three-stage Agni-V, in turn, are meant to add some much-needed credible deterrence muscle against China, which has a massive nuclear arsenal with missiles like the 11,200-km Dong Feng-31A capable of hitting any Indian city. The canister-launch Agni-V, with its high road mobility and fast-reaction ability, in particular, is being talked about as a small but sharp riposte to China.

The Agni-IV represents a significant step towards this objective. Though it was tested for a 3,000-km range from a road-mobile launcher at Wheeler's Island off the Odisha coast at 9 am on Tuesday, it can easily go up to 3,500 km.

"The missile, with a payload reduced to 800 kg from 1,000 kg, followed its trajectory, attained a height of about 900 km and reached the pre-designated target in Bay of Bengal with very high level of accuracy after a 20-minute flight," said a DRDO scientist.

"Much lighter in weight than Agni-II and Agni-III, Agni-IV is an entirely new missile with two stages of solid propulsion and a payload with re-entry heat shield. All mission objectives were fully met. All systems functioned perfectly till the end encountering re-entry temperatures of over 3,000 degree Celsius," he added.

The missile, however, will have to be tested several times before it can be ready for serial production and then induction. The Agni family of missiles, which constitute the land leg of India's quest for a fully-operational nuclear-weapon triad, have been dogged by glitches over the years.

Three launches of Agni-II variants, for instance, failed in 2009 and 2010. DRDO, however, blamed manufacturing and other problems rather than any integral design and development flaws.
http://economictimes.indiatimes.com/news/politics/nation/with-china-in-mind-india-tests-new-agni-missile/articleshow/10750275.cms

15 NOV, 2011, 02.07PM IST, MANJARI MISHRA & ASHISH TRIPATHI,TNN

Mayawati cabinet proposes division of UP into four states; Poorvanchal, Paschhimanchal Bundelkhand and Awadh

Politics: Battle for Uttar Pradesh
Mayawati may not get House numbers for Uttar Pradesh state division
It won't be easy for her to get House approval, particularly when there are MLAs ready to switch loyalties before 2012 elections.

LUCKNOW: Uttar Pradesh chief minister Mayawati on Tuesday announced that she would table the proposal to divide UP into four smaller states in the winter session of the state assembly starting November 21.

The four parts will be - Poorvanchal (East UP),Paschhimanchal (West UP), Bundelkhand and Awadh(central UP). Mayawati got the proposal of dividing UP into four parts approved from her cabinet this morning and later annouced it at a press conference.

The move is being seen as Maya's trump card for upcoming assembly elections. The move, political observers, believe has been taken to compensate for anti-incumbency, divert public attention from corruptioncharges against Mayawati and will put opposition parties on the backfoot. But opposition parties described the move as political stunt.

Mayawati said that the decision to divide UP in four parts had been taken after hectic deliberations and threadbare analysis of its pros and cons. She said that smaller states could be managed in a better way in comparison to bigger ones. She said UP was backward mainly because of its huge size. She said she had created smaller districts in UP for better management.

The chief minister said UP had given maximum number of prime ministers to the country but none of them contributed to development of the state. She said that as per the constitution, re-organisation, division and renaming of states could only be done by Parliament. She said that governments at the centre should have taken the decision of division of the state. But, she said, unfortunately neither BJP led NDA government, nor Congress led UPA government took any decision.

Mayawati said that soon after taking charge of UP in 2007, she had asked Prime Minister to consider division of UP. She said that she also asked for Rs 80,000 core package for development of east UP and Bundelkhand but the Centre had done nothing. However, she said that she kept on sending reminders to the Prime Minister for division of UP and development package hoping that the Centre would take a positive initiative.

Mayawati said as per the procedure, UPA government should have passed a proposal of UP's division in Parliament and send it for consent of the UP assembly. "But after waiting for a long time, when the Centre did nothing, my government finally decided to bring the proposal of UP's division in the next assembly session and send it to the the Centre to mount pressure on the UPA government," she said.

More stories from this edition of UP Elections



http://economictimes.indiatimes.com/news/politics/nation/mayawati-cabinet-proposes-division-of-up-into-four-states-poorvanchal-paschhimanchal-bundelkhand-and-awadh/articleshow/10738925.cms

16 NOV, 2011, 11.36AM IST, SHAJI VIKRAMAN & R SRIRAM,ET BUREAU

India's fiscal woes could deepen because of welfare schemes: YV Reddy

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MUMBAI: India's fiscal woes could deepen because of welfare schemes such as the National Rural Employment Guarantee Scheme, former governor of the Reserve Bank of India, Yaga Venugopal Reddy, said on Tuesday.

Reddy, whose conservative stewardship of the central bank between 2003 and 2008 is widely credited with shielding India's banking system from the worst of the global financial crisis, said schemes such as NREGS, the flagship welfare scheme of the United Progressive Alliance government, were almost impossible to withdraw, potentially exacerbating the fiscal situation.

The scheme, which commits the state to provide employment for a minimum of 100 days a year to rural workers, has been criticised by many economists for its failure to create assets on the ground but appears to have paid rich political dividends for the government. It has been also hailed for reducing migration from rural areas, providing an economic stimulus by boosting consumption and raising wages for those at the bottom of the pyramid in both rural and urban areas. But Reddy said India entered the downturn in a frail fiscal state, leaving it in a weaker position to raise spending.

"In India, there are three problems: One, we started with a relatively weak fiscal situation. Second, we viewed programmes such as NREGS and rural pay as a stimulus whereas actually they are not easily withdrawable, and third, the revenue component was more than the capital component in the expenditure. All these put together have resulted in some sort of a fiscal problem," the former governor said.

India's fiscal deficit is expected to widen to close to 5% of national income in the year ending March 31, 2012, compared with a projection of 4.6% in this year's budget because a slowing economy has had an adverse impact on revenue collection0 while the government has been unable to rein in spending.

INDIA MUST JOIN EU BAILOUT

Reddy, who now lives in Hyderabad, says that policymakers need to do some "honest introspection" about the fiscal situation. "In the name of fiscal stimulus, we should not try to simply reduce expenditure. In fact, you should raise revenue and you should be able to identify where revenue enhancement is possible," he said.

With inflation still close to double digits, Reddy, who is this year's winner of the Lifetime Achievement Award at The Economic Times Awards for Corporate Excellence, said the central bank would hardly be in a position to pause, let alone consider cutting interest rates.

Reddy, who supervised Indian banks as a central banker for over eights years in the RBI, including a stint as deputy governor, said there are "significant elements of truth" in the analysis of ratings agencies Moody's and Standard & Poor's. Reddy said the "negative conclusion" by Moody's, which had recently revised its outlook on Indian banks to 'negative', was not warranted, but advised banks and the government to treat the analysis as a "good warning". The finance ministry and Indian banks have trashed the change in outlook.

Reddy strongly favoured India supporting the Euro zone by funding the European Stability Fund - a view already expressed by the government. "India is an important country and has to demonstrate its interest in ensuring the Euro zone succeeds."
http://economictimes.indiatimes.com/news/economy/policy/indias-fiscal-woes-could-deepen-because-of-welfare-schemes-yv-reddy/articleshow/10748309.cms

16 NOV, 2011, 02.35AM IST, DHEERAJ TIWARI,ET BUREAU

Finance Ministry to provide 'affordable' 3-in-1 security for unorganized sector workers

NEW DELHI: The finance ministry is putting shape to a new social security scheme for unorganized sectorworkers, creating for the first time a safety net for millions of underpaid and overworked people, many of whom living in abject poverty.


The ministry has discussed with the Life Insurance Corporation (LIC) and the four state run non-life insurance companies the contours of this scheme that will provide life insurance, health cover andretirement pension to some 15 crore unorganized sector workers for a nominal amount.


This three-in-one protection, the cost of which will be mostly funded by the central and state governments, is aimed at taking care of workers and their families' medical needs, support the family in the event of death of the main breadwinner and provide some income during retirement.


"It will provide a complete insurance package for the policy holder," said one finance ministry official, requesting anonymity.


The scheme envisages state and the central governments bearing 75% of the cost, with the remaining amount to be paid by the policyholder.


"As of now we have worked out that the annual premium for such a product should be in the range of 2,500 to 3,000. But if we achieve economies of scale, it may be brought down further," the official said.


LIC will act as the trustee of the overall fund and the lead insurer in most of the states. Private life and non-life insurers may be roped in at a later stage.


A government panel headed by the late Arjun Sengupta, an economist and parliamentarian who headed theNational Commission for Enterprises in the Unorganised Sector, had in 2006 estimated about 92% of the country's workforce to be in the so-called 'informal sector'.


Unorganised sector workers are not only poorly paid, but often do not get any health cover from employers and are not part of any pension plan that helps them accumulate a corpus for retirement.


A senior LIC official said offering three benefits in one scheme could be a big challenge, especially since the premium amount was envisaged to be low.


"What we can do is to use the platform of the existing schemes and club the pension product or life product," he said.


The structure of the scheme envisages a central recordkeeping agency to maintain individual details.


"It will be a convergence with the whole financial inclusion plan as a person will have a bank account and a total insurance cover. So, even if he is a migrant labour, the IFSC code will give his family access to benefits under the scheme," the finance ministry official said.


The government could also consider bringing its flagship healthcare and insurance schemes -- Rashtriya Swasthya Bima Yojana (RSBY) and the Aam Admi Bima Yojana - targeted at poor people under the fold of this comprehensive coverage.


"We will be working with the concerned ministries and see if those scheme can be merged with this or whether the three products can be offered to the poor on a single platform," the financial ministry official quoted earlier said.


At present, there are 2.5 crore beneficiaries under the RSBY scheme, which provides health insurance for people living below the poverty line, and around 1.78 crore policy holders in the Aam Aadmi Bima Yojna scheme. Started in 2007, the AABY provides an insurance cover to the head of a family or one earning member of rural landless households.
http://economictimes.indiatimes.com/news/economy/policy/finance-ministry-to-provide-affordable-3-in-1-security-for-unorganized-sector-workers/articleshow/10747745.cms

14 NOV, 2011, 08.00AM IST, ET BUREAU

7 golden rules of retirement; Some time-tested tenets that will ensure a comfortable life after work

Experts contend that retirement planning should start from the day you start earning. Sound advice indeed, but one that is seldom followed.


This is why ET Wealth decided to bring to you seven immutable rules of retirement planning. Steeped in financial prudence, these canons have been advocated by experts through the decades. Follow them and you can be sure that you will retire in comfort.



Save 10% of your income for retirement


The first rule of retirement planning is also the easiest to follow. If you have a regular job, then 12% of your basic salary and an equal contribution by your employer that flows into your Provident Fund account is a good way to build a nest egg. The best thing about this option is that you cannot avoid it. EPF rules require all employees to contribute 12% of their basic income to retiral savings, which include the Employee Provident Fund and the Family Pension Fund. It is a forced saving that becomes the default retirement plan for many individuals.


The amount of contribution to the EPF does not matter. Given the power of compounding, even a small contribution can bloat into a big sum over the long term. Don't underestimate the significance of the savings in the first few years. Assuming that a 25-year-old investor puts away a fixed amount every month, his savings in the first five years will account for 44% of his total corpus when he is 60 years old. The later you start, the more you will need to save. If you have started late, say in your 40s or 50s, you will have to invest up to 20-25% of your income if you want a comfortable retirement.


The 10% rule is crucial for self-employed professionals and others who are not covered by the EPF umbrella. They can opt for mutual funds, choosing the ones that suit their risk appetite and age profile. Find out about the best mutual funds for retirement planning for different ages on page 20. However, you need to have the discipline to put away the given sum on a regular basis.


SMART TIP


Start an SIP in a mutual fund and automate the process by giving an ECS mandate to your bank. In this way, your retirement planning will stay on track.

More stories from this edition of ET Wealth


http://economictimes.indiatimes.com/personal-finance/savings-centre/analysis/7-golden-rules-of-retirement-some-time-tested-tenets-that-will-ensure-a-comfortable-life-after-work/articleshow/10702111.cms

14 NOV, 2011, 03.45PM IST, ET BUREAU

Coca-Cola to invest $2 billion in India

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NEW DELHI: Beverage maker Coca-Cola on Monday announced that its Atlanta-based parent will invest US$2 billion in the country over the next five years, beginning 2012. This is the single largest investment in one phase for Coca-Cola in India since it began operations here 18 years back. India ranks among the firm's top 10 markets in volume globally, and is the largest market in the Eurasia and Africa Group.

"The investment will capture the opportunity in the Indian non-alcoholic ready-to-drink beverage market; it will span across infrastructure, brand building and sustainability programmes," Ahmet C. Bozer, Coca-Cola's president, Eurasia and Africa Group, told media persons here today. "India is one of our most important growth markets as we work toward our vision of doubling system revenues," Bozer said.

Coca-Cola has invested over US$2 billion in India since it re-entered the country in 1993.

Atul Singh, president & CEO, Coca-Cola India and South West Asia, said the country's demographics, economic and social parameters were big growth drivers. "We have to ensure that we capitalise on the opportunity," he said.

The beverage maker has registered 15 quarters of double-digit growth.
http://economictimes.indiatimes.com/news/news-by-industry/cons-products/food/coca-cola-to-invest-2-billion-in-india/articleshow/10727067.cms

Lessons from India's Economic Reforms

Montek S. Ahluwalia

(Published in the book titled 'Development Challenges in the 1990s' - Leading Policymakers Speak from Experience; a copublication of the World Bank and Oxford University Press, March 2005)

It is a great honor to have been asked to give this lecture, joining a series of extremely distinguished practitioners in development policy. It is also a pleasure to be doing so at the World Bank, where I had my first job after graduating from uni­versity. I have many pleasant memories of my days at the Bank and especially the many friendships I formed at the time.

The lecturers in this series have been asked to provide personal reflections rather than deep analyses—to draw lessons from their experiences and discuss what they would have done differently had they known then what they know now. That seems simple enough, but of course it is not. In my current position, which involves con­ducting ex post evaluations of International Monetary Fund (IMF) programs, I am very conscious that it is extremely difficult to determine what constitutes a valid les­son. A lesson necessarily implies some kind of statement about counterfactuals—that if things had been done differently, outcomes would have differed as well—and establishing sound counterfactuals is extremely difficult. Having genuflected before this qualification, I propose to get into the spirit of these lectures by skirting analyses and simply asserting my perceptions, leaving it to scholars to test whether these per­ceptions, and the lessons drawn from them, are valid.

India's Economic Performance and Reforms since the 1970s

Before attempting to draw lessons, let me first summarize India's economic perform­ance over the past three decades. When I returned to India in 1979, after a decade at the Bank, the country was generally regarded as a growth laggard. In the 1970s its GDP growth averaged just 3.2 percent a year—lower than in Sub-Saharan Africa, East Asia, Latin America, and the global average for developing countries (table 1). India also fared poorly relative to other large developing countries, ranking 17 in a sample of 20 (table 2). Its growth performance improved considerably in the 1980s, rising to an annual average of 5.7 percent and causing its rank to rise to 7 among the sam­ple of 20 countries. Growth rates improved further in the first half of the 1990s.

The acceleration of growth in the 1980s was associated with a process of policy rethinking and (very partial) reforms. This rethinking was spurred partly by main­stream thinking about development policy but mainly by the example of the supe­rior performance of many East Asian countries. The World Bank is the principal source of data on comparative economic performance among developing countries, and it should be a source of satisfaction to those who collate and publish these data that the picture they present has an impact on policy-making.

The main lesson that Indian policymakers learned from this comparison was that India's economic system needed to be redesigned. The system was characterized by extensive government controls over private sector activity in the form of investment licensing and price controls, high levels of tariff protection combined with quantita­tive restrictions on imports, restrictive controls on foreign investment, and so on. This system came to be regarded as dysfunctional and in need of change.

Nevertheless, the control system was not fundamentally altered in the 1980s. It remained in place, but was operated more liberally. Controls were relaxed in marginal ways by removing some industries from licensing controls, allowing some automatic expansion in licensed capacity, and removing some imports from controls. More important, the controls in place were generally operated more permissively, in the sense that there was less suspicion of private sector activity and permissions needed were more freely given.

As this process of incremental liberalization proceeded and produced good results in the 1980s, many technocrats were convinced that deeper, more systemic changes were needed. Several committees were appointed to review various aspects of the economic management system, and these committees recommended further liberal­ization. Many of these recommendations were implemented in the 1990s.

The reforms of the 1990s were triggered by the fact that India experienced a severe balance of payments crisis in 1991. The new administration, headed by Prime Minister Narasimha Rao, appointed a technocrat and economist, Manmohan Singh, as minister of finance. Singh (who is now prime minister) unveiled a comprehensive program of economic reforms, including:

  • Abandoning the earlier predisposition in favour of a dominant role for the public sector and recognizing the importance of the private sector as a leading

  • engine of growth.

  • Placing much greater reliance on market forces and competition as the primary means of increasing efficiency.

  • Opening the economy to international trade, foreign investment, and foreign

  • technology.

Because reforms were implemented at a time of crisis, when the economy also had to resort to IMF financing and a structural adjustment loan from the World Bank, they were criticized as being driven by the IMF and World Bank. But the fact is that the package of reforms was the outcome of considerable internal thinking. Although the reforms were broadly in line with what was considered sensible policy by international institutions, this was more a reflection of a genuine convergence of views on develop­ment policy than of pressure exerted by the IMF and the Bank. One indication of the extent to which the design of the package was home-grown is that in many areas — especially privatization and the pace of external liberalization India's reforms differed significantly from those in typical IMF-Bank programs. Another indication is that the reforms were continued even though the crisis was overcome relatively quickly.

The initial response to the reforms was an impressive acceleration in annual GDP growth, which averaged 6.7 percent in the first half of the reform period (1992—97). This acceleration was widely viewed as vindicating the government's approach. But in the second half of the reform period (1998-2003) the growth rate decelerated to an average of about 5.7 percent. Not surprisingly, there has been a great deal of con­cern in India about this deceleration.

TABLE 1

Average Annual GDP Growth in India, China, and Developing Regions, 1971-2003


Country/region


1971-80


1981-90


1992-97


1998-2003


India

3.2


5.7


6.7


5.7


China

6.3


9.3


11.5


7.7


Sub-Saharan Africa

3.3


2.2


2.3


3.0


Developing Asia excl. China and India

5.8


5.0


6.2


2.7


Middle East and North Africa

6.3


2.4


3.3


4.3


Latin America and Caribbean

6.1


1.5


3.9


1.3


All developing countries

5.5


4.1


6.3


4.5


Source: IMF, World Economic Outlook.

TABLE 2

Average Annual GDP Growth in 20 Large Emerging Economies, 1971-2003


Region/country


1971-80

1981-90

1992-97

1998-2003

South Asia


India


3.2


5.7


6.7


5.7


Bangladesh


1.8


3.7


4.8


5.2


Pakistan


4.8


6.0


3.6


3.8


East Asia


China


6.3


9.3


11.5


7.7


Indonesia


7.8


5.4


7.1


0.5


Korea, Rep. of


7.7


8.7


6.6


4.3


Malaysia


8.0


6.1


9.2


2.7


Philippines


6.0


1.8


3.8


3.4


Thailand


6.9


7.9


6.5


1.8


Vietnam


3.9


5.9


8.8


5.0


Middle East and North Africa


Egypt


5.8


5.2


3.0


4.0


Turkey


5.5


5.2


5.1


1.9


Sub-Saharan Africa










Nigeria


4.4


2.2


2.7


2.7


South Africa


3.5


1.5


2.1


2.4


Tanzania


3.7


3.3


2.5


5.2


Latin America


Argentina


2.9


-1.1


5.5


-1.7


Brazil


8.6


1.6


3.4


1.6


Chile


2.8


3.3


8.3


2.5


Mexico


6.9


1.9


2.6


2.9


Venezuela


4.1


1.0


2.4


-4.2


Source: IMF, World Economic Outlook.

The deceleration can be explained by two factors. First, global economic growth slowed in the wake of the East Asian crisis and the collapse of the technology boom in the United States. Among the 20 comparator countries mentioned earlier, India's rank in 1992-97, when growth accelerated, was 6 out of 20. But in 1998-2003, when India's growth decelerated, its rank rose to 2 (see table 2). Second, there was a weakening in the pace of reforms. I will touch on this issue and its implications at various points in this lecture.

Lessons from India's Experience

The above description suggests that India's reforms may not have been as successful as we would have liked. Still, India's growth was higher than that of many compara­tor countries in recent decades. What can be drawn from this experience? Six lessons seem to me to be of special relevance.

The first lesson relates to the importance of a home-grown approach for reforms to take hold. The second relates to the inevitability of gradual implementation in a pluralist, highly participatory democracy. The third is that implementation of com­plex reforms involves a process of learning and discovery, which means that there will inevitably be some false starts and midcourse adjustments in the implementation process. The fourth is that when dealing with multiple reforms on several fronts, careful attention must be paid to sequencing. The fifth relates to India's federal polit­ical structure and the increased importance of policy action at the subnational level in an environment where the central government is liberalizing controls. Finally. India's experience yields important lessons about poverty alleviation.

A homegrown approach

The broad direction of India's reforms was by no means unique. I have already men­tioned that the reforms implemented in the 1980s, and especially in the 1990s, reflected the emerging consensus on development policy in the international com­munity. The difference from many other countries that took the same path is that India's reforms were not dictated from the outside. Although the reforms were sup­ported by financial assistance from the IMF and the Bank—which implies that they met with the approval of these institutions—they were not an externally designed blueprint thrust on an unwilling government.

On the contrary', the broad direction of reforms had been extensively discussed internally, and there was fairly wide domestic consensus that changes along these lines were needed. This is not to say that the reforms were universally accepted, but democracies are not given to encouraging universal acceptance. Indeed, they put a significant premium on adversarial debate. The point is that the reforms had substan­tial homegrown support.

Several committees had recommended reforms well before they were introduced. I recall a discussion with the prime minister in 1989 on why and how so many East Asian countries were doing so well, and why India was lagging behind. I argued that the main reason was that India's economic policies were not conducive to rapid growth and needed wide-ranging reforms. I was asked to write a paper on the sub­ject, which I did and which was discussed internally in the government. I mention this incident only to illustrate that we were not operating in completely virgin ter­ritory: the intellectual foundation for the reforms was already in place. Had that not been the case, it would have been extremely difficult to make many of the changes that were made in 1991 because resistance would have been too strong, and it would have looked like they had been imposed by technocrats cut off from the mainstream.

A gradual approach

The second lesson that emerges from India's experience is that the pace of reforms is dictated by economic and political forces, and it is difficult to force that pace beyond a certain point. In India, with its highly pluralist and participatory democ­racy, this meant that reforms were gradualist. The more impatient of my friends often argued that it was more like glacialism, because you could barely see the movements taking place. The process was often compared unfavourably with Latin America, where similar reforms were adopted much more vigorously and with much greater speed.


There were two somewhat different reasons why India's reforms were imple­mented in a gradualist fashion. First, there were areas of reforms where there was broad technocratic and political consensus on what needed to be done, based on established theoretical and empirical work. But implementation was deliberately stretched out due to a desire to avoid sudden changes and spread the costs of adjust­ment over a longer period. Second, in certain areas gradualism arose because there was consensus that change was needed, but no consensus on how far it should go. In such cases some steps were taken but it was never clear whether further steps would be taken.

An example of the first type of gradualism is the conduct of reforms involving external liberalization. In the late 1970s India suffered from a grossly overvalued exchange rate as a result of tight import controls as well as a varied, but generally very-high, tariff structure. There was considerable agreement in technocratic circles that quantitative restrictions on imports were dysfunctional and should be phased out. In addition, tariffs had to be reduced over time and the exchange rate had to be deval­ued to provide incentives for domestic production as tariffs were cut.

The 1980s saw some partial steps to address this problem. The exchange rate was managed in a way that achieved a steady depreciation in real terms, eroding the impact of quantitative restrictions. There was also some limited relaxation in quanti­tative restrictions, but little progress on tariffs. In fact, where quantitative import licensing was reduced, tariffs were actually raised as a way of shifting from quantita­tive restrictions to tariffs.

The reforms of the 1990s envisaged a systemic change on all three fronts but at a graduated pace. In 1991 the fixed exchange rate was devalued by 25 percent (in two successive steps) to a more reasonable level. Since import controls were to be liberalized, it was logical to shift to a system that allowed greater exchange rate flexibility. This was done in two stages. In 1992 a dual exchange rate was introduced, with one fixed rate at which exporters were expected to surrender 30 per­cent of export earnings (which were then used to finance essential imports such as petroleum and to meet government debt servicing obligations) and a floating rate at which all other transactions took place based on the demand and supply of for­eign exchange. There was no indication at the time on how long the dual exchange rate system would be kept, but the government clearly intended it to be a transi­tional measure, and internally we were clear that if the market exchange rate did not get pushed to unreasonable levels, the two rates would quickly be unified. In 1993 the dual exchange rate was replaced by a single exchange rate that was effec­tively market-determined.

Gradualism was also evident in phasing out import licensing. Licensing was phased out fairly quickly for all non-consumer goods (intermediate goods and capi­tal goods), but it remained in place for consumer goods until as late as 2002.Through­out this period a steady effort was made to cut tariffs, and the weighted average import tariff fell from more than 80 percent in 1991 to about 30 percent in 1997. There was a reversal in 1997, partly because Indian industry began to feel the pres­sure of competition after the East Asian crisis, but the process of reducing tariffs resumed in 2000. India's weighted average tariff is now about 24 percent. Though definitely an improvement relative to 1991, it is three times as high as that in East Asia, and that is despite the fact that for the past five years a declared objective of gov­ernment policy has been to approximate East Asian tariffs.

Looking back, I have no doubt that we were too cautious and we should—and probably could—have moved faster. The case for gradualism was that a slower pace would evoke less opposition, and this was probably true. But there are two somewhat obvious disadvantages to this type of gradualist approach. First, although it minimizes pain in the short run, it also postpones benefits and to that extent does not build a strong enough constituency for reforms. For example, the export response normally associated with trade reform was slow to materialize in India. It has emerged in the past four or five years, but it would have occurred much earlier if we had been bolder on this front. A second disadvantage is that gradualism gives more time for opponents of reform to mobilize, and all the more so because the benefits of reform are neces­sarily muted. The reversal of tariff cuts in 1997 was to some extent a concession to growing protectionist pressures from industry.

The second type of gradualism refers to situations where there was consensus on the need for policy change, but no consensus on how far to go. That was the case with privatization. Unlike in Eastern Europe, where privatization was politically attractive because it was part of a structural change that was generally supported, in India there was little public support for privatization. The pressure for change came from the technocracy, which recognized that too many loss-making public enter­prises imposed a drain on the budget. But even among this group there was no con­viction about the need for wholesale privatization as an ideology. Rather, there was a desire to privatize all loss-making units, in the belief that private entrepreneurs would do a better job, and to privatize units in sectors where no strategic interests were being served and private ownership was clearly more appropriate (hotels and simple consumer goods were the most obvious candidates in this category).

Even this limited approach had little support outside the technocracy when reforms began in the early 1990s. The process was driven primarily by the need to raise resources for the budget and was limited to selling minority shares in public enterprises (described as "disinvestment" rather than privatization). While the pri­mary motivation was to raise revenue, there was also a belief that by bringing in pri­vate shareholders, management of public enterprises would take on a more commercial orientation.

The Congress government, which began the process of disinvestment, was suc­ceeded after the 1996 elections by a left of centre government that was not expected to favour privatization. It is an interesting example of the way gradualism helped build consensus that the new government did not reverse policy. Instead it focused on process issues, criticizing the earlier process as one in which the choice of which public enterprises would be privatized was arbitrary and non-transparent.

To remedy this problem, the government created a Disinvestment Commission to examine the issue, hold hearings, talk to all stakeholders, and then make recommen­dations. The government did not endorse any particular policy; it simply established a commission to make recommendations on which units should be privatized and to what extent or in what manner. The commission held consultations and submitted reports recommending different courses of action for different public sector units, including full privatization in some cases.

Since the government was in office less than two years, it collapsed before it had to make any decisions on these recommendations. Following the elections of 1997, it was succeeded by a right of centre coalition led by the Bharatiya Janata Party (BJP). The new government decided to accept the recommendations on privatization, and in 1998 announced that it would transfer management control of all nonstrategic public enterprises. A new Ministry of Disinvestment was created to push the process more vigorously.

The first two privatizations involving a change in management occurred in 1999 and 2000 and created tremendous controversy. Company workers took the matter to court, saying that privatization was illegal. Numerous nongovernmental organiza­tions (NGOs) also opposed the government's efforts, as did a variety of other indi­viduals and institutions, with many filing petitions accusing it of doing something wrong. The Supreme Court considered the matter and pronounced that the govern­ment was perfectly within its rights to sell public enterprises. But while the princi­ple was established and some units were privatized, the government was unable to overcome internal resistance to privatizing some of the most attractive public units in the petroleum sector, despite its declared intention to do so.

Relative to Latin America, where privatization was pushed enthusiastically, India looked uncertain about its intentions and slow in its decision-making. Indeed, invest­ment bankers often commented that India's approach was difficult to understand and that it looked as if we did not know what we were doing. But the fact is that priva­tization did not command sufficient public support. The government took a series of partial steps and encouraged active public debate, giving many voices a chance to be heard. This approach was aimed at building sufficient consensus before moving for­ward. In general, changes were made opportunistically, with the government moving forward when it sensed an opportunity—but being just as willing to hold back when there was opposition.i

India's experience with privatization shows that ensuring debate on a policy does not guarantee that consensus will emerge. The essence of democracy is that it is adver­sarial, and parties participating in a democratic process do not have a compulsion to reach an agreement. On the contrary, opponents will remain opposed even after an issue has been extensively debated, at least until public opinion changes very broadly.

This point is important in the context of the push by the IMF and World Bank for various types of participator)- processes in formulating Poverty Reduction Strategy-Papers (PRSPs). There is often an unstated assumption that if all stakeholders are involved in such discussions, it will be possible to reach agreement. But that is by no means certain. Debate is an essential part of the political process, and while it helps ensure participation, it does not guarantee convergence. Indeed, it can sometimes even sharpen conflicts that might have remained muted in the absence of debate. In short, public debate does not eliminate the need for political leaders to make decisions in areas where full support may not be forthcoming. In the end, politicians still have to take risks—and if they fail, their opponents will obviously try to capitalize on those failures.

Complex reforms

The third lesson relates to the special challenges posed when attempting second gen­eration reforms, which are much more complex. This was evident in India's experi­ence with reforms aimed at introducing private participation in infrastructure sectors such as electricity generation and distribution, telecommunications, and roads. It was evident in the early 1990s that India had huge infrastructure gaps and that the gaps could not be filled through a strategy based purely on public investment. Infrastructure services had traditionally been delivered by government-owned suppliers that charged very low user fees and so did not generate adequate resources within the sys­tem. The government's fiscal situation did not allow it to cover the resources shortfall, making the system inherently unsustainable. Thus a change in policy was essential.

One way of solving these problems was to end the public sector monopoly and open these sectors to private investment. This approach was readily accepted, but the complexity- of the reforms needed to achieve it was not recognized. There was a ten­dency to think that if only private entry were allowed, India would be flooded with new investors setting up infrastructure projects. The technocracy was aware that enabling reforms would be needed, but in retrospect I do not think that we appreci­ated the extent and complexity of the preconditions needed to attract private invest­ment in infrastructure.

Let me illustrate by describing what happened in the case of electricity. Initially, the policy aimed at attracting private investors into the generation of electricity without addressing the lack of financial viability of the distribution segment. Distri­bution, which was a public sector monopoly, suffered from an unviable tariff struc­ture that charged some consumers far less than the cost of power. Public distribution companies also suffered from large-scale under-collection due to a combination of operational inefficiency and corruption in the form of deliberate under-billing. The effort to attract private investors to sell power to financially bankrupt monopoly buyers could succeed only if the government guaranteed power purchases, and there was a flood of applicants seeking to set up plants backed by such guarantees.

Although state governments were willing to provide guarantees, their weak finan­cial positions typically made investors seek counter-guarantees from the central gov­ernment, which initially resisted giving them. In the end some limited guarantees were given, but many of these plants ran into other problems.

The World Bank Group—especially the International Finance Corporation (IFC)—was actively involved in this process, and it pushed for the structural changes needed to allow private players to operate in the power sector. But I think it is fair to say that the Bank Group also underestimated the complexity of such reforms. For example, I remember being told on many occasions that India was insufficiently sen­sitive to the needs of private actors in the power sector, and Pakistan's Hub River Pro­ject was frequently cited as a model of effective private participation. Yet that project has since become an example of everything that can go wrong with project design.

Even when the focus shifted to privatizing electricity distribution under the supervision of a statutory regulator, there were unexpected problems. In Delhi, for example, when a regulator was finally put in place, it laid down regulations for deter­mining power tariffs on the basis of a cost-based tariff structure. Although such struc­tures are not perfect, they are quite common. But the initial regulations did not generate confidence among private sector players. The regulations listed the various factors to be taken into account in determining costs—but they also stated that in exceptional circumstances, regulators could depart from any of them. Such omnibus clauses giving governments a great deal of power are readily accepted in a public sec­tor framework, since public utilities can appeal to the government to take a reasonable view. But when a private utility is expected to provide $1 billion in invest­ment—$800 million of which is going to be borrowed—tariff regulations contain­ing such large potential for arbitrariness are unlikely to be acceptable.

India also had problems introducing private participation in telecommunications, but with somewhat different results. Again, the initial policies for attracting private investment did not take adequate account of the complexities involved. In telecom­munications, low tariffs were much less important than in electric power because long-distance telephone charges were too high to start with, and private investors were quite willing to enter the market because they knew that consumers would be willing to pay for their services.

But there were other problems. First, investors wanted a regulatory environment that would ensure interconnection with the incumbent service provider on reason­able terms. A regulator was established, but it did not have sufficient powers to enforce a level playing field for private investors relative to the incumbent. Second, investors initially bid unrealistically high tees for telecommunications licenses and soon com­plained that revenue streams would not support such high payments. This led to demands to renegotiate the license fees, because otherwise the new system would not be sustainable. Not surprisingly, there was severe criticism that changes were being made in response to lobbying by the private sector—which they were. But the gov­ernment felt that enforcing the original conditions was impractical, because it would lead to prolonged legal wrangles as well as service interruptions for many consumers.

In the end the problem was resolved by restructuring the regulatory authority, increasing its powers and converting the payments to be made by licensees into a share of revenues instead of fixed license fees. The evolution of policy in this area can be described as a kind of learning by doing, adjusting policies that were not quite right in a series of steps. This was obviously not ideal, but unlike with electric power, private participation in telecommunications succeeded. Capacity expanded consid­erably, and there were visible improvements in the quality and supply of services, as well as a reduction in their cost.

To summarize, reforms in infrastructure development were generally much more complex than we had expected, and the results therefore varied across sectors. In some sectors, such as electric power, we faced problems from the very beginning that con­tinue even today. In others, such as telecommunications, there was a process of periodic adjustments in policy that were controversial at the time but appear to have worked in the end. It is tempting to think that by anticipating sufficiently, one could ensure a pol­icy design that would avoid problems subsequently. In practice however, it is difficult to hold back initiatives because their design is imperfect—especially if many participants are keen on making progress. Some learning by doing is therefore unavoidable, and it is important to retain flexibility' in policy to allow for such improvements.

The importance of sequencing

Because reforms in some areas are essential to success in others, broadly based reforms require that careful attention be paid to sequencing. This becomes even more important when a gradual approach is used, because gradualism inevitably reduces the effectiveness of other reforms. If gradualism means fitful progress, as was the case in India in many areas, then correct sequencing is that much harder to achieve because reforms in some areas may be held up by unexpected opposition. In hindsight, Indian policy toward sequencing got it right in some cases and wrong in others.

An interesting example of sequencing problems relates to the need to remove domestic distortions before, or at least at the same time as, lowering external barri­ers. India got this sequencing right in one sense, because domestic industrial liberal­ization was implemented much earlier than external liberalization. However, there were important exceptions. The policy of reserving certain items for production by small-scale industries was a domestic distortion that should have been eliminated well before external liberalization. But doing so proved politically difficult, and all that could be achieved was a progressive reduction in the list of reserved industries. Over 10 years the reserved list was cut from about 800 to 500.

A faster pace would have been more logical and would have helped these indus­tries adjust sooner to the new, more competitive environment. To realize the com­petitive potential of exports such as garments, toys, and leather goods—areas where China has done incredibly well—Indian producers should have been allowed to pro­duce on larger, more credible scales. Technocrats recommended such changes in the mid-1990s, but political constraints prevented the government from making them. Indeed, only in 2002 were significant adjustments made in this area.

An area where India got sequencing right was liberalization of the capital account. Many countries have liberalized capital flows before developing a strong financial sec­tor, and suffered as a result. India avoided this problem. It had traditionally followed restrictive policies toward external debt. The government never borrowed abroad, and commercial organizations could not incur external debt without government per­mission—and the government was very restrictive in granting such permission. It also did not allow commercial organizations to take on short-term loans, only long-term, and even those were subject to a global limit determined by the minister of finance.

In the mid-1990s, when there was ample liquidity in world markets, there was a lot of pressure from domestic businesses to liberalize policies on capital flows. That is pretty much what happened in East Asia, and a lot of the instability that arose there in 1997 was the result of huge amounts of short-term external debt having been incurred. India avoided that problem because its decision to liberalize the capital account remained essentially cautious.

This caution did not stem from a desire to avoid change. Indeed, in late 1996 the government appointed an expert committee, headed by a former deputy governor of the Reserve Bank of India, to examine how the capital account should be liberal­ized. The committee's report, submitted before the East Asian crisis, recommended that India liberalize the capital account in a gradual manner, with appropriate sequencing. The sequence proposed was to first liberalize foreign direct investment, because it is the least volatile, and portfolio investment, because such investment is a little more self-regulating. Investors are less likely to make sharp reversals in portfo­lio equity flows because stock markets are likely to collapse if they do. The report was emphatic that short-term flows should not be liberalized until the fiscal deficit was brought under control and the banking system was made much stronger. This was good advice that was followed by the government.

Liberalization and State governments

The next lesson involves the extent to which the role of sub-national governments becomes more important in a liberalized environment. Earlier, the central govern­ment's control over private investment decisions enabled it to spread resources thinly across Indian states. But in a liberalized environment, resources will flow to states where conditions are considered most favourable for private investment.

This tendency was heightened by the fact that state governments responded very differently to liberalization. More enlightened states aggressively adopted investor-friendly policies, trying to attract both domestic and foreign investors. Less enlight­ened states were laggards in this respect. Some of the poorest states, which have the largest populations, grew slower in the 1990s than in the 1980s. So, while India as a whole experienced faster growth, many important states saw a deceleration. This was not because the central government followed a discriminatory policy. Unlike in China, India's liberalization was not geographically selective. But states responded differently, causing an increase in inequality between states.

This outcome had predictable consequences. It generated pressure on the central government to adopt a more proactive approach to ensure more egalitarian growth processes. Although this objective was widely supported, it was not entirely clear what the central government should do. It could provide more money to slower-growing states, but its resources were limited. Another question was whether addi­tional resources provided to poorly performing states should be unconditional transfers, on equity grounds, or whether they should be linked to efforts that would improve performance. Implicit in the latter approach is the notion that additional transfers to poorly performing states should be linked to greater conditionally. This is a controversial issue, and hard decisions of this type cannot be avoided indefinitely.

The key lesson in this area was that economic liberalization implies that unless state governments actively engage in reforms, the potential benefits of liberalization may not materialize—and that state governments that do not change their approach will actually see a deterioration in economic performance, because of the competi­tive environment created by reforms. This simple fact took time to sink in, though I am happy to say that it is now much more widely recognized.

Implications for poverty reduction

Finally, India's experience provides some useful lessons on poverty alleviation. It shows that growth is good for poverty alleviation. Poverty did not decline in India in the 1970s, when growth was weak, but it did decline in the 1980s and 1990s, when growth was strong. India is blessed with a wealth of survey data on consumption lev­els—and an even larger endowment of people willing to analyze it! As a result there is a rich, diverse literature from which you can probably prove whatever you want if you choose your data and analyst appropriately.

That said, a general consensus has emerged. Most experts who have thoroughly examined the issue—including independent international experts such as Angus Deaton—have concluded that not only did poverty decline in India in the 1980s and 1990s, but also that the decline was greater in the 1990s. Poverty did not decline as much as was targeted, but growth also did not reach the levels associated with those targets.

An important issue in the Indian debate is how much reliance should be placed on poverty reduction induced by growth as opposed to poverty reduction resulting from targeted antipoverty programs. India has used both strategies. It has relied heavily on growth and, furthermore, on growth of a particular quality, with an explicit emphasis on the need to accelerate income generation in agriculture. This is not to say that it has achieved this goal. In fact, one of the disturbing facts about India's recent eco­nomic performance is that the momentum of agricultural growth was lost in the sec­ond half of the 1990s, and this slowdown is part of the reason why there has been dissatisfaction with the equity' aspect of recent reforms. However, while this surfaces as an equity' issue, it is as much a failure of the growth component of the strategy.

India has also relied on a wide variety- of targeted antipoverty programs. These programs are limited in scale but play an important supporting role—because there can be little doubt that the bulk of the reduction in poverty has occurred because the benefits of growth have spilled over sufficiently to poor people.

The main lesson I draw from this experience is that growth helps poverty- allevi­ation and should be as pro-poor as possible. In India, where a large portion of poor people are in rural areas, this means paying special attention to policies that stimulate agricultural growth and non-agricultural economic activity - in rural areas. The poverty-reduction strategy has not been very effective in this respect in recent years given that agricultural growth slowed in the mid-1990s.

Although it is beyond the scope of this lecture to provide answers on why this has happened, there is growing consensus on many issues relevant in this context. India's approach to agriculture has depended on a combination of subsidies and public invest­ment. Over time, subsidies have expanded while public investment has fallen. This approach should be reversed, with fewer subsidies and more public investment, espe­cially in irrigation and rural roads. In addition, policies should encourage agricultural diversification and agro-processing. I am not sure that we have all the answers yet. Careful analysis is needed to devise a workable package of reforms, some the respon­sibility of the central government but many requiring action by state governments.

While on the subject of poverty; I would like to comment on some aspects of poverty" reduction as a policy objective where there are interesting differences of per­ception between policymakers in developing countries and international institutions such as the World Bank and other multilateral development banks. The international institutions focus on poverty- alleviation as the overriding objective of policy and are often inclined to view all policy choices from the perspective of what they do for poverty-alleviation. This is understandable because the mandates of these institutions, as defined by the development community" in industrial countries, define poverty' alleviation as the principle international public good that the institutions are meant to promote. Allocation of public resources to these institutions is justified largely on this basis. But policymakers in developing countries necessarily have multiple objec­tives. Poverty alleviation is clearly one of the most important in low-income coun­tries, but other objectives—such as economic development and achievement of middle-income and ultimately industrial country status—are also important. And these go beyond poverty alleviation, narrowly defined.

This has a number of interesting consequences. First, an exclusive focus on poverty alleviation can lead to a bias in favour of interventions that directly affect poor groups in the short run in a measurable manner, compared with other interventions that have either an indirect (and so not easily measured) impact or a positive impact but over a long time horizon. Since resources are scarce, it is important to recognize the oppor­tunity costs of direct interventions. In India, for example, investments in land develop­ment, irrigation, and rural road connectivity may not appear to affect poverty directly because their benefits accrue to the rural population generally. But the net results in terms of impact on poor people may be substantial. It is important that broader infra­structure investments not be short-changed by an excessive concern with targeting.

Another area of difference between multilateral development banks and practical policymakers is that distributional concerns cannot be limited to the issue of the impact on poverty. Multilateral development banks tend to treat this issue as the only relevant distributional concern. But this does not reflect the compulsions of practi­cal politics: policymakers have to be concerned with broader distributional concerns. It is perfectly possible to envisage a growth process that reduces poverty- but increases relative inequality, or the urban-rural divide, or regional inequality; Any of these could become a political problem and would need to be addressed.

Consider a situation where a policy change has no impact on poor people, or is even marginally favourable, but has a churning effect on the distribution above the poverty line—with some groups that were higher up in the distribution pushed down and some lower down pushed up. This may leave the distribution statistically unchanged, but the "impoverishment" of some groups above the poverty line would entail a political price.

All this suggests that politicians have to work with complex objective functions. Ideally, a politician would like to claim that policy reforms have helped poor people, and indeed that every group and region has also benefited.

These are some of the lessons uppermost in my mind as I reflect on India's expe­rience over the past two decades. Some are certainly relevant for policymaking in India in the years ahead.

Note


Deputy Chairman, Planning Commission, Government of India


Born in India in 1943, Montek S. Ahluwalia received a B.A. Hons. in Economics from Delhi Uni­versity and an M.A. and M.Phil in Economics from Oxford University, where he was a Rhodes Scholar. He spent his early career as an economist at the World Bank, where he worked in the Public Finance and Income Distribution Divisions. He left the Bank in 1979 to begin a long career of public service in the Indian government, first as Economic Adviser in the Ministry of Finance, a position he held until 1985. From 1985-90 he was Additional Secretary and later Special Secretary to the Prime Minister, and from 1990-91 was Commerce Secretary. He rejoined the Ministry of Finance in 1991, where he was Finance Secretary from 1993-98. From 1998-2001 he was Member of both the Planning Commission and the Economic Advisory Council to the Prime Minister. Throughout the 1990s Ahluwalia played a major role in design­ing and implementing groundbreaking economic reforms, helping to place India on the high-growth trajectory it enjoys today.


Ahluwalia left the Indian government in 2001 to become the first Director of the Indepen­dent Evaluation Office at the International Monetary Fund (IMF). There he oversaw the IMF's self-evaluation of its role in Argentina's financial crisis. When he left the position in 2004, the IMF Executive Board commended him by saying, "Mr. Ahluwalia has successfully established independent evaluation as an essential element for the effective functioning of the Fund with respect to its surveillance, program, and technical assistance activities in support of its mem­bers." In mid-2004 he began a Cabinet-level position as Deputy Chairman of India's Planning Commission. Ahluwalia cowrote (with Hollis Chenery and others) Redistribution with Growth: An Approach to Policy (Oxford University Press, 1975). He has also written extensively for pro­fessional journals on India's economic reforms and global financial architecture.






i The change of government in 2004 has brought a further modification. The new gov­ernment has indicated that it will not privatize profit-making public enterprises. But privati­zation of loss-making enterprises remains an option, as does the sale of minority holdings in profit-making enterprises.






November 14, 2011, 1:21 AM

India's Godot: Economic Reforms 2.0

By VIKAS BAJAJNathan Lane, left, as Estragon and Bill Irwin as Vladimir in the Roundabout Theater Company's production of "Waiting for Godot" in April, 2009.
The World Economic Forum's India Economic Summit in Mumbai has hosted several prominent figures from the business and political worlds – Mukesh Ambani, chairman of Reliance Industries, and Anand Sharma, the commerce minister, have been among them – but one guest seems to have disappointed many by not showing up: Economic Reforms 2.0.
Prithviraj Chavan, Maharashtra's chief minister, lamented that a "second phase" of reforms was overdue and necessary to accelerate India's growth. Mr. Ambani, the country's richest man, said the government needed to speed up decision-making. And Mr. Sharma acknowledged the absence of reforms by saying that they might be just around the corner.
"My only concern is we must not delay the second phase of reforms," Mr. Chavan said at the summit meeting's opening plenary session Sunday morning.
For many of India's economic and political elite, "reforms" – a generic reference to policies that reduce government control over the economy – are like Samuel Beckett's Godot,  a much-discussed character who doesn't show up.
Economists and business executives say Reforms 2.0 should, among other things, open the retail and insurance markets to foreign investors, ease labor laws and simplify the tax system. Reforms 1.0, of course, were the policy changes that came in 1991 and the years that followed, which included the dismantling of industrial licensing.
Many W.E.F. attendees have been waiting for many years for a second generation of reforms. From 2004 to 2009, policy makers did not attempt many bold economic changes because the Congress party relied on the Communist Party of India (Marxist) to help it keep control of the coalition government. The C.P.I. (Marxist) opposes further liberalization of the economy and has at times advocated rolling back many of the 1991 reforms.
In 2009, when Congress returned to power without the C.P.I.'s support, many political and economic analysts expected its leaders to push through new reforms. But they were again disappointed, as the government was rocked by corruption scandals and, earlier this year, the Anna Hazare movement's demands for a Lokpal, or government ombudsman.
Mr. Chavan argued Sunday that reforms are difficult to achieve because there is no political consensus on them. While "captains of industry" are pushing for them, he noted, social activists, labor leaders and left-leaning politicians say the government should focus on lifting up those who have not yet enjoyed the fruits of India's more vibrant economic growth.
"We might not be able to satisfy either end," he said. "Those who are left behind and those who want to move faster."
Mr. Sharma agreed, saying it is "impossible to satisfy everyone." But he argued that the government would move ahead, citing the recent adoption by the cabinet of a new manufacturing policy that would create a handful of special economic zones where it would be easier to set up factories. The policy's goal is to boost  manufacturing, long a laggard in the Indian economy, to 25 percent of G.D.P in 10 years, from about 16 percent now.
"Some of the reforms that have been delayed will hopefully go through," he said, referring to the winter session of Parliament.
Later Sunday, I spoke to Ashutosh Varshney, a professor of political science at Brown University, who expanded on Mr. Chavan's comments. He said that because investment accounts for about 35 percent of India's economy, the country is essentially guaranteed an economic growth rate of at least 7 percent a year for the foreseeable future.
He said India's "elite political class" – executives, technocrats and others, the sort of people who attend the W.E.F. – rightly recognize reforms as a way to boost growth to 9 percent or 10 percent. That would make the country richer and more productive  faster, which would translate into outsized benefits for them.
But for the "mass political class" in India — that is, most voters — economic reforms and the boost to growth that they could provide are relatively abstract concepts, Mr. Varshney said. They are more interested in policies that will directly benefit their lives now, he said. And few of the delayed reforms will do that, at least in the short run.
"Elite politics is constantly asking about growth rates and can we beat China," he said. "Mass politics is asking about inclusion of the marginalized, and inclusion of the excluded."
Reforming labor laws, for instance, could help create millions of new jobs in the long run. But a vocal minority that includes millions of employees of state-owned banks and companies would lose their lifetime job guarantees. And they would likely protest those reforms fiercely on the streets of Mumbai and New Delhi.
"Look at what will happen to the economy," Mr. Varshney said. "It can completely upset the normal, everyday life of India."
That's why New Delhi will talk a good game on reforms at the W.E.F.   But do not expect it to deliver any of the big-ticket items on corporate India's wish list soon. "Does 9 percent get you votes?" Mr. Varshney asked rhetorically. "All the politicians in this government understand that 7 percent will work."
http://india.blogs.nytimes.com/2011/11/14/indias-godot-economic-reforms-2-0/
AMARESH MISRA NEW DELHI, NOVEMBER 14, 2011 | UPDATED 12:30 IST

Reassess Pandit Jawahar Lal Nehru's legacy

Nehru was blamed for Partition, the Kashmir crisis and India's foreign policy with the US.

Today, as the nation celebrates Pandit Jawahar Lal Nehru's 122nd birth anniversary, a crisis stalks his legacy. For the past twenty years, since the beginning of economic reforms, it had become a fashion to decry Nehru, especially his economic policies. Nehru was seen as the harbinger of a 'notorious' quota-permit Raj, which stifled India's growth.
He was blamed for Partition, the Kashmir crisis and a foreign policy which ensured India's isolation from the American orbit.
But, following the global economic catastrophe, several ideas of Nehru are being seen in a new light. Pro-market liberalisers acknowledge grudgingly, the role played by self reliance, indigenous industrialisation and state intervention in saving India from the global meltdown.
Economy
Pre-Independence India had a negative growth rate. Nehru ensured 3-4 per cent of consistent growth. This was a huge jump which pulled millions out of poverty. At present, India enjoys 8 per cent growth - but poverty alleviation stands at a meagre 0.8 per cent.
The huge Indian market that the world doesn't tire talking about has a lot to do with Nehru's investment in education, health, employment and human resources. Though an unapologetic socialist, Nehru was never a supporter of the command economy. While giving a major role to the public sector, Nehru retained private ownership. At the same time, he curbed monopolistic capitalist practices for he understood that unchecked capitalism could only wreak havoc in India's small peasant economy.
In 1944, Indian business houses themselves brought out a 'Bombay plan', which called for a massive investment by the state. In this plan, businessmen acknowledged their critical weakness with regard to nation building.
The ABC of political economy defines that it is impossible to build a truly dynamic capitalist economy, and a modern nation, without demolishing feudalism and initiating land reforms in villages. India could create a middle class in the countryside only because Nehru distributed zamindari land amongst the peasantry. Land reforms released labour, stuck in medieval practices in villages, for India's expanding industries.
Yet, along with feudal elements, the conservative right wing lobby of moneylenders-traders-black marketers blocked Nehru's every move. The sad part is that more often than not India's nascent capitalist class also did not fully back Nehru's progressivism. Nehru faced conservative- non modern- right wing opposition from within the Congress; he also had to bear the brunt of regressive pulls exercised by the RSS. The right wing and the RSS did not even support parliamentary democracy and the equal rights given to the minorities, women and Dalits by the Indian Constitution.
Right wing forces blame Nehru for Partition - the communal-fascist RSS does not see the contradiction in its advocacy of akhand Bharat, while upholding, at the same time, blind hatred for Pakistan. Nehru was an intellectual- politician, an academically sound but a practical historian with a deep, intuitive- political grasp of the currents of Indian and world history and statecraft: His Discovery of India and Glimpses of World History remain classics to this day.
Nehru did not choose Partition. If things were as simple as 'making Jinnah the PM would have avoided partition', Nehru might have readily agreed to step back. Nehru stuck to an ideological issue: he did not agree to the 1946 Cabinet Mission Plan which divided India into three zones on the basis of religion. Earlier, in the 1930s, Nehru opposed the Muslim League proposal of unity that called for the Congress recognising the League as the sole representative of Muslims. Under that scenario, the Congress would have become the sole representative of Hindus. The British, RSS and the Muslim League wanted that to happen- but Nehru flatly refused to reduce the Congress to a party pandering to identity politics. He knew that no modern nation building would accrue from medieval religious identities. Nehru was interested in the evolution of a modern Indian- not Hindu or Muslim, or Dalit or Christian-identity for his country.
Modernity
Nehru was pro-technology. In diction and speech, his English stood second to no one - not even Churchill and Roosevelt.
Yet his chaste Urdu and love for Persian - as well as his Indo- Persian dress - shamed Josh Malihabadi- the great Urdu poet. In a famous incident, during a mushaira in Pakistan, Malihabadi was rendered speechless when confronted with the sight of Pakistani Muslims dressed in western suits while Nehru, who was present, wore his trademark sherwani.
Eaton and Harrow co-existed with Allahabad and its liberal but rugged city-culture in Nehru. He was comfortable with the India of clubs, Anglophiles and sophomores, while standing tall and rooted in Indian reality, sensitive to the language and expressions of the peasant ethos.
Anecdotes reflect Nehru's rich dialectic. Even as a Prime Minister, Nehru, the intellectual-politician, was not averse to chasing RSS goons, stick in hand- such a thing actually happened in October 1947 in front of Delhi's Odeon cinema. Nehru also charged often, at the height of post-Partition tensions, into a thick crowd, without a thought for his safety, against people who abused Mahatma Gandhi.
Progressive-reformist elements from all caste and creed in India supported Nehru's unrelenting quest. Maulana Hussein Ahmed Madani, the leading Deobandi ulema of pre- Independence India, wrote a pamphlet on composite nationalism, which debunked Jinnah's idea of nation building based on religion. India's Left movement channelled its immense energy to help establish socialistic ideas and practices in the field of culture and cinema.
Despite adjustments to the new post- Soviet word order, Nehru's anti-Imperialist foreign policy has withstood the challenge of time and change. It still guarantees India a leading role in world affairs.
Pluralism
Conservatives contrast Patel's toughness on Hyderabad with Nehru's soft approach on Kashmir. Nehru believed in the will of the people. His decision to use force in Hyderabad was premised on the popular movement there, which was being suppressed by the armed forces of the Nizam. In Kashmir, popular sentiment, represented by Sheikh Abdullah, Nehru's personal and ideological friend, tilted towards India, while Hari Singh, the King, wavered and even considered ceding his territory to Pakistan. Nehru acted swiftly by sending Indian troops in Kashmir during the 1947-48 crisis - but knowing well the history of Kashmir, and popular aspirations for autonomy within India, Nehru, while reaffirming Kashmir as an integral part of India, allowed Kashmiris their own pace and time. It was geopolitics, mistakes by post-1970s Indian and Kashmiri politicians, and distortions emerging out of America's beguiling, proxy anti- Soviet war - not Nehru - that created terrorism in Kashmir.
Nehru's left-of-centre, democratic, third world nationalism, saved India from the fate of other third world countries which chose the quasi- socialist but autocratic- or pro- American, dictatorial-path after gaining Independence from colonial rule. Nehru was Mahatma Gandhi's true heir- he left behind an ideological tradition of secular, plural, pro- poor nation building. While his ideology ruled the country, subversion/ infiltration by the RSS and foreign imperialist powers was in check.
The history of Independent India is too short to produce a definitive judgement on Nehru. His detractors still oppose each and every move of renewal of Nehru's ideas and practices. Yet, as India struggles to become an economic superpower in the 21st century amid a crisis-ridden global order, it is the people of India and organic intellectuals who will play a crucial role in Nehru's critical appreciation.
It is they who will determine whether a revival of Nehru is in the offing.
- The writer is a historian and political analyst.


Read more at:http://indiatoday.intoday.in/story/reassess-the-legacy-of-pandit-jawahar-lal-nehru/1/159866.html

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