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12th Five-Year Plan approvedOn October 5, 2012, the Union government approved the 12th Five-Year Plan (2012-17) document that aims to achieve annual average economic growth rate of 8.2 per cent, down from 9 per cent envisaged earlier, in view of fragile global recovery.

The document will now be placed before the National Development Council (NDC), the apex decision making body, for the final approval. The NDC, headed by the Prime Minister with all Chief Ministers and Cabinet Ministers on board, is the final authority to approve the five-year long policy document.

During the 11th Plan (2007-12), India recorded an average economic growth rate of 7.9 per cent. This, however, is lower than the 9 per cent targeted in 11th Plan. Besides other things, the 12th Plan seeks to achieve 4 per cent agriculture sector growth during 2012-17. The growth target for manufacturing sector has been pegged at 10 per cent.  The total plan size has been estimated at Rs 47.7 lakh crore, 135 per cent more that for the 11th Plan (2007-12).

As regards to poverty alleviation, the Commission aims to bring down the poverty ratio by 10 per cent. At present, 30 per cent of the population is below poverty line.

Five-year plan to slash fiscal deficit
On October 29, 2012, Finance Minister P Chidambaram unveiled plans to reduce India's fiscal deficit to 3% of GDP in five years, demonstrating the government’s intent to walk the talk on budgetary discipline amid hopes that his roadmap will serve as a cue for the Reserve Bank of India (RBI) to cut policy interest rates.

Chidambaram’s plan draws from the recommendations that a committee headed by former finance secretary Vijay Kelkar had laid out in a recent report. It called for a heavy cut in subsidies, and controls on government expenditure.

The five-year plan involves reining in the fiscal deficit to 5.3% of GDP in this fiscal year, 4.8% the next year and gradually narrowing it down to 3% by 2016-17.

High subsidies have widened the government’s fiscal deficit-shorthand for the amount of money that it borrows to fund its expenses-limiting its elbow room to spend on investing in infrastructure and development schemes to spin jobs and multiply income. Chidambaram said efforts will be made to avoid “parking or idling of funds” while ensuring that essential expenditure was not hurt.

Experts said the roadmap was good in intent, but lacked detail.

RBI Monetary Policy Review
On October 30, 2012, the Reserve Bank of India (RBI) left the key policy rate unchanged at eight per cent, defying pressure from the finance ministry to lower rates. The central bank, however, cut the cash reserve ratio (CRR), the portion of deposits banks have to maintain with it, to 4.25 per cent, freeing up Rs 17,500 crore of additional funds.

In his second quarter monetary policy announcement, RBI Governor D Subbarao offered a ray of hope to the ministry and a disappointed corporate India by saying there was “reasonable likelihood” of policy easing in early 2013.

Justifying his decision to hold rates, Subbarao said during tight liquidity conditions, a rate cut might not inspire banks to lower lending rates. “We were very conscious of the fact that a rate cut will not help if liquidity is tight. Conversely, even if we are comfortable with liquidity, it will not help if rates are high. Hence, we had to carefully calibrate between the repo rate and the cash reserve ratio,” he said.

  • CRR cut by 25 bps to 4.25%, effective the fortnight beginning November 3, to keep liquidity comfortable and support growth
  • No change in repo rate to anchor medium-term inflation expectations
  • Bank rate stands unchanged at 9%
  • GDP growth projection for 2012-13 revised down-wards to 5.8% from 6.5% in July
  • WPI inflation projection for March 2013 raised to 7.5% from 7% indicated in July

India lags behind Pakistan, China in reducing hunger
In another sign of the growing disconnect between economic growth and the upliftment of millions of citizens, a new report states that India ranks 65th out of 79 countries on a global hunger index. The country lags behind neighbouring Pakistan, China, Sri Lanka in reducing hunger level. The results are particularly stark when one compares the growth of per capita income in the country with hunger levels.

India’s per capita income doubled between 1995 and 2010, according to the World Bank. However, its score on the Global Hunger Index (GHI) worsened between 1996 and 2001. Minor improvements in the past decade have brought the 2012 score around the 1996 level.

The report, titled ‘Global Hunger Index 2012’, released by three organisations, the International Food Policy Research Institute, Welt Hunger Hilfe and Concern Worldwide, states “India has lagged behind in improving its GHI score despite economic growth”.

The index that reflects the multidimensional nature of hunger, accounts for child mortality, the proportion of undernourished people in the population and the percentage of children under the age of five who are underweight.

The news comes despite successive governments having launched various nutrition schemes. But poor design, low coverage, and insufficient monitoring have turned them into multi-billion dollar leaky cauldrons. Among the regions, South Asia has the worst GHI—worse than Sub-Saharan Africa. In Asia, Bangladesh ranks below India.

Visit of Australian Prime Minister
On October 17, 2012, during the visit of Australian Prime Minister Julia Gillard, both countries decided to set aside past indifference and announced their decision to enter into civil nuclear cooperation by negotiating a safeguards agreement which will facilitate export of uranium to India.
After official talks with Prime Minister Manmohan Singh, Australian PM Julia Gillard said this decision meant a lot to her personally as only last year, her Labour Party had overturned the ban on selling uranium to India.

The actual supply of uranium, however, may take a couple of years as negotiations for the safeguards agreement are expected to be complex and lengthy. It is essential for Australia to sign such an agreement before it can start shipping uranium to any country.

The two countries also signed four agreements—including one for student mobility and welfare—and agreed to hold annual meetings at the summit level, either bilaterally or during multilateral events.

It was also agreed to launch a ministerial-level dialogue on energy security, establish a water technology partnership and start negotiations for an agreement for transfer of sentenced persons. The energy dialogue will be led by the Planning Commission deputy chairman and the Australian minister for resources and energy.

The two countries are also developing wide-ranging cooperation in defence and security issues, including terrorism. They will also enhance maritime cooperation through more joint naval exercises.

The two leaders reaffirmed the importance of reform of the UN, including the Security Council, to better reflect contemporary realities. Prime Minister Manmohan Singh warmly welcomed Australia’s continued support for India as a permanent member in a reformed United Nations Security Council. 

The two leaders also welcomed ongoing cooperation through other regional bodies such as the ASEAN Regional Forum and the Asia Europe Meeting. Gillard reaffirmed Australia’s support for India’s membership of the Asia Pacific Economic Cooperation forum.


Scotland gears up for 2014 breakaway vote On October 15, 2012, Scotland set up a historic independence referendum after its leader and Britain’s PM finalised arrangements for a vote that could lead to the demise of its three-centuries-old union with England.

Scotland's drive for sovereignty, led by its nationalist leader Alex Salmond, echoes separatist moves by other European regions such as Catalonia and Flanders which feel they could prosper as separate entities inside the European Union.

Signed in the Scottish capital Edinburgh, the referendum agreement allows Scotland to ask its people in a 2014 vote whether their homeland should become an independent country or stay within the United Kingdom.

One of the most contentious issues at stake is the ownership of an estimated 20 billion barrels of recoverable oil and gas reserves beneath the UK-controlled part of the North Sea.
Britain is also worried about the future of its nuclear submarine fleet based in Scotland as Salmond says there would be no place for nuclear arms on Scotland's soil after independence.

Moving the fleet elsewhere would be costly and time-consuming. Cameron, who did not address reporters alongside Salmond, opposes Scotland’s push for independence but agrees it is up to its people to determine their future in a vote.

Many Scots themselves are unconvinced. Opinion polls show only between 30 and 40 percent of them are in favour—a range that has changed little as negotiations have intensified.
To convince doubters, Salmond is banking on his skill as an orator to tap into a centuries-old rivalry with England and show that independence would allow his country to pursue a more distinct left-leaning agenda than its southern neighbour.
He has also won a major concession from London to allow Scotland to lower the voting age to 16 from Britain’s countrywide 18—a coup for Salmond who believes that young people are more likely to vote in favour of independence.


October 11, 2012 was observed as the first International Day of the Girl Child.

On October 30, 2012, Reserve Bank of India reduced the cash reserve ratio (CRR)—proportion of deposits that banks have to park with RBI) by 0.25 percentage points. RBI, however, kept the repo rate—at which banks borrow—unchanged at 8 percent. Following the CRR cut Rs 17,500 crore extra became available with Banks to lend.

The 103-year-old Indian Institute of Science (IISc) is the only Indian institution to figure in the Global Employability List 2012. The Bangalore-based research institute has moved up from rank 134 to 35. The list includes top-notch institutions like Harvard, Yale, Cambridge, Oxford and Stanford in its top 10.

INDIAEX-2012 was the Indo-US submarine rescue exercise which was held in October 2012, off the coast of Mumbai.

National Customer Care Day is observed on October 23.

World Post Day is celebrated on October 9.

The Union government is planning to create an Expressway Authority of India to formulate and implement a master plan to build 15,600 km of expressways at an estimated cost of Rs 156,000 crore. The government also proposed to set up a company—National Expressways and Connectivity Corporation (NEXCOR)—under the ministry of road transport, to speed up the development of the expressways.

The C. Rangarajan committee has presented a road map of phased decontrol of the sugar industry by suggesting removal of the levy obligation, release mechanism and having a uniform, revenue-linked sugarcane price. It has also favoured a free import-export regime, with a duty of up to 10 per cent against the practice of a blanket ban or quantitative restriction. The committee has also recommended abolishing the 15/25 km distance criteria between two mills, doing away with the jute packaging obligation and phasing out of sugarcane reservation area.

The Zaranj-Delaram road, connecting Afghanistan with Iran, was built by India in 2008.

Business News

Robert Iger-led 
Walt Disney has agreed to buy Lucasfilm and its “Star Wars” series in a $4 billion deal.

IDBI Bank has cleared a proposal to merge Stock Holding Corporation of India (SHICL) with the bank.

Two of English language’s hottest publishing labels, Penguin and Random house, have decided to come together in a partnership to create the world’s biggest consumer publisher.

Norwegian telecom firm Telenor has signed Lakshdeep Investments & Finance as a partner for Telewings Communications, its new venture in India. Lakshdeep is owned by Sudhir Valia, who holds around 1% stake in Sun Pharmaceuticals.

Indian-American Rajat Gupta has been sentenced to two-years in jail on Insider Trading charges by a US Court. Rajat Gupta is former global head of McKinsey & Co.

Infrastructure Financing and Project Development frim IL&FS is working on setting up a 4,000 MW power plant in Gujarat. It will be the single-largest generation power project of India.

RP Sanjiv Goenka Group has acquired a 34.5% stake in Firstsource Solutions Ltd. With this acquisition the group has ventured into the business process outsourcing (BPO) space.

Sidecar investment is described as an investment strategy in which one investor allows a second investor to control where and how to invest the capital. The sidecar investment will usually be used when one of the parties lacks the ability or confidence to invest for themselves. The strategy will place trust in someone else’s ability to gain profits.  The word “sidecar” refers to a motorcycle sidecar; the person riding in the sidecar must place his or her trust in the driver's skills. This differs from coattail investing, where one investor mimics the moves of another. For example, suppose there are two individuals—Alok, who is experienced in trading stock, and Vivek, who has a background in real estate. They decide to work together in a sidecar investing strategy. In this case, Alok would give Vivek money to invest in real estate on his behalf and Vivek would give Alok money to invest in stocks. This setup allows both Alok and Vivek to diversify their portfolios and benefit from one another’s expertise.

L&T Finance Holdings Ltd has acquired FamilyCredit Ltd, an auto finance company, from its French parent for Rs 120 crore.

Drug major Dr Reddy’s Laboratories (DRL) has acquired Dutch firm OctoPlus for Rs 192 crore.

Indian Oil Corporation (IOC) has become first Indian company to raise debt in Singapore dollar. It has raised $326 million through issue of bonds denominated in Singapore dollar.

Telecom operator Bharti Airtel, chipset maker Qualcomm Inc. And device and telecom equipment maker Huawei Technologies have kicked-off a new phase in India’s 4G roadmap by launching India’s first multi-mode LTE TDD smartphone. The phone will work on 2G, 3G and 4G networks seamlessly.

Japanese mobile operator Softbank Corp has decided to buy 70% of Sprint Nextel Corp, the third-largest US mobile carrier, for $20.1 billion. The deal gives Softbank an entry into the US market.

On October 19, 2012, global leader Starbucks formally entered India’s frenetic cafe business with its first store opening in South Mumbai’s Horniman Circle.

The Foreign Investment Promotion Board has allowed shoe firm Pavers England to set up India’s first 100% foreign-owned single-brand retail venture.

Mahindra & Mahindra has launched Rexton SUV, its first product from its SsangYong stable. SsangYong is a South Korean car manufacturer which has been purchased by M&M.

US weekly magazine Newsweek has decided to publish its last print edition on December 31, 2012 and move to an all-digital format in early 2013. The all-digital publication will be called Newsweek Global and will be subscription based.

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