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.
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.
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