General Studies - 3 (Mains Practice Questions)

Analyze the functioning of PDS in India and bring out its limitations.

India’s public distribution system to some extent  has helped in reduction of  rural poverty. Evaluate the performance of PDS and analyze what ails it. (250 Words)

What do you think has been the impact of Targeted Public  Distribution System in India on food security for the poor? Justify your answer.(200 Words)

Evaluate the track record of land reform in India in its various aspects, bringing out inter state differences. How would you interpret this record? (250 Words)

Analyze the impact of MGNREGA on rural and urban wages and rural migration. (200 Words)

“The APMC Act, designed to protect farmers from the vagaries of the market, has been turned on its head to enrich traders and harm farmers.” Critically comment. (250 Words)

What is malnutrition and undernourishment? Why is India according to some reports, in spite of surplus food grain production, home to a large number of stunted, wasted and underweight children in the world?  Explain. (300 Words)

“The continuing tragedy is that the Indian system is not able to deliver the ‘surplus’ food grain to the hungry.” Comment. (200 Words)

“Over two thirds of the crop land of the United States is devoted to feed crops and only slightly over one-fifth to food crops.” Discuss the implications of the above statement. Explain with reasons why the conditions are totally different in India. (250 Words)

“Food security bill is a populist, but much-needed legislation, enacted without laying the foreign policy foundations for its continued existence.” Examine. (200 Words)

“In India, the fragmented and unreliable supply chain corrodes the profitability of food processing sector and makes it unattractive for large investments.” Critically comment. (250 Words)

“Crops in their centres of origin and diversity often have a deep cultural significance that can easily get lost when utilitarian issues dominate the discourse”. Examine the statement in the backdrop of the controversy over allowing  field trials of Bt transgenics in certain food crops in India.

 “In India, the fragmented and unreliable supply chain corrodes the profitability of food processing sector and makes it unattractive for large investments.” Critically comment. (250 Words)

“Infrastructure is India’s biggest supply chain challenge.” Comment.(200 Words)

Critically examine the impact of New Industrial policy initiated in 1991 in India. (150 Words)

“The Reserve Bank of India’s (RBI) decision not to prohibit corporate/industrial houses from applying (unlike in 1994 and 2001) for banking licences threatens to take us back to the days before bank nationalisation.” What is the ‘threat’  involved in giving new bank licences to corporate/industrial houses? Comment. (200 Words)

Examine how ‘smart grids’ can be a solution to India’s power woes. (200 Words)
Examine in what ‘unique’ ways  India’s Civil Liability for Nuclear Damages Act, 2010 (the Act) deals with supplier liability? Also throw light on how the present act impacts nuclear commerce. (250 Words)

Monthly Assignment January 2014

Please attempt the following questions and submit the answers by 31st January 2014.

1. “During the Eleventh Plan period, India slipped from 127th rank to 134 rank in the HDI rankings despite the ‘inclusive growth’ strategy adopted during the period. ” Critically comment. (250 Words)
2. “The Monterrey Consensus of the International Conference on Financing for Development  places the mobilization of domestic financial resources for development at the centre of the pursuit of economic growth, poverty eradication and sustainable development.”  Examine the role of banks in resource mobilization in India.  (250 Words)
3. “ The talk of financial inclusion and inclusive growth is meaningless in the absence of a mass movement for economic democracy.” Critically comment. (200 Words)
4. “Crops in their centres of origin and diversity often have a deep cultural significance that can easily get lost when utilitarian issues dominate the discourse”. Examine the statement in the backdrop of the controversy over allowing  field trials of Bt transgenics in certain food crops in India." (250 words)
5. Write a note on National Mission on Micro Irrigation (150 Words)
6. “The APMC Act, designed to protect farmers from the vagaries of the market, has been turned on its head to enrich traders and harm farmers.” Critically comment. (250 Words)
7. “ GSLV launch is dubbed as a game changer given the critical urgency of its success for future Indian space odysseys.” Comment. (250 Words)
8. “Since 2011, when the Tamil Northern Alliance won a decisive local elections in Sri Lanka’s North, the disillusionment of the people in the region has only grown larger with the Sri Lankan government.” Critically comment.  (250 Words)
9. Examine the critical issues in higher education sector in India and how the 12th Five Year plan seeks to address them.  (250 Words)
10. Evaluate the evolving economic relationship between India and  Bangladesh . (250 Words)

Assignment for December 2013

The below listed questions need to be answered them by 29 Dec 2013 as comments under this post. Any confusions or doubts can be taken up as group discussion. 

1. Identify the major obstacles in the smooth functioning of Parliamentary democracy in India.(250 Words)

2. “while economic growth is an important boon for enhancing living conditions, its reach depends greatly on what we do with the fruits of growth.” Comment. (250 Words)

3.Discuss the major extra constitutional factors influencing the working of federal polity in India. (250 words)

4.How does depreciating Rupee affect the CAD and Fiscal deficit? Explain. (250 Words)

5.Highlight the nature of the land reforms still needed in the country.(250 Words)

6.How is agricultural price policy is determined in India? Does the process take note of agricultural subsidies? (200  Words)

7. What do you understand by the term ‘Rule of Law’? How does the constitution of India seeks to establish it?

India's food conundrum and WTO

This year's ministerial conference of WTO at Bali has been in news lately with India has been at its centre stage.The terms like AoA, product specific support , de-minimis level formed the part of daily headlines of leading national or international dailies.

Amidst the cacophony of dissenting voices that lead to WTO ministerial lets try to deconstruct the whole scenario in a piecemeal approach.

To the uninitiated the mjnisterial conference of WTO is its topmost decision making body and it meets every two years.This year's ministerial(9th) was at Bali, Indonesia.

As i write this article a good news ,that India has been able to get the deal at Bali to defend it subsidies is coming in, but we'll focus on it later on.For now we will focus our attention on the contentious issues wrt India and its case of defending subsidies at WTO.

Lets clear some basic terms at the start to facilitate a greater understanding of the issues discussed here.

1).AoA -Agreement on Agriculture or AoA as it is known popularly was negotiated Uruguay round of GATT(General Agreement on Tariffs and Trade)in 1988 and it came into force with commencing of WTO from 1st Jan 1995.It may be noted here that GATT was a preceding body of WTO i.e. it was established in 1948 & after Marrakesh Agreement WTO came into existence in its place.

2).Subsidies under AoA :

Type of subsidies under AoA are as follows ,

(a).Amber Box - These are the measures or subsidies that have a trade distorting effect at international level like the MSP india gives to its farmers fall under Amber box while the funding govt does for training and research in agriculture or likewise are not deemed to be as Amber box category but Green box .The amber box subsidies or measures if exceed their limit, invite penalities .

(b).Green Box - These measures or subsidies are those which do not have a trade distorting effect and are protected from legal challenges.

(c).Blue Box - These subsidies or measure have no limits .

Now,under AoA a minimun threshold has been kept beyond which if domestic support measures that which dont fall into any of the above exempt category of subsidies ,invite penalities.

(3).De-minimis - The threshold level of domestic support measures( that dont fall into any of above exempt category of subsidies ).This level is 5% for developed countries and 10% for.developing countries.

(4).Agrregate measurement of support( AMS) : The reduction commitments are calculated in terms of AMS .The product specific and non-product specific support are calculated as a single figure.In case of members with no reduction commitmments (Currently 30 countries have reduction committments at WTO under AoA)they are required to maintain their domestic support that doesnt fall into any of above exempt categories of amber,green or blue under relevant product-specific and non-product specific de-minimis levels.

Now lets move ahead with the main issue .

Issue :Countries like US and EU or simply developed countries are pushing developing countries like India to cut down on their trade distorting subsidies in agricultral sector.On the other hand G33 countries lead by India are demanding a continual of these subsidies citing reasons of food security and livelihood of poor farmers.

Another major issue that involves india and developed countries ( & WTO too) is its food bill or National Food Security Act(NFSA) as it is known popularly that guarantees 67% of population a quantity of 5kg/person per month at cheap prices of Re. 2-3 resp.

The matter of NFSA deals purely with India but its implications are to be felt at a global scale.As such this issue set the stage for a clash of interests at Bali.If India could take care of its food bill being not in violation of AoA at WTO then the incidental issue of food subsidies for developing countries would be automatically taken care of(As per latest news from Bali India has been successfull in that ).

To implement NFSA successfully would mean India would require 62million tonne of foodgrain in a year so as to give its 82 crore people 5kg of foodgrain per person in a month.For that increased rate of procurement India would have to increase its MSP to incentivise farmers to produce more foodgrain and in the process the subsidy levels will breach the de-minimis levels of 10% agreed to in AoA by India.

Although if procurement is done at current market price then no subsidy will be involved  but procurement at MSP entails subsidies from govt therefore according to AoA the above difference in the acquisition price i.e. procurement price and the ERP(External Reference Price -it is the world price notified by India in the 90s)will be accounted under "domestic support" which is a part of Amber Box measures.In other words,AoA implies that procurement price should be at market price (and not be higher then market price) & should not exceed the world price (Predetermined by ERP)

Concerns of developed countriee and EU wrt India's NFSA :

1).Developed countries fear that India's stockpiling of grains would first soar prices in international market & later on cheap exports will affect farmers' interests worldwide.

2).A case may also arise when monsoon is deficient in India & then India would have to  import grains to support NFSA .This would lead to soaring of global prices.India hence will start exporting inflation to poor countries like BDesh,Nigeria,Indonesia if imports swell during a drought year.

3).Some developed nations that are big commodity exporters believe that India's large stocks of wheat and rice could lead India to dump those in global markets.Also the giving away of foodgrains at cheap throwaway prices would lower local prices & damage demand for their products in one of the world's biggest market i.e. India

What developing countries and G33 say ,

Developing countries including India blame developed countries and EU that they have moved their trade distorting subsidies( or measures) from Amber Box to Green Box ,thereby concealing them & protecting them from legal challenges at WTO.

They also claim that the way de-minimis is calculated (I would show by example how de-minimis is calculated)is also outdated and flawed based on ERP prevailing during 1986-88.The rates have shot up 650% since then.

G33 argues that the illogical way the trade-distorting domestic subsidy is calculated means developing countries are in danger of reaching or exceeding the permissible limits.What matters is how high the govt administered prices i.e. MSP are compared to ERP of 1986-88.and not how much it spends in totality.Eg :-ERP notified by India is Rs.3.52/kg for.paddy while.current year's MSPis Rs.19.65/Kg.This implies an untenable subsidy of over Rs.16/Kg.

US & EU want India to sign a trade facilitaion agreement (trade facilitation looks at how procedures and controls governing the movement of goods across national borders can be improved to reduce associated cost burdens and maximise efficiency while safeguarding legitimate regulatory objectives ).

They also offered a peace clause .Under this clause the trade distorting  subsidies of developing countries in case they rise past de-minimis would not be legally challenged in WTO for a period of 4yrs i.e. till 11th ministerial.

What India can do to ward of concerns of Developed countries ?

1).Continually increasing farm productivity ,maintain consistently high stockpiles of wheat and rice (dont let them rot) which means increased investment in irrigation & creating efficient supply chains .India's food production dropeed from 250 million tonnes in 2011-12 to 250 million tonnes in 2012-13 because of poor rains.

2).Reducing dependence on monsoons and improving agricultural infrastructure is critical in curbing import distortions during drought year.

Challenge before India is to defend its national obligations while giving due credence to policy externalities (consequences of policy that extend beyond policymakers' domain) that may arise during implementation of NFSA.

Calculation for de-minimis

>First we need to calculate AMS

Below example is for wheat

All the figures and values are assumed in below example .

-MSP or procurement price or acquisition price or intervention price =Rs.1920

-Fixed ERP(World Market Price)= Rs.300

-Domestic production of wheat =2,000,000

-Total value of Wheat production =1920*2,000,000 = Rs.3840,000,000

-Wheat AMS would then be calculated as per formula ,

AMS =(MSP-ERP)*Total Domestic production =(1920-300)*2,000,000

         =1620*2,000,000=3240,000,000

Now for de-minimis ,

de-minimis is 5% of total value of production (for developed country it is 5% and for developing countries it is 10%)

          =5*3840,000,000/100= Rs.192,000,000

Hence in above case.,

         AMS1 > de-minimis

Note :.In actuality Current Total AMS is calculated .

Current total AMS =AMS1+AMS2+AMS3 . . . . .

Here AMS1 is for wheat,AMS2 is for rice & AMS3 is for paddy and so on .

Also is to be noted that in above calculation only those AMS ' are taken which have exceeded the threshold of de-minimis so if AMS1 in case of wheat is within de-minimis then it will not be included in final calculation of Current Total AMS

From a breakout Nation to a breakdown Nation by John

The economy of India is the tenth-largest in the world by nominal GDP and the third-largest by purchasing power parity (PPP). The country is one of the G-20 major economies and a member of BRICS. On a per-capita-income basis, India ranked 141st by nominal GDP and 130th by GDP (PPP) in 2012, according to the IMF. India is the 19th-largest exporter and the 10th-largest importer in the world. The economy slowed to around 5.0% for the 2012–13 fiscal year compared with 6.2% in the previous fiscal. On 28 August 2013 the Indian rupee hit an all time low of 68.80 against the US dollar. In order to control the fall in rupee, the government introduced capital controls on outward investment by both corporates and individuals. The independence-era Indian economy (from 1947 to 1991) was based on a mixed economy combining features of capitalism and socialism, resulting in an inward-looking, interventionist policies and import-substituting economy that failed to take advantage of the post-war expansion of trade. This model contributed to widespread inefficiencies and corruption, and the failings of this system were due largely to its poor implementation.  

     

Everything seems to be good  in term of number about india but it could have been a much better if , so let discuss about past  but  we should not discussion before independence , before independence india was a nation not a state while after that , india was a state as well as nation , because of sovereignty. india got independence  on 14th august 1947 , the value of rupee was almost equal to US dollar and also there was no foreign borrowing on India's balance sheet. india adopted its first five year plan in 1951 , the government started external borrowing for finance welfare and development activities , this required the devaluation of the rupee.

Year	Gross Domestic Product	US Dollar Exchange	Per Capita Income (as % of USA)
1950	100,850	4.79 Indian Rupees	3.12
1955	110,300	4.79 Indian Rupees	2.33
1960	174,070	4.77 Indian Rupees	2.88
1965	280,160	4.78 Indian Rupees	3.26
1970	462,490	7.56 Indian Rupees	2.23
1975	842,210	8.39 Indian Rupees	2.18

this figure is showing that , after independence, Indian choose to adopt a fixed rate currency regime. The rupee was pegged at 4.79 against a dollar between 1948 and 1966. but due to two consecutive wars from china in 1962 , from Pakistan in 1965 , resulted in a huge deficit on India's budget, forcing the government to devalue the currency to 7.57 against the dollar. The rupee's link with the British currency was broken in 1971 and it was linked directly to the US dollar. In 1975, the Indian rupee was linked to a basket of three currencies comprising the US dollar, the Japanese yen and the German mark. The value of the Indian rupee was pegged at 8.39 against a dollar. In 1985 it was further devalued to 12 against a dollar.

Year	Gross Domestic Product	Exports	Imports	US Dollar Exchange	Inflation Index (2000=100)	Per Capita Income (as % of USA)
1975	842,210			8.39 Indian Rupees		2.18
1980	1,380,334	90,290	135,960	7.86 Indian Rupees	18	2.08
1985	2,729,350	149,510	217,540	12.36 Indian Rupees	28	1.60
1990	5,542,706	406,350	486,980	17.50 Indian Rupees	42	1.56
1995	11,571,882	1,307,330	1,449,530	32.42 Indian Rupees	69	1.32
2000	20,791,898	2,781,260	2,975,230	44.94 Indian Rupees	100	1.26

If we see figure we can realize that import is more than exports in india after 1975 so India faced a serious balance of payment crisis in 1991 and was forced to sharply devalue its currency. The country was in the grip of high inflation, low growth and the foreign reserves were not even worth to meet three weeks of imports. Under these situation, the currency was devalued to 17.90 against a dollar. in this year the Indian economy adopted LGP. Prime Minister Narasimha Rao, along with his finance minister Manmohan Singh, initiated the economic liberalisation of 1991. The reforms did away with the Licence Raj, reduced tariffs and interest rates and ended many public monopolies, allowing automatic approval of foreign direct investment in many sectors. Since then, the overall thrust of liberalisation has remained the same, although no government has tried to take on powerful lobbies such as trade unions and farmers, on contentious issues such as reforming labour laws and reducing agricultural subsidies. By the turn of the 21st century, India had progressed towards a free-market economy, with a substantial reduction in state control of the economy and increased financial liberalisation. This has been accompanied by increases in life expectancy, literacy rates and food security, although urban residents have benefited more than agricultural residents

The year 1993 is very important in Indian currency history. It was in this year when the currency was let free to flow with the market sentiments. The exchange rate was freed to be determined by the market, with provisions of intervention by the central bank under the situation of extreme volatility. In 1993, one was required to pay Rs.31.37 to get a dollar.Rupee traded in the range of 40-50 between 2000-2010. It was mostly at around 45 against a dollar. It touched a high of 39 in 2007. The Indian currency has gradually depreciated since the global 2008 economic crisis, an all time low of 68.80 against the US dollar on august 2013.

these were some facts through which we realize the value of rupee in an international market , there are several reasons for that like CAD , poor GDP etc

CAD is considered to be the key factor behind the steep volatility of rupee against dollar. CAD occurs when the total import of goods and services of a country is greater than the total export goods and services thus making India a debtor to the rest of the world. CAD increases due to have oil and gold imports. India is among top five oil importer and also among top in gold importer.

With fall of the GDP to 4.8%, it had significant effect on the stock markets and the falling rupee. The manufacturing, mining and the agricultural sector has faltered and investors have become cautious of investing in India.  

From a breakout Nation to a breakdown Nation

The rupee had plunged to an all-time low against the dollar and its fall has become a subject for debate. India, which was a potential ‘breakout nation’ in past is now a days facing an economic and political crisis. It is now near the bottom of the emerging markets’ list of countries that will break through their troubles. Majority of India’s troubles are self-inflicted, but some are part of the global sweep of economic events.

At the time of independence, India had no foreign borrowings and the rupee was at par with the dollar. With the introduction of the 5 years plan and the subsequent requirements for foreign investments the dollar slowly rose. In the era of economic liberalization in 1991, there was a sharp devaluation of rupee and the rupee had dropped to Rs.24.5 against a Dollar. It continued and the rupee had hit an all-time low of Rs. 68.85 against a dollar on August 2013. Factors identified and responsible for fall of Indian Rupee against Dollar are Current Account Deficit and Poor economic growth in terms of GDP.

India’s current account averaged a deficit worth 1.5 billion USD since 1947 until 2013. In the first quarter of 2013 the CAD was 18.1 billion and at present it has gone up over 20 billion. India's these fundamental terms have deteriorated steadily since 2007. The current account deficit has exploded from $8 billion to $90 billion; it now equals 5% of GDP, twice the level academic studies suggest is sustainable. Meanwhile, many corporations have been on a borrowing mode. Since 2007, borrowing by the 10 most indebted companies has risen six-fold to $120 billion, with much of it denominated in foreign currencies.

The downfall in the Indian economy had worsened the situation and the government is unable to generate heavy capital inflows. Despite all the government effort to allow Foreign Direct Investment (FDI), there hasn’t been significant FDI inflow. US federation had also withdrawn some of its bond buying programmes resulting in a sudden outflow of money that in return has left India far behind in the race .Foreign investors started pulling out of the Indian economy.

As stated above, adverse point came in may, when signals that the US Federal Reserve was serious about tapering off its quantitative easing programme triggered a sharp rise in long-term interest rates in the US, drawing dollars home. The trickle of money out of emerging markets turned into a flood. In India, more dependent than ever on foreign capital, the rupee has fallen 20% since May - the largest decline of all emerging market currencies.

Economic growth has also fallen to an average of 4% in emerging nations. In India, it is barely 5%, disappointing for a country with an income of only $1,500 a head, compared with the emerging market average of nearly $10,000.

Indian government assumed strong investment and savings rates would keep growth above 8%, and dismissed inflation as the natural price of prosperity and crony capitalism as a normal symptom of early-stage growth, rather than recognising it as the serious decease that leads to a backlash against wealth creation.

After the advent of new governor of reserve bank of India and his policies on very basic instrument like repo rate, cash reserve ratio, SLR and many other fiscal matters, the falling trend of Indian Rupee was somehow controlled. Initiatives taken by RBI during this time was criticised by economist initially but accepted when it shows curbing on falling down of Indian currency.

Government of India and RBI are the main players in the field of economy in India and global world. Both are empowered to regulate and control the economy by respective area’s instruments. Government of India has although taken immediate action to control the down fall of Rupee and Indian economy, yet failed in all areas. This time RBI initiatives have somehow controlled the economy.

A sharp decline in rupee affects inflation, current account deficit and the economic growth of our country. The government and the Reserve Bank of India both have the power to regulate and monitor the economic and fiscal policy for India. They should work hand in hand to stabilize the situation and minimise the gap between Indian Rupee and Dollar. In present scenario of global economy uncertainty, both should be aware and updated on latest economic trends in world economy and its effects over India. They are required to be equipped with diversified business areas apart from traditional dependency on borrowing and imports, keeping eagle eye on CAD, Forex Reserves and GDP. External borrowing and Imports should be minimised and promotion to be given for maximum export of indigenous goods and services. It will help in strengthen the health of economy and Indian Rupee as well in global market.

From a breakout Nation to a breakdown Nation

The rupee has collapsed, stock market is falling – has India moved away from a breakout nation to a breakdown nation in just a few months?

A crisis point that Indian Economy is facing is the all-time lowest point that it had had in past. Experts have their own views on this, if it will be a long term or a short term crisis. If this situation is persistent and it continues to be like this, India is likely to be declared junk status. A short term loan of $170 bn  standing to be paid by March 2014 is making the situation worst. Rupee has collapsed and the stock markets are in a free fall.

At the time of independence Indian economy was at par with no foreign debt and economy was in equilibrium. With subsequent requirement for foreign investment the dollar rose. With a GDP growth of 8% in 2008-09 India was experiencing a boom. A slowdown in US economy was a gain for India. A free fall in the rupee in last few months has been erratic for the Indian economy. This has certain internal as well as external factors attached to it. A mismanagement of Economy by UPA-2 government along with certain macroeconomic factors has led to a slowdown of Indian Economy.

Current Account deficit is considered to a major factor behind this slow down and downward movement of rupee against dollar. CAD occurs when total imports are greater than total exports thus making India a debtor to rest of the world. Strengthening of Dollar in the last six months the dollar has strengthened by 3.52 percent with the strengthening of the US economy. The dollar has been rising on signs of growing economic momentum and talk of an early end to the Fed’s stimulus effort.  This is something which is beyond the control of the Indian Government and it is hampering the recovery of the rupee. This is one of the immediate reasons for fall of rupee that the US Economy is doing better. Money is flowing to United States. Insufficient inflow of FDIs and outflow of the foreign investments. The downfall in the Indian economy has worsened the situation and the government is unable to generate heavy capital inflows. Despite all the government effort to allow Foreign Direct Investment (FDI), there hasn’t been significant FDI inflow. The US federation has withdrawn some of its bond buying programmes resulting in a sudden outflow of money that in return has left India far behind in the race .Foreign investors has been pulling out of the Indian economy. The month of May has seen a record outflow of foreign investments of Rs. 44162 crore. With the giants like Posco pulling out of its Rs. 30000 crore steel plant project in Karnataka followed by ArcelorMittal pulling out of its Rs. 50,000 crore project in Odisha due to delays and land acquisition delays.

The rising import bill is one of major concern and is has hindered the government effort to tackle the falling rupee. Oil accounts for 35% of the total imports and gold 11% on India’s current bill. Oil and gold imports account for 35 per cent and 11 per cent of India’s trade bill respectively. There has been an uninterrupted demand for the dollar from the oil importers pushing the rupee lower. Likewise the falling gold prices have made the central bank to reduce imports, which increases CAD and hits the currency directly. Indian economy requires a strong structural reform to maintain a positive balance of payment. According to the latest figures released by the RBI the CAD has fallen down to 1.2% of GDP on the back of turnaround in exports and decline in gold imports.

The Gross Domestic Product (GDP) has hit its lowest patch in the last 10 years. With fall of the GDP to 4.8%, it had significant effect on the stock markets and the falling rupee. The manufacturing, mining and the agricultural sector has faltered and investors have become cautious of investing in India.

The central government has unraveled a multipronged strategy to bring about an increment in the inflow of dollars and limit the outflow to compensate for the sliding value of rupee. A planned increase in import duty has been exercised to shore up the decrement in rupee. Some of the other possible remedies that can be emphasized are:

• The customs duty on several red-hot imports like gold and silver is on the rise as it’s a strategic movement by the central government to ease the gap between dollar and rupee.
• NRI bank deposits can be made more attractive and foreign loan norms eased.
• The government has also decided on three public sector institutions based on finances to raise funds in dollars through bonds.

• Electronic goods top the list when it comes to making big business. In order to stabilize rupee a significant increase in customs duty on Electronic goods needs to be exercised.
• Another point that can be kept on the anvil is that some imports should be denied. The products can include crude palm oil, copper and certain varieties of coal.

The best business prototype anyone can have is to spend in rupees and earn in dollars, which is what the giants of India Inc, including the top IT companies, excel in. Basically the sector which is targeting exports for its industrial operations are the one wins the game.

Dollar appreciation would be positive for sectors such as IT, pharmaceuticals, hotel, textiles and automobiles which have the total foreign exchange earnings of these firms are far greater than their forex spends. As much as the rupee weakens, the foreign exchange earners gain provided the other factors remains constant. A sharply declining rupee triggers inflation, broaden the current account deficit, hits investor sentiment and creates burdens for organization with high exposure to foreign debt. The government and the Reserve Bank of India have taken several reform initiatives to resist the downturn, but their success stories are looking gloomy. As a whole we can say that though weakening rupee is the reason for someone’s smile it is a real threat for the country’s overall fiscal health and increase the current account deficit heavily. But in my opinion this huge downgrade is a temporary phenomenon and the rupee is really oversold. Now the Central bank and Government should work hand in hand and find out the policy measures to stabilize the frightening scenario. I personally hope a further cut in SLR to ease the liquidity to save rupee and also import duty hike in gold and other related materials. RBI can buy bonds to ease liquidity in the market. Finally we can say that the situation is tight and challenging for us, but we can not only hope for the best but also should contribute the most to get back Indian economy in the driving seat.

From a breakout Nation to a breakdown Nation by Luv Sharma

The economy of India is 10th largest in the world by the GDP and the third largest in terms of purchasing power parity(PPP).For much of the past decade, India waa celebrated as one of the emerging nations destined to rise indefinitely.India's dream run continued from 2003 and lasted for five years with economy recording an average annual growth rate of 9% throughout that period i.e. 2003-04 till 2007-08.It was during these times that stories of a breakout nation vis-a-vis India started doing rounds in World market but this raging Indian juggernaut was brought to a deafening halt as recession hit the world in 2008.Though India survived the recession but its after-effects that reverberated throughout the world affected India too.India's economy & its currency has been on a downward spree ever since.

When India got freedom value of Dollar was at par with rupee.To finance welfare and development activities especially after introduction of 5year plan in 1951 ,the government started external borrowings which required the devaluation of Currency.The rupee was pegged at 4.79 against dollar between 1948 & 1966.In 1975 it was 12 against dollar.During 1991 economic crisis ,a period marked by high inflation, low growth & low foriegn reserves forced India to further devaluae rupee to 17.90.The rupee traded in the range of 40-45 between 2000 & 2010 touching a high of 39 in 2007 during economic boom.This boom that India witnessed was the outcome of a surge in bank credit to the private corporate sector boosted by a flood of foreign capital.The loose monetary policy followed by the US to revive the domestic economy after the dot-com bubble burst and Japan's near zero.interest rates around the middle of the first decade of this century led to the resurgence of the capital outflows to the emerging markets , with investors prepared to take greater risks in search of higher returns.FDI inflows also increased during this period as Indian Government relaxed norms to allow Venture funds/Private equity/Hedge funds to enter Indian Market .This was the story till the dream run lasted but as soon as the lehman brothers collapsed foreign portfolio investment ezpectedly fled for the safety of the dollar.

From 2008 till 2013 rupee has drooped to its lowest when it touched a record low of 62.80 against dollar in August .Present case scenario can.be attributed to many factors ,inflation and High Fiscal Deficit being prominent among them.If we take up inflation in India then one achool of thought argues that inflation in India is because of factors like increased payment through MGNREGA, higher minimum support prices for farmers& recently goverment introduced food bill under which it has committed to spend around Rs 1.3Lakh Crore per annum ..Money spent without increase in storage capacity in case of Food Bill & many infrastructure projects not getting under MGNREGA is bound to cause inflation.Questions are further raised about effective usage of Government money on health & education.Critiques also argue that although development indicators have improved ,money is not being spent as well ,as quality of service has not improved.Add corruption to this and one finds a perfect recipe for inflation.Inflation and a rise in Fiscal Deficit is bad news for exchange rate.Jn foreign exchange markets ,expectation plays a major role.High fudcal deficit & higher inflationary expectations make domestix assets less attractive .Currency depreciates & foreigners pull out money from the domestic capital market.

The fall of rupee every other day is a direct consequence of the above fact.The fall in currency has had its adverse impact on India's economy and will further dent it.India's CAD is likely to increase further as oil and precious metals still contribute to the bulk of India's imports.Moreover as government of india imports oil for its energy needs and then sells it at subsidised prices to companies the reultant Oil import subsidy bill will contribute its share to CAD .India buys oil in dollars and sells in rupees so this part of our import package is going cut a gaping hole in our forex reserves..Government takes short-term loans from international organisations that it will have to reimburse at a higher rate because of fall in the value of rupee.Still there are ways government and RBI can seek to fight it out in this tough battle.Govt can take number of steps like creation of environment for long-term capital investment,Improving of trade relations with Iran which will allow India to import oil in rupee so no need of spending precious dollar.Similarly Govt can try to implement government funded schemes better.Reforms such as Direct Benefits Cash Transfer(DBT)Scheme are welcome as they are expected to plug leakages in the system.Further short-term measures include, curbing imports of gold and silver by raising of import duties, raising of additional funds through ECBs by PSUs,liberalised deposit schemes to attract dollar inflow from NRIs,tighteninh of liquidity to reduce rupee availability in the system and lastly reducing amount of dollar resident Indians can take with them.outside.

The irony of the situation is profound.Indian leaders wete quick to credit a boom to the country's natural strengths, rather than easy flow of capital from.outside world but now they are quick to blame their troubles on the receding glolobal tide.This phase too shall pass as government looks to take some strict measures but toexpect a likely turnaround soon would be a farcry.India has always wanted to be 'next china' in economic terms but beating China to next crisis is not whay Indians had in mind.People are still wondering as to how their breakout nation became a breakdown nation seemingly overnight.

Food Paradox of India: Hunger amidst Plenty By Luv Sharma

India is the world's second biggest grower of rice and wheat & may very well produce a record quantity of food in the 2013-14 season as monsoon covered the entire nation early.India has world's highest percentage of arable land area & second largest in total(after US) coupled by the fact that it also ranks first in gross irrigated croplands, an obvious corollary would have been the non-existence of hunger & malnourishment in India but such is the criminal & strange paradox of plenty that in india millions still go without food.Not only this to further substantiate a brilliant example of hunger amidst plenty it was ranked 66th in Global Hunger Index.Even after 45yrs of the Green Revolution India provides a unique spectre of overflowing warehouses & rotting grqins on the one hand while.millions go to bed hungry.

Spurred by the agricultural innovation & generous subsidies, India now grows so much food that it has a bigger grain of stockpile than any country except china & it exports some of it to countries like Saudi Arabia & Australia.Yet 1/5th of its people are malnourished , which is double the rate of other developing countries like Vietnam & China.This glaringly ironical situation has been under constant neglect from the government.

The explanation of this anomaly lies in the complex regulations that govern procurement & distribution .One major problem is the storage of the grains.For past 25yrs the storage capacity has not been upgraded at all.Part of the grain is officially stored outside warehouses, where chances of rotting are high.The current storage facilities are quite inadequate.Granaries are filled beyond capacity & many are in deplorable condition.The above problem is further compounded by infrastructural barriers like insufficient road network & transportation.Consider the example of punjab which has been blessed with rich & fertile soil and is popularly called as bread-basket of India.It has been reeling under inadequate incentives and investment for procurement & storage of food grains.Of 14Million ton of wheat to be purchased by State govt's food & civil supplies deptt., Punjab currently has space to store only 6Million ton.This has forced state govt to look for alternative storage spaces in empty mills,abandoned factories ,schools & even graveyards.Meanwhile its open sites are overflowing & slowly spoiling grain from previous years.So the need of the hour is to setup a network.of grain silos & warehouses & godowns across country .This would redice the burden for stock holding of wheat by the producing states and they can also be used for effective distribution among the poor.Another problem is the inefficient & corrupt system used to get the food to those who need it.Just 41.4% of the grain picked by the states from central warehouses reaches Indian homes, according to a worldbank study.Officials all along the chain, from warehouse managers to shopkeepers, steal food and sell it to the traders, pocketing tidy ,illicit profits.Many families have still not got their ration cards and they hesitate in.getting them due to bribery involved.Some States like TamilNadu & Chhatisgarh have made marked improvements by using technology to track food & have made it easier for households to get ration Cards.India should move towards giving poor cash or food stampsas US ,Mexico & other countries have done.That would eliminate mismanagement because govt would.buy and store only enough grain to insure against bad harvests thus solving the twin problem of wastage and of providing maximum outreach.

Recently food security law has been passed by government of India which gurantees 67% population nutritious food at very low prices.This is an another step towards achieving food security.If implemented correctly this law would not only help in exterminating the problem of hunger and malnourishment but also help divert the excess grain procured by the govt thereby eliminating the wastage of grains.

The visuals of food rotting speak volumes of the criminal apathy,neglect & callousness on our part with which we, as a nation have failed to address the shameful scourge of hunger.

India is facing a major food problem ,arising mainly from poor policies,infrastructure & corruption but it can be resolved with sincere efforts on the part of government by strengthening the market support system & establishing a network of storage spaces across the country.

Every piece of grain wasted is a cruel joke and a slap on the faces of millions of children living under poverty and malnourishment.Perhaps if policy makers could realise the gravity of what Gandhiji was trying to say when he said " There are people in this world  so hungry that God cannot appear for them except in the form of bread.

Perhaps its high time that India puts the national Agricultural ox before the cart of being a major global power.