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Hilary Kelley
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1 Economic Survey of India to

2 Contents Author's Note on the Book vii-xvi 1. Indian Economy Since Independence: An Overview Economic Scene on the Eye of Independence 1.2 From Regulations and Controls to Economic Liberalisation 1.3 Human Resources 1.4 Economic Planning 1.5 Agriculture 1.6 Industry 1.7 Infrastructure Development 1.8 Fiscal Policy 1.9 Money and Prices 1.10 Banking and Finance 1.11 Employment and Labour Welfare 1.12 Human Development and Social Security 1.13 Environment 1.14 Foreign Trade 2. Indian Agriculture: Major Developments and Initiatives Nature and Importance of Agriculture in the Indian Economy Agriculture in the Constitution of India Role of Agriculture in the Indian Economy Use Distribution of India's Geographical Area Cropping Pattern in Indian Agriculture Classification of Agricultural Crops Subsistence Nature of Farming Small-sized Agricultural Holdings Reasons for Small Holdings Disadvantages of Small Holdings Farm Size and Productivity Low Productivity of Indian Agriculture Causes of Low Productivity

3 xviii # Economic Survey of India: to Land Reforms Aspects of Land Reforms Abolition of Intermediaries Tenancy Reforms Security of Tenure Regulation of Rents Ownership Rights Ceiling on Land Holdings Consolidation of Holdings Critical Appraisal of Land Reforms in India Lack of Political Will Indifferent Attitude of Bureaucracy Legal System Protecting Right to Property A Absence of Pressure from Rural Poor Absence of Up-to-date Land Records Recent Plans on Land Reforms Eighth Five Year Plan ( ) Ninth Five Year Plan ( ) Tenth Five Year Plan ( ) Approach Paper to Eleventh Five Year Plan ( ) 2.3 Agricultural/Rural Credit Credit Needs of the Indian Farmers Sources of Rural Credit Co-operative Societies Micro Finance Kisan Credit Cards (KCCs) Moneylenders 2.4 Marketing of Agricultural Produce Present System of Marketing Measures to Improve Agricultural Marketing Inter-Ministerial Task Force on Agricultural Marketing Salient Features of the Model Act for State Agricultural Produce Marketing (Development and Regulation) Act, New Agricultural Strategy/Green Revolution Scope and Achievements of High Yielding Variety (HYV) Programme Problems Created by Green Revolution Inter-regional Inequalities

4 Contents xix Inter-personal Inequalities Inter-crop Imbalances Fluctuating Output Neutrality to Scale Social Costs 2.6 Agricultural Price Policy, Food Subsidy and Public Distribution System Minimum Support Prices Food Subsidy Public Distribution System (PDS) Targeted Public Distribution System (TPDS) 2.7 Recent Initiatives in Indian Agriculture National Agriculture Policy, Protection of Plant Varieties and Farmer's Rights Legislation Development of Food Processing Industry Agricultural Exports and Imports Agricultural Exports Agriculture-export Zones Agricultural Imports Protecting Domestic Agriculture Vishesh Krishi Upaj Yojana Oilseeds/Edible Oils: Widening Shortfall Policy Initiatives for New Employment Opportunities Crop Diversification Measures Emphasis on Horticultural Crops Agricultural Diversification in the Union Budget Recent Initiatives to Boost Plantation Sector Marine Fishing Policy, Policy Objectives Main Provisions of the Policy National Commission on Fanners Eleventh Five Year Plan ( ) on Agriculture 3. Year-wise Review of Agricultural Developments in India: to

5 xx Economic Survey of India: to Indian Industry: From Controls and Regulations to Liberalisation and Privatisation Legal Framework for Industrialisation Constitutional Provisions Industrial (Development and Regulation) Act, Monopolies and Restrictive Trade Practices (MRTP) Act, FERA and FEMA Competition Act, Post-Independence Industrial Policy Industrial Policy Resolution, Industrial Policy Resolution, Categorisation of Industries Other Features Industrial Policy Statements 1973,1977 and Industrial Policy, : A Critique Expansion of Public Sector Regulation and Controls of Private Sector Absence of Internal Competition Absence of Foreign Competition Disillusionment and Rethinking Pressure for Industrial Liberalisation Internal Factors External Factors New Economic Policy and Industrial Liberalisation, Industrial Policy Statement, Public Sector Enterprises Objectives of Public Sector Enterprises Organisation of Public Sector Departmental Undertakings Government Companies Public Corporations Holding Companies, Poor Performance and Rethinking Industrial Policy Statement, 1991 on Public Sector

6 Contents xxi Public Sector Disinvestment Commission Classification of Industry Groups Objectives and Strategy Loss-making PSUs Profit-making PSUs Criteria for Disinvestment Use of Disinvestment Proceeds Disinvestment/Privatisation in Action Supreme Court Judgement, September 16, Public Sector at the State Level Future of Public Sector 4.4 Small-scale Industries Introduction Modern Small Industries Traditional Industries Arguments for Small-scale Industries High Employment Potential Widely Dispersed Entrepreneurial Base Relatively Low Capital Investment Regional Balanced Development Export Potential Problems of Small Industries Technological Obsolescence Inadequate and Irregular Supply of Raw Material Imperfect Knowledge of Market Conditions Inadequate Availability of Finance and Credit Lack of Infrastructural Facilities Deficient Managerial and Technical Skills Policy Measures to Help Small Industries Reservation of Items for Exclusive Production by Small-scale Industries (SSI) Excise Duty Concessions Priority in the Disbursement of Loans by the Financial Institutions Other Concessions Recent Policy Initiatives for Promoting Small Industries Small-Scale Industries in the Union Budget Micro, Small and Medium Enterprises Development (MSMED) Act, 2006: Main Provisions

7 xxii Economic Survey of India: to Conclusion 4.5 Industrial Relations and Restructuring of Labour Laws Industrial Relations: Post-Independence Trends From Laissez Faire to State Intervention First National Commission on Labour, Declaration of Emergency, Post-Emergency to Post-liberalisation Period (1991 onwards) Contract Labour Meaning and Forms of Contract Labour Contract Labour (Regulation and Abolition) Act, Employers' Viewpoint Workers' Viewpoint Issues in Regulating Contract Labour Industrial Disputes Act, National Commission on Labour, Labour Reforms: A Touchy Issue 4.6 Industrial Sickness Causes of Industrial Sickness External Causes Internal Causes Measures to Help Sick Industrial Units Government Policy Regarding Nationalisation of Sick Industrial Units 5. Year-wise Review of Industrial Developments in India: to India's Fiscal Policy: From Fiscal Adjustments to Fiscal Accounting Central Government Budget Annual Financial Statement Revenue Budget Revenue Receipts Revenue Expenditure

8 Contents xxiii Capital Budget Capital Receipts Capital Expenditure Various Measures of Budget Deficit and Their Significance Overall Deficit (or Budgetary Deficit) Fiscal Deficit Revenue Deficit Primary Deficit Monetised Deficit Fiscal Responsibility and Budget Management Act (FRMBA), Trends in Combined (Centre and States) Tax Revenues Trends in Tax-GDP Ratio Trends in the Relative Significance of Direct and Indirect Taxes Reversal of Roles 6.3 Trends in Central Taxes Direct and Indirect Taxes Composition of Direct Taxes Income Tax Wealth Tax Composition of Indirect Taxes Union Excise Duties Service Tax Customs Duties 6.4 Trends in State Taxes Direct and Indirect Taxes Composition of Direct Taxes Composition of Indirect Taxes Local Finance 6.5 Public Expenditure in India Classification of Public Expenditure in India Structure of Revenue Expenditure Structure of Capital Expenditure Factors Responsible for Increase in Public Expenditure Public Expenditure Policy 6.6 Public Debt in India

9 xxiv Economic Survey of India: to Rationale for Government Borrowings Constitutional Provisions Pertaining to Public Borrowings in India Instruments of Government Borrowings in India States' Indebtedness Recent Trends in Central Government Liabilities Debt Restructuring Suggested by the Twelfth Finance Commission 6.7 Centre-State Financial Relations India: A Federal Polity Rationale for Constitutional Arrangements Sharing of Central Taxes Centralisation of Revenues and the Need for Transfers Mechanism of Central Transfers to the States Transfer of Resources through the Finance Commission From Itemised Sharing to Global Sharing 7. Year-wise Review of Fiscal Developments in India: to V: Morteil&iiMees-in IndiaW ym$& 8. Monetary Management and Price Policy in India: Controlled Expansion with Economic Stability Monetary Policy Objectives Monetary Policy-Fiscal Policy Interface Measures of Money Supply in India Reserve Bank of India's Monetary Policy Monetary Policy Reforms Since Ways and Means Advances (WMA) Replace Treasury Bills Reactivation of the Bank Rate Deregulation of Interest Rate Deregulation of Credit 8.2 Credit Policy in India Allocation of Credit between Government and the Private Sector

10 Contents xxv Inter-sectoral Allocation of Institutional Credit Inter-regional Allocation of Credit 8.3 RBI's Internal Group on Liquidity Adjustment Facility Recommendations Regarding Day-to-day Liquidity Management Recommendations Regarding Sterilisation 8.4 Changing Monetary Policy Paradigm in India 8.5 Recent Challenges 8.6 Price Rise Defined 8.7 How is Price Rise Measured? 8.8 Need to Monitor and Moderate Price Rise 8.9 Causes of Price Rise Excess of Demand Lack of Supply Other Factors 8.10 Effects of Price Rise 8.11 Determinants of Price Policy 8.12 Constituents of Price Policy Fiscal Policy Monetary Policy Commercial Policy 8.13 Role and Coverage of Controls 8.14 Role of Buffer Stock Operations 8.15 Price Policy of the Government Demand Side Supply Side Agricultural Sector Industrial Sector 9. Year-wise Review of Money and Prices in India: to apcl-finf riqgyn India! *- 10. Banking and Financial Markets in India: From Financial Repression to Financial Openness Financial System of India: An Introduction Post-Independence Developments

11 xxvi Economic Survey of India: to Nationalisation of Imperial Bank of India (1955) Nationalisation of Life Insurance Business (1956) Nationalisation of Commercial Banks (1969 and 1980) Nationalisation of General Insurance Business (1973) Rethinking on Government Domination of Financial Sector From Financial Repression to Financial Liberalisation (1991 onward) 10.2 Reserve Bank of India Functions of RBI Sole Currency Authority Banker to the Governments Bankers' Bank and Lender-of-the-last-resort Controller of Money and Credit Controller of Foreign Exchange Source of Economic Information Promotional Role of RBI 10.3 Commercial Banks Classification of Commercial Banks in India Post-Independence Developments in Commercial Banking Pre-nationalisation Period Post-nationalisation Period Banking Sector Reforms since Objectives of Banking Sector Reforms Contents of Banking Sector Reforms 10.4 Co-operative Banks 10.5 Development Finance Institutions The Changed Scenario 10.6 Non-banking Financial Companies 10.7 Mutual Funds 10.8 Money Market Meaning and Functions of Money Market Reserve Bank of India (RBI) and the Money Market Developments in the Money Market since 1991 D

12 Contents xxvii 10.9 Government Securities Market RBI and the Government Securities Market Post-1991 Measures to Promote Government Securities Market Fiscal Responsibility and Budget Management (FRBM) Act, Capital Market Meaning and Importance Stock Market Capital Market in the Pre-reforms (i.e. Pre-1991) Period Establishment of Securities and Exchange Board of India (SEBI) Reforms in the Capital Market since New Capital Issues: Introduction of Free Pricing Disclosure Norms Transparency and Efficiency Shortening of Settlement Cycle Strengthening Regulatory Framework Derivatives Market Insurance Market Nationalisation of Insurance Business Nationalisation of Life Insurance (1956) Nationalisation of General Insurance Business (1973) Reinsurance Business Weaknesses of Insurance Industry Prior to Reforms of Late 1990s Low Productivity Lack of Information Technology Limited Availability of Insurance Products Poor Quality of Insurance Services Committee on Reforms in Insurance Sector (Chairman: R.N. Malhotra), Indian Insurance Business: Current Status Foreign Exchange Market Foreign Exchange Regulation Act (FERA), 1947

13 xxviii Economic Survey of India: to Foreign Exchange Regulation Act (FERA), Foreign Exchange Management Act (FEMA), Foreign Exchange Policy Initiatives since Introduction of Liberalised Exchange Rate Management System (LERMS) Current Account Convertibility Capital Account Convertibility (CAC) 11. Year-wise Review of Banking and Financial Developments in India: to ; ; :"T J^SSfvri^India's Foreign Trade -'-'.. '" ; 12. Foreign Trade of India: From Protectionism to Openness India's Post-Independence Trade Policy Partition and the Aftermath Depletion of Sterling Balances Empire Dollar Pool Devaluation of the Rupee in September Korean War and the Export Boom Trade Agreement with Pakistan, Devaluation of the Rupee in June Import Substitution: Cornerstone of Trade Policy Balance of Payments Crisis, Post-1991 Reforms in Foreign Trade Sector East Asian Crisis Tenth Five Year Plan ( ) on the Role of Foreign Trade Eleventh Five Year Plan ( ) on Trade Liberalisation India's Look East Policy India's Share in World Trade Summing Up 12.2 Exports: Trends in Composition, Destination and Strategy Post-Independence Export Performance Trends in the Composition of Exports Project Exports from India

14 Contents xxix India's IT Sector Gems and Jewellery: Recent Export Measures Trends in the Destination of Exports Export Strategy and Concerns Reservations for Small-Scale Industries and Export Growth Competitiveness of Exports Medium Term Export Strategy (MTES) Future of India's Exports 12.3 Imports: Trends in Composition and Origin Trends in the Composition of Imports Import Intensity of Exports in India Trends in the Origin of Imports Reduction in Tariff and Non-tariff Barriers / Future of India's Imports 12.4 India's Export-Import (EXIM) Policy EXIM Policy, to EXIM Policy, to Objectives Salient Features EXIM Policy, to Special Economic Zones (SEZs) Employment Generation Technology Upgradation Growth-oriented Foreign Trade Policy (FTP) to Objectives and Strategy Special Focus Initiatives New Export Promotion Schemes Simplification, Rationalization and Modifications of Ongoing Schemes Simplification of Rules and Procedures and Institutional Measures 12.5 WTO and India's Foreign Trade WTO: An Introduction Third Trade Policy Review of India at WTO (June 2002)

15 xxx Economic Survey of India: to Year-wise Review of Developments in India's Foreign Trade: to Part VIII: Time-series Data on Indian Economy ' Table 1 Gross National Product, Net National Product and Per Capita Net National Product: to ( series) Table 2 Trends in the Production of Foodgrains in India: to (Million tonnes) Table 3 Index Numbers of Industrial Production: to Table 4 Combined Tax Revenue, Breakdown between Direct and Indirect Taxes with Percentage Shares, and Tax-GDP Ratios: to Table 5 Components of Money Stock: to Table 6 Wholesale Price Index: to Table 7 Savings Deposits with Scheduled Commercial Banks: to Table 8 Trends in Call Money Rate, Exchange Rate, BSE Sensex and NIFTY: 1965 to 2008 Table 9 Trends in India's Trade Balance: to Index

Monetary, Banking and Financial Developments in India

Monetary, Banking and Financial Developments in India 1947-48 to 2009-10 Incorporating A Comprehensive Description and Review, of the Post-Independence Evolution and Present Structure of India's Monetary