Debate On Models of Development in India

DEBATE ON MODELS OF DEVELOPMENT IN INDIA
Module III

INTRODUCTION In a democracy, it is an essential prerequisite to have an ideal model of development. The formulation and implementation of policies greatly depend on the model of development adopted for this purpose. Several debates took place in the Indian political and business circles, about the time of Independence and Constitution making in India, on the future course of development of India. The purpose of evolving an ideal pattern was not only to safeguard the democratic principles but also create necessary social and political conditions to ensure an overall development.

The debates on the issues of development were complex and diverse ranging from land policies to the industrial development and planning

BACKGROUND It has been seen in the previous unit that, about the time of independence, three broad streams of thinking on Indias socio-economic development crystallised: capitalist industrialisation with minimal state control and support, socialist industrialisation under state guidance and the Gandhian view of sarvodaya philosophically based on a distrust of state power. The ideological debate was complicated by the political and economic problems arising out of the Second World War and partition of the country.

Thus, the question of control over food supply that had been imposed during the war became critical for a country that had just lost the richest food-producing provinces to Pakistan and had been inundated by a huge refugee influx. Gandhi opposed control on moral ground as it enhanced corruption and control was abolished. As a result food prices rose steeply and control had to be re-imposed

CONFUSING OVERLAPS The three broad streams of thinking mentioned above were not clearly demarcated from each other. No Indian political leader was more committed to the poorest of the poor than Gandhi. This placed him close to the socialist position. But no Indian had a greater distrust for the state power than Gandhi and this made him morally opposed to state control of economic activities. This made him a favourite of the Indian capitalist class. Yet the Indian capitalists rejected Gandhis stress on the small and cottage industries which, according to them, might be temporarily accommodated but only for meeting the problem of unemployment in the country.

Like the capitalists, the socialists believed in large-scale industries as the chief strategy in solving the economic problems of the newly decolonised underdeveloped countries and, naturally, rejected the efficacy of the small and the cottage industry. But, unlike the capitalists, they were firm believers in state control.

A part of this debate concerned the traditional socialist policy of nationalization as had been implemented in the Union of Soviet Socialist Republics. Nehrus utterances before independence and his installation as the Prime Minister of the Government of independent India raised a certain alarm among the Indian capitalists. The same reason, combined with the rise of militancy among the industrial working class in India, raised critical questions about industrial relations. The Indian capitalists naturally did not like trade unionism and state support to the cause of labour.

Gandhi supported trade unionism as long as it worked in amity with the owners of industries and set aside the philosophy of class contradiction. The socialist doctrine was based on class contradiction. This made it possible for the industrial capitalists of India to use Gandhis name in aid of their position.

It was only on the question of land reforms that the broadest amount of national consensus had been reached. This was partly because permanent settlement of land did not encompass the entire country and a big chunk of the permanent settlement area was transferred to Pakistan East Bengal. Yet Jagirdari and other intermediate right owners in the rest of British India were unhappy about the new trend

1. THE DEBATE ON LAND POLICY It may be convenient to start with the question of land reform on which the broadest consensus was obtained. It has been seen in the earlier unit that even the Bombay Plan of the big industrialists of India envisaged land reforms. On 28 June, 1946 the Eastern Economist, house journal of the Birlas, made a strong case for land reform declaring that the landlord has no economic justification for his existence. In December 1946 the sub-committee on land reform of the National Planning Committee of the Congress headed by J.C. Kumarappa, a staunch Gandhian, laid down three stages of land reform: abolition of zamindari and other intermediary rights, grant of tenancy right to the actual cultivator and ceiling on land holding

The fate of zamindari and intermediary rights was thus sealed. The debate, therefore, focused on compensation. During discussion on the right to property in the Constituent Assembly of India this issue acquired poignancy. On 2 May 1947 Raja Jagannath Baksh Singh moved an amendment to the draft article on the right to property which allowed acquisition of private property by the state, for public purpose, against compensation inserting the word just (before compensation).

Sardar Vallabhbhai Patel rejected the amendment proposal making it clear that the zamindars or some of their representatives could not thwart the programme of land reform in that way. They must recognise the times and move with the times, he announced. Legislations had already been undertaken in the provinces for the abolition of zamindari and laws to that effect would be made even before the Constitution came into force. The process of acquisition is already there and the legislatures are already taking steps to liquidate the zamindaris, Patel declared

2. THE SYSTEM OF CONTROL The system of control and ration on food supply had been necessary during World War II for the Imperial Government for the purpose of food supply to the war fronts. At the end of the War it was continued in view of continued uncertainty of the market. Partition only aggravated the scarcity in the food front

As early as 14 January 1944, the Eastern Economist, had suggested a progressive strengthening of the present system of controls, in scope and character, so that not only may it strengthen the smooth transition to peace economy, but may also become the instrument of long-term economic planning in our country. In 1946, however, the issue became contentious

Early that year the Commodity Prices Board, consisting of noted economists A.D. Gorwala and D.R. Gadgil was appointed. It submitted a report in the same year recommending not abolition but the improvement of the system of controls. On the other hand, the Food-grains Policy Committee, appointed in September 1947 with mostly industrial magnates as members, adopted by a majority and submitted in December the same year an interim report recommending reduction of the Governments commitment under the existing system of food controls.

As has been noted in the earlier unit Gandhi lent his moral support to the decontrol demand and control was lifted for a period. When the prices rose high, control was again imposed.

3. THE ISSUE OF NATIONALISATION Indian businessmen were alarmed at the talk of nationalization emanating from the socialists and the left radicals. On 14 June 1946, the Eastern Economist declared: We reject unreservedly the Soviet ideal of complete and immediate socialisation of the whole range of the economy. At the twentieth annual session of the Federation of Indian Chambers of Commerce and Industry, Jawaharlal Nehru had to assure the businessmen. It is wrong to imagine, he said, that this Government is out to injure industry. It will be folly on our part. We want to provide facilities for industry and facilities for production technical, scientific and power resources and all that. On 4 April 1947, in an address to the All-India Manufacturers Organisation he repeated the assurance

THE ISSUE OF PLANNING Though there was a general welcome to the idea of planning among all sections of the Indian population, the ideas about the character of the plan varied among them. Indian businessmen firmly rejected the Soviet-type planning and welcomed a vague system of state guidance. They would even welcome a state role in the expansion of basic and heavy industries for which the private sector did not have much resource. But the states role, according to them, would be minimal. The socialists and the left radicals envisaged a much greater role of the state in the national economic activities.

It is believed that Sardar Vallabhbhai Patel was sympathetic to the first view and Jawaharlal Nehru to the second view. However, Patel is believed to have strongly resisted the establishment of a Planning Commission by the Government which he thought would reflect the Soviet Unions economic ideology and would encroach upon the domain of the Government. It was only after the death of Patel that a Planning Commission of India could be set up under the cabinet and with the Prime Minister as the chairman

INDUSTRIAL RELATIONS It was at the trade union front that the sharpest conflict arose. When the All-India Trade Union Congress (AITUC) was set up in 1920, at the instance of the International Labour Organisation, Congressmen, by and large, distanced themselves from it. They joined it only after the Gaya session of the All-India Congress Committee in 1922. The Ahmedabad Textile workers Union, directly patronised by Gandhi, never joined it. As a result the AITUC was under strong influence of the communists and the socialists.

When, in and after 1942, in the wake of the Quit India movement, Congressmen, including the Congress socialists, went to jail in large number the field was almost entirely left to the communists The differences were aggravated by two main factors. In 1942 the Communist Party had opposed the Quit India movement on which ground the communist members of the AllIndia Congress Committee were expelled. Secondly, after the end of the Second World War, Communist militancy in the labour front increased greatly. In view of the smooth transfer of power, that was accompanied by smooth transfer of several British industries to Indian hands, this labour militancy was disliked by the Congress leadership that had the support of the Indian big business.

Congress leaders prescribed compulsory arbitration of industrial disputes and disfavoured the workers right to strike In early 1947, Hindustan Mazdoor Sevak Sangh was set up with the Ahmedabad Textile Workers Union as the nucleus. In view of the Sanghs failure to gather strength, in May 1947 the top leaders of the Congress met in New Delhi at a high-level conference under the leadership of Patel and decided to have a separate labour organisation.

As a result the Indian National Trade Union Congress (INTUC) was set up. Within about another year, two other central labour organizations cropped up: the Hind Mazdoor Sabha (splitting from the INTUC) and the United Trade Union Congress (splitting from the AITUC

At the time of transfer of power, when Indian capitalism was coming to its own, therefore the issue of class contradiction acquired sharpness and it naturally affected industrial relations. For the capitalists industrial peace was necessary for industrial development and militant trade unionism was inimical to industrial peace. Since Independence the Communists and Socialists wanted that the class relations within the economy to be immediately settled.

THE POLITICAL DEBATE The ideological debate had its impact on the politics around the period of independence. The first post-war budget was inflationary. To counteract the inflationary tendency of the national economy, the finance minister of the Interim Government, Liaquat Ali Khan, presented a budget which proposed a 25% tax on all business profits above one hundred thousand rupees. The tax was intended to restrict the spending habits of the wealthy Indians and had a socialistic colour. But it created a furore among the Congressmen who alleged that the budget was aimed at harming the interests of the businessmen who were mostly Congress supporters.

This budget practically sealed the fate of the Congress-League cooperation and was one of the major factors leading to the partition of the country On the eve of independence, in June 1947, the Central Committee of the Communist Party of India concluded that though the forces of freedom movement had compelled the imperial rulers to open negotiations with the Indian leaders, the former were trying to forge a new alliance with the princes, big landlords and big business of India in order to control the Indian state and economy. Yet, the party held that the agreement embodied in the Mountbatten proposal of 3 June 1947 for partition of British India offered new opportunities for national advance and the two popular governments and Constituent Assemblies were strategic weapons in the hands of the national leadership.

It welcomed Independence on 15 August 1947. In December 1947, however, it reversed the position and called the acceptance of the Mountbatten plan an abject surrender on the basis of an imperialist-feudal-bourgeois combine. The resolution led to the communist militancy in 1948-49

In 1947 the Forward Bloc left the Congress. On 28 February 1947 the Congress Socialist Party decided to drop the word Congress from its name. Rammanohar Lohia, a socialist leader, accused the Congress of compromising with the vested interests. In March the party opened membership to non-congressmen. In March 1948, Sardar Vallabhbhai Patel, after having been accused of neglecting the security of Mahatma Gandhi, who had been assassinated in January 1948, decided to quit the Congress. Jayaprakash Narayan declared that the Draft Constitution framed by the Constituent Assembly of India was clumsy and not inspiring. The partys Legislative Assembly members in U.P., who had been elected on Congress ticket, resigned and sought re-elections but were defeated

The period around Independence, therefore, saw sharp ideological debate on the future course of Indias development. No wonder, the ideological debate was partly reflected in the proceedings of the Constituent Assembly of India that framed the Constitution

THE OBJECTIVES RESOLUTION OF THE CONSTITUENT ASSEMBLY OF INDIA All these issues were sought to be sorted out in the Objectives Resolution that was passed in the Constituent Assembly of India in a fairly early stage of its proceedings. That resolution pledged to establish an independent Sovereign Republic of India which, along with its component parts, would derive all power and authority from the people of India. This would also guarantee to all people of India justice, social, economic and political; equality of status, of opportunity and before the law; freedom of thought, expression, belief, worship, vocation, association and action, subject to law and public morality. Further, adequate safeguards would be provided for minorities, backward and tribal areas, and depressed and other backward classes.
Globalization and Liberalization in India

Module III
Globalization and Liberalization

Globalization and liberation are directly linked with each other. The first wake of globalization started in India when the economic liberalization policies were undertaken in the 1990s by Dr Manmohan Singh, the then Finance Minister of the country. Since then, the economy of India has improved to a great extent and has significantly led to the rise in the standard of living of the citizens.

Pre liberalization period and globalization From independence till the later part of the 1980s, India economic approach was mainly based on government control and a centrally operated market. The country did not have a proper consumer oriented market and foreign investments were also not coming in. This did not do anything good to the economic condition of the country and as such the standard of living did not go up.

In the 1980s, stress has given on globalization and liberalization of the market by the Congress government under Rajiv Gandhi. In his government tenure, plenty of restrictions were abolished on a number of sectors and the regulations on pricing were also put off. Effort was also put to increase the condition of the GDP of the country and to increase exports.

Even if the economic liberalization policies were undertaken, it did not find much support and the country remained in its backward economic state. The imports started exceeding the exports and the India suffered huge balance of payment problems. The IMF asked the country for the bailout loan. The fall of the Soviet Union, a main overseas business market of India, also aggravated the problem. The country at this stage was in need of an immediate economic reform

Liberalization in the 1990s It was in the 1990s that the first initiation towards globalization and economic liberalization was undertaken by Dr Manmohan Singh, who was the Finance Minister of India under the Congress government headed by P.V. Narasimha Rao. This is perhaps the milestone in the economic growth if India and it aimed towards welcoming globalization. Since, the liberalization plan, the economic condition gradually started improving and today India is one of the fastest growing economies in the world with an average yearly growth rate of around 6-7%.

Impact of globalization and liberalization Globalization and liberalization has greatly influenced the Indian economy and made it a huge consumer market. Today, most of the economic changes in the country are based on the demand supply cycle and other economic factors. Today, India is the worlds 12th largest economy in terms of market exchange rate and 4th largest in terms of the Purchasing Power Parity. According to a report by the World Bank, the Indian market is expected to grow at around 8% in the year 2010.

Globalization and liberalization has also made a positive impact on various important economic segments. Today, the service sectors, industrial sectors and the agriculture sector have really grown to a great extent. Around 54% of the annual Gross Domestic Product (GDP) of India comes from the service industry while the industrial and agriculture sector contributes around 29% and 17% respectively. With the improvement of the market, more and more new sectors are coming up and reaping profits such as IT services, chemical, textiles, cement industry and so on. With the increase in the supply level, the rate of employment is also increasing considerably

There has been an improvement in the manufacturing sector as well which grew from 8.98% in 2005 to around 12%. The communication segment has grown up to around 16.64%. The condition is expected to improve further with more demand and increase in customer base. The yearly growth of the industrial sector has been around 6.8 % which will rise more in the future. India is one of the well known industrial markets in the Asia-Pacific region

Globalization and foreign investment One of the main aspects of globalization is foreign investment. India today has emerged as one of the perfect markets for foreign investors due to its vast market base. More and more foreign companies are investing in the Indian market to get more returns. The foreign institutional investments (FII) amounts to around US$ 10 billion in FY 2008-09, while the rate of Foreign direct investments (FDI) has grown around 85.1% in 2009 to US$ 46.5 billion from US$ 25.1 billion (2008).
Liberalization in Different Sectors of India

MODULE III
Liberalization of Indian Telecommunication Sector

Module III

The Liberalization of Indian Telecommunication Sector in the early 1990s was the effect of economic reforms promulgated by the Government of India to align its economy with the world economy. Further the economic renaissance of India catalyzed the need for the opening of Indian telecommunication industry. Since independence the number of basic telecommunication services network has expanded from about 84 thousand connections to around 385.95 lakh connections as on March 31 2002.

The basic service network represents the majority of the telephone subscription, which accounts for around 86% of the total telecommunication network in India. Post 1990s, the Government of India did away with its old monopoly-market concept and shifted to open-market policy regime.

The Indian telecommunication industry's contribution towards the overall health of Indian economy is substantially high in the recent years. The history of the Liberalization of Indian Telecommunication Sector suggests that although, this industry has matured tremendously over the last fifteen years but huge scope of growth still waits to be explored. The urban India is well connected with basic telephone services but the semi-rural area needs immediate attention.

The rural- India today is the most neglected in the area of telecommunication connectivity. Huge scope of growth is lying still untapped in the area of rural telecommunication networking, especially in the area of basic telephony and Internet

The Government of India is now more focused on faster connectivity of rural-telephony in rural India and drafted its latest telecommunication policy to attract investments for the growth of Indian telecommunication industry. The latest telecommunication policy of India offers host of fiscal incentives and tax rebates to attract investors, both domestic and foreign investors. The era of post Liberalization of Indian Telecommunication Sector, witnessed formation of 'Department of Telecommunication' (DOT) and the 'Telecom Regulatory Authority of India' (TRAI).

These two independent bodies operate in sync and under the guardianship of the Ministry of Telecommunication Government of India. These independent bodies have earned good reputation for transparency and competence of governance

The main service providers in the Indian telecommunication sector are as follows - State owned telecommunication companies like - VSNL, BSNL and MTNL Private Indian telecommunication companies like - Tata Teleservices and Reliance Infocomm Foreign telecommunication companies like - Idea Cellular, BPL Mobile, Spice Communications, Hutchison - Essar, Bharti Tele-Ventures, Escotel, etc

The main objectives of the telecommunication industry after the Liberalization of Indian Telecommunication Sector are as follows Creating world class telecommunication infrastructure to meet the requirements of growing Indian industries Easy and affordable access to basic telecommunication services across India Establishing a modern and efficient telecommunication infrastructure to meet the requirements of modern industrial nation Modernization of the Indian telecommunication industry Provisions for entry of private players into the Indian telecommunication industry Provide an equal opportunity for all the telecommunication service providers operating in India

Status of the telecommunication sector post Liberalization of Indian Telecommunication Sector (as on 31.03.2002) are as follows Total number of telephone exchanges - 35023 Total number of rural telephone exchanges - 26,953 Total number of fixed telephone subscribers - 385.95 lakh Total number of cellular mobile phone subscribers - 64.31 lakh All India tele-density - 4.4 Total number of village PCOs - 4.68 lakh Total number of Internet subscribers - 38 lakh

Indian Telecom Sector Introduction The telecom services have been recognized the world-over as an important tool for socio-economic development for a nation. It is one of the prime support services needed for rapid growth and modernization of various sectors of the economy. Indian telecommunication sector has undergone a major process of transformation through significant policy reforms, particularly beginning with the announcement of NTP 1994 and was subsequently re-emphasized and carried forward under NTP 1999.

Driven by various policy initiatives, the Indian telecom sector witnessed a complete transformation in the last decade. It has achieved a phenomenal growth during the last few years and is poised to take a big leap in the future also. Status of Telecom Sector The Indian Telecommunications network with 621 million connections (as on March 2010) is the third largest in the world. The sector is growing at a speed of 45% during the recent years.

This rapid growth is possible due to various proactive and positive decisions of the Government and contribution of both by the public and the private sectors. The rapid strides in the telecom sector have been facilitated by liberal policies of the Government that provides easy market access for telecom equipment and a fair regulatory framework for offering telecom services to the Indian consumers at affordable prices. Presently, all the telecom services have been opened for private participation. The Government has taken following main initiatives for the growth of the Telecom Sector:

Liberalization The process of liberalization in the country began in the right earnest with the announcement of the New Economic Policy in July 1991. Telecom equipment manufacturing was delicensed in 1991 and value added services were declared open to the private sector in 1992, following which radio paging, cellular mobile and other value added services were opened gradually to the private sector. This has resulted in large number of manufacturing units been set up in the country.

As a result most of the equipment used in telecom area is being manufactured within the country. A major breakthrough was the clear enunciation of the governments intention of liberalizing the telecom sector in the National Telecom Policy resolution of 13th May 1994.

National Telecom Policy 1994 In 1994, the Government announced the National Telecom Policy which defined certain important objectives, including availability of telephone on demand, provision of world class services at reasonable prices, improving Indias competitiveness in global market and promoting exports, attractive FDI and stimulating domestic investment, ensuring Indias emergence as major manufacturing / export base of telecom equipment and universal availability of basic telecom services to all villages. It also announced a series of specific targets to be achieved by 1997.

Telecom Regulatory Authority of India (TRAI) The entry of private service providers brought with it the inevitable need for independent regulation. The Telecom Regulatory Authority of India (TRAI) was, thus, established with effect from 20th February 1997 by an Act of Parliament, called the Telecom Regulatory Authority of India Act, 1997, to regulate telecom services, including fixation/revision of tariffs for telecom services which were earlier vested in the Central Government.

TRAIs mission is to create and nurture conditions for growth of telecommunications in the country in manner and at a pace, which will enable India to play a leading role in emerging global information society. One of the main objectives of TRAI is to provide a fair and transparent policy environment, which promotes a level playing field and facilitates fair competition. In pursuance of above objective TRAI has issued from time to time a large number of regulations, orders and directives to deal with issues coming before it and provided the required direction to the evolution of Indian telecom market from a Government owned monopoly to a multi operator multi service open competitive market.

The directions, orders and regulations issued cover a wide range of subjects including tariff, interconnection and quality of service as well as governance of the Authority. The TRAI Act was amended by an ordinance, effective from 24 January 2000, establishing a Telecommunications Dispute Settlement and Appellate Tribunal (TDSAT) to take over the adjudicatory and disputes functions from TRAI. TDSAT was set up to adjudicate any dispute between a licensor and a licensee, between two or more service providers, between a service provider and a group of consumers, and to hear and dispose of appeals against any direction, decision or order of TRAI.

New Telecom Policy 1999 The most important milestone and instrument of telecom reforms in India is the New Telecom Policy 1999 (NTP 99). The New Telecom Policy, 1999 (NTP-99) was approved on 26th March 1999, to become effective from 1st April 1999. NTP-99 laid down a clear roadmap for future reforms, contemplating the opening up of all the segments of the telecom sector for private sector participation. It clearly recognized the need for strengthening the regulatory regime as well as restructuring the departmental telecom services to that of a public sector corporation so as to separate the licensing and policy functions of the Government from that of being an operator.

It also recognized the need for resolving the prevailing problems faced by the operators so as to restore their confidence and improve the investment climate. Key features of the NTP 99 include: Strengthening of Regulator. National long distance services opened to private operators. International Long Distance Services opened to private sectors. Private telecom operators licensed on a revenue sharing basis, plus a one-time entry fee. Resolution of problems of existing operators envisaged

National Long Distance National Long Distance opened for private participation. The Government announced on 13.08.2000 the guidelines for entry of private sector in National Long Distance Services without any restriction on the number of operators. The DOT guidelines of license for the National Long Distance operations were also issued.

Highlights - NLD Guidelines Unlimited entry for carrying both inter-circle and intra-circle calls. Total foreign equity (including equity of NRIs and international funding agencies) must not exceed 74%. Promoters must have a combined net worth of Rs.25 million. Private operators will have to enter into an arrangement with fixed-service providers within a circle for traffic between long-distance and shortdistance charging centers.

International Long Distance In the field of international telephony, India had agreed under the GATS to review its opening up in 2004. However, open competition in this sector was allowed with effect from April 2002 itself. There is now no limit on the number of service providers in this sector. The licence for ILD service is issued initially for a period of 20 years, with automatic extension of the licence by a period of 5 years. The applicant company pays one-time non-refundable entry fee of Rs.25 million plus a bank guarantee of Rs.250 million, which will be released on fulfillment of the roll out obligations.

The annual licence fee including USO contribution is @ 6% of the Adjusted Gross Revenue and the fee/royalty for the use of spectrum and possession of wireless telegraphy equipment are payable separately. At present 24 ILD service providers (22 Private and 2 Public Sector Undertaking) are there. As per current roll out obligations under ILD license, the licensee undertakes to fulfill the minimum network roll out obligations for installing at least one Gateway Switch having appropriate interconnections with at least one National Long Distance service licensee.

There is no bar in setting up of Point of Presence (PoP) or Gateway switches in remaining location of Level I Taxs. Preferably, these PoPs should conform to Open Network Architecture (ONA) i.e. should be based on internationally accepted standards to ensure seamless working with other Carriers Network.

Universal Service Obligation Fund Another major step was to set up the Universal Service Obligation Fund with effect from April 1, 2002. An administrator was appointed for this purpose. Subsequently, the Indian Telegraph (Amendment) Act, 2003 giving statutory status to the Universal Service Obligation Fund (USOF) was passed by both Houses of Parliament in December 2003. The Fund is to be utilized exclusively for meeting the Universal Service Obligation and the balance to the credit of the Fund will not lapse at the end of the financial year.

Credits to the Fund shall be through Parliamentary approvals. The Rules for administration of the Fund known as Indian Telegraph (Amendment) Rules, 2004 were notified on 26.03.2004.

The resources for implementation of USO are raised through a Universal Service Levy (USL) which has presently been fixed at 5% of the Adjusted Gross Revenue (AGR) of all Telecom Service Providers except the pure value added service providers like Internet, Voice Mail, E-Mail service providers etc. In addition, the Central Govt. may also give grants and loans. An Ordinance was promulgated on 30.10.2006 as the Indian Telegraph (Amendment) Ordinance 2006 to amend the Indian Telegraph Act, 1885 in order to enable support for mobile services, broadband connectivity, general infrastructure and pilot project for new technological developments in rural and remote areas of the country.

Subsequently, an Act has been passed on 29.12.2006 as the Indian Telegraph (Amendment) Act 2006 to amend the Indian Telegraph Act, 1885. USFO has initiated action to bring mobile services within the ambit of Universal Service Obligation Fund (USOF) activities. Under this initiative, 7387 mobile infrastructure sites are being rolled out, in the first phase, across 500 districts and 27 states of India.

This scheme will provide mobile services to approximately 0.2 million villages which where hitherto deprived of the same. As on 30th June 2010, 7183 shared towers have been set up under the First Phase of the scheme. The USOFof DOT has proposed to set up about 10,128 additional towers in order to extend the mobile coverage in other uncovered areas under the Second Phase of the Scheme.

Unified Access Services Unified access license regime was introduced in November2003. Unified Access Services operators are free to provide, within their area of operation, services, which cover collection, carriage, transmission and delivery of voice and/or non-voice messages over Licensees network by deploying circuit, and/or packet switched equipment. Further, the Licensee can also provide Voice Mail, Audiotex services, Video Conferencing, Videotex, E-Mail, Closed User Group (CUG) as Value Added Services over its network to the subscribers falling within its service area on non-discriminatory basis. The country is divided into 23 Service Areas consisting of 19 Telecom Circle and 4 Metro Service Areas for providing Unified Access Services (UAS).

The licence for Unified Access Services is issued on nonexclusive basis, for a period of 20 years, extendable by 10 years at one time within the territorial jurisdiction of a licensed Service Area. The licence Fee is 10%, 8% & 6% of Adjusted Gross Revenue (AGR) for Metro and Category `A, Category `B and Category `C Service Areas, respectively. Revenue and the fee/royalty for the use of spectrum and possession of wireless telegraphy equipment are payable separately. The frequencies are assigned by WPC wing of the Department of Telecommunications from the frequency bands earmarked in the applicable National Frequency Allocation Plan and in coordination with various users subject to availability of scarce spectrum.

Internet Service Providers (ISPs) Internet service was opened for private participation in 1998 with a view to encourage growth of Internet and increase its penetration. The sector has seen tremendous technological advancement for a period of time and has necessitated taking steps to facilitate technological ingenuity and provision of various services. The Government in the public interest in general, and consumer interest in particular, and for proper conduct of telegraph and telecom services has decided to issue the new guidelines for grant of licence of Internet services on non-exclusive basis. Any Indian company with a maximum foreign equity of 74% is eligible for grant of license.

Broadband Policy 2004 Recognizing the potential of ubiquitous Broadband service in growth of GDP and enhancement in quality of life through societal applications including tele-education, telemedicine, e-governance, entertainment as well as employment generation by way of high-speed access to information and web based communication; Government has announced Broadband Policy in October 2004. The main emphasis is on the creation of infrastructure through various technologies that can contribute to the growth of broadband services. These technologies include optical fibre, Asymmetric Digital Subscriber Lines (ADSL), cable TV network; DTH etc.

Broadband connectivity has been defined as Always On with the minimum speed of 256 kbps. It is estimated that the number of broadband subscribers would be 20 million by 2010. With a view to encourage Broadband Connectivity, both outdoor and indoor usage of low power Wi-Fi and Wi-Max systems in 2.4 GHz-2.4835 GHz band has been delicensed. The use of low power indoor systems in 5.15-5.35 GHz and 5.7255.875 GHz bands has also been delicensed in January 05. The SACFA/WPC clearance has been simplified. The setting up of National Internet Exchange of India (NIXI) would enable bringing down the international bandwidth cost substantially, thus making the broadband connectivity more affordable.

The prime consideration guiding the Policy includes affordability and reliability of Broadband services, incentives for creation of additional infrastructure, employment opportunities, induction of latest technologies, national security and brings in competitive environment so as to reduce regulatory interventions.

By this new policy, the Government intends to make available transponder capacity for VSAT services at competitive rates after taking into consideration the security requirements. The service providers permitted to enter into franchisee agreement with cable TV network operators. However, the Licensee shall be responsible for compliance of the terms and conditions of the license. Further in the case of DTH services, the service providers permitted to provide Receive-Only-Internet Service. The role of other facilitators such as electricity authorities, Departments of ITs of various State Governments, Departments of Local Self Governments, Panchayats, Departments of Health and Family Welfare, Departments of Education is very important to carry the advantage of broadband services to the users particularly in rural areas.

Target has been set for 20 million broadband connections by 2010 and providing Broadband connectivity to all secondary and higher secondary schools, public health institutions and panchayats by 2010. In rural areas, connectivity of 512 KBPS with ADSL 2 plus technology (on wire) will be provided from about 20,000 existing exchanges in rural areas having optical fibre connectivity. Community Service Centres, secondary schools, banks, health centres, Panchayats, police stations etc. can be provided with this connectivity in the vicinity of above-mentioned 20,000 exchanges in rural areas. DOT will be subsidizing the infrastructure cost of Broadband network through support from USO Fund to ensure that Broadband services are available to users at affordable tariffs.

Tariff Changes The Indian Telecom Sector has witnessed major changes in the tariff structure. The Telecommunication Tariff Order (TTO) 1999, issued by regulator (TRAI), had begun the process of tariff balancing with a view to bring them closer to the costs. This supplemented by Calling Party Pay (CPP), reduction in ADC and the increased competition, has resulted in a dramatic fall in the tariffs. ADC has been abolished for all calls w.e.f. 1st October 2008.

The peak National Long Distance tariff for above 1000 Kms. in 2000 has come down from US$ 0.67 per minute to US$ 0.02 per minute in 2009. The International Long Distance tariff from US$ 1.36 per minute in 2000 to US$ 0.16 per minute in 2009 for USA, Canada & UK. The mobile tariff for local calls has reduced from US$0.36 per minute in 1999 to US$ 0.009 - US$ 0.04 per minute in 2009. The Average Revenue Per User of mobile is between US$ 5.06 - US$ 7.82 per month

Foreign Direct Investment (FDI) In Basic, Cellular Mobile, Paging and Value Added Service, and Global Mobile Personal Communications by Satellite, Composite FDI permitted is 74% (49% under automatic route) subject to grant of license from Department of Telecommunications subject to security and license conditions. (para 5.38.1 to 5.38.4 of consolidate FDI Policy circular 1/2010 of DIPP)

FDI upto 74% (49% under automatic route) is also permitted for the following: Radio Paging Service . Internet Service Providers (ISP's) FDI upto 100% permitted in respect of the following telecom services: Infrastructure Providers providing dark fibre (IP Category I); Electronic Mail; and Voice Mail Subject to the conditions that such companies would divest 26% of their equity in favor of Indian public in 5 years, if these companies were listed in other parts of the world

In telecom manufacturing sector 100% FDI is permitted under automatic route. The Government has modified method of calculation of Direct and Indirect Foreign Investment in sector with caps (para 4.1 of consolidate FDI Policy circular 1/2010 of DIPP) and have also issued guidelines on downstream investment by Indian Companies. (para 4.6 of consolidate FDI Policy circular 1/2010 of DIPP) Guidelines for transfer of ownership or control of Indian companies in sectors with caps from resident Indian citizens to non-resident entities have been issued (para 4.2.3 of consolidate FDI Policy circular 1/2010 of DIPP)

Investment Opportunities and Incentives An attractive trade and investment policy and lucrative incentives for foreign collaborations have made India one of the worlds most attractive markets for the telecom equipment suppliers and service providers. No industrial license required for setting up manufacturing units for telecom equipment. - 100% Foreign Direct Investment (FDI) is allowed through automatic route for manufacturing of telecom equipments. Payments for royalty, lumpsum fee for transfer of technology and payments for use of trademark/brand name on the automatic route.

Foreign equity of 74% (49 % under automatic route) permitted for telecom services - basic, cellular mobile, paging, value added services, NLD, ILD, ISPs - and global mobile personal communications by satellite Full repatriability of dividend income and capital invested in the telecom sector.

Network Expansion The telecom sector has shown robust growth during the past few years. It has also undergone a substantial change in terms of mobile versus fixed phones and public versus private participation. The number of telephones has increased from 54.63 million as on 31.03.2003 to 621.28 million as on 31.03.2010. Wireless subscribers increased from 13.3 million as on 31.03.2003 to 584.32 million as on 31.03.2010. Whereas, the fixed line subscribers decreased from 41.33 million in 31.03.2003 to 36.95 million in 31.03.2010. The broadband subscribers grew from a meager 0.18 million to 8.76 million as on 31.03.2010.

Trend in Tele-density Tele-density in the country increased from 5.11% in 2003 to 52.74 % in March 2010. In the rural area teledensity increased from 1.49% in Mar 2003 to 24.31% in March 2010 and in the urban areas it is increased from 14.32% in Mar 2003 to119.45% in March 2010. This indicates a rising trend of Indian telecom subscribers.

Rural Telephony Apart from the 200.77million fixed and WLL connections on March 2010 provided in the rural areas, 570000 uncovered VPTs have been provided as on March 2010. Thus, 96% of the villages in India have been covered by the VPTs. More than 3 lakh PCOs are also providing community access in the rural areas. Further, Mobile Gramin Sanchar Sewak Scheme (GSS) a mobile Public Call Office (PCO) service is provided at the doorstep of villagers.

At present, 2772 GSSs are covering 12043 villages. Also, to provide Internet service, Sanchar Dhabas (Internet Kiosks) have been provided in more than 3500 Block Headquarters out of the total 6337 Blocks in the country. The target of 80 million rural connections by 2010 have already met during year 2008 itself. USOF subsidy support scheme is also being utilized for sharing wireless infrastructure in rural areas with about 19,000 towers by 2010.

Performance of telecom equipment manufacturing sector As a result of Government policy, progress has been achieved in the manufacturing of telecom equipment in the country. There is a significant telecom equipmentmanufacturing base in the country and there has been steady growth of the manufacturing sector during the past few years.

Rising demand for a wide range of telecom equipment, particularly in the area of mobile telecommunication, has provided excellent opportunities to domestic and foreign investors in the manufacturing sector. The last two years saw many renowned telecom companies setting up their manufacturing base in India. Ericsson set up GSM Radio Base Station Manufacturing facility in Jaipur. Elcoteq set up handset manufacturing facilities in Bangalore. Nokia and Nokia Siemens Networks have set up their manufacturing plant in Chennai.

LG Electronics set up plant of manufacturing GSM mobile phones near Pune. Ericsson launched their R&D Centre in Chennai. Flextronics set up an SEZ in Chennai. Other major companies like Foxconn, Aspcom, Solectron etc have decided to set up their manufacturing bases in India.

The Government has already set up Telecom Equipment and Services Export Promotion Council and Telecom Testing and Security Certification Centre (TETC). A large number of companies like Alcatel, Cisco have also shown interest in setting up their R&D centers in India. With above initiatives India is expected to be a manufacturing hub for the telecom equipment.

Opportunities India offers an unprecedented opportunity for telecom service operators, infrastructure vendors, manufacturers and associated services companies. A host of factors are contributing to enlarged opportunities for growth and investment in telecom sector:

An expanding Indian economy with increased focus on the services sector Population mix moving favorably towards a younger age profile Urbanization with increasing incomes Investors can look to capture the gains of the Indian telecom boom and diversify their operations outside developed economies that are marked by saturated telecom markets and lower GDP growth rates.

Inflow of FDI into Indias telecom sector during April 2000 to Feb. 2010 was about Rs 405,460 million. Also, more than 8 per cent of the approved FDI in the country is related to the telecom sector.

Research & Development India has proven its dominance as a technology solution provider. Efforts are being continuously made to develop affordable technology for masses, as also comprehensive security infrastructure for telecom network. Research is on for the preparation of tested infrastructure for enabling interoperability in Next Generation Network. It is expected that the telecom equipment R & D shall be doubled by 2010 from present level of 15%.

Modern technologies inductions are being promoted. Pilot projects on the existing and emerging technologies have been undertaken including WiMax, 3G etc. Emphasis is being given to technologies having potential to improve rural connectivity. Also to beef up R&D infrastructure in the telecom sector and bridge the digital divide, cellular operators, top academic institutes and the Government of India together set up the Telecom Centres of Excellence (COEs).

The main objectives of the COEs are as follows: Achieve Telecom Vision 2010 that stipulates a definite growth model and take it beyond. Secure Information Infrastructure that is vital for countrys security. Capacity Building through Knowledge for a sustained growth. Support Planned Predictive Growth for stability. Reduce Rural Urban Digital Divide to reach out to masses

Utilize available talent pool and create environment for innovation. Management of National Information Infrastructure (NII) during Disaster Cater the requirement of South East Asia as Regional Telecom Leader To achieve these objectives seven Centre of Excellences in various field of Telecom have been set up with the support of Government and the participation of private/public telecom operators as sponsors, at the selected academic institutions of India.

3G & Broadband Wireless Services (BWA) The government has in a pioneering decision, decided to auction 3G & BWA spectrum. The broad policy guidelines for 3G & BWA have already been issued on 1stAugust 2008 and allotment of spectrum has been planned through simultaneously ascending e-auction process by a specialized agency. New players would also be able to bid thus leading to technology innovation, more competition, faster roll out and ultimately greater choice for customers at competitive tariffs.

The 3G will allow telecom companies to offer additional value added services such as high resolution video and multi media services in addition to voice, fax and conventional data services with high data rate transmission capabilities. BWA will become a predominant platform for broadband roll out services. It is also an effective tool for undertaking social initiatives of the Government such as e-education, telemedicine, ehealth and e-Governance. Providing affordable broadband, especially to the suburban and rural communities is the next focus area of the Department.

BSNL & MTNL have already been allotted 3G & BWA spectrum with a view to ensuring early roll out of 3G & WiMax services in the country. They will pay the same price for the spectrum as discovered through the auction. While, Honble Prime Minister launched the MTNLs 3G mobile services on the inaugural function of India Telecom 2008 held on 11th December 2008, BSNL launched its countrywide 3G services from Chennai, in the southern Tamil Nadu state on 22nd February 2009.

Mobile Number Portability (MNP) Mobile Number Portability (MNP) allows subscribers to retain their existing telephone number when they switch from one access service provider to another irrespective of mobile technology or from one technology to another of the same or any other access service provider. The Government has announced the guidelines for Mobile Number Portability (MNP) Service License in the country on 1st August 2008 and has issued a separate License for MNP service w.e.f. 20.03.2009.

The Department of Telecommunication (DoT) has already issued licences to two global companies (M/s Syniverse Technologies Pvt. Ltd. and M/s MNP Interconnection Telecom Solutions India Pvt. Ltd.) for implementing the service. MNP is to be implemented in whole country in one go by 31.10.2010

Targets Set By the Government 1. Network expansion 800 million connections by the year 2012. . Rural telephony 200 million rural subscribers by 2012 Reduce urban-rural digital divide from present 25:1 to 5:1 by 2010. 3. Broadband 20 million Broadband connections by 2010 Broadband with minimum speed of 1 mbps. Broadband coverage for all secondary & higher secondary schools and public health care centres by the end of year 2010. Broadband coverage for all Grampanchayats by the year 2010 Broadband on demand is every village by 2012

4. Manufacturing Making India a hub for telecom manufacturing by facilitating more and more telecom specific SEZs. Quadrupling production in 2010. Achieving exports of 10 billion during 11th Five year plan. 5. Research & Development Pre-eminence of India as a technology solution provider. Comprehensive security infrastructure for telecom network. Tested infrastructure for enabling interoperability in Next Generation Network

8. International Bandwidth Facilitating availability of adequate international bandwidth at competitive prices to drive ITES sector at faster growth.
Liberalization of Indian Information Technology Sector

Module III

The Indian Information Technology sector can be classified into the following broad categories - IT Services, Engineering Services, ITES-BPO Services and E Business IT Services can further be categorized into Information Services (IS) outsourcing, packaged software support and installation, systems integration, processing services, hardware support and installation and IT training and education

Engineering Services include Industrial Design, Mechanical Design, Electronic System Design (including Chip/Board and Embedded Software Design), Design Validation Testing, Industrialization and Prototyping IT Enabled Services are services that use telecom networks or the Internet. For example, Remote Maintenance, Back Office Operations, Data Processing, Call Centers, Business Process Outsourcing, etc.

IT sector is attracting considerable interest not only as a vast market but also as potential production base by international companies. Therefore India is considered as a pioneer in software development and a favorite destination for IT-enabled services

The rapid growth in the sector is a consequence of access to trained English speaking professionals, cost competitiveness and quality telecommunications infrastructure. Companies operating from India are able to leverage the advantage of the Indian time zone to offer 24 x 7 services to their global customers. Several world leaders including General Electric, British Airways, American Express, and Citibank, have outsourced call centre operations to India.

E Business (electronic business) is carrying out business on the Internet; it includes buying and selling, serving customers and collaborating with business partners. The following are some of the strengths of the Indian IT sector: Highly skilled human resource; Low wage structure; Quality of work;

Initiatives taken by the Government (setting up Hi-Tech Parks and implementation of egovernance projects); Many global players have set-up operations in India like Microsoft, Oracle, Adobe, etc.; Following Quality Standards such as ISO 9000, SEI CMM etc.; English-speaking professionals; Cost competitiveness; Quality telecommunications infrastructure

The following are some of the weaknesses of the sector: Absence of practical knowledge; Dearth of suitable candidates; Less Research and Development; Contribution of IT sector to Indias GDP is still rather small; IT development concentrated in a few cities only

Regulatory Regime and Laws relating to the IT sector: Department of Information Technology (DIT): This department which is under the Ministry of Communications and Information Technology is responsible for the formulation, implementation and review of national policies in the field of Information Technology including hardware and software, standardization of procedures, internet, ecommerce and information technology education and development of electronics

Initiatives for development of Hardware/Software industry including knowledge based enterprises, measures for promoting IT exports and competitiveness of the industry are looked after by the Electronics Export and Computer Software Promotion Council (ESC) and National Informatics Centre (NIC) along with DIT

The Department of Information Technology undertakes the following functions: Policy matters relating to Information Technology; Electronics; and Internet (all matters other than licensing of Internet Service Provider). Promotion of Internet, IT and IT enabled services. Assistance to other departments in the promotion of E-Governance, Ecommerce, E-Medicine, E-Infrastructure, etc.

Promotion of Information Technology education and Information Technology-based education. Matters relating to Cyber Laws, administration of the Information Technology Act. 2000 (21 of 2000) and other IT related laws

Matters relating to promotion and manufacturing of Semiconductor Devices in the country; The Semiconductor Integrated Circuits Layout Design Act, 2000 (37 of 2000). Interaction in IT related matters with International agencies and bodies e.g. Internet for Business Limited (IFB), Institute for Education in Information Society (IBI) and International Code Council - on line (ICC).

Initiative on bridging the Digital Divide: Matters relating to Media Lab Asia. Promotion of Standardization, Testing and Quality in IT and standardization of procedure for IT application and Tasks. Electronics Export and Computer Software Promotion Council (ESC). National Informatics Centre (NIC).

Initiatives for development of Hardware / Software industry including knowledge-based enterprises, measures for promoting IT exports and competitiveness of the industry. All matters relating to personnel under the control of the Department

National Association of Software and Services Company (NASSCOM): NASSCOM acts as an advisor, consultant and coordinating body for the IT-BPO industry in India, and has played a key role in enabling the government in India to develop industry friendly policies. NASSCOM was set up in 1988 to facilitate business and trade in software and services and to encourage advancement of research in software technology. It is a not-for-profit organization, registered under the Indian Societies Act, 1860

NASSCOM has been proactive in pushing this cause for ensuring that the Indian Information Security environment benchmarks with the best across the globe. As a part of its Trusted Sourcing initiative, NASSCOM is in the process of setting up the Data Security Council of India (DSCI) as a Self Regulatory Organization (SRO) to establish, popularize, monitor and enforce privacy and data protection standards for Indias ITeS-BPO industry. DSCI shall function as an enabler to the IT and ITeS industry to grow at a rapid pace by facilitating the adoption and enforcement of the prescribed security standards and best practices

Information Technology Act, 2000: The legal enactment which governs the process and dissemination of information digitally in India is the Information Technology Act, 2000. The Act along with its Rules legalizes the acceptance of electronic records and digital signatures providing a legal backbone to ecommerce.

The Indian Information Technology Act addresses the following issues: Legal Recognition of Electronic Documents; Legal Recognition of Digital Signatures; Offenses and Contraventions; Justice Dispensation System for Cyber crimes

Government Initiatives: The Foreign Trade Policy 2004 - 2009 permits import of all kinds of computers (except second hand computers) in India without any licenses. In order to promote domestic investment, foreign direct investment, transfer of technology / process know-how, technical collaboration, joint venture etc in India and export IT software products and services from India to the global market, both Government of India and State Governments in India have been offering a series of policy packages including tax breaks, import duty concessions etc under various schemes which include:

Export Oriented Units (EOUs) Scheme: The purpose of the scheme was basically to boost exports by creating additional production capacity. Electronics Hardware Technology Parks (EHTPs): Electronics Hardware Technology Park (EHTP) complexes can be set up by the Central Government, State Government, Public or Private Sector Undertakings or any combination thereof, duly approved by the Inter- Ministerial Standing Committee (IMSC) in the Ministry of Communication and Information Technology (Department of Information Technology).

Software Technology Parks (STPs): The Software Technology Parks of India (STPI) have been set up by the Ministry of Information Technology, Government of India and the International Technology Park in a joint project by the State Government

Special Economic Zone (SEZ) Scheme: SEZs are being set up to enable hassle free manufacturing and trading for export purposes Sales from Domestic Tariff Area (DTA) to SEZs are being treated as physical export. This entitles domestic suppliers to Drawback/ DEPB benefits, CST exemption and Service Tax exemption

Certain exemptions like Income Tax exemption on export profits is available to SEZ Units for 5 years, 50% for next 2 years and 50% of ploughed back profits for 3 years thereafter are available for units in these designated areas/zones

Export Promotion Capital Goods (EPCG) Scheme: The EPCG Scheme allows import of capital goods for pre-production, production and postproduction (including CKD/SKD thereof) at 5% customs duty subject to export obligations

Units undertaking to export their entire production of goods and services may be set up under the Export Oriented Unit (EOU) Scheme, Electronic Hardware Technology Park (EHTP) Scheme or Software Technology Park (STP) Scheme.

The Export Promotion Industrial Park, built near International Technology Park, gives an exclusive 288 acres of area for export oriented business. GE has its India Technology Center located at this park and employs hundreds of multi disciplinary technology development activities. An industrial park, known as Electronic City was set up in 1991 taking more than a hundred electronic industries including Motorola, Infosys, Siemens, ITI, and Wipro, in an area of around 330 acres

The IT Corridor project, conceptualized by Singapores Jurong Town Corporation Private Ltd, was initiated by the Department of IT and the Bangalore Development Authority in order to develop state of the art facilities for the development of knowledge based industries

Government initiatives for the ITes Sector: The government of India has already set up a single-window facility for attracting foreign direct investments in this sector. Recognizing the potential of this sector, the government has provided many incentives including a tax holiday up to 2010 and competitive duty structures

In addition to the central government incentives, respective state governments have also developed attractive incentive packages to target investors The government is also actively trying to reduce international communication cost. The telecommunications ministry has already started phased liberalization programme. In order to support IT-related services, the government is providing some special incentives and is also providing infrastructure support through organizations such as the Software Technology Parks (STP).

The government is also actively trying to reduce international communication cost. The telecommunications ministry has already started phased liberalization programme. In order to support IT-related services, the government is providing some special incentives and is also providing infrastructure support through organizations such as the Software Technology Parks (STP).

Financial institutions and venture capitalists in the country are willing to provide funds at competitive rates for expansion in ITes businesses. All these factors collectively create a number of opportunities in the IT sector.

Market Trends: 1. Information Technology: The Information Technology (IT) sector in India is amongst the fastest growing in the country and the world. It is expected that by the year 2008, IT software and services industry will account for 7 per cent of Indias GDP and 35 per cent of total exports. The Indian domestic IT market grew by 29% in the financial year 2007-08 to report revenues of Rs 288, 810 crore

The revenue of the information technology sector has grown from 1.2 per cent of the gross domestic product (GDP) in FY 1998 to an estimated 5.5 per cent in FY 2008. The net value added by this sector, to the economy, is estimated to be 3.3 to 3.9 per cent for FY 2008

The Indian IT-BPO sector grew by 33 per cent in FY 2008 to reach US$ 64 billion in aggregate revenue (including hardware). Of this, the software and services segment accounted for US$ 52 billion, growing by 28 per cent over FY 2007

Software and services exports (including exports of IT services, BPO, engineering services and R&D and software products) reached US$ 40.4 billion, contributing nearly 63 per cent to the overall IT-BPO revenue aggregate. IT-BPO exports (including hardware exports) grew by 28 per cent from US$ 31.8 billion in FY 2007 to US$ 40.9 billion in FY 2008

Domestic IT market (including hardware) reached US$ 23.1 billion in FY 2008 as against US$ 16.2 billion in FY 2007, a growth of 43 per cent. Hardware remained the largest segment of the domestic market with a growth rate of 44 per cent in FY 2008. Software and services spending grew by over 41 per cent during the year.

The Indian IT services market is estimated to remain the fastest growing in the Asia-Pacific region with a CAGR of 18.6 per cent.

2. IT enabled Services (ITeS): The IT / ITeS industry's contribution to the country's gross domestic product (GDP) has grown from 1.2 per cent in FY 1998 to an estimated 5.5 per cent in FY 2008. The net value-added by this sector, to the economy, is estimated at 3.3-3.9 per cent for FY 2008

The Indian IT-ITeS sector (including hardware) grew by 33 per cent in FY 2008 to reach US$ 64 billion in aggregate revenue. Of this, the ITeS/BPO sector contributed US$ 12.5 billion as against US$ 9.5 billion in FY 2007, an increase of 31 per cent

The Indian ITeS-BPO exports grew significantly from US$ 8.4 billion in FY 2007 to US$ 10.9 billion in FY 2008 while the revenues of domestic BPO grew to US$1.6 billion in FY 2008 from US$ 1.1 billion in FY 2007. The sector provided direct employment to 700,000 in FY 2008 up from 553,000 in FY 2007

Liberalization of Indian Information Technology Sector 100% FDI is permitted in the Electronic hardware sector and the Software development sector under the automatic approval route. Industrial Licensing has been virtually abolished in the Electronics and Information Technology sector except for manufacturing electronic aerospace and defence equipment

IT / ITes Export Trends: The Software exports are projected to grow by $9 billion to $50 billion in fiscal 2008-09 from $41 billion in fiscal 2007-08 and $32 billion in fiscal 2006-07. Exports contribute nearly 65% of the Indian IT sector revenue

The United States and Britain are the biggest markets for India's booming software exports, accounting for about 80 percent of the country's $12-billionexports per year. ITeS/BPO exports grew by over 30 per cent from the previous year collecting revenues of US$ 10.9 billion in FY 2008

Key Players: The following are Indias Tier 1 companies in the IT sector: Tata Consultancy Services Ltd. Wipro Technologies Ltd. Infosys Technologies Ltd. Satyam Computer Services Ltd.

The other key players include the following: IBM HCL Patni Polaris Cisco KPIT Cummins

Kanbay i-Flex Solutions Cognizant Sapient Mphasis

Global IT players in India: There are a large number of multi-national IT enterprises operating in India in sectors such as: Integrated Chip Design, System Software, Communication Software, R&D Centres, Technology Support Sector, Captive Support Sector, BPO Sector etc reaping the cost and quality advantages

These multinationals include Siemens, Philips, Intel, Texas Instruments etc.(Chip Design); Siemens, Motorola, Lucent Technologies, Sony, Nortel etc. (Communication Software); Microsoft, Oracle, Sun Microsystems, HP, Compaq etc. (Systems Software); Google, Yahoo etc. (R&D Centres); Axa Business Services, Swiss Shared Services, Siemens Shared Services etc. (BPO Sector); Accenture, DELL, HSBC, GE Capital, Fidelity etc. (Captive Support Sector

Localization of the IT industry: The Indian state of Karnataka dominates other Indian states in terms of attractiveness as an IT destination with the city of Bangalore being at the topmost. Bangalore offers good infrastructure, with large floor space and great telecom facilities and is therefore the most preferred destinations of all the big banners like HSBC, Dell, Microsoft, GE, Hewlett Packard, and several Indian multi national firms like Infosys Technologies, Wipro, and Microland who have set up their offices in the city.

The state of Andhra Pradesh, backed by the emergence of the city of Hyderabad as a major IT hub, ranks as the second IT hub of India. This is followed by the state of Tamil Nadu and Maharashtra. The city of Chennai in Tamil Nadu is emerging as a global capital for business process outsourcing (BPO) and is propelling Tamil Nadu to the number one position in IT exports. The state is a pioneer in IT and software services, and has a 100 percent digital exchange network thus having the potential to garner a major chunk of ITeS business.

Maharashtra is the second largest exporter of software with annual exports of Rs 18 000cr (20% of India's software exports). The state has set up software parks in Pune, Mumbai, Navi Mumbai, Aurangabad, Nagpur and Nasik

Globally branded firms have their presence in the state of Gujarat. Nasscom (National Association of Software and Services Companies) has ranked the city of Ahmedabad in Gujarat to be among the top five Indian destinations for business process and knowledge process outsourcing

The state of West Bengal is beginning to be recognized as the fastest growing IT destination in the country with more than double the national average growth rate. A number of IT majors are doing significant business in the city of Kolkata. West Bengal aims to become one of the top three IT states by 2010, contributing 15-20 per cent of the country's total IT revenue

Growth of the Indian IT Sector: The Indian information technology sector is one of the sunshine sectors of the Indian economy showing rapid growth and promise The Indian IT-BPO sector is estimated to reach a target of US$ 60 billion in exports and US$ 73-75 billion in overall software and services revenues by 2010. India's information and communication technology market is estimated to grow 20.3 per cent annually to reach US$ 24.3 billion b y 2011

The Indian IT and ITeS market is estimated to grow at the rate of over 16 per cent to become a US$ 132 billion industry, significantly, the domestic market alone is expected to become over US$ 50 billion, with a CAGR of about 18.4 percent. Simultaneously, the IT and ITeS exports are estimated to more than double to US$ 78.62 billion by 2012.

Leading international companies have identified custom application development and maintenance as priority areas due to high offshoreable component. The demand for domestic BPOs has been largely driven by faster GDP growth and by sectors such as telecom, banking, insurance, retail, healthcare, tourism and automobiles

ITES now offers services such as Knowledge Process Outsourcing (KPO), Legal Process Outsourcing (LPO), Games Process Outsourcing (GPO) etc. More and more sophisticated products are being developed in India. The domestic BPO segment is growing annually at a rate of nearly 35 - 40 %

The revenues generated by the BPO's are almost $1.18 million and the domestic market is expected to reach $10 billion by the end of the financial year 2008 If it continues to grow by the current rate then by the end of the financial year 2012 then IT and IT enabled services will reach nearly US$330 million

The electronics hardware is growing at over 30% and is expected to grow rapidly in the coming years and is estimated to be US$62 billion by 2010. According to a recent World Bank study, India is the preferred location for software vendors for its quality and cost. India has strong UNIX base which provides opportunity for the development of products for internet based applications.

Further, India has global connectivity with international dialing facility from over 13220 locations, Leased/switched high-speed data links from major centers through STPs and VSNL for point-to-point communication are also available

Abundant investment opportunities exist in the following thrust areas in India: Communication Infrastructure Optic Fiber Cable Gateways Satellite based Communication Wireless Software Development IT-enables Services IT-enabled education Data Centers & Server Farms

Hence IT sector is attracting considerable interest not only as a vast market but also as potential production base by international companies. And it is one of the fastest growing segments of the Indian industry both in terms of production and exports
Liberalization of Retail Sector of India

Module III

Retailing is the transaction between the seller and consumer for personal consumption It does not include transaction between the manufacturer, corporate purchase, government purchase and other wholesale purchase. A retailer stocks the goods from the manufacturer and then sells the same to the end user for a marginal profit. In the supply chain that also consists of manufacturing and distribution, retailing is the last link before the product reaches the consumer

Retail Sector in India Post liberalization the Retail sector in India is heralded as one of the sunrise industries. It has never been better for the retail sector in India. Today within the booming service sector, retailing is the single biggest contributor in terms of GDP to the National Income. Retailing itself can be further divided into organized and unorganized sector.

Organized Sector Organized retailing came into its own in tandem with the retail boom. Indian corporate like Reliance, ITC and Pantaloon have made foray into this segment along with several foreign brands changing the landscape of retailing in India. It coincided with the high growth in the Indian economy, resulting in greater purchasing power amongst the middle class, which in turn went on a purchasing spree.

Other factors like consumer awareness, investments by venture capitalists and private equity firms have also contributed to the growth of organized retail. The growth in the organized retailing has resulted in the establishment of departmental stores, supermarkets, rural retailing, e-retailing and luxury retailing. Each one of these formats has a unique advantage and the scale of operation depends upon factors like average footfalls, sales per sq ft etc. However the process of acquiring license is still a bottleneck for the development of Indian retailing.

Unorganized sector The unorganized sector is still dominant in India, since it has the advantage of low investment need. Since retailing is the process of connecting the supplier and consumer, pricing of products is very important in a price conscious market like India. Unorganized retailers play an important role in this regard and are a vital part of the supply chain. If unorganized retail segment positions itself correctly, it can carve a niche for itself in India's booming retail sector

Rural Retailing India's huge rural market has also attracted retail investments and is seen as a viable opportunity for growth by corporate India. ITC launched the countries first rural mall "Chaupal Sagar" with diverse products being offered ranging from FMCG to electronics appliance to automobiles, with a view to provide farmers a one stop center for all their consumption requirements. Many more new trends could possibly be tried in rural markets to unearth the huge potential.

The Retail Sector of Indian Economy is going through the phase of tremendous transformation. The retail sector of Indian economy is categorized into two segments such as organized retail sector and unorganized retail sector with the latter holding the larger share of the retail market. At present the organized retail sector is catching up very fast.

The impact of the alterations in the format of the retail sector changed the lifestyle of the Indian consumers drastically. The evident increase in consumerist activity is colossal which has already chipped out a money making recess for the retail sector of Indian economy.

With the onset of a globalized economy in India, the Indian consumer's psyche has been changed. People have become aware of the value of money. Nowadays the Indian consumers are well versed with the concepts about quality of products and services. These demands are the visible impacts of the Retail Sector of Indian Economy

Since the liberalization policy of 1990, the Indian economy, and its consumers are getting whiff of the latest national & international products, the with help of print and electronic media. The social changes with the rapid economic growth due to trained personnel's, fast modernization, enhanced availableness of retail space is the positive effects of liberalization

The growth factors of the retail sector of Indian economy are: Increase in per capita income which in turn increases the household consumption Demographical changes and improvements in the standard of living Change in patterns of consumption and availability of low-cost consumer credit Improvements in infrastructure and enhanced availability of retail space Entry to various sources of financing

The infrastructure of the retail sector will evolve radically. The emergence of shopping malls are going steady in the metros and there are further plans of expansion which would lead to 150 new ones coming up by the year 2008. As the count of super markets is going up much faster than rate of growth in retail sector, it is taking the lions share in food trade.

The non-food sector, segments comprising apparel, accessories, fashion, lifestyle felt the significant change with the emergence of new stores formats like convenience stores, mini marts, mini supermarkets, large supermarkets, and hyper marts. Even food retailing has became an important retail business in the national arena, with large format retail stores, establishing stores all over India. With the entry of packaged foods like MTR, ITC Ashirbad, fast foods chains like McDonald's, KFC, beverage parlors like Nescafe, Tata Tea, Cafe Coffee and Barista, the Indian food habits has been altered. This stores have earned the reputation of being 'super saver locations'

With the arrival of the Transnational Companies(TNC), the Indian retail sector will confront the following round of alterations. At present the Foreign Direct Investments(FDI) is not encouraged in the Indian organized retail sector but once the TNC'S get in they would try to muscle out their Indian counterparts. This would be challenging to the retail sector in India.

The future trends of the retail sector of Indian economy: The retail sector of Indian economy will grow up to 10% of total retailing by the year 2010. No one single format can be assumed as there is a huge difference in cultures regionally. The most encouraging format now would be the hypermarts The hypermart format would be further encouraged with the entry of the TNC's

Challenges Faced By The Retail Industry 1. Even though India has well over 5 million retail outlets of different sizes and styles, it still has a long way to go before it can truly have a retail industry at par with International standards. This is where Indian companies and International brands have a huge role to play.

2. Indian retailing is still dominated by the unorganized sector and there is still a lack of efficient supply chain management. India must concentrate on improving the supply chain management, which in turn would bring down inventory cost, which can then be passed on to the consumer in the form of low pricing.

3. Most of the retail outlets in India have outlets that are less than 500 square feet in area. This is very small by International Standards. 4. India's huge size and socio economic and cultural diversity means there is no established model or consumption pattern throughout the country. Manufacturers and retailers will have to devise strategies for different sectors and segments which by itself would be challenging

The drawbacks provide a huge opportunity for the retail industry. The entry of foreign majors like Benetton, Dairy Farm and Levis underline the opportunity for the industry in India

Future trends 1. Organized retailing is dominated by large conglomerates like TATA's, ITC, RPG group, Piramals and Rahejas apart from the various MNC's. This trend is expected to continue in future. 2. Textile and Garment companies like Raymond, Madura Garments and Arvind Denims have achieved forward integration by opening their own retail outlets for their branded garments. This gives them a huge advantage by reducing the role of intermediaries, increase profit margin and enables them to be close to the end user.

3. Inflation and the global meltdown have had an effect on the growth of retailing in India. Experts believe the retail industry should focus on distinction, branding, after sales service, exploring commoditization, share of purchasing power and innovation to tide over the crisis. . The year 2009 is seen as a year of consolidation for Indian retail sector. By ushering in best practices and restructuring business models, the retail industry in India is expected to adjust to the changing market conditions and ensure new opportunities for growth. 5. The retail sector is expected to grow at 8 to 12 per cent in 2009-2010

4. The year 2009 is seen as a year of consolidation for Indian retail sector. By ushering in best practices and restructuring business models, the retail industry in India is expected to adjust to the changing market conditions and ensure new opportunities for growth. 5. The retail sector is expected to grow at 8 to 12 per cent in 2009-2010
Liberalization of the Insurance Market in India

Module III

We examine the institution of insurance in India. Over the past century, Indian insurance industry has gone through big changes. It started as a fully private system with no restriction on foreign participation. After the independence, the industry went to the other extreme.

It became a state-owned monopoly. In 1991, when rapid changes took place in many parts of the Indian economy, nothing happened to the institutional structure of insurance: it remained a monopoly. Only in 1999, a new legislation came into effect signaling a change in the insurance industry structure.

We examine what might happen in the future when the domestic private insurance companies are allowed to compete with some foreign participation. Because of the time dependence of insurance contracts, it is highly unlikely that these erstwhile monopolies are going to disappear

Introduction Insurance in India started without any regulation in the Nineteenth Century. It was a typical story of a colonial era: a few British insurance companies dominating the market serving mostly large urban centers. After the independence, it took a dramatic turn. Insurance was nationalized

First, the life insurance companies were nationalized in 1956, and then the general insurance business was nationalized in 1972. Only in 1999 private insurance companies have been allowed back into the business of insurance with a maximum of 26% of foreign holding. In what follows, we describe how and why of regulation and deregulation. The entry of the State Bank of India with its proposal of bancassurance brings a new dynamics in the game

We study the collective experience of the other countries in Asia already deregulated their markets and have allowed foreign companies to participate. If the experience of the other countries is any guide, the dominance of the Life Insurance Corporation and the General Insurance Corporation is not going to disappear any time soon.

Insurance under the British Raj Life insurance in the modern form was first set up in India through a British company called the Oriental Life Insurance Company in 1818 followed by the Bombay Assurance Company in 1823 and the Madras Equitable Life Insurance Society in 1829. All of these companies operated in India but did not insure the lives of Indians

They were there insuring the lives of Europeans living in India. Some of the companies that started later did provide insurance for Indians. But, they were treated as "substandard "and therefore had to pay an extra premium of 20% or more. The first company that had policies that could be bought by Indians with "fair value" was the Bombay Mutual Life Assurance Society starting in 1871

The first general insurance company, Triton Insurance Company Ltd., was established in 1850. It was owned and operated by the British. The first indigenous general insurance company was the Indian Mercantile Insurance Company Limited set up in Bombay in 1907.

By 1938, the insurance market in India was buzzing with 176 companies (both life and nonlife). However, the industry was plagued by fraud. Hence, a comprehensive set of regulations was put in place to stem this problem (see Table 1). By 1956, there were 154 Indian insurance companies, 16 non-Indian insurance companies and 75 provident societies that were issuing life insurance policies

Most of these policies were centered in the cities (especially around big cities like Bombay, Calcutta, Delhi and Madras). In 1956, the then finance minister S. D. Deshmukh announced nationalization of the life insurance business.

Monopoly Raj The nationalization of life insurance was justified mainly on three counts. (1) It was perceived that private companies would not promote insurance in rural areas. (2) The Government would be in a better position to channel resources for saving and investment by taking over the business of life insurance.

(3) Bankruptcies of life insurance companies had become a big problem (at the time of takeover, 25 insurance companies were already bankrupt and another 25 were on the verge of bankruptcy). The experience of the next four decades would temper these views.

Life Story of the Life Insurance Corporation The life insurance industry was nationalized under the Life Insurance Corporation (LIC) Act of India. In some ways, the LIC has become very successful. (1) Despite being a monopoly, it has some 60-70 million policyholders. Given that the Indian middle-class is around 250300 million, the LIC has managed to capture some 30 odd percent of it

(2) The level of customer satisfaction is high for the LIC (one of the findings of the Malhotra Committee, see below). This is somewhat surprising given the frequent delays in claim settlement. (3) Market penetration in the rural areas has grown substantially.

Around 48% of the customers of the LIC are from rural and semi-urban areas. This probably would not have happened had the charter of the LIC not specifically set out the goal of serving the rural areas.

One exogenous factor has helped the LIC to grow rapidly in recent years: a high saving rate in India. Even though the saving rate is high in India (compared with other countries with a similar level of development), Indians exhibit high degree of risk aversion. Thus, nearly half of the investments are in physical assets (like property and gold).

Around twenty three percent are in (low yielding but safe) bank deposits. In addition, some 1.3- percent of the GDP are in life insurance related savings vehicles. This figure has doubled between 1985 and 1995.

Life Insurance in India: A World Perspective In many countries, insurance has been a form of savings. In many developed countries, a significant fraction of domestic saving is in the form of (endowment) insurance plans. This is not surprising. The prominence of some developing countries is more surprising

For example, South Africa features at the number two spot. India is nestled between Chile and Italy. This is even more surprising given the levels of economic development in Chile and Italy. Thus, we can conclude that there is an insurance culture in India despite a low per capita income. This bodes well for future growth. Specifically, when the income level improves, insurance (especially life) is likely to grow rapidly

The General Insurance Corporation Although efforts were made to maintain an open market for the general insurance industry by amending the Insurance Act of 1938 from time to time, malpractice escalated beyond control. Thus, the general insurance industry was nationalized in 1972. The General Insurance Corporation (GIC) was set up as a holding company

It had four subsidiaries: New India, Oriental, United India and the National Insurance companies (collectively known as the NOUN). It was understood that these companies would compete with one another in the market. It did not happen. They were supposed to set up their own investment portfolios. That did not happen either

It began to happen after 29 years. The NOUN has kicked off an internal exercise to segregate the entire investment portfolio of the GIC (in 2001). The GIC has a quarter of a million agents. It has more than 2,500 branches, 30 million individual and group insurance policies and assets of about USD 1,800 million at market value (at the end of 1999)

It has been suggested that the GIC should close 20-25% of its nonviable branches (Patel, 2001). The GIC has so far been the holding company and re-insurer for the state-run insurers. It reinsured about 20% of their business.

Two Committee Reports: One Known, One Unknown Although Indian markets were privatized and opened up to foreign companies in a number of sectors in 1991, insurance remained out of bounds on both counts. The government wanted to proceed with caution. With pressure from the opposition, the government (at the time, dominated by the Congress Party) decided to set up a committee headed by Mr. R. N. Malhotra (the then Governor of the Reserve Bank of India).

Malhotra Committee Liberalization of the Indian insurance market was recommended in a report released in 1994 by the Malhotra Committee, indicating that the market should be opened to private-sector competition, and ultimately, foreign private-sector competition. It also investigated the level of satisfaction of the customers of the LIC. Curiously, the level of customer satisfaction seemed to be high

The union of the LIC made political capital out of this finding http://www.maoism.org/misc/india/rupe/asp ects26_27/insurance.htm).

The following are the purposes of the committee. (a) To suggest the structure of the insurance industry, to assess the strengths and weaknesses of insurance companies in terms of the objectives of creating an efficient and viable insurance industry, to have a wide coverage of insurance services, to have a variety of insurance products with a high quality service, and to develop an effective instrument for mobilization of financial resources for development.

(b) To make recommendations for changing the structure of the insurance industry, for changing the general policy framework etc. (c) To take specific suggestions regarding LIC and GIC with a view to improve the functioning of LIC and GIC. (d) To make recommendations on regulation and supervision of the insurance sector in India.

(e) To make recommendations on the role and functioning of surveyors, intermediaries like agents etc. in the insurance sector. (f) To make recommendations on any other matter which are relevant for development of the insurance industry in India

The committee made a number of important and far-reaching recommendations. (a) The LIC should be selective in the recruitment of LIC agents. Train these people after the identification of training needs. (b) The committee suggested that the Federation of Insurance Institute, Mumbai should start new courses and diploma courses for intermediaries of the insurance sector.

(c) The LIC should use an MBA specialized in Marketing (a similar suggestion for the GIC subsidiaries). (D) It suggested that settlement of claims were to be done within a specific time frame without delay. (E) The committee has several recommendations on product pricing, vigilance, systems and procedures, improving customer service and use of technology.

(f) It also made a number of recommendations to alter the existing structure of the LIC and the GIC. (g) The committee insisted that the insurance companies should pay special attention to the rural insurance business

(h) In the case of liberalization of the insurance sector the committee made several recommendations, including entry to new players and the minimum capital level requirements for such new players should be Rs. 100 crores (about USD 24 million). However, a lower capital requirement could be considered for a co-operative sectors' entry in the insurance business.

(i) The committee suggested some norms relating to promoters equity and equity capital by foreign companies, etc.

Mukherjee Committee Immediately after the publication of the Malhotra Committee Report, a new committee (called the Mukherjee Committee) was set up to make concrete plans for the requirements of the newly formed insurance companies. Recommendations of the Mukherjee Committee were never made public

But, from the information that filtered out it became clear that the committee recommended the inclusion of certain ratios in insurance company balance sheets to ensure transparency in accounting. But the Finance Minister objected. He argued (probably on the advice of some of the potential entrants) that it could affect the prospects of a developing insurance company

Insurance Regulatory Act (1999) After the report of the Malhotra Committee came out, changes in the insurance industry appeared imminent. Unfortunately, instability in Central Government, changes in insurance regulation could not pass through the parliament.

The dramatic climax came in 1999. On March 16, 1999, the Indian Cabinet approved an Insurance Regulatory Authority (IRA) Bill that was designed to liberalize the insurance sector. The bill was awaiting ratification by the Indian Parliament. However, the BJP Government fell in April 1999.

The deregulation was put on hold once again. An election was held in late 1999. A new BJPled government came to power. On December 7, 1999, the new government passed the Insurance Regulatory and Development Authority (IRDA) Act

This Act repealed the monopoly conferred to the Life Insurance Corporation in 1956 and to the General Insurance Corporation in 1972. The authority created by the Act is now called IRDA. It has ten members. New licenses are being given to private companies (see below). IRDA has separated out life, non-life and reinsurance insurance businesses

Therefore, a company has to have separate licenses for each line of business. Each license has its own capital requirements (around USD24 million for life or non-life and USD48 million for reinsurance).

Some Details of the IRDA Bill On July 14, 2000, the Chairman of the IRDA, Mr. N. Rangachari set forth a set of regulations in an extraordinary issue of the Indian Gazette that details of the regulation

The first covers the Insurance Advisory Committee that sets out the rules and regulation. The second stipulates that the "Appointed Actuary" has to be a Fellow of the Actuarial Society of India. Given that there has been a dearth of actuaries in India with the qualification of a Fellow of the Actuarial Society of India, this becomes a requirement of tall order.

As a result, some companies have not been able to attract a qualified Appointed Actuary (Dasgupta, 2001). The IRDA is also in the process of replacing the Actuarial Society of India by a newly formed institution to be called the Chartered Institute of Indian Actuaries (modeled after the Institute of Actuaries of London).

Curiously, for life insurers the Appointed Actuary has to be an internal company employee, but he or she may be an external consultant if the company happens to be a non-life insurance company. Third, the Appointed Actuary would be responsible for reporting to the IRDA a detailed account of the company

Fourth, insurance agents should have at least a high school diploma along with training of 100 hours from a recognized institution. More than a dozen institutions have been recognized by the IRDA for training insurance agents (the list appears online at http://www.irdaonline.org/press.asp).

Fifth, the IRDA has set up strict guidelines on asset and liability management of the insurance companies along with solvency margin requirements. Initial margins are set high (compared with developed countries). The margins vary with the lines of business (for example, fire insurance has a lower margin than aviation insurance).

Sixth, the disclosure requirements have been kept rather vague. This has been done despite the recommendations to the contrary by the Mukherjee Committee recommendations.

Seventh, all the insurers are forced to provide some coverage for the rural sector. (1) In respect of a life insurer, (a) five percent in the first financial year; (b) seven percent in the second financial year; (c) ten percent in the third financial year; (d) twelve percent in the fourth financial year; (e) fifteen percent in the fifth year (of total policies written direct in that year).

(2) In respect of a general insurer, (a) two percent in the first financial year; (b) three percent in the second financial year; (c) five percent thereafter (of total gross premium income written direct in that year).

New Entry Immediately after the passage of the Act, a number of companies announced that they would seek foreign partnership. In mid-2000, the following companies made public statements that they already were in the process of setting up insurance business with foreign partnerships. However, not all the partnerships panned out in the end (see below).

Three days before the deadline that the IRDA had set upon itself (October 25, 2000), it issued three companies with license papers: (1) HDFC Standard Life. This will be jointly set up by India's Housing Development Finance Company - the largest housing finance company in India and the Scotland based Standard Life.

(2) Sundaram Royal Alliance Insurance Company. It is a partnership created by Sundaram Finance and three other companies of the TVS Group of Chennai (Madras) and the London based Royal & SunAlliance

(3) Reliance General Insurance. This company is fully owned by Mumbai based Reliance Industries which has operations in textile, petrochemicals, power and finance industries.

There are three other companies with "in principal" approvals: (1) Max New York Life. It is a partnership between Delhi based pharmaceutical company Max India and New York Life, the New York based life insurance company

(2) ICICI Prudential Life Insurance Company. This is a joint venture between Mumbai based Industrial Credit & Investment Corporation and the London based Prudential PLC.

(3) IFFCO Tokio General Insurance Company. It is a joint venture between Indian Farmers' Fertilizer Cooperative and Tokio Marine and Fire of Japan

To date (end of April 2001), the following companies have thus been granted licenses: ICICI -Prudential, Reliance General, Reliance Life, Tata-AIG General, HDFC Standard Life, Royal-Sundaram, Max-New York Life, IFFCOTokio Marine, Birla-SunLife, Bajaj-Allianz General, Tata-AIG Life, ING-Vyasa, Bajaj-Allianz Life, SBI Cardiff Life.

Note that all of these companies are either in the life insurance business or in the non-life insurance business. No license has been granted for reinsurance business so far (the size of the reinsurance business can be 10-20% of the total revenue). No stand-alone health insurance company has been granted license so far.

Enter the Dragon On December 28, 2000, the State Bank of India (SBI) announced a joint venture partnership with Cardif SA (the insurance arm of BNP Paribas Bank). This partnership won over several others (with Fortis and with GE Capital). The entry of the SBI has been awaited by many. It is well known that the SBI has long harbored plans to become a universal bank (a universal bank has business in banking, insurance and in security).

For a bank with more than 13,000 branches all over India, this would be a natural expansion. In the first round of license issue, the SBI was absent. There were several reasons for this delay. First, the SBI was seeking a foreign partner to help with new product design

Second, it did not want the partner to become dominant in the long run (when the 26% foreign investment cap is eventually lifted). It wanted to retain its own brand name. Third, it wanted a partner that is well versed in the universal banking business. This ruled out an American partner (where underwriting insurance business by banks have been strictly forbidden by law).

Cardif is the third largest insurance company in France. More than 60% of life insurance policies in France are sold through the banks. Fourth, the Reserve Bank of India (RBI) needed to clear participation by the SBI because in India banks are allowed to enter other businesses on a "case by case" basis.

Over the course of the next twelve months, the SBI will sell insurance in 100 branches. Over a period of 2-3 years it will expand operation in 500 branches. Initially it will hold 74% ownership of the joint venture company with Cardif. Over time, it will dilute its holding to 50-60%.

The SBI entry is groundbreaking for several reasons. This was the first for a bank to enter the insurance market. This kind of synergy between a bank and an insurance company is extremely rare in many parts of the world. In Continental Europe, it is called bancassurance (in France) or allfinanz (in Germany).

Second, even though the regulators have said that banks would not (generally) be allowed to hold more than 50% of an insurance company, the SBI was allowed to do so (with a promise that its share would be eventually diluted).

Broken Marriages Several partnerships broke down during the year 2000. Probably the most dramatic breakdown took place between Hindustan Times (a newspaper group) and the Commercial Union of the UK. The management of Hindustan Times realized that they are heavily reliant on a steady daily cash flow (Kumari, 2001).

Insurance is a completely different business. Their shareholders would revolt if they faced large one-time losses (common in insurance business). Similarly, by the end of July 2000, KotakMahindra and Chubb declared their divorce. Dabur Group and Allstate also parted company. Allianz and Alpic broke their partnership.
BANKING SECTOR LIBERALIZATION IN INDIA

Module III

The year 1991 marked a decisive changing point in India's economic policy since Independence in 1947. Following the 1991 balance of payments crisis, structural reforms were initiated that fundamentally changed the prevailing economic policy in which the state was supposed to take the "commanding heights" of the economy. After decades of far reaching government involvement in the business world, known as the "mixed economy" approach, the private sector started to play a more prominent role

The enacted reforms not only affected the real sector of the economy, but the banking sector as well. Characteristics of banking in India before 1991 were a significant degree of state ownership and far-reaching regulations concerning among others the allocation of credit and the setting of interest rates. The blueprint for banking sector reforms was the 1991 report of the Narasimham Committee. Reform steps taken since then include a deregulation of interest rates, an easing of directed credit rules under the priority sector lending arrangements, a reduction of statutory pre-emptions, and a lowering of entry

The regulations in India are commonly characterized as "financial repression". The financial liberalization literature assumes that the removal of repressionist policies will allow the banking sector to better perform its functions of mobilizing savings and allocating capital what ultimately results in higher growth rates. If India wants to achieve its ambitious growth targets of 7-8% per year as lined out in the Common Minimum Programme of the current government, a successful management of the systemic changes in the banking sector is a necessary precondition.

While the transition process in the banking sector has certainly not yet come to an end, sufficient time has passed for an interim review. The objective of this therefore is to evaluate the progress made in liberalizing the banking sector so far and to test if the reforms have allowed the banking sector to better perform its functions.

2 ROLE AND MANAGEMENT OF THE BANKING SECTOR A banking sector performs three primary functions in an economy: the operation of the payment system, the mobilization of savings and the allocation of savings to investment projects. By allocating capital to the highest value use while limiting the risks and costs involved, the banking sector can exert a positive influence on the overall economy, and is thus of broad macroeconomic importance

Since the general importance of a banking sector for an economy is widely accepted, the questions arise under which coordination mechanism state or market it best performs its functions, and, if necessary, how to manage the transition to this coordination mechanism

Currently, there are opposing views concerning the most preferable coordination mechanism. According to the development and political view of state involvement in banking, a government is through either direct ownership of banks or restrictions on the operations of banks better suited than market forces alone to ensure that the banking sector performs its functions.

The argument is essentially that the government can ensure a better economic outcome by for example channeling savings to strategic projects that would otherwise not receive funding or by creating a branch infrastructure in rural areas that would not be build by profit-maximizing private banks. The active involvement of government thus ensures a better functioning of the banking sector, which in turn has a growth enhancing effect

The proponents of financial liberalization take an opposite stance. In their view, repressive policies such as artificially low real interest rates, directed credit programs and excessive statutory pre-emptions that are imposed on banks have negative effects on both the volume and the productivity of investments. Removing these repressionist policies and giving more importance to market forces will, in the view of the proponents of financial liberalization, increase financial development and eventually lead to higher economic growth

A majority of empirical studies support the conclusion of the financial liberalization hypothesis. The policy recommendations arising from these studies are evident: abolishment of repressionist policies and privatization of state-owned banks

3 MEASURES OF FINANCIAL REPRESSION Financial repression refers to policies, laws, formal regulations and informal controls that through the distortion of financial prices inhibit the proper functioning of the banking sector. While there is certainly a wide array of ways in which a government can interfere in the banking sector, three common policies are statutory preemptions, regulated interest rates, and directed credit programs

Statutory pre-emptions can take the form of reserve or liquidity requirements. Reserve requirements oblige banks to deposit a certain percentage of deposits at the central bank. While this is a common practice in many countries, it becomes a repressive policy if the amount of funds pre-empted is above the level required to ensure an orderly functioning of the monetary policy.

Liquidity requirements are relatively similar in nature and oblige banks to keep a certain percentage of deposits in government securities or other approved securities. Thus, statutory pre-emptions create both an under-supply of credit by taking liquidity out of the market and an artificial demand for government securities

Interest rate regulation can take several forms. Demetriades and Luintel describe a total of six interest rate controls. These controls are a fixed deposit rate, a ceiling on the deposit rate, a floor on the deposit rate, a fixed lending rate, a ceiling on the lending rate and a floor on the lending rate .

Depending on how the interest-rate controls are set, they can either constitute an incentive or disincentive for investments and savings. The controls on the lending side are especially important since they can affect the riskiness of the loan portfolio. Fixed lending rates or floors on the lending rate tend to crowd out "low-risk, low-return" projects that become unprofitable with higher interest rates

Under a directed credit program, banks have to allocate a certain portion of bank credit to priority sectors. In the case of India, 40% of the total credit has to go to priority sectors such as agriculture, smallscale industries, small transport operators or the export sector. The quantitative priority sector lending targets are often combined with interest rate controls that lead to a segmentation of financial markets and constitute a barrier to financial development.

Furthermore, loans to priority sectors can have a destabilizing effect on the banking system, since they are often less profitable and more likely to be nonperforming The results of statutory pre-emptions and regulated interest rates are a forced low return on assets and high portions of reserve money.

This effectively leads to disincentives to save because of low real interest rates while at the same time creating demand for credit due to relatively low lending rates. In this environment, a directed lending program serves as an allocation mechanism for scarce credit

Repressive policies can have negative effects on the development of the banking sector and the economy as a whole. Among them are a higher degree of less efficient self financing due to a shortage of loans, a cross-subsidization through interest rates that provides disincentives for certain groups to fulfill their banking needs through the organized banking sector, and a lower productivity of investments caused by restrictions on investments. Finally, the resulting underdevelopment of the banking sector associated with financial repression may result in lower economic growth

The policy recommendation for countries using repressive policies is to liberalize the banking sector through the removal of repressive policies. Various measures have been proposed to achieve this goal. First, real interest rates for deposits and loans should be market-determined. This includes the abolition of interest rate ceilings and floors.

Second, reduction of reserve requirements to the extent that is necessary to ensure the stability of the financial system. Third, discontinuation of the mandated allocation of credit to certain sectors While liberalization should entail further elements such as institution building or privatization of state owned banks, the removal of repressionist policies is certainly an important step towards more market oriented banking.

India is a case in point for a country where the government used the described policies to gain control over the banking sector and integrate it in its overall development strategy.

DEVELOPMENT OF THE INDIAN BANKING SECTOR 4.1 Development from Independence until 1991 At the time of Independence in 1947, the banking system in India was fairly well developed with over 600 commercial banks operating in the country. However, soon after Independence, the view that the banks from the colonial heritage were biased in favor of working-capital loans for trade and large firms and against extending credit to small-scale enterprises, agriculture and commoners, gained prominence.

To ensure better coverage of the banking needs of larger parts of the economy and the rural constituencies, the Government of India (GOI) created the State Bank of India (SBI) in 1955. Despite the progress in the 1950s and 1960s, it was felt that the creation of the SBI was not far reaching enough since the banking needs of small scale industries and the agricultural sector were still not covered sufficiently. This was partly due to the still existing close ties commercial and industry houses maintained with the established commercial banks, which gave them an advantage in obtaining credit

Additionally, there was a perception that banks should play a more prominent role in India's development strategy by mobilizing resources for sectors that were seen as crucial for economic expansion. As a consequence, in 1967 the policy of social control over banks was announced. Its aim was to cause changes in the management and distribution of credit by commercial banks

Following the Nationalization Act of 1969, the 14 largest public banks were nationalized which raised the Public Sector Banks' (PSB) share of deposits from 31% to 86%. The two main objectives of the nationalizations were rapid branch expansion and the channeling of credit in line with the priorities of the five-year plans. To achieve these goals, the newly nationalized banks received quantitative targets for the expansion of their branch network and for the percentage of credit they had to extend to certain sectors and groups in the economy, the so-called priority sectors, which initially stood at 33.3%

Six more banks were nationalized in 1980, which raised the public sector's share of deposits to 92%. The second wave of nationalizations occurred because control over the banking system became increasingly more important as a means to ensure priority sector lending, reach the poor through a widening branch network and to fund rising public deficits. In addition to the nationalization of banks, the priority sector lending targets were raised to 40%

However, the policies that were supposed to promote a more equal distribution of funds, also led to inefficiencies in the Indian banking system. To alleviate the negative effects, a first wave of liberalization started in the second half of the 1980s. The main policy changes were the introduction of Treasury Bills, the creation of money markets, and a partial deregulation of interest rates

Besides the establishment of priority sector credits and the nationalization of banks, the government took further control over banks' funds by raising the statutory liquidity ratio (SLR) and the cash reserve ratio (CRR). From a level of 2% for the CRR and 25% for the SLR in 1960, both witnessed a steep increase until 1991 to 15% and 38.5% respectively

In summary, India's banking system was at least until an integral part of the government's spending policies. Through the directed credit rules and the statutory pre-emptions it was a captive source of funds for the fiscal deficit and key industries. Through the CRR and the SLR more than 50% of savings had either to be deposited with the RBI or used to buy government securities.

Of the remaining savings, 40% had to be directed to priority sectors that were defined by the government. Besides these restrictions on the use of funds, the government had also control over the price of the funds, i.e. the interest rates on savings and loans . This was about to change at the beginning of the 1990s when a balance-of-payments crisis was a trigger for far-reaching reforms

Developments after 1991 Like the overall economy, the Indian banking sector had severe structural problems by the end of the 1980s. Joshi and Little characterize the banking sector by 1991 as "[] unprofitable, inefficient, and financially unsound" By international standards, Indian banks were even despite a rapid growth of deposits extremely unprofitable. In the second half of the 1980s, the average return on assets was about 0.15%.

The return on equity was considerably higher at 9.5%, but merely reflected the low capitalization of banks. While in India capital and reserves stood at about 1.5% of assets, other Asian countries reached about 4-6%. These figures do not take the differences in income recognition and loss provisioning standards into account, which would further deteriorate the relative performance of Indian banks

The 1991 report of the Narasimham Committee served as the basis for the initial banking sector reforms. In the following years, reforms covered the areas of interest rate deregulation, directed credit rules, statutory pre-emptions and entry deregulation for both domestic and foreign banks. The objective of banking sector reforms was in line with the overall goals of the 1991 economic reforms of opening the economy, giving a greater role to markets in setting prices and allocating resources, and increasing the role of the private sector

Statutory pre-emptions The degree of financial repression in the Indian banking sector was significantly reduced with the lowering of the CRR and SLR, which were regarded as one of the main causes of the low profitability and high interest rate spreads in the banking system

During the 1960s and 1970s the CRR was around 5%, but until 1991 it increased to its maximum legal limit of 15%. From its peak in 1991, it has declined gradually to a low of 4.5% in June 2003. In October 2004 it was slightly increased to 5% to counter inflationary pressures, but the RBI remains committed to decrease the CRR to its statutory minimum of 3%.

The SLR has seen a similar development. The peak rate of the SLR stood at 38.5% in February 1992, just short of the upper legal limit of 40%. Since then, it has been gradually lowered to the statutory minimum of 25% in October 1997

The reduction of the CRR and SLR resulted in increased flexibility for banks in determining both the volume and terms of lending

Priority sector lending Besides the high level of statutory preemptions, the priority sector advances were identified as one of the major reasons for the below average profitability of Indian banks. The Narasimham Committee therefore recommended a reduction from 40% to 10%.

However, this recommendation has not been implemented and the targets of 40% of net bank credit for domestic banks and 32% for foreign banks have remained the same. While the nominal targets have remained unchanged, the effective burden of priority sector advances has been reduced by expanding the definition of priority sector lending to include for example information technology companies

Interest rate liberalization Prior to the reforms, interest rates were a tool of cross-subsidization between different sectors of the economy. To achieve this objective, the interest rate structure had grown increasingly complex with both lending and deposit rates set by the RBI. The deregulation of interest rates was a major component of the banking sector reforms that aimed at promoting financial savings and growth of the organized financial system

The lending rate for loans in excess of Rs200,000 that account for over 90% of total advances was abolished in October 1994. Banks were at the same time required to announce a prime lending rate (PLR) which according to RBI guidelines had to take the cost of funds and transaction costs into account. For the remaining advances up to Rs200,000 interest rates can be set freely as long as they do not exceed the PLR

On the deposit side, there has been a complete liberalization for the rates of all term deposits, which account for 70% of total deposits. The deposit rate liberalization started in 1992 by first setting an overall maximum rate for term deposits. From October 1995, interest rates for term deposits with a maturity of two years were liberalized.

The minimum maturity was subsequently lowered from two years to 15 days in 1998. The term deposit rates were fully liberalized in 1997. As of 2004, the RBI is only setting the savings and the non-resident Indian deposit rate. For all other deposits above 15 days, banks are free to set their own interest rates

Entry barriers Before the start of the 1991 reforms, there was little effective competition in the Indian banking system for at least two reasons. First, the detailed prescriptions of the RBI concerning for example the setting of interest rates left the banks with limited degrees of freedom to differentiate themselves in the marketplace. Second, India had strict entry restrictions for new banks, which effectively shielded the incumbents from competition

Through the lowering of entry barriers, competition has significantly increased since the beginning of the 1990s. Seven new private banks entered the market between 1994 and 2000. In addition, over 20 foreign banks started operations in India since 1994. By March 2004, the new private sector banks and the foreign banks had a combined share of almost 20% of total assets

Deregulating entry requirements and setting up new bank operations has benefited the Indian banking system from improved technology, specialized skills, better risk management practices and greater portfolio diversification

Prudential norms The report of the Narasimham Committee was the basis for the strengthening of prudential norms and the supervisory framework. Starting with the guidelines on income recognition, asset classification, provisioning and capital adequacy the RBI issued in 1992/93, there have been continuous efforts to enhance the transparency and accountability of the banking sector. The improvements of the prudential and supervisory framework were accompanied by a paradigm shift from micro-regulation of the banking sector to a strategy of macro-management

The Basle Accord capital standards were adopted in April 1992. The 8% capital adequacy ratio had to be met by foreign banks operating in India by the end of March 1993, Indian banks with a foreign presence had to reach the 8% by the end of March 1994 while purely domestically operating banks had until the end of March 1996 to implement the requirement

Significant changes where also made concerning nonperforming assets (NPA) since banks can no longer treat the putative 'income' from them as income. Additionally, the rules guiding their recognition were tightened. Even though these changes mark a significant improvement, the accounting norms for recognizing NPAs are less stringent than in developed countries where a loan is considered nonperforming after one quarter of outstanding interest payments compared to two quarters in India

Public Sector Banks At the end of the 1980s, operational and allocative inefficiencies caused by the distorted market mechanism led to a deterioration of Public Sector Banks' profitability. Enhancing the profitability of PSBs became necessary to ensure the stability of the financial system. The restructuring measures for PSBs were threefold and included recapitalization, debt recovery and partial privatization

Despite the suggestion of the Narasimham Committee to rationalize PSBs, the Government of India decided against liquidation, which would have involved significant losses accruing to either the government or depositors. It opted instead to maintain and improve operations to allow banks to create a good starting basis before a possible privatization

Due to directed lending practices and poor risk management skills, India's banks had accrued a significant level of NPAs. Prior to any privatization, the balance sheets of PSBs had to be cleaned up through capital injections. In the fiscal years 1991/92 and 1992/93 alone, the GOI provided almost Rs40 billion to clean up the balance sheets of PSBs.

Between 1993 and 1999 another Rs120 billion were injected in the nationalized banks. In total, the recapitalization amounted to 2% of GDP In 1993, the SBI Act of 1955 was amended to promote partial private shareholding. The SBI became the first PSB to raise equity in the capital markets.

After the 1994 amendment of the Banking Regulation Act, PSBs were allowed to offer up to 49% of their equity to the public. This lead to the further partial privatization of eleven PSBs. Despite those partial privatizations, the government is committed to keep their public character by maintaining strong administrative control such as the ability to appoint key personnel and influence corporate strategy
Social Justice
Module III
Social Justice
Inclusive growth demands that all social groups have equal access to the services provided by the State and equal opportunity for upward economic and social mobility. It is also necessary to ensure that there is no discrimination against any section of our society. In India, certain social groups such as the SCs, STs, OBCs and Minorities have historically been disadvantaged and vulnerable. Then there are certain other groups which may be discriminated against and which suffer from handicaps
Social Justice
These include persons with disabilities, older persons, street children, beggars and victims of substance abuse. Our Constitution contains various provisions for the development of such marginalized groups, for instance, Article 341 for SCs, Article 342 for STs, Article 340 for OBCs, Article 30 which provides the right to minorities to establish and administer educational institutions, and so on. Their individual and collective growth, however, cannot be ensured without improving their surroundings and providing clean drinking water, toilets and educational opportunities
Development of Scheduled Castes in India

Module III

SCHEDULED CASTES (SCs) The SCs constitute 16.23% of Indias population. In the past, they have been socially ostracized, economically exploited and denied human dignity and a sense of self worth. The socio-economic development and protection of SCs from discrimination and exploitation has been a high priority from the very start of the planning process

People belonging to SC communities are spread all over the country, with 80% of them living in the rural areas. They constitute more than a fifth of the population of Uttar Pradesh, Punjab, Himachal Pradesh and West Bengal. Punjab has the highest proportion of SCs to the State population. More than half of the SC population is concentrated in the five States of Uttar Pradesh (35.1 million), West Bengal (18.4 million), Tamil Nadu (11.8 million), Andhra Pradesh (12.3 million) and Bihar (13.0 million)

CONSTITUTIONAL SAFEGUARDS The Constitution of India guarantees protection from social injustice and all forms of exploitation (Art. 46). It guarantees equality before law (Art. 14), and enjoins upon the State not to discriminate against any citizen on grounds of caste (Art. 15 (1)). Untouchability is abolished and its practice in any form is forbidden (Art. 17). The Constitution mandates that no citizen shall, on grounds only of caste or race, be subjected to any disability and restriction (Art. 15 (2)).

It empowers the State to make provisions for reservation in educational institutions (Art. 15 (4) and (5)), and in appointments for posts in favour of SCs (Art. 16 (4), 16(4A), 16(4B) and Art. 335). Reservation of seats for SCs in the Lok Sabha is provided under Article 330, in the State Assemblies under Article 332 and in the Local Self-Governments bodies underArticles 243D and 340T

In addition to the above, the Parliament has enacted the Untouchability (Offences) Act, 1955, renamed as Protection of Civil Rights Act, in 1976. To check and deter atrocities against SCs, the Scheduled Castes and the Scheduled Tribes (Prevention of Atrocities) Act, 1989 has also been enacted

SCHEDULED CASTES DEVELOPMENT: AN OVERVIEW The Tenth Five Year Plan (200207) adopted a multipronged approach for the socio-economic development of the SCs: social empowerment through educational development; economic empowerment through income and employment enhancing avenues; protection through effective implementation of protective legislations and eradication of occupations such as manual scavenging; and holistic development through earmarking of funds proportionate to the population. [Scheduled Caste Sub-Plan (SCSP) and Tribal Sub-Plan (TSP

Educational Development With respect to the educational development of SCs, the Central Government has introduced major scholarship programmes and these are given as under

Major Scholarship Schemes under the Ministry of Social Justice and Empowerment 1. Post-Matric Scholarships (PMS) implemented since 194445 to promote higher education among SCs by extending scholarships to pursue studies beyond matriculation. In the Tenth Plan, an amount of Rs 1822.25 crore was utilized to reach the coverage of 29.59 lakh students in 200607. 2. Pre-Matric Scholarships are being awarded since 1977 78 with an objective to encourage children of scavengers and those engaged in menial works, to pursue education. 4.72 lakh children were awarded pre-matric scholarships for which Rs 56.41 crore was utilized in the Tenth Plan.

3. Upgradation of Merit for SC Students Scheme in operation since 198788 to extend remedial and special coaching offered to students to remove their deficiencies in school subjects (class IX to XII) into professional and technical courses. An expenditure of Rs 14.68 crore was incurred to benefit 10625 students. 4. Rajiv Gandhi National Fellowships launched in the Tenth Plan in 200506 as a special incentive to extend scholarships to SC students to pursue higher studies and research degrees such as M.Phil. and Ph.D. An amount of Rs 50.20 crore was earmarked for this scheme in the Tenth Plan to benefit 2666 SC students.

6.8. The other important schemes for the educational development of SCs: are (i) providing coaching facilities to students to prepare them for various competitive examinations being conducted by Union Public Service Comission (UPSC), State Public Service Commissions, banks, and so on; and (ii) hostel facilities to both boys and girls for pursuing education from middle level onwards.

Economic Development . The National Scheduled Castes Finance and Development Corporation (NSFDC) established in 1989, provides financial and other support to beneficiaries for taking up various income generating activities. An amount of Rs 388.80 crore was made available to the Corporation up to 31 March 2007 as equity share contribution against the authorized share capital of Rs 1000 crore. The number of SC persons who received assistance during the Tenth Five Year Plan (up to December 2006) is 257901

The National Safai Karamcharis Finance and Development Corporation was established in 1997 to provide financial support to the safai karamcharis (scavengers) to take up various income-generating activities. During the Tenth Five Year Plan, the Corporation introduced the Micro Credit Finance Scheme and the Mahila Samridhi Yojana, benefitting 102187 persons. During 200607, it disbursed loans to 16545 beneficiaries (up to December 2006) for various income generating activities in 23 States and two UTs

The scheme of grant-in aid to the Scheduled Castes Development Corporations (SCDCs) was introduced in 197879 as a CSS for participating in the equity share of the State corporations in a CentreState ratio of 49:51. The SCDCs finance employment oriented schemes that cover: (i) agriculture and allied activities including minor irrigation; (ii) small-scale industry; (iii) transport; and (iv) trade and service sector. They also finance projects by dovetailing the loan component from NSFDC/Banks

Protective Measures Two important protective legislations in operation for people belonging to SCs are the Protection of Civil Rights Act, 1955 and the Scheduled Castes and Scheduled Tribes (Prevention of Atrocities) Act, 1989. However, despite these Constitutional provisions, atrocities and crimes on members of SCs, especially the women, continue to occur in all parts of the country in varying degrees. As per the National Crime Records Bureau Report 2005, the crimes against SCs in the last few years were mainly atrocities

Implementation of the Scheduled Caste Sub-Plan (SCSP) and Tribal Sub-Plan (TSP) In view of the persistent and wide-spread socioeconomic backwardness of SCs and STs, a distinct need was felt for innovative policy intervention to enable these groups to share the benefits of growth in a more equitable manner. The government prepared a separate Development Plan called Tribal Sub Plan for STs in 1976. It was followed by the Special Component Plan for the SCs in 1978 (recently renamed the Scheduled Caste Sub Plan [SCSP]).

The SCSP and TSP aim at facilitating convergence and pooling of resources from all the other development sectors in proportion to the population of SCs and STs, respectively for their overall development At present, 27 States/UTs are implementing SCSP through different mechanisms. The State Governments generally divide their resources into divisible and nondivisible components and earmark funds for SCs only from the divisible pool. As a result, the actual funds flowing directly to SCSP from the total State Plan becomes much less than the proportion of SC population to the total population of the State

The State Government of Maharashtra has pioneered a special mechanism to ensure effective operationalization of SCSP and TSP. Other States could explore replication of this mechanism The Prime Minister has reiterated the need for effective implementation of SCSP and TSP during the 51st and 52nd NDC meetings held on 27 June 2005 and 9 December 2006. He emphasized that the SCSP and TSP strategies should become an integral part of the Annual Plans as well as the Five Year Plans so that full inclusion of SCs and STs in socioeconomic development is achieved within a period of 10 years

All Central Ministries/Departments are also expected to formulate SCSP and ensure that the flow of funds to SCSP in their plans is at least in proportion with the SC population of the country. At present, 17 Central Ministries/Departments have done so

These are the Ministries of Labour, Coal, Commerce and Industries, Textiles, Non-Conventional Energy Sources, Women and Child Development, Steel and Rural Development, and the Departments of Agriculture and Cooperation, Small-Scale Industries and Agro and Rural Industries, Biotechnology, Science and Technology, Health, Family Welfare, Elementary Education and Literacy and Secondary and Higher Education. Many Ministries/Departments maintain that they are unable to provide funds for SCSP because their funds are devoted expenditure on large projects and are not divisible

The implementation of SCSP and TSP leaves much to be desired. This applies equally to the Central as well as State governments. Though there may be several reasons for this lacklustre implementation, lack of statutory or clear-cut administrative sanction is an important one

To look into the issues related to TSP and SCSP, a Central Standing Tripartite Committee (CSTC) which includes representatives of the Planning Commission, National Commission for SCs and STs, the Ministries of Social Justice and Empowerment and States/Uts Ministries/Departments, was set up in May 1999. The CSTC was reconstituted in early 2006 to review the formulation, implementation and monitoring of SCSP and TSP and advise the Planning Commission and Prime Minister on measures which would serve the interests of the SCs and STs more effectively

For effective implementation of SCSP and TSP, the Planning Commission also issued guidelines to all State Governments/UTs which have been revised from time to time, the last revision being on 31 December 2006. The main guidelines are given as under

1. Earmarking of funds for SCSP and TSP from the total State Plan outlay should at least be proportionate to the SC and ST population of the State/UT. 2. Making the Social Welfare/Tribal Welfare Departmentwhich are concerned with the well-being and development of SCs and STs the nodal department for formulation and implementation of SCSP and TSP.

3. Placing the funds earmarked for SCSP and TSP at the disposal of the Principal Secretary/Secretary, Social Welfare/Tribal Welfare, who will work as Planning Secretary and have exclusive authority for the reallocation of funds to other line departments for of SC and ST development schemes
PRESENT STATUS OF THE SCHEDULED CASTES

Module III

Education Although the literacy rate of SCs has increased considerably, from 10.3% in 1961 to 54.7% in 2001, till recently the gap between literacy rates of the general and SC population had not reduced. However, the Census in 2001 showed a distinct reduction in this literacy gap

The school dropout rate is a crucial indicator of lack of educational development. The dropout rates for SC children are still very high 32.7% in Classes I to V; 55.2% in Classes I to VIII; and 69.1% in classes I to X in 200405 . The gap between the SC population and the general category increases at higher levels of schooling. However, an encouraging sign is the reduction in the gap between the dropout rates of the total population vis--vis the SCs at all levels

In the area of higher education, also, there is a gap between the SCs and the general population. The gross enrolment ratio for the country as a whole in 2000 was about 10%. For the SCs, however, it was significantly lower at 6.4%.

Economic Development OCCUPATIONAL CATEGORY As can be seen , 45.61% of SC workers at the allIndia level and 52% at the rural level were agricultural labourers, compared to 26.55 and 33.05% among all workers at the national and rural levels, respectively. The position is reversed when we come to the share of SCs among cultivators, which is 19.99% and 23.47% for rural workers compared to 31.65 and 40.24%, respectively for all workers

AVAILABILITY OF BASIC AMENITIES IN SC LOCALITIES Another important dimension of discrimination is the wide gap between the SCs and the rest of the population with respect to the availability of basic civic amenities such as electricity, banking services, pucca houses, water supply, toilet facilities, drainage and telephone facilities

In 2000, about two-thirds of rural SC households were landless and near landless, compared to one-third among others. Less than one-third of SC households had acquired access to capital assets, compared to 60% among the others. About 60% of SC households still have to depend on wage labour, compared to onefourth for the others.

Employment rates and wage earnings among SCs have also tended to be low. Similar disparities exist in the status of health of SCs The incidence of anaemia among women and mortality rate among children are higher than in other groups. Studies also show evidence of discrimination in various market and non-market transactions, including access to social services like education, health and housing, and in political participation.

The cumulative impact of all these disparities, therefore, is reflected in the high levels of poverty, about 36% among SCs as compared to only 21% among others.

ACCESS TO INCOME EARNING ASSETS AGRICULTURAL LAND AND CAPITAL ASSETS About 80% of the SCs live in rural areas. In 2000, only 16.8% of them pursued cultivation as an independent self-employed occupation, whereas among the non-SC/ ST this percentage was more than double (41.11%).

The percentage of those employed in some kind of non-farm self-employment activities (read business) was about 12% and 15%, respectively for SCs and others. In rural areas, about 28% of SC households had acquired some access to fixed capital assets compared to 56% for other households (non SC/ST).

In urban areas, also, the access to capital assets for SCs was low (27%) as compared to other households (35.5%). In rural as well as urban areas, due to inadequate access to fixed capital assets, an exceptionally high percentage of all SC households, morethan 62%, was dependent on wage employment

UNEMPLOYMENT SITUATION In 2000, the CDS employment rate in rural areas was 46% for SC male workers, compared with 48.40% for other male workers. Similarly, the CDS employment rate for SC workers in urban area was 45.8%, compared to 49.9% for other households. Disparities between the SC and others are also reflected in the unemployment rate

Unemployment rate based on CDS for SCs was about 5.0% as compared to about 3.5% for other workers in rural and urban areas. The NSSO data on wage earning revealed disparities in labour wages for SCs and others. For instance, in 19992000, the average weekly wage earning of an SC worker (at 199394 price) was Rs 174.50 compared to Rs 197.05 for other workers (estimate by Dubey 2003, Department for International Development [DFID] study

ECONOMIC STATUS Available empirical evidence suggests discrimination against SCs in employment, wages, credit, and so on. These factors have acted as constraints to their occupational mobility. In urban areas, too, there is prevalence of discrimination by caste; particularly discrimination in employment, which operates at least in part through traditional mechanisms; SCs are disproportionately represented in poorly paid, dead-end jobs.

Further, there is a flawed, preconceived notion that they lack merit and are unsuitable for formal employment. Due to the lack of access to fixed sources of income and high incidence of wage labour associated with high rate of under-employment and low wages, SC households are often faced with low incomes and high incidence of poverty. In 200405, about 36.80% of SC persons were BPL in rural areas as compared to only 28.30% for others (non-SC/ST).

In urban areas the gap was slightly larger; 39.20% of SC households were BPL compared to 25.70% among other households. The variation in poverty ratio across household types or occupational groups is striking. In 199394, the incidence of poverty was about 60% among agricultural labour followed by 41.44% among non-agricultural labour.

HUMAN DEVELOPMENT INDEX (HDI) AND HUMAN POVERTY INDEX (HPI) FOR SC VIS--VIS NON-SC/ST According to the UNDP India Report (2007) on Human Poverty and Socially Disadvantaged Groups in India, the HDI at all India level for SCs is estimated to be 0.303, which is lower than the HDI for non-SC/ST at 0.393 for the period 1980 2000. The variation across States is very large, ranging from 0.661 for Kerala to 0.195 for Bihar

There are ten States with HDI value higher than the all-India average for SCs and six States with HDI value lower than this average HPI is a measure to assess the level of deprivation among a given social group with reference to Infant Mortality Rate, Illiteracy Rate, Poverty Ratio (Head Count Ratio), Health Status and Nutritional Status. The value of HPI was estimated at 33.63% for all social groups taken together at the all-India level

The HPI for SCs was estimated to be 41.47% for all India, which was much higher compared to non-SC/STs (31.34%). The HPI revealed significant variation across the States with values ranging from 18.62 to 59.36%. The level of deprivation was greatest in Bihar (59.36%) followed by Uttar Pradesh (50.03%), Orissa (47.66%), Rajasthan (43.78%) and Madhya Pradesh (43.68%), as compared to the all-India level (41.47%).

In the remaining 11 States, the rate of deprivation was lower than the all-India value. Deprivation was found to be least in Kerala (18.62%).

REPRESENTATION IN GOVERNMENT SERVICES There has been a marginal improvement in the percentage of overall SC representation in the Group A, B and C categories of Central Government services from 1994 to 2004, while there was a substantial decline in the Group D category

APPROACH IN THE ELEVENTH FIVE YEAR PLAN: THE WAY AHEAD . The efforts made in the previous Five Year Plans have brought about some empowerment of SCs. However, gaps still exist in almost all social and economic dimensions between SCs and the general population. The Eleventh Plan provides an opportunity to restructure policies for faster, more broad-based and inclusive growth
Development of Scheduled Tribes

MODULE iii

THE SCHEDULED TRIBES POPULATION PROFILE The population of STs in India stood at 84.33 million as per the Census of 2001. STs constitute 8.2% of the total population of the country with 91.7% of them living in rural areas and 8.3% in urban areas. The sex ratio of ST population in 2001 was 978, which was much higher than the national average of 933. The proportion of ST population to the total population had also increased from 6.9% in 1971 to 8.2% in 2001.

The proportion of STs to the total population in States/UT was highest in Mizoram (94.5%) and Lakshadweep (94.5%) followed by Nagaland (89.1%) and Meghalaya (85.9%). Within major States, Chhattisgarh (31.8%) had the highest percentage followed by Jharkhand (26.3%) and Orissa (22.1%). Of the total ST population in the country, Madhya Pradesh accounted for the highest proportion of ST population (14.5%) followed by Maharashtra (10.2%), Orissa (9.7%), Gujarat (8.9%), Rajasthan (8.4%), Jharkhand (8.4%) and Chhattisgarh (7.8%). In fact, 68% of the countrys ST population lives in these seven States only.

CONSTITUTIONAL SAFEGUARDS The Constitution of India has made several provisions to safeguard the interests of the STs in Articles 15(4), 16(4), 46, 243M, 243 ZC, 244, the first and second provisos to 275(1), Articles 334, 335, 338A, 339(1), and the Fifth and the Sixth Schedules.

Besides these, several laws have been enacted by the Central Government like the Protection of Civil Rights Act, 1955; the Scheduled Castes and Scheduled Tribes (Prevention of Atrocities) Act, 1989; the Provisions of the Panchayats (Extension to Scheduled Areas) Act, 1996; the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006 as well as by the State Governments (relating to the prevention of alienation and restoration of tribal land, money-lending, reservations, and so on).

The Centre has been given the authority of giving directions to the State Governments (cf. Article 339(2), Para 3 of the Fifth Schedule) in the interest of tribal people. Further, a National Tribal Policy is on the Central anvil.

Eleventh Five Year Plan The scenario calls for a major shift towards entrusting, enabling and empowering the tribal people to look after their own welfare and address issues of development through their own initiative. The extant constitutional-cum-legal-cum-policy framework has been enormously strengthened by the enactment of the Provisions of the Panchayats (Extension to the Scheduled Areas) Act, 1996 (PESA), a charter of autonomous tribal governance, embodying rights in favour of tribal communities coupled with respect for their ethos

Protective Measures Despite protective legislation, incidents of atrocities on members of STs, including gang rape and murder, continue to take place in almost all parts of the country. During the period 2001 to 2005, the total recorded incidents of atrocities against STs were 30128. Five StatesMadhya Pradesh, Orissa, Rajasthan, Andhra Pradesh, and Chhattisgarhcontributed 72% of the total incidents of crimes against STs

Primitive Tribal Groups (PTGs) There are 75 identified Primitive Tribal Groups (PTGs) spread across 17 States/UTs living in utmost destitute conditions. Some of them, in dire straits, also face the threat of extinction. In order to provide focused attention to the survival, protection and development of these PTGs, a special scheme launched in 199899 was implemented during the Tenth Plan to provide tribespecific services and support including, inter-alia, housing, land, agricultural inputs, cattle rearing, health, nutritional services and income generating programmes

Displacement, Rehabilitation, and Resettlement Ancestral land, villages, habitations and environs belonging to the tribal people have been made available for various development projects as tribal areas possess 6070% of the natural resources of the country. In such cases, though primary displacement appears small due to low population density, secondary displacement has been extensive, encompassing common property resources that provided supplemental livelihoods, particularly to those with low or no dependence on farming.

Estimates of STs displaced on account of acquisition over the past six decades vary between 8.5 and 10 million (roughly about 40% of all oustees). The widespread secondary displacement in the zone of influence has neither been measured nor was provided for, calling for an accurate verification of actual displacement both in terms of persons and resource loss. Cash compensation for land having been the practice as per the provisions of the Land Acquisition Act, 1894, oustees owning little land, such as wage-labour artisans, have hardly figured in the relief and rehabilitation packages. As a result, some groups have continued to suffer successive, multiple displacement

Land (both owned by community and individuals) is the most important source of livelihood for the tribal people for agriculture (settled and shifting cultivation), horticulture, floriculture, forestry and animal husbandry. Several laws and regulations have been in place to prevent the alienation of tribal land and private grabbing of such land. A Report of the Ministry of Rural Development reveals in March 2005:

1. 3.75 lakh cases of tribal land alienation have been registered covering 8.55 lakh acres of land; 2. Out of the above, 1.62 lakh cases have been disposed of in favour of tribals covering a total area of 4.47 lakh acres; 3. 1.55 lakh cases covering an area of 3.63 lakh acres have been rejected by the courts on various grounds; and 4. 57521 cases involving 0.44 lakh acres of land are pending in various courts of the country

Despite the fair rate of disposal, the other related issues are: (i) the time taken in disposal, (ii) the number of alienations for which STs found access to courts difficult, if not impossible and (iii) the physical possession of the land needs to be addressed comprehensibly
PRESENT STATUS OF SCHEDULED TRIBES (STs)

Module III

Educational Status of STs Between 1961 and 2001, the literacy rate of STs increased 5.32 times, while that of total population increased 2.69 times. However, the gap between the literacy rates of STs and of the general population continued during the three decades between 1971 and 2001 almost at the same level of 17.70% and above, but with marginal variations

The dropout rate is a critical indicator reflecting lack of educational development and inability of a given social group to complete a specific level of education. In the case of tribals, dropout rates are still very high 42.3% in Classes I to V; 65.9% in Classes I to VIII; and 79.0% in Classes I to X in 200405

About 4.34 lakh ST students were studying at different levels of higher education as on 30 September 2004

Economic Status OCCUPATIONAL CATEGORY 81.56% of the total ST workers, both rural and urban taken together, are engaged in the primary sector of whom 44.71% are cultivators and 36.85% are agricultural labourers. The corresponding figures for all workers are 31.65% (cultivators) and 26.55% (agricultural labourers). This indicates that STs are essentially dependent on agriculture

AVAILABILITY OF BASIC AMENITIES AND INFRASTRUCTURE Since most of the tribal habitations are located in isolated villages and hamlets in undulating plateau lands coinciding with forest areas, they have limited access to critical infrastructure facilities such as roads, communication, health, education, electricity, drinking water, and so on. This widens the gap between the quality of their life and the people in the country.

Eleventh Five Year Plan ACCESS TO INCOME EARNING ASSETS AGRICULTURAL LAND AND CAPITAL ASSETS The STs are mainly landless poor forest dwellers and shifting cultivators, small farmers and pastoral and nomadic herders. The livelihood strategy would thus have to take into account the land structure, level of skills, socio-economic conditions, low level of HDI along with the physical infrastructure and natural resource base in the tribal areas

EXTENT OF POVERTY The incidence of poverty amongst STs still continues to be very high at 47.30% in rural areas and 33.30% in urban areas, compared to 28.30% and 25.70%, respectively in respect of total population in 200405 . A large number of STs who are living below the poverty line are landless, with no productive assets and with no access to sustainable employment and minimum wages.

The women belonging to these groups suffer even more because of the added disadvantage of being denied equal and minimum wages

HUMAN DEVELOPMENT INDEX (HDI) AND HUMAN POVERTY INDEX (HPI) FOR STS VIS--VIS NON-STS As per the UNDP India Report 2007 on Human Poverty and Socially Disadvantaged Groups in India the HDI for STs at the all-India level is estimated at 0.270, which is lower than the HDI of SCs and non-SC/ST for the period 19802000. The HPI (explained earlier in this Chapter in the section on SCs) for STs is estimated at 47.79, which was higher than SCs and non-SC/ST for the period 19902000.

REPRESENTATION IN GENERAL SERVICES There has been a marked improvement in the representation of STs in various categories of services during 1994 and 2004, though they are yet not adequately represented in any of the four categories. The situation is especially unsatisfactory with respect to the A and B categories.

APPROACH IN ELEVENTH PLAN: A PARADIGM SHIFT The Eleventh Plan will attempt a paradigm shift with respect to the overall empowerment of the tribal people, keeping the issues related to governance at the Centre. The operational imperatives of the Fifth Schedule, TSP 1976, PESA 1996, RFRA 2006; the desirability of a tribal-centric, tribal-participative and tribal-managed development process; and the need for a conscious departure from dependence on a largely undereffective official delivery system will be kept in view during this shift

Self Governance Article 243G of the constitution and PESA Act make it incumbent that State legislations endow power and authority on Panchayats in Scheduled Areas enabling them to function as institutions of self-governance, preparing and implementing schemes of economic development and social justice.

The Act confers abundant powers on the four tiersGram Sabha, Gram Panchayat (extant since decades), Intermediate Panchayat (development block tier) and Zilla Panchayat (ZP, district tier)which need to be given effect in real operational terms. The vision of self-governance should be made functional forthwith in keeping with the spirit of PESA.

The Gram Sabha and the three other hierarchical Panchayats would require infrastructure, personnel, and financial resources to carry out their tasks. Apart from other sources, the State Finance Commissions need to provide the necessary devolutions for Scheduled and Tribal Areas, as per Article 243(I) of the Constitution. The Ministry of Tribal Affairs should ensure direct flow of funds to the ZPs of the districts in these areas, which should apportion them on an equitable basis to the three lower Panchayat bodies for various programmes

The Fifth Schedule needs to be urgently operationalized. The Tribes Advisory Council (TAC) needs to be made proactive, functioning as an advisory body to the State Government in matters relating to STs. Second, it should function as a tier in between the ZPs in Scheduled Areas and the State Government. Its jurisdiction should be expanded to cover all matters relating to tribes people, and not limited, as of now, to those which are referred to it by the Governor.

The Ministry of Tribal Affairs is required to ensure regular and meaningful annual reports for the Governor as per para 3 of the Schedule. The Ministry should also examine the feasibility of insertion in the Fifth Schedule of a suitable provision to the effect that discretionary power may be exercised by the Governor on the advice of TAC. Lastly, the Scheduled Areas and Tribal Sub Plan areas should be made co-terminus, enabling protective and legal measures to be available in all TSP areas.

To the extent possible, demarcation of Scheduled Areas should be notified down to the village level and other settlements.

Educational Development The following measures should be taken to accelerate the educational progress among the tribal population during the Eleventh Plan 1. In the deficit areas, the requisite number of primary schools needs to be established. Specific norms for middle schools and high schools for tribal areas will be evolved and deficiencies made up. All schools should have proper school buildings, hostels, water, toilet facilities (particularly for the girls schools).

2. Residential high schools for ST boys and girls will be set up at suitable places. At the Gram Panchayat level, ensuring girls hostels will be attached to the existing primary/elementary schools that do not have hostels, wherever it is feasible to do so

3. Textbooks in tribal languages, especially at the primary level, will be produced to enable better comprehension by ST students in classes up to III. Side by side, adequate attention will be paid to the regional language so that children do not feel handicapped in higher classes

4.Efforts will be made to set up Industrial Training Institutes (ITIs) in the TSP areas. Other training centres will include community polytechnics, and undertaking rural/community development activities in their proximity, through application of science and technology.

5. Timely distribution of fellowships, scholarships, textbooks, uniforms and school bags to students. 6. The ICDS/Anganwadi schemes for tribal areas will be evaluated and shortcomings eliminated

7. There is a need to constitute a special committee composed of eminent sociologists, anthropologists, educationists, administrators, representatives of ST communities, and so on, to comprehensively assess the problems of ST education and make recommendations for implementation.

Health Efforts will be made to make available affordable and accountable primary health care facilities to STs and bridge the yawning gap in rural health care services through a cadre of ASHA and sectoral convergence of all the related sectors. Periodic reviews will be conducted on the delivery system and functioning of the health care institutions under three broad heads to optimize service in the tribal areas: (i) health infrastructure, (ii) manpower and (iii) facilities like medicines and equipment.

Action will be taken to make up the shortfall in the different categories of health institutions, liberalization of norms, addressing infrastructural deficiencies, application of quality standards and revitalization of Health Care Systems, PHCs and CHCs

Economic Sectors and Livelihood Opportunities An overwhelming proportion of STs depend on MFP, cottage and small industries, and horticulture for their livelihood. Towards making the existing tribal livelihoods more productive, intensive efforts will be mounted to restitute, vitalize and expand the agricultural sector. Use of irrigation in agriculture with a preference for organic farming, will be a major step

Training centers will be opened to impart skills for diverse occupations to the tribals. Efforts will be made to promote horticulture, animal husbandry, dairy farming, sericulture, sylviculture and cottage and small industry by extending the necessary technology and credit, marketing and entrepreneurial information, and training. TRIFED has to shoulder the task of marketing to ensure remunerative prices to STs.

Lending by agencies like the State Governments, NSTFDC and TRIFED will be streamlined by better coordination at higher levels and efficient delivery at the field level. Large-Scale Multi Purpose Corporate Societies and such like cooperative institutions in tribal areas will be revived to make them representative, autonomous and professional.

TribalForest Interface To enable the tribal primary producers, collectors and consumers to enter into transactions with primary cooperatives, the monopoly of corporations in certain items procured by them through contractors and middlemen will be replaced by alternative market mechanisms like minimum price support with institutional backing. It will be incumbent on the national-level organizations like TRIFED and NAFED to play their due role in marketing of the tribal MFP.

Technological support for value addition will be extended to the corporations as well as other institutional and private processors. Skills like culling, barking, tapping of gums, storage of sal seeds and preparation of tamarind extracts, need to be upgraded through ITIs, TRIFED, NSTDFC and other training organizations

As visualized under the National Forest Policy (NFP) Resolution (1988), tribal association with forestry will be maximized through tribal cooperatives and SHGs of tribal women. Specific schemes for quality improvement, higher productivity and regeneration of MFP species will be implemented to facilitate sustainability of this source of tribal livelihood.

No outside labour will be engaged where tribal labour is available. Inter-disciplinary scientific studies to develop feasible agronomic strategies to make shifting cultivation ecologically compatible and economically viable will be undertaken. Special protection will be extended to Jhumias
DEVELOPMENT OF OTHER BACKWARD CLASSES (OBCs)

Module III

POPULATION PROFILE The Second Backward Classes Commission headed by B.P. Mandal (1980), basing its calculation on the Census of 1931, estimated that OBCs constituted 52% of the population. Recently, the NSSO 61st Round (July 2004 to June 2005) report on Employment and Unemployment Situation among Social Groups in India gave an estimate of OBCs constituting 41% of the population. State-wise, OBC-wise data on population as well as vital and demographic variables are not available, which is the main hurdle in the formulation of policies and programmes for the development of the Other Backward Classes

CONSTITUTIONAL SAFEGUARDS Though the Constitution does not make specific provisions for OBCs, it empowers the State to make provisions for reservation in appointments or posts in favour of any backward class of citizens which, in the opinion of the State, is not adequately represented in the Services under the State [Article 16(4)]. It also empowers the State to appoint a commission to investigate into the conditions of socially and educationally backward classes (Article 340).

In pursuance of the Supreme Court judgment, Indira Sawhney and Others vs Union of India (1992), the National Commission for Backward Classes was set up on 14 August 1993 under the National Commission for Backward Classes Act, 1993. Thus, after 46 years of independence of the country, the backward classes or OBCs got recognition as a separate group of people for the purpose of 27% reservation in services in the GoI and public sector undertakings. The States/Uts were free to decide the quantum of reservation based on the OBC population in their State/UT.

All State Governments/UT Administrations were also directed by the Supreme Court of India in the same case to set up a permanent body and to draw up their own list and decide the quantum of reservation as per their demography

Specific programmes for the development of OBCs were initiated from the Eighth Plan. The National Backward Classes Finance and Development Corporation (NBCFDC) was set up in 1992 with an authorized share capital of Rs 200 crore. This was augmented to Rs 700 crore in the Ninth Plan. The objective of NBCFDC is to promote selfemployment projects among the OBCs living below the poverty line

During the Ninth Five Year Plan period, programmes such as Pre-Matric and Post-Matric scholarship schemes, construction of hostels and pre-examination coaching centres for OBCs were introduced. The Pre-examination Coaching Scheme for OBCs was merged with the umbrella Coaching and Allied Scheme for Weaker Sections including SCs, OBCs, and minorities from September 2001.

TENTH PLAN ACHIEVEMENTS Educational Development The salient features of schemes for educational development of OBCs being implemented through State Governments/UT Administrations and voluntary organizations (VOs) are given in the Table 6.12

Salient Features of Schemes for Other Backward Classes (OBCs) Name of the Scheme 1. Pre-Matric Scholarships, Classes I to X, Parents annual income not to exceed Rs. 44500 2. Post-Matric Scholarships, Classes XI onwards, Parents annual income not to exceed Rs. 44500

Economic Development The NBCFDC provides financial assistance through SCAs nominated by the State Governments/ UTs. NBCFDC assists a wide range of income generating activities which include agricultural and allied activities, artisan and traditional occupations, technical trades, small-scale and tiny industry, small business, transport services.

Entrepreneurs with annual income less than double the poverty line are eligible for concessional finance. The GoI has made available Rs 448.35 crore to the Corporation as paid-up capital towards the authorized share capital of Rs 700.00 crore. The Corporation has disbursed Rs 1150.89 crore, covering 750432 beneficiaries (up to December 2006).

Oversight Committee on Reservation in Higher Educational Institutions In the last year of the Tenth Plan, the GoI decided on another way to introduce reservation for OBC students in institutes imparting higher education. The Oversight Committee under the Chairmanship of Veerapa Moily was constituted in 2006 to prepare a policy roadmap for implementation of reservation for OBCs in higher educational institutions. The matter, however, is sub-judice.
Present Status of Other Backward Castes

Module III

Eleventh Five Year Plan Present Status of Target Groups RESERVATION IN SERVICES Despite 27% posts being reserved for OBCs from 1993, the overall representation of OBCs in government service is abysmally low, just 4.53%. Only 3.9, 2.3 and 5.2%, respectively of Group A, B, and C posts are occupied by OBC persons. This is indeed a matter of concern

RESERVATION IN SERVICES Despite 27% posts being reserved for OBCs from 1993, the overall representation of OBCs in government service is abysmally low, just 4.53%. Only 3.9, 2.3 and 5.2%, respectively of Group A, B, and C posts are occupied by OBC persons. This is indeed a matter of concern

ELEVENTH PLAN APPROACH: THE WAY AHEAD The Eleventh Plan will address the issues for development of OBCs through a threepronged strategy: of (i) educational development, (ii) economic development and (iii) social development.

EDUCATIONAL DEVELOPMENT While the universalization of primary education through the SSA is poised to take care of OBC children, their continued education through the secondary and higher education stages must be ensured. The Eleventh Five Year Plan shall give priority to designing and implementing of schemes to provide the necessary facilities to OBC students to get better education at all levels. Reservation for OBC students in all the Central and Centrally aided schools/colleges/professional institutes needs to be ensured

Both Pre-Matric and Post-Matric Scholarship schemes should be revised by enhancing the income ceiling for eligibility and rate of scholarship and maintenance allowance, as these have not been revised since 1998 The performance of the existing coaching scheme for SCs and OBCs is not good and the scheme needs to be revised to attract good, professionally reputed coaching institutions.

Economic Development In economic and occupational terms, the backward classes comprise of peasants, landless labourers, artisanal communities such as handloom weavers, carpenters, metal workers, stone cutters and fishermen, and those who provide various traditional services. The plight of these categories of the backward classes has worsened in recent years due to extensive mechanization and market competition

There is a need to ensure upgradation of skills of such categories so that they can compete better in the market. Credit flow must be unhampered and easy to access, especially in occupations which have been the traditional forte of OBCs, for example, weaving, pottery, quarrying, cultivation of fruits and vegetable, and so on.

Social Development Like SCs, STs, Minorities, and Persons with Disabilities, there is an imperative need to carry out a census of OBCs now or in the next census in 2011. In the absence of exact assessment of their population size; literacy rate; employment status in government, private and unorganized sectors; basic civic amenities; health status; poverty status; and human development and HPIs; it is very difficult to formulate realistic policies and programmes for the development of OBCs

Since some backward class people are also working in occupations which are hazardous, the government should identify occupational diseases prevalent among them and take steps to prevent and treat such diseases. The income ceiling of Rs 2.5 lakh per annum for purposes of obtaining OBC certificates may be periodically reviewed to make it more realistic
DEVELOPMENT OF MINORITIES
Module III
In pursuance of the Constitutional provisions, the government is committed to the well being of the minorities. Such measures are not limited to protecting and promoting their language, religion and culture, but also in making special efforts for their socio-economic development and mainstreaming.
As per the provisions under the National Commission of Minorities Act, 1992, five religious communities including Muslims, Christians, Sikhs, Buddhists, and Zoroastrians (Parsis) have been Notified as minorities. Among the minorities, Muslims, especially Muslim women, need special attention since relative to other communities they have remained socially, educationally and economically backward.
According to the Census of 2001, 18.4% of our population belongs to Minority communities. Muslims constitute 13.4%, Christians 2.3%, Sikhs 1.9%, Buddhists 0.8% and Parsis 0.07% of the countrys total population. In absolute numbers, Muslims (nearly 140 million) account for 72.8% of the total minority population of 189.5 million.
The distribution of minority population indicates that Muslims are in majority in the Union Territory of Lakshadweep and in the State of Jammu and Kashmir. In six States the proportion of Muslims to total population is above the national percentage of 13.4%Assam (30.9%), West Bengal (25.2%), Kerala (24.6%), Uttar Pradesh (18.55%), Bihar (16.5%) and Jharkhand (13.8%). In absolute numbers, Uttar Pradesh (30.7 million), West Bengal (20.2 million), Bihar (13.7 million), and Maharashtra (10.70 million) have the largest Muslim population.
The highest percentages of Christians to total population are in Nagaland (90%), Mizoram (87%), and Meghalaya (70.03%). There are also substantial numbers of Christians in Kerala, Tamil Nadu, Andhra Pradesh, Jharkhand, Orissa, Maharashtra, and Karnataka. Sikhs constitute 60% of the population of Punjab. Buddhists are categorized into traditional and neo-Buddhists
Traditional Buddhists are, by and large,from tribal communities inhabiting the hilly areas of Ladhakh, Himachal Pradesh, West Bengal, Sikkim, Assam and the North Eastern States. The highest percentage of Buddhists is in Sikkim (28.1%) followed by Arunachal Pradesh (13%). In absolute numbers, Maharashtra reported 58.38 lakh Buddhists, the highest in the country. Parsis number just 69000, and reside mostly in Maharashtra
CONSTITUTIONAL SAFEGUARDS Following are some of the special constitutional safeguards for minorities: Important Constitutional Provisions for Minorities Article 15 Prohibition of discrimination on grounds of religion Article 16 Equality of opportunity in matters of public employment Article 25 Freedom of conscience and free profession, practice and propagation of religion
Article 26 Freedom to manage religious affairs Articles 29 Right to conserve language, script, and culture Article 30 Right to establish and administer educational institutions Article 347 Recognition of language Article 350 Redressal of grievances to any authority in the government in any of the languages used in the States/ Union Territories Article 350(A) Instruction through mother tongue at the primary stage of education Article 350(B) Investigate all matters relating to linguistic minorities
DEVELOPMENT OF MINORITIES: AN OVERVIEW . As the well-being of minorities has been a deep concern of the government, a HLC to study their conditions was set up in 1980 under the chairmanship of Gopal Singh. The Committee, in its report, concluded that the poor among the Muslims could not avail opportunities in education, employment, and economic activities because of isolation and various historical factors. In view of this, in 1983, the Prime Ministers 15-Point Programme was launched to provide a sense of security to minority communities and ensure their rapid socioeconomic development
This Programme was based on a three-pronged approach: (i) to tackle the situation arising out of communal riots; (ii) to ensure adequate representation of the minority communities in employment under the Central and State Governments as well as PSUs; and (iii) other measures, such as ensuring flow of benefits to the minority communities under various development programmes, maintenance and development of religious places, Wakf properties and redressal of grievances of the minorities
Till the Seventh Five Year Plan, however, minorities continued to get the developmental benefits along with OBCs. In 1989, an autonomous, non-political, nonprofit organizationthe Maulana Azad Education Foundation (MAEF)was set up to promote education among educationally backward Muslims in general, and Muslim girls in particular.
With a corpus of Rs 100 crore, it undertook activities like establishing and expanding schools/residential schools/ colleges/hostels; purchasing laboratory equipment and furniture; setting up/strengthening vocational/technical training centre/institutes; providing scholarships to meritorious girl students; opening Maulana Azad Sadbhawana Kendras; (since discontinued) and announcing Maulana Abul Kalam Azad Literacy Awards.
In the final year of the Tenth Plan the corpus of Rs 100 crore with the Foundation was doubled. The interest accrued on the corpus was used for implementation of its educational schemes. It sanctioned a total grant-in-aid of Rs 91.81 crore to 702 NGOs/local bodies located in 20 States and two UTs for construction/expansion of schools/colleges/girls hostels/polytechnics/ and purchase of equipments/machinery/furniture up to December 2006. The Foundation also distributed scholarships amounting to Rs 6.98 crore to 6986 girl students in 29 States/UTs between 200304 and 200506.
During the Eighth Plan (199297), two exclusive schemes were introduced for their educational and economic development. In 1994, the National Minorities Development and Finance Corporation (NMDFC) was set up with an authorized share capital of Rs 500 crore. The Ninth Plan (19972002) saw a new Central Sector Scheme for Pre-examination Coaching for Weaker Sections based on economic criteria. It assisted voluntary organizations to run coaching centres to prepare minorities for various competitive and professional examinations. As few organizations came forward, this scheme, along with the Pre-examination Coaching Scheme for OBCs, was merged with the existing Centrally Sponsored Coaching Scheme for Scheduled Castes in 2001.
It was renamed Coaching and Allied Scheme for Weaker Sections including SCs, OBCs, and minorities. During the Tenth Five Year Plan, the authorized share capital for NMDFC was raised to Rs 650 crore. Of this, the share of the GoI is Rs 422.50 crore (65%) and that of the State Governments is Rs 169 crore (26%). The remaining Rs 58.50 crore (9%) is to be contributed by institutions/individuals interested in the well being and empowerment of minorities.
The task of NMDFC is to extend loans at concessional rates to enable economically weak minorities to take up income generating activities. Since its inception, NMDFC has given financial assistance of Rs 827 crore to 2.16 lakh beneficiaries spread over 25 States and three UTs.
Despite these schemes, till the end of 200506, the Ministry of Social Justice and Empowerment continued to be the implementing agency for programmes for educational development and economic empowerment of minorities. Then, on 29 January 2006, a separate Ministry of Minority Affairs (MMA) was created. Meanwhile, the GoI also constituted a HLC under the Chairmanship of Justice (Retd.) Rajinder Sachar to prepare a report on the social, economic and educational status of the Muslim community
In its comprehensive Report, the Committee observed that Muslims have been left behind the growth and development process. It recommended setting up of an autonomous Assessment Monitoring Authority, creation of a National Data Bank and constitution of an Equal Opportunity Commission (EOC). It also suggested provision of hostel facilities at reasonable cost, inclusion of minority aspects in the general curriculum for teacher training, setting up and strengthening of Staterun Urdu medium schools, linkage of madarsas to Higher Secondary Boards, recognition of degrees of madarsas for eligibility in competitive examinations, and provision of financial and other support to madarsas
PRESENT STATUS OF MINORITIES

Module III

Education literacy rates among Muslims, both men and women, have been the lowest among all the religious minorities The Sachar Committee Report found that enrolment of children aged 614 years at the all-India level was 85.3% for all communities. The enrolment figures for Muslims was lower (81.8%) than the national average as well as relative to All others (89.9%), but higher than SCs/STs (79.3%). The gap between Muslims and other SRCs increases as the level of education advances

The literacy rate for Muslim girls is particularly low. This can be attributed to a number of reasons. Many parents do not send their girls to school as they feel unsafe, especially in view of the growing communalism. Further, as the dependency ratio for the young is high among Muslims, older siblings often have to stay home and provide care. Given the high levels of poverty and selfemployment, children also provide much needed labour

While it is a misconception that most Muslim children go to madarsas, a large proportion of parents do want their children to receive some form of religious education in addition to the general curriculum. For this, it is vital to ensure that the school timings do not clash with those of madarsas and maktabs. Kerala has successfully managed to do this and hence has a high literacy rate among Muslims.

Economic Development WORK PARTICIPATION RATE (WPR) The WPR for all religious communities was 39.1% in the Census of 2001. Buddhists had 40.6% WPR, Christians 39.7% and Muslims 31.3% (being the lowest

OCCUPATIONAL CATEGORY Muslims and Buddhists both comprise 20% each of the cultivator category; Sikhs were highest at 32.4% followed by the Christians with 29.2%. The Sachar Committee Report clearly shows that due to limited land ownership, most Muslims are engaged in nonagricultural occupations. They are usually merchants, shopkeepers, sales persons, shop assistants, tailors, dress makers, transport equipment operators, tobacco preparers, tobacco product makers, spinners, weavers, knitters, dyers, machinery fitters, assemblers and precision instrument maker

Being self-employed and often in the unorganized sector, they lack any kind ofsocial security. Further, Muslims have traditionally been engaged in skilled occupations like weaving, spinning, artisanship and tailoring. A large proportion of them are also street vendors. As these are professions which have suffered maximum reversals due to globalization, more and more Muslim families are being left without a source of livelihood.

The self-employed, especially entrepreneurs, are unable to get credit to expand and run their micro and small enterprises. This is leading to increasing frustration and discontent.

HEALTH Census data indicates that Muslims have the highest sex-ratio of any social group in the country (950/1000). However, among other minorities like the Sikhs and Jains, who incidentally have better female literacy figures, the sex-ratio is alarming (786 and 870 for Sikhs and Jains, respectively).

Muslims have the second lowest infant and under-5 mortality rate of any SRC in India. Infant mortality is lower for Muslims than Hindus59 against 77 for every 1,000 births in 199899 (NFHS-2). Muslims are, however, worse off than most other groups in terms of child undernutrition; for instance, Muslim children suffer from the highest rate of stunting and the second highest rate of under-weight children among all social groups. This can be primarily attributed to lack of access to PHCs and ICDS centres.

Violence against minority communities is on the rise worldwide. India too has seen various instances of communal violence which has led to trauma and growing fear and suspicion in the minds of people. Thiscombined with economic and social backwardnesshas resulted in the alienation of large segments of the population, many of whom belong to the minority communities. Provision of adequate social and physical infrastructure, economic opportunities, justice and counselling services are thus vital

ELEVENTH FIVE YEAR PLAN: A WAY AHEAD Though previous Five Year Plans have attempted to focus on weaker sections of the society, they have failed to include many groups, especially Muslims, into the development net. The Eleventh Plan will thereforeaccord highest priority to the development of innovative programmes, expansion of existing schemes, implementation and monitoring of all initiatives for the minorities by making adequate budgetary allocations at every level of governance. The Eleventh Plan agenda for empowerment of the minorities will focus on

1. Access, retention and achievement in primary, elementary and higher education, with particular emphasis on the education of the minority, especially Muslim, girl child. 2. Enhanced access to credit and subsidy for selfemployment, export promotion of traditional crafts, upgradation of technical skills and provision of vocational training with forward linkages in terms of employment, that is, equal opportunity in public and private sector employment.

3. Access to government schemes and programmes, including schemes aimed at poverty alleviation; provision of physical infrastructure such as housing; provision of civic amenities and health infrastructure in Muslim-dominated village clusters and urban neighbourhoods as envisaged under the PMs New 15-Point Programme Multisectoral Plan for Minority Concentration Districts and 338 towns with substantial Minority population

4. Create a national data bank to collect data on various aspects of socio-religious communities through comprehensive surveys on education, health, access to government, access to justice, situation of girls and women; conduct qualitative studies to understand the persisting bottlenecks in access to a wide range of government services and programmes, to understand patterns of discrimination and its socioeconomicimplications; to suggest long- and short-term remedies; and to understand regional variations in the condition of the minorities from the perspective of plan interventions
Development of Women in India

Module III

The status of women in India has been subject to many great changes over the past few millennia. From equal status with men in ancient times, through the low points of the medieval period, to the promotion of equal rights by many reformers, the history of women in India has been eventful. In modern India, women have adorned high offices in India including that of the President, Prime minister, Speaker of the Lok Sabha and Leader of the Opposition.

As of 2011, the President of India, the Speaker of the Lok Sabha and the Leader of the Opposition in Lok Sabha (Lower House of the parliament) are all women.

Women in Independent India Women in India now participate in all activities such as education,sports, politics, media, art and culture, service sectors, science and technology, etc. Indira Gandhi, who served as Prime Minister of India for an aggregate period of fifteen years is the world's longest serving woman Prime Minister.

Constitutional Safeguards for Women The Constitution of India guarantees to all Indian women equality (Article 14), no discrimination by the State (Article 15(1)), equality of opportunity (Article 16), equal pay for equal work (Article 39(d)). In addition, it allows special provisions to be made by the State in favour of women and children (Article 15(3)), renounces practices derogatory to the dignity of women (Article 51(A) (e)), and also allows for provisions to be made by the State for securing just and humane conditions of work and for maternity relief. (Article 42).

Since alcoholism is often associated with violence against women in India, many women groups launched anti-liquor campaigns in Andhra Pradesh, Himachal Pradesh, Haryana, Orissa, Madhya Pradesh and other states Many Indian Muslim women have questioned the fundamental leaders' interpretation of women's rights under the Shariat law and have criticized the triple talaq system.

In 1990s, grants from foreign donor agencies enabled the formation of new women-oriented NGOs. Self-help groups and NGOs such as Self Employed Women's Association (SEWA) have played a major role in women's rights in India. Many women have emerged as leaders of local movements. For example, Medha Patkar of the Narmada Bachao Andolan.

The Government of India declared 2001 as the Year of Women's Empowerment (Swashakti) The National Policy For The Empowerment Of Women came was passed in 2001. In 2010 March 9, one day after International Women's day, Rajyasabha passed Women's Reservation Bill, ensuring 33% reservation to women in Parliament and state legislative bodies

According to 1992-93 figures, only 9.2% of the households in India were female-headed. However, approximately 35% of the households below the poverty line were found to be female-headed. Education Though it is gradually rising, the female literacy rate in India is lower than the male literacy rate.

Compared to boys, far fewer girls are enrolled in the schools, and many of them drop out. According to the National Sample Survey Data of 1997, only the states of Kerala and Mizoram have approached universal female literacy rates. According to majority of the scholars, the major factor behind the improved social and economic status of women in Kerala is literacy

Under Non-Formal Education programme (NFE), about 40% of the centres in states and 10% of the centres in UTs are exclusively reserved for females. As of 2000, about 0.3 million NFE centres were catering to about 7.42 million children, out of which about 0.12 million were exclusively for girls. In urban India, girls are nearly at par with the boys in terms of education. However, in rural India girls continue to be less educated than the boys.

According to a 1998 report by U.S. Department of Commerce, the chief barrier to female education in India are inadequate school facilities (such as sanitary facilities), shortage of female teachers and gender bias in curriculum (majority of the female characters being depicted as weak and helpless)

Workforce participation Contrary to the common perception, a large percent of women in India work. The National data collection agencies accept the fact that there is a serious underestimation of women's contribution as workers However, there are far fewer women in the paid workforce than there are men.

In urban India Women have impressive number in the workforce. As an example at software industry 30% of the workforce is female. They are at par with their male counter parts in terms of wages, position at the work place.

In rural India, agriculture and allied industrial sectors employ as much as 89.5% of the total female labour. In overall farm production, women's average contribution is estimated at 55% to 66% of the total labour. According to a 1991 World Bank report, women accounted for 94% of total employment in dairy production in India. Women constitute 51% of the total employed in forest-based small-scale enterprises

One of the most famous female business success stories is the Shri Mahila Griha Udyog Lijjat Papad. In 2006, Kiran Mazumdar-Shaw, who started Biocon one of India's first biotech companies, was rated India's richest woman. Lalita D. Gupte and Kalpana Morparia were the only businesswomen in India who made the list of the Forbes World's Most Powerful Women in 2006. Gupte ran India's second-largest bank, ICICI Bank, until October 2006, and Morparia is the CEO of JPMorgan India.

Land and property rights In most Indian families , women do not own any property in their own names, and do not get a share of parental property. Due to weak enforcement of laws protecting them, women continue to have little access to land and property. In fact, some of the laws discriminate against women, when it comes to land and property rights

The Hindu personal laws of mid-1956s (applied to Hindus, Buddhists, Sikhs and Jains) gave women rights to inheritance. However, the sons had an independent share in the ancestral property, while the daughters' shares were based on the share received by their father. Hence, a father could effectively disinherit a daughter by renouncing his share of the ancestral property, but the son will continue to have a share in his own right.

Additionally, married daughters, even those facing marital harassment, had no residential rights in the ancestral home. After amendment of Hindu laws in 2005, now women in have been provided the same status as that of men

In 1986, the Supreme Court of India ruled that Shah Bano, an old divorced Muslim woman was eligible for maintenance money. However, the decision was vociferously opposed by fundamentalist Muslim leaders, who alleged that the court was interfering in their personal law. The Union Government subsequently passed the Muslim Women's (Protection of Rights Upon Divorce) Act.

Similarly, the Christian women have struggled over years for equal rights of divorce and succession. In 1994, all the churches, jointly with women's organisations, drew up a draft law called the Christian Marriage and Matrimonial Causes Bill. However, the government has still not amended the relevant laws.
Reservation in India
Module III
Reservation in India is a form of affirmative action designed to improve the well being of perceived backward and under represented communities in India. These are laws wherein a certain percentage of total available slots in educational institutes and government jobs are set aside for people from backward communities. Scheduled Castes (SC), Scheduled Tribes (ST) and Other Backward Classes (OBC) are the primary beneficiaries of the reservation policies, while there are also reservation policies for women.
The reservation system has been a matter of contention ever since the British occupied India and remains a point of conflict. Many citizens who come from the upper classes find this policy of the government biased and oppose it, since they feel it takes away their rights to equality. But not everyone who comes from the underprivileged communities support the system because they say it makes them feel disadvantaged. Thus the reservation system is controversial.
Background of caste based reservation A common form of discrimination in India is the practice of untouchability. Scheduled Castes (SCs), Scheduled Tribes (STs) and Other Backward Classes (OBCs) are the primary targets of this medieval practice, a practice, which is outlawed by the Constitution of India An untouchable person is considered, "impure, less than human. STs are generally those who have been living in tribal areas, away from modern civilization and development.
While the definition of SCs and STs are primarily based on the history of oppression of the community, the definition of OBCs is more flexible and dynamic, and they are defined based upon the prevailing social status of their communities
The main objective of the Indian reservation system is to increase the social and educational status of the underprivileged communities, enabling them to take their rightful place in Indian society The reservation system exists to provide opportunities for the members of the SCs and STs so as to increase their representation in the legislature, the executive of the nation and states, the labor force, schools, colleges, and other social institutions.
The Constitution of India states in article 15(4): "All citizens shall have equal opportunities of receiving education. Nothing herein contained shall preclude the State from providing special facilities for educationally backward sections of the population. It also states that The State shall promote with special care the educational and economic interests of the weaker sections of society (in particular, of the scheduled castes and aboriginal tribes), and shall protect them from social injustice and all forms of exploitation." The article further states that nothing in the Article 15(4) will prevent the nation from helping SCs and STs for their betterment.
In 1982, the Constitution specified 15% and 7.5% of vacancies in public sector and government-aided educational institutes, are a quota reserved for the SC and ST candidates respectively for a period of five years, after which the quota system would be reviewed. This period was routinely extended by the succeeding governments. The Supreme Court of India ruled that reservations cannot exceed 50% (which it judged would violate equal access guaranteed by the Constitution) and put a cap on reservations.[
However, there are state laws that exceed this 50% limit and these are under litigation in the Supreme Court. For example, the caste-based reservation fraction stands at 69% and is applicable to about 87% of the population in the state of Tamil Nadu. In 1990, Prime Minister V.P. Singh announced that 27% of government positions would be set aside for OBC's in addition to the 22% already set aside for the SCs and STs.
Beneficiary Groups of the Reservation System Enrolment in educational institutions and job placements are reserved based on a variety of criteria. The quota system sets aside a proportion of all possible positions for members of a specific group. Those not belonging to the designated communities can compete only for the remaining positions, while members of the designated communities can compete for all positions (reserved and open). For example, when 1 out of 10 clerical positions in railways are reserved for ex-servicemen, those who have served in the Army can compete both in the General Category as well as in the specific quota.
Seats are reserved for people under the following criteria: 1. Caste In central government funded higher education institutions, 22.5% of available seats are reserved for Scheduled Caste (SC) and Scheduled Tribe (ST) students (15% for SCs, 7.5% for STs) This reservation percentage has been raised to 49.5%, by including an additional 27% reservation for OBCs.
This ratio is followed even in Parliament and all elections where a few constituencies are earmarked for those from certain communities (which keeps rotating as per the Delimitation Commission). The exact percentages differ from state to state
2. Gender Women get 50% reservation in gram panchayat (village assembly - a form of local village government) and municipal elections. There is a long-term plan to extend this reservation to parliament and legislative assemblies. For instance, some law schools in India have a 30% reservation for females. Progressive political opinion in India is strongly in favor of providing preferential treatment to women in order to create a level playing field for all of its citizens
The Women's Reservation Bill was passed by the Rajya Sabha on 9 March 2010 by a majority vote of 186 members in favor and 1 against. It will now be forwarded to the Lok Sabha, and if passed there, would be implemented.
3. Religion The Tamil Nadu government has allotted 3.5% of seats each to Muslims and Christians, thereby altering the OBC reservation to 23% from 30% (since it excludes persons belonging to Other Backward Castes who are either Muslims or Christians). Andhra Pradesh's administration has introduced a law enabling 4% reservations for Muslims. (contested in court) Kerala Public Service Commission has a quota of 12% for Muslims.
Religious minority status educational institutes also have 50% reservation for their particular religions. The Central government has listed a number of Muslim communities as backward Muslims, making them eligible for reservation
4. State of Domiciles With few exceptions, all jobs under state government are reserved to those who are domiciles under that government. In Punjab Engineering College, Chandigarh, earlier 85% of seats were reserved for Chandigarh domiciles and now it is 50%. There are also some seat reserved for Jammu and Kashmir migrants in every Government aided educational institute
Other Some reservations are also made for: Terrorist victims from Kashmir in Punjab Single Girl Child in Punjab Sons/daughters/grandsons/granddaughters of Freedom Fighters Physically handicapped Sports personalities
Government funding allowing reservations in colleges/universities There is a University Grants Commission (UGC) set up that provides financial assistance to universities for the establishment of Special Cells for SC/STs. Their purpose is to help universities implement the reservation policy in the student admissions and staff recruitment processes at teaching and non teaching levels. They also help the SC/ST categories integrate with the university community and remove the difficulties which they may have experienced.
SC/ST cells like these have been set up in 109 universities. The UCG provides financial assistance to universities and affiliated colleges for implementation of the Special Cells. It provides the universities with assistance worth "Rs.1, 00,000/- per annum for: 1. Travelling Allowances & Dearness Allowances for field work 2. Data Collection 3. Analysis and evaluation of statistical data 4. New Computer and Printer (once in a plan period)
Excluded from the reservation system The following people are not entitled to reserved seats. Meaning that people cannot take advantage of the reservation system if they fall under the following categories:
Categories for Rule of Exclusion Constitutional Posts Rule of Exclusion Applies to the following: The sons and daughters of the President of India, the Vice-President of India, Judges of the Supreme Court, the High Courts Chairman, the members of Union Public Service Commission, members of the State Public Service Commission, Chief Election Commissioner Comptroller, Auditor-General of India or any person holding positions of a constitutional nature.[14]
Categories for Rule of Exclusion Armed forces including Paramilitary Forces (Persons holding civil posts are not included). Rule of Exclusion Applies to the following: The sons and daughters of parents either or both of whom is or are in the rank of colonel and above in the army or in equivalent posts in the Navy, the Air Force, and the Paramilitary Force. But that will hold true provided that-"the wife of an armed forces officer is herself in the armed forces (i.e., the category under consideration) the rule of exclusion will apply only when she herself has reached the rank of Colonel
Categories for Rule of Exclusion Creamy layer Rule of Exclusion Applies to the following: Son(s)/daughter(s) of those who earn 4.5 lakh Rs. or more annually for three consecutive years are excluded from reservation.
The creamy layer is only applicable in the case of Other Backward Castes and not applicable on other group like SC or ST. Though the efforts are also being made to do so. In some state the reservation within reservation has been made but creamy layer as such is applicable in OBCs only.

Debate On Models of Development in India

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DEBATE ON MODELS OF DEVELOPMENT IN INDIA