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ROUND-UP OF NATIONAL AFFAIRS 2008

BANKING & FINANCE

FDI rules eased up:

The Union government has brought major changes to Foreign Direct Investment
(FDI) rules, easing existing curbs on overseas capital in such key areas as real
estate, petroleum refining, commodity exchanges, mining and aviation. The
review, however, did not include the politically contentious issue of allowing
foreign multi-brand retailers like Wal-Mart and Carrefour to open front-end
stores in India. The changes cleared by the Cabinet included increasing the limit
on FDI to 100 per cent for titanium mining and aircraft maintenance companies,
from 49 to 74 per cent in cargo and chartered airlines, and from 26 per cent to 49
per cent in public sector refining companies. The changes are expected to boost
FDI inflows, which peaked to $16 billion through 2006-07. In 2007-08 the
government expects such inflows to reach $26 billion.

India kicks off foreign currency futures trade:

On August 29, 2008, India launched exchange-traded rupee futures, with the
front-month contracts seeing the highest activity in heavy trade, but dealers said
volumes may wane after the initial burst of interest. Dealers said banks and large
companies accounted for the bulk of trading, although concerns regarding small
contract sizes and trading limits remains. All resident individuals of India are
allowed to trade. Underlying exposure is not necessary. Cash settlement in Indian
rupees is mandatory. Individual investment limit has been set to $200,000 per
annum. RBI-permitted banks and SEBI permitted members can trade on the
exchange.

Institutions now get direct market access:

In a move that will usher in algorithmic trading and transform the Indian stock
market, SEBI has now allowed Direct Market Access (DMA) to institutional
investors. Foreign Institutional Investors (FIIs) and domestic institutions such as
mutual funds and insurance firms can now directly execute their buy and sell
orders without any manual intervention by their brokers. However, brokers aren’t
entirely out of the picture because the trades will still be executed through their
systems.

Insurance firms can lend shares:

IRDA, India’s insurance sector regulator, has decided to allow insurance


companies to lend shares to foreign and domestic institutions, a move that will
create a new stream of revenues for these firms, and increase overall trading
activity in the stock market. Postal life funds set to get street smart: The
government has allowed the Postal Life Insurance Fund (POLIF) and Rural Postal
Life Insurance Fund (RPOLIF) to enter the markets through investments in public
sector mutual funds. The Union Cabinet has appointed UTI MF and SBI MF as
managers of the over Rs 10,000-crore corpus of these two funds. It has also
approved setting up of an investment board for deciding investment policies. This
would primarily be applicable to new deposits into these schemes, as much of the
existing corpus is already invested in government bonds.

RBI measures to tackle liquidity crisis:

In the month of October 2008 the government and RBI took all possible measures
to shovel in as much money into the financial system as possible. RBI released
bank funds it had impounded, allowed banks to borrow more against gilts, made
NRI deposits a little more attractive. The Centre, after delaying borrowing,
advanced its spending by releasing Rs 25,000 crore to banks. Significantly, the
government also promised to recapitalize banks. The one percentage point cut in
CRR, which was with retrospective effect from October 11, 2008, released Rs
40,000 crore. This, with the farm relief package, released around Rs 65,000 crore
into the banking system.

Fresh guidelines on Basel II:

As part of efforts to prepare Indian banks for compliance with new risk
management norms under Basel II, Reserve Bank of India (RBI) has come out with
guidelines asking them to keep adequate capital to meet wide areas of risks,
including those that could damage their reputation. The guidelines issued on
Supervisory Review Process (SRP) ask banks to make provision for risks relating to
credit concentration, liquidity, settlement risk, reputation, strategy, and under
estimation of credit risk that were not specified earlier. Already, RBI has issued
two guidelines on minimum capital ratio and market disciplines for Basel II norms,
called Pillar I and Pillar III.

SEBI gives nod for new pro-ducts in F&O mart:

In what is being seen as the first step towards bringing in a dramatic change in the
country’s derivatives landscape, and at the same time provide a smooth closure
of participatory notes, SEBI has given the initial go ahead for launching a host of
new products in the Futures & Options (F&O) segment. Interestingly, the new
derivatives pro-ducts approved for launch are not only based on shares and stock
market indices, some are even products based on bonds, bond indices and foreign
exchanges. The SEBI board has approved introduction of seven new types of
derivatives products.

Sen Panel on Commodity Trading:

The draft report of the expert committee on futures commodity trading, headed
by Abhijit Sen, has recommended better regulation and participation by farmers
in the commodities market, even while saying that there was no evidence to
suggest that futures trading stoked inflation. Noting that food grain had at no
point accounted for more than 6% of total volume of futures trading in
agricultural commodities, the panel made a case for actually enlarging futures
trading.
Short selling by FIs allowed:

Securities and Exchange Board of India (SEBI) has allowed from April 21, 2008
short selling by institutional investors, banned after the Ketan Parekh scam six
years ago. This means that institutional investors will be able to sell shares
without owning them at the time of trade. Simultaneously, a full-fledged
securities lending and borrowing scheme, the essential condition for short selling,
has also started. The system of naked short selling as is available in the US
markets has not been allowed, and all investors must honour their obligation of
delivering the securities at the time of settlement.

Trusts get nod to invest in stocks:

The Union Cabinet has decided to amend the Indian Trusts Act, 1882, to allow
trusts to invest in securities, including shares and bonds of listed companies.

BUSINESS & TRADE

Now, foreign news magazines can have Indian editions:

The Union government has further relaxed the norms pertaining to publishing of
the foreign magazines in India by reviewing the print media policy whereby the
foreign news magazines could now have Indian editions. However, the permission
for publishing such editions would only be granted to those Indian companies
registered under the Indian Companies Act, 1956. The norms for publishing of
such foreign magazine editions would include that publishers of such editions
continue to be eligible for 26 per cent foreign direct investment. The other
parameters for granting such permission would be that the Indian companies
would be allowed to enter into financial arrangements with the owners of the
foreign magazines. At least three-fourth of the directors on the board of directors
of the applicant Indian company and all key executives and editorial staff will have
to be resident Indians. The title of the magazine will have to be verified and
subsequently registered by the Indian company from the Registrar of Newspapers
for India.

Reservation era nears an end for small units:

Almost 17 years after the process of reforms began with the new industrial policy
statement of P.V. Narasimha Rao in July 1992, governments remained wary of
intruding on the politically sensitive issue of reservation for Small-Scale Industry
(SSI) till the end of the 1990s. Thus, while at the turn of the millennium the
number of items reserved for SSI units had come down from its peak of 873 in
1984, well over 800 items remained on the list. Since 2002, the scenario has
changed dramatically. In these last seven years, around 790 items, including
things like farm equipment, toothpaste, ice cream, footwear, detergents and even
garments have been knocked off the list. Thus, for the first time in over 40 years,
there are today as few as 35 items reserved for SSI units. Latest de-reservation
means that pastries, hard boiled sugar candy and tooth powder can be
manufactured by large units too. Electrical goods, which include geysers, hot air
blowers and toasters, too are out of the reserved list, as are ball-point and
fountain pens.

COMMISSIONS
Liberhan Commission:

Sixteen years after it was set up to probe the demolition of the Babri Masjid, the
Justice M.S. Liberhan Commission has received the 46th extension of its term.
Though the latest extension of three months will end on September 30, 2008,
there is no reason to believe that this could be the last. The 70-year-old Justice
Liberhan has not so far disclosed any reason for such an inordinate delay in a
politically sensitive matter.

Nanavati Commission Report:

Giving a clean chit to Gujarat Chief Minister Narendra Modi, the Godhra train
carnage report, tabled in the Gujarat Assembly, has described the burning of the
S-6 coach of the Sabarmati Express on February 27, 2002 as a conspiracy. The first
part of the report, dealing with the fire on the ill-fated train was recently handed
over to the State government by a fact-finding Commission headed by Justice G.T.
Nanavati. The second part dealing with post-Godhra riots will be submitted in
December. The findings of the two-member commission, presented six years after
the incident, go contrary to a probe headed by another former Supreme Court
judge U.C. Banerjee, set up by the Lalu Prasad-headed Railway Ministry. Banerjee
had concluded that the fire on the train, in which 58 kar sevaks returning from
Ayodhya were killed, was accidental. The train carnage was cited as the reason by
Hindu outfits to justify the post-Godhra riots where over 1,000 people were killed
in communal clashes in different parts of the State.

DEFENCE
Armed Forced Tribunal Bill passed:

The Armed Forces Tribunal Bill, 2005, has been passed by the Parliament, paving
the way for setting up the first services tribunal in the country. When the tribunal
is set up as many as 11,000 pending cases of armed forces personnel in civil
courts will be tansferred to the new body based at New Delhi.

Army to have two new mountain divisions:

Realising the growing needs of fighting a war in the Himalayas, India will add
about 25,000 more troops as part of its process to have two more mountain
divisions. Each division will have about 10,000 to 13,000 men. The move is aimed
at providing more teeth to India’s existing mountain warfare machinery. The
Army already has 10 divisions dedicated to mountain warfare and another
infantry division earmarked for high-altitude operations.
Cell to counter threat in space:

With China already having acquired the ability to shoot down satellites using
missiles, India has now announced setting up of a cell to counter threats to its
space-based assets. The space cell, under the aegis of the Integrated Defence Ser-
vices headquarters, is to act as a single window between the Armed Forces,
department of space and Indian Space Research Organisation to work out
measures to protect India’s space-based assets.

FDI Cap in Defence hiked to 49%:

The Union government has accepted industry’s proposal to hike the FDI ceiling in
the defence sector from the current 26% to 49% on a case-to-case basis. This is
expected to help indigenize defence production through absorption of latest
technologies. The government would also review the Offset Policy, which came
into effect from September 2008. The aim of the review would be to hasten
defence procurement.

India gears up for wars of future:

India is launching a futuristic programme to develop sophisticated NBC (Nuclear-


Biological-Chemical) defence technology to counter the threats posed by hostile
armies or terrorists resorting to such warfare. The new programme, being
spearheaded by Defence Research and Development Organisation (DRDO), comes
after the Army has already inducted Rs 700 crore worth of NBC defence
equipment, with another Rs 2,000 crore worth of it in the pipeline after being
approved by the Defence Ministry. The NBC equipment already developed by
DRDO includes as many as 60 products, which have been handed over to either
the ordnance factories or the private sector for bulk production.

DISASTERS
Bihar’s Sorrow:

The Kosi river, which gathers water from some of the highest mountains in the
world, including Everest, and enters India in north Bihar, has changed its course
and shifted over 120 km eastwards, going back to a course it had abandoned
more than 300 years ago. In the process it has rendered useless more than 300
km of embankments that had been built to control its ever angry waters. The
effect has been enormous, inundating numerous towns and villages that had not
seen such floods for decades. The people of Madhepura, Araria and Supaul
districts were affected as the river broke through the embankment just after the
barrage at Bhimnagar and swept into its old course.

EDUCATION
Go-ahead to South Asian var sity:

The Union Cabinet has given its approval to the South Asian University. The Bill
traces its roots to the 13th SAARC Summit held in Dhaka in November 2005, when
Prime Minister Manmohan Singh proposed the establishment of a South Asian
University (SAU) to provide world-class facilities and professional faculty to
students and researchers. The university would have branches of learning in other
SAARC member States. Its jurisdiction shall extend to whole of SAARC region. It
would have full functional autonomy as per terms and conditions of the inter-
governmental Agreement of April 2007.

Kerala tops primary education index:

Kerala is ranked number one among the 21 major States (large in geographical
area) in the latest composite Education Development Index (EDI) prepared for the
primary and upper primary levels of schooling for 2006-07. Delhi comes second,
followed by Tamil Nadu, Himachal Pradesh and Karnataka. The report on the EDI
was prepared by the National University of Educational Planning and
Administration (NUEPA), based on the District Information System for Education
(DISE), a comprehensive database on elementary education in India, which it had
created in recent years. Delhi is the only “Top 5” State which has improved its
overall position in terms of infrastructure in primary and upper primary schools.

National Means-cum-Merit Scholarship scheme:

In the first major move towards strengthening secondary education in India, the
Centre has approved the ambitious National Means-cum-Merit Scholarship
scheme for students from classes IX to XII. Announced in 2007 in the Union
Budget speech, the scheme seeks to arrest the high dropout rate at secondary-
level by offering financial support to economically backward students. One lakh
scholarships worth Rs 6,000 each, per annum, will be awarded every year to
meritorious class IX students from economically weaker sections. Monetary
support will continue till the students reach secondary stage and complete class
XII. Each successful student will thus get Rs 6,000 per year to study in classes IX, X,
XI and XII. State-level tests to select candidates for these scholarships will be held;
tests will be held in conjunction with the first level selection tests for National
Talent Search Examination.

Right to Education Bill gets Cabinet nod:

The ambitious Right to Education Bill has got the Cabinet nod. The Bill, which
guarantees elementary education for children from 6 to 14 years, had earlier
faced obstructions from the Law Ministry, which questioned the manner of
budgeting as detailed in the draft legislation. There was lack of clarity in the draft
law as to how resources would be allocated and shared between the Centre and
States. As for the Bill, it secures children’s right to elementary level education in
neighbourhood schools, and seeks to hold all stakeholders—the State, teachers
and parents—responsible for the education of
children.
ELECTIONS
BJP wins in Himachal Pradesh:

Riding on a strong anti-incumbency wave, the Bharatiya Janata Party (BJP) swept
to power in Himachal Pradesh, registering its most specta-cular victory to date
under the leadership of Prem Kumar Dhumal. Out of the 68 Assembly seats for
which polling was held in two phases, the BJP bagged 44 seats, while Congress
could muster only 23 against its 2003 tally of 43 seats. The BJP had won only 16
seats in the previous elections. These assembly polls also saw the Bahujan Samaj
Party (BSP) opening its account in the hill State. The party, which had fielded 68
candidates, mostly Congress and BJP rebels, secured one seat.

BJP Wins in Gujarat:

On December 24, 2007, Gujarat Chief Minister Narendra Modi defied all poll
predictions and anti-incumbency to pull off a stunning electoral victory by
romping back to power with a near two-thirds victory. His tally: 117 of the State’s
182 seats. The Congress: virtually where it was in 2002 with 59 seats. Though BJP
had been confident of a win, the scale of the victory was gratifying.

BJP wins in Karnataka:

The Bharatiya Janata Party defeated the Congress in Karnataka elections held in
May 2008, stepping across the Vindhyas to try to rule a southern State by itself
for the first time. A simple but effective “give us a chance” card helped the BJP
win 110 seats—three short of a simple majority—in the 224-member Legislative
Assembly. Congress won 80 seats, better than the 65 it won in 2004. B.S.
Yeddyurappa was sworn-in as the Chief Minister.

Left win in Tripura:

Elections to elect 60-member Assembly were held on March 1, 2008. Tripura


experienced an unprecedented turnout which was by and large peaceful with no
major incident of violence. Of the 20-lakh-odd electors in Tripura, around 30% are
tribal voters. The ruling Left Front, led by Chief Minister Manik Sarkar, retained
the power for the fourth time in a row with a facile win over the Congress-led
alliance. Left Front, comprising of the CPM, RSP and CPI, secured three-fourth
majority. CPM alone emerged winner in 46 seats. Manik Sarkar was sworn-in as
the Chief Minister for the third consecutive term.

Meghalaya elections:

On March 3, 2008, over 75 per cent voters turned out to exercise their franchise
to elect representatives to the 8th Meghalaya Assembly from 59 constituencies
spread over all the seven-districts of the hill State. The polling remained by and
large peaceful. The ruling Congress emerged as the single largest party in a hung
Assembly. A seven member coalition government of the Meghalaya Progressive
Alliance (MPA) ministry, led by Chief Minister Donkupar Roy, was sworn in after
the Congress-led minority Meghalaya United Alliance ministry led by D.D. Lapang
resigned ahead of trust vote in the Assembly. Lapang had been allowed to form
the government by Governor S.S. Sidhu on March 10, 2008, after the Congress
emerged as the single largest party.

Nagaland elections:

All apprehensions regarding possible violence were set aside as the Nagas across
the hill State came out in large numbers on March 5, 2008 to cast their votes for
the 11th Nagaland Assembly. Authorities put the overall turnout at 83 per cent.
The Democratic Alliance of Nagaland (DAN), comprising the Nagaland People’s
Front, BJP and NCP emerged victorious with 34 out of the 59 results declared.
Neiphiu Rio of NPF staked the claim to the post of Chief Minister.

Ban on exit polls:

The Union Cabi-net has given its approval to the proposal to restrict the telecast
of exit polls till the last polling in an election is over and also amend the
Representation of the Peoples Act, 1951 in this regard. The government said the
restriction on the telecast of exit polls would enable the voters to exercise their
right to vote without being influenced by the projection of the exit polls after the
one phase of voting was over and the other phases of voting were yet to be
completed.
Cabinet okays delimitation:

On February 14, 2008, ending weeks of speculation, the Union cabinet decided to
endorse recommendations of the Delimitation Commission. President Pratibha
Patil, accordingly, issued the notification, setting in motion the process of holding
the next round of Assembly polls and the 2009 General Election under a redrawn
electoral map. The Presidential notification on delimitation covers 24 States and
Union Territories, and excludes Jhar-khand, Assam, Arunachal Pradesh, Manipur
and Nagaland, where the exercise of redrawing the electoral maps could not be
completed because of local resistance. Under the redrawn electoral map, the
number of seats reserved for SCs and STs will go up from 119 to 132, reflecting
the increase in the population of these social categories over the last 32 years.

ENVIRONMENT
Agenda to combat climate change:

The National Action Plan on Climate Change sets out an eight-point agenda to not
only promote efficient and alternative energy use, but also gradually reduce the
country’s reliance on fossil fuels. The plan is meant to evolve and change with
scientific developments and through multilateral negotiations. India’s plan
includes boosting use of solar energy in the country over the next 10 years. The
government also proposes tax sops to promote fuel-efficient vehicles and those
that use alternative fuel. It also proposes to cap energy use in sectors that include
thermal power, cement, iron and steel, and fertilizers.
Biofuel policy:

The Union government is planning to make it mandatory for oil companies to sell
a 20% ethanol-blended petrol across the country by 2017. The National Policy on
Bio-fuels has set the target to achieve higher blending of biofuel in both petrol
and diesel. The policy has also suggested removing all Central taxes on bio-diesel
and accord ‘declared goods’ status to biofuels that would ensure a uniform 4%
sales tax (VAT) on the product across States. As per the policy, a certification
mechani-sm would be put in place for the blending exercise that would have to
conform to BIS specifications. The use of blended diesel, however, is yet to kick-
off due to non-availability of adequate land for plantation of biofuel plants like
jhatropha.

JUDICIARY
Judicial Impact Assessment:

Judicial Impact Assessment (JIA) is soon going to be an integral part of every


legislation that the Centre and States bring. Simply explained, every new law will
have to calculate the increase in workload of courts in implementing new
legislation and also provide financial support to the judiciary. This is part of the
recommendations made by the task force on JIA set up in 2007 as per the
Supreme Court order in the Salem Advocate case. It was headed by Justice M.
Jagannadha Rao, retired SC judge and former chairperson, Law Commission.
LAW POINT
Bharat Mata a work of art:

In a blow against the moral brigade, the Supreme Court of India has termed M.F.
Hussain’s painting Bharat Mata a work of art, paving the way for the eminent 92-
year-old painter to end his self-imposed exile in Dubai and London and return to
his home in Mumbai. The court refused to entertain a petition seeking initiation
of proceedings against the artist for hurting the sentiments of Indians. The
argument that the painting, which depicted a nude woman as Mother India, had
hurt the sentiments of every sane citizen did not impress the bench.

SC rules that Courts should not interfere in economic policies:

The Supreme Court, in a significant judgement, has said that the judiciary must
keep itself away from the executive and legislature’s economic decisions and give
greater latitude to the laws on fiscal and tax measures. The judgement further
held that the role of judiciary only comes when the civil liberties and fundamental
rights of the citizens were affected by any law passed by the legislature. The court
gave the ruling while upholding an amendment affected by Andhra Pradesh in the
Indian Stamp Duty Act, to curb the practice of under valuation of the real value of
the properties in the sale deeds and defrauding the government in the payment
of proper revenue charges.
SC slams judicial overreach:

In an unprecedented confession, the Supreme Court has admitted that the


judiciary has erred in the recent past in usurping the powers of the executive.
Cautioning against judicial activism, it said that if the trend continued, politicians
would step in and clip the judiciary’s wings. If the judiciary does not exercise
restraint and overstretches its limits, there is bound to be a reaction from
politicians and others.

LEGISLATION
Bill to amend 1894 Land Act:

In the backdrop of raging controversies on SEZs and big projects, the government
has introduced the Land Acquisition (Amendment) Bill 2007, which provides for
alternative mechanisms for disposal of land compensation disputes in a time-
bound manner. The Bill would make it difficult for those who acquire land for a
particular purpose and use it for something else, making huge commercial gains in
the bargain.

Cabinet nod for limited liabi lity partnership Bill:

The Union Cabinet has given its approval for introduction of a Limited Liability
Partnership Bill, 2008. A Limited Liability Partnership (LLP) is an alternative
business structure, falling between partnership firm and a corporate body,
combining the limited-liability benefits of a company with the flexibility of a
partnership.

Companies Bill:

A liberal regulatory set-up for corporates is on the anvil with the Cabinet
approving the introduction of a new companies Bill that will replace the present
archaic and voluminous companies Bill. The new law will also pave the way for the
formation of a one-Person Company (OPC) that would help start-up
entrepreneurs operate as a company without facing the liabilities attached to a
sole partnership firm. The new Bill also seeks appointment of minimum 33%
independent directors on board and puts restrictions on firms on raising deposits
from public. Issue of shares on discount will not be allowed. It also provides for an
Investor Education and Protection Fund that will be administered by a statutory
authority, as also proposes stringent regime for misuse of not-for-profit
companies. The new law will put no restrictions on number of subsidiaries and
allow wider choice on number of partners in a partnership firm. The Bill also
provides for special courts to deal with offences and scrapping of minimum paid-
up capital requirement. It also makes regulation of insolvency, winding up and
liquidation effective.

Limited Liability Partnership Bill:

The Limited Liability Partnership Bill, 2008 aims to give professionals such as
chartered accountants, lawyers and venture capitalists more flexibility in setting
up new firms. A limited liability partnership, or LLP, is an alternative business
structure falling between a partnership firm and a corporate body, combining the
limited liability benefits of a company with the flexibility of a partnership.

Money Laundering Bill:

Payment gateways like Visa and MasterCard, money changers, money transfer
ser-vice providers and casinos will now come under the ambit of India’s
money laundering law and face mandatory reporting obligations. The Bill
introduces new category of offences which have cross-border implications for
fighting terrorism. Insider trading and market manipulation will be treated as a
laundering offence and face stricter punishment under the law. Offences related
to human trafficking, smuggling of migrants, piracy and environmental crimes,
over invoicing and under invoicing under customs will also be punishable under
PMLA. At present, the mandatory reporting requirement is applicable on banks,
financial institutions and intermediaries. Under the rules, every banking company,
financial institution and intermediary has to maintain a record of all transactions
for 10 years.
PLANNING & ECONOMY
11th Five-year plan approved:

Prime Minister Manmohan Singh chaired the meeting of the National


Development Council (NDC) on December 18, 2007, to approve the eleventh Five-
year plan that seeks to raise the growth rate from 7.5 per cent to 9 per cent over
the next five years. The Rs 36,44,000 crore Plan seeks to nearly double
agricultural growth to four per cent and raise the Central outlay for education
from eight per cent in the last five years to 19 per cent. At the end of the five-year
period, the plan expects to bring down poverty levels by 10 percentage points and
reduce unemployment to less than five per cent. The 11th Plan target of average
9% GDP growth rate means more than doubling agriculture growth rate from
1.7% in 10th Plan to 4% during next plan; services growing by over 10%, industry
by 10.5% with manufacturing growth at over 12%. It has been agreed that
allocation for education would increase from 7.7% of total GBS during 10th Plan
to 19.3% during 11th Plan; rural development from 10.7% to 13.4%, agriculture
from 7% to 9.7% and social justice from 4.5% to 6.3%. This, however, would come
at the cost of physical infrastructure where allocations would go down 10.18% of
GBS to 8.45%. The Plan also proposes to reduce poverty by 10 percentage points,
generate 7 crore new employment opportunities and reduce unemployment
among educated persons to less than 5%.
Collapsing financial system worldwide crashes Indian market:

Following the footsteps of central banks of developed countries like US, UK, Japan
and Switzerland, among others, which infused liquidity to pep up the banking
system, Reserve Bank of India (RBI) also decided to pump in around Rs 84,000
crore ($18 billion) in the domestic banking system through Liquidity Adjustment
Facility (LAF). In India, however, the condition did not reach the negative
proportions as in USA and Europe. The negative sentiment, however,
overpowered all measures and worldwide the stock markets fell like nine-pins.
Sensex in India fell to below 8,000 thus wiping out more than 50% of the gains
made before January 22, 2008.

Current Account deficit surges:

India’s current account deficit in 2007-08, due to rise in oil import bill, rose by
77% to touch $17.4 billion, accounting for 1.5% of GDP in 2007-08, as against $9.8
billion or 1.1% of GDP in 2006-07, according to data released by RBI. Oil import
bill increased by 34.6%, to $76.9 billion in 2007-08, due to surge in crude price.
Surging oil import bill has turned India’s January-March current balance into
deficit of Rs 104 crore, against Rs 425 crore surplus a year ago, despite growth in
software services exports and rise in remittances from overseas Indians.

Extra Rs one lakh crore subsidy bill:

Finance Minister P. Chidambaram sought Parliament approval for an additional


spend of Rs 1,06,113 crore ($ 21.7 billion) for 2008-09 to fund the food and
fertilizer subsidy bills as well as provide for the farm loan waiver scheme. This was
the net additional outgo from the government for the fiscal year. According to
analysts, the additional spending would lead to bigger borrowings, putting
pressure on government finances and widening the fiscal deficit to more than the
budget target of 2.5% of gross domestic product. However, this is likely to add
liquidity in the system and generate economic activity.

Farm loan waiver raised by Rs 12,000 cr:

The Union government enlarged the farm loan waiver by Rs 11,600 crore—a
move that also seemed to be timed to inject some “feel-good” into the UPA
regime completing four years in power. By making its rebate scheme—called One-
Time Settlement (OTS)—more liberal, the government has sought to address
criticism—endorsed by the Congress leadership—that a 2 hectare or 5 acre cutoff
for a complete loan waiver discriminated against farmers in dryland areas. The
entire sum of Rs 50,524 crore debt waiver to small and marginal farmers and Rs
9,790 crore worth of one-time settlement to other farmers would be financed by
the Centre in cash, but spread over four fiscal years. Rs 25,000 crore would be
reimbursed to the lending institutions by June 30, 2009. A further Rs 15,000 crore
would be disbursed by August 2009, completing two-thirds of the package,
another Rs 12,000 crore through Budget 2010 and the final instalment of Rs 8,000
crore through the 2011-12 Budget.
GDP scores a hat-trick with 9% growth in FY08:

The Indian economy grew at the rate of 9% in 2007-08, faster than the advance
estimate of 8.7%, according to the Central Statistical Organisation (CSO). With
this, the compound annual growth rate for the last four years has touched 8.9%.
Growth averaged 9.3% over the last three years. The total value of goods and
services produced in the economy—this is what GDP measures—at current
market prices stood at Rs 47.13 lakh crore. The population in 2007-08 stood at
113.8 crore, which yields a per capita GDP of Rs 41,416. At constant prices (1999-
2000 prices), the per capita income moved up to Rs 24,321, representing an
increase of 7.8% during 2007-08. The economic growth was 8.8% in the fourth
quarter ending March 31, 2008. The economy grew 9.7% in Q4 of 2006-07. The
agricultural and allied sectors grew by 4.5% during 2007-08, compared to earlier
lower estimate of 2.6%.

India slips on Human Development Index:

India has dropped to rank 128—a fall of two ranks—among 177 countries in 2007
report on the Human Development Index despite a marginal gain in HDI value.
The UNDP’s Human Development Report states that climate change may actually
reverse the trend of a steady linear progress in health, education and poverty
reduction seen in the last few decades, especially in India, which has a “large
human development deficit”. The HDI is the measure of life expectancy, literacy,
education, standard of living and well-being for countries worldwide.
New National Mineral Policy:

The Union government has unveiled the new National Mineral Policy (for non-
fuel, non-coal minerals), replacing the policy of 1993. Despite 100% Foreign Direct
Investment (FDI) allowed in the old policy, India did not attract FDI in this sector.
The new policy aims at changing that. The new policy aims to allow seamless
transition to companies, which have reconnaissance licence, to obtain a
prospecting and eventually a mining licence. It will also allow companies to just
conduct reconnaissance and sell the data. The State governments will be allowed
to give preference to companies setting up manufacturing plants in the States.
The policy also proposes a local area development fund, with contribution from
the mining company for the development of the area around the mine. It is
envisaged that the people affected by the mining project will be necessarily made
the stakeholders in the project.

Only new State-run refineries to get tax sops:

The Finance Ministry has restricted tax holidays to only new refineries run by
public sector firms and has barred units under construction by private sector
companies like Essar Oil from the benefit. The seven-year income tax holiday to
refineries will be available before March 2012 only if they are owned by Public
Sector Company or built by companies where State-run-firms have 49 per cent
stake. For the other refineries to be eligible for the tax sops they should have
been notified before May 31, 2008.
Poverty redefined:

The Union government has decided to redefine poverty as deprivation by


including access to facilities like education, health, infrastructure, clean
environment and benefits for women and children. The new index will be used in
the next round of the countrywide National Sample Survey conducted to gauge
poverty. The current index measures poverty mainly on the basis of the number
of calories consumed, income and the kind of dwelling. It fails to reflect the
number of people in India who don’t have access to the basic facilities enshrined
in the Constitution. To provide a broader national picture of deprivation, rather
than absolute poverty, the commission has decided to incorporate 27 national
targets under six essential sectors. The percentage of poor in 2004-05 was 21.8 of
the country’s population. This came down to 20.4 per cent in 2005-06.

Railway Budget, 2008:

Railway Minister Lalu Prasad flagged off the government’s election express on
February 26, 2008, unveiling a super-populist budget that handed out poll-year
goodies to practically every section of the society. The budget slashed passenger
fares for all classes of tra-vel, upped existing discounts for students and women
senior citizens, and introduced discounts for new categories of travellers like AIDS
patients and national honour winners. The Railways recorded their highest-ever
cash surplus (or profit): an impressive Rs 25,000 crore. The Railway Budget also
sent out obvious signals about the perceived tilt towards privatization of the
utility.
Sixth Pay Commission recommendations implemented:

The Union Cabinet bettered the recommendations of the Sixth Pay Commission
on August 4, 2008, coming up with a please-all final award. The pay raise would
be effective from January 1, 2006, but to save the exchequer from the sudden
load, the arrears of 22 months would be paid in two parts—40% in 2007-08 and
the remaining 60% in 2009-10. The financial implication in 2008-09 on account of
the implementation would be around Rs 15,700 crore on the Central budget and
Rs 6,400 crore in the railway budget. These figures do not account for the 60%
arrears to be paid during 2009-10. The final package makes a rise of 21% over
what the pay panel had recommended.

Union Budget, 2008:

Finance Minister P. Chidambaram presented the 2008 Budget on February 29,


2008. Mr Chidambaram shifted the growth logic from a decades-old reliance on
more government spending to a new one on tax breaks that would put more
money into private hands to fuel growth. Buttressing this incentive to boost
disposable incomes was a bid to widen the farmers’ constituency by a Rs 60,000
crore debt waiver package for an estimated 4 crore farmers. Education remained
the focus of the Union budget for the third consecutive year with increase in
allocation of 20 per cent for the sector.
Key Features of Budget 2008-2009

 The GDP increased by 7.5 per cent, 9.4 per cent and 9.6 per cent in first three
years, of the UPA government resulting in an unprecedented average growth
rate of 8.8 per cent.

 Growth rate in agriculture for 2007-08 is estimated at 2.6 per cent.

 Food grain production in 2007-08, estimated at 219.32 million tonnes—an all


time record. Rice production at 94.08 million tonnes, maize at 16.78 million
tonnes, soya bean at 9.45 million tonnes, cotton at 23.38 million bales each, an
all time record.

 Plan Expenditure estimated at Rs 243,386 crore.

 Non-Plan Expenditure estimated at Rs 507,499 crore.

 Revenue deficit for 2007-08 to be 1.4 per cent (against a BE of 1.5 per cent)
and the fiscal deficit to be 3.1 per cent (against a BE of 3.3 per cent); Revenue
deficit for 2008-09 estimated at Rs 55,184 crore, which amounts to 1.0 per
cent of GDP; Fiscal deficit for 2008-09 estimated at Rs 133,287 crore which is
2.5 per cent of GDP.
 Tax to GDP ratio that was 9.2 per cent in 2003-04, set to rise to 12.5 per cent
at the end of 2007-08.

 Four services brought under service tax net namely, asset management service
provided under ULIP, services provided by stock/commodity exchanges and
clearing houses; right to use goods, in cases where VAT is not payable; and
customised software.

 Threshold limit of exemption for small service providers increased from Rs 8


lakh per year to Rs 10 lakh per year; about 65,000 small service providers go
out of the tax net.

 Threshold limit of exemption from personal income tax in the case of all
assessees increased to Rs 150,000.

 In case of a woman assessee, the threshold limit increased from Rs 145,000 to


Rs 180,000; for a senior citizen, the threshold limit increased from Rs 195,000
to Rs 225,000.

 Senior Citizen Saving Scheme 2004 and the Post Office Time Deposit Account
added to the basket of saving instruments under Section 80C of the Income
Tax Act.

 Additional deduction of Rs 15,000 allowed under Section 80D to an


individual paying medical insurance premium for his/her parent or parents.
 Central Sales Tax rate being reduced from 3 per cent to 2 per cent from April 1,
2008.

 Roadmap for Goods and Service Tax being prepared for introduction of GST
from April 1, 2010.

 Rashtriya Krishi Vikas Yojana launched with an outlay of Rs 25,000 crore,


National Food Security Mission with an outlay of Rs 4,882 crore under National
Policy for Farmers.

 Agricultural credit poised to reach Rs 2,40,000 crore by March, 2008.

 11.4 crore children covered under Mid Day Meal Scheme, the largest school
lunch programme in the world.

 1,82,000 girls enrolled in residential schools under Kasturba Gandhi Balika


Vidyalaya Scheme.

 Three IISERs at Mohali, Pune and Kolkata, and an IIIT at Kanchipuram have
started functioning.

 Rs 85 crore allocated for Innovation in Science Pursuit for Inspired Research


(INSPIRE).

 Rs 16,534 crore allocated for the health sector marking an increase of 15%
over 2007-08.
 Rashtriya Swasthya Bima Yojana to provide health cover of Rs 30,000 for every
worker in the unorganised sector falling under the BPL category will be
launched in Delhi and in the States of Haryana and Rajasthan on April 1, 2008.

 National Programme for the Elderly to be started in 2008-09 with a Plan outlay
of Rs 400 crore.

 Remuneration of Anganwadi workers being increased from Rs 1,000 per


month to Rs 1,500 per month; remuneration of Anganwadi Helpers increased
from Rs 500 per month to Rs 750 per month.

 National Rural Employment Guarantee Scheme (NREGS) to be rolled out to all


596 rural districts in India.

 Life Insurance Corporation of India being asked to scale up Janashree Bima


Yojana scheme to cover all women self-help groups that are
credit-linked to the banks.

 Gross Capital Formation (GCF) in agriculture as a proportion of GDP in the


agriculture sector improves from a low of 10.2 per cent in 2003-04 to 12.5 per
cent in 2006-07; Target to raise it to 16 per cent during the Eleventh Plan to
achieve the growth rate of 4 per cent.

 National Plant Protection Training Institute at Hyderabad to be converted and


upgraded into an autonomous National Institute of Plant Health Management.
 Prof Vaidyanathan Committee's report on reviving the short-term cooperative
credit structure under implementation in 17 States.

 Scheme of Debt Waiver and Debt Relief for farmers to cover all loans
disbursed by scheduled commercial banks, regional rural banks and
cooperative credit institutions up to March 31, 2007 and overdue as on
December 31, 2007.

 Saving rate and investment rate estimated to be 35.6 per cent by the end of
2007-08.

 Rajiv Gandhi Grameen Vidyutikaran Yojana to be continued during the


Eleventh Plan period with a capital subsidy of Rs 28,000 crore; allocation of Rs
5,500 crore for 2008-09.

 Aam Admi Bima Yojana to provide insurance cover to poor households.

 Rashtriya Swasthya Bima Yojana to be implemented with effect from April 1,


2008; Indira Gandhi National Old Age Pension Scheme enlarged to include all
persons over 65 years falling under the BPL category.

 Allocation for Defence to be increased by 10 per cent from Rs 96,000 crore to


Rs 105,600 crore.

 Special grant of Rs 100 crore awarded to three institutions of excellence for


2008-09: (i) Mahatma Phule Krishi Vidyapeeth, Rahuri, Maharashtra, (ii)
University of Mysore, and (iii) Delhi University.

POLITICAL
Amarnath land deal:

Jammu broke into wild celebrations on August 31, 2008 after an agreement
between a government panel led by Governor N.N. Vohra and a conglomerate of
Hindu groups gave exclusive right to the Shri Amarnath Shrine Board (SASB) on
forestland at Baltal for use during the pilgrimage season. According to the
agreement, the State government will set aside land at Baltal and Domail,
comprising 800 kanal, for exclusive use by SASB for the purpose of yatra. The
proprietary status of the land, however, shall not undergo any change. While PDP
and Hurriyat Conference rejected the deal, National Conference gave it a thumbs-
up.

Prime Minister wins trust of Lok Sabha:

After a day of high drama, backstage deals and frayed nerves, the Manmohan
Singh government, July 22, 2008, won the trust vote in the Lok Sabha. Although
the government won comfortably 275 against 256 votes the exercise produced a
damaging moral and ethical deficit for the government and its leadership. The
voting was conducted on the back of an unsavoury episode of cash for votes.
Earlier, on July 8, after rounds of wheels within wheels politicking, where the
Leftists and the government vied to outdo each other, the Communists had ended
their association with the UPA government thus prompting the necessity for a
vote of confidence.

Soren takes over as Chief Minister of Jharkhand:

On August 27, 2008, JMM president Shibu Soren was sworn in as the sixth Chief
Minister of Jharkhand after a wait of nearly three-and-a-half years. This
development ended the more than week-long political drama that began with the
withdrawal of support by the JMM to the Madhu Koda-led UPA government,
which finally forced the Chief Minister to resign. Significantly, the independents
shifted allegiance to Soren in exchange of their 12-point demand. During his first
stint as Chief Minister, which lasted only for nine days, Soren had to step down as
he failed to obtain majority on March 11, 2005.

FOREIGN RELATIONS
Visit of Syrian President:

Demonstrating its commitment to the Arab cause, India accorded a grand


welcome to Syrian President Bashar al-Assad who visited on June 18, 2008.
President Assad called for cooperation between India and Syria in the fight
against terrorism, while emphasizing that there was tremendous potential for
expanding trade and economic relations between the two countries. India and
Syria also signed three major agreements pertaining to the avoidance of double
taxation and prevention of fiscal evasion with respect to taxes, multilateral
promotion and protection of investments and cooperation in the field of
agriculture and allied sectors.

India’s report on nuclear

safety lauded in Vienna: India’s first national report on nuclear power plants
safety has been very well received and appreciated at the 4th Review Meeting of
the Convention of Nuclear Safety (CNS) in Vienna. India presented its 206-page
report for the first time. The report included the effective regulatory mechanism
for its 17 operating nuclear plants and six plants under construction.

NSG clears entry to N-Commerce:

On September 7, 2008 India gained unique status as the only nuclear weapons
power to be allowed global nuclear commerce without signing either the Nuclear
Non-proliferation Treaty or Comprehensive Test Ban Treaty, until now a
precondition for entering the elite nuclear club. When the NSG “adjusted the
guidelines” for India, after 76 hours of high drama, it marked a delicious irony.
NSG had come into being 34 years ago as a response to India’s 1974 Pokharan
test and yet, on September 7, the NSG bended its rules to accommodate India’s
nuclear ambitions. The deal will not just give India access to nuclear fissile
material and technology to mount a credible nuclear energy programme, it will
also open up certain key high-tech industries such as pharma, IT, space and
defence.

Earlier, in a significant vote of confidence for the Indo-US civilian nuclear deal, the
IAEA board of governors, on August 1, 2008, passed the India-specific safeguards
agreement by a consensus, allowing India to take the next step of seeking a
Nuclear Suppliers Group (NSG) waiver. The fact that the board agreed by
consensus is significant as this means that hardliner non-proliferation countries
like Ireland, Austria and Switzerland, which are also NSG members, supported the
safeguards agreement. Even Pakistan, which had been threatening to push for a
vote in the IAEA, quietly supported the safeguards agreement in the end.

PM calls on Indian Ocean navies to pool resources:

On February 14, 2008, India launched a unique endeavour to forge cooperation


among navies of the Indian Ocean Region (IOR), with Prime Minister Manmohan
Singh urging all littoral States to pool their resources to take on emerging threats
like transnational crimes and terrorism. Inaugurating the forum, dubbed the
Indian Ocean Naval Symposium (IONS), which was attended by Naval Chiefs from
almost 30 countries, Mr Singh said the expansion in trade and economic growth in
the region dictated the need to ensure the safety and security of the sea lanes.

Visit of President Karzai of Afghanistan:

Afghanistan Pre si dent Hamid Karzai came calling on Prime Minister Manmohan
Singh on August 4, 2008, to personally condole the Indian leadership over the July
7, 2008 car bomb attack on the Indian embassy in Kabul and the serial blasts in
Bangalore and Ahmedabad. During their meeting, the two leaders expressed their
firm resolve to fight terrorism unitedly. Clearly demonstrating that New Delhi
would not be deterred by incidents like the embassy bombing and fulfil all its
commitments to Afghanistan, Dr Manmohan Singh pledged an additional amount
of $450 million over and above the existing $750 million to meet the
requirements of India’s ongoing and upcoming projects in the war-ravaged
nation.

India-Africa Summit:

India hosted its first India-Africa Heads of State Summit in New Delhi on April 8-9,
2008, as it tries to match China’s ever-growing clout on the mineral-rich
continent. As India seeks to intensify its engagement with Africa, Prime Minister
Manmohan Singh launched the Summit by almost doubling the lines of credit to
that continent to $ 5.4 billion. India also opened its market for goods from Africa
through a duty-free preference scheme for least developed countries, 34 of which
are located in Africa. Mr Singh also announced an enhanced quota of 1,600 seats
annually for Africans under its flagship technical training scheme, ITEC.

India, ASEAN ink free trade deal:

On August 28, 2008, India concluded negotiations on a Free Trade Agreement


(FTA) with the ASEAN bloc, which will ensure lowering of duties and free flow of
trade in goods. The agreement will create a market of over 1.5 billion people in
the region. The main countries that will be included in the new trade bloc are
India, Thailand, Indonesia, Malaysia, Myanmar, Vietnam, the Philippines and
Indonesia.

Fifth Australia-India Foreign Ministers Framework Dialogue:

At the fifth Australia-India Foreign Ministers Framework Dialogue held on June


23, 2008, India and Australia underlined the strong bonds and enduring shared
interests that underpin this bilateral relationship. They signed an Extradition
Treaty and a Mutual Legal Assistance Treaty, underscoring the willingness of the
two countries to collaborate and address criminal matters in a practical way.
Australia, however, conveyed that it will not lift its ban on uranium exports to
India as long as the latter doesn’t sign the Nuclear Non-Proliferation Treaty (NPT).
Both ministers also agreed to strengthen intelligence cooperation, including on
counter-terrorism issues. The two ministers also announced a new forum, the
Australia-India Roundtable convened by the Sydney-based Lowy Institute for
International Policy and the New Delhi-based Indian Council for World Affairs, to
extend the political partnership between the two countries.

Kolkata to Dhaka train after 43 years:

After a gap of over four decades, rail services between Kolkata and Dhaka
resumed on April 14, 2008, with the simultaneous launch of “Moitree Express”
from Kolkata and Bangladeshi capital Dhaka. The move is aimed a strengthening
ties between the two neighbours. The rail connection between Kolkata and Dhaka
was snapped during the 1965 Indo-Pak conflict when Bangladesh was part of
Pakistan. However, India and Bangladesh, in 1996, resumed direct bus service
linking Kolkata and Dhaka. The Moitree (friendship) Express will cover 538-km
running 120 km on the Indian soil and the rest in Bangladeshi territory.

PM’s Bhutan visit:

Prime Minister Manmohan Singh visited Bhutan on May 16, 2008, for a two-day
official visit, where he had the honour of being the first international leader to
address a joint session of the newly constituted Bhutanese Parliament. The visit
also coincided with the 50th anniversary of India’s first Prime Minister Jawaharlal
Nehru’s visit to Bhutan. The Prime Minister held talks with the previous king,
Jigme Singye Wangchuk, and his son and the present monarch, Jigme Khesar
Namgyel Wangchuk. He also had extensive discussions with his Bhutanese
counterpart Jigne Thnley. During his stay in Bhutan, the Prime Minister dedicated
the 1,020 MW Tala power project to the Bhutanese people and layed the
foundation stone of another hydro-electric project with a capacity of 1,095 MW at
Punatsangchu.

President Patil arrives in Bhutan:

Heralding a new era in bilateral relationship with Bhutan, President Pratibha Patil
began her maiden four-day visit to the Himalayan nation of Bhutan on November
5, 2008. During her visit she also attended the coronation of its 5th King Jigme
Khesar Namgyel Wangchuck.
PM’s China visit:

Prime Minister Manmohan Singh visited. Building on a much-improved bilateral


relationship, Prime Minister Manmohan Singh and his counter-part Wen Jiabao,
on January 14, 2008, signed a joint declaration titled “A Shared Vision for the 21st
Century”. In another advance over previous formulations, China supported India’s
aspirations to play a greater role in the United Nations, including in the Security
Council. Taking forward their 2006 accord, the two countries pledged to promote
bilateral cooperation in civil nuclear energy, consistent with their respective
international commitments.

Pranab Mukherjee’s China visit:

External Affairs Minister Pranab Mukherjee arrived in the southern Chinese city of
Guangzhou in first week of June 2008, kick-starting his four-day visit to China,
during which the boundary row and irritants surrounding it dominated his talks
with the Chinese leadership. India used the opportunity to convey to the Chinese
leaders that it was not ready to bring the Sikkim issue in the boundary talks
because there was no dispute concerning that portion of the boundary with
China. Mukherjee returned extremely satisfied with the talks that covered a range
of issues, including plans for the next military exercise between the two countries
in India by end 2008. The two countries renewed a deal on cooperation over
sharing of hydrological data and on monitoring the situation to guard against
possible floods.
India, China hold first joint military exercise:

In an atmosphere tinged with the Hindi-Chini Bhai Bhai spirit, Indian troops
arrived on December 20, 2007, in China, to a warm welcome by the Chinese hosts
for the first-ever Sino-Indian joint military exercise in a hilly terrain in South
western Yunnan province. The Indian troops were drawn from the Jammu and
Kashmir Light Infantry. Military cooperation gives the two countries a way to
bring vision to their efforts to improve relations.

India, EU to sign open skies pact:

Air India, Jet Airways, JetLite and the Deccan-Kingfisher combine will soon get
more access to European destinations. A liberal aviation pact between India and
the European Union is on the cards, which will enable this as well as give EU
carriers better access to India. According to civil aviation ministry sources, Indian
carriers will get to operate a virtually unrestricted number of flights to European
destinations. On a reciprocal basis, European carriers will also get similar market
access in India and be able to ink pacts with Indian counterparts without going
through elaborate government clearances.

India to buy N-reactors from France:

India’s nuclear isolation ended on October 1, 2008 when France agreed to sell
reactors and fuel to Delhi. This French factor came just 24 days after the Nuclear
Suppliers Group (NSG) amended its guidelines governing civil atomic commerce.
The pact was signed during visit of Prime Minister Manmohan Singh to France and
effectively ended the 34-year-old sanctions imposed by the NSG after India
conducted its first nuclear test in 1974. India also signed a bilateral social security
agreement.Earlier, French President Nicolas Sarkozy visited India from January 25,
2008. He was the chief guest at the Republic Day parade. India and France signed
five agreements, including one for construction and operation of a nuclear reactor
at Cadarache in France, which is the home of the ITER project. A pact for transfer
of sentenced prisoners was also signed. President Sarkozy, who is known for his
hardline stance against Islamic radicalism, agreed to work with India in counter-
terrorism efforts.

Visit of Iranian President:

On April 29, 2008, Iranian President Mahmoud Ahmadinejad arrived in India on


his first official visit. He had visited Pakistan before moving on to Sri
Lanka. The main engagement of Iranian President Mahmoud Ahmadinejad’s visit
to the Indian sub-continent was to sign agreements with the Sri Lankan
government for setting up an oil refinery and a hydropower project. The brief
stopovers at Islamabad and New Delhi were made to explore avenues of
economic cooperation.
Prime Minister’s Japan visit:

Prime Minister Manmohan Singh arrived in Tokyo on October 21, 2008 for a
three-day visit. The highlight of the visit was a decision to proceed with the so-
called dedicated freight corridor, a project that seeks to link through a railway
freight line, India’s east and west coasts, and also envisages an industrial belt
coming up along the corridor. Prime Minister Manmohan Singh and his Japanese
counterpart Taro Aso stressed that their growing economic and strategic relations
had nothing to do with a third country especially China. Mr Singh went out of his
way to thank Japan for not coming in the way of the Indo-US nuclear deal at the
Nuclear Supplies Group (NSG) in Vienna. Mr Aso said Japan hoped India would
stick to its nuclear-test moratorium.

Japan has committed Rs 8,582 crore as assistance for developing nine


infrastructure projects in India. The assistance will help in undertaking projects
such as the Kolkata metro, Hogennakal water supply project and Tamil Nadu
urban infrastructure project. The second phase of the
Delhi metro project will also be funded by Japan. This is the highest-ever official
development assistance by the Japanese government to India.

President Pratibha Patil’s visit to Latin America:

Seeking to infuse new warmth in India’s relations with Latin American countries,
President Pratibha Devisingh Patil, on April 13, 2008, embarked on a 14-day
official trip to Brazil, Mexico and Chile. This was the maiden official visit of India’s
first woman President. During the Brazil leg she visited Sau Paulo, Rio de Janeiro
and Brasilia. In Mexico she travelled to Mexico City and Guadalajara. In the end
she visited Santiago, the capital of Chile.

India, Malaysia to step up defence cooperation:

Stepping up defence cooperation with Malaysia, India said on January 8, 2008,


that it would train the Southeast Asian country’s Air Force personnel to fly
Russian Su-30 MKM fighters and hold joint military exercises. The two sides also
agreed to strengthen efforts to combat terrorism.

India, Myanmar ink four pacts:

India will finance power transmission lines in Myanmar, with which it has also
signed an investment protection agreement to boost economic ties. A total of
four agreements have been signed, including regular banking arrangement for
border trade. The two countries have also entered into a Bilateral Investment
Promotion Agreement (BIPA) to encourage flow of funds. The trade pact provides
a framework for resolution of disputes, promotion and protection of investment,
extending national and MFN treatment, repatriation of investment and returns
and entry and sojourn of technical and managerial personnel, an official
statement said here.
Visit of Prime Minister of Nepal:

Nepal’s Prime Minister Prachanda visited India on September 16, 2008. India used
the occasion to agree to Nepal’s long-standing demand for review of the 58-year-
old bilateral Trade and Transit Treaty, which has a bearing on almost all aspects of
ties between the two countries, saying it was important to carry forward the
relationship between the neighbours. India and Nepal also decided to take
preventive measures for the protection of barrages on the Gandak and other
rivers under the existing bilateral arrangements in the wake of the Kosi disaster.

Manmohan Singh-Zardari meeting in USA:

Prime Minister Man-mohan Singh met with President Asif Ali Zardari of Pakistan
on September 25, 2008 on the sidelines of the UN General Assembly meeting in
New York. During the meeting India reminded Pakistan yet again of its promise to
crack down on anti-India terror groups operating from its territory. At the end of
it, India is understood to have secured a fresh pledge from Pakistan that it would
honour its word. Singh and Zardari sought to bolster confidence between the two
neighbours by agreeing to cross-LoC trade on the Srinagar-Muzaffarabad and
Poonch-Rawalakot roads from October 21, 2008. The meeting was candid, and for
most part, without aides.

Pakistan breaches ceasefire:

The Indian Army has accused Pakistan of violating the ceasefire by firing on Indian
positions near the Line of Control in Tangdhar sector in the Valley on June 22,
2008. A defence spokesperson said the firing took place at 6.15 a.m. and lasted
for about 20 minutes. No casualties were reported. Prime Minister Manmohan
Singh described the development as “worrisome”. He said the Indian DGMO
(Director General of Military Operations) had taken up the matter with his
Pakistani counterpart. Defence Minister A.K. Antony also expressed concern. This
was the first time after Pakistan declared a ceasefire along the LoC in November
2003 that its troops fired at Indian positions in the Valley.

Trade across LoC after 60 years:

The faltering India-Pakistan peace process received a shot in the arm on October
21, 2008, as the two countries opened trade links across divided Kashmir for the
first time in six decades. The opening, hailed as the most significant confidence-
building measure since the launch of Srinagar-Muzaffarabad bus service in 2005,
is aimed at reducing tensions between the nuclear-armed neighbours. Salamabad
village, the venue of the ceremony, wore a festive. The route, however, largely
remains symbolic as limited trade would be allowed across the de facto border;
only four trucks will be allowed each side once a week.

Visit of Pranab Mukherjee to Pakistan:

On May 21, 2008, Foreign Ministers of Pakistan and India agreed to carry forward
the composite dialogue and hold the fifth round on an eight-point agenda, which
includes Kashmir, trade and anti-terrorism, in mid-July. It was also announced
that Prime Minister Manmohan Singh would visit Pakistan later in 2008. On
Siachin, it was accepted that there was slow progress but Pakistan said it has
proposed a package to expedite it. The Srinagar-Muzaffarabad and Poonch-
Rawalakot bus services will now become weekly instead of the existing fortnightly
affairs. The two countries also signed a consular agreement on access to prisoners
being kept in jails; each will provide on a regular basis an updated and
comprehensive list of prisoners to the other. On trade and commerce, the two
countries agreed to discuss further steps for facilitating trade and “redressing”
the trade imbalance.

India gives land for Palestine Embassy:

In a gesture of solidarity with the Palestinian cause, on October 7, 2008, India


gifted to the Palestinian National Authority (PNA) a prized piece of land in the
New Delhi’s diplomatic enclave for building its Embassy. India also announced a
grant of $10m as budgetary support to the PNA to help meet its immediate
requirements and an additional $10m as assistance for development projects.
India and Palestine have also signed an agreement on the construction of a school
in the name of the India’s first Prime Minister Jawaharlal Nehru in Abu Dees in
Palestine. The gift underlines India’s consistent solidarity and commitment to an
independent Palestine and is seen by many as a balancing exercise in view of New
Delhi’s growing relations with Israel.
India, Russia defence ties enter new phase:

On September 29, 2008, India reaffirmed its relationship with its oldest defence
ally—Russia. The two countries signalled a shift in the earlier “buyer-seller
relationship” by announcing: “We will now be partners in jointly developing next
generation of weapons, aircraft and hold joint scientific research.” Besides, the
two nations announced plans to increase the frequency and scope of bilateral
military exercises.

Visit of Russian Prime Minister:

On February 12, 2008, Prime Minister Manmohan Singh briefed his Russian
counterpart Victor A. Zubkov, during the later’s visit to India, on his government’s
ongoing efforts to finalise a safeguards agreement with the IAEA. The two Prime
Ministers also discussed all aspects of Indo-Russian relations and vowed to take
their strategic partnership from strength to strength. After their one-to-one and
delegation-level talks, the two Prime Ministers jointly inaugurated the Year of
Russia in India at a gala concert in Purana Qila.

India, Singapore to upgrade ties:

In a significant move to deepen the bilateral ties, India and Singapore have
decided to set up a bilateral strategic dialogue mechanism to identify newer areas
of cooperation and exchange notes on political and security issues. Singapore is
the latest addition to list of the countries with which India already has an
institutionalised strategic dialogue mechanism. Initially, the strategic dialogue
mechanism with Singapore will operate in a Track 2 diplomacy mode. This was
disclosed by Singapore Prime Minister Lee Hsien Loong to mark the first day of
the Incredible India @ 60 campaign, held in Singapore by the government of India
and the Confederation of Indian Industry (CII).

India-UK:

British Prime Minister Gordan Brown visited India in January 2008. The 4th India-
UK summit concluded on January 21, with the two countries vowing to forge ever-
closer linkages on all major political and economic issues including counter-
terrorism and climate change. A joint statement, signed by the two Prime
Ministers said UK supported the Indo-US civil nuclear co-operation initiative with
all its elements, including an appropriate India-specific exemption to the Nuclear
Suppliers Group guidelines.

India, US to strengthen military ties:

On October 16, 2008, India and the USA for the first time agreed to work together
to formulate a doctrine and raise the level of participation in joint military
exercises during the meeting of chief of US army General George William Casey
with his Indian counterpart General Deepak Kapoor, in New Delhi. They also
discussed security-related developments in south-east Asia, especially in Pakistan,
Nepal and China. The two Chiefs also agreed to cooperate in exchange of military
and related technologies for the development of enhanced capabilities for the
future combat soldier (a programme of the Indian Army referred to as FINSAS—
Future Infantry Soldier as a System). General Casey also visited the Siachin Glacier
despite loud protests by Pakistan, a clear indication from Washington that the
boundaries between India and Pakistan, including the Line of Control, will not be
redrawn, and any solution to the Kashmir issue will be within the ambit of the
current boundaries.

Nuclear Deal signed with USA:

Three decades of nuclear apartheid that New Delhi had been subjected to, ended,
appropriately enough, on October 2, 2008 following the final US Senate vote
which approved the US-India civilian nuclear agreement with a thumping 86-13
margin. On October 9, extending Diwali greetings to Indians all around the world,
President George Bush signed the nuclear deal legislation into law. On October
10, Foreign Minister Pranab Mukherji visited Washington to sign the 123
Agreement with Condoleeza Rice, ending the process that started in 2005 with
the joint statement of Mr Bush and Prime Minister Manmohan Singh. The deal,
which is the centerpiece of Indo-US ties, is also expected to rejuvenate ties in
other sectors as well.

India and Myanmar working to strengthen ties:

The second highest ranked general of Myanmar, Maung Aye, visited India in early
April 2008 to take forward an initiative that will give land-locked States in the
North-East access to the Bay of Bengal. The Indian government, earlier on March
27, 2008, paved the way for the country to pay for and be involved in upgrading
Myanmar’s Sittwe port and Kaladan waterway, when it approved a Rs 535.91
crore multi-modal transit transport project under the Aid to Myanmar initiative.
The fact that Bangladesh has refused to give any transit rights for trucks to carry
goods through to the North-East makes the Myanmar project that much more
significant.

RESERVATIONS
Cabinet clears women’s quota Bill:

On May 5, 2008, the Union Cabinet cleared the women’s


reservation Bill that is aimed at providing 33 per cent quota for women in
Parliament and State legislatures. The Bill was tabled in the Rajya Sabha on May 6.
The emergency action on the Bill was necessitated after the Lok Sabha was
adjourned sine die and the Bill would have lapsed if not presented immediately in
the Rajya Sabha.

Gujjars’ quota war:

The Rajasthan Gujjars’ demand for inclusion in the Scheduled Tribe (ST) category
has turned violent in the past year, as the community feels squeezed out of OBC
quota benefits. Sources say that the demand—first put forth in 1961-62—has to
be seen in relation to the inclusion of Jats in the Rajasthan OBC list in 1999. With a
significant presence in about 100 assembly constituencies, and 36 MLAs in the
State, Jats are politically and educationally more powerful than Gujjars—who
make up about 5 per cent of the population—and other OBC castes.
Consequently, Gujjars want inclusion in the ST quota, where Meenas are
practically the sole beneficiaries. Under an agreement finally reached between
the Gujjars in Rajasthan will be given a 5% job quota as a special category.
Apparently keeping in mind the sensitivities of the influential Meena community,
which already has ST status in the State, Chief Minister Raje sought to allay
misgivings about the impact of the quota for Gujjars on the present reservation
system. This quota would not have any adverse effect on the present reservation
system in the State, she said.

SC clears OBC quota law:

Ending uncertainty over the controversial law providing for 27 per cent
reservation for Other Backward Classes in Central educational institutions,
including IITs and IIMs, the Supreme Court, on April 10, 2008, upheld its validity
but ruled that the creamy layer among the backwards would not get reservation.
A five-judge Constitution bench headed by Chief Justice K.G. Balakrishnan upheld
the Central Educational Institutions (Reservation in Admission) Act, 2006, paving
the way for its implementation in all Central educational institutions.

Vacant OBC seats will go to general category:

The Supreme Court has put an end to the confusion over unfilled OBC quota,
saying it had maintained that all vacant seats under the 27% OBC quota in Central
educational institutions, including IITs and IIMs, should go to the general
category. The five-judge bench also reiterated its earlier order that the Centre
could not dilute merit by lowering the cutoff marks for backward class students
too far below that prescribed for the general category.

SCANDALS
Kidney racket:

A Rs 100 crore kidney transplant racket that thrived on exploiting the poor and
miserable with false promises and then removing their kidneys by force was
busted in Gurgaon, Haryana, on January 25, 2008. The sheer scale of the racket
organised and brazen that spanned six States and catered to the rich, including
NRIs and foreigners, has left the authorities shaken. It was carried out right under
the nose of the police and could have been thriving for the past 15 years,
according to one account, though Gurgaon police said it was eight years old. Four
doctors and about five touts have so far been identified. But what’s shocking is
that this racket had been busted four times earlier, with Dr Amit Kumar, the
mastermind, figuring in police files. Dr Amit Kumar, a surgeon from Maharashtra,
say the police, has many aliases. He also has several passports and property worth
crores in Gurgaon, Mumbai and Canada.

Two senior Delhi lawyers held guilty of contempt:

The Delhi High Court has convicted two senior lawyers R.K. Anand and I.U. Khan
of criminal contempt for trying to persuade key witness Sunil Kulkarni in the BMW
hit-and-run case to turn hostile. The Court held the two guilty of obstructing the
administration of justice and debarred the duo from appearing in High Court and
lower courts for four months. It also recommended that they be stripped of their
designation of senior advocate. This was the first time that a media report of a
nexus between the prosecution and defence in a case led to court action against
lawyers.

TELECOM & BROADCASTING


3G auction finally gets go ahead:

After nearly two years of debate and controversy, the government finally
announced on August 1, 2008, its plans for a global auction of third generation
(3G) radio frequencies and also for the introduction of Mobile Number Portability
(MNP). The government will also auction spectrum for Broadband Wireless Access
(BWA) services, also called WiMAX services. These big-bang policy initiatives will
change the telecom landscape in the country and bring telecom services in India
at par with the rest of the world. The government hopes to raise between Rs
30,000-Rs 40,000 crore from the auction of 3G spectrum. The global 3-G auction
offers a lifeline to both new entrants and international communication majors
such as AT&T, Verizon and others to gain a foothold in the world’s fastest growing
mobile market.
Cabinet nod to IPTV policy:

The Union government has cleared the policy framework for the commercial roll
out of Internet Protocol TV (IPTV) services, a new cable TV delivery
platform that would benefit telecom players as well as consumers. The Union
Cabinet has also given its approval to amend the policy guidelines for down-
linking of TV channels for allowing broadcasters to provide content to IPTV service
providers. IPTV involves delivery of television and video signals over a broadband
network.

TERRORISM; LAW & ORDER


Agartala riddled with blasts:

On October 1, 2008, two persons were killed and over 100 injured when a series
of five explosions rocked Agartala, the capital of Tripura, within a span of 90
minutes. The low-intensity bombs were planted either on bicycles or motorcycles.
The blasts occurred in Tripura four days after the Army shot dead seven
suspected Huji militants in Dhubri district bordering Bangladesh in western
Assam.

Blasts rip through Assam:

On October 30, 2008, thirteen bomb blasts in quick succession ripped through
Guwahati, the commercial capital of Assam, and three other towns, killing more
than 70. A little-known group called the Islamic Secu-rity Force-Indian Mujahideen
claimed responsibility for the serial blasts. The group is believed to be an offshoot
of older Islamist outfits such as the Muslim United Liberation Tigers of Asom. It
was formed mostly by ex-activists of SIMI.

Bodo-Bangla clashes flare up:

On October 5, 2008, at least seven persons were killed when police fired on a
group of Bangladeshi migrants who tried to defy shoot-at-sight orders in
troubled-torn districts of Darrang and Udalguri even as violent clashes between
the immigrant workers and tribal Bodos claimed seven more lives. The clashes
that broke out over stealing of cattle have claimed more than 30 lives.

Bomb blasts rock Delhi:

On September 13, 2008, at least 25 persons were killed and over 100 injured
when five low-intensity serial bomb blasts rocked three major markets of Delhi, in
what appeared to be a meticulously planned terrorist attack. Indian Mujahideen,
a home-grown terror organisation has owned responsibility for the blasts in the
capital via an e-mail to various media organisations.

Conversion fire engulfs Karnataka:

After Kandhmal, it was the turn of Christians in Karnataka to face the ire of right-
wing Hindu mobs. Suspected Bajrang Dal activists vandalized seven churches and
a house in Mangalore Udupi and Chikmagalur districts in September 2008,
protesting alleged conversions of Hindus to Christianity. Some preachers and
parishioners were assaulted and church property damaged in the attacks.

Orissa burns:

In the month of August 2008, attacks on churches and Christians continued in


Orissa claiming at least nine lives. Violence escalated during the Vishwa Hindu
Parishad-sponsored State-wide bandh to protest the murder of its leader Swami
Lakshmananda Saraswati and four of his disciples. The bandh turned communal
with protestors attacking churches and missionary schools across the State.

Fidayeen attack on CRPF camp in UP:

Year 2008 began on an ominous note when, in a daring pre-dawn attack, heavily-
armed terrorists, suspected to be belonging to the Lashkar-e-Tayyaba, stormed a
CRPF recruitment centre at Rampur in the Rohilla-khand region of Uttar Pradesh,
killing eight persons, including seven jawans and a civilian. This was the first time
a fortified security installation had been attacked outside the State of Jammu and
Kashmir.

Indian mission blast in Kabul:

A suicide car bomb hit the Indian embassy in Kabul on July 7, 2008, killing 41
people and wounding 139, in an attack Afghan authorities said was coordinated
with foreign agents in the region, a likely reference to Pakistan. Afghan analysts
argue Pakistan is loath to see the emergence of a strong Afghanistan that is
friendly to India and is secretly backing the Taliban as a strategic asset, enabling
Pakistani forces to concentrate on defending the Indian border.

Maoist strikes:

Thirty-six personnel of an elite anti-naxal force were drowned when, on June 29,
2008, Maoists struck in a big way, opening fire on a launch carrying the security
personnel and sinking the vessel in a reservoir near Malkanigri, Orissa. Earlier, on
February 16, 2008, fifteen persons, including 13 policemen, were killed by Maoists
in a stunning siege of three police stations in Nayagarh district headquarters,
Orissa, barely 90 km from the State capital.

Serial blasts rock Bangalore, Ahmedabad:

On July 25, 2008, a string of seven synchronized bomb blasts shook Bangalore
during the busy lunch hour, leaving two killed and injuring 12 others. A day after
terror turned westwards to engineer more than 20 blasts in Ahmedabad. More
than 40 people were killed. The explosions were clearly aimed at disrupting life in
crowded areas, affecting the economic activity in general.

Terror Strikes Jaipur:

At least 80 people were killed and over 200 injured in seven explosions that took
place on May 13, 2008 evening in crowded areas of Jaipur. This was Rajasthan’s
second brush with terrorism in recent years—the last being a bomb blast at the
Ajmer Sharif Dargah of Moinuddin Chisti on October 11, 2007. The bombs were
carried on bicycles to the destinations before being exploded by the terrorists.

Terror strikes UP:

Terror struck on November 23, 2007 in Uttar Pradesh when militants triggered
near-simultaneous blasts in court premises in Varanasi, Faizabad and the State
capital Lucknow, killing 14 people, some of them lawyers, and injuring over 50
other. Six bombs—three in Varanasi, two in Faizabad and one in Lucknow—some
planted on cycles, went off within a span of 15 minutes in the crowded court
complexes.

Three get life term for IC-814 hijack:

Nine years after an FIR was registered into the hijacking of an Indian Airlines plane
from Kathmandu to Kandahar, the designated court in Patiala, Punjab, on
February 5, 2008, pronounced life term for three accused Abdul Latif, Bhupal Man
Damai and Dilip Kumar Bhujel. Ten persons, including seven Pakistani Nationals
were held accused in the case, but only three, including one Nepali—Bhupal Man
Damai—and two Indians—Abdul Latif of Mumbai and Dilip Kumar Bhujel of
Kalimpong (WB)—could be arrested.
MISCELLANEOUS
12 guilty in Uphaar case:

Ten years after a major fire engulfed Uphaar cinema hall leading to the death of
59 people and injury to 114, a trial court has convicted owner businessmen Sushil
Ansal, Gopal Ansal and 10 others—among them six government officials—holding
them responsible for the tragedy. Seven other accused—four employees of Ansals
and three officials of Delhi Vidyut Board—have been convicted for a graver
offence, culpable homicide not amounting to murder.

IPL crowns India’s cricket czars:

Cricket, Bollywood and big business came together in heady cocktail on January
24, 2008, as corporates and film stars forked out millions of dollars at an auction
of city-franchises of the Indian Premier League, the BCCI’s mega-hyped Twenty20
competition. The BCCI wound up with a combined total of $ 723.6 million (Rs
2,853 crore); factoring in the sale of TV rights, it has so far netted a total revenue
of $ 1.749 billion (Rs 7,000 crore) from the IPL even before the first ball has been
bowled.

Lifestyle diseases could cost India heavily:

India could incur losses to the tune of $237 billion by 2015 due to rise in lifestyle
diseases like diabetes, stroke and cancer, because of unhealthy workplaces,
according to a new WHO report, “Preventing Communicable Diseases in the
workplace through Diet and Physical Activity”. The projected loss for China—the
other fast developing country—is a massive $558 billion, while the estimated
figure for Russia and the UK is $33 billion.

Smoking ban:

From October 2, 2008 anyone smoking will be fined Rs 200 if found smoking at
any place outside personal spaces like home and car, and open public areas like
pavements and roads. The law came into effect after the Supreme Court rejected
a petition of tobacco major ITC, which sought a stay on the government’s smoking
ban order. Places where you can’t smoke: Workplaces, hospitals, stations,
auditoria, amusement centres, cinema halls, restaurants, bars, canteens, airports
(except for smoking lounge), courts, educational institutions, libraries, banks,
shopping malls, monuments, parks, bus stops, public transport. Not listed as
public places: Roads, and inside a car with windows rolled up.

Stampedes are bigger killers than bomb blasts:

Stampedes are bigger killers in India than bomb blasts that so dramatically
capture our mind space. In 2008 alone so far, over 360 people lost their life in
major stampedes compared to 156 killed by bomb blasts. This year is not an
aberration. Data collated for the last nearly nine years shows that while 875
people have lost their lives in stampedes that were big enough to make the
national press, 766 have been killed by terror bombs.

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