Rural Tourism

Last year when Vivek Sherode from Pune told his children that he was taking them for a holiday, they were more than excited “Will their father take them to Mumbai or Goa?”They started guessing among themselves? But Vivek had some other plans this time. He had heard about village tourism and this time he wanted to give his children the taste of village life. The children were disappointed when they first came to know about it. But the moment they landed in a village they fell in love with the place.  For them it was a different world altogether. Vivek said he had never seen his children so happy as they ran about, sometimes climbing the tree to pluck chikoos or riding a bullock cart or a tractor  or simply playing with water  at the village well. Vivek said that he had never seen his family enjoy the holiday so much as in this village.  He said   at night   the local dance and music with rustic flavor was organized, something they would never had the chance to see in a city.

 

Living in high rise buildings amidst noise and coping with the fast paced life, people want to get away from the daily hustle and bustle for a quiet holiday and breathe fresh air.  Rural tourism as a concept was envisaged in the National Tourism policy in 2002. It was defined as a form of tourism that showcases village life, art, culture and heritage at rural locations, thereby benefiting the local community economically and socially as well as enabling interaction between the tourists and the locals for a more enriching tourism experience.

 

Rural Tourism Scheme

 

The Rural Tourism Scheme was formulated with a focus on developing tourism related infrastructure that would help promote   village tourism. This was later supplemented by a pilot project Endogenous Tourism Project (ETP) in collaboration with United Nations Development Programme (UNDP) by building and strengthening tourism livelihoods-linked capacities of local communities. The project also aimed at convergence of issues like sustainable livelihoods, gender equality, empowerment of women, youth and other disadvantaged sections of the community, and working towards cultural sensitivity and environmental sustainability.

 

Since 2006 the funding of the capacity building activities has also been going on under the capacity building scheme of the Ministry of Tourism.

 

Panduranga,  who is into rural tourism  says that in  Maharshtra, village tourism  took birth in  Baramati district  in 2004 as a pilot project  spread over 110 acres of land.  There is horticulture plantation in the 65 acre area. He says when they urban tourists come, they are also able to see silk processing units, milk dairies and fruit plantations.  Another objective of encouraging rural tourism was to curb migration from rural to urban areas. Since 2004 more than 200 centres of rural and farm tourism have been developed in Maharashtra and more than a lakh of tourists have had the taste of village life. In addition extra income to the farmers, the unemployed youth in villages have also been roped into the activities connected with rural tourism.

Rajasthan is another state where rural tourism has developed fast over the years. Rajasthan  is not only famous  forhistorical monuments and places of worship but also for its rich culture  be its performing arts or crafts  or dance and music. According to Vijay Deep Singh of Murarka Foundations they have developed several packages  not only for  the Indian tourists but tourists from place like America, France, England and even Switzerland. He says that many tourists want to stay with villagers in their homes to get first hand flavour of local life, cuisine and culture. Under one such  packages  the tourists are charged 1200 rupees  per day  for one day and night  of which  850 rupees are paid to the farmers family.  For the tourists it is not expensive and the farmer too is able to earn extra money.

In Punjab it is farm tourism that has become the favourite. One can walk along the golden mustard fields, take a ride on the tractor, take the cattle for grazing or feed them, get to drink  fresh buttermilk in the green fields with Makki ki Roti and Saag, enjoy  the folk dance Bhangra and get to see the making of the local craft  phulkari  and also meet the village community and the Panchayat. The tourists also get to participate or simply watch local games like wrestling, Gilidanda , kite flying. Children too can experience the joy of jumping on the hay and taking bath in the tube wells.

Many other states too are now giving encouragement to rural tourism.

 

12^th Plan Strategy to Boost Rural Tourism

 

The working group on   tourism for the 12^th plan observed that due to several reasons, the rural tourism projects have achieved only limited success.  It has suggested a strategy that can exploit the full potential of rural tourism.

 

The strategy for developing rural tourism is focussed on phased development of cluster of villages for tourism instead of individual villages.

It says that the concentration of tourism facilities or opportunities in a cluster of villages in a geographically compact area, rather than in a number of individual villages spread across vast areas, is likely to provide better tourism attraction.

 

Another advantage is that marketing of local products can be facilitated by holding Craft Bazars or Haats, a concept which has been in vogue throughout the country for a long time.

Also it is more practical and cost effective for tour operators to take a busload or a group of large number of tourists to a rural tourism cluster, which offers more variety and opportunities of shopping, and exposure to customs, lifestyles, local arts and artisans/ artists, including performing arts.

Financial Inclusion

Financial Inclusion is meant to extend financial services to the large hitherto un-served population of the country to unlock its growth potential. In addition, it strives towards a more inclusive growth by making financing available to the poor in particular. The Prime Minister in his Independence Day speech this year had announced that “it will be our endeavour to ensure that all households benefit from bank accounts in the next 2 years”. Keeping in view the banking facilities being extended under “Swabhimaan” and the campaign launched that every household has at least one bank account, it is expected to achieve the target by August, 2014.

 

Bank Branch Network

 

There are 93,659 branches of Scheduled Commercial Banks (SCBs) functioning in the country as on 31st March, 2012, out of which 34,671(37.02%) branches are in rural areas, 24,133(25.77%) are in semi-urban areas, 18,056(19.28%) in urban areas and 16,799(17.93%) are in metropolitan area.

 

Opening of Bank Branches

 

In view of the continued need for opening of branches in rural areas for increasing banking penetration and financial inclusion, the Government had issued detailed strategy and guidelines on financial inclusion in October 2011, advising banks to open branches in all habitations of 5,000 or more population in under-banked districts and 10,000 or more population in other districts. By end of June 2012, 1,237 branches (including Ultra Small Branches) have been opened in these areas.

 

Branch Expansion Plan of RRBs

 

With a view to make Financial Inclusion Plan effective and expand the outreach of banking services in unbanked/under banked rural areas, the RRBs were required to work out branch expansion plan for 2011-12 and 2012-13 with 10% increase over previous year. The RRBs had fixed targets of 1247 branches to be opened during 2011-12. RRBs opened 913 branches against this target. This was short of target but was a sharp increase compared to 521branches opened during 2010-11 and 299 in 2009-10. For 2012-13, a target of 1845 new branches has been fixed.

 

Policy For Opening RRB Branches Liberalised

 

Reserve Bank of India vide its circular dated 1st August, 2012 has liberalised the Branch Licensing policy of RRBs and has allowed RRBs to open branches in Tier 2 to, 6 centres (with population up to 99,999 as per Census 2001) without the need to take permission from the Reserve Bank in each case, subject to reporting, provided they fulfil the certain conditions. RRBs not fulfilling the conditions will have to continue to approach RBI / NABARD, as hitherto. Opening of branches by RRBs in Tier 1 centres (centres with population of 100,000 and above as per Census 2001) will also continue to require prior permission of Reserve Bank of India.

 

“Swabhimaan” – The Financial Inclusion Campaign  

 

In order to further extend the reach of banking to the rural hinterland, banks were advised to provide appropriate banking facilities to habitations having population in excess of 2000 by March, 2012 using various models and technologies including branchless banking through Business Correspondent Agents (BCAs). This Financial Inclusion Campaign named “Swabhimaan” was formally launched by the Government in February, 2011. Banking facilities to 74,194 such villages have been provided and about 3.16 crore financial accounts have been opened under this Campaign by end of March, 2012. Further, in terms of Finance Minister’s Budget Speech 2012-13 it has been decided to extend the “Swabhimaan” campaign to habitations with population of more than 1000 in North Eastern and hilly States and to other habitations which have crossed population of 2,000 as per census 2011. Accordingly about 45,000 such habitations have been identified to be covered under the extended “Swabhimaan” campaign.

 

Establishment of Ultra Small Branches

 

Considering the need for close supervision and mentoring of the business correspondent agents by the respective banks and to ensure that a range of banking services are available to the residents of such villages, it has been decided that Ultra Small Branches(USBs) be set up in all villages covered through BCAs. These USBs would comprise of a small area of 100-200 sq. feet where the officer designated by the bank would be available with a lap-top on pre-determined days. While the cash services would be offered by the BCAs, the bank officer would offer other services, undertake field verification and follow up the banking transactions. The periodicity and duration of visits can be progressively enhanced depending upon business potential in the area.

 

Banking Facilities in Unbanked Blocks

 

With a view to provide banking facilities in unbanked blocks, the Government in July, 2009 identified 129 unbanked blocks, of which 91 blocks were in North East States and 38 in other States. With the persistent efforts of the Government, the number of unbanked blocks were brought down to 71 as on 31.3.2011, and by March 2012, banking facilities have been provided in all the unbanked blocks either through Brick and Mortar Branches or Business Correspondents Model or mobile banking, etc.

 

 

 

 

 

Opening of One Bank Account Per Family

 

 

 

In order to ensure electronic transfer of cash subsidies directly into the accounts of the beneficiaries under the various Schemes of the Central Government and State Governments, it is important that the beneficiaries have an account in the service area bank. Accordingly, banks have been advised that the service area bank in rural areas and banks assigned the responsibility in specific wards in urban area ensure that every household has at least one bank account.

 

Advisory Committee

 

The Reserve Bank has constituted a high level Financial Inclusion Advisory Committee (FIAC) to spearhead the efforts toward greater financial conclusion.  The collective expertise and experience of the members of the committee is expected to explore issues, such as developing viable and sustainable banking services delivery models focusing on accessible and affordable financial services, developing products and processes for rural as well as urban consumers presently outside the banking network and suggest appropriate regulatory framework to ensure that financial inclusion and financial stability move in tandem.  The Committee is to be chaired by Dr. K.C. Chakrabarty, Deputy Governor, Reserve Bank of India and will comprise eleven members, from banking and finance sector, including Shri D.K. Mittal, Secretary Department of Financial services, Ministry of Finance, Government of India.

 

 

The Committee, if necessary, would call other market players like corporate business correspondents, technology vendors etc., as special invitees to the meetings.  Since the financial inclusion model selected in India is primarily bank-led, the Financial Inclusion Advisory Committee may also invite the chairperson managing directors of banks to each of its meetings to gather the perspective of banks.

 

 

There has been a significant, albeit slow, progress towards greater financial inclusion.  However, ensuring accessible and affordable financial services in all the 6 lakh villages in India is a herculean task and given the enormity of the task, a lot of ground still needs to be covered.  This calls for a partnership of all the stakeholders-the Reserve Bank, other sectoral regulators like the Securities and Exchange Board of India, the Insurance Regulatory and Development Authority, the Pension Fund Regulatory and Development Authority the National Bank for Agriculture and Rural Development; banks; governments; civil society and non-governmental organisations (NGOs) etc.

 

Public-Private Partnership Model to Boost Infrastructure Development

Public Private Partnerships (PPPs) is an effective tool for bringing private sector efficiencies in creation of economic and social infrastructure assets and for delivery of quality public services. The extent of private sector participation in creation of infrastructure, especially through PPP, has shown a promising increase in the recent years. As on January 2012, there were 881 PPP projects with Total Project Cost of Rs. 543,045 crore as compared to over 700 projects with TPC of Rs.371,239 crore by March 2011. These projects are at different stages of implementation i.e. under bidding, construction and operational stages. The broad sectors encouraged under the PPP framework are Highways, Railways, Ports, Airports, Power and Urban Infrastructure etc.

PPP Projects Approved by the PPPAC

The appraisal mechanism for the PPP projects has been streamlined to ensure speedy appraisal of projects, eliminate delays, adopt international best practices and have uniformity in appraisal mechanism and guidelines. The appraisal mechanism notified includes setting up of the Public Private Partnership Appraisal Committee (PPPAC) responsible for the appraisal of PPP projects in the Central Sector. Since its constitution in January 2006, PPPAC has granted approval to 223 projects, with a total project cost of Rs. 212,819.50 crore.

 

Standardized bidding and contractual documents have been  notified. These include model Request for Qualification (RFQ); Request for Proposal (RFP) and RFP for technical consultants; Model Concession Agreements (MCAs) for different sectors including Highways (both National and State Highways), Ports, Urban Transport (Metro), Power sectors and Manuals of Standards & Specifications have been developed and standardized. Further, Project Sponsors are encouraged toward projects through a transparent open competitive bidding process, which leads to greater transparency and consistency to the bid process and terms of contract.

 

 

Sectoral Distribution of PPP Projects

 The maximum number of PPP projects have been undertaken in the Road sector with 447 projects, constituting 51.6% of the total projects.  This was followed by Urban Development sector with 177 projects (22.4%), Energy sector with 77 projects (8.9%),  Ports with 62 projects (7.2%) and the Tourism sector with 55 projects (6.4%).  225 projects have been completed whereas 410 are under various stages of construction and 184 under bidding stage and the remaining in other various stages. State-wise, Karnataka had the maximum of 105 projects with total cost of Rs. 44,459.85 crore under PPP followed by Andhra Pradesh 98 projects with project cost of Rs. 67,696.31 crore, Madhya Pradesh 86 projects  (Rs. 14,928.7 crore), Maharashtra 76 projects (Rs. 45,916.34 crore), Gujarat 72 projects (Rs. 45,315.02 crore), Rajasthan 65 projects (Rs. 16,479.5 crores), Tamil Nadu 50 projects (Rs. 21,491.04 crores), Haryana 35 projects (Rs. 67,840.57 crore), West Bengal 34 projects (Rs. 6,849.8 crore) and Orissa (Rs. 22,652.88 crore), Kerala (Rs. 22,281.54 crores) and Punjab (Rs. 4,653.7 crores) with  32 projects each.

Viability Gap Funding Scheme

A unique characteristic of infrastructure projects is that the positive externalities caused by projects cannot be captured by project revenues alone. Hence, a project may be economically essential but commercially unviable. Such projects, which are marginally viable or unviable, can be made financially attractive through a grant. Viability Gap Funding (VGF) Scheme was devised for Financial Support to PPPs in Infrastructure. It provides VGF support to PPP projects up to 20 per cent of the Total Project Cost (TPC). So far, 131 projects have been granted approval with TPC of Rs. 67,237.47 crore and VGF support of Rs. 13,077.28 crore. An amount of Rs. 617.00 crore has been disbursed as Viability Gap Funding (VGF) under the Scheme for Financial Support to PPPs in Infrastructure.

The following sub-sectors have been included in the list of sectors eligible for VGF support under the Scheme for Financial Support to Public Private Partnerships (PPPs) in Infrastructure i.e. Viability Gap Funding Scheme.

• “Capital investment in the creation of modern storage capacity including cold chains and post-harvest storage” vide Department of Economic Affairs (DEA) Notification dated March 17, 2011.
• “Education, health and skill development, without annuity provision” vide DEA Notification dated May 4, 2011.
• “Infrastructure projects in Special Economic Zones and internal infrastructure in National Invest and Manufacturing Zones” vide Notification dated February 2, 2012.
• “Oil/Gas/Liquefied Natural Gas (LNG) storage facility (includes city gas distribution network); Oil and Gas pipelines (includes city gas distribution network); Irrigation (dams, channels, embankments etc.); Telecommunications (fixed Network) (includes optic fibre/wire/cable networks which provide broadband/internet); Telecommunication towers; Terminal markets; Common infrastructure in agriculture markets; and Soil testing laborites” vide Notification dated May 24, 2012.

Scope of Viability Gap Funding (VGF) scheme to support PPP projects in infrastructure has also been extended to attract private investment. The Delhi Mumbai Industrial Corridor (DMIC) is being developed on either side along the alignment of the Western Dedicated Rail Freight Corridor with Central assistance of Rs. 18,500 crore spread over a period of 5 years.

 

 

Projects Approved under India Infrastructure Project Development Fund (IIPDF)

The IIPDF assists projects that closely support the best practices in PPP project identification and preparation. The IIPDF supports up to 75% of the project development expenses. So far, 51 projects have been approved with an IIPDF assistance of Rs. 64.51 crore.

National PPP Capacity Building Programme

To intensify and deepen the capacity building of public functionaries at the State and municipal level and to integrate the capacity building programme on PPPs in the ongoing programmes at the State level, a comprehensive National PPP Capacity Building Programme has been developed by Department of Economic Affairs (DEA), which has been rolled out at the State level in collaboration with KfW German Development Bank. Under it, eight different programmes have been conducted and 155 Trainers of Trainers (ToTs) have been covered. 15 States and two Central Training Institutes viz. Indian Maritime University and Lal Bahadur Shastri National Academy of Administration have rolled out training programmes on PPPs and have trained over 700 public functionaries who deal with PPPs in their domain.

 

National PPP Policy and Rules

 

Pursuant to the announcement by the Finance Minister in the Budget Speech for the year 2011-12 to come up with a “Comprehensive Policy on PPPs, DEAhas prepared the draft ‘National Public Private Partnership Policy’ which is under finalization. Further, pursuant to the recommendations of the Committee on Public Procurement, and to ensure that the PPP projects are procured and implemented by following laid down process and observing principles of transparency, competitive bid process, affordability and value for money, the draft ‘PPP Rules’ have been prepared. These are undergoing extensive consultation process at the Central and State Governments level before their finalization.

Online Database

 An online database on PPP projects www.pppindiadatabase.com  and the website www.pppinindia.com in the country have been developed. The purpose of the website is to provide comprehensive and current information on the status and extent of PPP initiatives in India at the central, state and sectoral level. The potential use of PPPs in e-governance, health and education sectors remains largely untapped across India as a whole, though of late there have been some activities shaping in these sectors.

-PIB

Is Indian Economy Turning Around?

For a few months now, the Indian economy appears to be on a recovery path. At least there are enough indications to that. Foremost is the performance of various sectors of the economy.

 

Industrial output has been gathering some pace since August. It rose by 2.7 % in August this year compared to a fall of 0.2 % in July. But the hike has been less if we compare it with August last year when it stood at 3.4%. The manufacturing sector grew 2.9% in August but again less than 3.9 % growth it recorded in the same month last year. The mining sector recorded an increase by 2.9% in August when it actually declined by 5.5 % in the same month last year. The growth recorded by the manufacturing sector is significant since it accounts for about 76 % of the index of industrial production.

 

There have been some down turns as well. Electricity sector grew by just 1.9% as against 9.5 % in August last year. Another area of concern is the exports sector which as per the Commerce Ministry figures fell by 11% in September last. The decline was consecutive for the fifth month. As against this, imports rose by 5% in the same month. For the first six months of the current financial year fall in exports has been 6.8% compared to the corresponding period last year. Though non-oil imports fell by 4.5% in September, the value of oil imports rose by over 30% to $14.1 billion in September compared to the same month last year when it stood at $10.8 billion.

 

There are various reasons for this scenario. Global demand has been on the decline due to financial crises. It has led the World Trade Organisation to revise its estimate for global trade during 2012 from the earlier 3.5% to only 2.7. Domestically, high cost of credit is one important factor responsible for this situation.

 

But there are lots of silver linings. Of late the Foreign Direct Investment is showing an upward movement. Last financial year it reached $46.84 billion, compared to $34.84 billion in the previous year. In 2009-10 FDI accounted for $37.74 billion. More than the FDI, NRI inflows have been consistently rising for the last three years. The remittances stood at $ 53.64 billion in 2009-10 which reached $55. 62 billion in 2010-11 and 66.13 in 2011-12.  The remittances account for 4% of our GDP.

 

Overseas investors have poured in more than Rs.11, 000 crore in the stock market in October so far. Clearly this has been a fallout of the reforms initiatives taken by the government. As per SEBI data, Foreign Institutional Investors were gross buyers of shares worth Rs.40, 940 crore in the first 20 days of October. This takes the FII investment in the country’s equity market to Rs. 93,444 crore this year so far.

 

After Shri Chidambaram took over as the Finance Minister, the government has embarked on a vigorous reforms path. It has cleared bills to open up insurance and pension sectors to foreign investment. Foreign investment in pension sector is to be raised to 49%. In the   insurance sector, FDI will be raised to 49 % from the current 26%. Some other sectors including the aviation sector are also being liberalised.

 

The government is set to carry forward the reforms process in the days and months ahead. The idea is to make India an investment friendly country to boost growth. The reforms are important because the country would need about $1 trillion to modernise its infrastructure. Thus huge additional resource mobilisation is needed. This won’t be possible without streamlining the system and attracting much more foreign investment. Besides other measures further opening up of the insurance, pension and banking sectors would be needed. Reforms in energy sector, including restructuring of State Electricity Boards, is no less important. Other important areas include education and labour laws.

 

Of immediate concern is to narrow the fiscal deficit which has been rising to as much as 6 percent. The attempt is to limit it to this year’s budget estimate of 5.1 %.

 

All this is of utmost importance in the face of the warnings by the Finance Ministry commissioned Kelkar committee and the likelihood of S and P downgrading India’s rating if things don’t improve in next 24 months. But then 24 months is a long time and a lot is going to happen till then.

 

Investment rate in the first quarter of the current financial year has been at 32.8 % which is less by 1 percentage point compared to last year. Persistently high food inflation is also a big concern. How far will the current reforms spree allow us to reach the envisaged 8% growth is still an open question. The IMF has brought down it’s forecast for India to 4.9 % in the current year. But the planning Commission has put the growth target for the 12^thPlan period realistically at 8.2 % since the current year growth is likely to end up between 6 and 6.5 %.  The plan’s thrust area is Health, education and infrastructure which are considered to be the centre of our growth engine. The plan size too has been increased 135 percent compared to the 11^th plan. As the Prime Minister says, achieving 8% growth rate is not unattainable if we put in efforts to boost investment.

 

Soon after the current reforms process began a couple of months ago, sensex is flirting with 19000 mark and the slide of the rupee has been curbed. The currency market is thus in a better shape.

 

With plans afoot to phase out the current subsidy regime slowly and replace it by cash transfers through unique identification cards, things are set to improve. A roadmap for fiscal correction is in the pipe line despite, RBI’s cautious moves with regard to lowering of interest rates. There are thus credible indications that the animal spirits are on display in different sectors of the economy. This could signal better days ahead.  But as of now it is a long journey yet.

Auto Industry – India in Changing World Order

Change is the only universal constant.  This is also quite evident in the global automotive industry and can be seen with regards to the products, consumer choice, markets, technology and the competitive paradigms that govern this sector. The changing world order in the automotive space can be categorized around a few important broad themes – “emergence of new markets and opportunities”, “enhanced concerns over sustainable growth”, “the competitive paradigms of the future”.

 

 The recent past has witnessed the emergence and reinforcement of new automotive markets and centers of global automotive growth.  The automotive growth in the past few years has been driven largely by emerging markets; China andIndia in particular.  This not only due to the higher rate of economic growth seen in these economies but also coincides with their demographic profiles and lower existing vehicle penetration levels.  These very factors lead most analysts to predict the shift in automotive equilibrium to the east.  This opens up tremendous opportunities for Global OEMs and also for the local automotive industry in these countries.  The competitive environment in these new fast growing economies will therefore further intensify requiring the companies to remain on a path of continuous improvement.

 

While continued high rate of growth of the Indian automotive sector is great news for our economy, however, such high levels of growth will also throw up the challenges associated with fast depletion of traditional energy sources, rising energy costs, ever increasing oil import bill and the impact of mobility on the environment.  Studies by International Energy Agency (IEA) indicate that three fourth of the projected increase in oil demand (from 2006-2020) will be from the transportation sector and that China and India will account for forty five percent of this increased demand.  This coupled by the fact that India’s dependence on fossil fuel imports is likely to increase sharply in the future, makes it essential to take steps immediately for mitigating this trend.  While traditional measures such as increasing the fuel efficiency of vehicles, encouraging modal shift to public mass transportation, better infrastructure and urban planning, use of technology will certainly help improve the situation.  However, these interventions can at best only provide incremental improvements as the strong sectoral dependence on oil will still remain.  Further, with the large future demand for mobility these measures alone will not be enough.  As such transformational change is required to disrupt the present status quo by addressing the fundamental issue of reducing sectoral dependence on oil.

 

The concerns around environmental impact of transportation are encouraging Governments and Industry alike to make huge investments in future, cleaner technologies.  The future sustainable competitive advantage in the industry will therefore be around environmentally sustainable products, high end technologies and innovation.  Cost advantage can at best supplement competitive positioning.  Challenges of today cannot be met with yesterday’s tools.  Therefore, it is essential that Indian companies position their future strategies around these changing realities.

 

Faster adoption of full range of electric vehicles, including hybrids, is the right future direction for the country and the automotive industry for meeting the challenges of the future.  For this the Government had in 2011 approved the National Mission for Electric Mobility (NMEM) which has National energy security and growth of domestic manufacturing capabilities in full range of electric vehicle technologies as its two inter-related key end objectives.  National Electric Mobility Mission Plan (NEMMP) 2020 was approved on 29 August, 2012.

 

The NEMMP 2020, which is the mission document for NMEM, lays the vision, sets the targets and provides the roadmap for achieving significant penetration of efficient and environmentally friendly electric vehicle (including hybrids) technologies in India by 2020, thereby helping to achieve the NMEM objectives. NEMMP-2020 implementation will involve finanlistion and roll out of comprehensive array of interventions schemes and projects involving all stakeholders, both in and out of the Government.

 

The NEMMP 2020 targets have been arrived at through an in-depth primary data based study conducted jointly by the Government and the Industry which indicates that high latent demand for environmentally friendly electric vehicle technologies exists in the country.  It is believed that 6-7 million units of new vehicle sales of full range of electric vehicles, along with resultant liquid fuel savings of 2.2-2.5 million tonnes can be achieved in 2020.  However, strong upfront and continued support by Government would be essential to realize this demand especially through demand support measures that facilitate faster consumer acceptance of these expensive newer technologies.  In addition, Government will also need to facilitate automotive R&D and put in place charging infrastructure.  It is estimated that for this the Government will need to provide support to the tune of Rs. 13000 – Rs. 14000 crore over the next 5-6 years.  The industry will also need to match this with investments for developing the products and creating the manufacturing eco-system.  Projections also indicate that the savings from the decrease in liquid fossil fuel consumption as a result of shift to electric mobility alone more than will offset the support provided thereby making this a highly economically viable proposition.

 

As such, the NMEM promises to be amongst the most significant interventions of the Government for the automotive sector that has the potential to change the automotive paradigm of the future through lessening the dependence of the sector to single source of primary energy and paving the way for the ultimate objective of renewable energy generation powering the transportation sector of the future.  This intervention will also help encourage the Indian Industry to shift to newer, cleaner technologies so that it builds its future competitive advantage around environmentally sustainable products, high end technologies, innovation and knowledge.

 

One of the key factors that have been instrumental in shaping the successes seen in the Indian automotive industry so far has been the exemplary Industry – Government partnership, clarity and joint ownership of the future vision through Automotive Mission Plan (AMP) 2006-16.  The NEMMP 2020 also provides a shared vision and a common future roadmap for the National Mission for Electric Mobility for all the stakeholders, on the lines of the AMP 2006-16.  The strength of this collaborative working should be further leveraged by actively involving all Government Ministries, departments related to automotive sector, the industry and the automotive research agencies.

Infrastructure Debt Fund

India has emerged as one of the fastest growing economies during the past decade. However, infrastructure development has not kept pace with the growth in the rest of the economy. Realizing this, India initiated an ambitious reform programme in all infrastructure sectors. The Government has taken several initiatives to promote private sector participation in the infrastructure sector as a result of which the share of GDP going into infrastructure investment has increased from 5% in 2007 to 7% during 2009-10 and has increased to more than 8% in 2011-12. For the XII Five Year Plan (2012-2017), the target of infrastructure investment has again been doubled to US $ 1 trillion 50% of which is envisaged from the private sector.

The Ministry of Finance has taken several initiatives to promote the flow of long term funds in infrastructure sector (both domestic and off-shore funds) like setting up of the Infrastructure Debt Fund (IDF), raising the FII limits and liberalizing the ECB regime in order to facilitate off shore fund flows to infrastructure.

The Finance Minister in his Budget speech for 2011-12 had announced setting up of Infrastructure Debt Funds (IDFs) to accelerate and enhance the flow of long term debt in infrastructure projects. To attract off-shore funds into IDFs, it was decided to reduce withholding tax on interest payments on the borrowings by the IDFs from 20% to 5%.

Wide-scale consultations with stakeholders were undertaken . Ministry of Finance issued the guidelines for the IDFs that inter alia allowed IDFs to be set up as NBFCs or as mutual funds in June, 2011. Regulations governing IDFs structured as mutual funds was issued by SEBI in August, 2011 and regulations governing IDFs structured as NBFCs was issued by RBI in November, 2011.

The IDFs through innovative means of credit enhancement is expected to provide long-term low-cost debt for infrastructure projects by tapping into source of long tenure savings like Insurance and Pension Funds which have hitherto played a comparatively limited role in financing infrastructure in India. Further, the IDFs set up as NBFC shall invest only in PPP projects which have successfully completed one year of commercial operation and are a party to a Tripartite Agreement with the concessionaire and the Government authority sanctioning the project. Banks and NBFCs would be eligible to sponsor IDFs subject to existing prudential limits. The restricted portfolio of investment of the IDF, tripartite agreement and first loss of the sponsors would enable the IDFs to issue bonds with at least AA rating.  Thus the IDFs would present an attractive option for such entities who wish to invest for long term in comparatively secure instruments. The off-shore investors that these IDFs are targeted to tap are Pension Funds, Insurance Companies, Sovereign Wealth Funds, Endowment Funds etc.

So far 3 IDFs have already been launched. The first IDF structured as a NBFC was launched on March 5, 2012, with ICICI Bank, Bank of Baroda (BoB), Citicorp Finance India Limited (Citi) and Life Insurance Corporation of India (LIC) entering into a Memorandum of Understanding (MoU). The initial size of this IDF is expected to be Rs. 8,000 crore.

IDBI along with a consortium of public sector banks has also launched an IDF structured as a NBFC with an initial equity of Rs. 1000 crore which enables it to raise funds upto Rs. 26,000 crore.

IDFC has launched an IDF structured as a mutual fund.   Three more funds are awaiting regulatory approval.

source-PIB

National Strategy for Financial Education

The first decade of the 21st century has seen a universal recognition for spreading financial literacy among people.   Most of the countries  are adopting a unified and coordinated national strategy for financial education.  Given the fact that India is having large population, a fast growing economy with national focus on inclusive growth and an urgent need to develop a vibrant and stable financial system, it has become all  the more necessary to quickly formulate and  implement a national strategy.

Also since a large number of stakeholders including the central and state governments, financial regulators, financial  institutions, civil society, educationists and others are involved in spreading financial literacy; a broad national strategy is a prerequisite to ensure that they  work in tandem according to the strategy and not at cross purposes.

The National Strategy, thus, seeks to create a financially aware and empowered India. It aims at undertaking a massive Financial Education campaign to help people manage money more effectively to achieve financial well being by accessing appropriate financial products and services through regulated entities

What is Financial Literacy?

Organization for Economic Cooperation & Development  defines Financial Literacy as  a combination of financial awareness, knowledge, skills, attitude and behaviour necessary  to make sound financial decisions and ultimately achieve individual financial well being. People achieve financial literacy through a process of financial education.

Financial Inclusion : A Top Policy Priority of Government

Government of India has recognized the importance of spreading financial literacy to intensify efforts to channelize domestic savings to investments. However, increasing range and complexity of products has  made it very difficult for an ordinary person to take an informed decision. Financial literacy develops confidence, knowledge and skills to manage financial products and services enabling them to have more control of their present and future circumstances. Financial literacy will also help in protecting society and individuals against exploitative financial schemes and  exorbitant interest rate charged by moneylenders.

It is expected that financial education can lead to multiplier effects in the economy. A well educated household would resort to regular savings, which in turn would lead to investment in right channels and income generation. Thus, the financial well  being of individuals, will in turn increase the welfare of the society.

International Experience and the Lessons for India

Globally, Countries like Czech Republic, Netherlands, New Zealand, Spain, and UK have already implemented National Strategy for Financial Education, while many other countries are in the process of formulation and implementation.

In India, we need a tiered approach under National  strategy in view of our diversity.  The draft National Strategy has been prepared with the objectives  of i) Creating awareness and educating consumers on access to financial services, various types of products and their features, ii)changing attitudes to translate knowledge into behavior and  iii) Making consumers understand their rights and responsibilities as clients of  financial services.

Given the fast pace of changes in the financial  world, it has been envisaged to have a five year timeframe for implementing the strategy, using Strategic Action Plans.

Sample Survey to Assess the State of Financial Literacy and Inclusion

The Strategy provides for conduct of a nation wide sample survey for assessing the state of financial inclusion and financial literacy. The survey, inter-alia will assess the level of financial inclusion, level of financial awareness about various financial products, level of financial competency to make informed decisions, people’s attitude towards money as well as their attitude towards risk taking.

Based on the assessment of the survey, various financial regulators would develop their financial education modules to address the needs of their clients. It would then be delivered through school curriculum, social marketing, advertising through radio, television, print and outdoor and by setting up dedicated financial education websites. There is also a proposal to rope in Self-Help Groups, Micro-Finance Institutions, investors and consumer associations etc.

Financial Education in School Curriculum

Governments have recognized that financial education should start at school and that people should be educated about financial matters as early as possible in their lives. Organization for Economic Cooperation & Development has developed Guidelines to assist policymakers and interested stakeholders in designing, introducing and developing efficient financial  education programmes in schools.

However, it needs to clearly be specified that the financial education would not be another subject  taught in the schools. What is needed is its  appropriate integration in the school curriculum. For example, compound interest is taught in Arithmetic as an abstract concept of, A lending to B at some interest rate compounded annually. This can be turned into an opportunity of financial education by weaving into a problem of a company that borrows from a bank or a bank customer who opens a Cumulative Deposit Account instead of a simple Fixed Deposit Account. Similarly, moral science courses could have content which are based on day to day financial transactions

CBSE has agreed, in principle, to introduce it in an integral manner in school education at the post primary level and to facilitate the process, a committee of experts has been constituted.

Synergizing the Efforts of Regulators in Spreading Financial Literacy.

In India, various financial regulators including Reserve Bank of India, Securities Exchange Board of India, Insurance Regulatory & Development Authority etc have already embarked upon massive financial literacy programmes adopting multi-pronged approach.

Reserve Bank of India has undertaken a project titled ‘Project Financial Literacy’ to disseminate information regarding the central bank and general banking concepts to various target groups, including school and college students, women, rural and urban poor, defense personnel and senior citizens.

Securities Exchange Board of India has empanelled Resource Persons throughout India who organize workshops to target segments on various aspects viz. savings, investment, financial planning, banking, insurance, retirement planning etc. More than 3500 workshops have been already conducted in various states covering nearly 3 lakh participants.

Insurance Regulatory & Development Authority has been disseminating simple messages about the rights and duties of policyholders, channels available for dispute redressal etc through radio, TV and print media in English, Hindi and 11 other Indian languages.

The Pension Fund Regulatory and Development Authority(PFRDA) has been engaged in spreading social security messages to the public.  PFRDA has developed FAQ on pension related topics on its website, and has been associated with various non government organizations in India in taking the pension services to the disadvantaged community.

Similarly, commercial banks, Stock Exchanges, Broking Houses and Mutual Funds have the initiatives in the field of financial education that spawns conducting of seminars, issuance of do’s and don’ts, and newspaper campaigns.

It will be necessary to collate and classify the vast amount of material developed by these institutions, that can serve as the knowledge base for financial education in India.

Institutional arrangements envisage creation of the National Institute of Financial Education(NIFE), with representatives of various regulators as members. The main role of NIFE shall be to create financial education material for respective financial sectors. NIFE shall also create and maintain a website exclusively for financial education.

The entire policy is sought to be implemented through existing institutional mechanism.  The Technical Group of Sub-Committee of Financial Stability & Development Council on Financial Inclusion and  Financial Literacy shall be made responsible for periodic monitoring and implementation of the strategy.
-PIB

Financial Inclusion

In his Budget Speech 2010-11, the Finance Minister had directed all banks to provide appropriate banking facilities to habitations having population in excess of 2000 by March, 2012 using various models and technologies including branchless banking through Business Correspondents (BCs). The Financial Inclusion Campaign has been named ‘Swabhimaan’. The Banks formulated their road maps for Financial Inclusion through the mechanism of the State Level Bankers Committee (SLBCs) and had identified approximately 74,000 habitations across the country having a population of over 2000 for providing banking facilities. These habitations were allocated to Public Sector Banks, Regional Rural Banks, Private Sector Banks and Cooperative Banks for extending banking services by March, 2012. As per information received from SLBC Convener Banks, out of 74,398 villages identified under the campaign, 74,194 villages have been covered and 3.16 crore Financial Inclusion bank accounts have been opened by end of March, 2012.

Further, the banks have been advised to set up Ultra Small Branches in villages covered under Business Correspondent model where the officer designated by the bank would be available with a lap top on predetermined day and time in a week. While the cash services would be offered by the Business Correspondent Agent, the bank officer would offer other services to be offered by the bank, undertake field verification and follow up the banking transactions.

The Government issued Strategy and Guidelines on Financial Inclusion in October, 2011, vide which it was, inter-alia, advised to banks to open bank branches by September 2012 in all habitations of 5,000 or more population in under banked districts and 10,000 or more population in other districts. As per reports received from the Convener Banks of State Level Bankers Committees (SLBCs), of the 3,905 bank branches to be opened, 739 bank branches have been opened by end of April, 2012.

Regional Rural Banks (RRBs) have also been advised to work out branch expansion plan such that there is an increase of 10% in bank branches in 2011-12 and also in 2012-13 over the respective previous years. As per provisional data, RRBs opened 914 branches during 2011-12.

Of the 71 unbanked blocks in the country, as on 31 March, 2011, with the persistent efforts of the Government, banking facilities have been provided in all unbanked blocks by March 31, 2012. As a next step it has been advised to cover all those blocks with Business Correspondents and Ultra Small Branch which have so far been covered by mobile banking only.
-PIB

IT-BPO, A Key Sector of Indian Economy

The year 2011-12 was marked by growing global uncertainties. Global recovery has stalled, growth prospects have dimmed and downside risks have escalated. By contrast, the Indian IT-BPO Industry (including hardware) continued to exhibit resilience. It weathered uncertainties in global business environment and reached a significant milestone in the year 2011-12 by aggregating revenue of US $ 101 billion, a growth of about 14.7 per cent over the previous year. Thus, the year 2011-12 is a landmark year for the IT-BPO Industry.

The Indian software and services export including BPO exports is estimated at US $ 68.7 billion in 2011-12, an increase of 16.4 per cent. The IT services exports is estimated to be US $ 39.8 billion, showing a growth of 18.8 per cent. BPO exports are estimated to grow to US $ 15.9 billion in 2011-12, a year-on-year growth of about 12 per cent. IT services contributed 58 per cent of total IT-BPO exports in 2011-12, followed by BPO at 23 per cent and Software products/engineering services at 19 per cent.

USA continues to drive IT-BPO exports growth. Growth is being driven by higher demand for IT services and support. Continental Europe and UK, the second largest markets for Indian IT-BPO exports are seeing their share decline in the last three years. Indian service providers have been aggressively growing business in the Asia-Pacific (APAC) market. Aimed at reducing their geographic dependency and spread currency risk, APAC is growing fastest at nearly 18 per cent; its share in total IT-BPO exports is expected to increase to nearly 8 per cent.

The IT-BPO market is being driven by demand across all key consumer segments. Notwithstanding the growth witnessed in the IT-BPO domestic segment, it accounts for a little over 21 per cent of overall industry revenues. India continued its dominant position as the leading sourcing market as compared to other emerging economies. Its share is global sourcing stood at 58 per cent in 2011.

The IT-BPO sector has become one of the key sectors for the Indian economy because of its economic impact. The sector is responsible for creating significant employment opportunities in the economy. Direct employment within the IT-BPO sector reached 2.77 million, with over 2,30,000 jobs being added in 2011-12.

The spectacular growth performance in the IT-BPO industry in the last decade has helped the industry contribute substantially to India’s GDP. In 2011-12, this sector’s contribution to GDP is estimated to be 7.5 per cent. The IT-BPO industry has played a key role in putting India on the world-map. This segment has enormous potential to grow in the year to come. By 2012-13, this would have developed to a potential to touch US $ 100 billion in revenues as compared to US $ 87.7 billion in 2011-12, a growth of about 14 per cent.
-PIB

Grow, Transform and Sustain – The Mantra for Indian PSUs

India’s central public sector enterprises have undergone a cycle of transformation since the introduction of liberal economic policies a couple of decades ago.  Many believed that the public sector enterprises will simply wither away because of competition and their inefficiency; or they will be subsumed by the private sector because of the divestment programme. However, as the experience has shown, the Central Public Sector Enterprises (CPSEs) continue to have a critical role to play in many businesses, especially in the strategic sectors.  Many CPSEs have proved their critics wrong by becoming extremely efficient and competitive.

In the strategic sectors of our economy, CPSEs are needed to ensure that the national and the social priorities are guaranteed – in terms of assured supply and affordable prices.  Infrastructure, energy, healthcare, defence are such areas where it cannot be left entirely to the markets.  In fact, the CPSEs are needed to create, balance and sustain the market in these sectors.  Even in the business and consumer services sector, the CPSEs are needed to ensure adequate and fair competition and stabilize the market.

However, at the same time, the CPSEs cannot take such role for granted for future also.  They cannot be allowed to become complacent.  Efficient and effective management is essential to ensure that the CPSEs continue to fulfill their obligations to the country.  Indian CPSEs need to be competitive at home against the global competitors and become multinationals themselves.  By striving to become multinationals, Indian CPSEs will be following the best management and operational benchmarks in the world, making it easier for them to be competitive at home and also in global arena.

Most of CPSEs are profitable despite operating with the constraints of public service priorities.  Of the 248 CPSEs, 220 are currently operational and of those 158 are profitable.  That is an impressive 70 per cent plus mark for a group that also includes a large number of legacy companies taken over as sick private sector units.  The operating efficiency of the CPSEs is also quite good in the prevailing dullness in the economy.  Last year, i.e. 2010-11, CPSEs delivered dividend of Rs. 35,681 crore. Importantly, there has been significant improvement in the revenue and profitability levels of the CPSEs.  So, the CPSEs are making a substantial contribution to the country’s economic growth.  Even on the stockmarkets, the listed 45 odd CPSEs make nearly 20 per cent of the value of all listed Indian stocks.  Clearly, Indian public sector has the size and the efficiency to entertain ambitions of going global.  The CPSEs can also build and be parts of global supply chains.  In doing so, they can achieve an edge in technological and managerial innovation and help Indian economy grow at a faster rate.

Already, many Indian CPSEs are global giants.  Most of the petroleum PSEs are now multinationals and helping secure energy fuels for now and the future.  In the heavy engineering, infrastructure and project services too, Indian CPSEs have significant presence overseas.  Now, the power sector CPSEs are set to spread out in the world.  Given their experience of working in resource constrained and politically obstructive environment, Indian CPSEs are well equipped to do business in the other developing parts of the world, particularly Southeast Asia and Africa.

The Government has taken steps to help the Central Public Sector Enterprises (CPSEs) to improve their operations and competitiveness at home.  The Maharatana and Navaratna CPSEs have been allowed to invest in assets overseas and undertake joint ventures abroad.

The CPSEs are continuing to invest even in the prevailing slowdown.  Much of this money is being invested in the critical sectors such as energy and infrastructure.  This investment will have a multiplier effect on the economy.  Also, a significant part of the fresh investment this year is going into capacity building overseas.  This investment has been made possible by the CPSEs strong performance during the past few years, which have yielded adequate cash surpluses for investment.  The government has also allowed the CPSEs to use their cash surpluses to buy others’ stocks in order to aggregate their complementary strengths.

Steps have also been taken to improve efficiency of these investments.  Majority of the CPSEs have been signing MOUs with the Government which cover not only the financial results but also the outcomes in areas such as corporate governance, research and development and corporate social responsibility.  A vast majority of the MOU signing CPSEs have been meeting or exceeding their targets.  A comprehensive review of the MOU system is underway and revamped MOU system would be put in place shortly.

The Government has also been taking steps through, the Board for Reconstruction of Public Sector Enterprises (BRPSE) and Government approved revival packages to ensure that the performance of loss-making CPSEs could be improved.  We are also taking new initiatives such as enhancement of the age of superannuation from 58 to 60 years and grant of 1997 pay scales to the employees of sick and loss-making CPSEs as these steps can give them the incentive to make extra effort to get out of the red.

Even as the CPSEs move towards becoming globally competitive and going global, they still have to play their role as the catalysts of development and opportunity.  The CPSEs will continue to go to hinterlands to seed industries there and they will continue to invest in creating employment and economic opportunities for the deprived.  The government would like the CPSEs to integrateIndia’s rural economy into the mainstream.  However, it is upto the CPSEs themselves to continue to prove their relevance and they will survive only if the public sees them performing a useful function and only if they can compete with the best in the world at home and overseas.

Autonomy and more freedom are crucial for achieving this objective.  In fact freedom is not complete if it does not include freedom to commit mistakes and take risks.  Keeping this in view, it is the Government’s endeavour to enhance freedom and autonomy to CPSE management and an exercise in this direction has already begun.

source:- PIB