Poverty in India

F

Percent of population living below the poverty line, over the final

quarter of the 20th century.

Poverty is widespread in India, with the nation estimated to have a

third of the world's poor. According to a 2005 World Bank estimate,

41.6% of the total Indian population falls below the international

poverty line of US$ 1.25 a day (PPP, in nominal terms 21.6 a day in

urban areas and 14.3 in rural areas).[1] According to 2010 data from

the United Nations Development Programme, an estimated 37.2% of

Indians live below the country's national poverty line.[2] A recent

report by the Oxford Poverty and Human Development Initiative

(OPHI) states that 8 Indian states have more poor than 26 poorest

African nations combined which totals to more than 410 million poor

in the poorest African countries.[3][4] According to a new UN Millennium

Development Goals Report, as many as 320 million people in India

and China are expected to come out of extreme poverty in the next

four years, while India's poverty rate is projected to drop to 22% in

2015.[5] The report also indicates that in Southern Asia, however, only

India, where the poverty rate is projected to fall from 51% in 1990 to

about 22% in 2015, is on track to cut poverty in half by the 2015

target date.[5]

The latest UNICEF data shows that one in three malnourished children

worldwide are found In India 42 percent of children under five were

underweight. It also showed that A total of 58 percent of children

under five surveyed were stunted. Rohini Mukherjee Of the Naadi

foundation one of the Ngos which published the report stated India is

"doing worse than sub-Saharan Africa,".[6] The 2011 Global Hunger

Index (GHI) Report ranked India 45th, amongst leading countries with

hunger situation. It also places India amongst the three countries

where the GHI between 1996 and 2011 went up from 22.9 to 23.7,

while 78 out of the 81 developing countries studied, including

Pakistan, Nepal, Bangladesh, Vietnam, Kenya, Nigeria, Myanmar,

Uganda, Zimbabwe and Malawi, succeeded in improving hunger

condition.[7]

Percentage population living on less than 1 dollar a day from 2007-2008

Contents [hide] 

1 Poverty estimates

2 Impact of poverty

3 Causes

o 3.1 Caste system

o 3.2 India's economic policies

o 3.3 Liberalization policies and their effects

4 Reduction in poverty

5 Efforts to alleviate poverty

o 5.1 Outlook for poverty alleviation

o 5.2 Controversy over extent of poverty

reduction

o 5.3 Persistence of malnutrition among

children

6 See also

7 References

8 Further reading

9 External links

[edit] Poverty estimates

There has been no uniform measure of poverty in India.[8][9] The

Planning Commission of India has accepted the Tendulkar Committee

report which says that 37% of people in India live below the poverty

line(BPL).[10]

The Arjun Sengupta Report (from National Commission for Enterprises

in the Unorganised Sector), based on data between the period 1993-

94 and 2004-05, states that 77% of Indians live on less than 20 a day

(about $0.50 per day).[11] The N.C. Saxena Committee report states,

on account of calorific intake apart from nominal income, that 50% of

Indians live below the poverty line.[12]

A study by the Oxford Poverty and Human Development Initiative

using a Multi-dimensional Poverty Index (MPI) found that there were

650 million people (53.7% of population) living in poverty in India, of

which 340 million people (28.6% of the population) were living in

severe poverty, and that a further 198 million people (16.4% of the

population) were vulnerable to poverty.[13] 421 million of the poor are

concentrated in eight North Indian and East Indian states of Bihar,

Chattisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan, Uttar

Pradesh and West Bengal. This number is higher than the 410 million

poor living in the 26 poorest African nations.[14] The states are listed

below in increasing order of poverty based on the Multi-dimensional

Poverty Index.[15]

[show]MP

I rank

State

s

Populati

on (in

millions)

2007

MP

I

Proporti

on of

poor

Averag

e

intensi

ty

Contributi

on to

overall

poverty

Numbe

r of

MPI

poor

(in

million

s)

Estimates by NCAER (National Council of Applied Economic Research)

show that 48% of the Indian households earn more than 90,000

(US$1,980) annually (or more than US$ 3 PPP per person). According

to NCAER, in 2009, of the 222 million households in India, the

absolutely poor households (annual incomes below 45,000)

accounted for only 15.6% of them or about 35 million (about 200

million Indians). Another 80 million households are in income levels of

45,000– 90,000 per year. These numbers also are more or less in line

with the latest World Bank estimates of the “below-the-poverty-line”

households that may total about 100 million (or about 456 million

individuals)[16]

[edit] Impact of poverty

Since the 1950s, the Indian government and non-governmental

organizations have initiated several programs to alleviate poverty,

including subsidizing food and other necessities, increased access to

loans, improving agricultural techniques and price supports, and

promoting education and family planning. These measures have

helped eliminate famines, cut absolute poverty levels by more than

half, and reduced illiteracy and malnutrition.[17]

Presence of a massive parallel economy in the form of black (hidden)

money stashed in overseas tax havens and underutilisation of foreign

aid have also contributed to the slow pace of poverty alleviation in

India.[18][19][20]

Although the Indian economy has grown steadily over the last two

decades, its growth has been uneven when comparing different social

groups, economic groups, geographic regions, and rural and urban

areas.[17][21] Between 1999 and 2008, the annualized growth rates for

Gujarat (8.8%), Haryana (8.7%), or Delhi (7.4%) were much higher

than for Bihar (5.1%), Uttar Pradesh (4.4%), or Madhya Pradesh

(3.5%).[22] Poverty rates in rural Orissa (43%) and rural Bihar (41%)

are among the world's most extreme.[23]

Despite significant economic progress, one quarter of the nation's

population earns less than the government-specified poverty

threshold of 32 rupees per day (approximately US$ 0.6)[24].

According to a recently released World Bank report, India is on track

to meet its poverty reduction goals. However by 2015, an estimated

53 million people will still live in extreme poverty and 23.6% of the

population will still live under US$1.25 per day. This number is

expected to reduce to 20.3% or 268 million people by 2020.[25]

However, at the same time, the effects of the worldwide recession in

2009 have plunged 100 million more Indians into poverty than there

were in 2004, increasing the effective poverty rate from 27.5% to

37.2%.[26]

As per the 2001 census, 35.5% of Indian households availed of

banking services, 35.1% owned a radio or transistor, 31.6% a

television, 9.1% a phone, 43.7% a bicycle, 11.7% a scooter,

motorcycle or a moped, and 2.5% a car, jeep or van; 34.5% of the

households had none of these assets.[27] According to Department of

Telecommunications of India the phone density has reached 33.23%

by December 2008 and has an annual growth of 40%.[28] This tallies

with the fact that a family of four with an annual income of 1.37 lakh

rupees could afford some of these luxury items.

[edit] Causes

Capitalism and global weath inequality are the main cause of poverty

in India.[citation needed] The inseperability of corruption and the economy of

third world countries is ignored by those who single corruption out as

the main problem in India. There is also a high population growth

rate, although demographers generally agree that this is a symptom

rather than cause of poverty. While services and industry have grown

at double digit figures, agriculture growth rate has dropped from 4.8%

to 2%. About sixty percent of the population depends on agriculture

whereas the contribution of agriculture to the GDP is about eighteen

percent.[29] The surplus of labour in agriculture has caused many

people to not have jobs. Farmers are a large vote bank and use their

votes to resist reallocation of land for higher-income industrial

projects.

[edit] Caste system

Further information: Caste system in India

According to S. M. Michael, Dalits constitute the bulk of poor and

unemployed.[30] According to William A. Haviland, casteism is

widespread in rural areas, and continues to segregate Dalits.[31]

Others, however, have noted the steady rise and empowerment of the

Dalits through social reforms and the implementation of reservations

in employment and benefits.[32][33]

Caste explanations of poverty fail to account for the urban/rural

divide. Using the UN definition of poverty, 65% of rural forward castes

are below the poverty line.[citation needed]

[edit] India's economic policies

A rural worker drying cow dung in Bihar.

In 1947, the average annual income in India was US$439, compared

with US$619 for China, US$770 for South Korea, and US$936 for

Taiwan. By 1999, the numbers were US$1,818; US$3,259; US$13,317;

and US$15,720, respectively.[34] (numbers are in 1990 international

Maddison dollars) In other words, the average income in India was not

much different from South Korea in 1947, but South Korea became a

developed country by 2000s. At the same time, India was left as one

of the world's poorer countries.

License Raj refers to the elaborate licenses, regulations and the

accompanying red tape that were required to set up and run business

in India between 1947 and 1990.[35] The License Raj was a result of

India's decision to have a planned economy, where all aspects of the

economy are controlled by the state and licenses were given to a

select few. Corruption flourished under this system.[36]

The labyrinthine bureaucracy often led to absurd restrictions - up to

80 agencies had to be satisfied before a firm could be granted a

licence to produce and the state would decide what was produced,

how much, at what price and what sources of capital were used.

—BBC[37]

India had started out in the 1950s with:[38] high growth rates,

openness to trade and investment, a promotional state, social

expenditure awareness and macro stability but ended the 1980s with:

[38] low growth rates, closure to trade and investment, a license-

obsessed, restrictive state (License Raj), inability to sustain social

expenditures and macro instability, indeed crisis.

Poverty has decreased significantly since reforms were started in the

1980s.[39][40]

[edit] Liberalization policies and their effects

Other points of view hold that the economic reforms[clarification needed]

initiated in the early 1990s are responsible for the collapse of rural

economies and the agrarian crisis currently underway. As journalist

and the Rural Affairs editor for The Hindu, P Sainath describes in his

reports on the rural economy in India, the level of inequality has risen

to extraordinary levels, when at the same time, hunger in India has

reached its highest level in decades. He also points out that rural

economies across India have collapsed, or on the verge of collapse

due to the neo-liberal policies of the government of India since the

1990s.[41] The human cost of the "liberalisation" has been very high.[clarification needed] The huge wave of farm suicides in Indian rural population

from 1997 to 2007 totaled close to 200,000, according to official

statistics.[42] That number remains disputed, with some saying the

true number is much higher. Commentators have faulted the policies

pursued by the government which, according to Sainath, resulted in a

very high portion of rural households getting into the debt cycle,

resulting in a very high number of farm suicides. As professor Utsa

Patnaik, India’s top economist on agriculture, has pointed out, the

average poor family in 2007 has about 100 kg less food per year than

it did in 1997.[42]

Government policies encouraging farmers to switch to cash crops, in

place of traditional food crops, has resulted in an extraordinary

increase in farm input costs, while market forces determined the price

of the cash crop.[43] Sainath points out that a disproportionately large

number of affected farm suicides have occurred with cash crops,

because with food crops such as rice, even if the price falls, there is

food left to survive on. He also points out that inequality has reached

one of the highest rates India has ever seen. In a report by Chetan

Ahya, Executive Director at Morgan Stanley, it is pointed out that

there has been a wealth increase of close to US$1 Trillion in the time

frame of 2003-2007 in the Indian stock market, while only 4-7% of the

Indian population hold any equity.[44] During the time when Public

investment in agriculture shrank to 2% of the GDP, the nation

suffered the worst agrarian crisis in decades, the same time as India

became the nation of second highest number of dollar billionaires.[45]

Sainath argues that

Farm incomes have collapsed. Hunger has grown very fast. Public

investment in agriculture shrank to nothing a long time ago.

Employment has collapsed. Non-farm employment has stagnated.

(Only the National Rural Employment Guarantee Act has brought

some limited relief in recent times.) Millions move towards towns and

cities where, too, there are few jobs to be found.

In one estimate, over 85 per cent of rural households are either

landless, sub-marginal, marginal or small farmers. Nothing has

happened in 15 years that has changed that situation for the better.

Much has happened to make it a lot worse.

Those who have taken their lives were deep in debt – peasant

households in debt doubled in the first decade of the neoliberal

“economic reforms,” from 26 per cent of farm households to 48.6 per

cent. Meanwhile, all along, India kept reducing investment in

agriculture (standard neoliberal procedure). Life was being made

more and more impossible for small farmers.

As of 2006, the government spends less than 0.2% of GDP on

agriculture and less than 3% of GDP on education.[46] However, some

government schemes such as the mid-day meal scheme, and the

NREGA have been partially successful in providing a lifeline for the

rural economy and curbing the further rise of poverty.

[edit] Reduction in poverty

Despite all the causes, India currently adds 40 million people to its

middle class every year.[citation needed] Analysts such as the founder of

"Forecasting International", Marvin J. Cetron writes that an estimated

300 million Indians now belong to the middle class; one-third of them

have emerged from poverty in the last ten years. At the current rate

of growth, a majority of Indians will be middle-class by 2025.

Despite government initiatives, corporate social responsibility (CSR)

remains low on the agenda of corporate sector. Only 10 percent of

funding comes from individuals and corporates, and "a large part of

CSR initiatives are artfully masqueraded and make it back to the

balancesheet". The widening income gap between the rich and the

poor over the years, has raised fears of a social backlash.[47]

[edit] Efforts to alleviate poverty

Since the early 1950s, govt has initiated, sustained, and refined

various planning schemes to help the poor attain self sufficiency in

food production. Probably the most important initiative has been the

supply of basic commodities, particularly food at controlled prices,

available throughout the country as poor spend about 80 percent of

their income on food. The schemes have however not been very

successful because the rate of poverty reduction lags behind the

rapid population growth rate.[48]

[edit] Outlook for poverty alleviation

Eradication of poverty in India is generally only considered to be a

long-term goal. Poverty alleviation is expected to make better

progress in the next 50 years than in the past, as a trickle-down effect

of the growing middle class. Increasing stress on education,

reservation of seats in government jobs and the increasing

empowerment of women and the economically weaker sections of

society, are also expected to contribute to the alleviation of poverty.

It is incorrect to say that all poverty reduction programmes have

failed. The growth of the middle class (which was virtually non-

existent when India became a free nation in August 1947) indicates

that economic prosperity has indeed been very impressive in India,

but the distribution of wealth is not at all even.

After the liberalization process and moving away from the socialist

model, India is adding 60 to 70 million people to its middle class

every year. Analysts such as the founder of "Forecasting

International", Marvin J. Cetron writes that an estimated 390 million

Indians now belong to the middle class; one-third of them have

emerged from poverty in the last ten years. At the current rate of

growth, a majority of Indians will be middle-class by 2025. Literacy

rates have risen from 52 percent to 65 percent during the initial

decade of liberalization (1991–2001).[citation needed]

[edit] Controversy over extent of poverty reduction

The definition of poverty in India has been called into question by the

UN World Food Programme. In its report on global hunger index, it

questioned the government of India's definition of poverty saying:

The fact that calorie deprivation is increasing during a period when

the proportion of rural population below the poverty line is said to be

declining rapidly, highlights the increasing disconnect between official

poverty estimates and calorie deprivation.[49]

While total overall poverty in India has declined, the extent of poverty

reduction is often debated. While there is a consensus that there has

not been increase in poverty between 1993–94 and 2004–05, the

picture is not so clear if one considers other non-pecuniary

dimensions (such as health, education, crime and access to

infrastructure). With the rapid economic growth that India is

experiencing, it is likely that a significant fraction of the rural

population will continue to migrate toward cities, making the issue of

urban poverty more significant in the long run.[50]

Some, like journalist P Sainath, hold the view that while absolute

poverty may not have increased, India remains at an abysmal rank in

the UN Human Development Index. India is positioned at 132ond place

in the 2007-08 UN HDI index. It is the lowest rank for the country in

over 10 years. In 1992, India was at 122ond place in the same index. It

can even be argued that the situation has become worse on critical

indicators of overall well-being such as the number of people who are

undernourished (India has the highest number of malnourished

people, at 230 million, and is 94th of 119 in the world hunger index),

and the number of malnourished children (43% of India's children

under 5 are underweight (BMI<18.5), the highest in the world) as of

2008.[49]

Economist Pravin Visaria has defended the validity of many of the

statistics that demonstrated the reduction in overall poverty in India,

as well as the declaration made by India's former Finance Minister

Yashwant Sinha that poverty in India has reduced significantly. He

insisted that the 1999-2000 survey was well designed and supervised

and felt that just because they did not appear to fit preconceived

notions about poverty in India, they should not be dismissed outright.[51] Nicholas Stern, vice president of the World Bank, has published

defenses of the poverty reduction statistics. He argues that increasing

globalization and investment opportunities have contributed

significantly to the reduction of poverty in the country. India, together

with China, have shown the clearest trends of globalization with the

accelerated rise in per-capita income.[52]

A 2007 report by the state-run National Commission for Enterprises in

the Unorganised Sector (NCEUS) found that 77% of Indians, or 836

million people, lived on less than 20 rupees per day (USD 0.50

nominal, USD 2.0 in PPP), with most working in "informal labour sector

with no job or social security, living in abject poverty."[53][54] However,

a new report from the UN disputes this, finding that the number of

people living on US$1.25 a day is expected to go down from 435

million or 51.3 percent in 1990 to 295 million or 23.6 percent by 2015

and 268 million or 20.3 percent by 2020.[55]

A study by the McKinsey Global Institute found that in 1985, 93% of

the Indian population lived on a household income of less than 90,000

rupees a year, or about a dollar per person per day; by 2005 that

proportion had been cut nearly in half, to 54%. Thus, according to the

report, between 1985 and 2005, more than 103 million people have

moved out of desperate poverty in urban and rural areas as well.

They project that if India can achieve 7.3% annual growth over the

next 20 years, 465 million more people will be lifted out of poverty.

Contrary to popular perceptions, rural India has benefited from this

growth: extreme rural poverty has declined from 94% in 1985 to 61%

in 2005, and they project that it will drop to 26% by 2025. Report

concludes that India's economic reforms and the increased growth

that has resulted have been the most successful anti-poverty

programmes in the country.[56][57][58]

[edit] Persistence of malnutrition among children

According to the New York Times, is estimated that about 42.5% of

the children in India suffer from malnutrition.[59] The World Bank,

citing estimates made by the World Health Organization, states that

"About 49 percent of the world's underweight children, 34 percent of

the world's stunted children and 46 percent of the world's wasted

children, live in India." The World Bank also noted that "while poverty

is often the underlying cause of malnutrition in children, the superior

economic growth experienced by South Asian countries compared to

those in Sub-Saharan Africa, has not translated into superior

nutritional status for the South Asian child."[60]

A special commission to the Indian Supreme court has noted that the

child malnutrition rate in India is twice as great as sub-Saharan Africa [61]

Data from The World Bank shows that the percentage of underweight

children in sub-Saharan Africa is 24% while India has almost twice the

amount at 47%. Out of the 47%, 50 % were from rural areas, 38%

from urban areas, 48.9% of the underweight are girls and 45.5% are

boys.[62]

Malnutrition is often associated with diseases like diarrhea, malaria

and measles due to the lack of access in health care which are also

linked to the problem of poverty. The United Nations had estimated

that “2.1 million Indian children die before reaching the age of 5

every year – four every minute”.[63]

The Indian government had come up with the Integrated Childhood

Development Service (ICDS) in 1975 to combat the problem of

malnutrition in the country. ICDS is the world’s largest child

development program but its effects on the problem in India are

limited.[64] This is because the program failed to focus on children

under 3, the group that should receive the most help from the ICDS.

This is due to the fact that most growth retardation would have

developed during the age of 2 and are mostly irreversible.[65] With the

lack of help, the chances that newborn babies are unable to develop

fully would be higher. The quality of ICDS centers also varies from

states to states and often, the states with the most serious problem of

malnutrition have the lowest amount of help given.[64] Examples are

“Rajasthan, Uttar Pradesh, Bihar, Orissa and Madhya Pradesh, all rank

in the bottom ten in terms of ICDS coverage”.[65] Despite the poor

distribution of help, the ICDS is still considered to be efficient in

improving the health of the children in the country.[66] Statistics from

UNICEF shows that the mortality rate of children under 5 has

improved from 118 per 1000 live births in 1990 to 66 in the year

2009.[67]

However, malnutrition is still a problem for India; it has been found

that “micronutrient deficiencies alone may cost India US$2.5 billion

annually”.[68] Malnutrition can lead to children not being able to attend

school or perform to their fullest potential, which in turn leads to a

decrease in labor productivity, affecting India’s economic growth as a

whole

Economy of India

From Wikipedia, the free encyclopedia

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Economy of The Republic of India

Modern Indian currency notes

Rank 9th (nominal) / 3rd (PPP)

Currency 1 Indian Rupee (INR) ( ) = 100 Paise

Fiscal year 1 April – 31 March

Trade

organizations

WTO, SAFTA, G-20 and others

Statistics

GDP $1.846 trillion (nominal: 9 th ; 2011)[1]

$4.469 trillion (PPP: 3 rd ; 2011)[1]

GDP growth 8.5% (2009-10)

GDP per capita $1,527 (nominal: 135 th ; 2011)[1]

$3,703 (PPP: 127 th ; 2011)[1]

GDP by sector agriculture: 18.1%, industry: 26.3%,

services: 55.6% (2011 est.)

Inflation (CPI) 6.55% (January 2012) [2]

Population

below poverty

line

37% (2011)

(Note:42% live less than $1.25 per day)[3]

Gini coefficient 36.8 (List of countries)

Labour force 487.6 million (2011 est.)

Labour force

by occupation

agriculture: 52%, industry: 14%, services:

34% (2009 est.)

Unemployment9.8% (2011 est.) [4]

Average gross

salary

$1,330 yearly (2010)

Main

industries

telecommunications, textiles, chemicals,

food processing, steel, transportation

equipment, cement, mining, petroleum,

machinery, software, pharmaceuticals

Ease of Doing

Business Rank

132nd[5] (2011)

External

Exports $298 billion (2011 est.) [6]

Export goods petroleum products, precious stones,

machinery, iron and steel, chemicals,

vehicles, apparel

Main export

partners

US 12.6%, UAE 12.2%, China 8.1%, Hong

Kong 4.1% (2010)

Imports $451 billion (2011 est.) [7]

Import goods crude oil, precious stones, machinery,

fertilizer, iron and steel, chemicals

Main import

partners

China 12.4%, UAE 6.5%, Saudi Arabia

5.8%, US 5.7%, Australia 4.5% (2010)

FDI stock $19.42 billion (2010-11) [8]

Gross external

debt

$267.1 billion (31 December 2011 est.)

Public finances

Public debt 62.43% of GDP (2011 est.) [9]

Revenues $218.7 billion (2011 est.)

Expenses $311.2 billion (2011 est.)

Economic aid $2.107 billion (2008) [10]

Credit rating BBB- (Domestic)

BBB- (Foreign)

BBB+ (T&C Assessment)

Outlook: Stable

(Standard & Poor's)[11]

Foreign

reserves

$296 billion (Dec 2011) [12]

Main data source: CIA World Fact Book

All values, unless otherwise stated, are in US dollars

"Dollar" and "$" refer throughout to the US dollar.

The Economy of India is the ninth largest in the world by nominal

GDP and the third largest by purchasing power parity (PPP).[1] The

country is one of the G-20 major economies and a member of BRICS.

In 2011, the country's GDP PPP per capita was $3,703 IMF, 127th in

the world, thus making a lower-middle income economy.[13]

The independence-era Indian economy (before and a little after 1947)

was inspired by the Soviet model of economic development, with a

large public sector, high import duties combined with interventionist

policies, leading to massive inefficiencies and widespread corruption.

However, later on India adopted free market principles and liberalized

its economy to international trade under the guidance of Manmohan

Singh, who then was the Finance Minister of India under the

leadership of P.V.Narasimha Rao the then Prime Minister. Following

these strong economic reforms, the country's economic growth

progressed at a rapid pace with very high rates of growth and large

increases in the incomes of people.[14]

India recorded the highest growth rates in the mid-2000s, and is one

of the fastest-growing economies in the world. The growth was led

primarily due to a huge increase in the size of the middle class

consumer, a large labor force and considerable foreign investments.

India is the fourteenth largest exporter and eleventh largest importer

in the world. Economic growth rates are projected at around 6.9% for

the 2011-12 fiscal year.[15]

Contents [hide] 

1 Overview

2 History

o 2.1 Pre-colonial period (up to 1773)

o 2.2 Colonial period (1773–1947)

o 2.3 Pre-liberalisation period (1947–

1991)

o 2.4 Post-liberalisation period (since

1991)

3 Sectors

o 3.1 Industry and services

o 3.2 Agriculture

o 3.3 Banking and finance

o 3.4 Energy and power

o 3.5 Infrastructure

4 External trade and investment

o 4.1 Global trade relations

o 4.2 Balance of payments

o 4.3 Foreign direct investment

5 Currency

6 Income and consumption

7 Employment

8 Economic trends and issues

o 8.1 Agriculture

o 8.2 Corruption

o 8.3 Education

o 8.4 Infrastructure

o 8.5 Economic disparities

9 See also

10 Notes

11 References

12 Further reading

13 External links

[edit] Overview

A combination of protectionist, import-substitution, and Fabian

socialist-inspired policies governed India for sometime after India's

Independence from the British. The economy was then characterised

by extensive regulation, protectionism, public ownership, pervasive

corruption and slow growth.[16][17] Since 1991, continuing economic

liberalisation has moved the country towards a market-based

economy.[16][17] A revival of economic reforms and better economic

policy in first decade of the 21st century accelerated India's economic

growth rate. In recent years, Indian cities have continued to liberalise

business regulations.[5] By 2008, India had established itself as one of

the world's, fastest growing economy. Growth significantly slowed to

6.79% in 2008–09, but subsequently recovered to 7.4% in 2009–10,

while the fiscal deficit rose from 5.9% to a high 6.5% during the same

period.[18] India’s current account deficit surged to 4.1% of GDP during

Q2 FY11 against 3.2% the previous quarter. The unemployment rate

for 2010-11, according to the state Labour Bureau, was 9.8%

nationwide.[4] As of 2011, India's public debt stood at 62.43% of GDP

which is highest among the emerging economies.[9]

India's large service industry accounts for 57.2% of the country's GDP

while the industrial and agricultural sectors contribute 28.6% and

14.6% respectively.[19] Agriculture is the predominant occupation in

Rural India, accounting for about 52% of employment. The service

sector makes up a further 34%, and industrial sector around 14%.[20]

However, statistics from a 2009–10 government survey, which used a

smaller sample size than earlier surveys, suggested that the share of

agriculture in employment had dropped to 45.5%.[4]

Major industries include telecommunications, textiles, chemicals, food

processing, steel, transportation equipment, cement, mining,

petroleum, machinery, software and pharmaceuticals.[21] The labour

force totals 500 million workers. Major agricultural products include

rice, wheat, oilseed, cotton, jute, tea, sugarcane, potatoes, cattle,

water buffalo, sheep, goats, poultry and fish.[21] In 2009–2010, India's

top five trading partners are United Arab Emirates, China, United

States, Saudi Arabia and Germany.

Previously a closed economy, India's trade and business sector has

grown fast.[16] India currently accounts for 1.5% of world trade as of

2007 according to the World Trade Statistics of the WTO in 2006,

which valued India's total merchandise trade (counting exports and

imports) at $294 billion and India's services trade at $143 billion.

Thus, India's global economic engagement in 2006 covering both

merchandise and services trade was of the order of $437 billion, up

by a record 72% from a level of $253 billion in 2004. India's total

trade in goods and services has reached a share of 43% of GDP in

2005–06, up from 16% in 1990–91.[22] India's total merchandisee trade

(counting exports and imports) stands at $ 606.7 billion[23] and is

currently the 9th largest in the world.

[edit] History

Main articles: Economic history of India and Timeline of the economy

of India

[edit] Pre-colonial period (up to 1773)

The citizens of the Indus Valley civilisation, a permanent settlement

that flourished between 2800 BC and 1800 BC, practiced agriculture,

domesticated animals, used uniform weights and measures, made

tools and weapons, and traded with other cities. Evidence of well-

planned streets, a drainage system and water supply reveals their

knowledge of urban planning, which included the world's first urban

sanitation systems and the existence of a form of municipal

government.[24]

The spice trade between India and Europe was the main catalyst for

the Age of Discovery.[25]

Maritime trade was carried out extensively between South India and

southeast and West Asia from early times until around the fourteenth

century AD. Both the Malabar and Coromandel Coasts were the sites

of important trading centres from as early as the first century BC,

used for import and export as well as transit points between the

Mediterranean region and southeast Asia.[26] Over time, traders

organised themselves into associations which received state

patronage. However, state patronage for overseas trade came to an

end by the thirteenth century AD, when it was largely taken over by

the local Parsi, Jewish and Muslim communities, initially on the

Malabar and subsequently on the Coromandel coast.[27] Further north,

the Saurashtra and Bengal coasts played an important role in

maritime trade, and the Gangetic plains and the Indus valley housed

several centres of river-borne commerce. Most overland trade was

carried out via the Khyber Pass connecting the Punjab region with

Afghanistan and onward to the Middle East and Central Asia.[28]

Although many kingdoms and rulers issued coins, barter was

prevalent. Villages paid a portion of their agricultural produce as

revenue to the rulers, while their craftsmen received a part of the

crops at harvest time for their services.[29]

Silver coin minted during the reign of the Gupta emperor Kumara

Gupta I (AD 414–55)

Assessment of India's pre-colonial economy is mostly qualitative,

owing to the lack of quantitative information. The Mughal economy

functioned on an elaborate system of coined currency, land revenue

and trade. Gold, silver and copper coins were issued by the royal

mints which functioned on the basis of free coinage.[30] The political

stability and uniform revenue policy resulting from a centralised

administration under the Mughals, coupled with a well-developed

internal trade network, ensured that India, before the arrival of the

British, was to a large extent economically unified, despite having a

traditional agrarian economy characterised by a predominance of

subsistence agriculture dependent on primitive technology.[31] After

the decline of the Mughals, western, central and parts of south and

north India were integrated and administered by the Maratha Empire.

After the loss at the Third Battle of Panipat, the Maratha Empire

disintegrated into several confederate states, and the resulting

political instability and armed conflict severely affected economic life

in several parts of the country, although this was compensated for to

some extent by localised prosperity in the new provincial kingdoms.[32]

By the end of the eighteenth century, the British East India Company

entered the Indian political theatre and established its dominance

over other European powers. This marked a determinative shift in

India's trade, and a less powerful impact on the rest of the economy.[33]

[edit] Colonial period (1773–1947)

An aerial view of Calcutta Port taken in 1945. Calcutta, which was the

economic hub of British India, saw increased industrial activity during

World War II.

There is no doubt that our grievances against the British Empire had a

sound basis. As the painstaking statistical work of the Cambridge

historian Angus Maddison has shown, India's share of world income

collapsed from 22.6% in 1700, almost equal to Europe's share of

23.3% at that time, to as low as 3.8% in 1952. Indeed, at the

beginning of the 20th century, "the brightest jewel in the British

Crown" was the poorest country in the world in terms of per capita

income.

— Manmohan Singh [34]

Company rule in India brought a major change in the taxation and

agricultural policies, which tended to promote commercialisation of

agriculture with a focus on trade, resulting in decreased production of

food crops, mass impoverishment and destitution of farmers, and in

the short term, led to numerous famines.[35] The economic policies of

the British Raj caused a severe decline in the handicrafts and

handloom sectors, due to reduced demand and dipping employment.[36] After the removal of international restrictions by the Charter of

1813, Indian trade expanded substantially and over the long term

showed an upward trend.[37] The result was a significant transfer of

capital from India to England, which, due to the colonial policies of the

British, led to a massive drain of revenue rather than any systematic

effort at modernisation of the domestic economy.[38]

Estimates of the per capita income of India (1857–1900) as per 1948–

49 prices.[39]

India's colonisation by the British created an institutional environment

that, on paper, guaranteed property rights among the colonisers,

encouraged free trade, and created a single currency with fixed

exchange rates, standardised weights and measures and capital

markets. It also established a well-developed system of railways and

telegraphs, a civil service that aimed to be free from political

interference, a common-law and an adversarial legal system.[40] This

coincided with major changes in the world economy –

industrialisation, and significant growth in production and trade.

However, at the end of colonial rule, India inherited an economy that

was one of the poorest in the developing world,[41] with industrial

development stalled, agriculture unable to feed a rapidly growing

population, a largely illiterate and unskilled labour force, and

extremely inadequate infrastructure.[42]

The 1872 census revealed that 91.3% of the population of the region

constituting present-day India resided in villages,[43] and urbanisation

generally remained sluggish until the 1920s, due to the lack of

industrialisation and absence of adequate transportation.

Subsequently, the policy of discriminating protection (where certain

important industries were given financial protection by the state),

coupled with the Second World War, saw the development and

dispersal of industries, encouraging rural-urban migration, and in

particular the large port cities of Bombay, Calcutta and Madras grew

rapidly. Despite this, only one-sixth of India's population lived in cities

by 1951.[44]

The impact of the British rule on India's economy is a controversial

topic. Leaders of the Indian independence movement and left-wing

people who opposed India's independence movementeconomic

historians have blamed colonial rule for the dismal state of India's

economy in its aftermath and argued that financial strength required

for industrial development in Europe was derived from the wealth

taken from colonies in Asia and Africa. At the same time, right-wing

historians have countered that India's low economic performance was

due to various sectors being in a state of growth and decline due to

changes brought in by colonialism and a world that was moving

towards industrialisation and economic integration.[45]

[edit] Pre-liberalisation period (1947–1991)

Indian economic policy after independence was influenced by the

colonial experience, which was seen by Indian leaders as exploitative,

and by those leaders' exposure to British social democracy as well as

the progress achieved by the planned economy of the Soviet Union.[42]

Domestic policy tended towards protectionism, with a strong

emphasis on import substitution industrialisation, economic

interventionism, a large public sector, business regulation, and

central planning,[46] while trade and foreign investment policies were

relatively liberal.[47] Five-Year Plans of India resembled central

planning in the Soviet Union. Steel, mining, machine tools,

telecommunications, insurance, and power plants, among other

industries, were effectively nationalised in the mid-1950s.[48]

Jawaharlal Nehru, the first prime minister of India, along with the

statistician Prasanta Chandra Mahalanobis, formulated and oversaw

economic policy during the initial years of the country's existence.

They expected favorable outcomes from their strategy, involving the

rapid development of heavy industry by both public and private

sectors, and based on direct and indirect state intervention, rather

than the more extreme Soviet-style central command system.[49][50]

The policy of concentrating simultaneously on capital- and

technology-intensive heavy industry and subsidising manual, low-skill

cottage industries was criticised by economist Milton Friedman, who

thought it would waste capital and labour, and retard the

development of small manufacturers.[51] The rate of growth of the

Indian economy in the first three decades after independence was

derisively referred to as the Hindu rate of growth by economists,

because of the unfavourable comparison with growth rates in other

Asian countries.[52][53]

Since 1965, the use of high-yielding varieties of seeds, increased

fertilisers and improved irrigation facilities collectively contributed to

the Green Revolution in India, which improved the condition of

agriculture by increasing crop productivity, improving crop patterns

and strengthening forward and backward linkages between

agriculture and industry.[54] However, it has also been criticised as an

unsustainable effort, resulting in the growth of capitalistic farming,

ignoring institutional reforms and widening income disparities.[55]

[edit] Post-liberalisation period (since 1991)

Main articles: Economic liberalisation in India and Economic

development in India

GDP of India has risen rapidly since 1991.

In the late 1970s, the government led by Morarji Desai eased

restrictions on capacity expansion for incumbent companies, removed

price controls, reduced corporate taxes and promoted the creation of

small scale industries in large numbers. He also raised the income tax

levels at one point to a maximum of 97.5%, a record in the world for

non-communist economies. However, the subsequent government

policy of Fabian socialism hampered the benefits of the economy,

leading to high fiscal deficits and a worsening current account. The

collapse of the Soviet Union, which was India's major trading partner,

and the Gulf War, which caused a spike in oil prices, resulted in a

major balance-of-payments crisis for India, which found itself facing

the prospect of defaulting on its loans.[56] India asked for a $1.8 billion

bailout loan from the International Monetary Fund (IMF), which in

return demanded reforms.[57]

In response, Prime Minister Narasimha Rao, along with his finance

minister Manmohan Singh, initiated the economic liberalisation of

1991. The reforms did away with the Licence Raj, reduced tariffs and

interest rates and ended many public monopolies, allowing automatic

approval of foreign direct investment in many sectors.[58] Since then,

the overall thrust of liberalisation has remained the same, although

no government has tried to take on powerful lobbies such as trade

unions and farmers, on contentious issues such as reforming labour

laws and reducing agricultural subsidies.[59] By the turn of the 20th

century, India had progressed towards a free-market economy, with a

substantial reduction in state control of the economy and increased

financial liberalisation.[60] This has been accompanied by increases in

life expectancy, literacy rates and food security, although the

beneficiaries have largely been urban residents.[61]

While the credit rating of India was hit by its nuclear weapons tests in

1998, it has since been raised to investment level in 2003 by S&P and

Moody's.[62] In 2003, Goldman Sachs predicted that India's GDP in

current prices would overtake France and Italy by 2020, Germany, UK

and Russia by 2025 and Japan by 2035, making it the third largest

economy of the world, behind the US and China. India is often seen by

most economists as a rising economic superpower and is believed to

play a major role in the global economy in the 21st century.[63][64]

[edit] Sectors

[edit] Industry and services

See also: Information technology in India, Business process

outsourcing in India, Retailing in India, and Mining in India

India has one of the world's fastest growing automobile industries.[65]

Shown here is the Tata Nano, the world's cheapest car.[66]

Industry accounts for 28% of the GDP and employ 14% of the total

workforce.[20] In absolute terms, India is 12th in the world in terms of

nominal factory output.[67] The Indian industrial sector underwent

significant changes as a result of the economic reforms of 1991,

which removed import restrictions, brought in foreign competition, led

to privatisation of certain public sector industries, liberalised the FDI

regime, improved infrastructure and led to an expansion in the

production of fast moving consumer goods.[68] Post-liberalisation, the

Indian private sector was faced with increasing domestic as well as

foreign competition, including the threat of cheaper Chinese imports.

It has since handled the change by squeezing costs, revamping

management, and relying on cheap labour and new technology.

However, this has also reduced employment generation even by

smaller manufacturers who earlier relied on relatively labour-intensive

processes.[69]

Textile manufacturing is the second largest source of employment

after agriculture and accounts for 20% of manufacturing output,

providing employment to over 20 million people.[70] As stated in late

January, by the then Minister of Textiles, India, Shri Shankersinh

Vaghela, the transformation of the textile industry from a degrading

to rapidly developing industry, has become the biggest achievement

of the central government. After freeing the industry in 2004–2005

from a number of limitations, primarily financial, the government

gave the green light to the flow of massive investment – both

domestic and foreign. During the period from 2004 to 2008, total

investment amounted to 27 billion dollars. By 2012, still convinced of

the government, this figure will reach 38 billion as expected; these

investments in 2012 will create an additional sector of more than 17

million jobs. But demand for Indian textiles in world markets

continues to fall. According to Union Minister for Commerce and

Industries Kamal Nath, only during 2008–2009 fiscal year (which ends

31 March) textile and clothing industry will be forced to cut about 800

thousand new jobs – nearly half of the rate of two million, which will

have to go all the export-oriented sectors of Indian economy to soften

the impact of the global crisis.[71] Ludhiana produces 90% of woollens

in India and is known as the Manchester of India. Tirupur has gained

universal recognition as the leading source of hosiery, knitted

garments, casual wear and sportswear.[72]

India is 13th in services output. The services sector provides

employment to 23% of the work force and is growing quickly, with a

growth rate of 7.5% in 1991–2000, up from 4.5% in 1951–80. It has

the largest share in the GDP, accounting for 55% in 2007, up from

15% in 1950.[20] Information technology and business process

outsourcing are among the fastest growing sectors, having a

cumulative growth rate of revenue 33.6% between 1997–98 and

2002–03 and contributing to 25% of the country's total exports in

2007–08.[73] The growth in the IT sector is attributed to increased

specialisation, and an availability of a large pool of low cost, highly

skilled, educated and fluent English-speaking workers, on the supply

side, matched on the demand side by increased demand from foreign

consumers interested in India's service exports, or those looking to

outsource their operations. The share of the Indian IT industry in the

country's GDP increased from 4.8 % in 2005–06 to 7% in 2008.[74] In

2009, seven Indian firms were listed among the top 15 technology

outsourcing companies in the world.[75]

Mining forms an important segment of the Indian economy, with the

country producing 79 different minerals (excluding fuel and atomic

resources) in 2009–10, including iron ore, manganese, mica, bauxite,

chromite, limestone, asbestos, fluorite, gypsum, ochre, phosphorite

and silica sand.[76] Organised retail supermarkets accounts for 24% of

the market as of 2008.[77] Regulations prevent most foreign

investment in retailing. Moreover, over thirty regulations such as

"signboard licences" and "anti-hoarding measures" may have to be

complied before a store can open doors. There are taxes for moving

goods from state to state, and even within states.[77] Tourism in India

is relatively undeveloped, but growing at double digits. Some

hospitals woo medical tourism.[78]

[edit] Agriculture

Main articles: Agriculture in India, Forestry in India, Animal husbandry

in India, and Fishing in India

See also: Natural resources in India

India ranks second worldwide in farm output. Agriculture and allied

sectors like forestry, logging and fishing accounted for 15.7% of the

GDP in 2009–10, employed 52.1% of the total workforce, and despite

a steady decline of its share in the GDP, is still the largest economic

sector and a significant piece of the overall socio-economic

development of India.[79] Yields per unit area of all crops have grown

since 1950, due to the special emphasis placed on agriculture in the

five-year plans and steady improvements in irrigation, technology,

application of modern agricultural practices and provision of

agricultural credit and subsidies since the Green Revolution in India.

However, international comparisons reveal the average yield in India

is generally 30% to 50% of the highest average yield in the world.[80]

Indian states Uttar Pradesh, Punjab,Haryana, Madhya Pradesh, Andhra

Pradesh, Bihar,West Bengal and Maharashtra are key agricultural

contributing states of India.

India receives an average annual rainfall of 1,208 millimetres (47.6 in)

and a total annual precipitation of 4000 billion cubic metres, with the

total utilisable water resources, including surface and groundwater,

amounting to 1123 billion cubic metres.[81] 546,820 square kilometres

(211,130 sq mi) of the land area, or about 39% of the total cultivated

area, is irrigated.[82] India's inland water resources including rivers,

canals, ponds and lakes and marine resources comprising the east

and west coasts of the Indian ocean and other gulfs and bays provide

employment to nearly six million people in the fisheries sector. In

2008, India had the world's third largest fishing industry.[83]

India is the largest producer in the world of milk, jute and pulses, and

also has the world's second largest cattle population with 175 million

animals in 2008.[84] It is the second largest producer of rice, wheat,

sugarcane, cotton and groundnuts, as well as the second largest fruit

and vegetable producer, accounting for 10.9% and 8.6% of the world

fruit and vegetable production respectively.[84] India is also the second

largest producer and the largest consumer of silk in the world,

producing 77,000 million tons in 2005.[85]

[edit] Banking and finance

Main article: Finance in India

See also: Banking in India and Insurance in India

The Indian money market is classified into the organised sector,

comprising private, public and foreign owned commercial banks and

cooperative banks, together known as scheduled banks, and the

unorganised sector, which includes individual or family owned

indigenous bankers or money lenders and non-banking financial

companies.[86] The unorganised sector and microcredit are still

preferred over traditional banks in rural and sub-urban areas,

especially for non-productive purposes, like ceremonies and short

duration loans.[87]

Prime Minister Indira Gandhi nationalised 14 banks in 1969, followed

by six others in 1980, and made it mandatory for banks to provide

40% of their net credit to priority sectors like agriculture, small-scale

industry, retail trade, small businesses, etc. to ensure that the banks

fulfill their social and developmental goals. Since then, the number of

bank branches has increased from 8,260 in 1969 to 72,170 in 2007

and the population covered by a branch decreased from 63,800 to

15,000 during the same period. The total bank deposits increased

from 5,910 crore (US$1.3 billion) in 1970–71 to 3,830,922 crore

(US$842.8 billion) in 2008–09. Despite an increase of rural branches,

from 1,860 or 22% of the total number of branches in 1969 to 30,590

or 42% in 2007, only 32,270 out of 500,000 villages are covered by a

scheduled bank.[88][89]

India's gross domestic saving in 2006–07 as a percentage of GDP

stood at a high 32.7%.[90] More than half of personal savings are

invested in physical assets such as land, houses, cattle, and gold.[91]

The public sector banks hold over 75% of total assets of the banking

industry, with the private and foreign banks holding 18.2% and 6.5%

respectively.[92] Since liberalisation, the government has approved

significant banking reforms. While some of these relate to

nationalised banks, like encouraging mergers, reducing government

interference and increasing profitability and competitiveness, other

reforms have opened up the banking and insurance sectors to private

and foreign players.[20][93]

Energy and power

Main article: Energy policy of India

As of 2010, India imported about 70% of its crude oil requirements.[94]

Shown here is an ONGC platform at Mumbai High in the Arabian Sea,

one of the few sites of domestic production.

As of 2009, India is the fourth largest producer of electricity and oil

products and the fourth largest importer of coal and crude-oil in the

world.[95] Coal and oil together account for 66 % of the energy

consumption of India.[96]

India's oil reserves meet 25% of the country's domestic oil demand.[20]

[97] As of 2009, India's total proven oil reserves stood at 775 million

metric tonnes while gas reserves stood at 1074 billion cubic metres.[98] Oil and natural gas fields are located offshore at Mumbai High,

Krishna Godavari Basin and the Cauvery Delta, and onshore mainly in

the states of Assam, Gujarat and Rajasthan.[98] India is the fourth

largest consumer of oil in the world and imported $82.1 billion worth

of oil in the first three quarters of 2010, which had an adverse effect

on its current account deficit.[94] The petroleum industry in India

mostly consists of public sector companies such as Oil and Natural

Gas Corporation (ONGC), Hindustan Petroleum Corporation Limited

(HPCL) and Indian Oil Corporation Limited (IOCL). There are some

major private Indian companies in the oil sector such as Reliance

Industries Limited (RIL) which operates the world's largest oil refining

complex.[99]

As of December 2011, India had an installed power generation

capacity of 185.5 Giga Watts(GW), of which thermal power

contributed 65.87%, hydroelectricity 20.75%, other sources of

renewable energy 10.80%, and nuclear power 2.56%. [100]. India meets

most of its domestic energy demand through its 106 billion tonnes of

coal reserves.[101] India is also rich in certain renewable sources of

energy with significant future potential such as solar, wind and

biofuels (jatropha, sugarcane). India's huge thorium reserves – about

25% of world's reserves – are expected to fuel the country's ambitious

nuclear energy program in the long-run. India's dwindling uranium

reserves stagnated the growth of nuclear energy in the country for

many years.[102] However, the Indo-US nuclear deal has paved the way

for India to import uranium from other countries.[103]

Infrastructure

India has the world's third largest road network,[104] covering more

than 4.3 million kilometers and carrying 60% of freight and 87% of

passenger traffic. [105] Indian Railways is the fourth largest rail network

in the world, with a track length of 114,500 kilometers.India has 13

major ports, handling a cargo volume of 850 million tonnes in 2010.[106]

India has a national teledensity rate of 74.15% with 926.53 million

telephone subscribers, two-thirds of them in urban areas,[107] but

Internet use is rare, with around 13.3 million broadband lines in India

in December 2011.[108] However, this is growing and is expected to

boom following the expansion of 3G and wimax services.[109]

External trade and investment

Further information: Globalisation in India and List of the largest

trading partners of India

Global trade relations

A map showing the global distribution of Indian exports in 2006 as a

percentage of the top market (USA – $20,902,500,000).

Until the liberalisation of 1991, India was largely and intentionally

isolated from the world markets, to protect its economy and to

achieve self-reliance. Foreign trade was subject to import tariffs,

export taxes and quantitative restrictions, while foreign direct

investment (FDI) was restricted by upper-limit equity participation,

restrictions on technology transfer, export obligations and

government approvals; these approvals were needed for nearly 60%

of new FDI in the industrial sector. The restrictions ensured that FDI

averaged only around $200 million annually between 1985 and 1991;

a large percentage of the capital flows consisted of foreign aid,

commercial borrowing and deposits of non-resident Indians.[110] India's

exports were stagnant for the first 15 years after independence, due

to general neglect of trade policy by the government of that period.

Imports in the same period, due to industrialisation being nascent,

consisted predominantly of machinery, raw materials and consumer

goods.[111]

Since liberalisation, the value of India's international trade has

increased sharply,[112] with the contribution of total trade in goods and

services to the GDP rising from 16% in 1990–91 to 47% in 2008–10.[113][22] India accounts for 1.44% of exports and 2.12% of imports for

merchandise trade and 3.34% of exports and 3.31% of imports for

commercial services trade worldwide.[113] India's major trading

partners are the European Union, China, the United States of America

and the United Arab Emirates.[114] In 2006–07, major export

commodities included engineering goods, petroleum products,

chemicals and pharmaceuticals, gems and jewellery, textiles and

garments, agricultural products, iron ore and other minerals. Major

import commodities included crude oil and related products,

machinery, electronic goods, gold and silver.[115] In November 2010,

exports increased 22.3% year-on-year to 85,063 crore (US$18.71

billion), while imports were up 7.5% at 125,133 crore (US$27.53

billion). Trade deficit for the same month dropped from 46,865 crore

(US$10.31 billion) in 2009 to 40,070 crore (US$8.82 billion) in 2010.[116]

India is a founding-member of General Agreement on Tariffs and

Trade (GATT) since 1947 and its successor, the WTO. While

participating actively in its general council meetings, India has been

crucial in voicing the concerns of the developing world. For instance,

India has continued its opposition to the inclusion of such matters as

labour and environment issues and other non-tariff barriers to trade

into the WTO policies.[117]

[edit] Balance of payments

Cumulative Current Account Balance 1980–2008 based on IMF data

Since independence, India's balance of payments on its current

account has been negative. Since economic liberalisation in the

1990s, precipitated by a balance of payment crisis, India's exports

rose consistently, covering 80.3% of its imports in 2002–03, up from

66.2% in 1990–91.[118] However, the global economic slump followed

by a general deceleration in world trade saw the exports as a

percentage of imports drop to 61.4% in 2008–09.[119] India's growing

oil import bill is seen as the main driver behind the large current

account deficit,[94] which rose to $118.7 billion, or 9.7% of GDP, in

2008–09.[120] Between January and October 2010, India imported

$82.1 billion worth of crude oil.[94]

Due to the global late-2000s recession, both Indian exports and

imports declined by 29.2% and 39.2% respectively in June 2009.[121]

The steep decline was because countries hit hardest by the global

recession, such as United States and members of the European Union,

account for more than 60% of Indian exports.[122] However, since the

decline in imports was much sharper compared to the decline in

exports, India's trade deficit reduced to 25,250 crore (US$5.56

billion).[121] As of June 2011, exports and imports have both registered

impressive growth with monthly exports reaching $25.9 billion for the

month of May 2011 and monthly imports reaching $40.9 billion for the

same month. This represents a year on year growth of 56.9% for

exports and 54.1% for imports.[23]

India's reliance on external assistance and concessional debt has

decreased since liberalisation of the economy, and the debt service

ratio decreased from 35.3% in 1990–91 to 4.4% in 2008–09.[123] In

India, External Commercial Borrowings (ECBs), or commercial loans

from non-resident lenders, are being permitted by the Government

for providing an additional source of funds to Indian corporates. The

Ministry of Finance monitors and regulates them through ECB policy

guidelines issued by the Reserve Bank of India under the Foreign

Exchange Management Act of 1999.[124] India's foreign exchange

reserves have steadily risen from $5.8 billion in March 1991 to

$283.5 billion in December 2009. [125]

Foreign direct investment

Share of top five investing countries in FDI inflows. (2000–

2010)[126]

Rank CountryInflows

(million USD)Inflows (%)

1 Mauritius 50,164 42.00

2 Singapore 11,275 9.00

3 USA 8,914 7.00

4 UK 6,158 5.00

5 Netherlands 4,968 4.00

As the third-largest economy in the world in PPP terms, India is a

preferred destination for FDI;[127] India has strengths in

telecommunication, information technology and other significant

areas such as auto components, chemicals, apparels,

pharmaceuticals, and jewellery. Despite a surge in foreign

investments, rigid FDI policies were a significant hindrance. However,

due to positive economic reforms aimed at deregulating the economy

and stimulating foreign investment, India has positioned itself as one

of the front-runners of the rapidly growing Asia-Pacific region.[127] India

has a large pool of skilled managerial and technical expertise. The

size of the middle-class population stands at 300 million and

represents a growing consumer market.[128]

During 2000–10, the country attracted $178 billion as FDI.[129] The

inordinately high investment from Mauritius is due to routing of

international funds through the country given significant tax

advantages; double taxation is avoided due to a tax treaty between

India and Mauritius, and Mauritius is a capital gains tax haven,

effectively creating a zero-taxation FDI channel.[130]

India's recently liberalised FDI policy (2005) allows up to a 100% FDI

stake in ventures. Industrial policy reforms have substantially reduced

industrial licensing requirements, removed restrictions on expansion

and facilitated easy access to foreign technology and foreign direct

investment FDI. The upward moving growth curve of the real-estate

sector owes some credit to a booming economy and liberalised FDI

regime. In March 2005, the government amended the rules to allow

100% FDI in the construction sector, including built-up infrastructure

and construction development projects comprising housing,

commercial premises, hospitals, educational institutions, recreational

facilities, and city- and regional-level infrastructure.[131] Despite a

number of changes in the FDI policy to remove caps in most sectors,

there still remains an unfinished agenda of permitting greater FDI in

politically sensitive areas such as insurance and retailing. The total

FDI equity inflow into India in 2008–09 stood at 122,919 crore

(US$27.04 billion), a growth of 25% in rupee terms over the previous

period.[132].

Currency

The RBI's new headquarters in Mumbai

Main articles: Indian rupee and Reserve Bank of India

The Indian rupee is the only legal tender in India, and is also accepted

as legal tender in the neighbouring Nepal and Bhutan, both of which

peg their currency to that of the Indian rupee. The rupee is divided

into 100 paise. The highest-denomination banknote is the 1,000

rupee note; the lowest-denomination coin in circulation is the 10 paise

coin.[133] However, with effect from 30 June 2011, 50 paise is the

minimum coin accepted in the markets as all denominations below

have ceased to be legal currency.[134][135] India's monetary system is

managed by the Reserve Bank of India (RBI), the country's central

bank.[136] Established on 1 April 1935 and nationalised in 1949, the RBI

serves as the nation's monetary authority, regulator and supervisor of

the monetary system, banker to the government, custodian of foreign

exchange reserves, and as an issuer of currency. It is governed by a

central board of directors, headed by a governor who is appointed by

the Government of India.[137]

The rupee was linked to the British pound from 1927–1946 and then

the U.S. dollar till 1975 through a fixed exchange rate. It was

devalued in September 1975 and the system of fixed par rate was

replaced with a basket of four major international currencies – the

British pound, the U.S. dollar, the Japanese yen and the Deutsche

mark.[138] Since 2003, the rupee has been steadily appreciating

against the U.S. dollar.[139] In 2009, a rising rupee prompted the

Government of India to purchase 200 tons of gold for $6.7 billion from

the IMF.[140]

Income and consumption

Main article: Income in India

See also: Poverty in India

World map showing the Gini coefficient, a measure of income

inequality. India has a Gini coefficient of 0.368.

India's gross national income per capita had experienced astonishing

growth rates since 2002. India's Per Capita Income has tripled from

Rs.19,040 in 2002–03 to Rs.54,835 in 2010–11, averaging 14.4%

growth over these eight years.[141] It further grew by 11.2% to reach

Rs.60,973 during 2011–12 fiscal. Indian official estimates of the

extent of poverty have been subject to debate, with concerns being

raised about the methodology for the determination of the poverty

line.[142][143] As of 2005, according to World Bank statistics, 75.6% of

the population lived on less than $2 a day (PPP), while 27.5% of the

population was living below the new international poverty line of

$1.25 (PPP) per day.[144][145][146] However, data released in 2009 by the

Government of India estimated that 37% of the population lived below

the poverty line.[147]

Housing is modest. According to The Times of India, a majority of

Indians had a per capita space equivalent to or less than a 100 square

feet (9.3 m2) room for their basic living needs, and one-third of urban

Indians lived in "homes too cramped to exceed even the minimum

requirements of a prison cell in the US."[148] The average is 103 sq ft

(9.6 m2) per person in rural areas and 117 sq ft (10.9 m2) per person

in urban areas.[148]

GNI per capita:

  India (1,170 $)

  Higher GNI per capita compared to India

  Lower GNI per capita compared to India

Around half of Indian children are malnourished. The proportion of

underweight children is nearly double that of Sub-Saharan Africa.[149]

[150] However, India has not had any major famines since

Independence.[151]

Since the early 1950s, successive governments have implemented

various schemes to alleviate poverty, under central planning, that

have met with partial success. All these programmes have relied upon

the strategies of the Food for work programme and National Rural

Employment Programme of the 1980s, which attempted to use the

unemployed to generate productive assets and build rural

infrastructure.[152] In August 2005, the Parliament of India, in response

to the perceived failure of economic growth to generate employment

for the rural poor, passed the Rural Employment Guarantee Bill into

law, guaranteeing 100 days of minimum wage employment to every

rural household in all the districts of India.[153] The Parliament of India

also refused to accept Union Government's argument that it had

taken adequate measures to reduce incidence of poverty in India.The

question of whether economic reforms have reduced poverty has

fuelled debates without generating clear-cut answers and has also

increased political pressure against further economic reforms,

especially those involving the downsizing of labour and cutting

agricultural subsidies.[154] Recent statistics in 2010 point out that the

number of high income households has crossed lower income

households.[155]

Employment

See also: Labour in India and Indian labour law

India’s labor regulations – among the most restrictive and complex in

the world – have constrained the growth of the formal manufacturing

sector where these laws have their widest application. Better

designed labor regulations can attract more labor- intensive

investment and create jobs for India’s unemployed millions and those

trapped in poor quality jobs. Given the country’s momentum of

growth, the window of opportunity must not be lost for improving the

job prospects for the 80 million new entrants who are expected to join

the work force over the next decade.

— World Bank: India Country Overview 2008.[156]

Agricultural and allied sectors accounted for about 52.1% of the total

workforce in 2009–10.[79] While agriculture has faced stagnation in

growth, services have seen a steady growth. Of the total workforce,

7% is in the organised sector, two-thirds of which are in the public

sector.[157] The NSSO survey estimated that in 2004–05, 8.3% of the

population was unemployed, an increase of 2.2% over 1993 levels,

with unemployment uniformly higher in urban areas and among

women.[158][159] Growth of labour stagnated at around 2% for the

decade between 1994–2005, about the same as that for the

preceding decade.[153] Avenues for employment generation have been

identified in the IT and travel and tourism sectors, which have been

experiencing high annual growth rates of above 9%.[160]

Unemployment in India is characterised by chronic (disguised)

unemployment. Government schemes that target eradication of both

poverty and unemployment (which in recent decades has sent

millions of poor and unskilled people into urban areas in search of

livelihoods) attempt to solve the problem, by providing financial

assistance for setting up businesses, skill honing, setting up public

sector enterprises, reservations in governments, etc. The decline in

organised employment due to the decreased role of the public sector

after liberalisation has further underlined the need for focusing on

better education and has also put political pressure on further

reforms.[161][162] India's labour regulations are heavy even by

developing country standards and analysts have urged the

government to abolish or modify them in order to make the

environment more conducive for employment generation.[163][164] The

11th five-year plan has also identified the need for a congenial

environment to be created for employment generation, by reducing

the number of permissions and other bureaucratic clearances

required.[165] Further, inequalities and inadequacies in the education

system have been identified as an obstacle preventing the benefits of

increased employment opportunities from reaching all sectors of

society.[166]

Child labour in India is a complex problem that is basically rooted in

poverty, coupled with a failure of governmental policy, which has

focused on subsidising higher rather than elementary education, as a

result benefiting the privileged rather than the poorer sections of

society.[167] The Indian government is implementing the world's

largest child labour elimination program, with primary education

targeted for ~250 million. Numerous non-governmental and voluntary

organisations are also involved. Special investigation cells have been

set up in states to enforce existing laws banning the employment of

children under 14 in hazardous industries. The allocation of the

Government of India for the eradication of child labour was

$21 million in 2007.[168] Public campaigns, provision of meals in school

and other incentives have proven successful in increasing attendance

rates in schools in some states.[169]

In 2009–10, remittances from Indian migrants overseas stood at

250,000 crore (US$55 billion), the highest in the world, but their share

in FDI remained low at around 1%.[170] India ranked 133rd on the Ease

of Doing Business Index 2010, behind countries such as China (89th),

Pakistan (85th), and Nigeria (125th).[171]

[edit] Economic trends and issues

Commercial office buildings in Gurgaon.

In the revised 2007 figures, based on increased and sustaining

growth, more inflows into foreign direct investment, Goldman Sachs

predicts that "from 2007 to 2020, India’s GDP per capita in US$ terms

will quadruple", and that the Indian economy will surpass the United

States (in US$) by 2043.[172] In spite of the high growth rate, the report

stated that India would continue to remain a low-income country for

decades to come but could be a "motor for the world economy" if it

fulfills its growth potential.[172]

[edit] Agriculture

Main article: Agriculture in India

Slow agricultural growth is a concern for policymakers as some two-

thirds of India’s people depend on rural employment for a living.

Current agricultural practices are neither economically nor

environmentally sustainable and India's yields for many agricultural

commodities are low. Poorly maintained irrigation systems and almost

universal lack of good extension services are among the factors

responsible. Farmers' access to markets is hampered by poor roads,

rudimentary market infrastructure, and excessive regulation.

— World Bank: "India Country Overview 2008"[156]

India's population is growing faster than its ability to produce rice and

wheat.[173] The low productivity in India is a result of several factors.

According to the World Bank, India's large agricultural subsidies are

hampering productivity-enhancing investment. While overregulation

of agriculture has increased costs, price risks and uncertainty,

governmental intervention in labour, land, and credit markets are

hurting the market. Infrastructure and services are inadequate.[174]

Further, the average size of land holdings is very small, with 70% of

holdings being less than one hectare in size.[175] The partial failure of

land reforms in many states, exacerbated by poorly maintained or

non-existent land records, has resulted in sharecropping with

cultivators lacking ownership rights, and consequently low

productivity of labour.[176] Adoption of modern agricultural practices

and use of technology is inadequate, hampered by ignorance of such

practices, high costs, illiteracy, slow progress in implementing land

reforms, inadequate or inefficient finance and marketing services for

farm produce and impracticality in the case of small land holdings.

The allocation of water is inefficient, unsustainable and inequitable.

The irrigation infrastructure is deteriorating.[174] Irrigation facilities are

inadequate, as revealed by the fact that only 39% of the total

cultivable land was irrigated as of 2010,[82] resulting in farmers still

being dependent on rainfall, specifically the monsoon season, which is

often inconsistent and unevenly distributed across the country.[177]

[edit] Corruption

Overview of the index of perception of corruption, 2010

Main article: Corruption in India

Corruption has been one of the pervasive problems affecting India.

The economic reforms of 1991 reduced the red tape, bureaucracy and

the Licence Raj that were largely blamed for the institutionalised

corruption and inefficiency.[178] Yet, a 2005 study by Transparency

International (TI) found that more than half of those surveyed had

firsthand experience of paying bribe or peddling influence to get a job

done in a public office.[179]

The Right to Information Act (2005) which requires government

officials to furnish information requested by citizens or face punitive

action, computerisation of services, and various central and state

government acts that established vigilance commissions, have

considerably reduced corruption and opened up avenues to redress

grievances.[179] The 2010 report by TI ranks India at 87th place and

states that significant setbacks were made by India in reducing

corruption.[180]

The number of people employed in non-agricultural occupations in the

public and private sectors. Totals are rounded. Private sector data

relates to non-agriculture establishments with 10 or more employees.[152]

The current government has concluded that most spending fails to

reach its intended recipients. A large, cumbersome and overworked

bureaucracy also contributes to administrative inefficiency.[181] India's

absence rates are one of the worst in the world; one study found that

25% of public sector teachers and 40% of public sector medical

workers could not be found at the workplace.[182][183]

The Indian economy continues to face the problem of an underground

economy with a 2006 estimate by the Swiss Banking Association

suggesting that India topped the worldwide list for black money with

almost $1,456 billion stashed in Swiss banks. This amounts to 13

times the country's total external debt.[184][185]

[edit] Education

Main article: Education in India

India has made huge progress in terms of increasing primary

education attendance rate and expanding literacy to approximately

three-fourth of the population.[186] India's literacy rate had grown from

52.2% in 1991 to 74.04% in 2011. The right to education at

elementary level has been made one of the fundamental rights under

the eighty-sixth Amendment of 2002, and legislation has been

enacted to further the objective of providing free education to all

children.[187] However, the literacy rate of 74% is still lower than the

worldwide average and the country suffers from a high dropout rate.[188] Further, there exists a severe disparity in literacy rates and

educational opportunities between males and females, urban and

rural areas, and among different social groups.[189]

[edit] Infrastructure

Shown here is the Chennai Port.

Shown here is the Mumbai-Pune expressway in Maharashtra.

See also: Transport in India, Indian Road Network, Ports in India,

Electricity sector in India, States of India by installed power capacity,

Water supply and sanitation in India, and Communications in India

In the past, development of infrastructure was completely in the

hands of the public sector and was plagued by slow progress, poor

quality and inefficiency.[190] India's low spending on power,

construction, transportation, telecommunications and real estate, at

$31 billion or 6% of GDP in 2002 had prevented India from sustaining

higher growth rates. This has prompted the government to partially

open up infrastructure to the private sector allowing foreign

investment,[152][191] and most public infrastructure, barring railways, is

today constructed and maintained by private contractors, in

exchange for tax and other concessions from the government.[192]

Some 600 million Indians have no electricity at all.[193] While 80% of

Indian villages have at least an electricity line, just 44% of rural

households have access to electricity. Some half of the electricity is

stolen, compared with 3% in China. The stolen electricity amounts to

1.5% of GDP.[194][195] Transmission and distribution losses amount to

around 20%, as a result of an inefficient distribution system, handled

mostly by cash-strapped state-run enterprises.[196] Almost all of the

electricity in India is produced by the public sector. Power outages are

common, and many buy their own power generators to ensure

electricity supply.[193] As of December 2011,the monthly electricity

production was at 73,000 GWH[197], with an installed capacity of 1.86

GW.[100]In 2007, electricity demand exceeded supply by 15%.[193]

However, reforms brought about by the Electricity Act of 2003 caused

far-reaching policy changes, including mandating the separation of

generation, transmission and distribution aspects of electricity,

abolishing licencing requirements in generation and opening up the

sector to private players, thereby paving the way for creating a

competitive market-based electricity sector.[198] Substantial

improvements in water supply infrastructure, both in urban and rural

areas, have taken place over the past decade, with the proportion of

the population having access to safe drinking water rising from 66%

in 1991 to 92% in 2001 in rural areas, and from 82% to 98% in urban

areas. however, quality and availability of water supply remains a

major problem even in urban India, with most cities getting water for

only a few hours during the day.[199]

[edit] Economic disparities

Main articles: Economic disparities in India and Poverty in India

India continues to grow at a rapid pace, although the government

recently reduced its annual GDP growth projection from 9% to 8% for

the current fiscal year ending March 2012. The slowdown is marked

by a sharp drop in investment growth resulting from political

uncertainties, a tightening of macroeconomic policies aimed at

addressing a high fiscal deficit and high inflation (going well beyond

food and fuel prices), and from renewed concerns about the European

and US economies. Although the Government was quite successful in

cushioning the impact of the global financial crisis on India, it is now

clear that a number of MDG targets will only be met under the Twelfth

Five Year Plan (2012-17)..

— World Bank: India Country Overview 2011[156]

Illegal Slums next to high-rise commercial buildings in Kochi. millions

of people, mostly comprising rural residents who migrate to cities

seeking jobs, live in squalid conditions like these.[200]

A critical problem facing India's economy is the sharp and growing

regional variations among India's different states and territories in

terms of poverty, availability of infrastructure and socio-economic

development.[201] Six low-income states – Bihar, Chhattisgarh,

Jharkhand, Madhya Pradesh, Orissa and Uttar Pradesh – are home to

more than one third of India's population.[202] Severe disparities exist

among states in terms of income, literacy rates, life expectancy and

living conditions.[203]

The five-year plans, especially in the pre-liberalisation era, attempted

to reduce regional disparities by encouraging industrial development

in the interior regions and distributing industries across states, but

the results have not been very encouraging since these measures in

fact increased inefficiency and hampered effective industrial growth.[204] After liberalisation, the more advanced states have been better

placed to benefit from them, with well-developed infrastructure and

an educated and skilled workforce, which attract the manufacturing

and service sectors. The governments of backward regions are trying

to reduce disparities by offering tax holidays and cheap land, and

focusing more on sectors like tourism which, although being

geographically and historically determined, can become a source of

growth and develops faster than other sectors.[205][206]

Taxation in India

Taxes in India are levied by the Central Government and the state

governments. Some minor taxes are also levied by the local

authorities such the Municipality or the Local Council.

The authority to levy a tax is derived from the Constitution of India

which allocates the power to levy various taxes between the Centre

and the State. An important restriction on this power is Article 265 of

the Constitution which states that "No tax shall be levied or collected

except by the authority of law."[1] Therefore each tax levied or

collected has to be backed by an accompanying law, passed either by

the Parliament or the State Legislature. In 2010-11, the gross tax

collection amounted to Rs 7.92 trillion, with direct tax and indirect tax

contributing 56% and 44% respectively.)[2]

Contents [hide] 

1 Central Board of Direct Taxes

2 Constitutionally established scheme of

taxation

o 2.1 Central government

o 2.2 State governments

3 Income Tax Act of 1961

o 3.1 Income tax rates

4 Service tax

5 Other major taxation laws

6 See also

7 Reference list

[edit] Central Board of Direct Taxes

The Central Board of Direct Taxes (CBDT) is a part of the Department

of Revenue in the Ministry of Finance, Government of India. The CBDT

provides essential inputs for policy and planning of direct taxes in

India and is also responsible for administration of the direct tax laws

through Income Tax Department. The CBDT is a statutory authority

functioning under the Central Board of Revenue Act, 1963.It is India’s

official FATF unit.The Central Board of Revenue as the Department

apex body charged with the administration of taxes came into

existence as a result of the Central Board of Revenue Act, 1924.

Initially the Board was in charge of both direct and indirect taxes.

However, when the administration of taxes became too unwieldy for

one Board to handle, the Board was split up into two, namely the

Central Board of Direct Taxes and Central Board of Excise and

Customs with effect from 1.1.1964. This bifurcation was brought

about by constitution of the two Boards u/s 3 of the Central Boards of

Revenue Act, 1963.

Organisational Structure of the Central Board of Direct

Taxes : The CBDT is headed by Chairman and also comprises six

members, all of whom are Special Secretary to Government of India.

Member (Income Tax)

Member (Legislation and Computerisation)

Member (Revenue)

Member (Personnel & Vigilance)

Member (Investigation)

Member (Audit & Judicial)

The Chairman and Members of CBDT are selected from Indian

Revenue Service (IRS), a premier civil service of India, whose

members constitute the top management of Income Tax Department.

[edit] Constitutionally established

scheme of taxation

Article 246[3] of the Indian Constitution, distributes legislative powers

including taxation, between the Parliament of India and the State

Legislature. Schedule VII[4] enumerates these subject matters with the

use of three lists;

List - I entailing the areas on which only the parliament is

competent to make laws,

List - II entailing the areas on which only the state legislature

can make laws, and

List - III listing the areas on which both the Parliament and the

State Legislature can make laws upon concurrently.

Separate heads of taxation are is no head of taxation in the

Concurrent List (Union and the States have no concurrent power of

taxation).[5] The list of thirteen Union heads of taxation and the list of

nineteen State heads are given below:[5]

[edit] Central government

S.

No.Parliament of India

1 Taxes on income other than agricultural income (List I, Entry 82)

2 Duties of customs including export duties (List I, Entry 83)

3

Duties of excise on tobacco and other goods manufactured or

produced in India except (i) alcoholic liquor for human

consumption, and (ii) opium, Indian hemp and other narcotic

drugs and narcotics, but including medicinal and toilet

preparations containing alcohol or any substance included in (ii).

(List I, Entry 84)

4 Corporation Tax (List I, Entry 85)

5

Taxes on capital value of assets, exclusive of agricultural land, of

individuals and companies, taxes on capital of companies (List I,

Entry 86)

6Estate duty in respect of property other than agricultural land

(List I, Entry 87)

7Duties in respect of succession to property other than agricultural

land (List I, Entry 88)

8Terminal taxes on goods or passengers, carried by railway, sea or

air; taxes on railway fares and freight (List I, Entry 89)

9Taxes other than stamp duties on transactions in stock

exchanges and futures markets (List I, Entry 90)

10Taxes on the sale or purchase of newspapers and on

advertisements published therein (List I, Entry 92)

11

Taxes on sale or purchase of goods other than newspapers,

where such sale or purchase takes place in the course of inter-

State trade or commerce (List I, Entry 92A)

12Taxes on the consignment of goods in the course of inter-State

trade or commerce (List I, Entry 93A)

13 All residuary types of taxes not listed in any of the three lists (List

I, Entry 97)

[edit] State governments

S.

No.State Legislature

1

Land revenue, including the assessment and collection of

revenue, the maintenance of land records, survey for revenue

purposes and records of rights, and alienation of revenues (List II,

Entry 45)

2 Taxes on agricultural income (List II, Entry 46)

3Duties in respect of succession to agricultural income (List II,

Entry 47)

4 Estate Duty in respect of agricultural income (List II, Entry 48)

5 Taxes on lands and buildings (List II, Entry 49)

6 Taxes on mineral rights (List II, Entry 50)

7

Duties of excise for following goods manufactured or produced

within the State (i) alcoholic liquors for human consumption, and

(ii) opium, Indian hemp and other narcotic drugs and narcotics

(List II, Entry 51)

8Taxes on entry of goods into a local area for consumption, use or

sale therein (List II, Entry 52)

9 Taxes on the consumption or sale of electricity (List II, Entry 53)

10Taxes on the sale or purchase of goods other than newspapers

(List II, Entry 54)

11

Taxes on advertisements other than advertisements published in

newspapers and advertisements broadcast by radio or television

(List II, Entry 55)

12Taxes on goods and passengers carried by roads or on inland

waterways (List II, Entry 56)

13 Taxes on vehicles suitable for use on roads (List II, Entry 57)

14 Taxes on animals and boats (List II, Entry 58)

15 Tolls (List II, Entry 59)

16 Taxes on profession, trades, callings and employments (List II,

Entry 60)

17 Capitation taxes (List II, Entry 61)

18Taxes on luxuries, including taxes on entertainments,

amusements, betting and gambling (List II, Entry 62)

19 Stamp duty (List II, Entry 63)

Any tax levied by the government which is not backed by law or is

beyond the powers of the legislating authority may be struck down as

unconstitutional.

[edit] Income Tax Act of 1961

Main article: Income tax in India

The major tax enactment in India is the Income Tax Act of 1961

passed by the Parliament, which imposes a tax on income of

individuals and corporations.[6] This Act imposes a tax on income

under the following five heads:[7]

Income from house and property,

Income from business and profession,

Income from salaries,

Income in the form of Capital gains, and

Income from other sources

However, this Act is about to be repealed and be replaced with a new

Act which consolidates the law relating to Income Tax and Wealth

Tax, the new proposed legislation is called the Direct Taxes Code

(to become the Direct Taxes Code, Act 2010). The new Act is

purported to come into effect from 1 April 2012.

[edit] Income tax rates

In terms of the Income Tax Act, 1961, a tax on income is levied on

individuals, corporations and body of persons. The rate of taxes are

prescribed every year by the Parliament in the Finance Act, popularly

called the Budget. In terms of the Finance Act, 2009, the rate of tax

for individuals, HUF, Association of Persons (AOP) and Body of

individuals (BOI) is as under;

A surcharge of 2.50% of the total tax liability is applicable in

case the Payee is a Non-Resident or a Foreign Company; where

the total income exceeds Rs 10,000,000.

Note : -

Education cess is applicable @ 3 per cent on income tax, inclusive of

surcharge if there is any. A marginal relief may be provided to ensure

that the additional IT payable, including surcharge, on excess of

income over Rs 1,000,000 is limited to an amount by which the

income is more than this mentioned amount.

[edit] Service tax

Service tax is a part of Central Excise in India.[8] It is a tax levied on

services provided in India, except the State of Jammu and Kashmir.

The responsibility of collecting the tax lies with the Central Board of

Excise and Customs(CBEC).

The Finance Minister of India, Pranab Mukherjee in his Budget speech

has indicated the government's intent of merging all taxes like

Service Tax, Excise and VAT into a common Goods and Service Tax by

the year 2011. To achieve this objective, the rate of Central Excise

and Service Tax will be progressively altered and brought to a

common rate.[citation needed] In budget presented for 2008-2009 It was

announced that all Small service providers whose turnover does not

exceed Rs10 lakhs need not pay service tax.

[edit] Other major taxation laws

Other major taxation laws enacted by the Parliament are;

1. Wealth Tax Act, which has a regular history of being passed and

repealed;

2. Service Tax, imposed under Finance Act, 1994, which taxes the

provision of services provided by service providers within India

or services imported by Indian from outside India;

3. Central Excise Act, 1944, which imposes a duty of excise on

goods manufactured or produced in India;

4. Customs Act, 1962, which imposes duties of customs,

counterveiling duties and anti-dumping duties on goods

imported in India;

5. Central Sales Tax, 1956, which imposes sales tax on goods sold

in inter-state trade or commerce in India;

6. Transaction Tax, which taxes transactions of sale of securities

and other specified transactions;

The major taxation enactments passed by the State Legislatures are

in the nature of the following;

1. Excise duties on tobacco, alcohol and narcotics;

2. Sales tax, on sale of goods within the State;

3. Stamp duties, on sale of property situated within the State;

4. Entertainment taxes

Socio-economic issues in India

Since India's Independence in 1947, country has faced several social

and economic issues.

Contents [hide] 

1 Overpopulation

2 Economic issues

o 2.1 Poverty

o 2.2 Sanitation

o 2.3 Corruption

3 Education

o 3.1 Initiatives

o 3.2 linkage between education and economic

growth

o 3.3 Measurement of returns to school

o 3.4 Issues

4 Violence

o 4.1 Religious violence

o 4.2 Terrorism

o 4.3 Naxalism

o 4.4 Caste related violence

5 See also

6 References

[edit] Overpopulation

Further information: Family planning in India and Demographics of

India

India suffers from the problem of overpopulation. The population of

india is very high- 1.2 billion approx. [1][2][3] Though India ranks second

in population, it ranks 33 in terms of population density below

countries such as The Netherlands, South Korea and Japan. Indira

Gandhi, Prime Minister of India, had implemented a forced

sterilization programme in the early 1970s but the programme failed.

Officially, men with two children or more had to submit to

sterilization, but many unmarried young men, political opponents and

ignorant, poor men were also believed to have been sterilized. This

program is still remembered and criticized in India, and is blamed for

creating a public aversion to family planning, which hampered

Government programmes for decades.[4]

[edit] Economic issues

Further information: Economy of India

[edit] Poverty

Main article: Poverty in India

Percent of population living under the poverty line

One-third of India's population (roughly equivalent to the entire

population of the United States) lives below the poverty line and India

is home to one-third of the world's poor people.

Though the middle class has gained from recent positive economic

developments, India suffers from substantial poverty. According to

the new World Bank's estimates on poverty based on 2005 data, India

has 456 million people, 41.6% of its population, living below the new

international poverty line of $1.25 (PPP) per day. The World Bank

further estimates that 33% of the global poor now reside in India.

Moreover, India also has 828 million people, or 75.6% of the

population living below $2 a day, compared to 72.2% for Sub-Saharan

Africa.[5][6][7][8]

Wealth distribution in India is fairly uneven, with the top 10% of

income groups earning 33% of the income.[9] Despite significant

economic progress, 1/4 of the nation's population earns less than the

government-specified poverty threshold of $0.40/day. Official figures

estimate that 27.5%[10] of Indians lived below the national poverty line

in 2004–2005.[11] A 2007 report by the state-run National Commission

for Enterprises in the Unorganized Sector (NCEUS) found that 25% of

Indians, or 236 million people, lived on less than 20 rupees per day[12]

with most working in "informal labor sector with no job or social

security, living in abject poverty."[13]

[edit] Sanitation

Main article: Water supply and sanitation in India

Lack of proper sanitation is a major concern for India. Statistics

conducted by UNICEF have shown that only 31% of India’s population

is using improved sanitation facilities as of 2008.[14] It is estimated

that one in every ten deaths in India is linked to poor sanitation and

hygiene. Diarrhoea is the single largest killer and accounts for one in

every twenty deaths.[14] Around 450,000 deaths were linked to

diarrhoea alone in 2006, of which 88% were deaths of children below

five.[14] Studies by UNICEF have also shown that diseases resulting

from poor sanitation affects children in their cognitive development.[15]

Without proper sanitation facilities in India, people defecate in the

open or rivers. One gram of faeces could potentially contain 10 million

viruses, one million bacteria, 1000 parasite cysts and 100 worm eggs.[16] The Ganges river in India has a stunning 1.1 million litres of raw

sewage being disposed into it every minute.[16] The high level of

contamination of the river by human waste allow diseases like cholera

to spread easily, resulting in many deaths, especially among children

who are more susceptible to such viruses.[17]

A lack of adequate sanitation also leads to significant economic losses

for the country. A Water and sanitation Program (WSP) study The

Economic Impacts of Inadequate Sanitation in India (2010) showed

that inadequate sanitation caused India considerable economic

losses, equivalent to 6.4 per cent of India’s GDP in 2006 at US$53.8

billion (Rs.2.4 trillion).[18] In addition, the poorest 20% of households

living in urban areas bore the highest per capita economic impacts of

inadequate sanitation.[19]

Recognising the importance of proper sanitation, the Government of

India started the Central Rural Sanitation Program (CRSP) in 1986, in

hope of improving the basic sanitation amenities of rural areas. This

program was later reviewed and, in 1999, the Total Sanitation

Campaign (TSC) was launched. Programs such as Individual

Household Latrines (IHHL), School Sanitation and Hygiene Education

(SSHE), Community Sanitary Complex, Anganwadi toilets were

implemented under the TSC.[20]

Through the TSC, the Indian Government hopes to stimulate the

demand for sanitation facilities, rather than to continually provide

these amenities to its population. This is a two-pronged strategy,

where the people involved in this program take ownership and better

maintain their sanitation facilities, and at the same time, reduces the

liabilities and costs on the Indian Government. This would allow the

government to reallocate their resources to other aspects of

development.[21] Thus, the government set the objective of granting

access to toilets to all by 2017.[22] To meet this objective, incentives

are given out to encourage participation from the rural population to

construct their own sanitation amenities. In addition, the government

has set out to educate its people on the importance and benefits of

proper sanitation through mass communication and interpersonal

communication techniques. This is done through mass and print

media to reach out to a larger audience and through group

discussions and games to better engage and interact with the

individual.[23]

Extent of corruption in Indian states, as measured in a 2005 study by

Transparency International India. (Darker regions are more corrupt)[24]

[edit] Corruption

Main article: Corruption in India

Corruption is widespread in India. India is ranked 72 out of a 179

countries in Transparency International's Corruption Perceptions

Index, although its score has improved consistently from 2.7 in 2002

to 3.5 in 2007.[25] Corruption has taken the role of a pervasive aspect

of Indian politics and bureaucracy.[26]

In India, corruption takes the form of bribes, evasion of tax and

exchange controls, embezzlement, etc. A 2005 study done by

Transparency International (TI) India found that more than 50% had

firsthand experience of paying bribe or peddling influence to get a job

done in a public office.[24] The chief economic consequences of

corruption are the loss to the exchequer, an unhealthy climate for

investment and an increase in the cost of government-subsidised

services. The TI India study estimates the monetary value of petty

corruption in 11 basic services provided by the government, like

education, healthcare, judiciary, police, etc., to be around Rs.21,068

crores.[24] India still ranks in the bottom quartile of developing nations

in terms of the ease of doing business, and compared to China and

other lower developed Asian nations, the average time taken to

secure the clearances for a startup or to invoke bankruptcy is much

greater.[27]

[edit] Education

Further information: Education in India and Literacy in India

[edit] Initiatives

Since the Indian Constitution was finalized in 1949, education has

remained one of the priorities of the Indian government. The first

education minister Maulana Azad founded a system of education

which aimed to provide free education at the primary level. Primary

education was made free and compulsory for children from 6-14, and

child labour was banned. The government introduced incentives to

education and disincentives for not receiving education – for instance,

the provision of mid-day meals in schools were introduced. Many

similar initiatives echoed, and the largest of such initiatives is Sarva

Shiksha Abhiyan, which actively promoted “Education for All”. In line

with this, the United Progressive Alliance (UPA) aimed to increase

their expenditure on education to 6% of its Gross Domestic Product

(GDP) from values fluctuating about 3% through their National

Common Minimum Programme (NCMP) in 2004. The Right of Children

to Free and Compulsory Education Act was also imposed in 2009.

Despite these initiatives, education continues to persist as an

impediment to development.

[edit] linkage between education and economic growth

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There is a direct linkage between education and economic growth.

This was given by Theodore W. Schultz.[28] Here labour plays a very

important role.[29]

[edit] Measurement of returns to school

Measurement of returns to school (r) is measured by: Y*= wages of

illiterate people Y= wages of people after education C= cost of

education

r= (Y - Y*)/(Y* + C)

Where Y - Y* is benefit.

Now this is only for 1 year

so,

Y - Y*/(Y* + C)x

Where x is the number of years.

For developed countries Y* is higher than the developing countries.

But the leap from Y* to Y is greater in developing countries. Therefore

in developing countries the rate of returns to school is much much

higher. In developing countries the rate of return of investing on

human capital is much higher.

There is a difference between the rate of returns for boys and girls.

The returns is very less in comparison to boys. The rate of return for

boys is much greater.

This mathematical formula was given by Psacharopoulos. He was a

Greek economist.[30]

[edit] Issues

While many schools were built, they had poor infrastructure and

inadequate facilities. Schools in the rural areas were especially

affected. According to District Information System for Education

(DISE) in India in 2009, only about 51.5% of all schools in India have

boundary walls, 16.65% have computers and 39% have electricity. Of

which, only 6.47% of primary schools and 33.4% of secondary schools

have computers, and only 27.7% of primary schools have electricity.[31] Learning in poorly furnished schools was not conducive, resulting

in poor quality education.

Furthermore, the absence rates of teachers and students were high,

while their retainment rates low. The incentives for going to school

were not apparent, while punishment for absence was not enforced.

Despite the government’s decree on compulsory education and the

child labour ban, many children were still missing classes to go to

work. The government did not interfere even when children missed

school.

Also, online country studies publications by the Federal Research

Division of the Library of Congress stated that “it was not unusual for

the teacher to be absent or even to subcontract the teaching work to

unqualified substitutes”.[32] This exacerbates the problems of the lack

of qualified teachers. Currently, the student-teacher ratio remains

high at around 32, which is not much of an improvement since 2006

when the ratio was 34.[33]

Economic and social disparities also plague the fundamentals of the

education system. Rural children are less able to receive education

because of greater opportunity costs, since rural children have to

work to contribute to the family’s income. According to the Annual

Status of Education in 2009, the average attendance rate of students

in the rural states is about 75%. Though this rate varies significantly,

states like Uttar Pradesh and Bihar had more than 40% absentees

during a random visit to their schools. In the urban states, more than

90% of the students were present in their schools during a visit.[34]

[edit] Violence

[edit] Religious violence

Main article: Religious violence in India

Further information: Hindutva, Hindu nationalism, Islamic

Extremism, Khalistan movement, Islamic terrorism, and Christian

terrorism

See also: Anti-Christian violence in India, Anti-Christian violence in

Karnataka, and Religious violence in Orissa

The 16th Century Babri Mosque,was destroyed by the members of

VHP and Bajrang Dal in 1992,[35] resulting in nationwide religious riots

Constitutionally India is a secular state, [36] but large-scale violence

have periodically occurred in India since independence. In recent

decades, communal tensions and religion-based politics have become

more prominent. .[37] Although India is generally known for religious

pluralism, [38] the Hindutva ideology propagates that India belongs to

the Hindus, and the Christians and the Muslims are "aliens", [39] and

many proponents of this ideology portray violence against Muslims

and Christians as a form of "self-defence" against "invaders". [40] The

Hindutva ideology is at the core of Sangh Parivar politics and its

expression in violence against religious minority. [39] Throughout the

history of post-Independence India, more religion and communal

violences were happen. [41] As the Hindutva ideology has grown more

powerful over the years, many Hindutva activists have partaken in

riots against minority communities. [42] Over the last decade, religious

violence in India has increasingly become what academics believe to

be organized pogroms to eliminate minority communities. [43] [44] [45]

Some state governments in India have been accused of not

effectively prosecuting those who attack religious minorities. [46] Major

religious violent incidents include Ayodhya debate, Bombay Riots,

1993 Bombay bombings, 2002 Gujarat violence.

Many Ahmedabad's buildings were set on fire during 2002 Gujarat

violence

Although related, Hinduism and Hindutva are different. Hinduism is a

religion while Hindutva is a political ideology. The Hindutva

movement is not supported by majority of Hindus. Some tolerant or

"secular" Hindus use the term "Hindu Taliban" to describe the

supporters of the Hindutva movement.[47] Fukuoka Asian Culture Prize-

winning Indian sociologist and cultural and political critic Ashis Nandy

argued "Hindutva will be the end of Hinduism."[48]

In Jammu and Kashmir, Since March 1990, estimates of between

250,000 to 300,000 pandits have migrated outside Kashmir due to

persecution by Islamic fundamentalists in the largest case of ethnic

cleansing since the partition of India.[49] The proportion of Kashmiri

Pandits in the Kashmir valley has declined from about 15% in 1947 to,

by some estimates, less than 0.1% since the insurgency in Kashmir

took on a religious and sectarian flavor.[50] Many Kashmiri Pandits

have been killed by Islamist terrorists in incidents such as the

Wandhama massacre and the 2000 Amarnath pilgrimage massacre.[51][52][53][54][55]

In recent years, there has been a sharp increase in violent attacks on

Christians in India, often perpetrated by Hindu Nationalists.[56] The

acts of violence include arson of churches, re-conversion of Christians

to Hinduism, distribution of threatening literature, burning of Bibles,

raping of nuns, murder of Christian priests and destruction of

Christian schools, colleges, and cemeteries.[57][58] The Sangh Parivar

and related organisations have stated that the violence is an

expression of "spontaneous anger" of "vanvasis" against "forcible

conversion" activities undertaken by missionaries,[57][59][60] a claim

described as "absurd" and rejected by scholars.[57] Between 1964 and

1996, thirty-eight incidents of violence against Christians were

reported.[57] In 1997, twenty-four such incidents were reported.[61] In

2007 and 2008 there was a further flare up of tensions in Orissa, the

first following the Christians' putting up a Pandhal in land traditionally

used by Hindus and the second after the unprovoked murder of a

Hindu Guru and four of his disciples while observing Janmashtami

puja. This was followed by an attack on a 150-year-old church in

Madhya Pradesh,[62] and more attacks in Karnataka,[63]

[edit] Terrorism

Main article: Terrorism in India

[show]

v

t

e

Terrorist attacks in India

(since 2001)

The regions with long term terrorist activities today are Jammu and

Kashmir, Central India (Naxalism) and Seven Sister States

(independence and autonomy movements). In the past, the Punjab

insurgency led to militant activities in the Indian state of Punjab as

well as the national capital Delhi (Delhi serial blasts, anti-Sikh riots).

As of 2006, at least 232 of the country’s 608 districts were afflicted,

at differing intensities, by various insurgent and terrorist movements.[64]

Terrorism in India has often been alleged to be sponsored by

Pakistan. After most acts of terrorism in India, many journalists and

politicians accuse Pakistan's intelligence agency, the Inter-Services

Intelligence of playing a role. Recently, both the US and Afghanistan

have accused Pakistan of carrying out terrorist acts in Afghanistan.[65]

[edit] Naxalism

Main article: Naxalism

Map showing the districts where the Naxalite movement is active

Naxalism is an informal name given to communist groups that were

born out of the Sino-Soviet split in the Indian communist movement.

Ideologically they belong to various trends of Maoism. Initially the

movement had its centre in West Bengal. In recent years, they have

spread into less developed areas of rural central and eastern India,

such as Chattisgarh and Andhra Pradesh through the activities of

underground groups like the Communist Party of India (Maoist).[66] The

CPI (Maoist) and some other Naxal factions are considered terrorists

by the Government of India and various state governments in India.[67]

[edit] Caste related violence

Main articles: Caste system in India, Caste politics in India, and Caste-

related violence in India

Over the years, various incidents of violence against Dalits, such as

Kherlanji Massacre have been reported from many parts of India. At

the same time, many violent protests by Dalits, such as the 2006

Dalit protests in Maharashtra, have been reported as well.

The Mandal Commission was established in 1979 to "identify the

socially or educationally backward",[68] and to consider the question of

seat reservations and quotas for people to redress caste

discrimination. In 1980, the commission's report affirmed the

affirmative action practice under Indian law whereby members of

lower castes were given exclusive access to a certain portion of

government jobs and slots in public universities. When V. P. Singh

Government tried to implement the recommendations of Mandal

Commission in 1989, massive protests were held in the country. Many

alleged that the politicians were trying to cash in on caste-based

reservations for purely pragmatic electoral purposes.

In 1990s, many parties Bahujan Samaj Party (BSP), the Samajwadi

Party and the Janata Dal started claiming that they are representing

the backward castes. Many such parties, relying primarily on

Backward Classes' support, often in alliance with Dalits and Muslims,

rose to power in Indian states.[69] At the same time, many Dalit

leaders and intellectuals started realizing that the main Dalit

oppressors were so-called Other Backward Classes,[70] and formed

their own parties, such as the Indian Justice Party. The Congress (I) in

Maharashtra long relied on OBCs' backing for its political success.[69]

Bharatiya Janata Party has also showcased its Dalit and OBC leaders

to prove that it is not an upper-caste party. Bangaru Laxman, the

former BJP president (2001–2002) was a Dalit. Sanyasin Uma Bharati,

former CM of Madhya Pradesh , who belongs to OBC caste, was a

former BJP leader. In 2006 Arjun Singh cabinet minister for MHRD of

the UPA government was accused of playing caste politics when he

introduced reservations for OBCs in educational institutions all around

Corruption in India

From Wikipedia, the free encyclopedia

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Overview of the index of perception of corruption, 2010.

Political corruption

Concepts

Bribery · Cronyism · Economics of corruption

Electoral fraud · Nepotism · Slush fund

Corruption by country

Angola · Armenia · Bahrain · Canada · Chile ·

China

Colombia · Cuba · Ghana · India · Indonesia ·

Iran

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Political, bureaucratic, corporate and individual corruption in India

are major concerns. A 2005 study conducted by Transparency

International in India found that more than 55% of Indians had first-

hand experience of paying bribes or influence peddling to get jobs

done in public offices successfully.[1][2]

Transparency International estimates that truckers pay US$5 billion in

bribes annually.[3] In 2011 India was ranked 95th out of 178 countries

in Transparency International's Corruption Perceptions Index.

In the book 'Corruption in India: The DNA and RNA' authored by

Professor Bibek Debroy and Laveesh Bhandari say that the public

officials in India may be cornering as much as Rs.92,122 crore

($18.42 billion), or 1.26 per cent of the GDP, through corruption.[4] The

books estimates that corruption has virtually enveloped India growing

annually by over 100 percent[5] and most bribery is accrued from the

transport industry, real estate and "other public services".[6] On March

31, 2010 the Comptroller and Auditor General of India said that

unutilised committed external assistance was of the order of

Rs.1,05,339 crore.”[7]

“The recent scams involving unimaginably big amounts of money,

such as the 2G spectrum scam, are well known. It is estimated that

more than trillion dollars are stashed away in foreign havens, while

80% of Indians earn less than 2$ per day and every second child is

malnourished. It seems as if only the honest people are poor in India

and want to get rid of their poverty by education, emigration to cities,

and immigration, whereas all the corrupt ones, are getting rich

through scams and crime. It seems as if India is a rich country filled

with poor people",[8] the organisers of Dandi March II in the United

States said.[9]

Contents [hide] 

1 History

2 Politics

3 Bureaucracy

o 3.1 Land and property

o 3.2 Tendering processes and awarding

contracts

o 3.3 Medicine

o 3.4 Income tax department

o 3.5 Preferential award of public resources

o 3.6 Driver Licensing

4 Black money

o 4.1 Black Money in Switzerland

5 Judiciary

6 Armed forces

7 Right to Information Act

8 Ombudsmen

9 Whistleblowers

10 Anti-Corruption Laws in India

11 Anti-corruption police and courts

12 Anti-corruption organizations

13 Effects of corruption

o 13.1 Economic Concerns

14 See also

15 References

16 Further reading

17 External links

[edit] History

The economy of India was under socialist-inspired policies for an

entire generation from the 1950s until the late 1980s. The economy

was characterized by extensive regulation, protectionism, and public

ownership, policies vulnerable to pervasive corruption and slow

growth.[10][11][12][13] License Raj was often at the core of corruption.

The Vohra Report, submitted by the former Indian Union Home

Secretary, N.N. Vohra, in October 1993, studied the problem of the

criminalisation of politics and of the nexus among criminals,

politicians and bureaucrats in India.

The report contained several observations made by official agencies

on the criminal network which was virtually running a parallel

government. It also discussed criminal gangs who enjoyed the

patronage of politicians — of all political parties — and the protection

of government functionaries. It revealed that political leaders had

become the leaders of gangs. Over the years criminals had been

elected to local bodies, State Assemblies, and even the Parliament.

The unpublished annexures to the Vohra Report are believed to

contain highly explosive material.

According to Jitendra Singh, "in the bad old days, particularly pre-

1991, when the License Raj held sway, and by design, all kinds of free

market mechanisms were hobbled or stymied, and corruption

emerged almost as an illegitimate price mechanism, a shadowy

quasi-market, such that scarce resources could still be allocated

within the economy, and decisions could get made. ... These were

largely distortions created by the politico-economic regime. While a

sea change has occurred in the years following 1991, some of the

distorted cultural norms that took hold during the earlier period are

slowly being repaired by the sheer forces of competition. The process

will be long and slow, however. It will not change overnight."[14] One of

the major problems and obstacles to development that many

developing countries face is corruption by greedy, power-hungry

politicians, which is endemic in certain parts of the world.

[edit] Politics

As of December 2008, 120 of India's 522 parliament members were

facing criminal charges.[15] Many of the biggest scandals since 2010

have involved very high levels of government, including Cabinet

Ministers and Chief Ministers, such as in the 2G spectrum scam, the

2010 Commonwealth Games scam and the Adarsh Housing Society

scam, mining scandal in Karnataka and cash for vote scam.

[edit] Bureaucracy

A 2005 study done by Transparency International (TI) in India found

that more than 50% of the people had firsthand experience of paying

bribe or peddling influence to get a job done in a public office.[2] Taxes

and bribes are common between state borders; Transparency

International estimates that truckers pay annually US$5 billion in

bribes.[3] A 2009 survey of the leading economies of Asia, revealed

Indian bureaucracy to be not just least efficient out of Singapore,

Hong Kong, Thailand, South Korea, Japan, Malaysia, Taiwan, Vietnam,

China, Philippines and Indonesia; further it was also found that

working with India's civil servants was a "slow and painful" process.[16]

[edit] Land and property

Officials often steal state property. In cities and villages throughout

India, consisting of municipal and other government officials, elected

politicians, judicial officers, real estate developers and law

enforcement officials, acquire, develop and sell land in illegal ways.[17]

[edit] Tendering processes and awarding contracts

Government officials having discretionary powers in awarding

contracts engage in preferential treatment for selected bidders and

display negligence in quality control processes[citation needed]. Many state-

funded construction activities in India, such as road building, are

dominated by construction mafias, which are groupings of corrupt

public works officials, materials suppliers, politicians and construction

contractors.[18] Shoddy construction and material substitution (e.g.

mixing sand in cement while submitting expenses for cement) result

in roads and highways being dangerous, and sometimes simply

washed away when India's heavy monsoon season arrives.[19]

[edit] Medicine

In Government Hospitals, corruption is associated with non

availability/duplication of medicines, getting admission, consultations

with doctors and availing diagnostic services. [2]

[edit] Income tax department

There have been several cases of collusion of officials of the income

tax department of India for a favorable tax treatment and relaxed

prosecutions in return for bribes.[20][21]

[edit] Preferential award of public resources

See also: Illegal mining in India

As detailed earlier, land in areas with short supply is relatively

common with government entities awarding public land to private

concerns at negligible rates. Other examples include the award of

mining leases to private companies without a levy of taxes that is

proportionate to the market value of the ore.[citation needed]

[edit] Driver Licensing

A study conducted between 2004 and 2005 found that India’s driver

licensing procedure was a hugely distorted bureaucratic process and

allows drivers to get licenses despite their low driving ability through

promoting the usage of agents. Individuals with high willingness to

pay make a significant payment above the official fee and most of

these extra payments are made to agents, who act as an

intermediary between bureaucrats and applicants[22]. The average

license getter paid Rs 1080, approximately 2.5 times the official fee of

Rs 450, in order to obtain a license. On average, those who hired

agents had a lower driving ability, with agents helping unqualified

drivers obtain licenses and bypass the legally required driving

examination. Among the surveyed individuals, approximately 60% of

the license holders did not take the licensing exam and 54% of those

license holders failed an independent driving test[23].

Agents are the channels of inefficient corruption in this bureaucratic

driver licensing system, facilitating access to licenses among those

who are unqualified to drive. Some of the failures of this licensing

system are caused by corrupt bureaucrats who collaborate with

agents by creating additional barriers within the system against those

who did not hire agents[24].

[edit] Black money

Main article: Indian black money

Black money refers to money removed from the official economy (via

corruption, bribery, tax evasion, etc.) and stored outside of the

country. A November 2010 report from the Washington-based Global

Financial Integrity estimates that India lost at least US$462 billion in

illicit financial flows, another word for black money, from 1948

through 2008. The report also estimated the size of India's

underground economy at approximately US$640 billion at the end of

2008 or roughly 50% of the nation's GDP.[25]

[edit] Black Money in Switzerland

According to a 2010 The Hindu article, unofficial estimates indicate

that Indians had over US$1456 billion in black money stored in Swiss

banks (approximately USD 1.4 trillion).[26] While some news reports

claimed that data provided by the Swiss Banking Association Report

(2006) showed India has more black money than the rest of the world

combined,[27][28] a more recent report quoted the SBA's Head of

International Communications as saying that no such official statistics

exist.[29] Another report said that Indian-owned Swiss bank account

assets are worth 13 times the country’s national debt.The current

investigation is undertaken by the Income Tax Department.[30]

[edit] Judiciary

According to Transparency International, judicial corruption in India is

attributable to factors such as "delays in the disposal of cases,

shortage of judges and complex procedures, all of which are

exacerbated by a preponderance of new laws".[31]

[edit] Armed forces

The Indian Armed Forces have witnessed corruption involving senior

armed forces officers from the Indian Army, Indian Navy and Indian

Air Force. A number of scandals in the 2000-2010 period damaged the

military's reputation; such scandals included skimming of armed

forces money, re-selling of government property, and faking combat

missions.[32]

[edit] Right to Information Act

Main article: Right to Information Act

The Right to Information Act (2005) and equivalent acts in the states,

that require government officials to furnish information requested by

citizens or face punitive action, computerization of services and

various central and state government acts that established vigilance

commissions have considerably reduced corruption or at least have

opened up avenues to redress grievances.[2][33] The 2006 report by

Transparency International puts India at the 70th place and states

that significant improvements were made by India in reducing

corruption.[34][35]

[edit] Ombudsmen

Main article: 2011 Indian anti-corruption movement

The Lokayukta is an anti-corruption organization in the Indian states.[36][37] These institutions are based on the Ombudsman in Scandinavian

countries. An amendment to the Constitution has been proposed to

implement the Lokayukta uniformly across Indian States as a three-

member body, headed by a retired Supreme Court judge or high court

chief justice, and comprise of the state vigilance commissioner and a

jurist or an eminent administrator as other members.[38]

Social welfare worker Anna Hazare has led a movement to compel the

Indian Government to notify the Committee for the implementation of

the Lokayukta against corruption as an independent body and also

giving enough powers to the Lokayukta to also receive corruption

complaints against politicians, bureaucrats and even sitting judges.

Anna Hazare is currently pursuing an agenda to pass a bill called Jan

Lokpal bill, and he has gathered the support of many citizens residing

in metropolitan cities of India. He was on an indefinite fast at the

Ramlila Grounds, Delhi, in order to campaign for the cause.[39]

[edit] Whistleblowers

See also: Whistleblower protection in India

Whistleblowers play a major role in the fight against corruption. India

currently does not have a law to protect whistleblowers, which was

highlighted by the assassination of Satyendra Dubey. Indian courts

are regularly ordering probe in cases of murders or so-called suicide

of several whistle blowers. One of the latest cases of such murder is

of V Sasindran Company Secretary of Palakkad based Malabar

Cement Limited, a Government company in Kerala and his two minor

children, Kerala High Court ordered CBI probe on 18 February 2011.

Initially, CBI showed its unwillingness for probing into such cases

citing over-burden as a reason.

[edit] Anti-Corruption Laws in India

Public servants in India can be penalized for corruption under the

Indian Penal Code, 1860

The Prevention of Corruption Act, 1988

The Benami Transactions (Prohibition) Act, 1988 to prohibit

benami transactions.

Prevention of Money Laundering Act, 2002

India is also a signatory (not ratified) to the UN Convention against

Corruption since 2005. The Convention covers a wide range of acts of

corruption and also proposes certain preventive policies.[40]

[edit] Anti-corruption police and courts

The income tax department of India, Central Vigilance Commission

and Central Bureau of Investigation all deal with anti-corruption

initiatives. Certain states such as Andhra Pradesh (Andhra Pradesh

Anti-corruption Bureau) and Karnataka (Lokayukta) also have their

own anti-corruption agencies and courts.[41][36]

[edit] Anti-corruption organizations

A variety of organizations have been created in India to actively fight

against corrupt government and business practices. Notable

organizations include:

Bharat Swabhiman Trust established by well known Yog Guru

Swami Ramdev running a large campaign against black money

and corruption since last 10 years.

5th Pillar is most known for the creation of the zero rupee note,

a valueless note designed to be given to corrupt officials when

they request bribes.

India Against Corruption is a movement created by a citizens

from a variety of professions and statuses to work against

corruption in India. It is currently headed by Anna Hazare.[42]

Jaago Re! One Billion Votes is an organization originally founded

by Tata Tea and Janaagraha to increase youth voter

registration.[43] They have since expanded their work to include

other social issues, including corruption.[44]

Association for Social Transparency, Rights and Action (ASTRA)

is an NGO focused on grass-roots work to fight corruption in

Karnataka.

One organization, the Lok Satta Movement, has transformed itself

from a civil organization to a full-fledged political party, the Lok Satta

Party. The party has fielded candidates in Andhra Pradesh, Tamil

Nadu, and Bangalore. In 2009, it obtained its first elected post, when

Jayaprakash Narayan won the election for the Kukatpally Assembly

Constituency in Andrha Pradesh.

[edit] Effects of corruption

According to a report by KPMG, "high-level corruption and scams are

now threatening to derail the country's credibility and [its] economic

boom".[45]

[edit] Economic Concerns

Corruption may lead to further bureaucratic delay and inefficiency as

corrupted bureaucrats may introduce red tape to extract more

bribes[46]. Such inadequacies in institutional efficiency could affect

growth indirectly by lowering the private marginal product of capital

and investment rate[47]. Levine and Renelt showed that investment

rate is a robust determinant of economic growth[48]. According to the

neoclassical growth model, institutional variables contribute to

determining steady-state per capital income levels and speed of

convergence to its steady state, hence affecting its growth rate[49].

Bureaucratic inefficiency could also affect growth directly, such as

through misallocation of investments in the economy[50]. When a

country’s economy is below its steady-state income level, higher

corruption could result in lower growth, for a given level of income[51].

[edit] See also

India portal

Politics

portal

List of politicians in India charged with corruption

2011 Indian anti-corruption movement

Jan Lokpal Bill

Right to Public Services legislation

List of scandals in India

Corruption Perceptions Index

Licence Raj

Mafia Raj

Rent seeking

Lok Ayukta

Socio-economic issues in India

United Nations Convention against Corruption

Jan Lokpal Bill

From Wikipedia, the free encyclopedia

Jump to: navigation, search

This article may require copy editing for grammar, style, cohesion,

tone, or spelling. You can assist by editing it. (January 2012)

The Jan Lokpal Bill, also referred to as the Citizen's ombudsman

Bill is a draft anti-corruption bill drawn up by prominent civil society

activists seeking the appointment of a Jan Lokpal, an independent

corruption investigation body.[1] This draft bill has also proposed

improvements to the Lokpal and Lokayukta Bill 2011[2], which is

currently being passed by Lok Sabha in December 2011.[3]

The Jan Lokpal Bill aims to effectively deter corruption, redress

grievances of citizens, and protect whistle-blowers. If made into law,

the bill would create an independent ombudsman body called the

Lokpal (Sanskrit: protector of the people). The body would be

empowered to register and investigate complaints of corruption

against politicians and bureaucrats without prior government

approval.[4][5][6]

The prefix Jan (translation: citizens) signifies the fact that these

improvements include inputs provided by "ordinary citizens" through

an activist-driven, non-governmental public consultation.[7]

Contents

 [hide] 

1 Background

o 1.1 Lokpal Bill: Over four decades of failed attempts

1.1.1 Timeline of Lokpal and cost

o 1.2 Current anti-corruption laws and organizations

1.2.1 Central Vigilance Commission (CVC)

1.2.2 Central Bureau of Investigation (CBI)

o 1.3 Inspiration

2 Key features of proposed bill

3 Difference between government's and activists' drafts

o 3.1 Highlights

o 3.2 Details

4 Governments approach about Whistleblower protection & Citizen-

charter

5 Campaign for the Jan Lokpal Bill

o 5.1 Fast & Agitation – Phase 1

o 5.2 Drafting Committee

o 5.3 Fast & Agitation – Phase 2

o 5.4 Notable supporters and opposition

o 5.5 Logjam of Lokpal and Lokayukta Bill 2011

6 Criticisms of the Jan Lokpal Bill

o 6.1 Naïve approach

o 6.2 Extra-constitutional

o 6.3 Scope

o 6.4 Criticism from Aruna Roy, Arundhati Roy and NCPRI

o 6.5 The Director of CBI argued against merger of its anticorruption

wing with the Lokpal

7 Support for the Bill

o 7.1 Surveys

o 7.2 Legislator support

o 7.3 Social media

o 7.4 Online surveys

8 Parliamentary actions on the proposed legislation

9 See also

10 References

11 External links

[edit] Background

This section has been nominated to be checked for its neutrality.

Discussion of this nomination can be found on the talk page. (February

2012)

The word Lokpal was coined in 1963 by L.M.Singhvi, a Member of

Parliament during a debate in Parliament about grievance redressal

mechanisms. His son Dr. Abhishek Singhvi is now the head of the

Parliamentary Standing Committee reviewing the bill.[8]

In order to bring to the attention of the Government, the need to

enact the Jan Lokpal Bill, a focused campaigning was started in the

form of the India Against Corruption (IAC) movement. Anna Hazare is

heading core members of civil society and India Against Corruption

(IAC) movement. Being a foreground for Jan Lokpal campaign, IAC has

also setup a website www.indiaagainstcorruption.org to encourage

suggestions and objections from citizens across India.[7] Through

these collaborative efforts till August 2011, IAC was able to upload the

23rd version of Jan Lokpal Bill draft. [9].

[edit] Lokpal Bill: Over four decades of failed attempts

The Lokpal Bill was first introduced by Shanti Bhushan in 1968[10] and

passed the 4th Lok Sabha in 1969. But before it could be passed by

Rajya Sabha, the Lok Sabha was dissolved and the bill lapsed.[11]

Subsequent versions were re-introduced in 1971, 1977, 1985, 1989,

1996, 1998, 2001, 2005 and in 2008,[12] but none of them were

passed.

In 2011, during the Parliament's Winter Session, the Lok Sabha

passed controversial Lokpal Bill, but it was subsequently turned down

in the Rajya Sabha.[13]

[edit] Timeline of Lokpal and cost

The Lokpal Bill has been introduced in the Parliament a total of eight

times since 1968.

1968 – 3 lakh[14] (300,000)

1971 – 20 lakh (2 million)

1977 – 25 lakh (2.5 million)

1985 – 25 lakh

1989 – 35 lakh (3.5 million) – PM under lokpal

1996 – 1 crore (10 million) – PM under lokpal

2001 – 35 crore (350 million) – PM under lokpal

2011 – 1700 crore[14] (17 billion)

[edit] Current anti-corruption laws and organizations

Main article: Corruption in India#Anti-Corruption Laws in India

While India currently has a number of laws intended to stem

corruption, supporters of the Jan Lokpal Bill have argued that the

current laws are inadequate in light of the large number and size of

scandals in India.

[edit] Central Vigilance Commission (CVC)

Main article: Central Vigilance Commission

CVC has a staff strength of between 200-250 employees.[15] If one

went by international standards, India needs 28,500 anti-corruption

staff in CVC to check corruption of 57 lakh employees. [16]

There has been considerable delay in many cases for grant of

sanction for prosecution against corrupt government officials. The

permission to prosecute such officials acts as a deterrent in the drive

to eradicate corruption and bring transparency in the system.[17]

[edit] Central Bureau of Investigation (CBI)

Main article: Central Bureau of Investigation

Because the CBI is under the control of the Central Government, it

needs a go-ahead from central agencies to initiate criminal

proceedings. By then, the accused can take advantage of such a

situation. He can get time to pressure the complainant and intimidate

him so that the case be withdrawn.[18][19]

In the Jan Lokpal Bill, it is proposed that both of these wings be

merged into the Lokpal.[20] This would enable the Lokpal to be

completely independent of the government and free from ministerial

influence in its investigations.

[edit] Inspiration

The bill was inspired by the Hong Kong Independent Commission

Against Corruption (ICAC).[21][22] In the 1970s, the level of corruption in

Hong Kong was seen so high,[citation needed] that the government created

the Commission with direct powers to investigate and deal with

corruption. In the first instance, the ICAC sacked 119 out of 180 police

officers.[where?][citation needed][23]

[edit] Key features of proposed bill

Some important features of the proposed bill are:[1]

1. To establish a central government anti-corruption institution called

Lokpal, supported by Lokayukta at the state level.

2. As is the case with the Supreme Court and Cabinet Secretariat, the

Lokpal will be supervised by the Cabinet Secretary and the Election

Commission. As a result, it will be completely independent of the

government and free from ministerial influence in its investigations.

3. Members will be appointed by judges, Indian Administrative Service

officers with a clean record, private citizens and constitutional authorities

through a transparent and participatory process.

4. A selection committee will invite short-listed candidates for interviews,

the video recordings of which will thereafter be made public.

5. Every month on its website, the Lokayukta will publish a list of cases

dealt with, brief details of each, their outcome and any action taken or

proposed. It will also publish lists of all cases received by the Lokayukta

during the previous month, cases dealt with and those which are

pending.

6. Investigations of each case must be completed in one year. Any resulting

trials should be concluded in the following year, giving a total maximum

process time of two years.

7. Losses to the government by a corrupt individual will be recovered at the

time of conviction.

8. Government office-work required by a citizen that is not completed within

a prescribed time period will result in Lokpal imposing financial penalties

on those responsible, which will then be given as compensation to the

complainant.

9. Complaints against any officer of Lokpal will be investigated and

completed within month and, if found to be substantive, will result in the

officer being dismissed within two months.

10.The existing anti-corruption agencies [CVC], departmental vigilance and

the anti-corruption branch of the [CBI] will be merged into Lokpal which

will have complete power authority to independently investigate and

prosecute any officer, judge or politician.

11.Whistle-blowers who alert the agency to potential corruption cases will

also be provided with protection by it.

[edit] Difference between government's

and activists' drafts

[edit] Highlights

Difference between Jan Lokpal Bill and Draft Bill 2010[24]

Jan Lokpal Bill (Citizen's

Ombudsman Bill)Draft Lokpal Bill (2010)

Lokpal will have powers to

initiate suo motu action or

receive complaints of

corruption from the general

public.

Lokpal will have no power to initiate suo motu

action or receive complaints of corruption from

the general public. It can only probe complaints

forwarded by the Speaker of the Lok Sabha or the

Chairman of the Rajya Sabha.

Lokpal will have the power to

initiate prosecution of anyone

found guilty.

Lokpal will only be an Advisory Body with a role

limited to forwarding reports to a "Competent

Authority".

Lokpal will have police

powers as well as the ability

to register FIRs.

Lokpal will have no police powers and no ability to

register an FIR or proceed with criminal

investigations.

Lokpal and the anti corruption

wing of the CBI will be one

independent body.

The CBI and Lokpal will be unconnected.

Punishments will be a

minimum of 1 year and a

maximum of up to life

imprisonment.

Punishment for corruption will be a minimum of 6

months and a maximum of up to 7 years.

[edit] Details

The following table details differences between the Government and

activist backed versions.[25][26][27]

Comparison SlideShow uploaded by India Against Corruption.[28]

Issue The Jan Lokpal Bill[9]Government's Lokpal

Bill[2]

Prime Minister

PM can be investigated with

permission of seven member

Lokpal bench.[clarification needed][25]

PM can be investigated by

Lokpal after she/he vacates

office.[29]

Judiciary

Can be investigated, though

high level members may be

investigated only with

permission of a seven member

Lokpal bench.[clarification needed][25]

Judiciary is exempt and will

be covered by a separate

"judicial accountability bill".[26]

Conduct of MPs

Can be investigated with

permission of seven member

Lokpal bench.[clarification needed][25]

Can be investigated, but

their conduct within

Parliament, such as voting,

cannot be investigated.[26]

Lower

bureaucracy

All public servants would be

included.[26]

Only senior officers (Group

A) will be covered.[26]

Anti-Corruption

wing of the

Central Bureau of

Investigation

(CBI)

The Anti-Corruption wing of the

CBI will be merged into the

Lokpal.[26]

The Anti-Corruption wing of

the CBI cannot be merged

into the Lokpal.[25]

Removal of

Lokpal members

and Chair

Any person can bring a

complaint to the Supreme

Court, who can then

recommend removal of any

member to the President.[25]

Any "aggrieved party" can

raise a complaint to the

President, who will refer the

matter to the CJI.[25]

Removal of

Lokpal staff and

officers

Complaints against Lokpal staff

will be handled by independent

boards set-up in each state,

Lokpal will conduct inquiries

into its own behaviour.[25]

composed of retired

bureaucrats, judges, and civil

society members.[25]

Lokayukta

Lokayukta and other local/state

anti-corruption agency would

remain in place.[26]

All state anti-corruption

agencies would be closed

and responsibilities taken

over by centralised Lokpal.[26]

Whistleblower

protection

Whistleblowers are protected

by Lokpal.[25]

No protection granted to

whistleblowers by Lokpal.[25]

Punishment for

corruption

Lokpal can either directly

impose penalties, or refer the

matter to the courts. Penalties

can include removal from

office, imprisonment, and

recovery of assets from those

who benefited from the

corruption.[25]

Lokpal can only refer

matters to the courts, not

take any direct punitive

actions. Penalties remain

equivalent to those in

current laws.[25]

Investigatory

powers

Lokpal can obtain wiretaps (to

make a connection to a

telegraph or telephone wire in

order to obtain information

secretly), issue rogatory letters,

and recruit investigating

officers. Cannot issue contempt

orders.[25]

Lokpal can issue contempt

orders, and has the ability

to punish those in

contempt. No authority to

obtain wiretaps, issue

rogatory letters, or recruit

investigating officers.[25]

False, frivolous

and vexatious

complaints

Lokpal can issue fines for

frivolous complaints (including

frivolous complaints against

Lokpal itself), with a maximum

penalty of Rs 100,000.[25]

Court system will handle

matters of frivolous

complaints. Courts can give

2–5 years imprisonment and

fines of Rs 25,000 to

200,000.[28]

NGOs

NGOs not within the scope due

to their role in exposing

corruption.[27]

NGOs are within the scope

and can be investigated.[27]

[edit] Governments approach about

Whistleblower protection & Citizen-

charter

In a bid to narrow differences on the anti-graft legislation and provide

itself some political cover against the threat of a public protest, the

Government introduced Citizen's Charter and Grievance Redressal Bill

2011 or Citizen-charter bill in Dec 20, 2011 along with the already

introduced Whistleblower Protection Law or Public Interest Disclosure

(Protection of Information) Bill – 2010 back in August 2011.[30]

Responding to this move, Team Anna issued a statement that: “The

government proposes to remove CBI, judiciary, citizen charter, whistle

blower protection, Group C and Group D employeesfrom the Lokpal

jurisdiction. Wouldn't that reduce Lokpal to an empty tin box with no

powers and functions?”[31]. This issue remains open between Team

Anna & Government.

[edit] Campaign for the Jan Lokpal Bill

Lokpal activist – Anna Hazare

Main article: 2011 Indian anti-corruption movement

The first version of the Lokpal Bill drafted by the Government of India

headed by United Progressive Alliance in 2010 was considered

ineffective by anti-corruption activists from the civil society.[32] These

activists, under the banner of India Against Corruption, came together

to draft a citizen's version of the Lokpal Bill later called the Jan Lokpal.[32] Public awareness drives[33] and protest marches[32] were carried out

to campaign for the bill. However, public support for the Jan Lokpal

Bill draft started gathering steam after Anna Hazare, a noted

Gandhian announced that he would hold an indefinite fast from 5 April

2011 for the passing of the Lokpal/ Jan Lokpal bill." Anna Hazare

announces fast unto death till Jan Lokpal Bill enacted". The Economic

Times. 4 April 2011. Archived from the original on 5 April 2011.

http://www.webcitation.org/5xi4sP1kB. Retrieved 5 April

2011.</ref>[34] The government has however accepted it.

To dissuade Hazare from going on an indefinite hunger strike, the

Prime Minister's Office directed the ministries of personnel and law to

examine how the views of social activists can be included in the

Lokpal Bill.[35] On 5 April, the National Advisory Council rejected the

Lokpal bill drafted by the government. Union Human Resource

Development Minister Kapil Sibal then met social activists Swami

Agnivesh and Arvind Kejriwal on 7 April to find ways to bridge

differences over the bill.[36] However, no consensus could be reached

on 7 April owing to several differences of opinion between the social

activists and the Government.

[edit] Fast & Agitation – Phase 1

On 7 April 2011 Anna Hazare called for a Jail Bharo Andolan

(translation: Fill jail movement) from 13 April to protest against the

Government's rejection of their demands.[37] Anna Hazare also

claimed that his group had received six crore (60 million) text

messages of support[38] and that he had further backing from a large

number of Internet activists. The outpouring of support was largely

free of political overtones; political parties were specifically

discouraged from participating in the movement.[39] The fast ended on

9 April, after 98 hours, when the Government accepted most

demands due to public pressure. Anna Hazare set an 15 August

deadline for the passing of the bill in the Parliament,[40] failing which

he would start a hunger strike from 16 August. The fast also led to the

Government of India agreeing to set up a Joint Drafting Committee,

which would complete its work by 30 June 2011.[40]

[edit] Drafting Committee

Salman Khurshid, the Minister of the Law and Justice is part of the drafting

committee

The drafting committee was officially formed on 8 April 2011. It

consisted of the following ten members, including five from the

government and five drawn from the civil society.[41][42]

Member Qualifications and status

Pranab Finance Minister, Chairman

Mukherjee

Shanti Bhushan Former Minister of Law and Justice, Co-Chairman

P. Chidambaram Minister of Home Affairs

Veerappa Moily Minister of Corporate Affairs

Kapil Sibal Minister for Human Resource & Development

Salman Khursid Minister of Law

Anna Hazare Social Activist

Prashant

BhushanLawyer

N. Santosh

Hegde

Former Lokayukta (Karnataka) and Supreme Court

Justice

Arvind Kejriwal RTI Activist.

The Government's handling of the formation of the draft committee,

involving the civil society in preparation of the draft Lokpal bill, was

criticized by various political parties including BJP, BJD, TDP, AIADMK,

CPI-M, RJD, JD(U) and Samajwadi Party.[43][44]

The committee failed to agree on the terms of a compromise bill and

the government introduced its own version of the bill in the

Parliament in August 2011.[45]

[edit] Fast & Agitation – Phase 2

Hindi Sign at Ramlila Grounds

According to Anna and his team, the Government's version of the

Lokpal bill was weak and would facilitate the corrupt to go free apart

from several other differences. To protest against this, Anna Hazare

announced an "Indefinite Fast" (not to be confused with "Fast until

death"). Anna and his team asked for permission from Delhi Police for

their fast and agitation at Jantar Mantar or JP Park. Delhi Police gave

its permission with certain conditions. These conditions were

considered by team Anna as restrictive and against the fundamental

constitutional rights and they decided to defy the conditions. Delhi

Police imposed Sec 144 CrPC.[46][47]

On 16 August, Anna Hazare was taken into preventive custody by

Delhi Police. Senior officers of Delhi Police reached Anna Hazare's flat

early in the morning and informed him that he could not leave his

home. However, Hazare turned down the request following which he

was detained.Anna in his recorded address to the nation before his

arrest asked his supporters not to stop the agitation and urged the

protesters to remain peaceful.Other members of "India Against

Corruption", Arvind Kejriwal, Kiran Bedi, Kumar Vishwas and Manish

Sisodia were also taken into preventive custody. Kiran Bedi described

the situation as resembling a kind of Emergency (referring to the

Emergency imposed in 1975 by the Indira Gandhi Govt.).[47]

The arrest resulted in a huge public outcry and under pressure, the

government released him in the evening of 16 August. However, Anna

Hazare refused to come out of jail, starting his indefinite fast from Jail

itself. Manish Sisodia explained his situation as, "Anna said that he

left home to go to JP Park to conduct his fast and that is exactly where

he would go from here (Tihar Jail). He has refused to be released till

he is given a written, unconditional permission". Unwilling to use

forces owing to the sensitive nature of the case, the jail authorities

had no option but to let Anna spend the night inside Tihar. Later on

17 August, Delhi Police permitted Anna Hazare and team to use the

Ramlila Maidan for the proposed fast and agitation, withdrawing most

of the contentious provisions they had imposed earlier.[48] The

indefinite fast and agitation began in Ramlila Maidan, New Delhi, and

went on for around 288 hours (12 days from 16-August-2011 to 28-

August-2011).[49] Some of the Lokpal drafting committee members

became dissatisfied with Hazare's tactics as the hunger strike went on

for the 11th day: Santosh Hegde, a member of Hazare team who

headed the Karnataka Lokayukta, strongly criticised Hazare for his

insistence of "having his way", concluding “I feel I am not in Team

Anna any more by the way things are going. These (telling Parliament

what to do) are not democratic things.”[50] Swami Agnivesh, another

central figure in the Hazare group also distanced himself.[51]

[edit] Notable supporters and opposition

Union HRD[clarification needed] Minister – Kapil Sibal, a notable critic of the citizens'

version of the Bill

In addition to the activists responsible for creating and organising

support for the bill, a wide variety of other notable individuals have

also stated that they support this bill. Spiritual leaders Sri Sri Ravi

Shankar [52] and Yog Guru Ramdev [53] expressed support. Notable

politicians who indicated support for the bill include Ajit Singh [54] and

Manpreet Singh Badal [55] as well as the principal opposition party,

Bharatiya Janta Party.[56][57] In addition, numerous Bollywood actors,

directors, and musicians publicly approved of the bill.[58][59][60][61][62][63][64]

[65]

Notable opposition to the activists' version of the Bill was expressed

by HRD minister Kapil Sibal and other Congress leaders; Chief Minister

of West Bengal Mamta Banerjee; Punjab Chief Minister and Akali Dal

leader Prakash Singh Badal; Shiv Sena leader Bal Thackeray, and

former Chief Justice of the Supreme Court Jagdish Sharan Verma.[66]

Although BJP showed their support earlier, there were reports that BJP

shared Congress's concern "over letting the civil society gain the

upper hand over Parliament in lawmaking".[67] The All-India

Confederation of SC/ST Organisations, representing the Dalits and

backward castes, also expressed opposition to the bill proposed by

Anna Hazare as well as to the government's version of the bill. The

confederation opposed Hazare's proposed bill saying that it will be

above the constitution and that proposers of the bill have support

from elements who oppose reservation.[68]

[edit] Logjam of Lokpal and Lokayukta Bill 2011

On December 27 2011, Lok Sabha Parliament winter session passed

controversial Lokpal Bill under title of Lokpal and Lokayukta Bill 2011,[2] but without constitutional status. Before passing this bill it was

introduced in Lok Sabha with key amendments moved. The 10 hour

house debate, number of opposition parties claimed introduced bill is

weak and wanted it withdrawn. Key amendments that were discussed

but defeated were following:

Including corporates, media and NGOs receiving donations

Bringing CBI under the purview of Lokpal

Amendments that the house agreed upon were:

Keeping the defence forces and coast guard personnel out of the purview

of the anti-graft ombudsman

Increasing the exemption time of former MPs from five to seven years [3]

Team Anna rejected the proposed bill describing it as "anti-people

and dangerous" even before the Lok Sabha gave its assent.[69] The

key notes Team Anna made about rejection were:

Government will have all the control over Lokpal as it will have powers to

appoint and remove members at its will.

Only 10 per cent political leaders are covered by this Bill

Bill was also covering temples, mosques and churches

Bill was offering favor to corruption accused by offering them free lawyer

service.

Bill was also unclear about handling corruption within Lokpal office.

Only five per cent of employees are in its ambit, as Class C & D officers

were not included.

Team Anna was also disappointed over following inherent exclusions

within tabled government bill.[70]

Central Bureau of Investigation (CBI) should be merged with the Lokpal,

and the anti-corruption bureaus and the Vigilance Departments of the

State governments with the Lokayuktas.

The Lokpal and the Lokayuktas should have their own investigative wings

with exclusive jurisdiction over cases filed under the Prevention of

Corruption Act.

The Lokpal should have administrative and financial control over the CBI,

and the appointment of the CBI Director should be independent of any

political control.

The jurisdiction of the Lokpal and the Lokayukta should cover Class C and

D officers directly.

This bill was then presented in Rajya Sabha where it hit log jam again.[71]

[edit] Criticisms of the Jan Lokpal Bill

[edit] Naïve approach

The bill has been criticised as being naïve in its approach to

combating corruption. According to Pratap Bhanu Mehta, President of

the Center for Policy Research Delhi,[72] the bill "is premised on an

institutional imagination that is at best naïve; at worst subversive of

representative democracy". The very concept of a Lokpal concept has

received criticism from HRD minister Kapil Sibal in that it will lack

accountability, be oppressive and undemocratic.[73]

[edit] Extra-constitutional

The pro-bill activist Arvind Kejriwal rejects the claim of Lokpal being

extra-constitutional with the explanation that the body will only

investigate corruption offences and submit a charge sheet which

would then tried and prosecuted through trial courts and higher

courts, and that other bodies with equivalent powers in other matters

exist. The proposed bill also lists clear provisions for the Supreme

Court to abolish the Lokpal.[74]

Despite these clarifications, critics feel that the exact judicial powers

of Lokpal are rather unclear in comparison with its investigative

powers. The bill[75] requires "...members of Lokpal and the officers in

investigation wing of Lokpal shall be deemed to be police officers".

Although some supporters have denied any judicial powers of Lokpal,[76] the government and some critics have recognised Lokpal to have

quasi-judicial powers.[77]

The bill also states that "Lokpal shall have, and exercise the same

jurisdiction powers and authority in respect of contempt of itself as a

High court has and may exercise, and, for this purpose, the provisions

of the Contempt of Courts Act, 1971 (Central Act 70 of 1971) shall

have the effect subject to the modification that the references therein

to the High Court shall be construed as including a reference to the

Lokpal."[78][79][80] Review of proceedings and decisions by Lokpal is

prevented in the bill by the statement "...no proceedings or decision

of the Lokpal shall be liable to be challenged, reviewed, quashed or

called in question in any court of ordinary Civil Jurisdiction.". As a

result, how the trials will be conducted is unclear in the bill, although

the bill outlines requiring judges for special courts, presumably to

conduct trial that should be completed within one year. The critics

hence express concern that, without judicial review, Lokpal could

potentially become an extra-constitutional body with investigative

and judicial powers whose decisions cannot be reviewed in regular

courts.[81]

[edit] Scope

The matter of whether the Indian Prime Minister and higher judiciary

should or should not be prosecutable by the Lokpal remains as one of

the major issues of dispute. Anna's own nominee for co-chairing the

joint panel Justice Verma, the former Chief Justice of the Supreme

Court, has expressed his constitutional objections for including the

Prime Minister and higher judiciary under Lokpal.[82] According to him,

"this would foul with the basic structure of the constitution".[83]

[edit] Criticism from Aruna Roy, Arundhati Roy and NCPRI

Critic – Aruna Roy

Magsaysay Award winner Aruna Roy who has said "Vesting

jurisdiction over the length and breadth of the government machinery

in one institution will concentrate too much power in the institution,

while the volume of work will make it difficult to carry out its tasks".

She and her colleagues at the National Campaign for People's Right to

Information (NCPRI) have proposed an alternative mechanism

consisting of five institutions.[84] Noted author and social activist

Arundhati Roy was highly critical of Lokpal, stating "you could say

that the Maoists and the Jan Lokpal Bill have one thing in common –

they both seek the overthrow of the Indian State", and "While his

means may be Gandhian, Anna Hazare's demands are certainly not.

Contrary to Gandhiji's ideas about the decentralisation of power, the

Jan Lokpal Bill is a draconian, anti-corruption law, in which a panel of

carefully chosen people will administer a giant bureaucracy,.."[85][86][87]

[edit] The Director of CBI argued against merger of its anticorruption wing with the Lokpal

The CBI Director, in a presentation before the Standing Committee of

the Parliament has strongly argued against the vivisection of the CBI

and merger of its anticorruption wing with the Lokpal, noting that this

would seriously cripple the core functioning of the CBI and reduce it to

irrelevance. An organization built over last 60 years comprising

competent professionals should not be subsumed under Lokpal. CBI

officers concede that in some sensitive political cases there is of

course interference from the government, but in respect of an

overwhelming majority of cases CBI functions, unfettered and

uninfluenced by extraneous considerations. For this reason there is an

ever increasing demand for CBI investigation from all-over the

country in respect of important cases.[88].

However, in a contradictory TOI article in August 2011, it has been

revealed that one its own report says that the the CBI is still finding

itself waiting for a go-ahead from central agencies so that it can

initiate criminal proceedings against high-ranking officials.[89]

[edit] Support for the Bill

[edit] Surveys

India Against Corruption conducted a survey on the draft Lokpal Bill

presented by the Indian Government in Parliament. It showed that

85% of the participants were opposed to the government's bill. The

team especially cited the results from the Chandni Chowk

constituency, the constituency of Telecom Minister Kapil Sibal, who is

a vehement voice for the government's version of the bill.[90][91]

According to a nationwide survey conducted by CNN-IBN & CNBC-

TV18 and published in early August, only a shade over a third of

respondents have heard of Lokpal. 34% of all respondents said they

have heard of the ombudsman and only 24% knew what it actually

meant[92]

Prashant Bhushan, one of Anna Hazare's associates and a drafter of

the Jan Lokpal Bill, has demanded a nation-wide referendum on the

Jan Lokpal Bill to gauge the mood of the nation.[93]

[edit] Legislator support

Post the massive support to Anna Hazare's movement, several MPs

across party lines have come out in support to the Jan Lokpal Bill.

Most notable are Congress MPs from Maharashtra, Priya Dutt and

Datta Meghe.[94][95] Datta Meghe also demanded that his party

spokesperson Manish Tiwari should apologise to Anna Hazare for his

uncharitable comments.[94]

This support started coming as over 150 MPs and Ministers from

different states were forced to remain confined to their houses as

Anna supporters protested outside their houses. Protests were also

seen outside the residence of Sheila Dixit CM of Delhi, Kapil Sibal,

Pranab Mukherjee amongst others.[94][95][96]

BJP MP Varun Gandhi is introducing Jan Lokpal Bill as a private

member's bill in the parliament.[97]

[edit] Social media

As per reports, Anna Hazare's fast was successful in mobilising the

support of thousands in the virtual world of social media. On

Independence Day, Anna had over 500,000 mentions through status

updates and comments across top social networking sites, including

Facebook and Twitter in the country. Two days later, the number had

shot up to 9 million.On YouTube, over 40,000 people watched the

video shot by Kiran Bedi inside Tihar Jail in which Anna has addressed

his supporters. Facebook has 542 fan pages by Anna's name.[98][99]

[edit] Online surveys

According to the survey conducted by STAR News and Nielsen, 87% of

the 8900 respondents of the survey supported the Jan Lokpal Bill. The

survey – conducted in 28 cities across the country, including all four

metros – mainly dealt with three important points: public’s knowledge

about the Lokpal Bill; awareness about Anna’s campaign; and the

perceived problems with the Jan Lokpal Bill.[100]

Over a million people joined the Times of India online anti-graft

campaign, in one of the biggest ever voting exercises in the virtual world.

The news analysis points that citizens want to make their voices heard

and have found the platform offered by the campaign a viable one to do

so.[101]

[edit] Parliamentary actions on the

proposed legislation

On 27 August 2011, a special and all exclusive session of Parliament

was conducted and a resolution was unanimously passed after

deliberations in both the houses of Indian Parliament by sense of the

house.[102][103]

The resolution, in principle, agreed on the following subjects and

forwarded the Bill to a related standing committee for structure and

finalise a report:[104][105]

A citizen charter on the bill

An appropriate mechanism to subject lower bureaucracy to Lokpal

The establishment of Lokayuktas (ombudsmen at state level) in states

On being informed of this development, Anna Hazare, civil rights

activists along with protestors at the site of the fast welcomed this

development, terming it as a battle "half won" while ending the

protest.[104]