social sector & econimic reforms

ECONOMIC REFORMS AND SOCIAL SECTOR

A NEGLECTED LOT?

FMG 18 A – Group No. 7

Neha Kasturia – 91037 Nikhil Soni – 91038 Nishant Singh – 91039 Pragati Saraf – 91040

Radhika Gupta – 91041 Rajat Rathore – 91042

Causes of the Crisis

Very large Curre

nt accou

nt defici

ts

Over-valuation of Indian Rupee

Increasing Fiscal Deficits High

Inflation

CAUSES

Main Features of Economic Reforms

Rationalization of income tax

• bringing down the max rate of income tax from 51 to 30 percent

Rationalization of custom duties

• Peak tariff duties brought down to lower levels of around 50 percent as prevailing in other countries

Reduction in subsidies

Expanding the tax base by including services (not previously taxed)

Providing for tax incentives for infrastructure and export-oriented sectors, including setting up special (Export) Economic Zones

LIBERALIZATION

Deregulation of IndustriesSeeks to abolish all

restrictions and free the economy from shackles of licence-

permit-quota raj

All industries except 18, were permitted to establish, expand and

renovate without acquiring any license

List further reduced to only 5 industries

Liberalized policy towards Foreign Capital and Technology

Relaxation in upper limit of Foreign Investment• Maximum limit of foreign equity

participation was 40%• Under July 1991 Policy, limit was

raised to 74% in some industries• FDI further liberalized to 100%

foreign equity permission in mining, electricity, transmission, ports, harbors etc

Automatic Permission for Foreign Technology Agreements• Automatic permission to foreign

technology agreements in the high priority sectors

LIBERALIZATION

Disinvestment in Public Enterprises

Reduced Role for the Private Sector

17 industrial areas reserved exclusively for the public sectors

reduced to only 8 sectors

Number further reduced to 3, viz., defense production, atomic

energy, railway transport

Process of transferring ownership of a business, enterprise, agency or public service

from the government to the private sector

GLOBALIZATION

Liberalization of Import

Licensing

•Pre-reforms imports were subject to stringent quantitative restrictions

•Under the new trade policy, most licensing regulations were abolished

•Most of the imports put under OGL-allowing automatic permission for imports.

Reforms in

Foreign Exchang

e Manage

ment

•Pre-reforms- Fixed Exchange rate system

•Led to over-valuation of the Rupee

•Post-reforms- liberalized exchange management

•Free convertibility of rupee

Achievements so far

• State monopoly has been abolished in virtually all sectors, which have been opened to the private sector. The License Raj is a thing of the past.

• The economy has grown at more than 7 percent post reforms against 3.5 percent during 1950-1980

• per capita income has been rising by about 4.0 per cent during the post-reform period against a meagre 1.3 per cent growth during 1951-80.

• Indian economy is now increasingly resilient to most of the external shocks

Achievements in the Social Sector

• Rural Infrastructure and development• Bharat Nirman launched in 2005-06 has 6 components

under it like rural housing, roads, irrigation etc.» Up to march 2009, a total length of around 2 lakhs kms

of roadworks got completed under PMGSY» 21.05 lakh houses have been constructed during 2008-09

under (IAY)

• sanitation - The sanitation coverage among rural households has increased from 21.9 per cent in 2001 to 27.3 per cent in 2004 and has more than doubled since then to 63.91 per cent (of 2001 Census households) as on May 20, 2009

Source : http://www.indlaw.com/datastore/union_budget/eco_survey/chap107.pdf

Bharat Nirman - Rural drinking water-cumulative achievements

Source : http://www.indlaw.com/datastore/union_budget/eco_survey/chap107.pdf

Unemployment rate

Year Unemployment rate

Percent Change Date of Information

2003 8.80 % 2002

2004 9.50 % 7.95 % 2003

2005 9.20 % -3.16 % 2004 est.

2006 8.90 % -3.26 % 2005 est.

2007 7.80 % -12.36 % 2006 est.

2008 7.20 % -7.69 % 2007 est.

2009 6.80 % -5.56 % 2008 est.

Source: CIA World Factbook

trend in fii investmentYear Net FII Flow

1992-93 13

1993-94 5127

1994-95 4796

1995-96 6942

1996-97 8575

1997-98 5958

1998-99 -1584

1999-00 10122

Year Net FII Flow2000-01 99352001-02 8755

2002-03 2688

2003-04 45764

2004-05 45881

2005-06 41446

2006-07 30841

In Rs. crore

Source: SEBI

Compiled from the statistics released by : Reserve Bank of India.

Social Sector Expenditure

State-wise Per Capita Expenditure in Social Sector* in India(2003-2004 to 2006-2007)

(In Rs.)States/UTs 2003-04 2004-05 2005-06 2006-07(RE)

Non-Special Category

Andhra Pradesh 1700 1738 1854 2600

Bihar 806 690 961 1352

Chhattisgarh 1491 1644 1913 2950

Goa 4940 5584 5972 7006

Gujarat 1698 1882 2012 2353

Haryana 1265 1540 2049 2389

Jharkhand 1532 1789 2114 2500

Kamataka 1521 1765 2085 2733

Kerala 1818 2234 2269 2922Madhya Pradesh 1068 1123 1430 1695

Maharashtra 1870 1992 2330 2830

Orissa 1150 1200 1391 1733

Punjab 1396 1464 1563 2260

Rajasthan 1551 1623 1766 2064

Tamil Nadu 1814 2114 2202 2870

Uttar Pradesh 743 949 1107 1384

West Bengal 1086 1160 1349 1687

Special Category

Arunachal Pradesh 5463 5657 6380 7564

Assam 1338 1698 1562 2736

Himachal Pradesh 3739 3664 4363 4643

Jammu and Kashmir 2362 2896 3705 3940

Manipur 2692 3849 4089 4582

Meghalaya 2670 3053 3120 3923

Mizoram 7098 6956 7667 8571

Nagaland 3131 3020 3813 4619

Sikkim 7267 8465 8742 11495

Tripura 2912 3347 3307 4138

Uttarakhand 2286 2582 3036 3891

All States 1386 1533 1743 2216

Memo Item

NCT Delhi 2317 2773 2884 3385

Puducherry NA NA 7385 7214

Projected Allocation under Social Sector in India(2007-2012)

(Rs. in Crore at 2006-07 Price)

Sectors

Eleventh Plan

ProjectedAllocation

% toTotal

Education 274228 19.29

Rural Development, Land resources & Panchayati Raj 190330 13.39

Health, FW & Ayush 123900 8.71

Agriculture and Irrigation 121556 8.55

Social Justice 90273 6.35

Physical Infrastructure 128160 9.01

Scientific Departments 66580 4.68

Energy 57409 4.04

Total Priority Sector 1052436 74.03

Others 369275 25.97

Total 1421711 100.00

Source : Lok Sabha

The Ground Realities

Quality of life in India continues to be appalling

Country ranked poorly at 134 among 182 countries

The position in the year 2007and 2008 was 128

Human development index

Poverty

• Indian poor constitute roughly 33% of global poor– International poverty line- below $1.25 per day– India(No. of poor)-456 million– Global (No. of poor)-1.4 billion

• Figures have emerged from the World Bank’s estimates on global poverty in the year 2005

• Clearly hints that the fruits of economic benefits have failed to trickle down to India’s poor

Source : World Bank Report 2005

Poverty

• The rate of poverty decline in India was faster between 1981 and 1990 than between 1990 and 2005

• The poverty rate for India declined from 59.8% in 1981 to 51.3% by 1990, or 8.5 percentage points over nine years

• Between 1990 and 2005 it declined to 41.6%, which is a drop of 9.7 percentage points over 15 years, clearly a much slower rate of decline

Source : World Bank Report 2005

Poverty and inequality

As per Planning Commission about 27.5% of the population lives in poverty in India (based on per capita consumption expenditure per month; for rural areas Rs. 356; for urban areas Rs. 538)

Economic growth also tends to be higher in wealthier states in the south and west such as Gujarat and Maharashtra than poorer states like Bihar, Orissa, and Uttar Pradesh in the north and east

over 60 percent of Indian children are stunted or underweight or a combination of the aforesaidSource: India: Undernourished Children: A call for Reform and Action

State Growth Rate

Maharashtra 9

Gujarat 8.8

Haryana 8.7

Delhi 7.4

State Growth Rate

Bihar 5.1

UP 4.4

MP 3.5

High Growth States Low Growth States

Average Annualized Economic Growth Rates

Between 1999 and 2008

Source: Indiastat.com

Particulars Kerala Bihar

Literacy Rate 90.86% 47%

Life Expectancy at Birth(M) 71.61 years 65.66 years

Life Expectancy at Birth(F) 75 years 64.79 years

Infant Mortality(per 1000) 10 61

Birth Rate 1.69% 3.09%

KERELA VS. BIHAR

Poverty and Hunger Index 2009Country Rank(out of

81)Performance

China 31 Medium

Pakistan 45 Medium

Nepal 58 Low

India 62 Low

Bangladesh 67 Low

Zimbabwe 74 Low

PHI is a new composite indicator – the Poverty and Hunger Index (PHI) – developed to measure countries’ performance towards halving poverty and hunger by 2015. The PHI combines all five official MDG1 indicators, a) the proportion of population living on less than US$ 1/day, b) poverty gap ratio, c) share of the poorest quintile in national income or consumption, d) prevalence of underweight in children under five years of age, and e) the proportion of population undernourished.

Source: World Bank

education

Although Literacy rate has been rising in the country, but the population growth rate had been high enough that the absolute number of illiterates rose with every decade

1991-2001 decade is the first census period when the absolute number of Indian illiterates declined (by 32 million)

educationYear 1951-61 1961-71 1971-81 1981-91 1991-

2001Literacy Rate 28.3 34.45 43.57 52.21 64.84Illiterates(in million)

249.4 283.03 305.31 328.88 296.2

Source: Census of India

education

Kerala is the most literate state in India, with 90.86% literacy, followed closely by

Mizoram at 88.80%

Bihar is the least literate state in India with 47%

literacy

All India literacy rate is 64.84%

Ratio of TeachersCountry No. of teachers per

million studentsUSA 3200

Caribbean 1500

Middle-East 800

India 456

Source: Sixth Education Summit

India has been facing shortage of primary and elementary school

teachers due to uncompetitive pay structure of teachers

Gender wise Literacy Rate Disparity

Year Male Female

1941-51 27.16 8.86

1951-61 40.40 15.35

1961-71 45.96 21.97

1971-81 56.38 29.76

1981-91 64.13 39.29

1991-01 75.85 54.16


Sarva Shiksha Abhiyan

• The SSA programme covers the entire country and schools except private unaided schools

• In 2009 Planning Commission evaluated the progress of SSA– 50 per cent (of schools) do not have a boundary

walls and separate toilets for girls– 60 per cent do not have electricity– 88 per cent do not have a computer– 18 per cent of teachers'posts have not been filled

National Literacy mission

Country Adult Literacy RateFor the year 2007

China 93.3

Sri Lanka 90.8

Burma 89.9

Iran 82.4

India 66

Nepal 56.5

Pakistan 54.2

Bangladesh 53.5

The objective of National literacy mission was to make the age group

between 15-35 year functionally literate, achieving 75% literacy rate,

by 2007

Adult literacy rate is based on the 15+ years age group

Source: UNICEF

Health & sanitation

Negatives

India’s expenditures on health are woefully low, at 1% of the country’s GDP- N.J. Kurien, a former

member of the Planning Commission.

2.1 million Indian children die before reaching the age of 5 every year – Lizette Burgers, chief of water

and environment sanitation of the Unicef

Every day, 1,000 Indian children die because of diarrhoea alone.

Positives

Since Independence, the life expectancy of its population has increased astonishingly from about

32 years to almost 65years, and

infant mortality rate has been halved

life expectancy at birth


Year Life expectancy at birth

Rank(out of 221)

Percent Change

2003 63.62 161

2004 64.35 162 1.15 %

2005 64.35 162 0.00 %

2006 64.71 162 0.56 %

2007 68.59 144 6.00 %

2008 69.25 144 0.96 %

2009 69.89 144 0.92 %

infant mortality rate

Year Infant mortality rate

Percent Change

2003 59.59

2004 56.29 -5.54 %

2005 56.29 0.00 %

2006 54.63 -2.95 %

2007 34.61 -36.65 %

2008 32.31 -6.65 %

2009 30.15 -6.69 %


infant mortality rate

Country IMR(per 1000)

USA 6.26

UK 4.84

China 20.25

Brazil 22.58

India 30.15

Pakistan 65.14

Sri Lanka 18.57

Angola 180.21

Year: 2009


shortage in health care sector

Country No. of Hospital beds/1000 population

India 0.86

Brazil 2.6

China 2.2

World Average 3.96

Source: Ernst & Young-Ficci projection

Country Patient-Doctor ratio(per 10,000 patients)

India 1

Canada 209

UK 166

USA 548

Australia 249

Source: Planning Commission

water supply in Cities

• None of the 35 Indian cities with a population >1 million distribute water for more than a few hours per day (World Bank)

• A 2007 study by the Asian Development Bank showed that in 20 cities the average duration of supply was only 4.3 hours per day– No city had continuous supply– The longest duration of supply was 12 hours per day in

Chandigarh– The lowest was 0.3 hours per day in Rajkot

RURAL employment

Only about a million people or around 0.1% of India’s population are benefiting from employment in India’s rapidly growing outsourcing, IT, and services industries

• Vulnerable to nature• attracts only 7% of public and private investment

Roughly half of the poor are employed in agriculture

• Due to increased productivity, not by job growth

Manufacturing Sector : growing at 7% annualy

In 2008-09, nearly 55 million people receive employment — almost thrice the number employed during 2007-08 (19.7 million)

MNREGS is expected to add roughly 50 basis points to GDP growth this year

MNREGS-generated consumption expenditure amounts to nearly 1.4 per cent of total rural consumption and nearly 1 per cent of total household consumption in India this year, nearly doubling the share since 2007-08

MAHATAMA GANDHI National Rural Employment Guarantee Scheme

(MNREGS)

female-to-male ratio of only 93 to 100

poorer health and nutritional care of girl children

country has made sex-selective abortion a crime and has initiated a national campaign against the practice

2001 census showed a notable decline in sex ratios in the 0-6 age range

gender

Female-male ratio


Mixed efforts to address cast inequaities

caste system continues to assert itself through social inequalities and voting patterns

Introduction to reservations in various sectors

Caste

Our verdict – not completely ignored

On the basis of above stats and discussions, we can say that no doubt we have achieved greater heights post reform period, in fact as a consequence of all these momentous changes there is a new respect for India in the world and, even more important, Indians in all walks of life have found a new level of self confidence. But at the same time we all strongly believe that the country still has miles to go and in that regard we have made the following suggestions.

Suggestions

Agricultural

development

Urban development

Human resource development

Management of public

services.

Areas needing attention

Empowerment of Public Sector - not to increase its control but to exploit its services to public

Higher agriculture growth will also lead to faster increases in rural household incomes giving rise to greater demand for goods and services in rural and urban areas alike, which would be employment promoting

Recently growth in cereals has stagnated significantly, so there is a change in supply side.

There has been a change in demand because of may be increased incomes leading to the demand of non cereals.

So produce other products more than cereals

agriculture

With the increasing diversification of the Indian diet, there is a need for agri revolution in dairying, horticulture, aquaculture and pisciculture, poultry, meat, and even wineries.

A crash programme is required for the urgent renovation of agricultural universities.

Public Private partnership.

Roads, storage facilities, transportation, telecommunication and power

need for a second green revolution

Human resource development

We are primarily known as knowledge intensive country mainly because of our achievements in various fields especially IT

Literacy levels improved from 52% in 1991 to 65% in 2001

• Bridging the gap between industry-academia• Emphaising on skill development and value addition

Steps that can be taken

Primary and Secondary education

According to the 2001 census, the total literacy rate in India is 65.38% against 52.21% as per 1991 census.

The female literacy rate is only 54.16%.

gap between rural and urban literacy rate is also very significant in India

Factors responsible: poorly qualified teachers, inadequate and outdated teaching material etc.

Cont ..

For promoting girl education, special education deductions could be allowed

Encouraging and inviting more private participation (PPP model)

For improving quality of education

Providing better training to teachers

For building up of infrastructure especially for programes like SSA

Steps that can be taken :

Higher education

More than17000 colleges, 20 central universities, 217

State Universities, 106 Deemed to Universities and

13 institutes of National importance.

the success of a few elite institutions have masked the general lack of quality in Indian higher education

only three were included in the top 500 higher

education institutions in the world as ranked on

objective criteria by a group of Chinese researchers.

Cont..

Suggestions for further improvements:

More funds should be allocated to encourage research

Requirement or procedural aspect of obtaining education loan should be made simpler

Need for holistic approach to the taxation of education

Some provisions for providing scholarship opportunities for higher education

Health

• Government spending on health amounts to 1.15 per cent of GDP in 2008-09

• large and growing share of the burden of health care has been borne by households in India

• public medical systems being replaced by private providers

Source: National Health Accounts for India

Steps that can be taken: -

Working towards improving health care infrastructure across the country

Pursuing National Urban and Rural Health Mission programme more vigorously

Setting up more and improving existing prestigious medical institutes like AIIMS

Encouraging more of PPP model to improve quality

social sector & econimic reforms

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