New Delhi: Restoring investor confidence and reversing economic slowdown which kept the Finance Ministry in a difficult year would continue to be its priority in 2013 with everyone looking forward to the Budget to be presented by new incumbent P Chidambaram two months from now in February.
    
The economic turnaround, however, may take time and more efforts on the part of the government as well as the Reserve Bank of India (RBI), as global factors do not indicate the possibility of a strong revival.
    
Chidambaram has already suggested that some 'bitter medicine' was needed to put the economy back on the path of fiscal correction and address other issues to spur investments and remove bottlenecks to infrastructure spending.
    
As regards growth, it had slipped again after recovering from the slowdown, which was witnessed after the 2008 global financial meltdown mainly due to global economic problems and domestic woes.
    
The growth rate during January-March (2012) quarter slipped to a dismal 5.3 percent reflecting continued sluggishness. The first three months of the year witnessed the slowest growth in the past several years.
    
The decline becomes more glaring when viewed against the annual growth rates of 8.4 percent during 2009-10 and 2010-11. Pulled down by the January-March quarter, the rate of economic expansion during the 2011-12 slipped to 6.5 percent.
    
The downturn during 2012 continued despite serious efforts and pep talk to revive growth by former Finance Minister Pranab Mukherjee and his successor P Chidambaram. The growth rate during the April-June quarter turned out to be 5.5 percent slipping to 5.3 percent in the July-September quarter.
    
The latest data released by the Central Statistical Organisation (CSO) revealed that the growth rate during the first half of the current financial year declined to 5.4 percent from 7.3 percent a year ago.

Sibal could achieve little success in getting key legislations stuck in Parliament passed. His successor Raju also had little luck in passing these legislations, one of which is National Accreditation Regulatory Authority for Higher Educational Institutions Bill, 2010. The passage of the Bill would have made accreditation mandatory for every institutions.
    
During 2012, UGC issued guidelines which mandates that foreign universities entering into agreement with their Indian counterparts for offering twinning programmes will have to be among the global top 500. The Indian varsities on the other hand, should have received the highest accreditation grade.
    
During the year, outlay for the education sector for the 12th Plan Period was finalised at 4,53,728 crore, a jump of around 155 per cent, with focus on setting up of new institutes and universities and expanding existing one.
    
UGC proposed 20 exclusive women universities and 800 constituent during the 12th Plan Period colleges under the central varsities to ensure equity in access to quality education.
    
The efforts of the ministry in the first half of the new year would be aimed at ensuring that states achieve Right to Education standards by March in terms of infrastructure and teacher requirement. Raju has already ruled out extension of the deadline for enforcing the RTE Act beyond March 2013 as several states are yet to achieve the standards. Over 12,000 new schools still remains to be opened.
    
On November 11, the advanced version of low cost tablet Aakash was launched by President Pranab Mukherjee. Coming at a price tag of Rs 1,130 for students, the device is powered by a processor running at 1 GHz and has a 512 MB, a 7 inch capacitative touch screen and a battery working for three hours of normal operations.

As Mukherjee moved to the President's House, Chidambaram took charge of the Finance Ministry from August 1 and promised fine-tuning of policies and corrective measures to put in place a stable and non-adversarial tax regime.
    
"Clarity in tax laws, a stable tax regime, a non-adversarial tax administration, a fair mechanism for dispute resolution and an independent judiciary will provide great assurance to investors. We will take corrective measures wherever necessary," the new Finance Minister had promised.
    
Under the leadership of Chidambaram, the Finance Ministry initiated measures to speed up infrastructure spending, asking the cash-rich PSUs to increase their spending and also removing the bottlenecks for private sector spending.
    
Taking on board the concerns of investors, Chidambaram said changes in the laws would be undertaken after taking into account the views of stakeholders and the recommendations of the Shome Committee.
    
The Shome Committee in its draft report suggested deferment of GAAR by 3 years till April 2016 and prospective changes in tax laws and waiver of interest and penalty in case of their retrospective application.
    
The run-away government finances, lesser revenue realisation and increased expenditure on account of subsidies, too were a concern and Chidambaram appointed a committee under the Chairmanship of Vijay Kelkar to suggest a roadmap for fiscal consolidation.
    
The Kelkar Committee in its report suggested that the government should undertake reform initiatives, go ahead with disinvestments and reduce subsidies. Without these, the fiscal deficit could shoot up to 6.1 per cent in the current financial year.
    
The Finance Minister, after taking into account the recommendations of the Kelkar Committee, unveiled a fiscal consolidation roadmap pegging the fiscal deficit for the current fiscal at 5.3 per cent and to bring it down to 3 per cent by 2016-17. The Budget had pegged the fiscal deficit at 5.1 per cent of GDP.

"This plan is necessary, this plan must be implemented and the government is very serious about implementing this fiscal consolidation plan ... As fiscal consolidation takes place and investors' confidence increases, it is expected that the economy will return to the path of high investment, higher growth, lower inflation and long-term sustainability," Chidambaram had said.
    
According to the Minister, the government has to continue with the food, fuel and fertiliser subsidies. The outgo on food, fuel and fertiliser subsidies in 2012-13 is pegged at over Rs 1.79 lakh crore.
    
The government also got Parliament's nod for an additional Rs 28,500 crore towards petroleum subsidy in the supplementary grants. The government has increased price of subsidized diesel and also capped the supply of subsidised LPG cylinders.
    
Undertaking the reform exercise, the government opened the multi-brand retail sector to foreign direct investments (FDI) and also allowed foreign aviation companies to pick up stakes in Indian carriers.
    
Besides, the Union Cabinet also cleared to proposal of hiking FDI in insurance and pension sector to 49 per cent. However, the proposal could not move forward in Parliament. The amendment to the Insurance Act has been pending in the Rajya Sabha since 2008.
    
Besides, it also cleared setting up of a Cabinet Committee on Investment, under the Chairmanship of the Prime Minister, for clearing large projects of over Rs 1,000 crore.
    
As the reform momentum built up, investor confidence improved and was reflected in FII inflows in capital markets.
    
Foreign investors put in a net Rs 1.2 lakh crore (USD 23 billion) in 2012 taking their total cumulative investment in India's equity market to all-time high of USD 125 billion.
    
While the government's disinvestment programme failed to pick up in the first seven months of the current fiscal and state-run financial institutions and LIC had to come in to rescue stake sales of ONGC and HCL, there were concerns about its success.
    
However, with good response from foreign investors in the NMDC issue, the disinvestment programme saw some light. Against the target of Rs 30,000 crore for the current fiscal, over Rs 6,900 crore has been raised so far. Many blue-chip PSUs, including MMTC, SAIL, Bhel and OIL, are in the pipeline.
    
The Finance Minister exuded confidence that the tax mop up and disinvestment target for the current fiscal would be achieved. Besides, several measures in the form of tax sops are underway for the insurance industry.
    
Although several steps have been taken by the government and the RBI also hinted at some rate cut in January, the prospect of economic growth in 2013 would depend on improvement in global economy and also the thrust which Chidambaram might provide in his Budget for 2013-14 in February.

(Agencies)

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