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CURRENT AFFAIRS (01.01.2013)

1. On shaky foundation
The draft of the 12th Five Year Plan covering the period 2012-13 to 2016-17,
approved by the National Development Council last week, aims to achieve an
annual average growth rate of 8 per cent, scaled down from 8.2 per cent. The
Prime Minister has called the target aspirational, while a few Chief Ministers,
notably Narendra Modi, found it lacking in ambition. Political statements apart, it
is clear that the focus on growth rates has tended to distract attention from the rest
of the planning exercise. In retrospect, most official projections have been over-
optimistic. The approach paper of the 12th Plan talked of an annual average growth
rate of between 9 and 9.5 per cent. The Prime Minister had gone even further,
hoping for double-digit growth rates during the latter part of the Plan. What made
those projections totally unrealistic was the fact that the economic slowdown was
already getting reflected in successive quarterly GDP data. The Union Budget
(2012) projected an ambitious growth rate of 7.6 per cent, way above what most
other forecasters had estimated at that time. The government has been slow in
lowering the forecasts even when conclusive evidence of deceleration has been
coming in. True to form, the government expects the economy to grow by between
5.7 and 5.9 per cent this year the first year of the 12th Plan when the growth
during the first half has been at just 5.4 per cent. Considering that a revival in
manufacturing where the slowdown is most pronounced cannot happen that
quickly, an annual average rate of 8 per cent over the plan period can be achieved
only if the growth rate in each of the last three years is well above 9 per cent.
The Planning Commission is banking on reinvigorating a few existing policies
while expecting vastly improved performance in certain key areas: gross fixed
capital formation rate to go up to 35 per cent from the present 32 per cent, with the
private sector playing a major role in catalysing such investment; a new look
industrial policy that focuses on better coordination between the government and
the private sector to vastly improve business sentiment; stressing the importance of
national industrial manufacturing zones in a scheme of reviving industrial output.
More controversial are suggestions to streamline labour laws by increasing the
threshold employment for labour legislation to 300. The case for increasing
agricultural growth to 4 per cent largely through technology absorption is
unexceptionable. Yet all these and more may not be sufficient to achieve an annual
growth rate of 8 per cent. Since any likely shortfall will reflect adversely on the

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planning process itself, the question then is: is the obsessive focus on growth rates
counterproductive?
2. In 2012, Supreme Court made its presence felt in all spheres
The year 2012 was an eventful year for the Supreme Court, as it asserted its
supremacy and authority in all spheres, especially by cancelling the 122 cellphone
licences and ordering a thorough probe into the 2G scam that covered even the
NDA regime.
To protect human rights, the court said the right to life and liberty guaranteed to a
citizen under Article 21 of the Constitution could not be taken away without the
due procedure of law being followed. It held that a mere apprehension that an
accused was likely to be released on bail was not a ground for the authorities to
pass preventive detention.
The court deprecated the eviction of Yoga Guru Baba Ramdev and his followers
on the night of June 4, 2011. The present case is a glaring example of trust deficit
between the people governing and the people to be governed. Greater confidence
needs to be built between the authorities in power and the public at large, it
observed. It all started in January, when the court allowed Vodafones appeal
against the Bombay High Court verdict, ruling that the Income Tax Department did
not have the jurisdiction to levy Rs.11,000 crore in taxes on the overseas deal
between Vodafone International Holdings and Hutchison Group. It held that both
Vodafone and Hutch were not fly by night operators or short-term investors,
having contributed Rs. 20,242 crore in taxes to the exchequer between 2002-03
and 2010-11.
The judgment shocked the government, which immediately sought a review,
arguing that the ruling suffered from error apparent on the face of the record and
left out its case.
The review petition pointed out that the finding that the off-shore transaction,
which gave the Vodafone holding company a 67 per cent stake in Hutch-Essar,
was bonafide and structured Foreign Direct Investment in India. The case did
not involve any flow of money into India, as was evident from the characterisation
of the transaction and the incontrovertible fact that no investment or inflow of
money took place.
The court, however, rejected the petition, saying it was devoid of merits.

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Then came the cancellation of 122 cellphone licences, which were ordered to be
auctioned afresh. Furthermore, the court directed the government to auction all
natural resources in future. The ruling prompted the UPA government to seek a
Presidential Reference to the Supreme Court, wanting to know whether the
judgment made it mandatory to auction natural resources in the other sectors as
well, and whether it had retrospective impact.
The Department of Telecom felt that the judgment had far-reaching implications
for several other sectors that also followed the first come, first served policy for the
allocation of coal and iron ore, among other resources. A specific question in the
Reference was what would happen to those licences that were issued post-1994,
when an auction was not conducted.
In its advisory opinion, the court clarified that the earlier order on natural resources
was limited only to the telecom sector. It is a matter of huge relief for the
government. It is a matter of being vindicated on what we are trying to say again
and again, Telecom Minister Kapil Sibal had said, speaking of the opinion.
Auctions may be the best way of maximising revenue, but revenue maximisation
may not always be the best way to sub-serve public good, the court said.
The former Telecom Minister, A. Raja, wanted the court to reconsider its 2G order,
saying the court had condemned him for alleged illegalities without giving him an
opportunity to explain and without making him a party to the proceedings. But the
court dismissed his petition, saying it had no merits. We have carefully perused
the averments and are convinced that there is no valid ground, much less
justification, to entertain the prayer
The court also rejected Janata Party president Subramanian Swamys petition for
including Union Finance Minister P. Chidambaram as an accused in the 2G case. A
review plea was also discarded by the court.
Since the court is monitoring the 2G probe, the CBI filed a charge sheet against
Bharti Airtel, Vodafone India Ltd. and Sterling Cellular Limited for alleged
irregularities in the allocation of excess spectrum during the NDA regime. The CBI
charged the former Telecommunications Secretary, Shyamal Ghosh, and the three
firms with criminal conspiracy that cost the exchequer Rs. 846 crore.
The CBI told the trial court that additional spectrum was allotted on July 17, 2002,
to Bharti Cellular Limited (now Bharti Airtel) and Sterling Cellular Limited (now
Vodafone Mobile Service Limited) for the Delhi metro area and Hutchison Max

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(Vodafone India Limited) for the Mumbai metro area. The CBI contended that the
Communications Minister of the time, Pramod Mahajan, along with Mr. Ghosh,
allotted addition spectrum to the companies in a hurry and in contravention of the
telecom policy.
Investigation has revealed that Mr. Shyamal Ghosh, then Chairman of the
Telecom Commission and Secretary, DoT, in conspiracy with the late Pramod
Mahajan, and the accused beneficiary companies, abused his official position
as public person and showed undue favour which caused a loss of Rs.846.44 crore
to the exchequer and a corresponding undue gain to the companies, the
charge sheet said.
The court dismissed as not maintainable a petition from the former Army Chief,
Gen. V.K. Singh, to restore his date of birth as May 10, 1951. He wanted the
Defence Ministry to consider May 10, 1951 his date of birth instead of May 10,
1950, which was listed in the Army records. Gen. Singh retired on May 31.
Justice Dalveer Bhandari of the Supreme Court was elected a Judge of the
International Court of Justice. He was the first Indian judge chosen for the primary
judicial organ of the United Nations after two decades.
Justice Altamas Kabir took over as Chief Justice of India from Justice S.H.
Kapadia on September 29. Justices Deepak Verma and Swatanter Kumar retired.
Justice Swatanter Kumar took over as Chairperson of the National Green Tribunal.
Justices M.Y. Eqbal, V. Gopalagowda and Vikramajit Sen were sworn in judges of
the Supreme Court on December 24.
3. Astronautical Societys Aryabhatta award for Muthunayagam, Saraswat
The former secretary of the Department of Ocean Development, A.E.
Muthunayagam, will receive the prestigious Aryabhatta award, instituted by the
Astronautical Society of India (ASI), for 2010 and V.K. Saraswat, Scientific
Adviser to the Defence Minister, will receive the award for 2011. They have been
selected for their achievements in rocketry.
The ASI awards for rocket and related technologies will go to G. Satheesh Reddy,
associate director of the Research Centre, Imarat, Hyderabad, for 2010 and P.
Kunhikrishnan of the Vikram Sarabhai Space Centre, Indian Space Research
Organisation (ISRO), Thiruvananthapuram, for 2011.

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The awards for spacecraft and related technologies will go to P. Chakraborty of the
Laboratory for Electro-Optics Systems (LEOS), ISRO, Bangalore, (for 2010) and
Yateendra Mehta, ISRO Satellite Centre, Bangalore.
Several other awards under various categories have been won by ISRO engineers
and scientists.
Dr. Muthunayagam was the director of the Liquid Propulsion Systems Centre,
ISRO. In 2011, the Department of Atomic Energy appointed him as head of a
committee to look into safety issues related to the Kudankulam Nuclear Power
Project in Tamil Nadu.
Dr. Saraswat, who is also the director-general of Defence Research and
Development Organisation (DRDO), is an architect of the interceptor missile
programme, the Agni and Prithvi programmes.
Mr. Reddy is a specialist in navigation systems and he developed the avionics,
including the ring-laser gyroscope-based navigation system, in the target missile
(Prithvi) of the DRDOs interceptor programme and the fibre-optic gyroscope-
based inertial navigation system in the interceptor.
Mr. Kunhikrishnan has been the mission director of several Polar Satellite Launch
Vehicles.
4. Current account deficit widens to 5.4 % in Q2
Net primary and secondary income flows are smaller
The Reserve Bank of India (RBI), on Monday, said that the Current Account
Deficit (CAD), as a proportion of gross domestic product (GDP), during the
second quarter (July to September) of 2012-13 increased to 5.4 per cent from 4.2
per cent in the second quarter of the previous year.
Notwithstanding a reasonable increase in net services receipts, net invisibles
earnings could finance only a lower proportion of trade deficit as net primary and
secondary income flows were relatively smaller. Consequently, the CAD
worsened to $22.3 billion in the second quarter of 2012-13 from $16.4 billion in
the preceding quarter and $18.9 billion in the second quarter of 2011-12, the RBI
said in its report on developments in Indias Balance of Payments (BoP) position.

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Surge in inflows
Despite the surge in net inflows during the quarter under review led by foreign
direct investment (FDI) and portfolio investment, there was a marginal draw-down
of reserves by $0.2 billion, mainly due to the higher level of current account
deficit.
On a BoP basis, merchandise exports recorded a decline of 12.2 per cent (year-on-
year) as against an increase of 45.3 per cent during corresponding quarter of 2011-
12. Similarly, imports registered a decline of 4.8 per cent (year-on-year) as against
an increase of 38.1 per cent.
Steeper decline in exports than that in imports led to the widening of trade deficit
to $48.3 billion during the period under review from $44.5 billion during the
corresponding quarter of the previous year.
However, in this period, net services receipts recorded a rise of 11.4 per cent (year-
on-year), led by software, construction, information services, business services.
Net receipts under secondary income (private transfers) recorded a moderate
increase of 2.9 per cent during the quarter and were partly offset by the net outflow
under primary income (investment income).
In the half-year period ended September 2012, CAD was higher at $38.7 billion
against $36.3 billion in the same period of the previous year. As a proportion of
GDP, CAD rose sharply to 4.6 per cent in the first-half of 2012-13 from 4 per cent
in the the previous year reflecting slowdown in GDP and a significant
depreciation in rupee.
Net inflows under the financial account were lower during April-September 2012
over the corresponding period of the previous year, mainly due to decline in FDI,
external commercial borrowings (ECBs) and banking capital.
Moderation in capital inflows coupled with continued elevated level of CAD led
to only a marginal accretion of $0.4 billion in foreign exchange reserves during
April-September 2012, the RBI added.