Questions - answers

Good Class
"I do not expect India of my dreams to develop one religion, i.e., to be wholly Hindu or wholly Christian or wholly Mussalman, but I want it to be wholly tolerant, with its religions working side by side with one another.''
          —Mahatma Gandhi
On paper, India is unquestionably a secular State with secure constitutional guarantees for all citizens. Yet, at a social and political level secularism seems an abstraction. There is a serious contradiction between the secular goal of the Indian Constitution and the growing communalisation of its polity.

Secularism cannot be defined without relating it to the socio-political context. What is true in the western context, may not be necessarily valid in Indian context and vice versa.

Secularism, in philosophy and politics, is rejection of religious and sacred forms and practices in favour of rational assessment and decision-making. In Europe and North America, secularism can be traced to the 18th-century Age of Enlightenment or Age of Reason. Enlightenment thinkers attacked classical traditions and religious authority. In particular, they argued that the separation of Church and State would enable the free exercise of human intellectual capacities and imagination, and would bring about government by reason, rather than by tradition and dogma.  The State, which was subservient to Church, till then, was able to free itself from domination of papal authority, after a long struggle.

Western dictionaries define "secularism" as the absence of religion, but Indian secularism means a profusion of religions, none of which is privileged by the State. Secularism in India does not mean non-religiousness, rather it means multi-religiousness.

The Indian society was very different from the European society in its socio-religious structure and could not, therefore, imitate the western model of secularism. It had to evolve its own model of secularism from its own experimental context. Since there was not any struggle against any established religious authority, there was no question of any resentment against religion. Also, India was rich in pluralistic traditions, and mainly relied on them for developing its concept of secularism.

Indian pluralism is best summed up in two maxims: ekam sad vipra bahula vadanti (That which exists is one; sages call it by various names) and sarva dharma sambhava (All religions should be equally respected).

Thus, right from the beginning, Indian secularism drew its strength from pluralism. It was the religious community, rather than the religious authority, which mattered in the Indian context of secularism. The saner leaders of both the communities emphasized justice in power-sharing, without questioning the religious authority of either community.

In fact, the leaders of minority communities feared domination by the majority community and interference in their religious affairs. The leaders of the majority community, on the other hand, sought to assuage the feelings of minority communities by assuring them they would be free to follow their own religions. Such leaders were called secular, while those of the majority community who resented unrestricted religious freedom for minorities were called communal. (a loose definition) Thus, in Indian secularism an anti-religious attitude did not play a part.

When the concept of secularism came to be accepted in Indian politics, beginning with later part of 19th century, Indian society was deeply religious and people jealously guarded their religious rites as well as religious identities. Even the modern reform movements by Raja Rammohan Roy and Sir Syed, in the Hindu and Muslim societies, respectively, were launched within the framework of respective religions.

The leaders of freedom movement, like Tilak, Mahatma Gandhi, Maulana Azad and others were all believers themselves and adopted the religious idiom to mobilize the Indian masses for the freedom struggle.

For Gandhiji, the basis of Hindu-Muslim unity was also religion. The political unity, in his view, should also be based on one's religious duty to unite with other human beings. He wrote in the Harijan of July 6, 1947 that " trying to befriend Muslims I have only proved myself a true Hindu and have rightly served the Hindus and Hinduism. The essence of true religious teachings is that one should serve and befriend all". To strengthen his point then he goes on to quote a couplet-from Iqbal's famous poem Naya Shivala: Mazhab nahin sikhata aapas mein bayr rakhna", meaning, religion does not teach us to bear ill-will towards one another.

Constitutional concept
Differing views of national leaders meant that the form of secularism that found expression in the Constitution after independence was ambiguous. The result was that the Constitution sought to do several things. It made some allowance for the role played by religion, especially Hinduism, in Indian life. It also gave statutory recognition to minorities, thereby implicitly accepting the existence of a majority. It aimed to foster a common civic identity, but then compromised this by the provision of reserved seats in legislatures to Scheduled Castes and Scheduled Tribes (initially meant to last 10 years, no Parliament has contemplated doing away with this and its regular extension has become a formality).

Though our Constitution is secular, originally the word 'secular' found only a single casual mention in the document of 1950. The reference was to "economic, financial, political or other secular activity" in Article 25(2a) and the usage followed the standard dictionary meaning.

It was only during the emergency in mid-seventies, during Congress party rule, that the words "secular and socialist" were added.  The secular objective of the State was specifically expressed by inserting the word 'secular' in the Preamble of the Constitution (42nd Amendment) Act, 1976.

But the word 'secular' was not defined, although it was given official (not Constitutional but operational) expression in the State practice of maintaining equi-distance from all religions, or paying equal respect to all religions, not favouring one at the cost of another. Thus, the unity and fraternity of the people of India, professing numerous faiths, was sought to be achieved by enshrining the ideal of a 'secular State', which means that the State protects all religions equally and does not itself uphold any religion as the State religion.

Thus, the spirit of Indian secularism is not denial of any religion or religious practice, but religio-cultural pluralism. It is certainly better than atheistic secularism as the latter does not admit the right of citizens to believe.

Uneven benefits of modernization and industrialization, on one hand, and marginalization of religious traditions, on the other, have led to strong reaction, lending legitimation to the reassertion of religious and ethnic identities, and putting more and more pressure on the secular State.

During eighties, right-wing politicians mooted the concept of positive secularism, putting a question mark on the Nehruvian concept of secularism. The advocates of 'positive secularism' argue that all those who follow Nehruvian secularism are following a 'pseudo secularism' or 'false secularism', as they are indulging in 'minorityism' by unduly favouring the minorities.

Religion in India, whether pre- or post-Independence, has never been dissociated or de-linked from State institutions at any level: legal, institutional or cognitive. Rather, the modern Indian State has been involved in regulating the religious affairs of society, more to secure political goals than to "modernize" the social structure of Indian society. As a matter of fact, its various policies have promoted and strengthened the religious identity of people and provided State patronage to religious institutions and leaders.

Secularism became not a creed of radical separation between religion and politics, but of spiritualising politics itself, which often took the form of mutual accommodation of orthodoxies.

The crucial question would be what should be the relationship between the State and religion? Should the State play a part in religious affairs?

Many argue that it is not possible to do away with religion from politics in India. It must be noted that though the Constitution provides for citizenship on individual basis, irrespective of one's religion or caste, one can hardly forget that our existential reality is communitarian, rather than individual-oriented.

The Constitution had to take note of this existential reality. Thus, our Constitution tries to imbibe elements of both as an honourable compromise.

Strictly speaking, the ruling elites do not rule in the name of religion, or for a particular religion. However, politics of the ruling elites has always found it convenient to negotiate with various communities, rather than individuals. Religion has firm presence within the communities, and it is a reference point for the communities to define themselves. The Indian State, therefore, continues to interact and deal with communities, and in the process, constantly legitimises and reinforces the communities through its acts.

The meaning of religion varies from one person to another. All religious people are not dogmatic, narrow-minded, ignorant, superstitious and intolerant. Dogmatism and narrow-mindedness or fanaticism are psychological rather than religious categories. In that way, even an atheist or agnostic can be dogmatic or intolerant and even fanatic.

The role of religion has often varied, from being an instrument in the hands for enforcing abject subjugation of the toiling masses, to that of inspiring the revolt against tyranny or racial oppression.

Religion for toilers generally steps in to cement the strong bonds desired. It provides values and meaning to their lives. It is their hope. Religion acts not only as a substitute to science in explaining the universe and its laws, it also acts as a popular philosophy for even the most ordinary person to be able to appreciate.
The ordinary or powerless need stronger, collective existence to give meaning and purpose to their existence. The collective social existence through which the individual seeks to compensate his or her powerlessness is to have common social values, culture, and a world-view.

Some social scientists in India have argued that the serious threats to social tolerance and diversity in India today come either from an anti-democratic, majoritarian, ethnic nationalism or from a homogenising and modernising nation State, and the imposition of alien values on Indian society. Such theorists prefer a State which does not claim procedural neutrality and separation of State from religion but is, instead, guided by an encompassing indigenous culture, although they oppose the interpretations of Indian culture which are being marketed by right-wing forces today. Minorities could be protected, they argue, by the tolerance and modes of coexistence which have evolved in the society over time, rather than by a modernising nation State with alien values. The State should be prepared to devolve some of its powers and functions on to communities.
India’s relations with China have a long history. The origins of China’s expansionist and aggressive designs can be traced to its full occupation of Tibet, a vast region in Central Asia, often called the "Roof of the World" and the "Forbidden Land". It brought China to the very edge of our border.

The decades-old cordiality, which marked the “Hindi-Chini Bhai-Bhai” days and all the impressive talk of Panchsheel (five principles of peaceful co-existence), to which China was also a vocal party during Nehru’s time, were turned into hostility as a result of the sudden invasion of India by China in 1962 and forcible occupation of about 35,000 square km of Indian territory.

Every now and then, the Chinese, officially or unofficially, release maps in a bid to establish their legal right over Indian territory which it seized in 1962 and other areas.

Several rounds of talks have been held, frequent gestures of friendship made, feelers thrown by both countries and false hopes aroused of a settlement of the vital border question. The results of the prolonged discussions, do not mark concrete achievements towards the solution of the boundary question which naturally continues to be the topmost priority from the Indian viewpoint.

Relations with China have also remained soured because of its support to Pakistan in making nuclear weapons. India has often protested about this but the co-operation has continued. China’s hand in the making of the Pakistani nuclear bombs was all too evident but India did not make it into an international issue. Nor has it highlighted the plight of the Tibetan refugees in India. More and more have been crossing the border and settle in India to escape the prosecution in China.

The Chinese set of principles were aimed at pursuing Mr Deng Xiaoping’s package deal which envisaged freezing the status quo on the India-China border.

India made it known to the Chinese that it could not accept the package plan which amounted to accepting the Chinese occupation of more than 20,000 square km of Indian territory. This includes Aksai Chin, as also Indian territory which the Chinese captured by their blatant, deceitful aggression in 1962. To this total should be added the Indian territory under Pakistan’s illegal occupation which was ceded to China under the Sino-Pakistan Agreement of 1963.

Mr Rajiv Gandhi’s five-day visit to China in December, 1988, created an atmosphere of goodwill and set the stage for a settlement of the border dispute between the two countries. The two sides had in-depth discussions and agreed to develop their relations in several fields and work hard to create a favourable climate and conditions for a fair and reasonable settlement of the boundary question. Both sides agreed that concrete steps would be taken, such as establishing a joint working group on the boundary question and a joint group on economic relations, trade, science and technology. The Indian side assured that anti-China political activities by Tibetan elements would not be permitted in the country.

India and China signed a landmark agreement on September 7, 1993, during Prime Minister Narasimha Rao’s Beijing visit. It generated much goodwill and set the stage for peaceful resolution of the vexed border issue.

The accord was a pragmatic step forward to promote understanding and mutual confidence. The two sides agreed to reduce their military forces along the Line of Control (LoC). They also agreed that neither side would undertake specified levels of military exercises in identified zones.

Relations with India and China improved during 1995. On March 4, 1995, India and China reached an agreement to open two more points along the border at Nathu La in the Sikkim sector and another in the middle sector, for meetings between their military personnel. On July 17, 1995, then Home Minister S.B. Chavan, during a visit to China, reiterated India’s willingness to continue to work with China to maintain substantive contacts in all areas.

A meeting of the Sino-Indian Joint Working Group (JWG) on the border question yielded a breakthrough at New Delhi on August 20, 1995, when both countries agreed to pull back troops at four points on the Arunachal Pradesh border. The agreement ended a 33-year-old eyeball-to-eyeball deployment where the two forces are separated by as less as 50 to 100 yards.

India and China marked 50 years of diplomatic contact on April 1, 2000. For most of these five decades, ties between Asia’s two largest countries had been uneasy, especially since the short border war of 1962. Much had happened since and today India and China are discussing the border problem across the table. Though it has been a long, slow process, with no concrete results, the hostility and suspicion, at least, has not led to military skirmishes.

A bilateral trade agreement between the two countries helped remove one more barrier to China’s 14-year bid for membership of the World Trade Organisation (WTO). The agreement was hailed as a boost to Sino-Indian relations. The joint statement said that India gave full support to China’s entry into global trading body and would work with China to develop trade ties in future.

In August, 2000 both the countries signed a five-year memorandum of under­standing on critical areas of information technology, during the visit of Information and Technology Minister Pramod Mahajan to Beijing.

In May 2001, the Chief of Indian Air Force,  Air  Chief Marshal A.Y. Tipnis, visited China to help enhance military to military ties. Tipnis became the first IAF Chief to visit China in the 51 years of diplomatic relations between the two countries. Later, two Chinese naval ships—Harbin and Tailing—arrived in Mumbai to engage the Indian Navy in a three-day ‘Pasex’ exercise or naval exercise while on passage.

Beijing assured New Delhi of its active co-operation in the fight against international terrorism, including Pakistan-sponsored cross-border terrorism, when the two countries held a bilateral dialogue on terrorism for the first time in Beijing in November 2001.

The two sides also discussed developments in the region following the September 11 attacks in the US, and expressed concern on the grave threat faced by India and China from terrorism. Though Beijing had earlier also condemned acts of terrorism in India, it was the first time that it  recognized New Delhi’s concern on Pakistan-sponsored terrorism.

Chinese Prime Minister Zhu Rongji’s six-day visit to India, in the second week of January, 2002, took place at a time when military tensions between India and Pakistan were on the boil. The message of China, a close friend of Pakistan, during the India visit was, however, clear. It wanted to expand economic, scientific and business ties between India and China.

Mr Rongji reiterated the Chinese position that the India-Pakistan dispute should be resolved through negotiations. He also assured India that China posed no threat to it, and that Beijing will keep out of the Indo-Pakistani dispute over Kashmir.

Both China and India also agreed to expand cooperation in order to combat terrorism, which had assumed global dimensions. It was announced  that the two countries would hold regular dialogue on the subject and constitute a joint working group on terrorism, and cooperate with another on intelligence sharing and exchange know-how to combat  terrorism.

India and China also agreed to speed up resolution of their border dispute—a legacy of the bitter border war in 1962—by clarifying the 3268 km long Line of Actual Control (LAC).

Prime Minister Zhu, however, preferred to concentrate on the business of strengthening bilateral economic ties. Five Memoranda of Understanding and contracts worth more than $100 million were signed during the visit.

Prime Minister Atal Behari Vajpayee visited Beijing, Luoyang and Shanghai from June 22 to 27, 2003. The visit helped in taking the relationship to a new level.Ten agreements and a Declaration on Principles for Relations and Comprehensive Cooperation between the Republic of India and the People’s Republic of China were signed during the visit. While the Declaration contained the sensitive formulation on Tibet, what held more interest from the Indian point of view was a Memorandum of Understanding signed on expanding border trade.

In the first-ever joint declaration of Principles of Relations and Comprehensive Cooperation signed by Prime Minister Atal Behari Vajpayee and his Chinese counterpart Wen Jiabao, India recognised that the Tibetan Autonomous Region is part of the territory of the People’s Republic of China. It reiterated that New Delhi will not allow Tibetans to engage in anti-China political activities in India. The declaration was the first-ever joint document signed by leaders of the two countries.

In the MoU on expanding border trade, the Indian side agreed to designate Changgu of Sikkim State as a venue for the border trade market. The Chinese side agreed to designate Renqinggang of the Tibetan Autonomous Region as the venue for the border trade. And the two countries agreed to use Nathu La as a pass for entry and exit of persons, means of transport and commodities engaged in border trade.

What was most important in this MoU was related to the status of Sikkim, whose merger with India in 1975 China had consistently refused to recognise. Through this document China extended a de facto recognition by agreeing to open a new trade route between the two countries through Sikkim—something that China had been refusing to do earlier.

Also, in an attempt to speed up resolution of the border dispute, India and China agreed to appoint a special representative to explore, from the political perspective of the overall bilateral relationship, a framework on the boundary settlement. This is an acknowledgement that the key issue in resolving the dispute is political and discussion at a purely official and technical level may have reached a plateau.

In a major move to foster friendly ties with India, China, on October 8, 2003, removed Sikkim as a separate country from its Foreign Ministry website, honouring an understanding reached on the issue during Prime Minister Atal Behari Vajpayee’s historic visit to Beijing in June 2003.

On May 31, 2004, China took another significant step to recognise Sikkim as part of India by not showing the North-eastern State as an independent country in the Annual Year Book (2004 edition). China took a strategic step forward in its relations with India by formally endorsing India’s candidature to the UN Security Council. The decision was conveyed during a crucial visit to India by Tang Jiaxuan, State councillor and one of the senior-most leaders in China.

Seeking to upgrade bilateral relationship, India and China held their first-ever ‘strategic dialogue’ on January 24, 2005, to discuss major global and regional issues, including international terrorism, non-proliferation and energy security. The aim of the strategic dialogue was to broaden the scope of the blooming bilateral relationship, allowing both sides to exchange notes on global and regional security issues.

Prime Minister Wen Jiabao of China paid a State visit to India from April 9-12, 2005. The visit was substantive in its outcome. Heralding a new dimension in bilateral ties, India and China agreed to work for “early” settlement of the vexed boundary question, establish a strategic and cooperative partnership for peace and prosperity and further promote exchanges in the military field.

After wide-ranging discussions, Prime Minister Manmohan Singh and visiting Chinese Premier Wen Jiabao signed a landmark Joint Statement that contained a vision of where India-China relations are headed and an action plan for cooperation in bilateral, regional and global domain.

The two countries also agreed on the importance of comprehensive reforms in the UN system. China conveyed that it attached great importance to the status of India in international affairs and understood and supported India’s desire to play an active role in the UN and international affairs.

India hosted Chinese Premier Wen Jiabao in December 2010, in an attempt to stabilize Sino-Indian ties, which had undergone great turbulence in the past two years.

There was no dearth of warm words during the visit: Wen, in a lecture in New Delhi, invoked Mahatma Gandhi as "a man of love and integrity" who "has always lived in my heart." He stressed that although Sino-Indian relations have experienced major turns, they were only a short episode in a 2000-year history of friendly bilateral exchanges.

As in the past, economic ties ended up being the focus of the visit. The two sides have now set a target of $100 billion in trade expansion by 2015 from the present $60 billion. Wen had come to India with a group of around 300 Chinese executives; business deals worth about $16 billion were signed. But there was no progress on the regional trade agreement as India remained concerned about its growing trade deficit with China.

China did not concede to India on any major issue while India decided to play hard-ball on various issues of importance to China. Wen, for example, refused to acknowledge Indian concerns over China's issuance of stapled visas to the residents of Jammu and Kashmir, the growing Chinese presence in Pakistan-occupied Kashmir, and anti-India terrorist groups operating from Pakistan. Unlike other major powers, China has refused to unambiguously demand that Pakistan shut down the terrorist infrastructure on its soil.

For its part, India this time refused to explicitly state that it recognizes the Tibet Autonomous Region as part of the Chinese territory.

There was little movement on a range of concerns that India had flagged before the visit. India had expressed concerns about Beijing damming rivers like the Brahmaputra as well as the non-tariff trade barriers to Indian companies in China.

Despite the lack-luster nature of Wen's India trip, the new-found robustness in India's China policy was rather striking. After trying to push significant differences with China under the carpet for years, Indian decision-makers are being forced to grudgingly acknowledge that the relationship with China is becoming more contentious.

Ignoring pressures from Beijing, India decided to take part in the Nobel Peace Prize ceremony for Chinese dissident Liu Xiaobo in Oslo. Beijing had asked several countries, including India, to boycott the ceremony, describing the prize as open support for criminal activities in China.

As India grows outwardly, the two giants are beginning to rub shoulders in different parts of Asia, Africa, and Latin America. New economic prosperity and military strength is re-awakening nationalist pride in India, which could bring about a clash with Chinese nationalism. The existence of two economically powerful nations will create new tensions as they both strive to stamp their authority on the region.

In the power competition game, while China has surged ahead by acquiring economic and military capabilities under-pinned by a clear policy to achieve broader strategic objectives, India has a lot of catching up to do.

The existing asymmetry in international status and power serves Beijing’s interests very well; any attempt by India to challenge or undermine China’s power and influence or to achieve strategic parity is strongly resisted through a combination of military, economic, and diplomatic means.

Maritime competition is also set to intensify as Indian and Chinese navies show off their flags in the Pacific and Indian oceans with greater frequency. Their maritime rivalry is likely to spill into the open in a couple of decades’ time when one Indian aircraft carrier will be deployed in the Pacific Ocean and one Chinese aircraft carrier in the Indian Ocean, ostensibly to safeguard their respective sea lanes of communication. Perhaps sooner rather than later, China’s military alliances and forward deployment of its naval assets in the Pakistani, Bangladeshi, Sri Lankan, and Myanmarese ports would prompt India to respond in kind by seeking access to ports in Vietnam (Cam Ranh Bay), Taiwan (Kao- hsiung), and Japan (Okinawa), which would allow for the forward deployment of Indian naval assets to protect India’s East Asian shipping and Pacific Ocean trade routes, as well as access to energy resources from the Russian Sakhalin province.

For the foreseeable future, India-China ties will remain fragile and as vulnerable as ever to sudden deterioration as a result of mis-perceptions, accidents, and eruption of unresolved issues. Simmering tensions over territory, overlapping spheres of influence, resource scarcity, and rival alliance relationships ensure that relations
between the two rising Asian giants will be characterized more by competition and rivalry than cooperation for a long time to come.
In 2010-11 the Indian economy emerged from the slowdown caused by the global financial meltdown of 2007-09 with remarkable rapidity. As per the Advance Estimates of the Central Statistics Office, released on February 7, 2011, the turnaround was strong, with a rebound in agriculture and continued momentum in manufacturing. The deceleration in community, social, and personal services, as also industry, remained a cause for concern.

The medium to long-run prospect of the economy, including the industrial sector, however, continues to remain positive. On the demand side, a rise in savings and investment, and pick-up in private consumption resulted in strong growth of GDP at constant market prices at 9.7 per cent in 2010-11.

Food items largely drove inflation, which remained at elevated levels for greater part of the year, though the goods that were inflating at the beginning of the year were different from the goods for which prices had risen in the end part of the year.

The rise in the purchasing power owing to the rapid growth of the economy and inclusive programmes like the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) partly might have contributed to the upward trend in inflation.

Despite tightening of the money markets and moderate growth in deposits, the financial situation remained orderly with a pick-up in credit growth, vibrant equity market and stable foreign exchange market.

In last three years the Indian economy had been severely buffeted by two shocks in rapid succession—the onset of global financial crisis in 2007-09 and erratic monsoon resulting in drought in 2009-10. This period of economic stress severely tested the policymakers. Yet the Indian economy came through with resilience and strength, by following counter-cyclical macro-economic policies, structural measures to promote growth, and social spending to provide a stronger foundation to protect the poor.

The estimated level of growth in the GDP at constant 2004-05 prices at factor cost (real GDP) in 2010-11 was composed of: growth of 5.4 per cent in agriculture, growth of 8.1 per cent in industry, and a decelerated growth of 9.6 per cent in services.

The service sector, with a share of 57.3 per cent in 2009-10, has, however, started to gather momentum and given the fact that it is the power house of the Indian growth story, this portends well for the medium-term prospects. The savings rate has gone up to a level of 33.7 per cent and investment rate is up to 36.5 per cent of the GDP in 2009-10.

The fiscal policy being followed is now on the consolidation path with revenues doing well on the strength of the rebound in economic activity and, going forward, this is likely to yield growth dividends in the medium to long term.

Headline inflation, year-on-year, as measured by the wholesale price index (WPI), remained at elevated levels from December 2009, even though it has, by and large, been on downward trajectory since April 2010, when the WPI inflation peaked at 11 per cent year-on-year. Inflation in primary articles, particularly food articles, was the main contributor to the elevated levels of WPI inflation. Inflation in food articles remained in double digits for 76 weeks from June 5, 2009.

The inflationary pressures on the domestic front are likely to be exacerbated by the high levels of global commodity prices and also the easy money policy being followed in several industrial nations trying to jump-start their own economies.

The growth of agriculture and allied sectors continues to be a critical factor in the overall performance of the Indian economy. For four consecutive years from 2005-06 to 2008-09, food-grains production registered a rising trend and touched a record level of 234.47 million tonnes in 2008-09. The production of food-grains declined o 218.20 million tonnes during 2009-10 (4th Advanced Estimates) due to long spell of drought in various parts of India in 2009.

The agricultural sector, however, is today at a crossroads with rising demand for food items and relatively slow supply response in many commodities, resulting in spikes in food inflation. The technological breakthrough achieved in 1960s is gradually waning. The need for a second green revolution is being recognized more than ever before. There is a need to significantly step up both private and public investment in the agricultural sector to ensure sustained growth so as to achieve the target growth of around 4 per cent per annum.

Six core industries that have a large bearing on infrastructure registered a growth of 6.6 per cent (provisional) in December 2010, compared to 6.2 per cent in December 2009.  The investment in infrastructure reached 7.18 per cent of GDP in 2008-09. Rapid reduction of the infrastructure deficit holds the key to competitiveness in an increasingly globalized economic environment.

In 2010-11, the achievement under various phases of the National Highway Development Project (NHDP), up to November 2010, was about 1007 km of road. About 25 per cent of the total length of National Highways continues to be single lane; about 52 per cent is two-lane standard; and the balance 23 per cent is four-lane standard or more.

In the civil aviation sector, the scheduled domestic passenger traffic at 51.53 million clocked a growth rate of 19 per cent during January-December 2010, as compared to a level of 43.3 million during the corresponding period in 2009. The total number of non-scheduled operators stood at 121 in December 2010 with 360 aircraft in their fleet. 12 scheduled airlines are operational (10 passenger and 2 cargo).

Total telephone connections increased to 84.5 per cent in November 2010 as against a meager 5 per cent in 1999. Tele-density, an important indicator of telecom penetration, rose to 64.34 per cent. In rural areas the tele-density rose to 30.18 per cent while in urban areas it has risen to 143.95 per cent at the end of November 2010.

The services sector has played a dominant role in the Indian economy with a 57.3 per cent share in the GDP. The sector showed a growth rate of 10.1 per cent in 2009-10. It has a high share in FDI equity inflows with the financial and non-financial services category alone contributing 21 per cent during April 2000 to November 2010; and a 35 per cent share in total exports with 27.4 per cent export growth in the fist half of 2010-11.

High-growth services categories include financing, insurance, real estate, and business services and transport. Growth of trade, hotels and restaurants, which slowed down in 2008-09, has recovered moderately in 2009-10. Among other services, education and medical health are two important services in terms of relative share of the GDP. They had growth rate of 13.9 per cent and 5.3 per cent, respectively, in 2009-10.

In tandem with world trade volumes, India’s exports fell rapidly following the deepening of the global financial crisis through 2008-09. The exports, however, rose in the second half of 2009-10, which continued through 2010-11 until June 2010. Thereafter, growth decelerated till October 2010 and picked up subsequently to reach 36.4 per cent in December 2010, which is the highest growth in last two years. The cumulative export growth in April-December 2010-11 was 29.5 per cent and reached $ 164.7 billion during the period.

India’s merchandise imports, also affected by the global recession, fell to $288.4 billion with a negative growth of -5.0 per cent in 2009-10. Trade deficit (on customs basis) increased by 2.4 per cent to $82 billion in 2010-11 (April-December). The lower level of surpluses on the invisible balance, the relatively higher import growth compared to export growth in fist half of 2010-11 raised concerns of unsustainable current account deficit levels.

Foreign exchange reserves increased from $ 252 billion at the end of March 2009 to $279.1 billion at the end of March 2010. Of the total increase, $13.6 billion was account of valuation gain and remaining in account of Balance of Payment (BoP).

India’s external debt stood at $ 295.8 billion at the end of September 2010, recording an increase of $ 33.5 billion (12.8 per cent) over the level of end-March 2010. The rise in debt was largely due to higher commercial borrowings, short-term trade credits, and multilateral government borrowings.

In 2007-09, a surge in capital flows far in excess of the absorptive capacity and with implications for competitiveness had complicated monetary management on account of trade-offs involving the impossible objectives of open capital account, exchange rate stability and monetary policy independence. However, with the recovery in 2009-10 and 2010-11, the external sector broadly remained supportive as rising capital flows easily financed the elevated levels of current account deficits. The concerns of sustainability, however, remain.

On the monetary front, the Reserve Bank of India (RBI) raised the policy rates six times during 2010-11, wherein the repo rate under its liquidity adjustment facility was increased cumulatively by 175 basis points, raising it to 6.5 per cent, and the reverse repo rate was increased by 225 bps, raising it to 5.5 per cent. The cash reserve ration (CRR) was at 6 per cent of net demand and time liabilities (NDTL) of banks. The steps by RBI resulted in tightening of liquidity conditions.

With the clear evidence of economic recovery in 2009-10, the 2010 Budget resumed the path of fiscal consolidation with a partial exit from the stimulus measures. The fiscal outcome in the first nine months of 2010-11 remained broadly on the consolidation track chalked out by the Budget. With a much higher than budgeted realization in non-tax revenues, arising from telecom 3G/BWA auctions, there was headroom for higher expenditure at the given fiscal deficit targets.

The expenditure on social services, by Central and State governments combined, has increased to 25.2 per cent of GDP in 2010-11. Sector-specific priorities are reflected in the continued higher budgetary allocations in areas like rural development, education, medical and public health, family welfare, water supply and sanitation, housing, and welfare of Scheduled Tribes and Castes, as also Other Backward Classes.

On the employment front, India has been able to withstand the adverse impact of the global crisis. The upward trend in employment has been continuously observed since July 2009. During the quarter July to September 2010, the overall employment has been estimated to increase by 4.35 lakh. The progress under the MGNREGA that guarantees wage employment on an unprecedented scale has been satisfactory. During 2010-11, 4.10 crore households were provided employment under the scheme till December 2010.

As per the Economic Survey 2011, India’s real GDP is expected to grow by 9 per cent in 2011-12. The savings and investment rates had gone down a little during 2008-09 because of the deliberate decision by the government to encourage consumption as an antidote to the economic downturn. The 2009-10 data, however, shows that the savings rate has gone up from 32.3 per cent in previous year to 33.7 per cent. The investment rate has also increased to 36.5 per cent. Since savings and investments now are showing a positive momentum and the government is implementing a gradual exit from the stimulus package, the savings and investment rates are likely to rise further.

The point to note is that once an economy begins to operate close to its capacity, the savings and investment rates are no longer such effective drivers of GDP growth, which then depends much more on skill development and innovative activity in the country. Fortunately, there is awareness of this in India and efforts are afoot in terms of budgetary allocation and actual initiatives to boost the development of skill and human capital. As a consequence, the next two decades should see the Indian economy growing faster than it has done any time in the past.

However, forecasts, no matter how carefully they are made, are subject to many factors. A sharp deterioration in weather conditions or a disproportionate spike in the price of crude can lead to slower growth. Certain amount of uncertainty continues to prevail over economic conditions in Europe and USA. The fiscal situation and level of sovereign debt in a large number of industrialized nations are in a somewhat tenuous situation. India will be adversely hit in the event of a serious crisis in any of the industrialized nations.


  • Economy likely to grow by up to 8.75 per cent in 2010-11.
  • Full recovery; return to 9 per cent growth in 2011-12.
  • Broad recovery gives scope for gradual stimulus roll back.
  • High double-digit food inflation in 2009-10 major concern.
  • Signs of food inflation spreading to other sectors.
  • Farm & allied sector production falls 0.2% in 2009-10.
  • Need serious policy initiatives for 4% agriculture growth.
  • Moots direct food subsidy via food coupons to households.
  • Favours making available food in open market.
  • Favours monthly ration coupons usable anywhere for poor.
  • Gross fiscal deficit pegged at 6.5 per cent of GDP in 2009-10.
  • India 10th largest gold holding nation at 557.7 tonnes.
  • Exports in April-December 2009 down 20.3 per cent.
  • Imports in April-December 2009 down 23.6 per cent.
  • Trade gap narrowed to USD 76.24 bn in April-December.
  • 32.5% savings & 34.9% investment (of GDP in 2008-09) put India in league of world's fastest growing nations.
  • Government initiates steps to boost private investment in agriculture.
  • Wants credit available at reasonable rates on time for private sector to invest in agriculture.
  • Slowdown in infrastructure that began in 2007, arrested.
  • Domestic oil production to rise 11 per cent in 2009-10.
  • Gas output up 52.8 per cent to 50.2 billion cubic meters with Reliance Industries Ltd (RIL) starting production.
  • India world's 2nd largest wireless network with 525.1 million mobile users.
  • Virtually every second Indian has access to phone.
  • Auction for 3G spectrum to provide existing and foreign players to bring in new technology and innovations.