Introduction
Policies for macroeconomic management in 2001-02 were geared to initiate and nurture the recovery of industrial activity and exports against the backdrop of sluggishness in several industries and the deepening of the synchronised slowdown characterising the global economy. A robust recovery in agricultural performance, comfortable food stocks, record lows in inflation, and a strong improvement in the balance of payments reflected in a large accretion to the foreign exchange reserves provided the enabling environment for the macroeconomic policy stance.
1.2 Real sector policies were guided by the objective of boosting domestic investment demand by expanding the participation of private enterprise and by promoting foreign investment. Trade policies focussed on an aggressive medium-term export strategy, both product- and market-specific, within the overall goal of raising Indias share in world exports over a five-year span. The process of removal of quantitative restrictions (QRs) and the reduction/ rationalisation of tariffs was carried forward. Foreign investment policy extended the liberalisation of extant ceilings on foreign direct investment (FDI) in various sectors. Liberalisation was also effected in respect of the participation of foreign institutional investors (FIIs) in Indian corporate entities. Norms for overseas issuances by Indian companies and Indian direct investment abroad were eased significantly along with procedural simplifications. Fiscal policies renewed the commitment to consolidation and rectitude alongside a six-pronged strategy to reinvigorate the economy and return to a growth path consistent with its potential. Monetary policy continued its stance of ensuring adequate liquidity to meet credit demand, and pursued the objective of softening of interest rates consistent with a vigil on price stability. Channels of credit delivery were refined and augmented and the operational effectiveness of monetary policy was improved as an integral part of building the institutional infrastructure of an efficient and vibrant financial system. Banking and financial sector reforms were intensified with continued emphasis on deregulating the policy environment to enhance the operational efficiency of financial intermediaries, strengthening these institutions by benchmarking prudential standards against international best practices, improving the regulatory and supervisory function, and enhanced transparency, accountability and market discipline.
REAL SECTOR POLICIES: AGRICULTURE AND INDUSTRY
Agriculture
1.3 A number of steps were undertaken to reduce foodgrain stocks that are posing problems of storage and disposal. QRs on export of several food items including wheat and wheat products, coarse grains and pulses were dismantled in March 2002. The First In First Out (FIFO) condition for export of foodgrains from the Food Corporation of India (FCI) stocks - requiring disposal of old stocks before newer arrivals could be sold - was waived in June 2001. The Central Issue Price (CIP) of wheat and rice was lowered by around 26 per cent in July 2001 for the Above Poverty Line (APL) consumers so as to increase the off-take under the Targeted Public Distribution System (TPDS). The quantum of foodgrains for the Below Poverty Line (BPL) consumers was increased to 35 kilograms per household. The Public Distribution System (PDS) was converted into a statutory entity in September 2001. The policy of dividing the country into five zones for selling subsidised wheat in the open market was removed in January 2002. Each State would be treated as a separate zone and the actual freight cost incurred by the FCI in transporting wheat to that State would be charged.
1.4 Several new initiatives under the "save grain campaign scheme" to reduce losses of foodgrains during the post-harvest period were initiated in 2001-02, including creation of additional storage capacities (estimated at 54 lakh tonnes), creation of additional capacity for bulk handling, storage and transportation facilities and creation of conventional godowns through private sector participation. Grain banks are proposed to be established in various locations of the country.
1.5 Forward trading was allowed in sugar in April 2001. A package of policy measures aimed at boosting sugar exports and forward trading was announced in November 2001. Three exchanges were given in-principle approval to carry futures trading in sugar. A consortium was given an in-principle approval to set up a multi-commodity exchange to undertake futures and spot trading in 30 commodities in July 2001.
1.6 A key objective of fiscal policy for 2002-03 is the acceleration of agricultural reforms, the removal of regulatory and procedural rigidities and an improved infrastructure in the agricultural sector. Assistance from Rural Infrastructure Development Fund (RIDF) is linked to reforms in the agriculture and rural sectors and funds for RIDF-VIII have been enhanced. The allocation for the Accelerated Irrigation Benefit Programme (AIBP) was also stepped up.
Policies for macroeconomic management in 2001-02 were geared to initiate and nurture the recovery of industrial activity and exports against the backdrop of sluggishness in several industries and the deepening of the synchronised slowdown characterising the global economy. A robust recovery in agricultural performance, comfortable food stocks, record lows in inflation, and a strong improvement in the balance of payments reflected in a large accretion to the foreign exchange reserves provided the enabling environment for the macroeconomic policy stance.
1.2 Real sector policies were guided by the objective of boosting domestic investment demand by expanding the participation of private enterprise and by promoting foreign investment. Trade policies focussed on an aggressive medium-term export strategy, both product- and market-specific, within the overall goal of raising Indias share in world exports over a five-year span. The process of removal of quantitative restrictions (QRs) and the reduction/ rationalisation of tariffs was carried forward. Foreign investment policy extended the liberalisation of extant ceilings on foreign direct investment (FDI) in various sectors. Liberalisation was also effected in respect of the participation of foreign institutional investors (FIIs) in Indian corporate entities. Norms for overseas issuances by Indian companies and Indian direct investment abroad were eased significantly along with procedural simplifications. Fiscal policies renewed the commitment to consolidation and rectitude alongside a six-pronged strategy to reinvigorate the economy and return to a growth path consistent with its potential. Monetary policy continued its stance of ensuring adequate liquidity to meet credit demand, and pursued the objective of softening of interest rates consistent with a vigil on price stability. Channels of credit delivery were refined and augmented and the operational effectiveness of monetary policy was improved as an integral part of building the institutional infrastructure of an efficient and vibrant financial system. Banking and financial sector reforms were intensified with continued emphasis on deregulating the policy environment to enhance the operational efficiency of financial intermediaries, strengthening these institutions by benchmarking prudential standards against international best practices, improving the regulatory and supervisory function, and enhanced transparency, accountability and market discipline.
REAL SECTOR POLICIES: AGRICULTURE AND INDUSTRY
Agriculture
1.3 A number of steps were undertaken to reduce foodgrain stocks that are posing problems of storage and disposal. QRs on export of several food items including wheat and wheat products, coarse grains and pulses were dismantled in March 2002. The First In First Out (FIFO) condition for export of foodgrains from the Food Corporation of India (FCI) stocks - requiring disposal of old stocks before newer arrivals could be sold - was waived in June 2001. The Central Issue Price (CIP) of wheat and rice was lowered by around 26 per cent in July 2001 for the Above Poverty Line (APL) consumers so as to increase the off-take under the Targeted Public Distribution System (TPDS). The quantum of foodgrains for the Below Poverty Line (BPL) consumers was increased to 35 kilograms per household. The Public Distribution System (PDS) was converted into a statutory entity in September 2001. The policy of dividing the country into five zones for selling subsidised wheat in the open market was removed in January 2002. Each State would be treated as a separate zone and the actual freight cost incurred by the FCI in transporting wheat to that State would be charged.
1.4 Several new initiatives under the "save grain campaign scheme" to reduce losses of foodgrains during the post-harvest period were initiated in 2001-02, including creation of additional storage capacities (estimated at 54 lakh tonnes), creation of additional capacity for bulk handling, storage and transportation facilities and creation of conventional godowns through private sector participation. Grain banks are proposed to be established in various locations of the country.
1.5 Forward trading was allowed in sugar in April 2001. A package of policy measures aimed at boosting sugar exports and forward trading was announced in November 2001. Three exchanges were given in-principle approval to carry futures trading in sugar. A consortium was given an in-principle approval to set up a multi-commodity exchange to undertake futures and spot trading in 30 commodities in July 2001.
1.6 A key objective of fiscal policy for 2002-03 is the acceleration of agricultural reforms, the removal of regulatory and procedural rigidities and an improved infrastructure in the agricultural sector. Assistance from Rural Infrastructure Development Fund (RIDF) is linked to reforms in the agriculture and rural sectors and funds for RIDF-VIII have been enhanced. The allocation for the Accelerated Irrigation Benefit Programme (AIBP) was also stepped up.
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