News Wrap


Financial powers have been transferred from the Planning Commission to the Union Finance Ministry of India, who will decide on the plan budget for the different ministries. The Union Finance Ministry is now responsible for state and central level ministries, in respect of financial allocations. The distinction between plan and non-plan budgets is being steadily done away with.

A pre-budget hike of rail fares implies a 14.2% increase in passenger fares, and 6.5% increase in freight rates, inclusive of the Fuel Adjustment Component (FAC) of 4.2% for passenger fares and 1.5% for freight rates. The additional burden due to oil prices fluctuation will get reviewed if the price of oil decreases. The fare and freight hikes will earn the cash strapped railways, an estimated Rs 8000 crore a year, as against the requirement of Rs 14 lac crore for capacity expansion, of a basic nature by 2020. The operating ratio of March 2014 has slid down to 90.8% as compared to the target of 87.8%.

Job creation
Between 2004 and 2014, despite better economic growth of average 8% in India, job creation has been below 1% in the country. The proportion of people in labour force declined from 43% (2004-05) to 39.5% (2011-12), with a sharp drop in female participation rate from 29% to 22.5%. Although the overall unemployment rate is at 2.2%, the unemployment rates for youth in the age group 15 to 29 years, and particularly those possessing secondary level of education and above, are much higher. More than 52% of workers are engaged in self-employment and a significant proportion of women workers are primarily home-based. India’s labour productivity is $10,080 a year, compared with $107,551 in USA, and $23,888 in Brazil.

Pope in Holy Land
The wall separating Bethlehem and Jerusalem is part of a barrier Israel built, a decade ago, after the Palestinians’ violent uprising against Israeli rule. During a visit to the Holy Land at end May 2014, Pope Francis prayed at the Wall and spoke of the Vatican’s good relations with the ‘‘State of Palestine’’, delighting his Palestinian hosts, by paying tribute to their struggle against Israeli occupation. Pope Francis arrived in Bethlehem from Jordan, on the second day of visit Vatican officials described as pastoral. The unscheduled stop at the Wall was laden with political symbolism, because of the collapse of Israel-Palestinian peace talks, and the Palestinians’ renewed push for international recognition. The itinerary in the West Bank included the Beheisheh Refugee Camp, where the Pope met families from a Christian village, destroyed in 1948.

At the request of the Israeli Prime Minister, Benjamin Netanyahu, the Pope deviated from his itinerary, to visit a stone and marble memorial to Israeli victims of terrorism, The Pope also prayed at the adjacent Western Wall, one of the most revered shrines for Jews.

Rationing in Venezuela
Three months of violence, arising from anti-government protesters clashing with police, have left over 60 people dead, and plunged Venezuela into its worst crisis in a decade. Venezuelan families are restricted to one weekly shop for subsidised food, under measures to prevent households hoarding basic goods, and selling them at a profit. Children are also banned from shopping at government owned supermarkets, to prevent their parents circumventing the new rules. Venezuela’s central bank has listed more than a quarter of basic staples as out of stock, food shortages, and record crime level, as key triggers of street protests since March 2014. Even at state run shops, people often have to queue for hours to buy staples such as flour, cooking oil, and chicken at discounted prices.

The Venezuelan government has allowed landlords 60 days, to offer properties for sale to any tenant who has occupied them for more than 20 years. Failure to do so will result in a fine of $40,000 (24,000 Pound) at the official exchange rate. The new law stipulates that landlords can charge only a ‘‘fair price’’ for an apartment. The government approves all paper work for the property sales.

Stability in Algeria
The Algerian government tackled riots in early 2011 over rising food prices, by increasing subsidies, and raising public spending, to prevent contagion from neighbouring Tunisia and Egypt, where popular uprisings had toppled long serving dictators. Aimed to buy peace of the 37 million population, the elderly President Abded Aziz Bouteflika has made generous state spending on subsidies, public-sector salaries and social housing a plank of his domestic policy. The Algerian economy is over-dependent on shrinking gas exports and spends excessively on its considerable foreign currency reserves now at $195 billion. Gas production has declined, while rising domestic energy consumption was squeezing export volumes. Powered by revenues from gas and oil exports, government spending jumped by half and civil servants’ salaries rose by 46%, since 2011. Algeria’s shadowy establishment, having deep rooted connections with military and intelligence circles, derives legitimacy from the redistribution of hydro carbon rent, through rampant social spending. Foreign investors are not permitted to own more than 49%, of any joint venture, with a local partner. Algeria received only $1.5 billion in foreign investment in 2012. The economy is dominated by the state, and big private businesses are linked to regime figures. Corruption scandals have been uncovered at Sonatrach, the state owned oil company since 2010. Al-Qaeda inspired militants have attacked remote gas facilities in Sahara.

Vol. 47, No. 3, Jul 27 - Aug 2, 2014