Understanding Left wing and right wing

The political terms Left and Right were coined during the French Revolution (1789–1799), referring to the seating arrangement in the Estates General: those who sat on the left generally opposed the monarchy and supported the revolution, including the creation of a republic and secularization, while those on the right were supportive of the traditional institutions of the Old Regime. Use of the term "Left" became more prominent after the restoration of the French monarchy in 1815 when it was applied to the "Independents".
The term was later applied to a number of movements, especially republicanism during the French Revolution, socialism, communism, and anarchism. Beginning in the last half of the Twentieth Century, the phrase left-wing has been used to describe an ever widening family of movements, including the civil rights movement, anti-war movements, and environmental movements.

Source: Wikipedia

Understanding GDP

GDP at PPP best indicator

What is GDP? The gross domestic product (GDP) is perhaps the most talked about economic indicator. In simple terms, the GDP is the combined market value of all goods and services produced within an economy in a year.

In order to avoid the same things getting counted repeatedly for instance, the tyres on your car getting counted when they are produced as tyres and then again as part of the value of the car, what is actually added up is the value added at each stage, that is the value of the output minus the value of the inputs. In a typical economy, the vast majority of the goods and services are created for consumption domestically while a much lesser quantity is exported to other countries.

Hence, GDP gives a rough idea about the general standard of living in the economy. Thanks to globalisation, income is not confined within the borders of a country because many persons and companies generate income from work or investments abroad. Most of the governments also calculate the gross national product (GNP), which estimates the value of goods and services produced by all nationals of a country, within or outside the country.

If all these calculations are on market value, wouldn't inflation distort the picture?

Undoubtedly, inflation would give a distorted figure of the GDP, if we didn't adjust for it. Most governments have devised various indices to measure the movement of prices. To offset the effect of all forms of inflation in the economy, a GDP deflator is calculated, which is then used to calculate the real increase in GDP over a particular base period. The base period is the year whose prices are used to find the adjusted value of goods at some other period of reference. The GDP so calculated is called GDP at constant prices. The real per capita income, which is one of the best methods of measuring the economic standard of a country, is calculated by dividing real GDP by the countrys population.

Why do governments keep changing the base year?

Considering the ever changing economic scenario across the world the base year needs constant revision so that all kinds of economic activities get included in the GDP calculation. For instance, having a base period from the early 90s would underplay incomes from IT and other fast emerging services sectors. After all, gathering all the information about economic output within the economy is a fairly complex task, which involves economists and statisticians analysing various data from tax collections to industry reports and so on. Even after doing all this, GDP remains an estimate.

If it's just an estimate can't it be fudged?

To have internationally comparable figures of GDP, its mandatory for all governments to follow the system of National Accounts 1993 (1993 SNA), which is a conceptual framework that sets the international statistical standard for the measurement of market economy.

It is jointly published by the UN, the Commission of the European Communities, IMF , the Organisation for Economic Co-operation and Development, and the World Bank. It is a general convention to convert the GDP so calculated in the national currency into American dollars at the market exchange rates and hence an internationally comparable GDP figure is obtained which uses a similar methodology and is also expressed in the same currency.

Why do some people consider GDP expressed in purchasing power parity (PPP) rates a better indicator?

Market exchange rates are determined by the daily demand and supply of currencies in the international market, in turn determined mainly by things that are globally tradable, while many goods and services are never traded internationally.

Also, developing countries have relatively lower prices of these non-tradable goods and services. Hence, conversion of GDP into dollars at the market exchange price would give a lower value to the GDP of a developing country like India than is warranted. Hence, to make an apples to apples comparison, PPP exchange rates are calculated by comparing the prices of a similar basket of goods and services in different countries.

These rates are then used to determine the GDPs of different countries in PPP dollars. To see how much of a difference using PPP rates can make, consider this: In nominal dollars, Chinahas only just overtaken Japan as the second largest economy in the world and is only a little more than one-third the size of US economy. India is ranked 12th and is just 10% of the US economy.

In PPP terms, China is more than double the size of Japan and about two-thirds the size of the US. India is ranked fourth just a little behind Japan and about one-fourth as big as the US economy.

Source: timesoindia

How oil Bonds work for Oil Marketing Companies

The govt. of India (GOI) issues special oil bonds to govt. owned oil marketing companies as a share of their subsidies. What exactly are these oil bonds and how exactly do they compensate the oil marketing companies? 
I will work out the answer to this question by using the financial statements of Indian Oil Corp. (IOC) for 2007-08.
IOC makes a loss selling petroleum products due to govt. restrictions on pricing. The govt. of India compensates this loss by issuing special oil bonds.
IOC shows these bonds as income on its P&L (the IOC P&L for 2007 - 2008 shows an income of Rs.13,943 CR this way), thus converting the loss into a profit.
IOC also shows these bonds as investment on its balance sheet (Schedule G of IOC balance sheet for 2007 - 2008 shows investment worth Rs. 14,308 in these GOI special bonds). This means that without paying a penny for these bonds, IOC has invested in these GOI bonds! If you think about it, the real investment is the losses IOC incurred to oblige the GOI.
Now, if IOC just sits on these bonds, it will get a cash flow (around 7% - 8%) from GOI by way of interest payment on these bonds. Also upon maturity, the GOI will have to redeem these bonds from IOC (maturity periods are anywhere from 2009 to 2026 as per Schedule G). i.e. upon maturity the GOI has to cough up cash compensation for the losses IOC has incurred in 2007 - 2008!
Instead, what IOC does is, it sells these bonds in the secondary bond market to mutual funds, insurance companies and other such financial institutions (http://www.thehindubusinessline.com/2008/05/02/stories/2008050250780600.htm). Thus, the bonds are converted into hard cash (Schedule G says IOC made Rs. 6,503 Cr this way in 2007- 2008). This is how IOC gets hard cash to compensate for its losses immediately. (Of course, upon maturity the GOI has to still pay cash to whoever holds these bonds at that time).
The interesting part is this: GOI issues bonds without actually borrowing from anybody. Does this run counter to the very definition of a bond? Not really.
The GOI has issued bonds to IOC without directly borrowing any money from IOC. The borrowing is indirect - IOC made a loss to oblige the GOI and that is akin to the GOI borrowing from IOC and hence the GOI issues these bonds to IOC. This is the crux of the matter.
Bottom line is, the oil bond is a GOI bond and hence is a govt. debt which has to be repaid some day. Interestingly, this debt stays off-budget and does not reflect in the revenue or fiscal deficit of the GOI (http://www.business-standard.com/common/news_article.php?leftnm=10&bKeyFlag=BO&autono=323750)!. This is because these companies are anyway owned by the government.



Source: wikianswers.com

Indian Community Welfare Fund

Indian Community Welfare Fund

The Government of India provides budgetary support for the setting up of the fund in Indian Missions with allocations ranging from Rs.5-15 lakh So far as the corpus of such fund is concerned. The Ministry’s contribution is initially for a period of 3 years or till the period the fund becomes self sustaining whichever is earlier. The amount is released annually and is limited to meet the deficit in the financial resources of the Missions, with due regard to the utilization of the amount released during previous years. Funds raised by the Indian Missions by levying a service charge on Consular Services and voluntary contributions by the Indian community. 

Kabir Puraskar Awards

Kabir Puraskar Awards

The Kabir Puraskar Scheme was introduced in 1990. Under this a National Award designated as “KABIR PURASKAR” has been instituted is in three grades. These are: Grade-I Rs. 2,00,000/- (Rupees Two lakh only), Grade-II Rs, 1,00,000/- (Rupess One Lakh only) and Grade III Rs. 50,000/- (Rupees Fifty Thousand only). A certificate with suitable citation is also awarded to the recipients. 

The Puraskar is given for the conspicuous acts of physical/moral courage displayed under circumstances of danger to the life of the rescuer in saving the lives and properties of member(s) of another community, caste or ethnic group during communal riots, caste conflicts or ethic clashes. 

Interested persons have to approach the respect State Governments/UTs for their nominations as the Puraskar is given by the Ministry of Home Affairs on the basis of the nominations received from the respect State Governments/UTs. The award is announced on 2nd October each year. 

Investment tracking system

Prime Minister sets up an Investment Tracking System

In order to address the issue of major investment projects being delayed for a variety of reasons, the Prime Minister has approved the setting up of an Investment Tracking System to ensure speedy implementation of such projects.
2. In pursuance of this, an Investment Tracking System has been put in place whereby –

(a) National Manufacturing Competitiveness Council shall track all Public Sector projects with an investment of ` 1000 crore and above. The National Manufacturing Competitiveness Council shall submit a quarterly statement of all projects monitored and any issues identified that need resolution, either systemically or individually. 

(b) The Department of Financial Services shall monitor projects with an investment of ` 1000 crore and above in the private sector. The Department would use data available with the banking sector for this purpose. The Department shall submit a quarterly statement of all projects monitored and issues identified that need resolution, either systemically or individually. 

IPv4 versus IPv6

The Internet has run out of Internet addresses… sort of. Perhaps you’ve heard the news: the last blocks of IPv4 Internet addresses have been allocated. The fundamental underlying technology that has powered Internet Protocol addresses (ever seen a number like 99.48.227.227 on the web? That’s an IP address) since the Internet’s inception will soon be exhausted.

A new technology will take its place, though. IPv4′s successor is IPv6, a system that will not only offer far more numerical addresses, but will simplify address assignments and additional network security features.

The transition from IPv4 to IPv6 is likely to be rough, though. Most people are unfamiliar with IPv4 and IPv6, much less the potential impact the switch to IPv6 may have on their lives.

That’s why we’ve compiled this short guide to IPv4 and the eventual transition to IPv6. We explain the two versions of IP and why they matter. We also go into detail on what you can expect in the next few years as billions of websites, businesses and individuals make the switch to the new era of the Internet.

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IPv4 & IPv6 Q&A

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Q: What is IPv4?
A: IPv4 stands for Internet Protocol version 4. It is the underlying technology that makes it possible for us to connect our devices to the web. Whenever a device access the Internet (whether it’s a PC, Mac, smartphone or other device), it is assigned a unique, numerical IP address such as 99.48.227.227. To send data from one computer to another through the web, a data packet must be transferred across the network containing the IP addresses of both devices.

Without IP addresses, computers would not be able to communicate and send data to each other. It’s essential to the infrastructure of the web.

Q: What is IPv6?
A: IPv6 is the sixth revision to the Internet Protocol and the successor to IPv4. It functions similarly to IPv4 in that it provides the unique, numerical IP addresses necessary for Internet-enabled devices to communicate. However, it does sport one major difference: it utilizes 128-bit addresses. I’ll explain why this is important in a moment.

Q: Why are we running out of IPv4 addresses?
A: IPv4 uses 32 bits for its Internet addresses. That means it can support 2^32 IP addresses in total — around 4.29 billion. That may seem like a lot, but all 4.29 billion IP addresses have now been assigned to various institutions, leading to the crisis we face today.

Let’s be clear, though: we haven’t run out of addresses quite yet. Many of them are unused and in the hands of institutions like MIT and companies like Ford and IBM. More IPv4 addresses are available to be assigned and more will be traded or sold (since IPv4 addresses are now a scarce resource), but they will become a scarcer commodity over the next two years until it creates problem for the web.

Q: How does IPv6 solve this problem?
A: As previously stated, IPv6 utilizes 128-bit Internet addresses. Therefore, it can support 2^128 Internet addresses — 340,282,366,920,938,000,000,000,000,000,000,000,000 of them to be exact. That’s a lot of addresses, so many that it requires a hexadecimal system to display the addresses. In other words, there are more than enough IPv6 addresses to keep the Internet operational for a very, very long time.

Q: So why don’t we just switch?
A: The depletion of IPv4 addresses was predicted years ago, so the switch has been in progress for the last decade. However, progress has been slow — only a small fraction of the web has switched over to the new protocol. In addition, IPv4 and IPv6 essentially run as parallel networks — exchanging data between these protocols requires special gateways.

To make the switch, software and routers will have to be changed to support the more advanced network. This will take time and money. The first real test of the IPv6 network will come on June 8, 2011, World IPv6 Day. Google, Facebook and other prominent web companies will test drive the IPv6 network to see what it can handle and what still needs to be done to get the world switched over to the new network.

Q: How will this affect me?
A: Initially, it won’t have a major impact on your life. Most operating systems actually support IPv6, including Mac OS X 10.2 and Windows XP SP 1. However, many routers and servers don’t support it, making a connection between a device with an IPv6 address to a router or server that only supports IPv4 impossible. IPv6 is also still in its infancy; it has a lot of bugs and security issues that still need to be fixed, which could result in one giant mess.

Nobody’s sure how much the transition will cost or how long it will take, but it has to be done in order for the web to function as it does today.

Sorce: mashable.com

Indian Depository Receipts

What are Indian Depository Receipts (IDRs)?
IDRs are like American Depository Receipts or Global Depository Receipts, except that the issuer is a foreign company raising funds from the Indian market. IDRs are rupee-denominated and created by a domestic depository against the underlying equity shares of a foreign company.

Who can issue IDRs?
Any company listed in the country of incorporation can issue IDRs. Besides, the issuer needs pre-issue capital and free reserves of at least $50 million (around Rs 225 crore) and should have a market capitalisation of $100 million (Rs 450 crore) or more during the last three years. The company should have also made profits in three of the preceding five years.How will it work?

The process is similar to an initial public offering where a draft prospectus is filed with the Securities and Exchange Board of India.

The minimum issue size is $500 million (around Rs 2,250 crore). Shares underlying IDRs will be deposited with an overseas custodian who will hold shares on behalf of a domestic depository. IDRs will be issued through a public offer in India in the demat form and will be listed on Indian exchanges. Trading and settlement will be similar to those of Indian shares.

At least half of the investors have to be qualified institutional investors with 30 per cent of the issue size reserved for small investors. Recently, the regulators allowed a single institutional investor to acquire up to 15 per cent of the issue size. In addition, banks have also been allowed to participate.

For a retail investor, the annual $200,000 ceiling (Rs 90 lakh) on overseas remittances, which can be used to buy shares, will not apply to IDRs, as the issues are rupee-denominated.

Will Indian investors get equal rights as shareholders?
Except attending annual general meetings and voting on resolutions, other rights are available.

Are there tax issues?
IDRs are not subject to securities transaction tax. Besides, dividends received by IDR holders will not be subject to dividend distribution tax. But, at present, exemption from long-term capital gains tax and concessional short-term capital gains are not available for secondary sales on the stock exchanges. However, the issue is expected to be resolved with the implementation of the Direct Tax Code.

What are the benefits for the issuing company?
The main benefit is in terms of branding, besides allowing foreign companies to access Indian capital. It is also seen as the platform for creation of acquisition currency and a management talent pool. Issuers have the option to reserve a proportion of the issue for employees.

ADRs and GDRs : Depository Receipts

ADRs and GDRs are not for investors in India – they can invest directly in the shares of various Indian companies.

But the ADRs and GDRs are an excellent means of investment for NRIs and foreign nationals wanting to invest in India. By buying these, they can invest directly in Indian companies without going through the hassle of understanding the rules and working of the Indian financial market – since ADRs and GDRs are traded like any other stock, NRIs and foreigners can buy these using their regular equity trading accounts!

This is what happens: The company deposits a large number of its shares with a bank located in the country where it wants to list indirectly. The bank issues receipts against these shares, each receipt having a fixed number of shares as an underlying (Usually 2 or 4).

These receipts are then sold to the people of this foreign country (and anyone who is allowed to buy shares in that country). These receipts are listed on the stock exchanges. They behave exactly like regular stocks – their prices fluctuate depending on their demand and supply, and depending on the fundamentals of the underlying company.

These receipts, which are traded like ordinary stocks, are calledDepository Receipts. Each receipt amounts to a claim on the predefined number of shares of that company. The issuing bank acts as a depository for these shares – that is, it stores the shares on behalf of the receipt holders.

Both ADR and GDR are depository receipts, and represent a claim on the underlying shares. The only difference is the location where they are traded.

If the depository receipt is traded in the United States of America (USA), it is called an American Depository Receipt, or an ADR.

If the depository receipt is traded in a country other than USA, it is called a Global Depository Receipt, or a GDR.

The United Nations Convention on the Law of the Sea (UNCLOS), also called the Law of the Sea Convention or the Law of the Sea treaty, is the international agreement that resulted from the third United Nations Conference on the Law of the Sea (UNCLOS III), which took place from 1973 through 1982. The Law of the Sea Convention defines the rights and responsibilities of nations in their use of the world's oceans, establishing guidelines for businesses, the environment, and the management of marine natural resources. The Convention, concluded in 1982, replaced four 1958 treaties. UNCLOS came into force in 1994, a year after Guyana became the 60th state to sign the treaty. To date, 162 countries and the European Community have joined in the Convention. However, it is uncertain as to what extent the Convention codifies customary international law.

The convention introduced a number of provisions. The most significant issues covered were setting limits, navigation, archipelagic status and transit regimes,exclusive economic zones (EEZs), continental shelf jurisdiction, deep seabed mining, the exploitation regime, protection of the marine environment, scientific research, and settlement of disputes.

The convention set the limit of various areas, measured from a carefully defined baseline. (Normally, a sea baseline follows the low-water line, but when the coastline is deeply indented, has fringing islands or is highly unstable, straight baselines may be used.) The areas are as follows:

Internal waters

Covers all water and waterways on the landward side of the baseline. The coastal state is free to set laws, regulate use, and use any resource. Foreign vessels have no right of passage within internal waters.

Territorial waters

Out to 12 nautical miles (22 kilometres; 14 miles) from the baseline, the coastal state is free to set laws, regulate use, and use any resource. Vessels were given the right of innocent passage through any territorial waters, with strategic straits allowing the passage of military craft as transit passage, in that naval vessels are allowed to maintain postures that would be illegal in territorial waters. "Innocent passage" is defined by the convention as passing through waters in an expeditious and continuous manner, which is not "prejudicial to the peace, good order or the security" of the coastal state. Fishing, polluting, weapons practice, and spying are not "innocent", and submarines and other underwater vehicles are required to navigate on the surface and to show their flag. Nations can also temporarily suspend innocent passage in specific areas of their territorial seas, if doing so is essential for the protection of its security.

Archipelagic waters

The convention set the definition of Archipelagic States in Part IV, which also defines how the state can draw its territorial borders. A baseline is drawn between the outermost points of the outermost islands, subject to these points being sufficiently close to one another. All waters inside this baseline are designated Archipelagic Waters. The state has full sovereignty over these waters (like internal waters), but foreign vessels have right of innocent passage through archipelagic waters (like territorial waters).

Contiguous zone

Beyond the 12 nautical mile limit, there is a further 12 nautical miles from the territorial sea baseline limit, the contiguous zone, in which a state can continue to enforce laws in four specific areas: customs, taxation, immigration and pollution, if the infringement started within the state's territory or territorial waters, or if this infringement is about to occur within the state's territory or territorial waters.^[4] This makes the contiguous zone a hot pursuit area.

Exclusive economic zones (EEZs)

These extend from the edge of the territorial sea out to 200 nautical miles (370 kilometres; 230 miles) from the baseline. Within this area, the coastal nation has sole exploitation rights over all natural resources. In casual use, the term may include the territorial sea and even the continental shelf. The EEZs were introduced to halt the increasingly heated clashes over fishing rights, although oil was also becoming important. The success of an offshore oil platform in the Gulf of Mexico in 1947 was soon repeated elsewhere in the world, and by 1970 it was technically feasible to operate in waters 4000 metres deep. Foreign nations have the freedom of navigation and overflight, subject to the regulation of the coastal states. Foreign states may also lay submarine pipes and cables.

Continental shelf

The continental shelf is defined as the natural prolongation of the land territory to the continental margin’s outer edge, or 200 nautical miles from the coastal state’s baseline, whichever is greater. A state’s continental shelf may exceed 200 nautical miles until the natural prolongation ends. However, it may never exceed 350 nautical miles (650 kilometres; 400 miles) from the baseline; or it may never exceed 100 nautical miles (190 kilometres; 120 miles) beyond the 2,500 meter isobath (the line connecting the depth of 2,500 meters). Coastal states have the right to harvest mineral and non-living material in the subsoil of its continental shelf, to the exclusion of others. Coastal states also have exclusive control over living resources "attached" to the continental shelf, but not to creatures living in the water column beyond the exclusive economic zone.

Aside from its provisions defining ocean boundaries, the convention establishes general obligations for safeguarding the marine environment and protecting freedom of scientific research on the high seas, and also creates an innovative legal regime for controlling mineral resource exploitation in deep seabed areas beyond national jurisdiction, through an International Seabed Authority and the Common heritage of mankind principle.^[5]

Landlocked states are given a right of access to and from the sea, without taxation of traffic through transit states.

[edit]Part XI and the 1994 Agreement

Part XI of the Convention provides for a regime relating to minerals on the seabed outside any state's territorial waters or EEZ (Exclusive Economic Zones). It establishes an International Seabed Authority (ISA) to authorize seabed exploration and mining and collect and distribute the seabed mining royalty.

The United States objected to the provisions of Part XI of the Convention on several grounds, arguing that the treaty was unfavorable to American economic and security interests. Due to Part XI, the United States refused to ratify the UNCLOS, although it expressed agreement with the remaining provisions of the Convention.

From 1983 to 1990, the United States accepted all but Part XI as customary international law, while attempting to establish an alternative regime for exploitation of the minerals of the deep seabed. An agreement was made with other seabed mining nations and licenses were granted to four international consortia. Concurrently, the Preparatory Commission was established to prepare for the eventual coming into force of the Convention-recognized claims by applicants, sponsored by signatories of the Convention. Overlaps between the two groups were resolved, but a decline in the demand for minerals from the seabed made the seabed regime significantly less relevant. In addition, the decline of Socialism and the fall of Communism in the late 1980s had removed much of the support for some of the more contentious Part XI provisions.

In 1990, consultations were begun between signatories and non-signatories (including the United States) over the possibility of modifying the Convention to allow the industrialized countries to join the Convention. The resulting 1994 Agreement on Implementation was adopted as a binding international Convention. It mandated that key articles, including those on limitation of seabed production and mandatory technology transfer, would not be applied, that the United States, if it became a member, would be guaranteed a seat on the Council of the International Seabed Authority, and finally, that voting would be done in groups, with each group able to block decisions on substantive matters. The 1994 Agreement also established a Finance Committee that would originate the financial decisions of the Authority, to which the largest donors would automatically be members and in which decisions would be made by consensus.

On February 1, 2011, the Seabed Disputes Chamber of the International Tribunal for the Law of the Sea (ITLOS) issued an advisory opinion concerning the legal responsibilities and obligations of States Parties to the Convention with respect to the sponsorship of activities in the Area in accordance with Part XI of the Convention and the 1994 Agreement.^[6] The advisory opinion was issued in response to a formal request made by the International Seabed Authority following two prior applications the Authority's Legal and Technical Commission had received from the Republics of Nauru and Tonga regarding proposed activities (a plan of work to explore for polymetallic nodules) to be undertaken in the Area by two State-sponsored contractors (Nauru Ocean Resources Inc. (sponsored by the Republic of Nauru) and Tonga Offshore Mining Ltd. (sponsored by the Kingdom of Tonga). The advisory opinion set forth the international legal responsibilities and obligations of Sponsoring States AND the Authority to ensure that sponsored activities do not harm the marine environment, consistent with the applicable provisions of UNCLOS Part XI, Authority regulations, ITLOS case law, other international environmental treaties, and Principle 15 of the UN Rio Declaration

Switching to Treasury Mode : Recommendations of C. Rangarajan Committee

CSSs are specific transfers from the central government (GOI) to the state government and are meant to help the latter “to plan and implement programmes that help attain national goals and objectives”¹. A case in point is the Sarva Shiksha Abhiyan whose aim is to achieve universal enrolment in elementary education. Other examples include the goal of livelihood security through the National Rural Employment Guarantee Scheme and of rural housing through the Indira Awaas Yojana. While the GOI is responsible for formulation and (to a considerable extent) financing, state governments are in charge of implementation. Many schemes also require a financial contribution from the state (eg. SSA funding is split between GOI and states in a 60:40 ratio).

CSSs can be classified in 2 types – Treasury mode or Society mode depending on the fund flow mechanism

What does the fund flow mechanism look like in the Treasury mode?

The treasury mode gets its name from the fact that funds to implementing agencies are are routed through respective state budgets, or the state treasuries. An example of such a CSS is the ICDS. Fund flow occurs as follows:

1. The approved amount is first sanctioned by the concerned administrative ministry (for instance, the Ministry of Human Resource Development in the case of education, or the Ministry of Health and Family Welfare in the case of health) or the central government’s Ministry of Finance.
2. A sanction letter is issued by the GOI and copies are sent to the State government and state Accountant General (AG).
3. The Pay and Account office of the GOI then issues an advice letter to the RBI asking it to transfer funds to the State government’s treasury.
4. RBI completes the transfer and confirms this by issuing a clearance memo to the State Government and the AG.
5. The state finance department now approves the budgetary allocation and sanctions the withdrawal of funds.
6. Finally, the concerned department/agency withdraws funds

How are funds tracked? Is there a monitoring mechanism?

Funds are tracked through a system of vouchers. Expenditures are routed through the treasury and vouchers have to be submitted to the AG for all expenditures incurred. Since computerisation of account compilation, funds can be tracked till the state government spends through state departments or transfers the fund to the Implementing Agencies (usually local bodies) for various schemes.

Interestingly, the AG’s office captures funds transferred to local bodies by the state treasury at the time of release and books it as expenditure. However the treasury system does not capture actual expenditure by local bodies.

Hence, in a nutshell there is a fairly effective monitoring system but it does not track expenditure at the last mile.

What are the pros and cons of the Treasury mode of fund transfer?

Pros

1. The system can track expenditure to the object level (the economic type of expenditure - details here) as vouchers for each transaction are available with the treasury or the AG.
2. Expenditure is compiled by the Auditor General, and is audited by the Comptroller and Auditor General’s office.
3. There is a well-defined system of cash management and bank reconciliation which provides information on cash flows at any point of time. Hence the system is amenable to monitoring and review at all stages barring the last.

Cons

1. Releases are booked as expenditure in central and state government accounts - GOI accounts treat transfer to states as Grants-in-Aid and book them as final expenditure. Similarly, releases by States to IAs are treated as final expenditure in State accounts. Since actual expenditure cannot be tracked, one does not have complete information on end use of funds in real time.
2. Money not released by the government (GOI or state) by the end of the financial year gets lapsed, i.e., does not get carried over to the next year. This often results in GOI and states pushing funds out without looking at actual utilisation.
3. The exact dates of interim stages like administrative or financial sanction in the state Government that often involve concurrence of the Finance Department are almost impossible to obtain.
4. Statements don’t match! Department accounts and expenditure statements provided to GOI by states are often not reconciled with accounting records of the AG, sometimes for years. This raises concerns about the accuracy of data and thereby of actual expenditure reported.
   
   
   
   
   
   
   
   

   Source: Accountabilityindia.in