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Current Affairs: Dec 2008-Jan 2009

Current Affairs: Dec 2008-Jan 2009


RBI infuses 20k crore: On January 2, 2009, the Reserve Bank of India (RBI) announced a further easing of money supply with the reduction of key rates and ratio which it said would release Rs 20,000 crore into the banking system. While the cash reserve ratio—the amount of cash that banks need to keep in reserve—has been cut by 0.5 per cent to 5 per cent, repo and reverse repo rates—the short-term rates at which the RBI lends and borrows from banks—have been cut by 100 basis points each to 5.5 per cent and 4 per cent, respectively. Following the RBI measures, government-owned banks provided a respite from high interest rates to individuals wanting to buy a house and to the distressed owners of Micro, Small and Medium Enterprises (MSMEs).
Companies can now launch IPOs 1 year after SEBI nod: The Securities and Exchange Board of India (SEBI) has granted greater flexibility to corporate to raise funds and outlined measures to prevent the kind of panic redemptions that brought the mutual fund industry to its knees in October 2008. SEBI has now approved a proposal to extend the validity period for an initial public offering approval from three months to a year.  The new rule comes as a relief for those who were forced to defer their IPOs even though they had obtained approval. Under the new rule, the companies can go public within one year of receiving the regulator’s approval. However, SEBI has
stipulated that companies will have to update the document with fresh numbers and any other material changes whenever required.

Economy gets another booster dose: On December 7, 2008, the Union government announced major tax cuts across the board for housing sector and duty cuts for companies that provide finance to real estate companies. The move was intended to prop up sagging demand in sectors such as housing, exports, textile and infrastructure. Paying special attention to exports, the government has decided to provide an interest subvention of 2 per cent up to March 2009 for pre- and post-shipment export credit for labour-intensive exports like textiles, leather, marine products and SME sector. Items of handicrafts will be included under Vishesh Krishi and Gram Udyog Yojana among other initiatives.
30k-cr oil bonds: The government is working on a bailout package to prevent its three blue chip oil companies—Indian Oil, Bharat Petroleum and Hindustan Petroleum—from closing 2008-09 in the red. The package proposes to provide additional oil bonds of Rs 30,000 crore to the oil companies to compensate them for losses incurred on fuel sales at government-controlled prices. The total subsidy for 2008-09 is estimated at around Rs 1,06,000 crore. The government gives oil bonds to the State-run OMCs to partly compensate their losses for keeping retail prices of four fuels below market rates. The compensation was based on a ‘burden sharing formula’ approved by theCabinet on October 11, 2007 while extending fuel subsidy schemes up to April 1, 2010. Due to an unprecedented jump in crude oil price, the formula was later abandoned. The crude oil prices had peaked at $147 a barrel in mid-July 2008.
Factory output drops to negative terrain: Industrial production unexpectedly fell 0.4% in October 2008, shocking policy- makers. It slipped into negative territory for the first time in 15 years, highlighting the case for further aggressive interest rate cuts and fiscal measures to shore up a slowing economy. The drop was on the back of a 1.2% year-on-year contraction in manufacturing activity, confirming fears the economic slowdown was gathering pace amid a faster-than expected drop in demand slowdown in overseas and domestic markets. Manufacturing accounts for nearly 80% of the Index of Industrial Production (IIP), which rose by a revised 5.5% in September 2008.
PMO nod to new pay panel for armed forces: The Prime Minister’s Office has approved a separate pay commission for the armed forces. The Seventh Pay Commission for soldiers would be delinked from the civilian pay panel. The decision comes after a committee, headed by External Affairs Minister Pranab Mukherjee, submitted its report to review the concerns in the armed forces. The concerns were raised after the Sixth Pay Commission recommended placing lieutenant colonels and equivalent ranks in the Air Force and Navy at a lower pay band than their counterparts in the paramilitary/Group A services and IAS. The government has also agreed to accommodate lieutenant colonels in a higher pay band and increase their monthly salary by Rs 8,000. However, the government has not yet addressed the sweeping discontent in the military’s higher echelons over lieutenant generals and their equivalent being excluded from the higher pay band.
Centre accepts 70% pay hike for teachers: In line with the Sixth Pay Commission recommendations for Central government employees, the Union government has accepted the G.K. Chadha Committee report recommending a 70% hike in pay scales of teachers. Other recommendations in the report include a uniform retirement age of 65, opportunities for re-employment up to 70 years, flexibility to accommodate talent through incentives, and one-time grants for research for teachers in Central, State and deemed universities. At the early level, the recommendations aim to attract talented young people hoping to get into the teaching profession. Among other things, it includes advance increment, enhanced research grants and facilities for housing and research. To boost research and consultancy projects, the panel also encourages teachers in universities and college to accept consultancy, directing projects, registering patents, R & D products and technology transfers.
Education schemes get Cabinet nod: The Cabinet Committee on Economic Affairs has approved a scheme, National Mission on Education, to use the Information Communication Technology (ICT) to provide personalized and interactive knowledge modules to students. The scheme will cost Rs 4,612 crore in the 11th Plan. Over 18,000 colleges across India will get computer infrastructure and connectivity, including all departments in 419 universities, deemed universities and institutions of national importance. In another decision, the Cabinet approved the Rashtriya Madhyamik Shiksha Abhiyan to increase enrolment rates in secondary education from 52.56 per cent at present to 75 per cent in 2012. Under the scheme 11,188 new schools will be built and 44,000 existing schools strengthened and 1.79 lakh additional teachers will be appointed.
India, US ink $2.1 bn defence deal: The Union government has signed the biggest-ever defence deal with US—a $2.1 billion contract for eight Boeing P-8I Long-Range mari-time Reconnaissance (LRMR) aircraft for Navy. India will get the first P-8I towards end 2012 or early 2013, with the other seven following in a phased manner by 2015-2016. The contract also provides an option for India to order four to eight more such planes. Armed with torpedoes, depth bombs and Harpoon anti-ship missiles, the P-8I will also be capable of anti-submarine warfare and anti-surface warfare. They will replace the eight ageing and fuel-guzzling Russian Tupolev-142M turboprops currently being operated by Navy.
India, Russia clinch civil nuclear accord: During the visit of Russian President Dmitry Medvedev in December 2008, New Delhi and Moscow signed an agreement on civil nuclear cooperation. Russia is the third country to sign such an agreement with India after France and US. India also signed the $1.2 billion deal to buy 80 Mi-17 V-5 helicopters even as both countries work towards resolving “outstanding issues” over the lease of a nuclear-powered submarine and huge cost escalation in aircraft carrier Admiral Gorshkov’s refit. In the initial stages, Russia will help India build two additional nuclear power plants at Kundankulam. Even before the NSG waiver, Russia was helping India build two 1,000 MW nuclear power plants at the same site. The Russians, however, had to wait for the NSG waiver to India for a more focused N-cooperation. More such power plants of Russian design, according to the two sides, will come up at other places in the country.
Jammu & Kashmir elects new government: In first week of January 2009, the decks were cleared for Omar Abdullah, 38, to become the youngest and the 13th Chief Minister of Jammu and Kashmir after his party, the National Conference (NC), and the Congress decided to share power in the State. Former Speaker and Congressman Tara Chand has been appointed as the new Deputy Chief Minister. The NC emerged as the single biggest party in the 87-member State Assembly after winning 28 seats in the month-long elections. The People’s Democratic Party (PDP) and the Congress, which had an alliance government over the past six years, followed with 21 and 17 seats, respectively. The BJP sprung a major surprise by emerging victorious in 11 constituencies.
BJP secures majority in Karnataka Assembly: Karnataka’s ruling Bharatiya Janata Party (BJP) won five out of eight seats in crucial by-elections, cementing its hold in the State’s Legislative Assembly where it had been short of an outright majority by three seats since May 2008. The BJP now has 115 out of 224 Assembly seats. The by-polls also marked the entry of Deve Gowda’s daughter-in-law Anita Kumara-swamy into Karnataka politics—the fourth member from the Gowda family to do so. She won on a
JD(S) ticket from Madhugiri constituency.

Parliament passes Bills on anti-terror apparatus, NIA: The Parliament, despite opposition from Left parties on select provisions, has approved the anti-terror Unlawful Activities (Prevention) Amendment (UAPA) Bill—which analysts say is similar to the Prevention of Terrorism Act (POTA), repealed after the Congress-party-led United Progressive Alliance (UPA) assumed power. The complementary National Investigation Agency Bill, 2008, that seeks to create a federal agency to investigate terror-related incidents has also been passed. After the President’s assent the National Investigative Agency (NIA) started functioning from January 1, 2009.
Right to Education Bill: Almost six years after Parliament passed the 86th Constitutional Amendment, the government has introduced the Right of Children to Free and Compulsory Education Bill in the Rajya Sabha. The 86th Amendment made free and compulsory education for children between the age of 6 and 14 years a fundamental right. The proposed legislation provides a blueprint for systemic reforms in the elementary education. It promises to counter the growing lobby for the privatization of school education. The legislation is, in fact, a step towards the common school system first proposed by the Kothari Commission.
Self-regulation guidelines for media in place: With visual media drawing the flak for coverage of the Mumbai mayhem and the government mulling an emergency protocol, India’s broadcasters association has unveiled self-regulatory guidelines. These include no live reporting of hostage crises and blocking information which may help terrorists. The guidelines, billed as first big step towards self-regulation, were formulated and unveiled by the News Broadcasters Association. Among the major guidelines are: Don’t give live coverage of hostage crises; Block information that may help terrorists; Don’t disclose details of hostages; withhold sensitive information on rescue operations; Avoid live contact with victims and with security personnel engaged in rescue operations in 26/11-like situations; Avoid unnecessary repetition of archival footage which may agitate the minds of viewers.
Cash for vote scam: A Lok Sabha panel probing allegations that Members of Parliament (MPs) were bribed to vote in favour of the United Progressive Alliance (UPA) government in the July 22, 2008 trust vote gave a clean chit to two politicians, even as committee members belonging to the Opposition Bharatiya Janata Party (BJP) and the Left submitted dissent notes while differing with the conclusions. The two Rajya Sabha MPs at the centre of the controversy were Samajwadi Party general secretary Amar Singh and Congress President Sonia Gandhi’s political
secretary Ahmad Patel.

Administrative Reforms Commission: In what will be one of the biggest changes in the bureaucratically-run Indian governance system, the Administrative Reforms Commission (ARC), headed by Congressman M. Veerappa Moily, has suggested much-desired changes that aim to free the system from political meddling and also from the grip of bureaucrats hiding behind self-serving safety nets. The ARC wants a change in the profile and method of recruiting civil servants to provide for a lateral entry on earmarked posts, identify specialists and have accountability. It also rules out assured promotions, besides having a civil services authority to administer the services. These are among the dozen new path-breaking suggestions, probably the biggest since Lord Thomas Macaulay laid down the basic policy governing recruitment to civil services in India in 1854. Among the major recommendations are: Lower age profile, lateral entry; Armed forces personnel can apply for top IPS posts;
Higher accountability; No assured promotions; New civil authority to control and decide on selections; Change in exam system; No deputation for IAS for profit-making bodies.

Terror strike in Guwahati: The year 2009 began with terror striking, this time in Assam. Three serial blasts in as many hours, triggered by suspected ULFA militants, left five people dead and over 60 injured in Guwahati. The explosions took place a few hours before P. Chidambaram flew in for his maiden visit as Home Minister. Terrorists appeared to mock heavy security put in place for the New Year in the wake of the 26/11 carnage and for the Home Minister’s visit. Assam Chief Minister Tarun Gogoi admitted that there were security lapses.
Hasina wins Bangla polls: Bangladesh’s charismatic leader Sheikh Hasina, who favours strong ties with India, scripted a landslide victory on December 30, 2008, trouncing rival Bangladesh Nationalist Party (BNP) in the country’s first polls in seven years, restoring democracy in the impove-rished nation after two years of military-led rule. Hasina’s Awami League-led alliance clinched 258 seats of the total 300 seats in Parliament leaving only 31 constituencies to her arch rival Khaleda Zia’s Bangladesh Nationalist Party-led four-party alliance.
Israel clobbers Gaza: In retaliation to constant rocket attacks by Hamas militants in Gaza Strip, on December 27, 2008 Israel retaliated with air strikes on suspected Hamas hideouts. More than 300 people were killed in first 24 hours of the constant strikes by Israeli forces. Israeli leaders said the campaign was a response to almost daily cross-border rocket and mortar fire that intensified after Hamas, as Islamist group in charge of the coastal enclave Israel quit in 2005, ended a six-month ceasefire.
LTTE capital Kilinochchi falls to Lankan army: The Sri Lankan army took control of the northern town of Kilinochchi on January 2, 2009, the so- called administrative capital of the LTTE from where the Tigers ran a de facto State for nearly 10 years. The fall of Kilinochchi is of great symbolic importance as for many years the LTTE had maintained that government troops would never gain control of the area.
Students riot bring Greece to a halt: In the second week of December 2008, protesters attacked Athens’ main courthouse with firebombs during a hearing for police officers whose shooting of a teenager set off rioting. The strike shut down schools, public services, hospitals and flights, increasing pressure on the fragile conservative government of Prime Minister Costas Karamanlis. Riot police and youths also clashed in the city center during a demonstration by more than 10,000 people to protest the conservative
government’s economic policies. The demonstrations and the strike, called by Greece’s two largest labour unions’ umbrella groups that include virtually all public sector and many private employees, were scheduled before the riots broke out. They were fuelled, however, by anger at the handling of the riots by the government, which holds a single-seat majority in the
Opposition leader is Thai PM: On December 15, 2008, Opposition leader Abhisit Vejjajiva was selected as Thailand’s third Prime Minister in as many months, taking control with a slender majority in Parliament and an economy teetering on the brink of recession. In a sign of the trouble in store for the Oxford-educated economist, at least 200 supporters of the previous administration, sacked by the courts earlier, blocked access to Parliament and smashed windows of cars carrying MPs who had backed him. Demonstrators denounced the 44-year-old as a front man for the military, which ousted elected leader Thaksin Shinawatra in 2006 and which has been accused of political meddling ever since. Born in Britain to a pair of medical professors, Abhisit was
educated at Eton college and then Oxford University, where he graduated with first class honours in Politics, Philosophy and Economics. He entered the Thai Parliament in 1992 as one of its youngest members.
Russia, Ukraine gas row: On the first day of 2009, Russia and Ukraine looked no closer to compromise over a gas row that disrupted supplies to at least four European Union (EU) countries. Poland, Hungary, Romania and Bulgaria reported drops in supplies after Russian State-controlled gas export monopo-ly OAO Gazprom cut off Ukraine on New Year’s Day in a row over prices. The EU, which gets about one-fifth of its gas from pipelines that cross Ukraine, demanded that transit and supply contracts be honoured. Moscow said Kiev was stealing gas intended for Europe and playing political games. Ukraine accused Russia of using energy blackmail and of not providing enough gas for the proper functioning of the transit system. A similar dispute briefly disrupted supplies to Europe three years ago. That crisis prompted calls for the EU to diversify its energy supplies, but it has struggled to break its reliance on Russian gas. Some policy-makers see parallels with Russia’s treatment of Ukraine which, like Georgia, has angered the Kremlin by seeking to join the North Atlantic Treaty Organisation or NATO.
Worldwide bailouts 10 times bigger than Indian economy: In their efforts to tackle the global economic crisis, the rescue packages announced by the governments across the world have crossed 10 trillion-dollar mark (about Rs 50,00,000 crore), an amount equivalent to nearly 10 times the total size of Indian economy. The amount is believed to grow even bigger with the turmoil still being in expansion mode. A lion’s share of about three-fourth of the worldwide bailout package of about $ 10.1 trillion has come from the world’s biggest eco-nomy, the US, whose total national debt has also incidentally crossed the 10 trillion-dollar mark.
Nearly one billion hungry people worldwide: There are 963 million hungry people worldwide, or 40 million people more than in 2007, according to the UN Food and Agricultural Organisation (FAO). In its latest report on hunger worldwide, FAO has said this backward step stemmed mainly from soaring food prices and warned that the situation might become worse by the international economic crisis. According to the experts, the increase in the number of hungry people worldwide means that “in three years we lost virtually all progress made in 1990-2005.”
The great Madoff rip-off: Bernard L. Madoff, the 70-year-old founder of Bernard L. Madoff Investment Securities was arrested on December 11, 2008, for an alleged fraud of around $50 billion. If
convicted, he faces 20 years in prison and a maximum fine of $5 million. He was offering attractive returns to new investors and made it look as if he was investing in blue-chip stocks and options, but there was very little capital at the heart of the operation. He was actually running a Ponzi scheme—a pyramid scheme which uses cash from new customers or investors to pay returns to existing investors. It does little legitimate business, but just recycles money. The scheme depends on a constant stream of new investors to fund the payouts. Madoff kept few records and was clever at hiding the alleged fraud for 10 years.

Japan, Mexico, Uganda, Austria and Turkey have joined the UN’s powerful Security Council as non-permanent members for a two-year term, replacing South Africa, Indonesia, Belgium, Italy and Panama. The 15-member Council comprises five permanent and 10 non-permanent members, five of whom retire each year and their replacements are chosen by the General Assembly. The newly elected members will join Libya, Vietnam, Burkina Faso, Costa Rica and Croatia whose two-year term expires on December 31, 2009.
The super-luxury train, Royal Rajasthan on Wheels (RROW), with spas and wi-fi system among other attractions, chuged off for the first time from the Safdarjang railway station, New Delhi, on January 11, 2009.
Mumbai-based Tata Institute of Fundamental Research (TIFR), the country’s premier research organisation, has decided to set up its second campus in Hyderabad with an investment of Rs 2,500 crore.
Tamil Nadu is the best e-governed State in India, according to a study by IDC India. Apart from its high IT spends, the southern State has also scored high on parameters such as citizen and business satisfaction. The other States in the top five include: Himachal Pradesh, Delhi, Haryana and Andhra Pradesh.
The Atomic Energy Commission has accorded permission for setting up an atomic power plant at Kumahrian in Fatehabad district of Haryana.
The Innovation of Science Pursuit for Inspired Research (INSPIRE) programme has been designed as a national endeavour to attract young India to embrace scientific research. The philosophy of INSPIRE is to create excitement, motivation, nurturing and promotion of excellence with assured career opportunities.
Ksenya Sukhinova of Russia has been crowned Miss World 2008. The first runner-up was Parvathy Omanakuttan of India. Gabriel Walcott of Trinidad and Tobago was the second runner-up. The contest was held in Johannesburg, South Africa.
Anna University Coimbatore has achieved the distinction of becoming the first University in India to adopt and implement the radical Examination Management System (EMS) to conduct its UG and PG exams.
Parliament has approved three-fold increase in the monthly salary of the President, Vice-President and State Governors. While the President will get Rs 1.50 lakh per month, it will be Rs 1.25 lakh for the Vice-President and Rs 1.10 lakh for the Governors. The revision in salary and pension will come into effect from January 1, 2006.
The Union government has cleared an ordinance to hike salaries of Judges, making it Rs 1 lakh per month for the Chief Justice of India, Rs 90,000 per month for Supreme Court Judges and High Court Chief Justice and Rs 80,000 per month for High Court Judges.
The RBI has asked National Building Organisation (NBO), a government agency that collects statistics on the country’s housing construction activities, to launch a housing start-up index by March 2009 to help it assess the impact of fiscal and monetary stimulus offered to revive the sector. All major economies use similar indices to assess economic activity using demand and supply data on the housing sector.
Ferrari head honcho Luca di Montezemolo has made it known that Tata branding would appear for the first time on the scarlet Ferraris of Felippe Massa and Kimi Raikkonen fighting for world championship honours in 2009.
After 137 years, the government of India has recognized Kuka Namdhari Movement of 1871 and Jallianwala Bagh massacre, 1919, as part of the national freedom movement. The recognition is required for purpose of grant of pension under the Swatantra Sainik Sanman Pension Scheme 1980.
International Mobile Equipment Identity (IMEI) number is a unique 15-digit code that can identify a mobile to a GSM network. It prevents stolen handsets from being used to make calls and allows lawful interception to prove that a particular device was used for making calls.
Sun Pictures has bought the production rights for the costliest Indian movie to date, Robot, starring Rajnikanth and Aishwarya Rai. The Sci-fi movie is to be directed by Shankar, with a whopping Rs 100 crore plus budget.


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13.0 Learning Outcome

13.1 Introduction

13.2 Initiatives towards Constitutional Status to Local Governance

13.2.1 Features of 73rd Constitutional Amendment

13.2.2 Features of 74th Constitutional Amendment

13.2.3 Decentralised Planning in Context of 73rd and 74th Constitutional Amendment Act

13.3 Initiatives after Economic Reforms

13.4 Functioning of PRIs in Various States after 73rd Amendment

13.5 Functioning of Local Governance after 73rd and 74th Constitutional Amendment: Observations

13.6 Conclusion

13.7 Key Concepts

13.8 References and Further Reading

13.9 Activities


After studying this Unit you should be able to:

• Identify the background of revitalisation of local governance;

• Understand the features of 73rd and 74th constitutional amendment;

• Discuss the initiatives after economic reforms; and

• Outlines the functioning of local governance in various states after the amendment.


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1.0 Learning outcome

1.1 Introduction

1.2 Concept of Democratic Decentralisation

1.3 Evolution of Democratic Decentralisation

1.4 Significance of Democratic Decentralisation

1.5 Democratic Decentralisation in India

1.6 Conclusion

1.7 Key concepts

1.8 References and Further Reading

1.9 Activities


After studying this unit, you should be able to:

• Understand the concept of Democratic Decentralization;

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