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Indian Economy
Major Institutions

Major Institutions
The Reserve Bank of India RBI was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934. The Central Office of the Reserve Bank was initially established in Calcutta but was permanently moved to Mumbai in 1937. The Central Office is where the Governor sits and where policies are formulated. Though originally privately owned, since nationalization in 1949, the Reserve Bank is fully owned by the Government of India. The Reserve Bank's affairs are governed by a central board of directors. The board is appointed by the Government of India in keeping with the Reserve Bank of India Act. Functions: General superintendence and direction of the Bank's affairs Financial Supervision The Reserve Bank of India performs this function under the guidance of the Board for Financial Supervision (BFS). The Board was constituted in November 1994 as a committee of the Central Board of Directors of the Reserve Bank of India. Objective Primary objective of BFS is to undertake consolidated supervision of the financial sector comprising commercial banks, financial institutions and non-banking finance companies. Main Functions of RBI Monetary Authority: Formulates, implements and monitors the monetary policy. Objective: maintaining price stability and ensuring adequate flow of credit to productive sectors.

Regulator and supervisor of the financial system: Prescribes broad parameters of banking operations within which the country's banking and financial system functions. Objective: maintain public confidence in the system, protect depositors' interest and provide cost-effective banking services to the public.

Manager of Foreign Exchange Manages the Foreign Exchange Management Act, 1999. Objective: to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.

Issuer of currency: Issues and exchanges or destroys currency and coins not fit for circulation. Objective: to give the public adequate quantity of supplies of currency notes and coins and in good quality.

Developmental role Performs a wide range of promotional functions to support national objectives.

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Indian Economy
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Banker to the Government: performs merchant banking function for the central and the state governments; also acts as their banker. Banker to banks: maintains banking accounts of all scheduled banks. Has 22 regional offices, most of them in state capitals.

The Planning Commission The Planning Commission was set up by a Resolution of the Government of India in March 1950 in pursuance of declared objectives of the Government to promote a rapid rise in the standard of living of the people by efficient exploitation of the resources of the country, increasing production and offering opportunities to all for employment in the service of the community. The Planning Commission was charged with the responsibility of making assessment of all resources of the country, augmenting deficient resources, formulating plans for the most effective and balanced utilisation of resources and determining priorities. Jawaharlal Nehru was the first Chairman of the Planning Commission. Functions The 1950 resolution setting up the Planning Commission outlined its functions as to: a. Make an assessment of the material, capital and human resources of the country, including technical personnel, and investigate the possibilities of augmenting such of these resources as are found to be deficient in relation to the nations requirement; b. Formulate a Plan for the most effective and balanced utilisation of country's resources; c. On a determination of priorities, define the stages in which the Plan should be carried out and propose the allocation of resources for the due completion of each stage; d. Indicate the factors which are tending to retard economic development, and determine the conditions which, in view of the current social and political situation, should be established for the successful execution of the Plan; e. Determine the nature of the machinery which will be necessary for securing the successful f. implementation of each stage of the Plan in all its aspects; Appraise from time to time the progress achieved in the execution of each stage of the Plan and

recommend the adjustments of policy and measures that such appraisal may show to be necessary; and g. Make such interim or ancillary recommendations as appear to it to be appropriate either for facilitating the discharge of the duties assigned to it, or on a consideration of prevailing economic conditions, current policies, measures and development programmes or on an examination of such specific problems as may be referred to it for advice by Central or State Governments. Evolving Functions From a highly centralised planning system, the Indian economy is gradually moving towards indicative planning where Planning Commission concerns itself with the building of a long term strategic vision of the future and decide on priorities of nation. It works out sectoral targets and provides promotional stimulus to the economy to grow in the desired direction. Planning Commission plays an integrative role in the development of a holistic approach to the policy formulation in critical areas of human and economic development. In the social sector, schemes which require coordination and synthesis like rural health, drinking water, rural energy needs, literacy and environment protection have yet to be subjected to coordinated policy formulation. It has led to multiplicity of agencies. An integrated approach can lead to better results at much lower costs.

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Indian Economy
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The emphasis of the Commission is on maximising the output by using our limited resources optimally. Instead of looking for mere increase in the plan outlays, the effort is to look for increases in the efficiency of utilisation of the allocations being made. With the emergence of severe constraints on available budgetary resources, the resource allocation system between the States and Ministries of the Central Government is under strain. This requires the Planning Commission to play a mediatory and facilitating role, keeping in view the best interest of all concerned. It has to ensure smooth management of the change and help in creating a culture of high productivity and efficiency in the Government. The key to efficient utilisation of resources lies in the creation of appropriate self-managed organisations at all levels. In this area, Planning Commission attempts to play a systems change role and provide consultancy within the Government for developing better systems. In order to spread the gains of experience more widely, Planning Commission also plays an information dissemination role. Organisation The Prime Minister is the Chairman of the Planning Commission, which works under the overall guidance of the National Development Council. The Deputy Chairman and the full time Members of the Commission, as a composite body, provide advice and guidance to the subject Divisions for the formulation of Five Year Plans, Annual Plans, State Plans, Monitoring Plan Programmes, Projects and Schemes. The Planning Commission functions through several Divisions, each headed by a Senior Officer. The present members (in 2011-12) are: 1. Chairman 2. Sh. Montek Singh Ahluwalia, Dy. Chairman 3. Shri Ashwani Kumar, Minister of State 4. Members o o o o o Shri B. K. Chaturvedi Saumitra Chaudhuri Dr. (Ms.) Syeda Hameed Dr. Narender Jadhav Prof. Abhijit Sen

o Dr. Mihir Shah o Dr. K. Kasturirangan o Sh. Arun Maira 5. Ms. Sudha Pillai, Member Secretary The Finance Commission The Constitution of India provides for the establishment of a Finance Commission for the purpose of allocation of certain resources of revenue between the Union and the State Governments. The Finance Commission is established under Article 280 of the Constitution of India by the President. The qualifications, powers and procedures of the Commission itself are regulated by the Finance Commission (Miscellaneous Provisions) Act 1951. Such Commissions are deemed to be civil courts for the purposes of the Code of Criminal Procedure 1898.

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Indian Economy
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The Finance Commission is constituted to define financial relations between the Centre and the States. Under the provision of Article 280 of the constitution, the President appoints a Finance Commission for the specific purpose of devolution of non-plan revenue resources. Functions Under Article 280 of the Constitution the Finance Commission is required to make recommendations to President in respect of: 1. The distribution of net proceeds of taxes to be shared between the Centre and the States, and the allocation between the States, the respective share of such proceeds. 2. The principles which should govern the grants-in-aid by the Centre to States out of the Consolidated Fund of India. 3. The measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats and the Municipalities in the state on the basis of the recommendations made by the State Finance Commission. 4. Any other matter referred to it by the President in the interests of sound finance. Finance Commissions appointed so far So far 13 Finance Commissions have been appointed which are as follows: Finance Commissions Appointed Year of Establishment 1951 1956 1960 1964 1968 1972 1977 1983 1987 1992 1998 2003 2007 Operational Duration 1952-57 1957-62 1962-66 1966-69 1969-74 1974-79 1979-84 1984-89 1989-95 1995-2000 2000-2005 2005-2010 2010-2015

Finance Commission First Second Third Fourth Fifth Sixth Seventh Eighth Ninth Tenth Eleventh Twelfth Thirteenth

Chairman K.C Neogi K. Santhanam A.K. Chanda P.V. Rajamannarr Mahaveer Tyagi K. Brahmananda Reddy J.M. Shellet Y.B. Chavan N.K.P.Salve K.C Pant A.M.Khusro C.Rangarajan Vijay Kelkar

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Indian Economy
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Some of the provisions under the Constitution to ensure equality and distributive justice: 1. 2. 3. Levy of duties by the Centre but collected and retained by the States (Article 268) Taxes and duties levied and collected by the Centre but assigned in whole to the States (Article 269). Sharing of the proceeds of all Union taxes between the Centre and the States under Article 270. (Effective from April 1, 1996, following the eightieth amendment to the Constitution replacing the earlier provisions relating to mandatory sharing of income tax under Article 270 and permissive sharing of Union excise duties under Article 272). Statutory grants-in-aid of the revenues of States (Article 275) Grants for any public purpose (Article 282). Loans for any public purpose (Article 293).

4. 5. 6.

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