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Homeowner Assistance in the Obama Administration’s Economic Stimulus Package

nt recession has had many unfortunate effects on the US economy, and one of the most devastating has been an upswing in homeowners who are losing their homes through no fault of their own, either because they have lost jobs or because their property has lost a tremendous amount of value, sometimes over 100%. In order to assist affected homeowners, President Obama has included a plan to help distressed homeowners to the Economic Stimulus Package. The Obama administration’s assistance falls into three broad categories: credits on your taxes, grants, and loan modifications, the last of which I will discuss further below.

Since interest rates have fallen down into the 5% range (currently 5.16%), this is a good time to consider refinancing. The new loan modification program put into effect by the Obama administration is applicable to both Fannie May and Freddie Mac mortgages, which includes most US mortgages, and although the participation on the part of mortgage lenders is voluntary, they receive government incentives. Under the new plan, a loan modification is now easier to apply for, since you can apply even if you owe up to 105% of the value of your home. Both fixed and adjustable rate mortgages can be modified, so that your monthly payments are not more than 31% of your gross monthly salary. You also have an option to lengthen the term of a mortgage loan, thereby also reducing your payments.

You can search online by related keyword, such as “loan modification” or “homeowner stimulus” to find more in-depth information.

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August 29, 2010 Posted by | Economic Stimulus | Comments Off on Homeowner Assistance in the Obama Administration’s Economic Stimulus Package

Performance of DRDA Projectc in Vizianagaram, inrespect to the Public Policy and Populist Measures

* Goteti Himabindu ** N.V.S.Suryanarayana

In the past studies on public policy were dominated by researchers and students of political science who largely concentrated in the institutional structure and philosophical justification of government.  The focus was rarely on policies themselves.  Past studies hardly recognized the role of organizations towards the formulation of policy.  Yet, the policy is an important element of political process.

It is important to understand the concept of public for a discussion in public policy.  We often use such terms as ‘Public Interest’, ‘Public Sector’, and ‘Public Health’ and so on.  The strategy point is that public policy has to do with those spheres, which are so labeled as public.  Public dimension is generally referred to public ownership or control for public purpose.  The public comprises that domain of human of human activity, which is regarded as requiring governmental intervention or common action.  However, there has always been a conflict between what is public and what is private.

Like the idea of public, the concept of policy is not a precise term.  Policy denotes, among other elements, guidance for action.  It may take the form of – (a) A declaration of goal; (b) A declaration of course of action; (c) A declaration of general purpose – and (d) An authoritative decision.

Unfortunately the policy itself is something, which takes different forms.  There is thrust to designate policy as the outputs of the political system, and in a lesser degree to define public policy as more or less interdependent policies dealing with many different activities.  Studies of public policy areas, on the contrary, have intended to focus on the evaluation of policy decisions in terms of specified values a rational rather than a political analysis.

Taken as a whole, policy may be defined as a purposive course of action taken or adopted by those in power in pursuit of certain goals or objectives.  Public policies are formulated by authorities in a political system, namely elders, executives, legislators, judges and the like.  These are the persons who engaged in the daily affairs of the political system, are recognized by most members of the system as having responsibility for those matters.  The actions taken by them are accepted as binding most of the time by most of the members so long as they act within the limits of their roles.

Significance of the Study:

A public policy may cover a major portion of its activities, which are consistent with the development policy.  Socio-economic development or self-reliance or similar broad principles of guidance for action may be adopted as a developmental policy or national goal.  A public policy may be narrow, covering a specific activity, such as family planning.  A public policy may be applied to all people in a country or it may be limited to a section of its people.  Besides, each level of government – central, state and local – may have its specific or general policies.  Then there are ‘mega policies’, which are general guidelines to be followed by all specific policies.  Mega policies form a kind of master policy, as distinct from concrete discrete policies, and involve the establishment of overall goals to serve as guidelines for the larger set of concrete and specific policies.

Public policies in modern political system are purposive or goal oriented statements.  Again, a public policy may be positive or negative in form.  In its positive form, it may involve some form of overt government action to deal with a particular problem.  On the other hand, in it is negative form.  It involves a decision by public servants not to take action on some matters on which a government order is sought.  Public policy has a legal coercive quality that citizens accept as legitimate.  This legal coercive quality of public policies makes public organizations distinct from the private organizations.

Policy making is closely related to decision-making.  However, it is not the same as decision-making.  Policy-making does involve decision-making, but a decision does not necessarily constitute a policy.  Decision-making often involves identification of a problem, a careful analysis of possible alternatives and selection of one alternative for action.  Generally decisions are taken by the administrators in their day-to-day work within the distinct framework of policy.  The policy decisions eventually taken thus provide a sense of direction to the courses of administrative action.

Policies are distinct from goals and can be distinguished from the latter as means from ends.  By goals or objectives one means the ends towards which actions are directed.  It is reasonable to expect that a policy indicate the direction towards which action is sought.  Policies involve a deliberate choice of actions designated to achieve these goals and objectives.  The actions can take the form of directives to do or refrain from certain action.  Public policy is about means and ends, which have to have a relationship to each other.  To say that policy-making involves a choice of goals or objectives is to argue that it deals with values.

Statement of the Problem:

The present study is designed to probe into “Performance of DRDA Projectc in Vizianagaram, inrespect to the Public Policy and Populist Measures” Policies as well as objectives are chosen under the influence of values.  Decision-makers often act on the basis of their belief or perceptions of the public interest concentrating what is proper or morally correct public policy. Studies of Supreme Court indicate that judges are influenced by policy values in deciding cases.

Policy-making must be distinguished from planning.  Broadly speaking a plan is a programme of action for attaining definite goals or objectives.  In this sense, a plan is a policy statement and planning implies policy-making.  Oten the goals or policies of a plan are not stipulated in plan documents.  They may be stated only in a very general or vague terms, or are found to be internally inconsistent or contradictory.  A national development plan, broadly speaking is a collection of targets or individual projects which, when put together, may not constitute an integrated scheme.

Allocation of resources for investments and showing of targets indifferent sectors of the economy are considered to be at the core of planning.  However, it has been aptly stated that a plan needs proper policy framework.  Targets cannot be achieved just because investments are provided for.  They have to be drawn within the framework of policies.  Successful policies make for successful plans and administration.

Administration involves co-operative effort by a number of people to achieve some purpose whether private or public, large or small, ‘it consists in the systematized ordering of affairs and the calculated use of resources, aimed at making those things happen which we want to happen and simultaneously preventing developments that fail to square with our intentions.

Phiffmer has defined administration ‘as the organization and direction of human and material resources to achieve, desired ends’.

According to Marshall E, Dimock, ‘Administration is now so vast an area that a philosophy of administration is come close to being a philosophy of life’.

The administration process has a number of distinct phases such as Organization, Personnel, Financial, Management, Policy making, Planning, Direction and Control Policy has to be decided before anything can be attempted to be done.

Policy means a decision as what shall be done and how, when and where.  The most common social and political usage of the term policy refers to a course of action or intended course of action conceived as deliberately adopted and perceived or oriented to be perceived.  A policy is concerned not only with what is (i.e., positive principle) but also with what should be (i.e., normative principle).  Policy is a comprehensive term and connotes a set of intended actions.  Policy is defined as a course of action selected by the government, an institution, a group or an individual among alternatives in the light of given conditions to guide and usually to determine present and future decisions.  In the words of Terry a policy is a verbal, written or implied basic guide to action that is adopted and followed by a manager.  Dimock defines policies as the consciously acknowledged rules or conducts that guide administrative decisions.  According to Koontz and D.Donnell ‘Policies are general statements or understandings, which guide or channel thinking in decision making of subordinates’.  The term public policy refers to the policies made and implemented by government with a view to achieve certain goals.  Public policy means the functioning of government.  Public policies intend to attain definite objectives of government.  For instance eradication of poverty is a goal.  Rural development, urban development and industrial developmental policies are shaped to attain that broad goal.  David Eastern defines public policy as ‘Authoritative allocation values to the society’.  Public policy is when the government actually chooses to do or not to do some scholars’ claim to see differences between specific action and overall programme of action towards a given goal.  They insist that government action must have a goal in order to be leveled as ‘policy’.  Laswell and Kaplan defined Policy as ‘A projected programme or goals, values and practices’.

A decision is usually taken within the frame work of policy that is a policy may involve a series of decisions.

The issue of implementation assumes importance in the context of policy analysis as it takes into account of what happens to policies in terms of their actual results on the ground, as making policies is not enough but a sincere effort to implement these policies is equally important.  It is relevant to quote Woodrow Wilson who said, ‘it is getting harder to name a constitution than to frame one’.  Running is the implementation aspect of government activity.

Many implementation studies while analyzing public policies point out variety of factors.  Firstly different kinds of uncertainties often accompany programmes: Space, inputs, technology and even staff may not be available at specific time and locations, impending the take-off of the programmes.  Secondly, resources may fall short of the requirements and may not be flowing in time.  Thirdly, there are well-known organization problems affecting programmes implementation and within a department a new programme may not be welcome by all.  A new programme may demand a new organization, which takes time to take shape.  Fourthly, as experience tells, leadership makes or destroys an organization and its programmes.  Specially, when new programmes are launched in any sector, leadership to a large extent determents the outcome.  Fifthly, many government programmes cut across departments and therefore, success depends on inter departmental co-ordination.  Sixthly, under ‘privatization’ philosophy, government programmes are contracted out to third parties like NGOS and private agencies.  Success in that event would dependent on the performance of the ‘outside agencies’.

Formulation of Public Policy:

The whole process is indeed of two folds namely a working down from the rules at the top and a working up from the persons affected. They are from internal sources, from external sources, from special investigations conducted by commission or committee and from research and study.

Every administrative department receives periodic reports, returns, statements, accounts and statistics from its various sub-agencies regarding their various activities.  These are consolidated together and recorded by the departments and are available for use as data for the formulation of policy.  Whether modern emphasis on planning, statistics have become a important tool for administration.  Many departments have special machinery for the collection of statistics relating to their activity, helpful for policymaking.  For example in India, the ministries of Finance, Commerce, Industry, Food, Agriculture and Labour have their own statistical sections and a central statistical organization attached to the cabinet Secretariat National Sample Survey, The Bureau of Public Enterprises.  Directorate of Industrial statistics and various other organizations are working for the collection of information and statistics.  The data so collected are properly processed, organized and interpreted to certain facts essential for policy-making.

The identification of major policy making organs of India is not a sure proof of their compulsory involvement in the policymaking.  If the Prime Minister’s Office proposes a policy, it may not be thoroughly discussed and in the process, some organs may even get completely bypassed.  Behind policymaking, there are much interest, many factors, many perceptions and the map is not necessarily the same or similar even with the same or similar problems emerging again.  According to Krishna Menon ‘Policies are seldom framed the way, we read in books.  What we read in Sir Ivor Jennings’s works and other treaties is hardly observed while making policies.’

The Indian Context:

Public Policies in the developing nations have acquired critical significance in view of the complex challenges being faced by them on the one hand and their propensity to effect shifts in the regime on the other.  Among the new nations, India has embraced upon new tasks of social re-construction, economic modernization, political participation, welfare, providing liberty, equality and rights in the life of the millions of people.  In order to achieve these objectives the constitutions of India reiterated its commitment to welfare state with an emphasis on secular, socialist, federal, parliamentary and democratic ideologies.  Further, it has also derived an institutional framework to act as infrastructure to oversee the fulfillment of the said objective.  The social, economic and political philosophy of Indian Constitution is orchestrated in the Preamble, Fundamental Rights and Directive Principles of State Policy, which lays down an egalitarian ideology as a part of liberal democratic constitutional order. (14)

C.D.Deshmukh, the Finance Minister while moving a resolution on 20th December, 1954 on the economic situation of India observed, ‘the broad aim of public policy is set out in the Directive Principle in the Constitution.  These are presents, the will of the nation and not the creed of any individual or any party or the dogma of any section.  And so long as they remain in the Constitution, they must govern the overall policy not only of this government, but whatever government there may be in future’. Indeed, the articulations in them are the potential stuff out of which public policies at both levels of government in the federal system are to be made.  The view that the Directive Principles of State Policy are largely ornamental being un-enforceable by the judiciary is not valid.  Current judicial thinking is that the Fundamental Rights and the Directive Principles are complementary to each other and mutually re-enforcing.  The formal provisions of the Constitution do not provide sure clues to either the direction of public policymaking or its contents.  Yet, the Socio-economic provisions of the Constitution can be made to operate only by the political process and dynamics of the land.

India is committed for the establishment of Welfare State as has been reflected in the Constitution.  The basic aim of a Welfare State finds expression in the preamble and part IV of the Constitution as reflected through Directive Principles of the State Policy.  At aims to secure all its citizens.  Justice, Liberty, Equality and Fraternity, Secure and Protect social orders.  A peep into the provisions incorporated emphasis the determination of founding fathers of our Constitution.  It attempts to strike a balance between rural development and urban planning through well-coordinated administrative agencies.  No wonder, this determination has strengthened the concept of Welfarism in India.  Consequently, it gave rise to the concept of populist measures.  Hence, public policy analysis has to be examined from the angle albeit objectively.

Populist Measures:

In pursuance of the provisions enshrined in Part –IV of the Constitution, as well as objective conditions of Planned Development and Leadership role necessitated introduction of a series of developmental programme, especially rural developmental programmes.  It arose due to competition among the political parties to retain power.  Various political parties as well as groups, which have conceived divergent social and economic policies which are both developmental and welfare oriented has been termed as populist policies, which act as important components of public policies.  Different populist strategies have been persuaded by different political parties including the regional ones.  Populist politics is in fact, the need of the hour, India is an old civilization but a new nation having backwardness in many spheres.  Many feel India is still ‘a nation in the making’.  India is perhaps the only major country whose leadership is determined to transform the traditional society into a modern and developed one.  The political process during 1970 witnessed an increased accent on populist policies, which are either incremental in nature or intended to pass on specific benefits to the target groups.  At the state level also, the parties and groups have tended to accept populist, welfare policies, not only as a sort of developmental strategy but also recognized this as politically expedient and electorally rewarding.  Series of antipoverty programmes of rural development such as 20-Point Economic Programmes, SFDA, NREP, DPAP, IRDI, Jawahar Rojgar Yojana etc., have launched in order to ameliorate the poorest of the poor.  Alternative policy approaches to the problems of growth, poverty and inequalities in the third world countries necessitated the need not for one or two isolated policies but for a package of complimentary and supportive policies. (15)  For many less-developed countries including India, a significant factor contributing to persistence of low level of living evolving into a culture of poverty is the highly unequal distribution of economic and political power between rich and poor.  All people have certain needs without which life is inconceivable.  These, life-sustaining necessities include basic human needs as food, shelter and protection, when any one of these is absent or in short supply, it assumes that a condition of under development exists.

The Welfare State performs positive functions besides acting as a policeman entrusted with the maintenance of law and order in short it promotes human welfare.  Concept of welfare implies realizing the required socio-economic change, which will ultimately pave the way for the promotion of greatest happiness of greatest number.  Welfare schemes refer to guaranteed programmes intended to protect citizens against economic risks and insecurities.  It performs the divine rules of a father, a nurse, manager and an industrial entrepreneur.  The welfare functions of a state clearly point out that the state in modern times has become an instrument of socio economic change.  A Social welfare state is a society with a set of government programmes that protect the minimum standards of living of families and individuals against loss of income due to economic instability, old age illness and disability and family disintegration.  All modern welfare states through the details of their programmes differ in providing social welfare measures to their citizens.

Social Welfare and its manifestations in the forms of social service, welfare and its manifestations in the forms of social service, social reform, social security etc., have come to be prominently used in the twentieth century.  However, social welfare in its rudimentary form did exist over in punitive societies in the desire of people to help one another on times of need and stress, which deeply ingrained in the human nature.  Moreover all the religions of the world enjoin upon their devotees and followers to practice compassion and exhibit concern for their fellow beings especially for those in distress and deprivation and to help them by giving a portion of their earnings in charity.  Thus through the ages and in all parts of the world, the humanitarian impulses have marked the beginning of social welfare.

Andrews, Rhys and others (2009) studied ‘Centralization, Organizational Strategy, and Public Service Performance’.  One of the core functions for public managers is the creation of appropriate structures that can provide system stability and institutional support for a host of other internal organizational elements, such as values and routines.

Anne Stevens (2009) studied Representative Bureaucracy – What, Why and How?.  Issues of representation have become increasingly salient in European countries with attempts to find mechanisms to increase the representation of women, including various types of quota and parity legislation. This article examines the extension of the idea to bureaucracies.

Chris Game (2009) studied Just over 100 years ago, 5 pioneering women and 1 quite exceptional one became the first legitimately elected female members of English county and county borough councils. While obviously important, the Qualification of Women Act 1907 that enabled their election was far from the only one to have influenced women’s electoral involvement in local government.

Craig R.Smith (2009) studied on ‘Institutional determinants of Collaboration: an empirical Study of County Open-space Protection (Survey).  In this article the author attempted to add to this burgeoning literature by arguing that institutions are an important component of collaboration because they signal to potential collaborative partners a policy commitment by the government. In credibly committing to a policy, governments can reduce uncertainty and gain cooperation without necessarily building trust via managerial behavior.

Dr.Pantricia Hamilton & Dr.Rosalyn Proops (2008) opined that Professionals are well aware of the difficult decisions they face. On the one hand, returning an abused child to abusive parents may literally be a matter of life and death; on the other, parents who lose their children feel devastated.

Money Control.com (ed.) (2009) studied ‘Two Populist Measures save Lalu a dull day’.  This article disclosed that When Lalu Yadav walked out this morning to present the interim Railway Budget for the last time in the tenure of the United Progressive Alliance, anybody would have expected him to not only come out with impressive statistics of the Railways’ scorecard but also balance profitability and populist measures with his characteristic élan — and not without a keen eye on the upcoming Parliamentary polls.

Peter Riddel (2007) opined on ‘Lost of Populist Measures but little sense of an overall strategy’.  The Conservatives are in two minds about an early election. In one sense, they do not want one, since every spokesman and MP to whom the author accepted that the party could not win outright and almost certainly could not become the largest single party.

Prof.Gray King, Department of Government, Harvard University (2009) studied ‘Political Analysis’ that ‘The relatively new field of political methodology is growing exponentially; is improving empirical work in every field of the discipline; and is even making major contributions to empirical and methodological scholarship well outside the diffuse borders of political science. Political Analysis chronicles these exciting developments by publishing the most sophisticated scholarship in the field.

Sabina Siebert (2009) studied ‘Gender Balance in Scottish Local Authority Councils’.  Women make up over 40 per cent of community councilors in Scotland, however, evidence suggests that they are less likely to progress to local authority councils. This article investigates the barriers to wider engagement of women in participative democracy, and based on the analysis of empirical data suggests some ways of promoting a more equitable gender representation in Scottish local authority councils.

Sir Rodney Brooke (2008) examined ‘The Public Needs Confidence in Family Courts’.  He reported that that social workers are not accountable for their actions is not correct. As your article states, social workers have been required to register with the General Social Care Council (GSCC) since 2005. In registering, they sign up to a code of practice that sets out the standards they must work to. The great majority of the 93,000 registered social workers provide excellent services to high standards.

AFP South Asian Edition (2009) Article on ‘Populism Pips Economc Price on India’s Pool Trial’.  The Editorial disclosed that Four years of soaring growth is a record most governments would trumpet from the rooftops at election time, but India’s ruling party is giving the subject a wide berth ahead of this week’s polls.

CJ:Abhishek Behl (2008)KEEPING IN mind the general elections next year, Railway minister Lalu Prasad Yadav today presented a populist Rail Budget offering reduction in train fares, a slew of new trains and concessions and a provision for special trains to cater to the needs of Indian masses.

Subramanian, Narendra (2007) studied ‘Populism in India’.  Populist political forces have played significant roles in Indian politics, and have varied in their vision of political community, in the social groups they targeted, in the policies they pursued, and in their impact on democracy. The Indian National Congress had populist aspects in the interwar period, and then again under Indira Gandhi’s leadership from the late 1960s to the late 1970s. Movements and parties that represented particular language and caste groups also employed populist rhetoric and methods of mobilization, and pursued populist policies.

Sudheendra Kulkarni (2009) made on ‘Why India is turning to Populism’.  Not being an expert in etymology, He opined that he do not know how the word ‘populism’ originated. However, keen observers of and participants in the discourse on India’s political economy know that ‘populism’ has travelled an interesting journey in our country. From being reviled as ‘bad economics’ since the advent of liberalization in the early 1990s by a section of the intelligentsia that had embraced the credo ‘West is Best’, it has now been honourably enshrined as an indispensable part of ‘good politics’ by mainstream political parties.

The Republic of India is a large country with a population of over one billion people spread over 3.28 million sq. km. It has a federal structure of 35 states and union territories divided into nearly 600 districts. India has 32 different languages and numerous dialects. In the 19th century, Britain had assumed political control of virtually all Indian lands. By 1947 the people of India declared their independence.  India is located in Southern Asia, bordering Burma, Bhutan, China, Nepal and Bangladesh along the Arabian Sea and the Bay of Bengal. India has a diverse landscape with flat to rolling plains along the Ganges River, deserts in the west and the Himalaya mountain range in the north.  The nationality of India is Indian with ethnic groups of Indo-Aryan comprising 72% of the population with Dravidian groups comprising 25%, and Mongoloid and others comprise the remaining 3%. Languages include Hindi as the national language which is the primary tongue of 30% of the population. There are 14 other official languages with English being spoken in business and political circles.  According to the United Nations, country-specific poverty lines are generally used due to variations between countries and is affected by local tastes and cultural norms. However, definitions are not particularly sensitive to more qualitative needs such as health care, housing and education. According to the ADB, in 1999 India had 26.1% of its population below the national poverty line with 27.1% represented in rural areas and 23.6% in urban areas.

India’s economy encompasses traditional village farming, modern agriculture, handicrafts and a wide range of modern industries and support services. India is a major exporter of software services and workers.

Economic growth slowed in 2002, largely due to a drought-induced drop in agriculture. The industry sector showed increases, which is expected to continue in FY2003 and should lead to a moderate revival in GDP growth. Assuming normal monsoon conditions, the economy is projected to grow by 6% in FY2003 with agriculture and services increasing on average. Exports are expected to increase at over 15% in 2003, based on increasing world demand. Inflation will likely remain moderate at approximately 5%. The fiscal deficit is expected to remain at the average level of 9.5% of GDP during FY2003.  Gross Domestic Product (GDP) growth averaged approximately 6% throughout the 1990s, however, it decreased to an average of 5% for FY2000 and FY2001. During FY2002 (ending March 31, 2003) GDP growth was approximately 4.4%. The general decline in GDP growth over the years is primarily attributable to a decrease in the service sectors growth and from external effects such as a global recession, drought, the impact of the government’s large fiscal deficit and slow progress of reforms in certain sectors. The Asian Development Bank forecasts a 6.3% growth in GDP in the FY2003 with agriculture and services increasing on average.

GDP stood at approximately US$2.66 trillion in 2002 of which agriculture comprised 25%, while manufacturing and trade comprised 29.7%.  The Government provides welfare schemes for the social services sector and over the past 10 years has increased the budgeted amount four-fold for welfare schemes for Scheduled Castes, Other Backward Classes and minorities as well as welfare and development of scheduled tribes. The Government also provides separate allocations for People with Disabilities (PWDS) under separate schemes. Based on the Government’ economic survey conducted for outlays for the social sector for the fiscal year 2000, rural development, employment and poverty alleviation encompassed the largest share of social welfare schemes at 42% of total expenditures in the social sector.  According to the World Health Organization (WHO), the life expectancy at birth was 60 years for males and 61.7 for females. It is estimated by the WHO that as of 1992 there were 48 and 45 physicians and nurses, respectively for every 100,000 people living in India.  Total expenditures on health as a percentage of GDP in 2000 was 4.9% according to the WHO, while general government expenditures on health as a percentage of total general government expenditures in 2000 was 5.3%.  The WHO estimates that 3.9 million people were living with HIV/AIDS in 2000, while there were 350,000 deaths related to HIV/AIDS in the 15 to 49 year old population in the same time period. The total estimated adult prevalence rate was 0.8% of the total population.

Bansal, R;John,S and Ling PM (2005) made an article on ‘Cigarette Advertising in Mumbai, India: Targeting different Socio-economic groups, Women and Yough’.

Despite a recent surge in tobacco advertising and the recent advertising ban (pending enforcement at the time of this study), there are few studies describing current cigarette marketing in India. This study sought to assess cigarette companies’ marketing strategies in Mumbai, India.

Rijo M.John (2006) studied ‘Household’s Tobacco Consumption Decisions’.  This article analyses consumption patterns, socio-economic distribution and household choice of a variety of tobacco products across rural and urban India. Using a multinomial logic model, we examine the choice behaviour of a household in deciding whether and which tobacco products to consume.

Editorial (2009) an article on ‘Socio-economic Issues in India’.   Constitutionally India is a secular state, but large-scale violence have periodically occurred in India since independence. In recent decades, communal tensions and religion-based politics have become more prominent, coinciding with a rise in Islamic terrorism.

Vannhim (2009) studied ‘Gender Inequality in India’.  In this study the author opined that “No nation, no society, no community can hold its head high and claim to be part of the civilized world if it condones the practice of discriminating against one half of humanity represented by women” That was a sentence from the speech of Prime Minister Manmohan Singh at national conference to oppose gender inequality in 2006, but in reality this situation is becoming worse and worse, especially when the widespread practice of aborting female fetuses happens every day everywhere without people’s care and strict law.

Thus socio-economic indicators provide an opportunity to understand, in general, the status of an individual.

The socio-economic position helps an individual to assert his or her position in the society.  Educational levels, occupational positions and income earnings do influence the behavioral pattern of individuals.  These achievements instill confidence individuals and stimulate them to take part in the societal and political activities.  Astrictive qualities like case and religion have also a greater role to play, especially in Indian situation in determining the status of a person.  The lower caste status is a barrier in the way of an individual to achieve his or her goal.  An attempt would be made by the researcher to enquire into the socio-economic indicators of Vizianagaram District and present on analysis of populist measures that have emerged in the course of undertaking the present study.

Socio-economic Profile of Vizianagaram District:

No two districts can be said to be same in terms of land, area, size of population, strategic location, natural resources, cultural patterns, social structures, political dynamics and economic development.  The Republic of India occupying the central sector of the Asian subcontinent is the sub-continent of Asia and is the second most populous nation and seventh largest country of the world having 439 districts.

Andhra Pradesh is a state of India having 23 districts and Vizianagaram is a district of Andhra Pradesh.  Andhra Pradesh is divided into four natural regions viz., Andhra, Rayalaseema and Telengana regions.

Historical background:

The history of Vizianagaram District is connected with hoary past of Kalinga, one of the Political divisions of ancient India.  Only in modern times, the upper part of Kalinga was gradually merged into Orissa State and the lower part into Andhra Region.

After abolition of the Zamindaris in 1948, Visakhapatnam district was found to be unwidely for administrative purposes.  Consequently, Srikakulam District was carved out in 1950, bifurcating it from Visakhapatnam District.  The Constitution of Vizianagaram District in 1979, by transferring the taluks of Parvathipuram, Kurupam, Salur, Bobbili, Badangi and Cheepurupalle from Srikakulam District and some taluks of Visakhapatnam, forms the latest development in the history of the district.

Geographic Profile of Vizianagaram District:

Vizianagaram District was formed as 23rd district in the State on 1st June, 1979 with headquarters at Vizianagaram in terms of G.O.Ms.No:700/Revenue(U)Department, Dt.15th May, 1979 with portions carved from Srikakulam and Visakhapatnam District.

The district is a part of the Northern Coastal plains of Andhra Pradesh State and lies between 17° – 15’ and 19° -15’ of the Northern Latitude and 83° – 0’ to 83° – 45’ of the Eastern Longitude.  It is bounded on the East by Srikakulam District, on the West and South by Visakhapatnam District, on the South-east by Bay of Bengal and North-West by Orissa State.

The District was formed with 9 taluks viz., Viianagaram, Gajapathinagaram, Srungavarapukota and Bhogapuram taluks from Visakhapatnam district, Bobbili, Parvatipuram, Salur, Kurupam and Cheeprupalli from Srikakulam District.  In December, 1979, 3 more taluks were added by creating Nellimarla, Viyyampeta,  Badangi and GummaLakshmipuram duly bifurcating the taluks of Vizianagaram, Srungavarapukota, Bobbili and Kurupam respectively making the total taluks to 13 and these taluks have been further subdivided into 52 Firkas.  For administrative convenience, the district is divided into 2 Revenue Divisions viz., Vizianagaram and Parvathipuram.  In may, 1985 the taluks and firkas were replaced with 34 Revenue Mandals in the District.

Population:

The population of this district as per the Census Reports is – Census 1981 18.04 Lakhs, 1991 21.10 Lakhs and 2001 22.49 lakhs of population.  This clearly indicates that gradual increase is found from one Census to Census.  The Male population in 1981 Census is 8.99 Lakhs, followed by 1991 10.55 Lakhs and 2001 11.20 Lakhs.  Whereas the Female Population is in 1981 Census reported as 9.05 Lakhs followed by 1991 Census 10.55 Lakhs and 2001 11.30 Lakhs.  From the above it can be concluded that the gradual increase in population in respect of Female category is higher than Male Population.

Further, out of the total population 22.49 Lakhs of this District as per report of Census 2001 that Scheduled Caste population is 2,38,023 (1058%).  Out of total population of Males 11.20 Lakhs, the SC Male population is 1,19,116 (10.63%), where out of 11.30 Lakh Population female the SC Female is 1,18,907 (10.52%).

Agriculture:

The major agriculture in this district is Rice, Groundnut, Mazie, Sugar Cane, Bazra, Koraa, Redgram etc.  Out of which, the major cultivation is preferred to Sugar Cane in view of the demand from Sugar Industries in this district.  Cultivating Mesta, Rice, Groundnut, Mazie are preferred by the Farmers. The Farmers are preferred least to cultivate Bazra, Korra, Redgram.

Land Assigned for Agriculture Purpose:

Out of Ac.3512.00 land, assigned to Scheduled Caste people Ac.745.00 (21.22%), Scheduled Tribe people Ac.1042.00 (29.67%), Backward Class People Ac.1586.00 (45.16%) and other community people Ac.139.00 cts. (3.95%).

District administration in a sense comprehends a wide spectrum of public administration in India.

District administration includes all the agencies of the government, the individual officials, functionaries and public servants.  It comprehends all institutions for the management of public affairs in the district, all the corporate bodies such as Panchayats of different kinds, Panchayats, Municipal councils of every kind.  Thus district administration provides the principal point of contact between the citizen and the process of government.  It is the cutting edge of tool of public administration and this is what constitutes its vital significance in the nation’s government.

Factors of Development:

Development is affected by a number of factors like natural resources, environment technology and economic growth, which are interactive and interdependent.  Environment, including natural resources like land, water, forest, fisheries, minerals and economy comprising among other things, production, consumption and distribution activities are interactive and are interdependent.  The report of the World Commission on Environment and Development (WCED), says our common future was the first major international initiative that enhanced the awareness of policy makers about the complexity of relationship between environmental problems, economic growth and needs of people, rich and poor.

After independence, India has adopted the strategy of planned development as the Constitution declared India a Democratic Socialist State having commitment to socio-economic justice through the democratic process and organized planning.  Planning is needed both at the individual, district, state and national levels.  Its need is bring realized both by socialist as well as capitalist countries.  In developing countries it is increasing being realized that without planning it is impossible to have economic development and solve nation’s economic problem on the one hand and to industrialize the country on the other.  Planning is needed for ending poverty and unemployment.  It is a rational process of human behavior.  Planning both at administrative, social and economic levels is increasingly occupying a important and significant place in our social, economic and political set-up.

The first Five-Year Plan of (1951-52 to 1955-56) had a twofold objective.  It attempted to correct the disequilibrium in the economy and ensure all round balanced development.  It further aimed to raise national income and achieve steady improvement in the living standards over a period of time.  The plan accorded highest priority to agriculture, including irrigation and power projects, transport and communication.

The Second Five-Year Plan of 1956-57 (1956-57 to 1960-61) aimed at the establishment of socialistic pattern of society in India.  It projected to achieve 25 percent increase in the national income by giving priority to rapid industrialization with particular emphasis on basic and heavy industries.  It broadened the horizon of employment opportunities to reduce inequalities in income and wealth and to achieve more even distribution of economic power.

The Third Five-Year Plan 1961-62 (1961-62 to 1965-66) aimed at securing marked advance towards self-sustaining growth and secure an increase in the national income over 5 per cent per annum, to increase it by about 30 percent.  It aimed to achieve the target by giving priority to self-sufficiency in food grains and increase in agricultural production to meet the requirement of industry and exports.  It also targeted to expand basic industries like steel, chemicals, fuel and power and to establish machine-building capacity for requirements of further industrialization.  It aimed to utilize fully the manpower resources of the country and ensure a substantial expansion in employment opportunities.  It further aimed to establish progressively greater equality of opportunities and bring about reduction in disparities of income and wealth and a more even distribution of economic power.

Mid 60’s was one of the critical periods in the history of Five-Year Plan in India.  Series of crisis left many economists to ponder over the effectiveness of planning in India.  The first among the series of crisis was the Indo-Pak war of 1965.  The was ravaged Indian economy needed some kind of a special effort by the economic planners in the country.  The first two decades of development planning in India saw the implementation of rural development programmes like community development projects National Extension Services, Land Reforms and Co-operative Farming.  Although it was initiated with much fund fare it did not benefit the targeted groups i.e., the rural community.  In 1968 the Planning Commission organized a number of studies on the problems of small farmers in different areas.  The small Farmer Development Agency Scheme (SFDA) 1971 was launched with a view to provide special preferential arrangements for the supply of inputs to the potentially viable small farmers.  During the Fourth Five-Year Plan along with the SFDA another agency called the Marginal Farmers and Agricultural Labourers Development Agency (MFAL) was introduced to help the sub-marginal and landless workers.  While SFDA covered the entire district, the MFAL was confined to blocks and tahasils.  The Fourth Five-Year Plan 1969 (1969-70 to 1973-74) aimed at raising the standard of living of the people through programmes which at the same time designed to promote equality and social justice.  The Plan laid particular emphasis on improving the conditions of the less privileged and weaker sections of the society especially through the provision of employment and education.  Efforts were also directed towards reduction of concentration and wider diffusion of wealth, income and economic power.

The twin objectives of the Fifth Five Year Plan 1974-79 (1974-75 to 1978-79) were the removal of poverty and the attainment of Self-reliance.  It envisaged 4.37 percent overall growth of gross domestic product, expansion of productive employment, a national programme of minimum needs, emphasis on agriculture, key and basic industries producing goods for mass consumption, extended programmes of social welfare and an equitable prices.

During the Fifth Five-Year Plan period, the 20-Point Programme was launched on 1st July, 1975 as precursor to ‘Garibi Hatao’ programme to alleviate the conditions of the poorer sections of the society.   A revised programme was annulled on 14th July, 1982, which has been under implementation from 1982-83 onwards.  The coverage of the progrmme has been broadened to include a number of major areas of social concern such as provision of safe drinking water, health facilities, family planning, expansion of education, equality for women, justice to scheduled castes and scheduled tribes.  It aimed to generate new opportunities for youth, housing for the under privileged sections, enhancement of agricultural production and productivity reduction in income inequalities, removal of social and economic disparities, raising quality of life and protection of environment.

The new 20-Point Programme of 1986 prepared under the guidance of Late Prime Minister Rajiv Gandhi in the light of experience gained in the implementation of the 20-point programme of 1975 and 1982.  In general it aimed at and improving the quality of life of the people.  It is not a declaration of intention but charter of emancipation for poor.

The Sixth Five-Year Plan of 1980-81 (1980-81 to 1984-85) has been formulated after taking into account the achievement and short comings of the past three decades of planning.  Janata Government had fixed its own targets but before the plan could be implemented the government went out of power and the Congress (I) government prepared its own plan.  The plan aimed at removal of poverty and to make the country self-reliant, though it was recognized that the task of this magnitude could not be accomplished in a short period of five years.  The main strategy was to strengthen the infrastructure for both agriculture and industry to create conditions for growth in investment, output and exports and provide through special programmes designed for the purpose.  The objective of the plan document is envisaged to create opportunities for employment, especially in the rural areas and unorganized sector and meet the minimum basic needs of the people.  Further, the document aimed at to achieve the objectives through the involvement of the people in formulating specific schemes of development at the local level.  It was further aimed to secure speedy and effective implementation and to attain a growth rate of 5% per annum and gross domestic product at 3.3% per annum.

The Seventh Five-Year Plan 1985-86 (1985-86 to 1989-90) came into operation on 1.3.1985 and covered plan period from 1985-89.  It main strategy is removal of poverty, providing social justice, economic expansion and technological development and bringing about a sharp reduction to the rate of population growth.  It laid stress on agriculture by introducing land reforms, irrigation, drainage and management of multiple cropping.  It also wanted to self-reliant industrial economy and has the fullest human resources development.  It wanted to put stress on anti-poverty programmes.  The main aim of the plan is to remove illiteracy, unemployment, and poverty and provide food, clothing and shelter, health, education and other basic amenities through Minimum Needs Programme.  According to some critics there was nothing new in the strategies and programmes however, a new hope seemed to have been created by the reconstitution of the Planning Commission and liberalization of imports in order to give a boost to development and hike the customs revenue.

That was far higher than the longer-term trend rate of 3.5 percent per annum and also higher than the average annual trend growth rate of 4.3 percent a year during the decade 1974-75 to 1984-85.

The development of agriculture should inevitably have to be given priority.  Problems of crop combination perspective, land and water management, productivity, agro-processing industries, backward areas development diversification of technology to modernize stagnant agriculture needed carefully formulated plans for solution of problems.  It was argued that the agricultural sector should receive preference over the industrial sector in view of the size, nature and demographic and other peculiarities of the country.  It was believed by many, if India aims to enter into 21st Century, it has to put emphasis on faster growth of industries.  It would help to achieve the projected target of providing increased employment.  A notable feature of the plan document was it tried to redefine the role of small industries.  It emphasized for setting up or agro-industrial development in rural areas.  Through this the document aimed to achieve the goal of self-reliance.

Human Development has been the ultimate goal.  The effort of the plan was directed towards achieving employment generation, population control, literacy, education, health, drinking water.  In addition provision for adequate food and basic infrastructure were the other priorities.  As a welcome step, the planning process in India seeks to make people’s initiative and participation a key element in the process of development.

Working of DRDA in Vizianagaram District:

District administration is defined as the management of public affairs within a territory marked off for the purpose. After Independence, the District Administration was made a partner in the development process in which the Collector emerged as the overall agent of the State Government occupying a cardinal position.  As the implementation of the development programmes, the task was onerous calling for missionary zeal, scientific foresight and all pervading spirit of selfless service.  With the introduction of Panchayati Raju, structure had emerged at the district level where the Collectors Association with the emergent system and the role assigned under it varied from State to State.  The role of Collector in development administration does not find a clear and precise definition.  Except in the fields of revenue, law and order and natural calamities, his role, as a coordinator seems to be nebulous.  In recent years though the Union and State Governments have launched several special projects, the Collectors face gnawing problem of inter-sector transfer of funds.

The execution of Five-Year Plans for rural development is ultimately the responsibility of the District Administration, where in the District Collector plays a key role.  Originally, he was in charge of collection of revenue, and then he was entrusted with administrative and some judicial responsibilities for maintaining law and order.  Now he is also responsible for the development work in his district.  There is no limit to what a District Magistrate can get close so it is felt that it is too much to load him with developmental work.  The task of implementing development programmes is very difficult and time consuming.  It required patience, tack, dedication and vision.  So, it requires a specialized cadre of men and women who should have dedicated their lives to developmental work.

To reduce the burden of Collector of supervising developmental work, the developmental functions of Collector were vested in the name of ‘Project Officer’ to lookafter ITDA Projects for implementation in Tribal Agency areas and in plains the responsibilities have to be given to the respective departments.  It was ultimately decided to set one single integrated organization.  The task of the organization was to oversee and effectively implement poverty alleviation programme.  Consequently District Rural Development Agency (DRDA) was set up in 1980, with Collector as the Chairperson.

While analyzing the function of DRDA it can be point out that the overall charge of the planning implementation, monitoring and evaluation of all anti-poverty programmes in the district can be divided into broad areas.  Firstly, to keep the district and Mandal agencies informed of the basic parameters and the requirements of the programmes and the task to be performed by all these agencies.  Secondly, to coordinate and oversee the surveys, preparation of prospective plans and annual plan of the blocks and finally prepare a district plan.  Thirdly to monitor and evaluate the programmes implementation by government and governmental agencies to ensure its effectiveness.  Fourthly to secure inter-sectoral and inter departmental co-ordination and co-operation.  Fifthly, to give publicity of the achievements made under the programs and disseminate knowledge and build up awareness about the programmes.  Sixthly to send periodical returns to the state government in the prescribed formats.  Coming to the functions of DRDA in Vizianagaram District it can be had the clear picture and to assess the analysis of the anti-poverty programmes of rural Development, which are implemented in this district.

BRGF (Grameena Rojgar Yojana):

The funds under this scheme in 2007-08 under 11th Plan period have been released under the approval by the High-Power Committee of BRGF Planning.  The aim of this scheme is to meant to eradicate the disparity regional developments and provide funds where there is deficiency to meet the executions for developmental activities.  In this scheme 50%, 30% and 20% grants have been allocated to Gram Panchayats, Mandal Prajaparishads and Zillah Praja Parishads and four Municipalities respectively.

Fashion Technology Project:

The Fashion Technology Project  under Swarna Jayanti Gram Swarajgar Yojana Scheme is started by the Government of India under the SGSY –II Scheme to enhance the additional income to the Self-employment Societies.  To meet the objective of this scheme has been estimated to a tune of Rs.1215.32 Lakhs.  Out of which an amount of Rs.218.02 Lakhs being the first phase and  the Government of India and Rs.72.67 as its share to bare the expenditure under this scheme.  The scheme will be continued for three years i.e., from October, 2006 to September, 2010.  Accordingly, for about 7000 Self-financed groups will be given training Embroidery, Garments Clothes preparation.  In the first phase an amount of Rs.86.00 Lakhs was spent for four months training to the Instructors in NIFT Institute i.e., 30 Women trained in advanced garment production, 40 Women trained in preparation of Surface Armamentation.  The District Rural Development Agency has procured the necessary machines and tools from East Godavary District with reasonable rates.  The DRDA make efforts through this scheme, 780 members after completion of their training have already been recruited in various Garment Industries and still 680 members are going to be completed within the next couple of months.  Further, DRDA has provided 300 Machines in TTDC and Mahilapranganam, 150 machines in Nellimarla, Garividi, Cheepurupalli and 100 Machines in S.Kota Mandals for the purpose of training the unemployed Women.  The DRDA make necessary arrangements to train the unemployed Women of 300 members in Bobbili Mahilapranganam, Dwakra Bazar, Vizianagaram in Surface Armamentation. (Source: DRDA, Vizianagaram District).

A.P.Housing Board Limited:

During 2007-2008 under the I.A.Y (Indira Avasa Yojana) Scheme is sanctioned for Rs.1080.75 Lakhs provided to 4,323 Schedule Caste and Scheduled Tribe community peoples have benefitted.  Accordingly, 4,174 dwelling houses have been constructed and completed and an amount of Rs.939.15 has been spent for this purpose in all 34 mandals in Vizianagaram District.

Prime Minister Gram Shadak Yojana Welfare Activities:

The objective of the scheme is to provide better transportation facilities connecting to National High Way Roads.  Accordingly priority was given for development of road facilities in all the rural areas.  The total road formation works were taken place 203.38 Kms. in this district and an amount of Rs.2867.04 Lakhs have been made being expenditure.

Integrated Waste Land Development Programme (IWDP):

The IWD Programme was introduced during 1999-2000 with an object to utilize the waste lands for cultivation purpose.  Under this scheme Rs.2670.00 Lakhs has been allocated from 1999 – 2000 to 2006 – 2007 so as to utilize the 48500 Hectares of land spread over all 34 Mandals in Vizianagaram.  Accordingly, an amount of Rs.1640.76 Lakhs (61.45%) was spent for the development of 31416 (64.77%) Hectares of waste land was taken for use of agriculture purpose.

Micro Irrigation Development Programmes:

As per the policy of A.P., State Government that Electrical Motors/Diesel Engines will be supplied to the farmers with 70% subsidy for the purpose of Drip Irrigation.  Accordingly, Rs.50,000/- to each farmer family is eligible to purchase the water machines.  Where, SC and ST community farmers may be allowed to pay 10% of the loan being their subscription and 20% per cent being margin money will be met by the respective SC/ST Corporation and the rest of money will be provided being loan to each farmer.  Accordingly, 1617 Farmer families are utilizing the above facility for the use of 3154 hectares of land in this district under Micro Irrigation Development programme.

Drinking Water Supply in Rural area under ARSWS Scheme:

According to DRDA statistical information that out of 2874 villages in  Vizianagaram district drinking water was provided to 1600 (55.67%) villages and the rest of 1274 (44.33%) villages are yet to be provided drinking water.

A.P. NEDCAP:

The objective of this scheme is to implement and development of Bio-gas Plants and their proper utilization so as to saving the Coal, Petroleum, wood and such other natural resources utilization particularly in rural areas and to protect the health of rural female.  This scheme is meant for low category farmers as well as Scheduled Caste and Scheduled Tribe farmers.  Out of the cost of a Bio-gas plant unit of Rs.9750/-, an amount of Rs.5500/- is given to each farmer being the subsidy and the rest of the amount has to be borne by the farmer being the loan subject to repay the same to the government in an easy instalment basis.  As per the NEDCAP, Vizianagaram 500 units have been provided and Rs.48.75 lakhs was accorded to that extent.  Out of which 27.50 lakhs was given being subsidy and Rs.21.25 lakhs being the share of the individual.

GRAM PANCHAYATS:

The basic assessment of a nation’s development is depending on Village in all aspects.  Keeping this into consideration, the grants have been released to the Gram Panchayats to meet the developmental activities in the respective villages in Vizianagaram District.  Out of the total grants of Rs.14.35 lakhs released by the Government of India, an amount of Rs.13.06 lakhs (91%) was spent.  Further, an amount of Rs.10.37 lakhs (79.4%) for Sanitation, Rs.2.67 (20.44%) for Drinking Water and Rs.0.02 Lakhs (0.153%) for other purpose was spent.

SARVA SIKSHA ABHIYAN (SSA):

Rajiv Vidya Mission (SSA) Scheme functioning in this district is to provide necessary facilities to the Schools in Rural and Urban localities so as to attain the national objective that to provide ‘education for all’ as the Constitution slogan  to provide education to all the children upto 14 years.  During Academic Year 2006 -2007, an amount of Rs.1249.99 Lakhs was provided for the construction of 540 additional classrooms.  Out of which 363 classrooms constructed and the expenditure to a tune of Rs.1140.92 lakhs was made and the additional amount of Rs.109.07 lakhs is still needed to meet the construction of remain 177 classrooms.

During the financial year 2007-2008, an amount of Rs.806.20 lakhs was estimated being the expenditure for the construction of 278 classrooms to provided to the needy schools in rural and urban localities.  Accordingly the Director of Rajiv Vidya Mission, Government of A.P., has accorded to start the execution.  However, 150 classroom constructions was executed with an amount of Rs.297.25 lakhs being grant released and Rs.508.95 lakhs is yet to be released to complete the remaining 128 classrooms construction in respective schools in this district.

The SSA has also accorded for Rs.7.20 lakhs for providing minimum facilities in urban areas i.e., providing drinking water, 18 constructions of Lavatories etc.  According to SSA 6 Lavotories have been constructed with provision of safety drinking water in 4 schools with a cost of Rs.11.50 lakhs and the rest of 12 lavatories construction is under progress.

The objective of SSA is to provide ‘Education for All’.  Accordingly to provided education 2617 children between 6 – 8 years age.  The SSA has also spent an amount of Rs.22,00,900/- during 2007-2008 being remuneration paid to the 183 Para Teachers paid at the rate of Rs.1500/- each per month.

The Home based Education Scheme is also introduced by SSA during 2007-2008 so as to provide education to 288 physically handicapped children at their residence and 20 mandal resource persons are engaged at an amount of Rs.5000/- p.m. being remuneration.

Similarly, the SSA, Vizianagaram has also provided Rs.44,44,502/- during 2006-2007 for 39 Bridge Courses to be provided to the Child Labour education so as to meet the constitutional objective.

CONCLUSIONS:

According to Subramanian, Narendra (2007) Populist political forces have played significant roles in Indian politics, and have varied in their vision of political community, in the social groups they targeted, in the policies they pursued, and in their impact on democracy. The Indian National Congress had populist aspects in the interwar period and then again under

August 29, 2010 Posted by | Fiscal Policy | Comments Off on Performance of DRDA Projectc in Vizianagaram, inrespect to the Public Policy and Populist Measures

Economic Stimulus Act Offers Big Benefits to Contractors

Although a great deal of media attention has been given to the 2008 Economic Stimulus Act and how it benefits individual taxpayers, less information has been shared about the tax incentives that this law delivers to businesses. For construction companies, there are some very useful provisions within the Act, primarily around depreciation deductions for new software and equipment purchases. But time is running out for you to take advantage of them: Purchases must be made by December 31, 2008 to qualify for the maximum depreciation allowances. To help you sort through the specifics of the Economic Stimulus Act, Construction Partner talked with Kevin Thurman, a CPA with ThomasYork, LLP, a California-based CPA firm that specializes in construction. According to Thurman, there are two parts to the Stimulus Act’s deprecation features. Part one involves revisions to Section 179, a longstanding tax law that allows businesses to deduct a specified amount of equipment purchases each year. Part two involves bonus depreciation on equipment purchases made in 2008. Section 179 Depreciation Under Section 179, businesses can expense up to $250K of new and used asset purchases made in 2008. (This is double the 2007 deduction of $125K.) Qualified purchases include equipment, machinery, furniture and even construction-specific software (as well as the hardware needed to run that software). However, Section 179 isn’t without limits. “One caveat of this tax benefit,” says Thurman, “is that you can’t buy more than $800K in qualifying purchases without losing some of the benefit.” Making multiple heavy equipment purchases, for example, would likely put a contractor above the $800K limit and they would forfeit that initial $250K deduction. On the other hand, contractors that buy $250K or less in qualifying purchases would get to deduct those purchases in full on their 2008 tax return. Bonus Depreciation The new bonus depreciation allowance is where the Stimulus Act gets interesting. “The bonus depreciation provides an additional 50 percent deduction on new purchases that can be taken in conjunction with Section 179,” explains Thurman. (The bonus depreciation is available even if purchases exceed the Section 179 $800K limit.) Here’s how the bonus depreciation works: Let’s say you make software and equipment purchases in 2008 totaling $750K. The first $250K of depreciation deduction comes right off the top, which leaves $500K remaining of your original purchases. You’re now allowed to deduct an additional 50 percent, which would give you another $250K in deductions. In addition, you’re also allowed to take your regular multi-year depreciation deductions if applicable. In this example, regular depreciation would apply to the final $250K. “The end result is an incredible tax deduction,” states Thurman. “If you’re considering purchases in excess of $800K, even though you won’t be able totake advantage of Section 179’s $250K deduction, you may want to go ahead with those purchases in 2008 because of the 50 percent bonus depreciation benefit you’ll get up front.” Software and Other Purchases Although software purchases are typically depreciated over three years, the 2008 tax provisions make this an especially good year to upgrade your construction accounting solution to a program such as Construction Partner, especially if you’ve been struggling with the lack of functionality in generic software like QuickBooks®. In most cases, you’ll get a 100% tax deduction in 2008 for your software purchase and hardware upgrades. Other business benefits of the Economic Stimulus Act involve vehicle purchases and leasehold improvements. The new tax laws provide some incentives around the purchase of “luxury” automobiles and “heavy” vehicles. (Sport utility vehicles are in a tax class by themselves.) In addition, if you lease your office space, you might be eligible for tax breaks if you make improvements to that space. Special Cautions for Contractors Before you run out and stimulate the economy with your new purchases, however, you need to consider what impact these purchases might have on your operations. Issues to consider include: Bonding: “A construction company is very dependent upon its ability to secure bonding,” explains Thurman. “One of the major things that a surety company will look at is your cash flow. You need to balance how much cash you spend or borrow to buy new equipment with what you leave in reserve. Depleting your cash on hand or having too many liabilities on your balance sheet can hurt your bonding capacity.” Fiscal Year: “Bonus depreciation applies to purchases made from January 1 through December 31,” cautions Thurman. “Even if your fiscal year is March to March, for instance, to get the maximum benefit you still need to make your purchases before December 31, 2008.” The best way to ensure that your business gets the most benefit from all of the provisions in the Economic Stimulus Act is to consult with a professional that specializes in construction accounting and taxation, like Thurman and the other CPAs at ThomasYork. “The bottom line,” states Thurman, “is that you shouldn’t make your final decision to purchase new equipment based solely on the tax break. If implementing new construction accounting software will give you greater control over costs and help your staff work more efficiently, then that purchase is absolutely a good business decision – no matter what the tax incentive may be.”

August 29, 2010 Posted by | Economic Stimulus | Comments Off on Economic Stimulus Act Offers Big Benefits to Contractors