UGC NET INDIAN ECONOMY MATERIAL
INDIAN ECONOMY: SALIENT FEATURES
1. Low per Capita Income: India’s per capita income is very less as compare to developed
countries. As per the estimates of the Central Statistics Office (CSO), the per capita net
national income of the country at current prices for the year 2015-16 is estimated to attain
the level of Rs. 93231/-.
2. Agriculture Based Economy: Agriculture and allied sectors provide around 14.2% of Indian
GDP while 53% of total Indian population is based on the agriculture sector.
3. Over population: in every decade Indian population get increased by about 20% . During the
2001-11 population increased by 17.6%. Currently India is adding the total population of
Australia every year. India is the possessor of around 17.5% population of the whole world.
4. Income Disparities: a report released by Credit Suisse revealed that the richest 1% Indians
owned 53% of the country’s wealth, while the share of the top 10% was 76.30%. To put it
differently, in a manner that conveys the political economy of this stunning statistic, 90% of
India owns less than a quarter of the country’s wealth.
5. Lack of Capital Formation: Rate of capital formation is low because of lower level of
income. Gross domestic capital formation was 23.3% in 1993-94 increased upto the level os
38.1% in 2007-08 but declined upto 34.8% in 2012-13.
6. Backwardness of Infrastructural Development: As per an recent study, 25% of Indian families
don’t have reach of electricity and 97 million peoples don’t have reach of safe drinking water and
840 million people in India don't have sanitation services. India needs 100 million dollar for
infrastructural development upto 2025.
7. Market Imperfections: Indian economy doesn’t have good mobility from one place to other
which hinders the optimum utilization of resources. These market imperfections create the
fluctuations in the price of commodities every year.
8. Economy is Trapped in the Vicious Circle of Poverty: Prof. Ragner Nurkes says that ‘a
country is poor because it is poor’. It means poor countries are trapped in the vicious circle of
poverty.
9. Use of Outdated Technology: It is very clear that Indian production technique is more labour
oriented in nature. So it increases the cost of production of the products made in these countries.
10. Traditional Set Up of Society: Indian societies are trapped in the menace like casteism,
communalist, male dominated society, superstitions, lack of entrepreneurship, and ‘chalta hai
attitude’ of the peoples. These all factors hindered the growth of the country as a whole.
History of Indian Economy
1) During British Rule (Before 1947):-
Agriculture:
Indian agriculture remained completely traditional and primitive during the British rule from
1757 to 1947. Farm technology followed during those days was simple and no transformation
was adopted into it. There was an increasing pressure on agricultural sector as there was a
decline of urban handicrafts in India.
Till the 19th century, there was a little change in the agricultural practices adopted in India.
Throughout the past centuries, Indian farmers were growing the same crops. Rice and Wheat
were the two principal crops in India followed by jawar and barley. Other crops, produced in
India from the very beginning, were consisting of pulses of different types, oil seeds, jute,
cotton, indigo and spices.
Commercialisation of Agriculture:
Towards the end of the 18th century, the East India Company realised the export potentialities
of some of the Indian agricultural commodities like indigo, jute, cotton and oilseeds. This was
mostly resulted from growing demand for agricultural raw materials like jute and raw cotton
arising out of Industrial revolution in England and imposition of restrictions on the export of
manufactured and finished goods from India.
Industry:
The process of industrialisation in India during British period must be traced back from 1750
onwards. India was quite well known for her industrial products. The industry which was very
much famous in India during those days was the urban handicraft industry. Again the most
important urban handicraft industry in India during those days was the textile industry.
The well known products produced by this textile industry include cotton textile. Dacca
muslin, dhotis and dopattas of Ahmedabad, Chintzes of Lucknow, sarees of Madurai etc.
These products were quite famous throughout the country and also outside the country.
Moreover, silk fabric produced in Bengal, Poona, Ahmedabad etc. was also quite famous.
Towards the end of the 18th century and thereafter, there was a rapid decline of most of the
aforesaid handicrafts industries. These was mostly resulted from increasing competition faced
by Indian handicrafts industries with the factory-made goods produced in England after the
Industrial Revolution started in England after 1750 and especially in the first half of 19th
century.
The policy followed by the British in respect of its industries and trade are also responsible for
the decline of Indian industries.
Transport and Communications:
Development of transport and communications has been considered quite significant from
strategic, administrative, economic, political, cultural and social point of view. During the
British period, the transport and communications system in India was totally backward.
Road communications in India were extremely underdeveloped in the early part of 19th
century. Whatever few trunk roads that were developed in the country by the Mughal
emperors, they started deteriorating due to lack of proper care and maintenance.
Although British constructed a few roads during the early part of their conquest of India, but
most of them were abandoned after their conquest of the country. Till 1936, the East India
Company did not pay any attention to the construction of roads for the development of
transportation and communication system and commerce.
It was only 1836, the East India Company took some initiative to introduce postal
communications and thereby taken up the construction of Calcutta-Delhi road at the
estimated cost of £1.5 million. Again in 1842 Calcutta and Bombay and also Bombay and Agra
were connected by roads.
It was only during the regime of Lord Dalhousie, the central public works department was
established in 1850 and real initiative was taken to construct roads in various parts of the
country. Lord Dalhousie abolished the Military Boards and set up Public Works Department in
the provinces of Bombay, Madras and Bengal in 1854-55.
As a part of development of Railway transportation, the Bombay-Thana railway route was
opened for traffic officially on 16th April, 1853,. Moreover, in subsequent years, the East India
Company entered into contracts with 12 more Railway companies for railway construction
during the period 1844-1860. As a result, some short routes like Howrah to Panduah (38
miles), Howrah to Raniganj (120 miles) coal field etc. were opened.
It was only during the regime of Lord Dalhousie, the present system of uniform postage
throughout the country and use of postage stamps (instead of cash) was developed in 1856.
It was again during Lord Dalhousie’s regime that the system of electric telegraph line was
installed between Calcutta and Agra in 1853, covering a distance of about 800 miles. By 1855,
nearly 4,000 miles of telegraph lines were installed. In 1950-51, there was only one post office
for every 10,000 population of the country and the condition of the postal services in rural
areas was deplorable.
Foreign Trade:
During the pre-British period, India was quite self-sufficient in foodstuffs and maintained a
favourable balance of trade. But the composition, volume and direction of foreign trade have
undergone a significant change during the British period. During the early part of British
period, India experienced a little change in the composition of its foreign trade.
At the beginning of 18th century, exports from India were mostly consisting of cotton and silk
manufactures, indigo, spices and sugar and its imports were consisting of gold and silver,
woollen goods and miscellaneous types of novelties.
After the Industrial Revolution in England since 1750, factory industries started to produce
various commodities on a large scale and thereby replaced the old small scale handicrafts.
Thereafter, England wanted to establish market for their manufactured goods in India and
also wanted that India should supply different types of raw materials to the newly developed
industries in England.
India started to import manufactured goods mostly from England. Among these
manufactured goods cotton piece goods from Lancashire constituted about half of the total
imports by the middle of 19th century. Import of other factory products with high quality at
cheaper price had also led to decay of Indian handicrafts and cottage industries.
2) From Independence to Reform period(1947-1991):-
Indian economic policy after independence was influenced by the colonial experience, which
was seen as exploitative by Indian leaders exposed to British social democracy and the
planned economy of the Soviet Union. Domestic policy tended towards protectionism, with a
strong emphasis on import substitution industrialisation, economic interventionism, a large
government-run public sector, business regulation, and central planning, while trade and
foreign investment policies were relatively liberal. Five year plans of India resembled central
planning in the Soviet Union. Steel, mining, machine tools, telecommunications, insurance,
and power plants, among other industries, were effectively nationalised in the mid-1950s.
Jawaharlal Nehru, the first prime minister of India, along with the statistician P C Mehalanobis,
formulated and oversaw economic policy during the initial years of the country's
independence. They expected favourable outcomes from their strategy, involving the rapid
development of heavy industry by both public and private sectors, and based on direct and
indirect state intervention, rather than the more extreme Soviet style central command
system.
The policy of concentrating simultaneously on capital- and technology-intensive heavy
industry and subsidising manual, low-skill cottage industries was criticised by
economist Milton Friedman, who thought it would waste capital and labour, and retard the
development of small manufacturers.
Since 1965, the use of high-yielding varieties of seeds, increased fertilisers and
improved irrigation facilities collectively contributed to the Green Revolution in India, which
improved the condition of agriculture by increasing crop productivity, improving crop
patterns and strengthening forward and backward linkages between agriculture and
industry. However, it has also been criticised as an unsustainable effort, resulting in the
growth of capitalistic farming, ignoring institutional reforms and widening income disparities.
In 1984, Rajiv Gandhi promised economic liberalization, he made V. P. Singh the finance
minister, who tried to reduce tax-evasion and tax-receipts rose due to this crackdown
although taxes were lowered. This process lost its momentum during later tenure of Mr.
Gandhi as his government was marred by scandals
3) Post-reform period (since 1991)
The collapse of the Soviet Union, which was India's major trading partner, and the Gulf War,
which caused a spike in oil prices, resulted in a major balance-of-payments crisis for India,
which found itself facing the prospect of defaulting on its loans. India asked for a $1.8 billion
bailout loan from the International Monetary Fund (IMF), which in return demanded de-
regulation.
In response, the Narasimha Rao government, including Finance Minister Manmohan Singh,
initiated economic reforms in 1991. The reforms did away with the Licence Raj, reduced tariffs
and interest rates and ended many public monopolies, allowing automatic approval of foreign
direct investment in many sectors. Since then, the overall thrust of liberalisation has remained
the same, although no government has tried to take on powerful lobbies such as trade unions
and farmers, on contentious issues such as reforming labour laws and reducing agricultural
subsidies
By the turn of the 21st century, India had progressed towards a free-market economy, with a
substantial reduction in state control of the economy and increased financial liberalisation.
India experienced high growth rates, averaging 9% from 2003 to 2007. Growth then
moderated in 2008 due to the global financial crisis.
Starting in 2012, India entered a period of reduced growth, which slowed to 5.6%. Other
economic problems also became apparent: a plunging Indian rupee, a persistent high current
account deficit and slow industrial growth.
India started recovery in 2013–14 when the GDP growth rate accelerated to 6.4% from the
previous year's 5.5%. The acceleration continued through 2014–15 and 2015–16 with growth
rates of 7.5% and 8.0% respectively. For the first time since 1990, India grew faster than China
which registered 6.9% growth in 2015. However the growth rate subsequently decelerated, to
7.1% and 6.6% in 2016–17 and 2017–18 respectively, partly because of the disruptive effects
of 2016 Indian banknote demonetisation and the Goods and Services Tax (India).
According to Economic Survey 2020 GDP growth seen at 6-6.5 per cent for 2020-21.
The International Monetary Fund (IMF) further slashed India’s growth estimate for FY21 to
1.9% from 5.8% estimated in January, 2020.
QUESTIONS FOR CLARIFICATIONS
1. In India, during the British rule, railways were developed for
A. Creating better infrastructure for the development of the Indian economy.
B. The export of raw materials from India to England for British industries.
C. Providing better transport facilities to Indians
D. Developing trade and commerce in India.
2. National income estimates in India is prepared by
A. Planning commission B. Finance Ministry
C.C.S.O D.RBI
3. In the context of Independent India’s economy, which one of the following was the earliest
event to take place
A. Nationalisation of state bank of India B. Introduction of first five year plan
C. Nationalisation of Insurance companies D. Enactment of banking Regulation Act
4. The`` Drain theory `` about poverty in India is associated with
A. M. Viswesaraiah B. V. K. R. V. Rao
C. Dadabhai Naoroji D. Subash Chandra Bose
5. The cultivation of crops which are consumed in the farmers household and do no enter Market
on a significant scale is called
A. Subsistence farming B. Intensive farming
C. Extensive farming D. Small farming
6. The high yielding variety seeds were developed by
A. Norman Borlaug B. Swaminathan
C. Sundaram D. Smith
7. Which of the following Agricultural holdings have largest percentage in India
A. Small holding B. Large holdings
C. Marginal holdings D. Medium holdings
8. The industry having the largest investment in Indian economy is
A. Tea B. Cement
C. Steel D. Jute
Answers:-
1) B 2) C 3) D 4) C 5) A 6) A 7) C 8) C
Growth of Indian Economy
The Indian economy was in distress at the brink of the country’s independence. Being a
colony, she was fulfilling the development needs not of herself, but of a foreign land. The
state, that should have been responsible for breakthroughs in agriculture and industry,
refused to play even a minor role in this regard.
On the other hand, during the half century before India’s independence, the world was seeing
accelerated development and expansion in agriculture and industry - on the behest of an
active role being played by the states.
British rulers never made any significant changes for the benefit of the social sector, and this
hampered the productive capacity of the economy. During independence, India’s literacy was
only 17 percent, with a life expectancy of 32.5 years.
Today India is ranked the fifth largest economy, and third largest in terms of Purchasing
Power Parity (PPP). The Indian economy’s GDP is pegged at $ 2.9 tn.
1. Agricultural Sector:
One of the most important sectors of the Indian economy remains Agriculture. Its share in the
GDP of the country has declined and is currently at 14%. However, more than 50% of the total
population of the country is still dependent on agriculture.
As a remedial measure to the worsening condition of India’s agriculture sector;
• Government subsidies to agriculture are at an all - time high.
• Introduction of cooperative farming like – e - choupal etc.
• Agricultural land is being brought under industrial and commercial use, thereby
straining the remaining agricultural land.
• Many export sectors have been opened for agricultural goods.
• Food processing is emerging as a ‘Sunrise Industry’
2. Industry Sector:
Another important part of the Indian economy is the Industry sector. Changes such as the end
of the ‘Permit Raj’ and opening up of the economy were welcomed in the country with great
enthusiasm and optimism. As a result of these changes, the industrial potential of the
economy has increased since 1991.
3. Services Sector:
The sector that benefited most from the New Economic Policy was the services sector.
Banking, Finance, Business Process Outsourcing - and most importantly Information
Technology services - have seen double - digit growth.
• Indian IT giants such as Infosys, WIPRO and TCS have made their mark on the global platform.
• 60 percent of the GDP contribution comes from the services sector.
• India, with its huge demographic dividend potential, has emerged as the IT hub of the world.
• New employment opportunities are being created in this sector.
Food Processing:
Food processing has emerged as a high - growth, high - profit sector and is one of the focus
sectors of the ‘Make in India’ initiative. The vast availability of raw materials, resources,
favourable policy measures and numerous incentives have led India to be considered as a key
attractive market for the sector. With a population of 1.3 bn and an average age of 29, as well
as a rapidly growing middle - class population that spends a high proportion of their
disposable income on food, India boasts of a large consumer base.
Manufacturing Sector:
The manufacturing sector is the second largest contributor to India’s GDP after the Services
sector. Various government initiatives like Make in India, MUDRA, Sagarmala, Startup India,
Freight Corridors, along with a whole - hearted contribution from states, will raise the share of
the manufacturing sector in the foreseeable future.
FOREIGN TRADE POLICY OF INDIA
The integration of the domestic economy through the twin channels of trade and capital
flows has accelerated in the past two decades which in turn led to the India’s GDP reaching Rs
190.10 trillion (US$ 2.72 trillion) in 2018-19*. Simultaneously, the per capita income also
nearly trebled during these years. India’s trade and external sector had a significant impact on
the GDP growth as well as expansion in per capita income. Provisional estimates of India’s
GDP during first half of 2019-20 stood at Rs 98.56 trillion (US$ 1.41 trillion).
Total exports from India (Merchandise and Services) registered a growth of 2.13 per cent
year-on-year during April 2019-February 2020 to US$ 491.64 billion, while total imports are
estimated at US$ 559.45 billion, according to data from the Ministry of Commerce & Industry.
The merchandise export stood at Rs 20,67,408.73 crore (US$ 292.91 billion) during April 2019-
February 2020 and imports reaching Rs 30,76,266.13 crore (US$ 436.03 billion) for the same
period.
The estimated value of services export for April 2019-February 2020 stood at US$ 198.73
billion and import is US$ 123.42 billion.
According to Mr. Piyush Goyal, Minister for Commerce and Industry, the Government of India
is keen to grow exports and provide more jobs for the young, talented, well-educated and
even semi-skilled and unskilled workforce of India.
Capital Inflows
India's foreign exchange reserves were Rs 33.98 lakh crore (US$ 476.09 billion) in the week up
to February 14, 2020, according to data from the RBI.
India's total foreign exchange (Forex) reserves stand at around US$485.313 billion on 8th May
2020, the highest ever, with foreign exchange assets (FCA) component at around US$447.548
billion, gold reserves at around US$32.291 billion, SDRs (Special Drawing Rights with the IMF)
of around US$1.423 billion and around US$4.051 billion reserve position, as per Reserve Bank
of India's (RBI) weekly statistical supplement published on 6 February 2020.
Foreign Trade Policy
In the Mid-Term Review of the Foreign Trade Policy (FTP) 2015-20 the Ministry of Commerce
and Industry has enhanced the scope of Merchandise Exports from India Scheme (MEIS) and
Service Exports from India Scheme (SEIS), increased MEIS incentive raised for ready-made
garments and made- ups by 2 per cent, raised SEIS incentive by 2 per cent and increased the
validity of Duty Credit Scrips from 18 months to 24 months.
In August 2019, Ministry of Commerce plans to introduce new foreign trade policy aimed at
providing incentives and guidelines for increasing export in next five financial years 2020-25.
Boosted by the forthcoming FTP, India's exports are expected reach US$ 330-340 billion by
2019-20 according to Federation of India Export Organisation (FIEO). Also, with the
Government of India striking important deals with the governments of Japan, Australia and
China, the external sector is increasing its contribution to the economic development of the
country and growth in the global markets.
Moreover, by implementing the FTP 2014-19, by 2020, India's share in world trade is expected
to double from the present level of three per cent.
Three Major Problems faced by Indian Economy are;
1) Poverty
2) Unemployment
3) Inequality
Poverty in India
According to World Bank, Poverty is pronounced deprivation in well-being, and comprises
many dimensions. It includes low incomes and the inability to acquire the basic goods and
services necessary for survival with dignity.
Poverty also encompasses low levels of health and education, poor access to clean water and
sanitation, inadequate physical security, lack of voice, and insufficient capacity and
opportunity to better one's life.
In India, 21.9% of the population lives below the national poverty line in 2011.
Poverty Estimation in India
Poverty estimation in India is carried out by NITI Aayog’s task force through the calculation of
poverty line based on the data captured by the National Sample Survey Office under the
Ministry of Statistics and Programme Implementation (MOSPI).
Poverty line estimation in India is based on the consumption expenditure and not on the
income levels. Poverty is measured based on consumer expenditure surveys of the National
Sample Survey Organisation.
The incidence of poverty is measured by the poverty ratio, which is the ratio of the number of
poor to the total population expressed as a percentage. It is also known as head-count ratio.
Alagh Committee (1979) determined a poverty line based on a minimum daily requirement
of 2400 and 2100 calories for an adult in Rural and Urban area respectively. Subsequently
different committees; Lakdawala Committee (1993), Tendulkar Committee (2009),
Rangarajan committee (2012) did the poverty estimation.
As per the Rangarajan committee report (2014), the poverty line is estimated as Monthly
Per Capita Expenditure of Rs. 1407 in urban areas and Rs. 972 in rural areas.
Causes of Poverty in India
1) Population Explosion: India’s population has steadily increased through the years.
2) Low Agricultural Productivity: A major reason for poverty is the low productivity in the
agriculture sector.
3) Inefficient Resource utilisation: There is underemployment and disguised unemployment in
the country, particularly in the farming sector.
4) Low Rate of Economic Development: Economic development has been low in India especially
in the first 40 years of independence before the LPG reforms in 1991.
5) Price Rise: Price rise has been steady in the country and this has added to the burden the poor
carry.
6) Unemployment: The ever-increasing population has led to a higher number of job-seekers.
However, there is not enough expansion in opportunities to match this demand for jobs.
7) Lack of Capital and Entrepreneurship: The shortage of capital and entrepreneurship results in
low level of investment and job creation in the economy.
8) Social Factors: Apart from economic factors, there are also social factors hindering the
eradication of poverty in India.
Poverty Alleviation Programmes in India
Integrated Rural Development Programme (IRDP): It was introduced in 1978-79 and
universalized from 2nd October, 1980, aimed at providing assistance to the rural poor in the form
of subsidy and bank credit for productive employment opportunities through successive plan
periods.
Jawahar Rozgar Yojana/Jawahar Gram Samridhi Yojana: The JRY was meant to generate
meaningful employment opportunities for the unemployed and underemployed in rural areas
through the creation of economic infrastructure and community and social assets.
Rural Housing – Indira Awaas Yojana: The Indira Awaas Yojana (LAY) programme aims at
providing free housing to Below Poverty Line (BPL) families in rural areas and main targets would
be the households of SC/STs.
Food for Work Programme: It aims at enhancing food security through wage employment. Food
grains are supplied to states free of cost, however, the supply of food grains from the Food
Corporation of India (FCI) godowns has been slow.
Sampoorna Gramin Rozgar Yojana (SGRY): The main objective of the scheme continues to be
the generation of wage employment, creation of durable economic infrastructure in rural areas
and provision of food and nutrition security for the poor.
National Old Age Pension Scheme (NOAPS): This pension is given by the central government.
The job of implementation of this scheme in states and union territories is given to panchayats
and municipalities. The states contribution may vary depending on the state.
Annapurna Scheme: This scheme was started by the government in 1999–2000 to provide food
to senior citizens who cannot take care of themselves and are not under the National Old Age
Pension Scheme (NOAPS), and who have no one to take care of them in their village.
Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) 2005: The Act
provides 100 days assured employment every year to every rural household. One-third of the
proposed jobs would be reserved for women. The central government will also establish National
Employment Guarantee Funds.
National Rural Livelihood Mission: Aajeevika (2011): It evolves out the need to diversify the
needs of the rural poor and provide them jobs with regular income on a monthly basis. Self Help
groups are formed at the village level to help the needy.
National Urban Livelihood Mission: The NULM focuses on organizing urban poor in Self Help
Groups, creating opportunities for skill development leading to market-based employment and
helping them to set up self-employment ventures by ensuring easy access to credit.
Pradhan Mantri Kaushal Vikas Yojana: It will focus on fresh entrant to the labour market,
especially labour market and class X and XII dropouts.
Pradhan Mantri Jan Dhan Yojana: It aimed at direct benefit transfer of subsidy, pension,
insurance etc. and attained the target of opening 1.5 crore bank accounts. The scheme particularly
targets the unbanked poor.
QUESTIONS FOR CLARIFICATION
1. ‘Black Revolution’ for making the country self dependent in
A. Edible oil B. Petroleum
C. Ethanol D. Biodiesel
2. The major function of NABARD is to
A. Give loans to the public
B. Accept deposits from the public
C. Give loans to commercial banks and regional rural banks for the development of the rural
sector
D. Deal in government securities
3. Which of the following is a domestic support creating trade distortion effect in agricultural
commodities are included in
A. Green box B. Amber box
C. Blue box D. None of the above
4. Demographic divide refers to a rise in population
A. Between the age group of 65 to 74 years B. Above 74 years
C. Between the age group of 1 and 14 years D. Between the age group of 15 to 64 years
5. Food for work programme was renamed as
A.IRDP B.MNP
C.NREGA D.RLEGP
Answers:-
1) B 2) C 3) B 4) D 5) C
Unemployment in India
Unemployment occurs when a person who is actively searching for employment is unable to
find work. Unemployment is often used as a measure of the health of the economy. The most
frequent measure of unemployment is the unemployment rate, which is the number of
unemployed people divided by the number of people in the labor force.
Types of Unemployment in India
Disguised Unemployment:
It is a phenomenon wherein more people are employed than actually needed. It is primarily
traced in the agricultural and the unorganised sectors of India.
Seasonal Unemployment:
It is an unemployment that occurs during certain seasons of the year. Agricultural labourers in
India rarely have work throughout the year.
Structural Unemployment:
Many people in India do not get job due to lack of requisite skills and due to poor education
level, it becomes difficult to train them.
Cyclical Unemployment:
It is result of the business cycle, where unemployment rises during recessions and declines
with economic growth.
Technological Unemployment:
In 2016, World Bank data predicted that the proportion of jobs threatened by automation in India
is 69% year-on-year.
Frictional Unemployment:
The Frictional Unemployment also called as Search Unemployment, refers to the time lag
between the jobs when an individual is searching for a new job or is switching between the
jobs.
Measurement of Unemployment in India
National Sample Survey Office (NSSO), an organization under Ministry of Statistics and
Programme Implementation (MoSPI) measures unemployment in India on following approaches:
1) Usual Status Approach: This approach estimates only those persons as unemployed who
had no gainful work for a major time during the 365 days preceding the date of survey.
2) Weekly Status Approach: This approach records only those persons as unemployed who did
not have gainful work even for an hour on any day of the week preceding the date of survey.
3) Daily Status Approach: Under this approach, unemployment status of a person is measured
for each day in a reference week. A person having no gainful work even for 1 hour in a day is
described as unemployed for that day.
Causes of Unemployment
1) Large population.
2) Low or no educational levels and vocational skills of working population.
3) Inadequate state support, legal complexities and low infrastructural, financial and market
linkages to small/ cottage industries or small businesses
4) Huge workforce associated with informal sector due to lack of required education/ skills
5) The syllabus taught in schools and colleges, being not as per the current requirements of the
industries.
The unemployment rate in India rose to 7.2 percent in February 2019, the highest since
September 2016, and up from 5.9 percent in February 2018.
The total number of employed persons in February 2019 is estimated at 400 million against
406 million in the year-ago period and 407.5 million employed in February 2017.
Inequality in India
The United Nations describes inequality as “the state of not being equal, especially in status,
rights and opportunities”.
Inequality can be broadly classified in to:
Economic inequality: Economic inequality is the unequal distribution of income and opportunity
between individuals or different groups in society.
Social inequality: It occurs when resources in a given society are distributed unevenly based on
norms of a society that creates specific patterns along lines of socially defined categories e.g.
religion, kinship, prestige, race, caste, ethnicity, gender etc.
Economic Inequality
The 2019 report by Oxfam, titled "Public good or Private Wealth?" showed that India’s top
10% holds 77.4% of the total national wealth, while the top 1% holds 51.53% of the wealth.
The bottom 60% population holds only 4.8% of the national wealth.
13.6 crore Indians, who make up the poorest 10% of the country, have continued to remain in
debt for the past 15 years.
The Gini coefficient of wealth in India in 2017 is at 0.83, which puts India among the countries
with highest inequality countries.
According to Oxfam, if India stops inequality from rising further, it could end extreme poverty
for 90 million people by 2019. If it goes further and reduces inequality by 36%, it could
virtually eliminate extreme poverty.
Land Reforms in India
1. Abolition of Intermediaries: Intermediaries like Zamindars, Talukdars, Jagirsand Inamshad
dominated the agricultural sector in India by the time the country
attained independence.
2. Tenancy Reforms: Tenancy reforms aim to regulation of rent, provide security of tenure
and conferring ownership to tenants. The tenancy reforms laws provide
the provisions for registration of tenants, or giving ownership rights to
the former tenants to bring them directly under the state
3. Ceiling on land holdings: Ceiling on land holdings implies the fixing of the maximum
amount of land that an individual or family can possess.
For example, in Andhra Pradesh, the limit of ceiling varied from 27 to 216 acres. In Rajasthan
it varied from 22 to 366 acres.
4. Consolidation of Holdings: Consolidation of Holdings means bringing together the various
small plots of land of a farmer scattered all over the village as
one compact block, either through purchase or exchange of land
with others.
5. Co-operative farming: It has been advocated to solve the problems of sub-division and
fragmentation of holdings.
In this system, farmers pool their small holdings for the purpose of cultivation and reap
benefits of large scale farming.
6. BhoodanMovement: The Bhoodan Movement was spearheaded by Acharya Vinoba
Bhave. He collected land from the rich landlords and distributed
that to the landless.
About 4.2 million acres of land were received under Bhoodan, but so far only about 1.3
million acres have been distributed.
7. Compilation and updating of land records: In recent years the states have been urged to
take all measures for updating land records with the
utmost urgency by adopting a time-bound programme.
Efforts are also being made to maintain the land records
through computerization
AGRICULTURE PRICE POLICY IN INDIA
In India, the price policy was first introduced in 1947 with the formation of Food grains Policy
Committee. The foodgrains Price Committee was appointed in 1964.
In 1965, the Food Corporation of India (FCI) was set up for making necessary procurement,
storage and distribution of foodgrains.
The policy of minimum support prices was accepted by the Fourth Plan but its effectiveness
depends on the efficiency of the purchasing machinery like FCI and State Trading Corporation
(STC).
NAFED is also an important agency which appoints state agencies for undertaking Price
Support Scheme (PSS) operations.
In 1965, the Agricultural Price Commission was set up which announced the minimum
support prices and procurement prices
Objectives of Agriculture Price Policy in India are:
1.Providing incentives for increasing production or marketable surplus or bringing about the
change in agriculture output mix.
2. Stability of prices of agriculture goods.
3. Determine the minimum price of a crop for farmers in case of a glut or to fix a maximum price
for consumers in case of scarcity or shortages.
4. Provision of food grains at prices below the market prices to the weaker sections of the society.
5. Maintaining the stability of income of farming sector.
6. Increase earnings of foreign exchange.
7. It would encourage investments in agriculture to help increase production of agriculture sector.
8. Ensure regular flow of raw material.
Institutions established under Agriculture Price Policy:
1. Agriculture Price Commission (1965), renamed as Commission for Agricultural Cost and
Prices in 1985.
2. Food Corporation of India (FCI) established in 1965.
The Agricultural Price Commission
This was set up in 1965 which announced the minimum support prices and procurement
prices for the agricultural products. Moreover, the foodgrains Policy Committee was
appointed by the Government in 1966 which also recommended various measures of price
support.
The Food Corporation of India FCI:
The Food Corporation of India was set up in 1965 for making necessary procurement, storage
and distribution of food grains.
The government fixes the minimum support prices of agricultural products like wheat, rice,
maize, cotton, sugarcane, pulses etc., regularly for safeguarding the interest of farmers.
Minimum Support Price:
MSP cover 25 agricultural product.
I. 14 cropsof the kharifseason viz. paddy, jowar, bajra, maize, ragi, arhar, moong, urad,
groundnut-in-shell, soyabean, sunflower, sesamum, nigerseedand cotton;
II. 6 rabicrops viz. wheat, barley, gram, masur
III. 3 other commercial crops.
PUBLIC DISTRIBUTION SYSTEM (PDS)
PDS system was introduced keeping one basic objective in mind and that is ensuring food
security to the people of our country. It was officially introduced in 1966.
Objectives of PDS:
1.Food security
2. Provide essential consumer goods at cheap and subsidised prices
3. To prevent price rise
4. Maintaining the minimum nutritional standards for the population.
5. Remunerative prices for the farmers
Commodities covered under PDS
1.Wheat 2. Rice 3. Sugar
4. Kerosene – subsidised kerosene only to un-electrified households.
5. Soft Coke 6. Imported edible oil
Revamped PDS 1992-It was especially designed for the population living in the difficult areas of
the country.
Targeted PDS 1997-The main objective was to identify the poor for the delivery of food grains
and the distribution in a transparent manner.
Economic planning
Economic planning is mentioned in concurrent list of 7th schedule. Joseph Stalin implemented
the first Five Year Plan in the Soviet Union in 1928.
China and India both continue to use FYPs, although China renamed its Eleventh FYP, from
2006 to 2010, a guideline rather than a plan
India launched its First FYP in 1951, immediately after independence under socialist influence
of first Prime Minister Jawaharlal Nehru.
Planning commission
Planning commission was established in 15 March 1950. J. L. Nehru was the head of national
planning committee. Planning commission was dissolve in 17 aug2014. Planning commission
has been replaced with NITI ayog. NITI ayog is policy making and think tank of govt.
QUESTIONS FOR CLARIFICATION
1.Choose the correct statements
1.Multi cropping is desirable for optimal utilization of a resources, supply of which is
already falling of its demand
2.Increased demand for pasture land should be met from the present uncultivated land
Codes:
A. 1 only B. 2 only
C. Both 1 and 2 D. Neither 1 nor 2
2. Consider the following statements
1.Annual survey of Industries extends to the entire country
2.ASI covers all factories registered under sections 2m(I) and 2m(ii) of the factories act of
1948
Codes
A. 1 only B. 2 only
C. Both 1 and 2 D. Neither 1 nor 2
3. Consider the following statements about National Agricultural Insurance scheme
1.The scheme has been implemented from Rabi 1999-2000 season
2.The scheme is available a non –loaned farmers only
Codes
A. 1 only B. 2 only
C. Both 1 and 2 D. Neither 1 nor 2
4. Which of the following components forms part of the new agricultural strategy in India.
1.Package of inputs
2.Greater cropping intensity
3.Emphasis on land reforms
Codes
A.1 only B.1 and 2
C.2 and 3 D.1 and 3
5.The sum of which of the following constitutes Broad Money in India
1.Currency with the public
2.Demand deposits with banks
3.Time deposits with banks
4.Other deposits with RBI
Codes
A.1,2,3,4 B.1,2,4
C.1,2 D.1,2,3
Answers:-
1) C 2) B 3) A 4) B 5) D
National Income Estimates in India
There was no systematic effort made to calculate national income of India before
independence. The first attempt to calculate national income of India was made by Dadabhai
Naoroji in 1867-68, who estimated per-capita income to be Rs. 20.
The first scientific method was adopted by professor VKRV Rao in 1931-32, but was not very
satisfactory. The first official attempt was made by national income committee headed by
professor PC Mahalanobis in 1949.
According to National Income Committee Report (1954) national income of India was Rs.
8710 crore and per-capita income was Rs. 225 in 1948-49.
For further estimation of national income, the Government of India established Central
Statistical Organisation (CSO). CSO has been making estimates till now.
Presently, the base year from which India's GDP is measured is 2004-05. The central statistical
organisation is in the process of revising the base year to 2011-12. This revision will try to
incorporate more of the unorganised sector and value addition in services, which has been
neglected till now.
Calculating National Income
1) Product Method
In this method, net value of final goods and services produced in a country during a year is
obtained, which is called as gross value added at market price equivalent of GDPMP.
Value Added = Sales – Intermediate Cost + Change in Stock
Change in Stock = Closing Stock – Opening Stock
Once we get GDP or GVA then we add net factor income from abroad.
Income Method
In this method a total of net income earned by working people in different sectors and
commercial enterprises is obtained. Income of both categories of people paying taxes and not
paying taxes are added to obtain national income. By income method, national income is
obtained by adding receipts as total rent, total wages, total interest and total profit.
Expenditure Method
Expenditure method calculates national income of the country by adding consumption
expenditure of different sectors of an economy. National income through expenditure
method is addition of consumption expenditure and saving of all the people.
National income = C + I + G + (X – M)
C = Consumption expenditure by private home holds
I = Investment expenditure
G = Government final consumption expenditure
(X – M) = Net exports
The Financial System of India
The financial system of India can be broadly classified into the organised and unorganised
financial system. The organised financial system comes under the purview of the Ministry of
Finance, the Reserve Bank of India, the Securities and Exchange Board of India, Insurance
Regulatory and Development Authority and other regulatory bodies.
The unorganised financial system consist of group of persons operating as funds or
associations. These groups function under a system of their own rules. Most of the financial
institutions now resort to financial markets for raising funds.
Financial securities are financial instruments that are negotiable and tradable. Financial
securities may be primary or secondary securities. Primary securities are equity share
debentures etc and secondary securities are bank deposits, insurance policies etc.
The RBI regulates the money market and the SEBI regulates the capital markets. The RBI acts
as a clearing house for all member banks and avoids unnecessary transfer of funds between
the various banks.
The Indian Currency System
The present monetary system of India is based on inconvertible paper currency and is
managed by the Reserve Bank of India. The present currency system is based on minimum
reserve system, of note issue.
It was adopted in 1957 under the minimum reserve system, minimum of gold and foreign
securities to the extent of Rs. 200 crore (of which gold should be of value Rs. 115 crore) and
the balance in rupee (Rs.) securities maintained.
FIVE YEAR PLANS IN INDIA
1
st five year plan (1951-56)
1
st 5YP was based on Harrod-Domar Strategy. Planning commission was established in 15
March 1950.
Main focus on agriculture. K. N. Raj was the architect on this plan.
Target growth 2.1% and achieved 3.6%.
Many irrigation projects were initiated during this period, including the Bhakra, Hirakud,
Mettur Dam and Damodar Valley dams
2
nd five year plan(1956-61)
2
nd 5YP was based on Mahalanobis plan. Main focus on development of basic and heavy
industries.
The Second Plan was particularly in the development of the public sector and "rapid
Industrialisation".
"The target growth rate was 4.5% and the actual growth rate was 4.27%
3
rd fiveyear plan(1961-66)
Self –reliant and self-generating economy was main goal. In this plan Indian economy entered
in to take off stage of W.W. Rostow. First time extensive input-output method used in this
plan.
The target growth rate was 5.6%, but the actual growth rate was 2.4%
4
th five year plan 1969-74.
This plan emphasized on improving the condition of weaker section. This plan failed due to
oil crisis and indo-pakwar 1972.
The IndiraGandhi government nationalised 14 major Indian banks and the Green Revolution
in India advanced agriculture.
The target growth rate was 5.6%, but the actual growth rate was 3.3%
5
th five year plan (1974-78)
Final draft of this plan was prepared by D.P.Dhar. The Fifth Five-Year Plan laid stress on
employment, poverty alleviation (Garibi Hatao), and justice. The plan also focused onself-
reliancein agricultural production and defence.
The twenty-point programme was launched in 1975
Annual plan(rolling plan) 1978-80
The concept of Rolling plan is related with Gunnar Myrdal. The sixth five year was stated in
1978 by Janta govt under headed by Morarji Desai. This plan was rejected by the Indian
national congress in 1980..
6
th five year plan(1980-85)
Main focus on removal of poverty through strengthening of infrastructure for both agriculture
and industry. The Sixth Five-Year Plan marked the beginning of economic liberalisation.
This was the end of Nehruvian socialism. The Sixth Five-Year Plan was a great success to the
Indian economy.
The target growth rate was 5.2% and the actual growth rate was 5.4%.The only Five-Year Plan
which was done twice
7thfive year plan(1985-90)
Goal of this plan-food , work, and productivity. In this plan the Indian economy crossed the
barriers of the Hindu rate of growth(Raj krishna)
The main objectives of the Seventh Five-Year Plan were to establish growth in areas of
increasing economic productivity, production of food grains, and generating employment
through "Social Justice".
Annual plan (1990-92)
Eighth plan could not take off due to fast changing political situations at the centre.
8
th five year plan (1992-97)
In this plan, fiscal reforms and economic reforms initiated by Narsimha Rao Govt. At that time
Dr. Manmohan Singh launched India's free market reforms that brought the nearly bankrupt
nation back from the edge
It was the beginning of liberalization, privatisation and globalization (LPG) in India.
Modernization of industries was a major highlight of the Eighth Plan.
The major objectives included, controlling population growth, poverty reduction, employment
generation, strengthening the infrastructure, institutional building, tourism management,
involvement of Panchayatiraj, Nagar Palikas, NGOs, decentralisation and people's
participation.
9th five year plan(1997-2002)
Goal-growth with social justice and equality. New implementation measures in the form of
Special Action Plans (SAPs) were evolved during the Ninth Five-Year Plan to fulfil targets
within the stipulated time with adequate resources. The SAPs covered the areas of social
infrastructure, agriculture, information technology and Water policy.
10thfive year plan(2002-2007)
In this plan there was no any target for agriculture. Reduction in ICOR (Incrimental capital
output ratio) to 4.25 which was higher than target.
Reduction of poverty rate by 5% by 2007. Target growth: 8.1% –growth achieved: 7.7%.
Reduction in gender gaps in literacy and wage rates by at least 50% by 2007.
11thfive year plan (2007-2012)
It focus on distant education, and IT education institutions. Slogan of this plan was-inclusive
growth.
Aimed at reduction in gender inequality. This plan also aimed at increasing the agriculture
growth rate by 4%. Reduction in TFR is targetted by 2.1%
12thfive year plan(2012-17)
div style="font-weight: bold;">Slogan-faster sustainable and more inclusive growth. To reduce malnutrition among children aged 0-3 years. The objectives of the Twelfth Five-Year Plan were: 1) To create 50 million new
work opportunities in the non farm sector. 2) To provide electricity to all villages. To provide
access to banking services to 90% of households.
Target- IMR-25 Child sex ratio-950 TFR-2.1
QUESTIONS FOR CLARIFICATION
1. India’s first port-based special Economic Zone named Inter national Container trans shipment
Terminal is being set-up at
A. Tuticorin B. Goa
C. Kochi D. Kandla
2. The first Industrial policy Resolution was presented in the year
A.1947 B.1948 C.1949 D.1950
3. The New Exploration License policy of the Government of India is related with
A. Diamond and precious stones B. Oil and Gas
C. Coal and Lignite D. Uranium and Thorium
4. Restrictive trade practices are covered under
A. FEMA B. FERA
C. MRTP D. Consumer protection Act
5. One of the problems in calculating the national income in India correctly is
A. Non –monetised consumption B. Low saving
C. Under-employment D. Inflation
6. The rate of growth of Indian economy during last three years chas been 8 percent . At this rate
the G.N.P will be double in
A. 10 years B. 15 years.
C. 12 years D. 9 years
Answers:-
1) C 2) B 3) B 4) C 5) A 6) D
Industrial Policy Resolution of 1948:
First Industrial Policy –1948 Given by Mr. Shyama Prasad Mukherjee.
Basic aim was to develop a strong industrial base. The resolution visualised a mixed economy.
Items under Central Government control: Arms, Energy, Railway. Items under State
Government Control: Coal, Iron, Steel, etc.
Industrial Policy Resolution of 1956:
The reasons for the revision were:
(i)introduction of the Constitution of India,
(ii) adoption of a planned economy, and
(iii) declaration by the Parliament that India was going to have a socialist
pattern of society.
‚The IPR 1956 has been known as the Economic Constitution of India‛ or ‚The Bible of State
Capitalism‛.
The Resolution classified industries into three categories
1. Schedule A consisting of 17 industries would be the exclusive responsibility of
the State.
2. Schedule B, consisting of 12 industries, would be open to both the private and
public sectors; however, such industries would be progressively State-owned.
3. Schedule C-All the other industries not included in these two Schedules
constituted the third category which was left open to the private sector.
Industrial Policy Statement –1977
Industrial Policy Statement –1977 Given by Janta Government .
Maximise production of consumer goods. The policy made industry responsible to social
needs. Generation of rural employment opportunities.
It aimed to prevent monopoly and concentration of economic power.
Industrial Policy Statement –1980
It was a growth oriented industrial policy.
Factors focussed on were:
1. Labour relations, 2. Pollution control,
3. Ecological balance, 4. Mergers & Amalgamations,
5. Correcting industrial sickness, 6. Foreign collaborations,
7. Taking over sick industrial units.
Industrial Policy of 1991:
It was a growth oriented industrial policy. The long-awaited liberalisedindustrial policy was
announced by the Government of India on 24 July 1991.
Objectives: 1. Maintain a sustained growth in productivity.
2. Enhance gainful employment
3. Achieve optimum utilization of human resources.
4. Attain international competitiveness
5. Transform India into a major partner and players in the global arena.
Features of new industrial policy-1991
1) De-reservation of public sector:-
Number of public sector industries was reduced to 8.
At present, its reduced to 3 industries: 1. Defence, 2. Railways, 3. Atomic energy.
2) Delicensing:-
Abolished industrial licensing except for five industries related to security and environment:
1.Hazardous chemicals 2. alcoholic drinks
3. Cigarettes and Cigars 4. defence equipment
5. Industrial explosives including match boxes
3) Disinvestment from public sector
4) Liberalisation of foreign investment
National Manufacturing Policy-2011
Manufacturing’s share in India’s GDP has been stuck at 16% since the 1980s. The policy aims
to increase the share of manufacturing in the country’s GDP.
The National Manufacturing Policy aims to create 100 million additional jobs in the next
decade. Both state and central Government would fund trunk infrastructure.
According to The national manufacturing policy (NMP), manufacturing should contribute 25
percent in India’s GDP by 2022. Currently, the sector contributes about 16-17percent in India’s
economic growth.
It has the following objective:
The share of manufacturing in GDP to rise by 25% in 2022.
Increase in growth of manufacturing sector to 12 to 14 percent across the medium term-
Increase in rate of employment creation in manufacturing for creation of 100 million
additional jobs by 2022
Central government will create the enabling policy framework providing incentives for
infrastructure development on PPP basis through effective financing
Policy also aims at improving access to finance for SMEs in manufacturing sectorDelhi
Mumbai Industrial Corridor/DMIC
Index of Industrial Production (IIP)
Index of Industrial Production (IIP) Became operative since June 10, 2011.
The Central Statistics Office (CSO) revised the base year of the all-India Index of Industrial
Production (IIP) from 2004-05 to 2011-12 on12 May 2017.
IIP in the revised series will continue to represent the Mining, Manufacturing and Electricity
sectors.
Sector Weightage:-
Manufacturing 77%
Mining 14%
Electricity 8%
Public sector undertakings in India
As on 13 September 2017 there are 8 Maharatnas, 16 Navratnas and 74 Miniratnas. There are
nearly 300 CPSEs(central public sector enterprises) in total
Maharatna
In 2010, the government established the higher Maharatna category, which raises a
company's investment ceiling from Rs. 1,000 crore to Rs. 5,000 crore
Maharatna Companies
1) National Thermal Power Corporation(NTPC)
2) Oil and Natural Gas Corporation(ONGC)
3) Steel Authority of India Limited(SAIL)
4) Bharat Heavy Electricals Limited(BHEL)
5) Indian Oil Corporation Limited(IOCL)
6) Coal India Limited(CIL)
7) Gas Authority of India Limited(GAIL)
8) Bharat Petroleum Corporation Limited(BPCL)
POLICIES IN INDUSTRIAL SECTOR
Credit Guarantee Fund Scheme for Small Industries
Established in August, 2000.
Objective: Making available credit to Small Scale Industrial units, particularly tiny units,
Renamed as: Credit Guarantee Fund Scheme for Micro and Small Enterprises for loans up to
Rupees 100 lakhs without collateral.
National Textile Policy announced in 2000.
2.National Textile Policy
Objective: Take care of the challenges and opportunities presented by the changing global
environment.
Competition Commission of India
Established in 2003,May20, 2009 became operational
Objective:
1. Prohibition of anti-competitive agreement 2. Prohibition of abuse of dominance,
3. Competition Act 2002 Replaced MRTP Act
MRTP Act 1969
On the basis of recommendation of Dutt Committee, MRTP Act was enacted in 1969 to
ensure that concentration of economic power in hands of few rich.
FERA 1973
FERA Came into force in 1974
Objective: Regulating the foreign exchange markets.
Focussed on areas dealing with foreign exchange market, import and export of currency.
FEMA 1999
FEMA Came into force in 2000 Replaced FERA.
Objective: Emphasis on exchange management and facilitates external trade and payments.
The Industrial Development Bank of India (IDBI):
IDBI was established in July 1964. The IDBI was set up formally to provide term finance to
industries.
Till 1976 this bank was a wholly owned subsidiary of the Reserve Bank of India. But till 1976
the IDBI was delinked from the RBI and was taken over by the Government of India. Since
then IDBI became an autonomous, corporation.
Industrial Credit and Investment Corporation of India (ICICI):
In January 1955, the Industrial Credit and Investment Corporation of India was set up with the
sponsorship of the World Bank for the development of small and medium industries in the
private sector.
State Financial Corporations (SFCs)
The Government of India also passed the State Financial Corporation Act in 1951 and made it
applicable to all states of India. The authorized capital of such corporation can vary within the
maximum and minimum limit of Rs. 50 lakh and Rs. 5 crore.
5.Industrial Finance Corporation of India (IFCI):
IFCI was developed in July 1, 1948 by the Government under a special Act.
The prime object of IFCI is to provide medium term and long-term finance to public limited
companies and co-operative organisations.
Micro Units Development and Refinance Agency (MUDRA)Bank
'Micro Units Development and Refinance Agency Bank(or 'MUDRA Bank) is a public sector
financial institution in India.
It provides loans at low rates to micro-finance institutions and non-banking financial
institutions which then provide credit to MSMEs It was launched by Prime Minister Narendra
Modi on 8 April 2015.
The bank will classify its clients into three categories
1) Shishu: Allowed loans up to50,000
2) Kishore: Allowed loans up to5 lakh
3) Tarun: Allowed loans up to10 lakh
Those eligible to borrow from MUDRA bank are
1) Small manufacturing unit 2) Shopkeepers
3) Fruit and vegetable vendors 4) Artisans
Small Industries Development Bank of India(SIDBI)
Formed on 2nd April 1990
Its purpose is to provide refinance facilities and short term lending to industries, and serves as
the principal financial institution in the Micro, Small and Medium Enterprises (MSME) sector.
SIDBI also coordinates the functions of institutions engaged in similar activities
SIDBI is one of the four All India Financial Institutions regulated and supervised by the
Reserve Bank; other three are EXIM Bank, NABARD and NHB.
NEW ECONOMIC POLICY
This constitute 3 major policies; 1) Liberalization
2) Privatization
3) Globalization
1.Liberalisation:-
Liberalisation refers to end of licenses, quota and many more restrictions and controls which
were put on industries before 1991.
Indian companies got liberalisation in the following way:
(1)Abolition of licence except in few.
(2) No restriction on expansion or contraction of business activities.
(3) Freedom in fixing prices.
(4) Liberalisation in import and export.
(5) Easy and simplifying the procedure to attract foreign capital in India.
(6) Freedom in movement of goods and services
2.Privatisation:
Privatisation refers to giving greater role to private sector and reducing the role of public
sector.
To execute policy of privatisation government took the following steps:
(1) Disinvestment of public sector, i.e., transfer of public sector enterprise to
private sector
(2) Setting up of Board of Industrial and Financial Reconstruction (BIFR-1987).
Ediv style="font-weight: bold;">This board was set up to revive sick units in public sector enterprises suffering loss.
(3) If in the process of disinvestments private sector acquires more than 51%
shares then it results in transfer of ownership and management to the private
sector.
3. Globalisation:
It refers to integration of various economies of world.
Till 1991 Indian government was following strict policy in regard to import and foreign
investment in regard to licensing of imports, tariff, restrictions, etc.
But after new policy government adopted policy of globalisation by taking following
measures:
(i) Import Liberalisation. Government removed many restrictions from import of
capital goods.
(ii) Foreign Exchange Regulation Act (FERA) was replaced by Foreign Exchange
Management Act (FEMA)
(iii) Rationalisation of Tariff structure
(iv) Abolition of Export duty.
(v) Reduction of Import duty.
Current account convertibility of Rupee
India adopted current account convertibility in August 1994
Current account convertibility means that a country's residents can purchase foreign
exchange for the purpose of buying goods and services from abroad.
Current Account Convertibility allows free inflows and outflows of foreign currency for all
purpose including resident Indians buying foreign goods and services (imports),
Indians selling foreign goods and services (exports), Indians receiving and sending
remittances, accessing foreign currency for travel, study abroad, medical tourism purpose etc.
Capital account convertibility
This will lead to a free exchange of currency at a lower rate and an unrestricted movement of
capital.
Capital account convertibility means that its residence have freedom to purchase foreign
exchange for the sake of buying financial assets from abroad, such as stocks or bonds or
opening a bank account in another country, and similarly that foreigners can purchase
domestic financial assets.
QUESTIONS FOR CLARIFICATION
1. Consider the following statements about Rashtriya Swasthya Bima Yojana (RSBY) :
(A) Under RSBY the premium is shared on 85 : 15 basis by the centre and state governments.
(B) In the case of the North-Eastern States and Jammu & Kashmir, under RSBY the premium is
shared in a 90 : 10 ratio.
Which of the statement(s) given above is/are correct ?
(A) Only (B) (B) Only (A)
(C) Both (A) & B (D) Neither (A) nor (B)
2. Which among the following can contribute to improvement in industrial climate of the region ?
(A) Development banks (B) Trade unions
(C) Natural resources (D) All of the above
3. As per Tendulkar Committee Report, the percentage of the population below the poverty line
in 2004-05 was
A) 41.8% B) 25.7% C) 21.8% D) 37.2%
4. List 1 List 11
A. 1951-65. 1. Industrial Recovery
B. 1966-80. 2. Post Liberalisation
C. 1981-91. 3. High growth of capital and basic goods
D. 1992-2000 . 4. Industrial Declaration
Codes A. B. C. D
A. 3 4 1 2
B. 4 3 1 2
C. 4 1 3 2
D. 3 1 2 4
5. The Phenomenon of ‘demographic dividend’ of a country is related to :
(A) A sharp decline in the total population
(B) A decline in the Infant Mortality Rate
(C) An increase in the sex ratio
(D) An increase in the population in the working age group
6. Single out the activity that is not included in the Industrial Production Index of India :
(A) Manufacturing (B) Construction
(C) Mining (D) Electricity
Answers:-
1) C 2) D 3) D 4) A 5) D 6) B
The Union Budget for FY 2020-21
This has been announced on 1 February, 2020, to herald a decade of growth and prosperity.
Prominent themes of this Budget are its focus on governance and financial sector to enhance
the ease of living.
Continuing on the aspiration to deliver maximum governance with minimum government, the
Budget envisages structural reforms, digital revolution and inclusive growth.
Likewise, the Financial sector receives renewed priority with various reforms such as
increasing the deposit insurance coverage, divesting remaining government holding in IDBI
Bank & separation of National Pension System (NPS) Trust for government employees
from PFRDAI (Pension Fund Regulatory & Development Authority).
The Budget is preceded by the tabling of the Economic Survey in the Budget Session of the
Parliament by the Finance Minister. This year, the Finance Minister Ms.Nirmala Sitharaman
presented the Economic Survey 2019-20 on 31 January, 2020. The Survey is also
presented by the Chief Economic Advisor (CEA) during a press meet after it is tabled in the
Parliament.
Budget Highlights
Expenditure:
The government proposes to spend Rs 30,42,230 crore in 2020-21, which is 12.7% higher than the
revised estimate of 2019-20.
Receipts:
The receipts (other than net borrowings) are expected to increase by 16.3% to Rs 22,45,893 crore,
owing to higher estimated revenue from disinvestments.
GDP growth:
The government has assumed a nominal GDP growth rate of 10% (i.e., real growth plus inflation)
in 2020-21. The nominal growth estimate for 2019-20 was 12%.
Deficits: Revenue deficit is targeted at 2.7% of GDP, which is higher than the revised estimate of
2.4% in 2019-20. Fiscal deficit is targeted at 3.5% of GDP, lower than the revised estimate of 3.8%
in 2019-20. Note that the government is estimated to breach its budgeted target for fiscal deficit
(3.3%) in 2019-20 and the medium term fiscal target of 3% in 2020-21. This does not include off-
budget borrowings (0.9% of GDP in 2020-21).
Ministry allocations:
Among the top 13 ministries with the highest allocations, the highest percentage increase is
observed in the Ministry of Communications (129%), followed by the Ministry of Agriculture and
Farmers’ Welfare (30%) and the Ministry of Home Affairs (20%).
Tax proposals in the Finance Bill
In addition to changes in tax laws, the Finance Bill, 2020 also proposes certain non-tax
changes to the Prohibition of Benami Properties Transactions Act, 1988.
Change in income tax rates: The income tax rates have been changed.
Note that the new personal tax rates are optional and may only be availed if the
person satisfies certain conditions, such as if they do not claim certain
exemptions or deductions. These include standard deductions, leave travel
allowance, house rent allowance, interest payment on housing loan, and
deductions under Chapter VI-A (investments in provident fund, insurance
premium, donations to charities, etc.). Once the option is exercised, it will be
applicable for all subsequent years.
Option for lower tax rates: The Income Tax Act was recently amended to give an option to
domestic companies to avail of 22% tax rate if they did not claim certain deductions. The list has
been expanded to include other deductions, such as those under Section 80G (donations to
charities). Also, a similar facility has been provided to co-operatives.
Benefits to corporates: Currently, domestic manufacturing companies have an option to pay
income tax at the rate of 15% if they do not claim certain deductions under the Act. This benefit
has been extended to domestic companies engaged in electricity generation.
Dividend Distribution Tax: Currently, companies have to pay a tax of 15% on dividends
distributed by it to shareholders. This has been removed and the dividend income will now be
taxable in the hands of the recipient.
Limit on deductions for social security contributions: Currently, there is no combined limit for
the purpose of deductions on the amount of contribution made by an employer towards a
recognized provident fund, an approved superannuation fund and the National Pension
Scheme. A combined ceiling of Rs 7.5 lakh is being introduced on deductions which may be
claimed towards such contributions.
Residence in India: The Income Tax Act, 1961 specifies various conditions for determining the
resident status of an Indian citizen or a person of Indian origin. A person will be considered a
resident, i.e. their global income is taxable in India, if they are in India for more than 182
days. This has been reduced to 120 days. In addition, any Indian citizen who is not liable to tax in
any other country or territory by reason of domicile or residence shall be deemed to be a resident
of India.
Tax changes for start-ups: Start-ups are allowed to get a full tax waiver on profits for any three
consecutive years out of their first seven years, if they are incorporated between April 1, 2016 and
March 31, 2021, and their turnover does not exceed Rs 25 crore. The waiver has been extended
to start-ups for any three years out of their first ten years. In addition, the turnover threshold has
been increased from Rs 25 crore to Rs 100 crore.
Excise: The rate of central excise duty on certain tobacco products such as cigarettes, chewing
tobacco, and tobacco extracts has been increased. For example, the rate of duty on chewing
tobacco has been increased from 10% to 25% per kg. Further, crude petroleum has been
included at a rate of duty of Rs 50 per tonne.
Customs: Customs duty has been raised on some items such as tableware and kitchenware,
footwear, fans, and toys.
Health cess on customs: A health cess will be levied (in addition to customs duty) on certain
medical devices, such as X-ray machines, imported into India. This cess may be utilised for the
financing of health infrastructure and services.
Obligations on charities: Charitable organisations get an exemption from taxation under Section
12AA, and donations to them get exemptions under Sections 10(23C), 35, and 80G. From now,
the approvals under these sections will be valid for a maximum of five years. Any entity having
these approvals has to get them re-issued.
Commodities Transaction Tax: Currently, the commodities transaction tax on commodity
derivatives is 0.01%. The Bill creates three tax rates: (i) 0.01% payable by the seller on sale of
commodity derivatives based on its price or price index, (ii) 0.0001% payable by the buyer on the
sale of an option in goods resulting in the delivery of the goods, and (iii) 0.125% payable by the
buyer on the sale of an option in goods resulting in cash payment.
The Prohibition of Benami Property Transactions Act, 1988: The Act constitutes an
adjudicating authority on issues related to benami properties. The qualifications for the
chairperson and members of the authority are that they must have been: (i) a member of the
Indian Revenue Service as Commissioner of Income-tax or equivalent, or (ii) a member of the
Indian Legal Service as Joint Secretary or equivalent. The Bill states that an individual qualified for
the position of District Judge may also be the chairperson or a member of the authority.
Removal of tax exemptions on certain allowances: Certain exemptions on facilities to current
and former members of the Union Public Service Commission and the Election Commission such
as rent-free residence, conveyance allowance, and medical facilities are exempt from tax. This
exemption has been removed.
Policy Highlights
Legislative Changes: The Banking Regulation Act, 1949 will be amended for better governance
of cooperative banks. The limit for NBFCs to be eligible for debt recovery under the SARFAESI
Act, 2002 will be reduced. The asset size will be reduced from Rs 500 crore to Rs 100 crore, and
loan size will be reduced from one crore rupees to Rs 50 lakh. The Deposit Insurance and Credit
Guarantee Corporation has been permitted to increase deposit insurance coverage for a
depositor, which will now be one lakh to five lakh rupees, per depositor. The Factor Regulation
Act, 2011 will be amended to enable NBFCs to extend invoice financing to MSMEs. The PFRDA
Act will be amended to separate NPS trust for government employees for PFRDAI. Laws where
there is criminal liability for acts that are civil in nature will be examined and amended. Contracts
Act, 1872 will be strengthened to ensure that contracts are honoured.
Disinvestment: The government will sell a part of its holding in LIC through an Initial Public
Offer. The government also plans to sell the balance of its holding in IDBI Bank.
Investment: Certain specified categories of government securities will be opened fully for non-
resident investors. The limit for Foreign Portfolio Investment in corporate bonds will be increased
from 9% to 15% of the outstanding stock of corporate bonds. It has been proposed to set up an
Investment Clearance Cell which will provide “end to end” facilitation and support, such as pre-
investment advisory at the central and state level.
Commerce and Industry: A scheme focused on encouraging manufacturing of mobile phones,
electronic equipment, and semi-conductor packaging has been proposed. The National Technical
Textiles Mission will be implemented from 2020-21 to 2023-24 with an outlay of Rs 1,480 crore. A
scheme will be launched for the refund of duties and taxes on exported products, which are not
getting exempted under any other existing mechanism.
Infrastructure and Urban Development: The government will build 6,500 projects under the
National Infrastructure Pipeline. These projects will include housing, safe drinking water, and
healthcare, among others. A National Logistics Policy will be released which will clarify the roles
of the central government, state governments, and key regulators. Further, it will create a single
window e-logistics market. Five new smart cities will be developed in collaboration with states in
public-private partnership mode.
Transport and Energy: Four railway station re-development projects and operation of 150
passenger trains will be done through public-private partnership mode. The government will
encourage states to replace conventional energy meters with prepaid smart meters by 2023. It
has been proposed to expand the national gas grid from 16,200 km to 27,000 km.
Agriculture and allied activities: The government will expand the Pradhan Mantri Kisan Urja
Suraksha evam Utthan Mahabhiyan scheme to help 20 lakh farmers in setting up stand-alone
solar pumps. Viability gap funding will be provided for setting up warehouses at the block
level. All eligible beneficiaries of Pradhan Mantri Kisan Samman Nidhi will be covered under the
Kisan Credit Card scheme. The government will propose comprehensive measures for 100 water
stressed districts.
Technology: A policy will be introduced to enable private sector to build data centre parks. Fibre
to the Home connections through Bharatnet will link one lakh gram panchayats in 2020. A new
National Policy on Official Statistics has been proposed which will use latest technology including
Artificial Intelligence. An outlay of Rs 8,000 crore has been proposed for the National Mission on
Quantum Technologies and Applications, over a period of five years.
Education: The new National Education Policy will be announced. Steps will be taken to enable
sourcing of External Commercial Borrowings and Foreign Direct Investment for
education. Degree level online education programme will be started by institutions who rank
within top 100 in the National Institutional Ranking framework.
Health: Jan Aushadhi Kendra scheme will be expanded to all districts and 2,000 medicines and
300 surgicals will be offered by 2024. Viability gap funding window has been proposed for
setting up hospitals in the public-private partnership mode.
3 Estimates in each Budget:-
1. Budgeted Estimates (BE) are budget allocations announced at the beginning of each
financial year.
2. Revised Estimates (RE) are estimates of projected amounts of receipts and expenditure until
the end of the financial year.
3. Actual Estimates (AE) are audited accounts of expenditure and receipts in a year.
Total Expenditure: The government is estimated to spend Rs 30,42,230 crore during 2020-
21. This is 12.7% more than the revised estimate of 2019-20. Out of the total expenditure,
revenue expenditure is estimated to be Rs 26,30,145 crore (11.9% growth) and capital expenditure
is estimated to be Rs 4,12,085 crore (18.1% growth).
Total Receipts: The government receipts (excluding borrowings) are estimated to be Rs
22,45,893 crore, an increase of 16.3% over the revised estimates of 2019-20. The gap between
these receipts and the expenditure will be plugged by borrowings, budgeted to be Rs 7,96,337
crore, an increase of 3.8% over the revised estimate of 2019-20.
Transfer to states: The central government will transfer Rs 13,90,666 crore to states and union
territories in 2020-21. This is an increase of 17.1% over the revised estimates of 2019-20 and
includes devolution of (i) Rs 7,84,181 crore to states, out of the centre’s share of taxes, and (ii) Rs
6,06,485 crore in the form of grants and loans.
Deficits: Revenue deficit is targeted at 2.7% of GDP, and fiscal deficit is targeted at 3.5% of GDP
in 2020-21. The target for primary deficit (which is fiscal deficit excluding interest payments) is
0.4% of GDP.
GDP growth estimate: The nominal GDP is estimated to grow at a rate of 10% in 2020-21. The
estimated nominal GDP growth rate for 2019-20 was 12%.
Disinvestment is the government selling its stakes in Public Sector Undertakings (PSUs). In 2019-
20, the government is estimated to meet 62% of its disinvestment target. The disinvestment
target for 2020-21 has been set at Rs 2,10,000 crore.
Receipts Highlights for 2020-21
Total receipts (including borrowings) in 2020-21 are estimated to be Rs 30,42,230 crore and net
receipts (excluding borrowings) to be Rs 22,45,893 crore. Receipts (without borrowings) are
estimated to increase by 16.3% over the revised estimates of 2019-20.
Gross tax revenue is budgeted to increase by 12% over the revised estimates of 2019-20, which
is higher than the estimated nominal GDP growth of 10% in 2020-21. The net tax revenue of
the central government (excluding states’ share in taxes) is estimated to be Rs 16,35,909 crore in
2020-21.
Devolution to states from centre’s tax revenue is estimated to be Rs 7,84,181 crore in 2020-
21. In 2019-20, the devolution to states reduced by 19% from an estimate of Rs 8,09,133 crore at
the budgeted stage to Rs 6,56,046 crore at the revised stage.
Non-tax revenue is expected to be Rs 3,85,017 crore in 2020-21. This is 11.4% higher than the
revised estimate of 2019-20.
Capital receipts (without borrowings) are budgeted to increase by 175.7% over the revised
estimates of 2019-20. This is on account of disinvestments, which are expected to be Rs 2,10,000
crore in 2020-21, as compared to Rs 65,000 crore as per the revised estimates of 2019-20.
Indirect taxes: The total indirect tax collections are estimated to be Rs 10,96,520 crore in 2020-
21. Of this, the government has estimated to raise Rs 6,90,500 crore from GST. Out of the total
tax collections under GST, 84% is expected to come from central GST (Rs 5,80,000 crore), and 16%
(Rs 1,10,500 crore) from the GST compensation cess.
Corporation tax: The collections from taxes on companies are expected to increase by 11.5% in
2020-21 to Rs 6,81,000 crore. The revised estimates of 2019-20 indicate a 20.3% shortfall in
collections from corporation tax over the budget estimates of 2019-20. This shortfall may be due
to a cut in the corporate tax rates made earlier during the financial year.
Income tax: The collections from income tax are expected to increase by 14% in 2020-21 to Rs
6,38,000 crore. The 14% growth is despite a reduction in tax rates. That is, income tax is
estimated to grow at 21%, if not for the Rs 40,000 crore revenue foregone due to the reduction in
tax rates.
Non-tax receipts: Non-tax revenue consists of interest receipts on loans given by the centre,
dividends and profits, external grants, and receipts from general, economic, and social services,
among others. Non-tax revenue is expected to increase by 11.4% over the revised estimates of
2019-20 to Rs 3,85,017 crore.
Disinvestment target: The disinvestment target for 2020-21 is Rs 2,10,000 crore. This target is
223.1% higher than the revised estimate of 2019-20 (Rs 65,000 crore).
Expenditure Highlights for 2020-21
Total expenditure in 2020-21 is expected to be Rs 30,42,230 crore, which is 12.7% higher than
the revised estimate of 2019-20. Out of this, (i) Rs 8,31,825 crore is proposed to be spent on
central sector schemes (7.6% increase over the revised estimate of 2019-20), and (ii) Rs 3,39,894
crore is proposed to be spent on centrally sponsored schemes (7.3% increase over the revised
estimate of 2019-20).
The government is expected to spend Rs 2,10,682 crore on pensions in 2020-21, which is 14.4%
higher than the revised estimate of 2019-20. In addition, expenditure on interest payments in
2020-21 is expected to be Rs 7,08,203 crore, which is 23% of the government’s expenditure.
Expenditure on Subsidies
In 2020-21, the total expenditure on subsidies is estimated to be Rs 2,62,109 crore, a decrease of
0.5% from the revised estimate of 2019-20. This is largely due to a decrease in expenditure on
fertiliser subsidy.
Expenditure by Ministries
The ministries with the 13 highest allocations account for 53% of the estimated total expenditure
in 2020-21. Of these, the Ministry of Defence has the highest allocation in 2020-21, at Rs
4,71,378 crore. It accounts for 15% of the total budgeted expenditure of the central
government. Other Ministries with high allocation include: (i) Home Affairs, (ii) Agriculture and
Farmers’ Welfare, (iii) Consumer Affairs, Food and Public Distribution, and (iv) Rural Development.
Allocation to Major Schemes
Among the schemes, the PM-KISAN scheme (income support to farmers) has the highest
allocation in 2020-21 at Rs 75,000 crore. Allocation to the scheme has increased by 37.9% from
the revised estimate of 2019-20.
The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) has the second
highest allocation in 2020-21 at Rs 61,500 crore. This is a decrease of Rs 9,502 crore (13.4%) from
the revised estimate of 2019-20.
Allocation to the Pradhan Mantri Gram Sadak Yojana has increased by 38.6% over the revised
estimate of 2019-20 to Rs 19,500 crore. In 2019-20, allocation to the scheme has been cut by Rs
4,930 crore (26%) from the budgeted stage to the revised stage.
Expenditure on Scheduled Caste and Scheduled Tribe sub-plans and schemes for
welfare of women, children and NER
Programs for the welfare of women and children have been allocated Rs 2,39,504 crore in
2020-21, an increase of 3.9% over the revised estimate of 2020-21. These allocations
include programs under all the ministries.
Fiscal Responsibility and Budget Management targets
The Fiscal Responsibility and Budget Management (FRBM) Act, 2003 requires the central
government to progressively reduce its outstanding debt, revenue deficit and fiscal deficit. The
central government gives three year rolling targets for these indicators when it presents the Union
Budget each year. Table 8 shows the targets for revenue deficit and fiscal deficit as given in the
Medium Term Fiscal Policy Statement.
Extra-Budgetary Resources:
In addition to the expenditure shown in the budget, the government also spends through
extra-budgetary resources. These resources are raised by issuing bonds and through loans
from the National Small Savings Fund (NSSF). In 2020-21, the government estimates an
expenditure of Rs 1,86,100 crore through such extra-budgetary resources. This includes an
expenditure of Rs 1,36,600 crore by the Food Corporation of India financed through loans
from NSSF.
Since funds borrowed for such expenditure remain outside the budget, they do not get
factored in the deficit and debt figures. If borrowings made in the form of extra-budgetary
resources are also taken into account, the fiscal deficit estimated for the year 2020-21 would
increase from 3.5% of GDP to 4.4% of GDP. Similarly, the fiscal deficit for the year 2019-20
would increase from 3.8% of GDP to 4.6% of GDP due to extra-budgetary borrowings of Rs
1,72,699 crore.
Outstanding debt is the accumulation of borrowings over the years. A higher debt implies
that the government has a higher loan repayment obligation over the years.
Total outstanding debt of the government has decreased from 55.5% of GDP in 2000-01
to 50.1% of GDP in 2020-21 (estimate). The FRBM Act sets a target of 40% of GDP for
outstanding debt to be met by 2024-25.
QUESTIONS FOR CLARIFICATION
1. The term ‘Rent seeking’ refers to which of the following?
(a) Excessive rent collected by the owners because of rise in demand
(b) Practise of manipulating public policy as a strategy to increase profits
(c) Higher prices collected by business entities by forming cartels
(d) Manipulating profits by inflating costs
2. Which of the following are part of the 'Index of Industrial Production (IIP)'?
(i) Mining and quarrying (ii) Electricity generation
(iii) Construction (iv) Forestry
Select the correct answer using the code given below:
(a) (i) & (ii) only (b) (ii) & (iii) only
(c) (i), (ii) & (iii) only (d) All of the above
3. The budget of 2020-21 is focused on three themes. Which of the following is not one of them?
(a) Aspirational India (b) Economic Development
(c) Caring Society (d) Skilled India
4. Which of the following statements are correct regarding the "SMILE" scheme:
(a) It is linked to providing credit to MSME enterprises under Make in India
(b) It is linked to providing financial support by Govt. of India for women and SC/ST entrepreneurs
(c) It is a scheme to provide support to small and marginal farmers for allied activities
(d) None of the above
5. The term "Graded Surveillance Measure" recently seen in the news is related to which of the
following:
(a) Security of Indian coastal areas (b) Companies listed on stock exchanges
(c) ISRO's satellite programme (d) IMF monitoring various economies
6. Which of the following statements are true regarding the SAUBHAGYA scheme recently
launched:
(i) The scheme aims to particularly electrify the villages
(ii) Government will be providing subsidized electrification to rural and urban households
(iii) Government will be providing subsidy on electricity consumption
Select the correct answer using the code given below:
(a) (i) only (b) (ii) & (iii) only
(c) (ii) only (d) All of the above
Answers:-
1) B 2) A 3) D 4) A 5) B 6) C
Economic Survey
An Economic Survey is a snapshot of the major economic developments that have taken place in
the last one year and gives a glimpse of what is to come ahead in the short to medium term. It
essentially lays the groundwork for the presentation of Budget
Economic Survey 2019-20
This year's survey has a 'Lavender Purple theme' -- a synthesis of old and new with wealth
creation as the focus. It emphasised on the importance of 'Ethical Wealth Creation', as the key to
making India $5 trillion economy by 2025
The Union Minister for Finance & Corporate Affairs, Smt. Nirmala Sitharaman presented the
Economic Survey 2019-20
Survey posits that India’s aspiration to become a $5 trillion economy depends critically on:
1) Strengthening the invisible hand of the market.
2) Supporting it with the hand of trust.
Pro-business versus Pro-markets Strategy
Survey says that India’s aspiration of becoming a $5 trillion economy depends critically on:
1) Promoting ‘pro-business’ policy that unleashes the power of competitive markets to
generate wealth.
2) Weaning away from ‘pro-crony’ policy that may favour specific private interests,
especially powerful incumbents.
Pro-crony policies such as discretionary allocation of natural resources till 2011 led to rent-
seeking by beneficiaries while competitive allocation of the same post 2014 ended such rent
extraction.
Strengthening the invisible hand by promoting pro-business policies to:
1) Provide equal opportunities for new entrants.
2) Enable fair competition and ease doing business.
3) Eliminate policies unnecessarily undermining markets through government intervention.
4) Enable trade for job creation. 5) Efficiently scale up the banking sector.
6) Introducing the idea of trust as a public good, which gets enhanced with greater use.
Entrepreneurship at the Grassroots
Entrepreneurship as a strategy to fuel productivity growth and wealth creation. India ranks third in
number of new firms created, as per the World Bank.
New firm creation in India increased dramatically since 2014:
2 % cumulative annual growth rate of new firms in the formal sector during 2014-18,
compared to 3.8 % during 2006-2014.
About 1.24 lakh new firms created in 2018, an increase of about 80 % from about 70,000 in
2014.
Impact of education on entrepreneurship
Literacy and education in a district foster local entrepreneurship significantly: Impact is most
pronounced when literacy is above 70 per cent. New firm formation is the lowest in eastern
India with lowest literacy rate (59.6 % as per 2011 Census).
Physical infrastructure quality in the district influences new firm creation significantly.
Ease of Doing Business and flexible labour regulation enable new firm creation, especially in
the manufacturing sector.
Divestment in public sector undertakings
The Survey has aggressively pitched for disinvestment in
PSUs by proposing a separate corporate entity wherein
the government’s stake can be transferred and divested
over a period of time. The survey analysed the data of
11 PSUs that had been disinvested from 1999-2000 and
2003-04 and compared the data with their peers in the
same industry.
Further, the survey has said privatized entities have performed better than their peers in terms
of net worth, profit, return on equity and sales, among others. The government can transfer
its stake in listed CPSEs to a separate corporate entity.
This entity would be managed by an independent board and would be mandated to divest
the government stake in these CPSEs over a period of time.
This will lend professionalism and autonomy to the disinvestment programme which, in turn,
would improve the economic performance of the CPSEs.
Golden jubilee of bank nationalization: Taking stock
The survey observes 2019 as the golden jubilee year of bank nationalization.
Accomplishments of lakhs of Public Sector Banks (PSBs) employees cherished and an
objective assessment of PSBs suggested by the Survey.
Since 1969, India’s Banking sector has not developed proportionately to the growth in the
size of the economy. India has only one bank in the global top 100 – same as countries that
are a fraction of its size: Finland (about 1/11th), Denmark (1/8th), etc. A large economy needs
an efficient banking sector to support its growth
Solutions to make PSBs more efficient:
1. Employee Stock Ownership Plan (ESOP) for PSBs’ employees
2. Representation on boards proportionate to the blocks held by employees to incentivize
employees and align their interests with that of all shareholders of banks.
3. Creation of a GSTN type entity that will aggregate data from all PSBs and use technologies
like big data, artificial intelligence and machine learning in credit decisions for ensuring better
screening and monitoring of borrowers, especially the large ones.
GDP Growth
GDP growth is a critical variable for decision-making by investors and policymakers. Therefore, the
recent debate about accuracy of India’s GDP estimation following the revised estimation
methodology in 2011 is extremely significant.
As countries differ in several observed and unobserved ways, cross-country comparisons have to
be undertaken by separating the effect of other confounding factors and isolating effect of
methodology revision alone on GDP growth estimates.
Models that incorrectly over-estimate GDP growth by 2.7 % for India post-2011 also misestimate
GDP growth over the same period for 51 out of 95 countries in the sample.
External Sector
Balance of Payments (BoP):
India’s BoP position improved from US$ 412.9 bn of forex reserves in end March, 2019 to US$
433.7 bn in end September, 2019.
Current account deficit (CAD) narrowed from 2.1% in 2018-19 to 1.5% of GDP in H1 of 2019-
20. Foreign reserves stood at US$ 461.2 bn as on 10th January, 2020.
Global trade:
India’s merchandise trade balance improved from 2009-14 to 2014-19, although most of the
improvement in the latter period was due to more than 50% decline in crude prices in 2016-
17. India’s top five trading partners continue to be USA, China, UAE, Saudi Arabia and
Hong Kong.
Exports:
Top export items: Petroleum products, precious stones, drug formulations & biologicals,
gold and other precious metals.
Largest export destinations in 2019-20 (April-November): United States of America (USA),
followed by United Arab Emirates (UAE), China and Hong Kong.
The merchandise exports to GDP ratio declined, entailing a negative impact on BoP position.
Slowdown of world output had an impact on reducing the export to GDP ratio, particularly
from 2018-19 to H1 of 2019-20. Growth in Non-POL exports dropped significantly from 2009-
14 to 2014-19.
Imports:
Top import items: Crude petroleum, gold, petroleum products, coal, coke & briquittes.
India’s imports continue to be largest from China, followed by USA, UAE and Saudi Arabia.
Merchandise imports to GDP ratio declined for India, entailing a net positive impact on BoP.
Large Crude oil imports in the import basket correlates India’s total imports with crude prices.
As crude price raises so does the share of crude in total imports, increasing imports to GDP
ratio.
Logistics industry of India:
Currently estimated to be around US$ 160 billion. Expected to touch US$ 215 billion by 2020.
According to World Bank’s Logistics Performance Index, India ranks 44th in 2018 globally, up
from 54th rank in 2014.
Direct investments and remittances:
Net FDI inflows continued to be buoyant in 2019-20 attracting US$ 24.4 bn in the first eight
months, higher than the corresponding period of 2018-19.
Net FPI in the first eight months of 2019-20 stood at US$ 12.6 bn. Net remittances from
Indians employed overseas continued to increase, receiving US$ 38.4 billion in H1 of 2019-20
which is more than 50% of the previous year level.
External debt:
Remains low at 20.1% of GDP as at end September, 2019.
After significant decline since 2014-15, India’s external liabilities (debt and equity) to GDP
increased at the end of June, 2019 primarily by increase in FDI, portfolio flows and external
commercial borrowings (ECBs).
Monetary policy:
Remained accommodative in 2019-20. Repo rate was cut by 110 basis points in four
consecutive MPC meetings in the financial year due to slower growth and lower inflation.
However, it was kept unchanged in the fifth meeting held in December 2019. In 2019-20,
liquidity conditions were tight for initial two months; but subsequently it remained
comfortable.
Inflation Trends:
Inflation witnessing moderation since 2014
Consumer Price Index (CPI) inflation increased from 3.7 per cent in 2018-19 (April to
December, 2018) to 4.1 per cent in 2019-20 (April to December, 2019).
WPI inflation fell from 4.7 per cent in 2018-19 (April to December, 2018) to 1.5 per cent
during 2019-20 (April to December, 2019).
Drivers of CPI – Combined (C) inflation:
During 2018-19, the major driver was the miscellaneous group. During 2019-20 (April-
December), food and beverages was the main contributor.
Among food and beverages, inflation in vegetables and pulses was particularly high due
to low base effect and production side disruptions like untimely rain.
Cob-web Phenomenon (Cyclical fluctuations in inflation) for Pulses:
Farmers base their sowing decisions on prices witnessed in the previous marketing period.
Measures to safeguard farmers like procurement under Price Stabilization Fund (PSF),
Minimum Support Price (MSP) need to be made more effective.
Volatility of Prices:
Volatility of prices for most of the essential food commodities with the exception of some of
the pulses has actually come down in the period 2014-19 as compared to the period 2009-14.
Lower volatility might indicate the presence of better marketing channels, storage facilities
and effective MSP system.
Essential Commodities Act is outdated
The Centre’s imposition of stock limits in a bid to control the soaring prices of onions over the
last few months actually increased price volatility, according to the ES.
The finding came in a hard-hitting attack in the report against the Essential Commodities Act
(ECA) and other “anachronistic legislations” and interventionist government policies, including
drug price control, grain procurement and farm loan waivers.
The Centre invoked the Act’s provisions to impose stock limits on onions after heavy rains
wiped out a quarter of the kharif crop and led to a sustained spike in prices.
However the Survey showed that there was actually an increase in price volatility and a
widening wedge between wholesale and retail prices.
The lower stock limits must have led the traders and wholesalers to offload most of the kharif
crop in October itself which led to a sharp increase in the price volatility.
Agriculture
Agricultural productivity is also constrained by lower level of
mechanization in agriculture which is about 40 % in India, much
lower than China (59.5 %) and Brazil (75 %).
With regard to the agri sector, the Survey argued that the
beneficiaries of farm loan waivers consume less, save less, invest
less and are less productive.
It added that the government procurement of foodgrains led to a burgeoning food subsidy
burden and inefficiencies in the markets, arguing for a shift to cash transfers instead.
Food Management
The share of agriculture and allied sectors in the total Gross Value Added (GVA) of the
country has been continuously declining on account of relatively higher growth performance
of non-agricultural sectors. GVA at Basic Prices for 2019-20 from ‘Agriculture, Forestry and
Fishing’ sector is estimated to grow by 2.8 %.
Services Sector
Increasing significance of services sector in the Indian economy:
About 55 % of the total size of the economy and GVA growth. Two-thirds of total FDI inflows
into India. About 38 per cent of total exports. More than 50 % of GVA in 15 out of the 33
states and UTs.
Social Infrastructure, Employment and Human Development
The expenditure on social services (health, education and others) by the Centre and States as
a proportion of GDP increased from 6.2 % in 2014-15 to 7.7 % in 2019-20 (BE).
India’s ranking in Human Development Index improved to 129 in 2018 from 130 in 2017 with
1.34 % average annual HDI growth, India is among the fastest improving countries
Gross Enrolment Ratio at secondary, higher secondary and higher education level needs to be
improved.
Gender disparity in India’s labour market widened due to decline in female labour force
participation especially in rural areas:
Around 60 % of productive age (15-59) group engaged in full time domestic duties.
Sustainable Development and Climate Change
India moving forward on the path of SDG implementation through well-designed initiatives
SDG India Index:
Himachal Pradesh, Kerala, Tamil Nadu, Chandigarh are front runners.
Assam, Bihar and Uttar Pradesh come under the category of Aspirants.
India hosted COP-14 to UNCCD which adopted the Delhi Declaration: Investing in Land
and Unlocking Opportunities.
COP-25 of UNFCCC at Mandrid:
India reiterated its commitment to implement Paris Agreement.
COP-25 decisions include efforts for climate change mitigation, adaptation and
means of implementation from developed country parties to developing country
parties.
Forest and tree cover:
Increasing and has reached 80.73 million hectare. The numbers of stubble-burning incidents in 2019 were the least in four years, the Economic
Survey says.
QUESTIONS FOR CLARIFICATION
1) Which of the following statements are true regarding the scheme “Nirvik”?
(a) It is an insurance scheme for the exporters
(b) It is related to internal security
(c) It is a subsidy provided by the government
(d) It is related to MSME credit
2) ‘Logistics Performance Index’ is released by which of the following institutions?
(a) World Bank (b) IMF
(c) World Economic Forum (d) UNCTAD
3) Which countries are eligible to become member of BRICS Bank?
(a) Any Country (b) Members of United Nations
(c) Members of World Bank or IMF (d) Any 'developing' country
4) The main objectives of setting up Special Economic Zones (SEZ) are:
(i) Generation of additional economic activity
(ii) Promotion of investment from foreign sources
(iii) Creation of employment opportunities
Select the correct answer using the code given below:
(a) (i) & (iii) only (b) (i) only
(c) (iii) only (d) All of the above
5) Consider the following statements regarding the SFURTI scheme:
(i) It is implemented by ministry of MSME
(ii) It promotes cluster-based development
Select the correct answer using the code given below:
(a) (i) only (b) (ii) only
(c) Both (i) & (ii) (d) Neither (i) nor (ii)
6) Which of the following statements are true regarding the term ‘Force Majeure’ which was
recently in the news?
(i) It is generally treated as a breach of contract
(ii) Unforeseeable circumstances that prevent someone from fulfilling a contract
(iii) Includes an Act of God or natural disasters, war or war-like situations, epidemics, pandemics,
etc.
Select the correct answer using the code given below:
(a) (i) & (iii) only (b) (ii) & (iii) only
(c) (iii) only (d) All of the above
Answers:-
1) A 2) A 3) B 4) D 5) C 6) B
NATIONAL STATISTICAL OFFICE (NSO)
Recently, the government has decided to merge the Central Statistical Organization (CSO)
and the National Sample Survey Office (NSSO) to form a National Statistical Office (NSO),
under the Ministry of Statistics and Program Implementation.
Headed by a Director General, it is responsible for conduct of large-scale sample surveys
in diverse fields on All India basis.
Primarily data are collected through nationwide household surveys on various socioeconomic
subjects, Annual Survey of Industries (ASI), etc. Besides these surveys, NSO collects data on
rural and urban prices and plays a significant role in the improvement of crop statistics
through supervision of the area enumeration and crop estimation surveys of the State
agencies.
The NSO has four Divisions:
1. Survey Design and Research Division (SDRD)
2. Field Operations Division (FOD)
3. Data Processing Division (DPD)
4. Survey Coordination Division (SCD)
NATIONAL STATISTICAL COMMISSION (NSC)
The government released Draft National Statistical Commission (NSC) Bill which aims at
empowering NSC to become nodal body for all core statistics in country. It has provisions
such as the composition of NSC, statistical audit, independent secretariat for the commission
etc.
The NSC is the apex advisory body on statistical matters, but its suggestions are not
binding on the government.
It was set up in 2005 through a Notification on recommendations of Rangarajan
Commission, as an interim measure. However, in the absence of any legislative framework,
the NSC has faced challenges in implementing its recommendations
Core statistics include national income statistics like GDP, jobs data, industry data and
budgetary transactions data.
7TH ECONOMIC CENSUS
For the first time, an IT based digital platform is being used for data capture, validation,
report generation and dissemination. This will ensure high accuracy and data security.
For this, Ministry of Statistics and Program Implementation (MoSPI) has tied up with
Common Service Centre (CSC), a Special purpose vehicle under Ministry of Electronics and
IT.
The process of Economic Census was first held in 1978. Present Census will provide
disaggregated information on various operational and structural aspects of all
establishments in the country.
SABKA VISHWAS
Recently the Sabka Vishwas-Legacy Dispute Resolution Scheme, 2019 was notified.
It was announced with the objective of settling pending disputes of Service Tax and Central
Excise, which are now subsumed under GST.
DIRECT TAX CODE
Recently, the draft legislation of the new Direct Tax Code (DTC) was submitted by the task
force, headed by Akhilesh Ranjan, to the Government of India.
The Direct Tax Code (DTC) is an attempt by the Government of India to simplify the direct
tax laws in India.
DISINVESTMENT
Centre has given in-principle approval for the strategic disinvestment of the government
shareholding along with management control in 5 PSUs such as BPCL, CCI etc.
Disinvestment refers to the government selling or liquidating its assets or stakes in PSE
(public sector enterprise). The Department for investment and public asset management
(DIPAM) under Ministry of finance is the nodal agency for disinvestment
The Union Cabinet approved the new Strategic Disinvestment policy under which the
Department of Investment and Public Asset Management (DIPAM) under the Ministry
of Finance has been made the nodal department for the strategic stake sale.
DIPAM and NITI Aayog will now jointly identify PSUs for strategic disinvestment
DIPAM secretary would now co-chair the inter-minister group on disinvestment, along
with the secretary of administrative ministries concerned.
Announcements in Budget 2020-2021- The government has promised to raise Rs 210,000
crore in 2020-21, compared to only Rs 65,000 crore in 2019-20.
BANKING REFORMS
The Union cabinet has expanded the Partial Credit Guarantee Scheme to lower rated assets.
Partial Credit Guarantee is offered by Government of India (GoI) to Public Sector Banks
(PSBs) for purchasing high rated pooled assets from financially sound Non-Banking
Financial Companies (NBFCs)/Housing Finance Companies (HFCs)’.
Its objective is to address temporary asset liability mismatches of otherwise solvent
NBFCs/HFCs without having to resort to distress sale of their assets for meeting their
commitments.
(Enhanced Access and Service Excellence) EASE 3.0-
It is a reform agenda which aims at providing smart, tech-enabled public sector banking (like
Dial-a-loan for doorstep loan facilitation, palm banking),to enhance ease of banking in all
customer experiences.
Insolvency and Bankruptcy Code (Amendment) Act, 2019-
The amendment primarily aims to protect successful resolution applicants from criminal
proceedings against offences committed by previous managements or promoters.
Prompt Corrective Action (PCA)-
It was introduced in 2002 as a structured early intervention mechanism for banks that
become under-capitalised due to poor asset quality, or vulnerable due to loss of profitability
The Reserve Bank of India (RBI) allowed domestic banks to directly sell their bad loans in
manufacturing and infrastructure sectors to investors abroad as part of one-time
settlement (OTS) exercises.
Prudential Framework for resolution of stressed assets-
RBI has made it voluntary for lenders to take defaulters to the bankruptcy court i.e. to use the
Insolvency and Bankruptcy Code.
Asset Reconstruction Companies (ARCs) have been barred from buying financial assets
from their sponsors and lenders. An asset reconstruction company is a special type of
financial institution that buys the debtors of the bank at a mutually agreed value and
attempts to recover the debts or associated securities by itself.
MONETARY POLICY TRANSMISSION
The State Bank of India Ltd announced the linking of savings bank account deposits and
short-term loans to the RBI’s repo rate which may ensure faster monetary transmission.
Monetary transmission refers to the process by which a central bank’s monetary policy signals
(like repo rate) are passed on, through financial system to influence the businesses and
households.
In India, policy rate changes by RBI are not reflected in the base rates of banks regularly.
While rate hikes are passed on immediately, but same is not witnessed in rate cuts by the RBI.
This shows there is a lag in monetary transmission.
Interest Rate Spread: Spread refers to the difference in borrowing rates and lending rates of
financial institutions. In other words, it is the interest yield on earning assets such as a loan minus
interest rates paid on borrowed funds.
Marginal cost of funds-based lending rate (MCLR): It is the minimum lending rate below which
a bank is not permitted to lend, except in some cases allowed by the RBI. It is an internal
benchmark or reference rate for the bank. It replaced the earlier base rate system.
CRR LEEWAY FOR NEW RETAIL AND MSME LOANS
Reserve Bank of India (RBI) asked banks to avail cash reserve ratio (CRR) exemption on
incremental retail loans given to MSME, housing and auto sectors between January 31 and
July 31, 2020 for a period of five years.Banks can deduct the equivalent amount of incremental credit disbursed by them as retail
loans to these sectors, over and above the outstanding level of credit to these segments as on
January 31, 2020, from their net demand and time liabilities (NDTL) for maintenance of the
CRR.
Monetary Policy Committee (MPC): MPC is constituted by the Central Government under
the RBI Act, 1934 to determine the policy interest rate required to achieve the inflation target.The committee comprises six members – three officials of the RBI(including RBI Governor
who also chairs the MPC) and three external members nominated by the Government of
India.
Inflation Targeting: It is a monetary policy where a central bank follows an explicit target for
the inflation rate for the medium-term and announces this inflation target to the public.
The Government of India has notified a medium-term inflation target of 4 %, with a band of
+/- 2 %
Non-Banking Financial Company (NBFC): It is a company registered under the Companies
Act, 1956 engaged in the business of loans and advances, acquisition of
shares/stocks/bonds/ debentures/securities issued by Government or local authority or
other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit
business.
P2P lending Platform: P2P lending is a form of crowd-funding which enables individuals to
borrow and lend money without any financial institution as an intermediary. The borrower can
either be an individual or a legal person.
Consortium lending: The Indian Banks’ Association (IBA) will come out with a framework
around April next year to address issues related with consortium lending to industry.
Consortium lending is a process under which several banks finance a borrower based on
common appraisal and documentation, and conduct joint supervision and follow-up
exercises.
NPA Divergence: Divergence is the difference between RBI’s assessment and that
reported by the lender/ banks. Divergence takes place when the RBI finds that a lender has
underreported or not reported at all bad loans in a particular year and hence asks the lender
to make disclosures if under-reporting is more than 10% of bad loans or the provisioning.
Letter of undertaking (LoU): It is a form of bank guarantee under which a bank can allow
its customer to raise money from another Indian bank’s foreign branch in the form of a short
term credit.
Repco Bank: It is a multi-state cooperative society established in 1969 by the central
government for rehabilitation of repatriates from Myanmar and Sri Lanka. It is operated only
in the South Indian states of Andhra Pradesh, Karnataka, Kerala and Tamil Nadu.
Utkarsh 2022: RBI launched ‘Utkarsh 2022’, the Reserve Bank of India’s Medium term
Strategy Framework to achieve excellence in the performance of RBI’s mandates and
strengthening the trust of citizens and other institutions.eBkray: It is an e-auction platform which provides single-window access to information
on properties up for eauction as well as facility for comparison of similar properties on all
PSB e-auction sites.Operation Twist: It was US Federal Reserve Bank’s monetary policy which involved buying
and selling of government bonds to provide monetary easing for the economy.
On similar lines, RBI also announced a simultaneous sale and purchase of government
bonds under the Open Market Operations mechanism.
ORPORATE BOND MARKET
RBI has setup a task force under TR Manoharan to examine the possibilities of a secondary
market for corporate loans in India.
Corporate bonds are debt securities issued by private and public corporations. Companies
issue corporate bonds to raise money for a variety of purposes, such as building a new plant,
purchasing equipment, or growing the business.
MASALA BONDS
Asian Development Bank (ADB) has listed its 10- year Masala bonds worth ₹850 crore on the
Global Securities Market of India International Exchange (India INX).
They are rupee-denominated bonds i.e. the funds would be raised from overseas market in
Indian rupees.
Any corporate, body corporate and Indian bank is eligible to issue Rupee denominated bonds
overseas.
The first Masala bond was issued in 2014 by International Finance Corporation (IFC) for the
infrastructure projects in India.
Participatory notes are offshore derivative instruments of underlying Indian assets. These are
issued by registered Foreign Portfolio investors (FPIs) to overseas investors or hedge funds
who wish to be part of the Indian stock market without registering themselves with SEBI
directly. E.g. Citigroup and Deutsche Bank
BILATERAL NETTING
The Budget 2020 has proposed bilateral netting.
A bilateral netting agreement enables two counterparties in a financial contract to offset
claims against each other to determine a single net payment obligation that is due from
one counterparty to the other.
Indian financial contract laws do not permit bilateral netting, however, they do allow multi-
lateral netting where parties can offset claims against each other through a central
counterparty.
ALTERNATE INVESTMENT FUND (AIF)
The government has announced the creation of an Alternate Investment Fund (AIF) with a
targeted corpus of Rs 25,000 crore for the completion of stalled housing projects.
AIF means any fund established or incorporated in India which is privately pooled
investment vehicle which collects funds from sophisticated investors, whether Indian or
foreign for investing it in accordance with a defined investment policy for the benefit or its
investors.
Bharat- 22 ETF: Recently, fourth tranche also known as Further Fund Offer-2 (FFO-2) of
Bharat 22 Exchange Traded Fund (ETF) was launched.
An ETF is a security that tracks an index, a commodity or a basket of assets like an index
fund, but trades like a stock on an exchange.Competition Commission of India (CCI): It is a statutory body established under the
Competition Act, 2002 for administration, implementation and enforcement of the Act.
Duty of CCI is to eliminate practices having adverse effect on competition, promote and sustain
competition, protect the interests of consumers and ensure freedom of trade in the markets of
India.
Serious Fraud Investigation Office (SFIO): It is a fraud investigating agency. It is under the
jurisdiction of the Ministry of Corporate Affairs, Government of India.
It is involved in major fraud probes and is the co-ordinating agency with the Income Tax and
CBI. It is a multi-disciplinary organization having experts from financial sector, capital market,
accountancy, forensic audit, taxation, law, information technology, company law, customs and
investigation.
Predatory Pricing: It is the act of a market leader lowering its prices below its costs to
gain an unfair advantage.
Later, with fewer competitors, the predator can raise prices to recoup losses. The market’s
entry. barriers should be high enough to deter new entrants when the predator tries to
recoup its losses. Such behaviour is considered anti-competitive.
However, a firm which reduces the costs below that of its competitors (price war) would not
be considered as predatory. E.g. Walmart.
MULTI-DIMENSIONAL POVERTY INDEX
It was developed in 2010 by the Oxford Poverty and Human Development Initiative
(OPHI) and the United Nations Development Programme (UNDP).
The global Multidimensional Poverty Index (MPI) is an international measure of acute
multidimensional poverty covering over 100 developing countries.
It captures both the incidence and intensity of poverty. It assesses poverty at the
individual level.
The 2019 update of the global MPI covers 101 countries—31 low income, 68 middle income
and 2 high income. India’s MPI value reduced from 0.283 in 2005-06 to 0.123 in 2015-16.
Overall, India was among three countries where poverty reduction in rural areas outpaced
that in urban areas which is an indicator of pro-poor development.
CONTRACTUAL EMPLOYEES
The Supreme court held that the contractual employees will be entitled to provident fund
benefits.
Under EPF Act, definition of an employee is an inclusive definition, and is widely worded
to include “any person” engaged either directly or indirectly in connection with the work of an
establishment and is paid wages.
Contractual employees engaged by a Company, who draw their wages/salary directly or
indirectly from Company, are entitled to benefit of PF under EPF Act.
SOCIAL STOCK EXCHANGE
In budget session, Finance Minister proposed a social stock exchange (SSE) under the
regulatory ambit of the Securities Exchange Board of India (SEBI) to support social
enterprises and nonprofits in raising funds.
It is an electronic fundraising platform that allows investors to buy shares in a social
enterprise that has been vetted by the exchange
NOBEL PRIZE IN ECONOMICS
Indian-American economist Abhijit Banerjee has won the 2019 Nobel Prize in Economics, along
with Esther Duflo of the Massachusetts Institute of Technology and Michael Kremer of Harvard
University “for their experimental approach to alleviating global poverty.”
Their new experiment-based approach- called Randomised Control Trials (RCTs) has
transformed development economics.
RCTs break larger questions about policy interventions into smaller, easier to test studies. For
example, the big questions like ‘poverty’ are broken down into its various dimensions like--poor
health, inadequate education, etc. Within poor health, they look at nutrition, provisioning of
medicines, and vaccination, etc. Within vaccinations, they try to conduct various experiments and,
based on such “evidence”, decide what needs to be done.
QUESTIONS FOR CLARIFICATION
1. Despite being a high saving economy, capital formation may not result in significant increase in
output due to:
(a) weak administrative machinery
(b) illiteracy
(c) high population density
(d) high capital-output ratio
2. Capital formation in a country will necessarily lead to which of the following:
(i) Increase in ICOR (ii) Decrease in ICOR (iii) Economic growth
Select the correct answer using the code given below:
(a) (i) & (iii) only (b) (ii) & (iii) only
(c) (iii) only (d) None of the above
3. Which of the following statements are correct about CPI rural, CPI urban and CPI combined
index?
(i) Inflation data is published by NSO
(ii) The base year is 2011-12
(iii) It is released for all India and for states and UTs separately on a monthly basis
Select the correct answer using the code given below:
(a) (i) only (b) (ii) only
(c) (ii) & (iii) only (d) All of the above
4. The term “Seigniorage” means:
(a) The income generated by the Central Bank on account of money creation
(b) The income generated by Government on account of money creation
(c) The backup of physical gold required to print currency notes
(d) It is the nominal value of all the currency notes and coins
5. Consider the following statements regarding purchasing power parity (PPP) exchange rates:
(i) If two countries have zero rate of inflation, their PPP exchange rates will be constant
(ii) The prices of goods will be same in both the countries when converted at PPP exchange rate
Select the correct answer using the code given below:
(a) (i) only (b) (ii) only
(c) Both (i) & (ii) (d) Neither (i) nor (ii)
Answers:-
1) D 2) C 3) D 4) A 5) C
BASE EROSION AND PROFIT SHIFTING (BEPS)
India has recently ratified the Multilateral Convention to Implement Tax Treaty Related
Measures to Prevent Base Erosion and Profit Shifting (MLI).
The Multilateral Convention/MLI is an outcome of the OECD / G20 Project to tackle Base
Erosion and Profit Shifting (the “BEPS Project”) i.e. tax planning strategies that exploit
gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where
there is little or no economic activity, resulting in little or no overall corporate tax being paid.
Organisation for Economic Co-operation and Development (OECD)
It is an intergovernmental economic organization founded in 1961 to stimulate economic
progress and world trade. It has 36 members, the latest member being Lithuania which joined
it in 2018.
India is a not a member, but is among its key partners.
DEVELOPING COUNTRY STATUS
India rallied 51 countries at the World Trade Organization (WTO) to reject a US presidential
memorandum, which had sought to deny special and differential treatment (S&DT) to
developing countries in current and future trade agreements.
South Korea will no longer seek special treatment reserved for developing countries by
the World Trade Organization in future negotiations given its enhanced global economic
status.
In the WTO, developing countries are entitled to ‘special and differential treatment’ set
out in its rules.
Special and differential treatment (S&DT)
These are provisions which give developing countries special rights and which give developed
countries the possibility to treat developing countries more favourably than other WTO
Members. These special provisions include, for example, longer time periods for
implementing Agreements and commitments or measures to increase trading opportunities
for developing countries.
S&DT is given to all developing members due to the uneven level of development
between developed and developing Members.
In the Doha Declaration, member governments agreed that all special and differential treatment
provisions are an integral part of the WTO agreements, and that these provisions should be
reviewed with a view to strengthening them and making them more effective and operational.
Nirvik Scheme
It is a new Export Credit Insurance Scheme (ECIS) introduced by Ministry of Commerce and
Industry through Export Credit Guarantee Corporation (ECGC).
Under the scheme, ECGC will provide 90% credit insurance cover and any additional outgo
would be supported by the government.
ARTIS
Launched by Directorate General of Trade Remedies, ARTIS (Application for Remedies in
Trade for Indian industry and other Stakeholders) is an online system for filing of anti-
dumping applications by domestic industry.
It aims to enhance transparency, efficiency and provide expedited relief to the domestic
producers for different trade remedies like anti-dumping duty, safeguard duty and
countervailing duty.
Duty Free Import Authorisation (DFIA) scheme: DFIA is issued to allow duty free import of
inputs, fuel, oil, energy sources, catalyst which are required for production of export product.
EASE OF DOING BUSINESS (EODB)
India had managed to improve its rank for EoDB from 77th position in 2019 to 63rd
(among 190 countries) in 2020 as mentioned in World Bank’s Doing Business 2020 report.
However, India ranking in 2019 on ease of registration of property parameter was low at 154.
EoDB index is a ranking system established by the World Bank Group. In the EODB index,
‘higher rankings’ (a lower numerical value) indicate better, usually simpler, regulations for
businesses and stronger protections of property rights.
ICEDASH AND ATITHI
ICEDASH is Ease of Doing Business monitoring dashboard of the Indian Customs helping
public see the daily Customs clearance times of import cargo.
ATITHI is Easy to use mobile app, developed by CBIC for international travelers to file the
Customs declaration in advance.
INDIA SKILLS REPORT 2020
Recently, the 7th edition of India Skills Report 2020 was released.
It is a joint initiative of Wheebox (a global talent-assessment company), People Strong and
Confederation of Indian Industry (CII) in collaboration with UNDP, AICTE and Association of
Indian Universities.
India Skills Report 2020 aims to provide an overview of the supply of talent and the demand
from industry. The report brings together the readiness of our present talent pool for new-
age jobs or job types and the skills that employers are today seeking in prospective
employees.
Employability of India’s youth has remained stagnant for the past three years, lingering at
46.21% of participants who are job-ready.
Female employability witnessed an upward trend at 47% while that of male workforce
declined from 47.39% in 2019 to 46% this year. This reflects the opportunity for the industries
to leverage female resource pool.
RESKILLING REVOLUTION
India recently joined the World Economic Forum’s Reskilling Revolution as a founding
government member. Founding governments include Brazil, France, India, Pakistan, the
Russian Federation, UAE and the US.
Reskilling Revolution aims to provide one billion people with better education, skills and
jobs by 2030.
WEF also released a report titled ‘Jobs of Tomorrow: Mapping Opportunity in the New
Economy’ to identify jobs that require reskilling.
India Skills 2020: It is an event by Ministry of Skill Development and Entrepreneurship that
provides a platform for skilled and talented Indian youngsters to showcase their abilities at
regional and national level competitions in over 50 skills.
RPL certificates to 500 candidates: Recognition of Prior Learning (RPL) is a platform to
provide recognition to the informal learning or learning through work to get equal
acceptance as the formal levels of education.
NATIONAL STARTUP ADVISORY COUNCIL
Recently Central Government has notified the structure of the National Startup Advisory
Council. NSAC aims to build a strong ecosystem for nurturing innovation and startups in
the country
PRIORITY SECTOR LENDING
Priority Sector includes the following categories:
(i) Agriculture (ii) Micro, Small and Medium Enterprises
(iii) Export Credit (iv) Education (v) Housing (vi) Social Infrastructure
(vii) Renewable Energy (viii) Others.
PMKISAN
Pradhan Mantri Kisan Samman Nidhi (PMKISAN) is a Central Sector scheme with 100%
funding from Government of India. The entire responsibility of identification of beneficiary
farmer families rests with the State / UT Governments.
Under PM-Kisan scheme, central government is providing annually Rs 6,000 in three
equal installments to about 14 crore farmers.
Fertilizers in India- an overview
India is second largest consumer of urea fertilizers after China.
India also ranks second in the production of nitrogenous fertilizers and third in phosphatic
fertilizers whereas the requirement of potash is met through imports since there are limited
reserves of potash in the country. It is one of the eight core industries.
Fertilizers can be classified in three categories namely- Primary, Secondary and
Micronutrients
PDS REFORMS
To bring automation in Public Distribution System (PDS), electronic point of sale(ePOS) was
initiated in Punjab.
Under ePOS, beneficiaries can get their ration just by getting their fingerprints matched at
Aadhar enabled ePOS machines instead of having to show their ration card.
PDS facilitates supply of food grains and distribution of essential commodities to poor
through network of Fair Price Shops (FPS) at subsidized price
To further focus on poor, Targeted Public Distribution System (TPDS) was launched in
1997.
Plan Scheme on ‘End-to-End Computerisation of TPDS Operations’ is being run in
collaboration with all States/UTs under 12th Five Year Plan (2012-17). Validity of scheme has
been extended upto March 2020.
One nation, one ration card initiative: The Centre has designed a standard format for
ration cards and has asked state governments to follow the pattern while issuing fresh ration
cards. In a step towards the launch of ‘One Nation, One Ration Card’ by June 2020,
Ministry of Consumer Affairs, Food and Public Distribution is working to integrate 12 states
on a single portability platform – Public Distribution System Network (PDSN).
Integrated Management of Public Distribution System
The main objective of the scheme is to introduce nation-wide portability of ration card
holders under National Food Security Act, 2013 (NFSA), through 'One Nation One Ration
Card' system.
It enables the migratory ration card beneficiaries to lift their entitled foodgrains from any Fair
Price Shop (FPS) of their choice in the country by using their existing ration card issued in
their home State/UT after biometric authentication on electronic Point of Sale (ePoS) devices
installed at the FPSs.
AGRICULTURAL PRODUCE MARKET COMMITTEES (APMCS)
Central government is impressing upon states to dismantle the Agricultural Produce Market
Committees (APMCs) and move towards a better platform by adopting electronic National
Agriculture Market (e-NAM) as digital agriculture market at national level will ensure that
farmers get better price for their produce.
APMC are established by the state governments in order to eliminate the incidences
exploitation of the farmers by the intermediaries, where they are forced to sell their produce
at extremely low prices.
e-NAM is pan-India electronic trading portal for farm produce which aims to create unified
national market for agricultural commodities by integrating existing APMC markets.
SOIL HEALTH CARD SCHEME
Soil Health Card scheme recently completed five successful years of implementation. Soil
health and fertility is the basis for sustainable profitability of the farmers. Using optimal
doses of fertilizers and cropping pattern as per the scientific recommendation is the first
step towards sustainable farming.
In India, the current consumption of Nitrogen, Phosphorus, and Potassium (NPK) ratio is
6.7:2.4:1, which is highly skewed towards nitrogen (urea) as against ideal ratio of 4:2:1.
DIGITISATION OF LAND RECORDS
Recently, Ministry of Rural Development informed that about 90 per cent of villages in India
have computerized the Records of Right (RoR) and about 53 per cent of survey maps showing
boundaries and ownership of land have been digitized.
Telangana and Maharashtra top the list of states with 99% organization of land records
data followed by Andhra Pradesh at 98%. Along with some States in the North East, Kerala
at 43.24% and Jammu and Kashmir at 9.32% are lagging behind in the organization of land
records.
Maharashtra first state to integrate its land records with the web portal of PM Fasal Bima
Yojana (PMFBY)
DAIRY SECTOR
Central government has made some changes in Dairy Processing and Infrastructure
Development Fund (DIDF) scheme.
Government increased the interest subvention or subsidy on loans given to the dairy sector
from 2 per cent to 2.5 per cent.
The funding period of the scheme is revised (earlier 2017-18 to 2019-20: now 2018-19 to
2022-23) and the repayment period has been extended up to 2030-31.
It also proposed to intensify the Quality Milk Programme for both cooperative and private
sector with fund sharing basis to improve quality of milk.
Budget 2020 aims to double the country’s milk processing capacity by 2025. (from 53.5
million tonne to 108 million tonne)
EDIBLE OIL DEFICIENCY
The Commerce ministry has asked the Agriculture ministry to prepare a road map for India
to attain self-sufficiency in edible oil production.
India imports most of its edible oils from Indonesia and Malaysia. Moreover, Malaysia has a
duty advantage over Indonesia under the India-Malaysia Free Trade Agreement.
Under the government’s plan to double farmers’ incomes, achieving self-sufficiency in
oilseeds production by 2030 is a major target. Also, the need for a “zero edible oil import”
plan was discussed at an inter-ministerial meeting.
Small Farmers’ Agri- Business Consortium (SFAC)
It is an Autonomous Society promoted by Department of Agriculture, Cooperation and
Farmers Welfare, Ministry of Agriculture and Farmers Welfare, Govt. of India“ It’s role is to
aggressively promote agribusiness project development in their respective States.
The Society is governed by Board of Management which is chaired, ex- officio, by Union
Minister for Agriculture and Farmers Welfare as the President and the Secretary,
Department
of Agriculture, Cooperation and Farmers Welfare, Government of India, is the ex-officio Vice-
President.
SUTRA PIC India Programme
It stands for Scientific Utilisation Through Research Augmentation-Prime Products from
Indigenous Cows. It is inter-Ministerial funding program to research on ‘indigenous’ cows.
It has been planned with the support of Ministry of Science & Technology along with Council
of Scientific & Industrial Research, Ministry of Ayush, Ministry of New and Renewable Energy
etc.
QUESTIONS FOR CLARIFICATION
1. “Central Government Debt” includes which of the following?
(i) Outstanding liabilities on the security of the Consolidated Fund of India
(ii) Outstanding liabilities in the Public Account of India
(iii) Off-budget liabilities
Select the correct answer using the code given below:
(a) (i) only (b) (i) & (ii) only
(c) (ii) & (iii) only (d) All of the above
2. Which of the following is not a case of Centre’s Off Budget Borrowings?
(a) Borrowing by FCI to fund the food subsidy programme
(b) Borrowing by NTPC for its power generation projects
(c) Borrowing by NABARD for govts’ irrigation projects
(d) Borrowing by HUDCO to fund the affordable housing programme
3. Consider the following statements regarding electronic National Agriculture Market (e-NAM)
(i) It will ensure that the people get the agri-commodities at the same price over the entire
country
(ii) Farmers can sell their agri-produce through e-NAM sitting at their homes without bringing it
in the physical APMC mandis
Select the correct answer using the code given below:
(a) (i) only (b) (ii) only
(c) Both (i) & (ii) (d) Neither (i) nor (ii)
4. Participatory Guarantee System for India (PGS-India) is related to which of the following:
(a) Organic Farming
(b) Patents
(c) Banking
(d) None of the above
5. Consider the following statements regarding the scheme PM-KISAN:
(i) All the farmers are eligible without any exception
(ii) The scheme will not be inflationary in nature
Select the correct answer using the code given below:
(a) (i) only (b) (ii) only
(c) Both (i) & (ii) (d) Neither (i) nor (ii)
6. “Private Entrepreneurs Guarantee Scheme” is related to which of the following?
(a) Construction of Godowns in PPP mode
(b) Construction of Mega Food Parks by private developers
(c) Export promotion
(d) Promotion of MSMEs
7. Consider the following statements regarding the 'Nutrient Based Subsidy' (NBS) Scheme.
(i) It is given for phosphatic and potassic fertilizers
(ii) It is given for urea
(iii) The prices of fertilizers under nutrient based scheme are regulated by the government
(iv) Subsidy is based on per kg of nutrients present in the fertilizer
Select the correct answer using the code given below:
(a) (i) & (iii) only (b) (ii) & (iii) only
(c) (i) & (iv) only (d) (iii) & (iv) only
Answers:-
1) D 2) B 3) D 4) A 5) D 6) A 7) C
MICRO, SMALL AND MEDIUM ENTERPRISES
The Government has approved changes to operational guidelines of the Interest Subvention
Scheme to provide a fillip to the sector.
It was launched in 2018 which provides a 2% interest subvention on fresh or incremental
loans for all GST registered MSMEs having valid Udyog Aadhaar Number (UAN).
It aims at encouraging both manufacturing and service enterprises to increase
productivity and provides incentives to MSMEs for onboarding on GST platform which helps
in formalization of economy, while reducing the cost of credit.
The Scheme will be in operation for a period of two financial years FY 2019 and FY 2020.
Small Industries Development Bank of India (SIDBI) is the national-level nodal
implementation agency for the scheme.
The new guideline eases the settlement of claims and requirement of Udyog Aadhaar
Number (UAN). Trading activities without UAN have been made eligible.
NATIONAL INVESTMENT AND MANUFACTURING ZONES (NIMZ)
Recently central government granted final approval to three NIMZs namely Prakasam (Andhra
Pradesh), Sangareddy (Telangana), Kaliganganagar (Odisha).
The NIMZs are envisaged as integrated industrial townships with state of the art
infrastructure, land use on the basis of zoning, clean and energy efficient technology,
necessary social infrastructure, skill development facilities etc. to promote worldclass
manufacturing activities.
At least 30% of the total land area proposed for the NIMZ will be utilized for location of
manufacturing units. The land for these zones will preferably be waste infertile land not
suitable for cultivation, not in the vicinity of any ecologically fragile area and with
reasonable access to basic resources.
STEEL SECTOR
As per World Steel Association data, India became the second largest steel producer of
crude steel after China in 2018 and 2019, by replacing Japan.
Steel being a deregulated sector, the Government does not set any annual targets for steel
production
Ministry of steel issues the Steel Scrap Recycling Policy. It shall provide standard guidelines
for collection, dismantling and shredding activities in an organized, safe and environmentally
sound manner. The policy envisaged a framework to facilitate and promote establishment
of metal scrapping centres in India.
TELECOM SECTOR
India is currently the world’s second-largest telecommunications market with a subscriber
base of 1189.28 million (of which mobile telephone connections are 1168.32 million and
landline telephone connections are 20.96 million).
The overall tele density in the country is 90.23%. While the rural tele density is currently
57.01%, the urban tele density stands at 160.87%.
A committee headed by Rajiv Gauba has been setup to help the struggling telecom sector.
Challenges being faced by Indian Telecom sector include- Tarrif war, low level of capital
expenditure, large accumulated debts, limited spectrum availability, import dependence, high
regulatory dues and high taxes.
National Broadband Mission
The vision of the NBM is to fast track growth of digital communications infrastructure,
bridge the digital divide, facilitate digital empowerment and inclusion and provide
affordable and universal access of broadband for all.
The mission is part of the National Digital Communications Policy, 2018. Objective of the
Mission includes Broadband access to all villages by 2022 and to Develop a Broadband Readiness Index (BRI)
HARMONIZED SYSTEM (HS CODE)
Khadi has been allocated a separate Harmonized System (HS) code by the Ministry of
Commerce and Industry. The absence of a separate HS code hindered Khadi from achieving
its full potential, as its exports were difficult to categorize and calculate.
Harmonized System is a six-digit identification code developed by the WCO (World
Customs Organization). It allows participating countries to classify traded goods on a
common basis for customs purposes. India has 8-digit Indian Trade classification (HS)
code based on Harmonized System of Coding.
TECHNICAL TEXTILES
Cabinet Committee on Economic Affairs (CCEA) has recently approved the setting up of a
National Technical Textiles Mission with a total outlay of ₹1,480 Crore.
Technical textiles (TT) are textiles materials and products manufactured primarily for
technical performance and functional properties rather than aesthetic or decorative
characteristics.
Indian technical textiles segment constitute around 6% of the $250 billion global technical textiles market.
L2PRO INDIA
Department for Promotion of Industry and Internal Trade (DPIIT), launched the website and
mobile application L2Pro India (Learn to Protect, Secure and Maximize Your Innovation)
on Intellectual Property Rights (IPRs).
It has been developed by Cell for IPR Promotion and Management (CIPAM)-DPIIT in
collaboration with Qualcomm and National Law University (NLU), Delhi.
The modules of this e-learning platform will aid and enable in understanding IPRs for their
ownership and protection, integrate IP into business models and obtain value for their R&D
efforts.
RAILWAY RESTRUCTURING
Recently, Union Cabinet approved organizational restructuring of the Indian Railways (IR).
Reforms include Unification of the existing 8 Group A services of the Railways into a Central
Service called Indian Railway Management Service (IRMS).Re-organisation of Railway Board on functional lines headed by Chairman of Railway Board
with four Members and some Independent Members.
The existing service of Indian Railway Medical Service (IRMS) to be consequently renamed as
Indian Railway Health Service (IRHS).
PRIVATE SECTOR IN RAILWAYS
Indian Railways has entered into Procurement cum Maintenance Agreement with
Madhepura Electric Locomotive Pvt. Ltd. (MELPL), a joint venture of Indian Railways and M/s
Alstom (France).
A landmark agreement worth 3.5 bn Euro was signed to manufacture 800 electric locomotives
for freight service and its associated maintenance.
100% FDI is allowed under automatic route in most of areas of railway like high speed trains,
railway electrification, passenger terminal, mass rapid transport systems, railway infrastructure
etc. However, FDI are not allowed in train operations due to safety concerns
Amitabh Kant Panel- Ministry of Railways has constituted Amitabh Kant Panel to oversee the
entry of private operators for 150 trains and development of 50 railway stations as per global
standards.Tejas Express- These are India’s first two private trains which will run on following routes-
Lucknow-Delhi-Lucknow corridor and Ahmedabad-Mumbai corridor
VADHAVAN PORT
Cabinet gave in-principle approval for setting up a Major Port at Vadhavan in Maharashtra.
A Special Purpose Vehicle, formed with Jawaharlal Nehru Port Trust as lead partner, will
develop the port infrastructure. All business activities would be undertaken under Public
Private Partnership mode.
Jawaharlal Nehru Port is the biggest container port in India and the 28th largest in world.
When ready, Vadhavan port is expected to be among the top 10 container ports in world.
India has 12 major and 205 notified minor and intermediate ports. Only two major ports,
namely Jawahar Lal Nehru Port Trust (JNPT) (1989) and Ennore (Kamrajar) Port (1999), and 9
minor ports by state governments have been developed in the last 30 years.
COMMERCIAL COAL MINING
India will now offer coal mines to private companies ‘only for commercial mining and sale
purpose’, thereby moving away from the earlier regime of offering mines for captive use.
Captive coal blocks produced only 25.1 million tonne (MT) in 2018-19, much lower than the
peak output of 43.2 MT in 2014-15 when the Supreme Court had cancelled the licences of 204
such coal mines.
Captive mining could not achieve desired results as it presumed that power producers, steel
makers and others have the expertise and inclination for mining.
ULTRA-MEGA RENEWABLE ENERGY PARKS (UMREP)
The Ministry of New and Renewable Energy (MNRE) aims to set up Ultra Mega Renewable Energy
(RE) Parks of a total of 50 GW in Gujarat and Rajasthan.
The initiative could be the one of the largest renewable energy investment programmes in the
world.
Khavada in Gujarat and Jaisalmer in Rajasthan have been identified for RE parks of 25,000
megawatt (25GW) each.
Land would be made available for setting up solar, wind and wind hybrid plants and the
proposed parks would have received necessary clearances of the respective state governments
and the Ministry of Defence.
The objective of the UMREPP is to provide land upfront to the project developer and facilitate
transmission infrastructure for developing RE based UMPPs with solar/wind/hybrid and also with
storage system, if required.
RENEWABLE ENERGY INDUSTRY PROMOTION AND FACILITATION BOARD (REIPFB)
Ministry of New and Renewable Energy (MNRE) has decided to constitute REIPFB.
It will deal with challenges and issues being faced by Renewable Energy (RE) sector due to
Payment delays by state distribution companies, increasing curtailment of projects,
renegotiation of power purchase agreements (PPAs) by states and difficulties in land
procurement and transmission connectivity.
RENEWABLE HYBRID ENERGY SYSTEMS
India recently conducted two auctions for wind/solar hybrid projects.
Hybrid energy system usually comprises of two or more renewable energy sources
combined in such a way to provide an efficient system with appropriate energy conversion
technology connected together to feed power to local load or grid.
Various types of Hybrid Renewable Energy Systems include: Biomass-wind-fuel cell, a
photovoltaic cell array coupled with a wind turbine, hydro-wind energy system etc.
POWER PURCHASE AGREEMENTS
Recently, various states have been working to renegotiate the Power Purchase Agreements
(PPAs) with the renewable energy companies.
A Power Purchase Agreement (PPA) is a contract between two parties, one who generates
electricity and one who is looking to purchase electricity. These define all of the commercial
terms for the sale of electricity between the two parties, including when the project will begin
commercial operation, schedule for delivery of electricity, penalties for under delivery,
payment terms, and termination.
INFRASTRUCTURE FINANCING
A Task Force under the chairmanship of Economic Affairs Secretary had been constituted to
draw up a NIP(National Infrastructure Pipeline) for each of the years from FY 2019-20
to FY 2024-25. It will help to achieve the target of $5 trillion economy by 2025.
NIP will enable a forward outlook on economic and social infrastructure projects which
will create jobs, improve ease of living, and provide equitable access to infrastructure for all,
thereby making growth more inclusive.
INDIA INFRASTRUCTUREFINANCE COMPANY LIMITED (IIFCL)
Union Cabinet has approved the proposal for providing additional equity support to IIIFCL to the
tune of Rs 5,300 crore in financial year 2019-20 and Rs 10,000 crore in financial year 2020-21.
IIFCL, a wholly owned Government of India company set up in 2006 to provides long term
finance to viable infrastructure projects across sectors. It is a Non-Banking Financial Company
– Infrastructure Finance Company (NBFC-IFC) registered with RBI since September, 2013.
Credit Linked Subsidy Service Awas Portal
Minister for Housing and Urban Affairs launched Credit linked Subsidy Services Awas
Portal, (CLAP). The portal provides a transparent and robust realtime web-based
monitoring system for beneficiaries of credit-linked Subsidy Services (CLSS) under Pradhan
Mantri Awas Yojana-Housing for All (Urban).
Using the portal, a beneficiary can track his application status in real-time and thus will
help in addressing the grievances of beneficiaries in a more comprehensive and organized
manner.
Elephant Bonds: An advisory group to GOI has suggested issuance of ‘Elephant Bonds’.
The HLAG estimates that India could recover up to $500 bn of black money stashed overseas
through Elephant bonds. Elephant Bonds would be sovereign bonds issued for aperiod of 25
years in which people declaring undisclosed income will be bound to invest 50 per cent, similar to
an amnesty scheme.
TreDS: It stands for Trade Receivable Discounting System
It is an online bill discounting platform that helps cash starved micro, small and medium
enterprises (MSMEs) raise funds by selling their trade receivables to corporates.
Major Economic Indices
Global Competitiveness Report: By World Economic Forum
It features the Global Competitiveness Index 4.0 (GCI 4.0), which has been used since 2018.
It provides guidance on what matters for long-term growth. The GCI 4.0 framework is organized into 12 main drivers of productivity, which are categorized as
Enabling Environment- Institutions, Infrastructure, ICT adoption, Macro-economic stability
Markets- Product market, Labour market, Financial system, Market size
Human Capital- Health and Skills
Innovation Ecosystem- Business dynamism and Innovation capability
India’s rank in 2020 is 72.
Global Social Mobility Index: By world Economic Forum
It is designed to provide policy-makers with a means to identify areas for improving social
mobility and promoting equally shared opportunities in their economies, regardless of their
development.
Social mobility is the moving of individuals, families, or groups up or down the social ladder
in a society, such as moving from low-income to middle class. In absolute terms, it is the
ability of a child to experience a better life than their parents.
It measures countries across five key dimensions distributed over 10 pillars – health;
education (access, quality and equity); technology; work (opportunities, wages, conditions);
and protections and institutions (social protection and inclusive institutions).
India’s rank in 2020: 76th
Human Development Report: By UNDP
The Human Development Report releases five composite indices each year: Human
Development Index (HDI), Inequality-Adjusted Human Development Index (IHDI),
Gender Development Index (GDI), Gender Inequality Index (GII), and the
Multidimensional Poverty Index (MPI).
India ranks 129 out of 189 countries on the 2019 HDI compared to 130th in 2020
World Employment and Social Outlook
Released by- International Labour Organization (ILO). ILO is a UN agency whose mandate
is to advance social justice and promote decent work by setting international labour
standards
It analyses key labour market issues, including unemployment, labour underutilization,
working poverty, income inequality, labour income share and factors that exclude people
from decent work.
World Economic Outlook
Released by- International Monetary Fund (IMF)
A Survey by the IMF staff usually published twice a year. It presents IMF staff economists'
analyses of global economic developments during the near and medium term. Chapters give
an overview as well as more detailed analysis of the world economy; consider issues affecting
industrial countries, developing countries, and economies in transition to market; and address
topics of pressing current interest.
World Happiness Report: By United Nations
India’s Rank 2019: 140 among 156 countries
QUESTIONS FOR CLARIFICATION
1. “Annual Observance Report” is published by which institution/agency?
(a) IMF (b) World Bank
(c) RBI (d) OECD
2. Harmonized System of Nomenclature’ (HSN) was recently in the news, is related to which of the
following?
(a) Classification of goods in international trade (b) International financial transactions
(c) Space technology (d) Classification of seeds and plants
3. Which of the following institution is not part of World Bank Group?
(a) International Finance Corporation
(b) The Multilateral Investment Guarantee Agency
(c) The International Centre for Settlement of Investment Disputes
(d) Food and Agricultural Organization
4. Which of the following statements are true regarding the “Multilateral Convention to
Implement Tax Treaties Related Measures”?
(i) India has ratified the Treaty
(ii) It has come into force
(iii) It will replace double taxation avoidance agreements
Select the correct answer using the code given below:
(a) (i) only (b) (i) & (ii) only
(c) (i) & (iii) only (d) (iii) only
5. Which of the following are imposed in case a country’s government is subsidizing its exporters?
(a) Anti-Dumping Duty (b) Counter-vailing Duty
(c) Safeguard Duty (d) Customs Duty
6. Which of the following has been granted infrastructure status?
(i) Multi-modal logistics park
(ii) Cold Chain
(iii) Affordable Housing
(iv) Soil-testing laboratories
Select the correct answer using the code given below:
(a) & (ii) only (b) (i), (ii) & (iii) only
(c) & (iv) only (d) All of the above
Answers:-
1) A 2) A 3) D 4) B 5) B 6) D