1 Economic Survey

Volume 1

2 Economic Survey

01 Shifting Gears: Private Investment as the Key Driver of Growth, Jobs, Exports & Demand

3-11

02 Policy for Homo Sapiens, Not Homo Economics: Leveraging the Behavioural Economics of “Nudge"

12-22

03 Nourishing Dwarfs to become Giants: Reorienting Policies for MSME Growth 23-28

04 Data “Of the People, By the People, For the People” 29-36

05 Ending Matsyanyaya: How to Ramp up Capacity in the Lower Judiciary 37-44

06 How does Policy Uncertainty affect Investment? 45-50

07 India's Demography at 2040: Planning Public Good Provision for the 21st Century 51-56

08 From Swachh Bharat to Sunder Bharat via Swasth Bharat: An Analysis of the Swachh Bharat Mission

57-62

09 Enabling Inclusive Growth through Affordable, Reliable & Sustainable Energy 63-73

10 Effective Use of Technology for Welfare Schemes – Case of MGNREGS 74-79

11 Redesigning a Minimum Wage System in India for Inclusive Growth 80-87

LEARN, UNLEARN

& RE-LEARN

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Introduction:

The Survey makes the case for investment as the key driver of growth. By presenting data as a public good, emphasizing legal reform, ensuring policy consistency, and encouraging behaviour change using principles of behavioural economics, the Survey aims to enable a self-sustaining virtuous cycle in which key ingredients include a focus on policies that nourish MSMEs to create more jobs and become more productive, reduce the cost of capital, and rationalise the risk-return trade-off for investments.

Last Five Years: The Accomplishments:

Macroeconomic Stability:

In the last five years when the world did not appear to have changed much, India became the sixth largest economy by sustaining growth rates higher than China, thereby earning the epaulette of being the fastest growing major economy in the world.

The current account deficit (CAD) remained within manageable levels.

Foreign exchange reserves rose to all-time highs.

Average inflation in these five years was less than half the inflation level of the preceding five years

Monetary Policy Committee (MPC) which mandate to target a headline inflation of 4 per cent, with a band of two percentage points on either side. The framework has been successful in containing inflation.

Gross Fiscal Deficit (GFD) and GDP ratio declined from 4. 5 per cent in 2013-14 to 3. 4 per cent in 2018-19.

Shifting Gears: Private

Investment as the Key

Driver of Growth, Jobs,

Exports & Demand

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Beneficiary focus and targeted delivery

In the last five years the government has taken several steps on last-mile delivery of basic services to the poor and on creating pathways for the benefits of growth to reach the bottom of the socioeconomic ladder.

The promulgation of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits, and Services) Act, 2016: By assigning a unique identification number to every individual, the government now has the ability to provide targeted support. Presently, Aadhaar coverage stands at more than 90 per cent of the country’s population.

Pradhan Mantri Jan Dhan Yojana (PMJDY), a financial inclusion initiative.

The linking of mobile numbers with bank account numbers and subsequently Aadhaar, created a JAM (Jan Dhan, Aadhaar, Mobile) trinity that further secured Direct Benefit Transfers (DBT) to the intended beneficiaries.

A key initiative for last-mile delivery was the Pradhan Mantri Ujjwala Yojana (PMUY) that was launched in 2016. The PMUY had originally targeted to provide 5 crore LPG connections over a span of three years to BPL families with a support of `1, 600 per connection.

In 2018, another effort to provide a basic safety net was launched through the Ayushman Bharat Yojana (ABY), which provides an insurance cover of 5,00,000 for cashless treatment to each of the 100 million BPL families at a nominal premium of 100 per month.

Infrastructure

The creation of physical infrastructure accelerated significantly during 2014-19. Some key achievements are as follows:

In April 2018, electricity finally reached every village in India.

The construction of national highways (NH) proceeded at a rapid pace with more than 20 per cent of the existing highway length of 132, 000 km being constructed in the last four years alone.

UDAAN scheme was launched in 2017 and Over 30 unserved and underserved airports have been mainstreamed under UDAAN with flights creating additional 40 lakh seating capacity.

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North Eastern states was a special focus and there has been a significant improvement in connectivity with the building of key bridges, and the expansion of railways/highways. (Bogibeel bridge in Assam, the second longest rail-cum-road bridge in Asia)

Federalism

The Fourteenth Finance Commission increased the share of states in the divisible pool of central taxes from 32 percent to 42 percent. This shift empowers states to manage their revenues and expenditures independently.

The launch of the GST (Goods and Services Tax) in July, 2017 added a new dimension to centre-state and inter-state financial relations.

The GST Council experience provides key learning for implementing cooperative federalism in several other areas such as labour and land regulation.

Niti Aayog has helped institutionalize cooperative federalism by setting up teams from both the states and the central government to jointly evolve strategies for addressing development challenges

Corporate Exits

Insolvency and Bankruptcy Code (IBC) was introduced in 2016, it consolidated the insolvency resolution process into a single law by repealing/ amending multiple rules and processes earlier in operation.

Following the operationalization of IBC since 2017, a significant number of non-performing assets have been brought under its ambit.

The Next Five Years: A Blueprint for Growth and Jobs

With the micro-economic and macroeconomic foundations laid over the last five years, the Indian economy is ready to shift gears so that economic growth, jobs and exports can be pushed up to the next level. For this purpose, the Survey presents a blueprint.

A virtuous cycle of savings, investment, exports and growth with investment as the “central driver”

This Survey makes the case for investment as the “key driver” that can create a self-sustaining virtuous cycle in India. This investment can be both government investments in infrastructure, as such investment crowds in private investment

Investment, especially private investment, is the “key driver” that drives demand, creates capacity, increases labour productivity, introduces new technology, allows creative destruction, and generates jobs.

When the economy is in a virtuous cycle, investment, productivity growth, job creation, demand and exports feed into each other and enable animal spirits in the economy to thrive.

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In contrast, when the economy is in a vicious cycle, moderation in these variables dampen each other and thereby dampen the animal spirits in the economy.

Savings and growth are not only positively correlated but their positive correlation is even stronger than that between growth and investment. In fact, it is argued that as investment is risky, entrepreneurs are exposed to the risk of idiosyncratic business failure that leads to the loss of the invested capital. Therefore, savings have to increase more than investment to allow for the accumulation of precautionary savings.

Labour and investment complement each other therefore; job creation can indeed be fostered by encouraging investment. The Chinese experience illustrates how a country with the highest investment rates also created the most jobs. What matters most is whether or not investment enhances productivity and thereby international competitiveness.

An aggressive export strategy must be a part of any investment driven growth model.

Navigating A World of Constant Dis-Equilibrium

An economy that is in a constant state of dis-equilibrium needs a new approach to navigate. Therefore, navigating this uncertain world of dis-equilibrium requires three elements:

(i) A clear vision;

(ii) A general strategy to achieve the vision; and

(iii) The flexibility and willingness to continuously recalibrate tactics in response to unanticipated situations.

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Behavioural economics

By analysing the successful behavioural change effected by the Swachh Bharat Mission and the Beti Bachao, Beti Padhao campaigns; this Survey incorporates their learning and lays out frameworks for integrating behavioural economics into policymaking in various contexts:

Taking the learning from Beti Bachao, Beti Padhao campaigns, the chapter attempts to further the cause of Gender equality by coining the slogan of BADLAV (Beti Aapki Dhan Lakshmi Aur Vijay-lakshmi) to inter alia enhance contribution of women in the workforce and the economy

The framework embeds the idea of taking off from the Swachh Bharat Mission into "Swasth + Ayushman = Sundar" Bharat. This would enhance labour productivity and enhance savings, and thereby investment;

Insights from behavioural economics can be utilised to enhance the credit culture, especially with respect to frauds and wilful defaults, by drawing on the social and cultural norms of the “doctrine of pious obligation. ” This, in turn, will foster credit growth and investment.

Behavioural insights can be leveraged to transform the tax culture from one of tax evasion to tax compliance. This would then provide the necessary revenues for investments in both the hard infrastructure of roads, ports, railways, etc. and the soft infrastructure of skills and education;

Behavioural insights can build on the positive outcome of the introduction of the GST, a path-breaking policy change to reduce loss aversion and thereby improve policy and legislative outcomes.

Data as a Public Good

Governments already hold a rich repository of administrative, survey, institutional and transactions data about citizens. However, these data are scattered across numerous government bodies. Utilising the information embedded in these distinct datasets would inter alia enable government to enhance ease of living for citizens, enable truly evidence-based policy, improve targeting in welfare schemes, uncover unmet needs, integrate fragmented markets, bring greater accountability in public services, generate greater citizen participation in governance, etc.

Given that sophisticated technologies already exist to protect the privacy and share confidential information, governments can create data as a public good within the legal framework of data privacy.

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Legal Systems and Contract Enforcement

A well-functioning legal system is important to economies in all situations, it is absolutely central to one that aims to drive economic growth through high investment rates in an unpredictable world.

Unfortunately, India’s legal system, burdened by 3. 5 crore pending cases, is arguably now the single biggest constraint to doing business in India and thereby fostering investment.

The World Bank’s latest Ease of Doing Business Report ranked India at 163 for contract enforcement.

Experience shows that every other field of economic reform, be it property rights, taxes and insolvency, eventually flounders because it gets entangled in the legal system. This is why the legal sector reforms must be a top priority.

Major Factors, Reforms and Risks

Role of Demographics in the “Virtuous Cycle”

India has already entered this demographic phase of a high share of working age population, and will remain in this “demographic dividend” zone for over two decades.

A rise in the share of the working-age population, brought about by a decline in the fertility rate, increases income per capita as output per worker remains unchanged but the number of youth dependents declines.

In fact, changes in growth of labour force per capita, changes in the savings rate, and changes in the investment rate are three plausible mechanisms by which demographics affects the economic growth.

The “virtuous cycle” fosters job creation by exploiting the complementarity between capital and labour, on the one hand, and by increase overall productivity and labour productivity, on the other hand.

Savings is driven primarily by demographics and income growth. Therefore, keeping domestic interest rates high may not encourage savings behaviour;

As investment depends crucially on a low cost of capital, reducing real interest rates need not necessarily lower savings when the demographics are favourable. At the same time, the reduction in real interest rates can foster investment and thereby set in motion the virtuous cycle of investment, growth, exports and jobs.

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Role of Job Creation and Earnings

Firms employing less than 100 workers are categorized as small and Firms that are both small and older than ten years are categorized as dwarfs as these firms have continued to be stunted in their growth despite surviving for more than 10 years.

Dwarfs account for half of all the firms in organized manufacturing by number, their share in employment is only 13. 3%. In fact, their share in NVA is a miniscule 4. 7% despite them dominating half the economic landscape.

In contrast, young, large firms (firms that have more than 100 employees and are not more than 10 years old) account for only 6. 2% of firms by number but contribute a quarter of the employment and 38% of the NVA.

Thus, firms that are able to grow over time to become large are the biggest contributors to employment and productivity in the economy. In contrast, dwarfs that remain small despite becoming older remain the lowest contributors to employment and productivity in the economy.

Thus, firms in India do not grow enough to create the necessary jobs and productivity in the economy

The Role of the Financial Sector

The investment-led growth model implies a rapid expansion in the financial system by a factor of magnitude – both banks and capital markets. In turn, this runs up the risk that such a rapid expansion could be disrupted by a major financial crisis that derails the savings-investment dynamic.

In this context, recent efforts to clean up the banks and establish a bankruptcy process should be seen as valuable investment that must be completed.

The banking sector clean up and the IBC framework are important foundations that will now reap benefits when the investment-driven growth model is put into motion as the incentives get aligned towards better quality lending.

A cross-country comparison shows that the cost of capital remains quite high in India, which affects investment prospects in the country.

The Risk-Return Trade-off in the Economy

Another aspect that constrains the savings-investment driven model for growth, jobs and exports pertains to the incentive structure prevailing for risk-taking in the economy. The following aspects of the risk return trade-off need attention.

Systematically lowering the risks faced by investors in India is critical for the success of the investment-driven model for economic growth.

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So, the implementation of the IBC is crucial in this regard as it puts into process a framework for reconfiguration of assets following business failure.

Optimal tax policy plays a crucial role in this regard.

Design of optimal tax policy also aims to raise revenue efficiently and fairly, while encouraging the bonafide taxpayers and punishing the malafide ones.

Growth in the new economy cannot be fostered without an ecosystem that rewards innovation and entrepreneurship

Conclusion:

In postulating the above growth model, the Survey departs from traditional Anglo-Saxon

Thinking by viewing the economy as being either in a virtuous or a vicious cycle, and thus never in equilibrium.

By presenting data as a public good, emphasizing legal reform, ensuring policy consistency, and encouraging behaviour change using principles of behavioural economics, the Survey aims to enable a self-sustaining virtuous cycle. Key ingredients include a focus on policies that nourish MSMEs to create more jobs and become more productive, reduce the cost of capital, and rationalise the risk-return trade-off for investments.

Terminologies and Meanings:

“Feldstein-Horioka puzzle”, a high investment effort must be backed by domestic savings.

Animal spirits is the term John Maynard Keynes used in his 1936 book The General Theory of Employment, Interest and Money to describe the instincts, proclivities and emotions that ostensibly influence and guide human behaviour, and which can be measured in terms of, for example, consumer confidence.

“Virtuous cycle”: Self-propagating advantageous situation in which a successful solution leads to more of a desired result or another success which generates still more desired results or successes in a chain. For example, compound interest earned on a deposit keeps on generating ever greater amounts of interest. Also called virtuous cycle.

Doctrine of pious obligation: The duty or obligation of a child to repay the debts of the deceased parent is rested upon a special doctrine, known as the doctrine of pious obligation.

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Prelims Level Questions:

1. Consider the following statements:

1. Firms of age less than one year and employing less than 100 workers are categorized dwarfs.

2. Dwarfs account for half of all the firms in organized manufacturing by number.

Which of the following statements is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer: (B)

2. In which of the following schemes there is provision of Direct Benefit Transfers (DBT) to bank account of intended beneficiaries

1. MGNREGS (Mahatma Gandhi National Rural Employment Guarantee Scheme)

2. NSAP (National Social Assistance Program)

3. PMAY-G (Pradhan Mantri Awas Yojna- Gramin)

Select the correct answer using the code given below:

(a) 1 and 2 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2, and 3

Answer: (D)

3. Which of the following key indicators can help in measuring Macro stability of the economy?

1. Stability of the exchange rate in the currency markets

2. Volatility of short term policy interest rates and long term interest rates such as the yield on government bonds.

3. Changes in measured unemployment / employment.

Select the correct answer using the code given below:

(a) 1 and 2 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2, and 3

Answer: (D)

Mains Level Questions:

1. When the economy is in a virtuous cycle, it enables animal spirits in the economy to thrive. Discuss

2. With the micro-economic and macroeconomic foundations laid over the last five years, how Indian economy should shift gears to achieve the vision of India becoming a $5 trillion economy by 2025.

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Summary of the Chapter:

This chapter focuses on the use of Behavioural Economics in Public Policy. In other words, it builds on the efforts of policy-makers to gently push people by creating a social phenomenon and acceptance level in a particular direction.

This is done in opposition to more common use of incentives or pushing through mandate.

It takes the help of recent initiatives like Swachh Bharat Mission and Beti Bachao Beti Badhao to illustrate the successful use of Behavioural economics in making people take a predetermined path. However, importance is also given to preserve the right to make a choice.

Next, it explains the 7 behavioural principles to overcome cognitive biases and goes on to apply these principles to various schemes in order to improve the implementation and consequently, the outcomes of the scheme.

Important Highlights of the Chapter

What are Nudge Policies?

Public policy influences people to act in a socially desirable way. They can be graded on a spectrum capturing how strongly they influence (or coerce) behaviour. For eg.

1. Laissez faire i. e. doing nothing and leaving individuals/ firms to chart their own course. But these policies fail in case of negative externalities like expecting industry to control pollution voluntarily. Eg - ‘Give it up’ campaign

2. Nudge Policies - they gently steer people towards desirable behaviour even while preserving their liberty to choose. Eg Beti Bachao, Beti Padhao, Swachh Bharat Mission

3. Incentives - they incentivize good behaviour or dis-incentivize bad behaviour, such as subsidies for renewable energy and taxes on tobacco.

4. Mandate - It is a regulation which mandates people to act in a socially desirable manner. Eg. Ban on alcohol in some states

Policy for Homo Sapiens,

Not Homo Economics:

Leveraging the Behavioural Economics of “Nudge"

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Global Examples of Nudge Policy:

1. Pension Policy (USA) - When the default in a saving plan is non-enrolment, most people do not enrol. If, instead, employees are made to check a box to not enrol, savings increase by up to 40 per cent.

2. Tax Compliance (UK) - Positive reinforcement like sending text messages to people on how their taxes make a difference to public services increased compliance without increase in tax surveillance costs.

3. Agriculture (Africa) - To tackle farmers’ procrastination in buying fertilizer (possibly because of the hassle of traveling to town), home delivery of fertilizer early in the season was attempted. Early home delivery increased fertilizer use by 70 per cent. The effect was as much as a 50 per cent price subsidy would have accomplished.

Indian Examples of Nudge Policy:

1. Swacch Bharat Mission

(a) It is not the first programme to address sanitation concerns. But SBM is the first one to emphasize behaviour change on an unprecedented scale.

(b) BM has impacted both parameters of sanitation.

i. Access - Thus, within five years of the launch of SBM, 93. 1 per cent of rural households had access to toilets, as per the National Annual Rural Sanitation Survey (NARSS) 2018-19.

ii. Use - 96. 5 per cent of the households in rural India who have access to a toilet use it, again, as per the National Annual Rural Sanitation Survey (NARSS) 2018-19.

(c) One important point to note is the direct correlation between SBM, on the one hand, and female literacy and early marriages of girls, on the other.

(d) Use of Behavioural insights in SBM:

i. SBM was launched on 2nd October, 2014, the birthday of India’s most revered ‘role model’ Mahatma Gandhi. The idea was to create a mass movement on the lines of ‘satyagraha’ for a cleaner India.

ii. More than five lakh swachhagrahis, foot soldiers of the SBM, were recruited; to reinforce the similarity with satyagrahis. Also, swachhagrahis were able to leverage their social ties within their villages to effect change.

iii. Further, SBM relies on community-based approaches to sanitation. The fear of community scorn, or a desire to fit in, or both, have led many to renounce open defecation.

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iv. Appealing to people’s emotions, for example by attaching a sense of disgust to open defecation, has a better chance of moving people to change.

2. Beti Bachao, Beti Padhao (BBBP)

BBBP Scheme was launched on 22nd January, 2015 to address the issue of decline in Child Sex Ratio and related issues of empowerment of girls and women.

Application of behavioral economics to BBBP:

o Significance of choice of Panipat for the launch of BBBP:

Panipat, Haryana, had the worst child sex ratio at 834 among Indian states as compared with the national average of 919 (as per Census, 2011)

One of the principles of behavioural economics is to adapt the message to match “mental models” of people. The choice of Panipat in the battle was also symbolic through the association with the famous battles fought at Panipat in 1526, 1556 and 1761.

o The initiative was expanded to all districts of the Country on March 8, 2018 from Jhunjunu, Rajasthan.

The date and location was again selected carefully to ensure that the symbolism behind the message matched the relevant mental model

Rajasthan was chosen as the State improved by 34 points from 888 girls per 1000 boys in 2011 to 922 per 1000 boys in 2017-18 to indicate that good performance receives a reward.

o Also, International Women’s Day was chosen to launch to reinforce the stress on gender empowerment and establish the social norm of ‘girls are valuable’.

o BBBP Scheme demonstrates a powerful use of the insight on ‘social norm’ in its 'Selfie with Daughter' initiative.

The strategy addresses a cognitive bias called ‘failure bias’.

The failure bias is the tendency to focus on failures rather than successes, mostly because failures have greater visibility.

Therefore, in the context of BBBP, focus must be on people who treat their girls fairly;

o On an average, the sex ratio for 161 districts has improved from 909 in 2015-16 to 919 in 2018-19

How can Behavioural Economics be used in informed policy-making?

Real people are not homo economics. Homo Economics is a robot-like individual who will make the optimal choice irrespective of the way the

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choices are presented to her. This is in contrast to real people, who are relatively biased and not always rational.

For example, a large fraction of individuals opt for the default choice, irrespective of their intrinsic preferences.

Therefore, the nearly costless act of changing the default on an enrolment form makes people go for an option which is better for them in the long term. And yet, it preserves people’s right to choose.

For eg. enrolment rates in a healthcare or retirement savings plan improve dramatically if the plan is designed as an opt-in by default embedded with the option to opt-out, as opposed to voluntary enrolment by opting in.

Seven Principles of Behavioral Economics:

1. Leverage default rules- Choose the right default i. e. Make the default ‘opt-in’ for welfare programs like insurance, retirement savings, organ donation, etc, and Make the default ‘opt-out’ for purchasing add-on services, enrolling for a subsidy, etc.

2. Make it easy to choose- Keep options few in number and easy to comprehend.

3. Emphasize social norm- Emphasize the enhancers of good behaviour i. e. the number of people who vote, save regularly, file taxes on time, etc.

4. Disclose outcomes- Disclose the realized benefits of good behaviour.

5. Reinforce repeatedly- Remind people of past good behaviour and Elicit a pre-commitment for desired behaviour

6. Leverage loss aversion- Design incentives to reward good behaviour

7. Make messages match mental models- Make the rules of thumb catchy, easy to remember and intuitive

Application of the 7 principles of Behavioural Economics:

1. Using Behavioral Economics to avoid Mahatma Gandhi’s Seven Social Sins: Mahatma Gandhi’s Seven Social Sins, published in Young India on October 22, 1925, provide deep insights into the role of social and political conditions shaping human behavior.

Politics without principle - It is related to Leverage loss aversion - Growing perceptions of criminalization of politics, misuse of public office and lack of effective governance has led to increased apathy towards participation in political processes.

Wealth without work - It is related to Disclosure of outcomes - Indian ethos has always worshipped the fruits of one’s own efforts. Work also leads to dignity and self-reliance. The perception of getting things for ‘free’ as an

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entitlement has to be reoriented towards discharging our obligations towards society which will lead to enhancing tax compliance.

Pleasure without conscience - It is related to Leverage default rules - When less deserving people claim benefits of a development programme, it is an act of pleasure without conscience or a sense of responsibility. The “Give it up” campaign can use this principle more effectively.

Knowledge without character - It is related to Match messages to mental models - A lack of moral element underlying this information bears the risk of desensitizing societies to ethics of harmony and brotherhood. This has led to Gender based violence, internet trolling, and rise of drug abuse amongst teenagers. People can be nudged to understand that soft skills like self-control, altruism, patience, and trust are as important as cognitive skills.

Commerce without morality - It is related to Emphasizing social norms - These morals are shaped by social and cultural norms and religious practices. Highlighting information regarding people who exhibit good behaviour can help enhance conformity and deter unethical social behaviours. The National Corporate Social Responsibility Awards of Ministry of Corporate Affairs is an initiative in this direction.

Science without humanity - It is related to Making it easy to choose - We can use the application of technology to improve the effectiveness of welfare programmes

Worship without sacrifice - It is related to repeated Reinforcement - Across all religions, positive mythological insights about gender and caste equality as well as universal brotherhood have been available. Repeatedly reinforcing examples of people following these positive sentiments as truly spiritual people can help establish the correct social norm that “serving man is serving God.” This may also be seen in the MARD (Men Against Rape and Discrimination) campaign.

2. Transforming BBBP to BADLAV (Beti Aapki Dhan Lakshmi Aur Vijay Lakshmi): While the BBBP campaign has helped, gender inequality needs a revolutionary campaign that utilises the benefits of behavioural economics.

This campaign can be labelled BADLAV (Beti Aapki Dhan Lakshmi Aur Vijay Lakshmi) to represent the 'change' towards gender equality. The campaign must draw on cultural and social norms because they affect behaviour so crucially in India.

By drawing on the imagery of the forms of Goddess Lakshmi that symbolises wealth (Dhan Lakshmi) and victory (Vijay Lakshmi), the message of treating women as the forms of Lakshmi needs to be emphasized.

Indian women have enjoyed a position of respect and reverence in ancient Indian society.

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o Ardhanareshwar – a half male-half female representation of Lord Shiva – captures the equality between men and women.

o The Rigveda identified many women sages as treasures of knowledge and foresight: the prophetess Gargi and the great Maitreyi.

o The long philosophical conversations between sage Agasthya and his highly educated wife Lopamudra are legendary.

o Men in ancient Indian society were identified with their mothers, Yashoda-Nandan, Kaushalya-Nandan, Gandhari-Putra, as well as their wives/consorts, Janaki-Raman, Radha-Krishna

Applying 7 behavioural principles:

o Make it easy to choose - Simplify procedures for women toreport incidences of harassment and discrimination, to open bank accounts etc

o Emphasize social norms - Eg MeToo movement

o Disclose outcomes - Publishing gender rankings

o Reinforce repeatedly - Having multiple visually descriptive posters

o Leverage loss aversion - Reward structures can be modified to ameliorate the higher aversion of women to competition

o Make messages match mental models - Skill training and apprenticeship programmes can be redesigned with appropriately gendered wording to attract female applicants in male dominated professions.

3. Transforming Swacch and Ayushman Bharat to Sundar Bharat:

A strong way to reinforce behaviour is by getting people to pre-commit to a certain course of action. For instance, a simple act of asking people if they will vote, enrol in a smoking cessation programme increases the likelihood that people will act in accordance with their goals.

This needs to be leveraged to make people pre-commit to sanitation goals and about how they plan to act in the near-term future.

People often make decisions in healthcare that are not in their best interest. This ranges from failing to enrol in health insurance to which they are entitled, to engaging in harmful behaviour like smoking and drug abuse. The way forward is to develop an all-encompassing behavioural economics architecture for the entire health sector

Applying 7 behavioural principles:

o Leverage default rules - Eg default flu shot appointment time, insurance plan defaults etc.

o Make it easy to choose - Minor behavioural alterations in school and college canteen menus (putting healthy options near the cash counter, making the process of buying unhealthy options more time taking) etc.

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o Emphasize social norms - Presenting information on how many people in the neighbourhood have chosen to take up the health insurance plan

o Disclose outcomes - Disclosing to people about the realized benefits of hand-washing

o Reinforce repeatedly - Sending messages to patients that asked the patient to write down the day and time they planned to get their next vaccination, signed pledges

o Leverage loss aversion - Forfeiting physical objects in case target not met eg lottery tickets

o Make messages match mental models - Message boards

4. Give it Up Campaign: “Give It Up” encouraged above poverty line (APL) households to voluntarily surrender their LPG subsidies – for every household that “gave it up,” a BPL household would receive a gas connection.

“Give It Up” requires only a one-time action that is inconsequential to most affluent households, unlike BBBP and SBM which require repeated reminders.

People act when they see others act. Information campaigns do not, however, adequately emphasize what the (metaphorical) neighbours are doing. The Give It Up website has a “scroll of honour” to felicitate participants. However, it may be improved to readily show the participants.

Applying 7 behavioural principles:

o Leverage default rules - The default option can be modified so that households above a certain income threshold have to opt in to continue their subsidies with the default option being “opt out” of the subsidy

o Make it easy to choose - Prepopulating fields of subsidy giving up forms can make it more likely that people will submit applications

o Emphasize social norms -Making people feel good by having “Give it Up” events where participation is acknowledged with visual changes to people’s online profiles.

o Disclose outcomes - Displaying the names and photographs of people

o Reinforce repeatedly - Playing a video with a beneficiary saying thanks you.

o Leverage loss aversion - pledge a certain amount of subsidy when people feel most inspired

o Make messages match mental models - People need to be reminded more frequently

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5. PM Jan Dhan Yojana: The programme’s mandate is not only to open accounts but to enable access to credit, insurance, pension schemes and other facilities

Applying 7 behavioural principles:

o Leverage default rules - Make auto enrolment into a savings plan the default

o Make it easy to choose - Regulator must ensure that products for the poor do not confound with too many options.

o Emphasize social norms - Information campaigns should highlight the number of people who use their bank accounts

o Disclose outcomes - Remind people to sustain their usage of bank accounts

o Reinforce repeatedly - Reminding and committing people about the savings that they have done in the past

o Leverage loss aversion - get people to save more when salary increases

o Make messages match mental models - People may be asked to choose their own names such as “home savings plan” or “education savings plan. ” to reinforce planning

6. Improving Tax Compliance:

behavioural insights need to be employed to modify the social norm from “evading taxes is acceptable” to “paying taxes honestly is honorable”

Use of Religion to increase Tax Compliance:

o In Hinduism, non-payment of debts is a sin and a crime. The duty or obligation of a child to repay the debts of the deceased parent is rested upon a special doctrine, known as “The Doctrine of Pious Obligation”

o Under Islam, Prophet Muhammad advocated – A person cannot enter Paradise until his debt was paid off.

o The Bible says, “Let no debt remain outstanding except the continuing debt to love one another “

o Given the importance of religion in the Indian culture, the principles of behavioural economics need to be combined with this “spiritual/religious norm” to reduce tax evasion and wilful default in the country

Applying 7 behavioural principles:

o Leverage default rules - Automatic deduction of tax

o Make it easy to choose - Filing of tax forms even for zero payment of tax

o Emphasize social norms -Providing information about peer behaviour

o Disclose outcomes - Public shaming of individuals

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o Reinforce repeatedly - Repeatedly sending fairness driven and normative messages like most people in your local community pay their taxes on time

o Leverage loss aversion - Tax withholding followed by refunds at the time of tax filing

o Make messages match mental models - Reminding tax payers that public goods can only be provided in return for tax compliance

Suggestions for Policy Makers:

1. Set up a behavioural economics unit in the Niti Aayog

2. Every program must go through a “behavioural economics” audit before its implementation.

3. As several programs are administered by state governments, the behavioural economics team can work with various state governments.

Use of names to reinforce behavioural economics:

Messaging needs to be clear and simple and aligned to a mental model. This is evident from the names used for various recent schemes.

Examples - Namami Gange means ‘I pray to Ganga’ as the river Ganga is revered in our culture, Poshan (abhiyan) means holistic nutrition, Ayushman (Bharat) means “Being Blessed with long life” and so on.

3. Chapter-wise terminologies and their meanings

Homo Economicus - In Behavioral Economics, Homo Economicus is a robot-like individual who will make the optimal choice irrespective of the way the choices are presented to her. This is in contrast to real people, who are relatively biased and not always rational.

Anchoring Bias - Individuals suffer from a cognitive bias called “anchoring bias”, viz. , once a default option is presented to them, they anchor on to it. For example, a large fraction of individuals opt for the default choice, irrespective of their intrinsic preferences.

Failure Bias - It is a type of cognitive bias. The failure bias is the tendency to focus on failures rather than successes, mostly because failures have greater visibility. Because failures get the spotlight, people tend to think that failing is the norm, or at least that failing is more prevalent than it really is.

Sex Ratio at Birth = (Total Number of Live Female Births/Total Number of Live Male Births)*1000

Tax morale - the intrinsic motivation of taxpayers in a country to pay taxes

Factors governing Tax Morale: Tax morale is driven primarily by two perceptive factors:

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o vertical fairness, i. e. what I pay in taxes is commensurate to the benefits I receive as services from the Government; and

o Horizontal fairness, i. e. , differences in the taxes paid by various sections of society.

Mains Practice Question

1. Nudge policies may not just push the socially desired changes in the people, but also lead to revolution in the policy-making space. Illustrate with examples.

2. Do you think it is right to conclude that sanitation standards are correlated to female literacy and women empowerment?

MCQ

1. Consider the following statements about BBBP (Beti Bachao, Beti Padhao):

1. The primary focus of the scheme is to increase the enrolment ratio of girl child in education.

2. The scheme was launched in Rajasthan on International Women’s Day.

3. ‘Selfie with Daughter’ is connected to BBBP.

Which of the above statements is correct?

(a) Only 1

(b) Only 1 and 3

(c) Only 2 and 3

(d) All of the above

Answer: (B)

2. Consider the following statements regarding SBM (Swachh Bharat Mission):

1. Sanitation has a strong correlation with female literacy and women empowerment.

2. Gandhiji’s charkha and glasses are the symbol of SBM.

3. The scheme has ended with achievement of ODF status for every village in the country.

Which of the above statements is correct?

(a) Only 2

(b) Only 1 and 2

(c) Only 2 and 3

(d) All of the above

Answer: (B)

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3. What is Homo economicus?

(a) She is the new-age individual ready to take risks in search of optimal, fulfilling life.

(b) She is the individual having economic interests of community in mind as against overall, holistic growth

(c) She is a robot-like individual who will make the optimal

choice irrespective of the way the choices are presented to her

(d) She is a real life individual who will make different choices even when governed by similar questions presented in similar circumstances.

Answer: (C)

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Basic terminology Used in the Chapter

1. Dwarf Firm: Firms with less than 100 workers despite being more than ten years old. Firms that are both small and older than ten years are categorized as dwarfs as these firms have continued to be stunted in their growth despite surviving for more than 10 years

Infant Firm: infant firms are small and young.

Flexible States are those state where there is flexibility in labour laws and creates a more conducive environment for the growth of industry.

Grandfather clause is an exemption that allows persons or entities to continue with activities or operations that were approved before the implementation of new rules, regulations or laws. Generally speaking, a grandfather clause only exempts people or entities engaged in specified activities prior to new rules being put in place, while all other parties must abide by the new rules. However, these clauses effectively place two sets of rules or regulations on otherwise similar businesses or circumstances, which can create unfair competitive advantages for grandfathered parties. In these situations, grandfather clauses may only be granted for a set period of time.

Employment Elasticity: It is a measure of the percentage change in employment associated with a 1 percentage point change in economic growth. The employment elasticity indicates the ability of an economy to generate employment opportunities for its population as per cent of its growth (development) process.

Small Scale Industries (SSI) reservation policy : Reservation of products for exclusive manufacture in the small scale sector as a policy instrument for its promotion owes its origin to the Industries (Development & Regulation) Act, 1951 (section 11B). As per this policy, creation of fresh capacity in the large/medium sector in reserved areas is permitted only if the unit agrees to an export obligation of a minimum of 75% of its production. The main rationale for reservation of items for exclusive production in the SSI sector were the feasibility of producing an item in the SSI Sector without compromising on quality; level of employment generation, diffusion of entrepreneurial talent and prevention of economic concentration etc. The

Nourishing Dwarfs to

become Giants: Reorienting Policies for MSME Growth

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reservation policy was initiated in 1967 with 47 items which was enlarged to 504 items by 1978.

Summary of This Chapter:

The Bane of Dwarfism and its Impact on Jobs and Productivity:

Domination of ‘Dwarfs’ in Number

While dwarfs account for half of all the firms in organized manufacturing by number, their share in employment is only 14. 1 per cent. In fact, their share in NVA is a miniscule 7. 6 per cent despite them dominating half the economic landscape. In contrast, young, large firms (firms that have more than 100 employees and are not more than 10 years old) account for only 5. 5 per cent of firms by number but contributes 21. 2 per cent of the employment and 37. 2 percent of the NVA.

Firms that are able to grow over time to become large are the biggest contributors to employment and productivity in the economy. In contrast, dwarfs that remain small despite becoming older remain the lowest contributors to employment and productivity in the economy.

the contribution of small firms to output and employment in the manufacturing sector is insignificant though they account for close to 85 percent of all firms

Effect of Size compared to the Effect of age

As compared to the small firms, it is the young firms that contribute significantly to employment and value added.

Young firms account for a disproportionate share of employment and productivity as compared to older firms.

Cross-Sectional Comparison

The average 40- year old firm in the U. S. generates five times (=7/1. 4) as much more employment than the average 40-year old Indian firm.

Both employment creation and productivity do not grow adequately as firm’s age in India.

The Role of Policy in Fostering Dwarfism:

Policies like labour legislation create a “perverse” incentive for firms to remain small. If the firms grow beyond the thresholds that these policies employ, then they will be unable to obtain the said benefits. Therefore, rather than grow the firm beyond the said threshold, entrepreneurs find it optimal to start a new firm to continue availing these benefits.

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As economies of scale stem primarily from firm size, these firms are unable to enjoy such benefits and therefore remain unproductive.

Impact of Labour Regulation

India has a plethora of labour laws, regulations and rules, both at the centre and the state levels that govern the employer employee relationship. Many of these legislations exempts smaller firms from complying with these legislations.

For Instance under the Industrial Disputes Act (IDA), 1947 (Chapter VB) mandates companies to get permission from the Government before retrenchment of employees. This restriction is, however, applicable only to firms with more than 100 employees. Thus, firms with less than 100 employees are exempt from the need to get permission from the Government before retrenching their employees. Given the transaction costs inherent in complying with such regulations, naturally a large majority of firms would prefer to be below the threshold of 100 employees.

Thus, such labour legislation creates perverse incentives for firms to remain small. In this sense, labour legislation complements other benefits provided to small firms in providing such perverse incentives.

Comparing productivity indicators in “inflexible” versus “flexible” states

The Flexible States contribute disproportionately more, on average, to labour, capital and productivity when compared to the Inflexible States. The aggregate number of workers, capital and NVA are significantly higher on average in the Flexible States than in the Inflexible States.

Inflexible state are unable to create enough employment, cannot attract adequate capital into their states and their wages are lower as their productivity is lower.

Impact of the labour law change in Rajasthan

Post labour reforms in Rajasthan has increased number of operating factories employing more than 100 employees in the state, the average number of workers per factory in a state, total output in the state and total output per factory in the state.

.

Impact of Small Scale Reservation

Overall, when benefits reserved for small firms are eliminated, younger and larger entrants create the most jobs while older and smaller incumbents destroy the maximum jobs. Together with the fact that older and smaller firms utilize the reservation policies the most, this evidence highlights further that benefits provided to small scale firms irrespective of their age create perverse incentives for firms to remain dwarfs and thereby limit their contribution to jobs. In contrast, infant firms, especially new entrants, create the most jobs.

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The misallocation of resources due to SSI (Small scale industry) reservation policy originates from four sources (Santana and Pijoan-Mas, 2010). First, SSI policies substantially lower the average capital to labour ratio when compared to the efficient level. Second, because of the lower capital accumulation, the overall demand for labour and the market wage rate are much lower due to SSI policies than the efficient level. Third, SSI policies result in inefficient allocation of managerial talent, which in turn affects productivity

Way Forward

Dwarfs consume vital resources that could possibly be given to infant firms, they contribute less to the creation of jobs and economic growth as compared to infant firms. This necessitates re-calibration of policy towards supporting infant firms.

Incentivizing ‘infant’ firms rather than ‘small’ firms: There is a requirement to incentivize infant firms rather than dwarfs firms. It can be possible if age is provided as criteria. Incentive should be provided for fixed period of time.

Re-orienting Priority Sector Lending (PSL): Under MSME’s PSL targets, it is necessary to prioritize ‘start ups’ and ‘infants’ in high employment elastic sectors. This would enhance direct credit flow to sectors that can create the most jobs in the economy.

Sunset Clause for Incentives: With appropriate grandfathering, every incentive for fostering growth should have a ‘sunset’ clause, say, for a period of five to seven years after which the firm should be able to sustain itself. The policy focus would thereby remain on infant firms.

Focus on High Employment Elastic Sectors: To step up the impact of economic growth on employment, the focus has to be on such high employment elastic sectors

Focus on Service Sectors with high Spill over Effects such as Tourism: Developing key tourist centres will have ripple effects on job creation.

MCQ

1. Which of the following Subsector of Manufacturing in Indian economy have highest employment Elasticity?

(a) Rubber and Plastic Products

(b) Textiles and leather industry

(c) Chemicals and chemical products

(d) Electrical and Optical Equipment

Answer: (A)

Explanation:

Farm sector in India has shown negative employment elasticity or low employment elasticity.

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Textiles and leather industry, Chemicals and chemical products have high employment elasticity compared to farm sector. Rubber and Plastic Products (Employment elasticity: 0. 85) is highest. Electrical and Optical Equipment has Employment elasticity: 0. 48.

2. Which of the following provisions/incentives are available for the Small Scale Firms (irrespective of their age)

1. Priority Sector Lending

2. Purchase Preference Policy

3. Credit Guarantee Fund Scheme

Select the correct answer using the code given below:

(a) 1 only

(b) 2 and 3 only

(c) 1 and 2 only

(d) 1, 2and 3

Answer: (d)

Explanation:

Priority Sector Lending: Direct and indirect finance at subsidized interest rates shall include all loans given to micro and small enterprises, irrespective of their age.

Purchase Preference Policy: A group of items (Group IV) are reserved for exclusive purchase from small scale units, irrespective of their age. Group V items are to be purchased from MSMEs, irrespective of their age, up to 75 per cent of the requirement.

Credit Guarantee Fund Scheme: This scheme makes available

collateral-free credit to the micro and small enterprises, irrespective of their age.

3. As per Economic Survey 2018-19, which of the following states are classified as flexible state on the basis of labour reforms?

1. West Bengal

2. Uttar Pradesh

3. Rajasthan

Select the correct answer using the code given below:

(a) 3 only

(b) 2 and 3 only

(c) 1 and 2 only

(d) 1 and 3 only

Answer: (B)

Explanation:

As per Economic Survey 2018-19 Assam, Jharkhand, Kerala, Bihar, Goa, Chhattisgarh and West Bengal are classified as inflexible states. While Uttar Pradesh and Rajasthan are under the category of flexible state.

4. Consider the following statements about ‘Credit Guarantee Fund Scheme’:

1. It makes available collateral-free credit to the micro and small enterprises

2. Benefits under it is only available for two year to any micro and small enterprises.

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Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer: (A)

Explanation:

STATEMENT 1 is correct as It makes available collateral-free credit to the micro and small enterprises

STATEMENT 2 is incorrect as there is no duration for which micro and small enterprises will benefit. There is no time limit.

5. Consider the following statements about ‘GST Composition scheme’:

1. The turnover limit for businesses availing of the GST composition scheme is set at 1 crore.

2. Under this scheme anyone can pay tax at a flat percentage of turnovers every quarter, instead of paying tax at normal rate every month.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer: (B)

Explanation:

STATEMENT 1 is incorrect as the turnover limit for businesses availing of the GST composition scheme is set at 1. 5 crore.

STATEMENT 2 is correct as Under this scheme anyone can pay tax at a flat percentage of turnover every quarter, instead of paying tax at normal rate every month.

Mains Practice Question:

1. There is a requirement of re-orienting the policy stance to foster the growth of MSMEs and thereby greater job creation and productivity in the economy. Discuss

2. Deregulating labour law restrictions is one of the prime reforms required in MSME sector. Comment.

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Summary

This chapter basically argues that ‘data’ should be made a ‘public good’ and tries to give reasons and also highlights the potential benefits of that. The chapter says as the private sector may not invest in harnessing data where it is profitable, the government must intervene in creating data as a public good, especially of the poor and in social sectors of the country. Finally, it states that in the spirit of the Constitution of India, data should be “of the people, by the people, for the people” i. e., data is of the people, created by the people and should be utilized for the people.

What is Data?

Data means a representation of information, numerical compilations and observations, documents, facts, maps, images, charts, tables and figures, concepts in digital and/or analog form, and includes metadata, that is all information about data, and/or clarificatory notes provided by data provider(s), without which the data concerned cannot be interpreted or used.

Data as a general concept refers to the fact that some existing information or knowledge is represented or coded in some form suitable for better usage or processing.

The Economics of Data

In recent years, the world has witnessed an information explosion – exponential increases in the amount of published data.

Why this data explosion? As people shift their day-to-day activities online, they leave digital footprints of these activities.

Data “Of the People,

By the People, For the People”

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Concurrent with this data explosion, the advancements in gathering, storing, processing and dissemination of data have lowered the marginal cost of data to unprecedented levels and the marginal benefit to society of using this data is higher than ever.

Apart from benefits, an indirect cost also exists – the cost of misuse of data. However, technology has largely kept pace to mitigate these risks.

Social Welfare and Data

Currently, The Government of India collects four distinct sets of data about people – administrative, survey, institutional and transactions data and also much of the data is dispersed across different registries maintained by different ministries. The government can thereby deliver a better experience to the citizen by bringing disparate datasets scattered across various ministries together. If the information embedded in these datasets is utilized together, data offers the potential to reduce targeting error in welfare schemes.

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Do Data has Characteristics of a Public Good?

Public Goods: A public good is a product that one individual can consume without reducing its availability to others and from which no one is deprived. Most of public goods are both "non-rivalrous" and "non-excludable".

Data carries some of the characteristics of public goods. It is non-rivalrous, i. e. , consumption by one individual does not reduce the quantum available for others.

In principle, data can be made excludable, i. e. , it is possible to exclude people from accessing data. However, there are some kinds of data – particularly data gathered by governments on issues of social interest – that should be democratized in the interest of social welfare. Such data should be made public goods.

Why Must Data be treated as a Public Good?

Lack of private sector interests in certain sectors: Private sector investment in data related endeavours is higher than ever before. But, there are several areas where data is not as ubiquitously harnessed and used. Consider, for example, the agriculture market.

Different forms of Data: Data comes in many forms with each form offering a different benefit. Data linked to an individual can range from extremely intimate – such as their biometric details to the extremely public – such as their name. Data that is not linked to a specific individual but is still available at an individual level of granularity, is called Anonymized data. Anonymized data is critical in some areas such as medical research. Data neither linked to an individual nor at an individual level of granularity is known as public data, such as the census.

To ensure that the socially optimum amount of data is harvested and used, the government needs to step in, either by providing the data itself or correcting the incentive structure faced by the private sector, depending on the nature and sensitivity of data.

Indeed, in the agriculture sector, the Government has done exactly this by creating the e-NAM, as it is unlikely that the private sector would come up with a solution like this on its own.

32 Economic Survey

Concerns and Opportunities

Data Privacy: In the endeavour to create data as a public good, it is very important to consider the privacy implications and inherent fairness of data being used.

Economies of scale and scope: The need for a Government-driven data revolution should be motivated by three key characteristics:

1. Integration: When it comes to data, it is more useful when it is married with other data. It will be helpful in designing and implementing schemes.

2. Participation: Data needs to cover a critical mass of individuals/firms so that comparisons and correlations can be assessed among individuals/firms to generate useful policy insights.

3. Time-scale: Data must have a long enough time-series so that dynamic effects can be studied and employed for policymaking.

Thus, the data generation process exhibits significant economies of scope and scale. The private sector may not have the risk appetite or the capital to make the necessary investments required for generating data that possesses all three characteristics. Even if private sector were to put such rich data together, this would result in a monopoly that would reduce citizen welfare, on the one hand, and violate the principle of data by citizens, and, therefore, for citizens.

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Transforming India’s Data Infrastructure

Applications/Benefits

Governments themselves as beneficiaries: Being able to retrieve authentic data and documents instantly, governments can improve targeting in welfare schemes and subsidies by reducing both inclusion and exclusion errors. For example, cross-verification of the income tax return with the GST return.

Private sector firms as beneficiaries: The private sector may be granted access to select databases for commercial use like to predict demand, discover untapped markets or innovate new products.

Citizens as beneficiaries: Citizens are the largest group of beneficiaries of the proposed data revolution. Consider the case of Digital Locker.

Few Initiatives in India

Digital Locker: DigiLocker makes all their documents available, in a verified format, in one place on the cloud. Citizens only need an internet connected device, smartphone or computer to access the locker.

The National Scholarship Portal: The portal serves as an umbrella platform for all scholarship related services ranging from student application, application receipt, processing and sanction to disbursal of funds. In addition to creating a transparent database of all beneficiaries of all government scholarship schemes at various levels, the portal reduces hassles in discovering scholarships and facilitates direct benefit transfer (DBT).

NREGAsoft: NREGA soft is a comprehensive e-governance system for the

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MGNREGA scheme. Accessible by a range of stakeholders, it captures the complete flow of all MGNREGA work at every level – from the centre all the way to the panchayat. In the spirit of citizens’ right to information, the system makes available documents like muster rolls, registration application register, job card/employment register/ muster roll issue register and muster roll receipt register, which is otherwise inaccessible to the public.

Local Government Directory: It is an application developed by the Ministry of Panchayati Raj. A comprehensive directory of all local administrative units, the platform maps each land region entity to a local Government body (like villages with their respective gram panchayats) and assigns location codes compliant with Census 2011. The Local Government Directory is a great example of Data as a Public Good.

Way Forward

The benefits of creating data as a public good can be generated within the legal framework of data privacy. Going forward, the data and information highway must be viewed as equally important infrastructure as the physical highways. In the spirit of the Constitution of India, data “of the people, by the people, for the people” must, therefore, become the mantra for the government.

MCQ

1. Which of the following best describes ‘Public Good’?

(a) A public good is any commodity distributed through the Public Distribution System.

(b) A public good is a product that one individual can consume without reducing its availability to others and from which no one is deprived.

(c) A public good is a product that upon consumption by one individual prevents another individual from consuming it.

(d) None of the above

Answer: (B)

A public good is a product that one individual can consume without reducing its availability to others and from which no one is deprived. Public goods are "non-rivalrous" and "non-excludable," and most such goods are both.

2. Which of the following best describes ‘Marginal Cost’?

(a) Marginal cost is the cost which is incurred by the government for the welfare of the marginal sections in society.

35 Economic Survey

(b) Marginal cost is the cost which is added by producing one additional unit of a product or service.

(c) Marginal cost is the benefit that is missed or given up when an investor, individual or business chooses one alternative over another.

(d) Marginal Cost is the cost that has been incurred and cannot be recouped.

Answer: (B)

Marginal Cost: It is the cost which is added by producing one additional unit of a product or service.

Opportunity Cost: It is the benefit that is missed or given up when an investor, individual or business chooses one alternative over another.

Sunk Cost: It is the cost that has been incurred and cannot be recouped.

3. Which of the following is not correct about ‘Local Government Directory’?

(a) It is an application developed by the Ministry of Rural Development.

(b) The depository maps each land region entity to a local Government body (like villages with their respective gram panchayats)

(c) It assigns location codes compliant with census 2011.

(d) Both (a) and (c)

Answer: (A)

Local Government Directory: It is an application developed by the Ministry of Panchayati Raj. A comprehensive directory of all local administrative units, the platform maps each land region entity to a local Government body (like villages with their respective gram panchayats) and assigns location codes compliant with Census 2011. The Local Government Directory is a great example of Data as a Public Good.

4. Which of the following best describes ‘Anonymized data’?

(a) Data that is linked to a specific individual and is available at an individual level of granularity

(b) Data neither linked to an individual nor at an individual level of granularity

(c) Data that is not linked to a specific individual but is still available at an individual level of granularity

(d) Data that is linked to a specific individual but is not available at an individual level of granularity.

Answer: (C)

Anonymized data: Data that is not linked to a specific individual but is still available at an individual level of granularity, is called. Anonymized data is critical in some areas such as medical research.

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Public data: Data neither linked to an individual nor at an individual level of granularity, such as the census.

5. Which of the following are the potential benefits of using the ‘data’ efficiently?

1. Evidence based policy making

2. National Integrated Markets

3. Product Innovation

4. Better targeting of welfare schemes

Select the correct answer using the codes given below:

(a) 1 and 2 only

(b) 1, 2 and 3 only

(c) 3 and 4 only

(d) All of the above

Answer: (D)

Mains Practice Question

1. The protection of personal data holds the key to empowerment, progress, and innovation. In the light of the statement, identify key data protection issues in India and recommend methods of addressing them".

2. Recent Economic Survey says that ‘data’ should be made a public good. Do you agree? Also, highlight how society will be benefitted if government use the ‘data’ efficiently?

3. In the spirit of the Constitution of India, data should be “of the people, by the people, for the people.” Comment.

37 Economic Survey

Summary

This chapter helps in understanding how pending of cases in the Indian Judiciary is acting as the single biggest constraint to ease of doing business in India.

The backlog of cases weighs down the Indian judiciary, economic tribunals and the tax department, thereby constraining economic growth. Therefore it delves into various issues like Pendency, disposal time and provides solutions to increase the efficiency in the Judicial Process going forward.

Terminologies

Pendency: The pendency of a case on a given date is the time since the date of filing

Disposal time: It is measured as the time span between the date of filing and the date when the decision is passed

Case Clearance Rate (CCR): It is the ratio of the number of cases disposed of in a given year to the number of cases instituted in that year, expressed as a percentage. It is mainly used to understand the efficiency of the system in proportion to the inflow of cases.

Introduction

“The Rule of Law and maintenance of order is the science of governance”

- Kautilya’s Arthashastra

“No branch of knowledge and policy is of any avail if the Rule of Law is neglected”

- Kamandak’s Nitisara

Ending Matsyanyaya:

How to Ramp up Capacity in the Lower Judiciary

38 Economic Survey

The relationship between economic governance and the Rule of Law (Dandaniti) has been emphasized by Indian thinkers since ancient times. It is seen as the key to prosperity, and a bulwark against Matsyanyaya (i.e. law of the fish/jungle).

It should be no surprise, therefore, that the Preamble to the Constitution of India defines that the first role of the State is ‘to secure for all its citizens: Justice, social, economic, and political’.

In other words, it is well accepted that economic success and prosperity are closely linked to the ability to enforce contracts and resolve disputes.

Efforts currently taken by the government

The government’s has taken several measures to improve the present regime, by introducing

Insolvency and Bankruptcy Code

Adoption of the Goods and Services Tax

These have had a profound impact on improving Ease of Doing Business (EODB) in India.

Concerns

• This progress notwithstanding, India continues to lag on the indicator for enforcing contracts, climbing only one rank from 164 to 163 in the latest report of EODB, 2018.

• In spite of a number of actions to expedite and improve the contract enforcement regime, economic activity is being affected by the long shadow of delays and pendency across the legal landscape.

• Contract enforcement remains the single biggest constraint to improve our EODB ranking.

• This is ironical for a country that has long idealized contract enforcement. As Tulsi Ramayana puts it, “praan jayi par vachan na jayi” i. e. , “one’s promise is worth more than one’s life”.

Key Stats

• The Indian judicial system has over 3. 53 crore pending cases

• District and Subordinate courts (D&S courts) account for 87. 54 per cent of pending cases

• The distribution of Pendency of both civil and criminal cases is more or less the same.

o More than 64 per cent of all cases are pending for more than one year.

• The Disposal Rate reveals that 74. 7 per cent of the civil cases and 86. 5 per cent of the criminal cases are disposed within three years.

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o It shows that Bihar, Odisha and West Bengal have higher average disposal time than the national average for both civil and criminal cases.

o Further, Punjab and Delhi have the lowest average disposal time. These trends are consistent with the distribution of average pendency age across states.

o Again, the states in eastern India perform poorly although Gujarat too has higher disposal time.

o International comparison of disposal rate data reveals that the average disposal time for civil and criminal cases in Indian District &State (D&S) courts in 2018 was 4. 4 fold and 6 fold higher respectively when compared with the average of Council of Europe members (2016).

• The number of cases instituted each year in D&S courts has gone up, so has the number of disposals. However, the gap between institution and disposals allows cases to accumulate and results in an increase in pendency.

o This is because the CCR remains structurally below 100 per cent.

o An encouraging sign was that the CCR had increased from 86. 1 per cent in 2015 to 90. 5 per cent in 2017, but then declined to 88. 7 per cent in 2018.

Can the legal logjam be cleared?

There are two key issues at hand that need to be dealt with in order to make the judiciary more efficient.

Firstly to achieve this, a 100 per cent clearance rate must be achieved so that there is zero accumulation to the existing pendency.

Secondly, the backlog of cases already present in the system must be removed.

A look at number of Judges

There are currently 17, 891 judges in district courts compared to the sanctioned strength of 22, 750. On average, a judge disposes 746 cases.

o In order to reach 100 per cent CCR in 2018, the D&S courts needed 2, 279 additional judges. This is within the sanctioned strength!

o However, in order to clear all the backlog in the next five years, further 8, 152 judges are needed

As of June 2017, High Court judges were working at 62 per cent of their sanctioned strength.

o In order to reach 100 per cent CCR, they needed just 93 additional judges

o This is already within the present sanctioned strength for High Courts.

o To clear all backlogs in the next five years, the High Courts need a further 361 additional judges

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As of October 2018, Supreme Court judges were working at 90 per cent of their sanctioned strength.

o With a high case clearance rate of 98 per cent, each judge disposes 1, 415 cases per year on average.

o In order to reach 100 per cent CCR, the Supreme Court would have needed only one extra judge in 2018.

o To clear all backlog in the next five years, an additional eight judges are required.

How should the additional judges be allocated?

The civil cases contribute a mere 28. 38 per cent of total pendency while criminal cases contribute about 71. 62 per cent in D&S Courts.

This means that not only the backlog of criminal cases is about 2. 5 fold higher than civil cases; criminal case type also has lower CCR. This means that the situation for criminal cases is distinctly worsening.

This implies that the additional judges need to specialize in these case types so as to speed up the disposal of such cases.

Life-cycle Analysis

The progress of a case through various stages reveals to a large extent where judicial delays occur and can aid policy formulation to reduce delays and backlog.

Analysis of life-cycle can be used to precisely identify causes of delay, whether they are procedural inefficiencies or shortages of human and physical resources.

The data from eCourts shows that most of the time is spent in the ʻLCR/R and P’ (Lower Courts Records – Records and Proceedings) stage.

The process for both civil and criminal cases can be significantly sped up by targeting the delay in these specific stages.

State-wise CCR

Gujarat and Chhattisgarh have clearance rates of above 100 per cent in 2018. These states have achieved a level of efficiency where they are not only able to cope with fresh filings but can also address backlog from previous years.

Bihar, Odisha, and West Bengal have low clearance rates of 55. 58 per cent, 62. 18 per cent, and 78. 63 per cent respectively. Hence priority should be given in the appointment of additional judges.

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There is some correlation between vacancy and pendency.

This is true for Uttar Pradesh and Bihar. In these states, the focus should be on filling vacancies.

In West Bengal and Maharashtra have few vacancies but high pendency. This means that the national allocation of judges also has to be revisited.

Making Indian Courts More Productive

The analysis thus far has provided a gauge of how many judges would be needed in order to increase the clearance rate at the existing efficiency rate and the nature of the delays. However, there is a large scope for improving the efficiency of the process.

Increase number of working days:

It has often been pointed out that Indian courts close down for significant periods due to vacations. The length of these vacations varies a great deal from court to- court, but appears to have a palpable impact on the number of working days.

For instance, the Supreme Court’s official calendar for 2019 suggests that it would close for 49 days for summer vacations, 14 days for winter break, and a further 18 days for Holi, Diwali and Dussehra.

o After accounting for weekends and public holidays, it leaves 190 working days for the Supreme Court.

o In contrast, the average is 232 working days for High Courts and 244 days for Subordinate courts.

o For comparison, Central Government offices will be open for 244 working days in 2019 (note that the above calculations exclude personal leaves).

There is a great deal of variation between states, and many courts make up for vacations by working on Saturdays. The main finding is that increasing the number of working days may improve productivity of the Supreme Court and in some High Courts, but is unlikely to significantly impact lower courts.

o Subordinate courts, which account for the bulk of pendency, seem to work almost as many days as government offices.

Establishment of Indian Courts and Tribunal Services:

Most judicial reforms tend to focus only on the quality and quantity of judges, but a major problem lies with the quality of the administration of the courts system, particularly backend functions and processes. This is critical to reducing the process delays.

As a recent report by the National Institute of Public Finance and Policy put it, “For effective functioning, courts require competent administration to

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ensure that processes are followed, documents are submitted and stored, facilities are maintained and human resources are managed. Court administration must support the judges in performing their core judicial function efficiently.

In the current system, the main responsibility for administration in Indian courts is assigned to the Chief Judicial Officer. In addition to significant demands on his/her time, this approach is not conducive to systemic reforms and gradual accumulation of institutional knowledge on administrative matters.

In this context, it has been proposed to create a specialized service called Indian Courts and Tribunal Services (ICTS) that focuses on the administrative aspects of the legal system.

The major roles to be played by ICTS would be

Provide administrative support functions needed by the judiciary

Identify process inefficiencies and advise the judiciary on legal reforms

Implement the process re-engineering. The ICTS is not a unique model. Similar, court management services exist in other countries: Her Majesty’s Court and Tribunals Services (UK), Administrative Office of US Courts (US), Court Administration Service (Canada).

Deployment of Technology:

Technology can significantly improve the efficiency of courts. One major effort in this direction is the eCourts Mission Mode Project that is being rolled out in phases by the Ministry of Law and Justice. This has allowed the creation of the National Judicial Data Grid (NJDG). The system is already able to capture most cases, their status and progress.

The digitalization of cases is now allowing stake-holders to keep track of individual cases and their evolving status. It is not possible yet to statistically measure the efficiency gains from this effort, but it is certainly a big step forward.

Conclusion

There are significant productivity gains to be derived from better administration, increase in working days, and technology deployment (including likely future applications of Artificial Intelligence).

It is difficult to predict the exact improvement, but the purpose is to show that the required efficiency gains for clearing the backlog are ambitious but achievable if combined with speeding up appointments.

Given the social and economic importance of this issue, it should be given top priority by policy-makers.

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MCQ’s

1. With respect to Pendency consider the following statements:

(1) More than 64 per cent of all cases are pending for more than one year

(2) Punjab and Delhi have higher average pendency for both civil and criminal cases as compared to the national averages whereas

(3) Odisha, Bihar, West Bengal, Uttar Pradesh and Gujarat have the least average pendency of cases

Which of above statements are incorrect?

(a) 1 and 2 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) None

Answer: (b)

• Odisha, Bihar, West Bengal, Uttar Pradesh and Gujarat have higher average pendency for both civil and criminal cases as compared to the national averages whereas Punjab and Delhi have the least average pendency of cases

• The worst performing states are usually (albeit not always) also the poorest.

2. Which of the following statements are correct in reference to Case Clearance Rate (CCR)?

(1) CCR has been increasing constantly from 2015 to 2018

(2) USA’s district courts have better CCR than India

(3) Criminal and civil courts in the UK’s England and Wales court system perform relatively well in comparison to India

Options:

(a) 1 only

(b) 2 only

(c) 2 and 3 only

(d) 1 and 3 only

Answer: (B)

• CCR had increased from 86. 1 per cent in 2015 to 90. 5 per cent in 2017, but then declined to 88. 7 per cent in 2018.

• Criminal courts in the UK’s England and Wales court system perform relatively well, with a clearance rate of roughly 100 per cent, their civil courts fare poorly in comparison to India

3. Consider the following about Council of Europe

1) It is an organization of European countries that seeks to protect democracy and human rights

2) The council is headquartered in Strasbourg, France

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3) English and French are its two official languages

4) Its laws are binding

The correct code is:

(a) 1 and 4 only

(b) 2 and 3 only

(c) 1, 2 and 3 only

(d) 2, 3 and 4 only

Answer: (C)

• The Council of Europe addresses issues of common concern to its members, including human rights, crime

prevention, drug abuse, environmental protection, bioethical issues, and migration.

• The organisation is distinct from the 28-nation European Union (EU)

o Unlike the EU, the Council of Europe cannot make binding laws, but it does have the power to enforce select international agreements reached by European states on various topics

Mains Practice Question

1. Unclogging India’s courts can help boost investment. Suggest measures to make the Indian Courts more Productive.

2. An objective approach of resolving cases should be replaced by subjective approach by designing templates as per the need of the states. Analyse the statement in terms of pendency and clearance.

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Summary

• Economic Policy Uncertainty in India has reduced significantly over the last decade.

• Correlates of economic policy uncertainty are:

o Macroeconomic environment,

o Business conditions

• Impacts of economic policy uncertainty are:

o Increase in cost of capital in the economy

o Lowering of investment

• Unlike generic economic uncertainty, which cannot be controlled, economic policy uncertainty can be reduced.

• The following steps can reduce the economic policy uncertainty:

o Reduction in ambiguity in policy implementation

o Tracking of economic policy uncertainty index

o Quality assurance of processes in policy making must be implemented

Basics related to the chapter

• Policy uncertainty (also called regime uncertainty) is a class of economic risk where the future path of government policy is uncertain, raising risk premier and leading businesses and individuals to delay spending and investment until this uncertainty has been resolved.

• Policy uncertainty may refer to uncertainty about monetary or fiscal policy, the tax or regulatory regime, or uncertainty over electoral outcomes that will influence political leadership.

• During the Great Recession of the late 2000s and the years following it, many academics, policymakers, and business leaders have asserted that levels of policy uncertainty had risen dramatically and had contributed to the recession and the weakness of the following recovery.

How does Policy

Uncertainty affect

Investment?

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Important highlights of the chapter

Uncertainty in policy making can spook investors and spoil the investment climate in the economy.

Factor leading to uncertainty:

o As policy making relies on judgment, it often involves discretion. Such discretion can generate uncertainty.

Risk and Uncertainty:

o Both affect economic activity.

o While risk can be quantified, uncertainty is hard to measure.

Measuring economic policy uncertainty:

o It can be attempted to measure by globally recognized Economic Policy Uncertainty (EPU) index.

o The index is created by quantifying newspaper coverage of policy-related economic uncertainty.

Uncertainty and Investment:

o As investment is a forward-looking activity, future expectations play a critical role in the decision to invest. As uncertainty influences these expectations, it affects the decision to invest.

o As fixed investment is irreversible, uncertainty exacerbates risk aversion and eventually dampens investment.

Economic Policy Uncertainty:

o Economic policy uncertainty has reduced significantly over the last decade in India.

o Economic Policy Uncertainty was the highest in 2011-12 coinciding with the years of policy paralysis.

o It was also high in 2013 when the economy faced the episode of “taper tantrum” leading to volatile capital flows and depreciation of the rupee.

Correlates of EPU index:

o The EPU index correlates very strongly to macroeconomic stability which comprises of fiscal deficit, current account deficit, and inflation.

o Apart from this, EPU index is very strongly correlated to volatility in exchange rate, stock market and various other macroeconomic variables.

o EPU is positively correlated to- repo rate, WPI inflation, volatility of exchange rate, and Capacity Utilization.

Recent status of economic policy certainty:

o In recent times, while the economic policy uncertainty has been increasing across the world, including US, UK and China; India’s economic policy uncertainty has been falling.

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o The low economic policy uncertainty index for India in last one year points towards resilience of the economy even in times of global trade uncertainty.

Trends in Investment Activity:

o Gross fixed capital formation fell from 37 per cent in 2007-08 to 27 percent in the following ten years but has since recovered to approximately 28 per cent recently.

o Main factor that led to investment slowdown:

Twin balance sheet problem.

o Factors that helped promote investment:

Insolvency and Bankruptcy Code 2016

Recapitalization of banks

Improvement in the business climate

Economic policy uncertainty and Foreign Investment:

o Foreign investments are also negatively related to the economic policy certainty in the economy

o Both Foreign Direct Investment (FDI) flows and Foreign Institutional Investment (FII) flows are negatively correlated to EPU index, implying that not only the short term inflows, but also long term capital inflows are affected by higher uncertainty in economic policy.

Other factors that affect investment apart from economic policy uncertainty:

o Cost of borrowing: Borrowing costs are expected to be negatively associated with investment as they reflect higher input costs.

o Prices that producers get for their products: Rise in prices are expected to trigger greater investments as businesses find it profitable to do so as long as consumption demand is sufficiently strong to overcome the impact of inflation

o Capacity utilization: The utilization of capacity in any quarter is expected to have a positive relationship with investment growth in the following quarter, as excess unutilized capacity in the previous quarter may lower the need for new investment in the current quarter.

Recommendations:

Reducing economic policy uncertainty is critical because both domestic investment and foreign investment are strongly deterred by increases in domestic economic policy uncertainty. Few steps in this regard are:

o First, top-level policymakers must ensure that their policy actions are predictable, maintain consistency in actual policy with the forward guidance, and reduce ambiguity/arbitrariness in policy implementation.

o Second, economic policy uncertainty index must become an important index that policymakers at the highest level monitor on a quarterly basis.

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o Third, for quality assurance of processes in policy making, government departments must be mandated to seek quality certifications.

Terminologies related to the chapter

Economic Policy: The economic policy of governments covers the systems for setting levels of taxation, government budgets, the money supply and interest rates as well as the labour market, national ownership, and many other areas of government interventions into the economy. Most factors of economic policy can be divided into either fiscal policy, which deals with government actions regarding taxation and spending, or monetary policy, which deals with central banking actions regarding the money supply and interest rates

Investment: An investment is an asset or item acquired with the goal of generating income or appreciation. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or will later be sold at a higher price for a profit.

GFCF: Gross fixed capital formation (GFCF) measures the value of acquisitions of new or existing fixed assets by the business sector, governments and "pure" households (excluding their unincorporated enterprises) less disposals of fixed assets. GFCF is a component of the expenditure on gross domestic product (GDP), and thus shows something about how much of the new value added in the economy is invested rather than consumed.

FDI: Foreign direct investment (FDI) is an investment made by a firm or individual in one country into business interests located in another country. Generally, FDI takes place when an investor establishes foreign business operations or acquires foreign business assets, including establishing ownership or controlling interest in a foreign company. Foreign direct investments are distinguished from portfolio investments or FII in which an investor merely purchases equities of foreign-based companies.

FII: A foreign institutional investor (FII) is an investor or investment fund registered in a country outside of the one in which it is investing. Institutional investors most notably include hedge funds, insurance companies, pension funds, and mutual funds. The term is used most commonly in India and refers to outside companies investing in the financial markets of India.

Capacity utilization: Capacity utilization refers to the manufacturing and production capabilities that are being utilized by a nation or enterprise at any given time. It is the relationship between the output produced with the given resources and the potential output that can be produced if capacity was fully used.

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MCQ

1. Consider the following statements about ‘risk’ and ‘uncertainty’ in economy:

1. Uncertainty affects economy while risk doesn’t.

2. Risk is easier to measure than uncertainty

Choose the correct statement/s from the codes given below:

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer: (B)

Statement 1 is incorrect: Both Uncertainty and risk affects economy.

Statement 2 is correct.

2. Consider the following statements about Economic Policy Uncertainty in India

1. It has reduced consistently in last five years.

2. It was highest in 2013.

Choose the correct statement/s from the codes given below:

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer: (A)

Statement 1 is correct as it was reduced consistently over last decade.

Statement 2 is incorrect.

3. Which of the following are among the correlates of EPU Index:

1. Repo rate

2. WPI inflation

3. Volatility of exchange rate

4. Capacity Utilization

Choose the correct answer from the codes given below:

(a) 1 and 2 only

(b) 2 and 3 only

(c) 1, 3 and 4 only

(d) 1, 2, 3 and 4

Answer: (D)

o The EPU index correlates very strongly to macroeconomic stability which comprises of fiscal deficit, current account deficit, and inflation.

o Apart from this, EPU index is very strongly correlated to volatility in exchange rate, stock market and various other macroeconomic variables.

o EPU is positively correlated to- repo rate, WPI inflation, volatility of exchange rate, and Capacity Utilization.

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4. Which of the following statements is/are correct about the recent trends in Investment Activity

1. Gross fixed capital formation fell by 10 percent in the last ten years.

2. Main factor that led to the investment slowdown was the twin balance sheet problem.

Choose the correct answer from the codes given below:

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer: (C)

Mains Questions Related to the Chapter

1. Economic Policy Uncertainty in India has reduced significantly over the last decade. What do you mean by Economic Policy Uncertainty? Can it be measured? Explain.

2. Explain how Economic Policy Uncertainty impacts investment. Suggest measures to reduce economic policy uncertainty.

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Summary

India is set to witness a sharp slowdown in population growth in the next 2 decades.

Although the country as a whole will enjoy the “demographic dividend” phase, some states will start transitioning to an ageing society by the 2030s.

Population in the 0-19 age bracket has already peaked due to sharp declines in total fertility rates (TFR) across the country.

TFR is expected to be below replacement level by 2021.

The age distribution implies that India's working-age population will grow.

The proportion of elementary school-going children, will witness significant declines so many states need to consolidate/merge schools to make them viable rather than building new ones.

Policy makers need to prepare for ageing which will need investments in health care as well as a plan for increasing the retirement age in a phased manner.

Recent Demographic Trends

Population growth in India has been slowing from an annual growth rate of 2. 5 per cent during 1971-81 to an estimated 1. 3 per cent as of 2011-16.

A key driver of this trend has been the steady decline in India’s total fertility rate (TFR) since the mid-1980s. The decline in India’s TFR has been more gradual when compared to the experience of other emerging economies.

India has reached the current TFR of 2. 3 at a relatively low per capita income when compared to the experience of major developed economies but similar to that of other Asian countries.

Developments suggest that India has entered the next stage of demographic transition (“demographic dividend” phase).

India's Demography at

2040: Planning Public Good Provision for the 21st Century

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However, national-level population trends mask the significant heterogeneity across states in terms of fertility, mortality, age-structure, and the ageing phenomenon already underway in some states.

The projected population and age-structure over the next 2 decades has several implications for policy, inter-alia for the (i) provision of health care, (ii) provision of old-age care, (iii) provision of school facilities, (iv) access to retirement related financial services, (v) public pension funding, (vi) income tax revenues, (vii) labour force and labour participation rates, and (viii) retirement age.

II. Projecting National and State Level Population

Declining Fertility Rates

Projected values for 2021-41 suggest that TFR at the national level will continue to decline rapidly and will lie below replacement level fertility at 1. 8 as early as 2021.

In line with the fertility patterns witnessed in other countries, TFR is expected to stabilize thereafter for some time around 1. 7.

By 2031, all states would see below replacement level fertility.

This decline in fertility for females in the 20-30 age-groups is driven by rising female education, postponement of marriage, access to family planning methods, and continued decline in infant mortality.

As of 2014-16, sex ratio at birth remains higher than the normal range of 1. 02-1. 076 at the national level and in 17 out of 22 major states. This implies that the required replacement level fertility at the national and state level is higher than the usual benchmark of 2. 1.

Population Growth Trajectory

Demographic projections show that India’s population growth will continue to slow rapidly over the next 2 decades, growing less than 1 percent during 2021- 31 and under 0. 5 per cent during 2031-41.

In fact, with TFR projected to fall well below replacement level fertility by 2021, positive population growth in the next two decades will be due to population momentum and the continued rise in life expectancy.

Given state-level differences in initial fertility levels, mortality and age composition, both the trajectory of population and population growth will continue to vary across states.

States ahead in the demographic transition will see a continued deceleration in population growth and reach near-zero growth rates by 2031-41.

States lagging behind in the demographic transition will also witness a marked slowdown in population growth during 2021-41.

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Changing Age Composition

With TFR reaching low levels and longevity continuing to increase, India’s population will begin ageing significantly in just a decade from now.

The share of India’s young, i. e. 0-19 years, population has already started to decline and is projected to drop from as high as 41 per cent in 2011 to 25 per cent by 2041.

On the other hand, the share of elderly, 60 years and above, population will continue to rise steadily, nearly doubling from 8. 6 per cent in 2011 to 16 per cent by 2041.

India’s demographic dividend will peak around 2041, when the share of working-age, i. e. 20-59 years, population is expected to hit 59 per cent.

All major states are projected to witness a decline in the share of young population and an increase in the share of elderly population over the next two decades.

States ahead in the demographic transition would have less than one-fourth of the population under the age of 20 but about one fifth or more population over the age of 59 by 2041.

Even states in earlier stages of demographic transition, will see a significant decline in the share of young population.

Implications for Working-Age Population

Changes in the size of working-age population plays a key role in determining the size of labour force and direction of inter-state labour migration.

Given changing age composition, India’s working-age population will continue to increase during 2031-41which will have implications for the required rate of job creation in the economy.

The size of working-age population will start to decline in states ahead in the demographic transition during 2031-41.

On the other hand, working-age population will continue to rise through 2041 in states lagging behind in the demographic transition.

In principle, the states lagging behind in the demographic transition could meet the labour deficit in many of the ageing states.

Current migration trends broadly follow this pattern.

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III. Policy Implications of Ageing

Elementary Schools

As of 2016, population in the 5-14 age-groups, which roughly corresponds to the number of elementary school-going children, has already begun declining in India and across all major states except Jammu & Kashmir.

The number of elementary schools with less than 50 students has increased over the past decade across all major states except Delhi.

The “optimal” school size varies widely according to terrain and urban clustering.

The time may soon come in many states to consolidate/merge elementary schools in order to keep them viable.

Health Care Facilities

Access to health care is still a major challenge in India.

If India’s hospital facilities remain at current levels, rising population over the next 2 decades will sharply reduce the per capita availability of hospital beds in India across all major states.

States with high population growth are also the ones with the lowest per capita availability of hospital beds.

For states in the advanced stage of demographic transition, however, the rapidly changing age structure will mean that the type of health care services will have to adapt towards greater provision of geriatric care.

A major problem with planning for the provision of medical facilities is the paucity of specific data, especially on private hospitals.

Retirement Age

India’s healthy life expectancy at the age of 60, which is the average number of years a 60-year old person is expected to live in full health taking into account the impact of diseases and injuries, has continually increased over the years.

Due to ageing population and increasing pressure on pension funding, many countries have begun raising the pensionable retirement age.

Given that life expectancy for both males and females in India is likely to continue rising, increasing the retirement age for both men and women going forward could be considered. This will be key to the viability of pension systems and would also help increase female labour force participation in the older age-groups.

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Conclusion

It is important, that working assumptions and projections are constantly revised in light of new evidence (especially in the age of big data) for areas such as urbanization, energy requirements, forest cover, water availability, climate change and other long-term factors that have a large impact on the socio-economic context in which government policy interventions play out.

Population Projections for Smaller States and UTs

The 8 smaller states (Arunachal Pradesh, Goa, Manipur, Meghalaya, Mizoram, Sikkim, and Nagaland & Tripura) & 6 UTs (Chandigarh, Puducherry, Daman & Diu, Dadra & Nagar Haveli, Lakshadweep and Andaman & Nicobar) account only 1. 6 % of India’s population.

Due to constraints in obtaining reliable estimates for long-term trends in mortality and fertility, the ratio method is used for population projection.

The ratio of the small area (say a small state) to the larger area (say India) is calculated and assumed to remain constant up to 2041.

For each year, this ratio is multiplied by the projected population of the larger area, as derived using the cohort-component methodology, to obtain the population projections for these states and UTs.

Mortality Rate:

A log-linear model is used to project mortality using life expectancy at birth for 1970-2016

Fertility Rate:

TFR is projected up to 2041 using the Gompertz method.

Main Questions

1. Planners in India need to take the advantage of demographic dividend which may not be always there. Comment.

2. The projected population and age-structure over the next 2 decades has several policy implications. Discuss

3. In population planning, the thrust of the Government has been ‘planning the population' not ‘plan for the population'. Elaborate. 2015 UPSC Geography Optional

4. What is Geriatrics? What are the problems associated with Geriatric population? 2013 UPSC Geography Optional

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MCQ

1. Working-age population includes those persons who fall in the age group of

(a) 15-65 years

(b) 20 -59 years

(c) 15-65 years

(d) 15-59 years

Answer: (B)

2. According to economic Survey India’s demographic dividend will peak around

(a) 2045

(b) 2041

(c) 2050

(d) 2031

Answer: (B)

India’s demographic dividend will peak around 2041, when the share of working-age, i. e. 20-59 years, population is expected to hit 59 per cent

3. In India the required replacement level fertility at the national and state level is-

(a) Higher than the usual benchmark of 2. 1

(b) 2. 1

(c) Lower than the usual benchmark of 2. 1

(d) Data is insufficient

Answer: (B)

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Introduction

SBM, one of the largest cleanliness drives in the world, has brought in a remarkable transformation and traceable health benefits. Through SBM, 99. 2 per cent of the rural India has been covered. Since October 2, 2014 over 9. 5 crore toilets have been built all over the country and 564, 658 villages have been declared ODF. Becoming ODF has reduced deaths due to diarrhoea, malaria especially in under-five children and thereby improved child health and nutrition.

Issues related to sanitation

• Lack of access to basic sanitation services continues to be a major problem in many parts of the world.

• In 2015, 2. 3 billion people, globally, lacked basic sanitation services.

• Lack of sanitation has been recognised as a major problem in India. Even after 67 years of India’s independence, in 2014, around 10 crore rural and about one crore urban households in India were without a sanitary toilet and over 55 crore – about half the country’s population –practiced open defecation.

• Open defecation in India represented 60 per cent of open defecation globally.

• Poor sanitation costs India around 5. 2 per cent of its GDP.

Swachh Bharat Mission-Gramin (SBM)

• Swachh Bharat Mission was launched on 2 October, 2014.

• It is a multi-pronged approach to enhance the level of sanitation in the country.

• The focus under this mission has not just been on construction of toilets but also on effecting a behavioural change in the communities.

• It has been launched to enhance the quality of life by promoting cleanliness, hygiene and eliminating open defecation.

• Solid and Liquid Waste Management (SLWM) is another major component of SBM Mission.

• The targets of the mission are to be met by 2 October, 2019 (150th birth anniversary of Mahatma Gandhi).

From Swachh Bharat to

Sunder Bharat via Swasth

Bharat: An Analysis of the

Swachh Bharat Mission

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Key provisions

• Under SBM, an incentive of Rs. 12, 000 is provided for construction of Individual Household Latrines (IHHL) to eligible beneficiaries in rural areas and covers for provision of water storage.

• The central share for the incentive provided for IHHLs is 60 per cent and the State share is 40 per cent.

• For North Eastern States, Jammu and Kashmir and Special Category States, the central share is 90 per cent and the State share is 10 per cent.

• Additional contributions from other sources are also permitted.

• A provision is made for Extra Budgetary resources of Rs. 15, 000 crore.

Multi-faceted approach

• Community participation: Ensuring appropriate participation of the beneficiary/communities, financially or otherwise, in the setting up of the toilets to promote ownership and sustained use.

• Flexibility in Choice: SBM offers flexibility by giving many options so that the poor/disadvantaged families can subsequently upgrade their toilets depending upon their requirements and their financial position. This is done to ensure that sanitary toilets are constructed, which ensures safe confinement and disposal of faeces. An illustrative list of technology options, with cost implications is provided to meet the user preferences and location specific needs.

• Capacity Building: SBM augments the institutional capacity of districts to change behaviour at the grassroots level and strengthen the capacities of implementing agencies so that the programme could be rolled in a time-bound manner and collective outcomes could be measured.

• Instil Behaviour change: Incentivizing the performance of State-level institutions to implement activities for behavioural change among communities. Emphasising on awareness generation, triggering mind-set changes, leading to community behaviour change and demand generation for sanitary facilities in houses, schools, anganwadis, places of community congregation and for solid and liquid waste management activities.

• Broad-based Engagement: SBM set up the Swachh Bharat Kosh to encourage Corporate Social Responsibility and accept contributions from private organizations, individuals and philanthropists.

• Use of Technology: Information technology and social media is imperative to this program as it allows citizens to keep a check on the availability of toilets for every rural household in India. Nearly 90 per cent of all SBM toilets have already been geo-tagged. Many mobile applications have been launched by not only the government but also by few citizens, which direct the municipal corporations’ attention towards unclean areas.

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Outcomes of SBM

• Till date 98. 9 per cent of India has been covered under SBM.

• Since October 2014, over 9. 5 crore toilets have been built all over the country (till 14. 06. 2019).

• The total number of household toilets constructed from 2014 till 2018 shows a rapid progress over the last few years starting from less than 50 lakh household toilets per year and reaching up to over 3 crore toilets per year.

• The number of ODF villages have significantly increased since 2015. Around 5, 61, 014 villages (93. 41 per cent), 2, 48, 847 gram Panchayats (96. 20 per cent)- 6, 091 blocks (88. 60 per cent) and 618 districts (88. 41 per cent) have been declared ODF so far.

• Many states have undertaken various activities such as construction of waste collection centres, menstrual hygiene management activities, installation of bio-gas plants, construction of compost pits, installation of dustbins, system for collection, segregation and disposal of garbage, construction of drainage facility and leach pits and construction of soak pits and stabilization ponds.

Comparison across the states

• Most of the states showed significantly greater access to IHHL in 2018-19 as compared to 2014-15.

• Most of the states have achieved the status of 100 per cent IHHL coverage and only few states are yet to achieve their targets.

• Goa has the lowest ODF coverage declared followed by Odisha, Telangana and Bihar.

• West Bengal and Sikkim are very close to achieving 100 per cent ODF coverage.

Impact on issues related to Health

• The success of SBM can be assessed from the gains that the actions under the scheme had on the various socio-economic outcomes of the rural populace.

• A direct impact of improved sanitation should manifest on the health indicators.

• Becoming ODF had a positive impact on the child health and nutrition.

• Diarrhoea, a leading cause of death among the under-five children in India, accounted for around 11 per cent of deaths in 2013. Diarrhoea cases among children below 5 years in India have reduced significantly over the past 4 years.

• Malaria cases have also improved significantly after the implementation of SBM.

• Still births and low birth weight cases also came down in 2019 as compared to 2015.

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Way forward

• SBM has brought in a remarkable transformation and traceable benefits to the society as a whole.

Action plan

• Construction of toilets is one part of the solution for a clean India. There are various facets for a clean India.

• The dream of clean India can only be realized by addressing these multiple facets – maintaining a culture of swachhata at public places beyond individual houses, cleaning water bodies, scientific waste management, dealing with plastic menace, controlling air pollution, etc.

• To sustain the momentum created and behavioural change, a number of actions would have to be taken on a continuous basis such as motivation of “agents of change” at the ground level, impart training to field agents, appointment of sanitation Ambassadors to campaign and create awareness especially on health benefits, obtain systematic feedback from users.

• Annual monitoring of the various rural villages of different states has to be guaranteed for the effective formulation of different policies and their implementation.

Social empowerment

• It has led to a sea change in the dignity of people, especially women.

• This mission acts as a driver for eliminating the gender disparity through the construction of gender-specific latrines in public areas such as schools, roads and parks.

• This public movement will have indirect positive impact on society by increasing the enrolment ratio of girls in schools and improving health standards.

• Importantly, it is also aligned with the 2030 global sustainable development agenda and SDGs (Sustainable Development Goals) especially the SDG 6. 2 – “By 2030, achieve access to adequate and equitable sanitation and hygiene for all, and end open defecation, paying special attention to the needs of women and girls and those in vulnerable situations”.

Behavioural changes

• India’s phenomenal journey towards sanitation for all has ensured the social, environmental and economic gains by ensuring that the behavioural change gets rooted in people’s consciousness.

• The Mission has brought one of the largest behavioural changes in its citizenry.

• Strongly imparting the culture of swachhata at public places and maintaining it should be an important part of clean India.

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Waste disposal

• Attention must also be accorded to the sewer construction and water availability.

• Going forward, SBM should focus on achieving 100 per cent disposal of solid and liquid waste.

• Scientific techniques for the safe and effective disposal of waste should be the next on the agenda for this mission.

Cleaning of rivers

• The cleaning of rivers should be an integral part of clean India, along with coordinated activities between Centre and States such as treatment of industrial effluence, drain bio-remediation, river surface cleaning, rural sanitation, river front development, afforestation and biodiversity conservation etc.

Resource allocation

• The availability of financial resources intermixed with changing mind-sets have to be ensured.

• As the resource requirements are large, there is a need to facilitate and sustain innovative financing mechanisms by exploring the suitability of various financial instruments in specific contexts and interventions.

• For example, micro-financing, concessional loans, corporate social responsibility and crowd funding align with local government financing.

• Private Partnership and Corporate Social Responsibility can ensure, in specific contexts, a smooth flow of funds for the procurement of various scientific technologies for waste disposal and awakening masses.

• However, Governments must assign significant weight to the allocation of adequate resources as improvement in sanitation is one of the key determinants for the wider economic development of the economy.

Environment Friendly Green India

• Keeping the surroundings clean and maintaining hygiene would have tremendous environmental benefits.

• SBM needs to incorporate environmental and water management issues for long term sustainability and improvements.

• The issues relating to water availability are expected to be exacerbated by the effects of climate change and incidence of extreme weather events.

• Investment in the toilet and sanitation infrastructure in future, therefore, demands incorporation of principles of sustainability, circular economy, and adoption of eco-friendly sanitation technologies.

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• Finally, all these efforts together endeavour into culminating a Swachh (Clean), Swasth (Healthy) and Sundar (Beautiful) Bharat that we dreamt for us and future generations to inherit which will be a real tribute to the 'Father of the Nation'.

Mains Question:

1. The success of SBM can be assessed from the gains that the actions under the scheme had on the various socio-economic outcomes of the rural populace. Substantiate with examples.

MCQ:

1. Consider the following statements with respect to Swachh Bharat Mission – Urban.

(i) Swachh Bharat Mission – Urban is implemented by the Ministry of Drinking Water and Sanitation.

(ii) It seeks to provide separate toilets for boys and girls in all government schools.

(iii)The objectives include eradication of manual scavenging as well.

Which of the above statement/s is incorrect?

(a) I only

(b) I and II only

(c) II and III only

(d) All of the above

Answer: (b)

Explanation:

• The urban component of the Swachh Bharat mission is implemented by the Ministry of Urban Development, and the rural component by the Ministry of Drinking Water and Sanitation.

• The Ministry of Human Resource Development has launched Swachh Vidyalaya Programme under Swachh Bharat Mission with an objective to provide separate toilets for boys and girls in all government schools within one year.

• SBM – Urban includes elimination of open defecation, conversion of unsanitary toilets to pour flush toilets, eradication of manual scavenging, municipal solid waste

management and bringing about a behavioural change in people regarding healthy sanitation practices.

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Brief Background

• Despite accounting for 18 per cent of world’s population, India uses only around 6 per cent of the world’s primary energy.

• 53% of our population could not access clean cooking in 2017.

• India will be able to increase its real per capita GDP by US$ 5000 (in 2010 prices) by increasing per capita energy consumption by 2. 5 times.

• If India has to reach the HDI level of 0. 8, it has to increase its per capita energy consumption by four times.

• Energy efficiency programmes have generated cost savings worth more than `50, 000 crores and a reduction of about 110 million tons of CO2 emission in 2017-18.

• The share of renewables in total generation has increased from 6 per cent in 2014-15 to 10 per cent in 2018-19.

Introduction

• Energy has been the driving force behind the process of economic development.

• India has a per-capita energy consumption of only about one-third of the global average. Within this consumption, access to clean fuel is unevenly distributed spatially in rural vis-à-vis urban areas and socio-economically when seen across income groups.

• India needs to quadruple its per-capita energy consumption. This will also enable India to achieve the human development status of an upper-middle-income country.

• The overall electricity savings due to adoption of these energy efficiency measures is estimated at 7. 21 per cent of the net electricity consumption in 2017-18. Total thermal energy saved is 2. 7 per cent of the net thermal energy consumption and 2. 0 per cent of the net energy supply during the same period.

Enabling Inclusive

Growth through Affordable, Reliable & Sustainable Energy

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Energy for Prosperity

• The present day developed countries pursued a path of energy-intensive industrial growth to reach the standards of living witnessed by them today. The upper-middle-income countries have also seen per capita energy consumption rise with their rise in per capita incomes.

• India’s per capita energy consumption equals 0. 6 tonnes of oil equivalent (toe) as compared to the global per capita average of 1. 8 toe.

• In the initial years of economic development, increase in per capita GDP requires a large increase in primary energy per capita.

• Energy intensity of India’s GDP has been declining in the recent past, which is reflective of increases in the efficiency of energy use.

• India cannot become an upper-middle-income country without:

(i) Rapidly raising its share of the global energy consumption commensurate with its share of the global population, and

(ii) Ensuring universal access to adequate modern commercial energy at affordable prices.

It is also important to note that India’s energy intensity of GDP started declining at a much lower level of per capita GDP as compared to the developed world.

• Access to energy is important due to its linkages with other social indicators.

• The Sustainable Development Goal (SDG) -7 on Affordable and Clean Energy is closely related to all other SDGs.

• A country with 100 Gigajoules of per capita energy consumption has, on an average, HDI of around 0. 8 which is considered to be very high human development.

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• India had a per capita energy consumption of 24 Gigajoules and a HDI of 0. 64 in 2017 i. e., medium human development. India would have to quadruple its per capita energy consumption to reach a HDI of 0. 8 and enter the group of countries with high human development.

Access to Energy – Energy Poverty

• There is wide disparity between urban and rural areas in access to energy.

• A large proportion of the population especially in rural areas relies on non-commercial biomass such as firewood and dung cakes for their cooking/heating needs, thereby exacerbating health concerns due to poor indoor air quality.

• There is a large gap in energy access between the rural and urban areas, and between the households at various economic strata.

• Around 81 per cent of rural households and 59 per cent of urban households in lowest five percentile classes of expenditure reported firewood & chips as their primary source of energy for cooking.

• The access to clean cooking fuel has increased considerably in the recent years, especially through the efforts of the Government of India such as the Ujjwala scheme.

• Around 7 crore LPG connections have been provided till April 2019 under the Scheme. Under, ʻPAHAL’, as on 5 March, 2019, 24. 39 crore LPG consumers have joined the scheme.

• As a result, in 2017, 53 per cent of the population in India did not have access to clean cooking when compared with 68 per cent in 2010.

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Energy Efficiency

• The term energy efficiency broadly means using lesser amount of energy to produce a given amount of output.

• India strives to ensure that it follows a growth path that delivers sustainable development and protect the environment.

• The implementation of various energy efficiency programmes has witnessed exceptional performance in terms of reducing energy consumption thereby leading to lower greenhouse gas (GHG) emissions and cost savings.

• According to a BEE study, overall, this saving has resulted in total cost savings worth `53, 000 crore (approximately) in 2017-18 and contributed in reducing 108. 28 Million Tonnes of CO2 emission.

• The contribution is largely from three major programmes – PAT, UJALA and Standard & Labelling.

• The overall electricity savings due to energy efficiency measures is 7. 21 per cent of the net electricity consumption in 2017-18, total thermal energy saved is 2. 7 per cent of the net thermal energy consumption and 2. 0 per cent of the net energy supply.

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Ability of Energy Generation

• Globally, focus has been gradually shifting to non-fossil fuel sources for electricity generation.

• Despite this, coal remains the largest source of electricity generation mix globally, with 38 per cent market share in 2018.

• Almost 60 per cent of India's installed capacity is in thermal power out of which the main component is the coal based thermal power plants.

• India’s Nationally Determined Contribution (NDC) under the Paris Agreement states that India will achieve 40 per cent installed capacity of power from non-fossil fuels by 2030.

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• It may not be advisable to effect a sudden abandonment of coal based power plants without complete utilisation of their useful lifetimes as it would lead to stranding of assets that can have further adverse impact on the banking sector.

• Further, considering the intermittency of renewable power supply, unless sufficient technological breakthrough in energy storage happens in the near future, it is unlikely that thermal power can be easily replaced as the main source of energy for a growing economy such as India.

• There is a need for building capacity for cleaner and more efficient coal technologies. Also important is the economy’s ability to generate greater output from available energy resources and its resource endowments.

Potential of Renewable Energy

• Renewable energy sources are a strategic national resources. Harnessing these resources is a part of India’s vision to achieve social equity and energy transition with energy security, a stronger economy, and climate change mitigation.

• Union Budget 2018-19 announced zero import duty on components used in making solar panels to give a boost to domestic solar panel manufacturers.

• Government has also offered various financial incentives for off-grid and decentralized renewable energy systems and devices for meeting energy needs for cooking, lighting and productive purposes.

• Now globally India stands 4th in wind power, 5th in solar power and 5th in renewable power installed capacity.

• The cumulative renewable power installed capacity (excluding hydro above 25 MW) has more than doubled from 35 GW on 31 March 2014 to 78 GW on 31 March 2019.

• In addition, around 27 GW renewable power capacity is under installation and over 38 GW under bidding.

• The target is to achieve an installed capacity of renewable based power of 175 GW by the year 2022.

• Recent years have seen rapid growth in installed solar generating capacity along with significant improvements in technology, price, and performance.

• Moreover, creative business models have spurred investment in this sector.

• Priority has been accorded to seamless integration of renewables into the grid and better grid stability.

• Kisan Urja Suraksha Evam Utthaan Mahabhiyan (KUSUM) scheme has been launched for providing financial and water security to farmers and for de-dieselization of the farm sector.

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Hydro-Electricity

• India has a hydro potential of around 145320 MW, out of which 45400 MW have been utilised.

• To encourage the hydro sector, a new Hydro Policy has been approved which includes recognising large hydropower projects as a renewable energy source.

• Further, tariff rationalization measures have been undertaken, including providing flexibility to the developers to determine tariff by back loading of tariff after increasing project life to 40 years, increasing debt repayment period to 18 years and introducing escalating tariff of 2 percent, budgetary support for funding flood moderation component of hydropower projects on a case-to-case basis, and budgetary support for funding cost of enabling infrastructure i. e. roads and bridges on a case-to-case basis.

Electric Vehicles (EVS) in India

Need for Electric Vehicles

• In India, transport sector is the second largest contributor to CO2 emissions after the industrial sector.

• Road transport accounts for around 90 per cent of the total emissions in the transport sector in India.

• Increasing vehicle ownership has also meant that the demand for the fossil fuels for these vehicles has also increased.

Initiatives Taken

• A “National Electric Mobility Mission Plan 2020 (NEMMP)” was conceived with an objective to achieve sales of 60-70 lakh units of total EVs by 2020.

• In 2015, the Faster Adoption and Manufacturing of Electric vehicles (FAME) scheme was launched to fast-track the goals of NEMMP with an outlay of `795 crore’.

• In addition to the initiatives of the Government of India, several states, including Karnataka, Kerala, Telangana, Maharashtra and Andhra Pradesh, Uttar Pradesh, Uttarakhand, have drafted EV policies to complement the national policy and address state-specific needs.

Current Market Share

• In India, electric two wheelers have been the major part of EV sales with sales of around 54, 800 in 2018.

• Compared to this, sales of electric cars have been only around 2000 in 2017.

• Indian market share of electric cars is a meagre 0. 06 per cent.

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Incentives for Buyers in Various Countries

• Norway provides exemption from VAT, tax incentives on import and purchase of EVs, waiver of toll and ferry fees, free parking, etc.

• China has issued a new energy vehicle (NEV) credit mandate that sets a minimum requirement regarding the production of new energy vehicles (PHEVs, BEVs and FCEVs), with some flexibility offered through a credit trading mechanism in the car industry.

• Every manufacturer is required to earn minimum NEV credits either through producing or importing NEVs or through the purchase of NEV credits from other manufacturers who have excess credits.

• Additionally, the subsidy program- with a consistent focus on the investment intensity of the charging and battery infrastructure - seems to have driven the increasing Chinese market share in EVs.

Issues with Electric Vehicles and Way Forward

• In India, the limited availability of charging infrastructure seems to be a major impediment to increased adoption of EVs.

• Another major impediment is that of time taken for completely charging EVs, compared to conventional vehicles. Even fast chargers can take around half an hour to charge an electric car while slow chargers could take even 8 hours.

• It is also important to provide information on public chargers to the users of EVs through online maps and other means such as physical signage. This will encourage increased ease of adoption of EVs.

• Also, since the battery is the heart of any EV, development of appropriate battery technologies that can function efficiently in the high temperature conditions in India need to be given utmost importance.

• If India reaches an EV sales penetration of 30% for private cars, 70% for commercial cars, 40% for buses, and 80% for 2 and 3 wheelers by 2030, a saving of 846 million tons of net CO2 emissions and oil savings of 474 MTOE can be achieved.

• It also provides us an opportunity to grow as a manufacturing hub for EVs, provided policies are supportive.

• While various incentives have been provided by the government and new policies are being implemented, it is important that these policies not only focus on reducing the upfront costs of owning an EV but also reduce the overall lifetime costs of ownership.

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Chapter Summary

• India with a per-capita energy consumption of about one-third of the global average will have to increase its per capita energy consumption at least 2. 5 times to increase its real per capita GDP by $5000 per capita, in 2010 prices, to enter the upper-middle income group.

• Additionally, if India has to reach the HDI level of 0. 8, which corresponds to high human development, it has to quadruple its per capita energy consumption.

• India has set ambitious targets for renewable energy and has been undertaking one of the world’s largest renewable energy expansion programmes in the world. Now, globally India stands 4th in wind power, 5th in solar power and 5th in renewable power installed capacity.

• Energy efficiency programmes in India have generated cost savings worth more than `50, 000 crore and a reduction in about 11 crore tonnes of CO2 emission.

• The share of renewables in total electricity generation has increased from 6 per cent in 2014-15 to 10 per cent in 2018-19 but thermal power still plays a dominant role at 60 per cent share.

• The market share of electric vehicles is only 0. 06 per cent in India when compared to 2 per cent in China and 39 per cent in Norway. Access to fast charging facilities must be fostered to increase the market share of electric vehicles.

Mains Practice Questions

1) Discuss the steps that could help in increasing energy efficiency in India. Why is it important to increase the energy efficiency?

2) “Energy is an integral component of the growth process for any economy. ” Comment.

3) “Access to energy is important not just in its own right but also due to its linkages with various other social sectors. ” In what ways does access to energy become vital for a country? What are the initiatives taken by the government of India to increase the access to energy?

4) Discuss the various Energy Efficiency Programmes taken by India over the years. Briefly discuss the impact of such programmes.

5) Describe the various initiatives taken by India to tap the potential of renewable energy in the country.

6) What are the various hindrances in providing a push to electric vehicles in India? Suggest some steps and initiatives that can be taken to counter these issues.

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MCQs

1. Consider the following statements about India’s energy consumption:

1. India has a per-capita energy consumption of only about one-third of the global average.

2. If India has to reach the HDI level of 0. 8 and above, it has to quadruple its per capita energy consumption.

Select the correct option

(a) 1 only

(b) 2 only

(c) Both

(d) Neither 1 nor 2

Answer: (C)

Both statements are correct.

2. Consider the following statements

1. Energy efficiency means using more amount of energy to produce a given amount of output.

2. Energy efficiency helps in lowering greenhouse gas (GHG) emissions

Which of the above statements are correct:

(a) 1 only

(b) 2 only

(c) Both

(d) Neither 1 nor 2

Answer: (B)

Explanation:

Statement 1 is incorrect. Energy efficiency means using less amount of

energy to produce a given amount of output.

Statement 2 is correct. Energy efficiency helps in lowering greenhouse gas (GHG) emissions and also in cost savings.

3. Consider the following statements about ELECTRIC VEHICLES (EVs) IN INDIA

1. In India, the limited availability of charging infrastructure seems to be a major impediment to increased adoption of EVs.

2. In India, electric cars have been the major part of EV sale.

3. No state in India have drafted state-specific EV policies to complement the national policy.

Which of the above statements are incorrect:

(a) 3 only

(b) 2 only

(c) 2 and 3 only

(d) 1, 2 and 3

Answer: (C)

Explanation:

• Statement 1 is correct. In India, the limited availability of charging infrastructure seems to be a major impediment to increased adoption of EVs.

• Statement 2 is incorrect. In India, electric two wheelers have been the major part of EV sales with sales of around 54, 800 in 2018. Compared to this,

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sales of electric cars have been only around 2000 in 2017. Indian market share of electric cars is a meagre 0. 06 per cent.

• Statement 3 is incorrect. In addition to the initiatives of the Government of India, several states, including Karnataka,

Kerala, Telangana, Maharashtra and Andhra Pradesh, Uttar Pradesh, Uttarakhand, have drafted EV policies to complement the national policy and address state-specific needs.

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The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), which was enacted by Parliament in 2005, represents the modern version of “food for work” programmes in India.

• The programme was initiated to ameliorate rural distress by providing at least 100 days of manual labour at minimum wages to anyone who seeks employment under the program.

• Creation of productive assets for prescribed quality and durability, social inclusion, gender parity, social security and equitable growth form the founding pillars of the programme.

• The Act states that “the objective of the legislation is to enhance the livelihood security of poor households in rural areas”.

• The programme was reviewed in 2015 and the government initiated major reforms using technology and emphasised on bringing in more transparency and accountability, robust planning and creation of durable productive assets.

• The scheme was also integrated with the Aadhaar Linked Payments (ALP) system. The ALP leveraged the Jan Dhan, Aadhaar and Mobile (JAM) trinity to provide Direct Benefit Transfers (DBT) to the beneficiary accounts

The MGNREGS programme made effective when the government harnessed the skilful use of technology:

• The benefits of careful and effective targeting of government programmes by demonstrating the Direct Benefits Transfer (DBT) - enabled MGNREGS has indeed helped to alleviate distress of workers.

• This included the implementation of Direct Benefit Transfer (DBT) and linking it Aadhar linked Payments (ALP).

• It leveraged the Jan Dhan, Aadhaar and Mobile (JAM) trinity to credit wages directly into MGNREGS workers’ bank accounts, thereby reducing scope for delays in payment.

Effective Use of

Technology for Welfare Schemes – Case of MGNREGS

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• MGNREGS by the effective use of technology has significantly reduced Post DBT payment delays in the payment of wages thereby providing livelihood security to people in distress.

• Both demand and supply of work under MGNREGS increased, especially in districts suffering from distress.

• The importance of ALP-enabled MGNREGS in alleviating distress is particularly pronounced for the vulnerable sections of society, including women, persons with disability, Scheduled Castes and Scheduled Tribes.

Structural constraints:

• Before the implementation of DBT, MGNREGS wages were transferred to the panchayat bank accounts and a significant number of workers had to collect wages in cash from the gram panchayat office.

• As per a World Bank report, until 2015, close to 50 per cent of the country’s population did not have bank accounts

• The proportion of unbanked population was significantly higher for rural people who are the target group for MGNREGS.

• In rural India, banking penetration was extremely low.

• And verifying the identity of genuine beneficiaries and transferring wages directly into their bank accounts posed problems.

Positive outcomes:

• By December, 2015, the total number of Aadhaar enrolments in the country exceeded 100 crore, thereby covering a major portion of the adult population.

• Linking the Aadhaar Number to an active bank account was the key to implementing income transfers.

• In 2015, the Pradhan Mantri Jan Dhan Yojana (PMJDY) was launched to ensure universal access to banking facilities with at least one basic banking account for every household.

• PMJDY addressed the issue of banking the unbanked population in the country and Aadhaar provided a credible identity source to whoever wanted to open a bank account

• By expanding the mobile payment options, the Government was able to ease the connectivity issue as people could get access to banking facilities using their mobile phones.

• So, the JAM trinity enabled the roll-out of DBT by streamlining the validation/verification of beneficiaries as well as the process for release of funds.

• This ensured timely transfer of funds to the right beneficiary and enabled effective targeting under welfare schemes.

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Use of Technology in Implementation of MGNREGS:

1. National electronic Fund Management System (NeFMS)

a. Under the system, the Central Government directly credits the wages of the MGNREGS workers, on a real time basis, to a specific bank account opened by the State Governments.

b. NeFMS is implemented in 24 States and 1 Union Territory wherein payment of wages is being credited directly to the bank/post office accounts of MGNREGS workers by the Central Government.

c. This initiated the implementation of DBT in the Scheme.

2. Aadhar Linked Payments (ALP)

• ALP could speed up the wage payment cycle due to stringent biometric requirements; the Central Government can transfer wages directly to the bank accounts of the beneficiaries, thereby cutting the bureaucratic red tape.

BENEFITS OF DIRECT BENEFIT TRANSFER:

• Providing timely release of payments.

• Ensuring correct funds are transferred to correct beneficiaries, reducing corruption & leakages in system.

• Reduction in delays in system for funds transfer (improving programme performance and instilling trust and confidence in system by beneficiaries).

• Strong focus on security, tracking and monitoring of funds (through use of digital sign/signatures and convergence/interoperability)

• Reconciliation process during payments between intermediate agencies involved in funds transfer (near real time tracking, accountability and transparency).

• Streamline the verification process and end to end funds release process in all the beneficiary oriented schemes.

Some Initiatives to Streamline Mgnregs:

1. NREGAsoft: It is a local language enabled work flow based e-Governance system to capture all the activities under MGNREGS at Center/State/District/Block and Panchayat level.

2. GeoMGNREGA uses space technology to develop a database of assets created under MGNREGS using technological interventions like mobile based photo geo-tagging and a GIS based information system for online recording and monitoring.

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3. Annual Master Circular: It consolidated 1039 advisories that had been issued since the inception of the programme. This has helped to streamline the implementation of the programme and bringing in clarity.

4. Tweaking the wage & material ratio: Durable and productive assets are essential for the sustainable livelihood of the poor people in rural areas. The wage and material ratio of 60:40 was allowed at the district level rather the GP level.

5. Emphasis on Individual Beneficiary Schemes: The emphasis on IBS has resulted in enhanced incomes of the beneficiaries and also improved the quality of assets as the beneficiaries often put in their savings to supplement the contribution of MGNREGS.

6. Natural Resource Management (NRM) – Mission Water Conservation (MWC): Planned and systematic development of land to improve its productivity and harnessing of water through development of watersheds have become the central focus of MGNREGS work across the country

7. Support for Drought Proofing: In 2015-16, provision of additional employment of 50 days in drought affected areas over and above 100 days per household under MGNREGS was approved. The major drought proofing works undertaken under MGNREGS are plantations, afforestation, land development, check dams, wells, trenches, bunds and ponds, percolation tanks

8. Increased accountability: Various citizen centric mobile Apps like Gram Samvaad Mobile App and JanMnREGA (an asset tracking and feedback app for MGNREGS assets) have been developed, which aim to empower the rural citizens by providing direct access to information and improve accountability to the people.

Way Forward:

• It highlights the benefits of using technology in welfare schemes to improve end to end governance, create a robust evidence based implementation framework in partnership with the States, streamline the processes, timely transfer of funds to implementing agencies and beneficiaries, plugging of leakages, optimum utilization of public funds and improving overall performance (outputs/outcomes) of the programmes.

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MCQ

1. The core objectives of the MGNREGS are

(A) Providing not less than one hundred days of unskilled manual work as a guaranteed employment in a financial year to every household in rural areas.

(B) In creation of productive assets of prescribed quality and durability.

(C) Proactively ensuring social inclusion

Select the correct option code

(a) A only

(b) A and B only

(c) B and C only

(d) All the above

Answer: (D)

All the statements mentioned above are correct.

2. What are the Rights and Entitlements of wage- seekers in MGNREGS

1. Obtaining a Job Card (JC)

2. Right to check their Muster Rolls (MRs) and to get all the information regarding their employment entered in their JCs.

3. Right to get unemployment allowance.

Select the correct option code

(a) A only

(b) A and B only

(c) B and C only

(d) All the above

Answer: (D)

3. Which among the below statements is/are correct?

1. MGNREGA is to be implemented mainly by gram panchayats (GPs).

2. This act extends to whole of India except Jammu and Kashmir.

Select the correct option code

(a) A only

(b) B only

(c) Both

(d) None of the above

Answer: (C)

4. Which among the below is/are the initiatives to streamline MGNREGS

1. NREGAsoft is a local language enabled work flow based e-Governance system to capture all the activities under MGNREGS at Centre/State/District/Block and Panchayat level.

2. GeoMGNREGA uses space technology to develop a database of assets created under MGNREGS using technological interventions like mobile based

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photo geo-tagging and a GIS based information system for online recording and monitoring.

Select the correct option code

(a) A only

(b) B only

(c) A and B only

(d) None of the Above

Answer: (C)

5. Which among the below statements is/are correct?

1. The MGNREGS states that “the objective of the legislation is to enhance the livelihood security of poor households in both rural areas and urban areas”

2. As per a World Bank report, until 2015, close to 50 per cent of the country’s population did not have bank accounts.

3. In 2015, the Pradhan Mantri Jan DhanYojana (PMJDY) was launched to ensure universal access to banking facilities with at least one basic banking account for every household.

Select the correct option code:

(a) A only

(b) B and c only

(c) A and B only

(d) All of the Above

Answer: (B)

Mains Based Questions

1. How does effective uses of technologies in welfare schemes such as Mahatma Gandhi national rural employment guarantee schemes will improve the end to end governance? Comment.

2. Discuss the impact of direct benefit transfer on effectiveness of MGNREGS?

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Summary:

• This chapter reviews the situation pertaining to minimum wages in India and suggests the way forward for rationalizing and streamlining the policy for minimum wages.

• The present minimum wage system in India is complex with 1, 915 minimum wages defined for various scheduled job categories for unskilled workers across various states.

• One in every three wage workers in India is not protected by the minimum wage law.

• Minimum wages should be fixed for four categories namely, unskilled, semi-skilled, skilled and highly skilled based on the geographical region and should cover all workers, irrespective of any wage ceilings.

• A simple, coherent and enforceable Minimum Wage System should be designed with the aid of technology as minimum wages push wages up and reduce wage inequality without significantly affecting employment.

• An effective minimum wage policy is a potential tool not only for the protection of low paid workers but is also an inclusive mechanism for more resilient and sustainable economic development.

Important Highlights:

1. Historical Overview:

• Minimum wages for labour rendered has been a feature of society since ancient times. For instance, the famous Indian treatise from 2nd Century BCE, Arthashastra, ordained “the lowest wages for state employees was 60 panas per year for unskilled workers such as servants, guards, valets, palanquin bearers, and labourers. ”

• The Code of Hammurabi, which is often cited as the oldest written laws on record, mentions minimum wages: “If a man hires a workman, then from the beginning of the year until the fifth month he shall give six grains of silver per

Redesigning a Minimum

Wage System in India

for Inclusive Growth

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diem. From the sixth month until the end of the year he shall give five grains of silver per diem. ”

• In recent years, minimum wage systems have been strengthened by many countries to lift workers out of poverty and to reduce levels of inequality.

• Recent literature and evidence suggests that minimum wages can promote social justice without any major negative implication for employment if wages are set at an adequate level.

(a) The Indian Experience:

• India was one of the first developing countries to introduce minimum wages with the enactment of the Minimum Wages Act back in 1948.

• The Act protects both regular and casual workers. Minimum wage rates are set both by the Central and the State governments for employees working in selected ‘scheduled’ employment.

• Minimum wages have been set for different categories of workers according to skill levels, location and occupations.

• However, the Act did not prescribe norms for fixing the level of the minimum wage.

• The Indian Labour Conference (ILC) of 1957 recommended determining the minimum wage based on the principle of a household’s needs.

• In 1988, the Labour Minister’s Conference made recommendations for linking minimum wage with the cost of living index, which became mandatory in 1991.

• In 1992, the Supreme Court of India ruled that minimum wage should also be linked with aspects such as children’s education, medical requirements etc.

• The idea of a national level minimum wage has been debated since the enactment of the Minimum Wages Act in India. The main argument against a national minimum wage has been the existence of wide disparities in economic development and large variations in cost of living between regions and states.

• Timeline of Adoption of the National Minimum Wage:

• 1969: First National Commission on Labour.

o Recommendation: National Minimum Wage is neither ‘feasible nor desirable’

• 1978: Bhoothalingam Committee

o Argued for adoption of National Floor Level Minimum Wage to ensure a uniform wage for all workers and enhance the protection of the most vulnerable workers and eliminate arbitrariness in the determination of level of minimum wages for different States and occupations.

o Recommendations were mainly for the organized sector.

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o Unorganized sector and agriculture were left out.

• 1991: National Commission on Rural Labour

o Recommended for a National Floor Level Minimum Wage as wide disparities were prevalent in minimum wages across States.

• 1996: Central Government adopted non-statutory National Floor Level Minimum (NFLMW)

o Rs. 35 per day was notified.

o This NFLMW is updated regularly as per CPI.

o NFLMW is Rs. 176 per day w. e. f. 01. 06. 2017

1. Complex Minimum Wage System in India:

• The first set of complexities arises from issues relating to its coverage. Today, there are nearly 429 scheduled employments and 1, 915 scheduled job categories for unskilled workers. This massive expansion in job categories and wage rates has led to major variations not only across states but also within states.

• A second set of complexities arises from the lack of uniform criteria for fixing the minimum wage rate. In some states or in specific scheduled employments, minimum wages are linked to the cost of living, through a variable dearness allowance (VDA) whereas other states do not include the VDA component. All these affects the level and variation of wage rates that can be observed across and within States.

• The third set of complexities arises from the fact that Minimum Wages Act does not cover all wage workers. One in every three wage workers in India has fallen through the crack and is not protected by the minimum wage law (ILO, 2018).

• It is important to note that India has taken a number of steps to improve overall coherence, for example, by declaring a national minimum wage floor and strengthening the coordination of the Central Advisory Board with State Advisory Boards, and by promoting states to determine minimum wage rates through consultations within five broader regional committees. However, a simple system covering as many workers as possible, understood by all, and easily enforceable is the key to improve the effectiveness of minimum wage.

• The main justification for persisting with different levels of minimum wages across states is that they reflect different levels of economic development.

2. Gender Discrimination through Minimum Wage Provisions:

• Although the Minimum Wages Act does not discriminate between women and men, an analysis of minimum wages for different occupations shows the persistence of systematic bias.

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• For instance, women dominate in the category of domestic workers while men dominate in the category of security guards.

3. Compliance with the Minimum Wage Act:

• The proliferation of minimum wage rates and scheduled employments is a strong deterrent for compliance.

• Different statutory minimum wage rates for the same occupation between states combined with the wide range between the lowest and highest minimum wages can trigger migration of the industry to lower wage regions/state.

• As the impact of minimum wage levels on employment and poverty depends on the level of compliance and enforcement, it is of paramount importance to rationalise the minimum wage policy.

4. Impact of minimum wage on the Labour Market in India:

• Minimum wage in India does not operate as a conventional floor wage to protect the lowest paid workers.

• Some studies show that the minimum wage does impact the distribution of actual wages, with the impact depending on wage quantile.

• Minimum wage seems to have shaped wage bargaining, thereby leading to rise in actual wages.

• One also observes a mixed trend of wage inequality, i. e. increasing amongst regular workers and declining amongst the bottom and middle level of all workers. This can perhaps be explained by the rise of average minimum wages, in consonance with the increase in Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) wages, which were benchmarked to minimum wages.

(b) Minimum Wage System in BRICS Nations:

1. Coverage:

• In Brazil, National minimum wage covers all workers. Regions can also define minimum wages above the national level.

• In China, Minimum wage rates are established by province.

• In Russia, regional minimum wages coexist with a national minimum wage. The regional minimum wages are fixed above the federal rate.

• In South Africa, a national minimum wage was approved in 2018, covering all groups of wage earners.

• In India, minimum wages are limited to Scheduled Employments, different skills & occupations.

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2. Criteria:

• In Brazil, Minimum wage is increased by the sum of inflation in the previous year plus the GDP growth of 2 years before (if >0).

• In China, the criteria is a function of the cost of living of workers and their dependents; the consumption price index; the average wages of workers; labour productivity; the urban economic situation; and the level of economic development.

• In Russia, regions choose different criteria for their minimum wages but the subsistence minimum is a need-based income level that is the benchmark that guarantees minimum consumption requirements.

• In South Africa, the criteria is a function of cost of living and minimum living levels, poverty alleviation, wage differentials & inequality, OSH, conditions and level of employment, inflation, GDP, productivity, collective bargaining.

• India adopted need-based norms from the 1957, 15th ILC Session and 1992 Supreme Court Judgment.

The Way Forward:

• A well designed minimum wage system can be a potent tool for protecting workers and alleviating poverty, if set at an appropriate level that ensures compliance. International experience has shown that relatively simple systems are more effective and usually complex systems are least effective.

• Studies show that a complex system of minimum wages shows lack of coherence about wage levels and wages being set in an arbitrary fashion.

• For example, the United Kingdom has abolished its system of industry-wide trade boards in the 1980s and replaced it with a simple national minimum wage.

• Rationalisation of minimum wages as proposed under the Code on Wages Bill needs to be supported. This code amalgamates the Minimum Wages Act, 1948, the Payment of Wages Act, 1936, the Payment of Bonus Act, 1965 and the Equal Remuneration Act, 1976 into a single piece of legislation. The definition of wage in the new legislation should subsume the present situation of 12 different definitions of wages in different Labour Acts.

• Central Government should notify a “national floor minimum wage”. Thereafter, states can fix the minimum wages, which shall not be less than the “floor wage. ” This would bring some uniformity in the minimum wages across the country and would make all states almost equally attractive from the point of view of labour cost for investment as well as reduce distress migration.

• Further, the Code on Wages Bill should consider fixing minimum wages based on either of the two factors viz; (i) the skill category i. e unskilled, semi-skilled, skilled and highly skilled; and (ii) the geographical region, or else both.

• The proposed Code on Wages Bill should extend applicability of minimum wages to all employments/ workers in all sectors and should cover both the organized as well as the unorganized sector.

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• A mechanism should be developed to adjust minimum wages regularly and more frequently, similar to countries like Montenegro, Nicaragua, Netherlands, Uruguay, and Costa Rica, where the minimum wage adjustment takes place every six months (ILO, 2014).

• A dashboard needs to be set up by the Ministry of Labour & Employment, which shows the date of the last revision in the minimum wage adjunct to the mandated period. This would enable dissemination of information and increased transparency in the system.

Technology should be leveraged:

a) The use of a variety of online, mobile phone and networking technologies have the potential to facilitate the collection and analysis of labour statistics, assist with the dissemination of information about labour laws and policies, reduce costs and improve transparency.

b) A national level dashboard can be created at the Centre with access to the state governments whereby the states can regularly update the notifications regarding minimum wages. This portal must be made available at Common Service Centres (CSCs), rural haats etc. , with the required mass media coverage so that the workers are well-informed and their bargaining skills and decision-making power are strengthened.

Uniformity in minimum wages would also encourage industries to move towards interior areas and thereby reduce labour migration.

c) International Examples:

In UAE, all enterprises have been legally required to pay wages for both national and migrant workers through banks and other financial service providers. This system allows the Ministry of Labour to have a comprehensive wage database and an electronic wage payment monitoring mechanism for enterprises within the country.

In South Africa a system, called ‘Impimpi Alive’, enables workers to send anonymous SMS messages to the Department of Labour (DOL) after which an inspector is dispatched to the employer’s place of business within 48 hours.

In U. S. an app – The Wage & Hour Guide for Employers App – puts federal and state wage and hour laws at the fingertips of employers as well as law makers for better transparency.

U. S. also has an app – GovDocs Minimum Wage app that provides the most up-to-date minimum wage rate data for all company locations.

Effective Grievance Redressal: There should be an easy to remember toll-free number for anybody to register his grievance on non-payments of the statutory minimum wages. This number should be given wide publicity to make people aware of this avenue for grievance redressal.

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Terminologies and Meanings:

1. “Lighthouse Effect”: In this context, it pertains to the minimum wage acting as a benchmark that pulls up wages in the low-paid and informal sector by enhancing the bargaining power of vulnerable workers.

2. Net State Domestic Product (NSDP) is defined as a measure, in monetary terms, of the volume of all goods and services produced within the boundaries of the State during a given period of time after deducting the wear and tear or depreciation, accounted without duplication.

3. National Floor Level Minimum Wage is the minimum wage below which no state Government in India can fix the minimum wage.

MCQ

1. Consider the following statements with respect to the “Bhoothalingam Committee”:

1. The Bhoothalingam Committee argued for adoption of National Floor Level Minimum Wage to ensure a uniform wage for all workers and eliminate arbitrariness in the determination of level of minimum wages for different States and occupations.

2. The recommendations were mainly for the organized sector.

Which among the above statements is/are correct?

(a) 1 Only

(b) 2 Only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer (B)

2. Consider the following statements:

1. Net State Domestic Product (NSDP) is defined as a measure, in monetary terms, of the

volume of all goods and services produced within the boundaries of the State during a given period of time after deducting the wear and tear or depreciation, accounted without duplication.

2. The “lighthouse effect” of minimum wage pertains to the minimum wage acting as a benchmark that pulls up wages in the low-paid and informal sector by enhancing the bargaining power of vulnerable workers.

Which among the above statements is/are correct?

(a) 1 Only

(b) 2 Only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer (C)

3. Consider the following statements:

1. Labour force participation rate is defined as the section of the

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working population in the age group of 16-64 in the economy currently employed or seeking employment.

2. The participation rate refers to the total number of people or individuals who are currently employed or in search of a job. People who are not looking for a job such as full-time students, homemakers, individuals above the age of 64 etc. will not be a part of the data set.

3. At the time of recession, it is generally seen that the labour force participation rate goes down.

Which among the above statements is/are correct?

(a) 1 and 2 Only

(b) 2 and 3 Only

(c) All 1, 2 and 3

(d) 1 and 3 Only

Answer: (B)

Mains Questions:

1. An effective minimum wage system in India would go a long way towards realizing the goal of inclusive growth. Critically Analyse.

2. Chalk out the comparative differences between the Idea of a ‘Universal Basic Income’ from that of a ‘Minimum Wage System’. Examine their points of convergence and divergences, if any.

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Volume 2

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1 State of the Economy in 2018-19: A Macro View 90-93

2 Fiscal Developments 94-98

3 Monetary Management & Financial Intermediation 99-106

4 Prices & Inflation 107-115

5 Sustainable Development & Climate Change 116-125

6 External Sector 126-137

7 Agriculture & Food Management 138-145

8 Industry & Infrastructure 146-150

9 Summary of Services Sector 151-154

10 Social Infrastructure, Employment & Human Development 155-176

LEARN, UNLEARN

& RE-LEARN

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• India is the 7th largest economy in terms of Gross Domestic Product (GDP) in current US$, 3rd largest in terms of PPP (Purchasing Power Parity) and has emerged as the fastest growing economy

• The global GDP has declined from 3. 8% in 2017 to 3. 6% in 2018. This slowdown is the result of US- China trade war, tightening of credit in China, financial tightening observed in larger advanced countries. Meanwhile the growth in Indian economy has declined from 7. 2% in FY18 to 6. 8% in FY19. Despite this decline in growth, Indian economy is the fastest growing economy. The growth in EMDEs (Emerging Market Developing Economies) and world economy is projected to slow down by 0. 1% and 0. 3% respectively; and set to increase in India

• Indian Economy Overview

o The average growth rate of Indian economy for the last five years (starting from FY15) has averaged at 7. 5%

o The growth rate has moderated to 6. 8% in FY19 because of lower growth in agriculture and allied sectors; trade, hotel, transport, storage, communication and services related to broadcasting etc

o Inflation

The headline CPI inflation was close to double digit number in 2013-14 and has gradually declined thereafter to be within the target of 4 (+/-2) per cent

The headline CPI and WPI inflation was 3. 4% and 4. 3% respectively for 2018-19

o External front

The CAD (Current Account Deficit) has increased from 1. 9% of GDP in FY18 to 2. 6% of GDP in April to December 2018

The widening of CAD was because of higher crude oil prices

The trade deficit has increased from US$ 162. 1 billion in 2017-18 to US$184 billion in 2018-19

State of the Economy

in 2018-19:

A Macro View

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Having said so, crude prices have moved in both directions in the last year

The forex reserves are placed at a comfortable level of US$ 422. 2 billion as of 14th June 2019. Having said so, the reserves have declined by US$11. 6 billion at the end of march 2019 over the march end of 2018

The FDI inflows have been growing at a higher rate since FY16 and have the net FDI inflows have grown by 14. 2% in FY19. this increase in FDI inflows indicate the confidence the foreign investors have on Indian economy

o Fiscals

FD (Fiscal Deficit) stood at 3. 4% of GDP for FY19 (as per Provisional Actuals - PA)

Government stood by its path of fiscal consolidation in FY19

It has adopted a new framework involving reducing the debt and fiscal deficit

Consolidation of the revenue expenditure

The quality of expenditure has improved i. e. there is a gradual tilt towards the capital spending

There has been a progressive reduction in the primary deficit and fiscal deficit

Total liabilities of the government as a percentage of GDP has declined

The combined liabilities of the general government (centre + states) has come down to 67% of GDP by March 2019

Fiscal Deficit of the General Government is expected to decline to 5. 8% in FY19 (from 6. 4% of GDP in FY18)

o Banking sector

The banking sector has suffered from Twin Balance Sheet Problem (TBSP)

NPAs as a percentage of gross advances in the scheduled banks have come down from 11. 5% to 10. 1% between March 2018 to December 2018

The decline was sharper in case of PSBs from 15. 5% to 13. 9% for the same period

o Savings and Investments

The savings rate has declined along with the investment rate in India but the decline in investment rate has been greater than the decline in the savings arte, thereby reducing the savings and investment gap

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Investment or Gross Capital Formation (GCF) accounts for around 32% of GDP, of this, the Gross Fixed Capital Formation (GFCF) accounts for 29% of GDP

The decline in investments rate and fixed investments rate since 2011-12 seems to have bottomed out and there are signs of recovery

Another indicator for this recovery is the pick-up in credit growth to the industry

The growth of credit to MSMEs contracted in 2016 and 2017 but has picked up in 2018

The credit to industries also had contracted since March 2016 and recovered since early 2018-18

o Services sector

The contribution of the services sector to the economy has been increasing and stands at 54%

Share of India in World Service exports has increased from 2% in 2005 to 3. 5% in 2017. This share is much higher than the share in manufacturing exports (1. 8% in 2017)

o Outlook of the economy

The real GDP growth rate for 2019-20 is projected at 7%. The factors responsible are

Investment rate is showing signs of recovery

Higher credit growth for the industries

Political stability will push the animal spirits which will materialise in higher investments

The continuing resolution of the stressed assets will push up the recovery rates of the banks and help the capex cycle

Some of the terms used

• Purchasing Power Parity (PPP) – Currencies of different countries are compared based on their purchasing power i. e. how many currencies of two countries are required to purchase same basket of goods

• Inflation – is the persistent rise in the value of basket of commodities. It is measured by CPI (Consumer Price Index) and WPI (Wholesale Price Index)

• GDP – Gross Domestic Product is the total monetary value of goods and services which are produced in a territory within a specified time period

• Trade Deficit - Whenever the value of exports by a country is lesser than the value of imports done, then there is a deficit which is referred to as trade deficit

• Fiscal Deficit – the borrowings of the government in order to meet the revenue/income shortfall

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MCQ

1. Which of the following indicate a policy of fiscal prudence?

1. Consolidation of the revenue expenditure

2. Improvement in the quality of expenditure

3. Announcing loan waivers

Choose the correct option

(a) Only 1 and 3

(b) Only 2 and 3

(c) Only 1 and 2

(d) 1, 2 and 3

Answer. (C)

2. Which of the following statements are true?

1. The government has adopted a new policy under which it is going to control/bring down the fiscal deficit as well as the debt to GDP ratio

2. The general debt has come down to 67% of GDP

Select the correct answer using the codes given below:

(a) Only 1

(b) Only 2

(c) Both

(d) None

Answer: (C)

3. Which of the following statements are true?

1. The service sector contributes 54% to the Indian economy

2. Share of India in World Service exports is 5% in 2017

3. Share of India in World Service exports is higher than that of merchandise exports

Select the correct answer using the codes given below:

(a) Only 1 and 2

(b) Only 1 and 3

(c) Only 2 and 3

(d) 1, 2 and 3

Answer: (B)

4. Which of the following statements are false?

1. In the last year, the CAD has increased while the Trade deficit has decreased

2. The widening of CAD is being of crude oil prices

3. The crude oil prices in the last year have steadily increased

Select the correct option

(a) Only 1 and 3

(b) Only 2 and 3

(c) Only 1 and 2

(d) 1, 2 and 3

Answer: (A)

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Introduction

• Indian economy is expected to grow at 6. 8 per cent (as per provisional estimates released by Central Statistics Office) in 2018-19 while maintaining the macro-economic stability.

• The Medium Term Fiscal Policy (MTFP) Statement presented along with the Union Budget 2018-19 revised the fiscal deficit target for 2017-18, as percent of GDP, by 0. 3 percentage point from 3. 2 per cent to 3. 5 percent.

• The debt-GDP ratio of Central Government was projected at 48. 8 per cent at end-March 2019. It is targeted to decline to 46. 7 per cent by end-March 2020 and 44. 6 per cent by end-March 2021, restoring the long-term trend of decline in the debt to GDP ratio.

Trends in Receipts

• Central government receipts can broadly be divided into non-debt and debt receipts.

• The non-debt receipts comprise of tax revenue, non-tax revenue, recovery of loans, and disinvestment receipts.

• Debt receipts mostly consist of market borrowings and other liabilities, which the government is obliged to repay in the future.

Tax Revenue

• Budget 2018-19 envisaged a growth of 16. 7 per cent in gross tax revenue (GTR) over the revised estimates (RE) of 2017-18.

• GTR was estimated at 222. 7 lakh crore for BE 2018-19, which was 12. 1 per cent of the GDP. The growth in GTR was estimated to be led by 17. 3 per cent growth in indirect taxes and 14. 4 per cent growth in direct taxes over the revised estimates of 2017-18.

• Broadly, 51 per cent of GTR was estimated to accrue from direct taxes and the remaining 49 per cent from indirect taxes.

Fiscal Developments

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Fig 1: Composition of Gross Tax Revenue

• Though there has been improvement in tax to GDP ratio over the last six years (Figure 3), GTR as a proportion of GDP has declined by 0. 3 percentage points in 2018-19 PA over 2017-18.

• Indirect taxes have fallen by 0. 4 percentage points of GDP primarily due to shortfall in GST collections. This has been partly offset by 0. 1 percentage points increase in direct taxes.

• Trends in major taxes in relation to GDP displayed below, shows that receipts from corporate tax have considerably improved in 2018-19 PA.

• Better tax administration, widening of TDS carried over the years, anti-tax evasion measures and increase in effective tax payers base have contributed to direct tax buoyancy.

Fig 2: Tax to GDP Ratio

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Fig 3: Taxes as percent of GDP

Non-Tax Revenue

• Non-tax revenue consists mainly of interest receipts on loans to States and Union Territories, dividends and profits from Public Sector Enterprises including surplus of Reserve Bank of India transferred to GOI, and external grants and receipts for services provided by the Central Government.

• These services include fiscal services like currency, coinage and mint, general services such as Public Service Commission and police, social services like education and health, and economic services like irrigation, transportation and communication.

• Non-tax revenue constitutes about 1. 3 per cent of GDP in 2018-19.

Non-Debt Capital Receipts

• Non-debt capital receipts mainly consist of recovery of loans and advances, and disinvestment receipts.

• The share of recovery of loans has declined over the years following disintermediation of loan portion of Central assistance to States consequent to the recommendation of the Twelfth Finance Commission, and States allowed to borrow directly from the market.

• The Budget for 2018-19 has envisaged generation of 20. 92 lakh crore of non-debt capital receipts, comprising 70. 12 lakh crore of recovery of loans and advances, and 20. 80 lakh crore of disinvestment receipts.

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Trends in Expenditure

• The composition of government expenditure reveals that expenditure on defence, salaries, pensions, interest payments and subsidies account for more than sixty per cent of total expenditure.

• Several initiatives have been undertaken by the Ministry of Defence to improve efficiency and utilization of defence expenditure, promote self-reliance, and encourage private sector participation in the defence sector.

• Expenditures on salaries, pensions and interest payments are, by and large, committed in nature and have limited headroom for creation of additional fiscal space.

• Subsidies have seen significant moderation through improved targeting.

• There has been considerable restructuring and reclassification of Central sector and Centrally Sponsored Schemes in the recent past.

Fig 4: Composition of Expenditure

Fig 5: Major Subsidy as % of GDP

Transfers to States

• Transfer of funds to States comprises essentially of three components: share of States in Central taxes devolved to the States, Finance Commission Grants, and Centrally Sponsored Schemes (CSS), and other transfers.

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• Till 2013-14, funds for CSS were routed through two channels, the Consolidated Funds of the States and directly to the State implementing agencies.

• In 2014-15, direct transfers to State implementing agencies were discontinued and all transfers to States including for the CSS were routed through the Consolidated Funds of the States.

• Another significant development has been award of the Fourteenth Finance Commission to devolve 42 per cent of the divisible pool of taxes to the States, up from 32 per cent earlier.

Questions

1. Which among the following is not a non-debt receipt?

(a) Tax revenue

(b) Recovery of loans

(c) Disinvestment receipts

(d) Market borrowings

Answer: (D)

Explanation:

Central government receipts can broadly be divided into non-debt and debt receipts. The non-debt receipts comprise of tax revenue, non-tax revenue, recovery of loans, and disinvestment receipts. Debt receipts mostly consist of market borrowings and other liabilities, which the government is obliged to repay in the future.

2. Arrange the following taxes as percentage of GDP (Budget estimate) in increasing order:

I. Corporate Tax

II. GST

III. Customs

IV. Union Excise Duty

Select the correct answer using the codes given below.

(a) I > II > III > IV

(b) II > I > III > IV

(c) III < IV < II > I

(d) III > II > IV > I

Answer: (C)

Explanation:

Mains Questions:

1. What do you understand by term ‘the macro-economic stability’? What are the factors which affect it?

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Introduction

The significance of a central bank lies in its function of managing the monetary system of the country. It also maintains the monetary standard for the country, internally as well as externally. A financial intermediary is an entity that acts as the middleman between two parties in a financial transaction, such as a commercial bank, investment banks, mutual funds and pension funds etc. The objective of the Monetary Management and Financial Intermediation are to stabilise the general price level and money market through various tools under monetary policies.

Chapter Highlights

• Monetary policy witnessed a U-turn after initial hike due to weaker-than-anticipated inflation, growth slowdown and softer international monetary conditions.

• Tight liquidity conditions impacted the yields on government papers.

• The performance of the banking system has improved as NPA ratios declined and credit growth accelerated.

• financial flows to the economy remained constrained because of decline in the amount of equity finance raised from capital markets and stress in the NBFC sector

• The ecosystem for insolvency and bankruptcy is yielding good recoveries through resolution of case related to distressed assets and settlement of claims.

• Along with the recovery of NPA some nonstandard assets were upgraded to standard assets.

• All these show behavioural change in the lending ecosystem even before entering the IBC process.

Monetary Management &

Financial Intermediation

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Chapter Summery

Monetary developments

Circumstances like increase in crude oil prices during 1st half of the financial year, Federal Reserve monetary policy, softening of food price, USA-China trade negotiations impacted the RBI monetary policy. As a result of this entire domestic and global situation, RBI’s policy stances changed from neutral to calibrated-tightening to again neutral and finally accommodative.

Reserve Money (M0) as a whole has grown to 14. 5 % which were mainly driven by Currency in Circulation (CiC). From the sources side, expansion in M0 was contributed mainly by net RBI credit to the government as against driven by net foreign assets in the previous year. Increase in net RBI credit to government was mainly from the recourse to open market operations (OMOs). However Net foreign assets also contributed to M0 expansion at a lower magnitude vis-à-vis previous year.

Broad money growth (M3) has improved marginally against the trend since 2009. M3 growth was driven mainly by aggregate deposits. Deposits with the banking system both demand and time accelerated from 5. 8% to 9. 6%. Amongst sources, credit from scheduled commercial banks (SCBs) to the commercial sector primarily contributed to an increase in M3 during the year. Bank credit to government from RBI also supplemented M3 expansion. The money multiplier (M3/M0) has declined this year also due to expansion in M0 at faster pace than M3.

Liquidity conditions and its Management

A liquidity condition has been systematically tightened after August 2018 from earlier comfortable level. The OMOs of RBI proved to be temporary measures and liquidity shortage has been persistent.

Due to breach of overnight call money rate several times RBI has increased its OMOs frequency during the period. RBI had changed its liquidity management objective (in June 2016) from 1% of net time and demand liabilities (NDTL) of banks to neutral position. Key factors which led to the liquidity tightening are:

• As compared to the credit growth the deposits remained tepid in banking system.

• Growth in currency in circulation accelerated during this period.

• RBI had to draw down its foreign exchange reserves in to smooth exchange rate volatility.

The measures taken by RBI are:

• Increase in the frequency of OMOs

• Increase in the Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR); individual banks can avail liquidity from the repo market against high-quality collateral.

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• Reduction in the statutory liquidity ratio (SLR) by 25 bps every calendar quarter until it reaches 18 per cent of NDTL to align the SLR with the liquidity coverage ratio (LCR) requirement.

• RBI decided to inject rupee liquidity for longer duration through long-term foreign exchange buy/sell swaps.

Impacts of the tight liquidity are:

• Increase in spread of treasury bills (T-bill) and Government security (g-sec) rates over the repo rate.

• Availability of durable liquidity has a big impact on the market borrowing cost of the government.

G-sec Market

During the 1st half of the year g-sec yields were hardened due to rising crude oil prices, the firming up of US treasury yields, risks to domestic inflation and currency depreciation. However it later softens as the crude oil prices eased, rupee volatility contained and central government borrowings lowered than expected earlier.

Banking Sector

The performance of the banking sector (domestic operations) in general and PSBs in particular, improved as the Gross Non-Performing Advances (GNPA) ratio decreased along with its entire component including Restructured Standard Advances (RSA) ratio and Stressed Advances (SA) ratio. Capital to risk-weighted asset ratio (CRAR) of SCBs has increased.

Credit Growth

The non-food bank credit (NFC) has improved as compared to last year due to increase in the bank credit to large industry and services. However it has moderated at the end of the year due to deceleration in service sector. Although it is picking-up in recent month.

Non-banking financial Sector

In the recent past, the NBFCs have becoming increasingly important for resource mobilization and credit intermediation, thereby helping commercial sector to make up for low bank credit growth. However at present this sector is experiencing difficult times due to ratings downgrades and default of IL&FS Group. Most of its health indicator has come down. Bank borrowings, debentures and commercial paper are the major sources of funding for NBFCs (public funding 70%). To maintain liquidity in this sector periodic government’s intervention is necessary.

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Insurance Sector

Apart from protecting against mortality; property; and casualty risks; it provides a safety net for individuals and enterprises in urban and rural areas. The insurance sector encourages savings and provides long-term funds to individuals. It also provides funds for infrastructure development and other long gestation projects of the nation.

The potential and performance of the insurance sector are generally assessed on the basis of two parameters:

Insurance penetration: It is measured as the percentage of insurance premium to GDP.

Insurance density: It is calculated as the ratio of premium to population (measured in US$ for Convenience of international comparison).

Measure of insurance penetration and density reflects the level of development of insurance sector in a country. While both of these parameters are increasing steadily, but still very low as compared to emerging economies in Asia, i. e. , Malaysia, Thailand and China.

IBC 2016: resolving corporate Stress in a changed Paradigm

• With the enactment of Insolvency and Bankruptcy Code, 2016 a robust, modern and sophisticated insolvency framework was established.

• The IBC seeks to achieve resolution of corporate debtors (CDs) in distress and failing that, its liquidation in a time-bound manner under the non-intrusive oversight of the National Company Law Tribunal (NCLT).

• The Financial Creditors (FC) has been provided with greater role and powers through the committee of creditors.

• The management and control of assets of the debtor are handed over to an Insolvency Professional (IP) who is responsible for operating the debtor’s enterprise as a going concern and managing the corporate insolvency resolution process (CIRP) besides performing other crucial functions.

• It is one of the most important economic reforms of recent times designed to effectively deal with non-performing CDs and the resultant logjam in the availability of credit.

• Sashakt: the resolution scheme to resolve the problem of NPAs through a market-led approach was introduced in July.

• It entails participating banks to work together under an Inter-Creditor Agreement (ICA).

• Further, the notification on "Prudential Framework for Resolution of Stressed Assets" was released by RBI dated June 7, 2019 2.

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Implementation of IBC

• The Insolvency and Bankruptcy Board of India (IBBI) is the regulator, was established for the IBC.

• The Central Government designated the IBBI as the ‘Authority’ under section 247 of the Companies Act.

• It registered three Insolvency Professional Agencies (IPAs):

1. Indian Institute of Insolvency Professionals of Institute of Chartered Accountants of India (IIIP of ICAI),

2. Institute of Company Secretaries of India’s Institute of Insolvency Professionals (ICSIIIP),

3. Insolvency Professional Agency of Institute of Cost Accountants of India (IPA of ICMAI)

• The IBBI through Limited Insolvency Examination (LIE) granted regular registration as IPs

• Hon’ble Supreme Court upheld the Constitutional validity of the IBC in its entirety.

• The Insolvency Law Committee (ILC) is mandated to analyze the functioning and implementation of the Code, identify issues impacting the efficiency and effectiveness of corporate insolvency resolution and liquidation framework and make suitable recommendations to address them.

• National Company Law Appellate Tribunal (NCLAT), is the Principal Bench of NCLT at New Delhi, and there are 11 benches of in different states.

Outcome analysis

• Banks and financial institutions views IBC as a preferred mode to resolve distressed assets and maximize returns.

• IBC is emerging as a feasible recourse to enforce payment discipline by corporate debtors.

• It has created a cadre of professionals to manage stressed businesses and effective resolution.

• Information Utilities (IU) collects financial information from creditors, get it authenticated by debtors, store and provide access to the resolution professional, creditors, liquidator and other stakeholders.

• The National e-Governance Services Limited (NeSL) was registered as the first IU by the IBBI. The details of information filed.

• It has initiated a cultural shift in the dynamics between lender and borrower, promoter and creditor. The threat of promoters losing control of the company or protracted legal proceedings is forcing many corporate defaulters to pay off their debt even before the insolvency can be started.

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• Before enactment of the IBC, the recovery mechanisms available to the lenders were through Lok Adalat, Debt Recovery Tribunal, and SARFAESI Act.

• These mechanisms are recovery focused as compared to the IBC which aims at the turnaround of the debtor while maximizing returns for the creditors.

• Resolving Insolvency ranking has improved from 134 in 2014 to 108 in 2019.

• India won the Global Restructuring Review (GRR) award for the most improved jurisdiction in 2018.

• Financial Sector Assessment Program of IMF- World Bank in January 2018 observed: “India is moving towards a new state of the art bankruptcy regime.

Cross Border Insolvency

• India has initiated the steps to adopt the UNCITRAL Model Law on Cross-Border Insolvency (Model Law) -the most widely accepted blueprint to effectively deal with cross-border insolvency issues while ensuring the least intrusion into each country’s internal insolvency and bankruptcy laws.

• A draft Bill has been placed in the public domain for discussion. Once enacted, the law will address the key. Once enacted, the Model Law will help in increased foreign investment.

Group Insolvency

• Presently, the insolvency of different companies belonging to the same group is dealt with through separate insolvency proceedings for each company.

• When a commercial venture operates through group of entities and if one or more of the companies in the group become insolvent, separation of legal personality raises a number of complex issues.

• IBBI has recently set up a working group under former SEBI Chairman Mr. U. K. Sinha to recommend a complete regulatory framework to facilitate insolvency resolution and liquidation of debtors in a corporate group.

Individual Insolvency

• Implementing insolvency law for individuals and partnership firms poses distinct challenges.

• A Working Group under the chairmanship of Mr. P. K. Malhotra, former law secretary, has been set up by the IBBI to recommend the strategy and approach for implementation of the provisions of IBC dealing with insolvency and bankruptcy of individuals.

• The IBC was amended to provide three classes of individuals:

1. Individuals who have executed personal guarantees for corporate debtors;

2. Individuals who are engaged in economic activities through proprietorship and partnership firms;

3. Other individuals.

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MCQ

1. Which of the following implies an increase in Bank Rate?

(a) Market rate of interest is likely to fall.

(b) Central bank is no longer making loans to commercial banks.

(c) Central bank is following an easy money policy.

(d) Central bank is following a tight money policy.

Answer: (D)

Explanation:

Central Bank is following a tight money policy. If RBI increases the bank rate, the cost of borrowing for banks rises and this credit volume gets reduced leading to decline in supply of money. Thus, increase in Bank rate reflects tightening of RBI monetary policy.

2. Which of the following are constituents of Reserve Money (M0)

1. Currency in Circulation

2. Balance maintained by Banks with RBI under CRR

3. Deposits from foreign central banks to RBI

Correct answer code is

(a) Only 1 and 2

(b) Only 2 and 3

(c) Only 1 and 3

(d) All of the above

Answer: (D)

Explanation:

Reserve money = Currency in Circulation + Bankers’ Deposits with RBI + ‘Other’ Deposits with RBI. Currency in circulation includes notes in circulation, rupee coins and small coins. Bankers Deposits with the RBI represent balances maintained by banks in the current account with the Reserve Bank mainly for maintaining Cash Reserve Ratio (CRR) and as working funds for clearing adjustments. Other Deposits with the Reserve Bank for the purpose of monetary compilation includes deposits from foreign central banks, multilateral institutions, financial institutions etc.

3. Which of the following situation will lead to the liquidity tightening in the economy?

1. If RBI sells foreign exchange reserves

2. If credit grows but deposits with the banking systems get reduced.

3. Growth in currency in circulation accelerated.

Correct answer code is

(a) Only 1 and 2

(b) Only 2 and 3

(c) Only 3 and 1

(d) All of the above

Answer: (D)

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Explanation:

Key factors which have led to the liquidity tightening are:

• As compared to the credit growth the deposits remained tepid in banking system.

• Growth in currency in circulation accelerated.

• RBI had to draw down its foreign exchange reserves

4. Which of the followings are the components of Monetary Policy?

1. Bank rate

2. Open Market Operations

3. Public debt

4. Public revenue

Correct answer code is

(a) Only 1 and 2

(b) Only 2 and 3

(c) Only 1 and 3

(d) Only 1, 2 and 3

Answer: (A)

5. Which of the following statement(s) is/are correct?

1. Insurance penetration in an economy is measured as

percentage of insurance premium to GDP.

2. Insurance density is measured as ratio of premium to population.

3. India has highest insurance penetration in Asia

Correct answer code is

(a) 1 Only

(b) Only 2 and 3

(c) Only 1 and 2

(d) All of the above

Answer: (C)

Explanation:

Insurance penetration: It is measured as the percentage of insurance premium to GDP.

Insurance density: It is calculated as the ratio of premium to population (measured in US$ for Convenience of international comparison).

Measure of insurance penetration and density reflects the level of development of insurance sector in a country. While both of these parameters are increasing steadily, but still very low as compared to emerging economies in Asia, i. e. , Malaysia, Thailand and China.

Mains Practice Questions:

1. Discuss the role of NBFCs (Non-Banking Financial Companies) in promoting inclusive growth in the country. Also discuss how it is different from scheduled banks.

2. Discuss the importance of Insolvency and Bankruptcy Code (IBC) to bring behavioural changes in the Indian corporate ecosystem. Also evaluate the role of IBC in improving Ease of Doing Business.

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Summary

Trends in Inflation

• In the last five years, the economy witnessed a gradual transition from a period of high and variable inflation to more stable and low level of inflation.

• Headline inflation based on the Consumer Price Index – Combined (CPI-C) has been declining continuously for the last five years from 5. 9% in 2014-15 to 3. 4% in 2018-19. It is the lowest average since the new series of CPI-C began. The decline in the inflation in the FY 2018-19 was mainly due to low food inflation which ranged between (-) 2. 6 to 3. 1 per cent.

• Food Inflation based on Consumer Food Price Index (CFPI) in the country has been extremely benign. Even globally, food inflation has been moderate. Average food inflation for the financial year 2018- 19 declined to a low of 0. 1 per cent from 6. 4% in 2014-15. The food deflation in the second half of FY 2018-19 is mainly due to deflation in vegetables, fruits, pulses and products, sugar & confectionery and eggs, which together account for 13. 1 per cent weight in overall CPI-C.

• Inflation based on Wholesale Price Index (WPI) remained moderate at 3. 0 per cent in 2017-18 compared to 1. 7 per cent in 2016-17, (-) 3. 7 per cent in 2015-16 and 1. 2 per cent in 2014-15. During the FY 2018-19, WPI inflation stood at 4. 3 per cent.

Prices & Inflation

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• CPI-C based core inflation, which equals CPI excluding the food and fuel group, has remained above 4 per cent since the start of new series of CPI-C.

• Refined core inflation, which equals CPI excluding food and fuel group, petrol & diesel, too has moved closely with core inflation; it was 5. 7 per cent in 2018-19 as compared to 4. 6 per cent in 2017-18.

Meaning of the Terms:

Inflation: It occurs when there is general rise in the prices of goods and services. Inflation is caused when goods and services are in high demand, thus creating a drop in availability.

Deflation: Deflation is the general decline in prices for goods and services occurring when the inflation rate falls below zero percent.

Headline Inflation: It is a measure of the total inflation within an economy, including commodities such as food and energy prices (e. g. , oil and gas), which tend to be much more volatile and prone to inflationary spikes.

Core Inflation: It corresponds to the component of inflation that is likely to continue for a long period. Unlike the non-core component of inflation, core inflation is not affected by temporary shocks. In India, core inflation is generally measured by excluding highly volatile components from the headline inflation. By their very nature, food and fuel have been highly volatile. Therefore, we arrive at core inflation by removing food and fuel components from the headline inflation. As headline inflation exhibits volatility due to short run shocks, Central banks in many countries focus on core inflation.

Refined core inflation equals CPI excluding food and fuel group, petrol & diesel.

CPI: CPI is a consumer prices index which measures the change in the price in the

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sale of goods or services in retail or it measures the price of goods or services sells directly to consumers. CPI is published by Central Statistical Office under Ministry of Statistic and Programme Implementation. It includes both goods and services. Goods and services covered under CPI are education, food, transport, communication, recreation, apparel, housing, and medical care. It releases on monthly basis. The base year for CPI 2012.

WPI: WPI is a Wholesale prices index it is used to measure the average change in price in the sale of goods in bulk quantity by the whole seller. WPI is published by the office of economic advisor under the Ministry of Commerce and Industry. It is restricted to goods only and goods covered under WPI primarily are manufacturing products, food items, fuel and power. The base year for WPI is 2011-12.

Drivers of Inflation

• At the all India level, CPI-C inflation during FY 2018-19 was driven mainly by miscellaneous group followed by housing as well as fuel and light group.

• Services inflation has been higher than goods inflation and the gap between the two is growing. In recent times, services inflation has influenced headline inflation as it has contributed more than its weight (shown in the figure below). 40 items of services account for 23. 37 per cent weight in CPI-C with contribution from housing (10. 07%) transport and communication (4. 59%), (3. 51%) and health (1. 82%).

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Analysis of Components of Services Inflation

Education

• Education with weight of 4. 46 per cent in the Combined CPI is spread over 5 items including goods components (‘books, journals: first hand’ and ‘stationery, photocopying charges’) and services components (‘tuition and other fees (school, college, etc. )’, ‘private tutor/ coaching centre’ and ‘other educational expenses, incl. fees for enrolment in web based training’).

• Goods components are witnessing lower inflation than the services.

Health

• Health with weight of 5. 89 per cent in the Combined CPI is spread over seven items including goods components [‘medicine (non-institutional)’, ‘family planning devices’ and ‘spectacles’] and services components [‘hospital & nursing home charges’, ‘other medical expenses (non-institutional)’, ‘doctor’s/ surgeon’s fee-first consultation (non-institutional)’ and ‘X-ray, ECG, pathological test, etc. (non-institutional)’].

• Services components of health are witnessing higher inflation than the goods embedded into it.

Transport and Communication

• Transport and Communication, with a weight of 8. 59 per cent in the Combined CPI, is spread over twenty-one items including goods components [‘motor car, jeep’, ‘motor cycle, scooter’, ‘bicycle (without accessories)’, ‘tyres & tubes’, ‘petrol for vehicle’, ‘diesel for vehicle’, ‘lubricants & other fuels for vehicle’ and ‘mobile handset’] and services components [‘other conveyance expenses’, ‘railway fare’, ‘bus/tram fare’, ‘taxi, auto-rickshaw fare’, ‘rickshaw (hand drawn & cycle) fare’, ‘horse cart fare’, ‘school bus, van, etc. ’, ‘air fare (normal): economy class (adult)’, ‘steamer, boat fare’, ‘porter charges’, ‘telephone charges: landline’, ‘telephone charges: mobile’ and ‘internet expenses’].

• Within ‘transport & communication’, services components are witnessing higher inflation than goods.

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Rural – Urban Inflation

• The current phase of low inflation is marked by reduction in both urban and rural inflation.

• The decline in rural inflation is steeper than that of urban inflation since July 2018, resulting in decline in headline inflation due to moderation in food inflation, which has been negative for the last six months.

• The importance of food in determining rural inflation has been declining over the years. In contrast, the role of miscellaneous category i. e. services in determining rural inflation has increased.

• Miscellaneous group was the main driver of CPI (Rural) inflation in 2018- 19, contributing more than 70 per cent to the overall rural inflation. In urban areas, miscellaneous group and housing have contributed to inflation in equal measure during FY 2018-19.

Housing Price Index

NHB Residex

• The Housing Price Indices (HPIs) are a broad measure of movement of residential property prices observed within a geographical boundary. The first official housing price index for the country named ‘NHB RESIDEX’ was launched in July 2007 by the National Housing Bank. Over time, the base year has been revised to FY 2017-18 to capture the latest information and to accurately reflect the current economic situation in the country.

• Currently, National Housing Bank publishes NHB RESIDEX for 50 cities.

• The indices are computed using the Laspeyres methodology and a four quarter weighted moving average.

HPI (RBI)

• The Reserve Bank of India (RBI) began compiling a House Price Index (HPI) in 2007 with a quarterly HPI for Mumbai city (Base 2002-03=100). Since then, it has extended its coverage to nine more cities, revised its base to 2010-11=100, and started publishing a composite All India HPI.

Trends in Global Commodity Prices

• As per the commodity prices published by the World Bank, energy commodity prices have continued their increasing trend in FY 2018-19 from 16. 8% (2017-18) to 22. 1% (2018-19).

• Movement of ‘Fuel & Power’ inflation increase to 11. 5% in 2018-19 compared to 8. 1% in 2017-18.

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• Both World Bank food prices as well as Food and Agriculture Organization (FAO) food prices recorded deflation during FY 2018-19. WPI based food inflation too declined during 2018-19.

Efforts to Contain Inflation

• Central Government has taken a number of measures to control inflation which include both general measures and specific measures.

General measures include:

• Advisories are being issued to State Governments to take strict action against hoarding & black marketing.

• Regular review meetings on prices and availability of key commodities.

• Announcement of Higher Minimum Support Price (MSP) for pulses and other crops.

• Government has set up Price Stabilization Fund (PSF) for procurement of agro-horticultural commodities.

The specific measures include:

• During lean periods of 2017-18 and 2018- 19, to control the rise in onion prices, onions were released at reasonable prices from the stock procured under PSF.

• Pulses from the buffer are utilized for strategic market intervention for price management, meeting institutional requirements like supplies to State Governments/UTs for Mid-Day Meal Scheme (MDM), Integrated Child Development Services (ICDS) Scheme, and Public Distribution System (PDS), and through Open Market Sale, etc.

• Prohibition on export has been withdrawn in April 2018 on all varieties of edible oils, except mustard oil.

• The order empowering States/ UTs to impose controls including Stock Limits on Edible Oils and Edible Oilseeds has been withdrawn vide Notification dated June 13, 2018.

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KEY HIGHLIGHTS OF THE CHAPTER

• Headline inflation based on CPI-C continued its declining trend for fifth straight financial year. It has remained below 4. 0 per cent in the last two years.

• Food inflation based on Consumer Food Price Index (CFPI) too declined over the last five years, and has remained below 2. 0 per cent for the last two consecutive years.

• CPI-C based core inflation (CPI excluding the food and fuel group) increased during FY 2018-19 as compared to FY 2017-18. However, it has started declining since March 2019.

• Main contributors of headline inflation based on CPI-C during FY 2018-19 are miscellaneous, housing, and fuel and light groups. Relative importance of services in shaping up headline inflation has increased.

• • CPI rural inflation declined during FY 2018-19 over FY 2017-18. However, CPI urban inflation increased marginally during FY 2018-19. Many States witnessed fall in CPI inflation during FY 2018-19.

MCQs

1. With reference to headline inflation based on the Consumer Price Index – Combined (CPI-C), consider the following statements:

1. It has been declining continuously for the last five years.

2. It is at the lowest average since the new series of CPI-C began.

Which of the above statement(s) is/are incorrect?

(a) Only 1

(b) Only 2

(c) Both 1 and 2

(d) None of the above

Answer: (D)

Explanation:

Both the statements are correct.

Headline inflation based on the Consumer Price Index – Combined (CPI-C) has been declining continuously for the last five years from 5. 9% in 2014-15 to 3. 4% in 2018-19.

It is the lowest average since the new series of CPI-C began. The decline in the inflation in the FY 2018-19 was mainly due to low food inflation which ranged between (-) 2. 6 to 3. 1 per cent.

2. Consider the following statements:

1. In the financial year 2018-19, services inflation has been higher than goods inflation.

2. The contribution of services in headline CPI Inflation has been decreasing in the last five years.

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Which of the above statement(s) is/are correct?

(a) Only 1

(b) Only 2

(c) Both 1 and 2

(d) None of the above

Answer: (A)

Explanation:

Statement I is correct and statement II is incorrect.

Services inflation has been higher than goods inflation and the gap between the two is growing. In recent times, services inflation has influenced headline inflation as it has contributed more than its weight.

3. Arrange the following services in the correct increasing order of their share (in percentage) in combined CPI (Consumer Price Index):

1. Health

2. Education

3. Transport and Communication

Select the correct answer using the codes given below:

(a) 2-1-3

(b) 2-3-1

(c) 1-3-2

(d) 1-2-3

Answer: (A)

Explanation:

Education with weight of 4. 46 per cent in the Combined CPI is spread over 5 items.

Health with weight of 5. 89 per cent in the Combined CPI is spread over seven items.

Transport and Communication, with a weight of 8. 59 per cent in the Combined CPI, is spread over twenty-one items.

4. Which of the following fiscal measures help to moderate inflation?

1. Higher Minimum Support Price (MSP) for pulses and other crops

2. Decrease the overall Government expenditure

3. Increase rate of direct taxes

Select the correct answer using the codes given below:

(a) Only 1 and 2

(b) Only 1 and 3

(c) Only 2 and 3

(d) All of the above

Answer: (D)

Explanation:

All the given measures can be taken to moderate inflation in the economy. Higher Minimum Support Price (MSP) for pulses and other crops has been announced so as to incentivize production and thereby enhance availability of

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food items, which may help moderate prices.

Decreasing the overall Government expenditure will help in reducing money supply in the economy, thereby controlling inflation.

Increase the rate of direct taxes causing individuals to decrease their total expenditure, leading to a decrease in demand and a drop in the money supply in the economy.

Mains Practice Question

1. Discuss the effectiveness of the measures taken by the Government to moderate inflation in the country?

2. Examine the reasons for declining trends of inflation in the country. Also discuss its implication on the economy.

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Introduction

• The 2030 Agenda for Sustainable Development and its 17 SDGs presents a roadmap for future development trajectory to all nations with focus on poverty eradication, environmental sustainability, peace and prosperity.

• India’s development agenda has for long been based on principles that are closely related to those that have been propounded in the 2030 Development Agenda.

• Climate change requires concerted global efforts and India has been preserving to address the climate challenges along with other developmental imperatives.

• The country has been making substantial additions to its installation of renewable power capacity. Resource efficiency can be a major tool to meet the resource needs of the country at the least possible cost to the environment.

• Air pollution has emerged as a serious issue in India. National Clean Air Program (NCAP) has been launched by the Government as a pan-India, time bound, national level initiative to address the challenge.

India’s Progress towards the SDGs

• India follows a holistic approach for achieving the SDGs by implementing a comprehensive array of schemes.

• Current flagship policies and programmes of Government of India such as Swachh Bharat Mission (SBM), Beti Bachao Beti Padhao (BBBP), Pradhan Mantri Awas Yojana (PMAY), Pradhan Mantri Jan-Dhan Yojana (PMJDY), Deen Dayal Upadhyay Gram Jyoti Yojana (DDUGJY) and Pradhan Mantri Ujjwala Yojana (PMUY) have substantially contributed to India’s progress in this regard.

• NITI Aayog has come up with a single measurable index to track the progress of all the States and UTs across 13 out of 17 SDGs (excluding Goal 12, 13, 14 and 17 on account of unavailability of comparable data across States/UTs).

Sustainable Development

and Climate Change

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• The score varies from 0 to 100. States with scores equal to/greater than 65 are considered as Front-Runners; as Performers in the range of 50-64 and as Aspirants if the score is less than 50.

• States with an index score of 100 are classified as Achievers i. e. the states have achieved the national target set for 2030.

Ganga – The Lifeline of India

• A key policy priority of the Government towards achieving the SDG 6 (Ensure availability and sustainable management of water and sanitation for all) has been the cleanliness of mighty River Ganga through Namami Gange Mission.

• For effective implementation and proper synchronization with the State and Local Bodies, National Mission for Clean Ganga (NMCG) was empowered as an Authority under the Environment (Protection) Act, 1986 for fast track implementation.

Major Components of Namami Gange Mission

I. Sewerage Project Management

II. Urban Sanitation

III. Sewerage Infrastructure

IV. Industrial Pollution

V. Water Quality

VI. River as Public Space

VII. Rural Sanitation

VIII. Ecosystem Conservation

IX. Urban River Management

X. Water Use Efficiency

XI. Clean Ganga Fund

Resource Efficiency

• SDG 12 aims to ‘Ensure Sustainable Consumption and Production Patterns’ along with the eight other SDG goals (2, 6, 7, 8, 9, 11, 14 and 15) have a bearing on resource efficiency.

• Sustainable consumption and production is also a priority for the Government of India and is reflected in various policies/programme announcements like Make in India, Zero Effect-Zero Defect Scheme, Smart Cities, Swachh Bharat, and Ganga Rejuvenation Mission.

• A resource efficient development approach essentially means a transition of the management of natural resources with a progressive minimization of

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waste in both consumption and production processes through various policies and measures.

• Economic growth and urbanization in India have spurred the demand for natural resources. This growing demand has resulted in high imports, in particular, imports of fossil fuels and metals.

• Integrated, concerted and collaborative policy of resource efficiency could be a suitable response strategy to address resource security and the growing demand with the limited supply of the materials and at the same time ensures environmental sustainability.

• The International Resource Panel estimated that efficient resource policies in G7 countries could reduce the global use of natural resource by 28 per cent, diminish greenhouse gas (GHG) emissions by an additional 15 to 20 per cent and deliver annual economic benefits of US$2 trillion globally by 2050.

Six Pillars for a Resource Efficiency Framework in India

Policies

i. Formulate a national policy on RE for all types of resources (biotic, abiotic) addressing various lifecycle stages and key stakeholders

ii. Formulate a national policy on Sustainable Public Procurement (SPP) and for End-of-Life Vehicles (ELVs) to minimize consumption of resources, reduce waste generation and GHG emissions, as well as contribute to innovation in materials and technology in the space of RE.

iii. Formulate a Waste to Resource Management Directive based on existing waste and hazardous substance management rules/regulations following a lifecycle approach targeting relevant stakeholders and focusing on RE.

Programmes and Mainstreaming

i. Mainstream RE initiatives by leveraging existing flagship programmes and schemes like Swachh Bharat Abhiyan, Smart Cities, Make in India, Start-up India, Digital India and others.

ii. Industry may leverage Corporate Social Responsibility (CSR), Corporate Environmental Responsibility (CER) and Extended Producer Responsibility (EPR) for RE initiatives.

iii. Build on the National Chemical Management Plan being drafted by Ministry of Environment, Forest and Climate Change (MoEF&CC) to develop a strategy, framework and guidelines for the safe and circular management of chemicals.

iv. Leverage the national clean energy and environment fund to finance infrastructure, clean technologies and related RE initiatives.

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Regulations

i. Establish a national coordinating body- Bureau of Resource Efficiency (BRE) between various ministries to identify, implement and achieve national RE goals.

ii. Large and resource intensive industries and bulk waste generators may be mandated to file the Resource Use and Efficiency Statement.

iii. Establish and mandate a ‘Consent to Close’ requirement for medium and large industries in the ‘RED’ category to ensure that waste streams are responsibly managed and recycled before closure.

Setting up a Dynamic Recycling Industry

i. Facilitate Urban Local Bodies (ULBs) to undertake urban mining and create secure landfills.

ii. Facilitate the establishment of Producer Responsibility Organizations (PRO) for waste recycling and for engagement with the informal sector.

iii. Facilitate innovation to enhance resource recovery and improve working conditions by integrating the informal sector into the waste value chain.

R&D and Technology Development

i. Leverage technologies like Artificial Intelligence (AI), robotics, block-chain etc. for the recycling industry.

Capacity Development, Outreach & Monitoring

i. Facilitate creation of accredited laboratories that could conduct testing.

ii. Develop and promote programmes and certifications for informal sector skill development in RE.

iii. Develop and launch citizen awareness programmes on RE.

iv. Foster inter-governmental collaboration and knowledge exchange with the G20, RE dialogue and other bodies like International Resource Panel and other national and international forums.

v. Develop monitoring and outcome indicators for tracking progress on RE.

AIR Pollution

• Government is executing the National Air Quality Monitoring Programme (NAMP) covering 312 cities/towns across the country.

• Under NAMP, four major air pollutants viz. Sulphur Dioxide (SO2), Oxides of Nitrogen as NO2, Suspended Particulate Matter (PM10) and Fine Particulate Matter (PM2. 5) have been identified for regular monitoring at all the locations.

• The smaller PM2. 5 is particularly deadly as it can penetrate deeper into the lungs.

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Major Government Initiatives

• National Ambient Air Quality Standards (NAAQS) are the standards for ambient air quality with reference to various identified pollutant notified by the CPCB under the Air (Prevention and Control of Pollution) Act, 1981.

• Major objectives of NAAQS are:

o To indicate necessary air quality levels and appropriate margins required to ensure the protection of vegetation, health and property.

o To provide a uniform yardstick for assessment of air quality at the national level.

• Air Quality Index (AQI) is a tool for effective communication of air quality status to people. There are six AQI categories, namely - Good, Satisfactory, Moderately Polluted, Poor, Very Poor and Severe.

• MoEF&CC has launched NCAP in 2019 as a pan India time bound national level strategy. The tentative national level target of 20-30 per cent reduction of PM2. 5 and PM10 concentration by 2024 is proposed under the NCAP with 2017 as the base year for comparison of concentration.

Climate Change

• Since the adoption of United Nations Framework Convention on Climate Change (UNFCCC) in 1992 we have witnessed the adoption of various related instruments to address climate change including the adoption of Kyoto Protocol in 1997 and the latest and most ambitious one being the Paris Agreement.

• The ultimate objective of UNFCCC is to stabilize GHG concentration in the atmosphere at a level that will prevent dangerous human interference with the climate system, in a time frame which allows ecosystems to adapt naturally and enables sustainable development.

• The main aim of the Paris Agreement is to hold the increase in the global average temperature well below 2oC above pre-industrial levels and pursuing efforts to limit the temperature increase even further to 1. 5oC above pre-industrial levels.

• The Paris Agreement sets a roadmap for all nations in the world to take actions against climate change in the post-2020 period.

India’s Climate Actions

• India’s climate actions are based on the principles of Equity and Common but Differentiated Responsibilities.

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• The major policies and plans include National Action Plan on Climate Change (NAPCC), launched in 2008, formulated in the backdrop of India’s voluntary commitment to reduce emission intensity of its GDP by 20 to 25 per cent by 2020 over 2005 levels.

• A National Adaptation Fund on Climate Change was established in 2015 to meet the cost of adaptation to climate change for the State and Union Territories that are particularly vulnerable to the adverse effects of climate change.

Katowice Climate Package

• At the 24th session of the 2018 UNFCCC Climate Change Conference held at Katowice (Poland), India engaged positively and constructively in the negotiations while protecting its key interests including recognition of different starting points of developed and developing countries; flexibilities for developing countries and consideration of principles including equity and Common but Differentiated Responsibilities and Respective Capabilities (CBDR–RC).

• India reiterated its promise to implement the Paris Agreement in its spirit and to act collectively to address climate change.

• The key takeaways of Katowice package are the guidance on Nationally Determined Contributions (NDCs) that preserves the nationally determined nature of NDCs and provides for Parties to submit different types of contributions including adaptation.

• The Enhanced Transparency Framework builds upon the existing guidelines while providing flexibilities for developing countries;

• Parties have also agreed to initiate the work on setting up the new collective finance goals post-2020 from the floor of US$100 billion

• Provision of financial support to developing countries is an important pillar of climate change response.

• UNFCCC mandates that countries in Annex-II (industrialized countries) provide financial resources, including for the transfer of technology, needed by the developing countries to take climate actions.

• Paris Agreement also emphasizes the role of climate finance in strengthening the global response to climate change.

• Without sufficient climate finance, the proposed NDCs would not fructify.

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Three Essential ‘S’s of Climate Finance

i) Scope

Climate finance should support both the adaptation and mitigation activities of the developing countries in accordance with the country needs and priorities.

The Paris Agreement gives equal weightage to adaptation and mitigation. Under the UNFCCC, the intent and obligation of climate finance is unambiguous, that developed country Parties shall provide financial resources to developing countries; but what constitutes of financial resources and its key elements for climate finance itself are very broadly defined.

Some more important parameters such as how to treat private climate finance flows that are ‘mobilized’ or ‘leveraged’, the clarity on “new and additional” also need to be understood in this context.

ii) Scale

Developing countries have myriad developmental challenges and climate change puts additional burden on the already scarce resources. The climate finance requirements of developing countries are likely to be enormous.

A recent report by Oxfam, 2018 indicated, “People in poorer countries are on average five times more likely than people in rich countries to be displaced by extreme weather events.

By mid-century, the costs of climate change to developing countries are estimated to exceed US$1trillion per year, even if global average temperature remains below 2°C. ”

iii) Speed

To answer the question, whether the speed of climate finance in the multilateral climate regime is sufficient, we need to understand if the developed countries have fulfilled their commitments and the progress of delivery of finance is from developed to developing countries.

As of February 2019, the pledge and approval of multilateral climate change funds shows lagged performance.

India’s Nationally Determined Contribution (NDC)

• An important feature of Paris Agreement is that it seeks to elicit ambitious action by each country by basing it on a country-driven approach with the contribution by each country to the global fight against climate change determined at national level.

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• Each Party’s successive NDC will have to be a progression of Party’s previous efforts.

• India’s NDC outlines the post-2020 climate actions India intends to undertake under the Paris Agreement on climate change adopted in December 2015.

• India ratified the Paris Agreement on October 2, 2016. At the national level, the roadmap for implementation of India’s NDC is being prepared.

Developments in the Sustainable Finance Arena

• Implementing 2030 Sustainable Development Agenda and the Paris Agreement requires investments of scale and size which is unprecedented.

• This essentially means that along with domestic public budgets and international public finance, resources would have to be mobilized from a variety of sources, in particular, private sector.

• Currently, private sector financing has been mostly done by the banks. Therefore, capital market products are required to free-up the banks’ balance sheet capacity and allow them to underwrite loans to meet the accelerating demands for new sustainable investments.

• In India, SEBI has provided a regulatory environment for issuance of green bonds in May 2017, the fruits of which are reflected in the cumulative issuance of green bonds in India.

• India stands at 11th position in global country ranking and accounts for 33 per cent of the Certified Climate bonds by number in emerging markets.

International Solar Alliance (ISA)

• ISA is the first treaty-based International Intergovernmental Organization launched by India and France on 30 November, 2015 in Paris and entered into force on 6 December, 2017.

• The first Assembly of the ISA was convened on October 3, 2018.

• ISA’s motto is, “let us together make the sun brighter”.

• ISA has launched five programmes so far:

o Scaling Solar Applications for Agriculture Use;

o Affordable Finance at Scale;

o Scaling Solar Mini Grids;

o Scaling Solar Rooftop, and

o Scaling Solar in E-mobility and Storage.

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Way Forward

• India has been progressing rapidly towards achieving the SDGs. Lack of adequate resources is a major challenge in achieving the SDGs and international cooperation is essential in achieving these goals.

• India’s NDC has set clear targets for achieving its climate goals. However, a substantial scaling up of financial resources and technology are needed to implement this target by 2030.

MCQ’s

1. Which of the following provides for financing the implementation of SDG’s?

(a) Kyoto Protocol

(b) Nagoya Protocol

(c) Addis Ababa Action Agenda

(d) Cancun Declaration

Answer: (C)

Explanation:

The Addis Agenda provides a new global framework for financing sustainable development, which supports implementation of the 2030 Agenda, including the SDGs.

2. Consider the following statements -

I. The National Air Quality Index provides for real-time assessment of air quality and uses a color coded mechanism to spread awareness about air pollution.

II. It measures a total of 8 major air pollutants and classifies the risk through six categories.

Which of the above statements is/are correct?

(a) I only

(b) II only

(c) Both I and II

(d) Neither I nor II

Answer: (C)

Explanation:

Air Quality Index (AQI) is a tool for effective communication of air quality status to people. There are six AQI categories, namely - Good, Satisfactory, Moderately Polluted, Poor, Very Poor and Severe.

3. The Green Climate Fund under the UNFCCC was established through the –

(a) Basel Convention

(b) Copenhagen Accord

(c) Doha Agreement

(d) Bali Declaration

Answer: (B)

4. In India, ‘extended producer responsibility’ was introduced as an important feature in which of the following?

(a) The Bio-medical Waste (management and handling) rules, 1998

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(b) The Recycled Plastic (manufacturing and usage) rules, 1999

(c) The e-Waste (Management and handling) rules, 2011

(d) The food safety and standard regulations, 2011

Answer: (C)

5. Which of the following activities can release Particulate Matter into the atmosphere?

I. Stubble Burning

II. Burning Fossil Fuels

III. Forest Fires

Select the correct code

(a) I and II only

(b) III only

(c) I and III only

(d) I, II and III

Answer: (D)

Mains Practice Questions

1. Explain the principle of Common but differentiated responsibilities which forms the bedrock of climate change negotiations. Has the Paris Agreement diluted this principle?

2. Evaluate the performance of India in achieving the 2030 SDG Agenda. Identify the areas where India seems to be lagging behind.

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External Sector in a nutshell

India’s macroeconomic situation on the external side continues to be stable.

Current account deficit(CAD) is projected at 2. 4 % GDP for 2018-19, up from 1. 8 per cent in 2017-18 reasons being-

o Widening of the trade deficit from 6. 0 % GDP to 6. 7 % over the last 2 years due to

Rise in crude prices and

Decline in the growth of merchandize exports

The acceleration in the growth of remittances has offset the deterioration of the current account deficit.

Total liabilities-to-GDP ratio, inclusive of both debt and non-debt components, has declined from 43 per cent in 2015 to about 38 per cent at end of 2018.

o Share of foreign direct investment has risen and that of net portfolio investment has fallen in total liabilities, thereby reflecting a transition to more stable sources of funding the current account deficit.

o The current account deficit to GDP ratio has started to increase lately, the external indebtedness continues to be on a declining path.

India’s foreign exchange reserves continue to be comfortably placed in excess of US$400 billion.

The Indian Rupee traded in the range of 65-68 per US$ in 2017-18 but depreciated to a range of 70-74 in 2018-19.

The Real Effective Exchange Rate also depreciated in 2018-19, making India’s exports potentially more competitive. The exchange rate in 2018-19 has been more volatile than in the previous year, mainly due to volatility in crude prices, but not much due to net portfolio flows.

The composition of India’s exports and import basket in 2018-19 –

External Sector

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o Top export items – Petroleum products, precious stones, drug formulations, gold and other precious metals

o Top Import items- Crude petroleum, pearl, precious, semi-precious stones and gold

o India’s main trading partners continue to be the US, China, Hong Kong, the UAE and Saudi Arabia.

Global Economic Environment

Increasing Trade Protectionism and Slowing down of Global Output

The World Economic Outlook (WEO) in its April 2019 issue has projected growth in world output at 3. 3 % in 2019, down from 3. 6 % in 2018.

The World Trade Organization(WTO) -World trade growth has slowed down to 3 per cent in 2018, much below the growth rate of 4. 6 per cent in 2017, following the introduction of new and retaliatory tariff measures, heightened US-China trade tensions, weaker global economic growth and volatility in financial markets.

o World commercial services on the other hand recorded a strong growth of 7. 7 per cent in 2018 but was still lower than 8. 4 per cent in 2017.

Along with the slowing down of world trade seen in 2018 there has been a spatial shift in the nature of BoP balances as well in the last few years. This reflects the shifting of the consumption hub of the world from the advanced to the less advanced countries.

India’s Balance of Payments Developments (BoP)

Overview of BoP

o Current Account Developments -CAD is projected at 2. 4 % GDP for 2018-19, up from 1. 8 per cent in 2017-18 reasons being-

Trade Account

Widening of the trade deficit from 6. 0 % GDP to 6. 7 % over the last 2 years due to

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(i) Rise in crude prices and

(ii) Decline in the growth of merchandize exports

Net Invisibles in Current Account

(i) Net services accelerated initially in 2017-18 before decelerating in 2018-19.

The contribution of net services to financing merchandise trade deficit has fallen from 62. 2 % in 201617 to 43. 7% in 2018-19, reflecting a muted performance of service exports in recent times.

Software services, accounting for about 40 per cent of total services receipts, along with financial services, have been the main drivers in the service exports.

Growth of net transfers kept on accelerating between 2017-18 to 2018-19

Net Private transfer receipts, mainly representing remittances by Indians employed overseas, increased in 2018-19 as compared to in 2017-18.

Improved income conditions in the Gulf countries with the rise in oil prices, might have led to this rise in remittances as a significant portion of remittances are sourced from these countries.

According to the World Bank (April 2019), India remained a top remittance recipient country in 2018, followed by China, Mexico, Philippines, and Egypt.

(iii) No growth in net factor income during 2017-18 to 2018-19

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Developments in Capital Account of BOP

o Foreign investments

During 2018-19, net foreign investment declined to US$31. 3 billion as compared to US$52. 4 billion in the corresponding period of 2017-18.

As a proportion of GDP, net FDI fell from 1. 6 % in 2016-17 to 1. 1 per cent in 2017-18, before rising to 1. 2% in 2018-19.

o Banking capital

Shown increase.

Debt creating capital flows

o Net external assistance

Increased

o Net External Commercial Borrowings (ECBs)

Experienced a net inflow of US$2. 8 billion during 2018-19 (April-December) as against a net outflow of US$1. 2 billion in the corresponding period of the previous year, reflecting in part a possible credit crunch in the country.

o Net NRI deposit

Increased

o Net short-term trade credit

Recorded a sharp decline during April-December 2018 as import contraction started to set in.

o Overall, net capital flows fell short of financing CAD resulting in depletion of foreign exchange reserves by US$17. 5 billion during April-December 2018.

o In 2009-14 net portfolio investment funded 45. 6 % of current account deficit but declined to 17. 1 per cent in 2014-19.

o The financing of the current account deficit in 2014-19 thus became less vulnerable to capital flight as compared to the previous period.

External Debt

o India’s External Debt was US$521. 1 billion at end-December 2018, 1. 6 % lower than its level at end-March 2018.

o Foreign Exchange cover to total external debt deteriorated to 75. 5% at end-December 2018 from 80. 2% at end-March 2018.

o International comparison of external debt based on World Bank data shows that among the top twenty developing debtor countries in 2017, India’s external debt to Gross National Income (GNI) ratio at 19. 8%

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was fourth lowest, while China continues to have the lowest ratio of 14 per cent.

In terms of the foreign exchange reserves cover to external debt, India’s position is fifth highest at 75. 9 %, whereas India has fifth lowest short-term debt to foreign exchange reserves at 25. 1% among the top twenty developing debtor countries.

Again as per the World Bank data, though India is the third largest debtor country (in absolute amounts) among developing countries (after China and Brazil), its average-age of debt is much higher given that its ratio of short-term debt to total debt is only about 19. 0 while that of China is 69 %. Higher age of debt reduces the rollover risk.

o Debt Service ratio indicates the claim that servicing of external debt makes on current receipts and is, therefore, a measure of strain on BoP due to servicing of debt service obligations.

Debt Service ratio increased till 2016 and then declined continuously since 2016 from 8. 8 per cent to 8. 3 per cent in 2017 to 7. 5 per cent in 2018 (end-March).

The declining ratios of debt service, in 2016-17 and 2017-18 may be seen as favorable for India.

Composition of Trade

Exports - In 2018-19, petroleum products continued to be the largest exported commodity, in value terms. Other major exports included pearls, precious, semi-precious stones as also gold and other precious metal jewelry besides drug formulations. However, it was exports of organic chemicals which grew the highest at 30. 6% in 2018-19.

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Import

o In the import basket of 2018-19, petroleum: crude, at 22. 2 per cent had the largest share followed by gold and other precious metal Jewelry and pearls precious/semi-precious stones.

o Growth rates of gold and pearls (including precious and semi-precious stones) however declined in 2018-19.

o Electronics components grew the fastest at 54. 6 per cent in 2018-19, followed by petroleum: crude and iron and steel.

Major trading partners in 2018-19

Export

o India’s largest export destination country continues to be the United States of America (USA), which accounted for 16 % of India’s exports (in value terms) in 2018-19, followed by United

Arab Emirates (UAE), China and Hong Kong (Figure 34).

o However, in 2018-19, growth of India’s exports to the Netherlands was the highest (40. 7 per cent), followed by (25. 6%) and Nepal (17. 4%)

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Import

China continues to be the largest source of imports of India accounting for 13. 7% of the total imported value in 2018-19. The other important sources from which India imports are the USA, UAE and Saudi Arabia.

In terms of growth rates, imports from Singapore grew the highest at 118. 1 % in 2018-19, followed by Hong- Kong (68. 5 per cent) and UAE (37. 0 per cent).

Further, though China continues to be the largest exporter to India, India’s imports from China fell from US$76. 4 billion in 2017-18 to US$70. 3 billion in 2018-19, registering a negative growth.

Trade Policy

India has bilateral trade agreements with all major regional groupings.

India has signed 28 bilateral/multilateral trade agreements with various country/group of countries.

In 2018-19, India’s exports to countries with which it has a trade agreement stood at US$121. 7 billion accounting for 36. 9% of India’s export to all countries.

Similarly, in the same year, India’s imports from countries with which it has a trade agreement stood at US$266. 9 billion accounting for 52. 0 per cent of India’s imports from all the countries.

Trade Facilitation

India ratified the WTO Agreement on Trade Facilitation (TFA) in April 2016 and subsequently constituted a National Committee on Trade Facilitation (NCTF) with the Cabinet Secretary of India as the Chair.

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The NCTF has played an important role in reducing the high cost of imports and exports so as to integrate our cross-border trade with the global value chain.

Some of the landmarks being

i. Establishment of a National Single Window system to route all import related formalities viz. , examination, sampling, clearance, etc. which involves plethora of agencies, through a single online national portal;

ii. Simplification of fees and charges for various clearance related activities at the borders;

iii. Paperless filing of import/ export documents through ‘E-sanchit’ project; and

iv. Publishing of resource information viz. , procedures for import/ export, laws and regulations, etc. online for ease of access.

Consistent trade facilitation efforts have resulted in substantive improvement of India’s performance in Trading across Borders indicator from 146 in 2017 to 80 in the year 2018.

Further, these initiatives have also contributed to overall improvement in ‘Ease of Doing Business’ environment in the country, as also recognized by the World Bank.

Trade Related Logistics

The Indian logistics sector is on a big growth tide.

According to the domestic rating agency ICRA, Indian logistics sector is expected to grow at a rate of 8-10% over the medium term. This is an improvement over the compound annual growth rate (CAGR) of 7. 8% at which the industry grew during the last five years.

The logistics industry of India is currently estimated to be around US$215 billion. 6. 61 The last few years have seen significant development for this industry which is reflected in the global rankings.

According to the Global Ranking of the World Bank’s 2016 Logistics Performance Index, India jumped to 35th rank in 2016 from 54th rank in 2014 in terms of overall logistics performance. In 2018, India stood at 44th rank. Experts predict that the logistics sector can be the largest job creator by 2022.

Government of India has announced a draft National Logistics policy for which a national logistics action plan is being developed. The key objective is to drive economic growth and trade competitiveness of the country through a truly integrated, seamless, efficient, reliable and cost effective logistics network, leveraging best in class technology, processes and skilled manpower. Various logistics schemes have been introduced, which are as under:

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i. The Government has launched many flagship programmes like the Bharatmala Yojana, the Sagarmala Yojana and the Dedicated Freight Corridors. The objective of these programmes is to develop infrastructure to meet the growing demand of logistics in the country and to make a modal shift on more cost effective modes of transport.

ii. 111 waterways have been identified for development.

iii. Infrastructure status has been given to select logistics activities like warehousing, cold chains, Multi modal logistics parks and slurry pipelines.

iv. Subsidy is provided to develop cold chains and pack houses.

Indian logistics industry is a sunshine sector and there are multiple factors on both demand and supply side that are driving this sector. On the demand side, the reduction in truck turnaround time following GST is a major stimulus to logistics growth as also pick up in industrial production. On the supply side, the outsourcing of non-core activities like warehousing is allowing main players to focus on improving the efficiency of transportation. Automation of large warehouses is also adding to the efficiency of the logistics sector.

According to Bowersox, Calantone and Rodrigues, India’s logistics cost as a % of GDP was 15. 4 in 1997 and 17 per cent in the year 2000. As per an international market research conducted by Armstrong & Associates (October 2017), India’s logistics cost as a % of GDP is estimated to be 13 per cent. A comparison of India with the rest of the world, taking 2016 as reference year, is in Table 4.

Driving logistics cost down from estimated current levels of 13-14% of GDP to 10 per cent in line with best-in class global standards is essential for India to become globally competitive.

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Anti-Dumping and Safeguard Measures

India conducts anti-dumping investigations on the basis of applications filed by the domestic industry with prima facie evidence of dumping of goods in the country, injury to the domestic industry and causal link between dumping and injury to the domestic industry. The countries involved in these investigations are China PR, Hong Kong, Korea, Germany, EU, USA, Malaysia, South Africa, Thailand, and Brazil among others.

DGTR is also in the process of developing a web application for online submission of petitions, information, submissions, rejoinders etc. related to antidumping/ countervailing/ anti-circumvention investigations, for the convenience of the industry and for enabling DGAD to provide trade remedies available under the WTO framework to the various stakeholders.

Outlook

The WEO, April 2019 has forecast acceleration of world output in the second half of 2019.

The key assumptions in this regard are continued accommodative monetary policy stance in advanced countries and fiscal stimulus in China and de-escalation of trade tensions between the US and China.

There could be pressure on crude prices to increase as world output grows yet that may not impact India since growth in world output will also favourably impact India’s exports, which is not decoupled from growth of world trade.

Government policies are expected to further lift restrictions on FDI inflows, which will continue to increase the stability of sources funding the current account deficit.

From a macro-economic perspective the deterioration of CAD may be contained if consumption slows down in the economy while increase in investment and exports become the new drivers of the Indian economy.

Some of the Terms Used

GDP – Gross Domestic Product is the total monetary value of goods and services which are produced in a territory within a specified time period

CAD (Current Account Deficit) – Current Account is a part of the Balance of Payments Accounts (BoP Accounts). When the expenditure side of the current account is higher than the revenue side then there is a CAD

Trade Deficit - Whenever the value of exports by a country is lesser than the value of imports done, then there is a deficit which is referred to as trade deficit.

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Mains Practice Questions

1. Recent Economic survey predicts that the logistics sector can be the largest job creator by 2022. Does draft National Logistics policy is right step in this direction. Discuss.

2. Global economic environment is muddled by increasing trade protectionism and slowing down of global output. It poses both challenge and opportunity for Indian economy. Comment.

MCQ

1. Arrange the following Commodities in the correct decreasing order of their share (in percentage) in India’s export:

1. Iron and Steel

2. Drug Formulations, Biologicals

3. Pearl, Precious, Semi-Precious Stones

4. Petroleum products

Select the correct answer using the codes given below:

(a) 4-3-2-1

(b) 2-3-1-4

(c) 1-3-2-4

(d) 1-3-4-2

Answer: (A)

2. Arrange the following Countries in the correct decreasing order of their share (in percentage) in India’s export:

1. China

2. United States of America (USA)

3. United Arab Emirates (UAE)

4. Hong Kong

Select the correct answer using the codes given below:

(a) 2-1-3-4

(b) 2-3-1-4

(c) 1-3-2-4

(d) 1-3-4-2

Answer: (B)

Explanation:

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3. With which of the following countries India have Bilateral Trade agreements:

1. Nepal

2. Sri Lanka

3. Bangladesh

4. China

5. Pakistan

Options:

(a) 1, 2, 3, 4, 5

(b) 1 and 3 only

(c) 2, 3 and 4 only

(d) 1, 2 and 3 only

Answer: (D)

4. ‘Logistics Performance Index’, often seen in the news is published by:

(a) World Economic Forum

(b) World Customs Organisation

(c) World Bank

(d) United Nations Conference on Trade and Development

Answer: (C)

The Logistics Performance Index (LPI) is an interactive benchmarking tool created by the World Bank to help countries identify the challenges and opportunities they face in their performance on trade logistics and what they can do to improve their performance.

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Introduction

• Agriculture and allied sectors are critical in terms of employment and livelihoods for the small and marginal farmers, who dominate the agriculture ecosystem in India.

• To attain the Sustainable Development Goal (SDGs) of ending poverty and bringing in inclusive growth, activities related to agriculture need to be closely integrated with the SDG targets.

• With the decline in the size of landholdings in agriculture, India has to focus on resource efficiency in small holder farming to meet the SDG targets and also to attain sustainability in agriculture.

• A combination of resource efficient methods, dynamic cropping patterns, farming that is responsive to climate change and intensive use of ICTs should be the backbone of smallholder farming in India.

• For a safe and food secure future, the agriculture landscape has to undergo tremendous transformation and shift from the philosophy of ‘green revolution led’ productivity to ‘green methods’ led sustainability in agriculture.

Overview of Agriculture and Allied Sectors

Average annual growth rate in real terms in agricultural & allied sectors has remained at around 2. 88 per cent during 2014-15 to 2018-19. However, the volatility of output growth as measured by the coefficient of variation has declined from 2. 7 in the period of 1961-1988 to 1. 6 during 1989-2004 and further to 0. 8 during 2005 to 2018

Share of Agriculture Sector in GVA (Gross Value Added)

The share of agriculture, forestry & fishing sector in GVA has seen a steady decrease over the years from 15. 4 per cent in 2015-16 to 14. 4 per cent in 2018-19. The decline was mainly due to decline in the share of crops

Agriculture & Food

Management

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Gross Capital Formation in Agriculture & Allied Sector

Gross Capital Formation (GCF) in agriculture and allied sectors as a percentage of GVA saw a rise to 17. 7 per cent in 2013- 14 but declined thereafter to 15. 2 per cent in 2017-18

Pattern of Agricultural Land Holdings in India

As per Phase-I results of the Agriculture Census, 2015-16, the number of operational holdings, i. e. land put to agricultural use, has increased by 5. 3 percent from 2010-11 to 2015-16.

The share of marginal holdings (less than 1 ha) in total operational holdings increased from 62. 9 per cent in 2000-01 to 68. 5 percent in 2015-16, while the share of small holdings (1 ha to 2 ha) decreased from 18. 9 percent to 17. 7 percent during this period. Large holdings (above 4 ha) decreased from 6. 5 per cent to 4. 3 percent.

Growing Number of Women Farmers

The share of operational holdings cultivated by women has increased from 11. 7 per cent in 2005-06 to 13. 9 percent in 2015-16. The marginal and small holdings operated by women farmers together constitute 27. 9 percent of total operational holdings cultivated by women

Bringing Resource Efficiency in Small Holder Agriculture

1. Appropriate mechanism needs to be framed for economical use of water among small and marginal farmers.

2. The cropping pattern in India is highly skewed towards crops that are water intensive. The incentive structures like MSP, heavily subsidized electricity, water and fertilizers have played a significant role in the misalignment of crop patterns in the country. So scientific cropping pattern is the need of the day. Also there is an urgent need to focus on irrigation water productivity to raise agricultural productivity

3. While adoption of micro-irrigation systems (MI), to improve water use efficiency.

Economizing the Use of Fertilizers and Pesticides

The improvement in fertilizer use efficiency requires farmers’ knowledge regarding the right product, dosage, time and method of application. Some of the suggested measures are the use of optimal dose based on soil health status, promotion of Neem-coated urea, promotion of micronutrients, promotion of organic fertilizers, and promotion of water soluble fertilizers.

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Increasing Sustainability in Agriculture - Turning to Organic and Natural Farming

The Government has been promoting organic farming in the country through schemes such as Paramparagat Krishi Vikas Yojana (PKVY) and Rashtriya Krishi Vikas Yojana (RKVY).

In the revised guidelines of PKVY scheme during the year 2018, various organic farming models like Natural Farming, Vedic Farming, Cow Farming, Homa Farming, Zero Budget Natural Farming etc. have been included wherein flexibility lies with the States to adopt any model of Organic Farming depending on the farmer’s choice

Adopting Appropriate Technologies for Smallholder Farms

The Custom Hiring Centres (CHCs) can be set up to promote the use of high-tech machinery

To facilitate communication and reduce transaction costs, the ICT (Information and Communication Technology) applications are crucial in smallholder farming.

Technology can play a critical role in bridging the information gaps that prevail in agricultural markets.

The use of block chain technology in the coffee market represents one such example

Improving Infrastructure and Access to Markets

A combination of enhancing rural infrastructure to improve connectivity, Information, Communication Technology (ICT) to provide timely information about prices, aggregation and storage facilities can help small and marginal farmers in overcoming the marketing bottlenecks.

Agricultural Marketing and Farmer Friendly Reforms Index (AMFFRI)

NITI Aayog launched in 2016 an index to rank States and UTs based on implementation of seven provisions proposed under model APMC Act like joining e-NAM initiative, special treatment to fruits and vegetables for marketing and level of taxes in mandis. These indicators reveal ease of doing agribusiness as well as opportunities for farmers to benefit from modern trade and commerce and have wider option for sale of her/his produce and also represent competitiveness, efficiency and transparency in agro-markets.

The State of Maharashtra achieved first rank in implementation of various reforms. Gujarat ranks second with a score of 71. 5 out of 100, closely followed by Rajasthan and Madhya Pradesh.

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Role of Extension Services

A Report on Review of Agricultural Extension in India, 2010 by IFPRI has highlighted the increasing need to share knowledge and skills in order to provide locally relevant services that meet the information needs of small and marginal farmers.

Secondly, the report highlighted the need to bring small and marginal farmers within the framework of extension services.

Trend of Expenditure on Agriculture Research & Education

There has been an increasing trend in the expenditure on agricultural research and education as a percentage of total agricultural GVA with an exception of 2017-18.

Agricultural Credit

The regional distribution of agricultural credit in India shows that the distribution of credit is highly skewed. It is seen that the distribution of agricultural credit is low in North Eastern, Hilly and Eastern States

Allied Sectors: Animal Husbandry, Dairying and Fisheries

Animal Husbandry and Dairying:

India ranks first in milk production, accounting for 20 percent of world production. Milk production in India has been increasing steadily from 1991-92 to 2017-18, at an average annual growth rate of 4. 5 percent.

Schemes/Initiatives to Improve Productivity of Livestock and Dairy Sector

1. Rashtriya Gokul Mission (RGM): To undertake breed improvement programme for indigenous breeds so as to improve the genetic makeup and increase the stock.

2. E Pashu Haat Portal: Under the scheme National Mission on Bovine Productivity, E Pashudhan Haat portal was developed for connecting breeders and farmers regarding availability of quality bovine germplasm.

3. National Livestock Mission: National Livestock Mission ensures intensive development of livestock, especially small livestock (sheep/goat, poultry rearing etc. ) along with adequate availability of quality feed and fodder.

4. Livestock Health & Disease Control Scheme: Assistance provided under the Scheme for prevention and control of animal diseases like Foot and Mouth Disease (FMD), Peste des Petits Ruminants, (PPR), Brucellosis, Classical Swine Fever etc.

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5. Dairy Development: The Government is making efforts for strengthening infrastructure for production of quality milk, procurement, processing and marketing of milk and milk products through various schemes.

Fisheries Sector

India is the second largest fish producer in the world with a total production of 13. 7 million metric tonnes in 2018-19 of which 65 percent was from inland sector. Almost 50 per cent of inland fish production is from culture fisheries, which constitutes 6. 5 per cent of global fish production. The sector has been showing a steady growth in the total gross value added and accounts for 5. 23 per cent share of agricultural GDP.

Food Security and Food Management in India

Food Security

The Global Food Security Index (GFSI), 2018 considered four core issues of food security across 113 countries: (i) affordability, (ii) availability, (iii) quality & safety and (iv) natural resources and resilience.

India ranks No. 1 in Nutritional standards. India’s overall Food Security Score is 50. 1 out of 100 which ranks India 76 out of 113 countries. This reflects the need for India to further improve the management of food supply in various aspects.

The Government specifically undertakes the following measures:

i. Announcing Minimum Support Prices and Central Issue Price

ii. Undertake procurement of food grains through FCI and decentralised procurement by State Agencies

iii. Maintain buffer stocks; and

iv. Open market sale of wheat and rice to check inflation.

Food Subsidy

Food subsidy comprises of two main components:

The first component includes subsidy provided to the Food Corporation of India (FCI) for procurement and distribution of wheat and rice under the National Food Security Act (NFSA), 2013 and other welfare schemes and for maintaining the buffer stock of food grains as a measure of food security.

The second component comprises subsidy provided to States undertaking decentralized procurement. The acquisition and distribution costs of procuring food grains for the central pool constitute the economic cost.

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Action Plan for Doubling The Income of Farmers

The Government has set a target of doubling of farmers’ income by the year 2022. For the said purpose, the Government had constituted an Inter-Ministerial Committee to examine issues relating to Doubling of Farmers’ Income (DFI) and recommend strategies.

The Committee has identified seven sources of income growth viz, improvement in crop productivity; improvement in livestock productivity; resource use efficiency or savings in the cost of production; increase in the cropping intensity; diversification towards high-value crops; improvement in real prices received by farmers; and shift from farm to non-farm occupations.

Measures taken are: Encouraging contract farming through the State Governments by promulgating of Model Contract Farming Act, Up-gradation of Gramin Haats to work as centers of aggregation and for direct purchases of agricultural commodities from the farmers, e-NAM to provide farmers an electronic online trading platform, Distribution of Soil Health Cards to farmers so that the use of fertilizers can be rationalized, Increase water efficiency through Pradhan Mantri Krishi Sinchayee Yojana (PMKSY)-“ Per drop more crop”, Better insurance coverage to crops for risk mitigation under Pradhan Mantri Fasal Bima Yojana (PMFBY),

Quote :( can be used in essay or mains answer)

“Since nature has the most sustainable ecosystem and since ultimately agriculture comes out of nature, our standard for a sustainable world should be nature’s own ecosystem”

-Wes Jackson

Terminologies used:

Gross value added (GVA): It is an economic productivity metric that measures the contribution of a corporate subsidiary, company or municipality to an economy, producer, sector or region. Gross value added provides a dollar value for the amount of goods and services that have been produced in a country, minus the cost of all inputs and raw materials that are directly attributable to that production.

Micro irrigation methods: A scientific method of irrigation carrying desired water and nutrients direct to the root zone of the plant, drop by drop. E. g. : drip irrigation.

Minimum Support Price (MSP): It is price fixed by Government of India to protect the producer - farmers - against excessive fall in price during bumper production years. The minimum support prices are a guarantee price for their produce from the Government.

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MCQ

1. Consider the following statements:

I. The share of agriculture, forestry & fishing sector in GVA has seen a steady decrease from 2015-16 to 2018-19.

II. Gross Capital Formation (GCF) in agriculture and allied sectors as a percentage of GVA saw a steady rise from 2013-14 to 2017-18

Which of the above statements is/are correct?

a) Only I

b) Only II

c) Both I & II

d) None

Answer: (A)

2. Which among the following has the highest share in total operational holdings in the agricultural sector of India?

(a) Small holdings

(b) Marginal holdings

(c) Medium holdings

(d) Large holdings

Answer: (B)

(marginal holdings>small>large holdings)

3. Which of the following statement(s) is/are correct regarding Paramparagat Krishi Vikas Yojana (PKVY)?

I. It is an elaborated component of Soil Health Management (SHM)

of major project National Mission of Sustainable Agriculture (NMSA)

II. It is promoted through adoption of organic village by cluster approach and PGS certification.

Select the correct option code:

(a) Only I

(b) Only II

(c) Both I & II

(d) None

Answer: (C)

4. According to AMFFRI, which of the following states holds first rank for implementing better agricultural market reforms?

(a) Karnataka

(b) Maharashtra

(c) Gujarat

(d) Rajasthan

Answer: (B)

5. Consider the following statements:

I. India ranks first in milk production, accounting for 33 percent of world’s production

II. India is the second largest fish producer in the world, of which 65 per cent was from inland sector.

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Which of the above statements is/are correct?

(a) Only I

(b) Only II

(c) Both I & II

(d) None

Answer: (B)

Explanation.

India accounts for 20% of the world's production not 33%.

Mains Practice Questions:

1. With fragmentation of agricultural holdings and depletion of water resources, the adoption of a resource-efficient, ICT based climate-smart agriculture can enhance agricultural productivity and sustainability. Comment.

2. For a safe and food secure future, the agriculture landscape has to undergo tremendous transformation and shift from the philosophy of ‘green revolution led’ productivity to ‘green methods’ led sustainability in agriculture. Substantiate.

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The performance of industrial sector has improved in 2018-19 compared to 2017-18.

The IIP growth rate registered was 3. 6% in FY19 compared to 4. 4% a year earlier.

The overall investments or real gross fixed capital formation though has increased by 10% in FY19, its share of GDP is 29. 3% in 2018-19. The rate of growth of GCF (Gross Capital Formation) has experienced a sharp rise from -0. 7% for FY17 to 7. 6% in FY18.

The Index of Eight Core Industries (ICI) registered a growth rate of 4. 3% in FY19.

CPSEs (Central Public Sector Enterprises)

o There are a total of 339 CPSEs

o Of these, 257 were in operation and rest non-operational in 2018

o Of these operation 257 CPSEs, 184 were profit making

Initiatives taken by the government to boost industrial sector –

Government has implemented a host of reforms post 2014 in order to boost the industrial sector. The focus of these reforms has been to simplify and rationalise the existing rules and introduce information technology to make governance more effective and efficient. As a result of these reforms, India’s ranking has jumped by 23 positions to reach 77th rank (out of 190 countries) in the Ease of Doing Business Report published by the World Bank (the report covers 10 indicators spanning the life cycle of the business, of these India has improved its ranking in 6 indicators; apart from this India also has moved closer to best practises at international level which is usually indicated in the improvement of the country's performance in Distance to Frontier)

Industry & Infrastructure

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Startup India

Announced by the government in 2015 (launched in 2016)

Steps taken under this

o Exemption from Income tax on investments raised by Start-ups

o 22 regulatory reforms implemented to improve Ease of Doing Business for Start-ups

o Self-certification regime for six labour laws and three environmental laws

o Start-up India Hub as ‘One Stop Shop’ for the start-up ecosystem (it provides handholding support for the start-ups)

As per industry-wise distribution, IT services accounted for around 15% of the start-ups followed by healthcare and life science

Steel Sector

Contributes around 1. 4% to 2% of India’s GDP

India is the second largest producer of crude steel and third largest consumer of finished steel. However, the per capita consumption stands at around 69 kg, much lesser compared to the global average of 214 kg

With trade restrictive measures imposed by the US, European Union etc. , the steel exports from India have declined and on the other hand imports from South Korea, Japan etc. have increased

Some of the issues faced by the sector are

o Capacity expansion

o High grade steel used in sectors like power, defence, automobile etc. are imported

o Difficulties in acquiring mining leases

o High logistics cost

o Dependence on imports of coking coal

Infrastructure

It is referred to as “Overhead Capital” or “Social Overhead Capital”. It is the basic services without which the primary, secondary and tertiary productive activities cannot function

There is a very close linkage between investments and growth. As per various estimates there is a need of spending 7 to 8% of GDP annually on Infrastructure in India, which translates to investment of US$ 200 billion, but the investments have been around US$ 100 to 110 billion, which means there is an investment deficit of US$ 90 to 100 billion annually. Since there are fiscal constraints which limit public investment, there is an urgent need to promote

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the private investment and government has taken certain measures in this regard

o National Investment and Infrastructure Fund (NIIF) has been set up with a capital of ₹ 400 billion to provide investment opportunities to the private commercially viable projects

o Credit enhancement Fund (CEF) for infrastructure projects to increase the credit rating of the bonds issued by the infrastructure bonds will be launched

o A new credit rating system for infrastructure projects has also been launched

Roads

Are part of integrated multi-modal system of transport

Issues faced

o Availability of funds for financing large projects.

o Lengthy processes in acquisition of land and payment of compensation to the beneficiaries.

o Environmental concerns

o Time and cost overruns due to delays in project implementation, procedural delays

o Lesser traffic growth than expected increasing the risk associated with the projects resulting in stalled or languishing projects and shortfall in funds for maintenance.

Railways

Mission Electrification - The railways has initiated this electrification program which will electrify 100% of its broad gauge network and also reduce India’s dependence on imported diesel oil.

Swachh Rail, Swachh Bharat - it focuses on cleanliness

o Beas station has been ranked first in Category A stations.

Civil Aviation

UDAN (Ude Desh ka Aam Nagarik)

o Total of 719 routes have been awarded in three rounds of bidding, of these 182 are operational.

o Currently connectivity has been provided to more than 22 states / UTs.

o UDAN (International) has been launched very recently.

Infrastructure financing - Public Private Partnership (PPP)

More than a third of the investments in infrastructure in the last decade has come from the private sector. The private sector investment is mainly in the form of PPP.

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As per the Private Participation in Infrastructure Database of World Bank, India is ranked second among developing countries in terms of number of PPP projects and associated investments.

One of the issues plaguing this sector has been dispute resolution of the projects which are stuck up in mid-way. There is a need for dispute resolution mechanism.

Terms used

Index of Industrial Production (IIP) - is used to measure of volume changes in the industry. It is used to represent the industrial growth in the economy. IIP assigns weight of 77. 6% for manufacturing, 14. 3% for mining and 7. 99% for electricity

Gross Fixed Capital Formation (GFCF) - represents the investments in fixed assets

Index of Eight Core Industries (ICI) - represents eights manufacturing sectors (coal, crude oil, natural gas, petroleum refinery products, fertilisers, steel, cement and electricity) weighing 40. 3% of IIP.

MCQ

1. Consider the following statements

1. The index of Industrial Production (IIP) measures increase in the value of production

2. The highest weightage is given for manufacturing sector under IIP

Select the correct answer using the codes given below:

(a) Only 1

(b) Only 2

(c) Both

(d) None

Answer: (B)

2. Consider the following statements

1. The Ease of Doing Business Index is published by the World Bank

2. As per the latest report, India has been ranked at 77th position out of 190 countries

Select the correct answer using the codes given below:

(a) Only 1

(b) Only 2

(c) Both

(d) None

Answer: (C)

3. Consider the following statements

1. India is the third largest producer of steel and second largest consumer of finished steel in the world

2. Per capita consumption of steel in India is higher than the global average.

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Select the correct answer using the codes given below

(a) Only 1

(b) Only 2

(c) Both

(d) None

Answer: (D)

4. Which of the following measures have been taken/announced by the government to boost investments in infrastructure?

1. Credit Enhancement Fund

2. National Infrastructure and Investment Fund (NIIF)

3. New credit rating methodology for infrastructure projects

Select the correct answer using the codes given below

(a) Only 1 and 2

(b) Only 2 and 3

(c) Only 1

(d) 1, 2 and 3

Answer: (D)

Mains Practice Questions

1. There is a very close relation between investments in infrastructure and growth. In this regard discuss the current situation in India and the reforms undertaken.

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The economic reforms of 1991 led to the liberalisation of Indian economy.

India’s growth story was discussed all over and market was viewed as a lucrative option for investments by the world community.

The spike in the GDP led to massive investments in the social security apparatus of the nation as well. The believers of ‘trickle down’ encouraged more liberal economic policies.

Yet the period post 1991 is often viewed as a phase of ‘Jobless Growth’. The economy grew manifold yet the jobs could not be created commensurate to the growth trajectory.

This growth was fuelled mostly by the Services Sector. It is the biggest contributor to India’s GDP, yet in terms of job creation it lags behind. India’s services sector does not generate jobs in proportion to its share in GVA. Services share in employment is 34 per cent in 2017 which is significantly lesser that its share of 54 per cent in GVA. However, this also suggests that there lies immense potential for employment generation in the services sector in the coming years in line with other countries. Eg in USA the share of services in employment is 79% while in UK it is 81% and in China the percentage stands at 56.

The services sector accounts for 54 per cent of India’s Gross Value Added (GVA). Its growth rate moderated to 7. 5 per cent in 2018-19 from 8. 1 per cent in 2017- 18.

Areas which showed deceleration in the growth:

1. Trade

2. Hotels

3. Transport

4. Communication and

5. Broadcasting services.

Summary of Services

Sector

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Areas which showed acceleration in the growth:

1. Financial services

2. Real Estate and

3. Professional Services

Important Points:

1. Computer & ICT services, business services and travel services account for about 75 per cent of the total services exports.

2. In 2018, world trade in commercial services stagnated. India's growth rate decelerated as well but remains above world growth rate.

3. According to the WTO data, India is among the world’s top 10 exporters and importers of commercial services, ranking eighth in exports and tenth in imports in 2017, with the ranking staying unchanged from 2016.

4. Government has taken many initiatives that includes measures such as Start-up India, Insolvency and Bankruptcy Code, National Intellectual Property Rights (IPR) policy, implementing GST regime and improving the ease of doing business, which have helped increase India’s ranking in the World Bank’s Ease of Doing Business Index from 100 in 2017 to 77 in 2018, Digital India, e-visas, infrastructure status to Logistics, schemes for the housing sector etc. , which could give a further fillip to the growth of services sector.

5. The Government has implemented FDI reforms in a number of sectors, including defence, construction development, insurance/pension/other financial services, asset reconstruction companies, broadcasting, civil aviation, pharmaceuticals and trading etc.

6. An investor-friendly FDI policy has been put in place under which up to 100 per cent FDI is permitted via automatic route in most sectors, including single-brand retail trading, construction development and regulated financial sector activity.

7. In order to boost services exports, the Service Exports from India Scheme (SEIS) covers business services, education services, health services, tourism and travel related services, transport services etc. Government has also created a dedicated fund of `5, 000 crore for financing sectoral initiatives under the Champion Services Sector Scheme.

8. FDI equity inflows into the services sector1 accounted for more than 60 per cent of the total FDI equity inflows into India.

9. As per the UN National Accounts Statistics data, India ranked 7th in terms of GDP size and 9th in terms of services sector size in 2017.

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MCQs:

1. Which of the following releases the report ‘World Tourism Barometer’?

(a) UN WTO

(b) IMF

(c) World Bank

(d) Transparency International

Answer: (A)

2. Which of the following statement(s) is/are correct?

1. ‘National Mission on Pilgrimage Rejuvenation and Spiritual, Heritage Augmentation Drive’ (PRASHAD) is launched by The Ministry of Tourism.

2. It was launched in the year 2018.

3. The total number of sites identified for development under the scheme at present is 41.

Options:

(a) Only 1

(b) Only 1 & 2

(c) Only 1 & 3

(d) All of the Above

Answer: (C)

Statement 2 is incorrect. The scheme was launched in 2015.

3. Consider the following statements:

1. Medical Tourism is regularly highlighted for promotion as

part of the Incredible India Campaign.

2. ‘E- Medical Visa’ has been introduced for 166 countries.

Which of the above statement(s) is/are correct?

(a) Only 1

(b) Only 2

(c) Both

(d) None

Answer: (C)

4. Consider the following regarding The National Policy on Electronics 2019 (NPE 2019):

1. The policy is proposed by the Ministry of Finance.

2. The objective is to make India a global hub for Electronics System Design and Manufacturing - (ESDM).

3. The target is to promote domestic manufacturing and export in the entire value-chain of ESDM for economic development to achieve a turnover of USD 400 billion (approximately INR 26, 00, 000 crore) by 2025.

Which of the above statement(s) is/are correct?

(a) Only 1

(b) Only 1 & 2

(c) Only 2 & 3

(d) All of the Above

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Answer: (C)

The Policy is proposed by Ministry of Electronics and Information Technology (MeitY)

5. Which of the following are correct regarding ISRO’s Bhuvan:

1. It was launched in 2009.

2. It offers map services for Earth Observation and Disaster Management.

Options:

(a) Only 1

(b) Only 2

(c) Both

(d) None

Answer: (C)

Mains Practice Questions

1. Services sector growth is governed by both domestic and global factors. Comment.

2. The most puzzling aspect about employment policies in India in recent times is that the years of high economic growth have been years of joblessness too. Disucss.

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Sustainable Development

India and Human Development Index

• India’s HDI has improved significantly between 1990 and 2017 [0. 427 to 0. 640]

• Despite improvement, it is still the lowest among its peer countries [130 among 189 countries]

• There exist inter-State disparities [Kerala, Goa, Himachal Pradesh, Punjab – best performing while Bihar, UP and MP are worst performing]

• But all States have shown significant improvement between 1990 and 2017

• Minimum Sub national HDI for year 2017 is more than maximum Sub national HDI for year 1990 across all States

• Southern and Northern States have performed much better as compared to their Eastern.

Sustainable Development Goal

• 17 global goals and 169 targets set to be achieved by 2030.

• Calls for global partnership to ensure peace and prosperity for people and the planet, now and into the future

• Focus on ending poverty and other deprivations but this must also include strategies on improving health and education, reducing inequality and spurring economic growth in a sustainable manner

India and SDG

• NITI Aayog has developed the SDG India Index to measure India’s performance in SDG

• States are classified into four categories depending on the SDG India Index score.

Social Infrastructure,

Employment and

Human Development

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• Achiever (score = 100), Front Runner (score >100, <65), Performer(score >65 but <=50), Aspirant(score >50)

• Kerala, Himachal Pradesh and Tamil Nadu are occupying top three positions [Front runner]

• UP, Bihar and Assam are ranked at the lowest [Aspirant]

Global SDG Targets (2030) India’s achievements

All girls and boys complete free, equitable and quality primary and secondary education

2016-17 Gross enrolment ratio (GER) under elementary education is 93. 55 %%

79. 35 %% in secondary education

Equal access for all women and men to affordable and quality technical, vocational and tertiary education

2017-18 GER is significantly lower in higher education, 25. 8 % (18-23 years) in higher education

Eliminate gender disparities in education

Ensure equal access to all levels of education and vocational training

Gender parity index - improvement in girls’ education at all levels of education, except higher education

Ensure that all youth and a substantial proportion of adults, both men and women, achieve literacy and numeracy

2011 - Total literacy rate is 73. 0 % and 80. 9 % for male and 64. 6 % for female respectively

Global MMR to be less than 70 per 100, 000 live births

MMR during 2014-16 was 130

Neo natal mortality 12 per 1, 000 live births

Neo-natal mortality rate of India was 24 (2016)

Under-5 mortality - 25 per 1, 000 live births by 2030

Under-5 mortality rate of India was 39 (2016)

GENDER ISSUES

• Govt. has launched many Initiatives to address gender issues - Beti Bachao, Beti Padhao (BBBP), Ujjwala Scheme, Poshan Abhiyaan, Pradhan Mantri Matra Vandana Yojana

• Proportion of women having a bank or saving account has increased from 15. 5 % (2005-06) to 53 % (2015-16)

• Participation of currently married women in household decision making has increased- 76. 5 % (2005-06) to 84 % (2015-16)

• Front Runners in household decision making - Chhattisgarh, Goa, Himachal Pradesh, Kerala, West Bengal and North Eastern States.

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Gender Budgeting

• A tool for gender mainstreaming to ensure that government budgets are planned and prioritized according to the differential needs of women and men

• Focus areas - Gender-sensitive legislation, policies, plans, programmes and schemes; allocation and collection of resources; implementation and execution; monitoring, review, audit and impact assessment of programmes and schemes; and corrective actions to address gender disparities

• Several institutional mechanisms are set up such as Gender Budget Statement, Gender Budget Cells

• Guidelines issued to provide a road map towards institutionalizing Gender Budgeting at State level in 2013

• The MoWCD has been conducting, trainings, workshops, one to one interactions and development of resource material.

• Gender Budget Statement of 2019-20 included 30 Ministries/Departments having schemes with women's component.

Social Protection

Pradhan Mantri Suraksha Bima Yojana Accident insurance scheme

Pradhan Mantri Jeevan Jyoti Bima Yojana

Government-backed life insurance

Atal Pension Yojana Pension scheme for unorganized sector

Pradhan Mantri Fasal Bima Yojana Crop Insurance Scheme replaces NAIS and Modified NAIS

Pradhan Mantri Vaya Vandana Yojana Pension scheme for senior citizens

Atal Bimit Vyakti Kalyan Yojana Relief in cash for unemployment

Pradhan Mantri Rojgar Protsahan Yojana

12% EPFO contribution provided by Government for 3 months for salary less than 15000 INR per month

PM Shram-Yogi Mandhan Yojana Pension after 60 years

PM-KISAN

Income support of Rs 6000/- per annum in three equal installments for all eligible farmers

Ayushman Bharat Umbrella scheme- Health & Wellness

Centres and PMJAY upto 5 lakh per family per year for secondary & tertiary hospitalization

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National Nutrition Mission or POSHAN Abhiyaan

Malnutrition free India by 2022

Mission Indradhanush and Intensified Mission Indradhanush

Reduce vaccine preventable under-5 mortality rate [low immunization average, hard to reach areas]

Pradhan Mantri Awas Yojana-Rural & Urban

Housing for All by 2022

Swachh Bharat Mission-Urban +Rural 100 % open defecation free by 2019

Education

Status of education in India

• Goal 4 of SDG - equitable, inclusive and quality education, promotion of lifelong learning opportunities

• India - remarkable progress -in respect of female participation up-to secondary level

• GER for girls has exceeded that of boys

• But girls’ enrolment rate is lower than that of boys at the higher education level.

• Drop-out rates are very high for boys at the secondary school level due to economic activities, lack of interest in education and financial constraints

• Transition rate from secondary school to senior secondary and further to higher education is also very low

Learning Outcomes: Improving Quality of Education

• Gradual improvement in both basic literacy and numeracy for Class III students but only a quarter of them are at grade level

• 1 out of 4 children leaving Class VIII are without basic reading skills

• Rules of the RTE Act were amended - Learning outcomes for each class in Languages, Mathematics, Environmental Studies, Science and Social Science up to the elementary stage have been developed

• National Achievement Survey evaluation from 2017 (replacing textbook content survey) modified.

Recent initiatives in school education sector

• Samagra Shiksha – a comprehensive programme subsuming Sarva Shiksha Abhiyan (SSA), Rashtriya Madhyamik Shiksha Abhiyan (RMSA) and Teacher Education (TE)

• Swayam - platform offers 10 courses of Diploma in Elementary Education

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• UDISE+ - online real time version of UDISE [Unified District Information on School Education] - GIS mapping, data verification through third-party mobile application and data analytics

• PGI - 70-point Performance Grading Index to assess areas of deficiency in each state’s school education system

• ICT driven initiatives Shaala Sidhi - to enable all schools to self-evaluate their performance, e-Pathshala - providing digital resources, Saransh - an initiative of CBSE for schools to conduct self-review exercises

Skill Development

• NSSO Report 2011-12 - only 2. 3 % of the total workforce in India had formal sector skill training

• Government formulated the National Policy on Skill Development & Entrepreneurship, 2015

• Skill India Mission by 2022 was also formulated

Skill development -recent government initiatives

Pradhan Mantri Kaushal Vikas Yojana (PMKVY) (1. 0)

Provide industry relevant training to 1 crore youth by 2020

Pradhan Mantri Kaushal Vikas Yojana (2. 0), 2016- 20

Has provisions for provisions for placement tracking as well

Pradhan Mantri Kaushal Kendra Aspirational Model Training Centers in every district

National Apprenticeship Promotion Scheme

Basic Training and On-the-Job Training/

Practical Training at workplace.

SANKALP, 2017 Creating convergence among all skill

Training activities

STRIVE, 2017 Creating awareness clusters, integrating delivery quality of ITIs

Bridging the disconnect in the Skilling Ecosystem

• Proper pre-screening process to ensure that only eligible candidates are enrolled

• Stronger facilitation support to avail MUDRA loan should be provided to PMKVY certified candidates

• Skill vouchers - financing instrument to enable beneficiary to sign up for vocational education course at any accredited training institute

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• Incentivize industries to set up training institutions in PPP mode

• Local Industry must be involved for curriculum development, training modules, provision of equipment

• Take help of personnel of Railways and other para-military forces - can lend institutional support in imparting

Impact of PMKVY. 2 on employability and income

• Training and certification has led to a 9% increase in proportion of employed individuals and 15 % on the mean monthly income

• Certification alone, was found to have a non-significant impact of two percentage points

• Recognition of Prior Learning (RPL) certified individuals suggest a 25 % increase in their mean monthly income.

Employment

Employment scenario

• Labour Force Participation Rate (LFPR) in India has declined to 36. 9 % in 2017-18 from 39. 5 % in 2011-12

• Declined by 3. 6 % in rural areas and by 0. 1 % in urban areas

• Worker Population Ratio declined to 34. 7 % in 2017-18 from 38. 6 % in 2011-12

• Declined by 4. 9 % in rural areas and by 1. 6 % in urban areas

• Male employee earned nearly 1. 2-1. 3 times the earnings of female regular salaried worker in 2018.

• Self-employed male workers earned 2 times more than self-employed female

Health

Status of health

• National Health Mission with sub-missions National Urban Health Mission (NUHM) and National Rural Health Mission (NRHM) are focusing on ensuring universal access to equitable, affordable and quality healthcare services which should be accountable and responsive to peoples’ needs

Maternal and Child health

• Maternal Mortality Ratio - 130 per lakh live births in 2014-16

• Declined by 77 % as compared to 44 % decline in global average (1990 and 2015)

• Under Five Mortality Rate - 39 per 1000 live births

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• Infant Mortality Rate is 34 per 1000 live births

• Neonatal Mortality Rate is 24 per 1000 live births

New initiatives for maternal & New Born Health

LaQshya ‘A Quality Improvement Initiative'

• Aims at reducing preventable maternal and new born mortality, morbidity and stillbirths associated with the care around delivery in labour room and maternity OT and ensuring respectful maternity care

Midwifery Initiative

• To provide access to quality maternal and new born health services, promote natural birthing, ensure respectful care and reduce over medicalization.

• Create a cadre for Nurse Practitioners in Midwifery

Pradhan Mantri Surakshit Matritva Abhiyan

• Provide comprehensive and quality Ante-Natal Care (ANC) to pregnant women on the 9th of every month.

• Doctors from both the public and private sector examine pregnant women

Expenditure on health

• During 2013-14 to 2015-16, focus is on decreasing Out of Pocket Expenditure (OOPE) and increasing public health expenditure out of Total Health Expenditure

• OOPE is expenditure on medicines remains high

• Despite various provisions to provide medicines free of cost in Government facilities, more than 60 % of patients are still forced to pay more for some medicines.

Ayushman Bharat

• “Health and Wellness Centres”

o Comprehensive Primary Health Care

o Focus on preventive, promotive, rehabilitative and curative care for Reproductive, Maternal, New Born, Child plus Adolescent Health (RMNCH+A), Communicable diseases, non-communicable diseases, Ophthalmology, ENT, trauma services

o Would undertake population based screening, prevention and control for Common NCDS and the three common cancers (oral, cervix, breast)

o Would reduce the burden on secondary and tertiary centres

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“Pradhan Mantri Jan Arogya Yojana”

o Assurance scheme for preventing the financial hardships in availing in-patient care

o Financial protection (Swasthya Suraksha) to 10. 74 crore poor and vulnerable families (approx. 50 crore beneficiaries

o Benefit cover of 5 lakh per family per year (on a family floater basis)

o Covers medical and hospitalization expenses for most of the secondary and tertiary care procedures

o Defined 1, 350 medical packages

o No cap on family size and age in the scheme

o Is cashless and paperless at public hospitals and empanelled private hospitals

o Also include pre and post-hospitalization expenses.

Promoting AYUSH: an affordable healthcare option for all

• Immense scope and potential in expanding the AYUSH systems of treatment

• At present only 5 to 7 % usage of ‘other’ including AYUSH services in rural and urban areas

• Average out of pocket expenditure on AYUSH medicines per treated person is lower compared to non-AYUSH medicine

• There are scalable projects which can be replicated in other States

• Local traditional preference/acceptability for the systems can be considered –e. g. Unani in Uttar Pradesh, Sidhha in Tamil Nadu and Ayurveda across India

• JANANI’5 scheme of Government of Kerala – successful example of homeopathy treatment for infertility in public health facilities

• Government approved continuation of National AYUSH Mission

Heath Infrastructure and Human resource in health sectors

• Difficulty in attracting, retaining, and ensuring regular presence of highly trained medical professionals across all cadres

• States with large number of PHCs functioning with one doctor or without doctor have higher level of rural IMR and MMR compared to other States

• Lack of supplies, inadequate infrastructure facilities, poor monitoring of the staff

• There is a need for a better governance mechanisms through adoption of technologies, community and Local Self Government (LSG) participation and social audit

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• IPHS (Indian Public Health Standards) - set of uniform standards envisaged to improve the quality- upgradation of facilities to IPHS norms can lead to reduction in maternal mortality

‘Kayakalp’

• Clean Hospital Initiative launched in 2015

• It is Swachh Bharat Abhiyan in public health system

• Aims to promote sanitation and hygiene in public healthcare institutions. Facilities are assessed using objective checklist covering seven domains

Rural Development

Rural connectivity

• The Pradhan Mantri Gram Sadak Yojana provides funds to States to construct rural roads to connect villages by all-weather roads

• Since 2014, around 190, 000 km of rural roads has been constructed

• The rate of rural road construction increased momentum from 2015-16 onwards

• Maharashtra, Assam, Uttar Pradesh & Odisha- better performing states

• Mizoram, Sikkim, Goa & Meghalaya - length of rural roads is very less

• PMGSY is encouraging use of “Green Technologies” and non-conventional materials like waste plastic, cold mix, geo-textiles, fly-ash, iron and copper slag etc.

• These technologies will reduce the “Carbon Footprint” of rural roads, reduce environmental pollution, increase the working season and bring cost effectiveness

Rural housing (PMAY-G)

• Target was to complete one crore pucca houses with basic amenities by March 31, 2019

• Involves convergence of government initiatives like piped drinking water, toilets under Swachh Bharat Mission/ MGNREGS, electricity connection under Saubhagya programme, LPG connection under UJJWALA programme

• To prevent misutilization of funds new methods being used - DBT, geo tagging, fair beneficiary selection, effective transaction based MIS, monitoring through “AWAASSOFT” and mobile based application “AWAASAP”

• Average number of days taken for completion of a house has consistently decreased

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Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)

• Aims at enhancing livelihood security of households in rural areas

• Provides at least one hundred days of guaranteed wage employment

• Pillars of the programme - creation of productive assets of prescribed quality & durability, social inclusion, gender parity, social security and equitable growth are the foundational pillars

• Upward trend in budget allocation and release of funds to the States in the last four years

• 2018-19 - 267. 96 crore person days of work (women was 54. 6 %, SC was 20. 7 % and ST was 17. 4 % )

• 85, 000 km of road length was constructed under MGNREGA during 2018-19.

Mains Practice Question

1. Ayushman Bharat with its underlying commitment of “leaving no one behind” can be a game changer for health care in India. Critically analyse.

2. Skill India needs a sharp realignment. Comment

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Ready Reference: Economic Survey

Shifting gears: Private Investment as the Key Driver of Growth, Jobs, Exports and Demand

Survey states that pathways for trickle-down opened up during the last five years; and benefits of growth and macroeconomic stability reached the bottom of the pyramid.

Sustained real GDP growth rate of 8% needed for a $5 trillion economy by 2024-25.

“Virtuous Cycle” of savings, investment and exports catalysed and supported by a favourable demographic phase required for sustainable growth.

Private investment- key driver for demand, capacity, labour productivity, new technology, creative destruction and job creation.

Survey departs from traditional Anglo-Saxon thinking by viewing the economy as being either in a virtuous or a vicious cycle, and thus never in equilibrium.

Key ingredients for a self-sustaining virtuous cycle:

o Presenting data as a public good.

o Emphasizing legal reforms.

o Ensuring policy consistency.

o Encouraging behaviour change using principles of behavioural economics.

o Nourishing MSMEs to create more jobs and become more productive.

o Reducing the cost of capital.

o Rationalizing the risk-return trade-off for investments.

Policy for Real People, Not Robots: Leveraging the Behavioural Economics of “Nudge”

Decisions by real people deviate from impractical robots theorized in classical economics.

Behavioural economics provides insights to ‘nudge’ people towards desirable behaviour.

Key principles of behavioural economics:

o Emphasizing the beneficial social norm.

o Changing the default option.

o Repeated reinforcements.

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Using insights from behavioural economics to create an aspirational agenda for social change:

o From ‘Beti Baco Beti Padhao’ to ‘BADLAV’ (Beti Aapki Dhan Lakshmi Aur Vijay Lakshmi).

o From ‘Swachh Bharat’ to ‘Sundar Bharat’.

o From ‘Give it up” for the LPG subsidy to ‘Think about the Subsidy’.

o From ‘Tax evasion’ to ‘Tax compliance’.

Nourishing Dwarfs to become Giants: Reorienting policies for MSME Growth

Survey focuses on enabling MSMEs to grow for achieving greater profits, job creation and enhanced productivity.

Dwarfs (firms with less than 100 workers) despite being more than 10 years old, account for more than 50% of all organized firms in manufacturing by number.

Contribution of dwarfs to employment is only 14% and to productivity is a mere 8%.

Large firms (more than 100 employees) account for 75% employment and close to90% of productivity despite accounting for about 15% by number.

Unshackling MSMEs and enabling them to grow by way of:

o A sunset clause of less than 10 years, with necessary grand-fathering, for all size-based incentives.

o Deregulating labour law restrictions to create significantly more jobs, as evident from Rajasthan.

o Re-calibrating Priority Sector Lending (PSL) guidelines for direct credit flow to young firms in high employment elastic sectors.

Survey also focuses on service sectors such as tourism, with high spillover effects on other sectors such as hotel & catering, transport, real estate, entertainment etc. , for job creation.

Data “Of the People, By the People, For the People”

Society’s optimal consumption of data is higher than ever given technological advances in gathering and storage of data.

As data of societal interest is generated by the people, data can be created as a public good within the legal framework of data privacy.

Government must intervene in creating data as a public good, especially of the poor and in social sectors.

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Merging the distinct datasets held by the Government already would generate multiple benefits.

Ending Matsyanyaya: How to Ramp up Capacity in the Lower Judiciary

Delays in contract enforcement and disposal resolution are arguably now the single biggest hurdle to the ease of doing business and higher GDP growth in India.

Around 87. 5 per cent of pending cases are in the District and Subordinate courts.

100 per cent clearance rate can be achieved by filling out merely 2279 vacancies in the lower courts and 93 in High Courts.

States of Uttar Pradesh, Bihar, Odisha and West Bengal need special attention.

Productivity improvements of 25 percent in lower courts, 4 percent in High Courts and 18 percent in Supreme Court can clear backlog.

How does Policy Uncertainty affect Investment?

Significant reduction in Economic Policy Uncertainty in India over the last one decade, even when economic policy uncertainty increased in major countries, especially the U. S.

Uncertainty dampens investment growth in India for about five quarters.

Lower economic policy uncertainty can foster a salutary investment climate.

Survey proposes reduction in economic policy uncertainty by way of:

o Consistency of actual policy with forward guidance.

o Quality assurance certification of processes in Government departments.

India's Demography at 2040: Planning Public Good Provision for the 21st Century

Sharp slowdown in population growth expected in next 2 decades. Most of India to enjoy demographic dividend while some states will transition to ageing societies by 2030s.

National Total Fertility Rate expected to be below replacement rate by 2021.

Working age population to grow by roughly 9. 7mn per year during 2021-31 and 4. 2mn per year during 2031-41.

Significant decline to be witnessed in elementary school-going children (5-14 age group) over next two decades.

States need to consolidate/merge schools to make them viable rather than build new ones.

Policy makers need to prepare for ageing by investing in health care and by increasing the retirement age in a phased manner.

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From Swachh Bharat to Sundar Bharat via Swasth Bharat: An Analysis of the Swachh Bharat Mission

Traceable health benefits brought about by Swachh Bharat Mission (SBM).

93. 1% of the households have access to toilets.

96. 5% of those with access to toilets are using them in rural India.

100% Individual Households Latrine (IHHL) Coverage in 30 states and UTs.

Financial savings from a household toilet exceed the financial costs to the household by 1. 7 times on average and 2. 4 times for poorest households.

Environmental and water management issues need to be incorporated in SBM for sustainable improvements in the long-term.

Enabling Inclusive Growth through Affordable, Reliable and Sustainable Energy

2. 5 times increase in per capita energy consumption needed for India to increase its real per capita GDP by $5000 at 2010 prices, and enter the upper-middle income group.

4 times increase in per capita energy consumption needed for India to achieve 0. 8 Human Development Index score.

India now stands at 4th in wind power, 5th in solar power and 5th in renewable power installed capacity.

Rs 50, 000 crore saved and 108. 28 million tonnes of CO2 emissions reduced by energy efficiency programmes in India.

Share of renewable (excluding hydro above 25 MW) in total electricity generation increased from 6% in 2014-15 to 10% in 2018-19.

Thermal power still plays a dominant role at 60% share.

Market share of electric cars only 0. 06% in India while it is 2% in China and 39% in Norway.

Access to fast battery charging facilities needed to increase the market share of electric vehicles.

Effective Use of Technology for Welfare Schemes – Case of MGNREGS

Survey says that efficacy of MGNREGS increased with use of technology in streamlining it.

Significant reduction in delays in the payment of wages with adoption of NeFMS and DBT in MGNREGS.

Demand and supply of work under MGNREGS increased, especially in distressed districts.

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Vulnerable sections of the society viz. women, SC and ST workforce increased under MGNREGS during economic distress.

Redesigning a Minimum Wage System in India for Inclusive Growth

Survey proposes a well-designed minimum wage system as a potent tool for protecting workers and alleviating poverty.

Present minimum wage system in India has 1, 915 minimum wages for various scheduled job categories across states.

1 in every 3 wage workers in India not protected by the minimum wage law.

Survey supports rationalization of minimum wages as proposed under the Code on Wages Bill.

Minimum wages to all employments/workers proposed by the Survey.

‘National Floor Minimum Wage’ should be notified by the Central Government, varying across five geographical regions.

Minimum wages by states should be fixed at levels not lower than the ‘floor wage’.

Minimum wages can be notified based either on the skills or on geographical region or on both grounds.

Survey proposes a simple and enforceable Minimum Wage System using technology.

‘National level dashboard’ under the Ministry of Labour & Employment for regular notifications on minimum wages, proposed by the Survey.

Toll-free number to register grievance on non-payment of the statutory minimum wages.

Effective minimum wage policy as an inclusive mechanism for more resilient and sustainable economic development.

State of the Economy in 2018-19: A Macro View

India still the fastest growing major economy in 2018-19.

Growth of GDP moderated to 6. 8 per cent in 2018-19 from 7. 2 per cent in 2017-18.

Inflation contained at 3. 4 per cent in 2018-19.

Non-Performing Assets as percentage of Gross Advances reduced to 10. 1 per cent at end December 2018 from 11. 5 per cent at end March 2018.

Investment growth recovering since 2017-18:

o Growth in fixed investment picked up from 8. 3 per cent in 2016-17 to 9. 3 per cent next year and further to 10. 0 per cent in 2018-19.

Current account deficit manageable at 2. 1 percent of GDP.

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Fiscal deficit of Central Government declined from 3. 5 percent of GDP in 2017-18 to 3. 4 percent in 2018-19.

Prospects of pickup in growth in 2019-20 on the back of further increase in private investment and acceleration in consumption.

Fiscal Developments

FY 2018-19 ended with fiscal deficit at 3. 4 per cent of GDP and debt to GDP ratio of 44. 5 per cent (Provisional).

As per cent of GDP, total Central Government expenditure fell by 0. 3 percentage points in 2018-19 PA over 2017-18:

o 0. 4 percentage point reduction in revenue expenditure and 0. 1 percentage point increase in capital expenditure.

States’ own tax and non-tax revenue displays robust growth in 2017-18 RE and envisaged to be maintained in 2018-19 BE.

General Government (Centre plus states) on the path of fiscal consolidation and fiscal discipline.

The revised fiscal glide path envisages achieving fiscal deficit of 3 per cent of GDP by FY 2020-21 and Central Government debt to 40 per cent of GDP by 2024-25.

Money Management and Financial Intermediation

Banking system improved as NPA ratios declined and credit growth accelerated.

Insolvency and Bankruptcy Code led to recovery and resolution of significant amount of distressed assets and improved business culture.

o Till March 31, 2019, the CIRP yielded a resolution of 94 cases involving claims worthINR1, 73, 359 crore.

o As on 28 Feb 2019, 6079 cases involving INR2. 84 lakh crores have been withdrawn.

o As per RBI reports, INR50, 000 crore received by banks from previously non-performing accounts.

o Additional INR50, 000 crore "upgraded" from non-standard to standard assets.

Benchmark policy rate first hiked by 50 bps and later reduced by 75 bps last year.

Liquidity conditions remained systematically tight since September 2018 thus impacting the yields on government papers.

Financial flows remained constrained because of decline in the equity finance raised from capital markets and stress in the NBFC sector.

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o Capital mobilized through public equity issuance declined by 81 per cent in 2018-19.

o Credit growth rate y-o-y of the NBFCs declined from 30 per cent in March 2018 to 9 per cent in March 2019.

Prices and Inflation

Headline inflation based on CPI-C continuing on its declining trend for fifth straight financial year remained below 4. 0 per cent in the last two years.

Food inflation based on Consumer Food Price Index (CFPI) also continuing on its declining trend for fifth financial year has remained below 2. 0 per cent for the last two consecutive years.

CPI-C based core inflation (CPI excluding the food and fuel group) has now started declining since March 2019 after increment during FY 2018-19 as compared to FY 2017-18.

Miscellaneous, housing and fuel and light groups are the main contributors of headline inflation based on CPI-C during FY 2018-19 and the importance of services in shaping up headline inflation has increased.

CPI rural inflation declined during FY 2018-19 over FY 2017-18. However, CPI urban inflation increased marginally during FY 2018-19. Many States witnessed fall in CPI inflation during FY 2018-19.

Sustainable Development and Climate Change

India’s SDG Index Score ranges between 42 and 69 for States and between 57 and 68 for UTs:

o Kerala and Himachal Pradesh are the front runners with a score of 69 amongst states.

o Chandigarh and Puducherry are the front runners with a score of 68 and 65 respectively among the UTs.

Namami Gange Mission launched as a key policy priority towards achieving the SDG 6, with a budget outlay of INR. 20, 000 crore for the period 2015-2020.

For mainstreaming Resource Efficiency approach in the development pathway for achieving SDGs, a national policy on Resource Efficiency should be devised.

A comprehensive NCAP launched in 2019 as a pan India time bound strategy for:

o Prevention, control and abatement of air pollution

o Augmenting the air quality monitoring network across the country.

Achievements in CoP 24 in Katowice, Poland in 2018:

o Recognition of different starting points for developed and developing countries.

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o Flexibilities for developing countries.

o Consideration of principles including equity and Common but Differentiated Responsibilities and Respective Capabilities.

Paris Agreement also emphasizes the role of climate finance without which the proposed NDCs would not fructify.

Though the international community witnessed various claims by developed countries about climate finance flows, the actual amount of flows is far from these claims.

Scale and size of investments required to implement India’s NDC requires mobilizing international public finance and private sector resources along with domestic public budgets.

External Sector

As per WTO, World trade growth slowed down to 3 per cent in 2018 from 4. 6 per cent in 2017. Reasons:

o Introduction of new and retaliatory tariff measures

o Heightened US-China trade tensions

o Weaker global economic growth

o Volatility in financial markets (WTO)

In Indian rupee terms growth rate of exports increased owing to depreciation of the rupee while that of imports declined in 2018-19.

Net capital inflows moderated in April-December of 2018-19 despite robust foreign direct investment (FDI) inflows, outweighed by withdrawals under portfolio investment.

India’s External Debt was US$ 521. 1 billion at end-December 2018, 1. 6 per cent lower than its level at end-March 2018.

The key external debt indicators reflect that India’s external debt is not unsustainable.

The total liabilities-to-GDP ratio, inclusive of both debt and non-debt components, has declined from 43 per cent in 2015 to about 38 per cent at end of 2018.

The share of foreign direct investment has risen and that of net portfolio investment fallen in total liabilities, reflecting a transition to more stable sources of funding the current account deficit.

The Indian Rupee traded in the range of 65-68 per US$ in 2017-18 but depreciated to a range of 70-74 in 2018-19.

The income terms of trade, a metric that measures the purchasing power to import, has been on a rising trend, possibly because the growth of crude prices has still not exceeded the growth of India’s export prices.

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The exchange rate in 2018-19 has been more volatile than in the previous year, mainly due to volatility in crude prices, but not much due to net portfolio flows.

Composition of India’s exports and import basket in 2018-19(P):

o Exports (including re-exports): INR23, 07, 663 Cr.

o Imports: INR35, 94, 373 Cr.

o Top export items continue to be Petroleum products, precious stones, drug formulations, gold and other precious metals.

o Top import items continue to be Crude petroleum, pearl, precious, semi-precious stones and gold.

o India’s main trading partners continue to be the US, China, Hong Kong, the UAE and Saudi Arabia.

India has signed 28 bilateral / multilateral trade agreements with various country/group of countries. In 2018-19,

o Exports to these countries stood at US$121. 7 billion accounting for 36. 9 per cent of India’s total exports.

o Imports from these countries stood at US$266. 9 billion accounting for 52. 0 per cent of India’s total imports.

Agriculture and Food Management

Agriculture sector in India typically goes through cyclical movement in terms of its growth.

o Gross Value Added (GVA) in agriculture improved from a negative 0. 2 per cent in 2014-15 to 6. 3 per cent in 2016-17 but decelerated to 2. 9 per cent in 2018-19.

Gross Capital Formation (GCF) in agriculture as percentage of GVA marginally declined to 15. 2 per cent in 2017-18 as compared to 15. 6 per cent in 2016-17.

The public sector GCF in agriculture as a percentage of GVA increased to 2. 7 per cent in 2016-17 from 2. 1 per cent in 2013-14.

Women’s participation in agriculture increased to 13. 9 per cent in 2015-16 from 11. 7 per cent in 2005-06 and their concentration is highest (28 per cent) among small and marginal farmers.

A shift is seen in the number of operational land holdings and area operated by operational land holdings towards small and marginal farmers.

89% of groundwater extracted is used for irrigation. Hence, focus should shift from land productivity to ‘irrigation water productivity’. Thrust should be on micro-irrigation to improve water use efficiency.

Fertilizer response ratio has been declining over time. Organic and natural farming techniques including Zero Budget Natural Farming (ZBILLIONF) can improve both water use efficiency and soil fertility.

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Adopting appropriate technologies through Custom Hiring Centers and implementation of ICT are critical to improve resource-use efficiency among small and marginal farmers.

Diversification of livelihoods is critical for inclusive and sustainable development in agriculture and allied sectors. Policies should focus on

o Dairying as India is the largest producer of milk.

o Livestock rearing particularly of small ruminants.

o Fisheries sector, as India is the second largest producer.

Industry and Infrastructure

Overall Index of Eight Core Industries registered a growth rate of 4. 3 percent in 2018-19.

India’s ranking improved by 23 to 77th position in 2018 among 190 countries assessed by the World Bank Doing Business (DB) Report, 2019.

Road construction grew @ 30 km per day in 2018-19 compared to 12 km per day in 2014-15.

Rail freight and passenger traffic grew by 5. 33 per cent and 0. 64 per cent respectively in 2018-19 as compared to 2017-18.

Total telephone connections in India touched 118. 34 crore in 2018-19

The installed capacity of electricity has increased to 3, 56, 100 MW in 2019 from 3, 44, 002 MW in 2018.

Public Private Partnerships are quintessential for addressing infrastructure gaps

Building sustainable and resilient infrastructure has been given due importance with sector specific flagship programmes such as SAUBHAGYA scheme, PMAY etc

Institutional mechanism is needed to deal with time-bound resolution of disputes in infrastructure sector

Services Sector

Services sector (excluding construction) has a share of 54. 3 per cent in India’s GVA and contributed more than half of GVA growth in 2018-19.

The IT-BPM industry grew by 8. 4 per cent in 2017-18 to US$ 167 billion and is estimated to reach US$ 181 billion in 2018-19.

The services sector growth declined marginally to 7. 5 per cent in 2018-19 from 8. 1 per cent in 2017-18.

o Accelerated sub-sectors: Financial services, real estate and professional services.

o Decelerated sub-sectors: Hotels, transport, communication and broadcasting services.

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Services share in employment is 34 per cent in 2017.

Tourism:

o 10. 6 million Foreign tourists received in 2018-19 compared to 10. 4 million in 2017-18.

o Forex earnings from tourism stood at US$ 27. 7 billion in 2018-19 compared to US$ 28. 7 billion in 2017-18.

Social Infrastructure, Employment and Human Development

The public investments in social infrastructure like education, health, housing and connectivity is critical for inclusive development.

Government expenditure (Centre plus States) as a percentage of GDP on

o Health: increased to 1. 5 per cent in 2018-19 from 1. 2 per cent in 2014-15.

o Education: increased from 2. 8 per cent to 3 per cent during this period.

Substantial progress in both quantitative and qualitative indicators of education is reflected in the improvements in Gross Enrolment Ratios, Gender Parity Indices and learning outcomes at primary school levels.

Encouraging Skill Development by:

o Introduction of the skill vouchers as a financing instrument to enable youth obtain training from any accredited training institutes.

o Involving industry in setting up of training institutes in PPP mode; in curriculum development; provision of equipment; training of trainers etc.

o Personnel of Railways and para-military could be roped in for imparting training in difficult terrains.

o Create a database of Instructors, skill mapping of rural youth by involving local bodies to assess the demand-supply gaps are some of the other initiatives proposed.

Net employment generation in the formal sector was higher at 8. 15 lakh in March, 2019 as against 4. 87 lakh in February, 2018 as per EPFO.

Around 1, 90, 000 km of rural roads constructed under Pradhan Mantri Gram Sadak Yojana (PMGSY) since 2014.

About 1. 54 crore houses completed under Pradhan Mantri Awas Yojana (PMAY) as against a target of 1 crore pucca houses with basic amenities by 31st March, 2019.

Accessible, affordable and quality healthcare being provided through National Health Mission and Ayushman Bharat scheme for a healthy India.

Alternative healthcare, National AYUSH Mission launched to provide cost effective and equitable AYUSH healthcare throughout the country to address the issue of affordability, by improving access to these services.

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Employment generation scheme, MGNREGA is prioritized by increasing actual expenditure over the budgetary allocation and an upward trend in budget allocation in the last four years.