Economic Suvey Summaries To Be Read

IASscore Summary Volume 1 2018-19 3
IAS Score Summary Volume 2 2018-19 49

Vision Summary 2017-18 109
CONTENT
CHAPTER-1
! Shifting Gears: Private Investment ..................................................................................................04
CHAPTER-2:
! Policy for Homo Sapiens, not Homo Economicus: .......................................................................
Leveraging the Behavioural Economics of “NUDGE” ...............................................................08
CHAPTER-3:
! Nourishing Dwarfs to become Giants: ...............................................................................................
Roerienting Policies for MSME Growth .........................................................................................16
CHAPTER-4:
! Data “Of the People, By the People, For the People” ...............................................................19
CHAPTER-5:
! Ending Matsyanyaya: How to Ramp-up capacity in the Lower Judiciary.........................22
CHAPTER-6:
! How does Policy Uncertainty affect Investment? ......................................................................26
CHAPTER-7:
! India’s Demography at 2040: Planning Public Good Provision for the 21st Century ...29
CHAPTER-8:
! From Swachh Bharat to Sundar Bharat via Swasth Bharat: ........................................................
An Analysis of the Swachh Bharat Mission ..................................................................................33
CHAPTER-9:
! Enabling Inclusive Growth through Affordable, Reliable & Sustainable Energy ...........36
CHAPTER-10:
! Effective use of Technology for Welfare Schemes - Case of MGNREGS ...........................40
CHAPTER-11:
! Redesigning a Minimum Wage System in India for Inclusive Growth...............................43

ECONOMIC SURVEY 2018-19
CHAPTER: 1
SHIFTING GEARS
PRIVATE INVESTMENT
Important terms
Traditional Growth Economics looks at economy from perspective of equilibrium and assumes that as
a central feature and desirable objective too. Whereas, an alternative approach can be there to look at
economy from perspective of boom and bust phases. When economy is in boom phase it is because of a
virtuous cycle and vice versa.
Virtuous Cycle is said to be present, when improves in one economic indicator pushes others in a positive
manner leading to an overall economic boom.
Example: India’s virtuous cycle was 2003 to 2008. The average annual real growth during this period
was 8.7%. This period was marked by increasing investment, both by the public and private sectors,
rising domestic savings, fiscal consolidation, moderate inflation and low interest rates. There was
an element of a virtuous cycle between all these factors: i.e. a lower fiscal deficit leading to lower
interest rates and public borrowing, which left extra room for private investment. These domestic
macroeconomic developments were also blessed by a global boom in growth, with increased trade,
liquidity and financial flows.
Vicious Cycle is said to be present when drastic fall in some economic indicators spread to entire economy
and leads to confidence crisis along with decline in consumption.
It is a self-propagating disadvantageous situation in which a solution (specially the one that does not addresses
the root cause) leads to another problem whose solution, in turn, leads back to the first problem in a more
severe form.
General Equilibrium Theory and Criticism

The very name of (traditional economic) models, general equilibrium, shows that they assume that the
economy is basically in balance until an outside shock upsets it. They assume that you can understand the
economy by studying a representative agent whose expectations and decisions are rational. This view is
essentially linear, and the policy advice it generates is tailored to a linear system, where an action produces
a fairly predictable reaction. Real life is not like that, we need a new approach to economics that isn’t just
about quantitative economics.
An economy that is in a constant state of dis-equilibrium needs a new approach to navigate. The earlier
attempt to create five-year plans, largely using the equilibrium framework, failed because it was too
prescriptive for an inherently unpredictable world. 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.
Behavioural Economics
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As policymaking must keep real people as its focus, rather than the optimization focused robots that
conventional economics assumes, the insights from behavioural economics need to be integrated into
policymaking to foster productivity and economic growth.
Dwarf Firms
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. Small firms that never grow beyond
their small size, dominates the Indian economy and holds back job creation and productivity. Firms
employing less than 100 workers are categorized as small and firms employing 100 or more workers as
relatively large.
While 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.
Growth Record in Last Five Years

During the last five years, India’s economy has performed well. By opening up several pathways for trickle-down,
the government has ensured that the benefits of growth and macroeconomic stability reach the bottom of the
pyramid.
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 (Figure 1). Importantly, this pace of growth
was sustained while re-establishing macro-economic stability.
Growth of GDP in India and the world
MACROECONOMIC STABILITY
It includes the Fiscal deficit and Current Account Deficit and Inflation.
Average inflation in these five years was less than half the inflation level of the preceding five years,
matching the lowest levels attained in the country’s post-independence history.
The current account deficit (CAD) remained within manageable levels and foreign exchange reserves rose
to all-time highs.
! MPC and Inflation

Monetary Policy Committee (MPC) was constituted in February, 2015 with the mandate to target a
headline inflation of 4 percent, with a band of two percentage points on either side. The framework has
been successful in containing inflation. Since April 2015, when the MPC was first convened, the monthly
headline inflation has always remained within the band except for one month.
! Fiscal Deficit and FRBM Act

The Fiscal Responsibility and Budget Management (FRBM) Act of 2003, which got a new lease of life since
2016, determines the glide path for the ratio of GFD to GDP to reach an eventual target of 3 per cent. The
ratio declined from 4.5 per cent in 2013-14 to 3.4 per cent in 2018-19.
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TRICKLE DOWN AND BALANCED GROWTH

! Aadhaar
The promulgation of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits, and
Services) Act, 2016 was one such initiative that opened a major pathway to this trickle-down. 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 percent of the country’s population.
! Jan Dhan Yojana

Another pathway for the trickle-down is the Pradhan Mantri Jan Dhan Yojana (PMJDY), a financial inclusion
initiative. Presently close to Rs. 1 lakh crore is deposited in more than 35 crore bank accounts opened
under PMJDY. The JAM trinity has enabled cumulative transfers thus far of around Rs. 7.3 lakh crore.
Objectives of Next Five Years

India aims to grow into a USD 5 trillion economies by 2024-25, which will make India the third-largest
economy in the world. Given 4% inflation, as the Monetary Policy Framework specified by the Government
for the Reserve Bank of India, this requires real annual growth rate in GDP of 8 per cent.
To achieve the objective of becoming a US$5 trillion economy by 2024-25, India needs to sustain a real GDP
growth rate of 8%. International experience, especially from high-growth East Asian economies, suggests
that such growth can only be sustained by a “virtuous cycle” of savings, investment and exports catalyzed
and supported by a favourable demographic phase. 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. In contrast, when the
economy is in a vicious cycle, moderation in these variables dampens each other and thereby dampens
the animal spirits in the economy.
EXPERIENCE OF EAST ASIA

In recent times, Chinese economic growth stands out for its explosive growth over a long period of four
decades. Post war economic expansion in Western Europe led to high growth rates of its economies. During
1950-73, Japan’s GDP growth rate frequently exceeded 10 per cent. Post-World War II, Hong Kong, Singapore,
South Korea, and Taiwan successfully maintained a rapid growth rate of more than 7 per cent until 1980s.
With the rising GDP per capita, China’s savings, investment and exports increased further. There is evidence
for same relationships for saving and investment for four countries in East Asia (Thailand, Indonesia, Malaysia
and South Korea), which witnessed high growth before the Asian Financial Crisis.
Their experience shows savings and growth are not only positively correlated, but their positive correlation is
even stronger than that between growth and investment.
INVESTMENT AND JOB CREATION

A general apprehension is that high investment rate will substitute labour. This thinking has led to much
debate about labour-intensive versus capital-intensive modes of production. However, 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.
CORRELATION BETWEEN GROWTH AND SAVINGS AND INVESTMENTS

Exports must form an integral part of the growth model because higher savings preclude domestic consumption
as the driver of final demand. Similarly, job creation is driven by this virtuous cycle. While the claim is often
made that investment displaces jobs, this remains true only when viewed within the silo of a specific activity.
When examined across the entire value chain, capital investment fosters job creation as production of capital
goods, research & development and supply chains generate jobs.
! Saving Behaviour
Savings rate in China and other high-growth East Asian economies was driven significantly by change in
its demographics from a predominantly young to an older population.
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Jobs that pay meaningful wages become crucial in driving savings rate in the economy. The “virtuous
cycle” that we describe fosters job creation by exploiting the complementarity between capital and labour,
on the one hand, and increase overall productivity and labour productivity, on the other hand.
! Investment Dynamics
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.
As investment represents a forward-looking activity, investors eventually make their decisions to invest
based on the risk adjusted return they expect. In other words, if two projects offer the same return but one
of them is riskier, then investors c hoose the less risky project to invest. Therefore, systematically lowering
the risks faced by investors in India is critical for the success of the investment-driven model for economic
growth. Risk pertains to the possibilities of upside, when a project performs well, and downside, when the
project fails. 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.
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.
**********
Practice Question
Why the traditional economics driven by the general equilibrium model isn’t most adequate
for rational decision makers in the economy?
What do you understand by the term Virtuous cycle and how does it support the economic
growth in respective country?
What India needs to do to achieve 8 percent growth in the coming years?
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CHAPTER: 2
POLICY FOR HOMO SAPIENS,

NOT HOMO ECONOMICUS
LEVERAGING THE BEHAVIOURAL ECONOMICS OF
“NUDGE”
Purpose of Public Policy:

Public policy influences people to act in a socially desirable way, be it driving safely, conserving natural resources,
educating children, respecting the human rights of fellow citizens or saving for retirement.
How does Public Policy work?

Some policies subtly influence by fostering the right incentives, while others mandate desired behavior or ban
undesirable ones.
GRADING OF PUBLIC POLICY:

Public Policy can be graded on a spectrum capturing how strongly they influence (or coerce) behavior.
On one extreme is, laissez faire, i.e. doing nothing and leaving individuals/ firms to chart their own
course.
Laissez faire works well when markets achieve socially desirable outcomes on their own. Where markets
fail, laissez faire fails.
For instance, individuals/firms in a free market would not restrain pollution.
Public policy – in the form of regulation – mandates people to act in a socially desirable manner.
Sandwiched between these extremes are policies that incentivize good behavior or dis-incentivize bad
behavior, such as subsidies for renewable energy and taxes on tobacco.
Recently, behavioral economists have discovered the efficacy of a new class of “nudge” policies that lie
between laissez faire and incentives. Such policies leverage insights from human psychology to influence
the choice architecture of people. Nudge policies gently steer people towards desirable behavior even
while preserving their liberty to choose.
FACTORS AFFECTING HUMAN CHOICES

Adam Smith, in his book the ‘Theory of Moral Sentiment’, noted that a wide range of human choices are
driven and limited by:
Our mental resources, i.e. cognitive ability, attention and motivation.
Behavioral economics relies on the essential insight from human psychology that, real people do not
always behave like robots, rational and unbiased individuals that form the basis of classical economic
theory called “homo economicus” (Thaler, 2000).
To homo economicus, the choice architecture is irrelevant, as they will make the optimal choice
irrespective of the way the choices are presented to them.
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However, real people respond to the choice architecture.

For example, a large fraction of individuals opt for the default choice, irrespective of their intrinsic
preferences.
This is because individuals suffer from a cognitive bias called “anchoring bias”, viz., once a default
option is presented to them, they anchor on to it Anchoring bias, along with several others, drives a
wedge between people’s intrinsic preferences and the choices they eventually make.
Individuals suffer from tremendous inertia when they have to make a choice, and hence, they tend to
stick to the default option (Thaler and Sunstein 2008; Samson 2014).
Therefore, the nearly costless acts of changing the default on an enrolment form harvests this inertia for
people’s own good. At the same time, this form of paternalism preserves people’s right to choose as the
choice architecture makes it easy for an individual to opt out of the scheme.
For example, studies have shown that 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.
INNOVATIVE GLOBAL BEHAVIORAL CHANGE INTERVENTIONS:

Understanding the principles of behavioral economics, can bridge the gap between people’s preferences
and the choices they make, and thereby enable informed policymaking.
Many governments, including the U.S., the U.K. and Australia, have set up dedicated units to use behavioral
insights for effective policymaking. Innovative interventions across the world that utilize the principles of
behavioral economics.
Table 1: Innovative Global Behaviour Change Interventions

Sector Problem Intervention Observations
People tend to go with de- Instead of employees check-

Automatic enrolment
faults. When the default in a ing a box to enrol in savings
Pension Policy increased savings by up to
saving plan is no enrolment, plans, employees check a box
(USA) 40 per cent (Beshears et. al,
most people do not enrol to not enrol; i.e. the default
2005).
even when they want to. option is to be enrolled.
People who owed most tax

were also most responsive
People need reminders and People were sent variations to messages asking them to
Tax Compliance positive reinforcement to of text messages on how pay. Compliance increased
(UK) sustain socially desirable be- their taxes make a difference without increase in tax sur-
haviour. to public services. veillance costs (UK Cabinet
Office, Behavioural Insights
Team, 2012).
Fertilizer use increased by

To tackle farmers’ procras-
70 per cent (Duflo ct al.,
Inertia makes people pro- tination in buying fertilizer
2011). Early home delivery
crastinate important, time- (possibly because of the
Agriculture increased fertilizer use by 70
sensitive decisions even hassle of traveling to town),
(Africa) per cent. The effect was as
when they are aware of the home delivery of fertilizer
much as a 50 per cent price
consequences of delay. early in the season was at-
subsidy would have accom-
tempted.
plished.
Nearly 30 per cent of

People were offered spe-
People save much less those who were offered
cially designed savings
Savings than they want to because the account adopted it.
accounts that locked up
(Philippines) of lack of adequate self- Saving balance increased
funds until a self-specified
control in spending. by 81 per cent in a year
target was met.
(Ashraf et al. 2006).
People save much less People were sent peri-

Savings Reminders increased the
than they want to because odic and timely remind-
(Bolivia, Peru, amount saved by six per
of inertia and lack of posi- ers about their self-deter-
Philippines) cent (Karlan ct al., 2010).
tive reinforcement. mined saving goals.
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Many parents under-

estimate the returns to
Information dissemina-
spending another year at
Parents were informed tion increased children’s
school. They think school-
about the average income test scores by 0.37 stand-
ing is worthless unless the
Education gains from spending ard deviations, particu-
child is able to go all the
(Madagascar) one more year in school larly for those parents
way through high school.
for children from back- who had underestimated
Many allow their children
grounds like their own. the return to education
to drop out with even
(Nguyen, 2008).
fewer years of schooling
than they can afford.
SUCCESSFUL APPLICATIONS OF BEHAVIOURAL INSIGHTS IN INDIA

! Swachh Bharat Mission:
SBM was launched on 2nd October, 2014 to achieve universal sanitation coverage.
The principles of behavioral economics were applied in SBM. Measures of female literacy and early
marriages of girls, which associate strongly with rigid social norms, correlate powerfully with access and
usage of toilets across states. This shows that toilet access and usage can be suitably increased with
behavioral nudges that push female literacy rates up and discourage early marriages of girls. In this
respect, the BBBP scheme complements SBM strongly as factors related to gender empowerment are
seen to be significantly correlated with toilet access and usage. This interplay can be effectively used to
improve the efficacy of both the schemes.
! Beti Bachao, Beti Padhao

BBBP Scheme was flagged from Panipat, Haryana, which 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 behavioral economics is to adapt the message to match “mental models” of
people. The symbolism captured by the choice of Panipat in Haryana helped significantly in matching
the message to the relevant mental model. 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’.
BBBP has had an impact particularly on large states with very poor child sex ratios – states that plausibly
also needed the greatest pivot in their social norms.
! Use of clear messaging:
Table: Use of clear messaging for schemes
Name of the Objective of the Scheme

Literal Meaning of the Name
Scheme Cultural/Societal aspect used
Namami Gange means ‘I pray

To arrest the pollution of Ganga River and
Namami Gange to Ganga’ as the river Ganga is
revive the river
revered in our culture
Multi-ministerial convergence mission to

POSHAN Abhiyan Poshan means holistic nutrition
ensure a malnutrition free India by 2022.
To safeguard the health of women by provid-

Ujjwala Means ‘bright, clear’
ing them with clean cooking fuel – LPG.
Provides loans upto 10 lakh to the non-cor-

PM Mudra Yojana Mudra means “currency, coins”
porate, non-farm small/micro enterprises.
Jan Dhan Yojana Jan Dhan implies “money of the Financial inclusion program to expand access
people” to financial services.
Ayushman means “Being Blessed Universal and affordable access to good qual-
Ayushman Bharat
with long life” ity health care services.
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ASPIRATIONAL AGENDA FOR PATH-BREAKING CHANGE:
Box 3: Citizen@75-Using Behavioral Economics to Avoid the Seven Social Sins

The destiny of a nation is shaped by its citizens. India+@75 is envisaged as a ‘New India’ where every
individual realizes his or her full potential and looks for opportunities to contribute rather than claim
entitlements. A new spirit of independence needs to be imbibed from all extrinsic and intrinsic fetters to
shape the future of India. 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.
Each of these is a statement of principle that can be interpreted and utilized for nudging people towards
desirable behaviour.
! From BBBP to BADLAV
Using Behavioural Principles for BADLAV
Principle Applying the principle to BADLAV
1. Make it easy to Simplify procedures to make it easier for women to, inter alia, report
choose
incidences of harassment and discrimination, to open bank accounts, to get
government documents such as passports, visas etc.
Prominent women, including many female and male Hollywood and

Bollywood stars, played an important role in raising the profile of the
recent “Me too” movement, thereby contributing to changing the norm and
illustrating that change in social norm is possible.
Instead of highlighting the number of top companies that have few women
on their boards, it is more effective to highlight how many do. Similarly,
showing how prevalent and pervasive gender based violence is, runs the
2. Emphasize social risk of normalising it; instead emphasising on how many people are not
norms perpetrators or reinforcing injunctive norms against it can be more helpful
in shaping correct norms towards gender equality.
Research shows that girls and women who observed female village chiefs
exhibit behaviour that highlights them as equal to men. Villagers who had
exposure to at least two female chiefs rated male and female leaders equally.
Therefore, women village leaders must be advertised as role models as
people can relate to proximate “others”. Mass media must be utilised for
regular efforts to change the social norm via BADLAV.
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Publishing gender rankings or audits in public domain, whether for numbers

of women in legislatures, in political parties, in bureaucracy or on company
3. Disclose out-
comes
boards, can prompt organisations to take action to avoid bad publicity or
looking worse than their competitors. Mandating organisations to report the
“Gender pay gap” can reinforce this trend.
Having multiple visually descriptive posters in every corridor of workplaces

and public places regarding what constitutes sexual harassment at workplace
4. Reinforce repeat-
edly
can reinforce the norm of it not being acceptable. Similarly, regular TV
advertisements that reinforce the positive norm of gender equality can help
to reinforce repeatedly.
Evidence from field studies and experiments shows that among men and
women of equal abilities, men often choose to compete twice as often
5. Leverage loss as women. Reward structures can be modified to ameliorate the higher
aversion aversion of women to competition. For instance, application fees for women
applicants in jobs can be waived. Removing demographic information from
job applications can also help.
Women consistently tend to place more value on flexibility at workplace.

Companies that offer flexibility as the default norm have many more women
applicants and employees.
Women are less likely to apply for jobs perceived as “male-labelled.”
Skill training and apprenticeship programmes can be redesigned with
6. Make mes-
appropriately gendered wording to attract female applicants in male
sages match mental
models
dominated professions.
Stereotypes regarding innate ability linked to gender and/or race can
impact standardized test performance. Gender stereotype threats (filling
demographic information before tests) can influence test scores of girls and
boys differentially. These insights are crucial for building gender and race
sensitive curriculum and evaluation procedures in schools.
! From Swachh and Ayushman Bharat to Sundar Bharat
Using behavioral principle for Sundar Bharat

Principle Applying the principle
Giving individuals default flu shot appointment time can increase influenza
1. Leverage default vaccination rates.
rules Providing smart insurance plan defaults can significantly simplify health insurance
choice.
Asking consumers the factors that are most important to them while choosing a
health plan and restricting the plan to these factors can make choice easier and
thereby enhance take-up of health insurance.
2. Make it easy to
choose Minor behavioural alterations in school and college canteen menus (giving
interesting names to healthy options, putting them near the cash counter, making
the process of buying unhealthy options more time taking) can increase uptake
of nutritious food.
Adolescents often overestimate how much alcohol or drugs their peers take
making heavier consumption to be perceived as a socially desirable behaviour.
Campaigns focusing on number of people who don't drink or take drugs may be
more effective.
3. Emphasize social Youth may be more responsive to a drug prevention program after the death of
norms a celebrity from drug overdose.
Giving out messages in information campaigns such as "90 per cent of doctors
agree that vaccines are safe” can significantly reduce public concern about
childhood vaccine, establish the social norm that vaccinations are safe and
enhance vaccination.
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Presenting information on how many people in the neighbourhood have chosen

to take up the health insurance plan and the benefits it has offered to families
with similar disease in that area can increase enrolment rates.
4. Disclose outcomes Disclosing to people about the realized benefits of hand-washing and, or family
planning practices experienced by other people in their community, can enable
them to take up these healthy practices.
Sending messages to patients that asked the patient to write down the day and
time they planned to get their next vaccination can boost uptake of vaccines.
Doctors asking patients coming to hospitals for a signed pledge or a verbal
commitment, preferably in the presence of someone the signee respects, called
“accountability partner” to take up Yoga and walks can encourage such healthy
lifestyle practices. A monthly appreciation ( joint coupon rewards) for following
5. Reinforce repeatedly
the pledge, after being certified by the “accountability partner”, can sustain such
behaviour.
Many people suffering from critical diseases do not take their medicines regularly.
Use of simple text messages & pill bottles that light up if not opened at the right
time can increase drug adherence. Delivering an appreciation certificate at the end
of the month for following their prescription schedule can sustain adherence.
People often find it difficult to achieve goals like weight loss or ceasing to smoke.
6. Leverage loss People voluntarily made to post bonds (deposit contracts) or lottery tickets on a
aversion website that will be returned to them if they achieve their goals, but are forfeited
otherwise, can help them achieve these difficult goals.
Control of diarrhoea suffers from a flawed mental model: the perception that the
solution is to decrease the child’s fluid intake and to keep the child ‘dry’, implying
less use of Oral Rehydration Solution. Information campaigns on adoption of OR
Scan overturn this flawed mental model.
Message boards in public hospitals and medical advertisements on media must
7. Make messages emphasize gains from smoke cessation and breastfeeding to foster preventive
match mental action. Similarly, messages for sexually transmitted diseases and breast cancer
models must focus on the loss to deter and encourage early diagnosis respectively.
The Mother’s Absolute Affection (MAA) Programme campaign leverages role of
influencers (the relationship between mother-in-law and the daughter-in-law)
and the idea of commitment devices (“Vaada” i.e., promise) to reinforce the idea
of breastfeeding the child within one hour of birth. Cultural tailoring of health
messages in this area can nudge them to adopt breastfeeding.
! Think about Subsidy
Using Behavioural Principle for “Think about the Subsidy”

Principle Appling the principle
For campaigns like Give It Up, the default choice matters immensely. People
have a strong tendency to go with the status quo. The default option can
be modified so that households above a certain income threshold have
1. Leverage default
rules
to opt in to continue their subsidies with the default option being ‘"opt
out" of the subsidy. It is critical to ensure that people find it extremely easy
- through only a text message, a phone-call or a few clicks - to opt in to
continue their subsidy.
For people who donate impulsively, reducing the friction between the
moment when their intention to give up the subsidy appears and when
2. Make it easy to they feel they can take action can make them more likely to give up the
choose subsidy. Prepopulating fields of subsidy giving up forms can make it more
likely that people will submit applications. Mobile phones and apps can
also make impulsive giving up easier.
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Making people feel good about giving up subsidies can help establish the
correct social norm. To discourage the middle-class and the comparatively
3. Emphasize social rich people from enrolling for subsidies like kerosene, cooking gas etc.,
norms the government could, in its advertisements of the particular schemes,
state that the scheme is intended to help the poor who make X per cent of the
population and who earn less than Y per month.
Advertisements could suggest that by not enrolling, the rich are becoming
contributors to eradication of extreme poverty from the country.
Social networks could support live “Give it Up” events where participation is
acknowledged with visual changes to people’s online profiles.
Creating quick outlets such as a simple phone app or physical kiosks for exercising
our general intentions of donating small amounts can build the overall social norm
of being charitable.
Increasing visibility of donors can encourage giving up of subsidies, especially for
people who think and donate based on their alignment with the causes they choose
to support. Highlighting the noble act of giving in general using respected leaders
in the world, and not just giving up a subsidy could increase the visibility of a more
deliberate approach to giving.
Displaying the names and photographs of people who give up subsidy on the
4. Disclose outcomes
website and while filling the form can bolster the act of giving it up.
Immediately and vividly showing givers the effect of them giving up the subsidy
can make giving feel really good. Givers could view personal photos of the people
benefitting from the subsidy or a video with a beneficiary saying thank you.
5. Reinforce repeat-
edly During tax filing time, people could fill an extra field in the form about whether
they would like to give up their subsidy (a form of tax payment) for the cause of the
nation. Givers could sign up for personalized reminders to bring attention to their
giving up objectives throughout the year.
Loss aversion can he used to explain why majority of LPG users have not given up
their subsidy. This reinforces the policy of setting the subsidy schemes default to
opt-out with a fairly easy-process to opt-in.
6. Leverage loss
aversion Asking individuals to pledge a certain amount of subsidy when they feel most
inspired, possibly when watching a social movie in the theatre, with then payment
coming later can encourage giving. They can be prompted to set a giving goal in
advance to track their progress.
Behavioural techniques can help achieve desirable outcomes from subsidy

programmes and in turn reduce the effective costs of subsidy.
7. Match messages Sometimes individuals do not take up vaccinations because they either forget the
to mental models location of the clinic or the time of appointment. Fiscal subsidies to make people
take up vaccinations can be made more cost effective if such set of individuals are
reminded more frequently about the time and location or encouraged to make a
concrete plan about when and where they will get their vaccination.
! Improving Tax Compliance
Table 8: Using Behavioural Principles to enhance tax compliance

Principle Applying the principle
Automatic deduction of tax and directing all or portion of refunds into savings accounts
can be used to encourage savings, including retirement savings.
1. Leverage de-
Sending messages to individuals suggesting that not declaring taxes is a deliberate
fault rules
and intentional choice on their part can help them overcome status quo bias and
improve compliance.
Filing of tax forms even for zero payment of tax.

Removing barriers to filing taxes procrastination, hassle of filling forms, or failing to
2. Make it easy
understand the terms can improve compliance.
to choose
Automated tax collection can make individuals pay less attention to tax collected
(Salience effects).
14 www.iasscore.in
Providing information about peer behavior can make taxpayers adjust their reported
income. Message in the form of moral appeals to taxpayers regarding payment of
3. Emphasize taxes may have limited effects.
social norms Tax amnesties might reduce tax compliance of taxpayers perceive amnesties as unfair.
Amnesties can decrease the government’s credibility and the taxpayers intrinsic
motivation to comply by setting the incorrect social norm.
Public shaming of individuals who don’t pay taxes can reduce non-compliance because
of stigmatization effects.
4. Disclose
If cheaters feel that the probability of their detection has increased, voluntary disclosure
outcomes programs for tax payments can increase tax evasion incidence as these programs may
offer the possibility to avoid strict punishments.
Repeatedly sending fairness driven and normative messages added to standard

5. Reinforce reminder letters that referred to the facts that (a) most people in your local community
repeatedly pay their taxes on time, and (b) the person concerned was in the very small minority
who had not yet done so, can help reduce late tax payments.
Tax withholding followed by refunds at the time of tax filing may increase tax
compliance and total taxes paid. Taxpayers are more concerned about tax deduction
6. Leverage loss claims when they owe additional tax (loss) at the time of filing than when they expect
aversion a refund (gain).
Framing tax cuts; tax cuts presented as a bonus (gain) are more likely to be spent than
tax cuts presented as a rebate (loss).
7. Match mes- Reminding tax payers that public goods can only he provided in return for tax
sages to mental compliance (reciprocity appeal) can boost tax morale,
models
IMPLEMENTING THE ASPIRATIONAL AGENDA FOR BEHAVIOURAL CHANGE:

First, the proposal to set up a behavioural economics unit in the NitiAayog must be immediately activated.
Care, however, must be taken in setting up the unit as applying the principles of behavioural economics
seems innocuously and misleadingly simple; after all, everyone can claim to be an expert in understanding
human behaviour. However, as research in behavioural economics itself clearly highlights, there is a world
of difference between anecdotes and averages. While insights gathered from careful research rely on
averages, everyday experience is often driven by anecdotes. As anecdotes are more likely to represent
outliers than averages, behavioural policymaking driven by anecdotal evidence can create more damage
than good. Therefore, the temptation to appoint those who are not experts in this area must be avoided.
Second, every program must go through a “behavioural economics” audit before its implementation. This
audit may adhere to the principles of behavioural economics outlined above to conduct its audit. Such
an audit and the modifications undertaken, therein, can significantly enhance the efficacy of the program.
A simple application of this approach is in the Government communication that goes to citizens. For
example, recent experience of the Department of Revenue showed that perceptions of “tax terrorism”
often had more to do with the language employed in the communication than any Government action in
reality. Therefore, by the mere act of altering the language, it may be possible to change the relationship
between the Department and the taxpayer from adversarial to collaborative.
Third, as several programs are administered by state governments, the behavioural economics team can
work with various state governments not only to inform them about the potential benefits but also help
them to improve the efficacy of the programs.
CONCLUSION:
While social norms impact behaviour significantly in India, the power to employ behavioural change to alter these
norms has not been adequately tapped. Implementing the agenda in this chapter would be a valuable step in
this direction.
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CHAPTER: 3
NOURISHING DWARFS TO
BECOME GIANTS
REORIENTING POLICIES FOR MSME GROWTH
Introduction:
MSMEs that grow not only create greater profits for their promoters but also contribute to job creation and
productivity in the economy. Our policies must, therefore, focus on enabling MSMEs to grow by unshackling
them.
Job creation in India, however, suffers from policies that foster dwarfs, i.e., small firms that never grow, instead
of infant firms that have the potential to grow and become giants rapidly.
While dwarfs, i.e., firms with less than 100 workers despite being more than ten years old, account for more
than half of all organized firms in manufacturing by number, their contribution to employment is only 14
percent and to productivity is a mere 8 per cent. In contrast, large firms (more than 100 employees) account
for three-quarters of such employment and close to 90 percent of productivity despite accounting for about
15 per cent by number.
Cross-Sectional Comparison with USA and Mexico

The average employment level for 40-year old enterprises in the U.S. was more than seven times that of the
employment when the enterprise is newly set up. In contrast, the average employment level for 40-year old
firms in India was only 40 per cent greater than the employment when the enterprise is newly set up. Thus,
once they survive for forty years, 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.
Even Mexico does far better on this dimension than India. The average employment level for 40-year old firms
in Mexico is double that of the employment when the enterprise is newly set up. Thus, once they survive for
forty years, the average 40-year old firm in Mexico generates 40 per cent more (=2/1.4) employment than the
average 40-year old Indian firm.
The Role Of Policy In Fostering Dwarfism

! 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. Each of these legislations exempts smaller firms from
complying with these legislations.
Table 1 shows the size thresholds applicable to each piece of labour regulation. For instance, 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.
16 www.iasscore.in
Table 1. Size based Limitations posed by Key Labour Legislations
S.No. Labour Acts Applicability to Establishments
Industrial Disputes Act, 1947, Chapter V relating

1. Employing 100 or more workers
to strikes, lockouts, retrenchment, layoff
Trade Union Act, 2001-Registration of trade Membership of 10 per cent or 100 workmen
2.
unions whichever is less
Industrial Employment (Standing Orders) Act,

3. 100 or more workmen
1946
10 or more workers with power and 20 or

4. Factories Act, 1948
more workers without power
Contract Labour (Regulation & Abolition) Act, 20 or more workers engaged as contract la-
5.
1970 bour
Employment in the schedule having more

6. The Minimum Wages Act, 1948
than 1000 workers in the State
Employees’ State Insurance Act, 1948 - ESI 10 or more workers and employees monthly
7.
Scheme wage does not exceed Rs. 21000
Employees’ Provident Fund & Miscellaneous

8. 20 or more workers
Provisions Act, 1952
! Impact of the labour law change in Rajasthan

Studies have found that on average, plants in labour-intensive industries and in states that have
transited towards more flexible labour markets, such as Uttar Pradesh or Gujarat, are 25.4 per cent
more productive than their counterparts in states like West Bengal or Chhattisgarh that continue to
have labour rigidities.
The major reforms undertaken by the State of Rajasthan included the amendments in IDA, 1947,
Factories Act, 1948, The Contract Labour (Regulation & Abolition) Act, 1970 and the Apprentices Act,
1961.
! Impact of Small Scale Reservation

The Small Scale Industries (SSI) reservation policy was introduced in 1967 to promote employment
growth and income re-distribution. Given the predominance of dwarfs in the Indian economy and
the low productivity and employment generation is crucial to examine the role of the SSI reservation
policy.
From 1997 to 2007, several product categories reserved for small-scale firms were eliminated in a
phased manner.
Table 4. Incentives Available to Small Scale Firms (irrespective of their age)

Scheme Objective
Direct and indirect finance at subsidized interest rates shall include all loans given
Priority Sector Lending
to micro and small enterprises, irrespective of their age.
Credit Guarantee Fund This scheme makes available collateral-free credit to the micro and small enter-
Scheme prises, irrespective of their age.
A group of items (Group IV) are reserved for exclusive purchase from small scale
Purchase Preference Policy 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.
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For selected items that are produced by both small scale and large scale units,
price preference is provided to small firms, irrespective of their age. This price
Price Preference Policy
preference amounts to a 15 per cent premium over the lowest quotation of the
large-scale units.
MSMEs, irrespective of their age, can avail benefits such as availability of tender
Benefits in tendering sets free of cost, exemption from payment of earnest money deposit, exemption
from payment of security deposit.
Raw Material Assistance

Scheme of National Small This scheme aims to help MSMEs, irrespective of their age, with financing the
Industries Corporation purchase of raw material (both indigenous and imported).
(NSIC)
Provides assistance to MSMEs, irrespective of their age, for the following activi-
Marketing Assistance ties: organization of exhibitions abroad, co-sponsoring of exhibitions organized
Scheme by other organizations, organizing buyer-seller meets, intensive campaigns and
marketing promotion activities.
Scheme allows MSME firms, irrespective of their age, to pay GST at a flat rate. The
GST Composition scheme turnover limit for businesses availing of the GST composition scheme is set at Rs.
1.5 crore.
Exemption under Central Small scale units below a turnover of Rs. 4 crore, irrespective of their age, manu-
Excise law facturing good specified in SSI are eligible for exemption.
! Incentivizing ‘infant’ firms rather than ‘small’ firms:

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: The manufacture of rubber and plastic products,
electronic and optical products, transport equipment, machinery, basic metals and fabricated metal
products, chemicals and chemical products, textiles and leather & leather products, are the subsectors
with highest employment elasticities. To step up the impact of economy growth on employment, the
focus has to be on such high employment elastic sectors.
Focus on Service Sectors with high Spillover Effects such as Tourism: Developing key tourist centres
will have ripple effects on job creation in areas such as tour and safari guides, hotels, catering and
housekeeping staff, shops at tourist spots etc. It is possible to identify 10 tourism spots in each of the
larger 20 states and 5 spots in the 9 smaller states and build road and air connectivity in these tourist
attractions, which would boost economic activity along the entire route and would also reduce the
migration of the rural labour force who form a major proportion of the total labour force.
**********
Practice Question
MSMEs that grow not only create greater profits for their promoters but also contribute to
job creation and productivity in the economy. Comment. Also, discuss the impact of labour
regulation on MSMEs in India.
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CHAPTER: 4
DATA “OF THE PEOPLE, BY THE

PEOPLE, FOR THE PEOPLE”
Important terms
Types of Data on the basis of Privacy
Intimate Data – This is the data linked to an individual can range from such as their biometric details.
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. It is critical in some areas such as medical research. For
example – an anonymous survey.
Public Data - Data neither linked to an individual, nor at an individual level of granularity is known as
public data, such as the census.
Why data is important?

The best part about data is that it is non-rivalrous, i.e, a particular data set can be used by any number of firms, so
there will be no rivalry for this resource. Utilising the information embedded in the vast distinct datasets enables
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
Characteristics of a Usable Data

Common Identifiers – The datasets should be organized such that they have common identifiers. This will
allow easy merger of disparate datasets and will be extremely useful in obtaining the necessary richness
required to design and implement welfare policies.
Massive Scale of Data - 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. For example, to
gather price data on trades across various product markets and across the country, a very large number of
producers and buyers need to log their transactions on a platform in real time.
Long Time Series – Data must have a long enough time-series so that dynamic effects can be studied and
employed for policymaking. For instance, to undertake before-after evaluations to assess the effectiveness of
policies, data that spans a long-enough time series is critical.
Accurate Data Sets - Without accurate data sets, no meaningful information can be extracted from the data.
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Data Collection Framework by India

The Government of India collects four distinct sets of data about people:
Administrative data – It constitutes Birth and death records, pensions, tax records, marriage records, etc.
Government hold administrative data for mainly non-statistical purposes.
Survey data – It constitutes Census data, National Sample Survey data, etc. This data is gathered predominantly
for statistical purposes. For example, the National Sample Survey Office conducts large-scale sample surveys
across India on indicators of employment, education, nutrition, literacy etc.
Transactions data – It constitutes e-National Agriculture Market data, United Payments Interface data etc. This
is a nascent category of data but is likely to grow as more people transition to cashless payment services.
Institutional data – It constitutes Public school data on pupils, public hospital data on patients, etc. Most such
data are held locally, predominantly in paperbased form. This data can be digitized to enable aggregation at
the regional or national level.
The Economics of Data and Social Welfare

In the era of information explosion, the marginal cost of data has declined exponentially and the marginal benefit
to society of using this data is higher than ever.
HOW MARGINAL COST OF DATA IS DECREASING?

Increasing efficiency of data gathering – People produce data about themselves through online activities
and store this data on public and private servers, every day.
Falling prices of data storage – The cost per gigabyte of storage has fallen from Rs. 61,050 in 1981 to
less than Rs. 3.48 today.
Increasing skills and resources to process data rapidly – An increasing number of people are equipped
with skills to handle large datasets because Data science has evolved as a distinct, well-funded field of
study that is constantly innovating ways to put data to efficient use.
INITIATIVES BY GOVERNMENT OF INDIA

Open Government Data Platform – It allows citizens to access a range of government data in machine-
readable form in one place. The portal allows union ministries and departments to publish datasets,
documents, services, tools and applications collected by them for public use.
Samagra Vedika initiative of Telangana Government gives a flavour of the potential benefits of
integrating datasets. The initiative links around twenty-five existing government datasets using a common
identifier – the name and address of an individual.
Seeding of Aadhaar number across databases such as PAN database, bank accounts, mobile numbers is
under the process.
Local Government Directory, an application developed by the Ministry of Panchayati Raj is 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.
Digitize India – This initiative is a solution to the tedious task of converting paper-based data into digital
form. The initiative crowd-sources the data entry effort by presenting volunteering citizens with snippets
of scanned documents, which they type into a data entry portal. Correct entries earn cash rewards for the
contributor.
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NREGAsoft - It is a comprehensive e-governance system for the 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 etc.
INTERNATIONAL EXAMPLES
Transport for London (TfL) releases a significant amount of data – such as timetables, service status and
disruption information – in an open format for anyone to use, free of charge. Open travel data can support
travel apps and real-time alerts to save time, reduce uncertainty and lower information costs.
The Open-Government initiative by United States mandates federal government and public agencies to
publish their data online for public use in machine-readable format.
The city of St. Petersburg, Florida, recently created a citizen dashboard called St. Pete Stat, where
citizens can view dynamically updated information about the performance of city departments, status of
development projects.
BENEFITS TO GOVERNMENT
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.
Datasets that utilise information across various datasets can also improve public service delivery. For
example, cross-verification of the income tax return with the GST return can highlight possible tax
evasion.
The government can earn benefit from the private sector by levying a fee for access to datasets.
BENEFITS TO PRIVATE SECTOR

Datasets may be sold to analytics agencies that process the data, generate insights, and sell the insights
further to the corporate sector, which may in turn use these insights to predict demand, discover untapped
markets or innovate new products.
BENEFITS TO CITIZENS
Citizens are the largest group of beneficiaries of the proposed data revolution. Consider the case of Digital
Locker. Citizens no longer need to run from pillar to post to get “original” documents from the state such
as their driving licence, Aadhaar card, PAN card, CBSE results, etc. These documents are critical in the life
of every resident of India.
Non-Banking Financial Company - Account Aggregator (NBFC-AA) announced by RBI, simply enables
citizens to demand their data from various financial institutions in a machine-readable format, so that it
can be used by them meaningfully.
WAY FORWARD
Integration of Data: The government can deliver a better experience to the citizen by bringing disparate
datasets scattered across various ministries together. If the information embedded in these datasets is utilised
together, data offers potential to reduce targeting error in welfare schemes.
It should be noted that while any ministry should be able to view the complete database, a given ministry
should be able to manipulate only those data fields for which it is responsible.
Privacy: It is very important to consider the privacy implications and inherent fairness of data being used. It is
to be noted that different type of data requires different level of privacy process. The key difference in dealing
with these different types of data is the knowledge and consent of the data principal.
Citizens must be given the options to opt out of divulging data to the government, where possible.
Even if there is no viable private market choice of certain public services, the choice to share the individually
linked data from such services should always be with the citizen.
Real Time Update: Updating of data should happen in real time and in such a way that one ministry’s
engagement with the database does not affect other ministries’ access.
PPP: The government may also consider opening certain kinds of data to private players with all the necessary
security safeguards.
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CHAPTER: 5
ENDING MATSYANYAYA
HOW TO RAMP UP CAPACITY IN THE
LOWER JUDICIARY
Important terms
Matsaya Nyay
“The Matsya Nyaya,” the law whereby the small fish becomes the prey of the big fish. Government, rulers and
laws are necessary to prevent this natural law from operating in human society. Remove the government,
remove the rulers and remove the laws, and human society will degenerate into a state of anarchy in which
the stronger will destroy the weak.
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.
Clearance rate is mainly used to understand the efficiency of the system in proportion to the inflow of
cases.
The biggest constraint to ease of doing business in India is the slow ability to enforce contracts and resolve
pending disputes.
Nearly 3.5 crore cases are pending in the judicial system. The problem is concentrated in the district and
subordinate courts.
Can the problem be resolved - quantitatively?

Yes. A case clearance rate of 100 per cent (i.e. zero accumulation) can be achieved with the addition of merely
2,279 judges in the lower courts and 93 in High Courts even without efficiency gains.
Economic Survey (2017-18) presented evidence of the backlog of cases that weighs down the Indian judiciary,
economic tribunals and the tax department, thereby constraining economic growth.
The government resolved to improve the present regime by introducing the Insolvency and Bankruptcy Code.
Adoption of the Goods and Services

EODB, 2018: 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.
DISTRIBUTION OF PENDING CASES AMONG DIFFERENT LEVELS OF COURTS IN

INDIA
Supreme Court - 0.16%
High Courts - 12.30%
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Subordinate Courts - 87.54%

The following section will provide the overview of the performance of District & Subordinate courts, using metrics
that quantify different aspects of the litigant’s experience. These include average age of cases, (both pending and
disposed), the number of days between hearings, and the average amount of time spent on the life cycle of cases.
PENDENCY
The pendency of a case on a given date is the time since the date of filing.
The distribution of pendency of both civil and criminal cases is more or less the same.
More than 64 per cent of all cases are pending for more than one year.
Odisha, Bihar, West Bengal, Uttar Pradesh and Gujarat have higher average pendency for both civil and
criminal cases as compared to the national averages.
Punjab and Delhi have the least average pendency of cases.
Worst performing states are usually also the poorest.
DISPOSAL
Disposal time is measured as the time span between the date of filing and the date when the decision is
passed.
74.7 per cent of the civil cases and 86.5 per cent of the criminal cases are disposed within three years.
Bihar, Odisha and West Bengal have higher average disposal time than the national average for both civil
and criminal cases.
Punjab and Delhi have the lowest average disposal time.
The average disposal time for civil and criminal cases in Indian 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).
This indicates that there is huge scope for improvement in the disposal time for Indian D&S courts.
Detailed Analysis Of The Effectiveness And Efficiency Of Courts
RELATIONSHIP BETWEEN THE INSTITUTION, DISPOSAL OF CASES, AND CCR AT

ALL INDIA LEVEL:
While the number of cases instituted each year in D&S courts has gone up, so has the number of disposals.
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.
THE INTERNATIONAL COMPARISON OF CCR:

CCR for civil and criminal cases in India was 94.76 per cent and 87.41 per cent respectively in 2018 while the
COE members have already achieved the CCR above 100 per cent in 2016 for both civil and criminal cases.
The civil courts of UK’s England and Wale fare poorly in comparison to India, the USA, and the COE average,
with a clearance rate of just 62 per cent.
HOW COME IT IS ABOVE 100%:

The cases disposed off need not have been filed in the same year, as some proportion of them will typically
be backlog from previous years.
KEY ISSUES THAT NEED TO BE DEALT WITH IN ORDER TO MAKE THE JUDICIARY
MORE EFFICIENT:
Achieve a 100 per cent clearance rate so that there is zero accumulation to the existing pendency. The backlog
of cases already present in the system must be removed.
THE INPUT-OUTPUT MODEL:

The survey estimates the number of additional lower court judges that would be needed to stop further
accretion of pendency and clear the backlog.
www.iasscore.in 23
Case Study:
The D&S courts received 1.5 crore additional cases in 2018 and had a backlog of 2.87 crore as on
January 1, 2018.
The number of cases disposed of in 2018 was 1.33 crore.

Thus, the closing balance in end-2018 was 3.04 crore.
There are currently 17,891 judges compared to the sanctioned strength of 22,750. On average, a
judge disposes 746 cases.
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.
APPLY THE SAME FRAMEWORK TO THE HIGHER COURT:

As of June 2017, High Court judges were working at 62 per cent of their sanctioned strength.
With a case clearance rate of 88 per cent, each judge achieved an average disposal rate of 2,348 cases per year.
The backlog of cases as on June, 2018 was 44.40 lakh.
In order to reach 100 per cent CCR, they needed just 93 additional judges.
This is already within the present sanctioned strength for High Courts.
With a high case clearance rate of 98 per cent, each Supreme Court judge disposes 1,415 cases per year
on average.
The backlog of cases as on October 2018 was 56,320. In order to reach 100 per cent CCR, the Supreme
Court would have needed only one extra judge in 2018.
To clear all backlog in the next five years, an additional eight judges are required. In May 2019, three
additional judges were appointed to the Supreme Court raising their number to the full sanctioned
strength of 31.
To clear backlog, the Supreme Court needs to increase its sanctioned strength by six.
To clear all backlogs in the next five years, the High Court’s need a further 361 additional judges.
To clear all the backlog cases in District and Subordinate Courts in the next five years, further 8,152
judges are needed (above the sanctioned strength).
In order to optimally allocate additional D&S judges, there has to be critical analysis to common case types
in both civil and criminal pendency.
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.
Lower Courts Records – Records and Proceedings stage: Civil cases spend an average of 398 days in this
stage and 369 days in the ʻHearing’ stage.
This inefficiency consumes a significant proportion of a case’s life, and is a major factor contributing to
delays and backlog.
As with civil cases, awaiting lower court records causes delays for criminal cases in which they spend the
largest amount of time of 243 days, on average.
The ʻEvidence’ stage and ʻFraming of Charges’ stages consume 235 and 231 days, respectively.
HOW TO MAKE INDIAN COURTS MORE PRODUCTIVE:

The backlog in lower courts can be cleared in five years at full sanctioned strength with an efficiency gain
of 24.5 per cent. At current working strength, it would take an efficiency gain of 58 per cent.
With full sanctioned strength, High Courts would need only 4.3 per cent increase in efficiency to clear the
backlog although, given high vacancy rates, the required rate at current working strength is 68 per cent.
The equivalent numbers for the Supreme Court are 18 per cent and 31 per cent respectively.
Few suggestions for enhancing productivity in the judiciary:

Increase number of working days:
Supreme Court’s official calendar for 2019 suggests that it would work 190 days. In contrast, the average is
232 working days for High Courts and 244 days for Subordinate courts.
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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.
Courts require competent administration to 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 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: (i) provide administrative support functions needed
by the judiciary; (ii) identify process inefficiencies and advise the judiciary on legal reforms; and (iii)
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:
eCourts Mission Mode Project 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.
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Practice Question
What suggestions according to you can help in enhancing the productivity of the judiciary?
Is there a need of drastic change in Judicial set up or there exists any probable pragmatic
corrective mechanism? Analyze.
The single biggest constraint to ease of doing business in India is the weak ability to enforce
contracts and resolve disputes. What corrective measures have been suggested by the
Economic Survey? How far is it pragmatic? Examine.
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CHAPTER: 6
HOW DOES POLICY

UNCERTAINTY AFFECT
INVESTMENT?
Economic policy uncertainty has correlations with:
Macroeconomic environment
Business conditions
Other economic variables that affect investment
Surges in economic policy uncertainty increase the cost of capital in the economy. As a result, higher
economic policy uncertainty lowers investment, especially because of the irreversibility of investment.
How can the policymakers reduce Uncertainty in Economic Policy?

The following action plans are recommended:
Predictable actions: Provide forward guidance on the stance of policy, and reduce ambiguity/arbitrariness in
policy implementation.
Belief in “what gets measured gets acted upon”: Economic policy uncertainty index must be tracked at the
highest level on a quarterly basis.
Quality assurance of processes in policy making must be implemented in Government via international
quality certifications.
Effect of Uncertainty/Ambiguity in Policy Making on the Investment

climate in the Economy
A poorly drafted law that is riddled with ambiguities, amendments, clarifications and exemptions inevitably
leads to conflicting interpretations and endless litigations. Such uncertainty can spook investors and spoil the
investment climate in the economy.
PREDICTABILITY OF POLICY ACTION

A nation that provides forward guidance on policy action, maintains broad consistency in actual policy with the
forward guidance, reduces ambiguity and arbitrariness in policy implementation creates economic policy certainty.
Investors may enjoy the certainty provided by such an environment and flock to invest in this environment.
IT IS CRITICAL TO UNDERSTAND THE DIFFERENCES BETWEEN RISK AND

UNCERTAINTY
Both fundamentally affect economic activity. Risk can be quantified but uncertainty is inherently tough to
measure. Policy making involves discretion and such discretion can generate uncertainty.
Among different sources of economic uncertainty, economic policy uncertainty matters significantly because
this uncertainty refers to one that policymakers can control and thereby influence economic activity.
Economic policy uncertainty is difficult to quantify. There have been attempts at quantifying economic policy
uncertainty.
A model given by Baker called an Economic Policy Uncertainty (EPU) index has gained global recognition.
To measure economic policy uncertainty, the index is created by quantifying newspaper coverage of policy-
26 www.iasscore.in
related economic uncertainty.

EPU index picks up the period of economic policy uncertainty, such as the taper tantrum of 2013, and correlates
very well with other vulnerability indices like inflation volatility, stock market volatility, business sentiment
index, and other macroeconomic vulnerability indices.
DECISION TO INVEST AND EPU

As investment is forward-looking, future expectations play a critical role in the decision to invest. Specifically,
an investor invests in a project if the upfront costs are less than the present value of the expected rewards
from the investment.
As uncertainty influences these expectations, irrespective of its source, it affects the decision to invest.
Projects that generate a return lower than this required return become unviable when uncertainty increases
in the economy.
ECONOMIC POLICY UNCERTAINTY IN INDIA

The index of economic policy uncertainty for India shows peaks in few months of 2011 and 2012, reflecting
the policy paralysis during that period, which witnessed the problems of the high twin deficits and high
inflation, thereby exacerbating macroeconomic vulnerability.
Twin deficits: Fiscal Deficit and Current Account Deficit

Macroeconomic attributes: Aggregate output or income, the unemployment rate, the inflation rate, and
the interest rate.
The index was also high in the second half of 2013 when the economy faced the episode of “taper tantrum”
leading to volatile capital flows, depreciation of rupee vis-à-vis US dollar.
Economic policy uncertainty in India moved closely in tandem with global uncertainty until 2014.
It started diverging since early 2015 and seems to have completely decoupled in 2018.
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.
Uncertainty seems to have stabilized at lower levels in case of India since last few years, which is noteworthy
given the recent surge in global uncertainty, partly due to rising trade tensions between US and China,
uncertainty about outcome of Brexit, slower world growth.
Year 2018 saw sharp divergence of India’s economic policy uncertainty index with that of global uncertainty
index, which increased sharply. Global uncertainty index increased from 112 to 341 in the same year,
whereas that of India remained below 100.
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.
The continued resolution of the twin balance sheet problem following implementation of Insolvency and
Bankruptcy Code 2016 and recapitalization of banks helped to promote investment.
Twin balance sheet problem refers to the stress on balance sheets of banks due to non-performing assets
(NPAs) or bad loans on the one hand, and heavily indebted corporate on the other.
Focus on improvement in the business climate via measures to improve ease of doing business, clarity in the
policy for FDI liberalization may have also helped in this regard by reducing economic policy uncertainty.
The relationship of uncertainty in economic policy with investment may be through two channels. First is the
direct relationship of economic policy uncertainty with investment growth and second is the relationship
of EPU with other variables which in turn affect investment.
RELATIONSHIP OF ECONOMIC POLICY UNCERTAINTY WITH INVESTMENT IN

INDIA
Economic policy uncertainty as measured by EPU index foreshadows a decline in economic growth,
banking crisis.
High uncertainty and deteriorating business confidence played a role in the investment slowdown in India.
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
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are affected by higher uncertainty in economic policy.
FACTORS AFFECTING INVESTMENT

Cost of borrowing: Negatively associated with investment as they reflect higher input costs.
The 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.
Investment growth is positively correlated to wholesale price inflation, but negatively to consumer
price inflation
This may be due to the fact the producers would realize producer prices which are closer to wholesale
prices upon selling any product, whereas consumers have to pay consumer prices and higher prices
may dampen the demand.
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. Data shows a positive correlation between
investment growth and capacity utilization in previous quarter.
A note on FDI: If the volatility of the exchange rate is higher, it may decrease the growth of foreign inflows.
It is seen that the relationship between growth in FDI and volatility of exchange rate is weak suggesting
that foreign investors in projects have other considerations as well.
On the other hand, a negative relationship, is seen between FII inflows and volatility of exchange rate. The
negative relationship suggests that the portfolio investments which are generally short term investments
are more affected by the volatility in exchange rate, as compared to FDI flows, which are generally for
longer duration.
HOW POLICYMAKERS WOULD REDUCE DOMESTIC ECONOMIC POLICY

UNCERTAINTY:
Top-level policymakers must ensure that their policy actions are predictable, provide forward guidance on
the stance of policy, maintain broad consistency in actual policy with the forward guidance, and reduce
ambiguity/arbitrariness in policy implementation.
Economic policy uncertainty index must become an important index that policymakers at the highest level
monitor on a quarterly basis.
Government must encourage construction of economic policy uncertainty sub-indices to capture economic
policy uncertainty stemming from fiscal policy, tax policy, monetary policy, trade policy, and banking policy.
Tracking these sub-indices would enable monitoring and control over economic policy uncertainty.
Quality assurance of processes in policy making, which reflect the adage of “Document what you do, but
more critically do what you document!” must be implemented in the government.
Practice Question
According to Economic Survey 2018-19, Economic Policy Uncertainty has reduced
significantly in India over the last decade. Substantiate.
What is Economic Policy Uncertainty Index? Define the relationship of Economic Policy
uncertainty with Investment in India.
28 www.iasscore.in
CHAPTER: 7
INDIA’S DEMOGRAPHY AT 2040

PLANNING PUBLIC GOOD PROVISION
FOR THE 21st CENTURY
CONTEXT:
India is set to witness a sharp slowdown in population growth in the next two 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. This chapter focuses on future projections of Indian demography, its implications, and strategies for
policy formulations and implementation.
Important terms
Total Fertility Rate (TFR): Total fertility rate refers to the total number of children born or likely to be born
to a woman of child-bearing age in her lifetime.
Replacement Level Fertility: TFR of 2.1 children per woman is called the replacement level fertility, which is
the average number of children a woman would need to have in order for the population to replace itself.
Cohort-component Methodology: It is a methodology followed for population projections using certain
components, such as assumptions for fertility, mortality, life expectancy and sex ratio at birth.
Life Expectancy at the Age of 60: It 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.
Recent demographic trends

Population growth in India has been slowing in recent decades from an annual growth rate of 2.5 per cent during
1971-81 to an estimated 1.3 per cent as of 2011-16. All major states have witnessed a marked deceleration
in population growth
during this period.
Population is now
growing below 1 per cent
in the southern states
as well as West Bengal,
Punjab, Maharashtra,
Odisha, Assam and
Himachal Pradesh.
A key driver of this trend
has been the steady
decline in India’s total
fertility rate (TFR) since
the mid-1980s. India’s
TFR has been halved
from 4.5 in 1984 to 2.3
as of 2016.
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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.
These developments suggest that India has entered the next stage of demographic transition with population
growth set to slow markedly in the next two decades along with a significant increase in the share of working age
population (the so-called “demographic dividend” phase).
THE PROJECTED POPULATION AND AGE-STRUCTURE HAS SEVERAL IMPLICATIONS

FOR:
Provision of health care.
Provision of old-age care.
Provision of school facilities.
Access to retirement related financial services.
Public pension funding.
Income tax revenues.
Labour force and labour participation rates.
Retirement age.
NATIONAL AND STATE LEVEL POPULATION PROJECTION:

Population and its age structure are projected at the national and state level up to 2041.
! Declining Fertility Rates:

National level:
TFR at the national level will continue to decline rapidly and will lie below replacement level fertility at
1.8 as early as 2021 which is expected to stabilize thereafter for some time around 1.7.
Such fertility levels are close to the TFR seen in countries such as China, Belgium, Netherlands and
Brazil.
State level:
The states which are already below replacement level fertility, including the southern states, West
Bengal, Punjab, Maharashtra and Himachal Pradesh, are expected to see TFR decline further by 2021,
reaching as low as 1.5-1.6 and stabilizing thereafter.
By 2031, all states would see below replacement level fertility.
Factors responsible for declining fertility for females:

Rising female education.
Postponement of marriage.
Access to family planning methods.
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Continued decline in infant mortality.
! Population Growth Trajectory:

National level:
India’s population growth will continue to slow rapidly over the next two decades, growing less than 1
percent during 2021-31 and under 0.5 per cent during 2031-41.
Such population growth rates would be close to the trend currently seen in countries such as Germany
and France.
State level:
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
! Changing Age Composition:

National level:
With TFR reaching low levels and longevity continuing to increase, India’s population at the national
level and in several states will begin ageing significantly in just a decade from now.
The share of India’s young, i.e. 0-19 years, population is projected to drop from as high as 41 per cent
in 2011 to 25 per cent by 2041.
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.
India’s age-structure by 2041 will resemble that of China and Thailand as seen during the current
decade.
State level:
States ahead in the demographic transition, such as Himachal Pradesh, West Bengal, Maharashtra,
Punjab and most of the southern states, 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.
States in earlier stages of demographic transition, such as Bihar, Uttar Pradesh, Jharkhand, Chhattisgarh,
Madhya Pradesh and Rajasthan, will see a significant decline in the share of young population.
! Implications for Working-Age Population:

National level:
India’s working-age population will continue to increase through 2041, rising by 96.5 million during
2021-31 and by 41.5 million during 2031-41.
Depending on the trajectory of labour force participation during 2021-41, additional jobs will need to
be created to keep pace with the projected annual increase in working-age population of 9.7 million
during 2021-31 and 4.2 million during 2031-41.
State level:
The size of working-age population will start to decline in 11 out of the 22 major states during 2031-41,
including in the southern states, Punjab, Maharashtra, West Bengal and Himachal Pradesh.
Working-age population will continue to rise through 2041 in states lagging behind in the demographic
transition, particularly Bihar, Uttar Pradesh, Madhya Pradesh and Rajasthan. With rising working-age
population of these states could meet the labour deficiency in many of the ageing states.
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.
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Overall, the number of school-going children in India will decline by 18.4 per cent between 2021 and 2041.
This will have very important social and economic consequences.
Therefore in the light of the projected decline in elementary school-going children, the number of schools
per capita will rise significantly in India across all major states even if no more schools are added.
WHAT TO DO?
The “optimal” school size varies widely according to terrain and urban clustering hence this sharp increase
in number of elementary schools per capita needs to be carefully studied.
Consolidate/merge elementary schools in order to keep them viable. Schools located within 1-3 kms
radius of each other can be chosen for this purpose to ensure no significant change in access.
Learn from the experiences of other major economies witnessing a decline in elementary school-going
population, such as Japan, China, South Korea, Singapore and Canada, which have implemented policies
to merge or close down schools.
Shifting policy emphasis from quantity towards quality and efficiency of education.
! 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 two decades will sharply reduce the per capita availability of hospital beds
in India across all major states.
What to do?
Expand medical facilities in these states.
For states in the advanced stage of demographic transition, the type of health care services will have to
adapt towards greater provision of geriatric care.
Need comprehensive and precise data that provides true quantity and quality of health care in
country.
! Retirement Age:
India’s healthy life expectancy at the age of 60 has continually increased over the years for both men and
women. It is still much lower than that for other major developed and emerging economies. Due to ageing
population pressure on pension funding is increasing.
What to do?
Raise the age pensionable retirement. Countries such as Germany, France and U.S. have increased the
retirement age. In the U.K., for example, the state pension age will increase for both men and women
to 66 by October 2020.
Therefore 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 in line with
the experience of other countries.
This will be key to the viability of pension systems and would also help increase female labour force
participation in the older age-groups.
CONCLUSION:
As the demographic projections could help in effective policy formulations, 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.
Practice Question
Explain how India can solve the problem of ageing and its impact on socio-economic aspects
of the country.
Critically analyse the recent trends of India’s demography.
32 www.iasscore.in
CHAPTER: 8
FROM SWACHH BHARAT TO

SUNDAR BHARAT VIA SWASTH
BHARAT
AN ANALYSIS OF
THE SWACHH BHARAT MISSION
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 recognized as a major problem in India. In fact, an unflattering national fact was that
open defecation in India represented 60 per cent of open defecation globally. Poor sanitation costs India around
5.2 per cent of its GDP.
The Swachh Bharat Mission (SBM) was launched as 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.
The result has been substantial gains in health parameters as shown by various studies. The gains from a cleaner
India are important inputs, directly as well as indirectly, for achieving broader economic development objectives.
Swachh Bharat Mission Gramin

Aim of India’s Swachh Bharat (Clean India) Mission to enhance the quality of life by promoting cleanliness, hygiene
and eliminating open defecation. The targets of the mission are to be met by 2 October, 2019, coinciding with the
150th birth anniversary of the Father of the Nation.
SBM adopts a multi-faceted approach including:
Community participation
Flexibility in Choice: SBM offers flexibility by building in a menu of options so that the poor/disadvantaged
families can subsequently upgrade their toilets depending upon their requirements and their financial position.
Capacity Building
Instil Behaviour change: Incentivizing the performance of State-level institutions to implement activities for
behavioural change among communities.
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
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.
COMPARISON ACROSS STATES FOR ODF STATUS (IN PER CENT)

Most of the states have achieved the status of 100 per cent ODF 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.
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The National Annual Rural Sanitation Survey (NARSS) 2018-19, conducted by an Independent
Verification Agency (IVA) has found that 93.1 per cent of households had access to toilets during the
survey period.
Further, 96.5 per cent of the households in rural India that had access to a toilet used them. The NARSS
also re-confirmed the ODF status of 90.7 per cent of villages, which were previously declared and verified
as ODF by various districts/ States.
It is also interesting to note that 95.4 per cent of the villages surveyed were found to have minimal litter
and minimal stagnant water.
SOLID AND LIQUID WASTE MANAGEMENT

Solid and Liquid Waste Management (SLWM) is another major component of SBM Mission. As scientific
disposal of waste has a noticeable impact on social development, there is an urgent need for setting up
the system for the efficient disposal of waste in various states, especially rural villages.
In light of this, 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.
These activities require huge disbursement of funds from Central and State governments.
ANALYSIS OF SBM ON HEALTH ISSUES

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.
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
There may be other factors like distribution of mosquito nets, fogging machines and construction of
Gambusia fish hatcheries under the National Vector Borne Disease Control Programme and provision of
safe drinking water, Oral rehydration solutions (ORS) and zinc, hand washing and personal hygiene under
Integrated Action Plan for Prevention and Control of Pneumonia and Diarrhoea that have also played an
important role in reduction of malaria and diarrhoea, but are not in the scope of this study.
With improved sanitation and 100 per cent ODF, diarrhoea cases reduced significantly in many states like
Gujarat, Tamil Nadu, West Bengal & Bihar. Similarly, improvements are evident in malaria, still births and
low birth weight cases.
IMPACT OF SBM: FEW INDEPENDENT STUDIES .............................................

The Sanitation Health Impact Assessment study was conducted by Ministry of Drinking Water and
Sanitation (MoDWS), to understand the impact of ODF status on the key child health and nutritional
indicators in five states- Karnataka, Madhya Pradesh, Rajasthan, Uttar Pradesh and West Bengal.
Non-ODF districts were selected to ensure socio-cultural and regional similarity across geographies
within the state.
Becoming ODF had a positive impact on the child health and nutrition, evident from the fact that
the health and nutritional indicators of the children and mothers belonging to the ODF areas were
comparatively better than their non-ODF counterparts.
Another study, “Swachh Bharat Mission– Preliminary estimations of potential health impacts from
increased sanitation coverage” conducted by World Health Organization (WHO) to estimate health gains
based on the latest available evidence linking sanitation and mortality from diarrhoeal disease, showcased
initial estimates of expected health gains from reduced diarrhoeal disease due to increased sanitation
coverage with the SBM initiative.
World Bank estimated the economic impacts of inadequate sanitation in India in the year 2006 – showing
an annual economic impact of Rs. 2.4 trillion (US$ 53 billion), implying a per capita annual loss of Rs. 2,180
(US$ 48) or 6.4 per cent of the GDP in the same year.
A recent study conducted by UNICEF on behalf of MoDWS assessed the economic impacts (benefits)
of SBM. The study focused on the household and community financial and economic benefits as well as
costs of improved sanitation and hygiene.
The study found that on an average, every household in an open defecation free village saved about
Rs. 50,000 per year on account of financial savings due to lower likelihood of disease from using a toilet
and practicing hand washing and the value of time saved due to a closer toilet.
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In terms of the impact of SBM on the physical environment, a very recent study by UNICEF, in association
with MoDWS indicates considerable impact on combating contamination of water, soil and food.
WAY FORWARD
SBM has brought in a remarkable transformation and traceable benefits to the society as a whole. It is
one of the largest cleanliness drives in the world. 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.
The mission mirrors the National Developmental priorities by focusing on the gender equality and women
empowerment. Importantly, it is also aligned with the 2030 global sustainable development agenda and
SDGs 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”.
Yet, India’s challenge is an enormous one. 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 behavioral 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.
Going forward, SBM should focus on achieving 100 per cent disposal of solid and liquid waste. Currently,
many states are not concentrating enough on this aspect which could pull us back to where we were a few
years back.
Scientific techniques for the safe and effective disposal of waste should be the next on the agenda for this
mission.
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.
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.
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.
**********
Practice Question
Apart from financial resources, mindset change is the other major ingredient required for
sustained progress in sanitation. Analyse in the light of Swachch Bharat Abhiyan.
Swachh bharat has to be a mission of the people, by the people, facilitated by the government.
Comment.
Eliminating open defecation is just one aspect of Swachch Bharat Mission. Discuss holistic
approach required to make SBM a success.
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CHAPTER: 9
ENABLING INCLUSIVE GROWTH

THROUGH AFFORDABLE,
RELIABLE & SUSTAINABLE
ENERGY
Important terms
Energy Poverty: Energy poverty is a lack of access to modern energy services. These services are defined
as household access to electricity and clean cooking facilities (e.g. fuels and stoves that do not cause air
pollution in houses). Access to energy is a prerequisite of human development.
Enabling Inclusive Growth through Affordable, Reliable and

Sustainable Energy
INDIA’S ECONOMIC DEVELOPMENT AND ROLE OF ENERGY IN IT

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, therefore, needs to quadruple its per-capita energy consumption to meet the rising aspirations
of its citizens. This will also enable India to achieve the human development status of an upper-middle-
income country.
ENERGY FOR PROSPERITY

Industrialization and economic development go hand in hand. The present day developed countries
pursued a path of energy-intensive industrial growth to reach the standards of living witnessed by them
today.
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.
India’s per capita primary energy consumption lags that of the upper-middle-income countries by a
considerable margin.
This has been reflected in India’s growth and standard of living in India. India’s human development index
(HDI) value is still only above the average of 0.638.
It needs to take wider approach towards its energy economy to increase its HDI to 0.8.
RELATIONSHIP BETWEEN ENERGY EFFICIENCY AND ECONOMIC DEVELOPMENT

Energy intensity of India’s GDP has been declining in the recent past, which is reflective of increases in
the efficiency of energy use.
However, India cannot become an upper-middle-income country without:
Rapidly raising its share of the global energy consumption commensurate with its share of the global
population, and
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Ensuring universal access to adequate modern commercial energy at affordable prices.

Access to energy is important not just in its own right but also due to its linkages with other social
indicators. The Sustainable Development Goal (SDG) No.7 on Affordable and Clean Energy is closely
related to all other SDGs.
This is highlighted by the strong relationship between Human Development Index (HDI) and Per capita
energy consumption.
At low levels of energy consumption, increases in per capita energy consumption leads to considerable
increases in human development.
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.
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
! Disparity in access to energy in India
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.
While the share of Liquefied Petroleum Gas (LPG) as a cooking fuel has increased over the years, the
share of households reporting it to be as the primary source of energy for cooking has been low in the
rural areas when compared with the urban areas.
This indicated that the problem of energy poverty has been more pervasive than income poverty. 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.
As per IEA-1(2018), 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.
! Government’s steps to ensure energy access

Pradhan Mantri Ujjwala Yojna was launched in 2016, with the aim to safeguard the health of women
and children by providing them with clean cooking fuel.
As on 5 March, 2019, 24.39 crore LPG consumers have joined the scheme. LPG consumers, who join
the PAHAL scheme, will get the LPG cylinders at non- subsidized price and receive LPG subsidy (as per
their entitlement) directly into their bank accounts.
PAHAL has been recognized by the “Guinness Book of World Record” as the World’s Largest Direct
Benefit Scheme.
ENERGY EFFICIENCY
The primary energy intensity of India’s GDP has followed a falling trend over the years. India’s
primary energy intensity of GDP has fallen from 0.0004 toe in 1990 to 0.0002 toe in 2017.
The institutional and legal framework in the country for energy efficiency has been strengthened through
the Energy Conservation Act in 2001, which created the Bureau of Energy Efficiency (BEE).
The overall size of the energy efficiency market in India is estimated to be US$ 22.81 billion. Realizing the
potential, Government of India with BEE in the lead undertook a number of schemes for promoting energy
efficiency in various sectors across India.
! Performance of Energy efficiency programs

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 Rs. 53,000 crore
(approximately) in 2017-18 and contributed in reducing 108.28 Million tonnes of CO2 emission.
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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.
SUSTAINABILITY OF ENERGY GENERATION

Coal remains the largest source of electricity generation mix globally, with 38 per cent market share in 2018
(IEA, 2019).
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.
While there has been tremendous increase in the renewable energy capacity, fossil fuels, especially coal,
would continue to remain an important source of energy.
! Potential of growth of Renewable Energy in India

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.
In this regard, India has been undertaking one of the world’s largest renewable energy expansion
programmes in the world. The share of renewable energy is progressively increasing in the Indian
electricity mix.
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.
! Solar power
The initial target of the National Solar Mission upto the year 2022, was to install 20 GW solar power,
which was further enhanced to 100 GW in early 2015. The solar power installed capacity has increased
around 1000 times from 25 MW as on 31 March, 2011 to 28.18 GW as on 31 March, 2019.
In order to facilitate smooth integration of increasing share of renewables into the national grid, Green
Energy Corridor project continues to be in operation. Eleven Renewable Energy Management Centres
are already at different stages of installation.
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. The scheme envisages
around 2.75 million solar pumps and, on a pilot basis, 1 GW decentralized solar power plants in
uncultivable lands of farmers to enhance income of farmers.
! Small Hydro-electricity Plants

India has great potential for hydro power generation. However, the utilisation of hydro power for
meeting the power generation needs have been limited. India has a hydro potential of around
145,320 MW, out of which 45,400 MW have been utilised.
To encourage the hydro sector, a new Hydro Policy has been approved.
INDIA’S POTENTIAL TO DEPLOY ELECTRIC VEHICLES

Given the large import dependence of the country for petroleum products, it is imperative that there be a
shift of focus to alternative fuels to support our mobility in a sustainable manner.
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 Rs. 795 crore.
FAME India Phase II has been launched, with effect from 1 April 2019, with a total outlay of Rs. 10,000
crore over the period of three years. Emphasis in this phase is on electrification of public transportation.
Apart from it many EV policies have been announced by different states in India. Currently, the market
share of electric cars is only 0.06 per cent when compared to 2 per cent in China and 39 per cent in
Norway. One of the most concerning fact is that there is lesser acceptance of EVs in India. Sale of EVs in
India is half of that of China.
38 www.iasscore.in
CONCLUSION:
While increasing access to energy is important, it is also imperative that this comes at much lower costs to
the environment. Renewable energy sources are a strategic national resource. 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. It can only happen when India consumes and produces in a sustainable way
by adopting renewable sources of energy like Solar, wind, hydroelectricity, tidal and geothermal energy, and
consumes sustainable by adopting technologies like EVs, solar pumps etc. This will enable India to achieve multiple
Sustainable Development Goals such as Climate Action (Goal 13), Responsible Production and Consumption
(Goal 12) and Affordable Clean Energy (Goal 7).
**********
Practice Question
“Renewable energy sources are a strategic national resource. 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.” Elucidate it with reference to India’s
INDC commitments and steps taken by India to achieve it.
Discuss the role of energy in determining GDP growth of a nation. Examine it with reference
to energy poverty in India and its quest to enter the club of upper middle income group.
www.iasscore.in 39
CHAPTER: 10
EFFECTIVE USE OF
TECHNOLOGY FOR WELFARE
SCHEMES - CASE OF MGNREGS
Introduction:
The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), which was enacted through
an Act of Parliament in 2005, was operationalized through the Mahatma Gandhi National Rural Employment
Guarantee Scheme (MGNREGS) with effect from February 2, 2006. 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.
Delays in payments can materially drive genuinely distressed farmers away from MGNREGS and improvements
in the targeting of MGNREGS to genuine beneficiaries can increase the demand for work from distressed
workers, thereby effectively realising the objective of the programme.
A person undergoing economic distress needs immediate and certain liquidity. Working for uncertain promised
wages, which are likely to be realised with a substantial lag, presents an unattractive proposition for a person
in distress as delayed payments effectively imply zero wages in adverse times. Consistent with this thesis, this
chapter highlights the benefits of careful targeting of Government programmes by use of technology.
Use of Technology in Implementation of MGNREGS

Linking the Aadhaar Number to an active bank account has been 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.
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.
National electronic Fund Management System (NeFMS)

In order to streamline the system of fund flow and to ensure timely payment of wages, NeFMS was implemented
in the year 2016. 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.
This initiated the implementation of DBT in the Scheme. As a result of this initiative, the e-payment under
MGNREGS has increased from 77.34 per cent in FY 2014-15 to 99 per cent in FY 2018-19.
Aadhar Linked Payments (ALP)

ALP could speed up the wage payment cycle in the following two ways. First, due to stringent biometric
requirements, an Aadhaar linked account is unlikely to belong to a ‘ghost’ beneficiary. Hence, Government
officials require less time to verify and audit claims from such accounts. Second, the Central Government, which
ultimately foots the bill for the program, can transfer wages directly to the bank accounts of the beneficiaries,
thereby cutting the bureaucratic red tape.
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Impact of DBT on Effectiveness of MGNREGS

COVERAGE:
Muster rolls are a form of an attendance register. Higher number of filled muster rolls represent higher
worker turnout on site after implementation of DBT indicating that more people are reporting for work.
Total person days and total person days of vulnerable sections (women, SCs and STs) is also higher in
the post DBT years as compared to pre-DBT years indicating that employment generated is higher post
implementation of DBT.
TIMELY PAYMENT OF WAGES:

The proportion of total amount of wage payments that were received with a lag of more than 90 days
before and after the implementation of ALP, the delay in payments reduced by almost one third from
35 per cent to less than 10 percent in the post-ALP period. Thus, implementation of ALP has positively
impacted the flow of payments under the scheme.
DEMAND FOR MGNREGS WORK

There has been an increase in amount disbursed to bank accounts post implementation of ALP and a
decline in delayed payments, it is expected that there will be an increase in demand for work under the
programme in distressed areas.
Before the implementation of ALP, the rural poor treated MGNREGS as an option to earn additional income
during good times rather than a shock absorber during bad times.
The change post ALP implementation suggests that reduction in the delay of payments has an immediate
positive effect on the demand for work in distressed times.
SUPPLY OF MGNREGS WORK

It can be inferred that the increased state capacity to implement anti-poverty programmes brought about
by ALP can potentially bridge the demand supply gap in MGNREGS.
With reliable data, it is possible that the Central and State governments will be able to effectively monitor
the implementation of MGNREGS and nudge the officials to provide jobs wherever and whenever they are
needed the most.
WORK DONE UNDER MGNREGS

The actual work done under MGNREGS also increased significantly in blocks affected by drought due to the
use of ALP. This increase was more than double the increase in blocks that were unaffected by drought.
IMPACT ON VULNERABLE SECTIONS OF THE SOCIETY

As economic shocks affect vulnerable sections of society (women, persons with disability, SCs and STs) the
most, there are concerns that they might not be able to adapt easily to the use of technology under DBT
and hence may get excluded.
But the findings shows, after implementation of ALP, women, SC and ST workforce increased under
MGNREGS during times of economic distress.
WAY FORWARD:
DBT through Electronic Fund Management Systems in MGNREGS has streamlined the fund flow process and
helped in better targeting, reduction in delay in payments to beneficiaries, minimized leakages and above all
led to substantial saving of funds. More importantly, it has enabled MGNREGS to be effective in alleviating
distress of workers.
The above analysis has the following policy implications:
Probable Indicator of distress
Expansion of ‘works’ under MGNREGS
Up-skilling the MGNREGS Workers
Expanding use of JAM to other Welfare Schemes
Use of Digital Infrastructure for micro-benefits
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Practice Question
Use of technology in streamlining MGNREGS has helped increased its efficacy. Substantiate
this Statement.
DBT enabled MGNREGS has helped to alleviate distress of workers. In the light of above
statement, highlight the benefits of careful and effective targeting of government welfare
programmes.
42 www.iasscore.in
CHAPTER: 11
REDESIGNING A MINIMUM
WAGE SYSTEM IN INDIA FOR
INCLUSIVE GROWTH
Minimum wage system in India:
The Indian Minimum Wage System has been quite a debated and dynamic issue.
India was one of the first developing countries to introduce minimum wages with the enactment of the
Minimum Wages Act way 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.
National level minimum wage:

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.
Complex minimum wage system in India:

Over the last 70 years, the minimum wage system in India has expanded and has become complex.
Note: Figures on the horizontal axis indicates the number of scheduled employments notified under the Minimum Wage Act by the
Central Government and all the States/Union Territories.
Source: The data pertaining to the scheduled employments and minimum wage rates notified by the State/Central Government have
been collated from the latest minimum wage notifications issued by the respective Governments. These notifications have been issued
at different points of time ranging from December 2014 to April 2019.
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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 this 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). Some major vulnerable categories – such as domestic workers – are presently covered
only in 18 States and Union Territories. Further, the revision of minimum wage rates has often been delayed.
Reflection of gender discrimination through minimum wage

provisions:
While the Minimum Wages Act does not discriminate between women and men, an analysis of minimum
wages for different occupations shows persistence of systematic bias. For instance, women dominate in the
category of domestic workers while men dominate in the category of security guards.
While both these occupations fall within the category of unskilled workers, the minimum wage rate for domestic
workers within a state is consistently lower than that for the minimum wage rates for security guards.
Impact of minimum wages:
IMPACT ON WAGE LEVELS:

Minimum wage in India does not operate as a conventional floor wage to protect the lowest paid workers.
Nevertheless, the study shows the presence of a “lighthouse effect”, i.e., the minimum wage acts as a
benchmark that pulls up wages in the low-paid and informal sector by enhancing the bargaining power
of vulnerable workers.
IMPACT ON WAGE INEQUALITY:

Well-designed and effective implementation of minimum wages will strengthen the trend towards
decreasing wage inequality especially at lower levels. This becomes all the more significant as women
constitute the majority of the bottom rungs of the wage distribution. This also shows how compliance of
the statute is imperative for increasing welfare.
BOX 2: MINIMUM WAGE SYSTEM IN BRICS
BRICS countries have varied systems in terms of coverage, degree of tripartite consultation, criteria for setting
the minimum wage and adjustment procedure. However, in all these countries, minimum wages are explicitly
embedded within a larger wage policy aimed at balancing needs of the workers with overall economic factors
Table 3: Minimum Wage System in BRICS countries
Brazil China Russia South Africa India
Coverage National minimum Minimum Regional minimum A national Minimum wages

wage, covering all wage rates are wages that coexist minimum wage are limited
workers. Regions established by with a national was approved to Scheduled
can also define province. minimum wage. in 2018, Employments,
minimum wages The regional covering all different skills &
above the national minimum wages groups of wage occupations.
level. are fixed above the earners.
federal rate.
44 www.iasscore.in
WAY FORWARD:
SIMPLIFICATION AND RATIONALISATION:

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 differen Labour Acts.
SETTING A NATIONAL FLOOR LEVEL MINIMUM WAGE:

Central Government should notify a “national floor minimum wage” that can vary across the five
geographical regions.
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 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.
CRITERIA FOR SETTING MINIMUM WAGE:

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. This key change would substantially reduce the number of minimum wages in the
country. For instance, Madhya Pradesh has notified minimum wages based on just four skill levels of
unskilled, semiskilled, skilled and highly skilled across occupations and regions. The state has just four
basic minimum wages for the four skill categories.
COVERAGE:
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.
REGULAR ADJUSTMENT:
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 .
ROLE OF TECHNOLOGY:
Technology can help in overcoming this behavioural bias by making information available in a simple and
clear manner.
GRIEVANCE REDRESSAL:
There should be an easy to remember toll-free number for anybody to register his/her grievance on non-
payments of the statutory minimum wages.
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Practice Question
Despite India’s outstanding growth in the last two decades, low pay and wage inequality
remain serious obstacles towards achieving inclusive growth. Discuss.
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VOL-II

CONTENT
$ CHAPTER-1
> State of the Economy in 2018-19 : A Macro View ...................................................................04
$ CHAPTER-2:
> Fiscal Developments .............................................................................................................................06
$ CHAPTER-3:
> Monetary Management & Financial Intermediation ...............................................................09
$ CHAPTER-4:
> Prices & Inflation ...................................................................................................................................13
$ CHAPTER-5:
> Sustainable Development & Climate Change ............................................................................16
$ CHAPTER-6:
> External Sector ........................................................................................................................................22
$ CHAPTER-7:
> Agriculture and Food Management ...............................................................................................30
$ CHAPTER-8:
> Industry & Infrastructure ...................................................................................................................41
$ CHAPTER-9:
> Services Sector .......................................................................................................................................47
$ CHAPTER-10:
> Social Infrastructure, Employment & Human Development ...............................................50

CHAPTER: 1
STATE OF THE
ECONOMY IN 2018-19
A MACRO VIEW
/ Global Economic Scenario

$ Growth of both advanced economies and emerging economies are expected to decline.
$ World output declined to 3.6% in 2018 due to various reasons such as:
! US-China trade tensions
! Change in credit policy of China
! Financial tightening in the advanced economies
$ According to World Economic Outlook report, India forms part of 30% of the global economy, whose growth
is not projected to decline in 2019 whereas other economies are going to slow down.
$ India’s contribution to GDP of EMDE’s and world economy has increased over the years.
$ WEO report of IMF states that growth of world economy will be boosted mainly by the growth in India and
China and their increasing weights in world income.
/ Indian Economy
$ India is still the fastest growing major economy and 7th largest economy in terms of GDP in 2018-19.
$ India’s GDP at current international dollar with PPP adjustments ranks 3rd in the world.
$ Growth of India’s GDP moderated to 6.8% in 2018-19 from 7.2% in 2017-18.
$ Various reasons behind moderation is mainly due to:
! “Agriculture and allied” – Decline in rabbi crop production and contraction in food prices.
! Lower growth in trade, hotel, transport, communication and service related to broadcasting.
! Moderation in public administration and defence sectors.
$ Election related uncertainty may have contributed too.
$ Deceleration in manufacturing sector has hindered growth of industry sector. IIP of manufacturing sector
grew at 0.3% compared to 7.5% in the same quarter of previous year.
$ Slowdown in auto sector.
$ Stress in NBFC’s also contributed to slowdown.
$ GDP deflator has become small as gap between nominal and real growth rate has reduced.
$ Decline in CPI inflation during the last few years. Headline CPI declined to 3.4 per cent in 2018-19 from 3.6
per cent in 2017-18.
$ Headline WPI inflation stood at 4.3 per cent in 2018-19, higher as compared to 3.0 per cent in 2017-18.
$ On the external front, current account deficit (CAD) increased from 1.9 per cent of GDP in 2017-18 to 2.6 per
cent in April-December 2018. The widening of the CAD was largely on account of a higher trade deficit driven
by rise in international crude oil prices.
$ Trade deficit increased from US$ 162.1 billion in 2017-18 to US$ 184 billion in 2018-19.
$ Rupee depreciated by 7.8 per cent vis-à-vis US dollar, 7.7 per cent against Yen, and 6.8 per cent against Euro
and Pound Sterling in 2018-19.
$ The foreign exchange reserves in nominal terms (including the valuation effects) decreased by US$ 11.6 billion
at end-March 2019 over end-March 2018.
$ FDI inflows grew by 14.2% in 2018-19. Among the top sectors attracting FDI equity inflows, services,
automobiles and chemicals were the major categories.
$ As per Provisional Actual (PA) for 2018-19, fiscal deficit stood at 3.4 per cent of GDP.
$ Direct taxes grew by 13.4% owing to improved performance of corporate tax. However, indirect taxes fell short
of budget estimates by about 16% following a shortfall in GST revenues.
4 www.iasscore.in
/ Banking Sector
$ Indian banking sector has been dealing with twin balance sheet problem, which refers to stressed corporate
and bank balance sheets. The increase in Non-Performing Assets (NPA) of banks led to stress on balance
sheets of banks, with the Public Sector Banks (PSBs) taking in more stress.
$ But, the performance of the banking sector (domestic operations), and PSBs in particular, improved in
2018-19.
/ Drivers of Growth
$ Consumption has always been a strong and major driver of growth in the economy. Especially private final
consumption has always been a strong and major driver of growth in the economy. Although the share of
private consumption in GDP remains high, the pattern of consumption has undergone some change over time
– from essentials to luxuries and from goods to services.
$ Second component of consumption is the government final consumption expenditure (GFCE). Growth of
GFCE decelerated from 15.0 per cent in 2017-18 to 9.2 per cent in 2018-19.
$ The third major component of demand is investment. Investment (Gross Capital Formation) accounts for
nearly 32 per cent of GDP, within which fixed investment (Gross fixed capital formation) accounts for about
29 per cent of GDP.
$ Green shoots (fresh investments) in the investment activity appear to be taking hold as also seen in the pickup
in credit growth to industry. Credit to, large and micro, small & medium enterprises has also witnessed pickup
ingrowth.
$ Investment rates have been declining since 2011-12, though the investment rate in services is displaying
signs of bottoming out. In 2017-18, investment rate in services sector became the highest. Investment rate in
agriculture still continues to lag behind and now is half the investment rate in the industry sector.
$ There has been a decline in savings rate as well, with the household sector entirely contributing to the
decline.
/ Exports and Imports

$ Exports are the external component of demand of domestic goods, and imports are a leakage of income
of the country for demand of products from other countries. While the growth of both export and import
declined in US$ terms, it increased in rupee terms (at current prices) in 2018-19.
$ Exports of both service and merchandise (in rupee terms) picked up in 2018-19 in nominal terms.
$ Import prices as compared to export prices in rupee terms increased sharply in 2018-19
$ There was improvement in contribution of net exports to GDP growth, owing to higher growth of exports and
lower growth of imports at constant prices as compared to previous year.
/ Supply Side of the Economy

$ Gross Value Added (GVA), reflects the supply or production side of the economy to which net indirect taxes
on products are added to get GDP at market prices.
$ Growth of net indirect taxes was 8.8 per cent in 2018-19, lower than that of 2017-18, on account of loss of
momentum of economic activity.
$ Real growth in ‘Agriculture & allied’ sector was lower in 2018-19 at 2.9 per cent, after two years of good
agriculture growth. Share of agriculture sector in total GVA has been consistently falling and now stands at
16.1 per cent in 2018-19.
$ Crop sector’s growth rate remains volatile largely because of vagaries of nature, although the growth in
livestock and fishing has remained stable during the past four years.
$ Modest compositional shift within the ‘Agriculture and allied’ sectors, i.e., from crop to livestock sectors and
within crop sector from cereals to horticultural produce is been witnessed.
$ Manufacturing accounted for 16.4 per cent in total GVA in 2018-19, marginally higher than that of ‘Agriculture
& allied’ sector.
$ Construction sector growth is estimated using growth of production of cement and consumption of finished
steel. Production of cement and consumption of finished steel grew at 13.3 per cent and 7.5 per cent
respectively in 2018-19, higher than their growth rates in 2017-18.
$ The ‘Financial, real estate and professional services’ sector grew at 7.4 per cent in 2018-19, higher as compared
to 6.2 per cent in 2017-18
**********
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CHAPTER: 2
FISCAL DEVELOPMENTS
/ Introduction
$ Budget 2018-19 affirmed Government’s intent on fiscal consolidation. The new fiscal targeting framework was
adopted, which rests on twin pillars of reducing debt and fiscal deficit.
$ 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.
$ Broadening and deepening the direct tax base and stabilization of Goods and Services tax are the other
priorities.
$ Improving the quality of expenditure remains the key target.
/ Central Government Finances

$ The salient changes in the Central Government finances include improvement in the tax to GDP ratio, significant
consolidation of revenue expenditure and gradual tilt towards capital spending over the years. These have led
to progressive reduction in primary and fiscal deficits.
$ Central government receipts can broadly be divided into non-debt and debt receipts where non-debt receipts
comprise of tax revenue, non-tax revenue, recovery of loans, and disinvestment receipts and 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. Here, 51 per cent of GTR was estimated to accrue from direct taxes and the remaining 49
per cent from indirect taxes.
! Direct taxes have grown by 13.4 per cent owing to improved performance of corporate tax. Whereas,
indirect taxes have fallen short of budget estimates by about 16 per cent. This is largely owing to the
shortfall in GST revenues.
! 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.
$ 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.
! Non-tax revenue constitutes about 1.3 per cent of GDP in 2018-19. Receipts from non-tax revenue have
exceeded the budget estimate. Increased realisation from dividends and profits has offset slight declines
in its other components.
$ 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 borrowing directly from the market.
/ Trends in Expenditure
$ Government faces the challenge of providing sufficient funds for investment and infrastructure expansion
while maintaining fiscal discipline.
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$ 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.
$ Defence Initiatives
! Capital Expenditure in absolute terms has gone up in the past few years.
! Several measures as part of “Business Process Re-engineering” have been undertaken to make the
acquisition process industry friendly, provide a level playing field for various stakeholders and reduce the
complexities.
! To achieve self-reliance in the defence sector and make India a global hub in defence manufacturing, the
Ordinance Factories (OFs), Defence Public Sector Undertakings (DPSUs) and the private industry ecosystem
have enhanced their capabilities and widened the product range.
! In order to encourage participation of Indian industry in design and development of defence items, a
‘Make-II’ procedure was notified wherein a number of industry friendly provisions have been introduced,
such as relaxation of eligibility criteria, minimal documentation, and provision for consideration of suo-
moto proposals suggested by industry/ individual.
! An innovation ecosystem for Defence, titled “Innovation for Defence Excellence” (iDEX) was launched.
iDEX is aimed at creating an ecosystem to foster innovation and technology development in Defence and
Aerospace.
! iDEX intends to engage industries including MSMEs, Start-ups, Individual Innovators, R&D institutes and
Academia and provide them grants/funding and other support to carry out R&D, which has potential for
future adoption for Indian defence and aerospace needs.
! A Defence Investor Cell has been made functional in the Department of Defence Production (DDP). It
has played an important role as one-stop solution for all types of defence production related queries.
! Continuous efforts are being made to increase indigenization wherever technologically feasible and
economically viable to facilitate private sector participation.
! The Defence Industry sector has been opened up to 100 per cent for Indian private sector participation,
with Foreign Direct Investment (FDI) up to 26 per cent, both subject to licensing.
$ Composition of Expenditure in 2018-19 RE

! Growth in revenue expenditure in 2018-19 PA though moderate, has been led by salaries, pensions and
interest payments.
! Major subsidies comprising food, fertiliser and petroleum have continued their downward trend and have
further declined by 0.1 percentage point of GDP in 2018-19 PA over 2017-18. Major subsidies comprising
food, fertiliser and petroleum have continued their downward trend and have further declined by 0.1
percentage point of GDP in 2018-19 PA over 2017-18.
! Expenditure on defence, salaries, pensions, interest payments and subsidies account for more than 60%
per cent of total expenditure.
/ 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.
$ 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.
$ Central Government Debt

! Total liabilities of the Central Government include debt contracted against the Consolidated Fund of India,
technically defined as Public Debt, as well as liabilities in the Public Account.
! 90 per cent of total liabilities of the Central Government was public debt.
! Central government debt is characterised by low currency and interest rate risks.
! Other salient feature is the gradual elongation of the maturity profile of the Central Government’s debt
leading to reduced rollover risks.
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$ State Finances
! State budgets expanded considerably on account of increase in revenue expenditure.
! Capital expenditure consists of capital outlay and loans and advances by the State Governments.
! The loans and advances by the State Governments declined sharply in 2017-18 RE owing to reduction in
loans and advances by States for power projects and food storage and warehousing.
! The RBI study on State Finances points to the deterioration in fiscal deficit to GDP ratio in 2017-18 RE when
compared to the budget estimate.
! The issuance of UDAY bonds in 2015-16 and 2016-17, farm loan waivers, and the implementation of Pay
Commission awards have led to higher debt to GDP ratio.
! However, despite rising States’ debt to GDP ratio, interest payment as proportion of revenue receipts has
not deteriorated.
/ General Government Finances

$ The General Government (Centre plus States) has been on the path of fiscal consolidation and fiscal
discipline.
$ The combined liabilities of Centre and States have declined to 67 per cent of GDP as on end-March 2018.
$ The fiscal deficit of General Government is further expected to decline from 6.4 per cent of GDP in 2017-18 RE
to 5.8 per cent of GDP in 2018-19 BE.
$ Outlook
! There are apprehensions of slowing of growth, which will have implications for revenue collections.
! The financial year 2018-19 has ended with shortfall in GST collections.
! Resources for now expanded Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) and Ayushmaan
Bharat, as well as new initiatives of the new Government, will have to be found without compromising the
fiscal deficit target as per the revised glide path.
! US sanctions on oil import from Iran is likely to have impact on oil prices and thereby on the petroleum
subsidy, apart from implications for current account balances.
! Fifteenth Finance Commission will submit its report for next five years beginning April 2020. Its
recommendation especially on tax devolution will have implications for Central Government finances.
# RE - Revised Estimates
# PA - Provisional Actuals
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CHAPTER: 3
MONETARY MANAGEMENT &

FINANCIAL INTERMEDIATION
Important terms
$ Insurance penetration is measured as the percentage of insurance premium to GDP.
$ Insurance density is calculated as the ratio of premium to population (measured in US$ for convenience of
international comparison).
/ Introduction
$ 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.
$ During 2018-19, the growth rate of monetary aggregates back on to the track after experiencing demonetisation
and remonetisation.
Year-on-Year Growth in Monetary Aggregates (per cent)

Items 2010- 2011- 2012- 2013- 2014- 2015- 2016- 2017- 2018-
11 12 13 14 15 16 17 18 19
Currency in Circulation 19.2 14.1 12.2 9.9 10.6 11.9 -4.0 9.8 22.6
Cash with Banks 18.8 18.7 16.7 6.8 14.4 13.3 45.8 -20.1 3.5
Currency with the
19.2 13.9 12.0 10.0 10.4 11.8 -6.2 11.9 23.5
Public
Bankers’ Deposits with
29.1 14.8 -10.9 4.6 7.6 11.0 8.6 7.9 7.9
the RBI
Demand Deposits 14.2 -3.8 5.9 8.6 10.5 9.7 20.0 13.8 7.9
Time Deposits 16.0 19.3 14.7 14.7 12.3 10.6 10.8 6.4 8.5
Reserve Money (M0) 21.5 13.9 6.2 8.8 10.1 12.1 -1.3 9.6 19.5
Narrow Money (M1) 16.8 5.8 9.5 9.6 10.6 11.3 3.9 12.9 16.5
Broad Money (M3) 16.2 15.9 13.5 13.6 11.9 10.7 9.3 7.8 10.2
Source: RBI.
Note: Growth rates have been calculated for financial year averages of the monetary aggregates.
/ Liquidity Conditions and its Management

$ Due to tighten position of liquidity since August 2018, RBI infused money through Open Market Operations
(OPOs) and continued to scale up in November and December. The tight liquidity is also shown in interest
rates as well. The responsible key factors:
! Apart from bank deposits remained indifferent; its growth has improved in last two quarters of 2018-19.
! The growth in currency in circulation also accelerated during this period.
! The RBI had to draw down its foreign exchange reserves to smoothen exchange rate volatility.
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$ Moreover, based on an assessment of financial market conditions, the RBI increased the Facility to Avail
Liquidity for Liquidity Coverage Ratio (FALLCR) which supplemented the ability of individual banks to avail
liquidity from the repo market against high-quality collateral. The RBI also decided to inject rupee liquidity for
longer duration through long-term foreign exchange buy/sell swaps.
$ The tighten liquidity impacted short-term as well as long term interest rates, led to 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.
/ Developments in the G-Sec Market

$ During 2018-19, the 10-year benchmark g-sec yields altered significantly, because of:
! Rising crude oil prices, the firming up of US treasury yields, concerns regarding the pace of rate hikes by
the US Fed, upside risks to domestic inflation and announcement of OMO purchases.
$ Banking Sector
! The performance of the banking sector, in particular Public Sector Banks (PSBs) has improved in 2018-19
(March-December 2018).
6 The Gross Non-Performing Advances (GNPA) ratio of SCBs decreased from 11.5 per cent to 10.1 per
cent. Their Restructured Standard Advances (RSA) ratio declined from 0.7 per cent to 0.4 per cent.
The Stressed Advances (SA) ratio decreased from 12.1 per cent to 10.5 per cent.
6 GNPA ratio of PSBs decreased from 15.5 per cent to 13.9 per cent. SA ratio of PSBs decreased from 16.3
per cent to 14.4 per cent.
6 Capital to risk-weighted asset ratio (CRAR) of SCBs increased from 13.8 per cent to 14.0 per cent
largely due to improvement of CRAR of Public sector banks (PSBs). SCBs’ return on assets (RoA)
decreased from 0.21 per cent to 0.03 per cent while their return on equity (RoE) decreased from 2.41
per cent to 0.4 per cent.
$ Credit Growth
! Growth in non-food bank credit (NFC) improved in 2018-19. Bank credit lending to large industry and
services segments were the main drivers of overall NFC growth in 2018-19.
! However, growth of credit to services sector has been decelerated and yet to gain momentum.
$ Non-Banking Financial Sector

! Non-Banking Financial Companies (NBFCs) bring in diversity and efficiency to the financial sector and
makes it more responsive to the needs of the customers. In the recent past, the NBFCs have played
increasingly important role in resource mobilization and credit intermediation, thereby helping commercial
sector to make up for low bank credit growth.
! However, in the aftermath of the ratings downgrades and default of IL&FS Group, the NBFCs experienced
complexities. NBFCs depend largely on public funds which account for 70 per cent of total liabilities of the
sector. Bank borrowings, debentures and commercial paper are the major sources of funding for NBFCs.
Immediately after the IL&FS crisis, NBFCs faced severe liquidity crunch as mutual funds (MFs) stopped
refinancing the loans of NBFCs. The deployment of funds by MFs has turned negative which impacted the
lending capability of the NBFCs.
! Other performance indicators of the NBFCs have also been affected adversely like CRAR of NBFC sector
worsened to 22.2 per cent from 22.8 per cent. The GNPA ratio of NBFC sector deteriorated to 6.5 per cent
from 6.1 per cent. However, the net NPA also increased marginally to 3.6 per cent from 3.2 per cent.
$ Capital Market
! The year 2018-19 witnessed a significant decrease in resource mobilization through public issue and rights
issue of equity. Resource mobilisation through issuance of debt public issue also rose rapidly. In this
period, Indian corporates preferred private placement route to gear up the capital requirement.
! The mutual fund funding, investments by FPIs and value of offshore derivative instruments got
decreased.
! The secondary market segment, represented by BSE and NSE, also witnessed healthy growth.
$ Insurance Sector
! Insurance protects people against mortality; property; and casualty risks; it provides a safety net for
individuals and enterprises in urban and rural areas. It also provides funds for infrastructure development
and other long gestation projects of the nation.
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! The potential and performance of the insurance sector are generally assessed on the basis of two
parameters, viz., insurance penetration and insurance density. The measure of insurance penetration and
density reflects the level of development of insurance sector in a country.
! Insurance penetration which was 2.71 per cent in 2001, has steadily increased to 3.69 per cent in 2017 (Life
2.76 per cent and Non-Life 0.93 per cent). Insurance penetration in some of the emerging economies in Asia,
i.e., Malaysia, Thailand and China during the same year were 4.77, 5.29 and 4.57 per cent respectively.
! The insurance density in India which was US$11.5 in 2001, reached to US$73 in 2017 (Life-55$ and Non-
Life -18$).
! Globally insurance penetration and density were 3.33 per cent and US$353 for the life segment and 2.80
per cent and US$297 for the non-life segment respectively.
/ Insolvency and Bankruptcy Code 2016: Resolving Corporate Stress

in a Changed Paradigm
$ The Indian banking sector has been at the forefront of driving the economic growth of the country. In the last
several years, however, the sector has been plagued by growing NPAs on account of various reasons.
$ Resolving stressed assets requires significant and concerted efforts. Among many steps taken by the
government, the RBI and individual banks to enable rescue and revival Insolvency and Bankruptcy Code,
2016 has been the major one.
! A robust, modern and sophisticated insolvency framework was established with the enactment of the
Insolvency and Bankruptcy Code, 2016 (IBC). 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) have 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.
$ Sashakt - the resolution scheme to resolve the problem of NPAs through a market-led approach was introduced
in July 2018, which entails participating banks to work together under an Inter-Creditor Agreement (ICA).
Implementation of IBC
$ To operationalize the IBC, the National Company Law Appellate Tribunal (NCLAT), the Principal Bench of
NCLT at New Delhi, and 11 benches of NCLT – two at New Delhi and one each at Ahmedabad, Allahabad,
Bengaluru, Chandigarh, Chennai, Guwahati, Hyderabad, Kolkata, and Mumbai were constituted.
$ The Insolvency and Bankruptcy Board of India (IBBI) – the regulator, was established on October 1, 2016.
It registered three Insolvency Professional Agencies (IPAs), namely, the Indian Institute of Insolvency
Professionals of Institute of Chartered Accountants of India (IIIP of ICAI), the Institute of Company
Secretaries of India’s Institute of Insolvency Professionals (ICSI IIP), and the Insolvency Professional
Agency of Institute of Cost Accountants of India (IPA of ICMAI).
What has been done?

$ The Banking Regulations Act, 1949 was amended to enable the RBI to direct banks to take defaulting
borrowers into insolvency.
$ The RBI constituted an Internal Advisory Committee which recommended the filing of cases under the
IBC in all accounts with fund and non-fund based outstanding amounts greater than 5,000 crore, with 60
per cent or more classified as non-performing by banks as of March 31, 2016.
$ The IBC provides for the establishment of Information Utilities (IU) to collect financial information from
creditors, get it authenticated by debtors, store and provide access to the resolution professional,
creditors, liquidator and other stakeholders so that they can make informed decisions.
$ The National e-Governance Services Limited (NeSL) was registered as the first IU by the IBBI. The
details of information filed with NeSL show a growing trend of use of IU by creditors. Increased use of IUs
is expected to eliminate information asymmetry and improve implementation timelines under the IBC.
$ A key objective of the IBC is the maximization of the value of assets of the CDs and consequently value
for its stakeholders. A critical element towards achieving this objective is the transparent and credible
determination of the value of the assets of CD to facilitate comparison and informed decision making.
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$ Institutional Response:
! Two amendments were introduced in the IBC:
6 Section 29A, prohibiting persons with certain disabilities from submitting a resolution plan.
6 Changes to make the IBC easier to operate by reducing the threshold for decision making by the
committee of creditors from 75 per cent to 66 per cent in specified matters and to 51 per cent for
routine decisions. This amendment also entailed the recognition of home buyers as FCs.
! The NCLTs and NCLAT continue to play an important role as adjudicating and appellate authorities
respectively for IBC. The government has notified additional benches in Amravati, Indore, Cuttack and
Kochi.
! The Securities Contracts (Regulation) Rules, 1957 was amended to protect the interest of minority
shareholders.
$ Impact of IBC
! Behavioural Changes: The IBC has paved the way for Operational Creditors, mostly SMEs and small
vendors to use the IBC as a recovery tool. 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.
$ Achievements and Recognition

! India improved its ‘Resolving Insolvency’ ranking from 134 in 2014 to 108 in 2019. Apart from that India
won the Global Restructuring Review (GRR) award for the most improved jurisdiction in 2018.
$ Research and Training

! The IBBI has announced the launch of Graduate Insolvency Programme (GIP), the first of its kind, for
those aspiring to take up the discipline of IPs as a career or other roles in the value chain.
! The Insolvency Research Foundation (IRF) has been established by the Indian Institute of Corporate
Affairs (IICA), an autonomous body under the Ministry of Corporate Affairs, in partnership with SIPI-
INDIA industry think-tank as an independent research centre.
! The Centre for Insolvency and Bankruptcy (CIB) has been set up at IICA to serve as an apex institute of
learning, training, and development in the area of insolvency and its spheres of influence.
/ Reforms in Pipeline
$ The UNCITRAL Model Law on Cross-Border Insolvency (Model Law) is 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. India has initiated steps to inact a model law.
$ Recognising the need for a legal framework to deal with insolvency of group companies, the 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.
$ 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 technology can be used to an extent by the NCLT and the IBBI to enhance case management for strict
timekeeping of insolvency cases.
$ Technology can also be used for data mining and analysis for constant review of the IBC impact on the
ground. IPs should be encouraged to use technology to speed up data collection and access for the purpose
of efficient CIRP.
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CHAPTER: 4
PRICES & INFLATION
/ Introduction
$ The economy witnessed a gradual transition from a period of high and variable inflation to more stable and
low level of inflation in the last five years. Headline inflation based on CPI-C continued its declining trend for
fifth straight financial year. It has remained below 4.0 % 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% for the last two consecutive years.
$ Inflation based on Wholesale Price Index (WPI) stood at 4.3% during the FY-19.
$ FY-19 saw low headline as well as food inflation. The year witnessed deflation in prices of pulses, vegetables
and sugar. Core inflation averaged higher than the previous year.
Table: General Inflation based on different Price Indices (in per cent)
2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
WPI 6.9 5.2 1.2 -3.7 1.7 3.0 4.3 (P)
CPI-C 9.9 9.4 5.9 4.9 4.5 3.6 3.4
CPI-IW 10.4 9.7 6.3 5.6 4.1 3.1 5.4
CPI-AL 10.0 11.6 6.6 4.4 4.2 2.2 2.1
CPI-RL 10.2 11.5 6.9 4.6 4.2 2.3 2.2
Note: CPI-C inflation for 2012-13 and 2013-14 is based on old series 2010=100; (P) - Provisional; C
stands for Combined, IW stands for Industrial Workers, AL stands for Agricultural Labourers and RL
stands for Rural Labourers.
/ Current Trends in Inflation

! The decline in the inflation in the FY-19 was mainly due to low food inflation which ranged between (-)
2.6 to 3.1 per cent. The CPI-C inflation for the month of April 2019 stood at 2.9% same as in March 2019
as compared to 4.6% in April 2018.
Table: Inflation in selected groups of WPI- Base 2011-12 (in Per cent)
Mar-19 Apr-19
Description Weight 2017-18 2018-19 Apr-18
(P) (P)
All Commodities 100 3.0 4.3 3.6 3.2 3.1
Food Index 24.4 1.9 0.6 0.8 3.9 4.9
Food articles 15.3 2.1 0.4 0.9 5.7 7.4
$ Core Inflation
! Core inflation captures the underlying trend of inflation and is more stable. It 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. As headline inflation exhibits volatility
due to short run shocks, Central banks in many countries focus on core inflation.
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! CPI-C based core inflation, which equals CPI excluding the food and fuel group, has remained above 4%
since the start of new series of CPI-C. Core inflation based on CPI-C increased to 5.8% in 2018-19 from
4.6% in 2017-18. However, it has declined from 5.7 % in November 2018 to 4.5% in April 2019.
! Refined core inflation, which equals CPI excluding food and fuel group, petrol & diesel, too has moved
closely with core inflation; it was 5.7% in 2018-19 as compared to 4.6% in 2017-18 and stood at 4.8% in
April 2019.
$ Drivers of Inflation
! 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.
! Goods inflation was 2.6% during FY-19 as compared to 3.2% during FY 2017-18.
! In contrast, services inflation was 6.3% during FY-19 when compared to 5% during 2017-18.
! Services inflation has been higher than goods inflation and the gap between the two is growing. Services
inflation has influenced headline inflation as it has contributed more than its weight.
6 Housing has the highest weight amongst services - 10.07%.
> 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, ‘NHB RESIDEX’, was
launched in July 2007 by the National Housing Bank for 50 cities on a quarterly basis with FY 2017-
18 as the base year.
> Among the 50 cities covered are 18 State/UT capitals and 33 are part of the smart city list released
by Government of India.
> RBI’s quarterly HPI is based on transactions data received from housing registration authorities in
ten major cities. Growth in housing prices shows a downward trend.
6 Transport and communication: 4.59%
> Within ‘transport & communication’, on an average, services components are witnessing higher
inflation than goods. However, volatility is more for goods than for services.
6 Education: 3.51%
> It includes ‘books, journals: first hand’; ‘stationery, photocopying charges’; ‘tuition and other fees
(school, college, etc.)’; ‘private tutor/coaching centre’ and ‘other educational expenses (incl. fees for
enrolment in web-based training)’.
> Inflation of ‘private tutor/ coaching centers’ and ‘tuition and other fees (school, college, etc)’ has
risen during 2018-19.
> The sharp decline in ‘primary school-fee’ inflation may be possibly due to the enactment of Right
to Education Act (RTE) in 2010.
6 Health: 1.82%
> Services components of health are witnessing higher inflation:
! Contribution of health, education, transport and communication in driving services inflation has gained
prominence across rural and urban areas. Inflation in health is more prominent in rural than urban areas
probably owing to supply side constraints.
$ Rural-Urban Inflation
! CPI rural inflation declined during FY-19 over FY 2017-18. However, CPI urban inflation increased marginally
during FY-19. Many States witnessed fall in CPI inflation during FY-19.
! The decline in rural inflation is steeper than that of urban inflation since July 2018, resulting in decline in
headline inflation. Fall in rural inflation is due to moderation in food inflation, which has been negative
for the last six months (October 2018 to March 2019). 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%
to the overall rural inflation. In urban areas, miscellaneous group and housing have contributed to inflation
in equal measure during FY-19.
$ State-wise Inflation
! Many States have witnessed fall in CPI inflation during 2018-19. Inflation in 23 States/Union Territories
(UTs) was below 4% in FY-19.
! Inflation ranged between (-) 1.9% to 8.9 % across States in FY-19 compared to 1.5% to 12.4% in FY 2017-18.
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! 16 States/UTs had inflation rate lower than All India average for FY-19 with Daman & Diu having the lowest
inflation followed by Himachal Pradesh and Andhra Pradesh.
! In rural areas, among major States/UTs, 16 States had recorded inflation of less than 4% in FY-19 as
compared to 13 in FY 2017-18. In urban areas, 9 States recorded inflation of less than 4% in FY-19 as
against 15 in 2017-18.
$ 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-19. These recorded average inflation of 22.1% in 2018-19 as compared to 16.8% in
2017-18.
! Movement of ‘Fuel & Power’ inflation based on All India WPI tracks World Bank Energy price index; it
increased at an average of 11.5% in FY-19 when compared to 8.1% in FY 2017-18.
! Both World Bank food prices as well as Food and Agriculture Organization (FAO) food prices recorded
deflation during FY-19. WPI based food inflation too declined during 2018-19.
$ Efforts to contain Inflation

! Central Government monitors the price situation on a regular basis as controlling inflation remains a key
area of policy focus.
! Government has taken a number of measures to control inflation especially food inflation, which includes
both general and specific measures.
General Measures Specific Measures
Advisories are being issued, as and when re- During lean periods of 2017-18 and 2018- 19, to control the rise
quired, to State Governments to take strict in onion prices, onions were released at reasonable prices from
action against hoarding & black marketing, the stock procured under PSF.
especially for commodities in short supply.
These measures are taken to effectively en- The order empowering States/ UTs to impose controls including
force the Essential Commodities Act, 1955 Stock Limits on Edible Oils and Edible Oilseeds has been with-
& the Prevention of Black-marketing and drawn in June, 2018.
Maintenance of Supplies of Essential Com-
modities Act, 1980.
Regular review meetings on prices and avail- Pulses from the buffer are utilized for strategic mar-
ability of key commodities are held at the ket intervention for price management, meeting in-
highest level, including at the level of Min- stitutional requirements like supplies to State Gov-
isters, Committee of Secretaries, Inter Min- ernments/UTs for Mid-Day Meal Scheme (MDM),
isterial Committee, Price Stabilization Fund Integrated Child Development Services (ICDS) Scheme, and
Management Committee (PSFMC), and Public Distribution System (PDS), and through Open Market
other Departmental level review meetings to Sale, etc. In addition, pulses from the buffer are being utilized
take stock of the prevailing price and avail- to meet the requirement of Army and Central Para-Military
ability situation and recommend appropriate Forces.
policy intervention.
Higher Minimum Support Price (MSP) for Prohibition on export has been withdrawn in April 2018 on all
pulses and other crops has been announced varieties of edible oils, except mustard oil. Export of mustard oil
so as to incentivize production and thereby in branded consumer packs of up to 5 kgs is permitted with a
enhance availability of food items, which Minimum Export Price (MEP) of United States Dollar (USD) 900
may help moderate prices. per million ton (MT).
Government has set up Price Stabiliza-

tion Fund (PSF) for procurement of agri-
horticultural commodities including
potatoes, onions and pulses for its release
during lean period to improve availability
and moderate their prices.
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CHAPTER: 5
SUSTAINABLE DEVELOPMENT
& CLIMATE CHANGE
Important terms
$ Resource efficiency : It means using the Earth’s limited resources in a sustainable manner while minimising
impacts on the environment. It allows us to create more with less and to deliver greater value with less input.
/ Sustainable Development Goals (SDGs):

$ The 2030 Agenda for Sustainable Development adopted by all United Nations Member States in 2015,
provides a shared blueprint for peace and prosperity for people and the planet, now and into the future. At its
heart are the 17 Sustainable Development Goals (SDGs) (built upon the erstwhile Millennium Development
Goals) which are an urgent call for action by all countries - developed and developing - in a global partnership.
They recognize that ending poverty and other deprivations must go hand-in-hand with strategies that improve
health and education, reduce inequality, and spur economic growth – all while tackling climate change and
working to preserve our oceans and forests.
$ Estimates suggest that US$5 to US$7 trillion per year is required for financing these goals worldwide and
US$3.9 trillion per year in developing countries. However, the current investment in developing countries
is around US$1.4 trillion leading to a shortfall of US$2.5 trillion per year (UNCTAD, 2014). Global action
of this scale requires strong coordination between different governments, development institutions, private
sector and financial institutions for the effective financing and implementation across the globe.
/ India’s Progress towards the SDGs

$ India follows a holistic approach for achieving the SDGs by implementing a comprehensive array of
schemes.
$ 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).
$ This SDG index provides an aggregate assessment of India’s progress. This index helps in informed policy
formulations as it captures status of both national and state-level social, economic, and environmental
parameters across a set of 62 select indicators. 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.
! A score of 0 denotes worst performance.
$ The SDG Index Score ranges between 42 and 69 for States and between 57and 68 for UTs.
$ NITI Aayog has also developed a composite index for each State/UTwhich aggregates progress towards each
SDG.
! Kerala and Himachal Pradesh are the front runners amongst all the states with a score of 69.
! Among the UTs, Chandigarh and Puducherry are the frontrunners with a score of 68 and 65
respectively.
/ Namami Gange Mission

$ 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.
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$ The mission was launched as a priority programme with a budget outlay of Rs. 20,000 crore for the period
2015-2020. During the period 2014-15 to 2018-19, a total amount of Rs. 6,106.25 crore has been spent on
the programme indicatinga substantial jump over earlier similar programmes.
$ 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 and to formulate policies for long term sustainability of the Ganga rejuvenation
efforts.
$ Major Components of Namami Gange Mission:

! Sewerage Project Management: The policy decision to use Public-Private Partnership (PPP) approach of
Hybrid Annuity Mode (HAM) and 15 years long-term Operation & Maintenance (O&M) included in the
project cost and improved governance through ‘One City One Operator’ approach ensured competitive
and positive market participation along with synergy in implementation.
! Urban Sanitation: The Mission extended a comprehensive coverage of 10 cities that contributes more
than 60 percent pollution load in Ganga with construction and rehabilitation of Sewage Treatment Plants
(STPs) for a prospective year of 2035, inception and diversion of drains, solid waste management through
cleanliness drives on ghats and deployment of skimmers for river surface cleaning.
! Sewerage Infrastructure: 150 sewerage projects (111 on Ganga stem & 39 in tributaries) at sanctioned
cost of Rs.23, 130.95 crore has been approved for creation of new STP.
! Industrial Pollution: To ensure proper inventorisation and inspection of point source pollution from
industrial units, 1,109 Grossly Polluting Industries (GPIs) were identified and surveyed independently by
12 Technical Institutions. The compliance of the operational GPIs in 2017 as against 2018 improved from
39 percent to 76 per cent.
! Water Quality: 36 Real Time Water Quality Monitoring Stations (RTWQMS) are operational under
Namami Gange Programme.
! River as Public Space: 143 ghats have been taken up under the Mission out of which 100 have been
completed. Under the Mission, 54 crematories have also been taken up for ensuring safe crematory
rituals.
! Rural Sanitation: Under Namami Gange, 4,465 villages on the Ganga stem have been declared ODF with
completion of construction of about 11 lakh independent toilets. Support is also being extended to 1,662
Gram Panchayats along Ganga for solid and liquid waste management.
! Ecosystem Conservation: Afforestation along banks of Ganga has been taken up scientifically with
the help of Forest Research Institute, Dehradun. Local communities have been involved in massive
afforestation drive undertaken in the five Ganga States.
! Urban River Management: NMCG, in partnership with National Institute of Urban Affairs (NIUA), is
preparing an Urban River Management Plan to protect and enhance the status of river health within
the city, to prevent their deterioration and to ensure sustainable use of water resources. A comprehensive
survey for generating high-resolution Light Detection and Ranging (LIDAR) maps of the entire Ganga
stretch to create a baseline of its spatial status has also been initiated.
! Water Use Efficiency: A market for reuse of treated waste-water is being developed and the re-use of
20 MLD of treated waste-water in Mathura Refinery is a milestone in propagating this waste-to-wealth
approach as well as saving the water-stressed Yamuna River.
! Clean Ganga Fund: It has been set up for encouraging and facilitating corporates and individuals to join
the efforts of rejuvenation of Ganga by contributing to this Fund and sponsoring certain projects.
/ 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.
$ A resource efficient development approach essentially means a transition of the management of natural
resources with a progressive minimization of waste in both consumption and production processes through
various policies and measures.
$ 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 relative to existing trends
(UNEP, 2018).
$ Current and Future Projections for India:

! In 2010, India accounted for 7.2 percent consumption of globally extracted raw materials.
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! India’s average share of material cost in the total production cost was estimated to be more than 70 per
cent and rate of recycling is very low as compared to other developed economy which signifies an urgent
need for improving productivity and efficiency (TERI, 2019).
! As per the NITI Aayog’s Strategy Paper on Resource Efficiency 2017, India consumed 5 billion tonnes
of biomass, fossil fuels, minerals and metals in 2010 and was the third largest consumer after China (21.5
billion tonnes) and USA (6.1 billion tonnes).
! It is projected that India’s demand for total material will more than double by 2030 under the assumption
of continued economic growth of 8 per cent till 2030 and possible slowing down to 5 per cent thereafter
till 2050 and medium growth in population. India would be requiring around 6.5 billion tonnes of minerals
in order to sustain the demand of growing population.
Six Pillars for a Resource Efficiency Framework in India

Policies
$ Formulate a national policy on RE for all types of resources (biotic, abiotic) addressing various
lifecycle stages and key stakeholders.
$ Formulate a national policy on Sustainable Public Procurement (SPP) 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.
$ Strengthen existing sectoral policies and programmes of Ministry of Mines by incorporating RE
principles.
$ Formulate a national policy for End-of-Life Vehicles (ELVs).
$ 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

$ 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.
$ Industry may leverage Corporate Social Responsibility (CSR), Corporate Environmental
Responsibility (CER) and Extended Producer Responsibility (EPR) for RE initiatives.
$ 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.
$ Leverage the national clean energy and environment fund to finance infrastructure, clean
technologies and related RE initiatives.
Regulations
$ Establish a national coordinating body- Bureau of Resource Efficiency (BRE) between various
ministries to identify, implement and achieve national RE goals.
$ Establish State Level coordinating bodies to identify implement and achieve State level RE
goals.
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$ Large and resource intensive industries and bulk waste generators may be mandated to file the
Resource Use and Efficiency Statement.
$ 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.
$ Rationalise tax regime on critical virgin raw materials to make secondary raw materials price
competitive.
Setting up a Dynamic Recycling Industry

$ Promote the establishment of Material Recovery Facilities (MRFs) with the allocation of land in
urban areas and industrial estates.
$ Facilitate Urban Local Bodies (ULBs) to undertake urban mining and create secure landfills.
$ Facilitate the establishment of Producer Responsibility Organizations (PRO) for waste recycling
and for engagement with the informal sector.
$ Facilitate innovation to enhance resource recovery and improve working conditions by integrating
the informal sector into the waste value chain.
$ Establish a remanufacturing council or association to catalyse the growth of the re-manufacturing
industry.
$ Establish and manage platforms for waste exchange by expanding the SBM portal.
R&D and Technology Development

$ Support R&D to develop scalable technologies for RE.
$ Create and manage knowledge platforms that facilitate open innovation, provide access to
experts, and engage academia to support the transition towards RE.
$ Leverage technologies like Artificial Intelligence (AI), robotics, block-chain etc. for the recycling
industry.
Capacity Development, Outreach & Monitoring

$ Facilitate creation of accredited laboratories that could conduct testing (especially for recycled
products) as well as provide advisory services.
$ Provide capacity development support on RE for ministries/departments at the National and
State levels.
$ Develop and promote programmes and certifications for informal sector skill development in
RE.
$ Develop and launch citizen awareness programmes on RE.
$ 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.
$ Develop monitoring and outcome indicators for tracking progress on RE.
$ Establish and mandate the certification for operators managing waste-to-resource recycling
centres to ensure safe, efficient, and net positive operations.
# RE - Resource Efficiency
/ Government Initiative to tackle Air Pollution:

$ Under National Air Quality Monitoring Programme (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.
$ 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 to:
! Indicate necessary air quality levels and appropriate margins required to ensure the protection of
vegetation, health and property.
! Provide a uniform yardstick for assessment of air quality at the National level.
$ Air Quality Index (AQI): It transforms complex air quality data of various pollutants into a single number
(index value), nomenclature and colour. There are Six AQI categories, namely - Good, Satisfactory, Moderately
Polluted, Poor, Very Poor and Severe.
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$ CPCB has issued a comprehensive set of directions under Section 18(1)(b) of Air (Prevention and Control
of Pollution) Act, 1986 for implementation of forty-two measures to mitigate air pollution in major cities
including Delhi and National Capital Region (NCR).
$ The Government has notified a Graded Response Action Plan for Delhi and NCR,which comprises of the
graded measures for each source framed according to the AQI categories.
$ MoEF&CC has launched NCAP in 2019 as a pan India time bound national level strategy. A budgetary allocation
of Rs. 150 crore has been made under NCAP during the financial year 2019-20.
! Overall objective of the NCAP is comprehensive management plan for prevention, control and abatement
of air pollution besides augmenting the air quality monitoring network across the country.
! 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. This will be mid-
term five years action plan beginning from 2019.
/ Climate Change
$ The ultimate objective of UNFCCC (1992) 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
2°C above pre-industrial levels and pursuing efforts to limit the temperature increase even further to 1.5°C
above pre-industrial levels. It sets a roadmap for all nations in the world to take actions against climate
change in the post-2020 period.
$ As per the recent Intergovernmental Panel on Climate Change (IPCC) Special Report on Global warming
of 1.5°C, human-induced warming reached approximately 1°C (likely between 0.8°C and 1.2°C) above pre-
industrial levels in 2017, increasing at 0.2°C (likely between 0.1°C and 0.3°C) per decade (high confidence).
$ The year 2018was the sixth warmest year on record since the nation-wide records commenced in 1901.
$ Achievements in CoP 24 in Katowice, Poland in 2018:
! Paris Agreement Work Programme (PAWP) was adopted.
! Recognition of different starting points for developed and developing countries.
! Flexibilities for developing countries.
! Consideration of principles including equity and Common but Differentiated Responsibilities and
Respective Capabilities (CBDR-RC).
$ India’s Climate Actions

! 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 percent by 2020 over
2005 levels.
6 It was also meant to focus on key adaptation requirements and creation of scientific knowledge and
preparedness for dealing with climate change.
6 States/ Union Territories have also State Action Plans on Climate Change (SAPCC) in line with the
NAPCC taking into account State’s specific issues relating to climate change.
! Central sector scheme called Climate Change Action Programme (CCAP) has been launched in 2014
with a total cost of Rs. 290 crore, with the objective to build and support capacity at central and state
levels, strengthening scientific and analytical capacity for climate change assessment, establishing
appropriate institutional framework and implementing climate related actions in the context of sustainable
development.
! 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. The Scheme will continue till 31 March 2020 with a financial implication of Rs. 364
crore.
! The outcomes of these initiatives are reflected in India’s Second Biennial Update Report (BUR) submitted
to UNFCCC in December 2018 as per the reporting obligations under the Convention.
6 The report shows that emission intensity of India’s GDP came down by 21 per cent between 2005 &
2014 and its achievement of climate goal for pre-2020 period is on track.
6 A total of 2.607 billion tons of CO2 equivalent of GHGs were emitted from all activities (excluding Land
use, Land-Use Change, and Forestry (LULUCF)) in India.
6 Energy sector accounted for 73 percent, Industrial Processes and Product Use (IPPU) 8 percent,
agriculture 16 percent and waste sector 3 percent.
6 About 12 percent of emissions were offset by the carbon sink action of forestland, cropland and
settlements.
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$ India’s Nationally Determined Contribution:

! It outlines the post-2020 climate actions India intends to undertake under the Paris Agreement on climate
change adopted in December 2015.
! India’s NDC states, “Preliminary estimates indicate that India would need around US$206 billion (at 2014-15
prices) between 2015 and 2030 for implementing adaptation actions in key areas like agriculture, forestry,
fisheries infrastructure, water resources and ecosystems.”
! Apart from this there will be additional investments needed for strengthening resilience and disaster
management.
! NDC further provides the preliminary total estimates for meeting India’s climate change actions between
now and 2030 which is at US$2.5 trillion (at 2014-15 prices).
! 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:
! Scaling Solar Applications for Agriculture Use;
! Affordable Finance at Scale;
! Scaling Solar Mini Grids;
! Scaling Solar Rooftop; and
! Scaling Solar in E-mobility and Storage.
$ Key Initiatives:
! ISA has been working with various financial institutions for scaling up financing, lowering the cost of capital,
and designing innovative financial instruments to accelerate the massive deployment of solar energy.
! In addition, “Action to Transaction” meets an innovative platform where project developers and bankers
were brought together, facilitated 238 projects in ISA countries.
! A task force was constituted to design a Common Risk Mitigation Mechanism to reduce risks and financial
cost of solar projects. The World Bank and Agence Française de Development (AFD) are developing a
joint Global Solar Risk Mitigation Initiative (SRMI), an integrated approach to tackle policy, technical
and financial issues.
! The ISA is also working with the European Investment Bank and the EU Commission to launch an
off-grid fund, initially for four Asian member countries of the ISA, to rapidly scale up to Africa and Latin
America.
! A project pipeline of US$5 billion in mini-grids and rooftops is created.
! ISA has forged financial partnerships with various MDBs, UN agencies, Climate Parliament, European
Commission, Commonwealth Secretariat and other International and Intergovernmental organizations.
ISA Solar Award has been instituted for Solar Scientists doing extraordinary work across ISA countries with a
onetime corpus contribution of US$1.5 million from the Government of Haryana.
Practice Question
$ India considers the outcome of COP24 a positive one which addresses concerns of all
Parties and sets us on the path towards successful implementation of the Paris Agreement.
Elucidate.
$ Air pollution is one of the biggest global environmental challenges of today and a major
issue in India. In this context, enumerate various steps taken by the Indian government to
tackle the issue of increasing air pollution.
$ Resource Efficiency (RE) has emerged as one of the key strategies towards the 2030 Agenda
of achieving the SDGs. Elaborate.
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CHAPTER: 6
EXTERNAL SECTOR
Important terms
$ Foreign Exchange Reserves: The FOREX are reserve assets held by a central bank in foreign currencies. It
acts as buffer to be used in challenging times and used to back liabilities on their own issued currency as
well as to influence monetary policy.
$ Components of Indian FOREX Reserves: Foreign currency assets (FCAs), Gold, Special Drawing Rights
(SDRs) and RBI’s Reserve position with International Monetary Fund (IMF). FCAs constitute largest
component of Indian FOREX Reserves.
$ External Debt: It is owed to creditors outside the country. The outsider creditors can be foreign governments,
International Financial Institutions like WB, IMF etc., corporate and foreign private households. External
debt may be of several kinds such as multilateral, bilateral, IMF loans, Trade credits, External commercial
borrowings etc.
/ Introduction
$ India’s macroeconomic situation on the external side continues to be stable. Though the current account
deficit is projected at 2.4 per cent of GDP in 2018-19, up from 1.8 per cent in 2017-18, this is within reasonable
levels. The widening of the current account deficit has been driven by a deterioration of trade deficit from 6.0
per cent of GDP to 6.7 per cent across the two years. The acceleration in the growth of remittances has offset
the deterioration of the current account deficit.
$ The 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. India’s
foreign exchange reserves continue to be comfortably placed in excess of US$400 billion.
$ The real effective exchange rate also depreciated in 2018-19, making India’s exports potentially more
competitive. 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.
$ 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.
$ Petroleum products, precious stones, drug formulations, gold and other precious metals continue to be top
export items. Crude petroleum, pearl, precious and semi-precious stones, and gold remain as top import
items. 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
! 2018-19 has closed with growth in world output on a downward trajectory. The World Economic Outlook
(WEO) in its April 2019 issue has projected growth in world output at 3.3 per cent in 2019, down from 3.6
per cent obtained in 2018.
! Heightened US-China trade tensions have been stated as one of the reasons behind the global slowdown
that has spilled into other economies including India through the channel of exports.
! The WEO also clarifies that trade-protectionism will only divert bi-lateral trade imbalances from one
country to another as the root cause of trade deficits is the macroeconomic imbalance.
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! The WEO accordingly advises that at the multi-lateral level, the main priority is for countries to resolve
trade disagreements cooperatively, without raising distortionary barriers that would further destabilize a
slowing global economy.
! These developments increase the vulnerability of external sector of emerging market economies like India,
which are dependent on crude imports for fuelling their economic growth.
! Emerging and developing economies on the other hand slipped from their current account surplus position
of US$379.0 billion in 2011 to US$0.1 billion in 2017. This reflects the shifting of the consumption hub of
the world from the advanced to the less advanced countries.
! It is in this context of global slowdown of output and trade, increase in trade protectionism across the world
and shifting of the consumption hub to the emerging and developing economies that the developments
on India’s trade and BoP fronts have been discussed.
/ India’s Balance Of Payments Developments

$ Overview of Balance of Payments
> Current Account Developments:
6 The widening of the CAD was largely on account of a higher trade deficit driven by rise in international
crude oil prices (Indian basket) making merchandise imports grow relatively faster than exports.
6 The trade deficit increased to US$145.3 billion during the same period from US$118.4 billion in the
corresponding period of previous year.
6 Petroleum products continue to have the largest share in India’s export basket at 14.1 per cent in 2018-
19.
6 Crude petroleum continues to be the largest imported commodity in 2018-19 with a share of 22.2 per
cent, followed by Gold, Silver; Pearl, Precious, Semi-Precious Stones; and Petroleum Products; having
share of 6.4 per cent, 5.3 per cent and 5.2 per cent respectively, in the import basket.
6 Growth of POL exports was only driven by price rise as volume exported by India actually contracted
from 2016-17 to 2018-19. This reflects that India is more dependent on POL imports than the world is
on India’s POL exports.
6 Gold and Silver Imports growth again turned negative in 2018-19, although not to the same extent as
in 2016-17.
6 Net Private Transfer receipts, mainly representing remittances by Indians employed overseas increassed
by 12.4 percent in 2018-19 as compared to 11.5 percent in 2017-18.
6 Improved income conditions in the Gulf countries with rise in oil prices, might have led to this rise in
remittances as a significant portion of remittances are sourced from these countries.
6 According to the World Bank (April 2019), India remained a top remittance recipient country in 2018,
followed by China, Mexico, Philippines, and Egypt, with remittance inflows peaking at all-time high at
US$78.6 billion.
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> Developments in Capital Account of BOP

6 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. Robust foreign direct investment (FDI) inflows were more than
outweighed by withdrawals under portfolio investment reflecting an escalation of global risk aversion.
6 The reduced dependency on FPIs to fund CAD in recent times is also reflected in the fact that growth of
forex reserves in the country bears no correlation with movements in net FPI. India’s foreign exchange
reserves stood at US$422.2 billion as of June 14, 2019.
6 The level of foreign exchange reserves can change due to change in reserves on BoP basis as well as
valuation changes in the assets held by the Reserve Bank of India.
6 Among the major economies running current account deficit, India is the largest foreign exchange
reserve holder and eighth largest among all countries of the world.
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$ External Debt
! 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.
! 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 per cent. Higher age of debt
reduces the roll-over risk.
! 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.
$ Net International Investment Position

! The International Investment Position (IIP) is a statistical statement that shows at a point in time the value
of financial assets of residents of an economy that are claims on non-residents or are gold bullion held
as reserve assets; and the liabilities of residents of an economy to non-residents (International Monetary
Fund (IMF)).
! The difference between the assets and liabilities is the net position in the IIP and represents either a net
claim on or a net liability to the rest of the world.
! A positive NIIP value indicates a nation is a creditor nation, while a negative value indicates it is a debtor
nation.
! Among the top ten economies having Net IIP deficit in 2018, United States is ranked first with net IIP deficit
of US$9.7 trillion, followed by Spain (US$1.1 trillion) and Australia (US$0.7 trillion).
! There is continuous deterioration in net IIP of India from 2011 till 2018, on account of consistent increase
in IIP liabilities over the corresponding period of time.
! The share of net FDI inflows in total liabilities has seen a secular increase since 2013 reflecting an increase
in dependence on more stable sources of financing the CAD.
/ Nominal and Real Exchange Rate and Terms of Trade

$ Exchange Rate
! The Indian rupee was one of the least volatile Emerging Market (EM) currencies during 2017-18 and traded
in the range of 63.63 to 65.08 per US$.
! During 2018-19, Indian rupee traded with a depreciating trend against US dollar and touched a historical
low of 74.4 per US$ before recovering by 4.1 per cent to 69.2 per US$.
! Softer monetary policy stance across major central banks and easing of crude oil prices coupled with
return of risk-on sentiment triggered FPIs inflows and helped rupee to recover.
! Apart from rupee depreciating by 7.8 per cent vis-a-vis US dollar in 2018-19, it also depreciated against
other major currencies. It depreciated by 7.7 per cent against Yen, and 6.8 per cent against Euro and Pound
Sterling each.
$ NEER and REER

! In terms of the 6 and 36 currency, Nominal Effective Exchange Rate (NEER) (trade-based weights), rupee
depreciated by 7.1 and 5.6 per cent respectively in the fiscal year 2018-19 over 2017-18.
! In terms of the 6 and 36 currency, Real Effective Exchange Rate (REER), rupee depreciated by 5.8 per
cent and 4.8 per cent respectively in 2018-19 over 2017-18.
! This can be attributed to strong economic fundamentals, softening of crude oil prices, sustained selling of
the dollar by exporters and banks, and improving investor confidence on account of recovery in the Indian
equity markets.
$ Exchange Rate Volatility

! The standard deviation is calculated using monthly data as an indicator of exchange rate volatility. It
indicates that the rupee witnessed a spike in volatility in 2018-19 after two years of relative stability.
! The degree of exchange rate volatility will depend on the extent to which exchange rate movements can
be anticipated.
! In particular, crude oil prices and net portfolio flows have been major drivers of exchange rate movements
in recent years.
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$ Terms of Trade
! While depreciation of REER indicates that India’s exports must have become more competitive, appreciation
of REER indicates less competitive exports. Price competitiveness of exports can however be better assessed
by looking at how Terms of Trade (ToT) have fared across a time period.
! Commodity or net terms of trade (NTT) of a country is the ratio of the unit value (price) of export to
the corresponding unit value (price) of import measured relative to a base year.
/ 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 per cent over the medium term.
$ The logistics industry of India is currently estimated to be around US$215 billion.
$ 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.
$ Various logistics schemes have been introduced, which are as under:

! 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.
! 111 waterways have been identified for development.
! Infrastructure status has been given to select logistics activities like warehousing, cold chains, Multi modal
logistics parks and slurry pipelines.
! 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 efficiency of transportation. Automation of large warehouses is also adding to the efficiency of
the logistics sector.
$ Driving logistics cost down from estimated current levels of 13-14 per cent of GDP to 10 per cent in line with
best-in-class global standards is essential for India to become globally competitive.
Table: Logistics Cost of India and rest of the world (Reference Year-2016)
2016 Comparative Logistics Cost** (USS Logistics % GDP

Analysis Billions)
India 293.1 12.80
Brazil 208.6 11.62
China 1626.7 14.50
USA 1522.7 8.14
World 8226.3 10.86
Source: **Armstrong & Associates, October 2017
/ 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.
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$ The countries involved in these investigations are China PR, Hong Kong, Korea, Germany, EU, USA, Malaysia,
South Africa, Thailand, and Brazil among others.
/ Composition of Trade
$ Major Products Exchanged in 2018-19
! In 2018-19, petroleum products continued to be the largest exported commodity, in value terms, with a
share of 14.1 per cent in the country’s export basket.
! 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 Jewellery at 6.4 per cent and pearls precious and semi-precious stones at 5.3 per
cent.
$ Major trading partners in 2018-19

! India’s largest export destination country continues to be the United States of America (USA), which
accounted for 16 per cent of India’s exports (in value terms) in 2018-19, followed by United Arab Emirates
(UAE), China and Hong Kong.
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! China continues to be the largest source of imports of India accounting for 13.7 per cent of the total
imported value in 2018-19.
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/ CONCLUSION
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.
Practice Question
$ Indias’s Current Account Deficit (CAD) widens to 2.1% of GDP. In this context,
analyse how the variation in CAD impacts the economy.
$ What is the difference between FDI and FPI? FDI is more desirable than FPI for
Indian Economy. Comment.
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CHAPTER: 7
AGRICULTURE AND FOOD

MANAGEMENT
Important terms
$ Irrigation water productivity: It is defined as ratio of the crop output to the irrigation water applied by
the farmer/ irrigation system either through surface canals, tank, pond or the well and tube well during the
crop growth.
$ Agriculture Census: Agriculture Census in India is conducted at five yearly intervals for collection of
information about structural aspects of agricultural holdings in the country. The basic statistical unit for
data collection is ‘Operational Holding’. Recent agriculture census was held in 2015-2016.
$ Operational Holding: All land which is used wholly or partly for agricultural production and is operated
as one technical unit by one person alone or with others without regard to the title, legal form, size or
location.
$ Fertilizer response ratio: It is an indicator of responsiveness of soil fertility to fertiliser application.
$ Economic cost of food grains: The acquisition and distribution costs of procuring food grains for the
central pool constitute the economic cost.
/ Context:
Agriculture remains the pre-dominant occupations in India for vast sections of the population. Over the years,
several new challenges have emerged before the sector. Therefore to transform the agriculture and rural economy,
this chapter focuses on allied sectors with a major focus on dairy, poultry, fisheries and rearing of small ruminants
and the rationalisation of food subsidy and greater use of technology in food management.
/ Gist Of Chapter:
To attain the Sustainable Development Goals (SDGs) of ending poverty and bringing in inclusive growth, activities
related to agriculture need to be closely integrated with the SDG targets. 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.
$ The share of agriculture, forestry & fishing sector in GVA (Gross Value Added) 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 in GVA.
$ However, the share of the fisheries in GVA has increased form 4.9 per cent in 2012-13 to 11.9 per cent in
2017-18.
Share of Agriculture, Forestry & Fishing at 2011-12 Prices (in per cent)
Item 2012-13 2013-14 2014-15 2015-16* 2016-17# 2017-18@ 2018-19 **
Agriculture
forestry & 17.8 17.8 16.5 15.4 15.2 14.9 14.4
fishing
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Crops 11.5 11.4 10.3 9.2 9.0 8.7 NA
Livestock 4.0 4.0 4.0 4.0 4.1 4.1 NA
Forestry &
1.5 1.5 1.4 1.3 1.2 1.2 NA
logging
Fishing &
0.8 0.8 0.8 0.9 0.9 0.9 NA
aquaculture
Note-* Third Revised Estimate,# Second Revised Estimate, @ First Revised Estimate
**As per the press note on Provisional Estimates of Annual National Income 2018-19 and Quarterly Estimates of Gross Domestic Product
for the Fourth Quarter (Q4) of 2018-19 released by CSO on 31st May 2019.
$ The share of public investment in GCF in agriculture and allied sectors registered an increase from 2014-15
and maintained an upward trend till 2016-17, the share of private investment in GCF (Gross Capital Formation)
showed a decline during this period.
/ Pattern Of Agricultural Land Holdings In India

$ The number of operational holdings, i.e., land put to agricultural use, has increased to 14.6 crore in 2015-16
from 13.8 crore in 2010-11, thereby registering an increase of 5.3 per cent.
$ The share of marginal holdings in total operational holdings increased from 62.9 per cent in 2000-01 to 68.5
per cent in 2015-16, while the share of small holdings decreased from 18.9 per cent to 17.7 per cent during
this period.
$ The classification of operational land holdings based on area is given in following table.
Size Group
Marginal (below 1.00 ha)
Small (1.00-2.00 ha)
Semi-Medium (2.00-4.00 ha.)
Medium (4.00-10.00 ha.)
Large (10.00 ha. & above)
$ Role of women in agriculture and their operational holdings:

! Women play a significant and crucial role in agriculture including crop production, livestock production,
horticulture, post-harvest operations, agro/social forestry, fisheries, etc.
! The share of operational holdings cultivated by women has increased from 11.7 per cent in 2005-06 to
13.9 per cent in 2015-16.
/ Bringing Resource Efficiency in Smallholder Agriculture

$ The pattern of agricultural holdings reflects pre-dominance (85 per cent) of small and marginal farmers in
agriculture sector.
$ The productivity of a farm depends on the use of inputs like fertiliser, access to irrigation, technology, crop
intensity and choice of crops (crop pattern) grown at the farm. One of the key aspects which can improve
productivity of small farm holdings is improving resource use efficiency.
$ The key factors which will bring resource efficiency in smallholder agriculture in
India:
> Increasing Irrigation Water Productivity (IWP) in Agriculture:

6 In India, according to the Asian Water Development Outlook, 2016, almost 89 per cent of
groundwater extracted is for irrigation.
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6 By 2050, India will be in the global hot spot for ‘water insecurity ’. Therefore there is a major concern
whether the present practice of groundwater use can be sustained as the depth of the groundwater
level continues to drop.
6 Agriculture is dependent highly on water. 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. ‘The water
guzzlers, paddy and sugarcane, consume more than 60 per cent of irrigation water available in the
country, thereby reducing water availability for other crops.
6 So, appropriate mechanism needs to be framed for economical use of water among small and marginal
farmers.
What are the steps to be taken?
6 There is divergence between land productivity and irrigation water productivity in the major sugarcane
producing States in India, hence its need to focus on irrigation water productivity to raise agricultural
productivity.
6 The States like Tamil Nadu, Karnataka, Maharashtra and Andhra Pradesh which have high land
productivity tend to have very low irrigation water productivity, hence adopting improved methods of
irrigation and irrigation technologies will have a critical role in increasing irrigation water productivity
along with re-calibrating the cropping patterns.
6 The States with penetration of MI systems and improved adoption of micro irrigation systems have
almost 40 to 50 per cent savings in energy and fertiliser consumption. Therefore it needs to be examined
whether the procurement supported systems which are resource inefficient in terms of subsidies and
water use, can be replaced with MI supported cropping patterns and systems which will maximise
irrigation productivity and resource use efficiency,.
6 Combinations of measures which suit the local agro-economic context need to be applied to improve
irrigation productivity in agriculture which will reflect sustainable water use in agriculture.
6 Focus in agriculture should shift from ‘land productivity’ to ‘irrigation water productivity’.
6 Devising policies to incentivise farmers to adopt efficient ways of water use should become a national
priority to avert the looming water crisis.
> Economizing the Use of Fertilizers and Pesticides:

6 For the small and marginal farmers, the costs of fertilizers are key determinants of profitability of
farming.
6 According to Department of Fertilizers, the fertilizer response ratio is declining.
Why fertilizer response ratio is declining?
6 Inadequacy and imbalance in fertiliser use.
6 Increasing multi nutrient deficiency.
6 Lack of farmer’s awareness about balanced plant nutrition.
6 Poor crop management.
What needs to be done to improve fertilizer use efficiency?
6 It requires farmers’ knowledge regarding the right product, dosage, time and method of application.
6 Use of optimal dose based on soil health status.
6 Promotion of neem-coated urea.
6 Promotion of micro-nutrients
6 Promotion of organic fertilizers.
6 Promotion of water-soluble fertilizers.
> Increasing Sustainability in Agriculture:

6 This can be achieved by turning to Organic and Natural Farming.
Major initiatives of government to promote organic and natural farming:
6 National Mission for Sustainable Agriculture (NMSA): The main objective of NMSA is to make
agriculture more productive, sustainable, and remunerative and climate resilient by promoting location
specific integrated/composite farming systems and to conserve natural resources through appropriate
soil and moisture conservation measures.
32 www.iasscore.in
6 Paramparagat Krishi Vikas Yojana (PKVY) and Rashtriya Krishi Vikas Yojana (RKVY): To promote
organic farming in the country. In the revised guidelines of PKVY scheme during the year 2018, various
organic farming models like Natural Farming, Vedic Farming, Cow Farming, Home Farming, Zero
Budget Natural Farming (ZBNF) etc. have been included.
6 Zero Budget Natural Farming (ZBNF): The main aim of ZBNF is elimination of chemical pesticides and
promotion of good agronomic practices. ZBNF also aims to sustain agriculture production with eco-
friendly processes in tune with nature to produce agricultural produce free of chemicals. Soil fertility &
soil organic matter is restored by pursuing ZBNF. Less water is required under ZBNF and it is a climate
friendly agriculture system.
6 Some of the States which are progressively practicing ZBNF are Karnataka, Himachal Pradesh and Andhra
Pradesh. After ZBNF, Andhra Pradesh has witnessed a sharp decline in input costs and improvement
in yields.
6 Mission Organic Value Chain Development for North Eastern Region (MOVCDNER): It is a
component of National Mission for Sustainable Agriculture (NMSA) to promote organic farming.
> Adopting Appropriate Technologies for Smallholder Farms:

6 In smallholder farms, resource efficiency can be brought about through adoption of appropriate
technologies. Such as:
Environment friendly automated farm machinery tools:
6 Use of technology, investment in costly farm machinery, or scaling up the existing technology may
not be economically feasible for small and marginal farmers. Hence, there is need to promote use of
environment friendly automated farm machinery tools suited to small scale operations. The Custom
Hiring Centers (CHCs) can be set up to promote use of high-tech machinery for the mechanization of
small and marginal farm holdings, especially in difficult terrains.
Adoption of ICT in agriculture:
6 The spread of mobile phones in rural areas has already impacted the way the small and marginal farmers
get access to information about soil health, weather and prices. In the context of poor infrastructure,
adoption of ICT in agriculture will promote market access, facilitate financial inclusion and contribute
significantly to early warning signals that are critical for the development of smallholder community.
Box 1: Coffee Board Activates Blockchain Based Marketplace in India
Coffee Board has launched blockchain based coffee e-marketplace. This is a pilot project
which is likely to help integrate the farmers with markets in a transparent manner and lead
to realization of fair price for the coffee producer. It will also reduce the number of layers
between coffee growers and buyers and help farmers double their income.
India is the only country in the world where entire coffee is grown under shade, handpicked
and sun dried. Coffee is produced in India by small coffee growers, tribal farmers adjacent to
National Parks and Wildlife Sanctuaries in Western and Eastern Ghats, which are two of the
major bio-diversity hot spots in the world. Indian coffee is highly valued in the world market
and sold as premium coffee. However, the share of farmers in the final returns from coffee
is very meagre.
Blockchain based market place app for trading of Indian coffees is intended to bring in
transparency in the trade of Indian coffee, maintain the traceability of Indian coffee from
bean to cup so as consumer tastes real Indian coffee, the grower is paid fairly for his coffee
produced. This initiative will reduce grower's dependency of intermediaries by providing
direct access to buyers at a fair price for their produce. The initiative will also help coffee
producers find exporters within the stipulated time to meet the growing demands and in
building greater trust through increased transparency.
Coffee Board is in the process of developing Blockchain based marketplace application. This
platform has already registered a group of 15-20 coffee farmers, exporters, importers and
retailers from India and abroad. India is one of the few coffee blockchain processors for
coffee in the world, after France and Ethiopia.
The stakeholders like coffee farmers, traders, exporters register on platform to make trade
transactions. The coffee farmers register credentials like place where coffee is grown, details
of crop, elevation etc. A block is created for each lot farmer sells. The credentials of the lot
are stored on the blockchain throughout its journey and is immutable.
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> Improving Infrastructure and Access to Markets:

6 The informal actors like local traders and input dealers are more prominent in the marketing channels
of the smallholder farmers.
What to do?
6 Improve farmers’ access through better connectivity to nearby mandis; it will help farmers fetch better
prices for their agricultural produce.
6 To overcome the marketing bottlenecks of small and marginal farmer’s, combination of enhancing rural
infrastructure to improve connectivity; Information and Communication Technology (ICT) to provide
timely information about prices, aggregation and storage facilities can help solve the problem.
$ 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.
! These indicators also represent competitiveness, efficiency and transparency in agri-markets.
! The second area of reforms captured by the index include facilitation and liberalization of land lease.
! The third area included in the index represent freedom given to farmers for felling and transit of trees
grown on private land. This represents opportunity to diversify farm business.
! The Index is named as “Agricultural Marketing and Farmer Friendly Reforms Index (AMFFRI)” and it has a
score that can have minimum value “0” implying no reforms and maximum value “100” implying complete
reforms in the selected areas. States and UTs have been ranked using this index.
> Ranking of States based on AMFFRI:

6 No state in the country has implemented the entire set of market reforms. Also, land leasing and
harvest and marketing of some tree species on private farmland are subjected to various degrees of
restrictions in almost all the States/UTs.
6 The State of Maharashtra achieved first rank in implementation of various reforms. The State has
implemented most of the marketing reforms and it offers best environment for doing agri-business
among all the States/UTs. Gujarat ranks second with a score of 71.5 out of 100, closely followed by
Rajasthan and Madhya Pradesh.
6 Almost two third States/UTs could not reach even halfway mark of reforms score.
6 Some States/UTs do not have APMC Act. It is a challenge to provide ranking to these States in market
reforms.
/ Role Of Extension Services

$ Agricultural extension plays a key role in boosting agricultural productivity, enhancing food security, improving
rural livelihoods and changing farmers’ preferences and farming practices positively (for example, adoption of
better quality seeds and cutting down loss by getting their crops insured).
$ As per the Report on Review of Agricultural Extension in India, 2010 by IFPRI:
! There is increasing need to share knowledge and skills in order to provide locally relevant services that
meet the information needs of small and marginal farmers.
! Need to bring small and marginal farmers within the framework of extension services.
$ The farmers tend to access technical advice more during the second half of the year, i.e., during January-June.
‘Progressive farmer’ and ‘radio/TV/newspaper/internet’ were the two most accessed sources for technical
advice by the agricultural households during this period. There is thus greater scope to improve services by
Krishi Vigyan Kendras (KVKs) and agricultural universities in agriculture advisory services.
/ Agricultural Credit
$ 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. The share of North Eastern States has been less than one per cent in total
agricultural credit disbursement.
$ The small and marginal holdings constitute majority (more than 85 per cent) of total operational holdings in
the eastern region, north-eastern region and central region, which warrants greater distribution of agricultural
credit disbursement to this region.
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/ Allied Sectors: Animal Husbandary, Dairying And Fisheries

$ Animal Husbandry and Dairying
! India ranks first in milk production, accounting for 20 per cent of world production. Milk production in
India has been increasing steadily over the years from 55.6 million tonnes in 1991-92 to 176.3 million
tonnes in 2017-18, at an average annual growth rate of 4.5 percent.
! But there exists wide inter-state variability in milk production. The per capita availability of milk is determined
by the production of milk in the State. While the All India per capita availability of milk is 375 grams per
day, it varies between 71 grams per day in Assam to 1120 grams per day in Punjab.
> Domestic Demand and Price of Milk:

6 Though the production of milk has been rising at an increasing rate, the change in its price shows a
fluctuating trend.
6 There are three key drivers of increasing milk demand and price:
> Population growth
> Urbanization
> Income growth, which leads to an increase in the price of milk.
6 Of the total milk produced in rural areas, around 52 per cent is the marketable surplus. Of this surplus,
less than half of the milk sold is handled by the organized sector comprising of dairy cooperatives and
private dairy companies and the rest by the unorganized sector.
$ Small Ruminant Sector

! Sheep and goat are collectively known as small ruminants.
! As per the 70th round of NSSO, livestock rearing was the principal source of income to about 3.7 per cent
of the agricultural households.
! India supports 16.1 per cent of the world’s goat population and 6.4 per cent of its sheep (Food & Agriculture
Organisation).
> Characteristics of small ruminant and its importance for income generation:
6 Small ruminants have higher survival rates under drought conditions compared to large ruminants.
6 Because of their higher reproductive rates and smaller reproductive cycle flock numbers can be restored
more rapidly.
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6 With regard to goats, water economy is also an important biological feature. Due to their short
reproductive cycles (short kidding interval) and high incidence of multiple births, there is potential for
a higher annual offtake of goats than seen with cattle & buffaloes. This allows farmers/producers a
quick interval of selling part of their flock and generating cash income.
6 Sheep/goats can also efficiently survive on available shrubs and trees in adverse harsh environment in
low fertility lands where no other crop or animals can survive except some rare exceptions like camel.
> Schemes/Initiatives to Improve Productivity of Livestock and Dairy Sector:

6 Rashtriya Gokul Mission (RGM): To undertake breed improvement programme for indigenous breeds
so as to improve the genetic makeup and increase the stock. Indigenous cattle are well known for their
quality of heat tolerance and ability to withstand extreme climatic conditions.
6 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. Through the portal, breeders/farmers can sell or purchase their breeding stock.
Information on all forms of germplasm including semen embryos and live animals with all the agencies
and stakeholders in the country has been uploaded on the portal.
6 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.
6 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. In order to strengthen and expand the trained veterinary
manpower, the number of recognized veterinary colleges has been increased.
6 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 the following
dairy development schemes, viz; National Programme for Dairy Development, National Dairy Plan
(Phase-I), Dairy Entrepreneurship Development Scheme, Dairy Processing and Infrastructure
Development Fund (DIDF).
$ Fisheries Sectors
! 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 per cent was from inland sector.
! 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. Fish and fish product exports emerged as the largest group in agricultural
exports in 2018-19.
> Government measures to boost fisheries sector:

6 A separate Department of Fisheries was created in February 2019.
6 The Government has merged all the schemes of fisheries sector into an umbrella scheme of ‘Blue
Revolution: Integrated Development and Management of Fisheries’ focusing on increasing fish
production and productivity from aquaculture and fisheries resources, both inland and marine.
6 Creation of the Fisheries and Aquaculture Infrastructure Development Fund (FIDF) was approved
with a total fund size of Rs. 7522.48 crore.
While enhancing incomes through livestock development and fisheries sector, it is significant to integrate
the SDGs of ensuring incomes and livelihoods for the poor. This must be undertaken without compromising
the needs of the future generation by over exploiting/depleting marine resources.
$ Draft National Inland Fisheries and Aquaculture Policy (NIFAP), 2019:

! Although inland fisheries and aquaculture have grown in absolute terms, the development in terms of its
potential is yet to be realized. The unutilized and underutilized vast and varied resources, in the form of
191,024 km of rivers and canals, 1.2 million hectares of floodplain lakes, 2.36 million hectares of ponds and
tanks, 3.54 million hectares of reservoirs and 1.24 million hectares of brackish water resources offer great
opportunities for livelihood development and ushering economic prosperity.
> Major Policy Recommendations in the NIFAP, 2019 Inland Fisheries:

6 For inland fisheries:
> Conserving indigenous resources, and restoring natural ecosystem of rivers.
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> Transferring management of fisheries in manmade reservoirs to the state fisheries departments for
scientific enhancement and efficient governance.
> Conserving and restoring ecosystem in natural wetlands.
> Bringing policies, law, and conservation programmes for development of fisheries in the Himalayan
and north-eastern states.
6 For aquaculture:
> Developing state and area-specific action plans.
> Redefining land use categories to include fisheries and aquaculture as components of agriculture.
> Developing separate programmes for small farmers.
> Simplifying requirements for registration and leasing of farms.
> Encouraging private sector in production of seed, feed and other aquaculture inputs.
> Developing the required regulatory frameworks.
6 Other policy measures:
> Making registration of all aquaculture inputs compulsory.
> Regulating exotic species.
> Improving disease surveillance.
> Diversifying species.
> Developing post-harvest and marketing infrastructure.
> Strengthening fisheries cooperatives.
/ Food Security and Food Management in India

$ Food Securtity
Food security exists when all people, at all times, have physical and economic access to sufficient, safe and
nutritious food that meets their dietary needs and food preferences to ensure an active and healthy life (FAO,
2018).
> Challenges:
6 India’s food security challenges lie in the areas of low GDP per capita, sufficiency of supply, public
expenditure on R&D and protein quality.
6 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.
> Steps taken by government:

6 The Central Government takes several steps to prudently manage food grain stock, to ensure adequate
availability of wheat and rice in the Central pool, to keep a check on the open market prices, to augment
the domestic availability of wheat and rice, and to ensure food security. Major steps taken are as
follow:
> Announcing Minimum Support Prices and Central Issue Price.
> Undertake procurement of food grains through FCI and decentralised procurement by State
Agencies.
> Maintain buffer stocks.
> Open market sale of wheat and rice to check inflation.
$ Global Food Security Index (GFSI), 2018

! It was first published in 2012, and is managed and updated annually by The Economist’s Intelligence
Unit.
! 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.
! The GFSI ranks countries on a score of 0-100 based on the first three categories while natural resources
and resilience is used as an adjustment factor.
! A rank of 100 is considered most favourable. GFSI’s major goal is to assess in a timely manner which
countries are most and least vulnerable to food insecurity.
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$ MSP and Foodgrains Procurement
> Minimum Support Price (MSP):

6 The Minimum Support Price (MSP) is announced for 22 crops before the sowing season.
6 The objective is to give guaranteed prices and assured market to the farmers and protects them from
price fluctuations.
6 In 2018-19, the government raised the MSP of both kharif and rabi crops to ensure a return of at least
50 per cent above the cost of production to enhance farmers’ income.
6 An increase in MSP leads to increase in production, but only about one-third of the total production of
food grains are procured. The rest of the food grains are sold in the open market.
> Foodgrains Procurement:

6 In States like Punjab, Haryana, Chhattisgarh, Uttar Pradesh, Madhya Pradesh etc. where MSP procurement
is well established, there arise problems in storage of food grains.
6 The government tries to liquidate excess stocks through open market sale to bulk buyers above the
reserve price, which equals the MSP plus the procurement cost.
6 Exports of food grains by FCI at prices lower than the reserve price would effectively imply and export
subsidy. Moreover, this would expose India to disputes in the multilateral trade framework. Exports of
food grains by FCI either as aid or commercial sale has been less than 1 million tonnes.
Foodgrains Production, Procurement & Offtake (In million tonnes)
Year Foodgrains Foodgrains Procurement Offtake (TPDS Balance

Production Procurement (% share in + Welfare stock as of
minus pulses Production) schemes) 1st July
2015-16 235.22 64.91 27.6 53.73 54.72
2016-17 251.98 61.14 24.3 56.45 49.85
2017-18 259.60 69.10 26.6 57.85 53.48
2018-19 257.36 75.28 29.3 56.40 65.14
Source: Foodgrain Bulletin, DFPD.
> Challenges:
6 According to an Evaluation Study on Minimum Support Price conducted by Development Monitoring
& Evaluation Office (DMEO), NITI Aayog (January 2016),:
> In majority of the sample states, farmers are unaware of the MSP announcement before the sowing
season. In Eastern India, in States such as Assam, West Bengal, the poor impact of the scheme could
be judged from the fact that none of the selected farmers were even aware of the existence of such
a scheme.
> In certain cases, though aware of the MSP, the absence of procurement centres in the villages,
transportation costs, reluctance of mill owners to buy small quantities from the farmers remain
stumbling blocks.
$ Food Subsidy
! Food subsidy comprises of two main components:
6 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.
6 The second component comprises subsidy provided to States undertaking decentralized
procurement.
6 The acquisition and distribution costs of procuring food grains for the central pool constitute the
economic cost. The difference between the per quintal economic cost and the per quintal Central Issue
Price (CIP) gives the quantum of per quintal consumer subsidy.
38 www.iasscore.in
> Why there is rise in food subsidy?

6 In order to ensure food security to the vulnerable sections, Government continues with the subsidized
pricing under National Food Security Act (NFSA). This has resulted in widening of the gap between
the economic cost and CIP and the per quintal food subsidy incurred by the Government has risen
substantially over the years.
6 The subsidized CIPs of Rs. 3/2/1 per kg for rice, wheat and coarse grains respectively under NFSA were
earlier applicable only to the Antyodaya Anna Yojana Families (which constitute about 2.5 crore poorest
of the poor households) under the Targeted Public Distribution System (TPDS). Therefore BPL/APL
categories were required to pay higher CIPs. The NFSA provides a wider coverage than the erstwhile
TPDS.
6 NFSA also made the Antyodaya CIPs uniformly applicable to all NFSA beneficiaries. APL/BPL
categorization was done away with under NFSA.
6 The wider coverage provided under the Act together with lower CIPs have obvious implications for the
food subsidy bill.
For sustainability of food security operations, the issue of burgeoning food subsidy bill needs to be
addressed.
$ Targeted Public Distribution System (TPDS)and its Computerization:

! The Targeted Public Distribution System (TPDS) is operated under the joint responsibility of the Central
and State/UT Governments.
! The Central Government is responsible for procurement, allocation and transportation of food grains up
to the designated depots of the FCI.
! The State Governments are responsible for allocation and distribution of food grains involving identification
of eligible beneficiaries/ families, issuance of ration cards to them and supervision and monitoring of
functioning of Fair Price Shops (FPSs).
! Therefore, as and when complaints are received by the Government from individuals and organizations
as well as through press reports, they are sent to State/ UT Governments concerned for inquiry and
appropriate action. An offence committed in violation of the provisions of TPDS (Control) Order, 2015 is
liable for penal action under the Essential Commodities Act, 1955.
> Government initiatives for computerization of TPDS:

6 To modernize and bring about transparency in the TPDS operations, the Central Government is
implementing the Scheme ‘End-to-end Computerisation of TPDS Operations’ on cost sharing basis
with the States/UTs. The validity of the scheme was extended up to March 2019.
6 The scheme provides for:
> Digitization of ration cards and beneficiary records.
> Computerization of supply chain management.
> Setting up of transparency portal and grievance redressal mechanisms.
6 There are 5.33 lakh Fair Price Shops (FPSs) and over 23 crore ration card holders in the country as
on March 2019. About 3.95 lakh FPSs have been automated by installing the electronic point of sale
device.
> What more needs to be done?

6 There needs to be holistic monitoring along the supply chain to completely prevent the diversions and
leakages of foodgrains and also to maintain the quality of foodgrains distributed through the FPS.
6 The level of computerization of FPSs across States is not uniform. Therefore there needs to be uniform
computerization throughout country.
/ 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 has 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:
! Improvement in crop productivity.
! Improvement in livestock productivity.
! Resource use efficiency or savings in the cost of production.
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! Increase in the cropping intensity.

! Diversification towards high value crops.
! Improvement in real prices received by farmers.
! Shift from farm to non-farm occupations.
$ Government Initiatives to Double Farmer’s Income by 2022:

! Advocating progressive market reforms through the State Governments, 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 purchase 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.
! Pradhan Mantri Krishi Sinchayee Yojana (PMKSY)-“Per drop more crop” to increase water efficiency.
! Pradhan Mantri Fasal Bima Yojana (PMFBY): For better insurance coverage to crops for risk mitigation.
! Providing total interest subvention up to 5 per cent (inclusive of 3 per cent prompt repayment incentive)
on short-term crop loans up to Rs 3 lakh, thus making loan available to farmers at a reduced rate of 4 per
cent per annum.
! Extended the facility of Kisan Credit Card (KCC) for animal husbandry and fisheries related activities as
well as Interest Subvention facilities to such categories of farmers.
! Increase in the Minimum Support Price (MSPs) for all Kharif & Rabi crops for 2018-19 season at a level
of at least one and half times of the cost of production.
! A new Central Sector Scheme for providing old age pension: with a view to provide social security net
for small and marginal farmers as they have minimal or no savings to provide for old age and to support
them in the event of consequent loss of livelihood.
> Scheme Provisions:

6 Rs 3000 to the eligible small and marginal farmers, subject to certain exclusion clauses, on attaining
the age of 60 years.
6 The scheme aims to cover around 5 crore beneficiaries in the first three years.
6 It would be a voluntary and contributory pension scheme, with entry age of 18 to 40 years.
! The Government has constituted an Empowered Body for monitoring the implementation of the
recommendations of the DFI Strategy.
Practice Question
$ What are the key factors in bringing resource efficiency in smallholders agriculture?
Also suggest some policy changes required to bring resource efficiency.
$ The Government has set a target of doubling of farmers’ income by the year 2022.
By listing major government initiatives, discuss the action plan to make the goal
achievable.
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40 www.iasscore.in
CHAPTER: 8
INDUSTRY
& INFRASTRUCTURE
Important terms
$ Gross Value Added (GVA): Gross value added (GVA) 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.
GVA thus adjusts gross domestic product (GDP) by the impact of subsidies and taxes (tariffs) on products.
$ Index of Industrial Production (IIP) : IIP is an index that shows the performance of different industrial
sectors of the Indian economy. The IIP is estimated and published on a monthly basis by the Central
Statistical Organization (CSO). As an all India index, it gives general level of industrial activity in the economy.
The IIP assigns a weight of 77.63 percent to manufacturing sector, 14.37 per cent to mining sector and 7.99
per cent to electricity sector.
/ Industry
$ Current Scenario of Industries in India
• The industrial sector performance during 2018-19 has improved as compared to 2017-18. As per the
provisional estimates of the Annual National Income 2018-19 released by Central Statistics Office
(CSO)
• The growth of industry real Gross Value Added (GVA) was higher at 6.9 per cent in 2018-19 as
compared to 5.9 per cent in 2017-18.
• Construction and manufacturing sectors have experienced 8.7 per cent and 6.9 per cent growth
rate respectively during 2018-19. The mining and quarrying sector has experienced sluggish growth
in 2018-19 as compared to 2017-18.
> Index of Industrial Production (IIP)

6 The industrial growth rate in terms of IIP was 3.6 per cent in 2018-19 as compared to 4.4 per cent in
2017-18.
6 The Mining, Manufacturing and Electricity sectors registered positive growth rates of 2.9 per cent,
3.6 per cent and 5.2 per cent respectively in 2018-19.
6 The index of infrastructure/construction goods remained higher at 7.5 per cent in 2018-19 driven
by the robust performance of cement and steel sectors. Large scale public spending has boosted the
demand for these sectors.
6 Primary goods and consumer non-durables have registered a positive growth rate of 3.5 per cent
and 3.9 per cent in 2018-19 respectively. On the other hand, the capital goods sectors registered a
moderate growth of 2.8 per cent in 2018-19 which is indicative of shortfall in investment activities.
6 Overall investment as indicated by the real gross fixed capital formation has increased by 10 per
cent in 2018-19. But its share in GDP at current prices is estimated to be only marginally higher at
29.3 per cent during 2018-19.
6 Within consumer goods, consumer durables have shown improved performance with a growth of 5.5
per cent in 2018-19.
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$ Index of Eight Core Industries

! The Index of eight core industries measures the performance of Coal, Crude Oil, Natural Gas, Petroleum
Refinery Products, Fertilizers, Steel, Cement and Electricity.
! The eight core industries comprise about 40.3 per cent weight in the IIP. The overall Index of eight core
industries registered a growth rate of 4.3 per cent in 2018-19 similar to the increase achieved in 2017-
18.
! The production of Coal, Steel, Cement, Electricity, Refinery Products, Natural Gas and Fertilizers registered
positive growth rate in 2018-19 with Cement and Coal registering a higher growth rate of 13.3 per cent
and 7.4 per cent respectively.
$ Central Public Sector Enterprises (CPSEs)

! Out of the operating 257 CPSEs, 184 CPSEs were profit-making, 71 loss making and 2 CPSEs at no
profit no loss. The profit of profit-making CPSEs (184) stood at Rs. 1,59,635 crore, while the loss of loss-
making CPSEs (71) stood at Rs. 31,261 crore during 2017-18.
! The overall net profit of the 257 operating CPSEs went up by 2.29 percent to Rs. 1,28,374 crore during
2017-18.
$ Corporate Sector Performance

! Growth of sales (YoY) of over 1700 non-governmental non-financial (NGNF) listed manufacturing
companies was 21.6 per cent in Q1, 19.3 per cent in Q2 and 13.2 per cent in Q3 during 2018-19.
! The rate of growth of Gross Capital Formation (GCF) in industry has registered a sharp rise from (-) 0.7
per cent in 2016-17 to 7.6 per cent in 2017-18, showing upward momentum of investment in industry.
! According to RBI, the growth in gross bank credit flow to the industrial sector has increased by 6.9 per
cent in March, 2019 compared to the increase of 0.7 per cent in March, 2018.
$ Initiatives taken by Government to boost Industrial Sector in India

! To improve ease of doing business, the emphasis has been given to simplification and rationalization of
the existing rules and introduction of information technology to make governance more efficient and
effective.
! As per the World Bank Doing Business (DB) Report, India has considerably improved its ranking to
77th position among the 190 countries and has leapt 23 ranks over its previous rank of 100.
! The World Bank Doing Business Report 2019 covers 10 indicators which span the life-cycle of a business.
India has improved its rank in 6 out of 10 indicators and has moved closer to international best practices.
> Start-up India

6 The initiative aims to create an ecosystem that is conducive for the growth of Start-ups.
6 As on March 1, 2019, 16,578 new start-ups were recognized across 499 districts, 47 per cent Start-ups
from Tier II and III cities and 46 per cent of Recognized Start-ups have at least one woman director.
6 Steps are taken for easing regulations such as exemption from Income tax on investments raised by
Start-ups, 22 regulatory reforms implemented to improve Ease of Doing Business for Start-ups,
Self-certification regime for six labour laws and three environmental laws, Start-up India Hub
as ‘One Stop Shop’ for the start-up ecosystem in which 2,37,902 users have availed free Start-up
India Learning Program to build business plans, 647 Start-ups supported through dedicated facilitation
services, 1,262 start-ups connected to mentors, etc.
> Foreign Direct Investment (FDI)

6 During 2018- 19, total FDI equity inflows were US$44.36 billion as compared to US$44.85 billion during
2017-18.
$ Performance of Important Indian Industries and Issues faced by them

! Steel Industry
> Steel industry directly contributes to about 1.4 to 2 per cent of India’s GDP and its weightage in IIP
is 7.22 per cent. It accounts for 7.53 percent of the Wholesale Price Index (WPI).
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> India is the second largest producer of crude steel in the world surpassing Japan with a global
share of 6 percent. India is the third largest consumer of the finished steel after China and
USA.
6 Problems faced by steel industry
> Pursuant to the imposition of trade restrictive measures by USA, European Union and Canada,
India’s exports have declined.
> The total export with highest volume of 9.62 million tonnes during 2017-18 fell to 6.36 million
tonnes during 2018-19.
> On the other hand, imports have gone up India remained an importer of finished steel at 7.84
million tonnes during 2018-19 as against 7.48 million tonnes during 2017-18.
6 Steps taken by government to improve this sector
> The National Steel Policy, 2017 gives broad policy directives to the industry for encouraging long-
term growth for Indian steel on both supply and demand fronts.
Growth in production of Eight Core Industries (in per cent)
Sector Weight 2016-17 2017-18 2018-19 (P)
Coal 10.3335 3.2 2.6 7.4
Crude oil 8.9833 -2.5 -0.9 -4.1
Natural Gas 6.8768 -1.0 2.9 0.8
Refinery Products 28.0376 4.9 4.6 3.1
Fertilizers 2.6276 0.2 0.03 0.3
Steel 17.9166 10.7 5.6 4.7
Cement 5.3720 -1.2 6.3 13.3
Electricity 19.8530 5.8 5.3 5.2
Overall Index 100.00 4.8 4.3 4.3
Source: Office of the Economic Adviser, DPIIT; P : Provisional
Note: The industry-wise weights indicated above are individual industry weight derived from IIP and blown up
on pro rata basis to a combined weight of Index of Core Industries equal to 100.
$ MSME
! The Micro, Small and Medium Enterprises (MSME) sector in India plays a crucial role by providing large
employment opportunities, industrialization of rural areas, reducing regional imbalances, etc. Government
is committed to supporting this important sector with better credit flow, technology upgradation, ease of
doing business and market access.
! Steps taken by Government to boost growth of MSME :
6 Government made various key announcements for faster growth of this sector and for promoting ease
of doing business that included ‘in-principle approval’ for loans up to Rs. 1 crore within 59 minutes
through online portal.
6 Interest subvention of 2 per cent for all GST registered MSMEs on incremental credit up to Rs. 1 crore
is also being provided and will be in operation for a period of two financial years 2018-19 and 2019-20
with an allocation of Rs. 975 crore.
6 The term loan or working capital extended by Scheduled Commercial Banks and RBI Registered
Systemically Important Non-Banking Finance Companies and Regional Rural Banks will be covered
under the Scheme.
6 The Government has undertaken a number of schemes/programmes like the Prime Minister’s
Employment Generation Programme, Credit Guarantee Trust Fund for Micro and Small Enterprises,
Credit Linked Capital Subsidy Scheme for Technology Up-gradation, Scheme of Fund for Regeneration
of Traditional Industries, and Micro and Small Enterprises- Cluster Development Programme for the
establishment of new enterprises and development of existing ones.
/ Infrastructure
$ Current Scenario of Indian Infrastructure Sector:
! SDG goal number 9 aims to “Develop quality, reliable, sustainable and resilient infrastructure,
including regional and trans-border infrastructure, to support economic development and human
well-being, with a focus on affordable and equitable access for all”.
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! India needs to spend 7-8 per cent of its GDP on infrastructure annually, which translates into annual
infrastructure investment of US$200 billion currently.
! However, India has been able to spend only about US$100-110 billion annually on infrastructure, leaving
a deficit of around US$90 Billion per annum.
> Steps taken by government to improve infrastructure

6 Given the fiscal constraints that leave less room for expanding public investment at the scale required,
there is an urgent need to accelerate the flow of private capital into infrastructure.
6 With the aim of boosting investment in infrastructure, National Investment and Infrastructure Fund
has been created with a capital of approximately Rs. 400 billion to provide investment opportunities to
commercially viable projects.
6 Credit Enhancement Fund for infrastructure projects for increasing the credit rating of bonds floated
by infrastructure companies is going to be launched in the country.
6 A new Credit Rating System for infrastructure projects, based on Expected Loss approach, has also
been launched which seeks to provide additional risk assessment mechanism for informed decision
making by long-term investors.
6 Measures like infrastructure investment trusts and Real Estate Investment Trusts have been
formulated to pool investment in infrastructure.
$ Development of Infrastructure in India (Sector-wise)

! Road Sector:
6 Roads are part of an integrated multi-modal system of transport which provides crucial links to airports,
railway stations, ports and other logistical hubs and acts as a catalyst for economic growth by playing
a critical role in the supply chain management.
6 It is the dominant mode of transportation in comparison with rail, air traffic and inland water-ways
and accounts for about 3.14 per cent of GVA and 69 per cent and 90 per cent of the country wide
freight and passenger traffic respectively.
6 India has a road network of about 58.98 lakh kms with rural roads constituting 70.65 per cent and
National highways constituting 1.94 percent.
6 Ministry of Road Transport and Highways (MORTH) declared 2018-19 as the ‘Year of Construction’,
and has been making constant efforts to expand and upgrade the network of National Highways in the
country as a result of which road construction in kms grew at the rate of 30 kms per day in 2018-19
as compared to 12 kms per day in 2014-15.
> Problems faced by Road sector in India

6 The major constraints faced are availability of funds for financing large projects, lengthy processes in
acquisition of land and payment of compensation to the beneficiaries, environmental concerns, time
and cost overruns due to delays in project implementation, procedural delays, lesser traffic growth
than expected increasing the riskiness of the projects resulting in stalled or languishing projects and
shortfall in funds for maintenance.
> Steps taken by government to improve road sector

6 The increase in the pace of construction was achieved by introducing a proactive sector policy to
respond to the major challenges faced by the sector, including process streamlining indicating approval
authorities with enhanced delegation of approval limits, putting in place mechanisms for inter-ministerial
coordination, detailing steps to be taken for languishing projects, introducing innovative project
financing for leveraging both private and public funding, streamlining land acquisition processes, issue
of explicit guidelines on standards of road construction in hill areas etc.
6 Huge investments have been made in the sector with total investment increasing more than three
times.
6 In India, the investments in roads have been financed from budgetary support, internal and extra-
budgetary resources (IEBR) and private sector investment.
6 Major outcomes in Road sector during the period 2014-15 to 2018-19 were construction of Eastern
Peripheral Expressway, Delhi-Meerut expressway and Dhola-Sadiya Bridge.
! Railways
6 Indian Railways has taken numerous steps such as provision of lifts/escalators, plastic bottle crusher
machines, mechanized cleaning and housekeeping etc. at major stations.
6 Revenue Earning Freight loading registered an increase of 4.83 percent, with incremental loading of
53.40 million tonnes over 2016-17.
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6 In 2018-19, Indian Railways carried 1221.39 million tonnes of revenue earning freight an increase of
5.33 per cent.
6 The category-wise break-up of consequential train accidents shows that the incident of train collisions
has come down to zero in the year 2018-19. The incidents of derailment have decreased from 78 in
2016-17 to 46.
6 IR has initiated a major electrification program for electrifying 100 per cent of its Broad Gauge
network.
6 IR has also made sincere efforts in the area of energy and water conservation and there is an increasing
competition among stations to obtain “Green Rating”.
! Civil Aviation
6 India’s scheduled domestic air transportation for passengers and goods has grown by 14 per cent and
12 per cent respectively in 2018-19.
6 Domestic passenger traffic in revenue passenger kilometre (RPK) recorded the fastest growth
in the world at about 20 per cent for over 50 consecutive months up to December 2018, which has
positively impacted India’s economy.
6 Total domestic and international passengers were 204 million in 2018-19. To meet the surging
demand and providing air connectivity to remote regions, new Greenfield airports are being rapidly
developed.
6 At the end of 2018-19, a total of 107 airports provided scheduled airline operations. Under “Ude
Deshka Aam Naagrik - UDAN”, a total of 719 routes have been awarded in three rounds of bidding
for regional connectivity, 182 of which are operational.
6 Impressive double-digit domestic air cargo growth of 12.1 per cent in 2018-19 over 2017-18 was
achieved and air cargo handled reached 3.6 MMT.
6 In conformance with the objectives of the holistic National Civil Aviation Policy, 2016, a number of
initiatives and measures were taken up.
6 The first National Air Cargo Policy’s outline was released at the Global Aviation Summit in January
2019.
! Shipping
6 As on January 31, 2019, India had a fleet strength of 1405 ships with dead weight tonnage (DWT) of
19.22 million (12.74 million GT) including Indian controlled tonnage, with Shipping Corporation
of India (SCI) having the largest share of around 30.52 per cent.
! Ports
6 Port sector development is very crucial for the development of any economy. Ports handle around 90
per cent of EXIM Cargo by volume and 70 per cent by value.
6 In order to meet the ever increasing trade requirements, expansion of Port Capacity has been accorded
the highest priority with implementation of well-conceived infrastructure development projects like
Sagarmala, Project Unnati etc.
6 Ministry of Shipping had identified various parameters for reducing dwell time and transaction costs
in the major ports. These include elimination of manual forms, accommodation for laboratories to
Participating Government Agencies, Direct Port Delivery, Installation of Container Scanners, E-delivery
orders, Radio Frequency Identification based Gate-automation System, etc.
! Inland Waterways
6 India’s first inland waterway multi-modal terminal (MMT) was inaugurated at Varanasi. The main
focus of MMT is to promote inland waterways as it is cheap and environment friendly.
6 To enhance the access and establish alternative connectivity to the North-East through Indo- Bangladesh
Protocol route, dredging works between Ashuganj and Zakiganj and Sirajganj and Daikhawa in
Bangladesh through 80:20 sharing (80 per cent by India and 20 per cent by Bangladesh) have been
awarded. It will help to improve cross border waterways connectivity.
! Telecom Sector
6 From a low of 93.30 crore in 2013- 2014, total telephone connections in India touched 118.34 crore in
2018-19, registering a growth of 26.84 percent.
6 The wire-less telephony now constitutes 98.17 per cent of all subscriptions whereas share of landline
telephones now stands at only 1.83 percent.
6 The mobile industry supports about 6.5 percent of India’s GDP. Telecom industry contribution to GDP
is expected to reach 8.2 per cent by 2020.
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6 The wider mobile ecosystem also supported a total of 32 million jobs (directly and indirectly) and
made a substantial contribution to the funding of the public sector.
6 During 2018-19 FDI equity inflow touched US$2.67 billion more than double rise from the level of
US$1.3 billion witnessed in 2015-16.
> Advent of 5G technology and steps taken by government regarding it

6 The Government has constituted High Level 5G India 2020 Forum to articulate the Vision for 5G in
India and submitted its report on “Making India 5G Ready” in August, 2018.
6 Based on the recommendations of the forum, seven committees have been constituted for action on
Spectrum Policy, Regulatory Policy, Education and Awareness Promotion Program, Application & Use
Case Labs, Development of Application Layer Standards, Major Trials & Technology Demonstration and
Participation in International Standards for 5G.
! Power Sector
6 Power sector in India has witnessed a paradigm shift over the years due to the constant efforts of
Government to foster investment in the sector.
6 As a result, India improved its ranking in the Energy Transition Index published by World Economic
Forum (76th position).
6 Along with universal electrification, commendable progress has been made in generation and
transmission of electricity.
6 The installed capacity has increased from 3,44,002 MW in 2018 to 3,56,100.19 MW in 2019. Total
generation of energy during 2018-19 was 1376 BU (including imports and renewable sources of
energy).
6 The capacity of thermal power is 64 per cent followed by renewable energy. More than 46 per cent of
power generation comes from private sector.
> Initiatives taken by government to support power sector

6 The Pradhan Mantri Sahaj Bijli Har Ghar Yojana (SAUBHAGYA) was launched in with the aim of
universal household electrification by providing last mile connectivity and electricity connections to all
remaining unelectrified households in rural and all poor households in urban areas.
6 As on March 2019, 2.62 crore households have been electrified since the launch of SAUBHAGYA
scheme.
! Housing (Urban)
6 The Real Estate (Regulation and Development) Act, 2016 (RERA) was launched which tried to
ensure regulation and promote real estate sector in an efficient and transparent manner and to protect
the interest of home buyers.
6 Pradhan Mantri Awas Yojana was launched with the objective of providing housing facilities to all the
eligible families/beneficiaries by 2022. So far 4,427 cities/towns have been included under PMAY-(U).
6 Smart Cities Mission was launched with the objective of promoting cities that provide core infrastructure
and give a decent quality life to its citizens.
6 The first framework on ‘Ease of Living’ Index for cities was launched in June 2017 with the objective
of framing an index to enable a shift to data driven approach in urban planning and management and
promote healthy competition among cities.
Practice Question
$ “India’s Telecom sector has risen sharply with growth in customer base of about 27% and
contribution of about 6.5% in India’s GDP”. Discuss the proactive role played by government
in India’s telecom revolution.
$ “India’s scheduled domestic air transportation for passengers and goods has grown by 14
per cent and 12 per cent respectively along with domestic passenger traffic in revenue
passenger kilometre (RPK) recorded the fastest growth in the world at about 20 per cent
for over 50 consecutive months.” Discuss the different factors which contributed in rise of
India’s domestic aviation sector.
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46 www.iasscore.in
CHAPTER: 9
SERVICES SECTOR
/ Introduction
$ 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 services sector growth declined marginally to 7.5 per cent in 2018-19 from 8.1 per cent in 2017-18.
! Accelerated sub-sectors: Financial services, real estate and professional services.
! Decelerated sub-sectors: Hotels, transport, communication and broadcasting services.
$ Services share in employment is 34 per cent in 2017. India’s services sector does not generate jobs in
proportion to its share in GVA.
Services Sector Performance in India’s GVA
Share in GVA Growth % Growth %

2018-19 2017-18 2018-19
Total Services (Excluding Construction) 54.3 8.1 7.5
Trade, hotels, transport, communication

18.3 7.8 6.9
and services related to broadcasting
Financial, real estate & professional

21.3 6.2 7.4
services
Public administration, defence& other

14.7 11.9 8.6
services
! State-Level Services Sector Performance: Services Sector Share in GSVA in2017-18 (percent)
> State with maximum service sector share in state GDP: Chandigarh (88%), Delhi (84%) Karnataka
(65%)
> State with least service sector share in state GDP: Gujarat (35.5%), MP (35.3%), Sikkim (30.3%)
! Trade in Services Sector
> Computer & ICT services, business services and travel services account for about 75 per cent of the
total services exports.
> The rising services trade surplus has helped finance nearly 50 per cent of India’s trade deficit as of
2017-18.
> 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.
! Steps taken by Government to boost Services Export
> In order to boost services exports, the Service Exports from India Scheme (SEIS) launched which
covers business services, education services, health services, tourism and travel related services,
transport services etc.
> Government has also created a dedicated fund of Rs. 5,000 crore for financing sectoral initiatives
under the Champion Services Sector Scheme.
> Under this scheme, various domestic policy reforms critical to enhance the competitiveness of
services exports, including on data privacy/security and e-commerce, would be pursued through
the Ministries concerned.
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! FDI into Services Sector

> FDI equity inflows towards the services sector accounted for more than 60 per cent of the total
FDI equity inflows in India.
> FDI equity inflows towards services sector fell by 1.3 per cent from the previous year.
! Services Sector Gross Value Added versus Employment
> 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.
> Among top 15 economies in terms of GDP and Services GVA in 2017, India ranks the second lowest
after China in terms of services share in Gross Value Added (GVA) and ranks the lowest in terms of
services share in employment.
> Compared to the experience of other countries, services share in India’s employment at 34 per cent
is significantly lower than services share in GVA at 54 per cent.
> The services sector expansion in the recent decades has been unable to generate proportionate
employment, especially in the formal sector.
> This suggests that there lies immense potential for employment generation in the services sector in
the coming years in line with other countries.
! Major Services: Sector-wise Performance and Some Recent Policies
> While sub-sectors within the services sector slowed down in 2018-19, some others accelerated.
> IT-BPM and cargo traffic continued to recover in terms of absolute numbers but the growth rate
declined.
> Growth of aviation sector declined mainly on account of slowdown in international airline passenger
traffic.
> The tourism sector also experienced a sharp slowdown in 2018.
> The Telecom sector, however, continued to grow at a rapid pace led by wireless internet
subscriptions.
! Tourism:
> 10.6 million foreign tourists received in 2018-19 compared to 10.4 million in 2017-18.
> The Ministry of Tourism launched the ‘National Mission on Pilgrimage Rejuvenation and
Spiritual, Heritage Augmentation Drive’ (PRASHAD) in January 2015 with the objective of
pilgrimage infrastructure at selected important pilgrimage destinations.
> Under the Swadesh Darshan Scheme, the Ministry of Tourism has identified 15 thematic circuits
for development.
> India currently has around 18 per cent of the global medical tourism market. ‘Medical Visa’ has
been introduced, which can be given for specific purpose to foreign travellers coming to India for
medical treatment.
! Steps required to boost Tourism:
> The co-ordination mechanism of various like-minded Ministries and Stakeholders to resolve issues
for promotion of tourism in the country needs to be strengthened.
> State/UT Government need sensitization about tourism as a major driver of employment and
poverty alleviation.
> Budgetary allocation for development of tourism infrastructure should be increased.
> Land should be made available for hotels and reserve land for hotels in all new townships under
planning.
> Fast-track clearances for hotel projects.
> Increase skill development efforts to train more persons.
> Make the Taxation regime on Hospitality Industry globally competitive.
! IT –BPM Services
> The Indian IT-BPM industry grew by 8.4 per cent in 2017-18 to US$167 billion (excluding
e-commerce but including hardware) from US$154 billion in 2016-17, as per NASSCOM data.
> The Indian Information Technology /Information Technology enabled Services (IT/ ITeS) industry has
contributed immensely in positioning the country as a preferred investment destination amongst
global investors and creating huge job opportunities in India, as well as in the USA, Europe and
other parts of the world.
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! Media & Entertainment Services

> The Media and Entertainment sector comprises mainly of television (44%), print (18%), radio (2%),
films (10%), music (1%), digital advertising, over the top (OTT-film and television content delivered
over internet), visual effects (VFX) and gaming.
> Technology has rapidly changed the profile of this sector especially in the area of content and
carriage.
> Audio–visual services have been identified by the Government (2018) as one among the 12
Champion Service sectors for focused development so as to reap its full potential.
! Space Services
> Over the last three decades, space technology has matured from providing simple mapping
applications to development of complex models, decision support and early warning systems,
incorporating space and derived inputs. Satellite launch services and satellite database mapping
and Geospatial services are areas in which India is making a mark and has huge potential for the
future.
> India became the sixth nation to develop this highly coveted complex cryogenic rocket
propulsion technology and also paved the way for the development of a high thrust Cryogenic
engine & stage for the next generation launch vehicle i.e. GSLV Mk-III.
> Bhuvan Services: ISRO’s Bhuvan Geo-portal provides multi sensor, multi-platform and multi
temporal Satellite Imagery, thematic maps and satellite data-derived information related to Earth
Observation & Disaster Management Support.
> Mapping and Geo-spatial Services: Periodic assessment of state of natural resources like
vegetation, land cover, snow & glacier and wetland is also being carried out, in addition to national
level assessment of status of wastelands and land degradation.
! Important Statistics:
> No. of internet subscriber: 570 million (373 million urban and 197 million rural) as of November
2018
> TV penetration reached 66 per cent in the country
> Smart-phone users : 340 million in 2018
! The National Policy on Electronics, 2019 (NPE, 2019)
6 NPE 2019 launched by the Ministry of Electronics and Information Technology (MeitY) to boost IT
sector has following important component:
> Creating eco-system for globally competitive ESDM sector.
> Promotion of electronic components manufacturing ecosystem.
> Special package of incentives for mega projects.
> Encouraging industry-led R&D and innovation and promoting start-up eco-system in all sub-sectors
of electronics, including emerging technology areas such as 5G, IoT/ Sensors, artifcial intelligence
(AI), machine learning, augmented reality (AR) and virtual reality (VR), drones, robotics, additive
manufacturing, gaming and entertainment, photonics, nano-based devices, medical electronics,
defence and strategic electronics, automotive electronics, cyber security, power electronics and
automation.
> Providing incentives and support for skill development including re-skilling, in the ESDM sector.
> Promoting research, innovation and support to industry for green processes and sustainable e-waste
management, emphasis on cyber security and promoting trusted electronics value chain initiatives
to improve India’s national cyber security profile etc.
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CHAPTER: 10
SOCIAL INFRASTRUCTURE,
EMPLOYMENT
& HUMAN DEVELOPMENT
Important terms
Gender Budgeting:
$ The Ministry of Women and Child Development (MoWCD) as the Nodal agency has adopted the mission
strategy of ‘Budgeting for Gender Equity’ to ensure that government budgets are planned according
to the differential needs of women and men and accordingly prioritized. Gender Budgeting is concerned
with gender-sensitive formulation of 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 follow-up corrective action to address gender disparities. It is undertaken
through several institutional mechanisms such as Gender Budget Statement, Gender Budget Cells, as well
as various schemes/programmes for women and girls.
$ In the Gender Budget Statement of 2019-20, 30 Ministries/Departments reported having schemes with women’s
component, amounting to approximately 5 percent (Rs. 1,31,699.52 Crore) of the total Union Budget.
/ Introduction
India is committed to achieve SDGs anda strong social infrastructure is a key to achieve them. The Government
has been focusing on provisioning of assets such as schools, institutes of higher learning, hospitals, access to
sanitation, water supply, road connectivity, affordable housing, skills and livelihood opportunities. This gains
significance given the fact that India is home to the world’s youngest population as half of its population is below
the age of 25. It has also been estimated that demographic advantage in India is available for five decades from
2005-06 to 2055-56, longer than any other country in the world (UNFPA, 2018). This demographic advantage can
be reaped only if education, skilling and employment opportunities are provided to the young population.
/ Human Development Index

$ India’s HDI (Human Development Index) has improved significantly over the years between 1990 and 2017.
The country’s HDI value increased from 0.427 to 0.640, but its position is still lowest among its peer countries
(Asian and developing economies).
$ As per the UNDP Human Development Index (HDI), India is ranked 130 among 189 countries. Moreover,
India also reflects inter-State disparities in regional and human development which are reflected by State level
HDIs.
$ The 2017 HDI scores indicate that the States like Kerala, Goa, Himachal Pradesh and Punjab occupy the top
four positions while the States like Bihar, UP and MP are at the bottom of the rankings.
$ The region-wise trend of HDI scores suggests that most Southern and Northern States have performed much
better as compared to their Eastern counterparts who have registered poor performance in SHDIs.
/ Sustainable Development Goals

The 2030 Agenda for Sustainable Development as reflected in the 17 Sustainable Development Goals (SDGs)
and 169 targets, calls for global partnership to ensure peace and prosperity for people and the planet, now and
into the future. It is recognized that ending poverty and other deprivations must go hand-in-hand with strategies
that improve health and education, reduce inequality and spur economic growth in a sustainable manner.
50 www.iasscore.in
$ SDGs Targets and Achievements in Health - Goal 3: Good Health & Well-Being
Global Targets India’s Achievements
1 By 2030, reduce the global MMR to less India’s MMR during 2014-16 was 130.
than 70 per 100,000 live births.
2 To reduce Neo-natal mortality to at least In 2016, Neo-natal mortality rate of India

as low as 12 per 1,000 live births by was 24.
2030.
3 To reduce under-5 mortality to at least as In 2016, under-5 mortality rate of India

low as 25 per 1,000 live births by 2030. was 39.
$ SDGs target and achievements in Education - Goal 4: Quality Education

Global Targets India’s Achievements
1 By 2030, ensure that all girls and boys U-DISE provisional data shows that the
complete free, equitable and quality all India gross enrolment ratio (GER)
primary and secondary education under elementary education is 93.55 per
leading to relevant and effective learning cent during 2016-17, while it is 79.35 per
outcomes. cent in secondary education.
2 By 2030, ensure equal access for all India’s GER is significantly lower in higher
women and men to affordable and education. The MHRD provisional data
quality technical, vocational and tertiary for the year 2017-18 indicates that the
education, including higher education. GER in higher education is 25.8 per cent
(18-23 years).
3 By 2030, eliminate gender disparities in India’s gender parity index (GPI) shows
education and ensure equal access to an improvement in girls’ education at
all levels of education and vocational all levels of education, except higher
training for the vulnerable, including education. In the case of Scheduled
persons with disabilities, indigenous Tribe (ST) students, the GPI value is<1
peoples and children in vulnerable indicating disparity between girls and
situations. boys in primary education.
4 By 2030, ensure that all youth and a The total literacy rate is 73.0 per cent
substantial proportion of adults, both in 2011 for the age group 7 and above
men and women, achieve literacy and having 80.9 per cent and 64.6 per cent
numeracy. for male and female respectively.
/ Gender Issues
$ As the World aspires to achieve the SDGs by 2030, one of the most important factors which will determine
whether countries achieve their targets set under SDGs will be ‘gender equality’ (SDG-5).
$ The Government of India has initiated several programmes like Beti Bachao, Beti Padhao (BBBP), Ujjwala
Scheme, Poshan Abhiyaan, Pradhan Mantri Matra Vandana Yojana etc., to mainstream women and make
women active agents of change in the society.
$ As far as financial inclusion in India is concerned, significant progress has been made during the last decade.
At all India level, the proportion of women having a bank or saving account that they themselves use have
increased from 15.5 percent in 2005-06 to 53 percent in 2015-16.
$ As per NFHS-4, participation of currently married women in household decision-making has increased from
76.5 percent in 2005-06 to 84 percent in 2015-16 at all India level. States like Chhattisgarh, Goa, Himachal
Pradesh, Kerala, West Bengal and North Eastern States are front runners in terms of women’s participation in
household decision making compared to other States.
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/ Trends in Social Sector Expenditure

$ The expenditure on social services by the Centre and States as a proportion of GDP has registered an increase
of more than 1 percentage points during the period 2014-15 to 2018-19 (BE), from 6.2 per cent in 2014- 15
to 7.3 per cent in 2018-19 (BE).
$ The increase was witnessed across all social sectors especially education where the public expenditure as a
percent of GDP increased from 2.8 per cent in 2014-15 to 3 per cent in 2018-19.
$ The share of expenditure on social services out of total budgetary expenditure increased from 24.9 per cent
in 2013-14 to 26 per cent in 2018-19.
Item 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

RE BE
(Rs. in crore)
Total Budg- 30,00,299 32,85,210 37,60,611 42,65,969 48,57,990 53,61,181

etary
Expenditure
Expenditure 7,46,391 7,67,622 9,15,500 10,40620 12,52,943 13,93,643

on Social
Services
of which:
i) Education 3,48,267 3,53,589 3,91,881 4,34,974 4,92,544 5,66,770
ii) Health 1,39,280 1,48,791 1,75,272 2,13,119 2,54,365 2,76,083
iii) Others 2,58,844 2,65,243 3,48,348 3,92,527 5,06,034 5,50,790
As percentage to GDP
Expenditure 6.6 6. 2 6.6 6.8 7.3 7.3

on Social
Services
of which:
i) Education 3.1 2.8 2.8 2.8 2.9 3.0
ii) Health 1.2 1.2 1.3 1.4 1.5 1.5
iii) Others 2.3 2.1 2.5 2.6 3.0 2.9
As percentage to total expenditure
Expenditure 24.9 23.4 24.3 24.4 25.8 26.0

on Social
Services
of which:
i) Education 11.6 10.8 10.4 10.2 10.1 10.6
ii) Health 4.6 4.5 4.7 5.0 5.2 5.1
iii) Others 8.6 8.1 9.3 9.2 10.4 10.3
As percentage to social services
i)Education 46.7 46.1 42.8 41.8 39.3 40.7
ii) Health 18.7 19.4 19.1 20.5 20.3 19.8
iii) Others 34.7 34.6 38.0 37.7 40.4 39.5
52 www.iasscore.in
$ Social services include, education, sports, art and culture; medical and public health, family welfare; water
supply and sanitation; housing; urban development; welfare of SCs, STs and OBCs, labour and labour welfare;
social security and welfare, nutrition, relief on account of natural calamities etc.
$ Expenditure on ‘Health’ includes expenditure on ‘Medical and Public Health’, ‘Family Welfare’ and ‘Water
Supply and Sanitation’.
$ Expenditure on ‘Education’ pertains to expenditure on ‘Education, Sports, Arts and Culture’.
$ The ratios to GDP at current market prices are based on 2011-12 bases.
$ Major Social Protection Schemes and Achievements during 2014-2019

Scheme Features Status
Pradhan Mantri Surak- Accident insurance scheme, As on 31/10/2018, gross

sha Bima Yojana, 2015 offers a one-year accidental enrolment is 14.27 crore. Amount of
death and disability cover. claims raised: Rs. 449.82 crore
Annual premium is Rs. 12.
Available to people in the age
group between18 to 70 years
Pradhan Mantri Government-backed life As on 31/10/2018, gross enrolment is

JeevanJyoti Bima Yo- insurance scheme. Annual 5.57 crore, Amount of claims raised:
jana, 2015 premium is Rs. 330. Available Rs. 2422.54 crore
to people between 18 and 50
years of age
Atal Pension Yojana, Pension scheme targeted at In 2017-18, total subscribers enrolled
2015 the Unorganized sector. were 97.05 lakh
Pradhan Mantri Fasal A Crop Insurance Scheme. Kharif 2017: 13.7 million farmers
Bima Yojana, 2016 Replaces the existing two received compensation of Rs.
schemes National Agricultural 17209.94 crore.
Insurance Scheme as well as
the Modified NAIS.
Pradhan Mantri Vaya Pension Scheme exclusively As on 30/11/2018, 3.31 lakh

Vandana Yojana, 2018 for the senior citizens aged 60 subscribers, corpus of Rs. 22,812.75
years and above. crore
Atal Bimit Vyakti Kaly- For Insured Persons (IP) To benefit 3 crore insured persons
an Yojana, 2018 covered under the Employees’ under ESIC coverage
State Insurance Act, 1948.
Relief payable in cash in
case of unemployment and
while they search for new
engagement.
Pradhan Mantri Rojgar 12 per cent of employer Number of establishments benefitted

Protsahan Yojana contribution to EPFO of the between 2016-17 & 15th January, 2019
new employees ‘drawing was 1.24 lakh.
salary upto Rs. 15000 pm is
given by government for the
initial three years.
PM Shram-Yogi Offers every individual with As on 20th June, 2019 30.67 lakh
Mandhan Yojana, a regular pension after they subscribers
2019 attain 60 years. Beneficiaries in
unorganized sector workers.
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PM-KISAN, 2019 Offers income support of As on 23rd April, 2019, around 3.10
Rs. 6000 per annum in three crore small farmers have received the
equal instalments to all first tranche of Rs. 2,000 and 2.10 crore
eligible farmers irrespective of farmers have got the second
land holdings. instalment.
Ayushman Bharat, Umbrella scheme of two major As on 11th January, 2019, 4503HWCs
2018 health initiatives: operationalized.
(i) Health & Wellness Centres PMJAY: as on 30th Dec, 2018, no.
to provide to comprehensive of hospitals empaneled: 16,112,
primary health care. beneficiaries admitted: 6.81 lakh,
(ii) PMJAY aims to cover 10.74 e-cards issued: 39.48 lakh.
crore poor & vulnerable
families providing health
coverage upto Rs. 5 lakh per
family per year for secondary
& tertiary hospitalization.
National Nutrition Ensure attainment of Scheme rolled out in all

Mission or POSHAN malnutrition free India by districts of 36 States/UTs. Mass
Abhiyaan 2022. Targeted intervention in media campaign and information
areas with high malnutrition dissemination at grassroots level being
burden. undertaken. September 2018
observed as Rashtriya Poshan Maah.
Mission Indra- To vaccinate unreached/ As of 12th April, 2019, 3.39 crore children
dhanush (MI) and partially reached pregnant immunized of which 81.79 lakh fully
Intensified Mission women and children so as to immunized. Under IMI, full
Indradhanush (IMI) reduce vaccine preventable immunization coverage in 190
under-5 mortality rate. districts increased from 50.5
The drive is focused on percent to 69 percent as per Coverage
pockets of low immunization Evaluation Survey, 2018 conducted
average and hard to reach by WHO and UNDP.
areas where proportion of
unvaccinated and partially
vaccinated children and
pregnant women is high.
Pradhan Mantri Awas Housing for All by 2022 PMAY - Urban: 80.96 lakh houses
Yojana-Rural & Urban sanctioned and 25.69 lakh houses
completed as on 27th May, 2019.
90lakh houses completed in PMAY
Gramin during 2017-19.
Swachh Bharat 100 per cent open defecation Urban areas of 21 States/UTs
Mission-Urban +Rural free by 2019 declared ODF 5.33 lakh villages in 25
States/UTs declared ODF.
/ Status of Education in India

$ Goal 4 of Sustainable Development Goals (SDGs) on education requires ensuring equitable, inclusive and
quality education along with promotion of lifelong learning opportunities for all by 2030.
$ As per Educational Statistics at a Glance (ESAG), 2018, the thrust on providing primary education has
yielded results across social categories and gender in Gross Enrolment Rate (GER). Over the years, remarkable
progress has been made in respect of female participation up-to secondary level and GER for girls has
exceeded that of boys. But girls’ enrolment rate is lower than that of boys at the higher education level. At this
level, the gap is visible across the social categories too.
54 www.iasscore.in
$ GER (per cent), Drop-out Rate (per cent) and Pupil Teacher Ratio at levels of
Schooling
Drop-Out Rate Pupil Teacher Ratio

Level GER (2016-17)
(2016-2017) (2015-16)
Primary Male: 94.02 Male: 6.3 23 (30 - RTE)

Female: 96.35 Female: 6.4
Upper Primary Male: 86.90 Male: 4.97 17 (35 - RTE)

Female: 95.19 Female: 6.42
Secondary Male: 78.51 Male: 19.97 27 (30 – Secondary

Female: 80.29 Female: 19.81 level laid down in the
relevant Scheme)
Senior Male: 54.93 Male: .6.37 37

Secondary Female: 55.91 Female: 5.49
Higher Male: 26.3 NA 30

Education Female: 25.4 NA
·
$ As per Annual Status of Education Report (ASER, 2018), from 2014 to 2018, there is a gradual improvement
in both basic literacy and numeracy for Class III students but still only a quarter of them are at grade level
(ability to read and do basic operations like subtraction of Class II level). The report also shows that 1 out of 4
children leaving Class VIII are without basic reading skills (ability to read at least at Class II level).
$ The Rules of the RTE Act were amended in February, 2017 to include, for the first time, the class wise, subject
wise Learning Outcomes till Class VIII, thereby emphasising the importance of quality education.
$ National Achievement Survey (NAS) which was earlier based on textbook content, has been made a
competency-based evaluation from 2017.
· (Norm) 2015-16
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). For first
time, it also includes provisions for support at pre-school level, library grants and grants for
sports and physical equipment. The vision of the Scheme is to ensure inclusive and equitable
quality education from pre-school to senior secondary stage in accordance with the Sustainable
Development Goal (SDG) for Education (SDG-4).
$ Swayam platform offers 10 courses of Diploma in Elementary Education (D.El.Ed) and more than
13 lakh unqualified teachers have enrolled for this diploma.
$ UDISE+, an updated online real time version of UDISE (Unified District Information on School
Education) has been launched with three additional features – GIS mapping, data verification
through third-party mobile application and data analytics.
$ PGI, Ministry of Human Resource Development has launched a 70-point Performance Grading
Index (PGI) to assess areas of deficiency in each state’s school education system so that targeted
interventions can be made at every level from pedagogy to teacher training.
$ ICT driven initiatives: Shaala Sidhi (to enable all schools to self-evaluate their performance),
e-Pathshala (providing digital resources such as textbooks, audio, video, periodicals etc.) and
Saransh (an initiative of CBSE for schools to conduct self-review exercises).
/ Skill Development
According to NSSO Report 2011-12, only 2.3 percent of the total workforce in India had formal sector skill training.
Keeping in view the predominance of young population, the Government had formulated the National Policy on
Skill Development & Entrepreneurship, 2015 under which the Skill India Mission by 2022 was formulated.
www.iasscore.in 55
$ Skilling in India: Recent Government Initiatives
Initiatives Objectives Achievements
Pradhan Mantri During 2015-16, 19.8 lakh youth were trained

Mobilize youth to take up
Kaushal Vikas as against the target of 24 lakh
industry relevant skill training.
Yojana (PMKVY) (1.0), Targets to train 1 crore youth
2015 by 2020. Recognizes and
certifies prior learning.
PMKVY version 2 has Short term training: 30 lakh

mandatory provisions for candidates enrolled, 27.9 lakh trained, 12.05
Pradhan Mantri placement tracking. lakhs placed. Placement percentage: 54
Kaushal Vikas per cent.
Yojana (2.0), 2016-20 Recognition of Prior Learning: 22.65 lakh
enrolled, 22.08 lakh trained and 17.84 lakh
assessed out of which 16.60 lakh passed as
on 13th May, 2019
Aspirational Model Training

Pradhan Mantri Till June 2019, 851 PMKKs have been
Centres to be opened in every
Kaushal Kendra,2015 allocated, 601 PMKKs have already been
district.
established.
To promote apprenticeship.
National Appren- Till June 2019, 11.87 lakhs candidate
Consists of Basic Training and
ticeship Promotion registered. 76,860 establishments
On-the-Job Training/Practical
Scheme,2016 registered under the scheme.
Training at workplace.
Creating convergence among As on December 2018, the process of

all skill training activities, disbursements of funds to States/ UTs is
improving quality of skill underway. Regional workshops with States/
SANKALP, 2017 development programmes, UTs are also being held to facilitate roll out.
Creating industry led and
demand driven skill training
capacity.
Creating awareness through As on December 2018, the

industry clusters, integrating operations manual of the project has been
STRIVE, 2017
and enhancing delivery quality prepared.
of ITIs.
/ Bridging the disconnect in the Skilling Ecosystem

$ Approximately 30 percent of the surveyed STT participants in PMKVY were not looking for employment
currently. At implementation level, proper pre-screening on the candidates should be done and ensure
that only eligible candidates are enrolled for the programme. Moreover, stronger facilitation support to avail
MUDRA loan should be provided to PMKVY certified candidates.
$ Skill Voucher can be introduced as a financing instrument given to a beneficiary that enables them to sign up
for vocational education course at any accredited training institute. Once training is completed, the accredited
institution can redeem the voucher from the government.
$ Industry should be incentivized to setup training institutions in PPP mode. Local Industry must be involved
for curriculum development, training modules, provision of equipment, training of trainers etc. Industry can
help in developing a database of instructors for selection of Training providers.
$ The personnel of Railways and other para-military forces could be used for skill training or lending institutional
support in imparting training in hilly, inaccessible and difficult terrains. Local bodies can be used for skill
mapping and creating a data base of youth at local level to assess demand supply gaps.
56 www.iasscore.in
/ Employment Scenario
$ The Periodic Labour Force Survey (PLFS) has been designed to yield annual estimates of the labour force
on employment and unemployment along with quarterly estimates for the urban areas.
$ The first annual PLFS (2017-18) provides quarterly employment statistics for urban areas on Current Weekly
Status (CWS) basis and annual estimates of employment indicators both in rural and urban areas on CWS
and usual status basis.
$ As per PLFS estimates, Labour Force Participation Rate (LFPR) in India has declined to 36.9 per cent in
2017-18 from 39.5 per cent in 2011-12 (NSSO) as per usual status. In rural areas, it has declined by 3.6
percentage points while it has declined by 0.1 percentage points in urban areas.
$ The Worker Population Ratio (WPR) has also shown similar trend. As per usual status, WPR in India has
declined to 34.7 per cent in 2017- 18 from 38.6 per cent in 2011-12 (NSSO). The WPR has declined by 4.9
percentage points in rural areas while it has declined by 1.6 percentage points in urban areas.
$ The unemployment rate (UR) in India stood at 6.1 percent with 5.3 percent in rural areas and 7.8
percent in urban areas as per usual status. As per CWS, the UR was 8.9 percent with 8.5 percent in rural areas
and 9.6 per cent in urban areas.
$ General education of youth has improved to 65.4 per cent for urban females and 65.8 per cent for urban
males. However, 94.3 per cent of those aged 15 or over in urban areas do not have technical education. The
proportion of urban youth who received formal vocational training has improved to 4.4 per cent in 2017-18.
$ PLFS found on average, a male employee earned nearly 1.2-1.3 times the earnings of female regular salaried
worker in 2018. However, self-employed male workers earned 2 times more than the earnings of self-employed
female workers in urban areas in 2018.
$ The net employment generation in the formal sector was higher at 8.15 lakh in March 2019 against 4.87 lakh
in February, 2018. The trend line reflects a positive trend in terms of employment in the formal sector.
/ Status of Health
$ Maternal Health
! Maternal Mortality Ratio (MMR) of India has declined by 37 points from 167 per lakh live births in 2011-
13 to 130 per lakh live births in 2014-16, in a span of three years. Between 1990 and 2015, MMR in India
has declined by 77 percent as compared to 44 percent decline in global average.
$ Child Health
! As per the latest Sample Registration System, 2016 report, the:
6 Under Five Mortality Rate in India is 39 per 1000 live births,
6 Infant Mortality Rate is 34 per 1000 live births, and
6 Neonatal Mortality Rate is 24 per 1000 live births.
! The U5MR has declined at a faster pace in the period 2008-2016, registering a compound annual decline
of 6.7 per cent per year, compared to 3.3 percent compound annual decline observed over 1990-2007.
New Initiatives for Maternal and New Born Health

$ 'LaQshya- Quality Improvement Initiative' was launched in December, 2017 with the objectives of
reducing preventable maternal and new born mortality, morbidity and stillbirths associated with the
care around delivery in Labour room and Maternity OT (Operation Theatre) and to ensure respectful
maternity care.
$ Midwifery initiative: The revision of Nurse Practitioner in Midwifery curriculum is being undertaken
by the Indian Nursing Council to include core competence. The objective is to provide access to
quality maternal and newborn health services, promote natural birthing, ensure respectful care and
reduce over medicalization.
$ Pradhan Mantri Surakshit Matritva Abhiyan (PMSMA): It was launched in 2016 to provide
comprehensive and quality Ante-Natal Care (ANC) to pregnant women on the 9th of every month.
/ Expenditure on Health
$ As per the National Health Accounts Estimates during 2013-14 to 2015-16, there is an encouraging trend
of decreasing Out of Pocket Expenditure (OOPE) and an increase in public health expenditure out of Total
Health Expenditure (THE).
www.iasscore.in 57
$ Public health expenditure (Centre, States and Local Bodies), as a percentage of Total Health Expenditure (THE)
increased from 22.5 percent in 2004-05 to 30.6 percent in 2015-16.
$ Affordability is a key issue in healthcare. In terms of the costs to the Government and for the individuals who
seek healthcare in a country like India, the potential of AYUSH (Ayurveda, Yoga or Naturopathy Unani,
Siddha and Homoeopathy) in reducing health expenses is immense. This aspect has been rightly recognised
by the National Ayush Mission (NAM).
$ ‘JANANI’ scheme of Government of Kerala is an exemplar which has popularised the system of homeopathy
treatment for infertility in public health facilities6. In July to December 2012, the launch year of the pilot
project JANANI, the number of cases at Kannur district was less than 100. However, over time there has
been exponential growth in the number of infertility cases being registered and treated at Kannur District
Homeopathy Hospital.
Ayushman Bharat – a major step towards achieving Universal Health Cov-

erage
$ It is a flagship programme of the Government, which comprises of two interrelated components,
viz. establishment of “Health and Wellness Centres” (HWCs) for delivering Comprehensive
Primary Health Care and “Pradhan Mantri Jan Arogya Yojana” (PMJAY), a health assurance
scheme for preventing the financial hardships in availing in-patient care. This is the strategy
adopted by India to achieve the vision of Universal Health Coverage (UHC) with its underlying
commitment of “leaving no one behind”.
$ The National Health Policy, 2017 recommends strengthening the delivery of primary health care,
through establishment of Health and Wellness Centres and calls for a commitment of two third
of the health budget for Comprehensive Primary Health care. Government of India announced
upgradation of 1, 50,000 Sub Centres and Primary Health Centres to Health and Wellness Centres
by 2022 under Ayushman Bharat.
/ Health Infrastructure in Rural Areas

$ IPHS (Indian Public Health Standards) are a set of uniform standards envisaged to improve the quality
of health care delivery in the country. The upgradation of facilities to IPHS norms can lead to reduction in
maternal mortality. MMR in the States where PHCs were functioning according to IPHS norms ranged between
1.7 per cent (Haryana) to100 per cent (Andhra Pradesh).
$ Andhra Pradesh, Tamil Nadu are the States where higher percentage of PHCs are following IPHS norms,
indicating higher level of antenatal care, thereby reflecting low MMR. Haryana and UP had very low percentage
of PHCs functioning as per IPHS norms and they reflect very high MMR.
‘Kayakalp’: Assuring Quality across Health Systems for Improving Out-

comes
$ The lack of sanitation and hygiene protocols in health care facilities in India could cause for
spreading infections and other diseases. Keeping in view, the urgency of the situation, under the
ambit of National Quality Assurance Programme (NQAP), Kayakalp: Clean Hospital Initiative
was launched in 2015. It is the ramification of Swachh Bharat Abhiyan in public health system.
$ Kayakalp aims to promote sanitation and hygiene in public healthcare institutions. Facilities are
assessed using objective checklist covering seven domains (a) Hospital Upkeep, (b)Sanitation &
Hygiene, (c) Waste Management, (d) Infection control, (e) Support Services (f) Hygiene Promotion,
and (g) Beyond the hospital boundary.
$ The major achievement with the advent of Kayakalp is the improvement of many of the components
of basic amenities related to availability of water, sanitation, hand hygiene, biomedical waste
management and basic environmental cleaning in public health facilities.
/ Rural Development
$ Rural Connectivity:
! The Pradhan Mantri Gram Sadak Yojana launched in 2000 aims to provide 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.
58 www.iasscore.in
! PMGSY is aggressively encouraging use of “Green Technologies” and non-conventional materials like
waste plastic, cold mix, geo-textiles, fly-ash, iron and copper slag etc. in rural roads. This is to reduce the
“Carbon Footprint” of rural roads, reduce environmental pollution, increase the working season and bring
cost effectiveness. Using “Green Technologies”, 28,619 km of roads have been constructed and a record
road length of 14,756 km was constructed in 2018-19.
! 62 million tonnes of solid waste is generated daily in India and 8 per cent of this is plastic waste. Recycling
is the best way to manage plastic waste. PMGSY is recycling waste plastics in a novel way by constructing
roads out of recycled plastics. 12,666.52 kms of roads have been constructed across the country using
waste plastic.
$ Rural Housing (PMAY-G): Shelter for the Poorest of the Poor

! Pradhan Mantri Awas Yojana (Gramin) was launched in 2016 with a target to complete one crore pucca
houses with basic amenities by March 31, 2019.
! During 2014-2019, 1.54 crore houses were completed including those carried over from Indira Awas
Yojana.
! On account of DBT, geo tagging, fair beneficiary selection, effective transaction based MIS, monitoring
through “AwaasSoft” and mobile based application “AwaasApp” etc, misutilization of funds was
substantially brought down leading to faster completion of houses.
$ Mahatma Gandhi National RuralEmployment Guarantee Act (MGNREGA)

! It aims to enhance livelihood security of households in rural areas of the country by providing at least one
hundred days of guaranteed wage employment in a financial year to every rural household whose adult
members volunteer to do unskilled manual work.
! Creation of productive assets of prescribed quality & durability, social inclusion, gender parity, social
security and equitable growth are the foundational pillars of Mahatma Gandhi NREGA.
! MGNREGS has been instrumental and a guiding factor for tackling rural poverty and unemployment by
providing employment to the rural poor and unskilled people. It has generated 267.96 crore person-
days during 2018-19. Out of the total person-days, person-days for women were 54.6 per cent, SC was
20.7 per cent and ST was 17.4 per cent which are well above the norms. During 2018-19, 66 per cent of
total works taken up pertained to individual beneficiary schemes and 63 per cent of the total expenditure
was on agriculture and allied works. Around 85,000 km of road length was constructed under MGNREGA
during 2018-19.
Practice Question
$ The role of women is critical not only across agriculture and industrial sectors but also in
governance, education and health services. In this regard, analyze the various steps taken by
the Government of India to mainstream women and make women active agents of change
in the society.
$ The schooling system improves the educational level of the population. It is skill training
that equips the youth to enter the labour market and improves their employability. But
there is disconnect in the skilling ecosystem. Suggest measures to bridge this disconnect.
$ Discuss on how Pradhan Mantri Gram Sadak Yojana has contributed in the rural connectivity
and in managing plastic waste.
**********
www.iasscore.in 59
UMMARY OF
Economic urvey 2017-18
Volume - I & II
www.visionias.in +91 8468022022

Vision Summary 2017-18 DELHI | JAIPUR | PUNE | HYDERABAD 109
ECONOMIC SURVEY SUMMARY 2018 – VOLUME 1 & 2
Table of Contents
VOLUME 1 _____________________________________________________________________ 2
Chapter 01: State of The Economy: An Analytical Overview and Outlook for Policy ________________ 2
Chapter 02: A New, Exciting Bird’s-Eye View of The Indian Economy Through the GST ______________ 7
Chapter 03: Investment and Saving Slowdowns and Recoveries: Cross-Country Insights for India _____ 9
Chapter 04: Reconciling Fiscal Federalism and Accountability: Is There A Low Equilibrium Trap? ____ 11
Chapter 05: Is There A “Late Converger Stall?” In Economic Development? Can India Escape It? _____ 14
Chapter 06: Climate, Climate Change and Agriculture _______________________________________ 17
Chapter 07: Gender & Son Meta-Preference: Is Development Itself an Antidote? _________________ 20
Chapter 08: Transforming Science and Technology in India ___________________________________ 22
Chapter 09: Ease of Doing Business’ Next Frontier-Timely Justice _____________________________ 25
VOLUME 2 ____________________________________________________________________ 28
Chapter 01: An Overview of India’s Economic Performance in 2017-18 _________________________ 28
Chapter 02: Review of Fiscal Developments _______________________________________________ 31
Chapter 03: Monetary Management & Financial Intermediation ______________________________ 33
Chapter 04: Prices and Inflation ________________________________________________________ 35
Chapter 05: Sustainable Development, Energy & Climate Change _____________________________ 37
Chapter 06: External Sector ____________________________________________________________ 40
Chapter 07: Agriculture and Food Management ___________________________________________ 44
Chapter 08: Industry & Infrastructure ____________________________________________________ 47
Chapter 09: Services Sector ____________________________________________________________ 53
Chapter 10: Social Infrastructure, Employment & Human Development ________________________ 55
Copyright © by Vision IAS

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transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise,
without prior permission of Vision IAS.
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DELHI | JAIPUR | PUNE | HYDERABAD 8468022022
VOLUME 1
CHAPTER 01: STATE OF THE ECONOMY: AN ANALYTICAL OVERVIEW
AND OUTLOOK FOR POLICY
Introduction
The chapter gives an overview of Indian economy in the light of major reforms undertaken during last year
as well as the preceding year. It analyses the global growth prospects and the inherent risks thereto. Under
outlook for Indian economy, it analyses the factors which could push it ahead in FY 2018-19.
Overview of the Indian Economy
Short term
During the past year, the government has undertaken some major reforms. These include launch of GST,
actions taken to address Twin Balance Sheet (TBS) challenge, resolution framework under Indian
Bankruptcy Code (IBC), and a recapitalization package (about 1.2 percent of GDP) to strengthen the balance
sheets of the public sector banks (PSBs).
Decoupling of Indian Economy
• In the first half, India’s economy
Until early 2016, India’s growth had been accelerating when
temporarily “decoupled,”
growth in other countries was decelerating. But then the
(decelerating as the rest of the world
converse happened. The world economy embarked on a
accelerated). However, it remained synchronous recovery, but India’s GDP growth—and indeed a
the second-best performer amongst number of other indicators such as industrial production, credit,
major countries, with strong and investment—decelerated. This is referred to as “decoupling”.
macroeconomic fundamentals. Reasons for decoupling
• In the second half of the year, the
• India’s tight monetary conditions contributed by depressing
economy witnessed robust signs of consumption and investment and caused the rupee to
revival. Economic growth improved as strengthen, dampening both net services exports and the
the shocks began to fade, corrective manufacturing trade balance.
actions were taken, and the global • Demonetization and GST: Demonetization temporarily
economic recovery boosted exports. reduced demand and hampered production, especially in the
As a result, India improved its ranking informal sector. GST affected supply chains.
by 30 spots on the World Bank’s Ease • The TBS challenge has reduced investment and consequently
of Doing Business rankings, and economic activity and, hence growth.
foreign direct investment (FDI) • Oil prices increase since 2017
increased. • sharp falls in certain food prices that impacted agricultural
incomes.
The concerns relating to macro-economic
stability still remain as fiscal deficit, current account deficit and inflation were all higher than expected.
Medium term
Going forward in the medium term, there is a need to draw broader lessons for the Indian economy:
• Promote cooperative federalism. Spirit of cooperative federalism, as evident in creation of the GST
Council should be used to address difficult structural reforms that involve the states. For example, to
create a common agricultural market, integrate fragmented and inefficient electricity markets, solve
interstate water disputes, implement direct benefit transfers (DBT), make access to social benefits
portable across states, and combat air pollution.
• Facilitating “exit”: Over the last 50 years India had gone from “socialism with limited entry to
marketism without exit.” Indian Bankruptcy Code (IBC) and proposed Financial Resolution and Deposit
Insurance (FRDI) Bill will address this problem in the Indian corporate sector and financial sector
respectively.
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8468022022 DELHI | JAIPUR | PUNE | HYDERABAD
• Rationalize government resources: Significant
Public provision of private goods & services
progress has been made in providing bank accounts, • 74% of household in rural India have toilets.
cooking gas, housing, power, and toilets (amongst However, only 91% of these households
others). However, there is a need to convert actually use them
increased physical availability into greater actual • More than 30 crores Jan Dhan accounts have
use: toilet building into toilet use, bank accounts been opened. Out of which approximately 22
into financial inclusion, cooking gas connections into crores have linked it with Adhaar. Moreover,
consistent gas offtake, and village electrification into zero balance accounts have also reduced
extensive household connections. drastically.
• India has two underlying macroeconomic • As of January 2018, 16.3 lakhs houses have
been built under Pradhan Mantri Awas Yojana
vulnerabilities, its fiscal and current accounts, both
- Gramin and 3.2 lakh were built under Indira
of which tend to deteriorate when oil prices rise. Awa Yojana
o Overcoming the fiscal vulnerability requires • Over 32 million gas connections have been
increasing the tax-GDP ratio and halting the provided under Ujjwala and 79% of these
steady conversion of contingent liabilities into connections came back for refill.
actual ones (typically through the assumption of
state discom debts and public sector bank recapitalization).
o The current account vulnerability can be addressed by export growth. This can be achieved by
reviving manufacturing and increasing the international competitiveness of manufacturing.
• Maintaining a balance between attacking corruption and reducing its cost: While there are significant
social and economic benefits to attacking corruption and weak governance, addressing those
pathologies entails cost and challenges viz impacting growth and informal sector (due to
demonetisation). Thus policy design must minimize these costs wherever possible.
3
• There should be greater reliance on using incentives and carrots than on sticks; greater focus on
addressing the flow problem (the policy environment that incentivizes rent-seeking) than the stock
problem.
• Clarity on the role of markets and state, private capital and public institutions. India is in a grey zone
of uncertainty on the role of state and markets. Limitations on state capacity (center and states) affect
the delivery of essential services such as health and education. At the same time, the introduction of
technology and the JAM (Jan Dhan—Aadhaar— Mobile) architecture, now enhanced by the Unified
Payments Interface (UPI), holds the potential for significant improvements in such capacity.
• Addressing meta challenges: Last year’s survey identified three meta-challenges: addressing inefficient
redistribution; accelerating the limited progress in delivery of essential public services, especially health
and education; and correcting the ambivalence toward property rights, the private sector, and price
incentives. This year’s survey has identified following new issues: Education, Agriculture and
employment.
Way Forward for Indian economy
Over the coming year, the government need to
• Focus on the 4 R’s of the TBS—recognition, resolution, recapitalization, and reforms. It needs to ensure
that the process of resolving the major indebted cases and recapitalizing the PSBs is carried to a
successful conclusion.
• stabilize GST implementation to remove uncertainty for exporters, facilitate easier compliance, and
expand the tax base;
• privatize Air- India; and
• stave off any nascent threats to macroeconomic stability, notably from persistently high oil prices, and
sharp, disruptive corrections to elevated asset prices.
The Global Outlook
• According to the International Monetary Fund (IMF), the global economy is experiencing a near-
synchronous recovery. Roughly three-quarters of countries experienced improvements in their growth
rates.
• The recovery is driven by improvement in world trade in goods and services, upswing in commodity
prices, accommodative monetary policies in advanced regions, buoyant demand conditions etc.
• However there are geo-political and geo-economic risks: war in the Korean peninsula; political
upheaval in the Middle East; aggressive output cuts by Saudi Arabia (and Russia) which could force oil
prices even higher; China’s unprecedented credit surge in the form of capital controls, slowdown in
growth and trade tensions.
• There are risks on the macrofinance front in advanced economies due to possibility of correction in
asset valuation, and bond and equity prices due to possible increase in interest rates.
Outlook for Indian Economy for 2017-18
Economic Activity
• Recovery is taking hold as reflected in a variety of indicators, including overall GVA, manufacturing
GVA, the IIP, gross capital formation and exports. Similarly, real non-food credit growth has rebounded.
The flow of non-bank resources to the corporate sector, such as bond market borrowing and lending by
NBFCs, has increased, substituting in part for weak bank credit. Rural demand is recovering.
• The re-acceleration of export growth and deceleration of import growth suggest that the
demonetization and GST effects are receding. Services export and private remittances are also
rebounding.
• However, while the direction of the indicators is positive, their level remains below potential. IIP
growth is low, real credit growth to industry is still in negative territory, and the growth in world trade
remains less than half its level of a decade ago. Moreover, even though the cost of equity has fallen to
low levels, corporates have not raised commensurate amounts of capital, suggesting that their
investment plans remain modest.
4
Macro-economic Indicators
• Headline inflation has increased recently. The recent upswing in inflation stems from rising global oil
prices, unseasonal increase in the prices of fruits and vegetables, and the 7th Pay Commission housing
rent allowances.
• The current account deficit has also widened in 2017-18. Despite these developments, the overall
external position remains good. The current account deficit is well below the 3 percent of GDP
threshold beyond which vulnerability emerges. Meanwhile, foreign exchange reserves have reached a
record level of about $432 billion.
Fiscal Developments
• The fiscal deficit has breached the norms, largely because of a shortfall in non-tax revenue, reflecting
reduced dividends from government agencies and enterprises. Expenditure also increased due to the
advancing of the budget cycle by a month which gave considerable leeway to the spending agencies to
plan in advance and start implementation early in the financial year.
• GST revenue collections are robust despite being it in the initial phase.
• Government measures to curb black money and encourage tax formalization, including demonetization
and the GST, have increased personal income tax collections substantially (excluding the securities
transactions tax). From about 2 percent of GDP between 2013-14 and 2015-16, they are likely to rise to
2.3 percent of GDP in 2017-18, a historic high. The number of taxpayers have substantially increased
post demonetisation. After November 2016, 10.1 million filers were added compared with an average
of 6.2 million in the preceding six years.
Outlook for Indian Economy for 2018-19
If macro-economic stability is kept under control, the ongoing reforms are stabilized, and the world
economy remains buoyant, growth could start recovering towards its medium term economic potential of
at least 8 percent.
5
The components of demand that will influence the growth outlook:
• The acceleration of Understanding the Stock Market Boom: Is India Different?
global growth will Over the past two fiscal years, the Indian stock market has soared, outperforming
provide a solid boost many other major markets. This has led to a convergence in the price-earnings
to export demand. ratios of the Indian stock market to that of the US. Yet over this period the Indian
• Private investment is and US economies have been following different paths:
expected to increase. • The stock market surge in India has coincided with a decelaration in economic
However it will growth, whereas US growth has accelerated.
depend on the • India’s current corporate earnings/GDP ratio has been sliding since the Global
resolution and Financial Crisis, while profits in the US have remained healthy.
recapitalization • Real interest rates have diverged substantially. Rates in the US have persisted
process. If this process at negative levels, while those in India have risen to historically high levels.
moves ahead Why stock market convergence then?
expeditiously, Two factors seem to be at work:
stressed firms will be • First, expectations of earnings growth are much higher in India.
put in the hands of • Second is demonetization. The government’s campaign against illicit wealth
stronger ownership, over the past few years—exemplified by demonetization, has reduced returns
allowing them to in gold, property etc. This led to increased investment in stock markets.
resume spending.
• Consumption demand: On the positive side, it will be helped by the likely reduction in real interest
rates in 2018-19. At the same time, increase in average oil prices will crimp real incomes and spending.
Resultant tighter monetary policy to meet the inflation target will increase real interest rates which
could exert a drag on consumption.
• Increased exports can help in increasing the growth.
• Implementation of the IBC process: Timelines in resolution and acceptance of the IBC solutions must
be a priority to kick-start private investment.
• Persistently high oil prices (at current levels) remain a key risk. They would affect inflation, the current
account, the fiscal position and growth, and force macro-economic policies to be tighter than
otherwise.
Way forward
• India seems poised to achieve its medium term economic potential of at least 8 percent growth rate.
However it needs to guard against an emerging market “sudden stall” induced by sharp corrections to
elevated stock prices.
• Also for the coming year, the fiscal policy should target a reasonable fiscal consolidation i.e. modest
consolidation that credibly signals a return to the path of gradual but steady fiscal deficit reductions.
A case study on Export packages: The Clothing Package of 2016
Importance points related to apparel sector:
• Has immense potential to drive economic growth, increase employment, and empower women in India.
• Space vacated by China with its share of global apparel exports coming down in recent years. However, India has
not capitalized on this opening with countries like Vietnam and Bangladesh quickly filling the space left by China.
The export package: Rs. 6,000 crore package for the apparel sector including rebates on state levies (ROSL) to offset
indirect taxes levied by the state.
Three main findings emerge:
• The package increased exports of readymade garments (RMG) made of man-made fibres (MMFs) and its impact
increased gradually over time.
• The package did not have a statistically positive impact on RMG made of other fibres (silk, cotton, etc.
A policy implication is that the GST Council should conduct a comprehensive review of embedded taxes arising from
products left outside the GST (petroleum and electricity) and those that arise from the GST itself (for example, input
tax credits that get blocked because of “tax inversion,”). This review should lead to an expeditious elimination of these
embedded export taxes, which could provide an important boost to India’s manufacturing exports.
6
CHAPTER 02: A NEW, EXCITING BIRD’S-EYE VIEW OF THE INDIAN
ECONOMY THROUGH THE GST
Theme
This chapter provides a brief insight from the data provided by GST from different perspectives - indirect
taxpayers, composition and analysis of tax base of different firms, states' trading trends and informality of
economy. Thus, it provides a radical alteration and enlargement in the understanding of the Indian
Economy.
Introduction
Apart from GST’s potential to create one Indian market, expand the tax base and foster cooperative
federalism, data from the GST can help unveil and understand some long-elusive and basic facts about the
Indian economy. Some new findings include:
Composition scheme
1) Taxpayers:
Taxpayers (with turnover less than 1.5
• There has been a fifty percent increase in the number
crore) registered under this scheme pay a
of indirect taxpayers; and a large increase in voluntary
small tax (1%, 2% or 5%) on their turnover.
registrations, especially by small enterprises that buy
It reduces administrative burden of
from large enterprises and want to avail themselves of
taxpayers but makes it difficult for them to
input tax credits. More than 54.3% of those eligible to sell to larger firms as they are not eligible
register under the composition scheme chose instead for input tax credits.
to be regular filers.
2) Tax base and its spatial distribution:
• The distribution of the GST base among the states is closely linked to their Gross State Domestic
Product (GSDP), allaying fears of major manufacturing states that the shift to the new system (with
GST being a destination and consumption-based tax) would undermine their tax collections;
• The top states are Maharashtra (16 percent), Tamil Nadu (10 percent), Karnataka (9 percent), Uttar
Pradesh (7 percent), and Gujarat (6 percent).
• For manufacturing states, though the tax base under the GST is lower than their respective share of
manufacturing. However, due to significant presence in services as well, overall fairness is
maintained in GST outcomes with tax base share being in line with GSDP
3) Size distribution of inter-firm transactions:
• Registered smaller firms (less than Rs. 5 crore) seem to be equally involved in B2C and B2B
transactions whereas medium and large firms have a much greater presence in B2B than B2C
transactions.
• Not only small B2B firms but also small B2C firms voluntarily chose to register under GST.
Therefore, they not only sell but also buy from large enterprises (with 68 percent of their purchases
being from medium or large registered enterprises) and secure input tax credits.
4) International Trade, Interstate Trade and Economic Prosperity:
• Data on the international exports of Data on inter-state trade
states (the first in India’s history) • Five states—Maharashtra, Gujarat, Karnataka, Tamil
suggests that conventional wisdom is Nadu & Telangana—in that order account for 70% of
correct with a state’s GSDP per capita India’s exports.
(standard of living) being highly • The five largest importing states are Maharashtra, Tamil
correlated with its export share in Nadu, Uttar Pradesh, Karnataka and Gujarat;
GSDP (Kerala being an outlier due to • The states with the largest internal trade surpluses are
large remittances). Gujarat, Haryana, Maharashtra, Odisha and Tamil Nadu.
• Internal trade is about 60% of GDP, even greater than estimated in last year’s Survey and
comparing very favorably with other large countries. Two observations related to inter-state trade
include:
o The states that export the most are also the ones that import the most.
7
o The states that trade the most are the ones that are the most competitive and run the largest
trade surpluses.
5) Trading Superstars: Indian Export Egalitarian Exceptionalism:
• Exports superstars are firms that account for a disproportionately large share of exports. India’s
exports are unusual in that the largest firms account for a much smaller share than in other
comparable countries:
Share in exports
Other major countries India
top 1% firms 55-72 38
top 5% firms 74-91 59
top 25% firms 93-99 82
• The possible reason could be that unlike in other countries, Indian data includes exports of services,
where concentration ratios in top firms tend to be much lower than in manufacturing.
• The implication, however, of such an egalitarian export structure are unclear as concentration in
favor of few firms can have advantages (spillover effects on other firms & dynamism) as well as
disadvantages (impeding competition).
6) Informality of the Indian Economy:
• Major findings related to magnitude of formal sector firms are 87% of firms are purely informal
(outside both social security and tax nets), 12% of firms are under tax net but not social security net
and less than 0.1% are in social security net and not in tax net
• India’s formal sector non-farm payroll is substantially greater than currently believed. Its estimate
is ranging from 31% in the case of social security-defined formality and 53% in case of tax-defined
formality.
The survey analyses Informality (or rather formality) in Social security provided
two ways: • In form of pensions & provident funds -
• Social security provided by firms Government provides this for its employees and the
• Firms under tax net Employees’ Provident Fund Organization (EPFO) to
There are many different definitions of formality/ private sector employees. EPFO contribution is
informality. The most common ones are: mandatory for firms employing greater than 20
workers and whose monthly salary is below 15000.
• whether a worker has a formal contract
Above that, contributions are voluntary.
• whether a worker is a regular/salaried worker (as
• In respect of medical benefits - Employees’ State
opposed to self-employed or casual)
Insurance Corporation (ESIC) provides it. ESIC
• whether a firm is registered with any branch of the contribution is mandatory for firms employing
government; greater than 10 workers and whose monthly salary
• whether the firm pays taxes and is below 21000.
• whether a worker receives social security.
8
CHAPTER 03: INVESTMENT AND SAVING SLOWDOWNS AND
RECOVERIES: CROSS-COUNTRY INSIGHTS FOR INDIA
Theme
This chapter studies the pattern of investment and saving slowdowns as well as recoveries in order to
obtain policy lessons for India. This is in context of India’s unique trajectory of unprecedented climb to
historic high levels of investment and saving rates in the mid-2000s followed by a pronounced, albeit
gradual, decline which is still ongoing.
Introduction
• There is a firm belief that domestic saving and investment will soon start to accelerate and help the
Indian economy revert to 8-10 percent growth.
• But this cannot be taken for granted as neither saving nor investment is actually unduly depressed.
Investment (gross fixed capital formation) rate and gross domestic saving rate are actually above the
levels that prevailed throughout the 1990s.
• After the exceptional boom of the 2000s in domestic saving and investment rates (9 percentage point
pick-up), the subsequent slide in investment and saving (as a percent of GDP) has merely brought
these rates back towards normal levels.
• However, such sharp swings in investment and saving rates have never occurred in India’s history.
• The decline in private investment and household/government saving was the main reason behind the
recent saving/investment decline in India.
Identifying Investment and Saving Slowdowns
Some important observations include:
• Investment slowdown episodes are more frequent than saving episodes, while common episodes (both
investment and saving slow) are relatively unusual.
• However, owing to concerted efforts in emerging economies to revive investment after the Global
Financial Crisis via stimulus and other policies, there has been relatively lower number of investment
episodes recently.
• Investment and saving slowdowns tend to be similar in duration. However, investment slowdowns are
greater in magnitude and is more prone to extreme events.
• India’s current investment/saving slowdown episode has been lengthy compared to other cases
(investment slowdown started in 2012 and saving slowdown started in 2010) – and it may not be over
yet.
Saving Versus Investment: Growth Consequences
• On the question of prioritizing boosting investment or saving, the standard solution that is often
prescribed is that both problems - slump in saving and investment - need to be tackled simultaneously.
However, the issue is about relative importance and urgency.
• The survey along with other studies observes that policies should focus on encouraging investment,
rather than saving, to boost growth.
Recovery from ‘India-Type’ Investment Slowdowns
India’s investment slowdown is unusual in that:
• It is relatively moderate in magnitude, long in duration and started from a relatively high peak rate of
36 percent of GDP.
• It is a balance sheet-related slowdown. In other words, many companies have had to curtail their
investments because their finances are stressed, as the investments they undertook during the boom
have not generated enough revenues to allow them to service the debts that they have incurred.
9
Implications of balance-sheet slowdowns
• Investment declines flowing from balance sheet problems are much more difficult to reverse. In these
cases, investment remains highly depressed, whereas in case of non-balance-sheet slowdowns the
shortfall is smaller and tends to reverse.
• India’s investment decline so far (8.5 percentage points) has been unusually large when compared to
other balance sheet cases. Due to this, it has paid moderate costs in terms of growth. Between 2007
and 2016, rate of real per-capita GDP growth has fallen by about 2.3 percentage points.
Way forward
To reverse the investment slowdown, the government has already launched a policy agenda; first with the
step-up in public investment since 2015-16; and policies to decisively resolve the Twin Balance Sheet
challenge. These steps will have to be followed up, along with complementary measures:
• Easing the costs of doing business further, and creating a clear, transparent, and stable tax and
regulatory environment.
• Creating a conducive environment for small and medium industries to prosper and invest will help
revive private investment. The focus of investment-incentivizing policies has to be on the big and small
alike.
10
CHAPTER 04: RECONCILING FISCAL FEDERALISM AND
ACCOUNTABILITY: IS THERE A LOW EQUILIBRIUM TRAP?
Theme
The chapter throws light on the issues related to fiscal federalism, taxation, and accountability. It makes a
commentary on own-resources generated by different tiers of government and draws important
conclusions. This is important because the better the performance in generating own revenue via taxes, the
stronger accountability is expected to be.
Introduction
• Taxation is not just a vehicle for raising state revenue but can also be critically important for economic
and political development. Taxation is the economic glue that binds citizens to the state in a necessary
two-way relationship as part of the social contract.
o The state's role is to create the conditions for prosperity for all by providing essential services and
protecting the less well-off via redistribution.
o The citizen's part of the contract is to hold the state accountable. But a citizen's stake in exercising
accountability diminishes if he does not pay in a visible and direct way for the services the state
commits to providing.
• Also, economic and institutional development is stunted when countries rely on non-tax sources of
government revenues as illustrated by “aid” and “natural resource” curses.
Direct taxation and development: General Government Why more focus on direct tax?
• As the name itself suggests, direct taxes are
• Economic and political development has been felt more by the taxpayer. Direct taxes feel
associated with a rising share of direct taxes in total more like expropriation because they
taxes. reduce citizens’ disposable income, the
o Advanced countries collect a substantially earnings that they get to keep.
higher proportion of their taxes as direct taxes • With indirect taxes, citizens are burdened
than do emerging markets. For instance, direct but that sense is leavened to the extent that
taxes account on average for about 70 percent citizens feel they are exercising choice.
of total taxes in Europe.
• Even though, India is not an outlier with its direct tax share being similar to other countries at a
comparable stage of development, India has the lowest share of direct taxes in total taxes.
o However, unlike in other countries its reliance on direct taxes seems to be declining, a trend that
will be intensified if the Goods and Services Tax (GST) proves to be a buoyant source of revenue.
Direct taxation and development: Sub-federal levels
• Own direct tax collections by Indian states and local governments are significantly lower than those of
their counterparts in other federal countries.
Resources received by the states as part of successive Finance Commission verdicts – Devolved or shared? To answer
this, following points need to be considered:
• It is difficult to dispel the association (in the eyes of taxpayers) of the Center with the income taxes and customs
duties that form a major part of the divisible pool.
• If the Center were a mere collecting agency the funds would be apportioned according to states’ tax bases; they
would not have sizable redistributive components.
• GST provides a sharp contrast in that it is clearly more “shared” because decisions and tax administration are
done by both.
• In sum, whatever their de jure status, de facto resources from the divisible pool to the states have the strong
whiff of devolution.
11
• India’s urban local governments (ULGs), meanwhile, are much closer to international norms. This is
evidence that ULGs have emerged more fiscally empowered than RLGs so far in India
Local governments: what do we know?
• Over the past two decades, local governments have gained prominence as institutions with substantial
‘say’ in grassroots development issues, albeit with significant spatial variations, and spaces of intense
political contestability. However, the tied nature of a considerable part of resource flow constrains
spending autonomy in RLGs.
• Expenditure patterns of different tiers of government: The central and state governments spend on an
average 15-20 times more per capita than do RLGs. ULGs spend about 3 times more. More importantly,
this gap has persisted over time despite per capita spending by RLGs increasing almost four-fold since
2010-11.
• Overwhelming reliance on devolved funds:
o ULGs are different: ULGs generate about 44 per cent of their total revenue from own sources.
RLGs, in contrast, rely overwhelmingly (about 95 percent) on devolution. Per capita own revenue
collected by ULGs is about 3 per cent of the urban per capita income while the corresponding figure
is only 0.1 per cent for RLGs.
o Variation across states - Broadly, there are two categories—RLGs of those States that collect some
direct taxes and own tax revenue (e.g. Kerala, Andhra Pradesh and Karnataka in our sample), in
contrast to RLGs of states like Uttar Pradesh that almost entirely depend on transfers. This variation
is much starker in case of RLGs than ULGs.
o Due to the overwhelming reliance on devolved funds which, to a large extent, are tied to sectors
and schemes, the gram panchayats (GP) spend the bulk of such funds on earmarked areas, such as
roads, other basic services, sanitation and community assets. The spending on purely local public
goods like irrigation are not a priority out of such funds.
12
State and local governments: posing an entirely different question
• Standard discourse has primarily focused on the following:
o Inadequate tax and expenditure devolution: Successive Devolution Reports of the Ministry of
Panchayati Raj (MoPR) show that the share of revenues assigned to local governments in many
states are much less vis-à-vis expenditure assignments. For example, the permissible taxes for
panchayats include property and entertainment taxes but not land taxes or tolls on roads (except
local panchayat roads).
o State Finance Commission’s recommendations: As per the latest MoPR Devolution Report (2015-
16) the percentage of acceptance of such recommendations varies from as low as 11 percent in
Karnataka to above 50 percent in West Bengal, Andhra Pradesh and Rajasthan to full acceptance in
Kerala.
However, much less examined has been a different question: given their powers to tax, how have they
performed and whether they have collected revenues close to the potential conferred by these powers.
• Property taxes are the principal sources of direct tax The property taxes collected at the second
revenue at the third tier of government, apart from and third tiers of government are-
professional taxes. The collections from these • land tax assessed and collected at the
potentially buoyant sources of revenue are generally state level; and
stacked at very low levels because of archaic base • building tax, including property/house
tax, collected at the municipality (ULG)
values—far below market values—applied to properties,
and gram panchayat (RLG) levels.
low rates of taxes levied, and lack of powers to local
bodies in some states like Odisha and Rajasthan.
• Further, the under-collection of direct taxes relative to potential afflicts the Center (in UTs where the
central government assumes this responsibility) as much as the other two tiers.
Conclusion
• There is a broader challenge—afflicting all tiers of government—in the limited ability to collect direct
taxes. Given the quality of public service delivery, such taxes are often viewed as a "tribute" rather
than a contribution to the state in raising the quality of life. One consequence is middle-class exit to
more privately-provided services (safety, health, and education) that only serves to exacerbate the
problem.
• Future discussions of devolution and decentralization must identify and solve underlying problems as
local governments could remain stuck in a low equilibrium trap. That is, the fiscal model of the states
and third tier institutions could forever be based on outside resources which come with weak
accountability mechanisms and weak own-resource generation capacity. This is perhaps the heart of
the governance challenge in India.
13
CHAPTER 05: IS THERE A “LATE CONVERGER STALL?” IN ECONOMIC
DEVELOPMENT? CAN INDIA ESCAPE IT?
Theme
The chapter focuses on convergence process (poorer countries closing gaps with richer countries in
standards of living) that has been broadening and accelerating for the last 20-30 years. Identifying certain
challenges, it talks about potential slowdown in the process of lower middle income countries. It also lists
policy lessons for India to avoid “late convergence stall”.
Survey talks about 4 categories of
Introduction
economies, viz-
• In last few decades, the global goods (standards of living, • Low-income- Real Per Capita Income
access to essential services & material well-being more less than 5% of the US.
generally) have improved drastically, especially among the • Lower middle income- Real Per Capita
poor countries. Income of about 5-15% of the US
• A major driver of these developments has been the • Upper Middle Income- Real Per Capita
process of poorer countries “catching up” with richer Income of about 15-35% of the US.
countries and closing gaps in the standard of living • High Income- All those above that
line- including some above US’ level.
between the two, also known as “economic convergence”.
• The poor countries continue to catch up so rapidly that the process has been called as “convergence
with a vengeance”.
• Following two trends justify the broadening of this process-
o Substantial increase in the number
Middle Income Trap
of poor countries growing faster • The doubts about the convergence process have been
than advanced economies. articulated around the notion of “middle income trap”,
o Accelerated rate of catch up under which the middle income countries would have grown
among these economies. slowly as expected because of two fold reasons-
• However, there are fears that there o On one hand, as the countries attain middle income
could be a slowdown for the “late status, they would be squeezed out of manufacturing
converger stall” (the countries that and other dynamic sector,
joined the process of convergence o One the other hand, they would lack the institutional,
human and technological capital to carve out niches
after the Global Financial Crisis (GFC)),
higher up the value added chain.
due to 4 possible headwinds that
• However, denying such fears the middle income countries
were absent for early convergers like continued to grow faster than the convergence standard
Japan & Korea. demanded. Rather, the poorest have been growing faster
Why such Scepticism? than the lower middle income countries that in turn have
been growing faster than the richest.
• The scepticism emerges from the fact
that after GFC, there was a sharp decline in rates of growth across the world. Even if the rate of decline
among the lower income countries was lower as compared to the richer ones, there is a scepticism
regarding a “late converger stall” for countries like India who are looking to pace up their convergence
process. The major reasons behind the worry are-
o Hyperglobalization Repudiation- Gravity Model of Trade-
▪ The hyperglobalization (that benefited the • It says that if there is convergence there
early convergers) led to a backlash in the would also be increased trade.
• Two equal size countries will experience
advanced countries, as seen through their
higher trade as compared to a scenario
de-facto moves in the direction of seeking
where one big country is responsible for the
and forcing lower trade GDP ratios to majority part of the trade.
protect their domestic economies and • Due to convergence the world is increasingly
interests (reflected in the decline in world becoming equal which means higher trade.
trade GDP ratio since 2011).
▪ This means that similar trading opportunities may no longer be available for the new
convergers.
14
▪ For few countries like India, there might not be such external constraint on growth due to such
changes in trends in global trade. But it may impact lower and middle income countries as a
group.
o Thwarted Structural Transformation: good growth and sustainable growth:
▪ The manufacturing sector is identified as a critically important sector for ensuring
transformation. Further, there are two structural transformations important for the successful
development-
✓ Shift of resources from low productivity to high productivity
✓ Larger share of resources devoted to sectors that have potential for rapid productivity
growth.
▪ However, in many cases there has been “thwarted structural transformation”, i.e. shift from
informal/low productivity sectors to ones that are marginally less informal/more productive.
▪ This is why “premature de-industrialization”, the
Good Growth- involving desirable
tendency for manufacturing in late convergers to peak
structural transformations.
at lower levels of activity and earlier in the Less Good Growth- Growth in sectors
development process, is a cause of concern. like hotels, restaurants, transport, etc.
▪ Also, there is a negative share of good growth over
time along with weakening of the positive correlation between growth and good growth.
▪ There are various outliers to the convergence process in this regard like India and China.
China’s good growth persists and India’s share of the same declined.
▪ However, such cases are very few and it would be more prudent not to rely on permanent
exceptionalism.
o Human Capital Regression:
▪ Unlike early convergers (whose human capital endowment aligned with the sector associated
with structural transformation, i.e. manufacturing), the current situation is going to be tough
for late convergers because-
✓ They failed to provide even basic education Learning Poverty Count- measures the
necessary for some structural transformation. number of children who do not meet the
basic learning benchmark.
✓ Human capital frontier for the new structural
Learning Poverty Gap- Takes into account
transformation has shifted further away how far each student is from the
making the transformation costlier. This is benchmark.
because advents in technology would require
skilled human capital which would have greater adaptability and ability to learn continually.
▪ As opposed to these requirements, there is a wider educational attainment gap between lower
income countries and advanced economies. If this gap persists or widens, the kind of
transformation enjoyed by the early convergers might prove more difficult for late convergers.
▪ This gap is highly stark for India given its absolute Learning Poverty Count between 40-50%
and Learning Poverty Gap is about 25% for reading and a little lower for math.
o Climate change-induced Agricultural Stress-
▪ For late convergers, the agricultural productivity is crucial both for feeding people and for
ensuring human capital accumulation in those who move from agriculture to modern sector.
▪ The agricultural growth rates of richer countries have been consistently greater than for
developing countries in each time period. While for the poorest, these growth rates have even
declined post-GFC.
▪ The reason behind this is the impact of change in temperature. For example in India,
agriculture is vulnerable to temperature increase and heavily dependent on precipitation.
India’s Case
• In 1960, India was a low-income country with per capita income around 6% of the US. However India
attained status of lower middle income in 2008 with per capita income of about 12% of the US.
• But the growth has occurred with limited transfer of labour resources to high productivity and dynamic
sectors, despite relatively modest agricultural growth. Thus, the late converger stall risk remains for
India too.
15
Way Forward
• The key to India’s dynamic and sustainable growth trajectory will be-
o Rapidly improving Human Capital- healthy individuals, including all women, with the basic
education to continually learn and adapt.
o Rapidly improving agricultural productivity- against the headwinds of climate change and water
scarcity.
• Along with this, the hyperglobalization repudiation must also recede to create a favourable external
climate to sustain rapid growth.
• There is no late converger stall for India as yet but it would be wise to act to head it off.
16
CHAPTER 06: CLIMATE, CLIMATE CHANGE AND AGRICULTURE
Theme
This chapter pursues three objectives - first, to document the changes in climactic patterns in temperature
and rainfall. Second, to estimate the effects of fluctuations in weather on agricultural productivity. And
finally, to use these short-run estimates in conjunction with predicted changes in climate over the long-run
to arrive at estimates of the impact of global warming on Indian agriculture. In the end, while calling for
review of the cereal-centric policy, some policy implications have been given.
Overview
Need to focus on agriculture The survey calls this focus on agriculture for
transition to other sectors an irony. However,
• Agriculture accounts for a substantial part of GDP (16 this does not mean neglecting farmers rather
percent) and employment (49 percent). Poor making them more productive. This is because
agricultural performance can lead to inflation, farmer the transition itself requires rapid productivity
distress and larger political and social disaffection. growth in agriculture, to produce greater food
• Raising productivity in agriculture will facilitate supplies for the people, provide rising farm
transition to more productive sectors of the economy. incomes, and permit the accumulation of
human capital.
Long run agricultural performance
• Real agricultural growth since 1960 has averaged about 2.8 percent in India. However, China’s annual
agricultural growth over the long run has exceeded that of India by a substantial 1.5 percentage points
on average.
Reason behind persistent volatility in
• Even though the volatility of agricultural growth in
agriculture - Agriculture in India continues to be
India has declined substantially over time, it continues vulnerable to the vagaries of weather because
to be high as compared to China where the ups and close to 52 percent (73.2 million hectares area
downs have been virtually eliminated. of 141.4 million hectares net sown area) of it is
still un-irrigated and rainfed.
17
Documenting changes in climatic patterns
Temporal and spatial patterns of temperature and precipitation
• The average increase in temperature between the • Temperature increases have been particularly
most recent decade and the 1970s is about 0.45 felt in the North-East, Kerala, Tamil Nadu,
degrees and 0.63 degrees in the kharif and rabi Kerala, Rajasthan and Gujarat. On the other
seasons respectively. hand, Punjab, Odisha and Uttar Pradesh have
• During the same period, rainfall for kharif and Rabi been the least affected.
season has declined on average by 26 millimeters • Rainfall deficiencies are more concentrated in
and 33 millimeters respectively. Annual average Uttar Pradesh, North-East, and Kerala,
rainfall has on average declined by about 86 Chattisgarh and Jharkhand. While, there has
actually been an increase in precipitation in
millimeters.
Gujarat, Odisha and Andhra Pradesh.
• The imprint of climate change is also manifested in • This suggests that spatially temperature
the increasing frequency of extreme weather increases and rainfall declines seem to be
outcomes- weakly correlated.
o proportion of dry days (rainfall less than 0.1
mm per day), as well as wet days (rainfall greater than 80 mm per day) has increased steadily over
time
o rise in the number of days with extremely high temperatures, and a corresponding decline in the
number of days with low temperatures
Impact of weather on agricultural productivity
The two key findings are:
• Marginal changes in weather have little or no
impact and the impact is felt almost only when
temperature increases and rainfall shortfalls are
extreme.
o These findings have important implications for
the impact of climate change on agriculture,
since most climate change models predict an
increase in extreme weather events.
• Extreme shocks have highly divergent effects
between unirrigated (defined as districts where
less than 50 percent of cropped area is irrigated)
and irrigated areas almost twice as high in the
former compared with the latter.
o Crop impacts - crops grown in rainfed areas—
pulses in both kharif and rabi—are vulnerable to weather shocks while the cereals—both rice and
wheat—are relatively more immune.
Impact on farm revenue
Table 2 shows the impact of extreme shocks on famer
incomes, measured by value of production.
• Here again, the largest adverse effects of weather
shocks are being felt in unirrigated areas.
• Also, these figures indicate that even though lower
supply should increase local prices, here the
“supply shock” dominates, with reductions in
yields leading to reduced revenues.
18
Implication on agriculture performance in the long run
• Climate change models predict that temperatures in India are likely to rise by 3-4 degree Celsius by the
end of the 21st century. These imply that in Another way of looking at the findings:
the absence of any adaptation by farmers • In a year where temperatures are 1 degree Celsius
and any changes in policy (such as higher farmer incomes would fall by 6.2 percent during
irrigation), farm incomes will be lower by the kharif season and 6 percent during rabi in
around 12 percent on an average in the unirrigated districts.
coming years. Unirrigated areas will be the • In a year when rainfall levels were 100 millimetres less
most severely affected, with potential than average, farmer incomes would fall by 15 percent
losses amounting to 18 percent of annual during kharif and by 7 percent during the rabi season.
revenue.
• Based on the observed decline in precipitation over the last three decades, it is found that in
unirrigated areas, farm incomes will decline by 12 percent for kharif crops and 5.4 percent for rabi
crops.
• Models of climate change also predict an increase in the variability of rainfall in the long-run, with a
simultaneous increase in both the number of dry-days as well as days of very high rainfall. This channel
alone would imply a decrease in farm incomes by 1.2 percent.
• These three channels through which climate change would impact farm incomes are likely to be
correlated. Taking these correlations into account, farmer income losses from climate change could be
between 15 percent and 18 percent on average, rising to anywhere between 20 percent and 25 percent
in unirrigated areas. These are stark findings, given the already low levels of incomes in agriculture in
India.
Policy Implications
• In thinking about agricultural policy reforms in India, it is vital to make a clear distinction between two
agricultures in India.
o cereals grown in Northern India— the well-irrigated, input-addled, and price-and-procurement-
supported, where the challenge is for policy to change the form of the very generous support from
prices and subsidies to less damaging support in the form of direct benefit transfers.
o non-cereals in central, western and southern India - inadequate irrigation, continued rain
dependence, ineffective procurement, and insufficient investments in research and technology
(non-cereals such as pulses, soyabeans, and cotton), high market barriers and weak post-harvest
infrastructure (fruits and vegetables), and challenging non-economic policy (livestock).
• India needs to spread irrigation – and do so against a backdrop of rising water scarcity and depleting
groundwater resources. Technologies of drip irrigation, sprinklers, and water management—captured
in the “more crop for every drop” campaign should be accorded greater priority in resource allocation.
Also, the power subsidy needs to be replaced by direct benefit transfers so that power use can be fully
costed and water conservation furthered.
• There is a need to embrace agricultural science and technology. It will not only be vital in increasing
yields but also in increasing reliance to all the pathologies that climate change threatens to bring in its
wake: extreme heat and precipitation, pests, and crop disease, especially important for crops such as
pulses and soyabean that are most vulnerable.
• Building on the current crop insurance program (Pradhan Mantri Fasal Bima Yojana), weather-based
models and technology (drones for example) need to be used to determine losses and compensate
farmers.
India needs bottom-up planning along with benevolent-and-strategic top-down planning and reforms. The
cooperative federalism model of the GST Council that brings together the Center and States could be
promisingly deployed to further agricultural reforms and durably raise farmers’ incomes.
19
CHAPTER 07: GENDER & SON META-PREFERENCE: IS DEVELOPMENT
ITSELF AN ANTIDOTE?
Theme
The chapter makes an assessment of the current status of gender equality in the country considering both
chronological and development time in tandem. It has made critical observations on - comparison with
other countries, heterogeneity within India and issues of son preference. It also throws light on the steps
taken by the government to address the situation.
Introduction
Since independence there have been numerous initiatives for elevating the role and status of women in the
country. As a result of these efforts India has improved on most of the indicators towards greater equality
like increased literacy among women, better health etc. However, there remain few arenas that require
better focus and improved efforts like their participation in the work force etc.
Gender Equality
Gender Equality is inherently a multidimensional issue. The assessments in the survey are made on 3
specific dimensions, viz:
• Agency- relate to women’s ability to make decisions on reproduction, spending on themselves,
spending on households, and their own mobility and health.
• Attitude- relate to attitudes about violence against women/wives, and the ideal number of daughters
preferred relative to the ideal number of sons.
• Outcomes- relate to son preference (measured by sex ratio of last child), female employment, choice of
contraception, education levels, age at marriage, age at first childbirth, and physical or sexual violence
experienced by women.
Need to take stock of progress made towards gender equality
• Apart from inherent benefits of Gender Equality in society, evidences show that there can also be
significant gains in economic growth if women acquire greater personal agency, assume political power
& participate equally in the labour force.
• It is also important to take stock of Gender Equality in society so as to correct a methodological
problem of combining “development time” (based on assessment over the stages of development) and
“chronological time” (based on assessment over
Assessing indicators that India needs to work on-
a period of time) together into one. a) Using reversible contraception- Not many
• It is crucial to measure and utilize both of them women in India use such methods. Thus, women
for an informed policy making. Urgency in only seem to have control over when they stop
actions can be informed by assessments in having children and not on when they start having
chronological time but that must be infused by them.
the understanding achieved from the This may have impact on other milestones early in
development time assessment. a woman’s life. For example, women may not get
same access to employment than men.
Major findings and observations b) Participation in workforce- too has declined
because-
1. Convergence impact on India: 15 out of 17
On supply side, increased incomes of men allow
indicators of gender equality show a positive
women to withdraw from work force.
correlation with wealth in the country (which On demand side, there is a lower demand for
has been more than the effect for other women due to
countries). This means that even if India is • Farm mechanization
lagging in development time, it can expect to • Insufficient availability of type of jobs that
catch up with other countries as household women prefer
wealth increases. • Security concerns & social norms
• The 2 indicators that show a negative
correlation are- participation of women in the labour force & sex ratio of last birth.
20
2. India as compared to other countries: India has improved over time in 12 out of 17 variables between
2005-2015. Further, in 7 out of these 12 indicators India performed either better or at par with cohort
of other developing countries.
3. Heterogeneity within India: All states have improved across all the dimensions except Delhi. There is
also a “convergence” effect where the poorer performers from the earlier period improved their score
over time.
• Most of the North east states (except Tripura & Arunachal) and Goa stand as the best performers at
all points of time followed by Kerala.
• The states that lag behind are Bihar, Rajasthan, Concept of Missing Women
Madhya Pradesh, Uttar Pradesh, Jharkhand & Andhra It is the number of women who go missing
Pradesh. across age groups every year either due to
4. Issues of son preference & son meta preference: The sex selective abortion, disease, neglect, or
biologically determined natural sex ratio is 1.05 males for inadequate nutrition.
every female. There are around 100 million missing
• Son Preference- India’s sex ratio (males for every women around the world, 40 million of
which are in India alone.
female) during the period between 1970-2014
increased substantially from 1060 to 1108.
• However, a negative correlation has been observed between income and sex ratio in the country
• One of the major reasons behind the high sex ratio in India is sex selective abortion as well as the
neglect of the girl child after birth. It reflects an explicit son preference which results in millions of
“missing women”.
• Son-Meta Preference- It is measured by the Sex Ratio Son Meta Preference
of the Last Child (SRLC) • It is a subtler way of son preference
o For India, the sex ratio of the last child for first- which means that parents may choose
to keep having children until they get
borns is 1.82, heavily skewed in favor of boys
the desired number of sons.
compared with the ideal sex ratio of 1.05. This
• It does not lead to sex selective
ratio drops to 1.55 for the second child for abortion but it may be detrimental to
families that have exactly two children and so on. female children because it may lead to
The striking contrast between the two panels fewer resources devoted to them.
conveys a sense of son meta preference. • This form of sex selection alone will not
o It gives rise to “unwanted” girls (girls whose skew the sex ratio. However, this kind
parents wanted a boy, but instead had a girl), of fertility stopping rule will lead to
computed as the gap between the benchmark skewed sex ratios but in different
sex ratio and the actual sex ratio among families directions i.e. skewed in favor of males
that do not stop fertility. It stands at 21 million if it is the last child, but in favor of
females if it is not.
for India.
• A preference for sons will manifest
• Reasons for such a son preference include
itself in the SRLC being heavily skewed
patrilocality (women having to move to husbands’ in favor of boys.
houses after marriage), patrilineality (property
passing on to sons rather than daughters), dowry (which leads to extra costs of having girls), old-
age support from sons and rituals performed by sons.
Conclusion
The challenge of gender inequality is historical and long standing in India, the stakes are equally held by
both the government as well as the society. The government has already taken many steps including-
• Launching schemes like Beti Bachao, Beti Padhao & Sukanya Samridhi Yojana.
• Providing 26 weeks long maternity leave in both public and private organizations.
• Every organization having more than 50 employees is now required to offer creche facility, etc.
21
CHAPTER 08: TRANSFORMING SCIENCE AND TECHNOLOGY IN INDIA
Theme
The chapter gives an insight into the status of science in India by drawing evidences from inputs (R&D
expenditure and number of PhDs) and outputs (publications and patents). It then provides a number of
suggestions for India to recapture the spirit of innovation that can propel it to be a global science and
technology leader-from net consumer to net producer of knowledge.
Need to focus on Science
• It would lay the knowledge foundations to address some of India’s most pressing development
challenges in addition to maintaining a decent, open society, thus acting as a key driver of economic
performance and social well-being.
• It is also important for developing a scientific temper. With its spirit of enquiry, the primacy accorded to
facts and evidence and the ability to challenge the status quo, it can provide a bulwark against the
darker forces of dogma, religious obscurantism, and nativism that are threateningly resurfacing around
the world.
• It is also essential for human security, for combating climate change as well as national security threats
ranging from cyber ware to autonomous military systems such as drones.
Historically, India boasts of many contributions such as More recent accomplishments include nuclear
the first use of zero as revealed by the Bakshali energy program, hybrid seeds program, space
manuscript. However, India now needs to look ahead program, production of vaccines and generic drugs,
of its past laurels and move from being a net consumer participation in LIGO program.
of knowledge to becoming a net producer as it emerges as one of the world’s largest economies.
Status of Science in India - Some Evidence for inputs and outputs
Inputs
• R&D Expenditures
o It has tripled in nominal terms and doubled in real terms since 2004-05 to 2016-17. However, it has
remained stagnant at 0.6-0.7% of GDP over the past two decades. This is well below other
countries such as US (2.8), China (2.1), Israel (4.3) and Korea (4.2).
▪ This is not surprising given the fact that India is a lower middle-income country. However, it
currently underspends even relative to its income level.
o The government is the primary source of fund (compared to other countries where private sector
carries the bulk of R&D) as well as the primary user of these funds.
▪ Further, the Central government undertakes almost entire R&D expenditure with limited State
government spending but spending by state governments is needed especially for application
oriented R&D aimed at problems specific to their economies and populations.
o There is a disconnect between the teaching and research enterprise with research being
concentrated in specialized research institutes under different government departments limiting
universities to largely play a teaching role.
▪ This has led to a situation where universities have students but need additional faculty support,
while research institutes have qualified faculty but are starved of young students.
▪ This is in contrast to the practise followed in many other countries where universities play a
critical role in both creating the talent pool for research as well generating high quality research
output.
• Ph.Ds in Science, Technology, Engineering and Mathematics (STEM)
o In comparison to China, there are less than half Indian STEM Ph.D students in the US. Fewer
students have been enrolling for such degrees either due to lucrative career options after master’s
degree or rising work visa challenges.
o On the other hand, there has been an increase in the no. of Ph.D enrolments in India which can be
attributed to government efforts such as Prime Minister Research Fellowships at IITs. However, if
we look at the overall picture India has fewer researchers than other countries.
22
Outputs – Publications and patents (reflects a country’s prowess in science and technology respectively)
can help assess the productivity and quality of Indian research.
• Publications
o India’s share in global publications increased from 3.1% (2009) to 4.5% (2014).
o However, this increase must be seen with a caution with major catalyst for this being number of
publications being a determinant for the appointment or promotion of a faculty or scientists. There
are many journals that publish non-peer-reviewed manuscript for a substantial fee.
o Overall though, the quality of publications (as measured by highly cited articles) has increased over
the years but it still lags behind China and US.
• Patents
o According to WIPO, India is the seventh largest patent filing office in the world. However, India
produces fewer patents per capita.
▪ While on one hand, India’s lower middle-income status hinders patent output; patents have
grown much faster with income in countries like China, Korea and Japan implying that India
needs a greater focus on R&D along with rising income to catch up.
o India’s patent applications and grants have grown rapidly abroad, however the same is not true at
home. Since joining the international patent regime in 2005, while residential applications have
increased substantially; the number of patents granted fell sharply post 2008 and has remained low.
o The decrease in grants can be due to stricter examination process but more pressing problem is
pendency and backlog applications which could be as a result of less examiners.
o The recent hiring of more examiners by government and creation of an expedited filing system for
Indian residents in 2017 will help fix the system. Moving forward, addressing patent litigation issues
will also be crucial.
Expanding R&D in India: Way Forward
In order to improve Science and R&D in the country, India needs to double its national expenditure on
R&D with larger share of the pie coming from private sector and universities. The metrics need to go
beyond paper and publications to providing value for society.
• Educating its youth in science and mathematics
o Improve Maths and Cognitive Skills at School level: Despite increasing access to primary and
secondary education, learning outcomes have been weak compromising the foundations for future
R&D.
o Link National Labs to Universities and Create new Knowledge ecosystems: Better synergy between
universities and research institutes would fill the gaps of faculty support and young talents and
ensure deep commitment to excellence. Together they can link up with commercial sector, which
requires speed and nimbleness, and help develop industrial clusters.
• Engage private sector, state government and Indian diaspora
o Increase Funding for Research from Private sector as well as from State governments:
▪ The private sector should be incentivised to both undertake and support R&D through CSR
(Corporate Social Responsibility) funds. Along with the current favourable tax law for CSR
investments in R&D, type of eligible activities can be expanded.
▪ Government can also partner with private sector to create new R&D funding opportunities such
as 50:50 partnerships with Science and Engineering Research Board (SERB) for industry relevant
research under Ucchtar Avishkar Yojana (UAY).
▪ State governments also need to invest as it would strengthen state universities and provide
much needed knowledge in areas such as crops, ecology and species specific to a state.
o Leverage Scientific Diaspora
▪ India has the opportunity to attract back more scientists with growing strength of India’s
economy and anti-immigrant atmosphere in some countries. There has been an increase in
scientists returning to India. However, the number has been modest.
▪ Schemes like Ramanujan Fellowship Scheme, the Innovation in Science Pursuit for Inspired
Research (INSPIRE) Faculty scheme and the Ramalingaswami Re-entry Fellowship, Visiting
23
Advanced Joint Research Faculty Scheme (VAJRA) can act as a catalyst in leveraging the
scientific diaspora.
▪ The inducements should be to allow them to do good research (laboratory resources, ability to
hire post-docs, housing etc.) rather than financial, to ensure that home grown talent has level
playing field.
• Greater public engagement of the science and research establishment: National laboratories and other
publicly funded R&D institutions need to make much stronger efforts to engage with the public through
the media or through regular tours and lectures and create broad public support for their work.
• Take a More Mission Driven Approach to R&D in some areas such as:
o National Mission on Dark Matter: It would have implications on future space missions, quantum
computing, newer solutions to energy problems etc. It will not only build on the strong foundations
of astrophysics and astronomy research institutes but will also open up more international
collaborative possibilities.
o National Mission on Genomics: Various countries are involved in projects to study the determinants
and life course of biological pathways and disease. India can make considerable contribution in this
field through its already existing life research institutes.
o National Mission on Energy Storage Systems: In lieu of the fact that India has made a major
commitment to renewable energy and has lagged behind in manufacturing renewable energy
systems, investments in energy storage systems can be a game changer. It will be especially helpful
for round the clock electricity to villages using off-grid renewable energy systems.
o National Mission on Mathematics:
Cyber Physical System (CPS)
Encompassing several initiatives, it would have
• It refers to machine based communication,
an overall goal of rapidly increasing India’s analysis, inference, decision, action, and
human capital and research profile in control in the context of a natural world
mathematics within a decade. • It is a multidisciplinary area including deep
o National Mission on Cyber Physical Systems: mathematics used in Artificial Intelligence,
These are the building blocks of future industry machine learning, Big Data analytics,
which will throw new challenges and blockchains, expert systems, contextual
opportunities. learning to integration of all of these with
o National Mission on Agriculture: It could help intelligent materials and machines, control
overcome the weaknesses in existing systems, sensors and actuators, robotics and
smart manufacturing.
agricultural research institutions and provide a
much needed thrust in agricultural science and technology given the plethora of looming challenges.
• Reform the way research is conducted
o Improve the Culture of Research: Indian science and research institutes need to inculcate less
hierarchical governance systems and encourage risk-taking and curiosity in the pursuit of excellence.
There should also be greater representation of younger scientists in decision making bodies in their
areas of expertise.
o Encourage investigator-led Research: India needs to build upon the establishment of the SERB,
which has sanctioned new R&D projects to individual scientists, with more resources and creative
governance structures.
24
CHAPTER 09: EASE OF DOING BUSINESS’ NEXT FRONTIER-TIMELY
JUSTICE
Theme
Recognizing that economic activity is being affected by the realities and long shadow of delays and
pendency across the legal landscape, this chapter makes an attempt at quantitatively highlighting these
developments. It then suggests certain steps so that Government and the Courts can both work together
for large-scale reforms and incremental improvements to combat a problem that is exacting a large toll
from the economy.
Introduction
• India’s performance in ease of doing business has improved over last few years jumping about 30
places ahead. However, among various individual indicators, India lags behind in terms of enforcing
contracts causing and further accentuating pendency,
Steps taken by government to improve
delays and backlogs in the applellate & judicial arenas. contract enforcement regime-
• A clear and certain legislative and executive regime • Scrapping of over 1000 redundant
backed by an efficient judiciary that fairly and legislations
punctually protects property rights, preserves sanctity • Rationalizing the Tribunals
of contracts, and enforces the rights and liabilities of • Amending the Arbitration & Conciliation
parties provides conducive environment for growth of Act 2015
business and commerce. • Passing the Commercial Courts,
Commercial Division & Commercial
Major Findings Appellate Division of High Courts Act
1. Pendency & Delay- Delays and Pendency of economic 2015
cases have led to issues like stalled projects, mounting • Expanding Lok Adalat programme
legal costs, contested tax revenues and reduced • Reduced intra governmental litigation
• Advancing prospective legislative regime
investments.
for legal consistency
a) Economic Tribunals- Two major patterns have
• Expansion of National Judicial Data Grid.
been noticed regarding appellate tribunals of commercial cases-
• There is high level of pendency of cases. The average age of pending cases across these
tribunals is 3.8 years.
• Pendency has risen sharply over time. In telecommunication & electricity the rise in pendency
is due to interventions by the Supreme Court.
b) High Courts (HC) - As opposed to the expectation, the creation of Tribunals could neither alter
pendency in High Courts nor their ability to deal with other economic cases. Pendency continues to
increase.
• The volume of economic cases is smaller than other case categories, but their average duration
of pendency is worst of most cases at around 4.3 years.
2. Reasons for Pendency & Delay
a) Burden from expansion of Discretionary Jurisdictions in High Courts- A major reason behind the
increasing pendency, apart from increasing number of
Any reductions in pendency were
cases and the complexity of commercial and economic
achieved either due to changes in the
cases, is the expansion of discretionary jurisdiction by counting methodology of pending cases,
courts. or due to changes in pecuniary
• This has not been accompanied by countervailing jurisdictions that led to a mass transfer of
measures such as balancing the scope of other cases from the original side of the High
jurisdictions exercised by HCs or improving overall Courts to District Courts.
efficiency, thereby further aggravating the Art 226 & 227 empower HCs with carefully
problem of pendency. circumscribed writ jurisdiction.
• HCs have extensively interpreted the provisions of Art 226 & 227 of the constitution which has
resulted in a substantial increase in cases.
b) Burden on HCs from Original Side Jurisdiction- Some High Courts retain a unique original
jurisdiction, under which the High Court, and not the relevant lower court, transforms into the
25
Court of first instance for some civil cases. These cases occupy a significant share of the Court’s
docket. The Delhi and Bombay High Courts have original jurisdictions that occupy nearly 10-15% of
their workload.
• Also HCs take longer to clear civil suits as compared to their district court counterparts.
c) Expansion of Special Leave Petition (SLP) Jurisdiction of Supreme Court- Article 136 of
Constitution empowers any party to approach SC directly from any court on Tribunal (initially
invoked in exceptional circumstances).
• The number of SLPs, admitted by SC, has grown from 25% in 2008 to 40% in 2016. This has
increased pendency in SC.
d) Recourse to Injunctions & Stays- Due to injunction 60% of cases are being stayed, whose average
pendency is 4.3 years.
• About 50% of these cases are pending at the stage of pleadings and another 12% of these cases
are pending for final disposal.
3. Cost of Pendency & Delay-
• Numerous projects currently stayed by the court injunction and their average duration of stays lead
to high amount of losses (close to 52,000 crores in six infrastructure ministries)
• In many cases, since the project costs were predominantly debt financed, the likely increase in the
cost of project is estimated to be around 60% given the average duration of stay.
• This has also led to a spiraling of legal expenses of corporate India.
Way forward
To address the situation following steps may be considered-
• There needs to be an expansion in judicial capacity in the lower courts and reducing the existing
burden on the HCs and SC. Following steps may be considered-
✓ Lower Judiciary needs to be
capacitated to particularly deal with Constituting Dedicated subject matter Benches-
economic and commercial cases via • Such benches ensure that the SC speaks in one voice and
amendments to the Code of Civil there is continuity & consistency of legal jurisprudence.
• They allow judges to focus on the specialised branch of
Procedure, Commercial Courts Act &
law placed before them.
other related commercial legislations
• The Supreme Court has been able to control the
and training judges increasing pendency of tax cases by constituting tax
✓ Downsizing or removing original and benches in 2014.
commercial jurisdiction of High • The special bench authored 197 judgements in 2015,
Courts and revisiting the size and nearly 3 times as many passed in the previous three
scale of their discretionary years.
jurisdictions.
✓ Fully utilizing the existing judicial capacity.
• Need to substantially increase expenditure on the judiciary and its modernization (and digitalization).
Legislations must be accompanied by judicial capacity and public expenditure memorandums, which
lays out the necessary provisions required to address increasing judicial requirements and ensure their
adequate funding.
• Given low success rate, tax department should exercise greater self-restraint by limiting appeals. This
may be done via-
✓ Framing ex ante rules
✓ Creation of an independent panel to decide on further appeals
✓ Limiting the number of tiers of scrutiny for taxation cases
• Creating more subject matter and stage specific benches that allow the court to build internal
specializations and efficiencies in combating pendency and delay.
• Reducing reliance on injunctions and stays. Courts may consider prioritizing stayed cases and impose
stricter timelines within which cases with temporary injunctions may be decided.
• Improving the Courts Case Management & Court Automation Systems. initiatives like the Crown Court
Management Services of the UK that are dedicated to the management and handling of administrative
duties, may be considered.
26
Conclusion
• Recent experience with the GST has shown that vertical cooperation between the center and states—
Cooperative Federalism—has brought transformational economic policy changes.
• The horizontal variant of this, called the Cooperative Separation of Powers, could be applied to the
relationship between the judiciary on the one hand, and the executive/legislature on the other.
• This will enable them to preserve their independence and legitimacy and also ensure speedier justice to
help overall economic activity.
27
VOLUME 2
CHAPTER 01: AN OVERVIEW OF INDIA’S ECONOMIC PERFORMANCE
IN 2017-18
Introduction
The chapter gives a bird’s eye view of India’s economic performance in 2017-18 by analyzing the factors
responsible for movement in GDP growth rate, its sectoral composition, movements in savings and
investment rate etc. It also gives the growth prospects for FY 2018-19 and factors that could derail it.
GDP growth in 2017-18
The main difference between nominal and
• India registered average Gross Domestic Product (GDP) real values is that real values are adjusted
growth of 7.5% between 2014- 15 & 2016-17, and was for inflation, while nominal values are not.
among the best performing economies in the world. As a result, nominal GDP/GDP growth will
• However, it is expected to decline to 6.5 per cent in often appear higher than real GDP/ GDP
growth.
2017-18 due to lower growth in ‘Agriculture & allied’,
and ‘Industry’ sector. Despite this, it will be significantly higher than most economies of the world.
• In the recent years, the wedge between the real and nominal GDP growth has narrowed significantly.
From a avg difference of 6 per cent between 2012-13 and 2014-15, it has declined to avg difference of
3% during 2015-16 to 2017-18. This is due to the fact that inflation in the earlier period (particularly in
2012-13 and 2013-14) was significantly higher than the latter period.
• The differences in the nominal growth between GVA (Gross Value Added) and GDP have increased in
the last few years. This is indicative of an increase in the share of net indirect taxes in GDP.
GVA growth of major sectors
• The agriculture sector
registered significantly
higher growth in 2016-17
than the previous two
years on the back of
normal monsoon. Most of
the other crops and non-
crop agriculture sector
also showed significant
growth.
• Public administration,
defence & other services’
sector also registered
growth due to higher
payouts in salaries and
arrears on account of
implementation the Seventh Pay Commission.
• However, growth of industry sector declined in the last financial year. The growth of manufacturing
sector showed an improvement in 2017-18.
• Overall the growth of all three major sectors of the economy viz. agriculture & allied, industries, and
services sectors in second half (H2) of 2017-18 was better than H1 of 2017-18.
• During 2016-17 two sectors viz. ‘Agriculture & allied’, and ‘Public administration, defence & other
services, contributed nearly one-third of the total growth of the economy. In 2017-18, the contribution
of both these sector declined somewhat as the growth of this sector decelerated. The contribution of
industry sector also declined primarily on account of lower growth (due to the slowdown in credit
growth.).
28
Per-capita Income
The real per capita income (measured in terms of per capita net national income at constant (2011-12)
prices) is expected to increase to Rs. 86,660 in 2017-18. In nominal terms to Rs. 111,782 in 2017-18.
Components of GDP growth PFCE includes final consumption expenditure of (a)
• Consumption expenditure has been the households and (b) non-profit institutions serving
major driver of GDP growth in India. households (NPISH) like temples, gurdwaras. The final
Between 2012-13 and 2015-16, it consumption expenditure of households relates to outlays
accounted for nearly sixty per cent of the on new durable as well as non-durable goods (except land)
total GDP growth. This increased to over and on services.
95 per cent in 2016-17, due to higher GFCE: Final consumption expenditure of administrative
growth of both Private Final Consumption departments is equivalent to the current expenditure on
Expenditure (PFCE) and Government Final compensation of employees, purchase of non-durable goods
Consumption Expenditure (GFCE). and services net of sales and the CFC. By convention,
expenditure on durable goods, which are used for defence,
• PFCE has been the single most important
are also treated as part of consumption expenditure of the
driver of GDP growth from 2011-12. In Government.
2016-17, it contributed nearly two-thirds
to GDP growth.
• The share of investment (in particular that of fixed investment) in the GDP continuously declined
between 2011-12 and 2016-17. Although fixed investment is expected to grow at a faster rate in 2017-
18 (thus pointing to some recovery in investment), it is still not high enough to prevent a further
reduction in the share of fixed investment in GDP.
• The share of net exports of goods and services in GDP is negative and is expected to decline further.
Trends in Savings and Investment
• The investment rate (Gross Capital Formation (GCF) as a share of GDP) in the economy declined by
nearly 5.6 percentage points between 2011-12 and 2015-16.
o This was on account of number of factors viz. difficulties in acquiring land, delayed and
cumbersome environmental clearances, problems on infrastructure front, etc. Although many of
these problems have been addressed, the investment rate (mainly fixed investment) has not picked
up.
• The faster decline in investment rate vis-à-vis the savings rate has led to lower level of current account
deficit (Savings Investment Gap) from 2013-14 to 2015-16.
Savings
Savings in an economy originate from households, private corporate sector and public sector (including
general government).
• Household sector:
o The savings of household sector as a ratio of GDP have declined from 23.6 per cent in 2011-12 to
19.2 per cent in 2015-16.
o Household sector accounts for the bulk of the savings. However, the share of household savings in
total savings declined from around 68 per cent in 2011-12 to 59 per cent in 2015-16. Within the
households’ savings, there has been a substitution away from physical to financial assets.
o Financial savings by the households are held mainly in currency, bank deposits, life insurance funds,
provident and pension funds and of late in the form of shares and debentures.
o During 2016-17, saving in the form of currency notes has declined due to demonetization while it
has increased in the form of shares, mutual funds etc.
29
• Public savings that declined to 0.9 per cent in 2014-15, increased again in 2015-16. This could be partly
explained by higher collection of union excise duties, particularly from petroleum products and reduced
level of petroleum subsidy bill of the central government.
• The share of private corporate sector in the total savings increased from 9.5 per cent of GDP in 2011-
12 to about 12 per cent of GDP in 2015-16.
Investment
There has been a consistent reduction in investment rate from close to 39 per cent in 2011-12 to 33.3 per
cent in 2015-16. Gross fixed capital formation (GFCF) accounts for major proportion of Investment.
• Fixed investment rate
(measured by GFCF as a share
of GDP) declined due to twin-
balance sheet problem. This
trend of declining fixed
investment rate needs to be
reversed at the earliest to
realise the potential growth of
over 8 per cent in the years to
come.
• The institution-wise break-up
of the investment in the
economy has undergone
significant changes in the last
few years.
• Assets-wise fixed investment:
o Fixed investment accounts
for around 90 per cent of total investment. Fixed investment is in various assets including
dwellings, machinery & equipment and intellectual property products (IPP), along with small
contribution coming from cultivated biological resources (CBR).
o Household’s investment in dwellings has declined considerably, which is possibly linked to
reduction in the share of household’s savings in the form of physical assets.
Prospects of Growth for 2018-19
• CSO has estimated the GDP growth in 2017-18 to be 6.5 per cent. However, the growth during 2018-19
could be higher, depending on a number of factors.
o Increase in global growth in 2018 will provide further boost to India’s exports.
o Remittances are expected to increase, owing to rising trend in oil prices.
o Stable policy rates along with the favourable interest rate regime in the global markets could
provide greater certainty to the investment climate.
o The reform measures undertaken in 2017-18 are expected to strengthen further in 2018-19 and
will reinforce growth momentum.
• Downside risk to higher growth emanate from higher crude oil prices, protectionist tendencies in some
of the countries, and possibility of tightening of monetary conditions in the developed countries which
could lead to lower capital inflows and financial stress.
Overall, there is a strong possibility of growth in 2018-19 and it could be in the range of 7.0 to 7.5 per cent.
Note: Following parts of chapter have been left, as they are covered in detail in respective chapters:
• PUBLIC FINANCE Covered in chapter 2.
• PRICES AND MONETARY MANAGEMENT Covered in Chapter 3 and 4
• EXTERNAL SECTOR (Covered in chapter 6)
• AGRICULTURE AND ALLIED SECTORS (Covered in Chapter 7)
• INDUSTRIAL, CORPORATE AND INFRASTRUCTURE PERFORMANCE (Covered in Chapter 8)
• SUSTAINABLE DEVELOPMENT, ENERGY AND CLIMATE CHANGE (Covered in Chapter 5)
30
CHAPTER 02: REVIEW OF FISCAL DEVELOPMENTS
Introduction
• During the last few years, the government has focused on improving its public financial management
which has resulted in improved macro-economic stability in the last three years. Building further on
this, the Central Government, in partnership with States, has implemented GST.
• During current FY also the direct tax collections are expected to meet targets and spending plans are
broadly on track.
Trends in Receipts and Expenditure of the Central Government
A. Receipts: As per Economic Survey till November 2017, the gross tax collections of the government are
reasonably on track and Non-debt capital receipts, mainly proceeds from disinvestment, are doing well.
However, the non-tax revenues have under-performed.
B. Expenditure and Deficits:
• Central Government expenditure has progressed at a robust pace due to the advancing of the budget
cycle and processes by almost a month. This gave considerable leeway to the spending agencies to plan
in advance and start implementation early in the financial year. This has also partly contributed to
greater deficits in the current year compared to the previous year so far.
• The fiscal deficit has overshot the budgetary target during April-November 2017 due to the early
progression of expenditure and front-loading of some expenditure, undertaken as part of prudent
expenditure management.
• Revenue expenditure has increased due to increase in:
o Interest payment liabilities (possibly due to outgo on account of servicing the market stabilization
bonds issued to reduce excess liquidity, post demonetization).
o petroleum subsidy due to its increasing prices.
o enhanced outgo on pensions after seventh pay commission.
State and General Government
• After the UDAY-led aberration in their
fiscal balances for the previous two
years, States have consolidated their
finances in the current year. UDAY
bonds had an impact of 0.5 and 0.6
percentage points of GDP on the
deficits of the States in 2015-16 and
2016-17 respectively.
• Both revenue and fiscal deficits as
percentage of the corresponding
budget estimates are lower in the
current year, compared to the previous
year.
• For the general government as a whole,
the Fiscal Deficit as % of GDP has declined (see figure).
Government initiatives to improve fiscal parameters:
a) Salient measures under indirect taxes: The government has introduced GST on 1st July, 2017,
subsuming almost all major indirect taxes. Under GST regime, it has taken various measures to improve
ease of doing business for small traders. Also changes in customs duty were made to incentivize ‘Make
in India’.
b) Salient measures Taken on Direct Taxes:
• Lowering of tax rate on domestic companies with turnover or gross receipts less than or equal to
Rs. 50 Crore in FY2015-16 to 25 per cent from 30 per cent.
31
• Lowering of tax rate on individuals between income of Rs. 2.5 lakhs & 5 lakhs to 5% from 10%
• A new safe harbour regime has been notified for three years with effect from 1st April, 2017 to
reduce transfer pricing disputes, provide
certainty to taxpayers, align safe harbour A safe harbour is a provision of a statute or a
regulation that specifies that certain conduct will
margins with industry standards and enlarge the
be deemed not to violate a given rule. From the
scope of safe harbour transactions. perspective of Transfer pricing provisions, the
• Base year for fair market value and cost inflation safe harbour rules provides a window for the
index has been shifted from 1981 to 2001. taxpayers wherein in case of defined
• Mandatory linking of Aadhaar with PAN circumstances the income-tax authorities shall
database. accept the transfer pricing declared by the
• Income-tax return (ITR) Forms have been taxpayer.
rationalised to make it more objective and The adoption of safe harbour rules provides
taxpayer friendly. many perceived benefits both for taxpayers and
c) Policy Initiatives On Investment Management In the revenue authorities like,
CPSEs: • Advance information or knowledge about
• The government has migrated from the the range of profits or prices to qualify for
‘disinvestment based approach’ to ‘investment the safe. This brings certainty in
based approach’ for CPSEs. transactions.
• Elimination of the possibility of litigation
• Guidelines on “Capital Restructuring of CPSEs”
between taxpayers and revenue authorities.
has been issued with focus on efficient
• Automatic approvals and self-assessment
management of Government’s investment in procedures,
CPSEs by addressing various aspects, such as • Ease in compliance,
payment of dividend, buyback of shares, issues of bonus shares &insplitting
• Reduction of shares.
compliance cost harbour.
• Time-bound listing of CPSEs: The Government has put in place a mechanism/procedure along with
indicative timelines for listing of CPSEs.
• The focus of the strategic disinvestment is on adopting a pragmatic approach for the Government
to exit from non-strategic business to optimize economic potential.
• The Government has started using index based Exchange Traded Fund (ETF) to offer an investment
opportunity in CPSEs to pension funds and retail investors in India. For this purpose a new ETF,
namely BHARAT 22 was launched.
32
CHAPTER 03: MONETARY MANAGEMENT & FINANCIAL
INTERMEDIATION
Introduction
• Monetary Policy Committee (MPC) was constituted in August 2016. Monetary policy since then is being
conducted under the MPC.
• As the year-on-year effect of demonetisation wore off, the growth rate of both currency in circulation
and reserve money (M0) turned sharply positive
The chapter further analyses the developments in monetary market in the wake of first Demonetisation
and the re-monetisation, as discussed below:
Liquidity Conditions and its Management
• After demonetisation in early November 2016, RBI had scaled up its liquidity absorption operations
using a mix of both conventional and unconventional instruments. Net RBI credit to government
declined owing to net open market sales as well as an increase in government deposits.
• Liquidity conditions remain in
surplus mode even as its
magnitude moderated gradually
with progressive re-monetisation.
Developments in the G-Sec Market
During 2017-18, the 10-year G-sec
yield altered significantly. Following
factors affected it:
• Announcement of new benchmark
security index, lower inflation,
positive monsoon forecast, dovish
stance of monetary policy and
rating upgrade reduced yield
• Higher CPI inflation, additional
supply of securities through OMO sales, rise in oil prices leading to concerns of higher inflation, and
higher government borrowings exerted upward pressure on yields
Banking Sector
• The performance of the banking sector, Public Sector Banks (PSBs) in particular, continued to be below
par in the current financial year. During the period March – September 2017
o The Gross Non-Performing Advances (GNPA) ratio of Scheduled Commercial Banks (SCBs) increased
to 10.2%, their Restructured Standard Advances (RSA) ratio declined, Stressed Advances (SA) ratio
rose marginally and Capital to Risk-weighted Asset Ratio (CRAR) increased
o GNPA ratio of PSBs increased to 13.5% and their Stressed advances ratio also rose. Many PSBs have
continued to record negative profitability ratios since March 2016.
Credit Growth
• There was revival in credit operations of banks. Bank credit lending to Services and Personal Loans (PL)
segments continue to be the major contributor to overall non-food credit growth.
• Credit growth finally picked up in industrial sector too. However, growth of credit to medium scale
industries has remained negative and is yet to pick up.
Non-Banking Financial Sector
• Non-Banking Financial Companies (NBFCs) bring in diversity and efficiency to the financial sector and
make it more responsive to the needs of the customers.
33
• The NBFC sector, as a whole, accounted for 17 per cent of bank assets and 0.26 per cent of bank
deposits as on September 30, 2017. NBFCs depended largely on public funds for funding their balance
sheets.
• The Reserve Bank has introduced a new category of Non-Banking Financial Company (NBFC) called
NBFC-P2P (NBFC- Peer to Peer Lending Platform) to further financial inclusion through direct
interaction between small lenders and small borrowers. One more category of NBFC has been
announced – NBFC – Account Aggregators.
Capital Market:
• The Primary market segment witnessed a steady increase in resource mobilization with launch of many
IPOs. The Indian mutual fund industry also registered a robust growth.
• Resource mobilisation through issuance of corporate bonds (public issuance and private placement)
also rose rapidly. However, it is not a substitute for bank credit. The flip side is that the maturity period
of bonds is much shorter compared to bank credit. Also, if banks subscribe to corporate bonds then it
may lead to double counting.
• The secondary market segment, represented by BSE and NSE, also witnessed healthy growth due to
increased investor confidence.
Insurance penetration is defined as the
Insurance Sector ratio of premium underwritten in a given
• Insurance, an integral part of the financial sector, plays a year to the gross domestic product (GDP).
Insurance density is defined as the ratio of
significant role in India’s economy. The performance of the
premium underwritten in a given year to
insurance sector is assessed on the basis of two
the total population (measured in US$ for
parameters, viz., Insurance Penetration and Insurance convenience of international comparison).
Density.
o The Insurance penetration in India which was 2.71 per cent in 2001, increased to 3.49 per cent in
2016 (Life 2.72 per cent and General 0.77 per cent).
o The insurance density in India, which was US$ 11.5 in 2001, has increased to US$ 59.7 in 2016 (Life
46.5 and General 13.2).
o Globally insurance penetration and density were 3.47 per cent and US$ 353 for the life segment in
2016 and 2.81 per cent and US$ 285.3 for the non-life segment respectively.
Review of the New Insolvency and Bankruptcy Regime
The Insolvency and Bankruptcy Code, 2016 (IBC) was passed in May 2016. Since then, there has been a
significant amount of progress –
• The entire mechanism for the Corporate Insolvency Resolution Process (CIRP) has been put in place.
Rules and regulations have been notified to create the institutions and professionals necessary for the
process to work.
• A major factor behind the effectiveness of the new Code has been the adjudication by the Judiciary.
o The Code prescribed time limits have been followed by NCLT benches across India.
o In addition, appellate courts, including the NCLAT, High Courts and the Supreme Court have also
disposed appeals quickly and decisively.
• The Insolvency and Bankruptcy Code (Amendment) Bill, 2017 was passed recently. It has made some
persons ineligible to submit resolution plans viz an undischarged insolvent, wilful defaulter; a person
disqualified as a director, a convicted person etc.
o The aim is to prevent a range of undesirable persons from bidding for the debtor. This will prevent
promoters from bidding for their own firms.
o A resolution plan would typically involve significant haircuts on the parts of the financial and
operational creditors. Thus, allowing a promoter to bid without restriction would mean permitting
a situation where an owner, having driven a firm into insolvency, is now able to purchase it back at
a discount. This can lead to a situation of moral hazard, where incompetent or fraudulent
promoters are effectively rewarded with the control of their company, leaving the creditors to
write off their debts.
34
CHAPTER 04: PRICES AND INFLATION
Introduction
Facts about inflation in India:
The economy has witnessed a gradual transition from a • Inflation in the country continued to
period of high and variable inflation to more stable prices moderate during 2017-18.
in the last four years. This chapter analyses the inflation • CPI based headline inflation averaged 3.3
trends through various indices, drivers of inflation and per cent during April-December 2017-18,
government measures taken to control inflation. the lowest in the last six financial years.
• The average food inflation fell to 1.2 per
Trends in inflation cent during April-December 2017-18.
• Headline inflation measured by the Consumer Price Index (CPI) has remained under control. This was
indicative of benign food inflation.
• Food inflation measured by the Consumer Food Price Index (CFPI) declined. Good agricultural
production coupled with regular price monitoring by
Drivers of Inflation
the Government helped to contain inflation. The rise
• Both CPI-Combined and CPI-Rural inflation
in food inflation in recent months is mainly due to was driven mainly by food during FY 2016-
factors driving prices of vegetables and fruits. Though 17. The miscellaneous group (includes
decline in food inflation is broad-based, major drivers household goods & services, health,
are meat & fish, oil & fats, spices and pulses & transport & communication, recreation and
products. amusement, education and personal care
• Core Inflation: The CPI based core inflation (i.e. CPI and effects.) has contributed the most to it
excluding food and fuel group) has remained above 4 during the current FY.
per cent during the last four financial years. Refined • In urban areas, while food was the main
core (CPI excluding food and fuel group, petrol & driver of inflation during last year, housing
sector has contributed the most in the
diesel) is in line with core inflation.
current financial year.
Seasonal Movements in CPI-C and its Food components
• Seasonal movement of inflation refers to the price Trends in Global Commodity Prices
variations/fluctuations in items arising from supply shocks • As per the commodity prices
during certain periods of the year. published by the World Bank, energy
• General (Headline) inflation is more volatile than core commodity prices are surging
recently. Movement of ‘Fuel & Power’
inflation due to large changes in the prices of certain food
inflation based on All India WPI tracks
items which are vulnerable to supply shocks. For e.g.
World Bank Energy price index.
Pulses, fruits and vegetables groups. • World Bank Food price index declined
• An analysis of seasonality of the price indices shows that in 2017-18 reflecting moderation in
the seasonality starts from July and end in November for food prices.
CPI-C (All Groups) with peak observed in August for CFPI • WPI ‘Basic Metals’ prices also tracked
(Consumer Food Price Index) and Vegetables. World Bank’s ‘Base Metals’ prices.
• Unlike the presence of seasonality in Food groups of CPI-C, Inflation of ‘Basic Metals’ as per WPI is
its Non-Food groups display negligible seasonality. lower than that of World Bank’s ‘Base
Metals’ inflation.
Efforts to Contain Inflation
Central Government has taken a number of measures to control inflation especially food inflation:
• Advisories issued to State Governments to take strict action against hoarding & black marketing.
• Higher MSP announced to incentivize production and thereby, enhanced availability of food items may
help moderate prices
• Price Stabilization Fund to control price volatility of agricultural commodities like pulses, onions, etc.
• Enhancement in buffer stock of pulses to enable effective market intervention for moderation of retail
prices.
• To incentivize domestic production of oil, restriction on oil export has been removed except for palm
oil, mustard oil and sunflower oil.
• Imposition of stock holding limits on stockist/dealers and duty on export of sugar.
• Limitations on export of all varieties of onion.
35
Development of New Indices
Producer Price Index
The Producer Price Index (PPI) measures the average change in the prices of goods and services, either as
they leave the place of production called Output PPI or as they enter the production process called Input
PPI.
• PPI contrasts with other measures such as the Consumer Price Index (CPI) which measures changes in
prices from buyers or consumers perspective.
• The benefits of migrating from WPI to PPI are to cover bulk transactions of all goods and services, do
away with the bias of double counting inherent in WPI and to compile indices that are conceptually
consistent with the National Accounts Statistics (NAS) for use as deflators.
Recommendation of Working Group under the Chairmanship of Professor B. N. Goldar: The committee
set up in 2014, submitted its report in 2017. The major recommendations are as follows:
• Two separate sets of input PPIs may be compiled - one including services and the other excluding
services.
• The PPIs may be initially compiled on an experimental basis and switching over from WPI to PPI should
be undertaken after the PPI series stabilizes.
• The experimental PPI will be released on monthly basis with base year 2011-12.
• Inclusion of 15 services in the PPI basket to begin with.
Housing Price Index
The Housing Price Indices (HPIs) are a broad measure of movement of residential property prices observed
within a geographic boundary.
NHB RESIDEX: It is the first official housing price index launched in 2007 by the National Housing Bank
(NHB). The base year has been revised to FY 2012-13 to ensure capturing the latest information and
accurately reflect the current economic situation in the country.
• Currently, National Housing Bank is publishing NHB RESIDEX for 50 cities on quarterly basis.
• NHB is not computing the composite all India housing price index as of now.
• However using population proportion as weights, an all India index as weighted average of city indices
has been computed. The rate of growth in housing prices at All India level has started to decline from
the quarter ending December, 2016.
36
CHAPTER 05: SUSTAINABLE DEVELOPMENT, ENERGY & CLIMATE
CHANGE
Introduction
During past few years, India has taken many steps to meet its commitment towards the goals of climate
change, sustainable development and energy access.
The chapter analyses progress made by India in above mentioned areas.
Sustainable Development Goals The VNR report is based on an analysis of
progress under various programmes and
• The UN Sustainable Development Goals (SDGs) initiatives in the country. The VNR report
adopted in 2015 comprehensively covers social, focused on 7 SDGs: 1 (No Poverty); 2 (Zero
economic and environmental dimensions. For ex - a Hunger); 3 (Good Health and Well-Being); 5
universal agreement to end poverty in all its forms and (Gender Equality); 9 (Industry, Innovation and
dimensions, including extreme poverty. Infrastructure), 14 (Life below Water) and 17
• India has volunteered to take part in the Voluntary (Partnerships for the Goals).
National Reviews (VNRs) at the High-Level Political Forum (HLPF) 2017. India presented its 1st VNR on
implementation of SDGs in July, 2017 in the HLPF at United Nations, New York.
• In the light of the global SDG indicators endorsed by the UN Statistical Commission, the draft national
SDG indicators are being developed by Ministry of Statistics & Programme Implementation to regularly
track progress of the SDG with base year as 2016.
Urban India and Sustainable Development
• India is now embarking on a fast rural to urban transition as India’s urban population is projected to
grow to about 600 million by 2031. Indian cities are facing multiple problems including delivery on a
number of basic services. Thus, government has undertaken various measures such as Smart Cities
Mission, Swatch Bharat Mission, National Urban Housing and Habitat Policy etc. to be able to achieve
SDG 11 which states: “make cities inclusive, safe, Pillars of urban sustainability: According to
resilient and sustainable”. World Economic and Social Survey, 2013,
• However certain challenges remain such as financing achieving the sustainability of cities entails
(about 39 lakh crore (at 2009-10 prices) was integration of four pillars -social development,
required for creation of urban infrastructure and 20 economic development, environmental
lakh crore for operation and maintenance in next 20 management, and effective urban governance.
years as estimated by High Powered Expert Committee appointed by the Ministry of Housing and
Urban Affairs) and recovering of user charges when the average cost recovery is less than 50 per cent in
most of the Urban Local Bodies (ULBs).
• Thus, ULBs should be encouraged to bring operational efficiency and financial viability in urban
projects, raise resources through various innovative financial instruments such as municipal bonds,
PPPs, credit risk guarantees etc. For e.g. in July, 2015, SEBI notified a new regulatory framework for
issuing municipal bonds in India. It allows municipal bodies to issue municipal bonds through private
placement or public issue.
Access to Sustainable Energy
• Access to affordable, reliable, sustainable and modern energy is important for achieving the SDGs as it
has deep inter-linkages with all the other goals.
• For example – lack of access to clean cooking to around 64% of the population (world average – 38%)
increases the burden on female members of the households to collect fuel wood. It also impacts their
health disproportionately due to more exposure to indoor air pollution due to usage of such fuels.
Thus, access to clean energy may reduce time spent on collection of fuelwood and may have a positive
impact on girl’s education and employment
• Therefore government has taken various initiatives for improving access to clean energy
o Pradhan Mantri Ujjwala Yojana to provide LPG connections to BPL households.
o “Ujjwala Plus” to address the cooking needs of deprived people who are not covered under the
Socio-Economic Caste Census (SECC) 2011.
37
o Deen Dayal Upadhyaya Gram Jyoti
Yojana (DDUGJY) to achieve 100 Renegotiation of PPAs by certain states
per cent village electrification and PPA is a contract between purchaser of electricity and electricity
Saubhagya scheme to universal generator setting out the terms and price for supplying
electricity. In the case of renewable energy, state electricity
household electrification.
regulatory commissions set the Feed-in Tariffs for the purchase
o Focus on energy generation of electricity from these sources. PPAs were signed based on
through sustainable sources. As on these pre-determined prices for a number of years.
30th November 2017, 18% of the Present problems: The recent auctions for solar/ wind power
total installed capacity of electricity procurement have led to discovery of very low tariffs. In view of
was from renewable energy this some Discoms have hinted at the possibility of
sources. However this has also led renegotiating the earlier PPAs. This renegotiation could risk
to disputes relating to investments worth 48000 crore and may also result in legal
renegotiations of Power Purchase battles which will bring uncertainty for the sector leading to
Agreements (PPAs). reduced financing by banks.
o For efficient energy use, guidelines Way forward: Government has already placed renewable
were issued for mandatory energy under the priority sector lending. Affordable financing
installation of energy efficient holds the key for financing sustainable energy projects. Risk
appliances in all Central mitigating instruments such as payment guarantee fund or a
foreign exchange fund available to developers could be a way
Government buildings across India
forward. Subsidies and incentives given by government could be
under Buildings Energy Efficiency
revisited.
Programme implemented by
Energy Efficiency Services Limited (EESL).
International Solar Alliance (ISA) Entered Into Force
ISA, a coalition of countries lying fully or partially between the Tropics of Cancer and Capricorn, entered
into force on 6th December, 2017. It has become the first International intergovernmental treaty-based
organization headquartered in India (Gurugram, Haryana). The United Nations including its organs are
ISA’s strategic partners.
• India has made a provision of 100 crore for ISA Fund corpus and provided `15 crore per annum till
2020-21 for running expenditure. India has earmarked around US $ 2 billion Line of Credit (LoC) to the
African countries for implementation of solar and related projects
• Presently ISA has three programmes Scaling Solar Applications for Agricultural Use, Affordable Finance
at Scale and Scaling Solar Mini-grids. In addition, ISA plans to launch two more programmes on Scaling
Solar Rooftops and Scaling E-Mobility & Storage.
• Major initiative of ISA includes development of “Common Risk Mitigating Mechanism” (CRMM) for de-
risking & reducing the financial cost of solar projects and establishment of Digital Infopedia which
serves as a platform to interact, connect, communicate and collaborate with one another.
India and Climate Change
• India has always engaged constructively under the United Nations Framework Convention on Climate
Change (UNFCCC) and India is now actively engaged in the efforts towards developing guidelines for
effective implementation of the Paris Agreement on climate change.
• Domestically, India has launched various policies & institutional mechanisms to advance its actions.
o National Action Plan on Climate Change and State Action Plans on Climate Change, which includes
eight national missions covering solar, energy efficiency, agriculture, water, sustainable habitat,
forestry, Himalayan ecosystem and knowledge, apart from various other initiatives.
o Mission on strategic knowledge for climate change, India has established 8 Global Technology
Watch Groups in the areas of Renewable Energy Technology, Advance Coal Technology, Enhanced
Energy Efficiency, Green Forest, Sustainable Habitat, Water, Sustainable Agriculture and
Manufacturing.
o Climate Change Action Programme, for building and supporting capacity at central & state levels,
strengthening scientific & analytical capacity for climate change assessment, establishing
appropriate institutional framework and implementing climate related actions
o National Adaptation Fund on Climate Change to support concrete adaptation activities which are
not covered under on-going activities through the schemes of State and Central Government.
38
o Forest and tree cover has
increased transforming Air Pollution in Delhi -- Possible Solutions
country’s forests into a net In recent years, the National Capital Delhi and adjoining areas have
sink experienced poor air quality starting winter. It is imperative to
address the proximate 4 top reasons for Delhi’s worsening air quality:
o Pradhan Mantri Krishi
Sinchayee Yojana for • Crop residue, biomass burning
extending the coverage of • Vehicular emissions and redistributed road dust
irrigation and improving • Massive construction, power plants, industry, other.
• Winter temperature inversion, humidity and (absence of) wind.
water use efficiency.
o Zero Effect, Zero Defect to Effective actions have been suggested (National Green Tribunal and
enhance energy efficiency and Supreme Court decisions), some of which have begun:
resources efficiency in Short-Term Emergency Plan (when 24-hourly PM2.5 exceeds 300-
MSMEs. 400 mg/m3): Strict enforcement through heavy penalties on
agricultural waste burning using satellite based tools detecting fires,
o National Mission for Clean
and mobile based applications in NCR; and incentive payments to
Ganga to rejuvenate the river
farmers, coordinated across states and NCR.
o Indian financial market also
Medium and Long-Range Actions: Implement congestion pricing for
moved in the direction of
vehicles, expand and improve public buses dramatically to reduce
greener actions. SEBI issued private vehicle use, and for connectivity to and beyond metro. Phase-
the circular on the disclosure out old vehicles, accelerate BS-VI (already notified and to be
requirements for Issuance and commenced from 2020), and expand modernized bus fleets.
Listing of Green Debt Use technologies to convert agricultural waste into usable
Securities in May, 2017. concentrated fodder or bio-fuels, develop and implement business
Conclusion models with private sector and communities and incentivize shift to
non-paddy crops.
The Global Climate Risk Index 2018
has put India amongst the six most vulnerable countries in the world. Given that a sizeable population
under poverty lives in areas prone to climatic shifts and in occupations that are highly climate-sensitive,
future climate change could have significant implications for living standards. In view of this, India needs to
build inherent adaptive capacities of individuals, households, and communities.
39
CHAPTER 06: EXTERNAL SECTOR
Introduction
India’s external sector has been resilient and strong so far. The Balance of Payments situation has been
comfortable. Merchandise exports have picked up, net services receipts have increased, net foreign
investment grew and the external debt indicators has improved.
Global Economic Environment
• The global economy is expected to accelerate from 3.2% in 2016 to 3.6% in 2017 and 3.7% in 2018.
• The upward trend is supported by better results in the first half of 2017 in Euro Area, Japan, emerging
Asia and Russia even though there are downward revisions in USA and UK.
• World trade volume is projected to increase.
• The top five countries with which India has
Commodity prices (Oil and Nonfuel) are also
negative bilateral trade balance are China,
expected to grow, in contrast to previous years
Switzerland, Saudi Arabia, Iraq and South Korea
of decline. while the top five countries with which it has
India’s Balance of Payments Developments surplus trade balance are USA, UAE, Bangladesh,
Nepal and UK.
• India’s balance of payments situation has been • India has the highest trade deficit with China. Its
comfortable since 2013-14 and continued to be share in India’s total trade deficit increased from
so in the first half of 2017-18. 20.3 per cent in 2012-13 to 43.2 per cent in 2017-
• India’s CAD has increased primarily on account 18 (April-September).
of a higher trade deficit due to sharp rise in • In the case of Switzerland, the trade deficit is
imports of gold coupled with the rise in crude mainly due to import of gold. This deficit has
fallen in the last two years. Moreover, a part of it
oil prices.
is used in exports.
• Net invisibles receipts were higher mainly due
• In the case of Saudi Arabia and Iraq, the deficit is
to the increase in net services earnings and due to crude oil imports, while for South Korea it
private transfer receipts. is due to import of electrical machinery &
✓ Net services earnings increased primarily on equipments and iron and steel.
account of the rise in net earnings from
travel and telecommunications, computer & information services.
✓ Private transfer receipts, mainly representing remittances by Indians employed overseas also
increased. However, the structural factors viz tightening norms of hiring foreign workers in USA,
labour market adjustment in GCC countries and rising anti-immigration sentiments in many source
countries pose considerable downside risk.
• While trade deficit widened, the improvement in invisibles balance and the net capital flows
dominated by foreign investment and banking capital was able to finance the CAD leading to accretion
in foreign exchange reserves.
Composition of Indian Trade
In 2017-18 (April - November) among the major sectors, there was good export growth in engineering
goods and Petroleum crude & products; moderate growth in chemicals & related products, and textiles &
allied products; but negative growth in gems and jewellery.
40
Sector wise share of Exports Sector wise share of Imports
Development in Trade Policy

Two important developments on the trade policy are mid-term review of Foreign Trade Policy (FTP) and the
recent multilateral negotiations of WTO in December 2017. Besides these, some developments on the
trade logistics front and anti-dumping measures were also there.
Highlights of the Mid Term Review of Foreign Trade Policy and subsequent trade related policies
• MEIS (Merchandise Exports from India Scheme) incentives for two sub-sectors of Textiles i.e. Ready
Made Garments and Made Ups increased
• Across the board increase of 2% in existing MEIS incentive for exports by MSMEs / labour intensive
industries.
• To provide an impetus to the services trade, the SEIS (Service Export from India Scheme) incentives
have been increased by 2% for notified services such as Business, Legal, Accounting, Architectural,
Engineering, Educational, Hospital, Hotels and Restaurants.
• New trust based Self Ratification Scheme introduced to allow duty free inputs for export production
under duty exemption scheme with a self-declaration.
• New Logistics Division created in the Commerce Department to develop and coordinate
implementation of an Action Plan for the integrated development of the logistics sector,
41
• For clarity, a negative list of capital goods Special package for leather and footwear sector: The
which are not permitted under the EPCG scheme would lead to development of infrastructure
(Export Promotion on Capital Goods) scheme for the leather sector, address environment concerns
has been notified. specific to the leather sector, facilitate additional
• Second Hand Goods imported for the purpose investments, employment generation and increase in
of repair/ refurbishing/re-conditioning or reproduction. The Special Package has the potential to
engineering have been made duty free, thereby generate 3.24 lakhs new jobs in 3 years and assist in
formalization of 2 lakh jobs as cumulative impact in
facilitating generation of employment in the
Footwear, Leather & Accessories Sector.
repair services sector.
• The special package for employment generation in leather and footwear sector was announced. The
package involves implementation of Central Sector Scheme “Indian Footwear, Leather & Accessories
Development Programme” over the three years from 2017-18 to 2019-20.
WTO Multilateral Negotiations
• The Eleventh Ministerial Conference (MC11) of World Trade Organisation (WTO) ended without a
Ministerial Declaration or any substantive outcome.
• During the Ministerial Conference (MC11), India stood firm on its stand on the fundamental principles
of the WTO, including multilateralism, rule-based consensual decision making, an independent and
credible dispute resolution and appellate process, the centrality of development, which underlies the
Doha Development Agenda (DDA), and special and differential treatment for all developing countries.
• However, still work on issues such as public stockholding for food security purposes, agricultural
Special Safeguard Mechanism and agricultural domestic support, need to be continued.
Trade Related Logistics
• The Indian logistics industry is estimated to be worth around US$ 160 billion in 2016-17 and has grown
at a compound annual growth rate (CAGR) of 7.8 per cent over the past five years.
• It is expected to reach about US$ 215 billion in 2019-20 considering the positive impact of GST
implementation.
• Improved logistics have huge implications on increasing exports, as a 10% decrease in indirect logistics
cost can contribute to around 5-8% of extra exports. India has improved its ranking in the “Logistics
Performance Index” but compared to countries like Singapore, South Africa, Taiwan and China, India
has long way to go.
Anti-Dumping Measures
• In the aftermath of global slowdown, complaints of dumping have been rising hurting the domestic
industry.
• In 2016, 300 anti-dumping investigations were initiated by all countries with India leading at 69
investigations followed by USA (37).
• Products wherein anti-dumping duty has been imposed fall in the products group of Chemicals &
Petrochemicals, Products of Steel & other metals and Rubber or Plastic Products.
• Major products were found to have been dumped from China.
Foreign Exchange Reserves
• India’s foreign exchange reserves reached US$ 409.4 billion by end-December 2017.
• The level of foreign exchange reserves can change due to change in reserves on BoP basis as well as
valuation changes in the assets held by the Reserve Bank of India.
• The import cover of India’s foreign exchange reserves was 11.1 months at end-September 2017 as
compared with 11.3 months at end-March 2017.
• Within the major economies running current account deficit, India is among the largest foreign
exchange reserve holder and sixth largest among all countries of the world.
Exchange Rate
During 2017-18 (up to December 2017), the rupee generally traded with an appreciating bias against the US
dollar on the back of significant capital flows, both foreign portfolio flows and FDI.
42
In terms of the real effective exchange rate (trade weighted) against a basket of 36 currencies, the rupee
appreciated. Though the rupee continued to be broadly stable, the appreciation of REER indicates that
India’s exports might have become slightly less International comparison of external debt situation
competitive. based on World Bank data shows that
• Among the top 20 developing debtor countries in
External Debt
2016, India’s external debt stock to Gross National
India’s External Debt stock increased to US$ 495.7 Income (GNI) ratio at 20.4 percent was the second
billion at end- September 2017. lowest after China’s 12.8 per cent.
• In terms of the foreign exchange reserves cover to
• The long-term debt also showed growth, external debt, India’s position is the fifth highest
though its share remained almost same at and India’s debt service rate is the eight lowest.
81.3%. The increase was primarily due to the • As per the World Bank data, though India is the
increase in foreign portfolio investment in the third largest debtor country among developing
debt segment. Short term debt also grew due countries (after China and Brazil), India’s share of
to increase in trade related credits. short term debt to total debt (18.6%) is much less
• Share of Government (sovereign) debt in total compared to China’s 59.0%.
debt increased to 21.6 percent end-September • India is not among the top debtor countries in the
world (including developed and developing) with
2017, mainly due to other Government
26th position at end-June 2017.
external debt component reflecting the
increased level of foreign portfolio investments in Government securities.
• Foreign exchange cover to total external debt also improved to 80.7 per cent.
43
CHAPTER 07: AGRICULTURE AND FOOD MANAGEMENT
Agriculture in India plays a pivotal
role in providing livelihood,
ensuring food security, reducing
poverty and sustaining growth.
Overview of agriculture sector in
India
• Agriculture & GVA: India is
witnessing a general decline in
share of agriculture in Gross
Value Added (GVA). However,
growth rate of agriculture &
allied sectors have been
fluctuating at 1.5% in 2012-13
to (-)0.2% in 2014-15 to 4.9%
in 2016-17 primarily due to
fact that more than 50% of
agriculture in India is rainfall dependent and private investment has declined.
• Crop Production: There is an overall increase in food production on account of good rainfall during
2016-17 and policy initiatives taken by government.
• Structural changes in sector: A gradual shift can be seen in Indian Agriculture sector, where the share
of livestock in GVA has increased and share of Crop sector has declined (Figure 1). This also coincided
with the change in sources of income
Gender-specifc interventions in agriculture to integrate women
of farm households. as active agents in rural transformation are:
• Feminisation of Agriculture: Role of • Earmarking at least 30% of the budget allocation for
women as cultivators, entrepreneurs, women beneficiaries in all ongoing schemes/programmes
and labourers has increased with and development activities.
growing rural to urban migration by • Initiating women centric activities to ensure benefits of
men. According to Census 2011, out of various beneficiary-oriented programs/schemes reach
total female main workers, 55% were them.
agricultural labourers and 24% were • Focusing on women self-help group (SHG) to connect them
cultivators. However, there is a gender to micro-credit through capacity building activities and to
provide information and ensuring their representation in
disparity in ownership of landholding
different decision-making bodies.
in agriculture (only 12.8% owned by
women) along with concentration of operational holdings (25.7 per cent) by women in the marginal
and small holdings categories. • Crops Diversification Programme: Government is
• Cropping pattern: India has highest net implementing it in green revolution states viz. Punjab,
cropland area (NCA) with 179.8 Mha Haryana and in Western UP to diversify paddy area
(9.6% of global NCA). However, according towards less water requiring crops like oilseeds, pulses,
to Index of Crop Diversification, there is a coarse cereal, agroforestry.
declining inter-temporal behavior in crop • It will also help in mitigating the risks faced by farmers
diversification among most of States in terms of price shocks and production/ harvest losses.
(exception being Himachal Some steps taken to improve Input management
Pradesh & Jharkhand). This • Direct Beneft Transfer in Fertiliser sector: It will help in better soil
monoculture practices has health management, balanced fertilization, and better productivity
been the reason for declining with the combine usage of Soil Health Card, Aadhaar and Land
productivity, lower response to Records.
fertilizer, degradation of soil • ‘Seed Production in Agricultural Crops’ project: Under this, high
health and declining quality seeds are produced to promote Seed Replacement Rate
profitability of cultivation. (SRR) and Varietal Replacement Rate (VRR).
44
• Input Management in Agriculture: A sustainable use of inputs like irrigation, seeds, fertilizer, credit,
machines, extension services etc. helps in improving the productivity without losing soil fertility and
causing environmental damages. However, lack of educational level of farmers had impacted their
capacity to adopt and inculcate new methods of cultivation and input management.
✓ Irrigation: Only 34.5% of total cropped area is irrigated in India. To improve irrigation facility
Pradhan Mantri Krishi Sinchayee Yojana was launched by government.
✓ Agriculture Mechanization: As 50% of Indian population would be urban by the year 2050 (World
Bank), It is estimated that percentage of
agricultural workers of total work force Reason for low Insurance coverage: lack of awareness,
would drop to 25.7% by 2050 from 58.2% improper coverage & reach, complicated procedures &
in 2001. Thus, there is a need to cater the lack of resources etc
increasing food security need by enhancing Pradhan Mantri Fasal Bima Yojana (PMFBY)
the level of farm mechanization in the components:
country which has the potential to increase • Uniform premium to be paid by farmer of 2% for
productivity up to 30% and reduce the all Kharif crops and 1.5% for all Rabi crops and 5%
cost of cultivation up to 20%. for commercial and horticultural crops.
• There is no upper limit on Government subsidy
• Crop Insurance and crop loss: According to the
and no capping on sum and farmers will get claim
NSSO Report (July 2012 – June 2013), very against full sum insured without any reduction.
small share of agricultural households engaged
in crop production activities was insuring their Interest Subvention Scheme
crops. Government initiated PMFBY which • Under it, farmer can effectively avail short term
provides comprehensive coverage of risks from crop loans up to Rs. 3 lakh payable within one
pre-sowing to post harvest against natural non- year at only 4% per annum.
preventable risks. • It also gives loans at concessional rate of 7% for
• Agriculture credit and marketing Initiatives storage in ware houses accredited by
Warehousing Development Regulatory Authority
o Credit is a critical input in achieving high
(WDRA) for upto 6 months post harvest for
productivity and overall production in the avoiding distress sale.
agricultural sector. Institutional Credit helps e-NAM: It aims at integrating the dispersed APMCs
in delinking the farmers from non- through an electronic platform and enable price
institutional sources of credit, and increases discovery in a competitive manner.
financial inclusion.
o Marketing reform has been undertaken to Open Market Sale (OMS) Scheme: Food
benefit farmers from remunerative prices for Corporation of India sells excess stocks out of
their produce in the market like electronic Central Pool in the open market from time to time
at predetermined prices to
National Agriculture Market (e-NAM).
• To enhance the supply of food grains during
• Agriculture Research and Development
the lean season and deficit regions
o It is the main source of innovation, which is • To moderate the open market prices
needed to sustain agricultural productivity • To offload the excess stocks
growth in the long-term. • To reduce the carrying cost of food grains.
o There has been an increasing allocation for it
which is manifested in development of a
total 209 new varieties/hybrids for Cereals, Climate-smart agriculture (CSA)
Pulses, Oilseeds, Commercial and Forage It is an approach that helps to guide actions needed to
crops, tolerant to various biotic and abiotic transform and reorient agricultural systems to
effectively support development and ensure food
stresses with enhanced quality.
security in a changing climate.
• Food Management
✓ In India, both central and state Objectives
government are engaged in managing food • To sustainably increase agricultural productivity
security through centralized and and incomes.
decentralized process of procurement • Adapting and building resilience to climate change.
(MSP), allocation and distribution of • Reducing and/or removing greenhouse gas
emissions wherever possible.
foodgrains to consumer (PDS) under
National Food Security Act and in maintaining buffer stocks for emergencies and for price
stabilization (OMS scheme).
45
Way forward
Due to the structural changes being experienced in farming practices, the farmers should be encouraged to
diversify their income generating sources along with adopting climate smart agriculture. Also, government
should consolidate land to reap the benefits of Farm mechanisation, contract farming etc.
46
CHAPTER 08: INDUSTRY & INFRASTRUCTURE
Industry
• Introduction: It forms the backbone of any modern country, so to
improve its situation Government has undertaken a number of
economic and institutional reforms like implementation of Goods
and Services Tax (GST), Insolvency and Bankruptcy Code (IBC),
introduction of eBiz portal, Demonetization, inflation targeting
regime etc. which have led to significant up-gradation in India’s
ranking in Ease of Doing Business of the World Bank Report 2018
and improvement in its sovereign credit rating to Baa2 from Baa3
by credit rating agency Moody’s Investor Service.
• Challenges and solution: Twin balance sheet problem of corporate and banking system has
undermined the capacity utilization of industries, which is reflected in lower industrial growth in 2017-
18. However government has recently taken Bank Recapitalization reform to improve the balance
sheet of PSB’s and also encouraging alternative sources of investment for industrial sector revival
through slew of measure like simple FDI regime, Champions Sectors include Capital goods,
promoting corporate bond market etc. Auto and Auto Components, Defence &
Initiatives taken by the Government to boost industrial Aerospace, Biotechnology, Pharmaceuticals
performance and Medical Devices, Chemicals, Electronic
System Design & Manufacturing (ESDM),
• Make in India: It aims at making India a global hub for Leather & Footwear, Textiles & Apparels,
manufacturing, research & innovation and integral part Food Processing, Gems & Jewellery, New &
of the global supply chain. Renewable Energy, Construction, Shipping
o Government has identified ten ‘Champions sectors’ and Railways.
under Make in India 2.0, which have potential to become global champion, drive double digit
growth in manufacturing and generate significant employment opportunities.
• Intellectual Property Rights (IPR) Policy, 2016: It • Startup India hub: Developed as a single point
aims to improve Indian intellectual property of contact for the entire Startup ecosystem and
ecosystem and to create an innovation movement enables knowledge exchange
in the country and aspires towards “Creative • Fund of Funds for Startups (FFS), managed by
India; Innovative India”. SIDBI, has been created with a corpus of 10,000
• Start-up India: It aims to create an ecosystem that crores to provide financial support. Seed Fund
is conducive to growth of Startups. and Equity Funding support is also provided to
o Under this, regulatory burden have been Bio-Tech Startups.
reduced on Startups such as Government have allowed them to self-certify compliance under 3
labour laws and 6 environment law. Schemes for the development of MSME sector
Sector wise Analysis of industries • Prime Minister’s Employment Generation
Programme (PMEGP) is aimed at generating self-
• Steel sector: India witnessed rising imports of employment opportunities through establishment
cheap steel from countries like China, South of micro-enterprises in the non-farm sector.
Korea and Ukraine due to slowing world • Credit Gurantee Scheme for MSME – It covers
economy and over capacity in production of collateral free credit facility extended by eligible
steel, which adversely affected domestic financial institutions.
producers. However, they saw a revival in its • Credit Linked Capital Subsidy Scheme (CLCSS) aims
growth with introduction of New Steel Policy at facilitating technology upgradation of the MSME
2017 and implementation of a policy on sector.
preference to domestically manufactured • Pradhan Mantri Mudra Yojana: To provide funding
to the non-corporate small business sector.
select iron & steel products, along with
imposition of anti-dumping duty, Minimum Import Price (MIP) and Countervailing duty on imports.
• MSME sector: According to the National Sample Survey (NSS: 2015-16) there are 633.8 lakh
unincorporated non-agriculture MSMEs (helps in industrialization of rural & backward areas) in
country engaged in different economic activities providing employment to 11.10 crore workers. The
47
share of MSME in India’s GVA is 32% approximately. However, sector faces challenge in getting
adequate credit (only 17.4% of the total credit outstanding) for expansion of business activities.
• Textiles and Apparels: This sector has enormous potential for growth in exports and employment,
particularly, women’s employment. It witnesses a
Step to promote Textiles & Apparels in India
historic opportunity with China losing market share in
• Subsidy under Amended Technology
clothing exports due to rising labour costs. However,
Upgradation Fund Scheme for
India also faces stiff competition from Bangladesh, concessional import of machinery.
Vietnam, Ethiopia in global market due to high • Government to bear 12% of the
domestic taxes on man-made fabrics , stringent labour employers’ contribution of the full EPFS
laws and high logistics cost. for new workers.
• Leather sector: It is highly labour intensive sector. • Increasing overtime caps in line with ILO
Indian tax policy favors leather footwear production norms and introduction of fixed term
but it is facing challenges such as global demand for employment.
footwear is moving towards non leather footwear, • Scheme for Capacity Building in Textile
high customs tariffs is being faced by India in a number Sector (SCBTS), 2017 – It involves National
Skill Qualification Framework compliant
of developed country markets. Therefore to improve
training courses.
the situation, government unveiled Scheme for
promotion of employment in the leather & footwear sector, 2017, for the development of
infrastructure, addressing environment concerns, facilitating additional investments by more tax
incentives, improving employment capacity and increasing production by better technology.
• Gems and Jewellery: It is one of the fastest growing sectors and is export oriented and employed 20.8
lakh persons in 2011-12 (NSSO). Economic survey gives following recommendations for promoting
employment in this sector:
✓ leverage Public Private Partnership models for training in jewellery designing. The jewellery
training institutes may be affiliated with the Gems and Jewellery Sector Skill Council.
✓ Setting up infrastructure such as refineries, hallmarking centres etc., to promote jewellery
manufacturing in rural areas.
✓ Creation of multiple jewellery parks (accommodating manufacturers, shared services, testing,
banking, logistic support etc.), to promote production in a more organized environment.
Infrastructure
Reason for under-investment in Infrastructure
• Efficient Infrastructure helps in maintaining high sector
and sustainable growth; therefore substantial • Collapse of Public Private Partnership (PPP)
investment has been seen in transportation, especially in power and telecom projects.
energy, communication, housing & sanitation • Stressed balance sheet of private companies.
and urban infrastructure sector. • Issues related to land & forest clearances.
• Under-Investment: According to Global infrastructure outlook, the gap between required
infrastructure investment and current trend of investment is expected to be widened over the year
(US$ 526 Billion by 2040).
Road Sector
• India has one of the largest road networks of over 56.17 lakh km (rural road = 61%) and contribute
highest in terms of inland freight transportation. Road transportation also plays a key role in promoting
equitable socio-economic development across regions of the country.
• India’s road density at 1.66 km/sq.km of area is highest among BRIC countries.
o Density of National Highways is proportional to the Per capita GSDP (Gross State Domestic Product)
and Interstate Trade (Export + Import) as % of GSDP in Indian States.
• Challenges and Solution: Increasing stalled Projects and NPAs in road sector mainly due to problem in
land acquisition, utility shifting, poor performance of contractors, environment/ forest/wildlife
clearances, arbitration/ contractual disputes with contractors etc. However, revival has been seen in
88% of the stalled project after one time fund infusion by NHAI, streamlining acquisition and
clearances, adopting Hybrid Annuity Model (HAM) and exploring alternative funding mechanism like
Infrastructure Investment Trust, LIC, Long term pension fund etc.
48
Railways
• Pradhan Mantri Gram Sadak Yojana (PMGSY): It
• Share of Indian Railways in freight movement
is a centrally sponsored scheme connecting
has been declining over a period of time
habitations with rural roads.
primarily due to non-competitive tariff structure • Bharatmala Pariyojana: It is a new umbrella
and stiff competition from other modes of program for the highways sector with an
transportation. objective to achieve optimal resource allocation
• To make rail transportation attractive and arrest for a holistic highway development by bridging
the declining trend various initiatives were taken critical infrastructure gaps through effective
like tariff rationalization, withdrawal of dual interventions like development of Economic
freight policy for export of iron ore, policy Corridors, Inter Corridors and Feeder Routes,
guidelines of Merry Go Round System, new National Corridor Efficiency Improvement etc.
delivery models like Roll-on Roll-off services etc. Government is also pushing for railway infrastructure
development like completion of broad gauge lines, Infrastructure Status to Station Redevelopment etc.
Metro Rail System
• Following the success of the Delhi Metro, it is seen as a solution to the problem of urban
transportation.
• Metro rail projects are highly capital intensive, so it is difficult to fund metro rail projects from
Government exchequer only. Thus, Government of India has notified Metro Rail Policy, 2017, which
imbibes on the learning from international examples and bridges the gap for enhancing the feasibility
of metro rail projects from economic, social and environmental perspective.
Civil Aviation Regional Connectivity Scheme – ‘Ude Desh
ka Aam Naagrik’ (RCS-UDAN): This is a first-
• India is the 3rd largest and the fastest growing domestic of-its-kind scheme globally to stimulate
aviation market in the world in terms of number of regional connectivity through a marketbased
domestic tickets sold. mechanism. It also aims to make flying
• Government has been promoting it through schemes accessible and affordable for the masses in
such as UDAN, granting in-principle approval for setting the regionally important cities.
up 18 Greenfeld airports in the country, reviving 50 unserved and underserved airports/air strips and
Liberalizing Air Services like India-Afghanistan Air freight Corridor etc.
Shipping
• Around 95% of India’s trade by volume and 68% in terms of value is transported by sea.
• Shipbuilding and ship-repair industry
o Shipbuilding industry employs over 30,000 people directly and more than lakhs indirectly. In India,
there are 27 Shipyards comprising 6 under Central Public Sector, 2 under State Governments and
19 under Private Sector Undertakings
o Future potential: Geostrategic location of India, Sagarmala programme is the flagship
abundance of labour etc. are the strengths for Indian programme of the Ministry of Shipping to
ship-repair business which needs to be harnessed for promote port-led development in the
country. It aims to reduce logistics cost for
realising the potential of the industry.
international and domestic trade with
• Port development: It is essential to harness country 7,500 minimal infrastructure investment.
km long coastline, 14,500 km of potentially navigable
waterways and strategic location on key international maritime trade routes. Initiatives to improve the
performance of Major Ports:
o Introduction of Major Ports Authorities Bill, 2016 to modernise the institutional structure of Major
Ports
o Introduction of Radio Frequency Identifcation System (RFID) in 9 major ports to reduce dwell time,
transaction time and ease congestion.
o Direct port delivery and direct port entry initiated at Major Ports for EXIM containers.
• Inland Waterways Transport (IWT): To promote it, Jal Marg Vikas Project was launched along with
declaration of additional 106 inland waterways as National Waterways(NW) through NW Act, 2016. To
49
provide institutional funding government has proposed to allocate 2.5% proceeds of the Central Road
Fund for development and maintenance of National waterways
Telecom Sector Bharat Net project: It is the largest rural
• The mobile industry provide employment to over 4 connectivity project of its kind in the world
million people both directly and indirectly, with overall and is the first pillar of Digital India
Programme. It aims to link each of 2.5 lakh
tele-density in India at 93.42% (56.78% in rural areas and
gram panchayats of India through optical
172.86% in urban areas) in September 2017. fibre network. It will facilitate the delivery of
• Challenges: Telecom sector is going through a stress various e-Services and applications including
period with growing losses, increasing debt, price war e-health, e-education, e-governance and e-
due to new entrant, reduced revenue and irrational commerce.
spectrum costs
• Reforms undertaken by government - spectrum management, Bharat Net programme and Digital India
scheme to convert India into a digital economy and a knowledge based society. TRAI has also
recommended new policy on net neutrality to prohibit discriminatory tariffs in data services
• Reforms in pipeline – formulation of new telecom policy to address issues such as regulation, licensing,
connectivity, service quality, adopting new technology (5G etc.)
Power Sector
• India has witnessed a substantial development in power sector with improved power generation
capacity at 330860.6 MW (November, 2017) and reduced peak deficit i.e. the percentage shortfall in
peak power supply vis-à-vis peak hour demand.
• Saubhagya (Pradhan Mantri Sahaj Bijli Har
• However, challenge of efficient distribution of
Ghar Yojana): It envisages electrification of
power supply still remains, for which various around 4 crore households that do not have
initiatives like Deen Dayal Upadhyaya Gram Jyoti electricity connection by March 2019. Under
Yojana, Ujjawal DISCOM Assurance Yojana it, beneficiary households would be identified
(UDAY) etc. have been taken to provide electricity using Socio Economic Caste Census (SECC)
for all by 2019. 2011.
• Energy conservation: Lighting accounts for about • Establishment of a National Smart Grid
20% of the total electricity consumption in India, Mission in power sector to plan and monitor
therefore energy efficiency assumes significance, implementation of programmes related to
for which various initiatives have been taken like smart grid activities.
o National LED programme: For promoting use of efficient lighting technology at affordable rates.
Two component:
▪ Unnat Jyoti by Affordable LED for All Logistics includes transportation, inventory
(UJALA) providing LED bulbs to domestic management, warehousing, materials handling &
consumers to replace 77 crore packaging, and integration of information. It is
related to management of flow of goods between
incandescent bulbs with LED bulbs
the point of origin and the point of consumption.
▪ Street Lighting National Programme
(SLNP) to replace 1.34 crore conventional street lights with smart and energy efficient LED
street lights by March
2019.
Logistics Sector
• Indian logistics industry provides
employment to more than 22
million people and worth around
US$ 160 Billion. With the
implementation of GST, it is
expected to reach about US$ 215
Billion in 2020. India also ranked
35th in World Bank’s 2016
Logistics Performance Index (see
fig.12)
50
• Some key challenges
o largely an unorganised market at present
o High cost of logistics – impacting competitiveness in domestic & global market
o Unfavorable modal mix (Roadways 60%, Railways 30%) and inefficient fleet mix
o Under-developed material handling infrastructure and fragmented warehousing.
o Multiple regulatory/policy making bodies with procedural complexities including cumbersome and
duplicate processes.
o High dwell time and lack of seamless Benefit of inclusion of Logistics in HMLIS:
• Facilitation of credit flow into the sector with longer
movement of goods across modes.
tenures and reasonable interest rates.
• Suggested Action Plan
• Simplification of the process of approval for
o Formulation of National Integrated construction of multimodal logistics (parks) facilities
Logistics Policy to bring in greater • Encouraging market accountability through
transparency and enhance efficiency in regulatory authority & attracting investments from
logistics operations debt and pension funds into recognized projects.
o Develop integrated IT Platform as a single
window for all logistics related matters. This portal will have linkages with the IT systems of
Railways, Road transport & Highways, Shipping, Civil Aviation, CBEC, State Transport departments,
etc. and act as a Logistics marketplace
o Usher in ease of documentation, faster clearance, digitization.
o Bring down logistics cost to less than 10% of GDP by 2022
o Faster clearances for setting up of logistics infrastructure like Multi-modal logistic parks (MMLPs),
Container Freight Station (CFS), Air Freight Station (AFS) & Inland Container Depot (ICD).
o Introduce professional standards and certification for service providers
o Promote introduction of high-end technologies like high-tech scanning equipment, RFID, GPS, EDI,
online Track & Trace systems in the entire logistics network.
o Improve Logistics skilling in the country and increase jobs in Logistics sector to 40 million by 2022.
• Initiatives taken: Including Logistics sector in the Harmonized Master List of Infrastructure Subsector
(HMLIS), creation of new Logistics Division in Department of Commerce for integrated development of
the sector.
Petroleum & Natural Gas
• Indian companies were unable to meet its Crude oil production target during 2017-18 due to declining
production from old and marginal fields, delay in completion of some projects in western offshore,
unplanned shutdown of wells, processing platform/plants and pipelines.
• Government has taken new initiatives to transform hydrocarbon sector:
o Mapping of Sedimentary Basins: it will help in launch of future Exploration and Production (E&P)
activities and increasing investments in domestic production of oil and gas
o Increasing refining Capacity: India has emerged as a refinery hub (2nd largest in Asia) with refining
capacity exceeding demand.
o National gas Grid: To ensure easy availability of clean and eco-friendly fuel, Natural Gas, to the
industrial, commercial, domestic and transport sector. E.g.: Pradhan Mantri Urja Ganga of Eastern
India
o Pratyaksh Hanstantrit Labh (PAHAL): Targeted system of subsidy delivery to LPG consumers.
o Pradhan Mantri Ujjwala Yojana (PMUY): Aimed at replacing the unclean cooking fuels mostly used
in rural India with the clean and more efficient LPG.
Housing sector
• Housing for all by 2022 is government priority for which a housing policy is required which caters to the
need of increasingly fluid Indian population, by enabling horizontal and vertical mobility. It can be
achieved by promoting Rental Housing and solving the issue of
Rental housing: It allows people to
Vacant Housing. access suitable housing without
• Importance of Rental Housing actually having to buy it. It is an
o Trend in rental housing: important foothold into a city for new
arrivals especially rural migrants.
51
▪ Its share in Indian cities has been declining from 54% in 1961 to 28% in 2011. However, it is not
uniform as northern states experienced sharper decline (excluding the mountain states).
▪ More prevalence in Urban areas (31%) than in rural areas (only 5%) - census 2011.
▪ More in larger cities than in smaller cities.
o Rental market is an important part of the urban eco-system, however some issue needed to be
resolved like rent control, unclear property rights and difficulties with contract enforcement.
• Issue of Vacant Housing: According to the census, vacant houses constitute around 12% of the share of
the total urban housing stock mainly due to the difficulties mentioned in rental housing.
o Trend with vacant housing:
▪ Greater prevalence in the western half of the country with Maharashtra has the highest
number of vacant houses.
▪ It generally increases with distance away from the denser urban cores.
52
CHAPTER 09: SERVICES SECTOR
Introduction
The services sector continued to be the key driver of India’s economic growth contributing almost 72.5% of
gross value added growth in 2017-18 while providing employment to around 30% of population (ILO
estimates, 2016). The government has initiated many reforms to boost the sector which is expected to
grow at 8.3% in 2017-18.
Government has taken many initiatives in the different
India’s Services Sector services to provide impetus to service sector and ensure
that India remains an increasingly attractive investment
• State wise estimation: Services sector destination. Some steps are:
contributed more than half of the gross • Ease of doing business: Simplifying and overhauling FDI
state value added (GSVA) in 15 states and process by abolishing FIPB (Foreign Investment
UTs. However, regional variation is Promotion Board) as a result, more than 90% of FDI
witnessed in terms of services-GSVA share, inflows are now through automatic route.
with Delhi and Chandigarh are at the top • Increasing incentives under Services Exports from India
with over 80% share, while Sikkim is at the Scheme (SEIS) by 2%, through mid-term Review of
bottom with 31.7% Foreign Trade Policy 2015-2020, to help services
• FDI in India’s service sector: Total share of exports including Hotel & Restaurant, Hospital,
Educational services, etc.
FDI equity inflows to the services sector is
• Other Initiatives like digitization, e-visas, infrastructure
69.6% during 2017-18 (April-October), status to Logistics, Start-up India, announcement of
mainly led by higher inflow in two sectors National Intellectual Property Rights (IPR) policy,
viz. Telecommunications and Computer implementation of GST etc. also provide filip to sector.
Software & Hardware.
• India’s Service Trade: India remained the eighth largest exporter of commercial services in the world
in 2016 (WTO, 2017) with 3.4% share, which is double the share of India’s merchandise exports in the
world at 1.7%. It reflects
o Growing importance of the services sector in India’s exports, as it helped in financing about 49% of
India’s merchandise deficit in 2017-18 H1 and thus, providing cushion to current account deficit
(CAD).
o Improvement in Baltic Dry Index, which is a freight index and a good proxy for the robustness of
trade and shipping services.
Initiative taken by government to promote Tourism in India
Sector Wise Performance • E-Visa Facility under three categories of Tourist, Medical and
Business for the citizens of 163 countries.
• Tourism Sector: It has seen an • Celebration of 'Paryatan Parv’ under:
overall improvement, with o ‘Dekho Apna Desh’ to encourage Indians to visit their own
increasing number of Foreign Tourist country.
Arrival (FTA), Outbound Tourism and o ‘Tourism for All’ with tourism events at sites across all
Domestic Tourism. Some important states in the country.
facts are: o ‘Tourism & Governance’ with interactive sessions &
o According to provisional data by workshops with stakeholders on varied themes.
Ministry of Tourism, FTAs have • Other steps like Launch of Global Media Campaign for 2017-
increased to 8.8 million and 18 on various Channels and launch of ‘The Heritage Trail’ to
promote the World Heritage Sites in India.
Foreign Exchange Earnings
(FEEs) from tourism have grown to
Initiatives to promote IT-BPM sector
US$ 27.7 billion in 2017.
• BPO Promotion and Common Services Centres: To help
o Outbound tourism is more than create digital inclusion and equitable growth and provide
double the FTA in India. employment to 1.45 lakh persons, mostly in the small
o In terms of number of domestic towns.
tourist visits, Tamil Nadu, Uttar • Setting up a separate Northeast BPO Promotion Scheme
Pradesh, Andhra Pradesh, Madhya with 5000 seats and having employment potential of
Pradesh, and Karnataka were the 15000 persons.
top 5 destination States. • Preparation of the draft open Data Protection Policy Law.
53
• India’s Information Technology - Business Process Management (IT-BPM) Services: It is estimated to
employ nearly 3.9 million people and value around US$ 139.9 billion (excluding e-commerce and
hardware) in 2016-17.
o Challenges: The share of ICT in total services exports for India has declined marginally during the
decade (2006-2016), due to stance of protectionism in some countries and increasing competition
from countries like China, Brazil, Russia, Philippines, Israel and Ukraine.
o New opportunity: A new market is emerging in Asia-pacific, Latin America and in Middle East Asia.
• Real State and Housing: Real estate and construction together, is the second largest employment
provider in the country, next only to agriculture. Out of these, over 80% constitutes minimally skilled
workforce.
o Employment Potential: As per the PPP policy for affordable housing segment to provide impetus
to the ambitious ‘Housing for all by 2022’ mission.
National Skill Development Council
(NSDC), it is expected to require Pradhan Mantri Awas Yojana (PMAY): Government
sanctioning over 3.1 million houses for the affordable housing
over 66 million people by 2022.
segment in urban regions.
o Challenges: Credit is a major reason
Extension of Credit Linked Subsidy Scheme (CLSS) under
for achieving full potential of sector
PMAY to the Middle Income Group (MIG)
due to rising Non-Performing Asset
(NPA) of PSBs due to which share of Enactment of Real Estate (Regulation & Development) Act,
2016: It involved compulsory disclosures and registrations to
bank lending for organized funding
increase transparency whereas increased accountability would
to real estate sector has dropped lead to higher growth across the real estate value chain.
significantly from over 68% in 2013,
to 17% in 2016. However, Private Equity (PE) fund and Finance Institution such as pension funds
and sovereign wealth funds have replaced banks as the largest source of credit for this sector.
o Increasing Transparency and accountability: Recent policy initiatives (See box) by government
have created positive sentiment among investors reflected by increasing private equity (PE)
investments in the real estate sector from US$ 0.9 billion in 2013 to over US$ 5.9 billion in 2016.
• Research & Development: India-based R&D services companies, account for almost 22% of the global
market, grew at 12.7% in 2015-16. However, India’s gross expenditure on R&D has been low at around
1% of GDP and it ranks 60th out of 127 on the Global Innovation Index (GII) 2017.
o Future Potential: India, Western Europe and North America capture 75% of the global Engineering
R&D Services market and According to consulting firm Zinnov, for India, it is estimated to grow at a
CAGR of 14% to reach US$ 42 billion by 2020. India is also expected to witness strong growth in its
agriculture and pharmaceutical sectors.
• Space Services: Indian Space Programme contributes to national development, through the application
of space technology, comprising communication, navigation and earth observation to address issues
related to societal development and strategic requirements.
o Foreign exchange earnings (FEE) of India from export of satellite launch services is Rs 394 crore in
2016-17, while it's share in global satellite launch services revenue has increased to 1.1 per cent in
2015-16 from 0.3 per cent in 2014-15.
Conclusion
• The growth of India’s services sector is expected to improve in 2017-18 as reflected in the Nikkei/ IHS
Market Services Purchasing Manager’s Index (PMI). The prospects look bright with good performance
of sub sectors like Tourism, Aviation, and Telecom. However, downward risk lies in the external
environment for software and business services.
54
CHAPTER 10: SOCIAL INFRASTRUCTURE, EMPLOYMENT & HUMAN
DEVELOPMENT
Introduction
The government has taken many steps to ensure a sustainable growth by enhancing the efficiency of the
expenditure incurred on human capital through the convergence of schemes. Five of the major areas
where the government has taken various steps to improve their performance have been discussed below.
1) Education for All:
• Since the passage of the Right to Free & Compulsory Education Act (RTE, 2009) there has been
significant improvement in the quantitative indicators such as enrolment levels, completion rates
and other physical infrastructure like toilets, school buildings, etc.
• Further, to improve the qualitative indicators of learning outcome the central rules under RTE Act
were amended in 2017, to include the defined class
wise, subject wise learning outcomes. Learning Outcomes- are assessment
standards indicating the expected levels of
• The indicators defined under RTE Act are-
learning that a student should achieve for
o Student Classroom Ratio is defined as average a particular class.
number of pupils per classroom in a school in a
given school year. The ideal SCR should be 30 students/classroom. In India the number of
schools with SCR more than 30 declined from 43% in 2009-10 to 25.7% in 2015-16 with varied
improvement in almost all states.
o Pupil Teacher Ratio at primary level and upper primary level should be 30:1 and 35:1
respectively. India’s national level PTR for primary schools has improved to 23:1 in 2015-16,
which is comparable to countries with similar
socio-economic indicators. Beti Bachao Beti Padhao
o However, still many states like Bihar, Jharkhand, It is a tri-ministerial scheme introduced for
Madhya Pradesh & Uttar Pradesh have a higher promoting survival, protection and
education of girl child; targeted at
percentage of schools with PTR >30. The central
changing mind set and creating awareness
government through various flagship about the criticality of the issue.
programmes (like Sarva Shiksha Abhiyan)
It has been introduced in 161 districts in 2
provides assistance to the state governments
phases and has further been approved for
that manage aspects like recruitment, service expansion to cover all 640 districts in the
conditions and redeployment of teachers. country.
o Gender Parity Index in education reflects the
discrimination against girls in access to education opportunities. Although gender disparity still
prevails in the higher education, the government has improved it substantially at primary
levels through measures like Beti Bachao Beti Padhao (BBBP).
2) Progress in Labour Reforms:
• In order to remove the multiplicity of definitions and authorities, government is in process to
rationalize 38 central labour Acts by framing their relevant provisions under 4 major Codes-
o Code on Wage Employee’s State Insurance Act
o Code on Safety & Working Conditions • Under the scheme, insured persons are
o Code on Industrial relations entitled to various cash benefits in the
o Code on Social Security & Welfare events of abstention from work due to
• Other steps taken by the government are- sickness, temporary disablement,
o Technology enabled initiatives like Shram dependent benefit, unemployment
Suvidha Portal allowance, maternity benefits, etc.
o Universal Account Number have been affected • Family members of the insured person
are also entitled to the benefits.
to bring transparency and accountability
o National Career Service Portal to facilitate online registration, job search, career counselling,
etc.
o Extension of Employee’s State Insurance Act to more districts and areas.
55
• Gender gap in labour force participation in India is as high as 50% which adversely affects the
growth potential of the country. The disadvantaged position of women workers is due to their low
levels of skills and engagement in low productivity and low paying work.
• One of the important schemes to ensure a better gender participation is MGNREGA, while others
being-
o Mahila E-Haat- promoting Self Employment ventures among women
o Maternity Benefits (Amendment) Act, 2017- provides a 26 weeks maternity leave & provision
for crèche facilities (by establishments employing more than 50 employees)
3) Political Empowerment of Women:
• The representation of women in Parliament and in decision making roles in public sphere is one of
the key indicators of empowerment. However, in India women representatives in Lok Sabha (as in
2016) were 11.8% and 11% in Rajya Sabha. While only 9% women MLAs are there across the
country.
• In this context the Indian constitution provides for-
o Article 243 D (3)- 1/3rd of total number of • Women Sarpanch, in the country, account
for about 43% of total gram Panchayats.
seats be reserved for women in every
• Highest percentage of women MLAs were
Panchayat.
from Bihar, Haryana and Rajasthan (14%),
o Article 243 D (4)- 1/3rd of total number of followed by West Bengal & Madhya
seats of office of Chairperson in Panchayat be Pradesh (13%) and Punjab (12%).
reserved for women.
• For their leadership development and addressing women’s issues, schemes like Mahila Shakti
Kendra & Nai Roshni have been launched at the village level.
4) Health for All:
DALYs is the sum total of the years of potential life
• A crucial step towards the achievement of lost due to premature mortality and the years of
SDG(3) is India’s National Health Policy, 2017. productive life lost due to disability. One DALY
However, there are areas which need further represents loss of the equivalent of one year of full
improvement like- health.
o Prominence of Private Healthcare • The per person disease burden measured as
because the government healthcare DALYs rate dropped by 36% from 1990 to 2016.
providers accounted only for 23% of • Of total disease burden in India due to
current healthcare expenditure. communicable, maternal, neonatal, & nutritional
o Out of Pocket Expenditure (OoPE) as diseases fell from 61% (1990) to 33%(2016).
high as 62% (2014-15) adversely impacts • While the contribution of non communicable
diseases increased from 30% to 55%.
the poorer section and widens inequality.
• Highest DALY rate increase observed for Diabetes
While 10% of this OoPE is spent merely
(80%) and ischemic heart disease (34%).
on diagnostics, which highlights the need
for standardized rates through appropriate quality assurance framework and regulatory
mechanism.
• Burden of Diseases in India- There is an inverse relation between Disability Adjusted Life Years
(DALYs) and life expectancy at birth (LEB).
• Various risk factors specified as the drivers of risk and injury are-
o Malnutrition- Neonatal disorders and nutritional deficiencies are manifestation of maternal
and child malnutrition for which government has laid down various schemes.
Government Programmes for Women & Children
• Integrated Child Development Scheme- aims at holistic development of children upto 6 years and pregnant &
lactating women. The fortification of food items with essential micro nutrients has been made mandatory in
government funded nutrition related schemes.
• Pradhan Mantri Matru Vandana Yojana- earlier known as Maternity Benefit Programme, it provides for partial
compensation for the wage loss in terms of cash incentive.
• National Nutrition Mission will monitor, supervise, fix targets and guide the nutrition related interventions across
ministries. It will create synergy, ensure better monitoring, issue alerts for timely action to achieve the targeted
goals.
• Pradhan Mantri Ujjawala Yojana is to provide LPG connection to 5 crore women belonging to BPL families to
safeguard their by providing cleaner fuel.
56
o Pollution causes a mix of non communicable and infectious diseases, mainly cardiovascular,
chronic respiratory and lower respiratory infections.
o Behavioural and Metabolic risks are caused due to lifestyle changes in the country and cause a
rising burden of non communicable diseases.
o Unsafe water, Sanitation & hand washing causes 5% of health loss. However, it has dropped to
7th risk factor (2014) from 2nd in 1990.
• Apart from increasing expenditure on health (8% of state government’s budget as suggested by
National Health Policy), it is crucial to acknowledge that efficiency in the use of resources along
with measures of preventive and curative healthcare is necessary to translate enhanced
expenditure into improved health outcomes.
• Two other factors that require attention are the excessive use of antibiotics and better access to
sanitation and safe drinking water.
Steps taken to regulate the prices of Drugs and Diagnostics
• National Free Diagnostic Service Initiative to provide essential diagnostic services in public health facilities.
• National Free Drug Initiative for expanding the availability of free drug in all public health facilities.
• Under Clinical Establishments (Registration & Regulation) Act, 2010 and Clinical Establishments Rules, 2012,
the clinical establishments shall charge the rates determined by the central govt in consultation with the state
governments.
• All the registered Medical practitioners have been directed by the Medical Council of India to ensure rational
prescription of generic drugs.
Combating Antimicrobial Resistance (AMR)
• The resistance (in bacteria, virus, fungi, etc) may occur naturally but is facilitated by inappropriate use of
medicines.
• India has among the highest bacterial disease burden in the world which makes the issue even more crucial.
• Government has finalized a National Action Plan based on Global Action Plan for a holistic and collaborative
approach involving all stakeholders such as UN, WHO, FAO and other UN agencies.
• Other steps taken include- setting up a National Surveillance System for AMR, enacted Regulations (schedule-H-
1) to regulate sale of antibiotics, National Guidelines for use of antibiotics, etc.
5) Swachh Bharat Mission (SBM) Eight states and two Union Territories have
• Health & Sanitation- Health of population is largely been declared ODF, i.e. Sikkim, Himachal
related to the quality of sanitation and safe drinking Pradesh, Kerela, Haryana, Uttarakhand,
water. To address this issue government launched Chhattisgarh, Arunachal Pradesh, Gujarat,
SBM. It has been found that the households in Open Daman & Diu, and Chandigarh.
Defecation Free (ODF) villages, in India, have significantly better health indicators as compared to
non-ODF villages. In ODF areas, not only children but their mothers were also healthier as
compared to non-ODF areas.
• Education & Sanitation- It was also found that the ODF villages had higher number of population
with secondary education while the non-ODF villages had lesser population with secondary
education.
• Economy & Sanitation- World Bank estimates that the lack of sanitation facilities costs India over
6% of GDP. While UNICEF estimated that a household in an ODF village saves appx 50,000 Rs.
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IASscore Summary Volume 1 2018-19 3

IAS Score Summary Volume 2 2018-19 49

IASscore Summary Volume 1 2018-19 5

 General Equilibrium Theory and Criticism

 Growth Record in Last Five Years

Growth of GDP in India and the world

! MPC and Inflation

! Fiscal Deficit and FRBM Act

 TRICKLE DOWN AND BALANCED GROWTH

! Jan Dhan Yojana

 Objectives of Next Five Years

 EXPERIENCE OF EAST ASIA

 INVESTMENT AND JOB CREATION

 CORRELATION BETWEEN GROWTH AND SAVINGS AND INVESTMENTS

POLICY FOR HOMO SAPIENS,

 Purpose of Public Policy:

 How does Public Policy work?

 GRADING OF PUBLIC POLICY:

 FACTORS AFFECTING HUMAN CHOICES

However, real people respond to the choice architecture.

 INNOVATIVE GLOBAL BEHAVIORAL CHANGE INTERVENTIONS:

Table 1: Innovative Global Behaviour Change Interventions

People tend to go with de- Instead of employees check-

People who owed most tax

Fertilizer use increased by

Nearly 30 per cent of

People save much less People were sent peri-

Many parents under-

 SUCCESSFUL APPLICATIONS OF BEHAVIOURAL INSIGHTS IN INDIA

! Beti Bachao, Beti Padhao

! Use of clear messaging:

Table: Use of clear messaging for schemes

Name of the Objective of the Scheme

Namami Gange means ‘I pray

Multi-ministerial convergence mission to

To safeguard the health of women by provid-

Provides loans upto 10 lakh to the non-cor-

 ASPIRATIONAL AGENDA FOR PATH-BREAKING CHANGE:

Box 3: Citizen@75-Using Behavioral Economics to Avoid the Seven Social Sins

! From BBBP to BADLAV

Using Behavioural Principles for BADLAV

Principle Applying the principle to BADLAV

 Prominent women, including many female and male Hollywood and

 Publishing gender rankings or audits in public domain, whether for numbers

 Having multiple visually descriptive posters in every corridor of workplaces

 Women consistently tend to place more value on flexibility at workplace.

! From Swachh and Ayushman Bharat to Sundar Bharat

Using behavioral principle for Sundar Bharat

 Presenting information on how many people in the neighbourhood have chosen

! Think about Subsidy

Using Behavioural Principle for “Think about the Subsidy”

 Behavioural techniques can help achieve desirable outcomes from subsidy

! Improving Tax Compliance

Table 8: Using Behavioural Principles to enhance tax compliance

 Filing of tax forms even for zero payment of tax.

 Repeatedly sending fairness driven and normative messages added to standard

 IMPLEMENTING THE ASPIRATIONAL AGENDA FOR BEHAVIOURAL CHANGE:

 Cross-Sectional Comparison with USA and Mexico

 The Role Of Policy In Fostering Dwarfism

Table 1. Size based Limitations posed by Key Labour Legislations

S.No. Labour Acts Applicability to Establishments

Industrial Disputes Act, 1947, Chapter V relating

Industrial Employment (Standing Orders) Act,

General Equilibrium Theory and Criticism

Growth Record in Last Five Years

TRICKLE DOWN AND BALANCED GROWTH

Objectives of Next Five Years

EXPERIENCE OF EAST ASIA

INVESTMENT AND JOB CREATION

CORRELATION BETWEEN GROWTH AND SAVINGS AND INVESTMENTS

Purpose of Public Policy:

How does Public Policy work?

GRADING OF PUBLIC POLICY:

FACTORS AFFECTING HUMAN CHOICES

INNOVATIVE GLOBAL BEHAVIORAL CHANGE INTERVENTIONS:

SUCCESSFUL APPLICATIONS OF BEHAVIOURAL INSIGHTS IN INDIA

ASPIRATIONAL AGENDA FOR PATH-BREAKING CHANGE:

Prominent women, including many female and male Hollywood and

Publishing gender rankings or audits in public domain, whether for numbers

Having multiple visually descriptive posters in every corridor of workplaces

Women consistently tend to place more value on flexibility at workplace.

Presenting information on how many people in the neighbourhood have chosen

Behavioural techniques can help achieve desirable outcomes from subsidy

Filing of tax forms even for zero payment of tax.

Repeatedly sending fairness driven and normative messages added to standard

IMPLEMENTING THE ASPIRATIONAL AGENDA FOR BEHAVIOURAL CHANGE:

Cross-Sectional Comparison with USA and Mexico

The Role Of Policy In Fostering Dwarfism

Why data is important?

Characteristics of a Usable Data

Data Collection Framework by India

The Economics of Data and Social Welfare

HOW MARGINAL COST OF DATA IS DECREASING?

INITIATIVES BY GOVERNMENT OF INDIA

BENEFITS TO PRIVATE SECTOR

Case Clearance Rate (CCR)

Can the problem be resolved - quantitatively?

Adoption of the Goods and Services

DISTRIBUTION OF PENDING CASES AMONG DIFFERENT LEVELS OF COURTS IN

Detailed Analysis Of The Effectiveness And Efficiency Of Courts

RELATIONSHIP BETWEEN THE INSTITUTION, DISPOSAL OF CASES, AND CCR AT

THE INTERNATIONAL COMPARISON OF CCR:

HOW COME IT IS ABOVE 100%:

THE INPUT-OUTPUT MODEL:

The number of cases disposed of in 2018 was 1.33 crore.

APPLY THE SAME FRAMEWORK TO THE HIGHER COURT:

LIFE CYCLE ANALYSIS:

HOW TO MAKE INDIAN COURTS MORE PRODUCTIVE:

How can the policymakers reduce Uncertainty in Economic Policy?

Effect of Uncertainty/Ambiguity in Policy Making on the Investment

PREDICTABILITY OF POLICY ACTION

IT IS CRITICAL TO UNDERSTAND THE DIFFERENCES BETWEEN RISK AND

DECISION TO INVEST AND EPU

ECONOMIC POLICY UNCERTAINTY IN INDIA

RELATIONSHIP OF ECONOMIC POLICY UNCERTAINTY WITH INVESTMENT IN

FACTORS AFFECTING INVESTMENT

HOW POLICYMAKERS WOULD REDUCE DOMESTIC ECONOMIC POLICY

Recent demographic trends

THE PROJECTED POPULATION AND AGE-STRUCTURE HAS SEVERAL IMPLICATIONS

NATIONAL AND STATE LEVEL POPULATION PROJECTION:

Continued decline in infant mortality.

Policy Implications of Ageing

Swachh Bharat Mission Gramin

COMPARISON ACROSS STATES FOR ODF STATUS (IN PER CENT)

SOLID AND LIQUID WASTE MANAGEMENT

ANALYSIS OF SBM ON HEALTH ISSUES

IMPACT OF SBM: FEW INDEPENDENT STUDIES .............................................

Enabling Inclusive Growth through Affordable, Reliable and

INDIA’S ECONOMIC DEVELOPMENT AND ROLE OF ENERGY IN IT

ENERGY FOR PROSPERITY

RELATIONSHIP BETWEEN ENERGY EFFICIENCY AND ECONOMIC DEVELOPMENT

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