GD Material Part 1

Table of Contents
Important Data Points 2
India's weak export 5
FMCG and rural demand 5
Is GDP the Correct Measure 5
Global climate and GDP 6
Greta Thunberg 6
Global Economic Slowdown 7
India's issue of Foreign sovereign bonds 7
5 trillion Economy 7
Demonetisation 8
Shadow Banking / NBFC Crisis 8
Importance of bond market 9
Ayushman Bharat 10
Chandrayan and India's scientific community 10
Huawei Ban 11
AI Impact 12
Future of Healthcare – Connected device 13
Hyperlocal 14
India Telecom AGR
 Important Data Points
(Take Note of the Trend, not necessarily of exact data)

1. India’s GDP: ​$2.97 Tn (5​th​)

2. India’s GDP ​by Purchase Power Parity: 3​rd

Numbers approximated,
Population 1.3 billion (2018)
GDP ● ​$2.97 trillion​ (nominal; 2019 est.)
GDP rank ● 5th (nominal; 2019)
● 3rd (PPP; 2019)
GDP growth​ (​latest Qtr​) ● ​5% (Q1, FY 2019-20)
GDP per capita ● $2,200 (nominal; 2019 est.)
● China: $8500, USA: $62,517
GDP by sector ● Agriculture​: 15%
● Industry​: 30%
● Services​: 55%
Labour force by occupation ● Agriculture​: 50%
● Industry​: 20%
Services​: 30%
Inflation​ (​CPI​) ● 3% (May 2019)
Repo​ Rate ● 5.4%
Population below ​poverty line ● 60% on less than ($3.20 ,INR 230) /day
4% in ​extreme poverty
Gini coefficient ● 33.9 medium (2013) , measures inequality
● USA 41, medium
● Higher score means higher inequality
Human Development Index ● 130th​ (2017)
● Measure Life Expectancy, Education Level and National
Income

Labour force ● 0.5 Billion or ~ 50 Crore (2018)

Unemployment 6.1% (FY 2018) Four decade High
●
 Exports ~​$350 billion​ (2018–19)
Export goods Fuels​ and ​mining​ products 14%
Manufacturers​ 71%
Agricultural​ products 13%
Main export partners Arab League​ 18%
European Union​ 18%
Imports $​514 billion​ (2018–19)
Import goods Fuels​ and ​mining​ products 30%
Manufacturers​ 52%
Main import partners Arab League​ 20%
China​ 13%
Gross ​external debt $543.0 billion (2019)
Foreign Reserve $429 billion (August 2019)

3. Exchange Rate: ​1USD ~ 71 INR

4. Fiscal Deficit Target FY 2019-20: ​3.3 % of GDP
5. Trade Deficit: ​Exports – Imports = $176Bn (2018-19)

6. Purchasing Managers Index :

The Purchasing Managers Index (PMI) is a measure of the prevailing direction of economic
trends in manufacturing
7. Index of Industrial Production (IIP):
An index which shows the growth rates in different industry groups of the economy
A growth in July but overall trends have been on a downward slope in 1​st​ half of 2019 (H1
2019)

8. Repo Rate: ​5.15 %

9. Reverse Repo Rate : ​4.90%

10. India’s Oil Import Dependency : ​84%

11. Per capita Energy consumption : ​650 kg of oil equivalent (2014)

12. Per capita carbon emission : ~​2 metric tons (2014)

13. Per Day Per capital Municipal Solid Waste Generated

In India: ​0.4 kg (CAG, 2009)
75% of municipal garbage in India dumped without processing
United States, 2 kg (2015)
 India's weak export
1. Weak Infrastructure​ : ​Problems with India's roads, railroads, sea ports, airports, power grids, and 
telecommunications infrastructure are significant obstacles as the country strives to achieve its full 
economic potential 
2. High Tariffs and Protectionist Policies: ​India has the highest average applied tariff of any G20 country 
and among the highest bound tariff rates in the WTO. Increased import tariff dissuades many exporters to 
make trade in India. 
3. Inconsistent Trade Policies​: ​The international traders see India as a very complex market that has many 
barriers to trade.
4. High Government Control​: ​One of the biggest problems faced by the Indian export sector is the high 
restrictions that the government has put on the trade. A number of licenses and permissions need to be 
taken by both the countries that create confusion in the mind of the traders who refrain from making export 
due to this 
5. WTO Ruling​ on the India offering export subsidies to its manufacturers should be illegal as it is causing 
losses to the US Economy. 
 
https://www.exportersindia.com/blog/6-major-problems-hindering-india-s-export-growth.htm 
 
1. Government is trying to bridge the gaps in the infrastructure with the ​ambitious BHARATMALA and 
SAGARMALA​ project to build inter country road connectivity with the former and port capacities with 
the latter. 
BHARAT MALA:​https://www.youtube.com/watch?v=XTPyH2wC548 
SAGAR MALA: ​https://www.youtube.com/watch?v=pN70GpRkyyY 
 
FMCG and rural demand
1. Slowdown in the economy has led to plummeting year-on-year volume growth for FMCG
Company Growth Recent Quater Growth Year Ago
HUL 5.5% 12%
Marico 7 10.7
Dabur India 6 21
Britannia 6 13

2. The ​negative factors for the FMCG industry are average monsoons and poor sentiments post-Budget and a
general slowdown in the economy.
3. While the near-term demand outlook remains subdued, industry is positive about growth in the mid to long
term basis
4. India's FMCG in 2019 will grow at least two percentage points slower than in the last quarter of 2018, says
Nielsen
5. Last year, farmers received lower prices on crops, which led to low spending and is now getting reflected in
piling up of inventories in different segments like auto
6. Discretionary spending gets immediately impacted, especially in rural markets, on the backdrop of a weak
monsoon
7. Skymet, a private weather forecasting agency, has forecast below-normal monsoon rains
8. Will get real picture of consumption only by September-October post monsoon in India

https://www.livemint.com/industry/retail/fmcg-no-longer-fast-moving-as-rural-demand-fizzles-out-15555453
16308.html

 
 
Is GDP the Correct Measure
1. GDP measures both the economy’s total income and the economy’s total expenditure on goods and 
services. 
 
2. Senator Robert Kennedy when running for Presidency in 1968, he gave a moving critique of
such economic measures: ​Gross Domestic Product does not allow for the health of our children, the 
quality of their education, or the joy of their play. It does not include the beauty of our poetry or the 
strength of our marriages, the intelligence of our public debate or the integrity of our public officials.

3. But, GDP does in fact help us to lead good lives 

 
 4. Large GDP can afford better healthcare for their children, larger GDP can afford better educational 
systems, nations with larger GDP can afford to teach more of their citizens to read and enjoy poetry. 
 
5. GDP is not, however, a perfect measure of well-being. ​Some things that contribute to a good life are left 
out of GDP. One is leisure. 
 
6. Another thing that GDP excludes is the quality of the environment. 
 
7. GDP also says ​nothing about the distribution of income​. 
 

Global climate and GDP

(Richer getting Richer)
1. Warming likely to exacerbate regional inequality 
2. Climate change is driving the wealth gap 
3. The gap between the world's poorest and richest countries is about 25% larger today than it would have been 
without global warming, according to Stanford University researchers in California. 
4. India had a 30% lower GDP per capita in 2010 because of global warming, said report 
5. While the biggest greenhouse gas emitters, including the US, have an average of 10% higher per capita GDP 
today 
6. Crops are more productive, people are healthier and we are more productive at work when temperatures are 
neither too hot nor too cold 
7. Since 1980, extreme weather has cost $1.6 trillion. 
8. Scientists estimated that:  
● If temperatures only rose 2 C, global gross domestic product would fall 15% 
● If temperatures rose to 3 C, global GDP would fall 25%.  
● If nothing is done, temperatures will rise by 4 C by 2100. Global GDP would decline by more than 
30% from 2010 levels 
 
https://www.thebalance.com/economic-impact-of-climate-change-3305682
https://www.bbc.com/worklife/article/20190502-how-global-warming-has-made-the-rich-richer

Greta Thunberg
1. Greta Thunberg[a] (born January 2003) is a ​Swedish teenager​ who is credited with raising global 
awareness of the risks posed by Global warming and climate change, and with holding politicians 
to account for their lack of action.  
2. Thunberg took time off school to demonstrate outside the Swedish parliament, soon, other 
students engaged in similar protests in their own communities. Together they organized a school 
climate strike movement, under the name ​Fridays for Future​. 
3. In May 2019, Thunberg was featured on the cover of Time magazine 
 Global Economic Slowdown

Is a global recession coming? Here are few warning signs

1. Escalation in US-China tariff war: I​ t’s difficult to measure the impact, but most countries report a
downturn in trade since the tariffs began to bite.
2. Slowing US growth​: ​Last year the US central bank, the Federal Reserve, increased interest rates. A
combination of those higher borrowing costs, end of the income tax cuts and the tariff war with China has
increased costs which has hit US industrial production. US Steel, which the president believed would
prosper once it was protected from cheap Asian and European imports, said business was so bad it would
be laying off workers
3. Long recession in Germany: ​Country saw two consecutive quarters of negative growth. A
turnaround largely depends on a recovery in China where Germany sells most of its machine tools,
industrial equipment and cars.
4. Chinese debt crisis​: ​The country is in the throes of a full-blown debt crisis. State industries have
borrowed heavily and so have consumers. Banks are weighed down by loans that will never be repaid.
Industrial production growth is at a 30-year low.
5. Brexit: ​The uncertainty surrounding Britain’s future has already damaged investment and GDP growth.
The IMF, OECD and World Bank have warned UK that leaving EU without a deal will knock global growth.
6. Financial market jitters: ​Stock markets in the US and Germany remain at historically high levels, but
bond markets are more jittery. ​Investors who lend money to the US government via the bond market
have sold their short-term loans in droves in expectation of an imminent recession. The bond market
never lies, especially about the path of the US economy, say many analysts.

India's issue of Foreign sovereign bonds

Sovereign bonds are government securities issued in order to finance the fiscal deficit and
manage the temporary cash mismatches of the government.
They offer fixed return, maximum safety, and are also actively traded in the secondary
market.
Issue of foreign sovereign bonds​:
● May facilitate the inclusion of India’s government bonds in the global debt indices.
India’s representation in global debt market indices is small compared to other
emerging markets. This may lead to higher foreign inflows into India​.
● Inclusion in global benchmarks would also improve the attractiveness of
rupee-denominated sovereign bonds.
● The rates at which the government borrows overseas will act as a yardstick for
pricing of other corporate bonds, helping India Inc raise money overseas.
Risk:
● Dollar-denominated bonds are more sensitive to global interest rates​.
Impact:
● Lower yields on government bonds in the domestic market.
Reference:
https://www.thehindubusinessline.com/opinion/columns/slate/all-you-wanted-to-know-ab
out-foreign-sovereign-bonds/article28657885.ece
https://economictimes.indiatimes.com/markets/bonds/the-overseas-sovereign-bond-conun
drum/articleshow/70339899.cms?from=mdr

5 trillion Economy
Impossible to achieve
1. Impossible to achieve view - $5 trillion economy is impossible to achieve because it needs
12% GDP growth.
2. There was no hope if growth kept going down the way it has for the last five quarters.
3. He said that at least one million people may lose their jobs if a stimulus package is not given
to the auto sector, which is crying for aid, and investment in the private sector is not
promoted.
4. He said the size of the economy was $2.7 trillion in the current financial year and to reach
$5 trillion economy by 2024, ​the country needs a growth rate of 12 per cent by the nominal
terms and 9 per cent in real terms​ which is near impossible given our structural deficiencies
Manmohan:
https://indianexpress.com/article/india/manmohan-singh-5-trillion-economy-by-2024-looks
-like-pipe-dream-5990564/

Can be achieved
Rudra Sir: ​Note that this 12% growth is required in nominal GDP, so in real terms we require
only 8% growth (assuming inflation to be at RBI's mandated target of 4%).
As you have said in the article, IMF expects India's growth rate to be 7%. So we need to raise
that by 1% which is not really impossible.
If we are able to do a number of reforms such as cut taxes, reform land and labour laws,
privatise all PSUs (profit making and loss making) and most PSU banks, simplify GST, open
up multi brand retail to FDI, incentivise exports.
Of course it's improbable, but not impossible!

Demonetisation
1. On November 8, 2016, the Prime Minister of India, Narendra Modi announced
the Demonetization of all Rs.500 and Rs. 1,000 denomination banknotes of the Mahatma
Gandhi Series.
2. The demonetization announcement made the use of Rs.500 and Rs.1000 banknotes invalid
past midnight of November 8.
3. It was also announced that the new Rs.500 and Rs.2000 banknotes of the Mahatma Gandhi
new series would be introduced in exchange for the old banknotes.
4. The objective of demonetization as claimed by Government of India was to curtail the black
money running as shadow economy and to stop the use of counterfeit cash to fund illegal
activity and terrorism.

Shadow Banking / NBFC Crisis

• What are NBFCs​- Non-banking financial companies (NBFCs) are financial institutions that
offer various banking services but do not have a banking license. Generally, these
institutions are not allowed to take traditional ​demand deposits​—readily available funds,
such as those in checking or savings accounts—from the public. This limitation keeps them
outside the scope of conventional oversight ​from federal and state financial regulators​.
(​Investopedia​)
• However, NBFCs had existed long before the Act. In 2007, they were given the moniker
“​shadow banks​” by economist Paul McCulley
• Problem: ​In the last two years, the share of bank borrowing as a proportion of total
borrowings of NBFCs has gone up. This is where the problem lies.
• How:​ As of 31 March 2017, bank lending made up 21.2% of NBFC borrowings. This figure
jumped to 23.6% as of 31 March 2018 and finally to 29.2% as of 31 March 2019.
• Result:​ NBFCs got access to easy money from banks. This, as is often the case, led to a small
fall in lending standards and that has ultimately showed up in higher gross NPAs. The
 trouble at NBFCs such as Infrastructure Leasing and Financial Services Ltd, and Dewan
Housing Finance Corp. Ltd forced banks and mutual funds away from NBFCs. Between
March and May, outstanding bank loans to NBFCs fell 3% to ₹6.2 trillion. Given that NBFCs
fund a lot of low-end consumption expenditure, there has been an impact there as well.
• Way forward: ​Like the Reserve Bank of India did in the case of banks in mid-2015, it needs
to carry out an asset quality review of NBFCs as well, at least some of the larger ones. Also,
there is a great need to share agglomerated NBFC data in the public domain than is
currently the case. In recent years, most financial crises around the world have started in
the shadow banking sectors, which is where NBFCs belong.
How easy money from banks led NBFCs into crisis

Importance of bond market

Absence of corporate bond market
● A large burden of corporate lending is taken on by the banking system
● The over-sized banking system becomes fertile ground for crony capitalism, resulting
in lax lending criteria and relaxed investment standards by companies​.
● Eventually the resulting excessive borrowing leads to excess capacities and ​lack of
controlling measures leads to inefficiencies​, which in turn lowers the return on
invested capital, causing many of the loans to go bad.
● Poor accounting transparency, regulatory imperfections, moral hazard problems,
and government inaction tends to delay the necessary corrective measures.

Presence of well-developed corporate bond market​:

● Market forces have a much greater opportunity to assert themselves, thereby
reducing systemic risk and the probability of a crisis.
● Ensures greater accounting transparency, a large community of professional financial
analysts, respected rating agencies, a wide range of corporate debt securities and
derivatives demanding sophisticated credit analysis, an opportunity to make private
placements, and efficient procedures for corporate reorganization and liquidation.
● The richness of available securities will tend to enhance economic welfare, and the
market forces are likely to have a strong spillover effect on the banking system.
● Bonds can be used for forecasting the economy. An ​inverted yield curve​ tells you
that the economy is about to go into recession.
Reference:
https://archerbaycapital.com/bond-market-more-important-to-economy/
https://escholarship.org/uc/item/6sq4c6g0

Ayushman Bharat
National Health Protection Scheme covering over 10 crore poor and vulnerable families
(approximately 50 crore beneficiaries) providing coverage up to 5 lakh rupees per family per
year for secondary and tertiary care hospitalization.
Impact:
● Reduction of Out of Pocket (OOP) expenditure​.
● Increased benefit cover to nearly 40% of the population, (the poorest & the
vulnerable)
● Covering almost all secondary and many tertiary hospitalizations
● Coverage of 5 lakh for each family, (no restriction of family size)
● Increased access to quality health and medication - timely treatments,
improvements in health outcomes, patient satisfaction, improvement in productivity
and efficiency, job creation thus leading to improvement in quality of life.
 Challenges:
● Financing: ​States to contribute 40% of the expenditure​ for Ayushman Bharat as
health is state subject, ​Poor fiscal situation of majority of states​, need of alignment
of several operational state health schemes with the central initiative.
● Implementation: ​Improper procedure for empanelment​, cost fixating mechanisms
and inordinate ​delay in reimbursement​ to hospitals, absence of proper mechanism
for standardization of services.
Solution:
Standardization​ ​in clinical practice and other processes
Claims Disbursal: ​National Costing Guidelines ​should be used for calculating reimbursement
Reference:
https://www.india.gov.in/spotlight/ayushman-bharat-national-health-protection-mission
https://www.iasparliament.com/current-affairs/daily-news/ayushman-bharat-the-challenge
s

Chandrayan and India's scientific community

Chandrayaan-1​:​ ​Discovered traces of water​, magnesium, aluminum and silicon in north
polar region of moon. Global imaging of the moon is another achievement.
Chandrayaan-2​: Explore the moon's south polar region. It comprises of​ ​orbiter, lander
(Vikram) and rover (Pragyan).
This mission fosters a new age of discovery, increases our understanding of space,
stimulates the advancement of technology, promotes global alliances, and inspires a future
generation of explorers and scientists.
The failure of the lander to achieve a proper landing quashed India’s hopes but ISRO is
gearing for another shot at the endeavour in 2020.
Why Moon:​ ​Linkage to Earth’s early history, undisturbed historical record of the inner solar
system environment.
Why South Pole:​ Possibility of the presence of water in permanently shadowed areas
around it​; craters in it are cold traps and contain a fossil record of the early solar system
(South Pole-Aitken Basin is the largest​ ​known craters in the solar system)
Could have been only fourth nation after US, Russia, and China to explore the region.

Reference:
https://www.indiatoday.in/information/story/chandrayaan-2-esaay-india-lunar-mission-lan
ding-all-you-need-to-know-1596301-2019-09-06

Huawei Ban
1. About company – ​based in China​ – sell networking equipment, Smartphones, Computers
2. Number 2 in Smartphones- by market share​ – 2018 (below Samsung, above Apple)
3. US Government ​sign executive order, ​added Huawei to black list ​aka “Entity List” – restricted
to do business with any US Companies at all
Why? - US-China Trade wars escalating, History of security concerns – US Company buying
Huawei networking equipment – Spying
4. What about people who owns Huawei Phone – 90 day exemption – will stop getting
software updates after that
5. Honor is a brand owned by Huawei
6. https://www.vox.com/technology/2018/12/11/18134440/huawei-executive-order-entity-lis
t-china-trump
 AI Impact
Optimist View
1. In technology, there is arguably no bigger debate today, than the impact on employment of
artificial intelligence (AI)
2. Will we fade to irrelevance as machines take over? Or are our uniquely human capabilities
irreplaceable? There are valid arguments on both sides, and the truth is, no one really
knows.
3. The optimists point to the history of technology and its impact on jobs
4. Since the Industrial Revolution, the world has added more than six billion people , with most
of the adult population employed
5. They point out that new jobs will be created that are beyond our imagination.
6. After all, 25 years ago, who could have predicted occupations such as web programmer,
YouTube influencer, or Airbnb host
7. For optimists, we will continue to work with machines and ​humans will be valued for skills
such as creativity, judgement, collaboration and interpersonal communication​.
8. AI is now being viewed as a new category of intelligence that can complement existing
categories of emotional, social, spatial, and creative intelligence.

Pessimistic View
1. The history of technology is rather brief in the grand scheme of things, and the past is not
necessarily a predictor of the future
2. Once machines do mental work better and cheaper than us, corresponding jobs will
disappear.
3. The example for the pessimists is the great wave of business process and software
development outsourcing that occurred in the past 20 years, benefiting India and other
developing countries.
4. The difference this time is that instead of the developing world taking jobs away from the
developed, machines will take away jobs all over the world.

Key is to Stay Relevant

1. Continuous education throughout our lives, whether through formal certifications or
informal self-learning, will be the norm.

AI will diversify human thinking, not replace it: Tata Communications study
 :​Visualizing the AI Revolution in One Infographic

Future of Healthcare – Connected device

1. Connected Medical Device
2. Wearables, implantable stationary – monitor patients remotely
3. Instant access to more data coming from these connected devices
4. Example of connected devices: Insulin Pump, Asthma Inhaler, Pacemaker etc.
5. Results: Better Patient care, Patients can stay at home, Improved insights, Instant results,
quicker response time, Automatic supply control
6. Risk: Device security, Software safety and Data Privacy
Infographic 1: ​The 6 Forces Transforming the Future of Healthcare
Infographic 2: ​THE FUTURE OF HEALTHCARE

Hyperlocal

1. The meaning of hyperlocal is

something (community, organisation, service etc.) that is confined to a certain geographical area
2. The basic principle on which the concept of hyperlocal works on are geography and time
3. With an upsurge in technology, the current of hyperlocalism has covered almost all the possible streams. Like​-
● Food Delivery (Swiggy,Zomato)
● Grocery Stores (Big basket, Grofers)
● Hyperlocal electronic market (Zopper.com)
● Hyperlocal Services(UrbanClap, Dunzo)
● Mobility (Rapido, Ather Energy, Bounce and Vogo)

4. Challenges:
● Limited Area of operation
● Existing Brick and mortar stores
● Cut-throat competition
5. Mobility market is still at a nascent stage, with more than 300 million commutes happening and not even 1% is
catered to by the platforms
6. The latest funding boom in the technology-powered, ride-sharing space has been fuelled by the realization that
a majority of Indians who use two-wheelers are largely turning to technology and using new-age smartphone
apps to fulfil everyday transportation needs

https://www.livemint.com/Companies/o3cgDKFgXqRI69XBFtARZL/Investors-hitch-a-ride-on-mobility-startups-in-India.ht
ml
https://yourstory.com/mystory/challenges-and-opportunities-of-hyperlocal-ecommer-d8cgujlmig
INDIAN TELECOM(AGR STORY)

1. India's telecoms sector has been rocked by a Supreme Court ruling last
month that sided with the government in a dispute over how levies are
calculated, saddling the ​industry​ with a combined $13 billion in fresh
debt.
2. Supreme Court overturned a lower court ruling and agreed with the
government's definition of adjusted gross revenue (AGR)
3. Vodafone Idea needs to pay more than 283 billion rupees ($3.9 billion)
while Airtel owes roughly 216 billion Indian rupees ($3.0 billion)
4. “​Given the multiplier impact the (telecom) sector has on the economy and
various intermediary industries, it is of critical importance that the sector
remains healthy, dynamic and vibrant,” FICCI

https://telecom.economictimes.indiatimes.com/news/indias-telecom-sector-on-
the-ropes-after-13-billion-levy-ruling/72276504
https://www.business-standard.com/article/companies/after-13-bn-agr-hit-futur
e-of-india-s-tattered-telecom-hinges-on-govt-aid-119112800562_1.html
https://www.thehindubusinessline.com/info-tech/sc-ruling-on-agr-will-lead-to-te
lecom-sectors-collapse-ficci/article30117041.ece