Economic Sectors

No t e b o o k: Economy

Ease of doing Business in India:

Govt announced Central Registration center and government process re engineering are
announced to reduce the time to incorporate a company.
Presumptive Taxation limts increased to 2 Cr(Applicable from April 2017)
Corporate Tax reduced for small companies whose turnover is less than 5Cr from 30 to
29.
Cabinet approved Mines and Mineral(Development and Regulation Act, 1957: This will
pave way for transfer of captive mining leases, granted otherwise through auction, and
would allow merger and acquisition of companies. This will facilitate the profiltability of
the companies and solve the problem of NPA to an extent.
Unified online portal for registration of labour Identification Number, submission of
returns, grievnace redressal, combined returns under eight labour laws.
Online application forms for environmental and forest clearances, 14 govt services
delivered via eBiz, single window online portal, investor facilitaiton cell, dedicated Japan
+Cell, consent of electricity(NOC) no longer required for new electricity connections.
Many defence sector dual use products no longer require licenses.
State Govt contributions
Gujarat : Online consent system for pollution control board and a GIS based land
identification system
Chattisgarh: Online consent system for environmental clearances
MCA21 Portal is a single platform to submit all the required documents and filings under
the Companies Act.
Govt came up with Ease of Doing Businees Dashboard and Make in India Dashboard,
which facilitate state to report progress on State Level Business Action Plan and ranking
of states by DIPP.

Agriculture:

Problems:

Crash in global prices had a impact on our farmers too

Agricultural credit not benefitting small and marginal farmers.

Measures needed:

Raising productivity
Risk mitigation
Investment in irrigation, rural infrastructure technology and extension can raise agricultural
productivity
More focus to the rain fed areas
Water conservation and drought proofing for tackling droughts, floods
Reformation of subsidies in the fertlizer
Yellow Revolution:
It refers to the sudden increase in the production of the edible oil due to plantation of Hybrid Oil
seed.

Mustard is Indias largest source of edible oil. It contributes quater of our edible oil production. 75%
of Mustard crop is under irrigation unlike 25% for groudnut and 1% for soyabean, it has roughly
40% of oil content, hence is the most suitable candiadate for yellow revolution.

Constraints to increase production:

Heterosis : Is the improved or increased function of any biological quality in a hybrid offspring i.e by
crossing two varieties.
Two Problems

Narrow genetic base of mustard varieties in India. Can be overcome by crossing our
varieties with the European.
Absence of natural hydrabization system in mustard. Mustard is self pollinating (both male
and female in same plant). Hence restricts the scope of developing hybrid varieties.

GM Mustard:
A team of scientists at Delhi University has bred DMH 11, which enables to create a viable
hybridization system in mustard using GM Technology. The resulting GM Mustard hybrid(Mustard
DMH-11) is claimed to give 30% more production than the best species of mustard available
'varuna'

Need: To decrease our dependence on import of edible oil.

Problem : Scientists used 'Barnase' gene isolated from soil bacterium called Bacillus
Amyloliquefaciens. It makes it male sterile. Crossed with other fertile plant having both Barnase
gene and Barstar gene(blocks action of barnase). The progeny will have both these genes which
will make it fertile at the same time improving production.

Why objection to GM?

GM technology has already been commercialized in India via Bt Cotton, which helped increase our
cotton production to 2.5 times. Opponents say that GM cotton is not a food crop, but the claim is
wrong because cotton also yields oil and oil cake(meal) fed to animals. Infact oil extracted from
cotton seeds is the 2nd largest produced edible oil in the country, which makes cotton no less a
food crop.

Also India imports around 3 million of soyabean oil which is predominantly GM.
Also in this case the developer of GM Mustard is a govt funded institution as opposed to Bt cotton.

But we cannot reject entire opposition, their complaints against a less than robust regulatory
environment for genetically modified organisms in the country are genuine. There is lack of
transparency as well as conflict of interest in the system. Genetic Engineering Aprroval committee,
functions under the MoEF is not indenedent. The case of review committee on Genetic manipulation
that supervises and clears research activities and also small scale field trials is even worse. It is
part of Department of Bio Technology whose primary function is to promote Bio Technology, hence
it is acting as both regulator and promoter. On several occassions developers of transgenic crops
have also been members of regulatory committees.
Why Regulatory Environment not being reformed??

Since the controversy over the Bt Bringal, govt trying to create Independent Bio Technology
regulatory authority - a single organization that will replace multiple committees. This
would deal with the use of all GMOs in agriculture, pharmaceutical and biodiversity sector.
As of now there is a 2 tier regulatory framework for GM crops includes a Review Committee
on Genetic Manipulatoin(RCGM) under Department of Biotechnology and GEAC under MoEF.
GAEC considers proposals for trail only after the approval from the RCGM.
DBT new bill proposing a regulator and new biotechnology policy.

Fisheries:

Importance:

1% of GDP, and 5% of agricultural GDP

Aquaculture has a vast potential in India considering the huge water resources and the
surrounding sea that we have.
Fastest growing food producing sector in the world, great potential to meet the protein
requirement.
India is the second largest producer of fish from acqaculture.

Potential Areas and Progress:

Feasibility of inland saline aquaculture in Haryana, punjab and UP, which can bring unused
agriculture land under economic use
Standardizaiton of pen and cage farming which offer vast potential of Inland acquculture in
the country.
Encouragement of high value cold water speices like brown trout in the states like HP, J&K.
Govt established Directorate of Cold Water Fisheries(DCFR) at Bhimtal.
Brackish water aquaculture regulated by Coastal Aquacuture authority for sustainable
development. Regular awareness programmes, avialabilty of technologies pertaining to
management practices made this Brackish sector grow huge.

Govt Initiatives:
Govt is in the process of revising National Policy on Marine Fisheries.
Establishment of 'Brood Bank' for commercially important species at Bhubaneswar by National
Fishery Development Board is expected to ensure production and supply of certified broods to
hatcheries in the country.

Cage and Pen Farming:

To rear fish inland, low initial costs, simple technology and management methods
Cage or Pen a system that confines the fish or shell fish in a mesh enclosure.
These cages are placed in the lakes.
Labor Problem:

Three Main Labour Laws:

1. Industrial Disputes Act, 1947

1. Contract Labor Act, 1970

1. Trade Union Act, 1926.

Constitutionally:

1. Art 246, Issues related to labor and labor welfare comes under List III i.e concruent list

1. Exceptional matters related labor safety in mines etc comes under Union LIst

1.

There are eight core ILO conventions. India did not ratify 4(Freedom of Association and
Protection, Right to organize and Bargain, Worst form of child labor convention, Minimum Age
convention). India did not ratify Minumum wage fixing convention.

Annual Global Rights Index, published by ITUC, puts India along with the Dictatorial regimes
showing the poor status of Labor rights.

93% of the labor are informal.They dont have the protection under the 144 laws. There is lot of
'rigidity' in formal and 'flexibility' in informal. ILO points out that India has highest labor
flexibility. Around 144 Labor Laws only apply to Formal sector.

Contrary to the ILO mandated norm of 'tripatriate' consultations between employers, state and
union, Union Govt introducing the labor laws amendment just by consulting FICCI.

FICCI proposal: Dilution of the laws so they can be employed formally but without legal
protections.

Reasons for such a state of affairs:Global supply chains has in-formalized the labor by breaking
down the production process and sub-contracting. Most of whom are working in the informal
conditions. Ex: Tommy Hilfiger outsourcing the work to informal sectors in Banglore for thread
making, hence stripping of its responsibility of social security measures that it need to take.
Decreases the value of human effort.Growth of Service sector, kept the huge work force away
from unions. Else the employee will be fired.Government s attempt to dilute the existing laws
further worsening the situation. SO, Annual Global rights index published by ITUC –
International trade union confederation gave a rating to India along with dictatorships like
Saudi, Qatar.
Why the labor unions are diluting? Fatal flaws

1. Political party affiliation – It dilutes their commitment to the cause of the labor rights. It
restricts, creates disunity among unions. Hence they are no more autonomous to
represent the interests of labor class.

1. Leadership and its Bureaucratic style of function – Leadership is more focused on policy
analysis rather than a strong on ground action.

1. Growth of service sector esp. IT industry changed the labor landscape.

Regularisation of contract workers and equal pay for contract workers performing the same job
as permanent workers should be the goal. Else the there will be major turmoil due to labor
unrest.

Employment in Indian Manufacturing sector:

1. 80% of the manufacturing output comes form the formal sector but 80% employment in
informal sector

1. This has created a labor aristocracy that seeks to protect its privileges keeping the
remaining in the informal sector

Hence the only viable way is to break the cycle of distress is labour intensive industralization as
done in China.

Economic Survey Observations:Excessive job security and too regulated environment is

working against to the workers.Employer likes to keep the employee as a contractual labor and
employee is also not willing to contribute to EPFO. Most of them prefer to receiving cash
instead of the money going to their accounts.

Labor reforms:
Govt is trying to bring 3 laws

Code on wages : It combines four central laws like Minimum wages act, payment of
wages act etc. This code would also give powers to centre to impose minimum wage
across all sectors which till date is available only to Central jurisdiction
Small factories bill : To provide a separate set of labor laws for factories less than 40
Industrial relations bill : Allows companies with staff of 300 not to retrench without
permission of govt, present : 100
Make in India:
It aimed at ensuring rerotin FDI from around the world to India. This is an aggressive push for
manufacturig sector as it looks at single window clearances , minmimal procedures and cutting out
red tape. It led to the opening up of 25 sectors like automobiles, defense etc. Govt Promised the
deregulations to effectively use the 3 D's i.e Democracy, Demography and Demand.

Problems:

Retrospective Taxation.
Most of the new jobs in construction sector which are low productivity.
Indias natural advantage lies in vast pool of unskilled labor but most of the jobs in
manufacuturing and services sector are skill intensive. Thus a demand supply problem in
these two sectors
Economis Survey points out that Cost of Skill intensive model is to leave "two generations of
those who are currently unskilled"
Another report from Citi group claims that increased use of automation will tilt the balance
in favour of developed countires
Fragmentation of Global Value Chains that led to manufacuturing in low cost countries has
slowed down.
Renewed "onshoring" of production" with increasing use of robotics poses a problem.
Lack of coordination between Universites and manufactureres. Ex: Jaguar is in coodrination
with Wawrink University and Rolls Royce with University of Birmingham for advanced
 engineering R n D.

Economic Survey Observations:

Eliminating exemptions on countervailing duties on imports, monetization of land owned by

public sector(to use in smart cities, developing industrial clusters in rural areas a/c to the
availability), allowing industries and companies to buy electricity directly from free markets
are suggested to enable make in India a success
India joining Trans Pacific partnership can jeopardize the Make in India initiative as it would
prevent using state owned enterprises and procurement by the govt to achieve social and
economic objectives.

Way Ahead:

Urgent need to skill the people

Make in India cannot succed unless the cost of doing business is brought down
Pursue various reforms to improve doing business

Onshoring of Production : Production of the good within the nationOutsourcing: Comapany

givng certain part of their production/services in their setup to other company within the same
country or abroad.Offshore Production : Production taking place abroad. In outsourcing it may
or maynot. Ex: Reliance going to Africa and setup industry is Offshoring Production. Also
Reliance can give lets say Customer Service to Africa - It can be called both Offshoring and
Outsourcing.

Aviation Sector :

Open Sky Policy

At present countries sign Air Service Agreements, through which they decide the flights or
seats per week to be allowed. Generally various terms are associated with it
If there are no restrictions on flights, seats or landing points then it is called Open Sky
At present India has Open Sky only with US

BLUE-SKY THINKING

What is open sky?

An agreement between two countries to allow any number of airlines to fly from either
country, without any restriction on the number of flights, destinations, seats or price

But, open skies may vary and restrictions do exist at present

India has an open-sky with:

United States, with NO restriction on number of flights, seats or destinations

 United Kingdom, with restriction on frequencies, only with respect to flights to and from
Mumbai and Delhi

Limited open-sky with Asean countries, for more than a dozen tourist destinations

With other countries, India has entered into 109 bilateral agreements which cover
capacity, landing points, traffic rights and seasons

WHAT IS THE PRESENT PROPOSAL?

Open skies for countries beyond 5,000-km radius of Delhi (essentially Saarc & Europe) with:

No restriction on number of seats or flights

But will be applicable to only limited destinations in India

Aviation sector – 5/20 rule

5/20 rule prescribes that any operator need to serve 5 years in the domestic sector and shall have
at least 20 aircrafts to operate on the more profitable international sectors.
It is been criticized as an entry barrier to the new airlines and is going against the competition and
consumer interests. In a market economy government is expected to be a regulator ensuring the
competition.
On the other hand, established players argue that any changes in 5/20 rule shall come along with
changes in route dispersal guidelines ( established players are asked to operate to less
remunerative, essential routes.
civil aviation policy – important issues

Replacement of 5/20 with 0/20.

Affordability - Prices for flights less than one hour are capped at 2500Rs. Ceiling on airfares
will be proportional to the flying hours
Open Skies: India will have open sky policy for countries beyond the 5000Km radius from
delhi on a reciprocal basis. It has a scope to increase flights between europe and SAARC
countries
Cess: Regional connectivity cess will be imposed
Regional connectivty schme : The scheme aims to revive 50 airports in the next two years
Connectivity to NE: 10% of the total capacity deployed on metro routes need to be deployed
on NE and other states.
Tax incentives for those airlines serviing on unserved routes under RCS
To boost the cargo volumes the freight industry has given incentives such as zero airport
charges and waiving off terminal navigation landing charges.

Analysis:

Open Sky policies beyond 5000Km would not bring any perceptible change because India
has Open Sky policy with US and UK and the other countires are not even using the exisitng
seats
0/20 is not a welcome because almost takes 5 years to build 20 aircrafts it would have been
ideally 0/10.
 Policy did not touch Indias safety and security dynamics, did not recommend measures for
revamping DGCA and Bureau of Civil aviation security.
Silent on formation of independent civil aviation authority.
Adoption of hybrid till would increase the prices: The airports economic regulatory authority
of india recommended to determine tariff based on single till. Under this both aeronautical
and non aernautical revenues(food and beverages etc) are taken into account to calcuate
the passenger fee. A/c to hybrid till only 30% of the airport operators non aeronautical
reveneus would be used to subsidize the airport costs. It is said that differentiating
aeronautical from non aeronautical is also a big challenge.

Govt Initiatives:

Since 90% of the Maintainence, Operation, Repair business go out of India, Budget gave
tools and tool kits used by the MRO operations exemption from Customs and Excise duty.

Wayforward:

There are many airports in India which are opened to increase regional connectivity turned
white elephants for India AAI spent around 300Cr with out any commercial income. Hence
selection of regional airpots in the draft policy which aims to improve regional connectivity is
crucial Ex: Include cuddaph, Julgaon etc.
Instead of capping fares or leving cess the govt should give concession on the regional
airports after carefully choosing their liocation and allow the market to determine the price.

Pharma Sector:

Union Fertilizers minister said that they soon implement Katoch Panel Committee report,
which has been constituted to suggest ways to reduce the independence on bulk drug
imports from China
Govt recognises Pharma as a 'sunshine indusrty'
Indian currently meets 80% of its demand of bulk drugs or API used as raw materials from
China
He said problems of Inverted duty structure would be taken care of.

National Pharmaceutical Pricing Policy 2012:

Regulation of prices based on essentiality as listed in NLEM

Regulation of prices of drugs is on the basis of regulationg the prices of formulations only
Regulation of prices of drugs in on the basis of fixing the ceiling price of formulations
thorugh Market Based Pricing.

NLEM 2011 for example lists 614 formulations.

Regulation:
Lack of adequate regulation bought a bad name to the countries pharma sector. Dinesh Thakur
who a whistleblower from Ranbaxy also highlighted the inadequacy of Indian regulation.(Use this in
Ethics, overcome Companies loyalty for the betterment of the society) The pharma lobby dont want
to increase any regulation.
Even states are resisting. At present both Center and state approve durgs. for effective control
there has to be unified approver, but states dont want to loose their power.
India should join Pharamceutical Inspection Convention which will help country upgrade its
regulatory processes.
Problems:

Entire focus on improving the quality of drugs is focused on Exports to western markets and
not on domestic and exports to poor nations. Leading to release of substandard drugs into
the markets and it in turn increasing the drug resistance, superbugs.
Even after knowing that the company provides substandard medicines one cannot close
because lets us company is in UK and selling products in Kerala, only the Uttarakhand govt
can close the company which many states would not do as it leads to loss of employment.
Poor and non transparent regulatory environment
lack of enforcement of manufacturing standards
Ban of indian drugs on ground of poor quality, adulterated drugs, hygiene and sanitation
Growing dependence on the bulk drugs especially from the imports of china
RnD investment going down in the past few years
Poor and erractic power supply led to decline of the fermentation industry engaged in
production of drugs
Lack of cordination among different minsitres Ex: Department of pharmaceuticals deals with
drug policy and DoSnT deals with innovation

Solution:

Cluster Scheme: Setting up of mega parks with common efflucent treatement plants,
common lab etc
Coordination action by ministries
Easier and transparent regulatory regime
Develop WTO compliant regulations which domestic players will find easy to confirm
Govt shall stick to its vision of Pharma vision 2020
Providing more incentives to MSME in pharma sector.

Way Forward:

A think tank is necessary to do sufficient reserach on Issues of India drug regulatory

framework
Mandatroy Bio Equivalent studies for all generic drugs as recommended by Ranjit Roy
committee
Drug licensing shall be made centralized. Even many experts recommended the same.

Despite being known as the manufacturing hub of pharma, India imports almost all the medical
devices, whose regulation recetly entrusted with the Dep of Pharmaceuticals. It puts a dent on
our import bill and denies the ordinary citizen for its access because of the treatment would be
highly costly. This can be partly attributed to Inverted duty structure, which was taken care by
the budget by incresing the duty on the imports.

Quality – Government is also trying to develop quality standards and certification rather than
relying on USFDA.
Generic Drugs:
Doctors preference to the branded medcines which are way higher are making people move away
from using Genric drugs from Jan Aushadi stores. The govt is thinking to bring a law to make it
mandatory for the doctors to prescribe generic drugs

Doctors shall be made to prescribe the composition rather than the brand, so the
patient can get the composition
A computer platform suggesting various alternative generics for the prescribed brand by the
drugs and stationing at Jan Aushadi shp
Making the centre, state manditorily procure from the generic list of drugs.

India may cease to be a pharmacy of the World:

Voluntary licensing agreement signed between 11 Indian generic markets and Gilead Science to
bring drug sovaldi for Hepatitis C

A/c to which, Indian companies will pay royalty to Gilead and are allowed to make the
generic versions but the same cannot be exported to 50 middle income high burden
companies of high income nations and US.

As it is a business strategy Govt cannot interfere.

Problems:
USA Government made it mandatory for active pharmaceutical ingredients to be manufactured
locally. It has a huge negative impact on Indian subsidiaries in USA, who largely import it from
India.

Any drug is composed of two components. One is the actual API or Active Pharmaceutical
Ingredients which is the central ingredient. The second is excipient.API : They are the
chemically active substances which meant to produce desired effect in the body.Excipeints:
They are the inert substances present inside a drug. For Ex: The liquid used in the syrup.

Certain API are unknown and hence require additional substances, which can work in
conjuction with the API to produce the required medicinal effect. Ex: Most of the herbal
medicines where the API is usually a combination of several mixtures and substances which
when used together become active, in these API are not singular substances but the
culmination of several herbs and ingredients. As the herbal medicines are a combination of
several different substances they are prone to bad quality as suppliers procure poor quality
batches.

Strength of API : Manufacturers use certian standards and benchmarks for the calcualtion of
relative strength of API, but the method of standardizing are differently used by diferent brands
hence their strength also varies.
Indias Drug Policy:

Ship Building Industry:

Cabinet cleared 4000Cr package to spur the industry which include the right to first
refusal on all govt purchases for Indian Shipyards, tax incentives and infrastructure
status for ship building
Govt would grant financial assistance of 20% of the contract price or the fair price,
whichever is lower, following the delivery of the ship.
Finance Ministry in Nov exempted all raw materials and parts used in manufacture
of ships/vessels/tugs and others from customs and centre excise duties.
Ship building is strategically important industry due to role in energy security and maritime
defense and for developing heavy engineering industry.

Fertilizer Industry:

Has not seen any fresh investment in the past 15 years

Urea Manufacturers are thinking to shut down, happening when the India has the highest
demand for fertlizers in the World.
Result - Imports are rising and productivity stagnat - exactly opposite to Make in India.
Though govt announced New Investment Policy 2012 for investment in Urea, it didnot
attractors investors.

Reasons for such a state of affairs:

Unpaid fertilizer subsidy bills crossed 48000Cr.

Flawed Fertilizer policy - Our Urea prices are the lowest in the world.
Low Ureas prices leads to several problems
High subsidy burden and when govt dont pay industry gets demoralized
Dependence on imports rising
Because of highly distorted prices of Nitrogen, Phosphorus and Potassium, the use of
nutrients is imbalanced damaging soil fetility and breeding ineffienciency
Due to highly subsidized nature, it is being diverted to boundering coutries. Neem
coated can partially help in use for non agricultural purposes but not smuggling
Discouraged investments in new Urea Plants.

Way out:

clear the Arrears

Bring under Nutrient Based Subsidy schem and recalibrate the relative prices of nitrogen,
phosphorous and potassium
Propogate modern techniques like fertigation and bring soluble fertlizers under
NBS scheme.
 Distribute Fertility subsidy by DBT coupled with decanalisation of imports and decontrol of
fertlizer.
Considering the rates of the Natural Gas, why not produce Outside India. It would be wise to
promote "Make for India" rather than "Make in India" in such case.
Single Super phosphate is the appropriate fertilizer for the small and marginal farmers. But
the current system is not conducive for the promotion of SSP usage, India like Brazil should
shift to SSP in place of DAP(Di Ammonium phosphate) for phosphate addition
Allowing the industry to charge market prices and providing subsidy, use of Jan Dhan Bank
Accounts. Deregulate the market only then private players would invest in the sector.

New Urea Policy/Neam Coated Urea Policy:

Objective: Maximizing Urea Production, promoting energy efficiency, and rationalizing subsidy
burden.
Govt recently mandatory for urea manufacturers to produce NCU upto a minimum of 75% of their
total production of subsidized urea.
Benefits:

Ordinary Urea - some part converted to ammonium carbamate -> Ammonia Gas(Ammonia
Volatilisation, 10% loss) + Nitrates. Neem checks Nitrogen loss at each stage, it slows the
process of nitrate formation and hence excess nitrate is not available for denitrification.
Increases crop yields because of 'sustained release nature' (SRN) of Nitrogen.
Decreases consumption due to SRN - decreases imports - save FE - Also increase in income
for farmers - Reduces ground water contamination.
Neem coated urea would check diversion of urea for industrial use.
Movement plan of Urea to be given by the govt to ensure availability through out India
Under Nutrient Based subsidy policy, govt decide to continue with existing subsidy rates for P
& K fertilizers
Movement Plan for P & K fertilizers has been freed to reduce monopoly of few companies.

Nutrient Based Subsidy Scheme

Cabinet approved the proposal for removing the minimum capacity utilization criteria for the
Single Super Phosphate(SSP) units to be eligible for NBS. This would put smaller SSP units
to get subsidy and create a level playing field. This minimum production criteria was
applicable only to SSP and not to other P&K fertilizers.

Apart from the Fertilizer, Urea is used as

Milk adulteration
Manufacture of explosives
Manufacture of Plastics
Reducing air pollution.

SSP: It is a phosphatic multi nutrient fertilizer, contains 16% phoosphate, 11% sulphur, 16%
calcium, and other micronutrients.
Defense Sector:

India is probable one large Democracy without robust military industrial complex. As per the
SIPRI India is the sixth largest military spender in 2015 surpassing, France, Germany
and Isreal.
India accounted for 15% of global defense imports in the past 5 years, they are three times
more that China.
Also big ticket purchases are so dominating that 93% of the capital budget in the 2014-15
were due to committed liabilities.
Though on the face it appears as if our PSU in defence sector are doing well based on
profits, the hidden secret is that the profits are coming from the huge advances that the
govt pays and not from by the route of maintainence, manufacturing and innovations.

Way Out:

Leveraging offset clause. For Ex: The offset clause in Rafale deal led to the coopeartion
between Reliance and Dassualt aviation Joint venture.
A robust military industrial complex would require a better human resource
Dhirendra singh committee to evolve a policy framework for facilitating Make in India said
Make in India should not be "Assemble in India with no IPR and design control" as has
happened to the PSU(became assembly units)
Committee under Abdul Kalam had recommended that India should look at increasing its
defense acquisition from 30 to 70% by 2005. However today it is still 35% MOD expert
committee suggested that by 2027 we have to achieve it.
The arguement of Gun Vs Butter (defense versus civilian goods) seems contrary one cannot
neglect the gains the country would acrue
India has all the necessary prerequisiites for the robust military industrial complex : a
diverse private sector, a large scale of enginerring institutes and a growing defense budget
and market. It is right time to become one.
Establishing a seperate department of overseas acquisitions in the ministry of defense for
assisting private companies willing to take over foreign companies.

Initiatives by the Govt:

Govt made changes in the defense procurement plan.Based on recommendations of

dhirendra singh committee.
Approval for the DPP is given by the Defense Acquisition council, which is headed by
Defense Minister.
DPP 2016, will include new category indigenously designed, developed and
manufactured category(IDDM). Two sub categories - Mandatory 40% domestic
content for a domestic design or mandatory local content of 60% if design is not
Indian
Department of Defense production will fund Private RnD
Offset policy is amended and the bar is raised from 300Cr to 2000Cr, (A/c to which
30% has to be invested back in India, which raised the cost of project by 15%)
In the bidding process, additional weightage is given to the performance rather than
relying only on lowest bidder.
 Empowered committee to solve disputes, which till date went to DAC.
MSME will be encouraged in defense procurement

It fails to solve the following problems

1. In India, domestic military industry is dominated(monopoly) by the PSU and acts as a drag
on an economy
2. The duty exemptions, self certification benefits offered to foreign companies were not
offered to the Indian companies, even if offered had to take many permissions, leading to
bureaucratic hurdles.
3. No "strategic partners and strategic partnerships" as recommended by the committee,
under which select private companies to be given preferential status in major defense
projects, hence it is said that dont faciltate Make in India

FDI in Defense Sector:

Present Provisions: 49% automatic route, 100% on a case to case basis. Higher FDI will be
permitted only when the investment is likely to result in access to modern and state of art
technology
Problems : Further increase of FDI may not in the long term interest and would not help our
dreams for self reliance. It could destroy dometic comapanies.

Advantages:

India can become a regional hub for defence equipment

Demand for MRO(maintainence, Repair and overhaul) will increase
It has strategic significance for india.

Why India has to allow:

Current requirements catered by imports, opening of strategic defence sector for private
companies will help foreign original equipment manufacturers to enter India.
Offset policy(where 30% of the cost requirement to be reinvested in our defence purchases)
would be ensure that ecosystem of suppliers is built domestically
Promotes self reliance, indigenization tech upgradation etc

Disadvantages

Strategic concerns.
Apprehensions that outdated tech is being shifted because in today time F35 are more
prefered than F16.

DAC: Constituted in the backdrop of Post Kargil reforms in defense sector, approves long term
integrated perspective plans to begin acquisition proposlas, and has to grant its approval to all
major deals. It has power to approve any deviations in the acquisition, and recommends all big
purchases to the cabinet committee on Security. Headed by Defense Minister.

Defense sector is always mirred in controversies due to lack of transparency and never ending
 scams. Bofors Scandal, Tata Trucks Scandal, Barak missile scam, HDW scandal are all
examples of this. Ironically CBI failed to convict even one person in these big cases. The
probalbe reason might be that these involves many offshore entities and complex financial
mechanism to transfer the bribes which involve proxy directors, tax heavens. So conviction rate
is close to zero. So the best way forward is to strengthen the military industrial complex.Three
important stages prone to corruption

Services qualitative requirements - changing the service quality that suits the vendor

Field Evaluation : Improper certificaitons that trails are good

Service contract negeotiation - High bench mark prices are set.

Already a policy to deal with the middle men and agents in defense procurements and there is
integrity pacts but problem is that they are implemented in spirit.

The official sanctioned limit for Army to maintain ammunition is eqvivalent to 40 days of intense
war. But a CAG report found that it was being maintained at Minimum Acceptable Risk Level(20
days) of intense war. Even this not maintaining properly. The audit also pointed out serious
concerns regarding fire safety, transportation and storage. The problems include transportation
of explosives in ordinary vechicles, unfriendly disposal practices damaging environment,

Energy:

Power Sector:
Power generation is completelty a central subject. states cannot commission a powerplant on its
own.

National Power Tariff Policy :

The amendments NPT Policy 2006 are based on 4 E's - Electricity, Efficiency,
Environment and Ease of Doing Business.

Highlights:

Power companies are allowed to pass costs on consumers

Renewable Energy Obligation on New Coal or lignite based thermal plants. They have to
purchase or establishe renewable capacity
No inter state transmission charges
Power producers - expansion 100% - through automatic route earlier, 50%
Tariff for multi state power projects to be determined by Central Electricity Regulatory
Commission
Purchase of 100% electricity produced from waste.

How will benefits consumers:

Cost of power reduced. Cleaner Environement due to renewables

Help achieving the targets of Swaach Bharat and Namami Ganga Mission thorugh WTE.
Complements UDAY thereby ensuring realization of 24 x 7 affordable power
Ujwaj Discom Assurance Yojana : UDAY:

Central Govt - to bail out DISCOMS by transfering debt to state.

It is reform package for the loss making DISCOMS, aimed at improving operation
efficinciey, reduciton of interest cost and enforcing financial discipline(thorugh
alingning with state financing).
State govt will take 75% of the debt and pay lenders by issuing bonds. Remainging 25%
discoms will issue bonds. It is now state responsiblity to ensure discoms are financially
viable
States accepting would be additional/priority fuding throug DDUGJY, IPDS, PSDF

Problems faced by the DISCOMS:

Plants ruuning at low plant load factor.

power tarriffs not adequate
Discoms that won the coal blocks owe premium to the state government which is much
higher.

How it helps?

Operational Efficinecy will be improved : By the use of compulsory smart metering,

upgradation of transformers etc reduces AT & C to 15%
Cost of Power will be reduced : Due to supply of cheaper domestic coal, coal linkage
rationalization etc.
Reduction in interset cost of DISCOMS : Improvement in their credit rating
Enforcing financial discipline:
 Debt burden over state will make them take strong coerce steps to make finances of
DISCOMS sustainable.

Is it useful in long run??

Scheme intends to build a culture of dependency among DISCOMS

Root problem i.e looses to poor revenue realization is not met
AT &C (Average Terminal and Commercial losses - sum total of technical loss, commercial
loss and shortage loss due to non realization of total billed amount) problems are not
solved, which should involve customers to pay their due prices.

So it is only a short term measure that gives room for DISCOMS to make further finances in order
to deal with technical loses, but adequate measures need to taken in order to ensure that the new
loans are invested for infrastructure upgradation.
No Monitoring mechanism to :

Reduce AT & C loses

Reduce debt
Realise 100% rurual electrification.

Shunglu Committee Recommendations:

State Electricity Regulators should be made independent finacially and their functioning.
Areas where losses are high, loss surcharge should be imposed.
Need to stop political interference in working of discoms and the regulator.
DISCOMS need to focus on segregation in agriculture and rural feeders
Govt should attract private sector.

Coal Linkage Rationalization : Govt consituted Inter Ministerial Task Force in 2010 to
recommend the feasiblity of rationalization of linkages to reduce transportation cost. The
committe has submitted its report. To undertake optimization again govt constituted again and
IMTF in 2014.

The IMTF approved the report submitted by KPMG( a consultancy firm) to rationalize the coal
linkages. The report recommended that Western Maharastras plants which are closer to ports
can swap their domestic linkages with those in hinterland which are working on imports which
could save Rs 303 Cr. If these proposals are implemented Rs 5000-6000 Cr can be saved on
the logistics. And exchequer wil be saved by 600Cr (Because all are not Govt companies)

Economic Survey on Power Sector:

Highest ever increase in generation capacity 26.5GW.

Grid parity for solar generation is on the way as the auctions under the National Solar
mission witnessed lower tarriff of 4.34Rs
Debt overhang of the DISCOMS is being resolved by UDAY
It pointed that electricity tariff is unusally high in India, compounded with erratic supply
forcing them to have captive generation plants which witnessed steady growth.
It states steps have been taken towards 'making One India' in the power sector. Open
 Access Policy introduced under the Electricity Act 2003, which allows consumers with
electricity load above 1MW directily from the market was a step towards discovering a
single market price of power around the country.
States the financial ability of the DISCOMS to purchase electricity has been decreased
resulting in their lowest power plant load factors

Solar Sector:

Problems:

Solar Industry is captial intensive and often runs with debt equity ration of 70:30. Hence
there are more no of banktrupcy cases.
Limited nature of private sector lending is the major problem.
The operational and Maintainence costs of the solar plants in India are very high compared
to the west, it faces many problems like dust, high temperatures(Which is decreasing their
efficiency), and dearth of water for cleaining solar modules. In places such as Rajasthan,
solar modules are to be cleaned amost fortnightly increasing operational costs. Also there is
no avaialbiality of soft water to clean hence the reliance on the reverse osmosis which is
furhter adding Cost : Solution : Anti soiling technology with self cleaning nano coating stops
dust from sticking to the glass of the module, but it may further increase capital cost.

Problems with Roof Top Solar Sector:

Net Mering polices in most state are not being implemented Ex: MH
Stringent technical requirements and artificial restrictions on how much power can go
through net metering. It is not the case any where
Artifical restriction on capacity that can be done through net merting Ex: AP has 0.5MW and
Karnataka 1 MW

Net Metering: It is the policy that credits the owners of solar energy systems like roof top solar
for the electricity they add to the grid. A 'net meter' tracks both the electricity consumed on site
and the electricity generated by the solar energy system.

Graphene coated solar panel can produce electricity from rain drops. Rain water contains salts
which means positive and negeative ions. As Graphene is a good conductor of electricity, these
postive and negeative ions are used to produce electricity.

National Solar Programmee and WTO:

In this to encourage the private participation it gave the guarantee of buying the electricity so
produced. But the condition is that 25% Domestic content requirement clause.
US arguements:
 Against National Treatment clause

Indian Arguements:

Govt Procurement: A/c to WTO Govt procurement if not for commercial purpose is
exempted
General Exception clause: It is meant to fulfill the obligations of the Paris Agreement so it
can be exempted from national treatment clause

Other Arugements:

DCR is a mechanism to facilitate sustainable development

It indicated that the DCR would be applied for buying solar panels used for govt sector
consumption and assured US that will not be sold for commercial use
It is a measure for improving social and economic conditions of the people by providing jobs
and oppurtunities

WTO Judgement:

The product that govt procuring is not Solar Panels but electricity hence Govt procurement
clause not applicable
India failed to point out any specific obligation under the international law than can have
direct effect in India so general exception not applicalble.

Analysis:
Though the ruling seems legal, the point is whether these missions with its social relevance which
has significant implications for green economy can be seen just through the prism of business
interests. The fight against climate change is not an exclusie cause, the developed countries should
recongnize it to help create greener economy and reach the goals of paris climate agreement.
Fight against Sustainable development should not be in declaration but in actions.

In this inter connected world the challenge lies in balancing the global trade obligations with the
domestic social compulsions. The world indeed requires a spirit of accomodation and co existence
for the larger global good.
Solution:

Make our Domestic sector more competitive

Give tax sops rather than DCR.

Textile Sector:
4% to the GDP and 11% to the countries export earnings. Second largest provider of
employment after Agriculture.

MoEFCC, Textiles having > 25KL discharge - establish Zero Liquid Discharge - effulent
treatment plants. Common Textile Units - irrespective of discharge they have to establsih -
notification under Environmental Protection Act 1986
Technologies for such treatment plants is steam and electricity intensive leading to higher
GHG as India largely relies on coal for power, as they are costly which would make our
textiles much more costlier and put us at disadvantage.
 There are no such strignet norms even in developed countries.

Govt Initiatives:

CCEA cleared 'Amended Technology Upgradation Scheme" - 15% subsidy on capital

investment for apparel, garment and technical textiles. Remaining subsectors will be
eligible for 10%.
It will replace the existing Revised Restructured Technology Upgradation Fund Schme (RR-
TUFS)

TUFS : Intoduced by Govt in 1999 to facilitate new and appropriate technology for making
textile industry globally competitive. The scheme invited around 2.5L investment from 1999 to
2015 and helped in generation of 48L Jobs.

Technical Textiles - These are products manufactured for protective clothing, textiles used in
applications such as automotive and Medical field Ex: Aapron.

“Price Deficiency Payment System” (as an alternative to minimum support price) to

cotton farmers, will be started from Maharashtra. If Cotton prices fall below MSP; Textil
min => State Government => Farmers’s DBT account. Experiment @Arvi taluk, Wardha
district of Maharashtra.

Ghar Sodhan : It is non corrosive room disinfectant, devoid of requirment of labor water and
electricity developed by Center Silk Reserach and Training Institute under Central Silk Board
under the Minsitry of Textiles.

StarUps:

India - 3 rd in No of StartUps - fails due to regulatory environment.

Start up not just in Apps, but in social sector and Food Processing etc

Problems:

1. ForEx regulations are major reason for redomiciling.

2. Cost of loan is too high.
3. Should be wary about too much money chasing few ideas, thereby creating Start Up Bubble.
The same happened in US in 1999-2000.
4. Definition of StartUp : It has to be technologically and commercially relevant to get funding.
5. Benefits only after certification by inter ministerial board - Red Tape.
6. DIPP came up with proposal to grant CGT exemption for those who are investing their
capital gains in notified Venture Funds and Angel Funds. (Budget proposed exemption only
for investing in notified Fund of Funds). Finance Minstry is wary that this could lead to
 misuse through 'Related Party Transaction' (RPT: are transactions such as sale/lease of
property between the company and its related parties, including directors, key mangerial
personnel)
7. Rajan said that though license raj is gone inspector raj still remains, he cited the example of
Italy and UK, where in the former regulations are tight and hence startups flourished less in
Italy than in UK. Hence he advocated "System of self certification" for the industries
8. Complex Tax Structure, even Angel Investors is taxed as income
9. Lack of Bankruptcy law - easy exit
10. Complex Labor Laws
11. Delay in Clearances
12. Underdeveloped venture capital market
13. Too much focus on IT sector
14. Foreign capital interested only in replicating western models.
15. Govt in Budget, introduced a 'Equalization Levy' for the online advertisement services
provided by non resident entities which hitherto are untaxed. Being a part of Financial Bill
and not IT Act, they wont get any tax credit so that they can adjust in DTAA if avaiable.
Online advertisements are the major avenue for the start Ups for publishing. The burden of
tax would fall on the Start Ups

What they need:

Favourable regulatory and tax structure

Co existence of capital idea, passion and technology together
Angel investors need to better encouraged with better incentives
Freedom of communication
Govt support Ex : In USA, CIA funds technology startups in cyber security
Easy availability of loans.

Steps Taken by Govt:

Action Plan of StarUP India Stand Up India:

1. Profits to be Tax free for 3 out of 5 years but has to pay MAT.
2. Deduction of 100% profits and gains derived from eligible start ups is provided in budget.
3. Exemption from Capital Gains Tax if the long term capital gains proceeds are invested in
notified funds.
4. Compliance - self certification is enough.
5. Hastle free registration through mobile app.
6. No Labor inspection for 1st 3 years
7. Exist with in 90 days
8. 10000 Cr over a period of 4 years and Credit Guarantee Fund
9. IT tax relief for 3 years.
10. Sector Specific incubators, 500 tinkering labs, pre incubation and see funds under AIM
11. Fast Track Mechanism for Patent applications, with 80% rebate.
12. Innovation focused programe for students like NIDHI(National Initiative for Developing and
Harnessing Innovations) to support student innovations in the schools.
13. Annula incubator grand challenge: To promote competition among incubators, which govt
selects accoriding to the Key Performance Indicators and pump Rs 10 Cr each year for
infrastructure.
 14. RBI relaxed FDI norms to boost start Ups - Now they can get foreign venture capital
investment irrespective of sector.
15. Reduced Public procurement norms for Start UP MSME
16. Govt removed tax on seed funding.

Advantages to India

Economic Growth
More Employment Oppurtunities
Development of entrepreneurship culture.

Stand Up India Scheme:

By Department of Financial Services, to promote entreprenuership among SC/ST and

women.
2 projects per bank brach.
Creation of credit guarantee fund and refinance window through SIDBI.
Target atleast 2.5 Lakh borrowers
Budget setaside 500Cr for this
Govt will also set up a Natioanl Hub in the minsitry of MSME, with industry associations to
provide professional support to SC/ST entrepreneurs.

Are StartUps a contradiction??

No start Ups in Health, Clean Energy and other social problems.

The idea that the social sector is very different from e commerce is dettering, govt has to
take initiative and educate them that it is the same case with any sector 10 years ago.
Ex: Lot of people from village come to spend lot of money to find the right hospital, so can
we have a local language app that helps people find directly the hospital. Similarly we can
use better post operative care of pateints outside of hosiptals which will reduce burden on
the hospitals.
But then what is the problem
Social Sector - deeper understanding required - one need to go to "Bharat"
Many solutions that are readily avialable reside within reaserach labs
Many tech entreprenuers donot know that their solution could solve the problem of
healthcare sector

SETU :Self Employment and Talent UtilizationFor strenthening incubators and setting up of labs
where ideas can be shaped into prototypes before they are ready for funding. It is to support
for "All Aspects of Start Up" businesses and other self employment activities, particularly in
technology driven areas.

AIM : Atal Innovation MissionWould foucs on inviting aspiring entreprenuers to solve India's
contemporary socio economic problems via "grand challenges" that offer substantial
 awards to incubate and scale up winning ideas. The idea of posing social challenges as "grand
challenges" is to engage young graduates eyeing for the startup space into thinking beyond the
internet, e-commerce and mobile applications space.

SBI - InCube:It is a dedicated advisory service branch for startups, which will provide
personalized advices to startup founder on investments.

BHARAT FUND:PM lauched bharat fund during his visit to US for Better Health, Agriculture,
Renewable and Technologies.It is a public private academia partnership set up by IIM- A's
Centre for Innovation Incubation and Entrepreneurship. It helps start ups in areas of healthcare
and life sciences, sustainability and digital technologies.Managed and coordinated by CIIEIt
recieved pledges form the DIPP, MNRE, TATA trusts etc.

India Aspiration Fund by SIDBI - To allocate more money to different domestic venture Funds.

Space start Ups are entering the arena. Ex: SpaceX in US, lauched its commercial payload.

Death Valley Curve: Refers to a period of time from when a startup firm receives an initial
capital contribution to when it begins generating revenue. During the death valley curve,
additional financing is usually scarce leaving the firm vulnerable to cash flow requirements.

Deendayal Upadhyay Swaniyojan Yojana:

To be lauched by Ministry of rurla development to promote rural entrepreneurship under

Start UP India Campaign

it is the rural avatar of Start Up India

Objective is provide incentives such as financial assistance to the rural poor looking for
self employment options.

To be funded the exisiting National Rural Livelihood mission.

it hast the potential to solve various problems of rural economy like disguised
unemployment in agriculture, reducing poverty etc.

Railways:

Kayakalp is the innovation council of IR.

In line with the budget if has been setup for the purpose of business re-engineering and
introducing a spirit of Innovation in Railways.

4th meeting took place under the charimanship of Ratan Tata, which discussed safety issues with
an attempt to indentify the causes of accidents because of manual failure, increase hygiene in
railway stations.

BIBEK DEBROY COMMITTEE REPORT ON RESTRUCTURING OF RAILWAYS

Based on three pillars: Commericial accounting, Changes in HR and and independent

regulator.

1. Creation of Railway Ministry with three secretary level officers to design a policy of rail
sector, not just of Railways alone but to encourage competition, encourage private entry
and private investment.
2. Railway regulatory authority of india should be established, coming under Ministry
which decides technical standards, set freight rates, resolve disputes and recommends fare
rates which is not binding on Railway Minsitry
3. The present Railway Board will be merged with Indian Railways
4. The Railway Budget would cease to exit after 5 years with govt taking the entire burden of
subsidy for passenger fare
5. Seperation of Railway track construction, train operations, and rolling stock production into
different entitites to enable open access.
6. Dedicated Freight corridor limited should be made autonomous and seperated for Indian
railways so that it can non discriminatory access to both indian railways and private
operators

So the crux of recommendation is, the committee didnt endorse privitization rather private entry
with provision for independent regulator, also recommended commercial accounting without which
it is difficult to know the rate of return on the projects

Bibek Debroy Committee: miblization of resources for major rail projects and restricting railways
ministry.
Rakesh Mohan Committee: Overall working of Indian railways
Anil Kakodkar : Safety review committee
Sam pitroda: Modernization of railways
DK Mittal Committee: Strategy to improve revenue generation.
Ajay Shanker Committee: review the exisiting public private partnership cell in the railway board.

Rail Regulator: Rail Development authority of India:

Proposed in the Rail budget

Functions:

Mandate to set tariff for passenger and freight, which would be bassed on cost recovery
principle
Ensuring level playing field for private investment in railways.
Determination of efficiency and performance standards.
Diseemination of information.

The proposal comes at a time when estimated losses in the passenger sector balloned to 30K Cr,
and cross subsidization led to the decrease in freight to 36%

Industrial Corridors:
The proposed industrial corridors are
 Delhi Mumbai Industrial corridor - DL, RJ, GJ, MH, UP, HR, MP
Amritsar Kolkota Industrial Corridor - Punjab, Haryana, Uttarpradesh, UK, Bihar, Jhakhand
WB
Banglore Mumbai Economic Corridor - Karnataka and MH
Chennai Bangalore Industrial corridor - TN, KN, AP
Vishakhapatnam Chennai Industrial Corridor - AP and TN

The problems for the progress include finances and land acquisition. A parliamentary committee is
constituted to look into these matters.

National Industrial Corridor Authority: Budget 2014-15, proposed for the creation of this body
through consitutional route and aims to declare industrial corridors in the union list. But due to
dealy in getting approval from the Parliament, center decided to gvie the responsibility to DMICDC.

Industries other than mentioned in the Union List falls under the State List, hence as of now it is not
clear IC falls under which list. Hence govt decided to bring CAA to make IC in the union list but
dropeed the idea as of now.

Dedicated Freight Corridors:

To overcoangle, WDme the saturation that is reached in the Golden TriFC and EDFC are
proposed
Executed by the Dedicated freight corridor corporation of India a SPV under the Minstry of
Railways
EDFC: Dankuni (WB) - Jharkhand - Bihar - UP - Haryana - Ludhiana. (No NCR).
WDFC - Dadri(UP) - NCR- Haryana - Rajasthan - Gujarat - Maharastra - JNPT. Both meet at
Dadri.
WDFC will benefit export import container traffic, whereas EDFC will benefit coal based
power plants
Minstry of Railways considering four more projects like East West Corridor, East Coast
Corridor, North South Corridor, Southern Corridor.

Dedicate Freight Corridor corporation of India limited is created as a SPV under MoR.

Bio Tiolets by the Indian Railways

IR along with DRDO developed the BioTiolets 2013

It contains a anaerobic bacteria(Not fungi), which decomposes the faecal matter with
into water and gases.
Gases are released into the atmosphere and water after chloronation released into the
tracks. It does not produce any foul smelling gas rather it produces odourless gas.
Generated gas can be used for energy/cooking and water for irrigation purposes. (Methane
ga)
High Speed Trains:Advantages:

1. Reduced journey times

2. Connectivity benefits
3. Can create agglomeration benefits
4. Lower pollution
5. Potential of employment and transfer of technology while construction
6. Environmental degradation
7. Dislocation of the people
8. Noise Pollution
9. Regional imbalance in development.
10. Chinese exprience shows that it will spread economic opp and human habitation across
geographies and leads to balanced urbanization
11. Assistance coming from Japan also has Technical Know How which helps India self
reliable.

Disadvantages:

Railway Budget:The present rail budget is presented in the context of 7th pay commission
recommendation, decreasing passenger, freight traffic to the railways.

An RnD organization called SRESTHA(Special railway establishment for strategic

technology and holistic advancement) is announced. It will focus on long term research
Significant changes from past:

1. Departure from the populist announcements

1. Change in perspective from a 'govt entity' to service providing entity

1. Excess emphaisis on operation and maintainence is a new trend

1. Organization restructuring - to bring more professionalism

1. Trend of delegation of powers to zonal offices and fixing accountabilty through

innovative measures like third party audit

1. Emphasis on technology like proposal for ticket booking, 'clean my coach'

 1. Diversification of freight traffic into non core sectors, involvement of private players and
state govts for resource mobilization

1. Long term plan - National Rail Plan 2030.

1. More Inclusive : special provisions for disabled and children.

Budget overview

No increase in fares

8.5 L cr investment in next 5 years

Operation 5 minutes - passengers travelling unreserved can purchase a ticket in 5

minutes

Bio tiolets and air plane type vaccum tiolet in trains

Survelliance cameras in select coaches and ladies compartments

Speed to go up to 200 Km/hr on nine railway corridors

WIfi in more stations, facilty of online booking for senior citizens

Four Railway reserach centers to start in four universities

Clean my Coach through SMS

Porter will called SAHAYAKS and not coolies anymore

Automated ticket vending machine, GO INDIA SMART CARD for cashless purchase.
Laid emphasis on PPP for connecting railways with ports etc.
Passenger friendly services – new trains Tejas, hamsafar, antyodaya, deendayal
coaches, overnight double decker trains(UDAY) a re introduced
Digital Push - GPS connected digital display, on board entertainment, bar coded tickets
More powers are given to the zones and divisions with clear fixation of accountability
freight corridors– three new dedicated freight corridors are introduced from New Delhi
to Chennai, Mumbai to kharagpur and kharagpur to Vijayawada

Strategy to make to it a service provider

New revenues (Monetizing on the options available in non core sectors

New norms (Incorporating best international practices

New Structures(Revisiting all process and organization structures)

Providing optional insurance to passengers.

Problems of Railways in general:

 Our freight rates highest in world

Loss of market to road

Cross Subsidization

Improve average speeds

Safety

Lack of Investment: A/c to Prabhu china invests around 9 to 10L and India only 40K in
Railways. Amtrack(Govt funded american railways) position is very bad due to lack of
investments. He warned same would happen if India dont invest.
Operational ratio – it can be defined as how much an organization shall spend to earn a
rupee. In Indian railways, the operational ratio is at 92% an increase of 2 points over
last year.

TOURISM:
Schemes launched in North East:

1. Swadesh Darshan - Integrated development of circuits around specific themes Ex: Buddhist
Circuit, Coastal Circuit, NE India Circuit, Himalayan Circuit, Krishna Circuit, Desert Circuit,
Spirutual Circuit, Ramayana Circuit, Tribal Circuit, Eco Circuit, WIld Life Circuit and Rural
Circuit.
2. PRASAD : National Mission on Pilgrimage Rejuvenation and Spiritual Augmentation Drive
3. 100% Central finance assistance for organizing fairs and festivals in the NE states.
4. International Tourism Mart orgnaized annually with the objective of showing the untapped
potential of NE.

Medical Tourism:Problems:

Complicated provisions and high costs for Medical Visas. Manytimes they come using
normal visa and face challenges
Lack of Information: NABH accredition is accepted by the International bodies but is
hardly known to people. Marketing in the name of NABH would solve this information
assymetry
Medical Tourism should not be only for surgery and treatement but can also involve
visits to wellness ceters and rejuvenation hospitals like AYUSH and others. This has to
identified.

Telecom Industry:
A scarce resource like spectrum should not be made expensive which increases the price and
under utilization of the resouced and there by decreasing the penetration of mobile phones and
technology. The larger public good has to be satisfied by ensuring meaningful utilization of the
scarce resource. TRAI recommendation of auction of 700MHZ airwaves at R 11500 cr per MHZ, is a
example. Though it may meet the fiscal requirements of the day it can bleed the industry and
recurring income to the govt in long run.

Call Drop Issue:

Telecom Licenses are issued under Indian Telegraph Act, 1885.

Virtual Network Operators:

Telecom commission accepted the TRAIs recommendation of allowing VNO.
VNO: It is an entity that does not own telecom network infrastructure but provides telecom services
by purchasing the capacity form other telecom carriers Ex: Walmart, Virgin
Advantages:

Provides huge opp from start up entreprenerus to comapanies with large consumer base
like mutual fund, e commerce etc
No problem of huge capital as they need not build costly networks
More choices for the consumers
Telecom companies will have additional options to monetize unused airwaves

AYUSH:
Minstry of AYUSH has the mandate to promote, promulgate propogate and globalize the recognized
Traditional and Complementary systems of Medicine including Ayurveda, Yoga, Naturopathy, Unani,
Siddha, Sowa Rigpa and Homeopathy.
 Sowa Rigpa:

It is oldest medical tradition of the world currently a part of AYUSH mission.

Commonly known as Amchi Systems.
Popularized in Tibet, Mongolia, Bhutan Himalayan regions of India.
Majority of theory and practices of Sowa Rigpa is similar to Ayurveda.
In India it is practised in Sikkim, Arunachal Pradesh, Lahoul and Spiti(HP) and Ladakh
region
Orign remains controversial, scholars differ among Tibet, India and China.

Unani: Though practiced by Greeks came to India during the time of Arabs

Homeopathy: Was introduced to India by German physician.

Ayurveda:
Global Ayurveda Festival organized in Kerala
History :

Our indigenous systems are based on "sarve bhavantu, sarva santu niramay" (All should
remain happy all should remain healthy)
Ayurveda is generally defined as "Science of Life"
Ayurveda, Yoga and Siddha believes in harmonious relationship with nature
Due to inadequate scientific scrutiny and concerns regarding standards and quality Ayurveda
has not reached its real potential
To realize the same national AYUSH mission has been lauched

Traditional Medicine:
Union Cabinet gave approval for the Colloboration agreement between AYUSH and WHO. It would
help in improving International Acceptability and branding of AYUSH systems.

Yoga:
It is an invaluable gift of India's ancient tradition. It embodies unity of mind and body, thought and
action, restraint and fulfillment, harmony between man and nature a holistic apporach to health
and well being.

Constriants:

1. Empirical based medicine and its procedures are built to validate pharmacological
interventions and interventions like yoga can not be evaluated on the same lines.
2. There is no single protocol for yoga postures or techniques and this lacuna renders scientific
validation difficult.

If scientific Proof is developed, Yoga can be an effective supportive therapy.

Petroleum Industry:

Govt Initiatives:

Ministry of PNG, released 'Hydrocarbon Vision 2030' for North East region. To leverage
hydrocarbons potential, enhance access to cleaner fuel, improve availability of petroleum
products and facilitate economic deveolopment. States invovled are Sikkim and all NE
5 pillars
People : Providing cleaner fuels to people, ensuring skill development and
involvement of local community
Policy : Ensuring fund for new projects
Partnership :With state govt
Projects : Focusing on Pipeline connectivity for LPG and oil and lubricants
Production.
It also mentions exploring the hydrocarbon linkages with Bangaldesh and Nepal
 Strategic Reserves:India is building underground storages in Visakhapatnam, Mangalore and
Padur in Karnataka to store about 5.33 million tonnes of crude oil. Construction of strategic
crude oil storage is being managed by Indian strategic Petroleum reserves limited a SPV, which
wholly owned subsidiary of Oil Industry Development Board(OIDB)

PM Ujjwala Yojana:

1. In India, Household air pollution from the use of solid fuels such as Bio mass is the second
largest risk factor contributing to the India’s disease burden
2. Pradhan Mantri Ujjwala yojana provides free LPG connections to women form LPG
Households providing access to clean energy. It aims to provide for 5 Cr LPG connections to
women in BPL households by 2020. Govt to bear the initial cost of connection, security
deposit and consumers has to pay for the refill.
3. Along with access following needs are further important
4. Affordability for refilling of the cylinder - BPL might not have the cost to bear. Installements
is a welcome move. It may consider increasing subsidies for the first few cylinders.
5. Developing a distribution system which is largely confined to urban areas, else the scheme
would become like Rajiv Gandhi Grammen Vidyutikaran Yojana where the physical
infrastructure has been extended but not ensured electricity supply.
6. Widening the net beyond BPL families – known inclusion and exclusion errors exists in the
BPL lists in the family
Diary Sector:
India occupies the first position on milk production. Despite which milk productivity per animal is far
less than developed countires. Hence the need for implementing technologies.

Contributes to 3.9% of GDP.

Today the per capita availability of milk around 300 g/day more than mandated by WHO

Problems:

Milk development programmes focussed on promoting cross breeding of diary cows. This
resulted in neglection of indigenous cattle breeds, hence the time has come to focus on the
development of productivity in the indigeneious varieties. Govt launched National Gokul
Mission, for preservation and promotion of indigenous breeded cows under national bovine
and diary development programe.
Milk productivity per animal is less.
Wide regional variations in profitability at regional level and small vs commercial level.

Solutions:

With the increasing awareness about the benefits of A2 type milk which some studies are
more healthier as they contain A2 type milk protein and help in prevention of diabetes. And
fortunately this type of milk is found in indigenous breeds. This should be explored to make
it more attractive at the same time saving our breeds.

Economic Survey:

India first in milk production

Indian agriculture- mixed crop livestock farming system - livestock supplmenting farm
incomes by provind employment, manure.
Per capita availability of milk is 322 grams per day more than mandated by FAo - 294
gm
Success due to - integerated cooperative system from collection to marketing

Transportation Sector:

In India due to the inadequate, uncomfortable, unreliable public transport has given way to
increasing private transport system. Budget tried to improve the public transport system. It
proposed to introduce a Model Vehicles Act, which the states can implement. Motor vehicles comes
under the state list.

To end the state monopoly in the passenger segement in some states and invite private
players
Greater investment, increased quality of services, multiplier effect on the economy
Problems:

Standard regulatory practices and institutions has to be set up.

National Transport Development Policy Committee 2013 said that there is a need for a
strategy panel at the national and state levels to take the comprehensive view of rail, road
waterway and non motorised vehicles to bring integeration among them

Expereinece of London can be a guiding example, Intelligent transport systems can be used to
bring modern desing standards, service level benchmarking strict enforcement through use of
technology can improve the quality of public services.

E Commerce Sector:

Potential of e commerce sector:

CII-Deloitte report called e commerce as the "gamechanger for the economy" . It highlighted its
potential for employment, increase export revenues and tax collections. Attracted maximum FDI in
2015, and to be $50 billion industry by 2020.
Challenges:

Lack of uniform taxation(varies from state to state) makes the movement of goods difficult
Infrastructure and logistical problems
Internet pentration
Skilled manpower
banking penetration as COD comes with higher adminstrative cost.

Recommendations by the report:

Uniform tax structure under GST

Timely implmentation of statup India, Digital India, skill india
increasing no of years of tax holiday for e commerce start ups.

FDI:

100% of FDI is allowed through automatic route in the market based model of E
commerce. It is not been permitted in inventory based model.
The marketplace model means providing a IT platform and acting as a facilitator between
buyer and seller. Market place can provide support services to sellers in warehousing,
logistics, order fulfillment, call centre, Payment collection and other services. E commerce
firm is just an intermediary.
The same is not permitted in the investory based model, in which the e commerce entity
owns the good and services and sells to consumer directly.

Analysis of Policy:

Market placed model and inventory based model are well defined
Level playing field to all the sellers because of 25% clause.
New rules say that market place firms cannot offer discounts, only the vendors selling their
goods on the e commerce sites can offer discounts Ex: Amazon cannot offer 50% discount.
 which means less business for the EC firms
Any single vendor or a group company of the market EC player cannot account for over 25%
of the total sales. Ex:WS Retail of Flipkart which accouts for 80% of FK sales should
constrain itself to 25%
Sitharam opined that it will curb 'anti competitive practices' and bring level playing field
between offline and online entities. It will help in checking predatory pricing and discount
giving exercices

Concerns:

The new policy will increase bureaucratic discretion and open door to rent seeking.
Increased complexity by drawing line between inventory based model and market based
model
Cap of 25% may prove to be restrictive if the seller slees high value items. It may result in
firms creating newer entities to avoid the clause.
The clause the retailers will not influence sale price of goods and services goes agains the
pricing freedom.
Indian market is not yet ready to opening up e retail for foreign investors, it will seriously
hurt brick and mortor shops, as the ecommerce firm will have greater more bargaining
power because of predatory pricing.
Indian e commerce in nascent stage, FDI in it would undermine domestic sector

Advantages:

Boost to infrastructural sector, manufacturing sector.

More efficient supply chain management
Adoption of best global standards
Traceability and transparency.
Improved customer service.
Deliberate attempt to allow Market based and not inventory based which otherwise would
have competed with MSME

With new regulations in place the govt is legitmizing the sector which before is neither regulated
nor well defined. Now there is a clarity which can assit growth. But the listed concerns have to
taken care off.

Predatory Pricing:It is an anti competitive practice according to the Competition Act, where in
the dominant player reducing prices to a very low level to edge out competing players from the
market. Later the firm increases the prices and makes huge gains.

Way Forward for EC:

EC companies still now offered hefty discounts to capture the market share, incurring massive
losses, now they have to differentiate from other competitors by innovate practices

The prices are going to increse for consumers since no more discounts.
Brick and motor retail companies welcomed the move

NASSCOM feels limiting the sales to 25% is restrictive practise, more so if the vendor supplies high
end value items
National Capital Goods Policy: By Minstry of Heavy Industries and Public enterprises.

Increasing production of capital goods from Rs 2.3L Cr to 7.5 Cr by 2025

Creating employment to 30 million people from present 8
Increasing exports from 27% to 40% of production
Increasing share of domestic production in domestic demand to 80% from present 60%
Making India a nex exporter of capital goods
Facilitate improvement in technology depth across sub sectors, increase skill availabilty,
ensure mandatory standards and promote growth and capacity building of MSME
Key issues recognized: Avaialbilty of credit, Raw Material, innovation and technology,
productivity, Manufacturing practises, promoting exports and creating domestic demand.

Policy recommended strengthening the existing scheme of DHI on enhancement of competiveness

of capital goods sector, launching a technology development fund, making standards mandatory in
order to reduce sub standard machine imports, setting up new testing and certification facilties,
enhancing the export of capital goods through "Heavy Industry Export and Market
development assistance scheme" (HIEMDA). It also emphasies on lauching scheme for skill
development of Capital Goods Industry.

For Critical Analysis : Reverse these points.

Sugar Industry:
It is an essential commodity under Essential commodities act.
Sugar Pricing Policy:
The problem with sugar pricing issues it the idea to sustain the low sugar price, high cane price(to
farmers) and flourishing sugar industry, which in itself becomes a unsurmountable challenge.
Numerous committees have tried to design a pricing formulae, the problem for arrving at formulae
is

If there is abundant supply of sugarcane, mill will drop the prices to be paid to farmers
If there is erractic supply of sugarcaen, the opp will hapeen.

1st such formulae was given by Bhargava formulae, which held if there is erractic supply farmers
will get a part of profits of mills.

As of now with the amendment of Sugarcane(control) order, statutory minimum price is replaced
by fair and remunerative price. The cane price announded is based on recommendation of CACP,
under this farmers are not required to wait till end of season or for any announcemnt of profits by
sugar mills.

Levy Sugar:
It is the amount of sugar set aside from the total production for the PDS, this should sold to the
govt at the discounted price.This is also known as dual policy. The non levy is allowed to be sold
as per the quantity released by the centrla govt under the regulated release mechanism. Govt has
done away with this practice for 2 years from 2013. At present non dual policy.
 Government Control Recommendation Remarks

Do away with reserved area.

Empowering the farmer to
Sugar crop area Give farmer option to trade
do better business.
with any mill.

Do away with minimum

Mill distance To enable competition.
distance between mills.

1. Give the farmers FRP price

at the 1st stage and do away Double stage strategy to
with SAP.2. Share 70% of have better cash flow to
Pricing of Sugar
the sold value of mills.Putting proper system
sugar+molasses+bagasse+press for remuneration.
mud at the 2nd stage.

Do away with the jute

Packaging Can save about 1000 crores.
packaging

Do away with the 10% sale

to the central government.
Instead, pass on the subsidy Can ease central subsidy
Levy of Sugar to state government, which tension. The levy savings is
can buy the sugar from the about 2000 crores.
market and give it
subsidized.

The move is to help

India(17% of world
Ease the market control of
production) to enable its
Market government on export and
exports(only 4% of world
import.
export), but leaving it all to
the market is risky.

Rangarajan’s recommends:

Electronics Industry:

New electronic policy – recommendations of NITI Aayog

1. India also shall give emphasis on production of low value adding high volume production. By
doing this we can ensure large value addition.
2. Consumer electronics has a market size of $64bn in India and $2tn across the world. An
export oriented strategy is necessary to capture the same.
3. Tax holidays for 10years are recommended if investment in manufacturing is above $1bn
and is generating an employment of 20,000.
4. Growing real wages in China can be an oppourtunity for India tot tract manufacturing sector.
 5. It also recommended changes in govt procurement in areas especially of defence( as of
now, 30% need to be procured from domestic market.
6. Simplification of tax laws and ending tax uncertainties.

Development of Mineral Sector:

Ministry of Mines is the responsible and facilitator for the development of mining industyr in India. It
is responsible for survey and exploration of all minerals other than natural gas, petroleum and
atomic minerals. Development of mines and minerals comes under Union.

National Mineral Policy, 2008:

Zero Waste mining

Auction of ore bodies
Independent mining adminstritative tribunal

The MMDR Amendment of 2015, makes provision for a simple and transparent mechanism for
grant of mining lease or prospecting licence through competitive bidding.

UNFC(UN framework classification) of minerals is based on three parameters: Economic viability,

Feasisibliy assessment and Geological assemnt leading to three digit code system.