RBI’S INFLATION TARGETING PROMOTES INDIA’S GROWTH?

RBI-Inflation-growth-India-economy-reasons.

RBI India inflation growth: Indian Economy is being through a slowdown, and in this scenario, the efficacy of RBI’s Inflation targeting process has come under criticism, stating it as a reason behind this slowdown.#RBI #Inflation #India

So, the process of inflation targeting and the benefits accrued due to it and the possible reasons (apprehensions) behind various criticisms and the way forward has been discussed in this article in brief.

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What is Inflation Targeting?

  • Inflation Targeting is a part of monetary policy framework wherein the Central Bank of a country focuses on maintaining the rate of Inflation within a targeted range.
  • It is believed that increasing prices in an economy create uncertainties in decision making, adversely affecting savings and encouraging speculative investments (such as buying Gold).  Inflation targeting brings in more predictability and transparency in deciding monetary policy.
  • Inflation targeting was first adopted by New Zealand and subsequently, a large number of countries including India have been following Inflation Targeting as their core element of monetary policy.
  • In case of India, the Inflation targeting was introduced through the Monetary Policy Framework Agreement signed between the RBI and Government in 2015. As per terms of the agreement, RBI’s primary objective would be to maintain price stability, while keeping in mind the objective of growth. The RBI is required to maintain rate of inflation of 4% with a deviation of 2% i.e. inflation has to be maintained between 2% to 6%.

Benefits of Inflation Targeting

1. Enhanced Transparency: The Inflation targeting explicitly states as to what would be the targeted rate of Inflation in an economy. Such explicitly mandated target brings in more clarity and predictability with respect to the rate of Inflation and monetary policy formulation.
2. Promote Growth: A high rate of inflation leads to decrease in the purchasing power of currency, reduces the savings and investment rate, increases the unemployment and leads to overall decrease in the GDP growth rate.  Further, high rate of inflation is accompanied by higher levels of Fiscal Deficit and Current Account Deficit leading to an adverse impact on the macro-economic stability of the country. Hence, low and moderate level of inflation would incentivise the investors to undertake the investment in the economy leading to the promotion of higher growth and development.
3. Autonomy and Accountability of RBI: As per the monetary policy framework agreement, the RBI has been given complete autonomy in maintaining the rate of inflation within the mandated targets. If the RBI fails to maintain the Inflation within the target, then it would be required to submit in writing, the reasons for its failure.

Such a provision enables the RBI to enjoy autonomy and at the same time, it enables the Government to have enhanced accountability over the actions of the RBI.

4. Empirical Evidence:  The Inflation targeting has been quite successful in some of the advanced economies such as UK, New Zealand etc. These advanced economies have been able to maintain moderate rate of inflation for a much longer time leading to increased macro-economic stability.

Problems and Challenges with Inflation Targeting

1. Disregards the Multi-faceted role of RBI: In a developing country like India, it is not practical for the central bank to focus exclusively on inflation without taking into account the larger development context. The RBI needs to balance between growth, price stability and financial stability.
2. No Clear link between Price Stability and Financial Stability: Prior to 2008, advanced economies were able to maintain moderate rate of inflation for a long term mainly due to adoption of Inflation Targeting. It was believed that Inflation targeting was responsible for overall macroeconomic stability of the country.
However, the 2008 Global Financial Crisis has clearly proved that price stability alone cannot lead to financial stability and the excessive focus of the Central banks on the price stability may lead to neglect of other crucial functions such as regulation leading to the economic crisis.

3. Empirical Evidence failing in India: The RBI has been able to maintain stable rate of Inflation within the mandated range since last 2-3 years. However, inspite of stable rate of Inflation, Indian economy is facing challenges on multiple fronts. The GDP growth rate has been reduced to 25 quarter low of 5% for the first quarter of financial year 2019-20.

The unemployment has increased to 45- year high of 6.1%. There has been contraction in the manufacturing activity as evident in declining IIP. The agriculture sector is staring at agrarian distress. All these clearly highlight that the Inflation targeting has failed to promote growth and development.

4. Poor Monetary Policy Transmission: The Inflation targeting is more suited to the developed economies since the monetary policy transmission in such economies is quite efficient. However, in case of India, the monetary policy transmission is quite inefficient and this can in turn reduce the effectiveness of Inflation Targeting.
5. Hinder GDP Growth: In order to contain Inflation, the RBI would be required to increase the rate of Interest by following the contractionary monetary policy. However, such a policy would lead to increase in the rate of interest on the loans leading to decrease in investment and consumption expenditure leading to decline in the GDP growth rates. For example, during 2013-2015, the higher interest rates in the country on account of higher rate of inflation had led to decrease in the GDP growth rates.
6. Does not address the Supply Side Inflation: The inflation in India may take place due to supply side bottlenecks such as increase in global crude oil prices, poor monsoon, floods etc. For instance, the recent increase in the prices of Tomato and Onions is mainly on account of supply side disruptions.
Under such circumstances, RBI would have limited role to play in easing the rate of inflation. Rather, the Government of India would be required to address these supply side disruptions in order to moderate the prices of such commodities.

Way Forward

  • Post-Global Financial crisis, the dominant view around the world is that flexible inflation targeting, rather than pure inflation targeting is more efficient for monetary policy formulation.
  • According to the Flexible inflation targeting, the major role of the Central Bank would depend on the prevailing rate of inflation in the country. If the rate of inflation is way off the target, the primary emphasis of the central Bank would be to bring the rate of inflation within an acceptable range.
  • On the other hand, if the rate of inflation is within the range, the central Bank should focus on its other core objectives. Thus, it is being said that the Central banks should focus on flexible inflation targeting rather than pure inflation targeting. Here pure inflation targeting means RBI solely concentrating on the inflation targeting at the cost of other major functions of it.
  • In this aspect, there is a need for greater debate around kind of Inflation targeting in India.

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GOVERNMENT PROCURED ONLY 3% OF OILSEEDS AND PULSES UNDER PM-AASHA

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GOVERNMENT PROCURED ONLY 3% OF OILSEEDS AND PULSES UNDER PM-AASHA

Why in News?

  • Data from Agriculture Ministry has indicated that only less than 3% of this season’s sanctioned amount of pulses and oilseeds have actually been procured so far under the once-hyped PM-AASHA scheme.

About PM-AASHA:

  • The PM-AASHA or Pradhan Mantri Annadata Aay Sanrakshan Abhiyan was announced with great fanfare in September 2018, as an effort to ensure that farmers growing pulses, oilseeds and copra actually get the minimum support prices they are promised for their crops each year.
  • Apart from initiatives to allow cash payment to farmers or procurement by private traders, PM-AASHA’s main feature was a price support scheme whereby Central agencies would procure pulses and oilseeds directly from farmers.
  • The three schemes that are part of AASHA are:
    • The Price Support Scheme (PSS)
    • The Price Deficiency Payment Scheme (PDPS)
    • The Pilot of Private Procurement and Stockist Scheme (PPPS)
  • PSS – Under the PSS, physical procurement of pulses, oilseeds and copra will be done by Central Nodal Agencies.
  • Besides, NAFED and Food Cooperation of India will also take up procurement of crops under PSS.
  • The expenditure and losses due to procurement will be borne by the Centre.
  • PDPS – Under the PDPS, the Centre proposes to cover all oilseeds.
  • The difference between the MSP and actual selling/modal price will be directly paid into the farmer’s bank account.
  • Farmers who sell their crops in recognised mandis within the notified period can benefit from it.
  • PPSS – In the case of oilseeds, States will have the option to roll out PPSSs in select districts.
  • Under this, a private player can procure crops at MSP when market prices drop below MSP.
  • The private player will then be compensated through a service charge up to a maximum of 15% of the MSP.
  • The Centre had budgeted ₹15,053 crore over two years to implement the scheme apart from an additional government credit guarantee of ₹16,550 crore for agencies undertaking procurement.
  • It was launched as increasing MSP was not adequate and it is more important that farmers should get full benefit of the announced MSP.
  • Crops covered under the Scheme for this Season:
  • The main crops covered under the scheme this season are moong, urad, arhar, and groundnut and soya bean.
  • The late arrival of the monsoon means that harvests and crop arrivals also began slightly later than expected, especially for arhar or tur dal, so procurement is likely to continue, though tapering, until February.

Issues Associated with the MSP Scheme:

  • The scheme provides little to strengthen the procurement mechanism infrastructure in the country which largely only works for two crops – wheat and rice.
  • According to a survey conducted by the National Sample Survey Office (NSSO) in the 70th round in 2013, only 6% of farmers are able to sell their produce at MSP.
  • A 2017 study found that only 24% households were aware about the MSP of crops grown by them.
  • Further, the study found, although MSP is announced for the whole of India, the operation is limited only to few states where the designated government agencies procure the produce from farmers and except for crops like rice and wheat, quantity procured is very limited leading to low level of awareness.
  • According to a 2016 NITI Aayog evaluation report 79% farmers were dissatisfied with the MSP regime.
  • Some of the reasons for their dissatisfaction were delay in payments, lack of infrastructure at procurement centres, distance to procurement centres and delayed announcement of MSP rates.
  • NITI Aayog’s evaluation also found that there were several states where the procurement infrastructure facilities were ‘inadequate’.

What is the Current Issue regarding the PM-AASHA?

  • Procurement is still lagging badly in most States.
  • The highest sanctioned procurement is in Maharashtra, where 10 lakh tonnes of soya bean procurement were sanctioned, apart from 58,000 tonnes of moong and urad dal. However, barely 1,709 tonnes have been procured in the State so far, including just 14 tonnes of soya bean.
  • The highest procurement so far has taken place in Rajasthan, where more than 51,000 tonnes of moong and groundnut have been procured, against a total sanctioned amount of 9.6 lakh tonnes.
  • While almost 5 lakh tonnes had been sanctioned in Madhya Pradesh, and 1.18 lakh tonnes in Uttar Pradesh, procurement has not yet begun in either State.

MISSION FOR INTEGRATED DEVELOPMENT OF HORTICULTURE (MIDH)

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MISSION FOR INTEGRATED DEVELOPMENT OF HORTICULTURE (MIDH)

Why in News?

  • Information about the MIDH was provided by the Union Minister of Agriculture and Farmers’ Welfare in the Lok Sabha.

MIDH:

  • The MIDH is a centrally sponsored scheme for the holistic growth of the horticulture sector covering fruits, vegetables, root & tuber crops, mushrooms, spices, flowers, aromatic plants, coconut, cashew, cocoa and bamboo.
  • Under MIDH, the Government of India contributes 60% of the total outlay for developmental programmes in all the states except states in the North East and the Himalayas. 40% share is contributed by State Governments. In the case of North Eastern and Himalayan States, GOI contributes 90%.
  • MIDH also provides technical advice and administrative support to State Governments/State Horticulture Missions (SHMs) for the Saffron Mission and other horticulture-related activities like the Rashtriya Krishi Vikas Yojana (RKVY).
  • The Mission was started in 2014.

Objectives of the MIDH:

  • To promote the holistic growth of horticulture sector, including coconut through area-based regionally differentiated strategies which include research, technology promotion, extension, post-harvest management, processing and marketing in consonance with comparative advantage of each State/region and its diverse agri-climatic features.
  • To encourage aggregation of farmers into farmer groups like FIGs/FPOs and FPCs to bring economy of scale and scope.
  • To enhance horticulture production.
  • To augment farmers’ income.
  • To strengthen nutritional security.
  • To improve productivity by way of quality germ-plasm, planting material and water use efficiency through micro-irrigation.
  • To support skill development and create employment generation opportunities for the rural youth in horticulture and post-harvest management, especially in the cold chain sector.

MIDH Sub-Schemes:

  • National Horticulture Mission (NHM)
  • Horticulture Mission for North East & Himalayan States (HMNEH)
  • National Horticulture Board (NHB)
  • Coconut Development Board (CDB)
  • Central Institute for Horticulture (CIH), Nagaland

Major interventions of MIDH:

  • Setting up of nurseries, tissue culture units for production of quality seed and planting material.
  • Area expansion i.e., the establishment of new orchards and gardens for fruits, vegetables, and flowers.
  • Rejuvenation of unproductive, old, and senile orchards.
  • Protected cultivation, i.e. poly-house, green-house, etc., to improve productivity & grow off-season high value vegetables and flowers.
  • Organic farming and certification.
  • Creation of water resources structures and watershed management.
  • Bee-keeping for pollination.
  • Horticulture mechanization.
  • Creation of post-harvest management and marketing infrastructure.

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If we analyse the question papers and mark-list of last 5-10 years of UPSC Civil Services Exams, we can collect a lot interesting and valuable data. The UPSC questions have evolved and now the bias is more towards current related aspects of polity, economy, international relations etc than conventional topics. (Please also keep in mind that there is no guarantee by UPSC that the case will remain the same for future exams!) Due to high standard of questions and valuation, the marks scored by top candidates are coming down every year. The percentage of top ranks in IAS exam has come down from 58-60% in 3-4 years back to 50%, while the last rank of a successful candidate in General category is around 40% marks.

BLUE ECONOMY

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Commitment to the development of the Blue Economy has been expressed by a mention in the budget speech. This has laid the foundation and will provide the initial traction to create the space for implementation of the strategy.

  • The development of the Blue Economy can play a critical role in nation building.
  • It would enhance the GDP, not just by exploitation of under-water resources but by developing it as a platform for infrastructure expansion into the ocean, especially when there is a shortage of space on land.
  • The idea is to expand port activities on the sea rather than on land.
  • There is possible re-calibration of its growth potential, first, by improving the measurement of its contribution to the economy and then through strategic policy interventions to enhance its contribution to manufacturing and services.
  • A time-bound action plan can be set using the SMART (Specific, Measurable, Achievable, Realistic, Time-tested) formula.
  • A graded policy intervention will be the first part of implementation.
  • For the success of the idea, a dedicated national-level institution, skilled in such state-of-the-art analytical approaches, will have to be given this responsibility.

Scopes of growth and development

  • The sub-sectors includes blue trade in both goods and services, including the development of marine services (such as port services, ship repair, maritime finance and insurance, marine ICT and digitisation)
  • Blue investment (port and transloading in mid-seas, coastal-to-hinterland connectivity)
  • Blue SMEs — a sub-category of the SMEs as defined by the Ministry of Small and Medium Enterprises (MSME)
  • Blue manufacturing (development of dedicated industrial parks, as is being envisaged under the Sagarmala, protection risks of coastal natural calamities, etc.)
  • Some time-tested paradigms of PPPs (Public Private Partnerships) will be ideal for the growth and development of the sector.
  • A mechanism to coordinate the efforts of the coastal districts/municipalities/panchayats, coastal state governments, and the Union government will need to be established.

Meaning of the term “Blue Economy”

Blue economy’ is the integration of ocean economy development with values of social inclusion and environmental sustainability, along with dynamic and innovative business models.

For India, however, blue economy extends beyond being merely an economic and environmental proposition. It presents India with an unprecedented opportunity to meet its national objectives, strengthen connectivity with neighbours, and exert influence in the surrounding regions.

Introduction on oceans and Blue Economy

  • Oceans cover three quarters of the Earth’s surface, contain 97% of the Earth’s water, and represent 99% of the living area on the planet
  • Oceans are claimed to be ‘last frontiers’ of growth and development, but the immense potential that the Oceans present remains to be tapped fully
  • However, this potential needs to be harnessed in a balanced manner, where the preservation and health of Oceans are given their due importance, along with adherence to the United Nation’s Sustainable Development Goal 14 that states “Conserve and sustainably use the oceans, seas and marine resources for sustainable development.
  • The Ocean based Blue Economy is the next sunrise issue for development – “The Blue Economy: 10 years, 100 innovations, 100 million jobs”.
  • Blue Economy is based on the idea to use locally available resources and employ renewable inputs.
  • Marine based economic development will reduce environmental risks and mitigate ecological challenges. As a result, the optimized and responsible resource utilization will enable to achieve balanced socio­economic development

India’s Sagarmala initiative for port led development

  • India has a 7,517 km long coastline, 14,500 km of potentially navigable waterways, and strategic locations along major international maritime trade routes.
  • Data shows that despite its long coastline, India’s coasts only contribute to 15 percent of national trade activity.
  • The blueprint includes setting up new ports, modernizing existing ports, developing coastal zones and boosting local employment generation, establishing connectivity between ports and road, rail, multi-modal logistics parks, pipelines, and waterways, as well as promoting coastal community development.
  • This comprehensive plan is now pitched as India’s primary infrastructure focus, rivaling China’s Belt and Road Initiative (BRI) that seeks to expand and build regional connectivity infrastructure.
  • The government wants to transform the country’s ports and reduce logistics costs for domestic as well as import/export cargo by optimizing infrastructure investment.
  • The government has planned six megaports under the project, namely the Vizhinjam International Seaport (Kerala state), Colachel Seaport (Tamil Nadu), Vadhavan Port (Maharashtra), Tadadi Port (Karnataka), Machilipatnam Port (Andhra Pradesh), and Sagar Island Port (West Bengal).
  • India currently permits 100 percent FDI for the construction and maintenance of ports.

Key initiatives under Sagarmala are

  • Port modernization and new port development;
  • Port connectivity enhancement;
  • Port-led industrialization; and,
  • Coastal community development.

Advantage of coastal shipping in India

  • Logistics in India contribute to 19 percent of the GDP, and remains among the highest in the world as compared to China
  • Several studies show that using coastal shipping and inland waterways would be 60 to 80 percent cheaper than road or rail transport.
  • If coastal shipping is used to complement road and rail transport in India, it could therefore lead to significant logistics cost savings.

India to Develop New Sea Routes and Shipping Services

  • The Government proposes to develop new sea routes and shipping services connecting with various countries.
  • New sea routes are considered with a view to enhance regional connectivity from the strategic and trade perspectives, and also to enhance maritime cooperation with neighbouring countries like Sri Lanka, Maldives, Bangladesh, Myanmar and Thailand.

Steps been initiated by the Government for preventive/ mitigating security measures to deal with sea-piracy

  • Guidelines for anti-piracy measures to be implemented on Indian Ships through issued by the Directorate General of Shipping for elaborate anti-piracy measures, including safe house/citadel for vessels.
  • Banning of sailing vessels to ply in waters south or west of the line joining Salala and Male.
  • Naval escort provided by Indian naval ships in the Gulf of Aden
  • Enhanced vigil by the Indian Navy in the Indian Exclusive Economic Zone (EFZ) and westward up to 65 degree east longitude.
  • Active participation of India in the security meeting of the International Maritime Organization Contact Group on Piracy off the Coast of Somalia (CGPCS) and other international forums.
  • Directorate General of Shipping has issued circulars from time to time, emphasizing action to be taken by Indian Merchant Ships, Shipping companies and other departments.

Environmental Concerns

  • Ballast water: Cruise ships, large tankers, and bulk cargo carriers use a huge amount of ballast water, which is often taken on in the coastal waters in one region after ships discharge wastewater or unload cargo, and discharged at the next port of call, wherever more cargo is loaded. Ballast water discharge typically contains a variety of biological materials, including plants, animals, viruses, and bacteria. These materials often include non-native, nuisance, invasive, exotic species that can cause extensive ecological and economic damage to aquatic ecosystems along with serious human health problems.
  • Wildlife collisions: Marine mammals, such as whales and manatees, risk being struck by ships, causing injury and death.
  • Oil spills: While less frequent than the pollution that occurs from daily operations, oil spills have devastating effects. While being toxic to marine life, polycyclic aromatic hydrocarbons (PAHs), the components in crude oil, are very difficult to clean up, and last for years in the sediment and marine environment.
  • Solid Waste: Solid waste generated on a ship includes glass, paper, cardboard, aluminium and steel cans, and plastics. It can be either non-hazardous or hazardous in nature. Solid waste that enters the ocean may become marine debris, and can then pose a threat to marine organisms, humans, coastal communities, and industries that utilize marine waters.

Lessons from Other Countries growing via Blue Economy

  • The strategies of Australia, China, and Mauritius, for example, view the potential of sustainable ocean economy in meeting their countries’ development objectives.
  • In Australia, offshore oil and gas and aquaculture industry have dominated the blue economy
  • In Mauritius, meanwhile, coastal tourism and seaport-related activities contribute the largest share
  • For China, fisheries, tourism, and transport lead its marine economy
  • Future plans and policies of these countries have laid additional emphasis on innovation, marine research and development, and marine information and communication technologies (ICT).
  • For India, the marine services sector could be the backbone of its blue economy. In line with the ‘Digital India’ and ‘Make in India’ initiatives
  • India must focus on marine ICTs, and transport (shipping) and communication services, and the creation of a knowledge hub for marine research and development, alongside the more traditional sectors like fisheries and coastal tourism.

Way forward

  • Regional focus has turned towards the Indian Ocean as the new frontier for sustainable economic development, alongside concerns of security issues.
  • India should build on the momentum it has created thus far and take on a larger responsibility in developing and securing the Indian Ocean by developing ideas, norms and road maps for an inclusive and collaborative ocean governance society.
  • Developing a normative framework for doing business and harnessing the ocean’s potential in a sustainable manner is another area where India could demonstrate leadership.
  • India should start by creating robust mechanisms for knowledge creation. For instance, diverse platforms for interaction between sect oral experts, professionals, scientists, and the business community could be envisaged.
  • The existing and new multilateral trading agreements should also be modified and defined in a way that enables the creation of sustainable infrastructure to meet the demands of future economic activities.

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Economic Survey 2019: Key Highlights & Facts of the Economic Survey 2019

What is Economic Survey?

The Department of Economic Affairs, Finance Ministry of India presents the Economic Survey in the parliament every year, just before the Union Budget. It is prepared under the guidance of the Chief Economic Adviser, Finance Ministry. It is the ministry’s view on the annual economic development of the country. A flagship annual document of the Ministry of Finance, Government of India and Economic Survey reviews the developments in the Indian economy over the previous 12 months, summarizes the performance on major development programs, and highlights the policy initiatives of the government and the prospects of the economy in the short to medium term.

The Economic Survey 2019 has been tabled in the parliament on July 04, 2019. This is Narendra Modi government’s first Economic Survey in second tenure. Economic Survey 2019 will be tabled by Finance Minister Nirmala Sitharaman.

The Economic Survey 2019-20 has been prepared by the new Chief Economic Advisor KV Subramanian. “Looking forward with excitement to table my first – and the new Government’s first – Economic Survey in Parliament… #EcoSurvey2019,” CEA KV Subramanian said on his Twitter account.

Economic survey 2019 can be downloaded from a direct link of Press Information Bureau (PIB)  – Click Here

Key Highlights of the Economic Survey – 2019

1. Shifting gears: Private Investment as the Key Driver of Growth, Jobs, Exports and Demand

  • As per the Economic Survey 2019, the pathways for drop opened up in the last five years; and benefits of growth and macroeconomic stability reached to the bottom.
  • Sustained real GDP growth rate of 8 percent is needed for a USD 5 trillion economy by 2024-25.
  • Virtuous Cycle of savings, investment and exports supported by a favorable demographic phase is required for sustainable growth.
  • Private investment is the key driver for demand, capacity, labor productivity, new technology, creative destruction and job creation.
  • Survey views the economy as being either in a virtuous or a vicious cycle or never in equilibrium.

Key ingredients for a self-sustaining Virtuous Cycle

  1. Presenting data as a public good
  2. Emphasizing legal reforms
  3. Ensuring policy consistency
  4. Encouraging behavior change using principles of behavioral economics
  5. Nourishing MSMEs to create more jobs and become more productive
  6. Reducing the cost of capital
  7. Rationalizing the risk-return trade-off for investments

Policy for Real People, Not Robots: Behavioral Economics of “Nudge

  • Decisions by real people diverge from impractical robots theorised in classical economics
  • Behavioral economics provides insights to push or nudge people towards desirable behavior
  • Key principles of behavioral economics: Emphasizing the beneficial social norm; changing the default option; and Repeated reinforcements.

Survey calls to create an aspirational agenda for social change by using insights from behavioral economics:

  1. From ‘Beti Bachao Beti Padhao’ to ‘BADLAV’ (Beti Aapki Dhan Lakshmi Aur Vijay Lakshmi)
  2. From ‘Swachh Bharat’ to ‘Sundar Bharat’
  3. From ‘Give it up” for the LPG subsidy to ‘Think about the Subsidy’
  4. From ‘Tax evasion’ to ‘Tax compliance’

Here, “Dwarfs” refer to the firms having less than 100 workers despite being over 10 years old. These dwarf firms account for over 50 percent of all organised firms in manufacturing. Their contribution to employment is only 14 percent and just 8 percent to productivity.

• Large firms with more than 100 employees account for 75 percent employment and around 90 percent to productivity. These large MSMEs firms account for just 15 percent of the total organised sector by number.

• Survey throws light upon the growth of the MSME sector for achieving greater profits, boosting job creation and enabling enhanced productivity.

• Survey also focuses on tourism, hotel & catering, transport, real estate, entertainment sectors etc., for job creation.

• It calls for enabling MSMEs to grow by way of:

A sunset clause of less than 10 years for all size-based incentives

  – Deregulating labor law restrictions to create more jobs

  – Re-calibrating Priority Sector Lending (PSL) guidelines for direct credit flow to young firms

Creation of Data “Of the People, By the People, For the People

  • At present, society’s consumption of data is at the optimum level, given the technological advances.
  • This data is generated by the people; thereby, Government too can create data as public good, ensuring data privacy.
  • Government must intervene in creating data for the good of the people, especially for poor and social sectors.
  • Ending Matsyanyaya: Ways to ramp up the Lower Judiciary to clear backlog
  • Matsyanyaya: The idea of government in India was based on a theory called the Matsyanyaya, literally meaning the “law of fish” or the “law of the jungle.” Why should there be governments in the world at all?
  • In short, it refers to a Governance where strong prevails over the weak.
  • The Government is facing the biggest hurdles in name of contract enforcement and clearance resolution while working towards the ease of doing business and higher GDP growth in India.
  • Around 87.5 percent of the total pending cases are in the District and Subordinate courts.
  • 100 percent clearance rate can be achieved by just recruiting to fill in 2279 vacancies in the lower courts and 93 in High Courts.
  • Uttar Pradesh, Bihar, Odisha and West Bengal need special attention.
  • The backlog can be cleared with just 25 percent productivity improvements in lower courts, 4 percent in High Courts and 18 percent in Supreme Court.

How does Policy Uncertainty affect Investment?

India has witnessed significant reduction in Economic Policy Uncertainty over the last one decade. Considering that the uncertainty dampens investment growth India for about five quarters, the Survey proposes reduction in economic policy uncertainty by:

• Consistency of actual policy with forward guidance

• Quality assurance certification of processes in Government departments

From Swachh Bharat to Sundar Bharat via Swasth Bharat

• 93.1 percent of the households have access to toilets and 96.5 percent of those with access to toilets are using them in rural India.

• 100 percent Individual Households Latrine (IHHL) Coverage in 30 states and UTs

• Now, environmental and water management issues need to be incorporated in the Swachh Bharat Mission (SBM) for sustainable improvements in the long-term.

Inclusive Growth through Affordable, Reliable and Sustainable Energy

• India requires 2.5 times increase in per capita energy consumption to increase its real per capita GDP by USD 5000 at 2010 prices to enter the upper-middle income group.

• 4 times increase in per capita energy consumption is needed to achieve 0.8 Human Development Index score.

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

• Thermal power still plays a dominant role at 60 percent share

• Market share of electric cars is only 0.06 percent in India while it is 2 percent in China and 39 percent in Norway. India needs faster access to fast battery charging facilities to increase the market share of electric vehicles

Effective Use of Technology for Welfare Schemes like MGNREGS

• Survey depicts boost in efficiency of MGNREGS with use of technology that has led to significant reduction in delays in the payment of wages with adoption of NeFMS and DBT.

• Demand and supply of work under MGNREGS increased.

• Vulnerable sections such as women, SC and ST workforce increased under MGNREGS during economic distress.

Minimum Wage System to be redesigned for Inclusive Growth

• Survey proposes redesigning of Minimum Wage System for protecting workers and alleviating poverty

• India has 1,915 minimum wages for various scheduled job categories across states

• 1 in every 3 wage workers is not protected by the minimum wage law

• Survey proposes minimum wages to all employments/workers

• Government will soon notify ‘National Floor Minimum Wage’, varying across five geographical regions.

• States will fix the Minimum wages at levels not lower than the ‘floor wage’.

• It proposes ‘National level dashboard’ under the Ministry of Labour & Employment for regular notifications on minimum wages.

State of the Economy in 2018-19: A Macro View

• GDP to grow at 7 percent in 2019-20 due to growth of investment & consumption

• India’s share in world service exports increased from 2 percent in 2005 to 3.5 percent in 2017

• India’s foreign exchange reserves are placed at USD 422.2 billion in June 2019

• India still holds the top position of the fastest growing major economy in 2018-19.

• GDP Growth Rate moderated to 6.8 percent in 2018-19 from 7.2 percent in 2017-18.

• Inflation was at 3.4 percent in 2018-19

• Non-Performing Assets (NPAs) as percentage of Gross Advances reduced to 10.1 percent at end December 2018 from 11.5 percent at end March 2018.

• Growth in fixed investment grew to 10.0 percent in 2018-19

• Current account deficit was manageable at 2.1 percent of GDP

Fiscal Developments

• Fiscal deficit declined from 3.5 percent of GDP in 2017-18 to 3.4 percent in 2018-19.

• 2018-19 closed with fiscal deficit at 3.4 per cent of GDP

• Total Central Government expenditure fell by 0.3 percentage points in 2018-19.

Money Management & Inflation

• Banking system improved with the decline in the NPA ratios.

• Insolvency and Bankruptcy Code led to recovery and resolution of significant amount of distressed assets.

• As per RBI reports, banks received Rs 50,000 crore from previously non-performing accounts.

• Repo Rate first hiked by 50 bps and later reduced by 75 bps in 2018.

• Inflation continued to decline for fifth straight financial year and remained below 4 percent.

• Food inflation based on Consumer Food Price Index (CFPI) also continuing on its declining trend and remained below 2 percent.

• Housing and fuel are the main contributors of inflation based on CPI-C during FY 2018-19

Sustainable Development and Climate Change

• India’s SDG Index Score ranges between 42 and 69 for States and between 57 and 68 for UTs

• Kerala and Himachal Pradesh are the front runners with a score of 69 amongst states. Chandigarh and Puducherry are the front runners with a score of 68 and 65 respectively among the UTs.

• Namami Gange Mission was launched for achieving the SDG 6 with a budget outlay of Rs 20,000 crore.

• A comprehensive National Clean Air Programme (NCAP) was launched in 2019 as a pan India time bound strategy for prevention, control and abatement of air pollution.

Agriculture and Food Management

• Gross Value Added (GVA) in agriculture improved from -0.2 percent in 2014-15 to 6.3 percent in 2016-17 but decreased to 2.9 percent in 2018-19.

• Gross Capital Formation (GCF) in agriculture declined to 15.2 percent in 2017-18 as compared to 15.6 percent in 2016-17.

• Women’s participation in agriculture increased to 13.9 percent in 2015-16 from 11.7 percent in 2005-06.

• 89 percent of groundwater extracted is used for irrigation.

• Policies should focus on Dairying as India is the largest producer of milk; Livestock rearing; Fisheries sector as India is the second largest producer.

Industry and Infrastructure

• India’s ranking improved by 23rd to 77th position in 2018 among 190 countries assessed by the World Bank Doing Business (DB) Report 2019.

• Road construction grew at 30 km per day in 2018-19.

• Rail freight and passenger traffic grew by 5.33 percent and 0.64 percent respectively in 2018-19.

• Total telephone connections in India touched 118.34 crore in 2018-19.

• Public Private Partnerships are ideal for addressing infrastructure gaps

• Building sustainable and resilient infrastructure was given due importance with programmes such as SAUBHAGYA scheme, PMAY etc.

Services Sector

• Services sector contributed more than half of GVA growth in 2018-19.

• IT-BPM industry grew by 8.4 percent in 2017-18 to USD 167 billion.

• The services sector growth declined marginally to 7.5 percent in 2018-19.

• The sectors that saw growth were Financial services, real estate and professional services.

• The sectors that saw decline were Hotels, transport, communication and broadcasting services.

Health & Education

• Government expenditure on Health increased to 1.5 percent in 2018-19 from 1.2 percent in 2014-15.

• Government expenditure on Education increased to 3 percent in 2018-19.

• Affordable and quality healthcare being provided through National Health Mission and Ayushman Bharat scheme.

Source: PIB

RAS Mains Exam Complete Study Notes

Download RAS Mains Study Notes

Paper-I Paper-II Paper-III Paper-IV
Unit-I
Rajasthan History Administrative Ethics   Rajasthan Current Affairs General Hindi & English
Art-Culture Rajasthan National Current Affairs
Indian History   International Current Affairs
Indian Culture
World History
Unit-II
Economy-Rajasthan Science & Technology Public Administration
Indian Economy Agriculture-Rajasthan Polity & Administration
                                          Unit-III
Sociology Geography-Rajasthan Sports & Yoga
Management Geography-India Behaviour
Accounting & Auditing Geography-World Law
general studies of Rajasthan