complete summary of economic survey 2018-2019 volume ii€¦ · ca rahul kumar 9045716803...

GS -3 Mains 2019-20

CA RAHUL KUMAR 9045716803

WriteToBeIAS.com ECONOMIC SURVEY 2019

SUMMARY NOTES

www.writetobeias.com Email : [email protected] 011-41561002 Online Video Course for GS 3 Mains 2019-2020

Complete Summary of Economic Survey 2018-2019

Volume II

How this summary is different from others

1. Includes all important tables and boxes

2. Includes important MCQs for prelims exam

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INDEX

1. State of the Economy in 2018-19

2. Fiscal Developments

3. Monetary Management and Financial Intermediation

4. Prices & Inflation

5. Sustainable Development and Climate Change

6. External Sector

7. Agriculture and Food Management

8. Industry and Infrastructure

9. Services Sector

10. Social Infrastructure, Employment and Human Development



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CHAPTER - 1

State of the Economy in 2018-19

Global Economic Scenario

● India is still the fastest growing major economy and seventh largest economy in terms of Gross

Domestic Product (GDP) in current US$ in 2018-19.

● Growth of India’s GDP moderated to 6.8% in 2018-19 from 7.2% in 2017-18.

● World output growth declined from 3.8% in 2017 to 3.6 % in 2018. It is because of the following

reasons,

(i) Escalation of US China trade tensions

(ii) Tighter credit policies in China

(iii) Financial tightening alongside the normalization of monetary policy in the advanced economies.

● As per World Economic Outlook (WEO) report, India forms part of 30% of the global economy,

whose growth is not projected to decline in 2019.



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● Contribution of the Indian economy to the GDP of EMDEs and world economy has increased

consistently over the years.

● WEO report of the International Monetary Fund (IMF) states that the growth of the world economy

will be bolstered mainly by growth in China and India.

● With Purchasing Power Parity (PPP) adjustments, India’s GDP at current international dollar, ranks

third in the world.

Indian Economy

● Indian economy grew at 6.8% in 2018-19 experiencing some moderation in growth when compared

to the previous year.

● Moderation in real GDP growth has been experienced in all quarters of 2018- 19.

● This moderation in growth momentum is mainly on account of lower growth in- ‘Agriculture &

allied’, ‘Trade, hotel, transport, storage, communication and services related to broadcasting’ and

‘Public administration & defence’ sectors.

● Election related uncertainty may have contributed to growth moderation.

● Deceleration in the manufacturing sector has tempered the growth of industry sector.

● Index of Industrial Production (IIP) of the manufacturing sector grew at 0.3% in Q4 of 2018-19, as

compared to 7.5% in the same quarter of previous year.

● Slowdown in the auto sector has also affected the manufacturing sector growth.



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● Stress in Non-Banking Financial Companies (NBFC) sector also contributed to the slow down by

adversely impacting consumption finance.

● Gap between nominal and real growth rate has reduced significantly. So, GDP deflator has

become smaller.

● On the demand side, lower growth of GDP was accounted for by a decline in the growth of

government final consumption, change in stocks and contraction in valuables.

● Headline CPI declined to 3.4% in 2018-19 from 3.6% in 2017-18.

● Headline WPI inflation stood at 4.3% in 2018-19 higher as compared to 3.0% in 2017-18.

● On the external front, Current Account Deficit (CAD) increased on account of a rise in

international crude oil prices.



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● Trade deficit increased from US$162.1 billion in 2017-18 to US$184 billion in 2018-19.

● Nominal growth of both merchandise exports and imports declined in US dollar terms in 2018-

19 compared to 2017-18.

● Growth in service exports and imports in US dollar terms declined to 5.5% and 6.7%

respectively in 2018-19.

● Rupee depreciated due to rising crude oil prices coupled with tighter financial conditions in the

US and world are responsible for the depreciation. Rupee also depreciated when measured as trade

based weighted exchange rates against Nominal Effective Exchange Rate (NEER) and Real Effective

Exchange Rate (REER).

● The foreign exchange reserves in nominal terms decreased, RBI’s intervention to modulate

exchange rate volatility is the reason behind it.

● Net Foreign Direct Investment (FDI) inflows grew by 14.2% in 2018- 19. The top sectors

attracting FDI equity inflows were services, automobiles and chemicals.

● Fiscal deficit stood at 3.4% of GDP.

● In 2018-19, direct taxes grew by 13.4% owing to improved performance of corporate tax.

However, indirect taxes fell short of budget estimates by about 16% following a shortfall in GST

revenues.

● Gross Tax Revenue as a proportion of GDP declined to 10.9% of GDP in 2018-19.

● Total expenditure of central government grew by 7.9% in 2018- 19, with the growth of 15.1% in

capital expenditure.



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● Primary deficit of the central government has been consistently declining and now stands at 0.3% of

GDP in 2018-19.

● State’s Gross Fiscal deficit reduced from 3.5% of GDP in 2016-17 to 3.0 % in 2017-18 (RE) and is

budgeted to decline to 2.6% in 2018-19.

Banking Sector

● Indian banking sector has been dealing with twin balance sheet problem, which refers to stressed

corporate and bank balance sheets.

● However, the performance of the banking sector (domestic operations), and PSBs in particular,

improved in 2018-19.

● Non-Performing Assets as a percentage of Gross Advances reduced to 10.1% at end December 2018

from 11.5% at end March 2018.

● During 2018-19, the 10 year benchmark Government Security (G-Sec) yields was volatile. It

hardened but witnessed intermittent softening. The hardening of yields in the first quarter may be

attributed to rising crude oil prices, the firming up of US treasury yields and upside risks to domestic

inflation. Later, with the decline in crude oil prices and with the announcement of Open Market

Operations (OMO) purchases, the yields softened.



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Drivers of the Growth

● Consumption, especially private final consumption, has always been a strong and major driver of

growth in the economy.

● Growth in private final consumption expenditure (PFCE) increased to 8.1% in 2018-19.

● The pattern of private consumption has undergone some change over time, from the essentials to

luxuries and from goods to services.



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● Growth of Government final consumption expenditure (GFCE) decelerated from 15% in 2017- 18

to 9.2% in 2018-19.

● Investment (Gross Capital Formation) accounts for nearly 32% of GDP, within which fixed

investment (Gross fixed capital formation) accounts for about 29% of GDP.

● Growth in fixed investment has picked up from 8.3% in 2016-17 to 9.3% next year and further to

10.0% in 2018-19. The decline in fixed investment until 2016-17 was mainly by the household

sector, with fixed investment by public sector and private corporate sector remaining almost at

same levels.

● Green shoots (i.e. fresh investments) in the investment activity appear to be taking hold as also

seen in the pickup in credit growth to industry.

● Credit large and micro, small & medium enterprises has seen pickup in growth.



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● Investment rate in the services sector is the highest followed by industry and agriculture sectors

respectively.

Exports

● Growth of both overall exports and imports declined in US$ terms, it increased in rupee terms (at

current prices) in 2018-19.

● This happened due to the depreciation of rupee vis-a-vis US dollar in 2018-19.

● Exports of both service and merchandise (in rupee terms) picked up in 2018-19 in nominal terms.

● Service sector raised its share in total exports from 26.8% to 38.4%. Share of India in world

service exports has also increased from 2% in 2005 to 3.5% in 2017.



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Supply side of the economy

● Gross Value Added (GVA) reflected a decline in economic activity, registering a growth of 6.6% in

2018-19, lower than 6.9% in 2017-18.

● Growth of net indirect taxes was 8.8% in 2018-19, lower than that of 2017-18 on account of loss of

momentum of economic activity.

● Share of agriculture sector in total GVA has been consistently falling and stands at 16.1% in 2018-

19.

● The share of crops in GVA has reduced from 12.1% in 2013-14 to 10.0% in 2017-18, and that of

livestock increased from 4.1% to 4.9% (at current prices).

● Manufacturing accounted for 16.4% in total GVA in 2018-19, marginally higher than that of

‘Agriculture & allied’ sector .

● Construction sector growth is estimated using growth of production of cement and consumption of

finished steel, which grew at 13.3% and 7.5% respectively in 2018-19.

● Service sector growth declined in 2018-19, due to decline in the growth ‘Public administration,

defence & other services’ and ‘Trade, hotel & transport’ sector. The share of services sector in

overall economy has been increasing and now stands at 54% .

● ‘Financial, real estate and professional services’ sector grew at 7.4 per cent in 2018-19, higher as

compared to 6.2 per cent in 2017-18. This sector amounts for more than 20% of overall GVA of the

economy.

● Each sector has a different composition of income going to labour, capital and entrepreneurship.

● Agriculture has a very small share of income going to labour as paid labour. On the other hand,

industry and services sector continue to show a high share of employee compensation.



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Outlook of the Economy

● Real GDP growth for the year 2019-20 is projected at 7%.

● Investment rate is expected to pick up further in the year 2019-20 on the back of higher credit growth

and improved demand. Accommodative monetary policy, resolution of stressed assets should

push the Capital Expenditure cycle.

● Growth in rural wages should help spur rural demand. PM-KISAN scheme will also increase the

rural incomes.

● The extent of recovery in farm sector and farm prices is also dependent on the situation of monsoon.

● If the impact of stress in the NBFC sector spills over to this year as well, it may lead to lower credit

off-take from NBFCs.

● Prospects of export growth remain weak for 2019-20. Reorientation of export policies to target

countries/markets based on our own relative comparative advantage and the importing country’s

exposure to Indian goods can foster export performance.

Practice Questions

1) Consider the following statements about the Indian Economy

1. India’s GDP growth has steadily increased from 2017-18 to 2018-19

2. India is the seventh largest economy in terms of GDP.

Select the correct code

a. 1 only

b. 2 only

c. Both a and b

d. Neither a nor b

2) World Economic Outlook is published by

a) OECD

b) World Bank



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c) IMF

d) UNCTAD

3) Consider the following statements

1. India’s Purchasing Power Parity is the highest in the world.

2. Contribution of the Indian economy to the GDP of EMDEs and world economy has increased with

intermittent lows over the years.


a. 1 only

b. 2 only

c. Both a and b

d. Neither a nor b

4) Which of the following factors have contributed to the moderation in growth of Indian economy ?

(i) Rupee depreciation

(ii) Declaration in manufacturing sector

(iii) Lower growth in Agriculture & allied sector

(iv) Stress in NBFC

(v) Election related uncertainty


a. (i), (ii), (iii), (iv)

b. (ii), (iii), (iv), (v)

c. (i), (iii), (iv), (v)

d. All the above

5) What are the reasons for the depreciation of rupee

(i) Rising crude oil prices

(ii) Tighter financial conditions in the world


a. 1 only

b. 2 only

c. Both a and b

d. Neither a nor b


1.In 2018-19, direct taxes fell short of their budget estimates due to shortfall in corporate tax.

2. In 2018-19, indirect taxes fell short of their budget estimates due to shortfall in GST revenues.




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a. 1 only

b. 2 only

c. Both a and b

d. Neither a nor b

7) Which of the following statements is not correct?

a) Primary deficit of the central government has been consistently declining.

b) Performance of the banking sector and PSBs have improved.

c) Current Account Deficit (CAD) increased on account of a rise in crude oil prices.

d) Rupee appreciated against Nominal Effective Exchange Rate (NEER) and Real Effective Exchange Rate

(REER).

8) Consider the following statements about the consumption pattern of Indian economy

1. Over the years, the consumption has undergone change from essentials to non-essentials.

2. Over the years, the consumption has undergone change from goods to services.


a. 1 only

b. 2 only

c. Both a and b

d. Neither a nor b

9) Which among the following are drivers of growth?

1. Fixed Investment

2. Consumption- Private and Government


a. 1 only

b. 2 only

c. Both a and b

d. Neither a nor b

10) Growth of both overall exports and imports in Indian economy declined in US$ terms, it increased in

rupee terms. Why did this happen?

a) Depreciation of rupee vis-a-vis US dollar

b) Depreciation of US dollar vis-a-vis rupee

c) Appreciation of rupee vis-a-vis US dollar

d) Appreciation of US dollar vis-a-vis rupee

11) Which among the following statements about the agriculture sector in India is correct

a) Share of agriculture sector in total GVA has been consistently falling.



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b) Agriculture has a large share of income going to labour as paid labour.

c) The share of crops in GVA has increased while that of livestock has reduced.

d) Investment rate in the services sector is the highest followed by agriculture and industry sectors

respectively.

Answers

1. B

2. C

3. D

4. A

5. C

6. B

7. D

8. B

9. C

10. A

11. A



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Chapter-2

Fiscal Developments

Introduction

1. Budget 2018-19 reiterated the objective of fiscal consolidation with the introduction of a new fiscal

targeting framework.

2. Revenue augmentation and expenditure prioritization and rationalisation continue to be integral

to fiscal reforms.

3. Broadening and deepening the direct tax base and stabilisation of Goods and Services tax are the

other priorities.

4. Over the last six years, budgetary expenditure of the Central Government, as a % of GDP, has seen

considerable moderation with most of the reduction in the revenue expenditure.

5. Improving the quality of expenditure remains the key priority.

6. Meeting allocational requirements without diversion from the newly revised fiscal glide path

remains the foremost challenge.

Prospects

➔ Indian economy is expected to grow at 6.8% in 2018-19 while maintaining macroeconomic

stability.

➔ The growth with macro-stability stems mainly from ongoing structural reform, fiscal discipline,

efficient delivery of services and financial inclusion.

➔ The Budget 2018-19 affirmed Government’s intent on fiscal consolidation. The new fiscal targeting

framework was adopted, which rests on twin pillars of reducing debt and fiscal deficit.

Medium Term Fiscal Policy

● The Medium Term Fiscal Policy (MTFP) Statement revised the fiscal deficit target for 2017-18,

from 3.2% to 3.5% , owing to spill-over impact of the new indirect tax regime.

● It aimed to reach the fiscal deficit target of 3.3% in 2018-19, 3.1% in 2019-20 and 3.0% in 2020-

21.

● The debt-GDP ratio of Central Government was projected at 48.8% at end-March 2019. It is

targeted to decline to 46.7 % by end-March 2020 and 44.6% by end-March 2021, restoring the long-

term trend of decline in the debt to GDP ratio.

● In, FY 2018-19; fiscal deficit- 3.4 % of GDP and debt to GDP ratio- 44.5%.

Fiscal Consolidation

❖ Fiscal consolidation entails revenue augmentation and expenditure rationalisation.

❖ In the post-Fiscal Responsibility and Budget Management Act (FRBMA) period from 2004-05 to

2007-08, significant fiscal consolidation was achieved largely due to buoyant tax revenues with net

tax revenue to the Centre increasing by 1.9% points of GDP.



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❖ There has been an improvement in the tax to GDP ratio, significant consolidation of revenue

expenditure and gradual tilt towards capital spending over the years.

❖ These have led to progressive reduction in primary and fiscal deficits.

Trends in Receipts-

➢ Central government receipts can broadly be divided into non-debt and debt receipts.

➢ The non-debt receipts comprise of tax revenue, non-tax revenue, recovery of loans, and

disinvestment receipts.

➢ Debt receipts mostly consist of market borrowings and other liabilities, which the government is

obliged to repay in the future.

➢ The Budget 2018-19 targeted significantly high growth in non-debt receipts of the Central

Government, which was driven by robust growth in net tax revenue and non-tax revenue.

Tax Revenue



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★ Direct taxes have grown by 13.4% owing to improved performance of corporate tax.

★ Indirect taxes have fallen short of budget estimates by about 16%, due to the shortfall in GST

revenues.

★ The GST collections are yet to stabilise and several changes have been carried out which are- rate

rationalisation for goods and services, changes in the threshold limits and exemptions granted.

Tax to GDP ratio

★ There has been improvement in tax to GDP ratio over the last six years.

★ Indirect taxes have fallen by 0.4% of GDP primarily due to shortfall in GST collections.

★ This has been partly offset by an increase in direct taxes. Corporate tax have considerably improved

in 2018-19.



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★ Better tax administration, widening of TDS carried over the years, anti-tax evasion measures and

increase in effective tax payers base have contributed to direct tax buoyancy.

➔ Widening of tax base due to increase in the number of indirect tax filers in the GST regime has also

led to improved tax buoyancy.

★ Sustaining the improvement in tax collection will depend on the revenue buoyancy of GST.

Non- Tax Revenue

● Non-tax revenue consists mainly of interest receipts on loans to States and Union Territories,

dividends and profits from Public Sector Enterprises including surplus of Reserve Bank of India

transferred to GOI, and external grants and receipts for services provided by the Central

Government.

Non-Debt Capital Receipts

❖ Non-debt capital receipts mainly consist of recovery of loans and advances, and disinvestment

receipts.

❖ The share of recovery of loans has declined over the years following disintermediation of loan

portion of Central assistance to States consequent to the recommendation of the Twelfth Finance

Commission, and States allowed to borrow directly from the market.

New Initiatives undertaken by DIPAM for Disinvestment

(a) Asset Monetisation

(b) Debt ETF- which will enable CPSEs to access the debt/ bond market to partially meet the capital

expenditure needs by leveraging their aggregate strength.

Defence Initiatives

Budget ★ Capital Expenditure in absolute terms has gone up in the past few

years.

➢ Ministry of Defence has reviewed the Defence Procurement

Procedure 2016.

★ Several measures as part of “Business Process Re-engineering” have

been undertaken to make the acquisition process industry friendly,

provide a level playing field for various stakeholders and reduce the

complexities and time lines in provisioning of defence platforms,

equipment and systems for modernization of the Indian Armed Forces.

Self- reliance ★ To achieve self-reliance in the defence sector and make India a global

hub in defence manufacturing, the Ordnance Factories (OFs), Defence



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Public Sector Undertakings (DPSUs) and the private industry

ecosystem have enhanced their capabilities and widened the

product range.

★ A large number of major products have been developed through

Research and Development initiatives. And also, being produced

through transfer of technology.

★ As a policy, DPSUs and OFs have been outsourcing many of their

requirements and developed a wide vendor base that includes a large

number of medium and small scale enterprises and large scale

industries.

★ The DPSUs and OFs are also striving to increase the indigenous

content in the equipment and products manufactured by them.

Policy

Initiatives

(i) Make-II procedure-

● In order to encourage participation of Indian industry in design and

development of defence items, a ‘Make-II’ procedure was notified in

February 2018.

● Under this a number of industry friendly provisions have been

introduced, such as relaxation of eligibility criteria, minimal

documentation, and provision for consideration of suo-moto proposals

suggested by industry/individual.

★ The framework for implementation of Make-II at OFs and DPSUs

level has been issued to undertake indigenization of the items,

particularly of the import substitution nature, through Indian private

industry.

(ii) Innovation for Defence Excellence (iDEX)-

● iDEX is aimed at creating an ecosystem to foster innovation and

technology development in Defence and Aerospace.

★ iDEX intends to engage industries including MSMEs, Start-ups,

Individual Innovators, R&D institutes and Academia and provide them

grants/funding and other support to carry out R&D, which has

potential for future adoption for Indian defence and aerospace needs.

● The iDEX programme has been operationalized through launch of the

‘Defence India Startup Challenges (DISC).

(iii) Defence Investor Cell-

● A Defence Investor Cell has been made functional in the Department

of Defence Production (DDP).



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● It has played an important role as one-stop solution for all types of

defence production related queries.

Measures

taken to

facilitate

Private

Sector

Participation

➔ Defence Industry sector opened up to 100% for Indian private sector

participation.

★ Foreign Direct Investment (FDI) has been allowed under automatic

route upto 49%, and above 49% wherever it is likely to result in

access to modern technology or for other reasons to be recorded.

Export

Promotion

★ Exports from Ordnance Factory Board (OFB), DPSUs and the private

sector DDP in the Financial Year 2017-18 has increased to 4,682 crore

from 1,522 crore in the financial year 2016-17.

★ Further, exports have more than doubled in 2018-19 to 10,746 crore

over the previous year.

Trends in

Expenditure

★ India’s tax to GDP ratio is low. Hence, Government faces the challenge of providing sufficient

funds for investment and infrastructure expansion while maintaining fiscal discipline.



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➢ Improving the composition and quality of expenditure towards capital spending is significant.

➢ More than 60% of total expenditure is spent on defence, salaries, pensions, interest payments and

subsidies.

➢ Ministry of Defence has taken up several initiatives to improve efficiency and utilisation of defence

expenditure.

➢ Subsidies have seen significant moderation through improved targeting.

➢ There has been considerable restructuring and reclassification of Central sector and Centrally

Sponsored Schemes in the recent past.

➢ Capital expenditure was rationalised in 2017-18, wherein support provided to Railways and the

mechanism for transferring Externally Aided Project loans to States were rationalised.

➢ Government has been able to contain fiscal deficit at 3.4% of GDP through compression of

Government expenditure. The entire reduction is in revenue expenditure.

➢ Over 2017-18, total expenditure has grown by 7.9% in 2018-19 PA with its capital component

growing at more than twice the rate of growth in revenue.

★ The quality of expenditure reflected in the share of capital expenditure in total expenditure has

improved in 2018-19. Both capital expenditure and non-defence capital expenditure register a

rise.

★ The growth in revenue expenditure in 2018-19 PA though moderate, has been led by salaries,

pensions and interest



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payments.

★ Major subsidies comprising food, fertiliser and petroleum have continued their downward

trend.

Transfers to States

★ Transfer of funds to States comprises essentially of three components: share of States in Central

taxes devolved to the States, Finance Commission Grants, and Centrally Sponsored Schemes (CSS),

and other transfers.

★ Till 2013-14, funds for CSS were routed through two channels, the Consolidated Funds of the States

and directly to the State implementing agencies.

★ In 2014-15, direct transfers to State implementing agencies were discontinued and all transfers to

States including for the CSS were routed through the Consolidated Funds of the States.



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★ Another significant development has been award of the 14th Finance Commission to devolve 42%

of the divisible pool of taxes to the States, up from 32% earlier.

★ Total transfers to States have risen by 1.2% of GDP between 2014-15 and 2018-19.

Central Government Debt

★ Total liabilities of the Central Government include debt contracted against the Consolidated Fund

of India, technically defined as Public Debt, as well as liabilities in the Public Account.

★ These liabilities include external debt (end-of-the financial year) at current exchange rate but

exclude part of NSSF liabilities to the extent of States’ borrowings from the NSSF and investments

in public agencies out of the NSSF, which do not finance Central Government deficit.

★ 90% of total liabilities of the Central Government is public debt.

★ The total liabilities of the Central Government as a ratio of GDP, has been consistently

declining, particularly after the enactment of the FRBM Act, 2003. This is an outcome of both

fiscal consolidation efforts as well as relatively high GDP growth



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➔ Central government debt is characterised by low currency and interest rate risks. This is owing to

low share of external debt in the debt portfolio and almost entire external borrowings being from

official sources.



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★ Most of the public debt has been contracted at fixed interest rate making India’s debt stock

virtually insulated from interest rate volatility. This lends certainty and stability to budget in terms

of interest payments.

★ The gradual elongation of the maturity profile of the Central Government’s debt is leading to

reduced rollover risks.

★ The proportion of dated securities maturing in less than five years has seen consistent decline in

recent years.

State Finances

★ The State budgets expanded considerably on account of increase in revenue expenditure.

★ Capital expenditure consists of capital outlay and loans and advances by the State Governments.

★ The loans and advances by the State Governments declined sharply owing to reduction in loans

and advances by States for power projects and food storage and warehousing.

● On the revenue front, States own tax and non-tax revenue display robust growth.

★ The RBI study on State Finances points to the deterioration in fiscal deficit to GDP ratio in 2017-

18 when compared to the budget estimate. This deterioration occurred due to the overshooting of

revenue expenditure mainly due to farm loan waiver and pay revisions.

● States have budgeted for fiscal deficit of 2.6% of GDP in 2018-19.

★ However, over 2016-17, there is consolidation in fiscal deficit by about 0.4%. Consolidation is

mainly due to posting of surplus of about 0.2% of GDP on the revenue account



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★ The outstanding liabilities of states, as per cent of GDP, has increased after 2014-15.

★ The issuance of UDAY bonds, farm loan waivers, and the implementation of pay commission

awards have led to higher debt to GDP ratio.

★ Economic Survey 2016-17 had estimated impact of UDAY bonds on fiscal deficit to be 0.7% of

GDP.

★ Despite rising States’ debt to GDP ratio, interest payments as a proportion of revenue receipts has

not deteriorated

General Government Finances

★ The General Government (Centre plus States) has been on the path of fiscal consolidation and fiscal

discipline.

★ The combined liabilities of Centre and States have declined to 67% of GDP.

★ The fiscal deficit of General Government is further expected to decline from 6.4% of GDP in 2017-

18 to 5.8% of GDP in 2018-19.



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Outlook

The coming year will pose several challenges on the fiscal front.

➢ Firstly, there are apprehensions of slowing of growth, which will have implications for revenue

collections.



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➢ Secondly, the financial year 2018-19 has ended with shortfall in GST collections. Therefore,

revenue buoyancy of GST will be key to improved resource position of both Central and State

Governments.

★ Thirdly, resources for now expanded Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) and

Ayushmaan Bharat, as well as new initiatives of the new Government, will have to be found

without compromising the fiscal deficit target as per the revised glide path.

★ Fourthly, US sanctions on oil imports from Iran is likely to have an impact on oil prices and thereby

on the petroleum subsidy, apart from implications for current account balances.

★ Finally, 15th Finance Commission will submit its report for the next five years beginning April

2020. Its recommendation especially on tax devolution will have implications for Central

Government finances.

Practice Questions

1. Fiscal consolidation rests on twin pillars of

a) revenue augmentation and expenditure rationalisation

b) Broadening of direct tax base and stabilisation of GST

c) Reduction of fiscal deficit and debt rationalisation

d) Improving quality of expenditure and quantity of revenue

2. Fiscal consolidation can be achieved by

a) increasing tax base and rate

b) setting up exports limits



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c) buoyant tax revenues

d) Disinvestment

3. Consider the following statements

1. Corporate tax contributes the highest percentage in tax revenue

2. Customs tax contributes the lowest percentage in tax revenue

Which of the following statements are true?

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

4. What are some measures carried out by the GST council to stabilise the GST collections?

(i) Rate rationalisation

(ii) Tax exemptions

(iii) Single filing of TDR

(iv) Anti tax evasion measures

a) (i), (ii), (iii)

b) (i), (iii), (iv)

c) (ii), (iii), (iv)

d) All the above

5. Choose the correct pair of defence initiatives taken by the Government improve self-reliance.

(i) Increasing offset liabilities - Defence Procurement Procedure 2016

(ii) Ecosystem for engaging Industry and Academia- Defence Investor Cell

(iii) Import substitution and indigenisation- Innovation for Defence Excellence (iDEX)

(iv) One-stop solution for defence production related queries-Make-II

6. Which of the following is not a component of transfer of funds to states from Centre?

a) Finance Commission Grants

b) Cess and Surcharges

c) Centrally Sponsored Schemes

d) Central taxes devolved to the States

7. Public debt in India is contracted at fixed interest rate. How is this move significant?

a) India’s debt is insulated from RBI monetary policies changes.

b) India’s debt is insulated from inflation tendencies of the economy.

c) India’s debt is insulated from



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d) India’s debt is insulated from interest rate volatility.

8. Consider the following statements

1. The debt to GDP ratio of Centre and States has reached the targets of NK Singh Committee

Recommendations.

2. The debt to GDP ratio of Centre and States is expected to decline further in 2019-20.

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

Answers

1. A

2. C

3. C

4. A

5. A

6. B

7. D

8. B



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CHAPTER - 3

Monetary Management and Financial Intermediation

Monetary developments in 2018-2019

● Monetary policy witnessed a U-turn over the last year with policy stance changing from

‘calibrated tightening’ in 2018 to ‘accommodative’ by June 2019.

● The policy rate was first hiked by 50 bps in 2018 and later reduced by 75 bps in 2019, due to

weaker inflation, growth slowdown and softer international monetary conditions.

● The growth rate of monetary aggregates reverted to long-term trend after faltering due to

demonetization and remonetisation.

Money Aggregates Trends Contributing Factors

Reserve Money Growth of 14.5% a. Mainly driven by currency in circulation



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(M0) b. RBI credit to government by Open Market

operations

c. RBI claim on Banks

d. Net foreign assets

Broad Money

(M3)

Declining since

2009; improved

marginally in

2018-19

a. Growth in currency.

b. Credit from scheduled commercial banks to

the commercial sector.

c. Banks credit to Government mainly from RBI.

Money multiplier

(M3/M0)

Declining since

demonetization

a. Tightening of bank capital and regulatory

norms



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Liquidity Conditions and its management

● Since September 2018, the liquidity situation is tight and continued to be so.

● Factors that led to liquidity tightening

(i) Tepid growth in bank deposits

(ii) Accelerated growth of currency in circulation

(iii) RBI drew down on its foreign exchange reserves in excess to smoothen exchange rate

volatility.

Steps taken to ease shortage of liquidity

● RBI carried out 27 Open Market Operations (OMOs).

● RBI increased the Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR) which

supplemented the ability of individual banks to avail liquidity from the repo market against high-

quality collateral.

● Reduction of Statutory Liquidity ratio (SLR) by 25 bps every calendar year to reach 18%

● RBI injected rupee liquidity for longer duration through long-term foreign exchange buy/sell

swaps.



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Developments in G-Sec

● The 10-year benchmark g-sec yields were volatile with alternate increase and decrease in last

fiscal.

● The yields reduced due to

(i) Rising crude oil prices,

(ii) Reduction in US treasury yields

(iii) Concerns regarding the pace of rate hikes by the US Fed,

(iv) Rising domestic inflation

● The yields increased due to

(i) Improved liquidity after OMO by RBI

(ii) Expectations of lesser borrowing by the government.



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Comparison of Banking sector and Non-Banking Financial Sector (NBFC)

December 2018 – March

2019

Scheduled Commercial Banks

(SCBs)

NBFCs

Gross Non-performing

Assets (GNPA)

Declined from 11.5 to 10.1% Increased to 6.5 from 6.1%

Capital to Risk weighted

asset Ratio (CRAR)

Increased from 13.8 to 14.0% Decreased from 22.8 to 22.2%

Performance The performance of the

banking sector especially Public

Sector Banks (PSBs) improved.

Faced difficulties due to

IL&FS default and subsequent

liquidity crisis

Credit Growth

● Growth in non-food bank credit (NFC), which remained sluggish in the last few years, showed

improvement in 2018-19.

● Bank credit to large industry and services segments were the main drivers of overall NFC growth

in 2018-19.

● However, the pace of credit growth has moderated in the last few months.

● The main contributor to this moderation has been the services sector.

● The growth in bank credit to large industries have improved in recent months

Developments in Capital Markets

1) Primary Market-

(a) Public Issue-



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● The year 2018-19 witnessed a significant decrease in resource mobilization. through public

issue and rights issue of equity compared to the previous year.

● Overall, total public issue declined by 50% from 2017-18 to 2018-

(b) Private Placement-

● During 2018-19, Indian corporates preferred private placement route to gear up the capital

requirement.

Other Capital Instruments

1) Foreign portfolio Investment (FPI) Net outflow Cumulative investment decreased

2) Mutual Funds Net Inflow Cumulative assets increased



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Movement of Indian Benchmark Indices

● BSE Sensex, the benchmark index of the Bombay Stock Exchange (BSE) witnessed an increase of

17.3% from its closing value in 2018 to its closing value in 2019

● Nifty 50, the benchmark index of the National Stock Exchange (NSE) witnessed an increase of

14.9% from its closing value in 2018 to its closing value in 2019

Insurance Sector

● Insurance has evolved as a tool of safeguarding the interests of people from loss and uncertainty.

● Apart from providing protection, it also encourages savings and provides long-term funds to

individuals

● The measure of insurance penetration and density reflects the level of development of the

insurance sector in a country.

● Insurance penetration increased steadily from 2001 to 2017 and stands at 3.69% of GDP, but still

lower than other emerging economies like China, Malaysia.

● Insurance Density also increased from 2001 (US$11.5 to 2017 (US$73) but is much below than the

global average.

Insolvency and Bankruptcy Code, 2016

● The Insolvency and Bankruptcy Code, 2016 (IBC) is one of the most important economic reforms

of recent times designed to effectively deal with non-performing assets.

● It seeks to achieve resolution of corporate debtors (CDs) in distress and failing that, it's liquidation

in a time-bound manner under the oversight of the National Company Law Tribunal (NCLT).



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● In addition to that RBI implemented Sashakt - the resolution scheme to resolve the problem of

NPAs through a market-led approach under an Inter creditor Agreement (ICA).

Progress Made- The cases filed so far

● 42% from the manufacturing sector

● 20% in real estate

● 10% in engineering, procurement, and construction (EPC) sector

● 10% in trading companies

● Other sectors under stress are textiles, power & utilities, FMCG, and hospitality.

● The growing number of cases indicate that the IBC as a preferred mode to resolve distressed

assets, enforce payment discipline and maximize returns.

● It has also created new cadre of professionals and institutions like Information utilities that acts as

repositories of credit information to enhance insolvency capability.

● IBBI has launched the Graduate Insolvency Programme (GIP) to promote insolvency as a career

option.

Impact of IBC

● Behavioural change: IBC has promoted cultural shift in corporate behaviour by encouraging

higher standards of corporate governance, including cash and financial discipline.

● Increased resolution of stressed assets: Pre-IBC resolution mechanisms like SARFAESI act, Lok

adalats focused on recovery but IBC focused on turn around of the debtors. This has increased

the recoveries under IBC compared to earlier.



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● India improved its ‘Resolving Insolvency’ ranking from 134 in 2014 to 108 in 2019

● Won the Global Restructuring Review (GRR) award for the most improved jurisdiction in 2018.

Way forward

1. Cross Border Insolvency:

● Adoption of the UNCITRAL Model Law on Cross-Border Insolvency to effectively deal with

cross-border insolvency issues, which will help in increased foreign investment.

2. Group Insolvency:

● Commercial ventures also operate through group firms with separate legal personality.

● However, when a group firms fails it will create a complex contagion which needs to be addressed

through a coherent approach.

3. Insolvency and bankruptcy of individuals pose different challenges for which special practices like

Mediation and counselling for efficient resolution can be adopted.

4. Improving NCLT capacity is needed through necessary infrastructure support such as,

● Centralised Research Wing to assist NCLT in following international best practices.

● Usage of technology by NCLT and IPs to enhance case management by strict timekeeping, data

mining and analysis for review of IBC impact on the ground.



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Practice Questions

1) Which of the following is not a monetary policies stance of RBI?

a) Neutral

b) Loosing

c) Calibrated Tightening

d) Accommodative

2) What is the effect of the policy of calibrated tightening on the economy?

a) RBI reduce the policy rates to increase the money supply in the economy.

b) RBI would have the flexibility to either increase or decrease the policy rates.

c) RBI would either keep the rates constant or increase the rates.

d) Government reduce the policy rates to increase the money supply in the economy.

3) Which of the following steps help to ease liquidity shortage ?

(i) Open Market Operations (OMOs).



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(ii) Reduction of Statutory Liquidity ratio (SLR)

(iii) Cut in Repo and Reverse Repo

(iv) Long-term foreign exchange buy/sell swaps.

(v) Market Stabilisation Scheme

(a) (i), (ii), (iii), (iv)

(b) (ii), (iii), (iv), (v)

(c) (i), (ii), (iv), (v)

(d) (i), (ii), (iii), (iv), (v)

4) Consider the following statements about Insolvency and Bankruptcy Code, 2016.

1. The insolvency resolution process can be initiated by any stakeholder of the firm-

employee/creditor/debtor/firm.

2. The adjudicating authority is NCLT for companies and DRT for individuals.


a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

5) Which of the following is not a part of Broad Money?

a) Public deposits of NBFCs

b) Current deposits with the Banking system

c) Savings deposits with the Banking system

d) Term Savings deposits with the Banking system

Answers

1) B

2) C

3) D

4) B

5) A



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CHAPTER – 4

Prices and Inflation

Introduction

● The economy witnessed a gradual transition from a period of high and variable inflation to more

stable and low level of inflation in the last five years.

● Headline inflation based on the Consumer Price Index – Combined (CPI-C) has been declining

continuously for the last five years.

● Food inflation based on Consumer Food Price Index (CFPI) declined to a low of 0.1% during the

2018-19.

● Wholesale Price Index (WPI) stood at 4.3 % during 2018-19.

Current trends in Inflation

● Headline CPI-C inflation has remained below 4.0% for two consecutive years.The decline in

inflation in the FY 2018-19 was mainly due to low food inflation.

● Food inflation based on Wholesale Price Index too declined over the last two financial years.

● Food Inflation based on Consumer Food Price Index (CFPI) has been declining since 2014-15.

● Decline in Food inflation is mainly due to deflation in the prices of pulses, vegetables and sugar.

● CPI-C based core inflation has remained above 4% since the start of a new series of CPI-C.

Drivers of Inflation

● At the all India level, CPI-C inflation during FY 2018-19 was driven mainly by miscellaneous

group (Services) followed by housing as well as fuel and light group.



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● Services inflation has been higher than goods inflation and the gap between the two is growing.

● Contribution of health, education, transport and communication in driving services inflation has

gained prominence across rural and urban areas

● Inflation in health is more prominent in rural than urban areas probably owing to supply side

constraints.



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Rural-Urban Inflation

● The current phase of low inflation is also marked by reduction in both urban and rural inflation.

● The decline in rural inflation is steeper than that of urban inflation, resulting in decline in

headline inflation.

● Fall in rural inflation is due to moderation in food inflation.

● Role of miscellaneous category i.e. services in determining rural inflation has increased.

Housing Price Indices

1) NHB- RESIDEX

● Launched in July 2007 by the National Housing Bank.

● Current base year- FY 2017-18



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● Currently, published for 50 cities on a quarterly basis

2) Housing Price Index

● Launched in 2007 by RBI

● Current base year- FY 2010-11

● Currently, published for 10 cities on a quarterly basis

State-wise Inflation

● Rural areas and Urban areas in 16 & 9 states/UTs respectively have registered CPI inflation of

less than 4%.

● Daman & Diu having the lowest inflation followed by Himachal Pradesh and Andhra Pradesh.



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Trends in Global Commodity Prices

● Both World Bank food prices as well as Food and Agriculture Organization (FAO) food prices

recorded deflation during FY 2018-19.

● WPI based food inflation too declined.

● World Bank Energy price index continued increasing in FY 2018-19.

● “Fuel & Power” inflation based on WPI also followed the same trend.

Efforts to contain Inflation



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Following efforts were taken by Central Government-

(i) General Measures

● Advisories to State Governments to take strict action against hoarding & black marketing by

enforcement of Essential Commodities Act, 1955 & the Prevention of Black-marketing and

Maintenance of Supplies of Essential Commodities Act, 1980.

● Higher Minimum Support Price (MSP) for pulses and other crops to enhance production.

● Regular review meetings on prices and availability of key commodities and recommend

appropriate policy intervention.

● Government has set up Price Stabilization Fund (PSF) for procurement of agri-horticultural

commodities for its release during lean period to improve availability and moderate their prices.

(ii) Specific measures

● To control the rise in onion prices, onions were released at reasonable prices from the stock

procured under PSF.

● Pulses from the buffer are utilized for strategic market intervention for price management and

meeting institutional requirements for Mid Day Meal Scheme, Integrated Child Development

Scheme, etc.

● Withdrawal of prohibition on export on all varieties of edible oils, except mustard oil.

Practice Questions

1) What is Headline Inflation?

a) Measure of inflation excluding certain volatile products

b) Deliberate action of the government to increase the rate of inflation

c) The rate of inflation at a slower rate



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d) Measure of inflation including even volatile products

2) Consider the following statements about Residex

1. It was launched in 2010 by the National Housing Bank.

2. The current base year is 2017-18

3. It is published on a quarterly basis


a) 1 only

b) 2 and 3 only

c) 1 and 3 only

d) 1,2 and 3

3) Consider the following statements about Housing Price Index.

1. It is published by RBI on a quarterly basis

2. The current base year is 2010-11.


a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

4) Consider the following statements about CPI-C inflation trend in India.

1. The decline in rural inflation is steeper than that of urban inflation.

2. Inflation in health is more prominent in urban than rural areas due to supply side constraints.


a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

5) Which of the following measures will help in inflation controlling?

(i) Imposing restrictions on the export of essential goods

(ii) Increasing stock limits under the Essential Commodities Act, 1955

(iii) Increasing Repo rate


a) (iii) only

b) (i) and (ii) only

c) (i) and (iii) only



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d) (i), (ii), (iii)

Answers

1) D

2) B

3) C

4) A

5) D



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CHAPTER – 5

Sustainable Development and Climate Change

Introduction

● The 2030 Agenda for Sustainable Development was adopted in 2015 for future development

trajectory to all nations with focus on poverty eradication, environmental sustainability, peace and

prosperity.

● The SDGs are global goals, built upon the erstwhile Millennium Development Goals.

● Estimates suggest that US$5 to US$7 trillion per year is required for financing these goals worldwide

and US$3.9 trillion per year in developing countries. However, the current investment in developing

countries is around US$1.4 trillion leading to a shortfall of US$2.5 trillion per year

India’s Progress towards the SDGs

SDG India Index

● It has been developed by NITI Aayog to track the progress of all the States and UTs across 13 out of

17 SDGs.

● It excludes Goal 12, 13, 14 and 17 on account of unavailability of comparable data across

States/UTs.

● This SDG index provides an aggregate assessment of India’s progress and helps in informed policy

formulations.

● The score varies from 0 to 100. A score of 0 denotes worst performance.

Performance Score

Front-Runners >= 65

Performers 50-64

Aspirants <50

Achievers 100

● The SDG Index Score ranges between 42 and 69 for States and between 57 and 68 for UTs.

● Several states have achieved 100 in SDG 10 (Reduced Inequality) and SDG 15 (Life on Land).

● It can be attributed to initiatives such as PMJDY, MGNREGA, the National Environment Policy,

National Agro-forestry Policy and Green Highways Policy.

● In SDG 5 (Gender Equality) and SDG 11 (Sustainable Cities and Communities), large number of

states are in the ‘Aspirants’ category’.

● Goa, a front runner among all the States and UTs in SDG 11, has been doing exceptionally well in

waste management.



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● Kerala and Himachal Pradesh are the front runners amongst all the states with a score of 69. Tamil

Nadu is also progressing very fast.

● Among the UTs, Chandigarh and Puducherry are the front runners with a score of 68 and 65

respectively.

● Collaboration between the national and sub-national governments as well as active participation of

all other relevant stakeholders are required for meeting the challenges of financing, technical support

and continuous monitoring of the progress.



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Namami Gange Mission

● SDG 6 (Ensure availability and sustainable management of water and sanitation for all) is to be

achieved through Namami Gange Mission.

● It was launched with a budget outlay of 20,000 crore for the period 2015-2020



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● National Mission for Clean Ganga (NMCG) was empowered as an Authority under the Environment

(Protection) Act, 1986. It has been done

a) For proper synchronization with the State and Local Bodies.

b) Fast track implementation and to formulate policies for long term sustainability of the Ganga

rejuvenation efforts.

Components of

Namami Ganga

Mission

Objectives/Achievements

Sewerage Project

Management

● Used Public-Private Partnership (PPP) approach of

Hybrid Annuity Model (HAM)

● 15 years long-term Operation & Maintenance (O&M)

● Improved governance through ‘One City One Operator’

approach

● It ensured competitive and positive market participation

along with synergy in implementation.

Urban Sanitation ● Cities contributed for more than 60% of the pollution

load were covered.

● Sewage Treatment Plants were constructed and

rehabilitated.

Sewerage

Infrastructure

● 150 sewerage projects are approved in Ganga and its

tributaries

Industrial Pollution ● Grossly Polluting Industries (GPIs) were identified and

surveyed

● Compliance of the operational GPIs in 2017 as against

2018 improved from 39 % to 76 %.

● Online Continuous Effluent Monitoring Systems

(OCEMS) of all operating GPIs have been connected

with Central & State Pollution Control Boards.

● Zero black liquor discharge has been achieved in Paper

and Pulp industry and in distillery.

Water Quality ● Real Time Water Quality Monitoring Stations

● Dissolved Oxygen levels increased, Biological Oxygen

Demand, and organic pollution load decreased.

River as Public ● Ghats, Crematories have been taken up under the



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Space mission.

● Innovative campaigns have been organized.

Rural Sanitation ● More than 4000 villages on the Ganga stem have been

declared ODF.

● Gram Panchayats along Ganga are supported for solid

and liquid waste management.

Ecosystem

Conservation

● Afforestation along banks of Ganga has been taken up

and Local Communities are involved.

Urban River

Management

● Urban River Management Plan is being prepared to

protect and enhance the status of river health within the

city.

● Generation of high-resolution Light Detection and

Ranging (LIDAR) maps are initiated.

Water Use

Efficiency

● Market for reuse of treated wastewater is being

developed

Clean Ganga Fund ● Clean Ganga Fund has been set up.

● Corporates and individuals can contribute to this Fund.

Resource Efficiency

Resource efficient development approach essentially means a transition of the management of natural

resources with a progressive minimization of waste in both consumption and production processes through

various policies and measures.

● SDG 12 aims to ‘Ensure Sustainable Consumption and Production Patterns’. Eight other SDG goals

2, 6, 7, 8, 9, 11, 14 and 15 also have a bearing on resource efficiency.

● Sustainable consumption and production is reflected in various policies/programme announcements

like Make in India, Zero Effect-Zero Defect Scheme, Smart Cities, Swachh Bharat, and Ganga

Rejuvenation Mission.

● International Resource Panel estimated that efficient resource policies in G7 countries could

a) Reduce global use of natural resources by 28 %,

b) Diminish greenhouse gas (GHG) emissions by an additional 15 to 20 % and

c) Deliver annual economic benefits of US$2 trillion globally by 2050 relative to existing trends.

● Several countries have introduced various policies specific to the different stages of material life

cycle.



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Indian Scenario

● Rate of recycling in India is very low as compared to other developed economies.

● As per the NITI Aayog’s Strategy Paper on Resource Efficiency 2017

a) India is the 3rd largest consumer of biomass after China and the USA.

b) Demand for total material will more than double by 2030 under the assumption of continued

economic growth of 8% till 2030.

Enhancing Resource efficiency

● Studies have analyzed the economic impact of effective RE strategy and identified that

a) 6000 crore can be saved in the manufacturing sector with the implementation of RE strategy.

b) Gold can be extracted with mining of urban e-waste.

c) Effective waste management policies can generate 14 lakh jobs.

● Global E-waste Monitor, 2017 estimated that India was the fifth largest producer of e-waste in 2016.

● NITI Aayog’s Status Paper “Circular Economy (CE) and Resource Efficiency (RE)- Current Status

and Way Forward” has outlined Six Pillars for a Resource Efficiency Framework.



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Air Pollution

It is one of the biggest environmental challenges in India and around the world.



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Major Government Initiatives-

1. National Ambient Air Quality Standards (NAAQS) -

● Standards for ambient air quality with reference to various identified pollutant notified by the CPCB

under the Air (Prevention and Control of Pollution) Act, 1981.

2. Air Quality Index (AQI)-

● Tool for effective communication of air quality status to people.

● There are six AQI categories, namely - Good, Satisfactory, Moderately Polluted, Poor, Very Poor

and Severe.

3. Graded Response Action Plan for Delhi and NCR-

● Comprises of the graded measures for each source framed according to the AQI categories.

● It also takes note of the broad health advisory for each level of AQI.

4. National Air Quality Monitoring Programme (NAMP)-

● Four major air pollutants viz. Sulphur Dioxide, Oxides of Nitrogen, PM 10 and PM 2.5 are regularly

monitored.

● It covers major cities/towns in 29 states and 6 Union Territories.



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5. National Clean Air Programme (NCAP)-

● It is a comprehensive management plan for prevention, control and abatement of air pollution.

● Augmenting the air quality monitoring network across the country.

● National level target of 20-30% reduction of PM2.5 and PM10 concentration by 2024 is proposed

with 2017 as the base year.

Climate Change

As per the Intergovernmental Panel on Climate Change (IPCC) Special Report on “Global warming of 1.50

C”,

● Human-induced warming reached approximately 1°C above pre-industrial levels in 2017, increasing

at 0.2°C per decade.

● It demands for unprecedented efforts to reduce GHG emissions.

● In 2018, annual mean surface air temperature of India was +0.41°C, significantly above normal. It

was the sixth warmest year on record since the nation-wide records commenced in 1901.

India’s Climate Action

1. National Action Plan on Climate Change (NAPCC)-

● It was launched in 2008.

● India made voluntary commitment to reduce emission intensity of its GDP by 20 to 25% by 2020

over 2005 levels.

● State Action Plans on Climate Change (SAPCC) was also drafted in line with the NAPCC.

2. Climate Change Action Programme (CCAP)-

● It has been launched in 2014 with a total cost of `290 crore.

● It aims to build and support capacity at central and state levels, strengthening scientific and analytical

capacity for climate change assessment, establishing appropriate institutional framework and

implementing climate related actions.

Outcomes

Outcomes of these initiatives are reflected in India’s Second Biennial Update Report (BUR).



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Katowice Climate Package

● Paris Agreement Work Programme (PAWP) was adopted in UNFCCC Katowice conference.

● Achievements in CoP 24 in Katowice, Poland in 2018:

a) Recognition of different starting points for developed and developing countries.

b) Flexibilities for developing countries.

c) Consideration of principles including equity and Common but Differentiated Responsibilities and

Respective Capabilities.

Climate Financing

● UNFCCC and Paris agreement recognize the importance of climate finance in strengthening the

global response to climate change.

● The Scope, Scale and Speed of climate finance required to take climate actions effectively.

○ Scope- Climate finance should support both the adaptation and mitigation activities of the

developing countries in accordance with the country needs and priorities.

○ Scale- Climate finance requirements of developing countries are likely to be enormous due to

existing developmental challenges.

○ Speed- Global action on climate change is contingent on the delivery of timely and adequate

finance.



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International Solar Alliance

ISA has launched five programmes so far:

● Scaling Solar Applications for Agriculture Use,

● Affordable Finance at Scale,

● Scaling Solar Mini Grids,

● Scaling Solar Rooftop, and

● Scaling Solar in E-mobility and Storage.

Other important initiatives include

● Action to Transaction meets- Innovative platform bringing project developers and bankers

together.

● Common Risk Mitigation Mechanism- To reduce risks and financial cost of solar projects.

● Global Solar Risk Mitigation Initiative- Developed by the World Bank and the Agence Francaise

de Development (AFD) as an integrated approach to tackle policy, technical and financial issues.



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CHAPTER – 6

External Sector

Global Economic Environment

● Increasing Trade Protectionism and Slowing down of Global Output has closed with growth in

world output on a downward trajectory.

● The World Economic Outlook (WEO) in its April 2019 issue has projected growth in world

output at 3.3 % in 2019, down from 3.6 % obtained in 2018.

● Heightened US-China trade tensions has been stated as one of the reasons behind the global

slowdown that has spilled into other economies including India through the channel of exports.

● Beginning 2019 global slowdown has made advanced countries persist with their accommodative

monetary policy stance.

● This has escalated portfolio investment into emerging market economies making their currencies

stronger and imports cheaper.

● The trade protectionism will only divert bi-lateral trade imbalances from one country to another as

the root cause of trade deficits is the macroeconomic imbalance.

● The main priority is for countries to resolve trade disagreements cooperatively, without raising

distortionary barriers that would further destabilize a slowing global economy.

● Crude oil prices have begun to harden following production cuts by oil exporting countries with

the US also cutting out oil supplies from Iran, while the prices of other commodities have also

risen due to supply distortions.

● These developments increase the vulnerability of external sector of emerging market economies

like India, which are dependent on crude imports for fueling their economic growth.

● Apart from trade tensions, trade and output were also influenced by temporary shocks, including

the federal government shutdown in the United States and production problems in the

automotive sector in Germany toward the end of the year.

● There has been a spatial shift in the nature of BoP balances as well in the last few years.



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● Advanced economies had a current account deficit in 2011, which has been reducing consistently

since then and turned into current account surplus in 2017.

● Emerging and developing economies slipped from their current account surplus.

● This reflects the shifting of the consumption hub of the world from the advanced to the less

advanced countries.

India’s Balance of Payments Developments

Overview of Balance of Payments

Current Account Developments

● The trade deficit increased to US$145.3 billion. The increase in CAD is driven by increasing

merchandise trade deficit.

● India is more dependent on Petroleum, Oil & Lubricants (POL) imports than the world is on

India’s POL exports.



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● Software services, accounting for about 40% of total services receipts, along with financial

services, have been the main drivers in the service exports.

● According to the World Bank (April 2019), India remained a top remittance recipient country in

2018, followed by China, Mexico, the Philippines, and Egypt, with remittance inflows peaking at all-

time high at US$78.6 billion.

Developments in Capital Account of BOP

● Robust foreign direct investment (FDI) inflows, were outweighed by withdrawals under portfolio

investment reflecting an escalation of global risk aversion.



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● The reduced dependency on FPIs to fund CAD in recent times is also reflected in the fact that

growth of forex reserves in the country bears no correlation with movements in net FPI.

● Among the major economies running current account deficit, India is the largest foreign exchange

reserve holder and eighth largest among all countries of the world.



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External Debt

● India’s External Debt was US$521.1 billion.

● The long-term debt was mostly the same at 80.1%.



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● India’s external debt to Gross National Income (GNI) ratio was fourth lowest, while China

continues to have the lowest

ratio.

● As per the World Bank data, though India is the third largest debtor country among developing

countries after China and Brazil, its average-age of debt is much higher.

● Higher age of debt reduces the rollover risk.

Debt Service ratio

● Debt Service ratio indicates the claim that servicing of external debt makes on current receipts

and is, therefore, a measure of strain on BoP due to servicing of debt service obligations.

● Debt Service ratio increased till 2016 and then declined continuously since 2016.



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Net International Investment Position

● The International Investment Position (IIP) is a statistical statement that shows at a point in time the

value of financial assets of residents of an economy that are claims on non-residents or are gold

bullion held as reserve assets; and the liabilities of residents of an economy to non- residents.

● The difference between the assets and liabilities is the net position in the IIP and represents either

a net claim on or a net liability to the rest of the world.

● A positive NIIP value indicates a nation is a creditor nation, while a negative value indicates it is a

debtor nation.

● India’s net international investment deficit is the eighth highest in 2018, that however has been

increasing consistently.



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● The total liabilities in the IIP statement is a more comprehensive measure of external indebtedness

than merely external debt as the former also includes net equity inflows, which is used for

financing the CAD.

● The share of net FDI inflows in total liabilities has seen a secular increase since 2013 reflecting an

increase in dependence on more stable sources of financing the CAD.

Nominal and Real Exchange Rate and Terms of Trade

Exchange rate



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● The Indian rupee was one of the least volatile Emerging Market (EM) currencies during 2017-18

and traded in the range of 63 to 65 per US$. It performed better than some of the other major

EME currencies.

● In particular, crude oil prices and net portfolio flows have been major drivers of exchange rate

movements in recent years.

● The rupee remained volatile in 2018-19 on account of both global and domestic factors including

rising crude oil prices, erratic trade balance, strengthening of dollar and continuous FPI outflows.



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● Additional factors impacting the rupee include trade war between the US and China and US

sanctions on Iran and interest rate hikes by the US Federal Reserve.

Terms of Trade

● Depreciation of REER indicates more competitive exports.

● Appreciation of REER indicates less competitive exports.

● Price competitiveness of exports can be better assessed by looking at how Terms of Trade (ToT)

have fared across a time period.

Commodity or net terms of trade (NTT)

● Commodity or net terms of trade (NTT) of a country are the ratio of the unit value (price) of export

to the corresponding unit value (price) of import measured relative to a base year.

● If this ratio increases, it implies that the country, for every unit of exports it exchanges for imports,

is receiving relatively more; if the ratio decreases then the country is receiving relatively less.

● Two other commonly used terms of trade indices are gross terms of trade (GTT) and income

terms of trade (ITT).

Gross Terms of Trade (GTT)

● The GTT is a ratio of total quantity of imports to that of exports of a given country.



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Income Terms of Trade (ITT)

● The ITT is the value of exports divided by the unit value (price) of imports to reflect how better

or worse a country’s purchasing power to imports has become.

Composition of Trade

Major Products Exchanged in 2018-19

● In 2018-19, petroleum products continued to be the largest exported commodity in value terms.

● Other major exports included pearls, precious, semi-precious stones as also gold and other precious

metal jewelry besides drug formulations, biological.



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● In the import basket of 2018-19, petroleum crude, had the largest share followed by gold and

other precious metal Jewelry and pearls precious/semi-precious

stones.

Major trading partners in 2018-19

● India’s largest export destination country continues to be the United States of America.

● USA accounted for 16 % of India’s exports, followed by the United Arab Emirates (UAE), China

and Hong Kong.

● China continues to be the largest source of imports of India though India’s imports from China fell

in 2018-19 registering a negative growth. The other important sources from which India imports are

the USA, UAE and Saudi Arabia.



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Trade Policy

● India has bilateral trade agreements with all major regional groupings.

● India has signed 28 bilateral/ multilateral trade agreements with various country/group of

countries.

● In 2018-19, India’s exports to countries with which it has a trade agreement stood at US$121.7

billion accounting for 36.9 % of India’s export to all countries.

● India’s imports from countries with which it has a trade agreement stood at US$266.9 billion

accounting for 52% of India’s imports from all the countries.

Trade Facilitation

● India ratified the WTO Agreement on Trade Facilitation (TFA) in April 2016

● India constituted a National Committee on Trade Facilitation (NCTF) with the Cabinet Secretary

of India as the Chair.

● Since then, the NCTF has played an important role in reducing the high cost of imports and

exports so as to integrate our cross-border trade with the global value chain.

● Some of the landmarks being –

1) Establishment of a National Single Window to route all import related formalities

2) Simplification of fees and charges for various clearance related activities at the borders

3) Paperless filing of import/export documents through ‘E-sanchit’ project

4) Publishing of resource information online for ease of access.



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● Consistent trade facilitation efforts have resulted in substantive improvement of India’s

performance in Trading Across Borders indicator and contributed to overall improvement in ‘Ease

of Doing Business’.

Trade Related Logistics

● The logistics industry in India is currently estimated to be around US$215 billion.

● According to the World Bank’s Logistics Performance Index, India jumped to 35th rank in 2016

from 54th rank in 2014 in terms of overall logistics performance.

● Experts predict that the logistics sector can be the largest job creator by 2022.

● The sector currently provides employment to more than 72 crore people in the country.

● Government of India has announced a draft National Logistics policy for which a national logistics

action plan is being developed.

● Various logistics schemes have been introduced, which are as under:

1) The Government has launched many flagship programmes like Bharatmala, Sagarmala and

Dedicated Freight Corridors. The objective of these programmes is to develop infrastructure to

meet the growing demand of logistics in the country and to make a modal shift on more cost-

effective modes of transport.

2) 111 inland waterways have been identified for development.

3) Infrastructure status has been given to select logistics activities like warehousing, cold chains,

Multi modal logistics parks and slurry pipelines.

4) Subsidy is provided to develop cold chains and packhouses.

● Indian logistics industry is a sunshine sector and there are multiple factors on both demand and

supply side that are driving this sector.

● On the demand side, the reduction in truck turnaround time following GST is a major stimulus

to logistics growth as also pick up in industrial production.

● On the supply side, the outsourcing of non-core activities like warehousing is allowing main

players to focus on improving efficiency of transportation.

● Automation of large warehouses is also adding to the efficiency of the logistics sector.

● Driving logistics cost down from estimated current levels of 13-14% of GDP to 10% in line with

global standards is essential for India to become globally competitive.



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Anti-dumping and safeguard measures

● India conducts anti-dumping investigations on the basis of applications filed by the domestic

industry with prima facie evidence of dumping of goods in the country, injury to the domestic

industry and causal link between dumping and injury to the domestic industry.

Outlook

● The WEO, April 2019 has forecast acceleration of world output in second half of 2019.

● The key assumptions in this regard are continued accommodative monetary policy stance in

advanced countries and fiscal stimulus in China and de-escalation of trade tensions between the US

and China.

● There could be pressure on crude prices to increase as world output grows.

● This may not impact India since growth in world output will also favorably impact India’s

exports, which is not decoupled from growth of world trade.

● Government policies are expected to further lift restrictions on FDI inflows. This will increase the

stability of sources funding the current account deficit.

● From a macroeconomic perspective, the deterioration of CAD may be contained if consumption

slows down in the economy.

● Increase in investment and exports will become the new drivers of the Indian economy.



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Practice Questions

1) Which of the following factors have not contributed to slowing down of world output growth?

a) Trade wars among countries

b) Trade protectionism

c) Domestic inflation of countries

d) Slowing down of global output

2) Current Account Balance deficit has shifted from advanced to developing countries. What does this say

about the consumption pattern of the world?

a) Consumption hub has shifted from advanced to developing countries

b) Low Purchasing Power Parity makes advanced countries consume less

c) Developing countries are importing more than their exports

d) Consumption hub has shifted from developing to advanced countries

3) What is Debt Service Ratio?

a) It is the claim that servicing of external debt makes on remittances

b) It is the claim that servicing of external debt makes on capital receipts

c) It is the claim that servicing of external debt makes on current receipts

d) It is the claim that servicing of external debt makes on FPI.

4) Consider the following statements about International Investment Position

1. It is the value of financial assets and liabilities of residents of an economy.

2. A positive value indicates a nation is a creditor nation, while a negative value indicates it is a debtor

nation.


a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

5) Rupee volatility was a major concern during the financial year 2017-18. What are the factors that affected

it?

(i) crude oil prices

(ii) erratic trade balance

(iii) strengthening of dollar

(iv) continuous FPI outflows.


a) (i), (ii) and (iii) only



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b) (ii), (iii) and (iv) only

c) (i), (iii) and (iv) only

d) (i), (ii), (iii) and (iv)

Answers

1) C

2) A

3) B

4) C

5) D



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CHAPTER – 7

Agriculture and Food Management

Introduction

● Agriculture and allied sectors are critical in terms of employment and livelihoods for the small and

marginal farmers.

● As the size of landholdings in agriculture is declining, India should focus on resource efficiency in

smallholder farming to meet the SDG targets and to attain sustainability.

Overview of Agriculture and Allied Sectors

Gross Value Added in Agriculture

● Gross Value Added (GVA) in agriculture improved from a negative 0.2% in 2014-15 to 6.3% in

2016-17 only to decelerate to 2.9% in 2018-19

● Crops, livestock and forestry sector showed fluctuating growth rates over the period from 2014-

15 to 2017-18.

● Fisheries sector has shown a rapid growth from 4.9% in 2012-13 to 11.9% in 2017-

18.

● Average annual growth rate in real terms in agricultural & allied sectors has remained at around

2.88% during 2014-15 to 2018-19.

Share of Agriculture Sector in GVA

● Share of agriculture, forestry & fishing sector in GVA has seen a steady decrease over the years

from 15.4% in 2015-16 to 14.4% in 2018-19.

● This was mainly due to decline in the share of crops in GVA.

● Share of the livestock in GVA has remained around 4% from 2012-13 to 2017-18.



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Gross Capital Formation in Agriculture & Allied Sector

● Gross Capital Formation (GCF) in agriculture and allied sectors as a percentage of GVA saw a rise

to 17.7% in 2013- 14 but declined thereafter to 15.2% in 2017-18.

● Share of private investment in GCF in Agriculture sector shows a decline.



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Pattern of Agricultural Land Holdings In India

● Agriculture Census 2015-16 show that the number of operational holdings, has increased to 14.6

crore in 2015-16 from 13.8 crore in 2010-11. (Increase of 5.3%).

● Share of marginal holdings (less than 1 ha) in total operational holdings increased.

● Share of small holdings (1 ha to 2 ha) decreased.

● Large holdings (above 4 ha) decreased from 6.5% to 4.3%.

● Area operated by the marginal and small holdings increased from 38.9% in 2000-01 to 47.4% in

2015-16 while areas that of the large holdings decreased from 37.2% to 20 %

● Operational Holdings- Land put to agricultural use



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Growing Number of Women Farmers

● Women play a significant and crucial role in agriculture including crop production, livestock

production, horticulture, postharvest operations, Agri-social forestry, fisheries, etc.

● Share of operational holdings cultivated by women has increased from 11.7% in 2005-06 to

13.9% in 2015-16.

● Marginal and small holdings operated by women farmers together constitute 27.9% of total

operational holdings cultivated by women.

Bringing Resource Efficiency In Smallholder Agriculture

● Development strategy for agriculture should prioritise smallholder agriculture in order to

promote sustainable livelihoods and for reduction of poverty in India.

● Productivity of a farm depends on the use of inputs like fertiliser, access to irrigation, technology,

crop intensity and choice of crops (crop pattern) grown at the farm.

● Committee on doubling farmer’s income stated that one of the key aspects which can improve

productivity of small farm holdings is improving resource use efficiency.

● Policy changes that are required to bring about resource efficiency are explained below,

1) Increasing Irrigation Water Productivity (IWP) in Agriculture

(a) According to the Asian Water Development Outlook 2016, almost 89% of groundwater

extracted is for irrigation in India.

(b) By 2050, India will be in the global hot spot for ‘water insecurity’.

(c) India’s water insecurity index shows that the resilience score of India is also very low.

(d) Appropriate mechanism needs to be framed for economical use of water among small and

marginal farmers.

(e) Cropping pattern in India is highly skewed towards crops that are water intensive. Incentive

structures like MSP, heavily subsidized electricity, water, fertilizers have played a significant role

in the misalignment of crop patterns in the country.

(f) Crops such as Paddy and sugarcane consume more than 60% of total irrigation water thereby

reducing water availability for other crops.



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(g) States like Tamil Nadu, Karnataka, Maharashtra and Andhra Pradesh which have high land

productivity tend to have very low irrigation water productivity. It reflects inefficient use of

water and the need to re-calibrate the cropping pattern.

(h) Adoption of micro-irrigation (MI) is one of the possible ways to improve water use efficiency.

(i) Subsidies can be provided to offset the costs of such improved irrigation systems.

(j) Focus in agriculture should shift from ‘land productivity’ to ‘irrigation water productivity’.

2. Economizing the Use of Fertilizers and Pesticides

(a) For the small and marginal farmers, the costs of fertilizers are key determinants of profitability

of farming.

(b) Fertilizer response ratio is showing a declining trend. This is an indicator of declining

responsiveness of soil fertility to fertiliser application.



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(c) Declining Response Ratio is due to,

→ Inadequacy and imbalance in fertiliser use

→ Increasing multi-nutrient deficiency

→ Lack of farmers awareness

→ Balanced plant nutrition and poor crop management

(d) Improvement in fertilizer use efficiency requires farmers’ knowledge.

(e) Some of the suggested measures are,

→ Use of optimal dose based on soil health status

→ Promotion of neem-coated urea

→ Promotion of micronutrients

→ Promotion of organic fertilizers

→ Promotion of water-soluble fertilizers

3. Increasing Sustainability in Agriculture - Turning to Organic and Natural Farming

(a) National Mission for Sustainable Agriculture (NMSA) has been launched to make agriculture

more productive, sustainable, remunerative and climate resilient.

(b) It promotes location specific integrated/composite farming systems and conserves natural

resources through appropriate soil and moisture conservation measures.

(c) Paramparagat Krishi Vikas Yojana (PKVY) and Rashtriya Krishi Vikas Yojana (RKVY)

schemes are launched to promote organic farming.

(d) Models like Natural Farming, Vedic Farming, Cow Farming, Homa Farming, Zero Budget Natural

Farming (ZBNF) have been included to adopt depending on the farmer’s choice.

(e) Organic farming is being promoted through the scheme Mission Organic Value Chain

Development for North Eastern Region (MOVCDNER) under National Mission for Sustainable

Agriculture (NMSA).



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(f) Some of the States which are progressively practicing ZBNF are Karnataka, Himachal Pradesh and

Andhra Pradesh.

4. Adopting Appropriate Technologies for Smallholder Farms

(a) In smallholder farms, resource efficiency can be brought about through adoption of appropriate

technologies.

(b) Custom Hiring Centres (CHCs) can be set up to promote the use of high-tech machinery for the

mechanization of small and marginal farm holdings, especially in difficult terrain.

(c) Technology can play a critical role in bridging the information gaps that prevail in agricultural

markets. For example, Coffee Board has launched blockchain based coffee e-marketplace.

5. Improving Infrastructure and Access to Markets

(a) Informal actors like local traders and input dealers are more prominent in the marketing channels

of the smallholder farmers.

(b) Information, Communication Technology (ICT) is needed to provide information about prices,

aggregation and storage facilities can help small and marginal farmers in overcoming the marketing

bottlenecks.

(c) NITI Aayog launched Agricultural Marketing and Farmer Friendly Reforms Index (AMFFRI)’

in 2016 to rank States and UTs based on implementation of seven provisions proposed under model

APMC Act.



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Role of Extension Services

1. Adoption of Accessed Advice and Its Usefulness

(a) Agricultural households adopts the technical advice given by the veterinary department and

progressive farmers for most of the time and least from the source radio/TV etc.

(b) Majority of them found the advice to be beneficial which reflects the significance of extension

services in agriculture.

2. Trend of Expenditure on Agriculture Research & Education

There has been an increasing trend in the expenditure on agricultural research and education as a

percentage of total agricultural GVA with an exception of 2017-18.



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Agricultural Credit

● Access to timely credit or finance is a critical determinant of profitability of agriculture.

● Regional distribution of agricultural credit in India shows that the distribution of credit is highly

skewed.

● Distribution of agricultural credit is low in North Eastern, Hilly and Eastern States.

● Financial inclusion in the eastern and north eastern India is relatively less as compared to the South

and West.

Allied Sectors: Animal Husbandry, Dairying and Fisheries

● According to the 19th Livestock Census, India has vast resources of livestock comprising about 300

million bovines, 65.1 million sheep, 135.2 million goats and 10.3 million pigs.

● Livestock farming in India is part of a composite farming system characterized by crop-livestock

interactions.



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1. Animal Husbandry and Dairying

● India ranks first in milk production, accounting for 20 % of world production.

● Milk production in India has been increasing steadily over the years from 55.6 million tonnes in

1991-92 to 176.3 million tonnes in 2017-18. (Average annual growth rate of 4.5%)

● All India per capita availability of milk is 375 grams per day. However, it varies between 71

grams per day in Assam to 1120 grams per day in Punjab.

2. Domestic Demand and the Price of Milk

● Milk demand is increasing and it is driven by factors such as population growth, urbanisation and

income growth.

● Of the total milk produced in rural areas around 52% is the marketable surplus.

3. Small Ruminant Sector

● Sheep and goat are collectively known as small ruminants.

● India supports 16.1% of the world’s goat population and 6.4% of its sheep.

● They have higher survival rates under drought conditions compared to large ruminants.

4. Schemes/Initiatives to Improve Productivity of Livestock and Dairy Sector

● Rashtriya Gokul Mission (RGM)

● iE Pashu Haat Portal

● National Livestock Mission

● Livestock Health & Disease Control Scheme

● Dairy Development

5. Fisheries Sector

● It provides income and employment to more than 14.5 million people.



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● India is the second largest fish producer in the world with a total production of 13.7 million metric

tonnes in 2018-19 of which 65 % was from inland sector.

● Almost 50% of inland fish production is from culture fisheries, which constitutes 6.5% of global

fish production.

● The sector has been showing a steady growth in the total gross value added and accounts for 5.23%

share of agricultural GDP.

● Fish and fish product exports emerged as the largest group in agricultural exports.

Schemes related to fisheries sector

● ‘Blue Revolution: Integrated Development and Management of Fisheries’

● Fisheries and Aquaculture Infrastructure Development Fund (FIDF)

● Draft National inland Fisheries and Aquaculture Policy (NIFAP), 2019

Food Security and Food Management in India

● Timely availability and affordability of food are critical for a developing country like India.

1. Food Security

● Global Food Security Index (GFSI), 2018 considered four core issues of food security across 113

countries,

(a) Affordability

(b) Availability

(c) Quality & safety

(d) Natural resources and resilience

● GFSI’s major goal is to assess in a timely manner which countries are most and least vulnerable to

food insecurity.

● Indian ranks 76th out of 113 countries

● The index shows that India’s food security challenges lie in the areas of low GDP per capita,

sufficiency of supply, public expenditure on R&D and protein quality.

● It reflects the need for India to further improve the management of food supply in various aspects.



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Government schemes in this context

● Announcing Minimum Support Prices and Central Issue Price

● Undertake procurement of food grains through FCI and decentralised procurement by State Agencies

● Maintain buffer stocks



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● Open market sale of wheat and rice to check inflation

2. Food Subsidy

● Food subsidy comprises of two main components.

(a) Food Corporation of India (FCI) for procurement and distribution of wheat and rice under the

National Food Security Act (NFSA), 2013 and other welfare schemes.

(b) Subsidy provided to States undertaking decentralized procurement

● The economic costs of wheat and rice for FCI have been increased in 2018-19. However, the CIP

of wheat and rice for NFSA beneficiaries has not been revised.

● For sustainability of food security operations, the issue of increasing food subsidy bill needs to be

addressed.

What is Economic Cost?

● Economic Cost constitute of the acquisition and distribution costs of procuring food grains for the

central pool.

● The difference between the per quintal economic cost and the per quintal Central Issue Price (CIP)

gives the quantum of per quintal consumer subsidy.

3. Computerization of Targeted Public Distribution System

● Under the scheme, Digitization of ration cards/ beneficiary’s data, Online allocation of food grains,

Computerization of supply chain management has been completed in more than 25 states.

● To modernize and bring about transparency in the TPDS operations, the Central Government is

implementing the Scheme ‘End-to-end Computerisation of TPDS Operations’.



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Practice Questions

1) Consider the following statements based on the Agricultural Census 2015-16.

1. It is conducted by NSSO.

2. According to the Census, there has been an overall decline in the share of operational holdings.


a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

2) Feminisation of agriculture has been highlighted for the past two Economic Surveys. In this context,

consider the following statements.

1. Share of operational holdings cultivated by women has increased over the years

2. Marginal and small holdings operated by women farmers together constitute almost one-third of total

operational holdings cultivated by women.


a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

3) Asian Water Development Outlook is published by

a) Asian Development Bank

b) World Water Council

c) UN Water- UNESCO

d) World Economic Forum

4) Which of the following factors are responsible for water scarcity in India?

(i) Water intensive crops

(ii) Micro irrigation

(iii) Inefficient water usage

(iv) Groundwater exploitation


(a) (i), (ii), (iii) only

(b) (i), (iii), (iv) only

(c) (ii), (iii), (iv) only

(d) (i), (ii), (iv) only



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5) Which of the following measures can help in fertiliser use efficiency

(i) Soil Health Cards

(ii) Micronutrients

(iii) Organic Fertilisers

(iv) Water-soluble fertilizers

(v) Neem-coated urea


a) (i), (ii), (iii), (iv) only

b) (ii), (iii), (iv), (v) only

c) (i), (iii), (iv), (v) only

d) (i), (ii), (iii), (iv) and (v)

Answers

1) D

2) A

3) A

4) B

5) D



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CHAPTER - 8

Industry and Infrastructure

Indian Industry: An overview

Overall, the industrial sector performance during 2018-19 improved as compared to 2017-18.

(a) Gross Value Added (GVA):

● Real GVA of Industry increased to 6.9% in 2018-19 from 5.9% in 2017-18.

● While the construction and manufacturing sectors performed well, the mining sector did poorly.

(b) Index of Industrial Production (IIP)

● Growth was positive but less compared to last year due to the shortfall of investment in capital

goods.

● The Index of eight core industries comprising about 40.3% of the IIP grew at a similar rate as that

of the last year.

● Except, crude oil all core industries registered positive growth.



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(c) Central Public Sector Enterprises (CPSEs)

● Out of 339 CPSEs, 184 CPSEs were profit making, 71 loss making and 82 were non-operational

during 2017-18.

● The overall net profit of operating CPSEs grew by 2.29%.

● However, CPSEs contribution to the total Central Exchequer decreased by 2.98%

● A comparative analysis with private sector shows that there is a great scope for improvement for

CPSEs.



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(d) Corporate Sector Performance

● According to RBI, sales of non-governmental non-financial (NGNF) listed manufacturing companies

posted double digit growth rate.

● It later moderated due to subdued demand conditions faced by textiles, iron and steel,motor

vehicles and other transport equipment.

● On the positive side, the demand scenario improved for consumer driven sectors such as food

products, beverages and pharmaceuticals.

(e) Gross Capital Formation in Industrial Sector:

• The rate of growth of Gross Capital Formation (GCF) in industry has registered a sharp rise showing

upward momentum of investment in industry.

• The Mining & Quarrying, Manufacturing, Electricity, Gas, Water Supply & Other Utility Services and

Construction had registered a positive growth rate.

(f) Credit Flow to the Industrial sector:

• Overall Gross bank credit flow to the industrial sector has increased but with variations.

• Positive growth: chemicals, cement, engineering industries, construction, infrastructure.

• Negative growth: textiles, petroleum, coal products and nuclear fuel, basic metal & products.



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Key Initiatives taken to boost Industrial Sector in India

Improving ease of doing business

● Simplification and rationalization of the existing rules and introduction of information technology

for effective governance.

● India improved its ranking to 77th position in the World Bank Ease of Doing Business (DB) Report,

2018.

● It has improved its rank in 6 out of 10 indicators and has moved closer to international best

practices.



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Start-up India

● “Start-up India, Stand-up India” initiative was launched in 2015 to promote innovation and

entrepreneurship among enterprising youth.

● Start-up India Hub as ‘One Stop Shop’ for the start-up ecosystem has provided learning program to

build business plan.

● Steps have been taken for easing regulations such as exemption from Income tax on investments

raised by Start-ups.

● Regulatory reforms implemented to improve Ease of Doing Business for Start-ups through a self-

certification for labour and environmental laws.



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Foreign Direct Investment (FDI)

● The Government is promoting investment through a liberal FDI policy as it enhances productivity

by bringing capital, skills and technology to the country.

● Total FDI equity inflows were US$44.36 billion of which more than 70% came from Singapore,

Mauritius, Netherlands, Japan and the United Kingdom.

Sector wise Performances and challenges:

1. Steel:

Performance:

Production: Positive growth

● Globally, India is the 2nd largest crude steel producer with a global share of 6%.

● It is one of the core industries that have strong forward and backward linkages with material

flows and income generation contributing about 2% of the GDP.

Consumption: Positive growth

● India is also the third largest consumer of the finished steel with per capita consumption of only 69

kg lower than the global average of 214 kg.



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● With huge investments in infrastructure, construction and automobile sector, steel demand and

consumption are growing.

Exports decline and Imports grow

● Imposition of protectionist measures and trade frictions led to decline in exports to US, EU and

Canada

● But the import of finished steel from East Asian and ASEAN countries grew making India net

importer.

The National Steel Policy, 2017 directives:

● Encourages long-term growth for Indian steel on both supply and demand fronts.

● Focus on domestic production especially of value added steel to match the growing demand

● Need to increase investment in capacity addition and infusion of modern technology for

production.

Key challenges:

● Capacity expansion as the demand for steel is bound to rise with economic growth

● Lack of indigenous production of high grade and value-added steel used in power, defence and

automobile.

● Difficulties in acquiring mining lease

● High dependency on import of coking coal add to cost of steel production.

● High logistics costs also act as a major constraint.

2. Leather and Footwear:

● It is a highly employment intensive sector.

● The global demand for footwear is moving towards non leather footwear.

● But, Indian tax policies favour leather footwear production.

● India faces high tariffs in international markets for leather goods and non-leather footwear.



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● Indian Footwear and Accessories Development Programme is being implemented (2017-20) to

address these challenges and create jobs and formalize the sector.

3. Gems and Jewellery:

● Contribution to exports and employment generation of around 5 million

● The gem and jewellery exports were 13.69% of total merchandise exports in the country.

Key Initiatives:

● Establishment of Special Notified Zone.

● Setting up of Common Facility Centres.

● Creation of separate ITC HS Code for lab grown diamond.

● Reduction of GST rates for cut and polished diamonds and precious stones.

● Exemption from IGST on import of gold by specified agencies and banks.

● Exemption from GST on supply of gold by nominated agencies to exporters

● Providing financial assistance for participation of international fairs.

● Domestic Council for Gems & Jewellery to organise the small scale domestic industry and

strengthen domestic manufacturing

4. MSMEs:

● The Micro, Small and Medium Enterprises (MSME) sector provides large employment

opportunities, industrialization of rural areas, reducing regional imbalances, etc.

Key initiatives:

● Loans up to 1 crore within 59 minutes through online portal.

● Interest subvention of 2% for all GST registered MSMEs on incremental credit up to 1 crore.

Schemes for establishment of new enterprises and development of existing ones

● Prime Minister’s Employment Generation Programme

● Credit Guarantee Trust Fund for Micro and Small Enterprises.

● Credit Linked Capital Subsidy Scheme for Technology Up-gradation.

● Scheme of Fund for Regeneration of Traditional Industries.

● Micro and Small Enterprises- Cluster Development Programme

5. Textiles and Apparels

● India is the second largest manufacturer and exporter in the world, contributing 12.65% to

manufacturing and 2.3% to GDP, 12% of exports and global share of 5%.

Challenges:

● Absence of scale or fragmented and scattered manufacturing.

● Technological gap in weaving, processing and embroidery and larger gaps in knitting, technical

textile and garmenting segments.



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● Higher average tariffs in external markets as compared with competing nations which enjoy duty

free access affects competitiveness.

Key Initiatives:

● Incentives under Amended Technology Up-gradation Fund Scheme

● Rebate of State Levies

● 4% interest rate under Merchandise Exports from India Scheme

● Labour law reforms

● Assistance is also provided to exporters under Market Access Initiative Scheme.

● Enhanced interest equalization rate of 5% for pre and post shipment credit

Infrastructure

SDG-9: “Develop quality, reliable, sustainable and resilient infrastructure, with a focus on affordable and

equitable access for all”

• There is massive investment need in infrastructure to achieve targeted economic growth in the country.

• India needs to spend US$200 billion (7-8% of GDP) on infrastructure annually and accelerate the flow

of private capital into infrastructure.

Correlation between investment in infrastructure and economic growth



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Key initiatives:

● National Investment and Infrastructure Fund (NIIF) to provide investment opportunities to

commercially viable projects.

● Credit Enhancement Fund for infrastructure projects for increasing the credit rating of bonds

floated by infrastructure companies is to be launched.

● New credit Rating System for infrastructure projects, based on Expected Loss approach, has

been launched to provide additional risk assessment mechanism for investors.

● Infrastructure investment trusts (InvITs) and Real Estate Investment Trusts(REITs) have been

formulated to pool investment in infrastructure.

1. Road Sector:

● Road construction in kms grew at 30 kms per day in 2018-19 compared to 12 kms per day in 2014-

15.

Challenges:

● Availability of funds for financing large projects.

● Lengthy processes in acquisition of land.

● Payment of compensation to the beneficiaries

● Environmental concerns, time and cost overruns due to delays.

● Procedural delays, lesser traffic growth than expected.

● Shortfall in funds for maintenance.

Key Initiatives:

● Central Road and Infrastructure Fund (CRIF) replaced the central road fund and now funds are to

be earmarked for various infrastructure sectors.

● Construction of Eastern Peripheral Expressway, Delhi-Meerut expressway and Dhola-Sadiya

Bridge has improved connectivity.

2. Railways Sector

Key Initiatives:

● Freight and passenger performance have improved over the year.



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● Rail Safety has improved with zero train collisions in 2018-

19.

● Mission Electrification for electrifying 100% of its Broad-Gauge network is undertaken.

● ‘Swachh Rail, Swacch Bharat’ mission focuses on cleanliness



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● Green Certification of Workshop and Production Units through Green Industries Certification

3. Telecom Sector

● Growth in the telecom sector in India remains strong over the last few years on the back of strong

consumer demand and supportive policies of the Government.

● Total telephone connections registered a growth of 26.84%

● Of all subscriptions, the wireless telephony now constitutes 98.17% whereas landline telephones

now stands at only 1.83%.

● The mobile industry has witnessed exponential growth over the last few years driven by

affordable tariffs, wider availability, roll out of Mobile Number Portability (MNP), expanding 3G

and 4G coverage, evolving consumption patterns and a conducive policy and regulatory

environment.

Key Initiatives:

● The Government has constituted ‘5G India 2020 Forum’ to articulate the Vision for 5G. ● FDI Reforms in the telecom sector to promote ease of doing business. ● 13-digit Machine to Machine (M2M) Numbering Plan for M2M communication: ● Digital Communications Commission to ensure effective implementation and monitoring of the

‘National Digital Communications Policy- 2018’.



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4. Power sector

● India improved its ranking in the Energy Transition Index published by the World Economic

Forum (76th position). ● Along with universal electrification, commendable progress has been made in generation and

transmission of electricity. ● More than 46% of power generation comes from the private sector.

Key Initiatives:

● The Pradhan Mantri Sahaj Bijli Har Ghar Yojana (SAUBHAGYA) launched in 2017 to achieve

universal household electrification by providing last mile connectivity and electricity connections

to all remaining un-electrified households in rural and all poor households in urban areas.



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5. Housing Sector

Key Initiatives:

● The Real Estate (Regulation and Development) Act, 2016 to ensure regulation of real estate

sector in transparent manner and to protect the interests of home buyers.

● Pradhan Mantri Awas Yojana (Urban) was launched in 2015 with the objective of providing

housing facilities to all the eligible families/beneficiaries by 2022.

● Smart Cities Mission (SCM) was launched in 2015 for a 5-year period with the objective of

promoting cities that provide core infrastructure and give a decent quality of life to its citizens



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● ‘Ease of Living’ Index for cities to enable data driven approach in urban planning and

management and promote healthy competition among cities.

● Municipal Performance Index (MPI), 2019, to examine the sectoral performance of

municipalities across a set of 5 verticals namely Service, Finance, Planning, Technology and

Governance.

● These Indices are linked to Sustainable Development Goals (SDGs) to track and achieve SDGs.



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● National Urban Innovation Hub (NUIH) will be the apex national level institution that will drive

the whole-of-system innovation through a Hub-and-Spoke network across states and UTs and for

delivering the capacity building and governance reforms.

6. Civil Aviation

● India’s scheduled domestic air transportation for passengers and goods has grown. ● Domestic passenger traffic in revenue passenger kilometres (RPK) recorded the fastest growth

in the world. ● The demand and supply trends in civil aviation shows that passenger demand is higher than the

seat supply

Key Initiatives:

● Under Ude Desh ka Aam Naagrik (UDAN) 719 routes have been awarded for regional

connectivity ● UDAN (International) Scheme has been launched recently for the benefit of international

connectivity is open to all cities.

● The first National Air Cargo Policy outline was released in 2019.

● The objectives are to leverage the Indian air cargo network to provide cargo transportation by air

at an affordable cost and connect every village to the national and global supply chains.



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7. Shipping

Key Initiatives:

● Expansion of Port Capacity with implementation of well-conceived infrastructure development

projects like Sagarmala, Project UNNNATI.

● To facilitate Ease of Doing Business- elimination of manual forms, accommodation for laboratories

to Participating Government Agencies, Direct Port Delivery, Installation of Container Scanners, E-

delivery orders, Radio Frequency Identification based Gate-automation System, etc.

● Focus on multimodal terminal (MMT) to promote inland waterways as it is cheap and

environment friendly.

● To enhance the access and establish alternative connectivity to the North East through Indo-

Bangladesh Protocol route, dredging works between Ashuganj and Zakiganj and Sirajganj and

Daikhawa in Bangladesh

8. Petroleum and Natural Gas

● The Government aims to “Reform, Perform and Transform” the energy sector of the country by

achieving self-sufficiency.

● Crude oil production during 2018-19 was lower compared to 2017-18.

● Natural gas production during 2018-19 was marginally higher compared to 2017-18.

● Refinery production during 2018-19 was higher compared to 2017-18.



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Key Initiatives:

● HydrocarbonExploration Licensing Policy (HELP) / Open Acreage Licensing Policy (OALP)

● Discovered Small Field (DSF) Policy

● Policy to Promote and Incentivize Enhanced Recovery Methods for Oil and Gas

● Policy framework for exploration and exploitation of Unconventional Hydrocarbons Coal Bed

Methane contracts and Nomination fields

● Extensions and Clarifications for early monetization of hydrocarbon and Coal Bed Methane

● Setting up of National Data Repository

● Appraisal of Unappraised areas in Sedimentary Basins

● Pradhan Mantri Ujjwala Yojana (PMUY) to provide LPG connections to eight crore women

belonging to the Below Poverty Line (BPL) families.



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Infrastructure Financing: Public Private Partnerships (PPPs)

● According to World Bank, India is ranked second among developing countries both by the

number of PPP Projects as well as the associated investments.

● Indian private participation in infrastructure program is supported by PPP models like

(i) Build-Operate-Transfer (BOT)- BOT (Toll) and BOT (Annuity)

(ii) Design-Build-Finance-Operate-Transfer

(iii) Rehabilitate - Operate - Transfer

(iv) Hybrid Annuity Model

(v) Toll-Operate-Transfer

Challenges

● To devise a comprehensive resolution/ settlement option for projects which are either stuck-up

mid-way or wherein the arbitral disputes/ claims have not been settled.

● The need is to establish an institutional mechanism to deal with time-bound resolution of

disputes in infrastructure sectors.

● Private developers have faced issues of leveraged balance sheets and aggressive bidding making it

difficult for them to mobilize resources for completion of projects.

Solution

● Government has adopted the Hybrid Annuity Mode to encourage private participation

● Government contributes 40% of the total project cost and the remaining 60% is paid as biannual

annuity after the completion of the project construction.

● The HAM model is considerably de-risked for the private concessionaires.

Way forward

● As an emerging economy, the scope for Industry 4.0 and Next generation infrastructure are

enormous.

● India needs adequate and timely investment in quality infrastructure through private investment

across the country with the collaboration of public sector.

● Along with physical infrastructure, provision of social infrastructure is also equally important.



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Practice Questions


1. Growth of IIP in India was lower in 2018-19 when compared to the previous year.

2. In spite of this growth of IIP in 2018-19 was positive.


a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 and 2


1. The overall net profit of operating CPSEs grew in 2018-19 .

2. CPSEs contribution to the total Central Exchequer also increased during this period.


a) 1 only

b) 2 only



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c) Both 1 and 2

d) Neither 1 and 2

3) Which of the following indicate a rise of investment in industry sector ?

1. Growth in Gross Capital Formation

2. Increase in Credit flow


a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 and 2

4) Consider the following statements about Ease of Doing Business Index

1. It is published by Asian Investment Bank as a part of its Ease of Doing Business Report

2. India ranks 77th in the recent index jumping 33 places, highest ever recorded


a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 and 2

5) Choose the correct pair

Scheme Sector

a) Sagarmala Airport capacity development

b) Bharatmala Port development

c) Saubhagya Household electrification

d) NABH Nirman Urban core infrastructure

6) Energy Transition Index is published

a) World Economic Forum

b) International Energy Agency

c) UN- Sustainable Development Network

d) Bureau of Energy Efficiency

Answers

1) C

2) A

3) C

4) D

5) C

6) B



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CHAPTER – 9

Services Sector

Introduction

● Services sector (excluding construction) has a share of 54.3% in India’s GVA and contributed more

than half of GVA growth in 2018-19.

● Services share in employment is 34% in 2017 which is significantly lesser that its share of 54 % in

GVA

● An important finding is that India’s services sector does not generate jobs in proportion to its share in

GVA. This contrasts with the international experience.

● India received 10.6 million foreign tourists in 2018-19.

Foreign exchange earnings from tourism in India stood at US$27.7 billion in 2018-19.

● Many of the high frequency indicators such as bank credit to services sector decelerated in 2018- 19.

● The IT-BPM industry grew and is estimated to have reached US$181 billion in 2018-19.

Services Sector Performance In India: An Overview

● Services sector growth moderated in 2018-19. Despite the recent growth moderation, services sector

growth continues to outperform agriculture and manufacturing sector growth.



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● The share of services is particularly high in Chandigarh and Delhi with over 80 % share while

Sikkim was at the bottom with 30 % share.

● In contrast, the services sector accounts for less than 40 % of the share of services in GSVA in states

such as Gujarat, Uttarakhand, Madhya Pradesh and Chhattisgarh.

● Even states with relatively low share of services, such as Haryana, Jharkhand, Odisha, Andhra

Pradesh and Uttarakhand, have witnessed strong services sector growth in recent years.



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Trade in Services Sector

● The rising services trade surplus has helped finance nearly 50% of India’s trade deficit as of 2017-

18.

● The service trade surplus is largely driven by Computer & ICT services, and to some extent, travel

services.



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India in World Commercial Services Exports and Imports

● India’s trade in commercial services, both in exports and imports, moderated in 2018 .

● In 2018, world trade in commercial services stagnated. India's growth rate decelerated but remains

above world growth rate.

● According to the WTO data, India is among the world’s top 10 exporters and importers of

commercial services

● India ranks eighth in exports and tenth in imports in 2017.

● India’s share in world’s commercial services exports has risen steadily over the past decade to reach

3.5 % in 2017.

● India remains one of the strongest performers among the major service-exporting countries.

● Government has taken many initiatives that included measures such as Start-up India, Insolvency and

Bankruptcy Code, National Intellectual Property Rights (IPR) policy, implementing GST regime and

improving the ease of doing business



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● These initiatives have helped increase India’s ranking in the World Bank’s Ease of Doing Business

Index from 100 in 2017 to 77 in 2018

● Digital India, e-visas, infrastructure status to Logistics, schemes for the housing sector etc., could

give a further fillip to the growth of services sector.

● The Government has implemented FDI reforms in a number of sectors, including defence,

construction development, insurance/pension/other financial services, asset reconstruction

companies, broadcasting, civil aviation, pharmaceuticals and trading etc.

● An investor-friendly FDI policy has been put in place under which up to 100 % FDI is permitted via

automatic route in most sectors, including single-brand retail trading, construction development and

regulated financial sector activity.

● In order to boost services exports, the Service Exports from India Scheme (SEIS) covers business

services, education services, health services, tourism and travel related services, transport services

etc.

● Government has also created a dedicated fund of 5,000 crore for financing sectoral initiatives under

the Champion Services Sector Scheme.

● Under this scheme, various domestic policy reforms critical to enhance the competitiveness of

services exports, including on data privacy/security and e-commerce, would be pursued through the

Ministries concerned.

FDI into Services Sector

● FDI equity inflows into the services sector accounted for more than 60 % of the total FDI equity

inflows into India.



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Services Sector Gross Value Added Versus Employment

● As per the UN National Accounts Statistics data, India ranked 7th in terms of GDP size and 9th in

terms of services sector size in 2017.

● India's rank has since risen to 6th in terms of GDP but the 2017 numbers have been used here for

purposes of comparison



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● India has the second fastest growing services sector after China, registering a growth of 7.9%.

● India also ranks second after the UK in terms of services share in exports, with the shares as high as

seen in developed countries, such as U.S.A, France and Spain.

● India ranks the second lowest after China in terms of services share in Gross Value Added (GVA)

and ranks the lowest in terms of services share in employment.

● In addition, compared to the experience of other countries, services share in India’s employment at

34 % is significantly lower than services share in GVA at 54 %.

● This divergence in the performance of the services sector in India has been witnessed as the sector

has not been able to generate jobs in proportion to its size.

● The share of services in employment is roughly the share of services GVA for other countries such

as the USA, China, Japan, Germany, UK, Brazil, Mexico in 2017.

● Services sector expansion in recent decades has been unable to generate proportionate employment,

especially in the formal sector.

● This also suggests that there lies immense potential for employment generation in the services sector

in the coming years in line with other countries.

Major Services: Sector-wise Performance and Some Recent Policies



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Tourism

● Tourism sector is a major engine of economic growth that contributes significantly in terms of GDP,

foreign exchange earnings and employment.

● As per the World Tourism Barometer of the United Nations World Tourism Organization,

International Tourist Arrivals (ITA) reached a total of 1.3 billion in 2017.

● The Foreign Tourist Arrivals (FTAs) in 2018-19 stood at 10.6 million. Foreign exchange earnings

(FEEs) from tourism stood at US$27.7 billion in 2018-19.



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● Outbound tourism increased in recent years. This was more than double the foreign tourist arrivals in

India.

● Growth in domestic tourist visits slowed down.

● Tamil Nadu , Uttar Pradesh, Karnataka , Andhra Pradesh and Maharashtra were the top 5 destination

States.

● Amongst centrally protected ticketed monuments, Taj Mahal, Agra was the most visited for domestic

visitors followed by Sun Temple, Konark and Red Fort, Delhi.

● The Ministry of Tourism launched the ‘National Mission on Pilgrimage Rejuvenation and Spiritual,

Heritage Augmentation Drive’ (PRASHAD) in January 2015 with the objective of pilgrimage

infrastructure at selected important pilgrimage destinations.

● Under the Swadesh Darshan Scheme, the Ministry of Tourism has identified 15 thematic circuits for

development namely: Himalayan Circuit, North East Circuit etc.

Health and Medical Tourism in India

● Government has taken various Policy initiatives and measures to promote Health and Medical

Tourism in India along with the Public Private Initiatives in the Tourism sector.

● India has emerged as a major Medical Tourism destination.

● The Ministry of Tourism has recognized Medical and Wellness Tourism including Ayurveda as a

Niche product in order to overcome the aspect of ‘seasonality’ and to promote India as a 365 days

destination and attract tourists with specific interests.

Indian Healthcare Industry

● The market size of medical tourism in India is estimated at US$ 3 billion in 2017. The value of

medical tourism is forecasted to reach US$ 9 billion by 2020.



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● India currently has around 18 % of the global medical tourism market.

● In an estimate, it can be a US$ 9 billion-worth medical tourism destination by having 20% global

market share by 2020.

● Government offers financial support as Marketing Development Assistance, for Publicity and for

organising Wellness and Medical Tourism Promotion shows.

● Medical Tourism is regularly highlighted for promotion as part of the Incredible India Campaign in

the print, electronic, online and outdoor media in India and abroad as well as at the various travel

trade exhibitions overseas.

● ‘Medical Visa’ has been introduced, which can be given for specific purpose to foreign travellers

coming to India for medical treatment.

● ‘E- Medical Visa’ has also been introduced for 166 countries.

Hospitality Sector

This sector has also shown marked rise.

Some of the issues relating to tourism sector are briefly stated below:

● The co-ordination mechanism of various like-minded Ministries and Stakeholders to resolve issues

for promotion of tourism in the country needs to be strengthened.

● State/UT Government need sensitization about tourism as a major driver of employment and poverty

alleviation.

● Budgetary allocation for development of tourism infrastructure should be increased.



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● Land should be made available for hotels and reserve land for hotels in all new townships under

planning.

● Fast-track clearances for hotel projects.

● Increase skill development efforts to train more persons.

● Make the Taxation regime on Hospitality Industry globally competitive.

IT –BPM Services

● The Indian IT-BPM industry is estimated to have reached US$181 billion in 2018.

● E-commerce market is estimated at US$43 billion for FY 2018-19, at a growth rate of 12%.

● The IT services constitute the largest segment with a share of around 52 %, followed by BPM with

share of around 20%. Software products and engineering services together accounted for around 19

% share whereas hardware accounts for 10%.

● The Indian Information Technology / Information Technology enabled Services (IT/ ITeS) industry

has contributed immensely in positioning the country as a preferred investment destination amongst

global investors and creating huge job opportunities in India, as well as in the USA, Europe and

other parts of the world.

● USA, UK and EU account for 90 % of the total IT-ITeS exports.

● However, there are new challenges surfacing in these traditional geographies.

● Demand from APAC, Latin America and Middle East Asia is growing and new opportunities are

emerging for expanding in continental Europe, Japan, China and Africa.



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SUMMARY NOTES


● Efforts are being made to further strengthen existing markets, and simultaneously diversify and

increase presence in the new and emerging markets in Europe (besides UK which is a mature

market), Africa, South America, Israel, Australia, China and Japan through market development and

industry repositioning initiative.

● India’s digital economy has received a tremendous boost through various Government initiatives.

● These initiatives coupled with new and emerging technologies are enhancing the digital economy of

the country and are creating IT and electronics led new opportunities for revenue and job creation in

both traditional as well as new sectors of the economy such as transport, health, power, agriculture,

and tourism.

● The National Policy on Electronics 2019 (NPE 2019) has been notified on February 2019 by the

Ministry of Electronics and Information Technology (MeitY)

Media & Entertainment Services

● The Media and Entertainment sector comprises mainly of television, print, radio, films, music, digital

advertising, over the top (OTT-film and television content delivered over internet), visual effects

(VFX) and gaming.

● Technology has rapidly changed the profile of this sector especially in the area of content and

carriage.

● Audio–visual services have been identified by the Government (2018) as one among the 12

Champion Service sectors for focused development so as to reap its full potential.

Private Television Sector

● India is the second largest pay-TV market in the world after China. TV penetration reached 66 % in

the country.



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SUMMARY NOTES


● The growth drivers for TV sector include digitisation of cable services, higher uptake of High

Definition channels, growth of OTT platform aided by rising smartphone penetration and high- speed

data adoption.

● In the distribution sector, Cable TV still dominates the distribution of TV channels in the country

through MSOs and LCOs. DTH sector is rapidly becoming a key player in the distribution sector.

Public Service TV Broadcasting

● Prasar Bharati is the country’s public service broadcaster with All India Radio and Doordarshan as

its two constituents.

● It came into existence in 1997 with a mandate to organise and conduct public broadcasting services

to inform, educate and entertain the public and to ensure a balanced development of broadcasting in

the country.

● Doordarshan has the world’s largest terrestrial broadcast facility with over 1400 terrestrial TV

transmitters and also provides free to air DTH services.

Print Media

● Print accounted for the second largest share of the Indian M&E industry.

● Print Industry is declining all over the world primarily due to huge in roads of internet and TV

channels in media industry. India is also no exception to this phenomenon.

● The number of registered publications in the country stood at 1,18,239.

● However, growth of circulation of publications contracted in 2017-18 over the previous year.

● The total circulation of publications in the country during 2017-18 was 43 crore of which Hindi,

English and Urdu publications were the top three.

● Hindi dailies continue to be the largest in terms of circulation followed by English and Urdu.



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Films

● India is the world’s biggest producer of films with 1,776 domestic film releases in 2018.

● The highest number of films were released in Kannada (243) followed by Hindi (238) and Telugu

(237). Despite producing the highest number of movies in the world, India has less than 25 % of the

number of screens as compared to China or USA.

● India’s screens per million of population is also the very low, primarily due to lack of cinema

penetration in tier-II, tier-III and tier-IV markets in India. This presents a large untapped potential for

the Indian film segment.

● In the Overseas Theatre Performances, the highest number of film exports were made to the Gulf

region (50) followed by Australia (48) and USA/Canada (46).

● In terms of value, however, China became the largest international market for Indian film content.



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SUMMARY NOTES


Digital Media

● The various segments of digital media include- online video viewing, audios, news through OTT

platforms and social media etc.

● The total number of mobile subscribers stood at 1.17 billion in 2018.

● Smartphone users increased by 39 % to reach 340 million in 2018.

● Average data consumption doubled from 4 GB to 8 GB per month between 2017 and 2018.

● Moreover, digital media market grew to reach 169 billion in 2018.

● Internet subscribers grew to 570 million in November 2018, driven by rural internet subscriber

growth of 49 %.



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SUMMARY NOTES


● Given that there are around 4 billion internet users in the world, one in eight is Indian.

● Entertainment was the largest category in mobile content consumption for Indian users, followed by

sports and lifestyle. Social Media penetration reached 17 % in 2018. The most active social media

platforms were YouTube, Facebook, WhatsApp and Instagram.



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SUMMARY NOTES


Radio Sector

● All India Radio (AIR) broadcasts cover nearly 92 % of the geographical area and 99.2% of the

population of the country.

● The opening of private FM radio since 1999 has not only resulted in providing good quality of

reception to radio listeners, but also helped encouraging local talent and generating employment to

large numbers of people in various cities.

● Community Radio Stations are set up with the involvement of various educational institutions and

civil society organizations. At present, 250 Community Radio stations have been operationalized. It

is proposed to establish at least one CRS in each district with priority to coastal districts and

aspirational districts.

Emerging Media

● As compared to the traditional media, it is the non-linear media comprising of digital media

including OTT, animation & VFX, live events, online gaming, etc. that has been witnessing double

digit growth in the media & entertainment sector in recent years.

● The spread of broadband connectivity fall in data prices, demand for regional language content have

triggered the growth of digital media.

● The Animation, VFX, gaming and comics sector in India is also a thriving business with even

Hollywood movies being outsourced to India for work related to post-production which includes

video editing, visual effects, animation, 2D-3D conversion, etc.

● It is one of the sunrise sectors for India and given the rapid expansion of the sector the requirement

of skilled professionals is also immense.



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Policy initiatives

In view of increasing piracy of films by unauthorized recording of films in cinema halls, a Bill has

been introduced in the Rajya Sabha in February 2019 to amend the Indian Cinematograph Act 1952.

Audio–visual service has been identified by the Government as one among the 12 Champion Service

sectors identified for focused development so as to reap its full potential.

● Government of India is in the process of setting up National Centre of Excellence (NCOE) for

Animation, Visual Effects, Gaming and Comics.

● Government of India has decided to establish a Film and Television Institute in Arunachal Pradesh.

Space Services

● Over the last three decades, space technology has matured from providing simple mapping

applications to development of complex models, decision support and early warning systems,

incorporating space and derived inputs.

● Satellite launch services and satellite database mapping and Geospatial services are areas in which

India is making a mark and has huge potential for the future.

● India became the sixth nation to develop this highly coveted complex cryogenic rocket propulsion

technology and also paved the way for the development of a high thrust Cryogenic engine & stage

for the next generation launch vehicle i.e. GSLV Mk-III.

Bhuvan Services

● ISRO’s Bhuvan Geo-portal provides multi sensor, multi-platform and multi temporal Satellite

Imagery, thematic maps and satellite data-derived information related to Earth Observation &

Disaster Management Support.

Mapping and Geospatial Services

● Satellite data are used to estimate crop acreage in season forecasting of production for 8 major crops

in the country viz. wheat, rice (kharif & rabi), mustard, rabi sorghum, jute, winter potato, sugarcane,

cotton in the country.

● Mahalanobis National Crop Forecast Centre under Ministry of Agriculture & Farmers Welfare

regularly generates crop forecasts



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CHAPTER- 10

Social Infrastructure, Employment and Human Development

Introduction

● It has also been estimated that demographic advantage in India is available for five decades from

2005-06 to 2055-56. It is longer than any other country in the world.

● This demographic advantage can be reaped only if education, skilling and employment opportunities

are provided to the young population.

Human Development Index

● India’s HDI (Human Development Index) has improved significantly over the years between 1990

and

201

● But India’s position is still lowest among Asian and developing economies.

● Region-wise trend of HDI scores suggests that most Southern and Northern States have performed

much better as compared to their Eastern counterparts.

Sustainable Development Goals

● SDG’s are a collection of 17 global goals and 169 targets set to be achieved by 2030, aimed at

addressing global challenges.

● To measure India’s performance in SDG’s, NITI Aayog has developed the SDG India Index for all

States and UTs.

● Based on this index, States are classified into four categories, for each of the SDGs



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a. Achiever – when SDG India Index score is equal to 100.

b. Front Runner – when SDG India Index score is less than 100 but greater than or equal to 65.

c. Performer – when SDG India Index score is less than 65 but greater than or equal to 50.

d. Aspirant – when SDG India Index score is less than 50.



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● The underlying dimensions of SDG targets are closely related to education and health aspects as

evident in the positive correlation between HDI and SDG rankings of Indian States.

● Hence, it is imperative that the government policies give necessary focus on investments in

education and health to achieve equitable and inclusive development in the country.

Gender Issues

● World is aspiring to achieve SDG 5 by 2030 which is associated with ‘achieving gender equality’.



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● Role of women is critical not only across agriculture and industrial sectors but also in governance,

education and health services.

● Government of India has initiated following programmes to mainstream women and make women

active agents of change in the society,

a) Beti Bachao, Beti Padhao (BBBP)

b) Ujjwala Scheme

c) Poshan Abhiyaan

d) Pradhan Mantri Matra Vandana Yojana

Financial Inclusion and level of household autonomy of women

● Financial Inclusion is considered as an essential tool for empowerment of women as it enhances their

self-confidence and enables financial decision-making to a certain extent.

● At all India level, the proportion of women having a bank or savings account that they themselves

use has increased from 15.5% in 2005-06 to 53% in 2015-16.

● As per NFHS-4, participation of currently married women in household decision making has

increased from 76.5% in 2005-06 to 84% in 2015-16 at all India level.



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● States like Chhattisgarh, Goa, Himachal Pradesh, Kerala, West Bengal and North Eastern States are

front runners in terms of women’s participation in household decision making compared to other

States.

Gender Budgeting

● It is a tool for gender mainstreaming by using the Budget as an entry point to apply a gender lens to

the entire policy process.

● Gender budgeting was referred for the first time by the then Finance Minister of India in his budget

speech in 2001.

● Gender budgeting is undertaken through several institutional mechanisms such as Gender Budget

Statement, Gender Budget Cells, as well as various schemes/programmes for women and girls.

Trends in Social Sector Expenditure

● Public investment in social infrastructure has a critical role in providing access to social services for

the people, especially the marginal and vulnerable sections of the society.

● Expenditure on social services by the Centre and States as a proportion of GDP has registered an

increase in different proportions across all the sectors.

● Education sector registered GDP increase from 2.8% in 2014-15 to 3% in 2018-19.

● Share of expenditure on social services out of total budgetary expenditure increased from 24.9% in

2013-14 to 26% in 2018-19.



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→ Social services include, education, sports, art and culture; medical and public health, family welfare;

water supply and sanitation; housing; urban development; welfare of SCs, STs and OBCs, labour and labour

welfare; social security and welfare, nutrition, relief on account of natural calamities etc.

→ Expenditure on ‘Education’ pertains to expenditure on ‘Education, Sports, Arts and Culture’



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Education for all

● SDG 4 on education requires ensuring equitable, inclusive and quality education along with

promotion of lifelong learning opportunities for all by 2030.

Status of Education in India

● As per Educational Statistics at a Glance (ESAG), 2018, the thrust on providing primary education

has yielded results across social categories and gender in Gross Enrolment Rate (GER).



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● Significant progress has been made in respect of female participation up-to secondary level and GER

for girls has exceeded that of boys.

● However, girls’ enrolment rate is lower than that of boys at the higher education level.

● Drop-out rates are very high for boys at the secondary school level. Reasons for male students

dropping out are economic activities, lack of interest in education and financial constraints.

● Pupil Teacher Ratio (PTR) at national level for primary schools is 23, 17 for upper primary, 27 for

secondary and 37 for senior secondary schools.

Gender Parity Index (GPI) based on Gross Enrolment Ratio (GER)

● GPI based on GER indicates increasing trend of female participation at all levels.

● At the higher education level the GPI is low (0.92 in 2015-16 for higher education level and for all

other levels it was above 1)



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● Although, enrolment of girls is higher than that of boys in government schools, the pattern gets

reversed in private schools.

Learning Outcomes: Improving the quality of education

● As per Annual Status of Education Report (ASER, 2018), there is a gradual improvement in both

basic literacy and numeracy for Class III students.

● However, still only a quarter of them are at grade level (ability to read and do basic operations like

subtraction of Class II level).

● Report also shows that 1 out of 4 children leaving Class VIII are without basic reading skills (ability

to read at least at Class II level).

● Rules of the RTE Act were amended in February 2017 to include the class wise, subject wise

Learning Outcomes till Class VIII for the first time.



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National Achievement Survey

● National Achievement Survey (NAS) which was earlier based on textbook content, has been made a

competency-based evaluation from 2017.

● The NAS, 2017 was one of the world’s largest sample surveys of student learning achievement.

● District wise report cards, generated under National Achievement Survey, show the learning levels

of students in every district against the expected learning outcomes of a particular grade.

Shortfall of teachers

● Shortage of teachers is a perennial problem with 9.08 lakh vacancies of teachers at elementary level

in government schools as on 31st March 2016.

● Performance Grading Index, 2017-18 states that shortage of teachers and principals and

administrative staff, lack of regular supervision and inspection, inadequate training of the teachers,

timely availability of finances are some of the factors plaguing the education system in the country.

Skill Development

● According to NSSO Report 2011-12, only 2.3% of the total workforce in India had formal sector

skill training.

● Government has announced many schemes to improve the skill development in the country.



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Bridging the disconnect in the Skilling Ecosystem

● Government initiatives in the skilling ecosystem require a more coordinated and concerted efforts

between various Ministries and State governments for improving quality, relevance, quantity,

aspirations, mobility and financing of skill development.

● Some recommendations towards improving the skill development programmes are stated below:

a) Proper pre-screening on the candidates should be done and ensure that only eligible

candidates are enrolled for the programme.

b) Stronger facilitation support to avail MUDRA loan should be provided to PMKVY certified

candidates.

c) Skill Voucher can be introduced as a financing instrument given to a beneficiary that enables

them to sign up for vocational education course at any accredited training institute.

d) Industry should be incentivized to set up training institutions in PPP mode. Local Industry

must be involved for curriculum development, training modules, provision of equipment,

training of trainers, etc.

e) Personnel of Railways and other paramilitary forces could be used for skill training or

lending institutional support in imparting training in hilly, inaccessible and difficult terrain.



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Employment Scenario

● As per Periodic Labour Force Survey (PLFS) estimates, Labour Force Participation Rate (LFPR) in

India has declined to 36.9% in 2017-18 from 39.5% in 2011-12.

● In rural areas, it has declined by 3.6 % while it has declined by 0.1 % in urban areas.

● The Worker Population Ratio (WPR) has also declined in both areas.

● Unemployment rate (UR) in India stood at 6.1% with 5.3% in rural areas and 7.8% in urban areas as

per usual status.

● Proportion of urban youth who received formal vocational training has improved to 4.4% in 2017-18.



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● PLFS found on average, a male employee earned nearly 1.2-1.3 times the earnings of female regular

salaried worker in 2018.

● Net employment generation in the formal sector was higher at 8.15 lakh in March 2019 against 4.87

lakh in February 2018. It reflects a positive trend in terms of employment in the formal sector.

Health for All

● Healthy productive population is an enabler for sustainable development and hence it is critical to

improve public health delivery, reduce health inequities and ensure affordable health care for all.

Status of Health system

● Maternal Mortality Ratio (MMR) of India has declined to 130 per lakh live births in 2014-16.

● MMR in India has declined by 77% as compared to 44% decline in global average.

● As per the latest Sample Registration System, 2016 report, the Under Five Mortality Rate in India is

39 per 1000 live births, Infant Mortality Rate is 34 per 1000 live births and Neonatal Mortality Rate

is 24 per 1000 live births.

● Under Five Mortality Rate has declined at a faster pace in the period 2008-2016.



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Expenditure on health

● As per the National Health Accounts Estimates during 2013-14 to 2015-16, there is an encouraging

trend of decreasing Out of Pocket Expenditure (OOPE) and an increase in public health expenditure

out of Total Health Expenditure (THE).

● OOPE still remains the major component of healthcare expenditure.



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● Public health expenditure of Centre, States and Local Bodies, as a % of Total Health Expenditure

(THE) increased from 22.5% in 2004-05 to 30.6% in 2015-16.

● Government has taken several steps to reduce Out of Pocket Expenditure (OOPE) and burden of

diseases in the country. E.g. Ayushman Bharat, Free Drugs and Diagnostics Service etc.



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● The potential of AYUSH in reducing health expenses is immense. There are several scalable projects

in the areas of infertility treatments, NCDs etc. which can be adopted across India by co-locating

AYUSH healthcare services under single roof so that people are free to choose what is appropriate

for them, thus making healthcare more accessible,accountable, affordable and customised.



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Health Infrastructure in Rural Areas

● Health infrastructure is an important indicator of the quality of health care delivery systems.

● Indian Public Health Standards(IPHS) are a set of uniform standards envisaged to improve the

quality of health care delivery in the country.



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Human Resource in health sector

● There exists shortfall across all cadres in the posts of doctors and specialists.

● There are a large number of Primary Health Centres (PHCs) which are functioning with one doctor

or without doctor.

● The States where large number of PHCs are functioning with ‘one doctor and without doctor’

indicate relatively higher level of rural IMR and MMR compared to other States.

● ‘Kayakalp’ initiative rewards public health facilities to maintain cleanliness, hygiene and infection

control in the facilities.



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Rural Development

Rural Connectivity

● Quality of life of people can be substantially improved by improving connectivity which will

enhance their access to medical services, schools, markets and many other social services.

● Pradhan Mantri Gram Sadak Yojana aims to provide funds to States to construct rural roads to

connect villages by all-weather roads.

● Since 2014, around 190,000 km of rural roads has been constructed. The rate of rural road

construction, i.e. kms of rural roads constructed per day, has increased.

● Some of the better performing states are Maharashtra, Assam, Uttar Pradesh & Odisha.



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Rural housing (PMAY-G): Shelter for the Poorest of the Poor

● During 2014-2019, 1.54 crore houses were completed including those carried over from Indira

Awaas Yojana.

● The average number of days taken for completion of a house under first year of PMAY in 2016-17

was 221 and around 114 days during the second year of PMAY in 2017-18.

Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)

● MGNREGS has been instrumental and a guiding factor for tackling rural poverty and unemployment

by providing employment to the rural poor and unskilled people.

● It has generated 267.96 crore person days during 2018-19.

● Out of the total person-days, person-days for women was 54.6%, SC was 20.7% and ST was 17.4%.

It was well-above targets.

● Around 85,000 km of road length was constructed under MGNREGA during 2018-19.



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Way Forward

● India's development trajectory is critically intertwined with the investments in social infrastructure.

● Scaling up development programmes for improving connectivity, providing housing, and bridging

gender gaps in socio-economic indicators is of paramount importance for sustainable development.

● India's march towards achieving SDGs is firmly anchored in investing in human capital and inclusive

growth.



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