Crack Grade B 1

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Q1. What are various macroeconomic and growth challenges in the
Indian economy? Is Indian economy resilient enough to sustain and
absorb these challenges?
Various domestic as well as global issues pose a formidable challenge to the growth of
Indian economy. However, with several groundbreaking reforms, robust regulatory
architecture, and strong corporate and banking balance sheets, Indian economy is
resilient enough to surpass these obstacles.

Major Macroeconomic and Growth Challenges

COVID-19 Pandemic

The impact of the pandemic on India was seen in a significant GDP contraction in FY21.
The following year, FY22, the Indian economy started to recover despite the Omicron
wave of January 2022. This third wave did not affect economic activity in India as much
as the previous waves of the pandemic did since its outbreak in January 2020.

Russia-Ukraine Conflict: High Inflation amidst Supply Chain Disruption

The conflict in Europe necessitated a revision in expectations for economic growth and
inflation in FY23. The country’s retail inflation had crept above the RBI’s tolerance range
in January 2022. It remained above the target range for ten months before returning to
below the upper end of the target range of 6 per cent in November 2022.

During those ten months, rising international commodity prices contributed to India’s
retail inflation as also local weather conditions like excessive heat and unseasonal rains,
which kept food prices high.

Monetary Policy Tightening

The government cut excise and customs duties and restricted exports to restrain
inflation while the RBI, like other central banks, raised the repo rates and rolled back
excess liquidity.

Rupee Depreciation and Widening Current Account Deficit (CAD)

With monetary tightening, the US dollar has appreciated against several currencies,
including the rupee. However, the rupee has been one of the better-performing
currencies worldwide, but the modest depreciation it underwent may have added to the
domestic inflationary pressures besides widening the CAD.

Weak Outlook on Global Trade

As per United Nations Conference on Trade and Development (UNCTAD) latest global
trade update, global trade growth turned negative during the H2:2022, and geopolitical
frictions, persisting inflationary pressures, and subdued demand are expected to
suppress global trade further in 2023. This is likely to affect many countries, including
India, with the prospects of sluggish exports continuing into FY24, compared to the
promise shown at the beginning of the current year.

Is Indian economy resilient enough to absorb these economic shocks?

Monetary tightening by the RBI, the widening of the CAD, and the plateauing growth of
exports have essentially been the outcome of geopolitical strife in Europe. As these
developments posed downside risks to the growth of the Indian economy in FY23, many
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agencies worldwide have been revising their growth forecast of the Indian economy
downwards.

IMF estimates India to be one of the top two fast-growing significant economies in 2022.
Despite strong global headwinds and tighter domestic monetary policy, if India is still
expected to grow between 6.5 and 7.0 per cent, and that too without the advantage of a
base effect, it is a reflection of India’s underlying economic resilience; of its ability to
recoup, renew and re-energise the growth drivers of the economy.
India’s economic resilience can be seen in the domestic stimulus to growth seamlessly
replacing the external stimuli. The growth of exports may have moderated in the second
half of FY23. However, their surge in FY22 and the first half of FY23 induced a shift in
the gears of the production processes from mild acceleration to cruise mode.
Manufacturing and investment activities consequently gained traction. By the time the
growth of exports moderated, the rebound in domestic consumption had sufficiently
matured to take forward the growth of India’s economy.
Private Consumption as a percentage of GDP stood at 58.4 per cent in Q2 of FY23, the
highest among the second quarters of all the years since 2013-14, supported by a
rebound in contact-intensive services such as trade, hotel and transport, which
registered sequential growth of 16 per cent in real terms in Q2 of FY23 compared to the
previous quarter.

The near-universal coverage of vaccination in India overseen by the government was

the single most important reason that brought people out to the streets to re-experience
the “bazaar” as the marketplace was rapidly populated with service providers returning
to resume business.

If, on the one hand, the universal vaccination coverage saved lives, on the other, it
served as a health stimulant to raise consumer sentiments and thus the recovery and
growth of the economy.

The “release of pent-up demand” was reflected in the housing market too. Demand for
housing loans picked up. Consequently, housing inventories have declined, prices are
firming up, and construction of new dwellings is picking up pace. This has stimulated
innumerable backward and forward linkages that the construction sector is known to
carry. The universalisation of vaccination coverage also has a significant role in lifting
the housing market as, in its absence, the migrant workforce could not have returned to
construct new dwellings.

Apart from housing, construction activity, in general, has significantly risen in FY23
as the much-enlarged capital budget (Capex) of the central government and its
public sector enterprises is rapidly being deployed. Going by the Capex multiplier
estimated for the country, the economic output of the country is set to increase by at
least four times the amount of Capex. Like the central government, states also have a
larger capital budget supported by the centre’s grant-in-aid for capital works and an
interest-free loan repayable over 50 years.

A capex thrust in the last two budgets of the Government of India was not an isolated
initiative meant only to address the infrastructure gaps in the country. It was part of a
strategic package aimed at crowding-in private investment into an economic
landscape broadened by the vacation of non-strategic PSEs (disinvestment) and idling
public sector assets.

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While an increase in export demand, rebound in consumption, and public capex have
contributed to a recovery in the investment/manufacturing activities of the corporates,
their stronger balance sheets have also played a big part equal measure to realising
their spending plans. As per the data on non-financial debt from the Bank for
International Settlements, in the course of the last decade, Indian non-financial private
sector debt and non-financial corporate debt as a share of GDP declined by nearly thirty
percentage points. This limited the increase in interest costs, which, together with
possible savings on overheads during lockdowns, contributed to the recent fortification
of corporate balance sheets by higher profits.

In FY22, the surge in exports also contributed to increasing profits in the corporate
world. After-tax profits were also boosted by the lower taxes announced in 2019. Better
profitability helped corporates pay down debt. Consequently, not only do corporates have
more scope to borrow now, but their improved financial health has also reassured their
prospective lenders to expand their credit portfolios.

The banking sector in India has responded in equal measure to the demand for credit.
The Year-on-Year growth in credit since the January-March quarter of 2022 has moved
into double-digits and is rising across most sectors. The credit growth to the MSME
sector has been remarkably high, over 30.5 per cent, on average, during Jan-Nov 2022,
supported by the extended ECLGS of the central government.
The finances of the public sector banks have seen a significant turnaround, with
profits being booked at regular intervals and their Non-Performing Assets (NPAs) being
fast-tracked for quicker resolution/liquidation by the Insolvency and Bankruptcy Board
of India (IBBI). At the same time, the government has been providing adequate budgetary
support for keeping the PSBs well-capitalized, ensuring that their Capital Risk-Weighted
Adjusted Ratio (CRAR) remains comfortably above the threshold levels of adequacy.

The successful macro stress tests performed on the banking sector further testify to
its financial strength. It does help that the banking sector has negligible cross-border
claims in times when currency risk is high. Nonetheless, financial strength has helped
banks make up for lower debt financing provided by corporate bonds and External
Commercial Borrowings (ECBs) so far in FY23. Rising yields on corporate bonds and
higher interest/hedging costs on ECBs have made these instruments less attractive than
the previous year.

To conclude, despite numerous macroeconomic and growth challenges, agencies

worldwide continue to project India as the fastest-growing major economy at 6.5-7.0 per
cent in FY23. These optimistic growth forecasts stem in part from the resilience of the
Indian economy seen in the rebound of private consumption seamlessly replacing the
export stimuli as the leading driver of growth.

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Q2. List all the major economic reforms undertaken in the last decade.
India’s last decade is an important period in its economic history. The economy
underwent a number of wide-ranging structural and governance reforms that
strengthened the economy’s fundamentals by enhancing its overall efficiency.

With an underlying emphasis on improving the ease of living and doing business, the
reforms were based on the broad principles of creating public goods, adopting trust-
based governance, co-partnering with the private sector for development, and improving
agricultural productivity.

Major Economic Reforms: Last Decade

• Creating public goods to enhance opportunities, efficiencies and ease of

living

o Core Infrastructure

▪ The dedicated programs for road connectivity (Bharatmala), port

infrastructure (Sagarmala), electrification, railways upgradation, and
operationalising new airports/ air routes (UDAN) have significantly
improved the physical infrastructure in the last few years.
▪ With the National Infrastructure Pipeline (NIP) in 2019 and the
National Monetization Pipeline in 2021, a strong baseline for
infrastructure creation and development has been put in place,
providing a multitude of opportunities for foreign investment and
engagement.

o Digital Infrastructure

▪ Based on the pillars of a digital identity Aadhar, linking bank

accounts with PM-Jan Dhan Yojana, and the penetration of mobile
phones (JAM Trinity), the country has witnessed significant progress
in financial inclusion in recent years.
▪ Numerous digital public goods such as digital verification (e-KYC),
digital signature, digital repositories (Digilocker), and digital payments
(UPI) have supported financial inclusion by improving access to formal
financial services and reducing transaction costs.
▪ Some of the recently introduced digital initiatives, such as the Open
Network for Digital Commerce (ONDC) and Account Aggregator
framework, will open up further avenues for e-commerce market
access and credit availability for smaller businesses and strengthen
the expected economic growth in the medium term.
▪ The creation of digital identities such as Aadhar, registration of
unorganised workers on the e-SHRAM portal, street vendors on
SVANidhi, taxpaying firms on GSTN, and MSMEs on the Udyam
portal, has played a significant role in the inclusion of these groups
under the formal economic net.

• Trust Based Governance

o Regulations

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▪ Simplification of regulatory frameworks through reforms such as the
Insolvency and Bankruptcy Code (IBC) and the Real Estate
(Regulation and Development) Act (RERA) have enhanced the ease of
doing business.
▪ The other regulatory reform, Real Estate (Regulation and
Development) Act (RERA), is creating a culture of transparent
transactions in the real estate sector. The Real Estate Regulatory
Authorities across the country have disposed off more than 1.06 lakh
complaints. With 99262 projects and 71514 agents already registered
under RERA, the Act incentivises more investments into the sector.

o Corporate Reforms

▪ Another significant reform to enhance doing business has been the

decriminalisation of minor economic offences under the Companies
Act of 2013. By introducing civil liabilities for dealing with simple
defaults that do not involve fraud or where the nature of the lapse is
purely procedural, the government has demonstrated its intent to
promote ease of doing business for domestic and global investors.
▪ After the reform, more than 1400 default cases have been decided
without resorting to the court. Also, more than 4,00,000 companies
have willingly rectified past defaults to avoid penalties under the
Companies Act.

o Taxation Reforms

▪ Tax policy reforms such as adopting a unified GST, reducing corporate

tax rates, exemption of sovereign wealth funds and pension funds
from taxes, and removing the Dividend Distribution tax have reduced
the tax burden on individuals and businesses; and have removed the
distortionary incentives from the economy.
▪ The introduction of technology-backed tax governance reforms for
simplifying tax processes, enhancing compliance, and improving fraud
detection systems.

• Promoting the private sector as a co-partner in the development

o Disinvestment

▪ The government’s disinvestment policy has been revived in the last

eight years with stake sales and the successful listing of PSEs on the
stock market. During FY15 to FY23 (as of 18 January 2023), an
amount of about ₹4.07 lakh crore has been realised as proceeds from
disinvestment through 154 transactions using various modes/
instruments.
▪ The privatisation of Air India was particularly significant for re-
igniting the privatisation drive.
▪ The New Public Sector Enterprise Policy for Aatmanirbhar Bharat has
thus been introduced to realise higher efficiency gains by minimising
the presence of the government in the PSEs to only a few strategic
sectors.

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o Production Incentive Schemes

▪ Significant initiatives have been introduced under Aatmanirbhar

Bharat and Make in India programmes to enhance India’s
manufacturing capabilities and exports across the industries.
▪ Sector specific Production Linked incentives (PLI) have been
introduced in the aftermath of the pandemic to incentivise domestic
and foreign investments and to develop global Champions in the
manufacturing industry.
▪ Production incentives under Aatmanirbhar Bharat also incentivise
foreign investments for domestic production.

o Foreign Direct Investment

▪ The last eight years have seen further liberalisation of the policy
towards foreign investors, with most sectors now open for 100%
Foreign Direct Investment (FDI) under the automatic route.
▪ This has resulted in a visible structural shift in the gross FDI flows to
India during the last decade. India’s gross FDI has increased from an
average of 2.2 per cent of GDP during FY05-FY14 to 2.6 per cent in
FY15-FY22. The highest-ever annual gross FDI inflow of USD 84.8
billion was recorded in FY22.

o Logistics

▪ The National Logistics Policy (2022) has been launched to create an

overarching logistics ecosystem for lowering the cost of logistics and
bringing it to par with other developed countries.
▪ Moreover, opening the strategic sectors, such as defence, mining and
space, for the private sector has enhanced the business opportunities
in the economy.

o MSMEs

▪ Support measures for MSMEs during the pandemic in the form of the
Emergency Credit Line Guarantee Scheme (ECLGS) and revision in
the definition of MSMEs under the ambit of Aatmanirbhar Bharat
helped them face the crisis shock.
▪ Further measures, such as the introduction of TReDS to address the
delayed payments for MSMEs, the inclusion of Retail and Wholesale
trades as MSMEs, and the extension of non-tax benefits for three
years in case of an upward change in the status of MSMEs, have
created a resilient support system for the MSME sector to grow.
▪ The MSMEs have also benefitted from access to digital platforms for
their marketing needs and easy payments. With the Open Network for
Digital Commerce creating opportunities for MSMEs to access e-
commerce technology and diversify their target markets, this trend
will likely strengthen further.
▪ Moreover, onboarding GSTN as a Financial information provider on
the Account aggregator platform will open up avenues for access to
credit for MSMEs.

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• Enhancing the productivity in Agriculture

o Policies such as Soil Health Cards, the Micro irrigation Fund, and organic
and natural farming have helped the farmers optimise resource use and
reduce the cultivation cost.

o The promotion of Farmer Producer Organisations (FPOs) and the

National Agriculture Market (e-NAM) extension Platform have empowered
farmers, enhanced their resources, and enabled them to get good returns.

o Agri Infrastructure Fund (AIF) has supported the creation of various

agriculture infrastructures. Kisan Rail exclusively caters to the movement of
perishable Agri Horti commodities.

o Cluster Development Programme (CDP) has promoted integrated and

market-led development for horticulture clusters. Support for creating a
Start-up ecosystem in agriculture and allied sectors is also being provided to
the farmers.
The Indian economy is well placed to grow faster in the coming decade. With improved
and healthier balance sheets of the banking, non-banking and corporate sectors, a fresh
credit cycle has already begun, evident from the double-digit growth in bank credit over
the past months.
Additionally, the economy has started benefiting from the efficiency gains resulting from
greater formalisation, higher financial inclusion, and economic opportunities created by
digital technology-based economic reforms. Thus, India’s growth outlook seems better
than in the pre-pandemic years, and the Indian economy is prepared to grow at its
potential in the medium term.

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Q3. Comment on the profile of India’s Government debt.
Given the unprecedented fiscal expansion in 2020, rising government liabilities have
emerged as a significant concern across the globe. IMF projects the global government
debt at 91 per cent of GDP in 2022, about 7.5 percentage points above the pre-pandemic
levels.
While countries worldwide had started winding up the fiscal support provided during the
pandemic, challenging global financial conditions amidst global uncertainties tightened
budget constraints.

Some European economies are expanding their budgets to provide relief to households
and small businesses from mounting energy bills. All these factors, together with rising
interest rates and the fear of slower growth, make the sustainability of sovereign debts a
concern worldwide.

India’s Government Debt Profile

It is crucial to analyse India's government debt profile against this global backdrop. For
India, the total liabilities of the Union Government, which were relatively stable as a
percentage of GDP over the past decade, witnessed a sharp spike in the pandemic year
FY21.

This spike in debt resulted from the pandemic-induced higher Government borrowings
to finance the additional expenditure needs, given the strained revenues and sharp
contraction in the GDP. Total liabilities of the Union Government moderated from 59.2
per cent of GDP in FY21 to 56.7 per cent in FY22.

India’s Public Debt

India's public debt profile is relatively stable and is characterised by low currency and
interest rate risks because most of India's public debt is held by the residents and
denominated in domestic currency.
Of the Union Government's total net liabilities in end-March 2021, 95.1 per cent were
denominated in domestic currency, while sovereign external debt constituted 4.9 per
cent, implying low currency risk. Further, sovereign external debt is entirely from official
sources, which insulates it from volatility in the international capital markets.

Public debt in India is primarily contracted at fixed interest rates, with floating internal
debt constituting only 1.7 per cent of GDP in end-March 2021. The debt portfolio is,
therefore, insulated from interest rate volatility, which also provides stability to interest
payments.

The weighted average maturity of the outstanding stock of dated securities of the
government has increased from 9.7 years in end-March 2010 to 11.71 years in end-
March 2022, thus reducing the rollover risk in the medium-term. Over the last few
years, the proportion of dated securities maturing in less than five years has declined,
whereas long-term securities have shown an increasing trend.
Consolidating General Government Finances
The General Government finances give an overview of fiscal position of the Government
sector as a whole. The General Government liabilities as a proportion of GDP increased

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steeply during FY21 on account of the additional borrowings made by Centre and States
on account of the pandemic.

However, the ratio has come off its peak in FY22 (Revised Estimates (RE)). The General
Government deficits as a per cent of GDP have also consolidated after their peak in F21.
The General Government is expected to follow the path of fiscal consolidation in the
medium term.

A positive growth-interest rate differential keeps the Government Debt sustainable

The emphasis on capital expenditure in recent years is expected to boost GDP growth
directly, and indirectly through multiplier effects on private consumption expenditure
and private investment. Higher GDP growth would thereby facilitate buoyant revenue
collection in the medium term, and thereby enable a sustainable fiscal path.

The General Government Debt to GDP ratio increased from 75.7 per cent of end-March
2020 to 89.6 per cent at the end of the pandemic year FY21. It is estimated to decline to
84.5 per cent of GDP by end-March 2022.

The emphasis on capex led growth will enable India to keep the growth-interest rate
differential positive. A positive growth interest rate differential keeps the debt levels
sustainable.

A comparison of the change in General Government debt to GDP ratio from 2005 to 2021
across the countries highlights a substantial increase for most countries. For India, this
increase is modest, from 81 per cent of GDP in 2005 to around 84 per cent of GDP in
2021.
It has been possible on the back of resilient economic growth during the last 15 years
leading to a positive growth-interest rate differential, which, in turn, has resulted in
sustainable Government debt to GDP levels.

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Q4. Discuss the developments in India’s Banking sector that reflects
its resilience.
Since the middle of the previous decade, RBI and the government have made dedicated
efforts in terms of calibrated policy measures like strengthening the regulatory and
supervisory framework, implementation of 4R’s approach of Recognition, Resolution,
Recapitalisation and Reforms to clean and strengthen the balance sheet of the banking
system.

These continuous efforts over the years have culminated in the enhancement of risk
absorption capacity and a healthier banking system balance sheet both in terms of asset
quantity and quality over the years.

Asset Quality

• The Gross Non-Performing Assets (GNPA) ratio has decreased from 8.2 per cent
in March 2020 to a seven year low of 5.0 per cent in September 2022, while Net
Non-Performing Assets (NNPA) have dropped to a ten-year low of 1.3 per cent of
total assets.
• Lower slippages and the reduction in outstanding GNPAs through recoveries,
upgrades and write-offs led to this decrease. Lower GNPAs, combined with high
provisions accumulated in recent years, contributed to a decline in NNPA. There
was a broad-based improvement in the GNPA ratio in the industrial sector, though
it remained elevated for gems and jewellery and construction sub-sectors.
• Going ahead, as per the baseline scenario of the RBI’s stress testing framework,
the declining tendency in the GNPA ratio is likely to continue and is projected to
drop further to 4.9 per cent in March 2023.
• Moreover, with shrinking GNPAs, the Provisioning Coverage Ratio (PCR) has
been increasing steadily since March 2021 and reached 71.6 per cent in
September 2022. The Capital to Risk (Weighted) Assets Ratio (CRAR) of SCBs has
been rising sequentially in the post-asset quality review period.
• With a pickup in lending activity during H1:FY23, CRAR moderated in September
2022 because of an increase in risk-weighted assets (RWAs). However, it remains
well above the minimum capital requirement, including Capital Conservation
Buffer (CCB) requirements of 11.5 per cent.
• During the first half of FY23, the profitability of Scheduled Commercial Banks
(SCBs), measured in terms of Return on Equity (ROE) and Return on Assets
(ROA), improved to levels last observed in FY15.
• At the system level, Profit After Tax (PAT) witnessed a double-digit growth of 40.7
per cent in the quarter ending September 2022, led by strong growth in Net
Interest Income (NII) and a significant lowering of provisions.
• Macro-stress tests conducted by RBI for credit risk reveal that SCBs are well-
capitalised and that all banks would be able to comply with the minimum capital
requirements even under adverse stress scenarios.

Credit Growth Aided by a Sound Banking System and Deleveraged Corporate Sector

The recovery in economic activity in FY22, along with the enhanced financial soundness
of banks and corporates, has bolstered the expansion of non-food bank credit since June
2021.

• The YoY growth in non-food bank credit accelerated to 15.3 per cent in December
2022. This not only shows an acceleration in the growth of current economic
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activities but also an anticipation of continued momentum in economic activity in
future.
• Credit growth has been broad-based across sectors, with retail credit driving the
growth primarily owing to rising demand for home loans. An increase in demand
for housing induces greater investment which, in turn, sets off a virtuous cycle of
growth and investment.
• Credit to agriculture and allied activities gained momentum supported by the
Government’s concessional institutional credit and higher agricultural credit
target.
• Industrial credit growth has been buoyed by a pick-up in credit to MSMEs,
assisted by the benefits accrued from the effective implementation of the
Emergency Credit Line Guarantee Scheme (ECLGS) and the support provided by
the government’s production-linked incentive scheme and improvement in
capacity utilisation.
• Credit growth in services was driven by a recovery in credit to NBFCs,
commercial real estate and trade sectors.
• With moderation in overseas issuances and lower investments by Private Equity
(PE)/ Venture Capital (VC), the financing needs of the corporate sector are being
met through domestic resources.
• As funds raised from the primary segment of domestic equity markets declined
during FY23, reliance on bank credit for funding regular operations and capacity
expansion increased.
• Also, the Incremental Credit-Deposit ratio rose sharply both on an annual
(122.0 per cent, YoY) and half-yearly basis (172.5 per cent; September 2022 over
March 2022). The accumulation of deposits in the past few years has enabled
banks to fund the growing credit demand.

Here, the well-capitalised banking system with a low NPA ratio and more robust
corporate sector fundamentals will continue to enhance the flow of bank credit into
productive investment opportunities, notwithstanding the rising interest rates.

Non-Banking Financial Companies (NBFCs) Continue to Recover

The growing importance of the NBFC sector in the Indian financial system is reflected in
the consistent rise of NBFCs’ credit as a proportion to GDP as well as in relation to credit
extended by SCBs. Supported by various policy initiatives, NBFCs could absorb the
shocks of the pandemic. They built up financial soundness during FY22, marked by
balance sheet consolidation, improvement in asset quality, augmented capital buffers
and profitability.

• The continuous improvement in asset quality is seen in the declining GNPA ratio
of NBFCs from the peak of 7.2 per cent recorded during the second wave of the
pandemic (June 2021) to 5.9 per cent in September 2022, reaching close to the
pre-pandemic level. Although this softening was observed across sectors, the
GNPA ratio of the services sector remains in double digits.
• With the decline in GNPAs, the capital position of NBFCs also remains robust,
with a CRAR of 27.4 per cent in end-September 2022, slightly lower than 27.6 per
cent in March 2022. However, it remains well above the regulatory requirement.
The decline of 20 bps was mainly because of an increase in RWA as lending picked
up.
• The Return on Assets (RoA) has recouped over successive half-years. RBI’s stress
test to assess the resilience of the NBFC sector to credit risk shocks for a sample

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of 152 NBFCs reveals that the number of NBFCs that would fail to meet the
minimum regulatory capital requirement of 15 per cent stood at 8 per cent
under the baseline scenario. It increases to 10 per cent and 13 per cent under
medium and severe stress scenarios, respectively.
• Credit extended by NBFCs is picking up momentum, with the aggregate
outstanding amount at ₹31.5 lakh crore as of September 2022.
o NBFCs continued to deploy the largest quantum of credit from their balance
sheets to the industrial sector, followed by retail, services, and agriculture.
o Loans to the services sector (share in outstanding credit being 14.7 per cent)
and personal loans (share of 29.5 per cent) registered a robust double-digit
growth.

The resilience of the domestic financial system is reflected in the healthy balance sheet
of banks, stronger capital levels of NBFCs and robust growth in the Asset under
Management of domestic mutual funds. Buoyant demand for bank credit and early signs
of a revival in the investment cycle are benefiting from improving asset quality, a return
to profitability and resilient capital and liquidity buffers. Further, IBC mechanism
continues to support the ‘Ease of Doing Business’ in India by facilitating easy exit with
time bound resolutions for firms. These strengths are helping the financial system
absorb external spillovers, tightening global financial conditions and high volatility in
financial markets.

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Q5. Evaluate the developments in India’s Capital Markets, Insurance,
and Pension sector amidst global challenges.
Global macroeconomic uncertainty, unprecedented inflation, monetary policy tightening,
volatile markets, etc., resulted in hurting investor sentiments, leading to a downbeat
performance of global capital markets in FY23.

Capital Markets

Primary Market

• Equity
o From April to November 2022, the buoyant performance of the primary
market has been observed despite turmoil in global financial markets.
Compared to FY22, the number of firms opting to list on the bourses
increased by 37 per cent, though the amount raised declined to almost half
of what was raised in the last year.
o Although the year so far has been lacklustre in terms of fund mobilisation
through IPOs, the number of SMEs coming out with public offer has been
quite encouraging. Compared to FY22 (until November 2021), this year, not
only did the number of SMEs coming with IPOs almost double, but the total
funds raised by them were almost three times the funds raised by them in
the same period last year.
• Debt
o In April-November 2022, the amount of resources mobilised by the issuance
of debt securities in the primary market increased by 5 per cent, compared
to the corresponding period last year.
o The total number of issues in the same period also increased by 11 per cent.
From April to November 2022, public issues of debt increased by 10 per cent
compared to the same period the year before, but the amount raised by
public issues of debt in the same period decreased by 27 per cent.
o However, the underactivity in public debt issuances was more than
compensated by private debt placements. The number of private debt
placements increased by 11 per cent from 851 to 945, while resources
mobilised increased by 6 per cent in April-November 2022, compared to the
corresponding period in the year before.

Secondary Market

• In April-December 2022, global stock markets declined because of geopolitical

uncertainty. On the contrary, the Indian stock market saw a resilient performance,
with the blue-chip index Nifty 50 registering a return of 3.7 per cent during the
same period.
• The Nifty 50 – US dollar adjusted return also stood at -4.7 per cent, adjusting for
the depreciation of the Indian Rupee against the US Dollar. Even among major
emerging market economies, India outperformed its peers in April-December 2022.
• Heightened geopolitical uncertainty and supply chain disruption post-Russia-
Ukraine crisis led to increased volatility in the stock market. India VIX, which
measures expected short-term volatility in the stock market, rose to a high of 32.0
on 24th February 2022 with the outbreak of the Russia-Ukraine conflict.

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Commodities Derivatives Markets

• The Russia-Ukraine conflict triggered disruptions to the supply of commodities,

especially energy, base metals and food commodities. As a result, a sudden jump
in the prices of crude oil and some base metals like Nickel and Aluminium was
witnessed.
• However, commodity prices have seen a sharp correction as the Federal Reserve
started increasing interest rates in March 2022 to combat rising inflation.
Compared to 31st March 2022, the price of MCX iCOMDEX Base Metal Index
declined by 19.1 per cent by the end of November 2022, followed by the bullion
index (-3.5 per cent) and Energy index (-1 per cent).
• The prices of Aluminium, Copper, Zinc and Nickel at MCX also declined as of
November 2022, compared to March 2022.

Mutual Funds

• During April-November 2022, Mutual Funds witnessed significantly lower net

inflows than last year. However, during the same period, some schemes
comprising growth/equity-oriented schemes and solution-oriented schemes
observed significantly higher inflows than in the previous year.
• On the other hand, income/debt-oriented schemes and hybrid schemes recorded
outflows compared to inflows in the same period of the previous year. Outflows
from liquid funds and hybrid schemes were mainly affected by increasing interest
rate cycles, liquidity requirements and advance tax commitments by corporates.
• Despite that, the mutual fund industry's assets under management (AuM)
increased by 8.1 per cent at the end of November 2022 on YoY basis, thanks to the
market performance.

Foreign Portfolio Investments

The overall net investments by Foreign Portfolio Investors during FY23 registered an
outflow of ₹16,153 crore at the end of December 2022 from an outflow of ₹5,578 crore
during FY22 at the end of December 2021, with both the equity segment and the debt
segment witnessing net FPI outflows.

Insurance Market

• Insurance penetration in India increased steadily from 2.7 per cent around the
turn of the millennium to 4.2 per cent in 2020 and remained the same in 2021.
• Life insurance penetration in India was 3.2 per cent in 2021, almost twice more
than the emerging markets and slightly above the global average. However, most
life insurance products sold in India are savings-linked, with just a small
protection component. Hence, households remain exposed to a significant
financing gap in the event of the premature death of the primary breadwinner.
• The insurance density in India has increased from US$ 11.1 in 2001 to US$ 91 in
2021 (density for Life insurance was US$ 69 and Non-Life insurance was US$ 22
in 2021) in keeping with the relatively faster expansion of the insurance market in
the country.
• During FY22, the gross direct premium of non-Life insurers (within and outside
India) registered YoY growth of 10.8 per cent, primarily driven by health and motor
segments.
• The net incurred claims of non-Life insurers stood at ₹1.4 lakh crore in FY22,
primarily driven by rising per capita income, product innovations and

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customisation, development of strong distribution channels, and rising financial
literacy.
• The life insurance premium registered YoY growth of 10.2 per cent in FY22, with
new businesses contributing 45.5 per cent of the total premiums received by the
life insurers. The life insurance industry paid benefits of ₹5.02 lakh crore in FY22,
out of which 8.3 per cent benefits were on death claims.
• To facilitate the penetration of insurance to the lower income segments of the
population, the Insurance Regulatory and Development Authority of India (IRDAI)
issued IRDAI (Micro Insurance) Regulations, 2015, which provide a platform for
distributing insurance products that are affordable for the rural and urban poor
and promote financial inclusion.
• Further, the IRDAI (Obligations of Insurers to Rural and Social Sectors)
Regulations, 2015 stipulate obligations for insurers in rural and social sectors and
has contributed to developing and promoting microinsurance products in India.
• In FY21, 10.7 lakh new micro-insurance policies were issued to individuals with a
new business premium of ₹355.3 crore (in the life-insurance segment), and 53,046
new microinsurance policies were issued in the general insurance segment
(excluding standalone health insurers).

Pension Sector

The Government of India announced various measures to provide pensions to families

who have lost their earning members due to Covid. It also took initiatives towards
enhancing and liberalising insurance compensation.

• The benefit of the Employees State Insurance Corporation (ESIC) pension scheme
was extended to even those who have lost earning members due to Covid-19.
Dependent family members of such persons were entitled to a pension equivalent
to 90 per cent of the average daily wage drawn by the worker as per the existing
norms. The insurance benefits under the Employees Deposit Linked Insurance
(EDLI) scheme were also enhanced and liberalised.
• Ex-gratia of ₹1,000 was given to around three crore poor senior citizens, widows,
and disabled sections of the population (aged above 60 years) for three months
during April-June 2020.
• Rule 64 of CCS (Pension) Rules, 1972, was relaxed to ensure immediate
provisional sanction of pensionary benefits amid the unprecedented pandemic.
• To enhance the “Ease of Living” of Central Government Civil Pensioners, an
Electronic Pension Payment order (e-PPO) was integrated with Digi Locker,
creating a permanent PPO record in the Digi Locker.
• The timeline for submitting Life Certificate was relaxed, along with providing a
doorstep facility to pensioners for submission of the life certificate digitally.
• The Government of India is implementing various pension schemes such as the
Indira Gandhi National Old Age Pension Scheme (IGNOAPS), Indira Gandhi
National Widow Pension Scheme (IGNWPS), Indira Gandhi National Disability
Pension Scheme (IGNDPS) under the National Social Assistance Programme
(NSAP) with a total beneficiary coverage of 4.7 crore. Apart from that, the
government launched National Pension System and Atal Pension Yojana to cover
majority of population.
There is tremendous scope for growth in India’s pension sector as per capita income is
expected to rise further as the economy transitions to a high-middle-income country.
India’s demographic structure, with a more significant proportion of younger people,

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favours a phase of accumulation. However, financial literacy is a significant challenge
not only in emerging market economies but also in advanced economies.

PFRDA, under the aegis of the Financial Stability and Development Council (FSDC), has
taken several steps to enhance financial education so that consumers can make
informed decisions and reap the benefit of the formal financial sector while being
cognizant of risks and various trade-offs involved. These include pension education
through print and electronic media, outreach programs through trade bodies,
intermediaries such as banks, and town hall events.

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Q6. Discuss the issue of persistent inflation amidst global and
domestic crisis. What steps have the Central Bank and the Central
Government taken to remedy the malaise of inflation?
Inflation is defined as an increase in the prices of goods and services across the economy
over time leading to decline in purchasing power of both consumers and businesses.

Headline Inflation

• During FY22, some sub-groups such as ‘oils & fats’, ‘fuel & light’ and ‘transport &
communication’ reported high inflation. This was mainly driven by supply
disruptions caused by pandemic-induced lockdowns. The subsequent year (FY23)
began with the Russia-Ukraine crisis that led to high headline inflation rate in
April 2022.
• In FY23, retail inflation was mainly driven by higher food inflation, while core
inflation stayed at a moderate level. Food inflation ranged between 4.2 per cent to
8.6 per cent between April and December 2022, while the core inflation rate stayed
at around 6 per cent except in April 2022.
• During FY23, ‘food & beverages’, ‘clothing & footwear’, and ‘fuel & light’ were the
major contributors to headline inflation– the first two contributing more this fiscal
than in the previous one.

Retail Inflation

• Retail price inflation mainly stems from the agriculture and allied sector, housing,
textiles, and pharmaceutical sectors. Further, the global spillovers, representing
the imported inflation channel, driven by price pressures in energy, mining,
chemicals, trade, basic and machinery, reaches the retail segment mainly through
the wholesale price inflation.
• Moreover, retail inflation in the ‘health’ sub-group moderated in the current
financial year as compared to FY22. However, inflation in the ‘education’ subgroup
surged on account of schools reopening for in-person classes after the pandemic.

Food Inflation

• Food inflation based on Consumer Food Price Index (CFPI) climbed to 7.0 per cent
in FY23 from 3.8 per cent in FY22. Though the increase in food inflation is broad-
based, the major contributors are vegetables, cereals, milk and spices.
• The RBI forecasts elevated domestic prices for cereals and spices in the near term,
owing to supply shortages. Milk prices are also expected to spike reflecting high
feed costs. Since September 2022, double-digit inflation was observed in cereals.
• High inflation in vegetables from April to September 2022 was mainly due to a
spike in prices of tomatoes owing to crop damage and supply disruption due to the
unseasonal heavy rains in the major producing states of Karnataka, Tamil Nadu,
Andhra Pradesh, and Telangana.

Wholesale Price Inflation

• WPI-based inflation remained low during the Covid-19 period, and it started to
gain momentum in the post-pandemic period as economic activities resumed. The
Russia-Ukraine conflict further exacerbated the burden as it worsened global
supply chains along with the free movement of essential commodities.

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• As a result, the wholesale inflation rate climbed to about 13.0 per cent in FY22.
Prices of items like petroleum products, basic metals, chemicals & chemical
products, and edible oils, with maximum exposure to international pricing
translated into a rise in the domestic WPI inflation.
• Part of the double-digit inflation in WPI during H1 of FY23 could be attributed to
food inflation, which stayed at 7.5 per cent against 6.8 per cent in FY22. Cereals
and vegetables were the major contributors to food inflation owing to erratic
climatic conditions.
• Inflation in the ‘manufactured products’ subgroup in FY23 saw a considerable
decline compared to the previous year due to the rationalisation of duties on
critical inputs and moderation in global commodity prices. In comparison to FY22,
core inflation remained lower in FY23.

Measures taken to control the inflation

Central Bank

• Reserve Bank of India's Monetary Policy Committee (MPC) increased the policy
repo rate under the liquidity adjustment facility (LAF) by 2.25 per cent (225 basis
points) from 4.0 per cent to 6.50 per cent between May and February 2023.
• Even in June 2023 Monetary Policy Statement, the RBI Governor clarified that
while the repo rate is unchanged at 6.50 per cent, the stance of the Monetary
Policy Committee continues to be ‘withdrawal of accommodation’.

Central Government

Cereals

• On 13 May 2022, wheat flour exports were prohibited in order to prevent a

domestic surge in prices.
• From 12 July 2022 wheat flour exports were permitted but were subjected to
restrictions as recommended by an inter-ministerial panel.
• With effect from 14 August 2022 the export of Maida and suji was allowed only
after the approval of the inter-ministerial panel.
• The Central Government, w.e.f. 9 September 2022, imposed an export duty of 20
per cent on rice, brown rice, and semi-milled as well as wholly milled rice, except
parboiled rice.

Pulses

• A buffer stock of pulses has been maintained for price stabilisation in 2020-21,
2021-22 and 2022-23.
• The import duty on masur was brought down to zero per cent with effect from 26
July 2021. Further, the Agriculture Infrastructure and Development Cess (AIDC)
on masur was brought down to zero per cent with effect from 12 February 2022.
The nil rate of AIDC has been extended up to 31 March 2023.
• On 30 March 2022, the import of tur and urad under the Free Category was
extended until 31 March 2023.
• The Central Government, on 1 September 2022 decided to provide 1.5 million
tonnes of chana to States and UTs at a discounted rate for distribution under
various welfare schemes.

Fuel Prices

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• The Central Government has made interventions by calibrating the excise duties
on petrol and diesel.
• The first phase of reduction in terms of `5 on petrol and `10 on diesel was made
effective from 4 November 2021 and the second phase from 22 May 2022 (`8 per
litre on petrol and `6 per litre on diesel).

Plastic products

• The import duty on import of raw materials used in the plastic industry has been
reduced to lower the cost of domestic manufacturing.
• The duties on naphtha, propylene oxide and polymers of vinyl chloride have been
reduced from 2.5 per cent to 1 per cent, 5 per cent to 2.5 per cent and from 10 per
cent to 7.5 per cent, respectively on 21 May 2022.

Steel

• On 21 May 2022, import duty on major inputs – ferronickel, cooking coal, PCI coal
– has been cut from 2.5 per cent to zero, while the duty on coke and semi-coke
has been slashed from 5 per cent to zero.
• Tax on export of iron ores and concentrates has increased from 30 per cent to 50
per cent, while that on iron pellets has been raised to 45 per cent.

Cotton

• The government waived customs duty on cotton imports w.e.f 14 April 2022, until
30 September 2022, to benefit the textile industry and lower prices for consumers.
• Earlier, cotton imports attracted 5 per cent Basic Customs Duty (BCD) and 5 per
cent AIDC. The Central Board of Indirect Taxes and Customs (CBIC) notified the
exemption from customs duty and AIDC for import of cotton.

Diamonds and gemstones

• In Budget 2022-2023, customs duty on cut and polished diamonds and gemstones
was reduced to 5 per cent and duty on the simply sawn diamond was reduced to
nil.

Chemical products

• Customs duty on certain critical chemicals namely methanol, acetic acid and
heavy feedstocks for petroleum refining was reduced in the Budget 2022-23.

To conclude, India’s inflation management has been particularly noteworthy and can be
contrasted with advanced economies that are still grappling with sticky inflation rates.
Due to the anticipated slowdown in advanced economies, inflation risks coming from
global commodity prices are likely to be lower in FY24 than in FY23. However, in terms
of overall risks to the benign baseline view on inflation, upside risks to India's projected
rates may outweigh the downside risks.

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Q7. Write a note on NITI Aayog’s Aspirational Districts Programme.
Also, list down numerous achievements of the program.
The Government of India launched the ‘Transformation of Aspirational Districts’
(Aspirational Districts Programme (ADP)) initiative in January 2018 with a vision of a
New India by 2022 wherein the focus is to raise living standards of its citizens and
ensuring inclusive growth of all in the burgeoning economy.

The districts are prodded and encouraged first to catch up with the best district of their
state, and subsequently aspire to become one of the best in the country, by competing
with and learning from others in the spirit of competitive and cooperative federalism.

117 Aspirational Districts (ADs) across 28 States/UTs have been identified by NITI Aayog
based upon composite indicators ranging from health and nutrition, education,
agriculture, and water resources, financial inclusion and skill development, and basic
infrastructure which have an impact on HDI.

The broad contours of the programme are Convergence (of Central & State Schemes),
Collaboration (of Central, State level Nodal Officers & District Collectors), and
Competition among districts through monthly delta ranking; all driven by a mass
movement.
With States as the main drivers, this programme focuses on the strength of each district,
identifying low-hanging fruits for immediate improvement and measuring progress by
ranking districts every month. The ranking is based on the incremental progress made
across 49 Key Performance Indicators (KPI) under five broad socio-economic themes
mentioned above.

NITI Aayog has developed a broad template for the formulation of district plans. Since
different districts have different opportunities and challenges, they have been advised to
customise the template.

A primer comprising steps to be taken to improve each of the indicators, compiled from
the inputs received from respective Ministries, has also been developed with the help of
Central Ministries and the States and shared with district administration.

Achievements of the Programme

• Many ADs have surpassed the average state values in several indicators under the
Health and Nutrition theme monitored under the programme. For instance, in 10
indicators of health, 73 ADs have surpassed the state averages.

• The programme monitors progress across five focus sectors. All districts have
made significant improvements across different indicators for instance, under
Health and Nutrition, 46 districts have improved by up to 45 per cent, and 23
districts have improved by up to 69 per cent in critical indicators related to
pregnant women’s health which have a bearing on the Maternal and Infant
Mortality Rates such as frequency and coverage of antenatal care check-ups;
regularity of supplementary nutrition intake by pregnant women, and timely
Anaemia detection and treatment rate.

• Under education, 46 districts have improved by up to 34 per cent, and 29 districts

have improved by up to 49 per cent in critical indicators which affect learning
outcomes attained by students such as the percentage of elementary schools
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complying with Right to Education Act, 2009 (RTE) specified Pupil-Teacher Ratio;
percentage of schools with functional drinking water facility and percentage of
schools with functional girls’ toilets.

• While monitoring the outcome of financial inclusion, it was seen that ADs have
performed better than non-aspirational districts. This means more people have
access to bank accounts, more have been covered under the fold of government
insurance schemes and more can secure MUDRA loans in ADs.

• Several ADs have reported saturation in the basic infrastructure indicators like
the percentage of households with electricity connection; percentage of habitations
with access to all-weather roads under Pradhan Mantri Gram Sadak Yojana
(PMGSY); cumulative number of kilometres of all-weather road work completed as
a percentage of total sanctioned kilometres in the district under PMGSY; and
percentage of households with individual household washrooms, etc.

• The ADP has emerged as a template for good governance, especially in remote and
difficult areas. At present, two programmes have been conceptualised along the
lines of ADP design, one is ‘Mission Utkarsh’ and the other is ‘Aspirational Blocks
Programme’ (ABP).

• On 22 January 2022, ‘Mission Utkarsh’ was launched, under which 15 Central

Ministries, having an interface with the public, have identified their low performing
10-15 districts. Following the ADP template, the Ministries have launched actions
to bring these districts at par with an average district in the state in one year and
close to the all-India average in another.

• The Central Government and States have come together to use the ADP template
to identify backward blocks and use similar data monitoring and competition-
based programme to improve the most under-developed blocks in the country. In
order to further strengthen this initiative, 500 most backward blocks across States
and UTs have been identified for rapid development.

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Q8. Discuss the critical role of Aadhaar & its ecosystem for Indian
economy.
Aadhaar, a 12-digit unique identification number provides a digital identity to the
residents of India and ensures authentication. It connects the Government and the
individual, replacing the disentangled web of multiple IDs for multiple purposes, and
secures the social contract between the State and the Citizen.

It is because of the initiative taken in 2010 that today, the nation is consistently building
and strengthening a digital economy which will ultimately give a global competitive
advantage in how money and goods move around the country over its competitors.

Paul Romer, a Nobel laureate and former World Bank Chief Economist, has described
what 135 crore citizens of India, which is 94 per cent of the population and 100 per cent
of the adult (>18 years), have as “the most sophisticated ID programme in the world.”
Aadhaar provides a conclusive connection between the photograph of the Aadhaar
holder, his/her fingerprints, and iris scan details.

Aadhar Achievements

Aadhaar is an essential tool for social delivery by the State. 318 Central schemes and
over 720 state DBT schemes are notified under section 7 of the Aadhaar Act, 2016, and
all these schemes use Aadhaar for targeted delivery of financial services, subsidies, and
benefits.

Aadhaar is the foundation of India’s digital integration, as shown by the following

statistics (as of November 2022):

• Aadhaar Generated- 135.2 crore

• Aadhaar Updated- 71.1 crore
• Authentication Done- 8621.2 crore
• eKYC Done-1350.2 crore
• 75.3 crore residents have linked their Aadhaar with ration cards to avail of ration
• 27.9 crore residents linked Aadhaar with cooking gas connection for LPG subsidy
• 75.4 crore bank accounts are linked with Aadhaar & 1549.8 crore transactions via
Aadhaar Enabled Payment Systems

Key Role of Aadhaar in the daily lives of citizens

• Aadhaar – Usage in DBT: When linked with a bank account, an Aadhaar

becomes the ‘Financial Address’ of an individual, which helps to accomplish the
country’s goal of financial inclusion. The number is sufficient to transfer any
payment to an individual’s bank account through Aadhaar Payment Bridge (APB),
thus eliminating the need to give other details, viz. the bank account, IFSC Code,
and bank branch details to the Government/ Institutions.

• Aadhaar Enabled Payment Systems (AEPS): AEPS helps an individual to do

basic banking transactions, viz. withdrawal, cash deposit, transfer of funds from
his bank account, etc., by simply using his Aadhaar. This has immensely
facilitated providing door-step banking services and helped mitigate the hardships
of the people due to the Covid-19 pandemic.

• JAM (Jan-Dhan, Aadhaar, and Mobile) trinity, combined with the power of DBT,
has brought the marginalised sections of society into the formal financial system,
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revolutionising the path of transparent and accountable governance by
empowering the people. Till November 2022, multiple large central schemes,
including PAHAL, MGNREGS, etc., have paid over `7,66,055.9 crore through over
1,010 crore successful transactions.

• One Nation One Ration Card (ONORC) Scheme: Aadhaar has played a key role in
the implementation of the ONORC Scheme. While Aadhaar seeding of the PDS
database has resulted in significant savings due to eliminating ghost and duplicate
beneficiaries. Grain disbursal through Aadhaar-based Biometric Authentication
has brought meaningful transparency and back-office improvement of the logistic
network of PDS. Free distribution of food grains under ‘Pradhan Mantri Garib
Kalyan Yojana’ (PMGKY) has greatly mitigated the Covid pandemic’s impact,
especially for the weakest and most vulnerable sections of society.

• PM Kisan Samman Nidhi: Aadhaar platform forms the backbone for the
implementation of this scheme, right from registration through Aadhaar eKYC to
DBT through the APB.

• Co-WIN: Successful management of the Covid pandemic without the Co-WIN

platform would not have been possible. Aadhaar played a vital role in developing
the Co-WIN platform and in the transparent administration of over 2 billion
vaccine doses.

• Face Authentication: The use of face as an additional modality of authentication

is increasing. This has helped, especially the elderly, to get ‘Jeevan Praman’
through their smartphones to avail of pension.

The Aadhaar Ecosystem

The Unique Identification Authority of India (UIDAI) is mandated to develop the policy,
procedure, and system for issuing an Aadhaar number to each resident individual and
performing authentication.
It also has the responsibility to take necessary measures to ensure that the information
stored in the Central Identities Data Repository (CIDR) is secured and protected against
unauthorised access or misuse. The ecosystem required for the purpose now consists of
the following (as of 30 November 2022):
• 66,103 Aadhaar counters and 34,834 Child Enrolment Lite Client devices are
functional
• 180 Active Registrars
• 507 Active Enrolment Agencies
• UIDAI run 88 Aadhaar Sewa Kendra are functional in 72 cities
• 15,002 Village Level Entrepreneurs operational as Banking Correspondents
permitted to undertake Aadhaar updates services
• Around 53,750 postmen/Grameen Dak Sewaks under India Post Payment Bank
have been approved to provide mobile number update facility
• 178 Aadhaar User Agencies
• 169 e-KYC user agencies

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Q9. Write a short note on SKILL INDIA MISSION. Evaluate its impact
on the Indian youth.
The Skill Indian Mission focuses on skilling, re-skilling and up-skilling through short
term and long-term training programmes. Under the Mission, the government, through
more than 20 Central Ministries/Departments, is implementing various skill
development schemes across the country. These include

• Deen Dayal Upadhyaya Grameen Kaushalya Yojna (DDUGKY),

• Rural Self Employment Training Institutes (RSETI),
• Deen Dayal Antyodaya Yojana-National Urban Livelihood Mission (DAY-NULM).

Ministry of Skill Development and Employment is implementing Schemes such as

• Pradhan Mantri Kaushal Vikas Yojana (PMKVY),

• Jan Shikshan Sansthan (JSS), National
• Apprenticeship Promotion Scheme (NAPS) and
• Craftsmen Training Scheme (CTS).

The advocacy of the programmes is being done through print media, electronic media,
and State Governments’ campaigns. More and more areas are being aligned with the
common framework spanning the skills ecosystem so that the outcomes of the
Government skilling programmes are uniform across the skilling ecosystem.

Impact of Skill India Mission Schemes on Youth

Pradhan Mantri Kaushal Vikas Yojana

• It was first launched in 2015. PMKVY has two training components, viz., Short
Term Training (STT) and Recognition of Prior Learning (RPL).
• Pradhan Mantri Kaushal Kendra set up at District level, are envisaged as state of
the art, visible and aspirational model training Centres.
• Between FY17 and FY23 (as of 5 January 2023), under PMKVY 2.0 about 1.1 crore
persons have trained: 83 per cent certified and about 21.4 lakh placed.
• Under PMKVY 3.0, during FY21 to FY23 (as on 5 January 2023) 7.4 lakh persons
have been trained, 66 per cent certified and 41,437 placed.
• PMKVY also provided training to Shramiks (migrant labourers) affected by Covid-
19. This component covered 116 districts of 6 States, viz., Assam, Bihar, Madhya
Pradesh, Odisha, Rajasthan, and Uttar Pradesh.
• As on 31 October 2022, 1.3 lakh migrants have been trained/ oriented (0.88 lakh
in STT and 0.38 lakh in RPL).

Skill Acquisition and Knowledge Awareness for Livelihood Promotion (SANKALP)

• It is a World Bank loan-assisted programme launched in 2018 to decentralise

skilling initiatives and align skill development programmes with local demand and
aspirations of the youth.
• Under the National Component and State Components of SANKALP, 64 and 700
projects respectively have been taken up in the area of Skill and Entrepreneurship
development and strengthening of monitoring.
• 724 District Skill Committees (DSCs) have been constituted, which are mandated
to plan, manage and monitor skilling activities at the district level.

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Jan Shikshan Sansthan Scheme

• It provides for a lump sum annual grant is released to Jan Shikshan Sansthans
(NGOs) for skill training to non-literate, neo-literates, persons with a rudimentary
level of education and school dropouts up to class XII in the age group of 15-45
years.
• The priority groups are women, SC, ST, and other backward sections of society.
• From FY20 to FY23 (as of 5 January 2023), 16.0 lakh beneficiaries have been
trained of which 28.4 per cent are from urban areas and 69.0 per cent are from
rural areas and 2.7 per cent are from tribal areas.
• Notably, 81 per cent of the trainees are women.

National Apprenticeship Promotion Scheme

• It provides financial support to industrial establishments undertaking

apprenticeship programmes under the Apprentices Act, 1961.
• Since the launch of the scheme in 2016, as on 31 December 2022, 21.4 lakh
apprentices have been engaged by Industries.

Craftsmen Training Scheme

• It provides long-term training in 149 trades through 14,938 Industrial Training

Institutes (ITIs) across the country.
• Since 2015, 91.7 lakh students have been trained as on 30 October 2022.

Craft Instructor Training Scheme

• It provides comprehensive training both in skills and training methodology is

imparted to the instructor trainees to make them conversant with the methodology
of teaching and techniques of transferring hands-on skills, to train skilled
manpower for the industry.
• During the year FY22, a total of 8,847 trainees have been trained in various
National Skill Training Institutes and Institute of Training of Trainers.

Making India Skill Capital of the World

With an aim to make India a Skill Capital of the World and improve mobility of Skilled
manpower the National Skill Development Corporation (NSDC) International has been
set up, which aims to create a network of institutions across India.
This network of institutions will be called as Skill India International (SII) Network. It
shall be created through the empanelment of state-of-the-art government and private
institutions.

• MSDE has also signed MoUs with 11 countries, Australia, Belarus, China,
Denmark, France, Germany, Japan, Qatar, Switzerland, UAE, and the United
Kingdom in the field of skill development and vocational education training.
• NSDC has also signed 18 B2B MoUs with countries like Australia, Canada,
Germany, Japan, Malaysia, Kingdom of Saudi Arabia, UAE, etc.

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Q10. What do you understand by Green Bonds. Are there any
developments regarding utilization of Green Bonds in India? How does
financial regulators are facilitating green finance?
Green bonds are financial instruments that generate proceeds for investment in
environmentally sustainable and climate-suitable projects. With the growing focus on
the environmental sustainability of projects, green bonds have become widely accepted
as an instrument to raise funds to support climate and environmental projects and
command a relatively lower cost of capital vis-à-vis regular bonds.

As per SEBI’s data on green debt securities, during the period of 2017 to September
2022, 15 Indian corporates have issued green bonds of value ₹4,539 crore. Most of these
are related to renewable energy generation, while one is slated to be used for the tertiary
treatment of wastewater.

Developments in India
In keeping with the ambition to reduce the carbon intensity of the economy significantly,
the Union Budget 2022-23 announced the issue of Sovereign Green Bonds. The issuance
of Sovereign Green Bonds will help the government to tap the requisite finance from
potential investors for deployment in public sector projects aimed at reducing the carbon
intensity of the economy. The Sovereign Green Bonds Framework has been designed to
comply with the components and key recommendations of the International Capital
Market Association (ICMA) Green Bond Principles (2021).
A Green Finance working committee has also been set up to oversee and validate key
decisions on the issuance of Sovereign green bonds. The committee has the mandate to
select the projects for allocation of proceeds, do a time-bound review of the allocation
and carry out annual reporting along with an impact assessment of the proceeds from
sovereign green bonds issued.

Role played by Financial Regulators in facilitating Green Finance

Reserve Bank of India

• On November 3, 2021, the RBI published its ‘Statement of Commitment to

Support Greening India’s Financial System’ - NGFS.

• Here, the Reserve Bank of India (RBI) laid out, keeping in view its national
commitments, priorities, and complexity of our financial system, committed to,
among others, exploring how climate scenario exercises can be used to identify
vulnerabilities in RBI-supervised entities’ balance sheets, business models and
gaps in their capabilities for measuring and managing climate-related financial
risks.

• Also, in 2007, the RBI advised banks to put in place an appropriate action plan for
making a meaningful contribution to sustainable development.

• Over time, RBI has incentivised bank lending towards greener industries and
projects. For example, renewable energy projects have been included under
Priority Sector Lending (PSL).

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• The RBI has also been spreading awareness on the issue of green and sustainable
finance by discussing the opportunities and challenges of green finance through
its publications and other communication.

• Also, in 2023, RBI released a circular on Green Deposits. The circular mandates
that the funds raised through green deposits must be utilized for activities
promoting energy efficiency, reducing carbon emissions and greenhouse gases,
fostering climate resilience and adaptation, and preserving and enhancing natural
ecosystems and biodiversity.

Securities and Exchange Board of India

• SEBI introduced the regulatory framework for issuance of green debt securities as
a mode of sustainable finance under the erstwhile SEBI (Issue and Listing of Debt
Securities) Regulations, 2008, (ILDS Regulations) on May 30, 2017.

• In a circular dated November 24, 2022, SEBI has allowed an issuer to issue a
green debt security if it falls within the definition of “green debt security”.

• In the backdrop of increasing interest in sustainable finance in India as well as

around the globe, and with a view to aligning the extant framework for green debt
securities with the updated Green Bond Principles recognised by International
Organisation of Securities Commission (IOSCO), SEBI undertook a review of the
regulatory framework for green debt securities. Based on the review, it has been
decided in the SEBI board meeting dated December 20, 2022, to:

o Enhance the scope of the definition of green debt security by including new
modes of sustainable finance in relation to pollution prevention and control,
eco-efficient products, etc.

o Introduce the concept of blue bonds (related to water management and

marine sector), yellow bonds (related to solar energy) and transition bonds
as subcategories of green debt securities.

• Also, in February 2023, SEBI revised the earlier circular on green bonds to avoid
greenwashing. In this circular, SEBI broadly defines a green debt security as one
that is issued for the purpose of raising capital to be used for the cause of
sustainable development or furthering energy efficiency.

To conclude, the sustainable finance framework has also evolved from the initial steps
covering the top listed 100 companies required to conform to sustainability standards.
The requirement has now not only been extended to 1000 top listed companies on a
mandatory basis but also the sustainability standards have become much stronger and
measurable that correspond to the best practices while taking into account the specific
context of India.

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Q11. What do you understand by Green Hydrogen? How can India’s
Green Hydrogen Mission help India transition into a green energy
nation?
Green hydrogen is defined as hydrogen produced by splitting water into hydrogen and
oxygen using renewable electricity. It’s production process makes it carbon neutral
unlike grey and blue hydrogen.

Grey hydrogen is traditionally produced from methane (CH4), split with steam into CO2
– the main culprit for climate change – and H2, hydrogen. Blue hydrogen follows the
same process as grey, with the additional technologies necessary to capture the CO2
produced when hydrogen is split from methane (or from coal) and store it for long term.

Green Hydrogen Mission

With a vision to make India an energy-independent nation, and to de-carbonise critical
sectors, the Government approved the National Green Hydrogen Mission on January 4,
2023 with an initial outlay of ₹19,744 crore. The Mission will facilitate demand creation,
production, utilisation and export of Green Hydrogen and mobilisation of over ₹8 lakh
crore of investment by 2030.

Features of the Mission

• Targets to be achieved by 2030

o It aims to develop a green hydrogen production capacity of at least 5 MMT

(Million Metric Tonne) per annum.
o The objective is cumulative reduction in fossil fuel imports over ₹1 lakh
crore and creation of over 6 lakh jobs.
o Also, Renewable energy capacity addition of about 125 GW and abatement
of nearly 50 MMT of annual GHG emissions.

• Interventions

o Financial incentive targeting domestic manufacturing of electrolysers and

production of Green Hydrogen.
o Regions capable of supporting large scale production and/or utilisation of
Hydrogen to be developed as Green Hydrogen Hubs.

• Policy Framework

o Development of an enabling policy framework to support establishment of

Green Hydrogen ecosystem.
o Robust Standards and Regulations framework.
o Public-private partnership framework for R&D.
o Skill development programme.

Green Hydrogen: Helping India transition into a green energy economy

A report by NITI Aayog in June 2022 shows that in the case of India, renewable tariffs
have fallen in recent years, and electrolyser costs are expected to fall in the future.

A recent report by the International Renewable Energy Agency (2020) suggests that the
cost of electrolysers is crucial for making green hydrogen economically viable. The report
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also underscores the importance of innovation in electrolyser technology and the rapid
increase in its scale of production as the main factors that would drive down the cost of
electrolysers and green hydrogen.

NITI’s report estimates that the cumulative value of the green hydrogen market in India
will be US$ 8 billion by 2030 and US$ 340 billion by 2050. The electrolyser market will
be approximately US$ 5 billion by 2030 and US$ 31 billion by 2050.

In addition, the adoption of green hydrogen will also result in 3.6 Giga tonnes of
cumulative CO2 emission reduction by 2050. This will also generate enormous energy
import savings, ensure stability in industry input prices, and strengthen foreign
exchange reserves in the long run.

However, all this is based on the assumption that access to critical minerals essential for
renewable energy at a reasonable cost will continue-an assumption that could be an
effective constraint in the face of the concentration of these minerals in certain
geographies with a monopoly in access to some countries.

With such targets in mind, it is not surprising that the mission is being touted as means
for the nation to achieve its target of becoming energy independent by 2047 and also
achieve its vision of ‘Atmanirbhar Bharat’ (self-reliant India). Steps in the direction
towards attaining this vision have already been taken in the form of projects like setting
up of “India’s first 99.999% pure” green hydrogen plant in Assam (Northeast India)
commissioned by Oil India Limited (OIL).
These ambitious targets and vision are creating more enthusiasm and optimism towards
the creation of a green hydrogen ecosystem in India which will not only cater to its
domestic needs but will also support global decarbonization objectives, with India
catering to the rising demand for green hydrogen internationally.

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Q12. Mention the contribution of Agriculture and allied activities
sector in the Indian economy.
With its solid forward linkages, the agriculture and allied activities sector significantly
contributed to the country's overall growth and development by ensuring food security.

Growth Metrics

• The Indian agriculture sector has been growing at an average annual growth rate
of 4.6 per cent during the last six years. As per Second Advanced estimates of
National Income, 2022-23 released by Ministry of Statistics & Programme
Implementation (MoSPI), the share of Gross value added (GVA) of agriculture
and allied sectors in total economy and growth of GVA of agriculture and allied
sectors for 2022-23 is 18.3% and 3.3% respectively.
• In recent years, India has also rapidly emerged as the net exporter of
agricultural products. In 2020-21, exports of agriculture and allied products from
India grew by 18 per cent over the previous year. During 2021-22, agricultural
exports reached an all-time high of US$ 50.2 billion.

Record Production of Foodgrains

• As per First Advance Estimates 2022-23 (kharif only) the paddy area was about
3.8 lakh hectares less than the sown area of 411.2 lakh hectare during 2021-22
(kharif season).
• Further, in the current rabi season the area under rabi paddy has expanded by
6.6 lakh hectares as compared to last year (Crop Weather Watch Group 12
January 2023).
• As per the First Advance Estimates for 2022-23 (Kharif only), total food grains
production in the country is estimated at 149.9 million tonnes which is higher
than the average Kharif food grain production of the previous five years (2016-17
to 2020-21).

Minimum Support Price for Farmers’ Produce

• The Union Budget for 2018-19 announced that farmers in India would be given an
MSP of at least one and a half times the cost of production.
• Accordingly, the Government has been increasing the MSP for all 22 Kharif, Rabi
and other commercial crops with a margin of at least 50 per cent over the all-India
weighted average cost of production since the agricultural year 2018-19.
• Given nutritional requirements and changing dietary patterns and to achieve self-
sufficiency in pulses and oilseeds production, the Government has fixed relatively
higher MSP for pulses and oilseeds.

Increased Access to Agricultural Credit

• Ensuring hassle-free credit availability at a cheaper rate to farmers has been the
top priority of the Government of India.
• Accordingly, the Kisan Credit Card Scheme (KCC) was introduced in 1998 for
farmers to empower them to purchase agricultural products and services on credit
at any time. As of 30 December, 2022, banks issued Kisan Credit Cards (KCC) to
3.89 crore eligible farmers with a KCC limit of ₹4,51,672 crore.
• With the Government of India extending the KCC facility to fisheries and animal
husbandry farmers in 2018-19, the number of such cards in the fisheries and

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animal husbandry sector has also grown. As of 17 October 2022, 1.0 lakh KCCs
have been sanctioned for the fisheries sector and 9.5 lakh (as of 4 November 2022)
for the animal husbandry sector.
• To ensure that the farmers pay a minimal interest rate to the banks, the
Government of India has introduced the Interest Subvention Scheme (ISS), now
renamed Modified Interest Subvention Scheme (MISS), to provide short-term
credit to farmers at subsidised interest rates.
• Under this scheme, short-term agriculture loan up to ₹3 lakh is available at 7 per
cent per annum to farmers engaged in Agriculture and other Allied activities,
including Animal Husbandry, Dairying, Poultry, Fisheries etc.
• An additional 3 per cent subvention (Prompt Repayment Incentive) is also given to
the farmers for prompt and timely repayment of loans. Therefore, if a farmer
repays his loan on time, he gets credit at 4 per cent per annum.
• As a result of the initiatives taken and the measures to strengthen existing
policies, there has been a consistent increase in the agriculture credit flow over
the years, exceeding the target every year for the past several years. In 2022-23
target for the flow of credit to agriculture was been fixed at ₹18.5 lakh crore.
However, as per Union Budget 2023-24, the agricultural credit target was fixed at
₹20 lakh crores.

Farm Mechanization

• Under the Sub Mission on Agricultural Mechanisation (SMAM), State Governments

are being assisted in training and demonstrating agricultural machinery and
helping farmers procure various farm machinery and equipment besides setting
up Custom Hiring Centres (CHC).
• As of December 2022, 21628 CHCs and 467 Hi-Tech hubs and 18306 farm
machinery banks have been established. Increasing fragmentation of farm
holdings (with the average size of household ownership holdings declining from
1.23 ha in 2005-06 to 1.10 ha in 2010-11 and further to 1.08 ha in 2015-16)
requires machines that are viable and efficient for small farm holdings.
The buoyant performance of agriculture sector could be ascribed to the measures taken
by the Government to promote farmer-producer organisations, encourage crop
diversification, and improve productivity in agriculture through support provided for
mechanisation and the creation of the Agriculture Infrastructure Fund.

Thus, enabling the country, in the spirit of Vasudhaiva Kutumbakam, to provide

necessary and essential support to other countries for the losses faced during Covid-19.
Further, income support to farmers through the Pradhan Mantri Kisan Samman Nidhi
(PM-KISAN) and the promotion of allied activities has led to diversification in sources of
farmers’ income, improving their resilience to weather shocks.

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Q13. Discuss the importance of Food Processing sector, its challenges
and the government initiatives to facilitate growth in the sector.
The food processing sector is of enormous significance for India's development because
of the strong connections and interactions it promotes between industry and agriculture.

Importance of the Food Processing Sector

• During the last five years ending FY21, the food processing industries sector has
been growing at an average annual growth rate of around 8.3 per cent.
• As per the latest Annual Survey of Industries (ASI) 2019-20, 12.2 per cent of
persons in the registered manufacturing sector were employed in the food
processing sector.
• The value of agri-food exports, including processed food exports, was about 10.9
per cent of India's total exports during 2021-22.
• With the growing importance of processed food items in the consumer basket, new
horizons are now open for both the agriculture and the industry sector pushing
diversification and commercialisation in farming, improvement in the efficiency of
resource use, enhancement in the income of farmers, expansion in the avenues to
export agro foods and generation of employment opportunities.
• Optimum development of the food processing sector will contribute significantly to
tackling several developmental concerns such as disguised rural unemployment in
agriculture, rural poverty, food security, food inflation, improved nutrition,
prevention of wastage of food etc.

Challenges for the Food Processing Sector

To facilitate the unfettered growth of the food processing sector, there is a continuous
need for extensive investment in cold chain infrastructure and address logistical
challenges.

• The NITI Aayog Strategy for New India identifies the lack of adequate and efficient
cold chain infrastructure as a critical supply-side bottleneck that leads to massive
post-harvest losses (mostly of perishables) estimated at ₹92,561 crore annually.
• The uneven geographic distribution of cold storage infrastructure also contributes
to regional-level disparities.
• Given that countries worldwide have stringent guidelines for importing food and
agricultural products, the probability of exports from India getting rejected
increases with the lack of adequate cold chain infrastructure.
• Further, logistical barriers relating to connectivity also pose supply-side
challenges. For instance, Indian national highways, while accounting for 2 per
cent of the total road network, carry 40 per cent of all cargo – exemplifying the
burden on the existing road networks and potential for congestion, which is
detrimental to food (and particularly perishables) transport.

Government Initiatives
Recognising the abundant potential of the sector, the Government has been at the
forefront with various interventions aimed at the development of food processing in the
country.

• The Ministry of Food Processing Industries, through the component schemes of

Pradhan Mantri Kisan SAMPADA Yojana (PMKSY), provide financial assistance for

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the overall growth and development of the food processing sector. Under PMKSY,
677 projects have been completed till 31 December 2022.
• The Ministry also launched in 2020 the Prime Minister's Formalisation of Micro
Food Processing Enterprises (PMFME) Scheme as part of the Atmanirbhar Bharat
Abhiyan to enhance the competitiveness of individual micro-enterprises in the
unorganised segment and promote the formalisation of this sector by providing
financial, technical and business support for upgradation/setting up of 2 lakh
micro units in the country.
• As of 31 December 2022, 15,095 loans of ₹1402.6 crore were sanctioned. The
scheme adopts the One District One Product (ODOP) approach to reap the benefit
of scale in procuring inputs, using shared services and marketing products. So
far, 713 Districts with 137 unique products were approved under the ODOP in 35
States/ UTs.
• The Production Linked Incentive Scheme for Food Processing Industry (PLISFPI),
launched in March 2022, has the specific mandate to incentivise investments to
create global food champions. Sectors with high growth potential, like marine
products, processed fruits & vegetables, and ‘Ready to Eat/ Ready to Cook’
products, are covered for support.
o In phase-I, 149 applications have been selected for assistance under the
PLISFPI. Subsequently, a PLI Scheme for millet-based products was also
introduced with an outlay of ₹800 crore.
o In phase-II, 33 applications (both organic and millet products) have been
selected.
• To focus on transporting perishable food products, including horticulture, fishery,
livestock and processed products, from the Hilly Areas, North-Eastern States and
Tribal Areas, Krishi UDAN 2.0 version was launched in October 2021 as a six-
month pilot project.
• The Airports Authority of India (AAI) provides a full waiver of Landing, Parking,
Terminal Navigational Landing Charges (TNLC) and Route Navigation Facility
Charges (RNFC) for Indian freighters and P2C (Passenger-to-Cargo) aircraft.
• The scheme covers around 25 airports focusing on North Eastern, Hilly and Tribal
regions and 28 airports in other regions/areas. Thus, the scheme assists farmers
in transporting agricultural products and improves value realisation.

To conclude, A greater focus on the development of the food processing sector can
reduce wastage/ loss and increase the length of storage, ensuring better prices for the
farmers. The initiatives like e-NAM and the Promotion of FPOs formation have been
introduced to strengthen the agricultural market.

With the interventions including PMKSY, PMFME, PLI, etc., attempts have been made to
boost the food processing industries to harness its linkages with the agriculture sector.
A well-developed food processing sector with improved infrastructure like cold storage
and better logistics helps reduce wastage, improve value addition, ensure better farmers'
returns, promote employment, and increase export earnings.

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Q14. Explain the government mechanism to ensure Food security in
India.
Food security is not only a question of the ability to produce food but also of the ability
to access food. Food security means availability, accessibility and affordability of food to
all people at all times. The poor households are more vulnerable to food insecurity
whenever there is a problem of production or distribution of food crops.

The Government is currently running the most extensive legislation-based food security
programme in the world, covering about 80 crores of India's population under the
National Food Security Act (NFSA), 2013.

Mechanism to ensure Food security in India

“The food management programme in India comprises procurement of food grains from
farmers at remunerative prices, distribution of food grains to consumers, particularly the
vulnerable sections of society, at affordable prices and maintenance of food buffer stock
for food security and price stability.”

Procurement

• Procurement from farmers for this programme is at MSP. During Kharif Marketing
Season (KMS) 2021-22, 581.7 lakh metric tons (LMT) of Rice was procured against
an estimated target of 532.7 LMT.
• In the current year, KMS 2022-23, a total of 355 LMT of rice has been procured up
to 31 December 2022. Also, during Rabi Marketing Season (RMS) 2022-23, 187.9
LMT wheat was procured against 433.4 LMT procured during RMS 2021-22.
• The procurement was lower as the market price of wheat was higher than its MSP
during its procurement season.
• During 2022-23, the Government of India allocated 970.1 lakh tons of foodgrains
to States/UTs under NFSA and Other Welfare Schemes, etc.

Distribution: Through Schemes

National Food Security Act

• Till December 2022, the NFSA provided, for coverage of up to 75 per cent of the
rural and up to 50 per cent of the urban population highly subsidised food grains
at ₹1/2/3 per kg for coarse grains/wheat/rice, respectively, at the rate of 35 kg
per family per month to households covered under Antyodaya Anna Yojana (AAY)
and at the rate of 5 kg per person per month to priority households.
• In a recent decision, the government has decided to provide free foodgrains to
about 81.35 crore beneficiaries under the NFSA for one year from January 1,
2023. To remove the financial burden of the poor, the government will spend more
than ₹2 lakh crore in this period on food subsidies under NFSA and other welfare
schemes.
• Under this, the Government will provide 5 kg of foodgrains per person to Priority
Households (PHH) beneficiaries and 35 kg per household to Antyodaya Anna
Yojana (AAY) beneficiaries (poorest of the poor) free of cost for the next year.

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PM Garib Kalyan Anna Yojana

• To ease the hardships faced by the poor due to economic disruption caused by
Covid-19, the Government initially launched Pradhan Mantri Garib Kalyan Anna
Yojana (PMGKAY) for the period from April to June 2020.
• However, keeping in view the need for continuous support to the poor and the
needy, the scheme has been extended and implemented in various phases (Phase
VII is the latest covering October-December,2022).
• Under the scheme, 5 kg of additional food grains per person per month has
been/is being provided free of cost to NFSA beneficiaries in all the phases. Under
the PM-GKAY scheme (covering all phases), the Government has allocated about
1,118 LMT foodgrains to the States/UTs.

One Nation One Ration Card Scheme

• To further ease the process of access to food, the Government launched a citizen-
centric and technology-driven scheme in 2019 called the One Nation One Ration
Card (ONORC) scheme.
• The ONORC system enables intra-State and inter-State portability of ration cards.
• It helps the migrant beneficiaries access their food security entitlements from any
fair price shop (FPS) of their choice by using the same ration card after
biometric/Aadhaar authentication on electronic Point of Sale (e-PoS) devices at the
FPS.
• Presently, the national/inter-State portability is enabled in all 36 States/UT,
covering 100 per cent of the total NFSA population.
To conclude, Food security of a nation is ensured if all of its citizens have enough
nutritious food available, all persons have the capacity to buy food of acceptable quality
and there is no barrier on access to food.

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Q15. Discuss the recent push by the Government on Allied activities.
How is this sector critical for the economy?
The allied sectors of Indian agriculture - livestock, forestry & logging and fishing &
aquaculture are gradually becoming sectors of buoyant growth and a potential source of
better farm incomes.

Livestock & Dairy

• The livestock sector grew at a CAGR of 7.9 per cent during 2014-15 to 2020-21 (at
constant prices), and its contribution to total agriculture GVA (at constant prices)
has increased from 24.3 per cent in 2014-15 to 30.1 per cent in 2020-21.
• The dairy sector is the most critical component of the livestock sector, employing
more than eight crore farmers directly, and is the most prominent agrarian
product.
• Other livestock products, such as eggs and meat, are also growing in importance.
• While India ranks first in milk production in the world, it ranks third in egg
production and eighth in meat production in the world.

Fisheries

• Similarly, the annual average growth rate of the fisheries sector has been about 7
per cent since 2016-17 and has a share of about 6.7 per cent in total agriculture
GVA.
• India has become the 3rd largest fish producer, and the 4th largest exporter of fish
and fisheries products taking Brand India from ‘Local to Global’.
• The fisheries sector has been recognized as a ‘Sunrise Sector’ and has
demonstrated an outstanding double-digit average annual growth of 10.87% since
2014-15, with record fish production of 161.87 lakh tons (provisional) during
2021-22.

Government Push
Higher growth in allied sectors compared to the crop sector has obvious implications in
terms of the increasing importance of the former in total agricultural GVA.
Recognising the growing importance of allied sectors, the Committee on Doubling
Farmers’ Income (DFI, 2018) considers dairying, livestock, poultry, fisheries and
horticulture as high-growth engines and has recommended a focussed policy with a
concomitant support system for the allied sector.
Cognisant of the importance of allied sectors, the Government has made several critical
interventions to enhance infrastructure and improve livestock productivity and disease
control.

• As a part of the Aatmanirbhar Bharat (ANB) stimulus package, the Animal

Husbandry Infrastructure Development Fund (AHIDF) worth ₹15,000 crore was
launched in 2020.
o Under this scheme, the Central Government provides a 3 per cent interest
subvention to the borrower and credit guarantees up to 25 per cent of total
borrowing.
o As of 14 October 2022, 116 projects have been approved under the scheme
involving project costs of ₹3,731.4 crore.

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• National Livestock Mission (NLM) scheme has been restructured for 2021-22 to
2025-26.
o The scheme focuses on entrepreneurship development and breeds
improvement in poultry, sheep, goat and piggery, including feed and fodder
development.
• Also, the Livestock Health and Disease Control (LH&DC) Scheme is being
implemented to supplement the State/UT governments’ efforts towards preventing,
controlling and containing animal diseases of economic and zoonotic importance
by vaccination.
• National Animal Disease Control Programme (NADCP) is being implemented to
control Foot & Mouth Disease and Brucellosis by completely vaccinating cattle,
buffalo, sheep, goat and pig populations against Foot & Mouth Disease and bovine
female calves of 4-8 months of age against brucellosis.
• In May 2020, as a part of the ANB package, the Government of India launched its
flagship scheme Pradhan Mantri Matsya Sampada Yojana (PMMSY), with a total
outlay of ₹20,050 crore.
o PMMSY marks the highest-ever investment in the fisheries sector in India, to
be implemented over five years from FY21 to FY25 in all States/Union
Territories to drive sustainable and responsible development of the fisheries
sector while ensuring socio-economic development of the fishers, fish
farmers and fish workers.
• A dedicated Fisheries and Aquaculture Infrastructure Development Fund (FIDF)
was established for five years, from 2018-19 to 2022-23, with an investment of ₹
7,522 crore.
o Under the FIDF, as of 17 October 2022, proposals to the tune of ₹4,923.9
crore have been approved and have benefitted over 9.4 lakh persons,
through direct and indirect employment, in fishing and allied activities.

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Q16. Explain the role and contribution of Industrial sector in the
Indian economy.
Industry holds a prominent position in the Indian economy, accounting for 31 per cent
of GDP, on average, during FY12 and FY21 and employing over 12.1 crore people.

Role and Contribution of Industrial sector

The sector’s relevance can be identified through various direct and indirect linkages with
other sectors, contributing to economic growth and employment.

• First, it ensures that domestic production can accommodate domestic demand

and reduces the reliance on imports. Thereby assisting in the improvement of
trade and current account balances.
• Second, industrial growth has multiplier effects, which translates into employment
growth. Some industries, such as textiles and construction, have high employment
elasticities.
• Third, industrial growth spurs growth in services sectors such as banking,
insurance, logistics, etc.

Industrial Production

• Industrial production is a means to increase industrial income in the country.

• As measured by industrial GVA, growth in industrial income has kept pace with
overall GVA growth in the economy since the pre-pandemic year of FY20.
• Manufacturing GVA, which contributes more than 50 per cent of industrial GVA,
has grown at an even higher rate when compared to overall GVA.
• In FY23, the Industry sector witnessed modest growth of 4.1 per cent compared to
the strong growth of 10.3 per cent in FY22.
• This is likely on account of input cost-push pressures, supply chain disruptions
and the China lockdown impacting the availability of essential inputs and slowing
the global economy.
• The fading away of the base effect must have also weighed on growth in FY23. On
a positive note, estimates of H2:FY23 shows improvement in overall industrial
growth, especially in the manufacturing sector, both yearly and sequentially.
• Easing input prices and conducive demand conditions will support growth, ceteris
paribus.

Robust Growth in Bank credit to Industry

• Growth in bank credit has kept pace with industrial growth, with a sequential
surge evident since January 2022.
• While a large share of bank credit continues to be assigned to large industries,
credit to MSMEs has also seen a significant increase in part assisted by the
introduction of the ECLGS, which supports around 1.2 crore businesses of which
95 per cent are MSMEs.
o The impact of ECLGS on increasing the growth of credit to MSME was felt
most during the pandemic impacted years of 2020 and 2021. It continued in
2022 as the scheme was extended to March 2023.
o Furthermore, growth in credit to MSME was buttressed by rebounding
consumption levels, particularly in the services sector.
o Consequently, the share of MSMEs in gross credit offtake to the industry
rose from 17.7 per cent in January 2020 to 23.7 per cent in November 2022.

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o While the growth in total credit has been driven by an increase in credit
demanded by MSMEs, large industries have also begun to increase the pace
of their credit offtake since the beginning of FY23.
• With the spread between corporate bond yields and marginal costs of funds-based
lending rate (MCLR) narrowing, and the volatility in the corporate bond market
remaining high, corporates appear to be shifting their sources of financing from
bond markets to bank capital, where rates have remained stable and predictable.
• Robust growth in credit demand combined with rising capacity utilisation and
investment in manufacturing underscores businesses’ optimism regarding future
demand.

Resilient FDI inflow in Manufacturing Sector

• Annual FDI equity inflows in the manufacturing sector have been steadily
increasing over the last few years.
• It jumped from US$ 12.1 billion in FY21 to US$ 21.3 billion in FY22 as the
pandemic-driven expansionary policies of advanced economies led to a surge in
global liquidity.
• With the rise in global uncertainty in the wake of the Russia-Ukraine conflict, FDI
equity inflow in manufacturing in the first half of FY23 fell below its corresponding
level in the first half of FY22.
• The monetary tightening at the global level has further restricted the FDI equity
inflows.
• A rebound in FDI inflows is, however, expected as the Indian economy sustains its
high growth while monetary tightening the world over eventually eases with the
weakening of inflationary pressures.
• Notwithstanding an overall drop in FDI in the first half of FY23, inflows have
stayed above the pre-pandemic levels, driven by structural reforms and measures
improving the ease of doing business, making India one of the most attractive FDI
destinations in the world.
• The government has implemented an investor-friendly FDI policy under which FDI
up to 100 per cent is permitted through automatic route in most sectors. India
continues to open up its sectors to global investors by raising FDI limits, removing
regulatory barriers, developing infrastructure, and improving the business
environment.

Innovation in the Manufacturing sector

The government’s efforts towards fostering innovation include incubation, handholding,
funding, industry-academia partnership and mentorship.

The government has also strengthened its IPR regime by modernising the IP office,
reducing legal compliances and facilitating IP filing for start-ups, women entrepreneurs,
small industries and others. This has resulted in a 46 per cent growth in the domestic
filing of patents over 2016-2021, signalling India’s transition towards a knowledge-based
economy.

• These measures have begun to pay dividends. As per the Global Innovation Index
2022 report, India entered the top 40 innovating countries for the first time in
2022 since the inception of the GII in 2007 by improving its rank from 81 in 2015
to 40 in 2022.

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• Further, India became the most innovative nation in the lower middle-income
group overtaking Vietnam (48th) and leading the Central and Southern Asia
region.

Industry 4.0

The advent of the fourth industrial revolution or industry 4.0 as it’s commonly referred
to, has begun. The transformation integrates new technologies such as cloud computing,
IoT, machine learning, and artificial intelligence (AI) into manufacturing processes,
leading to efficiencies across the value chain.
While the adoption of these technologies in the Indian manufacturing sector is
underway, large-scale adoption is yet to happen. However, an enabling environment is
rapidly developing.

In recent years, India has made significant strides in internet penetration which is one of
the key requisites of industry 4.0. The push towards self-reliance in semiconductor
technology and production will help India erect another pillar of this revolution: hyper-
efficient processing technology.

The government is cognisant of the importance of industry 4.0 in achieving the goals of
Aatmanirbharta and its ambitions of becoming a key player in global value chains.

• A few initiatives by the government include the SAMARTH (Smart Advanced

Manufacturing and Rapid Transformation Hubs) Udyog Bharat 4.0 under the
Ministry of Heavy Industries and Public Enterprises, which aims to encourage
technological solutions to Indian manufacturing units through awareness
programmes and demonstrations.
• Another initiative is the establishment of the Centre for Fourth Industrial
Revolution in India in 2018, which looks to develop policy frameworks for
emerging technologies.

To conclude, despite global headwinds, industrial production expanded during FY23,

backed by sustained demand conditions. The growth in bank credit has kept pace with
industrial growth, with a sequential surge evident since January 2022. Credit to MSMEs
has seen a significant increase in part, assisted by the introduction of the ECLGS.
Amidst heightened global uncertainty, FDI in the manufacturing sector moderated in the
first half of FY23. However, inflows stayed well above the pre-pandemic levels, driven by
structural reforms and measures improving the ease of doing business, making India
one of the most attractive FDI destinations in the world.

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Q17. Evaluate the prospects of India as a key player in the Global value
chain.
The risk of supply chain shocks has never been more palpable than today, following
compounding crises from the US-China trade war, the Covid-19 pandemic, and the war
in Ukraine.
In this fast-evolving context, as global companies adapt their manufacturing and supply
chain strategies to build resilience, India has a unique opportunity to become a global
manufacturing hub this decade.
The three primary assets to capitalise on this unique opportunity are

• the potential for significant domestic demand,

• the Government’s drive to encourage manufacturing, and
• a distinct demographic edge, including a considerable proportion of the young
workforce.
The manufacturing sector in India is gradually shifting to more automated and process-
driven manufacturing, which is expected to increase efficiency and boost the production
of the industry.
Make in India 2.0
The ‘Make-in-India’ Initiative was launched in 2014 to make India a hub for
manufacturing, design, and innovation. Since then, it has facilitated investment,
fostered innovation and built world-class infrastructure.

• To further enhance India’s integration in the global value chain, ‘Make in India
2.0’ is now focusing on 27 sectors, which include 15 manufacturing sectors and
12 service sectors.
• Amongst these, 24 sub-sectors have been chosen while keeping in mind the Indian
industries’ strengths and competitive edge, the need for import substitution, the
potential for export and increased employability.
• Efforts are on to boost the growth of the sub-sectors in a holistic and coordinated
manner.
Production Linked Incentive Schemes
In pursuit of the objectives of the Make-in-India programme and with a vision to achieve
Aatmanirbharta, the government launched the PLI scheme. The scheme is expected to
attract a capex of approximately ₹3 lakh crore over the next five years. It has the
potential to generate employment for over 60 lakhs in India and increase the share of the
manufacturing sector in total capital formation, which currently stands at around 17-20
per cent between FY12 and FY20.
It is further believed that there will be a significant reduction in the trade deficit with
domestic production substituting for imports.

• Sectors under which the PLI scheme has been announced currently constitute
around 40 per cent of the total imports.
• The scheme, spread across 14 sectors, can enhance India’s annual manufacturing
capex by 15 to 20 per cent from FY23.
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• PLI Scheme across these key specific sectors is poised to
o make Indian manufacturers globally competitive,
o attract investment in the areas of core competency and cutting-edge
technology;
o ensure efficiencies;
o create economies of scale; and
o make India an integral part of the global value chain.
• The scheme will benefit the MSME ecosystem in the country. The anchor units
built in every sector will require a new supplier base in the entire value chain.
Most of these ancillary units will be built in the MSME sector.
• As of 31st December 2022, 717 applications have been approved under 14
Schemes. More than 100 MSMEs are among the PLI beneficiaries in sectors such
as Bulk Drugs, Medical Devices, Telecom, White Goods and Food Processing.
• As per recent reporting from implementing Ministries/ Departments, around ₹
47,500 crore (US$ 6 billion) of actual investment has been made; production/
sales of ₹3.85 lakh crore (US$ 47 billion) of eligible products and employment
generation of around 3 lakhs has been reported and 106 per cent achievement of
actual investment reported versus the corresponding projections of FY22.
• Key sectors such as Large-Scale Electronics Manufacturing, Pharmaceuticals,
Telecom & Networking Products, Food Processing and White Goods have
contributed considerably to investment, production, sales and employment.
• Some of the latest developments under the PLI programme include the launch of a
design-led PLI in June 2022 to promote the entire value chain in telecom
manufacturing and to build a strong ecosystem for 5G as part of the PLI Scheme
for Telecom & Networking products.
• Approvals under this Scheme have already been granted to eligible companies. In
September 2022, the Cabinet recently approved PLI Scheme (Tranche II) on
‘National Programme on High-Efficiency Solar PV Modules’, with an outlay of ₹
19,500 crore to build an ecosystem for manufacturing of high-efficiency solar PV
modules in India, thus reducing import dependence in the area of renewable
energy.
To conclude, initiatives such as Make in India 2.0 and Production Linked Incentive
schemes places India in a favourable position in grabbing the opportunity to become a
key player in the global value chain. Recently announced investments by companies
such as Apple and Tesla is a testament to India’s increasing role in the global value
chain.

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Q18. While mentioning the contribution of MSME sector, list down
various initiatives by the government to facilitate the sector’s
development.
While the contribution of the MSME sector to overall GVA rose from 29.3 per cent in
FY18 to 30.5 per cent in FY20, the economic impact of the pandemic caused the sector’
s share to fall to 26.8 per cent in FY21. MSME contribution to the manufacturing
sector’s GVA also marginally fell to 36.0 per cent in FY21.
Government Initiatives

• Through the AatmaNirbhar Bharat Package, the government has taken multiple
steps to cushion the economic impact of the pandemic on MSMEs. Some of the
measures undertaken include
o the modification of the definition of MSMEs;
o the provision of ₹20,000 crore subordinate debt for stressed MSMEs, ₹
50,000 crore equity infusion through Self Reliant India fund;
o the waiving of the global tender requirement for procurement of up to ₹200
crore;
o launching of the Udyam portal for MSME registration, a paperless, zero-cost
registration portal that is based on self-declaration and only requires
Aadhaar.
▪ Registrations on the Udyam portal crossed the one crore mark in
August 2022, surpassing the total registration done in the past 14
years under the old regime in just 2.5 years.
▪ As of 7th January 2022, the portal has a total registration count of
1.32 crore, of which 1.27 crore have been classified as micro-
enterprises. Enterprises registered on the portal employ 9.6 crore
people, of which 2.3 crore are women.
▪ There are 1.5 lakh exporting units, which have contributed a
cumulative ₹9.7 lakh crore worth of exports.

• The government’s initiative of the Samadhaan Portal, set up under the Micro,
Small and Medium Enterprises Development (MSMED) Act to monitor the
outstanding dues to the MSME sector, is helping MSMEs in resolving their
cashflow difficulties.
o As of 7th January 2022, the portal has received a total of 1.3 lakh
applications, of which 16.8 per cent have been disposed while 25.0 per cent
are currently under consideration, and 25.1 per cent have been rejected.

• In order to fast-track this process, the government has instructed Central Public
Sector Enterprises (CPSEs) and all companies with a turnover of ₹200 crore or
more to get themselves onboarded on the Trade Receivables Discounting System
(TReDS) platform for facilitating the discounting of trade receivables of MSMEs
through multiple financiers.

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• CHAMPIONS, the single-window grievance redressal portal for MSMEs launched
by the Ministry of MSME in June 2020, has received 56,825 grievances as of 16th
January 2023, of which 55,878 grievances have been responded to.
o The portal continues to be improved through initiatives such as the
localisation of the portal in 11 regional languages and the introduction of a
Chatbot.

• The government has also initiated the ‘Raising and Accelerating MSME
Performance scheme (RAMP) in FY23.
o The World Bank-supported scheme aims at strengthening institutions and
governance at the Centre and State, improving Centre-State linkages and
partnerships and improving access of MSMEs to market and credit,
technology upgradation and addressing issues of delayed payments and
greening of MSMEs.
o The RAMP programme will be implemented over a period of five years. The
total outlay for the scheme is ₹6,062.4 crore, out of which ₹3750 crore
would be a loan from the World Bank, and the Government of India would
fund the remaining ₹2312.4 crore.

The bouquet of measures introduced by the government aided the resilience of the
MSME sector. Data from the National Credit Guarantee Trustee Corporation (NCGTC)
shows that as of 30th November 2022, 1.2 crore MSME units availed the ECLGS scheme
and raised collateral free resources to the tune of ₹3.6 lakh crore.

A recent CIBIL report showed that 83 per cent of the borrowers who availed of the
ECLGS were micro-enterprises, and more than half of these borrowers had an exposure
of less than ₹10 lakh.

The NPA rate in banks for the category of MSME borrowers who availed of ECLGS was
lower than the category that did not avail of the scheme. The recovery of the MSME
sector from the pandemic-induced shock is evident in the trend in GST paid by MSME
units. The GST paid by the sector in FY22 has crossed the pre-pandemic level in FY20.

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Q19. Discuss the growth of E-commerce sector in India post COVID.
Also, list down the initiatives taken by the government for facilitating
the growth of e-commerce sector.
The E-Commerce sector witnessed a renewed push and a sharp increase in penetration
in the aftermath of the pandemic. Lockdowns and mobility restrictions disrupted
consumer behaviour and gave an impetus to online shopping. The Government’s push to
boost the digital economy, growing internet penetration, rise in smartphone adoption,
innovation in mobile technologies, and increased adoption of digital payments further
accelerated the adoption and growth of e-commerce.
Increasing growth of the E-Commerce sector
E-Commerce Market

• According to the Global Payments Report by Worldpay FIS, India’s e-commerce

market is projected to post impressive gains and grow at 18 per cent annually
through 2025.
• The expansion of e-commerce to newer segments like grocery, fresh-to-home fruits
and vegetables, and general merchandise has contributed to the expansion of the
customer base beyond traditional buyers.
• And as per the latest report ‘How India Shops Online 2022’ by Bain & Company,
emerging categories – fashion, grocery, general merchandise–would shore up e-
commerce growth in India and would capture nearly two-thirds of the Indian e-
commerce market by 2027.
E-Commerce and MSMEs

• There has also been an increase in the adoption of digital solutions by Micro, Small
and Medium Enterprises (MSMEs) like e-commerce and e-procurement, realising
the prospects of increased revenues and margins, improved market reach, access to
new markets, and customer acquisition.
• A recent study by IIFT analysing the impact of the interaction between MSMEs and
e-commerce found that in recent years, MSMEs that adopted digital solutions fared
far better than offline MSMEs, assisting them in accessing a large marketplace
without incurring huge costs.
• The E-commerce platform has not only empowered small businesses by removing
geographical barriers and providing a large customer base but also allowed them to
deal directly with manufacturers and suppliers, thus reducing the cost of
procurement.
• This increased access to suppliers significantly helps small business owners scale
up their businesses at a much lower investment level, thus boosting their cost
structure.
E-Commerce and Rural India

• Further, there has been a phenomenal geographical expansion with the growth of
e-commerce business in rural India driven by increased smartphone penetration,
internet adoption, and increased purchasing power of rural customers.

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• In addition, fiscal support during the pandemic helped boost e-commerce
penetration in rural areas, likely by increasing consumption, which could mostly be
done online in the presence of pandemic restrictions.
• A vast untapped rural market holds the potential for strengthening consumption
growth;
• New E-commerce companies like Trell, Meesho, and shop 101, are expanding and
gaining popularity in Tier 3 and 4 cities.
• The E-commerce industry is focusing on local solutions to penetrate rural areas by
strengthening the network of rural distributors and retailers and using local
distribution centres as Pick Up Drop Off points, enabling logistics companies to
serve rural consumers.
E-Commerce: Order and Valuation

• In terms of order volume and valuation, post-Covid-19 years have been the most
successful years for Indian E-commerce start-ups.
• As per the Retail and E-commerce Trends report released by Unicommerce and
Wazir Advisors, overall e-commerce order volume witnessed a growth of 69.4 per
cent YoY in FY22, driven mainly by consumers from tier-2 and tier-3 cities in the
last two years.
• The shoppers from tier-2 and tier-3 cities accounted for over 61.3 per cent of the
overall market share in FY22, increasing from 53.8 per cent in FY21.
• The order volume from tier-2 and tier-3 cities grew at almost double the pace of
tier-I cities, with 92.2 per cent and 85.2 per cent YoY growth, respectively, in
FY22.
• In contrast, tier-1 cities indicated a comparatively slower order volume growth rate
of 47.2 per cent.
E-Commerce: Government E-Marketplace (GeM)

• The Government E-Marketplace (GeM) has also witnessed tremendous growth in

Gross Merchandise Value (GMV) and is catching up with E-commerce giants like
Amazon and Flipkart.
• GeM attained an annual procurement of ₹1 lakh crore within FY22, representing a
160 per cent growth compared to last FY.
• GeM has taken a host of steps to onboard products of Self-Help Groups (SHGs),
tribal communities, artisans, weavers, and MSMEs.
• 57 per cent of the total business on GeM has come through the MSME units, and
female entrepreneurs have contributed over 6 per cent.
Government Initiatives to promote E-Commerce sector

• Initiatives taken by the Government for the promotion of e-Commerce, including

the Digital India program, Unified Payment Interface (UPI), GeM, etc., have been
major contributory factors to the growth of E-commerce in recent years.
• Various initiatives have also been taken to provide an opportunity to small
retailers, manufacturers, and Self-Help Groups for greater outreach.
• One District–One Product (ODOP) initiative has been facilitating the onboarding of
sellers of identified products on e-Commerce platforms to provide greater visibility
for small businesses from the rural sector.
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• E-marketplace www.tribesindia.com portal through Tribal Cooperative Marketing
Development Federation of India Limited (TRIFED) has been onboarding tribal
artisans with their products for online sales, ensuring tribal products find a larger
audience in the international market as well.
• The recent initiative of the launch of Open Network for Digital Commerce (ONDC)
is also playing a significant role in democratising digital payments, enabling
interoperability, and bringing down transaction costs.
• ONDC provides better market access to sellers and helps bring the country's
remotest corners into the e-Commerce framework by empowering them with
digitisation.

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Q20. Discuss the growth of Digital Financial Services. Also evaluate
the role of Neo-Banking, Central Bank Digital Currency, Account
Aggregator Framework and Dematerialization in furthering Digital
Financial Services.
Digital financial services enabled by emerging technologies and innovative solutions are
accelerating financial inclusion, democratising access, and spurring the personalisation
of products.
With a strong foundation provided by the Jan Dhan-Aadhaar-Mobile (JAM) trinity, UPI,
and other regulatory frameworks, the pandemic has aided acceleration in digital
adoption and provided a fillip to digital financial services solutions by banks, NBFCs,
insurers as well as fintech.
The pandemic provided the opportunity for fintech companies to reach the underserved
and provide cost-effective financial services to those at the bottom of the pyramid. While
globally, the technological solutions cushioned the reverberations of the pandemic, India
took the lead with the fintech adoption rate of 87 per cent, substantially higher than the
world average of 64 per cent as per the latest Global FinTech Adoption Index.
Role of Neo-Banking

• Over the last few years, the number of nonbanking platforms and global
investments in the neo-banking segment has also risen consistently.
• Neobanks operate under mainstream finance's umbrella but empower specific
services long associated with traditional institutions such as banks, payment
providers, etc.
• Neobanks operate entirely online, with no physical presence apart from office
space in the offline world. The growth of these institutions is spurred by the need
for on-demand and easier-to-access financial solutions by a young and
increasingly digitally savvy demographic.
• Neobanks have eased availability and provided access to financial services to
MSMEs and underbanked customers and areas.
• The government also, through various initiatives, has given a push to digital
banking solutions. 75 Digital Banking Units (DBU) across 75 districts announced
in Union Budget 2022-23 to take banking solutions to every nook and corner of
the country have been launched.
Role of Central Bank Digital Currency (CBDC)

• The introduction of Central Bank Digital Currency (CBDC) will significantly boost
digital financial services.
• Issuance of CBDC in India offers several benefits, which inter alia, include
reduction in operational costs involved in physical cash management, fostering
financial inclusion, bringing resilience, efficiency, and innovation in the payments
system, boosting innovation in cross-border payments space, and providing public
with uses that any private virtual currencies can provide, without the associated
risks.
• As of July 2022, there are 105 countries in the process of exploring CBDC, a
number that covers 95 per cent of the global GDP.

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• Many countries have already launched the CBDC, while others are in the pilot
stage.
• RBI has also recently launched pilots of CBDC in both the Wholesale and Retail
segments.
• Digital Rupee –Wholesale- the pilot in the wholesale segment was launched on 1st
November 2022, with the use case being limited to the settlement of secondary
market transactions in government securities.
• Use of Digital Rupee- Wholesale is expected to make the inter-bank market more
efficient. The pilot in the retail segment, known as Digital Rupee-Retail kicked off
on 1st December 2022, within a closed user group comprising participating
customers and merchants.
• For full operationalisation of CBDC, RBI is gradually expanding the pilots' scope to
include more banks, users, and locations based on feedback received during the
pilots.
Role of Account Aggregator Framework

• Account Aggregator (AA) is a Non-Banking Financial Company (NBFC) engaged in

the business of providing the service of retrieving or collecting financial
information pertaining to the customer.
• No financial information of the customer is retrieved, shared or transferred by AA
without the explicit consent of the customer. AA transfers data from one financial
institution to another based on an individual's instruction and consent.
• Registering with an AA is fully voluntary for consumers. Entities may enrol
themselves on AA framework as Financial Information Provider (FIP) viz. banking
company, non-banking financial company, asset management company,
depository, depository participant, insurance company, insurance repository,
pension fund etc. and as Financial Information User (FIU) which is an entity
registered with and regulated by any financial sector regulator.
• In this direction, RBI has issued the Master Direction viz Non-Banking Financial
Company – Account Aggregator (Reserve Bank) Directions, dated September 02,
2016.

• Achievements so far

o As on 31st December 2022, 27 Financial Institutions have gone live as FIPs,

including all 12 PSBs, 10 Private Sector Banks, 1 Small Finance Bank, and
4 Life Insurance Companies.
o 119 Financial Institutions have gone live as FIUs viz; 93 RBI Regulated, 12
SEBI Regulated, 12 IRDAI-regulated entities, and 2 PFRDA-regulated
entities.
o With 23 Banks onboarded to the Account Aggregator framework, more than
1.1 billion bank accounts are eligible to share data on AA.
o 3.3 million users have linked their accounts on the AA framework out of
which 3.28 million users successfully shared data via AA.
o RBI has also notified Goods and Services Tax Network as FIP on 23rd
November 2022 which will enable digital invoice financing and provide
much-needed credit to the MSME sector.

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Role of Dematerialization

• In line with the objective of the Digital India mission, which seeks to transform
India into a digitally empowered nation, National e-Governance Services Limited
(NeSL), an Information Utility registered with and regulated by the Insolvency and
Bankruptcy Board of India under the aegis of the IBC 2016, introduced the Digital
Document Execution (DDE) platform in 2020.
• This was done at the behest of the Insolvency and Bankruptcy Board of India and
with the support of the Department of Financial Services (DFS), Ministry of
Finance. The core principle of the NeSL-DDE platform is to digitise all the steps of
the document/ agreement execution journey. These include: -
o Submission of information and document/agreement to be executed on the
platform
o Flexibility to accommodate any agreement/document format
o Consent-based process
o Digital payment of stamp duty and affixing of digital e-stamp certificate
o Verification of the identity of the executants and digital execution using an
electronic signature
o Secure storage transmission and retrieval of the digitally executed document
generated using the platform
• The NeSL-DDE platform eliminates the need for the physical presence of the
executants and the manual process to be carried out for executing
documents/agreements. By doing so, the platform generates several benefits, such
as lower execution time and cost, a secure system, authorised access, bulk
processing, fraud prevention, legal robustness, and evidentiary value.
• A significant enabler in the journey of digitisation of documents/agreements in the
financial sector is the use of the Aadhaar e-Sign, which has made electronic
signatures widely available to citizens at a nominal cost.
• The NeSL-DDE platform has garnered the support of state governments,
ministries, and financial institutions. DFS has been encouraging banks to
consider adopting DDE for their agreements.
• Currently, 23 States and Union Territories are available for digital e-stamping on
the NeSL DDE platform. 27 banks and NBFCs are using the platform for executing
their agreements, and so far, more than 9 lakh transactions have been
undertaken. This includes small-ticket consumer lending transactions to large-
value corporate lending transactions.

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Q21. What are the major highlights of Foreign Trade Policy 2023?
In March 2023, India’s Foreign Trade Policy 2023 was launched. The policy document is
based on continuity of time-tested schemes facilitating exports as well as flexibility and
responsiveness towards the requirements of trade.
The FTP 2023 aims at process re-engineering and automation to facilitate ease of doing
business for exporters. It also focuses on emerging areas like dual use high end
technology items under Special Chemicals, Organisms, Materials, Equipment, and
Technology (SCOMET), facilitating e-commerce export, collaborating with States and
Districts for export promotion.
The Key Approach to the policy is based on 4 pillars. These include
1. Incentive to Remission,
2. Export promotion through collaboration - Exporters, States, Districts, Indian
Missions,
3. Ease of doing business, reduction in transaction cost and e-initiatives and
4. Emerging Areas – E-Commerce Developing Districts as Export Hubs and
streamlining SCOMET policy.
Highlights of the new Foreign Trade Policy 2023
Process Re-Engineering and Automation

• Greater faith is being reposed on exporters through automated IT systems with

risk management system for various approvals in the new FTP.
• The policy emphasizes export promotion and development, moving away from an
incentive regime to a regime which is facilitating, based on technology interface
and principles of collaboration.
• FTP 2023 codifies implementation mechanisms in a paperless, online
environment, building on earlier 'ease of doing business' initiatives. Reduction in
fee structures and IT-based schemes will make it easier for MSMEs and others to
access export benefits.
• Duty exemption schemes for export production will now be implemented through
Regional Offices in a rule-based IT system environment, eliminating the need for
manual interface.
Towns of Export Excellence

• Four new towns, namely Faridabad, Mirzapur, Moradabad, and Varanasi, have
been designated as Towns of Export Excellence (TEE) in addition to the existing 39
towns.
• The TEEs will have priority access to export promotion funds under the Market
Access Initiative scheme and will be able to avail Common Service Provider (CSP)
benefits for export fulfilment under the EPCG Scheme. This addition is expected to
boost the exports of handlooms, handicrafts, and carpets.
Recognition of Exporters
• Exporter firms recognized with 'status' based on export performance will now be
partners in capacity-building initiatives on a best-endeavour basis.

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• Similar to the 'each one-teach one' initiative, 2-star and above status holders
would be encouraged to provide trade-related training based on a model
curriculum to interested individuals.
• This will help India build a skilled manpower pool capable of servicing a $5 Trillion
economy before 2030.
• Status recognition norms have been re-calibrated to enable more exporting firms
to achieve 4 and 5-star ratings, leading to better branding opportunities in export
markets.
Promoting export from the districts

• The FTP aims at building partnerships with State governments and taking forward
the Districts as Export Hubs (DEH) initiative to promote exports at the district
level and accelerate the development of grassroots trade ecosystem.
• Efforts to identify export worthy products & services and resolve concerns at the
district level will be made through an institutional mechanism – State Export
Promotion Committee and District Export Promotion Committee at the State and
District level, respectively.
• District specific export action plans to be prepared for each district outlining the
district specific strategy to promote export of identified products and services.
Streamlining SCOMET Policy

• India is placing more emphasis on the "export control" regime as its integration
with export control regime countries strengthens.
• There is a wider outreach and understanding of SCOMET (Special Chemicals,
Organisms, Materials, Equipment and Technologies) among stakeholders, and the
policy regime is being made more robust to implement international treaties and
agreements entered into by India.
• A robust export control system in India would provide access of dual-use High end
goods and technologies to Indian exporters while facilitating exports of controlled
items/technologies under SCOMET from India.
Facilitating E-Commerce Exports

• E-commerce exports are a promising category that requires distinct policy

interventions from traditional offline trade. Various estimates suggest e-commerce
export potential in the range of $200 to $300 billion by 2030.
• FTP 2023 outlines the intent and roadmap for establishing e-commerce hubs and
related elements such as payment reconciliation, book-keeping, returns policy,
and export entitlements. As a starting point, the consignment wise cap on E-
Commerce exports through courier has been raised from ₹5Lakh to ₹10 Lakh in
the FTP 2023. Depending on the feedback of exporters, this cap will be further
revised or eventually removed.
• Extensive outreach and training activities will be taken up to build capacity of
artisans, weavers, garment manufacturers, gems and jewellery designers to
onboard them on E-Commerce platforms and facilitate higher exports.

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Facilitation under Export Promotion of Capital Goods (EPCG) Scheme

• The EPCG Scheme, which allows import of capital goods at zero Customs duty for
export production, is being further rationalized. Some key changes being added
are:
o Prime Minister Mega Integrated Textile Region and Apparel Parks (PM
MITRA) scheme has been added as an additional scheme eligible to claim
benefits under CSP (Common Service Provider) Scheme of Export Promotion
capital Goods Scheme (EPCG).
o Dairy sector to be exempted from maintaining Average Export Obligation – to
support dairy sector to upgrade the technology.
o Battery Electric Vehicles (BEV) of all types, Vertical Farming equipment,
Wastewater Treatment and Recycling, Rainwater harvesting system and
Rainwater Filters, and Green Hydrogen are added to Green Technology
products – will now be eligible for reduced Export Obligation requirement
under EPCG Scheme
Facilitation under Advance authorization Scheme

• Advance authorisation Scheme accessed by DTA units provides duty-free import of

raw materials for manufacturing export items and is placed at a similar footing to
EOU and SEZ Scheme. However, the DTA unit has the flexibility to work both for
domestic as well as export production. Based on interactions with industry and
Export Promotion councils, certain facilitation provisions have been added in the
present FTP such as
• Special Advance Authorisation Scheme extended to export of Apparel and Clothing
sector on self-declaration basis to facilitate prompt execution of export orders –
Norms would be fixed within fixed timeframe.
• Benefits of Self-Ratification Scheme for fixation of Input-Output Norms extended
to 2 star and above status holders in addition to Authorised Economic Operators
at present.
Merchanting trade

• To develop India into a merchanting trade hub, the FTP 2023 has introduced
provisions for merchanting trade.
• Merchanting trade of restricted and prohibited items under export policy would
now be possible. Merchanting trade involves shipment of goods from one foreign
country to another foreign country without touching Indian ports, involving an
Indian intermediary.
• This will be subject to compliance with RBI guidelines, and won’t be applicable for
goods/items classified in the CITES and SCOMET list.
• In course of time, this will allow Indian entrepreneurs to convert certain places
like GIFT city etc. into major merchanting hubs as seen in places like Dubai,
Singapore and Hong Kong.
Amnesty Scheme

• Finally, the government is strongly committed to reducing litigation and fostering

trust-based relationships to help alleviate the issues faced by exporters.

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• In line with "Vivaad se Vishwaas" initiative, which sought to settle tax disputes
amicably, the government is introducing a special one-time Amnesty Scheme
under the FTP 2023 to address default on Export Obligations.
• This scheme is intended to provide relief to exporters who have been unable to
meet their obligations under EPCG and Advance Authorizations, and who are
burdened by high duty and interest costs associated with pending cases.
• All pending cases of the default in meeting Export Obligation (EO) of
authorizations mentioned can be regularized on payment of all customs duties
that were exempted in proportion to unfulfilled Export Obligation.
• The interest payable is capped at 100% of these exempted duties under this
scheme. However, no interest is payable on the portion of Additional Customs
Duty and Special Additional Customs Duty and this is likely to provide relief to
exporters as interest burden will come down substantially.
• It is hoped that this amnesty will give these exporters a fresh start and an
opportunity to come into compliance.

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Q22. Discuss the potential of International Trade Settlement in India
rupees.
In July 2022, the Reserve Bank of India (RBI) issued a circular permitting an additional
arrangement for invoicing, payment, and settlement of exports/imports in Indian Rupees
(INR) to promote the growth of global trade with emphasis on exports from India and to
support the increasing interest in the global trading community in INR as an
international currency.
The framework involves invoicing of exports and imports in INR, market-determined
exchange rates between the currencies of the trading partner countries, and settlement
through special Rupee Vostro accounts opened with authorised dealer banks in India.
Under this arrangement for settlement,
a) Indian importers undertaking imports through this mechanism shall make
payment in INR which shall be credited into the Special Vostro account of the
correspondent bank of the partner country, against the invoices for the supply of
goods or services from the overseas seller /supplier, while
b) Indian exporters, undertaking exports of goods and services through this
mechanism, shall be paid the export proceeds in INR from the balances in the
designated Special Vostro account of the correspondent bank of the partner
country.
Significance of RBI’s framework for international settlement in INR
The above-mentioned framework for international settlement in INR acquires
significance against the backdrop of the US Fed aggressively hiking the policy rates and
its hawkish stand, the consequent rallying of the US dollar to multi-decade high levels,
and concomitant weakening of currencies of various EMEs including the INR.

• The framework could largely reduce the net demand for foreign exchange, the US
dollar in particular, for the settlement of current account related trade flows.

• Further, the use of INR in cross-border trade is expected to mitigate currency risk
for Indian businesses.

• Protection from currency volatility not only reduces the cost of doing business but
also enables better business growth, improving the chances for Indian businesses
to grow globally.

• It also reduces the need for holding foreign exchange reserves and dependence on
foreign currency, making Indian economy less vulnerable to external shocks.

• Further, it could assist Indian exporters in getting advance payments in INR from
overseas clients and in the longer term promote INR as an international currency
once the rupee settlement mechanism gains traction.

• One of the prerequisites for the emergence of an international currency is that the
said currency needs to be increasingly used for trade invoicing.

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• In terms of foreign exchange market turnover (daily averages), as per the BIS
Triennial Central Bank Survey 2022, the US dollar is the dominant vehicle
currency accounting for 88 per cent of the global forex turnover.

• The INR accounted for 1.6 per cent. If the INR turnover rises to equal the share of
non-US, non-Euro currencies in global forex turnover of 4 per cent, INR could be
regarded as an international currency, reflecting India’s position in the global
economy.
To conclude, in a conflicting geopolitical environment where the value of dollar is
decreasing, India must explore the potential of settling bilateral trade in both nations’
respective currencies. India’s similar trade settlement agreement with UAE is a step in
the right direction.

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Q23. What do you understand by the term Free Trade Agreements?
Discuss India’s Global Trade Engagements.
Free Trade Agreements (FTAs) or Regional Trade Agreements (RTAs) in terms of the WTO
rules, are economic instruments available to a country for leveraging its competencies in
trade and investment.
As of June 2016, all WTO members now have at least one RTA in force. As of 1
December 2022, there has been a substantial rise in the number of trade agreements
with 355 notifications of RTAs having been made to the WTO. Many WTO members
continue to be involved in negotiations to create new RTAs, which are mostly bilateral.
However, a recent development has been negotiations and new agreements among more
than two WTO members, such as:
• Pacific Alliance between Chile, Colombia, Mexico, and Peru (Signed on 10
February 2014; entered into force on 1 May 2016);
• Tripartite Agreement, linking parties to the Common Market for Eastern and
Southern Africa, the East African Community and the Southern African
Development Community (Launched on 10 June 2015 and entered into force at
different dates by different members);
• Comprehensive and Progressive Trans-Pacific Partnership Agreement (Signed on
8 March 2018; entered into force on 31 October 2018);
• African Continental Free Trade Area (AfCFTA) (Signed on 21 March 2018 and
entered into force at different dates by different members); and
• Regional Comprehensive Partnership Agreement (RCEP) between the ASEAN
members and six other WTO members (Signed on 15 November 2020; entered
into force on 1 January 2022).
The limited progress in the multilateral trade negotiations at the WTO is one of the
reasons responsible for the increase in FTAs. FTAs are viewed favourably by trading
countries in comparison to multilateral negotiation at the WTO forum as they are easy to
negotiate and provide flexibility to factor in geopolitical considerations.
The purpose of RTAs is to lower tariffs on goods and services and increase cooperation
between trading partners with the aim of increasing trade, lower prices for consumers,
and provide enhanced export opportunities for producers. RTAs can also have a larger
impact on the economy. FTAs are positively correlated with direct domestic value-added
exports, as well as forward and backward participation in global value chains.
India’s Global Trade Engagements
This era of globalisation has been accompanied by a proliferation of trade agreements
and the emergence of competing trade blocs. These trends are affecting every business,
every industry, and every country so that keeping up with these changes has become a
challenging task for policymakers around the globe.
Governments have been pursuing international trade cooperation largely driven by
diverse external and internal political economy considerations such as promoting peace
and stability, increasing market size and most importantly, insuring themselves against
unfavourable trade policies of other countries.

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India has always stood for an open, equitable, predictable, non-discriminatory, and rule-
based international trading system. India considers Regional Trading Arrangements
(RTAs) as ‘building blocks’ towards the overall objective of trade liberalisation and as
complementing the multilateral trading system.
Recognising that RTAs would continue to feature permanently in world trade, India has
engaged with its trading partners/blocs with the intention of expanding its export
market since the early part of the previous decade and began concluding, in principle
agreements to move, in some cases, towards Comprehensive Economic Cooperation
Agreements (CECA) which covers FTA in goods, services, investment and identifies areas
of economic cooperation.
The economic rationale for FTAs was the diversification and expansion of India’s exports
to its trading partners, providing a level playing field vis-à-vis the competing countries
having preferential access in our trading partners, as well as gain easier access to raw
materials and intermediate products, at lower costs, for stimulating value-added
domestic manufacturing.
In the case of the India-Association of Southeast Asian Nations (ASEAN), India-Korea,
and India-Japan Agreements, this was also part of a geopolitical strategy that dovetailed
well into India’s “Look East Policy”.
India has so far concluded 13 FTAs and 6 Preferential Trade Agreements (PTAs).
The most recent in the list are the India-UAE Comprehensive Economic Partnership
Agreement (CEPA) which was signed on 18 February 2022 and officially entered into
force on 1 May 2022 and the India-Australia Economic Cooperation and Trade
Agreement (Ind-Aus ECTA), which was signed on 2 April 2022 and entered into force on
29 December 2022.
Further, India is presently engaged in FTA negotiations with some of its trading
partners, notable among these FTAs are
1. India-UK FTA,
2. India-Canada CEPA/ Early Progress Trade Agreement (EPTA),
3. India-EU FTA.
Moreover, India has also initiated action to review some of the existing FTAs, namely,
India-Singapore CECA, India-South Korea CEPA, and India-ASEAN Trade in Goods
Agreement and initiated discussions on scoping for the CECA with Australia, as
envisaged under Ind-Aus ECTA.

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Q24. Write a short note on the following topics
A. National Infrastructure Pipeline
B. National Monetization Pipeline
C. PM Gati Shakti
National Infrastructure Pipeline

• A developing economy such as ours requires a continued stepping up of

infrastructure investment to sustain a high rate of growth, which in turn is a pre-
requisite for achieving wide-ranging social objectives.
• In view of this, the government launched the National Infrastructure Pipeline (NIP)
with a forward-looking approach and with a projected infrastructure investment of
around ₹111 lakh crore during FY20-25 to provide high quality infrastructure
across the country.
• It also envisages improving project preparation and attracting domestic and
foreign investment in infrastructure. The NIP includes infrastructure projects of
more than ₹100 crore covering greenfield and brownfield investments.
• The NIP currently has 8,964 projects with a total investment of more than ₹108
lakh crore under different stages of implementation. Regarding sectoral
composition, the transport sector constituted more than half of the projects.
• NIP is hosted on the Invest India Grid (IIG) platform and provides opportunities for
States/UTs and Ministries to collate all major infrastructure projects at a single
location.
• IIG thus acts as a centralised portal to track and review project progress across all
economic and social infrastructure sub-sectors. The portal also enables project-
sponsoring authorities to showcase investment opportunities to national and
international investors.
• Project Monitoring Group (PMG) is an institutional mechanism put in place by the
government for resolution of issues related to large-scale projects. PMG is also
involved in the fast-tracking of approvals/clearances for projects with an
anticipated investment of ₹500 crore and above.
• Now, it has been proposed to integrate NIP and PMG portals. When implemented,
NIP will become the first entry point (database) for all infrastructure projects
(costing ₹100 crore or more). PMG portal will pick up data, as per requirements
(project cost of ₹500 crore or more), from the NIP database.
• This will save substantial time and effort by Ministries and States/UTs and ease
the monitoring of large infrastructure projects.
National Monetization Pipeline

• The need for scaling up infrastructure investment despite fiscal pressures from
Covid-19 pandemic required unlocking of capital from various projects across
sectors. The National Monetisation Pipeline (NMP), was thus announced on 23
August 2021. Based on the principle of ‘asset creation through monetisation’, it
taps private sector investment for new infrastructure creation.
• It is expected that private players would operate and maintain the assets. The
NMP provides an opportunity for deleveraging balance sheets and providing fiscal
space for investment in new infrastructure assets. The estimated aggregate
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monetisation potential under NMP is ₹6.0 lakh crore through core assets of the
Central Government, over a four-year period, from FY20-25.
• The process of monetisation entails a limited period license/ lease of an asset,
owned by the government or a public authority, to a private sector entity for
upfront or periodic consideration.
• Funds so received by the public authority are reinvested in new infrastructure or
deployed for other public purposes. Such contracts include provisions for the
transfer of assets back to the authority at the end of the contract period. It
includes a selection of de-risked and brownfield assets with a stable revenue
generation profile (or long-term revenue rights) that can be clearly ring-fenced.
• It contains 20+ asset classes across 12+ line ministries/ departments. In addition,
the top 5 sectors (by estimated value) capture around 83 per cent of the aggregate
pipeline value: roads (27 per cent) followed by railways (25 per cent), power (15 per
cent), oil & gas pipelines (8 per cent), and telecom (6 per cent). Roads and railways
together contribute around 52 per cent of the total NMP value.
• Against the monetisation target of ₹0.9 lakh crore in FY22, ₹0.97 lakh crore have
been achieved during the period under roads, power, coal and mines. The
cumulative investment potential over the years of transactions completed is
estimated at ₹9.0 lakh crore (value captured in the form of accruals, receipts,
and/or private investment).
• NMPs 2nd year, i.e., FY23, target envisaged is ₹1.6 lakh crore (27 per cent of
overall NMP Target) under Core-Asset Monetisation. This is an indicative value
while the actual realization for public assets may differ depending on the timing,
transaction structuring, investor interest, etc.
PM Gati Shakti

• The growth experience of advanced economies has highlighted the importance of

having a multimodal transport network approach.
• Introducing the holistic planning in the case of infrastructure projects, the
government launched PM GatiShakti, charting a transformative approach to
infrastructure development.
• The PM GatiShakti National Master Plan entails creation of a common umbrella
platform with all infrastructure projects pertaining to various ministries/
departments incorporated within a comprehensive database for efficient planning
and implementation on a real-time basis.
• The projects pertaining to seven engines (roads, railways, airports, ports, mass
transport, waterways, and logistic infrastructure) in the NIP will be aligned with
PM GatiShakti framework.
• The touchstone of the Master Plan will be high quality modern infrastructure and
logistics synergy among different modes of movement – both of people and of goods
– and location of projects. This will help raise productivity, and accelerate
economic growth and development.
• The focus is on integrated planning and synchronised implementation across
ministries/departments, with innovative use of technology. The aim is to improve
multimodal connectivity and logistics efficiency while addressing the critical gaps
for the seamless movement of people and goods, with a focus on minimising
disruptions and timely completion of infrastructure projects.

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• In order to facilitate integrated planning and coordinated implementation, a
GISbased and data-driven decision support platform called PM GatiShakti
National Master Plan has been introduced. Around 1950 data layers of 22
ministries/departments and 36 States/UTs were mapped up to the village,
district, and taluka levels on the national master plan.
• It can be integrated with various applications of different ministries/agencies to
prevent duplication of work and create a single window system for infrastructure
planning.
• Data layers on important assets pertaining to health, education, culture, tourism,
gram panchayats, municipal corporation, social welfare housing etc. are being
mapped and data validation is being done for optimum use of PM GatiShakti
principles in planning of both physical and social infrastructures.
• Use cases of GatiShakti National Master Plan include connectivity to model
schools and disaster management planning etc.

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Q25. Discuss the growth story of Unified Payments Interface.
‘I like how you’ve brought out the rising popularity of UPI. I laud my fellow Indians for
embracing digital payments! They’ve shown remarkable adaptability to tech and
innovation’ - Shri Narendra Modi, Hon’ble PM
Unified Payments Interface (UPI) is a system that empowers and knits multiple bank
accounts into a single mobile application (of any participating bank), merging several
banking features, seamless fund routing and merchant payments into one hood. It also
caters to the “Peer to Peer” collection request, which can be scheduled and paid as per
requirement and convenience.
Introduced in 2016 to revolutionize the payment landscape through universal
operability, single payment address, and low-cost mobile-first payment system, UPI has
acted as a positive disruption towards enabling greater digital payments adoption in the
country.
UPI is a single mobile application for accessing different bank accounts. It can be
accessed on all major platforms, such as Android and iOS. As the application is user-
friendly and fast, consumers and merchants have displayed a great affinity to digital
technology, leading to rapid growth in this digital payment infrastructure.
Growth Journey of UPI

• The journey of UPI has been fascinating.

• The number of banks that became part of the real-time payment system increased
from 35 in December 2017 to more than 380 in December 2022.
• Though pre-existing payment modes such as debit cards, credit cards, National
Electronic Funds Transfer (NEFT) and Real-Time Gross Settlement (RTGS) have
grown over time, UPI has shown a quantum jump comparatively to become one of
the preferred modes of payment.
• In this sense, the progress of UPI has been remarkable.
• In FY19, UPI accounted for 17 per cent of the country's total 3,100 crore digital
transactions. The next fiscal year saw UPI’s share rise to more than 27 per cent as
it processed 1,250 crore transactions out of 4,600 crore digital transactions.
• In FY22, UPI accounted for 52 per cent of the total 8,840 crore financial digital
transactions. On average, between FY19-22 (calendar year), growth in UPI-based
transactions in value and volume terms have been 121 per cent and 115 per cent,
respectively.
• Recently, in Dec 2022, UPI touched its highest-ever mark with 782 crore
transactions worth ₹12.8 lakh crore.
• UPI also allows for multiple methods for integrating payments—QR based
payments being the most popular. In just 5 years, over 23 crore UPI QRs have
been deployed in the market for accepting merchant payments, from only 25 lakhs
devices that were accepting merchant payments before this.
• The benefits of UPI became evident during the Covid-19 pandemic when UPI
served as a critical lifeline, especially for small and micro merchants.
• Further, UPI has processed 2,922 crore contactless merchants’ transactions with a
total value over ₹21.7 lakh crore in FY23 (till December 2022).

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Internationalization of UPI

• The success of UPI has not been restricted to India alone; NPCI, through its
international arm NPCIL is pushing for acceptance of RuPay/UPI powered apps,
cross-border remittance and UPI-Like deployment in international markets such
as Singapore, UAE, France, the Netherlands among others.
• Initiative towards the discussion on cross-border remittances will help reduce the
cost incurred and procedures involved towards money transfer at present by the
migrant workers.
• The smooth transfer of money will increase the total value of remittances,
increasing their impact on economic development.
• NPCI has also succeeded in developing an exemplary robust payments system that
is cost-effective, secure, convenient and instantaneous.
• Several nations have displayed an inclination towards establishing a ‘real-time
payment system’ or ‘domestic card scheme’ inspired by the exemplary innovations
by NPCI in the country.
• Tech companies are increasingly leveraging the power of UPI to expand the digital
ecosystem, which has led to a significant acceleration in the pace of financial
inclusion.
• UPI has opened up many opportunities for start-ups and e-Commerce players to
develop innovative solutions that elevate the customer experience.
• The open systems have enabled global players like Google, WhatsApp, Walmart,
True Caller, Amazon, Uber etc., to provide UPI services.
It is envisioned that the journey of UPI will help accelerate the process of financial
inclusion and digital adoption in India by creating a more prosperous and inclusive
ecosystem that can accommodate larger sections of the population in times to come.

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